thompson-hayward january 12. 2009 hearing transcript
TRANSCRIPT
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UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK
. Chapter 11IN RE: .
. Case No. 08-14692 (REG)
.T H AGRICULTURE & NUTRITION, .L.L.C., .
. New York, New YorkDebtor. . Monday, January 12, 2009
. . . . . . . . . . . . . . . . 4:06 p.m.
TRANSCRIPT OF TELEPHONIC CONFERENCEBEFORE THE HONORABLE ROBERT E. GERBER
UNITED STATES BANKRUPTCY JUDGE
APPEARANCES: (Via telephone - On the Record)
For the Debtors: John H. Bae, Esq.CADWALADER, WICKERSHAM & TAFT, LLPOne World Financial CenterNew York, New York 10281
Kenneth H. Frenchman, Esq.DICKSTEIN SHAPIRO, LLP1177 Avenue of the AmericasNew York, New York 10036
For the Punitive LegalRepresentative: Sander L. Esserman, Esq.
STUTZMAN, BROMBERG, ESSERMAN &PLIFKA, P.C.2323 Bryan Street, Suite 2200Dallas, Texas 75201
(Appearances Continued)
Audio Operator: Electronically Recordedby Kendra Harris, ECRO
Transcription Company: Rand Reporting & Transcription, LL80 Broad Street, Fifth FloorNew York, New York 10004(212) 504-2919www.randreporting.com
Proceedings recorded by electronic sound recording, transcriptproduced by transcription service.
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APPEARANCES: (Continued)
For PENAC: Garrard R. Beeney, Esq.SULLIVAN & CROMWELL, LLP125 Broad StreetNew York, New York 10004
For related Travelersentities: Robert B. Millner, Esq.
SONNENSCHEIN, NATH & ROSENTHAL, LL1221 Avenue of the AmericasNew York, New York 10020
For ContinentalCasualty Company: David C. Christian, Esq.
SEYFARTH SHAW, LLP131 South Dearborn Street
Suite 2400Chicago, Illinois 60603
For Volkswagen Group ofAmerica: Kirk T. Hartley, Esq.
Gerald Munitz, Esq.BUTLER, RUBIN, SALFARELLI& BOYD, LLP
For Creditors' Committee: Joseph Frank, Esq.FRANK GECKER, LLP325 N. LaSalle, Suite 625Chicago, Illinois 60610
For Owens Illinois: Katherine L. Mayer, Esq.MC CARTER & ENGLISH
For Larson, et al: Joseph Rice, Esq.MOTLEY RICE, LLC
Also Appearing: Dennis Valenza, Esq.MORGAN & LEWIS
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(Proceedings commence at 4:06 p.m.)
THE COURT: We're here on THAN. And as I understand
it, we're going to get an update on the status of the dialogue
on the insurers' issues, and we're going to deal with the
issues raised by Volkswagen.
Who's going to take the lead?
(No verbal response.)
THE COURT: Can anybody hear me?
UNIDENTIFIED: (Indiscernible.)
THE COURT: I'm sorry. You're breaking up.
MR. VALENZA: I can hear you, Judge. This is Dennis
Valenza. I can't (indiscernible) hear the operator, but nobod
else.
THE OPERATOR: (Indiscernible.)
THE COURT: All right. Then let me repeat what I
said.
First of all, I'm Judge Gerber.
As I understand it, we're here in THAN for two
separate things: One, to get an update on the dialogue with
the insurers, and second to deal with the issues raised by
Volkswagen and by the various responses to the Volkswagen
submission.
Who is going to take the lead?
MR. MUNITZ: Your Honor, this is Gerald Munitz in
Chicago. Kirk Hartley and I, we take the lead on the standing
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issue on behalf of Volkswagen.
THE COURT: All right, Mr. Munitz, but I want to deal
with the insurers' issues first.
MR. RICE: Your Honor, this is Joe Rice; I'm calling
on behalf of individual objectors that have filed objections to
the claim, but I don't know if that's on the -- anything today
but I'm on behalf of Larson (indiscernible) and
(indiscernible).
THE COURT: Well, I didn't -- can I get your name
again, sir?
MR. RICE: Joseph Rice, R-i-c-e.
THE COURT: Rice?
MR. RICE: Yes, sir.
THE COURT: Well, I didn't even understand that to be
a purpose of today's call, Mr. Rice.
MR. RICE: It may not be, Your Honor.
THE COURT: All right.
MR. RICE: I'll just put it on the record that --
THE COURT: Okay. Well, I thought I was going to hea
initially --
MR. MILLNER: Yes, Your Honor?
THE COURT: Yes, go ahead.
MR. MILLNER: It's Robert Millner for Travelers.
THE COURT: Okay, Mr. Millner.
MR. MILLNER: Good afternoon. And I will be pleased
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to give a report if somebody from the debtor is not.
MR. BAE: Your Honor, this is John Bae from -- as an
aside, Your Honor, I no longer (indiscernible) with Greenberg
Traurig as of today, but I have been retained by the debtor.
I was hoping that Mr. Frenchman would have been on the
phone to provide the Court with a report of the status of the
discussions with the insurers. I don't think Mr. Frenchman is
on.
MR. FRENCHMAN: I am on the phone. I'm sorry about
that, Your Honor. I will be taking the lead for the insurance
issues; and, to the extent that there are other issues,
including the Volkswagen issue, I believe Mr. Bae will be
taking the lead on behalf of the debtor.
THE COURT: All right. Mr. Frenchman, let's start
with you, please.
MR. FRENCHMAN: Yes, Your Honor.
The status is that the -- we provided plan language
and a draft stipulation to the insurers last week. We had a
meet-and-confer last Thursday. I think at that meet-and-confe
we narrowed some of the issues and crystallized other issues;
yet, we still certainly have some work to do and know that
there were other carriers who were unavailable for the meet-
and-confer. And although they sent representatives, they
certainly voiced a concern that they needed to be heard.
We have -- well, we are supposed to be receiving new
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language, plan language and a new stipulation, from the
insurance carriers on Wednesday. We have scheduled a meet-and
confer to occur at one o'clock Thursday, and we have all agreed
to block off Friday for an all-day meet-and-confer, should that
become necessary.
We are hopeful that, at the end of this week, at the
end of the meet-and-confer Friday, if that becomes necessary,
we will have reached an agreement.
THE COURT: Okay. Mr. Millner, can I get your
perspective, please.
MR. MILLNER: My perspective is as follows:
We did receive plan language last Tuesday, and then
some additional significant part of the plan language last
Wednesday night, and we met Thursday. We did as best we could
with the language, and we still have some significant issues
remaining, and we are continuing in our work. And Mr.
Frenchman is correct that he will receive back from the
insurers this Wednesday a further draft, which will address
several major issues, which, as he said, were crystallized at
our last meeting.
And the one point that I would make is that, when we
finish this week, while everybody is always hopeful about
reaching agreements, we of course will have to go back to our
clients; Mr. Frenchman may have to confer with his client. So
we're hopeful is -- what I'm hopeful of is of the lawyers
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reaching at least their own consensus that they can go back to
their own clients with, but I -- so that's point one.
Point two, just so that we understand, we are
continuing on this stipulation path, as the debtor wants, and
we have not received any discovery. And we're certainly not
waiving any rights on that part, Your Honor, if this does not
work. I just want to make that clear. And with that, that's
my perspective. We're working on it.
THE COURT: All right. Anybody else on the insurers'
side want to comment?
(No verbal response.)
THE COURT: All right. I hear no response.
All right. Well, gentlemen -- ladies and gentlemen,
think that this dialogue should continue, and I'm going to
allow it to continue and encourage it to continue; and of
course, it can without prejudice to anyone's rights.
And as a consequence, I would like recommendations
from the plan proponents on the one hand and the insurers on
the other as to what a useful time would be for a follow-up
conference call, to see how you're doing and/or to respond in
any other way to the outcome of your efforts to resolve this.
Mr. Frenchman, let me get your perspective first,
please.
MR. FRENCHMAN: Well, I think in terms of the follow-
up conference call, I take Mr. Millner's point that there may
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be some conferring with the clients, although I would say from
the debtors' perspective, knowing full well, I think, the state
of mind of the insurers, we intend to have those communication
with the client in advance of the meet-and-confer, and our
client will be available to confer with at any point in time
during the meet-and-confer, so we'll be able to straighten out
those authority issues. Nevertheless, I think giving until
Monday for that would be fair, and that the conference call
should be scheduled for a week for today, if the Court is
available.
THE COURT: Mr. Millner, do you concur or have an
objection?
MR. MILLNER: I don't, for two reasons:
This is a process, which if the Court were not here a
all, is underway. We are talking and negotiating. And if we
finish Friday with something useful, hopefully, we will go bac
to our clients -- we have several insurers, as you know --
Perhaps Monday, which would be the earliest next business day;
maybe for some it will end up being Tuesday. And to the exten
we still have some issues, my thinking is we would call Mr.
Frenchman back on the phone. I think that the best status is
week from Friday, but I certainly think that a week from today
is too soon, is too soon. And that's my perspective on that.
THE COURT: Mr. Millner, I assume you're keeping your
client or clients in the loop on this, aren't you?
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MR. MILLNER: We do. We do. But if we leave Friday,
we would certainly need to speak to our clients the following
Monday, and I assume the other insurers would also. And
depending on what happens then, my thinking is we may have to
come back and talk further with Mr. Frenchman. So my thinking
is you give a little time for that to play. So I think that
the Monday is too soon, for sure.
THE COURT: Uh-huh. Has everybody had a chance to
speak their piece on this?
MR. CHRISTIAN: Your Honor, may I be heard?
THE COURT: Who is speaking, please?
MR. CHRISTIAN: This is David Christian on behalf of
Continental Casualty Company and Pacific Casualty Company.
THE COURT: Yes, Mr. Christian.
MR. CHRISTIAN: Thank you, Judge.
I agree with Mr. Millner, and I guess I'd add a
further clause on that point. I heard Mr. Frenchman say that
he would doing his conferring with the debtor in advance of the
meeting, and so I guess the implication is that he'll come in
with all of the authority he needs and all of the information
from his client that he needs. I guess I have two thoughts in
response to that:
One is that, given the complexity and the number of
issues involved here, I'm not sure that Mr. Frenchman can
anticipate every issue and everything we might ask for, or
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everything that might be asked for of the client, just as I'm
not sure I can anticipate everything he might ask of me and my
client.
And number two, perhaps more importantly, many of the
issues we're dealing with are things on which Phillips, the
debtor-parent, is the final word. In particular, this plan
contemplates that it will be Phillips pursuing any insurance
coverage after confirmation, because it's Phillips making the
contribution in the first instance that it wants to indemnify.
And so, while Mr. Frenchman may be able to speak to the debtor
it may be that some of the issues addressed by the stipulation
or changes in the plan language affect more than just the
debtor, and Phillips may need to be consulted, as well, so I -
THE COURT: Pause, please, Mr. Christian.
MR. CHRISTIAN: Sure.
THE COURT: Has Mr. Beeney or some attorney from
Phillips been excluded from the meet-and-confers?
MR. CHRISTIAN: I wouldn't say, Your Honor, that
Phillips has been excluded (indiscernible) they have been
invited, but they have not come.
THE COURT: I see.
MR. BEENEY: Your Honor, if I may, it's Garrard Beene
for Phillips.
THE COURT: Yes, go ahead.
MR. BEENEY: We are in touch more than daily with
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counsel for the debtor, and in fact, we have been advised every
step of the way on the proposals that the debtor is going to
make. We get a complete report of the insurers' position
(indiscernible). There is no delay that needs to be built int
the schedule because of needing approval and needing time to do
that. The debtor's counsel certainly knows where to find me
(indiscernible) in regular contact with my client and they're
right on top of it.
THE COURT: All right. Back to you, Mr. Christian.
Do you want to finish up any further observations you want to
make, please.
MR. CHRISTIAN: Thank you, Your Honor. Just by way o
response to your question, I would say we've not only invited,
but we would actually encourage Phillips' direct participation
I don't know one way or another, and I take Mr. Beeney at his
word, with respect to their level of contact with the debtor a
intermediary.
THE COURT: All right. Anybody else want to be heard
MR. FRANK: Your Honor, this is Joseph Frank; I
represent the creditors' committee.
I just want to encourage the Court to set an earlier
date, rather than a later date, because it may become clear
next Monday that there isn't going to be a deal, in which case
we want to set a confirmation hearing for a contested
confirmation hearing; or it may become clear that we need more
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time.
But I really do think it's important to keep the
pressure here. As I think Your Honor knows, I'm very much
desirous of getting this case confirmed sooner, rather than
later. And I think leaving us to two weeks, given that we're
going to meet by phone, so there isn't a great deal of
inconvenience or expense for the parties -- I can't speak as to
the Court -- I think a Monday date makes more sense than a
Friday day, and there is no harm if there isn't a whole lot to
report on Monday, Your Honor.
THE COURT: All right. Everybody had a chance to
speak their piece?
MR. RICE: Your Honor, this is Joe Rice on behalf of
the plaintiffs.
THE COURT: Pause, please, Mr. Rice. Tell me who you
claimant is and, more importantly, not his name, but his
attitude about it. Is this a tort claimant who voted against
the plan?
MR. RICE: This plaintiff did vote against the plan.
There are three separate claimants --
THE COURT: I need you to speak up, Mr. Rice.
MR. RICE: I'm sorry. There are three separate
claimants that have filed objections; we represent all three o
them. Their objections have been set out, but it deals with
provisions of the trust distribution process for the most part
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and in the voting procedures in one part. They have objected
to the application of -- I can go into such detail as Your
Honor wishes, but they have filed objections to the voting
process, they've filed objections to the process of the claims
or the way they're reviewed and the equality of that; they've
challenged it on constitutional and due process grounds and
individual review process.
They have challenged the block-out of non-related
cases that occurs in the plan. They have challenged the use o
a limited amount of data. It's (indiscernible) understanding
and position that trying to (indiscernible) a bankruptcy claim
that goes on for the next forty years (indiscernible) cases
that have been processed over the last three years is
inadequate to allow the Court to approve any permanent
bankruptcy (indiscernible); and, therefore, they rejected the
block-out provisions that are (indiscernible).
THE COURT: Okay. So I assume you're going to object
to confirmation.
MR. RICE: Yes.
THE COURT: All right. You understand that I'm not
going to rule on the merits of your objections today.
MR. RICE: Yes. I was just making (indiscernible) Mr
Frenchman (indiscernible) indicated that (indiscernible)
insurance issues got worked out, there would not be a contested
confirmation, and I wanted to bring to the Court's attention
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that, as of the current status, there would be a contested
confirmation on behalf of these claimants even if the insurance
got worked out. And there is not an insignificant amount of
discovery that needs to be done in contemplation of the
confirmation hearing.
THE COURT: Well, have you already served your
discovery demands?
MR. RICE: No, sir, we have not.
THE COURT: Why not?
MR. RICE: We were -- we filed our objections and we
understood that the Court was having a hearing on Thursday to
perhaps (indiscernible) everything that needed to get done.
THE COURT: Have you read my case management order,
Mr. Rice?
MR. RICE: Yes, sir, I have.
THE COURT: Then you know that you didn't need to fil
your objection to get your discovery underway, didn't you?
MR. RICE: If our objection -- yes, sir, we could hav
done it that way; that's what we understand. We were hoping t
narrow down -- there was a significant amount of information
exchanged before the filing (indiscernible). Once we filed ou
objections, we were hoping to be able to work out with the
debtor's counsel (indiscernible) agreement to make use of
(indiscernible) so that we wouldn't have to go through a full-
blown discovery process. (Indiscernible) that process
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(indiscernible).
THE COURT: Well, Mr. Rice, I'm expressing no view on
whether you get discovery or not or whether any of the
discovery you want is over-broad or entirely appropriate. But
what I am telling you is that, if whatever discovery you think
you want, the time to ask for that was about four weeks ago,
and you're way behind. And the time for getting your needs an
concerns done was quite awhile ago.
I am not saying today, absolutely, positively no
adjournments of anything. But what I am telling you is that,
with so many other clients similarly situated having supported
this plan, and with the principal issue on the table being the
needs and concerns of the insurers, I think you would be well
served to get your work done because you might be very
unrealistic in assuming that this case is going to be held up
in its entirety to meet your needs and concerns.
MR. RICE: Your Honor, we will -- I do want to bring
the Court's attention that one of our issues is that the Court
has been told that there was approximately 90,000 votes in
favor of the plan, but we've been led to believe that
approximately 45,000 of those people were people that had been
told they had no claim against THAN. So that's part of the
issue we're trying to get to. Because there was a significant
number of (indiscernible) votes, and we can establish that.
THE COURT: Well, I don't know if people want to
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respond to that now or not. That sounds like the kind of thin
that is probably better addressed in a more fulsome discussion
when that issue is on the table.
MR. BAE: Your Honor, this is John Bae on behalf of
the debtor.
THE COURT: Yes, Mr. Bae.
MR. BAE: Mr. Rice's representation is false. We wer
-- I'm actually glad that Mr. Rice spoke up because I was going
to ask the Court -- I understand -- while I understand that the
discussions with the insurance carriers are ongoing, the debto
would like to respond to the objections filed by Mr. Rice, as
well as the objections filed by -- well, filed by Owens
Illinois, which frankly raised very similar issues as those
raised by Volkswagen. And we question the standing of Owens
Illinois.
But we want to keep the process moving, Your Honor;
and frankly, we don't believe that Mr. Rice has raised any
legitimate issues that warrant discovery. And once we submit
our response to what Mr. Rice has filed, I think at that point
we can have a fulsome discussion on the merits of the
allegations in Mr. Rice's (indiscernible). And I think that's
a more orderly way to address this. And we, the debtor,
intends on -- with the Court's permission of course, the debto
intends on filing a response to the objections.
THE COURT: Well, okay. But we're not going to deal
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with it today.
MR. BAE: That's correct, Your Honor.
THE COURT: All right. Mr. Rice, all we can and
should deal with today is for me to reiterate the importance o
you getting to work to deal with any discovery that you
perceive to be necessary or appropriate, and I forgot what was
ordered, vis-a-vis objections to confirmation, but I assume
you're working on your objection to confirmation, as well.
When the matter is fully briefed, I'll decide the issues as the
papers reflect. It's that simple.
Now the open issue for which I had solicited anybody
else who wanted to be heard was whether all of folks who were
involved in the debtor-insurer dialogue had a chance to speak
their piece; that was when Mr. Rice spoke up. Is there anybod
else who wants to be heard before I deal with when we're going
to have a follow-up call?
(No verbal response.)
THE COURT: All right. Hearing no response.
Mr. Frank, I understand your desire to keep things
moving forward, but I -- and I certainly don't think that
waiting a full, I guess it's more than ten days; it's almost
sixteen days -- or thirteen days, is excessive, so we're going
to have a follow-up call on this time, four o'clock eastern
time, on January 21, which is Wednesday -- excuse me, January
14 -- no, January 21 was right -- January 21, a Wednesday, nine
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days from today.
Now I gather you're going to have your dialogue on the
15th and the 16th; and while I find it surprising that the
insurers need two days after that talk to their clients, I'm
going to give it to you, mainly because I expect that if there
are any open issues after Friday, you're going to use the
Monday and Tuesday and three-quarters of the Wednesday to get
them resolved. So four o'clock on Wednesday, the 21st, folks.
Okay?
Now let's turn to the Volkswagen issues. I think I
heard Mr. Munitz say he wanted to speak on behalf of
Volkswagen, and I of course have briefs from Mr. Frank and Mr.
Esserman, and I think Mr. Bae said he wanted to be heard on
that, as well. So I'll hear from you, first, Mr. Munitz, and
make your remarks as you see fit, but when you do, I want you
to address the following questions and concerns that I have:
First, I reviewed your very thick exhibit package. I
looked to me like that complaint showed that your client
Volkswagen and THAN were named in the same lawsuit, but I
didn't see any evidence in that big package that your client
has actually asserted any cross-claim against THAN. Now I
don't know whether you're arguing that that's something that
doesn't need to be done, but it looked like it was a pretty big
hole in the record.
Likewise, your opponents asserted -- and I understand
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that the submissions were filed substantially
contemporaneously, so I guess there's a risk of ships passing
in the night -- that there was no evidence or even allegations
at this point that THAN had done any business with your client
Volkswagen. I didn't see any allegation in your papers that
your client had done business with THAN, aside from any proof
of that, and it struck me that the silence in that regard was
deafening.
I would assume, subject to your opponents' rights to
be heard, that if you had actually asserted a cross-claim
against THAN, you would have a claim, albeit contingent, and
would have 1109 status, but your opponents seems to be
suggesting to the contrary. I think we need to get our arms
around the facts and then we can get to the various points that
were made in your brief, which cause me some material concerns
Mr. Munitz, as to whether we should be holding up the case to
address these needs and concerns; and some material concerns in
my mind as to why discovery would be appropriate for them,
whether or not you have the 1109 status to be heard in
opposition to confirmation.
So let me hear from you first; and then, if there's
anybody else who has your view in life, I want to hear from him
or her next, and then I'll hear from Mr. Frank or Mr. Esserman
or Mr. Bae or anyone else who wants to be heard in opposition,
and I'll give you each a chance to reply and surreply.
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MR. MUNITZ: Your Honor, with your permission, I'd
like to defer to my partner Mr. Hartley, with respect to the
question posed regarding the status of the (indiscernible)
litigation.
THE COURT: Okay. That's Mr. Hartley, H-a-r-t-l-e-y,
the second name on the papers?
MR. MUNITZ: That's right.
MR. HARTLEY: Right.
THE COURT: Okay. Go ahead, Mr. Hartley.
MR. HARTLEY: Thank you, Judge.
I'm sorry if we were not clear enough, but, in fact,
the papers do demonstrate that there are sixteen pending cross
claims by Volkswagen America against THAN in certain underlying
cases. The way you come to this conclusion is (indiscernible)
two provides you with a list of various state courts, that we
were able to get done in a few days, in which there are cases
pending, in which both THAN and VWGOA are defendants. Then we
have provided you in Exhibits 3 and 4 with declarations and
case management orders, establishing the fact that in some of
these particular jurisdictions, cross-claims are automatically
deemed filed in these underlying cases.
So when you put the two together, the conclusion you
reach is that in Delaware there is an automatic cross-claim,
there are two pending cases involving both VWGOA and THAN, so
there are two cross-claims there.
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THE COURT: All right. Pause, please, Mr. Hartley.
To what extent do these orders take into account
whether or not the two parties have had any dealings with each
other?
MR. HARTLEY: Judge, they are not dependent on that,
nor is the existence of the cross-claim or contribution claim
dependent, under state law, on the existence of a prior
business relationship. So, essentially, they're offered you a
straw man there; that's not a prerequisite to a contribution
claim under at least the law in most states. I won't claim to
know all of them. But in Illinois, for example, where I've
grown up doing half asbestos cases and half commercial
litigation, there is no such requirement. Contribution claims
or an indemnity claim or (indiscernible) default does not
require a preexisting business relationship.
Now what we have shown you there, Judge, with the las
column in Exhibit 2, is that, in fact, there are many
codefendants in these cases which are (indiscernible) from
THAN, if we take us through what THAN said in their disclosure
statement as to who their customers were, and we of course take
that at its face value. So while we were going through the
complaints, we looked and found in many cases that, in fact,
some of the fiber customers are in those cases.
And what that means as a general rule, Judge, is that
the underlying tort victim has said to his lawyers or in
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interrogatories -- in answers to interrogatories, excuse me,
that he believes or she believes they were exposed to fibers
that came from those people who were customers of THAN. So
they are clearly squarely in the mix in the case, and the
claims, by our count we have proved up sixteen: Two in
Delaware, one in Rhode Island, thirteen in Illinois. We have
ongoing work to find more. And these are exactly the sorts of
proofs that were submitted in Federal-Mogul and deemed
satisfactory (indiscernible) not even questioning the standing
of VWGOA, Daimler-Chrysler, and other auto manufacturers.
So with respect to the facts, Judge, which is really
my side of the case, that's what I can say to you. On the
bankruptcy law, I of course defer to Mr. Munitz.
THE COURT: Okay. So are we back to you, Mr. Munitz.
MR. MUNITZ: Your Honor, I believe so.
Respectfully, Judge Gerber, if there are cross-claims
existing cross-claims, even though they may be contingent,
unliquidated, and disputed, we nevertheless fit within the
definition of "claim" contained in Section 1015 of the
Bankruptcy Code. As --
THE COURT: Pause, please, Mr. Munitz.
Respectfully or not, I don't need to be told that. I
understood that, and I said that was part of the assumptions
under which I was asking the question. But what I needed to
know from you -- and you passed me off to Mr. Hartley -- was
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the extent to which any such claims had been asserted against
THAN.
The next question we have is: Assuming that you're
going to have 1109 status because you do have claims, what you
need discovery for.
MR. MUNITZ: Your Honor, we may be able to latch on t
the discovery being conducted by others. But if we have
standing -- and one of the issues, you know, could range from
any of the confirmation standards -- we are not sure whether a
record has been developed with respect to those matters. We
appreciate the time constraints that may be imposed upon us.
But among the issues that we would like to get into is,
according to the pleading that -- the memorandum that they
filed, the future claims representative contends that he is
Volkswagen's representative. We would submit, Your Honor, tha
we are not a future demand-holder of Volkswagen, whatever else
may happen to it, will not contract an asbestosis case, and
that we are a creditor.
But most importantly, we don't understand how the
future claims representative can represent both the plaintiff
in that action, the alleged victim, and Volkswagen, who is one
of the defendants in that action, or whatever the fallout from
that action may be.
There may be other issues in this case, Your Honor.
was introduced to the matter the last week in December. But
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among other questions, is a 524(g) injunction appropriate in
the facts of this case? You know, is THAN, which is not -- yo
know, which might not be eligible for a discharge, entitled to
a 524(g) injunction? I do not know where the, you know, facts
on that matter stand. We realize the need to get to those
immediately, you know, but absent a ruling as to standing, we
have no opportunity to do so.
THE COURT: All right. Anybody else who's allied with
Mr. Munitz?
MR. MUNITZ: Your Honor, I have two other comments.
I would invite your attention to Paragraph 3 of the
committee's response to our position, and there is a sentence
that appears in that paragraph, which I quote:
"It is true that recovery by asbestos claimants
against movants may give rise to claims; indeed, very
substantial claims, against the debtors in the
future."
Your Honor, I think that is an admission that we do
hold present contribution or reimbursement-type claims; and,
therefore, even though our claims are contingent, unliquidated
and disputed, it gives us the status of a creditor, and when we
follow through with the definitions of being a creditor, we
have the right to oppose confirmation.
Similarly, with respect to the future claims
representative's opposition, there is a footnote on Page 8 that
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refers to Section 1109(b), it's a quote. The word "creditor"
appears in there, but there is no substance given to the fact
that the term appears. They would (indiscernible) --
THE COURT: Pause, please, Mr. Munitz. Pause, please
Where were you referring in the future claims
representative's submission?
MR. MUNITZ: There is, Your Honor, on Page 8, Footnot
9, there's an excerpt from the Section -- it's a quotation from
Section 1109(b).
THE COURT: All right. I found it now. And your
point again, please?
MR. MUNITZ: Your Honor, they recognize that 1109(b),
you know, would be applicable to the matter. They refuse to
acknowledge that we're a creditor (indiscernible) in there
would pertain to someone in Volkswagen's position.
THE COURT: Uh-huh.
MR. MUNITZ: The holder of, you know, albeit a
contingent future and disputed claim.
THE COURT: Okay. Anything else, Mr. Munitz?
MR. MUNITZ: No, Your Honor, unless you have further
questions.
THE COURT: No. Thank you.
All right. Is there anybody else who wants to argue
on Volkswagen's side before I give others a chance to be heard
MS. MAYER: Your Honor, this is Katherine Mayer from
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McCarter & English; I represent Owens Illinois in this matter.
I'm not chiming in to argue because during the call today is
the first I've heard that the debtors would plan on contesting
the standing of Owens Illinois in this case. We have
participated in numerous (indiscernible) bankruptcies, and
this is the first time our standing would be challenged. But
would respectfully request the opportunity to respond when
papers are filed by the debtors with respect to the standing
issue.
THE COURT: All right. Let's add that to the list of
things we've got to talk about.
All right. Mr. Frank, do you want to be heard first?
MR. FRANK: Thank you, Your Honor. Joseph Frank on
behalf of the committee.
Your Honor, it's clear you've read our papers, and I
don't want to repeat or belabor. I do want to respond to
several things Mr. Munitz said, and then make some general
comments.
The quotation Mr. Munitz read from the third paragraph
of our pleading was a quotation from a ruling by the Third
Circuit in the Federal-Mogul case, and it's a case that should
have been cited by Volkswagen, but wasn't, and it's a case that
demonstrates among other things that their reliance on
157(b)(5) to try and bootstrap themselves into this bankruptcy
case is -- you know, while not against the law in the Second
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Circuit, is certainly against the law in the Third Circuit, and
just has no basis. It's a case they should have cited. And t
try and quote it against us now is kind of silly, Your Honor.
You know, getting back to the other points, the notion
that a deemed cross-claim is a cross-claim remains to be seen,
in our opinion. All they've shown has been that some standing
orders in state courts deem a cross-claim between the various
codefendants, and that's not to say that they've ever been a
cross-claim (sic).
In addition, Your Honor, to compare the fact that
standing wasn't contested in Federal-Mogul and is being
contested here is to admit the point that the contribution
rights between codefendants bears a relationship to their
business relationship, Federal-Mogul was a case involving brake
manufacturers, where car manufacturers came into the
bankruptcy, and this is a case involving a fiber distributor
who, as far as I can tell, didn't distribute fiber to brake
manufacturers, so ...
THE COURT: Pause, please, Mr. Frank.
Did you say "did" or "didn't"? You broke up.
MR. FRANK: Did not, Your Honor.
So to try and draw a parallel between Federal-Mogul
doesn't really hold any water. And in addition, to draw a
parallel between Federal-Mogul and this case, where this Court
has adopted, in Quigley, standing position, doesn't really get
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you anywhere. So Federal-Mogul is a (indiscernible) utility,
particularly a bankruptcy court order on a non-contested
matter; or, it is, I think, the Third Circuit opinion basically
telling the auto manufacturers to stop the mischief and let the
state court cases go forward against them, has a great deal of
bearing on this case.
Beyond that, Your Honor, based on the ruling with
respect to the insurers' standing, it's one thing to say you're
a creditor. Even if we take that as a given, that they're a
creditor because of a contingent contribution claim that
apparently arises from a deemed cross-claim, being a creditor
in this case, the Court has already ruled, is not called
"standing," and it's certainly not equal to broad standing.
You still have to demonstrate where your ox is being gored.
And Volkswagen really hasn't made that demonstration.
They've laid out a few rote points (sic); they say the trust
terms would block codefendants from invoking state statutes or
common law rules, but they haven't really demonstrated how that
would occur, and they haven't really demonstrated how that
would occur in a way that (indiscernible) the Bankruptcy Code.
They said that the trust distribution procedures in
the confirmed plan would block transparency, but I don't really
think that's the case. They would have the same rights to
information that they have right now, which is to subpoena
information from people who are suing them, and subpoenaing
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information from third parties. When the information is
properly subpoenaed, the information, I'd have to presume,
would be produced by, you know, law-abiding third parties.
The other issue they raise is the allocation among
codefendants. And you know, everything they say about that is
just the nature of bankruptcy and the nature of 524(g). And
I'm not going to lecture anyone on federalism, and I'm not
going to lecture them on what creates standing; in other words
something the plan doesn't contemplate, versus what the
Bankruptcy Code does. That doesn't really create standing,
Your Honor.
So those are really my only points, which is -- and t
sum it up, which is that, to the extent -- even if the Court i
to buy it as a deemed cross-claim creating a creditor
relationship with it in this bankruptcy, based on Your Honor's
adoption of the Quigley standing position, we haven't seen
anything to create standing here. And I think Volkswagen need
to go back, read the plan carefully, rather than continuing to
say they haven't had time to read the plan carefully, and tell
us where their ox is being gored, or they just need to go back
and defend the state court claims.
THE COURT: All right. Who wants to be heard next?
MR. BAE: Your Honor, John Bae on behalf of the
debtor.
THE COURT: Uh-huh.
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MR. BAE: Your Honor, what Volkswagen is saying is
that, because certain state courts adopted a procedural
mechanism to avoid papers, needless papers being filed, so that
every defendant -- every codefendant is deemed to have asserted
a cross-claim against every other defendant does not create a
substantive claim. It is purely a procedural mechanism the
courts have adopted to manage their docket; that's all that is
Now for Volkswagen to come in here now and claim that
based on that procedural mechanism, that they have a
substantive cross-claim against THAN is ridiculous. Under tha
logic, 1,500 defendants, who are constantly named in these
asbestos actions, even though they have no business being in
that action, every single one of those codefendants would have
the ability to come into a bankruptcy case and be disruptive,
and there's no law to support that.
More importantly, Your Honor, we've asked Volkswagen
countless time as to what is the factual basis for which you
believe you have a cross-claim against THAN. We have yet to
get a response that is based on facts. It's ironic that Mr.
Munitz refers to facts, that he be focused on facts, but there
are no facts that they've cited.
The only fact that they've cited is that we were
unfortunately named as a codefendant in (indiscernible) action
just because the plaintiffs decided to name a handful of
companies, whether or not there was any connection is
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disruptive here, so that they can solve a greater problem they
have, which is in the state court litigation, the asbestos
litigation system.
And unfortunately or fortunately, this bankruptcy is
not the right place to try to solve the world's problems.
We're here to solve this debtor's problems with the claims that
are being asserted against it. That's all we're trying to do.
We're not trying to change the world. What we want to do is
pursue our rights under the Bankruptcy Code and the law and get
the best outcome that we can get.
Volkswagen has no place in this case. And just
because they so -- they claim that they have standing here,
just because they say they have an interest, doesn't make them
have -- make them a creditor, whether it's contingent or not.
They do not have a claim. And until they can present to the
Court how or why they have a legitimate and enforceable claim
- it's a not a question of whether or not a claim is
automatically asserted; that's superficial, that's completely
irrelevant. What is relevant is, substantively, what claim do
they have, and they can't articulate a claim.
So, Your Honor, I would respectfully submit that they
do not have standing here. The mere fact that some state cour
adopted a case management order that permits these cross-claim
to be asserted automatically doesn't make them a creditor; it
is purely a procedural mechanism, it was never intended to
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create a substantive right. Thank you, Your Honor.
THE COURT: All right.
MR. ESSERMAN: Your Honor, Sandy Esserman. May I be
heard?
THE COURT: Yes, Mr. Esserman.
MR. ESSERMAN: I would like to reiterate what Mr. Bae
said. If, in fact, Volkswagen had a claim, it would be very
easy to say, we bought THAN fiber on X date, we incorporated it
into our product, we're getting sued for THAN's liability, and
we paid THAN's liability. Nowhere has that ever been asserted
or alleged by Volkswagen.
In fact, Volkswagen has never, ever sued THAN. And
when I say "sued THAN," I'm now talking about the operation of
law and procedural mechanism of filing a complaint, a
counterclaim in which they allege facts as to why THAN is
somehow liable. And they've really pussyfooted around trying
to do that. And despite -- if a plaintiff has a case against
THAN, they've got to allege exposure damages, et cetera. Well
that is not being done here by Volkswagen. They're not
alleging exposure damages or telling you that they've paid
THAN's share because they can't, they just can't. They're
sorting of coming in here and hoping to get as much generalized
standing (indiscernible) against 524(g) in general.
I'd like to respond to this business about the FCR as
Volkswagen's representative. That's just pure silliness. The
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statutory obligation of the FCR is set forth in the statute;
the FCR has complied with that. Volkswagen -- the FCR doesn't
represent Volkswagen; Volkswagen represents Volkswagen. Under
the statute, if a claim comes into being, that person
represents his own claim.
What the duty of the FCR is, is to make sure that
there's a process and mechanism to treat future claims and
current claims substantially similar, and that the process is
fair, and that future claims would have their fair share of the
assets in the pie. It's not to represent Volkswagen ever, it'
not to represent any claimant ever. It's sort of almost in th
nature of a guardian ad litem for a class, which -- who doesn't
represent anyone individually. That's very, very clear from
the statute.
If, in fact, there is any kind of standing here --
which we don't think that they've shown factually -- and
frankly is a very simple and easy to show standing if they had
any facts: THAN sold me product, THAN damaged me, I sued THAN
I've made a demand on THAN, THAN owes me money, THAN owes me
this amount of money and this is how I calculate it in this
lawsuit; they have not done any of that, nor can they. Nor ca
they.
This is an effort by a defendant who's decided to make
a statement in a bankruptcy; they've chosen, unfortunately or
fortunately, your bankruptcy, Judge Gerber, to make that
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statement. And they're going to try and come in here and wrea
whatever havoc that they can.
Next, I'd like to talk about Federal-Mogul because
Volkswagen wants Federal-Mogul to be taken somehow to give them
standing because cross-claimants were recognized as having
standing. You know what? Cross-claimants can have standing.
in Federal-Mogul, cross-claimants -- they weren't just cross-
claimants who had standing; they were cross-claimants with
judgments against the debtor that had standing. They had
actual judgments, not just some assertion -- some general
assertion through some case management order of the standing
issue; they had judgments. Now of course, someone with a
judgment against a debtor, you know, no one is going to
challenge standing, and that's what happened in the Federal-
Mogul case.
So I think what Volkswagen is trying to do here is
they're trying to create as wide a swath as they can with
whatever political agenda they've got to disrupt a potential
(indiscernible), make havoc on (indiscernible) information they
can about the process (indiscernible) you know, I guess we have
to admire them for trying. But on the other hand, standing is
(indiscernible) it's constitutional, it's prudential, and it's
very -- and it's limited to issues in which an ox is being
gored. And frankly, these guys have now shown how their ox ha
been gored. When they do that, maybe they can have standing
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for limited purposes for showing how their ox is being gored.
These generalized sort of statements that they're making just
don't cut it. Thank you.
THE COURT: All right. Anybody else who agrees with
Mr. Frank and Mr. Bae and Mr. Esserman before I give it back to
Mr. Munitz to give him a chance to reply?
(No verbal response.)
THE COURT: Hearing none, Mr. Munitz, anything you
want to say before I --
MR. MUNITZ: Your Honor, may I first defer to Mr.
Hartley again?
MR. HARTLEY: Judge, to -- this is Kirk Hartley, to
address the points that have been raised.
First, they have not cited you the case for the
proposition that there needs to be a preexisting business
relationship in order to have a contribution or other cross-
claim. If this were really so simply, I'm sure they would
provide that to you. It is not so simple.
THE COURT: Hang on a second. Are you telling me, Mr
Hartley, that if you have, let's say for sake of example, fifty
defendants, and certain defendants are held liable and other
defendants aren't held liable, that anybody who pays has claim
against the ones who weren't held liable?
MR. HARTLEY: Well, Judge, the way the trials are
conducted varies state by state. But as a general rule, what
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you have happening in one of these underlying trials is a
debate about whether the exposure to any particular defendant'
product is sufficient to be causative of the disease. And in
given case, for example, we might have a plaintiff who says, I
am sick with mesothelioma or asbestosis as a result of having
worked with products produced by Bondex or Kelly Moore, these
various drywall and other kinds of products, and that one day,
one time, I changed a brake lining from a Volkswagen car. In
that case, my position as a defense lawyer for VW would be that
any fault or any harm was caused by the products that came from
the companies using the THAN fiber, and not the one time that
he changed one brake line. Depending on the state, that might
be framed as a claim for contribution or a portion of default;
it might be viewed as a proximate cause issue. These issues
vary state by state. But it is, in fact, the way these cases
are tried.
And to the point they were saying this has all been
deemed, well, they were deemed because we -- when I was a young
lawyer, we used to spend our lives generating these things, and
actually filing them in the clerks' offices that held
(indiscernible) because they were being asserted. So they did
exist at one time, and then we stopped doing it because it was
just too much paper inundating things. This is not -- they go
into CMOs for a reason, and that was because these were big
processes, and they still are. They are a very important
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calculus, Judge, of what's going on in the dynamic as you run
up to trial.
THE COURT: Pause, please, Mr. Hartley.
MR. HARTLEY: Sure.
THE COURT: Because I think you need to slice and dic
it. You have to help me, because my specialty is in bankruptc
and general civil litigation, and I didn't do, even as a
lawyer, asbestos litigation.
MR. HARTLEY: Okay.
THE COURT: When you're talking about contributory
fault or something like that, or saying that it's somebody
else's fault, and therefore the judgment against you should be
reduced, I understand that. If you're saying something
analogous to contributory negligence or something like that, so
that you're not liable for a hundred percent of the damages, I
understand that.
But if you're talking about a claim against the
debtor, a cross-claim against the debtor, I have difficulty as
a person who's been a lawyer for almost forty years
understanding how THAN could be liable on a cross-claim unless
THAN had some dealings with the underlying circumstance upon
which your client was held liable. Can you help me in that?
MR. HARTLEY: I think I can, Judge. And I appreciate
the framing of the question. And where these kinds of claims
come from, among other things, is if in any (indiscernible)
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there is a contribution between joint tort feasors. And
essentially, Judge, these have grown into place over the last
ten or fifteen years because, when we started out with this
tort, it was all -- everyone was liable for everything. And
over the years, it has become, according to some legislatures,
more important to apportion fault between the relative
different tort feasors.
And there are, for example, specialized rules in some
states, some of which come under the heading of tort reform,
that say, if this particular defendant is deemed by the jury to
be less than X percent at fault here, then they are liable only
for a limited subset of the damages; if the defendant's
relative responsibility is deemed to be more than X percent,
then there is a more expansive liability (indiscernible).
So where you are distinctively looking for contract
relationships for the basis of these claims, in fact, by the
legislative acts, that has been abolished, and all of this is
balled up in the (indiscernible) state by state consistent, and
frankly, rather it's someplace hard to follow, rules about
contribution between joint tort feasors or alleged joint tort
feasors.
And these are, you know, something that we haven't
even touched on today here, but that's cited in the papers --
or our papers is the settlement credit issue. In an underlyin
case, having a credit for a payment that's made by another
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defendant, which in this case would be THAN, would reduce my
potential liability if VWGOA goes to trial. And we gave you a
example of that, very recent, from Illinois, where the way the
whole trial and settlements played out, one defendant was
essentially freed from paying damages because they were getting
credit for payments made by others to resolve the case.
That's why, for something like VWGOA, Owens Illinois,
or any of the other codefendants, who are starting to pay
attention to these very important facts, an entity such as THAN
or the (indiscernible) entities that are not in bankruptcy, but
(indiscernible) injunction, we want them intra (sic) on the
verdict sheet, which in some states they have to be in the
trial to be on the verdict sheet, so that we can apportion
fault here.
THE COURT: Then, Mr. Hartley, how could any asbestos
case ever be confirmed within the statutory scheme that Section
524 contemplates?
MR. HARTLEY: Well, Judge, there are a lot of things
in asbestos litigation that are being done now and haven't been
done before for a variety of reasons. In my personal
estimation, many codefendants should have been (indiscernible)
long ago for a wide variety of reasons, they have chosen not
to. But there are some real issues here, and they are really
coming to the fore these days, Judge, because we truly are
moving into a world in which there is a (indiscernible) tort
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system and an outside trust system, if you will. And very
clearly, the goal of the plaintiffs, who are trying to serve
their clients, to go mine the tort system; and then, after they
are done with that, go mine the trust system, thereby depriving
my client, Owens Illinois, and everybody else of offsets or
credits for the amounts they are taking out of the bankruptcy
system.
And I agree with you, this has not been
(indiscernible) of any challenge before to my knowledge, but
they are starting to pop up in Thorpe (phonetic), in Sarco
(phonetic), and in the other cases because the different
remaining defendants are forced to start paying attention
because of losing the economic benefit of the payments and the
departure of these other entities. And it's going to be an
issue, I think, Judge, because we're seeing more and more about
it.
And then to switch to this issue of the FCR, this is
significant issue, Judge. As we read the FCR's papers, they
are suggesting that the professor (sic) is able to represent
both the interests of the personal injury claimant and
codefendants, both of whom want money out of the debtor. I
think under AmCam, Ortiz, he cannot do that because it is
simply an inherently conflicted position. The tort claimants
want more money, Mr. Rice wants more money; Volkswagen and
others want money or credits. I don't see how Mr. Issacharoff
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can handle both roles.
This is, to my knowledge, Judge -- and I will not
claim to have been in every asbestos bankruptcy, obviously
federal law will (indiscernible). This is, to my knowledge,
the first time there really has been precedent on the issue of
the scope of the representation of the futures representative.
And I think the position you are hearing is fairly remarkable,
in that I do think that Mr. Issacharoff's role is leaving him
purporting to protect the interests of Volkswagen in a future,
as yet unknown case, in which we would want to make a cross-
claim. I don't see how he can do that under the case law.
That, Your Honor, is one of the things that I do think needs to
be the subject of some very focused discovery, so we can try
and leave you with a record of exactly what he has done or not
done to protect the interests of entities in the position of VW
or OI.
I think what we're going to find is that he did not
take any steps to determine (indiscernible) to determine
(indiscernible), and that in fact it's simply a role that is
not properly (indiscernible), and instead, his role is to
represent the personal injury (indiscernible). But that's
going to be here, Judge, an issue of first impression.
Have I helped at all, Judge, on your question?
THE COURT: You've helped clarify my thinking on the
matter, yes. All right.
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MR. HARTLEY: Did I address (indiscernible.)
MR. ESSERMAN: May I respond briefly, please?
THE COURT: Who is that, Mr. Esserman?
MR. ESSERMAN: Yes.
MR. HARTLEY: Yes, Judge, can I make -- this is
Hartley -- can I make one more point (indiscernible).
THE COURT: Yes. First Mr. Hartley, then Mr.
Esserman.
MR. HARTLEY: Judge, if -- I've read your case
management order and understand the process. The assertions
we've made are supposed to be taken as correct. If people wan
to contravene them, then we're supposed to have a formal
evidentiary hearing.
I believe, and I'm confident we can bring you
underlying tort lawyers to testify in more detail if you need
further education or want further education about how the
underlying tort cases work. And I think to say at this
juncture we do not have standing in light of sixteen
indisputable cross-claims would be a mistake.
I also want to address the transparency issue that wa
alluded to when our opponents were saying we're not harmed. I
a present claim, Judge, the plaintiff is sitting in court, in
deposition, and saying, I was exposed the products of X, Y, and
Z, and all of that is on the table during his deposition and
during trial, so we are able to point to that evidence as we
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are trying to make our trial proofs.
Under this system, they are creating a deferral
process under which the plaintiff in my tort trial will not be
required to have made his claim against THAN, and will be
depriving him evidence. If the claims is --
THE COURT: Pause, please, Mr. Hartley.
Are you telling me that you're not going to have the
ability to depose the plaintiff in that tort litigation?
MR. HARTLEY: We will have the ability, Judge, but
that is not -- in a normal case, we will have access to the
papers and the product ID, which has been identified by
plaintiff, the physical process, the answers to the
interrogatories (indiscernible) deposition. The way this is
being set up, the claim may not even be on file at the time,
and I may not have access to the information that was
submitted.
There have been some significant controversies
already, Judge, in which the claimant, the tort claimant was
found after the fact to have submitted a claim to a bankruptcy
trust, and in deposition he has denied doing so. But the way
this is all being structured, I'm not going to have access to
that information in the real important time, which is when
these cases are being discovered for trial.
So the transparency is a major issue for all of the
codefendants. We need access to claims as they are being
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filed; and when payments are being made, that too needs to be
known, so that we're obtaining appropriate (indiscernible).
THE COURT: All right.
MR. VALENZA: Your Honor, this is Dennis Valenza. I
have a comment to make when Mr. Esserman is finished.
THE COURT: All right. Are you --
MR. ESSERMAN: Your Honor?
THE COURT: Wait, just a second. Did I hear
"Valenza"? I don't --
MR. VALENZA: Yes, Your Honor. I'm the special
counsel for THAN in the litigation, so I've been actively
engaged in the (indiscernible).
THE COURT: All right. Just a minute, Mr. Valenza, I
don't see you on my log here.
MR. VALENZA: Oh --
THE COURT: Oh, yes, now I do. All right. All right
You're up after Mr. Esserman. But Mr. Esserman, I promised yo
a chance to respond.
MR. ESSERMAN: Okay. This has been very productive
and (indiscernible) because, finally, after all the obfuscation
of VW has given this Court, we finally hear from VW exactly
what this is all about, and it has nothing to do with THAN, it
has nothing to do with THAN exposure, it has nothing to do with
THAN liability; it has to do with their concern that they're
one of fifty defendants, and that there's going to be some
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trust claim filed, there are going to be some other claims
filed in the court system that they're getting sued, and
they're not -- their concern is they're somehow not going to be
able to discover exactly what exposures or what other claims
that particular plaintiff had against others, so they can
attempt to get a judgment reduction or some other benefit or
credit.
And you know what? This bankruptcy is not here to
solve that problem. To the extent that they've got a problem
with a plaintiff and they want to find out what the plaintiff
has received from other places, it's very simple. The courts
allow subpoenas. He can subpoena -- he can subpoena the
plaintiff, he can take the plaintiff's deposition, he can do
all sorts of things to find out exactly from the plaintiff
exactly what the liability of Volkswagen is, to the extent he'
allowed -- and that's another issue, that's a state court
issue, to get into these other issues. He may or may not do
so, depending on the state court. But this is not a forum to
try and fix Volkswagen's codefendant problems that they're
somehow generally concerned about; that they're concerned that
they're either overpaying on a case, they're not getting
credit, they're not doing whatever, none of which has anything
to do with THAN liability. It has to do with the general tort
system, a generalized problem that they say.
And I think -- you know, I commend Volkswagen for at
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least finally getting it out on the table exactly what they're
wanting and exactly what this is all about. This isn't about
trying to find a case that they can't find, where they've got
(indiscernible) exposure. This is about a generalized
complaint about the legal system in general and about 524(g) in
general, and how that operates. So to that extent, this has
been very beneficial. Thank you.
THE COURT: All right. Mr. Valenza.
MR. VALENZA: Yes, Your Honor. And to -- just a
couple of points, and following up on what Mr. Esserman just
said, you know, the codefendants in the litigation have
mechanisms to do discovery against the plaintiff, and they can
use subpoena power, and in fact that's what's done in the
litigation. The various trusts, bankruptcy trusts, are
routinely subpoenaed to get the information with respect to
payments in order to get credit information.
What is important and what Mr. Hartley said is that
some of the plaintiffs can mislead and, in fact, perjure
themselves in the process, and not give information to the
plaintiff about THAN's potential exposure in a case. But
rarely, if ever -- and I can think of no occasion, Your Honor
- was THAN sued because of a direct exposure to asbestos
supplied by (indiscernible); to the contrary, it was always the
case that another codefendant is sued, along with THAN, for a
product that that codefendant manufactured using asbestos
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supplied by THAN.
So there is in the litigation today those individual
companies with which THAN had a contractual relationship, so
that Volkswagen can pursue whether or not there is an
appropriate contribution for an appropriate level of fault,
because the codefendant is there in the courtroom that made the
product.
So I hope I haven't confused the issue, but they're
basically making a statement that, because THAN is not
available in the litigation, that there's no way that they can
get information, and that's just not correct.
MR. MUNITZ: Your Honor, this is Mr. Munitz.
Our memorandum cited two bases for our standing in the
matter: One was that, as a matter of state law or orders
entered in state court proceedings, we are deemed a cross-
claimant and thereby become a creditor.
We also refer to 28 U.S.C. 157(b)(5), and perhaps if
got an answer, it would probably go away. Assuming the THAN
plan were to be confirmed, would that preclude Volkswagen's
right to ask that a particular pending lawsuit be tried
pursuant to the provisions of that section or remanded by the
District Court to the state court for trial, so that a state
court allocation provision could be had in the course of that
trial? In other words, if THAN and Volkswagen and three other
people are defendants in a particular action, is there anything
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in the THAN plan, such as a 524(g) injunction, that would
prevent Volkswagen from asking that the liability be determined
under 157(b)(5)?
THE COURT: Now are you talking about the injured
asbestos victim's ability to get his damages from THAN, or are
you saying that you have -- that 157(b)(5) applies to your
claim for contribution, as well?
MR. MUNITZ: Your Honor, I looked at the very languag
of the section, and I do not see anywhere where the right to
request that release is limited to the plaintiffs, to the tort
victim. So I should think, especially in view of recent
developments with respect to allocation statutes, that a
defendant would have the right to ask for invocation of that
section.
MR. BAE: Your Honor, this is John Bae. May I be
heard?
THE COURT: Yes.
MR. BAE: I'm a little confused by Volkswagen's
reference to 157(b)(5). 157(b)(5) does not provide a basis fo
a codefendant to bring back and to assert a claim against a
reorganized debtor or a trust that has been established by a -
MR. MUNITZ: No. Your Honor, this is not
(indiscernible) --
THE COURT: Wait. Gentlemen -- Mr. Munitz, we do not
interrupt in my courtroom.
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MR. MUNITZ: I apologize, Your Honor.
MR. BAE: Your Honor, to continue --
THE COURT: I lost the train of thought, Mr. Bae.
You're going to have to go back over it again, please.
MR. BAE: Yes, Your Honor.
Section 157(b)(5) is a provision under the statute
that provides jurisdiction to the district court in which a
bankruptcy case is pending to address and resolve personal
injury and wrongful death actions. It is not -- it is purely
jurisdictional mechanism to be sure that, if there is a
personal injury action, that that issue is addressed by the
District Court, not by the Bankruptcy Court in the claims
resolution process. That's what 157(b)(5) is intended to do.
Hence, in the Dow Corning bankruptcy case, Your Honor
the issue was raised as to whether claims that are related to
the bankruptcy could be transferred to the District Court where
the bankruptcy case was pending because the wrongful death and
personal injury claims should be resolved by the District
Court, and not by the Bankruptcy Court. That is wholly
different than the issue that is being raised by Volkswagen.
What Volkswagen is raising is it is saying that,
because it has been sued with the debtor in a pending asbestos
action, that somehow its rights are being compromised in its
defense of the state court litigation. And it is now asking
this Court to fix that problem that they have in the state
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court system.
I don't believe that that creates standing. What tha
does is it creates -- it's an inevitable problem, I suppose, in
any litigation where there are multiple defendants, and
individual defendants have -- are seeking relief under the
Bankruptcy Code, and they are no longer present in the pending
litigation. Whether it's fortunate or unfortunate, that is th
reality of life. Companies have a right to seek relief under
the Bankruptcy Code, and they can pursue those rights.
I think what Volkswagen is trying to do here is to sa
that THAN and its creditors, who have legitimate claims against
the debtor, are not entitled to the protections of the
Bankruptcy Code because they don't like the impact of the
relief that this Court may grant in any pending state court
action, and that's not what this should be about.
THE COURT: All right.
MR. HARTLEY: Judge, this is Kirk Hartley. May I jus
follow-up on Mr. Valenza's (indiscernible).
THE COURT: Yes.
MR. HARTLEY: The reality is that, of some of those
THAN fiber customers that he identified, several of them are
now in bankruptcy; and so, therefore, it is very important for
my client to be able to reach the fiber supplier which sold
them the fiber. And just going off the list in their plan
disclosure statement, and going from memory, which could be
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faulty, they list the following entities as customers, that I
believe are now bankrupt: (Indiscernible), Kaiser Gypsum, W.R
Grace, and United States Gypsum. So it is very important for
my client to be able to go behind them and reach back to that
fiber supplier, which is THAN, which is why I want to be able
to bring a claim. That's all I wanted to follow up on.
THE COURT: All right. Have I now heard from
everybody?
(No verbal response.)
THE COURT: All right. I am going to be leaving the
bench. Stand by, keep your telephone lines open, and I'll be
back with a ruling as soon as practical.
(Recess taken at 5:22 p.m.)
(Proceedings resume at 6:50 p.m.)
THE COURT: All right. This is Judge Gerber. I
apologize for keeping you all waiting.
Ladies and gentlemen, I'm ruling that Volkswagen
hasn't satisfied me that it has the requisite standing, and
most assuredly that it hasn't satisfied me that it needs any
discovery or any accommodation for its stated desires in the
scheduling for this case. The following is a summary of the
bases for this decision:
First, while Volkswagen has given me evidence that
Volkswagen and THAN are named as defendants in a number of
lawsuits, it hasn't given me any evidence of Volkswagen having
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Court Decision 5
actually asserted any cross-claims against THAN, other than by
the automatic operation of case management orders that deem
cross-claims to have been filed.
The fact that parties are named as codefendants, of
course, doesn't mean by i