Trust Fund for Federal Mogul's Asbestos Bankruptcy Enables Business as Usual

Future Asbestos Claims to be Paid from Bankruptcy Trust

January 29, 2008 - After a six year period, Federal Mogul emerged from bankruptcy last month by establishing a trust fund to pay out pending and future asbestos claims against the company. Southfield-based Federal Mogul entered Chapter 11 bankruptcy back in October 2001, in response to the thousands of asbestos claims it was facing at the time. Automotive workers, such as brake mechanics, were exposed to asbestos through their work with asbestos-containing brake parts, gaskets and other automotive parts made by companies acquired by Federal-Mogul in the 1990s. Almost 400,000 asbestos claims were filed by automotive workers suffering from asbestos-related diseases such as asbestosis, lung cancer and mesothelioma.

Federal Mogul faced hundreds of millions of dollars in liabilities and strategized, under the Chapter 11 plan, to create an asbestos bankruptcy trust fund. In essence, Federal Mogul set up The Federal-Mogul Asbestos Personal Injury Trust and used its bankruptcy status to deal with asbestos claims and cap liability. Today, asbestos attorneys and their clients, including future claimants have to file claims against the settlement trust fund rather than against Federal Mogul. Now, it will be business as usual for Federal Mogul "ending one of the longest and most expensive bankruptcy reorganizations in auto history." (Crain's Detroit Business, December 28, 2007)

Asbestos Bankruptcy - How Does it Protect Companies and Affect Asbestos Claimants?

Recently, a few notable companies heavily involved in chemical and asbestos litigation such as WR Grace, Congleum Corp. and Federal Mogul, filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Many people assume that bankruptcy means "going out of business," when in reality, it is merely a "reorganization," so that a company may restructure its debt and resolve liabilities such as asbestos suits. A bankruptcy court must approve a plan for reorganization. As a result, asbestos claimants may have to wait to receive any settlements for their asbestos-related injuries for as long as five to six years while the plan is developed and approved by the courts. According to an article, When Bankruptcy Means 'Business as Usual,' "When most people hear that a company is going bankrupt, they think liquidation of assets, massive layoffs, and shutting down the business. With asbestos bankruptcies this is the very rare exception. Most 'bankrupt' asbestos companies, especially the larger corporations typically offered as examples of asbestos-induced economic havoc, remain very competitive within their industries during bankruptcy, and often flourish afterwards." (Environmental Working Group, Section 2)

Bankruptcy is a reorganization authorized under Chapter 11 of the Bankruptcy Code. As part of the reorganization plan, a company inundated with asbestos claims often takes advantage of what is called section 524(g) of Chapter 11, which provides a permanent injunction against asbestos liabilities. The 524(g) sets up a trust organized to process, liquidate and pay all valid asbestos personal injury claims according to procedures approved by the bankruptcy court.

Approved claims are paid based on the current payment percentage at that time and the trusts determine its settlement value. Typically, a 1%-100% payment percentage of the total value of the claim is applied, depending on how the trust fund is structured.

Asbestos Contaminated Automotive Products Led to Federal Mogul Bankruptcy

Federal Mogul essentially "bought" companies once involved in the manufacture, sale and distribution of asbestos-containing materials. In 1998, Federal Mogul bought T&N plc, responsible for asbestos-containing products such as raw asbestos fiber or a sprayed-on asbestos-containing insulation and fireproofing material. Federal Mogul inherited T&N's subsidiaries, including Gasket Holdings, Inc., once known as Flexitallic Gasket Company. Flexitallic made high performance, long lasting and extremely popular industrial gaskets that contained asbestos, and were made for use on piping systems.

Federal Mogul also bought Moog Automotive, Inc., formerly known as Wagner Electric Corporation, Ferodo, and Abex. These companies also manufactured friction materials contaminated with asbestos. Federal-Mogul bought Felt Products Manufacturing Co., formerly known as Fel-Pro Inc., a manufacturer of automotive engine gaskets and other products. Some Fel-Pro gaskets contained asbestos, and there are thousands of claims still pending. Federal Mogul also acquired a company that used asbestos in heavy-duty and aircraft engine gasket materials.

Industrial Workers More Likely to Be Exposed to Asbestos

For most of the last century, many major automotive and construction manufacturers used asbestos in their products, well aware of the terrible diseases exposure to asbestos can cause. Because of the long latency period, people exposed to asbestos in the 1940s, 50s, 60s, and 70s are now developing asbestos-related cancers. If you have worked in the automotive, shipyard and construction industries, and feel that you may have been exposed to asbestos, please seek medical care immediately.

Your Asbestos Case

Since 1984 , the mesothelioma attorneys of Brayton Purcell have been extensively involved with the legal rights of asbestos victims, including injured workers and their families. We have represented both asbestos workers and individuals who have come into contact with asbestos through others. We seek damages to the full extent allowed by law in order to compensate our clients for their pain and suffering, loss of wages, and medical expenses.