Asbestos Bankruptcies in Asbestos Cases

Decisions in our library in which the court ruled on a defendant's bankruptcy: 249 cases, by state. Each line gives what the court held, in our words; the law differs from state to state and changes, so read the opinion and talk to a lawyer before relying on any of them.

About this issue

Dozens of companies with asbestos liabilities have filed for bankruptcy. Section 524(g) of the Bankruptcy Code, added in 1994, allows a Chapter 11 plan to create a trust that pays present and future asbestos claims, if the plan meets the statute's requirements, including findings about substantial future claims, a funded trust that treats present and future claimants alike, and approval by at least 75% of voting asbestos claimants. The court can then issue a channeling injunction that sends the claims covered by the plan to the trust instead of the courts. The injunction can also protect certain related companies and insurers, but only against claims that arise from their relationship with the debtor, not every claim against them.

Decisions in this section deal with:

• the automatic stay, which generally halts lawsuits against the company that filed, subject to exceptions and the court's power to lift it. It does not ordinarily protect co-defendants, which need their own legal basis;
• confirmation of plans and trusts, voting, and the rights of future claimants;
• who is protected by a channeling injunction, and which claims it covers;
• strategies such as divisional mergers ("Texas two-step") that place liabilities in a new company that then files, and court challenges to them;
• insurance disputes in bankruptcy.

Alabama

• Corley v. Long-Lewis, Inc. (2020). An order granting a plaintiff's Rule 41(a)(2) motion to voluntarily dismiss the rest of a complaint is a final judgment for appeal, and a court may refuse to consider a new choice-of-law (maritime law) argument first raised in a motion for reconsideration after summary judgment.
• Bradberry v. Carrier Corporation ET AL. (2011). The Bankruptcy Code's automatic stay halts proceedings only against the debtor and not against solvent codefendants, and a trial court need not formally sever or dismiss the debtor before proceeding against the others. Proceeding against solvent joint tortfeasors does not impermissibly split a wrongful-death action.

California

• In re Bestwall LLC (2022). A third party who produces data in response to a subpoena must show the data is privileged or trial-preparation material to invoke Rule 45's claw-back protection. HIPAA regulations and CDC guidelines did not create such a privilege here, and the protective order allows confidentiality designations but not claw-back.
• Darden v. Western Asbestos Settlement Trust (In re Western Asbestos Settlement Trust) (2022). Under California law, a third party not named in a release may enforce it if a reasonable person in the releasor's position would understand it was intended to cover that party, and claim preclusion under the primary rights theory bars a second asbestos claim against a predecessor in privity with the released defendant. A trust that compensates asbestos exposure claims need not pay heirs' wrongful death claims when no underlying compensable claim exists.
• Darden v. Western Asbestos Settlement Trust (In re Western Asbestos Co.) (2021). A California wrongful death claim belongs to the heirs, so a decedent's release does not bind them. A confirmed plan and trust documents are a contract, and where they unambiguously compensate only claimants who were exposed to asbestos and have a covered disease, the trust need not pay heirs' independent wrongful death claims.
• Darden v. Western Asbestos Settlement Trust (In re Western Asbestos Co.) (2021). Under California law a third party may enforce a general release if the contracting parties intended to benefit it, and a release of a successor's 'predecessor entity' covered the predecessor's negligence liability. A dismissal with prejudice of the same primary right in the earlier suit also barred the later claim by claim preclusion.
• Morgan v. JM Manufacturing Co., Inc. (2nd Appellate District, 1st Division, 2021). A plaintiff seeking punitive damages against a corporation must offer clear and convincing evidence that an officer, director or managing agent had the required state of mind, whether shown directly or by piecing together managing agents' knowledge and acts; the company's size does not relax that burden.
• Carrera v. Johnson & Johnson (2019). A removed talc injury suit is not 'related to' a supplier's bankruptcy under the Pacor test where indemnity and shared-insurance provisions would require a further action to establish liability. Even if jurisdiction existed, 28 U.S.C. § 1452(b) permits remand on any equitable ground.
• Strobel v. Colgate-Palmolive Company (2019). A removing defendant cannot establish bankruptcy 'related to' jurisdiction from a non-party debtor's disputed indemnification or shared-insurance claims. Even if jurisdiction existed, equitable remand under 28 U.S.C. § 1452(b) was warranted.
• Weirick v. Brenntag North America, Inc. (2019). A district court may remand a removed action "on any equitable ground" under 28 U.S.C. § 1452(b), even if "related to" bankruptcy jurisdiction exists. Factors such as state-law predominance, comity, forum shopping, jury-trial rights and prejudice favored remand of this substantially litigated state case.
• Continental Casualty v. Chatz for Cfb/wfb Trust (2018). A party that repeatedly told the court that a threshold ruling decided the case and that judgment should be entered against it is judicially and equitably estopped from later raising a new coverage defense. An insurer's vexatious and unreasonable delay in paying claims supports a penalty and fees under Section 155 of the Illinois Insurance Code.
• Hart v. Special Electric Company, Inc. (1st Appellate District, 5th Division, 2018). A Chapter 11 plan that allows insurers to defend claims under applicable state law does not preempt Wisconsin's two-year claims period for dissolved corporations. A dissolution notice that omits the required description of claim information has only a technical defect, which does not bar the limitations period absent prejudice to the claimant.
• In re Cfb Liquidating Corporation (2017). Under 215 ILCS 5/155, an insurer is liable for extra-contractual relief where its conduct is objectively unreasonable and injures the insured. A party that told the court it had lost on coverage is bound by that position and cannot reverse course, under both judicial estoppel and equitable estoppel.
• Flintkote Co. v. Aviva Plc (2016). Under California law and Fuller-Austin, an excess insurer's obligation to pay amounts the insured is 'obligated to pay' to a section 524(g) asbestos trust is limited to the trust's payment percentage, not the liquidated value. California Insurance Code section 1616 mandates a bond from a nonadmitted alien insurer that files a pleading.
• Flintkote Company v. Aviva Plc (2016). Under California law, following Fuller-Austin, an insurer whose policies cover sums the insured is 'obligated to pay' owes only the payment percentage the insured's § 524(g) asbestos trust actually pays claimants, not the claims' full liquidated value. Cal. Ins. Code § 1616 makes a bond mandatory for a nonadmitted alien insurer filing pleadings.
• In re Cfb Liquidating Corporation (2016). A chapter 11 plan is a contract interpreted under general contract rules (here Illinois law). The plan's term "allocated percentage" has its ordinary meaning, so an allocation of 100% is an allocation and no equitable contribution analysis was required.
• Fenicle v. Boise Cascade Company (2015). A state-law asbestos wrongful death claim does not raise a substantial federal question under Grable merely because a repealed federal statute might bear on a veil-piercing theory. The rule of unanimity does not apply to removal under § 1452, but a bankruptcy-related case may be remanded on broad equitable grounds.
• Melendrez v. Superior Court OF State OF California (2nd Appellate District, 3rd Division, 2013). An attorney may verify a corporate party's discovery responses as its agent, which waives the attorney-client and work product privileges only as to the sources of the information. If a corporation no longer exists, its attorney-client privilege passes to its insurers as de facto assignee, and a court cannot simply deem responses verified.
• Flores v. Kmart Corporation (2nd Appellate District, 5th Division, 2012). A bankruptcy reorganization plan's discharge cannot be enforced against a claimant at the demurrer stage unless the record shows the claimant received constitutionally adequate notice. Publication notice suffices only if the claimant's identity was not reasonably ascertainable or the claim was conjectural; otherwise actual notice is required.
• Saller v. Crown Cork & Seal Company, Inc. (2nd Appellate District, 1st Division, 2010). The consumer expectations test for design defect applies to asbestos-containing pipe insulation, and a worker's testimony about his exposure can support giving the instruction. Strict liability failure to warn is distinct from negligent failure to warn, so a verdict on the negligence claim does not make omitting the strict liability instruction harmless.
• Hopkins v. Plant Insulation Company (2006). State courts keep concurrent jurisdiction over bankruptcy trustee fraudulent-transfer claims under 11 U.S.C. section 544(b), and a bankruptcy-related claim removed under section 1441 as well as section 1452 can still be remanded on equitable grounds under section 1452(b).

Colorado

• Church v. Dana Kepner Company, Inc. (2012). Under Colorado's innocent seller statute, a plaintiff need only plead facts plausibly showing the seller had actual knowledge of a product defect to sue a non-manufacturer seller. Allegations of knowledge and distribution without adequate warnings also suffice to plead civil conspiracy.

Connecticut

• In re Nash Engineering Company (2024). A bankruptcy trustee suing under Connecticut's fraudulent transfer act stands in a creditor's shoes, and a tort claimant's claim arises on the date of injury, so she can be a creditor before any transfer even if her claim was not yet actionable. The two-year period in Bankruptcy Code section 548 is a statutory element not subject to equitable tolling.
• Dusto v. Rogers Corporation (2023). To avoid workers' compensation exclusivity, a plaintiff need only show a genuine issue of material fact as to whether the employer subjectively believed its conduct was substantially certain to injure employees, judged under the Lucenti factors with the evidence viewed favorably to the plaintiff. Under Wisconsin law, claims against an administratively dissolved corporation must be brought within two years of the published notice of dissolution, and that notice may be published by the corporation's insurers acting as its agents.

Delaware

• Burhenn v. Celotex Asbestos Settlement Trust (2024). A claim against an asbestos settlement trust is governed by the trust plan's own filing deadline (three years from first diagnosis), and tolling under the plan applies only if the trust claim was timely filed. Even under ordinary limitations law, via Delaware's borrowing statute, the claim was time-barred, and cross-jurisdictional tolling does not apply where the original foreign filing was untimely.
• In re Paddock Enterprises, LLC (2022). A bankruptcy court has post-confirmation subject matter jurisdiction over a subpoena dispute that has a close nexus to implementing and administering the confirmed plan and trust agreement, and although compliance burden was significant it did not outweigh relevance, so the subpoenas were not quashed but the responding party is entitled to reasonable expenses.
• In re Bestwall LLC (2021). A motion to quash a subpoena must be decided in the district of compliance, and transfer under Rule 45(f) requires exceptional circumstances that outweigh the nonparty's interest in local resolution. Subpoenas for confidential trust claimant data must be consistent with the protections in the earlier Delaware Bankruptcy Court access decision.
• In re Imerys Talc America, Inc. (2021). A creditor has no right to change a plan vote and must show cause under Bankruptcy Rule 3018, which presupposes a valid claim against the debtor. A presumption of cause in the solicitation procedures covers only changes made before the Voting Deadline. Designating a vote under § 1126(e) is a drastic remedy, and the movant carries a heavy burden.
• In re Energy Future Holdings Corp. (2020). A late proof of claim after a bar date is allowed only on a showing of excusable neglect under the Pioneer factors, and the late claimant bears that burden. Publication notice was adequate for unknown asbestos claimants, and notices of intent to participate in confirmation are not informal proofs of claim.
• In re Energy Future Holdings Corp. (2020). A Chapter 11 plan may discharge latent asbestos claims not filed by the bar date if claimants have an adequate chance to seek reinstatement under Rule 3003(c)(3). Section 363(m) bars relief that would alter the sale's terms, and there is no due process exception to it.
• In re Imerys Talc America, Inc. (2019). A non-debtor seeking wholesale provisional transfer of thousands of personal injury cases under 28 U.S.C. § 157(b)(5) must show grounds for immediate, ex parte relief, such as irreparable harm and no fault in creating the emergency. J&J did not make that showing, and the cases it cited did not support routine provisional transfer for a non-debtor.
• Aiu Insurance Company v. Philips Electronics North America Corporation (2018). A contract clause giving insurers the right to "audit" payments made by an asbestos trust is ambiguous where both parties' readings are reasonable, so extrinsic evidence is needed. A non-party trust cannot be bound to the settlement agreement, and offset claims fail without pleaded conditions precedent.
• In re Energy Future Holdings Corp. (2015). Bankruptcy Rule 3003(c)(3) requires the court to fix a bar date, and nothing makes a section 524(g) channeling injunction a prerequisite for unmanifested asbestos claims. Those claims arose at pre-petition exposure, and publication notice may satisfy due process, so discharge may be available.
• In re Motions for Access OF Garlock Sealing Technologies LLC (2013). Rule 2019 exhibits filed with the bankruptcy court are judicial records carrying a presumptive common-law right of public access, which the objecting parties did not rebut. Alternatively, there was good cause to modify the 2019 Orders to allow access.
• In re Specialty Products Holding Corp. (2013). In estimating asbestos liability under §502(c)(1), the court relies on the debtors' own tort-system claiming and settlement history, which places a value on claims. It will not discount that history for claimed implicit defense costs, nuisance settlements, market share, or apportionment among corporate eras.
• Motions for Access OF Garlock Sealing Technologies LLC (2013). Rule 2019 exhibits filed with the bankruptcy court are judicial records carrying a presumptive common law right of public access, and the party opposing access must show that secrecy outweighs it. Alternatively, the court found good cause to modify the confidentiality-type orders under the Pansy balancing test.
• In re Flintkote Co. (2012). Future demands under § 524(g) are those of people exposed to the debtor's asbestos whose disease has not yet manifested, so a debtor need not show post-confirmation exposure to qualify. Section 524(g) does not require continuing a viable pre-petition business, and Flintkote's new businesses satisfied any ongoing-business requirement.
• In re the Flintkote Company (2012). A § 524(g) injunction does not require that future 'demands' be limited to people first exposed after confirmation; exposed but not yet ill claimants count as future demand holders. Any 'ongoing business' requirement is met by a reorganized debtor's new, feasible business, which need not be its pre-petition business.
• In re WR Grace & Co. (2012). Rule 60(b) generally does not apply to a district court's appellate orders in bankruptcy. Even if it did, a later Third Circuit decision applying an earlier ruling is a development in the law, not the extraordinary circumstance needed for relief, and the motion cannot substitute for an appeal.
• In re WR Grace & Co. (2012). A § 524(g) asbestos trust and channeling injunction may be confirmed where they are fair and equitable in light of the contributions made to the trust, they cover only derivative third-party liability, and the plan treats similar claims in substantially the same manner. Bankruptcy Code § 1123(a)(5)(B) preempts anti-assignment clauses in insurance policies so that the policy rights can be transferred to the trust.
• In re WR Grace & Co. (2012). A Chapter 11 asbestos plan satisfies Section 524(g) and the Bankruptcy Code if its trusts, channeling injunction, claim classifications and payment procedures treat similar claims alike. Liability insurance policies and their proceeds are property of the debtor's estate, and Bankruptcy Code Section 1123(a)(5)(B) preempts anti-assignment clauses in insurance policies.
• In re Federal-Mogul Global, Inc. (2010). Under the 1994 asset purchase agreement, indemnity obligations ran only between the parties to it and their successors, not to PepsiAmericas, which was not a party or third-party beneficiary and whose corporate affiliation with the seller ended before 1994.
• General Motors Corporation v. Grenier (2009). A trial court's decision to admit expert testimony under Daubert and D.R.E. 702 is reviewed for abuse of discretion, and experts may reliably conclude that chrysotile from friction products is carcinogenic without epidemiological studies showing that association. Isolated errors in evidence and in closing argument did not require a new trial.
• In re Grossman's, Inc. (2009). Under Third Circuit precedent (Frenville and Schweitzer), a bankruptcy claim arises when the underlying state-law cause of action accrues, and asbestos injury claims do not arise until the injury manifests. Warranty claims accruing at delivery in 1977 under N.Y. UCC § 2-725 accrued prepetition and were discharged.
• In re WR Grace & Co. (2009). Under California law, and as the court predicted for Delaware, an asbestos-in-building property damage tort claim does not accrue until physical injury from contamination (release of fibers) occurs, not on mere knowledge of asbestos's presence; the discovery rule only delays accrual, and the defendant bears the burden of proving contamination outside the limitations period.
• In re Federal-Mogul Global Inc. (2008). A Section 524(g)(4)(A)(ii) channeling injunction cannot cover non-debtor third parties whose asbestos liability arises from their own conduct and products rather than derivatively from the debtor, and an unincorporated division is not a "predecessor in interest." The court also treated the injunction's lack of necessity to reorganization as a significant factor against issuing it.
• In re Grossman's Inc. (2008). Under Third Circuit law (Frenville, Schweitzer) and New York law, an asbestos personal injury claim arises when the injury manifests, so a claim that manifested years after plan confirmation was not discharged by the plan or barred by the confirmation injunction.
• Hopkins v. Plant Insulation Co. (2006). A district court sitting in the bankruptcy case may abstain under the discretionary abstention provision rather than transfer a related personal injury and wrongful death action under 28 U.S.C. § 157(b)(5). Here the debtor's opposition and the lack of precedent for using § 157(b)(5) against a debtor/plaintiff's chosen forum supported abstention.
• In re Armstrong World Industries, Inc. (2006). Under the Markell rebuttable-presumption test, a plan does not discriminate against a dissenting unsecured class if the plan proponents show by a preponderance of the evidence that the asbestos personal injury liability estimate is reasonable, so the class's percentage recovery is not materially lower than the asbestos claimants'. Estimation must be based on state tort law and the debtor's historical experience, adjusted for probable changes.
• In re WR Grace & Co. (2006). A property damage claimant must show that an asbestos-containing product creates an unreasonable risk of harm at the exposure levels actually encountered; contamination and fiber release on disturbance, without reliable evidence of risk, are not enough. Expert evidence must meet Daubert reliability and fit requirements to defeat summary judgment.