Asbestos Corporation Limited (ACL), a Canadian mining company facing numerous lawsuits related to mesothelioma and asbestos-related diseases in the United States, has taken steps regarding financial restructuring.
Here's a breakdown of the recent events:
- Chapter 15 Filing in the U.S. Bankruptcy Court: On Tuesday, May 6, 2025, Asbestos Corporation Limited filed a petition for recognition of foreign proceedings under Chapter 15 of the U.S. Bankruptcy Code in the Southern District of New York. The case number is 1:25-bk-10934.
- Canadian Creditor Protection: Simultaneously, ACL sought and obtained an initial order for protection under the Companies' Creditors Arrangement Act (CCAA) from the Superior Court of Québec (Commercial Division) on Wednesday, May 7, 2025.
- Purpose of the Filings: The primary goal of these legal actions is to obtain a stay of proceedings in the United States, effectively halting the numerous lawsuits pending against the company in at least 14 U.S. states. ACL argues that the "uncontrolled piecemeal litigation" is depleting its available insurance assets.
- Monitor Appointment: Raymond Chabot Inc. has been appointed as the monitor in the Canadian CCAA proceedings to assist ACL with its restructuring efforts and report to the Canadian court. They are also acting as the foreign representative for the Chapter 15 filing in the U.S.
- Temporary Restraining Order: The U.S. Bankruptcy Court for the Southern District of New York issued a Temporary Restraining Order (TRO) on Tuesday, May 6, 2025, providing a temporary stay of actions against ACL in the U.S. A hearing on this matter is scheduled for May 19, 2025.
- Next Steps: The U.S. Bankruptcy Court has scheduled a hearing for June 2, 2025, to consider the Verified Petition for recognition of the Canadian proceedings. The deadline for filing objections is May 27, 2025.
- Trading Suspension: The TSX Venture Exchange (TSXV) has been notified of these proceedings, and it is expected that trading of ACL's common shares and securities (symbol: AB.H) will cease on a date determined by the TSXV. The company also anticipates ceasing to be a public reporting issuer.
In essence, Asbestos Corporation Limited has initiated insolvency proceedings in Canada under the CCAA and is seeking recognition of these proceedings in the U.S. under Chapter 15 of the Bankruptcy Code to manage its liabilities related to asbestos litigation and pursue restructuring.
Asbestos Corporation Limited (ACL), while a Canadian company, has a significant history within United States asbestos litigation due to its role as a supplier of raw asbestos fibers to various manufacturers in the U.S. Here's a summary of its involvement:
Long History of Lawsuits:
- ACL has been named as a defendant in numerous lawsuits across the United States for decades. These lawsuits allege that individuals developed mesothelioma, asbestosis, and other asbestos-related diseases due to exposure to asbestos fibers that originated from ACL's mines in Quebec. In the 1970s, ACL was a named defendant in a massive asbestos litigation matter filed in the U.S. District Court for the District of New Jersey, involving workers who were exposed to asbestos fibers at Raybestos Manhattan’s plant in Passaic, NJ. The workers collected workers’ compensation benefits and also filed a civil action against the suppliers, manufacturers, and health research groups. Subrogation claims were available.
- Plaintiffs in these cases often worked in industries that utilized ACL's asbestos, including insulation manufacturing, shipbuilding, construction, and various other industrial settings.
- Legal actions have been filed in numerous states, reflecting the widespread use of asbestos-containing products across the country.
Challenges in Litigation:
- ACL has often presented challenges to plaintiffs by asserting that Canadian law restricts its participation in the discovery process within U.S. lawsuits. This stance has led to sanctions and adverse judgments in some cases where courts found the company in violation of state laws and court authority.
- Despite being a foreign entity, U.S. courts have generally maintained jurisdiction over ACL due to its business activities and the distribution of its products within the United States.
Recent Bankruptcy Filing and Its Impact:
- The recent Chapter 15 bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of New York is a direct consequence of the ongoing and substantial asbestos litigation in the United States.
- ACL explicitly stated that the purpose of this filing is to obtain a stay of proceedings to halt the "uncontrolled piecemeal litigation" in the U.S., which it claims is depleting its insurance assets.
- This action suggests that ACL is seeking a more centralized and managed approach to address its asbestos liabilities, potentially through a settlement trust or other mechanisms established within the bankruptcy process, similar to other asbestos defendants who have previously filed for bankruptcy in the U.S.
In conclusion, Asbestos Corporation Limited has a long and contentious history within U.S. asbestos litigation, marked by numerous lawsuits, legal challenges, and significant financial liabilities. The recent bankruptcy filing under Chapter 15 signifies a strategic move to manage these liabilities on a more comprehensive scale.
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*Jon L. Gelman of Wayne, NJ, is the author of NJ Workers' Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers' Compensation Law (West-Thomson-Reuters). For over five decades, the Law Offices of Jon Gelman 1.973.696.7900
jon@gelmans.com has represented injured workers and their families who have suffered occupational illnesses and diseases.
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