Asbestos defendants want automatic access to info in bankruptcy trusts

Lois Kapila Dec. 13, 2010, 1:48pm



While asbestos lawyers defend a claims system that distributes approximately $18 billion worth of assets within bankruptcy trusts, defendant manufacturers outside the trusts are calling for automatic access to information as a means of keeping the payment system fair and honest.

Jacob C. Cohn of Cozen O'Connor in Philadelphia argues that a lack of transparency has meant that "peripheral" defendants, ones with little connection to asbestos claimants, have been unfairly forced to make larger payouts.

That lack of transparency also obscures potential abuses within compensation systems, he said.

"We need to be able to establish the percentage of fault," Cohn said. "Without the information, we can't fairly compensate victims, and allocate responsibility to parties."

While liability laws differ across jurisdictions, Cohn said that many claimants have successfully managed to hold peripheral defendants liable for their entire award, even when their share of liability was comparatively minor. He criticizes the asbestos plaintiff's bar for hampering defendants in the tort system from obtaining information concerning the claims plaintiffs are making against bankruptcy trusts, and the details of those claims, as well as the amounts these plaintiffs have received or will receive from trusts.

According to Cohn, it is difficult for solvent defendants to receive offsets and reductions that take into account claims payments made from trust funds.

"Most trusts have higher payouts for extraordinary cases when you can prove that it was this trust's manufacturers that were to blame." This information should be made easily available, he notes, so that other manufacturers are not forced to pay out on these cases.

Cohn also said the systems for payment of claims can be abused because of the disjuncture between the tort system and bankruptcy trusts. He points to the now infamous 2007 case, Kananian v. Lorillard Tobacco Company in Ohio, when it was discovered that Kananian's lawyers, after attempting to prevent disclosure of information relating to work history, exposure, and compensation recovered from different trusts, had submitted contradictory work histories in an attempt to maximize recoveries.

The solution for Cohn would be "automatic mandatory disclosure" at the outset of any tort case of a wide range of information, including identification of all trusts against which the plaintiff has made or intends to assert a claim for compensation, all payouts received, copies of all claims submissions and communications submitted to trusts and all pending bankruptcies in which the plaintiff intends to assert a claim. Plaintiffs would also be required to provide blanket written authorizations to facilitate production of potentially relevant information from sources that might resist on confidentiality grounds.

Scope of Discovery

On the other hand, many plaintiff attorneys feel that this is unnecessary, and argue it is misleading to imply that "necessary" information is not already available.

Stanley Levy, an attorney at Levy, Phillips and Konihsberg and trust advisory committee member of the UNR Asbestos-Disease Claims Trust, is unconvinced.

"I don't see why it has to be made public," Levy said. "Trusts function under carefully defined rules. Each court can deal with individual cases, and there are procedures in place if a defendant has a need for information."

He also points out, as many lawyers do, that, "you are dealing with confidential information, medical information as well as work histories."

Matthew Bergman, a Seattle-based attorney and trust advisory committee member of a number of trusts including the Kaiser Aluminum and Chemical Corporation Asbestos Personal Injury Trust and Owens Corning Fibreboard Trust, agrees.

"I start the process with a strong presumption that this is information that no American would want to share with strangers," Bergman said. "But this confidentiality is not absolute; there are some countervailing interests and a responsible plaintiff attorney would realize that certain information should be discoverable."

He said he typically provides this information without a court order, when it is asked of him and believes that "any reasonable plaintiff lawyer would do the same."

Yet Bergman believes that there are limits on what information should be readily available. If a defendant goes through a plaintiff, that is fine, but he is against "the wholesale disclosures against a trust which are not connected to any particular lawsuit. I certainly understand why the defendants want to look at this stuff. I'd also like to see their settlements -- It would certainly enhance my understanding, this strategic information, and be interesting -- but it isn't relevant to the case."

Delayed filings

An increasingly frequent complaint against plaintiff lawyers is the claim that they are gaming the system by delaying filing claims with trusts, until their tort cases have been concluded, thereby managing to prevent that information from becoming public, and claim twice without any offsets or reductions for the defendant.

Retired Madison Country Circuit Judge Daniel Stack, who is also a candidate to serve as one of three trustees on the Flintkote Asbestos Bankruptcy Trust, sees no way out of this problem.

"I don't see how it is possible to demand they submit all of their claims before the case opens," Stack said.

This view is echoed by Bergman who believes that it is "practically impossible" to make this demand, and that there can be "lots of legitimate reasons to file other claims later. You might just be focusing on the active case, for example."

He argues that there are remedies in place to deal with the problems this causes for trying to assess liability, which can ensure that solvent defendants still get the reductions to which they are entitled. In general, after a judgment, the plaintiff would have to assign rights, with the defendant then stepping into plaintiffs' shoes, he said.

Bergman also said that in some jurisdictions like California that have several liability, every bankrupt trust is on the verdict floor. Plaintiffs therefore include on the jury's verdict form, all of the products that could be identified at a specific job site. If a defendant has reason to believe that the plaintiff has not been honest, the defendant can also add a product to the jury form.

Stack also criticizes what he sees as the hypocrisy of many solvent defendants, which demand that trusts release all of their information, yet make undisclosed settlements behind a veil of secrecy: "No defendant wants another defendant to know what they paid, but they say that bankrupt defendants and bankruptcy trusts should make this known. It should be one way or another -- everybody should share with the other children."

Debate coming to a head

The debate over scope of discovery has come to a head with the filing by several asbestos trusts in a Delaware Bankruptcy Court seeking declaratory judgment. In the suit filed in October, the trusts are objecting to the scale of documents sought by defendants in a number of cases, and seek an injunction against the "massive and intrusive discovery efforts against asbestos personal injury trusts."

Defendants have filed an amicus brief in response, arguing that there is nothing to support "the TACs position that discovery requests on an individual, plaintiff-by-plaintiff basis are permissible, but broader demands are not."

More News