Legal Newsline

Tuesday, September 17, 2019

Insurer, Bondex want to use sealed evidence of asbestos attorneys' misrepresentations

By John O'Brien | Apr 11, 2014

CHARLOTTE, N.C. (Legal Newsline) - An insurer of Pittsburgh Corning Corporation and Bondex International are the latest companies to seek the evidence of "misrepresentation" by asbestos attorneys that was referenced in a landmark January ruling.

Mt. McKinley Insurance Company argued in a motion filed April 4 that access to the evidence cited by U.S. Bankruptcy Judge George Hodges could factor in Pittsburgh Corning's bankruptcy case. In January, Hodges, who is presiding over Garlock Sealing Technologies' bankruptcy case, said the company presented evidence that asbestos attorneys withheld their clients' exposure evidence in order to maximize recovery in lawsuits against Garlock.

But the specific evidence is sealed. Legal Newsline has appealed Hodges' decision to close his courtroom during introduction of the evidence.

In March, Hodges denied motions by Legal Newsline and Ford to unseal the evidence cited in the ruling, but did not do so on the merits of the arguments. Instead, he decided both could appeal and have the decision made by the district judge presiding over Legal Newsline's appeal.

"Get all of these things done at once," Hodges said at a March 27 hearing.

Mt. McKinley Insurance says it did not file its joinder to Ford's motion until after Hodges' ruling because the motions were scheduled to be heard until an April 17 hearing.

"Mt. McKinley submits its joinder/motion should be addressed in the same manner so that it may pursue appropriate relief, including appeal," attorneys for Mt. McKinley wrote.

"Moreover, the Court indicated... that it would hear (Garlock's) motion for the establishment of a protocol to consider requests for public access to the estimation trial record.

"Because, as set forth herein, Mt. McKinley requires access to the sealed evidence for the purpose of investigating with diligence whether there is new evidence to support a motion for reconsideration of the confirmation rulings in the Pittsburgh Corning case and also because the Ford and Legal Newsline motions present unusual procedural issues, Mt. McKinley separately moves the Court for such relief."

Hodges was tasked with determining how much money Garlock should put in a trust for present and future asbestos claims.

His January order spurned asbestos attorneys who requested Garlock place more than $1 billion in the trust.

Hodges instead 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.

He ruled that Garlock needed to put $125 million in its bankruptcy trust and that math produced by plaintiffs attorneys wasn't reliable because Garlock had suffered large jury verdicts as a result of claimants previously focusing their lawsuits on Garlock while losing evidence to other asbestos exposure in the process.

"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."

According to Garlock's evidence, one firm issued to its clients 23 pages of directions on how to testify. Evidence also showed one lawyer stated, "My duty to these clients is to maximize their recovery, okay, and the best way for me to maximize their recovery is to proceed against solvent viable non-bankrupt defendants first, and then, if appropriate, to proceed against bankrupt companies."

Hodges permitted Garlock to bring evidence proving that roughly 220 settled cases withheld evidence. Then after settlement, clients made claims against roughly 20 companies' bankruptcy trusts.

"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.

"While it is not suppression of evidence for a plaintiff to be unable to identify exposures, it is suppression of evidence for a plaintiff to be unable to identify exposure in the tort case, but then later to be able to identify it in Trust claims. It is that practice that prejudiced Garlock in the tort system."

Bondex and its related holding company Specialty Products Holding Corp. are going through a similar bankruptcy process as Garlock. They filed their own motion to unseal the evidence, Rule 2019 statements and ballot materials.

"As debtors in possession in their own chapter 11 cases, the SPHC Debtors have a fiduciary duty to their respective estates to investigate potential claims against third parties, including potential claims arising from manipulation of exposure evidence, which this Court found was pervasive with respect to settlements to which Garlock agreed," Bondex's motion says.

"Access to three general categories of information filed or collected in the Garlock case - the 2019 Statements, the Ballot Materials, and the Sealed Evidence - will greatly assist the SPHC Debtors with their investigation."

Volkswagen, Crane Co. and Honeywell have already joined Ford's motion. The four are frequent defendants in asbestos lawsuits.

Strangely, the transcript from the Garlock trial was recently finished, but the bankruptcy court discovered that the parts that were supposed to be redacted were not. On Monday, Hodges ordered the destruction of any copies of those transcripts.

From Legal Newsline: Reach editor John O'Brien at jobrienwv@gmail.com.

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