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Asbestos and Mass Tort Claims
Asbestos-related bankruptcies are prevalent for various reasons, including expense of traditional tort litigation, lack of either state or federal procedures to handle mass litigation, disputes between insurer and insured, and need for many companies' creditors and shareholders to achieve certainty with large current and contingent asbestos liabilities. Bankruptcy remains an attractive alternative and sometimes last resort because section 524(g) of the Bankruptcy Code provides a mechanism for companies faced with overwhelming asbestos liability to resolve current and future asbestos claims by channeling them to a trust, thereby allowing the effected company to avoid what could result in an inevitable liquidation. One necessary component of this channeling mechanism is section 524(g)(4)(B)(i) of the Bankruptcy Code which requires the Bankruptcy Court appoint “a legal representative for the purpose of protecting the rights of persons that might subsequently assert [asbestos claims] …” 11 U.S.C. ' 524(g)(4)(B)(i), commonly referred to as a future claimants' representative (FCR).
Future Asbestos or Mass Tort Claims
Since the enactment of section 524(g) of the Bankruptcy Code, courts in numerous jurisdictions have appointed representatives for future asbestos or mass tort claimants. Specifically, FCRs have been appointed in, inter alia, the Chapter 11 cases of Combustion Engineering, Inc., Owens Corning, et al., Armstrong World Industries, Inc., Pittsburgh Corning Corp., J.T. Thorpe, Shook and Fletcher, Federal-Mogul Global Inc., T&N Limited, et al., Fuller-Austin Insulation Co., Babcock and Wilcox, Congoleum Corporation and Mid-Valley, Inc. Prior to the codification of the channeling mechanisms and the appointment of an FCR, courts faced with mass-tort bankruptcies recognized the need for an FCR. See, e.g., In re Johns-Manville Corp., 36 B.R. 743, 748-49 (Bankr. S.D.N.Y. 1984), aff'd, 52 B.R. 940 (S.D.N.Y. 1985) (holding that the interests of future asbestos claimants are affected by the bankruptcy so as to entitle them to party-in-interest status and a separate representative), quoted in In re Amatex Corp., 755 F.2d 1034, 1042-43 (3d Cir. 1985) (reversing lower court's denial of debtor's application to appoint futures representative for future asbestos victims, concluding that future claimants are sufficiently affected by reorganization proceedings to require a voice through their own representative, given adverse interests of other parties); see also In re UNR Indus., Inc. 46 B.R. 671, 675 (Bankr. Ill. 1995) (court granted application because such claimants have a stake in the outcome of the cases entitling them to party-in-interest status); In re Eagle-Picher Indus., 144 B.R. 69, 71 (Bankr. S.D. Ohio 1992) (“In mass tort cases, to have a meaningful reorganization from which a viable entity emerges, it has come to be accepted that someone serve as a guardian, a representative of future claimants”).
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