Discoverability of Asbestos Bankruptcy Claim Documents


Governo Law Firm attorneys David M. Governo and Corey M. Dennis published an article entitled "Discoverability of Asbestos Bankruptcy Claim Documents" in The National Forum for Environmental & Toxic Tort Issues (FETTI) Summer/Fall 2012 Case Law Update Newsletter.

The article provides an overview and analysis of the discoverability of asbestos bankruptcy claim documents, an issue that commonly arises in asbestos cases.

Please contact David Governo ([email protected]) or Corey Dennis ([email protected]) for further information regarding the discoverability of asbestos bankruptcy claim documents or other issues relating to asbestos litigation.

Discoverability of Asbestos Bankruptcy Claim Documents

David M. Governo and Corey M. Dennis
Governo Law Firm LLC
(617) 737-9045
[email protected]
[email protected]

Asbestos litigation has forced numerous companies into bankruptcy. As the traditional asbestos litigation defendant has invariably entered bankruptcy, plaintiffs have increasingly sought to hold less culpable, peripheral defendants accountable. See In re Asbestos Litig., 59 Pa. D. & C. 4th 62, 65-66 (C.P. Philadelphia June 11, 2002); Mark A. Behrens, The Evolving Civil Justice Reform Movement: Procedural Reforms have Gained Steam, but Critics Still Focus on Arguments of the Past, 31 U. Dayton L. Rev. 173, 192 (2006). Over the past 30 years, over 50 asbestos personal injury trusts have been established under § 524(g) of the Bankruptcy Reform Act of 1994. Asbestos bankruptcy trusts controlled $38.6 billion in assets in 2011. See U.S. Government Accountability Office, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts, GAO-11-819, at 3 (Oct. 20, 2011). Many states-including New York, Pennsylvania, Delaware, Ohio, Texas, West Virginia, and Kentucky-have adopted case management orders requiring plaintiffs to produce bankruptcy trust claim documents, which include statements regarding product exposure, in discovery. Defendants often utilize these documents to undermine a plaintiff's causation argument by establishing that the plaintiff was also exposed to various bankrupt entities' asbestos products, and to obtain post-verdict set-offs.

The discoverability of bankruptcy claim documents in the New England states remained largely unresolved until recently. Earlier this year, the Massachusetts Asbestos Litigation Pre-Trial Orders were amended to require plaintiffs to produce the product exposure section of all bankruptcy claim forms filed within 90 days before the trial date in any action. Under the amendment, plaintiffs are also required to certify that they have filed all known bankruptcy claims within 30 days before trial. In addition, in Rhode Island, plaintiff firms filed a joint motion for a protective order with respect to disclosing settlements and bankruptcy trust filings. The motion was opposed by the defendants and argued on May 9, 2012. No decision has been issued.

Plaintiffs typically object to requests for bankruptcy trust discovery on the ground that such documents are settlement documents that are not admissible at trial, and that they are privileged, confidential, and irrelevant. Such objections carry little force. The rules of evidence in most states and under the federal rules prohibit the introduction of evidence of settlement amounts, offers, or negotiations in civil cases, unless offered for another purpose, such as proving a witness's bias or prejudice. See Fed. R. Civ. P. 408; Mass. Guide to Evidence § 408; Conn. Code of Evid. § 4-8; Rhode Island R. of Evid. 408. However, this rule has no applicability to bankruptcy claim documents, as such documents are "more analogous" to complaints than to offers or settlement or compromise. See Shepherd v. Pneumo-Abex, LLC, MDL 875, No. 09-91428, 2010 WL 3431633, at *1-*2 (E.D. Pa. Aug. 30, 2010); Volkswagen of Am., Inc. v. Superior Court, 139 Cal. App. 4th 1481, 1494 (2006). Moreover, even if deemed settlement offers or compromises, the statements regarding exposure to bankrupt entities' products in such documents are relevant and admissible: to establish lack of causation, to impeach the plaintiff's credibility, as statements of fact made during settlement negotiations, or as admissions on the face of the documents. See Fed. R. Civ. P. 408; Zucco v. Kane, 439 Mass. 503, 510-11 (2003); Conn. Code of Evid. § 4-8; see also Notes of Committee on the Judiciary to Fed. R. Civ. P. 408.

Plaintiffs arguing that bankruptcy claim documents are inadmissible at trial fail to appreciate that the standard for production of documents in discovery is "considerably less rigorous" than the standard for admissibility of evidence at trial. Cusumano v. Microsoft Corp., 162 F.3d 708, 716 n.5 (1st Cir. 1998). It is hornbook law that any evidence that "appears reasonably calculated to lead to the discovery of admissible evidence" is relevant and discoverable, and that "[i]t is not ground for objection that the information sought will be inadmissible at the trial." Mass. R. Civ. P. 26(b)(1); see also Conn. Practice Book 13-2; Fed. R. Civ. P. 26(b)(1).

Plaintiffs also argue that bankruptcy trust claim documents are subject to the attorney-client and work-product privileges. Such arguments ignore the fact that these documents are factual records that are submitted to third parties and for which there is no reasonable expectation of confidentiality. Accordingly, although the law in this area remains unsettled in many states, defense counsel should seek any and all bankruptcy trust claim documents without reservation, as they are non-privileged documents that are highly relevant to any asbestos case.