Hatch Lays an egg...for Now
Asbestos victims have spoken and, for now, the U.S. Senate has listened.
For the year 2003, at least, thanks to your protest letters, phone calls, emails and faxes, the U.S. Senate will not debate or vote on the Hatch Asbestos Bail Out Bill (SB 1125, seehttp://www.mesothel.com/pages/s1125_hearing.htm.
I want to thank each of you for your spirited and tireless advocacy against the Hatch Bill. As you know, this breathlessly wrong Bill which would have created a massive yet under-funded federal bureaucracy that was going to be broke before it opened for business. It would have recklessly voided unpaid settlements. It would have barred victims from seeking redress in the courts. It would have bailed out some of the wealthiest companies in the world who caused the misery in the first place. It would have short-changed victims on a take-it-or-leave-it basis for amounts far less than historical settlement and jury value averages. It would have done nothing to deter negligent or malicious corporate conduct. Although conferring an astounding windfall to the wrongdoers, it would have done nothing to fund the long-overdue investment in cancer prevention, early detection or treatment. (see selected protest letters at http://www.mes
othel.com/pages/protest_main.htm.)
Thank you. Thank you.
But before celebrating, remember the Hydra headed monster from Greek mythology -- as soon as a brave warrior would lop off one gnashing head, another would spring up in its place. In order to terminally vanquish the monster, Hercules had to simultaneously lop off all 9 heads. Hatch may not rear it's ugly head in 2003, but my sources fear that a reincarnation of the Hatch bill will likely pop up in 2004.
Remain vigilant. The whisper is the Republican leadership is plotting behind the scenes to present the asbestos bill to the full Senate at some point buried within an omnibus "Jobs Bill." The omnibus "Jobs Bill" has yet to be unveiled and it's not likely to see the sunshine of public debate. The plan is to simply unveil it and take it straight to the Senate Floor -- a giant, virtually mind-numbing, voluminous and multi-chaptered bill weighed down with so many complex and controversial measures that it would never actually see an open debate.
Another rumor has it that the industry is working to amend the bankruptcy code to make it easier for solvent (and flush) asbestos defendants to escape liability by obtaining immunity in the bankruptcy courts. The scheme would allow a parent company to saddle a subsidiary with all of its asbestos debt, take the dummy corporation into chapter 11, and obtain a court order protecting the parent from any liability stemming from the subsidiary's asbestos sins.
The shell game ruse, unfortunately, is not merely theoretical. Presently Honeywell (with assets in 2002 estimated at $24.2 billion) is protected from asbestos lawsuits arising from its ownership of Bendix, which for many years made asbestos friction products. Honeywell sold Bendix to a company already in chapter 11, Federal Mogul, and by doing so obtained the protection of Section 524(g) of the bankruptcy code, which has been used to shield parents from the liability of the debtor during the latter's Chapter 11 reorganization litigation. This week, Detroit's Big Three automakers filed a lawsuit against Honeywell, alleging that it's scheme to avoid asbestos liability was illegal and fraudulent (see the article below). The Big Three didn't suddenly develop a conscience. They know that if competitors can exploit loopholes and avoid playing by the rules, companies that do obey the rules and have to pay the price will be put at an economic disadvantage in the marketplace.
The take-home message: it's not over. At the same time, we can feel good about the role each of us played in defeating the Hatch bill this year. When many soft voices speak at once, the roar can be deafening.
We will continue to keep you posted.
Roger G. Worthington, Esq.
10/02/03
rworthington@rgw-pc.com
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BIG THREE AUTOMAKERS SUE HONEYWELL, ALLEGING ASBESTOS FRAUD
NEW YORK/CHICAGO (Reuters) - Detroit's Big Three automakers have filed suit to stop Honeywell International Inc. (NYSE:HON - news) from selling its brake products unit to bankrupt Federal-Mogul Corp. (OTC BB:FDMLQ.OB - news), accusing Honeywell of trying to avoid its asbestos-related obligations.
Honeywell in January agreed to sell its Bendix brake unit, which faces about 47,000 asbestos cases, to Federal-Mogul, an auto parts supplier currently reorganizing after filing for Chapter 11 protection in October 2001 under the weight of mounting asbestos lawsuits.
Federal-Mogul's proposed reorganization plan includes the establishment of a trust to pay existing and future asbestos claims, allowing the company to emerge from bankruptcy free of asbestos liabilities.
Under the proposed Bendix deal, Federal-Mogul would acquire certain assets of the unit, and Honeywell, in exchange, would receive protection from asbestos liabilities.
In the lawsuit filed on Wednesday, Ford Motor Co. (NYSE:F - news), General Motors Corp. (NYSE:GM - news) and DaimlerChrysler AG (DCXGn.DE) described the proposed Bendix sale as a "fraudulent transfer."
"Bankruptcy protection cannot be bought and sold. Federal-Mogul's and Honeywell's unprecedented attempt to do so would violate federal and state law, be unfair to thousands of asbestos claimants and inappropriately shift litigation costs to the automakers," David Sykes, attorney with Duane Morris, which is representing the carmakers, said in a statement.
The Big Three face asbestos-related litigation costs totaling between $320 million and $1.2 billion, investment bank UBS Warburg estimated in a 2002 report.
A Honeywell spokesman said the company was reviewing the lawsuit and declined to comment on it.
A spokesman for Federal-Mogul, which is hoping to emerge from bankruptcy protection in 2004, also declined comment, saying the suit was under review.
Bendix makes brakes and brakes systems, and asbestos was once a key component in these products. The proposed sale of Bendix remains subject to anti-trust clearance and agreement with attorneys representing asbestos plaintiffs.
According to Federal-Mogul's reorganization plan, filed in Delaware federal court in March, asbestos claimants would convert all claims, running into billions of dollars, into equity in the emerging company.
In their lawsuit, the U.S. automakers said Federal-Mogul sought to use its immunity status to take on Honeywell's liabilities.
Hundreds of U.S. companies have been hit with lawsuits from claimants exposed to asbestos, a fire-resistant material that scientists have linked to a form of lung cancer and other fatal diseases.
