United States District Court, S.D. New York
March 19, 2004.
OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS OF G-I HOLDING, INC., Plaintiff, -against- SAMUEL J. HEYMAN, Defendant
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
Defendant Samuel Heyman ("Heyman") has moved pursuant to
28 U.S.C. § 1412, or in the alternative, pursuant to 28 U.S.C. § 1404(a),
to transfer this action to the District of New Jersey. For the reasons
set forth below, the motion is denied.
Plaintiff, the Official Committee of Asbestos Claimants of G-I
Holdings, Inc. (the "Committee"), is a creditors committee appointed by
the United States Trustee pursuant to 11 U.S.C. § 1102 (a). The
Committee is made up of persons who assert claims against G-I, as
successor to GAF Corporation ("GAF"), by reason of personal injuries or
wrongful death caused by asbestos-containing products.
Heyman is the former chairman and chief executive officer of GAF and is
a citizen of the State of New York.
Prior Proceedings and Background
The facts discussed herein are discussed in greater detail in
Official Committee of Asbestos Claimants of G-I Holdings, Inc. v.
Heyman, 01 Civ. 8539, 2003 WL 22790916 (S.D.N.Y. Nov. 25, 2003)
("Heyman II") and Official Committee of Asbestos Claimants
G-I Holdings, Inc. v. Heyman, 277 B.R. 20 (S.D.N.Y. 2002)
("Heyman I"), familiarity with which is presumed.
This action, brought pursuant to 11 U.S.C. § 544(b) and 550(a) of
the Bankruptcy Code, arises out of the Chapter 11 reorganization
proceeding of G-I Holdings, Inc. ("G-I") currently pending in the
District of New Jersey, seeks to set aside an allegedly fraudulent
transfer and to recover for breaches of fiduciary duty. G-I filed for
bankruptcy on January 5, 2001, as a result of a flood of personal injury
and wrongful death claims.
As of December 31, 1996, GAF was the top-tier holding company
in a corporate group that contained two principal operating businesses:
(1) ISP, a manufacturer of specialty chemicals and mineral products; and
(2) Building Materials Corporation of America ("BMCA"), a manufacturer of
roofing and building products. GAF was a privately held company at the
time. It later merged with G-I.
The transactions challenged in this action took place in January 1997,
when GAF owned 100% of a company named ISP Holding, Inc. ("ISPH"), which
in turn owned approximately 83.5% of the ISP stock. The remaining ISP
stock was publicly held.
With effect as of January 1, 1997, GAF distributed to GAF'S
shareholders, for no consideration, 100% of the capital stock of ISPH
(the transaction will be referred to as the "ISP Spin-off").
Heyman received approximately 96% of the shares, and the
minority shareholders of GAF received the remaining 4%. At ISP's closing
price on December 31, 1996, the stock that GAF disposed of in the
transfer was worth about $1 billion, $988,391,250 of which Heyman
received directly or indirectly.
Before G-I filed for bankruptcy, individual creditors filed three
different fraudulent transfer suits against Heyman in New York based on
the spin-off of ISP. Two of these, Nettles v. Heyman,
No. 00 Civ. 0035, filed January 3, 2000 and Stewart v. Heyman,
filed on December 26, 2000, were filed by asbestos claimants in the
Southern District of New York.*fn1 The third predecessor action, was
filed in the Supreme Court for the County of New York on September 18,
2000 by the Center for Claims Resolution, Inc. ("CCR"), a consortium of
asbestos defendants of which GAF was a former member. CCR v.
Heyman, Index No. 604002/2000 (Sup.Ct.N.Y. County).
Heyman moved to dismiss the Committee's complaint on December 13, 2001.
This Court denied the motion on April 8, 2002. See Heyman I.
The Legal Representative of Present and Future Holders of
Asbestos-Related Demands (the "Legal Representative")
was granted leave to intervene pursuant to Fed.R.Civ.P. 24 on
November 25, 2003. See Heyman II.
The Committee is simultaneously litigating another proceeding pending
before the Honorable William G. Bassler in the District of New Jersey
that also grows out of the G-I bankruptcy. In the action, styled G-I
Holdings, Inc. v. Bennett, Civ. No. 02-2626 (WGB) (D. N.J.) (filed
Feb. 7, 2001) (the "BMCA Action"), G-I seeks a declaratory judgment that
BMCA, its indirect subsidiary and sole operating company, has no
liability for asbestos claims under any theory of successor liability or
alter ego. Joined as defendants were seven individuals who had brought
suit against BMCA in state court on theories of successor liability and
The Committee moved on September 28, 2001 to intervene as a defendant
and a counterclaimant. In October 2002, the Bank of New York intervened
as a defendant to the Committee's counterclaims. The Bank of New York is
participating in the BMCA Action in a dual capacity, as a member and
agent of a bank consortium that made $210 million in revolving credit
facilities available to BMCA, and as indenture trustee for holders of
approximately $560 million of notes publicly issued by BMCA. Of the
several parties to the BMCA Action, only the Committee is presently a
party in the instant case.
The Committee's counterclaims in the BMCA Action arise from a series of
restructurings and financial transactions carried out between 1983, when
Heyman acquired control of GAF as a conglomerate operating a chemicals
business and a roofing business, and 2001, when G-I filed for bankruptcy.
The focus of the litigation, according to the Committee, is a 1994
transaction in which GAF's roofing subsidiary, which had assumed
responsibility for 100% of GAF's asbestos liability, created BMCA as its
own subsidiary and transferred to it substantially all of the assets of
the roofing business in exchange for BMCA's promise to pay a percentage
of the asbestos liabilities. This transaction purported to structurally
subordinate the asbestos claimants in favor of the financial creditors of
BMCA. The BMCA Action also concerns a transaction executed in December
2000, two weeks before G-I filed for bankruptcy, in which BMCA was
refinanced on a basis that resulted in BMCA's banks and noteholders
receiving first and second liens, respectively, on all of its assets,
which until then had been free of encumbrances.
According to the Committee, its goal in the BMCA Action is to establish
that BMCA bore liability for the asbestos claims so that the refinancing
may be challenged on behalf of the asbestos victims.
On May 13, 2003, Judge Bassler withdrew the reference of the BMCA
Action from the bankruptcy court. See G-I Holdings, Inc.
v. Bennett, 295 B.R. 211 (D.N.J. 2003). A scheduling
order was issued in July 2003 under which discovery was slated to close*
on December 15, 2003. Written discovery has been ongoing since April
In the instant case, Heyman filed his motion to transfer on September
19, 2003. After submission of briefs, the motion was deemed fully
submitted on October 15, 2003.
A fraudulent conveyance action brought pursuant to 11 U.S.C. § 544
(b) is a core proceeding under 28 U.S.C. § 157 (b)(2)(H) ("Core
proceedings include . . . proceedings to determine, avoid, or recover
fraudulent conveyances."). "Where a party seeks to transfer venue for a
core proceeding, the applicable statute is 28 U.S.C. § 1412." In
re Iridium Operating LLC, 285 B.R. 822, 835 (S.D.N.Y. 2002). Under
this section, "[a] district court may transfer a case or proceeding under
title 11 to a district court for another district, in the interest of
justice or for the convenience of the parties." 28 U.S.C. § 1412.
Such "motions are within the discretionary authority of the district
courts, according to `an individualized, case-by-case
consideration of convenience and fairness.'" In re Manville Forest
Prods. Corp., 896 F.2d 1384, 1391 (2d Cir. 1990) (quoting
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)). However,
"the party moving
for a change of venue bears the burden of proof and that burden
must be carried by a preponderance of evidence." Id. at 1390.'
In determining whether to grant a motion for transfer under § 1412,
courts consider substantially the same factors as for a motion to
transfer under 28 U.S.C. § 1404(a). See In re McCrory
Corp., 160 B.R. 502, 507 n.2 (S.D.N.Y. 1993) ("The standards for
§ 1412 are essentially the same as those for § 1404(a).");
see also Alliance Communications Group, Inc. v. Northern Telecom.
Inc., 65 B.R. 581, 585 (S.D.N.Y. 1986) (same). Those factors
(1) the plaintiff's choice of forum; (2) the locus
of the operative facts; (3) the convenience and
relative means of the parties; (4) the convenience
of witnesses; (5) the availability of process to
compel the attendance of witnesses; (6) the
location of physical evidence; (7) the relative
familiarity of court with the applicable law; and
(8) the interests of justice, including the
interests of trial efficiency.
Goggins v. Alliance Capital Management, L.P.,
279 F. Supp.2d 228, 232 (S.D.N.Y. 2003) (quoting Billing v. Commerce One,
Inc., 186 F. Supp.2d 375, 377 (S.D.N.Y. 2002)). Further, "the
district in which the underlying bankruptcy case is pending is presumed
to be the appropriate district for hearing and determination of a
proceeding in bankruptcy." In re Manville, 896 F.2d at 1391.
However, in this case, that presumption is at odds with the "strong
presumption in favor of the plaintiff's choice of forum."
VictoriaTea.com Inc. v. Cott Beverages, Canada, 239 F. Supp.2d 377,
381 (S.D.N.Y. 2003) (citing Piper Aircraft Co. v. Reyno,
454 U.S. 235
102 S.Ct. 252, 70 L.Ed.2d 419 (1981); DiRienzo v. Philip Servs.
Corp., 294 F.3d 21
, 28 (2d Cir. 2002)); see also Luciano v.
Maggio, 139 B.R. 572, 577 (E.D.N.Y. 1992) (noting "presumption in
favor of plaintiff's choice of forum" in the context of a motion pursuant
to § 1412). The two presumptions effectively cancel each other out,
and the motion will accordingly be decided on the basis of the remaining
The Committee argues that the locus of operative facts and the location
of documents favor retaining the action in New York. This court has
previously noted that "Heyman is a New York resident and some of the
injury took place in New York." Heyman I, 277 B.R. at 35 n.10.
The Committee maintains that the transaction challenged in this case was
planned and carried out by executives and valuation experts who maintain
offices in New York. Heyman has not contested this characterization.
Further, because the financial institutions that participated in the ISP
spin-off, such as Bear Stearns and Houlihan Lokey, are located in
New York, much of the relevant documentation will be found there.
G-I counters that there are also substantial connections to New Jersey.
GAF was, and G-I is, headquartered in New Jersey, and hence that many of
the documents that have been and will be produced to the Committee will
originate from New Jersey.
Because of the close proximity of New York and New Jersey, and in
particular of Manhattan and Newark, the location of documents favors
neither party. The same can be said with respect to factors relating to
the convenience of parties and witnesses, as well as the availability of
service of process.*fn2 However, the fact that "[t]he primary operative
facts underlying this action" occurred in Manhattan is significant,
see Pinto v. Doskocil, 91 Civ. 1518, 1991 WL 207523, at *8
(S.D.N.Y. Oct. 3, 1991), and this factor, accordingly, weighs against
The factor relating to the forum's familiarity with the applicable law
favors neither party, as "[i]t is assumed that the federal courts in both
this district and the District of [New Jersey] are equally familiar with
the legal principles necessary to resolve this case." Commerce
One, 186 F. Supp.2d at 379.
"Beyond these particular concerns, a district court has discretion to
transfer an action to where the trial would best be expedient and just."
Goggins, 279 F. Supp.2d at 234 (quoting Nematron,
30 F. Supp.2d at 407). The critical factor in this case
is the alleged relatedness of this action to the BMCA Action.
Heyman argues that because the BMCA Action will also address issues
concerning the genesis of, reasons for and circumstances surrounding the
ISP spin-off, that the two actions should be in the same district
so that discovery and other proceedings may be coordinated.
The Second Circuit has held that "[t]here is a strong policy favoring
the litigation of related claims in the same tribunal in order that
pretrial discovery can be conducted more efficiently, duplicitous
litigation can be avoided, thereby saving time and expense for both
parties and witnesses, and inconsistent results can be avoided." Id.
(quoting Wyndham Assocs. v. Bintliff, 398 F.2d 614, 619 (2d Cir.),
cert. denied, 393 U.S. 977 (1968)); see also APA Excelsior
III L.P. v. Premiere Technologies. Inc., 49 F. Supp.2d 664, 668
(S.D.N.Y. 1999) ("It is well established that the existence of a related
action pending in the transferee court weighs heavily towards transfer.")
The Committee argues that this action and the BMCA Action are not
related claims for purposes of the motion to transfer. In addition, the
Committee points to G-I Holdings. Inc. v. Baron & Budd, No.
01 Civ. 0216, currently pending before this Court, as a case with even
greater relation to this litigation than the BMCA Action. Because it is
found that the BMCA Action is insufficiently
related to this action to warrant transfer, the comparative
relatedness of the Baron & Budd litigation will not be
In considering whether two actions are sufficiently similar to justify
transfer, "[t]he issue is not whether identical causes of action have
been pled in the two actions but whether they hinge upon the same factual
nuclei." APA Excelsior, 49 F. Supp.2d at 669 (quoting Dahl
v. HEM Pharm. Corp., 867 F. Supp. 194, 197 (S.D.N.Y. 1994))
(internal quotations omitted). In APA Excelsior. the court found the two
actions similar enough to warrant transfer because the plaintiffs had
"allege[d] an important subset of the claims asserted in the [action in
the transferee court], with substantial overlap, and with minor
additions . . ." Id. at 670.
While the ISP Spin-off plays a role in both this action and in
the BMCA Action, and while at least four witnesses who were scheduled to
be deposed in the BMCA Action will also be deposed in this action, there
is not a "substantial overlap" between the claims asserted in the two
actions, nor do the cases "hinge upon the same factual nuclei." The
complaint filed by G-I in the BMCA Action makes no reference to the ISP
Spin-off, or any other financial transaction, and is strictly
concerned with the issue of successor and alter ego liability.
See Swett Declaration, Exh. 12. The counterclaims made by the
Committee also make no mention of the ISP Spin-off, and are
instead concerned with the 1994 transaction in which BMCA was created,
and the 2000 transaction in which G-I
refinanced BMCA. See id., Exh. 13. Those
transactions are the factual nuclei of the BMCA Action. Inevitably, the
ISP Spin-off will be considered by the parties and by the court
in the course of the litigation. According to the Committee, it will seek
in the BMCA Action "to discover whether ISP devoted resources before or
after the Spin-off to propping up this . . . structure and to
evaluate the impact of the ISP Spin-Off on the ability of its
former affiliates to indemnify BMCA." Pl's Mem. at 21. But that
consideration is insufficient to render the BMCA Action a related action
for purposes of justifying transfer.
Heyman has also argued that the failure to transfer this case would
create "an unfair and untenable situation for Mr. Heyman, who is entitled
to have his counsel fully participate in [the BMCA] litigation that
directly affects his rights." Def.'s Mem. at 3. However, as the Committee
points out, transfer of this case to the District of New Jersey would not
necessarily result in consolidation nor assure that Heyman could
intervene in the litigation. It is, however, within Heyman's rights to
move to intervene in the BMCA Action, a step that would not require
transfer of this action.
Heyman also seeks the coordination of discovery in the two cases, if
discovery remains open in the BMCA Action. Prior to the filing of this
motion, the parties had apparently already discussed the possibility of
coordinating depositions in the two
actions, in order to avoid overlap. Much of the efficiency to be
gained from a coordination of discovery tasks can be effected by the
conduct of the parties, without the need for a transfer.
Each relevant factor, therefore, weighs against transfer. Most
importantly, the two actions are not sufficiently related to realize
significant gains in judicial efficiency. Although rulings on some
similar discovery issues is to be expected in both actions, the risk of
inconsistent rulings is not significant.
For the reasons set forth above, Heyman's motion to transfer this
action to the District of New Jersey pursuant to 28 U.S.C. § 1412 or
28 U.S.C. § 1404 (a) is denied.
It is so ordered.