Bankruptcy Court Remains Open as a Venue to Resolve Mass Tort Litigation
History has shown that some companies choose to litigate each claim on a case-by-case basis hoping that its insurance does not run out, while others attempt to negotiate mass settlements utilizing insurance as well as company assets to strike a deal.
March 10, 2022 at 10:26 AM
7 minute read
BankruptcyHow does an otherwise healthy company that is facing mass tort litigation manage thousands of claims while preserving the enterprise as a going concern? History has shown that some companies choose to litigate each claim on a case-by-case basis hoping that its insurance does not run out, while others attempt to negotiate mass settlements utilizing insurance as well as company assets to strike a deal. When neither approach works, many companies turn to Chapter 11 as a last resort hoping it can use the bankruptcy process to avoid liquidation. Recently, however, some companies have attempted to utilize Chapter 11 even when it may not be the last resort, but rather a more efficient means to liquidate and pay claims without the attendant cost and delay of defending each claim on an individual basis. In a recent decision from the U.S. Bankruptcy Court for the District of New Jersey, Chief Judge Michael Kaplan refused to dismiss a Chapter 11 petition as a bad-faith filing even though the reason for filing the Chapter 11 petition was to fully resolve talc-related personal injury claims as opposed to reorganizing the defendant company. See In re LTL Management, Debtor, (Bankr. D.N.J. 2022).
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