Full opinion text
AMENDED MEMORANDUM, ORDERS AND FINAL JUDGMENT Table of Contents I. Introduction........................................................................479 II. Prior Proceedings..................................................................485 A. Trust’s Initial Operating Difficulties..............................................485 B. Class Action and First Settlement...............................................487 C. Appeal and Remand............................................................487 III. Present Proceedings................................................................488 A. Proceedings on Remand ........................................................488 B. Amended Complaint............................................................489 C. Settlement Negotiations.........................................................491 1. Notice of Settlement and Hearings...........................................492 2. Summary of Settlement.....................................................493 a. Pro Rata Shares .......................................................493 b. Removal of Trust from Tort System.....................................494 c. Scheduled Disease Values................................................495 d. Settlement of Claims Outside Trust Distribution Process...................496 [1.] Codefendants’ Claims........................................... 496 [2.] Distributors’ Claims............................................ 496 3. Amendments During Fairness Hearings.......................................497 D. Rule 706 Court-Appointed Panel Projections of Future Claims.....................498 1. Background and Role of Panel...............................................498 2. Panel Projections...........................................................498 3. Impact of Trust and Rule 706 Projections....................................501 E. Graphic Representations of Effect of Settlement..................................502 F. Objections to the Settlement....................................................509 G. Amended Memorandum, Orders and Final Judgment..............................510 1. Request by Berlack, Israels & Liberman on Behalf of the Keene Corp..........511 2. Motions to Intervene........................................................511 3. Motions for Additional Findings of Fact in Relation to USF & G..............512 4. Motion to have the Courts Disapprove the MaeArthur Fund...................512 5. Motions to Eliminate Escrow Requirements for Trust Payments in Maryland----512 6. Motions to Authorize Claims Payments Starting February 1, 1995 .............. 512 IV. Power to Modify Trust Payments Under New York Law..............................512 A New York Substantive Law Applicable...........................................512 B. Origins of Trusts in English Equity.............................................515 1. Development of Equity Jurisdiction......................,.....................515 2. Trusts in Equity............................................................517 C. Equity Antecedents in New York................................................518 1. History of Equity Courts....................................................518 2. Reception of English Substantive Law........................................521 3. Equity in Twentieth Century New York......................................524 D. Aspects of Equity Substantive Jurisprudence in Modern Adjudications..............525 1. Equity is Flexible...........................................................525 2. Equity Provides Remedies to the Otherwise Remediless .......................526 3. Equity is Equality..........................................................526 4. Equity Fills the Vacuum Created by Failure to Legislate......................527 5. Limitations on Modem Equity Jurisprudence..................................527 E. New York Trust Law Permits Deviation.........................................528 1. Consent of Ml Beneficiaries Not Needed.....................................530 2. Benefits of Deviation to Most................................................533 3. Administrative vs. Distributive Provisions.....................................535 F. Trust Law in Other States......................................................536 1. Case Law..................................................................536 2. Statutes....................................................................538 G. Application of Trust Law to the Facts...........................................540 V. State and Federal Law on Contribution and Settlement.............................540 A. Varied Approaches .............................................................540 B. Problem Solved by Settlement...................................................545 VI. Maryland Contribution and Set-Off Issue .......... 546 A. Choice of Law.................................................................547 B. Contribution Among Multiple Tortfeasors.........................................548 C. Dispute Among the Parties .....................................................550 D. Proposals......................................................................553 1. Plaintiffs...................................................................553 a. Maryland Plaintiffs......................................................553 b. Plaintiff Class..........................................................553 2. Third Party Defendants.....................................................554 a. Distributors ............................................................554 b. Codefendants...........................................................554 3. Manville Trust..............................................................555 E. Resolution by Maryland State Courts............................................556 VII. Fees.....................................................................1........556 A. Adoption of 25% Maximum......................................................557 B. Authority to Limit Attorneys’ Fees..............................................558 1. Obligations to Review Fees Under Rule 23 ...................................558 2. Court Authority to Limit Fees in Future Claims..............................559 a. Power of the Courts to Regulate Attorney Conduct.......................559 b. Courts as Protectors of Litigants ........................................560 VIII. Satisfaction of Procedural Requirements..............................................562 A. Jurisdiction...................................................’.................562 B. Class Action...................................................................562 1. Rule 23 Prerequisites.......................................................562 a. Numerosity.............................................................563 b. Commonality...........................................................563 c. Typicality..............................................................563 d. Adequacy of Representation .............................................563 2. Limited Fund ..............................................................564 3. Future Beneficiaries.........................................................565 C. Fairness, Reasonableness and Adequacy..........................................565 1. Notice to Class.............................................................565 2. Standards..................................................................566 3. Settlement Provisions .......................................................567 4. New York Trust Law........................................................569 5. Hard Fought, Arms-Length Negotiations.....................................569 6. Opinion of Counsel and Reaction of Class Members...........................569 7. State of the Litigation and Risk if It Continues...............................570 8. Public Interest ........................................................ 570 9. Suffering Claimants.........................................................570 IX. Amendment to Bankruptcy Statute ..................................................570 A. Statute........................................................................570 1. Future Reorganizations......................................................571 2. Existing Plans..............................................................571 B. Compliance by Settlement.......................................................572 C. Continuing Injunction...........................................................572 D. Implications as to Corpus.......................................................572 X. Appointments......................................................................573 XI. Future of Trust....................................................................573 XII. Orders and Stays ..................................................................573 XIII. Fee Applications ...................................................................574 XIV. Conclusions........................................................................574 Addendum A Settlement Stipulation Addendum B Amendments to Settlement Stipulation WEINSTEIN, Senior District Judge: I. Introduction It is time to end the incredibly convoluted and complex Manville asbestos litigation. It is now terminated, subject to appeals. This non-opt-out diversity class action was brought by Beneficiaries of the Manville Trust, most of whom are persons claiming to be injured by asbestos produced by the Johns-Manville Corporation (“Manville” or “Corporation”). Hundreds of thousands of workers and others have been seriously harmed by Manville and other vendors of asbestos products who had long known of the dangers of their products, but had failed to warn properly or to take other adequate protective steps. The resulting national disaster led to Manville’s bankruptcy. During the bankruptcy proceedings, the Manville Personal Injury Settlement Trust (“Trust”) was organized under New York law. Most of the Corporation’s assets — primarily 80% of its equity and the proceeds of its insurance policies — were assigned to the Trust. The Corporation itself was set free of its liability; all claims were to be made against the Trust. See In re Johns-Manville Corp., 68 B.R. 618, 635 (Bankr.S.D.N.Y.1986), aff'd, 78 B.R. 407 (S.D.N.Y.1987), aff'd sub nom. Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988). As a result of low estimates of potential claims, the Trust’s assets immediately proved grossly inadequate. See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 129 B.R. 710, 754-60 (E. & S.D.N.Y.1991) [Findley I], vacated, 982 F.2d 721 (2d Cir. 1992) [Findley II], modified on reh’g, 993 F.2d 7 (2d Cir.1993) [Findley III]. When the distribution plan was confirmed in 1986, it was estimated that the Trust would receive approximately 83,000 to 100,000 claims over the course of its life into the middle of the next century. To date, the Trust has received approximately 240,000 claims and it is expected to receive hundreds of thousands more. Moreover, the projected value of the claims was but a fraction of what had to be paid to each claimant. Unforeseen litigation expenses — running at the rate of $52 million per year — and heavy Trust administration expenses further depleted the assets. Current projections indicate that, in the absence of a settlement, over 400,000 claimants, representing over $18 billion in claim liability, will never receive any compensation for their injuries from the Trust. See Figure 1. Figure 1 and subsequent figures in this Memorandum were prepared by the Trust. They reflect reasonable assumptions borne out by the record of these proceedings. See Table 2, below, comments to the assumptions in that table and other tables and graphics based upon these assumptions. Settlement of a Rule 23(b)(1)(B) non-opt-out class action was approved to ensure some payment to all claimants. See Findley I, 129 B.R. 710. The Court of Appeals rejected the first Settlement because additional subclasses needed to be organized. Findley II, 982 F.2d at 739-44. Although the Court of Appeals remanded for designation of new subclasses, it otherwise approved certification of the non-opt-out class action. Findley II, 982 F.2d at 739. It also found subject matter and personal jurisdiction under 28 U.S.C. § 1332, and in rem and quasi in rem jurisdiction over the Trust and its Beneficiaries. Findley II, 982 F.2d at 734-35. Following designation of new subclasses and strenuous negotiation among them, and extensive trials and motions, a new. Stipulation of Settlement (“Settlement Stipulation”) was submitted. Fairness and other hearings were held. All federal procedural requirements have now been complied with. The only serious open question remaining is a substantive one: since, under Erie doctrine, New York law applies, would New York courts have the power to authorize the Trust to pay all unpaid present and future claimants — probably in the order of about 500,000 — an equal percentage of the values of their claims from limited Trust assets? Or would New York courts hew to the literal procedures of the original trust instrument, paying a few tens of thousands of claimants and their lawyers the billions of dollars they have not yet taken from the Trust, leaving many hundreds of thousands of equally deserving claimants with nothing? The answer is not disputable. Acting under Rule 23 of the Federal Rules of Civil Procedure, covering applicable procedural requirements, and New York state substantive doctrines of trusts, federal courts have both the power and the obligation to approve and enforce the new Settlement. The purpose of the Trust is “to use the assets in the trust estate to deliver fair, adequate and equitable compensation to bona fide beneficiaries, whether presently known or unknown, without overpaying or underpaying any claims.” Trust Agreement, § 2.02. Due to unforeseen circumstances, it is now impossible to achieve that purpose absent a modification in the trust distribution procedures. The Courts have the power under New York law to permit deviation from a trust’s terms where the trust’s purpose cannot be achieved without such deviation. The subclasses, representing all parties with an interest in the trust, have agreed via the Settlement that a pro rata distribution of trust assets achieves that purpose. The Courts concur. The parties have asked the Courts to decide separately the issue of the effect of the Settlement on claims “arising under Maryland law.” Settlement Stipulation, ¶ 4. Applying standard rules of conflicts and deference to state courts, this matter is left for resolution by the Maryland courts. The decisions in the class action are made by the district courts for the Eastern and Southern Districts. They are concurred in by the Bankruptcy Court for the Southern District of New York since that court has continuing oversight of the Trust. The word “Courts” in the opinion is to be construed to mean the district court or courts, the bankruptcy court, or all three, when applicable. Where power, may be exercised only by less than all of the courts, that court or courts is deemed referred to by the term “Courts.” Before the United States District Courts for the Eastern and Southern Districts of New York is a motion seeking final certification of a class and subclasses consisting of present and future Beneficiaries of the Man-ville Personal Injury Settlement Trust, and approval of a settlement among the class, the subclasses and the trustees of the Trust. Also pending are motions before the district courts and the bankruptcy court for the Southern District of New York for various appointments related to the Settlement. Settlement follows almost four years of litigation and negotiations. It resolves the impasse arising from the deep insolvency of the Trust and its resulting inability to carry out the purposes for which it was created. Many of the issues raised by the Settlement were fully covered in the Courts’ prior detailed and extensive decision, Findley I, 129 B.R. at 710-976. Findley I is adhered to by the Courts. Since only issues raised by the Court of Appeals in Findley II and Findley III or strongly urged now need to be addressed, the discussion below is attenuated. Because of substantial infusions of cash made largely through payments by Manville to the Trust pursuant to the 1990 settlement agreement, prudent financial management by the new trustees and Trust employees, and a sharp reduction in legal fees and costs of administering the Trust, there is ample cash to carry out the new, 1994, Settlement. The realistic settlement provisions now before the Courts are workable, fair and sound. Table 1, prepared by the Trust, demonstrates the projected impact of the Settlement, particularly its goal of ensuring that all claimants are compensated equitably given the Trust’s limited resources. Table 1 Estimated Projected Impact of Proposed Settlement Key Results 1988-2049 With Settlement Without Settlement Cumulative amount paid $4,994,000,000 2,615,000,000 Cumulative claims paid 503,921 71,641 Payment percentage 1994-1997 10.0 100.0% Final percentage 13.6 100.0% Cumulative unpaid liability $18,510,000,000 Cumulative unpaid claims 432,280 Table 1 and all of the graphics are based upon assumptions prepared by the Trust, summarized in Table 2, and found supportable by the Courts. Table 2 Projected Impact of Proposed Settlement Assumptions Underlying Graphics and Calculations With Settlement Operations Without Settlement Date stay on claim payments is lifted January 1, 1995 January 1, 1996 Payment order Firsh-In-First-Out (FIFO) Trial Docket Method of payment 10.0% of liquidated claim value from 1995-1997. Increased to 13.6% from 1998-2049 100% of liquidated claim value at time of settlement Year Trust’s assets are exhausted 2049 2000 Annual maximum claims paid 75,000 7,500 Operating costs per claim: 1995-2000 (excluding ADR & litigation costs)_ $164 2,321 Total ADR & Litigation costs: 1995-2000 $7,000,000 $212,000,000 Liabilities Claims settled as of 12/31/92 29,407 29,407 Backlog of unsettled elaims12/31/92 171,725 171,725 Future claim filings 1993-2049 302,789 302,789 TOTAL 503,921 503,921 Average liquidated value per claim (1995-2000) $42,820 $42,820 Claim Inflation 4.2% beginning in 1997 N/A (since the Trust would exhaust its assets by the year 2000, the unpaid liability is expressed in current dollars) Assets Year Manville common stock is sold 1996 1998 Selling price per share $12.71 $7.00 Value of 20% profit sharing rights $306,000,000 $159,000,000 Year of Schuller Note sale 1994 1994 Schuller Note net proceeds (000,000 $369,000,000 Year proceeds received on second bond 2013 and 2014 2000 (assumes consent of Manville Corp. and Manville Property Damage Trust) Proceeds received on second bond $150,000,000 $32,300,000 Rates of return on assets Pre-stock sale 5.50% 5.50% Post-stock sale 8.89% 5.50% See also assumptions in Fairness Exhibit F15. The figures attributed to the sale of the Schuller notes require some explanation, Exhibit F15 assumed that the Trust would sell a Trust Bond (approximately $400 million) in 1994 and 1995. The Trust actually exchanged the Bond for notes of Schuller International Group, Inc. (approximately $379 million) with the intention of selling the notes for approximately $369 million (net) in a public offering. Ultimately, the above assumptions result in a greater than 10% pro rata share. Because of the uncertainty of many key assumptions, a lower initial pro rata share of 10% payment was incorporated into the Settlement. The projections assume a review in 1998 of the pro rata calculations, a future increase in the pro rata share to 13.6% and a supplemental payment to all previously settled claimants to bring their pro rata percentage to 13.6%. The form of the Settlement — in light of subsequent statutory changes — substantially enhances the value of the Manville stock since there is full assurance against any asbestos claims being made against Manville and assets can be disposed of at a time, and under conditions, most favorable to the Trust. This in part accounts for the differences between the Trust’s projected selling prices of the stock given the Settlement ($12.71/share) and in the absence of the Settlement ($7/share). In the Courts’ view, the Trust’s assumptions, charts and figures showing the projected selling price for the stock under the Settlement may be based on an overly optimistic view of market behavior, while those depicting the stock’s selling price in the absence of the Settlement may be based on overly pessimistic assumptions. Nonetheless, the 10% initial payment and opportunities for adjustment in the pro rata share assure the adequacy of the Settlement even if the assets of the Trust turn out to be more or less valuable than expected. A fairer estimate of the value of the stock without the Settlement might be about $10 a share, and with the Settlement might be about $12 a share. At the Courts’ request, the Trust prepared an additional summary of the projected impact of the Settlement assuming a price of $10 a share, reproduced in part as Table 3, below. This change in assumptions narrows the difference between the total amounts paid with and without the Settlement, but there remains a difference in favor of the Settlement in the order of over a billion dollars. The graphics and tables supplied by the Trust are used in this Memorandum, even though they include the Trust’s assumptions in Table 2, because they clearly illustrate the situation for visual purposes with and without the Settlement. Table 3 Estimated Projected Impact of Proposed Settlement (assuming sale of stock at $10 a share in 1996) Key Results 1988-2049 With Settlement Without Settlement Cumulative amount paid $4,499,000,000 $3,128,000,000 Cumulative claims paid 603,921 83,618 Payment percentage 1994-1997 10.0% 100.0% Final percentage 12.0 100.0% Cumulative unpaid liability $17,997,000,000 Cumulative unpaid claims 420,303 II. Prior Proceedings The Trust was established by a trust agreement dated November 28, 1988 (the “Trust Agreement”) executed pursuant to the Second Amended and Restated Plan of Reorganization (the “Plan”) of the JohnsManville Corporation and affiliated entities. The Plan was confirmed as fair and equitable pursuant to 11 U.S.C. § 1129. In re JohnsManville Corp., 68 B.R. 618, 635 (Bankr. S.D.N.Y.1986), aff'd, 78 B.R. 407 (S.D.N.Y. 1987), aff'd, sub nom. Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir.1988). Pursuant to the Plan and the Trust Agreement, the Trust assumed all liabilities for all health claims and for “Other Asbestos Obligations” of Manville. Further litigation of these claims against Manville was enjoined to protect the value of Manville’s equity, most of which was contributed to the Trust. The principal purpose of the Trust is “to use the assets in the trust estate to deliver fair, adequate and equitable compensation to bona fide beneficiaries, whether presently known or unknown, without overpaying or underpaying any claims.” Trust Agreement, § 2.02. Beneficiaries of the Trust include persons suffering, or persons who in the future will suffer, from asbestos-related diseases caused in whole or in part by exposure to Manville asbestos or asbestos-containing products (generally, “Asbestos. Health Claimants”). Other Beneficiaries include entities formerly joined with Manville as defendants in tort litigation brought by Asbestos Health Claimants, including other manufacturers of asbestos and asbestos-containing products who have claims against Manville for contribution (“Codefendants”); and distributors of Manville asbestos or asbestos-containing products who have claims for indemnity or contribution against Manville (“Distributors”). The Plan was approved by the Manville creditors, including more than 90% of the members of the class of Asbestos Health Claimants, and a Legal Representative for Future Claimants appointed by the Bankruptcy Court. The Trust was established in November 1988. Immediately, it became apparent that the Trust would be unable to compensate the vast majority of Trust Beneficiaries, and that, unless the distribution process were changed, a comparatively small number of Beneficiaries and their attorneys would receive all of the Trust’s assets. In addition, the assets would be seriously depleted by heavy litigation expenses and excessive Trust administration costs. The settling parties have long agreed that the Trust is incapable of. meeting all its obligations and that the operation of the Trust and the rules by which it compensates Trust Beneficiaries must be adjusted if all of the Trust’s Beneficiaries are to be treated equitably. Until now, however, they have been unable to agree on the form that the adjustments should take. The Courts must now determine whether the instant action meets the requirements of Rule 23 governing class actions, including whether the Settlement proposed by the parties is fair, reasonable and adequate. A. Trust’s Initial Operating Difficulties Upon consummation of the Plan on November 28, 1988, the Trust received from Manville and its insurers insurance proceeds, cash, accounts receivable and accrued interest totaling $869 million. The Trust also received 80% of Manville’s common stock, and. beginning, in 1992 became eligible to receive up to 20% of Manville’s annual profits. In addition, Manville executed two bonds with an aggregate face value of $1.8 billion and a $50 million note; the bonds were payable in annual installments of $75 million commencing in August 1991 and extending through 2014. When the Plan was confirmed on December 18,1986, the Disclosure Statement issued in connection with the Plan estimated that over its life, the Trust would receive approximately 83,000 to 100,000 claims which would be liquidated at an average cost of $25,000 per claim; with the cost increasing four percent annually after 1986. While the architects of the Plan recognized that the actual amounts, numbers and timing of future demands could not be determined precisely, they believed that the Trust would be able to make full payment of the liquidated value of all claims, provided the timing of claims coincided with the-timing of payments from Mancille to the Trust and the number and the cost of claims did not exceed then current estimates. The number of claims filed and the settlement amounts of claims resolved during the initial period of Trust operation were, however, substantially greater than had been estimated. During 1989, its first year of operation, the Trust settled 14,000 claims at an average value of over $40,000, far in excess of the $25,000 originally estimated. By March 31,1990, the Trust had received over 140,000 claims, substantially more than the estimate expected over the life of the Trust stated in the Disclosure Statement. As of October 30, 1994, approximately 240,000 claims had been filed with the Trust. Of these, the Trust has settled approximately 30,000, while over 200,-000 remain pending. The Trust was not only spending far more to satisfy claims than had beén expected, but receiving far more claims as well. In addition, a high volume, of litigation against the Trust in courts across the country rapidly exhausted the Trust’s available cash. This resulted, in large measure, from two factors. Under the Plan’s Claims Resolution Procedures, Annex B to the Trust Agreement, an Asbestos Health Claimant could sue the Trust if it did not process the claim within 120 days. Because of the unexpectedly large number of claims filed, claims processing often took longer than the 120 days allowed. As a result, many claimants were entitled to sue the Trust, and the Trust found itself scheduled to participate in hundreds of trials each month. Second, pursuant to the Co-Defendants’ Procedures, Annex F to the Trust Agreement, governing Codefendants’ claims for indemnity and contribution against the Trust, Codefendants were permitted to implead the Trust into pending lawsuits against the Co-defendants 240 days after consummation of the Plan. The Codefendants impleaded the Trust into tens of thousands of cases. As a result of both the Asbestos Health Claimants’ and the Codefendants’ rights to force the Trust into litigation, the Trust had been named in over 90,000 eases in state and federal courts by the Spring of 1990. This exacerbated the Trust’s cash-flow problems since the Trust spent in excess of $40 million on outside defense counsel fees dining part of 1990 alone and would, if no action were taken, be spending more than $52 million a year for counsel on litigation expenses. Added to the amounts paid to claimants and excessive costs of administering the Trust, these expenditures materially diminished the Trust assets available to compensate Beneficiaries. To staunch this rapid depletion of the Trust’s assets, a district judge sitting in the United States District Courts for both the Eastern and Southern Districts of New York, and the Chief Judge of the United States Bankruptcy Court for the Southern District of New York, after consulting with Justice Helen E. Freedman of the supreme court of New York (supervising asbestos litigation in New York City) and other trial judges, entered several stay orders in July and August of 1990. These stays prevented the Trust from paying any Trust Beneficiaries except for claimants who could prove exigent health circumstances or extreme economic hardship. On September 18, 1990, the Trust moved for an order determining that the financial assets of the Trust were so limited that there existed a substantial risk that payment of present and prospective asbestos-related claims for personal injury and wrongful death would be placed in jeopardy. The Courts referred this issue to Special Master Marvin E. Frankel who, after evidentiary hearings, reported on November 3,1990. He concluded that the Trust was “deeply insolvent” and that its assets and expectations of future receipts were so limited that there was a substantial risk that payment of claims asserted by Beneficiaries, including present and prospective asbestos-related claims for personal injury and wrongful death, were in jeopardy. Special Master’s Report dated November 3, 1990, reprinted in In re Joint E. & S. Dist. Asbestos Litig., 120 B.R. 648, 661-68 (E. & S.D.N.Y.1990). Special Master Frankel’s conclusions are still fully applicable. There have been no relevant substantial changes since he issued his .report. B. Class Action and First Settlement On November 19, 1990, the instant action was commenced when five plaintiffs who had previously asserted Asbestos Health Claims against the Trust filed suit on behalf of themselves and on behalf of all Trust Beneficiaries. The plaintiffs’ complaint invoked the Courts’ diversity and bankruptcy jurisdiction and sought to establish an equitable restructuring and allocation of the Trust res among all Beneficiaries. Simultaneously with the filing of the complaint, the parties filed a proposed stipulation of settlement providing the terms on which the parties believed the matter should be resolved. See generally In re Joint E. & S. Dist. Asbestos Litig., 120 B.R. 648 & Findley I. The Courts appointed the five plaintiffs as class representatives. The plaintiffs retained as counsel the firms of Rose, Klein & Marias, of Los Angeles, California; Ness, Motley, Loadholt, Richardson & Poole, P.A., of Charleston, South Carolina; Baron & Budd, of Dallas, Texas; Wilentz, Goldman & Spitzer, of Woodbridge, New Jersey; and Cartwright, Slobodin, Bokelman, Borowsky, Wartniek, Moore & Harris, Inc., of San Francisco, California. Class counsel retained Caplin & Drysdale, Chartered, of New York, New York and Washington, D.C., as of counsel. All these counsel are highly skilled and well known specialists in the plaintiff mass tort bar. Following notice and extensive hearings on class action certification and the fairness of the proposed settlement, the Courts, on February 13,1991, certified the plaintiffs’ suit as a mandatory non-opt-out class action under Rule 23(b)(1)(B) of the Federal Rules of Civil Procedure. The February 13th Order also certified the class, which is defined as all Beneficiaries of the Trust “each of whom has or will have a claim either for wrongful death or personal injury caused by exposure to asbestos, or a claim for warranty, guarantee, indemnification or contribution arising from an obligation of the Trust for the payment of a death or personal injury claim.” See Findley I, 129 B.R. at 776. On June 27,1991, the Courts issued a final judgment approving the settlement, making permanent the prior stay of proceedings against the Trust, and reaffirming an injunction contained in the'Plan that enjoined suits against Manville. Objecting Asbestos Health Claimants and Codefendants who opposed the settlement filed appeals. They challenged the Courts’ diversity jurisdiction and bankruptcy jurisdiction, the certification of a non-opt-out class action and the approval of the settlement. The MaeArthur Company, a former distributor of Manville products, and its affiliated companies (“MaeArthur”) also appealed, arguing that the class was not properly certified and that MacArthur’s rights under a stipulation and order (the “MaeArthur Stipulation”) could not be altered by the settlement. C. Appeal and Remand The United States Court of Appeals for the Second Circuit held that although bankruptcy jurisdiction did not lie, diversity subject matter jurisdiction existed over the class action and that the Courts’ in rem and quasi in rem jurisdiction allowed the Courts to exercise personal jurisdiction over the Beneficiaries and the Trust. Findley II, 982 F.2d at 735. The Court of Appeals also indicated that a Rule 23(b)(1)(B) non-opt-out class would be proper in this action, provided that subclass designations appropriate to the unique facts of this case and the terms of the proposed settlement were made to ensure that “the consent of groups of claimants who are being treated differently by the settlement is being given by those who fairly and adequately represent only the members of each group.” Findley II, 982 F.2d at 739. The Court of Appeals vacated the judgment approving the settlement and remanded the ease for further proceedings, having concluded that. appropriate subclasses had not been designated and thus proper consent to the settlement had not been obtained. Findley II, 982 F.2d at 751. Specifically, in connection with the then-proposed settlement, the Second Circuit held that separate subclasses would be required for: (1) the Codefendants; (2) MacArthur; (3) those health claimants who had filed claims against the Trust “sufficiently early ... to assure the full payment of their claims before the trust runs out of money”; (4) those health claimants who had not filed early enough to claim an early place in the “FIFO (First In First Out) queue” ensuring that they would receive payment of their claims before the Trust ran out of money; (5) “Level One” health claimants (those with the most serious diseases); and (6) “Level Two” health claimants (those with non-debilitating conditions). Findley II, 982 F.2d at 739-44. The panel’s ruling depended in part on the panel’s then view that the settlement drew distinctions between categories of Beneficiaries which required separate representation for them. On rehearing, the Second Circuit panel modified its conclusions by holding that Rule 23 did not require the creation of subclasses of health claimants based on their position in the FIFO queue because, based on the evidence submitted on rehearing, a claimant’s place in the FIFO queue was' never intended to confer a substantive right to payment of his or her claim. Findley III, 993 F.2d at 11. Subclasses based on FIFO standing were therefore not required. III. Present Proceedings A. Proceedings on Remand On remand the Courts conditionally certified six subclasses and, after consultation with all parties, appointed subclass representatives. The plaintiff class representatives and their appointed counsel continued as representatives of the entire class of Trust Beneficiaries, subject to representation by subclass representatives with respect to those issues on which the interests of the class and the subclass diverged. The Courts continued the appointment of a Legal Representative of Future Claimants and designated the following subclasses: Codefendant Manufacturers, Manville Distributors, MacArthur, Present Claimants, Future Claimants and Claimants with Pre-November 19, 1990 Settlements and Judgments — the date the class action was commenced. No subclasses were certified for “Level One” and “Level Two” claimants because the parties advised the Courts that any future settlement would not distinguish among Asbestos Health Claimants in ways requiring separate representation. The Codefendant Manufacturers subclass representatives are Owens-Corning Fiberglas Corporation, Owens-Illinois, Inc., and the members of the Center for Claims Resolution, Inc., each of which is a former manufacturer or distributor of asbestos products which was sued regularly as a codefendant with Manville or the Trust. But for the stays, Manville or the Trust could still be a codefendant in asbestos litigation now brought against members of the Codefendant subclass. Each Codefendant subclass representative has contribution claims against the Trust typical of the claims of other codefendant manufacturers. Lead counsel for the Codefendant subclass are Roger E. Podesta and Anne E. Cohen of Debevoise & Plimpton, of New York, New York. These highly skilled counsel have represented the interests of the Codefendants throughout this litigation including serving as court-appointed representatives of Codefendant beneficiaries with respect to the first settlement of this case. They and théir firm have substantial experience in complex and “mass tort” litigation and represent a major manufacturer defendant in asbestos litigation around the country. The Distributors subclass representatives are the E.J. Bartells Corporation and J.T. Thorpe Co., both of which were major distributors of asbestos-containing products manufactured by Manville. Both have claims for contribution and indemnity against the Trust typical of those of other Manville distributors. The Distributors subclass is represented by Katherine Steele of Steele & Sales, P.S. of Seattle, Washington, and Francis Lawall.of Pepper, Hamilton & Scheetz, a major national law firm headquartered in Philadelphia, Pennsylvania. Both counsel are highly skilled. Ms. Steele has represented E.J. Bartells for more than eight years in its asbestos-related litigation, and has ably asserted the Distributors’ position in this ease since 1991. Mr. Lawall represented Pacor, Inc., a substantial Manville distributor, in its bankruptcy and in connection with claims against the Trust and has substantial expertise in complex bankruptcy and mass tort proceedings. MacArthur Co. represents the MacArthur subclass, which consists solely of it and two affiliated companies. Its claims are substantially identical to those of its affiliates. The MacArthur subclass is represented by MacArthur’s long-time counsel, John Faricy. Mr. Faricy has skillfully and tenaciously asserted MacArthur’s interests throughout this litigation. He also represents other distributors in connection with claims against asbestos manufacturers. The present claimants subclass is represented by Perry Weitz of the firm of Weitz & Luxenberg, in New York, New York. Mr. Weitz has represented thousands of plaintiffs in asbestos and other mass personal injury suits, including cases in which Manville or the Trust was a defendant. He is a highly skilled member of the mass tort plaintiff bar. Leslie Gordon Fagen is the Legal Representative of Future Claimants. He and his large firm, Paul, Weiss, Rifkin, Wharton & Garrison, New York, New York, represent the future claimants subclass. Mr. Fagen and his firm have no conflict of interest with any Beneficiary. He and his partners are nationally known and highly skilled litigators in complex eases. Lani A Adler, formerly of Grais & Phillips, New York, New York and now an independent practitioner, represents those preNovember 19, 1990 judgment and settlement claimants who did not accept certain settlements with the Trust modified during the pendency of this class action, described below. Ms. Adler is a highly skilled litigator, fully familiar with complex federal practice. David Austem, the Trust’s General Counsel, assisted by Patricia Dansbury, and the Trust’s outside counsel, James L. Stengel of Donovan, Leisure, Newton & Irvine, assisted by Laurie S. Dix, Richard De Marco and Steven Fink, conducted the litigation with great skill and with full fiduciary sensitivity to the rights of all claimants, present and future. These attorneys ensured that the Trust’s interests were well represented in court and in the complicated negotiations leading to the Settlement. All counsel in the ease have ably and diligently represented their clients’ interests. The many tens of millions of dollars of legal fees expended in the original bankruptcy and subsequent proceedings, including those following Findley III, were required by the emphasis of our judicial system on due process and strict compliance with procedural rules designed for less complex litigation. B. Amended Complaint ■ The named plaintiffs filed a “First Amended Class Action Complaint,” captioned Findley v. Falise, (the “Amended Complaint”) on October 8, 1993. The complaint seeks “an equitable distribution of the assets of the Trust among all Trust Beneficiaries.” See Settlement Stipulation 2 (emphasis added). It alleges, as did the original complaint, that the assets of the Trust are insufficient to permit the Trust to continue to pay all claims in full without jeopardizing the payment of claims of other Trust Beneficiaries. Amended Complaint, ¶21. It seeks an equitable allocation of the Trust’s assets among its Beneficiaries based on New York trust law and a restructuring of the Trust’s procedures to substantially reduce Trust expenses. Id., ¶ 22. The Courts’ jurisdiction over the action and the parties is predicated on diversity of citizenship pursuant to 28 U.S.C. § 1332 and the Courts’ jurisdiction over the Trust and the Trust res. Id., ¶¶ 3 and 4. The Trust filed an Answer to the Amended Complaint on October 22, 1993, and the Co-defendant subclass filed an Answer on February 11, 1994. In December 1993, counsel for the Subclass of Manville Distributors and the Legal Representative of Future Claimants successfully moved to intervene as representatives of their respective subclasses. A subclass complaint was filed by the Legal Representative- of Future Claimants on November 19,1993, to which Answers were filed by the Trust and the Subclass of Codefendant Manufacturers. A number of Trust Beneficiaries then-.moved for judgment on the pleadings dismissing the Amended Complaint. The Courts, by Orders dated December 19, 1993, denied the motions, as well as an application by some claimants for leave to appeal from that interlocutory order pursuant to 28 U.S.C. § 1292(b). On March 15, 1994 a full trial of all issues raised by the pleadings commenced before the Courts. It continued with adjournments until July 25, 1994, when, as noted below, it was aborted by a settlement. Because certain issues concerning claims arising únder Maryland law were not resolved by the Settlement, with the consent of all parties a separate trial of the “Maryland Issue” was held by the Courts. It was intended to resolve the “issue of appropriate set-off rules that should be developed with respect to Manville or the Trust in connection with claims arising under Maryland law in the context of a fair and adequate resolution of these proceedings.” Settlement Stipulation, ¶4. The Maryland claimants did, however, approve all other aspects of the Settlement. This narrow issue, by the consent of all parties, was severed from the rest of the issues resolved by the Settlement and tried on August 2, 1994. It is resolved, as indicated in greater detail below, by allowing Maryland courts tó decide and apply Maryland law in individual litigations. Where, under Maryland conflicts law, the law of another state governs, the Settlement provisions applicable to that other state will apply to the extent that Maryland’s choice of law rules provide. The Courts relied on evidence in all proceedings involving the bankruptcy of Man-ville and actions against the Trust in the Courts, including the fairness hearings. That evidence demonstrated the following: As of the commencement of the instant proceeding, the Trust had paid $679 million to approximately 15,700 claimants. By September 30, 1994, the Trust had paid $1.072 billion to approximately 29,010 claimants, including approximately $14 million to eight codefendants and distributors. Of this amount, approximately $343 million was paid during 1994 to approximately 11,300 plaintiffs who had either settled with, or won a judgment against, the Trust prior to November 19, 1990. These claimants argued that because their claims had been finally determined prior to initiation of the instant class action, they were entitled to full payment. They ultimately accepted payments equal to approximately 70% of their claims’ full value. These payments were challenged by some present claimants whose claims had not been settled or reduced to judgment prior to November 19,1990. Payments were upheld on appeal. In re Joint E. & S. Dist. Asbestos Litig., 14 F.3d 151, 154-57 (2d Cir. 1994). Those relatively few persons who have not yet accepted these discounted payments constitute the Subclass of Claimants with Pre-November 1990 Settlements and Judgments. The Trust retained the Resource Planning Corporation (“RPC”) to prepare an estimate of future claims to be received over the life of the Trust. RPC has determined, to an acceptable degree of probability, using standard and well accepted statistical methods, and based on the Trust’s experience, that between 303,000 and 328,000 claims will be filed against the Trust between 1993 and 2049. The settling parties acknowledge that there is inherent uncertainty in these predictions and that there is a possibility that the number of claims actually received may fall outside any projected range. RPC recommended that the estimate be reviewed at least every three years. This recommendation has been incorporated into the Settlement and provides the best assurance possible of fair and equal compensation to all Trust Beneficiaries. The Trust and RPC have also undertaken an analysis of the likely liability associated with current and future claims. Using a sample drawn from approximately 167,000 then-current claims, current liabilities were projected as being in excess of .$6.7 billion. Based on reasonable assumptions about claimant behavior, claim inflation and other factors affecting claim valuation, the Trust’s experts estimate the Trust’s total liability for future claims to be between $21 billion and $25 billion in nominal dollars, ie., not reduced to present value. The Trust retained Houlihan, Lokey, Howard & Zukin (“HLH & Z”) as experts to analyze the likely value of the Trust’s assets under a variety of scenarios. Based upon HLH & Z’s analysis, a reasonable valuation of the Trust’s assets ranges from $1.8 billion to $2.5 billion. See Asset Analysis dated 2/28/94, Exhibit B to Expert Witness Statement of Donald V. Smith. A committee appointed by the Courts pursuant to Rule 706 of the Federal Rules of Evidence has made a comprehensive study leading to predictions of future claims using a more sophisticated analysis than did the RPC. The panel examined a wider variety of assumptions than RPC and concomitantly found a much wider possible variation in future claims. Reasonable extrapolations from the Rule 706 Panel conclusions are, however, quite close to those of the RPC. This independent .work of the Rule 706 Panel, as well as the procedures for regular reevaluations of claims and assets, furnishes strong assurance that the debacle of lack of adequate assets to pay current claims will not be repeated. Comparison of the range of liability totals and the estimates of the value of the Trust’s assets shows that: (1) the Trust remains a limited fund; and (2) the only means by which the equivalent treatment of similarly situated claimants can be assured is by a pro rata reduction in the amounts paid for claims, that is, by paying each claimant the same percentage of damages suffered. Evidence of Trust assets and liabilities provides a prudent basis for the agreement of the parties on an initial pro rata payment of 10% of the value of claims. The “deep insolvency” of the Trust found by Special Master Frankel continues. Unless the manner in which the Trust operates and pays claims is restructured to include a pro rata payment scheme, the Trust will be unable to fulfill its purpose of delivering “fair, adequate and equitable compensation to bona fide Beneficiaries, whether presently known, or unknown, without overpaying or underpaying any claims.” C. Settlement Negotiations The parties began new settlement discussions in 1993 shortly after the Court of Appeals handed down its revised decision after rehearing in 1993. Those negotiations continued for more than a year. Each of the subclasses appointed by the Courts, the Class Counsel, the Trust, and any other person who wished to be heard, participated actively in the negotiations. There were many face-to-face meetings among the parties and numerous telephone conferences. Draft settlement papers were repeatedly circulated among the parties. Many lawyers and lay persons also communicated views to the class and subclass representatives. The negotiations were hard-fought, with each attorney vigorously representing the interests of his or her constituents. As the Settlement demonstrates, the negotiations were extraordinarily complex and required the settling parties to reach consensus on a panoply of issues. The principal problems included: • developing efficient claims resolution procedures; • developing consensus on scheduled disease categories and values; • deciding how the Trust would be removed from the tort system; • satisfying existing indemnity and contribution claims by the distributor and co-defendant manufacturer Beneficiaries and determining treatment of future claims for contribution by codefendant Beneficiaries and future claims for indemnity by distributor and other Beneficiaries; • dealing with MacArthur’s claim of rights under the MacArthur stipulation; and • resolving Trust management and continuing oversight issues; By September 1993, the parties had made substantial progress with respect to the development of efficient claims resolution procedures and scheduled disease categories and values, but other issues remained substantially unresolved. On September 28, 1993, after hearing reports of the negotiations, the Courts fixed a trial date of February 1,1994, and set a schedule for motions and for discovery under the supervision of Magistrate Judge John L. Caden. As the trial progressed, settlement discussions continued. Just before the Codefendants were to present their ease, the parties sought and obtained an adjournment to continue negotiations. Intensive bargaining followed, leading to the Settlement now presented. Mark Peterson, the Special Advisor appointed by the Courts, participated in every stage of the discussions. He testified at the fairness hearings that he had ample opportunity to observe the intense hard-fought negotiations and their arms-length, non-collusive nature. The Settlement was not the product of fraud or collusion. Class counsel and counsel for each of the subclasses made substantial efforts to inform and consult class or subclass members concerning the ongoing negotiations. Because of the close-knit nature of the bars of the plaintiffs, defendants and insurers, all those lawyers whose clients’ rights were affected were aware of these negotiations. As a practical matter, any of them had access to the. negotiations had they wished to participate, be heard or be informed. The .Courts were at all times open to any motions, including any to intervene. Drafts of the proposed settlement documents were widely circulated among class and subclass members. In June 1993, a draft of a proposed Trust Distribution Process (“TDP”) was circulated to all lawyers representing claimants against the Trust and to all pro se claimants. The Amended Complaint included a draft TDP as an attachment. The Complaint and the proposed TDP were reported on in Medley’s Litigation Reporter: Asbestos and Andrews Publications’ Asbestos Litigation Reporter, leading periodicals in the field. They made copies available to their readers. See Findley Fairness Hearings to Run First Week of November, Meale/s Litig.Rep.: Asbestos, Oct. 7, 1994, at 4; Findley Parties Announce Basic Terms of Settlement, Asbestos Litig.Rep., Aug. 5, 1994, at 30,339; Weinstein, Lifland Approve Notice to Class, Set Fairness Hearing, Asbestos Litig.Rep., Sept. 2, 1994, at 30,532. In addition, class and subclass counsel disseminated drafts of the TDP to interested class members. Counsel for the class and each subclass made themselves available to respond personally to inquiries from class members and others throughout the negotiation process. On July 25, 1994, a stipulation of settlement signed by the Trust, all class and subclass representatives and the J.T. Thorpe Company, (the “Settlement Stipulation”), together with various annexed exhibits, was filed. See Addendum A, attached to and made a part of this Memorandum, Orders and Judgment. The settling parties filed a motion on August 18, 1994 seeking an order setting a hearing to determine whether the agreement embodied in the Settlement Stipulation should be approved as fair, adequate and reasonable, and asking the Courts to order a proposed form of notice to the class of the Settlement and of the fairness hearings. The motion was heard on September 1,1994. The Courts then finally certified the class and subclasses, approved the proposed form of notice and scheduled fairness hearings to begin on November 1, 1994 to determine whether the Settlement should be approved as fair, adequate and reasonable. 1. Notice of Settlement and Hearings Pursuant to the Courts’ order of September 1, 1994, widespread notice of the Settlement and the fairness hearings was disseminated. The notice described the nature of the class action, indicated the time and place of the fairness hearings and described in substantial detail the principal features of the Settlement. The notice also stated that the Settlement, if approved, would be binding on all class members, and that any class member or other person could appear at the fairness hearings and present objections to the Settlement. Between September 30, 1994 and October 12, 1994, the notice was published twice in the following publications: USA Today (National Edition); New York Law Journal; New York Times; Washington Post; New Orleans Times Picayune; San Francisco Chronicle; Dallas Morning News; Atlanta Journal and Constitution; Chicago Tribune; Los Angeles Times; Baltimore Sun; and Philadelphia Inquirer. The notice was also published in general circulation newspapers in Seattle, Washington; Houston, Texas; Miami, Florida; Charleston, South Carolina; Norfolk, Virginia; Boston, Massachusetts; St. Louis, Missouri; Cleveland, Ohio; Kansas City, Missouri; and Detroit, Michigan. In addition, thirty- and sixty-second public service announcements (“PSAs”) were distributed to radio stations. It is estimated by News/Broadcast Network, the company hired to distribute the PSAs, that the PSAs were heard by 18 million people between the middle of September and the end of October 1994. Finally, a package containing the notice and the Settlement Stipulation was sent by first class mail to all plaintiffs’ attorneys who represent Trust Beneficiaries; all attorneys representing Codefendants; all members of the Manville Distributors subclass; all pro se claimants; all other persons or organizations listed on the class action service list; the “Property Damage Trust” created in connection with the Plan; the Manville Corporation; all subscribers to the Professional Negligence Law Reporter; all subscribers to the Association of Trial Lawyers of America’s Products Liability Law Reporter; and the National Asbestos Victims Action Organization Committee. Pursuant to the Courts’ order, any member of the public who appeared was heard at the fairness hearings. Any documents offered were made part of the record. 2. Summary of Settlement The following summary is designed to assist the reader. The actual Stipulated Settlement and TDP, attached as Addendum A, as amended by Addendum B, governs. Under the terms of the Settlement, the rights and duties of all class members and the rights and duties of the Trust with respect to class members are governed by the TDP, except that certain contribution claims, certain indemnity claims, the claims of the members of the MacArthur Subclass and the claims of the J.T. Thorpe Company (a member of the Manville Distributor Subclass) based on an agreement with the Trust dated April 29, 1989,’will be resolved as described below. All other claims of Trust Beneficiaries, including claims for contribution and indemnity, are to be processed and paid under the TDP. Payment under the TDP constitutes complete and total satisfaction of such claims under the bankruptcy reorganization plan and thus provides additional protection against suits naming Manville as defendant — suits which can only lessen the value of the Trust’s assets.' ■ ■ The ultimate goal of the Settlement is for all claimants to share equally in the burdens imposed by the Trust’s limited fund status. The TDP seeks to accomplish that goal by paying all claimants — whether Asbestos Health Claimants, Codefendants or Distributors — over time as equivalent a share as possible of their claims’ values, and by adopting numerous measures designed to reduce significantly the Trust’s operating and litigation expenses and to maximize the amount the Trust can obtain from its assets and pay to Beneficiaries. a. Pro Rata Shares To ensure equitable treatment of all claimants, present and future, in light of the Trust’s deep insolvency and inability to pay all Beneficiaries in fall, the TDP provides that each claimant will receive a pro rata— equal percentage — share of his or her claim’s liquidated value. The percentage to be paid will be set by the Trust with the concurrence or consultation of a number of persons outside the Trust. They are first, the Selected Counsel to the Beneficiaries (“SCB”), a group of lawyers representing health claimants appointed by the Courts under the Plan. The SCB is .charged with representing the interests of Trust Beneficiaries, and toward that end is granted- certain rights vis-a-vis management of the Trust. Second, the Special Advisor, the successor to the Advisor to the Courts, in effect a Special Master. Third, the Legal Representative, the successor to the attorney for the subclass of future claimants. The percentage of a settled claim to be paid will be set in the future by the Trust with the concurrence of the SCB and the Legal Representative, after-consultation with the Special -Advisor. The SCB is, as of now, essentially the representative of present plaintiffs. The Special Advisor is Mark Peterson. The Legal Representative is Leslie Fagen. See Part