May 6, 2014
(http://www.forbes.com/sites/danielfisher/2014/05/06/secrecy-crumbling-as-judge-gives-ford-insurers-access-to-asbestos-files/)
The wall of secrecy plaintiff attorneys have erected around asbestos claims has begun to crumble, as a judge in North Carolina granted Ford Motor F +2.33% Co.’s request to see forms filed in a prominent bankruptcy case as a way to ferret out suspected fraud and double-dipping.
In an order today, Judge George R. Hodges rejected efforts by plaintiff attorneys to keep the documents in the Garlock Sealing Products bankruptcy sealed, saying the so-called Rule 2019 filings are “public records available for examination.” Ford was joined by Volkswagen, Honeywell, Crane, and AIG and two other insurers in seeking the records, which those companies say may show that people who sued them for asbestos exposure made conflicting claims about how they were exposed when seeking money from the bankruptcy trusts.
The order represents a breakthrough for solvent companies that complain they are the victims of a one-two strategy where plaintiff lawyers craft lawsuits accusing them of causing their clients’ asbestos disease, then make completely different claims to trusts set up by companies that were driven into bankruptcy over asbestos liability. As more and more companies enter bankruptcy, plaintiff lawyers have targeted companies like Ford and Volkswagen with questionable allegations that previously wouldn’t have carried much weight in court, or been worth much in settlement negotiations.
Plaintiff lawyers target car manufacturers because they sold vehicles with brake pads containing asbestos. Epidemiological studies have failed to show that car mechanics have higher levels of mesothelioma, the cancer most closely associated with asbestos exposure, so Ford has an interest in showing that plaintiffs suing it for such cancers have claimed exposure to more dangerous substances elsewhere.
Insurers also want access to the records to pursue subrogation claims against people who collected settlements for asbestos-related disease while also tapping insurance policies to pay the medical costs associated with it.
Speeding to the courthouse for asbestos records? (Photo credit: Wikipedia)
In his order, Hodges granted Ford and the other companies access to the claims plaintiffs made against Garlock, including names and the last four digits of the plaintiffs’ social security numbers. He denied access to the retention agreements with their lawyers, which may show questionable fee-splitting arrangements but also could be covered by the attorney-client privilege.
The ruling is a defeat for plaintiff lawyers who argued that the filings with bankruptcy trusts weren’t public documents or contained confidential information.
Normally 2019 filings are public like any other judicial record, but asbestos lawyers in the early 2000s convinced judges to seal their filings for a variety of reasons. Chief among them: The records might reveal confidential “commercial information,” such as fee arrangements, that would hurt their business. Not only would potential clients be able to play one law firm off against another for lower fees, but the records might reveal fee-splitting arrangements that violate ethics rules in most states. Lawyers are not supposed to get fees for referring clients unless they do significant legal work on the case, but the practice is common in the industry where lawyers draw in clients with TV and Internet ads and then hand them off to firms that focus on litigation and settlement.
The lawyers also said the filings contained confidential medical information, but that argument is undermined by the fact they freely supplied the information for years before seeking to seal 2019 records, and plaintiffs must make all the same information public when they sue. Manufacturers and insurers got additional help last month after the Fourth Circuit Court of Appeals, which will consider any appeals in the Garlock case, ordered records in a federal consumer safety investigation unsealed.
Not many people asked for 2019 files until Garlock was driven into bankruptcy in 2010 by the escalating demands of asbestos plaintiff lawyers. The company had been settling asbestos claims for small amounts for years because its products contained a type of asbestos believed to be 1/1000th as dangerous as the long-fiber amphibole asbestos in insulation, and it was sealed in plastic. A plaintiff who took such a case to trial would have a hard time establishing the legal level of proof to win any damages. The Sixth Circuit Court of Appeals threw out a $500,000 jury verdict against Garlock on this basis in 2011, saying that to blame a pipefitter’s mesothelioma on Garlock gaskets would “be akin to saying that one who pours a bucket of water into the ocean has substantially contributed to the ocean’s volume.”
By gaining access to Garlock’s files, companies like Ford will have more ammunition to mount similar defenses against asbestos claims. Garlock also has records of claims filed with trusts established by other bankrupt companies but people close to the case told me there will likely be more litigation over whether they are public records available for examination.
Garlock’s bankruptcy involves most of the major asbestos law firms and probably contains a significant percentage of the active asbestos plaintiffs in the U.S. The documents therefore could provide a valuable database for defendant companies to match up plaintiffs against their claims in multiple venues.
