CHARLOTTE, N.C. (Legal Newsline) - Garlock Sealing Technologies filed its Amended Plan of Reorganization in its bankruptcy proceeding on Thursday, addressing concerns from the official Committee of Asbestos Personal Injury Claimants about payment plans.
Garlock and the other remaining debtors, Garrison Litigation Management Group and The Anchor Packing Company, submitted their Amended Plan of Reorganization in U.S. Bankruptcy Judge George Hodges' Charlotte, N.C., courtroom.
The 11-article plan describes how the debtors plan on setting up a bankruptcy trust and how they intend to pay claimants.
The Committee of Asbestos Personal Injury Claimants' request to see the amended plan originated out of the debtors' request for establishment of a bar date. The committee moved to adjourn the motion for a bar date, arguing that it cannot take a position on the proposed bar date due to the debtors' plan of payment.
The debtors plan to pay settled asbestos claims in full, which could raise issues of "desperate treatment" between settled claims, allowed unliquidated claims and future claims, the committee argues.
Hodges agreed, continuing the debtors' motion for a bar date until the amended plan is filed.
According to the plan, claimants will be paid cash in full for claims and cancellation of existing equity interests for both Garlock and Garrison. All payments will take place after the effective date.
As for Anchor, a dormant entity that has not had any property or paid any asbestos-related claims in more than a decade, it will be dissolved and liquidated with no distribution of property to creditors.
The plan addresses four classes of asbestos personal injury claimants: current asbestos claimants, future asbestos claimants, pre-petition judgment asbestos claimants and settled claimants.
Pre-petition judgment claimants include those who obtained judgments against Garlock that are currently on appeal. After the effective date, these claimants will have the option of either settling their case or completing the appeal in state court.
If the judgment is affirmed by the appellate court, the award will be paid in full by the settlement facility up to the CRP value - or upper limit of the settlement facility's obligation for a particular claim - and the rest will be paid by Garrison from the litigation fund.
Claimants who allege asbestos-related peritoneal mesothelioma, lung cancer, laryngeal cancer or asbestosis will have their claims processed and paid under expedited review and will receive payments of $200 after providing appropriate proof of asbestos-related disease resulting from asbestos exposure.
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 and the released parties will therefore be protected by the parent settlement enforcement injunction, the plan states.
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 against Garrison.
"Their rights in allowance litigation pursuant to the Bankruptcy Code are fully preserved by this plan, in the form of the liquidation option," the plan states.
The Claims Resolution Procedures 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, and therefore voluntarily waives their rights to litigation, including the right to jury trial.
The settlement facility will be a trust, which will be managed by a trustee, the plan explains.
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, or CMO, will govern litigation claims, preserving the claimants' rights in allowance litigation.
All pre-trial proceedings will take place in the bankruptcy court. Claimants entitled to trial will then be referred to district court.
"The bankruptcy court shall retain the fullest and most extensive jurisdiction permissible, including that necessary to ensure that the purposes and intent of the plan are carried out," the plan states.
"The CMO contains procedures designed to prevent 'the manipulation of exposure evidence by plaintiffs and their lawyers,' which the bankruptcy court found before the petition date 'had a profound impact on a number of Garlock's trials and many of its settlements such that the amounts recovered were inflated,'" it added.
Hodges ruled in January that the value of previous settlements and awards against Garlock were inflated because asbestos attorneys were withholding their clients' exposure evidence in order to maximize recovery.
Garrison will have sole discretion on settlements and will not be obligated to make settlement offers.
Claimants also have the option to join the Convenient Class Claims, which reduces any unsecured claims against Garlock or Garrison to $100.
Aside from the specified classes of claimants, the plan states that the debtors will have no additional or further obligation for asbestos claims or expenses.
On the effective date, without any further action of any entity, the settlement facility shall assume all liabilities, obligations, and responsibilities for all settlement option claims, the plan explains.
The plan also forbids the litigation fund from being decreased below $1 million.
As for equity interests, the plan allows for the transactions and agreements between the parent and debtors to be canceled and new equity interests will be distributed to a newly formed subsidiary of EnPro Industries, Inc.
After the settlement facility and litigation fund have both been established and funded, the debtors are permitted to operate their businesses without supervision or approval of the bankruptcy court.
The plan also addresses the debtors' current actions against certain entities, saying they will continue to investigate whether to pursue potential causes of action against other claimants or entities.
"The reorganized debtors shall have and retain any and all claims, causes of action, including the retained causes of action, unknown causes of action or defenses against any parties," the plan states.
From Legal Newsline: Reach Heather Isringhausen Gvillo at email@example.com