16‐343
In re Tronox Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
______________
August Term 2016
(Argued: November 16, 2016 Decided: April 20, 2017)
Docket No. 16‐343
____________
IN RE TRONOX INC.
TRONOX INC., TRONOX WORLDWIDE LLC, F/K/A KERR‐MCGEE
CHEMICAL WORLDWIDE LLC, TRONOX LLC, THE ANADARKO
LITIGATION TRUST,
Plaintiffs,
UNITED STATES OF AMERICA,
Intervenor Plaintiff,
AVOCA PLAINTIFFS,
Respondents‐Appellants,
v.
KERR‐MCGEE CORP.,
Defendant‐Appellee,
KERR‐MCGEE OIL & GAS CORP., KERR‐MCGEE WORLDWIDE
CORP., KERR‐MCGEE INVESTMENT CORP., KERR‐MCGEE
CREDIT LLC, KERR‐MCGEE SHARED SERVICES COMPANY LLC,
KERR‐MCGEE STORED POWER COMPANY LLC, ANADARKO
PETROLEUM CORP.,
Defendants.*
______________
Before:
KEARSE, WESLEY, and DRONEY, Circuit Judges.
Appeal from a February 1, 2016 decision of the
United States District Court for the Southern District of
New York (Forrest, J.) granting the motion of Defendant‐
Appellee Kerr‐McGee Corporation and ordering
Respondents‐Appellants Avoca Plaintiffs to dismiss with
prejudice their actions in Pennsylvania state court because
their claims were derivative and duplicative of claims that
were part of a $5.15 billion bankruptcy settlement and
therefore barred by the post‐settlement, permanent anti‐suit
injunction. Appellants challenge the merits of the District
Court’s ruling and contend that it is appealable as a final
order under 28 U.S.C. § 1291 or 28 U.S.C. § 158(d), or as a
modification or continuation of an injunction under 28
U.S.C. § 1292(a)(1). We hold that the order is not “final”
* The Clerk of Court is respectfully directed to amend the official
caption to conform to the caption above.
2
because it neither found contempt nor imposed sanctions as
required by § 1291, nor was it a decision by the District
Court on review of a bankruptcy court order as required by
§ 158(d). We further hold that the District Court did not
modify or continue the injunction for purposes of
§ 1292(a)(1). Because neither those nor any other bases for
jurisdiction are present, we DISMISS the appeal for lack of
jurisdiction.
______________
LUKE A. MCGRATH, Dunnington, Bartholow & Miller
LLP, New York, NY (Alani Golanski, Jerry
Kristal, Weitz & Luxenberg, P.C., New York,
NY, on the brief), for Respondents‐Appellants.
BRYAN M. KILLIAN, Morgan, Lewis & Bockius LLP,
Washington, DC (Kenneth N. Klee, David M.
Stern, Klee, Tuchin, Bogdanoff & Stern LLP,
Los Angeles, CA; Thomas R. Lotterman, Duke
K. McCall, III, Morgan, Lewis & Bockius LLP,
Washington, DC, on the brief), for Defendant‐
Appellee.
______________
WESLEY, Circuit Judge:
This is an appeal from an order of the U.S. District
Court for the Southern District of New York (Forrest, J.)
enforcing a permanent anti‐suit injunction issued after a
bankruptcy settlement. The tortured corporate histories and
shifting legal theories involved make it a messy case to
3
distill. At its core, it is about more than 4,300 individuals
(the “Avoca Plaintiffs”) who allege significant injuries from
the operation of a wood‐treatment plant in Avoca,
Pennsylvania (the “Avoca Plant”) between 1956 and 1996.
They originally brought their toxic‐tort claims in
Pennsylvania state court (the “PA State Action”) against
several entities including Kerr‐McGee Corporation (“New
Kerr‐McGee”), but their suits were stayed when two of
those entities, the owners/operators of the Avoca Plant (the
“Tronox debtors” or “the debtors”), filed for bankruptcy in
the Southern District of New York. The bankruptcy
proceeding revealed a series of corporate transformations
that ultimately yielded New Kerr‐McGee. After the spinoff,
New Kerr‐McGee maintained control of the more lucrative
oil and gas businesses and left the Tronox debtors with the
immense environmental and tort liabilities arising from the
previous operation of the Avoca Plant. These transactions
were, as the bankruptcy court concluded, essentially
fraudulent conveyances designed to place assets beyond the
reach of the Tronox entities’ creditors.
In the course of the bankruptcy proceeding, the
Tronox debtors instituted an adversary proceeding against
New Kerr‐McGee for fraudulent conveyance to recover
assets that would satisfy the debtors’ liabilities. Ultimately,
New Kerr‐McGee settled with the Tronox debtors for over
$5 billion; of that sum, more than $600 million was
designated for beneficiaries of the Tort Claims Trust,
including the Avoca Plaintiffs. New Kerr‐McGee sought
peace with that payment and required as part of the
settlement that the District Court—the court tasked with
4
approving the bankruptcy settlement—would issue an
injunction barring the litigation of claims that are derivative
or duplicative of the Tronox debtors’ claims against New
Kerr‐McGee (the “Injunction”).
After the District Court approved the settlement and
issued the Injunction, the Avoca Plaintiffs sought to revive
their toxic‐tort claims in Pennsylvania state court, again
naming New Kerr‐McGee as a defendant. The Avoca
Plaintiffs did not, however, alter their state‐court complaint
to allege direct claims against New Kerr‐McGee to hold it
responsible for its own alleged wrongdoing. Instead, they
advanced indirect alter‐ego and veil‐piercing theories to
hold New Kerr‐McGee responsible for the conduct of the
Tronox debtors. New Kerr‐McGee moved in the District
Court for an order enforcing the Injunction and for
sanctions, asserting that the Injunction forecloses claims
that arise from liabilities derived from or through the
Tronox debtors that are also generalized and common to all
creditors.
The District Court concluded that the claims are
barred by the Injunction and, without imposing sanctions
or finding contempt, ordered the Avoca Plaintiffs to dismiss
with prejudice their state‐court complaints. The Avoca
Plaintiffs appealed and sought a stay pending appeal,
which we granted.
The Avoca Plaintiffs assert three bases for appellate
jurisdiction—28 U.S.C. §§ 1291, 158(d), and 1292(a)(1)—
none of which persuade us. First, the District Court’s order
is not “final” for purposes of 28 U.S.C. § 1291, because it
5
neither found contempt nor imposed sanctions. Second, the
order is not a decision by the District Court on review of a
bankruptcy court order, as required by § 158(d). Third, after
an appropriate, under the circumstances, discussion of the
merits, we conclude that we lack jurisdiction under
§ 1292(a)(1) because the District Court properly construed
(and neither modified nor continued) the Injunction. In
confirming the District Court’s construction of the
Injunction, we hold that the Avoca Plaintiffs’ personal
injury claims based on conduct of the Tronox debtors, and
asserted against New Kerr‐McGee on a variety of state‐law
indirect‐liability theories, are generalized “derivative”
claims that fall within the property of the bankruptcy
estate. Accordingly, we lift the stay and DISMISS the
appeal for lack of jurisdiction.
BACKGROUND1
I. CORPORATE HISTORY OF THE RELEVANT ENTITIES
Critical to the District Court’s decision below and
ours here is the role and relationship of the relevant
1 Unless otherwise noted, these undisputed facts are taken from
the District Court’s recitation. The District Court relied on the
Master Complaint (described infra), the Avoca Plaintiffs’ motion
to restore jurisdiction in Pennsylvania state court, and the
“Amended Joint Fact Stipulations of the Parties” filed in
Tronox’s adversary proceeding against New Kerr‐McGee as well
as the bankruptcy court’s trial decision, both of which the Avoca
Plaintiffs accepted as true for purposes of the District Court’s
resolution of New Kerr‐McGee’s enforcement motion.
6
defendants in the PA State Action—“Kerr‐McGee
Chemical,” “Old Kerr‐McGee,” and “New Kerr‐McGee”—
and the allegations against them. It gets confusing because
both Old Kerr‐McGee and New Kerr‐McGee, at different
times, have operated under the name “Kerr‐McGee
Corporation.” The critical takeaway is that Kerr‐McGee
Chemical,2 the previous operator of the Avoca Plant, and its
former parent, Old Kerr‐McGee,3 ultimately became the
Tronox debtors (Tronox LLC and Tronox Worldwide LLC,
respectively). New Kerr‐McGee,4 a later corporate spinoff of
Kerr‐McGee Chemical and Old Kerr‐McGee, did not exist
until 2001 and was not a Tronox debtor.5
2 From 1956 until 1996, “Kerr‐McGee Chemical Corporation”
(herein referred to as “Kerr‐McGee Chemical”) and its
predecessors owned and operated the Avoca Plant. Kerr‐McGee
Chemical was later renamed “Tronox LLC,” after being
transferred to Tronox Incorporated.
3 Kerr‐McGee Chemical’s parent was called “Kerr‐McGee
Corporation” (herein referred to as “Old Kerr‐McGee”) until
2001, when it was renamed “Kerr‐McGee Operating
Corporation.” After being transferred to Tronox Incorporated,
the parent was ultimately renamed “Tronox Worldwide LLC.”
4 The former indirect parent of Kerr‐McGee Chemical and Old
Kerr‐McGee, referred to herein as “New Kerr‐McGee,” was
created in 2001. New Kerr‐McGee was briefly known was “Kerr‐
McGee Holdco, Inc.” and has ever since been known as “Kerr‐
McGee Corporation.”
5 To assist the reader, we reproduce at Appendix A the helpful
chart—prepared by New Kerr‐McGee and relied upon by the
7
The reason for the confusing history of corporate
restructurings and name changes is that, starting in 2002,
New Kerr‐McGee began to sever its chemical business—
which included the Avoca Plant and was riddled with
legacy tort and environmental liabilities—from its more
profitable oil and gas business. See Tronox Inc. v. Kerr McGee
Corp. (In re Tronox), 503 B.R. 239, 252‐55, 259, 266 (Bankr.
S.D.N.Y. 2013). Upon completion of the spinoff in 2006,
New Kerr‐McGee was separated from the Tronox entities,
including what were formerly Kerr‐McGee Chemical and
Old Kerr‐McGee. This spinoff in essence allocated
substantially all of the former companies’ valuable assets to
New Kerr‐McGee and substantially all of the companies’
costly liabilities to the Tronox debtors, which the debtors
claimed left them severely undercapitalized and became the
basis of their fraudulent‐conveyance claims in the
adversary proceeding against New Kerr‐McGee in the
bankruptcy. Id. More on that later.
II. THE PA STATE ACTION
In 2005, the Avoca Plaintiffs sued Kerr‐McGee
Chemical, Old Kerr‐McGee, and New Kerr‐McGee6 in
District Court—showing the undisputed history and roles of the
various entities.
6 The Avoca Plaintiffs also named Kerr‐McGee Holdco, Inc.,
which ultimately became New Kerr‐McGee. They have not
relinquished their claims against Kerr‐McGee Holdco, Inc., but
do not dispute that it has no separate existence from New Kerr‐
McGee.
8
Pennsylvania state court asserting toxic‐tort claims for
hundreds of millions of dollars based on the operation of
the Avoca Plant. A consolidated “Master Complaint”7
alleged that, from 1956 through 1996, operations at the
Avoca Plant led to the “intentional, negligent[,] and
otherwise tortious release of dangerous chemicals” into the
environment, causing the Avoca Plaintiffs cancer and other
illnesses.
The Master Complaint alleged no direct liability of
New Kerr‐McGee; it failed to identify any act by New Kerr‐
McGee that contributed to the injuries of the Avoca
Plaintiffs after its creation in 2001.8 Instead, it alleged the
direct liability of only Old Kerr‐McGee for its actions as
parent of Kerr‐McGee Chemical during that entity’s
operation of the plant. The Master Complaint sought to
impute the acts of the plant’s prior corporate
owners/operators to New Kerr‐McGee based on various
indirect‐liability alter‐ego/veil‐piercing and successor‐
7 The Avoca Plaintiffs did not argue below that the Master
Complaint is materially different from the other complaints in
the PA State Action, and their brief here refers us to the Master
Complaint. See, e.g., Appellants’ Br. 8‐9. Thus, although we refer
only to the Master Complaint, our analysis applies equally to all
complaints in the PA State Action.
8 The Master Complaint has the precision of birdshot. It often
lumps all three defendants together, or refers to them separately
as “Kerr‐McGee.” The only specific mention of New Kerr‐McGee
comes in the recitation of the corporate history at paragraph 18.
See J.A. 503.
9
liability theories.9 Specifically, the Master Complaint
alleged that Old Kerr‐McGee
provided environmental policies, legal
counsel, hydrological services and
laboratory technical services in connection
with the operation of the wood treatment
plant [the Avoca Plant]. Furthermore, [Old
Kerr‐McGee] communicated with
environmental agencies and approved and
controlled environmental budgets and
expenditures in connection with the wood
treatment plant. [Old Kerr‐McGee]
controlled the wood treatment plant’s
facility’s environmental changes and
monitoring and also directed the Plaintiffs’
managers as to environmental policies and
decisions, including emission controls,
regulatory compliance issues, regulatory
reporting and toxic waste handling.
J.A. 504‐05 (Master Compl. ¶ 21); see also Appellants’ Br. 9
(explaining that paragraph 21 refers to the conduct of Old
Kerr‐McGee).
9 See Appellants’ Br. 9 (explaining that the Master Complaint’s
allegations against New Kerr‐McGee appear at paragraphs 19‐20
and seek to hold “New [Kerr‐McGee] responsible for the acts of
its subsidiary, which operated the plant” (citing J.A. 503‐04
(Master Compl. ¶¶ 19‐20)).
10
III. THE TRONOX BANKRUPTCY AND THE ADVERSARY
PROCEEDING
In 2009, the Tronox debtors, Tronox LLC and Tronox
Worldwide LLC (f/k/a Kerr‐McGee Chemical and Kerr‐
McGee Operating Corp. (i.e., Old Kerr‐McGee),
respectively), filed for Chapter 11 bankruptcy in the
Southern District of New York. Because the principal
defendants in the PA State Action—Kerr‐McGee Chemical
and Old Kerr‐McGee—were debtors in the Tronox
bankruptcy, the PA State Action was stayed and remains
stayed.
In the bankruptcy proceeding, each of the Avoca
Plaintiffs, as claimant creditors, filed a proof of claim
seeking compensation for the toxic torts at the heart of the
PA State Action and reserving any claims against non‐
debtors. The United States, as a major creditor of the
Tronox debtors, subsequently intervened. Tronox Inc. v.
Anadarko Petroleum Corp. (In re Tronox Inc.) (“Anadarko”),
No. 14‐cv‐5495, 2014 WL 5825308, at *2 (S.D.N.Y. Nov. 10,
2014).
In May 2009, the Tronox debtors initiated an
adversary proceeding in the bankruptcy court against New
Kerr‐McGee, asserting fraudulent‐transfer claims (the
“Adversary Proceeding”).10 In 2010, with the Adversary
After the spinoff, Anadarko Petroleum Corporation acquired
10
New Kerr‐McGee. The Tronox debtors named Anadarko as a
defendant in the Adversary Proceeding for its alleged role in the
spinoff, but all claims against Anadarko were ultimately
11
Proceeding still pending, the bankruptcy court approved
the Tronox bankruptcy plan (the “Plan”). Because the
potential recovery from that proceeding was an important
estate asset, as part of the Plan, the Tronox debtors
transferred their interest in the Adversary Proceeding to a
specially formed “Anadarko Litigation Trust” (also referred
to as the “Litigation Trust”). See J.A. 49 (Plan), 448‐80
(Litigation Trust Agreement). The Plan made the Avoca
Plaintiffs (among other claimants) beneficiaries of a “Tort
Claims Trust,” which would receive a specified share (12%)
of any recovery from the Adversary Proceeding. See J.A. 48
(Plan), 272 (Tort Claims Trust Agreement). In return, the
Avoca Plaintiffs (and the other claimants) agreed to release
their creditor claims against the Tronox debtors and to be
enjoined from pursuing certain claims against the Tronox
debtors and other released parties, including New Kerr‐
McGee. See J.A. 48 (Plan), 68‐69 (release and injunction), 89
¶ 1.9 (definition of the “Anadarko Released Parties”).
The Adversary Proceeding continued for years. The
Anadarko Litigation Trust and the United States jointly
pursued the Adversary Proceeding against New Kerr‐
McGee and its parent, Anadarko. The Avoca Plaintiffs were
not silent partners in this endeavor. The Plan provided that
“representatives of the holders of Tort Claims will have
certain agreed rights concerning the pursuit” of the
dismissed. Nevertheless, the Adversary Proceeding remained
known as the “Anadarko Litigation.” Appellees’ Br. 9 n.2. For
ease of reference, we refer to it as the “Adversary Proceeding”
throughout.
12
Adversary Proceeding. J.A. 49. And participate the Avoca
Plaintiffs did: among other things, two of their lawyers sat
on the Tort Claims Trust’s Advisory Committee.
In December 2013, after trial over a four‐month
period, Bankruptcy Judge Gropper issued an opinion
holding, inter alia, that New Kerr‐McGee had “acted with
intent to ‘hinder and delay’ [the Tronox debtors’] creditors
when they transferred out and then spun off the oil and gas
assets, and that the [spinoff] transaction, which left the
Debtors insolvent and undercapitalized, was not made for
reasonably equivalent value.” In re Tronox, 503 B.R. at 249.
However, Judge Gropper reserved decision and final
judgment on damages, which he indicated would be
between $5.15 billion and $14.16 billion. See id. at 336‐37,
347.
In April 2014, before a final judgment was entered,
the parties settled the Adversary Proceeding for $5.15
billion (the “Settlement Agreement”).11 See J.A. 81‐139. The
Tort Claims Trust’s share was more than $600 million.12
Because no judgment had ever issued, Judge Gropper’s
liability findings never became final and binding.
At the time, the settlement was “the largest‐ever
11
environmental cleanup recovery.” J.A. 203.
The bankruptcy court estimated the present value of the toxic‐
12
tort claims, as of 2005, to be $257 million, approximately 40
percent of the actual amount received. In re Tronox, 503 B.R. at
315.
13
IV. THE INJUNCTION
In exchange for New Kerr‐McGee’s payment of $5.15
billion, the parties agreed to a permanent injunction to
insulate New Kerr‐McGee from claims related to those the
Adversary Proceeding’s settlement extinguished. The
District Court agreed and entered the following Injunction:
(i) [A]ny Debtor(s), (ii) any creditor of any
Debtor who filed or could have filed a
claim in the Chapter 11 Cases, (iii) any
other Person whose claim (A) in any way
arises from or is related to the Adversary
Proceeding, (B) is a Trust Derivative Claim,
or (C) is duplicative of a Trust Derivative
Claim, and (iv) any Person acting or
purporting to act as an attorney for any of
the preceding is hereby permanently enjoined
from asserting against any Anadarko Released
Party (I) any Trust Derivative Claims or (II)
any claims that are duplicative of Trust
Derivative Claims, whether or not held or
controlled by the Litigation Trust, or
whether or not the Litigation Trust could
have asserted such claims against any
Anadarko Released Party.
The injunction herein shall not apply to or
bar [eight classes of claims, including] . . .
any liability that an Anadarko Released
Party might have that does not arise from
or through a liability of a Debtor . . . .
14
Anadarko, 2014 WL 5825308, at *10 (emphasis added); see
also J.A. 223‐24.13
The Avoca Plaintiffs did not comment on or object to
the proposed order. No one appealed the Injunction; it
became final in early 2015.
V. POST‐INJUNCTION LITIGATION
In September 2015, the Avoca Plaintiffs filed a motion
in Pennsylvania state court to restore their toxic‐tort case to
the calendar (the “Avoca Motion” or the “Motion”). J.A.
231‐56. Despite detailing the history of the PA State Action,
the Tronox bankruptcy, and the Adversary Proceeding, the
Avoca Motion says nothing as to the effect, if any, of those
proceedings and the resulting Settlement Agreement and
Injunction on their state‐court claims. In fact, the Avoca
Motion curiously neither mentions the Injunction nor seeks
to amend the Master Complaint. It simply asks the
Pennsylvania court to reactivate the state proceedings in
light of the termination of the bankruptcy stay following
the Adversary Proceeding.
The Avoca Plaintiffs’ assertions against New Kerr‐
McGee—derived primarily from Judge Gropper’s pre‐
judgment findings14—mimic the legal theories employed by
13 The Injunction and pertinent defined terms, including
“Adversary Proceeding,” “Anadarko Released Party,” and
“Trust Derivative Claims” are reprinted at Appendix B for ease
of reference.
14 The Avoca Motion notes that Judge Gropper determined New
Kerr‐McGee “(a) undercapitalized its fraudulent spawn Tronox;
15
the Litigation Trust in the Adversary Proceeding. The
Motion argues that the Avoca Plaintiffs seek to hold New
Kerr‐McGee liable “under numerous theories including, but
not limited to, alter ego/piercing of the corporate veil and
successor liability.” J.A. 243 ¶ 59. There are no claims or
allegations that New Kerr‐McGee itself engaged in
wrongful conduct that directly harmed the Avoca Plaintiffs.
New Kerr‐McGee subsequently moved in the District
Court to enforce the Injunction. The District Court granted
New Kerr‐McGee’s motion, ordering the Avoca Plaintiffs to
dismiss with prejudice their state‐court action. In re Tronox
Inc., 549 B.R. 21 (S.D.N.Y. 2016).
It is clear from the District Court’s detailed decision
that its job was not made any easier by the efforts of the
Avoca Plaintiffs’ counsel. As the District Court explained:
[T]he Avoca Plaintiffs’ position as to which
slices of their claims remain has been a
moving target, as they have revised their
theories at each opportunity. Although oral
argument helped clarify their most recent
position, the Avoca Plaintiffs did not
clearly articulate which, if any, of the
potential bases for holding [New Kerr‐
(b) failed to adhere to corporate formalities; (c) substantially
intermingled corporate affairs; and (d) most certainly used the
corporate form to perpetrate a massive fraud the Court
determined to be valued as much as $14.14 Billion Dollars [sic].”
J.A. 243 ¶ 58.
16
McGee] liable they agree are no longer
tenable as a result of the release obtained as
part of Tronox’s bankruptcy.
Id. at 46.
Ultimately, the court made two rulings: (1) the Avoca
Plaintiffs’ claims were extinguished by the Settlement
Agreement; and (2) even if they were not, the claims are
barred by the Injunction. The District Court and New Kerr‐
McGee characterize the rulings as alternative holdings, in
that they equally resolve that all claims are somehow
barred. See id. at 50 (“Even if the Avoca Plaintiffs’ claims
were not otherwise unavailable as a matter of law, the
Injunction separately bars any claim against the movant
herein that they seek to assert.”); Appellees’ Br. 47‐48
(urging us to affirm based on the District Court’s
“alternative holding” that the claims were extinguished by
the Avoca Plaintiffs’ assent to and recovery from the
settlement). In our view, however, our job on appeal is to
first determine the reach of the Injunction.
Relying on the Injunction’s plain language and
fundamental principles of bankruptcy law, the District
Court interpreted the Injunction—particularly the term
“Trust Derivative Claims”—to cover “action[s] . . . intended
to increase the basket of assets for creditors regarding[ inter
alia, the Avoca Plant], or based on prior ownership of a
debtor . . . .” In re Tronox Inc., 549 B.R. at 51. In other words,
the District Court read the Injunction to bar “claims that
were or could have been part of an adversary proceeding
by [the Tronox debtors] against [New] Kerr‐McGee.” Id.
17
Judge Forrest then concluded that the claims the Avoca
Plaintiffs currently allege in state court fall squarely within
that definition.
Specifically, she reasoned that (a) the Avoca Plaintiffs
could not assert any direct‐liability claims against New
Kerr‐McGee for conduct during the Avoca Plant’s
operations from 1956 to 1996, since New Kerr‐McGee did
not exist until 2001, and (b) the Avoca Plaintiffs had not
asserted any direct‐liability claims against New Kerr‐
McGee for conduct after 2001. Thus, the only claims the
Avoca Plaintiffs raised were indirect‐liability claims based
on alter‐ego/veil‐piercing theories—attempts to impute to
New Kerr‐McGee the conduct of Old Kerr‐McGee and Kerr‐
McGee Chemical. Read that way, the District Court found
that the Avoca Plaintiffs’ claims were “generalized to all
creditors because they could be equally asserted (if they
were not barred by the release) by any creditor of the
Tronox debtor[s] . . . whose claim has been left partially
unsatisfied by recovery efforts from the Tronox debtors
themselves.” Id. at 53. For that reason, the claims were
derivative and therefore property of the Tronox estate. Id. at
54. Concluding that the term “Trust Derivative Claims,” as
defined in the Injunction, was coextensive with the
meaning of derivative claims in the bankruptcy context, the
District Court held that the Avoca Plaintiffs’ claims were
barred by the Injunction. Id.
The District Court finally concluded that it was
within its discretion and power to enforce the Injunction,
and enforcement served the interest of “preventing
litigation the pursuit of which is violative of an injunction
18
previously issued by this Court.” Id. at 55. In rejecting the
Avoca Plaintiffs’ request for the opportunity to replead in
state court, the District Court noted that the Avoca Plaintiffs
“had ample opportunity to work out their theories and
present their strongest possible claims,” yet “have provided
no fact that would save their claims.” Id. at 55‐56. The
District Court also noted concern that the Avoca Plaintiffs’
request to allow them to seek leave to amend in state court
was “in all events gamesmanship.” Id. at 56. That view was
“bolstered by the recent refusal of the Avoca Plaintiffs to
dismiss their claims against the Tronox debtors—parties as
to whom they have no credible arguments that any claim
survives.” Id.
Thus, the District Court ordered the Avoca Plaintiffs
to dismiss with prejudice the PA State Action within seven
days and to make no attempt to file any action alleging
similar claims against New Kerr‐McGee or any Tronox
debtor in any other forum. Id. Although New Kerr‐McGee
had initially sought an order to show cause why the Avoca
Plaintiffs and their counsel should not be held in contempt
for violating the Injunction, the District Court deemed that
request abandoned because, in part, New Kerr‐McGee did
not renew it in its reply brief or at oral argument. Id. at 38
n.11.
VI. PROCEEDINGS IN THIS COURT
Three days prior to the District Court’s deadline for
dismissal of the PA State Action, the Avoca Plaintiffs
moved for an emergency stay in this Court. In its opposing
papers, New Kerr‐McGee did not move to dismiss, but
19
argued that the Avoca Plaintiffs were unlikely to prevail on
the merits of the appeal because we lack appellate
jurisdiction. A judge of this Court granted a temporary stay
pending conclusive disposition of the emergency motion by
a motions panel, and directed the Avoca Plaintiffs to file a
reply to New Kerr‐McGee’s jurisdictional argument. After
the Avoca Plaintiffs filed a reply, a full motions panel
granted the stay pending appeal, referring “the question of
whether this Court has proper jurisdiction over this matter
. . . to the merits panel.” 2d Cir. Dkt. 64 (order granting stay
pending appeal).
DISCUSSION
Although New Kerr‐McGee has yet to move to
dismiss, it continues to argue that there is no jurisdictional
hook for this appeal. Federal courts at all levels always
begin their work with a simple question: Has Congress
given us authority to hear and decide this matter? Statutory
jurisdiction goes to the heart of a federal court’s power, and
federal courts have an “independent obligation to consider
the presence or absence of subject matter jurisdiction sua
sponte.” Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006) (citing
Travelers Ins. Co. v. Carpenter, 411 F.3d 323, 328 (2d Cir.
2005)). We therefore must conduct a jurisdictional inquiry
notwithstanding New Kerr‐McGee’s curious reluctance to
move to dismiss on jurisdictional grounds while continuing
to point out the flimsiness of the Avoca Plaintiffs’
jurisdictional predicate.
There are a couple relevant avenues to appellate
jurisdiction here: 28 U.S.C. § 1291 (conferring appellate
20
jurisdiction over “final decisions” of district courts) and 28
U.S.C. § 1292 (conferring appellate jurisdiction over, inter
alia, orders “granting, continuing, modifying, refusing or
dissolving injunctions, or refusing to dissolve or modify
injunctions”). New Kerr‐McGee argues that neither section
confers appellate jurisdiction over post‐judgment orders
that do nothing more than interpret and enforce a final
injunction. It would be different, New Kerr‐McGee urges, if
the District Court had found contempt, imposed sanctions,
or created new duties under the Injunction. Instead, New
Kerr‐McGee asserts, the District Court merely “reiterated
the plain meaning of the Injunction and gave the Avoca
Plaintiffs a grace period to comply.” Appellees’ Br. 18.
The Avoca Plaintiffs counter that we have § 1291
jurisdiction because the District Court’s order “finally
determines the rights of the Avoca Plaintiffs,” and “[t]here
was nothing left to be determined.” Appellants’ Reply Br. 3‐
4.15 Even if the order fails on finality, the Avoca Plaintiffs
contend we still have jurisdiction under § 1292 because the
District Court’s order modified the Injunction by expanding
the definition of “Trust Derivative Claims” in the Injunction
15 The Avoca Plaintiffs’ opening brief did not newly address
jurisdiction, but instead relied on their briefing in support of the
stay motion. After New Kerr‐McGee offered additional
jurisdictional argument in its merits brief, the Avoca Plaintiffs
took the invitation to address jurisdiction in their merits reply.
Thus, the Avoca Plaintiffs’ jurisdictional arguments are
primarily in their reply briefs (on the stay motion and the
merits).
21
to mean “all derivative claims.”16 Appellants’ Reply Br. 7‐8
(emphasis omitted).
New Kerr‐McGee has it right. We lack jurisdiction
because the order did not find contempt, issue sanctions, or
modify the injunction.
I. THE DISTRICT COURT’S ORDER IS NOT “FINAL” FOR
PURPOSES OF 28 U.S.C. § 1291
“It is a well‐established rule of appellate jurisdiction
that ‘a final order is one that conclusively determines the
rights of the parties to the litigation, leaving nothing for the
district court to do but execute the order.’” Forschner Grp.,
Inc. v. Arrow Trading Co., 124 F.3d 402, 410 (2d Cir. 1997)
(quoting In re Fugazy Express, Inc., 982 F.2d 769, 775 (2d Cir.
1992)). Generally, orders finding a party in contempt but
16 The Avoca Plaintiffs also assert jurisdiction under 28 U.S.C.
§ 158(d), which gives courts of appeals jurisdiction over, as
relevant here, “final decisions, judgments, orders, and decrees”
by district courts reviewing bankruptcy court orders. Section
158(d) is inapplicable here. This appeal is not from an order of
the District Court reviewing a bankruptcy court order. The two
cases that the Avoca Plaintiffs cite for the proposition that the
District Court’s order is appealable under § 158, by contrast,
involved appeals from a district court’s approval of bankruptcy
settlement orders. See Appellants’ Stay Reply Br. 5 (citing In re
Smart World Tech., LLC, 423 F.3d 166 (2d Cir. 2005); In re
Heiserman, 52 F. App’x 929 (9th Cir. 2002)). The Avoca Plaintiffs
could have appealed the District Court’s initial approval of the
Tronox bankruptcy settlement under § 158(d), but chose not to.
Section 158(d) provides them no cover now.
22
not imposing sanctions are not immediately appealable. See
id. (“[A]n order adjudging a party in contempt
unaccompanied by sanctions is not final and therefore is
not appealable.”).
Our decision in Wilder v. Bernstein, 49 F.3d 69 (2d Cir.
1995), and the Eleventh Circuit’s decision in Thomas v. Blue
Cross & Blue Shield Ass’n, 594 F.3d 814 (11th Cir. 2010), are
instructive. In both, the district court interpreted the
meaning of and directed compliance with its final order (a
consent decree in Wilder and an anti‐suit injunction in
Thomas), but did not find contempt or impose sanctions.
Specifically, in Wilder, the plaintiffs sued New York City
asserting racial discrimination in foster‐care policies. The
parties entered into a consent decree in which the City
agreed to certain changes in its practices. 49 F.3d at 70‐71.
The plaintiffs later sought contempt sanctions against the
City based on its alleged failure to comply. The district
court did not find the City in contempt or impose sanctions,
but directed it to take “all appropriate steps” to implement
the consent decree. Id. at 71‐72 (quoting Wilder v. Bernstein,
153 F.R.D. 524, 535 (S.D.N.Y. 1994)). We dismissed the
appeal for lack of jurisdiction, ruling that because “there
ha[d] not been a finding of contempt, much less an
assessment of sanctions, the order [was] not ‘final.’” Id. at
72 (citing Dove v. Atl. Capital Corp., 963 F.2d 15, 17‐18 (2d
Cir. 1992)). The Eleventh Circuit did the same in Thomas,
raising the issue of jurisdiction sua sponte and concluding
that the district court’s order directing the plaintiff to
withdraw his breach‐of‐contract complaint within twenty
days was not final under § 1291, did not fall within the
23
collateral order doctrine,17 and did not grant or modify an
injunction under § 1292(a)(1). See Thomas, 594 F.3d at 818‐20.
Here, as in Wilder, the District Court’s order was
issued in the context of a pending contempt motion but
made no contempt finding, “much less an assessment of
sanctions.” See Wilder, 49 F.3d at 72. Therefore, it is not
“final” as contemplated by § 1291. The District Court
proceedings concerning compliance with the Injunction will
not reach final adjudication until such time as the contempt
issue is fully resolved. For present purposes, that will occur
if the Avoca Plaintiffs refuse to comply and are sanctioned.
The only potential, yet ultimately inconsequential,
distinction that the Avoca Plaintiffs raise between this case
and Wilder and Thomas is that New Kerr‐McGee somehow
“abandoned” its request for a contempt finding or
sanctions. Appellants’ Stay Reply Br. 4 (citing In re Tronox
17 The Avoca Plaintiffs do not argue that the District Court’s
order falls within the small class of decisions excepted from the
final‐judgment rule under the collateral order doctrine, for good
reason. The order is at the heart of the merits of the proceedings
and therefore not collateral. Moreover, the order is not
effectively unreviewable on appeal from a final judgment; if the
Avoca Plaintiffs refuse to dismiss the PA State Action and the
District Court finds contempt or imposes sanctions, the Avoca
Plaintiffs can appeal from that ruling. We note that because our
jurisdictional analysis under 28 U.S.C. § 1292 requires an
analysis of the merits of the District Court’s interpretation of the
Injunction, a subsequent appeal would have to overcome any
preclusive effects of this opinion.
24
Inc., 549 B.R. at 38 n.11). In Thomas, they claim, the order
was not final because “it [did] not dispose of all of the
issues raised in the motion. . . . The order expressly
contemplated further action in the event that [the plaintiff]
failed to withdraw his claim within 20 days. It stated . . .
‘the contempt motion shall be revisited by this Court.’” Id.
(quoting Thomas, 594 F.3d at 819). By contrast, here, the
Avoca Plaintiffs argue, “the present Order expressly
contemplates that it has finally adjudicated the Avoca
Plaintiffs’ rights, and that the motion is now finally
‘closed.’” Id. (footnote omitted). Thus, they claim that
“[a]ny notion of contempt proceedings, as stated, was then
off the table, ‘abandoned.’” Id.
The Avoca Plaintiffs miss the point. The District
Court’s order did two things, and two things only: (1) it
interpreted the Injunction and Settlement Agreement to bar
the Avoca Plaintiffs’ state‐court claims, and (2) it directed
them to dismiss the state action—i.e., it enforced the
Injunction and Settlement Agreement by directing
compliance therewith. There is nothing more final about the
order here than the orders in Wilder and Thomas.
This result also makes good sense in light of “the
historic federal policy against piecemeal appeals.” See Sears,
Roebuck & Co. v. Mackey, 351 U.S. 427, 438 (1956). If § 1291
required us to entertain appeals every time a district court
interpreted or issued an order enforcing a final injunction
without more, we would risk being “besieged by successive
appeals in injunctive proceedings.” Ass’n of Cmty. Orgs. for
Reform Now (ACORN) v. Ill. State Bd. of Elections, 75 F.3d 304,
306 (7th Cir. 1996). Even more, § 1292(a)(1)—which
25
provides for immediate appeal of certain injunction‐related
orders, but not interpretive or enforcement orders—would
be rendered, at least partially, superfluous.
II. THE DISTRICT COURT’S ORDER IS NOT APPEALABLE
UNDER 28 U.S.C. § 1292(A)(1)
Section 1292(a)(1) allows interlocutory appeals from
orders “granting, continuing, modifying, refusing or
dissolving injunctions, or refusing to dissolve or modify
injunctions.” 28 U.S.C. § 1292(a)(1). The parties agree that
the only relevant consideration here is whether the District
Court’s order somehow modified the Injunction.18 Though
18 The Avoca Plaintiffs also argue briefly that the District Court’s
order does not merely interpret the Injunction, but “continues”
it. They are wrong. “An order that continu[es] an injunction is
one that extends the duration of the injunction, that is, one
entered in circumstances where, without such order, the
injunction would stand dissolved by lapse of the time fixed in
the original order.” In re Fugazy Express, 982 F.2d at 777
(alteration in original) (citations and internal quotation marks
omitted). Here, the Injunction is permanent. Moreover, if an
order enforcing an injunction were held to be continuing the
injunction, any post‐judgment order that fell short of terminating
an injunction would qualify to trigger § 1292(a). That cannot be.
The cases cited by the Avoca Plaintiffs on this point are
distinguishable. Appellants’ Stay Reply Br. 8. One deals with a
preliminary, as opposed to permanent, injunction. See Adams‐
Lundy v. Ass’n of Prof’l Flight Attendants, 792 F.2d 1368, 1370 (5th
Cir. 1986). The other involves a refusal to modify a consent
decree to protect plaintiffs from irreparable injury. Ho ex rel. Ho
v. S.F. Unified Sch. Dist., 147 F.3d 854, 860 (9th Cir. 1998). Thus,
26
the order did not purport to modify the Injunction, we do
not simply take the District Court’s word for it. Rather, we
look to whether the order was, in fact, merely interpretive,
and did “not change the meaning of—that is, modify—the
. . . [I]njunction.” ACORN, 75 F.3d at 306. To determine if
the Injunction has been modified, we have to understand if
the District Court extended the Injunction beyond its
original reach. That is, if Judge Forrest properly construed
the Injunction to bar the Avoca Plaintiffs’ claims, she did
not modify it; but if she erred in her construction, she did
modify it. See Wilder, 49 F.3d at 72.
In distinguishing interpretation from modification,
Wilder tells us to apply de novo review. See id. (citing United
States v. O’Rourke, 943 F.2d 180, 186 (2d Cir. 1991)); see also
EEOC v. Local 40, Int’l Ass’n of Bridge, Structural &
Ornamental Iron Workers, 76 F.3d 76, 79 n.2 (2d Cir. 1996)
(citing Wilder while noting that “we must at least look
through the door” to the merits “to see if we should open
it” (internal quotation marks omitted)). It is unclear,
however, how searching that review should be. A plurality
of our sister circuits have acknowledged that while “the
scope of the injunction is to be determined by the
independent judgment of [Courts of Appeals],” the
reviewing court must “approach the question with the
purpose of fulfilling the statutory goal of not ‘letting
piecemeal appeals, cloaked in the guise of jurisdictional
both cases, unlike this one, involved the duration of less‐than‐
permanent injunctions.
27
inquiries, come in through the back door.’” United States v.
Philip Morris USA Inc., 686 F.3d 839, 844 (D.C. Cir. 2012)
(quoting Birmingham Fire Fighters Ass’n 117 v. Jefferson Cty.,
280 F.3d 1289, 1293 (11th Cir. 2002)). Those courts—
including the Seventh, Tenth, Eleventh, and D.C. Circuits—
look to whether the district court’s order constitutes an
obvious misinterpretation of the injunction.19 Counseling
against too searching of a merits inquiry at the
jurisdictional stage, those circuits have voiced similar
concerns that “[t]o plunge into the details would collapse
the jurisdictional inquiry into a decision on the merits,
19 See Philip Morris, 686 F.3d at 845 (adopting the circumscribed
approach of the other circuits); Pimentel & Sons Guitar Makers,
Inc. v. Pimentel, 477 F.3d 1151, 1154‐55 (10th Cir. 2007)
(explaining that it does not “analyze the injunction and the order
in detail” because only “gross or blatant misinterpretation[s] of
the original injunction” amount to modifications under
§ 1292(a)(1) (internal quotation marks omitted)); Birmingham Fire
Fighters, 280 F.3d at 1292; Gautreaux v. Chi. Hous. Auth., 178 F.3d
951, 957‐58 (7th Cir. 1999) (explaining that only “obvious
misinterpretation[s]” are sufficient to “trigger appellate
jurisdiction under § 1292(a)(1),” and rejecting defendant’s
request for “an all‐out inquiry into the merits” of the at‐issue
order because “such an analysis would aim to uncover subtle
rather than blatant misinterpretations and is therefore too
searching for a preliminary jurisdictional inquiry”); accord
Southern Ute Indian Tribe v. Leavitt, 564 F.3d 1198, 1209 (10th Cir.
2009) (noting that “the benchmark for when an order modifies
an injunction is a high one,” and that the “detailed analysis . . .
requested by the [appealing party] is inconsistent with [the
Pimentel] standard of review”).
28
thwarting the purpose of § 1292(a)(1).” Birmingham Fire
Fighters, 280 F.3d at 1293.
Although we have never expressly adopted the
limited approach, we have endorsed it by summary order.
Scipar, Inc. v. Simses, 354 F. App’x 560, 562‐63 (2d Cir. 2009)
(citing Wilder and the decisions of the Seventh, Tenth, and
Eleventh Circuits). Such an approach makes sense, and is
consistent with our case law, when evaluating the district
court’s interpretation of its own order—that is, reviewing a
district court’s determination of what it meant when it
employed language that is later subject to question. See In
re Bernard L. Madoff Inv. Sec. LLC (“Madoff”), 740 F.3d 81, 87
n.7 (2d Cir. 2014) (stating that a court’s interpretation of its
own injunction “warrants customary appellate deference”)
(quoting Casse v. Key Bank Nat’l Ass’n (In re Casse), 198 F.3d
327, 333 (2d Cir. 1999))); Truskoski v. ESPN, Inc., 60 F.3d 74,
77 (2d Cir. 1995) (per curiam) (reviewing with great
deference a court’s interpretation of its own order). But
when, as here, the language the district court is interpreting
is tied to a term defined by law (e.g., “derivative claims” as
used in the bankruptcy context), the court’s conclusion is a
legal one and is reviewed de novo. See In re DeTrano, 326
F.3d 319, 321 (2d Cir. 2003) (noting that in a typical
bankruptcy appeal under § 158(d), “[t]he bankruptcy
court’s findings of fact are reviewed for clear error, and its
conclusions of law are reviewed de novo.”).
To be clear, to the extent the District Court
interpreted “Trust Derivative Claims” to mean all
derivative claims within a bankruptcy court’s jurisdiction,
its interpretation is entitled to deference and will not
29
constitute a modification unless it is an obvious or blatant
misinterpretation. See, e.g., Birmingham Fire Fighters, 280
F.3d at 1293. However, we review de novo the District
Court’s conclusion that the Avoca Plaintiffs’ claims are in
fact derivative claims within a bankruptcy court’s
jurisdiction.20 The merits of New Kerr‐McGee’s
enforcement claims are therefore unavoidably linked to the
jurisdictional question. The result turns on whether the
Avoca Plaintiffs’ claims are in fact “derivative” as that term
is used in the bankruptcy context—i.e., whether the claims
are property of the estate—and whether the District Court
obviously or blatantly misinterpreted the Injunction’s
definition of “Trust Derivative Claims.”
A. All of the Avoca Plaintiffs’ Claims Are
“Derivative” Claims—i.e., Estate Property
i. The Law on Derivative Claims
When, as here, a company files for bankruptcy, the
automatic‐stay provision of the Bankruptcy Code, 11 U.S.C.
20 The nature of the Injunction and the district court’s dual
analysis of both the language of the Injunction (for which its
views deserve deference) and the relationship of that language
to legal standards (which present clear issues of law reviewed by
us in the normal course) present an interesting twist to the
jurisdictional inquiry but should not be seen as an invitation for
“piecemeal appeals[] cloaked in the guise of jurisdictional
inquiries, [to] come in through the back door.” Id. at 1293.
Injunctions tied to the factual circumstances of the parties that
do not employ a legal principle to measure their scope will fall
under the more deferential standard of review noted above.
30
§ 362, operates to prevent certain creditors from
“pursu[ing] their own remedies against the debtor’s
property.” St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc. (“St.
Paul”), 884 F.2d 688, 701 (2d Cir. 1989). Congress’s intent
was “to protect all creditors by making the trustee the
proper person to assert claims against the debtor.” Id. “This
reasoning extends to common claims against the debtor’s
alter ego or others who have misused the debtor’s property
in some fashion.” Id. While bankruptcy courts generally
have limited authority to release a non‐debtor’s
independent claims, so‐called “derivative claims”—i.e.,
claims “based on rights ‘derivative’ of, or ‘derived’ from,
the debtor’s”—typically constitute “property of the estate.”
Madoff, 740 F.3d at 88. In other words, “when creditors . . .
have a claim for injury that is particularized as to them,
they are exclusively entitled to pursue that claim, and the
bankruptcy trustee is precluded from doing so.” Hirsch v.
Arthur Andersen & Co., 72 F.3d 1085, 1093 (2d Cir. 1995).
“Derivative claims” in the bankruptcy context are
those that “‘arise[] from harm done to the estate’ and that
‘seek [] relief against third parties that pushed the debtor
into bankruptcy.’” Madoff, 740 F.3d at 89 (alterations in
original) (quoting Picard v. JPMorgan Chase & Co. (In re
Bernard L. Madoff Inv. Sec. LLC) (“JPMorgan”), 721 F.3d 54,
70 (2d Cir. 2013)). In distinguishing derivative claims from
particularized claims exclusive to individual creditors,
labels are not conclusive, since plaintiffs often try, but are
not permitted, to plead around a bankruptcy. See id. at 91‐
92. In other words, we are wary of putting form over
substance. See id. at 89, 91‐92. Thus, we “inquire into the
31
factual origins of the injury and, more importantly, into the
nature of the legal claims asserted.” Id. at 89 (citing Johns‐
Manville Corp. v. Chubb Indem. Ins. Co. (In re Johns‐Manville
Corp.) (“Manville III”), 517 F.3d 52, 67 (2d Cir. 2008), rev’d on
other grounds sub nom. Travelers Indem. Co. v. Bailey, 557 U.S.
137 (2009)). If the claim “is a general one, with no
particularized injury arising from it, and if that claim could
be brought by any creditor of the debtor, the trustee is the
proper person to assert the claim, and the creditors are
bound by the outcome of the trustee’s action.” St. Paul, 884
F.2d at 701. Whereas a derivative injury “is based upon ‘a
secondary effect from harm done to [the debtor],’ an injury
is said to be ‘particularized’ when it can be ‘directly traced
to [the third party’s] conduct.’” Madoff, 740 F.3d at 89
(alterations in original) (quoting St. Paul, 884 F.2d at 704).
Non‐derivative claims are personal to the individual
creditor and of no interest to the others.
As difficult a task as it may be to distinguish
derivative from non‐derivative claims, our prior
decisions—namely, St. Paul, Manville III, JPMorgan, and
Madoff, each employed by the District Court—and the Third
Circuit’s divided‐panel decision in In re Emoral, Inc.
(“Emoral”), 740 F.3d 875 (3d Cir. 2014), have done much of
the legwork. Those cases and general principles of
bankruptcy law persuade us that the Avoca Plaintiffs’
claims against New Kerr‐McGee are generic, derivative
claims.
St. Paul. In St. Paul, PepsiCo sued Banner, the
corporate parent of the debtor, for claims PepsiCo had
against the debtor, claiming that Banner had stripped away
32
the assets of its alter ego subsidiary, the debtor.21 884 F.2d at
692. PepsiCo argued that its claim was particularized,
emphasizing its individualized harm suffered at the hands
of the debtor. Id. at 703‐04. We determined that PepsiCo’s
harm stemmed from its original relationship to the debtor,
not Banner. Id. at 704. But that harm—the failure to honor
contractual obligations—was not the harm for which
PepsiCo sought redress against Banner. See id. Instead,
PepsiCo “alleged a secondary effect from harm done to [the
debtor]” by Banner—removing assets from the debtor that
would have allowed it to meets its obligations to PepsiCo
and other creditors. Id. Thus, we held the proper remedy
for any harm caused by Banner to the debtor, and in turn all
of its creditors, was “for the trustee to bring an alter ego
claim as property of the estate, . . . or to bring an action
alleging preferential or fraudulent transfer of assets to
Banner.” Id.
Manville III. To understand Manville III, one must
appreciate the context in which it was decided. The
bankruptcy of the Johns‐Manville Corporation (“Manville”)
produced a number of cases in this Court. In one of those
cases, a distributor of Manville’s products, alleging that it
was a coinsured under Manville’s insurance policies,
challenged the bankruptcy court’s authority to enter an
Like Delaware corporate law (which New Kerr‐McGee argues
21
applies to the case before us) and Pennsylvania law (which the
Avoca Plaintiffs argue applies to the case before us), see infra at
36, Ohio law allowed a subsidiary to pierce its own veil, see St.
Paul, 884 F.2d at 695.
33
injunction barring what the distributor argued were
independent contract‐based claims against the insurer.
MacArthur Co. v. Johns‐Manville Corp. (In re Johns‐Manville
Corp.) (“Manville I”), 837 F.2d 89 (2d Cir. 1988). We rejected
the distributor’s characterization, holding that the
distributor’s claims, whether sounding in tort or contract,
were “derivative” of Manville’s because they sought
recovery “out of the proceeds of Manville’s insurance
policies on the basis of Manville’s conduct.” Id. at 92‐93.
Manville III was a very different case from Manville I.
There, asbestos victims sued the same insurer, but the
allegations were that the insurer had tortiously “influenced
Manville’s purported failure to disclose its knowledge of
asbestos hazards.” Manville III, 517 F.3d at 58.22 Contrasting
those claims with the ones in Manville I, we held the claims
were non‐derivative because they sought to recover for
harms done directly to plaintiffs by the insurer through the
insurer’s own wrongdoing, not for some wrongdoing that
affected the estate. See id. at 68.
22 The Supreme Court reversed Manville III in part on narrow
procedural grounds that did not upend our ruling that a
bankruptcy court is without jurisdiction to enjoin claims against
nondebtors that are not derivative of the debtor’s wrongdoing.
Travelers Indem., 557 U.S. at 155. Indeed, we affirmed the
jurisdictional analysis from Manville III in Johns‐Manville Corp. v.
Chubb Indem. Ins. Co. (In re Johns‐Manville Corp.) (“Manville IV”),
600 F.3d 135, 152 (2d Cir. 2010). Accord Madoff, 740 F.3d at 90
n.10.
34
We also now have the benefit of two recent cases
applying the distinction drawn in Manville III.
JPMorgan. In JPMorgan, we held that the liquidation
trustee for the estate of Bernard L. Madoff Investment
Securities LLC (“BLMIS”) lacked standing to bring claims
“on behalf of thousands of customers against third‐party
financial institutions for their handling of individual
investments made on various dates in varying amounts”
from BLMIS accounts. 721 F.3d at 71. As with the claims in
Manville III, we determined that the trustee’s claims—
because they alleged that the third‐party financial
institutions independently cause particularized harm to
individual creditors—were owned by the customers, and
were therefore not derivative. Id.
Madoff. Most recently, in Madoff, we considered
whether claims by a creditor against a non‐debtor were
derivative of claims asserted and settled by the BLMIS
trustee and therefore barred by the injunction that served as
the model for the Injunction here. The trustee in Madoff
asserted in an adversary proceeding claims for fraudulent
transfer, avoidable preferences, and turnover against
alleged Madoff co‐conspirator Jeffrey Picower and other
defendants, based on their alleged improper withdrawals of
more than $6.7 billion from BLMIS. Madoff, 740 F.3d at 85.
During the pendency of settlement negotiations, BLMIS
customers (creditors of the BLMIS estate) named the same
defendants in a class action in district court alleging, among
other things, civil conspiracy and conversion based on
similar allegations. Id. The bankruptcy proceeding
thereafter settled. In confirming the settlement and issuing
35
an injunction against duplicative and derivative claims, the
district court ruled that the class‐action claims were barred.
Id. at 87.
On appeal, we agreed. Id. at 96. We were not
persuaded by the fact that the plaintiffs alleged different
causes of action than had the trustee. There, as here, the
plaintiffs did not allege that the defendants took any
“particularized” action aimed at them. Id. at 93. Instead,
they sought to plead around an injunction by focusing on
the nature of the relief sought. See id. We looked beyond the
plaintiffs’ labels, and determined that the claims derived
from the estate because the “alleged injuries [were]
inseparable from, and predicated upon, a legal injury to the
estate.” Id. at 92. We contrasted the claims with those in
Manville III and JPMorgan, and likened them to claims
alleged in Manville I.23 Id. at 90. The specific damages BLMIS
customers sought from Picower and his codefendants—
namely, losses and taxes—were not “recoverable in an
avoidance action under the Bankruptcy Code.” Id. at 93
(citing 11 U.S.C. § 550(a) (“[T]he trustee may recover, for
the benefit of the estate, the property transferred, or . . . the
value of such property . . . .”)). Nonetheless, we held that
the damages suffered by all BLMIS customers “still
remain[ed] mere secondary harms flowing from the
We did, however, allow plaintiffs to amend their complaints
23
because there was a conceivable particularized conspiracy that
the trustee could not bring. See id. at 94. As we later explain,
there was good reason to do so there, but not here.
36
Picower defendants’ fraudulent withdrawals and the
resulting depletion of BLMIS funds.” Id.
In all but St. Paul, the claims at issue were against
third parties where the debtors had contractual relations
with, but were corporately separate from, those third
parties. Here, by contrast, the corporate relationship
between New Kerr‐McGee and the Tronox debtors presents
a new wrinkle. And that is where Emoral helps.
Emoral. Emoral, similar to the case here, arose in the
context of a motion to enforce a court order approving the
settlement of a claim for fraudulent transfer. 740 F.3d at
877. The case involved a prepetition sale of assets by
Emoral, a company that manufactured diacetyl, a chemical
used in food flavoring that was the subject of many toxic‐
tort suits. See id. After Emoral filed for bankruptcy, the
trustee brought an adversary proceeding against Aaroma,
the buyer of Emoral’s assets, alleging that the prepetition
sale constituted a fraudulent transfer. See id. The parties
reached a settlement and, like here, the trustee agreed to
release Aaroma from any claims that were property of the
Emoral estate. See id. At the hearing on the propriety of the
settlement, however, the Diacetyl plaintiffs (with the
agreement of a representative of the trustee) challenged the
release, arguing that any successor‐liability claims against
Aaroma did not belong to the Emoral estate, and that the
trustee was therefore without authority to release them. See
id. The plaintiffs thereafter sued Aaroma arguing for
successor liability, relying on the trustee’s arguments that
the claims were outside the estate. See id. The bankruptcy
court agreed, the district court reversed and remanded to
37
the bankruptcy court, and the Third Circuit affirmed the
district court’s order. See id. at 878.
The Third Circuit majority framed the issue (in terms
that could be used nearly verbatim here) as one that
“require[d] [it] to determine whether personal injury causes
of action arising from the alleged wrongful conduct of a
debtor corporation, asserted against a third‐party non‐
debtor corporation on a ‘mere continuation’ theory of
successor liability under state law, are properly
characterized as ‘generalized claims’ constituting property
of the bankruptcy estate.” Id. at 876.
The court answered that question in the affirmative.
Id. at 882. The majority relied on our explication in St. Paul
that, in analyzing “common claims against the debtor’s
alter ego or others who have misused the debtor’s property
in some fashion,” if a claim is “a general one, with no
particularized injury arising from it, and if that claim could
be brought by any creditor of the debtor, the trustee is the
proper person to assert the claim, and the creditors are
bound by the outcome of the trustee’s action.” Id. at 879
(quoting St. Paul, 884 F.2d at 701). In the majority’s eyes, the
plaintiffs “fail[ed] to demonstrate how any of the factual
allegations that would establish their cause of action based
on successor liability are unique to them as compared to
other creditors of Emoral,” or “how recovery on their
successor liability cause of action would not benefit all
creditors of Emoral given that Aaroma, as a mere
continuation of Emoral, would succeed to all of Emoral’s
liabilities.” Id. at 880. Thus, the majority held that the
plaintiffs’ claim was “general” rather than
38
“individualized,” and therefore part of the bankruptcy
estate. Id. The court emphasized that the “[p]laintiffs’ cause
of action against Aaroma would be based on facts generally
available to any creditor, and recovery would serve to
increase the pool of assets available to all creditors.” Id. at
881.
In dissent, Judge Cowen focused on the nature of the
initial toxic‐tort injury:
Because the Diacetyl Plaintiffs’ [claims]
against Aaroma “could [not] be brought by
any creditor of the debtor,” they constitute
individualized claims belonging to the
Diacetyl Plaintiffs themselves—and not to
the debtor or the bankruptcy estate.
Initially, it is uncontested that the
underlying personal injury claims against
Emoral are individualized in nature. In
fact, personal injury and product liability
causes of action under state law represent
quintessential examples of an
individualized claim, i.e., “a ‘personal’
[claim that is] a legal or equitable interest
only of the creditor.”
Id. at 883 (second and third alteration in original) (quoting
Bd. of Trs. of Teamsters Local 863 Pension Fund v. Foodtown,
Inc., 296 F.3d 164, 170 (3d Cir. 2002)). In Judge Cowen’s
view, the majority’s approach missed the point—the critical
question for him was whether the plaintiffs were suing for
themselves or for the benefit of all, the former being
39
individual property and the latter being estate property. Id.
at 885‐86 & n.1.
As did the Emoral majority opinion, we disagree with
the dissenting opinion’s focus on the nature of the toxic‐tort
injury. That the plaintiffs in Emoral had an underlying
harm specific to them did not put the claims automatically
outside the estate. Indeed, every creditor in bankruptcy has
an individual claim (set forth in a proof of claim) against
the debtor, whether it be in tort (as here), contract, or
otherwise. But often there are claims against third parties
that wrongfully deplete the debtor’s assets. Individual
creditors may wish to bring claims against those third
parties to seek compensation for harms done to them by the
debtor and secondary harms done to them by the third
parties in wrongfully diverting assets of the debtor that
would be used to pay the claims of the individual creditor.
The fact that an individual creditor may seek to do so does
not make those secondary claims particular to the creditor,
for it overlooks the obvious: Every creditor has a similar
claim for the diversion of assets of the debtor’s estate. Those
claims are general—they are not tied to the harm done to
the creditor by the debtor, but rather are based on an injury
to the debtor’s estate that creates a secondary harm to all
creditors regardless of the nature of their underlying claim
against the debtor.24
Perhaps it would be a different matter if state law recognized a
24
difference in successor liability between tort and contract claims.
But, in any event, the parties have not raised the issue and we
need not decide it.
40
The plaintiffs in Emoral would have courts allow an
individual creditor to sue third‐party successors of debtors
for claims that are truly aimed at recovering estate assets.
The exact same claim advanced by the trustee on behalf of
the estate would be a win for all creditors of the estate, but
a win by a single creditor would be a win by one to the
detriment of the others. That “is precisely the sort of result
the Bankruptcy Code exists to forestall, by placing exclusive
standing over estate claims in the bankruptcy trustee or
plan administrator.” In re Coudert Bros. LLP, No. 11‐2785,
2012 WL 1267827, at *6 (S.D.N.Y. Apr. 12, 2012). The Avoca
Plaintiffs ask the same of us, and we will not allow it.
ii. The Avoca Plaintiffs’ Claims Are
Derivative
As an initial matter, it is undisputed that under either
Pennsylvania or Delaware law the Adversary Proceeding
could have included indirect‐liability claims—based on
imputation theories such as alter ego or veil piercing—to
the extent the claims qualify as “general.”25 Accord In re
Apler Holdings USA, Inc., 398 B.R. 736, 759 (S.D.N.Y. 2008)
(“[U]nder Delaware law, a trustee possesses standing to
bring—and by logical extension, settle and release—an alter
ego claim on behalf of a creditor of the debtor, as long as
the claim qualifies as a ‘general’ claim.”); In re Jamuna Real
Estate, LLC, 365 B.R. 540, 562‐63 (Bankr. E.D. Pa. 2007)
(allowing trustees to assert alter‐ego and veil‐piercing
For this reason, we need not resolve the parties’ dispute
25
concerning which state’s law governs here.
41
claims under Pennsylvania law); Rosener v. Majestic Mgmt.,
Inc. (In re OODC, LLC), 321 B.R. 128, 136‐37 (Bankr. D. Del.
2005) (holding similarly vis‐à‐vis successor liability and
alter‐ego claims under Delaware law). Thus, the question is
whether the causes of action here qualify as “general”
claims. They do.
We start with what the Avoca Plaintiffs concede:
(1) They pursue claims against only New Kerr‐
McGee;
(2) Any claims against the Tronox debtors were
discharged by the bankruptcy plan;
(3) Tronox LLC succeeded the operator of the
Avoca Plant and Tronox Worldwide LLC
succeeded the parent of Tronox LLC;
(4) New Kerr‐McGee (and its predecessor, Kerr‐
McGee Holdco, Inc., formed earlier in the same
year) did not exist until 2001; and
(5) Any claims against New Kerr‐McGee for harm
done to the Tronox estate are barred as Trust
Derivative Claims.
With that as a baseline, we turn to what the claims are
not. The Avoca Plaintiffs do not, and indeed could not,
assert direct‐liability claims that New Kerr‐McGee breached
an independent duty to them arising out of the operation of
the Avoca Plant, since New Kerr‐McGee did not exist until
years after plant operations ceased. Of course, as the
District Court acknowledged and New Kerr‐McGee
conceded, the Avoca Plaintiffs could have raised direct
42
claims that, for instance, New Kerr‐McGee instructed its
subsidiaries not to clean up the toxic site or were negligent
in their supervision of the cleanup. The harm in that
instance would have been suffered directly and solely by
the Avoca Plaintiffs by acts of New Kerr‐McGee. As we
held in Manville III and JPMorgan, those claims would be
independent and particularized, belonging only to the
Avoca Plaintiffs as individual creditors. The Avoca
Plaintiffs, however, have never alleged, and until recently
had conceded that they could not allege, facts to support a
theory of direct liability against New Kerr‐McGee.
At oral argument before this Court, counsel for the
Avoca Plaintiffs stated “there is clearly the opportunity to
have a direct claim here.” For the first time, counsel
mentioned a December 2002 letter from New Kerr‐McGee
to the Environmental Protection Agency (“EPA”) alerting
the EPA to its ownership of the Avoca Plant and efforts to
remediate. This post‐2001 conduct, Plaintiffs’ counsel now
asserts, could have formed the basis for still unidentified
and unspecified claims in a theoretical amended complaint.
This painfully late assertion, unsupported by the record,26
bespeaks gamesmanship, but is best left to later review of
26 As best can be gleaned from an independent review of the
record on appeal, there is no reference to the alleged 2002 letter.
Indeed, the only references to letter exchanges with the EPA
appear in the Avoca Motion, and relate only to Old Kerr‐
McGee’s receipt of letters from the EPA in 1999 regarding an
investigation into a different wood‐treatment site than the Avoca
Plant. See J.A. 154‐55 ¶¶ 37‐39.
43
the aspect of the District Court order that required
dismissal with prejudice. See infra, at 59‐62. For now, it
suffices to note that the District Court did not conclude that
any such claims, to the extent they exist and had been
pleaded, would be barred by the Injunction, and we agree
that they would not without expressing any view as to the
merits of such claim. At bottom, New Kerr‐McGee could
not have engaged in torts prior to its existence, and the
Avoca Plaintiffs have not put forth facts supporting a claim
that New Kerr‐McGee breached a duty to them after it came
into existence.
Thus, the only claims the Avoca Plaintiffs assert are
through alter‐ego/veil‐piercing theories that seek to impute
the acts of the polluters to New Kerr‐McGee. Indeed, the
Avoca Plaintiffs tellingly summarize their state‐court
complaints to allege that “New [Kerr‐McGee] is responsible
for the acts of its subsidiary, which operated the plant,” and
“further allege direct liability of [Old Kerr‐McGee], which at
the time was the parent company, for actions it took on its
own.” Appellants’ Br. 9. Put another way, having conceded
that they no longer intend to bring claims against the
released Tronox debtors, the Plaintiffs admit that their sole
claims against New Kerr‐McGee are premised indirectly on
the liability of those debtors.
This is where it gets tricky. As we see it, there are two
species of claims against New Kerr‐McGee. The first,
“Fraudulent‐Transfer Actions,” are indirect‐liability claims
alleging that New Kerr‐McGee mismanaged and
undercapitalized Old Kerr‐McGee and Kerr‐McGee
Chemical (ultimately, the Tronox debtors) such that they
44
were left with insufficient assets to pay creditors after
entering bankruptcy. See J.A. 242‐43.
The second, “Personal Injury Actions,” comprises
indirect‐liability claims that seek to hold New Kerr‐McGee
liable for the tortious acts of its former indirect subsidiaries
in operating the Avoca Plant. See Appellants’ Br. 31‐32
(“The claims [against New Kerr‐McGee] are related to
actions that Old [Kerr‐McGee] took at the Avoca plant that
relate directly and specifically to the Avoca Plaintiffs and
only the Avoca Plaintiffs.”). This is the heart of the Avoca
Plaintiffs’ case.
The Fraudulent‐Transfer Actions are easy: they are
the paradigmatic example of claims general to all creditors
and are therefore barred by the Injunction for the reasons
stated by the District Court. See In re Tronox Inc., 549 B.R. at
53 (“[C]laims based on allegations such as these—a general
failure to adhere to corporate formalities and abuse of the
corporate form—are equally capable of increasing the
basket of assets that could be used to satisfy any and all
liabilities owed by the Tronox debtors.”).
The Personal Injury Actions are tougher. The Avoca
Plaintiffs attempt to particularize the Personal Injury
Actions against New Kerr‐McGee by personalizing the
harm. But the Avoca Plaintiffs cannot and do not trace their
harm to New Kerr‐McGee. If they did, their claims would
be particularized. Instead, the alleged liability of New Kerr‐
McGee arises not from its own conduct, but from its alleged
existence as the alter ego and successor to the liabilities of
the former parent of the actual alleged tortfeasor, Kerr‐
45
McGee Chemical.27 The harm they allege to have suffered at
the hands of the latter is specific to them, but the harm they
allege to have suffered at the hands of New Kerr‐McGee is
the same harm general to all Tronox creditors.
The whole point of channeling claims through
bankruptcy is to avoid creditors getting ahead of others in
line of preference and to promote an equitable distribution
of debtor assets. See Koch Ref. v. Farmers Union Cent. Exch.,
27 Proving these claims against New Kerr‐McGee requires
establishing a chain of liability from the original tortfeasors to
New Kerr‐McGee. The Avoca Plaintiffs would first need a
finding that the operator of the Avoca Plant, Tronox LLC (f/k/a
Kerr‐McGee Chemical) was liable for the underlying torts. Then
they would need two veil‐piercings or findings of alter‐ego
liability—the first to get to Tronox Worldwide LLC (f/k/a Old
Kerr‐McGee), the former direct parent of Tronox LLC, and the
second to get to New Kerr‐McGee as the non‐debtor ultimate
parent. At each level of piercing, the Avoca Plaintiffs would
have to show that “there is fraud” or the entity whose veil they
seek to pierce was “a mere instrumentality or alter ego of its
owner.” Fletcher v. Atex, Inc., 68 F.3d 1451, 1457 (2d Cir. 1995)
(quoting Geyer v. Ingersoll Publ’ns Co., 621 A.2d 784, 793 (Del. Ch.
1992)); see also Advanced Tel. Sys., Inc. v. Com‐Net Prof’l Mobile
Radio LLC, 846 A.2d 1264, 1278 & n.9 (Pa. Super. Ct. 2004)
(“Under [the alter‐ego] theory, piercing the corporate veil
applies when ‘two or more corporations share common
ownership and are, in reality, operating as a corporate
combine.’” (quoting Miners, Inc. v. Alpine Equip. Corp., 722 A.2d
691, 695 (Pa. Super. Ct. 1998))).
46
Inc., 831 F.2d 1339, 1343 (7th Cir. 1987) (“[H]istorically one
of the prime purposes of the bankruptcy law has been to
bring about a ratable distribution among creditors of a
bankrupt’s assets; to protect the creditors from one
another.” (alteration in original) (quoting Young v. Higbee
Co., 324 U.S. 204, 210 (1945)). That is why, after a company
files for bankruptcy, creditors lack standing to assert claims
that are estate property. Instead, the trustee is conferred the
right to recover for derivative, generalized claims; only the
estate is charged with ensuring equitable distribution of
estate assets and preventing individual creditors from
pursuing their own interests and thus diminishing the res
available to the rest of the creditors. Even more, it
encourages, as it did here, orderly settlements—an interest
not taken lightly. See In re PaineWebber Ltd. P’ship Litig., 147
F.3d 132, 138 (2d Cir. 1998) (recognizing a “strong judicial
policy in favor of settlements”).
The critical distinction between the underlying tort
claim against the Tronox debtors and the alter‐ego claim
against New Kerr‐McGee is that establishing the former
would benefit only the Avoca Plaintiffs as individual
creditors, whereas establishing the latter—that New Kerr‐
McGee is the alter ego of the relevant Tronox debtors and
should therefore be charged with all its liabilities—would
benefit all creditors of the Tronox debtors generally. See
Emoral, 740 F.3d at 880. The facts necessary to prove that
the Tronox debtors committed the underlying torts may be
particular to the Avoca Plaintiffs, but the facts necessary to
impute that liability to New Kerr‐McGee “would be . . .
generally available to any creditor, and recovery would
47
serve to increase the pool of assets available to all
creditors.” See id. at 881.
The Avoca Plaintiffs’ tactics prove the point. They
seek to use Judge Gropper’s findings against New Kerr‐
McGee in the adversary proceeding—which involved
generalized claims for fraudulent conveyance—in their
state action. If those generalized findings would benefit
their individual‐creditors case, then their claims are no less
generalized than the fraudulent‐conveyance claims in the
Adversary Proceeding.
For those reasons, the District Court correctly
classified the Avoca Plaintiffs’ claims as generalized,
derivative claims comprising estate property.
B. The Claims Are “Trust Derivative” or
“Duplicative” and Thus Barred by the
Injunction
Concluding that the claims are derivative and
therefore properly within the jurisdiction of the bankruptcy
court solves only part of the puzzle. The parties argue over
the specific coverage of the Injunction and whether it means
all “derivative claims” or something less. As noted above,
we owe deference to the District Court’s interpretation of
“Trust Derivative Claims,” considering the merits only to
determine whether the District Court’s obviously
misinterpreted the Injunction to cover all claims within the
jurisdiction of the bankruptcy court.
Applying that standard, we conclude that the District
Court’s order interpreted, but did not modify, the
Injunction. We construe terms of an injunction according to
48
the general interpretive principles of contract law.
Mastrovincenzo v. City of New York, 435 F.3d 78, 103 (2d Cir.
2006). Here, we must interpret the terms of the Settlement
Agreement, which defines certain pertinent terms used in
the Injunction, in accordance with New York law. New
York law requires us to interpret the Settlement Agreement
“so as to give effect to the intention of the parties as
expressed in the unequivocal language they have
employed.” Terwilliger v. Terwilliger, 206 F.3d 240, 245 (2d
Cir. 2000) (citing Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351,
355 (1978)).
i. What the Injunction Says
The Injunction (set forth at Appendix B along with
other relevant provisions of documents cross‐referenced
therein), read in conjunction with the Settlement
Agreement, the confirmed bankruptcy plan, and trust
documents, provides as follows: The Injunction bars the
Tronox Debtors’ creditors from asserting against any
“Anadarko Released Party” any “Trust Derivative Claims”
or any claims that are duplicative of “Trust Derivative
Claims,” “whether or not held or controlled by the
Litigation Trust, or whether or not the Litigation Trust
could have asserted such claims against any Anadarko
Released Party.” J.A. 224.28
As noted above, the Avoca Plaintiffs do not dispute that they
28
were creditors of Tronox or that New Kerr‐McGee qualifies as an
“Anadarko Released Party.” J.A. 89 ¶ 1.9.
49
The Injunction mirrors the Madoff injunction, but goes
further to define what claims those terms cover. Compare
Madoff, 740 F.3d at 87 (noting that the injunction bars “any
claim . . . that is duplicative or derivative of the claims
brought by the Trustee, or which could have been brought
by the Trustee” (emphasis omitted)), with J.A. 97‐98
(spelling out what the terms encompass). To wit, the
Settlement Agreement defines “Trust Derivative Claims” as
any claims the Anadarko Litigation Trust asserted or could
have asserted “seeking relief or recovery arising from harm to
any Debtor or any Debtor’s estate, based on any legal theory.”
J.A. 97 ¶ 1.82 (emphasis added). It then goes on to list a
variety of claims and theories that “Trust Derivative
Claims” include—namely, claims relating to New Kerr‐
McGee’s relationship with Tronox debtors, and “claims
and/or remedies” alleging “agency, joint venture, alter ego,
corporate veil piercing,” and “successor liability.” J.A. 97‐98
¶ 1.82.
The Injunction also clarifies the meaning of
“duplicative claims.” It explains that claims can be
duplicative “whether or not held or controlled by the
Litigation Trust” and “whether or not the Litigation Trust
could have asserted” them. J.A. 224 (emphases added).
These are, in other words, claims that substantially overlap,
but are not identical to, “Trust Derivative Claims.” See, e.g.,
Fox v. Picard (In re Madoff), 848 F. Supp. 2d 469, 473‐75, 481‐
82 (S.D.N.Y. 2012) (holding that creditors’ claims for
conversion and unjust enrichment, among others, were
duplicative of trustee’s fraudulent‐transfer claims), aff’d 740
F.3d 81 (2d Cir. 2014). Finally, the Injunction specifies the
50
claims it does not cover—namely, claims alleging liability
that New Kerr‐McGee “might have that does not arise from
or through a liability of a Debtor.” J.A. 224 (emphasis
added).
These provisions provide the primary sources of
contention. Aside from the now‐rejected contention that
their claims are not truly “derivative,” Appellants’ Br. 29‐
34, the Avoca Plaintiffs argue:
(1) The District Court erred when it determined
that the “Anadarko Litigation Trust Agreement
gave the Litigation Trust the power to institute
any other actions that could have been brought
by Tronox against [New Kerr‐McGee],”
Appellants’ Br. 19‐24;
(2) Their claims do not “arise from harm to” the
Tronox debtors or their estates, Appellants’ Br.
24‐29; and
(3) The court could not prohibit them from filing
other claims against New Kerr‐McGee, and
thus erred in ordering them to dismiss the PA
State Action with prejudice, see Appellants’ Br.
34‐45.
None has merit.
ii. The Litigation Trust Had Power to
Assert the Claims
The Avoca Plaintiffs also argue that the District Court
misread the trust documents to mean that the Litigation
Trust had authority over derivative claims like theirs that
51
had not yet been asserted in the Adversary Proceeding.
They point to a footnote set forth in the margin29 in which
the District Court explained that its conclusion that
personal injury claims can be derivative was “buttressed”
by certain bankruptcy documents and the proceedings
themselves.
The Avoca Plaintiffs, however, exaggerate the import
of that footnote and read some of the trust documents too
29 The footnote reads:
This understanding is buttressed by the proceedings and
litigation history that led to this Court’s entry of the
Injunction. In particular, the Court’s view is informed by
the nature and scope of the Adversary Proceeding and the
Settlement Agreement. The Adversary Proceeding (and
the resulting Settlement Agreement) encompassed any
and all claims that the Tronox trustee could pursue
against [New Kerr‐McGee]. The Adversary Proceeding
was brought by the Tronox estate (and then continued by
the Anadarko Litigation Trust) to recover funds
transferred to [New Kerr‐McGee]. through fraudulent
intra‐corporate shenanigans. The Anadarko Litigation
Trust Agreement gave the Litigation Trust the power to
institute any other actions that could have been brought
by Tronox against [New Kerr‐McGee]. Thus, any claims
that could be asserted by the Tronox trustee against the
defendants in the Adversary Proceeding may properly fall
within the scope of the Settlement Agreement and the
Injunction.
In re Tronox Inc., 549 B.R. at 52 n.21 (citation omitted).
52
narrowly, rendering other language superfluous and
generally making no sense. More importantly, for the
reasons that follow, they are wrong—the Litigation Trust
had authority over pleaded and unpleaded claims.30
The confirmed bankruptcy plan states that, pursuant
to the Litigation Trust Agreement, the Tronox debtors
would transfer to the Litigation Trust their “rights” to the
Adversary Proceeding. J.A. 49. The Litigation Trust
Agreement “irrevocably and absolutely” transferred all of
the debtors’ “rights, title, and interests (whether legal,
beneficial, or otherwise) to the Anadarko Litigation,
including any and all claims therein.” J.A. 452 (emphasis
added).
New Kerr‐McGee argues that this language means
that the agreement transferred more than pending claims. It
asserts that the word “including” suggests that the “claims
therein” were only some of the rights and interests
transferred to the trust—other rights were derivative claims
like the Avoca Plaintiffs’ claims that the debtors had not
specifically pleaded, as well as the procedural right to
amend the adversary proceeding complaint to include such
claims. In the absence of the other contextual documents,
New Kerr‐McGee’s construction of the “including” clause
would be a stretch—one of multiple interpretations of
equivocal language. Indeed, that language could just as
easily be read to mean that the Tronox debtors were
30 This is essentially a collateral attack on the Litigation Trust’s
authority, which could have been, but was not, brought at the
time the Injunction was issued.
53
transferring all claims then asserted. But taking the
documents together and applying a little common sense
confirms their view.
As an initial matter, the very definition of “Trust
Derivative Claims” lists a host of causes of actions that were
not pleaded in the adversary‐proceeding complaint. If the
Avoca Plaintiffs were right, then almost none of the claims
the Injunction purports to enjoin would actually be
enjoined because the trustee had not yet pleaded them in
the adversary proceeding. That makes little sense.
Moreover, the bankruptcy court’s confirmation order
twice states that the Tronox debtors transferred their rights
to the claims pending in the adversary proceeding “and any
claim or cause of action of Tronox related thereto.” Suppl.
App. 53 ¶ 126, 55 ¶ 131. Those pending and not‐yet‐
asserted derivative claims went to the Litigation Trust.
Likewise, the Litigation Trust was empowered to “institute
or continue actions which were or otherwise could have
been brought by any Debtor that constitute Trust Property.”
J.A. 456. If the Avoca Plaintiffs were right that “Trust
Property” included only then‐asserted claims, the Litigation
Trust would not need, and would in fact lack power, to
“institute” actions that “otherwise could have been brought by
any Debtor.” Id. (emphasis added).
Finally, contemplating that others might challenge
the Litigation Trust’s authority, the Injunction specifically
barred duplicative claims—enjoining claims “whether or
not held or controlled by the Litigation Trust, or whether or
54
not the Litigation Trust could have asserted such claims.”31
J.A. 224. The District Court correctly interpreted the
Injunction to cover claims beyond those asserted in the
Adversary Proceeding.
31 The Avoca Plaintiffs also argue that barring the claims violates
the expectations of the parties to the settlement, because,
through the Tort Claims Trust and its Advisory Committee, they
explicitly rejected Anadarko and New Kerr‐McGee’s request for
a broad release as to them as part of a settlement of the
Adversary Proceeding. But, as the District Court explained, “[a]
belief that claims are retained is trumped by contractual
language that clearly states they are not.” In re Tronox Inc., 549
B.R. at 54 (citing Mastrovincenzo, 435 F.3d at 103). Moreover, this
highlights a subtext to this whole case: it would be curious for
New Kerr‐McGee to have settled these claims without insulating
themselves from additional litigation with the individual
creditors, and if the Avoca Plaintiffs were able to pursue these
claims based on the same allegations set forth in their proofs of
claim in the Tronox bankruptcy, then for what harm were they
entitled to the original recovery?
The Avoca Plaintiffs further argue that New Kerr‐McGee waived
its right to contest its responsibility for policies at the Avoca
Plant because it did not argue in the PA State Action that it was
the wrong party in the years of litigation that preceded the
Tronox bankruptcy. But New Kerr‐McGee’s behavior before the
release of claims against the Tronox debtors does not indicate
how New Kerr‐McGee would have operated after the Injunction
issued and it was the sole remaining defendant. See J.A. 751.
55
iii. The Claims “Arise from Harm” to the
Debtors
The Avoca Plaintiffs take issue with the District
Court’s interpretation of the definition of “Trust Derivative
Claims,” arguing that their claims fall outside the definition
because they “seek redress for harms to the Avoca Plaintiffs,”
rather than “relief from harm to Tronox or the Tronox
bankruptcy estate.” Appellants’ Br. 17 (emphases added).
Their reading is too cute, and fails for the same reason that
the claims are derivative: any creditor’s claim is for harm to
itself, but the point of the Injunction was to bar claims that
were brought or could have been brought in the Adversary
Proceeding, and those claims arise from harm to the Tronox
debtors. At bottom, the Avoca Plaintiffs’ claims are that
certain Tronox debtors harmed them, and that New Kerr‐
McGee harmed the Tronox debtors. In that sense, “the
Avoca Plaintiffs’ indirect‐liability claims against New Kerr‐
McGee arise from two alleged harms—from harm to them
and from harm to the Tronox debtors.” Appellees’ Br. 32.
Further, Madoff is a hurdle that the Avoca Plaintiffs’
have failed to overcome. There, too, we confronted the
same “arise[] from harm done to the estate” language and
deemed it to mean derivative claims. 740 F.3d at 89
(alteration in original). The Avoca Plaintiffs’ attempts to
distinguish this case from Madoff are unpersuasive. First,
they argue that the Madoff injunction was broader than this
Injunction because the Madoff trustee had greater authority
than the Litigation Trust here. Even if that were true, the
Avoca Plaintiffs are bound by the Injunction’s language, to
which they did not object. Second, they argue the two
56
injunctions are different because the Injunction here bars
“Trust Derivative Claims,” whereas the Madoff injunction
excluded the word “Trust” and barred only “derivative
claims.” The addition of the word “Trust,” however, does
not render the two Injunctions materially different. Rather,
it is the definitions and not the titles which we compare,
and those do not materially differ. A219‐20.
Finally, the District Court noted—and New Kerr‐
McGee asserts here—that because the Injunction does not
bar any liability that such released parties “might have that
does not arise from or through a liability of a Debtor,” the
Injunction must bar claims that do arise from or through a
liability of a Debtor. Just because the Injunction does not
bar claims that do not arise from or through debtor liability
does not mean that a harm that does arise from or through a
liability of a debtor is necessarily barred; the claim still
must be trust‐derivative or ‐duplicative. That said, the
inclusion of that language supports the notion that the
Injunction was meant to bar all derivative or duplicative
claims, nothing more. In other words, by providing that the
Injunction does not bar any liability that such released
parties “might have that does not arise from or through a
liability of a Debtor,” the Injunction was making clear that
it covered derivative claims and did not cover non‐
derivative claims. Read against the backdrop of decades of
derivative‐claim jurisprudence, the language makes sense;
it specifically avoids the appearance of a Manville III
problem, where the Injunction could appear to go beyond
the jurisdiction of the bankruptcy court. See Manville III, 517
57
F.3d at 65 (holding that the bankruptcy court lacked
jurisdiction to enjoin claims against third‐party insurer).
The same was true in Madoff. Indeed, in issuing the
Injunction, the District Court noted that, in Madoff, this
Court “upheld a permanent injunction that, like the one at
issue here, was ‘limited to third‐party claims based on
derivative or duplicative liability or claims that could have
been brought by the Trustee against the . . . releasees.’”
Anadarko, 2014 WL 5825308, at *10 (quoting Madoff, 740 F.3d
at 89, 95). In making that pronouncement in Madoff, we held
that the bankruptcy court did not exceed its jurisdiction in
issuing the injunction. 740 F.3d at 89. The Injunction here
does the same: it goes to the limit of the bankruptcy court’s
jurisdiction to bar derivative or duplicative claims, but no
further.
For those reasons, the District Court acted well
within its discretion in interpreting the language of the
settlement when it found that the Avoca Plaintiffs’ claims
were barred by the Injunction. The District Court therefore
did not expand the scope of the Injunction, and thus did not
modify it.
The Avoca Plaintiffs had an opportunity to seek
recovery from the Tronox debtors in the bankruptcy
proceeding, to participate in settlement negotiations, and to
object to the Settlement Agreement and Injunction (and
refuse recovery therefrom). Indeed, as PepsiCo did in St.
Paul, the Avoca Plaintiffs, as unsecured creditors of the
Tronox debtors, filed claims in the bankruptcy court against
the debtors, were represented by the Litigation Trust, and
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had a voice through which to articulate their claims. See St.
Paul, 884 F.2d at 705. That voice sought assets from New
Kerr‐McGee in the Adversary Proceeding and settled those
claims for a significant sum, from which the Avoca
Plaintiffs recovered. The Avoca Plaintiffs cannot now get a
second bite at the apple.
C. The District Court’s Order to Dismiss the PA
State Action With Prejudice Was Not an
Abuse of Discretion
The Avoca Plaintiffs argue that, even if their already‐
pleaded claims are barred as derivative, the District Court
should have allowed them to amend their state‐court
complaints, and that by ordering them to dismiss with
prejudice the District Court exceeded its jurisdiction and
violated Madoff. Appellants’ Br. 43‐45. They are wrong.
The District court “plainly had jurisdiction to
interpret and enforce its own prior order[] [the Injunction]”
which it “explicitly retained jurisdiction to enforce.” See
Travelers Indem., 557 U.S. at 151. The court’s choice of how
to enforce the order is reviewed for abuse of discretion. See
EEOC v. Local 580, Int’l Ass’n of Bridge, Structural &
Ornamental Ironworkers, Joint Apprentice‐Journeyman Educ.
Fund, 925 F.2d 588, 595 (2d Cir. 1991). A court can take “any
reasonable action . . . to secure compliance,” and the “scope
of a district court’s equitable powers to remedy past wrongs
is broad.” Berger v. Heckler, 771 F.2d 1556, 1568 (2d Cir.
1985) (quoting Swann v. Charlotte‐Mecklenburg Bd. of Educ.,
402 U.S. 1, 15 (1971); Gates v. Collier, 616 F.2d 1268, 1271 (5th
Cir. 1980)).
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The District Court held that all claims already
pleaded were barred by the Injunction, and that, despite
ample opportunities to do so, the Avoca Plaintiffs had
failed to come up with a claim that would not be barred.
Madoff does not require a district court to allow countless
attempts to replead. At the point when we determined that
there was “conceivably some particularized conspiracy
claim,” Madoff, 740 F.3d at 94, the lower courts had
considered only whether specific claims in a filed complaint
were barred, see id. at 87‐88. The bankruptcy court and
district court had not yet had the opportunity to consider
what other claims, if any, were enjoined. That is why we
left the issue of whether alternative, unpleaded claims
might qualify as non‐derivative for the District Court to
consider in the first instance. Id. at 94. Madoff should not be
read beyond its facts and posture as an invitation for
plaintiffs to limitlessly re‐plead theories to circumvent the
reach of an injunction.
The Avoca Plaintiffs have had more than enough
time and opportunities—in state court, the District Court,
and in this Court—to articulate a claim that is not
derivative. They have failed. Their briefs here and below
have never mentioned any “particularized conspiracy
claim” or other type of direct claim against New Kerr‐
McGee. To date, they have only ever asserted that “they
suffered personal injuries as a direct result of the conduct of
[Old Kerr‐McGee].” Appellants’ Br. 41. As mentioned
above, counsel for the Avoca Plaintiffs argued for the first
time at oral argument that direct claims might exist based
on a purported letter to the EPA saying that New Kerr‐
60
McGee would be handling the remediation. But even then
counsel failed to articulate what the claim would be.
Lest the reader think the Avoca Plaintiffs were
deprived of sufficient opportunities to conceive a direct
claim, the Avoca Plaintiffs filed a post‐argument Federal
Rule of Appellate Procedure 28(j) letter to supplement their
challenge to the District Court’s determination that they
had no direct claims. In it, they articulate no direct claim,
but argue only that Judge Forrest’s determination that they
lacked any bona fide direct claims against New Kerr‐McGee
violated the historical admonition against advisory
opinions recently reiterated in In re Motors Liquidation Co.,
829 F.3d 135 (2d Cir. 2016). Unlike the bankruptcy court
decision in In re Motors, which resolved an issue not before
it and involved an entity not party to the litigation, id. at
150‐52, Judge Forrest’s opinion was not advisory. As
explained above, she had jurisdiction to interpret and apply
the Injunction, see Travelers Indem., 557 U.S. at 151, and to
take any reasonable action to secure compliance therewith,
see Berger, 771 F.2d at 1568.
The frailty of the Avoca Plaintiffs’ position is
confirmed by the last sentence of their merits Reply Brief:
The Avoca Plaintiffs contend, however,
that equity requires that the Court permit
them to return to the [Pennsylvania state
court] to obtain information in discovery
that New [Kerr‐McGee] should have
provided previously, and that the Court
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permit them to continue with the “slice” of
their claims that remain[s].
Appellants’ Reply Br. 23. Of course they have not yet had
discovery in state court, but that is not how claims are
pleaded—plaintiffs do not get to file a complaint hoping
that discovery will yield facts to give rise to claims that are
not barred. Concerned about continued gamesmanship, the
District Court acted within its discretion when it ordered
the Avoca Plaintiffs to dismiss with prejudice.32 But more
importantly, Judge Forrest did not modify the Injunction in
doing so. We therefore lack jurisdiction.
CONCLUSION
For the foregoing reasons, the stay is hereby lifted
and the appeal is DISMISSED for lack of jurisdiction.
The Avoca Plaintiffs finally argue that the issue of whether the
32
claims are extinguished by the Settlement Agreement—the
purported “alternative holding” that New Kerr‐McGee urges as
a fallback—is an issue that ought to be resolved by the state
court on any claims that survive the Injunction. But because no
claims survive the Injunction, and there are none that can be
properly pleaded by amendment, the issue of whether the claims
have been extinguished is of no moment. In any event, because
we dismiss for want of appellate jurisdiction, the propriety of the
extinguishment ruling may conceivably be litigated at a later
date on appeal from a contempt ruling or otherwise.
62
APP
PENDIX A
A
63
APPENDIX B
Relevant Portions of the Injunction and the Settlement
Agreement
THE INJUNCTION
(i) [A]ny Debtor(s), (ii) any creditor of any Debtor who filed
or could have filed a claim in the Chapter 11 Cases, (iii) any
other Person whose claim (A) in any way arises form or is
related to the Adversary Proceeding, (B) is a Trust
Derivative Claim, or (C) is duplicative of a Trust Derivative
Claim, and (iv) any Person acting or purporting to act as an
attorney for any of the preceding is hereby permanently
enjoined from asserting against any Anadarko Released Party (I)
any Trust Derivative Claims or (II) any claims that are
duplicative of Trust Derivative Claims, whether or not held
or controlled by the Litigation Trust, or whether or not the
Litigation Trust could have asserted such claims against
any Anadarko Released Party.
The injunction herein shall not apply to or bar [eight classes
of claims, including] . . . (v) any liability that an Anadarko
Released Party might have that does not arise from or
through a liability of a Debtor . . . .
Anadarko, 2014 WL 5825308, at *10 (emphasis added); see
also J.A. 223‐24.
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SETTLEMENT AGREEMENT
Adversary Proceeding: [T]he adversary proceeding
pending in the Bankruptcy Court . . ., including the claims
asserted in the Second Amended Adversary Complaint, all
claims and /or remedies that a Debtor transferred to the
Litigation Trust that were asserted or could have been
asserted in this adversary proceeding, and the claims
asserted in the Complaint‐in‐Intervention and that could
have been asserted in the Complaint‐in‐Intervention
relating to the subject matter of this adversary proceeding.
J.A. 88 ¶ 1.2.
Anadarko Released Party: Anadarko and each of its
Affiliates [including New Kerr‐McGee], and each of their
respective predecessors, successors, and assigns, all of their
past, present, and future officers, directors, employees,
managers, members, agents, attorneys and other
representatives. J.A. 89 ¶ 1.9.
Trust Derivative Claim: [A]ny and all claims and/or
remedies that are held and/or controlled by, and which
were or could have been asserted by, the Litigation Trust
against any Anadarko Released Party, seeking relief or
recovery arising from harm to any Debtor or any Debtor’s
estate, based on any legal theory including, without
limitation, such claims and/or remedies under federal or
state law, statutory or common law, in equity or otherwise,
arising out of or in any way related to (i) the Adversary
Proceeding; (ii) the Chapter 11 Cases; (iii) the Bankruptcy
65
Claims; (iv) the Covered Sites; and/or (v) any Anadarko
Released Party’s ownership, management, operation,
status, tenure, conduct, omission, action or inaction at any
time as a stockholder, affiliate, owner, partner, member,
manager, director, officer, employee, servant, agent,
representative, attorney, creditor, successor, assign or other
relationship with a Debtor and/or any of its predecessors, in
each case, including, without limitation, such claims and/or
remedies that are actions, causes of action, lawsuits, suits,
claims, counterclaims, cross‐claims, liabilities, interests,
judgments, obligations, rights, demands, debts, damages,
losses, grievances, promises, remedies, liens, attachments,
garnishments, prejudgment and post‐judgment interest,
costs and expenses (including attorneys’ fees and costs
incurred or to be incurred), including Unknown Claims to
the maximum extent allowed under the law, whether pled
or unpled, fixed or contingent, choate or inchoate, matured
or unmetered, foreseen or unforeseen, accrued or
unaccrued, past, present or future for fraudulent transfer,
fraudulent conveyance, preference, turnover, breach of
fiduciary duty, negligence, gross negligence,
mismanagement, civil conspiracy, aiding and abetting,
unjust enrichment, constructive trust, equitable
subordination, equitable disallowance, agency, joint
venture, alter ego, corporate veil piercing, . . . successor
liability, . . . and all other such claims and/or remedies. J.A.
97‐98 ¶ 1.82.
66