Judge Finds "Startling Pattern of Misrepresentation" by Plaintiffs' Firms in Asbestos Litigation

1/21/2014

On January 10, 2014, a Bankruptcy Court Judge issued a strongly-worded, 65-page opinion that exposes a "startling pattern of misrepresentation" by some plaintiffs' attorneys in asbestos litigation. He concluded that the "withholding of exposure evidence by plaintiffs and their lawyers was significant and had the effect of unfairly inflating" recoveries. In re Garlock Sealing Techs., No. 10-31607, at 35, 37 (Jan. 10, 2014, Bankr. W.D.N.C.).

As part of the bankruptcy process, Judge Hodges sought to determine the amount of gasket manufacturer Garlock Sealing Technology LLC's liability for present and future mesothelioma claims based on exposure to its asbestos-containing gaskets. The Court rejected the claimants' estimate of $1 to 1.3 billion in liability, and instead agreed with Garlock's ten-times lower estimate of $125 million. The Court concluded that the claimants' estimate was "not reliable" because it was based on amounts Garlock had paid to settle previous asbestos cases, which were "infected with the impropriety of some law firms" and "the manipulation of exposure evidence by plaintiffs and their lawyers." Id. at 4, 26. The Court's examination of Garlock's settlement history and prior asbestos litigation reveals widespread evidence of such abuse.

Asbestos litigation began in the 1980s, when the damaging effects of asbestos inhalation became widely recognized and plaintiffs' attorneys filed a series of cases against companies producing or selling asbestos products. Early on, asbestos litigation focused mainly on the manufacturers of asbestos insulation, which was often composed of the most dangerous type of asbestos fibers and was ubiquitous in many commercial settings. As these early defendants were forced into bankruptcy over the next decade, plaintiffs cast a broader net and brought suit against hundreds of companies, often in each case, frequently including claims against companies whose products were much less likely to cause asbestos-related disease.

One such peripheral company was Garlock, which produced and sold asbestos-containing gaskets for maritime and industrial use in pipes and valves. These pipes and valves generally were wrapped with asbestos insulation produced by other manufacturers. Garlock's products only released asbestos dust when its gaskets were replaced by scraping or grinding the old gaskets out and cutting and fitting new gaskets into place. To get to such a gasket, a worker was required to cut or rip the asbestos insulation, which created clouds of asbestos dust. As the Court determined in Garlock, "[i]t is clear that Garlock's products resulted in a relatively low exposure to asbestos to a limited population and its legal responsibility for causing mesothelioma is de minimus." Id. at 2. Nevertheless Garlock was often included in such suits and frequently settled asbestos claims to avoid the high costs of litigation and the potential for large plaintiffs' verdicts.

One of the primary defenses used by Garlock was to contrast the negligible fiber release from its products with that of the asbestos insulation manufacturers. The Court noted that as the large asbestos manufacturers went bankrupt and disappeared from the civil suits, a peculiar factual development occurred: "the evidence of exposure to those insulation companies also 'disappeared.'" Id. at 30. The Court concluded that this was the result of "the effort of some plaintiffs and their lawyers to withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants' asbestos trusts until after obtaining recoveries from Garlock (and other viable defendants)." Id. The Court's opinion suggests that plaintiffs' attorneys were coaching their witnesses to omit evidence of the bankrupted defendants' products and to only identify products of defendants in their present lawsuits, thereby driving up the potential liability and settlement values for defendants in those suits.

The Court in Garlock permitted full discovery in fifteen asbestos cases that Garlock had previously settled. It found that "Garlock demonstrated that exposure evidence was withheld in each and every one of them." Id. at 31 (emphasis in original). The Court discovered that after these cases settled for large sums, the plaintiffs' attorneys would file additional claims against an average of nineteen bankrupt company trusts, alleging that their clients were exposed to those products as well. Id. The Court concluded that there was a "startling pattern of misrepresentation:" the plaintiffs were unable to identify exposure to particular defendants' products in a tort case against Garlock, but then later were able to identify those very defendants as sources of a plaintiff's exposure in order to avail themselves of those defendants' bankruptcy trust money. Id. at 35. The Court therefore rejected claimants' use of historical settlement data as a basis for determining Garlock's liability, concluding that the amounts were inflated.

This important decision should be a rallying cry for transparency in the asbestos bankruptcy trust system. Even though the judge only examined fifteen of Garlock's cases, the Court determined that the fact that every case involved suppression of exposure evidence makes it almost "certain that more extensive discovery would show more extensive abuse . . . ." Id. at 35. The Court noted that Garlock also identified 205 additional cases in which plaintiffs' discovery responses conflicted with claims that the plaintiffs made to bankruptcy trusts. Id. The Court believes, based on the discovery it reviewed in this case, that almost half of those cases involved misrepresentation of exposure evidence. Id.

Garlock has since filed civil fraud and racketeering charges against four plaintiffs' firms.

Governo Law Firm carefully monitors the latest case developments as part of our continuing efforts to provide our clients with the most effective legal protection. Please contact David M. Governo (dgoverno@governo.com) or Colin N. Holmes (cholmes@governo.com) if you would like additional information on this topic.


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