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ILR study focuses on double-dipping in Virginia asbestos cases

By W.J. Kennedy | Dec 15, 2016

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NEWPORT NEWS, Va. (Legal Newsline) - Legislation bringing greater transparency to an asbestos victims’ compensation system that can result in attorneys and their clients collecting multiple times for the same alleged injury is the best way to prevent duplicitous exposure claims from being made, concludes a review of court cases in Virginia's asbestos litigation “epicenter.”

The study, which was published by the U.S. Chamber Institute for Legal Reform with asbestos litigation expert Mark Behrens of Shook, Hardy & Bacon L.L.P., looked at asbestos claims practices at Newport News Circuit Court, which hosts the nation’s highest win rate at trial for asbestos plaintiffs.

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It shows that in a rash of cases, plaintiff lawyers and their clients told one story about exposure in the tort system, yet they named other exposures while seeking compensation from bankruptcy trusts established by asbestos manufacturers to compensate victims.

In court, plaintiff attorneys target solvent down-the-line businesses that had even the remotest of connections with asbestos.

Separate timing of the claims in the courts and the trusts, and lack of transparency surrounding awards from the trusts, create a “perfect storm” for the collection of multiple awards, according to the study.

Behrens writes about the well-documented Garlock Sealing Technologies case of 2014, which exposed the character and scope of so-called “double-dipping” in court then bankruptcy trusts.

In Garlock, a North Carolina federal bankruptcy judge found the gasket and packing manufacturer’s settlements of mesothelioma claims in the tort system were “infected by the manipulation of exposure evidence by plaintiffs and their lawyers.” 

The judge described an effort by 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 (and other viable defendants).”

In short, the judge said that the alleged victims had different stories for different venues. The lawyers first targeted Garlock in court, coaching their clients to tell one story of exposure. They then told a different story to the trusts, one that linked the manufacturers with the exposure.

This evidence was filed under seal until Legal Newsline filed a successful challenge.

Behrens later reviewed cases out of Newport News. Testimony and other data surrounding the ones reviewed are emblematic of cases in other jurisdictions, he says.

The review showed a similar pattern as in Garlock: delayed filing of asbestos claims with the trusts denied solvent businesses being sued in court access to alternative exposure history – the other side of the story later told to the trusts. 

The Newport News asbestos plaintiffs routinely deny or are unable to recall many trust-related exposures during the court cases—when it would be helpful to defendants to establish other causes for the person’s injury—but later file claims with numerous trusts (sometimes as many as 25 different trusts) and obtain trust payments that in some cases have exceeded $1 million, the report says.

A case in point is Herman v. Owens Illinois, Inc., where in 2013, a circuit court for the City of Newport News awarded $1 million to the estate of John Herman following a jury trial on liability.

Herman alleged exposure to asbestos while working on ships in Norfolk as a machinist mate in the U.S. Navy and Reserves from 1955 through the late 1970s. During the court case, Herman testified that he recalled various solvent defendants’ products and some trust-related exposures, including Johns Manville, Flexitallic, Leslie Controls, and Worthington pumps.

Herman did not recall other trust-related exposures, including Armstrong, Amatex, Porter, and Raybestos. His estate, however, filed claims with and obtained settlements with all of these trusts. Further, in response to specific discovery requests, Herman stated that he did not have sufficient information to admit or deny many trust-related exposures, including Celotex, Owens Corning and Eagle-Picher.

After the court case was resolved, however, Herman’s estate obtained settlements with every one of these trusts. In all, Herman’s estate has obtained settlements with 20 trusts totaling over $250,000. All or virtually all of the trust claims appear to have been filed post-verdict.

In an August 2015 editorial published in the Wall Street Journal, American Tort Reform Association president Tiger Joyce wrote that it has been more than 15 years since former Supreme Court Justice David Souter referred to asbestos litigation as an “elephantine mass,” the most massive of mass torts in America for decades.

“Though the U.S. epidemiological peak for mesothelioma came and went in the early 1990s, roughly 2,000-3,000 new claims for compensation are filed each year,” Joyce wrote.

The exposure compensation system established with the trusts has become an insider game of plaintiffs’ lawyers enriching themselves at the expense of business and even their own clients, critics such as Behrens say.

Behrens writes that to address discrepancies in exposure claims, Virginia and other states that have yet to adopt reforms should require plaintiffs to file and produce all asbestos trust claims before trial.

“A growing number of states have enacted such asbestos bankruptcy trust transparency legislation, including regional competitors Tennessee and West Virginia,” he writes. 

“This common sense reform would speed up trust system recoveries for plaintiffs, allow juries to reach more fully informed decisions regarding the cause of a plaintiff’s asbestos-related disease, provide fairness to defendants, and restore the integrity of the civil justice system.”

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City of Newport News Circuit CourtWall Street Journal