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A federal judge in Wilmington, Del., ruled last Friday against the Big Three automakers’ landmark attempt to have their asbestos-related lawsuits consolidated with the bankruptcy case of Federal-Mogul Corp. as a way to get the claims against them dismissed due to a lack of scientific evidence. The ruling could have an impact on other companies seeking to have their own asbestos claims resolved through a lack of scientific evidence. Two other asbestos-related bankrupt companies — W.R. Grace & Co. and Babcock & Wilcox — are trying to make the same case and are using the same law firm, Chicago-based Kirkland & Ellis, as the Big Three. Never before, however, have other companies tried to piggyback on a bankruptcy case and have their asbestos claims resolved on the scientific evidence assertion. “The number of the cases that might be affected by this is substantial,” said Todd Snyder, a principal at Rothschild Inc. and Federal-Mogul’s restructuring adviser. U.S. District Judge Alfred Wolin is, for the first time ever, overseeing the scientific issues in five asbestos-related bankruptcies filed in the U.S. Bankruptcy Court for the District of Delaware. Wolin generally works out of a Newark, N.J., courtroom, but in a jammed courtroom in Wilmington on Feb. 8, he said that tacking on the asbestos-related lawsuits against DaimlerChrysler AG, General Motors Corp. and Ford Motor Co. wasn’t within his purview. “Judge Alfred Wolin said that, though there were a lot of problems in asbestos litigation, he did not have the power to do what we were asking him to do,” said the Big Three’s lawyer, David Bernick of Kirkland & Ellis. Bernick said that it’s “likely” his clients will file an appeal with the 3rd U.S. Circuit Court of Appeals in Philadelphia. The automakers have been attempting to bundle 15,000 to 20,000 pending asbestos suits against them in state courts and attach them to the Southfield, Mich.-based auto parts maker’s bankruptcy case. While the automakers made the motion to consolidate the cases, the asbestos claims involved target about 31 companies, including BMW AG, Volkswagen AG, Nissan Motor Co. Ltd. and Honeywell International Inc. The asbestos claims that Federal-Mogul and the automakers share are the result of an exposure to “brake dust” which came from the manufacturing of brake pads. Bernick said that his clients were the principal customers of Federal-Mogul. The companies, however, chose not to sue Federal-Mogul themselves over the claims because they felt that they wouldn’t be able to get substantial compensation. Previously, Bernick made similar challenges to the scientific basis of claims in Dow Corning’s breast implant-related bankruptcy and in the Dalkan Shield IUD-related cases. But the attempt to get asbestos claims dismissed on a scientific basis is novel. A Federal-Mogul press officer said the decision will not affect the company’s attempts to reorganize in bankruptcy. Wolin’s decision drew a very mixed reaction from investors Feb. 8. Ford finished at $14.30 per share, a slight 1.03 percent drop. Both GM and DaimlerChrysler ended the day higher — GM at $49.72 per share, up 2.39 percent, and DaimlerChrysler at $38.24, a 3.86 percent boost. Besides Federal-Mogul, four other asbestos bankruptcies are also filed in Delaware but are getting Wolin’s attention. They include Armstrong World Industries Co., Owens Corning, USG Corp. and Grace. The cases were transferred to Wolin’s jurisdiction on asbestos-related issues to alleviate some of the overcrowding in Wilmington. Delaware judges will still deal with Chapter 11 procedural issues. After meeting with those five companies, Wolin said two visiting judges in Delaware — Judge Judith Fitzgerald of Pittsburgh and Judge Randall Newsome of Northern California — will preside over the cases on procedural bankruptcy matters. Fitzgerald will sit on the Grace and Owens Corning cases, while Newsome will oversee the ones for Federal Mogul, USG and Armstrong. Copyright (c)2002 TDD, LLC. All rights reserved.

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