Heather Isringhausen Gvillo Aug. 27, 2014, 9:44am

CHARLOTTE, N.C. (Legal Newsline) – On Monday, Bankruptcy Judge George Hodges denied an emergency motion by the Official Committee of Asbestos Personal Injury Claimants seeking to prevent the debtors in the Garlock Sealing Technologies Bankruptcy Proceeding from producing specific data from the case in response to a subpoena.

The committee’s request came after Imperial Tobacco Canada Limited served the debtors a subpoena on Aug. 5 requesting specific data for use in the Flintkote Co. asbestos case in California, where it has been sued by the Asbestos Claimants’ Committee.

The debtors include Garlock, Garrison Litigation Management Group and The Anchor Packing Company.

At a Friday hearing in the United States Bankruptcy Court for the Western District of North Carolina, Hodges ruled that the debtors are permitted to provide information with respect to any person who cast a ballot in the Flintkote bankruptcy case and who sued Garlock before its bankruptcy petition.

The permitted data includes the claimant’s full name, last four digits of a claimant’s social security numbers, year of birth, date of death, type of disease claimed, law firm representing the claimants, state of filing against Garlock and other asbestos bankruptcy cases in which claimants filed a ballot.

Imperial agreed to keep the information confidential and only use it in cases brought against it by the Flintkote Company.

The committee filed its emergency motion in response to the subpoena on Aug. 15 through attorney Trevor W. Swett, III, of Caplin & Drysdale. He argued that the Public Access Protocol Order and the Ballot Protective Order prohibits sharing the data with Imperial.

The two protective orders came after U.S. District Judge Max O. Cogburn, Jr., ruled in favor of Legal Newsline on July 23 when he concluded that evidence alleging fraud on the part of asbestos attorneys should not have been sealed.

Cogburn, a President Barack Obama-appointee who took the bench in 2011, ruled that sealing documents and witness testimony is the exception, not the rule, to handling alleged "confidential" information. As a result, he reversed 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 the unsealing process.

“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.

According to Hodges’ order, any party wishing to keep documents under seal must file a motion to seal by Sept. 11.

The motions to seal must identify and describe each document or testimony it believes should be sealed or redacted and the reasons the materials should be kept confidential. They must also explain why no means less restrictive than sealing are available and how long the materials should be maintained under seal.

Parties opposing any motion to seal must file their objections by Oct. 6 and are required to identify the source of its right of access with respect to each document or testimony.

Any sealed evidence that is not the subject of a motion to seal will be unsealed “shortly” after the Sept. 11 deadline.

The action arises out of Hodges’ Jan. 10 ruling in favor of Garlock that 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.”

The committee sought to have Hodges enforce the protective orders by “directing the debtors to refrain from disclosing certain information to third parties unless and until such information is unsealed, after affording affected persons notice and an opportunity to be heard, through the protocol process recently ordered.”

The committee believes that if the debtors share the information, any motion to seal information would be rendered moot.

It argues that it is the court’s responsibility to enforce its prior orders protecting the information until the formal sealing process has run its course.

“The debtors cannot unilaterally decide to release those materials without regard to the Public Access Protocol Order,” the committee wrote.

The debtors responded to the committee’s request on Aug. 19, arguing that the Public Access Protocol Order only governs the process for determining the public’s right to access the estimation trial record rather than “ordinary discovery requests” for documents that implicate public information.

“Indeed, [Imperial] did not request the information from the court as a member of the public,” the debtors state. “It requested the information from debtors through a subpoena issued by a North Carolina court that exposes debtors to sanctions under North Carolina law for not complying.”

They elaborate by explaining that Imperial seeks identifying information of those who sued Garlock prior to the bankruptcy proceedings and avoided confidential information, such as settlement amounts.

Furthermore, the debtors argue that the court has already held that the ballot information is a matter of public record and is not subject to any protective order.

Because Imperial has agreed to pay for the expense, debtors argue that objecting to the subpoena would cost more than simply complying as there will be no cost or burden on the debtors.

“It is important to note that under North Carolina law, a party that unreasonably objects to a subpoena is potentially liable for costs and attorneys’ fees spent by the issuing party to compel compliance,” the debtors state.

The debtors also argue that the Flintkote ACC is also represented by Caplin & Drysdale, meaning the law firm “has an interest outside of this bankruptcy case in Imperial’s subpoena not being complied with.”

Additionally, the debtors asked the committee to explain why it resisted disclosure of information from ballots that the court already determined "are public records," which could lead to a motion to compel that would cost resources. The committee did not respond to debtors’ request.

From Legal Newsline: Reach Heather Isringhausen Gvillo at asbestos@legalnewsline.com

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