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Dow Corning plan nixed
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November 21, 1997: 7:08 p.m. ET
Bankruptcy judge refuses proposal for settling silicon breast implant claims
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NEW YORK (CNNfn) - A federal judge has refused to accept a proposed $2.4 billion reorganization plan by Dow Corning Co. to settle silicon gel breast implant claims in its Chapter 11 bankruptcy case, lawyers in the case said Friday.
Bankruptcy Judge Arthur J. Spector in Bay City, Mich. Opposed, among other items, a clause that would have released from any liability Dow Corning's parent company, Dow Chemical Co.
Analysts said Dow Chemical will remain a target for litigation regardless of what happens in Dow Corning's bankruptcy case.
"There's no long-term relief in sight for Dow Chemical," said James Kelleher, an analyst with Argus Research. "It remains a big target. But it doesn't mean it remains a vulnerable target."
Dow Corning filed for bankruptcy in May 1996 after getting slammed with lawsuits over the illnesses resulting from implants it once manufactured. The reorganization plan also includes $1.3 billion to settle commercial claims.
Kenneth Eckstein, attorney for the plaintiffs, said Spector's decision was a signal that Dow Corning and the plaintiffs should negotiate a plan together.
"Both parties need to go back to the bargaining table and craft a fair and consenual plan of reorganization," Eckstein said in a statement. He wasn't available for further comment Friday.
Donald Bernstein, attorney for the commercial creditors, said he hopes both sides will negotiate, rather than litigate the matter.
"We want to see a speedy, fair resolution," Bernstein said. "We want both parties to be on a consensual basis. It's not in anyone's best interest to litigate it. It could take years."
Efforts to reach spokesmen from Dow Chemical and Dow Corning were unsucessful Friday.
Kelleher said he has been mystified why Dow Chemical stock has performed so well in 1997 despite the threat of litigation and pricing pressures on oil-based chemicals, one of the company's prime products.
"You could almost argue that investors sense some relief," Kelleher said.
In August, a jury in a Louisiana court found Dow Chemical was negligent in the nation's first class-action suit involving implants. Jurors in the case found the company remained "intentionally" silent about the dangers of silicone.
Spector, in his ruling Thursday, refused to allow Dow Corning to send the plan to creditors for a vote. As part of bankruptcy court procedures, Dow Corning has to prepare a reorganization plan that claimants vote on.
Spector's decision means Dow Corning will have to redraft the plan, but the company doesn't necessarily have to negotiate with claimants.
Besides the liability question of Dow Chemical, Spector said the proposed voting process would improperly coerce creditors to vote yes, according to Command Trust Network Inc., an advocacy group that's been closely involved in the case.
Sybil Niden Goldrich, a co-founder of Command Trust, is also a member of the Tort Claimants Committee, which represents plaintiffs in the case. The committee includes eight lawyers and Goldrich, a cancer survivor who had breast implants.
Foreign creditors would also have been treated unfairly, Command Trust said.
Spector appeared especially appalled that even claimants who voted against the plan would lose the right to sue Dow Chemical, Command Trust said. Spector said it was a "fantasy" to believe the court would allow it, the group said.
Dow Chemical stock (DOW) closed down 1-1/16 to 98-9/16 on the New York Stock Exchange. But the company's stock is near its high for the year of 101-1/2. 
-- By staff writer Martine Costello
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