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If U.S. District Judge Alfred Wolin is ultimately bounced from the massive five-company asbestos bankruptcy case before him, it won’t be because he went quietly without a fight. Wolin has been adamant and feisty in his refusal to step off the case, lodging briefs with the 3rd U.S. Circuit Court of Appeals that defend his case management methods and warn of crafty litigation strategy, delaying tactics and other self-serving purposes that might underlie a recusal motion filed 12 weeks ago by some creditors in the case. Following oral argument on Dec. 18, a three-judge appeals panel ordered the judge to gather more facts, rejecting the pleas of both Wolin and the creditors, who asked them to decide on the recusal without any more fact-finding. The judges also turned down the creditors’ alternative argument, that if the recusal is remanded, it go to a different judge. The panel of Circuit Judges Julio Fuentes and Leonard Garth, who both have their offices in the same Newark, N.J., courthouse with Wolin, and Judge D. Brooks Smith of Pennsylvania, remanded the mandamus motion back to Wolin. Judge Garth said the panel was reluctant to make the call without more evidence, adding that the circuit court believed Wolin could render an impartial decision. At that point the 3rd Circuit had already received numerous briefs and hundreds of pages of argument. At issue is Wolin’s creative case management — specifically, his appointment of a pair of advisers who for almost two years were simultaneously representing future claimants in another asbestos bankruptcy case. The creditors trying to oust Wolin say that those advisers, David Gross and former Superior Court Judge C. Judson Hamlin, are tainted as impartial advisers because of their advocacy in the unrelated matter — the Chapter 11 case of G-1 Holdings Inc., the former GAF Corp. Every dollar that is set aside for present and future claimants is a dollar less for the lenders, they argue. The challenging creditors, Kensington International Ltd. and Springfield Associates, argue that even if there is no actual bias, there is an appearance of one, which goes to the judge who is relying on their counsel. The petitioning creditors are owed $275 million by Owens Corning, one of the five companies in the consolidated case before Wolin, In re Owens Corning, No. 00-03837. Lawyers for the petitioning creditors, led by John Gibbons, a former 3rd Circuit chief judge, are pounding a related point in their recusal motion. They object to the ex parte meetings that Wolin has held with some parties, and with Hamlin and Gross, a partner with Newark’s Saiber, Schlesinger, Satz & Goldstein. Gibbons, a name partner with Gibbons, Del Deo, Dolan, Griffinger & Vecchione, chides Wolin in his brief for “appointing advisers he knew from the outset to be conflicted, not disclosing the conflict,” and for going beyond precedents in seeking a creative, alternative remedy to the multibillion-dollar litigation. Wolin’s search for a better way to manage the case was understandable. The five consolidated cases were shipped to him from the bankruptcy court in Wilmington, Del., in the fall of 2001 by then-3rd Circuit Chief Judge Edward Becker. The other four companies in the consolidated action are Armstrong World Industries Inc., W.R. Grace & Co., Federal-Mogul Global Inc. and USG Corp., the parent of U.S. Gypsum Corp. With potential claims of more than 1 million individuals, along with several billion dollars sought by creditors and other companies who allege they were also harmed by the asbestos products, Wolin retained a total of five advisers in December 2001, including Gross and Hamlin. Their roles have at various times been described by Wolin as that of special masters, hearing officers, case managers and functionaries akin to examiners in bankruptcy cases. TRUMPING TRANSPARENCY Wolin, who two years ago issued an order saying he would employ ex parte meetings to facilitate the complex litigation, defends that action today. In his second brief to the circuit court on Dec. 8 he argues that in cases such as this one, transparency can be trumped by the need to protect proprietary and sensitive information that could damage the company’s stock price. In his initial brief to the 3rd Circuit on Nov. 3, Wolin suggested that the unsecured creditors were filing an 11th-hour recusal motion because they feared he was about to rule against them on a key issue that would cost them $1 billion. Wolin cited case law relating to lawyers filing recusal motions as litigation strategy, delaying tactics or other self-serving purposes — including use of such a motion as a fishing expedition. Specifically, Wolin told the 3rd Circuit that the case was at the critical juncture on the issue of whether he would approve Owens’ request to consolidate all of its subsidiaries into the parent company, a move that would wipe out more than $1 billion in debt guarantees by those subsidiaries. Settlement negotiations on that issue took place over the summer and fall, but failed, leading to Wolin holding a four-week bench trial in early fall. It was shortly after that trial that the recusal motion was filed. How Wolin rules on the consolidation is critical to the shape of the plan of reorganization for Owens, which in turn may affect the reorganization plans of the other four bankrupt companies. The Owens plan has been proposed by its proponents, which include the company as debtor-in-possession as well as many of the claimants. AN ISSUE OF TIMING Crucial to the recusal issue is when the petitioning creditors discovered that Gross and Hamlin had for 22 months been in another courtroom in Newark before U.S. Bankruptcy Judge Rosemary Gambardella on the G-1 Holding case. Gambardella had appointed Hamlin as the representative for the future claimants in that case on Oct. 11, 2001, 11 weeks before Wolin named Hamlin and Gross as advisers in Owens. Shortly after Wolin’s appointment of his advisers, Hamlin retained Gross, a veteran of asbestos mass-tort cases on the defense side, to help him in the G-1 case. Those aiming to dump Wolin — which include the debtor USG, banks that are owed $2 billion, the unsecured creditors committee and the Washington Legal Foundation in an amicus brief — all maintain that the complaining creditors knew all along about the roles that Gross and Hamlin were playing in the G-1 case. Not only was their appointment in the G-1 case a matter of public record; it was reported in Mealy’s Asbestos Bankruptcy Report, they point out. In fact, argue lawyers for Owens, which backs the recusal motion, Mealy’s described Hamlin as the representative of the future claimants in the G-1 case when it reported Hamlin’s appointment by Wolin in Owens. They further claim that the Kensington and Springfield investment funds had to know about Gross and Hamlin’s representation in the G-1 case because the New York firm of Kramer Levin Naftalis & Frankel was representing creditors in both cases. Kramer Levin is counsel to Credit Suisse First Boston (CSFB), the agent for all the banks in Owens, as well as counsel to the entire Bank Group in the case. Many of the creditors are in both cases, argue Wolin’s detractors, who also say that Wolin never disclosed the G-1 appointments of Gross and Hamlin in the Owens case, which he should have done. But Kensington and Springfield counter with a declaration by Kramer Levin partner Kenneth Eckstein, who says that while his firm was monitoring the G-1 case for a creditor — Bear Stearns & Co. — the firm stopped the monitoring when the Bear Stearns matter was resolved. That was in July 2001, says Eckstein, adding that the last time entry was for Aug. 9, 2001, before Judge Gambardella named Hamlin in the case. The Kramer Levin partner admits that documents from the G-1 case may have continued to come it, but any pleadings after August were “reviewed only by a paralegal and sent to files,” he says. Owens lawyer Norman Pernick of Saul Ewing says he doesn’t buy that. He writes in his brief, “The Judicial process can hardly tolerate the practice of a litigant with knowledge and circumstances suggesting possible bias or prejudice holding back, while calling upon the court for hopefully favorable rulings, and then seeking when they are not forthcoming. … Only now, when petitioners fear an adverse ruling, do they resurrect old information.” But a lawyer representing the plaintiff firm of Baron & Budd, who has 1,750 claimants against Owens, calls the recusal motion nothing more than a “dilatory tactic” put forth by those “irredeemably opposed to the plan of reorganization.” Another supporter of the judge, the Dallas-based plaintiff firm of Water & Kraus, labels the recusal effort as “extravagant … [and] much to do about nothing.” The firm’s lawyer, Neal Levitsky of Fox Rothschild O’Brien & Frankel, wrote that Gross and Hamlin were simply doing what they are required to do as ethical lawyers by advocating for the claimants in the G-1 case. “Whether their interests coincide with their individual views, or whether they hold individual views on the matters in which they fulfill their professional responsibilities, is immaterial beyond the purview of this proceeding,” wrote Levitsky. WOLIN URGES WARINESS For his part, Wolin in his Dec. 8 reply cautioned the 3rd Circuit to be wary of the creditors’ motives. Noting that Gross and Hamlin are prominent lawyers working on the record in both cases, the judge wrote, “If a party had a concern over their bona fides, and accepting for the moment petitioners’ claim of ignorance of the facts, it would have been possible with a modicum of effort to lay bare the entire careers of Messrs. Gross and Hamlin. Without pre-judging the ultimate merits of the application, neither this court nor the court of Appeals should ignore the implication of the timing of the Petition.” On the matter of holding ex parte meetings with his advisers and with parties in the case, Wolin is equally feisty. He defends the ex parte conferences, saying: “It was the expressed intent of the District Court to provide access to any and all interested parties free of the constraints of damaging admissions in a public arena. Much of the information provided to the court was proprietary in nature. With the current turbulence and volatility that exists in financial markets, information associated with asbestos claims has the tendency to severely punish a corporate offender. The court was sensitive to the need for privacy of disclosure even at the expense of transparency.” Noting that he announced his intention to use ex parte conferences from the outset, Wolin says that he “does not apologize for [his] case management means and methods,” adding that those conference “were eagerly sought and granted” and that no harm has occurred because of them. They were not surreptitious, he emphasizes. Wolin then ups the ante on the ultimate recusal, saying, “at stake is a philosophy of case management” in which the circuit court “will have to determine whether transparency supercedes non-disclosure of proprietary information.” At a hearing on the recusal motion last month Wolin, who had previously stayed all discovery in the matter, granted the creditors the OK to depose Gross, Hamlin and the other trio of advisers, who have all already submitted affidavits. The 3rd Circuit has given Wolin until Jan. 31 to decide. No doubt, if he denies the motion, the creditors will be back before the circuit panel.

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