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Monday, December 17, 2018

U.S. Trustee Program Files Objection to the Appointment of the Debtor’s Proposed Future Claimants’ Representative in In Re The Fairbanks Company, No. 18-41768 (Bankr. N.D. Ga.)

The Justice Department’s U.S. Trustee Program (USTP) filed on Friday an objection to a debtor company’s proposed candidate for appointment as a Future Claimants’ Representative (FCR) in a bankruptcy case involving a trust to compensate those suffering from asbestos disease.  An FCR is appointed by the court to protect the interests of those exposed to asbestos products manufactured or sold by a debtor, but who have not yet become sick.  Current claimants are represented by attorneys who often control the asbestos trusts to the detriment of future asbestos victims.

This is the second time this year that the USTP has opposed the selection of a candidate proposed by a debtor company and endorsed by the plaintiffs’ lawyers representing current claimants.

In its objection, the USTP argued that the court is required to select the best candidate without deference to the debtor or plaintiffs’ lawyers.  The objection asserts that the proposed candidate currently serves as FCR for several other trusts and has other connections to trusts that have contained inadequate safeguards against fraudulent claims, inflated professional fees, and other costs that threaten to deplete the trusts and reduce compensation to future claimants.  The USTP asked the court to adopt an open selection process that allows candidates without connections to the professionals in the case or other conflicts to be considered.  As noted in its brief, “the USTP was created to be the ‘watchdog’ for the bankruptcy system to ensure that cases are not administered for the narrow benefit of the lawyers and other professionals instead of stakeholders such as creditors and employees.”

“In recent years, there have been credible allegations—and at least one court has found evidence—of misrepresentation, mismanagement, and abuse in the asbestos trust system,” said Principal Deputy Associate Attorney General Jesse Panuccio.  “A significant contributing factor is the failure of courts to appoint independent future claimants’ representatives who are free from conflicts of interest, including conflicts caused by their involvement in other asbestos trusts.  The Department of Justice is committed to protecting the rights of victims of asbestos disease and the integrity of the bankruptcy system.”  

The USTP is a component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and enforcing the bankruptcy laws.  Learn more about the Program at https://www.justice.gov/ust

Updated December 17, 2018