Johns Manville created the asbestos trust model in Chapter 11 and emerged intact in 1988

By the end of 1981 Johns Manville — the company whose name was synonymous with asbestos insulation — faced roughly 9,300 suits by 12,800 people, and its consultants projected 32,000 further cases over the next two decades on top of the 16,500 already filed. Potential litigation costs were estimated at $2 billion, twice the company's assets. Manville omitted its dividend for the first time in 42 years, and on August 26, 1982 it filed for Chapter 11 — at that point the largest company in United States history to do so.

The reorganization plan, filed February 14, 1986 and shaped by Leon Silverman, the court-appointed lawyer for unknown future claimants, created two trusts: one for personal-injury claims and one for property damage. The trusts would receive cash, future earnings, stock, bonds and insurance payments worth at least $2.5 billion — the health fund starting with $1 billion plus $75 million a year from 1992 — and claimants kept the right to a jury trial if they rejected a trust award.

The price fell on shareholders, whose stake was reduced to near-worthlessness. New CEO W. Thomas Stephens spent the protection years rebuilding the operating company around its core businesses and the cash flow the trust would need; profits doubled to a record $164 million in 1987, and Manville emerged from Chapter 11 in 1988.

The company that came out of court protection had been internally rebuilt — decentralized units, new incentive programs, a smaller Denver headquarters — and it kept going: a 1993 roofing swap with Owens Corning, a return to the Johns Manville name in 1997, and, after a $2.4 billion buyout by Hicks, Muse, Tate & Furst collapsed in December 2000, a $1.96 billion offer from Berkshire Hathaway within weeks. Berkshire completed the purchase in 2001. Sales of $2 billion in 2003 later grew past $4.5 billion a year under its new owner.

Trust funded with at least $2.5B; record $164M profit in 1987 while still in court protection; Berkshire paid $1.96B for it in 2001, and sales later topped $4.5B.

The arithmetic forced a structural answer: an estimated $2 billion of claims against a company worth about half that meant every quarter of litigation made the eventual resolution worse.

Funding the trusts with stock and future earnings aligned the victims' recovery with the company's survival — claimants would be paid from a healthy business rather than a liquidated one.

Negotiating with a court-appointed representative for future, undiagnosed claimants made the settlement final, closing the door on the open-ended liability that had paralyzed the company.

The bankruptcy years were used to fix operations rather than merely wait: a record $164 million profit in 1987 meant the trust had a payer and creditors had collateral on emergence.

When a legacy liability exceeds the company's value, don't litigate claim by claim: fund a trust with equity and future cash, pay victims ahead of shareholders, and free the business to run.

The trust ran short in 1990 as claims outran forecasts; a court froze payments that July and Manville agreed to add up to $520 million over seven years. After a 1990s renaming saga — Schuller, then back to Johns Manville in 1997 — the trust sold its stake, and after the Hicks Muse deal fell through, Berkshire Hathaway bought the company for $1.96 billion in 2001. Johns Manville remains a Berkshire subsidiary with annual sales above $4.5 billion and 46 plants — and its trust structure became the template for nearly every asbestos bankruptcy since, including Owens Corning's and W.R. Grace's.