X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A group of asbestos claimants’ lawyers is accusing Zurich, Switzerland-based ABB Ltd. of buying the votes of other such plaintiffs for a settlement plan through the use of $400 million in cash from the bankruptcy estate of one of its nonoperating entities, Combustion Engineering Inc. Although ABB says it has affirmative votes on a $1.2 billion settlement from 80 percent of its asbestos claimants, four lawyers on the company’s seven-member official asbestos claimants committee object to the plan because they say ABB bought those votes by paying out $400 million in cash to certain asbestos plaintiffs. “The people who are opposed to this plan are an overwhelming minority” of asbestos claimants, said ABB’s lawyer, David Bernick of Kirkland & Ellis in Chicago. The dissidents are “a very small number of lawyers that represent mesothelioma claimants and are prepared to do anything to tank this deal because they just don’t want prepacks to take place because they’d rather pursue their claims in the tort system,” Bernick said. Norwalk, Conn.-based Combustion Engineering, which no longer has operations but still owns real estate assets, made a prepackaged Chapter 11 filing with the U.S. Bankruptcy Court in Wilmington, Del., on Feb. 17. Like most other reorganization plans in asbestos-related bankruptcies, Combustion Engineering’s prepack will create a 524(g) trust worth $1.2 billion that is funded by cash, notes and ABB stock to pay current and future asbestos claimants. Combustion Engineering needs the consent of 75 percent of claimants to create a 524(g) trust, which would shield the company from all future asbestos lawsuits. Unlike most other asbestos bankruptcies, Combustion Engineering had its own settlement trust before it filed for Chapter 11. It was funded with $400 million in cash from ABB. The four dissidents of the asbestos claimants panel, which was appointed two weeks ago, asked visiting Judge Judith Fitzgerald to stop payments from the Combustion Engineering settlement trust so that money would remain to pay current asbestos claimants. Fitzgerald, however, allowed those payments to continue. The dissident group has vowed to appeal her ruling in a higher court. “This is going to be a long, ugly fight,” one of them said. The dissident group members object to the $400 million cash payments on several grounds. Among other things, they argue that the payments may be unfair to future asbestos claimants because it would leave less money to fund the ultimate 524(g) trust, which will pay both current and future claimants. The dissidents also assert that the asbestos claimants ABB has already paid from the Combustion Engineering settlement trust may have no legitimate asbestos claims against ABB and, therefore, shouldn’t be allowed to vote on the plan. The practice of paying asbestos claimants before a company files Chapter 11 has been used in other prepackaged asbestos bankruptcies, including the cases of Birmingham, Ala.-based Shook & Fletcher Insulation Co., Houston-based industrial contractor J.T. Thorpe Co. and Swan Transportation Co., a subsidiary of Dallas-based Tyler Technologies Inc. “It’s becoming a standard way of setting up these prepacks. Depending on how you view it, it’s either a buying of votes or something less sinister,” said the lawyer for six insurers in the case, Mark Plevin of Crowell & Moring. Combustion Engineering paid out anywhere from 37.5 percent to 95 percent of individual claims out of the $400 million collateral trust. By not paying off the claims completely, the entity has kept those claimants eligible for the vote on the company’s reorganization plan. What’s unfair about such a move, according to lawyers on other asbestos-related bankruptcy cases, is that while claimants who sign on to the settlement trust may get up to 99 cents on the dollar of their asbestos claims paid, those who get paid by the 524(g) trust later could receive a lot less. Bernick countered that asbestos claimants who got paid out of the prebankruptcy settlement trust only had to agree to the broad outlines of Combustion Engineering’s reorganization plan without voting in favor of the plan. “Votes were not bought,” Bernick said. “All of the current claimants are able to settle and make a claim against the settlement trust. They can do that no matter how they voted.” One thing at issue is whether many of the vast majority of claimants who have voted for the plan have legitimate claims against Combustion Engineering. Bernick said that issue is for the Connecticut Valley Processing Center to decide. The Connecticut Valley Processing Center is one of several companies charged with paying out asbestos claims from 524(g) trusts. At a hearing on Monday, Fitzgerald extended the deadline for filing objections to Combustion Engineering’s reorganization plan to March 26 from March 13 after the dissident asbestos creditors and insurance companies complained. The judge overrode objections by those parties that the April 7 confirmation hearing is coming too quickly. She set a status hearing for April 1, at which Combustion Engineering’s creditors and insurers can again plead to push back the confirmation hearing. �Copyright 2003, The Deal, LLC. All rights reserved.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.