Johns-Manville Corp. was (is) a Fourtune 500 company, and was deemed a paradigm of success in
corporate America by the financial community. However, the company produced a product that was poison
—asbestos. (Moreover, Manville knew it was poison, and had know it since the 1930s
(http://www.ewg.org/research/asbestos-think-again/industry-hid-dangers-decades (Links to an external
site.)), and it hid the danger. By 1982 approximately 16,000 lawsuits were pending against Manville, and it
anticipated a further crushing economic burden by the filing of an even more staggering number of suits by
those who had been exposed but who will not manifest the asbestos-related diseases until some time
during this future period (20-30 years as the disease manifests itself–“the future asbestos claimants”).
Approximately 6,000 asbestos health claims were estimated to have arisen in only the first 16 months since
the filing date. The burden was compounded by the insurance industry’s general disavowal of liability to
Manville on policies written for this very purpose.
Procedure:
JM petitioned for a pre-emptive bankrupcy under Chapter 11; attorneys representing some of the people
sickened by JM’s product moved to dismiss the petition.
Issue:
Can JM pre-emptively declare bankruptcy and discharge future cases? Why? or Why Not?
Case Questions:
What did Manville want to do here, and why? (Analyze the purpose of the BK declation and the reason
behind it.)
How does this case demonstrate the fundamental purpose of Chapter 11 as opposed to Chapter 7 BK
filings?
The historical background here is that Manville knew from at least 1930 that asbestos—used in many
industrial applications—was a deadly carcinogen, and it worked diligently for decades to conceal and
obfuscate the fact. What “good faith” argument was raised by the movants in this case?
Sample Solution
