ResetAA Font size: Print

United States Court of Appeals,Fifth Circuit.

IN RE: PLACID OIL CO, Debtor Jimmy Williams, Sr.; Jimmy Williams, Jr.; Dalton Glen Williams; Jeanette Williams Shows; Gwendolyn Williams Peacock, Individually and on Behalf of the Deceased, Myra Williams, Appellants v. Placid Oil Company, Appellee.

No. 12–11120.

    Decided: May 27, 2014

Before DAVIS, GARZA, and DENNIS, Circuit Judges.John Henry Tate, II, Debra L. Innocenti, Strasburger PriceOppenheimer Blend, San Antonio, TX, William B. Baggett, Sr., Baggett, McCall, Burgess, Watson & Gaughan, Lake Charles, LA, for Appellants. Robert Andrew Simon, Barlow Garsek & Simon, L.L.P., Fort Worth, TX, for Appellee.

Mr. Williams and his children (“Williamses”) brought tort claims against Placid Oil Company (“Placid”) in connection with the allegedly asbestos-related illness and death of his wife. The bankruptcy court granted Placid's motion for summary judgment, and the district court affirmed. Because we conclude that the Williamses were unknown creditors whose pre-petition claims were discharged by Placid's constructive notice and that Placid's notice was not substantively deficient, we AFFIRM.


Placid, a Texas company, owned and operated a large natural gas production and processing facility near Black Lake, Louisiana. The company filed for bankruptcy in 1986. The bankruptcy court set January 31, 1987, as the bar date by which potential creditors were required to file claims. On three occasions in January 1987, Placid published a Notice of Bar Date in the Wall Street Journal, a newspaper of national circulation available in Louisiana. The notice informed creditors of the existence of the bankruptcy case, their opportunity to file proofs of claim, relevant deadlines, consequences of not filing a proof of claim, and how proofs of claim should be filed. On September 30, 1988, Placid confirmed its Fourth Amended Plan of Reorganization (“Plan”). The court order provided that all claims against Placid that arose on or before this confirmation date were forever discharged except for Placid's obligations under the Plan, which did not address potential future asbestos liability.

Mr. Williams worked at the Black Lake facility from 1966 to 1995. For the purposes of this proceeding, the parties agreed that Mr. Williams was occupationally exposed to insulation containing asbestos, that Mrs. Williams was exposed to asbestos dust and fibers when laundering Mr. Williams's clothing, and that the insulation was in Placid's care, custody, and control prior to the sale of the facility in 1988. In 2003, Mrs. Williams's health suddenly deteriorated. She was diagnosed with the asbestos-related lung cancer mesothelioma and passed away on August 9, 2003. In March 2004, in Louisiana state court, the Williamses brought a tort action against Placid, alleging that its negligence caused Mrs. Williams's death and attendant damages. In November 2008, Placid filed a motion to reopen its bankruptcy case, and in September 2009, Placid filed a complaint asking the bankruptcy court to determine whether the Williamses' claims were discharged, thereby commencing this adversary proceeding.

By the early 1980s, Placid was aware, generally, of the hazards of asbestos exposure and, specifically, of Mr. Williams's exposure in the course of his employment. Prior to the Plan's confirmation, no asbestos-related claims had ever been filed against Placid, and the Williamses did not file any proof of claim. After confirmation, other plaintiffs commenced asbestos-related suits against Placid, but Placid has neither been found liable in nor settled any such case. To Mr. Williams's knowledge, none of his co-workers or their spouses has ever developed mesothelioma. Additionally, Mr. Williams testified that he was generally aware of Placid's bankruptcy but does not recall any meetings, updates, or newspaper notices regarding the bankruptcy. To date, Placid has not been found liable in any lawsuit alleging asbestos exposure at a Placid facility, nor has it paid any money to settle such a case.

The bankruptcy court granted Placid's motion for summary judgment and denied the Williamses' cross-motion. The court found that the Williamses had pre-confirmation claims and that the claims were discharged by Placid's constructive notice. The district court affirmed. The Williamses now appeal, contending that because the method and substance of Placid's notice were insufficient on due process grounds, their claims were not discharged.


We review a bankruptcy court's grant of summary judgment de novo. See In re Kinkade, 707 F.3d 546, 548 (5th Cir.2013). Summary judgment is proper when there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id. (quoting Fed.R.Civ.P. 56(a)); Fed. R. Bankr.P. 7056. To make this determination, we must view facts and inferences “in the light most favorable to the nonmoving party.” In re Kinkade, 707 F.3d at 548.


The Williamses first contend that the bankruptcy court erred in finding that they were “unknown” creditors for whom constructive notice of the bar date satisfied due process.1

Section 523(a)(3)(A) of the Bankruptcy Code provides that a creditor's claim may be discharged upon the bankruptcy plan's confirmation if the “creditor had notice or actual knowledge of the case in time for ․ timely filing.” 11 U.S.C. § 523(a)(3)(A); see also In re Kendavis Holding Co., 249 F.3d 383, 38586 (5th Cir.2001). Due process requires that notice be “reasonably calculated, under all the circumstances, to inform interested parties of the pendency” of a proceeding. Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950).

The level of notice required by the Due Process Clause depends on whether a creditor is “known” or “unknown.” A debtor must provide actual notice to all “known creditors” in order to discharge their claims. City of New York v. New York, NH. & H.R. Co., 344 U.S. 293, 295–97, 73 S.Ct. 299, 97 L.Ed. 333 (1953). Known creditors include both claimants actually known to the debtor and those whose identities are “reasonably ascertainable.” Tulsa Prof'l Collection Servs., Inc. v. Pope, 485 U.S. 478, 489490, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988). A claimant is “reasonably ascertainable” if he can be discovered through “reasonably diligent efforts.” Id. at 490 (citation omitted). “[I]n order for a claim to be reasonably ascertainable, the debtor must have in his possession, at the very least, some specific information that reasonably suggests both the claim for which the debtor may be liable and the entity to whom he would be liable.” In re Crystal Oil, 158 F.3d at 297.2 By contrast, the debtor need only provide “unknown creditors” with constructive notice by publication. Id. at 295, 298. Publication in a national newspaper such as the Wall Street Journal is sufficient. Id. at 295, 297–98.

The crux of this dispute is the meaning of Crystal Oil. In Crystal Oil, the Louisiana Department of Environmental Quality (“LDEQ”) brought environmental damage claims against Crystal Oil Company after its bankruptcy plan's confirmation. Prior to the bankruptcy, a company representative had briefly corresponded with LDEQ. The LDEQ representative knew of contamination on a plot of land and, without informing Crystal Oil of the contamination or any potential environmental claim, asked only whether the company owned the land. After a faulty but good-faith title investigation, Crystal Oil replied in the negative. Id. at 293–95.

We held that although the issue was factually close, the bankruptcy court's determination that LDEQ was an unknown creditor was not clear error. Id. at 298. We first synthesized the case law: “[I]n order for a claim to be reasonably ascertainable, the debtor must have in his possession, at the very least, some specific information that reasonably suggests both the claim for which the debtor may be liable and the entity to whom he would be liable.” Id. We reasoned that LDEQ might arguably be a known creditor since the Crystal Oil employee expressed concern that “there could be environmental problems” after speaking with the LDEQ representative. Id. at 298. Moreover, the fact that the LDEQ representative had mentioned Crystal Oil's predecessor—the previous title holder of the land—meant that Crystal Oil had notice that LDEQ might have a claim. Id. On the other hand, LDEQ's inquiry mentioned nothing about environmental problems, and Crystal Oil lacked concrete notice of any claim. Id. We thus concluded that the bankruptcy court's finding that LDEQ was an unknown creditor was not clear error.

Here, we clarify this Circuit's understanding of the rule of Crystal Oil. At one extreme, the law does not require that a creditor serve upon the debtor a formal complaint in order to make himself “reasonably ascertainable” or “known.” However, at a minimum, the debtor must possess “specific information” about a manifested injury, to make the claim more than merely foreseeable.

This understanding of Crystal Oil is informed by several authorities and by our sensitivity to the policy concerns underlying bankruptcy law. First, the Supreme Court's opinion in Mullane, the origins of due process jurisprudence in the pre-discharge notice context, teaches that unknown creditors are those whose “interests are either conjectural or future or, although they could be discovered upon investigation, do not in due course of business come to knowledge [of the debtor].” Mullane, 339 U.S. at 317. The Court specifically declined to impose upon the debtor “ordinary standards of diligence,” given countervailing concerns for efficiency.3 Id. Thus, the Court recognized a temporal distinction; “conjectural” claims of a creditor that arise too far in the future cannot make that creditor “known.” Id.; see also In re Hunt, 146 B.R. 178, 182 (Bankr.N.D.Tex.1992) (“Unknown creditors include those whose identities or claims are not reasonably ascertainable and those who have merely conceivable, conjectural, or speculative claims.” (emphasis added)).

The decisions of other courts of appeals also establish that the claim of a known creditor must be based on an actualized injury, as opposed to merely foreseeable. The Third Circuit's Chemetron decision, which we cited favorably in Crystal Oil, held that known claimants must be “reasonably ascertainable, not reasonably foreseeable.” Chemetron Corp. v. Jones, 72 F.3d 341, 348 (3d Cir.1995). In Chemetron, the claims at issue were filed by residents of and occasional visitors to an area contaminated by radioactive waste. Id. at 344–45. The court explained that a foreseeability test conflicted with other authorities and would “place an impossible burden on debtors,” given the difficulty of defining the affected geography and individuals. Id. at 34748; see also COLLIER ON BANKRUPTCY ¶ 342.02 (6th ed.2013) (quoting Chemetron definition of unknown creditors).

Two appeals court opinions are particularly persuasive because they apply Crystal Oil. Those courts concluded that creditors were “known” because the debtor knew of specific complaints or injuries. The First Circuit in In re Arch Wireless, Inc., 534 F.3d 76 (1st Cir.2008), concluding that the bankruptcy court did not clearly err in finding a creditor to be “known,” cited emails sent by the creditor to the debtor prior to the bankruptcy. The emails alleged that the debtor's faulty products had caused substantial losses and “could reasonably be understood to assert an entitlement to affirmative compensation.” Id. at 81–82. Similarly, the Fourth Circuit in In re J.A. Jones, Inc., 492 F.3d 242 (4th Cir.2007), explained that an employee of the debtor was fully aware of a fatal and widely publicized accident in a construction zone for which the debtor served as the general contractor. Accordingly, the bankruptcy court did not clearly err in finding that the estate of an accident victim was a known creditor, even though no pre-petition claims had been filed. Id. at 251–52 & n. 9. Thus, to conclude that a creditor is known, a court must determine that, at a minimum, a debtor has “specific information” related to an actual injury suffered by the creditor. In re Crystal Oil, 158 F.3d at 297.4 Information, however specific, that makes a claim only foreseeable or conjectural is insufficient.5

Furthermore, policy concerns specific to bankruptcy weigh heavily against defining known creditors as those with merely foreseeable claims. Bankruptcy offers the struggling debtor a clean start. In the interests of facilitating this recovery and balancing due process considerations, the courts have established a practical limit to the debtor's duty to notify creditors: Actual notice is required only for “known” creditors. We decline today to alter this limit.

Applying the above principles, we hold that the bankruptcy court did not err in finding that the Williamses were unknown creditors under the undisputed facts presented here. Although Placid knew of the dangers of asbestos and Mr. Williams's exposure, such information suggesting only a risk to the Williamses does not make the Williamses known creditors. Here, Placid had no specific knowledge of any actual injury to the Williamses prior to its bankruptcy plan's confirmation. Cf. City of New York, 344 U.S. at 296 (concluding that holder of known liens was entitled to actual notice). Furthermore, no instances of asbestos-related injury or illness were known to Placid prior to confirmation. In re J.A. Jones, Inc., 492 F.3d at 25152 (accident-caused injuries known to debtor). Press clippings about widely-known, but general, risks of asbestos exposure do not establish that Placid knew of any specific injury to its employees or any asbestos-related claim.6

The Williamses invoke a series of policy arguments that are either inapplicable or unpersuasive. They first contend that delivering actual notice to Mr. Williams “would have been simple.” The proper threshold inquiry, however, is not the cost of providing actual notice, which is inevitably negligible when contemplating only an individual creditor. Rather, the bankruptcy court must assess the reasonableness of ascertaining known creditors. As for this threshold question, the Williamses fail to explain how Placid should have reasonably ascertained that some of its hundreds of employees (not to mention former employees) had actual asbestos-related injuries. Next, the Williamses submit that because Placid had superior knowledge of asbestos-related risks, it must bear the consequences of its choice to provide constructive notice where it had “no contemplation of future claims.” But this theory misses the bankruptcy overlay: If a debtor has “no contemplation” of a creditor's pre-petition claim, then that creditor is by definition unknown, and constructive notice discharges the claim upon confirmation. Finally, the Williamses emphasize the unique situation presented by the latency of asbestos-related illness. We are not unsympathetic to fairness concerns, but on the record and briefing before us, we again conclude that bankruptcy norms must trump: Parties with merely foreseeable claims are not “known” creditors.7


The Williamses further contend that even if they were unknown creditors, Placid's general notices of the bar date, published in the Wall Street Journal and not mentioning potential asbestos claims, were substantively insufficient for due process purposes.

We have never required bar date notices to contain information about specific potential claims. To the contrary, we have determined that publication in the national edition of the Wall Street Journal discharges the pre-confirmation claims of unknown creditors. In re Crystal Oil, 158 F.3d at 295, 297–98. Furthermore, neither the Bankruptcy Code nor Rules require bar date notices to apprise creditors of potential claims. See Fed. R. Bankr.P.2002(f) (requiring only that notice state “time allowed for filing claims”).

We hold that because a bar date notice need not inform unknown claimants of the nature of their potential claims, Placid's notices were substantively sufficient to satisfy due process. Placid's notice informed claimants of the existence of the bankruptcy case, the opportunity to file proofs of claim, relevant deadlines, consequences of not filing a proof of claim, and how proofs of claim should be filed.8 We decline to articulate a new rule that would require more specific notice for unknown, potential asbestos claimants.9


For the foregoing reasons, we AFFIRM.

The underlying legal issue in this case is whether a bankruptcy court may, consistent with the Constitution's guarantee of due process, hold that a state-law wrongful-death claim based on the death of a housewife, who fatally contracted mesothelioma from asbestos fibers on her husband's work clothes, was discharged in a bankruptcy filed by her husband's former employer fifteen years before she developed or was aware of any symptom of the disease. In my view, the bankruptcy court in this case erred in failing to recognize that such a result would violate the constitutional guarantee of due process of law. The bankruptcy court was led into this constitutional error by its misinterpretation of our decision in Lemelle v. Universal Manufacturing Corp., 18 F.3d 1268, 1276 (5th Cir.1994), as adopting the “pre-petition relationship test” formulated by other circuits and calling for the discharge of any asbestos-related claim resulting from a victim's exposure to asbestos by a debtor prior to the debtor's petition for bankruptcy. Contrary to the bankruptcy court's reading, however, Lemelle did not address whether an unknown, future claim,1 such as the housewife's latent mesothelioma claim in this case, was dischargeable in bankruptcy and it certainly did not hold that this circuit has adopted the pre-petition relationship test for application in bankruptcy cases involving asbestos-related injuries.2

Our duty to correct the bankruptcy court's constitutional errors as well as its misreading of Lemelle is complicated, however, by the plaintiffs' failure to adequately brief those issues in this court. On appeal, the plaintiffs squarely address only the issue of whether the constructive notice by publication provided to unknown, future claimants, such as the latent mesothelioma victim in this case, passed constitutional muster. Nevertheless, that alleged error inextricably relates directly to, and cannot adequately be addressed without considering, a more fundamental due process issue, viz., whether a latent asbestos claim of an asbestos-exposed, but not yet knowingly injured, person is dischargeable in bankruptcy and, if so, under what circumstances. Therefore, I believe that the plaintiffs have sufficiently preserved and argued all such errors for our review. Even if the majority of this panel refuses to grant the plaintiffs relief because of their deficient appellate briefing, this panel still owes a duty to oversee the orderly development of our jurisprudence, and a duty to future victims of mesothelioma and other latent diseases, to acknowledge and correct, rather than to paper over, the errors plainly evident in the bankruptcy court's decision below.

In Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), the Supreme Court considered what notice is mandated by the Due Process Clause. Due process, the Court said, “at a minimum” requires notice and an opportunity to be heard before a court may deprive a person of his or her property. Id. at 313. Personal notice, however, is not always necessary; rather, the Constitution requires “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Id. at 313–14. To determine what form the notice must take, the Mullane Court distinguished between two types of claimants: known and unknown. See id. at 317–19. The Court explained that for claimants “whose interests are either conjectural or future,” “extended searches are not required” and constructive notice by publication is sufficient. Id. at 317–18. The Mullane Court did not indicate, however, that the unknown-claimants category includes asbestos-exposed persons with latent-disease damage that is as yet unknown to those future victims.

Although “Mullane allows constructive notice to unknown claimants so long as no other method would be more effective in reaching them, the Court has not endorsed such an approach to claimants who are not only unknown but ‘unselfconscious and amorphous,’ as are future claimants in bankruptcy,” such as Myra Williams with her unknown, latent asbestos claim. Laura B. Bartell, Due Process for the Unknown Future Claim in Bankruptcy—Is This Notice Really Necessary?, 78 Am. Bankr. L.J. 339, 351–52 (2004) (footnote omitted) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 628, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)); see also Georgene Vairo, Mass Tort Bankruptcies: The Who, the Why and the How, 78 Am. Bankr. L.J. 93, 134 (2004) (“[N]either Mullane nor any case following it involved claimants who were not only unknown to the party sending the notice but who were in essence unknown to themselves and who therefore would not recognize themselves as the intended targets of the notice even were the notice actually received.”). Not only has the Court never endorsed such an approach, but a majority of the Court has also strongly indicated that requiring only constructive notice to individuals exposed to asbestos but who do not know about either their exposure or the harm that may result would present grave problems. In Amchem Products, Inc. v. Windsor, the Supreme Court considered certification of a class action under Rule 23(b)(3) that included individuals who had been exposed to asbestos but had yet to manifest any injuries. 521 U.S. at 597, 602–03. The Court ruled that the class as certified failed to satisfy Rule 23's predominance and adequacy-of-representation requirements, id. at 622–28, and further cautioned that

[m]any persons in the exposure-only category, the Court of Appeals stressed, may not even know of their exposure, or realize the extent of the harm they may incur. Even if they fully appreciate the significance of class notice, those without current afflictions may not have the information or foresight needed to decide, intelligently, whether to stay in or opt out.

Family members of asbestos-exposed individuals may themselves fall prey to disease or may ultimately have ripe claims for loss of consortium. Yet large numbers of people in this category—future spouses and children of asbestos victims—could not be alerted to their class membership. And current spouses and children of the occupationally exposed may know nothing of that exposure.

Because we have concluded that the class in this case cannot satisfy the requirements of common issue predominance and adequacy of representation, we need not rule, definitively, on the notice given here. In accord with the Third Circuit, however, we recognize the gravity of the question whether class action notice sufficient under the Constitution and Rule 23 could ever be given to legions so unselfconscious and amorphous.

Id. at 628 (citation omitted). Although Amchem emphasized the grave question regarding whether class-action notice sufficient under the Constitution and Rule 23 can ever be given to unselfconscious and amorphous individuals exposed to asbestos but who have yet to manifest any injuries, the same serious question exists as to whether notice sufficient under the Constitution can ever be given to workers exposed to asbestos and their families so as to properly discharge their claims in bankruptcy.

Several courts and commentators have also recognized that constructive notice to such unknown—and unknowing—future claimants fails to comport with the guarantee of due process. See, e.g., In re Hexcel Corp., 239 B.R. 564, 571 (N.D.Cal.1999) (stating that publication notice may be sufficient for “creditors who could contemplate that they might have a claim ” but reasoning that this is not the case “for a potential creditor who had no way of knowing that it may have a claim against the debtor some time in the future”); Bartell, supra, at 354 (“If they are alive and actually see the notice, [future claimants] could not recognize themselves as affected in any way by the bankruptcy court case and will, therefore, take no action to ensure their interests are represented.”). Unknown, future claimants, even if they receive notice of a bankruptcy proceeding, are often unable to recognize that their rights will be affected by the bankruptcy, for instance because they are unaware that the debtor has exposed them to toxic substances or because they have yet to manifest any injuries by the time the debtor files for bankruptcy. “Even if they fully appreciate the significance of [the] notice, those without current afflictions may not have the information or foresight needed to decide, intelligently, whether” to participate in the bankruptcy. Amchem, 521 U.S. at 628. This is especially true for claimants with asbestos-related injuries, which often take years to manifest themselves. See id. at 598 (noting “a latency period that may last as long as 40 years for some asbestos related diseases”) (internal quotation marks omitted); Kane v. Johns–Manville Corp., 843 F.2d 636, 639 (2d Cir.1988) (“A significant characteristic of these asbestos-related diseases is their unusually long latency period. An individual might not become ill from an asbestos-related disease until as long as forty years after initial exposure. Hence, many asbestos victims remain unknown, most of whom were exposed in the 1950's and 1960's before the dangers of asbestos were widely recognized. These persons might not develop clinically observable symptoms until the 1990's or even later.”); In re Evans Prods. Co., 2009 WL 2448145, at *8 (Bankr.S.D.Fla. Aug.6, 2009) (noting that “[d]ecades might pass before these persons even realize any harm has come to them” from asbestos).

“[W]hen an individual cannot recognize that he or she has a claim in a bankruptcy case and, therefore, cannot make a decision about how to assert that claim, that person is functionally or constructively ‘incompetent’ for purpose of the bankruptcy case.” Bartell, supra, at 366. “These claimants ․ have no ability to represent their own interests in the bankruptcy case because they cannot be given the information necessary to enable them to make decisions about those interests.” Id. at 370. Consequently, “[c]onstructive notice cannot reach [them because they] do not know of their claims.” Id. In other words, “[p]ublication is not notice at all.” Id.

However, “a bankruptcy court may appropriately appoint a guardian ad litem ”—or, stated differently, a future-claims representative—“to represent their interests in an adversary proceeding under [Bankruptcy] Rule 7017.” Id. at 367; see Fed. R. Bankr.P. 7017 (stating that Federal Rule of Civil Procedure 17 “applies in adversary proceedings”); Fed. R. Civ. P .17(c) (permitting “a general guardian,” “a committee,” “a conservator,” or “a like fiduciary” to “sue or defend on behalf of a minor or an incompetent person” and providing that “[t]he court must appoint a guardian at litem—or issue another appropriate order—to protect a minor or incompetent person who is unrepresented in an action”); cf. 11 U.S.C. § 524(g).3 Not only could notice to a future-claims representative appointed in this manner satisfy due process, see, e.g., In re Schicke, 97 F. App'x 249, 251 (10th Cir.2004) (notice to judgment creditor's attorney satisfied due process); In re De La Cruz, 176 B.R. 19, 23–24 (9th Cir.BAP1994) (notice to attorney for guardian of minor creditor satisfied due process); In re Chi., Rock Island & Pac. R.R. Co., 788 F.2d 1280, 1281–83 (7th Cir.1986) (notice to minor creditor's mother satisfied due process), but failure to appoint a future-claims representative likely means that unknown, future latent-disease claims may not, consistent with due process, be discharged, see In re Chance Indus., Inc., 367 B.R. 689, 708–10 (Bankr.D.Kan.2006) (concluding in the alternative that “a confirmation order that discharges the claims of an unknown future tort claimant without any notice [to the creditor or to a future-claims representative] and an opportunity to be heard violates due process” (citing Bartell, supra, at 354–56)); Bartell, supra, at 370; see also Jones v. Chemetron Corp., 212 F.3d 199, 209 (3d Cir.2000) (“[I]f a potential claimant lacks sufficient notice of a bankruptcy proceeding, due process considerations dictate that his or her claim cannot be discharged by a confirmation order. Such due process considerations are often addressed by the appointment of a representative to receive notice for and represent the interests of a group of unknown creditors.”) (citations omitted); cf. Covey v. Town of Somers, 351 U.S. 141, 146, 76 S.Ct. 724, 100 L.Ed. 1021 (1956) (concluding that “[n]otice to a person known to be an incompetent who is without the protection of a guardian” does not satisfy Mullane ). Recognizing this, many courts have discharged unknown, future claims but only when constructive notice has been coupled with the appointment of a future-claims representative. See, e.g., In re Johns–Manville Corp., 68 B.R. 618, 626–27 (Bankr.S.D.N.Y.1986), aff'd 78 B.R. 407 (S.D.N.Y.1987), aff'd sub nom. Kane, 843 F.2d at 636; cf. Jones, 212 F.3d at 209–10 (holding that if a claimant who was unborn at the time of confirmation had a “claim,” it was not discharged when no representative had been appointed to represent his interests in the bankruptcy).

These and other authorities4 recognize the grave due process problems presented by the discharge of unknown—and unknowable—future claims, such as Myra Williams's latent asbestos claim, when constructive notice to individuals exposed to toxic substances but who lack knowledge of either their exposure or any as-yet unaccrued injury is effectively no notice at all. Therefore, neither Lemelle nor Mullane—which did not consider notice with respect to unknown and unperceivable future claims—should be read as holding that due process has been satisfied when all that is provided is constructive notice to exposure-only individuals who may be unaware of their exposure, unaware of the severe harm that may ultimately result, and unable to recognize that their rights may be affected in bankruptcy. Rather, careful thought and a context-specific approach is required before concluding that unknown, future claimants have been provided with notice and an opportunity to be heard such that their claims may, consistent with the guarantee of due process, be discharged. See In re Grossman's Inc., 607 F.3d 114, 127 (3d Cir.2010) (“Whether a particular claim has been discharged by a plan of reorganization depends on factors applicable to the particular case[.]”).

The record in this case fails to demonstrate that Myra Williams was aware of either her exposure to asbestos dust and fibers or that she might someday grow ill and die as a consequence of that exposure. Under these circumstances, she was functionally incompetent to receive notice of Placid's bankruptcy because, even if she had in fact received notice of the proceedings, she would not have been able to recognize their effect on her or to understand that her rights could be affected by them. And because there was no future-claims representative to represent her interests, the bankruptcy court erred by concluding that she received constitutionally adequate notice that her claim would be discharged in the bankruptcy if she did not participate in the proceedings. In sum, constructive notice by publication to asbestos-exposed individuals with unmanifested or latent mesothelioma, without appointment of a representative for such future claimants, does not satisfy due process. As the Court said in Mullane, “[w]e have before indicated in reference to notice by publication that, ‘Great caution should be used not to let fiction deny the fair play that can be secured only by a pretty close adhesion to fact.’ “ 339 U.S. at 320 (quoting McDonald v. Mabee, 243 U.S. 90, 91, 37 S.Ct. 343, 61 L.Ed. 608 (1917)).

For these reasons, I respectfully dissent.5

EMILIO M. GARZA, Circuit Judge:

FindLaw Career Center

    Select a Job Title

      Post a Job  |  Careers Home

    View More