Garlock bankruptcy judge issues deadlines in unsealing process

By Heather Isringhausen Gvillo | Aug 8, 2014

CHARLOTTE, N.C. (Legal Newsline) – U.S. Bankruptcy Judge George Hodges released instructions and deadlines last week for the process of unsealing evidence introduced last year by Garlock Sealing Technologies that alleged fraud on the part of asbestos plaintiffs attorneys.

Hodges’ Aug. 1 order comes after U.S. District Judge Max O. Cogburn's July 23 ruling in favor of Legal Newsline that concluded that evidence alleging fraud on the part of asbestos attorneys should not have been sealed. Legal Newsline appealed Hodges 2013 decision to close the courtroom while the evidence was submitted.

Cogburn, a President Barack Obama-appointee who took the bench in 2011, ruled that sealing documents and witness testimony is the exception, not the rule, to handling alleged "confidential" information. As a result, he reversed Hodges’ denial of the motions seeking access to evidence admitted under seal and remanded the proceedings back to the bankruptcy court with instructions on how to handle the unsealing process.

“As a gatekeeper, a judge must consider sealing as the exception to the rule, give the public notice of its intent to seal, require counsel to provide valid reasons for such extraordinary relief, and then explain that decision as well as the reason why less drastic alternatives were not employed,” Cogburn wrote.

According to Hodges’ order, any party wishing to keep documents under seal must file a motion to seal by Sept. 11.

The motions to seal must identify and describe each document or testimony it believes should be sealed or redacted and the reasons the materials should be kept confidential. They must also explain why no means less restrictive than sealing are available and how long the materials should be maintained under seal.

Sealed materials fall into the following categories:

-Mesothelioma claim questionnaires and supplemental questionnaires;

-Data produced by Delaware Claims Processing Facility (information on trust claims);

-Documents produced by plaintiff law firms;

-Ballots from other bankruptcy cases;

-Settlement information in Garrison Database, and Settlement Agreements and Correspondence;

-Other Documents Designated Confidential by Estimation Parties: debtors’ internal documents and expert reports containing settlement information or other sealed material;


-Trial testimony; and

-Other filed documents, such as motions, briefs, responses, transcripts, etc.

Parties opposing any motion to seal must file their objections by Oct. 6 and are required to identify the source of its right of access with respect to each document or testimony.

A hearing is scheduled for 9:30 a.m. on Oct. 16, and reply briefs to the objections are also due that day.

Any sealed evidence that is not the subject of a motion to seal will be unsealed “shortly” after the Sept. 11 deadline.

Cogburn’s order, in the United States District Court for the Western District of North Carolina, came after a July 15 hearing addressed consolidated appeals from Legal Newsline, solvent asbestos defendants and other interested parties.

Legal Newsline’s first appeal came during the Garlock estimation trial on July-August 2013, in response to Hodges’ decision to close portions of the trial and documents associated with it. It then filed an additional appeal seeking access to sealed trial transcripts.

After Hodges’ ruling, several interested parties filed similar motions requesting access to sealed Rule 2019 filings.

Cogburn agreed that the proceedings were improperly closed, and, therefore, reversed the closure and the denial of Legal Newsline’s motion.

The action arises out of Hodges’ Jan. 10 ruling in favor of Garlock that ordered the gasket manufacturer to put $125 million in an asbestos trust – roughly $1 billion less than what plaintiffs’ representatives felt was proper – to satisfy its anticipated liability to current and future asbestos claimants. In his decision, Hodges cited evidence that he said showed asbestos attorneys were withholding evidence while pursuing claims against Garlock.

The evidence of alleged misconduct by plaintiffs’ attorneys led Garlock to file lawsuits claiming it had been victimized by fraud, deceit and racketeering when settling asbestos plaintiffs’ claims.

Hodges 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.

“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.”

“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.”

Despite the stricter sealing requirements set in place by Cogburn and carried out by Hodges, plaintiffs in the Garlock bankruptcy case are maintaining their efforts to reopen the estimation proceeding record, instead alleging Garlock had withheld evidence during the estimation trial.

“Garlock has concealed crucial evidence,” the Asbestos Claimants Committee wrote. “By doing so, Garlock misled the court into rejecting 30 years of Garlock’s settlement history and standard estimation methodology.”

On July 21, the Official Committee of Asbestos Personal Injury Claimants filed a response to the debtors’ opposition to their request to reopen the record.

Just after Cogburn’s order on the unsealing protocol, Hodges postponed a hearing indefinitely on the motion to reopen, holding that the actions that transpire in the next several months will have an effect on the committee’s request.

The debtors - which include Garlock, Garrison Litigation Management Group and The Anchor Packing Company - filed their opposition on July 3, calling the committee’s motion “remarkably thin” for providing no sound reason for reopening the estimation record as most arguments have already been rejected by the court.

“The motion does not even mention, much less attack, the fundamental bases of the court’s estimation opinion,” the debtors claim. “There the court found, on the basis of the scientific and social science evidence presented at the estimation trial, that ‘it is clear that Garlock’s products resulted in a relatively low exposure to asbestos to a limited population and that its legal responsibility for causing mesothelioma is relatively de minimus.’”

The committee claims the evidence allegedly withheld by Garlock “demonstrates more vividly than anything Garlock did produce, that exposure evidence did not ‘disappear,’ plaintiffs’ counsel did not ‘suppress’ the evidence and Garlock’s settlement strategies did not turn on evidence of specific non-Garlock products.”

They further argue knew of the exposures it claims were suppressed and say the debtors cannot blame them for its own failure to produce the information during asbestos litigation.

In other words, they argue Garlock had the burden of proving the claimants suffered additional asbestos exposures, not the plaintiffs’ counsel.

“While, as expressly noted in its brief, the Committee has reserved its rights to appeal, it is our hope that, with proper disclosure by Garlock, the court may come to a more realistic view of Garlock’s experience in the tort system and a fairer aggregate estimate of mesothelioma claims against it,” the Committee wrote. “In all events, justice and the integrity of the estimation process demand that the court reopen discovery and allow the Committee to supplement the record.”

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

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