Asbestos claimants to participate in fraud case against attorneys

CHARLOTTE, N.C. (Legal Newsline) - A committee representing those with asbestos claims against Garlock Sealing Technologies will be allowed to intervene in the company's fraud case against a plaintiffs firm.

Tuesday, U.S. Bankruptcy Judge George Hodges ruled that the Official Committee of Asbestos Personal Injury Claimants will participate in Garlock's case against the Houston firm Williams Kherkher Hart Boundas, which is alleged to have made inconsistent claims about the origin of client John Phillips' mesothelioma.

The committee says it wishes to intervene on behalf of the firm, while Garlock claimed it wanted nothing more than to obstruct the case.

Hodges held a hearing Thursday. He ordered the committee to file a pleading articulating its interest in the case within 30 days.

In response to the committee's motion to intervene, Garlock had harsh words.

"Rather than aligning with Garlock to recover for the Estate money that the defendants obtained via fraud - which recovery would benefit the committee's constituency, asbestos personal injury claimants - the committee instead tramps an all too familiar path of obstruction, waste of Estate resources and defense of the plaintiffs' bar at the expense of claimants," Garlock's response says.

"In their desire to oppose the debtors' at every step, the committee now moves this Court to allow its participation in an adversary proceeding that it has no statutory right to interrupt, in which it has no interest that is not adequately protected by the defendants, and which shares no common questions of law or fact aside from the committee's attempt to turn the proceeding into a 'test case' for its approach to estimating the debtors' liability in the bankruptcy case."

Garlock said that as a representative of asbestos personal injury claimants and not attorneys, the committee has no legitimate interest in the case.

"To allow the committee to intervene would unnecessarily inflate the cost to the Estate of litigating the defendants' misconduct in the context of the Phillips settlement," Garlock wrote.

The claimants' committee says Garlock has attempted to make similar fraud claims since its bankruptcy proceedings began in 2010.
"The fraud allegations that Garlock... raise(s) here clearly have bearing on the issues being litigated in the proceeding to estimate Garlock's asbestos liabilities in the aggregate," the committee's motion says.

"Such allegations are part and parcel of Garlock's larger objectives in the estimation case to trump its settlement history, to develop a new way of valuing its asbestos liability, to oust the non-bankruptcy courts that typically administer the tort laws, and to come out smelling like a rose in comparison to the $1.8 billion it paid before bankruptcy for the defense and payment of asbestos claims..."

Garlock is one of more than 60 asbestos defendants to have created a bankruptcy trust. Injured individuals submit claims to the trusts for compensation, but file lawsuits against still-solvent defendants.

Williams Kherkher sued Garlock in 2008 in a Texas state court, alleging that Phillips' illness was caused by a rare type of asbestos (crocidolite) that came solely from Garlock's products, the company claims, at the same time it was pursuing claims against a manufacturer of products that contained the same type of asbestos.

Garlock says it was induced to enter into a far larger settlement than it would have paid. In Texas, juries can allocate a percentage of liability to responsible third parties.

Phillips worked at Triplex, a company that sold parts that contained asbestos, from 1966-68, but no records still exist detailing the company's inventory then.

The company claims the firm could have asserted Johns-Manville's asbestos-containing gaskets were to blame, but Johns-Manville had already filed for bankruptcy. More than 90 companies have declared bankruptcy from asbestos litigation, and more than 60 bankruptcy trusts have been established to pay out claims.

The claimants' committee is a group of plaintiffs with pending claims against Garlock. Attorney Trevor Swett of Caplin & Drysdale in Washington, D.C., filed the motion Sept. 6.

Co-counsel for the claimants' committee is Travis Moon of Moon Wright & Houston in Charlotte.

Garlock wrote in its complaint that Williams Kherkher attorneys told two different stories about its client's exposure history.

"(The lawyers) repeatedly signed responses to requests for information about their client's claim against Garlock by describing a history of exposure to asbestos products that did not include exposure to the products of (CAPCO)," Garlock's complaint says.

"The lawyers had reason to believe that telling two different stories would succeed because their ballots would not be readily available to the public and their bankruptcy trust claims, when made, would be kept confidential."

Garlock obtained copies of ballots cast on plans of reorganization in certain bankruptcy cases in April. They showed that a Williams Kherkher attorney certified that Phillips held a claim against ASARCO, the owner of CAPCO.

A second ballot cast in 2009 after a settlement with Garlock showed Phillips had a claim against CAPCO in which he listed a disease level that required evidence of exposure to products mined, manufacture, sold, supplied, produced, specified, selected, distributed or marketed by CAPCO or ASARCO, the company says.

"Garlock is informed and believes that the firm knew about Phillips' exposure to CAPCO products during 2008-09 when it responded to or supplemented Garlock's discovery," the complaint says, "and failed to disclose such exposure to Garlock because it would decrease the value of the claims against Garlock."

Garlock called the current status of bankruptcy claims and civil lawsuits "a two-track system that is rife with potential for abuse."

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