Bondex Articles, January 2013 Asbestos bankruptcy estimation hearing gets under way in western Pa. January 7, 2013 9:22 PM By JON CAMPISI PITTSBURGH Lawyers for bankrupt companies that dealt in asbestos-containing products and attorneys representing claimants sparred in federal bankruptcy court Monday on what was the first day in a possible weeklong hearing designed to close the disparity on the value of future claims. The estimation hearing could last until Friday with each side given a total of 35 hours 17-anda-half each in which to present their respective cases. The hearing is being overseen by U.S. District Judge Judith Fitzgerald, a federal bankruptcy court judge based in the Western District of Pennsylvania who was specially assigned to handle the case known as In Re: Specialty Products Holding Corp. et al. The proceedings, held in the soon-to-be-retired Fitzgerald s 54th floor courtroom, got a relatively slow start after the judge questioned whether Bondex International Inc., which was incorporated in the spring of 1972 as an independently operated and wholly-owned subsidiary of RPM Inc. later known as RPM International Inc. should even be included as a party in the estimation hearings. I see no basis to estimate as to Bondex, Fitzgerald said from the bench, adding that she sees no plan as to how Bondex could survive bankruptcy. Bondex, which was in the business of manufacturing joint compound primarily for do-it-yourself home project renovation use, along with the other debtors in the case, Specialty Products Holding Corp. and RPM International Inc., filed for Chapter 11 bankruptcy in late May 2010 in the U.S. Bankruptcy Court for the District of Delaware. As of that date, court records show, the debtors were defendants in about 15,000 pending asbestos-related injury lawsuits, with about 2,800 of them being mesothelioma claims. Companies that dealt in asbestos products can seek to limit liability through the filing of Chapter 11 bankruptcy protection, which offers immediate immunity from lawsuits brought by injury victims. The companies, however, must pool assets and insurance proceeds and place them into a trust that is set up to compensate past and future victims, with the trusts establishing guidelines dictating the amount of compensation to be paid to claimants based primarily on the severity of the illness.
In the current case, the debtors, who are the three former defendants in the tort system, are going up against the Official Committee of Asbestos Personal Injury Claimants and the Future Claimants Representative (FCR), Eric D. Green. The committee and the FCR maintain that the agreed settlement values that the debtors have paid on claims are the best evidence of the value of those claims, according to the pre-trial order in the case, and the best predictor of what the debtors would pay in the future if they remained in the tort system. Both the committee and the FCR contend that the amount of enforceable, settled but unpaid asbestos claims is somewhere in the neighborhood of $55 million, while the debtors maintain that it is about $30 million, the judicial order says. The debtors claim that the facts relating to their asbestos litigation history differ significantly from the asbestos-related facts of previous bankruptcy cases in which experts presented estimations of the tort system settlement costs, the pre-trial order states. As a result, the order states, the earlier cases don t provide a basis for the court to conduct an estimation in a similar manner. The debtors claim they settled past cases mostly to avoid trial risk and to minimize defense costs. That point was reiterated by the first debtors witness called to the stand, which occurred after Fitzgerald allowed the proceedings to move forward after her initial questioning of Bondex s involvement in the case. Kelly Tompkins, the former general counsel to Bondex, who worked for the company and its predecessor from 1996 to 2010, testified that the debtors settled many prior asbestos injury claims because it would have cost more for them to defend the claims at trial. Tompkins said that in the early years, asbestos litigation for the debtors was not that remarkable, and was generally handled by third-party insurers. That soon changed, however, when the insurers stopped indemnifying their insured clients, and asbestos injury claims against the debtors began to rise. After the early 2000s, Tompkins testified, the volume of claims activity escalated significantly. Bondex, which was the successor company, was often named as a defendant in mass tort cases along with a host of other companies. Problems for Bondex arose when the other companies began filing for bankruptcy protection, since many of the asbestos claims were filed in jurisdictions across the country that employed joint and several liability. In those cases, a defendant who was found to be only one percent liable in an asbestos case could potentially be on the hook for most of the damages if the other defendants couldn t pay up. 2
Some jurisdictions have since reformed joint and several liability terms, including Pennsylvania, where the current bankruptcy case is playing out in federal court. As for Bondex, Tompkins testified that as general counsel, it was his job to ensure that risk was minimized, and in this case, that minimization would be signing off on settlements as opposed to taking certain asbestos cases to trial. Defense costs soar the closer a case gets to trial, he said. I started to really have to look at the total cost of the litigation, Tompkins testified. Tompkins said it got to the point where Bondex was almost a solvent bystander irrespective of what our true liability might be given [those] claims. Tompkins mentioned Madison County, Ill. as being the principal area of claims activity at that time in history, most likely due to the fact that the lack of procedural hurdles in that jurisdiction made it more appealing for plaintiffs firms to file asbestos claims. In Madison County, we looked at alternative ways of resolving the litigation, Tompkins testified, noting that it would typically cost Bondex between $250,000 and $300,000 to take a case to trial. He mentioned three plaintiffs firms in particular as being the major players who filed asbestos claims in Madison County: Cooney & Conway, The Lanier Law Firm and the firm previously known as Simmons and Cooper. On cross-examination of Tompkins, Mark B. Sheppard, an attorney working for the Official Committee of Asbestos Personal Injury Claimants, talked about the confidentiality clauses that were placed in settlement agreements as presumably being done because the companies were concerned about more asbestos claims being filed against them if word got out. Tompkins said such clauses are commonplace in settlement agreements. Two other debtors witnesses testified during Monday s proceedings: Denise Martin, an expert economic consultant who deals specifically with mass torts, and Charles Mullin, who works for the economic consulting firm Bates-White. Their respective testimony was fairly technical, although it addressed what the debtors are viewing as the phenomena of increased suits being filed against the likes of Bondex, whose attorneys claim dealt mostly in products designed for home, do-it-yourself use, and not commercial or industrial use, which is where most asbestos claims typically arise The estimation hearing is expected to last the balance of the week. 3
Bondex expert testifies Chrysotile joint compound not likely cause of mesothelioma January 8, 2013 7:55 PM By JON CAMPISI PITTSBURGH Highlighting the second day of an asbestos estimation trial was a testy exchange between an attorney representing the claimants and one of the debtors witnesses regarding the nature of a specific form of asbestos, and how it relates, or doesn t relate, to a mesothelioma diagnosis. Dr. Allan Feingold, a lung specialist who originally hails from Canada, and is currently based in Miami, took the stand for the debtors a consortium of companies that formerly dealt in asbestos-containing products who are presently in a state of Chapter 11 bankruptcies. The companies, Bondex International Inc., Specialty Products Holding Corp., and RPM International Inc., had thousands of asbestos injury claims pending against them in the tort system prior to their respective bankruptcy petitions. The weeklong estimation trial is taking place in U.S. Bankruptcy Judge Judith Fitzgerald s 54th floor courtroom. Claimant attorneys attempted to pick apart the testimony of Feingold, a medical doctor and expert in epidemiology, over the causation of mesothelioma -a type of cancer which affects the lining of lungs, is most often attributed to asbestos exposure and is almost always fatal. Chrysotile asbestos, the form of asbestos found in debtor Bondex s joint compound, which is the primary subject of the proceedings, is much less likely to stay in the mesothelium, or the lining of the lungs, than other forms of asbestos, such as amphibole asbestos, Feingold testified. He said that Chrysotile asbestos, in most cases, in and of itself doesn t lead to mesothelioma, or at least hardly ever leads to mesothelioma deaths. Other forms of asbestos inhalation, however, such as amphibole, typically account for the mesothelioma diagnoses that are usually seen, Feingold said from the witness stand. Feingold, who was retained by the debtors to review a sampling of the claimants who had filed asbestos injury cases, stressed that he was never given access to the actual lung samples of those claimants who had had surgeries performed by medical doctors given their respective lung cancer diagnoses. If he had actually viewed the tissues under a microscope, the doctor said, he most likely would have found that the patients had more than simply Chrysotile asbestos in their systems. Instead, Feingold said, all he had to go by was the information he was given. Out of the 2,765 mesothelioma victims who brought claims against the debtors, Feingold created a sample group of 229, and only about 25 of those people had what is known as pleural mesothelioma and had had exposure to the joint compound manufactured by Bondex, he said. 4
The joint compound, which is at the center of the case, was namely designed for do-it-yourself use in small home renovation projects, the debtors attorneys had previously stated. By contrast, most known mesothelioma victims are thought to have contracted the disease during their years working in commercial settings. While Feingold was adamant that Chrysotile asbestos, in and of itself, really wouldn t lead to a mesothelioma diagnosis without a patient having had been exposed to other forms of asbestos fibers, the attorneys representing the claimants, and possible future claimants, stressed that some published research shows otherwise. One claimants attorney sought to outline Feingold s history of being paid by asbestos companies to testify in proceedings such as the one currently going on in downtown Pittsburgh as serving as an example of the doctor s alleged bias. Feingold, however, reiterated that his medical and scientific opinions were formulated over 30 years worth of practical applicability, regardless of the fact that he was never a published academic. The claimants attorney made mention of the other supposed experts who would be participating in the trial later in the week. Feingold, however, sought to dispel this contention, saying that academics who publish research could be wrong as well. You think if someone is more famous they are more important, Feingold said from the stand. No. The facts are important. And the facts don t fly. When the claimants attorney referenced the jury verdicts that came out in favor of asbestos injury plaintiffs following cases that were taken all the way through trial, Feingold retorted, I think the juries get things correct most of the time, but not always. This is not about viewpoints, Feingold said. This is about facts. Show me a cause and effect relationship, between Chrysotile asbestos only and a mesothelioma diagnosis. When accused of molding his opinion to align with a certain bias, Feingold shot back by saying that his viewpoints may have changed, but only with the course of changing research in the field. Feingold was not the only one on the witness stand Tuesday. Charles Mullin, an economic consultant with the Washington, D.C.-based firm Bates-White, continued his testimony, which had been cut short the prior day because of time constraints. Mullin, who had also been retained by the debtors, talked about the reason why many asbestos defendants would choose to engage in settlements with plaintiffs rather than take a case to a jury. It is much more costly for an asbestos defendant to see a case through to a jury verdict rather than to go the settlement route. 5
The defense costs in a jury case could be upward of $300,000 on average, Mullin testified, in comparison to an average settlement of $200,000. At the end of the day, Mullin said, it s cheaper and less risky for a defendant to offer up a settlement than it is for that defendant to take a case to trial. It s going to be cost prohibitive for them to try a case, he said. The other debtors witness to testify on Tuesday on the concept of risk was Timothy Coleman, an employee of Blackstone, a New York-based global investment and advisory firm. Coleman was charged at looking at discount rates as they applied to asbestos claims. The discount rate is all about risk, Coleman said. This is a very long, 30-plus year type claim. Coleman s testimony went to the heart of the case playing out in Fitzgerald s courtroom. Companies that dealt in asbestos-containing products often choose Chapter 11 bankruptcy as a way of halting future injury claims against them, since businesses that go that route obtain immediate immunity from civil suit. The reason why the two parties are in court in Pittsburgh this week is because they differ greatly on the dollar figure estimations with regard to future asbestos claims. The claimants, which include the Official Committee of Asbestos Personal Injury Claimants and the Future Claimants Representative, Eric D. Green, contend that the amount of enforceable, settled but unpaid asbestos claims is somewhere around $55 million, while the debtors maintain that the figure is closer to $30 million. Under questioning by attorneys for both sides, Coleman stressed that future estimations are pure guesswork. At the end of the day these are all estimations, he testified. Coleman went on to say that when it comes to dealing with the concept of risk, nothing is set in stone. There s no question that there s risk in this world, Coleman testified. I think there are lots of risk to the estimations. Under cross-examination by claimants attorney John Dorsey, of the firm Young Conway, Coleman talked about how things like healthcare costs, a possible future cure for mesothelioma, and other factors, could affect the amount of money paid to asbestos claimants down the line. Obviously the experts have a very big range of difference between them, Coleman said. It means there are risks. Estimates are estimates, Coleman continued. They have risks associated with them. 6
The proceedings were expected to continue on Wednesday. Each side was afforded by the court 17-and-one-half hours by which to present their respective sides, for a total of 35 hours in the courtroom this week. Asbestos bankruptcy estimation hearing highlights major disparities January 9, 2013 5:02 PM By JON CAMPISI PITTSBURGH The legal proceeding playing out this week in a federal courtroom in this western Pennsylvania city is occurring because lawyers representing asbestos injury claimants and attorneys retained by the bankrupt companies are worlds apart on their respective estimations of the amount of cash available to parties who have been stricken ill because of asbestos exposure. Known as an estimation hearing, the proceeding, which is being overseen by U.S. Bankruptcy Judge Judith Fitzgerald, was necessary to help resolve the differences among the sides regarding the monetary value of future claims are concerned. The merits of the claims are not to be ignored, Gregory Gordon, an attorney from the firm Jones Day who is working for the debtors, said in court this week. What is the debtors responsibilities, is the ultimate question for the court, he said. The focus on the monetary estimation is on the debtors several share, Gordon said, while liability has to be estimated separately because there are separate debtor entities. The estimation hearing is grounded in the Chapter 11 bankruptcy petition filed in May 2010 by three companies: Bondex International, Specialty Products Holding Corp., and RPM International Inc. The companies, which specialized in the manufacture of asbestos-containing joint compound designed for do-it-yourself home renovation projects, were defendants in about 15,000 pending asbestos-related injury claims prior to their filing for bankruptcy, a process that gives companies immediate immunity from civil litigation. Out of the 15,000 lawsuits, 2,800 of them were mesothelioma claims. When a company files for bankruptcy, it must create what is known as a 524(g) trust, which is ultimately responsible for compensating present and future claimants. According to the American Bar Association, as of 2011, 56 trusts have been confirmed on behalf of asbestos defendants that declared bankruptcy, and payments from those trusts have increased exponentially. As of 2008, the ABA reported, the largest 26 trusts had paid $10.9 billion on 2.4 million claims. 7
The current combined total assets of the trusts is estimated to be between $35 billion and $60 billion, according to the ABA. In the present case, the U.S. Bankruptcy Court for the District of Delaware approved economic consulting firm Bates-White to be the estimation expert for the debtors. Meanwhile, the Official Committee of Asbestos Personal Injury Claimants and the Future Claimants Representative, Eric D. Green, retained their own experts to calculate what they believe will be the money owed to victims down the road. So far during the estimation hearing, both sides have been presenting expert witnesses who have been testifying on how they arrived at their respective estimations. Medical experts have also been put on the stand to address asbestos-related injuries themselves, the big one being mesothelioma, which is a type of cancer that affects the lining of the lungs called the mesothelium. The debtors in this case claim that they suffered a substantial spike in claims in the early 2000s due to a large number of bankruptcy filings by other defendants who were facing numerous lawsuits in the tort system. The same debtors claim that while still in the tort system, they had to shuck out money to pay for the several liability of other companies in judicial jurisdictions that employ the method known as joint and several liability. Basically, the debtors claim they were on the hook for others liability, hence the decision to file for bankruptcy. The debtors claim that the form of asbestos they dealt in, known as Chrysotile asbestos, is much less toxic than amphibole asbestos, and they question why more claims were being filed against them recently by people allegedly injured by their product. The debtors assert that the do-it-yourself nature of their products and the debtors limited market share make it statistically improbable that their products were a contributing cause of more than 50 percent of the mesothelioma cases filed across the country, according to background information on the case contained within the pre-trial order. The debtors also claim that a review of epidemiological research indicates that drywall workers don t have an increased incidence of mesothelioma, since the ailment is a dose-responsive disease, and in the normal use of their products, exposure would not be a substantial contributing factor to a plaintiff s mesothelioma diagnosis, the pre-trial order states. Allan Feingold, a medical doctor who has testified for other defendants in asbestos cases, said as much while on the stand this week. Feingold was challenged by claimants attorneys, however, who suggested people still could contract mesothelioma from exposure to Chrysotile asbestos alone, citing the disparity in the research that is in existence. 8
As for the future claims, Gordon, one of the lawyers working with the debtors, asserted this week that the debtors had less than one percent of the asbestos-containing joint compound on the market with sales of no more than $6 million annually, yet it is claimed that the debtors owe close to a billion dollars and cause half or more of annual mesothelioma claims in the United States. Common sense dictates that this can t be right, Gordon said in court this week, something that was reiterated by Charles Mullin, an economic consultant doing work for the debtors. Bondex was hit with its first asbestos injury suit back in 1980, Gordon said, while Specialty Products Holding Corp. faced its first claim two years later. Between 1980 and 1999, the two companies were named in only 107 cases. Why the avalanche of the meso cases against the debtors, Gordon asked. What changed, he surmises, is that a number of the truly responsible companies filed for bankruptcy and left others to take the fall. It s relatively cheap for plaintiffs attorneys to file mass tort claims such as asbestos lawsuits, Gordon said. By contrast, however, it s very expensive for companies to defend against the claims, with about $300,000 typically needed to defend against an asbestos suit. Gordon said as the volume of claims increased, and insurance money disappeared, the debtors had to change their approach. Namely, the debtors realized it would be cheaper to settle the claims out of court rather than to take a case to trial. During the course of this week s estimation hearing, the debtors mentioned Madison County, Ill., as being among the worst jurisdictions in the country as far as asbestos litigation is concerned, primarily because of the nature of the docket system in that jurisdiction. During opening arguments Monday, Natalie Ramsey, an attorney with Montgomery, McCracken, Walker & Rhoads, which is representing the Official Committee of Asbestos Personal Injury Claimants, disagreed with the debtors contention that Bondex, which became a subsidiary of Specialty Products Holding Corp. in the early 1970s, was a small player. Bondex, Ramsey said, continued to put into the stream of commerce asbestos-containing products even after a ban was put into effect, which demonstrated the company simply didn t care about those who got hurt from its products. There were some other things going on, Ramsey said in court. Ramsey said throughout the course of the estimation trial, the court would see a repeated theme on the part of the debtors. 9
It s not as small a player as the debtors will have you believe, Ramsey said of Bondex. The debtors have a robust history of resolving asbestos claims. Ramsey said the plan for her team is to see to it that the debtors are ultimately returned to the tort system. Bankruptcy s not a do-over for the debtors, she said. The attorney representing the Future Claimants Representative also made an opening statement in which he stressed that the debtors are not the victims here. The claimants are the victims your honor, said the lawyer, Edwin J. Harron, of the firm Young, Conway, Stargatt & Taylor. Harron said testimony by his expert witnesses during this week s hearing will show that $1.1 billion is a reasonable estimate on his future claims. Meanwhile, Harron called the used methodology used by Mullin, the economic consultant retained by the debtors, to come up with the debtors figures radical and severely flawed. Ramsey, the lawyer representing the claimants committee, had earlier in the week moved to have Mullin s testimony stricken, although the judge allowed Mullin to move forward with his testimony. Claimants witness in asbestos bankruptcy case: Chrysotile can cause mesothelioma January 11, 2013 8:42 AM By JON CAMPISI PITTSBURGH A medical doctor took the stand Thursday for asbestos claimants in the ongoing asbestos bankruptcy trial in western Pennsylvania arguing that Chrysotile exposure can indeed lead to malignancies in cells that line the lungs. Laura Welch, a board-certified physician based in Maryland who specializes in occupational medicine, testified for the Official Committee of Asbestos Personal Injury Claimants and the Future Claimants Representative, Eric D. Green, during a week-long estimation hearing before U.S. Bankruptcy Judge Judith Fitzgerald in the Western District of Pennsylvania. The hearing is designed to close a wide disparity of estimated future asbestos injury claims that exist between the claimants and the debtors, the latter of which in this case are three insolvent companies that formerly produced products containing asbestos: Bondex International, Specialty Products Holding Corp., and RPM International Inc. The claimants maintain that future asbestos claims number somewhere in the neighborhood of $55 million while the debtors experts have estimated that the true figure is closer to about $30 million. 10
The committee and the Future Claimants Representative represent those people who either were plaintiffs, or will be plaintiffs, in asbestos injury cases against the companies. In 2010, the debtors filed for Chapter 11 Bankruptcy, which offers former defendants in asbestos cases immediate immunity from civil suit, and forces the now-insolvent companies to set up trusts that would pay out claims outside of the tort system. Earlier in the week, Dr. Allan Feingold testified for the debtors in the estimation hearing, during which each side was afforded by the court 17-and-a-half hours by which to present their respective cases. On the stand, Feingold testified that in his professional opinion, Chrysotile asbestos, the type of asbestos found in the joint compound that was produced by Bondex and the other debtors, is unlikely to cause mesothelioma absent any other form of asbestos exposure. On Thursday, however, Welch, who said she has personally conducted studies of sheet metal workers since the mid 1990s, concluded that Chrysotile asbestos can, by itself, lead to the type of lung cancer called mesothelioma. Mesothelioma doesn t attack the actual lungs, but instead attacks the cells in the lining of the lungs, which separates the organs from the chest wall. Chrysotile asbestos does cause mesothelioma in humans, Welch said under questioning by Nathan Finch, an attorney from the firm Motley Rice, which is representing the claimants committee. While the debtors have claimed that the lawyers representing present and future claimants are inflating the number of those actually injured by exposure to asbestos in order to cash in on the money sitting in the asbestos trusts, Welch sought to explain an alternative reason why more and more claims seem to be popping up in recent times. It takes a long time between exposure and development of mesothelioma, Welch said. As we go forward, there s more time for people to develop and die from mesothelioma. When Finch questioned Welch on whether the commonly held belief by asbestos defendants that people exposed to joint compound alone can t develop mesothelioma was true, the doctor responded, not in my opinion. There s simply no safe level of asbestos exposure, Welch said. The average latency period per mesothelioma case is more than 40 years, Welch testified, meaning that people who were teenagers when exposed to asbestos dust and fibers might not show signs of mesothelioma until they are in their 80s. I think it s very well established that Chrysotile asbestos causes mesothelioma, Welch said. 11
The debtors contend that Chrysotile asbestos doesn t alone cause mesothelioma. The argument is central to their case because Chrysotile asbestos is the type found in the joint compound that was allegedly used by claimants. The debtors attorneys say the companies were responsible for a very small market share of the joint compound created in the United States in years past, and the product itself was specifically designed for do-it-yourself home use. Most mesothelioma cases are seen in those who worked around the dust and fiber for a living, such as various types of construction workers. The debtors claim that amphibole asbestos, the more potent form found in industrial materials, is what is really responsible for mesothelioma development. On cross-examination, one of the debtors attorneys pointed out a past report by Welch in which the doctor wrote that absent exposure to other asbestos forms, it was unlikely that a person would develop mesothelioma from Chrysotile asbestos exposure alone. Welch admitted to having written that report, but stressed that medical research changes with the times. No study s perfect, she said, before admitting, I think it s reasonable to say that amphibole is probably more potent. Welch went on to testify about the concept of individual susceptibility, or the idea that each individual s development of mesothelioma would also be dependent upon other factors. The example she gave was the two-pack-a-day smoker who inhaled cigarettes for four decades who never develops lung cancer versus the smoker who smoked the exact same amount of tobacco and does develop cancer. I think that in an individual, even the background sources add to their cumulative results, Welch testified. On redirect, Finch, the claimants attorney, asked Welch about the changing peer-reviewed academic literature that deals with Chrysotile asbestos where mesothelioma is concerned. Under this line of questioning, Welch again turned to her earlier theme. We have information that Chrysotile causes mesothelioma, and I think that s pretty indisputable, the doctor said. The epidemiology supports the relationship between peritoneal mesothelioma and Chrysotile. Reiterating his point, Finch asked Welch, Does Chrysotile persist in the body long enough to cause asbestos related lung cancer, to which his witness responded with a simple, Yes. The trial was expected to wrap up by Friday. 12