Date: Tue, 25 Apr 2000 11:16:09 -0700

To: Recipient List Suppressed:;

Updated 4/20/00

Below is a summary of the response briefs filed by the TCC and Dow Corning regarding the various appeals.

On February 18, 2000, briefs for those appealing the November 30, 1999 order approving the Plan of Reorganization of Dow Corning were filed. Twelve (12) briefs were filed representing four different groups -- 1) the Physicians' Committee, 2) the US Government, 3) Domestic (U.S.) Objectors, and 4) Foreign Objectors. Below is a summary of the briefs and allegations made by the objector-appellants. The Tort Claimants Committee (TCC) and Dow Corning will file a response to these briefs on March 13, 2000 and will make this response available for reading on the TCC website.

Some plastic surgeons who did breast implantations seek to pursue claims against Dow Corning in the Litigation Facility for their alleged "lost revenues," mental anguish and damage to reputation. They also seek the right to recover punitive damages. They challenge the bankruptcy court's finding that punitive damages are not allowed in the Plan.

The Physician Creditors' also claim that physicians' claims should have been separated into two classes - one for surgeons who wish to assert direct tort claims as described above and a separate class for physicians who seek only contribution or indemnification from Dow Corning for their use of Dow Corning implants (in other words, they seek repayment of any settlement or verdicts against them if they are found liable to implant recipients).

The last objection raised by the Physician Creditors is that the Litigation Fund is capped at $400 million and fails to provide absolute assurance that the Physician Claimants who litigate their claims will receive payment in full.

Physicians primarily from Texas filed a statement saying that they join in the brief of the Official Committee of Physician Creditors. The physicians are plastic surgeons who allege that they have a direct claim against Dow Corning for damages.

The Nevada Objectors consist of 47 women who allege that they are the only claimants in Class 5 (US women with Dow Corning breast implants) who have a legal right to pursue Dow Chemical. Specifically, they write that, "The 47 Nevada Claimants have a right to full payment of their claims before they are devalued or rendered worthless by the bankruptcy process. The other claimants in this class have no such rights against Dow Chemical." Also, "the Nevada Claimants ... have meaningful claims against Dow Chemical which the other 137,400 claimants in their class do not have ...." They argue that their 47 claims should have been separately classified and valued since their claims are more valuable than any other US breast implant claim.

The Nevada objectors also allege that the court does not have subject matter jurisdiction to approve a third party release, and that the elimination of punitive damages to Nevada claimants violated the absolute priority rule in bankruptcy. They argue that the order confirming the Plan of Reorganization should be reversed and remanded with instructions to convert the case to a Chapter 7 bankruptcy unless Dow Corning files a plan which does not enjoin Nevada claimants from suing Dow Chemical.

Objector-appellant Schroeder is a chin implant claimant who objects to the treatment of Class 9 (Other Product) claimants. She alleges that there was no representation of non-breast implant claimants and future non-breast implant claimants on the TCC, that the claims of non-breast implant claimants were improperly classified, and that the bankruptcy court should lift the confidentiality provision which protects the identities of persons who filed a claim.

Pro se claimant Jacobs is a breast implant claimant who is representing herself. She alleges that her objections to the Plan were ignored by the bankruptcy court. She claims that the final vote on the Plan for Classes 5-7 range between 52 - 61%, which is not sufficient for the 2/3 valuation in acceptance needed for a Plan to succeed. She suggests that the claimants should have been separated into classes of those who were currently ill and those who have a future claim.

Jacobs also claims that the bankruptcy court began to implement the Plan prior to confirmation. She suggests that the courts should remand the case back to the bankruptcy court for a new Plan and a new vote.

US Dow Corning breast implant claimants represented by a law firm in Philadelphia filed an appeal claiming that the bankruptcy court did not have jurisdiction to confirm a plan that affects their right to sue physicians and healthcare providers for malpractice arising from implantation of Dow Corning breast implants.

They claim that the Litigation Fund is inadequate to pay the claims of opt-outs including children's claims. They also allege that approximately $100 million of the $400 million fund has already ben spent on litigation relating to confirmation of the Plan. [Editorial Note - this is untrue.] They also claim that the children's rights to due process under the 5th and 14th Amendment have been violated because the Plan requires children's claim to be filed prior to the 15th year after the Effective Date of the Plan.

These Appellants object that the Plan does not pay multiple rupture payments to women who experience multiple ruptures. They also object to treating the claims of husband and wife as one claim and urge the court to separate them into two claims, thus allowing the husband to pursue his own claim in the Litigation Facility. They acknowledge that the spouse's claim may have little value in most cases, but believe that treating the claim as one will cause property disputes over the money in divorce cases.

The Altig Appellants believe that payments under the Plan should be adjusted for inflation, and that claims that are not paid in full in a particular year should earn interest on the unpaid portion until the claim is paid in full.

United States, on behalf of the 1) Department of Health and Human Services, Health Care Financing Administration, 2) Department of Health and Human Services, Indian Health Service, 3) Department of Defense, and 4) Department of Veterans Affairs

The US Government filed proofs of claims on behalf of various federal agencies alleging that they incurred costs of medical treatments for women implanted with Dow Corning breast implants. They seek recovery of these costs under the Medicare Secondary Payer (MSP) statute and the Medical Care Recovery Act (MCRA). The US Government alleges that the Plan of Reorganization prevents any direct recovery by the United States and stymies collection efforts against the claimants directly because the Plan keeps the claimants' identity confidential. They seek access to the proof of claims database so that they can compare this with their records to determine whether implanted women have received any health care benefits from Medicare.

The Australian objectors argue that the bankruptcy court erred in approving the separate classification and treatment of domestic and foreign tort claims. They believe that claims of women in Australia claims should be paid the same amount as claims of women in the U.S. (The Plan provides that Australian claims are in Class 6.1 which pays 60% of the settlement grid.)

They also allege that the Joint Plan was proposed in bad faith because they were excluded from the settlement negotiations, that the Plan does not meet the "best interests" tests in the bankruptcy code because it allegedly denies foreign claimants payment in full while leaving significant equity to inure to the benefit of the shareholders. They urge the court to reverse the order approving the Plan.

The New Zealand objector-appellants argue that their claims should not have been classified as Foreign Claims under the Plan because they are not subject to forum non conveniens defense and dismissal, their claims are not substantially similar to other Foreign Claims, and there is no legitimate reason to classify them with other Foreign Claims. Basically, they argue that since Judge Pointer (the MDL judge) denied the motion to dismiss New Zealand claims in the MDL proceeding based on the defense of forum non conveniens, that they are entitled to pursue their claims in U.S. courts. Other Foreign Claimants do not have this same right, they argue, because their claims were dismissed by Judge Pointer based on this defense. As a result, they believe their claims should be treated as Domestic (U.S.) Class 5 claims and be paid 100% of the settlement grid.

These Foreign Claimants argue that the classification of claims in Classes 6.1 and 6.2 was improper because the claims are not substantially similar. [Note -- Class 6.1 consists of claims in countries such as Canada, United Kingdom, Australia and other countries which either belong to the European Union, have a common law tort system, or have a per capita Gross Domestic Product (GDP) greater than 60% of the U.S. per capita Gross Domestic Product. Class 6.2 consists of claims in countries such as Vietnam, Thailand, Mexico and other countries which have a GDP of less than 60% of the U.S. GDP, do not belong to the European Union and do not have a common law tort system.]

The Foreign Claimants represented by Sybil Shainwald also claim that the bankruptcy court erred in holding that Class 6.2 was an accepting class, in approving the separate classification of foreign and domestic claims, and that the Plan was not adopted in good faith because they were excluded from representation or consideration in the negotiation process.

What is this appeal about? The US Government filed two briefs on two separate orders that they are appealing. Their first appeal challenged the order confirming (approving) the Plan of Reorganization. The US Government argued that it has a right to recover costs it incurred for Medicare and other federal benefits paid on behalf of women with breast implants. Their second appeal challenges an order entered by the bankruptcy court that denied a motion to compel discovery from Dow Corning and also disallowed a portion of the US Government's claim against Dow Corning.

Response by the TCC and Dow Corning. The US Government has the burden to prove that they are entitled to reimbursement of medical costs paid to implanted women, and they failed to meet this burden. The US Government filed four Proof of Claims on behalf of 10,879 Medicare recipients, 4,123 Department of Defense recipients (women implanted or treated at military institutions), 135 unidentified individuals treated by the V.A., and 58 unidentified persons treated by the Indian Health Service. The total number of persons listed in their Proof of Claims was 15,049.

The US Government was informed at a hearing in July 1998 that their Proof of Claims were inadequate because they failed to sufficiently identify persons on whose behalf they claimed to have paid medical benefits. The US Government also failed to produce the underlying documentation showing that the persons identified in their Proof of Claims had Dow Corning breast implants or that the listed persons were treated for problems related to their Dow Corning breast implants. Instead, the US Government filed interrogatories asking Dow Corning to identify all Dow Corning breast implant recipients from the Proof of Claim database. In effect, the US Government was trying to shift its burden of proving its claim to Dow Corning.

The TCC and Dow Corning filed a motion asking that the US Government's four claims be disallowed or at least limited to the 15,049 persons it had listed. This is because Bankruptcy Rule 3001 requires that every claim must be properly documented and provide information about the claimant, the basis for the claim and documents supporting the claim. The US Government failed to provide the necessary basic information. On October 27, 1999, the bankruptcy court granted the motion of the TCC and Dow Corning, limiting the claims to the 15,049 persons listed by the US Government in their four Proof of Claims. The US Government is appealing the October 27, 1999 order.

The US Government is also appealing the order of November 30, 1999 which confirmed the Plan of Reorganization, claiming that the Plan prevents any direct recovery by the US from Dow Corning and stymies collection efforts against claimants directly. The TCC and Dow Corning disagree with this interpretation of the Plan and point out that the Plan preserves the US Government's ability to assert its claimed right to repayment under applicable federal statutes. First, the US Government can assert its claims against Dow Corning in the Litigation Facility. There, the US Government will have to prove that Dow Corning's products caused the specific injuries or conditions for which women were paid benefits under the Medical Care Recovery Act (MCRA). If they are able to do so, then they can recover their costs for the medical payments to implanted women from the $400 million Litigation Fund.

Second, the Plan and the bankruptcy court's November 30, 1999 Order preserve the US's alleged rights for payments in the Settlement Facility. This is because claimants must provide notice to the US of their settlement in the Settlement Facility. The Plan also gives the US the ability to enforce whatever rights it may have through the MDL Court.

Appeals by the Domestic (U.S.) Tort Claimants (including the Physicians Committee). Appeal Summaries

What is this appeal about?Various U.S. implant claimants and plastic surgeons challenged the order approving the Plan claiming that the Litigation Fund was inadequately funded and objecting to the disallowance of punitive damages.

Response by the TCC and Dow Corning.The bankruptcy court was correct when it found that the Litigation Fund was adequately funded and that the Plan satisfied the "best-interests-of-creditors" test. The Nevada Objectors submitted no evidence to show that their claims would be paid less in this Plan compared to what they would receive in a Chapter 7 liquidation. As Judge Spector noted in his order, the evidence submitted by the Plan Proponents was "overwhelming" that the $400 million Litigation Fund "would be more than sufficient to pay all personal injury claims resolved through litigation in full even after factoring in the costs of the process." Judge Spector concluded that the question "was not even close" when he found that the $400 million is almost five times what will be necessary to satisfy all claims in the Litigation Facility.

Judge Spector's conclusions were based on the testimony of an economist who is a leading expert in estimation in mass tort cases (Dr. Frederick Dunbar) and TCC member Tommy Jacks. Dr. Dunbar used information about claims in the Revised Settlement Program (RSP) to project the number of claims which will likely be filed in the Dow Corning case. He was able to do this because the Plan utilizes

the same criteria as the RSP to qualify claimants for settlement. Dr. Dunbar then looked to the experience of the Dalkon Shield bankruptcy case to determine the likely number of persons who will opt-out and the value of those opt-out claims. His testimony was found by Judge Spector to be "impressive," "exquisitely matched to the task for which he was retained," and "thorough, logical, well-documented and credible." Further, Judge Spector wrote that, "notwithstanding attempts at cross-examination and at obfuscation in closing argument, the purity of [Dr. Dunbar's] reasoning shines through."

Dr. Dunbar's testimony was corroborated by TCC member and attorney, Tommy Jacks. Mr. Jacks negotiated the Plan on behalf of tort claimants and testified that the Plan offered better and broader settlement options than the RSP and that the litigation environment for plaintiffs is more difficult now because of recent science reports on breast implants.

In contrast, Judge Spector found that the objectors provided "no credible evidence" to support their claim that the Litigation Fund was inadequate. Most of the objectors' proffered expert testimony was excluded as unreliable under Daubert, and the Nevada objectors did not challenge any of these rulings (thus waiving any appellate review of those rulings).

The objectors also claim in their appeal that the disallowance of punitive damages renders the Plan non-confirmable. The bankruptcy court concluded though that no punitive damages would be paid to breast implant claimants in a Chapter 7 liquidation. Also, punitive damages may be disallowed because the Plan devotes substantial resources to the payment of benefits of tort claimants and this satisfies the policy goals of punishment and deterrence that might otherwise be served by a punitive award.

(1) The Nevada Objectors claim that their 47 claims should have been classified separately since they allege that they are the only persons who have a valid claim against Dow Chemical.

(2) The Physicians' Committee objected to the Plan because they want a separate class for claims of physicians who seek damages for loss revenues, mental anguish and damage to reputation.

(3) Class 9 Claimant Helene Schroeder (a chin implantee) objected to the treatment of claims in her class, alleging that the TCC did not adequately represent or compensate non-breast implant claimants.

(4) The Altig Objectors objected to several specific provisions in the Plan including treating the claims of husbands and wives as one claim, the lack of cost-of-living payments on settlements in the future, and limiting multiple rupture claims to one payment.

(5) The Pennsylvania Objectors suggest that the Plan is improper because it requires them to give up greater rights than other Class 5 claimants, namely their claims against their physicians.

(6) The Lacy Objectors claim that the rights of minor children to due process are being violated in the Plan because their alleged property rights are being taken.

(1) A Plan in bankruptcy must classify claims that are substantially similar together. The only claims considered are those against the debtor, Dow Corning, and not claims against third parties. Since the claims of the Nevada Objectors admit that their claims against the debtor are substantially similar to other domestic breast implant claims, their classification argument lacks merit. Further, the bankruptcy court found as unpersuasive the argument that the Mahlum case gives the Nevada Objectors greater rights than other breast implant claimants since the Nevada Supreme Court reversed the jury award of punitive damages against Dow Chemical.

(2) The Physicians' claims are all classified in Class 12 and include all types of claims against Dow Corning, including the claim for lost revenues, mental anguish and damage to reputation. A separate class is unnecessary. All physicians have the same choice and they can agree to settle all of their claims against Dow Corning in exchange for protection from lawsuits -- or they can elect to litigate all of their claims (including their tort claims) in the Litigation Facility.

(3) Class 9 claimant Helene Schroeder's claim was also properly classified. She offered no evidence at the confirmation hearing that chin implant claims are not substantially similar to other claims in Class 9. Nor could she. The Plan provides that all chin implant claimants are offered the same options and treatment as other tort claimants, i.e., they can elect to settle their claims under the settlement grid or they litigate their claims in the Litigation Facility.

(4) The Altig Objectors offered no evidence at the confirmation hearing to prove that multiple rupture claims are worth more than a single rupture claim. The severity of a woman's claim for rupture will depend on the facts and circumstances of her individual case. Claimants who believe their rupture claim " whether it is a single or a multiple rupture" is to severe to accept the settlement offer are free to opt out and seek a larger award in the Litigation Facility.

Cost of living adjustments (COLA), which the Altig Objectors seek, are not required by the bankruptcy code. The Altig Objectors did not submit any evidence to show that an inflation adjustment is a material concern to unmanifested claimants or that it was required by the bankruptcy code. Further, unmanifested disease claimants are given 15 years to file a claim without the fear of statute of limitations or other defenses. This is a sufficient trade-off for theoretical cost of living adjustments in the future.

(5) The Pennsylvania Objectors did not cite any provisions of the bankruptcy code to support their argument that the Plan treats them improperly. They receive the same treatment as other Class 5 claimants because they have the same option to settle or litigate. If they want to continue pursuing claims against physicians for malpractice, they can do so by opting into the Litigation Facility.

(6) The Lacy Objectors complaint that the Plan "impedes" their minor children "from obtaining their property rights" does not have a single citation in their brief to any legal authority to support their claim. They do not cite any federal statute, any provision in the bankruptcy code, or any case law. They simply state that somehow (they don't explain how) the constitutional rights of minor children have been violated. The Supreme Court of the United States established in 1938 that the rights of creditors in bankruptcy court can be discharged without running afoul of the Constitution. There is no due process concern for minor children because the Plan allows them to prosecute their claims in the Litigation Facility and can defer their decision to litigate for up to 15 years or until 6 months after they turn 18.

The Lacy Objectors claim that the evidence is amassing that the children have valid disease claims for their exposure to silicone in utero. However, they failed to produce any evidence whatsoever during the confirmation hearing to support this claim. They did not offer any expert testimony and did not introduce any admissible medical evidence. As Judge Spector stated during the confirmation hearing, "You say you're proving this, but what you're doing is you're having a discussion inside your own head about these things."

The Lacy Objectors' appeal was not filed on time and their designation of the record and statement of issues on appeal were also filed late. They are also wrong in stating that $100 million of the $400 million Litigation Fund has already been spent. The Plan clearly states that, absent prior court approval, funding of the Litigation Facility can occur only after the Plan becomes effective. The Plan is not yet effective.

Various groups of foreign claimants objected to the Plan because it classified and paid foreign claims separately and at lower amounts than domestic (US) claims.

The treatment of foreign claims in the Plan is based on the Pfizer heart valve mass tort class settlement that involved both US and foreign claims. Pfizer was a model that classified foreign claims from dozens of countries and established equivalent settlement values for those foreign claims ranging from 8% to 32% of the amounts offered to US claimants. In the Dow Corning Plan, foreign claimants were classified in a similar way as in the Pfizer case but the settlement compensation is far more generous than in Pfizer. In the Dow Corning Plan, claimants in Class 6.1 and Class 6.2 countries were offered 60% and 35% respectively of the amount offered to US claimants.

Though the Foreign Claimant Objectors suggest that the lower settlements are unfair and discriminatory, the evidence at the confirmation hearing was overwhelmingly to the contrary. Moreover, this argument is without merit since both classes of foreign claimants voted overwhelmingly in favor of the Plan. (Questions of fairness in treatment are only at issue when a class votes against the Plan. Here, both classes of foreign claimants voted in favor of the Plan.) The key facts proved by the evidence of several expert witnesses is that the value of foreign breast implant claims is lower than the value of US breast implant claims, and the legal rights of US and foreign breast implant claims are significantly different. The Foreign Claimant Objectors did not rebut this evidence during the confirmation hearing â*" either on cross examination of Proponents' experts or by direct examination of their own experts.

Brief of Dow Corning and the Tort Claimants Committee appealing the December 21, 1999 Opinion

The TCC and Dow Corning (Plan Proponents) filed an appeal to the court's opinion of December 21, 1999. The bankruptcy court interpreted the language in the Plan to mean that the release/injunction against Dow Chemical and Corning apply only to claimants who voted in favor of the Plan. This interpretation is contrary to the plain language and meaning of the Plan and to the evidence at the confirmation hearing. The Plan provides that "all persons who have held, hold or may hold product liability claims, whether known or unknown, shall be deemed forever to have forever waived and released all rights or claimants against the Released Parties (which includes both the debtor, the shareholders and settling physicians).

Also, as set forth in the Plan Proponents' Motion To Vacate Opinion, the bankruptcy court did not have jurisdiction to modify the November 30, 1999 confirmation order because the order was already being appealed.

On January 24, 2000, U.S. District Judge Denise Page Hood entered a "Scheduling Order Re Above-Captioned Appeals And Various Motions." The Scheduling Order establishes a time frame to submit legal briefs by the parties who are appealing the November 30th order confirming the Plan of Reorganization and the December 21st opinion on the best interests of the creditors test. The schedule for the appeals is:

February 18, 2000 Briefs are due for persons who are appealing the November 30^th Confirmation Order. (These persons are called Appellants.)

March 13, 2000 Responses to the February 18th briefs are due by the TCC and Dow Corning. (The TCC and Dow Corning are called the Appellees.)

March 13, 2000 Briefs are due for persons who are appealing the December 21^st opinion (TCC and Dow Corning).

March 28, 2000 Briefs are due for those persons who are opposing the appeal of the December 21^st opinion by the TCC and Dow Corning.

March 28, 2000 Reply briefs are due by Appellants to the November 30th Order.

April 4, 2000 Reply briefs are due by TCC and Dow Corning regarding their appeal of the December 21^st opinion.

April 12-13, 2000 Oral argument on all appeals will be held in Detroit, Michigan before U.S. District Court Judge Denise Page Hood.

The ruling by Judge Hood will be issued sometime after the April 12 and 13^th hearings. There is no scheduled date for the release of Judge Hood's opinion. Please do not write to ask us when she will rule. The TCC will post any updates on her ruling as soon as it is entered by the court.

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