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Congoleum payment to asbestos lawyers is free from conflict

Newark, N.J.—A judge’s May 7 ruling stated two lawyers for asbestos victims can keep the $2 million Congoleum paid to help resolve tens of thousands of claims against the company shortly before it filed for bankruptcy.

U.S. District Judge Joel Pisano in Newark, N.J., found no conflict by the lawyers, Joseph Rice of Motley Rice in South Pleasant, S.C. and Perry Weitz of Weitz & Luxemburg in New York City. He said they were working “to negotiate a prepackaged plan of reorganization under which asbestos personal injury claimants would likely recover more than they would have if Congoleum had gone into a ‘free fall’ bankruptcy.”

No plan has been confirmed even though the Congoleum bankruptcy case has been pending since Dec. 31, 2003.

Part of what has held up the process is the dispute over the payments to the lawyers. Congoleum turned to legal counsel in November 2002 to discuss the feasibility of a prepackaged plan. Its primary insurers’ policies were exhausted and the Mercerville flooring manufacturer was litigating coverage with its excess carriers in state court.

Last year, on Aug. 24, Pisano took the case away from bankruptcy court and wrote that the lawyer’s investigation of feasibility and creation of consensus among claimants was a “monumental task,” and it would have been unreasonable to expect their clients to bear the expense of negotiating a global settlement.

Rice stated, “The insurance industry tried to make this a poster child to warn corporations against a pre-packaged bankruptcy to try to work out an agreement with asbestos plaintiffs’ bar because they’d fight every step of the way.”