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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE In re: Federal Mogul Global, Inc., et al., Debtors. (Bankruptcy Case No. 01-10578)(RTL)

THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS and ERIC D. GREEN, as the LEGAL REPRESENTATIVE FOR FUTURE ASBESTOS CLAIMANTS, Plaintiffs, v. ASBESTOS PROPERTY DAMAGE COMMITTEE, Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) )

Civil Action No. 05-59 JHR

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW This matter comes before the Court as a contested matter on the estimation of the aggregate value of the present pending and expected future asbestos personal injury and wrongful death claims 1 asserted against Turner & Newall Limited, a U.K. company, and its nonU.S. subsidiary companies (collectively "T&N"). The Court has reviewed the briefs and supporting materials filed by the Official Committee of Asbestos Claimants and Eric D. Green, as the legal representative for the future asbestos-related persona l injury claimants (together the "Plaintiffs") and the Asbestos Property Damage Committee (the "Defendant "); has listened to the oral arguments of all interested counsel; has heard and weighed the testimony of fact witnesses and expert witnesses who testified during the Asbestos Claims Estimation Hearing
1

All subsequent references to "asbestos personal injury claims" include wrongful death claims as well.
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held over five trial days beginning June 14, 2005; and has considered the exhibits and other evidence admitted into evidence at the hearing. No appearances were made by the Debtors, any of the other Official Committees in the Chapter 11 proceedings, the administrators appointed in the Debtors' U.K. insolvency proceedings (the "U.K. Administrators "), the trustees for the T&N Retirement Benefits Scheme (1989) (the "T&N Pension Trustees"), or any other U.S. or U.K. creditors. After due deliberation, the Court hereby makes the following Findings of Fact and Conclusions of Law: I. FINDINGS OF FACT A. Trial Testimony 1. The Court heard live testimony from Paul Hanly, Andrea Crichton, Dr. Laura

Welch, Barbara Dohmann, Q.C., Dr. Mark Peterson, and Dr. Robin Cantor. The testimony of three witnesses was presented by deposition or from a prior trial: William Hanlon, Michael Lynch, and Dr. Hans Weill. 2 2. Paul Hanly was the National Trial and Coordinating Counsel for T&N in the

United States from the early 1980s until T&N filed for bankruptcy in October 2001. Hr'g Tr. 47:5-11 (Hanly). He testified about the factual and legal bases of T&N's liability to U.S. personal injury claimants, and its history of litigation and settlement of asbestos personal injury claims in the United States. Mr. Hanly also offered testimony about T&N's past involvement in the Asbestos Claims Facility (the "ACF") and the Center for Claims Resolution, Inc. (the "CCR").
2

The parties designated and agreed to admit portions of the deposition testimony taken in this case of Messrs. Hanlon and Lynch. Dr. Hans Weill testified pursuant to an agreement between the parties to admit his prior trial testimony in In re Owens Corning, Case No. 04-CV-905 (D. Del. Jan. 18, 2005) (JPF). 2
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3.

Andrea Crichton is the U.K. Asbestos Claims Manager for T&N. Hr'g Tr.

142:22-24 (Crichton). She has assisted T&N's Group Solicitor (equivalent to general counsel) with all asbestos-related litigation in the United Kingdom since 1985 and has held her current position since 1994. Hr'g Tr. 144:5-20, 142:25-143:1 (Crichton). She testified about T&N's history of litigation and settlement of asbestos personal injury claims in the United Kingdom. 4. William Hanlon is an attorney and has served as outside counsel for the CCR

since 1989. 6/1/05 Hanlon Dep. Tr. 9:6-17. He testified about the operations of the CCR and specifically about T&N's involvement in the CCR. 5. George Michael Lynch is the Chief Financial Officer for Federal Mogul

Corporation and has held this position since 2000. 5/25/05 Lynch Dep. Tr. 10:4-23. Mr. Lynch testified about the company's budget and cash flow estimates for the payment of asbestos personal injury claims and its financial statement disclosures related to asbestos liability. Mr. Lynch also testified about T&N's involvement in the CCR and the adverse results T&N suffered as a "stand-alone" defendant in the tort system after the CCR disbanded in early 2001. 6. Dr. Laura Welch is the medical expert for the Plaintiffs and is a physician with

extensive experience in the diagnosis and treatment of asbestos-related diseases. Hr'g Tr. 185:25-186:24 (Welch). She is board certified in both Occupational Medicine and Internal Medicine. Hr'g Tr. 183:6-184:7 (Welch). Dr. Welch testified about issues relating to the epidemiology and diagnosis of asbestos-related diseases and the medical harm suffered by victims of such diseases. She also testified that functional impairment is not required to diagnose a nonmalignant asbestos-related disease. Hr'g Tr. 197:3-12 (Welch). 7. Dr. Hans Weill is the medical expert for the Defendant and has 35 years of active

involvement in the research and treatment of individuals occupationally exposed to asbestos and

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other airborne inhalants. 1/18/05 Weill In re Owens Corning Hr'g Tr. 45:17-20. He is an expert in pulmonology and occupational lung disease. 1/18/05 Weill In re Owens Corning Hr'g Tr. at 46:13-14. Dr. Weill also testified about issues relating to the diagnosis and epidemiology of asbestos-related diseases. 8. Barbara Dohmann is a London-based barrister and Queen's Counsel. Hr'g Tr.

329:10-330:1 (Dohmann). She has extensive experience in choice of law issues and provided expert testimony concerning what law, under English choice of law principles, would govern the claims of U.S. residents brought against T&N resulting from exposure to T&N asbestos and asbestos-containing products in the United States. Hr'g Tr. 333:5-14 (Dohmann). 9. Dr. Mark Peterson is an acknowledged expert in the field of mass tort estimation,

including asbestos personal injury claims estimation. Hr'g Tr. 374:24-377:14 (Peterson). He is the Plaintiffs' asbestos personal injury claims estimation expert and testified as to the fair value of T&N's asbestos personal injury liabilities as of October 1, 2001 (the "Petition Date") in the United States and in the United Kingdom. 10. Dr. Robin Cantor is an econometrician and statistician, but does not have

substantial experience with asbestos personal injury liability. She is the Defendant's asbestos personal injury claims estimation expert. She testified as to the total net present value of indemnity costs for pending and future claims against T&N in the United States. Dr. Cantor did not estimate the value of asbestos personal injury claims filed against T&N in the United Kingdom. B. History of T&N's Involvement with Asbestos-Containing Products 11. T&N is a wholly-owned subsidiary of Federal Mogul Global, Inc. ("Federal

Mogul"), which was acquired by Federal Mogul in March 1998 when Federal Mogul purchased 4
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100 percent of its stock. T&N was formed by the Turner family and the Newall family in England in 1920. Hr'g Tr. 61:18-21 (Hanly). As early as 1921, T&N knew of the dangers of asbestos and failed to warn or otherwise protect its workers. See Hr'g Tr. 86:10-87:4 (Hanly). (1) United States Liability 12. T&N's liability for asbestos personal injury claims in the United States primarily

arose out of four areas of its historical businesses: (a) its manufacture and supply of Sprayed Limpet Asbestos ("Limpet"); (b) its supply of raw asbestos fiber from 1934 to 1962 to its former subsidiary Keasbey & Mattison Co. ("Keasbey"); (c) its brokerage of raw asbestos fiber to companies other than its own subsidiaries; and (d) the manufacture and supply by its U.K. subsidiaries, acting as its agent, of finished products containing asbestos. Hr'g Tr. 53:7-13, 54:1-3, 56:9-12, 59:1-60:3 (Hanly). The basic cause of action asserted against T&N by asbestos personal injury plaintiffs in the United States was breach of the duty to warn of the dangers caused by its asbestos-containing material. Hr'g Tr. 63:23-64:4 (Hanly); PEX 22, ¶ 22 (Hanly Statement of Factual Assumptions). (a) Limpet 13. Limpet, which was invented by T&N in 1931, was distributed throughout the

United States from 1934 through 1974. Hr'g Tr. 56:16-18 (Hanly). It was a process of spraying a mixture of asbestos and cement onto surfaces. Limpet was made of pure asbestos ­ either amosite or crocidolite, but never chrysotile ­ and it had the greatest asbestos content of any product in the United States. Hr'g Tr. 56:18-20, 56:23-57:4 (Hanly). Limpet was typically used for fireproofing, thermal insulation, acoustical insulation and correction, condensation control, and decorative finishes. See Hr'g Tr. 56:13-16 (Hanly).

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14.

T&N's liability in Limpet cases arose from allegations that a plaintiff either was a

part of the spraying process, a bystander to the spraying process, or was exposed to the clothes of someone who was heavily exposed on a regular basis to the spraying process. DEX 34 at 32 (Disclosure Statement). (b) Keasbey 15. T&N purchased Keasbey in 1934. Hr'g Tr. 54:6 (Hanly). Because of Keasbey's

extensive involvement in the mining, manufacture, and sales of asbestos and asbestos-containing products, Keasbey was known as a "mini Johns-Manville." Hr'g Tr. 54:4, 55:23-56:4, 104:1-6, 104:25-105:2 (Hanly). Keasbey manufactured and sold throughout the United States between 1934 and 1962 every variety of asbestos-containing product, including Limpet, textiles, insulation, cement pipe, and building materials. Hr'g Tr. 54:6-7, 55:24-56:4 (Hanly). In 1962, T&N sold Keasbey's assets and discontinued Keasbey's business. 16. In the late 1980s asbestos plaintiffs discovered evidence that T&N was the

supplier of raw asbestos fiber to Keasbey and bega n to assert claims against T&N based on its status as a fiber supplier to Keasbey. Hr'g Tr. 55:5-20 (Hanly). After 1988 or 1989, T&N's payments to resolve claims based on exposure to Keasbey's products or asbestos fibers were thus based on T&N's status as a fiber supplier. Hr'g Tr. 55:14-20 (Hanly). 17. Although prior to the late 1980s some plaintiffs pursued T&N for Keasbey

exposures on the theory that it was the legal alter ego of Keasbey and therefore responsible for its products, Hr'g Tr. 54:6-19, 104:11-14 (Hanly), very few claims were ever settled based on alter ego or similar theories of liability, and none on such a basis after the 1980s. Hr'g Tr. 54:2355:2, 55:14-20 (Hanly).

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(c) Fiber Supply 18. T&N owned asbestos mines and mining interests in southern Africa and Canada.

Hr'g Tr. 53:8-10 (Hanly). T&N sold substantial quantities of raw asbestos fiber to companies in the United States, including Johns-Manville. Hr'g Tr. 53:9-11 (Hanly). T&N also used the asbestos fiber it mined in its own manufacture of asbestos-containing products. Hr'g Tr. 53:1213 (Hanly). 19. T&N was named in asbestos personal injury cases by U.S. plaintiffs who claimed

to have been exposed to its asbestos fiber either during the manufacturing process or during the transportation process. Hr'g Tr. 53:16-19 (Hanly). T&N was also sued by end-users of finished asbestos products manufactured by other companies, on the theory that the fiber in such products was supplied by T&N. Hr'g Tr. 53:20-22 (Hanly). 20. Although plaintiffs sometimes alleged T&N was responsible for their asbestos

injuries based on civil conspiracy or concert of action theories of liability, Hr'g Tr. 57:11-15 (Hanly), T&N never paid money to settle a claim based on a conspiracy or concert of action theories of liability. Hr'g Tr. 57:23-58:5 (Hanly). 21. In the early 1900s, T&N and Manville formed a joint venture, named Turner

Manville, Ltd., for the distribution of asbestos-containing products in the United States and United Kingdom. Hr'g Tr. 58:9-13 (Hanly). As a result of this joint venture, which still exists, T&N could also be directly liable for exposure to Johns-Manville asbestos-containing products. See Hr'g Tr. 58:9-24 (Hanly). (d) Supply of finished products by U.K. agency companies 22. T&N had a number of U.K. subsidiaries which manufactured finished products

containing asbestos and marketed them in the United States. These subsidiaries were often

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named in claims by U.S. claimants. Based on the agency relationship that existed between T&N and these U.K. subsidiarie s, T&N determined that the parent was responsible for all claims against any of the T&N U.K. subsidiaries. Hr'g Tr. 59:8-60:17 (Hanly). T&N filed a standard affidavit in connection with every Fed. R. Civ. P. 12 or its equivalent motion stating that the defense was being tendered on behalf of T&N (the parent) and the U.K. subsidiaries. Hr'g Tr. 60:4-17 (Hanly). When settling claims, T&N never allocated the payments between parent and the particular U.K. subsidiary that had made or sold the asbestos to which the plaintiff was exposed. Hr'g Tr. 59:8-60:3 (Hanly). 23. Two of the T&N U.K. subsidiaries that were a source of claims were TBA

Industrial Products Ltd. and Ferodo U.K. Hr'g Tr. 60:18-61:1, 61:12-25 (Hanly). TBA Industrial Products Ltd. was named in more than 75 percent of the claims against T&N in the United States Hr'g Tr. 62:1-7 (Hanly). Approximately 1 to 5 percent of the claims filed against T&N in the United States named Ferodo U.K. as the defendant responsible for their injuries. Hr'g Tr. 61:7-11 (Hanly). (2) United Kingdom Liability 24. T&N's liability for the vast majority of asbestos personal injury claims in the

United Kingdom was based on negligence/failure to provide a reasonably safe workplace theories and were asserted by T&N employees that had worked in the production and application of T&N's asbestos-containing products. Hr'g Tr. 153:5-7, 160:6-25 (Crichton). T&N also faced claims from the families (usually a wife or child) of T&N employees for household exposure; persons living in the vicinity of T&N factories for environmental exposure; and contract workers hired by T&N. Hr'g Tr. 153:17-154:7 (Crichton). There were also a small number of product

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liability claims, which were typically brought by employees of small construction companies that used T&N products. Hr'g Tr. 154:17-25 (Crichton). C. Asbestos Personal Injury Claims 25. The claims filed against T&N in both the United States and United Kingdom were

for a variety of diseases caused by exposure to asbestos, including mesothelioma, lung cancer, and nonmalignant diseases, such as asbestosis and pleural plaques and thickening. Hr'g Tr. 70:5-7 (Hanly), 155:7-11 (Crichton). In a very small number of U.S. cases, claims were also brought for other cancers caused by asbestos exposure, such as esophageal, pharynx, larynx, colon, and gastrointestinal cancers. Hr'g Tr. 70:7-10 (Hanly); see also id. at 173:25-174:14 (Crichton). (1) Mesothelioma 26. Mesothelioma is a rare cancer that arises in the pleura (the lining of the lung) or

the peritoneum (the lining of the abdomen). The latency period for the disease is usually 30 to 40 years from first exposure, although there is no upper limit. Hr'g Tr. 255:5-10 (Welch); 1/18/05 Weill In re Owens Corning Hr'g Tr. 54:13-24. Mesothelioma is impossible to treat and is usually fatal within 18 months of diagnosis. See PEX 6 at 3 (HSE Dec. 2003 Report). The only epidemiologically-established cause of mesothelioma is asbestos exposure. Hr'g Tr. 269:610 (Welch); see 1/18/05 Weill In re Owens Corning Hr'g Tr. 53:6-19. Mesothelioma is caused by exposure to all types of asbestos and can result from a limited exposure, such as working in a shipyard for a few months or living with a worker exposed to asbestos at work. Though the reason is unknown, many claims involving Limpet were mesothelioma claims. Hr'g Tr. 56:2022 (Hanly).

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27.

The National Cancer Institute's SEER data allows one to compute the number of

mesothelioma deaths in the United States each year. Hr'g Tr. 270:6-22 (Welch). According to Drs. Weill and Welch, based on SEER data there are currently about 2,800 new mesothelioma cases in men each year, plus several hundred additional cases in women. Hr'g Tr. 270:23-271:1 (Welch); 1/18/05 Weill In re Owens Corning Hr'g Tr. 118:15-119:3. The incidence of mesothelioma in the United States has not yet reached its peak, but the rate is slowing. Hr'g Tr. 283:14-18 (Welch). Even according to Dr. Weill, the Defendant's expert, any perceived decline in mesothelioma incidence rates between the mid 1990s and now is not statistically significant. PEX 62 (Weill Mesothelioma Article at 439); 1/18/05 Weill In re Owens Corning Hr'g Tr. 11819. 28. In 1982, researchers at Mt. Sinai Hospital in New York published the seminal

epidemiological projections of the future incidence of asbestos-related cancers (mesothelioma, lung cancer, and other cancers) in the United States. Nicholson, et al., Occupational Exposure to Asbestos: Population at Risk & Projected Mortality ­ 1980-2030, AM. J. INDUS. M ED. 3:259-311 (1982), PEX 5 (the "Nicholson Study "). See Hr'g Tr. 494:14-495:12 (Peterson). Both estimation experts based their projections of future asbestos-related cancer claims to some extent on the mesothelioma projections of Dr. Nicholson, et al., using either the projections as stated in Dr. Nicholson's original peer-reviewed 1982 paper (PEX 5) or as subsequently modified. The SEER data confirms that Dr. Nicholson's original projections for mesothelioma incidence in the United States have proved to be remarkably accurate over a long period of time. PEX 4 at slide 30 (Peterson Demonstratives); compare PEX 2 at Appendix A-1 (Peterson Nov. 2004 Report, Nicholson Projections) with Hr'g Tr. 270:23-271:1 (Welch testimony that there are 2,800 new cases of mesothelioma each year in the United States in men alone).

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29.

The Health and Safety Executive of Great Britain ("HSE"), which is responsible

for the regulation of health and safety risks arising from work activity in Great Britain, published a report predicting the future burden of mesothelioma in Great Britain. See PEX 6 (HSE Dec. 2003 Report). HSE's Epidemiology and Medical Statistics Unit ("EMSU") publishes annually the number of deaths and other statistics on mesothelioma in Great Britain. Id. at 3. Based upon the EMSU data, HSE found that the number of mesothelioma deaths in Great Britain has risen fairly constantly over time from 153 deaths in 1968 (the first year for which the data was collected) to 1,848 deaths in 2001. Id. In addition, based on EMSU's data, HSE estimated that the total number of mesothelioma deaths in Great Britain (male and female) is expected to peak at a level of 1,950 to 2,450 during the period 2011 to 2015. Id. at 7. (2) Lung Cancer 30. Asbestos exposure causes lung cancer. Hr'g Tr. 249:19-21 (Welch). Lung cancer

is incurable in 90 percent of cases at the time of diagnosis. Those diagnosed with lung cancer usually die within five years. See Hr'g Tr. 204:13-18 (Welch). Numerous studies show that there is a dose-response relationship between exposure to asbestos and the risk of lung cancer, with increasing exposure leading to increasing risk of disease. Hr'g Tr. 250:13-14, 251:3-252:24 (Welch); PEX 27 (Helsinki Criteria); PEX 35 (Henderson Study). Workers with asbestosis have a four-fold increased risk of developing lung cancer than asbestos-exposed workers without asbestosis. Hr'g Tr. 203:24-204:12 (Welch); 1/18/05 Weill In re Owens Corning Hr'g Tr. 102:14-25. However, a diagnosis of asbestosis is not a necessary intermediary for development of asbestos-related lung cancer. Hr'g Tr. 249:22-250:9 (Welch); PEX 27 (Helsinki Criteria); see also Hr'g Tr. 84:14-85:1 (Hanly).

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(3) Nonmalignant Diseases 31. The pleura is a thin lining that surrounds the lung. There are two pleural layers,

one on the chest wall and one on the lung. The pleura allows the lung to expand easily inside the chest wall. When asbestos fibers are breathed into the lung, they are transported to the outside of the lung into the pleural space. This causes scars to form in the pleural lining. When these scars reach a certain size they are visible on chest x-rays. A majority of persons with heavy exposure to asbestos develop some kind of pleural scarring. Pleural scars are described as pleural plaques, pleural thickening, diffuse pleural thickening, pleural fibrosis, and pleural asbestosis. Most pleural scars alone do not cause enough loss of lung function to cause a disability, but even a small loss may be significant if combined with other impairments. Some types of pleural scarring do cause a significant loss of lung function. Hr'g Tr. 203:18-204:2 (Welch). 32. Asbestosis, also known as parenchymal asbestosis or pulmonary asbestosis,

occurs when asbestos exposure causes scar formation in the substance of the lung itself. These scars interfere with lung function because they block the transport of oxygen from the air in the lungs into the blood vessels that travel through the lungs. Oxygen can only cross the membranes if they are thin; asbestosis causes them to thicken. Asbestosis also makes the lungs stiffer, which results in a decrease in lung volume and an increase in the energy needed for chest expansion. As a general rule, the greater the exposure to asbestos the more likely the disease is to be present and the more severe the scarring. Some people's bodies form scars more readily than others, so there is also a range in the severity of the disease after similar levels of exposure to asbestos. PEX 24 at 7 (Welch Report). 33. Both medical experts testified that functional impair ment is not required for a

diagnosis of asbestos-related nonmalignant disease such as asbestosis. Hr'g Tr. 197:3-12

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(Welch); 1/18/05 Weill In re Owens Corning Hr'g Tr. 61:11-13, 101:16-19. The 2004 American Thoracic Society Statement on the Diagnosis and Initial Management of Nonmalignant Diseases Related to Asbestos, PEX 25 (the "2004 ATS Statement "), which provides medical personnel with guidelines for diagnosing nonmalignant asbestos-related diseases, also acknowledges that asbestos can cause real harm without functional impairment. PEX 25 at 691 (2004 ATS Statement); Hr'g Tr. 199:3-12 (Welch). Specifically, the 2004 ATS Statement provides: Demonstration of functional impairment is not required for diagnosis of nonmalignant asbestos-related disease, but where present should be documented as part of the complete evaluation. PEX at 691 (2004 ATS Statement); see also Hr'g Tr. 199:9-200:3 (Welch). 34. Although nonmalignant asbestos diseases cannot be cured, persons who are

diagnosed with them should receive annual medical evaluations that include x-rays and pulmonary function tests. Hr'g Tr. 205:6-206:3 (Welch). Dr. Welch testified that these tests cost a patient about $800-$1,000 per year. Hr'g Tr. 205:25-206:3 (Welch). 35. Both medical experts testified that asbestosis can exist even when a person has a

normal chest x-ray on an ILO scale. Hr'g Tr. 201:16-202:75 (Welch); 1/18/05 Weill In re Owens Corning Hr'g Tr. 75:7-13, 101:20-22; see also Hr'g Tr. 202:8-11 (Welch); PEX 30 (Kippen Study). The 2004 ATS Statement reports that, among individuals with asbestosis confirmed by histolopathologic findings, 15 to 20 percent had no radiographic evidence of parenchymal fibrosis. PEX 25 at 696 (2004 ATS Statement); see also Hr'g Tr. 202:12-203:2 (Welch). Similarly, the 2004 ATS Statement reports that studies of large cohorts have shown a significant reduction in lung function attributable to pleural plaques, averaging about 5 percent of FVC, even when there is no radiographic evidence of asbestosis. PEX 25 at 705 (2004 ATS Statement).

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36.

Like mesothelioma, asbestos-related nonmalignant diseases have very long

latency periods; the median latency period for such disease is 30 to 40 years after first exposure to asbestos. See 1/18/05 Weill In re Owens Corning Hr'g Tr. 106:6-12. The incidence and prevalence of asbestosis is still increasing. See Hr'g Tr. 261:8-17 (Welch). According to the most recent government data, asbestosis deaths and hospital discharge diagnoses of asbestosis consistently rose over the decade 1990-2000, reaching a high of 20,000 asbestosis-related hospitalizations in the year 2000. PEX 33 at 3-4, 15 (CDC/NIOSH Report); see also Hr'g Tr. 259:4-261:7 (Welch). D. Turner & Newall's Litigation History (1) United States 37. Paul Hanly and his law firms were the primary outside defense counsel for T&N

in the United States asbestos personal injury litigation for over 20 years, from 1982 until T&N filed for bankruptcy protection in late 2001. Hr'g Tr. 47:6-11 (Hanly). The Court finds Mr. Hanly to be a credible witness; his testimony is corroborated by the testimony of Messrs. Hanlon and Lynch and was essentially unrebutted by the Defendant. (a) Pre-1985 38. T&N was named in its first asbestos personal injury case in the United States in

August 1977. Hr'g Tr. 47:6 (Hanly). Before 1985, T&N was a less prominent defendant in asbestos litigation. During this period, T&N was a "stand-alone" defendant and paid low dollar amounts to resolve claims. Hr'g Tr. 51:8-16 (Hanly). T&N's general strategy was to settle legitimate claims for the lowest amount possible in order avoid the risks associated with litigation. Hr'g Tr. 65:2-4, 65:25-66:3 (Hanly). In particular, jury verdicts tended to be high because the cases brought against T&N typically alleged serious injuries (mesothelioma or lung

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cancer); Limpet had a very high asbestos fiber content; and the documents regarding T&N's early corporate knowledge concerning the hazards of asbestos exposure made establishing liability for failure of the duty to warn very easy. Hr'g Tr. 85:20-87:3 (Hanly); see, e.g., PEX 7 (1931 T&N corporate document). (b) Asbestos Claims Facility 39. In June 1985, T&N joined the ACF, a consortium of asbestos defendants and their

insurers intended to reduce litigation expenses and achieve lower settlements costs. Hr'g Tr. 49:6-10 (Hanly). ACF was the defense claims handling organization that preceded the CCR. Hr'g Tr. 49:6-12 (Hanly). After only a few years, internal disputes arose and the ACF was dissolved. Hr'g Tr. 49:22-23 (Hanly). (c) Center for Claims Resolution, Inc. 40. In 1988, following the collapse of the ACF, T&N joined the CCR. Hr'g Tr.

49:22-24 (Hanly). All of the CCR members were former members of the ACF. See Hr'g Tr. 50:6-10 (Hanly); 6/1/05 Hanlon Dep. Tr. 15:21-24. Similar to the ACF, the CCR sought to minimize the expense of litigation and increase its members overall bargaining power with plaintiffs. Hr'g Tr. 50:10-12 (Hanly). Initially, the CCR was an "all pay" regime whereby each member paid a portion of the claim that was either settled or went to verdict, regardless of whether a particular member was named, so long as at least one member was named. Hr'g Tr. 68:24-69:6 (Hanly). 41. In 1991, the CCR became a named-party only regime (only those members named

in a complaint paid). Hr'g Tr. 74:8-14 (Hanly); 6/1/05 Hanlon Dep. Tr. 32:19-33:6. Under the named-party only regime, the cost for each settled claim was divided among the CCR members named in the lawsuit based on "share allocations," which were assigned to each member based

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upon the alleged occupational category or jobsite. Hr'g Tr. 73:8-22 (Hanly); 6/1/05 Hanlon Dep. Tr. 36:13-37:1. The share allocations were calculated based upon the past settlement averages of each member as well as the production and sales history of each member, including the types of asbestos-containing products sold by a particular member, where the products were sold, and how the products were used. See Hr'g Tr. 75:12-76:3 (Hanly); 6/1/05 Hanlon Dep. Tr. 37:3-10, 124:17-128:20. The underlying purpose of the share allocations was to provide a fair sharing of costs for each asbestos personal injury complaint that reflected the relative liability of each CCR member. Hr'g Tr. 76:4-10 (Hanly); 6/1/05 Hanlon Dep. Tr. 40:13-24. Share allocations were adjusted fairly regularly and each member could petition for share review. Hr'g Tr. 74:15-75:11 (Hanly). There was a formalized process for share allocation changes provided for in the CCR Producer Agreement and an outside law firm managed the share allocation adjustment process. Hr'g Tr. 74:15-76:3 (Hanly); PEX 3 (CCR Producer Agreement); 6/1/05 Hanlon Dep. Tr. 38:1639:11. 42. Before paying a claim, the CCR required evidence of asbestos-related disease and

proof of exposure to the asbestos-containing product of at least one CCR defendant- member named in the plaintiff's complaint. See Hr'g Tr. 68:13-18 (Hanly); 6/1/05 Hanlon Dep. Tr. 108:17-110:9; see, e.g., PEX 52 (February 2000 Settlement Agreement). The evidence requirements for settlement varied by jurisdiction and settlement agreement, but in general these two basic settlement requirements remained constant. See Hr'g Tr. 69:20-25 (Hanly); see also PEX 20 (Sept. 1998 Settlement Agreement); PEX 52 (February 2000 Settlement Agreement). Although some settlement agreements paid more money to claimants who could show lung function decline on pulmonary function tests, such tests were not required to establish an

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asbestos-related disease in the tort system. 6/1/05 Hanlon Dep. Tr. 73:23-74:19; see also Hr'g Tr. 85:17-20 (Hanly). 43. Claims with the requisite evidence of exposure to the product of at least one CCR

member did not require additional proof of exposure to each and every defendants' products before the CCR attempted to settle the case with the plaint iff. See 6/1/05 Hanlon Dep. Tr. 28:829:6. Instead, the CCR would attempt to settle with the claimant for an aggregate dollar figure that represented the total liability of all CCR members named in the case (the "CCR Settlement Payment "). 6/1/05 Hanlon Dep. Tr. 28:8-29:6. If there was a settlement, then each CCR member named in the lawsuit would contribute its share allocation of the CCR Settlement Payment for that claim. 6/1/05 Hanlon Dep. Tr. 29:21-30:7. 44. This policy of "cross-subsidization" in which all CCR members that were named

in a lawsuit paid into the settlement of that claim (whether or not the plaintiff had yet provided evidence of exposure to the products of that member) was designed to allocate fairly overall the costs of claims in proportion to the CCR defendant's liability. The CCR chose not to require evidence of exposures to products of every CCR member that a claimant named in his/her lawsuit because the CCR did not want to undertake an expensive and internally divisive determination and then assess evidence about the relative responsibility among its members. As a result of this policy, T&N probably paid some claimants it would not have paid if it had remained outside the CCR, i.e., claims for which T&N was named in a lawsuit but the plaintiff may not have had sufficient evidence of T&N's liability. But in turn, T&N paid far less on average toward each settled claim because other members contributed to the settlement of claims for which T&N would have liability even in cases where those other members might have paid nothing if they had remained outside of the CCR; and T&N paid far less in the aggregate because

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the cost savings and reduced settlement amounts more than offset the cost of paying claims T&N would not have paid outside the CCR. See Hr'g Tr. 77:14-78:15 (Hanly); PEX 22, ¶ 5. CCR members believed that this cross-subsidization policy netted out, reflecting approximately what each member would have paid had contribution issues been thoroughly pursued, but it resulted in every member paying lower amounts in settlement, both on a case-by-case basis and in the aggregate, than they would have paid had they remained outside the CCR. Hr'g Tr. 77:8-78:15 (Hanly); PEX 22, ¶ 5. 45. In 1993, T&N and the other CCR members attempted to resolve their present and

future liabilities to asbestos personal injury claimants through a class action settlement (the "Georgine class action"). Hr'g Tr. 66:9-67:1 (Hanly); see Georgine v. Amchem Prods., Inc., 157 F.R.D. 246 (E.D. Pa. 1994). The class action settlement was filed in the Eastern District of Pennsylvania under Fed. R. Civ. P. 23. Georgine, 157 F.R.D. at 246. The concept was to create a class action mechanism by which all future asbestos personal injury claims filed against any CCR member would be resolved pursuant to the criteria set forth in the class action settlement agreement. Hr'g Tr. 66:14-24 (Hanly). As part of the class action proceeding, the district court entered an injunction prohibiting new claims from being filed against T&N. Hr'g Tr. 67:13-21 (Hanly) see also Carlough v. Amchem Prods., Inc. (sub nom Georgine v. Amchem Prods., Inc.), 1993 WL 144901 (E.D. Pa. May 5, 1993). 46. The Georgine class action settlement was approved by the district court.

Georgine, 157 F.R.D. at 315, 337-38. The settlement was appealed to the Third Circuit and the court exercised pendant appellate jurisdiction to review class certification. Georgine v. Amchem Prods., Inc., 83 F.3d 610 (3rd Cir. 1996). The Third Circuit reversed the class certification. Id.

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at 617, 634. The Supreme Court affirmed the Third Circuit's decision and vacated the injunction in June 1997. Georgine v. Amchem Prods., Inc., 521 U.S. 591, 629 (1997). 47. Following the Supreme Court's decision in June 1997 and the vacating of the

injunction, the CCR member defendants received large numbers of new claims, resulting from the build- up of unfiled claims during the four years the injunction was in effect. Hr'g Tr. 67:2568:7, 105:24-106:6 (Hanly); 6/1/05 Hanlon Dep. Tr. 79:9-13. In order to deal with the influx of new cases, the CCR implemented the Strategic Settlement Program (the "SSP"). 6/1/05 Hanlon Dep. Tr. 86:11-87:3. Under the SSP, cases were settled in large groups for the lowest amounts CCR could negotiate. 6/1/05 Hanlon Dep. Tr. 86:11-87:3. Notwithstanding this approach, T&N's settlement ave rages for mesothelioma continued to rise from $43,000 in 1997 to over $80,000 in 2000. PEX 4 at slide 9 (Peterson Demonstratives); DEX 2 at 18 (Cantor Supplemental Report). 48. In January 2001, T&N left the CCR for a number of reasons, including: its share

had dramatically increased, the number of members had decreased (declining from 20 members to 10), and it was clear the CCR was crumbling as members were defaulting or filing bankruptcy (and T&N had to pay others' shares). Hr'g Tr. 78:16-79:2 (Hanly); see also Hr'g Tr. 106:16107:1, 107:10-22 (Hanly). Mr. Lynch also testified that by changing strategies and leaving the CCR in 2001, Federal Mogul hoped to reduce the amount of cash it paid out to resolve asbestos personal injury claims. 5/25/05 Lynch Dep. Tr. 32:11-33:23. Subsequent events proved that Mr. Lynch's initial expectation was unrealistic and unachievable. (d) Post-CCR 49. After leaving the CCR, T&N became a more prominent asbestos defendant. T&N

could no longer share the costs of settling claims with other CCR members and was no longer

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protected by the relative obscurity it had maintained as one of 20 members of the CCR defense consortium. See Hr'g Tr. 77:14-78:15 (Hanly). In addition, the timing of T&N's departure from the CCR coincided with bankruptcy filings of a number of major asbestos defendants, which left T&N as one of the remaining available targets. See Hr'g Tr. 77:14-78:15 (Hanly). 50. T&N found itself facing tens of thousands of new claims with many cancer claims

fast approaching a trial date. It tried to verdict several mesothelioma claims with disastrous results. Nonetheless, T&N followed two basic requirements for paying a settlement to any plaintiff: (a) evidence sufficient to survive a motion for summary judgment of exposure to a T&N or Keasbey asbestos-containing product, or to the asbestos fiber supplied by T&N; and (b) evidence of a disease or condition caused by asbestos exposure (mesothelioma, lung cancer, certain other cancers, and nonmalignant conditions). Hr'g Tr. 79:10-17 (Hanly). 51. Despite the large volume of cases pending against it, T&N was able to defend

itself and to distinguish strong from weak cases. Hr'g Tr. 83:24-84:13 (Hanly). Indeed, Mr. Hanly testified that mass consolidations resulted in lower per case averages. Hr'g Tr. 81:14-21 (Hanly). Among the factors affecting settlement values were the severity of the plaintiff's disease, strength of exposure evidence, strength of medical evidence, identity of plaintiff's doctor supplying the diagnosis, identity of plaintiff's counsel; jurisdiction where the case was pending, ability of the plaintiff to obtain a trial date, the plaintiff's economic damages, and the history of asbestos defendants in the same jurisdiction Hr'g Tr. 79:18-80:23, 92:19-25 (Hanly). T&N was aware that some doctors' medical evidence was less credible than others in nonmalignant cases and took this into account in the values it would pay in settling a nonmalignant claim. Hr'g Tr. 80:9-19 (Hanly).

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52.

The amounts T&N paid in settlement to resolve claims against it (both as a stand-

alone defendant and in the CCR) were amounts that included only its own several share of the liability; T&N's payments did not include the share a plaintiff might recover from other defendants. Hr'g Tr. 76:4-77:7 (Hanly). 53. Mr. Hanly also testified that the T&N settlement amounts did not contain a

punitive damages component because "we priced cases . . . based on the strength of the product exposure evidence, the competence of the plaintiff's lawyer and, most importantly, or equally importantly, the significance or severity of the asbestos-related disease." Hr'g Tr. 92:14-25, 102:7-15 (Hanly); see also Hr'g Tr. 137:14-25 (Hanly). Indeed, there was only one punitive damages verdict against T&N in its entire history, which was returned in March 2001. Hr'g Tr. 92:3-10 (Hanly). The resulting judgment was bonded and paid in 2004 and was not even contained in the T&N claims database from which the experts made their projections. Hr'g Tr. 92:8-10 (Hanly). 54. After leaving the CCR, T&N experienced a significant increase in the number of

asbestos personal injury claims asserted against it and a sharp rise in its mesothelioma and lung cancer settlement costs. Hr'g Tr. 79:3-9, 81:22-82:10, 139:18-24 (Hanly); see also Hr'g Tr. 97:19-25 (Hanly); PEX 4 at slide 9 (Peterson Demonstratives); Hr'g Tr. 406:4-15 (Peterson). Mr. Lynch testified that T&N's experience as a stand-alone defendant after it left the CCR was a "nightmare." 5/25/05 Lynch Dep. Tr. 97:14-19. In the short period of time fo llowing leaving the CCR and before filing for bankruptcy, T&N resolved few nonmalignant claims (most in one settlement of 10,700 premises liability claims pending in Mississippi for $300 each), but largely focused on resolving the more serious mesothelioma claims. Hr'g Tr. 83:3-11 (Hanly). Mr. Hanly testified that the settlement values achieved in the nonmalignant cases were not

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sustainable and that he believed they would only increase. Hr'g Tr. 83:12-17 (Hanly). Indeed, by the end of 2001 Mr. Hanly had concluded that T&N's asbestos liability had increased greatly from what it had been as a CCR member. Hr'g Tr. 93:1-7 (Hanly). The rising number of claims and settlement values ultimately caused T&N and the Federal Mogul group of companies to file for relief under the Bankruptcy Code. See Hr'g Tr. 83:12-17 (Hanly). (2) United Kingdom 55. Due to significant differences in claiming behavior and the costs involved in

litigating products liability lawsuits in the U.S. and U.K. courts, as well as the significant ly lower population in the United Kingdom, T&N has historically been named in far fewer cases in the United Kingdom than in the United States. T&N rarely went to trial in the United Kingdom. Hr'g Tr. 151:17-152:11 (Crichton). Ms. Crichton testified that for the vast majority of claims in the United Kingdom, as in the United States, T&N had no defense and therefore T&N's policy was to settle legitimate claims as quickly as possible. Hr'g Tr. 152:10-11, 156:11-12 (Crichton). Overall, T&N was the primary asbestos personal injury defendant in the United Kingdom. Hr'g Tr. 167:7-11 (Crichton). 56. Under U.K. law, employers owe a non-delegable duty to their employees,

including the duty to provide a reasonably safe work environment. This was the basis upon which most U.K. claims were brought. Hr'g Tr. 160:15-161:4 (Crichton). Ms. Crichton testified that it was not difficult for a claimant, who was typically a T&N employee, to prove that T&N breached its duty towards the claimant. Hr'g Tr. 160:6-14 (Crichton). To prevail in a products liability action in the United Kingdom, claimants had to prove the elements of breach of the duty to warn, causation, and harm. Hr'g Tr. 161:1-4, 164:6-9 (Crichton).

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57.

In order to be compensated by T&N, claimants had to establish that they had a

disease caused by asbestos exposure and that they were exposed to asbestos dust through fault of T&N. Hr'g Tr. 159:15-22, 162:7-20 (Crichton). For employee claims, exposure was typically established through T&N's employment records simply by proving that the employee worked in a particular occupation or at a particular jobsite during a time that T&N knew asbestos exposure was likely. Hr'g Tr. 162:10-20 (Crichton). For non-employee claims, exposure was often established by the statement of the claimant, the statement of a colleague, or T&N's corporate documents. Hr'g Tr. 162:25-163:12, 163:21-164:5 (Crichton). In cases where defendants other than T&N were partly responsible for the claimant's exposure to asbestos, liability would be apportioned among the responsible defendants based on the proportional amount of time the employee worked for each defendant or around each defendant's asbestos operations. Hr'g Tr. 167:22-168:6, 168:19-169:6 (Crichton). 58. To prove the presence of disease, the claimant had to provide a report from a

doctor who specialized in asbestos diseases stating that the claimant had a disease caused by exposure to asbestos. Hr'g Tr. 164:10-165:12 (Crichton). T&N did not require any particular pulmonary function test score to settle a nonmalignant disease claim, but if the claimant had a measurable lung function decline T&N would pay more to settle the claim. Hr'g Tr. 169:7-22 (Crichton). For U.K. lung cancer claims, although T&N would generally require a diagnosis of underlying asbestosis, if the plaintiff came forward with medical evidence stating that the medical doctor attributed the lung cancer to asbestos exposure even though asbestosis was not present, T&N would usually accept such proof. Hr'g Tr. 165:4-12 (Crichton). E. English Law

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59.

Barbara Dohmann Q.C. is a barrister at the Bar of England and Wales and a

member of Blackstone Chambers, which is a leading set of barristers chambers at the London Bar. Hr'g Tr. 326:21-23 (Dohmann); PEX 37 at 27 (Dohmann Curriculum Vitae). She was called to the Bar in 1971 and appointed Queen's Counsel in 1987. Hr'g Tr. 329:10-330:1 (Dohmann); PEX 37 at 27 (Dohmann Curriculum Vitae). Ms. Dohmann has experience in a wide variety of areas of civil law, though her principal practice is in commercial law, which includes banking, insurance, reinsurance, and financial services. As part of her practice she frequently addresses questions of international conflicts of law and jurisdiction. Hr'g Tr. 333:514 (Dohmann). Ms. Dohmann appears regularly in the Appellate Courts, High Court (in both the Chancery Division and the Commercial Court, Queen's Bench Division), in arbitrations (as both Arbitrator and Counsel), and before regulatory and disciplinary tribunals. Ms. Dohmann provided expert testimony as to the choice of law for liability and for damages that would apply if T&N's asbestos personal injury liability for claims based on events in the United States were considered by an English court. 60. On questions of liability, the choice of law applicable to U.S. T&N asbestos

personal injury claims is governed by either the statutory provisions of the Private International Law (Miscellaneous Provisions) Act 1995 (the "1995 Act") or common law, although in the context of the U.S. claims against T&N the distinction will make no practical difference. For T&N asbestos personal injury claims in which both the exposure to T&N asbestos and the manifestation of an asbestos-related disease took place after May 1, 1996, the 1995 Act determines the applicable choice of law. Hr'g Tr. 342:20-343:2 (Dohmann). Under the 1995 Act, the general rule is that the applicable law for substantive issues is the law of the place where the victim was located when the injury was sustained. Thus, for asbestos personal injury claims

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in which both the exposure to T&N asbestos occurred in the United States and resulted in a personal injury claim against T&N after May 1, 1996, U.S. substantive laws would be applied by English courts. 61. For claims in which both exposure to T&N asbestos and the occurrence of an

asbestos-related disease occurred prior to May 1, 1996, English common law applies to the choice of law analysis. Under English common law, the cause of action for these claims would be considered to have arisen in the United States. See Hr'g Tr. 339:25-340:4 (Dohmann). Under Boys v. Chaplin, [1971] AC 356, which governs the choice of law when the cause of action arises outside of England, for an English court to apply foreign law to determine validity of foreign claims the claims must satisfy the rule of "double actionability" whereby the conduct complained of must be actionable as a tort according to English domestic law and must give rise to civil liability under the laws of the foreign jurisdiction (here, the United States), though the cause of action need not be defined in identical terms. See Hr'g Tr. 340:5-16 (Dohmann). In order to satisfy the double actionability rule, the nature of the asbestos claims and causes of action asserted against T&N in the United States must be reviewed in order to determine whether claims with exposure to T&N asbestos and evidence of asbestos-related disease are actionable in both the United States and the United Kingdom. 62. Based on the testimony of Mr. Hanly and Ms. Crichton, it is clear that the basic

causes of action asserted in asbestos personal injury claims and the nature of the proof required to establish liability are essentially the same in the United States and the United Kingdom. In both jurisdictions the causes of actions require proof of some fault or negligence on the part of T&N; evidence to prove an asbestos-related disease such as mesothelioma, lung cancer, asbestosis, or pleural disease; and exposure to the asbestos or asbestos-containing products of T&N. Hr'g Tr.

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340:17-341:18 (Dohmann); see also Hr'g Tr. 63:23-64:11 (Hanly); 161:1-4, 160:15-25 (Crichton). 63. Based upon this factual predicate, Ms. Dohmann testified that the asbestos

personal injury claims being asserted against T&N in the United States as described by Mr. Hanly would satisfy the double actionability requirement and that therefore a U.K. court would apply the law of the relevant U.S. jurisdiction to determine T&N's liability for asbestos claims asserted against it based upon exposure and injury that occurred in the United States. Hr'g Tr. 340:17341:18 (Dohmann). 64. Although it is unclear under English law whether the 1995 Act or common law

would apply to claims in which exposure to T&N asbestos occurred prior to May 1, 1996 and the asbestos-related disease manifested after May 1, 1996, in either case, as discussed above, the circumstances of the claims would be sufficient to give rise to liability in English courts. See Hr'g Tr. 342:14-343:9 (Dohmann). 65. The Court accepts Ms. Dohmann's testimony and finds that a Court in the United

Kingdom would apply the law of the relevant U.S. jurisdiction to determine T&N's liability for asbestos claims asserted against it based upon exposure and injury which occurred in the United States. Of course, this determination is for the purposes of this proceeding and the pending U.S. bankruptcy proceedings and the interpretation of U.K. law for purposes of the U.K. proceedings is a matter for the U.K. courts. 66. It is a basic principle of English law that matters of procedure are governed by the

law of the forum. Traditionally, it has been understood in England, on the basis of the judgments of the House of Lords in Boys v. Chaplin that quantification of damages is a procedural matter, and therefore governed by the law of the forum ­ i.e., English domestic law. Hr'g Tr. 343:10-

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344:8 (Dohmann). The 1995 Act did not explicitly change this. However, in 2004, Harding v. Wealands [2004] EWCA Civ 1735, the Court of Appeal called into question the traditional notion that quantification of damages should be considered a matter of procedure. In that case, which was subject to the 1995 Act, the Court of Appeal decided that a statutory cap on damages under the foreign law governing the tort was a substantive matter and therefore ought to be applied rather than the law of the forum. Hr'g Tr. 345:7-20 (Dohmann). The Court of Appeal gave leave to appeal to the House of Lords (the equivalent of the U.S. Supreme Court) and, in the ordinary course Harding is expected to be heard by the House of Lords in the latter half of 2005. Hr'g Tr. 347:18-348:3 (Dohmann). In view of the substantial criticism of the common law quantification of damages rule over the years, Ms. Dohmann testified that the House of Lords is expected to affirm the decision in the Harding case and may well reconsider the common law rule as well. Hr'g Tr. 348:22-349:10; 353:23-354:12 (Dohmann). If the House of Lords does not reconsider the common law question in Harding, Ms. Dohmann expressed the view that the questions will have to be reconsidered by the House of Lords in the T&N case when the question is presented by the U.K. Administrators or others parties in the United Kingdom as part of the U.K. insolvency proceedings. Hr'g Tr. 353:15-354:12 (Dohmann). 67. Ms. Dohmann gave several reasons for her opinion that the House of Lords would

ultimately determine that a U.K. court should apply U.S. law to the quantification of damages question presented by the asbestos personal injury claims arising against T&N in the United States. Firstly, the House of Lords has demonstrated its willingness to overturn established rules of procedural law where those rules are outdated or would result in injustice. In Miliangos v. George Frank Ltd. [1976] AC 443, the House of Lords discarded the then-well- settled rule that, as a matter of procedure and therefore of forum law, an English court could give judgments only

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in pounds sterling. The sterling rule, it was observed, had ­ because of exchange rate fluctuations ­ become a source of injustice where a claim arose in another country. Id. Similarly, two recent decisions by Australia's highest court, whose rulings are persuasive although not binding authority in English courts, stand for the proposition that the quantification of damages should be governed by the same law that governs liability. Régie Nationale des Usines Renault SA v. Zhang, (2003) 210 CLR 491; John Pfeiffer Pty. Ltd. v. Rogerson, (2000) 203 CLR 503; see also Hr'g Tr. 352:20-353:8 (Dohmann). In addition, the Council of the European Union has issued draft choice of law regulations which provide as a general rule that the law applicable to a tort or delict shall be the law of the country in which the damage occurs, and that the nature and assessment of damages will also be assessed according to the law of the country in which the damage occurs. Hr'g Tr. 349:21-351:24 (Dohmann). Although these regulations are still in draft form, and subject to further comment, Ms. Dohmann expressed the opinion that the approach in the draft regulations reflects "where our law is going." Hr'g Tr. 352:1-5; 353:21-354:12 (Dohmann). 68. This Court accepts that the law governing quantification of damages is in a state

of development or transition in England and accepts Ms. Dohmann's testimony and opinion that the House of Lords will ultimately decide that U.S. claims against T&N would be assessed and quantified, in an English insolvency, under the law of the U.S. jurisdictions where the injuries occurred, not under English law, regardless of whether the causes of action are considered under the 1995 Act or the common law. See Hr'g Tr. 354:13-16 (Dohmann). As with the choice of law for liability, this determination is for the purposes of this proceeding and the pending U.S. bankruptcy proceedings and the interpretation of U.K. law for purposes of the U.K. proceedings is a matter for the U.K. courts.

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F. Estimates of Liability 69. The estimation experts calculated T&N's aggregate asbestos personal injury

liability as the sum of (a) the estimated liability for claims pend ing but unresolved on the Petition Date plus (b) the present value of the estimated liability for claims that can be expected to be filed in the future. See Hr'g Tr. 409:14-410:1 (Peterson). Dr. Mark Peterson, the Plaintiffs' estimation expert, estimated the value of T&N asbestos personal injury liability for pending and future claims as of the Petition Date to be $11 billion in the United States and £229 million in the United Kingdom (approximately $400 million). Hr'g Tr. 523:5-11, 561:5-9 (Peterson). Dr. Cantor, the Defendant's estimation expert, estimated T&N's asbestos personal injury liability for pending and future claims to be approximately $2.5 billion in the United States. Hr'g Tr. 879:203 (Cantor). Dr. Cantor did not estimate the value of asbestos personal injury claims filed against T&N in the United Kingdom. 70. The asbestos personal injury estimation experts for the U.K. Administrators, EMB

Consultancy LLP ("EMB"), and the asbestos personal injury estimation experts for the T&N Pensions Trustee, Tillinghast Towers Perrin ("Tillinghast"), prepared reports reviewing a preliminary February 2004 asbestos estimation of Dr. Peterson. See Hr'g Tr. 562:4-11 (Peterson). The EMB and Tillinghast reports were entered into evidence only to show that Dr. Peterson considered them and reacted to the comments made by EMB and Tillinghast. 3 Hr'g Tr. 564:9-16, 565:2-7 (Peterson); see also PEX 14 (Peterson Supplemental Report).

3

EMB's forecast for the United Kingdom was almost identical to Dr. Peterson's and EMB adopted the same assumptions about the Nicholson Study (defined in ¶ 28) as Dr. Peterson. Hr'g Tr. 562:14-18 (Peterson). In conducting his review, Dr. Peterson discovered that, on the whole, EMB and Tillinghast agreed with his methodology. See Hr'g Tr. 562:19-563:24 (Peterson). Both EMB and Tillinghast agreed that the number of future claims against T&N would increase the propensity to sue T&N would increase and circumstances in changed litigation would increase the value of claims. See Hr'g Tr. 562:19-563:14 (Peterson). In addition, both EMB and 29
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(1) Dr. Peterson's Testimony 71. Dr. Mark Peterson is a lawyer and behavioral scientist by training who is a

nationally recognized expert on the valuation of asbestos personal injury liabilities. Dr. Peterson has experience as an expert witness in bankruptcy estimation proceedings and has projected asbestos personal injury liabilities in othe r contexts, including for trusts, defendants, insurers, and courts. Dr. Peterson has been recognized as an expert by a court, and his estimation of the number and value of asbestos personal injury claims has been accepted, in numerous cases, including: Eagle-Picher, National Gypsum, Babcock & Wilcox, Armstrong, Western Asbestos, H.K. Porter, E.J. Bartells Co., and Raytech. See, e.g., In re Babcock & Wilcox Co., Case No. 00-10992, slip op. 48, Docket No. 6133 (Bankr. E.D. La. November 9, 2004) (confirming plan of reorganization); In re Armstrong World Industries, Inc., et al., Case No. 00-04471, slip op. 4344, Docket No. 6255 (Bankr. D. Del. December 19, 2003), rev'd on other grounds, No. 00-4471, 2005 U.S. Dist. LEXIS 2810, at *1 (D. Del. Feb. 23, 2005) (same); In re National Gypsum Co., 257 B.R. 184, 198-99 (Bankr. N.D. Tex. 2000); In re H.K. Porter, Case No. 91-20468, slip op. 34, Docket No. 2624 (Bankr. W.D. Pa. June 25, 1998) (same); In re Eagle-Picher Indus., Inc., 189 B.R. 681, 686 (Bankr. S.D. Ohio 1995). 72. As he does in every case, Dr. Peterson started off his asbestos estimation analysis

work here by trying to understand in depth what drove the value of claims. He believes that in order to make a credible forecast, one must "appreciate the phenomenon you're studying," which required him to analyze the factors driving settlements in the court system as opposed to simply doing mathematical calculations on data. Hr'g Tr. 365:14-19 (Peterson). In his testimony, he outlined the following activities as his means to, as he put it, "get dirty with the data": Tillinghast included in their estimation methodologies an increasing propensity to sue. See Hr'g Tr. 563:5-6 (Peterson). 30
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· · · · · · · · · ·

consulting with the trustees for asbestos trusts and their staffs, consulting with asbestos plaintiffs lawyers, consulting with asbestos defense lawyers, consulting with other experts, consulting with and serving as an expert for judges, reading publications such as Mealeys, examining financial statements, speaking with asbestos victims, speaking with doctors who examine asbestos victims, speaking with union representatives.

Hr'g Tr. 372:6-374:4 (Peterson). 73. Dr. Peterson's methodology relies upon data drawn from T&N's pre-petition

claims experience (both within the CCR and afterwards as a "stand-alone" defendant), materials from other asbestos defendants, epidemiological projections of the incidence of asbestos-related cancers, and foreseeable trends and patterns in claiming behavior and settlement costs. See, e.g., Hr'g Tr. 399:14-400:13, 400:22-401:15, 408:5-22 (Peterson). Dr. Peterson made adjustments for changes that can be reasonably expected in the future and for anomalies in historical patterns. 74. To determine the liability for T&N's pending claims, Dr. Peterson first

determined the number of pending claims for each type of alleged disease (mesothelioma, lung cancer, other cancer, and nonmalignant disease) based upon information in the databases maintained by CCR and afterwards by T&N (collectively the "T&N Databases"). See Hr'g Tr. 410:2-12, 410:22-411:4 (Peterson). Dr. Peterson adjusted this universe of pending claims to account for claims historically resolved without payment and claims that were resolved at a

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lesser disease level than that originally claimed. Hr'g Tr. 414:24-413:11, 414:16-415:12 (Peterson). In order to facilitate the estimation, Dr. Peterson also imputed missing information for claims with incomplete information reported in the database, such as disease classification and settlement year. Hr'g Tr. 413:12-415:12, 417:23-418:15 (Peterson). 75. To value the pending claims, Dr. Peterson estimated what the average cost to

T&N would be for it to resolve each asbestos claim had it not filed for bankruptcy protection. Hr'g Tr. 408:14-15; see also id. at 416:12-15 (Peterson). Dr. Peterson used the information in the T&N Databases to calculate the historical settlement average for mesothelioma during 20002001, the two years immediately preceding the Petition Date (a "calibration period"). 4 Hr'g Tr. 427:3-7 (Peterson); see also id. at 432:3-4. The table below shows Dr. Peterson's calculation of T&N's mesothelioma and lung cancer settlement averages for the years 1998-2001: T&N Trends in Settlement Averages Year 1998 1999 2000 2001 Mesothelioma $46,608 $60,936 $86,606 $138,939 Lung Cancer $12,425 $12,179 $14,350 $18,956

PEX 4 at slide 9 (Peterson Demonstratives). 76. Dr. Peterson then considered the average trends in settlement values and the

factors driving those trends, such as T&N's increasing cost of settlement payments, T&N's loss of protection as a member of CCR in early 2001, the effect of the bankruptcies of other major defendants on T&N's liability, and the historic ratios of mesothelioma settlement averages to other types of disease claims across multiple defendants. See e.g., Hr'g Tr. 428:6-430:9, 432:134

Because, as Mr. Hanly testified, T&N only paid settlements to resolve its several share of the liability in each case, Hr'g Tr. 76:4-77:7, the database reflects only what T&N paid to resolve its several share of each case, not what a plaintiff receives from all defendants. Hr'g Tr. 417:2-12 (Peterson). 32
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22 (Peterson). Dr. Peterson also discussed T&N's litigation history and the impact of its departure from the CCR with Paul Hanly and his partners. Hr'g Tr. 429:2-430:9 (Peterson). 77. Based upon all of this information, Dr. Peterson calculated a conservative average

settlement value for mesothelioma ­ which was less than both the settlement average calculated based on the change in mesothelioma settlements values between 1998 and 2001 and the scheduled values in the trust distribution procedures ­ to use in forecasting T&N's liabilities. Hr'g Tr. 427:4-428:5 (Peterson); see also id. at 437:21-438:9. After determining the average settlement value for mesothelioma, Dr. Peterson determined the average settlement values for all other diseases using T&N's historic settlement ratios between settlement values for mesothelioma and those for lung cancer, other cancers and nonmalignant claims. Hr'g Tr. 434:9-21, 435:17-21 (Peterson); PEX 4 at slides 9-22 (Peterson Demonstratives). 78. As part of his ongoing work in the case between the preparation of his original

report and his testimony at trial, Dr. Peterson went back and tested his conclusions about T&N's average settlement values against the database. He found that where the settlement year was conclusively stated in the database as 2001 (i.e. without any data imputation issues), the settlement averages for mesothelioma and lung cancer were $194,051 and $29,836, respectively, which were almost exactly the averages he used in his preferred fo recast. Hr'g Tr. 433:16-440:7; PEX 4 at slides 20-21 (Peterson Demonstratives); DEX 92 (Peterson database excerpt). With respect to nonmalignan