CHICAGO (Legal Newsline) - A company that frequently finds itself targeted by asbestos attorneys is taking the reins on racketeering claims that allege those lawyers manipulated the system to unfairly drive up the costs of settlements and verdicts.
On Monday, John Crane Inc. filed lawsuits against at least two asbestos firms under the Racketeer Influenced and Corrupt Organizations Act. The basis of the claims is evidence uncovered by Garlock Sealing Technologies three years ago during its bankruptcy proceeding.
“The defendants devised and implemented a scheme to defraud JCI and others, and to obstruct justice,” the JCI complaints say.
“The defendants fabricated false asbestos ‘exposure histories’ for their clients in asbestos litigation against JCI and others and systematically concealed evidence of their clients’ exposure to other sources of asbestos.”
Meanwhile, Jones Walker attorney Mike Magner, who is representing Simon Greenstone, says the company is trying to intimidate lawyers who have had success against it in court.
"It is a cynical and deceitful legal tactic, and these claims will be proven false in court," he said.
In 2014, Garlock used the evidence from its 2013 bankruptcy estimation trial to file lawsuits against five firms – Shein Law Center of Philadelphia, Belluck & Fox of New York City and Dallas firms Simon Greenstone, Waters & Kraus and Stanley-Iola.
At presstime, a search of the federal courts’ online database showed JCI filed lawsuits Monday against Shein Law and Simon Greenstone in Chicago federal court.
The Garlock lawsuits alleged the five firms told different stories about their clients’ exposures to asbestos in civil lawsuits than they did in the bankruptcy trust system.
U.S. Bankruptcy Judge George Hodges agreed in a landmark 2014 decision.
The firms delayed the submission of their clients’ claims to trusts that were established by bankrupt former asbestos defendants, Hodges ruled. This was done so Garlock could not assign blame for the plaintiff’s disease to the companies in the trust system, Hodges ruled.
The bankrupt companies were forced to establish trusts because they could not afford to pay their asbestos liabilities. Asbestos victims submit claims to trusts in a process separate from the victims’ civil lawsuits against companies that are not bankrupt.
Garlock had submitted evidence in 15 cases during a trial to determine how much it would need to place in its trust.
“These fifteen cases are just a minute portion of the thousands that were resolved by Garlock in the tort system,” Hodges wrote.
“And they are not purported to be a random or representative sample. But the fact that each and every one of them contains such demonstrable misrepresentation is surprising and persuasive.
“More important is the fact that the pattern exposed in those cases appears to have been sufficiently widespread to have a significant impact on Garlock’s settlement practices and results… It appears certain that more extensive discovery would show more extensive abuse.”
Garlock’s evidence, which was originally sealed but eventually uncovered by a successful legal challenge from Legal Newsline, showed that after several dozen asbestos defendants established bankruptcy trusts, its own liabilities increased. The company’s average mesothelioma settlement rose from almost $10,000 in 1999 to nearly $80,000 by 2010.
Garlock’s allegations were part of a strategy to limit the amount it would need to put in the trust it is establishing to resolve its asbestos liabilities. Hodges ruled Garlock needed to only put $125 million in its trust, more than $1 billion less than plaintiffs attorneys had requested.
A recent proposed settlement put a stay on Garlock’s RICO lawsuits. They apparently will be dismissed when the settlement, which requires the establishment of a $480 million trust, is finalized.
Before the stay, John Crane Inc. sought to intervene. Now it has filed its own complaints instead.
“In the JCI litigation, Defendants gave false asbestos exposure histories in written discovery and counseled their clients to testify falsely to the same effect so as to fraudulently obtain and inflate verdicts, judgments and satisfactions, and settlements against JCI, whose asbestos-containing products were significantly less likely to cause injury than the products for which the defendants and their clients falsely denied exposure,” the complaints say.
Simon Greenstone filed a breach of contract lawsuit against JCI in Los Angeles federal court in response to JCI’s January motion. The firm, which has an office in that city, asked a judge to rule that JCI breached previous settlement agreements by asking to intervene in the Garlock RICO case.
“In a desperate effort to avoid future multimillion-dollar verdicts and punitive damage awards, JCI has embarked on a campaign to chill Simon Greenstone’s advocacy efforts and to discourage JCI’s victims from hiring Simon Greenstone by threatening to file suit against Simon Greenstone for racketeering…” the complaint says.
“Simon Greenstone has a real and reasonable apprehension that JCI will institute litigation against Simon Greenstone and has suffered and will continue to suffer injury until the actual controversy between them is resolved.”
Magner said Simon Greenstone will defend itself "aggressively."
"In some of these cases, not only did the court find that John Crane sells a product that kills and seriously injures innocent people, but also that it did so with maliciousness, recklessness, and/or a conscious indifference to their health and well-being," Magner said.
"This latest attack by John Crane is a direct response to the successes we’ve had holding them responsible in court."
The actions of the asbestos attorneys is the subject of proposed federal legislation – the Furthering Asbestos Claims Transparency Act – that passed the House of Representatives and is pending in the Senate. President Obama has promised a veto if it is passed, along with a class action reform bill.
Several states have passed their own versions of the bill. Those states include Wisconsin, Ohio, West Virginia and Oklahoma.
From Legal Newsline: Reach editor John O’Brien at jobrienwv@gmail.com.