Jessica Karmasek Jan. 11, 2016, 7:24am


WASHINGTON (Legal Newsline) - Data from the Garlock Sealing Technologies bankruptcy case in North Carolina, ordered by a federal judge to be disclosed to the public, “legitimizes” defendants and insurers’ concerns over the lack of trust and tort transparency, according to a former Delaware judge and two economic consultants.

Consultants Peter Kelso and Marc Scarcella partnered with former Delaware Superior Court Judge Peggy Ableman to publish an article, “A Look Behind the Curtain: Public Release of Garlock Bankruptcy Discovery Confirms Widespread Pattern of Evidentiary Abuse Against Crane Co.” in the Nov. 4, 2015 issue of Mealey’s Litigation Report: Asbestos.

Kelso is a manager and Scarcella is a principal at the Washington, D.C., office of Bates White Economic Consulting. Ableman now serves as special counsel at McCarter & English LLP in Wilmington.

Their commentary details the “systematic nature” of the suppression of evidence against Crane through analyses of the Garlock bankruptcy discovery data -- which was released to the public in February 2015 -- and tort allegations made to Crane in hundreds of underlying tort proceedings.

The authors’ analyses show that in cases where Crane was a co-defendant with Garlock, plaintiffs eventually filed an average of 18 trust claim forms.

Also, on average, 80 percent of the claim forms or related exposures were not disclosed by plaintiffs or their law firms to Crane in the underlying tort proceedings.

Overall, nearly half of all trust claims were filed after Crane already had resolved the tort case.

Kelso said to his knowledge, theirs is the first public analyses with the Garlock data since it was publicly made available.

“We sought to measure the level of evidence suppression against Crane Co. in cases that provided a robust set of trust discovery,” he explained. “In addition to discovery from trust claim processing facilities, we evaluated cases that included court-ordered plaintiff information questionnaires (PIQs).”

He said the PIQs included evidence of trust claim filing and payment activity that was supplied directly from the plaintiffs and plaintiff law firms.

“The paper is designed to show that the ‘manipulation’ of exposure evidence, as quoted by Judge Hodges in his estimation ruling, and its adverse economic impact on tort defendants did not just occur against Garlock but also against Crane Co. and any other defendant who settled or paid a judgment in the tort system absent the full complement of exposure information,” Kelso said.

The authors say the significance of the data “cannot be overstated.”

“For the first time, any interested party has access to information regarding what claims asbestos plaintiff law firms have filed against bankruptcy trusts for a large sample of historical cases,” the 12-page article states.

In October 2014, U.S. Bankruptcy Judge George Hodges, of the U.S. District Court for the Western District of North Carolina, ordered all documents pertaining to the Garlock bankruptcy proceeding to be unsealed and made available, effectively denying every motion to seal that had been filed by asbestos plaintiffs lawyers and Garlock.

The documents at issue include evidence submitted by Garlock that allegedly showed a pervasive pattern of misrepresentation and suppression of evidence on the part of asbestos plaintiffs and their attorneys.

On Jan. 10, 2014, Hodges ruled in favor of Garlock, ordering the gasket manufacturer to put $125 million in its bankruptcy trust, which is more than $1 billion less than what plaintiffs’ attorneys requested as Garlock’s liability.

Hodges found that the amount of previous awards and settlements paid by the company in the civil justice system were not reliable indicators of future liabilities because plaintiffs attorneys had withheld evidence of their clients’ exposure to asbestos-containing products manufactured by other companies in order to maximize recovery against Garlock.

The judge rejected the argument that the amount of settlements reached by asbestos claimants should be sealed, holding that the awards were an important part of the decision in the estimation proceeding and the public had a strong interest in the information.

Furthermore, Hodges rejected the plaintiffs firms’ arguments that adult plaintiffs should maintain confidentiality over their full names. He concluded that if the claimants chose to file a public lawsuit, then their names are not a private matter.

Hodges’ ruling came after U.S. District Judge Max O. Cogburn Jr.’s ruling in favor of Legal Newsline and other proponents of public access. 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 confidential information.

Cogburn’s order came after a hearing addressed consolidated appeals from Legal Newsline, solvent asbestos defendants and other interested parties.

Legal Newsline’s first appeal came prior to the Garlock estimation trial on July 31, 2013, in response to Hodges’ decision to close portions of the trial and documents associated with it. It then filed an additional appeal seeking access to the evidence and sealed trial transcripts that led to the January 2014 decision.

After Hodges’ ruling, several interested parties filed similar motions requesting access to sealed Rule 2019 filings.

Included in the Garlock files that can be accessed on Legal Newsline are the depositions of many of the plaintiffs’ attorneys whose firms Garlock eventually sued for racketeering, including Ben Shein, Peter Kraus and Joe Belluck.

To view the depositions and the rest of the record, click here.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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