The controversial plan to bring dead companies back to life in South Carolina to raid insurance policies they held decades ago doesn't fly in the United Kingdom.
A British judge has issued a worldwide injunction prohibiting a South Carolina lawyer from acting as receiver over Cape Plc, saying the judge who appointed him has no jurisdiction and the receiver appears to be “doing the opposite” of protecting the interests of the firm he supposedly represents.
In a highly critical 73-page ruling that sets up an international legal clash, High Court Justice Anthony Mann said the receiver, Peter Protopapas, was improperly interfering in the business of Cape and its parent company, Altrad Group, which has more than 12,000 employees and nearly $1 billion in revenue.
Protopapas is “positively damaging the interests of the company over whose assets he has been appointed, despite the fact that one of his obligations is to act in its proper interests,” the justice wrote. “Instead he has been utilizing his appointment as a vehicle which some …have aptly described as a `crusade.’”
Cape is based on the island of Jersey and has never conducted business in South Carolina, yet Judge Jean H. Toal appointed Protopapas receiver in charge of the company, supposedly to protect Cape’s assets for the benefit of asbestos plaintiffs. The U.K. ruling is the second time a court outside of South Carolina has rejected Judge Toal’s attempt to assert jurisdiction over out-of-state companies.
A federal court in New Jersey earlier this year blocked Protopapas from trying to prevent Whitaker Clark, a wholesale talc supplier based in New Jersey, from filing bankruptcy. Lloyds of London has also asked the South Carolina Supreme Court to remove Protopapas as receiver for Asbestos Corp. Ltd., a Canadian company that says Judge Toal has no jurisdiction over it.
Judge Toal, a former Chief Justice of the South Carolina Supreme Court, was placed in charge of the state’s asbestos docket in 2017. Since then she has used individual plaintiff suits as a vehicle for appointing Protopapas, a prominent local personal injury attorney, as receiver over companies she says have assets – mostly decades-old insurance policies -- that need to be protected.
The judge also signs orders giving Protopapas a third of any money he collects, meaning he has a strong financial interest in suing third parties to bring in settlement money to be distributed to himself and asbestos plaintiffs.
With Cape, Judge Toal and Protopapas pushed this concept into new territory. Cape denies Judge Toal has jurisdiction over it and the underlying cases she cited for the receivership apparently have been settled. Once named receiver, however, Protopapas launched on a litigation spree, suing not only Cape’s parent company but international mining giant Anglo American and the De Beers diamond company under a theory they were all involved in selling asbestos in the U.S.
The problem with that theory, Justice Mann wrote, is it was refuted in a landmark 1990 British court decision, meaning Protopapas is actually making legal arguments the company he purports to represent already defeated in court.
Protopapas “is a receiver, one of whose functions is apparently to protect the interests of” Cape, the justice wrote in an order issued Friday. “Yet he has demonstrated that he is not fulfilling that obligation, and is indeed apparently doing the opposite.”
The justice, expressing reluctance to contradict the orders of Judge Toal, said he nevertheless must issue a global injunction against Protopapas, including in South Carolina. Unless the receiver is barred from claiming he represents Cape, the justice said, Protopapas could damage the legitimate interests of a company operating under U.K. law.
“I fully appreciate that this decision brings about a clash between two court systems,” the justice wrote. “However, it seems to me that the requirements of the law that I administer require and justify what I have decided to do.”
Protopapas has not responded to previous requests for comment from Legal Newsline and did not immediately respond to questions about the injunction.
Justice Mann expressed surprise that Protopapas has thus far failed to cite the precedential Adams v. Cape Industries decision in any of his court filings. That decision explored at length, and refuted, the theory that Cape was part of a South African mining combine controlled by the Oppenheimer interests, making every company liable for U.S. asbestos claims.
Cape is a corporate descendant of Cape Asbestos, which mined asbestos until the early 1980s, including asbestos that was ultimately distributed in the U.S. Cape never operated in this country, although it once owned a corporate subsidiary in Chicago that distributed the material.
“While Mr. Protopapas must have known this for some time, if not from the onset of his receivership, it is not apparent …that this vital material has ever been drawn to the attention of Chief Justice Toal,” the British judge said.
The justice’s observations come after Protopapas himself sued Wall Templeton Haldrup, a law firm that once represented another company he was named receiver over, accusing it of legal malpractice for failing to represent that company’s interests. Protopapas wrung a $5 million settlement out of Wall Templeton’s insurance company in that case.
Now he is accused by a British judge of doing almost the same thing. In one filing cited by the British judge, Protopapas included this puzzling sentence:
“To the extent that it is not inconsistent with the allegations of the Third Party Complaint (the receiver’s lawsuit against Altrad and other companies), Cape hearby denies each and every allegation.”
The meaning of this convoluted sentence, the judge said, is that Protopapas is admitting, as the representative of Cape, to virtually all the allegations against it. If allowed to stand, that admission would make it much easier for plaintiff lawyers to win cases against Cape, the company Protopapas is supposed to be defending. Under Judge Toal’s receivership orders, Protopapas gets to keep a third.
“It basically sells the pass on issues of liability, responsibility and presence, quite contrary to the findings in the English proceedings,” the justice wrote. “It is hard to see how a receiver charged with protecting the interests of (Cape) could put in such a defence.”
Justice Mann was careful not to criticize Judge Toal. He wasn’t so deferential to Protopapas, however, calling his legal tactics “robust” and “aggressive.” Protopapas sued Winston & Strawn in South Carolina after that firm represented Cape in the U.K., for example, saying their behavior was “akin to extortion.”
“To English eyes at least, to commence proceedings against solicitors who bona fide advance a case on behalf of their client on the basis that it is `extortion’ is, to put it mildly, completely misplaced,” the judge wrote. “His ultimatum that the solicitors withdraw a letter sent on behalf of a client, or face being sued personally, makes a demand that the solicitors could not properly comply with because of their duties to their clients. It is surprising that a lawyer (which Mr. Protopapas is) would not appreciate that.”
From Legal Newsline: Reach reporter Daniel Fisher at dan@waldenconsultants.com.