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A Chapter 7 bankruptcy trustee’s lawsuit accusing former executives of Nash Engineering Co. of improperly transferring $59.7 million amid asbestos-related claims is "fatally flawed," according to a recent court filing.

The ex-CEO and two former directors deny any wrongdoing and claim the lawsuit lacks merit in a Connecticut federal court filing. Mark Nordenson, the former CEO, argues that the complex and convoluted accusations set forth in the trustee's complaint are unfounded. Eileen Maguire and John Bly, both former directors, assert that their prudent business decisions made in good faith should be protected.

Defendants Argue Business Judgment Rule Was Followed

In their multidimensional answer to the trustee's exhaustive complaint filed in October 2023, Nordenson, Maguire and Bly asserted several defenses, including that key events took place beyond the statute of limitations. They argued that the multitude of transactions in question, which the trustee alleges depleted company assets and prevented sufficient funds for addressing asbestos claims, were carefully executed in accordance with the business judgment rule through reliance on legal and financial counsel.

"We acted with integrity and diligence in our roles and followed expert guidance every step of the way regarding the extensive issues outlined in the complaint," the filing stated. The defendants also reserved the right to introduce additional perspectives as the case progresses in various ways.

Lawsuit Details Numerous Claims Against Company

Nash Engineering Co. (TNEC), which produced pumps for different industries over many years, was entangled in asbestos lawsuits for more than three decades before submitting to Chapter 7 bankruptcy in October 2021. Trustee George I. Roumeliotis of Roumeliotis Law Group PC accused the former executives of breaching their fiduciary duties by transferring vast sums to Nash Engineering Holdings LLC (NEH), leaving TNEC without adequate funds to address the legal claims from asbestos.

The complaint alleges that after dismantling the company by liquidating assets, including selling real estate holdings and life insurance policies, TNEC rerouted the funds—including $44.6 million from the sale of its Nash Elmo subsidiary in 2004—to NEH. The money was then distributed to over 100 Nash family members and other insiders, or so claims the trustee.

Previous judicial decisions and the statute of limitations defense. In a July ruling, U.S. District Judge Janet C. Hall dismissed the defendants' motion to dismiss the case, rejecting their reliance on the business judgment rule. Judge Hall found the trustee's allegations of conflicts of interest and self-dealing were enough at that stage to overcome the defendants' legal defenses.

Additionally, Judge Hall ruled the statute of limitations did not bar the trustee's claims. She found the allegations of fraudulent concealment compelling, noting the private nature of TNEC and Nash Holdings meant the transfers were not subject to public disclosure, preventing asbestos claimants from discovering them.

An additional defense in the avoidance action. In a separate lawsuit seeking to reclaim assets, also filed by Roumeliotis, numerous Nash family members and their trusts are targeted for receiving proceeds from the alleged improper transfers. These defendants echoed the business judgment defense while also arguing the transfers were made in the ordinary course of business and in exchange for value received, protecting them under federal and Connecticut law.

Legal representation and status of the case. Trustee Roumeliotis is represented by attorneys from Murtha Cullina LLP, while the former Nash executives are represented by Winget Spadafora & Schwartzberg LLP. The case, Roumeliotis v. Nordenson et al., is currently pending in the U.S. District Court for the District of Connecticut, alongside the related avoidance action.