A London judge hearing a U.K. company’s challenge to receivership orders handed down by his judicial counterpart in South Carolina called the procedure “a bit sort of odd,” given the U.K. company has never done business in South Carolina and has no assets there.
Cape PLC has asked the High Court of Justice in the U.K. to halt Peter Protopapas, a South Carolina personal-injury lawyer, from suing others – included the storied De Beers diamond company – in Cape’s name to recover money for alleged asbestos injuries. In response to a notice to appear in the foreign court, Protopapas allegedly slammed the door on a process server after threatening them with a trespassing notice.
Protopapas was appointed receiver over Cape by South Carolina Judge Jean H. Toal, who manages the state’s entire asbestos docket. In a series of orders, Toal has named Protopapas receiver of companies named as defendant in South Carolina lawsuits under her theory that any company sued in her court, regardless of where it is based or operated, has “assets” in the state in the form of insurance policies.
Judge Toal’s legal theories may receive their strongest test in this battle between Protopapas and Cape, which has among its corporate forebears a South African asbestos miner that sold the deadly insulation to distributors throughout the U.S. until the early 1970s. Cape Plc itself was formed in 2011, however, long after Cape Asbestos got out of the asbestos business, and was purchased in 2017 by French billionaire Mohed Altrad. It is an operating company in the industrial-services business based on the island of Jersey.
Cape has sued Protopapas in the U.K., arguing Judge Toal has no jurisdiction over the company and no authority to appoint him in charge of an operating company that has its own board of directors.
The judge seemed sympathetic to Cape’s claims at an Oct. 9 hearing in London. Among other things, they questioned how Protopapas can sue South African companies Cape did business with decades ago, including mining giant Anglo American, since Cape won a landmark ruling in the U.K. in 1990, Adams v. Cape Industries, refuting Protopapas’s theory that Cape was part of a network of companies all liable for asbestos injuries in the U.S.
That theory is scheduled to be tested in a trial next February, where Judge Toal will decide whether South Carolina plaintiffs can sue Cape and its subsidiaries as well as Anglo American and others. Judge Toal has scheduled the trial before any plaintiffs have obtained judgments against the defendant companies, and defense lawyers say there is strong evidence the plaintiffs have secretly settled their lawsuits, rendering the receivership moot.
At the London hearing, Cape’s lawyers argued Protopapas is legally barred from arguing Cape and its affiliated businesses are liable to U.S. plaintiffs since Cape won the opposite ruling in the U.K. in 1990. High Court Justice Sir William Trower asked if Cape meant “it's vexatious for anyone in the name of Cape to take points which are adverse, run contrary, to the decision of the Court of Appeal?”
“Absolutely,” said Cape Attorney Mark Phillips.
Later, Justice Trower asked if Cape’s argument was “English law does not recognize the receiver who has been appointed by the South Carolina court, whatever South Carolina law may be, English law just doesn't recognize it?” The judge also described as “a bit sort of odd” Judge Toal’s theory that any company was subject to her jurisdiction as long as someone in her court sought payment from insurance assets.
Judge Toal has often referred to Protopapas as an arm of the court, although he is a personal injury lawyer whom she has authorized to keep a third of any money he recovers. Justice Trower questioned that premise at the hearing, saying “that may not actually be the right way of thinking about it, when he’s taking decisions which are not of themselves sanctioned by the court.”
Protopapas didn’t attend or send representatives to the London hearing. The court heard evidence from a process server who attempted to serve him notice of the hearing at his office in South Carolina.
“Mr. Protopapas slammed the door in my face and told me not to come back, and that if I did he was going to put me on trespassing notice,” the server said in a witness statement.
Protopapas and Judge Toal have not responded to repeated requests for comment. Judge Toal has expressed anger at any company challenging her authority – including handing down stiff sanctions -- and Protopapas threatened to sue Cape’s lawyers at Winston & Strawn for representing the company in the U.K. blocking action. Judge Toal “is one of the most respected judges in the history of South Carolina,” he wrote in a Sept. 9 letter threatening legal action against the law firm.
“As a South Carolina lawyer, I am honored that she appointed me to serve as a receiver, and I will faithfully execute the duties she has assigned to me,” he wrote. “I will not succumb to your pressure.”
The threat of contempt proceedings in Judge Toal’s court “had an effect of them having to come off the record in these proceedings,” Cape’s lawyer told the U.K. court.
“He's asked (Winston & Strawn) to swap sides and put pressure on them, but in reality they just had to withdraw from the field,” said attorney Derrick Dale. “That has made our position again more difficult, but also just shows that we're in a battle royal, if I can put it like this, for the control of the company.”
At the end of the hearing, Justice Trower agreed with Cape’s lawyers that it was important to resolve the question of whether Protopapas has any authority over the company and set a hearing for the week of Nov. 11. While Protopapas has refused to participate in the U.K. action so far, the judge said, “it is in his interests, as much as in the interests of the de jure directors of Cape, to ensure that the uncertainty is brought to an end as soon as practicable, and it is particularly important for him to know what the position of English law is in relation to his appointment, given that English law is the law which on any basis governs the relationship between the company and its constituent organs.”
Under his receivership orders, Protopapas has collected tens of millions of dollars, including millions of dollars in fees for himself, from insurance companies that issued policies to often-defunct companies decades earlier. Much of that money has flowed into at least half a dozen “qualified settlement funds,” most of them Delaware partnerships, that Protopapas controls.
The operating agreements Judge Toal approved for those funds say Protopapas can spend the money on litigation expenses, including legal fees, and does not have to provide a public accounting, even to the court. Judge Toal and Protopapas have declined to say how much money is in the QSFs or how it is being spent.