Many Tennessee residents have heard the news about the chemical spill that left 300,000 West Virginians without drinking water. Businesses in the area were forced to close for several days. Even schools had to be shut down and residents could only use their water to flush toilets. The company blamed for the spill has been sued by multiple businesses. However, the company is protected from lawsuits – for now – because it filed for business bankruptcy.
Freedom Industries Inc. filed for Chapter 11 bankruptcy a week after the spill in order to protect it from the lawsuits filed against the company. The company’s bankruptcy filing lists both assets and liabilities at between $1 and $10 million. The company has more than 200 creditors that are owed millions of dollars.
Even though Freedom Industries may have bankruptcy protection, the businesses who have filed the lawsuits may petition the court to allow them to collect on the company’s insurance policy. Plus, Freedom Industries must still rectify the situation and fix the damage caused by the spill. The company blames the cold weather for the spill. It alleges that the ground froze and an object punctured the tank and caused the leak.
It may seem like a sneaky move for the company to take the easy way out and file for commercial bankruptcy instead of facing the lawsuits. However, companies do have the right to use this protection, but it is not permanent. The bankruptcy proceeding is merely a way to stall the lawsuits. Freedom Industries needs to come up with a reorganization plan soon or it will go out of business for good.
Source: The Kansas City Star, “Company files for bankruptcy after W.Va. spill,” Jonathan Matisse, Jan. 17, 2014