U.S. Trustee Program Files Objection to the Appointment of the Debtor’s Proposed Future Claimants’ Representative For Future Asbestos Claimants in Duro Dyne National Corp., No. 18-27963 (Bankr. D.N.J.)

Today—for the first time—the Justice Department’s U.S. Trustee Program (USTP) filed an objection to a debtor company’s proposed candidate for appointment as the Future Claimants’ Representative (FCR) in a case involving an asbestos bankruptcy trust.  An FCR is appointed to represent the possible future interests of individuals who are not yet, but may become, sick from exposure to asbestos from a company’s operations.  The interests of future claimants can be adverse to the interests of current claimants who are paid first and may deplete trust funds available to pay to future claimants.

In the objection filed in the Duro Dyne case, the USTP asserts that the candidate’s apparent conflicts of interest and close connections with lawyers representing current claimants may compromise his independence in serving as the FCR.  The proposed FCR was selected by the plaintiffs’ and debtors’ lawyers under a pre-negotiated trust plan that lacks protections against fraudulent claims (allowing depletion of the trust funds), but that provides the FCR with a long-term position that will continue long after confirmation of a bankruptcy plan.  The USTP seeks further discovery to determine if the apparent conflicts and connections are disqualifying. 

According to Principal Deputy Associate Attorney General Jesse Panuccio, “In recent years, evidence has emerged that asbestos trusts lack the transparency and rigorous auditing necessary to prevent fraud, waste, and abuse.  To best protect all victims, those appointed in asbestos cases should be held to the same conflicts prohibitions and standards of independence that are required of other fiduciaries appointed under the Bankruptcy Code.”

The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.  The Program has 21 regions and 92 field office locations.  Learn more on the Program at: https://www.justice.gov/ust.