Section 524(g) Without Compromise: Voting Rights and the Asbestos Bankruptcy Paradox

93 Pages Posted: 1 Apr 2008 Last revised: 9 Aug 2013

Date Written: September 1, 2008


Section 524(g) of the Bankruptcy Code was adopted to protect unknown future asbestos personal injury victims' rights and prospects for financial recovery. To serve these goals and satisfy the demands of due process, Section 524(g) provides two basic forms of virtual representation for future victims - requiring the appointment of an independent legal representative and aligning the interests of future victims with current claimants (75% of whom must approve any plan that invokes Section 524(g)). In recent years, however, the 75% super-majority vote requirement has been transformed into a veto power wielded by a small group of law firms, who control sufficient votes to block any proposed asbestos reorganization plan. These firms use this power to dictate critical steps in the process - including who will be appointed as the future victims' statutory legal representative - and demand terms that violate black letter bankruptcy law. Thus, the current approach leads to a bizarre paradox: the only way to obtain sufficient votes to confirm an asbestos reorganization plan is to include provisions that will render it unconfirmable (or, at least, unable to withstand challenge on appeal). The only way to overcome this paradox as a practical matter is to buy off all current parties who may object, usually by making deals that encroach upon the interests of future victims.

This article challenges the legal and practical justifications for the asbestos veto and outlines several modest modifications to the asbestos bankruptcy process. By restoring traditional negotiating leverage, returning voting power to asbestos victims, ensuring that legal representatives are unburdened by conflicts of interest, and aligning current and future victims' interests; this proposal outlines a more balanced, equitable approach to protecting future victims.

Keywords: asbestos, bankruptcy, 524(g), veto, voting, confirmation, plan, chapter 11, reorganization, future claimants, legal representative, bias

Suggested Citation

Brown, S. Todd, Section 524(g) Without Compromise: Voting Rights and the Asbestos Bankruptcy Paradox (September 1, 2008). 2008 COLUM. BUS. L. REV. 841, Available at SSRN:

S. Todd Brown (Contact Author)

SUNY Buffalo Law School ( email )

528 O'Brian Hall
Buffalo, NY 14260-1100
United States

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