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Full title: Response /Debtor's Objection to the Motion of the Official Committee of Asbestos Claimants of Bestwall LLC for a Stay Pending Appeal of the PIQ Order Hearing scheduled for 04/22/2021 at 9:30 AM at 3-LTB-Charlotte Courtoom 1-504/22/2021 (RE: related document(s)1711 Motion (Other) filed by Creditor Committee The Official Committee of Asbestos Claimants of Bestwall, LLC) Filed by Garland S. Cassada on behalf of Bestwall LLC. (Cassada, Garland) (Entered: 04/20/2021)
Document posted on Apr 19, 2021 in the bankruptcy, 25 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
Apr. 9, 2020) (stating that “[s]everal courts have found that bankruptcy court orders in regards to discovery, including Rule 2004 orders, are not final orders for purposes of appeals to district court” and listing cases);In re Pawlak, 520 B.R. 177, 183-4 (D. Md. 2014) (and noting that the “Fourth Circuit has previously stated that the rule against review of interlocutory orders applies with particular force in the discovery context, as allowing immediate appeal of orders resolving discovery disputes would only disrupt court proceedings and clog the appellate courts with matters more properly managed by the court familiar with the parties and their controversy”).In contrast to the speculative harms upon which the ACC relies, a stay of the PIQ Order pending appeal “will substantially injure” the Debtor, Allen, 590 B.R. at 356, by depriving it of the discovery it and its experts need for numerous purposes, including estimation, and without which the Debtor would be denied due process.As required by the PIQ Order, the claims agent served the Questionnaire and PIQ Order 6 As the Debtor has noted, the Court could authorize entry of a Lone Pine order as a “special procedure” under Rule 16(c) of the Federal Rules of Civil Procedure, requiring claimants to provide basic facts about their claims, a common practice in mass tort cases, including asbestos cases.In the alternative, the ACC requests that the Court suspend proceedings pursuant to Bankruptcy Rule 8007(e) with respect to “the implementation and enforcement of orders based on or related to the PIQ Order.”
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Document ContentsUNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION In re Chapter 11 BESTWALL LLC,1 Case No. 17-31795 (LTB) Debtor. DEBTOR’S OBJECTION TO THE MOTION OF THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS OF BESTWALL LLC FOR A STAY PENDING APPEAL OF THE PIQ ORDER Bestwall LLC (“Bestwall” or the “Debtor”) hereby objects to the Motion of the Official Committee of Asbestos Claimants of Bestwall LLC for a Stay Pending Appeal of the PIQ Order (Dkt. 1711) (“Stay Motion”), and its supporting Memorandum of Law in Support of the Official Committee of Asbestos Claimants’ Motion for Stay Pending Appeal of the PIQ Order (Dkt. 1712) (“ACC Br.”).2 Through the Stay Motion, the Official Committee of Asbestos Personal Injury Claimants (the “ACC”) seeks a stay of the Court’s Order Pursuant to Bankruptcy Rule 2004 Directing Submission of Personal Injury Questionnaires by Pending Mesothelioma Claimants and Governing the Confidentiality of Responses (the “PIQ Order”), while the ACC pursues an interlocutory appeal of the PIQ Order to the District Court. Introduction The Court should deny the Stay Motion because the ACC cannot satisfy the standard it must meet to obtain the extraordinary remedy of a stay pending appeal. The requested stay would 1 The last four digits of the Debtor’s taxpayer identification number are 5815. The Debtor’s address is 133 Peachtree Street, N.E., Atlanta, Georgia 30303. Capitalized terms not defined herein have the meanings set forth in the PIQ Motion. 2 Certain claimant law firms joined in the Stay Motion. Joinder to Motion of the Official Committee of Asbestos Claimants of Bestwall LLC for Stay Pending Appeal (Dkt. 1713). References to the arguments of the “ACC” in this objection also refer to the claimant law firms that filed the joinder, and the Debtor likewise objects to the joinder.
1cause substantial harm to the Debtor by depriving it of information it needs to prepare its estimation case and that its experts (including its claims expert Dr. Charles E. Bates) need to submit their expert reports in connection with estimation. The deadline for Questionnaire responses was fundamental to the construction and negotiation of the Case Management Order for Estimation of the Debtor’s Liability for Mesothelioma Claims (Dkt. 1685) (the “Estimation CMO”), which the Court entered on March 23 with the consent of all parties, including the ACC. The stay now requested by the ACC would render the Estimation CMO unworkable, would be highly prejudicial to the Debtor, and would very likely delay both the estimation proceeding and the Debtor’s effort to reorganize and fund a section 524(g) trust (in service of which this Court ordered estimation in October of last year). The ACC’s proposal that its discovery proceed as planned, while the Debtor’s critical discovery is indefinitely stayed, ACC Br. ¶ 32, would be one-sided and unfair. The ACC’s proposed stay also would interrupt a Questionnaire process that has already begun at considerable expense to the estate and with significant effort by the parties. The PIQ Order imposes no harm on the claimants, much less the irreparable harm the ACC must show to obtain a stay pending appeal. The order simply requires claimants to answer relevant discovery about the most basic facts concerning their claims asserted against the bankruptcy estate, in a manner that minimizes burden. Answering discovery does not constitute irreparable harm as a matter of law—especially because the ACC admits the Debtor could obtain the same discovery by other (more burdensome and expensive) means. Further, the ACC’s appeal of the PIQ Order has no likelihood of success. The PIQ Order is not a final order, and the ACC’s appeal does not meet the standards for interlocutory appeal. Even if it did, however, the
2appeal has no prospect for success given the appropriately deferential standard the District Court must apply to a discovery order. The Stay Motion should be denied. Relevant Background 1. The Debtor filed its Motion for Order Pursuant to Bankruptcy Rule 2004 Directing Submission of Personal Injury Questionnaires by Pending Mesothelioma Claimants (Dkt. 1236) (the “PIQ Motion”) on July 30, 2020. The PIQ Motion explained the Debtor’s need for the information sought through the Questionnaire, including to establish “a critical factual foundation for the negotiation, formulation, solicitation, and confirmation of” a plan of reorganization “establishing an asbestos trust” under 11 U.S.C. § 524(g). PIQ Motion at 1-2. The PIQ Motion attached in support (a) the Declaration of Charles E. Bates, PhD (the “Bates Discovery Declaration”), in which Dr. Bates described his need for the information sought through the Questionnaire, (b) orders and questionnaires from numerous previous mass tort cases (Exs. E to K, M); and (c) a chart showing how each of the topics included in Bestwall’s proposed questionnaire had been included in precedent questionnaires (Ex. O). The Bates Discovery Declaration incorporated a previous declaration submitted in connection with the Motion of the Debtor for Estimation of Current and Future Mesothelioma Claims (Dkt. 875) (the “Estimation Motion”), also summarizing the information Dr. Bates needs to perform his work (the “Bates Estimation Declaration”). 2. On October 22, 2020, the Court granted the Estimation Motion, concluding that “the only way forward for the case at this point is estimation.” 10/22/20 Tr. at 17. 3. In its Order Authorizing Estimation of Current and Future Mesothelioma Claims (Dkt. 1577) (the “Estimation Order”), the Court cited the Bates Estimation Declaration, recognized that the Debtor and its expert needed significant information in connection with
3estimation, and concluded “the Debtor would be denied due process if it were required to move forward with this chapter 11 case without the information it contends it needs and which the Court determines is necessary.” Estimation Order ¶ 11; see also id. ¶ 10 (“The Bates [Estimation] Declaration, introduced by the Debtor, describes the information Dr. Bates needs for a variety of reasons . . . The Bates Declaration is undisputed and no evidence to the contrary was introduced.”). The Debtor’s Questionnaire was designed to obtain the information the Debtor and Dr. Bates need and that he described in his declaration. 4. The PIQ Motion was the subject of extensive briefing, in multiple rounds over almost six months. See PIQ Order at 1 n.3. The ACC and the FCR also took document and deposition discovery with respect to the PIQ Motion. The Court then heard oral argument on the PIQ Motion on January 21, 2021. 5. On March 4, 2021, the Court granted the PIQ Motion. In its bench ruling, the Court held “that questionnaires have been used in mass tort bankruptcy cases across the country, including in this Circuit, over the course of many years . . . because courts and parties in those cases have acknowledged that the questionnaires will be helpful to all parties and efficient for purposes of an estimation proceeding.” 3/4/21 Tr. at 8-9. The Court further found that “the personal injury questionnaire discovery [was] relevant to a determination of the asbestos liability of [Bestwall], the administration of [Bestwall’s] estate, plan formulation, and plan confirmation,” and was the “most efficient way to proceed and avoid undue burden.” Id. at 8. The Court also recognized that Bestwall’s Questionnaire was “consistent with [the] questionnaires [used in prior cases], if not more finely well[-]tuned in light of experience gained from prior cases.” Id. at 12. And, the Court adopted the Debtor’s suggestion for a four-month period for claimants to
4complete responses to the Questionnaire, finding it was consistent with prior questionnaire processes in precedent cases. Id. at 12. 6. Over the following two weeks, the ACC and the Debtor met and conferred numerous times concerning the form of the PIQ Order and the deadlines for completing and serving the Questionnaire. The Debtor also invited and implemented comments from claimant law firms, including firms representing claimants on the ACC, as well as other interested law firms. 7. On March 18, 2021, the Court heard a status update with respect to the PIQ Order, and ruled concerning one unresolved aspect of the order (the use restriction). The parties resolved all remaining issues with respect to the PIQ Order on March 19, 2021 and jointly submitted a proposed order. The Court entered it on March 23, 2021. 8. The Debtor continued to work closely with the ACC as the Debtor implemented the PIQ Order. The Debtor made available to the ACC, the FCR, and their experts the fillable PDF form of the Questionnaire and the portion of the online portal that allows claimants and counsel to upload responses to the Questionnaire completed offline and upload other required documents (the “Upload Option”). 9. On March 26, 2021, as required by the PIQ Order, the claims agent served the Questionnaire and PIQ Order on more than 800 law firms that either represent known Pending Mesothelioma Claimants (as defined in the PIQ Order) or sued Old GP or Bestwall on an asbestos claim in the past. See Dkt. 1678. 10. The Debtor met and conferred with the ACC and its experts on March 29, 2021 concerning the fillable PDF form and the Upload Option, and implemented certain suggestions received from the ACC and its experts. The Debtor informed the ACC that the “fillable form”
5portion of the portal, which guides claimants through the Questionnaire in a question-by-question format (the “Fillable Form Option”), was still being completed but would be ready in the coming weeks. The Upload Option was made available to claimants and counsel on March 29, 2021. 11. Also on March 29, 2021, the parties (including the ACC) presented an agreed Estimation CMO to the Court, which the parties had negotiated over a period of several weeks after the March 4, 2021 rulings. As stated by Mr. Wright, counsel for the ACC: “We are fine with the dates that have been proposed and appreciate everybody’s willingness to work on that.” 3/29/21 Tr. at 17. The Court entered the Estimation CMO on March 31, 2021. 12. The Estimation CMO memorializes what the ACC and the FCR agree is an “aggressive” pretrial schedule ahead of a trial in May 2022. See 3/24/21 Tr. at 27 (statement of Mr. Gordon); id. at 31 (statement of Ms. Zieg); id. at 33 (statement of Ms. Ramsey); 3/29/21 Tr. at 25 (statement of Ms. Zieg). The Estimation CMO imposes strict deadlines on all parties, and in particular imposes on the Debtor substantial discovery obligations, including initial disclosures, the production of documents relating to over 2,000 resolved mesothelioma claims, and other fact and expert discovery obligations. Estimation CMO ¶ 3 et seq. 13. The Debtor had been clear for many months that the information requested in the Questionnaire is crucial to the Debtor’s ability to prepare its case and is a critical gating item as the parties prepare for the estimation hearing. See, e.g., 10/22/20 Tr. at 22 (statement of Mr. Cassada) (urging hearing on PIQ Motion and trust discovery motion because “they’re the first step to get the basic information we need and to engage in an orderly, efficient discovery process that will lead us to estimation”); 11/13/20 Tr. at 38-39 (statement of Mr. Gordon) (noting that if hearing on PIQ Motion were delayed “we’re going to have further delay with the estimation
6timeline”); 3/18/21 Tr. at 10 (statement of Mr. Worf) (Questionnaire is “a critical item to maintain progress in the case” and noting “we want to make sure to get the questionnaire served on, on law firms as soon as we possibly can so that period for returning the questionnaires can start to run and, and we can get the responses back and the experts can use them in a, in a timely fashion”). 14. The deadline for submitting initial expert reports under the Estimation CMO (November 24, 2021) is a mere four months after the Questionnaire return date (July 26, 2021). The Debtor views those four months as the minimum necessary to process and analyze the Questionnaire responses. See 3/29/21 Tr. at 10-11 (statement of Mr. Gordon) (noting that “one of the reasons for picking [the November 24] date is that’s about four months after the deadline for the submission of responses to personal injury questionnaires and that was pretty much, at least by our side—and I think probably by, by both sides—viewed as the minimum period of time the experts would need to review and analyze the data coming in from the PIQs”). 15. Although the parties negotiated the terms of the Estimation CMO over a multiple-week period, at no time during those negotiations or prior to the hearing at which the Estimation CMO was presented to the Court did the ACC inform the Debtor that it intended to appeal the PIQ Order and seek a stay of the order pending the outcome of the appeal. In fact, the Debtor did not learn of the appeal until counsel for the ACC informed counsel for the Debtor about it approximately two hours before the appeal was filed. The Debtor did not learn about the ACC’s intention to seek a stay pending appeal until after the Stay Motion was filed. 16. On April 6, 2021 (the last day of the appeal period under Rule 8002 of the Federal Rules of Bankruptcy Procedure), the ACC filed its notice of appeal of the PIQ Order, a motion
7for leave to appeal the PIQ Order, and the Stay Motion. Certain claimant law firms also filed a notice of appeal and joined in the motion for leave to appeal and the Stay Motion. 17. On April 9, 2021, the Debtor made available a test version of the Fillable Form Option to the ACC, the FCR, and their experts. After the Debtor implemented certain changes requested by ACC counsel, the Fillable Form Option was activated online on April 16, 2021 and is now available to all claimants and their counsel who wish to use it in responding to the Questionnaire. 18. Almost one month of the four-month response period for the Questionnaire is now past and the claims agent has begun receiving Questionnaire responses. The claims agent also has been responding to questions concerning the PIQ Order, including the various options for completing the Questionnaire, through a call line established by the claims agent to handle queries from counsel or claimants. Argument 19. “The decision whether to grant a stay pending appeal lies within the sound discretion of the court, and the burden on the movant seeking the extraordinary relief of a stay is a heavy one.” In re Franklin, 2020 WL 603900, at *3 (Bankr. M.D.N.C. Feb. 6, 2020) (quoting In re Sabine Oil & Gas Corp., 551 B.R. 132, 143 (Bankr. S.D.N.Y. 2016), punctuation omitted). Courts in the Fourth Circuit consider four factors when ruling on requests for stay pending appeal: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Allen v. Fitzgerald, 590 B.R. 352, 356 (W.D. Va. 2018) (citing Hilton v. Braunskill, 481 U.S. 770, 776 (1987)).
820. The movant must show that all four of these requirements weigh in favor of a stay pending appeal. BDC Capital, Inc. v. Thoburn Ltd. P’ship, 508 B.R. 633, 636-37 (E.D. Va. 2014) (“All four requirements must be satisfied.”); see also In re Foster, 2019 WL 7841547, at *12 (Bankr. M.D.N.C. Feb. 8, 2019).3 Moreover, the applicant for a stay has the burden of proof on each of the four elements. Schweiger, 578 B.R. at 736-37. Thus, a stay pending appeal “is not a matter of right even if irreparable injury might otherwise result to the Petitioners, as the parties and the public are also entitled to the prompt execution of orders . . . .” Allen, 590 B.R. at 360 (quotation omitted). 21. The ACC cannot show that it meets any of the four factors, much less all of them, and thus is not entitled to a stay pending appeal. I. The ACC is unlikely to succeed on the merits on appeal 22. First, the ACC must make a “strong showing” that it is “likely to succeed” on appeal. Id. at 356. It is not sufficient for the ACC to show a “substantial possibility” of success, Schweiger, 578 B.R. at 737, or that it is “just as likely as the other parties to succeed on appeal,” BDC Capital, 508 B.R. at 637-38. To the contrary, the “requirement that the plaintiff clearly demonstrate that it will likely succeed on the merits is far stricter than the [abrogated] Blackwelder requirement that the plaintiff demonstrate only a grave or serious question for 3 The ACC argues that all four requirements need not be satisfied, and that the Court can engage in balancing if some of the factors are met but others are not. See ACC Br. ¶ 14. Although this issue has not been addressed directly in this district or by the Fourth Circuit, the decisions in other courts within the Fourth Circuit holding that all four factors must be met are better reasoned and should be followed. See, e.g., BDC Capital, 508 B.R. at 636-37; Franklin, 2020 WL 603900, at *3; Foster, 2019 WL 7841547, at *12; see also In re Schweiger, 578 B.R. 734, 736-37 (Bankr. D. Md. 2017) (citing additional cases requiring that all four factors be met). Moreover, the Fourth Circuit has held that all four factors must be met to obtain a preliminary injunction. Real Truth About Obama, Inc. v. FEC, 575 F.3d 342 (4th Cir. 2009), vacated on other grounds and remanded, 559 U.S. 1089 (2010), reaffirmed in relevant part 607 F.3d 355 (4th Cir. 2010). Because “courts in the Fourth Circuit have held . . . that the preliminary injunction standard applies to issuance of a stay pending appeal,” Schweiger, 578 B.R. at 736, the Real Truth reasoning applies equally to stays pending appeal. In any event, because the ACC cannot carry its burden with respect to any of the factors, it would not be entitled to a stay pending appeal even if a balancing approach were appropriate.
9litigation.” Real Truth, 575 F.3d at 346-47 (emphasis in original, holding with respect to related preliminary injunction standard). 23. The ACC is unlikely to obtain review of an interlocutory discovery order and, even if it could, the ACC is unlikely to succeed in overturning the PIQ Order, which was decidedly within this Court’s discretion. The ACC, therefore, cannot make the likelihood of success showing required to support a stay. A. The PIQ Order is not a final order and the ACC cannot meet the criteria for interlocutory appeal 24. To meet its burden on the likelihood of success factor, the ACC first must show that it will succeed in obtaining appellate review of the PIQ Order. See In re Frascella Enters., Inc., 388 B.R. 619, 623 (Bankr. E.D. Pa. 2008) (likelihood of success analysis must include “whether the District Court will grant the Defendants’ leave to file an interlocutory appeal”) (quotation omitted); In re Smith, 397 B.R. 134, 137 (Bankr. D. Nev. 2008) (“procedural infirmities” in appeal must be considered in analyzing likelihood of success on appeal). The ACC does not address this issue in its Stay Motion or brief, and the ACC cannot demonstrate a likelihood of obtaining review because the PIQ Order is not a final order and does not meet the standard for an interlocutory appeal. 1. The PIQ Order is not a final order 25. First, the PIQ Order is not a final order entitling the ACC to appeal as of right. The Supreme Court has made clear that discovery rulings are “clearly interlocutory.” FirsTier Mortg. Co. v. Invs. Mortg. Ins. Co., 498 U.S. 269, 276 (1991); see also In re Bryson, 406 F.3d 284, 288 (4th Cir. 2005) (acknowledging the holding in FirsTier). Numerous bankruptcy and circuit courts have adhered to this view, both generally and in the specific context of Bankruptcy Rule 2004 orders. W.S. Badcock Corp. v. Beaman, 2015 WL 575422, at *1 (E.D.N.C. Feb. 11,
102015) (listing authority); In re Coleman Craten, LLC, 15 F. App’x 184 (4th Cir. 2001) (unpublished) (affirming dismissal of appeal of Rule 2004 order as interlocutory); McCoy v. Ace Motor Acceptance Corp., 2019 WL 7000088, at *2-3 (W.D.N.C. Dec. 20, 2019) (court lacked jurisdiction to hear appeal of bankruptcy court’s order on discovery dispute); Lynch v. Barnard, 2020 WL 1812504, at *5 (E.D.N.Y. Apr. 9, 2020) (stating that “[s]everal courts have found that bankruptcy court orders in regards to discovery, including Rule 2004 orders, are not final orders for purposes of appeals to district court” and listing cases); In re Royce Homes LP, 466 B.R. 81, 89 (S.D. Tex. 2012) (noting “extensive case law holding bankruptcy discovery orders to be interlocutory”); Decker v. Scott, 2019 WL 4491332, at *3 (W.D. Va. Sept. 18, 2019) (similar, listing cases); In re Kaiser Grp. Int’l, Inc., 400 B.R. 140, 144 (D. Del. 2009) (noting that “[g]enerally, pretrial discovery decisions [by a bankruptcy court] are not considered to be final decisions subject to immediate appeal”). Litigation would quickly become unmanageable if discovery orders (including Rule 2004 orders) were routinely appealable as of right. 26. There is no question that the PIQ Order is a discovery ruling. PIQ Order at 2 (characterizing relief as “discovery”). The ACC argues that the PIQ Order warrants treatment different from all other “clearly interlocutory” discovery orders because it resolves a “discrete” issue in this proceeding. Memorandum of Law in Support of the Official Committee of Asbestos Claimants of Bestwall LLC’s Motion for Leave to Appeal the PIQ Order (Dkt. 1708) at 9 (“Motion for Leave Memorandum”). But the ACC cites no authority, in this jurisdiction or any other, holding that a Rule 2004 discovery order presents a “discrete issue” that renders it a final judgment. The ACC relies on Mort Ranta v. Gorman, 721 F.3d 241 (4th Cir. 2013), which held that an order denying confirmation of a chapter 13 plan without prejudice is a final order. Id. at 246. That holding has no relevance here and, moreover, is no longer good law after the Supreme
11Court’s decision in Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1691-94 (2015) (holding that denial of confirmation of a chapter 13 plan is not final). 27. The PIQ Order is, categorically, not a final order giving the ACC the automatic right to appeal. See In re Diamond Trucking, Inc., 2019 WL 316711, at *2 (N.D. Ind. Jan. 24, 2019) (“[O]rders granting motions for Rule 2004 examinations, like discovery orders, do not resolve discrete disputes . . . [and] are interlocutory as a categorical matter.”). The PIQ Order is simply a discovery order that allows the parties to obtain basic information from asbestos claimants about their claims against Bestwall and is not appealable as of right. 2. The ACC cannot meet the standards for interlocutory review 28. Because the PIQ Order is not final, the ACC must obtain leave to appeal. District courts grant leave to appeal interlocutory bankruptcy court orders only upon finding that (1) the order to be appealed involves a controlling question of law, (2) as to which there is substantial ground for difference of opinion, and (3) that an immediate appeal from the order may materially advance the ultimate termination of the litigation. In re Biltmore Investments, Ltd., 538 B.R. 706, 710 (W.D.N.C. 2015) (also noting that “appellant must demonstrate that exceptional circumstances justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment”). The ACC must prove all three prongs to obtain leave to appeal. Id. None are met here. Indeed, federal district courts “have routinely declined to . . . allow immediate appeal of a bankruptcy court’s discovery orders.” Badcock, 2015 WL 575422, at *2 (internal quotation marks omitted). 29. First, the PIQ Order involves no controlling question of law. The Fourth Circuit has defined a controlling question of law as “a narrow question of pure law whose resolution will be completely dispositive of the litigation, either as a legal or practical matter, whichever way it
12goes.” Fannin v. CSX Transp., Inc., 873 F.2d 1438 (4th Cir.1989) (unpublished). “Whether or not [an] appellant should be subject to a Rule 2004 examination fails to satisfy this test.” Badcock, 2015 WL 575422, at *2 (citation omitted). To the contrary, whether to order a Rule 2004 examination is a question of discretion, involving a determination of what is advisable under the particular facts and circumstances. See In re Braxton, 516 B.R. 787, 794 (E.D.N.C. 2014) (noting that “Rule 2004 ‘commits to the sound discretion of the bankruptcy court the decision whether to require examination of a party.’”) (emphasis added; quoting McLaughlin v. McPhail, 707 F.2d 800, 804 (4th Cir. 1983)); see also 3/4/21 Tr. at 10 (“[T]he Court holds the ultimate discretion”). In this case, appellate review of this Court’s PIQ Order will not “be completely dispositive” of anything—not estimation, not plan negotiation and confirmation, and not this bankruptcy case. 30. The ACC cites no cases holding that a bankruptcy court’s Rule 2004 order raises a controlling question of law. Nor does the ACC distinguish or even address any of the extensive authority to the contrary. See Badcock, 2015 WL 575422, at *2; Decker, 2019 WL 4491332, at *4 n.5 (Rule 2004 order does not meet the three-factor test); Lynch, 2020 WL 1812504, at *6 (similar); McCann v. Commc’ns Design Corp., 775 F. Supp. 1506, 1534 (D. Conn. 1991) (holding that an order granting or denying discovery “is ordinarily a non-appealable interlocutory order . . . and in the circumstances presented does not involve  a controlling question of law”). Matters such as the PIQ Order that involve judicial discretion concerning the appropriate scope of discovery are left to the sound discretion of the bankruptcy judge most familiar with the proceeding. See Lynch, 2020 WL 1812504, at *6; In re Pawlak, 520 B.R. 177, 183-4 (D. Md. 2014) (and noting that the “Fourth Circuit has previously stated that the rule against review of interlocutory orders applies with particular force in the discovery context, as allowing immediate
13appeal of orders resolving discovery disputes would only disrupt court proceedings and clog the appellate courts with matters more properly managed by the court familiar with the parties and their controversy”). 31. Second, there is no “substantial ground for difference of opinion.” The ACC acknowledges that this prong typically requires “a difference of opinion  between courts on a given controlling question of law, creating the need for an interlocutory appeal to resolve the split or clarify the law.”4 The ACC apparently concedes that no such difference of opinion exists. Id. Instead, they argue that this is a matter of first impression, so the District Court must determine whether there is “‘substantial ground’ for dispute.” Id. But, as the Court observed in its ruling, courts have for decades routinely ordered questionnaires in mass tort bankruptcy cases. 3/4/21 Tr. at 8-9 (“[T]he reality is that questionnaires have been used in mass tort bankruptcy cases across the country, including in this Circuit, over the course of many years.”). The ACC has not cited a single example of a court that has denied a request for a Questionnaire to gather basic information in a mass tort bankruptcy case. And although the ACC claims to raise numerous issues of “first impression,” as described below, the ACC’s positions are utterly meritless. 32. Third, an immediate appeal will not materially advance the termination of the estimation proceeding or this bankruptcy case. Appellate review of the PIQ Order would not resolve the estimation proceeding or any other substantive matter. It would at most resolve a discovery dispute that, while important, would not materially advance the substantive tasks in this case, including estimation and negotiation, formulation, and confirmation of a plan of reorganization. To the contrary, by depriving the Debtor of discovery it needs to engage in those 4 Motion for Leave Memorandum at 19 (quoting KPMG Peat Marwick, L.L.P. v. Estate of Nelco, Ltd., 250 B.R. 74, 82 (E.D. Va. 2000)).
14substantive tasks, or potentially forcing the Debtor to resort to more burdensome and costly means of obtaining the information, appellate review threatens to prolong the estimation proceeding and delay resolution of the bankruptcy case. B. The District Court is unlikely to reverse the Court’s PIQ Order on appeal 33. Even if the ACC succeeded in gaining appellate review, it would be unlikely to succeed in reversing the PIQ Order on appeal. The ACC seeks to appeal a number of discretionary discovery rulings relating to the Questionnaire that would be reviewed under a deferential standard and that were, in any event, clearly correct. 34. The ACC’s principal argument on appeal seems to be that the “pending proceeding rule” prevents the Court from issuing the Questionnaire under Bankruptcy Rule 2004 because the Questionnaire relates to the estimation proceeding ordered by the Court. See ACC Br. ¶¶ 18-19. But as the Court correctly held, “applying the pending proceeding rule is discretionary and not mandatory,” In re Camferdam, 597 B.R. 170, 174 (Bankr. N.D. Fla. 2018), and bankruptcy courts have discretion to proceed under Bankruptcy Rule 2004 instead of the Federal Rules of Civil Procedure (the “Civil Rules”). See, e.g., In re Int’l Fibercom, Inc., 283 B.R. 290, 292 (Bankr. D. Ariz. 2002) (“[T]he court holds the ultimate discretion whether to permit the use of Rule 2004, and courts have for various reasons done so despite the existence of other pending litigation.”). Bankruptcy Rule 9014(c) expressly permits such a result, noting that the Civil Rules apply to contested matters “unless the court directs otherwise.” See In re M4 Enters., Inc., 190 B.R. 471, 475-76 (Bankr. N.D. Ga. 1995) (allowing Rule 2004 examination despite pending contested matter because topic was relevant to broader issues). Thus, the Court had discretion to use Rule 2004 rather than the contested matter rules, and the ACC would have to show that the Court abused its discretion to succeed on appeal, which it cannot do. Notably, in
15one case the ACC repeatedly cites, the district court refused to grant a stay during the pendency of an appeal that presented a “pending proceeding rule” issue. Braxton, 516 B.R. at 794-96. 35. The ACC also continues to press its procedural objections to the use of Rule 2004 as the authority for issuing the Questionnaire, arguing that subpoenas must be issued to each of the thousands of Pending Mesothelioma Claimants. See, e.g., ACC Br. ¶¶ 21-22. The Court rejected this argument, correctly holding that questionnaires are a time-tested and appropriate means for obtaining basic information about the claims against the estate in a mass tort bankruptcy case. 3/4/21 Tr. at 8-9 (noting the widespread use of questionnaires in mass tort bankruptcy cases, “and I think that’s because courts and parties in those cases have acknowledged that the questionnaires will be helpful to all parties and efficient for purposes of an estimation proceeding”). The Court also correctly observed that two previous courts issued questionnaires under the authority of Rule 2004. Id. As the Court recognized, any alternative to the Questionnaire would be impractical and would cause more burden and delay in this case. Id. at 9. The ACC’s proposal to issue subpoenas to thousands of Pending Mesothelioma Claimants “is neither practical nor feasible” and “would likely just create confusion and delay.” Id. at 9-10. 36. These decisions too would be reviewed under a deferential standard on appeal. The Fourth Circuit has consistently recognized that a trial court has “wide latitude in controlling discovery” and, for that reason, discovery rulings are not overturned on appeal “absent a showing of clear abuse of discretion.” United States v. Ancient Coin Collectors Guild, 899 F.3d 295, 323 (4th Cir. 2018); Rowland v. Am. Gen. Fin., Inc., 340 F.3d 187, 195 (4th Cir. 2003). Rule 2004, in particular, “commits to the sound discretion of the bankruptcy court the decision whether to require examination of a party,” and such a decision “may only be reversed on appeal for ‘abuse of discretion.’” Braxton, 516 B.R. at 794 (quoting McLaughlin v. McPhail, 707 F.2d 800, 804
16(4th Cir.1983) and In re ASI Reactivation, Inc., 934 F.2d 1315, 1324 (4th Cir. 1991)); see also In re Ramadan, 2012 WL 1230272, at *2 (Bankr. E.D.N.C. Apr. 12, 2012) (“Because Rule 2004(a) provides that the court may order the examination of any entity, its plain meaning grants to bankruptcy courts complete discretion in determining whether a Rule 2004 examination is appropriate.”) (emphasis in original). Orders regarding Rule 2004 examinations, therefore, are likewise reviewed under an abuse of discretion standard. See Braxton, 516 B.R. at 794. 37. The case for deference to this Court’s ruling is all the stronger because the PIQ Order is integrally related to the estimation proceeding, which the Court unquestionably has broad discretion to conduct using “whatever method is best suited to the circumstances.” Addison v. Langston (In re Brints Cotton Mktg., Inc.), 737 F.2d 1338, 1341 (5th Cir. 1984); see also KCH Servs., Inc. v. Nordam Grp., Inc., 345 B.R. 542, 548 (W.D.N.C. 2006) (“‘In estimating a claim, the bankruptcy court should use whatever method is best suited to the particular circumstances.’”) (quoting 4 COLLIER ON BANKRUPTCY § 502.04 (Lawrence P. King, ed., 15th ed. rev. 2005)). The District Court is highly unlikely to overturn the Court’s discretionary discovery rulings in connection with the estimation proceeding. 38. All of the other issues the ACC attempts to raise on appeal likewise involve discovery rulings that will be reviewed under the same deferential standard. See, e.g., ACC Br. ¶ 23 (erroneously characterizing the Questionnaire as a “mandatory injunction”); id. ¶ 25 (repeating ACC arguments about undue burden and requirement to disclose aggregate settlement amounts). The Court’s rulings on each of these matters were, in any event, correct.5 5 The ACC argues that “claimants may have legitimate challenges [to] the PIQ Order.” ACC Br. ¶ 30; see also id. ¶ 28. But all Pending Mesothelioma Claimants known to the Debtor were served with the PIQ Motion through their counsel (as permitted by the Court’s noticing order, Dkt. 65) in July 2020, and had ample opportunity to appear and object to the PIQ Motion and Questionnaire. See Dkt. 1251 (affidavit of service with respect to PIQ Motion). Many law firms did appear and object, and even had the opportunity to submit a second round of briefs with respect to the PIQ Motion. All of their objections were denied. In particular, the Court noted that they raised only generalized
17II. The ACC has not provided any evidence of irreparable harm 39. The ACC also cannot meet its burden of showing that it “will be irreparably injured absent a stay.” Allen, 590 B.R. at 356. The ACC’s principal allegation of irreparable harm appears to be the time that claimants and counsel will spend in answering the PIQ. ACC Br. ¶¶ 29-31. 40. The ACC’s position is unfounded. The cost or burden of litigation does not constitute irreparable harm, as a matter of law. See Renegotiation Bd. v. Bannercraft Clothing Co., 415 U.S. 1, 24 (1974) (“Mere litigation expense, even substantial and unrecoupable cost, does not constitute irreparable injury.”); Hayden v. New York Stock Exch., Inc., 4 F. Supp. 2d 335, 340 (S.D.N.Y. 1998) (“[A]ny injury arising . . . from the delay and cost of litigation are legally insufficient to establish irreparable harm.”); F.T.C. v. Standard Oil Co. of California, 449 U.S. 232, 244 (1980) (rejecting defendant’s reliance on “the expense and disruption of defending itself in protracted adjudicatory proceedings” as irreparable injury); Long v. Robinson, 432 F.2d 977, 980 (4th Cir. 1970) (“[M]ere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay, are not enough.”) (citation omitted). 41. If the cost and burden of litigation were irreparable harm, then every disappointed litigant in a discovery dispute would be able to satisfy this element, because virtually every discovery order entails some burden or expense for some party. Numerous courts, in denying motions to stay pending appeal, have rejected arguments that the costs and burdens of litigation or discovery constitute irreparable harm in the context of stays pending appeal. See, e.g., Picone v. Shire, LLC, 2020 WL 3051871, at *2 (D. Mass. June 8, 2020) (rejecting contention that litigation costs pending consideration of interlocutory appeal of denial of class certification allegations of burden, and that the Questionnaire is “consistent with [the] questionnaires [used in prior cases], if not more finely well[-]tuned in light of experience gained from prior cases.” 3/4/21 Tr. at 12.
18constituted irreparable harm); Bd. of Cty. Commissioners of Boulder Cty. v. Suncor Energy (U.S.A.) Inc., 423 F. Supp. 3d 1066, 1074 (D. Colo. 2019) (rejecting argument that burdens of litigation pending appeal of remand to state court, including “burdensome discovery,” constituted irreparable harm); Eshelman v. Puma Biotechnology, Inc., 2017 WL 9440363, at *4 (E.D.N.C. May 24, 2017) (rejecting contention that “burden of continued litigation” pending appeal was irreparable harm); In re Calabria, 407 B.R. 671, 680 (Bankr. W.D. Pa. 2009) (cost of litigation pending the completion of interlocutory appeal of dismissal ruling was not irreparable harm); In re Young, 2006 WL 3690678, at *2 (Bankr. M.D.N.C. Dec. 12, 2006) (rejecting argument that cost of state court litigation as a result of order granting relief from automatic stay was irreparable injury). 42. Nor does the ACC substantiate its allegations of harm with actual evidence, as it must to obtain a stay pending appeal. See Schweiger, 578 B.R. at 738 (faulting movant for failing to provide evidence with respect to irreparable harm); Braxton, 516 B.R. at 798 (refusing to find irreparable harm where allegations were “speculative”); In re Deluxe Cleaners of Durham, Inc., 2010 WL 4810822, at *2 (Bankr. M.D.N.C. 2010) (refusing to find irreparable harm when movant “provided no evidence”); Allen, 590 B.R. at 356 (not sufficient for movant to allege “some possibility of irreparable injury”) (punctuation and citation omitted). 43. Rather, the ACC relies on the same generalized and speculative allegations of burden (supported by no declaration or other competent evidence) that the Court rejected in granting the PIQ Motion. See ACC Br. ¶ 31; 3/4/21 Tr. at 12 (finding that Questionnaire is “consistent with [prior] questionnaires, if not more finely well[-]tuned in light of experience gained from prior cases” and noting that Debtor took steps to minimize burden by allowing responses by attaching documents and establishing online portal and a fillable PDF). After the
19Court’s ruling, the Debtor further decreased the burden of the Questionnaire by implementing numerous changes proposed by the very parties—the ACC and certain law firms—that now seek a stay. 44. The lack of irreparable harm here is especially clear because the ACC admits the Debtor could obtain the discovery sought in the Questionnaire by other means. See ACC Br. ¶ 32 (“[T]he Debtor is in no way precluded from obtaining the information from other sources.”). Although all of these alternative means (for example, a bar date or a Lone Pine order) would cause undue burden, expense, and delay—and the Court correctly held that the Questionnaire is preferable and proper—the possibility of other pathways to this discovery confirms that the PIQ Order does not subject claimants to extraordinary burdens or impose irreparable harm. See Bd. of Cty. Commissioners, 423 F. Supp. 3d at 1074 (rejecting claim of irreparable harm from discovery on remand to state court, in part because “Defendants would be subject to similar discovery if they were proceeding in federal court”). Rather, claimants are simply being asked to provide the basic information about their claims—information of indisputable importance to this bankruptcy case—in an efficient way that will cause a minimum of delay and thus will serve the best interests of all constituencies. And, even if the PIQ Order were somehow overturned, the claimants would have to answer the same discovery, albeit by more burdensome means. There is not and cannot be irreparable harm. III. Granting a stay will substantially injure the Debtor 45. In contrast to the speculative harms upon which the ACC relies, a stay of the PIQ Order pending appeal “will substantially injure” the Debtor, Allen, 590 B.R. at 356, by depriving it of the discovery it and its experts need for numerous purposes, including estimation, and without which the Debtor would be denied due process. Estimation Order ¶¶ 10, 11.
2046. The ACC argues there will be no substantial injury to the Debtor because “[a] stay would not necessarily halt other preparations related to the estimation proceeding, and parties could continue to prepare pending resolution by the District Court.” ACC Br. ¶ 32. 47. But the ACC fails to address the practical consequences a stay would have for the overall schedule established by the Estimation CMO. Even a brief stay of the PIQ Order would seriously prejudice the Debtor’s ability to prepare and present its estimation case. As the Debtor stated at the March 29 hearing, the four months between the receipt of Questionnaires and the current expert report deadline is “the minimum period of time the experts would need to review and analyze the data coming in from the PIQs.” 3/29/21 Tr. at 10-11 (statement of Mr. Gordon). In part, this is because claimants may answer the substantive parts of the Questionnaire by attaching documents (an important feature of the Questionnaire that minimizes the burden on claimants and counsel), and the Debtor’s experts will need time to process and analyze those documents. Thus, the ACC’s requested stay, in light of the deadlines in the Estimation CMO, would prejudice the Debtor’s ability to prepare and present its case and would deny the Debtor due process. See 3/4/21 Tr. at 15 (holding “all parties are entitled to due process in this and any proceeding in this court”). 48. A stay of the PIQ Order coupled with the ACC’s proposal that the estimation process nonetheless continue would amount to a de facto overturning of the PIQ Order. Indeed, the ACC appears to contemplate exactly that, reviving the proposal it made during the briefing and argument that instead of a Questionnaire, “the parties and their respective experts evaluate the available information—including the Debtor’s multitude of claims files from approximately 40 years of defending in the tort system—without the Questionnaires.” ACC Br. ¶ 32. The Court determined that requiring Bestwall to consult these files before being permitted to seek complete
21and up-to-date information from claimants and their counsel was not “practical, feasible or efficient.” 3/4/21 Tr. at 11. 49. If a stay of the PIQ Order were entered, basic fairness would demand a delay in the estimation proceeding and its associated deadlines, including the fact discovery and expert report deadlines, to ensure that the Debtor and its experts have the needed information in time to analyze it and use it in the estimation proceeding. Otherwise, the Debtor would be forced to proceed without the basic information the Court determined it needs to present its case. The schedule the Court approved just a few weeks ago with the consent of all parties would be dramatically altered. The Estimation Proceeding, which the Court authorized six months ago, would be delayed for as long as it takes the ACC to prosecute its interlocutory appeal of the PIQ Order. And, any further progress in the case would likely also be delayed. 10/22/20 Tr. at 17-18 (Court concluding that “the only way forward for the case at this point is estimation”). 50. If the Debtor sought to “obtain the information from other sources” while a stay is in place, as the ACC suggests, ACC Br. ¶ 32, this too would cause delay in the estimation schedule. The Court recognized that the Questionnaire was the “most efficient way to proceed and avoid undue burden.” 3/4/21 Tr. at 8. Other alternatives—such as a bar date and proofs of claim, or a Lone Pine order—would entail more delay and burden than the Questionnaire.6 51. Finally, a stay pending appeal would cause substantial harm by interrupting a Questionnaire process that is already underway and for which the Debtor has incurred significant expense. As required by the PIQ Order, the claims agent served the Questionnaire and PIQ Order 6 As the Debtor has noted, the Court could authorize entry of a Lone Pine order as a “special procedure” under Rule 16(c) of the Federal Rules of Civil Procedure, requiring claimants to provide basic facts about their claims, a common practice in mass tort cases, including asbestos cases. See Dkt. 1565, at 16-17 n.17 (summarizing law). The Court also could impose a bar date requiring all claimants to file a proof of claim; mandate a specialized proof of claim form; and also permit interrogatories pursuant to Civil Rule 33. Both of these options would take more time than the Questionnaire process already in place.
22on more than 800 law firms more than two weeks ago. The claims agent and other professionals have incurred substantial time and expense developing the fillable PDF, the Upload Option, and the Fillable Form Option, all of which are now operational. The claims agent has already received Questionnaire responses, and given that almost one month of the four-month response time has elapsed, law firms and/or claimants have undoubtedly already begun the work necessary to respond to the Questionnaire. 52. Entering a stay at this point, after firms and claimants have already been told to respond and begun responding, would cause only needless confusion due to the starting and stopping of the Questionnaire process. It would further likely result in additional time and expense for the Debtor and the claims agent (as they respond to inquiries from law firms and claimants) and also law firms and claimants (as they cease their information-gathering efforts only to recommence them once the process inevitably restarts). 53. The ACC cannot carry its burden of showing a lack of substantial harm to other parties. IV. A stay is not in the public interest 54. Finally, the public interest weighs against staying discovery that is necessary to the efficient and expeditious administration of this bankruptcy case. “The public interest favors . . . the expeditious administration of bankruptcy estates.” In re Brown, 354 B.R. 100, 113 (Bankr. N.D.W. Va. 2006). 55. The ACC identifies no public interest factors that weigh in favor of a stay, but merely repeats its arguments against the PIQ Order and couches them as implicating the public interest. ACC Br. ¶¶ 35-39. This is legally insufficient to meet its burden on this factor. See
23Braxton, 516 B.R. at 799 (disregarding alleged public interest factors that simply “go to the merits of [movant’s] arguments on appeal”). V. The Court should not suspend proceedings with respect to the PIQ Order or estimation more generally 56. In the alternative, the ACC requests that the Court suspend proceedings pursuant to Bankruptcy Rule 8007(e) with respect to “the implementation and enforcement of orders based on or related to the PIQ Order.” ACC Br. ¶ 40. “In considering a motion to suspend other proceedings in the case under Rule 8007(e), courts have applied the same standards as those for imposing a stay pending appeal.” Franklin, 2020 WL 603900, at *4-5. Thus, this request fails for the same reasons the ACC’s request for a stay fails. Notably, suspending the PIQ Order would have the same harmful effects as a stay pending appeal, depriving the Debtor of discovery it needs and effectively requiring an indefinite postponement of the estimation proceeding that the Court has ordered to advance this chapter 11 case. Conclusion 57. For all of these reasons, the Debtor respectfully requests that the Court deny the ACC’s Stay Motion.
24Dated: April 20, 2021 Respectfully submitted, Charlotte, North Carolina /s/ Garland S. Cassada Garland S. Cassada (NC Bar No. 12352) Richard C. Worf, Jr. (NC Bar No. 37143) Stuart L. Pratt (NC Bar No. 43139) ROBINSON, BRADSHAW & HINSON, P.A. 101 North Tryon Street, Suite 1900 Charlotte, North Carolina 28246 Telephone: (704) 377-2536 Facsimile: (704) 378-4000 E-mail: email@example.com firstname.lastname@example.org email@example.com Gregory M. Gordon (TX Bar No. 08435300) JONES DAY 2727 North Harwood Street, Suite 500 Dallas, Texas 75201 Telephone: (214) 220-3939 Facsimile: (214) 969-5100 E-mail: firstname.lastname@example.org (Admitted pro hac vice) Jeffrey B. Ellman (GA Bar No. 141828) JONES DAY 1420 Peachtree Street, N.E., Suite 800 Atlanta, Georgia 30309 Telephone: (404) 581-3939 Facsimile: (404) 581-8330 E-mail: email@example.com (Admitted pro hac vice) ATTORNEYS FOR DEBTOR AND DEBTOR IN POSSESSION