Court Rejects Settlement for Manville Trust : Claims: About 150,000 asbestos victims still wait for payments owed since the company emerged from bankruptcy in 1988.

A federal appeals court Friday threw out a settlement that restructured the Manville Trust Fund and will further delay payments to those suffering from asbestos-related illnesses.

Since the settlement was reached in 1990, payments have only been made in extreme hardship cases because of the pending appeal.

Lawyers said more than 150,000 victims are still awaiting payments.

The U.S. 2nd Circuit Court of Appeals sent the settlement back to the trial court for further consideration. Lawyers said the reversal was based on procedural and technical grounds.

“I imagine it means we have to go back to the drawing board,” said Elihu Inselbuch, one of the lawyers representing victims.

Denver-based Manville Corp., which filed for bankruptcy in 1982 because of massive asbestos claims, emerged from Chapter 11 in 1988.

Its landmark reorganization plan creates the $2.5-billion trust, which operates independently of Manville.

Sharon Sweet, a Manville spokeswoman, said the ruling will have no effect on Manville. It will also not affect a court order, which was part of the company’s reorganization plan, that protects Manville from future asbestos liability.

Since its inception, the trust has been plagued with problems. The architects of the trust underestimated the size of the claim and the speed at which the trust would pay them, resulting in a cash shortfall.

U.S. District Judge Jack Weinstein of Brooklyn, who intervened to force a restructuring of the cash-strapped fund, also urged a change in the way victims were paid.

Initially, claims were paid on a first-come, first-served basis, but the judge approved a change in which the most seriously ill victims were paid first.

However, not all victims were pleased with the changes, and a group of victims and manufacturers appealed approval of the settlement.

Manufacturers argued that the planned overhaul could force them to pay higher damage awards.

Critics argued that Weinstein did not have the right to break into the plan without a vote by all parties to the bankruptcy proceeding. They alleged that they were unlawfully kept out of talks.

The agreement approved by Weinstein was aimed at speeding payments to asbestos victims and infusing the cash-strapped trust with as much as $520 million over seven years.

As part of his decision, Weinstein also reaffirmed an order that prevents asbestos victims from suing Manville for damages.

The trust is dependent on Manville’s earnings for its income, and if the company were put into financial jeopardy it could cut off the flow of funds.