Asbestos bankruptcy conference highlights Chapter 11

Aricka Flowers Jun. 25, 2010, 4:38am


CHICAGO - An asbestos litigation expert said rules being developed in asbestos Chapter 11 cases are serving as precedent for resolution of other mass torts.

Asbestos defense attorney Kirk Hartley of Childress Duffy Goldblatt, Ltd. in Chicago co-chaired an asbestos bankruptcy conference earlier this week that featured discussions on how bankruptcies are affecting asbestos and tort litigation as a whole.

"The conference served as an opportunity for co-defendants in asbestos litigation to start learning about and paying attention to the Chapter 11 cases," Hartley said.

"Some are starting to realize that the more sophisticated entities are using Chapter 11 strategically to exit the tort system regardless of whether they are actually insolvent. The impacts are profound for both plaintiffs and co-defendants."

Plaintiff's attorney John Cooney of Cooney & Conway in Chicago co-chaired the conference with Hartley.

In light of recent Chapter 11 filings of asbestos targets Bondex International and Garlock Sealing Technologies, the conference covered the timely issue of how corporations are using Chapter 11 to seek refuge from lawsuits.

One particular session, "The Continued Impact of the General Motors and Chrysler Bankruptcies: Upcoming Issues on Estimation, Liability and the Effect on Co-Defendants," discussed the Chapter 11 filings of the major automobile manufacturers and how they impact pending and future lawsuits, sparking heated debate on the issue of transparency in bankruptcy trusts.

The session's moderator, Richard Ames of California-based Carroll, Burdick & McDonough, stated that the trusts make it much more difficult – and sometimes prohibit – attorneys from getting access to documents related to claims that have already been paid.

But Joseph Rice, co-founder of the personal injury firm Motley Rice in Mt. Pleasant, S.C., shot back saying that defense attorneys would have to go through the regular discovery process if a company hadn't filed bankruptcy. He said defense attorneys could actually get access to information on old bankruptcy trust claims by going through the typical discovery process instead of expecting plaintiff's attorneys "to do all the work for them."

Rice challenged asbestos defense attorneys by saying that he has been trying to get defendants to create a national database of job sites that were involved in cases surrounding successful bankruptcy trust claims. He went on to say that if any of the defense attorneys agreed to do so, plaintiffs would be willing to pass on information regarding claims, which got a laugh, but no takers.

One of the most anticipated sessions of the conference was a judicial panel comprised of bankruptcy and state court judges from across the nation, including Madison County Circuit Judge Daniel Stack. Stack presides over one of the busiest asbestos dockets in the country.

Other speakers were Judge Judith Fitzgerald, U.S. Bankruptcy Court for the Western District of Pennsylvania; Judge James Murray Lynn, Philadelphia Court of Common Pleas; Judge William D. Maddux, Circuit Court of Cook County and Judge. Randall J. Newsome, U.S. Bankruptcy Court for the Northern District of California.

Newsome lamented the state of asbestos litigation, blaming what he sees as no change over the last 30 years on the fact that there is no interaction between bankruptcy and state court judges.

"It's really no surprise that I don't see a difference between now and 1979 because there is no system in place," Newsome said.

"No one has ever put a legislative system in place that would encourage or require us to have any interaction whatsoever in this particular area. I think it's a real sad state of affairs that as I listen to the program today it's all the same thing; nothing's changed. It is like Groundhog Day."

Hartley said the judicial panel offered a unique opportunity to look at asbestos litigation from the vantage point of key players that decide the fate of many cases.

"The conference was important as serving as the first occasion in which bankruptcy judges and state court asbestos judges have actually talked to each other about their respective legal rules and practices," he said.

During the discussion, Fitzgerald said there is a serious misconception about the way the bankruptcy process operates.

"We have a tendency to be frequently looked at by people and entities as an appellate court," she said.

"Of course, we are not that and there are several guidelines that prohibit the bankruptcy courts from acting as an appellate court. But, I do think there are many cases in which we are being looked at as a new opportunity or open window and that really isn't what the bankruptcy process is about for claimants."

The judges also discussed the amount of time it takes for a mesothelioma case to go to trial in their jurisdiction.

Stack said the cases went to trial faster than any other lawsuit type in Illinois. He went on to say that a suit can be expedited in Illinois if plaintiff's attorneys prove that their client is suffering from mesothelioma.

If the mesothelioma victim is deceased, the plaintiff's attorney can file an affidavit of hardship for the family and get the trial expedited.

"I don't think you can ordinarily get that in a medical malpractice or other type of case unless you show some sort of a circumstance," Stack said.

There was also debate about Congress' inability to pass legislation, like the Fairness in Asbestos Injury Resolution Act that would put additional controls on the bankruptcy trust system.

Newsome said there is a systematic problem if otherwise healthy companies have to file for bankruptcy solely due to asbestos litigation.

Conversely, he said it is also a bad situation if plaintiffs are not being compensated in a timely manner because of the inherent delays in the bankruptcy process. Because of this, he said there is a strong need for legislators to make policy changes and create a systematic solution to the problem.

During the conference, Hartley responded by saying that policymakers might be in a better position to make a move on legislation if there was more transparency with regard to the bankruptcy trusts.

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