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Court reverses own stance on timing of asbestos claim

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PHILADELPHIA—A ruling by the 3rd U.S. Court of Appeals could make it more difficult for some asbestos injury claimants to pursue damages in cases involving bankruptcy.

The case, JELD-WEN Inc. fka Grossman’s Inc. vs. Gordon Van Brunt, involved a woman who bought home remodeling products in 1977 that allegedly contained asbestos. Mary Van Brunt bought the products from Canton, Mass.-based retailer Grossman’s. Twenty years later, Grossman’s filed for bankruptcy protection.

Subsequently, Klamath Falls, Ore.-based JELD-WEN acquired Grossman’s.

In its ruling Wednesday, the Philadelphia-based appeals court noted that Grossman’s plan of reorganization “purported to discharge all claims that arose before the plan’s effective date” and that the company gave no indication it might face future asbestos claims.

Ms. Van Brunt, who was diagnosed with mesothelioma in 2007, sued JEN-WELD and numerous other defendants. Under New York state law, the cause of action for asbestos-related injuries does not accrue until the injury manifests itself. She died before the case was heard.

JELD-WEN asked the U.S. Bankruptcy Court in Wilmington, Del., to bar the Van Brunt claim because it arose in 1977. But the bankruptcy court and the U.S. District Court for Delaware cited the 3rd Circuit’s 1984 ruling in Avellino & Bienes vs. M. Frenville Co. and ruled in favor of Mr. Van Brunt.

In its ruling Wednesday, however, an en banc panel of the 3rd Circuit overturned that ruling, which had said a claim “as that term is defined by the defined by the bankruptcy code, arises when the underlying state law cause of action accrues.” In overruling its Frenville stance, the court noted that the earlier ruling was at odds with rulings in other circuits and had been widely criticized over the years.

After discussing various approaches taken by other courts in similar situations where asbestos claims and bankruptcy law intersect, the court wrote that “whether a particular claim has been discharged by a plan of reorganization depends on factors applicable to the particular case and is best determined by the appropriate bankruptcy court or the district court.”

It remanded the case to the district court.