Bankrupt Texas Power Company Will Not Be Mandated to Create a Trust for Future Claimants

Illustration of legal cases for asbestos and mesothelioma

U.S. Bankruptcy Judge Christopher S. Sontchi has ruled that Energy Future Holding Corp., a Dallas-based company with 14 power plants, is not obligated to set up a trust for future asbestos personal injury claimants. Energy Future, which is the largest unregulated electricity provider in the Texas, has had nearly 400 asbestos claims filed against it.

The decision came after a group of asbestos lawyers sought out Judge Sontchi’s appointment of a representative for future claimants who have yet to exhibit symptoms of asbestos-related diseases. The asbestos lawyers claimed that these types of victims should be entitled to compensation, despite the fact that they are currently unaware of their future condition.

To make a decision, Judge Sontchi examined numerous cases to determine whether Energy Future, currently in Chapter 11, should be required to create a trust fund once the company emerges from bankruptcy, or if Chapter 11 precludes such a measure.

Citing a “weight of developing authority,” Judge Sontchi concluded that Energy Future could not be mandated to set up a trust for future claimants, but that the company was required to set a bar date by which any claims must be filed.

In the 33-page decision, Judge Sontchi acknowledged that all power plants built before 1980, like those belonging to Energy Future, used asbestos-containing insulation, and that the development of asbestos-related diseases and lawsuits stemming from such injuries was “virtually unavoidable.”

Exposure to asbestos can result in a variety of respiratory illnesses, including mesothelioma, which has an extremely high mortality rate; approximately 10% of those with the disease will survive for five years beyond their diagnosis. Although asbestos has been banned since the 1970s, mesothelioma’s latent nature continues to result in about 3,000 diagnoses each year.