NEW YORK (Legal Newsline) – The fight over New York City’s controversial asbestos court is not over, as companies worried about their treatment there are likely to appeal an order that kept alive the possibility for even bigger verdicts.

On March 22, an intermediate appeals court declined to change a case management order (CMO) that was amended last year to allow for the possibility of punitive damages in asbestos cases. But it probably won’t be the last word in the matter, as defendants are expected to appeal once the timeframe for doing so arrives.

After all, less than a month after that order, defendants were hit with a record-breaking $60 million verdict in an asbestos trial.

The March order - issued by the Appellate Division, First Department – was the product of the appeals of more than 300 companies that have avoided bankruptcy and, thus, still face lawsuits over asbestos exposure that occurred decades ago (other companies established bankruptcy trusts to compensate victims with a claims process).

Appealing the NYCAL CMO last year were companies like Crane Co., Honeywell, Ford Motor Company, 84 Lumber, Eli Lilly, National Grid, Cooper Industries and R.J. Reynolds Tobacco, among dozens of others that joined together on an appeal brief.

In briefs submitted to the intermediate appeals court, defendants said their ability to fight claims all the way through trial is hampered in two major ways: An Accelerated Docket that leaves them only five months to conduct their investigations and prepare for trial and a threat of punitive damages that makes simply going to trial a multimillion-dollar threat.

“The new NYCAL CMO is a mixture of old and new provisions that cannot be viewed in isolation, but rather represents a skewed recalibration of interests to which the defendants have not agreed,” attorneys for Crane Co. wrote.

“(T)he careful balance struck by the prior NYCAL CMO has now been undone. The lower court made no effort to retain that balance or to strike a new one… (T)here is no legal authority for imposing a skewed CMO that deprives defendants of (Civil Practice Law and Rules)-provided rights.”

NYCAL is home to one of the country’s largest asbestos dockets and the site of some of the highest plaintiff verdicts in recent history. The American Tort Reform Association has, in recent years, maintained the jurisdiction is a "Judicial Hellhole" in its annual report.

The new CMO, issued by Manhattan Supreme Court Justice Peter Moulton after being in the works for nearly two years, holds, among other things, that punitive damages awards are no longer deferred for cases placed on the trial calendar after the CMO’s effective date.

Punitive damages had been reintroduced to the NYCAL docket in 2014, but stayed by an appeals court pending further modification to the CMO.

Often in asbestos litigation, the alleged wrong was committed by a predecessor company, not the company being sued.

Punitive damages “only deplete resources that are better used to compensate injured parties,” wrote Justice Helen Freedman, who deferred punitive damages during her time as the presiding Administrative Law Judge for all NYCAL cases.

It was Owens Corning, which eventually was forced into bankruptcy, that asked for the deferral of punitive damages in 1994. Two years later, defendants say a compromise was reached in which defendants agreed to waive certain due process rights so that lawsuits could move quicker to trial in exchange for the deferral of punitive damages.

But plaintiffs attorneys in 2014 sought to end that deferral.

“There was no such ‘compromise’ or ‘bargain,’ simply judicial fiat based on the court’s supervisory efforts at the time, and not withstanding its cognizance of the ‘ethical and possible equal protection issues’ at stake,” a coalition of NYCAL plaintiffs lawyers wrote.

“(T)he defendants are simply revising history when they claim that a certain bargained-for balance was upset by the termination of the discriminatory automatic deferral of punitive damages.”

Defendants say punitive damages were brought back to the table to drive up the “already steep” price of settlement and make sure defendants never risk going to trial.

The new CMO allows plaintiffs to add a claim for punitive damages 10 days before they file applications to be included in a trial cluster.

"Further, Plaintiffs’ position appears designed to solve a non-existent problem. Jury trial verdicts in NYCAL are already exceedingly rare because NYCAL defendants settle in nearly every case," defendants wrote.

"On average, there have been 3 to 4 jury verdicts in NYCAL each year since 2013. This equates to less than 1% of the cases filed annually in NYCAL during the same four-year period."

Beyond the punitive damages issue, some defendants claim the new CMO puts no limit on the number of cases that can be listed for trial on the Accelerated Docket.

This limits the ability of defendants to investigate claims, they say, even though cases for the Accelerated Docket are the most complex. Hundreds of these cases are added to the Accelerated Docket each year.

“(I)ndividual defendants named in the majority of these expedited cases will be obliged to attempt the impossible – adequately investigate, conduct discovery and prepare for trial in dozens of cases on the new CMO’s less-than-six-month cycle,” says a brief filed last year by Honeywell, Bayer Cropscience, Union Carbide and CertainTeed.

“Or, such defendants can do what the new CMO’s accelerated docket provisions require as a practical matter – be forced to settle all but a few target cases in the hopes of being able to adequately prepare at least those few for trial.”

Defendants are being overwhelmed by volume and speed, they say. Twice a year, these cases are placed on the Accelerated Docket on a five-month trial schedule.

Discovery can’t be limited to just the plaintiff, his or her spouse and identified co-worker evidence, the defendants argue, especially in cases alleging mesothelioma – the most-serious asbestos disease and the one that produces the highest verdicts and settlements.

“Defendants cannot (and should not be made to) rely only on the asbestos exposure information shaped entirely by plaintiff, plaintiff’s counsel and his or her hand-picked witnesses – defendants must investigate and, as appropriate, take discovery concerning potential exposures or causes plaintiff fails to – for whatever reason – choose to disclose,” the brief says.

In the joint brief, defendants argued the new CMO:

-Deprives them of their constitutional and statutory rights because it supersedes the New York Civil Practice Law and Rules;

-Doesn’t comply with a 2015 appeals court ruling regarding adequate “procedural protocols”; and

-Isn’t permitted because it is in contradiction with rules enacted by the Legislature in the CPLR, and the defendants never agreed to that.

“(W)hen discussing proposals by certain defendants that would have modified plaintiffs’ CPLR or other statutory rights, Supreme Court noted that it had no authority to relax statutory provisions without the parties’ consent,” the defendants wrote.

“For example, Supreme Court concluded that it was not empowered to relax hearsay rules to admit deposition testimony of non-parties for purposes of establishing fault of other parties pursuant to Article 16 ‘in the absence of consent to the CMO by the parties in NYCAL.’”

Plaintiffs argue that a court supervising a complex litigation has the authority to amend case management provisions – even when a unanimous consensus can’t be reached.

“(I)n nearly all respects, the provisions of the instant CMO in NYCAL expressly pattern the CPLR,” plaintiffs attorneys wrote.

“Whenever the CMO ‘differs’ from the CPLR in the ways to which defendants object, this is done to accommodate or address specific circumstances peculiar to administering this mass tort litigation.”

Ultimately, the case is likely to head to the state's highest court, the Court of Appeals, which affirmed a pro-plaintiff ruling in 2016 over duty to warn. The ruling benefited plaintiffs attorneys looking for solvent companies to sue.

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