In Re: Settlement Facility
Filing
1652
Memorandum Opinion and Order Regarding two Orders to Show Cause against attorney Yeon-Ho Kim and Various Motions filed by the Korean Claimants. Signed by District Judge Denise Page Hood. (SSch)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
In Re:
Settlement FacilityDow Corning Trust.
Case No. 00-00005
Honorable Denise Page Hood
______________________________/
MEMORANDUM OPINION AND ORDER REGARDING
TWO ORDERS TO SHOW CAUSES AGAINST
ATTORNEY YEON-HO KIM
AND
VARIOUS MOTIONS FILED BY THE KOREAN CLAIMANTS
I.
ORDERS TO SHOW CAUSE AS TO ATTORNEY YEON-HO KIM AS
REQUESTED BY THE FINANCE COMMITTEE (ECF Nos. 1352/1368
and ECF Nos. 1387/1388)
A.
Background
This matter is before the Court on Two Orders to Show Cause for Attorney
Yeon-Ho Kim to Show Cause Why He Should Not Be Sanctioned and Held in
Contempt and for Attorney Yeon-Ho Kim to Show Cause Why He Should Not be
Sanctioned and Held in Contempt as to Attorney Fees. Attorney Kim has filed
responses to each of the Show Cause Orders.
The Settlement and Fund Distribution Agreement (SFA) provides that the funds
distributed by the Settlement Facility are in the custody of the Court until they are
paid to and actually received by the Claimant. SFA § 10.09. The Finance Committee
of the Settlement Facility - Dow Corning Trust seeks sanctions against Attorney Kim.
B.
Contempt Standard
There are two types of contempt: criminal and civil. The real distinction
between criminal and civil contempt is the nature of the relief sought and the purpose
of that relief. Penfield Co. v. SEC, 330 U.S. 585 (1947). A contempt proceeding is
civil if the purpose is “remedial” and intended to coerce the person into doing what
the person is supposed to do. Shillitani v. U.S., 384 U.S. 364 (1966). Civil contempt
is to coerce future compliance with the order and to compensate the opposing party
for the party’s violation of an order. United States v. Bayshore Associates, Inc., 934
F.2d 1391, 1400 (6th Cir. 1991). Remedial or compensatory action is essentially
backward looking, seeking to compensate the complainant through payment of money
for damages caused by past acts of disobedience. Garrison v. Cassens Transport Co.,
334 F.3d 528, 543 (6th Cir. 2003)(quoting Latrobe Steel Co. v. United Steelworkers,
545 F.2d 1336, 1344 (3d Cir. 1976)). Wilfulness is not a necessary element of civil
contempt. McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1948); TWM Mfg.
Co. v. Dura Corp., 722 F.2d 1261, 1273 (6th Cir. 1983). The burden of proof in a
civil contempt proceeding is on the party seeking a contempt order but need not be
beyond a reasonable doubt. Int’l Union, United Mine Workers of America, v. Bagwell,
512 U.S. 821, 827 (1994). Civil contempt sanctions, or those penalties designed to
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compel future compliance with a court order, are coercive sanctions and avoidable
through obedience. Id. at 827. Civil sanctions may be imposed in an ordinary civil
proceeding upon notice and an opportunity to be heard. Id.
If the purpose is to vindicate the court's authority by using “punitive” measures
or punishing the wrongdoer, the proceeding is one for criminal contempt. Garrison,
334 F.3d at 543. Criminal contempt is a crime and the penalties, including
imprisonment and noncompensatory fines, may not be imposed without the
protections of the Constitution required in criminal proceedings. Int’l Union, United
Mine Workers of America, 512 U.S. at 826, 838. The rules governing criminal
contempt are found in Rule 42(b) of the Rules of Criminal Procedure. For “serious”
criminal contempt proceedings involving imprisonment for more than six months or
noncompensatory and excessive fines, protections include the right to a jury trial. Id.
at 826-27, 838-39.
In order to hold a litigant in civil contempt, the movant must first present “clear
and convincing evidence” that shows that the litigant “violated a definite and specific
order of the court requiring him to perform or refrain from performing a particular act
or acts with knowledge of the court’s order.” Electrical Workers Pension Trust Fund
of Local Union No. 58 v. Gary’s Elec. Serv. Co., 340 F.3d 373, 379 (6th Cir. 2003).
“Clear and convincing evidence is not a light burden and should not be confused with
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the less stringent, proof by a preponderance of the evidence.” Id. “Clear and
convincing evidence is ‘that measure or degree of proof which will produce in the
mind of the trier of facts a firm belief or conviction as to the allegations sought to be
established. It is intermediate, being more than a mere preponderance, but not to the
extent of such certainty as is required beyond a reasonable doubt as in criminal cases.
It does not mean clear and unequivocal.’” Hobson v. Eaton, 399 F.2d 781, 784 n.2
(6th Cir. 1968)(citation omitted). Once the movant establishes a prima facie case, the
burden shifts to the contemnor who may defend by coming forward with evidence
showing that he or she is presently unable to comply with the court’s order by
showing categorically and in detail why he or she unable to comply with the court’s
order. Elec. Workers, 340 F.3d at 379. A court must evaluate whether the contemnor
took all reasonable steps within his or her power to comply with the court’s order. Id.
C.
OSC as to Attorney Kim regarding Claim Payment Checks
The Finance Committee asserts that Attorney Kim cashed claim payment
checks intended for 88 Claimants, failed to provide updated address information for
the Claimants, failed to provide proof of distribution claim funds to the Claimants, and
failed to return claim funds that were not distributed to Claimants. Attorney Kim is
the attorney-of-record representing a number of Claimants in Korea.
After determining that 148 Claimants represented by Attorney Kim had allowed
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Claims, the SF-DCT sent claim payment checks to his law office for distribution to
those Claimants. Award notification letters were mailed directly to the 148 Claimants,
and 88 letters were returned undeliverable, with no forwarding addresses. The SFDCT asserts that Attorney Kim ignored SF-DCT’s requests for updated addresses.
Counsel for the Finance Committee made a written request for updated addresses for
the 148 Claimants on December 20, 2017. Attorney Kim responded on January 3,
2018 providing addresses for 60 Claimants, therefore, 88 Claimants continue to have
invalid addresses. Attorney Kim has not returned any of the funds.
Attorney Kim responds that he sent several emails to the Claims Administrator
asking for the payment of $5 million pursuant to a settlement agreement1 between the
Finance Committee and Attorney Kim, yet the payment was not made. Attorney Kim
claims that the SF-DCT mailed the individual checks to him. Attorney Kim cashed
those checks and distributed the funds to any Claimant who asked for payment. The
SF-DCT then mailed more individual checks to Attorney Kim, but this time, he
returned the checks to the SF-DCT via FedEx.
On May 16, 2017, Attorney Kim received a letter from the SF-DCT asking to
1
The Sixth Circuit Court of Appeals affirmed this Court’s Order (ECF No.
1461) denying the Korean Claimants’ motion to enforce a mediation and draft
memorandum agreement between the Finance Committee and the Korean
Claimants. (ECF No. 1537, Sixth Circuit Opinion, Case No. 18-2446)
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return funds if the Claimants could not be located. Attorney Kim sent a letter to the
SF-DCT on June 8, 2017 indicating the Korean Claimants did not want their addresses
updated and that under Korean laws, this personal information is protected. Attorney
Kim indicated he has contact with the Claimants because he has their phone numbers.
He then received a letter from the Claims Administrator on June 21, 2017 indicating
the SF-DCT required current addresses, otherwise the Claims would not be processed.
Attorney Kim sent a letter to the Claims Administrator on July 28, 2017 indicating he
did submit their addresses in their initial Claims. He then requested to withdraw the
cancellation of the proof of manufacturer approvals and respect the mediation result.
On December 21, 2017, Attorney Kim then received a letter from the Finance
Committee’s counsel indicating addresses be provided within 15 days of the date of
the letter or return the payments.
Attorney Kim sent a letter to the Finance
Committee’s counsel on December 20, 2017 indicating he will update the addresses,
but needed an extension to February 20, 2018. On December 22, 2017, the Finance
Committee’s counsel indicated it did not agree to the February date, but that Attorney
Kim must so respond by January 4, 2018. Attorney Kim asserts he updated the
addresses on January 3, 2018 via FedEx to counsel for the Finance Committee.
Because he submitted the updated addresses for all 148 Claimants, Attorney
Kim asserts there is no basis for the motion. Attorney Kim claims that the Finance
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Committee is liable under a mediation agreement in the amount of $5 million.
Attorney Kim further responds that he has paid 72 of the 88 Claimants the Finance
Committee claims he has not paid.
The Finance Committee replied that Attorney Kim did respond on January 3,
2018, but that as to 88 Claimants, he only noted “not changed” as to the addresses.
The Finance Committee asserts that as to these 88 Claimants, they have not received
their claim payments. The Finance Committee seeks a return of $370,500 distributed
as Claim payments.
Applying the standard set forth in Electrical Workers Pension Trust Fund (the
case cited by the Finance Committee in its brief), the Court finds that the Finance
Committee has not met its initial burden of presenting “clear and convincing
evidence” that the litigant “violated a definite and specific order of the court requiring
him to perform or refrain from performing a particular act or acts with knowledge of
the court’s order.” 340 F.3d at 379. As acknowledged by the Finance Committee, at
the time the instant motion was filed, there was no court order which required
Attorney Kim to act on any matter, specifically to provide addresses. In any event,
it appears that Attorney Kim provided addresses on January 3, 2018. The Finance
Committee has not established a prima facie case that Attorney Kim has violated a
court order at the time the Finance Committee filed the instant motion.
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D.
OSC as to Attorney Kim re Attorney Fees
The Finance Committee seeks sanctions against Attorney Kim for charging
Claimants unauthorized and excessive amounts in fees and expenses. The Finance
Committee claims that Attorney Kim has a practice of charging 38% of the award as
fees. Exhibit B, Annex A to the SFA, Art. IX, § 9.01 provides the fees an attorney
may seek from an award: 1) 10% of the first $10,000; 2) 22.5% of the next $40,000,
and 3) 30% in excess of $50,000. As to Class 6.1 Claimants, the fees are: 1) 10% of
the first $6,000; 2) 22.5% of the next $24,000, and 3) 30% in excess of $30,000.
A Claimant raised a concern regarding the fees with the SF-DCT and in
response, a March 13, 2017 letter was sent to Attorney Kim. He responded that he
had a “special agreement” with the Claimant and that it was inappropriate for the SFDCT to be involved in fee disputes. The SF-DCT sent another letter on June 21, 2017
to Attorney Kim regarding the 38% fee and the $200 filing fee he charged to his
clients.
Attorney Kim responded explaining his fees and expenses, and also
maintaining his position that it was “inappropriate” for the SF-DCT to seek additional
documentation.
Attorney Kim responds that he did not charge 38% to his Claimants and that he
charged from 10% to 22.5% for attorney fees and 5% for expenses. He claims he has
spent nearly $1 million as chargeable expenses under Q11-4 to the Claimant
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Information Guide from 1994 until now. He lists many of his travel and other
expenses. Attorney Kim asserts he has charged the appropriate fees and expenses.
Applying the standard set forth in Electrical Workers Pension Trust Fund (the
case cited by the Finance Committee in its brief), the Court finds that the Finance
Committee has not met its initial burden of presenting “clear and convincing
evidence” that the litigant “violated a definite and specific order of the court requiring
him to perform or refrain from performing a particular act or acts with knowledge of
the court’s order.” 340 F.3d at 379. As acknowledged by the Finance Committee,
there is no court order which required Attorney Kim to act on any matter, specifically
to provide certain documentation regarding his fees and expenses schedule. The
Finance Committee, at this time, has not established a prima facie case that Attorney
Kim has violated any court order regarding fees.
II.
CROSS MOTION FOR ENTRY OF AN ORDER TO SHOW CAUSE
WITH RESPECT TO THE FINANCE COMMITTEE FILED BY THE
KOREAN CLAIMANTS (ECF No. 1357)
The Korean Claimants seek to hold the Finance Committee in contempt and be
sanctioned for failing to pay the $5 million in the settlement agreement between
Attorney Kim and the Finance Committee. The Korean Claimants assert that Attorney
Kim and the Finance Committee chose Professor Francis McGovern as the sole
mediator regarding their claims before the SF-DCT. A mediation conference was held
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in Washington, DC on August 10, 2012. Attorney Kim claims he accepted the
counter-offer of $5 million. A verbal agreement was consummated between Attorney
Kim, David Austern and Ann Phillips. Attorney Kim signed the agreement drafted
by David Austern and Ann Phillips. Attorney Kim asserts the Finance Committee
failed to execute the payment of $5 million.
A Motion for Recognition and
Enforcement of Mediation was filed by the Korean Claimants on December 15, 2016.
The Finance Committee asserts no agreement was executed, which Attorney Kim
claims is untrue.
The Finance Committee claims this issue, which was before the Court at the
time the instant motion was filed, cannot be raised in an Order to Show Cause. The
document at issue is an unsigned draft which was never approved nor executed by the
Finance Committee. There is no settlement agreement to be enforced argues the
Finance Committee.
Attorney Kim submitted a copy of the draft Memorandum of Understanding.
He claims that because he signed the agreement and it was drafted by the Finance
Committee, the agreement is valid and enforceable.
Dow Corning submits a response that asserts that the instant motion is a
duplicate of an earlier motion filed by Attorney Kim. As noted by Dow Corning in
its response to Attorney Kim’s earlier motion, the Plan does not provide for a bulk
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resolution of claims and therefore the SF-DCT would not have the authority to enter
into such an agreement.
As the instant motion is for an Order to Show Cause directed to the Finance
Committee, the Court applies the standard set forth in Electrical Workers Pension
Trust Fund. The Court finds that Attorney Kim has not met his initial burden of
presenting “clear and convincing evidence” that the litigant “violated a definite and
specific order of the court requiring him to perform or refrain from performing a
particular act or acts with knowledge of the court’s order.” 340 F.3d at 379. Attorney
Kim has not shown that there was a court order which required the Finance Committee
to enter or to enforce the settlement agreement that Attorney Kim alleges is valid.
Attorney Kim has not established a prima facie case that the Finance Committee has
violated any court order regarding any settlement agreement. In any event, as noted
above, this Court and the Sixth Court of Appeals have ruled that there was no valid
settlement agreement between the Finance Committee and the Korean Claimants.
III.
KOREAN CLAIMANTS’ MOTION FOR EXCLUSION OF DOW
CORNING FROM THE CROSS MOTION FILED BY KOREAN
CLAIMANTS (ECF No. 1378)
The Korean Claimants seek to exclude Dow Corning and the Claimants’
Advisory Committee from responding to the Motion for Order to Show Cause as to
the Finance Committee regarding the settlement agreement since they are not parties
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to the settlement agreement.
Dow Corning and the CAC respond that they have the right under the Plan and
other documents to be heard in any matter.
The Court agrees that Dow Corning and the CAC have the authority to be heard
in any matter relating to the Plan and the SFA. (SFA, § 4.09) Dow Corning and the
CAC are signatories to the Joint Amended Plan of Reorganization. The Korean
Claimants’ Motion to Exclude Dow Corning and the Claimants’ Advisory from
responding to any motion is denied.
IV.
KOREAN CLAIMANTS’ MOTION FOR EXTENSION OF DEADLINE
FOR FILING CLAIM (ECF No. 1586)
The Korean Claimants seek an extension of the June 3, 2019 Claim Deadline
Establishing Final Cure Deadlines, Revised Claim Review Procedures and Appeal
Deadlines set forth in Closing Order 1. They argue that they were informed on July
25, 2018 of the deadline, but that more than four hundred Korean Claimants have lost
the opportunity to submit their claims by the June 3, 2019 deadline because the Sixth
Circuit Court of Appeals did not issue its decision affirming this Court’s Order
Denying the Motion for Recognition and Enforcement of the Mediation Agreement
until June 1, 2020.
Dow Silicones, the Debtors’ Representatives and the Finance Committee argue
12
that the Plan itself, not Closing Order 1, established the final filing deadline. Closing
Order 1 simply provided guidance to the Settlement Facility to facilitate efficient
claims processing and to allow the orderly closure of incomplete and ineligible claims.
They further argue that the Korean Claimants did not appeal the entry of Closing
Order 1, which was entered in 2018.
On June 1, 2004, the Amended Joint Plan of Reorganization (“Plan”) governing
the Dow Corning Corporation bankruptcy matter became effective. The Court retains
jurisdiction over the Plan “to resolve controversies and disputes regarding
interpretation and implementation of the Plan and the Plan Documents” and “to allow,
disallow, estimate, liquidate or determine any Claim, including Claims of a NonSettling Personal Injury Claimant, against the Debtor and to enter or enforce any order
requiring the filing of any such Claim before a particular date.” (Plan, §§ 8.7.3, 8.7.4,
8.7.5) The Plan Documents pertinent to this matter include the Settlement Facility and
Fund Distribution Agreement (“SFA”) and the Dow Corning Settlement Program and
Claims Resolution Procedures, Annex A to the SFA (“Annex A”).
The Settlement Facility-Dow Corning Trust (“SF-DCT”) implements the claims
of those claimants who elected to settle their claims under the Settlement Program of
the Plan. (Plan, § 1.131) The SF-DCT was established to resolve Settling Personal
Injury Claims in accordance with the Plan. (Plan, § 2.01) The SFA and Annex A to
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the SFA establish the exclusive criteria by which such claims are evaluated,
liquidated, allowed and paid. (SFA, § 5.01) The process for resolution of claims is set
forth under the SFA and corresponding claims resolution procedures in Annex A.
(SFA, § 4.01) Section 5.05 of the SFA provides that Dow Corning and the CAC may
submit joint interpretations and clarifications regarding submissions of claims to the
Claims Administrator. (SFA, § 5.05) The Court may approve an amendment to the
SFA after notice and hearing as directed by the Court. (SFA, § 10.06) Dow Corning
and the CAC may jointly amend or modify the Plan, upon order of the Court. (Plan,
§ 11.4) There is no provision under the Plan or the or the SFA which allows a
claimant to submit an issue to be interpreted by the Court or to amend the Plan.
Article VII of Annex A outlines the general processing protocols for benefit
claims. Article VII of Annex A expressly prescribes the deadlines for submission of
benefits claims. (SFA, § 7.09) Section 7.09 provides that: (1) Claims for Explant
benefits “must be submitted on or before the 10th anniversary of the Effective Date.”
(SFA, § 7.09(a)(I)). The tenth anniversary of the Effective Date was June 2, 2014.
Claimants must have submitted claims for rupture benefits on or before the second
anniversary of the Effective Date. (SFA, §7.09(c)(I)). The second anniversary of the
Effective Date was June 1, 2006. Claimants were allowed to apply for disease
benefits at any time up to the fifteenth anniversary of the Effective Date. (SFA, §
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7.09(b)(I)). The fifteenth anniversary of the Effective Date was June 3, 2019.
Generally, the provisions of a confirmed plan bind the debtor and any creditor.
11 U.S.C. § 1141(a). Section 1127(b) of the Bankruptcy Code is the sole means for
modification of a confirmed plan which provides that the proponent of a plan or the
reorganized debtor may modify such plan at any time after confirmation of such plan
and before substantial consummation of the plan. 11 U.S.C. § 1127(b). “In
interpreting a confirmed plan courts use contract principles, since the plan is
effectively a new contract between the debtor and its creditors.” In re Dow Corning
Corporation, 456 F.3d 668, 676 (6th Cir. 2006); 11 U.S.C. § 1141(a). “An agreed
order, like a consent decree, is in the nature of a contract, and the interpretation of its
terms presents a question of contract interpretation.” City of Covington v. Covington
Landing, Ltd. P’ship, 71 F.3d 1221, 1227 (6th Cir. 1995). A court construing an order
consistent with the parties’ agreement does not exceed its power. Id. at 1228.
The Court has no authority to extend any deadlines set forth under the Plan and
agreed to by Dow Corning and the CAC. As noted above, Dow Corning and the CAC
may jointly amend or modify the Plan, upon order of the Court. (Plan, § 11.4) There
is no provision under the Plan or the SFA which allows the Court to extend the
deadlines without the agreement of Dow Corning and the CAC. The final deadline
to submit disease claims was established when the Plan was agreed to by the parties,
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which became effective on June 1, 2004. Closing Order 1, entered in 2018, did not
change the final disease claim deadline. The Korean Claimants’ Motion for Extension
of Deadline for Filing Claim must be denied.
V.
CONCLUSION
For the reasons above,
IT IS ORDERED that the Motion for Order to Show Cause as to Attorney
Yeon-Ho Kim Why He Should Not be Held in Contempt/Sanctioned filed by Finance
Committee (ECF Nos. 1352/1368) is DENIED. However, parties, claimants and their
counsel are bound by the Closing Orders entered by the Court in this matter.
IT IS FURTHER ORDERED that the Motion for an Order to Show Cause as
to Attorney Yeon-Ho Kim as to Attorney Fees Why He Should Not be Held in
Contempt/Sanctioned filed by Finance Committee (ECF Nos. 1387/1388) is
DENIED.
IT IS FURTHER ORDERED that the Korean Claimants’ Cross Motion for an
Order to Show Cause (ECF No. 1357) is DENIED.
IT IS FURTHER ORDERED that the Korean Claimants’ Motion to Exclude
Dow Corning, Debtor’s Representatives and the Claimants’ Advisory Committee from
responding to the Motion for OSC re Finance Committee (ECF No. 1378) is
DENIED.
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IT IS FURTHER ORDERED that the Korean Claimants’ Motion for Extension
of Deadline for Filing Claims (ECF No. 1586) is DENIED.
IT IS FURTHER ORDERED that the Korean Claimants’ Motion to Expedite
Hearing and Relief (ECF No. 1644) on the Motion for Extension of Deadline for
Filing Claims is DENIED as MOOT, the Court having ruled on the motion as set
forth above.
S/DENISE PAGE HOOD
DENISE PAGE HOOD
United States District Judge
DATED: August 12, 2022
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