# Appendix — Ortiz v. Fibreboard Corp., 117 S. Ct. 2503 (1997) (No. 96-1394) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1350%3A03 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1997 ## Text - Bite. PILED ) web! 394 mAR 31997 OFFRE OF THE CLERK - In the Supreme Court of the United States OCTOBER TERM, 1996 ESTEBAN ORTIZ, ET AL., Petitioners Vv. FIBREBOARD CORPORATION, ET AL., Respondents On Petition for a Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit APPENDIX TO PETITION FOR WRIT OF CERTIORARI VOLUME II (Pp. 209 - 435.) FREDERICK M. BARON LAURENCE H. TRIBE BRENT M. ROSENTHAL Counsel of Record STEVE BAUGHMAN BRIAN KOUKOUTCHOS BARON & BUDD, P.C. JONATHAN S. MASSEY 3102 Oak Lawn Avenue 1575 Massachusetts Avenue Suite 1100 Cambridge, MA 02138 <2? Dallas, TX 75219 (617) 495-4621 os ‘\\ (214) 521-3605 cor oo + Counsel for Petitioners e oh Xe March 3, 1997 nal A em —__ ny a~ e APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F APPENDIX G TABLE OF CONTENTS Opinion and Order of the United States Court of Appeals for the Fifth Circuit (July 26, 1996) .... la-64a Dissenting Opinion of Fifth Circuit Judge Jerry E. Smith (July 26, 1996) ....... 65a-148a Memorandum Opinion of the United States District Court for the Eastern District of Texas oe 149a-208a Findings of Fact of the United States District Court for the Eastern District of Texas (July 27, 1995) 209a-435a Conclusions of Law of the United States District Court for the Eastern District of Texas fb. Sa 436a-479a Supplemental Conclusions of Law of the United States District Court for the Eastern District of Texas (July 27, ee ere ae 480a-487a Judgment Approving Global Settlement of the United States District Court for the Eastern District of Texas (July 27, 1995) . 488a-503a APPENDIX H APPENDIX I APPENDIX J APPENDIX K APPENDIX L APPENDIX M APPENDIX N Judgment Regarding Class Certification of the United States District Court for the Eastern District of Texas (July 27, 1995) 504a-Sila Judgment on Attorney’s Fees of the United States District Court for the Eastern District of Texas (Aug. 29, RE ss bided-e'b 6 dears 512a-Sl4a Order Provisionally Certifying Class for Settlement Purposes of the United States District Court for the Eastern District of Texas OE. 515a-518a Order Denying Suggestion for Rehearing En Banc of the United States Court of Appeals for the Fifth Circuit (Nov. 26, Se La iewhewekeee 519a-522a Order Denying Application for Panel Rehearing of the United States Court of Appeals for the Fifth Circuit (Dec. Dy SPOR CNee baw eaves 5$23a-524a Constitutional Provisions, Statute, and Rules Involved ....... §25a-527a Class Action Complaint (Sept. 9, By eee a ee a 528a-542a — a oT APPENDIX O APPENDIX P APPENDIX Q APPENDIX R APPENDIX S APPENDIX T APPENDIX U Motion for Leave to Intervene by Continental Casualty Co. and Pacific Indemnity Co. 6 3. 543a-546a Joint Motion for Provisional Class Certification a 547a-5Sla Excerpts from Testimony of Fibreboard Counsel Stephen Snyder (Dec. 12, 1994) ....... 552a-553a Excerpts from Testimony of CNA Counsel Meyer Koplow fo. rerrere 554a-556a Excerpts from Testimony of Class Counsel Harry Wartnick (Dec. 13, 1994) ....... 557a-558a Trust Distribution Process from Global Settlement Agreement CRUD. Bas ESPEN cc ccnees 559a-597a Excerpt from Transcript of Sept. 9, 1993 Hearing of United States District Court for the Eastern District of Texas SS ee 598a-600a eee 209a APPENDIX D IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION x GERALD AHEARN, JAMES DENNIS, CHARLES W. JEEP, JAMES ELLISON and WILLIAM JAMES MITCHELL, on Behalf of Themselves and Others Similarly Situated, : Civil Action Plaintiffs : No. v : 6:93cv526 FIBREBOARD CORPORATION and BETHLEHEM STEEL CORPORATION Defendants, CONTINENTAL CASUALTY COMPANY;,: CNA CASUALTY COMPANY OF CALIFORNIA, COLUMBIA CASUALTY : COMPANY and PACIFIC INDEMNITY COMPANY, Defendant-Intervenors. : OWENS-ILLINOIS, INC., on Behalf of Itself and Others Similarly Situated, Additional Counterclaim Defendant. 210a FINDINGS OF FACT July 27, 1995 TABLE OF CONTENTS Page I. pops et ree rey oy Pee Pe l II. HISTORY OF ASBESTOS LITIGATION ...... 5 A General Background ..............55:: 5 B. Fibreboard Background .............. 14 Ill. ©FIBREBOARD INSURANCE COVERAGE .... 21 LITIGATION AND ATTENDANT RISKS .... . 21 IV. FIBREBOARD’S RESPONSE TO ASBESTOS LITRGEEEE Cb Vt eee badee ieeksbeeseee el 33 A. The Fibreboard Structured Settlement FURR v.50 baie cc OU) Ra N be eek s 33 B. The Fibreboard-Continental “Interim ROE, vk aced caw csbsives: 36 C. Fibreboard-Pacific Negotiations and the Fibreboard-Pacific Agreemems ......... 39 D. The Fibreboard Assignment Settlement Program and Related Litigation ........ 42 mS eee aL - j ‘ ’ | | Vil. Vil. IX. Zila HISTORY OF GLOBAL SETTLEMENT RE a le 50 A. Early Global Negotiations (1990-1992) .. 50 B. The Initial Ness Motley Agreement ..... . 62 C. Negotiations During 1993............. 63 1. Early 1993 to April 9, 1993 ...... 63 2. April 9, 1993 to August 9, 1993 .. 72 3. August 9, 1993 to August 27, 1993 83 4. August 27, 1993 to December 23, Sa wade hia’ dade nisseees 98 KEY SETTLEMENT TERMS ............. 103 A. The Global Settlement .............. 103 B. The Third-Party Claimant Class Settlement | 17 C. The Trilateral Settlement ............ 123 D. The Longshore Settlement ........... 125 FUTURE CLAIMS AND VALUE PROJECTIONS AND THEIR IMPLICATIONS FOR THE THREE LITIGATION/SETTLEMENT SCENARIOS BEPORE THE COURT ... 0... cece ecceees 126 COMPARISON OF GLOBAL AND TRILATERAL UI GMOS Kine dc adewn cers 132 ADDITIONAL FAIRNESS CONSIDERATIONSI40 A. Operation of the Trust .............. 140 B. Limitations on Claims Against the Trust . 145 c. Fibreboard’s Contributions tothe Settlement and the Insurers’ Insistence on “Total Peacd48 XII. 212a D. Changed Circumstances ............. 152 E. SRS bind sw dae haa ecewne tes 155 THE CLASSES AND CLASS i ee 156 A. p ARE A hn yf oar ga PERT? g* 156 B. The Class Representatives ........... 157 1. Global Health ClaimantClass Representatives .............. 157 2. Global Third-Party Claimant Class Representative .............. 161 3. Longshore Defendant Class Representative .............. 163 ADEQUACY OF CLASS COUNSEL ........ 164 A Global Health Claimant Class Counsel .. 164 B. Global Third-Party Claimant Class Counsel 168 ¢. Longshore Defendant Class Counsel .... 168 ETHICAL CONSiDERATIONS ............ 168 A. Alleged Conflict of Interest Between Present and Future Claimants ............... 173 I. Time Period (i): Early 1991 Through ART TI a a ot aN a ta 176 2. Time Period (ii): April 9, 1993 Through August 9, 1993 ....... 177 3. Time Period (iii): August 9, 1993 Through August 27, 1993 ...... 184 A a ele ee vancng Second 213a i 4. Time Period (iv): August 27, 1993 Through October 12, 1993 ..... 190 ; 5. Time Period (v): October 12, 1993 ! Through December 23, 1993.... 191 6. Conflict of Interest: Concluding | TO CU SRNAS ION Seekers. 192 | ; | B Alleged Intraclass Conflicts .......... 194 ! 1. Alleged Conflict Between Pre-1959 and Post-1959 Claimants ....... 196 2. Alleged Conflict Based on } “Cognizability” of Injury ....... 200 ; 3. Alleged Conflict Based on | Representation by SCB Member . 204 C. This Court’s Consent ............... 209 SS Paseo eer ES. 213 XIII. GUARDIAN ADLITEM ................. 215 XIV. LONGSHORE SETTLEMENT ............. 229 | XV. ADEQUACY OF NOTICE ................ 240 q 214a FINDINGS OF FACT The Court makes the following preliminary findings of fact:' L. INTRODUCTION 1. This is a class action commenced in connection with a settlement of contested and threatened litigation pursuant to Fed. R. Civ. P. 23(b). The agreements now before the Court for approval reflect a settlement among parties who have aggressively asserted and controverted the rights and claims that will be finally compromised and settled if the Court enters a final judgment. As detailed below, there has been nothing feigned or collusive about the negotiations that brought the parties to court. The disputes among the parties are real and, unless the settlement is approved, those disputes will continue. The controversies between the litigants are not moot. The disputes tendered for resolution are ripe and the parties have properly presented the requested adjudication of rights by this Court. 2. The principal parties to this litigation are the following: -- Gerald Ahearn, James Dennis, Charles W. Jeep, James Ellison and William "To the extent the following findings of fact include conclusions of law or mixed findings of fact and conclusions of law, those findings and conclusions are hereby adopted by this Court. 215a James Mitchell, the class representatives of the plaintiff and defendant asbestos ; } health claimant classes in this action (the “Global Health Claimant Class”).’ . -- Fibreboard Corporation (“Fibreboard”’), which manufactured and distributed asbestos-containing products from the 1920s uniil 1971. See Findings of Fact q 24. -- Continental Casualty Company (“Continental”), CNA Casualty Company of California and Columbia Casualty Company, which issued general . liability policies to Fibreboard. See Findings of Fact ¥ 37. -- Pacific Indemnity Company (“Pacific”), which Fibreboard alleges issued it a . general liability policy. See Findings of Fact ¥ 37. (Continental and Pacific are sometimes collectively referred to herein as the “Insurers.”) -- Owens-Illinois, Inc. (“Owens-Illinois”), the class representative of a defendant 7 The formal definition of the Global Health Claimant Class is set forth in this Court's Order Finally Certifying Plaintiff and Defendant Classes. 216a class of third-party claimants (the “Global Third-Party Claimant Class”).’ -- Bethlehem Steel Corporation (“Bethlehem”), the class representative of a defendant class of certain employers and insurers (the “Longshore Defendant Class”).* -- Esteban Yanez Ortiz, Marion Behee, Paul Cochran, Edee Cochran, Ida Beck, John R. Allgood, Henry Evers and Lester E. Taylor (the “Ortiz Interveors”), intervenors represented by the law firm of Baron & Budd, who have objected to this settlement. -- James Flanagan and David H. Middleton (the “Flanagan Intervenors”), intervenors represented by the Maritime Asbestos Legal Clinic, a Division of the Jaques Admiralty Law Firm, who have objected to this settlement. 3. Diversity of citizenship is present and is uncontested. Each class member alleges, in good faith, *The formal definition of the Global Third-Party Claimant Class is set forth in this Court’s Order Finally Certifying Plaintiff and Defendant Classes. “The formal definition of the Longshore Defendant Class is set forth in this Court’s Order Finally Certifying Plaintiff and Defendant Classes. 217a entitlement to damages in excess of $50,000, exclusive of interest and costs. This Court has subject matter jurisdiction over these proceedings. 4 Each member of the Global Health Claimant Class alleges exposure to asbestos, a well-documented human carcinogen, and therefore an increased risk of contracting cancer. In re Joint Eastern and Southern District Asbestos Litigation (“Manville”), 129 B.R. 710, 739-40 (E. & S.D.N.Y. 1991), vacated, 982 F.2d 721 (2d Cir. 1992); Tr. at 544.° A number of courts, including the trial court in the coverage litigation between Fibreboard and the Insurers, have found that exposure to asbestos causes injury at the cellular level.° See, e.g., Carlough v. Amchem Products, Inc., 834 F. Supp. 1437, 1454 (E.D. Pa. 1993). Accordingly, each member of the Global Health Claimant Class alleges injury-in-fact sufficient to confer standing. 5. Those members of the Global Health Claimant Class who have been exposed to asbestos, but who have not yet developed recognizable disease or injury, seek, inter alia, damages to compensate for fear of cancer and for enhanced risk of developing cancer, damages tied to the need to undergo medical monitoring to detect the early development of asbestos-related disease, and punitive damages. The Court takes judicial notice that it is not at all uncommon that asbestos ‘Citations to “Tr. at __” are to the daily transcript of the fairness hearings conducted herein. Sin making this finding, however, the Court in no way finds that such cellular or subclinical injury is sufficient to constitute “bodily injury” within the meaning of insurance policies. 218a plaintiffs recover jury verdicts substantially in excess of $50,000 notwithstanding the absence of disability or medical impairment, typically in pleural thickening cases. Each Global Health Claimant Class member, including each so-called “exposure- only” claimant, has a good faith basis for arguing for application of authorities permitting recovery for fear of cancer, risk of cancer and medical monitoring. See, ¢.g., Potter v. Firestone Tire and Rubber Co., 863 P.2d 795, 816 (Cal. 1993); Miranda v. Shell Oil Co., 15 Cal. Rptr. 2d 569 (Cal. Ct. App. 1993); Barras v. Monsanto Co., 831 S.W.2d 859 (Tex.App.- -Houston [14 Dist.] 1992, writ denied). Fibreboard’s headquarters are located in California, Fibreboard Exh. 706, a state that recognizes claims for medical monitoring and fear of cancer. Accordingly, such claims could be asserted against Fibreboard by all members of the Global Health Claimant Class. fl. HISTORY OF ASBESTOS LITIGATION A. General Background 6. Asbestos-related personal injury and wrongful death litigation began in the courts of East Texas in the late 1960s. The first modern-day asbestos-related personal injury case in this country was brought in this Court in 1967 by Claude Tomplait against Fibreboard and other defendants. Trial resulted in a verdict in favor of the defendants. Tr. at 60. It is generally accepted that the tide of asbestos-related injury litigation flooding the nation’s courts today turned on the result in the Borel case, an action filed in the Beaumont Division of thisCourt in 1969. Tr. at 131. All Borel defendants, including Fibreboard, were held liable, and on appeal the Fifth Circuit Oe ee Ee ee eT Le ee end Se eee eee 219a affirmed. Borel v. Fibreboard Paper Products Corporation, 493 F.2d 1076 (Sth Cir. 1973), cert. denied, 419 U.S. 869 (1974). i} Following Borel, and through the late 1970s, plaintiffs’ counsel around the country crafted theories of liability against the asbestos defendants they had identified, the primary target being Johns-Manville, Inc. (“Manville”). Plaintiffs’ counsel conducted discovery, assembled a mass of documents bearing on liability that are now well known to every experienced asbestos judge, and identified the various medical conditions that could be forensically attributed to asbestos exposure. Tr. at 128, 131-32, 937-38; Fibreboard Exh. 102 at vii; Manville, supra, 129 B.R. at 743-45. 8. By the mid-1980s, the fundamental legal theories and liability cases against the early defendants, including Fibreboard, had been established, and litigation against these companies intensified dramatically. Class Plaintiffs Exh. 1014; Tr. at 133; Manville, supra, 129 B.R. at 745-51; Class Plaintiffs Exh. 1014 (Transcript of Deposition of Lawrence Fitzpatrick, Feb. 22, 1994, Georgine v. Amchem Products, Inc., Civil Action No. 93- 215 (E.D. Pa.) (“Fitzpatrick Tr.”)) at 72-76. 9. Facing enormous liabilities and overwhelming defense costs, many defendants ended up in bankruptcy, including a number of companies previously considered to be immune fromfinancial difficulty. See In re Asbestos Products Liability Litigation, 771 F. Supp. 415, 420 (J.P.M.L. 1991). Beginning in 1982 with Unarco Industries, Inc. and Manville, the list of corporate asbestos bankrupts now includes such defendants as Celotex Corporation, Eagle-Picher Industries, Inc., H.K. Porter Company, Inc., Keene Corporation, 220a National Gypsum Company, Forty-Eight Insulations, Inc., and Raymark Industries, Inc. Fibreboard Exh. 919, Tab 4. 10. ‘Before it entered bankruptcy, Manville, which had supplied the largest share of asbestos-containing products, basically controlled the defense of asbestos litigation na- tionwide. Fitzpatrick Tr. at 74. Manville paid on an aggregate basis approximately 30% to 33% of the funds paid in asbestos settlements. After Manville entered bankruptcy in 1982, and stopped paying money in asbestos cases, other asbestos defendants generally believed that they did not receive settlement credits or set-offs reflecting Manville’s share. Tr. at 132-34, 1133-34; Fibreboard Exh. 100 at 5. 11. As asbestos-related personal injury litigation mushroomed in the 1980s, asbestos dockets across the country grew exponentially, and plaintiffs in many jurisdictions began to face substantial delays in having their claims resolved. PW pm FR ep Litigation (“Ast sd Hoc C tee B ) at 7-12 (1991) (Class Plaintiffs Exh. 1003). Transaction costs outpaced compensation to victims. Id, at 12-14. Rand Corporation studies in 1983 through 1985 found that only 37% to 39% of money paid by asbestos defendants actually went to victims, with 61% to 63% consumed by transaction costs. Fibreboard Exhs. 100-102. 12. Asbestos litigation constitutes “an unparalleled situation in American tort law.” In re School Asbesivus Liti- gation, 789 F.2d 996, 1000 (3d Cir.), cert. denied, 479 U.S. 852 (1986). Citing the Asbestos Ad Hoc Committee Report, the Judicial Panel for Multidistrict Litigation 221a summarized what it termed the “most objectionable aspect of asbestos litigation”: dockets in both federal and state courts continue to grow; long delays are routine; trials are too long; the same issues are litigated over and over, transaction costs exceed the victims’ recovery by nearly two to one; exhaustion of assets threatens and distorts the process; and future claimants may lose altogether. in.re Asbestos Products Liability Litigation, supra, 771 F. Supp. at 419 (citing Asbestos Ad Hoc Committee Report at 1-3). 13. By 1986, counsel, commentators and courts began to recognize the enormous problems facing all involved in asbestos litigation. In 1987, the Federal Judicial Center convened a conference to discuss the asbestos litigation crisis and the need for some type of overarching resolution. The conference included judges with significant asbestos dockets across the country and some leading members of the asbestos plaintiffs’ bar. Participants addressed many of the conditions outlined above, including the growing backlog of cases, the fact that new cases were being filed at a much greater rate than existing cases could be tried or settled, the fact that transaction costs greatly outweighed the victims’ recoveries, and the growing number of bankrupt defendants. Fitzpatrick Tr. at 72- 77. Despite the widespread recognition of these problems, the asbestos crisis continued to worsen. By 1990, overwhelmed asbestos courts had turned to novel mass adjudication techniques. Fibreboard Exhs. 104, 105, 107-117, 120-124. 222a 14. In 1990, the Federal Judicial Center convened another conference of judges, academics and counsel to address the continuing issues related to asbestos litigation. This took place at the Di: ley Madison House in Washington, D.C. The 1990 Federal Judicial Center conference was a significant event in the history of asbestos-related litigation. Many of those involved, including counsel for Fibreboard, came away with a clear impression that "business as usual” would not be a judicially acceptable solution to the problem. Tr. at 211; Fitzpatrick Tr. at 82-84. 15. In the wake of the 1990 conference, members of the asbestos bar and the judiciary took preliminary steps to- ward national action on the asbestos problem. A number of federal judges organized to explore class action treatment of the problem. Fitzpatrick Tr. at 84-86. 16. In July 1990, some leading members of the asbestos plaintiffs’ bar filed a class action in this Court pursuant to Fed. R. Civ. P. 23(b(1)(B), Linscomb v. Pittsburgh Coming Corp., et al. The action was commenced on behalf of all persons (present and future) with asbestos- related personal injury claims. Many of the major asbestos defendants were sued in Linscomb, including Fibreboard. Fibreboard Exh. 116. Preliminary proceedings were conducted in this Court on Linscomb in the summer of 1990. Steering committees were formed. Ronald Motley and Joseph F. Rice, of the law firm Ness, Motley, Loadholt, Richardson & Poole (“Ness Motley”) were appointed to the steering committee, and Mr. Motley was designated as one of the coordinating counsel for the plaintiffs. The parties conducted settlement meetings and explored whether an overall solution to asbestos injury litigation could be 223a found. Fitzpatrick Tr. at 87-89; Class Plaintiffs Exh. 1002; Fibreboard Exh. 117. 17. In September 1990, Chief Justice Rehnquist appointed a panel, the Judicial Conference Ad Hoc Committee on Asbestos Litigation (“Asbestos Ad Hoc Committee”), to study asbestos litigation and make recommendations. In November 1990, eight federal district judges with significant asbestos experience sent a letter to the Judicial Panel for Multicistrict Litigation (“MDL Panel”). They urged the MDL Panel to reverse its several prior rulings declining requested MDL transfers, and asked that the MDL Panel consolidate all federal asbestos litigation in a single judicial district. These judges argued that consolidation would, among other things, “facilitate global settlements,” and allow the transferee court to “fully explore . . . national disposition techniques such as classes and sub-classes under Rule 23.” Fibreboard Exh. 118; Fitzpatrick Tr. at 93-95. 18. In March 1991, the Asbestos Ad Hoc Committee issued its report. Class Plaintiffs Exh. 1003. The report has been described as a “ringing condemnation” of the treatment of asbestos claims in the tort system. See Georgine v. Amchem Products, Inc., 157 F.R.D. 246, 265 (E.D. Pa. 1994). The Asbestos Ad Hoc Committee stated: [T]he [asbestos] situation has reached critical dimensions and is getting worse. What has been a frustrating problem is becoming a disaster of major proportions to both the victims and the producers of asbestos products, which the 224a courts are ill-equipped to meet effectively. Asbestos Ad Hoc Committee Report at 2. 19. The Asbestos Ad Hoc Committee also expressed its hope that some alternative dispute resolution mechanism for processing asbestos claims could be fashioned. Id. at 14. It concluded, id, at 10, that: The volume and complexity of asbestos cases have resulted in the violation of a basic tenet of American justice and the spirit of the Civil Justice Reform Act of 1990: speedy and inexpensive resolution of cases. 20 On July 29, 1991, the MDL Panel issued an order transferring all federal personal injury asbestos litigation to Judge Weiner of the Eastern District of Pennsylvania for coordinated or consolidated pretrial proceedings.’ In re Asbestos Products Liability Litigation, supra, 771 F. Supp. 415. The MDL Panel voiced its hope that the MDL transfer might foster global settlements of the “asbestos mess,” noting that transfer “offer[s] a great opportunity to all participants who sincerely wish to resolve "In the hearing before the MDL Panel, the majority of the plaintiffs’ bar had favored the Eastern District of Texas as the transferee forum in connection with the MDL proceedings, if there was to be a transfer of cases. Fitzpatrick Tr. at 95. It is a matter of common knowledge that asbestos claimants from across the country, and from outside the United States, frequently select courts in Texas ~- and this District in particular -- as the venue in which to pursue their asbestos personal injury actions. The Court notes that substantial numbers of the most scent ashestos personal injury filings against Fibreboard in Texas by the Baron & Budd firm, counsel for the Ortiz Intervenors, were apparently on behalf of residents of states other than Texas. Fibreboard Exh. 824. 225a these asbestos matters fairly and with as little unnecessary expense as possible.” Id. at 424. At the time of the MDL transfer, almost 30,000 asbestos-related personal injury claims were pending in the federal courts, with two times that number pending in the state courts. Id. at 416, 421. Linscomb was transferred to Judge Weiner as part of the MDL proceedings. 21. After the MDL transfer, Judge Weiner appointed plaintiffs’ and defendants’ steering committees for the MDL litigation, the members of which included Ronald Motley, of Ness Motley, as one of the co-lead counsel of the Plaintiffs’ Steering Committee, Steven Kazan, of the law firm Kazan, McClain, Edises & Simon, as a member of that committee; and Stephen M. Snyder," counsel for Fibreboard, as a member of the Defendants’ Steering Committee. Judge Weiner made clear that he wanted the litigants to solve the asbestos crisis on a global basis. Tr. at 125; Fitzpatrick Tr. at 99-100, 110-11. 22. Settlement negotiations began between the Plaintiffs’ and Defendants’ Steering Committees in the MDL litigation. The parties made substantial efforts at global negotiations involving all plaintiffs and all defendants. Tr. at 221. The primary purpose of the MDL settlement talks was to craft a national settlement that would provide an alternative *Mr. Snyder is a partner in the San Francisco law firm Brobeck, Phieger & Harrison. Tr. at 118. Since the early 1980's, Mr. Snyder’s representation has focused on asbestos litigation defense and, in particular, the defense of Fibreboard. Tr. at 118. Between 1985 and 1988, he represented the members of the Asbestos Claims Facility in northern California, and served on a number of national committees of that organization. Since 1988, he has been Fibreboard’s national counsel for defense of asbestos bodily injury cases. Tr. at 120-23. 226a resolution mechanism for asbestos claims. Judge Weiner encouraged these global settlement negotiations. Fitzpatrick Tr. at 110-11. These talks did not result in a global settlement, Fitzpatrick Tr. at 114-17, but they did serve as a springboard for other, less inclusive negotiations, including those that resulted in a settlement between asbestos victims and defendants who had formed the Center for Claims Resolution (“CCR”), a claims handling facility created in late 1988 in the wake of the dissolution of a similar organization, the Asbestos Claims Facility. See Georgine, supra, 157 F.R.D. at 266-67. Fibreboard had a difficult time fitting itself into the MDL-related settlement talks because it had no cash with which to make settlements. Tr. at 221. 23. At the time of the settlement negotiations un- derlying this class action, asbestos litigation was probably the most “mature” mass tort litigation in this country: Le, the liability and medical issues pertinent to such litigation had been the subject of thorough and repeated discovery, trial and settlement. Georgine, supra, 157 F.R.D. at 321-22; F. McGovern, Resolving Mature Mass Tort Litigation, 69 B.U. L. Rev. 659 (1989). The results of this experience were known to counsel for the plaintiff class in this action, as well as to counsel for Fibreboard and, to some lesser extent, its insurers. Tr. at 937-38, 2162, 2720. B. Fibreboard Background 24. As asbestos-related defendants were sued on a regular basis, Fibreboard became known as an “all-years” defendant because its asbestos-containing products had been distributed from the 1920s until 1971, when it ceased producing 227a asbestos-containing products. Tr. at 127-28. In contrast, some defendants are generally recognized to bear liability for exposure to asbestos that occurred only during certain periods of time. In addition, Fibreboard was and is considered to be primarily a “pipe and boiler” defendant, in that its products frequently were used in high-temperature industrial applications involving shipyards, boiler rooms, shops, refineries, and similar applications. Most other defendants were primarily manufacturers of asbestos-containing roofing products, construction materials and linoleum flooring. Tr. at 128. Fibreboard became known as a regional defendant because its primary manufacturing facilities and distribution networks during most of the relevant years were in California. Fibreboard had a primary exposure to liability in West Coast and Gulf Coast (especially Texas) cases, rather than in cases in the East. Tr. at 128, 131, 2448-49. 25. In 1983, Fibreboard suffered its first punitive damages verdict. Tr. at 118, 400. Nonetheless, perhaps be- cause there is no “treasure trove” of inculpatory Fibreboard documents, Tr. at 440, Fibreboard never became a punitive damages target defendant. Tr. at 400. With one exception, Fibreboard ultimately never paid a punitive damages judgment in connection with an asbestos personal injury claim. Tr. at 399; Fitzpatrick Tr. at 130. 26. Fibreboard generally experienced greater liability in cases of earlier exposure to asbestos than in cases of later exposure. That was because (i) Fibreboard had a greater share of the pipe and boiler insulation markets in the earlier years (j,¢., before the mid-1950s) than in later years (i.¢., the late 1950s and 1960s); (ii) the bankruptcy of other defendants with 232a Fibreboard had no insurance assets except for the proceeds of two settlements with the American Insurance Group of Companies ("AIG") and with Home Insurance Company, totaling approximately $100 million, and the coverage provided by policies issued by Continental and Pacific that was disputed by the Insurers in then pending litigation. Tr. at 148-49. When it left the ACF, Fibreboard did not have enough cash to pay settlements of asbestos injury cases, Tr. at 153, and Fibreboard’s ability to mount a defense was greatly reduced because it had no insurance coverage for defense, it had insufficient funds to pay for defense, and it faced a difficult time putting together a national network of defense counsel in cooperation with other former ACF members who were at odds with one another in the wake of the difficult process of disbanding the ACF. Tr. at 149- 50. 35. From before the time it entered the ACF in 1985, and to this day, Fibreboard's corporate goal was, and has been, to manage and resolve its asbestos liabilities within its available insurance resources. Tr. at 144. li. FIBREBOARD INSURANCE COVERAGE LITIGATION AND ATTENDANT RISKS 36. Fibreboard's imsurance coverage litigation, which came to be captioned In re Asbestos Insurance Coverage Cases, Judicial Council Coordination Proceeding No. 1072 (the "Cover'ze Case"), commenced in 1979 when Fireman's Fund Insurance Company filed a complaint in San Francisco County Superior Court against Fibreboard and others, including Continental and Pacific. Fibreboard Exh. 203. Fibreboard's other insurers later became parties to this litigation. ee eee SE ee a a Ca pik inhi tal Galaga ed atts ak “ean Ae dl ORDA OUD silat bia at a 233a Fibreboard Exh. 204. In 1981, the action was coordinated with several separate asbestos coverage cases then pending in California. In 1983, Judge Ira A. Brown, Jr., was confirmed as coordination trial judge. Fibreboard Exhs. 205-207. Judge Brown ordered the parties to produce all relevant documents as part of a massive discovery effort. Fibreboard Exhs. 208, 209, 211. 37. Fibreboard alleged that Pacific insured it from 1956 to 1957 under a no-aggregate-limit policy, but was unable to locate a copy of the policy. Pacific denied that the policy had no aggregate limit. Continental issued a comprehensive general liability policy to Fibreboard commencing in May 1957, which Fibreboard terminated effective March 15, 1959. The premium for this policy was less than $10,000 per year. The policy had no aggregate limit, but had a $1,000,000 per occurrence limit, and a $500,000 per claim limit. Fibreboard Exh. 201. 38. The Coverage Case was tried in several phases. The trial was one of the largest and most complex proceedings in the history of American civil jurisprudence, inv diving numerous insureds and insurers. Fibreboard Exh. 215 at 1340-42. Phase I involved the existence and terms of certain missing insurance policies, including the missing Pacific policy. Fibreboard was not involved in Phase II. Phase III involved the basic coverage provisions of the policies, including the trigger of coverage and scope of coverage. Phase IV involved multiple subphases, including Continental's “number of occurrences” issue, scope issues concerning whether the policy-holders should be required to contribute to claims costs, and the Insurers’ contribution rights against each other. Fibreboard was not 230a a percentage was determined for each producer as a total of all producers.” Regarding “defense costs, the allocation was derived by taking each producer’s number of pending claims, divided by the total number of pending claims for all producers combined.” 29. The ACF was an insurance settlement. Fibreboard settled policy disputes with certain of its insurers -- but not with Continental or Pacific -- in order to enter the ACF. Tr. at 138. Producer members of the ACF, including Fibreboard, received a complete defense and indemnity with respect to claims for compensatory damages, even though they may have had gaps in their insurance coverage. 30. When Fibreboard entered the ACF, it anticipated that defense costs and indemnity levels would be kept within reasonable limits, and filings of cases in which the claimant did not appear to have any significant disease would be minimized. Tr. at 144. During ACF operations (June 1985 to September 1988), its members enjoyed lower defense costs because the number of defense counsel serving ACF members in asbestos cases fell from as many as 1,200 law firms to approximately 65 firms. Tr. at 139; Fibreboard Exh. 102 at 31. Within the ACF, Fibreboard paid close to 13% of all settlements made on behalf of any member. Tr. at 140. 31. In the Western United States there was some success from Fibreboard’s perspective in reducing filings of claims by “non-impaired” claimants, L.¢,, people with some exposure to asbestos who had no significant medical impairment or disability, and indemnity values in other types of cases were 23la kept within reasonable limits. This was accomplished by means of an expensive, labor-intensive litigation effort involving considerable trial activity. However, these results were not obtained elsewhere for Fibreboard within the ACF, and the filing of asbestos claims against Fibreboard in the Eastern United States and in Texas increased substantially during the ACF years. Tr. at 143-46. In the end, ACF membership overall did not achieve the results Fibreboard desired on liability and case control issues. 32. In fact, ACF membership drew Fibreboard into types of cases and into jurisdictions where it previously had not been sued and Fibreboard became a “national” defendant sued in regions of the country and in segments of asbestos litigation in which it had not faced liability previously. The result was to double Fibreboard’s exposure, even though the facts giving rise to that exposure remained unchanged. Tr. at 136-37, 2669-70, 2679-80. 33. ‘Filings of new asbestos-related cases against Fibreboard in 1982 through 1984 were in the range of 4,500 to 5,000 cases per year. With rumors that the ACF might be established, and upon its advent in June 1985, filings of such cases increased to over 8,000 in 1985. In the remaining full years of the ACF -- 1986 and 1987 -- filings stayed at a high level, in the range of 13,000 to 17,000 cases per year. Tr. at 136. 34. When the ACF ceased operations in October 1988, Fibreboard no longer had any right to a defense or payment of indemnity by Fireman's Fund because the limits of that insurance coverage had been exhausted. Tr. at 148-49. 228a substantial liability exposures arising out of early years, such as Manville, Eagle-Picher and Celotex, had the greatest impact on defendants such as Fibreboard who also had liability for early- years exposures; (iii) Fibreboard can produce evidence that it began to give warnings with respect to the health hazards of its products in 1966; and (iv) cases arising out of early exposures, such as those in World War II shipyards, tended to be more serious. Tr. at 129-31. 27. _‘Fibreboard has employed different strategies to defend asbestos injury cases over time. Early on, like most defendants, Fibreboard relied on Manville to bear the brunt of the defense of cases. Tr. at 131. When Manville declared bankruptcy in 1982, Fibreboard had to rely totally on a then-existing interim agreement under which one of its insurance carriers, Fireman’s Fund Insurance Company, provided Fibreboard with a defense of asbestos injury claims and paid indemnity as necessary. Tr. at 131-32. 28. Fibreboard joined the Asbestos Claims Facility (“ACF”), which began operations in 1985. The formation of the ACF was an effort by more than 30 companies that faced asbestos claims, and by some of their insurers, to create a mechanism to resolve asbestos-related claims through unified claims handling and joint representation in asbestos- related personal injury litigation. The general operation of the ACF (also known as the Wellington Facility, after Dean Wellington of the Yale University Law School, who assisted in the negotiations leading to its formation), is well known by the Court and is described in a number of judicial opinions. See, ¢.g., Unigard Security Insurance Company, Inc. v. North River 229a Insurance Co., 4 F.3d 1049, 1056 (2d Cir. 1993) (internal citations omitted): As a result of the massive liability for asbestos- related claims, the expense of litigation between producers and their insurers, and _ the administrative costs of managing nationwide litigation and claims, an agreement concerning asbestos-related claims, known as_ the Wellington Agreement, was signed by producers of asbestos and their insurers on June 19, 1985. ... The Agreement established the Asbestos Claims Facility (“the Facility”) to “administer and arrange for the evaluation, settlement, payment or defense of all asbestos-related claims against Subscribing Producers and Subscribing Insurers in accordance with the provisions of the Agreement. .. .” Moreover, as “sole agent, the Facility [had] exclusive authority and discretion to administer, evaluate, settle, pay or defend all asbestos-related claims.” Once the Facility settled a claim, the liability amount and the defense costs were allocated among the producers of asbestos . . . according to a producer-allocation formula. The producer- allocation formula was actually two formulae, one for indemnity (or to pay the annual claim) and one for defense costs. “To share indemnity, each producer’s historical average cost by state was multiplied by that producer’s pending claims in that state. And the product was summed and 234a involved in Phase V. Fibreboard Exh. 223. At stake for Fibreboard and the Insurers was the question of whether Fibreboard would be determined to have no further insurance coverage under the Continental and Pacific policies or, in stark contrast, virtuaily unlimited coverage under those policies. 39. ‘In March 1985, a jury in Phase I of the Coverage Case trial found that Pacific had issued a one-year comprehensive general liability policy to Fibreboard's predecessor in 1956. The jury also found, by a nine to three vote based on a preponderance of the evidence standard of proof, that the policy had a $500,000 per claim limit, but no aggregate limit. Tr. at 138; Fibreboard Exh. 223. 40. The Phase III issues, including the trigger and scope of coverage, were tried and argued to the court between September 1985 and February 1987. In May 1987, Judge Brown issued a tentative decision in Phase III of the Coverage Case in favor of the policyholders. Fibreboard Exh. 219. He found that a “continuous” trigger existed, which meant that policy coverage applied to any claim where the claimant had been exposed to any asbestos prior to the expiration date of the policy. He thus rejected an “exposure only" trigger, under which a policy would respond only to claims as to which exposure to asbestos occurred during the policy period, and like- wise rejected a "manifestation" trigger, under which a policy would respond only to claims as to which injury became apparent during the policy period. The Insurers had taken various positions on trigger of coverage in the trial court. Pacific took the manifestation position and Continental took no position. Fibreboard Exh. 200. Judge Brown further found that the scope of each triggered policy extended to full responsibility 235a for defense and indemnity on a claim within policy limits, and did not adopt a pro rata approach, which would have limited each insurer's responsibility to a proportion of the liability. In addition, Judge Brown's scope decision did not obligate the policyholder to contribute for uninsured or underinsured periods. Fibreboard Exh. 219. 41. The Phase IV issues, including the number of occurrences and reserved scope issues, were tried to the Court in the Fall of 1987. Among other issues, Continental asserted that its policy had a maximum limit of $2,000,000 for Fibreboard's asbestos bodily injury claims because of its $1,000,000 per occurrence limit. Continental urged that there were only two occurrences under the policy, contending that “occurrence” referred to the sources of Fibreboard's asbestos- containing products, and only two Fibreboard plants had manu- factured such products. In August 1988, Judge Brown issued a tentative decision in Phase IV of the Coverage Case. Judge Brown rejected Continental's contentions on the number of “occurrences,” holding instead that each claim constituted a separate occurrence. Judge Brown also tentatively ruled that each triggered policy is responsible for the full costs of a claim, with the right to seek contribution from other triggered policies. Fibreboard Exh. 220. 42. On January 24, 1990, the trial court rendered judgment in the Coverage Case. Fibreboard Exh. 223. the judgment incorporated the jury's findings as to the existence and terms of the Pacific policy. It incorporated in substance the “continuous trigger" and “scope” rulings set forth in the Phase III tentative decision, and the “occurrence” ruling set forth in the Phase IV decision. Fibreboard Exhs. 222, 223. Judge Brown 236a denied all motions for a new trial and for judgment notwithstanding the verdict. Fibreboard Exh. 224. 43. Insurers, including Continental and Pacific, appealed the trial court's decision in the Coverage Case, and the appeals were consolidated. The appellate record was extraordinarily voluminous. In November 1990, the California Court of Appeal issued an order calling for separate briefing by “issue groups." Appellate briefing took place between April and November 1991. Issue Group I included the Pacific missing policy issues. Pacific argued that the court should have instructed the jury that the burden of proof was by a "clear and convincing" standard rather than a “preponderance of the evidence" standard. Issue Group II addressed the basic coverage issues of the trigger and scope of coverage for asbestos bodily injury claims, as well as certain issues unique to Continental (the number of "occurrences" and the so- called “double anchor" question, viz., whether it was necessary that exposure and injury both occur during the policy period). Fibreboard Exhs. 225-242, 245, 246. 44. Oral argument upon the Coverage Case appeal was conducted in several phases during the Summer of 1993. Continental Exh. 23; Fibreboard Exhs. 243, 247. In late July 1993, the parties to the Coverage Case appeal were informed by the California Court of Appeal that oral argument upon the final phase of the appeal had been scheduled by that court for August 27, 1993, and, on that date, the final oral argument before the Court of Appeal in fact was heard. Tr. at 329, 1400-01, 1480-81; Fibreboard Exh. 248. On that same day an agreement in principle was announced in this Court with Te ee a ee ee ee ee ee ee ee ee ee ee ee ee pS ee ee ee i ta i ead 237a respect to the settlement that is now before this Court for consideration. Findings of Fact ¥ 179. 45. After the announcement of the global agreement in principle on August 27, 1993, the parties to that agreement wrote to the California Court of Appeal advising the court of the agreement in principle and asking that the court defer decision in the Coverage Case, at least with respect to those issues unique to Fibreboard and the Insurers pending the completion of the documentation necessary to consummate the settlement contemplated by the agreement in principle. Fibreboard Exhs. 249, 252. 46. On November 15, 1993, the California Court of Appeal issued an opinion substantially affirming a number of the principal aspects of the trial court's judgment in the Coverage Case, while reversing the trial court as to one such aspect that had been decided in Fibreboard's favor and against the Insurers. Fibreboard Exh. 254. However, the Court of Appeal simultaneously granted the joint motion of Fibreboard, Continental and Pacific to sever several insurance coverage issues unique to those parties, and to vacate submission of those issues pending further report to that court on the progress toward obtaining judicial approval of the settlement at bar. Tr. at 1497-98; Fibreboard Exh. 253. Accordingly, the disputes with respect to those severed coverage issues remain unruled upon by the California Court of Appeal, and their outcome thus remains uncertain even at the intermediate appellate level. 47. Requests for rehearing by the Court of Appeal as to the issues the Court of Appeal did decide were thereafter denied. Fibreboard Exh. 255. On January 27, 1994, 240a Insurance, Co., 5 Cal. Rptr. 2d 356 (Cal. Ct. App. 1992), aff'd 1995 WL 389860, Cal. Rptr. 2d _ (1995), and/or Stonewall Ins, Co. v. City of Palos Verdes Estates, 9 Cal. Rptr. 2d 663 (Cal. Ct. App. 1992), review granted, 834 P.2d 1147 (Cal. 1992). According to Justice Kaufman, although not identical, both the Montrose and Stonewall cases involve "trigger of coverage” issues.'* Stonewall also involves the "scope of coverage” issue. Continental Exh. 5 at 10, ¥ 19. 52. In addition, according to Justice Kaufman unless the California Supreme Court vacates the "grant and hold” status of the Coverage Case and either decides to hear the issues in the Coverage Case or dismisses review, it is likely that, once it has decided Montrose and/or Stonewall, the Supreme Court will remand the Coverage Case to the Court of Appeal. In that event, the Court of Appeal will be instructed to reconsider its Coverage Case opinion in light of the Supreme Court's Montrose and/or Stonewall decision(s), and the Court of Appeal will almost surely allow the parties the opportunity for further briefing and oral argument. The resulting decision of the Court of Appeal -- which would presumably also include the reserved issues -- would then be subject to another petition for review to the Supreme Court. Given the fact that Stonewall has not been set for oral argument yet, and the fact that after "On July 5, 1995, the California Supreme Court affirmed the appellate court's decision in Montrose. The supreme court noted the similarity of the trigger issue in the Coverage Case, but deemed it appropriate, given the unique nature of asbestos litigation, that trigger of coverage questions specifically involving asbestos claims be left for decision on an appropriate record in a case in which they are squarely presented. See California v. Admiral Ins. Co., 1995 WL 389860 atn. 16, Cal. Rptr.2d ___n. 16. (1995). eS ae 24la Montrose and Stonewall are finally decided a remand of the Coverage Case to the Court of Appeal followed by another petition for review to the Supreme Court is likely, Justice Kaufman believes that the Coverage Case may not be finally concluded for five years or more. Continental Exh. 5 at 10-11, q 20. 53. There are five issues currently before the California Supreme Court or the California Court of Appeal that have a significant bearing on the ultimate liability of Continental and Pacific to Fibreboard under their primary policies. These issues are commonly referred to as (i) trigger of coverage; (ii) scope of coverage; (iii) number of occurrences; (iv) double anchor; and (v) lost policy. Two of these issues -- trigger of coverage and scope of coverage -- involve both the Continental and Pacific policies. Two issues -- number of occurrences and double anchor -- involve only the Continental policy. The lost policy issue involves only the Pacific policy. Continental Exh. 5 at 11-12, 9 21. 54. The California trial court hearing the Coverage Case decided each of the five issues adversely to Continental and Pacific. Based on California law and the concerns and propensities of the California Supreme Court, however, it was the opinion of both Justice Kaufman and Professor Priest that as of August 27, 1993, there was a significant risk to Fibreboard that the California Supreme Court would render decisions on one or more of the coverage issues that would have the effect of either eliminating or substantially reducing further indemnity obligations by Continental and Pacific to Fibreboard for asbestos-related personal injury claims. 238a the Insurers’ petitions for review of the Court of Appeal's decision were granted by the California Supreme Court on a “grant and hold” basis, the effect of which is that the appeal is presently held in abeyance while the California Supreme Court considers issues in other pending appeals that may be dispositive of issues in the Coverage Case. Tr. at 1498; Fibreboard Exhs. 256, 258, 259; Continental Exh. 5 at 10, 4 19. 48. Two expert witnesses, Justice Marcus M. Kaufman and Professor George Priest, testified at the fairness hearing in this action with respect to the issue of the risk -- viewed both as of August 27, 1993 and today -- that Fibreboard would lose the Coverage Case pending in the California appellate courts.” No objector proffered any witness, testimony or evidence to contradict or impeach in any way the conclusions provided by Justice Kaufman and Professor Priest. 49. Justice Kaufman’ provided expert witness testimony on the uncertainty -- as of both August 27, 1993 and the present --as to how the appellate courts will *The Court finds that the testimony of all of the witnesses offered in support of this settlement -- including that of Justice Kaufman and Professor Priest -- was credible. ‘Justice Kaufman was in private practice from 1958 until 1970, specializing in civil litigation. He then served for seventeen years, from January 1970 until March 1987, as an Associate Justice of the California Court of Appeal, Fourth Appellate District, Second Division. From March 1987 until January 1990, he served as Associate Justice of the California Supreme Court by appointment of Governor George Deukmejian. Presently, he is of counsel to the law firm of Buchalter, Nemer, Fields & Younger. His practice consists principally of appellate litigation, often as a consulting expert, with special emphasis on insurance matters. Continental Exh. 5 at 1-2, { 2. 239a resolve several legal questions in the Coverage Case that are either presently pending before the California Supreme Court or that were reserved for decision by the California Court of Appeal. In particular, he focused on the likelihood that the California Supreme Court (or the Court of Appeal on the reserved issues) will or will not afford the Insurers relief on one or more of the coverage issues raised, on the likely timing of potential rulings in the Coverage Case, on the likely effect resolution of other cases now pending before the California Supreme Court will have on the Coverage Case, and on the California judicial process in general. Continental Exh. 5 at 2-3, q3. 50. Professor Priest'’ provided expert testimony on the likelihood, as of both August 27, 1993 and the present, that the California appellate courts would provide the Insurers relief on one or more of the coverage issues raised. The Court finds that both Justice Kaufman and Professor Priest are highly qualified experts in their fields, and finds their conclusions and reasoning to be persuasive. Sl. According to Justice Kaufman, it is likely that the Supreme Court decided to “hold” the Coverage Case pending the outcome in Montrose Chemical Corp. v. Admiral "Professor Priest is currently a Professor of Law at Yale University. Continental Exh. 6. The focus of his teaching and writing has been the study of the tort system, and, in particular, trends in tort and insurance law over the last 50 or 60 years, including recent developments. Tr. at 767. He has testified as an expert in both tort and insurance matters, including expert testimony about California insurance matters. Tr. at 767-68. Among his other duties at Yale, Professor Priest teaches a class on insurance, including an analysis of comprehensive general liability insurance policies and the California Supreme Court's approach to insurance matters. Tr. at 769-70. 242a It was also their opinion that the same risk exists today. Continental Ex. 5 at 12-46, $j 22-86; Tr. at 771-93. 55. Justice Kaufman's conclusions were based upon his analysis of (i) the policy language; (ii) the California Supreme Court ‘'s current approach to the resolution of insurance coverage issues in particular and litigation in general; (iii) distinctions between the application of contract law pursuant to which insurance polices are to be interpreted and tort law under which an asbestos manufacturer's liability is determined; (iv) recent insurance cases either pending before or decided by the California Supreme Court or decided by other courts; and (v) recent California Supreme Court decisions in non-insurance cases. Continental Exh. 5. 56. Professor Priest focused on the trend of the law in both California and elsewhere against what he termed - ‘se liability." This 1 iecheadion tot ing | policies issues more narrowly in order to make insurance coverage more predictable and certain and therefore more available to consumers at reasonable prices. Tr. at 772-91. 57. The Court finds that the risk attending the outcome of the Coverage Case was a matter of reasonable and substantial concern for counsel for all of the parties to the settlement at bar to have had, and to continue to have, and a legitimate factor and driving force in the negotiations that resulted in that settlement. Tr. at 792-93, 1056-59. IV. FIBREBOARD'S RESPONSES TO ASBESTOS LITIGATION 243a Program 58. In August 1988, Fibreboard informed Continental that the ACF was dissolving, and contended that Continental was obliged to provide a defense in the asbestos injury cases being prosecuted against Fibreboard. Fibreboard Exhs. 400, 401. The ACF stopped operations and ceased providing a defense to its members in September 1988. Fibreboard had insurance proceeds of approximately $100 million available from settlements with AIG and with Home Insurance Company. Fibreboard’s only other remaining insurance resources were the disputed coverages under the Pacific and Continental policies. Tr. at 148-49. 59. Upon dissolution of the ACF, Fibreboard was in a highly unusual situation compared to other asbestos defendants. It was a small company, valued by the market -- in light of its potential asbestos liabilities -- at $10 to $15 million. Tr. at 911-13; Fibreboard Exhs. 700, 701. It did not have enough cash to pay all or any substantial part of the asbestos injury claims asserted against it, but it had potentially very valuable insurance assets in the form of the disputed Continental and Pacific policies. Tr. at 169-70. 60. Faced with this situation, in September 1988 Fibreboard embarked upon a novel method of settling asbestos cases called the "Structured Settlement Program, " or "SSP." Under the SSP, Fibreboard agreed to make payments on a deferred basis, that is, payment would be made when the insurance coverage dispute with Continental and Pacific was resolved. Fibreboard approached members of the asbestos 244a plaintiffs’ bar, revealed the facts about its corporate worth and its insurance situation, and asked for what in a sense was credit, or a “bridge” loan, to keep the company viable until the Coverage Case was finally resolved. As originally conceived, the SSP called for no cash payable at the time a settlement agreement was reached. Tr. at 170-71, 958. 61. | However, the members of the plaintiffs’ bar refused to accept the SSP as originally offered, insisting that they receive both cash and assurances that Fibreboard would not engage in asset-hiding tactics or other so-called "scorched- earth" ligation tactics. Tr. at 171-72. The attorneys whom other members of the asbestos plaintiffs’ bar consulted on SSP- related .natters were principally Steven Kazan and Harry Wartnick. Messrs. Kazan and Wartnick negotiated a revised program with Fibreboard by which 40% cash was payable for what came to be called "pre-1959" exposure cases, Le., those cases in which the claimant was first exposed to asbestos before the end of the Continental policy period (March 15, 1959), and thus for which Fibreboard alleged it had coverage under the Continental and/or Pacific policies.» The deferred payments were due September 1, 1993, which deadline could be extended, if the Coverage Case was not by then resolved to September 1, 1996. The SSP contracts provided that Fibreboard would not make any excessive dividend distributions, or undertake corporate reorganizations that could siphon off corporate assets beyond the reach of asbestos claimants. Fibreboard Exh. 901; Tr. at 169-73. "Conversely, those cases or claims arising out of first exposure to asbestos after March 15, 1959, are commonly known as "post-1959" cases or claims. 245a 62. Fibreboard's strategy was simple. It asked that claimants defer collection of agreed-upon settlement amounts until the Coverage Case was resolved. In return, it undertook to conserve corporate assets as the Coverage Case made its way through the appellate process. If Fibreboard won the Coverage Case, those plaintiffs who accepted SSP settlements would be paid from insurance proceeds. If Fibreboard lost the Coverage Case, all of the company's assets would be turned over to the plaintiffs. Tr. at 170-74. 63. The revised SSP was offered on a standard basis nationwide, and was accepted generally by plaintiffs’ counsel. However, plaintiffs demanded increased settlement values reflecting the fact that the SSP vehicle presented a risk that they would never collect the deferred portion of the payment if Fibreboard lost the Coverage Case. Tr. at 176-77. 64. Fibreboard's strategy of deferring payment of settlements until resolution of its insurance disputes, and committing to keep corporate assets intact and available to claimants were the Coverage Case to be lost, differed from that taken by other asbestos defendants. Manville, which had the largest share of liability of any defendant (30% to 33%), entered bankruptcy while still an otherwise financially healthy company. Other asbestos defendants, such as Raymark and Celotex, spent considerable corporate resources defending cases as their corporate resources (including insurance) dwindled. These defendants adopted so-called “matrix” settlement systems, offering fixed, low-value settlement amounts for specific diseases, then reorganizing their corporate structures in such a way that remaining assets would not be available to claimants, 246a and then entering bankruptcy. These "scorched-earth" litigation tactics generated substantial trial activity. Fitzpatrick Tr. at 79- 81; Tr. at 151-54; Fibreboard Exh. 101 at 12, 48. B. The _Fibreboard-Continental “Interim Agreement" 65. In December 1988, Fibreboard and Continental entered into what became known as the "Interim Agreement." Fibreboard Exh. 900. The Interim Agreement included the following basic provisions: -- Fibreboard released Continental from claims for bad faith damages that were scheduled to be tried in the Coverage Case. -- Continental agreed to fund the 40% cash component of the SSP settlements, after Fibreboard first exhausted the monies it had available from the AIG and Home Insurance Company settlements. -- If Fibreboard prevailed in the Coverage Case, Continental would repay or credit the AIG and Home Insurance Company monies Fibreboard had spent, in order that the credit amounts would be available to pay uninsured cases i.¢., post-1959 cases. By the same token, if Fibreboard lost the Coverage Case, Fibreboard would reimburse Continental for monies Continental had paid for Fibreboard's defense and indemnity under the Interim Agreement. 247a -- Continental agreed to fund Fibreboard's defense up to annual limits, or "caps," of $25 million to $29 miilion per year. -- Continental and Fibreboard agreed to cooperate in the joint investigation, evaluation, management, defense, and disposition of pre- 1959 claims. -- The Interim Agreement was to expire upon the earlier of the end of 1992, or finality of the appeal of the Coverage Case. Tr. at 174-75; Fibreboard Exh. 900. 66. The SSP did not solve Fibreboard's settlement problems. As other defendants were taken to trial, plaintiffs also often would take Fibreboard to trial rather than attempting to resolve credit or set-off problems created by the SSP. Tr. at 180-82. The SSP was not adequate to dispose of large groups of cases that were consolidated for trial. the result was that Fibreboard became a defendant in trials of large consolidated cases, including the Cimino case in this Court, the Denver Turley case in West Virginia, the Baltimore consolidated cases, and the Brooklyn Navy Shipyard cases. These circumstances generated substantial defense expenditures by Fibreboard. Tr. at 180-82; Fibreboard Exhs. 104, 105, 107- 117, 120-124. 67. Fibreboard’s efforts to adjust to the post- ACF litigation setting were very costly. Fibreboard's defense costs from September 1988 through 1989 were $50 million, almost twice the total face value of settlements negotiated during that period. In 1990, Fibreboard's defense costs were 248a $52 million, as compared to $45 million of nominal value in negotiated settlements. Fibreboard Exh. 919, Tab 3; Tr. 230- 31, 432-33. 68. By June 1990, the annual defense ‘cap" for all of 1990 under the Interim Agreement had been reached, and Continental therefore declined to pay for defense costs incurred thereafter in 1990. Fibreboard Exhs. 402, 405; Tr. at 181-82. 9 Fibreboard-Pacific Negotiations and the Fibreboard-Pacific Agreements 69. In the course of negotiations to have the defense caps lifted, Fibreboard proposed in late 1990 to Conti- nental and Pacific that the parties negotiate complete set- tlements of the policies. Continental declined the proposal. Pacific and Fibreboard pursued such negotiations. Tr. at 184- 85. 70. Fibreboard was interested in pursuing separate negotiations with Pacific because Fibreboard had no coverage for post-1959 claims. The Coverage Case judgment required each policy to respond to a claim as to which first exposure to asbestos occurred before the expiration date of the policy. Because the Continental policy followed the Pacific policy, under the judgment any claim covered by the Pacific policy was also covered by the Continental policy. Fibreboard Exh. 223; Tr. at 184-87. 71. Beginning in 1990 and continuing into 1992, separate negotiations between Fibreboard and Pacific 249a produced two separate agreements. On March 1, 1991, Pacific and Fibreboard entered into a written settlement entitled "Settlement Agreement.” Fibreboard Exh. 902 (referred to as the "Pacific I Agreement"). The Pacific | Agreement provided that the parties would apply jointly to the California Court of Appeal to seek reversal of that part of the Coverage Case judgment that pertained to the Phase I jury verdict against Pacific (determining the existence and terms of the Pacific policy). The agreement provided that the settlement would become effective on the date the Court of Appeal’s order reversing the judgment with respect to the Phase I verdict became final. The effect of such a reversal was intended to be the elimination of any further liability of Pacific under its policy. The Pacific I Agreement provided for payments by Pacific for Fibreboard's benefit totalling $142 million, of which $107 million was payable to a trust, for use exclusively to pay post- 1959 asbestos injury claims, or, if not so needed, for asbestos property damage claims. Tr. at 186-88. 72. | OnMarch 5, 1991, a different division of the Court of Appeal from that in which the Coverage Case was pending issued an opinion in Neary v. Regents of the University of California, 278 Cal. Rptr. 773 (1991), rev'd, 834 P.2d 119 (Cal. 1992). The Court in Neary refused to reverse a trial court judgment on stipulation of the parties, where reversal was a condition to settlement. Tr. at 188; Fibreboard Exh. 903. 73. On April 19, 1991, Fibreboard and Pacific filed a motion for stipulated reversal of the judgment. The Court of Appeal denied the motion on October 3, 1991. Fibreboard Exh. 904. Thereafter, the time limit for achieving 250a the stipulated reversal expired and the Pacitic | Agreement did not become effective. Tr. at 188-91. 74. On March 27, 1992, Pacific and Fibreboard entered into a second agreement. Fibreboard Exh. 905 (referred to as the "Pacific II Agreement"). Under the Pacific Il Agreement, Pacific paid Fibreboard $9 million in the form of a loan, together with $1 million under a separate agreement providing for a rescission of the Pacific policy. Pacific also agreed to provide interim funding for defense and indemnity in excess of that provided by Continental, not to exceed $20 million. In addition, Pacific agreed to pay further sums to Fibreboard at the conclusion of the Coverage Case, but only if Fibreboard prevailed on the Phase III issues of trigger and scope. If so, and depending on the decision as to Phase I issues (the existence and terms of the Pacific policy), Pacific agreed to pay $105 million (if Fibreboard won on Phase I) or $80 million (if Fibreboard did not win). In addition, if Fibreboard obtained a "Final 5.2 Order,""* Pacific agreed to pay an additional $225 million (if Fibreboard won Phase I), or $140 million (if Fibreboard did not win). Thus, the Pacific Il Agreement called for a maximum payment to Fibreboard of $360 million, of which $225 million depended on Fibreboard obtaining a "Final 5.2 Order." As was the case with Pacific I, these payments, other than interim funds, were to be paid into trust to pay post-1959 asbestos injury claims, with any surplus ‘4A "Final 5.2 Order" (so-called on account of the paragraph number in the agreement that defined the term) was a final order determining that Continental would have no nghts against Pacific for any asbestos-related defense or indemnity costs that Continental had, before the date of the Pacific II Agreement, neither agreed to pay (issuing a policy without more was not such an agreement) nor actually paid. Pe ae ee ESE ep, Se ee eae ee eee ll ain ag ee oe Pra ee oe eal i 25la payable for asbestos property damage claims. Fibreboard Exh. 905. The Pacific II Agreement called for, and the parties executed, a rescission of all Pacific policies that might cover Fibreboard's asbestos claims. Fibreboard Exh. 906; Tr. at 188- 91. D. The Fibreboard Assignment Settlement P | Related Litigati 75. In early 1991, Fibreboard believed it faced extreme circumstances that caused it to initiate a new set- tlement program. Tr. at 182. Confronted with the inability to settle large groups of cases through the SSP, Fibreboard faced major consolidated trials in Texas, Mississippi and Baltimore. Together with the exhaustion of defense monies under the Interim Agreement "caps," this led Fibreboard to initiate the assignment settlement program. Tr. at 182. Unlike the SSP, the terms of each assignment settlement were separately negotiated, and were not identical. Their basic structures were all very similar, however. In settlement of pre-1959 exposure cases, Fibreboard paid the claimants no cash at the time the settlement agreement was made, but rather granted an assignment of rights to proceeds under the Continental policy, together with any bad faith claims for Continental's failure to pay the assigned amount. If Fibreboard lost the Coverage Case, it was responsible to pay the entire settlement amounts. In post-1959 cases, claimants were given an SSP promise to pay. Tr. at 191-93; Continental Exh. 14. Plaintiffs who entered into assignment settlements demanded that Fibreboard obtain a judicial confirmation of Fibreboard's right to make the assignments. Tr. at 196. 252a 76. Assignment settlements typically covered a law firm's entire caseload, but with provisions that addressed the possibility that certain claimants might reject the negotiated settlement. As it had done in the SSP settlements, under the assignment settlement program Fibreboard agreed to preserve its net worth and corporate resources, so that if it did lose the Coverage Case it could be liquidated for the benefit of asbestos claimants. Tr. at 193, 212-13; Continental Exh. 14. 77. Under the assignment settlement program, as was the case with the SSP before, nominal settlement values tended to increase again because, among other reasons (i) plaintiffs had to accept the increased risk that they would never be paid if Fibreboard lost the Coverage Case (they were receiving no cash, whereas under the SSP they had received 40% in cash); (ii) the assignments were of questionable validity under California law; and (iii) Continental now took the position that the assignment settlement program vitiated insurance coverage even if Fibreboard were to win the Coverage Case. Tr. at 195-96. The average settlement amount under the SSP held steady at roughly $5,400 per case; on the other hand, the assignment settlement average overall more than doubled, rising to over $11,400 per case. Tr. at 195-201; Fibreboard Exh. 919, Tabs 18-21. The weight of the assignment settlement program served to put pressure on Continental to engage in global settlement negotiations. Tr. at 608-09, 1082-84, 1177- 78, 1325-28. 78. Continental strongly objected to the assignment settlements and office-wide settlements on several grounds, including that Fibreboard had no right to enter into them, that they breached the Interim Agreement provisions oh ol il a a rt al lS 253a calling for joint management of the cases and claim-by-claim evaluation of cases, and that they violated policy provisions prohibiting assignments of policy rights and settlements without Continental's consent. Continental also objected to the assignment settlements on the grounds that the settlement amounts were inflated and that pre-1959 (insured) claims bore a disproportionately high share of gross settlement amounts in each office-wide settlement agreement. Tr. at 195-96. 79. Abroad, bitter and costly conflict ensued be- tween Fibreboard and Continental over the assignment program, and related issues. This conflict persisted through 1991 and 1992, and led to an agreement entered into on April 9, 1993 between Fibreboard and Continental, which has become known as the "April 9 Agreement." Fibreboard Exh. 908; Tr. at 1340-47. 80. In the conflict over the assignment settlement program, Continental took the position that the December 1988 "Interim Agreement" had redefined its policy obligations for the interim period, and that, if it complied with the Interim Agreement, it had provided all the defense that it was obligated to provide. Fibreboard took the position that an obligation to provide a full defense under the insurance policy still existed, that if payments under the Interim Agreement for defense were not adequate then Continental had not complied with its policy defense obligations leaving Fibreboard free to enter into settlements without Continental's consent, and that Fibreboard could do so by way of assignment of proceeds under the Continental policy. Tr. at 202-03. 254a 81. Continental's objections began with the first assignment settlement, in the Cimino litigation. Continental Exh. 14; Fibreboard Exhs. 403, 500. Continental consistently objected to use of the assignment vehicle in all settlements, including the Brooklyn Navy Shipyard cases brought by the Levy, Phillips law firm (Fibreboard Exh. 407), the Weitz & Luxenberg cases (Fibreboard Exh. 409), and the Kazan cases (Fibreboard Exhs. 410, 411), among several others. Fibreboard Exhs. 406, 408, 416, 430, 431. 82. Continental asserted and continues to assert that the assignment settlement program not only violated various provisions of the Interim Agreement, but also the insurance policy itself, including provisions prohibiting assignment of interests under the policy, prohibiting settlements without Continental's consent, prohibiting action against Continental other than for declaratory relief, mandating cooperation, and prohibiting assumption of obligations. Fibreboard Exh. 412; Tr. at 202-04. Continental further asserted, and continues to assert, that Fibreboard's use of assignments had vitiated its coverage altogether, quite apart from the outcome of the Coverage Case. Tr. at 1515-17. Fibreboard adamantly rejected, and continues to disagree with, Continental's position in this regard, and asserts that Continental has no right to make any such claims. Tr. at 1545- 46. 83. Several lawsuits were brought by Fibreboard against Continental to test whether Fibreboard legally could enter into settlements using the assignment mechanism. The first action, known as Andrus v. Fibreboard Corp., was filed by Fibreboard on April 1, 1991 in state court in 255a Alameda County, California, in connection with a proposed settlement of asbestos cases brought by Mr. Kazan's firm. Fibreboard Exhs. 303, 304. 84. On June 28, 1991, Continental filed an action in federal court in California, challenging the pending assignment settlement of the Cimino cases. Fibreboard Exhs. 305, 308. Eventually, that action was dismissed in favor of a third-party action filed in July 1991 by Fibreboard against Continental in Cimino seeking approval of the Cimino assignment settlement. Fibreboard Exhs. 306, 312, 313; Tr. at 206. 85. Fibreboard brought similar actions in federal court in New York to validate assignment settlements with claimants represented by the Levy, Phillips firm, and those represented by Weitz & Luxenberg. Fibreboard Exhs. 307, 311. Those matters were settled directly by Continental with claimants, immediately before trial or hearing, without a ju- dicial determination as to the validity of the assignment vehicle, and, accordingly, Fibreboard's efforts to obtain an early ruling in its favor on the assignment issue did not succeed. Fibreboard Exhs. 310, 314; Tr. at 205-06. 86. Mr. Kazan did not settle the cases involved in the Andrus action directly with Continental. Fibreboard Exhs. 421, 422. On June 1, 1992, Judge Kawaichi of the Superior Court in Alameda County granted summary adjudication in Andrus in Fibreboard's favor, ruling that Fibreboard had the right to make reasonable settlements by way of assignment. Fibreboard Exh. 315. Judge Kawaichi reaffirmed that order on July 6, 1992, on Continental's motion 256a for reconsideration. Fibreboard Exh. 317. On September 2, 1992, the California Court of Appeal summarily rejected Continental's petition for writ of mandate, Fibreboard Exhs. 318, 321, and judgment in Andrus was entered in Fibreboard’s favor in September 1992. Fibreboard Exh. 322; Tr. at 206-08. 87. On July 8, 1992, shortly after Judge Kawaichi reaffirmed the Andms summary adjudication, Continental wrote Fibreboard stating that, notwithstanding the defense cap provisions in the Interim Agreement, Continental would provide a defense in accordance with applicable law. Fibreboard Exh. 435. Continental then reiterated its position that Fibreboard had no basis to make assignment settlements, given the position taken in the July 8 letter. Fibreboard Exh. 436. Fibreboard contended that Continental's offer to provide a full defense came too late. This new dispute provoked a series of correspondence, with each side arguing its contention, and with Fibreboard eventually taking the position in January 1993 that Continental could not remedy the situation created by its past failures to defend as long as Continental continued to reserve its coverage position. Fibreboard Exhs. 439-441, 446, 450, 452, 454, 468; Tr. at 234- 36. 88. The controversies between Continental and Fibreboard involved many areas in addition to Continental's objections to Fibreboard settling claims by way of assignments. Fibreboard contended that Continental refused to pay defense- related costs, such as those for a computerized case management system, a case processing center, and costs of negotiating assignment settlements. Fibreboard Exhs. 419, 434. Continental argued that Fibreboard's method for allocating amounts to individual cases based on duration of exposure, date 257a of first exposure, and disease (known as the “point yan s improperly weighted the settlement amounts in group ¢ inventory settlements to pre-1959 cases. Fibreboard Exh. 410. Continental desired to attend settlement negotiations between Fibreboard’s counsel and claimants’ counsel; Fibreboard insisted on preconditions to such attendance. Fibreboard Exh. 413. When Continental developed its own settlement program, containing a 10% cash component, Fibreboard objected to that, Fibreboard Exhs. 437, 438, 442, 443, and to Continental's efforts to make settlement offers directly to claimants’ counsel rather than through Fibreboard's counsel. Fibreboard Exhs. 415, 417. After Continental negotiated privately with counsel for the Cimino claimants, Fibreboard took the position that Continental had assumed full responsibility for all of those cases. Fibreboard Exh. 432. Continental's efforts to transform the settlement process into one in which it fully participated, by way of three- party agreements (that is, including Fibreboard, plaintiffs and Continental), led to contentions by Fibreboard that there was no agreed-upon three-party settlement structure, and Continental's assertion that there was. Fibreboard Exhs. 452, 457, 459, 460. Vv. HISTORY OF GLOBAL SETTLEMENT 89. Anumber of factors prompted Fibreboard to begin to explore the possibility of a global resolution of all of its asbestos injury liabilities in late 1990 and early 1991. Fibreboard was locked in a significant dispute with Continental and did not have enough money to defend itself. As a result, it entered into the Pacific | Agreement -- and, later, the Pacific II 258a Agreement -- to obtain funds. Tr. at 208-09. It then commenced the assignment settlement program in order to try to bring the underlying litigation closer to Continental, believing that it was important that Continental feel as threatened as Fibreboard did before Fibreboard would be able to receive some protection from Continental. Fibreboard wanted, in short, to get Continental interested in Fibreboard's entire asbestos problem. Fibreboard believed that in order to bring Continental to the bargaining table with respect to resolving all of Fibreboard's asbestos injury liabilities (pre-1959 and post-1959 claims), it was necessary to demonstrate progress toward assignment- based global settlement negotiations with the plaintiffs. Tr. at 209,633. 90. Other developments contributed to Fibreboard’s interest in seeking a global resolution. Fibreboard was particularly motivated by the Linscomb action, filed in this Court in July of 1990 as a Rule 23(b)(1)(B) present and future claims class action, which had been widely discussed as a vehicle for "limited fund" treatment of certain defendants, including Fibreboard. Tr. at 210; Fitzpatrick Tr. at 86-87; Class Plaintiffs Exh. 1002; Fibreboard Exh. 117. At the 1990 Federal Judicial Center meeting at the Dolley Madison House in Washington, D.C., the message taken away by Fibreboard was that litigants should devise a solution to the asbestos problem, or the courts would impose a solution the litigants might not like. Tr. at 211; Fitzpatrick Tr. at 83-84. In September 1990, the Asbestos Ad Hoc Committee had been commissioned to report on the asbestos problem in the courts. In November 1990, eight federal judges had written a letter to the MDL Panel requesting transfer under 28 U.S.C. 91407 of federal asbestos cases to Judge Weiner. Fibreboard Exh. 118. All of these 259a developments stimulated Fibreboard's interest in global settlement discussions. Tr. at 208-11. 91. Fibreboard initially approached Mr. Motley of the Ness Motley firm to discuss a global settlement because he had been outspoken about the need for alternative approaches at the Dolley Madison House meeting, because asbestos lawyers generally advised that Ness Motley involvement would be necessary for any global settlement, and because Ness Motley was involved in virtually all major trials against Fibreboard. Tr. at 211-12. Mr. Motley -- together with his partner at Ness Motley, Joseph F. Rice -- eventually agreed to consider a global settlement on an assignment basis. As proposed by Fibreboard, such a settlement would have the following elemental structure: if Fibreboard confirmed its coverage through a victory in the Coverage Case, plaintiffs would look only to Fibreboard's insurance assets for compensation, and not to Fibreboard's other (non-insurance) assets; if Fibreboard lost its coverage as the result of a loss in the Coverage Case, in contrast, plaintiffs could “have the company.” Tr. at 212-13. 92. Fibreboard also approached Messrs. Kazan and Wartnick in late 1990 or in early 1991 suggesting that they consider a global settlement. Kazan and Wartnick were logical choices because they had the most information about Fibreboard's West Coast activity, and other asbestos plaintiffs’ lawyers looked to them for guidance in the Fibreboard litigation. Fibreboard felt that negotiations would have credibility only if they, as experts on Fibreboard, were in- volved. Tr. at 213-14. Messrs. Kazan and Wartnick contacted Mr. Motley in the belief that Ness Motley would have to be 260a involved if any global settlement was to succeed. Tr. at 644- 45. 93. Having decided to go forward with negotiations with Fibreboard with respect to an assignment- based global settlement of present and future claims, the Ness Motley lawyers and Messrs. Kazan and Wartnick ("Plaintiffs' Counsel")'* took several steps to increase their negotiating effectiveness. They retained the law firm of Caplin & Drysdale, Chartered, to represent them and assist them in handling certain highly complex tax, insurance, class action and commercial litigation issues that might arise in the negotiations and that they believed might be beyond their areas of personal expertise. Tr. at 646, 1555-56. The primary lawyers at Caplin & Drysdale involved in this representation were Elihu Inselbuch and Peter Van N. Lockwood. Either Mr. Inselbuch or Mr. Lockwood or both were present at most of the discussions and negotiations described herein. Fibreboard Exhs. 505, 511; Tr. at 1382, 1450, 1466, 1550-51, 1555. Although Caplin & Drysdale at no time represented individual asbestos plaintiffs, that firm had had extensive experience in the asbestos field, including work in connection with the Manville bankruptcy and trust. Tr. at 1556. This Court finds that it was prudent and reasonable for Plaintiffs’ Counsel to have retained them. 94. At the request of Plaintiffs’ Counsel, Fibreboard supplied them with information about its past claims experiences, historical settlement averages, and financial 'S Another Ness Motley partner, Joseph B. Cox, Jr., became involved in these negotiations in May 1992. Tr. at 1074-75. From that point on, the term “Plaintiffs’ Counsel” as used herein refers to Messrs. Rice, Cox, Kazan and Wartnick. 26la information, on a confidential basis. Tr. at 215-16, 648; Fibreboard Exhs. 501-15. 95. In _ negotiating a potential global settlement, Plaintiffs’ Counsel also drew upon a substantial body of knowledge about Fibreboard that had been collected by them and by other plaintiffs’ counsel. During the many years or asbestos-related litigation involving Fibreboard, various plaintiffs’ counsei had conducted massive discovery of Fibre- board, including document discovery and depositions of Fibreboard's corporate officers and knowledgeable employees. These counsel had exhaustively examined the evidence bearing upon Fibreboard's involvement with asbestos and its knowledge of the hazards of asbestos, including sales records and other information. Tr. at 937-38. This Court finds that Plaintiffs’ Counsel's extensive knowledge of Fibreboard and its operations was more than sufficient to permit them to negotiate effectively. 96. In 1991, Plaintiffs’ Counsel retained James Sinclair, an investment banker, to provide an estimated value of Fibreboard absent its asbestos-related liabilities. Tr. at 648. Mr. Sinclair conducted an analysis and estimated such value of Fibreboard to be between $230 million and $240 million. Ortiz Exh. 1. 97. Plaintiffs’ Counsel also retained Dr. William Nicholson, a prominent and _ distinguished epidemiologist at Mount Sinai Hospital in New York, to provide them with a projection of the number of future asbestos-related claims against Fibreboard. Tr. at 216, 648, 836-39, 849. Dr. Nicholson is the author (together with Drs. Selikoff and Perkel) of a 1982 study entitled "Occupational Exposure to Asbestos: 262a Population at Risk and Projected Mortality, 1980- 2030," which estimated the population that had been exposed to asbestos (of all manufacturers) in the past, and the number of resulting cancer cases from 1980 onward. Tr. at 839-49; Class Plaintiffs Exh. 1011. Dr. Nicholson's work in the field of future asbestos claims projections has been among the most accurate work done to date. Tr. at 648-49. 98. At the request of Plaintiffs’ Counsel, Dr. Nicholson was provided with data from Fibreboard concerning number of claims against Fibreboard per year by industry; time of claimant's first employment; duration of claimant's em- ployment; age of claimant; and type of claimant's disease. To the extent that gaps were found to exist in this database, Dr. Nicholson sought to fill those gaps with information gathered in connection with the Manville proceedings. Tr. at 216, 850- 51. Using this data, together with the results of this 1982 study, Dr. Nicholson made an estimate of the number of future claims against Fibreboard. The estimate, taking into account the uncertainty acknowledged by Dr. Nicholson, provided a range of just over 120,000 claims to just under 190,000 claims for the period beginning in September 1993 and continuing through 2029. Tr. at 851-58; Class Plaintiffs Exhs. 1010, 1012, 1018. 99. _ Dr. Nicholson's work was done in 1991. However, he reexamined his work during 1993 when projections by others were published in connection with the Manville trust litigation, and he reaffirmed the validity of his analyses and conclusions in August 1993. Tr. at 861-65. As Dr. Nicholson explained, mesothelioma projections among those exposed to Fibreboard asbestos logically peaked earlier in time and fell off faster than projections for persons exposed to 263a Manville products because of the different asbestos exposure patterns created by the different products of the two entities. Exposure to Fibreboard products was more common in shipyards during World War II, Tr. at 861-63, whereas Manville products were more broadly used over a wider period of time. It is thus inappropriate to compare Manville claims projections with Fibreboard claims projections. Tr. at 863. 100. Based on Dr. Nicholson's methodology, the his- torical accuracy of his work in the field of future asbestos claims projections, and his exemplary reputation in his field, the Court finds that it was prudent for Plaintiffs’ Counsel to have retained Dr. Nicholson, and reasonable for them to have relied on his projections in their subsequent global settlement negotiations. 101. In 1990 and 1991, some of Plaintiffs’ Counsel (together with other lawyers acting for asbestos claimants) had engaged in global negotiations with representatives of many asbestos defendants under the aegis of the Linscomb global class action pending in this Court. Fitzpatrick Tr. at 87-89. While those global negotiations never reached closure, a consensus among members of the plaintiffs’ bar developed about overall average settlement values for each asbestos-related disease and the respective settlement shares of the various asbestos defendants. This consensus was taken into consideration by Plaintiffs’ Counsel in their negotiations with Fibreboard. Tr. at 650-51, 1129-36. 102. Based upon their own broad experience, which included the SSP and assignment settlement program negotiations, the Linscomb negotiations, and the estimates from 264a Mr. Sinclair and Dr. Nicholson, Plaintiffs’ Counsel formulated a negotiating position with respect to an assignment-based global settlement. To do so, Plaintiffs’ Counsel needed to estimate the number of future asbestos claims against Fibreboard, the value of those claims, as well as the proportion of claims representing pre-1959 and post-1959 exposures. The work that had been done in connection with the Linscomb action provided appropriate national average settlement values for various diseases. And Fibreboard's share from time to time of the national averages could be derived from ACF data and knowledge of the asbestos litigation. This information provided a reasonable basis for Plaintiffs’ Counsel to use in global negotiations. Tr. at 650-52. 103. Prior to and during global negotiations, Plaintiffs' Counsel kept themselves informed of developments in the Coverage Case by obtaining and reviewing, inter alia, copies of the trial court's tentative decisions, the trial court's judgment, and the briefs submitted to the California Court of Appeal. Tr. at 643-44; Fibreboard Exh. 500. 104. In addition, later in the negotiating process the Ness Motley lawyers retained and consulted with Professor Samuel Dash with respect to ethical issues. Tr. at 1551-53. 105. This Court finds that Plaintiffs’ Counsel correctly identified those areas in which outside assistance would help them to negotiate a global settlement more ef- fectively on behalf of asbestos claimants, and that they took appropriate steps to obtain such outside assistance. In ad- dition, this Court finds that Plaintiffs’ Counsel took the ainsiniil 265a necessary and proper steps to inform themselves of the perti- nent facts and law so as to be able to formulate an effective negotiating position and to carry out their professional re- sponsibilities in accord with the ethical standards governing attorneys. Tr. at 412-13. 106. Fibreboard asked that Plaintiffs' Counsel keep their colleagues in the plaintiffs’ bar informed about global settlement discussions, and reiterated that Fibreboard would not pay any non-insurance resources in settlement if it prevailed in the Coverage Case. Tr. at 215. 107. Continental was informed early in the global negotiation process, and objected to a global settlement by way of assignment, as it had objected to any settlements by way of assignments. Tr. at 216-17. 108. Because Continental was not at the table, Plaintiffs’ Counsel developed the strategy of first establishing a ration between the present value of the total settlement amounts for pre-1959 (insured) and post-1959 (uninsured) claims. To do so they separately calculated the data for different periods of exposure, types of exposure, and settlement shares, so that it could be matched with Dr. Nicholson's projections respecting the number and types of future cases anticipated to be filed against Fibreboard. They then took the position that they would first negotiate only the post-1959 settlement price with Fibreboard, and that they then would use their predetermined ratio to derive the settlement price for the pre-1959 claims to avoid any argument by Continental that Fibreboard had, in effect made Continental (which would have responsibility for insured claims) pay for uninsured claims, which were Fibreboard's 266a responsibility. Fibreboard would retain liability for all amounts if the Coverage Case failed. Tr. at 217-18, 650-53. 109. The 1991-1992 global negotiations were conducted with respect to all present and future asbestos-related personal injury cases against Fibreboard. The parties negoiated in contemplation of a Rule 23(b)(3) opt-out class action structure. Given a choice, Plaintiffs’ Counsel preferred an opt- out settlement class structure, and felt it would be easier to support legally. Plaintiffs’ Counsel rejected Fibreboard's suggestions for total or partial mandatory class treatment (of ¢.g. punitive damages claims). Tr. at 218, 649. 110. Negotiations progressed to the point where the parties apparently had reached agreement on price terms of $278 million for the post-1959 cases, and $1.86 billion for the pre-1959 cases. These prices would have covered both present and future cases. The parties exchanged draft term sheets in November 1991. Fibreboard Exhs. 528-530. Fibreboard intended to pay the post-1959 settlement price with money to be derived from the Pacific | Agreement, together with credits to be received from Continental under the Interim Agreement, from some remaining AIG and Home Insurance Company settlement monies, and from recovery of unpaid defense costs from Continental. Tr. at 219-20. 111. Difficulties arose, however, in resolving questions about opt-outs and contribution and indemnity issues, Tr. at 226-28, and Plaintiffs’ Counsel eventually took the position in December 1991 that negotiations were terminated. Fibreboard Exhs. 531, 532; Tr. at 228-30. Further attempts in 1992 to reach agreement on the terms of a global settlement as Te ee e—eeeeeEEeEeeaaeaeeeEeEeEeEEeEeEeeEeEeEeEeEeEeEeEeEeEeEeEeEeEeEeeeeEeEeEeEeEeEeEeEeEeeeeEeEeEeEeeeeereeeaeeeeeeeee 267a were unavailing, with issues as to how to handle opt-outs and contribution and indemnity claims continuing to present major difficulties. Tr. at 230; Fibreboard Exhs. 533-536, 543-545. 112. Continental was kept informed of the global negotiations, and stated its objections to Fibreboard's assignment-based global settlement negotiations. Tr. at 216-17, Fibreboard Exhs. 404, 423. Continental expressed its desire to negotiate directly with representatives of the claimants, Fibreboard Exhs. 516, 518; Tr. at 223, and attempted to participate in negotiations, but Plaintiffs’ Counsel insisted on negotiating with Fibreboard so long as there was a coverage dispute. Fibreboard Exh. 519. Continental sought inclusion in the global negotiations, suggesting the possibility of a resolution subject to the final decision in the Coverage Case. Fibreboard Exhs. 522, 523. 113. In March 1992, Continental suggested a $1.5 billion settlement limited to pre-1959 claims (present and future), to be paid $100 million a year over 15 years. Other than $20 million payable yearly during the remainder of the Coverage Case, the Continental offer was subject to the outcome of that litigation. Fibreboard Exh. 539. Fibreboard objected to what it asserted was an improper attempt by Continental to address only part of the company’s asbestos litigation problem, Fibreboard Exh. 541, and there were no substantial discussions of the proposal. Tr. at 228-29. 114. There had also been efforts in April and May 1992, initiated by Fibreboard, to find a way, satisfactory to both Fibreboard and Continental, to proceed with global negotiations with Plaintiffs’ Counsel. Proposals included 268a Continental paying Fibreboard an amount of money to take responsibility for the entire asbestos problem, or Fibreboard turning over to Continental all its insurance, with Continental to assume responsibility for the entire problem. Fibreboard Exh. 424. These efforts were unavailing. Fibreboard Exhs. 425, 428, 429. B. The Initial Ness Motley Agreement 115. In May 1992, when global negotiations had stalled, Fibreboard expressed an interest in settling all of the Ness Motley firm's asbestos cases. Tr. at 301, 1075. Mr. Snyder approached Messrs. Rice and Cox, who entered into negotiations for Ness Motley clients and on behalf of Ness Motley affiliate law firms across the country. The cases involved presented the broad range of asbestos-related diseases. Tr. at 301-03, 1076-78. These negoi'»*ons continued through the remainder of 1992. Tr. at 1076-84. 116. Anagreement, now known as the "Initial Ness Motley Agreement," was signed December 30, 1992. Fibreboard Exh. 917. It covered 20,000 cases, at an average price of $13,000 per case, with provisions for adding more cases. It incorporated the point system, and was based on an assignment of rights under the Continental policy with respect to pre-1959 claims. Post-1959 claims were to be paid with monies derived from the Pacific II Agreement, and thus the Initial Ness Motley Agreement contained a provision requiring Fibreboard to obtain a Final 5.2 Order. With the Initial Ness Motley Agreement, by January 1993 Fibreboard had settlement agreements in place involving debt to asbestos bodily injury 269a claimants of over $1.2 billion, including $943 million in assignment settlements made in 1992. Tr. at 230-31. C. Negotiations During 1993 1. Early 1993 To April 9, 1993 117. The Initial Ness Motley Agreement required that Fibreboard obtain Continental's assent to the assignment underlying it, or a court order approving that assignment. Thus, pursuant to the Initial Ness Motley Agreement, on January 11, 1993 Fibreboard filed suit in this Court against Continental, Fibreboard Corp. v. Continental Casualty Co., Civil Action No. 6:93cv11 (E.D.Tex.), seeking (i) a declaration that the assignment in the Initial Ness Motley Agreement by Fibreboard to the claimants of Fibreboard's rights under the Continental insurance policy was valid; (ii) a declaration that the amounts Fibreboard assigned pursuant to the Initial Ness Motley Agreement were fair and reasonable, and (iii) a bar order cutting off Continental's equitable contribution rights as against Pacific. Tr. at 232-33, 1327; Continental Exh. 22. Such a bar order was simultaneously sought by Fibreboard against Continental in state court in Alameda County, California. Continental Exh. 23. 118. In February 1993, Continental responded to this litigation by moving to dismiss or stay the action before this Court under the Declaratory Judgment Act (based on the pendency of the Alameda County action), and by moving to dismiss under Fed. R. Civ. P. 12 for failure to join Pacific as a party. In the Alameda County action, Continental cross- complained against Fibreboard for a declaratory judgment that 270a Fibreboard's assignment of rights under the Continental policy and its seeking a contribution bar order constituted breaches of the policy. Fibreboard thereafter responded, resisting the relief sought by Continental. Continental Exhs. 22, 23. 119. In early 1993, Continental made a corporate decision to determine whether it would be possible to achieve a global resolution of its entire Fibreboard asbestos- related liability. Tr. at 1330. In connection with this decision, on February 8, 1993, Continental's parent, CNA Financial Corporation, publicly announced that Continental would be seeking to discuss such a global settlement with Fibreboard, and that Continental was increasing its asbestos-related reserves by $1.5 billion. Tr. at 1330-31; Fibreboard Exh. 552. Fibreboard, in response, stated that it was “pleased that CNA has publicly acknowledged the order of magnitude of its potential liability arising from prior trial court judgments in Fibre- boards's favor. Fibreboard has been and remains ready to engage in good faith settlement negotiations with Continental." Continental Exh. 15. 120. Ata status conference before this Court on March 10, 1993, at which representatives of Fibreboard, Con- tinental and Ness Motley were present, the Court and the par- ties discussed the possible appointment of a Settlement Fa- cilitator. Tr. at 307-08, 1092-93. 121. On March 23, 1993, the Court appointed Judge Patrick E. Higginbotham of the United States Court of Appeals for the Fifth Circuit to act as Settlement Facilitator in connection with the litigation pending in this Court between Fibreboard and Continental. Tr. at 1093, 1332; Fibreboard Exh. 559. 27la 122. Judge Higginbotham, by letter dated March 25, 1993, asked the parties for letters setting forth the status of the matter and the parties’ respective positions preparatory to a series of meetings before him. Fibreboard Exh. 560. Fibreboard and Continental responded with such letters. Fibreboard Exhs. 561, 562. 123. As set forth in its letter to Judge Hig- ginbotham, Fibreboard stated its views that: (i) Fibreboard and Continental should focus their attention on resolving the issues raised in Fibreboard's pending litigation in this Court, (ii) Continental should agree to the terms of the Initial Ness Motley Agreement; (iii) to the extent that there were discrete aspects of Fibreboard's litigation in this Court on which agreement between Fibreboard and Continental could not be reached -- for example, Fibreboard's prayer for a contribution bar order -- then such disputed aspects should be adjudicated by the Court on an expedited basis; and (iv) Continental should not be permitted to become involved in negotiations between Fibreboard and Plaintiffs’ Counsel toward a global resolution of all of Fibreboard's present and future asbestos personal injury liabilities -- negotiations that Fibreboard said were nearing a successful conclusion -- unless Fibreboard received assurances from Continental that Continental's participation in such negotiations would not cause delay, interference or prejudice to Fibreboard. Fibreboard Exh. 562. 124. Continental's understanding was that the focus of the settlement effort was intended to be an attempt to achieve a global settlement. Tr. at 1332-33. As set forth in Continental's letter to Judge Higginbotham, Continental believed that there were several major obstacles to a global settlement 272a with Fibreboard, namely: (i) the Pacific 11 Agreement, whereby the parties to that agreement agreed to rescind the Pacific policy with the purported effect of extinguishing Continental's right to contribution from Pacific, in exchange for a payment by Pacific to Fibreboard of up to $360 million; (ii) Fibreboard's assignment settlement program, including the threat of a global resolution of Fibreboard's asbestos liabilities by means of an assignment settlement be- tween Fibreboard and Plaintiffs’ Counsel without Continental's consent; (iii) obstructed communication between Continental and representatives of asbestos claimants, which Continental claimed prevented it from participating at the bargaining table; and (iv) alleged interference by Fibreboard with Continental's ability to acquire information regarding asbestos claimants asserting claims against Fibreboard. Tr. at 1333-34; Fibreboard Exh. 561. 125. Continental was also of the view in March 1993 that any global settlement with Fibreboard had to be structured as a non-opt-out class action settlement. This was a sine gua non for Continental, for several reasons. First, structuring the settlement on an opt-out basis could give the asbestos plaintiffs the equivalent of a “one-way option," in that if the Insurers were successful in the Coverage Case appeal there would likely be virtually no opt-outs from the settlement, whereas if Fibreboard were successful in the same appeal there might be a large number of opt-outs. Tr. at 1334-35. This analysis was predicated on an assessment that the likely time of decision by the California Court of Appeal in the Coverage Case would be before any date where one could anticipate that a plaintiff class would be given the right to decide whether or not to opt out of the settlement. Tr. at 1335-36. 273a 126. Second, Continental was not willing to contribute the major portion of a multi-billion dollar settlement and give up its right to continue litigating the Coverage Case appeal -- and thereby perhaps eliminate any liability to Fi- breboard -- unless it could thereby achieve certainty with respect to the magnitude of its liabilities under the insurance policy it had issued to Fibreboard. Continental thus regularly insisted that any global settlement provide it with "total peace” with respect to asbestos-related liability. Continental did not believe that it could make an accurate assessment of the ultimate liability that would be associated with those class members who would choose to opt out of a future-claimants asbestos class action such as that being contemplated." The contemplated class action differed in this regard from most class actions -- such as securities fraud class actions -- where the defendant can determine with reasonable accuracy at the outset the potential value of the opted-out claims. Tr. at 324, 1336-38, 1569-72. 127. For their part, Messrs. Rice and Cox were of the view that Fibreboard and Continental had to reach an agreement resolving the differences between them before Con- tinental should be permitted to participate in global settle- ment negotiations with Plaintiffs’ Counsel. Tr. at 1097-98. In an April 5, 1993 letter to Fibreboard’s counsel, Mr. Cox stated two preconditions to Plaintiffs’ Counsel's entering into global settlement negotiations. First, Mr. Cox was to be provided with a copoy of any written Fibreboard-Continental agreement that "While experts can assess -- although with uncertainty -- the value of a broad mix of future claums based on diseases that become manifest over a long period of time, there is little or no basis on which to predict which type: of claims -- more serious than average, less serious than average, or simply average -- will be presented by those individuals who might choose to opt out. 274a was reached, no later than April 9, 1993. And second, Continental was to advise Plaintiffs’ Counsel that Continental had sufficient information to Commence global negotiations. Mr. Cox further emphasized that, in his view, the original, primary focus of the negotiations before Judge Hig- ginbotham was with respect to a settlement of the Ness Motley cases. Fibreboard Exh. 563. 128. Fibreboard and Continental then engaged in extremely hard-fought, arm's-length, contentious negotiations that led to an agreement between them on April 9, 1993 (the "April 9 Agreement"). Tr. at 308-10, 1340, 1349; Fibreboard Exhs. 566, 908. Fibreboard believed that it had the right to enter into assignment settlements without Continental's con- sent. Plaintiffs’ Counsel had agreed in principle to enter into a globa! settlement with Fibreboard funded by an assignment of rights against Continental and the proceeds of its settlement with Pacific. Fibreboard was thus unwilling to give up this position unless Continental agreed that it could only enter into a global settlement that would not require contribution of any of Fibreboard's non-insurance assets. Tr. at 309-12. 129. The April 9 Agreement provided, inter alia, that the parties would use their best efforts to achieve a global resolution of Fibreboard's asbestos liabilities, including the resolution of present cases and resolution of future asbestos personal injury claims.'’ In addition, Continental agreed that it ‘The April 9 Agreement expressly provided, however, that the "best efforts” clause in the agreement did not “obligate Continental to pay or obligate itself with respect to any particular amount or amounts of money or to agree to any particular term or terms in order to achieve" such a global resolution. (continued...) 275a would not seek to reach a global settlement without Fibreboard's participation, and that any globai settlement Continental did conclude with Fibreboard would be funded entirely within Fibreboard's available insurance resources. Tr. at 309-312, 1345-49; Fibreboard Exh. 908. Such a provision -- excluding Fibreboard's non-insurance assets from any global settlement -- had been Fibreboard's corporate goal for many years and continued to be a sine qua non for Fibreboard. Tr. at 144, 1349, 1588-89. Continental also agreed to pay the monies that Pacific had agreed to pay under the Pacific Il Agreement under the same conditions and as if a Final 5.2 Order had been entered. This meant that if Continental were successful in voiding the Pacific Il Agreement, Continental would nonetheless stand behind the monetary obligations of that agreement. Tr. at 310, Fibreboard Exh. 908 at 4 6(b). 130. The April 9 Agreement achieved several important purposes for Continental. First, it prevented Fibreboard from entering into any settlements -- including any further assignment settlements -- without Continental's consent. Second, Continental obtained direct access to global negotia- tions with Plaintiffs’ Counsel. In addition, Continental ob- tained certain releases from Fibreboard, including a release with respect to asbestos property damage claims. Tr. at 1344; Fibreboard Exh. 908. 131. In the April 9 Agreement, Fibreboard obtained a number of important commitments from Continental: (i) most important, an undertaking -- which Fibrebcard viewed '7(__ continued) Fibreboard Exh. 908 at 1, ¥ 1. 278a 136. On the moming of April 30th, Continental made a global settlement offer to Plaintiffs’ Counsel to settle all of Fibreboard’s present and future asbestos personal injury claims for $2 billion face amount, to be paid over 25 years. The offer continued to be conditioned upon the settlement being structured on a non-opt-out basis, as well as an adequate contribution from Pacific. Plaintiffs’ Counsel briefly considered this offer among themselves and then returned to the negotiating room, stating that they believed that they had been presented with a “take-it-or-leave-it” offer, and that they would leave it. Plaintiffs’ Counsel then walked out of the meeting. Tr. at 314- 16, 1100, 1352-56. 137. For a period of time thereafter, Plaintiffs’ Counsel took the position that the global settlement negotia- tions had terminated, that the only issue for discussion was the resolution of the Ness Motley litigation, and that Judge Higginbotham’s role was limited to assisting in that resolu- tion. Continental and Fibreboard took the position that global negotiations were not over, and the Judge Higginbotham should encourage the parties to continue global negotiations. Tr. at 317-19, 1101-02, 1356-57, 1538; Fibreboard Exhs. 567, 572, 574-576. 138. Judge Higginbotham convened a meeting on May 5, 1993 in New Orleans attended by Fibreboard, Continental, Pa- cific and Messrs. Rice and Cox. At that meeting, Continental urged strongly that global negotiations be continued. Mr. Rice continued to insist that global negotiations were over, as long as Continental continued to insist -- as it did at that meeting -- that any global settlement be done on a non- opt-out basis, and that there be an adequate financial 279a contribution from Pacific. Pacific continued to state that the Pacific Il Agreement resolved its Fibreboard asbestos- related liabilities. | Nevertheless, Judge Higginbotham directed Continental and Messrs. Rice and Cox to set forth in writing their positions with respect to the structure of a global settlement (opt-out or non-opt-out) and the price of any such settlement. Continental and Messrs. Rice and Cox did so, in letters dated May 12, 1993 and May 17, 1993, respectively. Tr. at 1355-58, 1370, 1538; Fibreboard Exhs. 568, 574. 139. Judge Higginbotham convened another meeting in Washington, D.C., on May 17, 1993. Following their meeting with Judge Higginbotham, Continental, Fibreboard and Messrs. Rice and Cox met to discuss a resolution of the litigation concerning the Initial Ness Motley Agreement. Although Messrs. Rice and Cox took the position that formal global negotiations had ceased, and that they had no authority to negotiate on behalf of Messrs. Kazan and Wartnick, Continental and Fibreboard continued to seek to restart global negotiations, and Mr. Wachtell indicated that he would be willing to recommend to Continental a global price higher than that offered to Plaintiffs’ Counsel on April 30. Tr. at 320, 1101- 03, 1373-74. The global settlement being discussed continued to assume a settlement of both present and future claims. Tr. at 324-25, 1399-1400. 140. In late May 1993, during the course of nego- tiations concerning a settlement of the Ness Motley cases, informal meetings took piace among Fibreboard, Continental and Messrs. Rice and Cox in an effort to find a way to make progress on a global settlement. No avenue for progress was found. As a consequence, representatives of Continental and 276a as enforceable in court -- that Continental would use its best ef- forts to accomplish a settlement of all of Fibreboard's asbestos- related personal injury liabilities, pre-1959, post- 1959, settled, present, and future, within Fibreboard’s remaining insurance resources; (ii) Continental's agreement to provide a full defense for pre-1959 cases and to pay indemnity and defense costs up to a specified limit ($95 million) for post-1959 cases; (iii) an undertaking by Continental to pay the monies Pacific had agreed to pay in Pacific Il, as if a Final 5.2 Order had been entered; and (iv) a release of certain claims. Tr. at 309-12, 1344-49; Fibreboard Exh. 908. 132. Attempts by Continental during this period of time to enlist Pacific's agreement to participate in negotiations were unsuccessful. Pacific was of the view that it had entered into a binding agreement with Fibreboard that, upon entry of the court order being sought by Fibreboard in the action in this Court, would resolve its Fibreboard asbestos- related liability. Accordingly, Pacific rejected Judge Higginbotham's suggestion that it participate in global settlement negotiations. Tr. at 1349-50. 2. April 9, 1993 to August 9, 1993 133. In response to the Fibreboard suit seeking approval of the Initial Ness Motley Agreement, and once having reached the April 9 Agreement, on April 13, 1993 Continental commenced a separate suit in this Court against both Fibreboard and Pacific, seeking a declaration that Continental's rights to equitable contribution against Pacific were unaffected by the Pacific II Agreement. Continental Casualty Co. v. Pacific Indemnity Co, and Fibreboard Corp., Civil Action No. 6:93cv 277a 223 (E.D. Tex.). That suit was subsequently consolidated with Fibreboard's action relating to the Initial Ness Motley Agreement. Tr. at 1350; Fibreboard Exh. 329, Continental Exh.24. 134. On April 27, 1993, the California Court of Appeal notified the parties to the Coverage Case appeal that oral argument had been scheduled for June 11, 1993, with re- spect to a discrete group of appellate issues. The notice indicated that oral argument upon the Coverage Case appeal would be conducted in several “issue groups" (each dealing with a different group of appellate issues). The notice gave no indication, however, as to the schedule for completing the additional rounds of oral argument. Fibreboard Exh. 243. Indeed, the first notice was followed in short order by further notices from the Court of Appeal scheduling additional rounds of oral argument on the Coverage Case appeal. Continental Exh. 32, Fibreboard Exhs. 247, 248. 135. Having met the preconditions set forth in Mr. Cox's letter of April 5, Fibreboard Exh. 563, on April 29 and 30, 1993 discussions concerning a global settlement were held in Washington D.C. among Continental, Fibreboard, and Plaintiffs’ Counsel. On the 29th, Herbert M. Wachtell, counsel for Continental, set forth Continental’s negotiating positions, including its positions that any settlement must be on a mandatory non-opt-out basis, and that a prerequisite to any global settlement was an acceptable level of contribution from Pacific. Plaintiffs’ Counsel rejected both of these positions, and insisted that Continental put a concrete economic proposal on the table. Tr. at 314, 1099-1100, 1352, 1355. 280a Fibreboard began discussions during June 1993 regarding the possibility of the two parties entering into a “bilateral” settlement of the insurance coverage dispute without the participation of Plaintiffs’ Counsel. Several meetings were held between Continental and Fibreboard during June toward that end. By the end of June it was apparent that Fibreboard and Continental would not be able to reach such an agreement, with key issues such as price and Continental’s demand of an acceptable contribution from Pacific unresolved. Tr. at 316- 17, 1375-79. 141. On June 15, 1993, representatives of Continental met with all of Plaintiffs’ Counsel, including Messrs. Kazan and Wartnick, at the Caplin & Drysdale offices in Wash- ington, D.C. Continental explained again why any global settlement would have to be structured as a non-opt-out deal that would provide Continental with certainty as to the cost of the deal at the outset. Plaintiffs’ Counsel stated that they required a clearer indication of what Continental would be willing to pay in the early years of a settlement. Continental stated that it could be somewhat more flexible on price. Plaintiffs’ Counsel conferred among themselves, and then -- having concluded that, for persuasive reasons, Continental simply would not proceed on an opt-out basis -- informed Continental that they would be willing to consider a Rule 23(b)(1)(B) global class action settlement if Continental could articulate the legal basis for such a_ structure, and on the understanding that the global settlement would cost Continental more if done on a non-opt-out basis. Plaintiffs’ Counsel left Continental’s representatives with a list of questions to which they would require responses. Tr. at 392-93, 657-58, 1125-27, 1381-84, 1392-93, 1444-50, 1572; Class Plaintiffs Exh. 1015 at EO OEE ELS ILRI EY CE Der TRY x iia aed FPO EYEE DER GAS TS WT LEI be Te 28la 1-2. Again the contemplation of the discussion was a global settlement of both present and future claims. Tr. at 324-25, 393, 1399-1400. 142. During June and July 1993, negotiations with respect to the Ness Motley cases continued among representa- tives of Continental, Fibreboard, and Ness Motley. Tr. at 1103-05. Mr. Rice insisted on a settlement price of $13,000 per pre-1959 claim. Tr. at 1394-95. 143. Notwithstanding the April 9 Agreement between Continental and Fibreboard, Fibreboard was still contractually obligated to procure a court order validating its right to enter into assignment settlements, and Continental faced the prospect that such an adjudication would require it to pay Out on assignment agreements at case values it considered to be markedly inflated. Therefore, Continental desired to renegotiate these agreements as three-party deals, and Fibreboard and Continental created a national settlement program to do so. Tr. at 312-13, 1395-96. 144. Under that settlement program, representatives of Fibreboard and Continental met with various plaintiffs’ counsel across the country with whom Fibreboard had entered into assignment sett [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1350%3A03. Public record. Not legal advice.