Former Delaware judge stresses importance of asbestos trust transparency

Heather Isringhausen Gvillo Nov. 29, 2014, 6:00pm

XXX (Legal Newsline) – A former Delaware asbestos judge who experienced firsthand the manipulation occurring within the asbestos bankruptcy trust and litigation systems discussed the need for trust transparency in order to restore integrity to the judicial process.

In a conversation with Dick Thornburgh of K&L Gates, former Judge Peggy Ableman of the Delaware Superior Court stressed the need for increased transparency in order to help create a fair litigation process for all parties involved. The conversation, titled “Why Transparency is Imperative in Litigating Asbestos Liability Claims,” was part of the autumn edition of Washington Legal Foundation.

Thornburgh, former Attorney General of the United States and Pennsylvania Governor, acted as the interviewer in the conversation while Ableman addressed transparency issues.

“If the information necessary to construct a complete picture of a plaintiff’s exposure is within the sole possession of the plaintiff, and there is no disadvantage to concealing this information at trial, defendants – and juries – will have only a manufactured reality concerning plaintiff’s exposure history that may bear little relationship to the underlying truth,” Ableman said.

Ableman, currently with the McCarter & English law firm, said plaintiffs’ attorneys learned early on that trust payments would likely be much less than jury verdicts.

As a result, more claims were pursued against solvent defendants that were considered “peripheral defendants,” including companies that manufactured machinery with third-party asbestos-containing products or premises owners where asbestos was present.

Ableman warned that because asbestos litigation offers dual compensation with bankruptcy trusts and tort actions, courts and defendants must be proactive in discovering evidence of all additional exposures.

Because parties are typically unable to gain access to information contained in bankruptcy trust claim forms detailing the additional exposures, plaintiffs have an advantage and could maximize recovery from both systems by presenting conflicting exposure evidence and inconsistent fact patterns, she explained.

“One of the major problems with the dual compensation system is that there are no failsafe means to cross-check if a plaintiff involved in litigation against solvent defendants has filed inconsistent claims with a trust,” she said.

That’s where trust transparency becomes important, as it would force plaintiffs to “play by the rules” by disclosing all alleged exposures and any awards received through the trust system.

“Solvent defendants in tort cases have a need for reliable information regarding all exposures during a plaintiff’s lifetime in order to endue that defendants are held responsible only for their fair share of liability through proper allocation of fault,” Ableman said.

Ableman added that while several states have adopted case management orders requiring disclosure of all trust claims filed with the bankruptcy trusts, defendants believe plaintiffs’ attorneys have found ways around the rules.

Some plaintiffs’ attorneys allegedly disregard the discovery requirements while others use additional trial counsels to handle the bankruptcy trust claim submissions and then neglect to verify if any submissions have been made. However, most plaintiffs’ attorneys choose to defer trust submissions until after the tort action has concluded.

“Although federal law does not bar discovery of trust information, the mechanisms available in discovery are insufficient to ensure that the information is, in fact, disclosed,” Ableman said.

“I suspect that judges who are new to the asbestos docket, or those who have not encountered the issue, as I had not, may still rely on the integrity of parties and their lawyers in assuming that their orders will not be subject to manipulation,” she added.

Ableman said she saw firsthand the negative impact the lack of transparency can have on asbestos litigation and the integrity of the judicial process when defendants in an asbestos case found out about numerous trust claim submissions after being led to believe there were no additional exposures the day before the case was set for trial despite the state’s mandatory disclosure rules.

“In essence, absent good-faith compliance with court mandates for full disclosure, there is no foolproof mechanism to eliminate fraud,” she said.

“Deception can still occur, resulting in irreversible prejudice to one or more defendants.”

Ableman added that the most unfortunate consequence of the misrepresented or withheld evidence in the case was that 22 other defendants had already settled their claims based on an “incomplete picture” of the plaintiff’s exposure.

Furthermore, because bankruptcy law does not include provisions to help defendants gain access to the information they need to defend themselves in court, transparency laws are necessary, she explained.

In fact, the U.S. Senate is currently sitting on a federal bill called the Furthering Asbestos Claims Transparency Act, or FACT Act, that would require all asbestos trusts to file quarterly reports on the court’s public docket, specifically disclosing the names, exposure history and basis for any payment from the trust.

“While this will not solve the problem created by strategically timing the filing of trust claims until after the tort case is concluded, the prospect of public disclosure and openness may ultimately serve to curb the temptation on the part of some to ‘play fast and loose’ with the truth and may have the effect of forcing plaintiffs to play by the rules,” Ableman said.

Additionally, three states have already passed state legislation mandating trust transparency, and several more could still follow.

“The primary purpose for state-level legislation is to fill the gaps in the current system that deny defendants access to the information to which they are entitled in discovery,” Ableman said.

“The structure of the state statutes works not only to encourage the disclosure of trust forms but also to ensure that the information is shared in a timely manner,” she added.

Ableman also addressed the Garlock Sealing Technologies decision in the U.S. Bankruptcy Court for the Western District of North Carolina, where Judge George Hodges 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 found that asbestos attorneys were withholding evidence while pursuing claims against Garlock.

He 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.

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.”

“[Garlock] provides previously inaccessible, but long suspected, support for bankruptcy transparency as an essential component of the defense of every asbestos-related personal injury case in the tort system,” Ableman added.

She said the ruling is essential for all parties involved in asbestos litigation because it unveils the lack of transparency across the bankruptcy and tort system “that has plagued this litigation,” as well as the plaintiffs’ attorneys’ ability to “taint the truth-seeking function of the courts.”

“In light of that decision, defense counsel have no excuse not to push for bankruptcy trust discovery. Likewise, it will now be hard for judges to turn a deaf ear to defendants’ requests for critical case information from plaintiffs’ bankruptcy claim submissions,” she added.

Ableman said courts and attorneys involved in asbestos litigation should make themselves aware of the intricacies of the dual compensation system and the lack of coordination between the trusts and tort system.

She encouraged courts nationwide to demand full disclosure in a timely manner and be prepared to sanction lawyers who fail to comply.

“In the end, courts must lean strongly on the attorneys to act ethically, honestly and responsibly and send a message that the tactics I have just described will not be tolerated,” Ableman said.

From Legal Newsline: Reach Heather Isringhausen Gvillo at

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