Facts

Edward Darden worked with asbestos-containing materials while he worked as a welder for several Bay Area shipyards throughout the 1960s and 1970s. After it was determined that Darden had been exposed to asbestos from Western Asbestos Company and Western MacArthur Company's insulation products, in 1983, Darden filed a personal injury complaint in Alameda County Superior. While Western MacArthur was named as a defendant, Western Asbestos was not. In 1967, MacArthur Company formed Western MacArthur Company to take over Western Asbestos and it was through an asset-purchase agreement. Western Asbestos immediately stopped its operations and dissolved in 1969. Thereafter, Western MacArthur continued operation of Western Asbestos' business without change until the mid-1970s.

In 1983 Darden filed his lawsuit against Western MacArthur which Darden settled in 1986 for $1300 which included a release of liability favoring Western MacArthur and dismissal of the lawsuit with prejudice as to Western MacArthur and its predecessors, alternative entities and/or successors. In 2002, Western MacArthur and Western Asbestos filed Chapter 11 bankruptcies and in those cases filed a joint plan of reorganization to address pending and future asbestos liabilities. A Bankruptcy Code Section 524(g) trust was consequently established to allocate the funds among claimants suffering from "different disease processes." The trust, among other things, created claims procedures and criteria for evaluation of the claims. The Bankruptcy Court confirmed the plan of reorganization in January 2004. In December 2016, Darden was diagnosed with asbestos-related mesothelioma. The following year, he filed a personal injury claim with the trust. The claim form required claimants to disclose any asbestos- related lawsuits. Darden did not disclose the 1983 suit or the 1986 release. He passed away in September 2017, and his widow, Marvie Darden pursued his claim. The trust initially offered to settle the claim in February 2018, which was rejected. Then sometime around July 2019, the trust located the release and in December 2019 rejected Darden's 2017 claim. In 2020, Darden's heirs filed a declaratory relief action requesting that the Bankruptcy Court direct the Trust to process and pay Darden's personal injury claim and the heirs wrongful death claims. The Trust filed counterclaims for declaratory relief seeking a determination that the personal injury claim was barred by the 1986 release and dismissal and claim preclusion. In addition, the Trust sought a determination that under the terms of the confirmed chapter 11 reorganization plan, wrongful death claims, filed separately from previously settled personal injury claims, were not compensable. The Bankruptcy Court's rulings on competing motions for summary judgment were in favor of Western Asbestos Settlement Trust and others on both claims.

PLAINTIFFS' CONTENTIONS: On appeal, plaintiffs contended that the Bankruptcy Court misconstrued the 1986 release, which was specifically limited to only Western MacArthur who was the settling defendant and not to Western Asbestos who was not named on the release. Moreover, plaintiffs contended that Western MacArthur was a successor-in-interest to Western Asbestos only for strict product liability purposes. Plaintiffs also contended that the wrongful death claims of Marvie Darden and her children were compensable under the terms of the confirmed chapter 11 reorganization plan.

DEFENDANTS' CONTENTIONS: Defendants contended that they provided uncontroverted, extrinsic evidence showing that the circumstances surrounding the 1986 release supported that a reasonable person in Darden's shoes would have understood that Western MacArthur wanted the broadest release possible for itself and its one and only predecessor, Western Asbestos. Additionally, defendants argued that the June 2017 personal injury claim was barred by claim preclusion and that under the terms of the confirmed plan, wrongful death claims, filed separately from previously settled personal injury claims, were not compensable.

Result

The court affirmed the Bankruptcy Court's holdings that the 1986 release included Western Asbestos, that the 1983 lawsuit precluded Darden's personal injury claim, and that the Trust, under the terms of the confirmed chapter 11 reorganization plan, could not compensate the heirs' for their wrongful death claims.