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Despite finding that the federal judge overseeing five massive asbestos bankruptcy cases has not “done anything wrong or unethical or biased,” a divided panel of the 3rd U.S. Circuit Court of Appeals has ruled that he must be taken off three of the cases due to a “perception of bias” stemming from his consultation with court-appointed advisers who suffered from conflicts of interest. But a dissenting judge said that he believed the advisers had no real conflicts of interest and that the lawyers seeking the disqualification of Senior U.S. District Judge Alfred M. Wolin had “employed a guerrilla tactic timed to serve their own economic interests in this case, rather than the interests of justice and judicial integrity.” The 54-page opinion in In Re: Kensington International Limited and Springfield Associates is complicated by the fact that one of the five asbestos companies opted not to participate and another filed court papers too late to be included in Monday’s ruling. As a result, the court ruled only on motions filed by creditors for two of the debtors — Owens Corning and W.R. Grace & Co. — and by USG Corp. as debtor, and concluded that Wolin must step aside in those cases. But, writing for the majority, Senior 3rd Circuit Judge Leonard I. Garth emphasized that there wasn’t even the “slightest hint of any actual bias” on Wolin’s part. “On the contrary, Judge Wolin has throughout his stewardship over the five asbestos cases exhibited all of the judicial qualities, ethical conduct, and characteristics emblematic of the most experienced, competent, and distinguished Article III jurists,” Garth wrote in an opinion joined by 3rd Circuit Judge D. Brooks Smith. But under federal law, Garth said, “the test for disqualification … is not actual bias; it is the perception of bias.” As a result, the court reversed Wolin’s decision not to recuse. In a 106-page decision, Wolin had written that he is “free of outside influence” and directly urged the 3rd Circuit to allow him to continue. In their motions seeking Wolin’s disqualification, lawyers argued that some of Wolin’s court-appointed advisers suffer from a “blatant conflict” that has infected how the judge views the cases. They also complained that Wolin had refused even to rule on their motions asking for his recusal. In December, the 3rd Circuit declined to order Wolin to step aside but ordered him to rule promptly on the recusal motions. In response, Wolin handed down an opinion that spoke directly to the appellate court, defending his use of a team of advisers, explaining his creative and novel approaches to case management in such a massive case, and answering his critics’ charges point for point. “This court will not deny that it adopted an activist role in … case management,” Wolin wrote. “Likewise, through the appointment of its advisors, the court surrounded itself with persons who possessed a wealth of knowledge relevant to the history of asbestos litigation and its case management. They were a resource of impeccable credentials and even as the court writes this opinion their expertise remains unchallenged,” Wolin wrote. Wolin said that when he was first assigned by former 3rd Circuit Chief Judge Edward R. Becker to take over the five bankruptcies — W.R. Grace, Owens-Corning, Armstrong World, U.S. Gypsum and Federal Mogul — Becker urged Wolin to get creative. In his formal remarks accompanying the appointment, Becker called for “a management plan to try to make a quantum leap forward in the interest of the sound administration of these cases” and “a coordinated plan for management to be developed and implemented.” Wolin said he “accepted Chief Judge Becker’s assignment and his mandate to change how asbestos bankruptcies had been handled to date.” TEAM OF ADVISERS But Wolin’s critics complained that creativity became impropriety due to the judge’s decision to appoint a team of advisers — and specifically two advisers who suffered from conflicts of interest — as well as his practice of conducting ex parte meetings on a regular basis. The advisers appointed by Wolin were: � C. Judson Hamlin, a retired New Jersey Superior Court judge who had managed all asbestos litigation in New Jersey for a number of years. � David Gross, a New Jersey lawyer and mediator who had previously served as counsel for both asbestos plaintiffs and defendants. � William Dreier, a retired New Jersey appellate judge and products liability expert. � John Keefe, a retired New Jersey appellate judge who had managed all asbestos litigation in New Jersey for a different period of time. � Francis McGovern, a Duke University law professor with expertise in mass tort litigation. Lawyers seeking Wolin’s disqualification focused on Hamlin and Gross. Two months before Wolin appointed the advisers in the five asbestos cases, the Bankruptcy Court for the District of New Jersey had appointed Hamlin to serve as the “legal representative of present and future holders of asbestos-related demands” in another asbestos-related bankruptcy case captioned In re G-I Holdings Inc. Less than one month after Wolin appointed the advisers, Hamlin filed an application in G-I Holdings to engage Gross as his local counsel. Now the 3rd Circuit has ruled that Hamlin and Gross suffered from a “structural conflict of interest” that made it impossible for them to act as disinterested advisers. “This conflict arose from the dual roles they played in the five asbestos cases and the G-I Holdings bankruptcy,” Garth wrote. “On the one hand, Gross and Hamlin clearly had a duty to remain neutral in the five asbestos cases and to provide objective, unbiased information to Judge Wolin,” Garth wrote. “… On the other hand, Advisors Gross and Hamlin also had a duty to act as zealous advocates for the future asbestos claimants in the G-I Holdings bankruptcy.” Garth noted that Hamlin was the legal representative of the present and future asbestos personal injury claimants in G-I Holdings and Gross served as his local counsel. “In those roles, Gross and Hamlin owed the future asbestos claimants in G-I Holdings a fiduciary duty to advance their interests and to see that they received the greatest possible share of the bankruptcy estate,” Garth wrote. “To achieve that end, the very advisors who were advising Judge Wolin had to take positions in G-I Holdings and the five asbestos cases that favored the future asbestos claimants,” Garth wrote. Garth said it would be “hard … to overstate the importance of the advisors’ role,” because they exercised “a unique level of influence over Judge Wolin, given the role they played at the outset … in educating Judge Wolin (a self-admitted neophyte) on all of the key asbestos-related issues.” At the same time, Garth said, Gross and Hamlin “also had a duty to act as zealous advocates for the future asbestos claimants in the G-I Holdings bankruptcy.” ‘GUERRILLA TACTICS’ In a strongly worded dissent, 3rd Circuit Judge Julio M. Fuentes said, “I do not agree that the advisors labored under any sort of conflict, nor do I perceive Judge Wolin’s practice of ex parte communications to warrant his recusal.” Fuentes said that the appointments of such advisers “may well have been extraordinary and unprecedented” but that “this is a case of extraordinary and unprecedented complexity and magnitude.” Focusing on Gross and Hamlin, Fuentes found that their roles in the G-I Holdings case were unique since they represented future possible claimants. “Consequently, Gross and Hamlin do not have any clients in G-I, nor will they have any clients by the point at which their job in G-I is finished: their duty is to promote the collective interest of those parties that will have future claims against the G-I post-confirmation trust,” Fuentes wrote. “This duty does not place Gross and Hamlin in a materially adverse position to the estates in the five asbestos cases, nor does it give them a direct interest in manipulating those estates in any way,” Fuentes wrote. Although Wolin’s decisions could potentially benefit the G-I future claimants, Fuentes said, “this does not make Gross and Hamlin non-neutral as Judge Wolin’s advisors.” Fuentes said the lawyers seeking Wolin’s recusal had proved only that Gross and Hamlin “have opinions” as a result of their knowledge of asbestos litigation. “But strong opinions about the law are to be expected in any well-educated and well-informed judicial advisor (or judge),” Fuentes wrote. Fuentes said Wolin “took admittedly extraordinary measures to manage an unprecedentedly large and complex asbestos bankruptcy proceeding.” But while Wolin’s methods were “unconventional,” Fuentes said that he believed “none of them would inspire within the reasonable and informed observer legitimate questions regarding Judge Wolin’s impartiality.” Saying he believed the lawyers seeking disqualification were engaging in “guerilla tactics,” Fuentes warned that “in the end, putting the stamp of judicial approval on this kind of litigious gamesmanship threatens to undermine the integrity of our judicial proceedings far more than any techniques employed by Judge Wolin.”

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