Ex-Asbestos Giant Faces New Court Challenge : Health: Canadian litigation holds potential for more foreign lawsuits against Manville. Company asks U.S. to intervene.

NEW YORK —  More than four years after exiting bankruptcy court confident that its legal troubles over asbestos had ended, Manville Corp. is facing its first foreign challenge to a shield against asbestos-related lawsuits.

The trust fund that handles Manville’s asbestos cases said litigation in Canada could trigger a “worldwide run” on Manville assets. It is lobbying the U.S. government to ask Canada to honor the injunction barring asbestos lawsuits against Manville.

Manville denies that more than 60 lawsuits filed in a Vancouver, British Columbia, court pose any financial threat. But the situation reflects how the former asbestos titan is still struggling against its past despite emerging from Chapter 11 in November, 1988.

A Manville spokeswoman Monday disavowed letters written last month by the trust’s lawyer, David Austern, that raise the specter of widespread claims on Manville’s more than $660 million in foreign assets, including about $75 million in Canada. Manville operates in 12 foreign countries.

In a Dec. 4 letter to U.S. District Judge Jack B. Weinstein, Austern wrote, “We share Manville’s concern that if the current situation in British Columbia were made public, we could experience a worldwide run on Manville’s overseas holdings.

“We have very serious doubts about our ability to successfully defend such a global assault, and there is the equally serious matter of the effect such news would have on the financial community, specifically Manville’s creditors and the price of our Manville stock,” he wrote.

In an interview Monday, Austern backed off the language, saying he did not envision a run on Manville assets. Manville spokeswoman Sharon Sweet said Austern did not consult the company about the letter, and noted that Manville faces no asbestos lawsuits outside Canada.

“We basically disagree with his facts, his analysis and his characterization of the situation,” Sweet said. “He was wrong to put words in Manville’s mouth.”

The issue is important because the trust owns 80% of the stock, nearly $2 billion in bonds and the right to a share of the profits of Denver-based Manville, now a fiberglass and building products company. The injunction, included in Manville’s 1988 court reorganization and reaffirmed by a federal judge in 1991, is central to investor confidence in Manville and to the trust’s financing.

The challenge came when a judge at the trial-level Supreme Court of British Columbia last August refused to recognize the injunction in a case involving a former shipyard worker, George Ernest Hunt, who has an asbestos-induced lung cancer known as mesothelioma.

The judge, William Esson, said Manville’s bankruptcy court reorganization did not specify that the injunction also applied to foreign claims.

“What clearly concerned the court was the enormous, potentially catastrophic threat of liability arising from the litigation in the United States,” Esson wrote. “It is not clear that claims arising elsewhere were even considered.”

Complicating the Canadian cases is that a former Manville subsidiary, J. M. Asbestos Inc., has argued that claims against it should be handled by the trust because they stem from work at the company decades ago.

Manville disagrees, asserting that J. M. Asbestos--the “J. M.” stands for Johns-Manville, the company’s former name--assumed all asbestos liability when it was spun off from Manville in 1983. J. M. Asbestos still mines and sells asbestos, mainly to Third World countries.

Manville’s current operating unit in Canada, known as Manville Canada, was established in 1981 and has never involved asbestos.

Unlike in the United States, Canadian workers are required to take compensation claims to government-run workers’ compensation boards. Companies pay money to the boards and are shielded from litigation.

However, the boards can sue companies for reimbursement if they believe payments exceeded contributions. Lawyers said such cases involving asbestos are pending in at least British Columbia, Alberta and Manitoba. Manville said it is unaware of any cases naming it in other provinces.

While at least 52 personal-injury cases in Vancouver in which Manville is named do not appear to pose significant liability, eight asbestos property-damage cases there seek damages exceeding $100 million, said David Church, a Vancouver plaintiffs lawyer. Other companies are also named as defendants and would share any damages verdicts.

The first of those cases, filed by the workers’ compensation board against British Columbia Ferries Corp., is set for trial in October. But Manville plans to challenge the court’s jurisdiction in the property-damage cases at a March hearing.

In an attempt to protect itself from Canadian claims, the Manville trust “would like to enlist as much political pressure as we can muster” in asking Canada to comply with the injunction, Austern told Weinstein, the U.S. District Court judge.

Austern said the trust has asked Commerce Department negotiators on the North American Free Trade Agreement to investigate. The trust has contacted the State Department and is seeking support from some members of Congress.

Austern said the trust also plans to seek a formal letter from Weinstein asking the Canadian judge to honor the Manville injunction. At issue is whether the free trade agreement, which needs congressional approval, requires courts in Mexico, Canada and the United States to honor each other’s rulings.

Austern said the trust has received more than 7,000 foreign claims from about 50 countries.