Report of the Special Committee of Manville's Board Regarding Asbestos Litigation (1982)

The three-page report of the board's Special Committee on asbestos litigation, signed by J. P. Schroeder (chairman), William F. May and William D. Tucker, Jr., and dated by hand 8/25/82. It describes the committee's meetings of August 16 to 25, 1982 with the company's lawyers, its Litigation Analysis Group, the epidemiologist Dr. Alexander Walker and Price Waterhouse partner Robert O. F. Bixby, who advised that the standards of the accounting rule FASB 5 "had been sufficiently satisfied to require that a reserve be established of the low end of the estimated range of liability." The committee recommended "the immediate filing of a petition in Chapter 11 as the action best calculated to conserve the Company's assets and businesses."

What it shows

The committee's counsel, Davis Polk & Wardwell, gave the members the company's litigation and insurance analyses and the epidemiologists' report on claims expected over 1982 to 2002. At its first meeting, on August 16, the committee went over the projections with Dr. Walker, Marc Victor of Litigation Risk Analysis and Manville's legal and financial officers. On August 17 it took up the company's cash position, the possible need for secured borrowing and the effect a large reserve would have on the covenants in its bank loan and public debt. Bixby's advice that a reserve was now required (under Statement No. 5 of the Financial Accounting Standards Board, the rule on recording losses that can be reasonably estimated) answered the question the Legal Department had put to the board three weeks before. At the same meeting Michael Crames of Levin & Weintraub, "reorganization specialists," briefed the members on Chapter 11.

On August 18 the committee weighed Chapter 11 against carrying on "with a write off of such size as to require bank consent to avoid default," and "A consensus was developed that Chapter 11 was the course more likely to result in maintaining viable business operations and preservation of assets." Senior Vice President G. Earl Parker was authorized that day to retain Levin & Weintraub and prepare a filing. A fourth member, C. J. Zwick, resigned without attending. The board adopted the recommendation at a special meeting on the evening of August 25.