Dow Chemical's Free Ride Leaves Lawyers Fuming - 1998

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Sent: Monday, November 23, 1998 7:08 AM

Subject: Dow Chemical's Free Ride Leaves Lawyers

Fuming

TEXAS LAWYER, Nov. 16, 1998

Dow Chemical's Free Ride Leaves Lawyers Fuming

By: Sapino s

Houston plaintiff's lawyer Laminack may not

get his long-anticipated chance to prove Dow Chemical

Co. should pay damages for its role in the development

of silicone breast implants.

Dow Corning Corp. on Nov. 9 proposed a detailed

bankruptcy reorganization plan that earmarks $3.172

billion to settle litigation with thousands of women

who filed silicone breast-implant suits against the

former implant manufacturer. But the plan that was

negotiated with the Official Committee of Tort

Claimants, which represents women with breast-implant

cases against Dow Corning, releases Dow Chemical - a

half owner of Dow Corning that is a defendant in many

of the implant suits against Dow Corning - from

liability.

That's where Laminack has a big problem with the

settlement. Laminack says he doesn't want to let Dow

Chemical off the hook, and says he and his partner,

O'Quinn, may file an objection to the proposed

reorganization on behalf of claimants who are clients

of O'Quinn & Laminack of Houston.

" We find it very objectionable that the nonbankrupt

Dow Chemical is given the full protection of this

bankruptcy, " Laminack says. " I have serious questions

as to whether or not that is constitutional. "

In February 1995, Laminack helped win a verdict in an

implant suit in which the jury found Dow Chemical 20

percent liable and Dow Corning 80 percent liable for

one woman's injuries. But former 157th District Judge

Schneider threw out the verdict against Dow

Chemical, and Laminack says he's been waiting

anxiously for another shot at Dow Chemical.

Laminack also says that while the proposed

reorganization would allow claimants to opt out of the

proposed settlement and go forward with litigation

against Dow Corning, too many of the ground rules for

trying the suits would be decided by U.S. District

Judge Page Hood of Detroit after the

reorganization plan is approved.

" To lock something in place without knowing what the

primary variable is could be real unfair, and in fact,

it could be so unfair [so] as to raise some serious

constitutional questions, " he says.

The plan sets aside $400 million in a litigation fund.

It calls for claimants who accept the settlement to

receive $5,000 to have their implants removed, up to

$25,000 for a ruptured implant, and $12,000 to

$300,000 for illnesses. The women would not have to

prove their implants caused their illnesses.

Two of the nine members of the Official Committee of

Tort Claimants voted against the proposed

reorganization plan - O'Quinn and New York plaintiff's

lawyer Sybil Shainwald.

Shainwald, of the Law Offices of Sybil Shainwald, says

she will file an objection to the plan on behalf of

foreign claimants who will receive only 30 percent to

60 percent of what American women will be paid under

the plan. " I see no reason for these women to get

less, " Shainwald says.

Two members of the tort-claimants committee that

negotiated the settlement, Austin's Tommy Jacks and

Atlanta plaintiffs lawyer Ralph Knowles, concede the

settlement isn't perfect. Knowles, a name partner in

Atlanta's Doffermyre Shields Canfield Knowles &

Devine, says it was " distasteful " to him and others to

drop culpability against Dow Chemical.

" In the final analysis, we had to look and say, 'Is

Dow Chemical and Dow Corning and Corning [Corp.]

putting on a table a deal that is in the best interest

[of claimants]?' " says Knowles. The two owners of Dow

Corning are Dow Chemical and Corning Corp.

Jacks, a name partner in Mithoff & Jacks, and Knowles

say there would have been no settlement without the

Dow Chemical release.

" As with any compromise, there are parts of it that I

like better than others, " Jacks says.

Bernick, a partner in Kirkland & Ellis in

Chicago who was Dow Corning's lead negotiator, says a

release of Dow Chemical was one of Dow Corning's

ground rules for settlement.

" One of the ground rules was closure. Obviously . . .

one of the ways to produce closure for third parties,

like shareholders, was release, " Bernick says.

Dallas' Barbara Houser, a shareholder in Sheinfeld,

Maley & Kay of Houston who was the lead bankruptcy

lawyer for Dow Corning, did not return two telephone

messages by press time Nov. 12.

The settlement between Dow Corning and the tort

claimants could end the contentious bankruptcy that's

been dragging on for three and a half years. Dow

Corning filed for bankruptcy in May 1995 because of

the thousands of implant suits pending against it.

Under the plan, Dow Corning would pay up to $1 billion

to tort claimants during the first year. The rest of

the money would be paid over 16 years, and the value

of the settlement in 1998 dollars is $2.35 billion.

Dow Corning also proposes separately to pay its

commercial creditors in full.

Tort claimants could opt out of the settlement and

pursue their suits against Dow Corning. But the plan

sets aside only $400 million to pay women who choose

to sue for their actual damages, and it would not

permit them to sue for punitives.

The proposed reorganization calls for Hood to preside

over pretrial matters and decide whether there would

be a common-issue hearing on motions such as causation

and the validity of scientific evidence. Hood also

would preside over the trials unless she assigns them

to federal judges in districts where the suits were

filed. In some cases, suits could be remanded to state

courts for trial, but all sides must agree to it.

The location of the trials is a large concern for

Laminack. " I don't necessarily like having the rights

of Texas women litigated in Michigan, " he says.

Bernick says Dow Corning would ask Hood to hold a

common-issues hearing on causation. The committee

would oppose it, says Blizzard, a partner in

Blizzard & McCarthy of Houston who is litigation

counsel for the tort-claimants committee.

Settlement talks started in May 1996, but there was no

agreement until after federal mediator Francis

McGovern set a July 7 deadline to accept his proposal.

U.S. Bankruptcy Judge Arthur Spector of Bay City,

Mich., set a hearing on the disclosure statement for

Jan. 20, 1999. If he approves the disclosure

statement, the tort claimants and other creditors will

vote on the reorganization plan. Lawyers involved in

the bankruptcy say Spector could give final approval

to the plan by June.

Once the women start to get money from Dow Corning,

plaintiffs' lawyers also would begin to get their

fees. The plan calls for fees of 10 percent of the

first $10,000 paid to a claimant, 22.5 percent of the

next $40,000 and 30 percent of any amount above

$50,000. Fees would not apply to money women receive

to have their implants removed.

" We have tried very hard throughout this litigation to

make sure nobody can say the lawyers are trying to

take all the money, " Knowles says.

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