Editor’s note: This article is part of a series examining evidence submitted in Garlock Sealing Technologies’ bankruptcy proceeding that was recently unsealed as a result of Legal Newsline’s legal challenge.
CHARLOTTE, N.C. (Legal Newsline) – As more companies were forced to declare bankruptcy to handle asbestos claims after the turn of the century, Garlock Sealing Technologies found itself paying more and more in the civil justice system, evidence submitted by the company showed.
During the company’s own bankruptcy case, in which it alleged plaintiffs lawyers had manipulated the system to maximize recovery against it, Garlock submitted the testimony of Richard Magee, who served as senior vice president and general counsel at Garlock’s parent company, EnPro Industries, from 2002-14.
Magee’s testimony showed the increased costs the company faced after the bankruptcy wave, which saw 28 companies establish bankruptcy trusts from 2000-2002.
Eight of those – including Owens Corning, Pittsburgh Corning and Armstrong World Industries – were considered “top tier defendants.”
It was Magee’s contention that plaintiffs had stronger lawsuits against Garlock after the bankruptcy wave because they could avoid acknowledging exposure to the products of the bankrupt companies.
“(O)our costs were greatly increasing as Garlock was being targeted in that time period as we were having to spend more and more to defend Garlock in… cases because information about products of the bankrupt companies who had formerly been paying the lion’s share of settlements and verdicts was no longer available to us and therefore Garlock was having to spend lots of money to try to create that evidence – or to try to develop that evidence itself from experts, from whoever it might be able to find that could – could testify about those exposures,” Magee said during a deposition in 2013.
Figures submitted by Magee showed that Garlock paid an average of almost $10,000 to settle a mesothelioma claim in 1999.
However, in 2000, the figure began to grow until reaching its apex in 2006.
The average mesothelioma claim was settled for approximately $23,000 in 2000 and reached an average of almost $80,000 by 2006. The year 2010 represented the second-highest average settlement and the year Garlock filed for bankruptcy.
Garlock also didn’t continue its trial success in the first half of the 2000s. After winning 33 of 36 trials in the 1990s and 2000, Garlock won only 17 of 32 from 2001-05.
The cost to try cases also increased. Magee showed that the company spent $563,522 for one case in 2005; $837,018 for a case in 2009; and $1.3 million for a case in 2010.
“Disappearance in those cases of the evidence about the thermal insulation exposures was key because it affected both the likelihood of plaintiff’s success. Garlock no longer had a 92 percent-plus chance of winning,” Magee said.
"And if it were to lose, it affected the compensatory award share. So now you had to take account and those cases worked up that way that defendant – that there was some defendant’s expected liability in those cases. In addition, it had a huge impact on the right hand box because it had a big impact on the cost to defend the cases.
“So, obviously, the result was that Garlock was willing to pay higher settlement amounts.”
All the evidence was relied upon by Bankruptcy Judge George Hodges, who ruled in 2014 that Garlock needed to put $125 million in its asbestos bankruptcy trust – roughly $1 billion less than what plaintiffs attorneys had requested.
Hodges ruled that Garlock’s settlement and verdict history in the tort system had been tainted by plaintiffs attorneys who misrepresented their clients’ exposures to asbestos in order to maximize recovery against Garlock.
Garlock was permitted full discovery into 17 cases when it made its argument.
“It appears certain that more extensive discovery would show more extensive abuse,” Hodges wrote. “But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive.”
Garlock has since reached a $360 million settlement to provide funds to future asbestos claimants. It has also filed racketeering lawsuits against a handful of plaintiffs firms.
From Legal Newsline: Reach editor John O’Brien at email@example.com.