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Approved Congoleum Bankruptcy Plan Puts All Asbestos Claims in Same Boat
Mary Pat Gallagher
New Jersey Law Journal
July 21, 2010
After nearly seven years and more than a dozen failed attempts, a reorganization plan allowing Congoleum Corporation to emerge from bankruptcy has finally met with a federal judge’s approval.
The Chapter 11 plan, approved June 7 and effective July 1, establishes a fund to pay an estimated 100,000 plus asbestos claimants. Congoleum’s insurers — whose refusal to cover the mounting volume of those claims triggered the bankruptcy — are to contribute $253 million, and the reorganized Congoleum has pledged 50.1 percent of its equity.
All asbestos claimants — even those who agreed to settle before the bankruptcy case was filed on Dec. 31, 2003 — are placed in the same class and their claims are to be processed through the plan trust and resolved in the same manner.
In an opinion issued Monday, U.S. District Judge Joel Pisano in Trenton said the single-class placement is consistent with In re Combustion Engineering, 391 F.3d 190 (3d Cir. 2005), which held that a pre-bankruptcy settlement with some asbestos claimants violated the Bankruptcy Code’s requirement of equality of distribution among creditors. That ruling changed the landscape for resolving mass claims in the bankruptcy context.
The approved Congoleum plan wiped clean a series of settlements with various groupings of claimants both before and during the bankruptcy case.