Business Law Case Study

Chapter 11 Bankruptcy (BK) 

In re Johns-Manville Corp.

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36 B.R. 727 (Bkrtcy. N.Y. 1984)


Johns-Manville Corp. was (is) a Fourtune 500 company, and was deemed a paradigm of success in corporate America by the financial community. However, the company produced a product that was poison—asbestos.  (Moreover, Manville knew it was poison, and had know it since the 1930s ( (Links to an external site.)

), and it hid the danger.  By 1982 approximately 16,000 lawsuits were pending against Manville, and it anticipated a further crushing economic burden by the filing of an even more staggering number of suits by those who had been exposed but who will not manifest the asbestos-related diseases until some time during this future period (20-30 years as the disease manifests itself–“the future asbestos claimants”). Approximately 6,000 asbestos health claims were estimated to have arisen in only the first 16 months since the filing date. The burden was compounded by the insurance industry’s general disavowal of liability to Manville on policies written for this very purpose.


JM petitioned for a pre-emptive bankrupcy under Chapter 11; attorneys representing some of the people sickened by JM’s product moved to dismiss the petition.


Can JM pre-emptively declare bankruptcy and discharge future cases? Why? or Why Not?             

Case Questions:

  1. What did Manville want to do here, and why? (Analyze the purpose of the BK declation and the reason behind it.) 
  2. How does this case demonstrate the fundamental purpose of Chapter 11 as opposed to Chapter 7 BK filings? 
  3. The historical background here is that Manville knew from at least 1930 that asbestos—used in many industrial applications—was a deadly carcinogen, and it worked diligently for decades to conceal and obfuscate the fact. What “good faith” argument was raised by the movants in this case?

Case Study Directions:

Submit 3-5 page analyzing the Case above. Give bacground information describing bankruptcy, types of bankruptcies, and the purpose of bankruptcy filings. 

Provide a scholarly argument on the issue: Can JM pre-emptively declare bankruptcy and discharge future cases? Why? or Why Not? You also need to provide analytical and critical responses to the three (3) Case Questions listed above.   

As a college level course, please ensure that your arguments original, substantive, analytical, interactive and critical. Make sure to use scholarly writing using APA format, and include appropriate references, proper grammar and punctuation in all of your interactions. 


Congress delegates authority to an administrative agency, it can leave guidelines

for agency action so vague that the agencies can do almost anything they want




According to the legal realist school of thought,

precedent was more important than moral arguments

law is politics, and is thus not neutral

wives, children, land, and animals are valued as economic resources

the social context of law is critically important

there is preeminence of man and his dominance of both nature and women

According to deontology, _____.

rules are emphasized instead of results

lying cannot be universalized as it depends on the preexistence of honesty

emphasis is on what is the fair way to distribute goods among a group of people

people give up certain rights to government in exchange of security

social contracts can be changed by the participants in a community

Which of the following statements about subject matter jurisdiction is true?

A state court will have subject matter jurisdiction over any case that is based on state
law and where the parties are from the same state.

The state court will have subject matter jurisdiction over any case where the amount in
controversy is at least $1 million.

The state court provides a neutral forum, with an appointed, life-tenured judge and a
wider pool of potential jurors.

In diversity cases, state law will be used as the basis for a determination of legal rights
and responsibilities.

If a defendant wants to be in state court and there is diversity, he has to make a motion
for removal to the federal court.

The court has created three classifications under the Fourteenth Amendment, and the
outcome of any equal protection case can usually be predicted by knowing how the
court is likely to classify the case. Which of the following is true?

A government action interfering with a fundamental right will receive strict scrutiny.

Under intermediate scrutiny, government actions are always upheld if there is a rational
basis for them.

Under strict scrutiny, government classifications are typically upheld.

The minimal scrutiny test will be applied to classifications involving racial and ethnic

Under the rational basis test, classifications based on race are almost never upheld.

In ​Marshall v. Barlow’s, Inc.​, which of the following led the court reach its final decision?

No search warrant is expressly required under the OSHA.

Mr. Barlow refused the inspector admission to the employee area of his business.

Warrantless searches are rarely unreasonable.

Employees are prohibited from reporting OSHA violations.

Something observable by the public without a warrant does not apply to the
Government inspector.

Which of the following holds true in the case of assault and/or battery?

A hockey player who hits his opponent with his stick can be prosecuted for the crime of

If a man kisses a sleeping woman against her will, he could be prosecuted for the crime
of battery, but not assault.

If a man throws a rock at his neighbor who dodges it, the man has committed an

A and B

B and C

The Fifth Amendment guarantees criminal defendants the right to have the assistance
of defense counsel.


Tort law is intended to punish wrong-doers to that the public is protected from
negligence and intentionally harmful acts.


There is a well-established defense to a plaintiff’s tort action where the plaintiff has
knowingly and voluntarily entered into a hazardous activity, which results in injury. This
is known as _____.

causation in fact

assumption of risk

negligence of plaintiff

negligence per se

res ipsa loquitur

Which of following would be considered an example of an enforceable contract?

Nancy agrees to buy her 15-year-old neighbor’s car for $10,000.

George offers to pay Libber $600 for killing his neighbor’s tree-too much shade!-and
Libber agrees to it.

Tim owes Peter money, but the statute of limitations has run out.

Tam owes Peters money, but before the statute of limitations ends, Tom is declared

Tom owes Peter money, but Pete has waited too long to collect it and the statute of
limitations has run out; however, notwithstanding,Tom promises to repay half the

Which of the following is an example of a valid contract according to common law?

Bob offers to sell either of his bikes, red or blue, to Sam the coming Monday for $1,000,
to which Sam agrees. On Saturday Bob goes to race dirt bikes on his red bike; due to a
minor collision, the red bike’s brakes stop working. On Monday, however, he offers the
blue bike to Sam, who was out of town for the weekend.

Bob offers to sell either of his bikes, red or blue, to Sam the coming Monday, to which
Sam agrees. On Monday, Bob sells his blue bike to Sam and asks for $1,500 in return.

Bob offers to sell either of his bikes, red or blue, to Sam the coming Monday, to which
Sam agrees to pay $1,000 or $1,200 for the blue bike. On Monday, Bob asks Sam to
pay $1,200 for his red bike.

Bob offers to sell either of his bikes, red or blue, for $1.000 to Sam the coming Monday,
to which Sam agrees. Bob also asks Sam, as part of the deal, not to buy a bike during
the weekend. Sam goes out of town for the weekend and buys a bike for $700. Bob
asks Sam to pay him $1,000 for his bike on Monday.

Bob offers to sell either of his bikes, red or blue, to Sam for $1,000 the first Monday of
the month, to which Sam agrees. On the second Monday of the month, Sam asks Bob
to sell both his bikes for $1,000.

A promise cannot be made to one person who is not expected to do anything in return.


A promise to pay a debt discharged by the statute of limitations is unenforceable
because the debtor has received no new consideration.


Jason, 17 and unaware that minors (<18 years) cannot engage in prize-fight boxing matches, agrees with the manager of the gym where he works out to engage in a prize fight and to split the prize with the manager. After the fight, the manager refuses to give Jason any money. Jason may sue the manager.


The usage of trade is a _____.

pattern of behavior between parties showing how they intend their relationship to work

systematic and uniform conduct in which parties engage after they enter into a contract

customary way of doing business that may be used to inform the parties’ contractual

promise to pay a debt which need not be in writing if the promisor was motivated by a
desire for advantage or benefit

contract term stating that the written agreement contains the parties’ full understanding
and intent

Usage of trade is a pattern of behavior between parties showing how they intend their
relationship to work.


At common law, any failure by the promisor to perform as contracted is grounds for the
promisee to declare a breach.


Alice Accountant agrees to do Carl Client’s federal income tax, state income tax, and
gift taxes for the year. Alice fails to do the gift taxes, but she does the others. Client . . .

owes Alice nothing as she did not fully perform.

owes Allice something for what she did.

only owes Alice if he is satisfied with what she did.

can declare Alice in “anticipatory breach” and refuse to pay.

may, at his discretion, pay Alice or not.

Which of the following equitable remedies is a judicial order to the promisor that he
undertake the performance to which he obligated himself in a contract?



Negative covenant


Specific performance

The Code displaces all common-law rules with its own rules.


A clause in a finance lease requiring the lessee to continue to make payments to the
lessor even though the equipment leased is unsuitable, defective, or destroyed is called
a ____________ clause.



hell or high water

flying pigs

pie in the sky

A _____ has risk of loss and title too passing to the buyer and the buyer bears the risk
and expense of returning the goods.

shipment contract

consignment sale

sale-or-return contract

sale-on-approval contract

destination contract

The term “_____” means that the price includes cost and freight to the named

C. & F.




No arrival, no sale

_____ is an action to recover possession of goods wrongfully held.






In a shipment contract, a seller has the duty of getting the goods to the destination at
the buyer’s disposal and to provide appropriate documents of delivery.


A banker’s acceptance is:

a debt instrument issued by a bank and that which usually pays interest.

a negotiable instrument drawn against deposited funds, to pay a specified amount of
money to a specific person upon demand.

the acceptance by a drawee of a check or draft.

a short-term credit investment created by a non-financial firm and guaranteed by a

a written order by one person to pay a sum of money to a third person.

The benefit to negotiability is that the holder of the instrument takes free of most of the
obligor’s possible defenses.


“For deposit” or “for collections” are effective trust indorsements.


In the case of Carter & Grimsley v. Omni Trading, Inc., Carter argues that its motion for
summary judgment should have been granted because:

as a holder in due course, it has the right to recover on the checks from the drawer,

it was a “promise of performance,” not yet performed.

this retainer was a contract for future legal services.

when the attorney-client relationship is created by payment of a fee or retainer, the
contract is executory.

contract for future legal services should be treated the same as other executory


If a person to whom an instrument was negotiated became nothing more than a holder,
the law of commercial paper would not be very significant.


The _____ is the total of all money paid for credit.

prime rate

floor limit

finance charge

balloon payment

floating rate

Which of the following acts ensured that every individual who has need for consumer
credit is given full disclosure of the finance charge and the annual percentage rate of

Truth in Lending Act

Fair Credit and Charge Card Disclosure Act

Credit Card Accountability, Responsibility, and Disclosure Act

Fair Credit Reporting Act

Consumer Leasing Act

A lien is security obtained through operation of law.


The deed of trust requires only two parties: the borrower and the lender.


Debtors should be careful: they may by a mere promise reaffirm a debt discharged in


Bankruptcy law, including allowable exemptions, is uniform throughout the U.S.


A steamroller is an example of intangible property.


In general, the United States grants a patent right to the first person to file for a patent
on a product or process rather than to the first person to invent that product or process.


List the exceptions to the Freedom of Information Act (FOIA).

What factors led to noted American ethicist Michael Josephson’s core value analysis?
What are the core values identified by Josephson?

Explain in brief the various dimensions of tort.

In what ways can tortuous interference be established?

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