Pleas Made to Take Judge Off Bankruptcy Case

Philadelphia, PA, Dec. 16--A federal appeals court heard arguments on Friday over whether it should order the district court judge overseeing the asbestos-related bankruptcy cases of five large companies to step aside. According to the New York Times, lawyers for one company and the creditors of two others argued before a three-judge panel of the Court of Appeals for the Third Circuit that Judge Alfred M. Wolin of Federal District Court in Newark should be ordered off their cases. It would be unusual for the appellate court to issue such an order, which could both complicate and prolong the already difficult Chapter 11 proceedings of Owens Corning, USG, W.R. Grace & Company, Armstrong World Industries and Federal Mogul Global. From their questions, the three appellate judges were clearly concerned about the possible consequences of such a step. Lester Brickman, a professor at Benjamin N. Cardozo School of Law at Yeshiva University who has studied asbestos litigation, said in an interview: "This is a big deal. We're talking about a major, major set of cases, we're talking about multiple billions of dollars in assets." Advocates of Judge Wolin's removal focused on two issues. First, some creditors contended that two advisers to the judge faced conflicts of interest because in another bankruptcy case, G-I Holdings, they represented people who will have asbestos claims, but had not filed any yet. The creditors said that the advisers, David R. Gross and C. Judson Hamlin, used their status to influence Judge Wolin, then used his decisions to influence proceedings in another case. Second, lawyers for USG asserted that Judge Wolin had held numerous meetings individually with various parties in the company's bankruptcy, keeping other parties in the dark about developments in the case and depriving them of opportunities to advocate their position. In two years, USG contended in a court filing, Judge Wolin held a single two-hour hearing in open court with transcribed proceedings; in contrast, he "spent more than 300 hours conferring, in private, with his team of advisers, and, in many cases, with individuals whose names were 'redacted' or 'withheld.' '' Judge Wolin filed responses to the petition by creditors to have him taken off the Owens Corning case, but declined to appear at the argument in Philadelphia on Friday, citing "a concern for the solemnity and dignity of each court." But in one of two court filings, the judge questioned the timing of the effort to force him to step down, noting that "the involvement of all of the court-appointed advisers has been a matter of record for nearly two years." Lawyers for Kensington International and Springfield Associates, two investment funds controlled by the investment firm Elliott Associates and its affiliate, Elliott International, which brought the first motion seeking to have Judge Wolin step down--known as a motion for the judge's recusal--have said in court filings that they did not learn of the conflicts for the advisers until recently. Only by reviewing the fee statements, which professionals in bankruptcy cases must file to obtain court approval of payment of their fees, did the potential conflict facing the advisers become apparent, said John J. Gibbons, a former judge and a lawyer now representing the creditors in the Owens Corning case. "There's no reason for Kensington to have looked at the fee application filings in any case," Gibbons said. "They were led to believe that these people were neutral."