Asbestos Litigation, In re

Decision Date26 July 1996
Docket Number95-40694,Nos. 95-40635,s. 95-40635
Parties, 35 Fed.R.Serv.3d 1360 In re ASBESTOS LITIGATION James FLANAGAN; David H. Middleton; Kenneth Smith; Edee Cochran; Esteban Yanez Ortiz; John R. Allgood; Henry William Evers; Lester Eugene Taylor; Plant Insulation Company; Safety National Casualty Corporation, Appellants, v. Gerald AHEARN; James McAdams Dennis; Charles W. Jeep; James Drake; James Ellison; Roland Dearborn; Judith Dearborn; Kerwin Butcher; Dir., Workers Comp., Director, Office of Workers' Compensation Programs, U.S. Dept. of Labor; Longshore Intervenor; William James Mitchell; Fibreboard Corporation; Bethlehem Steel Corporation; Continental Casualty Company; Pacific Indemnity; Francis McGovern; Owens-Illinois, Inc.; Penn Mutual Life Insurance Company; Columbia Casualty Company; CNA Casualty Company of California; Celotex Corp., Daniel Herman Rudd, Jr., on behalf of themselves and others similarly situated; Beverly White, on behalf of themselves and others similarly situated; John Hansel, on behalf of themselves and others similarly situated; Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Leonard C. Jaques, Michael J. Connor, The Jaques Admiralty Law Firm, Detroit, MI, for appellants.

Elihu Inselbuch, Charles Sanders McNew, Caplin & Drysdale, Chartered, New York City, Steven Kazan, Kazen, McClain, Edises, Simon & Abrams, Oakland, CA, for Ahearn, Dennis, Jeep, Ellison and Mitchell.

Harry Fred Wartnick, San Francisco, CA, for Ahearn, Dennis and Jeep, appellees.

Joseph F. Rice, Ness, Motley, Loadholt, Richardson & Poole, Charleston, SC, Peter Van Lockwood, Caplin & Drysdale, Chartered, Washington, DC, Joseph B. Cox, Jr., Cox & Cox, Sullivan's Island, SC, for Ahearn, Dennis, Jeep and Ellison, appellees.

Eric D. Green, Boston, MA, for Dennis and Jeep, appellees.

Bruce L. Ahnfeldt, Napa, CA, for Juanita Drake, appellee.

Clinton A. Krislov, Krislov & Associates, Chicago, IL, Ronald W. Lupton, Stinson, Lupton and Weiss, Bath, ME, for Roland and Judith Dearborn, Butcher and Longshore Intervenor, appellees.

Michael Scott Hertzig, Washington, DC, for Dir., Workers Comp., Director, Office of Workers' Compensation Programs, U.S. Dept. of Labor, appellee.

Kelly C. Wooster, Stephen M. Snyder, William R. Irwin, James L. Miller, Brobeck, Phleger & Harrison, San Francisco, CA, for Fibreboard Corp.

Herbert Maurice Wachtell, Meyer G. Koplow, Wachtell, Lipton, Rosen & Katz, New York City, Donald T. Ramsey, David M. Rice, Rodney L. Eshelman, Carroll, Burdick & McDonough, San Francisco, CA, for Continental Cas. Co., Columbia Cas. Co. and CNA Cas. Co. of Cal., appellees in both cases.

Billy Glynn Parker, Ireland, Carroll and Kelley, Tyler, TX, for Continental Cas. Co., appellee.

Paul J. Bschorr, Richard B. Sypher, Dewey Ballantine, Dewey Ballantine, New York City, for Pacific Indemnity, appellee.

Richard L. Josephson, Baker and Botts, Houston, TX, Robert B. Shaw, Nelson Mullins Riley & Scarborough, L.L.P., Columbia, SC, for Owens-Illinois Inc., appellee in both cases.

Gary A. Bresee, Barger and Wolen, San Francisco, CA, for Penn Mutual Life Insurance Company, appellee in 95-40635.

Stuart Philip Ross, Ross, Dixon and Masback, Washington, DC, for Columbia Cas. Co. and CNA Cas. Co. of Cal., appellees.

Charles P. Schropp, Schropp, Buell & Elligett, Tampa, FL, for Celotex Corp., appellee.

Arthur H. Bryant, Anne W. Bloom, Trial Lawyers for Public Justice, Washington, DC, for Trial Lawyers for Public Justice, amicus curiae in both cases.

Jeffrey Robert White, Pamela A. Liapakis, Associated Trial Lawyers of America, Washington, DC, for Association of Trial Lawyers of America, amicus curiae in both cases.

Craig A. Berrington, David F. Snyder, James L. Kimble, American Insurance Association, Washington, DC, for American Insurance Association, amicus curiae in both cases.

Scott McCullen Baldwin, Baldwin & Baldwin, Marshall, TX, for Asbestos Victims of America, amicus curiae in both cases.

James E. Coleman, Jr., Diane M. Sumoski, John Andrew Martin, Carrington, Coleman, Sloman & Blumenthal, Dallas, TX, for Rudd, White and Hansel, appellees.

Robert L. Shaw, Westmoreland, KS, pro se.

J. Russell Stedman, Barger and Wolen, San Francisco, CA, for Penn Mutual Life Insurance Company, appellee in 95-40694.

Frederick M. Baron, Brent M. Rosenthal, Steve Baughman (argued), Baron & Budd, P.C., Dallas, TX, Sidney Katherine Powell (argued), S. Ann Saucer, Powell & Associates, Dallas, TX, for Ortiz, Cochran, Taylor, Allgood and Evers, amicus curiae.

Appeals from the United States District Court for the Eastern District of Texas.

Before REAVLEY, DAVIS and SMITH, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

In this consolidated appeal, we consider a number of challenges to the district court's approval of a class settlement of future asbestos victims with Fibreboard along with several related settlements. For the reasons that follow, we affirm the district court's judgment.

I. BACKGROUND
A. Procedural and Factual History

Fibreboard, primarily engaged in the timber business, also manufactured asbestos-containing products from 1920 until 1971. By the late 1980's, asbestos-related personal injury and death claims against Fibreboard numbered in the tens of thousands. At that time Fibreboard had approximately $100 million in hard insurance assets available to pay these claims. It also had disputed coverage claims against two of its insurers, Continental Casualty Company and Pacific Indemnity. These coverage claims ultimately played a key role in the class settlement.

Continental issued a general liability policy to Fibreboard in 1957 which remained in force for two years. Although the policy had no aggregate limit, it had a per-occurrence limit of $1 million and a per-person limit of $500,000. Fibreboard contended that Continental's policy replaced a similar Pacific policy with a per-claim limit of $500,000 but no aggregate limit.

Fibreboard contended that these two policies provided coverage to Fibreboard for thousands of claimants. This argument rested on Fibreboard's "continuous trigger" theory which maintained that the policies covered Fibreboard if the claimant had been exposed to asbestos at any time before or during the time the policies were in force, provided the claimant at some time was exposed to Fibreboard's asbestos product.

In 1979, Fibreboard and other insureds filed a massive multi-party insurance coverage case in California state court against a number of insurers, including Pacific and Continental. Following years of litigation, including a trial extending over four years, Fibreboard prevailed in the trial court. In its 1990 opinion, the trial court accepted Fibreboard's The insurers appealed to a California intermediate appellate court. Argument was held in August 1993 while the settling parties in this case were attempting to reach a final agreement.

continuous trigger theory as well as Fibreboard's argument that the insurer was required to pay the full cost of defense for each claim covered.

By 1988, Fibreboard had largely exhausted its coverage from insurers other than Pacific and Continental. It was unable to pay asbestos judgments and settlements as they occurred and also pay the continuing mounting defense costs. After the trial court in the coverage case issued several rulings in favor of Fibreboard, Fibreboard was able to develop a "structured settlement" program where payments to settle claims were deferred until resolution of the coverage case. Under this plan, most plaintiffs agreed to accept 40% cash up front with the balance due upon resolution of the coverage dispute. Additionally, Fibreboard agreed not to dissipate its assets and, in effect, to give the company to the plaintiffs if it lost its coverage case.

By mid-1990, Fibreboard's defense costs and settlement payments had mounted and Fibreboard looked for additional insurance resources. It proposed to both Continental and Pacific that they negotiate a complete settlement of its coverage claims. Continental declined to negotiate. Pacific, however, negotiated with Fibreboard and ultimately agreed to a settlement, "the Pacific Agreement." By this settlement, which was subject to a number of contingencies, Pacific's coverage was made available for claimants exposed to Fibreboard's asbestos products after 1959. The Pacific Agreement also purported to extinguish Continental's right to seek contribution from Pacific. Continental challenged this agreement in the District Court for the Eastern District of Texas in April 1993.

Even with the Pacific Agreement, Fibreboard faced acute problems with increased large-scale asbestos litigation. In early 1991 it proposed an "assignment settlement" plan to plaintiffs' counsel. Unlike the earlier program, this plan allowed asbestos claimants to settle their claims against Fibreboard for an agreed sum, receive no cash up front but rather receive an assignment of Fibreboard's rights (to the extent of the settlement) against Continental. Fibreboard agreed to pay the settlement sum if the court ultimately exonerated Continental. Under this plan, the settlement was also contingent upon Fibreboard obtaining court orders validating its right to make an assignment in the face of an insurance policy provision barring Fibreboard from settling claims without Continental's consent. Plaintiffs' counsel recognized the risk that their clients would never receive the agreed-upon settlements under the assignment plan and pressed for higher settlement amounts for accepting this risk. Fibreboard, using Continental dollars, was willing to pay more. As a result, the average per-case settlement amount under the assignment plan more than doubled the average amount of the earlier structured settlements. Continental strongly disputed Fibreboard's right to make these assignments. This dispute led to further costly litigation.

In June 1992, a California trial court in Andrus v....

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