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.

Massachusetts

• Honor v. Johnson & Johnson (2019). A defendant removing on the basis of a non-party supplier's bankruptcy must show 'related-to' jurisdiction; possible indemnification, shared-insurance and identity-of-interest arguments did not establish it, and equitable considerations also favored remand.
• Mitchell v. Johnson & Johnson (2019). Even where a case is colorably "related to" a bankruptcy proceeding, a court may remand it under 28 U.S.C. § 1452(a) "on any equitable ground."
• Barraford v. T & N Limited (2014). A Chapter 11 plan confirmation with a discharge and channeling injunction lifts the automatic stay, so 11 U.S.C. § 108(c) gave only 30 days to sue after that. A tolling letter between class counsel and the CCR did not cover plaintiffs who were not that firm's clients, and equitable tolling did not apply.

Minnesota

• In re Api, Inc. (2005). A party objecting to Chapter 11 plan confirmation must satisfy constitutional and prudential standing for each issue it raises, and § 1109(b) does not override that requirement. A § 524(g) asbestos trust plan that preserves insurers' pre-petition rights and substitutes the trust as insured does not impair those rights.

Mississippi

• Everitt v. Pneumo Abex, LLC (2009). A settlement agreement that set no express claim deadline implicitly required claims to be submitted by the date set for determining the total payable. The bankruptcy automatic stay does not automatically extend to a non-debtor co-defendant, so it did not suspend that deadline or the non-debtor's obligations.

Missouri

• Douglas v. Imerys Talc America, Inc. (2019). Venue in a removed action is governed by 28 U.S.C. § 1441(a), not § 1391, so a § 1406 motion cannot be used to dismiss or transfer a case removed to the district embracing the place where the state action was pending.

Montana

• Wells v. BNSF Railway Company (2023). Under Montana's comparative-fault statute, a defendant may not assign fault to an unsettled nonparty such as W.R. Grace, and must prove a settled party's negligence with expert testimony where the issues are beyond lay knowledge. The HMTA and FRSA do not preempt state-law claims over transporting asbestos-bearing vermiculite ore.

New Jersey

• Protopapas v. Whittaker, Clark & Daniels, Inc. (2024). A state-court receiver has only the powers given by the order appointing him. Absent plain language in the order or other authority displacing the board, the law of the state of incorporation controls who may file a bankruptcy petition for a corporation.
• In re Ltl Management LLC (2023). A substantial contribution claim under 11 U.S.C. § 503(b)(3)(D) and (b)(4) is narrowly construed and covers only non-duplicative services that directly and materially benefited the estate. It is not allowed for work that court-approved committee professionals were already doing or that mainly served individual claimants' interests.
• In re Ltl Management, LLC (2023). Under the Third Circuit's good-faith standard for chapter 11 petitions, a debtor must show financial distress that is immediate and apparent. A debtor that can meet its obligations through a funding agreement with a solvent affiliate has not shown it, and the best-interests exception in § 1112(b)(2) does not save a petition lacking good faith for that reason.
• In re Ltl Management, LLC (2023). A bankruptcy court may extend the automatic stay to non-debtors, or enjoin actions against them under § 105(a), where unusual circumstances exist, such as shared insurance and identity of interests. Here the court found a reasonable likelihood of reorganization at this early stage and could not make a bad-faith finding on the undeveloped record.
• In re Ltl Management, LLC (2022). A bankruptcy court may extend the automatic stay under § 362(a), or enjoin under § 105(a), state consumer-protection actions against nondebtors even where they fall within the § 362(b)(4) police-power exception, when unusual circumstances exist and the injunction factors are met.
• In re Ltl Management, LLC (2022). A bankruptcy court may extend the automatic stay, or issue a § 105(a) injunction, to protect non-debtors where unusual circumstances exist, such as a risk that the other litigation will harm the debtor's reorganization. A showing of risk above pure speculation can satisfy irreparable harm in that setting.
• In re Ltl Management, LLC (2022). A chapter 11 petition is dismissible for lack of good faith only if it serves no valid bankruptcy purpose or is filed merely for a tactical litigation advantage. Using a Texas divisional merger to create a debtor that seeks to resolve present and future talc claims through a settlement trust did not show bad faith.
• In re Ltl Management, LLC. (2022). A transferee bankruptcy court's predecessor order fixing a creditors' committee is law of the case that the U.S. Trustee cannot unilaterally override under § 1102. A bankruptcy court may review the U.S. Trustee's committee appointments under § 105(a) for arbitrary and capricious action and may disband a committee.
• N RE Ltl Management, LLC (2022). The automatic stay under § 362(a)(1) and (3) may be extended to non-debtors where unusual circumstances exist, such as an identity of interests, indemnification obligations, shared insurance, or risk to reorganization. A § 105(a) injunction is an alternative basis if § 362(a) does not independently support the extension.
• In re Duro Dyne National Corp. (2019). A bankruptcy court may appoint a debtor's nominee as future claimants' representative under § 524(g)(4)(B)(i) after notice, discovery and a hearing, without deferring to the nominee, and the appropriate standard is the 'disinterested person' standard of 11 U.S.C. § 101(14), not an 'appearance of impropriety' standard.
• In re GI Holdings, Inc. (2016). A building owner could not recover asbestos abatement costs from the former manufacturer in equitable indemnity or restitution where the manufacturer owed no duty to the tenants and the owner's abatement was routine maintenance rather than an immediately necessary response to a present hazard. The claims were also treated as recast time-barred tort claims.
• In re GI Holdings, Inc. (2014). A confirmed Chapter 11 plan binds creditors under res judicata, and a plan definition of "Claim" that includes any right to an equitable remedy discharges a late-asserted injunctive demand. A housing authority without regulatory power that seeks abatement costs acts as a creditor, so its injunction request is a dischargeable claim.
• Commissioner of Insurance v. Integrity Insurance Company (2012). Under N.J.S.A. 17:30C-28a, only claims that are 'absolute' (liability and value fixed by payment or judgment, standing on their own) may share in an insolvent insurer's estate. Grace's estimated asbestos claims were not absolute, and its bankruptcy did not change that.
• In re Congoleum Corp. (2009). Pre-petition settlement payments to claimants who retained no stub claims against the estate did not create unequal treatment under Combustion Engineering, but fees paid to claimants' counsel are subject to court approval as reasonable under 11 U.S.C. § 1129(a)(4). Dismissing a Chapter 11 case sua sponte without notice and a hearing on creditors' best interests was an abuse of discretion.
• In re Congoleum Corporation (2009). Pre-petition settlement payments to claimants who retained no stub claims against the estate did not violate the Bankruptcy Code's equal-distribution requirement, but a plan must provide for court approval of fees paid to claimants' counsel under § 1129(a)(4). Dismissal of the case without notice, a hearing or consideration of creditors' best interests was an abuse of discretion.
• In re Congoleum Corp. (2007). A § 524(g) plan must give the trust a majority of voting shares through a contingency that would operate while the shares still have meaningful value, and must treat similar asbestos personal injury claims in substantially the same manner. Separate classification and preferential treatment of pre-petition settling claimants violates that requirement.
• In re GI Holdings, Inc. (2005). Asbestos personal injury claimants hold Seventh Amendment and statutory jury trial rights that a § 502(c) estimation for distribution cannot strip, so a matrix that finally liquidates claims without a jury is rejected; the court may estimate aggregate liability and decide the legal validity of claims.
• Prudential Ins. Co. of America v. US Gypsum Co. (2001). A civil RICO claim accrues when the plaintiff knew or should have known of its injury, and a building owner who should have known of the potential asbestos hazard in its buildings more than four years before suing is time-barred. A prior state class settlement is given the preclusive effect it would have in the state that rendered it.

New York

• In re Johns-Manville Corporation (2022). An asbestos claim arises for bankruptcy purposes when the claimant is first exposed before the petition, not when the disease is diagnosed, so claims based on pre-petition exposure were discharged or channeled by the earlier plans. Notice in the subsidiary's bankruptcy satisfied due process even without a Future Claims Representative there.
• In re Johns-Manville Corporation (2020). Under federal bankruptcy law an asbestos claim arises at the time of first exposure, so a claim based on exposure that began before the bankruptcy petition is a pre-petition claim even if exposure continued afterward. Such a claim is subject to the plan's discharge and channeling injunction, and publication notice combined with the linked Manville proceedings satisfied due process.
• LaFLAIR v. Johnson & Johnson (2019). A removing defendant must show by clear and convincing evidence that there is no possibility the plaintiff can state a claim against the non-diverse defendant in state court, applying New York's lenient pleading standard. An affirmative defense such as the contract-specification defense that turns on unresolved facts does not meet that burden.
• In re Johns-Manville Corp. (2016). A person exposed to asbestos before the debtor's petition date holds a prepetition claim even if disease appears later. Such a claim against a Manville subsidiary is discharged by that subsidiary's plan and is also channeled to the Manville Trust under the Manville injunction, and notice by publication plus a future claims representative satisfied due process.
• In re Johns-Manville Corporation (2015). An injunction covering claims 'related to' an insurer's services for the debtor is unambiguous and broad, and it bars claims against the insurer that rest on its dealings with the debtor. A future claimants' representative gave future claimants constitutionally sufficient notice of the proceedings that produced the orders.
• US Fid. & Guaranty Co. v. American Re-Ins. Co. (1st Dept., 2012). Under a follow-the-fortunes clause, a reinsurer must accept its reinsured's good-faith allocation and settlement of covered losses and cannot second-guess them; collateral estoppel applies only to issues actually litigated and decided.
• Bernard v. Brookfield Props. Corp. (2011). A person whose asbestos disease had not appeared when a debtor's reorganization plan was confirmed did not lose her claims, because due process outweighs the plan's discharge language. A corporation that acquires another's assets can be liable as successor-in-interest only on certain grounds, and the defendants did not show these were absent.
• In re Quigley Company, Inc. (2011). A claim against a parent company as apparent manufacturer under Restatement (Second) of Torts § 400 rests on the parent's own use of its name on the product, not on its ownership of the debtor. Such a claim therefore does not arise by reason of ownership under 11 U.S.C. § 524(g)(4)(A)(ii) and cannot be enjoined by a channeling injunction.
• Garner v. Dii Industries, LLC (2010). A federal court cannot rule on the merits of a motion to dismiss without a pleaded factual basis for subject matter jurisdiction. A list of federal statutes with no supporting facts does not establish federal question jurisdiction, and diversity must be pleaded with facts about the parties' citizenship.
• In re Quigley Company, Inc. (2010). A plan is not proposed in good faith under 11 U.S.C. § 1129(a)(3) when the parent seeking a § 524(g) channeling injunction buys the votes needed for acceptance through side settlements. A § 524(g) injunction is fair and equitable only if the third party's contribution is consistent with its likely liability outside bankruptcy. The best-interests test also counts the claims that dissenting creditors keep against the non-debtor.
• In re Quigley Co., Inc. (2008). A person exposed to asbestos before the petition date holds a bankruptcy "claim" even if state law delays enforcement of the cause of action until a future event, so state tort reform statutes that defer unimpaired asbestos claims do not affect the right to vote on a plan.
• In re Quigley Co., Inc. (2007). Claims with the same legal rights against the debtor's estate may be classified together even if some holders can also look to a non-debtor for payment. Section 1123(a)(4) requires only approximate equality of treatment, and the court could not find unequal treatment as a matter of law from a non-debtor's separate settlement payments.
• In re Quigley Co., Inc. (2007). Bankruptcy courts may issue broad injunctions covering present and future claims against a non-debtor to preserve estate property such as shared insurance, but non-parties bound by such an injunction must be able to petition for relief from it.
• In re Dana Corp. (2006). Appointing an additional committee under section 1102(a)(2) is extraordinary relief, and the movant must show it is necessary for adequate representation, which courts decide by weighing factors such as the committee's ability to function, the nature of the case, added cost and the claimants' ability to participate without a committee.
• In re Quigley Co. (2006). A bankruptcy court has discretion to estimate unliquidated asbestos claims for voting so that voting power matches economic interests. The $1.00-per-vote method is acceptable only when it is harmless error, and claimants' contractual 90% reduction of their recovery can be reflected in a reduced vote.
• IN the Matter of United States Lines Inc. (2006). A bankruptcy court's rolling bar date order is interpreted as a claims-administration order rather than a statute of limitations, so the court may use New York's physical-manifestation approach to decide when injury manifested. Timeliness is a core issue decided without a jury, and the claimant bears the ultimate burden once the objector shows the claim is untimely.
• Matter of Midland Insurance Company (1st Dept., 2000). Under New York law, an excess asbestos liability policy covering an "occurrence" defined as continuous or repeated exposure is triggered by inhalation exposure during the policy period, whether first or later, but not by exposure "in residence" or manifestation.
• In re Waterman SS Corp. (1996). The claims bar date, not the plan confirmation date, decides whether an asbestos claim was discharged. A wrongful death claim is derivative and accrues when the underlying asbestosis claim accrued, and the claimants carry the burden of proving when their disease manifested.
• In re Keene Corp. (1994). A holder of a non-final judgment secured by a supersedeas bond can show cause under 11 U.S.C. § 362(d)(1) for stay relief to complete the appeal and then collect on the bond, where the debtor fails to show greater prejudice to itself or other grounds to deny relief.
• In re Waterman SS Corp. (1993). Seamen whom the debtor knew had manifested illness were entitled to actual personal notice of the bar date, while unidentifiable claimants could receive notice reasonable under the circumstances, such as publication. Claimants with no detectable signs of disease at the time of notice were not discharged.
• In re Prudential Lines, Inc. (1992). Under New York law, injury-in-fact during the policy period triggers coverage under a yearly P & I policy, and a policy deductible applies once per occurrence (the underlying event), not once per claim. Where medical evidence cannot apportion injury among triggered policies, each triggered policy is liable up to its limit.
• In re Waterman SS Corp. (1992). A claim arises when the acts giving rise to liability occur, so asbestos exposure before the petition creates a pre-petition claim. Discharge cannot be applied to known but unidentified future asbestos claimants who got only publication notice, because that violates Fifth Amendment due process.
• In re Joint Eastern & Southern Dist. Asbestos Lit. (1990). A federal court may enjoin pending state and federal suits against an insolvent asbestos personal injury trust, despite the Anti-Injunction Act, under the "in aid of jurisdiction" and "protect or effectuate judgments" exceptions, the All-Writs Act, and Bankruptcy Code section 105(a), to prevent inequitable distribution of limited trust assets.
• In re Johns-Manville Corp. (1989). A bankruptcy court retains post-confirmation jurisdiction to enforce a confirmed plan's channeling injunction and claims resolution procedures, and may enjoin asbestos suits filed in other courts against the debtors or the trust without meeting the strict Rule 65 standard.
• Kane v. Johns-Manville Corp. (1988). A creditor harmed by a reorganization plan may appeal, but may not assert the rights of future claimants or of other creditors who are already represented in the case or who accepted the plan. Voting-procedure irregularities that could not have changed the outcome of the vote are harmless error and do not defeat confirmation.