2013 finds asbestos bankruptcies back in the news.
For openers, 2013 has included two new asbestos bankruptcies. Second, after education by the US Chamber of Commerce and others, some states have passed new legislation specific to bankruptcy trusts, and other states are considering similar legislation. The plaintiff’s bar is not happy about the legislative effort, and so fired back with a commentary article in Mealey’s Litigation Reports: Asbestos. The article is by one of the dean’s of the asbestos bankruptcy bar (Mr. Elihu Inselbuch), and other lawyers from Caplin & Drysdale. The firm has spent decades representing the interests of asbestos plaintiffs in asbestos bankruptcies. The commentary article is online at Caplin & Drysdale – it’s accurate in some ways, but inaccurate or confusing in other areas.
Meanwhile, proposed federal legislation on asbestos trusts is back for another FACT Act hearing in the House. The hearing is set for March 13 – the speakers and materials are online here. It’s safe to predict that law professor Todd Brown will be be the best and most objective speaker at the hearing, although Marc Scarcella knows a tremendous amount about the trusts. Prior hearings on asbestos trust issues have prompted some knowledgeable legal reporters to comment on the partisan nature of some aspects of the proceedings. That’s a shame, because there many very real issues to address, but they keep getting lost in arguments about "fraud."
And, finally, the Wall Street Journal published today the first in a series of articles about asbestos bankruptcy trusts. The articles are by Dionne Searcy and Rob Barry. (I’ll gloat a bit, and note that the Journal story covers, among other things, a Manville trust claim (the Palermo claim) that was publicized over three years ago via this GlobalTort post.) The Journal story and graphics also re-plow much ground previously covered in excellent reports by Lloyd Dixon and colleagues at RAND in their studies on asbestos bankruptcy trusts.
In any event, a few sparks are back flying about asbestos trusts, and it’s good to see. Why? Because the asbestos trusts are widely viewed as good news, but they are in fact bad news, as I’ve been saying for some years. It is well past time for judges, legislators, the American Law Institute and others to start paying real attention to the need for better intersections between tort law and mass tort trusts.
On the facts, the first point is to cover the new asbestos bankruptcies The first was Resillo, a bankruptcy of a smallish, family-owned seller of laundry pads made with asbestos. The company filed a January 25, 2013 chapter 7 petition with the petition listing several asbestos claims.
More recently, on March 8, 2013, Rapid-American filed for chapter 11, citing the weight of asbestos claims. Rapid-American has ties back to Phillip Carey, a pipe insulation maker, as described in an asbestos plaintiff’s marketing piece. The filing includes a list of claims by plaintiff’s firm. The SimmonsCooper firm of Madison County leads the list with 1149. Another list compiles – by plaintiff’s firm – the aggregate amount per firm of unpaid asbestos settlements. Mass filers Baron & budd and Silber Perlman lead the list at about $2.6 million and $2.1 million, respectively. The lists are worth reading for the insights they offer into filing patterns.
A stress point of the press release quoted on Bloomberg is that the entity filing for chapter 11 never manufactured asbestos-products. That "poor me" point, however, is illusory because the entity is a holding company, and of course holding companies do not make anything tangible. Instead, the holding company acquired asbestos liabilities through m & a transactions, as described in an explanatory corporate history filing Mr. Paul Weiner. In this instance, the deal-making was done by the Riklis family. Some view Mr. Riklis as a major junk bond financier.
Mr. Weiner’s declaration also identifies many of the usual issues – massive claiming against the entity, especially after other target companies went into bankruptcy. The declaration also describes Rapid as having undertaken a common mistake known as a "National Settlement Program." Cynics observe that "national settlement" plans often appear to be grave mistakes, but the plans appear to be driven by insurers anxious to pay settlements in order to exhaust policy limits in order to stop paying unlimited defense expenses for the underlying cases.
Mr. Weiner’s declaration also notes that Rapid currently faces 275,000 asbestos claims, and is down to insurance polices and insurance claims worth something less than $100 million.