COLUMBIA, S.C. (Legal Newsline) - A South Carolina personal-injury lawyer with a court-ordered commission to keep a third of whatever he recovers has placed tens of millions of dollars in Delaware partnerships that he controls, out of sight of the public and even the judge who allowed them to be established.
Called “qualified settlement funds” or QSFs, these limited liability corporations store money attorney Peter Protopapas collects from insurance companies he has sued as receiver for often-defunct asbestos manufacturers, distributors and installers. It is not clear how much, if any, money flows from QSFs to individual asbestos plaintiffs, as opposed to paying the fees of lawyers associated with Protopapas, possibly including South Carolina Speaker of the House G. Murrell Smith.
The QSFs operates almost entirely out of public view thanks to orders signed by Judge Jean H. Toal, who oversees the asbestos docket in South Carolina. In case after case, Judge Toal has stated that while litigation “is of great public importance,” disclosure of the money Protopapas is placing in QSFs “could be misappropriated” and make it hard for him to recover assets from other defendants.
“Sealing the settlement agreement is the best way to balance the potential harm to the settling parties with the public interest, and there are no other alternatives in this case to protect the private interests of the settling parties,” Judge Toal has stated in multiple orders establishing QSFs.
What is known is that in one case, Protopapas negotiated nearly $50 million in settlements and placed the proceeds, minus his $16 million fee, in the Covil QSF in Delaware. The operating agreement for that fund, like the others, states it will be operated “free of the supervision of the court” and Protopapas has “sole discretion” to pay “reasonable fees and expenses” of lawyers, including himself.
There is no requirement to file financial reports with Judge Toal or disclose anything about the fund. After 30 years, if any money is left, it is to be distributed to the College of Charleston, Clemson University and the alma mater of Judge Toal and many of the lawyers practicing in her court, the University of South Carolina.
Protopapas has not responded to multiple requests for comment. Judge Toal also declined to answer questions about the settlement funds established in her court. She has approved at least 10 QSFs, all but one of them in asbestos cases. (The non-asbestos QSF is managed by Peter M. McCoy, former head of the legislature’s Judiciary Committee.)
Several QSFs were established as part of a single plaintiff’s lawsuit, although it is not known whether those plaintiffs have actually received any money from the funds theoretically set up to pay their damages.
In at least two cases, insurers are seeking information from Protopapas about whether the underlying plaintiff cases have been settled or delayed under “staying” agreements that are the functional equivalent of a settlement. In either case, insurers argue, the secret agreements with individual plaintiffs could make the cases Protopapas uses to pursue insurance proceeds moot.
Lenora Childers sued a number of companies after her husband Lewis C. Childers died of lung cancer, for example, claiming he got the disease from exposures at job sites across North and South Carolina. As part of her case, Protopapas established at least three QSFs funded with settlement money from Wausau, Admiral and Zurich insurance companies.
As in other cases, Judge Toal has punished companies that don’t settle with sanctions. She ordered AIG, National Union, Aetna and other insurers to pay up to $1.6 million in legal bills for seeking to derail the receivership of Payne & Keller, a Texas firm that was dissolved in the early 1990s. Those bills include fees for Protopapas and Morgan Lewis, a big New York firm whose partners charge as much as $1,200 an hour.
In a recent court filing, National Union asks the court to reveal details of those billing records, beyond the hours worked, as well as information about any settlements Protopapas may have reached with individual plaintiffs. Protopapas argues his billing records are protected under the attorney-client privilege – a claim routinely rejected by courts overseeing billing-related disputes – and refused to tell insurers whether he’d settled any underlying asbestos cases.
Protopapas also established two QSFs in litigation over Beaty Investments, a defunct North Carolina company; two in lawsuits by Charles T. Hopper; and one in a lawsuit by Shirley A. Jenkins.
The procedures in Judge Toal’s court are unusual in that they avoid federal bankruptcy court, where most asbestos litigation winds up. Instead of establishing a bankruptcy trust under a special provision of federal law, Judge Toal approves private partnerships in Delaware, which operate under South Carolina law.
Absent a change of heart by the judge, there appears to be no way for the public to learn how much of the money in QSFs is being paid to asbestos plaintiffs, and how much is going to Protopapas and other lawyers.