The judge supervising the Chapter 11 bankruptcy case of building products manufacturer Owens Corning gave the company on 22 September 2003 until 29 September to sue or get extensions of time to sue mo…
The judge supervising the Chapter 11 bankruptcy case of building products manufacturer Owens Corning gave the company on 22 September 2003 until 29 September to sue or get extensions of time to sue more than 100 lawyers or law firms that allegedly received USD 400 million in asbestos settlement payments in the months preceding the company“s filing for bankruptcy protection. Most of the lawyers and law firms that could be sued have already signed agreements to extend the period of time during which they could be sued over the payments, Norman Pernick, a lawyer for Owens Corning, said. The ruling came as creditors pressured for permission to enter into the potential litigation. Owens Corning was initially reluctant to bring the lawsuits but has said it will consider whether the law firms might properly be sued. U.S. Bankruptcy Chief Judge Judith K. Fitzgerald of Pittsburgh, told Owens Corning that if it did not sue or get extensions of time to sue from the law firms by 29 September 2003, the official committee of unsecured creditors could proceed with its planned lawsuit. Fitzgerald presides over the Owens Corning bankruptcy as a visiting judge. The ruling comes more than a year after the official committee of unsecured creditors began pressuring Owens Corning to try to recover money from the law firms that had sued the company over asbestos claims and then signed on to a national settlement plan that was supposed to deal with concerns about the liabilities. According to Gordon Harris, an attorney for the committee of unsecured creditors, the company is keen to see the evidence of what was happening before the bankruptcy buried to hide its own alleged complicity in a scheme that moved hundreds of millions of dollars out of the company in the months before the 5 October 2000 bankruptcy filing. The allegation against Owens Corning is that it knew its asbestos settlement plan was not viable a long time before it filed for Chapter 11 protection, Harris said. But instead of telling shareholders and the public, the company only told the law firms involved in the asbestos settlement. These law firms received hundreds of millions under deals that Owens Corning knew would leave it unable to pay other creditors, he said. According to a draft complaint that the official committee of unsecured creditors wants to file, Owens Corning knew its plan to settle asbestos lawsuits had made it insolvent by late 1999 or early 2000, but kept this quiet while paying managers and favored law firms. Under bankruptcy rules, that money should be returned to Owens Corning to fund its Chapter 11 reorganization, according to legal papers from the creditors committee. Asbestos claimants support the strategy for coming out of Chapter 11 company has proposed, while business creditors oppose it. Owens Corning will bring the disclosure statement explaining its Chapter 11 reorganization outline to the bankruptcy court for approval 27 October 2003. By that time, law firms that were part of Owens Corning“s pre-bankruptcy plan to settle asbestos litigation will have signed agreements extending the period during which they can be sued, or they will be sued by either Owens Corning or the creditors committee, Judge Fitzgerald said on 22 September 2003. The creditors committee“s draft complaint contains a list of lawyers and law firms that allegedly either reached new asbestos settlement deals with Owens Corning at a time when it could not pay other bills or received payments under existing asbestos settlement deals. Owens Corning is alleged to have deposited USD 289.3 million into an asbestos settlement account controlled by the New York firm of Weitz & Luxenberg in the months before the bankruptcy, according to the complaint. More than USD 75.5 million of that money arrived in the 90 days before the Chapter 11 petition, the papers say. Tobacco settlement heavyweight Ness, Motley, Loadholt, Richardson & Poole received about USD 4.5 million in asbestos settlement money from Owens Corning in the period during which creditors allege the company continued doing business without telling vendors it was running out of money. Tancred Schiavoni, a lawyer representing insurers in the case, said the litigation against the law firms should proceed to preserve evidence of what happened to a “huge amount of money” at Owens Corning before it filed for bankruptcy protection. According to Schiavoni, after that money changed hands, after management got its bonuses, the debtor turned over the keys to the asbestos claimants. Owens Corning and affiliates filed for Chapter 11 bankruptcy protection on 5 October 2000 to address asbestos liabilities.