Mar 27 2014, 6:10am CDT | by Forbes
The American philosopher William James once observed that real scientific breakthroughs are achieved by “the born geniuses” who “let themselves be worried and fascinated” by exceptions to widely held theories about how the world works. They chase down explanations, he said, until the conventional wisdom is upset.
Something similar may be happening with asbestos litigation. A manufacturer’s stubborn crusade to open up the records of thousands of claims in asbestos cases has drawn the support of big names like Ford and Aetna, as they join in the effort to uncover evidence that lawyers have been gaming the multibillion-dollar system with conflicting stories about how their clients got sick.
The evidence is all there, in hundreds of thousands of claim forms and lawsuits filed by people seeking tens of billions of dollars for asbestos-related diseases. But plaintiff lawyers have mounted a fierce effort to keep most of those records sealed, in defiance of the normal presumption that court proceedings should be open to the public.
A bankruptcy judge in Charlotte, N.C. today is scheduled to hear arguments on motions by Aetna, Ford, Volkswagen, Honeywell and other companies to make public evidence Garlock Sealing Technologies uncovered in its bankruptcy. (Legal Newsline, a publication funded by the U.S. Chamber Institute for Legal Reform, has a similar case on appeal in federal court.)
In a January ruling, U.S. Bankruptcy Judge George R. Hodges slashed the asbestos liability of Garlock, an EnPro Industries unit, by $1 billion to to $125 million, citing evidence that lawyers had withheld information about their clients’ exposure to other asbestos products in order to pry larger settlements from Garlock.
Ford, in a filing earlier this month, said Hodge’s “findings of widespread and demonstrable misconduct by asbestos claimants” and their attorneys suggest there’s valuable evidence in the sealed files that the automaker could use to defend itself. Volkswagen, in a filing earlier this week, said “it is nearly impossible for asbestos defendants to uncover the type of misrepresentation exposed in this proceeding without judicial intervention.”
If the companies are successful, they might finally unravel a pattern of misrepresentation in asbestos litigation that has cost companies billions of dollars and driven many of them into bankruptcy. Defense lawyers say the asbestos-lawsuit business is built upon the secrecy of plaintiff records, since only the lawyers representing asbestos claimants know all the different stories they’ve told in legal proceedings against different companies. (For one egregious example, see my story from 2006.) If those stories can be pulled together into a single file – as a Texas judge a few years ago did to uncover a massive fraud involving silicosis claims – then companies might have a better shot at limiting payouts to people who have already collected for their disease.
All the companies are seeking Rule 2019 filings, so named after the provision of the federal bankruptcy code that requires lawyers to identify clients who have claims against a bankrupt company. They say they need the 2019s to match up people who filed prior asbestos claims against lists of people suing them, so they can uncover evidence those plaintiffs had told conflicting stories about how they got sick.
This is a standard defense in tort law, which requires plaintiffs to prove that a company’s products were a “substantial factor” in causing their illness. As companies that made clearly dangerous products like asbestos pipe insulation have gone bankrupt, plaintiff lawyers have targeted companies like Garlock and Ford who sold products such as gaskets and brake pads that are unlikely to have made anyone sick. To help their clients win, they advise them to remember working only with the products of the company they are suing, even if they have previously made equally exclusive claims against other companies.
Normally 2019 filings are public like other judicial record, but asbestos lawyers in the early 2000s convinced judges to seal them for a variety of reasons. Chief among them: The records might reveal confidential “commercial information,” such as fee arrangements, that would hurt their business. Not only would potential clients be able to play one law firm off against another for lower fees, but the records might reveal fee-splitting arrangements that violate ethics rules in most states. Lawyers are not supposed to get fees for referring clients unless they do significant legal work on the case, but the practice is common in the industry where lawyers draw in clients with TV and Internet ads and then hand them off to firms that focus on litigation and settlement.
The lawyers also said the filings contained confidential medical information, but that argument is undermined by the fact they freely supplied the information for years before seeking to seal 2019 records, and plaintiffs must make all the same information public when they sue.
“A lot of firms simply responded” by filing public 2019 forms with medical information in the early days, said S. Todd Brown, an associate professor at State University of New York Buffalo Law School and expert on asbestos bankruptcy trusts. “It wasn’t until later, after the litigation really got into full swing, that the current approach (of sealing records) became more common. Now everything is filed under seal and you have to jump through a bunch of hoops to get access to it.”
The plaintiff lawyers had an ally in Judge Judith Fitzgerald, since retired to private practice, who oversaw a number of high-profile bankruptcies including Pittsburgh Corning, Armstrong World Industries, Federal-Mogul and Combustion Engineering. She allowed the lawyers to submit their 2019 filings on CDs, to be held by the court and released only on a judge’s order.
Not many people asked for the records until Garlock was driven into bankruptcy in 2010 by the escalating demands of asbestos plaintiff lawyers. The company had been settling asbestos claims for small amounts for years because its products contained a type of asbestos believed to be 1/1000 as dangerous as the long-fiber amphibole asbestos in insulation, and it was sealed in plastic. A plaintiff who took such a case to trial would have a hard time establishing the legal level of proof to win any damages. The Sixth Circuit Court of Appeals threw out a $500,000 jury verdict against Garlock on this basis in 2011, saying that to blame a pipefitter’s mesothelioma on Garlock gaskets would “be akin to saying that one who pours a bucket of water into the ocean has substantially contributed to the ocean’s volume.”
As solvent defendants went bankrupt, however, plaintiff lawyers started targeting companies like Garlock and demanding far more money to settle claims than they had before. Garlock’s attorneys figured their best defense might be to obtain evidence of other exposures, which would be contained in the 2019 filings and related paperwork filed with trusts bankrupt companies established to pay asbestos claims. But they hit a brick wall.
Judge Fitzgerald, in a March 2011 hearing, displayed outright disdain for the company’s arguments, telling attorney Garland S. Cassada with Robinson Bradshaw & Hinson that she didn’t buy Garlock’s claim that there was public interest in unsealing the documents./>/>
“Well, well has that intense interest shown up, Mr. Cassada?” she asked. “’Cause the only place I get it, frankly, is Garlock. And I’ve had probably more than any other judge in the country in terms of bankruptcy cases that have come up. So where is this intense interest?”
Later, she said, “I don’t think the 2019s are there just for fishing expeditions for private litigants.”
A federal judge in Delaware disagreed, overruling Fitzgerald in a March 2013 decision. The 2019s were indeed public judicial records and Garlock had a right to see them, U.S. District Judge Leonard P. Stark held. Garlock’s intention to use them in litigation is a “quintessentially proper purpose,” he said, because it fosters sharing of judicial records among courts.
That sharing of records is the question facing Judge Hodges today.
I reached out to Elihu Inselbuch of Caplin & Drysdale, a lead attorney for the Official Committee of Asbestos Personal Injury Claimants opposed to opening up the Garlock records. He didn’t respond to a request for comment, but in this article on the firm’s website criticizes the “effrontery” of those who seek to unseal plaintiff records.
“The so-called problem of `double-dipping,’ …as defined by the proponents of trust transparency, does not exist,” Inselbuch wrote. If it appears that way, he said, it’s only because workers were exposed to many different asbestos products and have the right to craft their complaints against each company as they see fit.
In a filing opposing motions to unseal the Garlock records, plaintiff attorneys also say the records would expose confidential medical conditions of plaintiffs, as well as their names and addresses. That information is all readily available from other litigation records, however, such as the New York City Asbestos Litigation website.
The plaintiff attorneys, of course, say the companies seeking to pry open the Garlock bankruptcy records can access those same websites to find the names of plaintiffs who have sued multiple defendants. But asbestos defendants believe the trust filings that Hodge examined could be the Rosetta Stone they need to show how plaintiffs have tailored their stories to obtain the maximum recovery from each company regardless of how much those stories conflict. Instead of scouring federal, state and bankruptcy courts across the country to find each claim, they will be collected in one place.
There’s an example to show how this can work. Back in 2006 a federal judge who happened to also be a former nurse grew curious, like Garlock’s lawyers, about the wave of silicosis lawsuits flooding her court. Silicosis is a rare disease, she knew, yet there seemed to be an epidemic unreported in any of the mainstream medical journals.
As detailed in this NPR article, Judge Janis Jack ordered the plaintiff lawyers to turn over the medical and exposure records for every one of the 10,000 silicosis plaintiffs and defense lawyers quickly discovered that 68% had previously filed asbestos claims. Asbestosis – itself extremely rare, despite the claims of plaintiff lawyers – and silicosis almost never occur in the same person. The silicosis claims were part of a massive fraud.
Judge Hodges only allowed Garlock to perform full discovery on 15 of the thousands of asbestos claims against it. In every case, lawyers had withheld significant information about other claimed asbestos exposures that Garlock could have used to deflect liability. Garlock has since sued a number of those firms for fraud, including Belluck & Fox, Shein Law Center, Simon Greenstone and Waters & Kraus.
I’ve tried to reach each of these law firms for this and other stories but so far they have declined comment. In a Wall Street Journal article after Hodge’s ruling slashing Garlock’s liability in January, Jeffrey Simon of Simon Greenstone called the judge’s opinion “an outlier.”
“It departs radically from the opinions of many other bankruptcy judges, as well as trial court judges and juries who reviewed the same subject matter and reached conclusions that much more closely reflect the evidence,” Simon told the Journal.
Sounds like the kind of accepted scientific wisdom that William James wrote about a century ago.
Source: Forbes Business
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