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DBMP LLC – Saint-Gobain, Having Expended $2bn on Legacy Asbestos Claims, Files Chapter 11 for US Subsidiary Looking for “CertainTee” as to Asbestos Liability


January 23,2020 − DBMP LLC  (“DBMP” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Western District of North Carolina, lead case number 20-30080. The Debtor, a company formed in 2019 to hold the legacy asbestos liability of CertainTeed LLC, an indirect subsidiary of France's Saint-Gobain, is represented by Gregory M. Gordon of Jones Day. Further board-authorized engagements include (i) Robinson, Bradshaw & Hinson, P.A. as special counsel for asbestos claims estimation matters and local bankruptcy counsel, (ii) Bates White, LLC as asbestos consultants (iii) Schiff Hardin LLP as special counsel and (iv) Epiq Corporate Restructuring, LLC as claims agent

The Debtors’ lead petition notes between 50,000 and 100,000 creditors; estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn. In lieu of a top 20 unsecured creditors list, the Debtor has requested permission to file a "List of the Top Law Firms with Asbestos Cases." That list, running to 25 law firms and not providing any specific $dollar amounts as to potential claims, is included with the Debtor's Petition. 

Objectives of the Chapter 11

The Declaration (defined below) states: The Debtor commenced this Chapter 11 Case to obtain a comprehensive and permanent resolution of its asbestos liability. Accordingly, the Debtor intends to focus its efforts on negotiating with representatives of current and future asbestos claimants, and ultimately obtaining approval of, a plan of reorganization that will, among other things (a) establish and fund a trust under section 524(g) of the Bankruptcy Code to pay qualifying asbestos-related claims and (b) provide for the issuance of an injunction that will permanently protect the Debtor, its affiliates and others from any further asbestos-related claims.

In a press release announcing the filing, the Debtors advised that “DBMP LLC, an affiliate of CertainTeed LLC, based in North Carolina that holds the legacy asbestos liabilities of the former CertainTeed Corporation, today announced that it has filed a voluntary petition for Chapter 11 relief in the U.S. Bankruptcy Court for the Western District of North Carolina in Charlotte in an effort to equitably and permanently resolve all of its current and future asbestos claims. 

DBMP LLC intends to seek court authority to establish a trust under Section 524(g) of the U.S. Bankruptcy Code to ensure that all individuals with current and future asbestos claims are treated fairly and equitably. Section 524(g) is a specific provision of the U.S. Bankruptcy Code that is applicable to companies that have been subject to and would continue to face substantial numbers of asbestos-related claims: dozens of companies – including a number of the most prominent defendants – have used this process to resolve their asbestos liabilities.

DBMP LLC is the parent company of another North Carolina entity, which operates manufacturing plants that are unaffected by the filing and will continue as usual with no impact on employees, customers and suppliers. All other affiliates of the Saint-Gobain Group in the U.S. are not part of the Chapter 11 filing and will continue to operate in normal course."

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Declaration”), Robert J. Panaro, the Debtor's Vice President and Chief Restructuring Officer, detailed the events leading to the Debtor's Chapter 11 filing. As with other companies looking to use Chapter 11's section 524(g) provisions to tie a tourniquet around liabilities relating to inter alia, asbestos, opioides, talc and sexual abuse, the Debtor stresses the enormous open-ended cost of defending claims arising out decade's old conduct. 

The goal is to get a Court to agree to the use of Section 524(g) while balancing the interests of a debtor against the rights (and plights) of current and potential claimants. Big numbers and a general pitch as to the overall justness of allowing total judicial absolution for past sins…is part of every debtor's declaration in support of first day pleadings for this sort of case; and this Declaration does not disappoint. The Declaration details $2.0bn of costs with a run rate of $80.0mn to $160.0mn per year since 2002 and notes that most of the 60,000 claims now pending were filed more than 40 years after the Debtor's asbestos-containing products were last sold [NB: Not mentioned is that asbestosis, unlike opioides,etc, has an extremely long latency period, often taking 40 years to develop]. 

This Declaration, however, does not stop there; aggressively attacking the "unceasing and unwarranted filing" of claims relentlessly filed by unscrupulous plaintiffs in respect of products that were not "friable and not likely to be released into the air in sufficient concentrations to be hazardous." It will be interesting to see how this "blame the victim" (or at least a lot of them) argument goes down with a Court obligated to protect the interests of those victims; as well as the parties with which the Debtor has committed to reaching a settlement.

The Declaration states: "This chapter 11 case was caused by the unceasing and unwarranted filing of thousands upon thousands of asbestos-related claims against the Debtor and Old CT. The burden of managing, defending and resolving these claims is substantial, and this litigation and its associated burdens are expected to continue for decades more.

Old CT [“Old CT” is the former CertainTeed LLC which no longer exists and has been replaced further to a 2019 restructuring with the unhelpfully named CertainTeed LLC, or New CT, a non-Debtor which holds certain of Old CT’s assets, see structure chart below] manufactured and/or sold certain products that contained asbestos, including asbestos cement pipe ('AC Pipe'), asphalt roofing products, other asbestos cement products such as siding shingles, joint compound products and specialty railroad insulation materials….Certain AC Pipe products continued to be produced and sold until 1992 and 1993, at which time Old CT ceased all production and sales of asbestos-containing products. 

Old CT ceased manufacturing and selling most other asbestos-containing products, however, by the 1970s or early 1980s

Old CT’s litigation burden has far exceeded its reasonable liabilities. Most of Old CT’s asbestos-containing products, including the products that give rise to the overwhelming majority of the asbestos claims, contained asbestos that was not friable and not likely to be released into the air in sufficient concentrations to be hazardous

Nonetheless, Old CT was relentlessly sued with respect to these products, as well as several other products that did not contain any asbestos at all.

In many other cases…the plaintiff’s identification of Old CT’s product was proven false after investigation by Old CT, but often only after substantial defense costs were incurred. I expect Old CT’s products were falsely identified in many other cases, although Old CT did not search for or did not uncover evidence in those cases to confirm the misidentification.

The Debtor and Old CT have faced hundreds of thousands of asbestos-related claims since the 1970s — over 40 years ago. The vast majority of these claims relate to Old CT’s production and sale of AC Pipe products or asbestos-containing asphalt roofing.

Since 2002 alone, the Debtor and Old CT have incurred approximately $2 billion in costs defending and resolving over 300,000 personal injury lawsuits relating to alleged asbestos exposure. Having long ago exhausted insurance coverage for asbestos claims, Old CT and the Debtor have borne the brunt of these costs. Together, Old CT and the Debtor have paid approximately $1.5 billion of that amount out of pocket — i.e., net of insurance recoveries over that same period of time. 

Despite having resolved hundreds of thousands of claims, more than 60,000 asbestos-related claims and associated lawsuits against the Debtor were pending on court dockets as of the Petition Date. 

Old CT has spent in the range of approximately $80 million to over $160 million every year since 2002 to defend and resolve asbestos claims.

The Debtor’s primary competitors have all filed for bankruptcy to resolve their asbestos liabilities, including all but one U.S.-based company with a limited history of manufacturing AC Pipe. As other co-defendants continue to file for bankruptcy, trend lines indicate that the asbestos tort claimants will attempt to seek even higher recoveries from fewer remaining defendants in the tort system. Under these circumstances, there is no predictable end in sight to the extraordinary and unflagging costs of litigating, defending and resolving asbestos claims."

About the Debtor

The Debtor manages and defends thousands of asbestos-related personal injury claims and oversees the operations of its subsidiary, Millwork & Panel.  Millwork & Panel, in turn, manufactures and sells vinyl siding and polyvinyl chloride (PVC) trim products for the construction market.  These products are manufactured at two facilities:  one located in Claremont, North Carolina; and the other in Social Circle, Georgia (together, the “M&P Facilities”).   

Corporate Structure Chart

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The post DBMP LLC – Saint-Gobain, Having Expended $2bn on Legacy Asbestos Claims, Files Chapter 11 for US Subsidiary Looking for “CertainTee” as to Asbestos Liability appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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