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Dept. of Justice objects to appointment of asbestos trust fund protector, calls for greater scrutiny

Federal Gov

By John Sammon | Sep 27, 2018


WASHINGTON D.C. (Legal Newsline)  – Officials of the U.S. Dept. of Justice on Sept. 26 objected to the appointment of Lawrence Fitzpatrick as a future claim representative (FCR) trustee to protect trust funding designed to help pay damages for future victims of asbestos exposure - stating the New Jersey-based attorney had potential conflicts of interest from relationships with plaintiff attorneys in asbestos litigation.

Fitzpatrick had been proposed for the post of trustee by officials of a New York-based sheet metal heating and air-conditioning company called Duro Dyne, which filed Chapter 11 bankruptcy in New Jersey in September. Duro Dyne has been involved in numerous court cases involving alleged asbestos exposure from the use of its products in recent years.

Fitzpatrick, experienced in handling asbestos litigation, served as executive director of the Center for Claims Resolution, an organization in New Jersey that has reportedly resolved more than 400,000 asbestos claims and whose purpose is to handle personal injury claims filed against its members - including asbestos producers or firms with products that contain asbestos.

Fitzpatrick couldn’t be reached for comment on the DOJ objection over his possible asbestos FCR appointment.

According to a DOJ release, this is the first time an objection has been raised by officials of the U.S. Trustee Program (USTP) to a proposed FCR candidate.

The FCR is responsible for representing the future interests of individuals who are not yet sick, but might become sick in the future from asbestos exposure in the workplace.

“In recent years, evidence has emerged that asbestos trusts lack the transparency and rigorous auditing necessary to prevent fraud, waste and abuse,” said Jesse Panuccio, DOJ principal deputy associate attorney general. “To best protect all victims, those appointed in asbestos cases should be held to the same conflicts prohibitions and standards of independence that are required of other fiduciaries (trust funds) under the Bankruptcy Code.”     

Clifford White, director of the USTP Executive Office, testified before a House Judiciary Committee this week. He told representatives the DOJ filed its one-of-a-kind objection to Fitzpatrick because his close connections to lawyers representing asbestos claimants may compromise his independence as FCR.

The USTP called for further discovery to determine if the candidate’s qualifications and connections in asbestos litigation are reasons for Fitzpatrick’s disqualification, or if he is capable of serving as an independent representative.

Officials stressed the importance of finding the right person.      

“The trust plan provides the FCR (trustee) with a long-term position that will continue long after the confirmation of a bankruptcy plan,” the DOJ report noted.

Panuccio said such “gaming” of the asbestos compensation system can bring wide-ranging harm to legitimately injured claimants who stand to collect less, while Medicare or medical assistance funding might not be reimbursed as required by law.

Section 524 (g) of the Bankruptcy Code creates protections for claims stemming from asbestos exposure. It accumulates funding to manage and pay the claims of victims who might not collect for years after their exposure.

The total cost of asbestos litigation in the U.S. analysts predict will reach approximately $200 to $275 billion involving more than 8,000 defendants and 700,000 claimants, the biggest single mass tort case in U.S. history.

A company may file a Chapter 11 bankruptcy to protect itself from lawsuits and establish trust funds to pay for current and future claims. Among hundreds of companies to do so include such major firms as Kaiser Aluminum Corp. Johns Mansville Corp., Owens Corning and Armstrong World Industries.  

The U.S. Trustee Program operates under the DOJ and is tasked with protecting the integrity of the bankruptcy system by case administration and litigation to enforce bankruptcy laws. The program has 21 regions and 92 field office locations across the country.    

       

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