Dow Corning Corp. and negotiators for women with silicone breast implants have tentatively agreed to a $3.2 billion bankruptcy-reorganization plan for the company that would compensate thousands of women and bring to a close most of the bitterly contested litigation that has spanned nearly a decade.
People familiar with the negotiated settlement, which could be announced by a U.S. bankruptcy court in Bay City, Mich., as early as Wednesday, said that the $3.2 billion would be paid out to about 400,000 women far more quickly than under an earlier proposal by Dow Corning that called for a payment of $3 billion. Under the deal, through which Dow Corning would end its three-year stay in Chapter 11 bankruptcy protection, women could get compensated for immune-system illness allegedly caused by silicone, plus receive monetary payments as compensation for ruptured implants. In addition, they could receive $5,000 payments to have the devices surgically removed.
The agreement is a skeletal one, and the talks could break down as further details are discussed. However, both sides have already signed an agreement in principle circulated by Duke University law Prof. Francis McGovern, the court-appointed mediator who helped forge the deal. He was appointed to that role by U.S. Bankruptcy Judge Arthur Spector in Bay City. Prof. McGovern reports both to Judge Spector and U.S. District Judges Denise Page Hood in Detroit and Sam C. Pointer Jr. in Birmingham, Ala., who also supervise the implant litigation.
Further talks also still have to take place before commercial and other creditors of Dow Corning might agree to a deal, but the negotiations with the tort claimants have been by far the most difficult all along.
Description of Accord
The agreement was described as mirroring a November 1995 settlement reached by other corporate defendants, Baxter International Inc., Bristol-Myers Squibb Co. and Minnesota Mining & Manufacturing Co. In that settlement -- with which about 85% of women with those implants have agreed -- an average of $26,000 per woman has been paid out. Payments in the negotiated Dow Corning plan are described as about 20% larger, or averaging about $31,000 per woman for disease and disability compensation; payments would range from $12,000 to $60,000, people familiar with the talks said. However, additional payments for rupture and explant surgery also will be made. Payments for ruptures would average about $25,000 under the negotiated plan, the people said.
Dow Corning, a joint venture of Dow Chemical Co. and Corning Inc., is a thriving chemical company but has said it couldn't fight an estimated 19,000 lawsuits and stay in business without bankruptcy-court protection. The company didn't comment Tuesday. Dow Chemical and Corning would obtain legal releases from liability under the terms of the deal, although some lawyers said this provision might undergo legal attack, especially regarding Dow Chemical.
The talks were described as every bit as contentious as the litigation has been and even briefly collapsed Tuesday morning before each side signed on. And the litigation has been particularly contentious, with the sides still disagreeing over whether implants cause systemic illness. (There is less disagreement over ruptures, disfigurement and localized pain related to implants.) Prof. McGovern had to take the extreme step of writing his own last-minute, take-it-or-leave-it proposal and giving the two sides until noon Tuesday to agree to it.
'Funding Available Earlier'
Assuming the agreement holds together as details are hammered out, a detailed plan could be mailed out by this fall for a vote by women with Dow Corning implants. As far as the timing of actual payments, one participant in the talks said that "more funding would be available earlier than under Dow Corning's earlier proposal to ensure that claims can be addressed at the rate they are filed."
Under the plan, women who prefer to litigate rather than accept the payments may do so, but amounts available to those who litigate will be limited. Other women continue to pursue lawsuits against other manufacturers, though most of these have been settled by now.
One of the details still unspecified is the level of payments to lawyers in the negotiated settlement. In an earlier global settlement plan that collapsed in 1995, Judge Pointer had said that 25% of the total fund would be the ceiling on payments to lawyers.
McGovern's Role
The key figure in the settlement talks, Mr. McGovern, has played a similar role in mass torts and other complex cases over the years. He served in court-appointed roles in litigation over asbestos and the Dalkon Shield birth-control device. More recently, he served as a mediator over Native American treaty fishing rights and as a United Nations appointee arranging compensation to Kuwaitis for environmental and property damage stemming from the Iraqi invasion of Kuwait.
Over several months, he and a group of up to five negotiators for the two sides met in locations including Washington, Chicago, New York, and Charlottesville, Va., where Mr. McGovern has a farm. Many of the talks also were held in the Minneapolis area, because Dow Corning attorney David Bernick of the Chicago firm Kirkland & Ellis was in the middle of a trial in St. Paul, Minn., representing client Brown & Williamson Tobacco Corp. in a tobacco liability lawsuit brought by the state of Minnesota. New York attorney James L. Stengel represented Dow Chemical and Jill K. Schultz of Rochester, N.Y., represented Corning Inc., while the plaintiffs were represented by Atlanta's Ralph I. Knowles Jr. and Tommy Jacks of Austin, Texas.
During recent weeks, it frequently looked as if the sides wouldn't come to terms over money, timing or conditions of payments. However, both sides faced impending dangers and were entering what one negotiator termed a sort of "box canyon," with no exits. One concern facing the women, for instance, was that Judge Spector has always had the option of simply sending Dow Corning's earlier proposal out for a vote by the women. They also faced the possibility that a federal appeals court could reject all cases against Dow Chemical.
Also, a panel of doctors, appointed by Judge Pointer, is expected to issue a report later this year evaluating the scientific evidence for whether implants actually cause systemic illnesses. One person familiar with the talks said neither side wanted to roll the dice and have the entire case determined by that decision.
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