In Lydon v. T& N Ltd., 2015 WL 544970 (1st Cir. 2015), the First Circuit found in favor of T&N Limited, an asbestos manufacturer, effectively denying thousands of asbestos-related claims. Once T&N became aware that its product exposed it to significant liability due to its propensity to cause mesothelioma, T&N filed for Chapter 11 Bankruptcy reorganization. Although one of T&N’s principal assets was a 500 million pound liability insurance policy issued by Hercules, United Kingdom law controlled the bankruptcy and the Hercules policy could not be assigned to the Trust. In addition, the Hercules policy contained a 690 million pound self-insured retention.
As part of the Chapter 11 plan a Trust was created. In order to take advantage of the Hercules policy, the plan allowed for T&N’s asbestos liability to continue post-reorganization and appointed the Trust as an agent of all claimants to bring suit against T&N. T&N’s liability was to continue until expiration of the Hercules policy.
As part of the Chapter 11 filing, the Bankruptcy Code imposes an automatic stay which barred commencement of lawsuits against T&N that arose prior to the bankruptcy filing. The stay was terminated on December 27, 2007. The Bankruptcy Code also tolls all statute of limitations periods, and allows for suits to be filed 30 days after the termination of the stay for suits that would have otherwise been time-barred.
One such claimant, Daniel Barraford, died from mesothelioma in 2002 after working with T&N’s asbestos products while constructing the Prudential Center in Boston. In 2004, his wife brought a lawsuit against other asbestos manufacturers, but could not sue T&N because of the stay created by the Chapter 11 filing. However, the Trust did not file the claim against T&N within 30 days of the stay’s termination. The Trust argued that the Chapter 11 plan permitted claims to be brought, effectively voiding the applicable statute of limitations, because the plan allowed for T&N’s liability to continue until expiration of the Hercules policy.
The District Court disagreed with the Trust, and found that the Barraford claim was time-barred by the Massachusetts statute of limitations. In the appeal, while the First Circuit acknowledged that the plan stated that asbestos claims could “proceed in the ordinary course to judgment or circuit”, the plan did not explicitly state that the statute of limitations was extended or voided.
The Trust advised the Court that there are potentially thousands of claims would be time-barred if the statute of limitations is not extended. Thus, the First Court’s decision in favor of the trust has protected T&N and Hercules from hundreds of millions of dollars in exposure while leaving thousands of claimants without a remedy against T&N.