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FRIENDS FOR ALL CHILDREN, INC. v. LOCKHEED AIRCRAF

May 3, 1983

FRIENDS FOR ALL CHILDREN, INC., as legal guardian and next friend of the named 150 infant individuals, et al., Plaintiffs
v.
LOCKHEED AIRCRAFT CORPORATION, Defendant and Third-Party Plaintiff, v. THE UNITED STATES OF AMERICA, Third-Party Defendant



The opinion of the court was delivered by: OBERDORFER

 In an Order filed March 10, 1983, the Court gave the parents of the individual American plaintiffs who are participants in the global settlement until April 8, 1983, to review the then latest draft of a central trust proposed by the guardian ad litem and to submit their written comments. A final hearing was held on this subject on February 10, 1983, after notice to all parents. Before and after that hearing, the Court received a number of letters from the parents of settlement participants, commenting on various aspects of the proposed trust. Those letters have all been placed in the court record in this case.

 Under the terms of the Stipulation of Compromise Settlement, authority to allocate the settlement proceeds is vested exclusively in this Court, unencumbered by any representation or understanding of representations not reflected in the language of the Stipulation. *fn1" In furtherance of this responsibility, the Court has made interim payments of fees and expenses of plaintiffs' attorneys and to the guardians ad litem,2 and on February 16, 1983, the Court authorized a payment of $100,000 to each individual plaintiff free of trust. The Court has also spent considerable time and effort on the question of whether a central trust should be created with the balance of the settlement proceeds, and if so, what form that trust should take. The Court has carefully reviewed and reflected upon the recommendations and advice of the guardians ad litem and the amicus curiae and has given particular attention to the comments by and on behalf of the adoptive parents of the infant plaintiffs.

 For reasons stated in the Court's Memorandum filed February 18, 1983, some of which are restated and amplified here, the Court concludes that the guardian ad litem should be authorized to set up a central trust, but that the proposed trust instrument should be modified in some respects to meet the concerns expressed by the parents.

 The Court has weighed a number of factors in support of the creation of a central trust. The most important factor is the universal prediction of plaintiffs' medical experts that over time some unidentified (and at present unidentifiable) number of plaintiffs are likely to suffer more serious symptoms of injury than they do now. Those plaintiffs may well have a need for funds in excess of the $100,000 which has been distributed to them, and it is predicted that the special future needs of those plaintiffs could not be met adequately if the amounts now available for a central trust were scattered by an additional payment of $50,000 to each plaintiff. Most parents naturally hope and expect that their children will not be among the stricken, but many have recognized the need of a "safety net" for those who prove in time to be less fortunate. The guardian ad litem took this need so seriously that a central trust was a critical element of his recommendation of the settlement. See Report and Recommendation of the Guardian Ad Litem (August 25, 1982). He has argued, quite convincingly, that a central trust is the only instrument presently available for this purpose.

 Before and since the Stipulation, the guardian ad litem, the Court, and others have searched in vain for a feasible alternative safety net that could meet the projected needs of the plaintiffs without the inherent problems of a central trust. The only theoretical alternative -- insurance -- has proved so far not to be available. On the chance that some break-through will later make insurance available, the proposed trust is structured to permit a shift to insurance should that option become available. In addition, the Court, by this Memorandum, requests the guardian ad litem to further modify the proposed trust to require periodic re-examination of the insurance alternative. For the present, however, the demonstrated need for a safety net and the absence of any viable alternative are the principle bases for the decision to approve the central trust.

 A further basis for the decision is the reasonable expectation of those parents concerned about the need for a safety net that the Court would follow the guardian's recommendation in this respect. This is not to say that these parents had a legally enforceable reliance interest in a central trust or that they had reason to believe that the recommendation of the guardian ad litem would be binding on the Court. But they were entitled to assume that the Court knew and would respect the guardian's conscientious commitment to the childrens' interests and that his recommendation would carry great weight. Some parents whose children were reportedly at greater risk than others presumably accepted the settlement on the assumption that the guardian would strongly recommend and the Court would be likely to approve a safety net of some kind.

 It is noticeable that those parents who feel the need for a safety net have not been as vocal as those who oppose the central trust. But the representatives of the parents' committee who met with the Court, and particularly Colonel Gaylor *fn3" (who has kept most thoroughly involved in these developments) have recognized both the need and justice of some kind of safety net and the fact that a central trust is the most feasible device presently available to meet that need. The Court itself expressed such interest in a central trust from time to time that some of those who preferred it may have been lulled into a sufficient sense of security that they felt no need to echo personally what the guardian ad litem and plaintiffs' trial counsel were saying for them on the record.

 Another consideration has been the Court's duty to carry out the Stipulation of Compromise Settlement in a way that is most likely to discourage later disaffirmance of the settlement by the infant plaintiffs. This can best be achieved by implementing the settlement agreement in a way that is most likely to meet both the needs of the plaintiffs and the reasonable expectations of those who accepted the settlement on their behalf. The Court is persuaded that, in the particular circumstances here, the combination originally recommended by the guardian ad litem of a substantial distribution free of trust supplemented by a safety net in the form of a trust is the arrangement most likely to protect the settlement and to preclude disaffirmance.

 In reaching these conclusions, the Court has carefully considered the independent submissions made on behalf of plaintiffs Dewey, Schneider, Colgan, Carnie, Zimmerly, Chione, McCartney, and Wright, copies of which have been filed in the public record and served on all counsel of record.

 The Dewey letter of March 30 suggests that the parents have been precluded from addressing the Court, despite the fact that the Court has held three hearings after full notice since November for the express purpose of affording parents an opportunity to be heard personally instead of through the guardian ad litem or trial counsel. The Court regrets that the Deweys did not avail themselves of those opportunities, because the affidavit attached to their letter is thoughtful and useful. The Court is satisfied that, in light of those earlier opportunities and the comprehensiveness of the Deweys' affidavit, the Court has had the full benefit of their information and views.

 The Deweys' affidavit features a questionnaire that they distributed to all of the parents involved in the settlement. The questionnaire sought the parents' opinions about the central trust and about the proposal to retain a Medical Advisor to provide medical advice to the parents and the Co-Trustee. Eight responses favored the central trust, sixteen did not favor it, and two were apparently undecided. Nineteen did not respond at all. Only two of the eight respondents favored a trust for the benefit of their own children. Seven favored it for the benefit of other children with serious problems; one favored it for unspecified reasons. As between a central trust and insurance (if it were feasible), two favored the central trust, thirteen favored insurance, and eight preferred neither. Two foresaw use for the services of a Medical Advisor over the next five years; twenty-one did not. One did not know.

 The Deweys therefore oppose the central trust, because neither the defendants nor a majority of the parents responding to their questionnaire favor it. They are not persuaded by the suggestion of catastrophic risk. In addition, they demonstrate the extent to which the trust expenses forecast by the guardian ad litem would hamper appreciation of the trust corpus by compounding; they claim that the appreciation from per capita distribution would gross $2 million more than the appreciation reasonably anticipated by a central trust burdened by the contemplated expense of administering it. *fn4" They vigorously question the potential effectiveness of the Medical Advisor, and express a strong preference for reliance on local specialists. In addition, they mention the confusion about whether defendants demanded a central trust as a condition of settlement. *fn5" The Deweys urge the Court to reject the central trust "as unnecessary, wasteful, ineffective and unrealistic" and to distribute the balance per capita, i.e. as the $100,000 has been distributed. In the alternative, they urge cost control, the appointment of a non-lawyer as trustee, elimination of the Medical Advisor, with medical services to be obtained as needed rather than on a retainer such as proposed in the pending draft of the central trust, and per capita distributions in 5 or 6 years, instead of the 10 now contemplated in the trust draft.

 Written comments by five parents responding to the Deweys' questionnaire are noteworthy. One recognized that the cost for the Medical Advisor and co-trustee will be high for the first couple of years, but expressed the hope and expectation that "this will die down." *fn6" Another set of parents stated a preference for an individual trust, but considered that they had agreed to a central trust "for the protection of those children, if any, whose needs come to exceed the resources of their families." A third parent felt that the Deweys had stated some valid reasons, but did not "really know which way would serve the needs of the children" and expressed a desire "to do the right thing for the other children." This third parent would therefore "support the parents if they decide against the central trust." A fourth expressed concern about "youngsters" like their own child "whose needs appear to be greater." They "would gladly devote $50,000 to a Central Trust in hope we never have to use it. In summation," ...


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