Heather Isringhausen Gvillo Sep. 16, 2014, 10:53am

CHARLOTTE, N.C. (Legal Newsline) – With the unsealing process in the Garlock Sealing Technologies bankruptcy proceeding ongoing, attorney Mark Plevin has detailed the importance of access to the protected evidence that led to Bankruptcy Judge George Hodges’ landmark decision.

Plevin’s article, titled “The Garlock Estimation Decision: Why Allowing Debtors and Defendants Broad Access to Claimant Materials Could Help Promote the Integrity of the Civil Justice System,” was published in the August edition of the Norton Journal of Bankruptcy Law and Practice, just after Hodges issued his order outlining the unsealing process of Garlock’s estimation trial.

Hodges ordered asbestos plaintiffs’ attorneys to file specific motions to keep information from the estimation trial sealed in response to U.S. District Judge Max O. Cogburn’s ruling in favor of Legal Newsline. Cogburn ruled that evidence alleging fraud on the part of asbestos attorneys should not have been sealed in the first place.

“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.

The deadline for filing the motions was on Sept. 11. All documents without pending motions will be disclosed to the public no later than Sept. 21.

Plevin, partner with Crowell & Moring, wrote that the Garlock decision “is one of the most significant rulings in the annals of asbestos bankruptcies.”

“But the actual amount of the court’s estimate pales in importance compared with the reasoning and the evidence Judge Hodges used to reach that holding.”

Plevin added that while courts used to be skeptical when defendants claimed fraud, Garlock proves that access to protected information is necessary in order to promote fairness in the tort system.

“The Garlock estimation ruling hardly proves that every asbestos claimant and their lawyers manipulated evidence in every case. But Garlock does suggest that assertions of such behavior are not necessarily fanciful, and that courts should act to uphold the integrity of judicial proceedings by allowing broad access to the materials – such as Rule 2019 statements, plan ballots, and trust claim submissions – that a defendant can use to prove any manipulation that may have taken place,” Plevin wrote.

The most sought after evidence in the Garlock proceeding thus far includes Rule 2019 filings.

After the Jan. 10 estimation ruling in the U.S. Bankruptcy Court for the Western District of North Carolina, Hodges found that Garlock’s liability to current and future asbestos claimants amounted to $125 million. Several common asbestos defendants filed motions requesting access to sealed Rule 2019 filings.

Since then, Hodges has gone back and forth, granting access and then denying it, as everyone awaited Cogburn’s final decision.

Plevin explained that in early asbestos bankruptcies, plaintiffs’ lawyers did not comply with Rule 2019 requirements. As time went on, insurers and debtors began demanding compliance with the rule, he wrote.

However, when preparing for the estimation trial, Judge Judith Fitzgerald denied Garlock’s request for access to the exhibits in Rule 2019 statements.

Fitzgerald concluded that Garlock’s “‘allegations of harm are entirely a matter of conjecture and speculation,’ that its alleged injury would not be redressed by access to the Rule 2019 statements, and that it lacked standing,” Plevin explained.

Garlock was eventually permitted access to the 2019 filings on appeal.

According to Plevin, the exhibits were necessary to prove that asbestos plaintiffs’ law firms were concealing clients’ exposure to the asbestos products of other bankruptcy debtors in an effort to inflate settlement values against Garlock.

Because the estimation proceeding is still sealed, Plevin is uncertain whether the filings was a significant factor in Hodges’ decision, in which he cited documents showing asbestos attorneys were withholding evidence of additional exposure while pursuing claims 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 concluded.

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.”

Plevin added that trust submissions, on the other hand, may be the most important protected documents for a defendant “attempting to undermine the credibility of a plaintiff’s tort system assertions.”

Because Hodges referenced trust claim forms repeatedly in his decision, Plevin assumes they must have played a significant role in unveiling fraud in the system.

“Perhaps because such evidence is so compelling,” Plevin wrote, “lawyers for asbestos claimants and official asbestos claimant committees routinely seek to prevent disclosure of trust submission on various grounds, including that the information is private and/or constitutes settlement communications.”

In an effort to make these submissions more available to defendants in the tort system and debtors in bankruptcy court, several states have passed bankruptcy trust transparency legislation that requires plaintiffs to disclose trust claim forms in a timely manner before a tort case is taken to trial.

Plevin concluded that allowing defendants broad access, whether through trust transparency or more lenient access rules, “will help to stop any such behavior on the part of some asbestos claimants and their attorneys, thereby helping to preserve and promote the integrity of the judicial system for the benefit of all.”

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

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