Korean v. Debtor's Representatives , 670 F. App'x 887 ( 2016 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0623n.06
No. 15-2548
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
In re: SETTLEMENT FACILITY DOW CORNING ) FILED
TRUST. ) Nov 23, 2016
___________________________________________ ) DEBORAH S. HUNT, Clerk
)
KOREAN CLAIMANTS, )
)
ON APPEAL FROM THE
Interested Parties-Appellants, )
UNITED STATES DISTRICT
)
COURT FOR THE EASTERN
v. )
DISTRICT OF MICHIGAN
)
DEBTOR’S REPRESENTATIVES, DOW )
CORNING CORPORATION, CLAIMANTS’ )
ADVISORY COMMITTEE, )
)
Defendants-Appellees. )
Before: McKEAGUE, GRIFFIN, and KETHLEDGE, Circuit Judges.
KETHLEDGE, Circuit Judge. In 1995, Dow Corning Corporation declared Chapter 11
bankruptcy while facing thousands of lawsuits related to silicone-gel breast implants. Dow
Corning’s Reorganization Plan established a settlement fund for claimants who agreed to settle
their suits. A number of claimants from Korea now object to a consent order entered on
December 3, 2015, which clarifies certain procedures for distributing part of the settlement fund.
We affirm.
The bankruptcy court confirmed the Reorganization Plan in 1999. Pursuant to the Plan,
Dow Corning and the Claimants’ Advisory Committee executed a Distribution Agreement that
details the procedure for distributing the settlement fund. That Agreement also created a Trust to
administer and evaluate claims for recovery from the fund. The Distribution Agreement divided
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the fund into sub-funds, including the Class 7 Fund, whose claimants received implants made by
American manufacturers (other than Dow Corning) and foreign manufacturers using Dow-
Corning silicone. To be eligible for a payment from the Class 7 Fund, claimants had to show,
among other things, that they received a silicone-gel breast implant between January 1, 1976 and
January 1, 1992, and that they “marshaled recoveries” from the manufacturers of their implants
by trying to collect from those manufacturers before seeking money from the Class 7 Fund.
[Distribution Agreement, Annex A, §§ 6.04(b)(ii), (e)(ii), (h)(v), R. 1239-6 at PageID 18909-10.]
Meanwhile, five other manufacturers of silicone-gel implants created their own
settlement fund—known as the Bristol, Baxter, 3M, McGhan and Union Carbide Revised
Settlement Program. See In re Silicone Gel Breast Implants Prods. Liab. Litig (MDL 926), 174
F. Supp. 2d 1242, 1249 (N.D. Ala. 2001). Dow Corning Class 7 claimants who received an
implant from one of those five manufacturers could “marshal recoveries,” for the purposes of
eligibility under the Class 7 Fund, by filing a claim with the Program. Before filing a claim,
however, claimants first had to register with the Program, which gave them a specific
“registration status.” That status determined whether the claimants could recover from the
Program, and if so to what extent.
The Trust began evaluating Class 7 claims in 2006. During that process, the Trust
determined that 6,325 claimants (the “disputed-marshaling claimants”) had failed to marshal
recoveries because they could have but did not pursue claims with the Program. In making those
determinations, however, the Trust did not consider the claimant’s registration status with the
Program, which likely barred some of those claimants from recovery from the Program. Based
on this oversight, some of the disputed-marshaling claimants—namely, the ones who alleged that
their registration status made them ineligible for recovery under the Program—appealed the
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denial of their claims, arguing that they should not have been required to pursue a claim through
the Program when doing so would have been futile. Various entities created for the purposes of
Dow Corning’s bankruptcy—specifically, the Claimants’ Advisory Committee, the Debtor’s
Representatives and Dow Corning itself (together, the “Dow Corning Parties”)—thereafter
agreed that the Trust should consider a claimant’s registration status in determining whether she
met the marshaling requirement. The Claimants’ Advisory Committee and the Debtor’s
Representatives later determined that 5,006 of the disputed-marshaling claimants were eligible to
receive payment from the Class 7 Fund because they could not have recovered from the
Program.
On May 22, 2015, the Dow Corning Parties submitted to the district court a proposed
Consent Order that specified, among many other things, the manner in which the marshaling
requirement would apply to Class 7 claimants whose registration status made them ineligible for
relief under the Program. The district court entered the Consent Order over the objections of the
Korean Claimants, who then brought this appeal.
The Korean Claimants first argue as follows: that, in entering the Consent Order, the
district court interpreted the term “marshaling recoveries” as used in the Plan; that the district
court lacks authority to interpret the Plan; and that the district court therefore exceeded its
powers when it entered the Consent Order. We review de novo whether the district court had
jurisdiction to enter the Consent Order. In re Dow Corning Corp., 86 F.3d 482, 488 (6th Cir.
1996). Under the Plan, the district court has jurisdiction to, among other things, “resolve
controversies and disputes regarding interpretation and implementation of this Plan and the Plan
Documents.” [Plan §§ 8.7.3, 8.7.5, R. 1239-2 at PageID 18691.] The Consent Order’s treatment
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of the term “marshaled recoveries” resolves a dispute as to the meaning of that term, and thus
plainly falls within the district court’s powers under the Plan.
The Korean Claimants next argue that the Consent Order’s clarification of “marshaled
recoveries” amounts to an impermissible modification of the Distribution Agreement. Under the
Distribution Agreement, the Dow Corning Parties can interpret the provisions that lay out the
substantive eligibility criteria for obtaining recovery, but they may not modify the criteria
themselves. Distribution Agreement, § 5.05[, R. 1239-5 at PageID 18847]. A modification of
the Agreement’s changes its substantive criteria for relief. Id.; see also In re Johns-Manville
Corp., 920 F.2d 121, 128 (2d Cir. 1990). Here, the Consent Order did nothing to modify the
substantive criteria for eligibility for recovery under the Distribution Agreement. Instead, the
Consent Order merely clarified that one of those criteria—the marshaling requirement—is met as
to claimants whose registration status made them ineligible for recovery under the Program. The
Consent Order thus does not modify the Distribution Agreement.
Some of the Korean Claimants—namely, those who received implants after January 1,
1992—also argue that the Consent Order should have modified the Distribution Agreement to
allow recovery for claimants who received implants after (rather than before) that date. But that
argument comes years too late. “Confirmation of a plan of reorganization by the bankruptcy
court has the effect of a judgment by the district court and res judicata principles bar relitigation
of any issues raised or that could have been raised in the confirmation proceedings.” In re
Chattanooga Wholesale Antiques, Inc., 930 F.2d 458, 463 (6th Cir. 1991). Here, the bankruptcy
court confirmed the Plan and its eligibility criteria in 1999. The Korean Claimants were present
at the confirmation hearing and could have made then the argument they make now. See In re
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Dow Corning Corp., 244 B.R. 634, 658 (Bankr. E.D. Mich. 1999). Their claim on this ground is
therefore barred.
Finally, the Dow Corning Parties have moved to dismiss 152 of the Korean Claimants on
standing grounds, arguing that they are Class 5 or 6 claimants rather than Class 7, and thus have
no stake in this appeal. That defect goes to the merits of their claim rather than to their standing
to bring it. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998). We therefore
deny the Dow Corning Parties’ motion.
The Consent Order is affirmed.
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