Local News
9:13 am
Wed July 23, 2014

Asbestos Claimants Fire Back As Charlotte Bankruptcy Case Draws National Attention

Federal courthouse in uptown Charlotte.
Federal courthouse in uptown Charlotte.
Credit www.ncwd.uscourts.gov

Back in January, a federal judge in Charlotte issued what some have called a watershed decision in the murky world of asbestos litigation. The judge laid out how lawyers for asbestos plaintiffs withheld evidence and misled courts in old cases against a gasket manufacturer called Garlock. Since that decision, Garlock's bankruptcy case has drawn the attention of federal lawmakers, large auto companies, and health insurers.

Now the plaintiffs' lawyers are striking back, saying that Garlock's lawyers essentially tricked the Charlotte judge by withholding their own evidence.

Judge George Hodges in Charlotte detailed some of the shenanigans that helped drive Garlock, a gasket-maker, into bankruptcy:

In Texas, a plaintiff said his only exposure to asbestos was from Garlock after his lawyers filed a claim with another company. In California, a plaintiff's lawyers misled a jury to make Garlock look worse. And in Philadelphia, lawyers made evidence disappear of their client's exposure to 20 different asbestos products. 

Those are among the 15 old cases that Judge Hodges allowed Garlock to reexamine as part its bankruptcy proceedings. Hodges later wrote that "evidence was withheld in each and every one of them."

But now lawyers for the asbestos plaintiffs are fighting back.

"We believe that Judge Hodges was misled by Garlock's arguments and by its failure to produce evidence that it was required to produce," said Trevor Swett, a Washington, D.C., lawyer.

He and others representing asbestos claimants have filed a motion to reopen the record in this bankruptcy case.

The stakes are high: Judge Hodges' order in January slashed the amount Garlock owes asbestos claimants by roughly $1 billion.

The record to this point has shown that plaintiffs' lawyers did everything they could to downplay their clients exposure to asbestos products besides Garlock's. That way, Garlock looked responsible for their clients' health problems.

But now there's a new argument: Garlock actually had plenty of evidence to show that plaintiffs were exposed to other products. It just failed to use it, and then hid it from Judge Hodges.

Elihu Inselbuch also represents the asbestos claimants.

"Garlock had umpty-umph of volumes of deposition testimony, and that's what they said they didn't have" he said. "They convinced Judge Hodges they didn't have it, and they convinced Judge Hodges that they were misled, when in fact what they were doing was misleading Judge Hodges."

A lawyer representing Garlock, Rick Magee, calls that new argument a bizarre switch – the idea that Garlock hid evidence that would've helped the company's case.

"Our whole purpose at those trials was to demonstrate that it was the other products that caused the disease and not our product," he said. "We even hired experts at those trials to come in to demonstrate that it was those other products."

The bankruptcy case is playing out in Charlotte since Garlock's parent company, EnPro, is based here.

Magee says the recent motion doesn't address the heart of what Judge Hodges laid out in January – that plaintiffs' lawyers withheld evidence and misled courts.

Magee calls the new motion a sideshow.

"As soon as I read their papers, my reaction was that desperate times call for desperate measures," he said. "It's just a desperate attempt by them to divert the attention from what Judge Hodges' order put the attention on."

Hodges' order was the subject of a recent law journal article by former Delaware judge Peggy Ableman. She's testified before Congress about an asbestos case in which she was almost duped by lawyers who withheld evidence.

"There's definitely been a lot of shenanigans going on that have gone undetected," she said in a phone interview. "And the ease with which they were almost able to pull it off leads me to believe it's done more frequently."

Ableman says Judge Hodges January decision should be required reading for all judges overseeing asbestos cases.

In California and Rhode Island, judges have referenced the case in discussing what lawyers in their asbestos cases have to turn over. 

Manufacturers are taking notice too.

"That opinion was the clearest statement from any judge recognizing that this was occurring," said Nicholas Vari, who represents Crane Company.

It's requesting some of the sealed evidence in the Garlock case, along with Ford, Volkswagen and other companies dealing with asbestos lawsuits. 

"We are just interested in having the information that the plaintiffs have regarding the claims that they're making to bankruptcy trusts," he said.

That's the kind of evidence some lawyers have withheld – claims filed with bankrupt companies. They get away with it because the bankruptcy system is separate from the court system where lawsuits play out. The Garlock case demonstrated how much double-dipping there can be between the two systems.

That got the attention of lawmakers. Harold Kim is executive vice president of the U.S. Chamber of Commerce Institute for Legal Reform.

"After the Garlock decision came out, it really helped build momentum for the Wisconsin law that was passed and signed in the spring of this year," he said.

That law requires asbestos plaintiffs to disclose if they've filed claims with bankrupt companies. Some in Congress are also pushing a bill to make the bankruptcy system more transparent, and Arizona Senator Jeff Flake used the Garlock case as part of his argument for that bill.

The case has also attracted insurance companies. Cynthia Michener is a spokeswoman for Aetna.

"If another party, like a company or an individual, is responsible for causing your illness or injury, that party should be paying for your medical care," she said.

Aetna wants to see if it's paid out insurance claims that a bankrupt company has already covered. Judge Hodges gave Aetna access to some records, and requests by some other companies haven't been decided.

Judge Hodges will hear arguments Thursday, Aug. 31 over the asbestos plaintiffs' motion to reopen the record.