Conflicts of Interest Put End to Congoleum's Pre-Packaged Bankruptcy Plan

Well, the Third Circuit has decided to clamp down on the "business as usual" on pre-packaged asbestos bankruptcies. Last week, it held that a bankrupt company couldn't hire a plaintiff's law firm to represent it in bankruptcy in pursuing claims against the company's insurance carriers where that firm had sued the company. The court held that the insurance companies for Congoleum had a large enough stake to have standing to challenge the designation as plaintiff's firm as special insurance counsel and, since counsel had previously filed claims against Congoleum in asbestos cases, that was sufficient to constitute a conflict of interest.

Read the opinion here.