CHARLOTTE, N.C. (Legal Newsline) – The first motion to seal in the Garlock Sealing Technologies bankruptcy proceeding was filed on Thursday by Louisiana asbestos attorneys, exactly one week before the deadline.
The motion was filed by the Roussel & Clement law firm on behalf of numerous asbestos claimants.
The motion asks the United States Bankruptcy Court for the Western District of North Carolina to seal Mesothelioma Claim Questionnaires and Supplemental Exposure Questionnaires as well as any data produced by the Delaware Claims Processing Facility regarding the listed individuals, which took roughly three pages to list.
Roussel & Clement argues that the claimants would be prejudiced if the documents are unsealed, because they supplied confidential settlement information in the documents with the understanding that the information would remain sealed and would not have provided the information if they knew it could become accessible to the public.
The documents in question contain claimants’ settlement information with asbestos bankruptcy trusts as well as solvent defendants in the tort system.
In support of its arguments to maintain confidentiality, the Roussel & Clement law firm discusses the 2010 Allison v Goodyear Tire & Rubber Co. decision out of the asbestos multidistrict litigation docket in the United States District Court for the Eastern District of Pennsylvania, in which the court held that settlement documents are not discoverable.
In Allison, the court ruled that settlement documents and bankruptcy trust information is not subject to discovery, even if the documents reveal additional exposure, and may not be used as impeachment evidence against a plaintiff, the motion states.
The law firm argues that settlement information is protected from disclosure under both federal and state law.
In Allison, the MDL court concluded that discovery of settlement documents would violate Rule 408 of the Federal Rules of Evidence, which provides that “evidence of a compromise of a claim, which is disputed as either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount,” the motion states.
Roussel & Clement explains that the purpose of this rule is to prevent prejudice against settling parties who may have settled in an effort to avoid litigation, which, therefore, promotes public policy of encouraging compromise.
In other words, the law firm argues that the federal rule recognizes the “strong” public policy encouraging settlements – meaning if the settlement information is disclosed, it would violate that public policy.
“Public policy favors settlements in the tort system,” the motion states. “Courts recognize that reasonable expectations of confidentiality are essential to promoting settlements and will deny a request for disclosure of a competitor’s settlement agreement because of ‘the chilling effect an order of disclosure of agreements entered into with the understanding of confidentiality would have on future settlement negotiations in other litigation.’”
Furthermore, Roussel & Clement cites the United States Supreme Court, saying it does not allow the bankruptcy court to be used as a discovery tool.
“The United States Supreme Court has made clear that filing for bankruptcy does not entitle a debtor to substitute a new legal regime to govern its liabilities: ‘Bankruptcy courts are not authorized in the name of equity to make wholesale substitution of underlying law controlling the validity of creditors’ entitlements, but are limited to what the Bankruptcy Code itself provides,’” the motion states.
The law firm also notes specific state codes in Louisiana, the firm’s practicing state, which discourage or even forbid discovery of “privileged or irrelevant” information – including settlement documents because they are protected under the attorney-client privilege.
Motions for information in the Garlock proceeding to remain sealed were ordered after U.S. District Judge Max O. Cogburn, Jr., ruled in favor of Legal Newsline on July 23 when he concluded that evidence alleging fraud on the part of asbestos attorneys should not have been sealed.
Cogburn, a President Barack Obama-appointee who took the bench in 2011, concluded 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.
As a result, Bankruptcy Judge George Hodges released an order stating that 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.
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.
Any sealed evidence that is not the subject of a motion to seal will be unsealed “shortly” after the Sept. 11 deadline.
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 with Garlock.
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.”
From Legal Newsline: Reach Heather Isringhausen Gvillo at firstname.lastname@example.org