On January 10, 2014, Judge Hodges of the United States Bankruptcy Court of the Western District of North Carolina issued an Order Estimating Aggregate Liability in the Garlock Sealing Technologies bankruptcy. The issue before the court was Garlock’s liability for present and future mesothelioma claims. Representatives for asbestos claimants asked the court to set aside $1.1 billion to $1.3 billion for future claims. This request was based on historic settlement values in past Garlock cases. Judge Hodges, persuaded by an approach premised on a “projection of [Garlock’s] legal liability that takes into consideration causation, limited exposure and the contribution of exposures to other products,” estimated Garlock’s liability at $125 million — roughly 10% of the amount requested.
This decision and its underlying rationale have important implications for asbestos litigation.
The $125 million figure was based on Judge Hodges’ findings after allowing Garlock to conduct discovery in 15 settled cases. He found “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.”
Judge Hodges’ opinion listed specific examples. The following are direct quotes:
- In a California case involving a former Navy machinist mate aboard a nuclear submarine, Garlock suffered a verdict of $9 million in actual damages. The plaintiff did not admit to any exposure from amphibole insulation, did not identify any specific insulation product and claimed that 100% of his work was on gaskets. Garlock attempted to show that he was exposed to Unibestos amphibole insulation manufactured by Pittsburgh Corning. The plaintiff denied that and, moreover, the plaintiff’s lawyer fought to keep Pittsburgh Corning off the verdict form and even affirmatively represented to the jury that there was no Unibestos insulation on the ship. But, discovery in this case disclosed that after that verdict, the plaintiff’s lawyers filed 14 Trust claims, including several against amphibole insulation manufacturers. And most important, the same lawyers who represented to the jury that that there was no Unibestos insulation exposure had, seven months earlier, filed a ballot in the Pittsburgh Corning bankruptcy that certified “under penalty of perjury” that the plaintiff had been exposed to Unibestos insulation. In total, these lawyers failed to disclose exposure to 22 other asbestos products.
- A Philadelphia case involved a laborer and apprentice pipefitter in the Philadelphia shipyard which Garlock settled for $250,000. The plaintiff did not identify exposure to any bankrupt companies’ asbestos products. In answers to written interrogatories in the tort suit, the plaintiff’s lawyers stated that the plaintiff presently had “no personal knowledge” of such exposure. However, just six weeks earlier, those same lawyers had filed a statement in the Owens Corning bankruptcy case, sworn to by the plaintiff, that stated that he “frequently, regularly and proximately breathed asbestos dust emitted from Owens Corning Fiberglas’s Kaylo asbestos-containing pipe covering.” In total, this plaintiff’s lawyer failed to disclose exposure to 20 different asbestos products for which he made Trust claims. Fourteen of these claims were supported by sworn statements, that contradicted the plaintiff’s denials in the tort discovery.
- Another case in New York was settled by Garlock for $250,000 during trial. The plaintiff had denied any exposure to insulation products. After the case was settled, the plaintiff’s lawyers filed 23 Trust claims on his behalf – eight of them were filed within twenty-four hours after the settlement.
- In another California case, Garlock settled with a former Navy electronics technician for $450,000. The plaintiff denied that he ever saw anyone installing or removing pipe insulation on his ship. After the settlement, the plaintiff’s lawyers filed eleven Trust claims for him – seven of those were based on declarations that he personally removed and replaced insulation and identified, by name, the insulation products to which he was exposed.
- In a Texas case, the plaintiff received a $1.35 million verdict against Garlock upon the claim that his only asbestos exposure was to Garlock crocidolite gasket material. His responses to interrogatories disclosed no other product to which he was exposed. The plaintiff specifically denied any knowledge of the name “Babcock & Wilcox” and his attorneys represented to the jury that there was no evidence that his injury was caused by exposure to Owens Corning insulation. Garlock’s discovery in this case demonstrated that the day before the plaintiff’s denial of any knowledge of Babcock & Wilcox, his lawyers had filed a Trust claim against it on his behalf. Also, after the verdict, his lawyers filed a claim with the Owens Corning Trust. Both claims were paid – upon the representation that the plaintiff had handled raw asbestos fibers and fabricated asbestos products from raw asbestos on a regular basis.
Judge Hodges found the estimates of Garlock’s liability based on historic settlement values to be unreliable because they were “infected with the impropriety of some law firms…” One day before Judge Hodges’ opinion, Garlock filed four civil RICO suits against asbestos plaintiff law firms. Those cases have been sealed.
The Garlock opinion underscores the obvious need to pursue bankruptcy claim forms in all asbestos cases, but perhaps it also emphasizes the need for asbestos trust transparency legislation such as in Ohio. The Ohio statute requires a plaintiff in an asbestos tort action to provide a sworn statement disclosing all existing asbestos trust claims made by them or on their behalf. These disclosures are in addition to requirements imposed by court order, local rule or case management order.
The US Congress is currently considering the “Furthering Asbestos Claims Transparency (FACT) Act.” (H.R. 982) which would require asbestos trusts to file quarterly reports about the payouts they make and who receives them, excluding any confidential matters such as the claimants Social Security number or medical information. The bill was approved by the House Judiciary Committee by a 17-14 vote in October 2013 and it was considered by the House in November 2013. It passed the House by a margin of 221-199, with the voting essentially being split along party lines. Congressional observers believe the bill will not have enough votes to pass the Senate.
Until a national system is in place, or until state legislatures enact strict disclosure measures such as in Ohio, defense attorneys must guard against the potential double compensation scenarios highlighted by Judge Hodges in the Garlock case by using focused and aggressive discovery, subpoena, and motion practice.