Lawyers with McGuireWoods LLP recently obtained a favorable ruling
in the Third Circuit Court of Appeals on behalf of firm client
Skinner Engine Company. In its ruling, a three judge panel preserved
Skinner’s right to be a Chapter 11 debtor and preserves the right of
all Chapter 11 debtors to confirm liquidating plans.
This verdict is seen as a significant ruling for companies with
significant asbestos liabilities because those companies now may
file liquidating plans over the strong objections of their insurance
companies. When confirmed, Skinner’s plan could herald the next wave
of asbestos bankruptcies in which non-operating debtors with
significant asbestos liabilities are able to offer a distribution to
asbestos creditors and non-asbestos creditors.
Until the mid-1970s, Skinner manufactured ship engines and engine
parts allegedly containing asbestos. During the 1980s, Skinner was
named as a defendant in a number of lawsuits filed by merchant
mariners who alleged exposure to asbestos. In 2003, Skinner ceased
operations and sold substantially all of its assets. Skinner’s
insurance policies, with aggregate policy limits in excess of $140
million, are Skinner’s last valuable asset.
As the Third Circuit noted in its opinion, which affirmed the
decisions of both the Bankruptcy Court and the District Court, the
confirmation of Skinner’s pending plan of liquidation represents the
only means by which Skinner can make distributions to its trade and
asbestos creditors, over 30,000 of whom have sued Skinner for
injuries from asbestos exposure and “on this basis alone [Skinner]
has satisfied [its] burden to show that [its] Chapter 11 case”
serves a valid bankruptcy purpose.
McGuireWoods Partners Sally E. Edison and Robert G. Sable as well as associate Nicholas E. Meriwether, all part of the firm’s
Restructuring and Insolvency group in Pittsburgh office, handled
this matter for the client.