Legal Newsline

Thursday, September 19, 2019

Judge: Garlock bankruptcy case a 'long, strange trip,' ultimately led to public access

By Heather Isringhausen Gvillo | Nov 4, 2014

CHARLOTTE, N.C. (Legal Newsline) – During the Oct. 16 hearing in which Judge George Hodges ruled in favor of Legal Newsline and unsealed essentially the entire record of Garlock Sealing Technologies' bankruptcy, he admitted that the bankruptcy proceeding should have been open to the public from the beginning.

“This is the type of proceeding that would have historically been open, and public access would have served a positive role in the functioning of the court by enabling the public to evaluate the court’s decision based on all of the evidence rather than on simply part of it,” Hodges said, according to the rough draft of the transcript.

Calling the case a “long, strange trip,” Hodges said the case led him down a path he could not have anticipated.

“I guess in a lot of ways I’m like Columbus,” Hodges said. “I set out on day one of the hearing not knowing where I was going, and when I got there I wasn’t sure where I was. If I had to guess where I was going on day one, I wouldn’t have guessed where I ended up. So we’ve had lots of twists and turns and I guess that makes things interesting.”

At the Oct. 16 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.

After considering the motions to seal, objections and replies, the court concluded that it was proper to unseal the estimation record with a few exceptions. Hodges held that specific personally identifying information is to be redacted before the public may have access.

The following information was ordered to be redacted and permanently sealed:

-Social security numbers (except for last four digits);

-Dates of birth (except year);

-Names of identifiable minors (except initials);

-Financial account numbers (except for last four digits); and

-Medical information (except claimed asbestos-related disease)

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.

Hodges discussed three sources of the right to access at the hearing: First Amendment, common law and bankruptcy code.

In regards to the First Amendment, Hodges held that it requires a compelling government interest to overcome the public’s right to access, which is not the case here.  

Additionally, he held that the case favors allowing access, explaining that the common law rights require a balancing of interests.

As for bankruptcy code, Hodges found that according to Rule 107(a), access is required.

“Restriction of access is appropriate only in unusual circumstances, and I don’t think we have any of that here,” Hodges said.

Addressing arguments raised in the motions to seal, he concluded that the public’s right to access outweighs any policy favoring confidentiality due to the nature of the case, specifically with settlement amounts because they played an important role in Garlock’s arguments.

“Any de-linking of names and settlement amounts, I think, would destroy the ability of the public to analyze the data, and to determine whether the evidence supported the decision,” Hodges said.

“Who made the settlement and for how much is essentially the issue that is important here,” he continued.

Hodges held that settlement amounts are not considered financial information and are instead a conclusion of a publicly filed lawsuit.

Calling the settlements at issue in the case “ancient history,” he said the most recent one is about four years old and added that there is no showing that disclosure of it will have a negative impact on encouraging settlements in the future.

Furthermore, several motions to seal sought to keep the full names of adult claimants protected, but Hodges disagreed.

He explained that all of the claimants’ names are included in state court complaints.

“The names are necessary for matching with other information in order that things can be properly evaluated,” he said.

Plaintiffs firms also sought to keep the questionnaires sealed, arguing that they should be protected under prior confidentiality agreements. However, Hodges held that the public’s right to access overcomes whatever expectations may have been created by the agreements.

Addressing Garlock’s motion to seal, Hodges concluded that disclosure of the MEA and PEF documents is proper because the debtor’s counsel testified about its reasons for settling cases, thus placing the materials into the record and waiving any privileges the documents previously held.

“I think all of that requires that the information not be sealed, that Garlock’s reason for settling cases is an issue. Garlock put it at issue,” he said.

Hodges admitted that his conclusion from reading the unsealed documents is “substantially different” than what the Asbestos Claimants Committee asserts. But he determined that the public is entitled to see the material and “make up its own mind about those things.”

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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