Thu 10/14/2021 11:24 AM
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Opinion

In a decision that could have implications for approval of the Mallinckrodt debtors’ plan settlement with the official committee of unsecured creditors and confirmation of the debtors’ plan, Judge Laurie Selber Silverstein on Wednesday, Oct. 13, issued an opinion in the Imerys Talc case excluding more than 15,000 votes to accept the plan cast by the Bevan & Associates law firm on behalf of purported asbestos claimants. According to Judge Silverstein, the votes should be excluded because “the evidence raises significant questions as to whether any of Bevan & Associates’ clients have a claim against any Debtor.”

As discussed in Judge Silverstein’s opinion, Bevan & Associates “built up” a list of clients without regard to the specifics of the Imerys Talc case and voted such claims as a block, despite later admitting that 97% of such claimants may never be entitled to a recovery under the Imerys Talc case.

As discussed in last week’s Reorg Americas Court Opinion Review, the Bevan firm represents one of the three members of the Mallinckrodt UCC and has asserted asbestos claims on behalf of a similar list of more than 15,000 clients in that case. The Mallinckrodt cases are proceeding in the same district as Imerys Talc but in front of a different judge. Counsel for the ad hoc Acthar group opposed to the Mallinckrodt plan has mentioned the Imerys voting dispute at hearings in that case and suggested that the UCC’s plan settlement with the debtors, which would distribute $18 million in effective date cash payments on account of asbestos claims but only $7.5 million on account of Acthar claims, may constitute a quid pro quo for the Bevan firm’s client on the UCC to approve the settlement and for the Bevan firm to vote its list of clients in favor of confirmation.

According to a confirmation objection filed by the ad hoc Acthar group in the Mallinckrodt case on Oct. 13, “[T]he circumstances surrounding the UCC settlement[] and its embedded promises of aggregate and class action settlements to two Committee members (ie., $18 million to Asbestos claimants and $8 million to Generic Antitrust claimants) is wrought with conflicts of interest and potential breaches of fiduciary [duty] that require discovery that has not taken place.” The ad hoc Acthar group has noticed a deposition of Thomas Bevan, principal of the Bevan firm, in connection with confirmation.

The Imerys Talc decision could also complicate confirmation in other mass tort chapter 11 cases. Voting on plans in mass tort cases is often undertaken through master ballots submitted by plaintiffs’ counsel, a practice Judge Silverstein does not reject but suggests needs more due diligence by counsel and consultation with clients.

In the Imerys case, the Bevan firm initially filed a master ballot rejecting the plan on behalf of all of its clients, but later withdrew that ballot and submitted a new master ballot accepting the plan after discussions with plan proponents’ counsel. Judge Silverstein finds that the Bevan firm “was not offered anything to change its clients' votes” and credits Thomas Bevan’s explanation for the change of heart. Nevertheless, the judge concludes that the questionable validity of Bevan’s clients’ claims against Imerys and Bevan’s failure to consult with clients before voting their claims and before changing the votes all justify excluding all of the votes cast by Bevan.

“In order for Master Ballots to work, great trust is placed in the plaintiff's bar,” Judge Silverstein says, but “[w]ith respect to Bevan & Associates, the evidence shows that such trust was not well-placed.” A lawyer submitting a master ballot, the judge continues, “still has the obligation to ensure that he only votes on behalf of clients who have a claim against Debtors.” Bevan admitted at a hearing that 97% of the clients likely would not receive any distribution under the Imerys plan.

As Judge Silverstein puts it, the Bevan firm “has a database of clients built up over the past thirty years,” “performed zero diligence to discern which of its clients, if any, had been exposed to talc, much less to Debtors' talc” and “submitted its Master Ballot without regard to whether any of its 15,713 clients had a Talc Personal Injury Claim as required to vote on the Plan.” “In other words,” the judge adds, “Bevan & Associates simply printed out a list of its clients in excel spreadsheet format and slapped it behind a Master Ballot.”

Judge Silverstein concludes with harsh words regarding Bevan’s failure to consult with clients before voting their claims. “I feel compelled to observe my disagreement with Mr. Bevan's apparent strongly-held belief that his clients cannot make a decision in their best interest when it comes to voting on a plan,” the judge remarks. “[I]t is counsel's job to make the plan understandable and (if counsel is not empowered to vote for the client) to provide advice on whether to accept or reject the plan.”
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