Opinion ID: 786193
Heading Depth: 2
Heading Rank: 3

Heading: Did the Advisors have a Conflict of Interest?

Text: 72 Before we can decide whether the reasonable person might question Judge Wolin's impartiality, we must determine if his Advisors had a conflict of interest. If not, then our inquiry comes to an end because the Petitioners will have failed to show that they have a clear and indisputable right to disqualification. On the other hand, if there was a conflict, then we must reach the question of whether that conflict might be perceived by the reasonable person as having tainted Judge Wolin. 73 Aside from the timeliness of the recusal motions, the existence of a conflict of interest by the Advisors may be the most sharply contested issue in these proceedings. Judge Wolin explained in his written opinion that he was an asbestos neophyte when he assumed control of the Five Asbestos Cases, and that he brought the Advisors on board to inform the Court of the vast landscape of asbestos related issues that would permit the Court to make reasoned case management decisions. Owens Corning, 305 B.R. at 198. 74 We conclude that two of the Advisors, Gross and Hamlin, did, in fact, operate under a structural conflict of interests at the same time that they served as Judge Wolin's Advisors. This conflict arose from the dual roles they played in the Five Asbestos Cases and the G-I Holdings bankruptcy. 75 On the one hand, Gross and Hamlin clearly had a duty to remain neutral in the Five Asbestos Cases and to provide objective, unbiased information to Judge Wolin. As Judge Wolin stated in his original appointment order, the Advisors' role was to advise the Court and to undertake [certain] responsibilities, including by way of example and not limitation, mediation of disputes, holding case management conference, and consultation with counsel.... 76 We would be hard pressed to overstate the importance of the Advisors' role in the Five Asbestos Cases. As a result of their appointment, the Advisors had a unique level of access to Judge Wolin. Indeed, Judge Wolin himself acknowledged in a fee allowance order that the Advisors occup[ied] a unique position in the [Five Asbestos] cases not shared by other persons and that they function[ed] in a manner in all respects similar to examiners as provided in the Bankruptcy Code. The Advisors also had a unique level of influence over Judge Wolin, given the role they played at the outset of the Five Asbestos Cases in educating Judge Wolin (a self-admitted neophyte) on all of the key asbestos-related issues. 77 On the other hand, Advisors Gross and Hamlin also had a duty to act as zealous advocates for the future asbestos claimants in the G-I Holdings bankruptcy. Hamlin was at all relevant times the legal representative of the present and future asbestos personal injury claimants in G-I Holdings and Gross served as his local counsel. 14 In those roles, Gross and Hamlin owed the future asbestos claimants in G-I Holdings a fiduciary duty to advance their interests and to see that they received the greatest possible share of the bankruptcy estate. 15 To achieve that end, the very Advisors who were advising Judge Wolin had to take positions in G-I Holdings and the Five Asbestos Cases that favored the future asbestos claimants. By their very position as representatives of the future asbestos claimants in G-I Holdings, Gross and Hamlin signaled to all that they could not be non-partisan, benign, or neutral. 78 Given their dual roles, we find that Gross and Hamlin had a conflict of interest. The structural conflict arose primarily out of the close relationship between the future asbestos claimants and the issues in the Five Asbestos Cases and G-I Holdings. In both proceedings, the debtors were leading manufacturers of asbestos products who were forced into bankruptcy by a flood of asbestos-related claims, including those of future claimants not yet identified. Consequently, many of the same legal issues (e.g., bar dates, proof of claim forms, medical manifestations, etc.) either have arisen or will arise in both the Five Asbestos Cases and the G-I Holdings bankruptcy. Both Judge Wolin and Advisor Hamlin implicitly acknowledge that there existed a conflict of interest. Hamlin stated in his deposition that [i]f any issue or any responsibility was sought from me [by Judge Wolin] in regard to any issue that I felt impinged on by G-I stuff, I would have asked that assignment be given to somebody else. Specifically, Hamlin stated that I wouldn't have touched the personal injury bar date issue ... [b]ecause that's what I'm dealing with in G-I. While the parties opposing recusal contend that this statement proves there was no conflict of interest, it proves just the opposite. Had there been no conflict, Hamlin would have perceived no need to reject any assignments in the Five Asbestos Cases. 79 Despite his conclusion that no conflict exists, Judge Wolin nevertheless shares Hamlin's concerns. Recognizing that [t]he core task of any futures representatives is to determine claim validity and claim valuation for future claimants, Judge Wolin explains that no conflict materialized because [t]he issues of claim valuation and future claimant versus present claimant equivalence have been neither briefed nor joined in the Five Asbestos Cases. Owens Corning, 305 B.R. at 198. Judge Wolin's statements further demonstrate the tension between Hamlin's and Gross's dual roles as advisors to Judge Wolin in the Five Asbestos Cases and Futures Representatives in G-I Holdings. 80 If Gross and Hamlin were precluded from addressing issues such as bar dates and claim valuation, we cannot understand how it could be appropriate for them to discuss other issues of importance to Futures Claimants in G-I Holdings. If both Hamlin and Judge Wolin would question the Advisors' ability to remain neutral with respect to bar dates, a reasonable person certainly would be suspicious of discussions with the Advisors on potential affirmative defenses to liability, the proper content of proof of claims forms, or the processes for estimating claims under 11 U.S.C. § 502(c). See supra at 297 (discussing the subjects addressed in Judge Wolin's ex parte meetings with the Advisors). 81 As discussed below in Section V-E, these suspicions are heightened by the ex parte nature of the communications between Judge Wolin and his Advisors. We do not hold that ex parte communications alone-in the absence of any conflict of interest-require recusal. We emphasize that it is the conflict of interest and not the particular specialty of the neutral expert or advisor that concerns us. A judge may engage an expert or someone to assist him who has no conflict and is disinterested. Here, however, we have concluded that the Advisors were conflicted and were not disinterested. Hence, any decision by us that would preclude a judge from obtaining assistance from a non-conflicted advisor would unnecessarily restrict a judge's ability to communicate with neutral experts. Indeed, a judge may consult ex parte with a disinterested expert provided that the judge gives notice to the parties of the person consulted and the substance of the advice, and affords the parties reasonable opportunity to respond. Code of Conduct for U.S. Judges Canon 3 § A(4) (2003). 82 A reasonable observer, understanding that certain issues were off limits, would be concerned by the absence of any mechanism to police those limits. Indeed, the record before the Court contains substantial evidence that these limits were, in fact, violated. Although Hamlin testified that a bar date was not discussed by the Advisors, and although Gross testified that he could not recall whether a bar date was discussed, the other three Advisors testified that the issue of whether and how to impose a bar date was discussed with Judge Wolin. Moreover, there is a substantial likelihood that many of the future claimants in G-I Holdings will also be future claimants in the Five Asbestos Cases because it is not unusual for asbestos claimants to bring claims against different asbestos manufacturers. As counsel for Kensington argued: 83 [I]t is our view that Judge Wolin has rendered a number of rulings favorable to tort claimants after discussions with the future — with the advisors who are Futures Representatives in G-I. 84 Do I have a signed, sealed confession, we urged this result on Judge Wolin and he then did it? No, I don't have that. But the problem here is a 455(a) problem. 85