Paddock Enterprises LLC, an affiliate of Owens-Illinois Group Inc., voluntarily filed for chapter 11 bankruptcy in the U.S. Bankruptcy Court in Wilmington, Del. on January 6, 2020 under the weight of thousands of asbestos claims alleging injury. The Wall Street Journal reported the news in a January 6 article titled, “Asbestos Costs Drive Owens-Illinois Affiliate to Bankruptcy.”
Owens- Illinois is one of the largest glass container manufacturers in the world. With many other manufacturers going bankrupt, Owens- Illinois was left as one of the last companies still solvent. As a result, they became a target for settlements and paid out $125 million on asbestos claims in 2016, $110 million in 2017 and $105 million in 2018, according to court records.
In addition to 900 current lawsuits, Owens has dealt with around 400,000 claims from persons alleging that they were harmed by asbestos-containing pipe covering and block insulation products which were sold from 1948 to 1958. They have spent an estimated $5 billion dollars in dealing with the claims.
The company, based in Perrysburg, Ohio, plans to establish an asbestos bankruptcy trust to process claims and distribute funds to victims. All future asbestos-related claims payments will be suspended pending final resolution of the Chapter 11 proceeding, according to the company.
With most claimants in their 80’s, it was thought that the company’s settlement claims would have begun to dwindle by now. Instead, according to Paddock’s president and chief restructuring officer, the costs of settling and defending each claim has risen. The company executive said the settlement payouts have exceeded industry peers and have depleted all insurance coverage. The company had been instead been paying claims out of its cash flows.
The evidentiary standards for claims in court are higher than those in an asbestos trust, according KCIC, a consulting firm. Some asbestos trusts see as many as 18,000 claims per year.
Asbestos trusts have often been criticized for being subject to unjustified claims from people who aren’t actually ill or otherwise harmed by the substance. Following requests by business groups for stricter safeguards against fraud and more transparency into payouts, the Trump administration has heightened scrutiny on these trusts.
Since asbestos was banned in the 1970’s, dozens of asbestos producers, installers and other companies have been driven to bankruptcy from the resulting asbestos litigation. Many of these companies opted for a chapter 11 reorganization plan including the creation of an asbestos bankruptcy trust, which channeled claims to one forum for resolution. Tens of billions of dollars have since been paid out in compensation.
According to a 2019 report by consulting firm KCIC, the top plaintiff law firms for asbestos and mesothelioma claims include The Gori Law Firm, Simmons Hanly Conroy, SWMW Law and Karst & Von Oiste. Weitz & Luxenberg also advertises aggressively for asbestos cases.
Owens-Illinois filed an agreement and plan of merger in a Form 8-K12B submitted to the Securities & Exchange Commission at the end of December. The agreement for the new holding company structure reads in part,
This Agreement and Plan of Merger is entered into as of December 26, 2019, by and among Owens-Illinois, Inc., a Delaware corporation (“Current O-I PublicCo”), O-I Glass, Inc., a Delaware corporation and a direct wholly owned subsidiary of Current O-I PublicCo (“New PublicCo”), and Paddock Enterprises, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of New PublicCo (“Paddock, LLC”). Current O-I PublicCo, New PublicCo and Paddock, LLC are sometimes collectively referred to in this Agreement as the “Constituent Companies.”
Paddock is being advised by Latham & Watkins LLP and Alvarez & Marsal. The bankruptcy case docket is online at following link: https://cases.primeclerk.com/Paddock/
Insurance Panel Counsel Considerations
Panel counsel law firms on toxic tort and environmental defense panels will be watching this case closely. Asbestos injury claims and law suits continue to be filed as a result of an aggressive plaintiff’s bar, meaning there will continue to be a need on the defense side.
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This article is provided for educational purposes only. It is not to be interpreted as legal advice or an opinion in regard to any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.