In re All Kelley & Ferraro Asbestos Cases , 104 Ohio St. 3d 605 ( 2004 )

[Cite as In re All Kelley & Ferraro Asbestos Cases, 104 Ohio St. 3d 605, 2004-Ohio-7104.]
IN RE ALL KELLEY & FERRARO ASBESTOS CASES.
[Cite as In re All Kelley & Ferraro Asbestos Cases,104 Ohio St. 3d 605, 2004-
Ohio-7104.]
Mass tort litigation – Asbestos – Settlement agreement with multiple asbestos
producers – Agreement provides for several liability, not joint and several
liability, when.
(No. 2003-1653 — Submitted September 14, 2004 — Decided December 30,
2004.)
APPEAL from the Court of Appeals for Cuyahoga County, Nos. 78158,
78159, 78299, 78301, 80083, 80332, 80673, and 81576, 153 Ohio
App.3d 458, 2003-Ohio-3936, 794 N.E.2d 729.
__________________
O’DONNELL, J.
{¶ 1} Two issues are presented for consideration in connection with this
appeal, which concerns the resolution of some 15,000 asbestos-related claims
settled for approximately $120 million between the law firm of Kelley & Ferraro,
L.L.P., and the Center for Claims Resolution (“CCR”) as agent for 19 member
companies: first, regarding the nature of the liability incurred by the members of
the CCR, and second, regarding whether the trial court had jurisdiction to enter
judgment for each claimant against all CCR members.
{¶ 2} The record before us reveals that in 1988, a consortium of former
asbestos-producing or distributing companies entered into an agreement styled the
“Producer Agreement Concerning Center for Claims Resolution” (“Producer
Agreement”), which created the CCR, a nonprofit Delaware organization, to
administer and resolve asbestos-related claims. The agreement—as amended on
February 1, 1994—governs the relationships between and among the CCR
SUPREME COURT OF OHIO
members and designates the CCR as each member’s sole agent to “administer and
arrange [on its behalf] for the evaluation, settlement, payment or defense of all
asbestos-related claims.”
{¶ 3} The agreement contains a formula for calculating each member’s
percentage share of liability payments1 and allocated expenses2 “attributable to
each claim handled by the [CCR] as sole agent for such Participating Producer.”3
And it requires any dispute among the members concerning the agreement,
including disputes involving the allocation of percentage shares of liability
payments, to be resolved through alternative dispute resolution.
{¶ 4} On July 26, 1999, pursuant to the authority conferred by the
Producer Agreement, the CCR negotiated a settlement agreement on behalf of 19
member companies4 with the law firm of Kelley & Ferraro to resolve the
asbestos-related claims of approximately 15,000 claimants. At that time, these
claimants had individual cases pending in Ohio, Florida, Mississippi, and
Massachusetts, among other jurisdictions.
{¶ 5} That settlement agreement estimated the dollar value of the
settlement at a total of $120 million to be paid in equal biannual installments of
$10 million each commencing September 1999 and ending December 2004. The
1. “Liability Payment” is defined in the Producer Agreement as “the sums paid in settlement of,
or in satisfaction of a judgment on, any asbestos-related claims, exclusive of allocated and
unallocated expenses for such claims.”
2. “Allocated Expenses” are “all fees and expenses incurred for services performed outside the
[CCR] that can be directly attributed to the defense and disposition of a particular asbestos-related
claim.”
3. A participating producer is defined as “persons that are or were engaged in the mining,
manufacturing, production, processing, fabrication, distribution, installation, sale or use of
asbestos or asbestos-containing products or that may have a liability with respect to asbestos-
related claims that have become signatories to the [Producer] Agreement.”
4 Those member companies are Amchem Products, Inc., Armstrong World Industries, Inc.,
Asbestos Claims Management Corp., CertainTeed Corp., C.E. Thurston & Sons, Inc., Dana Corp.,
Ferodo America, Inc. (formerly Nuturn Corp.), Flexitallic, Inc., GAF Corp. (now G-I Holdings,
Inc.), I.U. North America, Inc., Maremont Corp., National Service Industries, Inc., Nosroc Corp.,
Pfizer Inc., Quigley Co., Inc., Shook & Fletcher Insulation Co., Turner & Newall, PLC, Union
Carbide Corp., and United States Gypsum Co..
2
January Term, 2004
parties arrived at the total settlement amount based upon Kelley & Ferraro’s
approximation of the number of claimants who would qualify for payment in each
disease category. And, further, a condition of payment required each claimant to
provide documentation of an asbestos-related illness, exposure to “asbestos-
containing materials that were manufactured, sold, marketed or distributed by one
or more members of the CCR,” and “compliance * * * with the applicable statute
of limitations or other applicable timeliness doctrines” and a release of all CCR
member companies from liability. Upon claimants’ failure to tender the requisite
documentation or refusal to accept the settlement amount for an individual claim,
CCR members would adjust their installment payments.
{¶ 6} Against this contract posture, the CCR in connection with the
amounts due in 1999 submitted a payment to Kelley & Ferraro deficient by
$987,295.27, stating that the shortfall arose because GAF had refused to pay its
allocated share. GAF had disputed the CCR’s calculation of its share in
accordance with the Producer Agreement. In response, Kelley & Ferraro filed a
motion to enforce the settlement agreement. After a hearing, the trial court
granted that motion and entered a $987,295.27 judgment against all CCR
members, including GAF. The court concluded that, because the CCR had
promised to deliver a lump sum on specified dates in exchange for settlement of
individual claims, and because the settlement agreement did not apportion the
sums among the members, GAF’s disagreement over its allocated share
constituted an internal dispute to be decided by alternative dispute resolution,
pursuant to the terms of the Producer Agreement. Members of the CCR timely
appealed that decision to the appellate court.
{¶ 7} When the next payment became due, the CCR tendered an
installment deficient by $2,210,154.62, explaining that GAF had again failed to
pay its share as calculated by the CCR. Consequently, Kelley & Ferraro filed
another motion to enforce the settlement agreement, which the trial court granted,
3
SUPREME COURT OF OHIO
entering judgment for all claimants against all CCR members in the amount of the
shortfall. Members of the CCR again appealed.
{¶ 8} Regarding the next four installments, an increasing number of
members failed to pay their shares as determined by the CCR, resulting in larger
shortfalls. For the December 2000 installment, GAF and Asbestos Claims
Management Corporation (“ACMC”) did not pay their allocated shares. And in
May 2001, the CCR sent Kelley & Ferraro another deficient payment, as GAF,
ACMC, and Armstrong World Industries (“Armstrong”) failed to pay their shares.
At that point, both Armstrong and GAF had filed for bankruptcy protection, and,
at a hearing, the members described ACMC as insolvent.
{¶ 9} By December 2001, in addition to GAF and Armstrong, four more
CCR members had filed bankruptcy petitions or their foreign equivalent: United
States Gypsum Corporation, Turner & Newall, PLC, Ferodo America, Inc., and
Flexitallic, Inc. Consequently, none paid the shares allocated to them by the
CCR. For that installment, ACMC and Shook & Fletcher Insulation Company,
which subsequently filed for bankruptcy in April 2002, also failed to pay. This
time, however, although it had collected shares from the nondefaulting
companies, the CCR, instead of forwarding a deficient payment to the law firm,
sent Kelley & Ferraro a letter requesting that it pursue one of the options
contained in paragraph 13 of the settlement agreement.5 The CCR sent Kelley &
Ferraro a similar letter regarding the June 2002 installment and again withheld the
amounts it had collected from nondefaulting members.
5. Paragraph 13 of the settlement agreement provides that “[i]n the event that the CCR fails to
make any of the payments pursuant to paragraph 5 because any one of the CCR member
companies fails to make timely payment of its individual share of such payment when such
payment has become due * * *,” the claimant may either void the settlement agreement as to the
defaulting member companies or void the settlement agreement in its entirety. Regarding the first
option, however, the claimants may pursue the defaulting member company in tort or sue to
enforce its contractual obligation.
4
January Term, 2004
{¶ 10} As a result of the foregoing events, Kelley & Ferraro filed four
additional motions to enforce the settlement agreement. The trial court, consistent
with its earlier decisions, granted these motions and awarded the claimants the
deficient amounts plus interest. Again, members of the CCR separately appealed
each judgment to the appellate court. Not all of the trial court’s orders, however,
entered judgment against all CCR members, primarily due to pending bankruptcy
proceedings; nonetheless, in every instance, the trial court entered judgment
against all 11 members appealing to this court.
{¶ 11} The appellate court eventually consolidated eight separate appeals
arising from the trial court’s decisions to grant Kelley & Ferraro’s six separate
motions to enforce the settlement agreement. In its opinion, the court affirmed
the trial court’s judgments and held that the agreement provided for joint and
several liability among the CCR members. In re All Kelley & Ferraro Asbestos
Cases, 153 Ohio App. 3d 458, 2003-Ohio-3936, 794 N.E.2d 729, ¶ 57. It
explained that, although the phrase “each CCR member shall be liable under this
Settlement Agreement only for its individual share”6 appeared to indicate several
6. {¶a} This phrase appears in paragraph 13 of the settlement agreement, which states in its
entirety:
{¶b} “Payments to Plaintiff Counsel by the CCR under paragraph 5 of this Settlement
Agreement shall be funded by the CCR member companies in accordance with the terms of the
Producer Agreement Concerning Center For Claims Resolution (as amended, effective February 1,
1994) and each CCR member company shall be liable under this Settlement Agreement only for
its individual share of such payments as determined under that Producer Agreement. In the event
that the CCR fails to make any of the payments pursuant to paragraph 5 because any one of the
CCR member companies fails to make timely payment of its individual share of such payment
when such payment has become due in accordance with all of the terms of this Settlement
Agreement, including Appendix C (a ‘Default’), Plaintiff Counsel shall have the option of either
(a) declaring this Settlement Agreement null and void as against the Defaulting CCR member
company only, with respect to any and all Plaintiffs whose claims have not at that time been paid
by the CCR under paragraph 5 and Appendix C; or (b) declaring this Settlement Agreement null
and void as against all CCR member companies with respect to any and all Plaintiffs whose claims
have not at that time been paid by the CCR under paragraph 5 and Appendix C. Plaintiff Counsel
shall exercise either of these options by providing written notice to the CCR of their decision to do
so within 90 days of notice to that Counsel of any CCR member company's failure to make timely
payment of its share of any payment due under paragraph 5. In the event that Plaintiff Counsel
choose to exercise option (a) above, Plaintiff Counsel, the CCR, and the non-Defaulting CCR
5
SUPREME COURT OF OHIO
liability, the words read in context and in conjunction with other settlement
provisions imposed joint and several liability among the members. Id. at ¶ 42-43,
56.
{¶ 12} The court interpreted the first sentence in paragraph 13 of the
settlement agreement as “defining the members’ liability vis-à-vis each other”
(emphasis sic), not their liability to claimants and, therefore, as imposing joint and
several liability on the CCR members. Id. at ¶ 56. The court additionally stated
that its interpretation comported with fundamental fairness, as the parties did not
dispute the total amount owed to the claimants and as the CCR members were
better situated to pursue a defaulting member for its share. Id. at ¶ 58-60.
{¶ 13} Additionally, the court overruled the arguments of the CCR
members that the trial court lacked jurisdiction to adjudicate the asbestos claims
filed in other jurisdictions and that the trial court lacked personal jurisdiction to
enter judgment against members of the CCR who had not been named as
defendants or served with process in the underlying lawsuits. Id. at ¶ 63. The
appellate court concluded that the members had waived any jurisdictional defects
by voluntarily appearing and defending against the claimants’ motions and by
failing to raise such arguments until after the trial court entered judgment against
them in the first motion to enforce. Id. at ¶ 70.
member companies shall remain bound by this Settlement Agreement, but any and all Plaintiffs
whose claims have not been paid by the CCR under paragraph 5 and Appendix C as of the date of
the Default shall be free either to bring suit to enforce the Defaulting CCR member company's
obligations under this Settlement Agreement or to pursue their claims for asbestos-related bodily
injury against the Defaulting CCR member company in the tort system. In the event that Plaintiff
Counsel choose to exercise option (b) above, any and all Plaintiffs whose claims have not been
paid by the CCR under paragraph 5 and Appendix C as of the date of the Default shall be free to
pursue their claims against any CCR member companies in the tort system. Plaintiffs that opt to
bring suit in the tort system under either option (a) or option (b) above shall have one year from
the date of the written notice of termination to file their claims in the tort system, unless the
applicable law provides for a longer period of time.”
6
January Term, 2004
{¶ 14} The cause is now before this court in accordance with our
acceptance of a discretionary appeal filed by 11 CCR members: Amchem
Products, Inc., C.E. Thurston & Sons, Inc., CertainTeed Corp., Dana Corp., I.U.
North America, Inc., Maremont Corp., National Service Industries, Inc., Nosroc
Corp., Pfizer Inc., Quigley Co., Inc., and Union Carbide Corp. But we have
stayed the proceedings in this case as to Quigley Co., Inc. and Pfizer, Inc., due to
a bankruptcy action pending in the United States Bankruptcy Court for the
Southern District of New York. See 103 Ohio St. 3d 1445, 2004-Ohio-4799, 814
N.E.2d 1226.
Arbitration
{¶ 15} We begin by noting that the settlement agreement contains an
arbitration clause.7 And in Cales v. Armstrong World Industries, Inc., Scioto
App. No. 02CA2851, 2003-Ohio-1776, the Fourth District Court of Appeals
considered a similar settlement agreement negotiated by the CCR and ordered
arbitration of a comparable dispute after determining that the agreement was
sufficiently ambiguous regarding whether the member companies agreed to be
jointly and severally liable. See, also, Besece v. Armstrong World Industries, Inc.,
Jefferson App. No. 03 JE 8, 2004-Ohio-3636; 2004 WL 1533253; Rourke v.
Amchem Prods., Inc. (2003), 153 Md.App. 91, 835 A.2d 193. As pointed out by
claimants in the instant matter, however, neither party has argued the applicability
of the arbitration provision, and, therefore, we decline to address the matter. See,
generally, Bryant v. Clark (1992), 62 Ohio St. 3d 485, 584 N.E.2d 687, syllabus
(stating that “[a]n insurer that consents to a default judgment in a suit against an
uninsured motorist, and does not request arbitration until after that judgment has
7. That provision states: “It is agreed that the parties will make good faith efforts to resolve any
disputes which may arise while carrying out the terms and conditions of this Agreement. If the
parties are unable to resolve a dispute, the issue shall be referred to a mutually agreeable arbitrator
for binding resolution.”
7
SUPREME COURT OF OHIO
been entered, has waived its right to submit the issues of liability and damages to
arbitration”).
Joint and Several Liability
{¶ 16} The principal issue presented for our review concerns whether the
settlement agreement provides for several liability, as contended by the members
of the CCR, or for joint and several liability, as maintained by the claimants and
as determined by the appellate court.
{¶ 17} Claimants argue that the settlement agreement creates joint and
several liability and have correctly presented the law in Ohio as it has existed for
over 160 years—that joint and several liability generally attaches when multiple
parties default on their collective promise to pay a single sum of money, unless
the contract sets forth their individual obligations. See Stage v. Olds (1843), 12
Ohio 158, 167 1843 WL 21 (stating that “[w]hen several persons execute an
instrument, in parol or under seal, upon the same consideration, at the same time,
and for the same purpose, and taking effect from a single delivery, they are, in
legal effect, joint contractors or obligors”); Wallace v. Jewell (1871), 21 Ohio St.
163, 171-172; 1871 WL 45; Kostelnik v. Helper, 96 Ohio St. 3d 1, 2002-Ohio-
2985, 770 N.E.2d 58.
{¶ 18} In the textbook case of Raffles v. Wichelhaus (Ex.1864), 159
Eng.Rep. 375, the parties there also entered into an agreement but were uncertain
of its meaning. They had agreed to the sale of cotton aboard a ship named
Peerless from Bombay, when, in fact, two ships arriving from Bombay bore that
name. The seller claimed that he complied with the agreement when a ship
named Peerless arrived. The buyers, on the other hand, who had refused to pay
for that cotton, maintained that no meeting of the minds ever occurred, and,
accordingly, no contract ever existed, due to a latent ambiguity—the seller
meaning one Peerless and the buyer meaning the other. The court entered
judgment for the buyers.
8
January Term, 2004
{¶ 19} This case, however, is different from Raffles in that the signatories
of the settlement agreement do not disagree that a valid contract exists, but rather,
differ as to whether the contract language creates joint and several liability or only
several liability.
{¶ 20} The focus of their difference centers upon paragraph 13 of the
settlement agreement, the first sentence of which provides:
{¶ 21} “Payments to Plaintiff Counsel by the CCR under paragraph 5 of
this Settlement Agreement shall be funded by the CCR member companies in
accordance with the terms of the Producer Agreement Concerning Center For
Claims Resolution (as amended, effective February 1, 1994) and each CCR
member company shall be liable under this Settlement Agreement only for its
individual share of such payments as determined under that Producer
Agreement.” (Emphasis added.)
{¶ 22} The remainder of paragraph 13 contains options available to the
claimants in the event that a member company fails to pay its allocated share: “In
the event that the CCR fails to make any of the payments pursuant to paragraph 5
because any one of the CCR member companies fails to make timely payment of
its individual share of such payment when such payment has become due * * *,”
the claimants may (1) void the settlement agreement as to the defaulting member
companies or (2) void the settlement agreement as to all CCR members. Under
the first option, claimants may either pursue the defaulting member company in
the tort system or sue to enforce its obligation under the agreement.
{¶ 23} The member companies assert that the first sentence of paragraph
13 unambiguously provides, in their words, that “each company is liable under the
Settlement Agreement only for its own share—not for the entire amount of the
settlement and not for the shares of other companies.” (Emphasis sic.) And by
subsequently defining the options available to the claimants when they receive a
deficient payment due to one company’s failure to pay its allocated share,
9
SUPREME COURT OF OHIO
paragraph 13 further demonstrates that the parties envisioned that “default by one
company will result in a shortfall, not in increased payments by the other
companies.” Any other interpretation—according to the member companies—
would render those options meaningless, as there would be no impetus for the
claimants either to pursue only the defaulting company when they could pursue
all of them for the deficiency, or to void the agreement in its entirety and sue the
members in the tort system when they would always be paid in full under the
contract.
{¶ 24} The claimants, on the other hand, assert that the language in
paragraph 13—“each CCR member company shall be liable under this Settlement
Agreement only for its individual share of such payments as determined under the
Producer Agreement”—creates several liability only when the CCR has followed
the terms of the Producer Agreement in allocating each member’s individual
share. And they subsequently point to three main instances where the member
companies allegedly failed to adhere to those terms.8 Their argument continues
that without a clear articulation of individual shares and because the settlement
agreement does not specify the individual amounts owed by each company, the
claimants have no basis to assert a claim against any one company; and under
those circumstances, the law permits the agreement to be enforced jointly and
severally among the member companies.
8. According to the claimants, the member companies did not comply with the Producer
Agreement when they (1) failed—as allegedly required by Section F of Attachment A—to “pick
up the shares” of companies whose membership in the CCR had been terminated due to filing for
bankruptcy protection, (2) allocated shares to companies that had filed for bankruptcy protection,
as the CCR lost its agency authority under the Producer Agreement upon membership termination
and as the U.S. Bankruptcy Code delegates to the bankruptcy courts the exclusive authority to
determine a debtor’s obligations, and (3) failed to conclusively determine GAF’s share for the
1999 installments due to an internal dispute over share allocation.
10
January Term, 2004
{¶ 25} The claimants’ assertion regarding the CCR’s failure to properly
make a final share allocation for each member prior to each installment is not well
taken. The record shows that they knew of and agreed with the share allocation
procedure as set forth in the Producer Agreement and that they were aware that
the Producer Agreement expressly conferred no rights to third parties. Further,
the individual share allocation of a member does not affect the nature of the
promises made by the member companies in paragraph 13 of the settlement
agreement, as will be further developed.
{¶ 26} As is evident, we must decide whether the member companies
promised separate and limited performances to pay their respective shares or
whether they promised the same performance to pay the entire estimated amount
of $120 million. In the first of these alternatives, each member company would
be responsible only for its individual promise and could not be held liable for the
obligations of others, while in the second, each would be responsible for the
whole performance. See 12 Williston on Contracts (4 Ed.1999) 611-612, Section
36:1; see, also, Reliant Energy Servs., Inc. v. Enron Canada Corp. (C.A.5, 2003),
349 F.3d 816, 823.
{¶ 27} Corbin on Contracts explains that “[t]he question whether two or
more promisors have promised a single undivided performance, or have each
promised a limited and separate performance, is wholly a problem of
interpretation. The question is merely what was the performance promised and
who promised it.” 9 Corbin on Contracts (Interim Ed.2002) 625, Section 926;
see, also, Kostelnik v. Helper, 96 Ohio St. 3d 1, 2002-Ohio-2985, 770 N.E.2d 58,
where a plurality of this court considered the evidence and circumstances
surrounding an oral settlement to ascertain the parties’ intent regarding joint and
several liability.9 Therefore, although a promise by two or more promisors
9. Kostelnik held that a $1.2 million oral settlement resolving a wrongful-death action between
Kostelnik and the defendants—Dr. Helper and Meridia Hillcrest Hospital—did not impose joint
11
SUPREME COURT OF OHIO
generally suggests that the same performance, and not separate performances, will
be rendered, the parties’ intent controls. See 2 Restatement of the Law 2d,
Contracts (1981) 407, Section 288(1).
{¶ 28} With this reference, we acknowledge that “a settlement agreement
is a contract designed to terminate a claim by preventing or ending litigation” and
that the construction of a written contract is a question of law, which we review
de novo. Continental W. Condominium Unit Owners Assn. v. Howard E.
Ferguson, Inc. (1996), 74 Ohio St. 3d 501, 502, 660 N.E.2d 431; Nationwide Mut.
Fire Ins. Co. v. Guman Bros. Farm (1995), 73 Ohio St. 3d 107, 108, 652 N.E.2d
684; Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St. 2d 241, 7 O.O.3d
403, 374 N.E.2d 146, paragraph one of the syllabus.
{¶ 29} In construing the terms of a written contract, the primary objective
is to give effect to the intent of the parties, which we presume rests in the
language that they have chosen to employ. Saunders v. Mortensen, 101 Ohio
St.3d 86, 2004-Ohio-24, 801 N.E.2d 452, at ¶ 9, citing Kelly v. Med. Life Ins. Co.
(1987), 31 Ohio St. 3d 130, 31 OBR 289, 509 N.E.2d 411, paragraph one of the
syllabus. “Common words appearing in a written instrument will be given their
ordinary meaning unless manifest absurdity results, or unless some other meaning
is clearly evidenced from the face or overall contents of the instrument.”
Alexander, 53 Ohio St. 2d 241, 7 O.O.3d 403, 374 N.E.2d 146, at paragraph two
of the syllabus. Where the terms are clear and unambiguous, a court need not go
beyond the plain language of the agreement to determine the rights and
obligations of the parties. Aultman Hosp. Assn. v. Community Mut. Ins. Co.
(1989), 46 Ohio St. 3d 51, 53, 544 N.E.2d 920, 923. Where possible, a court must
and several liability among the defendants but rather constituted the sum of two separate
settlements reached with Kostelnik—one involving Helper for $1.1 million and the other
involving Hillcrest for $100,000.
12
January Term, 2004
construe the agreement to give effect to every provision in the agreement. Foster
Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth. (1997),
78 Ohio St. 3d 353, 362, 678 N.E.2d 519, quoting Farmers Natl. Bank v.
Delaware Ins. Co. (1911), 83 Ohio St. 309, 94 N.E. 834, paragraph six of the
syllabus.
{¶ 30} In the present case, the language—“Payments to Plaintiff Counsel
by the CCR under paragraph 5 of this Settlement Agreement shall be funded by
the CCR member companies in accordance with the terms of the Producer
Agreement * * * and each CCR member company shall be liable under this
Settlement Agreement only for its individual share of such payments as
determined under that Producer Agreement”—can only be interpreted as
imposing several liability upon the CCR member companies and manifests the
parties’ intent that each member be responsible for only its individual share of the
total settlement amount as calculated pursuant to the Producer Agreement. In
other words, the first sentence of paragraph 13 shows that the members promised
to pay limited amounts toward the biannual installments specified in the
settlement agreement. Cf. Ulman v. Manheimer (C.A.6, 1918), 249 F. 691, 695,
where the Sixth Circuit interpreted the phrase, “Each of us agrees to be liable for
our respective shares,” to render the liabilities “fractional, and not unitary.”
{¶ 31} The parties’ intent to create several liability is further evidenced by
the remaining portion of paragraph 13, which contains options available to the
claimants in the event that a member fails to pay its allocated share. Specifically,
that section provides that “[i]n the event that the CCR fails to make any of the
payments pursuant to paragraph 5 because any one of the CCR member
companies fails to make timely payment of its individual share of such payment
when such payment has become due,” the claimants may (1) void the settlement
13
SUPREME COURT OF OHIO
agreement as to the defaulting member10 or (2) void the settlement agreement as
to all CCR members.
{¶ 32} By providing these options for the situation where a member fails
to pay its individual share, paragraph 13 demonstrates that the parties believed
that the agreement created individual obligations among the members and that a
company’s failure to tender its allocated share would result in a deficient
installment payment to the claimants. As pointed out by the CCR members,
interpreting the settlement agreement to provide for joint and several liability
would render these options essentially meaningless, as there would be little or no
impetus for claimants to pursue the defaulting member individually, especially
when default is due to insolvency. And they would likewise lack incentive to
void the agreement in toto and pursue the members in the tort system because,
under joint and several liability, they could recover the entire settlement amount
from any one of the member companies. Moreover, the latter option—voiding the
agreement in its entirety—shows that the parties contemplated the situation where
a significant number of CCR members default on their individual shares,
presumably rendering the settlement agreement disadvantageous to the claimants.
{¶ 33} The structure of the agreement further fortifies our conclusion that
the member companies promised to be liable only for their respective shares.
Appendix A of the settlement agreement contains a list of all claimants whose
claims were to be settled pursuant to that agreement and identifies the injured
party’s name, the court in which the case was filed, the alleged disease, and the
settlement amount offered to each plaintiff. For each biannual installment, Kelley
& Ferraro informs the CCR of those claimants who have qualified for payment in
that installment, which is to be funded by the CCR in accordance with the terms
of the Producer Agreement. Notably, the formula for calculating shares provides
10. As previously mentioned, regarding this option, the claimants may either pursue the
defaulting member in the tort system or sue to enforce its obligation under the agreement.
14
January Term, 2004
that only those member companies named as defendants in a particular asbestos-
related claim will be allocated a share for it.11 Thus, the settlement agreement
serves as a mechanism to resolve each plaintiff’s individual claims against those
member companies of the CCR responsible for his or her injury. And the member
companies promised to be accountable only for their individual shares, which
relate to such claims.
{¶ 34} By way of contrast, the situation here differs from that in Wallace
v. Jewell (1871), 21 Ohio St. 163, 1871 WL 45, where several individuals signed
a promissory note for $2,000, stating, “I promise to pay * * *.” There, we
determined that, by signing a note worded in that manner for a single sum of
money, the signatories became jointly and severally liable on the note. Unlike the
present case, however, Wallace involved an agreement with joint obligors
promising to pay a single sum of money—in essence, promising the same
performance; it did not contain any expression limiting the responsibilities of the
obligors to certain amounts or otherwise evince an intent to create several liability
for separate amounts.
{¶ 35} Section F of Attachment A of the Producer Agreement cited by the
claimants does not change our conclusion that the CCR member companies
promised to be liable only for their respective shares. That section provides:
{¶ 36} “In the event that a Participating Producer shall withdraw from
membership in the Center pursuant to Section IV of the Agreement or have its
membership terminated pursuant to Paragraph 3 of Section III, the corresponding
11. The Producer Agreement specifically provides: “For each Asbestos-Related Claim in which
any Participating Producer is named as a defendant or a third-party defendant or is otherwise
designated in the claim as responsible for the injury, that Participating Producer’s Average Cost
Per Closed Claim in the corresponding Occupational Grouping will be converted into an
individual Liability Payment Share. For each such claim, the Liability Payment Share of each
Participating Producer so named will be the ratio of its Average Cost Per Closed Claim for that
Occupational Grouping to the sum of the Average Costs Per Closed Claim for that Occupational
Grouping of all Participating Producers so named in that particular claim.”
15
SUPREME COURT OF OHIO
shares of the other Participating Producers shall be increased appropriately to pick
up the shares of the withdrawing or terminating Participating Producer.”
{¶ 37} Notably, paragraph 3, Section III provides that “notwithstanding
termination of membership, a Participating Producer shall continue to have and to
honor all of the obligations incurred by it hereunder or on its behalf as a member
prior to the effective date of its membership termination, including any retroactive
adjustments of its percentage shares of liability payments and allocated
expenses.” We recognize that the parties dispute whether, in light of the
foregoing provision, Section F obligates the members to pick up a terminated
company’s liability share for installments due after membership termination or
whether it permits the CCR to continue to allocate shares to that company.
{¶ 38} What is undisputed, however, is the provision that the Producer
Agreement can be enforced only by the CCR companies, as it expressly confers
no rights to third parties. Thus, any alleged breach of that agreement, such as the
alleged failure to comply with Section F, can only be resolved between and
among the member companies in arbitration. The claimants understood these
terms and agreed to them, and they concede in their brief that the settlement
agreement provides for several liability, so long as the shares have been properly
and timely allocated. Any issues arising in regard to share allocation do not
change the nature of the promises made by the members in the settlement
agreement. Accordingly, Section F does not alter the intent of the parties to this
appeal, as manifested in the settlement agreement, that liability of the member
companies is limited to their individual shares.
{¶ 39} We are not unmindful of the position taken by the dissent but
hasten to point out that the options available to claimants in the event of default
by a member company have not only been provided for in the settlement
agreement but also have been ignored by the dissent. For such a situation, the
options available to the claimants include voiding the settlement agreement in its
16
January Term, 2004
entirety, voiding it as to the defaulting member and pursuing that member in tort,
or suing the defaulting member to enforce its contractual obligation. As is
evident, the parties anticipated a CCR member company defaulting on its
individual share.
{¶ 40} The dissent asserts that the provisions of the Producer Agreement
create joint and several liability among the member companies and suggests that
claimants may enforce these provisions. But that view distorts the meaning of
both the Producer and settlement agreements. The settlement agreement defines
the rights between the member companies and the claimants, while the Producer
Agreement defines the rights between and among the CCR member companies.
Equally troubling is the dissent’s discussion about the equities, as this case
concerns legal relief and not equitable relief. Although the dissent complains that
the majority’s viewpoint, which it does not share, is somehow distorted, analysis
of all provisions in both agreements reveals that the CCR member companies
agreed to be liable only for their individual shares.
{¶ 41} To summarize, by signing the settlement agreement, the claimants
understood that the members would be paying various, undisclosed amounts
toward the total sum, as calculated by the formula set in the Producer
Agreement—an agreement that had been in effect since 1988. And, as the
settlement agreement expressly refers to the Producer Agreement, claimants knew
not only about that formula, but also that the Producer Agreement expressly
conferred no rights to third parties and that disputes regarding share allocation
would be determined through arbitration among the members. See Cales v.
Armstrong World Industries, Inc., Scioto App. No. 02CA2851, 2003-Ohio-1776,
2003 WL 1798671, at fn. 12. They agreed that the CCR members would fund the
installments in accordance with the terms of the Producer Agreement and that
each member would be liable “only for its individual share” of such payments.
Under these circumstances, the claimants cannot assert that the members assumed
17
SUPREME COURT OF OHIO
joint and several liability for the settlement amount. See, generally, Energy
Acquisition Corp. v. Harbor Ins. Co. (Sept. 4, 1990), W.D.Mich. No. G8910341
CA.12
{¶ 42} Based on the foregoing, we hold that the settlement agreement
creates only several liability among the CCR members, and, therefore, each
member is responsible only for its individual share of liability payments. Because
the appellate court interpreted the agreement as providing for joint and several
liability, that decision is reversed.
Jurisdiction
{¶ 43} We are further asked to determine whether the trial court had
jurisdiction to enter judgment for all 15,000 claimants against all CCR member
companies in view of the fact that not all of the claimants filed suit in the
Cuyahoga County Common Pleas Court and that some of the claimants who did
file suit there did not name all of the CCR member companies as defendants.
However, based on our decision that the settlement agreement provides for
several liability as opposed to joint and several liability among the member
companies and that judgments for each claimant against all CCR members cannot
be upheld, we need not and do not reach this jurisdictional issue.
Conclusion
{¶ 44} The judgment of the court of appeals is reversed, and the cause is
remanded for further proceedings consistent with this opinion.
Judgment reversed
12. The federal court wrote that “[a]lthough, on its face, the [settlement] contract appears to create
joint and several liability, the parties’ actual intentions control” and that because plaintiffs were
aware that the defendants would be paying various amounts toward the total settlement amount,
knew the reasons for not disclosing each defendant’s individual contributions, and knew that two
of the defendants were excess insurance carriers whose liability would not be at issue unless the
underlying primary insurer’s limits had been exhausted, the plaintiffs understood that the
defendants did not intend to assume joint responsibility for the settlement amount.
18
January Term, 2004
and cause remanded.
MOYER, C.J., F.E. SWEENEY, LUNDBERG STRATTON and O’CONNOR, JJ.,
concur.
CARR, J., concurs but writes separately.
PFEIFER, J., dissents.
DONNA J. CARR, J., of the Ninth Appellate District, sitting for RESNICK, J.
__________________
CARR, J., concurring.
{¶ 45} Although I agree with the majority's resolution on the merits of this
appeal, I feel compelled to write separately to address the jurisdictional issue. It is
my opinion that personal jurisdiction here was either consented to or waived by a
failure to timely object.
__________________
PFEIFER, J., dissenting.
{¶ 46} Excessive focus on a single phrase or sentence of an extensive
settlement document can lead to an unbelievably distorted interpretation.
Unfortunately, that is what this court has done in this case. It has chosen to focus
on the last part of the first sentence of paragraph 13 of the settlement agreement.
I agree that that part of the sentence suggests that CCR member companies are
severally liable. In fairness, however, this court should acknowledge that there
are other provisions in the settlement agreement.
{¶ 47} Paragraph five of the settlement agreement provides that CCR will
make 12 payments of approximately $10,000,000 each, depending on the number
of qualifying claims. This provision is straightforward: CCR is responsible for a
lump-sum payment. No provision in the settlement agreement provides for
payment of less than this amount. The only mention in the settlement agreement
19
SUPREME COURT OF OHIO
of lesser payments is in paragraph 13, which gives the plaintiffs the discretion to
declare the agreement null and void if they don’t receive full payment.
{¶ 48} When read in its entirety and in the context of the settlement
agreement, it is clear that the first sentence of paragraph 13 merely defers to the
producer agreement the allocation of CCR member payments. Pursuant to
paragraph five, payments must approximate $10,000,000. The producer
agreement also makes no mention of any eventuality in which less than the full
amount can be paid to the plaintiffs. It is apparent from the agreement that the
plaintiffs were not concerned with which CCR members made payments, only
that the payments required by paragraph five be made. It is also apparent that the
CCR members agreed to pay $10,000,000 on each payment date.
{¶ 49} I understand why the individual CCR members would like to avoid
covering the shares of former CCR members that have declared bankruptcy. But
their own agreement covers the situation before us. Not that this court will
acknowledge it. Pursuant to paragraph 2(b) of Section III of the Producer
Agreement, a participating producer is terminated from the agreement upon
declaring bankruptcy. The agreement does not state that consequently that
participating producer’s share of liability shall go unpaid. Instead, Section F of
Attachment A to the Producer Agreement provides:
{¶ 50} “In the event that a Participating Producer shall * * * have its
membership terminated * * *, the corresponding shares of the other Participating
Producers shall be increased appropriately to pick up the shares of the * * *
terminating Participating Producer.”
{¶ 51} This provision answers the very question before us. The majority
opinion, which mentions the provision, essentially ignores it, relying on this
specious logic: “[T]he Producer Agreement can be enforced only by the CCR
companies.” This court should have looked at the entire agreement to determine
the intent of the parties. Instead, it focused on part of one sentence and ignored
20
January Term, 2004
the inconvenient provisions that do not support its view of the case. I agree with
the court of appeals, which stated:
{¶ 52} “In our effort to harmonize and to give reasonable effect to all
provisions in the parties’ agreement, we have concluded [that] the first sentence in
Paragraph 13 of the settlement agreement, read in its entirety and in conjunction
with other settlement provisions, imposes joint and several liability on the CCR
members. Instead of reading this sentence as defining the members’ liability to
the plaintiffs, as the CCR members propose, we read this sentence as defining the
members’ liability vis-à-vis each other. The CCR members could have easily
made themselves ‘severally’ bound to the plaintiffs by using that magic word, but
they did not. See Corbin on Contracts §925 (Interim Ed. 2002) (The ‘assumption’
that the promisors mean to be bound ‘jointly’ can easily be overcome by adding
words of ‘severance.’) It is rather disingenuous for the CCR members, who are
sophisticated business entities and represented by able counsel, to now tout that
sentence as manifestation of the parties’ intent to create several liability, when
that purported intent could have easily been expressed by the use of the words
‘severally liable.’ ” (Italics sic.)
{¶ 53} This court is being similarly disingenuous in focusing on part of
one sentence while essentially ignoring Section F of Attachment A to the
producer agreement and the overall context of Paragraph 13 of the settlement
agreement.
{¶ 54} The majority opinion suggests that the equities favor the producers.
Let’s be serious. Even aside from the grievous health issues that the plaintiffs, not
the producers, suffer, the producers are the parties that have violated the
settlement agreement. The producers defaulted. There is no provision for partial
payments. The producers made a partial payment in December 1999. There is no
provision for no payment. The producers made no payment in December 2001 or
thereafter. The producers should have submitted full payment and requested the
21
SUPREME COURT OF OHIO
court to escrow the disputed amount. Furthermore, the producers still haven’t
fixed the December 1999 payment schedule among themselves, which also
violates the settlement agreement. Concluding that the equities favor the
producers is difficult to comprehend.
{¶ 55} Finally, the majority states that the jurisdictional issue is moot. It
would be better to state the obvious, that the lower court had jurisdiction because
the parties entered into an agreement and asked the court to determine certain
aspects of it. I dissent.
_________________
Jones Day, Patrick F. McCartan, Mark Herrmann, and Mary Beth Young,
for appellants Pfizer, Inc., Quigley Company, Inc., and Dana Corp.
Vorys, Sater, Seymour & Pease, L.L.P., David S. Cupps and Richard D.
Schuster, for appellants Amchem Products, Inc., CertainTeed Corp., Dana Corp.,
I.U. North America, Inc., Maremont Corp., National Service Industries, Inc.,
Nosroc Corp., and Union Carbide Corp.
Cooper & Walinski, L.P.A., and Richard S. Walinski, for appellant Dana
Corp.
The Zagrans Law Firm Co., L.P.A., and Eric H. Zagrans; Marcus, Santoro
& Kozac, P.C., Frank J. Santoro, Karen M. Crowley, and John M. Ryan Jr., for
appellant C.E. Thurston & Sons, Inc.
Kelley & Ferraro, L.L.P., Michael V. Kelley and Thomas M. Wilson;
Hahn Loeser & Parks, L.L.P., Robert J. Fogarty, Andrew S. Pollis, and Yuri R.
Linetsky, for appellees.
Bricker & Eckler, L.L.P., Kurtis A. Tunnell, Anne Marie Sferra, and
Vladimir P. Belo, urging reversal for amici curiae, Ohio Manufacturers’
Association, Ohio Chapter of National Federation of Independent Business, and
Ohio Chemistry Technology Council.
_____________________
22