LEGAL NEWSLINE

HARRISBURG, Pa. (Legal Newsline) – As the deadline for unsealing the estimation record of the Garlock Sealing Technologies bankruptcy proceeding draws nearer, talks of asbestos trust transparency are on the rise. But three asbestos plaintiffs’ attorneys argue that many arguments in support of transparency aren’t quite what they seem, calling them “nothing more than tort reform.”

In an article with the Widener Law Journal titled “Clearing up the False Premises Underlying the Push for Asbestos Trust ‘Transparency,’” attorneys Bruce Mattock and Jason Shipp, of the Goldberg, Persky & White law firm in Pittsburgh, and Andrew Sackett, of the Caplin & Drysdale law firm in Washington, D.C., address why they believe transparency is unfair, unnecessary and burdensome.

“What underlies the concept of ‘transparency’ is a misunderstanding of the purpose and the operation of the asbestos personal injury trusts,” they wrote.

The group stated that the push for transparency is really just an effort to switch the burden from the few remaining solvent defendants involved in asbestos litigation to asbestos claimants.

They explain that the push for transparency began when Charles Bates and Charles Mullins of Bates White Consulting suggested "double-dipping" in a 2006 article. They claimed that claimants could potentially collect awards for their injuries from solvent defendants in the tort system and then from trusts.

“These two theories have developed into the principal justifications for trust transparency – that claimants will be collecting funds to which they are not entitled, and that solvent defendants are paying funds that they should not have to pay,” the article states.

Regardless, the writers argue that transparency is unnecessary because defendants already have access to the information they need from asbestos trusts.

They explain that “many” jurisdictions already allow defendants access to documents showing any trust claims a plaintiff has made or will likely make. Because defendants know a plaintiff’s occupation and when and where the claimant worked, that should be sufficient to establish that a plaintiff would be entitled to file trust claims with numerous trusts.

“A defendant already has far more information about trust claims than it has about settlements with either current or trust predecessor co-defendants in the tort system,” the article states.

As for specific transparency laws, the article first addresses the current Congressional bill sitting in the Senate called the Furthering Asbestos Claims Transparency Act, or FACT Act. If passed the bill would enact federal transparency laws stretching across the nation in every jurisdiction.

The FACT Act would require asbestos trusts to release information on those seeking compensation due to asbestos exposure in quarterly reports.

The bill would require the quarterly reports to be made on the court’s public docket, specifically disclosing the names, exposure history and basis for any payment from the trust of those who have filed a claim with each trust.

The House passed the bill, H.R. 982, in a 221-199 vote on Nov. 13. The bill remained on the party line as only five Democrats voted for the Act.

Then in May, the Senate introduced its own version of the transparency bill, officially titled S. 2319

They say that proponents of the FACT Act are wrong in believing that reporting and disclosure requirements of the bill would not place a burden on trusts.

The writers argue that providing exposure history and basis for payment cannot simply be done by producing electronically submitted claim forms, and may even require an analysis of a claimant’s medical history and exposure history.

The trusts believe that to figure out the required data, an experienced claim reviewer would have to analyze the supporting documents and prepare a special report, a task that would take roughly 15 minutes. The writers added that it would take managers and claims reviewers roughly 20,000 hours per year to comply with the Act.

As a result, trusts would either have to hire extra staff to prepare the special reports or take staff away from the task of processing claims.

Furthermore, the authors argue that there is no evidence of widespread fraud, which would provide a need for transparency, despite the recent Garlock ruling and uncovered fraud in the Kananian case.

On Jan. 10, Bankruptcy Judge George Hodges, of the United States Bankruptcy Court for the Western District of North Carolina, found Garlock’s asbestos liability amounted to $125 million – roughly $1 billion less than what plaintiffs’ representatives felt was proper. He concluded that the amount of previous awards and settlements paid by the gasket manufacturer in the tort system were not reliable because plaintiffs’ attorneys had withheld exposure evidence in order to maximize recovery against solvent 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.”

The fraudulent Kananian claims were discovered in the Knanian v. Lorillard Tobacco case in January 2007 when Judge Harry Hanna of the Court of the Common Pleas in Cuyahoga County, Ohio, issued an order indicating Alan Brayton, senior partner and founder of Brayton Purcell, committed “institutionalized fraud.”

Those supporting the FACT Act use the Garlock ruling, the Kananian mishap, and number of others, as proof of why transparency is necessary to solve the problem.

However, those opposing transparency legislation disagree.

“There are major problems with this evidence of an epidemic of fraud,” the article states. “The ‘evidence’ consist of a few cases in a system in which there are thousands of lawsuits filed yearly, and tens of thousands of trust claims processed, and the ‘evidence’ is anecdotal, not statistical.”

Some states have passed their own versions of asbestos trust transparency laws.

The Wisconsin Civil Justice Council, WCJC, thanked Gov. Scott Walker for providing fairness and transparency in asbestos litigation

“We thank Gov. Walker for signing this landmark legislation into law,” stated Bill Smith, WCJC President and NFIB State Director. “Wisconsin joins Ohio and Oklahoma in adding transparency in asbestos lawsuits and protecting large and small businesses from unscrupulous plaintiff attorneys who double-dip against asbestos trust funds and Wisconsin businesses.”

Ohio passed a similar bill called Ohio House Bill 380 in December 2012. Oklahoma followed suit with the Oklahoma Senate Bill 404 in May 2013.

The writers also oppose these bills, saying they are anti-plaintiff.

They state that the laws are “justified by their proponents primarily on the grounds that asbestos personal injury trusts should be paying more than they are.”

On the other hand, the writers say the “legislation is blatantly pro-defendant, with the goal of ensuring that ‘solvent companies do not unnecessarily absorb the liabilities of bankrupt entities that are not subject to tort actions.

They believe the laws force plaintiffs to do the defendants’ work for them by providing evidence of exposure that will ultimately be used against the claimant.

“By forcing the plaintiffs to work up trust claims and then statutorily bringing those claims into court, the laws make plaintiffs assist defendants in proving their case,” the article states. “That is, they have to create new ‘evidence’ which will be used against them at trial.”

The writers conclude that transparency laws will ensure that asbestos claimants will receive compensation entirely from asbestos personal injury trusts without awards from solvent defendants in the tort system.

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