WILMINGTON, Del. (Legal Newsline) – In an article for the American Journal of Trial Advocacy, former Delaware Superior Court Judge Peggy L. Ableman discussed the difficulties in her experiences accounting for bankruptcy trust recoveries in asbestos lawsuits due to lack of transparency and abusive practices.
Ableman expressed need for coordination between bankruptcy trusts and asbestos litigation in order to appropriately identify the effects fraudulent asbestos claims can have on the “integrity of the judicial process.”
In her article
, titled “The Garlock Decision Should be Required Reading for All Trial Court Judges in Asbestos Cases,” she suggests the Garlock Sealing Technologies decision in the U.S. Bankruptcy Court for the Western District of North Carolina “reveals just how widespread the tactics of strategic non-disclosure and trust submission timing have become.”
Ableman’s journey for more transparent courtrooms began when she was assigned to the asbestos litigation docket just before retiring from the Superior Court of the State of Delaware.
“In that capacity, the circumstances of one particular asbestos wrongful death case over which I was to preside unexpectedly thrust me at the center of one of the most controversial issues that has ever dominated asbestos litigation – the lack of any nexus, interface or transparency between the two systems that currently exist for providing compensation to victims of asbestos exposure,” she wrote.
Asbestos claimants seek relief through filing lawsuits against solvent manufacturers of asbestos-containing products and by filing claims with the established asbestos bankruptcy trusts, of which there are more than 60.
Trusts were established under section 524(g) of the Bankruptcy Code and have become a primary source of compensation for asbestos-related injuries, representing a fund worth roughly $30 billion.
In her article, Ableman, who is now special counsel at McCarter & English, explained that transparency reform efforts requiring asbestos claimants to disclose trust submissions have increased recently in order to prevent litigants from presenting two different fact patterns to maximize recovery from both trusts and companies sued in civil courts.
She added that many state trial courts – including Delaware and more recently Wisconsin – already require full disclosure of trust claims as part of their case management orders.
However, she said the problem is that there is no “foolproof” mechanism to enforce the disclosure requirement.
In one particular case, she discovered the morning she was scheduled to preside over an asbestos trial in which neither the plaintiff nor his attorneys failed to disclose a significant number of trust submissions and even withheld a substantial amount of exposure evidence that had been presented to trusts but not to the defendant at trial.
Because a pre-scheduled jury was waiting to serve and judicial and administrative resources had already been wasted, Ableman said she “had no choice” but to continue the trial, leading to a dismissal of the case.
“My reaction to the deceptive behavior caught the attention of those who were actively seeking greater transparency between the two compensation systems,” she wrote. “As a result, upon my retirement, I was frequently asked to testify about my experience, unquestionably because the case presents a quintessential example of the abusive practices that members of the asbestos defense bar are actively seeking to curb.”
Ableman’s efforts to encourage reform by testifying and sharing her experience were resisted by members of the plaintiffs’ bar, who argued that no fraud was established and that reform was only a “’solution in search of a problem.’”
Ableman said that while debate over transparency reform continues, Judge George Hodges’ decision in the Garlock bankruptcy case certainly silenced some resistance to bankruptcy trust reforms.
“The Garlock opinion represents a stunning expose of the breadth of the practice of withholding exposure evidence concerning the products of bankrupt entities,” she wrote.
In the Garlock case, Hodges strayed from the usual practice of estimating how much money a company must put in a bankruptcy trust, allowing Garlock to present evidence of what it felt was fraud.
The evidence revealed plaintiff attorneys were withholding exposure evidence in order to receive higher payouts from Garlock, which means Garlock’s historical settlement values were misrepresented, Hodges decided.
“In so doing, Judge Hodges unearthed what can best be described as a stunning pattern of fraud and misrepresentation that should provide new and powerful support for the defense bar’s crusade for greater openness,” Ableman explained.
“This occurrence was a result of the effort by some plaintiffs and their lawyers to withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants’ asbestos trusts until after obtaining recoveries from Garlock,” Hodges wrote.
Garlock brought evidence to the bankruptcy hearing demonstrating that the last 10 years of its participation in the asbestos litigation system “was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.”
According to Garlock’s evidence, one firm issued to its clients 23 pages of directions on how to testify. Evidence also showed one lawyer stated, “My duty to these clients is to maximize their recovery, okay, and the best way for me to maximize their recovery is to proceed against solvent viable non-bankrupt defendants first, and then, if appropriate, to proceed against bankrupt companies.”
Hodges permitted Garlock to bring evidence proving that roughly 220 settled cases withheld evidence. Then after settlement, clients made claims against roughly 20 companies’ bankruptcy trusts.
“It appears certain that more extensive discovery would show more extensive abuse,” Hodges continued. “But that is not necessary because the startling pattern of misrepresentation that has been shown is sufficiently persuasive.
“While it is not suppression of evidence for a plaintiff to be unable to identify exposures, it is suppression of evidence for a plaintiff to be unable to identify exposure in the tort case, but then later to be able to identify it in Trust claims. It is that practice that prejudiced Garlock in the tort system.”Legal Newsline
is seeking access to the evidence submitted by Garlock.
Speaking to trial judges, she added that they should view the Garlock case as a “wake-up call” to the “very real” possibility that asbestos lawsuits nationally may also be compromised by withheld exposure evidence.
“While these transparency loopholes exist, trial judges can and should take steps to eliminate the opportunity for lawyers to game the system through strategies such as withholding trust claims until the tort case is concluded, or utilizing professionals not involved in the state court litigation to be wholly responsible for the submission of bankruptcy trust claims,” Ableman continued. “I fell into the trap of relying upon the integrity of the parties or their lawyers to abide by the case management order requiring full disclosure.”
Ableman concludes that the Garlock decision should serve as an example that fraudulent cases are more than “mere anomalies,” and suggests making the opinion required reading to aid trial judges in their effort to encourage attorneys to act “ethically, honestly and responsibly.”
“For my part, I am relieved to have been somewhat vindicated by the Garlock decision and to have some support for my own suspicions regarding just how widespread these deceptive practices have become,” Ableman wrote. “In the final analysis, there is no question that the Garlock decision, together with the startling findings recounted therein, should be required reading for all judges who preside over asbestos personal injury cases.”(Editor's note: Legal Newsline is an associate publication of the Madison-St. Clair Record).