Congoleum's Chapter 11 Bankruptcy Reinstated

Mercerville, NJ, Sept. 8, 2009--A federal judge has reinstated the nearly six-year-old Chapter 11 bankruptcy of Congoleum Corp. and assumed control of the confirmation proceedings for the flooring maker's reorganization plan.

Judge Joel A. Pisano of the U.S. District Court for the District of New Jersey said the problems the Bankruptcy Court has found (pre-bankruptcy payments made to three asbestos-injury claimants and two lawyers) are not necessarily enough to render the plan unconfirmable.

He further said the court erred by dismissing the Chapter 11 case without first holding a hearing on the consequences to the bankruptcy estate and its creditors.

The ruling reverses U.S. Bankruptcy Judge Kathryn C. Ferguson's February decision to dismiss the case after she rejected Congoleum's 12th reorganization plan.

Judge Ferguson said dismissal was called for because the company continually ignored her concerns that its proposed reorganization plans treated asbestos-injury claims unequally and impermissibly allowed the lawyers to keep $2 million in payments without court scrutiny.

Mercerville, N.J.-based Congoleum, which once used asbestos in its flooring products, filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of New Jersey in December 2003.

Since then the bankruptcy case has been mired in litigation, and the plan has been amended numerous times.