RPM International, Inc., a company whose subsidiaries have come under fire for exposing their employees and consumers to dangerous asbestos fibers, is attempting a controversial bankruptcy filing in order to handle a downpour of asbestos related lawsuits. The company is seeking a chapter 11 bankruptcy for both Specialty Products Holding Corp. and Bondex International., two of its divisions whose unsafe work environments and negligent product distribution have been the cause of tragedy for many individuals and their families.
Under a chapter 11 bankruptcy a corporation’s officers do not lose control of their company. Instead, the company is reorganized in a manner deemed suitable to allocate available funds to creditors, while at the same time coming under protection of an automatic stay that prevents further litigation and collection attempts. This reorganization often results in the creation of a trust to settle existing debts. The corporation in question transfers assets into a trust, and individuals or companies who have a claim against the corporation must then apply for a settlement paid from that trust.
This strategy helps to keep liability pay-outs under control, referring victims of the company’s negligence to a regulated fund application process instead of undergoing the more volatile alternative of settling claims in a court of law. Other companies responsible for exposing their employees or consumers to dangerous asbestos fibers have created similar trusts to slow down and regulate settlement pay-outs, a plan which allows them to continue operating for profit. In one recent case, Federal-Mogul Corp formed a trust that paid more than $9 billion in asbestos settlements.
RPM’s bankruptcy filings have come on the heels of more than 10,000 pending asbestos lawsuits made against the paint and chemical company and its subsidiaries. Having already paid more than $80 million for asbestos claims in the last five years, RPM International, Inc. hopes to form a trust through the chapter 11 bankruptcies that would be used to settle with new claimants, a strategy that could protect the company from financial collapse.
If successful, the bankruptcy filings could mean difficulty and delay for affected individuals and their families. Victims of mesothelioma, lung cancer, asbestosis and other asbestos related disease caused by RPM’s products have historically filed lawsuits against the company to cover their medical costs and losses. If the chapter 11 bankruptcies are approved, those same victims will be forced into a slow, regulated fund application process that protects the company from financial damage.