LEGAL NEWSLINE

RALEIGH, N.C. (Legal Newsline) - North Carolina's state Senate is currently sitting on a bill that, if passed, would make the state the fourth in the nation to enact an asbestos bankruptcy trust transparency law, joining Wisconsin, Ohio and Oklahoma.

The North Carolina Commerce Protection Act of 2014, also called Senate Bill 648, was introduced by senators Brent Jackson, Wesley Meredith and Jim Davis in April 2013 and currently sits in the state's Senate Judiciary.

According to a summary of the bill dated May 20, the bill aims at making changes to the statutes governing commerce within the state, including provisions that would create transparency in asbestos bankruptcy trusts and the amendment of laws relating to products liability actions.

Section four of the bill intends to enforce transparency in asbestos trusts by requiring disclosures of all claims seeking a settlement against a debtor's bankruptcy trust.

A bankruptcy trust is formed after a company emerges from Chapter 11 bankruptcy but maintains outstanding liability in personal injury and wrongful death injuries allegedly resulting from asbestos exposure. Those companies have the option of establishing a trust to fund present and future asbestos claims.

The bill is intended to minimize potentially damaging confidentiality and promote transparency. The bill would require plaintiffs to file a sworn statement with the court within 30 days after filing of a claim - or after the bill becomes effective for claims already filed - identifying all other claims and potential claims against asbestos bankruptcy trusts.

The court would then be required to wait at least 180 days after the mandatory disclosure before scheduling a trial.

When a trial date is set, a defendant would be permitted to move for an order requiring the plaintiff to file claims against asbestos trusts that haven't already been identified in disclosure documents but the defendant reasonably believes the plaintiff has a sufficient case. This action must occur 75 days or more before the trial date is set to begin.

The plaintiffs would then have 10 days to either file the suggested claim or respond to the motion by explaining why there is insufficient evidence to support filing a claim with the specified asbestos trusts. If the court finds in favor of the defendant, however, the plaintiff would be ordered to file the claim.

Also, if the trial begins before a trust claim is resolved, the bill explains that the court should assume that the plaintiff is entitled to and will receive the compensation the claimant requested in the trust document.

If a verdict is still rendered against the defendant, the bill entitles the defendant to a setoff in the amount of any prior recovery by the plaintiff from a trust in addition to the amount of the compensation specified in the trust documents for any unresolved claims against trusts.

Currently, most claims filed with asbestos bankruptcy trusts are confidential and may allow claimants to delay filing claims until after a claimant has recovered awards and settlements from solvent defendants through lawsuits.

"As a result of asbestos manufacturers filing for bankruptcy and creating bankruptcy trusts, there are fewer available defendants for an injured party to pursue, and because of confidentiality provisions and delayed claims, it is difficult for solvent defendants to prove inconsistencies in the claims of an injured party," the summary states.

U.S. Bankruptcy Judge George Hodges' recent ruling in the Garlock Sealing Technologies case said he felt asbestos attorneys made misrepresentations when simultaneously handling possible claims against trusts and lawsuits against Garlock.

In his Jan. 10 opinion in the United State Bankruptcy Court Western District of North Carolina, Hodges estimated Garlock's liability at $125 million, meaning the gasket manufacturer would be required to pay roughly $1 billion less than what representatives of potential claimants requested be paid into the asbestos bankruptcy trust.

When reaching his decision, Hodges said plaintiffs attorneys had previously withheld exposure evidence in order to maximize recovery against Garlock in civil court, thus inflating the costs of judgments against and settlements with Garlock.

"In ordering the trust be funded with the lesser amount, the judge noted that plaintiffs in prior lawsuits had failed numerous times to disclose claims of plaintiffs against other defendants and bankruptcy trusts, which had resulted in the plaintiff recovering more than the value of the injury and the debtor paying more than its share of the recovery," the summary states.

Senate Bill 648 also addresses proposed amendments to the laws governing products liability actions, which could impact asbestos-related lawsuits alleging product liability and design defects.

Sections six and seven of the bill would provide immunity from liability as long as products comply with governmental requirements.

Products would be granted immunity if they are designed or manufactured in compliance with governmental approval and requirements relevant to the risk allegedly causing harm. They must also leave the care of the manufacturer or seller in compliance with requirements without being altered.

However, immunity is revoked if products are sold after a government agency withdraws, or recalls, the product from the market or alters the requirements for the product to avoid injury.

Manufacturers or those selling an allegedly harmful product that intentionally withhold or misrepresent information about their products in order to gain government approval are also barred from immunity.

According to the summary, current law does not provide absolute defense to a product liability action.

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