Description of Case:
Johns-Manville Corp. is a Fortune 500 company, and was deemed a paradigm of success in corporate America by the financial community. However, the company produced a product that was poison—asbestos. (Moreover, Manville knew it was poison, and had know it since the 1930s , and it hid the danger.). By 1982 approximately 16,000 lawsuits were pending against Manville, and it anticipated a further crushing economic burden by the filing of an even more staggering number of suits by those who had been exposed but who will not manifest the asbestos-related diseases until some time during this future period (20-30 years as the disease manifests itself--“the future asbestos claimants”). Approximately 6,000 asbestos health claims were estimated to have arisen in only the first 16 months since the filing date. The burden was compounded by the insurance industry’s general disavowal of liability to Manville on policies written for this very purpose.
My only Question here is:
The Johns Manville corporation petitioned for a preemptive bankruptcy under Chapter 11, Can the Johns Manville corporation declare bankruptcy and discharge future cases?
The Johns Manville corporation filed for bankruptcy under Chapter 11 specifically because it was facing a large number of current and potential future asbestos-related lawsuits. Filing for Chapter 11 bankruptcy allows a company to reorganize its financial affairs and continue its operations while developing a plan to address its debts and liabilities.
Under Chapter 11 bankruptcy, a company is protected from most types of legal actions, including pending and future lawsuits. This protection is known as the automatic stay, which puts a temporary halt on all attempts by creditors or claimants to collect debts or pursue legal actions against the company.
However, it is important to note that while the automatic stay provides temporary relief, it does not discharge the debts or liabilities permanently. The purpose of Chapter 11 bankruptcy is to provide an opportunity for the company to develop a plan to repay its debts and satisfy its obligations over time. As part of this process, future asbestos-related cases would typically be addressed through a separate trust or settlement fund, which would be established to compensate the affected individuals.
In the case of Johns Manville, the filing for Chapter 11 bankruptcy allowed the company to establish the Manville Personal Injury Settlement Trust, which was funded with various assets and insurance policies. This trust was created to compensate present and future asbestos claimants, ensuring that the company could continue operating while still addressing its legal obligations.
Therefore, while the bankruptcy filing provided temporary relief and a mechanism for addressing future cases, it did not discharge or eliminate the potential liability for future asbestos-related claims. The establishment of the trust allowed for a structured approach to compensating individuals affected by asbestos exposure.