Canadian Asbestos Giant Forces Dying Americans Into Foreign Courts

Landmark Bankruptcy Decision Sends 6,000+ U.S. Asbestos Victims to Canada—Despite Congressional Protections.

The Courtroom Clash That Could Change Asbestos Litigation Forever

On October 29, 2025, Chief U.S. Bankruptcy Judge Martin Glenn issued a sweeping decision that has sent shockwaves through the asbestos litigation community. In a 30-page opinion, Judge Glenn recognized a Canadian bankruptcy proceeding for Asbestos Corporation Limited (ACL) and—more controversially—extended the automatic stay to halt thousands of lawsuits filed by dying Americans in U.S. courts.

The decision affects approximately 6,100 pending asbestos claims across at least 14 U.S. states. On November 13, 2025, the asbestos victims and their representatives filed a notice of appeal, setting up what could become a defining battle over international bankruptcy law and the rights of American tort victims.

A Century of Asbestos: ACL's Deadly Legacy

Founded in 1925, Asbestos Corporation Limited operated open-pit chrysotile asbestos mines in Quebec for 60 years. The company shipped its deadly product worldwide, though over 90% of sales occurred outside the United States. Mining operations ceased in 1980, but ACL's legacy lives on in the lungs of thousands of workers.

The human toll is staggering:

• Over 50,000 asbestos-related claims have been filed against ACL
• Approximately 19,000 claims have been settled under an Interim Settlement Agreement (ISA) with London market insurers
• About 6,100 claims remain pending, most filed before 2005
• Victims include insulation workers, shipbuilders, construction workers, and countless others exposed to ACL's asbestos fibers.

For decades, ACL has been a defendant in U.S. courts. In the 1970s, the company was named in a massive litigation in New Jersey involving Raybestos Manhattan plant workers. Throughout this history, ACL has repeatedly challenged U.S. court jurisdiction, asserted that Canadian law restricts its participation in U.S. discovery, and faced sanctions for violating court orders.

The Bankruptcy Court's Decision: Five Critical Rulings

Judge Glenn's opinion addressed two fundamental questions: (1) Should the Canadian proceeding be recognized as a "foreign main proceeding"? and (2) Should the stay extend to third-party insurers and related entities?

Key Holding #1: ACL's "Center of Main Interests" (COMI) Is Canada

Despite the Asbestos Parties' arguments that ACL's actual business is managing U.S. litigation, Judge Glenn found the COMI factors pointed decisively to Canada:

• Headquarters and Management: All executives, employees, and board members reside and work in Canada; all operational and strategic decisions are made from Quebec
• Tangible Assets: ACL owns mines, real estate, warehouses, and tailings operations—all located in Quebec
• Ongoing Operations: The company continues extracting minerals from mining tailings and managing/leasing properties in Canada

The court rejected the argument that ACL's "true headquarters" is in the United States simply because its claims administrator (Resolute) operates there. Judge Glenn noted that courts only find COMI has shifted when there's been a "near total transfer of the business"—which hasn't happened here.

Key Holding #2: Involuntary Creditors' Expectations Don't Control COMI

The asbestos claimants argued their preference should matter—they never chose to contract with a Canadian company and expect U.S. courts to decide their claims. Judge Glenn acknowledged their "awful, painful, and oftentimes fatal diseases" but held that COMI analysis focuses on voluntary creditors who can assess risk before extending credit.

The court found that any voluntary creditor reviewing ACL's public filings would expect insolvency proceedings in Canada, where the company is incorporated, trades on the Toronto stock exchange, and operates its business.

Notably, Judge Glenn expressed concern that the objectors' position "furthers the interests of a small number of tort creditors that can win the 'race to the courthouse' to obtain and collect big judgments against ACL, depleting its insurance, rather than ensuring that ACL's Canadian reorganization proceeding will provide equality of distributions for all similarly situated creditors."

Key Holding #3: The Stay Extends to Third-Party Insurers

Perhaps most controversially, Judge Glenn extended the automatic stay to:

• CLMI (Certain London Market Insurers)
• Resolute (the third-party claims administrator)
• General Dynamics (ACL's former parent company)

The court found "immediate adverse consequences" would result without the stay. ACL's insurance operates as a "stack" where specific insurers pay designated portions of each claim. Critically, approximately 20% of the underlying insurers are already insolvent, meaning ACL must cover those portions itself—but the company has only about CAD $25 million in its trust account.

If litigation proceeds against the insurers, Judge Glenn found, it would deplete the insurance pool and leave remaining victims with no recovery.

Key Holding #4: Canadian Courts Provide "Sufficient Protection"

The Asbestos Parties argued that Canadian courts lack the protections of 11 U.S.C. § 524(g)—a provision Congress enacted specifically for asbestos bankruptcies to protect future claimants whose diseases haven't yet manifested.

Judge Glenn called this argument premature. No plan has been proposed in Canada yet. The court emphasized that:

• Canadian courts have a strong track record of providing due process
• The Canadian proceeding includes a "Monitor"—an independent officer who provides oversight absent in U.S. Chapter 11 cases.
• The Canadian court has broad discretion under the CCAA to craft creative solutions.
• U.S. courts have "time and again found [Canadian proceedings] to conform to high standards of due process."

The court noted it would have the opportunity to review any proposed plan later under step two of the Chapter 15 process—recognition of the proceeding (step one) doesn't guarantee enforcement of the plan (step two).

Key Holding #5: No Public Policy Violation

Finally, Judge Glenn rejected the argument that recognition violates U.S. public policy under § 1506. The public policy exception is "extraordinarily narrow" and applies only to actions that implicate "the most fundamental policies of the United States."

The court held that the lack of guaranteed § 524(g) protections doesn't meet this high bar—especially when it's uncertain whether such protections will be absent from any final plan.

The Issues on Appeal: What's at Stake?

The Asbestos Parties' appeal challenges each of these holdings. The central issues are:

1. COMI Determination: Canada or the United States?

Appellants' Position: ACL's COMI is actually the United States because:

• The company's primary assets are insurance policies that will produce over $1 billion in proceeds (located in the U.S.)
• ACL's actual business function is managing asbestos litigation, which is managed by Resolute in the United States
• The vast majority of creditors are U.S.-based
• U.S. law applies to most disputes
• ACL has "virtually no ongoing business operations in Canada."

ACL's Position: The company maintains substantial operations in Canada (mining tailings, real estate management), all management is in Canada, and the insurance policies will likely be administered through the Canadian restructuring—not through piecemeal U.S. litigation.

Why It Matters: If the COMI is in the United States, the Canadian proceeding cannot be recognized as a "foreign main proceeding"—only as a "foreign nonmain proceeding" (if at all). This would dramatically limit the relief available and potentially allow U.S. litigation to continue.

2. Third-Party Stay: Protecting Insurers or Harming Victims?

Appellants' Position:

• Claims against insurers won't have an "immediate adverse economic consequence" for ACL's estate (the legal standard for extending stays)
• The stay violates the "sufficient protection" requirement of § 1522(a) because victims lose access to U.S. courts and § 524(g) protections
• This is a "unique circumstance" where comity shouldn't extend to the Canadian court's decision

ACL's Position:

• The insurance structure means claims against insurers directly threaten ACL's ability to pay other creditors
• With 20% of insurers already insolvent, ACL must cover those portions—but has limited funds
• Allowing U.S. litigation to continue would deplete the insurance pool through the "race to the courthouse."

Why It Matters: Thousands of victims have pending lawsuits against these insurers in U.S. courts. If the stay is upheld, those cases must be dismissed or transferred to the Canadian proceeding. If reversed, litigation can continue—but may deplete insurance assets before all victims are compensated.

3. Section 524(g) Protections: Can Canada Substitute?

Appellants' Position:

• Section 524(g) was enacted by Congress specifically to address asbestos bankruptcies.
• It provides critical protections for future claimants (people exposed to asbestos who haven't yet developed disease)
• Canadian law has no equivalent.
• Forcing victims into a Canadian proceeding without these protections means they aren't "sufficiently protected" under § 1522(a)

ACL's Position:

• This argument is premature—no plan exists yet
• The Canadian court has broad discretion to create protections equal to or better than § 524(g)
• The CCAA provides a "Monitor" for oversight that the U.S. Chapter 11 lacks
• The real issue is whether any eventual plan should be recognized (step two), not whether the proceeding should be recognized (step one)

Why It Matters: Section 524(g) was Congress's response to the unique challenges of asbestos litigation—particularly protecting people who don't yet know they were exposed. If the appellate court finds that § 524(g) protections are mandatory, it could prevent recognition of the Canadian proceeding or limit the scope of the stay.

4. Public Policy Exception: Fundamental Fairness?

Appellants' Position:

• Recognition is "manifestly contrary" to U.S. public policy under § 1506
• Congress enacted specific protections for asbestos victims—forcing them into a foreign proceeding without those protections violates public policy
• ACL's history of discovery abuses and resistance to U.S. court authority shows bad faith

ACL's Position:

• The public policy exception is extremely narrow—reserved for actions that violate the "most fundamental policies."
• Canadian courts provide fair and impartial proceedings
• U.S. courts have repeatedly recognized Canadian insolvency proceedings

Why It Matters: If the appellate court finds a public policy violation, it must deny recognition entirely under § 1506—ending the Chapter 15 case and allowing all U.S. litigation to proceed.

Consequences for Asbestos Victims: A Devastating Blow or Necessary Protection?

The stakes couldn't be higher for the approximately 6,100 Americans with pending asbestos claims. The decision's impact depends heavily on your perspective:

The Case Against Recognition: Victims Lose Critical Protections

Immediate Harm:

• Loss of U.S. Forum: Victims who filed claims in U.S. state courts—often choosing forums with favorable law and procedures—must now pursue claims in Quebec
• Increased Costs: Victims must hire Canadian counsel, travel to Canada for proceedings, and navigate a foreign legal system
• Delay: Many victims are elderly and terminally ill with mesothelioma (median survival: 12-21 months after diagnosis); delay could mean death before compensation

Loss of Substantive Protections:

• No § 524(g) Guarantees: Congress enacted this provision specifically for asbestos bankruptcies to ensure future claimants are protected; Canadian law has no equivalent
• No Jury Trial: Canadian proceedings don't provide jury trials, which are available in many U.S. states for tort claims
• Different Substantive Law: Canadian courts may apply different standards for liability, causation, and damages

Systemic Concerns:

• Precedent: This could encourage other foreign companies facing U.S. tort liability to use Chapter 15 as a shield
• Congressional Intent: Section 524(g) was Congress's carefully crafted solution to asbestos litigation—allowing foreign proceedings to bypass it undermines that intent
• Forum Shopping: ACL timed its Canadian filing strategically after facing default judgments in U.S. courts (including a $14.5 million judgment in Washington state)

The Case For Recognition: Preventing a Race to the Courthouse

Equality of Distribution:

• First-Come Problem: Without a stay, the first victims to obtain judgments will deplete insurance assets, leaving later victims with nothing
• Insurer Insolvency: With 20% of insurers already insolvent and ACL having only CAD $25 million in reserves, uncontrolled litigation will quickly exhaust available funds
• 6,100 Victims: A coordinated Canadian proceeding can ensure all victims receive proportional compensation

Procedural Protections:

• Monitor Oversight: The Canadian proceeding includes an independent Monitor to ensure fairness—a feature absent in U.S. Chapter 11
• Proven Due Process: Canadian courts have consistently provided fair proceedings; U.S. courts have repeatedly recognized Canadian insolvency proceedings
• Judicial Discretion: The CCAA gives courts broad flexibility to craft solutions, potentially including protections similar to § 524(g)

Practical Realities:

• Most Claims Are Old: Most of the 6,100 claims were filed before 2005—they've been pending for 20+ years already
• Settlement History: ACL has successfully resolved 19,000 claims through the ISA; a Canadian proceeding could facilitate similar settlements for the remaining claims
• Two-Step Process: The bankruptcy court emphasized that recognition (step one) doesn't guarantee enforcement of any plan (step two)—victims can object to any proposed plan

Key Takeaways from the Bankruptcy Court Decision

1. COMI follows ongoing operations and management, not just litigation location. Even when a foreign company faces substantial U.S. litigation, its COMI remains in its home country if it maintains genuine business operations there.
2. Involuntary tort creditors' preferences don't determine COMI. The expectations of voluntary creditors—who can assess risk before contracting—control the analysis, not the preferences of tort victims who never chose to deal with the company.
3. Third-party stays can extend to insurers when claims threaten the estate. Despite the general rule limiting third-party stays, courts will extend them when the insurance structure means claims against insurers directly impact the debtor's ability to pay other creditors.
4. Recognition doesn't guarantee plan enforcement. Step one (recognizing the foreign proceeding) is distinct from step two (enforcing a foreign plan). Victims can challenge the fairness of any proposed plan at step two.
5. Section 524(g) concerns are premature at the recognition stage. The absence of guaranteed § 524(g) protections doesn't prevent recognition when no plan has yet been proposed.
6. Canadian proceedings receive strong comity. U.S. courts consistently recognize that Canadian insolvency proceedings provide adequate due process and fairness.
7. The public policy exception is extremely narrow. Even significant procedural differences (such as the lack of jury trials or § 524(g) protections) don't trigger the § 1506 public policy exception absent a showing of fundamental unfairness.
8. Equality of distribution trumps individual advantage. Courts prioritize ensuring all creditors receive fair distributions over allowing some creditors to win the "race to the courthouse."

What Happens Next?

The appeal to the U.S. District Court for the Southern District of New York will likely take many months—possibly over a year. During that time:

• The stay remains in effect under the bankruptcy court's order (unless the district court grants a stay pending appeal, which is unlikely)
• The Canadian CCAA proceeding continues, with the Monitor working toward a restructuring plan
• U.S. litigation is frozen, with victims unable to pursue their claims in U.S. courts

The appellate court could:

1. Affirm the bankruptcy court's decision entirely
2. Reverse and find the COMI is in the United States (preventing recognition as a foreign main proceeding)
3. Affirm recognition but reverse the third-party stay (allowing litigation against insurers to continue)
4. Remand for further findings on specific issues

If the district court affirms, victims could appeal to the Second Circuit Court of Appeals, potentially delaying resolution for years.

The Broader Implications: A New Frontier in Asbestos Litigation

This case represents a potential paradigm shift in how foreign companies handle U.S. asbestos liability. For decades, asbestos defendants have filed for Chapter 11 bankruptcy in the United States, establishing § 524(g) trusts to compensate victims. This case suggests an alternative path:

1. File for insolvency protection in the home country
2. Seek Chapter 15 recognition in the United States
3. Obtain a stay of U.S. litigation
4. Resolve all claims through the foreign proceeding

If upheld, this approach could:

• Encourage other foreign defendants to pursue similar strategies
• Shift power to foreign courts in cases involving U.S. victims
• Undermine Congressional intent behind § 524(g) and other protective provisions
• Create uncertainty about whether U.S. victims can rely on U.S. legal protections

Alternatively, reversal could:

• Reaffirm U.S. court jurisdiction over companies whose products caused harm in the United States
• Preserve Congressional protections for asbestos victims
• Limit Chapter 15 as a tool for avoiding U.S. liability

Conclusion: Justice Delayed or Justice Denied?

The battle over Asbestos Corporation Limited's bankruptcy raises profound questions about sovereignty, fairness, and the rights of tort victims in an increasingly globalized world.

Is this case about ensuring that all 6,100 victims receive equal treatment—preventing a handful from depleting limited insurance while others get nothing? Or is it about protecting the rights of dying Americans to pursue their claims in U.S. courts with the full panoply of protections Congress enacted specifically for asbestos cases?

For ACL and the insurers, this is about preventing the chaotic depletion of limited assets through uncoordinated litigation and ensuring an orderly resolution that treats all victims fairly.

For the victims and their families, this is about being forced into a foreign legal system without the protections—including § 524(g), jury trials, and familiar procedures—that U.S. law provides, potentially dying before seeing justice.

One thing is certain: The appellate court's decision will have lasting consequences far beyond this single case, potentially reshaping how multinational corporations address mass tort liability in the United States.

As this appeal proceeds, approximately 6,100 Americans—many suffering from terminal illnesses like mesothelioma—wait to learn whether they'll pursue their claims for justice in U.S. courts or Canadian ones.

Asbestos Corporation Limited and Raymond Chabot, Inc., 25-10934, (Bankr. S.D.N.Y. Oct 29, 2025) ECF No. 140,  Decided 10/29/2025.

Recommended Citation: Gelman, Jon L.,  Canadian Asbestos Giant Forces Dying Americans Into Foreign Courts, 12/30/2025.

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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).

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