In re Whittaker Clark & Daniels Inc, Third Circuit
A federal appellate court ruled in favor of Whittaker, Clark & Daniels Inc. (“WCD”), a company that processed and distributed asbestos-containing talc and filed for bankruptcy after facing approximately 2,700 asbestos-related lawsuits from victims across the country. The court addressed two main issues and sided with the company on both.
Court Upholds WCD’s Bankruptcy Filing
First, when a South Carolina state court appointed a receiver to take control of WCD following a $29 million jury verdict for a mesothelioma victim, WCD’s board filed for bankruptcy without the receiver’s permission. The appeals court, however, ruled that this bankruptcy filing was valid because the South Carolina court could not strip WCD, a New Jersey corporation’s board of its authority to make corporate decisions like filing for bankruptcy. The receiver needed to go through New Jersey courts to gain that authority to replace the board.
Court Rules Successor Liability Claims Belong to Bankruptcy Estate
Second, the appeals court held that successor liability claims belong to the debtor, WCD. When WCD sold its business to Brenntag in 2004, victims of asbestos exposure from WCD’s talc sued Brenntag based on, among other theories, “product line liability” (a legal theory positing that when a company buys another company’s manufacturing business and keeps making the same products, it can be held responsible for injuries caused by the original company’s defective product).
The court held that because the talc victims seek to impose WCD’s liability onto Brenntag solely due to its status as WCD’s successor, and not because of any particularized injury that can be directly traced to Brenntag’s wrongdoing, these successor liability claims are “general” to all creditors and are like assets that belong to the bankruptcy pot rather than to individual victims.
What the Decision Means for Asbestos Claimants
As a result, individual victims cannot independently pursue successor liability claims but must rely on the bankruptcy trustee to pursue these claims or settle them. This doesn’t mean victims get nothing: the bankruptcy estate has a legal duty to maximize value for all creditors, including the victims, and any settlement must be approved by the Bankruptcy Court.
The appeals court noted that WCD has recently sought approval from the Bankruptcy Court to settle the successor liability claims for approximately $535 million. The Bankruptcy Court decision remains pending.
Maura Kolb on Asbestos Claims in Bankruptcy Estates
Maura Kolb, Managing Attorney of The Lanier Law Firm’s Asbestos Resolution Practice, comments on the Third Circuit’s decision and how bankruptcy proceedings impact asbestos claims:
“Asbestos bankruptcies are designed to address the claims of thousands of individuals and families affected by exposure. In cases like Whittaker, Clark & Daniels, where successor liability claims become part of the bankruptcy estate, the focus shifts to ensuring those claims are properly managed and that available assets are maximized for the benefit of all affected claimants.”
About The Lanier Law Firm’s Asbestos Trust Fund Practice
The Lanier Law Firm’s Asbestos Resolution Practice is dedicated to helping individuals and families navigate the asbestos trust fund claim process. Led by Managing Attorney Maura Kolb, the practice has a dedicated team that works with clients to identify potential asbestos trust, prepare and file claim submissions, and help pursue compensation from bankrupt companies.
The Lanier Law Firm is a nationwide asbestos and mesothelioma litigation firm representing clients in complex asbestos matters involving a wide range of exposure sources and products.
The firm’s experience with asbestos lawsuits, trust fund processes, and available compensation options allows its attorneys to help families understand the different legal options that may be available after an asbestos-related diagnosis.
If you or a loved one has been diagnosed with mesothelioma or another asbestos-related illness, contact The Lanier Law Firm to learn how we can help.