Thompson-Hayward January 12. 2009 Hearing Transcript

8/14/2019 Thompson-Hayward January 12. 2009 Hearing Transcript

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UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

. Chapter 11IN RE: .

. Case No. 08-14692 (REG)

.T H AGRICULTURE & NUTRITION, .L.L.C., .

. New York, New YorkDebtor. . Monday, January 12, 2009

. . . . . . . . . . . . . . . . 4:06 p.m.

TRANSCRIPT OF TELEPHONIC CONFERENCEBEFORE THE HONORABLE ROBERT E. GERBER

UNITED STATES BANKRUPTCY JUDGE

APPEARANCES: (Via telephone - On the Record)

For the Debtors: John H. Bae, Esq.CADWALADER, WICKERSHAM & TAFT, LLPOne World Financial CenterNew York, New York 10281

Kenneth H. Frenchman, Esq.DICKSTEIN SHAPIRO, LLP1177 Avenue of the AmericasNew York, New York 10036

For the Punitive LegalRepresentative: Sander L. Esserman, Esq.

STUTZMAN, BROMBERG, ESSERMAN &PLIFKA, P.C.2323 Bryan Street, Suite 2200Dallas, Texas 75201

(Appearances Continued)

Audio Operator: Electronically Recordedby Kendra Harris, ECRO

Transcription Company: Rand Reporting & Transcription, LL80 Broad Street, Fifth FloorNew York, New York 10004(212) 504-2919www.randreporting.com

Proceedings recorded by electronic sound recording, transcriptproduced by transcription service.


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APPEARANCES: (Continued)

For PENAC: Garrard R. Beeney, Esq.SULLIVAN & CROMWELL, LLP125 Broad StreetNew York, New York 10004

For related Travelersentities: Robert B. Millner, Esq.

SONNENSCHEIN, NATH & ROSENTHAL, LL1221 Avenue of the AmericasNew York, New York 10020

For ContinentalCasualty Company: David C. Christian, Esq.

SEYFARTH SHAW, LLP131 South Dearborn Street

Suite 2400Chicago, Illinois 60603

For Volkswagen Group ofAmerica: Kirk T. Hartley, Esq.

Gerald Munitz, Esq.BUTLER, RUBIN, SALFARELLI& BOYD, LLP

For Creditors' Committee: Joseph Frank, Esq.FRANK GECKER, LLP325 N. LaSalle, Suite 625Chicago, Illinois 60610

For Owens Illinois: Katherine L. Mayer, Esq.MC CARTER & ENGLISH

For Larson, et al: Joseph Rice, Esq.MOTLEY RICE, LLC

Also Appearing: Dennis Valenza, Esq.MORGAN & LEWIS


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(Proceedings commence at 4:06 p.m.)

THE COURT: We're here on THAN. And as I understand

it, we're going to get an update on the status of the dialogue

on the insurers' issues, and we're going to deal with the

issues raised by Volkswagen.

Who's going to take the lead?

(No verbal response.)

THE COURT: Can anybody hear me?

UNIDENTIFIED: (Indiscernible.)

THE COURT: I'm sorry. You're breaking up.

MR. VALENZA: I can hear you, Judge. This is Dennis

Valenza. I can't (indiscernible) hear the operator, but nobod

else.

THE OPERATOR: (Indiscernible.)

THE COURT: All right. Then let me repeat what I

said.

First of all, I'm Judge Gerber.

As I understand it, we're here in THAN for two

separate things: One, to get an update on the dialogue with

the insurers, and second to deal with the issues raised by

Volkswagen and by the various responses to the Volkswagen

submission.

Who is going to take the lead?

MR. MUNITZ: Your Honor, this is Gerald Munitz in

Chicago. Kirk Hartley and I, we take the lead on the standing


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issue on behalf of Volkswagen.

THE COURT: All right, Mr. Munitz, but I want to deal

with the insurers' issues first.

MR. RICE: Your Honor, this is Joe Rice; I'm calling

on behalf of individual objectors that have filed objections to

the claim, but I don't know if that's on the -- anything today

but I'm on behalf of Larson (indiscernible) and

(indiscernible).

THE COURT: Well, I didn't -- can I get your name

again, sir?

MR. RICE: Joseph Rice, R-i-c-e.

THE COURT: Rice?

MR. RICE: Yes, sir.

THE COURT: Well, I didn't even understand that to be

a purpose of today's call, Mr. Rice.

MR. RICE: It may not be, Your Honor.

THE COURT: All right.

MR. RICE: I'll just put it on the record that --

THE COURT: Okay. Well, I thought I was going to hea

initially --

MR. MILLNER: Yes, Your Honor?

THE COURT: Yes, go ahead.

MR. MILLNER: It's Robert Millner for Travelers.

THE COURT: Okay, Mr. Millner.

MR. MILLNER: Good afternoon. And I will be pleased


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to give a report if somebody from the debtor is not.

MR. BAE: Your Honor, this is John Bae from -- as an

aside, Your Honor, I no longer (indiscernible) with Greenberg

Traurig as of today, but I have been retained by the debtor.

I was hoping that Mr. Frenchman would have been on the

phone to provide the Court with a report of the status of the

discussions with the insurers. I don't think Mr. Frenchman is

on.

MR. FRENCHMAN: I am on the phone. I'm sorry about

that, Your Honor. I will be taking the lead for the insurance

issues; and, to the extent that there are other issues,

including the Volkswagen issue, I believe Mr. Bae will be

taking the lead on behalf of the debtor.

THE COURT: All right. Mr. Frenchman, let's start

with you, please.

MR. FRENCHMAN: Yes, Your Honor.

The status is that the -- we provided plan language

and a draft stipulation to the insurers last week. We had a

meet-and-confer last Thursday. I think at that meet-and-confe

we narrowed some of the issues and crystallized other issues;

yet, we still certainly have some work to do and know that

there were other carriers who were unavailable for the meet-

and-confer. And although they sent representatives, they

certainly voiced a concern that they needed to be heard.

We have -- well, we are supposed to be receiving new


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language, plan language and a new stipulation, from the

insurance carriers on Wednesday. We have scheduled a meet-and

confer to occur at one o'clock Thursday, and we have all agreed

to block off Friday for an all-day meet-and-confer, should that

become necessary.

We are hopeful that, at the end of this week, at the

end of the meet-and-confer Friday, if that becomes necessary,

we will have reached an agreement.

THE COURT: Okay. Mr. Millner, can I get your

perspective, please.

MR. MILLNER: My perspective is as follows:

We did receive plan language last Tuesday, and then

some additional significant part of the plan language last

Wednesday night, and we met Thursday. We did as best we could

with the language, and we still have some significant issues

remaining, and we are continuing in our work. And Mr.

Frenchman is correct that he will receive back from the

insurers this Wednesday a further draft, which will address

several major issues, which, as he said, were crystallized at

our last meeting.

And the one point that I would make is that, when we

finish this week, while everybody is always hopeful about

reaching agreements, we of course will have to go back to our

clients; Mr. Frenchman may have to confer with his client. So

we're hopeful is -- what I'm hopeful of is of the lawyers


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reaching at least their own consensus that they can go back to

their own clients with, but I -- so that's point one.

Point two, just so that we understand, we are

continuing on this stipulation path, as the debtor wants, and

we have not received any discovery. And we're certainly not

waiving any rights on that part, Your Honor, if this does not

work. I just want to make that clear. And with that, that's

my perspective. We're working on it.

THE COURT: All right. Anybody else on the insurers'

side want to comment?


THE COURT: All right. I hear no response.

All right. Well, gentlemen -- ladies and gentlemen,

think that this dialogue should continue, and I'm going to

allow it to continue and encourage it to continue; and of

course, it can without prejudice to anyone's rights.

And as a consequence, I would like recommendations

from the plan proponents on the one hand and the insurers on

the other as to what a useful time would be for a follow-up

conference call, to see how you're doing and/or to respond in

any other way to the outcome of your efforts to resolve this.

Mr. Frenchman, let me get your perspective first,

please.

MR. FRENCHMAN: Well, I think in terms of the follow-

up conference call, I take Mr. Millner's point that there may


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be some conferring with the clients, although I would say from

the debtors' perspective, knowing full well, I think, the state

of mind of the insurers, we intend to have those communication

with the client in advance of the meet-and-confer, and our

client will be available to confer with at any point in time

during the meet-and-confer, so we'll be able to straighten out

those authority issues. Nevertheless, I think giving until

Monday for that would be fair, and that the conference call

should be scheduled for a week for today, if the Court is

available.

THE COURT: Mr. Millner, do you concur or have an

objection?

MR. MILLNER: I don't, for two reasons:

This is a process, which if the Court were not here a

all, is underway. We are talking and negotiating. And if we

finish Friday with something useful, hopefully, we will go bac

to our clients -- we have several insurers, as you know --

Perhaps Monday, which would be the earliest next business day;

maybe for some it will end up being Tuesday. And to the exten

we still have some issues, my thinking is we would call Mr.

Frenchman back on the phone. I think that the best status is

week from Friday, but I certainly think that a week from today

is too soon, is too soon. And that's my perspective on that.

THE COURT: Mr. Millner, I assume you're keeping your

client or clients in the loop on this, aren't you?


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MR. MILLNER: We do. We do. But if we leave Friday,

we would certainly need to speak to our clients the following

Monday, and I assume the other insurers would also. And

depending on what happens then, my thinking is we may have to

come back and talk further with Mr. Frenchman. So my thinking

is you give a little time for that to play. So I think that

the Monday is too soon, for sure.

THE COURT: Uh-huh. Has everybody had a chance to

speak their piece on this?

MR. CHRISTIAN: Your Honor, may I be heard?

THE COURT: Who is speaking, please?

MR. CHRISTIAN: This is David Christian on behalf of

Continental Casualty Company and Pacific Casualty Company.

THE COURT: Yes, Mr. Christian.

MR. CHRISTIAN: Thank you, Judge.

I agree with Mr. Millner, and I guess I'd add a

further clause on that point. I heard Mr. Frenchman say that

he would doing his conferring with the debtor in advance of the

meeting, and so I guess the implication is that he'll come in

with all of the authority he needs and all of the information

from his client that he needs. I guess I have two thoughts in

response to that:

One is that, given the complexity and the number of

issues involved here, I'm not sure that Mr. Frenchman can

anticipate every issue and everything we might ask for, or


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everything that might be asked for of the client, just as I'm

not sure I can anticipate everything he might ask of me and my

client.

And number two, perhaps more importantly, many of the

issues we're dealing with are things on which Phillips, the

debtor-parent, is the final word. In particular, this plan

contemplates that it will be Phillips pursuing any insurance

coverage after confirmation, because it's Phillips making the

contribution in the first instance that it wants to indemnify.

And so, while Mr. Frenchman may be able to speak to the debtor

it may be that some of the issues addressed by the stipulation

or changes in the plan language affect more than just the

debtor, and Phillips may need to be consulted, as well, so I -

THE COURT: Pause, please, Mr. Christian.

MR. CHRISTIAN: Sure.

THE COURT: Has Mr. Beeney or some attorney from

Phillips been excluded from the meet-and-confers?

MR. CHRISTIAN: I wouldn't say, Your Honor, that

Phillips has been excluded (indiscernible) they have been

invited, but they have not come.

THE COURT: I see.

MR. BEENEY: Your Honor, if I may, it's Garrard Beene

for Phillips.

THE COURT: Yes, go ahead.

MR. BEENEY: We are in touch more than daily with


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counsel for the debtor, and in fact, we have been advised every

step of the way on the proposals that the debtor is going to

make. We get a complete report of the insurers' position

(indiscernible). There is no delay that needs to be built int

the schedule because of needing approval and needing time to do

that. The debtor's counsel certainly knows where to find me

(indiscernible) in regular contact with my client and they're

right on top of it.

THE COURT: All right. Back to you, Mr. Christian.

Do you want to finish up any further observations you want to

make, please.

MR. CHRISTIAN: Thank you, Your Honor. Just by way o

response to your question, I would say we've not only invited,

but we would actually encourage Phillips' direct participation

I don't know one way or another, and I take Mr. Beeney at his

word, with respect to their level of contact with the debtor a

intermediary.

THE COURT: All right. Anybody else want to be heard

MR. FRANK: Your Honor, this is Joseph Frank; I

represent the creditors' committee.

I just want to encourage the Court to set an earlier

date, rather than a later date, because it may become clear

next Monday that there isn't going to be a deal, in which case

we want to set a confirmation hearing for a contested

confirmation hearing; or it may become clear that we need more


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time.

But I really do think it's important to keep the

pressure here. As I think Your Honor knows, I'm very much

desirous of getting this case confirmed sooner, rather than

later. And I think leaving us to two weeks, given that we're

going to meet by phone, so there isn't a great deal of

inconvenience or expense for the parties -- I can't speak as to

the Court -- I think a Monday date makes more sense than a

Friday day, and there is no harm if there isn't a whole lot to

report on Monday, Your Honor.

THE COURT: All right. Everybody had a chance to

speak their piece?

MR. RICE: Your Honor, this is Joe Rice on behalf of

the plaintiffs.

THE COURT: Pause, please, Mr. Rice. Tell me who you

claimant is and, more importantly, not his name, but his

attitude about it. Is this a tort claimant who voted against

the plan?

MR. RICE: This plaintiff did vote against the plan.

There are three separate claimants --

THE COURT: I need you to speak up, Mr. Rice.

MR. RICE: I'm sorry. There are three separate

claimants that have filed objections; we represent all three o

them. Their objections have been set out, but it deals with

provisions of the trust distribution process for the most part


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and in the voting procedures in one part. They have objected

to the application of -- I can go into such detail as Your

Honor wishes, but they have filed objections to the voting

process, they've filed objections to the process of the claims

or the way they're reviewed and the equality of that; they've

challenged it on constitutional and due process grounds and

individual review process.

They have challenged the block-out of non-related

cases that occurs in the plan. They have challenged the use o

a limited amount of data. It's (indiscernible) understanding

and position that trying to (indiscernible) a bankruptcy claim

that goes on for the next forty years (indiscernible) cases

that have been processed over the last three years is

inadequate to allow the Court to approve any permanent

bankruptcy (indiscernible); and, therefore, they rejected the

block-out provisions that are (indiscernible).

THE COURT: Okay. So I assume you're going to object

to confirmation.

MR. RICE: Yes.

THE COURT: All right. You understand that I'm not

going to rule on the merits of your objections today.

MR. RICE: Yes. I was just making (indiscernible) Mr

Frenchman (indiscernible) indicated that (indiscernible)

insurance issues got worked out, there would not be a contested

confirmation, and I wanted to bring to the Court's attention


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that, as of the current status, there would be a contested

confirmation on behalf of these claimants even if the insurance

got worked out. And there is not an insignificant amount of

discovery that needs to be done in contemplation of the

confirmation hearing.

THE COURT: Well, have you already served your

discovery demands?

MR. RICE: No, sir, we have not.

THE COURT: Why not?

MR. RICE: We were -- we filed our objections and we

understood that the Court was having a hearing on Thursday to

perhaps (indiscernible) everything that needed to get done.

THE COURT: Have you read my case management order,

Mr. Rice?

MR. RICE: Yes, sir, I have.

THE COURT: Then you know that you didn't need to fil

your objection to get your discovery underway, didn't you?

MR. RICE: If our objection -- yes, sir, we could hav

done it that way; that's what we understand. We were hoping t

narrow down -- there was a significant amount of information

exchanged before the filing (indiscernible). Once we filed ou

objections, we were hoping to be able to work out with the

debtor's counsel (indiscernible) agreement to make use of

(indiscernible) so that we wouldn't have to go through a full-

blown discovery process. (Indiscernible) that process


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(indiscernible).

THE COURT: Well, Mr. Rice, I'm expressing no view on

whether you get discovery or not or whether any of the

discovery you want is over-broad or entirely appropriate. But

what I am telling you is that, if whatever discovery you think

you want, the time to ask for that was about four weeks ago,

and you're way behind. And the time for getting your needs an

concerns done was quite awhile ago.

I am not saying today, absolutely, positively no

adjournments of anything. But what I am telling you is that,

with so many other clients similarly situated having supported

this plan, and with the principal issue on the table being the

needs and concerns of the insurers, I think you would be well

served to get your work done because you might be very

unrealistic in assuming that this case is going to be held up

in its entirety to meet your needs and concerns.

MR. RICE: Your Honor, we will -- I do want to bring

the Court's attention that one of our issues is that the Court

has been told that there was approximately 90,000 votes in

favor of the plan, but we've been led to believe that

approximately 45,000 of those people were people that had been

told they had no claim against THAN. So that's part of the

issue we're trying to get to. Because there was a significant

number of (indiscernible) votes, and we can establish that.

THE COURT: Well, I don't know if people want to


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respond to that now or not. That sounds like the kind of thin

that is probably better addressed in a more fulsome discussion

when that issue is on the table.

MR. BAE: Your Honor, this is John Bae on behalf of

the debtor.

THE COURT: Yes, Mr. Bae.

MR. BAE: Mr. Rice's representation is false. We wer

-- I'm actually glad that Mr. Rice spoke up because I was going

to ask the Court -- I understand -- while I understand that the

discussions with the insurance carriers are ongoing, the debto

would like to respond to the objections filed by Mr. Rice, as

well as the objections filed by -- well, filed by Owens

Illinois, which frankly raised very similar issues as those

raised by Volkswagen. And we question the standing of Owens

Illinois.

But we want to keep the process moving, Your Honor;

and frankly, we don't believe that Mr. Rice has raised any

legitimate issues that warrant discovery. And once we submit

our response to what Mr. Rice has filed, I think at that point

we can have a fulsome discussion on the merits of the

allegations in Mr. Rice's (indiscernible). And I think that's

a more orderly way to address this. And we, the debtor,

intends on -- with the Court's permission of course, the debto

intends on filing a response to the objections.

THE COURT: Well, okay. But we're not going to deal


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with it today.

MR. BAE: That's correct, Your Honor.

THE COURT: All right. Mr. Rice, all we can and

should deal with today is for me to reiterate the importance o

you getting to work to deal with any discovery that you

perceive to be necessary or appropriate, and I forgot what was

ordered, vis-a-vis objections to confirmation, but I assume

you're working on your objection to confirmation, as well.

When the matter is fully briefed, I'll decide the issues as the

papers reflect. It's that simple.

Now the open issue for which I had solicited anybody

else who wanted to be heard was whether all of folks who were

involved in the debtor-insurer dialogue had a chance to speak

their piece; that was when Mr. Rice spoke up. Is there anybod

else who wants to be heard before I deal with when we're going

to have a follow-up call?


THE COURT: All right. Hearing no response.

Mr. Frank, I understand your desire to keep things

moving forward, but I -- and I certainly don't think that

waiting a full, I guess it's more than ten days; it's almost

sixteen days -- or thirteen days, is excessive, so we're going

to have a follow-up call on this time, four o'clock eastern

time, on January 21, which is Wednesday -- excuse me, January

14 -- no, January 21 was right -- January 21, a Wednesday, nine


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days from today.

Now I gather you're going to have your dialogue on the

15th and the 16th; and while I find it surprising that the

insurers need two days after that talk to their clients, I'm

going to give it to you, mainly because I expect that if there

are any open issues after Friday, you're going to use the

Monday and Tuesday and three-quarters of the Wednesday to get

them resolved. So four o'clock on Wednesday, the 21st, folks.

Okay?

Now let's turn to the Volkswagen issues. I think I

heard Mr. Munitz say he wanted to speak on behalf of

Volkswagen, and I of course have briefs from Mr. Frank and Mr.

Esserman, and I think Mr. Bae said he wanted to be heard on

that, as well. So I'll hear from you, first, Mr. Munitz, and

make your remarks as you see fit, but when you do, I want you

to address the following questions and concerns that I have:

First, I reviewed your very thick exhibit package. I

looked to me like that complaint showed that your client

Volkswagen and THAN were named in the same lawsuit, but I

didn't see any evidence in that big package that your client

has actually asserted any cross-claim against THAN. Now I

don't know whether you're arguing that that's something that

doesn't need to be done, but it looked like it was a pretty big

hole in the record.

Likewise, your opponents asserted -- and I understand


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that the submissions were filed substantially

contemporaneously, so I guess there's a risk of ships passing

in the night -- that there was no evidence or even allegations

at this point that THAN had done any business with your client

Volkswagen. I didn't see any allegation in your papers that

your client had done business with THAN, aside from any proof

of that, and it struck me that the silence in that regard was

deafening.

I would assume, subject to your opponents' rights to

be heard, that if you had actually asserted a cross-claim

against THAN, you would have a claim, albeit contingent, and

would have 1109 status, but your opponents seems to be

suggesting to the contrary. I think we need to get our arms

around the facts and then we can get to the various points that

were made in your brief, which cause me some material concerns

Mr. Munitz, as to whether we should be holding up the case to

address these needs and concerns; and some material concerns in

my mind as to why discovery would be appropriate for them,

whether or not you have the 1109 status to be heard in

opposition to confirmation.

So let me hear from you first; and then, if there's

anybody else who has your view in life, I want to hear from him

or her next, and then I'll hear from Mr. Frank or Mr. Esserman

or Mr. Bae or anyone else who wants to be heard in opposition,

and I'll give you each a chance to reply and surreply.


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MR. MUNITZ: Your Honor, with your permission, I'd

like to defer to my partner Mr. Hartley, with respect to the

question posed regarding the status of the (indiscernible)

litigation.

THE COURT: Okay. That's Mr. Hartley, H-a-r-t-l-e-y,

the second name on the papers?

MR. MUNITZ: That's right.

MR. HARTLEY: Right.

THE COURT: Okay. Go ahead, Mr. Hartley.

MR. HARTLEY: Thank you, Judge.

I'm sorry if we were not clear enough, but, in fact,

the papers do demonstrate that there are sixteen pending cross

claims by Volkswagen America against THAN in certain underlying

cases. The way you come to this conclusion is (indiscernible)

two provides you with a list of various state courts, that we

were able to get done in a few days, in which there are cases

pending, in which both THAN and VWGOA are defendants. Then we

have provided you in Exhibits 3 and 4 with declarations and

case management orders, establishing the fact that in some of

these particular jurisdictions, cross-claims are automatically

deemed filed in these underlying cases.

So when you put the two together, the conclusion you

reach is that in Delaware there is an automatic cross-claim,

there are two pending cases involving both VWGOA and THAN, so

there are two cross-claims there.


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THE COURT: All right. Pause, please, Mr. Hartley.

To what extent do these orders take into account

whether or not the two parties have had any dealings with each

other?

MR. HARTLEY: Judge, they are not dependent on that,

nor is the existence of the cross-claim or contribution claim

dependent, under state law, on the existence of a prior

business relationship. So, essentially, they're offered you a

straw man there; that's not a prerequisite to a contribution

claim under at least the law in most states. I won't claim to

know all of them. But in Illinois, for example, where I've

grown up doing half asbestos cases and half commercial

litigation, there is no such requirement. Contribution claims

or an indemnity claim or (indiscernible) default does not

require a preexisting business relationship.

Now what we have shown you there, Judge, with the las

column in Exhibit 2, is that, in fact, there are many

codefendants in these cases which are (indiscernible) from

THAN, if we take us through what THAN said in their disclosure

statement as to who their customers were, and we of course take

that at its face value. So while we were going through the

complaints, we looked and found in many cases that, in fact,

some of the fiber customers are in those cases.

And what that means as a general rule, Judge, is that

the underlying tort victim has said to his lawyers or in


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interrogatories -- in answers to interrogatories, excuse me,

that he believes or she believes they were exposed to fibers

that came from those people who were customers of THAN. So

they are clearly squarely in the mix in the case, and the

claims, by our count we have proved up sixteen: Two in

Delaware, one in Rhode Island, thirteen in Illinois. We have

ongoing work to find more. And these are exactly the sorts of

proofs that were submitted in Federal-Mogul and deemed

satisfactory (indiscernible) not even questioning the standing

of VWGOA, Daimler-Chrysler, and other auto manufacturers.

So with respect to the facts, Judge, which is really

my side of the case, that's what I can say to you. On the

bankruptcy law, I of course defer to Mr. Munitz.

THE COURT: Okay. So are we back to you, Mr. Munitz.

MR. MUNITZ: Your Honor, I believe so.

Respectfully, Judge Gerber, if there are cross-claims

existing cross-claims, even though they may be contingent,

unliquidated, and disputed, we nevertheless fit within the

definition of "claim" contained in Section 1015 of the

Bankruptcy Code. As --

THE COURT: Pause, please, Mr. Munitz.

Respectfully or not, I don't need to be told that. I

understood that, and I said that was part of the assumptions

under which I was asking the question. But what I needed to

know from you -- and you passed me off to Mr. Hartley -- was


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the extent to which any such claims had been asserted against

THAN.

The next question we have is: Assuming that you're

going to have 1109 status because you do have claims, what you

need discovery for.

MR. MUNITZ: Your Honor, we may be able to latch on t

the discovery being conducted by others. But if we have

standing -- and one of the issues, you know, could range from

any of the confirmation standards -- we are not sure whether a

record has been developed with respect to those matters. We

appreciate the time constraints that may be imposed upon us.

But among the issues that we would like to get into is,

according to the pleading that -- the memorandum that they

filed, the future claims representative contends that he is

Volkswagen's representative. We would submit, Your Honor, tha

we are not a future demand-holder of Volkswagen, whatever else

may happen to it, will not contract an asbestosis case, and

that we are a creditor.

But most importantly, we don't understand how the

future claims representative can represent both the plaintiff

in that action, the alleged victim, and Volkswagen, who is one

of the defendants in that action, or whatever the fallout from

that action may be.

There may be other issues in this case, Your Honor.

was introduced to the matter the last week in December. But


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among other questions, is a 524(g) injunction appropriate in

the facts of this case? You know, is THAN, which is not -- yo

know, which might not be eligible for a discharge, entitled to

a 524(g) injunction? I do not know where the, you know, facts

on that matter stand. We realize the need to get to those

immediately, you know, but absent a ruling as to standing, we

have no opportunity to do so.

THE COURT: All right. Anybody else who's allied with

Mr. Munitz?

MR. MUNITZ: Your Honor, I have two other comments.

I would invite your attention to Paragraph 3 of the

committee's response to our position, and there is a sentence

that appears in that paragraph, which I quote:

"It is true that recovery by asbestos claimants

against movants may give rise to claims; indeed, very

substantial claims, against the debtors in the

future."

Your Honor, I think that is an admission that we do

hold present contribution or reimbursement-type claims; and,

therefore, even though our claims are contingent, unliquidated

and disputed, it gives us the status of a creditor, and when we

follow through with the definitions of being a creditor, we

have the right to oppose confirmation.

Similarly, with respect to the future claims

representative's opposition, there is a footnote on Page 8 that


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refers to Section 1109(b), it's a quote. The word "creditor"

appears in there, but there is no substance given to the fact

that the term appears. They would (indiscernible) --

THE COURT: Pause, please, Mr. Munitz. Pause, please

Where were you referring in the future claims

representative's submission?

MR. MUNITZ: There is, Your Honor, on Page 8, Footnot

9, there's an excerpt from the Section -- it's a quotation from

Section 1109(b).

THE COURT: All right. I found it now. And your

point again, please?

MR. MUNITZ: Your Honor, they recognize that 1109(b),

you know, would be applicable to the matter. They refuse to

acknowledge that we're a creditor (indiscernible) in there

would pertain to someone in Volkswagen's position.

THE COURT: Uh-huh.

MR. MUNITZ: The holder of, you know, albeit a

contingent future and disputed claim.

THE COURT: Okay. Anything else, Mr. Munitz?

MR. MUNITZ: No, Your Honor, unless you have further

questions.

THE COURT: No. Thank you.

All right. Is there anybody else who wants to argue

on Volkswagen's side before I give others a chance to be heard

MS. MAYER: Your Honor, this is Katherine Mayer from


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McCarter & English; I represent Owens Illinois in this matter.

I'm not chiming in to argue because during the call today is

the first I've heard that the debtors would plan on contesting

the standing of Owens Illinois in this case. We have

participated in numerous (indiscernible) bankruptcies, and

this is the first time our standing would be challenged. But

would respectfully request the opportunity to respond when

papers are filed by the debtors with respect to the standing

issue.

THE COURT: All right. Let's add that to the list of

things we've got to talk about.

All right. Mr. Frank, do you want to be heard first?

MR. FRANK: Thank you, Your Honor. Joseph Frank on

behalf of the committee.

Your Honor, it's clear you've read our papers, and I

don't want to repeat or belabor. I do want to respond to

several things Mr. Munitz said, and then make some general

comments.

The quotation Mr. Munitz read from the third paragraph

of our pleading was a quotation from a ruling by the Third

Circuit in the Federal-Mogul case, and it's a case that should

have been cited by Volkswagen, but wasn't, and it's a case that

demonstrates among other things that their reliance on

157(b)(5) to try and bootstrap themselves into this bankruptcy

case is -- you know, while not against the law in the Second


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Circuit, is certainly against the law in the Third Circuit, and

just has no basis. It's a case they should have cited. And t

try and quote it against us now is kind of silly, Your Honor.

You know, getting back to the other points, the notion

that a deemed cross-claim is a cross-claim remains to be seen,

in our opinion. All they've shown has been that some standing

orders in state courts deem a cross-claim between the various

codefendants, and that's not to say that they've ever been a

cross-claim (sic).

In addition, Your Honor, to compare the fact that

standing wasn't contested in Federal-Mogul and is being

contested here is to admit the point that the contribution

rights between codefendants bears a relationship to their

business relationship, Federal-Mogul was a case involving brake

manufacturers, where car manufacturers came into the

bankruptcy, and this is a case involving a fiber distributor

who, as far as I can tell, didn't distribute fiber to brake

manufacturers, so ...

THE COURT: Pause, please, Mr. Frank.

Did you say "did" or "didn't"? You broke up.

MR. FRANK: Did not, Your Honor.

So to try and draw a parallel between Federal-Mogul

doesn't really hold any water. And in addition, to draw a

parallel between Federal-Mogul and this case, where this Court

has adopted, in Quigley, standing position, doesn't really get


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you anywhere. So Federal-Mogul is a (indiscernible) utility,

particularly a bankruptcy court order on a non-contested

matter; or, it is, I think, the Third Circuit opinion basically

telling the auto manufacturers to stop the mischief and let the

state court cases go forward against them, has a great deal of

bearing on this case.

Beyond that, Your Honor, based on the ruling with

respect to the insurers' standing, it's one thing to say you're

a creditor. Even if we take that as a given, that they're a

creditor because of a contingent contribution claim that

apparently arises from a deemed cross-claim, being a creditor

in this case, the Court has already ruled, is not called

"standing," and it's certainly not equal to broad standing.

You still have to demonstrate where your ox is being gored.

And Volkswagen really hasn't made that demonstration.

They've laid out a few rote points (sic); they say the trust

terms would block codefendants from invoking state statutes or

common law rules, but they haven't really demonstrated how that

would occur, and they haven't really demonstrated how that

would occur in a way that (indiscernible) the Bankruptcy Code.

They said that the trust distribution procedures in

the confirmed plan would block transparency, but I don't really

think that's the case. They would have the same rights to

information that they have right now, which is to subpoena

information from people who are suing them, and subpoenaing


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information from third parties. When the information is

properly subpoenaed, the information, I'd have to presume,

would be produced by, you know, law-abiding third parties.

The other issue they raise is the allocation among

codefendants. And you know, everything they say about that is

just the nature of bankruptcy and the nature of 524(g). And

I'm not going to lecture anyone on federalism, and I'm not

going to lecture them on what creates standing; in other words

something the plan doesn't contemplate, versus what the

Bankruptcy Code does. That doesn't really create standing,

Your Honor.

So those are really my only points, which is -- and t

sum it up, which is that, to the extent -- even if the Court i

to buy it as a deemed cross-claim creating a creditor

relationship with it in this bankruptcy, based on Your Honor's

adoption of the Quigley standing position, we haven't seen

anything to create standing here. And I think Volkswagen need

to go back, read the plan carefully, rather than continuing to

say they haven't had time to read the plan carefully, and tell

us where their ox is being gored, or they just need to go back

and defend the state court claims.

THE COURT: All right. Who wants to be heard next?

MR. BAE: Your Honor, John Bae on behalf of the

debtor.

THE COURT: Uh-huh.


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MR. BAE: Your Honor, what Volkswagen is saying is

that, because certain state courts adopted a procedural

mechanism to avoid papers, needless papers being filed, so that

every defendant -- every codefendant is deemed to have asserted

a cross-claim against every other defendant does not create a

substantive claim. It is purely a procedural mechanism the

courts have adopted to manage their docket; that's all that is

Now for Volkswagen to come in here now and claim that

based on that procedural mechanism, that they have a

substantive cross-claim against THAN is ridiculous. Under tha

logic, 1,500 defendants, who are constantly named in these

asbestos actions, even though they have no business being in

that action, every single one of those codefendants would have

the ability to come into a bankruptcy case and be disruptive,

and there's no law to support that.

More importantly, Your Honor, we've asked Volkswagen

countless time as to what is the factual basis for which you

believe you have a cross-claim against THAN. We have yet to

get a response that is based on facts. It's ironic that Mr.

Munitz refers to facts, that he be focused on facts, but there

are no facts that they've cited.

The only fact that they've cited is that we were

unfortunately named as a codefendant in (indiscernible) action

just because the plaintiffs decided to name a handful of

companies, whether or not there was any connection is


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disruptive here, so that they can solve a greater problem they

have, which is in the state court litigation, the asbestos

litigation system.

And unfortunately or fortunately, this bankruptcy is

not the right place to try to solve the world's problems.

We're here to solve this debtor's problems with the claims that

are being asserted against it. That's all we're trying to do.

We're not trying to change the world. What we want to do is

pursue our rights under the Bankruptcy Code and the law and get

the best outcome that we can get.

Volkswagen has no place in this case. And just

because they so -- they claim that they have standing here,

just because they say they have an interest, doesn't make them

have -- make them a creditor, whether it's contingent or not.

They do not have a claim. And until they can present to the

Court how or why they have a legitimate and enforceable claim

- it's a not a question of whether or not a claim is

automatically asserted; that's superficial, that's completely

irrelevant. What is relevant is, substantively, what claim do

they have, and they can't articulate a claim.

So, Your Honor, I would respectfully submit that they

do not have standing here. The mere fact that some state cour

adopted a case management order that permits these cross-claim

to be asserted automatically doesn't make them a creditor; it

is purely a procedural mechanism, it was never intended to


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create a substantive right. Thank you, Your Honor.


MR. ESSERMAN: Your Honor, Sandy Esserman. May I be

heard?

THE COURT: Yes, Mr. Esserman.

MR. ESSERMAN: I would like to reiterate what Mr. Bae

said. If, in fact, Volkswagen had a claim, it would be very

easy to say, we bought THAN fiber on X date, we incorporated it

into our product, we're getting sued for THAN's liability, and

we paid THAN's liability. Nowhere has that ever been asserted

or alleged by Volkswagen.

In fact, Volkswagen has never, ever sued THAN. And

when I say "sued THAN," I'm now talking about the operation of

law and procedural mechanism of filing a complaint, a

counterclaim in which they allege facts as to why THAN is

somehow liable. And they've really pussyfooted around trying

to do that. And despite -- if a plaintiff has a case against

THAN, they've got to allege exposure damages, et cetera. Well

that is not being done here by Volkswagen. They're not

alleging exposure damages or telling you that they've paid

THAN's share because they can't, they just can't. They're

sorting of coming in here and hoping to get as much generalized

standing (indiscernible) against 524(g) in general.

I'd like to respond to this business about the FCR as

Volkswagen's representative. That's just pure silliness. The


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statutory obligation of the FCR is set forth in the statute;

the FCR has complied with that. Volkswagen -- the FCR doesn't

represent Volkswagen; Volkswagen represents Volkswagen. Under

the statute, if a claim comes into being, that person

represents his own claim.

What the duty of the FCR is, is to make sure that

there's a process and mechanism to treat future claims and

current claims substantially similar, and that the process is

fair, and that future claims would have their fair share of the

assets in the pie. It's not to represent Volkswagen ever, it'

not to represent any claimant ever. It's sort of almost in th

nature of a guardian ad litem for a class, which -- who doesn't

represent anyone individually. That's very, very clear from

the statute.

If, in fact, there is any kind of standing here --

which we don't think that they've shown factually -- and

frankly is a very simple and easy to show standing if they had

any facts: THAN sold me product, THAN damaged me, I sued THAN

I've made a demand on THAN, THAN owes me money, THAN owes me

this amount of money and this is how I calculate it in this

lawsuit; they have not done any of that, nor can they. Nor ca

they.

This is an effort by a defendant who's decided to make

a statement in a bankruptcy; they've chosen, unfortunately or

fortunately, your bankruptcy, Judge Gerber, to make that


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statement. And they're going to try and come in here and wrea

whatever havoc that they can.

Next, I'd like to talk about Federal-Mogul because

Volkswagen wants Federal-Mogul to be taken somehow to give them

standing because cross-claimants were recognized as having

standing. You know what? Cross-claimants can have standing.

in Federal-Mogul, cross-claimants -- they weren't just cross-

claimants who had standing; they were cross-claimants with

judgments against the debtor that had standing. They had

actual judgments, not just some assertion -- some general

assertion through some case management order of the standing

issue; they had judgments. Now of course, someone with a

judgment against a debtor, you know, no one is going to

challenge standing, and that's what happened in the Federal-

Mogul case.

So I think what Volkswagen is trying to do here is

they're trying to create as wide a swath as they can with

whatever political agenda they've got to disrupt a potential

(indiscernible), make havoc on (indiscernible) information they

can about the process (indiscernible) you know, I guess we have

to admire them for trying. But on the other hand, standing is

(indiscernible) it's constitutional, it's prudential, and it's

very -- and it's limited to issues in which an ox is being

gored. And frankly, these guys have now shown how their ox ha

been gored. When they do that, maybe they can have standing


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for limited purposes for showing how their ox is being gored.

These generalized sort of statements that they're making just

don't cut it. Thank you.

THE COURT: All right. Anybody else who agrees with

Mr. Frank and Mr. Bae and Mr. Esserman before I give it back to

Mr. Munitz to give him a chance to reply?


THE COURT: Hearing none, Mr. Munitz, anything you

want to say before I --

MR. MUNITZ: Your Honor, may I first defer to Mr.

Hartley again?

MR. HARTLEY: Judge, to -- this is Kirk Hartley, to

address the points that have been raised.

First, they have not cited you the case for the

proposition that there needs to be a preexisting business

relationship in order to have a contribution or other cross-

claim. If this were really so simply, I'm sure they would

provide that to you. It is not so simple.

THE COURT: Hang on a second. Are you telling me, Mr

Hartley, that if you have, let's say for sake of example, fifty

defendants, and certain defendants are held liable and other

defendants aren't held liable, that anybody who pays has claim

against the ones who weren't held liable?

MR. HARTLEY: Well, Judge, the way the trials are

conducted varies state by state. But as a general rule, what


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you have happening in one of these underlying trials is a

debate about whether the exposure to any particular defendant'

product is sufficient to be causative of the disease. And in

given case, for example, we might have a plaintiff who says, I

am sick with mesothelioma or asbestosis as a result of having

worked with products produced by Bondex or Kelly Moore, these

various drywall and other kinds of products, and that one day,

one time, I changed a brake lining from a Volkswagen car. In

that case, my position as a defense lawyer for VW would be that

any fault or any harm was caused by the products that came from

the companies using the THAN fiber, and not the one time that

he changed one brake line. Depending on the state, that might

be framed as a claim for contribution or a portion of default;

it might be viewed as a proximate cause issue. These issues

vary state by state. But it is, in fact, the way these cases

are tried.

And to the point they were saying this has all been

deemed, well, they were deemed because we -- when I was a young

lawyer, we used to spend our lives generating these things, and

actually filing them in the clerks' offices that held

(indiscernible) because they were being asserted. So they did

exist at one time, and then we stopped doing it because it was

just too much paper inundating things. This is not -- they go

into CMOs for a reason, and that was because these were big

processes, and they still are. They are a very important


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calculus, Judge, of what's going on in the dynamic as you run

up to trial.

THE COURT: Pause, please, Mr. Hartley.

MR. HARTLEY: Sure.

THE COURT: Because I think you need to slice and dic

it. You have to help me, because my specialty is in bankruptc

and general civil litigation, and I didn't do, even as a

lawyer, asbestos litigation.

MR. HARTLEY: Okay.

THE COURT: When you're talking about contributory

fault or something like that, or saying that it's somebody

else's fault, and therefore the judgment against you should be

reduced, I understand that. If you're saying something

analogous to contributory negligence or something like that, so

that you're not liable for a hundred percent of the damages, I

understand that.

But if you're talking about a claim against the

debtor, a cross-claim against the debtor, I have difficulty as

a person who's been a lawyer for almost forty years

understanding how THAN could be liable on a cross-claim unless

THAN had some dealings with the underlying circumstance upon

which your client was held liable. Can you help me in that?

MR. HARTLEY: I think I can, Judge. And I appreciate

the framing of the question. And where these kinds of claims

come from, among other things, is if in any (indiscernible)


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there is a contribution between joint tort feasors. And

essentially, Judge, these have grown into place over the last

ten or fifteen years because, when we started out with this

tort, it was all -- everyone was liable for everything. And

over the years, it has become, according to some legislatures,

more important to apportion fault between the relative

different tort feasors.

And there are, for example, specialized rules in some

states, some of which come under the heading of tort reform,

that say, if this particular defendant is deemed by the jury to

be less than X percent at fault here, then they are liable only

for a limited subset of the damages; if the defendant's

relative responsibility is deemed to be more than X percent,

then there is a more expansive liability (indiscernible).

So where you are distinctively looking for contract

relationships for the basis of these claims, in fact, by the

legislative acts, that has been abolished, and all of this is

balled up in the (indiscernible) state by state consistent, and

frankly, rather it's someplace hard to follow, rules about

contribution between joint tort feasors or alleged joint tort

feasors.

And these are, you know, something that we haven't

even touched on today here, but that's cited in the papers --

or our papers is the settlement credit issue. In an underlyin

case, having a credit for a payment that's made by another


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defendant, which in this case would be THAN, would reduce my

potential liability if VWGOA goes to trial. And we gave you a

example of that, very recent, from Illinois, where the way the

whole trial and settlements played out, one defendant was

essentially freed from paying damages because they were getting

credit for payments made by others to resolve the case.

That's why, for something like VWGOA, Owens Illinois,

or any of the other codefendants, who are starting to pay

attention to these very important facts, an entity such as THAN

or the (indiscernible) entities that are not in bankruptcy, but

(indiscernible) injunction, we want them intra (sic) on the

verdict sheet, which in some states they have to be in the

trial to be on the verdict sheet, so that we can apportion

fault here.

THE COURT: Then, Mr. Hartley, how could any asbestos

case ever be confirmed within the statutory scheme that Section

524 contemplates?

MR. HARTLEY: Well, Judge, there are a lot of things

in asbestos litigation that are being done now and haven't been

done before for a variety of reasons. In my personal

estimation, many codefendants should have been (indiscernible)

long ago for a wide variety of reasons, they have chosen not

to. But there are some real issues here, and they are really

coming to the fore these days, Judge, because we truly are

moving into a world in which there is a (indiscernible) tort


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system and an outside trust system, if you will. And very

clearly, the goal of the plaintiffs, who are trying to serve

their clients, to go mine the tort system; and then, after they

are done with that, go mine the trust system, thereby depriving

my client, Owens Illinois, and everybody else of offsets or

credits for the amounts they are taking out of the bankruptcy

system.

And I agree with you, this has not been

(indiscernible) of any challenge before to my knowledge, but

they are starting to pop up in Thorpe (phonetic), in Sarco

(phonetic), and in the other cases because the different

remaining defendants are forced to start paying attention

because of losing the economic benefit of the payments and the

departure of these other entities. And it's going to be an

issue, I think, Judge, because we're seeing more and more about

it.

And then to switch to this issue of the FCR, this is

significant issue, Judge. As we read the FCR's papers, they

are suggesting that the professor (sic) is able to represent

both the interests of the personal injury claimant and

codefendants, both of whom want money out of the debtor. I

think under AmCam, Ortiz, he cannot do that because it is

simply an inherently conflicted position. The tort claimants

want more money, Mr. Rice wants more money; Volkswagen and

others want money or credits. I don't see how Mr. Issacharoff


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can handle both roles.

This is, to my knowledge, Judge -- and I will not

claim to have been in every asbestos bankruptcy, obviously

federal law will (indiscernible). This is, to my knowledge,

the first time there really has been precedent on the issue of

the scope of the representation of the futures representative.

And I think the position you are hearing is fairly remarkable,

in that I do think that Mr. Issacharoff's role is leaving him

purporting to protect the interests of Volkswagen in a future,

as yet unknown case, in which we would want to make a cross-

claim. I don't see how he can do that under the case law.

That, Your Honor, is one of the things that I do think needs to

be the subject of some very focused discovery, so we can try

and leave you with a record of exactly what he has done or not

done to protect the interests of entities in the position of VW

or OI.

I think what we're going to find is that he did not

take any steps to determine (indiscernible) to determine

(indiscernible), and that in fact it's simply a role that is

not properly (indiscernible), and instead, his role is to

represent the personal injury (indiscernible). But that's

going to be here, Judge, an issue of first impression.

Have I helped at all, Judge, on your question?

THE COURT: You've helped clarify my thinking on the

matter, yes. All right.


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MR. HARTLEY: Did I address (indiscernible.)

MR. ESSERMAN: May I respond briefly, please?

THE COURT: Who is that, Mr. Esserman?

MR. ESSERMAN: Yes.

MR. HARTLEY: Yes, Judge, can I make -- this is

Hartley -- can I make one more point (indiscernible).

THE COURT: Yes. First Mr. Hartley, then Mr.

Esserman.

MR. HARTLEY: Judge, if -- I've read your case

management order and understand the process. The assertions

we've made are supposed to be taken as correct. If people wan

to contravene them, then we're supposed to have a formal

evidentiary hearing.

I believe, and I'm confident we can bring you

underlying tort lawyers to testify in more detail if you need

further education or want further education about how the

underlying tort cases work. And I think to say at this

juncture we do not have standing in light of sixteen

indisputable cross-claims would be a mistake.

I also want to address the transparency issue that wa

alluded to when our opponents were saying we're not harmed. I

a present claim, Judge, the plaintiff is sitting in court, in

deposition, and saying, I was exposed the products of X, Y, and

Z, and all of that is on the table during his deposition and

during trial, so we are able to point to that evidence as we


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are trying to make our trial proofs.

Under this system, they are creating a deferral

process under which the plaintiff in my tort trial will not be

required to have made his claim against THAN, and will be

depriving him evidence. If the claims is --

THE COURT: Pause, please, Mr. Hartley.

Are you telling me that you're not going to have the

ability to depose the plaintiff in that tort litigation?

MR. HARTLEY: We will have the ability, Judge, but

that is not -- in a normal case, we will have access to the

papers and the product ID, which has been identified by

plaintiff, the physical process, the answers to the

interrogatories (indiscernible) deposition. The way this is

being set up, the claim may not even be on file at the time,

and I may not have access to the information that was

submitted.

There have been some significant controversies

already, Judge, in which the claimant, the tort claimant was

found after the fact to have submitted a claim to a bankruptcy

trust, and in deposition he has denied doing so. But the way

this is all being structured, I'm not going to have access to

that information in the real important time, which is when

these cases are being discovered for trial.

So the transparency is a major issue for all of the

codefendants. We need access to claims as they are being


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filed; and when payments are being made, that too needs to be

known, so that we're obtaining appropriate (indiscernible).


MR. VALENZA: Your Honor, this is Dennis Valenza. I

have a comment to make when Mr. Esserman is finished.

THE COURT: All right. Are you --

MR. ESSERMAN: Your Honor?

THE COURT: Wait, just a second. Did I hear

"Valenza"? I don't --

MR. VALENZA: Yes, Your Honor. I'm the special

counsel for THAN in the litigation, so I've been actively

engaged in the (indiscernible).

THE COURT: All right. Just a minute, Mr. Valenza, I

don't see you on my log here.

MR. VALENZA: Oh --

THE COURT: Oh, yes, now I do. All right. All right

You're up after Mr. Esserman. But Mr. Esserman, I promised yo

a chance to respond.

MR. ESSERMAN: Okay. This has been very productive

and (indiscernible) because, finally, after all the obfuscation

of VW has given this Court, we finally hear from VW exactly

what this is all about, and it has nothing to do with THAN, it

has nothing to do with THAN exposure, it has nothing to do with

THAN liability; it has to do with their concern that they're

one of fifty defendants, and that there's going to be some


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trust claim filed, there are going to be some other claims

filed in the court system that they're getting sued, and

they're not -- their concern is they're somehow not going to be

able to discover exactly what exposures or what other claims

that particular plaintiff had against others, so they can

attempt to get a judgment reduction or some other benefit or

credit.

And you know what? This bankruptcy is not here to

solve that problem. To the extent that they've got a problem

with a plaintiff and they want to find out what the plaintiff

has received from other places, it's very simple. The courts

allow subpoenas. He can subpoena -- he can subpoena the

plaintiff, he can take the plaintiff's deposition, he can do

all sorts of things to find out exactly from the plaintiff

exactly what the liability of Volkswagen is, to the extent he'

allowed -- and that's another issue, that's a state court

issue, to get into these other issues. He may or may not do

so, depending on the state court. But this is not a forum to

try and fix Volkswagen's codefendant problems that they're

somehow generally concerned about; that they're concerned that

they're either overpaying on a case, they're not getting

credit, they're not doing whatever, none of which has anything

to do with THAN liability. It has to do with the general tort

system, a generalized problem that they say.

And I think -- you know, I commend Volkswagen for at


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least finally getting it out on the table exactly what they're

wanting and exactly what this is all about. This isn't about

trying to find a case that they can't find, where they've got

(indiscernible) exposure. This is about a generalized

complaint about the legal system in general and about 524(g) in

general, and how that operates. So to that extent, this has

been very beneficial. Thank you.

THE COURT: All right. Mr. Valenza.

MR. VALENZA: Yes, Your Honor. And to -- just a

couple of points, and following up on what Mr. Esserman just

said, you know, the codefendants in the litigation have

mechanisms to do discovery against the plaintiff, and they can

use subpoena power, and in fact that's what's done in the

litigation. The various trusts, bankruptcy trusts, are

routinely subpoenaed to get the information with respect to

payments in order to get credit information.

What is important and what Mr. Hartley said is that

some of the plaintiffs can mislead and, in fact, perjure

themselves in the process, and not give information to the

plaintiff about THAN's potential exposure in a case. But

rarely, if ever -- and I can think of no occasion, Your Honor

- was THAN sued because of a direct exposure to asbestos

supplied by (indiscernible); to the contrary, it was always the

case that another codefendant is sued, along with THAN, for a

product that that codefendant manufactured using asbestos


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supplied by THAN.

So there is in the litigation today those individual

companies with which THAN had a contractual relationship, so

that Volkswagen can pursue whether or not there is an

appropriate contribution for an appropriate level of fault,

because the codefendant is there in the courtroom that made the

product.

So I hope I haven't confused the issue, but they're

basically making a statement that, because THAN is not

available in the litigation, that there's no way that they can

get information, and that's just not correct.

MR. MUNITZ: Your Honor, this is Mr. Munitz.

Our memorandum cited two bases for our standing in the

matter: One was that, as a matter of state law or orders

entered in state court proceedings, we are deemed a cross-

claimant and thereby become a creditor.

We also refer to 28 U.S.C. 157(b)(5), and perhaps if

got an answer, it would probably go away. Assuming the THAN

plan were to be confirmed, would that preclude Volkswagen's

right to ask that a particular pending lawsuit be tried

pursuant to the provisions of that section or remanded by the

District Court to the state court for trial, so that a state

court allocation provision could be had in the course of that

trial? In other words, if THAN and Volkswagen and three other

people are defendants in a particular action, is there anything


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in the THAN plan, such as a 524(g) injunction, that would

prevent Volkswagen from asking that the liability be determined

under 157(b)(5)?

THE COURT: Now are you talking about the injured

asbestos victim's ability to get his damages from THAN, or are

you saying that you have -- that 157(b)(5) applies to your

claim for contribution, as well?

MR. MUNITZ: Your Honor, I looked at the very languag

of the section, and I do not see anywhere where the right to

request that release is limited to the plaintiffs, to the tort

victim. So I should think, especially in view of recent

developments with respect to allocation statutes, that a

defendant would have the right to ask for invocation of that

section.

MR. BAE: Your Honor, this is John Bae. May I be

heard?

THE COURT: Yes.

MR. BAE: I'm a little confused by Volkswagen's

reference to 157(b)(5). 157(b)(5) does not provide a basis fo

a codefendant to bring back and to assert a claim against a

reorganized debtor or a trust that has been established by a -

MR. MUNITZ: No. Your Honor, this is not

(indiscernible) --

THE COURT: Wait. Gentlemen -- Mr. Munitz, we do not

interrupt in my courtroom.


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MR. MUNITZ: I apologize, Your Honor.

MR. BAE: Your Honor, to continue --

THE COURT: I lost the train of thought, Mr. Bae.

You're going to have to go back over it again, please.

MR. BAE: Yes, Your Honor.

Section 157(b)(5) is a provision under the statute

that provides jurisdiction to the district court in which a

bankruptcy case is pending to address and resolve personal

injury and wrongful death actions. It is not -- it is purely

jurisdictional mechanism to be sure that, if there is a

personal injury action, that that issue is addressed by the

District Court, not by the Bankruptcy Court in the claims

resolution process. That's what 157(b)(5) is intended to do.

Hence, in the Dow Corning bankruptcy case, Your Honor

the issue was raised as to whether claims that are related to

the bankruptcy could be transferred to the District Court where

the bankruptcy case was pending because the wrongful death and

personal injury claims should be resolved by the District

Court, and not by the Bankruptcy Court. That is wholly

different than the issue that is being raised by Volkswagen.

What Volkswagen is raising is it is saying that,

because it has been sued with the debtor in a pending asbestos

action, that somehow its rights are being compromised in its

defense of the state court litigation. And it is now asking

this Court to fix that problem that they have in the state


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court system.

I don't believe that that creates standing. What tha

does is it creates -- it's an inevitable problem, I suppose, in

any litigation where there are multiple defendants, and

individual defendants have -- are seeking relief under the

Bankruptcy Code, and they are no longer present in the pending

litigation. Whether it's fortunate or unfortunate, that is th

reality of life. Companies have a right to seek relief under

the Bankruptcy Code, and they can pursue those rights.

I think what Volkswagen is trying to do here is to sa

that THAN and its creditors, who have legitimate claims against

the debtor, are not entitled to the protections of the

Bankruptcy Code because they don't like the impact of the

relief that this Court may grant in any pending state court

action, and that's not what this should be about.


MR. HARTLEY: Judge, this is Kirk Hartley. May I jus

follow-up on Mr. Valenza's (indiscernible).

THE COURT: Yes.

MR. HARTLEY: The reality is that, of some of those

THAN fiber customers that he identified, several of them are

now in bankruptcy; and so, therefore, it is very important for

my client to be able to reach the fiber supplier which sold

them the fiber. And just going off the list in their plan

disclosure statement, and going from memory, which could be


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faulty, they list the following entities as customers, that I

believe are now bankrupt: (Indiscernible), Kaiser Gypsum, W.R

Grace, and United States Gypsum. So it is very important for

my client to be able to go behind them and reach back to that

fiber supplier, which is THAN, which is why I want to be able

to bring a claim. That's all I wanted to follow up on.

THE COURT: All right. Have I now heard from

everybody?


THE COURT: All right. I am going to be leaving the

bench. Stand by, keep your telephone lines open, and I'll be

back with a ruling as soon as practical.

(Recess taken at 5:22 p.m.)

(Proceedings resume at 6:50 p.m.)

THE COURT: All right. This is Judge Gerber. I

apologize for keeping you all waiting.

Ladies and gentlemen, I'm ruling that Volkswagen

hasn't satisfied me that it has the requisite standing, and

most assuredly that it hasn't satisfied me that it needs any

discovery or any accommodation for its stated desires in the

scheduling for this case. The following is a summary of the

bases for this decision:

First, while Volkswagen has given me evidence that

Volkswagen and THAN are named as defendants in a number of

lawsuits, it hasn't given me any evidence of Volkswagen having


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Court Decision 5

actually asserted any cross-claims against THAN, other than by

the automatic operation of case management orders that deem

cross-claims to have been filed.

The fact that parties are named as codefendants, of

course, doesn't mean by i

Documents

Thompson-Hayward January 12. 2009 Hearing Transcript