Asbestos Estimation In Today s Bankruptcies: The Central Importance Of The New Trusts

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1 MEALEY S TM LITIGATION REPORT Asbestos Asbestos Estimation In Today s Bankruptcies: The Central Importance Of The New Trusts by Philip Bentley and David Blabey Jr. Kramer Levin Naftalis & Frankel LLP New York, NY A commentary article reprinted from the January 18, 2012 issue of Mealey s Litigation Report: Asbestos

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3 MEALEY S LITIGATION REPORT: Asbestos Vol. 26, #24 January 18, 2012 Commentary Asbestos Estimation In Today s Bankruptcies: The Central Importance Of The New Trusts By Philip Bentley and David Blabey Jr. [Editor s Note: Philip Bentley is a partner and David Blabey is an associate at the law firm of Kramer Levin Naftalis & Frankel LLP. The authors represented the Official Committee of Unsecured Creditors of Motors Liquidation Company (f/k/a General Motors Corp.) in the contested estimation of General Motors aggregate asbestos liabilities as part of its chapter 11 bankruptcy. The views expressed in this article are those of the authors andnotnecessarilythoseofthemembersofthegeneral Motors Creditors Committee. Copyright # 2012 by Philip Bentley and David Blabey Jr. Responses are welcome.] As many commentators have observed, a sea change has occurred in asbestos litigation over the past decade. During the first four years of the 21st century most of the principal asbestos defendants filed for bankruptcy protection. In the wake of those bankruptcy filings, the plaintiffs bar turned its attention to companies that previously had played only a peripheral role in asbestos litigation companies whose products caused far less exposure to asbestos than did those of the newly bankrupt companies. For the first time, asbestos suits began to target these once-peripheral companies. As a result, both the number and the value of claims filed against these remaining defendants sky-rocketed. A crucial question, already much debated, is whether or not this sharp increase in the number and value of claims against this new generation of asbestos targets is likely to be permanent. Is this the new normal for these defendants, or is it merely a temporary phenomenon a short-term spike which is likely to be followed by the return of conditions similar to those that prevailed in the 1990s? Strong arguments have been advanced in support of the latter view. As Charles Bates and Charles Mullin of the Bates White firm have observed, many of the asbestos defendants that filed for bankruptcy in the early years of this century have recently emerged from bankruptcy as healthy, robust entities that, in addition to having paid their unsecured creditors 100 cents on the dollar, have funded large trusts to pay their asbestos claimants. Unlike prior asbestos trusts, many of these new trusts have sufficient assets to pay their asbestos claimants as much as, or even more than, their predecessor companies had paid each claimant. In key respects, the creation of these trusts represents the return to the tort system of the companies whose temporary absence had caused the remaining defendants liabilities to spike. There is good reason to believe that this restoration of the status quo ante of the conditions that predated the spike will cause the solvent defendants asbestos liabilities to return much, if not all, of the way back to their pre-2000 levels. 1 Debates over this issue have only recently begun in the bankruptcy courts, and the courts eventual resolution of the issue will have a central impact on the estimation of debtors aggregate liabilities in current and future asbestos-driven bankruptcies. To date, the debate has played out in the context of a series of discovery battles first in the General Motors Corporation bankruptcy in the Southern District of New York, and then in the Garlock Sealing Technologies and 1

4 Vol. 26, #24 January 18, 2012 MEALEY S LITIGATION REPORT: Asbestos Specialty Products Holding Corporation cases in North Carolina and Delaware, respectively. 2 In each of these three bankruptcies, the debtor or the creditors committee sought discovery from the new asbestos trusts concerning claims filed against, and payments made by, those trusts. Asbestos claimants and the trusts objected to the discovery on multiple grounds, including relevance, burden and confidentiality. In each case, the opposing parties extensively briefed and argued each of these issues. In General Motors, the bankruptcy court ruled that the requested trust discovery was relevant and should be allowed, and this ruling ultimately led to an agreed estimation outcome favorable to the company s creditors. In the Garlock Sealing and Specialty Products bankruptcies, which are still ongoing, the parties seeking trust discovery have had less success, to date, in convincing the courts of the soundness of their estimation methodologies. This article discusses the arguments advanced by the opposing parties in these three bankruptcy cases and the courts rulings to date, with particular emphasis on the competing arguments over the relevance of the new trusts to the asbestos estimation process. Part I provides a short background on the wave of bankruptcy filings of the major traditional asbestos defendants in the early 2000s, the resulting increase in settlement values for solvent defendants during the pendency of these bankruptcies, and the recent emergence of the new asbestos trusts. Part II discusses the competing arguments regarding the impact of the asbestos trusts on claim values and the relevance of trust discovery. The article concludes, in Part III, with a discussion of pertinent proceedings in the General Motors, Garlock Sealing and Specialty Products bankruptcies. I. The New Asbestos Trusts In the first four years of the 21st century, at least 36 companies filed for bankruptcy to address their asbestos liabilities. These companies mostly construction companies and their suppliers included such major asbestos defendants as Armstrong World Industries, Federal-Mogul Corporation, Kaiser Aluminum, Owens Corning, U.S. Gypsum Company, and W.R. Grace. 3 This bankruptcy wave had a profound effect on the asbestos defendants that remained in the tort system, which had, to this point, been only peripheral defendants. As described in a 2005 RAND report on asbestos litigation, the stay of litigation against the newly-bankrupt defendants drove plaintiff attorneys to press peripheral non-bankrupt defendants to shoulder a larger share of the value of asbestos claims and to widen their search for other corporations that might be held liable for the costs of asbestos exposure and disease. 4 The experience of General Motors provides a dramatic example of this phenomenon. General Motors, whose asbestos liabilities related primarily to the use of small amounts of encapsulated asbestos in brake linings, had historically been a peripheral defendant in asbestos litigation. That changed with the bankruptcy wave of the early 2000s. As traditional asbestos defendants filed for bankruptcy, the average number of mesothelioma claims filed against General Motors increased from roughly 40 per year between 1990 and 1999 to over 850 per year between 2002 and Similarly, General Motors asbestos-related indemnity expenditures increased from an average of $2 million per year between 1990 and 1999 to over $30 million per year between 2002 and Garlock Sealing and Specialty Products likewise saw dramatic increases in their asbestos-related expenditures. Between 1999 and 2006, Garlock Sealing s payments to resolve mesothelioma claims increased on a per case basis from $9,000 to nearly $80,000 and on an aggregate annual basis from approximately $6 million to approximately $73 million. 7 The Specialty Products companies saw their asbestos expenditures increase from a total of $1.6 million for the entire period from 1980 to 1999 to $8.2 million in fiscal 2000, with subsequent dramatic increases thereafter, up to a high of $82.5 million in fiscal The tort world landscape that had changed so dramatically in the early 2000s to the detriment of solvent defendants began to change once again in the latter part of the 2000s, this time shifting in favor of remaining solvent asbestos defendants. The major asbestos defendants that had filed for bankruptcy in the early 2000s began to confirm bankruptcy plans that provided for the establishment of trusts to pay asbestos claims pursuant to section 524(g) of the Bankruptcy Code. 9 Unlikepriorasbestostrusts, many of these new trusts have sufficient assets to pay their asbestos claimants as much as, or even more than, their predecessor companies had paid each claimant. 10 By one estimate, the number and 2

5 MEALEY S LITIGATION REPORT: Asbestos Vol. 26, #24 January 18, 2012 funding of asbestos personal injury trusts has increased from 16 trusts with a combined total of $4.2 billion in assets in 2002 to 60 trusts with a combined total of over $36.8 billion in assets in The funding of the trusts is likely to increase, possibly to as much as $60 billion, as additional section 524(g) trusts are established or go effective. 12 II. The Relevance Of The New Trusts To Asbestos Estimation The central focus of an asbestos estimation in bankruptcy, courts have held, is to determine what the bankrupt company s aggregate asbestos liabilities both present and future would have been had the company remained in the tort system. Among other things, this determination must take into account the changes in the asbestos litigation landscape which have already occurred and which will likely continue. 13 While a company s past asbestos-related settlements are plainly relevant to the estimation of its current and future liabilities, a proper analysis of those liabilities must also consider the extent to which the factors contributing to past settlement values are likely to be replicated in the future. 14 For purposes of estimating the asbestos liabilities of a current debtor such as Specialty Products, a key question is whether, had the debtor remained in the tort system rather than filing for bankruptcy, its asbestos expenditures would have decreased over time as a result of the recent creation of the new section 524(g) trusts. The argument why the answer to the foregoing question should be yes is straightforward. Asbestos claimants usually file their claims against long lists of defendants. In a typical asbestos personal injury suit, a small number of named defendants become the principal litigation targets, and the other defendants remain peripheral and are dismissed or are resolved for modest sums. When one or more of the principal defendants files for bankruptcy, the burden of payment shifts to the remaining defendants, whose liability shares increase accordingly. 15 But when those bankrupt defendants return to the tort system, in the form of well-funded trusts, it stands to reason that the liability spike caused by the defendants bankruptcies should end. The elimination of the principal cause of the liability spike should result in a restoration of the status quo ante. The asbestos plaintiffs bar has advanced three main arguments in opposition to this view. While each of these arguments has at least some superficial appeal, a closer analysis reveals them to be generally unconvincing. The first argument asbestos claimants have made is that the recent emergence of the trusts has no relevance to the estimation of a debtor s asbestos liabilities because a company s assessment of the likelihood that other parties were responsible for a given claimant s injury is already reflected in, or baked into, the company s settlement history. 16 Under this theory, the bankruptcy of an asbestos defendant could not have led to increased recoveries against its solvent co-defendants because the solvent co-defendants all along retained the ability to try the empty chair that is, to argue that a bankrupt party was actually responsible for the claimant s injury as well as to seek reduction or setoff of any verdicts to reflect payments made or to be made by bankrupt parties, or to file claims for contribution against bankrupt parties. If a solvent defendant settled for a given number, it did so knowing full well what other sources of recovery might be available to an individual claimant, or at least having the opportunity to develop alternative exposure evidence from the claimant or co-defendants. 17 This theory, however, does nothing to explain the spike in the value of settlements against peripheral asbestos defendants in the early 2000s a spike that coincided with the wave of bankruptcies of large traditional asbestos defendants. It strains credibility to suggest that this spike in settlement values had nothing to do with the bankruptcy wave. And, indeed, one leading claimant-side estimation expert has acknowledged that the wave of asbestos bankruptcies in the early 2000s contributed to an increase in settlement values against remaining solvent defendants. 18 Once it is recognized that the post-2000 spike in the asbestos liabilities of the remaining solvent defendants was due in large part to the turn-of-the-century bankruptcy wave, it is not hard to see that the return of the bankrupt defendants to the tort system in the form of deep-pocketed trusts is likely to bring an end to that spike in claim values. Juries that, a few years ago, allocated large liability shares to once-peripheral defendants because they appeared to be the only 3

6 Vol. 26, #24 January 18, 2012 MEALEY S LITIGATION REPORT: Asbestos potential sources of redress no longer have the same reason to do so provided the defendants are able to present the jury with evidence of the trusts ample ability to pay. Equally important, many defendants are now able to obtain discovery of claims filed by plaintiffs against the new trusts and to present to the jury the exposure allegations contained in those claims, namely, allegations that the plaintiff was exposed to asbestos contained in the trust predecessor s product. To a large degree, this puts the onceperipheral defendants back in the position they enjoyed in the 1990s when they could point to the traditional defendants as the principal sources of asbestos exposure and argue that they should pay the lion s share of the plaintiff s damages. A second argument that asbestos claimants have made is that it is senseless to speak of an aggregate cap on the value of an asbestos claim, and, by extension, to seek to define a given defendant s share of total liability. It is only in the rare instance that a case is tried to a verdict that total aggregate liability on a claim is set. When defendants settle, by contrast, there is nothing to limit the amount that each may end up paying. Trust payments are irrelevant, on this view, because they do not result in a dollar for dollar offset against some absolute total recovery to which a claimant is entitled. 19 Asbestos claimants are constrained to make this argument because, as noted above, they cannot escape the fact that settlement values against peripheral defendants skyrocketed upon the bankruptcies of traditional defendants in the early 2000s. So instead of acknowledging that the return of the traditional defendants to the tort system (in the form of the trusts) will restore the status quo ante, they instead argue, in essence, that asbestos claimants will have their cake and eat it too that is, that claimants will continue to get the new, high-value settlements from the peripheral defendants and get the payments from the traditional defendants (i.e., the trusts) whose temporary absence was the cause of the high value payments from the peripheral defendants in the first place. Whether asbestos claimants are right or not will ultimately be determined by real world results in the tort world. It would seem unlikely, however, that remaining solvent defendants would accept this bargain, given the increased ability they now have to argue that claimants injuries were caused by exposure to the products of companies whose liabilities are now backed by well-funded trusts. This highlights a reality that is of critical importance for asbestos defendants: In the long run, the trusts are only relevant to the extent defendants are able to make them so. If solvent defendants ignore the presence of the trusts or are unable to capitalize on the availability of new sources of claimant recoveries, then asbestos claimants who argue that the trusts are irrelevant to estimation will have been proven right. 20 And, indeed, this is the essence of the third main argument that asbestos claimants have made in opposition to trust-based estimation theories. Claimants point out that many of the large asbestos trusts have now been paying claims for several years. Thus, claimants argue, the settlement histories of companies that are now filing for bankruptcy some five years after the trusts first began coming on line must already incorporate the trust effect, if, indeed, any such effect exists. It may well be correct that, as time goes by, bankruptcy courts will increasingly not need to speculate as to the likely effect of the trusts on settlement values, because the effect will be reflected in real world outcomes. The asbestos claimants overstate their case, however. As an initial matter, while several trusts were established in 2006, it takes many of the trusts several years to begin paying a meaningful number of claims. The return of the trusts to the tort system, moreover, did not become a high-profile topic of discussion until perhaps 2010 with the result that many solvent defendants may have yet to realize the potential salutary effects of the trusts. Finally, state court rules concerning discovery and admissibility are ever evolving. It has become easier in some jurisdictions for solvent co-defendants to obtain discovery of trust information or to use that information at trial 21 with the result that such defendants may now and in the future be better able to avail themselves of information concerning alternative sources of claimant recoveries. III. General Motors, Garlock Sealing, And Specialty Products Parties have sought trust discovery to varying extents and with varying degrees of success in the recent bankruptcy proceedings of General Motors, Garlock 4

7 MEALEY S LITIGATION REPORT: Asbestos Vol. 26, #24 January 18, 2012 Sealing,and Specialty Products. In General Motors,Judge Gerber (of the Bankruptcy Court for the Southern District of New York) was generally receptive to the estimation theories advanced by the creditors committee. In Garlock Sealing and Specialty Products, Judge Hodge (Bankruptcy Court for the Western District of North Carolina) and Judge Fitzgerald (Bankruptcy Court for the District of Delaware) have not been as welcoming. A. General Motors (Bankr. S.D.N.Y.) General Motors stands as the best example, to date, of the successful pursuit of trust discovery. In General Motors, the creditors committee filed a motion seeking authority to issue subpoenas to seven section 524(g) trusts seeking information concerning claims submitted by General Motors mesothelioma claimants to those trusts. 22 The trusts and the asbestos claimants committee filed lengthy objections to the discovery. 23 The asbestos committee objected primarily on grounds of relevance. It argued, among other things, that individual claimant data was not relevant to a macroeconomic estimation, that General Motors assessment of its co-defendants respective shares of responsibility was already baked into its historical settlement values, that the existence of co-defendants has no impact on General Motors liability under applicable tort law, and that the trust data would in any event be incomplete as trusts generally do not request or receive the totality of a claimants exposure information. 24 The trusts objected primarily on grounds of confidentiality, Rule 408 and undue burden. 25 The bankruptcy court rejected the asbestos claimants committee s relevance arguments out of hand, noting that the matters of inquiry were much more than sufficient to satisfy relevance requirements. 26 The court also rejected the notion that the information sought from the trusts was protected by confidentiality or by Rule Finally, focusing on the fact that the information sought was computerized and easily extractable, the court rejected the trusts undue burden arguments. 28 Having disposed of these objections, the court ordered production by the trusts of the claim and payment information that the creditors committee had sought. 29 Ultimately, the discovery never went forward. Instead, the asbestos claimants committee agreed to stipulate, for purposes of the estimation proceeding, that each General Motors mesothelioma claimant would be deemed to have recovered, or to be entitled to recover, from each named trust the average payment that each such trust made to its mesothelioma claimants. 30 This stipulation gave the creditors committee most of what it had sought to prove (and in some respects more than it could have proved) through the requested discovery, while at the same time addressing the confidentiality concerns of claimants who objected to disclosure of their personal information. Shortly thereafter, the parties to the estimation reached a settlement fixing the debtor s asbestos liability at $625 million or approximately $25 million less than the company s prepetition reserve. 31 B. Specialty Products (Bankr. D. Del.) Trust discovery efforts in Specialty Products have met with less success. The debtors in the Specialty Products bankruptcy case have sought extensive estimationrelated discovery, including information from current Specialty Products claimants, information from asbestos trusts regarding current Specialty Products claimants, and information from asbestos trusts concerning those trusts predecessors historical payment patterns. 32 The Specialty Products debtors trust discovery motion (relating to current claimants) sought the same three categories of information that the creditors committee sought in General Motors. 33 To date, the debtors discovery efforts in Specialty Products have been largely unsuccessful. The court granted the debtors personal injury questionnaire motion in part 34, but denied the debtors efforts to obtain discovery from the asbestos trusts. 35 The court scommentsfromthebenchsuggestthat,at least at this early stage of the litigation, it is not particularly receptive to the theories on which the proposed trust discovery rests. 36 C. Garlock Sealing (Bankr. W.D. N.C.) Efforts to incorporate trust information into the estimation process in Garlock Sealing have been somewhat more successful, though the ultimate outcome of the debtors trust discovery motion remains in question. In Garlock Sealing, the debtors have embarked on a discovery plan that is more ambitious than that pursued by the creditors committee in General Motors. The expanded discovery plan was necessitated by the debtors merits-based approach to asbestos estimation, pursuant to which, as an initial 5

8 Vol. 26, #24 January 18, 2012 MEALEY S LITIGATION REPORT: Asbestos step, the debtors hope to set a bar date for existing asbestos claims and then seek the disallowance of many of them on the grounds that there is insufficient scientific evidence to hold them accountable. Whatever claims remain following this initial step (including future claims) would then be estimated. 37 In service of these objectives, Garlock sought to take discovery not only from asbestos trusts, but also from its current mesothelioma claimants (in the form of a questionnaire), from certain of its past mesothelioma claimants, and from approximately 70 claimant-side law firms. 38 The information Garlock sought from the trusts was expansive: Garlock sought, in essence, the complete electronic database maintained by each subpoenaed trust with respect to each Garlock claimant. 39 The bankruptcy court has yet to rule on this motion. 40 The court has, however, ordered current claimants to respond to a questionnaire that requires them, among other things, to provide the debtors with copies of any claim forms submitted by the claimants to trusts. 41 D. Lessons From General Motors, Garlock Sealing And Specialty Products The General Motors experience teaches that debtors facing substantial asbestos liabilities can reap significant benefits from trust discovery, if the bankruptcy court in their case appreciates the potential impact of the recently-established section 524(g) trusts on their aggregate liability. As noted, the creditors committee s discovery efforts in General Motors were positively received by the court and ultimately resulted in a stipulation resolving the trust discovery dispute on highly favorable terms, followed by a settlement fixing the company s aggregate asbestos liabilities at an amount less than its pre-petition reserve. In contrast, the results of trust discovery efforts in Garlock Sealing and Specialty Products have been mixed though those cases are far from over and there are likely to be important discovery rulings in the future. In the face of the unsettled state of the law, the challenge for debtors is to show that trust-based estimation theories do not in fact represent a departure from longstanding estimation principles. Under precedents such as Owens Corning, it is perfectly appropriate for courts to consider the changes in the asbestos litigation landscape which have already occurred and which will likely continue. 42 To consider the impact that the trusts might have had if a debtor had remained in the tort system does not as claimants have argued amount to an attempt to rewrite history. Rather, the trusteffect isjustonemorechangeintheasbestos litigation landscape. Endnotes 1. See Charles E. Bates & Charles H. Mullin, Having Your Tort and Eating it Too?, 6-4 MEALEY S ASBESTOS BANKRUPTCY REPORT (November 2006). 2. In re Motors Liquidation Co. f/k/a General Motors Corp., No (Bankr. S.D.N.Y.); In re Garlock Sealing Technologies, No (Bankr. W.D. N.C.); In re Specialty Products Holding Corp., No (Bankr. D. Del.). 3. See STEPHEN J. CARROLL, ET AL., RAND CORP., ASBESTOS LITIGATION COSTS AND COMPENSATION: AN INTERIM REPORT at xxvii, 109, 117 (2005). 4. Id. at xxiii; see also id. at 48, 89, See Creditor Committee 2004 Motion at } 8, In re Motors Liquidation Co. [Dkt. No. 6383]. 6. Id. 7. See Debtors Information Brief at 3-4, 57, In re Garlock Sealing Techs. [Dkt. No. 24]. 8. See Debtors Informational Brief at 5, In re Specialty Prods. Holding Corp. [Dkt. No. 7]. 9. Section 524(g) of the Bankruptcy Code authorizes the creation of such trusts. See 11 U.S.C. 524(g). The section is intended to provide a mechanism for the discharge of past and future asbestos claims against a debtor through a plan of reorganization that establishes and funds a trust to which all such claims are channeled. 10. See Bates & Mullin, supra note 2, at See U.S. Gov t Accountability Office, GAO , Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts 3 (2011). 6

9 MEALEY S LITIGATION REPORT: Asbestos Vol. 26, #24 January 18, See Bates & Mullin, supra note 2, at See, e.g., Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 722, 725 (D. Del. 2005). 14. See id. at 723 (identifying 7 factors that were unlikely to be replicated in the future). 15. That settlements against any one defendant will vary depending on the nature and number of its co-defendants is supported by anecdotal evidence. See Carroll, supra note 4, at 91 (noting, on basis of interviews with plaintiff attorneys, that when claimants lose access to sources of compensation, they attempt to make up for their inability to obtain compensation from these defendants by demanding larger amounts in compensation from the surviving defendants and by bringing new defendants into the litigation. ). 16. See ACC Response and Limited Objection to 2004 Motion at 13, In re Motors Liquidation Co. [Dkt. No. 6488]; ACC Opposition to 2004 Motion at 16-18, In re Garlock Sealing Techs. [Dkt. No. 1076]. 17. ACC Response and Limited Objection to 2004 Motion at 14, In re Motors Liquidation Co. [Dkt. No. 6488]. 18. See Transcript of Hearing at 745, In re Western Asbestos Co., No (Bankr. N.D. Cal. Nov. 13, 2003) (testimony of Mark A. Peterson) ( [T]he most important thing is in the year 2000, 2001, almost every one of the remaining major asbestos defendants who had manufactured thermal insulation products entered bankruptcy. In the course of a 20-month period, nine major asbestos defendants entered bankruptcy. And that was an extremely turbulent event. It removed from the tort litigation those defendants that were paying almost all of the money that was being paid to claimants at that point in time, and shifted burdens to other remaining defendants who were not subject to the protections of the bankruptcy estate... So, essentially you have got kind of a whole change in the nature of who would be paying claims, by getting rid of the people who had the deep pocket defendants that were still around. They left. ); see also Debtors Brief in Support of 2004 Motion at 12-15, In re Specialty Prods. Holding Corp. [Dkt. No. 820]. 19. See ACC Opposition to 2004 Motion at 9-10, In re Garlock Sealing Techs. [Dkt. No. 1076]. 20. Garlock, perhaps fearing this result, has advanced certain estimation theories that are not dependent upon a reduction in payments by solvent co-defendants. These arguments which have not yet been tested are beyond the scope of this article. 21. See, e.g., 2010 Asbestos Case Management Order, In re Asbestos Personal Injury Litigation, Civil Action No. 03-C-9600 (Cir. Ct. Kanawha County, W.V. May 14, 2010), available at wv.us/wvsca/mlp/asbestos-2010-cmo.pdf. 22. See Creditor Committee 2004 Motion, In re Motors Liquidation Co. [Dkt. No. 6383]. 23. See Objection of Manville Trust, Objection of Multiple Trusts, and ACC Response and Limited Objection, In re Motors Liquidation Co. [Dkt. Nos. 6484, 6486, 6488]. 24. See generally ACC Response and Limited Objection, In re Motors Liquidation Co. [Dkt. No. 6488]. 25. See generally Objection of Manville Trust and Objection of Multiple Trusts, In re Motors Liquidation Co. [Dkt. Nos. 6484, 6486]. 26. Transcript of Hearing at 20:19-21, In re Motors Liquidation Co. (Aug. 9, 2010). See also id. at 8:3-5 ( Idon tneedargumentonwhetherornotthecreditors committee s request is sufficiently relevant. It plainly is. ); id. at 99:14-17 ( I m fully satisfied that the information that the creditors committee seeks is relevant, or at least much more than sufficiently relevant to permit discovery with respect to it. ). 27. See id. at 100:24 101:8 ( I ve also considered and rejected the contention that disclosure is barred by Rule 408. First, that s not a rule of privilege, it s a rule governing admissibility at trial. Second, we re talking about the results of settlement negotiations, not what the parties admit to each other or otherwise say in settlement negotiations. Third, Rule 408, by its express terms, excludes statements offered for purposes other than to prove liability for, inability of, or the amount of a claim, or for impeachment. Whatever their applicability might be in one-on-one litigation, they have no relevance here. ). 28. Id. at 100:

10 Vol. 26, #24 January 18, 2012 MEALEY S LITIGATION REPORT: Asbestos 29. Specifically, the court ordered production, in searchable electronic form, of: (i) the claim information electronically maintained by the Trust(s) in current datafield format for each identifiable [General Motors] Mesothelioma Claimant, as supplied by each claimant and/or his or her counsel to the Trust(s) but excluding medical and financial information (other than date of mesothelioma diagnosis) and medical and financial records, (ii) the amounts paid to each Mesothelioma Claimant by each Trust, and (iii) the claim status of each Mesothelioma Claimant who filed a claim against any Trust but has received no recovery from that Trust (i.e., whether that claim is still pending or has instead been dismissed). Order Pursuant to Bankruptcy Rule 2004 at } 5, In re Motors Liquidation Co. [Dkt. No. 6749]. The court s order authorizing the trust discovery was entered subject to three conditions. First, the information was to be produced pursuant to a confidentiality agreement attached as an exhibit to the order. Second, the parties were to confer regarding the possibility of implementing a so-called Anonymity Protocol that is, a way for the trusts to produce the requested information to the Creditors Committee in anonymous form. Id. at } 8. Finally, the court in an abundance of caution granted individual mesothelioma claimants a right to be heard on issues of confidentiality, though not on any issues that had already been addressed by the court, such as relevance and Rule 408. Id. at } See Stipulation and Order at 3-5, In re Motors Liquidation Co. [Dkt. No. 8002]. 31. See Stipulation and Order at }} F, 1, In re Motors Liquidation Co. [Dkt. No. 9214]. The settlement at less than the company s prepetition reserve was, to the authors knowledge, an unprecedented result, and was in sharp contrast to the norm in asbestos bankruptcies, which often result in valuations at five or six times the debtor company s prepetition reserve. 32. See Debtors 2004 Motions, In re Specialty Prods. Holding Corp. [Dkt. Nos. 436, 437, 559]. 33. See Debtors 2004 Motion, Exhibit A, In re Specialty Prods. Holding Corp. [Dkt. No. 437]. 34. Order, In re Specialty Prods. Holding Corp. [Dkt. No. 1466]. 35. Orders, In re Specialty Prods. Holding Corp. [Dkt. Nos. 1546, 1547]. 36. See, e.g., Transcript of Hearing at 64, In re Specialty Prods. Holding Corp. (Feb. 28, 2011) ( The issue is to estimate the debtor s aggregate liability, its several share, and what somebody got from another co-defendant when there was no verdict that assessed the proportionate liability share, is totally irrelevant to that liability. ); Transcript of Hearing at 98, In re Specialty Prods. Holding Corp. (July 25, 2011) ( With respect to the re-emergence of shares, I don t think anything ever left in terms of the loss of shares. I don t think the re-emergence is even a concept. ). 37. See generally Information Brief, supra note 8, at 75-83; Disclosure Statement, In re Garlock Sealing Techs. [Dkt. No. 1666]; Debtors Brief in Support of Motions for Estimation and Bar Date, In re Garlock Sealing Techs. [Dkt. No. 1685]. 38. See generally Debtors Rule 2004 Motions, In re Garlock Sealing Techs. [Dkt. Nos. 601, 1006, 1087, 1229, 1270]. Garlock has also sought certain information in other bankruptcy proceedings. For instance, Garlock filed motions in a number of other asbestos bankruptcy cases seeking access to Bankruptcy Rule 2019 statements filed by law firms representing asbestos claimants with a view towards establishing that claimants had made inconsistent exposure allegations to Garlock. These efforts have thus far been unsuccessful. 39. See Debtors 2004 Motion, Exhibit B, In re Garlock Sealing Techs. [Dkt. No. 601]. 40. Garlock s other Rule 2004 motions have met with only limited success. Its motions seeking authority to subpoena law firms and past claimants were denied. See Orders, In re Garlock Sealing Techs. [Dkt. Nos. 1201, 1347]. Its questionnaire motion was granted in a more limited form than originally conceived. Order, In re Garlock Sealing Techs. [Dkt. No. 1390]. 41. See Order, In re Garlock Sealing Techs. [Dkt. No. 1390]. 42. Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 725 (D. Del. 2005). n 8

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