Free Remark - District Court of Delaware - Delaware

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UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE . . OWENS CORNING, et al., . . . . Debtors. . . . . . . . . . . . . . . .. IN RE: Case No. 00-3837

USX Tower - 54th Floor 600 Grant Street Pittsburgh, PA 15219 February 28, 2005 10:31 a.m.

TRANSCRIPT OF HEARING BEFORE HONORABLE JUDITH K. FITZGERALD UNITED STATES BANKRUPTCY COURT JUDGE APPEARANCES: For the Debtor: Saul Ewing LLP By: NORMAN PERNICK, ESQ. 222 Delaware Avenue, Suite 1200 Wilmington, Delaware 19801 By: GORDON HARRIS, ESQ. (Telephonic appearance)

For the OCUC:

Audio Operator:

Cathy Younker

Proceedings recorded by electronic sound recording, transcript produced by transcription service. _______________________________________________________________ J&J COURT TRANSCRIBERS, INC. 268 Evergreen Avenue Hamilton, New Jersey 08619 E-mail: [email protected] (609)586-2311 Fax No. (609) 587-3599

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APPEARANCES (CONT'D): For Kensington Int'l, Springfield Assoc., Elliott Management: Stutman, Treister & Glatt By: JOHN SHAFFER, ESQ. ISAAC PACHULSKI, ESQ. 1901 Avenue of the Stars, 12th Fl. Los Angeles, California 90067 (Telephonic appearance) By: JOSEPH GIBBONS, ESQ. (Telephonic appearance) Sonnenchein Nath & Rosenthal LLP By: ROBERT B. MILLNER, ESQ. Sears Tower, Suite 8000 South Wacker Drive Chicago, Illinois 60606 (Telephonic appearance) Stutzman, Bromberg, Esserman & Plifka, P.C. By: SANDER ESSERMAN, ESQ. 2323 Bryan Street, Suite 2200 Dallas, Texas 75201 (Telephonic appearance) By: GERALD A. STEIN, ESQ. (Telephonic appearance) By: BRUCE WHITE, ESQ. (Telephonic appearance) Lowenstein Sandler, PC By: IRA M. LEVEE, ESQ. 65 Livingston Avenue Roseland, New Jersey 07068 (Telephonic appearance) Montgomery, McCracken, Walker & Rhoads, LLP By: NATALIE RAMSEY, ESQ. ELIZABETH W. MAGNER, ESQ. 128 South Broad Street Philadelphia, Pennsylvania 19109 (Telephonic appearance) Anderson Kill & Olick, P.C. By: HOWARD RESSLER, ESQ. 1251 Avenue of the Americas New York, New York 10020-1182 (Telephonic appearance)

For Travelers Casualty and Surety Co.: For Affiliated FM Insurance Co., et al.:

For Baron & Budd:

For Century Insurance: For Foster & Sear LLP: For Plaintiffs in Securities Litigation:

Counsel to Select Asbestos Claimants:

For Special Bondholders and Trade Creditors Committee:

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APPEARANCES (CONT'D): For Official Committee of Asbestos Claimants: Caplin & Drysdale, Chartered By: JULIE DAVIS, ESQ. One Thomas Circle, N.W. Washington, D.C. 20005 (Telephonic appearance) Binka-White Law Office By: STEPHEN OROZA, ESQ. 744 Montgomery Street, Fourth Floor San Francisco, California 94111 (Telephonic appearance) Morris, Nichols, Arsht & Tunnell By: WILLIAM SUDELL, ESQ. 1201 North Market Street Wilmington, Delaware 19899-1347 Debevoise & Plimpton, LLP By: ROGER PODESTA, ESQ. 919 Third Avenue New York, New York 10022-3904 Kaye Scholer By: EDMUND M. EMRICH ESQ. 425 Park Avenue New York, New York 19081 Archer & Greiner By: JOHN FIORELLA, ESQ. 1300 North Market Street, Suite 700 Wilmington, Delaware 19801 By: JEFFREY NORTON, ESQ.

For Claimants John and Kathleen Stratton, et al.:

For the Official Unsecured Creditors:

Special Counsel for the Debtors:

For the Futures Representative:

For the Stratton Claimants:

For the Stratton Class Claimants: For Credit Suisse First Boston:

Landis, Rath & Cobb By: RICHARD COBB, ESQ. 919 Market Street, Suite 600 Wilmington, Delaware 19801 Simpson, Thacher & Bartlett By: BARRY OSTRAGER, ESQ. 425 Lexington Avenue New York, New York 10017-3054

For Credit Suite First Boston:

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APPEARANCES (CONT'D): For the Futures Representative: Young Conaway Stargatt and Taylor By: SHARON ZIEG, ESQ. The Brandywine Building, 1000 West St. 17th Floor Wilmington, Delaware 19899 White and Williams By: JAMES YODER, ESQ. 824 North Market Street, Suite 902 Wilmington, Delaware 19801-4938 Potter Anderson and Corroon By: DAVID BALDWIN, ESQ. Hercules Plaza 1313 N. Market Street Wilmington, Delaware 19899 Monzack and Monaco, P.A. By: FRANK MONACO, ESQ. 1201 North Orange Street, Suite 400 Wilmington, Delaware 19899-2031 Campbell & Levine, P.C. By: MARLA ESKIN, ESQ. 800 N. King Street, Suite 300 Wilmington, Delaware 19801 Loizides & Associates By: CHRIS LOIZIDES, ESQ. Legal Arts Building 1225 King Street, Suite 800 Wilmington, Delaware 19801

For Taylor Ridge Corp. and Universal Building Products Corp.: For Kensington, Springfield:

Local Counsel for Designated Members of the Committees: For the Asbestos Claimants Committee:

For Certain Preferred Shareholders:

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1

THE COURT:

Good morning.

This is the matter of

2 Owens Corning. 3 4 5 6 Honor. 7

Can you hear? Yes, Your Honor.

UNIDENTIFIED ATTORNEY: THE COURT:

Mr. Pernick, can you hear? Yes. We heard in the courtroom, Your

MR. PERNICK:

THE COURT:

All right.

The parties that I have

8 listed to appear by phone are Gordon Harris, John Shaffer, 9 Isaac Pachulski, Joseph Gibbons, Robert Millner, Sander 10 Esserman or David Parsons, Gerald Stein, Bruce White, Ira 11 Levee, Natalie Ramsey, Elizabeth Magner, Howard Ressler, Julie 12 David, and Steve Oroza. I'll take entries of appearances from

13 those of you in the courtroom, please. 14 MR. PERNICK: Gordon Pernick on behalf of the

15 debtors, Your Honor. 16 MR. SUDELL: William Sudell, Morris, Nichols, Arsht &

17 Tunnell, on behalf of the official unsecured creditors 18 committee, Your Honor. 19 20 debtors. 21 MR. EMRICH: Edmund Emrich with Kaye Scholer, MR. PODESTA: Thank you. Roger Podesta, special counsel for the

22 representing the futures representative. 23 MR. FIORELLA: John Fiorella of Archer & Greiner,

24 appearing for the Stratton claimants. 25 THE COURT: I'm sorry, sir. What was your last name?

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1 2 3 4 5

MR. FIORELLA: THE COURT:

Fiorella.

F-i-o-r-e-l-l-a.

And who are you representing? The Stratton class action claimants.

MR. FIORELLA: THE COURT: MR. NORTON:

Thank you. Good morning, Your Honor. Jeffrey

6 Norton for the Stratton class claimants. 7 MR. COBB: Good morning, Your Honor. Richard Cobb on With me today,

8 behalf of Credit Suisse First Boston as agent.

9 Your Honor, is Mr. Barry Ostrager of the Simpson Thacher and 10 Bartlett firm, also on behalf of CSFB. 11 12 THE COURT: MS. ZIEG: Thank you. Good morning, Your Honor. Sharon Zieg of

13 Young Conaway Stargatt and Taylor, also on behalf of the 14 futures representative. 15 MR. YODER: Good morning, Your Honor. James Yoder of

16 White and Williams on behalf of Taylor Ridge Corporation and 17 Universal Building Products Corporation. 18 MR. BALDWIN: Good morning, Your Honor. David

19 Baldwin, Potter Anderson and Corroon, for Kensington, 20 Springfield. 21 Thank you. Good morning, Your Honor. Frank Monaco,

MR. MONACO:

22 local counsel for the designated members of the committees. 23 MS. ESKIN: Good morning, Your Honor. Marla Eskin,

24 Campbell Levine, for the asbestos claimants committee. 25 THE COURT: Okay. Mr. Pernick?

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1

MR. PERNICK:

Good morning, Your Honor.

Your Honor,

2 let me just go through a summary which was on the amended 3 agenda. And actually, I think updated even further because of So, just to

4 a couple orders that were entered by the Court.

5 make sure that our records are the same as the Court's, I have 6 continued to 3/21 number two. That was the motion for a Item number

7 protective order regarding the trustee motion.

8 six, there was a certificate of counsel with a form of 9 stipulated order attached. I think that was filed on Friday.

10 I'm not sure if the Court had a chance to see that, but just to 11 let you know that it was filed. 12 13 14 15 THE COURT: I haven't seen it. Okay. That's on the Hebron sale. What does it say?

MR. PERNICK: THE COURT:

All right.

MR. PERNICK:

If I could have one moment, Your Honor, There was an objection by the Ohio -For the record, it was docket And it

16 let me just grab that.

17 just -- I'm sorry, Your Honor. 18 number 14578.

It may help the Court in getting that.

19 is with respect to the sale of real property in Hebron, Ohio. 20 There was an objection of the Ohio State Fire Marshal, and that 21 was filed at docket number 14468. The parties resolved that

22 objection, and are submitting the proposed order, and that 23 order, in summary, provides for the sale of the Section 363 -24 pursuant to Section 363. And pursuant to Section 363(f), and

25 this is in paragraph four of the order, the property is to be J&J COURT TRANSCRIBERS, INC.

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1 transferred free and clear of any and all liens, claims, 2 encumbrances, and interests, with all of those to be attaching 3 to the proceeds, and the same priority with the same validity, 4 force, and effect which they now have against the property. 5 Just -- I don't -- nothing in the order, and this is in 6 paragraph four, releases or nullifies any liability on the part 7 of Owens Corning to the State of Ohio to comply with Ohio 8 revised code Section 37-37.88 through 37-37.89, and the rules 9 and regulations promulgated thereunder. So, there's basically

10 a carve out for those sections for the Ohio State Fire Marshal. 11 THE COURT: All right. I will have that order pulled

12 and signed. 13 objection. 14

That seems to be an appropriate resolution of the

MR. PERNICK:

Okay.

And I actually have another copy I can give it to Rachel.

15 here, if the Court would like it. 16 17 Pernick. THE COURT: Thanks. No.

I'm going to read it first, Mr.

I'll just have it pulled here and sign it,

18 and return it to her later for filing. 19 MR. PERNICK: Okay. Thank you. You entered an order

20 in number seven which was the Foreland stipulation, and also in 21 number eight with respect to the motion to stay the adversary 22 actions. That was an additional stay of six months. And there

23 was one point I wanted to just raise on item number eight for 24 the Court. While the agenda states that the motion to stay the

25 adversaries was uncontested, and as a result the actions were J&J COURT TRANSCRIBERS, INC.

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1 stayed in the pretrial conferences also won't be going forward. 2 I wanted to just let the Court know that with respect to Foster 3 and Sear's adversary action, which was number 9A on the agenda, 4 that was not stayed by Court order, and so that's not covered 5 by this order, and we just wanted to clarify that. Foster and

6 Sear, however, agrees, and we did speak with them before this 7 hearing, that the pretrial with respect to their matter should 8 not go forward today. And in the event the Court wants a

9 pretrial conference, and the parties agree, that we'll be happy 10 to have that in March, or at any other date that the Court 11 would like to have it. And I believe that Foster and Sear's

12 counsel is on the phone just to confirm that. 13 14 phone? 15 MR. WHITE: Your Honor, Bruce White appearing on That's correct. So, are you two just going to THE COURT: Counsel for Foster and Sear is on the

16 behalf of Foster and Sear. 17 THE COURT:

All right.

18 put it back on the calendar when you think it's appropriate and 19 it's stayed indefinitely, or what? 20 MR. PERNICK: I'm not clear. We will

Your Honor, that's correct.

21 put it back on when we believe it's appropriate. 22 23 THE COURT: All right. Thank you.

MR. PERNICK:

That would also cover number nine,

24 which were the adversary pretrials, and we assume that those 25 would be stayed pursuant to the order, which leaves with the J&J COURT TRANSCRIBERS, INC.

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1 following matters going forward:

item number one, which is the

2 Mira Vista class certification motion on a status conference 3 basis only; number three, which is the Taylor Ridge Section 362 4 motion, and it was going forward for the purpose of its 5 scheduling an evidentiary hearing only; number four and number 6 five, which are related, the CSFB motion to commence an 7 adversary action, and the motion for a determination of core, 8 non-core, that was number five; number ten, which was the 9 discussion carryover from last time regarding telephonic 10 procedures for hearings; and number 11, which was the emergency 11 motion with respect to trading restrictions. Unless the Court

12 has a preference, I would propose to just go in the order that 13 they were listed on the agenda. 14 15 THE COURT: That's fine. We'll start with number one, which is

MR. PERNICK:

16 the Mira Vista class certification status conference, and Mr. 17 Podesta for the debtor is handling that. 18 MR. PODESTA: Good morning, Your Honor. Roger

19 Podesta, for the debtors.

In terms of the Mira Vista class

20 action proceedings, we have completed our fact discovery and 21 the parties have exchanged all their expert reports. Last week

22 we had a settlement meeting and the plaintiffs have provided us 23 with a written settlement demand, to which the debtors expect 24 to be responding shortly. So, I think this matter is

25 proceeding along, and I am not aware of any currently pending J&J COURT TRANSCRIBERS, INC.

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1 disputes. 2 3 again? 4 5 6 MR. PODESTA: THE COURT: Yes. I believe so. THE COURT: Okay. So, you simply want this continued

How long? Let me just consult with counsel for

MR. PODESTA:

7 the plaintiff. 8 9 10 MR. PODESTA: THE COURT: All right. (Pause) If Mr. Oroza is on the line, I think

11 plaintiff's counsel would like a little input from Mr. Oroza. 12 I think the only issue, Your Honor, is if -- if there has been 13 some thought that we put off the expert witness depositions 14 briefly to explore the possibility of settlement, which might 15 squeeze the plaintiffs on the briefing of the class action -- a 16 briefing, and so we might need a little adjournment down the 17 road of the argument on the class action of -- but I believe 18 that's the only -19 UNIDENTIFIED ATTORNEY: That's correct. We're

20 actually -- we've pushed back the expert discovery to the point 21 where we're going to need to make an adjustment in the 22 schedule. Even now it's not completely clear that's going to

23 require an adjustment of the hearing date, but if it's pushed 24 back much further we are almost certain we will. But we're in

25 the process of discussing that, and if we do we can agree J&J COURT TRANSCRIBERS, INC.

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1 we'll submit a stipulation.

I would just suggest that we set

2 this for a status on the next month's omnibus calendar, and 3 then we can report on where we stand on that issue. 4 5 6 THE COURT: All right. That's fine. Thank you, Your Honor.

UNIDENTIFIED ATTORNEY: THE COURT:

So, next month we'll do a status

7 conference at the omnibus hearing, but then it's with the idea 8 of getting an order in place for briefing if you haven't 9 settled. 10 11 12 Is that it? UNIDENTIFIED ATTORNEY: THE COURT: Okay. Yes, Your Honor.

Thank you.

MR. PERNICK:

Your Honor, that takes us to item

13 number three, which is the motion of Taylor Ridge Corporation 14 and Universal Housing Corporation for the entry of an order 15 pursuant to Section 362, and in the alternative compelling the 16 debtor to assume or reject executory contracts and for the 17 related relief. And it's on the Court's calendar for a The Court may recall that

18 scheduling and evidentiary hearing.

19 this action arises out of a condominium development project 20 that was assumed by the condominium counsel, and a claimed 21 indemnification in favor of Taylor Ridge against Reynolds, 22 which is an Owens Corning entity. They've asked for relief

23 from stay to proceed with that, and, Your Honor, we don't 24 believe actually that an evidentiary hearing is necessary. 25 There may just be a hearing obviously necessary on the J&J COURT TRANSCRIBERS, INC.

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1 underlying merits.

But I believe that Mr. Yoder, and I'm not

2 sure if co-counsel is in Court or on the phone, but would like 3 to speak to why an evidentiary hearing is necessary, and then 4 if the Court agrees we can talk about scheduling that. 5 6 THE COURT: MR. YODER: All right. Mr. Yoder?

Actually, Your Honor -- this is James I've spoken with co-counsel

7 Yoder on behalf of Taylor Ridge.

8 for the debtor and we're going to attempt to stipulate to the 9 facts to avoid the necessity of an evidentiary hearing. We

10 haven't had those discussions yet, but at this point I think an 11 argument of an hour would suffice, without having to worry 12 about putting witnesses on. 13 THE COURT: Okay. After your stipulations are filed?

14 An argument after the stips are filed? 15 16 MR. YODER: THE COURT: Yes. All right. Why don't you folks work out

17 a time by which the stipulations will be filed, and also any 18 briefs, and then I'll give you an argument date after I see 19 when your last briefing is due. 20 21 MR. YODER: THE COURT: That's fine, Your Honor. All right. Thank you.

Then I'll expect to get a

22 certification of counsel from the debtor that will set dates 23 for filing of stips of fact and briefs, and leave a blank space 24 for an argument of -- Mr. Pernick, does the debtor agree it 25 will take an hour? Should I reserve an hour? J&J COURT TRANSCRIBERS, INC.

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1

MR. YODER:

Yes, Your Honor.

We think that's fine.

2 And we also agree, obviously, to talk about a stipulation of 3 facts, which, I apologize, I didn't speak about in the 4 beginning. 5 But we have spoken about that before the hearing. THE COURT: Okay. I will not be doing the argument, It will

6 since it will take an hour on an omnibus hearing date. 7 be a separate date, and it will be in Pittsburgh.

You folks I don't

8 can decide if you want to do it by phone or come here. 9 have a preference, since it's an argument.

But I will give you

10 the date for it after I see when your last briefs are due. 11 12 13 14 MR. PERNICK: MR. YODER: THE COURT: Okay. Thank you, Your Honor.

Thank you, Your Honor. Thank you. That takes us to item numbers four and

MR. PERNICK:

15 five, and that's Mr. Ostrager's motion, and on the debtor's 16 behalf Mr. Podesta is handling that. 17 18 19 MR. OSTRAGER: THE COURT: Good morning, Your Honor.

Good morning. I represent Credit Suisse First Boston

MR. OSTRAGER:

20 as agent for the pre-petition bank lenders to Owens Corning. 21 The pre-petition bank lenders wish, pursuant to the Cybergenics 22 case, to commence an adversary proceeding against certain B 23 reader radiologists who we contend are responsible for billions 24 of dollars having been wrongfully paid out, a fact which the 25 debtor apparently doesn't deny. We've asked the debtor to

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1 initiate this action.

The debtor has declined.

The bank

2 lenders are prepared to fund, at their own expense, the 3 prosecution of the action. The action alleges fraud and The allegations of fraud are

4 negligent misrepresentation.

5 really, in our judgment, res ipsa issues arising from the 6 Friedman report, which was issued in 2002, and which concluded 7 that it's statistically impossible for the variations in the 8 readings that exist post facto that -9 10 Ostrager. 11 THE COURT: I'm sorry. MR. OSTRAGER: I started to say, and I apologize for I'm sorry. You're fading out, Mr.

12 the acoustics here, that in 2002 a report was issued by 13 Professor Friedman concluding, in essence, that 90 percent of 14 the B readings by the B readers who we proposed to name in this 15 lawsuit were fraudulent, and that it could not be the result of 16 some subjective differences of opinion by one set of B readers 17 and other B readers. That conclusion was reaffirmed in 2004 by

18 Mr. Gitlin, who also found a 90 percent variation in terms of 19 what objective readings of x-rays showed compared to what 20 proposed defendants' B readings are. 21 it's -22 23 THE COURT: I'm sorry. Now I can't hear you at all. The debtor has alluded in

MR. OSTRAGER:

Your Honor, with our indulgence, I'm

24 just speaking as loudly as I can into the microphone. 25 THE COURT: I'm not sure. I think maybe your papers

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1 are covering up part of the speaker. 2 3 4 5 6 7 8 MR. OSTRAGER: THE COURT: I've moved my papers.

The round disk is the microphone. Okay.

MR. OSTRAGER: THE COURT:

Okay? Can you hear me now, Your Honor? Thank you.

MR. OSTRAGER: THE COURT:

Yes, I can.

MR. OSTRAGER:

To just summarize what I said while my

9 papers were on the microphone, the debtor acknowledges that 10 four B readers who we propose to name as defendants are also 11 involved in silica-related proceedings in Corpus Christi, 12 Texas. In those proceedings some of the proposed defendants

13 have conceded under oath that their findings were improper, and 14 incorrect, and negligent. We think that on the basis of the

15 Friedman report, the Gitlin report, these are 2002 and 2004 16 reports, there is no question that there has been improprieties 17 in connection with reports made by the B readers that have 18 resulted in billions of dollars of money being paid out of the 19 estate, and very simply, if billions of dollars has wrongfully 20 been paid out, which is a fact that the debtor doesn't deny, 21 creditors can't be fairly treated, and in -22 THE COURT: Well, the issue seems to be, really,

23 comes down to one thing, and that is whether or not there is 24 some indemnity that the banks, as agents, are willing to 25 provide the debtor in the event that counterclaims are filed. J&J COURT TRANSCRIBERS, INC.

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1 The debtor has done an analysis, indicated that in its view the 2 suits will cost more than will be recovered for the benefit of 3 the estate, and on top of that that there could be significant 4 counterclaims filed. That does not appear to be an

5 unreasonable basis upon which to refuse to take the suits 6 forward. 7 So, the question is, if Credit Suisse is that

8 convinced that the debtor is incorrect, then provide an 9 indemnity, or post a letter of credit, or do something that 10 permits the suits to go forward. And I guess you've got the

11 authority -- I am a little concerned, even under Cybergenics, 12 as to whether a specific creditor group, as opposed to an 13 organized group of creditors such as a creditors committee or 14 an asbestos committee, has the authority to commence the 15 action, but the debtor hasn't raised that issue, so I guess in 16 this instance I may not take that on on my own. 17 But with respect to the debtor's refusal, based on

18 the fact that the claims against the estate could exceed the 19 recovery, that's a legitimate reason for refusing to go 20 forward. So, if you want to do it, tell the debtor how you're

21 going to either indemnify, or post something that will stand 22 the debtor's estate in good stead so that if, in fact, the 23 recoveries do not exceed the costs, or the recoveries -- or the 24 recoveries are significantly greater than the costs, the 25 debtor's estate will be compensated. Doing that, then you will

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1 get your authority. 2 MR. OSTRAGER: Your Honor, the debtor concedes that a

3 single creditor can sue derivatively, and Your Honor did take 4 note of the fact that the pre-petition bank lenders are 5 prepared to fund this, so there can be no cost to the estate. 6 THE COURT: Of course there can. There can be

7 significant cost to the creditors in the estate if 8 counterclaims are filed and you are unsuccessful in the suit. 9 And that's the issue the debtor is raising. The debtor has a

10 fiduciary duty to all creditors to make sure that estate assets 11 are not wasted. And by permitting a suit to go forward that

12 could increase the claims exponentially against the benefit to 13 the estate, that's a good reason why the debtor can refuse to 14 go forward. So, based on the debtor's assertion that that's

15 the issue, either provide an indemnity or figure out how you're 16 going to compensate the estate in the event that that 17 eventuality happens, and then you'll have your authority. 18 MR. OSTRAGER: Your Honor, the debtor concedes that

19 billions of dollars have been paid out as a result of 20 wrongdoing by the B readers. 21 22 23 THE COURT: Well, I haven't seen that concession. Well --

MR. OSTRAGER: THE COURT:

If it's in the papers, I don't read the

24 papers that way.

But what the debtor has said is they did a

25 study, they agree that there are probably some payments -- I J&J COURT TRANSCRIBERS, INC.

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1 don't recall the billions of dollars, quote, unquote, that may 2 have been improperly paid. Nonetheless, the cost of recovery

3 may not exceed the counterclaims and other issues that will 4 come back to the estate. 5 solvent? I mean, are these B readers even

I mean, I don't know whether you're going to pursue

6 somebody if -- if they're going to be subject to judgments in 7 the silica cases, by the time you get in line in priority, are 8 they going to have anything to pay over? 9 MR. OSTRAGER: Your Honor, the debtor is trying to

10 conflate analyses that the debtor did in 1997 with newly 11 discovered evidence in 2002 and 2004 based on the Friedman 12 report and the Gitlin report. Now, the debtor concedes that

13 any counterclaims by these B readers would be meritless and I 14 submit to Your Honor that they wouldn't be able to meet the 15 standard of Rule 11. People who have defrauded the estate out

16 of hundreds of millions or billions of dollars by admittedly 17 and concededly improper B readings do not have a basis for 18 advancing counterclaims, so this whole issue -19 THE COURT: Well then, it shouldn't be an issue to

20 indemnify the estate, because you've already concluded that any 21 counterclaim would be meritless, and so it shouldn't be an 22 issue for your clients to decide that, fine, the debtor is 23 wrong, and you'll indemnify the estate. 24 MR. OSTRAGER: Is it the Court's position that you

25 are going to deny the -- the committee's claim unless there's J&J COURT TRANSCRIBERS, INC.

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1 an indemnity? 2 THE COURT: Well, it's not a committee's claim. It's

3 the banks as agents claim. 4 5 6 do. MR. OSTRAGER: THE COURT: Yes, the banks as agent claim.

I am -- I think that's what I'm going to

I'm going to hear from the other side, but it seems to me Something has to be

7 there's some indemnity or some bond.

8 posted to ensure the creditors of the estate that they will not 9 lose as the result of permitting one creditor to go forward 10 with these suits. 11 MR. OSTRAGER: And the indemnity would be for these

12 baseless counterclaims that the B readers might assert against 13 the estate? 14 THE COURT: It would be for whatever counterclaims

15 are asserted against the estate as the result of these actions 16 that lead to a judgment against the debtor. 17 whether they're baseless. 18 merits. I don't know

I haven't heard anything about the

I'm not going to make a determination that they're And number two, I don't know who all may

19 baseless, number one. 20 file counterclaims. 21

MR. OSTRAGER:

Well, Your Honor, the only people who

22 can presumably file counterclaims are the people who we sue. 23 And the people who we propose to sue are the B readers. 24 these are the same B readers who have admitted in Corpus 25 Christi, Texas that they have improperly read silica-related J&J COURT TRANSCRIBERS, INC. And

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1 x-rays, and these are the same B readers who Mr. Friedman and 2 Mr. Gitlin have concluded couldn't possibly have given honest 3 reads of the -4 THE COURT: I understand your argument. All I'm

5 saying is the debtor is concerned in its fiduciary capacity 6 that undertaking these suits will cost more than the recovery. 7 And the debtor wants to protect the creditors to whom it owes 8 that fiduciary duty from that risk. So, if Credit Suisse, as

9 agent, is convinced that the debtor is in error and that more 10 funds will indeed come in that will reimburse Credit Suisse for 11 whatever 503 action it may have, or 506 claim, whatever the 12 claim it will have against the estate for assuming these costs, 13 and in fact will compensate creditors, then it should be, I 14 guess, willing to provide that indemnity. 15 is wrong and Credit Suisse is correct. 16 indemnity will never be called upon. Perhaps the debtor

And if it is then the

But if the debtor is

17 correct and Credit Suisse is wrong, and the indemnities are 18 called upon, or in fact the costs exceed the return to the 19 estate, then Credit Suisse should act at its risk under these 20 circumstances. 21 take. 22 MR. OSTRAGER: Okay. I'm going to make the executive That is a reasonable position for the debtor to

23 decision on behalf of my client that we will indemnify the 24 debtor for any counterclaims that are interposed by the B 25 readers, and that should terminate controversy here because the J&J COURT TRANSCRIBERS, INC.

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1 debtor doesn't oppose proceeding, and concedes that the 2 counterclaims are largely meritless, and Your Honor, as the 3 gatekeeper, is going to obviously apply Rule 11 to any 4 counterclaims that are asserted. 5 THE COURT: Well, I'm going to apply Rule 11. I

6 guess my concern, and what I want to hear from the debtor is 7 whether that does -- that satisfies the debtor's objection. 8 9 debtor. MR. PODESTA: Your Honor, Roger Podesta for the As

I believe it does satisfy the debtor's objection.

10 I understand what Your Honor is saying, Credit Suisse is going 11 to bear the costs of the attorney's fees and expenses incurred 12 in connection with this litigation, and subject to potential 13 reimbursement out of recoveries pursuant to the bankruptcy 14 statute, and is going to indemnify the debtors against all 15 costs and expenses of defending against and judgments against 16 counterclaims, and that would be acceptable to the debtor. 17 18 B readers. 19 MR. PODESTA: Yes. Well those, as I understand it, THE COURT: Well, what they said was counterclaims by

20 counterclaims by whomever they sue is what I interpreted Mr. 21 Ostrager's statement to be, and he's only proposing to sue B 22 readers. I think, and I'll discuss this off the record with

23 Mr. Ostrager, I think the silica discovery shows that there 24 should be some distinctions drawn against the -- drawn among 25 the B readers in order to maximize the case. But I believe

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1 that with an appropriate indemnity we're prepared to go 2 forward. I do want to correct the record. The debtor

3 certainly does not concede that there are billions of dollars 4 that have been improperly paid. We investigated these B

5 readers and tried to control what was being paid on that basis, 6 and excluded some of them from various NSP agreements. But I

7 will certainly acknowledge that we have long had concern about 8 these B readers, and certainly with respect to Dr. Harron, 9 there has been strong new evidence in the silica hearings held 10 before Judge Jack in Corpus Christi last week, including the 11 adoption of the amazing practice of rendering so-called two for 12 a diagnoses, whereby Dr. Harron would read x-rays for one group 13 of plaintiff's lawyers for asbestosis and find small irregular 14 opacities, and then read either the same x-ray or another x-ray 15 for the same individual for silica plaintiff's lawyers and 16 diagnose silicosis based on large rounded opacities without 17 ever once referencing the other. I think that's a problem.

18 But the issue on recovery is that we had similar serious 19 problems with the Pitts cases, and attorney's fees wound up 20 three times the dollar recovery in settlement, and Mr. -- Dr. 21 Harron would be the principal defendant, a 73 year-old 22 radiologist from West Virginia, who no longer has an active 23 practice, and I don't think a malpractice claim is going to 24 cover -- any malpractice insurance he may have is going to 25 cover outright fraud. So, that's our concern.

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1

THE COURT:

What about -- one thing that has not been

2 stated in the pleadings and you just raised, Mr. Podesta, is 3 the issue of settlements. Who is going to control what types

4 of settlements will be discussed with any potential defendants? 5 And I take it they're going to have to be brought before the 6 Bankruptcy Court in any event, but I'm not sure that's part of 7 the pleadings that you've filed so far. 8 MR. OSTRAGER: Obviously Credit Suisse is going to

9 prosecute these actions on its own behalf, and we will consult 10 with Mr. Podesta as special counsel for the debtor. 11 THE COURT: Wait. You're not pursuing them on your

12 own behalf. 13 this estate. 14 15

You're pursuing them on behalf of the creditors of You have a fiduciary -Correct.

MR. OSTRAGER: THE COURT:

You're picking up a fiduciary duty to the

16 creditors of this estate in this action. 17 18 19 MR. OSTRAGER: THE COURT: We understand that.

Okay. We understand that we are prosecuting

MR. OSTRAGER:

20 this on behalf of the estate, and we understand that any 21 settlements that we reach has to meet Bankruptcy Court 22 approval. 23 24 THE COURT: All right. We also, you know, have the option of

MR. OSTRAGER:

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1 of these cases if we conclude, in our derivative capacity, that 2 it's no longer in the interest of the estate for us to pursue 3 them. And again, we'll do this in consultation with Mr.

4 Podesta and the estate. 5 6 THE COURT: All right. Mr. Podesta?

MR. PODESTA:

I believe that my understanding is

7 similar, Your Honor, that CSFB will be taking the lead role. 8 But I presume they will consult with the debtor concerning 9 potential settlements, and of course any settlement, I guess, 10 would be a Rule 9019 settlement that would have to be approved 11 by the Bankruptcy Court on notice. 12 THE COURT: All right. Why don't I get from you

13 folks, when you have an opportunity to talk out the specific 14 language that you want in the order, an order on a 15 certification of counsel? 16 17 Honor. 18 19 THE COURT: All right. Your Honor, believe that takes us to MR. OSTRAGER: We will do that. And thank you, Your

MR. PERNICK:

20 number ten. 21 22 sorry. 23 THE COURT: Mr. Pernick. Mr. Podesta -- I mean, Mr. Podesta, I'm Give me just a second. That's all right, Your Honor. I'm

MR. PERNICK:

24 flattered by the comparison. 25 MR. PODESTA: I'm glad it's on the record.

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1 2 3 THE COURT:

(Laughter) Okay, Mr. Pernick. Thank you.

MR. PERNICK:

Your Honor, we talked last time, and we

4 have since the last hearing actually done a comparison of Court 5 Call versus the current conference call vendor that we use, and 6 just to give you what I think our conclusion is, and we can 7 send the Court -- and probably -- it would probably be better, 8 if the Court wants it, we'll file some kind of certification 9 with a chart that we did attached just so every party that's 10 interested can see it, but the Court also. 11 But the biggest difference is, if I can summarize it,

12 seems to be the cost benefit of the current vendor actually 13 versus Court Call. And what we did was we did a chart looking

14 at the May, June, August, October, November, and December 15 hearings, and just to give the Court one example, but they all 16 run pretty much the same, the total cost of the current vendor 17 for the December 20 hearing was $361. The total cost using

18 Court Call would have been about $1,500. 19 Now, the reason for that is the current vendor that

20 we use just charges by the minute by each -- for the total 21 number of participants. Court Call charges a fee based on how

22 long the call actually lasts, whether you participate or not. 23 And so, if you sign up ahead of time and you don't end up on 24 the call, they charge for that. 25 The current vendor does not.

One of the big differences, I guess, is that under J&J COURT TRANSCRIBERS, INC.

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1 the current system the debtor paid the entire cost of the call, 2 and using Court Call the debtor would not pay the entire cost, 3 although as the Court is well aware, the debtor is paying for a 4 number of the participants in this case. I don't think it

5 would cut it down two-thirds, or even a half, but it wouldn't 6 -- it's not fair to compare these two numbers, because the 7 debtor in all fairness, under Court Call, would not pay that 8 entire, for example, for the December hearing, $1,500. 9 The other, I guess, major difference is, with Court

10 Call is, I think the Court knows, if you don't tell the 11 conference call service in advance that you want to participate 12 as opposed to listening, you cannot participate if you change 13 your mind, because they either plug you in or they don't, 14 actually, for your specific matter, to speak; whereas on the 15 current system, obviously people are on the call, and if 16 something comes up that they want to speak about they can. 17 Now, the down side of the current system is that you get, 18 sometimes, background noise and, you know, people being on hold 19 and that kind of thing, which I know has been a problem for the 20 Court on some of our calls. 21 differences. But those are the main

I guess the one other difference is right now

22 under the Court's procedures we have to advise the Court, and 23 people have to tell us in time so we can do it, seven days in 24 advance of who is going to participate, and I think the Court 25 Call system is 48 hours, or two days. But again, that's the

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1 Court's actual procedure, so maybe the seven days would apply 2 to Court Call also. 3 THE COURT: I just don't know. Okay. Well, what's the debtor's choice

4 in terms of what you want to do? 5 MR. PERNICK: Well, I think unless the Court has a

6 problem with the current service, I would say that we stick 7 with that just because I think it's been working relatively 8 well. And if at any hearing, or after any hearing the Court or

9 the other parties feel that there's a big problem and we should 10 switch, we'll be happy to. But I think it's a little more

11 efficient for the debtor to just pay for the call, and it's one 12 of the benefits, or maybe down sides of being in bankruptcy in 13 this case that, you know, we're going to pay for the call for 14 people who want to participate to participate. 15 I will say one other thing, which is I was not aware

16 until we did this chart that there actually are a fair number 17 of people who say that they're going to participate in the call 18 and they don't end up doing that. So, that is probably a

19 little bit of a cost that under the current system the debtor 20 is bearing, whereas under the Court Call service that would 21 probably be split because some of those people might be 22 constituents that we're paying for, and some of them may be 23 people who have to pay it themselves. But I think we can I don't think

24 probably deal with that issue a different way. 25 it really effects which service we pick. J&J COURT TRANSCRIBERS, INC.

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1

THE COURT:

All right.

Well, if the debtor is

2 content to continue the same system as is currently in place, 3 that's all right with me. I think you're correct that we can

4 always change it at any point in time if there is an issue that 5 arises. So, if that's the case then we'll just keep this

6 process as it is. 7 MR. PERNICK: Would you like us to file a

8 certification of counsel with the chart just so it's of record? 9 Or is it not -- does nobody really -- it doesn't matter? 10 THE COURT: I don't know that it really matters much, I accept your representation

11 unless somebody wants to see it.

12 that you did the analysis, and it's significantly less costly 13 overall this way, although maybe not to the debtor, 14 specifically. 15 Ms. Eskin? Your Honor? Marla Eskin, Your Honor. We

MS. ESKIN:

16 certainly have no objection to continuing the procedure as it 17 is now. There's just one issue. In -- the asbestos cases are Many of the cases are now The procedures

18 generally heard all in one day.

19 using Court Call, where it's a 48-hour notice.

20 in this case are seven days notice for telephonic appearances. 21 Often in these cases we have attorneys from out of state, and 22 in particular in our case, Caplin and Drysdale, who may be 23 coming in for other cases and will come in for this case. We

24 find out a couple of days, you know, a day or two ahead of time 25 things were resolved in the other cases and it's too late to J&J COURT TRANSCRIBERS, INC.

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1 participate telephonically in this case.

To be brief, there

2 may be some confusion because it's still seven days for 3 telephonic appearance in this case and in the other asbestos 4 cases it's 48 hours notice. Is it possible for us to contact

5 Mr. Pernick's office 48 hours in advance for telephonic 6 appearance in this case? 7 THE COURT: I've talked with Mr. Pernick --

The problem that I'm having is that I In fact, I'm thinking

8 don't get the information soon enough.

9 about extending the number of days for Court Call, because I 10 don't get lists of who is participating. In fact, for one of

11 the Court Call proceedings today I got it this morning, and as 12 a result my staff doesn't have an opportunity to update the 13 notes because they come in -- this information comes in right 14 before the hearing. So, I'm dealing with that administratively But I'm thinking about expanding

15 internally within my office.

16 that period for Court Call as a result of the problem that it's 17 creating getting ready for Court, as opposed to shortening it 18 in this case. 19 20 happens. MS. ESKIN: Okay. Then I'll wait and see what You So,

Maybe we can, if possible, make it consistent.

21 may make it seven days, and then we won't have an issue. 22 I'll just wait and see what happens. 23 THE COURT: Okay. But I cut you off.

You said you

24 talked to Mr. Pernick, and? 25 MS. ESKIN: Oh. There's no objection from his end if

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1 it's 48 hours, so long as we do get to his office within 48 2 hours so he can get the information timely to your office. 3 THE COURT: Okay. Hold on a second. If we get the

4 information 48 -- you know, the next day, in advance, and we 5 don't put it on preceding memos, but simply attach the e-mail 6 notice, is that -7 8 (Judge confers with clerk) THE COURT: Oh, okay. That probably will still work,

9 if the e-mail list can be sent to my office the say that 10 they're due, which I guess would be at least, what, 30 -11 MR. PERNICK: Your Honor, I think you've got to do

12 two business days, because if -- we typically have hearings on 13 Monday -14 15 THE COURT: That's the problem. -- 48 hours would be Friday. You're

MR. PERNICK:

16 not going to get it in time. 17 THE COURT: Yes, that's the problem. In fact, I

18 think that's the whole issue with all these Monday hearings, 19 and most of these cases come up on Monday, which may be the 20 problem. So, I don't have any objection trying to work with

21 it, too, but I do need the list before Monday morning, so I 22 guess I need it Friday. 23 MR. PERNICK: I would just -- just in case you change

24 some of your dates, I would suggest just two business days in 25 advance is the cut off. J&J COURT TRANSCRIBERS, INC.

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1

THE COURT:

Yes, I agree with that, Mr. Pernick.

I

2 was just trying to use that as an example, that I would need it 3 at least Friday, not the day of the hearing, but at least a day 4 in advance. 5 fine. 6 MR. PERNICK: Yes. So, if they notify us two So, two business days in advance of the hearing is

7 business days, that's Thursday, and then we have it to you by 8 Friday morning, that will probably work. 9 THE COURT: That's fine. Okay. We'll try that, Mr.

10 Pernick, and see if it works. 11 MR. PERNICK: Okay. And if it's not at any time, as

12 the Court knows, if you wish to change it, that's fine with us. 13 14 THE COURT: Okay. That takes us to the last item on the It's the debtor's emergency

MR. PERNICK:

15 agenda, which is item number 11.

16 motion for the entry of an interim and final order pursuant to 17 Sections 105, 362, and 541 of the Code limiting certain 18 transfers of equity securities of the debtors, and approving 19 related notice procedures. 20 docket number 14555. We filed this on February 23. It's

And as the Court is aware, this motion is Where they

21 only on for an interim hearing this morning.

22 proposed final hearing to be held, we proposed, at the April 23 omnibus hearing date, to provide enough notice time for anybody 24 who wishes to be heard to be heard, and I guess if somebody in 25 the interim had some kind of emergency objection we obviously J&J COURT TRANSCRIBERS, INC.

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1 would have no objection to them trying to bring that to the 2 Court earlier. This is a motion that, as the Court I believe

3 is aware, is getting filed more and more frequently in cases of 4 large public companies, and I suspect that Your Honor is 5 familiar with the relevant issues, but if you want I'd like to 6 just take you through some of the hot points. I'm actually not

7 sure whether we have any objections, or even parties appearing. 8 Maybe that's the first question, because it was an emergency 9 motion. There was no objection date. The parties are just

10 supposed to appear in Court today or on the phone to voice any 11 issues that they might have. 12 THE COURT: All right. Does anyone have an objection

13 to going forward with the debtor's motion at agenda number 11 14 on an emergency basis today for interim relief? There's no

15 objection, Mr. Pernick, and I am familiar with the issues. 16 I've entered these orders in at least one, probably two or 17 three of the Delaware cases recently. 18 MR. PERNICK: Yes, Your Honor. I guess there are a

19 couple things that I'd just like to point out to the Court. 20 This motion that we're asking for is similar to Grace but not 21 exactly the same, and we actually have set our limit at a 22 little bit below just so we have a little leeway, and we 23 propose that anyone with at least a 4.75 percent interest of 24 Owens Corning stock file a notice to that effect with the 25 Court. We've proposed a form of notice attached as Exhibit A1 J&J COURT TRANSCRIBERS, INC.

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1 -- I'm sorry, 1A.

And second, anyone who is a 4.75 percent

2 owner or who would become an owner, we call them substantial 3 equity holders as a result of the acquisition of Owens Corning 4 stock would need to give the debtors prior notice of any 5 proposed acquisition of that stock through the form of notice 6 that is attached in Exhibit 1B. 7 object to that acquisition. We would then have 15 days to

If we don't object, the

8 acquisition could not proceed unless permitted by the Court. 9 If we do object, that objection would actually tee up a 10 hearing, and so, it is our burden to basically get it to the 11 Court by filing that objection. We do not shift the burden or Their only burden is to

12 put that burden on the equity holder.

13 file the notice, and then we have to object or not object. 14 We've asked for this to be approved on an interim

15 basis with an order approving these procedures on a final basis 16 to be issued only after a notice to all parties and all 17 shareholders, and that they've all had an opportunity to 18 object. And those are the two proposed forms of order that One is the interim order and the And we've suggested that in

19 we've attached to the motion. 20 second one is the final order.

21 order to give everybody appropriate notice the final hearing be 22 held at the April omnibus hearing, which is April 25, and that 23 parties have until April 8 to object to that motion, and that 24 is the normal objection date for the April hearing. 25 Just as far as notice is concerned, the Court should J&J COURT TRANSCRIBERS, INC.

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1 know that we've already served this motion on the key parties 2 in this case, as well as all current substantial equity 3 holders. There are two of those that have filed the

4 appropriate documents with the Securities and Exchange 5 commission. We did that by e-mail or overnight delivery. We

6 also served the entire 2002 list by regular mail, and we would 7 propose that notice of the motion and of the Court's entry of 8 the interim order on the motion be given to all shareholders 9 and other interested parties so that they can review it and 10 interpose any objections they might have. 11 I do have Mr. Mickeloneous -- Mr. Mickelonus in the He is Owens Corning's Director of Taxation, in

12 Court with me.

13 case the Court has any questions beyond my presentation or 14 what's in the papers. But unless the Court has any questions,

15 that concludes my presentation. 16 THE COURT: No, I don't have any questions. Does

17 anyone have any comments or concerns? 18 MR. LOIZIDES: Yes. Good morning, Your Honor. Chris

19 Loizides for certain preferred shareholders, including Sanford 20 Bernstein. I can't say I'm really familiar with this motion,

21 but I did have a question, and that is whether this procedure 22 was intended to apply to preferred shareholders. My assumption

23 is not, but I'd ask Mr. Pernick just to clarify that. 24 MR. PERNICK: Your Honor, this proposed procedure

25 just applies to common shareholders. J&J COURT TRANSCRIBERS, INC.

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1 2

MR. LOIZIDES: THE COURT:

Okay.

Thank you, Your Honor. Is the order clear, Mr.

All right.

3 Pernick, that it's -- I think it is, that it's only to common 4 stockholders. I didn't read it as applying to preferreds, but

5 now that the question has come up maybe I just went by it too 6 fast. 7 MR. PERNICK: I think it is, Your Honor, but if I can

8 indulge the Court, give me one moment, I will double check 9 that. 10 11 12 THE COURT: Oh. THE COURT: All right. (Pause) While Mr. Pernick is looking at CSFB asked for It

13 that, I think I skipped something on item four.

14 leave to file a reply or a rebuttal to the debtor's brief.

15 came in late and it exceeded the five pages that I permit in 16 any event; nonetheless, having already ruled and expecting to 17 get an order on that issue, I'm going to permit it in this 18 instance, but in the future please limit it to five pages. 19 MR. PERNICK: Your Honor, I actually think the motion

20 is pretty clear, but the order does not specify it, so let us 21 send you a revised form of order so that people don't have to 22 look at the motion, which makes it clear that it applies to 23 common shareholders only. 24 25 Honor. J&J COURT TRANSCRIBERS, INC. MR. LOIZIDES: I'd very much appreciate that, Your

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1 2

THE COURT:

All right.

Thank you.

MR. PERNICK:

And we'll change the appropriate forms

3 of notice so that they're all consistent. 4 THE COURT: Okay. That's fine. Just file it on a

5 C.O.C., Mr. Pernick, please. 6 MR. PERNICK: Okay. And, Your Honor, I think from

7 the debtor's perspective that's all we have. 8 9 10 11 All right. 12 13 THE COURT: Okay. Thank you.

MR. PERNICK: THE COURT:

Thank you very much.

Anyone have any housekeeping matters? Thank you.

We're adjourned. MR. PERNICK:

Thank you. * * * * *

C E R T I F I C A T I O N I, TAMMY DeRISI, court approved transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the aboveentitled matter, and to the best of my ability.

____________________________ TAMMY DeRISI J&J COURT TRANSCRIBERS, INC.

Date:

March 7, 2005

J&J COURT TRANSCRIBERS, INC.