Asbestos litigation continues to rage on in the tort system with no likelihood of receding in the immediate future. In addition to the inherent costs associated with having to defend and settle asbestos claims, managing asbestos litigation can be a significant distraction for corporate officers and directors from running their businesses. The overhang of asbestos litigation can also severely dampen the value of an otherwise successful and profitable company.

For these and other related reasons, companies have continued to look for ways to exit the tort system. Historically, companies facing legacy asbestos liabilities had limited options—either continue to litigate and settle the lawsuits in the tort system, or find a permanent solution through the bankruptcy process. Judge Burton Lifland's decision in In re Johns-Manville paved the way for companies and their affiliates to exit the tort system by establishing a trust, and then channeling all present and future asbestos claims to that trust. Manville, 68 B.R. 618, 624 (Bankr. S.D.N.Y. 1986), aff'd, 78 B.R. 407 (S.D.N.Y. 1987), aff'd sub nom. Kane v. Johns-Manville, 843 F.2d 636 (2d Cir. 1988). Judge Lifland's bankruptcy solution for dealing with asbestos litigation was well received by lawmakers, and was later codified under §524(g) of Chapter 11, title 11, of the United States Code.

While §524(g) provides a much needed solution for companies facing legacy asbestos liabilities, it does not come without its challenges. First and foremost, Chapter 11 bankruptcies come with a significant transactional cost, as the debtor must bear the costs of its own restructuring professionals as well as those of other primary players in the bankruptcy. Second, the bankruptcy solution requires the funding of an asbestos trust, where the amount of funding is a byproduct of negotiations with the plaintiffs' representatives. And most importantly, when and how the debtor will emerge from Chapter 11 is rarely a matter of certainty as the debtor simply cannot confirm a plan of reorganization without the requisite vote of the asbestos claimants.