LEGAL NEWSLINE

CHARLOTTE, N.C. (Legal Newsline) – Thirteen motions to seal were filed in the Garlock Sealing Technologies bankruptcy proceeding before the deadline ended on Thursday, meaning Bankruptcy Judge George Hodges will release all sealed documents without pending motions to the public no later than Sept. 21.

The debtors – which include Garlock, Garrison Litigation Management Group and The Anchor Packing Company – filed a motion to seal with the handful of plaintiffs’ counsel in the U.S. Bankruptcy Court for the Western District of North Carolina, agreeing that some information was provided under the impression that confidentiality would be maintained.

In fact, they argue that the court entered protective orders restricting their disclosure, and those restrictions should not be abandoned.

“Sealing these documents is necessary to ensure that the documents’ disclosure is confined to the context in which their production was ordered,” the debtors’ state.

The bankruptcy proceeding is noteworthy in that Garlock alleged plaintiffs attorneys routinely withheld evidence of their clients' exposure to other companies' products in an attempt to maximize recovery against Garlock. Tasked with determining how much money Garlock should put into a trust for asbestos claimants, Hodges ordered $125 million - roughly $1 billion less than plaintiffs attorneys asked for.

Garlock has filed racketeering lawsuits against a handful of firms. Legal Newsline and several solvent asbestos defendants are seeking access to the evidence provided by Garlock last summer when Hodges shut courtroom doors to the public.

The debtors argue that some information provided is subject to protection under the attorney-client privilege or work-product immunity.

“Courts routinely conclude that compelling public interest in protecting the confidentiality of attorney-client communications overcomes the presumption of public access to judicial records,” the debtors' motion states, “thereby authorizing sealing or redaction of documents and information protected by the attorney-client privilege and work product doctrine.”

The debtors argue that the court compelled them to produce specific documents and testimony in response to the Asbestos Claimant Committee’s and the Future Claimant Representative’s settlement approach to determining liability. The debtors argued against this approach, claiming the settlements shouldn’t be considered at all. However, because the settlements were at issue, the settlement information was provided under confidentiality during trial, they say.

As a result, Garlock proposes redacting references to an individual’s social security number, taxpayer identification number, birthday, name if the claimant is a minor, financial account numbers and medical information not relating to asbestos-related diseases.

However, The Official Committee of Asbestos Personal Injury Claimants, or ACC, rejects “any effort by the debtors or others to skew the public record, or the facts surrounding Garlock’s historical verdicts and settlements in asbestos cases, by cherry-picking for continued sealing those documents of record that debtors find unhelpful to their position in the estimation proceeding.”

The Future Asbestos Claimants’ Representative, Joseph Grier, III, filed a statement on Sept. 11 explaining that the FCR has no objection to its filings or submissions being made public.

“Accordingly, it is for those parties to confirm whether or not such documents and testimony should remain under seal,” the FCR states, “and disclosure of such documents and testimony should await the court’s ruling on any motions to seal filed by any affected parties.”

The remaining motions to seal filed by plaintiffs’ firms are all similar, arguing that the information is confidential, will prejudice the claimants and is protected from disclosure.

Rousel & Clement, HendlerLaw, the Madeksho Law Firm and the Jacobs & Crumplar law firm asked Hodges to seal Mesothelioma Claim Questionnaires and Supplemental Exposure Questionnaires as well as any data produced by the Delaware Claims Processing Facility regarding the firms’ asbestos claimants.

The Bell and Montgomery law firms and the Belluck & Fox law firm seek to have the following personal information sealed: the first five digits of any social security number, date of birth, names of any minors, all but the last four digits of financial accounts, medical information unrelated to asbestos-related injuries and the settlement amounts claimants received from any entity in their asbestos claims.

The ACC seeks to redact or seal evidentiary exhibits, demonstrative exhibits, summaries, expert reports, transcripts, briefs and proposed findings and conclusions.

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.

As a result, 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.

Privacy

Jacobs & Crumplar argues that the claimants providing information in the Mesothelioma Claim Questionnaires were promised that all information would be treated as confidential, and now have legitimate privacy interests in their medical information, personal information and social security numbers.

The firm adds that the information provided under subpoena by the Delaware Claims Processing Facility should remain protected because it goes beyond Garlock’s stated purpose for the information, which was to be used in estimating its liability to current and future asbestos claimants.

Bell and Montgomery claim personal financial information is protected by the U.S. Constitution, which should include settlement agreements, and that medical records are “worthy of the highest privacy protection.”

Belluck & Fox seeks to protect its clients’ “most sensitive and private information,” but noted that apart from the protection it requests, it welcomes the unsealing of the record.

The ACC adds that privacy is not just a matter of maintaining the secrecy of personal matters, it also includes insuring individuals’ control over the disclosure of personal information.

Prejudice

Several firms argue 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.

HendlerLaw is specifically concerned that claimants will be subject to financial predators, because a majority of its clients are elderly and “unsophisticated in assessing financial fraud and the confidence schemes of those that seek to separate elderly people from their money."

“There is no public policy procedure for disclosure that outweighs the prejudice and potential harm that may befall HendlerLaw’s clients if they are subjected to the types of financial predators that could make use of this settlement information,” it argues.

Belluck & Fox agreed, claiming it “seeks to protect its clients from being victimized all over again by those who would misuse this confidential information if it were disclosed,” especially considering some claimants may have received “a substantial sum of money.”

The Bell and Montgomery law firms add that the potential harm associated with disclosure outweighs any possible public access interest, and disclosure of the confidential information could actually cause claimants to become targets of identity theft or other financial or physical harm.

They explain that the court should consider that “a common attribute among the individuals who historically reached settlements with the debtors is their lack of sophistication in legal matters and their inability to protect their own interests, particularly in these proceedings where they may not have engaged counsel.”

Allison decision

In support of its arguments to maintain confidentiality, several law firms discuss 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 motions explain.

The law firms argue that settlement information is protected from disclosure under both federal and state law.

Furthermore, HendlerLaw adds that the disclosure is not necessary because the information will be discoverable by any legitimate party with a legitimate interest in obtaining the information for litigation through the discovery process.

Strong public policy favoring settlement

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,” Rousel & Clement argues.

Rousel & 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,” HendlerLaw adds. “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.’”

Right to access

Regardless, Belluck & Fox argues that there is no compelling interest in public access to the settlement information because the estimation proceeding was focused on the aggregate value of all future asbestos claims.

“Indeed, the estimation proceeding could not be dispositive because it did not fully decide the rights of any of the parties,” it claims.

Bankruptcy as a discovery tool

Furthermore, Rousel & 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,’” Rousel & Clement states.

Jacobs & Crumplar agrees, explaining that the “intent of public access to public records is to promote trustworthiness in the judicial process, not to aid as a discovery tool.”

PIQ orders

The ACC argues that several protective orders were entered by the court, causing claimants to understandably rely on the protection they promised.

“Now that the question is one of public access to an evidentiary record, the factors that led the court to impose those protections in the first place do not dictate the outcome,” the ACC contends, “but they remain significant in balancing competing interests.”

The Bell and Montgomery firms argue that if the claimants knew their information would be provided to the public, then they would have appealed the PIQ orders. However, the claimants provided the requested information because they relied upon the “clear protections” the court promised in the orders.

Belluck & Fox reiterates that it is not seeking to place entire settlement agreements or trust claim forms under seal, but only wants to protect the private financial information specific to each client.

On that note, the firm details how “unfair” the debtors’ acted when it imposed “stringent and binding” obligations on claimants under the guise of confidentiality only to turn around and not seek to have the information sealed.

Belluck & Fox relied on the promise of confidentiality provided by the protective orders, called the PIQ orders.

The Williams, Kherkher, Hart & Boundas law firm, The Simon Greenstone law firm, Shein Law Center and the Higgins Owens law firm joined the motions to seal, adopting and incorporating the same arguments presented by other parties in order to refrain from burdening the court by repeating what has already been stated.

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