Weeks after an estimation hearing took place before a federal judge in Pittsburgh
concerning the future liabilities of asbestos claimants in a bankruptcy trust case, the parties are looking at putting forth post-trial arguments.
Specialty Products Holding Corp., Bondex International and RPM International appeared before U.S. District Judge Judith Fitzgerald in her courtroom in the Western District of Pennsylvania from Jan. 7 to 11 for a hearing designed to close the discrepancy between what the debtors figure they will owe to future asbestos injury claimants and what those representing the claimants contend the now-insolvent companies will owe in damages.
Like any former asbestos defendant who files for Chapter 11 bankruptcy, the debtors in this case, who specialized in the manufacture of chrysotile asbestos-containing joint compound designed for do-it-yourself home use, have created a trust that will pay money to those who claim they have developed asbestos related diseases such as mesothelioma, a cancer that affects the lining of the lungs.
The debtors, who claim that chrysotile asbestos is much less likely to cause mesothelioma than other forms of asbestos, estimate that future asbestos liabilities to be somewhere in the range of $125 million to $700 million while the Official Committee of Asbestos Personal Injury Claimants and the Future Claimants’ Representative, Eric D. Green, contend that the amount is closer to $1 billion.
Both sides requested the weeklong estimation hearing before Fitzgerald – the soon-to-be-retired federal jurist who splits her time between Delaware and Pittsburgh – in order to try and close the gap between their differing estimations, which they arrived at with the help of financial consulting experts.
During the trial, both sides presented various witnesses to bolster their respective estimations, with each side given 17-and-a-half hours by which to present their arguments.
Since the conclusion of the weeklong proceeding, the judge has ordered the parties to submit their post-trial briefs with the court no later than Feb. 6.
Reply briefs are due by Feb. 25 and closing arguments have been set for March 4.
The record shows that Fitzgerald also granted a motion by the claimants’ attorneys that sought a protective order directing certain exhibits in the case to remain under seal and providing partially redacted versions of sealed exhibits for filing on the public record.
And on Jan. 23, Fitzgerald granted a debtors’ motion seeking a court order authorizing the filing of a redacted version of the debtors’ motion in limine for an order precluding so-called “each and every exposure” expert opinion testimony as to the issue of defendant causation.
That motion had been filed the previous day.
As for the potential outcome of the case, it’s anyone’s guess at this point.
Steven Todd Brown, an associate professor and the director of the Centre for the Study of Business Transactions at SUNY Buffalo Law School at The State University of New York, said in an interview that judges in these types of cases generally come in on the higher end of the estimates.
“The judge ultimately concludes that they’re going to go with such and such a figure [and] we’ll probably see more litigation,” Brown said in a phone interview.
Brown was speaking in general terms, and not specifically about the Bondex case.
Brown did stress that ultimately, the parties in asbestos bankruptcy cases such as these tend to reach an agreed upon dollar figure.
“These estimation hearings are designed to do what they can’t do in the bankruptcy otherwise,” Brown said.
Brown also said that Fitzgerald, who has her sights set on retirement, has overseen more asbestos bankruptcy cases than perhaps any other judge.
“Everybody is pretty familiar with her,” he said. “She has some very set ideas about what is acceptable and what isn’t. She’s seen, I think, the best and the worst from everybody.”
Natalie Ramsey, an attorney from Montgomery, McCracken, Walker & Rhoads who is representing the claimants’ committee, said her impression thus far has been that both the creditors and the debtors were pleased with the respective cases they put on in front of Fitzgerald.
However, there were some differences.
“We didn’t have quite the same uphill battle that the debtors had because the case we were putting on, the judge has heard that same approach in other earlier cases,” Ramsey said by phone.
Fitzgerald had already had a pretty good understanding of the methodology used by the claimants, Ramsey said.
Ramsey said typically in asbestos bankruptcy cases, the point of the estimation proceeding is to make findings that are necessary in connection with the reorganization plan.
This case, though, is slightly different.
“We’ve got two plans that are going nowhere and they’re very, very different with what they provide,” Ramsey said. “We’re so very far apart in our assessment of what the debtors owe their asbestos creditors that we really can’t reach an agreement.”
The court’s goal in this case, she said, is to help the parties better assess their relative positions.
“The court’s goal is to help, have an objective person say, ‘OK, you guys are both advocates, this is what I think is the right range for the asbestos liabilities,’” Ramsey said.
The outcome of the case won’t determine anyone’s rights, Ramsey said, but it will most likely propel the case in one direction or another.
“Ultimately it’s to guide the negotiations or to tell the parties that there’s not going to be a consensus,” Ramsey said.
Brown, the law professor from New York, said it’s common for asbestos bankruptcy cases such as these to “linger for quite a while.”
As for Judge Fitzgerald, Brown said he imagines the jurist has some legitimate concerns about letting a case like this just “explode into something.”
“She’s heard all of this before,” Brown said of Fitzgerald’s extreme familiarity with this type of case. “She’s familiar with what all these people do, with the show they put on to make their case.”