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Sealed Air Corp.’s move to settle asbestos claims avoids a lengthy and expensive trial the company probably would have lost. The company was scheduled to go on trial next week. Opposing pressures on both sides of the table likely led to a settlement, noted Sandra Myerson of law firm Holland & Knight. A rehearing scheduled for Feb. 19 by the 3rd U.S. Circuit Court of Appeals of an unrelated fraudulent conveyance case involving bankrupt Cybergenics Corp. could have given Sealed Air the ammunition it needed to get the case against it dismissed, she said. Still, few believe other companies facing similar lawsuits will now rush to settle. “While this settlement may make some people more optimistic [about filing fraudulent conveyance case], at the end of the day you have to look at the facts of the case,” said Peter Lockwood of Caplin & Drysdale, a law firm representing asbestos plaintiffs in the case of Sealed Air and several other large asbestos bankruptcies. Sealed Air’s last-minute settlement in its fraudulent conveyance lawsuit is the largest of this type of legal action connected to a company facing massive asbestos litigation. While other companies have offered larger payouts for personal injuries related to asbestos, these cases did not involve claims of fraudulent conveyance, which is often a secondary means for asbestos plaintiffs hoping to win damage awards. On Friday, Sealed Air, a Saddle Brook, N.J.-based maker of bubble wrap, offered to part with $512.5 million in cash, plus interest and 9 million shares in Sealed Air to settle with plaintiffs in W.R. Grace Co.’s Chapter 11 case. The package is worth $838 million based on Sealed Air’s close Monday at $36.25 per share. Sealed Air was sued over allegations that its 1998 acquisition of W.R. Grace packaging division Cryovac was a fraudulent transfer. The asbestos plaintiffs charged that W.R. Grace sold Cryovac for less than its market value to shield the unit from asbestos plaintiffs. Plaintiffs are already suing Grace in bankruptcy, but to connect their case with Cryovac, they also went after Sealed Air. There already have been two noteworthy settlements in fraudulent conveyance lawsuits involving companies bankrupted by asbestos lawsuits. One settlement was in a suit that targeted McDermott International Inc., the parent of bankrupt Babcock & Wilcox, and the second was in a case filed against bankrupt Celotex Corp. and its parent Walter Industries. A recent settlement between Babcock & Wilcox, McDermott and asbestos plaintiffs is worth about $182.5 million, and the 1993 settlement in the Celotex case was worth about $400 million, Lockwood said. The reason the Sealed Air case has resulted in the highest settlement is that it involves a larger transaction. The Cryovac acquisition was worth about $5 billion “The assets transferred were worth a lot more in the Sealed Air case,” Lockwood explained. But it’s unclear whether the large settlement will embolden others to bring similar lawsuits in other Chapter 11 cases. Lockwood noted that the personal injury committees he represents in large pending asbestos bankruptcies have already brought all the fraudulent transfer lawsuits “where we believed there was a basis of such a claim.” The Sealed Air fraudulent conveyance case drew much attention partly because Judge Alfred Wolin, who handles Grace and other major asbestos bankruptcies filed in Delaware, issued an opinion that made it easier for plaintiffs to prove their cases. Wolin’s ruling may have pushed Sealed Air to settle rather than pursue a risky court battle that could have wiped out the entire value of the company had it gone to trial and lost. Henrey Wasserstein of Sealed Air defense counsel Skadden, Arps, Slate, Meagher & Flom said the Wolin ruling played no part in Sealed Air’s decision to settle. “Even with that opinion out there we felt we would be able to prevail on the solvency of Grace,” he said. The opinion by Wolin, a U.S. district court judge in Newark, N.J., only applies to cases in the 3rd Circuit. In the case of bankrupt Cybergenics, a three-judge panel in the 3rd Circuit ruled that creditors can’t bring fraudulent conveyance lawsuits according to a strict reading of the Chapter 11 code. That ruling was recently vacated, but the entire 3rd Circuit will rehear the case on Feb. 19. If it rules that creditors indeed can’t sue for fraudulent conveyance, the decision would render the asbestos plaintiffs’ lawsuit against Sealed Air illegal. Fear of such a decision, as well as legislation in the Republican-controlled Congress limiting asbestos litigation awards, may have motivated the plaintiffs to settle, said Holland & Knight’s Myerson. “The best time to get a settlement was when there were competing tensions,” she said. In the only other pending fraudulent transfer case related to asbestos in this circuit, the defendant, former corporate executive Sam Heyman, has shown little sign of backing down even in the face of Wolin’s ruling, Lockwood said. Asbestos plaintiffs are suing Heyman, the former chairman of GAF Corp., for $988 million alleging that bankrupt GAF illegally transferred 96 percent of the shares in its subsidiary International Specialty Products to Heyman in 1997. “I haven’t seen any inclination on the part of Heyman to settle,” he said. Sealed Air’s board and the committee of personal injury plaintiffs and property damage plaintiffs must approve the settlement announced by Friday, according to Philip Cook, spokesman for Sealed Air. Copyright �2002 TDD, LLC. All rights reserved.

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