ASBESTOS LITIGATION UPDATE: OR Richard O. Faulk Partner, Hollingsworth LLP Washington, DC
Asbestos Litigation: The Neverending Story This case is prompted by the elephantine mass of asbestos cases,... This litigation defies customary judicial administration and calls for national legislation. Ortiz v. Fibreboard Corp., US Supreme Court (1998)(Souter, J.). Under the present regime, transactional costs will surely consume more and more of a relatively static amount of money to pay these claims... The elephantine mass of asbestos cases cries out for a legislative solution. Ortiz v. Fibreboard Corp., US Supreme Court (1998)(Rehnquist, J.). TO DATE, CONGRESS HAS DONE NOTHING!
The Elephantine Mass Impedes Your Progress...
Or Worse...
BUT THERE IS PROGRESS... Asbestos reform in the states (e.g., inactive dockets, etc.) Investigations and criminal prosecution of prominent plaintiffs counsel s alleged legislative henchmen. Independent inquiries by bankruptcy judges into alleged fraud by claimants counsel that results in artificially enhanced claim values. Persistent development of Bare Metal defenses that protect valve and pump manufacturers from claims arising from asbestos gaskets and packing inserted by customers.
THE ENDLESS SEARCH FOR A SOLVENT BYSTANDER. RICHARD DICKIE SCRUGGS BEFORE AFTER
SHELDON SILVER THE REAL SOLVENT BYSTANDER?
THE GARLOCK SCANDAL
The Shot Heard Round the World On January 9, 2014. U.S. Bankruptcy Court Judge George Hodges for the Western District of North Carolina issued an order finding that a startling pattern of misrepresentation and withholding of exposure evidence in asbestos lawsuits resulted in unfairly inflated recoveries. Garlock s evidence demonstrated that the last ten years of its participation in the tort system was infected by the manipulation of exposure evidence by plaintiffs and their lawyers. That tactic had a profound impact on a number of Garlock s trials and many of its settlements such that the amounts recovered were inflated. Judge Hodges rejected the exaggerated claim values and estimated the debtors liability at $125 million - over $1 billion less than claimed.
The Shot Heard Round the World Garlock then sued four prominent asbestos law firms for fraud and racketeering ( RICO ), claiming that the law firms sued on behalf of clients who had already made conflicting claims about their asbestos exposure against other companies. Garlock alleged that the firms concealed evidence about their clients exposure to asbestos products and concealed it in litigation against Garlock. In essence they double-dipped. Named in the lawsuits are: Belluck & Fox and Shein Law Center in Philadelphia; and Simon Greenstone and Waters & Kraus in Dallas. Motions to dismiss have been denied.
The Shot Heard Round the World Garlock then split away a group of claims reserved for future claimants who weren t yet represented by asbestos counsel and settled them with bankruptcy court approval. The focus of the entire case is now entirely on the RICO suit against the lawyers allegedly involved in the fraud, and Garlock is pressing hard for trial. Garlock s situation probably isn t unique but it wasn t uncovered until they filed backruptcy why didn t state and federal trial judges exercise equal diligence?
BARE METAL DEFENSE UPDATE Bare metal defenses are used by manufacturers that made bare metal products, such as pipes, pumps and valves. After sale, the bare metal product is altered by a third-party with an asbestos-containing product oftentimes thermal insulation, gaskets, or packing material. The manufacturers of the original bare metal product thus argue that they should not be responsible for any asbestos exposure caused by such alteration.
HOW SUCCESSFUL IS IT? Courts have split into three types of rulings: 1. Manufacturers have no duty to warn of the aftermarket asbestos-containing parts supplied by a third-party; 2. Manufacturers have a duty to warn if it was foreseeable that asbestos-containing material may be used with their products; and 3. Manufacturers generally do not have a duty, unless a. the use of the asbestos-containing materials was specified by the manufacturer, b. the aftermarket asbestos product was essential for the product to function properly, or c. it is deemed that by supplying the product it was inevitable that asbestos would be introduced into the environment.
HOW SUCCESSFUL IS IT? State courts that have accepted the bare metal defense include: California, Washington, Georgia, Maryland, and Massachusetts. States where there has been some success with the bare metal defense in the lower courts include: Texas, Florida, Oregon, Idaho, Utah, Arizona, Minnesota, Maine, Connecticut, New Jersey, Alabama, and Mississippi. In several states New York, Pennsylvania and Illinois there are inconsistent decisions on the bare metal defense.
State courts that have adopted the Bare Metal Defense Lower/trial court decisions that support the Bare Metal Defense Battleground Jurisdictions (Maritime law is not included in the map. When considering maritime law, courts have generally applied the O Neil approach to the Bare Metal Defense.)
PROTECTING YOURSELF Be prepared for the long haul notify and mobilize your insurance resources and your personal outside counsel. Insurance companies may settle you into bankruptcy by exhausting your reserves. Defense costs may not impact reserves. Fighting, rather than settling, may be the best tactic. Have a national perspective with a coordinating counsel or firm responsible to you for all major strategic decisions and critical cases. Do not abandon the controversy to counsel solely selected by your insurance companies. Employ experienced and independent appellate counsel and insist that your insurers cover their costs they are essential to a strategic view of the controversy, are may be reflective and creative than trial counsel.
QUESTIONS? Richard O. Faulk Hollingsworth LLP 1350 I Street Washington, DC 20005 (2020 898-5813 rfaulk@hollingsworthllp.com