New Hope for Asbestos Defendants in Preventing Fraud

For years, asbestos defendants have suspected plaintiffs have been withholding evidence about similar asbestos claims they filed against other companies, thereby maximizing settlements or verdicts against each individual company. Specifically, defense attorneys have worried that by disingenuously claiming they only have viable claims against a single company, plaintiffs were able to maximize their recovery from that company. In In Re Garlock Sealing Technologies, LLC, 2014 Bankr. LEXIS 156 (Bankr. W.D.N.C. Jan. 10, 2014), a North Carolina bankruptcy case, the Court recently allowed perennial asbestos defendant, Garlock Sealing Technologies LLC, to investigate that possibility and the Court was shocked by what Garlock found.

Garlock had been forced into filing Chapter 11 Bankruptcy in 2010, largely due to mounting asbestos claims against it over a number of years. In the context of its North Carolina bankruptcy case, Judge George Hodges allowed Garlock to investigate the actions plaintiffs’ law firms took after settling with Garlock in 15 past asbestos cases. Garlock found that after they settled their asbestos claims with Garlock, the plaintiffs’ law firms then sought payments from the asbestos trusts of various bankrupt asbestos insulation manufacturers even though they had specifically identified Garlock as the main or sole cause of each plaintiff’s disease in each plaintiff’s suit against Garlock. In the context of  Garlock’s bankruptcy case, these suspicious findings tainted Garlock’s settlement history, and on that basis Judge Hodges ruled $125 million was enough of a set-aside for asbestos claims rather than the $1.3 billion asbestos plaintiffs wanted.

But in the broader asbestos litigation context, the Garlock decision allowing the company to investigate the plaintiffs’ post-settlement activities — and the startling results of that investigation — have renewed recurrent asbestos defendants’ hope of fighting plaintiffs’ firms’ abuses, and even fraud, in asbestos litigation. Since the Garlock ruling was issued, asbestos defendants have begun, and even had some success, using it to their advantage in different ways. Thus far, recurrent asbestos defendant Crane Co. has successfully used the Garlock ruling in a Rhode Island case to obtain discovery of all claims forms the plaintiff submitted to the trusts of bankrupt asbestos defendants. Sweredoski v. Alfa Laval, Inc., CA No. PC-2011-1544 (R.I. Super. Ct. January 15, 2014). In another North Carolina case, asbestos defendant Ford Motor Co. has cited the Garlock ruling in an effort to have an asbestos lawsuit against it dismissed. Asbestos defendants’ attorneys are still coming up with creative ways to use the Garlock ruling to asbestos defendants’ advantage, but if defendants continue to be able to successfully use the ruling, it could open new discovery avenues for asbestos defendants and ultimately help reduce settlement and even verdict amounts against those defendants.

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