Amicus Curiae Brief — Amchem Products, Inc. v. Windsor

— — ee

Supreme Court of the United States

OCTOBER TERM, 1996

AMCHEM PRODUCTS, INC., et al.

Petitioners,

Maynard Ungerman

Ungerman & lola

P.O. Box 701917

Tulsa, Oklahoma 74170

(918) 495-0550

Counsel of Record for Asbestos Victims uf America

January 15, 1997

No. 96-270

IN THE

Supreme Court of the United States

OCTOBER TERM, 1996

AMCHEM PRODUCTS, INC., ET AL.,

Petitioners,

v.

GEORGE WINDSOR, ET AL.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals for the Third Circuit

MOTION OF ASBESTOS VICTIMS OF AMERICA

FOR LEAVE TO FILE A BRIEF

AS AMICUS CURIAE

Pursuant to rule 37.3 of the Rules of this Court, Asbestos

Victims of America moves for leave to file the accompanying brief as

amicus curiae.

AVA was founded in 1981 by asbestos victims and friends to

provide an information clearinghouse on asbestos disease and

available medical, social, and legal services. A nonprofit educational

organization, AVA has grown to an alliance of more than 20,500

victims, union members, scientists, medical and legal professionals,

and concemed individuals. AVA is dedicated to increasing awareness

of the national asbestos tragedy and its effects upon present and future

generations. The interest of AVA in this action is to preserve the nghts

of future asbestos claimants, who are not provided fair compensation

by the class settlement and were not adequately represented during its

negotiation.

AVA believes there are several reasons why this brief is

significant to the Court’s evaluation of the case. The Petitioners,

Class Counsel, and the Class Plaintiffs have urged this Court to

interpret Rule 23 in a way that, if the district court determines that a

proposed settlement is fair and reasonable under Rule 23(e), then the

putative class is automatically certifiable. Given that the Settling

Parties have placed all of their class certification eggs in the fairness

basket, this Court should be made aware of the actual record evidence

relevant to the district court’s fairness findings.

Consent was granted by many of the parties to the filing of this

brief, and no party affirmatively objected. However, because of time

constraints, AVA had not yet received written consent from all parties

at the time of the filing of this brief. Accordingly, AVA moves for

leave to file the accompanying brief as amicus curiae.

January 15, 1997 Respectfully submitted,

P.O. Box 701917

Tulsa, Oklahoma 74170-1917

(918) 495-0550

Counsel of Record for Asbestos Victims of America

—_—-

1. THE

A.

TABLE OF CONTENTS

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CLASS SETTLEMENT

INADEQUATELY COMPENSATES CLASS

MEMBERS FOR THE RIGHTS THEY GIVE

UP UNDER STATE LAW

Large Groups of Class Members

With Valuable Claims for

Asbestos-Related Disease Will

Receive No Compensation

Under the Settlement.............

exclude many claimants whose

claims for asbestos-related

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nae 5

B On The Whole, Class Members

With Qualifying Claims Would

Be Able To Secure Greater

Monetary Compensation By

PE nn acecdseciens«<swee’ 11

1. Because qualifying claimants

have no leverage to refuse an

offer made under the class

settlement, such claimants will

be paid the minimum of the

negotiated average value range

PG, dev bcd Cub ds Wn 8 86 .. 12

2. CCR's historical settlement

averages are significantly higher

than the amounts CCR is

required to pay under the class

SE co pu GUe caG a dae be bece tues i3

to account for inflation, the

CLASS MEMBERS WERE DENIED DUE

PROCESS BY CLASS COUNSEL'S

FAILURE TO PROVIDE ADEQUATE

PUT bn Vode ccccdénnceessct 21

Under Disqualifying Conflicts Of

SE eS a 28

EE a a ee 30

iv

TABLE OF AUTHORITIES

FEDERAL CASES

In re Agent Orange Prod. Liab. Litig., 818 F.2d 216

(2d Cir.), cert. denied, 484 U.S. 926 (1987) . 22

In re Baldwin-United Corp., 105 F.R.D. 475

EE er ee 22

In re General Motors Corp. Engine Interchange Litig.,

594 F.2d 1106 (7th Cir. 1979) ......... 21, 22

SECONDARY AUTHORITIES

Blackmar, and Wolff, 3 Federal Jury Practice

and Instructions (4th ed. 1987) .......... 18

John C. Coffee, Jr. Class Wars: The Dilemma of the

Mass Tort Class Action,

95 COLUM. L. REV. 1343 (1995) ....... 17, 25

Edley & Weiler, Asbestos: A Billion-Dollar Crisis,

30 HARV. J. LeGis. 383 (1993) ........... 25

Susan Koniak, Feasting While the Widow Weeps:

Georgine v. Amchem Products, Inc.,

80 CORNELL L. REV. 1045(1995) ...... 26, 30

MODEL RULES OF PROFESSIONAL CONDUCT

i oc iven st chectaenane ses 29

M. Peterson, Compensation of Injuries -- Civil Jury

Verdicts in Cook “ounty, 46 (Rand 1984) ... 17

ee -

INTEREST OF AMICUS CURIAE

Asbestos Victims of America (“AVA”) submits this brief in

support of the Respondents, who, in the court below, successfully

challenged the injunction issued by the district court restraining

asbestos victims from initiating or prosecuting personal injury

claims against the Petitioners. The interest of AVA in this action is

to preserve the rights of future asbestos claimants, who are not

provided fair compensation by the class settlement and were not

adequately represented during its negotiation.

AVA was founded in 1981 by asbestos victims and friends to

provide an information clearinghouse on asbestos disease and

available medical, social, and legal services. A nonprofit

educational organization, AVA has grown to an alliance of more

than 20,500 victims, union members, scientists, medical and legal

professionals, and concerned individuals. AVA is dedicated to

increasing awareness of the national asbestos tragedy and its effects

upon present and future generations.

INTRODUCTION

AVA submits this brief to show that the proposed class

settlement is unfair to class members not only in its overall design,

but also in its particular provisions. Respondents and other amici

address the insurmountable problems endemic to the Petitioners’

effort to impose their version of tort reform upon millions of people

who have been exposed to Petitioners’ asbestos products, but who

have not yet manifested any injury, and AVA fully supports the

positions taken in their briefs. But even if the Constitution and

Rule 23 permit the rights of future asbestos claimants to be

extinguished through a “future claimant settlement-only class

action,” this particular settlement should not have been approved

because it does not provide adequate compensation, and because

the process by which the settlement was reached does violence to

the standards by which the legal profession judges the conduct of

counsel.

AVA believes there are several reasons why this brief is

significant to the Court’s evaluation of the case. The Petitioners,

2

Class Counsel, and the Class Plaintiffs have urged this Court to

interpret Rule 23 in a way that, if the district court determines that

a proposed settlement is fair and reasonable under Rule 23(e), then

the putative class is automatically certifiable. Given that the

Settling Parties have placed all of their class certification eggs in

the fairness basket, this Court should be made aware of the actual

record evidence relevant to the district court’s fairness findings. As

will be shown below, Respondents’ assertions “about the adequacy

of Class Counsel, about the negotiations leading to the settlement

in this case and about the settlement itself” are neither “reckless”

nor “unsubstantiated,” Class Plaintiffs’ Br. at 3, but are instead

fully supported by the record.

Before examining the actual record evidence, this Court should

note that the ballyhooed “findings of fact” of the district court

deserve little deference. Almost all of those allegedly factual

findings were actually legal conclusions drawn from an uncontested

account of factual events and data. For instance, the district court

found that the qualifying medical criteria in the settlement for lung

cancer claimants are “fair and reasonable,” Cert. App. 132a, but

there is no dispute that those criteria exclude the claims of many

victims of lung cancer who would have viable causes of action

under state law. Regardless of how the district court chose to label

its findings, to the extent those findings were no more than legal

conclusions in disguise, this Court may consider them de novo.

Moreover, the district court’s “findings of fact” have not yet

been subject to any appellate review. The objectors strenuously

contest those “findings,” but they chose not to raise fact-intensive

points regarding fairness and the ethics of class counsel on this

appeal from a preliminary injunction. Instead, such points were

reserved for any later appeal from any eventual final judgment. As

the following discussion shows, in spite of the district court's

“findings of fact,” the record evidence compels the conclusions that

the settlement’s terms are unfair and that class counsel’s

representation was inadequate.

SUMMARY OF ARGUMENT

3

The settlement fails to provide adequate compensation in

several key ways. First, it redefines state law as to what types of

injuries will be compensable by setting threshold medical criteria

that are, generally speaking, stricter than applicable state law. If

those criteria are not met by a particular class member, that victim

receives no recovery. Addiionally, comparison of the

compensation values under the class settlement with historical CCR

settlement values reveals that those class members who do qualify

for recovery under the settlement receive significantly less value

than they would have received had they filed a lawsuit. Finally, the

failure of the settlement to adjust compensation values for inflation

ensures that class members who fall ill or die in later years will be

grossly undercompensated.

In addition to those problems with compensation values, the

system for processing claims under the settlement is unfair to the

class. The settlement’s claims resolution procedure is run by the

Defendants. The settlement provides that the Defendants have sole

authority both to make initial determinations on whether a claimant

qualifies for compensation under the settlement’s strict medical

criteria and to determine the amounts of initial “offers” to qualifying

class members, within wide ranges. The Defendants have every

incentive to “offer” no more than the minimum required to

qualifying claimants, and similar incentive to deny compensation

altogether to cases close to the borderline of the settlement’s

exposure or medical criteria. Claimants have virtually no leverage

to contest initial determinations of qualifying claim status or

settlement value, because the settlement severely restricts the

number of class members who may exercise the right to file a

lawsuit after going through the settlement’s claim procedures.

Moreover, that “right” is only available to claimants who meet the

threshold qualifying criteria.

Beyond these grave fairness problems, the record reveals that

the process by which the settlement terms were achieved does not

conform with long-established standards for competent and ethical

legal representation. Apart from their entitlement to adequate

4

consideration for releasing their rights to sue for asbestos-related

injuries, the class members here also deserved loyal representation

by unconflicted counsel dedicated solely to the interests of the

class. Regardless of whether class counsel put forth good faith

efforts to represent this class, the duties they owed to other interests

irreparably interfered with that representation. No matter what

benefits a settlement provides, it may ~ot be approved over the

objections of class members who have been denied their rights to

adequate representation by the conduct of the negotiations.

ARGUMENT

I. THE CLASS SETTLEMENT INADEQUATELY

COMPENSATES CLASS MEMBERS FOR THE RIGHTS

THEY GIVE UP UNDER STATE LAW

According to the complaint, this case is a tort lawsuit. As

with any other tort claim brought under the diversity jurisdiction of

a federal district court, the filing of this lawsuit did not entitle the

trial court to cure any perceived ills in the tort system. Nor did the

filing of this lawsuit empower the trial court to clear the dockets of

the federal and state courts. The role of the trial court here -- as in

any other class action settlement -- was to determine whether class

members have been treated fairly and consistently with due process

in the settlement of their tort law claims.

Unfortunately, when judging the merits of this settlement, the

district court virtually ignored the causes of action available to class

members under state law that are released under this settlement and

instead rested its fairness determination largely on its conclusion

that the various rights and remedies available under state laws

reflect poor policy.' That determination was both wrong and

' See, e.g.,Cert. App. at 270a (referring to the “inadequate tort system,”

and describing how “unimpaired victims have, in many states, been forced to

assert their claims prematurely”).

5

beyond the authority vested to an Article III court in a diversity

case governed by state law.

A. Large Groups of Class Members With Valuable

Claims For Asbestos-Related Disease Will Receive No

Compensation Under the Settlement.

1. The qualifying medical criteria exclude many

claimants whose claims for asbestos-related

malignancies would be compensable under state

law

A large percentage of class members who have valuable claims

under state law for malignant diseases will receive nothing at all

under the class settlement. The settlement’s qualifying criteria

exclude many asbestos-related lung cancers that would be

compensated under state law because those criteria require that the

victim of lung cancer must also, in most instances, suffer from

underlying asbestosis that would have met the settlement’s

qualifying criteria for non-malignant disease. SOS at V(B)(2), JA

61.

All seven of the medical experts who testified at the fairness

hearing acknowledged that there is significant debate in the medical

community as to whether one can attribute the development of lung

cancer to asbestos exposure absent a finding of underlying

asbestosis. Cert. App. 131a. Because some qualified physicians

diagnose asbestos-related lung cancers even in the absence of

radiographic evidence of asbestosis, asbestos defendants, including

the CCR, have historically settled many claims alleging lung cancer

*Citations in this brief to provisions of the class “Stipulation of Settlement”

are abbreviated as “SOS”, followed by the applicable subsection of the

settlement, and the joint appendix citation.

6

related to asbestos exposure without requiring such x-ray findings.’

In fact, the unrebutted testimony of Dr. Christine Oliver revealed

that 45%-50% of individuals that she would diagnose with lung

cancer related to asbestos exposure will not meet the qualifying

criteria under the class settlement, because their chest x-rays and

pulmonary function tests do not provide the requisite evidence of

underlying asbestosis. JA 838. Dr. Oliver further testified that

approximately 50% of victims who in her opinion have asbestos-

related “uther” cancers, i.e., cancers other than mesothelioma or

lung cancer, will also not meet the settlement’s qualifying criteria.

Obviously, any persons who Dr. Oliver or any other qualified

physician would diagnose as having an asbestos-related disease

would have a claim that would survive summary judgment in the

tort system. While qualified physicians can disagree regarding

diagnoses of asbestos-related diseases, the mere possibility of a jury

accepting the positive diagnosis gives a plaintiff's case settlement

value. This reality is reflected by CCR's historical practice of

settling 99.8 percent of cases filed against it in the tort system

(which, of course, includes non-qualifying malignancy claims).*

2. The class settlement deprives a large percentage of

class members who develop non-malignant

asbestos-related diseases of the choices available to

them under state law.

The settlement abridges the rights of many victims of asbestos-

related non-malignant disease by establishing a threshold definition

* Testimony of Michael Rooney, March 1, 1994 at 169-71 (while he was

an asbestos claims adjuster at Travelers Insurance and at CCR, there was

never a requirement that the plaintiff have underlying “markers” of asbestos

exposure in order to settle a claim for an asbestos-related Jung cancer).

* The March 17, 1993 Response of the CCR Defendants to the trial

court’s Order to Show Cause state, “[T]he CCR Defendants’ experience [is]

that more than ninety-nine percent (in fact 99.8%) of the cases against them

settle.” JA 125.

5

of compensable injury that differs from the definition of injury

under the substantive laws of almost every state. In order for

victims of non-malignant asbestos disease to qualify for cash

compensation under this settlement, they must show not only that

asbestos has caused scarring of the lung or the lining of the lung,

but also that they have a certain level of functional breathing

difficulties as measured by pulmonary function tests. See SOS,

Part V(B)(4), JA 63-64. In sharp contrast, under the laws of

almost every state, demonstrable scarring of the pleura or interior

lung tissue as a result of asbestos exposure is itself a cognizable

injury giving rise to a claim for money damages. The Settling

Parties have virtually admitted that a majority of the claims in the

tort system for non-malignant asbestos-related injuries will not meet

the settlement’s criteria for cash compensation.’ Rather than

receiving cash, these non-qualifying class members are allegedly

provided a “package of benefits” to compensate them for releasing

their damages claim. However, a detailed analysis of these alleged

benefits demonstrates that they are all either already available to

victims of non-malignant disease in the tort system, or they have

not been proven by the Settling Parties.

The district court identified six benefits provided by the

settlement to non-qualifying claimants with non-malignant disease.

Cert. App. 173a-174a (citing, for example, that the settlement will

provide faster payment than a lawsuit if a class member should

develop a qualifying disease). The initial problem with the district

court’s analysis is that all six of these alleged “benefits” to non-

qualifying claimants actually are arguments that the settlement

provides value to qualifying claimants that qualifying claimants

allegedly would not receive in the tort system. This entire analysis

rests on the assumption that, once a claimant develops a qualifying

disease, she will be able to receive greater value for her claim

*Dr. Victor Roggli, one of the Settling Parties’ medical experts, testified

that claims for pleural disease that would not meet the Georgine qualifying

criteria “definitely” make up at least a plurality of all asbestos-related

illnesses, and “probably” constitute a majority. JA 807-08.

under the class settlement than she would if she filed a lawsuit in

the tort system. As discussed later in this brief, such an assumption

is grossly inaccurate.

For present purposes, the bottom line for non-qualifying

claimants is that the value of their claims is drastically reduced

because they no longer have the option of seeking a cash settlement

or judgment for money damages. Contrary to the semantic smoke

and mirrors adopted by the district court, non-qualifying claims are

not “deferred.” Instead, such claims are entirely released for no

money plus the CCR's agreement to waive the statute of limitations,

an option that CCR historically made readily available to all

plaintiffs.° Only if the claimant later develops a qualifying disease,

which would give her a much more valuable and different lawsuit

in the tort system, can that claimant ever receive any money under

the settlement.

By cutting off the option to seek cash compensation, the

settlement significantly and unfairly reduces the value of so-called

non-qualifying, non-malignant claims, which do qualify for

compensation in the iort system. Freedom of choice is valuable in

and of itself as a means to further the personal autonomy of a

claimant, but this particular choice is critical since many claimants

with non-qualifying claims are unlikely to develop a qualifying

*Mr. Rooney testified that CCR is generally willing to provide “Green

Cards,” or agreements to waive the statute of limitations upon a claimant's

development of a more serious disease, to any tort claimants who desire

them, and that he cannot think of a “downside” to CCR of providing such a

Green Card. Depo. of Michael Rooney, January 10, 1994 (Vol. I) at 171-72;

and at 169.

te

9

injury and would thus never benefit from the class settlement.’ The

relative value of a waiver of the statute of limitations as compared

with a cash settlement will differ drastically depending on the life

circumstances of a particular individual, and removing the choice

of claimants to seek cash unfairly abrogates the rights of the largest

single group of people with asbestos-related injuries -- those with

non-qualifying claims for non-malignant disease.

Although the Settling Parties’ medical experts all opined that

the settlement’s qualifying criteria for non-malignant injuries are

medically reasonable, such testimony was irrelevant to the district

court’s determination whether the settlement fairly compensates

claimants for releasing their tort claims. Since this action was

filed, the Settling Parties have attempted to frame the debate over

the settlement's fairness as a policy battle regarding the merits of

providing a tort law remedy to claimants who cannot demonstrate

objectively measurable asbestos-related breathing difficulties

through pulmonary function testing. See, e.g., Proffer of the CCR

Defendants of June 25, 1993, at 37 ("whether claimants with

pleural plaques should receive compensation is a hotly-debated

issue in the asbestos litigation"). AVA strongly disagrees with the

position of the Settling Parties that, as a policy matter, such victims

should not have cognizable tort claims. See Testimony of Dr.

Christine Oliver, March 14, 1994 at 143 (describing how many

7’ While the record contains contradictory evidence regarding the extent

to which non-qualifying, non-malignant claimants will eventually develop

qualifying illnesses, there is no question that large numbers of claimants will

never do so. Furthermore, the relative risk of developing a future

malignancy will differ with each claimant, depending upon exposure history,

life expectancy, and genetic propensity to develop cancer. While it may be

true that a waiver of the statute of limitations acts in some sense like an

“insurance policy” against the non-qualifying claimant developing a more

serious asbestos-related illness, for many claimants the “premium” of giving

up the right to pursue the cash will not be worth the “coverage,” for reasons

related to the individual life circumstances of the claimant. Absent the class

settlement, whether to take out such “coverage” is, and should remain, a

decision for each individual class member to make.

10

patients suffer from shortness of breath related to their asbestos

exposure that is not reflected by pulmonary function test results).

But whatever outcome that policy battle might have in an

appropriate legislative or state judicial forum, that debate should

not have been an issue facing the trial court. Under the laws of

nearly every state, class members who can demonstrate through x-

rays that their asbestos exposure has caused scarring on their lung

or pleura have a cognizable injury and a claim for damages. Those

claims have cash settlement value in the marketplace, and the class

settlement fails to compensate class members fairly for »eleasing

those claims because it removes the claimant's option to seek cash.

3. The settlement releases class members’ loss-of-

consortium claims for no consideration.

Several of the class representatives and millions of putative

class members have alleged claims against CCR based solely on

their loss of consortium. These plaintiffs are the spouses, parents,

children, and other relatives of class members who have been

exposed to asbestos, some of whom have physical symptoms, but

most of whom do not. JA 13-14. The purpose of including the

loss of consortium class members is unmistakable: the settling

parties hope to extinguish all of the consortium claims without

making any payment to the class members asserting those claims.

The unfair treatment of these class members is breathtaking.

Exposed class members who suffer, now or in the future, from a

compensable asbestos-related injury eventually will be paid, but

their spouses, parents, children, and other relatives take nothing at

all. This result can be seen clearly from the settlement, which

defines "Claim" and "Settlement Class Member” to encompass loss

of consortium claims and claimants, JA 49-50, but which only

compensates claimants for their own physical injuries.

SOS(VIII)(B), JA 79-82 & Exs. A, B, JA 108-110.

At the fairness hearing, CCR claimed that its historical

settlement data included loss of consortium settlements and that

those settlements were made in conjunction with the settlement of

the exposed person's claim. Testimony of Michael Rooney, March

1, 1994 Tr. at 186-87. This testimony is telling for what it omits.

That consortium claims are usually settled together with the

primary claims says absolutely nothing about how those claims are

valued in the tort system. The presence of relatives as plaintiffs in

a typical asbestos suit must add value to the suit. If that were not

so, plaintiffs’ lawyers would not routinely include loss of

consortium claims in asbestos personal-injury complaints, and the

CCR would not have negotiated their inclusion in the class. In any

event, the record is bereft of any indication that the CCR's

settlements have ordinarily valued loss of consortium claims at

zero, which is what the settlement does here by failing to make any

payments to the loss of consortium class members.

B. On The Whole, Class Members With Qualifying

Claims Would Be Able To Secure Greater Monetary

Compensation By Filing Lawsuits.

On average, the class members who receive cash compensation

under the class settlement will receive less money than they would

if they had filed an individual tort lawsuit. For the most part, in

order for a claimant to receive cash compensation for an asbestos-

related disease, he or she must meet the medical criteria set out for

each compensable medical category in Section V(B) of the

settlement. JA 60-65.

Class members who meet the criteria may elect to be paid

through one of three procedures: “the simplified payment

procedure,” Part VIII(B)(1), JA 79, “individualized payment

procedure,” Part VIII(B)(2), JA 80, or the “extraordinary claims

procedure,” Part IX, JA 82. However, for purposes of determining

what the average class member with a qualifying claim will receive

under Georgine, analysis of the individualized payment procedure

is all that is necessary. Under the individualized payment

procedures, qualifying claimants will be paid significantly less than

what similarly situated claimants would receive in the tort system.

12

1. Because qualifying claimants have no leverage to

refuse an offer made under the class settlement,

such claimants will be paid the minimum of the

negotiated average value range for their claims.

The Georgine settlement provides that the CCR “shall evaluate

all Qualifying Claims for which individualized payment procedures

have been elected.” JA 80." Based on this evaluation, the CCR

“shall make a good faith offer” to each Qualifying Claimant for an

the particular disease category from which the claimant suffers.

While any particular qualifying claimant who is applying for

compensation under the individualized payment procedures may

recover any amount between the minimum and maximum values,

for the class as a whole the only relevant values are contained in the

“Negutiated Average Value Range” ("NAVR"). This is because

“the average amount offered in settlement to those Claimants with

Qualifying Claims who have elected the individualized payment

procedures in each Compensable Medical Category in any six-

month period, shall fall within the negotiated average value range

for that compensable medical category.” JA 81. Both the minimum

* The settlement also provides that CCR makes the initial determination

whether a claim qualifies for compensation at all. This includes determining

whether the claimant has met the exposure criteria, SOS IV(A), JA 56-57, the

medical criteria, SOS I11(B)(2), JA 53, and even whether the claim is time

barred by applicable statutes of limitation. SOS VI(A), JA 75. While the

settlement allows claimants to “appeal” CCR's initial determinations to third

parties chosen jointly by the parties, clients with potentially valid claims often

do not appeal because they assume, rightly or wrongly, that the initial

decision was correct, or that they do not want to bear the additional time and

expense. In a system in which the initial decision-maker is neutral, deciding

not to pursue an appeal is often a rational decision based on all the risks and

benefits. Here, however, such forbearance will reflect no more than the

fundamental unfairness of the CCR-dominated claims procedure. Moreover,

claimants who do not meet the settlement's qualifying criteria are not entitled

to exit to the tort system, so the propriety of CCR's determinations can only

be tested by procedures established within the settlement. SOS(X), JA 87.

13

and maximum values and the NAVR for each compensable medical

category are found in the Compensation Schedule, Exhibit B to the

settlement. JA 110.

Qualifying claimants who are dissatisfied with the “offer” CCR

makes them have no leverage to force CCR to a higher figure. For

claimants who believe their claim is worth more than what the CCR

has offered, there are only three options: they can apply for

Extraordinary Claim treatment, they can stand in line to exit to the

tort system or to binding arbitration, or they can accept the offer.

For the vast majority of qualifying claimants, neither of the first

two options will provide them any benefit,” so claimants will be

effectively forced to accept CCR's initial offer whether they like it

Or not.

Because qualifying class members will have virtually no choice

but to accept CCR's initial offer, CCR has no incentive to offer

claimants, on average, amounts greater than the low-end of the

NAVR. The terms of the settlement do not require CCR to pay any

more to claimants on average than the low end of the NAVR. In

light of the fact that almost all qualifying claimants will effectively

be forced to accept CCR's initial offer, CCR would be acting

irrationally if its average offer exceeded the bottom of the NAVR.

2. CCR's historical settlement averages are

significantly higher than the amounts CCR is

required to pay under the class settlement.

"In the compensable medical categones of mesothelioma, lung cancer, and

“other cancer,” no more than 3% of qualifying claimants may be selected as

extraordinary claims. Worse, only | % of qualifying non-malignant claimants

may be selected for extraordinary claim treatment. With respect to the

supposed “right” to exit to arbitration or the tort system, only 2% of

mesothelioma and lung cancer victims, | ®% of other cancer victims, and 5%

of non-malignant victims may exercise this mght in any given year. What this

means in real numbers is that, of the claimants seeking individualized

payment in the first year of the settlement, a maximum of 97 -- .6% of the

total -- could have rejected CCR's first and only offer and access the tort

system. JA 173-74.

14

Once one assumes that CCR will act rationally and pay

claimants no more than the settlement obligates them to pay, it

becomes clear that the class settlement, on average, will afford

significantly less compensation to class members than historical

settlement averages would dictate. In each disease category, CCR's

overall historical mean for settlements paid that type of claim

substantially exceeds the averages that will be paid under the SOS.

The chart below demonstrates that fact:"°

CLASS

ACTION HISTORICAL PERCENTAGE

DISEASE AVERAGE SETTLEMENTS DIFFERENCE’

Mesothelioma $44,890 $68,657 53%

Lung Cancer 22,180 30,578 38%

Other Cancer 10,715 16,939 58%

Non-Malignant 6,242 8,810 41%

As the above chart demonstrates, victims who suffer from diseases

in each compensable medical category will be paid far less under

the class settlement than what CCR has historically paid individual

This chart uses a “blended average” to determine the average overall

values CCR will pay to all qualifying claimants. This average includes both

non-extraordinary claims, based on the bottom end of the NAVR, and

extraordinary claims, assuming that extraordinary claims will be paid at their

maximum. Compare Settling Parties’ Exhibit SP 601B and 601D (making

same comparison, but assuming claimants will be paid the top end of the

NAVR). The district court found the settlement’s compensation to be “fair”

by comparing the top end of the NAVR to historical values. See Cert. App.

139a (relying on SP 601B-D).

'' This column reflects the percentage by which historical averages exceed

the “blended average.”

15

claimants with the same diseases.'? In the aggregate, by paying at

the low end of the NAVRs, CCR will save more than one-third of

a billion dollars over the first ten years of the settlement. See chart

attached to district court docket no. 1058.

Finally, the district court’s contentions regarding benefits

provided by the settlement to qualifying claimants that are allegedly

unavailable to those claimants in the tort system are meritless. See

Cert. App. 173a-174a. The same defenses that are waived under

the settlement are also waived whenever CCR settles a claim in the

tort system. The value of any such waiver, therefore, is fully

reflected in the market's valuation of the case. That is, to the extent

CCR has available any viable defenses to claim, the possibility that

such defenses will be accepted by a court or jury reduces the value

of the claim for settlement purposes. Thus, while a waiver of such

defenses is indeed valuable, it is a value that, for purposes of

comparing the class settlement with the tort system, is already

accounted for by tort settlement averages. '’

3. By failing to provide any means to account for

inflation, the settlement ensures that future

claimants will be grossly undercompensated.

"This comparison of the negotiated value range to historical settlement

data understates the extent to which class members are being

undercompensated by the class settlement, because many claims that would

not qualify to be paid under Georgine are included in that data, and the value

of those non-qualifying claims in the tort system is generally less than the

value of those claims which would qualify for cash under Georgine.

Testimony of Michael Rooney, March 1, 1994 at 184-87.

'? Nor does the record reflect the value of the opportunity under the

settlement for claimants who suffer from non-malignant disease to later bring

a claim for any subsequently-developed malignancy. Indeed, the fact that

90% of tort claimants have refused CCR’s offers of analogous “limited

releases” is evidence that such releases are not worth as much as the increased

cash a claimant can receive by providing a full release of all claims. See

Testimony of Michael Rooney, February 28, 1994 at 243-44.

16

As the previous section demonstrates, compensation values

under the class settlement are severely inadequate when compared

with CCR's historical settlement averages. But even this

comparison understates the difference between the value of

qualifying class members’ claims under the settlément and the value

of their lawsuits in the tort system.

The most dramatic problem associated with relying solely on

historical settlement averages as a baseline for negotiating the class

settlement is the settlement’s failure to account for inflation. The

problem caused by inflation is simply stated. As prices rise, goods

and services become more difficult to obtain, unless the resources

available to purchase those goods and services rise at the same

pace. Inflation has been a continuous presence in the American

economy since the 1940's, rising as much as 103.4% over the

course of one decade (the 1970's). Astoundingly, the class

settlement does not take inflation into account. The Stipulation

compensates qualifying claimants in accordance with a fixed

schedule of average dollar payments, with no provision specifically

to adjust for inflation. Even if we conceded that the compensation

values under the settlement are fair in 1993 dollars -- which we do

not -- it is surely not fair to pay class members who qualify for

payment in 2003, or 2013, in the same 1993 dollars.

Over the past half-century, the cost-of-living has consistently

risen significantly during each decade. On April 8, 1994, the

district court took judicial notice of the “all items” Consumer Price

Index for all urban consumers, known as the "CPI-U,” from the

date of its inception, January 1913, through January 1994, and the

CPI-U for medical care from 1966 through 1993. Docket No. 1005.

The amounts reflected in the settlement’s Negotiated Average

Value Ranges for each compensable medical category are frozen in

place for the first 10 years of the settlement’s operation, i.¢.,

through late January 2004, see SOS, XXVII.G., JA 105, regardless

of increases in the cost of living or any other factor that would

render such future awards manifestly unfair. After the first 10

years, these amounts still may not increase. Rather, at the

beginning of year 10, class counsel and CCR are directed to

17

negotiate adjustments, if any, to the compensation schedule. If that

negotiation is unsuccessful, the matter is submitted to non-binding

mediation and, if necessary, to binding arbitration to be completed

by the end of the third quarter of year 10. SOS, VII.B.1. and 2,

JA 77. However, “in no event shall any adjustments to the values

in the Compensation Schedule ... exceed the values in the

Compensation Schedule for the prior ten (10) year period by more

than twenty percent (20%)." Id. VU.B.3., JA77 (emphasis

added). '*

In the 20 years prior to January 1994 when CCR began

processing claims under the settlement -- December 1973 through

December 1993 — the CPI-U increased by 2/5.6%. Moreover, the

rate of inflation for medical costs has recently exceeded the overall

inflation rate by a factor of two or three. John C. Coffee, Jr. Class

Wars: The Dilemma of the Mass Tort Class Action, 95 COLUM. L.

REV. 1343, 1377 n.122 (1995). Yet, under the settlement, for the

next 20 years, the Compensation Values will be adjusted upward no

more than 20%. Thus, if the inflation over the next two decades

is anything approaching what it was over the last two, awards under

the class settlement will become virtually worthless.

Tort awards and settlements should keep pace with inflation,

because large components of such awards and settlements -- ¢.g.,

lost wages and medical care -- are themselves driven by inflation.

See M. Peterson, Compensation of Injuries -- Civil Jury Verdicts in

Cook County 4 (Rand 1984)(jurors were remarkably adept at

adjusting awards for inflation). Thus, a tort award for lost future

income made in the year 2000 would look to wage rates in that year

and into the future. See id.; Blackmar, and Wolff, 3 Federal Jury

Practice and Instructions § 85.04, p. 316 (4th ed. 1987). The same

is true for an award of the cost of present and future medical care,

where the real cost, at the time of the trial and beyond, of the

'* We note the shocking inequality of this provision in that there is no

downward limit whatsoever on any adjustment, although the upward limit is

20%. The adjustments are to be made every 10 years in perpetuity, but, for

simplicity, we consider only the settlement’s operation over the first 20 years.

relevant goods and services would be assessed. Jd. § 85.07, pp.

319-20.

C. The Evidence Fails To Show That the Class Settlement

Will, On Average, Provide Compensation To

Qualifying Claimants More Quickly Than the Tort

System

One of the Settling Parties’ major selling points in ihis

litigation has been that the Georgine agreement will allegedly

provide compensation to qualifying claimants more quickly than the

tort system. See, e.g., SOS at 3, JA 47 ("The procedures set forth

in this Stipulation would provide a . . . speedy . . . method of

compensating claimants"). But neither the Settling Parties nor the

district court have pointed to any evidence to show that class

members will be paid any faster on average, or even as fast, under

the class settlement than they would have been paid had they filed

lawsuits.

Whether qualifying claimants will actually be paid quickly

after submitting their claim under the settlement depends entirely

on whether the case flow limitations for a particular disease

category have been exceeded during the year in which the claim is

submitted. See SOS, Part VIII(A)(1), JA 77-78. If more than the

maximum number of qualifying claims in a particular disease

category is submitted in a given year, then the excess claims will

be first in line to be paid the following year, and they will be

counted against the case flow maximums for that next year. /d.

Thus, if the case flow maximums underestimate the number of

qualifying claims in each year, with each passing year there will be

a growing backlog of claims waiting to be raid. See Testimony of

Michael Rooney, March 3, 1994 at 52-54 (discussing potential

backlog of non-malignant claims).

In negotiating the case flow maximums, the Settling Parties

failed to periorm the only analysis that would have enabled them to

determine the effect such caps would have on the timeliness of

claims payment — a projection of the number of future claims likely

19

to be filed against the CCR companies. Obviously, without having

some estimate of how many class members will submit qualifying

claims, there is no way to estimate whether or to what extent the

case flow maximums will be exceeded. Without knowing whether

the caps will be exceeded, there is no way of knowing how long a

claimant will have to wait to be paid. CCR Chief Operating Officer

Michael Rooney, the only witness to testify at the fairness hearing

who actively and extensively participated in the negotiation of the

Georgine settlement repeatedly said that he didn't expect or know

“anything” with respect to future filings against CCR. Testimony

of Michael Rooney, March 1, 1994 at 195. Similarly, Martha

Wilke Murray, CCR's appointed keeper of relevant statistics,

testified, “I have no idea what the number of claims to be filed in

the future will be." Testimony of Martha Murray, March 11, 1994

at 294. Mr. Rooney also testified that he did not recall either that

class counsel asked CCR to perform a future claims projection, or

that class counsel had ever indicated that they would perform their

own such projection. Testimony of Michael Rooney, March 3,

1994 at 163-64.

The only basis for the district court’s finding that the

settlement will provide “prompt compensation,” Cert. App. 268a,

is its finding that “the Case Flow Maximums, if reached, would

result in the CCR defendants paying claims at a faster rate, than

they have ever paid before.” Cert. App. 145a. That statement,

however, which is based on CCR's expressed hope or expectation

that it will resolve a certain number of pending claims outside the

class, in combination with the claims resolved under the class

settlement, has nothing to do with whether class members will

receive timely payments under the settlement. See SP Exhibit

601(H) (relied on by district court at Cert. App. 145a). No matter

how many claims CCR settles in the tort system, class members

20

who have not opted out will have to resolve their claims through

the class procedure, which is subject to the case flow caps."

The only evidence that indicates the likely number of future

claims to be filed shows that the case flow maximums will be

exceeded and qualifying claimants who file in the later years of the

settlement may well have a longer wait on average than they would

in the tort system. Based on work he has done predicting the time

course of cancer, Dr. William Nicholson was able to evaluate the

effect of the caps based on the assumption that the case flow

maximum for the first year of the settlement accurately predicts

how many qualifying lung cancers will be filed against CCR in that

year. Using that generous assumption, and charting the overall

incidence of lung cancer from that point forward, Dr. Nicholson

predicted that lung cancer claimants would be forced to wait in line

in the later years of the settlement because the decrease in the case

flow maximums for lung cancer does not correspond with the

expected incidence of asbestos-related lung cancers over the same

period. In other words, while the case flow caps go down, the rate

of asbestos-related lung cancers being filed will remain almost

constant. Deposition of Dr. William Nicholson, March 31, 1994

at 71-73. This problem is also true for the mesothelioma case flow

maximums under the settlement. /d. at 66. The Settling Parties’

own expert confirmed that the incidence of asbestos-related

mesothelicma cases over the course of the settlement is expected to

remain thy same, and he also assumed that the incidence of

asbestos-related lung cancers will remain constant. Testimony of

Dr. Victor Roggli, March 9, 1994 at 150; 121-23.

'S An additional problem with the Settling Parties’ claim of efficiency

from this class settlement is that virtually all lawsuits against CCR also

involve other asbestos defendants. See Testimony of Michael Rooney, March

10, 1994 at 3-4. In order to recover against those defendants, class members

will have to pursue a lawsuit, apart from their administrative claim against

CCR pursuant to this class settlement. Such a duplication of effort will

actually increase a claimant's transaction costs, and decrease efficiency with

respect to overall resolution of their claims against all defendants.

21

Il. CLASS MEMBERS WERE DENIED DUE PROCESS BY

CLASS COUNSEL'S FAILURE TO PROVIDE

ADEQUATE REPRESENTATION

The manner in which the Settling Parties negotiated the

proposed settlement denied due process to class members because

the conflicting interests of class counsel interfered with their

representation of the class. In the summer and early fall of 1992,

when class counsel undertook the fiduciary responsibility to

negotiate on behalf of class members, they faced an immediately

apparent ethical conflict of interest created by the combination of

their concurrent representation of present and future asbestos

claimants and CCR's announced settlement posture. Later, the

divided loyalties created by this conflict flowered into a forced

trade-off of the rights of one group of clients against another.

Because the conduct of these negotiations raise so many

troublesome questions regarding the loyalties of class counsel, the

Settling Parties would prefer the Court to presume from the district

court's review of the settlement that the negotiations were properly

conducted. Pet. Br. at 46 (“a court’s determination that the terms of

the settlement ave fair presumptively establishes that the class

received adequate representation”). But that is not correct. As the

Seventh Circuit stated in Jn re General Motors Corp. Engine

Interchange Litig., 594 F.2d 1106 (7th Cir. 1979):

No one can tell whether a compromise found to be “fair”

might not have been “fairer” had the negotiating

[attorney] possessed better information or been animated

by undivided loyalty to the cause of the class. The court

can reject a settlement that is inadequate; it cannot

undertake the partisan task of bargaining for better terms.

The integrity of the negotiating process is, therefore,

important.

22

594 F.2d at 1125 n. 24 (emphasis added).’* Regardless of the

district court’s conclusions regarding the fairness of this

settlement's terms, it erred by approving the settlement in light of

the overwhelming evidence that class counsel negotiated the deal

burdened by significant divided loyalties.

A. Class Members Gave Up Rights During The

Negotiation In Return For Consideration That Did Not

Go To the Class

In any negotiation, if one party desires a certain term or

concession, the other party is given leverage to demand something

in return. For example, in negotiating the typical personal injury

settlement, the defendant's desire to avoid the uncertainty of a

possible jury verdict allows the plaintiff to demand a higher price.

As a result, the closer the case comes to trial, the more the

defendant is generally willing to pay in settlement.’ During the

course of the negotiation of this class action settlement, CCR

demonstrated a willingness to pay significant value in return for the

class giving up their right to seek monetary compensation absent a

demonstration of measurable functional breathing impairment from

asbestos exposure. So, one would think that the affected class

members would have gained substantial benefits by conceding that

point. Perhaps, for instance, medical monitoring benefits could

“See also In re “Agent Orange” Prod. Liab. Litig., 818 F.2d 216, 224 (2d

Cir.), cert. denied, 484 U.S. 926 (1987) (“We also reject the district court's

finding that its authority to approve settlement offers under Fed. R. Civ. P.

23(e) acts to limit the threat to the class from a potential conflict of interest”);

In re Baldwin-United Corp., 10S F.R.D. 475, 482 (S.D.N.Y. 1984) (“[iJn

order to supplement judicial examination of the substance of a compromise

agreement . . . attention must be paid to the process by which a settlement

has been reached").

'? Mr. Rooney acknowledged that this is generally true in the asbestos

litigation. See Testimony of Michael Rooney, March 1, 1994 at 221.

——as «

23

have been obtained for non-qualifying class members. But a review

of the history of the negotiations reveals otherwise.

Since 1991, CCR had been unwilling to negotiate inventory

settlements with plaintiffs’ counsel unless there was a pleural

registry in place where that counsel practiced.'* Testimony of

Lawrence Fitzpatrick, February 23, 1994 at 191-92, JA 667. But

when CCR sat down with class counsel to negotiate the futures

class settlement, it made known that it would be willing to negotiate

inventory settlements with plaintiffs’ attorneys if and when CCR

became “reasonably confident” that there would be a class

settlement establishing a minimal level of medical criteria for a

compensable claim. Testimony of Lawrence Fitzpatrick, February

23, 1994 at 192-93, JA 667. In May or June of 1992, CCR

reached that level of confidence that the class negotiations would

succeed, and it fulfilled its promise to begin negotiating inventory

settlements. Testimony of Michael Rooney, February 28, 1994 at

202-03, JA 761-62. Unfortunately for the members of the class,

they were not among the many people who benefitted from CCR's

change in policy.

However one labels the behavior of class counsel, they failed

to fulfill their duties of adequate representation by effectively

bargaining away the rights of class members in exchange for

benefits that went to other clients, to themselves, and to third

parties. As Professor John Coffee testified, class counsel's existing

clients reaped greater than market value in settling their claims as

part of inventory settlements conducted by class counsel with the

CCR. March 29, 1994 Tr. at 54. Conversely, class members

received less value for their claims in the settlement than they

would have in the tort system. See supra, Part I; Testimony of

John Coffee, March 29, 1994 at 116. In light of the Settling

* A “pleural registry” is an order by a court requiring that asbestos defendants

waive the statute of limitations against claimants who do not meet an objectively

measurable level of functional impairment from asbestos exposure, and that such

claimants will not have the right to seck compensation until they are able to

demonstrate the requisite level of impairment. See Testimony of Lawrence

Fitzpatrick, February 22, 1994 at 123.

24

Parties’ acknowledgement that these inventory settlements would

not have occurred but for CCR's belief that the class settlement

would be reached, See, e.g., February 23, 1994 Tr. at 193-94, the

only fair inference is that class members traded value in return for

which CCR paid present inventory claimants.

1. Class counsel's inventory ciaims received

substantially greater compensation than they

would have received under the Georgine

settlement.

A comparison of the values received by class counsel's

inventory clients with the negotiated average value ranges under the

class settlement shows that class members gave up rights in return

for benefits that went to the inventory clients of class counsel. That

class members who are situated similarly to the inventory clients

will receive less value for their claims raises the unavoidable

inference that class counsel traded away the rights of class members

for the benefit of their present clients and themselves. Data supplied

by the Settling Parties reveals that inventory clients fared much

better than they would have under class deal. Settling Parties’

Exhibit 302 reveals the total amount of settlements for Ness,

Motley clients, the total amount for Greitzer & Locks clients, and

the number of claimants in each disease category. Using this data

from SP 302 and the negotiated average value ranges for each

disease category found in the Compensation Schedule to the

Georgine SOS, Objectors' Exhibit 170 (a copy of which is attached

to this brief) reveals that both Ness, Motley and Greitzer & Locks

es

25

received substantial premiums for their inventory settlements as

compared with the Georgine values."

Using two extremely generous assumptions, Objectors' Exhibit

170 shows that Ness, Motley's present clients received 54 percent

more” and Greitzer & Locks clients received 72 percent more”' in

the inventory settlements than those same claimants would have

received under the class deal. The first assumption benefitting the

Settling Parties is that the claimants would have received the high

end of the maximum negotiated average value under the class

settlement. Actually, it is far more fair to assume that CCR will

pay on average only its minimum legal obligation under the

agreement, which is the low end of the negotiated average value

ranges, as is discussed in detail in Part 1(A)(1) of this brief. The

second assumption that tilts this comparison sharply in favor of the

Settling Parties is that all of class counsel's present inventory

clients would have qualified for cash compensation under the class

settlement at all. The evidence suggests that in reality 45 to 50

percent of lung cancer and other cancer claimants who file claims

'* Exhibit O-170 was offered by Professor John Coffee as part of his

expert tesumony that class counsel collusively negotiated the class settlement.

Professor Coffee accepted no money from objectors for his time in the case,

see March 29, 1994 Tr. at 21, nor was he paid by objectors or others for his

article discussing this case (among others). See John C. Coffee, Jr., Class

Wars: the Dilemma of the Mass Tort Class Action, 95 COLUM. L. REV. 1343,

1343 n.* (1995). This fact stands in contrast to an article relied upon by

Petitioners, the writing of which they funded. Edley & Weiler, Asbestos: A

Billion-Dollar Crisis, 30 Harv. J. Legis. 383, 383 n.aal (1993).

® This percentage was calculated by dividing the difference between what was

actually paxd Ness, MoUcy's inventory clients and the estimated recovery for those

same clients under Georgine ($138,077,100 - $89,660,000 = $48,417,100), by

™ This percentage was calculated by dividing the difference between what was

actually paid Greitzer & Locks's inventory clients and the estimated recovery for

those same clients under Georgine ($77,417,000 - $44,907,500 = $32,509,500),

by the estumated Georgine recovery ($44,907,500).

26

and receive money in the tort system will not qualify under

Georgine,and a majority of non-malignant claimants will also not

qualify. See supra at Part (A). There is nothing in the record to

suggest that the inventory claims were any different from the

average group of claims filed in the tort system. See JA 770-71.”

2. Other evidence demonstrates that class counsel

traded away the rights of class members to benefit

other interests.

In addition to the comparison of relative valve discussed

above, the record reveals many other indicators that class counsel

is class counsel's behavior revealing that they believed their present

clients were receiving a better deal than class members. Mark lola,

a plaintiffs’ attorney who is affiliated with Ness, Motley in some

cases,” testified that class counsel Joe Rice advised a group of

Ness, Motley co-counsel during a Miami meeting in November,

1992 that “the terms as to certain nonmalignant people in the

futures deal, are going to be worse than the terms for those people

in the present system and . . . people [should] get their cases on

file.” Testimony of Mark lola, March 30, 1994 at 68.

lola's testimony is corroborated by Objectors’ Exhibit 16 (a

copy of which is attached to this brief), an August 21, 1992

memorandum from Motley to all Ness, Motley affiliated counsel,

which explicitly warns against the possibility of upcoming

agreements that would harm the interests of future claimants. The

memo States:

™For a detailed critique of the district court's failure to credit Exh. O-170,

see Susan Konak, Feasting While the Widow Weeps: Georgine v. Amchem

Products, Inc., 80 CORNELL L. REV. 1045, 1066-78 (1995).

” Testimony of Mark lola, March 30, 1994 at 26-77.

ee a

ee

27

Judge Weiner is pressing extremely hard for a settlement

of all asbestos personal injury cases pending in New

England. If this settlement agreement is signed, the judge

may use it as a blueprint for future settlement

negotiations. Please be advised that the New England

Agreement includes a so-called “futures agreement” that

would establish minimum medical criteria for payment of

future claims. Present claims would not be burdened

with such criteria.

Therefore, in order to have your cases considered

“present claims" we are advising you to serve and file

as many of your unfiled cases as soon as possible.

Exh. O-16 at 2 (emphasis in original). This document speaks for

itself — Motley advised all of his affiliated counsel to file claims as

soon as possible so as to avoid the risk that those claims would be

“burdened” with the necessity of meeting minimum medical criteria

in order to be paid. One month later, Motley and Rice reentered

members.

Of course, the best evidence of class counsel's professional

judgment regarding the relative merits of the class and inventory

settlements are found in the terms of the deals themselves. None of

the more than thirteen thousand of class counsel's inventory clients

suffering from non-malignant disease sought a waiver of the statute

of limitations from CCR rather than cash.** The district court's

attempts to justify this disparate treatment of similarly situated

claimants are spurious. Cert. App. 188a (“finding” that future

claimants may legitimately be »eated differently than present

“Professor John Freeman, who was the ethics expert consulted by Ness,

Motley during the course of the class negotiations, testified that it was his

understanding at the time that all of the present unimpaired clients of Ness,

Motley settled for cash in the inventory deals. March 11, 1994 Tr. at 16.

claimants because they had “different expectations” from present

claimants).”

Class counsel's sell-out of the futures class for the benefit of

present claimants is not made acceptable by the fact that CCR

settled inventories with law firms other than class counsel after

becoming confident that the class agreement would be reached.

Those agreements are consistent both with CCR’s short-term goal

of having the class action approved and its long-term goal of

resolving all of its pending and future asbestos liabilities. As

Professor Coffee testified, it would not have been realistic for CCR

to assume that the class action could be approved if the entire

plaintiffs’ bar, other than class counsel, formed a united phalanx to

oppose it. Thus, by settling the inventories of other plaintiffs’

firms, CCR assured that there would be some support for the class

action from other attorneys. See Testimony of John Coffee, March

29, 1994 at 61-62.”

B. Class Counsel Negotiated the Settlement While

Laboring Under Disquailifying Conflicts Of Interest

® indeed, Professor Hazard, who unlike Freeman had not been informed that

none of the mventory claunants received waivers of the statute of limitations in lieu

of cash, testified that he had assumed that a significant number of the inventory

claimants had accepted Green Cards because it was the best “professional

judgment” of their counsel to do so. February 25, 1994 Tr. at 140. In fact, when

asked to assume the contrary, Hazard acknowledged that such a faci could be an

indicator of collusion id. at 146.

In addition to giving up class leverage for the benefit of the inventory

semiements, class counsel! negotiated at least one provision into the class

settiement that will benefit themselves at the expense of most of the class. By

CCR's admission, the settlement requires that otherwise identically situated

claumante will be treated differently based solely upon the historical track

record of thew attorneys. See SOS(VII\B)2), JA 80; Testimony of Lawrence

Fitapatrick, February 24, 1994 Tr. at 88-89. The natural result of this reality

created by the settlement wii! de to drive claimants to historically successful

lawyers, such as class counsel, see Ex. SP 502, CCR Doc. No. 2000263, and

thereby to allow those lawyers to corner the market.

a

29

Class counsel's collusive negotiation of the Georgine

settlement constituted a realization of exactly the dangers the Model

Rules of Professional Conduct are designed to prevent. Although

the actual harm from class counsel's concurrent representation of

class members and present clients did not result until the deals for

both sets of clients were struck, under Model Rule 1.7(b) class

counsel should have been disqualified from representing the class

from the moment they understood CCR's negotiating posture,

which raised an unmistakable spectre of conflicting interests.

Model Rule of Professional Conduct 1.7(b) (1983) provides:

(b) A lawyer shall not represent a client if the

representation of that client may be materially limited by

the lawyer's responsibilities to another client or to a

third person, or by the lawyer's own interests, unless:

(1) the lawyer reasonably believes the representation

will not be adversely affected; and

(2) the client consents after consultation. When

representation of multiple clients is undertaken, the

consultation shall include explanation of the implications

of the common representation and the advantages and

risks involved.

The comment to the rule goes on to state: “[aJn impermissible

conflict may exist by reason of . . . the fact that there are

substantially different possibilities of settlement of the claims or

liabilities in question.” MODEL RULES OF PROFESSIONAL CONDUCT

Rule 1.7 cmt. (1983).

In this case, class counsel should never have represented the

futures class because they knew that, in light of CCR's settlement

posture, such representation would almost certainly be materially

limited by responsibilities owed to their present clients. There was

little question in late 1991 that inventory settlements would be in

the best interests of both class counsel and their present clients, and

once the class negotiations began, class counsel knew that in order

30

for CCR to be willing to enter into inventory settlements for the

benefit of their present clients, they would have to agree that future

claimants must meet some level of objective medical criteria that

demonstrated pulmonary function impairment as a result of asbestos

exposure. Because there was at least a substantial possibility that

such an agreement imposing medical criteria would “materially

limit” their representation of the futures class, and because there

was no reasonable method of obtaining the consent of the class to

the dual representation, Motley, Rice, and Locks should have

declined to negotiate the Georgine settlement.”

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted,

P.O. Box 701917

Tulsa, Oklahoma 74170-1917

(918) 495-0550

Counsel of Record for Asbestos Victims of America

January 15, 1997

APPENDIX

O-16 NESS, MOTLEY,

LOADHOLT, RICHARDSON & POOLE

MEMORANDUM

TO: All Asbestos Persona! Injury Co-counsel

FROM: Ronald L. Motley, Esquire and Charles W. Patrick,

Jr., Esquire

RE: Recent Developments in Asbestos Litigation/Ness,

Motley Personal Injury Co-counsel Meeting

DATE: August 21, 1992

The Asbestos Litigation Group is having an educational

seminar in Miami, Florida on Friday, November 6 through

Sunday, November 8, 1992. A tentative agenda for this meet-

ing is enclosed.

In conjunction with the ALG Seminar, we will have a Ness,

Motley Co-counsel Meeting on Thursday, November 8, 1992

in Miami. Both the Co-counsel Meeting and the ALG Seminar

will be held at the Grand Bay Hotel in Coconut Grove, Florida.

We are negotiating special room rates with the hotel, and you

can obtain a reservation by calling the Grand Bay Hotel at

(305) 558-2600. Indicate to them that you are reserving a room

for the ALG/Ness, Motley Co-counsel Meeting.

We have enclosed a tentative Co-counsel agenda as well.

As you know, we are extremely disappointed with Judge

Weiner’s handling of the MDL. Ness, Motley, along with

several other members of the Plaintiffs’ Steering Committee,

has moved before the MDL Panel for remand of all cases to their

home jurisdictions. A hearing before the MDL Panel has been

Deposition Exhibit

F-2-9

2a

scheduled on September 25, 1992 in Colorado Springs, Col-

orado. The MDL Panel will probably have issued a ruling on

our Motion for Remand by November 5, and you can be

updated on the MDL at this time.

In the meantime, Judge Weiner is pressing extremely hard

for a settlement of all asbestos personal injury cases pending

in New England. If this setthkement agreement is signed, the

judge may use it as a blueprint for future settlement negotia-

tions. Please be advised that the New England Agreement

includes a so-called “futures agreement” that would establish

minimum medical criteria for payment of future claims. Present

claims would not be burdened with such criteria.

Therefore, in order to have your cases considered “present

claims” we are advising you to serve and file as many of your

unfiled cases as soon as possible.

Additionally, you received a FAX from Susan Nial indicat-

ing that the Celotex Bankruptcy counsel was taking the position

that we had to file Proof of Claim forms for cases that had

been settled with Celotex, but had not been paid by Celotex.

On August ||, 1992, Judge Baynes ruled that “no asbestos

related claims, | 3, were

subject to the Bar Order.” Attached is a letter from Sheldon

Toll, our bankruptcy counsel, reporting on the Judge's deci-

sion.

Finally, even though we have moved for a remand of all

asbestos claims in the MDL, you should still aggressively

move for remand of individual cases. Judge Weiner has been

reluctant to remand any cases other than malignancy claims.

We urge you to move for remand of all of your mesothelioma

and lung cancer cases. If you file a Motion for Remand, the

Judge's clerk will most likely set a settlement conference on

the case, and, although it may take several telephone confer-

ence calls, you will either receive offers for settlement or the

case will be remanded. You should be aware that Judge Weiner

<a a es

ee

3a

has a policy of remanding cases without remanding the punitive

damage claim.

Our tentative arrangement with the Grand Bay Hotel in

Coconut Grove is that a block of rooms will be held until

October 5, 1992. After October 5, the rooms will be released

to the general public. You need to make reservations as soon

as possible. We look forward to seeing you all there.

4a

Copy of Exhibit O-170

COMPARISON OF NESS, MOTLEY INVENTORY SETTLEMENTS

WITH GEORGINE NEGOTIATED AVERAGE VALUE RANGE

[A] [B}

Numberof Georgine Neg.

Disease Category Inv.Cases Avg. Value Range [Ax B}

Mesothelioma 97 $60,000 $ 5,820,000

Lung Cancer 315 $30,000 $ 9,450,000

Other Cancer 85 $12,500 $ 1,062,500

Non-Malignant 9,777 $ 7,500 $73,327,500

Total [C]: $89,660,000

Total Actually Paid Ness, Motley Inventory Claimants per SP303(D]: | $138,077,100

Difference [D - C}: $48 417,100

COMPARISON OF GREITZER & LOCKS INVENTORY

SETTLEMENTS WITH GEORGINE NEGOTIATED

AVERAGE VALUE RANGE

[A] [B}

Numberof Georgine Neg.

Disease Category Inv.Cases Avg. Value Range [Ax B}

Mesothelioma 174 $60,000 $10,440,000

Lung Cancer 271 $30,000 $ 8,130,000

Other Cancer 52 $12,500 $ 650,000

Non-Malignant 3,425 $ 7,500 $25 687,500

Total [C]: $44,907,500

Total Actually Paid Greitzer & Locks Inventory Claimants per SP303 [D]: $77,417,000

Difference [D - C}: $32,509,500