Ford Motor Company recently obtained access to previously sealed testimony and exhibits that formed the basis for a bankruptcy court’s January 10, 2014 Order finding a widespread pattern of demonstrable misrepresentation by asbestos claimants in order to maximize their recovery. “Order Granting Ford Motor Company’s Motion for Access to Rule 2019 Filings,” In re Garlock Sealing Technologies, LLC, Case No. 10-31607, United States Bankruptcy Court for the Western District of North Carolina, Charlotte Division (May 6, 2014).
The January 10 Order (2014 WL 104021) was concerned with the bankruptcy court’s determination of the reasonable estimate of Garlock’s liability for past and future mesothelioma claims. Garlock, a producer and seller of asbestos gaskets and other related materials, was a named defendant in the civil tort system for three decades before Garlock’s insurance was exhausted and the company filed for bankruptcy protection. To reach its decision on estimated liability, the court embarked upon a lengthy exposition of asbestos litigation, including the proliferation of asbestos personal injury trusts following the bankruptcy of early primary asbestos defendants.
Garlock presented evidence “that the last ten years of its participation in the tort system was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.” January 10th Order, at 10. The court allowed Garlock to conduct discovery into 15 settled cases, and found that, in each case, the plaintiffs’ attorneys withheld exposure evidence. The court noted that “it is suppression of evidence for a plaintiff to be unable to identify exposure in the tort case, but then later (and in some cases previously) to be able to identify it in Trust claims.” Id. at 14. The limited discovery into previously settled cases demonstrated that the plaintiffs’ attorneys manipulated the chasm between the tort system and the bankruptcy trust system by withholding evidence of exposure to bankrupt the defendants during civil litigation, and then resurrecting claims against those defendants in order to recover from bankruptcy trust funds. Garlock presented evidence “that the last ten years of its participation in the tort system was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.” Id., at 10.
The widespread pattern of manipulation of exposure evidence suggested that Ford, and other so-called chrysotile defendants, “may too have been defrauded in some of the same cases and that this problem is pervasive and substantial enough to warrant further inquiry.” Ford Motor Company’s Motion For Access to Rule 2019 Filings and To Unseal the Evidence of “Demonstrable Misrepresentation,” In re Garlock Sealing Technologies, LLC, Case No. 10-31607, United States Bankruptcy Court for the Western District of North Carolina, Charlotte Division (March 14, 2014). Ford has been a co-defendant of Garlock’s in asbestos litigation. Like Garlock, Ford paid settlements to asbestos plaintiffs in reliance upon misinformation. Therefore, Ford moved for an order allowing it to access the documents relating to the 15 cases in which the plaintiffs’ attorneys were found to have withheld exposure evidence. Because each of the 15 cases investigated by the Garlock court demonstrated manipulation of exposure evidence to extract higher payouts from solvent defendants, Ford suspected that it may have been hoodwinked into paying artificially inflated settlements.
On May 6, 2014, the court granted Ford access to the previously sealed filings. The new order is significant because the January 10 Order noted that “more extensive discovery would show more extensive abuse” in asbestos litigation. The bankruptcy court therefore has signaled to plaintiffs’ attorneys throughout the country that manipulation of the asbestos bankruptcy trust jig is up. Perhaps we are witnessing a new trend toward judicial transparency in asbestos litigation. Such transparency would have a prophylactic effect and could prevent future widespread manipulation of evidence. If plaintiffs’ attorneys are aware of the possibility that their settlements and exposure evidence may be reviewed by future courts, they will be less tempted to play games with exposure evidence, such as those uncovered by the Garlock court. Certainly, granting Ford access to sealed records relating to prior settlements may open the floodgates of such requests, ultimately resulting in all of Garlock’s asbestos co-defendants accessing those same records. Given that Garlock has now sued four plaintiffs’ law firms and an individual attorney involved in the 15 settled cases considered by the court, accusing the lawyers of violating the Racketeer Influenced and Corrupt Organizations Act for their concealment of exposure evidence, the possibility of additional litigation filed by Garlock’s co-defendants should have a chilling effect on future manipulation of exposure evidence.