Earlier this month, after an extensive trial, a court ruled in In re Garlock Sealing Technologies that asbestos claims in the tort system are vastly overpaid, largely because of systematic misrepresentations by asbestos plaintiffs’ counsel.
Plaintiffs’ counsel in asbestos tort litigation routinely deny exposure to the products of any parties other than defendants. But they assert exposure to those other products in claims for recovery from asbestos bankruptcy trusts, in many cases supported by statements signed by the same plaintiffs who, in the civil litigation, remember only the defendants sued. There is now clear evidence that many of these signed statements were not disclosed in response to discovery in the tort system.
Defendants thus pay more than their fair share of liability – an estimated 10 times more. Garlock is likely to fuel calls for increased transparency of bankruptcy claims, to be cited in defense motions regarding discovery and damages and, perhaps, to lower the verdicts and settlements against many defendants.
1. Key evidence withheld from or denied in civil litigation: The lengthy decision examined cases involving gasket manufacturer Garlock. Although the sample of cases studied was “not purported to be a random or representative sample,” the court concluded that “demonstrable misrepresentation” was rampant.
“In 15 settled cases, the court permitted Garlock to have full discovery. Garlock demonstrated that exposure evidence was withheld in each and every one of them. These were cases that Garlock had settled for large sums. The discovery in this proceeding showed what had been withheld in the tort cases – on average plaintiffs disclosed only about 2 exposures to bankruptcy companies’ products, but after settling with Garlock made claims against about 19 such companies’ Trusts,” the court wrote. In other cases, where the court permitted only limited discovery, “Garlock identified 205 additional cases where the plaintiff’s discovery responses conflicted with one of the Trust claim processing facilities or balloting in bankruptcy cases.”
This is consistent with other high-profile cases, such as Ohio Judge Harry Hanna’s opinion in Kananian and the opinion of U.S. District Judge Janis Graham Jack of Texas in the silica cases, which also found “two sets of books,” with one story told in civil litigation and another to trusts. The Garlock ruling recounted that “[o]ne plaintiff’s lawyer stated [this] practice as seemingly some perverted ethical duty … ‘to maximize [my clients’] recovery.’”
Plaintiffs’ attorneys argued that the irregularities described in this ruling are not proof of widespread fraud. But the decision contains no evidence of any case where the same exposure evidence was presented in the civil case and to the asbestos bankruptcy trusts. Plaintiffs cannot point to a string of fraud accusations on which they have been exonerated, establishing that the practices exposed in the Kananian and Garlock rulings are rogue outliers rather than indications of common practice and design.
2. Effect on today’s “nominal” defendants: Garlock found the concealment of exposure evidence made defendants pay far more than their proportionate share of liability. This practice is made possible by the lack of transparency between trust compensation and the tort system.
Most of the existing bankruptcy trusts were formed to pay compensation on behalf of the manufacturers of dusty products acknowledged to be responsible for the lion’s share of dangerous asbestos contamination, like insulation. Many of today’s asbestos tort defendants marketed products that contained far less asbestos, far less potential exposure, and hence far less potential health risk. In many cases current defendants were not manufacturers of asbestos products, but only incorporated low-dose products made by others.
For example, “Garlock has demonstrated that its products [thin gaskets located inside machinery] resulted in relatively low exposure of a relatively lower potency asbestos to a limited population.” Thus, its “legal responsibility for causing mesothelioma” is de minimis, “as a ‘bucket of water’ would be to the ‘ocean’s volume.’ ” Garlock nevertheless was forced into bankruptcy because of the volume of asbestos claims. The number and “value” of those claims increased after insulation manufacturers and others had gone into bankruptcy and could no longer be defendants in civil cases, and the evidence that supported claims against these “big dusties” vanished after they went into bankruptcy.
3. Possible or desirable effects of the Garlock ruling: The ruling should provide compelling support for increased transparency between the civil tort system and claims made to asbestos trusts.
Civil defendants are entitled to discovery related to plaintiffs’ bankruptcy trust claims (e.g., Volkswagen of America v. Superior Court (Rusk) (2006) 139 Cal.App.4th 1481, an appeal won by Gordon & Rees). Plaintiffs’ counsel routinely avoid this obligation, including by deferring filing the trust claims until after the civil lawsuit is concluded. Some jurisdictions already have passed legislation requiring disclosure of claims be filed and discoverable during the pendency of the civil litigation. For example, Ohio requires a sworn statement disclosing all existing asbestos claims and supporting documents be made within 30 days of the commencement of discovery. Ohio Rev. Code sec. 2307.952(A)(1)(a). West Virginia requires a sworn statement attesting that “a good faith investigation of all potential claims against asbestos trusts” was conducted and describing those claims. (See ¶ 22(A)(2) here.) Last year, the Furthering Asbestos Claim Transparency (FACT) Act passed the House but stalled in the Senate. The FACT Act would require bankruptcy trusts to provide information about claims made and paid.
The Garlock ruling evidences a history and pattern of abuse of procedure and lack of transparency, effectively designed to increase liability payments out of proportion to fault. Some courts and legislatures have taken actions to curb these abuses, and Garlock may spur other courts and legislatures to follow in their footsteps.