WILMINGTON, Del. (Legal Newsline) - Owners of bankrupt gasket maker Garlock Sealing Technologies claim clients of asbestos lawyers told contradictory stories of exposure in civil courts and bankruptcy courts.
Suspecting the proof lies in reports that asbestos firms filed off the docket in Delaware bankruptcy court, they seek to make the summaries public.
They asked Bankruptcy Judge Judith Fitzgerald for access on Jan. 10, arguing they need the records as evidence for their own bankruptcy proceeding in North Carolina.
Fitzgerald set a hearing on Monday, Feb. 14.
She has allowed firms to file statements and exhibits under procedural Rule 2019 off the docket, but hasn't designated them as confidential or signed an order sealing them.
Docket entries for 2019 statements advise anyone seeking access to ask for an order, and Gregory Werkheiser of Wilmington did so for Garlock.
"By comparing these 2019 exhibits verifying known exposure to the debtors' products, to the discovery Garlock was simultaneously receiving in the tort system, Garlock can determine whether lawyers and claimants were lying in one or both forums," he wrote.
"If Garlock's past settlements were inflated by fraud and abuse, they present an unreliable guide to its current and future liability for asbestos claims, unless discounted to account for the fraud and abuse," he wrote.
He wrote that Garlock is investigating possible actions against firms or claimants, "to recoup settlements obtained through the concealment of exposure evidence."
"The public is presumptively entitled to obtain access to documents filed in federal courts, unless a party objecting to access can demonstrate that disclosure will cause a clearly defined and serious injury," Werkheiser wrote.
He wrote that prior to 2000, Garlock won the vast majority of cases tried to verdict against it.
"Garlock has a strong defense to liability in every case brought against it," he wrote.
He wrote that because Garlock encapsulated asbestos in products, plaintiffs found it difficult to prove the products caused their injuries.
He wrote that bankruptcies of asbestos companies weakened Garlock in negotiation.
"Garlock, in the event of a loss, was now exposed to bearing shares of liability formerly borne by the bankrupts," he wrote,
He wrote that the position of asbestos firms in bankruptcy cases was inconsistent with representations they made to Garlock in the tort system.
"This inconsistency raises a strong inference that plaintiffs' firms were concealing their clients' exposures to bankrupts' products in order to inflate the plaintiffs' settlement values against Garlock," Werkheiser wrote.
He wrote that in 2019 statements, firms verified that each client was a creditor.
"It is not possible for a person to have an asbestos personal injury claim against a debtor, and thus be a creditor, without having experienced exposure to the debtor's product."
Garlock objected to confirmation of the reorganization of W. R. Grace and Company partly because confidentiality provisions violated its rights, Werkheiser wrote.
Grace's trust distribution procedures would allow plaintiff firms to continue hiding exposures, he wrote.
In order to prove the practice, Garlock sought access to 2019 statements in the bankruptcy of Pittsburgh Corning, he wrote.
A judge ruled Garlock could gather the information it needed from creditor ballots that plaintiff firms certified under penalty of perjury, he wrote.
In a random sample, Garlock found ballots of 255 mesothelioma plaintiffs who had also sued Garlock, Werkheiser wrote.
He wrote that in their tort claims against Garlock, 236 failed to identify exposure to Pittsburgh Corning products.
"Potential damage to the pecuniary interests of the plaintiffs' bar is, of course, no reason to deny Garlock access," he wrote.
"To the contrary, the elimination of fraud and abuse is one of the major reasons why judicial records are presumptively open to public examination."
On Jan. 28, two groups of asbestos firms opposed the motion.
Daniel Hogan of Pittsburgh wrote for nine firms that among more than 50 asbestos debtors, Garlock alone sought access to confidential materials.
"Garlock doesn't explain how it, alone among asbestos debtors, needs this information," Hogan wrote.
"It is not uncommon for law firms to represent hundreds or even thousands of a mass tort debtor's potential creditors.
"How are such entities to comply with the rule?"
Hogan expressed concern for privacy of "clients who are ill and, for the most part, elderly and vulnerable."
Calling the reports "a concentrated store of information about many people," he warned of "identity thieves, investment schemers, dubious marketers and scam artists."
For 12 other firms, Natalie Ramsey of Wilmington wrote that Garlock's "impertinent and contemptuous allegations" justified denial of the motion.
"Garlock provides no detail as to which claimants or law firms it accuses of fraud, and therefore provides no ability to respond to its accusations," Ramsey wrote.
"Plaintiffs who have mesothelioma aren't lying about the fact that their disease was caused by asbestos.
"They are also not lying about their work histories or other exposures, as these are facts which can be objectively proven."
She wrote that a Rule 2019 statement is not the equivalent of a sworn statement of intention to pursue payment from a debtor.
She wrote that many firms list all claimants who might ultimately pursue payment from a debtor or an asbestos trust.
"As this court well knows, the 2019 statements are not equivalent to a factual assertion of a valid claim, but instead are used to disclose, in a bankruptcy reorganization, which firms represent which claimants," Ramsey wrote.
"While the 2019 statements were verified, and, in some cases, do include attorneys' statements of personal knowledge it was clear to all that this knowledge related to the disclosure of the relationship between the plaintiffs and their attorney, and could not be fairly, or even possibly, construed as an attorney having personal knowledge of the source of his clients' injuries."
She wrote that "the public's right of access to court records is not absolute."
"Every court has supervisory power over its own records and files, and access may be denied where court filings might be used in furtherance of improper purposes," Ramsey wrote.
Werkheiser had promised in his motion for access that, "Garlock will not steal the claimants' identities or cause them any unlawful injury."
Hogan opposed the motion for Texas asbestos firms Baron & Budd of Dallas; Reaud Morgan & Quinn of Beaumont; Waters & Kraus of Dallas; Hissey Kientz of Austin; and Williams Kherkher Hart Boundas of Houston; as well as Thornton & Naumes of Boston, Mass; Brayton Purcell in Los Angeles, Calif.; Lipman Law Firm in Florida; and Law Offices of Peter Angelos of Baltimore, Md.
Hogan listed Peter Ashcroft of Pittsburgh and Dallas lawyers Sander Esserman, David Klingler, David Parsons and Cliff Taylor as associates.
Ramsey opposed the motion for Simmons Browder Gianaris Angelides & Barnerd of East Alton, Ill.; Gori Julian of St. Louis; Stanley, Mandel & Iola of Dallas; Bergman, Draper & Frockt of Seattle; Cooney & Conway of Chicago; Kazan, McClain, Lyons, Greenwood, & Harley of Oakland, Calif.; Early, Lucarelli, Sweeney & Strauss of New York; George & Sipes of Indianapolis; Lipsitz & Ponterio of New York; the Bifferato firm of Wilmington, Del.; Montgomery, McCracken, Walker & Rhoads in Philadelphia, and Waters & Kraus in Dallas.
Ramsey listed Laurie Krepto of Wilmington and as counsel and Ellen Brotman of Philadelphia as of counsel.