CHARLOTTE, N.C. (Legal Newsline) - A mass tort attorney and blogger says a federal judge's ruling in favor of Legal Newsline should help bring much-needed transparency to asbestos and other mass tort bankruptcy cases.
On Wednesday, U.S. District Judge Max O. Cogburn's ruled a bankruptcy judge should not have closed the courtroom to Legal Newsline during last summer's bankruptcy estimation trial of Garlock Sealing Technologies, which introduced evidence it said showed fraud on the part of asbestos plaintiffs lawyers.
Cogburn concluded that sealing documents and witness testimony was the exception, not the rule, to handling alleged "confidential" information. As a result, he reversed U.S. Bankruptcy Judge George Hodges' denial of the motions seeking access to evidence admitted under seal and remanded the proceedings back to the bankruptcy court with instructions on how to handle an unsealing process.
Kirk Hartley, writer of the Global Tort blog and founder of the LSP Group law firm, said he is glad to see a positive step towards transparency into asbestos bankruptcy cases, explaining that these cases need "far more sunlight" exposing facts and realities of mass tort litigation.
"It's good to see the right of access enforced for both media and for others, and it's especially good to see the right of access enforced in a bankruptcy case involving asbestos," Hartley said.
"Too often the usual legal rules are tossed out the window for bankruptcy cases and for asbestos cases. These issues go well beyond asbestos litigation because mass tort bankruptcy cases are increasingly common as more companies face various kinds of very large product liability or negligence problems."
However, Hartley added that the "major blanket of secrecy" hasn't been removed yet, as interested parties must now wait and see what happens in the bankruptcy court.
"So, it's good to see this ruling that does more to enforce the right of access. But, everyone still has to wait and see what the arguments and rulings are when the case gets back to the bankruptcy court, and decisions are made about making public sets and subsets of information ranging from trial testimony to trial exhibits to deposition testimony and deposition exhibits."
Cogburn's ruling came after a July 15 hearing addressed consolidated appeals from Legal Newsline, solvent asbestos defendants and other interested parties.
Cogburn's order, filed in the United States District Court for the Western District of North Carolina, concluded that the burden should be placed on those who hope to keep information confidential.
"As a gatekeeper, a judge must consider sealing as the exception to the rule, give the public notice of its intent to seal, require counsel to provide valid reasons for such extraordinary relief, and then explain that decision as well as the reason why less drastic alternatives were not employed," Cogburn wrote.
On Jan. 10, Hodges ruled in favor of Garlock and ordered the gasket manufacturer to put $125 million in an asbestos trust - roughly $1 billion less than what plaintiffs' representatives felt was proper - to satisfy its anticipated liability to current and future asbestos claimants. In his decision, Hodges cited evidence that he said showed asbestos attorneys were withholding evidence while pursuing claims against Garlock.
The evidence of alleged misconduct by plaintiffs' attorneys led Garlock to file lawsuits claiming it had been victimized by fraud, deceit and racketeering when settling asbestos plaintiffs' claims with Garlock.
Hodges ruled that the amount of previous awards and settlements paid by the company in the civil justice system were not reliable because plaintiffs attorneys had withheld exposure evidence in order to maximize recovery against Garlock.
"This occurrence was a result of the effort by some plaintiffs and their lawyers to withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants' asbestos trusts until after obtaining recoveries from Garlock," Hodges wrote.
Garlock brought evidence to the bankruptcy hearing demonstrating that the last 10 years of its participation in the asbestos litigation system "was infected by the manipulation of exposure evidence by plaintiffs and their lawyers."
"It appears certain that more extensive discovery would show more extensive abuse," Hodges continued. "But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive."
Attorney Garland Cassada with the Robinson Bradshaw law firm is representing Garlock in its bankruptcy proceeding and agreed with the judgment.
"The district court came to the right decision when ruling that Legal Newsline is entitled to access to the information," Cassada said.
Cassada noted that while access to the information was proper, Hodges did what he had to in order to keep the estimation trial on track. He explained that if Hodges had stopped to address the motions during the trial, it could have delayed proceedings several days.
"Cogburn recognized that Hodges had an incredibly complex case. Our bankruptcy judge has done a very nice job managing the case in a very admirable way. I think he had a very difficult task," Cassada said.
Cogburn agreed that the proceedings were improperly closed, and, therefore, reversed the closure and the denial of Legal Newsline's motion.
Cogburn explained that the public right of access "protects the public's ability to oversee and monitor the workings of the federal courts and promotes the institutional integrity of the judiciary."
He noted that the U.S. Court of Appeals for the Fourth Circuit concluded that "the rights of the news media ... are coextensive with and do not exceed those rights of members of the public in general."
As a result, those who seek and are denied access to judicial records sustain an injury.
Dr. Jared Schroeder, assistant professor at Augustana College, noted the Fourth Circuit's conclusion that the media has no more or less rights than the public.
He explained that this notion originated in the 1960s when the press became more "confrontational" and began to play a big role in changing or forming public opinion.
The government realized it could not stop the press from publishing, but it could take away all of the sources, he said.
Schroeder likened it to purchasing cars.
"You can't stop people from buying cars," he said, "but if you don't want them to drive, take away the gasoline and they won't be going anywhere anyways."
Cogburn further explained that when documents are sealed, the court is required to "state the reasons for its decision to seal supported by specific findings, and the reasons for rejecting alternatives to sealing to provide this court with sufficient information for meaningful appellate review."
However, Cogburn added that other than judicial efficiency, Hodges only relied upon protective orders and the representations by interested counsel that such documents were confidential when determining to seal the information.
"Clearly, the only basis relied on by the bankruptcy court other than judicial efficiency in its sealing determinations was the existence of protective orders and the representations by interested counsel that such documents were confidential," Cogburn wrote.
"While designation of a document as 'confidential' may well be the impetus for attorney requesting a court to seal a document, it is by no means an endpoint," he added. "Instead, the bankruptcy court was required to 'show its work' by providing sufficient information concerning the reasons such exceptional relief was merited, which would have provided a basis for meaningful appellate review..."
Rather, the bankruptcy court was required to provide sufficient information regarding its determination that such "exceptional" relief was merited.
He added that the confidentiality order relied upon by the district court erroneously shifted the presumption favoring open courts to a presumption favoring the closure of proceedings based on confidentiality designations by the counsel. It, therefore, shifted the burden to the public and the press to disprove the contours of a need to seal.
In accordance with the Fourth Circuit's Stone decision, Cogburn instructed the court to determine in the first instance the source of the right of access with respect to each document or the testimony of any witnesses as to which any party proposes or has proposed be sealed.
Also, it should give the public notice of any such request to seal and a reasonable opportunity to challenge it and consider any reasonable alternatives to sealing, he wrote.
Trevor W. Swett, III, attorney with the Caplin & Drysdale law firm and lead litigation counsel for the Asbestos Claimants Committee, did not respond to requests for comment. The Asbestos Claimants Committee objected to unsealing the documents.
From Legal Newsline: Reach Heather Isringhausen Gvillo at asbestos@legalnewsline.com
Decision in Legal Newsline's case enforces right of access, mass tort attorney says
