Garlock: ACC motion to reopen estimation proceeding 'remarkably thin'

By Heather Isringhausen Gvillo | Nov 14, 2014

CHARLOTTE, N.C. (Legal Newsline) – Now that Bankruptcy Judge George Hodges has ordered the estimation record in the Garlock Sealing Technologies case unsealed, the Asbestos Claimants’ Committee, or ACC, is seeking to reopen the estimation proceeding to conduct more discovery.

In a Nov. 7 reply to the ACC’s most recent motion to reopen the estimation proceeding, the debtors – which include Garlock, Garrison Litigation Management Group and The Anchor Packing Company – oppose the committee’s “inflammatory claim.”

“[The estimation record] provided a sound basis for the court’s decision. The Committee has suffered no prejudice, and its motion provides no basis to question the estimation record or the court’s decision. The motion should therefore be denied in total,” they argue.

The debtors explain that six days after they filed their First Amended Plan of Reorganization in May, the ACC filed its original motion to reopen the record of the estimation proceeding, claiming the debtors committed fraud upon the court.

The debtors argue that the substance in the ACC’s motion “is remarkably thin,” as it does not address much of the “fundamental bases of the court’s estimation opinion.”

According to the Jan. 10 opinion, Hodges ruled 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.

The debtors argue that the committee’s motion fails to actually challenge any of Hodges’ findings.

More specifically, it does not challenge the court’s decision to reject reliance on Garlock’s settlements when determining its liability for mesothelioma claims, they claim.

“It was, of course, the Committee’s burden at trial to prove that those settlements were a reliable proxy, and the court found the Committee had not met that burden,” the reply states.

In the debtors’ sur-reply, they explain that since the January decision in favor of Garlock, the Committee has “scoured” their files in search for “newly discovered” evidence in an effort to undercut the court’s estimation opinion.

However, the debtors claim the Committee’s arguments have not changed.

“The Committee’s contentions continue to be completely devoid of merit. As the court found, the evidence at the estimation trial demonstrated a startling pattern and practice of evidence suppression, consisting in among other things,” the sur-reply states.

“The notion that this concealment of evidence did not matter to Garlock is belied by the admissions of the Committee’s own plaintiff lawyer witnesses that evidence of alternative exposures was important to Garlock at trial and in settlement negotiations. It is also belied by common sense, given the nature of Garlock’s defense,” it continued.

The debtors argue that the ACC fails to provide new evidence showing the settlements do measure Garlock’s liability, with no luck.

“The committee’s motion concerns the only other reason the court rejected the use of settlements: that ‘the last ten years of [Garlock’s] participation in the tort system was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.’ Even here, the motion addresses only a small part of the ‘substantial evidence’ upon which the court based that finding,” they explain.

As for the 15 cases in which the debtors received full discovery, which Hodges said revealed a “startling pattern of misrepresentation,” the ACC only addresses two of the cases: the Torres case and the Treggett case.

The debtors argue that the ACC’s motion does nothing more than present what it calls “new evidence” allegedly showing that Garlock had independent means to prove exposures that plaintiff firms had failed to disclose.

“Indeed, debtors’ witnesses testified at trial that they made independent efforts, but those efforts did not make it less important for plaintiffs to be truthful about their exposures,” the reply states.

In a Nov. 7 sur-reply, the debtors argue that the Committee blames Garlock, claiming it should have been able to discover the evidence concealment and should not have relied on the plaintiffs to disclose the additional exposures.

“Presumably, in the Committee’s view of the world, plaintiffs are free to deny exposures they have verified elsewhere so long as defendants do not catch them doing so,” the sur-reply states. “The court should reject the Committee’s misguided view of litigation and the attorney’s role.”

The debtors argue that suppression of evidence exposure is not about who has the burden of proof. Instead, it is about “candor to the tribunal, compliance with discovery obligations and professional responsibility.”

The ACC claims the evidence relating to the Torres and Treggett cases was hidden at trial. However, the debtors assert the documents upon which the committee bases its “bombastic arguments” were “fully accessible” during the estimation trial.

“It did not avail itself of them because they do not in fact help the Committee’s case (and in the case of Treggett, affirmatively hurt the case the committee tried to present at the estimation),” the debtors stated.

Additionally, the Committee’s motion does not even deny that plaintiff firms failed to disclose exposure evidence in its two featured cases.

In fact, the debtors argue the Committee does not address other evidence the court relied upon in its estimation opinion, including:

-A Baron & Budd memo instructing plaintiffs how to testify;

-Admitted “regular” practice of some plaintiff firms of delaying filing trust claims “so that remaining tort system defendants would not have that information”;

-Thirteen other cases with full discovery;

-Hundreds of other cases where limited discovery revealed non-disclosure of exposure evidence;

-The testimony of three men about this phenomenon;

-The success Garlock had at trial when it obtained trust claim evidence.

“The Committee’s arguments, therefore, do nothing to call into question the extensive record upon which the court based its estimation opinion, and provide no justification for permitting any further discovery or supplementation of that record. Equally important, accepting the Committee’s invitation to backtrack would be enormously detrimental to the orderly progress of these bankruptcy cases,” the reply states.

After three-and-a-half years litigating the bankruptcy case, reopening the estimation proceeding would halt the plan confirmation process, the debtors argue.

“None of this is warranted by a motion that does not bother to mention the fundamental foundations of the court’s opinion and casts no doubt on the few findings it does challenge,” they state.

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

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