WR Grace Exits Bankruptcy After 13 Years, Was it Worth the Wait? You Decide

After ducking asbestos claims for 13 years, W.R. Grace in February of this year finally emerged from Chapter 11 bankruptcy.  W.R. Grace was one of the worst polluters on Earth. At the time they filed, they were facing over 100,000 personal injury and death cases, primarily stemming from the use of fireproofing and plaster products.  W.R. Grace gained notoriety as the company which contaminated the tiny mountain town of Libby, Montana with tremolite asbestos from the mining of asbestos laced vermiculite.

At the time they filed, in 2001, WRG stock was around $1.50 a share. When they emerged from bankruptcy protection 13 years later, the stock was selling at $92 a share. It pays to duck responsibility? You decide.

Part of its court-approved bankruptcy reorganization plan was the establishment of two trusts to pay personal injury claimants and property owners.  The trusts are funded by more than $4 billion in cash, stock warrants, insurance proceeds and other sources.

This August, the trust began accepting Proof of Claim forms. According to their Trust Distribution Procedures, (basically their instruction manual) the Scheduled Average Value for a claimant diagnosed with mesothelioma is $180,000. The value for asbestos-related lung cancer is $42,000. However, the actual payment percentage is 26% of the Scheduled Value.  

A claimant is free to seek a value greater than the Scheduled Value by requesting the Trust perform an Individual Review of the claim. However, this does not guarantee a greater value or even an equal value as the Scheduled Value. The Maximum Value for this type of review for a mesothelioma claim is $450,000 before applying the liquidated payment percentage of 26%. For an asbestos-related lung cancer, the Maximum Value of an Individual Review claim is $95,000

To qualify for payment, a claimant must provide credible medical and exposure evidence as defined in the instruction manual (TDP).

The claims are paid on an impartial first-in-first-out basis.

Now, if a claimant was unfortunate enough to have filed a claim prior to April 2, 2001 against WRG as a part of a lawsuit but was never paid, they would have to follow the conditions outlined in the TDP, but the claim would be reviewed sooner.

The WRG bankruptcy is the longest in a long line of bankruptcies filed by the asbestos superpowers.  It's a sordid tale, and a long and desolate trail, but for those with the stomach, and the patience, here's a timeline. As they say, justice delayed is justice denied. What do you think? Will MBA students be studying the WRG bankruptcy as an example of what not to do in corporate america? Or will they be looking at it as a brilliant business move that saved the company billions and enriched thousands of shareholders?

You decide.

In April of 2001, WRG is named in more than 325,000 asbestos-related personal injury lawsuits.  They soon announce they have filed for voluntary Chapter 11 bankruptcy protection.

In May of 2001, WRG gets approval from the U.S. Bankruptcy Court to receive a $250 million loan from Bank of America, to help support operations.

In February of 2003, WRG asks the U.S. Bankruptcy Court to allow an extension of its $250 million loan agreement with Bank of America for another three years.

In October of 2004, WRG makes a request to delay filing a reorganization plan, hoping to continue negotiations with creditors.  WRG also is notified they are a target of a federal grand jury investigation, facing indictments on several charges including interfering with an EPA investigation, violating the Clean Air Act and placing asbestos materials in schools and local residences and conspiring to conceal the resulting health problems.

In November of 2004, WRG files a reorganization plan with a Delaware court which is soon approved.

In January of 2005, WRG files an amended bankruptcy protection plan with a Delaware court.

In September of 2005, WRG opens a new China headquarters in Shanghai, which consolidates four other offices in the country.

In December of 2005, WRG announces they have spent $20 million in the year 2005 on legal defense costs.

In February of 2006, WRG announces it will open a new manufacturing facility, costing $20 million, in Mt. Pleasant, Tennessee.

In April of 2008, WRG reaches a tentative settlement on all current and future asbestos-related claims, worth $2 billion.

In January of 2011, WRG latest bankruptcy reorganization plan is approved by Judge Judith Fitzgerald in Wilmington, Delaware.

In January of 2012, WRG’s bankruptcy reorganization plan is approved by a judge of the U.S. District Court.

In November of 2012, WRG announces it will pay cash, not stock, to settle a larger share of the asbestos-related injury claims against the company.

In December of 2012, WRG announces its total payments to date with its bank lenders, including interest is at $1.1 billion dollars.

In February of 2014, WRG emerges from bankruptcy protection.

The Wall Street Journal provided an excellent WRG trip summary.

WSJ highlights: 

• The original bankruptcy judge, Alfred Wolin, was ordered off the case under fire from distressed-debt investors who fretted he was too friendly with the asbestos plaintiff’s camp.
• A criminal indictment of the company and some executives, accused of knowingly allowing dangerous asbestos contamination to spread. WRG and its executives beat the charges, after a trial before a jury in Montana.
• Some dark comedy, such as the asbestos-disposal solution WRG pursued for years in a Minneapolis neighborhood: Advertise asbestos-contaminated material as “free crushed rock” and invite the neighbors to come haul it away to decorate their lawns, firm up their driveways. WRG cleaned up the contamination.

Was it all worth it?  Earlier this month, WRG showed off its new 90,000-square-foot global headquarters building along with several laboratories at its 160-acre Columbia, Maryland campus.

You decide.

Asbestos Bankruptcy Trust Update for October 22, 2010

Leslie Controls on the Fast Track to having its “Pre-Packaged” Bankruptcy Plan Approved­Could Begin Paying Claims by Early 2011

Leslie Controls, Inc., a wholly-owned subsidiary of CICOR International, Inc., filed for Chapter 11 bankruptcy protection in July 2010 citing overwhelming liabilities for current and future asbestos injury claims.

Since the early 1900’s, Leslie was a major manufacturer of industrial water heaters and steam control systems. Leslie was a large supplier of valves and other steam equipment to the United States Navy during World War I and World War II. Leslie’s products, which were often equipped with asbestos gaskets, insulation and packing, were responsible for exposing thousands of Americans to harmful asbestos fibers.

Upon filing for Chapter 11, Leslie received temporary immunity from all pending and future lawsuits brought by asbestos illness victims. Leslie will be entitled to permanent immunity upon certification of its bankruptcy plan by the bankruptcy court and approval by a Federal District Court. The one consolation to asbestos injury victims is the requirement that Leslie’s bankruptcy plan provide for the funding of a trust and a system for compensating claimants based on factors including the severity of their illness.

Leslie made substantial progress toward its emergence from bankruptcy when it obtained the asbestos claimant votes necessary for approval of its bankruptcy plan earlier this month. For the plan to be affirmed by the courts, bankruptcy law requires approval by at least 75 percent of current asbestos claimants. The vote on Leslie’s plan was completed on September 27, 2010, and on October 8, 2010 the balloting agent reported to the U.S. Bankruptcy Court that more than 75 percent of claimants had voted in favor of the plan.

Based on the progress to date, CIRCOR is targeting the plan’s affirmation by the courts and Leslie’s emergence from bankruptcy for the fourth quarter of 2010. Accordingly, it is conceivable that Leslie’s bankruptcy trust could begin processing claims by early 2011.

If the trust begins paying injury claims within a year of Leslie’s filing for bankruptcy, this would rank as one of the faster completions of this process among all asbestos bankruptcy trusts. By comparison, of the nine other companies which currently have proposed bankruptcy trusts pending approval, one has been in bankruptcy for over ten years, two over nine years, and another two over six years.

Leslie’s progress can be attributed to its use of a “Pre-packaged” bankruptcy plan. As compared to other bankruptcies, where the company files and thereafter begins negotiating a plan of reorganization with creditors, a pre-packaged approach involves negotiating a plan before the company files bankruptcy. Under a pre-packaged approach, the company is able to negotiate with creditors under less formal conditions, often behind closed doors, and deliver a plan of reorganization satisfying applicable rules at the same time the company files bankruptcy.

Check back often to Mesothelioma Bytes for breaking news about the Leslie Trust and other active and pending asbestos bankruptcy trusts.

Also, for information on how asbestos bankruptcy trusts came to exist, how trust claims are processed and the current status and future outlook of these trusts, see our comprehensive guide to asbestos bankruptcy trusts entitled: “Asbestos Bankruptcy Trusts: The Good, The Bad And The Ugly.”

Worthington Law Firm Announces New Guide to Asbestos Bankruptcy Trusts

“Asbestos Bankruptcy Trusts: The Good, The Bad And The Ugly”

Since the early 1980’s, companies responsible for inflicting asbestos-related illness on hundreds of thousands of Americans have sought to limit or escape legal liability through filing Chapter 11 bankruptcy.

By filing Chapter 11, a company is given immediate immunity from lawsuits filed by the victims of its asbestos products. The company is then given many years to satisfy a number of legal requirements while the victims, many of whom do not have the luxury of time, are forced to wait. Upon meeting the requirements, the company is granted permanent immunity from lawsuits filed by all past and future victims, and is able to emerge from bankruptcy and continue doing business as usual.

The one consolation to asbestos illness victims is the requirement that the company pool assets and insurance proceeds and place them in a trust to compensate past and future victims. The trust establishes guidelines dictating the amount of compensation to be paid to claimants based primarily on severity of illness. While it is not necessary for victims to appear in court or provide testimony, the amount received from the trust is often far less than what would have been received if the company could be sued in a lawsuit.

Despite their many shortcomings, asbestos bankruptcy trusts are becoming an increasingly important component of the compensation available to victims of asbestos disease. This is due to a continuing decrease in the number of viable companies that can be sued in court and a continuing increase in the number of companies filing Chapter 11 bankruptcy.

In order to aid in the understanding of how asbestos bankruptcy trusts came to exist, how trust claims are processed and the current status and future outlook of these trusts, we have assembled a comprehensive guide to asbestos bankruptcy trusts entitled: “Asbestos Bankruptcy Trusts: The Good, The Bad And The Ugly.” Click here to review this helpful resource and continue to visit Mesothelioma Bytes for the latest news on asbestos bankruptcy trusts.

If you have any questions, or would like to learn more, please contact us at info@rgwpc.com or 1-800-931-9399.

Court Rejects Pfizer’s “Bad Faith”

Court Rejects Pfizer’s “Bad Faith” Attempt to Limit Liability to Asbestos Victims

Many of our clients, as well as thousands of other victims of asbestos disease, were exposed to asbestos products manufactured by a company called Quigley. Because of legal maneuvering on the part of Quigley's parent company, pharmaceutical giant Pfizer, Inc., these families have been forced to stand in line and wait patiently for the justice they deserve. Here's the latest in Pfizer's lawyers attempt to delay, obfuscate, duck, bob and weave.

Earlier this month, a New York bankruptcy judge rejected the latest attempt by Pfizer, Inc. to shake off an estimated $900 million worth of asbestos damages through a Chapter 11 bankruptcy plan for its Quigley unit, which manufactured asbestos containing products from the 1940’s through the 1970’s.

Judge Stuart M. Bernstein refused to confirm Quigley's fourth Chapter 11 bankruptcy reorganization plan on the grounds it would run out of money within five years of paying claims for asbestos injuries and was unfair to some of the most seriously injured asbestos claimants. Judge Bernstein found that Pfizer, the architect, funder and chief beneficiary of Quigley's Chapter 11 plan, engaged in "bad faith" vote manipulation and should not enjoy the benefit of a confirmation ruling that would shield it from damage claims arising from Quigley products.

A maker of “Insulag”, “Panelag” and “Damit” refractory products for iron, steel, power generation, petroleum and other industries, Quigley was acquired by Pfizer in 1968. By 2003, it was out of operation, facing $1.2 billion worth of claims for asbestos damages, with more expected in future decades. In 2004, Pfizer filed for Chapter 11 bankruptcy protection on behalf of Quigley, part of what Judge Bernstein found was a bad faith scheme to "divide and conquer" law firms that represent people with asbestos injuries.

Quigley is one of many companies that resorted to Chapter 11 protection in order to get a reprieve from asbestos injury claims, and gain bargaining advantage with plaintiff's firms. Asbestos bankruptcy plans are generally designed to shield a company from product liability lawsuits by diverting the claims to a trust funded with cash, stock, insurance proceeds and other assets earmarked to cover the anticipated cost of current and future injury claims.

According to Judge Bernstein, Pfizer's $216 million contribution to the Quigley bankruptcy trust was far less than the benefit the company would obtain if the Quigley Chapter 11 plan was confirmed: immunity from more than $900 million in product liability claims.

Judge Bernstein’s ruling will force Pfizer into renewed negotiations if it wants to preserve its immunity from personal injury claims brought by persons injured by Quigley’s asbestos products. At the time it filed for bankruptcy protection in 2004, Quigley had been hit with 411,100 asbestos personal-injury claims. Experts estimated another 261,567 lawsuits would be filed in the coming decades.

If new plan is not approved, the Chapter 11 bankruptcy could be dismissed, allowing all of the pending and future lawsuits against Quigley/Pfizer to proceed.