Aldrich asbestos committee says ‘Texas Two-Step’ defrauded claimants

By Sarah Lizee

Olympia, Wash., June 21 – Aldrich Pump LLC and debtor Murray Boiler LLC’s official committee of asbestos personal injury claimants filed two adversary proceedings alleging fraudulent transfers and breaches of fiduciary duties that occurred through two pre-bankruptcy divisional mergers, according to court documents filed Saturday with the U.S. Bankruptcy Court for the Western District of North Carolina.

The lawsuits were filed against Ingersoll-Rand Global Holding Co. Ltd., Trane Technologies HoldCo Inc. and individuals who serve or served as officers and managers of the debtors, among others.

The committee claims Ingersoll-Rand and Trane sought to defraud asbestos claimants by implementing the divisional mergers to divide entities within the Trane organization to separate its valuable assets from its asbestos liabilities, and by putting the newly formed Aldrich Pump and Murray Broiler entities into bankruptcy to further hinder the asbestos claimants.

The committee noted that the move, now commonly referred to as a “Texas Two-Step” bankruptcy, follows similar corporate actions as those that led to the Bestwall LLC and Johnson & Johnson LTL Management cases.

“The divisional mergers – step one in the two-part dance – were essential to [the] defendants’ scheme, as they allowed the Trane organization (other than Aldrich and Murray) to continue to operate outside of bankruptcy while taking advantage of the bankruptcy process with respect to asbestos claims,” the committee said in court documents.

“The bankruptcies of Aldrich and Murray were an equally essential component – step two – of [the] defendants’ scheme, as the bankruptcies permitted [the] defendants to gain leverage against asbestos victims – many of whom are gravely ill or dying – and their families, estates and heirs.”

The group noted that the bankruptcies have stayed all pending litigation and delayed payments to asbestos victims and their families for years.

Through the lawsuits, the committee is seeking monetary damages to the debtors’ estates and creditors in a sum to be determined at trial, as well as punitive damages.

Davidson, N.C.-based Aldrich provides climate control solutions. The company filed bankruptcy on June 17, 2020 under Chapter 11 case number 20-30608.

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