Los Angeles Asbestos Court Demands Bankruptcy Trust Transparency

By on April 13, 2015

As previously reported, Judge Elias in Los Angeles had indicated an intention to bring to conclusion a long standing discussion with counsel regarding the extent of disclosure regarding asbestos bankruptcy trusts that plaintiffs will be obliged to provide when responding to “General Order” discovery requests for all asbestos cases in Los Angeles.  Despite receiving supplemental papers from the plaintiff bar urging her to alter her position, Judge Elias has now issued a formal order regarding such discovery. It varies little from the proposed order Judge Elias floated previously, and might be the first order requiring a signed authorization from plaintiff for the release of claims submitted to bankruptcy trusts.

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The order was entered retroactively and made applicable to all cases filed on or after February 1, 15, 2015.  Though it is to remain in force for a “trial period” of 6 months, it will stay in effect thereafter “unless amended, vacated or otherwise superseded by further order.” Therefore, as of now, the standard discovery in Los Angeles will include:

1.         An authorization from plaintiff for release of claimant information submitted to an asbestos bankruptcy trust.

2.         Additional interrogatories included within the “standard” discovery.  The existing discovery included 4 questions regarding claims to bankruptcy trusts.  These are now augmented by 6 more questions requiring extensive information regarding exposure to the products of, or on the premises of, dozens of identified trusts.  Further the new order requires that such responses be updated not later than 5 days before trial, regardless of whether a claim has been made or will be made to such bankrupt entity.

3.         The order broadly requires the disclosure of claims and any other communications with all trusts. In particular, the court finds “all documents sent to, received from, shown to, exchanged with, or otherwise disclosed to any established or pending asbestos trust funds — for any purpose” to be discoverable, and requires that “Plaintiffs shall produce” all such materials.

4.         The documents that must be produced further includes “ballots, questionnaires, submitted or filed forms, summaries, claims, ‘placeholder’ claims, request for extensions, requests for deferrals, all supporting documentation, all related communications, and all documents filed … pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure.”   This order is meant to require production of some of the required and verified disclosures that must be made by any “groups, committees and entities” that represent “multiple creditors” in a Ch.  9 or 11 proceeding. In past asbestos-related bankruptcies, these filings were not generally accessible to the public as they would be in a normal bankruptcy.  Garlock had made attempts to obtain such documents, but the bankruptcy courts rejected those attempts. Judge Elias’ order specifically ordering the production of these may be the first discovery order to specifically mention Rule 2019 disclosures in this context.

5.         The court also requires production of signed affidavits or declarations that “have been circulated to someone other than plaintiff and plaintiff’s counsel” as they are not privileged.  Thus any declaration sent to a trust must be disclosed.

No doubt the plaintiffs’ bar is considering its possible responses.  Defense counsel in other jurisdictions in California are already seeking ways to expand upon this. In particular, the presiding asbestos judges in San Francisco and Alameda Counties will be urged to implement similar orders.

Filed under Asbestos, Asbestos Bankruptcy Trust, asbestos fraud, California

U.S. Bankruptcy Court Exposes Plaintiff Scheme To Suppress Asbestos Exposure Evidence

By on March 3, 2014

On January 10, 2014, the Hon. George R. Hodges, United States Bankruptcy Court for the Western District of North Carolina, handed down a decision that promises to be a “game changer” for asbestos manufacturers facing potentially crushing mesothelioma death claims. Top Bloomberg BNA Toxics Law reporter, Perry Cooper, discussed the decision and its potential ramifications in her recent article titled, “Sides Fiercely Divided Over Impact of Garlock Asbestos Bankruptcy Court Order” (2/26/14).

The issue before the Bankruptcy Court was how to determine a reasonable and reliable estimate of Garlock Sealing Technologies, LLC’s (“Garlock”) liability for present and future mesothelioma claims. The court rejected the asbestos claimants’ $1.3 billion liability estimate in favor of Garlock’s $125 million estimate, an order of magnitude less.  Why did it do so?

The court initially determined that Garlock’s products resulted in a relatively low exposure to asbestos to only a limited population and that its legal responsibility for causing mesothelioma was relatively de minimis. During the early phase of the asbestos litigation in the 1980’s – when Garlock was generally named in complaints naming 20-50 more defendants – Garlock was very successful in settling its cases.

However, things changed for the worse by the early 2000’s, by which time large thermal insulation defendants had filed for bankruptcy and were no longer participants in the tort system. As the focus of plaintiffs’ attention turned to Garlock, as one of the remaining solvent defendants, evidence of plaintiffs’ exposure to other asbestos products often disappeared. As a result, plaintiffs’ law firms used their control over the evidence to drive up the settlements demanded of Garlock.

The crux of the court’s determination was that plaintiffs routinely denied exposure to other [bankrupt] companies’ asbestos products in pre-trial discovery and at trial, while often shortly thereafter filing multiple claims under oath with asbestos bankruptcy trusts. The “double-dipping” described by Judge Hodges where, for example, a plaintiff denies any exposure to insulation products, but after the case is settled, files 23 Trust claims, appears to be a widespread practice.

This conduct violates court rules and should be severely sanctioned if and when it comes to light. This decision shines a bright light on unethical practices in the plaintiff asbestos bar that may be a game changer particularly for manufacturers whose legal responsibility for causing mesothelioma, like Garlock, is relatively de minimis. It is the small players who are being pummeled by the lack of disclosure provided in these cases who should be seeking relief.

Garlock was able to demonstrate that in cases where it was able to obtain evidence of filed Trust claims and use them at trial, it generally had a successful trial result. In contrast, the thermal insulation defendants’ exodus from the tort system and the subsequent “disappearance” of evidence of exposure to their products, necessitated a sea change in Garlock’s negotiating and trial strategy.

Garlock demonstrated that the availability of comprehensive asbestos exposure information was often the difference between winning and losing at trial. If plaintiffs’ suppression of exposure evidence occurred in litigation against other defendants besides Garlock, it has likely resulted in higher asbestos settlements and judgments by as much as several hundred millions of dollars. At the same time, the contingency fees harvested by plaintiff lawyers in the asbestos litigation are staggering. But we should not assume that every plaintiff law firm improperly withholds exposure evidence. Cases should be examined on a case-by-case basis.

However, asbestos manufacturers are likely to bring increasing pressure on asbestos courts to compel plaintiffs to produce comprehensive evidence of asbestos exposure. The cookie-cutter management of large asbestos dockets often sweeps the legitimate concerns of asbestos defendants, particularly the smaller players, under the rug.

Trial courts should be encouraged to come up with creative means of ensuring judicial fairness. Depending upon the jurisdiction, this may involve having the trial court retain jurisdiction to reduce a verdict or settlement to account for post-verdict claims brought against other entities, who were not identified in the trial court. Alternatively, plaintiffs should be required to file Trust claims forms before trial or be judicially estopped from doing so after settlement.

RICO claims have been successfully brought against plaintiff law firms for fraud in the past. Judge Hodges’ decision, and the underlying evidence upon which it is based, provides Garlock with strong ammunition to pursue RICO claims. Additionally, the law firms identified by Judge Hodges may be subject to increasing scrutiny by the asbestos courts in the jurisdictions where they practice. Like the asbestos defendants of yesteryear, these well-heeled plaintiff law firms make for deep-pocketed defendants.
 

Filed under Asbestos, Asbestos Bankruptcy Trust, asbestos fraud, Bloomberg BNA Toxics Law Reporter, Cooper', exposure', Garlock, Garlock Asbestos Bankruptcy Court Order, Hon. George R. Hodges, Mesothelioma, RICO Tagged with