Opinion ID: 714797
Heading Depth: 2
Heading Rank: 1

Heading: The Settlement Agreement and the Trust Distribution Process

Text: 8 The Settlement Agreement provides that the rights and duties of the Trust and all class members, except as specified, are to be governed by an annexed document entitled Trust Distribution Process (TDP). The TDP sets forth the procedures for processing and evaluating claims against the Trust on a first-in-first-out basis with the intention of paying all claimants over time as equivalent a share as possible of their claims' values. (TDP at 1.) Toward this goal, the TDP designates seven asbestos-related disease categories and assigns a value to claims brought against the Trust for each of those categories of illness. Once a liquidated value is assigned to a claim, the claimant is entitled to receive a pro rata share of its value based on a percentage set by the Trust in consultation with various advisers. The initial share was set at 10% of the claims' value. The Trust is to reevaluate its assets and expected liabilities at least every three years to determine whether the pro rata share should be adjusted. A decrease in share is not to affect past payments; but if the share is increased, the Trust must equalize payments made to claimants who previously received a lower pro rata share of the value of their claims. 9 The TDP preserves the rights of claimants to obtain individual assessments of the value of their claims. Any unresolved dispute about the value of a claim is subject to arbitration, and if the dispute is not resolved by the arbitrator, the claimant may pursue a tort suit against the Trust. However, the TDP provides limitations as to the amounts and timing of payments by the Trust pursuant to judgments recovered in such suits. The bankruptcy court's original injunction against present and future litigation by claimants against Manville itself remains intact, and all Trust Beneficiaries are allowed to pursue their claims against the Trust only as provided in the TDP. 10 The TDP provides set-off and contribution rules governing codefendant claims against the Trust. The Trust is to be treated in litigation as a legally responsible tortfeasor without the introduction of additional proof; it is not to be treated as a bankrupt entity unless formal bankruptcy proceedings are commenced by or against the Trust and applicable law permits the treatment of the Trust as a bankrupt. Codefendants retain a right to partial reimbursement from the Trust through set-off or contribution in certain circumstances. In general, the TDP refers to local law for the calculation of the set-off, recognizing different rules in three categories of states: pro tanto states, in which the judgment against nonsettling defendants is reduced by the amount paid or agreed to be paid by a released party; pro rata states, in which the total liability is divided equally among all defendants held to be legally responsible tortfeasors, and the judgment is reduced by a released party's pro rata share of liability; and apportionment states, in which liability is apportioned by the factfinder among those found to be tortfeasors, and the amount of the judgment is to be reduced with reference to the apportioned share of a released or absent tortfeasor. See TDP § H.3. 11 With respect to suits brought in pro rata and pro tanto states, the TDP alters state set-off rules by indemnifying the Trust against contribution claims arising from judgments obtained by health claimants, if a set-off credit is awarded by the trial court in accordance with the TDP and local law. The TDP also permits a codefendant to elect to obtain a set-off according to state rules even where the claimant has not settled with the Trust. Alternatively, a codefendant may relinquish its right to a set-off credit and pay the full judgment, thereby preserving its right to pursue a contribution claim against the Trust. 12 With respect to suits in apportionment states, the TDP modifies the set-off rules by permitting a plaintiff to agree not to pursue his or her claim against the Trust in order to seek full compensation from the Trust's codefendants. TDP § H.3(d)(ii)(B). If a codefendant pays the entire resulting judgment or enters into a postverdict or postjudgment settlement with the claimant, that codefendant retains the right, by means of a contribution claim, to recover from the Trust a portion of the payment that is attributable to the Trust's liability. 13 The Settlement Agreement also required the Trust to establish a separate $10 million fund for the MacArthur Subclass (MacArthur Fund), in exchange for a release by members of that subclass of claims against Manville or the Trust. The purpose of this fund is to reimburse MacArthur Subclass members for legal fees incurred (a) in litigation against its current or former insurers, or (b) in defense of lawsuits or settlements of claims brought against it for personal injuries caused by exposure to Manville asbestos or asbestos-containing products. With respect to the latter, the MacArthur Subclass is entitled to seek reimbursement from the MacArthur Fund only after all available insurance coverage has been exhausted. If the subclass recovers $20 million or more from its insurers, its rights to the MacArthur Fund revert to the Trust. 14 The Settlement Agreement left one issue unresolved. Those plaintiffs who resided in Maryland (Maryland Plaintiffs) contended that the set-off provisions of the TDP dealt with them in a way that Maryland law did not permit and treated them unfairly in comparison to residents of some other states. Accordingly, the parties agreed that the TDP's set-off provisions would be inapplicable to asbestos health claims arising under Maryland law and that the question of what set-off rules were to be applied to those claims would be submitted to the Trial Courts: 15 The parties consent to trial by the [Trial] Courts of the issue of appropriate set-off rules that should be developed with respect to Manville or the Trust in connection with claims arising under Maryland law in the context of a fair and adequate resolution of these proceedings. 16 (Settlement Agreement at 9.) As discussed in greater detail in Parts I.C. and II.A. below, this issue was the subject of a short trial in August 1994. 17