TESTIMONY OF MARK BEHRENS, ESQ. SHOOK, HARDY & BACON L.L.P F STREET, NW, SUITE 200 WASHINGTON, DC (202) MBEHRENS@SHB.

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1 TESTIMONY OF MARK BEHRENS, ESQ. SHOOK, HARDY & BACON L.L.P F STREET, NW, SUITE 200 WASHINGTON, DC (202) MBEHRENS@SHB.COM BEFORE THE TASK FORCE ON ASBESTOS LITIGATION AND BANKRUPTCY TRUSTS OF THE AMERICAN BAR ASSOCIATION S TORT TRIAL AND INSURANCE PRACTICE SECTION JUNE 6, 2013

2 TESTIMONY OF MARK A. BEHRENS, ESQ. SHOOK, HARDY & BACON L.L.P. Thank you for the invitation to testify before the Task Force on Asbestos Litigation and Bankruptcy Trusts of the American Bar Association s Tort Trial and Insurance Section. PROFESSIONAL BACKGROUND I co-chair the Washington, D.C.-based Public Policy Group of Shook, Hardy & Bacon L.L.P., an international law firm that primarily represents corporate defendants in product liability and complex tort litigation. For over two decades, I have been involved in product liability law, defense litigation, liability reform, and counseling in the prevention of liability exposure. I am an elected member of The American Law Institute and taught Advanced Torts as a Distinguished Visiting Practitioner in Residence at Pepperdine University Law School in I spend a substantial amount of my time examining and writing about asbestos litigation trends and issues. I have also testified before state legislatures in support of legislation to bring about greater transparency between the asbestos bankruptcy trust and civil tort systems. I have worked on behalf of the U.S. Chamber s Institute for Legal Reform and serve as counsel to the Coalition for Litigation Justice, Inc., * a nonprofit association formed by insurers in 2000 to address and improve the asbestos litigation environment. The Coalition files amicus curiae briefs in important cases that may affect the asbestos litigation environment. I also counsel companies that have been named as defendants in asbestos cases. I received a J.D. from Vanderbilt University Law School in 1990 and a B.A. in Economics from the University of Wisconsin-Madison in * The Coalition includes Century Indemnity Company; Chubb & Son, a division of Federal Insurance Company; Fireman s Fund Insurance Company; Liberty Mutual Insurance Group; and the Great American Insurance Company.

3 TESTIMONY I. OVERVIEW OF THE ASBESTOS LITIGATION Now entering its fourth decade, 1 asbestos litigation is the longest-running mass tort. 2 Originally and for many years, asbestos litigation typically pitted a dusty trade worker with lung cancer, mesothelioma, or impairing asbestosis against the asbestos miners, manufacturers, suppliers, and processors who supplied the asbestos or asbestos products that were used or were present at the claimant s work site or other exposure location. 3 Much of this work involved insulation containing long, rigid amphibole fibers, rather than the more common, but far less toxic, chrysotile form of fiber. 4 Occupations such as shipbuilders and Navy personnel working around heavy amphibole asbestos exposures on World War II ships; insulators blowing large clouds of free amphibole or mixed fibers; and asbestos factory workers exposed to snowstorms 1 See Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th Cir. 1973) (asbestos manufacturers found strictly liable for injuries to industrial insulation workers exposed to their products), cert. denied, 419 U.S. 869 (1974). 2 Helen Freedman, Selected Ethical Issues in Asbestos Litigation, 37 Sw. U. L. Rev. 511, 511 (2008). 3 4 James S. Kakalik et al., Costs of Asbestos Litigation 3 (Rand Corp. 1983). See, e.g., In re Asbestos Litig., 911 A.2d 1176, 1181 (Del. Super. May 9, 2006) ( [I]t is generally accepted in the scientific community and among government regulators that amphibole fibers are more carcinogenic than serpentine (chrysotile) fibers. ), cert. denied, 2006 WL (Del. Super. June 7, 2006), appeal refused, 906 A.2d 806 (Del. Super. June 13, 2006); Bartel v. John Crane, Inc., 316 F. Supp. 2d 603, 605 (N.D. Ohio 2004) ( While there is debate in the medical community over whether chrysotile asbestos is carcinogenic, it is generally accepted that it takes a far greater exposure to chrysotile fibers than to amphibole fibers to cause mesothelioma. ), aff d sub nom. Lindstrom v. A-C Prod. Liab. Trust, 424 F.3d 488 (6th Cir. 2005). 2

4 of raw asbestos these are the classic settings for older cases and for known sources of asbestos disease. 5 By the late 1990s, the asbestos litigation had reached such proportions that the United States Supreme Court noted the elephantine mass of cases, 6 and referred to the litigation as a crisis. 7 The vast majority of claims in this time period were filed by unimpaired plaintiffs diagnosed largely through lawyer-arranged mass screenings. 8 The mass of filings by the nonsick pressured many of the traditional defendants to seek bankruptcy court protection. 9 Each of these bankruptcies put mounting and cumulative financial pressure on other primary defendants, creating a domino effect. 10 The result was a flood of bankruptcies between See James S. Kakalik et al., Variation in Asbestos Litigation Compensation and Expenses vi-vii (Rand Corp. 1984) ( For the sample claims closed by all or nearly all defendants in the 32 months we studied [t]hree worker classifications accounted for the vast majority of asbestosrelated litigation: shipyard workers (37 percent of all closed claims); asbestos-related factory workers (35 percent); and insulation workers (21 percent). ) Ortiz v. Fibreboard Corp., 527 U.S. 815, 821 (1999). Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 597 (1997). See American Bar Association Commission on Asbestos Litigation, Report to the House of Delegates (2003), at Alex Berenson, A Surge in Asbestos Suits, Many by Healthy Plaintiffs, N.Y. Times, Apr. 10, 2002, at A1 ( Very few new plaintiffs have serious injuries, even their lawyers acknowledge. ); Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 723 (D. Del. 2005) ( Labor unions, attorneys, and other persons with suspect motives [have] caused large numbers of people to undergo X-ray examinations (at no cost), thus triggering thousands of claims by persons who had never experienced adverse symptoms. ); Eagle-Picher Indus., Inc. v. Am. Employers Ins. Co., 718 F. Supp. 1053, 1057 (D. Mass. 1989) ( [M]any of these cases result from mass X-ray screenings at occupational locations conducted by unions and/or plaintiffs attorneys, and many claimants are functionally asymptomatic when suit is filed. ). 9 See Mark A. Behrens, Some Proposals for Courts Interested in Helping Sick Claimants and Solving Serious Problems in Asbestos Litigation, 54 Baylor L. Rev. 331 (2002). 10 See In re Collins, 233 F.3d 809, 812 (3d Cir. 2000), cert. denied, 532 U.S (2001); see also Mark A. Behrens & Monica Parham, Stewardship for the Sick: Preserving Assets For Asbestos Victims Through Inactive Docket Programs, 33 Tex. Tech L. Rev. 1 (2001). 3

5 As a result of these bankruptcies, the net spread from the asbestos makers to companies far removed from the scene of any putative wrongdoing. 12 Plaintiff s lawyers began to target defendants that manufactured products in which asbestos was encapsulated or that distributed products containing asbestos, or owned premises that contained asbestos. 13 One plaintiffs attorney described the litigation as an endless search for a solvent bystander. 14 Commentators have explained that, Prior to the Bankruptcy Wave, asbestos lawsuits were centered on the thermal insulation products and industrial settings that most scientific literature considered to present the highest excess exposure risk. However, following the bankruptcies of those frontline defendants during the Bankruptcy Wave, plaintiff attorneys shifted their litigation strategy away from the traditional thermal insulation defendants and towards peripheral and new defendants associated with the manufacturing and distribution of alternative asbestos-containing products such as gaskets, pumps, automotive friction products, and residential construction products See Mark D. Plevin et al., Where Are they Now, Part Six: An Update on Developments in Asbestos-Related Bankruptcy Cases, 11:7 Mealey s Asbestos Bankr. Rep. 1, Chart 1 (Feb. 2012) (documenting four asbestos-related bankruptcies in 2000, twelve in 2001, and thirteen in 2002 nearly as many as in the previous two decades combined). 12 Editorial, Lawyers Torch the Economy, Wall St. J., Apr. 6, 2001, at A14, abstract at 2001 WLNR ; see also Patrick M. Hanlon & Anne Smetak, Asbestos Changes, 62 N.Y.U. Ann. Surv. Am. L. 525, 556 (2007) ( The surge of bankruptcies in triggered higher settlement demands on other established defendants, including those attempting to ward off bankruptcy, as well as a search for new recruits to fill the gap in the ranks of defendants through joint and several liability. ); Stephen J. Carroll et al., Asbestos Litigation xxiii (RAND Corp. 2005) ( When increasing asbestos claims rates encouraged scores of defendants to file Chapter 11 petitions the resulting stays in litigation drove plaintiff attorneys to press peripheral nonbankrupt defendants to shoulder a larger share of the value of asbestos claims and to widen their search for other corporations that might be held liable for the costs of asbestos exposure and disease. ). 13 American Academy of Actuaries Mass Torts Subcommittee, Overview of Asbestos Claims Issues and Trends 3 (Aug. 2007). 14 Medical Monitoring and Asbestos Litigation - A Discussion with Richard Scruggs and Victor Schwartz, 17:3 Mealey s Litig. Rep.: Asbestos 5 (Mar. 1, 2002) (Mr. Scruggs). 15 Marc C. Scarcella et al., The Philadelphia Story: Asbestos Litigation Bankruptcy Trusts and Changes in Exposure Allegations from , 27:17 Mealey s Litig. Rep.: Asbestos 1 4

6 The dockets reflect that the litigation has moved beyond the era in which manufacturers, producers, suppliers, and distributors of friable asbestos-containing products or raw asbestos are the principal defendants. 16 The expanded range of defendants has produced exponential growth in the dimensions of the litigation. In 2010, the Towers Watson consulting firm identified more than 10,000 companies, including subsidiaries, named in asbestos litigation. 17 Parties formerly viewed as peripheral defendants are now bearing the majority of the costs of awards relating to decades of asbestos use. 18 In recent years, the disease mix has changed too. By the mid-2000s, legislative and judicial reforms had greatly diminished the economic incentive for plaintiffs lawyers to conduct mass screenings and file claims on behalf of the non-sick. 19 The litigation began to focus on mesothelioma claims, and that continues today. 20 One recent online advertising study found that mesothelioma settlement, mesothelioma asbestos attorney, asbestos attorney, and (Oct. 10, 2012); see also Charles Bates et al., The Naming Game, 24:15 Mealey s Litig. Rep.: Asbestos 1, 4 (Sept. 2, 2009) ( As the bankrupt companies exited the tort environment, the number of defendants named in a complaint increased, on average, from fewer than 30 on average to more than 60 defendants per complaint. ); Charles Bates et al., The Claiming Game, 25:1 Mealey s Litig. Rep.: Asbestos 1 (Feb. 3, 2010). 16 See Congressional Budget Office, The Economics of U.S. Tort Liability: A Primer 8 (Oct. 2003) (asbestos suits have expanded from the original manufacturers of asbestos-related products. ). 17 Towers Watson, A Synthesis of Asbestos Disclosures From Form 10-Ks - Insights, Apr. 2010, at Overview of Asbestos Claims Issues and Trends, supra, at 3. See Mark A. Behrens, What s New in Asbestos Litigation?, 28 Rev. Litig. 501 (2009); see also Mark A. Behrens, Asbestos Litigation Screening Challenges: An Update, 26 T.M. Cooley L. Rev. 721 (2009; Lester Brickman, On the Applicability of the Silica MDL Proceeding to Asbestos Litigation, 12 Conn. Ins. L.J. 289 ( ). 20 See Helen Freedman, Selected Ethical Issues in Asbestos Litigation, 37 Sw. U. L. Rev. 511, 513 (2008) ( Perhaps the most dramatic change since the dawn of the new century has been the restriction of the litigation to the functionally impaired. ). 5

7 asbestos asbestos law firms were the top four most expensive Google AdWords, commanding between $107 and $143 per click. 21 Mesothelioma cancer and asbestos cancer placed twelfth ($71) and eighteenth ($61), respectively. 22 II. THE PROLIFERATION OF ASBESTOS BANKRUPTCY TRUSTS To date, over 100 companies with asbestos-related liabilities have filed bankruptcy, allowing these companies to channel their asbestos liabilities into trusts and insulate themselves from tort claims in perpetuity. 23 According to a 2011 report by the U.S. Government Accountability Office, the number of asbestos personal injury trusts increased from 16 trusts with combined total of $4.2 billion in assets in 2000 to 60 with a combined total of over $36.8 billion in assets in A recent, major development in the asbestos litigation relates to the impact of the many trusts set up in bankruptcy to pay personal injury claims against former asbestos defendants and the impact of those trusts on civil tort litigation See Barry Schwartz, Mesothelioma, Asbestos, Annuity: Google s Most Expensive Keywords, Search Engine Land (Nov. 9, 2012) (linking to See id. See 11 U.S.C. 524(g); Lloyd Dixon et al., Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts 25 (Rand Corp. 2010); Mark D. Plevin et al., supra (Chart 1); New York City Asbestos Litigation, Bankruptcies, (2013). 24 U.S. Government Accountability Office, GAO , Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts 3 (Sept. 2011); see also Lloyd Dixon & Geoffrey McGovern, Asbestos Bankruptcy Trusts and Tort Compensation (Rand Corp. 2011); Marc C. Scarcella & Peter R. Kelso, Asbestos Bankruptcy Trusts: A 2012 Overview of Trust Assets, Compensation & Governance, 11:11 Mealey s Asbestos Bankr. Rep. 1 (June 2012). 25 See William P. Shelley et al., The Need for Transparency Between the Tort System and Section 524(g) Asbestos Trusts, 17 Norton J. Bankr. L. & Prac. 257 (2008). 6

8 III. ASBESTOS BANKRUPTCY TRUST MANIPULATION AND ABUSE Examples of asbestos bankruptcy trust submission abuses have materialized. A widelyreported example occurred in Kananian v. Lorillard Tobacco Co., 26 where Cleveland Judge Harry Hanna barred a prominent California asbestos plaintiffs firm from his court after he found that the firm and one of its partners failed to abide by the rules of the court proscribing dishonesty, fraud, deceit, and misrepresentation. 27 Supreme Court let Judge Hanna s ruling stand. 28 An Ohio Court of Appeals and the Ohio Judge Hanna said later, In my 45 years of practicing law, I never expected to see lawyers lie like this. 29 Judge Hanna added, It was lies upon lies upon lies. 30 Judge Hanna s ruling in Kananian received national attention for exposing one of the darker corners of tort abuse in asbestos litigation: inconsistencies between allegations made in open court and those submitted to trusts set up by bankrupt companies to pay asbestos-related claims. 31 As the Cleveland Plain Dealer reported, Judge Hanna s decision ordering the plaintiff No. CV (Ohio Ct. Com. Pl. Cuyahoga County Jan. 17, 2007). See Ohio Judge Bars Calif. Firm from His Court, Nat l L.J., Jan. 22, 2007, at 3 ( An Ohio state court judge has barred Novato, Calif.-based Brayton Purcell and one of its lawyers from appearing in that court due to their alleged dishonesty in litigating a mesothelioma case. ); Thomas J. Sheeran, Ohio Judge Bans Calif. Lawyer in Asbestos Lawsuit, Cincinnati Post, Feb. 20, 2007, at A3 ( A low-key judge fed up with disrespectful behavior and alleged lies by an attorney created a stir with a courtroom ban on the lawyer from a nationally known San Francisco-area law firm that handles asbestos-related lawsuits coast-to-coast. ). 28 See Kananian v. Lorillard Tobacco Co., No (Ohio Ct. App. Feb. 21, 2007) (dismissing appeal as moot, sua sponte), review denied, 878 N.E.2d 34 (Ohio 2007); see also Behrens, supra, 28 Rev. Litig. at James F. McCarty, Judge Becomes National Legal Star, Bars Firm from Court Over Deceit, Cleveland Plain Dealer, Jan. 25, 2007, at B Editorial, Cuyahoga Comeuppance, Wall St. J., Jan. 22, 2007, at A14; see also Kimberly A. Strassel, Opinion, Trusts Busted, Wall St. J., Dec. 5, 2006, at A18 ( [One] law firm filed a 7

9 to produce proof of claim forms effectively opened a Pandora s box of deceit. Documents from the six other compensation claims revealed that [plaintiff s lawyers] presented conflicting versions of how Kananian acquired his cancer. 32 s and other documents from the plaintiff s attorneys also showed that their client had accepted monies from entities to which he was not exposed, and one settlement trust form was completely fabricated. 33 The Wall Street Journal editorialized that Judge Hanna s opinion should be required reading for other judges to assist in providing more scrutiny of double dipping and the rampant fraud inherent in asbestos trusts. 34 In a Maryland case, Warfield v. AC&S, Inc., 35 defendants aggressively pursued discovery of trust claims and were forced to file motions to compel, despite the fact that prior rulings made it clear that trust claims materials must be produced. 36 At a hearing on the matter, plaintiff s counsel explained that he had been slow in producing the trust materials because he disagreed with the court s prior ruling, some two years previously, and went on to complain that the court claim to one trust, saying Kananian had worked in a World War II shipyard and was exposed to insulation containing asbestos. It also filed a claim to another trust saying he had been a shipyard welder. A third claim, to another trust, said he d unloaded asbestos off ships in Japan. And a fourth claim said that he d worked with tools of asbestos before the war. Meanwhile, a second law firm, Brayton Purcell, submitted two more claims to two further trusts, with still different stories. [Brayton Purcell then] sued Lorillard Tobacco, this time claiming its client had become sick from smoking Kent cigarettes, whose filters contained asbestos for several years in the 1950s. ) McCarty, supra, at B1. Daniel Fisher, Double-Dippers, Forbes, Sept. 4, 2006, at 136, 137. Cuyahoga Comeuppance, supra, at A14. No. 24X , Consolidated Case No. 24X , Jan. 11, 2011 Mesothelioma Trial Group (M 112). 36 See Problems with Asbestos Compensation System, Hearing Before The Subcommittee on the Constitution of the Committee on the Judiciary, House of Representatives, 111th Cong. (Sept. 9, 2011) (statement of James L. Stengel), at 2011 WLNR

10 had opened Pandora s Box by requiring their disclosure. 37 When production was finally made on the eve of trial, the reasons for counsel s reluctance to produce the trust materials were made clear. There were substantial and inexplicable discrepancies between the positions taken in [c]ourt and the trust claims. 38 Despite specific and explicit discovery requests, plaintiff had failed to disclose nine trust claims that had been made. As revealed in the claim forms, the period of exposure alleged in the litigation versus that alleged in the trust submissions was materially different. 39 In the tort system, Mr. Warfield claimed under oath that he was exposed to asbestos exclusively between 1965 and the mid-1970 s, focusing on the products of the solvent defendants and avoiding application of a Maryland statutory damage cap for later exposures. In the trust claim submissions, however, Mr. Warfield claimed exposure from 1947 to 1991, both different in scope, but also clearly triggering the damage cap. 40 Of note, eight of the trust forms had been submitted before Warfield testified in court. 41 In another Maryland case, Edwards, the plaintiff had, prior to trial, failed to disclose whether or not he had filed any claims with bankruptcy trusts. In addition, as trial drew near, plaintiff amended his discovery responses to assert that the only asbestos-containing material to which he had been exposed was that of the only remaining solvent defendant. 42 Two weeks prior to trial, however, the plaintiff produced claims materials relating to sixteen trusts. Again,

11 there was a clear inconsistency in the alleged exposure. Significantly, most of the trust forms had been filed in 2008, before the initial discovery responses. 43 In a Virginia case, Dunford v. Honeywell Corp., the plaintiff s assertion that his asbestosrelated illness was due to exposure only to friction products was contradicted by three defendant automakers who showed that the plaintiff had made multiple trust claims certifying exposure to products made by other asbestos defendants. 44 The plaintiff also reportedly filed a separate tort action against these asbestos defendants. 45 Presiding Judge Thomas Home described the case as the worst deception used in discovery that he had seen in his twenty-two years on the bench. 46 Delaware Superior Court Judge (ret.) Peggy Ableman provided another example of abuse in her recent testimony before a U.S. Congressional committee. 47 Judge Ableman discussed a case she presided over in which the plaintiffs filed a lawsuit against twenty-two asbestos defendants. Although the court had a standing order requiring plaintiffs to disclose all bankruptcy trust claims materials, and the defendants specifically requested this information in interrogatories, nowhere did plaintiffs identify exposure through any of the twenty entities to whom bankruptcy claims were submitted. 48 Instead, plaintiffs claimed the decedent was See Asbestos Claims Legislation, Hearing Before The Subcommittee on Courts, Commercial and Administrative Law of the Committee on the Judiciary, House of Representatives, 112th Cong. (May 10, 2012) (statement of Leigh Ann Schell), at 2012 WLNR See id. See Asbestos Claims Transparency, Hearing Before The Subcommittee on Regulatory Reform, Commercial and Antitrust Law of the Committee on the Judiciary, House of Representatives, 113th Cong. (Mar. 13, 2013) (statement of Hon. Peggy L. Ableman), at 2013 WLNR

12 exposed to asbestos solely through laundering her husband s work clothes throughout his career as an electrician, and emphatically reported to the court and the sole remaining defendant, Foster Wheeler, that no bankruptcy submissions had been made and no monies had been received. 49 Two days before trial was set to begin, however, plaintiff s counsel reported the existence of two bankruptcy trust settlements a disclosure that was directly inconsistent with [counsel s] unequivocal representations to the Court and to opposing counsel at the pretrial conference. 50 By late afternoon of the following day, the day before trial, Foster Wheeler learned that a total of twenty bankruptcy trust claims had been submitted. 51 Judge Ableman explained, [a]lthough Foster Wheeler had been led to believe that [the decedent s] exposure was solely the result of take-home fibers on her husband s clothing, at this late point in the litigation, it became obvious that one or more of Plaintiffs attorneys had been claiming exposure through [decedent s] own employment and that representations to the bankruptcy trusts painted a much broader picture of exposure to asbestos than either Plaintiff or any of Plaintiffs attorneys had acknowledged during the entire course of the litigation. 52 In an Oklahoma case, Bacon v. Ametek, Inc., 53 defendant CertainTeed Corp. learned at pretrial hearing that the plaintiff failed to disclose nineteen asbestos bankruptcy trust claims and eleven signed affidavits from product identification witnesses that were submitted with the claims. The trust claim submissions and co-worker affidavits disclosed exposures to many See id. No. CJ (Okla. Dist. Ct. Dec. 2011) (Memorandum in Support of Defendant CertainTeed Corporation s Motion to Strike the Testimony of Jasper Hubbard and for Sanctions Due to Plaintiff s Discovery Abuse). 11

13 asbestos products that were never identified during discovery. 54 The plaintiff had been paid approximately $185,000 from five trusts, but deferred fourteen other claims worth at least $313, In a New Jersey case, Barnes and Crisafi v. Georgia Pacific, 56 plaintiff s counsel disclosed the existence of bankruptcy trust claims submissions during the pre-trial conference. The disclosure came about only after defense counsel independently reached out to a representative of the Johns-Manville Trust who confirmed that a claim had been made on behalf of one of the plaintiffs. 57 Counsel for plaintiff subsequently disclosed the existence of multiple other trust filings, and attempted to explain the lack of earlier disclosure on the grounds that the filings were deferred claims intended to preserve the trust statute of limitations and seek compensation at a later time, and were filed by another law firm. 58 In response, the court stated that no such distinction in the type of trust claims filed was expressed in the court s discovery order and that the plaintiffs clearly had an obligation to identify and produce this information. 59 The court admonished plaintiff s counsel for violating its order, saying, You cannot be blind, deaf and dumb, and reminded counsel, You re an officer of The Court. 60 The court went on to repeatedly state that this failure to disclose the trust submissions constituted a major See id. at 1. See id. Nos. MID-L (AS) & MID-L (AS) (N.J. Super. Ct. Middlesex County June 12, 2012) (Pre-Trial Conf. Trans.) See id. at 126. See id. at See id. at

14 problem, questioning: How can I try this case now? 61 After discussing with the parties how this lack of disclosure prejudiced the defendants, the court decided to postpone the trial that was scheduled to begin the following week. 62 In a Texas case, Stoeckler v. American Oil Co., 63 plaintiff s counsel waited until the third day of trial to disclose the existence of additional bankruptcy trust claims submissions. Within a few hours of the disclosure, after the defendants had an opportunity to review the trust submissions while the trial continued, defense counsel moved for a mistrial. 64 The trust claims submissions revealed exposures to asbestos products over a longer period of time, starting with the year of the plaintiff s birth, and to a broader range of asbestos products. 65 Counsel for defendant Dana Corp. explained to the court that [o]ur trial strategy, our pretrial strategy, which was fixed weeks ago, is now thrown up in the air, 66 and [n]ot only are our experts not prepared and we have to do more discovery, I think we now need to go back and depose [the plaintiff]. 67 Defense counsel continued: It is too late. There is nothing I can do. I cannot I don t get to open again tomorrow and say, ladies and gentlemen of the jury, I just found out some stuff yesterday that I didn t know before, and now let me tell you what the evidence is going to be. My credibility, my client s credibility is at risk with this jury, and there is no cure for that at See id. at 152. No. 23,451 (Tex. Angelina County Dist. Ct. Jan. 28, 2004) (Trial Trans.). See id. at 63. See id. at at 19. at

15 In addition, the court took issue with the discrepancies between the trust submissions and statements made in the plaintiff s multiple depositions that no additional asbestos exposures existed. 69 Plaintiff s counsel attempted to defend these discrepancies on the grounds that the plaintiff had never seen the trust submission documents because they were submitted by counsel; an explanation to which the court replied: you know where this goes, to the Code of Professional Ethics. 70 Another Texas case, Brassfield v. Alcoa, Inc., 71 demonstrates what appears to be a purposeful disconnect or willful blindness on the part some plaintiff s attorneys in tracking claims submitted to the trusts and within the tort system. During a cross-examination of plaintiff s counsel Edward Moody at a motion s hearing, Mr. Moody stated that his law practice was set up in a manner in which neither he nor any single individual could verify for the purposes of discovery what claims were pending with which asbestos trusts. Rather, Mr. Moody testified that his computer system could only verify trust claims that had been paid. Mr. Moody also stated that he was not certified to submit claims to any trust, and that all trust submissions were handled in a separate law office by a team of paralegals, each responsible for submissions to a specific trust, such that no individual could readily provide a complete record of every trust submission. 72 Mr. Moody further testified that there was no communication regarding bankruptcy trust submissions with another plaintiffs firm retained in the case. 73 In response to See id. at 74. No (Tex. Harris County Dist. Ct. Nov. 22, 2006) (Trans. of Motions Hearing) See id. at See id. at

16 this lack of coordination, the presiding judge found that Mr. Moody had not made a good faith effort to comply with discovery. 74 The judge went on to say, I am frankly ashamed to be part of a process that allows [Mr. Moody] to collect a fee for things that somebody else does that he is not authorized to do, and then he gets a fee on the work [in the tort action]. 75 More recently, the Wall Street Journal reviewed trust claims and court cases of roughly 850,000 persons who filed claims against the Manville Trust since the late 1980s until as recently as The analysis found numerous apparent anomalies: More than 2,000 applicants to the Manville trust said they were exposed to asbestos working in industrial jobs before they were 12 years old. 77 Hundreds of others claimed to have the most-severe form of asbestos-related cancer in paperwork filed to Manville but said they had lesser cancers to other trusts or in court cases. 78 The study also identified a trust claim that was filed against the Manville Trust by an individual who did not exist. 79 As further evidence of trust claiming practices comes to light, it is my opinion that the above examples are not rare outliers but instead represent just the tip of the iceberg with respect to false or exaggerated claims made against asbestos bankruptcy trusts and tort defendants See id. at 41. See Dionne Searcey & Rob Barry, As Asbestos Claims Rise, So Do Worries About Fraud, Wall St. J., Mar. 11, 2013, at A1, A at A14. See id. 15

17 IV. THE TREND OF TRANSPARENCY FOR TRUST CLAIM FILINGS There is a movement afoot by courts and state legislatures to adopt trust transparency reforms that generally permit the discovery of asbestos bankruptcy trust claims information and in some jurisdictions compel plaintiffs to file trust claims before trial. 80 A California Court of Appeal in Volkswagen of America, Inc. v. Superior Court of San Francisco, 81 was one of the first appellate courts to embrace defendants efforts to discover trust claims filed by asbestos tort plaintiffs. 82 In Volkswagen, the defendant sought discovery of trust claims forms and supporting documents to obtain information about plaintiff s asbestos exposure history. 83 The plaintiff objected on various grounds. 84 The court rejected plaintiff s arguments, finding that most such documents normally are discoverable, 85 and that the information requested was plainly relevant, reasonably calculated to lead to admissible evidence, which includes admissions against interest, and, with the exception of any settlement correspondence or offer, not confidential See Victor E. Schwartz, A Letter to the Nation s Trial Judges: Asbestos Litigation, Major Progress Made Over the Past Decade and Hurdles You Can Vault in the Next, 36 Am. J. of Trial Advoc. 1, (2012) (discussing recent, major development of asbestos bankruptcy trusts and efforts to promote greater transparency between the trust and tort systems) Cal. App. 4th 1481 (1st Dist. Div ). Earlier decisions include Porter Hayden Co. v. Bullinger, 713 A.2d 962, 969 (Md. 1998); Skonberg v. Owens-Corning Fiberglas Corp., 576 N.E.2d 28, 34 (Ill. Ct. App. 1st Dist.), appeal denied, 580 N.E.2d 135 (Ill. 1991) See Volkswagen, 139 Cal. App. 4th at See id. at at at 1492,

18 In Seariver Maritime, Inc. v. Superior Court of San Francisco, 87 another California appellate division addressed whether claim documents submitted to bankruptcy trusts to obtain compensation for asbestos-related injuries are discoverable in litigation against another entity for the same injury. The court agree[d] with the Volkswagen court s analysis. 88 Following the Volkswagen and Seariver Maritime decisions, many courts have approved defendants requests to compel the production of trust claims submissions to discover information such as plaintiffs work histories and exposures to asbestos. State court decisions ordering the production of trust claims information include: Szostak v. A-B Elec. Supply Co., No. L (N.J. Super. Ct. Middlesex County Nov. 15, 2006) (Supplemental Recommendation to Compel Discovery and to Issue Commissions for Out-of-State Discovery) ( [T]he factual information contained in the [trust claims] is relevant to plaintiffs exposures to all types of asbestos-containing products of various manufacturers. Thus, defendant is entitled to the factual information of exposure contained in the [trust claims]. ); Brassfield v. Alcoa, Inc., No (Tex. Dist. Ct. Harris County Nov. 22, 2006) (Order at Motions Hearing) ( The Defendants are entitled to production of the applications from the trusts in order to introduce them into evidence at the trial of the case. ); Duncan v. A.W. Chesterton, No (Tex. Dist. Ct. Harris County Dec. 14, 2006) (Order) ( The information and documents related to plaintiff s bankruptcy claims are discoverable. ); Alvey v. 999 Quebec, Inc., No. 04CV200183, at 8, (Mo. Cir. Ct. Jackson County Mar. 19, 2007) (Order of the Discovery Commissioner Relating to Bankruptcy Claims) ( There simply is no perceived basis to preclude a defendant from obtaining unprivileged factual information discussing work history, asbestos exposure and injury data allegedly attributable to it. ); Miller ex rel. Miller v. PECO Energy Co., No , (Pa. Ct. Com. Pl. Phila. County Apr. 16, 2007) (Order) (requiring plaintiff to turn over records submitted to bankruptcy trusts and settlement releases); In re Eighth Judicial Dist. Asbestos Litig. (Drabczyk v. Amchem Prods., Inc.), No. 2005/1583, at 5 (N.Y. Sup. Ct. Erie County Jan. 18, 2008) (Decision and Order) WL (Cal. Ct. App. 1st Dist. Div. 4 July 28, 2006). at *1. 17

19 (bankruptcy trust proofs of claim must be disclosed. It seems likely that proof of claim forms submitted by plaintiffs in asbestos litigation to trusts established by bankrupt entities may contain information concerning product identification, the claimant s work history and exposure to asbestos, causation and apportionment of fault. Such information is not presumptively privileged and is clearly relevant for disclosure purposes Even if a proof of claim is employed to encourage settlement discussions, admissions of fact made in it are admissible and, therefore, discoverable. ); Cannella v. Abex, No /07 (N.Y. Sup. Ct. N.Y County Jan. 24, 2008) (Order at Motions Hearing, Trans. at 43) ( Defense Counsel: [W]e re specifically entitled to bankruptcy claims forms the Plaintiffs intend to file. The Court: I understand. I am going to direct that those all be turned over. ); In re Asbestos Litig., MDL No (Tex. Harris County Dist. Ct. Jan. 16, 2009) (letter ruling) ( I have consistently received into evidence BTFs [bankruptcy trust forms] as a statement of a party opponent as proof of exposure to the product of an alleged RTP [Responsible Third Party]. I will continue to find a written statement by a Plaintiff to a bankruptcy trust as evidence of exposure. ); Watts v. Alfa Laval, Inc., No (Mass. Super. Ct. Middlesex County Mar. 16, 2009) (Trans. at 394) ( [Plaintiff] is ordered to surrender [information] to the extent it relates to a claim, the existence of a claim against some other asbestos producer or trust or insurer that some other product caused his injury. ); Richards v. Armstrong Int l, Inc., No. BCD-WB-CV (Me. Bus. & Consumer Docket Sagadahoc County Jan. 10, 2011) (Order, Discovery Issues) ( Plaintiff shall produce for the Defendants copies of the forms filed on behalf of Plaintiff with any bankruptcy-related trust. ); Scapa Dryer Fabrics, Inc. v. Saville, 16 A.3d 159, 179 (Md. 2011) ( [Porter Hayden Co. v. Bullinger, 713 A.2d 962 (Md. 1998)] establishes that 524(g) Trust settlement agreements and payment amounts are discoverable. ); Cardella v. A.W. Chesterton, Inc., No. 09-L-434, at 4 (Ill. Cir. Ct. Madison County Apr. 18, 2011) (Order on Motion to Compel Disclosure of Claims Submitted to and Payments Received From Asbestos Bankruptcy Trusts) ( Plaintiff must answer whether a [bankruptcy trust] claim has been made, the name and address of the person or entity, the date the claim or suit was filed, the nature of the injury, and whether the claim or suit is presently pending. ); Reed v. Honeywell Int l, Inc., 2011 WL , *10 (Pa. Super. Ct. Dec. 6, 2011) ( We find the affidavits, claims forms, releases and other materials related to the 524(g) bankruptcy trusts at issue were indeed otherwise discoverable. ), appeal denied, 51 A.3d 839 (Pa. 2012) Earlier decisions include Casper v. Dow Chem. Co., No. 49D MI (Ind. Super. Ct. Marion County Oct. 5, 2005) (Ruling on Defendant Dow Chemical Company s Motion to Compel Production of the Proof of Claim Forms to Any/All Bankruptcy Trusts) 18

20 Federal court decisions ordering the production of trust claims information include: In re Asbestos Prods. Liab. Litig. (No. VI) (Lyman v. Union Carbide Corp.), MDL 875, 2009 WL , *1 (E.D. Pa. Sept. 18, 2009) (Rueter, Ch. M.J.) ( [P]laintiff shall produce to defendants all claim forms and other documentation submitted by plaintiffs or their attorneys to asbestos bankruptcy settlement trusts relating to their claims for injury from asbestos exposure (the Bankruptcy Trust Documents ) ); Shepherd v. Pneumo-Abex, LLC, MDL 875, 2010 WL , *1, *2 (E.D. Pa. Aug. 30, 2010) (Hey, M.J.) ( Recently, Chief Magistrate Judge Thomas Rueter, one of my colleagues in the asbestos MDL, found that such [claim forms] information was discoverable. See Lyman v. Union Carbide Corp., MDL 875, No (E.D. Pa. Sept. 18, 2009). I find the reasoning of Judge Rueter s Order and the cases upon which it relies sound and applicable to the matter before me... Based on Judge Rueter s Order and the cases cited therein, I agreed that a claim made to a bankruptcy trust is more analogous to a complaint than an offer of settlement or compromise. Thus, I find that Rule 408 does not bar production of certain information contained in the claim. ); In re Asbestos Prod. Liab. (No. IV), MDL 875 (E.D. Pa. Aug. 4, 2011) (Strawbridge, M.J.) (Relates to All Cases in Which the Cascino Vaughan Law Office is Listed as Plaintiffs Counsel) (overruling plaintiff s objection to interrogatories asking whether plaintiff [has] filed a claim and asking whether plaintiff [has] in the past received any compensation and ordering production of any all correspondence to any Bankrupt Entity and/or 524(g) Trust sent from you, or on your behalf ); Ferguson v. Lorillard Tobacco, Co., Inc., MDL 875, 2011 WL , *1 (E.D. Pa. Nov. 22, 2011) (Hey, M.J.) ( Plaintiff shall respond to the discovery seeking information ( Plaintiffs shall produce said Claim Forms. ); In re Personal Injury and Wrongful Death Asbestos Litig. (Poole v. AC&S, Inc.), No. 24X (Md. Cir. Ct. Baltimore City Jan. 6, 2005) (Order at Motions Hearing, Trans. at 20-22) ( Concerning all the facts and circumstances in evidence before the Court, in light of the case law that s been cited and the Maryland rules these [trust] documents do have some value to the defense the Defendant Garlock s motion to compel discovery is granted. ); Negrepont v. A.C.&S., Inc. (In re New York City Asbestos Litig.), No /01 (N.Y. Sup. Ct. New York City Dec. 11, 2003) (Order at Motions Hearing, Trans. at 3-4) ( [A]ny factual statements made in the proofs of claim about alleged asbestos exposure of the plaintiff to one of the bankrupt s products should be made available to the defendants who are still in the cases. ); In re Asbestos Personal Injury Litig. (Ky. Jefferson County Cir. Ct. Mar. 6, 2002) (ordering plaintiffs to answer Master File interrogatory requiring identification of all entities with which plaintiff has reached a settlement or filed a claim, or from which plaintiff has received compensation for alleged asbestos-related injuries, and Master File Request for Production of Documents calling for production of asbestos trust clam forms) (attached as Exhibit to Motion to Compel Discovery in In re Asbestos Personal Injury Litig. (Jones v. Cardinal Indus. Insulation Co., Inc.), No. 02-CI-06573(10) (Ky. Jefferson Cir. Ct. May 5, 2004)). 19