• Kirk Hartley

Comments as a Co-Chair – Can We Look Outside Asbestos to View the Role of Chapter 11 as the To

I’m enjoying today a role as co-chair of this Perrin conference on asbestos chapter 11 cases.The timing of the conference is fortuitous in view of recent chapter 11 filings, and the prominent discussions regarding the BP fund. In the following cover letter for conference materials, I’ve asked conference participants to look outside the asbestos context to the wider world of all mass torts, corporate reorganizations, actual insolvency, and the reality that chapter 11 proceedings are now used by corporations for strategic purposes instead of being forced into chapter 11 by actual insolvency. The letter pulls together some of the points previously aired on this blog. The letter states:

Conference Participants:

My purely personal view is that current law and practice pays far too little heed to science and the rapid changes that I believe will over time bring tort claiming on a scale that will widely exceed the asbestos claiming. Science is especially important when it comes to considering the potential rights and claims of current and future persons cancer victims. These concerns are especially strong now that science indicates that some subsets of exposed persons pass on genomic changes that will or may disrupt endocrine systems or produce future cancers. The best known examples may be the plights of the so-called DES daughters and the Vietnamese families that have seen generations of cancer after Agent Orange exposures. For more on the general topic of science, genomes and future litigation, see the recent articles of a brilliant lawyer who also holds a PhD in genetics, Gary Marchant, of the Sandra Day O’Connor School of Law at Arizona State University. One of the recent articles is included.

This conference brings us together to talk about chapter 11 cases that arise from asbestos claiming. These chapter 11 cases, however, matter for more than just asbestos claiming. Indeed, the highly unusual world of asbestos is only part of the larger scene in which chapter 11 is becoming or is being considered as the way to resolve mass tort claims and other product liability claims. The current hot issue is whether the BP oil rig fiasco will be resolved using chapter 11. In addition, chapter 11 procedures and trusts or funds are in place or contemplated for breast implant claims, silica claims, claims arising from sexual abuse by Catholic priests, and Chinese drywall claims. Consider also the Chrysler and GM chapter 11 cases, and their impacts on non-asbestos tort claimants. Note also the Tronox reorganization arising out of massive environmental risks. Note further the Third Circuit’s recent sua sponte grant of rehearing en banc in the GIT/Narco case that has previously caused 19 state Attorneys General to file an amicus brief regarding disposition of insurance-related rights and the scope of chapter 11 injunctions.

Other reorganization-like procedures and events also are relevant. For example, in Australia, one corporation facing massive asbestos claiming is trying to use a "schemes of arrangement" to seek to limit the assets at risk to pay asbestos and claims. Another Australian entity reincorporated around the world as it sought to give effect to a private asbestos trust, and its officers were convicted of securities fraud (the issues are on appeal). Meanwhile, insurers limit their exposures to paying claims by using schemes of arrangement and run-offs that are not unlike reorganizations.

The attached materials address these various topics. Some are court papers. Others are my purely personal comments. My personal comments are offered from the perspective of someone who has lived since 1984 in the world of asbestos claiming while representing manufacturers in underlying claims, coverage cases, corporate arbitrations, and asbestos bankruptcies. Due to cancers that have stricken persons very dear to me, I also look at the issues from the perspective of current and future cancer victims who may someday be claimants against entities that sell or use substances viewed as "toxins." Hopefully you will find the materials useful to considering the precedents being set in asbestos chapter 11 cases.

In short, I suggest that current law and practice fails to respect the rights of co-defendants that end up paying tort claims left behind by entities that are either (1) first movers into chapter 11 because of massive liabilities, or (2) the financially sophisticated and wealthy entities that are later movers into chapter 11 for strategic purposes. I also argue that current chapter 11 practice fails to meaningfully respect the rights of claimants who live and die outside the United States. Set out below is the full text of the cover letter:


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