In re Dow Corning Corp.

• Decision Date: 13 November 2000
• Docket Number: 99-CV-75958-DT,No. 99-CV-73941-DT,99-CV-76007-DT,99-CV-75929-DT,99-CV-75799-DT,99-CV-75959-DT,99-CV-75923-DT,99-CV-75925-DT,99-CV-75922-DT,99-CV-75927-DT,99-CV-75930-DT,99-CV-75960-DT,99-CV-75924-DT,99-CV-75380-DT,99-CV-,99-CV-74218-DT,99-CV-73941-DT
• Citation: 255 BR 445
• Parties: In re DOW CORNING CORPORATION, Debtor.
• Court: U.S. District Court — Western District of Michigan

255 B.R. 445 (2000)

In re DOW CORNING CORPORATION, Debtor.

Nos. 99-CV-73941-DT, 99-CV-74218-DT, 99-CV-75380-DT, 99-CV-75799-DT, 99-CV-75922-DT, 99-CV-75923-DT, 99-CV-75924-DT, 99-CV-75925-DT, 99-CV-75927-DT, 99-CV-75929-DT, 99-CV-75930-DT, 99-CV-75958-DT, 99-CV-75959-DT, 99-CV-75960-DT, 99-CV-76007-DT, 99-CV-76008-DT, 99-CV-76009-DT, 99-CV-76063-DT, 99-CV-76214-DT, 99-CV-76215-DT, 00-CV-70029-DT, 00-CV-70076-DT, 00-CV-70176-DT, 00-CV-70177-DT, 00-CV-70178-DT, 00-CV-70179-DT, 00-CV-70337-DT, 00-CV-70338-DT.

United States District Court, E.D. Michigan, Southern Division.

November 13, 2000.

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Sybil Shainwald, New York City, Stephen H. Weiner, Sybil Shainwald Assoc., New York City, for Certain Foreign Claimants.

Yeon-Ho Kim, International Law Office, Seoul, Korea, for Korean Claimants.

Harold V. Sullivan, II, Torrance, CA, for Certain Cambodia, Vietnam and Mexico Claimants.

David J. Hutchinson, Ann Arbor, MI, for Certain Brazilian Claimants.

Joel L. Miller, David B. Goroff, Hopkins & Sutter, Chicago, IL, Peter Cashman, Cashman & Partners, Sydney, NSW, Australia, for Certain Australian Claimants.

Kenneth H. Eckstein, Kramer, Levin, New York City, for Official Committee of Tort Claimants.

Barbara J. Houser, Dow Corning Corp., Auburn, MI, Rozanne M. Giunta, Lambert, Leser, Bay City, MI, David L. Ellerbe, Sheinfeld, Maley, Dallas, TX, for Dow Corning Corp.

D. Tyler Nurnberg, Hopkins & Sutter, Chicago, IL, for 1300 Australian Tort Claimants.

Donald S. Bernstein, Davis, Polk, New York City, Sheldon S. Toll, Honigman, Miller, Detroit, MI, for Official Committee of Unsecured Creditors.

OPINION RELATING TO APPEALS FROM AND MOTIONS REGARDING THE BANKRUPTCY COURT'S NOVEMBER 30, 1999 CONFIRMATION ORDER

HOOD, District Judge.

I. INTRODUCTION

On May 15, 1995, the Debtor Dow Corning Corporation ("Dow Corning" or "the Debtor") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtor submitted two plans of reorganization before negotiating with various parties, including the Official Committee of Tort Claimants (the "Tort Claimants' Committee"). On November 8, 1998, the Debtor and the Tort Claimants' Committee (the "Proponents") submitted a Joint Plan of Reorganization, amended on February 4, 1999. The Bankruptcy Court held hearings on the confirmation of the Amended Joint Plan over the course of several weeks, commencing on June 28, 1999, with closing arguments heard on July 30, 1999. Testimonies were taken and evidence submitted during the hearings. Numerous briefs and documents were filed by many parties in support of or in opposition to the confirmation of the Amended Joint Plan, including post-hearing briefs.

The Bankruptcy Court entered its Findings of Fact and Conclusions of Law and Order Confirming the Amended Joint Plan on November 30, 1999. The Bankruptcy Court also entered various opinions on this date. The Bankruptcy Court indicated that subsequent opinions would be entered in the future and on December 21, 1999, the Bankruptcy Court entered an opinion on the release and injunction issue, the best-interests-of creditors test, feasibility and whether the plan complies with other provisions of the Bankruptcy Code. In all, seven separate opinions were entered relative to the November 30, 1999 Confirmation Order.¹ Not all of the parties or all of the issues in the opinions were appealed. The Court will address the opinions appealed from below.

The following parties filed appeals and/or motions relating to the Confirmation Order which are currently before the Court:²

                                   Date filed with
                Case No.      Bankruptcy Court    Appellant/Movant
                99-CV-73941        August 9, 1999          Certain Foreign Claimants
                99-CV-74218        August 25, 1999         Korean Claimants
                99-CV-75380        November 5, 1999        United States of America
                99-CV-75799        December 1, 1999        United States of America
                99-CV-75922        December 9, 1999        Physician Claimants
                99-CV-75923        December 8, 1999        New Zealand Claimants
                99-CV-75924        December 9, 1999        Class Five Nevada Claimants
                99-CV-75925        December 9, 1999        Class Five Texas Children Claimants
                                                           represented by the Lacy firm
                99-CV-75927        December 9, 1999        Australian Claimants
                99-CV-75929        December 10, 1999       Certain Foreign Claimants represented
                                                           by the Shainwald firm
                99-CV-75930        December 8, 1999        Official Committee of Physician Creditors
                99-CV-75958        December 10, 1999       Helene D. Schroeder, pro se
                99-CV-75959        December 10, 1999       Sue Olexa, pro se
                99-CV-75960        December 10, 1999       Marti Jacobs, pro se
                99-CV-76007        December 13, 1999       Beatrix Shishido, pro se
                99-CV-76008        December 13, 1999       Karen L. Hustead
                99-CV-76009        December 13, 1999       Pamela Dowd, pro se and Maribeth
                                                           West, pro se
                

                99-CV-76063     December 16, 1999     Class Five Pennsylvania Claimants
                                                      Pennsylvania Coordinated Silicone
                                                      Breast Implant Litigation
                99-CV-76214     December 29, 1999     Dow Chemical
                99-CV-76215     December 29, 1999     Corning, Inc
                00-CV-70029     December 30, 1999     Dow Corning and Official Committee
                                                      of Tort Claimants
                00-CV-70076     December 30, 1999     Rita Altig, et al
                00-CV-70176     January 10, 2000      Hartford Accident & Indemnity Co., et
                                                      al
                00-CV-70177     January 10, 2000      Lloyds of London, et al
                00-CV-70178     January 10, 2000      Korean Claimants
                00-CV-70179     January 6, 2000       Dow Corning and Official Committee
                                                      of Tort Claimants' Motion to Withdraw
                                                      the Reference
                00-CV-70337     January 19, 2000      Dow Chemical
                00-CV-70338     January 19, 2000      Corning, Inc.
                

The general issues on appeal include: the classification and treatment of claims; the injunction and release; the cap on punitive damages; whether the proposed plan is fair; and the United States' motion to compel. This Court entered an order consolidating the briefing schedule of all the appeals relating to the Confirmation Order entered by the Bankruptcy Court. On April 12 and 13, 2000, the Court held hearings on the appeals, allowing counsel representing the appellants and appellees, pro se individuals and other interested parties to present arguments. Some parties filed supplemental briefs after the hearings. For the reasons set forth below, the Court AFFIRMS the Bankruptcy Court's November 30, 1999 Confirmation Order and REVERSES in part its December 21, 1999 Opinion on the Injunction and Release issue as it relates to the November 30, 1999 Order.

II. BACKGROUND

In 1943, The Dow Chemical Company ("Dow Chemical") and Corning Glass Works (now Corning, Incorporated ("Corning, Inc.")), formed Dow Corning Corporation for the purpose of developing and producing products based on silicone chemistry. Today, Dow Holdings, Inc. (a wholly owned subsidiary of Dow Chemical) and Corning, Inc. are the sole shareholders of the Debtor, each owning 50% of the Debtor's common stock. See generally In re Dow Corning Corp., 187 B.R. 919 (E.D.Mich.1995), rev'd in part, 103 F.3d 129 (6th Cir.1996) and In re Dow Corning Corp., 211 B.R. 545, 550 (Bankr.E.D.Mich. 1997).

The Debtor and its subsidiaries produce thousands of silicone-based products both for non-medical and medical uses. In the early 1960s, Drs. Thomas Cronin and Frank Gerow, plastic surgeons, developed the idea of placing silicone gel inside a sealed packet which would be surgically implanted inside a woman's breasts and collaborated with the Debtor to create what is now known as a silicone-gel breast implant. In re Dow Corning Corp., 211 B.R. at 550. The Debtor introduced silicone-gel breast implants to the market in 1964. Id. There were problems with the breast implants, including leakage and rupture. Id. As a result of various complaints, inserts were placed in the packages warning recipients of the potential non-pathogenic side effects. Id. at 551. The Debtor did not face significant legal actions during this time period because of the warnings in the packets. Id.

Reports in the 1980s suggested that silicone gel may cause systemic disease in humans. Id. Women began filing lawsuits during this period alleging that silicone gel caused an auto-immune connective tissue disease such as lupus, Scleroderma or rheumatoid arthritis. Id. Later on, suits were filed alleging symptoms such as aches and pains, fatigue, insomnia, memory loss and headaches. Id. After a successful suit against the Debtor in 1984, the Debtor modified its package inserts acknowledging that there were "reports of suspected immunological responses to silicone mammary implants" and that "convincing evidence does not exist to support a causal relationship between exposure to silicone materials and the acquisition or exacerbation of a variety of rheumatic and connective tissue disorders." Id. (citation omitted)

The Debtor ceased marketing the silicone gel for breast implantation in March of 1992. Two months later, the Food and Drug Administration ("FDA") ordered that implants containing the gel be taken off the market. Id. After the implants were withdrawn from the market, lawsuits against breast implant manufacturers dramatically increased with more than 3,000 suits filed against the Debtor in 1992, followed...