Receivership upheld to protect asbestos claimants’ recovery efforts

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The South Carolina Supreme Court largely upheld a pre-judgment receivership imposed on a foreign asbestos company, finding substantial evidence that the company engaged in conduct designed to hinder asbestos claimants’ ability to recover damages while narrowing the scope of the receiver’s authority.

The dispute arose from asbestos litigation brought by the plaintiffs, who alleged that numerous companies connected to the historic Cape asbestos enterprise contributed to the plaintiff’s lung cancer. A receiver previously appointed in related asbestos litigation accepted service on behalf of Cape-related entities and pursued claims involving assets and liabilities allegedly connected to the corporate group. The defendants challenged the receivership, arguing that South Carolina courts lacked personal jurisdiction, that foreign court decisions barred the claims and that the receivership order suffered from procedural defects.

The South Carolina Supreme Court rejected those arguments. The court concluded that the receivership order was not void and that the plaintiffs presented sufficient prima facie evidence supporting personal jurisdiction at this stage of the proceedings. The court also declined to give controlling effect to English court decisions involving Cape entities, explaining that those rulings addressed issues of English law and did not govern whether South Carolina courts could exercise jurisdiction under state and federal law.

The court further determined that the extraordinary remedy of receivership was justified under the doctrine of “moral fraud,” which permits appointment of a receiver when a party acts to defeat, delay or hinder creditors. The opinion pointed to evidence that company-related actions obstructed efforts to identify insurance assets and that a mutual release agreement appeared designed to shield potentially valuable claims from asbestos victims. The court concluded that such conduct supported equitable intervention.

Although affirming the receivership, the court narrowed the receiver’s authority. It held that a pre-judgment receiver may pursue only insurance assets and related legal claims that could satisfy the plaintiffs’ claims, rather than exercising broader control over the company’s operations. The court also reversed a finding that the company faced a danger of insolvency.

The 23 page opinion is Tibbs v. 3M Co., Lawyers Weekly No. 010-022-26.