Durabla Chapter 11 Case Continues; Dismissal Denied

Durabla Chapter 11 Case Continues; Dismissal Denied

WILMINGTON, Del. -- The Delaware bankruptcy judge overseeing Durabla Manufacturing Co.'s Chapter 11 case on Oct. 6 rejected a motion to dismiss the case made by a group of asbestos personal injury plaintiffs who maintain that the case was filed in bad faith and only to protect the company's president and related nondebtors (In re Durabla Manufacturing Co., No. 09-14415, D. Del. Bkcy.).

In the one-page order, Bankruptcy Judge Mary F. Walrath denied the motion without comment.

Durabla on Dec. 15 filed a voluntary petition for relief under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.  Durabla formerly distributed sheet gasket material and cut gaskets, some of which the company says may have contained asbestos.  In its petition for bankruptcy, Durabla said that as of the petition date, it had approximately 108,000 contingent, unliquidated and disputed asbestos cases pending against it.

On May 18, a group of asbestos personal injury plaintiffs represented by the Shein Law Center moved to dismiss the bankruptcy petition, saying that although Durabla purports to continue operating its business, it does not conduct any business; therefore, it has nothing to reorganize and could not have filed the petition for the good faith purpose of reorganizing its business.

The filing of the case is part of a plan to shield Durabla's president, David Moser, and related nondebtors such as DFT Inc. and Durabla Canada LTD., from any potential liability with respect to claims raised by multiple plaintiffs for their exposure to asbestos products manufactured and/or distributed by Durabla, the Shein plaintiffs said.

In opposing the dismissal, Durabla said it commenced its bankruptcy case in good faith to preserve and maximize its assets for the benefit of all of its creditors and to provide an equitable means of distributing those assets to its creditors.

The automatic stay of the bankruptcy reserved the company's remaining indemnity coverage and its excess insurance coverage for the benefits of the holders of asbestos claims asserted against it, Durabla said.

Also, the Shein plaintiffs cannot meet their burden for proving bad faith; they have only established that judgments under an alter ego theory may have value to the estate, Durabla said.  The company said it has made clear that its intent is to make any value of those claims available to all of its creditors and not just to the Shein plaintiffs.

[Editor's Note:  Full coverage will be in the October issue of Mealey's Litigation Report: Asbestos Bankruptcy.  In the meantime, the order is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #48-101013-029R.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

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For more information, e-mail editor Cheryl Keely at cheryl.keely@lexisnexis.com.