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RPM Unit May See $1B+ Asbestos Tab

Wednesday, May 22, 2013

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Bondex International Inc., a bankrupt division of RPM International Inc., may owe current and future asbestos product victims nearly $1.17 billion, a judge has ruled in rejecting RPM’s “novel” calculation of half that total.

In an order handed down Monday (May 20), U.S. Bankruptcy Judge Judith K. Fitzgerald put “the total of all estimated present and future asbestos personal injury claims against [Bondex and Specialty Products Holding Corp. (SPHC)] at $1.166 billion net present value.”

Bondex display Bondex
asbestoslegaljournal.com

Bondex manufactured a variety of asbestos-containing products and materials and inherited others in a 1966 acquisition.

Most of that total—$1.1 billion—involves claims for mesothelioma, a cancer caused by asbestos, Fitzgerald’s order said.

Appeal Planned

RPM, the parent of company of Carboline, Rust-Oleum and dozens of other paint, coatings and construction brands, immediately disputed the ruling and vowed to appeal.

“The debtors, Bondex and SPHC, firmly believe that the opinion substantially overstates the amount of their liability and is not supported by the facts or the law,” RPM said in a statement. “The debtors intend to appeal. It is anticipated that the appeal process could take an additional two to three years.”

Fitzgerald’s ruling was the latest step in the process of determining how much Bondex and SPHC must set aside in an asbestos trust for their reorganization plan. The companies want all Bondex- and SPHC-related product liability claims channeled to that trust.

Bondex and Specialty Holdings filed for Chapter 11 Bankruptcy on May 31, 2010, overwhelmed by claims from Bondex’s longtime manufacture of a wide variety of construction products and materials containing asbestos.

‘Novel Approach’

Determining the size of the companies' asbestos trust involves the submission of estimates of current and future claims by the company and its creditors.

Bondex
mesolthelioma.com

A bankruptcy judge estimated that future and current claims from Bondex products would total nearly $1.17 billion. Bondex parent RPM will appeal.

Fitzgerald’s 50-page memorandum accompanying her order noted that estimates of claims ranged from the companies’ own $300 million to $575 million net present value to $1.255 billion suggested by a lawyer and behavioral scientist for the Asbestos Creditors’ Committee.

However, the companies’ own expert testified that they “would have spent approximately $700 million nominal to settle claims” had they remained in the tort system and evaluated claims individually, the ruling noted.

Meanwhile, Dr. Thomas Vasquez, an economist who was the Future Claimants’ Representative, estimated total liability at $1.1 billion net present value.

The range of estimates reflects several factors, including different time periods for the forecasts, different judgments about propensities to sue, the average amount paid per claim, and other variables.

In addition, the ruling said, the companies used a forecasting model that assumes only occupational exposure to asbestos and assert that they have no liability for claims based on alleged exposures before 1966.

Vasquez’s forecasting model, on the other hand, averaged the company’s occupational-exposure approach with another model that considers “whoever gets asbestos from whatever source.”

Zinsser
Zinsser

The assets of Bondex were sold to sister companies Zinsser and DAP in 1999, leaving Bondex to fight asbestos litigation until it filed for bankruptcy in 2010.

In the end, the judge rejected what she called a "novel approach" by the companies and based her estimate mainly on Vasquez’s model.

Tangled History

The case has roots in 1947, when what is now Specialty Products Holding Corp. was incorporated as Republic Powdered Metals Inc. In 1955, Republic Powdered Metals acquired the assets and some liabilities of The Reardon Co., a small manufacturer of asbestos-containing joint compounds and other DIY products.

From 1966 to May 31, 1972, Republic Powdered operated the Reardon companies as a separate division. In 1972, Republic changed its name to RPM, and Bondex International was formed as an RPM subsidiary that included the Reardon products as well as the roofing products division.

Bondex continued to manufacture asbestos-containing joint compound until 1977, when it reformulated the product without asbestos. In 1999, however, Bondex sold its assets to DAP and Zinsser, leaving its “only activity” as “the litigation and settlement of asbestos-related claims,” Fitzgerald’s order notes.

RPM Products
RPM International Inc.

RPM International Inc., owner of many popular coating brands, is trying to determine how much it has to set aside in an asbestos trust against claims.

In 2002, RPM International Inc. was incorporated and became the corporate parent of RPM Inc., an intermediate holding company that changed its name in 2010 to Specialty Products Holding Corp.

Today, RPM owns some of the world's leading specialty coatings, sealants and building materials brands.

Asbestos Claims

The first mesothelioma cases were filed against Bondex in 1980. The litigation “began to increase dramatically in 2000” when the companies identified other asbestos products marketed under private-label names in court documents, the judge noted.

Until 2004, insurance covered about 90 percent of the asbestos claim settlement payments and defense costs, but the policy limits were exhausted. For eight years, the ruling notes, the companies “were paying about $50 million per year in indemnity payments.”

In one Illinois county alone, the ruling adds, the companies defense costs around that time were $10 million a year.

   

Tagged categories: Asbestos; Carboline; Coating Business; Construction; Health and safety; Laws and litigation; RPM; Zinsser

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