Rourke v. Amchem Products, Inc.

Decision Date14 December 2004
Docket NumberNo. 130 September Term, 2003.,130 September Term, 2003.
Citation384 Md. 329,863 A.2d 926
PartiesEdna O. ROURKE, as Personal Representative for the Estate of Franklin Adams, et al. v. AMCHEM PRODUCTS, INC., et al.
CourtMaryland Court of Appeals

William F. Mulroney (David M. Layton of Ashcraft & Gerel, L.L.P., on brief), Baltimore, for Petitioners.

Ronald B. Rubin (Michael A. Stodghill of Rubin & Rubin, Chartered, Rockville, MD; R. Thomas Radcliffe, Jr. of DeHay & Elliston, L.L.P., Baltimore, MD; William F. Sheehan, Richard M. Wyner, Richard L. Matheny, III, and Matthew J. Wilshire of Shea & Gardner, Washington, DC), all on brief, for Respondents.

Argued before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

WILNER, Judge.

This case arises from a consolidated settlement of several hundred asbestos-related personal injury and wrongful death actions. The issue before us is whether the dispute that emanated from the settlement agreement and that forms the basis of this lawsuit is subject to arbitration, and that, in turn, depends in part on whether we are required to give full faith and credit or common law collateral estoppel effect to a judgment of the Supreme Court of Virginia involving none of the plaintiffs and only three of the thirteen defendants in this case. The Circuit Court for Baltimore City concluded that it would not apply the doctrine of offensive non-mutual collateral estoppel based on that judgment, and that, under Maryland and Federal law, the dispute was subject to arbitration. Upon those conclusions, the court granted a motion to compel arbitration. The Court of Special Appeals, addressing as well the issue of full faith and credit, affirmed that ruling, Rourke v. Amchem, 153 Md.App. 91, 835 A.2d 193 (2003), and so shall we.

BACKGROUND

In September, 1988, a number of asbestos manufacturers that had been named as defendants in multiple lawsuits pending in several States entered into a Producer Agreement Concerning Center For Claims Resolution. Among other things, that agreement created a non-profit entity known as the Center for Claims Resolution (CCR), to act as a claims agent with respect to all asbestos-related claims made against the participating members. Each participating member designated CCR as its sole agent to administer, evaluate, settle, pay, and defend such claims. The agreement required CCR to handle each claim on behalf of all members and precluded it from settling a claim on behalf of fewer than all members. We were apprized at oral argument, apparently as a result of that requirement, that, whenever CCR settled a claim, it obtained a release of all participating members, even those who had not been named as defendants in the particular case.

Attachment A to the Producer Agreement apportioned among the members their respective shares of three categories of expenses — liability payments (sums paid in settlement of asbestos-related claims or in satisfaction of judgments on such claims), allocated expenses, and unallocated expenses (overhead, administrative, and operating expenses of CCR). The Attachment anticipated the prospect of new members joining CCR and current members terminating their membership, and it made provision for reducing apportioned shares when new members were admitted and increasing shares when members withdrew.1 Article III of the Producer Agreement permitted termination of membership in CCR only by (1) voluntary termination upon 60 days notice and a determination by the CCR Board of Directors that the withdrawing member had paid or made provision for the payment of all amounts due from it under the Agreement; (2) filing for bankruptcy protection or other protection from creditors under Federal or State law; or (3) action of the Board of Directors if a member was involuntarily placed in bankruptcy or was determined to be insolvent or if the Board found that the member had materially breached the Agreement. Article III further provided, however, that, notwithstanding termination of membership, the terminated member "shall continue to have and to honor all of the obligations incurred by it hereunder or on its behalf as a member prior to the effective date of its membership termination...."

In April, 2000, two law firms that represented 882 plaintiffs with asbestos-related personal injury or wrongful death claims pending in Maryland courts entered into a global settlement of those claims with CCR which, at the time, had 16 members.2 There were five categories of plaintiffs — those with mesothelioma (5), those with lung cancer (29), those with other cancer (20), those with non-malignant I diseases (essentially asbestosis or significant bilateral pleural thickening, 359), and those with less significant non-malignant II conditions (469) — and a settlement amount was agreed upon with respect to each plaintiff in each category. In order to receive the money, each individual plaintiff would have to establish that he/she met the criteria for payment, agree to the settlement amount, and execute a release. Because of those conditions and because of the prospect of new plaintiffs being added as the firms acquired additional clients, the aggregate amount actually to be paid was not entirely certain, but, based on counsel's representations at the time, it was estimated to be $10,089,400. The agreement called for CCR to make aggregate payments to plaintiffs' counsel, "subject to change as specified after the qualification review," in three installments: $4,500,000 on July 1, 2000; $4,000,000 on June 1, 2001; and any balance on September 1, 2002.

The procedure for payment of claims was set forth in Appendix C to the Settlement Agreement. That required, among other things, that the settling plaintiff sign a full release, in the form and subject to the conditions specified in the Appendix, of all CCR members, prior to payment.

Three provisions of the Settlement Agreement have particular relevance to this case. Paragraph 7 made clear that the liability of the CCR member companies for payment of the settlement amounts was several and not joint, and it gave Plaintiffs' Counsel certain options if one or more of the member companies failed to pay its apportioned share. In that regard, ¶ 7 provided, in relevant part:

"Payments to Plaintiff Counsel by the CCR under Paragraph 5 of this Settlement Agreement shall be funded by the CCR member companies in accordance with the terms of the Producer Agreement Concerning Center For Claims Resolution (as amended, effective February 1, 1994) and each CCR member company shall be liable under this Settlement Agreement only for its individual share of such payments as determined under that Producer Agreement."

(Emphasis added).

In the event that, because of a default by one or more CCR members, CCR failed to make a payment due under the Settlement Agreement, plaintiffs' counsel was given the option, as to any plaintiffs whose claim had not yet been paid in full, of either continuing the settlement as to the non-defaulting CCR members or, by written election made within 30 days after notice of the default, declaring the entire settlement agreement void. Upon that election, the plaintiffs would have one year to bring a tort action. If counsel elected to continue the settlement as to the non-defaulting member companies, ¶ 7 provided:

"[A]s to the defaulting CCR member only, any and all plaintiffs whose claims have not been paid in full by the CCR under this Agreement shall have the option of (a) electing to enforce the Defaulting CCR member company's obligations under this Settlement Agreement or (b) electing to pursue such plaintiffs claims for asbestos-related injury against the Defaulting CCR member company in the tort system...."

The second provision of note, contained in ¶ 12, was the requirement that the parties make a good faith effort to resolve any disputes that may arise while implementing the settlement agreement and that, "[i]f the parties are unable to resolve a dispute, the issue shall be referred to a mutually agreeable arbitrator for binding resolution." Finally, ¶ 21 provided that all disputes concerning the interpretation or performance of the agreement were to be resolved in accordance with Maryland law.

It appears that CCR anticipated that each installment would pay, in full, the aggregate claims of about one-third of the plaintiffsthe plaintiffs chosen by counsel whose signed releases were forwarded to CCR. The first installment, under that view, was intended to discharge the claims of 208 plaintiffs represented by Ashcraft & Gerel. When the time for that first installment arrived, one CCR member, Asbestos Claims Management Corporation (ACMC), had failed to pay its apportioned share of $679,348. Accordingly, the first installment, sent by CCR on October 5, 2000, did not include that amount. The check, in the amount of $3,822,501, was made payable to "Ashcraft & Gerel, attorneys for 208 claimants."

Ashcraft & Gerel either had or formed a different intent. Perceiving a legal or ethical problem in drawing distinctions among its clients as to when they would be paid, the firm decided that it would be necessary to pay all of its clients on a pro rata basis from the three installments and not pay any claims in full from the first one. That created a problem, as, under the settlement protocol, all plaintiffs who would be receiving any payment were required to sign and submit releases acknowledging payment in full when, in fact, they might not receive full payment of their claim until the final installment was paid two years later. After the CCR check was deposited, William Mulroney, an attorney with that firm, requested that CCR stop payment on the check and issue a new one to "Ashcraft & Gerel as attorneys for various plaintiffs." In an October 23, 2000, follow-up letter to Michael Rooney, then the Chief Claims Officer for CCR, Mr. Mulroney advised that he had identified 88 plaintiffs whose claims were unaffected by the ACMC...

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