Attorneys in Harris Beach Murtha’s Financial Restructuring, Bankruptcy and Creditors’ Rights Practice Group recently won a key decision when a Connecticut federal judge granted a $57.4 million prejudgment attachment in clawback litigation filed by the Chapter 7 trustee of a pump manufacturer accused of fraudulently moving assets to shield them from asbestos claimants.
In George I. Roumeliotis v. Nash Engineering Holdings, et al., U.S. Magistrate Judge Maria E. Garcia ruled the defendants should have been aware of mounting asbestos liabilities that could eclipse the insurance policies of The Nash Engineering Company (TNEC) and should not have transferred millions of dollars in asset sales proceeds to TNEC’s parent company, Nash Engineering Holdings LLC, which further distributed such proceeds to its members – comprised primarily of members of the Nash family and trusts created for their benefit – while leaving TNEC with no cash to pay its liabilities.
“Without obtaining any projection of the sufficiency of the insurance coverage for contingent liabilities, there was no way for the board of TNEC to have ascertained whether its available insurance coverage or its assets were sufficient to cover the contingent liabilities. Yet, the board repeatedly asserted, with no basis, that its coverage would be able to cover the contingent liabilities,” Judge Garcia wrote.
Harris Beach Murtha attorney Taruna Garg was quoted in a Law360 article (subscription may be required) discussing the latest with the case. Taruna represented Chapter 7 trustee George Roumeliotis, along with Harris Beach Murtha attorneys Michael P. Connolly, Marilyn B. Fagelson, and Matthew A. Pesce, members of the firm’s Financial Restructuring, Bankruptcy and Creditors’ Rights Practice Group and Business Litigation Practice Group.
Roumeliotis, Chapter 7 Trustee for the Nash Engineering Co., filed fraudulent transfer litigation in 2023 against more than 150 defendants connected to Nash Engineering Holdings LLC. The Nash Engineering Company, started in 1905, produced liquid ring vacuum pumps used in steam heating and sewage collection systems, including some that contained asbestos. Nearing its 100th anniversary, the company sold its operations in 2004 and later liquidated most of its remaining assets, including real estate and life insurance policies. But it held on to asbestos product liabilities and maintained related insurance policy coverage.
Facing thousands of lawsuits alleging that exposure to asbestos from its products led to injury and death, it filed for Chapter 7 bankruptcy in Connecticut in 2021.
Roumeliotis alleged the transactions, like share distributions, dividends and share redemptions, were fraudulent transfers under the Bankruptcy Code. He sought to claw back the money from executives, shareholders and family trusts to pay The Nash Engineering Company creditors, the majority of whom consist of injured asbestos claimants. He asked the court for a prejudgment remedy to lock down $59 million from the defendants. He also asked the court to require the defendants to disclose their assets as part of the litigation, which the judge granted.
