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Administration of Settlement Trusts & Qualified Settlement Funds

Lawyers in our MTI Group have been serving settlement trusts and qualified settlement funds (QSF's) for more than 20 years, beginning with our pivotal role in the creation of the Eagle Picher Industries Personal Injury Settlement Trust—the first section 524(g) asbestos settlement trust established in the United States.

Today, KMK is one of a few law firms in the country that regularly represent mass tort settlement trusts and claims resolution entities. Our leadership and innovation in these areas of the law have led numerous mass tort settlement trusts and claims resolution companies to engage KMK as counsel; today we represent over 15 active settlement trusts.

KMK’s practice in the areas of mass tort bankruptcy and settlement trusts was pioneered by senior partner Kevin E. Irwin. Over time, the practice has grown to include a multi-disciplinary group of lawyers and other professionals with backgrounds in bankruptcy, transactions, taxation, litigation, and insurance coverage. 

The MTI Group includes a team of lawyers with years of experience in dealing with the unique issues faced by trustees of mass tort settlement trusts. We advise trustees and other MTI Group clients on all aspects of trust administration, including:

  • Compliance with section 524(g) of the Bankruptcy Code, the plan of reorganization that created the trust, and their governing trust agreement and distribution procedures, as well as trustee liability and governance issues;
  • Claims processing, settlement, and dispute resolution.
  • Corporate matters, including dispositions of assets, publicly-traded securities, real estate, and operating businesses and general corporate matters including acquisitions, joint ventures and other strategic partnerships;
  • Bankruptcy law issues;
  • Insurance coverage litigation and liability insurance issues, including negotiating coverage disputes with members of the London market; and
  • Tax matters related to corporate reorganization, NOL application, and complicated matters of QSF status in the context of claims processing entities operated on a cooperative basis for tax purposes.

Our most significant settlement trust administration engagements include:

Celotex Asbestos Settlement Trust. KMK has been general counsel to the Celotex Asbestos Settlement Trust since its inception in 1998. The trust was created at the conclusion of the Celotex Corporation and Carey Canada, Inc. bankruptcy proceedings, and was funded with over $1.5 billion in assets, including all the common stock of the debtors, 19% of Walter Industries, Inc., a publicly traded Fortune 500 company, and significant insurance assets, including rights in ongoing asbestos insurance coverage litigation.  Celotex Corporation was a major building-products supply company with over $800 million in annual sales, multiple production facilities located throughout the country, and five separate business groups that manufactured and distributed roofing, wallboard, ceilings, fiber board, and rigid foam products.

KMK handled all aspects of the trust’s start-up, including closing the transactions contemplated to make the plan of reorganization effective, establishing a claims processing facility, and advising on trustee liability insurance coverage. Some of the specific matters on which KMK lawyers have advised the Celotex trustees include:

  • Sale of Carey Canada’s asbestos mine site in Quebec, and resolution of related environmental and reclamation liabilities.
  • Sale of Celotex’s five building-products businesses in separate private auction sales, resulting in over $500 million in sales proceeds, and subsequent wind-up of the corporation.
  • Management of the secondary public offering of a portion of the trust’s 19% ownership interest in Walter Industries, Inc., 13-D filings in connection with trust’s stock ownership, and sale of the trust’s remaining shares over four years through gradual market and private block sales.
  • Analysis of claims processing alternatives, establishment of a stand-alone claims processing facility, and the institution of procedures for web-enabled electronic claims filing.
  • Negotiation of the trust’s transfer of its claims processing facility to a limited liability company formed by several asbestos settlement trusts, which now operate the facility on a cooperative basis.
  • Acquisition of a private letter ruling from the Internal Revenue Service regarding compliance with IRC § 468B in connection with potential claims processing for other asbestos settlement trusts.
  • Compliance with the trust’s claims resolution procedures throughout the processing of over 650,000 claims.
  • Management of outside litigation counsel, including insurance coverage counsel and property damage dispute counsel, and assessment of litigation and settlement strategies recommended to the trustees by such counsel.
  • Selection of broker to market and sell real estate .
  • Preparation of annual reports and accounts filed with the trust’s supervisory court, the United States Bankruptcy Court for the Middle District of Florida.

Armstrong World Industries, Inc. Asbestos Personal Injury Settlement Trust. KMK was engaged as general counsel to the trustees of the Armstrong World Industries, Inc. Asbestos Personal Injury Settlement Trust in 2004. The trust, which was formed at the conclusion of the Armstrong World Industries, Inc. (AWI) bankruptcy case filed in the District of Delaware, was funded with assets in excess of $2 billion and owns a significant percentage of the outstanding common stock of AWI, one of the world’s leading manufacturers of flooring products and ceiling systems, with annual sales of over $3 billion.  The trust’s other assets included cash, AWI debt securities, and rights to significant insurance recoveries that are the subject of ongoing, complex litigation.  Representative matters on which KMK has advised the trustees include:

  • All trust start-up matters, including tax issues, banking relationships, liability insurance coverage, and internal trust operating procedures.
  • Securities-law compliance and corporate-governance issues arising out of the trust’s stock ownership interest in AWI, a major public company in the building-products industry.
  • The disposition of the trust’s controlling interest in AWI through underwritten secondary offerings of equity securities and related share repurchase by AWI; and block trades under SEC Rule 144.
  • Claims processing operations and compliance with the trust’s distribution procedures.

Tronox Tort Claims Trust. KMK was engaged in 2010 as counsel to the Tronox Tort Claims Trust, which was created at the conclusion of the Tronox Incorporated (f/k/a Kerr-McGee) bankruptcy case filed in the Southern District of New York. The trustee is Garretson Resolution Group (“GRG”). The trust’s assets consist of cash and a 12% interest in the Anadarko Litigation Trust, of which GRG is a Trust Advisory Board Member. Some of the matters on which KMK has advised the trustee include:

  • All trust start-up matters, including tax issues, liability insurance coverage, and internal trust operating procedures.
  • Processing of prepetition personal injury claims.
  • Revisions to the trust distribution procedures.
  • Representation of the trust in the mandatory arbitration of certain prepetition property damage claims.

DII Industries, LLC Silica PI Trust. KMK was engaged in 2004 as general counsel to the DII Industries, LLC Silica PI Trust, one of two settlement trusts created at the conclusion of the Mid-Valley, Inc. pre-packaged bankruptcy case filed in the Western District of Pennsylvania. (DII Industries and Mid-Valley are affiliates of Halliburton.)  Former defense trial lawyer, Martin J. Murphy, is the sole trustee of this trust.  KMK has advised the trustee on various matters, including:

  • Processing of over $100 million in payments of settled claims, which were required to be paid within days of the trust going effective.
  • All trust start-up matters, including tax issues, banking relationships, liability insurance coverage, and internal trust operating procedures.
  • Revisions to the trust’s distribution procedures.

Wallace & Gale Asbestos Settlement Trust. KMK was engaged as general counsel to the Wallace & Gale Asbestos Settlement Trust in 2004.  The trust’s only assets are insurance coverage rights of the former company.  Former Ohio state-court judge James J. McMonagle serves as the sole trustee.  Among the matters on which KMK has advised the trustee is the negotiation of procedures for paying claims through coverage-in-place agreements with insurers.

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