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Judge sides with Legal Newsline, orders all documents unsealed in Garlock bankruptcy

By Heather Isringhausen Gvillo | Oct 16, 2014

CHARLOTTE, N.C. (Legal Newsline) – A Thursday hearing in the Garlock Sealing Technologies bankruptcy concluded in a win for Legal Newsline and other proponents of public access to the courts as Judge George Hodges ruled in favor of the publication and ordered essentially the entire record to be disclosed to the public.

At the hearing, Hodges ordered all documents pertaining to the Garlock bankruptcy proceeding to be unsealed and made available, effectively denying every motion to seal that had been filed by asbestos plaintiffs lawyers and Garlock before a Sept. 11 deadline. The documents at issue include evidence submitted by Garlock that allegedly showed a pervasive pattern of misrepresentation and suppression of evidence on the part of asbestos plaintiffs and their attorneys.

Hodges agreed with Legal Newsline’s arguments that there is a First Amendment right of access as well as a common law right of access.

Additionally, he said Section 107 of the Bankruptcy Code provided a right of access, which states that “a paper filed in a case under this title and the dockets of a bankruptcy court are public records and open to examination by an entity at reasonable times without charge.”

Hodges concluded that the parties requesting confidentiality failed to provide a compelling state interest to override or outweigh the public’s interest in the information.

The action arose out of Hodges’ Jan. 10 ruling in favor of Garlock ordering the gasket manufacturer to put $125 million in its bankruptcy trust, which is roughly $1 billion less than what plaintiffs' attorneys requested as Garlock’s liability.

Hodges found 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 evidence of their clients' exposure to asbestos-containing products manufactured by other companies in order to maximize recovery against Garlock.

On Thursday, Hodges rejected the argument that the amount of settlements reached by asbestos claimants should be sealed, holding that the awards were an important part of the decision in the estimation proceeding and the public had a strong interest in the information.

Furthermore, Hodges rejected the plaintiffs firms’ arguments that adult plaintiffs should maintain confidentiality over their full names. He concluded that if the claimants chose to file a public lawsuit, then their names are not a private matter.

As for Garlock’s arguments that its documents detailing the reasons why it settled lawsuits while in the tort system are subject to the attorney-client  and work product privileges, Hodges also rejected its assertions. He concluded that the court did not compel the debtor to provide the information. Rather Garlock voluntarily provided the information and thereby waived any privileges pertaining to the documents.

Counsel for the debtor and the Official Committee of Asbestos Claimants, or ACC, estimated the documents could be available for release to the public in as early as four-to-five weeks, but did not offer an exact timeframe during the hearing. An order outlining his unsealing process is expected to be filed at a later date.  

Before anything can be disclosed, a third party company will be employed to review and redact all personally identifying information such as the names of minor plaintiffs and full social security numbers.

Outside the hearing, counsel for the ACC said it did not plan on filing an appeal, but it is unknown whether plaintiffs firms will appeal the decision. Counsel for Garlock stated that he did not believe the debtor would appeal, but that a final decision had not yet been made.

Hodges’ ruling comes after U.S. District Judge Max O. Cogburn, Jr.’s July 23 ruling in favor of Legal Newsline and other proponents of public access. 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, ruled that sealing documents and witness testimony is the exception, not the rule, to handling 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, Hodges released instructions and deadlines for the unsealing process in the Garlock proceeding.

According to Hodges’ instructions, any party wishing to keep documents under seal must file a motion to seal proving confidentiality is appropriate.

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 prior to the Garlock estimation trial on July 31, 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 the evidence and sealed trial transcripts from the January decision.

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.

On remand, Hodges entered an order establishing a protocol for consideration of unsealing evidence from the estimation hearing.

Hodges' landmark January ruling said plaintiffs' attorneys had manipulated their clients' exposure evidence while trying to maximize recovery against Garlock in civil lawsuits.

“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.

“It appears certain that more extensive discovery would show more extensive abuse,” he 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 asbestos@legalnewsline.com

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