In re G-I Holdings, Inc.

580 B.R. 388

IN RE: G–I HOLDINGS, INC. f/k/a GAF Corporation, et al. Debtors.

Case Nos.: 01–30135 (RG)

01–38790(RG) (Jointly Administered)

United States Bankruptcy Court, D. New Jersey.

Signed January 26, 2018

Riker, Danzig, Scherer, Hyland & Perretti, LLP BY: Dennis J. O'Grady, Esq., Joseph L. Schwartz, Esq., Headquarters Plaza, One Speedwell Avenue, Morristown, New Jersey 07962–1901, Co–Counsel for G–I Holdings, Inc.

Quinn Emanuel, Urquhart & Sullivan, L.P. BY: Andrew J. Rossman, Esq., Sylvia E. Simson, Esq., Scott C. Shelley, Esq., Jonathan B. Oblak, Esq., 51 Madison Avenue, New York, New York 10010, Co–Counsel for G–I Holdings, Inc.

Gibbons P.C. BY: Michael R. Griffinger, Esq., Brett S. Theisen, Esq., Natasha Songonuga, Esq., William S. Hatfield, Esq., One Gateway Center, Newark, New Jersey 07102, Attorneys for Ashland LLC (f/k/a Ashland, Inc.), International Specialty Products, Inc., and ISP Environmental Services, Inc.

ROSEMARY GAMBARDELLA, BANKRUPTCY JUDGE

MATTER BEFORE THE COURT

Before the Court is a Renewed Motion by Debtor G–I Holdings, Inc. (the "Debtor") to enforce the Plan injunction (the "Injunction Motion") against Ashland, LLC ("Ashland"), International Specialty Products, Inc. ("ISP"), and ISP Environmental Services, Inc. ("IES") (collectively the "Ashland Parties," or "Ashland") by barring Ashland from seeking payment from the Debtor under a 1996 Indemnification Agreement (the "Agreement") which the Debtor assumed under the confirmed Plan. Ashland has filed an objection and a separate Cross–Motion for permissive and mandatory abstention under 28 U.S.C. § 1334(c)(1) and (c)(2) in favor of a state court action, which is a Complaint for declaratory judgment and other relief filed by Ashland against the Debtor in Superior Court of New Jersey, Law Division, Morris County, Dkt. No. MRS–L–2331–15 (the "State Court Action" or the "Complaint"). The Debtor and Ashland filed replies. The issue underlying this Motion and Cross–Motion is whether confirmation of the Plan foreclosed the recovery which Ashland now seeks from the Debtor under the 1996 Agreement. A hearing was conducted on the motions on June 23, 2017 at which time the Court reserved decision. The following constitutes this Court's findings of fact and conclusions of law.

The Court previously entertained a prior version of the Injunction Motion filed by the Debtor on January 10, 2017 (the "First Injunction Motion") In re G–I Holdings, Inc., Case No. 01–30135, ECF No. 11029. The Court denied the First Injunction Motion without prejudice, as explained below, because arguments raised therein by the Debtor were also under consideration by the District Court in its then-pending review of a Remand Order in a related adversary proceeding. In re G–I Holdings, Inc., 568 B.R. 731 (Bankr. D.N.J. 2017) (May 1, 2017 Opinion denying First Injunction Motion for lack of jurisdiction during pendency of appeal). On May 5, 2017, the District Court issued an Order and Opinion affirming this Court's Remand Order. G–I Holdings, Inc. v. Ashland, Inc., Civ. No. 17–0077 (ES), ECF Nos. 29 and 30. The Debtor renewed its Injunction Motion on May 12, 2017.

For the reasons set forth below, the Bankruptcy Court permissively abstains under 28 U.S.C. § 1334(c)(1) from hearing the Injunction Motion.

JURISDICTIONAL STATEMENT

This Court has jurisdiction pursuant to 28 U.S.C. § 1334, and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984 and amended September 18, 2012.

STATEMENT OF FACTS

The corporate histories and prior relationship of the Debtor and Ashland are set forth at length in prior Opinions of this Court and are reiterated here. In re G–I Holdings, Inc., 564 B.R. 217, 222–28 (Bankr. D.N.J. 2016), aff'd, G–I Holdings, Inc. v. Ashland, Inc., Civ. No. 17–0077 (ES), 2017 WL 1788656 (May 5, 2017), ECF Nos. 29 and 30; and In re G–I Holdings, Inc., 568 B.R. 731, 733–43 (Bankr. D.N.J. 2017) (May 1, 2017), ECF No. 11076, 2–13.

A. The LCP Site

The dispute concerns liability for the environmental remediation of a certain Superfund site located in Linden, New Jersey—the LCP Site.

The LCP Site is the location of a former chemical manufacturing facility on an approximately 26–acre parcel of property in Linden, New Jersey. The LCP Site was acquired by GAF Corporation¹ prior to 1950. GAF Corporation constructed a chlor-alkali plant at the LCP Site, which it operated until it sold the property to Linden Chlorine Products, Inc. in 1972. The operations of the former chlor-alkali plant by GAF Corporation at the LCP Site resulted in the contamination of the LCP Site and off-site areas with various hazardous substances, including mercury. The LCP Site ceased production permanently in 1985.

B. Corporate History

The issue of who now bears responsibility for the LCP Site depends upon a series of complex corporate transactions and contractual agreements that span the course of three decades.

In 1989, GAF was liquidated, and its liabilities were transferred to five separate entities: Dorset Inc. ("Dorset"), GAF Building Materials Corporation (formerly known as Edgecliff Inc.), Merick Inc., Perth Inc., and Clover Inc. According to G–I, Dorset received "all the assets and liabilities, known and unknown, relating to [GAF's] acetylenic chemicals, surfactants, specialty chemicals, organometalics, mineral products, industrial filters and filter vessels business (collectively, the ‘Chemical Businesses’)," while GAF Building Materials Corporation, formerly known as Edgecliff Inc., received "all the assets and liabilities, known and unknown, relating to [GAF's] commercial and residential roofing materials business."² See Motion to Dismiss Adversary Proceeding at 6, Ashland Inc. v. G–I Holdings, Inc., Adv. Pro. No. 15–02379, ECF No. 12 (citing the 1989 Liquidation Plan). To effectuate the Liquidation Plan, on April 10, 1989, GAF entered into instruments of Assignment and Assumption with Dorset and GAF Building Materials Corporation, which transferred, in relevant part, "100% of the liabilities arising out of ... environmental claims arising out of plants currently operating in the Chemical Businesses" to Dorset, and "100% of all liabilities arising out of...environmental claims from plants no longer operating and from oil waste pollution" to GAF Building Materials Corporation. Id. at 7.

Ashland claims that the liabilities in connection with the LCP Site were transferred to Edgecliff Inc., which later became GAF Building Materials Corporation, because such liability fell under the umbrella of "environmental liabilities associated with plants no longer operating," such as the LCP site, whereas G–I claims the liabilities in connection with the LCP Site were transferred to Dorset, because such liability is related to the Chemical Businesses. Ashland asserts here that ISP and IES were later incorporated in 1991 as subsidiaries of GAF, and thus ISP and IES were never in the corporate lineage of Edgecliff Inc./GAF Building Materials (one of the Defendant–Indemnitors), which assumed responsibility for the LCP site before ISP and IES were even formed.

G–I, however, takes the position that none of the G–I Parties are responsible for any environmental liabilities or obligations at the LCP Site as these liabilities and obligations were assumed by IES in 1991 and that even if these liabilities resulted in G–I following the series of corporate transactions referred to herein, which G–I claims they did not, these liabilities were discharged in G–I's bankruptcy case.

Subsequently, in 1989, GAF Chemicals Corporation ("GAF Chemicals"), a subsidiary of GAF, merged with Dorset. G–I claims that because Dorset acquired liability in the 1989 Liquidation, liability in connection with the LCP Site was again transferred to GAF Chemicals when it merged with Dorset.

In 1991, ISP and IES were incorporated as subsidiaries of GAF Chemicals. On May 8, 1991, GAF Chemicals, GAF, and ISP 9 Corporation ("ISP 9")³ entered an agreement whereby ISP 9 assumed certain liabilities and obligations of GAF Chemicals, including "[a]ll liabilities and obligations relating to the manufacture and sale of specialty chemicals at Linden, NJ, known and unknown, contingent or otherwise, including liabilities for the remediation of the Linden site...." (the "1991 Agreement"). Additionally, the 1991 Agreement stated that IES:

shall indemnify, defend, and hold harmless [GAF Chemicals], GAF and its other subsidiaries from and against any and all [liabilities and obligations described in the 1991 Assumption Agreement Schedule] and any and all liabilities, costs and expenses in connection with any investigations, claims, actions, suits or proceedings arising out of or resulting from the conduct of any business, ownership or any assets or incurrence of any liabilities or obligations on and after May 9, 1991 by [IES].

Id. at 1. Therefore, G–I alleges that IES assumed all GAF and GAF Chemicals' liabilities, including those associated with the LCP Site. The Ashland Parties allege, conversely, that because liability originally passed from GAF to GAF Buildings Materials Corporation, and not to Dorset/GAF Chemicals, liability in connection with the LCP Site was not transferred to ISP and IES in the 1991 Agreement.

In 1994, GAF Buildings Materials Corporation formed a new corporation as a wholly-owned subsidiary known as Building Materials Corporation of America (now Standard Industries, Inc.) ("BMCA").⁴ BMCA, which is also an indirect subsidiary of G–I, is the primary operating subsidiary and principal asset of G–I. BMCA acquired the operating assets and certain liabilities of GAF Building Materials Corporation's roofing commercial and residential roofing materials business. G–I asserts that BMCA did not assume any liabilities associated with "closed manufacturing facilities," and therefore cannot be held liable in connection with the LCP Site.

On October 18, 1996, GAF Corporation (including its successor "GAF"), G–I, G...