In re All Kelley & Ferraro Asbestos Cases

• Citation: 821 NE 2d 159,104 Ohio St.3d 605
• Decision Date: 30 December 2004
• Docket Number: No. 2003-1653.,2003-1653.
• Parties: IN RE ALL KELLEY & FERRARO ASBESTOS CASES.
• Court: Ohio Supreme Court

104 Ohio St.3d 605
2004-Ohio-7104
821 NE 2d 159

2004-Ohio-7104

IN RE ALL KELLEY & FERRARO ASBESTOS CASES.

No. 2003-1653.

Supreme Court of Ohio.

Submitted September 14, 2004.

Decided December 30, 2004.

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Jones Day, Patrick F. McCartan, Mark Herrmann, and Mary Beth Young, Columbus, for appellants Pfizer Inc., Quigley Company, Inc., and Dana Corp.

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Vorys, Sater, Seymour & Pease, L.L.P., David S. Cupps and Richard D. Schuster, Columbus, for appellants Amchem Products, Inc., CertainTeed Corp., Dana Corp., I.U. North America, Inc., Maremont Corp., National Service Industries, Inc., Nosroc Corp., and Union Carbide Corp.

Cooper & Walinski, L.P.A., and Richard S. Walinski, Toledo, for appellant Dana Corp.

The Zagrans Law Firm Co., L.P.A., and Eric H. Zagrans, Elyria; Marcus, Santoro & Kozac, P.C., Frank J. Santoro, Karen M. Crowley, and John M. Ryan Jr., Chesapeake, VA, for appellant C.E. Thurston & Sons, Inc.

Kelley & Ferraro, L.L.P., Michael V. Kelley and Thomas M. Wilson; Hahn Loeser & Parks, L.L.P., Robert J. Fogarty, Andrew S. Pollis, and Yuri R. Linetsky, Cleveland, for appellees.

Bricker & Eckler, L.L.P., Kurtis A. Tunnell, Anne Marie Sferra, and Vladimir P. Belo, Columbus, urging reversal for amici curiae, Ohio Manufacturers' Association, Ohio Chapter of National Federation of Independent Business, and Ohio Chemistry Technology Council.

O'DONNELL, J.

{¶ 1} Two issues are presented for consideration in connection with this appeal, which concerns the resolution of some 15,000 asbestos-related claims settled for

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approximately $120 million between the law firm of Kelley & Ferraro, L.L.P., and the Center for Claims Resolution ("CCR") as agent for 19 member companies: first, regarding the nature of the liability incurred by the members of the CCR, and second, regarding whether the trial court had jurisdiction to enter judgment for each claimant against all CCR members

{¶ 2} The record before us reveals that in 1988, a consortium of former asbestos-producing or distributing companies entered into an agreement styled the "Producer Agreement Concerning Center for Claims Resolution" ("Producer Agreement"), which created the CCR, a nonprofit Delaware organization, to administer and resolve asbestos-related claims. The agreement — as amended on February 1, 1994 — governs the relationships between and among the CCR members and designates the CCR as each member's sole agent to "administer and arrange on its behalf for the evaluation, settlement, payment or defense of all asbestos-related claims."

{¶ 3} The agreement contains a formula for calculating each member's percentage share of liability payments¹ and allocated expenses² "attributable to each claim handled by the CCR as sole agent for such Participating Producer."³ And it requires any dispute among the members concerning the agreement, including disputes involving the allocation of percentage shares of liability payments, to be resolved through alternative dispute resolution.

{¶ 4} On July 26, 1999, pursuant to the authority conferred by the Producer Agreement, the CCR negotiated a settlement agreement on behalf of 19 member companies⁴ with the law firm of Kelley & Ferraro to resolve the asbestos-related claims of approximately 15,000 claimants. At that time, these claimants had

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individual cases pending in Ohio, Florida, Mississippi, and Massachusetts, among other jurisdictions

{¶ 5} That settlement agreement estimated the dollar value of the settlement at a total of $120 million to be paid in equal biannual installments of $10 million each commencing September 1999 and ending December 2004. The parties arrived at the total settlement amount based upon Kelley & Ferraro's approximation of the number of claimants who would qualify for payment in each disease category. And, further, a condition of payment required each claimant to provide documentation of an asbestos-related illness, exposure to "asbestos-containing materials that were manufactured, sold, marketed or distributed by one or more members of the CCR," and "compliance * * * with the applicable statute of limitations or other applicable timeliness doctrines" and a release of all CCR member companies from liability. Upon claimants' failure to tender the requisite documentation or refusal to accept the settlement amount for an individual claim, CCR members would adjust their installment payments.

{¶ 6} Against this contract posture, the CCR in connection with the amounts due in 1999 submitted a payment to Kelley & Ferraro deficient by $987,295.27, stating that the shortfall arose because GAF had refused to pay its allocated share. GAF had disputed the CCR's calculation of its share in accordance with the Producer Agreement. In response, Kelley & Ferraro filed a motion to enforce the settlement agreement. After a hearing, the trial court granted that motion and entered a $987,295.27 judgment against all CCR members, including GAF. The court concluded that, because the CCR had promised to deliver a lump sum on specified dates in exchange for settlement of individual claims, and because the settlement agreement did not apportion the sums among the members, GAF's disagreement over its allocated share constituted an internal dispute to be decided by alternative dispute resolution, pursuant to the terms of the Producer Agreement. Members of the CCR timely appealed that decision to the appellate court.

{¶ 7} When the next payment became due, the CCR tendered an installment deficient by $2,210,154.62, explaining that GAF had again failed to pay its share as calculated by the CCR. Consequently, Kelley & Ferraro filed another motion to enforce the settlement agreement, which the trial court granted, entering judgment for all claimants against all CCR members in the amount of the shortfall. Members of the CCR again appealed.

{¶ 8} Regarding the next four installments, an increasing number of members failed to pay their shares as determined by the CCR, resulting in larger shortfalls. For the December 2000 installment, GAF and Asbestos Claims Management Corporation ("ACMC") did not pay their allocated shares. And in May 2001, the CCR sent Kelley & Ferraro another deficient payment, as GAF,

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ACMC, and Armstrong World Industries ("Armstrong") failed to pay their shares. At that point, both Armstrong and GAF had filed for bankruptcy protection, and, at a hearing, the members described ACMC as insolvent

{¶ 9} By December 2001, in addition to GAF and Armstrong, four more CCR members had filed bankruptcy petitions or their foreign equivalent: United States Gypsum Corporation, Turner & Newall, PLC, Ferodo America, Inc., and Flexitallic, Inc. Consequently, none paid the shares allocated to them by the CCR. For that installment, ACMC and Shook & Fletcher Insulation Company, which subsequently filed for bankruptcy in April 2002, also failed to pay. This time, however, although it had collected shares from the nondefaulting companies, the CCR, instead of forwarding a deficient payment to the law firm, sent Kelley & Ferraro a letter requesting that it pursue one of the options contained in paragraph 13 of the settlement agreement.⁵ The CCR sent Kelley & Ferraro a similar letter regarding the June 2002 installment and again withheld the amounts it had collected from nondefaulting members.

{¶ 10} As a result of the foregoing events, Kelley & Ferraro filed four additional motions to enforce the settlement agreement. The trial court, consistent with its earlier decisions, granted these motions and awarded the claimants the deficient amounts plus interest. Again, members of the CCR separately appealed each judgment to the appellate court. Not all of the trial court's orders, however, entered judgment against all CCR members, primarily due to pending bankruptcy proceedings; nonetheless, in every instance, the trial court entered judgment against all 11 members appealing to this court.

{¶ 11} The appellate court eventually consolidated eight separate appeals arising from the trial court's decisions to grant Kelley & Ferraro's six separate motions to enforce the settlement agreement. In its opinion, the court affirmed the trial court's judgments and held that the agreement provided for joint and several liability among the CCR members. In re All Kelley & Ferraro Asbestos Cases, 153 Ohio App.3d 458, 2003-Ohio-3936, 794 N.E.2d 729, ¶ 57. It explained that, although the phrase "each CCR member shall be liable under this Settlement Agreement only for its individual share"⁶ appeared to indicate several

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liability, the words read in context and in conjunction with other settlement provisions imposed joint and several liability among the members. Id. at ¶ 42-43, 56

{¶ 12} The court interpreted the first sentence in paragraph 13 of the settlement agreement as "defining the members' liability vis-a-vis each other" (emphasis sic), not their liability to claimants and, therefore, as imposing joint and several liability on the CCR members. Id. at ¶ 56. The court additionally stated that its interpretation comported with fundamental fairness, as the parties did not dispute the total amount owed to the claimants and as the CCR members were better situated to pursue a...