Coltec Industries Inc., the parent company and primary equityholder in a gasket maker in bankruptcy, has moved to have an independent examiner look at the $105.2 million in fees paid to attorneys and other professional firms in the proceedings.
Garlock Sealing Technologies LLC, Garrison Litigation Management Group Ltd. and The Anchor Packing Co. are the three debtors who filed for bankruptcy over four years ago because the large number of asbestos suits they face.
The official committee of asbestos personal injury claimants, the official committee of unsecured creditors and the future asbestos claimants’ representatives all have been authorized to engage professional firms, leading to the accrual of $105.2 million in fees.
“One thing that is clear is that Coltec’s equity in these debtors is being squandered,” the company said in court papers.
Coltec is suggesting the appointment of W. Clarkson McDow Jr., a former U.S. bankruptcy trustee for region four covering South Carolina, Virginia, West Virginia, Maryland and the District of Columbia, to review fee applications and to control rising administrative expenses.
“Fee examiners or fee review committees have been appointed in numerous large, recent bankruptcy cases, such as those involving Bethlehem Steel, Bradlees, Enron, Worldcom, Adelphia, Lehman Brothers, Collins & Aikman Corp., Exide, General Motors, Spansion and the city of Detroit,” Coltec said. “Fee examiners have likewise been appointed in a number of asbestos Chapter 11 cases.”
Coltec said it has been considering seeking a fee examiner in the case for two years but it waited until after U.S. Bankruptcy Judge George Hodges of the Western District of North Carolina determined the liability Garlock owes to asbestos plaintiffs. During the proceedings held to estimate Garlock’s liability, Hodges found evidence of misrepresentation by plaintiffs’ lawyers in several cases that Garlock settled in the past or in which Garlock lost jury verdicts. Hodges ruled that the history of verdicts and settlements were “unreliable proxies when making an aggregate estimate of the Debtors’ actual liabilities,” Coltec said.
The alleged evidence of misrepresentation led the judge to estimate that Garlock likely owes $125 million to asbestos plaintiffs, not around $1 billion to $1.3 billion as the plaintiffs alleged.