THE NEED FOR FURTHER TRANSPARENCY BETWEEN THE

675

THE NEED FOR FURTHER TRANSPARENCY BETWEEN

THE TORT SYSTEM AND SECTION 524(G) ASBESTOS

TRUSTS, 2014 UPDATE – JUDICIAL AND LEGISLATIVE

DEVELOPMENTS AND OTHER CHANGES IN THE

LANDSCAPE SINCE 2008

William P. Shelley

Jacob C. Cohn

Joseph A. Arnold

***

INTRODUCTION

In 2008, we published The Need for Transparency Between

the Tort System and Section 524(g) Asbestos Trusts.

There, we

explored the disconnect between the tort system and 524(g)

asbestos trusts established to address the asbestos liabilities of

former asbestos tort defendants that have reorganized through

bankruptcy.

These trusts answer for the tort liabilities of the great

majority of the historically most-culpable large manufacturers that

exited the tort system through bankruptcy over the past several

William P. Shelley is the Managing Partner of Gordon & Rees’

Philadelphia, Pennsylvania office and serves as co-chair of the firm’s Insurance

Practice. Mr. Shelley’s practice primarily involves complex contract litigation,

including multi-party commercial insurance coverage litigation throughout the

United States focusing on asbestos, other toxic torts, advertising injury claims,

and related bankruptcy proceedings.

Jacob C. Cohn is a partner in Gordon & Rees’ Philadelphia office. Mr.

Cohn focuses his practice on appellate practice, class action defense,

policyholder bankruptcies, and insurance coverage.

***

Joseph Arnold is also a partner in Gordon & Rees’ Philadelphia office.

Mr. Arnold’s practice focuses on commercial litigation, with an emphasis on

commercial contract disputes and insurance coverage matters.

William P. Shelley, Jacob C. Cohn, & Joseph A. Arnold, The Need for

Transparency Between the Tort System and Section 524(g) Asbestos Trusts, 17

NORTON J. OF BANKR. L. & PRACTICE 257 (2008).

Id. at 260.

676 WIDENER LAW JOURNAL [Vol. 23

decades.

Collectively, these trusts pay billions of dollars each year

to claimants, many of whom are also suing solvent defendants in

the tort system.

As the "main players" have exited the tort system

through bankruptcy, asbestos plaintiffs have turned to targeting an

ever-growing number of "peripheral" defendants that have

comparatively lower degrees of culpability for the claimant's

injuries.

Our 2008 article detailed several reasons why disclosure

of trust claiming materials, as well as data regarding amounts

recovered by tort claimants from the 524(g) trusts, is crucial to

ensure that the remaining tort system defendants are not forced to

pay more than their fair share of a plaintiff's claim, and that

plaintiffs are not receiving a double recovery, to the detriment of

solvent defendants in the tort system and future claimants in the

trust system.

In many jurisdictions, the tort defendants need trust claiming

information in order to apportion fault to bankrupt entities to

reduce their own liabilities.

As we previously explained, tort

reform legislation has largely eliminated pure joint and several

liability in favor of systems that impose liability based upon the

comparative fault of each defendant.

Many of these systems

continue to permit the imposition of joint and several liabilities

See generally U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-11-819,

ASBESTOS INJURY COMPENSATION: THE ROLE AND ADMINISTRATION OF

ASBESTOS TRUSTS 2 (2011) [hereinafter GAO REPORT] (noting how these trusts

allow a company to transfer its liabilities to an asbestos personal injury trust,

which in turn compensates present and future claimants).

See id. at 16 (explaining that from 1988 through 2010, the 524(g)

asbestos trusts paid about $3.3 million claimants approximately $17.5 billion);

see also Marc C. Scarcella & Peter R. Kelso, Asbestos Bankruptcy Trusts: A

2013 Overview of Trust Assets, Compensation & Governance, 12:11 M

EALEY'S

ASBESTOS BANKR. REP. 1, 10 (June 2013) (noting that the trusts collectively

paid out approximately $1.25 billion in 2012).

Shelley, Cohn & Arnold, supra note 1, at 259, 265.

Id. at 259, 277-78.

Id. at 266-67, 288 n.53.

See generally id. at 270, 277 (discussing how the majority of the states

have comparative fault rules in an effort to remedy the inherent unfairness

imposed on defendants from joint and several liability).

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 677

solely with respect to economic damages,

while some states

continue to permit the imposition of overall joint and several

liability, but only with respect to defendants whose comparative

fault is shown to exceed some minimum benchmark, such as fifty

or sixty percent fault.

In addition, a number of jurisdictions, in

establishing the comparative fault of the tort system defendants,

permit bankrupt entities to be included on jury verdict sheets and

allow juries to apportion a percentage of fault to such bankrupt

entities.

Requiring disclosure of plaintiffs' trust claiming

materials provides both identification of bankrupt entities to which

a jury may appropriately apportion a degree of fault, as well as

potential evidence tending to indicate that the tort defendants'

degree of comparative fault is relatively less once the bankrupt

entities' shares of fault are taken into account.

Trust transparency also is needed to assure that tort defendants

receive appropriate judgment reduction credits.

Whether or not

states permit juries to assign comparative fault to bankrupt entities,

tort defendants generally are entitled to judgment reduction credits

or setoffs reflecting a plaintiff's recoveries from other sources,

including 524(g) trusts.

Given that a typical mesothelioma

claimant may recover hundreds of thousands of dollars from

524(g) trusts, disclosure of these trust recoveries to tort defendants

may significantly reduce a tort defendant's proportional share of

fault.

See generally id. at 270 (noting that Pennsylvania has retained joint and

several liability except for "intentional torts and environmental hazards").

Id. at 270.

See, e.g., Shelley, Cohn & Arnold, supra note 1, at 266-68 (discussing

how courts in Mississippi, Ohio, and Texas all allow juries to apportion fault on

a form so that no defendant is liable for more than its proportionate share of

liability).

See generally id. at 277 (noting that disclosure allows defendants to have

access to evidence of recoveries from asbestos trusts of the plaintiff's existence

and culpability).

Id. at 272.

Id. at 264-65, 272, 283.

See id. at 277 (discussing how disclosure can help peripheral defendants

establish their correct liability and protect themselves from abuses).

678 WIDENER LAW JOURNAL [Vol. 23

The disclosure of trust claiming information also serves as an

important check against fraudulent claiming practices both in the

tort system and among the trusts themselves.

In our prior article,

we highlighted the case of Kananian v. Lorillard Tobacco Co.,

where the plaintiff asserted claims in the tort system that were

inconsistent with, and in some cases contradicted, numerous prior

trust system claims (which were themselves inconsistent and

contradictory).

Contrary to claims from the plaintiffs' bar,

including their bankruptcy counsel, that such abuses are largely

unproven,

such conduct on a much broader scale was recently

exposed in a January 10, 2014 opinion in the bankruptcy of

Garlock Sealing Technologies, LLC (Garlock).

That court, in an

opinion estimating Garlock's current and future liability for

mesothelioma claims, concluded that "the last ten years of

[Garlock's] participation in the tort system was infected by the

manipulation of exposure evidence by plaintiffs and their

lawyers."

As discussed below, that court detailed numerous

instances of claimants and their counsel intentionally delaying their

trust claims to falsely minimize their true asbestos exposure

histories in the tort system.

These same claimants filed numerous

trust claims post-litigation, alleging exposure to the products of

bankrupt manufacturers, that, in their court cases, they testified

under oath did not exist.

As we explained in our 2008 article, these trusts, which are

heavily influenced by the same plaintiffs' lawyers whose clients are

Id. at 258.

Kananian v. Lorillard Tobacco Co., No. CV 442750, at 1 (Ohio Ct. C.P.

Cuyahoga Cnty. 2007).

Id. at 1-2 (noting the allegations of dishonesty and fraud).

Elihu Inselbuch et al., The Effrontery of the Asbestos Trust Transparency

Legislation Efforts, 28:2 M

EALEY'S LITIG. REP. ASBESTOS 7 (Feb. 20, 2013),

available at www.capdale.com/files/8122_ASB022013cm.pdf.

In re Garlock Sealing Techs., LLC, 504 B.R. 71, 84 (Bankr. W.D.N.C.

2014).

Id. at 82.

See generally id. at 84-85 (noting how the court identified a pattern of

non-disclosure by fifteen plaintiffs and five major firms, where plaintiffs

withheld evidence during disclosure and even denied exposure to the products).

Id. at 84.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 679

seeking payments from both the trusts and tort defendants, are

purposely structured in a manner intended to shield trust

submissions from scrutiny.

In addition, the trusts actively oppose

discovery efforts to obtain claiming information from them.

Likewise, the plaintiffs and their counsel in the tort system

continue to fight disclosure of their own trust claiming

information.

The purpose of this article is to update the evolving landscape

of the transparency debate in the six years since our original article

was published. The need for disclosure requirements and their

vigilant enforcement has by no means diminished.

Notwithstanding efforts by the plaintiffs' bar to portray the abuses

unmasked in Kananian as an isolated situation, instances of trust

claiming abuses and efforts to hide trust claiming histories from

tort system defendants continue to be exposed. As the Garlock

bankruptcy court only recently confirmed, claimants continue to

delay their trust filings in an effort to deny tort defendants the

benefit of allocating fault to bankrupt entities and obtaining

judgment reduction credits.

Claimants continue to make trust

submissions based upon alleged exposure histories that are at stark

variance from the tales they tell in the tort system. Moreover, the

trusts themselves, dominated by many of the same law firms who

have been caught "hiding the ball" in the tort system, continue to

do nothing to coordinate among themselves to ferret out potentially

fraudulent claims such as those exemplified by Kananian and

Garlock. Equally troubling, future claimant representatives, whose

duty it is to protect future claimants from the improper dissipation

of trust assets by current claimants, have remained mute on the

bankruptcy transparency front.

There has been substantial activity on bankruptcy transparency

since our article was published in 2008. In 2012 and 2013, two

states, Ohio and Oklahoma, enacted legislation mandating full

disclosure of trust claiming information by claimants, requiring

Shelley, Cohn & Arnold, supra note 1, at 262.

Id.

In re Garlock Sealing Techs., LLC, 504 B.R. at 84.

680 WIDENER LAW JOURNAL [Vol. 23

claimants to file all known trust claims in advance of any trial

against solvent defendants, and declaring the presumptive

admissibility at trial of trust submissions.

Similar bills have been

introduced in several other states.

In other jurisdictions, case

management orders now mandate disclosure by plaintiffs of trust

claiming information.

On the federal level, the Furthering

Asbestos Claim Transparency (FACT) Act (FACT Act), which

would amend section 524(g) to require regular public reporting by

524(g) trusts of trust payments and claimant exposure histories,

has been passed by the United States House of Representatives

(although further progress in this Congress is doubtful, given the

current administration's stated opposition to the bill).

In addition, in 2011 the Delaware bankruptcy court rebuffed

efforts by several 524(g) trusts to shield their claims data and limit

subpoena power by invoking "confidentiality" provisions built into

trust distribution procedures (TDP) by the asbestos creditors

committees to enjoin enforcement of such subpoenas.

In our

2008 article, we argued that enforcement of such provisions

exceeded the post-confirmation jurisdiction of bankruptcy courts.

In two related opinions, that court agreed, and held that whatever

those TDP provisions might purport to provide, it was beyond the

OHIO REV. CODE ANN. §§ 2307.951-54 (2013); OKLA. STAT. tit. 76, §§

81-89 (2013).

Rachel Reynolds, Following in Ohio's Footsteps: The Expansion of

Asbestos Transparency Legislation, S

EDGWICK L. (May 2013), http://www.

sdma.com/following-in-ohios-footsteps-the-expansion-of-asbestos-transparency-

legislation-05-13-2013/.

Shelley, Cohn & Arnold, supra note 1, at 267, 277, 279 (noting how

courts, including those in Ohio and California, are now requiring plaintiffs to

disclose information prior to commencing discovery).

OFF. OF MGMT. & BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT,

OFFICE OF MANAGEMENT AND BUDGET, STATEMENT OF ADMINISTRATIVE

POLICY: H.R. 982 – FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT)

ACT OF 2013 (Nov. 13, 2013) [hereinafter Statement of Admin. Policy]; H.R.

982, 113th Cong. (2013).

Id.

In re ACandS, Inc. v. Hartford Accident Indem. Co., No. 10-53721,

2011 WL 3471243, at *1-2, *4-5 (Bankr. D. Del. 2011).

Shelley, Cohn & Arnold, supra note 1, at 279-80.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 681

authority of the court to interfere with valid discovery subpoenas to

the trusts issued from state and federal courts.

II.

EXAMPLES OF CLAIMANT EFFORTS TO MANIPULATE THE

SYSTEM CONTINUE TO MOUNT

In our 2008 article, we highlighted the Kananian case in

Ohio.

There, the plaintiff's estate, represented by two prominent

plaintiffs' asbestos firms, recovered hundreds of thousands of

dollars from numerous trusts by making wildly inconsistent, and

often entirely untrue, claims regarding Mr. Kananian's work

history.

They then went to great lengths to conceal this claiming

history from Lorillard, which Kananian's estate had sued in the tort

system claiming that Mr. Kananian contracted mesothelioma solely

from smoking cigarettes tipped with asbestos-containing filters.

Post-Kananian examples of gaming the system continue to

emerge, further highlighting the need for strong trust disclosure

requirements and their vigilant enforcement.

Several themes

emerge from these latest examples.

First, different plaintiffs' law firms contract with each other to

divide responsibility for submitting trust claims and conducting

civil litigation.

Trial counsel is not informed by trust counsel

about claims that have been submitted on the plaintiff's behalf,

and trial counsel pleads ignorance when the plaintiff's failure to

disclose his trust submissions is unmasked.

Id. at 263, 276 (discussing how in both the Federal Mogul bankruptcy

case and the Celotex Asbestos settlement trust, the court held that it was beyond

the scope of the bankruptcy jurisdiction to interfere in issues concerning state

court discovery and issuance of subpoenas).

Id. at 263.

Id. at 264.

Id. at 263.

See, e.g., id. at 273 (discussing the similar case of Volkswagen of

America, Inc. v. Superior Court).

See Shelley, Cohn & Arnold, supra note 1, at 261, 264.

See generally id. at 264 (noting how trust submissions were made by

trusts to the estate).

See id. at 264 (showing that attorneys often knowingly deceive the court

and, in at least one example, admitted to submitting claims that are "rife with

682 WIDENER LAW JOURNAL [Vol. 23

Second, when the suppression of the existence of trust claims

is exposed, plaintiffs and their counsel continue to downplay the

importance of trust submissions, arguing, inter alia, that deferred

and/or unsigned claims are not evidence of exposure to the

bankrupt entities' products.

Third, plaintiffs are purposely delaying submission of trust

claims until after the conclusion of their tort claims, suggesting a

calculated strategy by the plaintiffs' bar to withhold information

about a plaintiff's true exposure history during litigation to unfairly

shift the blame to less-culpable, solvent tort system defendants.

A. The Garlock Bankruptcy Court Finds that Suppression and

Manipulation of Exposure Evidence by Leading Plaintiffs' Firms

Improperly "Infected" and "Inflated" Garlock's Tort Liabilities

Recently, Judge George R. Hodges, the bankruptcy judge

overseeing the Garlock bankruptcy, issued an opinion concluding

that Garlock's asbestos liabilities since 2000 had been grossly

inflated as a result of plaintiffs' manipulation of exposure evidence

in the tort system.

Garlock had proposed a plan of reorganization

that would provide $270 million to fund the resolution of current

and future asbestos claims.

To evaluate the feasibility of this plan

or any competing plans, the court undertook to estimate Garlock's

liabilities to current and future mesothelioma claimants.

outright fabrications."); see also Kananian v. Lorillard Tobacco Co., No. CV

442750, at 1, 9-10 (Ohio Ct. C.P. Cuyahoga Cnty. 2007) (showing how the

attorney knowingly attempted to deceive the court by pleading ignorance

regarding the submission of claim forms to the courts, but evidence shows he

did so "while knowing that his firm and Early Ludwick had received money on

behalf of Mr. Kanian from all of the trusts").

See generally Shelley, Cohn & Arnold, supra note 1, at 258, 262, 282

(discussing how plaintiffs and their attorneys try to prevent defendants from

obtaining information from trust submissions).

Id. at 282.

In re Garlock Sealing Techs., LLC, 504 B.R. 71, 86-87 (Bankr.

W.D.N.C. 2014).

Id. at 74 (noting Garlock's $270 million to fund the proposed Plan of

Reorganization).

Id. at 73 (noting Garlock's estimated liability as $125 million).

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 683

Garlock was a manufacturer of gaskets containing relatively

less dangerous chrysotile asbestos, which itself was encapsulated

in other materials.

The gaskets themselves were installed within

closed piping systems that were "generally wrapped with asbestos

thermal insulation produced by other manufacturers."

Garlock's

gaskets released asbestos only when they were disturbed during

sporadic maintenance activities that first required "the removal of

the thermal insulation products which caused a 'snowstorm' of

asbestos dust."

"It is clear," Judge Hodges found, "that Garlock's

products resulted in a relatively low exposure to asbestos to a

limited population and that its legal responsibility for causing

mesothelioma is relatively de minimus."

Garlock previously had been successful in minimizing

asbestos liabilities.

But, Garlock's experience changed

profoundly beginning in the early 2000s, when the great bulk of

asbestos insulation manufacturers exited the tort system for

bankruptcy, and Garlock became a "target" defendant.

Due to

"[c]ertain plaintiffs' law firms" causing evidence of a plaintiff's

exposure to other asbestos products to "disappear," Garlock's

asbestos liabilities increased drastically.

The "disappearance" of

evidence of exposure to thermal insulation products produced by

now-bankrupt entities, the court found, "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 (and other viable defendants)."

The court's observations were drawn directly from its review

of fifteen of Garlock's prior settled cases:

Id.

Id..

Id.

In re Garlock Sealing Techs., LLC, 504 B.R. at 73.

See id. at 73, 75 (discussing how in the past Garlock settled cases with

"relative success" and even after filing bankruptcy, its liability should remain

small).

See id. at 82.

Id. at 71, 73.

Id. at 84.

684 WIDENER LAW JOURNAL [Vol. 23

In 15 settled cases, the court permitted Garlock to have

full discovery. Garlock demonstrated that exposure

evidence was withheld in each and every one of them.

These were cases that Garlock had settled for large sums.

The discovery in this proceeding showed what had been

withheld in the tort cases – on average plaintiffs disclosed

only about 2 exposures to bankruptcy companies'

products, but after settling with Garlock made claims

against about 19 such companies' Trusts.

To illustrate the problem, the court gave several striking

examples. In a California case in which Garlock suffered a $9

million verdict, the plaintiff, a former navy machinist, claimed that

100% of his work was on gaskets and denied any exposure to

surrounding asbestos insulation.

"[T]he plaintiff's lawyer fought

to keep Pittsburgh Corning," the manufacturer of Unibestos, off the

verdict form and represented to the jury that there was no

Unibestos present on the ship.

After the verdict, however, the

plaintiff's lawyer filed fourteen trust claims, including several

against insulation manufacturers.

"And most important, the same

lawyers who represented to the jury that that there was no

Unibestos insulation exposure had, seven months earlier, filed a

ballot in the Pittsburgh Corning bankruptcy that certified 'under

penalty of perjury' that the plaintiff had been exposed to Unibestos

insulation."

In Philadelphia, Garlock settled a shipyard case for

$250,000.

In answers to written interrogatories, the plaintiff

claimed to have "no personal knowledge" of exposure to asbestos

from the products of any bankruptcy entities.

Yet, the plaintiff's

lawyers previously had filed a sworn statement in the Owens

Corning bankruptcy case claiming that the plaintiff "frequently,

Id. (emphasis in original).

In re Garlock Sealing Techs., LLC, 504 B.R. at 84.

Id.

Id. (emphasis in original).

Id.

Id. at 84-85.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 685

regularly and proximately breathed asbestos dust emitted from

Owens Corning Fiberglas's Kaylo asbestos-containing pipe

covering."

Of twenty undisclosed trust claims made by this

plaintiff, fourteen contradicted the plaintiff's denials in the tort

discovery.

Garlock paid $450,000 to a former Navy electronics

technician who denied that he ever saw anyone installing or

removing pipe insulation on his ship.

But, after settling, the

plaintiff filed eleven trust claims.

In seven, the plaintiff claimed

not only "that he personally removed and replaced

insulation . . . [but he also] identified, by name, the insulation

products to which he was exposed."

Garlock paid $250,000 to settle a New York case where the

plaintiff denied any exposure to insulation products.

Yet, the

plaintiff later filed twenty-three trust claims—eight within twenty-

four hours of the settlement.

Garlock suffered a $1.35 million verdict in Texas in which the

plaintiff claimed that his only asbestos exposure was to Garlock

gasket material.

Although the plaintiff specifically denied

knowledge of the name "Babcock & Wilcox," his lawyers filed a

claim against Babcock & Wilcox's trust the day before the plaintiff

gave this testimony.

Moreover, while the plaintiff's counsel told

the jury that there was no evidence that his injury was caused by

exposure to Owens Corning insulation, after the verdict, his

lawyers filed a claim with the Owens Corning Trust.

Both trust

claims represented that the plaintiff had both regularly handled raw

In re Garlock Sealing Techs., LLC, 504 B.R. at 85.

Id.

In re Garlock Sealing Techs., LLC, 504 B.R. at 85.

Id.

686 WIDENER LAW JOURNAL [Vol. 23

asbestos fibers and had fabricated asbestos products from raw

asbestos.

In addition to the fifteen settled claims, Garlock identified 205

other cases where the claimant's discovery responses conflicted

with the claimant's submissions to trusts or participation in

balloting in bankruptcy cases where no trust had yet been

established.

And, of 161 cases where Garlock paid judgments or

settlement in excess of $250,000, "[t]he limited discovery allowed

by the court demonstrated that almost half of those cases involved

misrepresentation of exposure evidence.

It appears certain that

more extensive discovery would show more extensive abuse."

The court contrasted these results with situations where

Garlock was able to obtain evidence of trust claims and use that

evidence to defend itself at trial.

"In three such trials, Garlock

won defense verdicts, and in a fourth it was assigned only a 2%

liability share."

Garlock's Asbestos Claimants' Committees (ACC) and Future

Claims Representative (FCR) had argued, based upon Garlock's

experience trying and settling cases in the tort system after 2000,

that Garlock's liabilities should be estimated at $1.0-1.3 billion.

The court rejected their experts' estimates, however,

finding that the last ten years of [Garlock's] participation

in the tort system was infected by the manipulation of

exposure evidence by plaintiffs and their lawyers. That

tactic, though not uniform, had a profound impact on a

number of Garlock's trials and many of its settlements

such that the amounts recovered were inflated.

Instead, the court estimated Garlock's liability to current and future

mesothelioma claimants at $125 million, the amount estimated by

Id.

Id. at 85-86.

In re Garlock Sealing Techs., LLC, 504 B.R. at 86 (emphasis omitted).

Id.

Id. at 74.

Id. at 82.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 687

Garlock's experts.

Nearly simultaneously with the release of

Judge Hodges' estimation ruling, Garlock filed four adversary

complaints against several leading plaintiffs' law firms and

attorneys, including Waters & Kraus LLP, Belluck & Fox LLP,

and the Shein Law Center Ltd., alleging conspiracy, fraud, and

violation of the Racketeer Influenced and Corrupt Organizations

Act (RICO).

B. Additional Examples of Claim Manipulation Continue to

Accumulate in the Tort System

The compelling evidence uncovered by Garlock with the aid

of only limited discovery issued by its bankruptcy court is by no

means unique. While uncovering such abuses is much more

difficult without access to the kinds of discovery allowed to

Garlock by Judge Hodges, examples of claiming abuses continue

to be exposed in state after state.

In one Maryland case, the plaintiff explained that he ignored

the court's order compelling disclosure of trust claims to the

defendants because the judge had opened Pandora's Box.

When

finally produced shortly before trial, the trust claiming documents

revealed "substantial and inexplicable discrepancies between the

positions" taken in court and before the trusts.

Despite explicit

discovery requests, the plaintiff had failed to disclose nine trust

claims.

In addition, the exposure period alleged in the litigation

was materially different from the exposure period alleged in the

Id. at 73.

See Daniel Fisher, Embattled Gasket Maker Sues Asbestos Lawyers for

Fraud, FORBES, (Jan. 10, 2014, 10:47 AM), http://www.forbes.com/sites/daniel

fisher/2014/01/10/embattled-gasket-maker-sues-asbestos-lawyers-for-fraud/.

Warfield v. AC&S, Inc., No. 24X06000460, Consolidated Case No.

24X09000163 (Md. Cir. Ct. Balt. City Jan. 11, 2011); see also Mark Behrens,

Esq., Testimony Before the Task Force on Asbestos Litigation and Bankruptcy

Trusts of the American Bar Association's Tort Trial and Insurance Practice

Section, at 8-9 (June 6, 2013), available at http://www.americanbar.org/groups/

tort_trial_insurance_practice/asbestos_task_force.html.

Behrens, supra note 82, at 9.

Id.

688 WIDENER LAW JOURNAL [Vol. 23

trust claims.

In the tort system, the plaintiff claimed under oath

that he was only exposed to asbestos between 1965 and the mid-

1970s,

thereby focusing the alleged liability on the solvent

defendants in the case while conveniently avoiding application of

Maryland's statutory damages cap that would apply to later

exposures.

In the trust system, however, the plaintiff claimed

exposure from 1947 to 1991,

exposures that were different in

scope and would have triggered the statutory damages cap.

It is

also noteworthy that eight of the improperly-withheld claim forms

were submitted to trusts before the plaintiff gave contradictory

exposure testimony in the civil action.

In another Maryland case, the plaintiffs filed twenty-three

asbestos trust claims in the weeks and months after losing a trial

during which the plaintiff alleged exposure to just two types of

asbestos-containing products manufactured by only three solvent

companies.

CertainTeed Corporation, which had obtained the

defense verdict, learned of the plaintiff's previously undisclosed

exposure history only after the Court of Special Appeals of

Maryland reversed the verdict and ordered a retrial,

which led

CertainTeed to seek discovery of the post-trial trust submissions.

In one of those trust submissions, the plaintiff signed a sworn

statement alleging exposure to National Gypsum asbestos-

containing products, despite having expressly denied any such

exposure during litigation.

Plaintiff's counsel, the Law Offices of

Peter G. Angelos, responded to CertainTeed's subsequent motion

for sanctions by contending that Gonzalez was unlikely to obtain

recovery from twenty-two of the twenty-three bankruptcy trusts

Id.

Behrens, supra note 82, at 9.

Id.

Defendant CertainTeed Corporation's Motion for Sanctions and Request

for Hearing, Luther Beverage v. ACandS, Inc., No. 24X08000439, at 2 (Md.

Cir. Ct. Balt. City Aug. 26, 2013).

Id. at 14-15.

See id. at 15.

Id. at 2.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 689

and the information submitted to the trusts was consistent with the

evidence presented during discovery.

Before the hearing on the

motion for sanctions, the case resolved.

In a third Maryland case, Union Carbide made similar

allegations against the Angelos firm before Maryland's highest

court.

In discovery responses served in August 2008, the plaintiff

denied making trust claims related to his mesothelioma.

October 2010, just ten days before trial, the plaintiff served

amended discovery responses identifying twenty-two trust claims,

including at least thirteen that were filed before the August 2008

discovery responses.

The plaintiff's survivors ended up winning a

judgment against Union Carbide in excess of $2.2 million.

100

November 2013, Union Carbide sought review from the Court of

Appeals of Maryland to remedy what Union Carbide characterized

as "a pattern of delay, deception and disobedience" that in effect

resulted in a trial by ambush.

101

In New Jersey, the asbestos judge recently admonished

plaintiffs' counsel during a pre-trial conference for concealing

"deferred" and actual trust claims.

102

Throughout discovery, the

plaintiffs denied making any trust claims.

103

However, counsel for

Georgia-Pacific learned through separate discovery from the

See CertainTeed Withdraws Sanction Motion Challenging Trust

Submission Testimony, 28:20 M

EALEY'S LITIGATION REPORT: ASBESTOS 23

(Nov. 20, 2013).

Id.

See Memorandum of Amici Curiae Chamber of Commerce of the United

States of America and American Tort Reform Association in Support of Petition

for Review, Union Carbide Corp. v. Pittman, 83 A.3d 780, 2013 WL 6143256,

at 2 (Md. 2014).

Id.

100

Id.

101

Union Carbide Seeks Review Addressing "Massive" Discovery

Violations, 28:21 M

EALEY’S LITIG. REP: ASBESTOS 1 (Dec. 4, 2013). On January

27, 2014, the Maryland Court of Appeals advised that it would not hear the

appeal. Union Carbide Corp. v. Pittman, 83 A.3d 780 (Md. 2014).

102

Pre-Trial Conference Transcript, Barnes & Crisafi v. Georgia Pacific,

MID-L-5018-08, MID-L-316-09, at 128-29 (N.J. Super. Ct. Middlesex Cnty.

June 12, 2012) [hereinafter Pre-Trial Conference Transcript].

103

See id.

690 WIDENER LAW JOURNAL [Vol. 23

Johns-Manville Trust that one of the plaintiffs indeed had

submitted a deferred claim.

104

When confronted by the court, the

plaintiff argued that he was not obligated to disclose deferred

claims because they were filed to preserve the statute of limitations

but were not actual demands for trust compensation.

105

The court,

unsatisfied with plaintiff's excuse,

106

ordered for the disclosure of

all deferred claims.

107

The plaintiff's attorney was unable to answer

because a different law firm, Motley Rice, handled the trust claims

pursuant to a contract between the two firms.

108

The court issued a

strong admonition that counsel could not be "blind, deaf and

dumb," and that he had an independent obligation to provide

accurate answers to discovery.

109

Remarkably, the plaintiff's

counsel contended that the trust submissions were a mistake

because he asked Motley Rice to refrain from filing trust claims

where a case was still in litigation.

110

The court continued the trial

to allow the defendant to conduct a full investigation into these

other potential exposures.

111

In Delaware, the Superior Court voiced its consternation over

the failure to disclose trust submissions in the case of Montgomery

v. American Steel & Wire Corp.,

112

calling the plaintiffs' behavior

104

Id. at 126.

105

Id. at 127-28.

106

The court stated: “I don’t see the difference between a claim and a

deferral claim, in terms of what I have ordered to be produced. At the very least,

it means that a defendant may want to do additional discovery, at the very least.”

Id. at 133.

107

Id.

108

Pre-Trial Conference Transcript, supra note 102, at 128-29.

109

Id. at 129-30. Counsel subsequently admitted that one client had made a

claim to the Johns-Manville Trust and deferred claims to three other trusts,

while his other client made deferred claims against seven trusts. Id. at 126-30.

110

Id. at 144-45. In response, the Court stated that it was powerless to

prevent delayed trust claims but noted that the defendants would succeed to

plaintiff's rights against those trusts. Id. at 148-49.

111

Id. at 152.

112

Pretrial Hearing Transcript at 3, In re Asbestos Litig.: Montgomery v.

Am. Steel & Wire Corp., No. 09C-11-217 ASB (Del. Super. Ct. New Castle

Cnty. Nov. 7, 2011); see also Furthering Asbestos Claim Transparency (FACT)

Act of 2013: Hearing on H.R. 982 Before the Subcomm. on Regulatory Reform,

Commercial and Antitrust Law of the Comm. on the Judiciary, 113

Cong. 39,

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 691

dishonest.

113

In Montgomery, the plaintiffs alleged that the

decedent suffered household asbestos exposure from her husband,

whose clothing was covered with asbestos dust from his work as

an electrician.

114

The plaintiffs denied various alternative

exposures throughout discovery and represented to the court just a

week before trial that the plaintiffs had not made any trust

submissions or recovered any trust settlements.

115

But, on the

Saturday before a Monday trial, Foster Wheeler, the sole

remaining defendant, learned that the plaintiffs had settled with

two trusts.

116

By Sunday, the plaintiffs' Delaware trial counsel

disclosed twenty additional trust claims,

117

blaming the prior

nondisclosure on the failure to communicate with the plaintiffs'

trust-claiming counsel, the Texas firm of Brent Coon &

Associates.

118

Superior Court Judge Peggy Ableman responded:

"This is really seriously egregiously bad behavior. This is

misrepresenting. This is trying to defraud. I don't like that in this

litigation. And it happens a lot. And I'm trying to put an end to it.

This is an example of the games that are being played."

119

At oral

argument following formal motion practice, Judge John Parkins

gave Foster Wheeler two choices: (1) take additional discovery to

get to the root cause of the potential fraud in order to further

support its motion to dismiss, with the plaintiffs to pay reasonable

at 52 (2013) (statement of Hon. Peggy L. Albeman) [hereinafter Albeman

Statement].

113

Albeman Statement, supra note 112, at 52.

114

Id. at 48.

115

See generally id. (noting that the plaintiffs identified no other contract

with asbestos-containing products).

116

Id. at 50.

117

Id.

118

Pretrial Hearing Transcript at 10, 13, In re Asbestos Litig.: Montgomery

v. Am. Steel & Wire Corp., No. 09C-11-217 ASB (Del. Super. Ct. New Castle

Cnty. Nov. 7, 2011). Counsel also argued that the plaintiffs did not sign any

affidavits in connection with the trust submissions, suggesting his clients were

not at fault for not knowing the exposure history that their trust lawyers were

submitting to trusts around the country. Id. at 16.

119

Id. at 7-8. Judge Ableman recently testified about this case before a

House of Representatives subcommittee. See Albeman Statement, supra note

112, at 45.

692 WIDENER LAW JOURNAL [Vol. 23

costs, or (2) take additional discovery necessary to prove the

liability of the bankrupt defendants, also to be paid for by the

defendants.

120

The case was dismissed, however, before any

further proceedings occurred.

In Louisiana, an asbestos plaintiff provided deposition

testimony that directly contradicted information provided to

sixteen asbestos bankruptcy trusts about his father's exposure

history.

121

Specifically, the decedent's son testified that his father

was a smoker, that he had no knowledge of his father's asbestos

exposure history, and that his attorneys had never spoken with his

father.

122

In an Oklahoma asbestos bodily injury case, the plaintiff

neglected to identify nineteen bankruptcy trust claims until the

court compelled disclosure on the eve of trial.

123

Strikingly, the

trust claims were supported by eleven co-worker affidavits, many

of which were signed prior to the plaintiff's verified discovery

responses.

124

The trust claims and affidavits revealed allegations of

exposure to almost thirty-five additional asbestos products that

were not disclosed during discovery.

125

One of the critical co-

worker witnesses who had signed affidavits for the plaintiff as

early as 2005 had since died and was unavailable to be re-deposed

(he provided deposition testimony in the civil case that was

120

Motions Hearing Transcript at 43-45, In re Asbestos Litig.:

Montgomery v. Am. Steel & Wire Corp., No. 09C-11-217 ASB (Del. Super. Ct.

New Castle Cnty. Jan. 30, 2012). Judge Parkins later clarified that Foster

Wheeler could take depositions of all attorneys associated with the plaintiffs'

cases, and plaintiff must waive the attorney-client privilege to facilitate that

discovery or face ultimate sanction of dismissal. Id. at 48.

121

See Furthering Asbestos Claim Transparency (FACT) Act of 2012:

Hearing on H.R. 4369 Before the Subcomm. on Courts, Commercial and Adm.

Law of the H. Comm. on the Judiciary, 112th Cong. 120, at 16 (2012) (written

Statement of Leigh Ann Schell) [hereinafter Schell Statement]. Ms. Schell was

referring to the January 24, 2011 deposition of David Thomas Robeson in

Robeson v. Amatek, Inc. Id.

122

Id.

123

See id. at 17 (discussing Bacon v. Ametek, Inc.).

124

Id.

125

See id.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 693

inconsistent with the trust affidavit).

126

The plaintiff defended a

motion in limine to preclude the witness' testimony by arguing that

he could be questioned at trial, despite the fact the witness had

been dead for fifteen months.

127

The sole remaining defendant also

discovered that the plaintiff had recovered $185,000 from five of

those trusts but deferred the remaining fourteen trust claims.

128

The

defendant's subsequent motion to delay trial argued that the

plaintiff, who stood to recover a minimum of $313,000 from her

deferred claims, intentionally deferred those claims to avoid

judgment reduction in the tort system.

129

The case settled prior to

resolution of the motions.

C. The Lack of Internal Trust Policing

The lack of internal trust policing also appears to be persistent.

Both the Government Accountability Office (GAO) and RAND

Corporation issued reports analyzing the asbestos trusts subsequent

to our initial article.

130

The 2010 RAND Study concluded that the

publicly available information from the trusts is "limited in many

important ways," with "perhaps the most-significant limitation of

the publicly available data [being] the inability to link payments

across trusts to the same individual."

131

The GAO interviewed

eleven trusts during its investigation.

132

None of these trusts, which

collectively had paid nearly $17.5 billion to claimants through

2010, had identified a single instance of fraud in any of their

audits.

133

According to Professor S. Todd Brown, "given the

history of asbestos litigation and global compensation systems

126

Id.

127

Shell Statement, supra note 121.

128

Id.

129

Id.

130

GAO REPORT, supra note 3; LLOYD DIXON ET AL., ASBESTOS

BANKRUPTCY TRUSTS: AN OVERVIEW OF TRUST STRUCTURE AND ACTIVITY

WITH

DETAILED REPORTS ON THE LARGEST TRUSTS AND TORT COMPENSATION

(2010), available at http://www.rand.org/content/dam/rand/pubs/technical_

reports/2010/RAND_TR872.pdf.

131

DIXON, ET AL., supra note 130, at 45.

132

GAO REPORT, supra note 3, at 4.

133

Id. at 16, 23.

694 WIDENER LAW JOURNAL [Vol. 23

generally, the trusts' representations to the GAO that they have

uncovered no fraud are more suggestive of weaknesses in their

internal controls than evidence that the trust system has managed

to avoid fraud and abuse."

134

Indeed, it is a truism that victim

compensation systems with lax claiming standards attract

fraudulent claims, even when those funds are not effectively

dominated by the plaintiffs' bar, as is the case with the asbestos

trusts.

135

Recent examples include the 9/11 Victim's Compensation

Fund and BP's Gulf oil-spill fund, where instances of fraudulent

claiming were repeatedly detected and prosecuted.

136

As Professor

Brown has observed, in his testimony in support of the FACT Act,

"either asbestos trusts are somehow magically different from every

other grid and matrix compensation scheme in history, or the

audits are not what they appear to be," that is such audits have

insufficient internal controls to effectively ferret out instances of

fraudulent claiming.

137

In 2013, the Wall Street Journal reported on a review of

850,000 claims made to the Johns-Manville Trust, the original

asbestos bankruptcy trust, from the late 1980s to 2012.

138

The

review uncovered a significant number of apparent anomalies,

including over 2,000 applicants who claimed vocational exposure

to asbestos from working in industrial jobs before they were twelve

134

S. Todd Brown, How Long is Forever This Time? The Broken Promise

of Bankruptcy Trusts, 61 BUFF. L. REV. 537, 571 (2013). While Professor Brown

suggests that "some trusts have become more vigilant in testing the intrinsic

merits" of trust claims, id. at 557, he nonetheless concludes that "the audit

provisions at many bankruptcy trusts appear to be more of an afterthought than a

vital component of preserving trust assets." Id.

135

See generally Karen Marshall, Spring Ushers in Increased Momentum

for Asbestos Trust Legislation, A

BESTOS.COM, http://www.asbestos.com/blog/

2013/05/10/momentum-for-asbestos-trust-legislation/ (last visited Mar. 31,

2014) (discussing the possibility of lax trust procedures leading to fraudulent

compensation).

136

Brown, supra note 134, at 569.

137

See Furthering Asbestos Claim Transparency (FACT) Act of 2012:

Hearing on H.R. 4369 Before the Subcomm. on Courts, Commercial and Adm.

Law of the H. Comm. on the Judiciary, 112th Cong. 120, at 24-25 (2012)

(testimony of Professor S. Todd Brown).

138

Dionne Searcey & Rob Barry, As Asbestos Claims Rise, So Do Worries

About Fraud, W

ALL ST. J., Mar. 11, 2013, at A1, A14.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 695

years old.

139

Hundreds more claimants asserted claims for lesser

cancers to other trusts or in court cases, but told the Johns-

Manville Trust that they had mesothelioma.

140

III.

LEGISLATIVE AND JUDICIAL RECOGNITION OF THE NEED FOR

TRUST CLAIMING TRANSPARENCY

Efforts to break down the information barrier between the tort

and trust systems have become more widespread. There have been

some significant advances through state courts and state

legislatures to compel disclosure of trust-claiming information and

to discourage tactics such as deferring trust claim submissions

while the claimant pursues solvent defendants in the tort system.

141

In the courts, formerly "peripheral" defendants have led the charge

in demanding access to claimants' trust filings.

142

These efforts

have resulted in a number of court rulings compelling plaintiffs to

produce trust claims information, as well as a number of

amendments to case management orders calling for the mandatory

disclosure of such information.

143

But, the tort system defendants are not alone. Companies such

as Garlock, that are operating under bankruptcy protection, are

seeking discovery from existing trusts to use in bankruptcy

139

Id. at A1.

140

Id. at A14.

141

See infra Part III.A.1. (discussing the recently enacted trust

transparency legislation in Ohio and Oklahoma).

142

See generally Lois Kapila, Asbestos Defendants Want Automatic Access

to Info in Bankruptcy Trusts, LEGAL NEWSLINE, http://legalnewsline.com/in-the-

spotlight/230231-asbestos-defendants-want-automatic-access-to-info-inbankrupt

cy-trusts (last visited Mar. 31, 2014) (discussing the unfair advantage the lack of

transparency has had on "peripheral" defendants).

143

See generally Santo Borruso, John J. Weinboltz, & John S. Stadler,

Products: Class Action, Trade & Industry Representation Alert: New York

Asbestos Judge Rules Bankruptcy Claims Materials Must Be Disclosed, N

IXON

PEABODY, LLP, http://www.nixonpeabody.com/files/153599_Products_Alert_11

_19_2012.pdf (last visited Mar. 31, 2014) (discussing a recent ruling in New

York mandating that "plaintiffs must disclose to defendants all materials

submitted in connection with any claims filed with asbestos-related bankruptcy

trusts").

696 WIDENER LAW JOURNAL [Vol. 23

proceedings where the court is undertaking to estimate the

aggregate value of current and future claims against such

debtors.

144

Like Garlock, these companies seek to ensure that such

estimates take into account the billions of dollars already available

from existing trusts to pay asbestos claimants.

145

Insurance

companies who are being asked to indemnify asbestos defendants

and trusts have also entered the fray by seeking claims information

from trusts to ensure that their insureds are not paying

disproportionate settlement amounts to claimants based on

claimants providing inconsistent exposure histories.

146

A. Legislative Efforts to Address Lack of Transparency

i. Ohio and Oklahoma Have Recently Enacted Trust Transparency

Legislation

In our 2008 article, we advocated for the enactment of

statutes, court rules, and/or standing orders mandating broad

disclosure by asbestos plaintiffs and their counsel of trust claiming

information, including, inter alia, identification of all trusts to

which the plaintiff has made or intends to make a claim for

compensation, disclosure of all amounts received from the trusts,

production of all trust claim submission materials, and

identification of all law firms that represent or previously

represented the plaintiff in seeking recovery for asbestos

144

See generally Philip Bentley and David Blabey Jr., Asbestos Estimation

In Today's Bankruptcies: The Central Importance Of The New Trusts, 26:24

EALEY'S LITIG. REP.: ASBESTOS 5-6 (Jan. 18, 2012), available at http://www.

kramerlevin.com/files/Publication/4478475a-e530-49df-8e26-863611a38f0f/Pre

sentation/PublicationAttachment/309d372e-318b-4566-a624-9130672d2600/As

bestos%20Estimation%20in%20Today's%20Bankruptcies.pdf (discussing the

nature of Garlock's discovery request).

145

See generally Sindhu Sundar, Garlock Ruling Gives Asbestos

Defendants Discovery Hammer, L

AW 360, http://www.law360.com/articles/508

160/garlock-ruling-gives-asbestos-defendants-discovery-hammer (last visited

Mar. 31, 2014) (discussing inflated settlements by plaintiffs who concealed

claims against other trusts and defendants).

146

See, e.g., Nat'l Union Fire Ins. Co. v. Porter Hayden Co., No. CCB-03-

3408, 2012 U.S. Dist. LEXIS 23716, at *2-4 (D. Md. Feb. 24, 2012) (discussing

defendants seeking trust claim information from plaintiffs).

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 697

injuries.

147

Since then, transparency advocates have made progress,

including the enactment of transparency legislation in two states,

Ohio and Oklahoma.

148

In December 2012, Ohio Governor Kasich signed asbestos

transparency legislation into law, effective March 27, 2013.

149

Under the law, an asbestos claimant is required, within thirty days

of the commencement of discovery, to provide to all parties a

statement, sworn under penalty of perjury:

identifying all existing asbestos trust claims made by or

on behalf of the claimant and all trust claims material

pertaining to each identified asbestos trust claim. The

sworn statement shall disclose the date on which each

asbestos trust claim against the relevant asbestos trust was

made and whether any request for a deferral, delay,

suspension, or tolling of the asbestos trust claims process

has been submitted.

150

The statute further imposes a continuing obligation upon the

asbestos claimant to supplement his initial disclosure within thirty

days of the filing of any additional trust claims by identifying such

additional trust claims, and "provid[ing] to all of the parties in the

asbestos tort action all trust claims material pertaining to each

additional asbestos trust claim identified in that amendment."

151

enforce compliance with the disclosure requirements, the statute

provides that a claimant's failure to disclose and produce all trust

claims material "shall constitute grounds for the court to decline to

assign an initial trial date or extend the date set for trial in the

action."

152

147

See Shelley, Cohn & Arnold, supra note 1, at 274-76 (discussing the

need for mandatory disclosures of trust claims by claimants).

148

OHIO REV. CODE ANN. §§ 2307.951-.954 (West 2013); OKLA. STAT. tit.

76, §§ 81-89 (2013).

149

§§ 2307.951-.954.

150

Id. § 2307.952(A)(1)(a).

151

Id. § 2307.952(A)(2)-(3).

152

Id. § 2307.952(B).

698 WIDENER LAW JOURNAL [Vol. 23

The Ohio statute also contains a mechanism to allow

defendants to move to stay the proceedings if there is evidence that

the plaintiff has delayed the submission of meritorious trust

claims.

153

Specifically, the statute authorizes defendants to move to

stay the proceedings if they can show "credible evidence" that

there are trusts against which the claimant has not claimed, "but

against which the defendant in good faith believes the claimant

may make a successful asbestos trust claim."

154

In response to a

motion to stay, a claimant may do one of three things: (1) file

claims with the trusts identified in the defendant's motion and

submit proof of such filings; (2) request a determination from the

court that the information identified by the defendant is insufficient

to support further trust claims, or that the information supplied by

the defendant "should be modified prior to the filing of [the

additional] asbestos trust claim[s]" identified by the moving

defendant; or (3) request that the court determine that the attorney's

fees and expenses required to submit the additional asbestos trust

claims "exceed the claimant's reasonably anticipated recover[ies]

from the asbestos trust claim[s]."

155

If the court determines that a

good faith basis exists to file claims with the trusts identified in the

defendant's motion, the court is required to stay the proceedings

until the claimant submits claims to the additional trusts.

156

Importantly, the Ohio statute rejects arguments by the asbestos

plaintiffs' bar and the trusts that trust claim submissions are

privileged or otherwise inadmissible at trial.

157

Trust claim

submissions "are presumed to be authentic, relevant to, and

discoverable in an asbestos tort action."

158

Moreover, such

materials may be introduced at trial

to prove alternative causation for the exposed person's

claimed injury, death, or loss to person, to prove a basis to

allocate responsibility for the claimant's claimed injury,

153

Id. § 2307.953(A)(1)-(3).

154

Id. § 2307.953(A)(1)-(3).

155

OHIO REV. CODE ANN. § 2307.953(C)(1)(a-c) (West 2013).

156

Id. § 2307.953(E).

157

Id. § 2307.954(B).

158

Id.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 699

death, or loss to person, and to prove issues relevant to an

adjudication of the asbestos claim, unless the exclusion of

the trust claims material is otherwise required by the rules

of evidence.

159

The Ohio statute additionally authorizes discovery regarding

the claimant's asbestos trust claims directly from the asbestos trusts

involved in addition to the claimant's own mandatory

disclosures.

160

As an additional backstop to the above-described safeguards,

the Ohio statute expressly authorizes a judgment debtor to file a

motion for sanctions or other relief for up to a year following entry

of the judgment in the event that the asbestos claimant thereafter

files additional claims with asbestos trusts that were in existence at

the time the judgment was rendered.

161

In such an event, courts are

authorized to reopen the judgment and either "(a) [a]djust the

judgment by the amount of any subsequent asbestos trust payments

obtained by the claimant; [or] (b) [o]rder any other relief to the

parties that the court considers just and proper."

162

On May 7, 2013, Oklahoma Governor Mary Fallin signed into

law that state's Personal Injury Trust Fund Transparency Act.

163

Substantially similar to the Ohio statute, Oklahoma's version

extends disclosure requirements beyond 524(g) asbestos trusts to

encompass claims made against all personal injury trust funds.

164

The Oklahoma statute also contains more robust enforcement

mechanisms.

165

Trial dates shall be set no earlier than 180 days

after a claimant makes the required disclosures.

166

Moreover, if the

claimant identifies yet-to-be-filed trust claims, courts are required

159

Id.

160

Id. §2307.954(C).

161

OHIO REV. CODE ANN. §2307.954(F) (West 2013).

162

§ 2307.954(E).

163

OKLA. STAT. tit. 76, § 81 (2013).

164

Id. § 83(A).

165

See id. (explaining that false statements are punishable under penalties

of perjury).

166

Id. § 85(A).

700 WIDENER LAW JOURNAL [Vol. 23

to stay all proceedings until the claimant submits such claims and

produces all related documentation to the defendants.

167

In addition, in the event that the claimant proceeds to trial

before all his trust claims have been resolved, the Oklahoma

statute permits courts to attribute value to submitted, but unpaid,

trust claims.

168

Specifically, the statute establishes "a rebuttable

presumption that the plaintiff is entitled to, and will receive, the

liquidated value specified in the trust governance document

applicable to his or her claim at the time of trial."

169

The trial court

is authorized to take judicial notice of the compensation amounts

and payment percentages established by the respective TDPs "and

shall establish an attributed value to the plaintiff's personal injury

trust claim."

170

A defendant is then entitled to a setoff or credit

against any adverse judgment in the amount of any trust fund

payments plus the attributed value of then-pending trust fund

claims.

171

If multiple defendants are found liable, the credit is to be

distributed proportionately among the defendants according to

their respective percentages of fault.

172

And, while the Ohio statute

authorized discovery directly from trusts, Oklahoma's version goes

further, requiring claimants to "provide consent or other expression

of permission that may be required by the personal injury trust to

release information and materials sought by the defendant."

173

In addition to Ohio and Oklahoma, similar transparency

measures have been introduced in the legislatures of Illinois,

Louisiana, Mississippi, Pennsylvania, Texas, West Virginia, and

Wisconsin.

174

Hearings on these bills have been held in some

167

Id. § 83(B).

168

Id. § 7.

169

tit. 76, § 81.

170

Id.

171

Id.

172

Id.

173

Id.

174

Asbestos, TAKE JUST. BACK, http://www.takejusticeback.com/Asbestos

(last visited Mar. 20, 2014).

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 701

states, and Wisconsin's bill passed the state assembly in May

2012,

175

but stalled in that state's senate.

176

ii. The FACT Act Passes the U.S. House, But Stalls in the Senate

On the federal front, the FACT Act, introduced in 2012 in the

United States House of Representatives,

177

and reintroduced in

2013,

178

seeks to mandate periodic public reporting by the trusts

themselves.

179

The FACT Act bill proposes to amend 11 U.S.C.

§ 524(g) to add a subsection requiring each trust to publicly file

quarterly reports with the bankruptcy court that authorized its

creation.

180

The reports would be required to disclose "each

demand the trust received from, including the name and exposure

history of, a claimant and the basis for any payment from the trust

made to such claimant."

181

In addition, the FACT Act would

require the trusts, upon payment of reasonable costs, to promptly

provide to parties in asbestos tort cases "any information related to

payment from, and demands for payment from, such trust, subject

to appropriate protective orders."

182

175

Wisconsin Assembly Disappoints Military Order of the Purple Heart by

Passing Bill Delaying and Denying Justice to Asbestos Victims, WIS. ASBESTOS

VICTIMS NETWORK (May 8, 2013), http://www.wisconsinasbestosvictims.org/

wisconsin_assembly_disappoints_military_order_of_the_purple_heart_by_passi

ng_bill_delaying_and_denying_justice_to_asbestos_victims.

176

Assembly Bill 19, WIS. LEGIS. DOCUMENTS (documenting the history of

Assembly Bill 19 which was in the Wisconsin Senate from May 2013 until

March 2014); WMC Praises Senate for Passing Asbestos Trust Transparency

Bill, W

IS. MANUFACTURING & COM. (Mar. 12, 2014, 1:03 PM), http://www.

wmc.org/news/wmc-praises-senate-for-passing-asbestos-trust-transparency-bill/

(since this article was written, Assembly Bill 19 was passed by the Wisconsin

Senate on March 12, 2014).

177

H.R. REP. NO. 112-687, at 1 (2012).

178

H.R. 982, 113th Cong. (2013).

179

Id.

180

Id. at § 2.

181

Id. at § 2(8)(A)(i).

182

Id. at § 2(8)(B).

702 WIDENER LAW JOURNAL [Vol. 23

Following hearings, the FACT Act was passed by the United

States House of Representatives on November 13, 2013.

183

The

Act was referred to the Senate Judiciary Committee, where it is

considered unlikely to proceed further, at least in part because the

White House issued a statement in opposition to the bill.

184

B. Compelling Trust Discovery Since Volkswagen – Trust Claims

Are Generally Discoverable in the Tort System

In our 2008 article, we discussed the Court of Appeals of

California's "bellweather" decision in Volkswagen of America, Inc.

v. Superior Court,

185

in which the court held that documents

submitted by plaintiffs to bankruptcy trusts were discoverable in

the tort system.

186

The Volkswagen decision served as a launching

pad for a series of orders on the discoverability of trust claims

issued in various jurisdictions in 2007 and 2008.

187

Since then,

numerous courts have ordered discovery of trust claims and

supporting information, rejecting plaintiffs' arguments that trust

claims are (1) not relevant to their tort claims; (2) deemed

confidential by the trusts' TDPs; and (3) constitute confidential

settlement discussions.

188

183

H.R. 982 – Furthering Asbestos Claim Transparency (FACT) Act of

2013, CONGRESS.GOV, http://beta.congress.gov/bill/113th-congress/house-bill/

982 (last visited Mar. 20, 2014).

184

See Statement of Admin. Policy, supra note 31.

185

Volkswagen of Am., Inc. v. Superior Court, 43 Cal. Rptr. 3d 723 (Cal.

Dist. Ct. App. 2006).

186

Id.

187

Shelley, Cohn & Arnold, supra note 1, at 292 n.100-03; Mark A.

Behrens, What's New in Asbestos Litigation?, 28 R

EV. LITIG. 501, 552 (2009).

188

Scapa Dryer Fabrics, Inc. v. Saville, 16 A.3d 159, 175 (Md. 2011);

Decision and Order at 19, In re N.Y. City Asbestos Litig., 966 N.Y.S.2d 347,

2012 N.Y. Misc. LEXIS 5646 (N.Y. Sup. Ct., N.Y. Cnty. Nov. 15, 2012);

Andrucki v. Aluminum Co. of Am., No. 190377/10 (N.Y. Sup. Ct. N.Y July 27,

2011); Nat'l Union Fire Ins. Co. v. Porter Hayden Co., No. CCB-03-3408, 2012

U.S. Dist. LEXIS 23716, at *4 (D. Md. Feb. 24, 2012); Watts v. Alfa Laval,

Inc., No. 06-3322, at 394 (Mass. Super. Ct. Middlesex Cnty. Mar. 16, 2009)

("[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."); Order, Richards v.

Armstrong Int'l, Inc., No. BCD-WB-CV-10-019 (Me. Bus. & Consumer Ct.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 703

The Pennsylvania state and federal courts have produced a

number of recent decisions in this arena. In Reed v. Honeywell

International, Inc.,

189

the Superior Court of Pennsylvania ruled that

"affidavits, claims forms, releases and other materials related to the

524(g) bankruptcy trusts at issue were indeed 'otherwise

discoverable' " in order to allow a defendant to establish its

entitlement to post-verdict setoffs.

190

Similarly, in the District

Court for the Eastern District of Pennsylvania, home of the federal

asbestos Multidistrict Litigation (MDL) docket, the court rejected

plaintiffs' arguments that trust claims are shielded from discovery

as confidential settlement communications,

191

or based on the

confidentiality provisions of the TDPs.

192

The court also rejected

Sagadahoc Cnty. Jan. 10, 2011) ("Plaintiff shall produce for the Defendants

copies of the forms filed on behalf of Plaintiff with any bankruptcy-related

trust."); Order on Motion to Compel Disclosure of Claims Submitted to and

Payments Received From Asbestos Bankruptcy Trusts at 4, Cardella v. A.W.

Chesterton, Inc., No. 09-L-434, at 4 (Ill. Cir. Ct. Madison Cnty. Apr. 18, 2011);

Letter Ruling, In re Asbestos Litig., MDL No. 2004-03964 (Tex. Dist. Ct. Harris

Cnty. Jan. 16, 2009) ("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.").

189

Reed v. Honeywell Int'l, Inc., 2011 Pa. Super. LEXIS 4797 (Pa. Super.

Ct. 2011).

190

Id. at *24-28.

191

Shepherd v. Pneumo-Abex, LLC, MDL 875, No. 09-91428, 2010 U.S.

Dist. LEXIS 90122, at *4-5 (E.D. Pa. Aug. 30, 2010) ("I agree 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."). See also In re Asbestos Prods.

Liab. Litig. (No. VI), MDL 875, 2009 WL 6869437, at *1 (E.D. Pa. Sept. 18,

2009) ("The court overrules plaintiffs' objections that the Bankruptcy Trust

Documents are not relevant or otherwise not discoverable under the Federal

Rules of Civil Procedure").

192

Ferguson v. Lorillard Tobacco Co., MDL 875, No. 09-91161, 2011 U.S.

Dist. LEXIS 135183, at *6-7 (E.D. Pa. Nov. 22, 2011) (holding that the plaintiff

did not show that compliance with discovery requests would violate the terms of

the bankruptcy trusts).

704 WIDENER LAW JOURNAL [Vol. 23

the claimants' "burden" argument that defendants should seek

discovery from the trusts rather than the plaintiffs.

193

Judicial reception to trust transparency efforts has not been

uniform, however. In Sweredoski v. Alfa Laval, Inc.,

194

a Rhode

Island trial court initially ruled that a plaintiff's submissions to

asbestos trusts were not discoverable because 524(g) trusts are not

"joint tortfeasors" under Rhode Island's joint tortfeasor act, thus

rendering evidence of exposure to bankrupt entities' products

irrelevant.

195

The court stated that "[e]vidence regarding

Sweredoski's exposure to other defendants' asbestos products . . . is

not relevant to the causation analysis" because the plaintiff only

had to present evidence of exposure to Crane Company

products.

196

On November 18, 2013, the court partially retreated

from its initial ruling and ordered an in camera review of the

plaintiff's trust submissions,

197

but ruled that these forms would

only be produced to Crane to the extent they contained

discoverable evidence bearing on the plaintiff's exposure to Crane's

products.

198

After conducting an in camera review, the court issued

a third opinion on January 30, 2014.

199

The court found no

evidence in the trust submissions bearing on the plaintiff's

exposure to Crane products and reaffirmed that trust submissions

are not admissible for purposes of establishing non-party liability

under Rhode Island's joint and several regime.

200

The court did,

however, rule that the trust claim forms were discoverable for the

limited purpose of finding admissible impeachment evidence.

201

193

In re Asbestos Prods. Liab. Litig. (No. VI), 2009 WL 6869437 at *1-2;

Certain Plaintiffs v. Certain Defendants, MDL 875, 02-875 (E.D. Pa. Apr. 18,

2012) (rejecting plaintiffs' argument that defendants should obtain bankruptcy

trust forms from the trusts rather than plaintiffs because it would be unduly

burdensome and duplicative to make plaintiffs produce them).

194

Sweredoski v. Alfa Laval, Inc., No. PC-2011-1544, 2013 R.I. Super.

LEXIS 128 (R.I. Super. Ct. July 15, 2013).

195

Id. at 18.

196

Id. at 17.

197

Id. at 1.

198

Id. at 7-8.

199

Id. at 1, 7.

200

Sweredoski, 2013 R.I. Super. LEXIS 128 at 1.

201

Id. at 6.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 705

Although the court still appeared hostile to the idea of trust

discovery, Crane Company was successful in convincing the court

to depart from its earlier ruling.

202

C. Courts Are Increasingly Mandating Trust Claim Disclosure by

Claimants Through Standing Case Management Orders

As courts across the country increasingly acknowledge the

discoverability of asbestos trust claims in discovery rulings, more

courts have formalized trust discovery obligations in their standard

case management orders (CMO).

203

In our prior article, we cited to

case management orders in West Virginia, Delaware, Ohio, Texas,

Massachusetts, and Kentucky, which either contained express

provisions requiring the disclosure of trust claims forms and

supporting information or, at the very least, adopted standard

written discovery that included requests about trust claims.

204

Courts in Pennsylvania, New York, and Michigan also require

mandatory disclosure of trust claims,

205

while courts in the

202

Id. at 1.

203

Shelley, Cohn & Arnold, supra note 1, at 247.

204

Amended Case Management Order, In re Asbestos Pers. Injury Litig.,

No. 03-C-9600 (W. Va. Cir. Ct. Kanawha Cnty. Mar. 3, 2010); Standing Order

No. 1–Amended Oct. 10, 2013, In re Asbestos Litig., No. 77C-ASB-2, ¶ 7(k)

(Del. Super. Ct. Newcastle Cnty. Oct. 10, 2013); Amendment to Case

Management Order, In re All Asbestos Cases, No. CV-073958, ¶¶ 18, 20(f)

(Ohio Ct. C.P. Cuyahoga Cnty. May 8, 2007) (requiring plaintiffs to produce

trust claims and supporting documentation within seven days of the case being

grouped for trial); Third Amended Case Management Order, In re Asbestos

Litig., MDL No. 2004-03964, § VII (Tex. Dist. Ct. Harris Cnty. Apr. 5, 2007)

(incorporating master discovery to all plaintiffs, July 29, 2004, which includes

Request No. 46 to produce documents "[w]ith respect to any lawsuit, claim, or

settlement made or anticipated (including but not limited to a claim made to a

settlement trust in conjunction with a bankruptcy proceeding such as those for

Johns Manville, UNARCO, and Celotex) regarding the plaintiff/decedent's

alleged asbestos related disease."); Amended Pre-Trial Order No. 9, In re Mass.

State Court Asbestos Litig. (effective June 27, 2012); March 6, 2006 Master

Order, In re Asbestos Pers. Injury Litig. (Ky. Cir. Ct. Jefferson Cnty. Mar. 6,

2006).

205

Amended Case Management Order at § XV.E.l, In re N.Y. City

Asbestos Litig., No. 40000/88 (N.Y Sup. Ct. N.Y. Cnty. May 26, 2011); Master

Case Management Order For Asbestos-Related Personal Injury Claims at § III,

706 WIDENER LAW JOURNAL [Vol. 23

asbestos litigation hotbeds of San Francisco and Illinois have

adopted more limited measures requiring plaintiffs to answer

standard interrogatory questions and produce documents reflecting

bankruptcy trust claims.

206

Recent amendments and challenges to pre-existing CMOs also

have strengthened the trust disclosure obligations in certain

jurisdictions.

207

In October 2013, the Superior Court of Delaware

issued a new Standing Order No. 1 that requires plaintiffs to

produce trust submissions:

As to asbestos trust claims, compliance with this

provision requires production of executed proofs of claim

together with all materials used to support such claim, all

trust claims and claim material, and all documents or

information relevant or related to such claims, including

but not limited to work histories, depositions, testimony

of plaintiff and others, and medical records and

In re Asbestos Litig., No. 0001 (Pa. Ct. C.P. Phila. Cnty. Dec. 1, 2010) (stating

that "Plaintiffs shall serve answers to Defendants' Master Interrogatories and

Requests for Production Directed to Plaintiffs, including information relating to

Bankruptcy Trust Filings" 180 days prior to jury selection); Pretrial Order, In re

Asbestos Prods. Liab. Litig. (No. VI), MDL 875, No. 01-00875 (E.D. Pa. Dec.

14, 2011) (adopting standardized bankruptcy trust interrogatories and procedure

for production of documents from trusts); Order No. 16 (Case Management

Order) Requiring Service of Bankruptcy Claims Forms in Malignancy and

Nonmalignancy Cases, In re All Asbestos Pers. Injury Cases, No. 03-310422-

NP (Mich. Cir. Ct. Wayne Cnty. Mar. 27, 2009).

206

Case Management Order at ¶ 6(B), Exhibit C ¶¶ 49, 53, In re Complex

Asbestos Litig., No. CGC-84-828684, (Cal. Super. Ct. S.F. Cnty. June 29,

2012); Standing Case Management Order for All Asbestos Personal Injury

Cases at § III(A)(7), In re All Asbestos Litig. Filed in Madison Cnty. (Cir. Ct.

Madison Cnty. Jan. 26, 2011) (incorporating Standard Asbestos Interrogatories

Directed to Plaintiffs, Interrogatory Nos. 26, 28).

207

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 A

M. J. OF TRIAL ADVOC. 1, 16-20 (2012) (discussing the

"recent, major development" of asbestos bankruptcy trusts and efforts to

promote greater transparency between the trust and tort systems).

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 707

documentation. Such materials shall be supplemented

seasonably up to the time of trial.

208

The most notable recent changes involve efforts to address the

phenomenon of claimants delaying submission of trust claims

while they pursue solvent defendants in the tort system. In 2012,

the Superior Court of Massachusetts issued Amended Pre-Trial

Order No. 9 which requires plaintiffs to "produce the product

exposure section of bankruptcy claim forms that have been filed

within ninety (90) days of a determined trial date" and requires

plaintiffs to certify that they have filed all known bankruptcy

claims within thirty days before trial.

209

Likewise, in 2010, the

Montgomery County Court of Common Pleas of Pennsylvania,

which borders Philadelphia County, issued a ruling that requires

asbestos plaintiffs in the county to "file[] any and all Asbestos

Bankruptcy Trust claims available to him or her," "no later than

one hundred twenty (120) days prior to trial[.]"

210

New York City, which historically has been ahead of the curve

on asbestos trust discovery, recently rejected an effort by the

plaintiffs' bar to invalidate provisions of that court's long-standing

CMO requiring disclosure of asbestos bankruptcy trust

submissions.

211

Since 1996, the CMO governing all New York

City Asbestos Litigation (NYCAL) cases has required plaintiffs to

disclose trust claims in standard discovery responses. The NYCAL

CMO was amended again in 2003 to require plaintiffs to disclose

"all knowledge and information available to them relating to their

208

Standing Order No. 1 – Amended Oct. 10, 2013 at ¶ 7(k), In re

Asbestos Litig., No. 77C-ASB-2 (Del. Super. Ct. Newcastle Cnty. Oct. 10,

2013); For a detailed history of Delaware's CMO, see generally Peter S.

Murphy, Asbestos Trust and Tort Litigation Compensation in Delaware: A Call

For Transparency, 27:22 M

EALEY'S LITIG. REP.: ASBESTOS 8-9 (Dec. 19, 2012)

(explaining the need for CMOs and Delaware's Standing Order No. 1).

209

Amended Pre-Trial Order No. 9, In re Mass. State Court Asbestos Litig.

(effective June 27, 2012). The amendments were the product of a joint motion

from liaison counsel for the plaintiffs and defendants.

210

Thibeault v. Allis Chalmers Corp. Prod. Liab. Trust., No. 07-27545, ¶

10 (Pa. Ct. C.P. Montgomery Cnty. Feb. 22, 2010).

211

In re N.Y. City Asbestos Litig., 966 N.Y.S.2d 347, 2012 N.Y. Misc.

LEXIS 5646, at *1 (N.Y. Sup. Ct., N.Y. Cnty. Nov. 15, 2012).

708 WIDENER LAW JOURNAL [Vol. 23

exposure, including all documents relating to claims made to

asbestos bankruptcy trusts."

212

The 2003 CMO was further

amended to require plaintiffs to identify within a designated period

of time prior to trial all trusts against which the claimant "intends

to make a claim."

213

After a group of defendants complained of plaintiffs' non-

compliance, the NYCAL Special Master issued a December 12,

2011 ruling reaffirming the CMO's mandate that all plaintiffs

produce trust submissions, including affidavits, sworn statements,

and proofs of diagnosis.

214

Weitz & Luxenberg, a leading asbestos

plaintiffs' firm, moved to vacate the Special Master's

recommendation, arguing that: (1) trust submissions are protected

from discovery by the confidentiality provisions of the TDPs, and

any challenges to those provisions can only by lodged in the

bankruptcy courts; (2) trust submissions are confidential settlement

communications with the trusts; and (3) the CMO provision

requiring disclosure of "intended" claims is unconstitutional

because it interferes with the time limitations in the TDPs.

215

November 15, 2012, Judge Heitler rejected the plaintiffs'

arguments and ordered the plaintiffs to comply with all outstanding

discovery requests.

216

Finally, West Virginia's 2010 amendments to the CMO

represent the most progressive and comprehensive steps toward

ensuring full transparency between the tort and trust systems.

217

212

Id. at *6-7.

213

Id. at *7.

214

Id. at *8; see also Mark Behrens et al., Asbestos Litigation "Magnet"

Courts Alter Procedures: More Changes on the Horizon, 27:8 M

EALEY'S LITIG.

REP.: ASBESTOS 1, 8-9 (May 16, 2012).

215

In re N.Y. City Asbestos Litig., 2012 N.Y. Misc. LEXIS 5646 at *9.

216

Id. at *31-32. The Court rejected the jurisdictional argument, finding

that the civil court discovery dispute did not fall within the bankruptcy court's

"related to" jurisdiction. Id. at *11-13. The court also disagreed with the

"confidential settlement discussions" argument, citing to prior decisions such as

Andrucki v. Aluminum Co. of Am., No. 190377/10 (July 27, 2011) (Shulman,

J.) and Drabczyk v. Amchem Prods., Inc., No. 1583/2005 (N.Y. Sup. Ct. Erie

Cnty. Jan 18, 2008) (Lane, J.). Id. at *13-20.

217

Amended Case Management Order at § 22, In re Asbestos Pers. Injury

Litig., No. 03-C-9600 (W. Va. Cir. Ct. Kanawha Cnty. Mar. 3, 2010).

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 709

Section 22, titled "Claims Against Bankruptcy Trusts" mandates

plaintiffs to provide

(2) [A] statement of any and all existing claims that may

exist against asbestos trusts. In addition, the statement

shall also disclose when a claim was or will be made, and

whether there has been any request for deferral, delay,

suspension or tolling of the asbestos trust claims process.

The statement must contain an Affidavit of the Plaintiff or

Plaintiff's counsel that the statement is based upon a good

faith investigation of all potential claims against asbestos

trusts.

(3) As to any claims already asserted against asbestos

trusts, the claimant shall produce final executed proofs of

claim together with any supporting materials used to

support such claim against the asbestos trusts, all trust

claims and claims material, and all documents or

information relevant or related to such claims asserted

against the asbestos trusts, including but not limited to,

work histories, depositions, and the testimony of the

claimant and others as well as medical documentation.

218

D. Discovery from the Trusts: Insurance Companies' and Newer

Bankrupt Entities' Successful Pursuit of Trust Data

Consistent with the plaintiffs' overarching opposition to

disclosing trust submissions and payments to tort defendants,

plaintiffs have also vehemently opposed efforts by insurers to audit

settlement payments made by 524(g) trusts. An illustration of this

is found in the long-running insurance coverage litigation in the

Maryland federal district court between National Union Fire

Insurance Company of Pittsburgh, PA and Porter Hayden, a

defunct distributor/installer of asbestos-containing insulation

products.

219

Porter Hayden entered bankruptcy in 2005, its plan of

218

Id.

219

Nat’l Union Fire Ins. Co. v. Porter Hayden Co., No. CCB-03-3408,

2012 U.S. Dist. LEXIS 23716, at *8 (D. Md. Feb. 24, 2012).

710 WIDENER LAW JOURNAL [Vol. 23

reorganization was approved in 2006, and its asbestos trust began

paying claims in 2007.

220

Throughout this time period, National

Union and Porter Hayden were embroiled in litigation regarding

National Union's insurance coverage obligations for the asbestos

claims.

221

In 2010, National Union issued subpoenas to various

claims processing facilities and bankruptcy trusts seeking claims

submissions made by claimants who also made claims to the Porter

Hayden trust.

222

National Union sought this information because

the "Porter Hayden trust gathers no information about its claimants'

submissions to other trusts and has no process in place to verify the

consistency of claimants' submissions."

223

In April of 2011, the court approved a protective order

between National Union and the claims processing facilities, with

National Union agreeing to accept limited amounts of information

barely sufficient to endeavor to root out potential inconsistent

claims practices: claimant name, disease and date of diagnosis, and

the claimants' alleged work and exposure history.

224

The plaintiffs'

bar, led by Weitz & Luxenburg and the Law Offices of Peter G.

Angelos (Objectors), moved to quash the subpoenas. First, the

Objectors argued that the submissions made to other bankruptcy

trusts are shielded from discovery by the confidentiality provisions

in the TDPs, which prohibit the trusts from sharing information

with third parties in the tort system.

225

The Objectors asserted that

220

PORTER HAYDEN BODILY INJURY TRUST, www.porterhaydentrust.com

(last visited May 27, 2014).

221

Porter Hayden Co., 2012 U.S. Dist. LEXIS 23716 at *4-5.

222

Id. at *5-6.

223

Id. at *14-15.

224

Id. at *6.

225

Id. at *7-8. The Objectors cited to the Porter Hayden TDP as an

example of the confidentiality obligations of the various trusts. The Porter

Hayden TDP states that "[e]vidence submitted to establish proof of exposure to

Porter Hayden Asbestos is for the sole benefit of the Trust, not third parties or

defendants in the civil system." Trust Distribution Procedures, P

ORTER HAYDEN

CO. 36, http://www.porterhaydentrust.com/Files/BALTIMORE-1744639-v1-

FIRST_AMENDED_PORTER_HAYDEN_TDP%20_2_.pdf (last visited May

27, 2014). The confidentiality section further states that submissions to the Trust

"shall be treated as made in the course of settlement discussions between the

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 711

such confidentiality, even if not expressly included in the TDPs,

nevertheless is implicit in every single TDP.

226

The court rejected

this argument, holding that a confidentiality agreement between

two parties does not bar discovery of information that is relevant to

a pending dispute.

227

The Objectors next challenged the relevance

of their clients' submissions to trusts other than Porter Hayden.

228

Again, the court agreed with National Union's position that

evidence of claims submitted to other trusts were relevant because

the claims would allow National Union to verify that it was only

reimbursing the Porter Hayden trust for valid claims.

229

The Objectors further contended that the various trusts and

claims processing facilities should not respond to National Union's

subpoenas because their clients' trust submissions constitute

privileged settlement communications.

230

Once again, the court

rejected the Objectors' argument, observing that:

Several courts have permitted discovery of information

contained in asbestos-related claims when limited to work

history, job duties, evidence of asbestos exposure, and

medical history. In those cases, the courts found that

because, as here, the subpoenaed information did not

include settlement figures or evidence of negotiations or

compromise, it did not warrant protection from

discovery.

231

Accordingly, the court denied the Objectors' motions to quash

the subpoenas and allowed National Union to obtain discovery

from the trusts in accordance with the court-approved protective

order.

232

holder and the Trust and intended by the parties to be confidential and to be

protected by all applicable state and federal privileges[.]" Id. at 41.

226

Porter Hayden Co., 2012 U.S. Dist. LEXIS 23716 at *8.

227

Id. at *8-9.

228

Id. at *13.

229

Id. at *14-16.

230

Id. at *9.

231

Id. at *12-13.

232

Porter Hayden Co., 2012 U.S. Dist. LEXIS 23716 at *16-17.

712 WIDENER LAW JOURNAL [Vol. 23

In the insurance coverage litigation between Congoleum

Corporation, which filed for bankruptcy in 2003, and its liability

insurers, two insurers obtained commissions from the presiding

judge in New Jersey to issue out-of-state subpoenas to certain

asbestos bankruptcy trusts in Nevada

233

and Delaware.

234

The

insurers sought to discover whether any of the potential 122,000

Congoleum claimants had also made claims to these other trusts,

ostensibly in an effort to ensure that plaintiffs were not defrauding

Congoleum into paying inflated settlements.

235

In this instance, it

was the trusts, rather than the plaintiffs' bar, that objected to the

subpoenas. The Delaware and Nevada courts, however, rejected

the trusts' identical arguments regarding relevance, privilege, and

undue burden, and ordered them to respond to the subpoena.

236

The

insurers were able to overcome the trusts' burden arguments by

offering to fund the creation of a computer program that would

capture the claims submissions made only by those claimants who

also made claims against Congoleum.

237

233

First State Insurance Company and Twin City Insurance Company

subpoenaed the JT Thorpe Settlement Trust and the Western Asbestos

Settlement Trust. Recommendation for Order at 2, 4, Congoleum Corp. v. Ace

Am. Ins. Co., No. CV09-00548 (Nev. Dist. Ct. Washoe Cnty. Nov. 9, 2009)

[hereinafter Nevada Ruling].

234

The insurers subpoenaed seven trusts in Delaware, including Babcock

& Wilcox, Celotex, OCF, Kaiser and USG. Memorandum Opinion at 1,

Congoleum Corp. v. Ace Am. Ins. Co., No. 09M-01-084 (Del. Super. Ct. New

Castle Cnty. Aug. 4, 2009) [hereinafter Delaware Ruling].

235

The insurers issued the commissions subject to a ruling by the discovery

master that overruled the plaintiffs' objections. The master observed that "[t]here

is more than anecdotal support that some trust claimants have filed inconsistent

factual information with trust administrators . . . .There is nothing more pertinent

to the question of coverage for an individual claim than whether the claimant

was exposed to an insured's product during a given period of coverage provided

by an insurer." Letter Opinion, Congoleum Corp. v. ACE Am. Ins. Co., No.

MID-L-8908-01 (N.J. Super. Ct. Dec. 12, 2008).

236

Nevada Ruling, supra note 233, at 10-17; Delaware Ruling, supra note

234, at 10-11, 13, 17-18. The courts also ruled that their respective concerns

about claimant privacy could be addressed by an appropriate protective order in

the New Jersey insurance coverage action.

237

Nevada Ruling, supra note 233, at 10-17; Delaware Ruling, supra note

234, at 10-11, 13, 17-18; see also Report and Recommendation of Special

Discovery Master at 40-44, Fed. Mogul Prod., Inc. v. AIG Cas. Co., No. MRS-

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 713

Efforts to discover claims data from the trusts has taken center

stage in more recent asbestos-related bankruptcies. Companies

such as Garlock, General Motors Corporation, and Specialty

Products Holding Corporation (Bondex) aggressively sought

claimant information from other trusts to use in estimating the

amount of money they would need to set aside to cover asbestos

liabilities.

238

Garlock, in particular, filed motions in twelve

asbestos bankruptcies presided over by now-retired Bankruptcy

Judge Judith Fitzgerald in which Garlock sought access to

Bankruptcy Rule 2019 statements and supporting exhibits filed by

attorneys for asbestos claimants.

239

Garlock argued, in part, that the

2019 statements were relevant for purposes of evaluating whether

Garlock historically paid inflated settlements based on claimants'

inconsistent or incomplete exposure history.

240

Judge Fitzgerald

denied every motion, holding that Garlock lacked standing to

intervene in the bankruptcies.

241

The United States District Court for the District of Delaware

reversed, holding that Garlock had standing to appear in the

bankruptcies and that the appellees failed to rebut the presumption

of public access afforded to the 2019 exhibits.

242

While the court

questioned the evidentiary value and the purpose for which

L-002535-06 (N.J. Super. Ct. Morris Cnty. July 20, 2011) (granting insurers'

motion to compel response to subpoena issued to Verus Claims Services, which

processes claims for various bankruptcy trusts, but limiting production to Verus'

Claimant Grid and Printable Claims Forms, subject to various confidentiality

protections).

238

See Philip Bentley & David Blabey Jr., Asbestos Estimation In Today's

Bankruptcies: The Central Importance Of The New Trusts, 26:24 MEALEY'S

LITIG. REP.: ASBESTOS 1-2 (Jan. 18, 2012); Mark D. Plevin, et al., Where Are

They Now, Part Six: An Update On Developments In Asbestos-Related

Bankruptcy Cases, 11:7 M

EALEY'S ASBESTOS BANKR. REP. 2-5 (Feb. 2012).

239

In re Motions for Access of Garlock Sealing Techs. LLC (Garlock),

488 B.R. 281, 290 (D. Del. 2013). Bankruptcy Rule 2019 requires law firms

representing more than one creditor in a Chapter 11 bankruptcy to file a verified

statement disclosing the identity of each creditor the firm represents and the

nature and amount of the creditor's claim. See F

ED. R. BANKR. P. 2019(b)-(c).

240

Garlock, 488 B.R. at 290.

241

Id. at 290. For an example of one of Judge Fitzgerald's opinions, see In

re ACandS, Inc., 462 B.R. 88 (Bankr. D. Del. 2011).

242

Garlock, 488 B.R. at 299-300.

714 WIDENER LAW JOURNAL [Vol. 23

Garlock sought the information, ultimately the court exercised its

discretion to permit Garlock access to the information subject to

certain safeguards to protect confidential information.

243

The court

also granted Garlock's motion to take judicial notice of proposed

transparency legislation, stating that "[t]hese legislative proposals

have arguable relevance to issues in this appeal, including at least

whether there is public interest in transparency."

244

Although

Garlock's discovery efforts are not directly linked to the tort

system, Garlock's need for trust claiming data is analogous and the

district court's ruling is indicative of courts' growing awareness and

sensitivity to the secrecy inherent in the trust claiming process and

the legitimate need for transparency. Indeed, as noted above, the

bankruptcy judge presiding over Garlock's bankruptcy case in

North Carolina relied in part upon information contained in these

2019 disclosures in concluding that claimants against Garlock had

been improperly 'disappearing' evidence of alternative asbestos

exposures in the tort system.

245

IV. ATTEMPTS TO ENGINEER STRUCTURAL IMPEDIMENTS TO

OBTAINING DISCOVERY FROM 524(G) TRUSTS HAVE BEEN RULED

BE BEYOND THE POST-CONFIRMATION JURISDICTION OF

BANKRUPTCY COURTS

We have previously criticized attempts by asbestos claimants

and their counsel to build discovery barriers into trust TDPs during

the bankruptcy process, such as requiring those seeking discovery

from trusts to seek subpoenas from the bankruptcy courts that

oversaw the cases leading to the creation of the trusts.

246

We cited

as an example the Federal Mogul TDPs, which as initially

proposed, purported to direct that the trust only produce

information in response to a subpoena obtained from the Delaware

bankruptcy court.

247

In response to objections by certain tort

system defendants, this language was broadened to include

243

Id. at 299-302.

244

Id. at 302.

245

See id. at 296.

246

Shelley, Cohn & Arnold, supra note 1, at 280.

247

Id.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 715

subpoenas from the United States District Court for the District of

Delaware or from a Delaware state court – but not validly issued

subpoenas from any other state or federal court outside of

Delaware.

248

These TDPs were incorporated by reference into the

orders confirming and affirming Federal Mogul's final plan of

reorganization.

249

We argued that such putative discovery immunities were both

inappropriate and unenforceable.

250

These precise issues have since

been litigated before the Delaware Bankruptcy Court, when several

trusts (including Federal Mogul's) and related constituencies asked

the bankruptcy court to enforce these purported discovery

limitations contained in TDPs to enjoin third-party discovery

subpoenas served upon certain of their contractors by non-

Delaware state and federal courts.

251

In two 2011 opinions, that

court confirmed that the bankruptcy court's post-confirmation

jurisdiction did not extend to protecting the trusts from responding

to valid discovery subpoenas issued by any court, and that even if

such jurisdiction existed, the bankruptcy court should and would

abstain in favor of permitting the trusts to litigate their objections

before the issuing courts themselves.

252

Specifically, trusts created by ACandS, Kaiser Aluminum, US

Gypsum, and OCF, with the cooperation of their respective post-

confirmation trust ACCs and FCRs, initiated adversary actions in

each case asking the Delaware Bankruptcy Court to quash

numerous subpoenas that had been served in two contexts.

253

First,

several insurers served subpoenas on the trusts from the federal

district courts in Maryland and New Jersey and the Superior Court

248

Id. at 263.

249

Id.

250

Id. at 282.

251

See ACandS Asbestos Settlement Trust v. Hartford Accident Indem.

Co. (In re ACandS, Inc.) (ACandS Settlement Trust), 2011 Bankr. LEXIS 609,

*31-38 (Bankr. D. Del. Feb. 22, 2011); In re ACandS, Inc. v. Hartford Accident

Indem. Co. (In re ACandS), 2011 Bankr. LEXIS 2962, *30-33 (Bankr. D. Del.

August 8, 2011).

252

See ACandS Settlement Trust, 2011 Bankr. LEXIS 609, at *31-38; In re

ACandS, 2011 Bankr. LEXIS 2962, at *30-33.

253

In re ACandS, 2011 Bankr. LEXIS 2962 at *14-15 & n.4; ACandS

Settlement Trust, 2011 Bankr. LEXIS 609 at *38-42 & n.11.

716 WIDENER LAW JOURNAL [Vol. 23

of New Jersey in connection with coverage litigation involving the

Federal Mogul and Porter Hayden trusts.

254

Second, two debtors

involved in their own asbestos bankruptcies served subpoenas for

information in connection with proceedings in their bankruptcies to

estimate their asbestos liabilities for purposes of establishing their

own asbestos trusts.

255

After analyzing the limited scope of bankruptcy jurisdiction

after a plan has been confirmed and consummated, and the

bankruptcy estate has ceased to exist, the court concluded that it

lacked continuing jurisdiction under Third Circuit precedent to

quash or otherwise limit the scope of subpoenas served in other

jurisdictions in matters that were not pending before the

bankruptcy court: "this court has no jurisdiction to create a 'one

size fits all' peremptory rule of discovery" with respect to the

trusts.

256

As the court emphasized, "we are not the appropriate

forum in which to address any issues related to a subpoena which

was not issued in our jurisdiction."

257

The court did, however, direct further briefing on the court's

authority over certain of the insurers who consented to and

received 524(g) injunctive protection through ACandS's

reorganization plan.

258

The ACandS TDP's "confidentiality"

provision purports to prohibit the trust from responding to non-

Delaware-issued subpoenas, which the trust argued constituted an

enforceable forum-selection provision with respect to subpoenas to

that trust.

259

Following supplemental briefing, the court reaffirmed

its prior conclusion that it lacked post-confirmation bankruptcy

jurisdiction even over the insurers that had consented to the

ACandS plan.

260

Moreover, the court held, alternatively, that even

if it had jurisdiction to adjudicate the issues, it was either required

to abstain from exercising such jurisdiction pursuant to 28 U.S.C.

§ 1334(c)(2) because the issues were pending and could be timely

254

In re ACandS, 2011 Bankr. LEXIS 2962, at *16-17 n.4.

255

ACandS Settlement Trust, 2011 Bankr. LEXIS 609, at *40-43 & n.11.

256

Id. at *43-44.

257

Id. at *31.

258

See id. at *25-28.

259

In re ACandS, 2011 Bankr. LEXIS 2962 at *17.

260

Id. at *18.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 717

adjudicated before the Superior Court of New Jersey, or it would

exercise its discretion to abstain because the district courts of

Maryland and New Jersey are "certainly capable and, in this

instance, more appropriate to determine the issues related to these

discovery subpoenas."

261

V. USING TRUST CLAIMS INFORMATION TO UPHOLD THE INTEGRITY

OF THE

JUDICIAL PROCESS AND LEVEL THE PLAYING FIELD FOR

THOSE DEFENDANTS IN THE ASBESTOS LITIGATION

Courts are generally receptive to the relevance of trust filings,

but uncertainty remains from jurisdiction to jurisdiction as to (1)

how defendants can use that information to ensure that they only

pay a fair share of liability; and (2) how to account for trust

recoveries that post-date the plaintiffs' tort system settlements or

trials.

262

Our 2008 article summarized tort reform in key jurisdictions

such as Mississippi, Ohio, Texas, and West Virginia, in which the

legislature had either eliminated or modified the traditional joint

and several liability rules.

263

We also discussed certain states'

approaches to apportioning liability and/or obtaining setoffs and

judgment reductions to reflect recoveries from bankruptcy trusts.

264

In 2011, the RAND Institute for Civil Justice published a detailed

study on the liability rules and setoff procedures relevant to

asbestos bankruptcy trusts in six states, revealing that the liability

rules and procedures with respect to asbestos litigation are

jurisdiction specific and far from uniform.

265

To illustrate, courts in Maryland and Pennsylvania recently

tackled the issue of how to apply setoffs for asbestos trust

recoveries, but reached different conclusions. The Court of

Appeals of Maryland recently observed that "[n]o appellate state

court . . . has rendered an opinion about the proper handling of

§ 524(g) Trust settlement agreements in concert with state laws

261

Id. at *32-33.

262

Shelley, Cohn & Arnold, supra note 1, at 278, 283.

263

Id. at 265-68.

264

Id. at 270.

265

DIXON ET AL., supra note 130, at app. B, 61 (2011).

718 WIDENER LAW JOURNAL [Vol. 23

implementing the Uniform Contribution Among Joint Tort-feasors

Act."

266

In Scapa Dryer Fabrics v. Saville,

267

the court reversed an

asbestos bodily injury judgment against Scapa because the trial

court failed to properly account for the plaintiff's trust

recoveries.

268

The court remanded the case to permit discovery of

plaintiff's settlements with all section 524(g) trusts in order to

determine the appropriate amount of setoffs, but also held that

Scapa could only reduce the judgment where the releases identified

the trust as a joint tortfeasor and/or permitted setoffs.

269

Thus, if a

trust release contained 'no admission' language (as many of them

do) and did not include a provision for treatment of the trust as a

joint tortfeasor, Scapa was not entitled to a setoff.

270

Just nine months after Maryland's highest court cited a

complete lack of appellate jurisprudence around the country, the

Superior Court of Pennsylvania affirmed a trial court's use of its

equitable powers to set-off a $492,007 asbestos bodily injury

verdict against Honeywell to account for nearly $150,000 in

recoveries from five trusts.

271

The plaintiff argued against a setoff

for her settlements with the Armstrong, U.S. Gypsum, and

National Gypsum trusts (totaling nearly $105,000 or 20% of the

entire verdict) because the releases did not have the specific setoff

language often found in settlements with the Johns-Manville

Trust.

272

The trial court rejected the plaintiff's argument as "without

merit on its face" because the plaintiff accepted bankruptcy trust

money "based on the fundamental contention that they were liable

for [Reed's] decedent's mesothelioma" and "[Reed] cannot now

come before this court and argue that there was no evidence of

exposure to asbestos from said manufacturer's products presented

266

Scapa Dryer Fabrics, Inc. v. Saville, 16 A.3d 159, 174 n.12 (Md. 2011).

267

Scapa Dryer Fabrics, Inc. v. Saville, 16 A.3d 159 (Md. 2011).

268

Id. at 181.

269

Id.

270

Id. at 180-81; see also John Crane, Inc. v. Linkus, 988 A.2d 511, 530

(Md. 2010).

271

Reed v. Honeywell, Int'l, Inc., Nos. 3022 EDA 2010, 3023 EDA 2010,

2011 Pa. Super. LEXIS 4797 *4-6 (Pa. Super. Ct. Dec. 6, 2011).

272

Id. at *19, *21-22.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 719

at trial in order to effect a double recovery."

273

The Pennsylvania

Uniform Contribution Among Tortfeasors Act defines a "joint

tortfeasor" as "two or more persons jointly or severally liable in

tort for the same injury to persons or property, whether or not

judgment has been recovered against all or some of them."

274

Although defendants are not permitted to include bankrupt entities

on the verdict form in Pennsylvania, the trial court molded the

verdict to reflect all trust recoveries, regardless of the language

contained in the trust settlement agreements.

275

The court reviewed

the claims forms and supporting affidavits the plaintiff submitted

to the trusts and subsequently determined that the trusts were joint

tortfeasors.

276

The Superior Court of Pennsylvania affirmed

Honeywell's entitlement to a pro tanto (dollar-for-dollar) setoff for

each of the trust recoveries, finding that "a combined reading of

the claims forms, affidavits and trust distribution process for the

subject bankrupt entities . . . provides a sufficient basis" to have

those entities deemed joint tortfeasors.

277

Pennsylvania also made substantial strides in leveling the

playing field for asbestos defendants with passage of the Fair Share

Act, which eliminated joint and several liability in favor of a

modified rule that imposes joint and several liability on defendants

held more than sixty percent liable.

278

Oklahoma and Tennessee

meanwhile codified the elimination of joint and several liability in

2011 and 2013, respectively.

279

273

Id. at *24 (alteration in original).

274

42 PA. CONS. STAT. § 8322 (2011) (emphasis added).

275

Reed, 2011 Pa. Super. LEXIS 4797 at *23-25.

276

Id. at *23-25.

277

Id. at *26.

278

tit. 42, § 7102(a.1)(3)(iii) (applying to injuries that occur or are

discovered after the June 28, 2011 effective date).

279

Oklahoma passed Senate Bill 862 in 2011 (codified at OKLA. STAT., tit.

23, § 15.1 (2011)), and Tennessee adopted Senate Bill 56 on April 29, 2013

(codified at T

ENN. CODE ANN. § 29-11-107 (2013)). The Tennessee statute

contains an exception, stating that joint and several liability remains in effect

"[a]mong manufacturers only in a product liability action . . . but only if such

action is based upon a theory of strict liability or breach of warranty." § 29-11-

107(b)(2).

720 WIDENER LAW JOURNAL [Vol. 23

Illinois has been portrayed in the past as perhaps the worst

state for asbestos defendants because of the state's joint and several

liability rules applicable to asbestos claims, and because of the

Lipke Rule, which made Illinois the only state in the country to

preclude defendants from introducing evidence of alternative

product exposures.

280

In 2009, however, the Supreme Court of

Illinois rejected the Lipke Rule, stating that

[t]he single paragraph in Lipke from which the

exclusionary rule of other-exposure evidence is derived

neither suggested nor held that a defendant should be

barred from introducing evidence of other potential

causes of injury where it pursues a sole proximate cause

defense, nor that juries should be deprived of evidence

critical to a causation determination.

281

Despite Lipke's demise, Madison County, Illinois remains a

constant on the "judicial hellhole" list.

282

The discoverability of trust submissions and the ability to

allocate liability or obtain appropriate setoffs to account for the

culpability of, and payments made on behalf of, bankrupt entities is

of little value to defendants if plaintiffs routinely delay their trust

claims until after litigation. The Maryland and New Jersey cases

discussed above demonstrate that certain plaintiffs' firms

intentionally delay the filing of trust claims to make it more

difficult for defendants to construct the plaintiffs' true exposure

history for a jury. Indeed, according to the RAND study, "[a]

280

Lipke v. Celotex Corp., 505 N.E.2d 1213, 1221 (Ill. App. Ct. 1987),

appeal dismissed, 536 N.E.2d 71 (Ill. 1989).

281

Nolan v. Weil-McClain, 910 N.E.2d 549, 564 (Ill. 2009).

282

"Despite having only .008 % of the U.S. population, Madison County

now accounts for one in four asbestos lawsuits filed in the U.S. Only 1 in 10 of

the lawsuits filed in Madison County is filed by a plaintiff who ever worked or

lived in the county." A

M. TORT REFORM FOUND., JUDICIAL HELLHOLES

2013/2014 22-23 (2013), available at http://www.atra. org/reports/hellholes.

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 721

prominent California plaintiffs' attorney said that he typically will

delay filing [trust claims] until after trial."

283

Very few jurisdictions have attempted to close this loophole

through amendments to the standard CMOs that require plaintiffs

to make all trust claims prior to trial. Notably, Massachusetts'

Amended Pre-Trial Order No. 9 requires plaintiffs to file "all

known bankruptcy claims" prior to trial.

284

The Montgomery

County Court of Common Pleas of Pennsylvania requires plaintiffs

to "file[] any and all Asbestos Bankruptcy Trust claims available to

him or her" 120 days prior to trial.

285

The NYCAL CMO was

amended in 2003 to require plaintiffs to identify trust claims they

"intend" to file, though one plaintiffs' attorney does not believe the

requirement is legally enforceable,

286

and Judge Heitler recently

suggested that the CMO does not require plaintiffs to identify

"claims they may or may not anticipate filing."

287

Besides the trust transparency legislation recently enacted in

Ohio and Oklahoma,

288

West Virginia's 2010 CMO offers the most

283

DIXON ET AL., supra note 130, at 62. In Texas, "[p]laintiffs' attorneys

indicated that they would delay filing [trust claims] if they believed that the

information would assist the defendants in assigning liability to RTPs" because

of the worry that "defense attorneys will misconstrue the information in a trust

claim filing in order to inappropriately increase the share of fault assigned to

bankrupt firms." Id. at 77.

284

Amended Pre-Trial Order No. 9 at XIII(C)(7)(o)(2), In re Mass. State

Court Asbestos Litig. (effective June 27, 2012).

285

Order at ¶ 10, Thibeault v. Allis Chalmers Corp. Prod. Liab. Trust., No.

07-27545 (Pa. Ct. C.P. Montgomery Cnty. Feb. 22, 2010).

286

DIXON ET AL., supra note 130, at 68-69 & n.24. This stands in contrast

with a case cited in our 2008 article, Cannella v. Abex, No. 1037729/07 (N.Y.

Sup. Ct. N.Y. Cnty. Jan. 24, 2008) (on file with authors), in which Judge

Kornreich warned Weitz & Luxenburg that she would vacate a verdict if they

filed post-verdict trust claims.

287

In re N.Y. City Asbestos Litig., 966 N.Y.S.2d 347, 2012 N.Y. Misc.

LEXIS 5646, at *30 (N.Y. Sup. Ct., N.Y. Cnty. Nov. 15, 2012) (emphasis in

original). Despite the uncertainty caused by that particular comment, the end

result – the court rejecting Weitz & Luxenburg's request to strike the provision

as unconstitutional – cannot be ignored. See Recommendation of Special Mater

Shelley Rossoff Olsen, In re New York City Asbestos Litig., Index No.

40000/988 (N.Y. Sup. Ct. N.Y. Cnty. Mar. 12, 2013).

288

See supra Part III.A.i.

722 WIDENER LAW JOURNAL [Vol. 23

comprehensive solution, requiring plaintiffs to provide a statement

identifying all trust claims that exist or may exist with an affidavit

"that the statement is based upon a good faith investigation of all

potential claims against asbestos trusts."

289

Non-compliance can

result in sanctions.

290

The CMO also contains a "Set-offs and

Assignments" provision allowing for a pro tanto setoff for the

"paid liquidated value of the trust claims," and requiring plaintiffs

to assign unpaid claims to the defendant and "cooperate with and

assist the defendants" with those assigned claims.

291

Outside of these CMOs, other courts are resistant to compel

plaintiffs to disclose anticipated trust claims or to actually make all

trust claims prior to trial. In the Eastern District of Pennsylvania

asbestos MDL, the court has sustained objections to discovery

asking plaintiffs to identify trust claims that they intend to file.

292

Judge Davidson, who presides over the Texas asbestos MDL,

would not compel plaintiffs to submit trust claims, citing to both

the absence of proof that plaintiffs intentionally delay the filing of

trust claims, and the legislature's refusal to act on the proposed

Asbestos Claims Transparency Act.

293

Courts in Delaware and

Connecticut similarly have refused to compel plaintiffs to disclose

yet-to-be-filed trust claims.

294

289

2010 Asbestos Case Management Order with Attached Exhibits at 26,

In re Asbestos Pers. Injury Litig., No. 03-C-9600 (W. Va. Cir. Ct. Kanawha

Cnty. Mar. 3, 2010).

290

Id. at 27.

291

Id. at 28.

292

Pretrial Order at 1-2, In re Asbestos Prod. Liab. (No. VI), MDL 875

(E.D. Pa. Aug. 4, 2011) (Strawbridge, M.J.) (relating to all cases in which the

Cascino Vaughan Law Office is listed as plaintiffs' counsel).

293

Hearing on Motion to Compel at 16-18, Brumley v. Azko Nobel, Inc.,

No. 17509-2010 (Tex. Dist. Ct. Harris Cnty. Feb. 12, 2012). The Asbestos

Claims Transparency Act was introduced in 2011, where it remains pending.

Bill: HB 2034, T

EX. LEGIS. ONLINE, http://www.capitol.state.tx.us/BillLookup/

History.aspx?LegSess=82R&Bill=HB2034 (last visited May 27, 2014); Bill: SB

1202, T

EX. LEGIS. ONLINE http://www.capitol.state.tx.us/BillLookup/History.as

px?LegSess=82R&Bill=SB1202 (last visited May 27, 2014).

294

McGhee v. AT&T, Inc., No. 10C-12-114, *106-07 (Del. Super. Ct. June

7, 2012) (acknowledging the "potential for abuse" with respect to delayed trust

claims but stating that "you could find out, in my courtroom anyway, whether

the plaintiff was exposed to asbestos in connection with other entities which are

2014] THE NEED FOR FURTHER TRANSPARENCY 2014 UPDATE 723

Finally, in Washington, courts have rejected defendants'

attempts to obtain setoffs for amounts that plaintiffs could receive

from various trusts post-verdict.

295

In the Barabin v. Astenjohnson,

Inc.

296

case, the defendants sought a setoff based on an expert

affidavit that identified certain trusts to which the plaintiff could

have made claims based on his exposure history (and valued those

claims under the trusts' respective TDPs and payment

schedules).

297

The court, however, ruled that the Revised Code of

Washington precluded offsets for unconsummated settlements and

although "risk [for double recovery] is inherent in the system, that

issue is for the legislature and not for this Court to resolve."

298

The

court also credited Alan Brayton's testimony at the fairness hearing

that his firm does not delay trust claims.

299

VI.

CONCLUSION

While much has been accomplished since 2008, much more

remains to be done. As the Garlock experience demonstrates,

transparency exposes abuses.

300

Indeed, that court was convinced,

even from the limited discovery it permitted, that the problems of

evidence manipulation and concealment in the tort system are

inconsistent and contradictory claiming in the trust system is

widespread. As Judge Hodges wrote, "[t]he limited discovery

now in bankruptcy, but beyond that, I don't think I can force them to say

whether they contemplate making a claim, and in fact, they may not know");

Ouellette v. A.W. Chesterton Co., No. CV05-4009802 (Conn. Super. Ct. Mar.

19, 2012) (denying motion to compel plaintiffs to disclose future trust claims,

stating that defendants should be able to learn exposure history during discovery

and demanding disclosure of future claims involves disclosure of trial strategy).

295

Coulter v. Asten Grp., Inc., 230 P.3d 169, 174 (Wash. Ct. App. 2010);

Barabin v. Astenjohnson, Inc., No. C07-1454RSL, 2010 U.S. Dist. LEXIS

102397, at *11-13 (W.D. Wash. Sept. 13, 2010).

296

Barabin v. Astenjohnson, Inc., Case No. C07-1454RSL, 2010 U.S. Dist.

LEXIS 102397 (W.D. Wash. Sept. 13, 2010).

297

Id. at *11, *13.

298

Id. at *15.

299

Id. at *17-18.

300

In re Garlock Sealing Techs., LLC, 504 B.R. 71, 86 (Bankr. W.D.N.C.

Jan. 10, 2014).

724 WIDENER LAW JOURNAL [Vol. 23

allowed by the court demonstrated that almost half of those cases

involved misrepresentation of exposure evidence. It appears certain

that more extensive discovery would show more extensive

abuse."

301

Judge Hodges' decision in Garlock should be a wakeup call to

courts, legislatures, and trust fiduciaries alike. As we advocated in

2008, if claiming abuses are to be effectively countered, 360

degree transparency between the tort system and the section 524(g)

trust system, and among the section 524(g) trusts themselves, is

needed.

302

Claimants should be required to self-disclose in the tort

system, but tort defendants also should be able to obtain

confirmatory discovery from the trusts.

303

Moreover, the trusts

themselves should be required to disclose payment and exposure

information to prevent the sort of "disappearance" of alternative

exposure evidence uncovered by the Garlock court, both for the

sake of the formerly peripheral tort-system defendants and for the

protection of bona fide current and future trust claimants whose

payouts from the trusts are being diluted by payments extracted by

claimants providing false, contradictory, and/or unsupportable

exposure claims.

304

Beyond the specific abuses of the asbestos claiming process,

the revelations in Garlock and other cases raise fundamental

questions about the integrity of a litigation process in which false

claiming testimony has become widespread. As in other areas of

human endeavor, in the tort litigation process "[s]unlight is said to

be the best of disinfectants."

305

301

Id. (emphasis in original).

302

Shelley, Cohn & Arnold, supra note 1, at 277.

303

Id. at 272.

304

Id. at 279-81.

305

Louis D. Brandeis, What Publicity Can Do, HARPER'S WEEKLY, Dec.

20, 1913, at 10, reprinted in Louis D. Brandeis, OTHER PEOPLE'S MONEY AND

HOW THE BANKERS USE IT 92 (1914).