Weyerhaeuser Denied Reconsideration of Judgment on Liability; Trial to Fix Damages Set for October 2003

HOUSTON -- U.S. Bankruptcy Judge Margaret Murphy has denied Weyerhaeuser Company’s Motion for Reconsideration of the Order granting Summary Judgment on liability against Weyerhaeuser entered in October of 2002 in favor of Paragon Trade Brands, Inc. “I find none of the evidence presented by Weyerhaeuser in its motion for reconsideration is new,” stated Judge Murphy.

Last year, Judge Murphy granted Summary Judgment on liability against Weyerhaeuser in a $400 million breach of warranty case filed by Paragon. The original proceedings stemmed from a 1993 asset sale by Weyerhaeuser to Paragon which closed concurrent with the sale of 100 percent of Paragon’s newly issued stock to public investors. Weyerhaeuser received approximately $240 million in proceeds from the IPO. At the time of the offering, Weyerhaeuser had incorporated patented features into diapers it sold in the business it transferred to Paragon, but did not have the licenses from its competitors for use of the technology. As a result, Paragon’s use of this patented technology resulted in a patent infringement lawsuit against Paragon by Procter & Gamble a year after the IPO, and another case filed after the IPO against Paragon by Kimberly-Clark Corporation. Paragon’s loss of the P&G patent case in late 1997 and the huge damages verdict and injunction that were issued set in motion Paragon’s bankruptcy filing. In the action by Paragon against Weyerhaeuser, the court found that four warranties included as part of the agreement between Weyerhaeuser and Paragon were a breach as a matter of law, because, among other matters, the intellectual property assets transferred to Paragon by Weyerhaeuser were not adequate to conduct the business that Weyerhaeuser was conducting at the time of the IPO.

In her ruling Wednesday, Judge Murphy stated that “motions for reconsideration serve a limited purpose of correcting manifest errors of law or fact or in certain instances calling newly discovered evidence to the Court’s attention or perhaps a new statute. The evidence and argument presented by Weyerhaeuser in its motion for reconsideration are repetitive and redundant of evidence in argument presented by Weyerhaeuser in its briefs and oral argument on the summary judgment motions.”

“We are very pleased with the decision by Judge Murphy on behalf of our client,” stated Andrews & Kurth partner, John Lee who represented the litigation claims representative for Paragon. “This ruling allows us to proceed with the trial to determine damages. We will seek to recover the more than $400 million in losses incurred by Paragon as a result of the patent claims, the injunction, and the bankruptcy. We will also seek to recover pre and post judgment interest and attorney’s fees relating to our claims under the warranties the Court has properly held Weyerhaeuser breached.” Mr. Lee added: “Judge Murphy properly rejected Weyerhaeuser’s effort to reargue the liability verdict. We remain quite confident that Judge Murphy’s decision will be upheld in the face of any appeal”

Lawyers representing Randall Lambert, the litigation claims representative for Paragon, were Mr. Lee and Scott Locher of Andrews & Kurth (Houston), and co-counsel Parker C. Folse, III of Susman Godfrey L.L.P. (Seattle) and Charles E. Campbell of McKenna Long and Aldridge L.L.P. (Atlanta).

For additional information concerning Judge Murphy's original Summary Judgment entered in October 30 2002, please review the Order .

Andrews & Kurth L.L.P., founded in 1902, is headquartered in Houston, has approximately 400 lawyers and additional offices in Austin, Dallas, The Woodlands, Los Angeles, London, New York and Washington D.C. The firm has an international clientele and broad industry experience, particularly in the areas of bankruptcy, energy, corporate, finance, technology, real estate, tax, litigation, labor, health care and many others.