A bankruptcy judge maintained a pause on asbestos-injury litigation against U.S. units of Ireland’s Trane Technologies PLC but said the company might have gone too far by placing its asbestos liabilities in chapter 11, WSJ Pro Bankruptcy reported. Judge J. Craig Whitley of the U.S. Bankruptcy Court in Charlotte, N.C., said that Trane’s move to split off its asbestos liabilities away from its core climate-control business before placing them in bankruptcy appears to have had a “material, negative effect” on the legal rights of thousands of injury claimants. Yesterday’s ruling marked the second time in recent weeks that Judge Whitley has suggested a solvent asbestos manufacturer might have crossed a legal line by hiving off asbestos liabilities and placing them in chapter 11. Earlier this month, he made similar comments about CertainTeed LLC, a U.S. unit of France’s Compagnie de Saint-Gobain SA that is using bankruptcy to try to settle vast asbestos litigation. Judge Whitley didn’t make any final conclusions in either case about whether the companies’ moves to silo asbestos liabilities ahead of a bankruptcy filing did, in fact, defraud asbestos claimants. Both decisions dealt with a Texas statute that allows companies to split themselves in two and allocate their liabilities between the successor entities. CertainTeed and Trane each used these transactions, known as divisive mergers, to isolate their asbestos liabilities in newly formed subsidiaries that then filed for chapter 11.
