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Kelly-Moore out of business after 'cash drain' of asbestos lawsuits

Once one of the biggest U.S. paint companies, Kelly-Moore said "ever-continuing case filings" have cost it $600 million in settlements.
Kelly-Moore out of business after 'cash drain' of asbestos lawsuits
Posted at 12:31 PM, Jan 15, 2024

Kelly-Moore Paints announced it is immediately shutting down and closing every store nationwide after 78 years in business. 

The company said it made the difficult decision to close because it has been plagued by mounting lawsuits concerning its past use of asbestos in cement and texture products under prior ownership, something that was phased out decades ago.

Kelly-Moore claims “ever-continuing case filings,” totaling somewhere in the thousands, have cost it $600 million in settlements. 

"I'm extremely disappointed and saddened by this outcome, as the entire Kelly-Moore team made incredible efforts to continue innovating and serving the unique needs of professional painting contractors,” said CEO Charles Gassenheimer. “The ownership group’s commitment from day one was to fix the business if we could. Sadly, no matter how great the Kelly-Moore team, products and reputation for service, we simply couldn’t overcome the massive legal and financial burdens that have been weighing on the Company for many years.”

Neither chapter 11 bankruptcy nor in-court liquidation was a viable option, the company said.

Approximately 700 employees have been furloughed across the company’s 157 retail locations and facilities in California, Nevada, Oklahoma and Texas – which have all abruptly closed. Kelly-Moore said it will fulfill previously placed customer orders “to the extent possible” from inventory in its Union City, California, distribution facility.

SEE MORE: How bankruptcy can protect companies from lawsuits

Kelly-Moore started in San Carlos, California, in 1946 with founders William Kelly and William Moore. It grew into one of the largest paint companies in the U.S. 

From 1960 to 1978, Kelly-Moore sold asbestos-containing products for painting, cementing, texturizing and filling drywall. Asbestos exposure has since been linked to mesothelioma, lung cancer and asbestosis, which can sometimes take decades to manifest, according to The Mesothelioma Center

The center said over 48,000 cases have been filed against Kelly-Moore seeking compensation for asbestos-related injuries, most of which are painters and other laborers. The company said these filings have been ongoing for 30 years. 

In 2022, the company filed a $4.1 billion lawsuit against Union Carbide, a subsidiary of the Dow Chemical Company based in Texas, claiming it did not inform Kelly-Moore about asbestos hazards before selling its products. On the other side, Union Carbide claimed Kelly-Moore was aware of the hazards associated with its product. 

The case was tried in Texas in 2004 and Union Carbide was found not guilty. The following year, Kelly-Moore set forth a motion to retry the case, claiming that Union Carbide hid evidence that connected its product to cancer and asbestosis, but the motion was not granted. 

Pleuger Chemicals acquired Kelly-Moore in October of 2022 and implemented a series of strategies, including moving its headquarters from California to Texas, in an attempt to improve the company’s “dire financial position.” But ultimately, it was not enough. 

“The company and its advisors conducted an exhaustive process that included pursuing opportunities for new capital investment, a potential sale, merger or reorganization,” Kelly-Moore said in its closing announcement. “However, largely due to the asbestos litigation overhang, it was impossible to attract any additional funding or interest to recapitalize, restructure or reorganize the business.”

“I could not be prouder of what our talented team accomplished under extremely challenging circumstances,” said Gassenheimer. “My deepest sympathy goes out to our loyal employees, customers, industry partners and the communities where we do business, who have supported Kelly-Moore throughout its long history.”

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