CHARLOTTE, N.C. (Legal Newsline) - Six months after the Garlock Sealing Technologies bankruptcy decision shook the ground in the asbestos tort system by revealing plaintiffs attorneys who were ruled to have withheld information in an effort to reach higher payouts, two defense attorneys have published an article in For The Defense addressing how important they feel the bankruptcy ruling is for asbestos defense attorneys.
Mark Behrens and Cary Silverman of Shook, Hardy & Bacon co-wrote the article titled, "The Garlock Bankruptcy Order and What it Means for Defense Counsel."
"The Garlock decision should spark more intense judicial scrutiny of the relationship between plaintiffs' asbestos bankruptcy trust fund claims and trot lawsuits against solvent defendants," they wrote. "The decision is a must-read for asbestos defense counsel and should be brought to the attention of judges in asbestos cases and policymakers."
They add that the ruling should do everything from assisting defense attorneys seeking access to asbestos trust claim submissions as well as fueling both jurisdictional and national efforts to require bankruptcy trust transparency through case management orders or even federal laws.
In a Jan. 10 order, Judge George Hodges of the United States Bankruptcy Court for the Western District of North Carolina issued an order estimating Garlock Sealing Technology's aggregate liability for current and future asbestos claims.
Behrens and Silverman explained in their article how the decision "is likely to have far-reaching consequences for asbestos defendants in the tort system and perhaps other companies that enter bankruptcy due to asbestos-related liabilities."
During the bankruptcy hearing, Garlock brought evidence demonstrating that the last ten years of its participation in the asbestos litigation system "was infected by the manipulation of exposure evidence by plaintiffs and their lawyers."
After Garlock brought extensive discovery revealing that asbestos attorneys had been withholding asbestos exposure evidence while pursuing claims against Garlock, Hodges ordered the amount sufficient to satisfy the company's asbestos liability to be $125 million - which is roughly $1 billion less than what plaintiffs' representatives felt was proper.
Garlock, which produced and sold asbestos-containing gaskets and gasket materials used in pipes and valves, was a fairly small player in the asbestos litigation system and typically settled claims brought against it.
Hodges wrote in his order that Garlock's products exhibited "a relatively low exposure to a limited population." The Sixth Circuit Court of North Carolina compared the exposures to a bucket of water as to the ocean's volume.
However, as more companies filed for bankruptcy, including virtually all thermal insulation manufacturers, Garlock found itself involved in more lawsuits and was forced to pay higher settlement values.
"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 stated in his opinion.
"In this new environment, where plaintiffs' counsel could control exposure evidence, Garlock was put at a major disadvantage," Behrens and Silverman wrote.
By June 2010, Garlock's insurance was exhausted and the company filed a voluntary petition for bankruptcy, seeking to establish a trust to resolve all current and future asbestos claims against it.
Behrens and Silverman explained that Hodges' order documenting the actions by asbestos attorneys draws back the curtain on the practices of plaintiffs' attorneys.
In an effort to bring out the truth, Hodges conducted a lengthy evidentiary hearing and ordered full discovery on 15 cases and partial discovery on more than 200 cases, revealing the abuse and finding that roughly 200 settled cases for large sums withheld exposure evidence.
"It appears certain that more extensive discovery would show more extensive abuse," Hodges stated. "But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive.
Behrens and Silverman held that the most important finding was that evidence Garlock needed in order to show claimants' injuries were a result of insulation products "disappeared" after the insulation companies filed for bankruptcy.
"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," Hodges stated. "It is that practice that prejudiced Garlock in the tort system."
Hodges detailed several cases in his order showing the extensive abuse Garlock endured.
In one example, a California jury rendered a $9 million verdict against Garlock after a claimant failed to admit any asbestos exposure from amphibole insulation, claiming that 100 percent of his work was on gaskets.
However, further discovery in the bankruptcy court revealed that the plaintiffs' lawyers filed 14 trust claims after the verdict was entered, including several against amphibole insulation manufacturers. In total, the plaintiffs' attorneys failed to disclose that the claimant had been exposed to 22 other asbestos products.
However, there were several honest cases involving Garlock where plaintiffs' attorneys admitted to filing trust claims. Of those cases, three trials concluded in defense verdicts and one trial only found Garlock two percent liable.
Behrens and Silverman believe that Hodges' Garlock order should be required reading for all defense counsel and judges participating in asbestos litigation.
"No matter what the final outcome will be in the Garlock bankruptcy, the facts uncovered and noted by Judge Hodges in his opinion after his detailed review of the evidence should not change," they wrote.
"Defense counsel should make a priority of finding ways to educate judges in asbestos cases about the Garlock ruling. It may not be intuitive for a busy state court judge in a tort case to research and read an opinion by a federal bankruptcy judge in Charlotte," they continued. "Opportunities may arise with respect to the admissibility of low dose plaintiffs' expert causation and with respect to discovery of trust claim submissions."
The authors explain that defense attorneys in future asbestos cases can use Hodges' ruling in low dose exposure cases. The order can also be used to encourage orders and laws requiring plaintiffs to produce trust claim forms, they said.
"The Garlock ruling demonstrates how aggressively seeking information about plaintiffs' claimed asbestos exposures can more reliably uncover which asbestos products actually caused a plaintiff's harm. By uncovering a plaintiff's full exposure history, defense counsel are better able to cross-examine plaintiffs and uncover attempts by unscrupulous plaintiffs to tell inconsistent exposure histories to trusts and juries," they wrote.
"Jurors are given the tools to reach fully informed decisions about which companies caused a plaintiff's harm. Settlements values will also better reflect a defendant's fair share of responsibility for a plaintiff's injury."
In fact, several asbestos litigation jurisdictions have already either adopted case management orders (CMOS) or passed transparency laws requiring plaintiffs to produce trust claim forms that have already been filed and information on potential trust claims. Wisconsin is the most recent state to pass a law requiring such information be disclosed before a trial can proceed.
"With the Garlock decision illustrating the improper failure of plaintiffs to disclose trust claims, defendants have more ammunition to convince courts to approve CMOs that require plaintiffs to file and produce all trust claims before trial," Behrens and Silverman wrote.
They add that the Garlock ruling also provides support for the Furthering Asbestos Claims Transparency Act, or FACT Act. Both a House and Senate version of the bill currently sits in the U.S. Senate.
The FACT Act, if passed, would require asbestos bankruptcy trusts to release quarterly reports providing information on claimants who seek payments for asbestos exposure.
The article notes how Hodges order revealing "significant" abuse surrounding asbestos bankruptcy trust claims is "making waves in the legal profession and mainstream media."
Behrens and Silverman wrote that the Jan. 10 ruling won't be the only game-changer in asbestos litigation created by the Garlock bankruptcy proceedings, as "more shake waves may be on the horizon."
The day before Hodges released his opinion, Garlock filed four adversary complaints under seal in the bankruptcy court alleging conspiracy, fraud and Racketeer Influenced and Corrupt Organizations Act (RICO) claims against several of the law firms and attorneys that participated in the documented abuse.
Garlock also filed a lawsuit against another plaintiffs' law firm in the bankruptcy court alleging fraud, negligent misrepresentation and civil conspiracy claims for allegedly withholding exposure evidence in tort cases.
Behrens and Silverman also mentioned Legal Newsline's motion to unseal the trial testimony and exhibits.
Attorneys for Legal Newsline appealed Hodge's decision to close the courtroom several times. Attorneys are challenging the decision under a First Amendment claim in district court.
Furthermore, a group of defendants headed by Ford Motor Company are in the process of trying to obtain access to Rule 2019 statements in the case, which require lawyers to identify clients with the claims against a bankruptcy company as well as the nature of those claims.
The group of defendants seeks the sealed information because they believe they may have been also victimized by the withheld evidence
Hodges granted their request before staying the order granting access pending an appeal by the Official Committee of Asbestos Personal Injury Claimants.
Both the motion to unseal trial evidence and the motion for access to Rule 2019 statements are pending and could provide more landmark decisions for asbestos litigation.
From Legal Newsline: Reach Heather Isringhausen Gvillo at email@example.com