Bankruptcy Stay Lifted Against Defendant/Debtor to Allow Plaintiffs to Pursue State Law Claims

In this case, the defendant that used asbestos in some of its production while in business filed chapter 11. There remained 123 claims against the defendant and the defendant’s proposed chapter 11 plan stated that the “liability issues will pass through the bankruptcy and be tried in non-bankruptcy courts having jurisdiction.” The defendant objected to the Asbestos Committee’s motion to lift the automatic stay, arguing the stay should remain in place pending plan confirmation.

In its analysis, the court applied the Fernstrom three-part balancing test that instructs courts to consider “(1) whether any great prejudice to either the bankruptcy estate or the debtor will result from continuation of the civil suit; (2) whether the hardship to the non-debtor party by maintenance of the stay considerably outweighs the hardship to the debtor; and (3) whether the creditor has a probability of prevailing on the merits.” The court found in favor of the plaintiffs on all three factors and lifted the stay.

Read the full decision here.