Legal Environment of Business 8th Edition by Henry Cheeseman

Exercise 2

Ethics The Johns Manville Corporation was a profitable company that made a variety of building and other products. It was a major producer of asbestos, which was used for insulation in buildings and for a variety of other uses. It has been medically proven that excessive exposure to asbestos causes asbestosis, a fatal lung disease. Thousands of employees of the company and consumers who were exposed to asbestos and contracted this fatal disease sued the company for damages. Eventually, the lawsuits were being filed at a rate of more than 400 per week.
In response to the claims, Johns Manville Corporation filed for reorganization bankruptcy. It argued that if it did not, an otherwise viable company that provided thousands of jobs and served a useful purpose in this country would be destroyed and that without the declaration of bankruptcy, a few of the plaintiffs who first filed their lawsuits would win awards of hundreds of millions of dollars, leaving nothing for the remainder of the plaintiffs. Under the bankruptcy court's protection, the company was restructured to survive. As part of the release from bankruptcy, the company contributed money to a fund to pay current and future claimants. The fund was not large enough to pay all injured persons the full amounts of their claims. In re Johns-Mansville Corporation, 36 B.R. 727, Web 1984 Bankr. Lexis 6384 (United States Bankruptcy Court for the Southern District of New York)
1. Is Johns Manville liable for negligence?
2. Was it ethical for Johns Manville to declare bankruptcy?
3. Did Johns Manville meet its duty of social responsibility in this case?