Asbestos plaintiffs lawyers: Garlock is the bad guy, not us

By Alison Frankel
June 6, 2014

Last January, U.S. Bankruptcy Judge George Hodges of Charlotte, N.C., issued a doozy of a ruling in the Chapter 11 of the gasket maker Garlock Sealing Technologies. Lawyers for asbestos claimants wanted Garlock to set aside more than $1 billion in a trust for thousands of current and future victims of asbestos exposure. Garlock, which maintains that anyone exposed to its long-ago products was also exposed to more potent products manufactured by other companies, argued that its liability was no more than $125 million. Plaintiffs lawyers based their estimate on Garlock’s settlement history; Garlock contended that it was manipulated into overpaying in settlements with plaintiffs lawyers who withheld evidence that their clients were exposed to other manufacturers’ products.

To test Garlock’s allegations, Hodges ordered discovery on 15 closed product liability cases in which Garlock paid out significant settlements. He held a 17-day hearing that included testimony from 29 witnesses and hundreds of exhibits. In all 15 of the settled cases, Hodges said, Garlock was able to show that lawyers for asbestos plaintiffs withheld evidence that their clients were exposed to asbestos products from other companies. “The fact that each and every one of (the surveyed cases) contains such demonstrable misrepresentation is surprising and persuasive,” Hodges wrote. He concluded that the “startling pattern of misrepresentation” so inflated Garlock’s settlements that the company’s settlement history was not a reliable gauge of its future liability. Hodges sided with the company and pegged Garlock’s asbestos liability at $125 million.

Other asbestos defendants seized on the ruling to argue that plaintiffs lawyers were monkeying with evidence. Some, including Ford and Volkswagen, moved for access to records from the estimation hearing, arguing that they deserved to know whether plaintiffs who settled with Garlock later turned around and sued them. The U.S. Chamber of Commerce, meanwhile, called Hodges’ opinion “a watershed” in exposing wrongdoing by asbestos lawyers, and suggested that Congress take note of it. The U.S. House of Representatives had already passed a bill to boost disclosure requirements for asbestos bankruptcy trusts before Hodges issued his Garlock opinion, but in May 2014, Senator Jeff Flake (R-Ariz.) introduced a Senate version of the bill.

As you can imagine, asbestos lawyers are eager to divert attention from the alleged evidence manipulation Hodges described in the Garlock opinion — which also pointed out that after denying their clients’ exposure to other products in litigation with Garlock, plaintiffs lawyers frequently turned around and filed claims against asbestos trusts of other defendants after they’d settled with Garlock. This week, the plaintiffs lawyers made a bid to undercut Hodges’ opinion. In a motion to re-open the hearing on Garlock’s liability, lawyers from Caplin & Drysdale claimed that Garlock violated Hodges’ discovery orders, hid evidence from the bankruptcy court and presented false testimony at the estimation hearing. “Garlock has committed a fraud upon the court,” the accompanying memo said in its first sentence.

Boiled down, the memo asserts that in two of the 15 cases Hodges examined, Garlock possessed documentary and other evidence that plaintiffs were exposed to asbestos products other than Garlock gaskets, yet Garlock didn’t disclose that evidence to Judge Hodges because it would have undermined the company’s argument that plaintiffs lawyers controlled exposure evidence. The new proof of what Garlock knew when those cases were being litigated, said Elihu Inselbuch of Caplin, “directly contradicts what they said in court. They indeed had evidence, and they’ve had it for decades.”

Inselbuch and his partner Trevor Swett, who represent the asbestos lawyers on the Garlock bankruptcy’s committee of asbestos personal injury plaintiffs, said that the entire basis of Hodges’ estimation opinion is misguided. The judge said he wouldn’t base his estimate of Garlock’s asbestos liability on its settlement history because plaintiffs lawyers forced Garlock into inflated deals by withholding evidence of exposure to other companies’ products. The new memo, they said, not only shows that Garlock itself possessed the exposure evidence it claimed to lack, but also that the company didn’t consider itself to be under coercion at the time it reached deals with plaintiffs lawyers. The judge should have seen those records at the estimation hearing, Inselbuch said, but “Garlock didn’t produce it.”

Garlock also didn’t produce this presumably exonerating evidence in the underlying personal injury cases, even though both of the cases went to trial and one resulted in a $36.6 million verdict for the plaintiff, a former U.S. Navy submarine machinist named Robert Treggett. Swett and Inselbuch said that’s a mystery they can’t solve. (“Why Garlock did not use these resources … is a matter best known to Garlock itself and to its lawyers,” their brief said. “Its failure to do so may reflect strategy, resource allocation, complacency, or inadequate trial preparation.”)

Garlock counsel Garland Cassada of Robinson Bradshaw & Hinson told me, however, that Caplin & Drysdale’s theory — that Garlock has hidden evidence that plaintiffs were exposed to products from other manufacturers — “makes no sense”: Why wouldn’t Garlock want to shift liability to another manufacturer? Moreover, he said, the asbestos lawyers’ supposed newly uncovered evidence contradicts testimony from their side before Judge Hodges.

Cassada also rejected assertions that Garlock failed to comply with Hodges’ discovery orders, and said the company will address the new brief’s specific allegations in a filing with the court. He called the asbestos lawyers’ assertions “a desperate attempt to change the dialogue.”

The Chamber certainly doesn’t seem worried that the new motion will mitigate the impact of the original Garlock opinion. “Does this impact legislative efforts? Absolutely not,” said Harold Kim of the Chamber’s Institute of Legal Reform in an emailed statement. “This motion does not change the fact that a federal court found that the plaintiffs’ lawyers misled the courts and defendants as evidenced through their subsequent trust filings.”

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