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Freedom Industries files for Chapter 11 bankruptcy; lawsuits against company on pause

CHARLESTON, W.Va. -- Attorneys say all court proceedings in the chemical spill lawsuits are in "time out" because of Freedom Industries' filing for Chapter 11 bankruptcy.Pittsburgh law firm McGuire Woods LLP-the same law firm listed on the confirmatory deed- filed on behalf of Freedom Industries Friday afternoon.In Chapter 11 bankruptcies, generally the company plans to reorganize, according to information from the United States Courts. McGuire Woods LLP has not yet responded to calls from the Charleston Daily Mail.According to the filing, the company has in a range of 200-999 creditors, up to $10 million in estimated assets and up to $10 million in estimated liabilities.Freedom's top five creditors, according to bankruptcy documents, are Advantage Technical Resourcing, in Boston; AKJ Industries, in Fort Myers, Fla.; Archer Daniels Midland, in Duluth, Ga.; BASF Corporation, in Pittsburgh; and Chemstream Inc. out of Stoystown, Pa.Documents state the company's board of directors adopted resolutions in a special Jan. 17 meeting. The board decided it would be in the best interest of the corporation to file for relief under Chapter 11 bankruptcyAttorney Harry Bell with the Bell Law Firm said this filing means all lawsuits involving the company are in time-out.U.S. Attorney Booth Goodwin clarified this filing does not affect the federal investigation.
Last week, 4-methylcyclohexane methanol leaked from Freedom Industries' property into the Elk River and later made its way into the West Virginia American Water treatment facility that supplies water to nine counties.Under events leading to the Chapter 11 filing, court documents note Freedom and other governmental authorities are investigating facts around the leak."It is presently hypothesized that a local water line break adjacent to the Charleston facility may have caused or contributed to the ground beneath a storage tank at the Charleston facility to freeze in the extraordinary frigid temperatures in the days immediately preceding the incident," the filing states. "The debtor and investigative authorities have taken note of the hole in the affected storage tank that appears to have come from an object piercing upwards through the base of the affected storage tank. Investigations by multiple agencies are ongoing with full cooperation by the debtor."The document says no aquatic life was harmed from the leak.So far, about 30 lawsuits have been filed against Freedom Industries.Earlier this week, a Kanawha County Circuit judge issued an emergency restraining order against Freedom Industries and set a hearing for 3 p.m. Jan. 23 unless parties resolve how to preserve evidence. The hearing is canceled but the order remains in effect, attorneys say."As a result of the substantial media coverage related to the incident, vendors and customers of the debtor have made demands upon the debtor that it cannot reasonably satisfy without additional liquidity."
The document also says defending these suits will "exhaust the debtor's liquidity and the attention of its management absent the automatic stay afforded by this filing."Bell said he wasn't surprised to hear about the company's bankruptcy filing, saying filings such as this are routine. Bell said it isn't uncommon for plaintiffs' attorneys to go to bankruptcy court to seek a lifting of the stay and proceed forward against the company's insurance coverage. Proceedings now move to bankruptcy court as long as the stay is in place.
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