CHARLOTTE, N.C. (Legal Newsline) - Asbestos lawyers found in contempt for fighting an order requiring them to turn over their clients' exposure histories have lost their latest legal battle.
Maune, Raichle, Hartley, French & Mudd is so far on the hook for $400,000 in penalties and will have to wait a while until a final battle over that punishment can be waged. For now, the U.S. Court of Appeals for the Fourth Circuit has found they have to wait until the bankruptcy proceedings of Bestwall are complete for a proper appeal.
An April 29 ruling said the contempt order was not a final decision from a discrete "proceeding" in Bestwall's bankruptcy case. In response, the firm asked the bankruptcy judge hearing it to issue a stay of payment and said it will put $402,000 up as bond, plus interest, until an appeal is appropriate.
"(T)he stay secured by the bond is only as much necessary to obtain an order from the reviewing court; it will not otherwise implicate or hinder the efficient administration of this case."
Bestwall is a spinoff of Georgia-Pacific designed to handle the company's asbestos liabilities from a joint compound. It is in bankruptcy, like dozens of other companies with asbestos problems.
Bankruptcy allows them to pay out claimants from a fund established by a bankruptcy judge, rather than through costly litigation in civil courts all over the country.
Part of Bestwall's strategy is to show asbestos lawyers tell different stories about their clients' exposures in bankruptcy claims and civil courts. The theory is that lawyers blame several companies for the same illness, driving their clients' recovery higher than it should be.
If proven, that means Bestwall can argue what happened in civil courts prior to bankruptcy is a poor indicator of how much money it needs to put in its new bankruptcy trust, because asbestos lawyers were gaming the system.
So in 2020, it asked that the firms filing claims against it be required to include personal injury questionnaires from their clients. Asbestos lawyers fought the request but lost when Judge Laura Beyer issued an order requiring the PIQs.
Asbestos lawyers asked for an appeal to a district judge, who said no. So they sued in Illinois federal court to obtain an injunction, and Bestwall was forced to spend hundreds of thousands of dollars litigating that case.
That led to the sanctions award against Maune Raichle, when Bestwall moved to enforce the PIQ requirement and the firm failed to do so. Beyer had offered to take financial penalties off the table if Maune Raichle dismissed its Illinois case, but it did not.
Maune Raichle lost the Illinois case on jurisdictional grounds, then appealed the sanctions. The Fourth Circuit then found it was too early for an appeal.
Judge Robert King dissented from the two-judge majority, noting Maune Raichle is not actually a party to the Bestwall bankruptcy.
"When Bestwall moved to enforce the discovery order while simultaneously requesting a contempt hearing, a discrete procedural sequence commenced," he wrote.
"Although finality is a lofty goal, a pragmatic approach to the issue of finality is always 'essential to the achievement of the just, speedy and inexpensive determination of every action: the touchstones of federal procedure.'
"We therefore should not champion finality to the detriment of the practical and sweeping consequences imposed by the contempt and sanctions orders. And the inability of practicing lawyers to appeal the contempt and sanctions orders will have serious ramifications, which will be starkly exacerbated by the protracted nature of bankruptcy proceeding."