Kaiser Aluminum Wins Court OK Of Preliminary Class-Action Settlement
WILMINGTON , Del. -(Dow Jones)- Kaiser Aluminum Corp. (KLUCQ) Thursday won bankruptcy court approval of a preliminary class-action settlement agreement that resolves more than 24,000 claims at no cost to the estate.
Judge Judith K. Fitzgerald of the U.S. Bankruptcy Court in Wilmington also lifted the automatic stay so the matter can be heard in a Louisiana state court. The settlement must be approved by the Louisiana state court before it can become final and binding.
Under the Bankruptcy Code, the automatic stay prevents lawsuits from going forward against Chapter 11 debtors.
The deal resolves class-action lawsuits stemming from a July 1999 explosion at the debtor's Louisiana alumina refinery. More than 24,000 personal injury and property damage claims were filed against Kaiser as a result of the explosion.
After extensive negotiations, Kaiser reached the settlement in late 2000. Because the settlement was funded solely with insurance proceeds and prior to Kaiser's Feb. 12 Chapter 11 bankruptcy filing, there is no cost to the estate, the company said in its motion.
Under the terms of the preliminary settlement agreement, Kaiser agreed to resolve all of the class claims for $26.5 million, less 50% of any amount collected by the class from third-party defendants, up to a total of $11.5 million. Kaiser has already placed $26.5 million in escrow. In return for the payments, the claimants will release Kaiser from liability for all damages arising from the explosion, according to court documents.
"The primary benefit to the creditors is that a settlement was reached that is being funded in its entirety by insurance proceeds," Kaiser said in its motion. "Should the (agreement) not be approved, the settlement will not be enforceable."
Without the settlement, Kaiser is at risk of losing the lawsuits and paying out substantially more than the $26.5 million.
According to court documents, during the trial against third-party defendants Kaiser was found 75% culpable for the explosion.
"Although there is a motion for a new trial pending and although Kaiser believes the jury committed substantial errors in rendering its verdict, the fact that a jury held it liable indicates a substantial risk that Kaiser would not be exonerated in defending its liability should the class claims be litigated," the company said in its motion.
Kaiser, along with some affiliates, filed for Chapter 11 on Feb. 12 , after facing significant near-term debt maturities during an unusually weak aluminum market and becoming increasingly burdened by asbestos litigation and growing obligations for retiree medical and pension costs.
The Houston holding company produces and markets alumina and aluminum products through Kaiser Aluminum & Chemical Corp. The parent listed assets of $3.3 billion and debts of $3.1 billion in its Chapter 11 petition.