CHARLOTTE, N.C. (Legal Newsline) – The Asbestos Claimants Committee has asked asbestos claimants to reject Garlock Sealing Technologies’ Amended Plan of Reorganization in an objection filed Thursday, calling the plan “unfair” and arguing that it does not ensure full recovery for mesothelioma claimants.
“The ACC believes that the plan will prove unconfirmable,” the objection stated. “Among its other flaws, the plan would channel both current and future asbestos claims to a capped fund, and would provide extraordinary injunctive relief and third-party releases without complying with the requirements of Section 524(g) of the Bankruptcy Code, and in violation of other aspects of the bankruptcy laws and principles of equity.”
Plaintiff attorney Trevor W. Swett III of the Caplin & Drysdale law firm filed the Objection of the Official Committee of Asbestos Personal Injury Claimants to the Proposed Disclosure Statement for Debtors’ First Amended Plan of Reorganization on Aug. 14.
The committee suggested that asbestos claimants reject the plan, stating that it “disagrees vehemently with the debtors’ one-sided, distorted and revisionist story.”
The debtors the committee is referring to includes Garlock, Garrison Litigation Management Group and The Anchor Packing Company, which submitted their Amended Plan of Reorganization as part of Garlock’s bankruptcy proceeding in Judge George Hodges’ courtroom on May 29 in the United States Bankruptcy Court for the Western District of North Carolina.
The 11-article plan describes how the debtors plan on setting up the bankruptcy trust and how they intend to pay claimants.
A settlement facility for the debtors will be funded with $245 million in cash intended for paying claims and expenses. The Reorganized debtors will contribute $215 million in cash. As for the remaining money, the parent settlement will contribute $30 million.
The parent settlement, if approved, is a “settlement of any causes of action held or potentially held by any one of more of the debtors against any one or more released parties,” the plan explains.
In exchange for the $30 million contribution, the debtors will release all claims against the “released parties,” who will therefore be protected by the parent settlement enforcement injunction, the plan states.
However, the committee believes that the bankruptcy court’s estimate of Garlock’s liability for mesothelioma claims is “unrealistic” and “far too low” to properly compensate asbestos claimants.
When Hodges found Garlock’s asbestos liability amounted $125 million – which was roughly $1 billion less than what plaintiffs’ representatives felt was proper – he concluded that the amount of previous awards and settlements paid by the gasket manufacturer in the tort system were not reliable because plaintiffs’ attorneys had withheld exposure evidence in order to maximize recovery against Garlock.
“This occurrence was a result of the effort by some plaintiffs and their lawyers to withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants’ asbestos trusts until after obtaining recoveries from Garlock,” Hodges wrote.
Garlock brought evidence to the bankruptcy hearing demonstrating that the last 10 years of its participation in the asbestos litigation system “was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.”
“It appears certain that more extensive discovery would show more extensive abuse,” Hodges continued. “But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive.”
In its objection, the committee disputed the debtors’ allegations that the plaintiffs’ attorneys suppressed evidence of additional asbestos exposures, resulting in inflated case settlement values for Garlock.
Asbestos claimants are not guaranteed full payment for their claims according to the proposed plan, and are, therefore, impaired by the plan and entitled to vote to accept or reject it, the committee claims.
The plan addresses four classes of asbestos personal injury claimants: current asbestos claimants, future asbestos claimants, pre-petition judgment asbestos claimants and settled claimants.
According to the plan, claimants falling into the four provided categories will have the opportunity to choose either the litigation option or the settlement option. Litigation is possible for claims arising against Garrison.
The Claims Resolution Procedures, CRP, will prescribe predetermined settlement offers for those who choose to settle based on specific factors for varying asbestos cases.
Claimants who choose the settlement option will be required to submit their claims to the settlement facility – or trust – and, therefore, voluntarily waives their rights to litigation, including the right to jury trial.
Claimants who are unsatisfied with their settlements and argue the CRP was improperly applied to their claims will have the option to appeal to binding arbitration.
However, those who choose the litigation option will be pursuing litigation against Reorganized Garrison. The case management order will govern litigation claims, preserving the claimants’ rights in allowance litigation.
Garrison will have sole discretion on settlements and will not be obligated to make settlement offers.
The committee argues the proposed claims resolution procedures and case management orders are skewed in favor of Garlock and unfair to asbestos claimants, in that they would impose stringent requirements that are not based on applicable law and are designed to insulate Garlock from legitimate claims.
In other words, the committee claims the standard for payment to asbestos claimants differs from the standards for payment in the tort system.
“Those standards would be far more onerous for asbestos claimants than rules applicable in the tort system and have been designated for Garlock’s unilateral and undue advantage,” the objection states.
Furthermore, the committee explains that the CRP prepared a complicated formula for calculating settlement values for claims, meaning “a vast majority” of mesothelioma claimants will receive settlement offers lower than the average $75,000 Garlock paid to settle similar claims in the tort system.
“While the CRP state that the maximum settlement offers for a pleural mesothelioma claims under expedited review is $200,000, the criteria used to calculate the settlement offer would result in a significantly lower settlement offer for virtually all claims,” the Committee argues.
Lastly, the committee alleges the parent settlement and non-debtor third party releases and the related injunction are unfair to asbestos claimants and impermissible under the bankruptcy code.
“It was not negotiated at arm’s length but, rather, was negotiated between commonly controlled corporations with no participation by asbestos claimants or the ACC,” it claims.
Therefore, the committee is not convinced the parent company would provide fair consideration for the individual claimants’ claims against the debtors and the intercompany claims that would be extinguished under the plan.
Additionally, the committee argues Garlock could have easily provided the additional $30 million itself, suggesting the parent company had its own agenda.
“The only reason for Coltec to make the contribution directly rather than indirectly through Garlock is to create a pretext for releasing Coltec and Garlock’s other affiliates from liability to the individual asbestos claimants and to the estates,” the committee stated. “The asbestos claimants would be given no net incremental benefit for relinquishing their claims against Garlock’s affiliates.”
From Legal Newsline: Reach Heather Isringhausen Gvillo at email@example.com