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Garlock's suit against asbestos firm points to abuse FACT Act designed to fix

By T.K. Kim | Nov 18, 2013


CHARLOTTE, N.C. (Legal Newsline) - During the bankruptcy trial of Garlock Sealing Technologies, a manufacturing company that once produced asbestos-containing products, Lester Brickman, a professor at the Benjamin N. Cardozo School of Law of the Yeshiva University, testified about fraud on the part of plaintiffs suing companies for their asbestos-related ailments.

The problem, he testified, was that certain confidentiality provisions enacted for trusts established to pay claimants who came into contact with asbestos caused significant transparency issues preventing companies like Garlock from cost-effectively ferreting out bogus claims. Brickman authored a report on fraudulent asbestos claims and has testified before Congress on the issue. The way the provisions are enacted, companies such as Garlock have no cost-effective means to find out whether a person filing a claim against them might also have done the same against other former asbestos manufacturers, he said in court.

That is why Brickman, in an interview with Legal Newsline, believes a recent bill introduced by Rep. Blake Farenthold, R-Texas, called the Furthering Asbestos Claim Transparency Act, which passed the U.S. House of Representatives last week would go a long way in helping alleviate these potential abuses.

The bill requires asbestos trusts established to pay off future claims against asbestos companies, to release quarterly reports about who seeks compensation. The House voted 221-199 to pass the bill.

Brickman said that the bill's requirement should allow debtor/defenders to "vastly improve" in their defense against fraudulent claims where a plaintiff files a claim attributing their asbestos-related ailments to one manufacturer and then filing a similar claim against another thereby collecting multiple recoveries for the same underlying issue.

To date, Garlock has paid out more than $1.3 billion in asbestos claims. Of that amount, Brickman previously testified at trial that about $1 billion had been paid out to claimants who did not develop any malignant cancers, which he labeled as fraudulent claims.

"These settlements as well as others were affected significantly by plaintiffs suppressing evidence," Brickman testified at the trial. "My opinion is that Garlock's settlement history is not an accurate reflection of Garlock's liability," he said at trial.

Because of the on-going status of the Garlock bankruptcy trial where he was a witness for Garlock, Brickman declined comment on any issues specifically related to Garlock. But in regards to the FACT Act, Brickman said that the FACT Act would enable defendants in the tort system to gain information about trust claim filings at a minimum of costs and delays.

A recent lawsuit Garlock filed against a plaintiffs law firm highlights the kinds of abuse the FACT Act is supposedly meant to discourage. In a 2012 complaint filed against lawyers from the firm Williams Kherkher Hart Boundas, LLP, Garlock alleges that lawyers from the firm fraudulently concealed evidence "they were obligated to disclose in discovery."

In the suit filed in the U.S. Bankruptcy Court for the Western District of North Carolina, Garlock contends that lawyers from the firm "repeatedly signed discovery responses concealing the exposures that were the foundations of the claims they were making in bankruptcy. The Defendants perpetrated fraud to increase the amount of the contingency fee that they would bring in from this personal injury case."

The lawsuit stems from an earlier suit filed by members of the firm representing a mesothelioma patient. The patient worked at Triplex, a company that sold different industrial products including asbestos pipes between the years 1966 to 1968 while he was still in high school. Because few, if any records of the company's inventory from that time period still exist, Garlock contended in the lawsuit that it allowed for (without explicitly alleging) plaintiff's attorneys to "implant memories" of what products the patient had been exposed to, allowing Garlock to be targeted in litigation.

In their lawsuit against lawyers from the firm, Garlock alleges that the firm's lawyers filed a claim against CAPCO, a bankrupt company that produced asbestos pipes Triplex sold. Triplex also was a distributor for Johns-Manville Corporation, a major manufacturer of asbestos-containing products including gaskets.

But with the potential payoff for a claim in bankruptcy court being limited, Garlock contended that the firm decided to target Garlock in the tort system since it was still solvent and could potentially result in a much larger payoff then filing a claim against the trust the companies in bankruptcy set up to pay victims. To do so, Garlock alleges in their lawsuit that the firm's attorneys sought to attribute their client's mesothelioma to exposure to two kinds of asbestos fibers that both Johns-Manville and Garlock used in the products they sold, chrysotile and crocidolite.

With both companies selling products that contained both kinds of fibers, it allowed for the firm to sue Garlock and attribute their client's chrysotile exposure to the other company. In their lawsuit, Garlock alleges that lawyers from the firm made a claim against the CAPCO trust claiming crocidolite asbestos exposure from their products as well.

The dispute is still ongoing in the U.S. Bankruptcy Court in the Western District of North Carolina with the court recently denying a defense motion for summary judgment on Sept. 17. The case is presided over by Judge George Hodges.

"I gauge the impact of the FACT Act in part on the plaintiffs' bar's level of opposition to its adoption - based upon that concerted effort on the part of the plaintiff's bar to prevent the Fact Act from being enacted, I conclude that the plaintiff's bar thinks it'll significantly impair the value of tort claims," Brickman said.

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Williams Kherkher Hart Boundas LLP