Rejection of Garlock bankruptcy plan by asbestos victims
The committee of 12 asbestos personal injury claimants, represented by their attorneys, in the ongoing bankruptcy case of Garlock Sealing Technologies (GST) is urging asbestos victims to reject the company’s second amended reorganization plan believing that the plan does not provide enough money to compensate future claimants and is also not in compliance with Congress’ bankruptcy code for asbestos-related reorganizations. The first reorganization plan was initially rejected by the bankruptcy court in 2013.
Before filing for bankruptcy protection in 2010, GST defended itself against the litigation, denying that the asbestos in its products were a health hazard. However, the committee’s official court filing, showed that GST “paid or committed to pay $1.366 billion,” for asbestos-related claims between 1975 and June 5, 2010. There are more than 100,000 active claims still pending. As per the committee GST’s present and future asbestos liability is $1.26 billion. Contrary to this, a U.S. District Court judge sided with GST in 2014, and ordered a significantly lower liability of $125 million. See In re Garlock Sealing Techs., LLC, 504 B.R. 71 (2014).
All the identifiable asbestos claimants, who already should have received a solicitation package that includes a voting ballot, will vote on the new plan, for which votes are likely to be returned by October 6, 2015. This also marks the deadline for filing all asbestos-related claims against GST to be considered valid, with an exception to asbestos-related injuries diagnosed after August 1, 2014. Reportedly, a court-appointed future claimants’ representative (FCR) will support and vote to accept the plan.
Under the plan, a $327.5 million settlement facility will be established to pay current and future claims, accompanied by a $162 million litigation fund that will be available over the next 40 years and prohibiting any future filing of asbestos-related claims against GST. Current and future claimants will further have an option of accepting a pre-arranged settlement on a variety of claims, or be able to move to litigation that comes with various restrictions. GST would not be responsible for anything beyond the pre-arranged total value of the plan.
However, the committee is of the opinion that the capped amount will be inadequate to pay the eligible claimants, either through settlement or litigation judgment.
Another issue now is who can vote and how the process would work, particularly with those represented by the FCR. The plan is scheduled for a consideration of confirmation by the Western District of U.S. Bankruptcy Court in Charlotte, North Carolina on June 20, 2016.