bk.ct. - emunoz.net indem. co. v. bailey 6 129 s. ct. 2195, *174 l. ed. 2d 99, **2009 u.s. lexis...

Travelers Indem. Co. v. Bailey 1129 S. Ct. 2195, *174 L. Ed. 2d 99, **2009 U.S. LEXIS 4537 Travelers-v-Bailey.wpd

HECHOS: Confirmation of Manville’s Chapter 11 plan in 1986 included an injunctive reliefprotecting its insurers (insurers that funded a trust to compensate asbestos-relatedclaims ) by releasing those insurers from any "Policy Claims," which werechanneled to the Trust. "Policy Claims" included "claims" and "allegations"

In 2004 Travelers obtained an order (Bk.Ct.) clarifying that the 1986 orderenjoined all actions without drawing distinction between“insurer actions” and“independent actions” (actions against the insurer for its own wrongdoings).

ISSUES: Whether the 2004 order (clarification order) expanded the 1986 order’s scope, ormerely and correctly interpreted it;

whether the 1986 order could validly (jurisdiction) enjoin the “independentactions”.

Bk.Ct. ORDERclarifying that the 1986 order enjoined all actions (withoutdrawing distinction between“insurer actions” and “independent actions”);no jurisdictional flaw found.

2nd Cir. (Wesley, Sotomayor, and Calabresi) REVERSED finding nojurisdictional authority for a Bk.Ct.’s injunction over “independentactions”; and construing the 1986 order accordingly: “independentactions” not enjoined.

S.Ct. (7 vs 2) Notably – and expressly stating that whether the Bankruptcy Courthad jurisdiction and authority to enter the injunction in 1986 was notproperly before the Second Circuit, and is not properly before it –REVERSES, AND REINSTATES the Bk.Ct.’s clarification.

HELD: “We hold that the terms of the injunction bar the actions and that thefinality [res judicata] of the Bankruptcy Court's orders following theconclusion of direct review generally stands in the way of challenging theenforceability of the injunction.” [The 1986 injunction had passed a directreview back then, when it was appealed on grounds other thanjurisdictional.]

SOUTER, J., delivered the opinion of the Court, in which ROBERTS, C.J., and SCALIA, KENNEDY, THOMAS, BREYER, and ALITO, JJ.,joined. STEVENS, J., filed a dissenting opinion, in which GINSBURG, J., joined.

Del disenso de Stevens:


... it is worth asking why Travelers paid [$ 445 million ] in 2004 to three newsettlement funds [***48] in exchange for the Bankruptcy Court's order"clarifying" that the independent actions "are -- and always have been --permanently barred" by the 1986 injunction *** If the 1986 injunction (Sic) wereas clear as the Court assumes, surely Travelers would not have paid $ 445 million-- more than five times the amount of its initial contribution to the Manville Trust-- to obtain a redundant piece of paper...

SOUTER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and SCALIA,KENNEDY, THOMAS, BREYER, and ALITO, JJ., joined. STEVENS, J., filed a dissentingopinion, in which GINSBURG, J., joined.

OPINION BY: SOUTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

DISSENT BY: STEVENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


129 S. Ct. 2195, *; 174 L. Ed. 2d 99, **;

2009 U.S. LEXIS 4537, ***; Bankr. L. Rep. (CCH) P81,505

THE TRAVELERS INDEMNITY COMPANY, ET AL., PETITIONERS v. PEARLIE

BAILEY ET AL. COMMON LAW SETTLEMENT COUNSEL, PETITIONER v.

PEARLIE BAILEY ET AL.

Nos. 08-295, 08-307

SUPREME COURT OF THE UNITED STATES

129 S. Ct. 2195; 174 L. Ed. 2d 99; 2009 U.S. LEXIS 4537; Bankr. L. Rep. (CCH) P81,505; 21Fla. L. Weekly Fed. S 932

March 30, 2009, Argued

June 18, 2009, Decided* *Together with No. 08-307, Common Law Settlement Counsel v.Bailey et al., also on certiorari to the same court.

NOTICE:

The LEXIS pagination of this document is subject to change pending release of the finalpublished version.

PRIOR HISTORY: [***1] ON WRITS OF CERTIORARI TO THEUNITED STATES COURT OF APPEALSFOR THE SECOND CIRCUIT.Johns-Manville Corp. v. Chubb Indem. Ins.Co. (In re Johns-Manville Corp.), 517 F.3d52, 2008 U.S. App. LEXIS 3228 (2d Cir.N.Y., 2008)

DISPOSITION: Reversed and remanded.

CASE SUMMARYPROCEDURALPOSTURE: A bankruptcy court found thatan injunction in a debtor's reorganizationplan, which barred actions against petitionerliability insurers of the debtor, applied tolawsuits brought directly against the insurers

by respondent claimants. Upon the grant of awrit of certiorari, the insurers appealed thejudgment of the U.S. Court of Appeals forthe Second Circuit which held that theclaimants' lawsuits were not subject to thebankruptcy injunction.

OVERVIEW: The insurers funded a trust toaddress asbestos-related claims against thedebtor, and the debtor's plan enjoinedactions against the insurers related to thesubject policies. The insurers contended thatthe injunction applied to bar the claimants'lawsuits which alleged that the insurersconcealed the dangers of asbestos, and thatthe injunction was within the bankruptcycourt's jurisdiction. The U.S. Supreme Courtheld that the bankruptcy injunction barred


the claimants' actions and that jurisdiction toissue the injunction was not subject tochallenge. Despite claimants' assertion thatactions only related to insurance coverage ifthey sought recovery based on the insurers'obligations to the debtor, the unambiguouslanguage of the injunction applied to theclaimants' actions since the actions regardingconcealment of the dangers of the debtor'sasbestos products clearly related to theinsurers' coverage of the debtor's asbestosliability, and there was no language limitingthe injunction to suits based upon thedebtor's liability. Further, since theinjunction order became final on directreview, jurisdiction to issue the injunctionwas not subject to collateral challenge.

OUTCOME: The judgment holding that theinjunction did not bar the claimants' actionswas reversed, and the case was remanded forfurther proceedings. 7-2 Decision; 1 Dissent.

CORE TERMS: insurer, settlement, directaction, injunction, enjoin, asbestos,independent actions, clarifying, enjoined,settling, wrongdoing, insurance policies,collateral attack, reorganization, directreview, subject-matter, insurance coverage,derivative, jurisdictional, nondebtor,bankruptcy estate, misconduct,unambiguous, claimants, res judicata,indirectly, indemnity, prior orders,enjoining, exceeded

LexisNexis® Headnotes Hide

Governments > Legislation > Interpretation HN1 In a statute, the phrase "in relation to"is expansive. More Like This Headnote

Governments > Courts > Authority to

Adjudicate HN2 Where the plain terms of a court orderunambiguously apply, they are entitled totheir effect. More Like This Headnote

Governments > Courts > Authority toAdjudicate HN3 A court should enforce a court order, apublic governmental act, according to itsunambiguous terms. More Like ThisHeadnote

Civil Procedure > Jurisdiction > SubjectMatter Jurisdiction > General Overview HN4 Subject-matter jurisdiction may not beattacked collaterally. More Like ThisHeadnote | Shepardize: Restrict ByHeadnote

SYLLABUS

[*2196] As part of the 1986 reorganizationplan of the Johns-Manville Corporation(Manville), an asbestos supplier andmanufacturer of asbestos-containingproducts, the Bankruptcy Court approved asettlement providing that Manville'sinsurers, including The Travelers IndemnityCompany and related companies (Travelers),would contribute to the corpus of theManville Personal Injury Settlement Trust(Trust), and releasing those insurers fromany "Policy Claims," which were channeledto the Trust. "Policy Claims" include, asrelevant here, "claims" and "allegations"against the insurers "based upon, arising outof or relating to" the Manville insurancepolicies. The settlement agreement andreorganization plan were approved by theBankruptcy Court (1986 Orders) and wereaffirmed by the District Court and the


Second Circuit. Over a decade laterplaintiffs began filing asbestos actionsagainst Travelers in state courts (DirectActions), often seeking to recover fromTravelers not for Manville's wrongdoing butfor Travelers' own alleged violations of stateconsumer-protection statutes [***2] or ofcommon law duties. Invoking the 1986Orders, Travelers asked the BankruptcyCourt to enjoin 26 Direct Actions.Ultimately, a settlement was reached, inwhich Travelers agreed to make payments tocompensate the Direct Action claimants,contingent on the court's order clarifying thatthe Direct Actions were, and remained,prohibited by the 1986 Orders. [*2197] Thecourt made extensive factual findings,uncontested here, concluding that Travelersderived its knowledge of asbestos from itsinsurance relationship with Manville andthat the Direct Actions are based on acts oromissions by Travelers arising from orrelated to the insurance policies. It thenapproved the settlement and entered an order(Clarifying Order), which provided that the1986 Orders barred the pending DirectActions and various other claims. Objectorsto the settlement (respondents here)appealed. The District Court affirmed, butthe Second Circuit reversed. Agreeing thatthe Bankruptcy Court had jurisdiction tointerpret and enforce the 1986 Orders, theCircuit nevertheless held that theBankruptcy Court lacked jurisdiction toenjoin the Direct Actions because thoseactions sought not to recover based onManville's [***3] conduct, but to recoverdirectly from Travelers for its own conduct.

Held: The terms of the injunction bar theDirect Actions against Travelers, and thefinality of the Bankruptcy Court's 1986

Orders generally stands in the way ofchallenging their enforceability. Pp. 9-18.

(a) The Direct Actions are "Policy Claims"enjoined as against Travelers by the 1986Orders, which covered, inter alia, "claims"and "allegations" "relating to" Travelers'insurance coverage of Manville. In a statute,"[t]he phrase 'in relation to' is expansive,"Smith v. United States, 508 U.S. 223, 237,113 S. Ct. 2050, 124 L. Ed. 2d 138, and so isits reach here. While it would be possible tosuggest that a "claim" only relates toTravelers' insurance coverage if it seeksrecovery based upon Travelers' specificcontractual obligation to Manville,"allegations" is not amenable to such anarrow construction and clearly reachesfactual assertions that relate in a morecomprehensive way to Travelers' dealingswith Manville. The Bankruptcy Court'sdetailed factual findings place the DirectActions within the terms of the 1986 Orders.Contrary to respondents' argument, the 1986Orders contain no language limiting "PolicyClaims" to claims derivative of [***4]Manville's liability. Even if, before the entryof the 1986 Orders, Travelers understood theproposed injunction to bar only suchderivative claims, where a court order's plainterms unambiguously apply, as they do here,they are entitled to their effect. If it isblack-letter law that an unambiguous privatecontract's terms must be enforcedirrespective of the parties' subjective intent,it is also clear that a court, such as theBankruptcy Court here, should enforce acourt order, a public governmental act,according to its unambiguous terms. Pp.10-13.

(b) Because the 1986 Orders became final


on direct review over two decades ago,whether the Bankruptcy Court hadjurisdiction and authority to enter theinjunction in 1986 was not properly beforethe Second Circuit in 2008 and is notproperly before this Court. The BankruptcyCourt plainly had jurisdiction to interpretand enforce its own prior orders, see LocalLoan Co. v. Hunt, 292 U.S. 234, 239, 54 S.Ct. 695, 78 L. Ed. 1230, and it explicitlyretained jurisdiction to enforce itsinjunctions when it issued the 1986 Orders.The Second Circuit erred in holding the1986 Orders unenforceable according totheir terms on the ground that theBankruptcy Court had exceeded [***5] itsjurisdiction in 1986. On direct appeal of the1986 Orders, any objector was free to arguethat the Bankruptcy Court had exceeded itsjurisdiction, and the District Court or Courtof Appeals could have raised such concernssua sponte. But once those orders becamefinal on direct review, they became resjudicata to the "'parties and those in privitywith them.'" Nevada v. United States, 463U.S. 110, 130, 103 S. Ct. 2906, 77 [*2198] L. Ed. 2d 509. So long as respondents orthose in privity with them were parties toManville's bankruptcy proceeding, and weregiven a fair chance to challenge theBankruptcy Court's subject-matterjurisdiction, they cannot challenge it now byresisting enforcement of the 1986 Orders.The Second Circuit's willingness to entertainthis collateral attack cannot be squared withres judicata and the practical necessityserved by that rule. Almost a quarter-centuryafter the 1986 Orders were entered, the timeto prune them is over. Pp. 13-16.

(c) This holding in narrow. The Courtneither resolves whether a bankruptcy court,

in 1986 or today, could properly enjoinclaims against nondebtor insurers that arenot derivative of the debtor's wrongdoing,nor decides whether any particularrespondent is bound [***6] by the 1986Orders, which is a question that the SecondCircuit did not consider. Pp. 17-18.

517 F.3d 52, reversed and remanded.

COUNSEL: Barry R. Ostrager argued thecause for petitioners.

Samuel Issacharoff argued the cause forrespondents Cascino Asbestos Claimants.

Jacob C. Cohn argued the cause forrespondent Chubb Indemnity InsuranceCompany.

JUDGES: SOUTER, J., delivered theopinion of the Court, in which ROBERTS,C. J., and SCALIA, KENNEDY, THOMAS,BREYER, and ALITO, JJ., joined.STEVENS, J., filed a dissenting opinion, inwhich GINSBURG, J., joined.

OPINION BY: SOUTER

OPINION

[**103] JUSTICE SOUTER delivered theopinion of the Court.

As an element of the 1986 reorganizationplan of the Johns-Manville Corporation(Manville), the United States BankruptcyCourt for the Southern District of New Yorkenjoined certain lawsuits against Manville'sinsurers, including The Travelers IndemnityCompany and its affiliates (Travelers). Thequestion is whether the injunction bars


state-law actions against Travelers based onallegations either of its own wrongdoingwhile acting as Manville's insurer or of itsmisuse of information obtained fromManville as its insurer. We hold that theterms of the injunction bar the actions andthat the finality of the Bankruptcy Court'sorders following the conclusion of directreview generally stands in the way ofchallenging the enforceability of theinjunction.

I

From the 1920s to the 1970s, Manville was,by most [***7] accounts, the largestsupplier of raw asbestos and manufacturer ofasbestos-containing products in the UnitedStates, In re Johns-Manville Corp., 517 F.3d52, 55-56 (CA2 2008), and for much of thattime Travelers was Manville's primaryliability insurer. In re Johns-Manville Corp.,No. 82 B 11656 etc. (Bkrtcy. Ct. SDNY2004), App. to Pet. for Cert. in No. 08-295,pp. 111a-112a (hereinafter [*2199] Bkrtcy.Ct. Op.). As studies began to link asbestosexposure to respiratory disease andthousands of lawsuits were filed againstManville, Travelers, as the insurer, workedclosely with Manville to learn what itsinsured knew and to assess the dangers ofasbestos exposure; it evaluated Manville'spotential liability and defenses, and paidManville's litigation costs. Id., at 114a-117a,121a-122a. In 1982, the prospect ofoverwhelming liability led Manville to filefor bankruptcy protection in the SouthernDistrict of New York.

It thus became incumbent on the BankruptcyCourt to devise "a plan of reorganization for[Manville] which would provide for

payment to holders of present or knownasbestos health related claims . . . and [to]those persons who had not yet manifested aninjury but who would manifest [***8]symptoms of asbestos-related illnesses atsome future time." In re Johns-ManvilleCorp., 97 B. R. 174, 176 (Bkrtcy. Ct. SDNY1989). The ensuing reorganization plancreated the Manville Personal InjurySettlement Trust (Trust) to pay all asbestosclaims against Manville, which would bechanneled to the Trust. See Kane v.Johns-Manville Corp., 843 F.2d 636,640-641 (CA2 1988); In re Johns-ManvilleCorp., 340 B. R. 49, 54 (SDNY 2006). TheTrust has since paid out more than $ 3.2billion to over 600,000 claimants. Bkrtcy.Ct. Op. 136a-137a.

In the period leading up to thereorganization, Manville and its insurerslitigated over the scope and limits of liabilitycoverage, and Travelers faced suits by thirdparties, such as Manville factory workersand vendors of Manville products, seekingcompensation under the insurance policies.There was also litigation among the insurersthemselves, who brought various indemnityclaims, [**104] contribution claims, andcross-claims. Id., at 132a-134a. In asettlement described as the "cornerstone" ofthe Manville reorganization, the insurersagreed to provide most of the initial corpusof the Trust, with a payment of $ 770million to the bankruptcy estate, $ [***9]80 million of it from Travelers. MacArthurCo. v. Johns-Manville Corp., 837 F.2d 89,90 (CA2 1988); Bkrtcy. Ct. Op. 134a; In reJohns-Manville Corp., 68 B. R. 618, 621(Bkrtcy. Ct. SDNY 1986).

There would have been no such payment


without the injunction at the heart of thepresent dispute. The December 18, 1986,order of the Bankruptcy Court approving theinsurance settlement agreements (InsuranceSettlement Order) provides that, upon theinsurers' payment of the settlement funds tothe Trust, "all Persons are permanentlyrestrained and enjoined from commencingand/or continuing any suit, arbitration orother proceeding of any type or nature forPolicy Claims against any or all members ofthe Settling Insurer Group." App. to Pet. forCert. in No. 08-295, at 446a. The InsuranceSettlement Order goes on to provide that theinsurers are "released from any and allPolicy Claims," which are to be channeled tothe Trust. Ibid. The order defines "PolicyClaims" as "any and all claims, demands,allegations, duties, liabilities and obligations(whether or not presently known) whichhave been, or could have been, or might be,asserted by any Person against . . . any or allmembers of the Settling [***10] InsurerGroup based upon, arising out of or relatingto any or all of the Policies." Id., at 439a.The insurers were entitled "to terminate thesettlements if the injunctive orders [were]not issued or if they [were] set aside onappeal." MacArthur, supra, at 90.

The Insurance Settlement Order wasincorporated by reference in the BankruptcyCourt's December 22, 1986, orderconfirming Manville's Second Amended andRestated Plan of Reorganization(Confirmation [*2200] Order). 1 App. toPet. for Cert. in No. 08-295, at 271a-272a.Both the Confirmation Order and theInsurance Settlement Order (collectively,1986 Orders) were affirmed by the DistrictCourt, see In re Johns-Manville Corp., 78 B.R. 407 (SDNY 1987), and the Court of

Appeals for the Second Circuit, seeMacArthur, supra; Kane, supra.

FOOTNOTES

1 The Confirmation Order itselfcontains an additional injunctionbarring certain claims against thesettling insurance companies. Bkrtcy.Ct. Op. 286a-288a. That injunctiondoes not bear on our decision, andwe do not consider it.

Nonetheless, over a decade later plaintiffsstarted filing asbestos actions againstTravelers in various state courts, cases thathave been spoken of in this litigation asDirect [***11] Actions. They are of twosorts. The Statutory Direct Actions arebrought under state consumer-protectionstatutes, and allege that Travelers conspiredwith other insurers and with asbestosmanufacturers to hide the dangers ofasbestos and to raise a fraudulent "state ofthe art" (or "no duty to warn") defense topersonal injury claims. Bkrtcy. Ct. Op.140a-143a. The Common Law DirectActions claim that Travelers violatedcommon law duties by failing to warn thepublic about the dangers of asbestos or byacting to keep its knowledge of thosedangers from the public. Id., at 143a-147a. Itis undisputed that many of the plaintiffs seekto recover from Travelers, not indirectly forManville's wrongdoing, but for Travelers' [**105] own alleged violations of state law.See 517 F.3d at 63. 2


FOOTNOTES

2 A true "direct action" suit is "[a]lawsuit by a person claiming againstan insured but suing the insurerdirectly instead of pursuingcompensation indirectly through theinsured." Black's Law Dictionary 491(8th ed. 2004). Because many of thesuits at issue seek to hold Travelersliable for independent wrongdoingrather than for a legal wrong byManville, they are not direct actionsin the terms of strict usage. [***12]Nonetheless, because the suits arereferred to as "direct actions" in thedecisions of the Bankruptcy Court,the District Court, and the Court ofAppeals, we call them that as well, inthe interest of simplicity. See 517F.3d at 55, n. 4.

In 2002, Travelers invoked the terms of the1986 Orders in moving the BankruptcyCourt to enjoin 26 Direct Actions pending instate courts. Id., at 58. The court issued atemporary restraining order, repeatedlyextended, and referred the parties tomediation, which led to settlements betweenTravelers and three sets of plaintiffs in bothStatutory and Common Law Direct Actions.Bkrtcy. Ct. Op. 103a-104a. Under thesettlement terms Travelers would pay morethan $ 400 million to settlement funds tocompensate Direct Action claimants,contingent upon the entry of an order by theBankruptcy Court clarifying that the DirectActions were, and remained, prohibited bythe 1986 Orders. Id., at 150a-152a. Thesettlement requires claimants seeking

payment from the settlement funds to grantTravelers a release from further liability,separate and apart from Travelers' protectionunder the 1986 Orders. Id., at 151a-152a.

After notice of the settlement was given [***13] to potential claimants, theBankruptcy Court (the same judge who hadissued the 1986 Orders) held an evidentiaryhearing and made extensive factual findingsthat are not challenged here. The courtdetermined that "Travelers['] knowledge ofthe hazards of asbestos was derived from itsnearly three decade insurance relationshipwith Manville and the performance byTravelers of its obligations under thePolicies, including through the underwriting,loss control activities, defense obligationsand generally through its lengthy andconfidential insurance relationship under thepolicies." Id., at 128a-129a. In sum, the [*2201] Bankruptcy Court found that"Travelers learned virtually everything itknew about asbestos from its relationshipwith Manville." Id., at 131a.

As for the Direct Actions, the court saw"[t]he gravamen of the Statutory DirectAction Lawsuits" as "center[ing] onTravelers['] defense of Manville inasbestos-related claims." Id., at 142a. Thecourt read the "alleged factual predicate" ofthe Common Law Direct Actions as being"essentially identical to the statutory actions:Travelers . . . influence[d] Manville'spurported failure to disclose knowledgeabout asbestos hazards; Travelers [***14]defended Manville; Travelers advanced thestate of the art defense; and Travelerscoordinated Manville's national defenseeffort." Id., at 147a (citations omitted). Thecourt understood "the direct action claims


against Travelers [to be] inextricablyintertwined with Travelers['] longrelationship as Manville's insurer," id., at169a, and found that "[a]fter the Courtpreliminarily enjoined prosecution of DirectAction Claims against Travelers pendingfinal ruling on the merits, certain plaintiffs'lawyers violated the letter and the spirit ofthis Court's rulings by simply deleting theterm 'Manville' from their complaints -- butleaving the substance unchanged," id., at147a.

[**106] Hence, the court's conclusion that"[t]he evidence in this proceedingestablishes that the gravamen of DirectAction Claims were acts or omissions byTravelers arising from or relating toTravelers['] insurance relationship withManville." Id., at 173a. Finding that the"claims against Travelers based on suchactions or omissions necessarily 'arise out of'and [are] 'related to'" the insurance policies,ibid., which compelled Travelers to defendManville against asbestos-related claims, id.,at 173a-176a, the [***15] Bankruptcy Courtheld that the Direct Actions "are -- andalways have been -- permanently barred" bythe 1986 Orders, id., at 170a.

The settlement was accordingly approvedand an order dated August 17, 2004(Clarifying Order), was entered, providingthat the 1986 Orders barred the pendingDirect Actions and "[t]he commencement orprosecution of all actions and proceedingsagainst Travelers that directly or indirectlyare based upon, arise out of or relate toTravelers['] insurance relationship withManville or Travelers['] knowledge oralleged knowledge concerning the hazardsof asbestos," including claims for

contribution or indemnification. Id., at 95a.The Clarifying Order does not, however,block "the commencement and prosecutionof claims against Travelers by policyholdersother than Manville . . . for insuranceproceeds or other obligations arising underany policy of insurance provided byTravelers to a policyholder other thanManville." Id., at 96a. The Clarifying Orderalso separately disclaims that it enjoinsbringing"claims arising from contractual obligationsby Travelers to policyholders other thanManville, as long as Travelers['] allegedliability or the proof required [***16] toestablish Travelers['] alleged liability isunrelated to any knowledge Travelers gainedfrom its insurance relationship withManville or acts, errors, omissions orevidence related to Travelers['] insurancerelationship with Manville." Ibid.

Some individual claimants and ChubbIndemnity Insurance Company (Chubb),respondents before this Court, objected tothe settlement and subsequently appealed. 3So far as it matters here, the District [*2202] Court affirmed, but the Court ofAppeals for the Second Circuit reversed. Inpresenting the case to the Second Circuit theobjectors argued that the Direct Actions falloutside the scope of the 1986 Orders andthat the Clarifying Order erroneouslyexpands those orders to bar actions beyondthe Bankruptcy Court's subject-matterjurisdiction and statutory authority.Travelers and the settling claimantsresponded that the Clarifying Order isconsistent with the terms of the 1986 Orders,that this reading of the 1986 Orders does notgenerate any jurisdictional or other statutory


concerns, and that the Second Circuit's priorrejection of a challenge to the InsuranceSettlement Order in MacArthur, 837 F.2d89, is controlling.

FOOTNOTES

3 Chubb is a codefendant with [***17] Travelers in certainCommon Law Direct Actions, andthe Clarifying Order prevents it frombringing contribution and indemnityclaims against Travelers undercertain circumstances. See Brief forRespondent Chubb 16.

In its opinion explaining the judgment underreview here, the Second Circuit recognizedthat "[i]t is undisputed that the bankruptcycourt had continuing jurisdiction to interpretand enforce its own 1986 orders," and that"there is no doubt that the bankruptcy [**107] court had jurisdiction to clarify itsprior orders." 517 F.3d at 60-61. It also had"little doubt that, in a literal sense, theinstant claims against Travelers 'arise out of'its provision of insurance coverage toManville," id., at 67, and the courtemphasized that "[t]he bankruptcy court'sextensive factual findings regardingManville's all-encompassing presence in theasbestos industry and its extensiverelationship with Travelers support thisnotion" that the subjects of the ClarifyingOrder fall within the scope of the 1986Orders, ibid. The Circuit nevertheless heldthat the Bankruptcy Court could not, inenforcing the 1986 Orders, "enjoin claimsover which it had no jurisdiction," id., at 61,

and that "[t]he [***18] ancillary jurisdictioncourts possess to enforce their own orders isitself limited by the jurisdictional limits ofthe order sought to be enforced," id., at 65,n. 22 (internal quotation marks omitted). Seealso id., at 65 ("The fact that our caseinvolves a clarification of the bankruptcycourt's prior order does not alter thejurisdictional predicate necessary to enjointhird-party non-debtor claims").

The Court of Appeals found that "thejurisdictional analysis by the lower courtsfalls short," id., at 62, in failing to recognizethe significance of the fact that the DirectActions "do not seek to collect on the basisof Manville's conduct," but rather "seek torecover directly from Travelers, anon-debtor insurer, for its own allegedmisconduct," id., at 63. The Court ofAppeals held that the Bankruptcy Courtmistook its jurisdiction when it enjoined"claims brought against a third-partynon-debtor solely on the basis of thatthird-party's financial contribution to adebtor's estate," because "a bankruptcy courtonly has jurisdiction to enjoin third-partynon-debtor claims that directly affect the resof the bankruptcy estate." Id., at 66.

In reaching this result, the court explained [***19] that its prior decision in MacArthurwas not controlling, as there a Manvilleasbestos distributor had challenged theauthority of the Bankruptcy Court to bar itfrom collecting out of Manville's owninsurance coverage. 517 F.3d at 62. Here, bycontrast, "Travelers candidly admits thatboth the statutory and common law claimsseek damages from Travelers that areunrelated to the policy proceeds." Id., at 63.The Court of Appeals also considered the


1994 enactment of 11 U.S.C. § 524(g),which provides explicit statutory authorityfor a bankruptcy court to order thechanneling of claims against a debtor'sinsurers to the bankruptcy estate, but thecourt understood § 524(g) to be "limited tosituations where a third party [*2203] hasderivative liability for the claims against thedebtor" and "was not intended to reachnon-derivative claims." 517 F.3d at 68(ellipsis and internal quotation marksomitted).

We granted certiorari, 555 U.S. ___, 129 S.Ct. 761, 172 L. Ed. 2d 752 (2009) and nowreverse.

II

The Bankruptcy Court correctly understoodthat the Direct Actions fall within the scopeof the 1986 Orders, as suits of this sortalways have. The Court of Appeals,however, believed it was free to look beyondthe terms of the 1986 [***20] Orders and sotreated the action as one "concern[ing] theouter reaches of a bankruptcy court'sjurisdiction." 517 F.3d at 55. This, we think,was error. If this were a direct review of the1986 Orders, the Court [**108] of Appealswould indeed have been duty bound toconsider whether the Bankruptcy Court hadacted beyond its subject-matter jurisdiction.See Arbaugh v. Y & H Corp., 546 U.S. 500,514, 126 S. Ct. 1235, 163 L. Ed. 2d 1097(2006); Mansfield, C. & L. M. R. Co. v.Swan, 111 U.S. 379, 382, 4 S. Ct. 510, 28 L.Ed. 462 (1884). But the 1986 Orders becamefinal on direct review over two decades ago,and Travelers' response to the Circuit'sjurisdictional ruling is correct: whether theBankruptcy Court had jurisdiction and

authority to enter the injunction in 1986 wasnot properly before the Court of Appeals in2008 and is not properly before us.

A

We begin at our point of agreement with theSecond Circuit, that the Direct Actions are"Policy Claims" enjoined as againstTravelers by the language of the 1986Orders, which covered "claims, demands,allegations, duties, liabilities andobligations" against Travelers, known orunknown at the time, "based upon, arisingout of or relating to" Travelers' insurancecoverage of Manville. App. to Pet. for Cert. [***21] in No. 08-295, at 439a. HN1In astatute, "[t]he phrase 'in relation to' isexpansive," Smith v. United States, 508 U.S.223, 237, 113 S. Ct. 2050, 124 L. Ed. 2d 138(1993), and so is its reach here, where"Policy Claims" covers not only "claims,"but even "allegations" relating to theinsurance coverage. Although it would bepossible (albeit quite a stretch) to suggestthat a "claim" only relates to Travelers'insurance coverage if it seeks recovery basedupon Travelers' specific contractualobligation to Manville, "allegations" is noteven remotely amenable to such a narrowconstruction and clearly reaches factualassertions that relate in a morecomprehensive way to Travelers' dealingswith Manville.

The Bankruptcy Court's uncontested factualfindings drive the point home. In substance,the Bankruptcy Court found that the DirectActions seek to recover against Travelerseither for supposed wrongdoing in itscapacity as Manville's insurer or forimproper use of information that Travelers


obtained from Manville as its insurer. Theseactions so clearly involve "claims" (and, allthe more so, "allegations") "based upon,arising out of or relating to" Travelers'insurance coverage of Manville, that wehave no need here to stake [***22] out theultimate bounds of the injunction. There is,of course, a cutoff at some point, where theconnection between the insurer's actioncomplained of and the insurance coveragewould be thin to the point of absurd. SeeCalifornia Div. of Labor StandardsEnforcement v. Dillingham Constr., N. A.,Inc., 519 U.S. 316, 335, 117 S. Ct. 832, 136L. Ed. 2d 791 (1997) (SCALIA, J.,concurring) ("[A]pplying the 'relate to'provision according to its terms was aproject doomed to failure, since, as many acurbstone philosopher has observed,everything [*2204] is related to everythingelse"); New York State Conference of BlueCross & Blue Shield Plans v. Travelers Ins.Co., 514 U.S. 645, 655, 115 S. Ct. 1671, 131L. Ed. 2d 695 (1995). But the detailedfindings of the Bankruptcy Court place theDirect Actions within the terms of the 1986Orders without pushing the limits.

Respondents argue that this is justrevisionism perpetrated by the ClarifyingOrder, which they say improperly expandedthe scope of the 1986 Orders to enjoin theDirect Actions. Their position appears to bethat the [**109] 1986 Orders only baractions against insurers seeking to recoverderivatively for Manville's wrongdoing, butnot actions to recover for Travelers' ownmisconduct, no matter what its relationship [***23] to Travelers' coverage of Manville.But this simply is not what the 1986 Orderssay. The definition of "Policy Claims"contains nothing limiting it to derivative

actions, and there is language in the 1986Orders directly to the contrary: The 1986Orders not only enjoin bringing expansivelydefined "Policy Claims" against the settlinginsurers, but they go on to provide that theinjunction has no application to a claimpreviously brought against a settling insurer"seeking any and all damages (other than orin addition to policy proceeds) for bad faithor other insurer misconduct alleged inconnection with the handling or dispositionof claims." App. to Pet. for Cert. in No.08-295, at 446a. There is no doubt about theimplication, that this same sort of claimbrought after the 1986 Orders become finalwill be barred. There would have been noneed for this exception if "Policy Claims"were limited to claims against Travelers forManville's wrongdoing.

Respondents seek further refuge in evidencethat before entry of the 1986 Orders someparties to the Manville bankruptcy(including Travelers) understood theproposed injunction to bar only claimsderivative of Manville's liability. They [***24] may well be right about that: we arein no position to engage in factfinding onthis point, but there certainly are statementsin the record that seem to supportrespondents' contention. See App. forRespondent Chubb 1a-3a, 5a, 13a-14a. Butbe that as it may, HN2where the plain termsof a court order unambiguously apply, asthey do here, they are entitled to their effect.See, e.g., Negron-Almeda v. Santiago, 528F.3d 15, 23 (CA1 2008) ("[A] court mustcarry out and enforce an order that is clearand unambiguous on its face"); UnitedStates v. Spallone, 399 F.3d 415, 421 (CA22005) ("[I]f a judgment is clear andunambiguous, a court must adopt, and give


effect to, the plain meaning of the judgment"(internal quotation marks omitted)). If it isblack-letter law that the terms of anunambiguous private contract must beenforced irrespective of the parties'subjective intent, see 11 R. Lord, Willistonon Contracts § 30:4 (4th ed. 1999), it is allthe clearer that HN3a court should enforce acourt order, a public governmental act,according to its unambiguous terms. 4 Thisis all the Bankruptcy Court did.

FOOTNOTES

4 Even if we found the 1986 Orders tobe ambiguous as applied to theDirect Actions, and [***25] even ifwe concluded that it would be properto look to the parties'communications to resolve thatambiguity, it is far from clear thatrespondents would be entitled toupset the Bankruptcy Court'sinterpretation of the 1986 Orders.Numerous Courts of Appeals haveheld that a bankruptcy court'sinterpretation of its ownconfirmation order is entitled tosubstantial deference. See In reShenango Group Inc., 501 F.3d 338,346 (CA3 2007); In re Dow CorningCorp., 456 F.3d 668, 675 (CA62006); Finova Capital Corp. v.Larson Pharmacy Inc. (In re OpticalTechs., Inc.), 425 F.3d 1294, 1300(CA11 2005); In re Dial BusinessForms, Inc., 341 F.3d 738, 744 (CA82003); In re National Gypsum Co.,219 F.3d 478, 484 (CA5 2000); In reCasse, 198 F.3d 327, 333 (CA21999); In re Tomlin, 105 F.3d 933,

941 (CA4 1997); Monarch Life Ins.Co. v. Ropes & Gray, 65 F.3d 973,983 (CA1 1995); In re Weber, 25F.3d 413, 416 (CA7 1994). Becausethe 1986 Orders clearly cover theDirect Actions, we need notdetermine the proper standard ofreview.

[*2205] B

Given the Clarifying Order's correct readingof the 1986 Orders, the only question left iswhether the Bankruptcy Court hadsubject-matter jurisdiction to enter theClarifying Order. [**110] The answer hereis easy: as [***26] the Second Circuitrecognized, and respondents do not dispute,the Bankruptcy Court plainly hadjurisdiction to interpret and enforce its ownprior orders. See Local Loan Co. v. Hunt,292 U.S. 234, 239, 54 S. Ct. 695, 78 L. Ed.1230 (1934). What is more, when theBankruptcy Court issued the 1986 Orders itexplicitly retained jurisdiction to enforce itsinjunctions. See App. to Pet. for Cert. in No.08-295, at 284a-286a.

The Court of Appeals, however, went on toa different jurisdictional enquiry. It held thatthe 1986 Orders could not be enforcedaccording to their terms because, as thepanel saw it, the Bankruptcy Court hadexceeded its jurisdiction when it issued theorders in 1986. We think, though, that it waserror for the Court of Appeals to reevaluatethe Bankruptcy Court's exercise ofjurisdiction in 1986.

On direct appeal of the 1986 Orders, anyone


who objected was free to argue that theBankruptcy Court had exceeded itsjurisdiction, and the District Court or Courtof Appeals could have raised such concernssua sponte. In fact, one objector argued justthat. In MacArthur, a distributor of Manvilleasbestos claimed to be a coinsured undercertain Manville insurance policies andargued that the 1986 Orders [***27]exceeded the Bankruptcy Court's jurisdictionby preventing the distributor fromrecovering under the policies; the SecondCircuit disagreed, concluding that theBankruptcy Court had not stepped outsideits jurisdiction or statutory authority. 5 See837 F.2d at 91-94. But once the 1986 Ordersbecame final on direct review (whether ornot proper exercises of bankruptcy courtjurisdiction and power), they became resjudicata to the "'parties and those in privitywith them, not only as to every matter whichwas offered and received to sustain or defeatthe claim or demand, but as to any otheradmissible matter which might have beenoffered for that purpose.'" Nevada v. UnitedStates, 463 U.S. 110, 130, 103 S. Ct. 2906,77 L. Ed. 2d 509 (1983) (quoting Cromwellv. County of Sac, 94 U.S. 351, 352, 24 L.Ed. 195 (1877)).

FOOTNOTES

5 We agree with the Court of Appealsthat MacArthur only resolved thenarrow question whether theBankruptcy Court could enjoinderivative claims against the insurersand did not address whether the 1986Orders, in their entirety, were proper.We note MacArthur merely toillustrate the obvious: the 1986

Orders were subject to challenge, onjurisdictional grounds or otherwise,on direct review. The dissentsuggests that MacArthur [***28]limited the scope of the 1986 Ordersto derivative claims, see post, at 1,7-9, but it did not. The questionwhether the Bankruptcy Court hadenjoined or could properly enjoinnonderivative claims was not at issuein MacArthur and the court did notanswer it.

Those orders are not any the less preclusivebecause the attack is on the BankruptcyCourt's conformity with its subject-matterjurisdiction, for HN4"[e]ven subject-matterjurisdiction . . . may not be attackedcollaterally." Kontrick v. Ryan, 540 U.S.443, 455, n. 9, 124 S. Ct. 906, 157 L. Ed. 2d867 (2004). See also Chicot CountyDrainage Dist. v. Baxter State Bank, 308U.S. 371, 376, 60 S. Ct. 317, 84 L. Ed. 329(1940) ("[Federal courts] are courts withauthority, when parties are brought beforethem in accordance with the requirements [*2206] of due process, to determinewhether or not they have jurisdiction toentertain the cause and for this purpose toconstrue and apply the statute under whichthey are asked to act. Their determinationsof such questions, while open to directreview, may not [**111] be assailedcollaterally"). So long as respondents orthose in privity with them were parties to theManville bankruptcy proceeding, and weregiven a fair chance to challenge theBankruptcy Court's subject-matter [***29]jurisdiction, they cannot challenge it now byresisting enforcement of the 1986 Orders.


See Insurance Corp. of Ireland v.Compagnie des Bauxites de Guinee, 456U.S. 694, 702, n. 9, 102 S. Ct. 2099, 72 L.Ed. 2d 492 (1982) ("A party that has had anopportunity to litigate the question ofsubject-matter jurisdiction may not . . .reopen that question in a collateral attackupon an adverse judgment"); Chicot County,supra, at 375, 60 S. Ct. 317, 84 L. Ed. 329("[T]hese bondholders, having theopportunity to raise the question ofinvalidity, were not the less bound by thedecree because they failed to raise it"). 6

FOOTNOTES

6 The rule is not absolute, and we haverecognized rare situations in whichsubject-matter jurisdiction is subjectto collateral attack. See, e.g., UnitedStates v. United States Fidelity &Guaranty Co., 309 U.S. 506, 514, 60S. Ct. 653, 84 L. Ed. 894 (1940) (acollateral attack on subject-matterjurisdiction is permissible "where theissue is the waiver of [sovereign]immunity"); Kalb v. Feuerstein, 308U.S. 433, 439-440, 444, 60 S. Ct.343, 84 L. Ed. 370 (1940) (wheredebtor's petition for relief waspending in bankruptcy court andfederal statute affirmatively divestedother courts of jurisdiction tocontinue foreclosure proceedings,state-court foreclosure judgment wassubject to collateral attack). [***30]More broadly, the Restatement(Second) of Judgments § 12, p. 115(1980), describes three exceptionalcircumstances in which a collateralattack on subject-matter jurisdiction

is permitted:

"(1) The subject matter of the action was soplainly beyond the court's jurisdiction that itsentertaining the action was a manifest abuseof authority; or

"(2) Allowing the judgment to stand wouldsubstantially infringe the authority ofanother tribunal or agency of government; or

"(3) The judgment was rendered by a courtlacking capability to make an adequatelyinformed determination of a questionconcerning its own jurisdiction and as amatter of procedural fairness the partyseeking to avoid the judgment should haveopportunity belatedly to attack the court'ssubject matter jurisdiction."

This is no occasion to address whether weadopt all of these exceptions. Respondentsdo not claim any of them, and we do not seehow any would apply here. This is not asituation, for example, in which abankruptcy court decided to conduct acriminal trial, or to resolve a custodydispute, matters "so plainly beyond thecourt's jurisdiction" that a different resultmight be called for.

The willingness of the Court [***31] ofAppeals to entertain this sort of collateralattack cannot be squared with res judicataand the practical necessity served by thatrule. "It is just as important that there shouldbe a place to end as that there should be aplace to begin litigation," Stoll v. Gottlieb,305 U.S. 165, 172, 59 S. Ct. 134, 83 L. Ed.104 (1938), and the need for finality forbids


a court called upon to enforce a final orderto "tunnel back . . . for the purpose ofreassessing prior jurisdiction de novo,"Finova Capital Corp. v. Larson PharmacyInc. (In re Optical Techs., Inc.), 425 F.3d1294, 1308 (CA11 2005). If the law wereotherwise, and "courts could evaluate thejurisdiction that they may or may not havehad to issue a final judgment, the rules of resjudicata . . . would be entirelyshort-circuited." Id., at 1307; see Willy v.Coastal Corp., 503 U.S. 131, 137, 112 S. Ct.1076, 117 L. Ed. 2d 280 (1992) ("[T]hepractical concern with providing an end tolitigation justifies a rule preventing collateralattack on subject-matter jurisdiction").Almost a quarter-century after the 1986Orders were entered, the time to prune themis over. 7

FOOTNOTES

7 Respondents point out that it isTravelers, not they, who moved theBankruptcy Court to enforce the1986 Orders. But who began thepresent proceedings has no bearingon [***32] the application of resjudicata; to the extent respondentsargue that the 1986 Orders shouldnot be enforced according to theirterms because of a jurisdictional flawin 1986, this argument is animpermissible collateral attack. Andto the extent respondents disclaimany initial intent to mount such anattack, this too is irrelevant, since thedecision of the Court of Appeals iswhat we review and find at odds withfinality.

[*2207] [**112] III

Our holding is narrow. We do not resolvewhether a bankruptcy court, in 1986 ortoday, could properly enjoin claims againstnondebtor insurers that are not derivative ofthe debtor's wrongdoing. As the Court ofAppeals noted, in 1994 Congress explicitlyauthorized bankruptcy courts, in somecircumstances, to enjoin actions against anondebtor "alleged to be directly orindirectly liable for the conduct of, claimsagainst, or demands on the debtor to theextent such alleged liability . . . arises byreason of . . . the third party's provision ofinsurance to the debtor or a related party,"and to channel those claims to a trust forpayments to asbestos claimants. 11 U.S.C. §524 (g)(4)(A)(ii). On direct review today, achanneling injunction of the sort issued [***33] by the Bankruptcy Court in 1986would have to be measured against therequirements of § 524 (to begin with, atleast). But owing to the posture of thislitigation, we do not address the scope of aninjunction authorized by that section. 8

FOOTNOTES

8 Section 524(h) provides that undersome circumstances § 524(g)operates retroactively to validate aninjunction. We need not decidewhether those circumstances arepresent here.

Nor do we decide whether any particularrespondent is bound by the 1986 Orders. We


have assumed that respondents are bound,but the Court of Appeals did not considerthis question. Chubb, in fact, relying onAmchem Products, Inc. v. Windsor, 521U.S. 591, 117 S. Ct. 2231, 138 L. Ed. 2d 689(1997), and Ortiz v. Fibreboard Corp., 527U.S. 815, 119 S. Ct. 2295, 144 L. Ed. 2d 715(1999), has maintained that it was not givenconstitutionally sufficient notice of the 1986Orders, so that due process absolves it fromfollowing them, whatever their scope. See340 B. R., at 68. The District Court rejectedthis argument, id., at 68-69, but the Court ofAppeals did not reach it, 517 F.3d at 60, n.17. On remand, the Court of Appeals cantake up this objection and any others thatrespondents have preserved.

IV

We reverse the judgment of the Court ofAppeals [***34] and remand for furtherproceedings consistent with this opinion.

It is so ordered.

DISSENT BY: STEVENS

DISSENT

JUSTICE STEVENS, with whom JUSTICEGINSBURG joins, dissenting.

The Court holds that the plain terms of aninjunction entered by the Bankruptcy Courtas part of the 1986 reorganization ofJohns-Manville Corporation (Manville) baractions against Manville's insurers for theirown wrongdoing. I disagree. In my view, theinjunction bars only those claims againstManville's insurers seeking to recover fromthe bankruptcy estate for Manville's

misconduct, not those claims seeking torecover against the insurers for their ownmisconduct. This interpretation respects thelimits of the Bankruptcy Court's power; it isconsistent with the Court of Appeals'understanding when it upheld the 1986injunction on [**113] direct review andwith Congress' codification of the Manvillebankruptcy approach for future asbestosproceedings in 11 U.S.C. § 524(g); and itmakes sense of Travelers' payment of $ 445million in 2004 in exchange for aBankruptcy [*2208] Court order thatsupposedly "clarified" an unambiguousinjunction.

Because the 1986 injunction has nevermeant what the Court today assumes,respondents' challenge is not animpermissible [***35] collateral attack. TheCourt of Appeals correctly concluded thatthe Bankruptcy Court's 2004 orderimproperly enjoined the state-law claims atissue in this proceeding.

I

At the heart of the dispute in this litigation isthe distinction between two types of lawsuitsseeking recovery from Manville's primaryinsurer, The Travelers Indemnity Company,and its affiliates (together, Travelers). Thefirst class, which I shall call "insureractions," comprises suits in which theplaintiff is asserting that Travelers, as aninsurer of Manville, has a duty to satisfy theplaintiff's claim against Manville. Plaintiffsin that class include not only members of thepublic exposed to asbestos but also Manvillefactory workers and vendors of Manvilleproducts. The second class, which I shallcall "independent actions," comprises suits


in which the plaintiff is asserting thatTravelers is liable for its own misconduct.The plaintiffs in these suits have allegedboth violations of state consumer-protectionlaws and breaches of common-law duties.See ante, at 4.

Suits that are called "direct actions" in theproceedings below and in the Court'sopinion may fall in either category, but asthe Court acknowledges [***36] the "true"definition of that term describes only insureractions. Ante, at 4-5, n. 2; see Black's LawDictionary 491 (8th ed. 2004). True directactions are lawsuits in which a plaintiffclaims that she was injured by Manville andseeks recovery directly from its insurerwithout first obtaining a judgment againstManville. The global settlement that madethe 1986 reorganization of Manville possibleclearly encompassed all such direct actions;Manville's insurers paid $ 770 million,including $ 80 million from Travelers, intothe Manville Personal Injury SettlementTrust (Manville Trust) to which theseactions would be channeled. But many of theclaims that gave rise to the instant litigationallege no breach of duty by Manville andseek no recovery from the Manville Trust.See ante, at 4-5, n. 2. They are claimsagainst Travelers based on its own allegedviolations of state statutes and common-lawrules. Thus, even though the Court callsthese claims "direct actions," they arenothing of the sort. They are independentactions.

Some of the independent actions are basedon facts concerning Travelers' insurancerelationship with Manville. A number ofsuits, for example, allege that Travelers [***37] acquired information about

asbestos-related hazards from Manville thatit had a duty to disclose to third parties. 1This sort of factual nexus does not, however,transform an independent action into [**114] an insurer action. Instead, thequestion remains whether a suit seeks torecover from Travelers for Manville'swrongdoing or instead seeks to recover fromTravelers for its own wrongdoing, makingno claim on Manville's insurance policyproceeds or other assets of the Manvillebankruptcy estate.

FOOTNOTES

1 The theories asserted in many of thestate-law actions are novel, and, asthe Court of Appeals noted, theseclaims "have met with almostuniversal failure in the state courts."In re Johns-Manville Corp., 517 F.3d52, 68 (CA2 2008).

Recognizing the distinction between insureractions and independent actions, the Courtof Appeals held that the Bankruptcy Courthad improperly enjoined the latter [*2209] in its 2004 order. 2 Without ruling on theextent of the Bankruptcy Court's power, seeante, at 17, the Court today concludes thatthe 1986 injunction unambiguously barredindependent actions and that the BankruptcyCourt's 2004 order simply clarified, and didnot enlarge, the scope of that injunction.Based [***38] on that premise, the Courtholds that respondents are challenging theBankruptcy Court's authority to have issuedthe injunction in 1986, and it deems thechallenge an impermissible collateral attack.


I disagree with both the Court'sunderstanding of the 1986 injunction and itsattendant res judicata analysis.

FOOTNOTES

2 The Court of Appeals noted that theBankruptcy Court had not consideredwhether the various actions at issuewere properly classified as insureractions or independent actions, and itremanded for the Bankruptcy Courtto undertake this assessment.

II

The 1986 order of the Bankruptcy Courtapproving the insurance settlementagreements (Insurance Settlement Order),which was incorporated by reference in theorder confirming Manville's plan ofreorganization, includes three relatedprotections for Manville's insurers, eachfocused on the company's insurance policies.It releases the insurers from all "PolicyClaims," channels these claims to theManville Trust, and permanently enjoins allpersons from commencing or continuing aproceeding for "Policy Claims" against asettling insurer. App. to Pet. for Cert.445a-446a. The Insurance Settlement Orderdefines "Policy Claims" as:"any [***39] and all claims, demands,allegations, duties, liabilities and obligations(whether or not presently known) whichhave been, or could have been, or might be,asserted by any Person against any or allmembers of the [Manville] Group or againstany or all members of the Settling Insurer

Group based upon, arising out of or relatingto any or all of the Policies." Id., at 439a(emphasis added). 3 Focusing on the italicized phrase, andparticularly the term "relating to," the Courtdeclares that this language "is not evenremotely amenable" to a construction thatexcludes independent actions and "clearlyreaches factual assertions that relate in amore comprehensive way to Travelers'dealings with Manville." Ante, at 10-11.Thus, it concludes that "the plain terms of[the] court order [**115] unambiguously"bar independent actions. Ante, at 12.

FOOTNOTES

3 As the Court notes, the orderconfirming Manville's reorganizationplan contains an additionalinjunction barring claims against thesettling insurance companies. Ante,at 4, n. 1. The language in that orderenjoins only insurer actions. SeeApp. to Pet. for Cert. 286a-288a(enjoining actions against settlinginsurance companies seeking,directly or indirectly, [***40] torecover on or with respect to a"Claim, Interest, or Other AsbestosObligation"); id., at 56a, n. 6(defining "Other AsbestosObligation" as an obligation arisingdirectly or indirectly from acts oromissions of a debtor). The partiesaccordingly focus on whether theInsurance Settlement Agreementenjoins independent actions.


The Court doth protest too much. Indeed,despite its insistence that the definition of"Policy Claims" is unambiguous, the Courtquickly concludes that it cannot apply the"based upon, arising out of or relating to"language literally because there is a "cutoffat some point, where the connection betweenthe insurer's action complained of and theinsurance coverage would be thin to thepoint of absurd." Ante, at 11. Presumably,for instance, the Court would not deemenjoined a state-law claim for personalinjuries caused by a Travelers' agent'sreckless driving while en route to thecourthouse to defend Manville even though,in a literal [*2210] sense, this suit relates to(perhaps even arises out of) Travelers'performance of its policy obligations toManville. The Court determines that it neednot "stake out the ultimate bounds of theinjunction" because it can rely [***41] onthe Bankruptcy Court's "uncontested factualfindings" that the particular independentactions at issue fall within the category thatit had intended to enjoin. Ibid.

If the definition of the term "Policy Claims"is not amenable to a purely literalconstruction and the Court must lookbeyond the four corners of the InsuranceSettlement Order to ascertain its meaning,however, the Bankruptcy Court's factualfindings in 2004 are not the best guide. Iwould instead construe the order withreference to the limits of the BankruptcyCourt's authority -- limits that were wellunderstood by the insurers during theoriginal settlement negotiations -- and withreference to the Court of Appeals'interpretation of the Insurance SettlementOrder when it upheld it against ajurisdictional challenge in 1988.

We should not lightly assume that theBankruptcy Court entered an order thatexceeded its authority. When a bankruptcyproceeding is commenced, the bankruptcycourt acquires control of the debtor's assetsand the power to discharge its debts. Abankruptcy court has no authority, however,to adjudicate, settle, or enjoin claims againstnondebtors that do not affect the debtor'sestate. Because [***42] Travelers'insurance policies were a significant asset ofthe Manville bankruptcy estate, theBankruptcy Court had the power to channelclaims to the insurance proceeds to theManville Trust. But this by no means gave itthe power to enjoin claims againstnondebtors like Travelers that had no impacton the bankruptcy estate. Thus, evenaccepting the Bankruptcy Court'srepresentation in 2004 that it had "meant toprovide the broadest protection possible" tothe settling insurers, App. to Pet. for Cert.172a, such relief could not includeprotection from independent actions.

That the Bankruptcy Court was withoutauthority to enjoin independent actions waswell understood by both Manville andTravelers during their settlementnegotiations. In Manville's memorandum insupport of the Insurance SettlementAgreement, it clarified that it did "not seekto have [the Bankruptcy] Court release itsSettling Insurers from claims by third partiesbased on the Insurer's own tortiousmisconduct towards the third party" butrather sought only to release the insurers"from the rights Manville might itself haveagainst them or rights derivative ofManville's rights under the policies beingcompromised [***43] and settled." App. forRespondent Chubb Indemnity Insurance Co.


5a. [**116] This understanding reflectednot only the basic fact that the settlementwas between Manville and its insurers (andnot third parties), but also the parties'knowledge that the "Second Circuit [hadheld] that the bankruptcy courts lack powerto discharge 'independent' claims of thirdparties against nondebtors." Id., at 5a-6a.

Travelers similarly acknowledged the limitsof the Bankruptcy Court's power. Notingthat "[t]he court has in rem jurisdiction overthe Policies and thus the power to enterappropriate orders to protect thatjurisdiction," it stated that "the injunction isintended only to restrain claims against theres (i.e., the Policies) which are or may beasserted, against the Settling Insurers." Id., at13a-14a; 4 see also id., at [*2211] 10a(memorandum of the legal representative ofthe Bankruptcy Court noting that "[a]llparties seem to agree that any injunction,channeling order and release is limited tothis Court's jurisdiction over the res"). Inshort, it was apparent to the settling parties,and no doubt also to the Bankruptcy Court,that the court lacked the power to enjointhird-party claims against nondebtors [***44] that did not affect the debtor'sestate.

FOOTNOTES

4 This statement of Travelers' intentbelies the Bankruptcy Court'ssuggestion that enjoiningindependent actions was a necessarycondition of Travelers' contributionto the Manville estate. See App. toPet. for Cert. 170a-173a.

When the Court of Appeals upheld theinjunction barring the assertion of "PolicyClaims" against Manville's insurers it, too,understood these limits of the BankruptcyCourt's authority. MacArthur Corporation, aManville asbestos distributor, claimed to bea coinsured under Manville's insurancepolicies by virtue of "vendor endorsements"in those policies entitling distributors toinsurance coverage for claims arising fromtheir sale of Manville products. MacArthurargued that the Bankruptcy Court lackedauthority to issue the Insurance SettlementOrder, which prevented it from suing theinsurers, because this order constituted a defacto discharge in bankruptcy of nondebtorparties not entitled to Chapter 11 protection.In rejecting MacArthur's argument, theCourt of Appeals did not hold that theBankruptcy Court possessed the authority toenjoin all actions against the insurersbearing some factual connection toManville. [***45] Rather, it held thatMacArthur had misconstrued the scope ofthe Bankruptcy Court's order, whichprecluded "only those suits against thesettling insurers that arise out of or relate toManville's insurance policies." MacArthurCo. v. Johns-Manville Corp., 837 F.2d 89,91 (CA2 1988).

The Court of Appeals reasoned that thislanguage enjoined MacArthur's claimsbecause "MacArthur's rights as an insuredvendor are completely derivative ofManville's rights as the primary insured."Id., at 92. Just as asbestos victims were"barred from asserting direct actions againstthe insurers," so too was MacArthur barredbecause "in both instances, third parties seekto collect out of the proceeds of Manville's


insurance policies on the basis of Manville'sconduct." Id., at 92-93 (emphasis added).The Court of Appeals further held that,because Manville's policies were property ofthe bankruptcy estate, the Bankruptcy Courthad "properly issued the orders pursuant toits equitable and statutory powers to disposeof the debtor's property free and clear ofthird-party interests and to channel [**117] those interests to the proceeds therebycreated." Id., at 91.

As the Court of Appeals recognized in theinstant [***46] proceedings, its earlierinterpretation of the Insurance SettlementOrder in MacArthur did not and does notextend to the independent actions at issue inthe instant suit: "Travelers candidly admitsthat both the statutory and common lawclaims seek damages from Travelers that areunrelated to the policy proceeds, quite unlikethe claims in MacArthur . . . where plaintiffssought indemnification or compensation forthe tortious wrongs of Manville to be paidout of the proceeds of Manville's insurancepolicies." In re Johns-Manville Corp., 517F.3d 52, 63 (CA2 2008). Also in contrast toMacArthur, "the claims at issue here do notseek to collect on the basis of Manville'sconduct. . . . Instead, the Plaintiffs seek torecover directly from Travelers, anon-debtor insurer, for its own allegedmisconduct." Ibid.

The Court of Appeals' interpretation of the1986 Insurance Settlement Order asenjoining only insurer actions and notindependent [*2212] actions is furthersupported by a statutory provision patternedafter the Manville settlement. In theBankruptcy Reform Act of 1994, Congressadopted 11 U.S.C. § 524(g) to expressly

authorize the approach of the Manvillebankruptcy in future asbestos-related [***47] bankruptcies. In grantingbankruptcy courts the power to provideinjunctive relief to nondebtors, Congressstated that courts may bar an action directedagainst a third party who "is alleged to bedirectly or indirectly liable for the conductof, claims against, or demands on the debtorto the extent such alleged liability of suchthird party arises by reason of . . . the thirdparty's provision of insurance to the debtoror a related party." § 524(g)(4)(A)(ii)(emphasis added). As the italicized languagemakes clear, the statute permits a bankruptcycourt to enjoin actions seeking to proceedagainst a nondebtor insurer for a debtor'swrongdoing, but it does not confer power toenjoin independent actions arising out of theinsurer's own wrongdoing. See generally Inre Combustion Engineering, Inc., 391 F.3d190, 235, n. 47 (CA3 2004) (explaining that§ 524(g), like the Manville injunction, islimited to insurer actions). Had Congressinterpreted "Policy Claims" in the mannerthe Court does today, and had it sought tocodify that definition, it would have usedbroader language.

Finally, it is worth asking why Travelerspaid more than $ 400 million in 2004 tothree new settlement funds [***48] inexchange for the Bankruptcy Court's order"clarifying" that the independent actions "are-- and always have been -- permanentlybarred" by the 1986 injunction. App. to Pet.for Cert. 170a. If the 1986 injunction were asclear as the Court assumes, surely Travelerswould not have paid $ 445 million -- morethan five times the amount of its initialcontribution to the Manville Trust -- toobtain a redundant piece of paper.


In sum, I believe the 1986 InsuranceSettlement Order did not enjoin independentactions of the sort giving rise to theseproceedings. A contrary conclusion ignoresthe limits of the Bankruptcy Court'sauthority, the Court of Appeals'interpretation of the order upheld on directreview in 1988, Congress' approval of theManville reorganization, and Travelers' ownconduct during both the 1986 and 2004settlement negotiations.

[**118] III

The Court's holding that respondents'challenge is an impermissible collateralattack is predicated on its determination thatthe 1986 Insurance Settlement Order plainlyenjoined their independent actions. See ante,at 13-14. Because I disagree with thispremise, I also disagree with the Court'spreclusion analysis. In challenging theBankruptcy [***49] Court's 2004 order"clarifying" the scope of the InsuranceSettlement Order, respondents were in facttimely appealing an order that rewrote thescope of the 1986 injunctions. Theirobjection could not have been raised ondirect appeal of the 1986 order because itwas not an objection to anything in thatorder. And, of course, the Court of Appealsdid not rule on a challenge to the enjoiningof independent actions during direct review,as the Court acknowledges. See ante, at 14,n. 5. To the contrary, it interpreted the 1986order as reaching only insurer actions. Thus,there neither was nor reasonably could havebeen a prior challenge that the 1986 orderimpermissibly enjoined independent actions.

Because the Court regards respondents'challenge as a collateral attack, it brushes

aside their jurisdictional objection to theBankruptcy Court's 2004 order on theground that "the Bankruptcy Court plainlyhad jurisdiction to interpret and enforce [*2213] its own prior orders." Ante, at 13.But neither respondents nor the Court ofAppeals contested that point. Rather,respondents argued that the BankruptcyCourt was not merely interpreting andenforcing its prior orders and that it had nojurisdiction [***50] to enjoin theindependent actions when it approved the2004 settlements. The Court of Appealsaccordingly examined whether the 2004order improperly expanded the scope of the1986 injunction and concluded that it did,thereby enjoining claims that were beyondthe Bankruptcy Court's power to enjoin.

In my view, the judgment of the Court ofAppeals was correct. The 1986 InsuranceSettlement Order did not bar independentactions, and the Bankruptcy Court lackedany basis for enjoining those actions in2004. The independent actions have noeffect on the bankruptcy estate, and"bankruptcy courts have no jurisdiction overproceedings that have no effect on thedebtor." Celotex Corp. v. Edwards, 514 U.S.300, 309, n. 6, 115 S. Ct. 1493, 131 L. Ed.2d 403 (1995). The Court of Appeals thuscorrectly concluded that the BankruptcyCourt had impermissibly enjoined "claimsagainst Travelers that were predicated, as amatter of state law, on Travelers' ownalleged misconduct and were unrelated toManville's insurance policy proceeds and theres of the Manville estate." 517 F.3d at 68.

IV

Because I am persuaded that the 1986


Insurance Settlement Order did notencompass independent actions and that thatBankruptcy Court improperly enjoined [***51] such actions in 2004, I respectfullydissent.

bk.ct. - emunoz.net indem. co. v. bailey 6 129 s. ct. 2195, *174 l. ed. 2d 99, **2009 u.s. lexis...

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