Judge Finds Collusion in Proposed Asbestos Deal

     (CN) – A federal bankruptcy judge in Pittsburgh rejected a proposed bankruptcy plan to resolve asbestos claims against Skinner Engine Co. Calling the agreement between asbestos lawyers and bankruptcy lawyers collusive, U.S. Bankruptcy Judge Bruce McCullough refused to approve the Chapter 11 filing and instead converted it to a Chapter 7.

     McCullough ruled that collusion between the Maritime Asbestos Legal Clinic of Detroit and Skinner Engine bankruptcy lawyers at McGuireWoods kept him from confirming the settlement, which would have pumped 20 percent of Travelers payments to Skinner Engine, totaling $146 million, according to media reports.
     Travelers Casualty and Surety Co. objected to the settlement; McCullough ruled that the plan could not be approved over the insurer’s objection.
     Travelers successfully defended the now-defunct Skinner Engine against 28,000 claims over 20 years and had never lost.
     “Such fact is strong evidence as to the futility of such claims, and it makes little, indeed no, sense to settle claims that have thus far been so overwhelmingly unsuccessful,” McCullough wrote.
     Skinner Engine, a ship engine-maker whose products were insulated with asbestos, filed for bankruptcy in 2001, and by 2003, had sold its assets.
     Creditors tried to convert the case from Chapter 11 to Chapter 7 so that the court could appoint a trustee to administer the estate.
     The settlement plans went through at least five revisions, with McCullough shooting them down along the way.

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