NEW YORK -- A New York federal bankruptcy judge approved an agreement on Feb. 14 in General Motors Corp.'s Chapter 11 bankruptcy case that fixes the debtors' aggregate liability for asbestos personal injury claims at $625 million (In re: Motors Liquidation Co., et al., No. 09-50026, S.D. N.Y. Bkcy.).
In June 2009, Motors Liquidation Co. f/k/a General Motors Corp. and its affiliated debtors filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. The cases are not asbestos Chapter 11 cases, but the debtors say that they have historically established reserves for liability with respect to asbestos personal injury claims and that before the deadline for filing claims in the Chapter 11 cases, approximately 29,000 asbestos personal injury claims were filed against them.
In November, the debtors requested that the Bankruptcy Court estimate the debtors' aggregate liability with respect to all present and future asbestos-related personal injury claims. Dean M. Trafelet, in his capacity as the legal representative for future asbestos claimants, and the Official Committee of Unsecured Creditors of Motors Liquidation Co. both endorsed the debtors' motion to estimate asbestos liability. Bankruptcy Judge Robert E. Gerber entered an order on Dec. 15 establishing a schedule for the estimation proceeding, but the order became moot with the bankruptcy judge's signing of the stipulation and order today.
The debtors say that at the time they filed for bankruptcy, their financial statements showed a reserve of approximately $650 million for present and future asbestos personal injury claims over the next 10 years. The Asbestos Claimants' Committee and Trafelet believed that the debtors' estimate was materially less than the debtors' actual aggregate liability for present and future asbestos claims, and the Creditors' Committee believed that the debtors' reserve materially exceeded the debtors' aggregate liability for asbestos claims.
"Since the filing of the Estimation Motion, the Parties have been engaged in good-faith negotiations to resolve the amount of the Asbestos Trust Claim and the Estimation Motion. Those negotiations have culminated in the agreement," the parties say in their stipulation and order.
According to the agreement, the $625 million asbestos trust claim "shall not be subject to any defense, counterclaim, right of setoff, reduction, avoidance, disallowance (including under section 502(d) of the Bankruptcy Code), or subordination."
The parties agree that because the debtors' disclosure statement and reorganization plan provide that the asbestos trust claim may be in an amount agreed upon by the parties, resoliciting votes on the reorganization plan is not required.
The debtors' plan of reorganization, filed in December, classifies asbestos personal injury claims in Class 5 and provides that on the effective date, all such claims will be channeled to an asbestos trust and will be satisfied in accordance with the trust, the trust distribution procedures and the trust agreement.
[Editor's Note: Full coverage will be in the February issue. In the meantime, the stipulation and order is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #48-110228-021R. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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