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BAY CITY, Mich. -- Dow Corning Corp. and lawyers representing breast implant claimants have agreed to accept a $3.2 billion settlement negotiated by a federal mediator.
The agreement, announced last Wednesday by U.S. Bankruptcy Judge Arthur Spector in Bay City, Mich., is $200 million more than Dow Corning had offered in February but $600 million less than claimants had sought.
Many of the payments, however, will be made sooner under the new settlement proposal, allowing women who seek "closure" to move on with their lives, one of the plaintiffs' lawyers said.
"More of the payments will be front-loaded, or we wouldn't have accepted the deal," said Elizabeth Joan Cabraser, a partner with Lieff, Cabraser & Heimann in San Francisco.
Still, the present-day cash value of the plan is estimated at $2.4 billion, about the same as Dow Corning's last offer.
So far, Dow Corning has reached settlements with its liability insurers totaling $1.2 billion. About half of that was in the form of cash payments, while the remainder is in the form of coverage-in-place agreements, according to Kevin Scroggin, Dow Corning's risk manager.
Meanwhile, the California Supreme Court late last week affirmed two lower court rulings shielding Dow Corning's parent company, Dow Chemical Co., from liability for breast implant claims. The court's action "can only serve to facilitate the resolution of breast implant claims in the Dow Corning bankruptcy reorganization process," John Scrivens, Dow Chemical vp and general counsel, said in a statement. Courts to date have dismissed Dow Chemical from more than 4,000 cases nationwide, according to the company.
Federal mediator Francis McGovern, a Duke University law professor, had given Dow Corning and the Tort Claimants Committee until July 7 to either accept or reject his compromise plan, which he called a "take-it-or-leave-it proposal."
The settlement will provide women with a range of options for settling their claims. Women may qualify for more than one settlement option based on the extent of their injuries. The options include: rupture, medical procedures such as implant removal surgery, various levels of qualified medical conditions, future symptoms and uninsured medical care. For example, a woman who has a rupture and a qualified medical condition can receive additional payments vs. those that just wish to have the implant removed.
The settlement trust will operate over a 16-year period, and women will retain their right to either settle or litigate their claims.
Dow Corning, a joint venture of Dow Chemical Co. and Corning Inc., filed for bankruptcy protection in 1995 as lawsuits over silicone gel breast implants mounted.
The company faces 177,000 breast implant claims worldwide from women who allege silicone gel leaked from their breast implants and made them sick.
But the company long has maintained that there is no scientific proof that silicone causes the immune-system ailments that implant recipients attribute to the devices.
Silicone implants were introduced in 1962 as a means of augmenting breast size or for reconstruction following mastectomy. After reports began surfacing about implant breakage and possible health effects in the early 1990s, the U.S. Food and Drug Administration restricted their use.
Earlier this year, Dow Corning presented to the bankruptcy court a revised $4.4 billion reorganization plan that included $3 billion to be paid to implant plaintiffs over a 16-year period. In its initial reorganization plan, Dow Corning had offered to pay implant recipients $2.4 billion (BI, Feb. 23).
In response to the company's February proposal, plaintiffs' attorneys filed a motion in the bankruptcy court seeking to present a competing plan that would have paid plaintiffs $3.8 billion over three years (BI, March 16).
But Judge Spector denied the plaintiffs' lawyers' request and appointed a mediator in an effort to bring the two sides closer together.
The federal mediator gave Dow Corning and plaintiffs until July 7 to accept a compromise settlement, complete details of which have not yet been released.
Judge Spector also extended the mediator's term so that he could work with the company and plaintiffs' lawyers to develop plan documents that will be presented to the court on or before Aug. 20.
At that time, the compromise deal will be made public.
Then plaintiffs and other creditors will be asked to vote on whether to accept or reject the deal, a process that will take about two months, a Dow Corning spokesman estimated.
If the plan is approved, Judge Spector will begin the confirmation process, during which time any last objections to the plan can be made.
If all goes according to schedule, Dow Corning should emerge from bankruptcy in early 1999, the spokesman said.
"While many of the details remain to be worked out over the next two months, this settlement is a breakthrough in an incredibly complex case," said Gary E. Anderson, president of Dow Corning, in a press release issued July 8.
"At a certain time in the controversy, both sides need to agree to disagree and look together to find common ground. We believe this complex case can be resolved faster and more fairly through consensus rather than through continued debate," he said.
The Tort Claimants Committee hadn't released an official comment late last week.
However, Ms. Cabraser said that the committee decided it was time to at least prepare a plan that could be voted on by the claimants.
"We've been fighting about plan issues since May of 1995. We've been attempting to negotiate a consensual plan for many months. The court appointed Francis McGovern to mediate that process. We were finally at a point where it was better to go with a plan that could be voted on rather than continue to fight for the next four to five years," she said.
"Our claimants would really like to see closure on this process," she added.
But even though all parties involved in the negotiations have agreed to settle, "the devil is in the details, and we still need to work out a lot of details on how the plan will be administered," Ms. Cabraser pointed out.
"So we'll have a lot of work to do before there's a completed plan to be presented to the bankruptcy court," she said. "We're going to spend the summer drafting it.'