Date decided January 10, 2014 End date January 10, 2014 | Judge sitting Judge George Hodges | |
Full case name In Re: Garlock Sealing Technologies, LLC, et al. | ||
In re Garlock Sealing Technologies, LLC is a court case heard in the United States District Court for the Western District of North Carolina which involves the entry into bankruptcy proceedings by Garlock Sealing Technologies, a manufacturer of coated asbestos gaskets, as a result of potential liability from current and future settlements. The plaintiffs were over 4,000 asbestos victims suffering from mesothelioma, including many Navy veterans, as well as an unknown number of future mesothelioma victims. As noted by the court, mesothelioma “is always fatal, causing death essentially by suffocation within about eighteen months of diagnosis” and involves “a horrific death.”
Contents
In March 2016 Garlock, and its parent company EnPro, settled with plaintiffs for $480 million (only a portion of the $1.26 billion sought by the court-appointed plaintiffs committee).
Case history
In 2010, Garlock filed under a special section of the bankruptcy code (Chapter 11, section 524(g)), which Congress enacted in 1994 because many asbestos companies were facing the prospect of bankruptcy due to the number of victims. Beginning in the 1930s, the asbestos industry engaged in a cover-up of the lethal of effects of asbestos that went on for decades. The product, which has not been banned in the United States, still kills over 3,000 people a year, according to the Centers for Disease Control and Prevention. The special bankruptcy law allows a company to set aside money in a trust to compensate - to a limited extent - its victims, while staying operational and profitable. Filing under 524(g) allows most asbestos corporations to remain economically healthy, although trusts typically lack sufficient funds to fully pay every claim. The median payment percentage to an asbestos victim is 25 percent of a claim’s value.
After filing under section 524(g) of the U.S. Bankruptcy Code in 2010, Garlock sought to limit its liability to current and future mesothelioma-related cases. The approach used by the court for calculating liability was put forth by Garlock’s expert, the Bates White, an industry-consulting firm. Benjamin N. Cardozo School of Law professor Lester Brickman was retained by counsel for Garlock to write an expert report describing the methods used by plaintiff law firms to arrive at inflated values for present and future claims.
The court decided to value Garlock’s responsibility by “divorcing” it from Garlock’s long history settling cases and the substantial jury verdicts against it. The company “contended that it was manipulated into overpaying in settlements with plaintiffs lawyers who withheld evidence that their clients were exposed to other manufacturers’ products.” The judge then ordered discovery on 15 cases, held a hearing and concluded that attorneys for the asbestos victims “withheld evidence that their clients were exposed to asbestos products from other companies.”
The lawyers for Garlock asked the judge for permission to investigate several other similar cases, and provided proof to the court that there was a pattern emerging of "withholding evidence” in mesothelioma cases. After discovery action of fifteen previously filed cases by plaintiffs against Garlock, Judge Hodges issued an opinion in his ruling that lawyers had "infected" the tort system with the "manipulation of exposure evidence." The controversial decision by Judge George Hodges limited the total liability in mesothelioma-related lawsuits of Garlock to $125 million rather than a lower court's estimate of $1.25 billion, a reduction of approximately 90 percent.
The plaintiffs strongly challenged this finding and moved to “re-open the hearing on Garlock’s liability,” based on new evidence that Garlock was in possession of this evidence and indeed had been for decades, but hid this from the court and “presented false testimony at the estimation hearing.”
In mid-October 2014, U.S. Bankruptcy Judge George Hodges ruled that all evidence supporting his decision to seal information in the case be unsealed as part of a broader examination of potential fraud in the case. However, Garlock continues to resist disclosing documents showing why the company settled its earlier cases. Plaintiffs are seeking to compel Garlock to release this information, which Garlock says led to inflated settlements but the plaintiffs say were reached due to significant evidence of Garlock’s liability.
In January 2015, Garlock agreed to pay $358 million over 40 years to settle all future (not current) asbestos-related injury claims, but in March 2016 both sides settled the case. Garlic agreed to pay $480 million to all current and future asbestos victims who may have a claim against them.
RICO allegations
In January 2014, Garlock attorneys filed suit against four prominent asbsestos law firms for conspiracy, fraud and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO); only the first page of the complaints were filed publicly, with the remainder filed under seal to protect confidential information about previous asbestos lawsuits. Since then, several other mesothelioma cases have used this opinion to alter or beg reconsideration for discovery in civil tort action. The firms also strongly contest these allegations and at least one firm is currently embroiled in litigation over broad discovery requests.
Throughout 2014, the court case evolved in several directions at the same time. Defendants in the RICO case moved to have that case moved to the state of New York, stating that “Indeed, virtually all of the conduct alleged in the complaint occurred in New York, and not a single allegation concerns any events in North Carolina,” According to an article in Legal Newsline, "The defendants deny the assertions in the lawsuit and believe critical evidence to prove their allegations include documents including at least three New York law firms – meaning the necessary evidence is located in New York." As the civil RICO act case heated up, more legal scholars began to follow the case and its far reaching implications for tort liability. Additionally, the U.S. Department of Justice filed an opinion in the case saying that Garlock's use of the 2019 filing procedure was correct, and Judge Hodges granting of disclosure of that information also correct, the judge erred in granting further access, and asked that his decision be reversed.
In March 2016, Garlock voluntary dropped the RICO claims against Plaintiffs' attorneys and a federal judge agreed to stay the cases. As part of the greater settlement package the action will be dismissed with prejudice.
Congressional bills
In January 2015, Texas Representative Blake Farenthold introduced legislation called "Furthering Asbestos Claims Transparency Act (FACT) Act of 2015." The bill would, among other things, require asbestos trusts in the United States to file quarterly reports about the payouts they make and personal information on the victims who receive them in a publicly accessible database. The bill passed out of committee in May 2015 and is awaiting a full vote by the House of Representatives. In 2015, Senators Richard Durbin (D-IL) and Ed Markey (D-MA) introduced the “Reducing Exposure to Asbestos Database Act of 2015,” which would establish a public database about the location and identity of asbestos and asbestos-containing products in the United States.
Industry reaction
In mesothelioma cases in other states, this decision has opened the door to "Rule 2019 Filings" disclosure, and several companies are now seeing confidential records of previously settled suits to see if plaintiffs or legal counsel are involved in further cases of "double dipping." This has reversed a trend started in the early 2000s wherein asbestos lawyers had convinced judges to seal filings that would otherwise have been made public, under the rationale that they contained "commercial information."