NEW YORK, JUNE 1 -- Two judges supervising hundreds of asbestos injury lawsuits today ordered the Manville Corp. bankruptcy case reopened to overhaul a financially ailing trust fund designed to compensate victims of asbestos-related diseases.
In a joint order, U.S. District Judge Jack B. Weinstein and New York State Supreme Court Judge Helen E. Freedman said the Manville Personal Injury Settlement Trust was out of money and suggested the company advance it between $200 million and $300 million so it can resume payments to victims.
The trust was formed in Manville's 1988 reorganization, six years after it was driven into bankruptcy court by lawsuits over production of asbestos, the insulation and building material found to cause severe and sometimes fatal illnesses.
The trust came under fire last month because of a cash shortage induced by more cases, larger payouts and quicker settlements than expected. The trust told the judges that claimants filing this year wouldn't get paid until 2004.
Last month, the judges sharply criticized trust management and said the bankruptcy court could lift an injunction barring asbestos victims from suing Manville directly. Currently, only the trust can be sued. Today, they supported keeping the injunction in place if changes in the trust are made.
As part of its Chapter 11 bankruptcy reorganization, Manville placed $2.5 billion in assets, mostly stock, into the trust. The company also agreed to contribute $75 million annually beginning in 1991 plus 20 percent of annual net income from 1992 until all claims are paid.
The trust told the judges this week it had paid out almost all of its $800 million in cash. It said the fund has not been mismanaged, denying claims that hundreds of millions of dollars were paid to a few plaintiffs' lawyers.
The judges said that more than 130,000 remaining claims require an estimated $6.5 billion, and with incoming claims and costs, the trust needs at least $7.5 billion. But the trust now is worth only about $1.5 billion, they said.