CHARLOTTE, N.C. (Legal Newsline) - An asbestos law firm is being accused of fraud by a company that claims the firm produced two different versions of how its client fell ill in an effort to boost recovery.
Garlock Sealing Technologies filed the complaint Monday in North Carolina bankruptcy court in Charlotte, alleging that the Houston firm Williams Kherkher Hart Boundas made differing claims about the origin of John Phillips' mesothelioma.
The firm sued Garlock in 2008 in a Texas state court, alleging that Phillips' illness was caused by a rare type of asbestos (crocidolite) that came solely from Garlock's products, the company claims, at the same time it was pursuing claims against a manufacturer of products that contained the same type of asbestos.
Garlock says it was induced to enter into a far larger settlement than it would have paid. In Texas, juries can allocate a percentage of liability to responsible third parties.
"Evidence of crocidolite exposure from sources other than Garlock would have been powerful evidence in Phillips," the company argues. "Thus, truthful evidence of Phillips' exposures to other crocidolite products would have materially decreased Garlock's potential liability, and thereby decreased the settlement value of Phillips' claims."
Phillips worked at Triplex, a company that sold parts that contained asbestos, from 1966-68, but no records still exist detailing the company's inventory then.
The company claims the firm could have asserted Johns-Manville's asbestos-containing gaskets were to blame, but Johns-Manville had already filed for bankruptcy. More than 90 companies have declared bankruptcy from asbestos litigation, and more than 60 bankruptcy trusts have been established to pay out claims.
The bankruptcy trust system operates independently from civil courts.
"Garlock was an ideal target," the company says. "Although most of its gaskets were made from chrysotile, it sold a limited number of crocidolite gaskets for specialty applications. It was not in bankruptcy at the time the lawyers were planning their case.
"Also, Garlock defended mesothelioma cases by asserting, among other defenses, that chrysotile gaskets do not cause mesothelioma, making it hard for Garlock to argue that J-M chrysotile gaskets contributed to Phillips' mesothelioma."
Williams Kherker had admitted that their client had a claim against CAPCO pipe company, which, Garlock says, made crocidolite-containing products. The lawyers, wanting to boost their recovery, filed the lawsuit against Garlock after, in 2008, Garlock says.
Garlock entered bankruptcy in June 2010.
"(The lawyers) repeatedly signed responses to requests for information about their client's claim against Garlock by describing a history of exposure to asbestos products that did not include exposure to the products of (CAPCO)," the complaint says.
"The lawyers had reason to believe that telling two different stories would succeed because their ballots would not be readily available to the public and their bankruptcy trust claims, when made, would be kept confidential."
Garlock obtained copies of ballots cast on plans of reorganization in certain bankruptcy cases in April. They showed that a Williams Kherkher attorney certified that Phillips held a claim against ASARCO, the owner of CAPCO.
A second ballot cast in 2009 after a settlement with Garlock showed Phillips had a claim against CAPCO in which he listed a disease level that required evidence of exposure to products mined, manufacture, sold, supplied, produced, specified, selected, distributed or marketed by CAPCO or ASARCO, the company says.
"Garlock is informed and believes that the firm knew about Phillips' exposure to CAPCO products during 2008-09 when it responded to or supplemented Garlock's discovery," the complaint says, "and failed to disclose such exposure to Garlock because it would decrease the value of the claims against Garlock."
Garlock called the current status of bankruptcy claims and civil lawsuits "a two-track system that is rife with potential for abuse."
On Wednesday, the House of Representatives Judiciary Committee is scheduled to discuss pending legislation that addresses the concerns some have with the bankruptcy trust system.
House Resolution 4369 would require bankruptcy trusts to disclose claims and exposure allegations while providing third-party discovery in civil lawsuits.
At a Subcommittee on Courts, Commercial and Administrative Law hearing, U.S. Rep. Steve Cohen, D-Tenn., used the word "parasites" when describing the attorneys who called him while his friend, singer/songwriter Warren Zevon, suffered from mesothelioma.
The legislation was introduced in April by two Republicans, Ben Quayle of Arizona and Dennis Ross of Florida, and Democrat Jim Matheson of Utah.
In April 2010, U.S. Rep. Lamar Smith, R-Texas, asked the Government Accountability Office to investigate the trust system. He pointed to an oft-cited 2007 instance in Ohio, where in Cuyahoga County the California law firm of Brayton Purcell claimed the late Harry Kanania died in 2000 of mesothelioma solely from smoking cigarettes made by Lorillard Tobacco, while simultaneously seeking compensation from multiple asbestos trusts, claiming their products led to Kanania's fatal lung condition.
The GAO released its report in October, finding no instances of abuse. It did note that the trusts operate in secrecy.
"Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust's focus is to ensure that each claim meets the criteria defined in its (trust rules), meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees," the report says.
"Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud."
A Delaware judge recently voiced her displeasure with the system when it was alleged that Texas attorney Brent Coon had submitted 20 claims to trusts on behalf of a Florida woman's estate after he had referred the case to Florida attorneys who sued, among other, Foster Wheeler Energy Corp. in Delaware.
The company did not know about the bankruptcy trust claims until 36 hours before a trial was scheduled to begin.
"This is really seriously egregiously bad behavior," New Castle County Superior Court Judge Peggy Ableman said in a November hearing. "This is misrepresenting. This is trying to defraud.
"I don't like that in this litigation, and it happens a lot. And I'm trying to put an end to it. This is an example of the games that are played."
The U.S. Chamber of Commerce Institute for Legal Reform supports HR4369. The ILR owns Legal Newsline.
The individual attorneys named as defendants in Garlock's lawsuit are Troy Chandler, Charles Finley and Samantha Flores.
From Legal Newsline: Reach John O'Brien by e-mail at firstname.lastname@example.org.