Legal Intern, Manhattan Institute's Center for Legal Policy
The Wall Street Journal notes a particularly interesting case out of federal bankruptcy court in North Carolina, where Judge Roy Hodges handed down a decision that strikes a blow against deceptive practices in asbestos litigation.
Garlock Sealing Technologies,a manufacturer of gaskets and packing,entered into bankruptcy in 2010 under the weight of pending and future asbestos claims. When manufacturers like Garlock file Chapter 11 in the face of asbestos claims, these firms are granted immunity on the condition that they meet a number of requirements. Among these requirements is the establishment of an asbestos trust, which establishes payments to be made to past and future victims based on the severity of their illness.
In this case, plaintiff's attorneys demanded that Garlock set aside 1.3 billion dollars for the settlement of mesothelioma related claims. Garlock believed the figure should be much lower, and earlier this month, federal judge Roy Hodges agreed, reducing their liability 90 percent, to 125 million dollars. This is significant, because for years, critics of this system have pointed out an exploitable information gap between the legal system and the trusts. In his opinion, Judge Hodges criticized the plaintiff's attorneys and their methods, noting that the larger number of 1.3 billion dollars was based on various forms of deceit by plaintiff's lawyers and clients, including the deliberate concealment of evidence that might suggest that plaintiff's injuries were the result of exposure to products other than Garlock's asbestos lined gaskets. The Journal notes one particularly poignant incident illustrating the extent of plaintiff misconduct:
Garlock had paid $9 million dollars in a California case involving a former Navy machinist mate. Garlock had attempted to show that the plaintiff had been exposed to asbestos-containing insulation, Unibestos, made by Pittsburgh Corning. The plaintiff denied exposure to insulation products, while his lawyer told the jury there was no Unibestos insulation on the ship. But Judge Hodges found that after the $9 million dollar verdict, the lawyers for the machinist filed 14 claims with other asbestos trusts, including several against insulation manufacturers. The same lawyers who told the Garlock jury there was no Unibestos exposure had claimed in the Pittsburgh Corning bankruptcy that the same plaintiff had been exposed to Unibestos. Judge Hodges wrote that the plaintiffs lawyers "failed to disclose" in court that their client had been exposed to 22 other asbestos products.
The Garlock case is a textbook instance of double dipping, a practice common in the asbestos litigation world. For years, critics of the system have alleged that plaintiff's attorneys "double dip," making claims to multiple asbestos trusts for the same injury. In this case, plaintiff's attorneys distorted or withheld facts while making claims with multiple asbestos trusts, even making allegations that were, as noted above, wholly inconsistent with the basis for rewards in prior decisions. As expected, companies forced into bankruptcy have decided to take action. Prior to this decision, EnPro Industries, Garlock's parent company, filed suit against four prominent asbestos law firms alleging they had concealed evidence about exposure to other products in litigation against Garlock. Judge Hodges' opinion provides significant ammunition for this claim.
The verdict is viewed as a major victory for Garlock, and is not without its critics. Paul Barrett of Bloomberg notes that the decision "obfuscates the long term wrongdoing by companies that didn't swiftly own up to the unintended harm caused by asbestos," while acknowledging that the circumstances present evidence that "influential members of the plaintiff's bar have lost their moral bearings."
It's not just companies like Garlock who have taken note. Congress, in an effort to solve the double dipping problem recently moved on the issue. In November, the House passed H.R. 982, the Furthering Asbestos Claim Transparency (FACT) Act, by a vote of 221 to 191. As BusinessWeek notes, the bill would require asbestos trusts around the country to file quarterly reports about who receives payments and how much they get. The bill is specifically designed to limit double dipping, and ensure that funds set aside for legitimate claims aren't unjustly dispersed to fraudulent claimants.