12-1094-bk L In Re: JOHNS-MANVILLE CORPORATION Common Law Settlement Counsel v. The Travelers Indemnity Co., et al. UNITED STATES COURT OF APPEALS 1 FOR THE SECOND…

12-1094-bk(L)
In Re: JOHNS-MANVILLE CORPORATION Common Law Settlement Counsel, et al.
v. The Travelers Indemnity Co., et al.
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
August Term, 2012 3
(Argued: January 10, 2013 Decided: July 22, 2014) 4
Docket Nos. 12-1094-bk(L), 12-1150-bk(Con), 12-1205-bk(Con) 5
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 6 IN RE: JOHNS-MANVILLE CORPORATION, MANVILLE CORPORATION, MANVILLE 7 INTERNATIONAL CORPORATION, MANVILLE EXPORT CORPORATION, 8 JOHNS-MANVILLE INTERNATIONAL CORPORATION, MANVILLE SALES 9 CORPORATION, f/k/a JOHNS-MANVILLE SALES CORPORATION, successor by 10 merger to MANVILLE BUILDINGS MATERIALS CORPORATION, MANVILLE 11 PRODUCTS CORPORATION and MANVILLE SERVICE CORPORATION, MANVILLE 12 INTERNATIONAL CANADA, INC., MANVILLE CANADA, INC., MANVILLE 13 INVESTMENT CORPORATION, MANVILLE PROPERTIES CORPORATION, 14 ALLAN-DEANE CORPORATION, KEN-CARYL RANCH CORPORATION, 15 JOHNS-MANVILLE IDAHO, INC., MANVILLE CANADA SERVICE INC., SUNBELT 16 CONTRACTORS, INC., 17
18 Debtors. 19
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20
COMMON LAW SETTLEMENT COUNSEL, STATUTORY AND HAWAII DIRECT ACTION 21 SETTLEMENT COUNSEL, 22
23 Movants-Appellants, 24
25 ASBESTOS PERSONAL INJURY PLAINTIFFS, 26
27 Interested Parties-Appellants, 28
29 v. 30
31 THE TRAVELERS INDEMNITY COMPANY, TRAVELERS CASUALTY AND SURETY 32 COMPANY, f/k/a AETNA CASUALTY AND SURETY COMPANY, 33
34 Objectors-Appellees.* 35 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 36 __________ 37 * The Clerk of the Court is instructed to conform the caption in 38 accordance herewith. 39
40
41

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B e f o r e: WINTER, POOLER, and CHIN, Circuit Judges. 1
2 Appeal from a judgment of the United States District Court 3
for the Southern District of New York (John G. Koeltl, Judge), 4
reversing the bankruptcy court’s final judgment (Burton R. 5
Lifland, Judge) that had enforced settlement agreements and 6
compelled appellees to make payments to asbestos plaintiffs under 7
the agreements. We vacate the district court’s order and order 8
reinstatement of the final judgment of the bankruptcy court. 9
PAUL D. CLEMENT (Matthew Gluck & Kent A. 10 Bronson, Milberg LLP, New York, NY, on 11 the brief), Bancroft PLLC, Washington, 12 D.C., for Movant-Appellant Statutory and 13 Hawaii Direct Action Settlement Counsel. 14
15
RONALD BARLIANT (Kenneth S. Ulrich & 16 Danielle Wildern Juhle, on the brief), 17 Goldberg Kohn Ltd., Chicago, IL, for 18 Movant-Appellant Common Law Settlement 19 Counsel. 20
21
SANDER L. ESSERMAN (Cliff I. Taylor, on 22 the brief), Stutzman, Bromberg, Esserman 23 & Plifka, P.C., Dallas, TX, for 24 Interested Parties-Appellants Asbestos 25 Personal Injury Plaintiffs. 26
27
BARRY R. OSTRAGER (Andrew T. Frankel, 28 Jonathan M. Weiss & Bryce A. Pashler, on 29 the brief), Simpson Thacher & Bartlett 30 LLP, New York, NY, for Objectors- 31 Appellees The Travelers Indemnity 32 Company & Travelers Casualty and Surety 33 Company. 34
35 WINTER, Circuit Judge: 36
37 Common Law Settlement Counsel, Statutory and Hawaii Direct 38
Action Settlement Counsel, and Asbestos Personal Injury 39
2

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Plaintiffs 1 appeal from Judge Koeltl’s reversal of a bankruptcy 1
court’s final judgment. Bankruptcy Judge Lifland had required 2
appellees -- The Travelers Indemnity Company and Travelers 3
Casualty and Surety Company (together, “Travelers”) -- to pay 4
over $500 million to asbestos plaintiffs based on Travelers’ 5
obligations under certain settlement agreements (the 6
“Agreements”). The district court reversed, holding that 7
conditions precedent to payment under the Agreements were never 8
met, and that Travelers’ obligation to pay therefore never 9
matured. 10
Because we conclude that the relevant conditions precedent 11
were satisfied, we vacate the district court’s order and remand 12
with instructions to reinstate the bankruptcy court’s final 13
judgment. In addition, given that Travelers did not timely raise 14
its arguments regarding the Agreements’ conditions that the 15
movants either execute a specific number of releases and deliver 16
them into escrow or dismiss their claims with prejudice, we deem 17
those arguments waived. Finally, we hold that the bankruptcy 18
court correctly applied prejudgment interest to the amount owed 19
and that it correctly calculated the total payment due from the 20
appropriate date. 21
22
23
1 The nature of the various appellants will become clear, to the extent
relevant, in the course of this opinion. The Asbestos Personal Injury
Plaintiffs are six asbestos personal injury claimants who stand to recover
from the Common Law Settlement Trust.
3

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BACKGROUND 1
For many years, Travelers was the primary insurer for the 2
Johns-Manville Corporation (“Manville”), once the largest 3
supplier of asbestos and asbestos-containing products. In re 4
Johns-Manville Corp. (Manville I), Nos. 82 B 11656, 82 B 11657, 5
82 B 11660, 82 B 11661, 82 B 11665, 82 B 11673, 82 B 11675, 82 B 6
11676(BRL), 2004 WL 1876046, at *2-3 ¶¶ 1, 3, *5 ¶ 12 (Bankr. 7
S.D.N.Y. Aug. 17, 2004). In 1982, after asbestos-related health 8
problems triggered litigation, Manville, faced with the prospect 9
of tremendous liability, filed a Chapter 11 petition for 10
bankruptcy protection and reorganization. In re Johns-Manville 11
Corp. (Manville II), 340 B.R. 49, 54 (S.D.N.Y. 2006); Travelers 12
Indem. Co. v. Bailey, 557 U.S. 137, 140 (2009). 13
With Manville entangled in bankruptcy proceedings, asbestos 14
plaintiffs began to file direct-action 2 suits against Travelers 15
and other insurers based on the insurers’ relationships with 16
Manville. Manville II, 340 B.R. at 55. At the same time, 17
Travelers and other insurers were involved in a policy-coverage 18
dispute with Manville, and numerous contribution, indemnity, and 19
cross claims were asserted among Manville’s insurers. Id.; 20
Manville I, 2004 WL 1876046, at *14-15 ¶¶ 54, 57. 21
Consequently, Travelers and the other insurers entered into 22
a settlement agreement with Manville. Pursuant to the 23
2 A “direct action” is “[a] lawsuit by a person claiming against an
insured but suing the insurer directly instead of pursuing compensation
indirectly through the insured.” Black’s Law Dictionary 525 (9th ed. 2009).
4

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settlement, Travelers agreed to contribute roughly $80 million to 1
a trust established as part of the bankruptcy estate (the 2
“Manville Trust”) in exchange for a complete release of Manville 3
policy-related liabilities. Manville I, 2004 WL 1876046, at *15 4
¶¶ 58, 61. The bankruptcy court provided extensive notice 5
regarding the settlement, and it also appointed a Future Claims 6
Representative (“FCR”) to represent future asbestos claimants 7
during relevant proceedings. In re Johns-Manville Corp. 8
(Manville IV), 600 F.3d 135, 140-41 (2d Cir. 2010). 9
The bankruptcy court eventually approved the settlement and 10
entered two orders, the Insurance Settlement Order and the 11
Confirmation Order (together, the “1986 Orders”). Manville I, 12
2004 WL 1876046, at *15-16 ¶¶ 60-61, 64. The 1986 Orders were 13
“meant to provide the broadest protection possible to facilitate 14
global finality for Travelers as a necessary condition for it to 15
make a significant contribution to the Manville estate.” Id. at 16
*31 ¶ 23. The Insurance Settlement Order released Travelers and 17
the other settling insurers from Manville-related obligations, 18
enjoined “all future claims for bad faith or insurer misconduct,” 19
and channeled all such claims to the Manville Trust. Id. at *15 20
¶ 61. The Confirmation Order confirmed Manville’s reorganization 21
plan, incorporating the Insurance Settlement Order by reference 22
and enjoining “all persons from commencing any action against any 23
of the Settling Insurance Companies for the purpose of, directly 24
or indirectly, collecting, recovering or receiving payment of, on 25
5

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or with respect to any Claim . . . or Other Asbestos 1
Obligation . . . .” Id. at *16 ¶ 64 (internal citation and 2
quotation marks omitted). 3
Despite the 1986 Orders, asbestos plaintiffs filed more 4
actions against Travelers in several states. Id. at *17 ¶ 70. 5
The majority of these claims did not allege violations derivative 6
of Manville’s actions; instead, they were based on Travelers’ own 7
alleged wrongdoing as Manville’s insurer. Although it is a 8
misnomer, see infra note 3, we will style these claims as the 9
“Direct Actions.” The Direct Actions were brought by three 10
categories of plaintiffs. We will call them the “Statutory 11
Direct Action Plaintiffs,” “Hawaii Direct Action Plaintiffs,” and 12
“Common Law Direct Action Plaintiffs.” They asserted two 13
categories of claims. First, the Statutory Direct Action 14
Plaintiffs and Hawaii Direct Action Plaintiffs alleged, among 15
other things, that Travelers “conspired to violate state laws 16
prohibiting unfair insurance . . . practices” by fraudulently 17
perpetuating a “state of the art” defense, id. at *18-19 ¶¶ 74- 18
79, and allegedly misrepresenting Manville’s knowledge of 19
asbestos hazards. Second, the Common Law Direct Action 20
Plaintiffs claimed similarly that Travelers violated common law 21
duties when it failed to disclose what it knew about asbestos 22
6

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hazards from its relationship with Manville. Id. at *19 ¶¶ 1
80-82. 3
2
Relying on the 1986 Orders, in June 2002, Travelers moved 3
before the bankruptcy court to enjoin the Direct Actions. 4
Manville II, 340 B.R. at 55. The bankruptcy court issued a 5
temporary restraining order against prosecution of certain 6
lawsuits against Travelers but also referred the matter to 7
mediation. Id. The mediation, conducted by former New York 8
Governor Mario M. Cuomo, resulted in the three Settlement 9
Agreements between Travelers and the Statutory, Hawaii, and 10
Common Law Direct Action Plaintiffs. In re Johns-Manville Corp. 11
(Manville III), 517 F.3d 52, 58 (2d Cir. 2008); Manville I, 2004 12
WL 1876046, at *1, *22-23 ¶¶ 96, 101, 105. In all, Travelers 13
agreed to pay up to $360 million to the Statutory Plaintiffs, up 14
to $15 million to the Hawaii Plaintiffs, and up to $70 million to 15
the Common Law Plaintiffs, in three respective funds separate 16
from the Manville Trust. Manville I, 2004 WL 1876046, at *22-23 17
¶¶ 96, 101, 105. 18
Under the Agreements, the Direct Action Plaintiffs were to 19
be paid from the funds, but only after three conditions were 20
satisfied. Id. at *22 ¶¶ 96-100. These conditions, described in 21
detail immediately infra, concerned the breadth of an order to be 22
3 As noted by the Supreme Court in Travelers Indem. Co. v. Bailey, 557
U.S. 137, 143 n.2 (2009), these suits were not direct actions “in the terms of
strict usage,” because they sought “to hold Travelers liable for independent
wrongdoing rather than for a legal wrong by Manville.” Nevertheless, because
all courts in the course of this litigation have dubbed these suits “direct
actions,” we do so here. See In re Johns-Manville Corp. (Manville IV), 600
F.3d 135, 142 (2d Cir. 2010).
7

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entered by the bankruptcy court (“Clarifying Order”) regarding 1
the interpretation of the 1986 Orders, the finality of the 2
Clarifying Order, and various provisions regarding disposal of 3
the Direct Actions. 4
First, the Agreements required that the bankruptcy court, 5
once it approved the settlements, enter a “Clarifying Order.” 6
The Statutory and Hawaii Direct Action Settlement Agreements 7
required that the Clarifying Order “contain[] prohibitions 8
against Claims at least as broad as those contained in Exhibit 9
A.” App. at 231, 269. Similarly, the Common Law Direct Action 10
Agreement required that the Clarifying Order contain language 11
“substantially in the form” of Exhibit A. 4 Id. at 307. 12
Exhibit A of each Agreement was a proposed Clarifying Order 13
containing provisions barring all claims against Travelers 14
arising out of, or relating to, Travelers’ handling of asbestos- 15
related claims, including contribution and indemnity claims. The 16
proposed Clarifying Order also expressly barred the new, 17
nonderivative Direct Actions that were the subject of the 18
settlements. Finally, each Exhibit A conveyed that the proposed 19
Clarifying “Order is an order clarifying the Confirmation Order 20
[of the 1986 Orders]” and that all the barred claims listed 21
4 Although the language of the Common Law Direct Action Settlement
Agreement differs somewhat from that of the Statutory and Hawaii Direct Action
Settlement Agreements, we find, as did both the district court and the
bankruptcy court, that the distinctions are not meaningful with regard to the
issues on appeal. See In re Johns-Manville Corp. (Manville VI), 845 F. Supp.
2d 584, 588 & nn.4&6 (S.D.N.Y. 2012); In re Johns-Manville Corp. (Manville V),
440 B.R. 604, 612 n.12 (Bankr. S.D.N.Y. 2010). We therefore reject the Common
Law Settlement Counsel’s arguments that rely on supposed differences in the
Agreements’ language.
8

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within the proposed Clarifying Order were “covered by the 1
Confirmation Order and permanently enjoined as against Travelers, 2
which [was] released therefrom under the Confirmation Order.” 3
Id. at 245, 283. 4
Second, the Clarifying Order had to become a “Final Order” 5
under the Agreements’ definition, i.e., an order from which no 6
appeal is taken, or an order that has been “affirmed by the 7
highest court to which such order was appealed or certiorari has 8
been denied and the time to take any further appeal or petition 9
for certiorari shall have expired.” Id. at 228, 265, 304. 10
Third, another set of conditions precedent required either 11
the execution and delivery into escrow of at least 49,000 general 12
releases of claims (under the Statutory Direct Action Settlement 13
Agreement), at least 14,000 general releases of claims against 14
Travelers (under the Common Law Direct Action Settlement 15
Agreement), or dismissals with prejudice of all named plaintiffs’ 16
pending claims against Travelers (under the Hawaii Direct Action 17
Settlement Agreement). 18
With the Agreements in place, the parties moved for the 19
bankruptcy court’s approval in 2004. Manville I, 2004 WL 20
1876046, at *1. Various third parties filed objections, 21
including Chubb Indemnity Insurance Company (“Chubb”). Chubb had 22
issued asbestos-related insurance policies -- although it never 23
insured Manville -- and complained that any potential 24
contribution and indemnification claims it might have against 25
Travelers would be unlawfully barred if the Clarifying Order were 26
9

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entered by the bankruptcy court. Manville II, 340 B.R. at 54, 1
56; see also Manville IV, 600 F.3d at 143-44. Chubb and the 2
other objectors argued that the bankruptcy court lacked subject 3
matter jurisdiction to enjoin third parties’ Direct Actions and 4
related claims against nondebtors. Additionally, Chubb objected 5
on due process grounds, arguing that it could not be bound by the 6
Clarifying Order because it had never received constitutionally 7
sufficient notice of the 1986 Orders. Manville IV, 600 F.3d at 8
143, 147. 9
On August 17, 2004, the bankruptcy court rejected the 10
objections and approved all three Agreements. It also entered 11
the Clarifying Order (the “2004 Orders”). The language of the 12
Clarifying Order was substantially the same as the language 13
contained in each Agreement’s appended Exhibit A. The bankruptcy 14
court concluded that it had authority to enter both the 15
Clarifying Order and the 1986 Orders, and that the Direct Actions 16
-- and related contribution and indemnity claims -- were barred 17
by the 1986 Orders. 5 Manville I, 2004 WL 1876046, at *26-28 ¶¶ 18
1-9, *30-34 ¶¶ 17-35. 19
Chubb and the other objectors appealed. The district court 20
affirmed the bankruptcy court’s order in all material respects. 21
5 Specifically, the bankruptcy court determined that potential claims by
insurers such as Chubb were properly barred by the 1986 Orders. In re
Johns-Manville Corp. (Manville I), Nos. 82 B 11656, 82 B 11657, 82 B 11660, 82
B 11661, 82 B 11665, 82 B 11673, 82 B 11675, 82 B 11676(BRL), 2004 WL 1876046,
at *34 ¶ 38 (Bankr. S.D.N.Y. Aug. 17, 2004); see also id. at *33-34 ¶¶ 34-35.
Additionally, the bankruptcy court reasoned that a “judgment reduction
provision” “protect[ed] the interests of non-settling defendants in the direct
action claims so completely as to render their objections to the settlements
moot.” Id. at *34 ¶ 38.
10

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It concluded that the bankruptcy court had authority to enter the 1
Clarifying Order because it had jurisdiction to enter the 1986 2
Orders and that the Clarifying Order interpreted and enforced 3
those orders. Manville II, 340 B.R. at 59-67. The district 4
court also reasoned that Chubb, a sophisticated insurer, received 5
sufficient notice regarding its purported claims. Id. at 68. It 6
determined further that, even if notice in the usual sense was 7
lacking, Chubb’s claims could be foreclosed upon because of the 8
special nature of the remedial scheme at issue: reorganization 9
of the bankruptcy estate. Id. at 68-69. 10
The objectors appealed again, and this court vacated and 11
remanded, concluding that entry of the 1986 Orders (as 12
interpreted by the Clarifying Order) exceeded the proper bounds 13
of the bankruptcy court’s jurisdiction insofar as they enjoined 14
state-law claims, nonderivative of the debtor’s wrongdoing, that 15
did not seek recompense from the Manville corpus. Manville III, 16
517 F.3d at 61-68. Having vacated on these grounds, this court 17
deemed it unnecessary to reach Chubb’s due process argument. Id. 18
at 60 n.17. 19
The Supreme Court granted certiorari and then reversed. 20
Bailey, 557 U.S. at 137, 147. The Court held that the Direct 21
Actions were -- and always had been -- barred by the 1986 Orders, 22
and it concluded that this court had erred in reevaluating the 23
bankruptcy court’s jurisdiction to enter those orders: “the 1986 24
Orders became final on direct review over two decades ago”; 25
“whether the Bankruptcy Court had jurisdiction and authority to 26
11

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enter the injunction in 1986 was not properly before th[e Court] 1
in 2008 . . . .” Id. at 148. 2
The Court concluded that the Clarifying Order’s entry was a 3
proper exercise of the bankruptcy court’s jurisdiction because it 4
“plainly had jurisdiction to interpret and enforce its own prior 5
orders.” Id. at 151. The Clarifying Order, therefore, did not 6
expand the scope of the 1986 Orders. The Court did not 7
determine, however, whether any parties in particular were bound 8
by the 1986 Orders, nor did it assess the propriety, as a general 9
matter, of a bankruptcy court enjoining third-party claims 10
against nondebtors that were not derivative of the debtor’s 11
wrongdoing. See id. at 155. The Supreme Court remanded for this 12
court to consider whether Chubb was bound by the 1986 Orders and 13
the Clarifying Order. Id. at 155-56. 14
On remand, this court concluded that Chubb was not bound by 15
the 1986 Orders -- nor, by extension, the Clarifying Order -- 16
because it had not been afforded constitutionally sufficient 17
notice of the 1986 Orders and their attendant proceedings. 18
Manville IV, 600 F.3d at 138, 148-49, 158. Underpinning this 19
holding was the determination that the bankruptcy court 20
interpreted the 1986 Orders to have in personam, not just in rem, 21
effect. Id. at 153-54. This court expressly refused to 22
determine the effect of this holding on the Agreements, however, 23
12

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leaving remaining issues to be resolved by “the parties, with the 1
aid of the bankruptcy court.” Id. at 159. 6
2
In September 2010, counsel for the Direct Action Plaintiffs, 3
claiming that all the conditions precedent had been satisfied, 4
moved before the bankruptcy court to compel Travelers to make the 5
payments required by the Agreements. Travelers objected, 6
contending only that the breadth and finality conditions 7
precedent to payment under the Agreements were unsatisfied 8
because Chubb was now free to bring claims against it. In re 9
Johns-Manville Corp. (Manville V), 440 B.R. 604, 613-15 (Bankr. 10
S.D.N.Y. 2010). 11
The bankruptcy court granted the Direct Action Settlement 12
Counsel’s motions to compel. See id. at 615. The court 13
concluded that the disputed conditions precedent had been 14
satisfied. It reasoned that: (i) a Clarifying Order of the 15
required breadth had been entered in 2004, see id. at 613-14; 16
(ii) the Order became a “Final Order” when “it was affirmed by 17
the Supreme Court, the court of last resort, in Bailey on June 18
18, 2009,” id. at 614; and, (iii) even after Manville IV’s 19
holding that Chubb was not bound by the injunctions due to its 20
lack of notice, the Order enjoined the bargained-for breadth of 21
claims, id. It explicitly noted for the record that satisfaction 22
of the release/dismissal conditions precedent was not disputed by 23
6 Travelers filed petitions for writs of certiorari and mandamus with
the Supreme Court, and the petitions were denied on November 29, 2010. See
Travelers Indem. Co. v. Chubb Indem. Ins. Co., 131 S. Ct. 644 (2010).
13

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Travelers. Id. at 608. The bankruptcy court directed Travelers 1
to fulfill its payment obligations immediately. Id. at 615. 2
Proceedings regarding the propriety and amount, if any, of 3
prejudgment interest then began. Travelers sought to broaden the 4
issues by claiming, for the first time, that the Agreements’ 5
conditions precedent regarding disposal of the Direct Actions had 6
not been met. The bankruptcy court rejected this attempt on the 7
ground that Travelers had not asserted this issue in response to 8
the motion to compel. A final judgment was subsequently issued 9
against Travelers requiring it to pay over more than $500 million 10
(more than $65 million of which was prejudgment interest). 11
The district court reversed on February 29, 2012, holding 12
that the disputed conditions precedent had not been satisfied 13
because (i) the breadth of the language represented in each 14
Agreement’s Exhibit A had been narrowed by this court’s Manville 15
IV decision; and (ii) the Clarifying Order never became a “Final 16
Order” as defined in the Agreements. In re Johns-Manville Corp. 17
(Manville VI), 845 F. Supp. 2d 584, 592-96 (S.D.N.Y. 2012). The 18
district court therefore did not determine whether other 19
conditions precedent under the Agreements had been satisfied, nor 20
did it rule on matters pertaining to the bankruptcy court’s award 21
of prejudgment interest. This appeal followed. 22
DISCUSSION 23
We review a bankruptcy court’s decision that has 24
subsequently been appealed to the district court “independently.” 25
In re Baker, 604 F.3d 727, 729 (2d Cir. 2010). In doing so, we 26
14

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accept the bankruptcy court’s “factual findings unless clearly 1
erroneous but review[] its conclusions of law de novo.” Id. 2
a) Contested Conditions Precedent 3
The interpretation of unambiguous settlement-agreement terms 4
is a question of law subject to de novo review. See Tourangeau 5
v. Uniroyal, Inc., 101 F.3d 300, 307 (2d Cir. 1996). The 6
Agreements here are “governed by and construed in accordance with 7
the laws of the State of New York.” App. at 239, 276, 312. 8
Under New York law, “a written agreement that is complete, clear 9
and unambiguous on its face must be enforced according to the 10
plain meaning of its terms.” Greenfield v. Philles Records, 11
Inc., 98 N.Y.2d 562, 569 (2002). New York law also requires 12
strict compliance with settlement agreements, which are binding 13
and enforceable contracts between parties. IDT Corp. v. Tyco 14
Grp., S.A.R.L., 13 N.Y.3d 209, 213-14 (2009). Further, 15
“[e]xpress conditions must be literally performed; substantial 16
performance will not suffice.” MHR Capital Partners LP v. 17
Presstek, Inc., 12 N.Y.3d 640, 645 (2009). 18
1) Breadth and Finality of the Clarifying Order 19
The parties primarily contest whether: (i) the breadth of 20
the bankruptcy court’s Clarifying Order met the breadth 21
requirement in Exhibit A of the Agreements; and (ii) the 22
Clarifying Order became “final” within the definition of the 23
Agreements. These questions, of course, govern whether the 24
conditions precedent to Travelers’ obligation to pay have been 25
satisfied. We conclude that they have been satisfied. 26
15

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A) Breadth 1
Under both the Statutory and Hawaii Direct Action 2
Settlement Agreements, the relevant condition precedent requires 3
entry of “a Clarifying Order containing prohibitions against 4
Claims at least as broad as those contained in Exhibit A . . . .” 5
App. at 231, 269. Similarly, under the Common Law Direct Action 6
Agreement, the relevant condition precedent requires the “[e]ntry 7
of an order or orders of the Bankruptcy Court, issued pursuant to 8
the [1986 Orders] . . . substantially in the form attached hereto 9
as Exhibit A . . . .” Id. at 307. 10
We begin by observing that the injunctive language found in 11
each Agreement’s appended Exhibit A was included, nearly 12
verbatim, in the Clarifying Order. Travelers concedes as much. 13
But Travelers argues, and the district court agreed, that this 14
court’s holding in Manville IV diminished the reach of the 15
Clarifying Order because the order became “jurisdictionally void” 16
as to Chubb, 600 F.3d at 158, which failed to receive 17
constitutionally sufficient notice of the 1986 Orders. Travelers 18
asserts that, consequently, the Clarifying Order does not 19
“contain[] prohibitions against Claims at least as broad as those 20
in Exhibit A,” because Chubb could potentially bring a claim 21
against Travelers. Brief for Appellees at 40-41 (internal 22
quotation marks omitted). We disagree. 23
The Clarifying Order’s injunctive language was affirmed in 24
Bailey and has not been altered since. In Bailey, the Supreme 25
Court determined that the bankruptcy court had, in substance, 26
16

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properly interpreted the 1986 Orders in the Clarifying Order with 1
respect to the new, nonderivative Direct Actions: “The 2
Bankruptcy Court correctly understood that the Direct Actions 3
fall within the scope of the 1986 Orders . . . .” 557 U.S. at 4
148. The injunction that Bailey approved, therefore, bars not 5
only those traditional direct-action claims that sought redress 6
from Travelers based on Manville’s own wrongdoing, but also those 7
nonderivative claims against nondebtor Travelers that were the 8
subject of the 2002-2004 settlement negotiations. The Clarifying 9
Order, as a restatement of the 1986 Orders’ injunction, precludes 10
claimants who have brought any Direct Actions -- or related 11
indemnity or contribution claims -- from further prosecution of 12
those claims against Travelers. Id. at 149-50; Manville VI, 845 13
F. Supp. 2d at 595. 14
Travelers had maintained that the 1986 Orders enjoined the 15
Direct Actions throughout the 2002-2004 settlement negotiations, 16
Manville I, 2004 WL 1876046, at *21 ¶ 93, but its position was 17
not vindicated until Bailey was issued. Bailey thus affirmed the 18
scope of the injunctive language contained within the Agreements’ 19
Exhibit As, and the Clarifying Order bars all such claims -- all 20
it was meant to do. 21
The fact that Chubb may collaterally attack the 22
applicability of the Clarifying Order to actions it might bring 23
-- because it never received constitutionally sufficient notice 24
-- does not alter our conclusion. The error in Travelers’ 25
reading of the Clarifying Order stems from the conflation of two 26
17

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separate issues: (i) a party’s ability to collaterally attack an 1
order for lack of constitutional notice; and (ii) the integrity 2
of that order and the breadth of claims it bars. 3
Travelers’ reading asks us to adopt an interpretation of the 4
Clarifying Order that could not reasonably have been intended by 5
the parties, whatever Travelers’ private hopes and dreams, and is 6
not supported by the language of the Agreements. The 7
interpretation proposed by Travelers would have required the 8
bankruptcy court either to: (i) certify that all potential 9
claimants -- all entities and individuals on the planet, from now 10
until the end of time -- have received constitutionally 11
sufficient notice of the 1986 Orders and their relevant 12
proceedings; or (ii) bar all claimants whether or not they had 13
constitutionally sufficient notice. But neither action could 14
have been intended by sophisticated parties because each would 15
have been well beyond the bankruptcy court’s power. Undoubtedly, 16
that is the reason why no such requirement is found in the 17
Agreements’ terms or their Exhibit As, whatever Travelers’ 18
“secret or subjective intent.” Klos v. Lotnicze, 133 F.3d 164, 19
168 (2d Cir. 1997). 20
The district court disagreed that Travelers’ position 21
required the bankruptcy court “‘to enter an order clarifying that 22
all Direct Action claims were enjoined . . . regardless of 23
whether the parties . . . received constitutionally sufficient 24
notice of the 1986 Orders.’” Manville VI, 845 F. Supp. 2d at 593 25
(quoting Manville V, 440 B.R. at 613). It correctly noted that 26
18

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Travelers is not seeking to enforce an injunction against 1
claimants in an unconstitutional manner but is asking only for a 2
recognition that the disputed condition precedent was never 3
fulfilled. However, this argument, like the argument rejected 4
above, proceeds on the erroneous premise that the Agreements 5
called for a Clarifying Order that bound entities without 6
constitutionally sufficient notice. As such, the Agreements, or 7
the ensuing Clarifying Order, would have been a nullity, and 8
common canons of contract construction call upon us to reject 9
such an interpretation, see Restatement (Second) of Contracts § 10
203 (1981), which is not a difficult task where, as here, such an 11
interpretation finds no support in the language. 12
Moreover, Travelers’ interpretation amounts to a contractual 13
term that is incapable of ever being fulfilled, because some 14
claimant somewhere on the planet could always appear to attack 15
the order collaterally. See id. § 76 cmt. b. Such an impossible 16
condition -- with no support in contractual language and clearly 17
not intended by the parties -- would have rendered the contract a 18
nullity from its inception. See id. 19
Travelers’ interpretation must be rejected for the 20
additional reason that the parties bargained only for a 21
clarification, not an expansion, of the 1986 Orders, and the 22
jurisdictional reach of those Orders was already at issue at the 23
time of negotiations. Leaving aside the separate issue, 24
discussed supra, of whether the bankruptcy court could have 25
extended the Orders’ scope, the portions of the Agreements at 26
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issue here evidence no intent by the parties that the Clarifying 1
Order would do so. Manville IV, therefore, was rooted in an 2
interpretation of the breadth of the 1986 and Clarifying Orders, 3
but that breadth had already been determined to be coextensive 4
with respect to the issues here and could not have been affected 5
by our decision in that case. 6
Rooted in the 1986 Orders, the Clarifying Order could bar 7
claims only by those parties that received constitutionally 8
sufficient notice of the 1986 Orders and relevant proceedings. 9
As a party to the proceedings leading up to the 1986 Orders, 10
Travelers knew the scope of notice attendant to those 11
proceedings. For example, Travelers knew that an FCR was 12
appointed by the bankruptcy court to represent the interests of 13
future asbestos claimants, but that no equivalent FCR had been 14
appointed regarding the interests of future indemnity and 15
contribution claimants. 16
To be sure, had Travelers believed that the bankruptcy court 17
exercised in rem as opposed to in personam jurisdiction in 18
entering the 1986 Orders, it might also have believed that the 19
Clarifying Order’s injunction barred Chubb’s attack. See, e.g., 20
Manville II, 340 B.R. at 68-69. Of course, the in personam 21
nature of the jurisdiction exercised by the bankruptcy court in 22
releasing nondebtors from third-party claims demands that any 23
party barred by the 1986 Orders (and by extension, the Clarifying 24
Order) must have received constitutionally sufficient notice 25
accordant with that jurisdiction. 26
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But Travelers recognized the possibility of this: “In its 1
October 26, 2009 post-argument submission, Travelers argued that 2
the bankruptcy court’s notice procedures relating to the 1986 3
Orders were ‘wholly consistent’ with the exercise of ‘both in rem 4
jurisdiction and in personam jurisdiction over all Chubb 5
entities.’” Manville IV, 600 F.3d at 154 n.14. Travelers also 6
conceded that the claims underlying the Direct Actions, which 7
were the subject of the 2002-2004 negotiations, were 8
“unimaginable” during the proceedings that led to the 1986 9
Orders. Travelers’ Reply Brief at 5, Manville V (No. 82-11656- 10
brl); App. at 642. 11
Nonetheless, the pertinent portions of the Agreements did 12
not provide for an injunction any greater than that contained 13
within the 1986 Orders, nor did they address issues of notice or 14
due process. A court “will not imply a term where the 15
circumstances surrounding the formation of the contract indicate 16
that the parties, when the contract was made, must have foreseen 17
the contingency at issue and the agreement can be enforced 18
according to its terms.” Reiss v. Fin. Performance Corp., 97 19
N.Y.2d 195, 199 (2001). We decline Travelers’ invitation to look 20
beyond the Agreements’ obvious meaning and to consider Travelers’ 21
subjective hopes. 22
We therefore hold the Clarifying Order contains an 23
injunction as broad as, or substantially in the form of, that 24
contained in the Agreements’ Exhibit As. 25
26
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B) Finality 1
We next consider whether the Clarifying Order became final 2
and unappealable after the Supreme Court’s ruling in Bailey. 3
Travelers argues here, and the district court concluded, that 4
when Manville IV “reversed” the district court’s decision “as to 5
Chubb,” 845 F. Supp. 2d at 594, it rendered the Clarifying Order 6
not final. We conclude, as the bankruptcy court did, that the 7
Clarifying Order became final under the Agreements’ definition 8
once Bailey was decided by the Supreme Court. 9
As noted, under the Agreements, a “Final Order” is an order 10
from which no appeal is taken or one that has been “affirmed by 11
the highest court to which such order was appealed or certiorari 12
has been denied and the time to take any further appeal or 13
petition for certiorari shall have expired.” App. at 227-28, 14
265, 304. 15
In reviewing the 2004 Orders, Bailey rejected the 16
jurisdictional challenges brought by Chubb and the other 17
objectors. It determined that the 1986 Orders, having been final 18
for decades, were no longer subject to challenges to the 19
bankruptcy court’s power to enjoin third-parties from bringing 20
claims that did not affect the res of the bankruptcy estate 21
against nondebtors. Bailey, 557 U.S. at 152 (“[O]nce the 1986 22
Orders became final on direct review (whether or not proper 23
exercises of bankruptcy court jurisdiction and power), they 24
became res judicata to the parties and those in privity with them 25
. . . .” (internal quotation marks omitted)). The Court also 26
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held, just as this court had in Manville III, that the bankruptcy 1
court “plainly had [subject matter] jurisdiction to interpret and 2
enforce its own prior orders.” Id. at 151. 3
Therefore, the pertinent portion of the injunction contained 4
within the Clarifying Order, as an extension of the 1986 Orders, 5
was similarly not subject to challenges regarding the bankruptcy 6
court’s subject matter jurisdiction. Once Bailey determined that 7
the bankruptcy court had jurisdiction to interpret the scope of 8
the 1986 Orders, the Clarifying Order became a “Final Order” 9
under the Agreements’ definition. 10
Travelers argues that: (i) Bailey’s remand to this court, 11
and (ii) this court’s subsequent reversal of the district court 12
in Manville IV, indicate that the Clarifying Order never became 13
final. Neither argument is persuasive. 14
First, the Supreme Court in Bailey reversed Manville III’s 15
vacatur of the 2004 Orders (for the bankruptcy court’s purported 16
lack of jurisdiction). This effectively reinstated the 2004 17
Orders, including the Clarifying Order. The Supreme Court’s 18
remand with respect to Chubb’s due process argument had no 19
bearing on the Clarifying Order’s finality. The case was 20
remanded for a determination of whether Chubb failed to receive 21
constitutionally sufficient notice of the 1986 Orders and whether 22
Chubb was thus bound by them and the Clarifying Order. 557 U.S. 23
at 155. That issue was then decided by this court in Manville 24
IV. 25
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Second, while Manville IV reversed as to Chubb, it did not 1
alter any aspect of the Clarifying Order, the meaning of which is 2
discussed in detail above. The fact that Chubb is not bound by 3
the 1986 Orders does not, therefore, render the 1986 Orders any 4
less “final.” In sum, neither Bailey nor this court’s holding in 5
Manville IV deprived the Clarifying Order of finality. 6
As the Supreme Court recognized, “the 1986 Orders became 7
final on direct review over two decades ago.” 557 U.S. at 148. 8
It would defy logic to hold that the Clarifying Order, as an 9
extension of the 1986 Orders, is not “final” simply because Chubb 10
did not receive constitutionally adequate notice of the 1986 11
proceedings. If the 1986 Orders are final despite the 12
inapplicability of the orders to Chubb, it follows that the 13
Clarifying Order is just as final. 14
Therefore, the Clarifying Order became final, as that term 15
is defined in the Agreements, once Bailey was issued. 16
2) Conditions Precedent Regarding Releases/Dismissals 17
We next consider the Agreements’ conditions precedent that 18
require either the escrowing of a certain number of releases or 19
the dismissal of claims with prejudice. We hold that Travelers’ 20
arguments in that regard are waived. 21
For Travelers’ payment obligation to mature under the Hawaii 22
Direct Action Settlement, plaintiffs must dismiss with prejudice 23
all claims against Travelers. Under the Common Law Direct Action 24
Settlement Agreement, at least 14,000 general releases must be 25
24

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executed and delivered into escrow before Travelers is required 1
to pay into the settlement fund. 2
Travelers argues that these conditions precedent have not 3
been satisfied. Appellants assert that Travelers has waived 4
these arguments by failing to raise them properly before the 5
bankruptcy court in its papers in opposition to appellants’ 6
motions to compel. 7
The motions to compel by their very nature, and explicitly 8
to boot, put the various issues regarding satisfaction of the 9
conditions precedent in play. Travelers’ opposition to the 10
motions recognized this by claiming that the conditions precedent 11
regarding the breadth and finality of the Clarifying Order were 12
not satisfied. As a result, the bankruptcy court understood, and 13
noted explicitly, that Travelers raised no objection regarding 14
the release/dismissal conditions precedent. It stated: 15
Pursuant to the Settlements, Travelers’ 16 payment obligations are contingent upon the 17 satisfaction of three conditions precedent. 18 These conditions, stated in general terms, 19 are as follows: (a) entry of an order by 20 this Court that becomes a “Final Order” 21 clarifying that the Direct Actions were, and 22 had always been, barred by this Court’s 23 injunction contained in the 1986 24 Orders . . .; (b) entry of an order, that 25 becomes a “Final Order” approving the 26 proposed Settlements; and (c) the execution 27 and delivery into escrow of a specified 28 number of General Releases . . . . None of 29 the Parties disputes that conditions (b) and 30 (c) have been satisfied. 31
32 Manville V, 440 B.R. at 608 (footnote omitted). 33
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Once the bankruptcy court determined that the Clarifying 1
Order met the breadth and finality requirements, it ordered 2
briefing and held oral argument regarding the issue of whether 3
plaintiffs were entitled to interest on the settlement proceeds 4
based on Travelers’ breach. Id. at 615. The arguments that 5
Travelers sought to raise were that the motions to compel lacked 6
adequate supporting evidence that the release/dismissal 7
conditions had been met. 8
The bankruptcy court did not rule on the merits of those 9
arguments. At the oral argument, the bankruptcy court noted 10
Travelers’ earlier concession that certain conditions precedent 11
had been satisfied: “If I recall back in all of the Sturm [and] 12
Drang here, we had conditions which we’ll label A, B and C. And 13
I think Travelers certainly conceded that B and C were met and 14
claimed that A was not met. I opined otherwise. And that’s 15
where we stand.” App. at 857. 16
On appeal to the district court, Travelers argued again that 17
the release/dismissal conditions had not been satisfied. The 18
district court did not reach these arguments, having found that 19
the conditions precedent regarding scope and finality had not 20
been fulfilled. See Manville VI, 845 F. Supp. 2d at 596. 21
These arguments were available to Travelers in the 22
bankruptcy court, and Travelers has not offered any reason for 23
its failure to raise these issues in a timely manner in that 24
court. Although we have discretion to consider a waived argument 25
where necessary to avoid manifest injustice, “the circumstances 26
26

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normally do not militate in favor of an exercise of discretion to 1
address . . . new arguments on appeal where those arguments were 2
available to the [parties] below and they proffer no reason for 3
their failure to raise the arguments below.” In re Nortel 4
Networks Corp. Sec. Litig., 539 F.3d 129, 133 (2d Cir. 2008) 5
(internal quotation marks omitted). 6
In its brief on appeal, Travelers notes only that it raised 7
these issues in the district court and does not claim to have 8
raised them in its opposition in the bankruptcy court to the 9
motions to compel. In opposing those motions, Travelers argued 10
to the bankruptcy court only that the condition precedent 11
regarding breadth and finality called for denial of the motions. 12
Clearly, a failure to satisfy other conditions precedent should 13
have been raised at that time. Instead, Travelers, which has had 14
the benefit of competent, imaginative, and meticulous counsel, 15
waited until the bankruptcy court disposed of the arguments 16
before it on the motions to compel and turned to the prejudgment 17
interest question. Under these circumstances, we see no reason 18
to exercise our discretion to entertain Travelers’ untimely 19
arguments. We, therefore, consider these arguments waived. 20
c) Calculation of Prejudgment Interest 21
Finally, we consider whether the bankruptcy court’s award of 22
prejudgment interest was appropriate and, if so, whether the 23
court erred in determining the date from which the award was 24
calculated. 25
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Travelers argues that the award is inappropriate because the 1
Agreements do not include an express provision regarding 2
prejudgment interest. Under New York law, however, the 3
beneficiaries of the settlements are entitled to statutorily 4
prescribed interest: “Interest shall be recovered upon a sum 5
awarded because of a breach of performance of a contract . . . .” 6
N.Y. C.P.L.R. 5001(a). We therefore hold that the bankruptcy 7
court did not err in its decision to award such interest. 8
Travelers argues further that the bankruptcy court erred in 9
determining the date interest began to accrue. A court’s 10
decision to award prejudgment interest running from a date 11
certain is a question of fact, see Ginett v. Computer Task Grp., 12
Inc., 962 F.2d 1085, 1101 (2d Cir. 1992), subject to reversal 13
only if clearly erroneous. Interest accrues “from the earliest 14
ascertainable date the cause of action existed.” N.Y. C.P.L.R. 15
5001(b). The bankruptcy court correctly found that Travelers’ 16
payment obligations have been “due and owing since June 18, 17
2009,” when the Supreme Court upheld the Clarifying Order in 18
Bailey. Manville V,440 B.R. at 615. 19
Travelers asserts that no “Final Order” as defined by the 20
Agreements could have existed until the proceedings were 21
concluded, which, according to Travelers, was November 29, 2010, 22
when the Supreme Court denied Travelers’ petitions for certiorari 23
and mandamus with respect to Manville IV. This argument assumes 24
incorrectly that Chubb’s due process claim had any bearing on the 25
finality of the Clarifying Order. As discussed above, however, 26
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that is not the case. The bankruptcy court did not err in its 1
assessment of prejudgment interest. 2
CONCLUSION 3
We have considered appellees’ remaining arguments and find 4
them to be without merit. For the foregoing reasons, the order 5
of the district court is vacated, and we remand with instructions 6
to reinstate the order of the bankruptcy court. 7
8
29

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