Date: Wed, 27 Dec 2000 16:58:33 -0700

Dear Micheline & Tony:

I'm back somewhat! You have probably seen some of the information in the first paragraph already, but what follows about the Alberta Court decision is extremely disappointing. I'd like you to put it on your website. I've sent it to Ilena too.

First, I have been quiet recently because I have just come out of hospital for the holidays. David had to take me in last Tuesday because I couldn't get my breath and I couldn't stop coughing. Our doctor ordered me into hospital immediately. Along with my other problems, I was diagnosed with pneumonia. I'm home now--I demanded to be let out for Xmas!--and perking up a bit. Along with the nebulizer-administered drugs, I'm now taking Levofloxacin daily as well...an antibiotic drug that is the equivalent of being on IV all day. There's also a chance that I had another silicone-induced pulmonary embolism because the oxygen in my blood gases dropped to 50, which is close to a hypoxic state (40). The doctors also did all kinds of blood work while I was in hospital. I will let you both know later what they find out. Fortunately, we were able to salvage some kind of Xmas...with David doing most of the cooking.

Second, I would like you to put out the following piece. Today, we were searching the Alberta Court judgements database. We came across this judgement from July 1998. To say the least, it floored us! It amounts to a legal travesty! The lady in this case has been denied justice and virtually betrayed by the Canadian legal system. We have always assumed that Canada was a sovereign nation, with laws that were made in Ottawa and not south of the border; however, it appears that we are being dictated to by US law. I find it hard to believe that the plaintiff's lawyer did not appeal this decision as high as he could. It makes me wonder if he bought into Dow's propaganda. This is what happened: Dow applied to the Alberta Court for a permanent stay of proceedings against them; the Canadian judge granted them the stay!

It appears that the problem lies with something called "comity of nations"...a courtesy that is afforded the laws of one nation in a foreign country, in this case US law in Canada. It seems that Dow is trying to force every woman--one way or another--into their bankruptcy settlement. Page 8 of Dow's Amended Joint Disclosure Statement (AJDS), which was sent to me even though I had most emphatically opted out in June 1994, seems to say that all claims that are litigated one-on-one with Dow should be handled in the Litigation Facility they have set up in Eastern Michigan.

But, also in the AJDS, page 9, and despite the above, they still want to be able to cry "forum non conveniens" whenever it suits them and send cases to a claimant's "residence"! This is the reason why I'm suing in Canada anyway! There seems to be a double-standard at work here.

In the AJDS, page 11, it declares that US$400 million has been designated for payments in one-on-one cases. Dow Chairman and CEO Richard Hazleton says women can choose to litigate. The Tort Claimants Committee message also says women can sue. The "Special Note..." says both: that women can sue and that there is US$400 million there for this. The "Frequently Asked Questions...and Answers" document also talks about US$400 million...and says that it will be used to "fund litigation for all personal injury tort claims...".

Further, in the AJDS, page 52, it seems that Dow expects every Canadian who is not in either the Ontario or Quebec class actions to go into the BC class action. I have not opted into the BC class action, which you must do to participate! The BC class action "Legal Notice", which was published in every major Canadian daily, also says "...you may pursue individual litigation in Canada".

That this stay has been granted is potentially devastating to Canadian women who want to litigate one-on-one with Dow. They are full of protestations that Canadian women can choose to litigate against them, but in reality they are doing everything in their power to prevent this from happening. I feel that US business law, ie, the "sweetheart" deal served up for Dow in the Chapter 11 arrangement, should have no place in a Canadian courtroom. In principle, I feel that the concept of "comity of nations" probably has a useful application in some areas of law, but it certainly shouldn't be used to deprive a Canadian woman's right to sue an entity that has damaged her personally and physiologically. This Canadian judge's decision hasn't acknowledged comity in law; it has merely caved in to the vested business interests of a huge US corporation. Hence my earlier remarks about "justice denied" and "betrayal"!

Unfortunately, I am in the same position as the woman in this Alberta decision. If Dow is successful in staying my case, I will have my lawyer appeal...to the Supreme Court of Canada if necessary!

On the brighter side, there is a ray of hope. The BC class action "Legal Notice", which says "you may pursue individual litigation in Canada", came out after the Alberta Court decision that follows here! All through this breast implant horror, Dow has been able to change the rules whenever they felt like it. Now, perhaps we can do it too.

Love you both..........Lea

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Roberts v. Picture Butte Municipal Hospital, 1998 ABQB 636

Date: 19980710

Action No. 8901-12679

IN THE COURT OF QUEEN'S BENCH OF ALBERTA

JUDICIAL DISTRICT OF CALGARY

BETWEEN:

[<]WANDA[>] MAE ROBERTS, a.k.a. [<]WANDA[>] MAE LICHUK,

and ALAN ROBERTS

Plaintiffs

- and -

PICTURE BUTTE MUNICIPAL HOSPITAL,

ST. MICHAEL'S GENERAL HOSPITAL,

DR. TOM MELLING, McGHAN MEDICAL CORPORATION

and DOW CORNING CORPORATION

Defendants

_____________________________________________________________________

REASONS FOR JUDGMENT

of The Honourable Mr. Justice G.R. Forsyth

_____________________________________________________________________

APPLICATION

[1] This is an application by the Defendant Dow Corning Corporation ("DCC") for a permanent stay of proceedings against it. DCC is now the only remaining Defendant in this action, as the actions against the other four Defendants were dismissed on the basis of having been commenced outside of the applicable limitation periods. DCC applies for a permanent stay of these proceedings on the grounds that this Court should recognize the jurisdiction of the United States Bankruptcy Court for the Eastern District of Michigan, Northern Division. The Plaintiffs, [<]Wanda[>][>] and Alan Roberts, argue that a stay is inappropriate.

BACKGROUND

[2] The female Plaintiff underwent surgery in 1981 for bilateral fibrocystic disease and mammary dysplasia in both breasts. Also in 1981, she received silicone gel breast implants manufactured by McGhan Medical Corporation ("McGhan"), a former Defendant. After problems with those implants, they were replaced in June 1983 with silicone gel implants manufactured by DCC. Soon after, one implant was found to have ruptured, necessitating surgery to clean up as much silicone as possible from her system.

[3] Since that time, the female Plaintiff alleges widespread pain and problems, which she blames on the silicone gel released into her body. For this application, it is not necessary nor appropriate for me to comment on her symptoms or their cause.

[4] The Plaintiffs started this action on August 31, 1989. There was also class action litigation in the U.S which coordinated all claims arising out of the failure of both McGhan and DCC implants. That class action collapsed when DCC sought bankruptcy protection on May 15, 1995 under Chapter 11 of the United States Bankruptcy Code (the " U.S. Bankruptcy Code "). Section 362 of the U.S. Bankruptcy Code imposes an automatic stay on all actions or proceedings against DCC to recover claims that arose before the claims bar date.

[5] The U.S. Bankruptcy Court set February 14, 1997 as the foreign claims bar date (the deadline for filing claims in the bankruptcy proceedings). The Plaintiffs filed proofs of claim in that U.S. proceeding on January 17, 1997. More than 700,000 proofs of claim were filed from many countries, including more than 30,000 by Canadian residents.

LEGISLATION

[6] DCC is asking that this Court recognize the proceedings in the U.S. Bankruptcy Court. The U.S. Bankruptcy Code provides for an automatic stay once bankruptcy proceedings are commenced in the U.S.:

362 (a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title... operates as a stay, applicable to all entities, of -

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; . .

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

Section 541 provides that "property of the estate" is comprised of various types of property "wherever located and by whomever held".

[7] Therefore, the stay purports to be extra- territorial, applying, for example, in Alberta. It is then up to this Court to decide whether the principles of comity favour upholding the stay in this jurisdiction. As the Plaintiffs emphasize, comity is a discretionary matter. I am not bound by the stay imposed by the U.S. Bankruptcy Act .

[8] I note that the Canadian legislation has a similar provision ( Bankruptcy and Insolvency Act ("BIA") , R.S.C. 1985, c.B-3):

69(1) Subject to subsections (2) and (3) and sections 69.4 and 69.5 on the filing of a notice of intention under section 50.4 by an insolvent person,

(a) no creditor has any remedy against the insolvent person or the insolvent person's property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy,

Under s.2(1) "property" of the BIA : "property" includes money, goods, things in action, land and every description of property, whether real or personal, legal or equitable, and whether situated in Canada or elsewhere, . . .

[9] The Plaintiffs accept that the U.S. Bankruptcy Code governs DCC's estate, and that the Plaintiffs are creditors under the jurisdiction of the U.S. Bankruptcy Court.

PLAN OF REORGANIZATION

[10] DCC filed a Plan of Reorganization (the " Plan") with the Bankruptcy Court on August 25, 1997. The Bankruptcy Court rejected this Plan, and an amended plan was presented on February 17, 1998. The Bankruptcy Court approved that Plan, which now has to be voted upon by the various classes of creditors. DCC's proposed Plan would allow it to pay most creditors and continue operating. To manage product liability claims, DCC would establish and fund two trusts with up to $2.4 billion U. S. DCC would separately pay approximately $1 billion to commercial creditors over seven years.

[11] Breast implant claimants would have four settlement paths, based on their history, symptoms and past and proposed treatment. Any claims not settled by agreement under the Plan process would go to common issue trials. Any claims remaining after common issue trials would undergo individual claims review and mediation. The last resort would be individual litigation. These individual trials would be held in the U.S., dismissed in favour of litigation in the claimant's home jurisdiction, or held in the U.S. using the law of the claimant's home jurisdiction. The Plan is designed to solve as many claims as possible in an orderly and expeditious manner.

[12] The U.S. procedure provides that once the Bankruptcy Court approves a Plan, it is sent to the creditors for a vote. The creditors vote by class. All of the Canadian breast implant claimants are in the foreign claimants' class of creditors. If more than two-thirds of those voting in a class approve, the Plan is considered approved by the class. After the vote, the Bankruptcy Court holds a confirmation hearing. It may confirm the Plan if it meets the U.S. Bankruptcy Code requirements. In DCC's words, the Bankruptcy Court must conclude:

(i) that the Plan was proposed in good faith;

(ii) that each class of creditors that does not vote to accept the Plan will receive at least as great a recovery as such creditors would have received had the debtor been liquidated under the liquidation procedures provided in Chapter 7 of the Bankruptcy Code ; and

(iii) that the Plan does not discriminate unfairly against any class of creditors that does not vote to accept the Plan.

Therefore, the Bankruptcy Court may approve a Plan even if all classes of creditors do not vote to accept it, as long as that Court finds the Plan does not discriminate unfairly against the rejecting class.

[13] The originally proposed Plan did not make it to the creditor review stage. The Bankruptcy Court apparently had a number of concerns, one of which was the treatment of the foreign claimants. The Plaintiffs raise that concern in this Court also. The proposed settlement payments for foreign claimants would range from 35 to 60 per cent of those offered to U.S. claimants, on the theory that product liability litigation yields lower damage awards in non-U.S. jurisdictions. The proposed settlement for Canadian claimants is 60 per cent of the payments offered to U.S. claimants. According to DCC's affidavit (by Craig J. Litherland, dated December 12, 1997), some of the differing factors among U.S. and foreign jurisdictions are:

a. the absence of contingency fee arrangements;

b. the responsibility of judges rather than juries to asses [sic] liability and damages;

c. the award of costs to prevailing litigants;

d. limitations on theories of liability and recovery;

e. limited pretrial procedures;

f. the absence of the 'deep pocket expectation' prevalent in the United States resulting in lower damage awards;

g. lower damage awards for pain and suffering;

h. less or no punitive damages; and

i. nationalized health care insurance and other benefits that are either directly deducted from an award or operate to reduce the likelihood of a large damage award.

Of course, not all of these factors would apply in any one non-U.S. jurisdiction.

[14] The Plaintiffs claim the foreign discount is discriminatory and inequitable. Not all of the factors are applicable in Alberta. Moreover, some simply try to shift the burden from DCC to other entities (such as the Canadian medicare system). In addition, the Plaintiffs claim that taking 40 per cent away from foreign claimants leaves that much more for U.S. claimants. DCC argues that the procedure is fair, not necessarily equal. It also emphasizes that the foreign discount only applies to settlements. Any claims that proceed to individual trials would not be discounted.

[15] The amended Plan will be put to the creditors. It may be that the Plan will be confirmed, even if the foreign claimants' class rejects it.

ANALYSIS

General Principles

[16] Where an appropriate forum must be chosen, the Courts may grant a stay of proceedings. In the words of the Supreme Court of Canada: "This enables the court of the forum selected by the Plaintiffs (the domestic forum) to stay the action at the request of the Defendant if persuaded that the case should be tried elsewhere." ( Amchem Products Inc. v. British Columbia (Workers' Compensation Board) , [1993] 1 S.C.R. 897 at 912).This decision is completely discretionary. I am not bound to defer to the U.S. bankruptcy proceedings.

[17] Amchem also discusses the vital principle of comity (at 913-14, citing Morguard Investments Ltd. v. De Savoye , [1990] 3 S.C.R. 1077 at 1096):

'Comity' in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws. . . .

[18] After cautioning against abusing the power to enjoin foreign litigation, the S.C.C. in Amchem outlined the test for restraining foreign proceedings. Although a case on anti-suit injunctions, the first part of the test also relates to stays. The Court must determine if there is a forum other than the domestic forum which is "clearly more appropriate" (at 931). If not, the domestic forum should refuse to stay the domestic proceedings. At 931-32, the S.C.C. continued:

In this step of the analysis, the domestic court as a matter of comity must take cognizance of the fact that the foreign court has assumed jurisdiction. If, applying the principles relating to forum non conveniens outlined above, the foreign court could reasonably have concluded that there was no alternative forum that was clearly more appropriate, the domestic court should respect that decision and the application should be dismissed. When there is a genuine disagreement between the courts of our country and another, the courts of this country should not arrogate to themselves the decision for both jurisdictions. In most cases it will appear from the decision of the foreign court whether it acted on principles similar to those that obtain here, but, if not, then the domestic court must consider whether the result is consistent with those principles.

[19] As La Forest J. stated in Morguard Investments Ltd. v. De Savoye (1990), 76

D.L.R. (4th) 256 (S.C.C.) at 268, modern states " cannot live in splendid isolation". They must follow comity, which is "the deference and respect due by other states to the actions of a state legitimately taken within its own territory."

[20] Comity and cooperation are increasingly important in the bankruptcy context. As internationalization increases, more parties have assets and carry on activities in several jurisdictions. Without some coordination, there would be multiple proceedings, inconsistent judgments and general uncertainty. See, for example, comments in Olympia & York Developments Ltd. v. Royal Trust Co. (1993), 20 C.B.R. (3d) 165 (Ont. Gen. Div.); Re Antwerp Bulkcarriers N.V. (1996), 43 C.B.R. (3d) 284 (Que.S.C.); and J.D. Honsberger, " Canadian Recognition of Foreign Judicially Supervised Arrangements " (1989), 76 D.B.R. (N.S.) 86.

[21] I also note that U.S. Courts have shown themselves willing to grant comity in similar circumstances. For example, a Bankruptcy Court granted comity in In re American Sensors Inc. (Bkrtcy. S.D.N.Y., 1997). In that case, all proceedings against the Defendant Canadian corporation were stayed under the Companies' Creditors Arrangement Act . The Defendant successfully applied to the U.S. Bankruptcy Court for a stay in the U.S. based on comity. That Court stated that U.S. public policy should recognize the foreign proceedings, thus facilitating the " orderly and systematic distribution" of the debtor's assets. This was especially true for Canada, which has similar procedures and procedural safeguards.

Discussion

[22] The U.S. Bankruptcy Code provision imposing a stay once bankruptcy proceedings have begun is comparable to Canada's BIA provision. They also both have the same underlying philosophy - to ensure a fair distribution of assets among all creditors, not just those who happen to have begun proceedings prior to the initiation of bankruptcy. In a situation such as DCC's, there is another motive - if all matters can be stayed, there is a better chance that the DCC will be able to restructure successfully.

[23] The number of claims is significant. The U. S. Bankruptcy Court has decided that it is impractical and unfair to have thousands of individual claims going through the adversarial court system. Instead, it agrees with DCC's proposal to settle as many as possible, hold common issue trials as appropriate, then have as many individual trials as still necessary. This appears logical and in the interests of all creditors as a group.

[24] An additional consideration is that the Plaintiffs have filed proofs of claim in the U.S. bankruptcy proceedings. The Plaintiffs have, therefore, attorned to the jurisdiction of the U.S. Bankruptcy Court. As stated in In re Neese , 12 B.R. 968 (Bkrtcy.W.D.Va., 1981) at 971:

. . . [the] defendants voluntarily availed themselves of the jurisdiction of this Court when they filed, by counsel, proofs of claim in the underlying title 11 bankruptcy case....Having filed their proofs of claim in the underlying bankruptcy case, the defendants cannot now deny this Court's personal jurisdiction over them in a proceeding directly related to that case.

The same principles apply in Canada - see, for example, Microbiz Corp. v. Classic Software Systems Inc. (1996), 45 C.B.R. (3d) 40 (Ont. Gen. Div.); and Pitts v. Hill & Hill Truck Line, Inc. (1987), 66 C.B.R. 273 (Alta.Q.B., Master).

[25] The Plaintiffs argue that foreign claimants are not treated fairly by the proposed Plan because their settlement package would be at a discount from that given to U.S. claimants. However, there are several safeguards to prevent unfairness. First, the Plaintiffs, along with the rest of the class, have the opportunity to vote against the Plan. If, as a class, they vote against it, the U.S. Bankruptcy Court can only confirm the Plan if it feels the Plan does not "discriminate unfairly" against classes which rejected it. I understand this to mean that treatment can be fair across classes without being equal, as long as there is equality within the class itself. Second, the Plaintiffs are not obliged to settle under the Plan. They may proceed to trial. Third, this Plan actually protects creditors. If there were no stay and no Plan, only the first to trial and judgment would receive any compensation at all, and trials could potentially drag on for many years. Under the Plan, each creditor will receive something and will receive it much sooner.

[26] I do not comment on the factors used to assess the discount rate for foreign claimants, except to say that they were not all intended to relate to each foreign jurisdiction. If these factors are accepted by the U.S. Bankruptcy Court in the exercise of its jurisdiction, a jurisdiction to which it is appropriate for me to grant comity and to which the Plaintiffs have attorned, then it is not for me to decide if I would have accepted the factors.

[27] The Plaintiffs also argue that the recent Australian case Taylor v. Dow Corning Australia Pty. Ltd. (19 December 1997), No. 8438/95 (Vict.S.C.) should persuade me to dismiss this stay application. There, the Australian Court denied Dow Corning Australia's ("DCA's") application for a stay of proceedings in an action by an Australian plaintiff against DCA. While not binding on me in any event, the reasons in Taylor are clearly distinguishable.

[28] DCA is a solvent subsidiary of DCC. DCC was initially a defendant, but that plaintiff discontinued against DCC. The Court ruled that any judgment against DCA would not disadvantage creditors of DCC. Further, the plaintiff was entitled to be treated as a creditor of DCA, not DCC.

[29] In addition, that plaintiff did not file a proof of claim in the U.S. bankruptcy proceedings. This is extremely significant. In the present case, the Plaintiffs deliberately attorned to the U.S. jurisdiction by filing proofs of claim. In Taylor , the plaintiff deliberately did not. There is obiter in Taylor , as the Court held attornment was not relevant where a solvent subsidiary, not the insolvent parent, asks for the stay.

[30] Finally, the Plaintiffs argue that I should not grant a stay when the U.S. Bankruptcy Court has not been asked to grant an injunction against non-U.S. proceedings such as this. For example, the Australian Court in Taylor queried why DCC had not requested such an injunction and concluded one would have been denied in any event. In the present case, however, an injunction is not necessary. The U.S. Bankruptcy Code itself provides for a stay of all proceedings against DCC. This is not comparable to Taylor , where the defendant was DCA, not DCC itself.

ORDER

[31] In the circumstances of this case, the U.S. Bankruptcy Court has apparently decided that fairness among creditors is achieved without having complete equality across all classes of creditors. The Plaintiffs attorned to that jurisdiction. However, even had there been no attornment, I find that common sense dictates that these matters would be best dealt with by one Court, and in the interest of promoting international comity it seems the forum for this case is in the U.S. Bankruptcy Court. Thus, in either case, whether there has been an attornment or not, I conclude it is appropriate for me to exercise my discretion and apply the principles of comity and grant the Defendant's stay application. I reach this conclusion based on all the circumstances, including the clear wording of the U.S. Bankruptcy Code provision, the similar philosophies and procedures in Canada and the U.S., the Plaintiffs' attornment to the jurisdiction of the U.S. Bankruptcy Court, and the incredible number of claims outstanding. Lastly, while not determinative, I found it significant that there has been acceptance of the Plan in Ontario and Quebec. This not only suggests that the Plan proposes a reasonable offer, but it also suggests that the parties affected in these provinces have accepted the principle that international comity should be recognized in these proceedings.

DATED at Calgary, Alberta, this 10 th day of July, 1998.

______________________________

J. C.Q.B.A.

COUNSEL:

G.J. Bigg for Plaintiffs

K.M. Eidsvik for Defendant, McGhan Medical Corporation

F. Foran, Q.C. for Defendant, Dow Corning Corporation

J. Shriar for Defendants, Picture Butte Municipal Hospital and St. Michael's General Hospital

P. Leveque for Defendant, Dr. Tom Melling