Oh What Chapter 11 Could Do for a Soon to be Bankrupt Asbestos Mining Firm

Looks like another asbestos bankruptcy is ahead. This bankruptcy apparently will involve an asbestos mine in Zimbabwe, according to this article from The Zimbabwe Times. According to the article, the mine is not paying its 2,000 workers their meager weekly wages, and some say that the mine is crucial to Zimbawe’s mining sector that supports much of the national economy and many jobs.

How easy it would be to solve the mining company’s problem if only chapter 11 could be invoked. If that were so, then judging by rulings in cases such as GM, Chrysler and Lyondell, the near-bankrupt mining company could use chapter 11 to create an answer for its problems. To do that, it could find a buyer willing to purchase and operate the mine through a section 363 asset sale. The asset deal could include a term conditioning the deal on a Zimbabwe bankruptcy judge issuing a global injunction specifying that that the miners are enjoined from making an claims for past wages or from making any future claims for any disease that may arise from their work.

The Zimbabwean bankruptcy court also could use its awesome powers under Zimbabwe bankruptcy code section 105 to enter an injunction stating that if the workers at the mine ever become sick and sue for damages for asbestos-related disease, then the defendant entities in those tort suits are barred from suing the mining company for contribution. (Such co-defendants, might be, for example, a later employer and companies that sold equipment used at a manufacturing plant, say for example the seller of a large pump with one asbestos gasket that was serviced twice a year by some other person). Citing the mining company’s desperate straits, its key role in the economy, and the lack of other willing buyers, the judge could quickly order a hearing to be held in a remote location far away from the mine on little or no notice to interested parties such as the miners and foreseeable future co-defendants, discovery could be truncated to the point of really not existing, and the hearing could be held in marathon sessions unavailable to most persons. Then the public hearing transcripts could be sequestered for 90 days afterwards.

Can you imagine the claims of “kangaroo court justice” that would follow from US lawyers if Zimbawe’s legal system actually followed such a procedure and entered such orders?

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Here are key quotes from the article:

“ZVISHAVANE – The government and management at the country’s major asbestos producer, Shabanie Mines, have failed to stop a week-long strike by the estimated 2 000 mine workers there.

Industry experts warn the prolonged job boycott by the asbestos miners could compound the company’s financial problems and cost the country millions of dollars in lost export earnings.

The workers downed tools last Monday to press the State-owned Shabanie Mashaba Mines (SMM) to pay them salaries due to them since the beginning of the year.

The Zimbabwe Times was informed that the now largely bankrupt company has failed to pay workers since January and has randomly selected a few workers each month to pay appallingly low monthly stipends of as low as US$30. It has since emerged some of the workers are now demanding that the State-run multimillion-dollar asbestos producer be returned back to self-exiled businessman Mutumwa Mawere, the former owner.

Since January, the company has made only three pay outs and only to a quarter of the 2 000-strong workforce.

The stand-off was referred to an arbitrator in Masvingo in August, but he has failed to resolve the drawn-out labour dispute.

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Since the takeover by government four years ago, the company has faced critical cash flow problems amid allegations of looting by top Zanu-PF officials. The mining firm is reportedly facing critical viability problems because of a hostile operating environment, and has for the past eight months failed to reach a compromise with the workers.

Several of Zimbabwe’s mining firms face collapse also because of lack of hard cash to buy new machinery and spares.

The perceived high political risk because of Zimbabwe’s lawlessness and political violence has also scared away foreign investors with investment funds to shore up the depressed mining sector.”

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About Kirk

Since becoming a lawyer in 1983, Kirk’s over 30 years of practice have focused on advising a wide range of corporations, associations, and individuals (as both plaintiffs and defendants) on both tort and commercial law issues centered around “mass torts.”

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