TESTIMONY OF MARK BEHRENS, ESQ.
SHOOK, HARDY & BACON L.L.P.
1155 F STREET, NW, SUITE 200
WASHINGTON, DC 20004
(202) 639-5621
MBEHRENS@SHB.COM
BEFORE THE TASK FORCE ON
ASBESTOS LITIGATION AND BANKRUPTCY TRUSTS
OF THE AMERICAN BAR ASSOCIATION’S
TORT TRIAL AND INSURANCE PRACTICE SECTION
JUNE 6, 2013
TESTIMONY OF MARK A. BEHRENS, ESQ.
SHOOK, HARDY & BACON L.L.P.
Thank you for the invitation to testify before the Task Force on Asbestos Litigation and
Bankruptcy Trusts of the American Bar Association’s Tort Trial and Insurance Section.
PROFESSIONAL BACKGROUND
I co-chair the Washington, D.C.-based Public Policy Group of Shook, Hardy & Bacon
L.L.P., an international law firm that primarily represents corporate defendants in product
liability and complex tort litigation. For over two decades, I have been involved in product
liability law, defense litigation, liability reform, and counseling in the prevention of liability
exposure. I am an elected member of The American Law Institute and taught Advanced Torts as
a Distinguished Visiting Practitioner in Residence at Pepperdine University Law School in 2010.
I spend a substantial amount of my time examining and writing about asbestos litigation
trends and issues. I have also testified before state legislatures in support of legislation to bring
about greater transparency between the asbestos bankruptcy trust and civil tort systems. I have
worked on behalf of the U.S. Chamber’s Institute for Legal Reform and serve as counsel to the
Coalition for Litigation Justice, Inc.,* a nonprofit association formed by insurers in 2000 to
address and improve the asbestos litigation environment. The Coalition files amicus curiae
briefs in important cases that may affect the asbestos litigation environment. I also counsel
companies that have been named as defendants in asbestos cases.
I received a J.D. from Vanderbilt University Law School in 1990 and a B.A. in
Economics from the University of Wisconsin-Madison in 1987.
*
The Coalition includes Century Indemnity Company; Chubb & Son, a division of Federal
Insurance Company; Fireman’s Fund Insurance Company; Liberty Mutual Insurance Group; and
the Great American Insurance Company.
TESTIMONY
I.
OVERVIEW OF THE ASBESTOS LITIGATION
Now entering its fourth decade,1 asbestos litigation is the “longest-running mass tort.”2
Originally and for many years, asbestos litigation typically pitted a “dusty trade” worker with
lung cancer, mesothelioma, or impairing asbestosis “against the asbestos miners, manufacturers,
suppliers, and processors who supplied the asbestos or asbestos products that were used or were
present at the claimant’s work site or other exposure location.”3 Much of this work involved
insulation containing long, rigid amphibole fibers, rather than the more common, but far less
toxic, chrysotile form of fiber.4 Occupations such as shipbuilders and Navy personnel working
around heavy amphibole asbestos exposures on World War II ships; insulators blowing large
clouds of free amphibole or mixed fibers; and asbestos factory workers exposed to “snowstorms”
1
See Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th Cir. 1973) (asbestos
manufacturers found strictly liable for injuries to industrial insulation workers exposed to their
products), cert. denied, 419 U.S. 869 (1974).
2
Helen Freedman, Selected Ethical Issues in Asbestos Litigation, 37 Sw. U. L. Rev. 511,
511 (2008).
3
James S. Kakalik et al., Costs of Asbestos Litigation 3 (Rand Corp. 1983).
4
See, e.g., In re Asbestos Litig., 911 A.2d 1176, 1181 (Del. Super. May 9, 2006) (“[I]t is
generally accepted in the scientific community and among government regulators that amphibole
fibers are more carcinogenic than serpentine (chrysotile) fibers.”), cert. denied, 2006 WL
1579782 (Del. Super. June 7, 2006), appeal refused, 906 A.2d 806 (Del. Super. June 13, 2006);
Bartel v. John Crane, Inc., 316 F. Supp. 2d 603, 605 (N.D. Ohio 2004) (“While there is debate in
the medical community over whether chrysotile asbestos is carcinogenic, it is generally accepted
that it takes a far greater exposure to chrysotile fibers than to amphibole fibers to cause
mesothelioma.”), aff’d sub nom. Lindstrom v. A-C Prod. Liab. Trust, 424 F.3d 488 (6th Cir.
2005).
2
of raw asbestos — these are the classic settings for older cases and for known sources of asbestos
disease.5
By the late 1990s, the asbestos litigation had reached such proportions that the United
States Supreme Court noted the “elephantine mass” of cases,6 and referred to the litigation as a
“crisis.”7 The vast majority of claims in this time period were filed by unimpaired plaintiffs
diagnosed largely through lawyer-arranged mass screenings.8 The mass of filings by the nonsick pressured many of the traditional defendants to seek bankruptcy court protection.9 Each of
these bankruptcies put mounting and cumulative financial pressure on other primary defendants,
creating a domino effect.10 The result was a flood of bankruptcies between 2000-2002.11
5
See James S. Kakalik et al., Variation in Asbestos Litigation Compensation and Expenses
vi-vii (Rand Corp. 1984) (“For the sample claims closed by all or nearly all defendants in the 32
months we studied…[t]hree worker classifications accounted for the vast majority of asbestosrelated litigation: shipyard workers (37 percent of all closed claims); asbestos-related factory
workers (35 percent); and insulation workers (21 percent).”).
6
Ortiz v. Fibreboard Corp., 527 U.S. 815, 821 (1999).
7
Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 597 (1997).
8
See American Bar Association Commission on Asbestos Litigation, Report to the House
of Delegates (2003), at http://www.abanet.org/leadership/full_report.pdf;. Alex Berenson,
A Surge in Asbestos Suits, Many by Healthy Plaintiffs, N.Y. Times, Apr. 10, 2002, at A1 (“Very
few new plaintiffs have serious injuries, even their lawyers acknowledge.”); Owens Corning v.
Credit Suisse First Boston, 322 B.R. 719, 723 (D. Del. 2005) (“Labor unions, attorneys, and
other persons with suspect motives [have] caused large numbers of people to undergo X-ray
examinations (at no cost), thus triggering thousands of claims by persons who had never
experienced adverse symptoms.”); Eagle-Picher Indus., Inc. v. Am. Employers’ Ins. Co.,
718 F. Supp. 1053, 1057 (D. Mass. 1989) (“[M]any of these cases result from mass X-ray
screenings at occupational locations conducted by unions and/or plaintiffs’ attorneys, and many
claimants are functionally asymptomatic when suit is filed.”).
9
See Mark A. Behrens, Some Proposals for Courts Interested in Helping Sick Claimants
and Solving Serious Problems in Asbestos Litigation, 54 Baylor L. Rev. 331 (2002).
10
See In re Collins, 233 F.3d 809, 812 (3d Cir. 2000), cert. denied, 532 U.S. 1066 (2001);
see also Mark A. Behrens & Monica Parham, Stewardship for the Sick: Preserving Assets For
Asbestos Victims Through Inactive Docket Programs, 33 Tex. Tech L. Rev. 1 (2001).
3
As a result of these bankruptcies, “the net…spread from the asbestos makers to
companies far removed from the scene of any putative wrongdoing.”12 Plaintiff’s lawyers began
to target defendants that “manufactured products in which asbestos was encapsulated” or that
“distributed products containing asbestos, or owned premises that contained asbestos.”13 One
plaintiffs’ attorney described the litigation as an “endless search for a solvent bystander.”14
Commentators have explained that,
Prior to the Bankruptcy Wave, asbestos lawsuits were centered on the thermal
insulation products and industrial settings that most scientific literature considered
to present the highest excess exposure risk…. However, following the bankruptcies
of those frontline defendants during the Bankruptcy Wave, plaintiff attorneys
shifted their litigation strategy away from the traditional thermal insulation
defendants and towards peripheral and new defendants associated with the
manufacturing and distribution of alternative asbestos-containing products such as
gaskets, pumps, automotive friction products, and residential construction
products.15
11
See Mark D. Plevin et al., Where Are they Now, Part Six: An Update on Developments in
Asbestos-Related Bankruptcy Cases, 11:7 Mealey’s Asbestos Bankr. Rep. 1, Chart 1 (Feb. 2012)
(documenting four asbestos-related bankruptcies in 2000, twelve in 2001, and thirteen in 2002 –
nearly as many as in the previous two decades combined).
12
Editorial, Lawyers Torch the Economy, Wall St. J., Apr. 6, 2001, at A14, abstract at 2001
WLNR 1993314; see also Patrick M. Hanlon & Anne Smetak, Asbestos Changes, 62 N.Y.U.
Ann. Surv. Am. L. 525, 556 (2007) (“The surge of bankruptcies in 2000-2002…triggered higher
settlement demands on other established defendants, including those attempting to ward off
bankruptcy, as well as a search for new recruits to fill the gap in the ranks of defendants through
joint and several liability.”); Stephen J. Carroll et al., Asbestos Litigation xxiii (RAND Corp.
2005) (“When increasing asbestos claims rates encouraged scores of defendants to file Chapter
11 petitions…the resulting stays in litigation…drove plaintiff attorneys to press peripheral nonbankrupt defendants to shoulder a larger share of the value of asbestos claims and to widen their
search for other corporations that might be held liable for the costs of asbestos exposure and
disease.”).
13
American Academy of Actuaries’ Mass Torts Subcommittee, Overview of Asbestos
Claims Issues and Trends 3 (Aug. 2007).
14
‘Medical Monitoring and Asbestos Litigation’ - A Discussion with Richard Scruggs and
Victor Schwartz, 17:3 Mealey’s Litig. Rep.: Asbestos 5 (Mar. 1, 2002) (Mr. Scruggs).
15
Marc C. Scarcella et al., The Philadelphia Story: Asbestos Litigation Bankruptcy Trusts
and Changes in Exposure Allegations from 1991-2010, 27:17 Mealey’s Litig. Rep.: Asbestos 1
4
The dockets reflect that the litigation has moved beyond the era in which manufacturers,
producers, suppliers, and distributors of friable asbestos-containing products or raw asbestos are
the principal defendants.16 The expanded range of defendants has produced exponential growth
in the dimensions of the litigation. In 2010, the Towers Watson consulting firm identified “more
than 10,000 companies, including subsidiaries, named in asbestos litigation.”17 “Parties formerly
viewed as peripheral defendants are now bearing the majority of the costs of awards relating to
decades of asbestos use.”18
In recent years, the disease mix has changed too. By the mid-2000s, legislative and
judicial reforms had greatly diminished the economic incentive for plaintiffs’ lawyers to conduct
mass screenings and file claims on behalf of the non-sick.19 The litigation began to focus on
mesothelioma claims, and that continues today.20 One recent online advertising study found that
“mesothelioma settlement,” “mesothelioma asbestos attorney,” “asbestos attorney,” and
(Oct. 10, 2012); see also Charles Bates et al., The Naming Game, 24:15 Mealey’s Litig. Rep.:
Asbestos 1, 4 (Sept. 2, 2009) (“As the bankrupt companies exited the tort environment, the
number of defendants named in a complaint increased, on average, from fewer than 30 on
average to more than 60 defendants per complaint.”); Charles Bates et al., The Claiming Game,
25:1 Mealey’s Litig. Rep.: Asbestos 1 (Feb. 3, 2010).
16
See Congressional Budget Office, The Economics of U.S. Tort Liability: A Primer 8
(Oct. 2003) (asbestos suits have expanded “from the original manufacturers of asbestos-related
products….”).
17
Towers Watson, A Synthesis of Asbestos Disclosures From Form 10-Ks - Insights,
Apr. 2010, at 1.
18
Overview of Asbestos Claims Issues and Trends, supra, at 3.
19
See Mark A. Behrens, What’s New in Asbestos Litigation?, 28 Rev. Litig. 501 (2009); see
also Mark A. Behrens, Asbestos Litigation Screening Challenges: An Update, 26 T.M. Cooley
L. Rev. 721 (2009; Lester Brickman, On the Applicability of the Silica MDL Proceeding to
Asbestos Litigation, 12 Conn. Ins. L.J. 289 (2005–2006).
20
See Helen Freedman, Selected Ethical Issues in Asbestos Litigation, 37 Sw. U. L. Rev.
511, 513 (2008) (“Perhaps the most dramatic change since the dawn of the new century has been
the restriction of the litigation to the functionally impaired.”).
5
“asbestos asbestos law firms” were the top four most expensive Google AdWords, commanding
between $107 and $143 per click.21
“Mesothelioma cancer” and “asbestos cancer” placed
twelfth ($71) and eighteenth ($61), respectively.22
II.
THE PROLIFERATION OF ASBESTOS BANKRUPTCY TRUSTS
To date, over 100 companies with asbestos-related liabilities have filed bankruptcy,
allowing these companies to channel their asbestos liabilities into trusts and insulate themselves
from tort claims in perpetuity.23
According to a 2011 report by the U.S. Government
Accountability Office, “the number of asbestos personal injury trusts increased from 16 trusts
with combined total of $4.2 billion in assets in 2000 to 60 with a combined total of over $36.8
billion in assets in 2011.”24
A recent, major development in the asbestos litigation relates to the impact of the many
trusts set up in bankruptcy to pay personal injury claims against former asbestos defendants and
the impact of those trusts on civil tort litigation.25
21
See Barry Schwartz, Mesothelioma, Asbestos, Annuity: Google’s Most Expensive
Keywords, Search Engine Land (Nov. 9, 2012) (linking to http://www.fetch123.com/SEM/themost-expensive-keywords-in-google).
22
See id.
23
See 11 U.S.C. § 524(g); Lloyd Dixon et al., Asbestos Bankruptcy Trusts: An Overview of
Trust Structure and Activity with Detailed Reports on the Largest Trusts 25 (Rand Corp. 2010);
Mark D. Plevin et al., supra (Chart 1); New York City Asbestos Litigation, Bankruptcies,
http://www.nycal.net/bankruptcies.htm (2013).
24
U.S. Government Accountability Office, GAO-11-819, Asbestos Injury Compensation:
The Role and Administration of Asbestos Trusts 3 (Sept. 2011); see also Lloyd Dixon &
Geoffrey McGovern, Asbestos Bankruptcy Trusts and Tort Compensation (Rand Corp. 2011);
Marc C. Scarcella & Peter R. Kelso, Asbestos Bankruptcy Trusts: A 2012 Overview of Trust
Assets, Compensation & Governance, 11:11 Mealey’s Asbestos Bankr. Rep. 1 (June 2012).
25
See William P. Shelley et al., The Need for Transparency Between the Tort System and
Section 524(g) Asbestos Trusts, 17 Norton J. Bankr. L. & Prac. 257 (2008).
6
III.
ASBESTOS BANKRUPTCY TRUST MANIPULATION AND ABUSE
Examples of asbestos bankruptcy trust submission abuses have materialized. A widely-
reported example occurred in Kananian v. Lorillard Tobacco Co.,26 where Cleveland Judge
Harry Hanna barred a prominent California asbestos plaintiffs’ firm from his court after he found
that the firm and one of its partners failed to abide by the rules of the court proscribing
dishonesty, fraud, deceit, and misrepresentation.27 An Ohio Court of Appeals and the Ohio
Supreme Court let Judge Hanna’s ruling stand.28 Judge Hanna said later, “In my 45 years of
practicing law, I never expected to see lawyers lie like this.”29 Judge Hanna added, “It was lies
upon lies upon lies.”30
Judge Hanna’s ruling in Kananian received national attention for exposing “one of the
darker corners of tort abuse” in asbestos litigation: inconsistencies between allegations made in
open court and those submitted to trusts set up by bankrupt companies to pay asbestos-related
claims.31 As the Cleveland Plain Dealer reported, Judge Hanna’s decision ordering the plaintiff
26
No. CV-442750 (Ohio Ct. Com. Pl. Cuyahoga County Jan. 17, 2007).
27
See Ohio Judge Bars Calif. Firm from His Court, Nat’l L.J., Jan. 22, 2007, at 3 (“An
Ohio state court judge has barred Novato, Calif.-based Brayton Purcell and one of its lawyers
from appearing in that court due to their alleged dishonesty in litigating a mesothelioma case.”);
Thomas J. Sheeran, Ohio Judge Bans Calif. Lawyer in Asbestos Lawsuit, Cincinnati Post, Feb.
20, 2007, at A3 (“A low-key judge fed up with disrespectful behavior and alleged lies by an
attorney created a stir with a courtroom ban on the lawyer from a nationally known San
Francisco-area law firm that handles asbestos-related lawsuits coast-to-coast.”).
28
See Kananian v. Lorillard Tobacco Co., No. 89448 (Ohio Ct. App. Feb. 21, 2007)
(dismissing appeal as moot, sua sponte), review denied, 878 N.E.2d 34 (Ohio 2007); see also
Behrens, supra, 28 Rev. Litig. at 550-552.
29
James F. McCarty, Judge Becomes National Legal Star, Bars Firm from Court Over
Deceit, Cleveland Plain Dealer, Jan. 25, 2007, at B1.
30
Id.
31
Editorial, Cuyahoga Comeuppance, Wall St. J., Jan. 22, 2007, at A14; see also Kimberly
A. Strassel, Opinion, Trusts Busted, Wall St. J., Dec. 5, 2006, at A18 (“[One] law firm filed a
7
to produce proof of claim forms “effectively opened a Pandora’s box of deceit…. Documents
from the six other compensation claims revealed that [plaintiff’s lawyers] presented conflicting
versions of how Kananian acquired his cancer.”32
Emails and other documents from the
plaintiff’s attorneys also showed that their client had accepted monies from entities to which he
was not exposed, and one settlement trust form was “completely fabricated.”33 The Wall Street
Journal editorialized that Judge Hanna’s opinion should be “required reading for other judges”
to assist in providing “more scrutiny of ‘double dipping’ and the rampant fraud inherent in
asbestos trusts.”34
In a Maryland case, Warfield v. AC&S, Inc.,35 defendants aggressively pursued discovery
of trust claims and were forced to file motions to compel, despite the fact that prior rulings made
it clear that trust claims materials must be produced.36 “At a hearing on the matter, plaintiff’s
counsel explained that he had been slow in producing the trust materials because he disagreed
with the court’s prior ruling, some two years previously, and went on to complain that the court
claim to one trust, saying Kananian had worked in a World War II shipyard and was exposed to
insulation containing asbestos. It also filed a claim to another trust saying he had been a
shipyard welder. A third claim, to another trust, said he’d unloaded asbestos off ships in Japan.
And a fourth claim said that he’d worked with ‘tools of asbestos’ before the war. Meanwhile, a
second law firm, Brayton Purcell, submitted two more claims to two further trusts, with still
different stories…. [Brayton Purcell then] sued Lorillard Tobacco, this time claiming its client
had become sick from smoking Kent cigarettes, whose filters contained asbestos for several
years in the 1950s.”).
32
McCarty, supra, at B1.
33
Daniel Fisher, Double-Dippers, Forbes, Sept. 4, 2006, at 136, 137.
34
Cuyahoga Comeuppance, supra, at A14.
35
No. 24X06000460, Consolidated Case No. 24X09000163, Jan. 11, 2011 Mesothelioma
Trial Group (M 112).
36
See Problems with Asbestos Compensation System, Hearing Before The Subcommittee
on the Constitution of the Committee on the Judiciary, House of Representatives, 111th Cong.
(Sept. 9, 2011) (statement of James L. Stengel), at 2011 WLNR 24791123.
8
had ‘opened Pandora’s Box’ by requiring their disclosure.”37 When production was finally made
on the eve of trial, the “reasons for counsel’s reluctance to produce the trust materials were made
clear. There were substantial and inexplicable discrepancies between the positions taken in
[c]ourt and the trust claims.”38 “Despite specific and explicit discovery requests, plaintiff had
failed to disclose nine trust claims that had been made. As revealed in the claim forms, the
period of exposure alleged in the litigation versus that alleged in the trust submissions was
materially different.”39 In the tort system, Mr. Warfield claimed under oath that he was exposed
to asbestos exclusively between 1965 and the mid-1970’s, focusing on the products of the
solvent defendants and avoiding application of a Maryland statutory damage cap for later
exposures. In the trust claim submissions, however, Mr. Warfield claimed exposure from 1947
to 1991, “both different in scope, but also clearly triggering the damage cap.”40 “Of note, eight
of the trust forms had been submitted before Warfield testified” in court.41
In another Maryland case, “Edwards, the plaintiff had, prior to trial, failed to disclose
whether or not he had filed any claims with bankruptcy trusts. In addition, as trial drew near,
plaintiff amended his discovery responses to assert that the only asbestos-containing material to
which he had been exposed was that of the only remaining solvent defendant.”42 Two weeks
prior to trial, however, the plaintiff produced claims materials relating to sixteen trusts. “Again,
37
Id.
38
Id.
39
Id.
40
Id.
41
Id.
42
Id.
9
there was a clear inconsistency in the alleged exposure. Significantly, most of the trust forms
had been filed in 2008, before the initial discovery responses.”43
In a Virginia case, Dunford v. Honeywell Corp., the plaintiff’s assertion that his asbestosrelated illness was due to exposure only to friction products was contradicted by three defendant
automakers who showed that the plaintiff had made multiple trust claims certifying exposure to
products made by other asbestos defendants.44 The plaintiff also reportedly filed a separate tort
action against these asbestos defendants.45 Presiding Judge Thomas Home described the case as
the “worst deception” used in discovery that he had seen in his twenty-two years on the bench.46
Delaware Superior Court Judge (ret.) Peggy Ableman provided another example of abuse
in her recent testimony before a U.S. Congressional committee.47 Judge Ableman discussed a
case she presided over in which the plaintiffs filed a lawsuit against twenty-two asbestos
defendants.
Although the court had a standing order requiring plaintiffs to disclose all
bankruptcy trust claims materials, and the defendants specifically requested this information in
interrogatories, “nowhere did plaintiffs identify exposure through any of the twenty entities to
whom bankruptcy claims were submitted.”48
43
Instead, plaintiffs claimed the decedent was
Id.
44
See Asbestos Claims Legislation, Hearing Before The Subcommittee on Courts,
Commercial and Administrative Law of the Committee on the Judiciary, House of
Representatives, 112th Cong. (May 10, 2012) (statement of Leigh Ann Schell), at 2012 WLNR
9840045.
45
See id.
46
Id.
47
See Asbestos Claims Transparency, Hearing Before The Subcommittee on Regulatory
Reform, Commercial and Antitrust Law of the Committee on the Judiciary, House of
Representatives, 113th Cong. (Mar. 13, 2013) (statement of Hon. Peggy L. Ableman), at 2013
WLNR 7440143.
48
Id.
10
exposed to asbestos solely through laundering her husband’s work clothes throughout his career
as an electrician, and “emphatically reported” to the court and the sole remaining defendant,
Foster Wheeler, that no bankruptcy submissions had been made and no monies had been
received.49 Two days before trial was set to begin, however, plaintiff’s counsel reported the
existence of two bankruptcy trust settlements – a disclosure that was “directly inconsistent with
[counsel’s] unequivocal representations to the Court and to opposing counsel at the pretrial
conference.”50 By late afternoon of the following day, the day before trial, Foster Wheeler
learned that a total of twenty bankruptcy trust claims had been submitted.51 Judge Ableman
explained, “[a]lthough Foster Wheeler had been led to believe that [the decedent’s] exposure was
solely the result of take-home fibers on her husband’s clothing, at this late point in the litigation,
it became obvious that one or more of Plaintiffs attorneys had been claiming exposure through
[decedent’s] own employment” and that “representations to the bankruptcy trusts painted a much
broader picture of exposure to asbestos than either Plaintiff or any of Plaintiffs attorneys had
acknowledged during the entire course of the litigation.”52
In an Oklahoma case, Bacon v. Ametek, Inc.,53 defendant CertainTeed Corp. learned at
pretrial hearing that the plaintiff failed to disclose nineteen asbestos bankruptcy trust claims and
eleven signed affidavits from product identification witnesses that were submitted with the
claims. The trust claim submissions and co-worker affidavits disclosed exposures to many
49
Id.
50
Id.
51
See id.
52
Id.
53
No. CJ-08-328 (Okla. Dist. Ct. Dec. 2011) (Memorandum in Support of Defendant
CertainTeed Corporation’s Motion to Strike the Testimony of Jasper Hubbard and for Sanctions
Due to Plaintiff’s Discovery Abuse).
11
asbestos products that were never identified during discovery.54 The plaintiff had been paid
approximately $185,000 from five trusts, but “deferred” fourteen other claims worth at least
$313,000.55
In a New Jersey case, Barnes and Crisafi v. Georgia Pacific,56 plaintiff’s counsel
disclosed the existence of bankruptcy trust claims submissions during the pre-trial conference.
The disclosure came about only after defense counsel independently reached out to a
representative of the Johns-Manville Trust who confirmed that a claim had been made on behalf
of one of the plaintiffs.57 Counsel for plaintiff subsequently disclosed the existence of multiple
other trust filings, and attempted to explain the lack of earlier disclosure on the grounds that the
filings were “deferred claims” intended to preserve the trust statute of limitations and seek
compensation at a later time, and were filed by another law firm.58 In response, the court stated
that no such distinction in the type of trust claims filed was expressed in the court’s discovery
order and that the plaintiffs clearly had an obligation to identify and produce this information.59
The court admonished plaintiff’s counsel for violating its order, saying, “You cannot be blind,
deaf and dumb,” and reminded counsel, “You’re an officer of The Court.”60 The court went on
to repeatedly state that this failure to disclose the trust submissions constituted “a major
54
See id. at 1.
55
See id.
56
Nos. MID-L-5018-08 (AS) & MID-L-316-09 (AS) (N.J. Super. Ct. Middlesex County
June 12, 2012) (Pre-Trial Conf. Trans.).
57
See id. at 126.
58
See id. at 128-29.
59
See id.
60
Id. at 129-30.
12
problem,” questioning: “How can I try this case now?”61 After discussing with the parties how
this lack of disclosure prejudiced the defendants, the court decided to postpone the trial that was
scheduled to begin the following week.62
In a Texas case, Stoeckler v. American Oil Co.,63 plaintiff’s counsel waited until the third
day of trial to disclose the existence of additional bankruptcy trust claims submissions. Within a
few hours of the disclosure, after the defendants had an opportunity to review the trust
submissions while the trial continued, defense counsel moved for a mistrial.64 The trust claims
submissions revealed exposures to asbestos products over a longer period of time, starting with
the year of the plaintiff’s birth, and to a broader range of asbestos products.65 Counsel for
defendant Dana Corp. explained to the court that “[o]ur trial strategy, our pretrial strategy, which
was fixed weeks ago, is now thrown up in the air,”66 and “[n]ot only are our experts not prepared
and we have to do more discovery, I think we now need to go back and depose [the plaintiff].”67
Defense counsel continued:
It is too late. There is nothing I can do. I cannot – I don’t get to open again
tomorrow and say, ladies and gentlemen of the jury, I just found out some stuff
yesterday that I didn’t know before, and now let me tell you what the evidence is
going to be. My credibility, my client’s credibility is at risk with this jury, and
there is no cure for that.68
61
Id. at 133-134.
62
See id. at 152.
63
No. 23,451 (Tex. Angelina County Dist. Ct. Jan. 28, 2004) (Trial Trans.).
64
See id. at 63.
65
See id. at 63-65.
66
Id. at 19.
67
Id. at 66.
68
Id.
13
In addition, the court took issue with the discrepancies between the trust submissions and
statements made in the plaintiff’s multiple depositions that no additional asbestos exposures
existed.69 Plaintiff’s counsel attempted to defend these discrepancies on the grounds that the
plaintiff had never seen the trust submission documents because they were submitted by counsel;
an explanation to which the court replied: “you know where this goes, to the Code of
Professional Ethics.”70
Another Texas case, Brassfield v. Alcoa, Inc.,71 demonstrates what appears to be a
purposeful disconnect or willful blindness on the part some plaintiff’s attorneys in tracking
claims submitted to the trusts and within the tort system.
During a cross-examination of
plaintiff’s counsel Edward Moody at a motion’s hearing, Mr. Moody stated that his law practice
was set up in a manner in which neither he nor any single individual could verify for the
purposes of discovery what claims were pending with which asbestos trusts. Rather, Mr. Moody
testified that his computer system could only verify trust claims that had been paid. Mr. Moody
also stated that he was not certified to submit claims to any trust, and that all trust submissions
were handled in a separate law office by a team of paralegals, each responsible for submissions
to a specific trust, such that no individual could readily provide a complete record of every trust
submission.72
Mr. Moody further testified that there was no communication regarding
bankruptcy trust submissions with another plaintiffs’ firm retained in the case.73 In response to
69
See id. at 74.
70
Id.
71
No. 2005-61841 (Tex. Harris County Dist. Ct. Nov. 22, 2006) (Trans. of Motions
Hearing).
72
See id. at 9-10.
73
See id. at 12.
14
this lack of coordination, the presiding judge found that Mr. Moody had not made a good faith
effort to comply with discovery.74 The judge went on to say, “I am frankly ashamed to be part of
a process that allows [Mr. Moody] to collect a fee for things that somebody else does that he is
not authorized to do, and then he gets a fee on the work [in the tort action].”75
More recently, the Wall Street Journal reviewed trust claims and court cases of roughly
850,000 persons who filed claims against the Manville Trust since the late 1980s until as recently
as 2012.76 “The analysis found numerous apparent anomalies: More than 2,000 applicants to the
Manville trust said they were exposed to asbestos working in industrial jobs before they were
12 years old.”77 “Hundreds of others claimed to have the most-severe form of asbestos-related
cancer in paperwork filed to Manville but said they had lesser cancers to other trusts or in court
cases.”78 The study also identified a trust claim that was filed against the Manville Trust by an
individual who did not exist.79
As further evidence of trust claiming practices comes to light, it is my opinion that the
above examples are not rare outliers but instead represent just the tip of the iceberg with respect
to false or exaggerated claims made against asbestos bankruptcy trusts and tort defendants.
74
See id. at 41.
75
Id.
76
See Dionne Searcey & Rob Barry, As Asbestos Claims Rise, So Do Worries About Fraud,
Wall St. J., Mar. 11, 2013, at A1, A14.
77
Id. at A14.
78
Id.
79
See id.
15
IV.
THE TREND OF TRANSPARENCY FOR TRUST CLAIM FILINGS
There is a movement afoot by courts and state legislatures to adopt trust transparency
reforms that generally permit the discovery of asbestos bankruptcy trust claims information and
in some jurisdictions compel plaintiffs to file trust claims before trial.80
A California Court of Appeal in Volkswagen of America, Inc. v. Superior Court of San
Francisco,81 was one of the first appellate courts to embrace defendants’ efforts to discover trust
claims filed by asbestos tort plaintiffs.82 In Volkswagen, the defendant sought discovery of trust
claims forms and supporting documents to obtain information about plaintiff’s asbestos exposure
history.83 The plaintiff objected on various grounds.84 The court rejected plaintiff’s arguments,
finding that “most such documents normally are” discoverable,85 and that the information
requested was “plainly” relevant, “reasonably calculated to lead to admissible evidence, which
includes admissions against interest,” and, with the exception of any settlement correspondence
or offer, not confidential.86
80
See Victor E. Schwartz, A Letter to the Nation’s Trial Judges: Asbestos Litigation, Major
Progress Made Over the Past Decade and Hurdles You Can Vault in the Next, 36 Am. J. of Trial
Advoc. 1, 16-20 (2012) (discussing “recent, major development” of asbestos bankruptcy trusts
and efforts to promote greater transparency between the trust and tort systems).
81
139 Cal. App. 4th 1481 (1st Dist. Div. 3 2006).
82
Earlier decisions include Porter Hayden Co. v. Bullinger, 713 A.2d 962, 969 (Md. 1998);
Skonberg v. Owens-Corning Fiberglas Corp., 576 N.E.2d 28, 34 (Ill. Ct. App. 1st Dist.), appeal
denied, 580 N.E.2d 135 (Ill. 1991).
83
See Volkswagen, 139 Cal. App. 4th at 1489.
84
See id. at 1496-97.
85
Id. at 1485.
86
Id. at 1492, 1497.
16
In Seariver Maritime, Inc. v. Superior Court of San Francisco,87 another California
appellate division addressed whether claim documents submitted to bankruptcy trusts to obtain
compensation for asbestos-related injuries are discoverable in litigation against another entity for
the same injury. The court “agree[d]” with the Volkswagen court’s analysis.88
Following the Volkswagen and Seariver Maritime decisions, many courts have approved
defendants’ requests to compel the production of trust claims submissions to discover
information such as plaintiffs’ work histories and exposures to asbestos. State court decisions
ordering the production of trust claims information include:
•
Szostak v. A-B Elec. Supply Co., No. L-9151-02 (N.J. Super. Ct. Middlesex County Nov.
15, 2006) (Supplemental Recommendation to Compel Discovery and to Issue
Commissions for Out-of-State Discovery) (“[T]he factual information contained in the
[trust claims] is relevant to plaintiffs’ exposures to all types of asbestos-containing
products of various manufacturers. Thus, defendant is entitled to the factual information
of exposure contained in the [trust claims]….”);
•
Brassfield v. Alcoa, Inc., No. 2006-08035 (Tex. Dist. Ct. Harris County Nov. 22, 2006)
(Order at Motions Hearing) (“The Defendants are entitled to production of the
applications from the trusts in order to introduce them into evidence at the trial of the
case.”);
•
Duncan v. A.W. Chesterton, No. 2004-07671 (Tex. Dist. Ct. Harris County Dec. 14,
2006) (Order) (“The information and documents related to plaintiff’s bankruptcy claims
are discoverable.”);
•
Alvey v. 999 Quebec, Inc., No. 04CV200183, at 8, 10-12 (Mo. Cir. Ct. Jackson County
Mar. 19, 2007) (Order of the Discovery Commissioner Relating to Bankruptcy Claims)
(“There simply is no perceived basis to preclude a defendant from obtaining unprivileged
factual information discussing work history, asbestos exposure and injury data allegedly
attributable to it.”);
•
Miller ex rel. Miller v. PECO Energy Co., No. 50-07014450, 50-07014451 (Pa. Ct. Com.
Pl. Phila. County Apr. 16, 2007) (Order) (requiring plaintiff to turn over records
submitted to bankruptcy trusts and settlement releases);
•
In re Eighth Judicial Dist. Asbestos Litig. (Drabczyk v. Amchem Prods., Inc.),
No. 2005/1583, at 5 (N.Y. Sup. Ct. Erie County Jan. 18, 2008) (Decision and Order)
87
2006 WL 2105431 (Cal. Ct. App. 1st Dist. Div. 4 July 28, 2006).
88
Id. at *1.
17
(bankruptcy trust proofs of claim “must be disclosed. It seems likely that proof of claim
forms submitted by plaintiffs in asbestos litigation to trusts established by bankrupt
entities may contain information concerning product identification, the claimant’s work
history and exposure to asbestos, causation and apportionment of fault. Such information
is not presumptively privileged and is clearly relevant for disclosure purposes… Even if
a proof of claim is employed to encourage settlement discussions, admissions of fact
made in it are admissible and, therefore, discoverable….”);
•
Cannella v. Abex, No. 1037729/07 (N.Y. Sup. Ct. N.Y County Jan. 24, 2008) (Order at
Motions Hearing, Trans. at 43) (“Defense Counsel: [W]e’re specifically entitled
to…bankruptcy claims forms the Plaintiffs intend to file…. The Court: I understand. I
am going to direct that those all be turned over.”);
•
In re Asbestos Litig., MDL No. 2004-03964 (Tex. Harris County Dist. Ct. Jan. 16, 2009)
(letter ruling) (“I have consistently received into evidence BTFs [bankruptcy trust
forms]…as a statement of a party opponent as proof of exposure to the product of an
alleged RTP [Responsible Third Party]…. I will continue to find a written statement by a
Plaintiff to a bankruptcy trust as evidence of exposure.”);
•
Watts v. Alfa Laval, Inc., No. 06-3322 (Mass. Super. Ct. Middlesex County Mar. 16,
2009) (Trans. at 394) (“[Plaintiff] is ordered to surrender [information] to the extent it
relates to a claim, the existence of a claim against some other asbestos producer or trust
or insurer that some other product caused his injury.”);
•
Richards v. Armstrong Int’l, Inc., No. BCD-WB-CV-10-019 (Me. Bus. & Consumer
Docket Sagadahoc County Jan. 10, 2011) (Order, Discovery Issues) (“Plaintiff shall
produce for the Defendants copies of the forms filed on behalf of Plaintiff with any
bankruptcy-related trust.”);
•
Scapa Dryer Fabrics, Inc. v. Saville, 16 A.3d 159, 179 (Md. 2011) (“[Porter Hayden Co.
v. Bullinger, 713 A.2d 962 (Md. 1998)] establishes that § 524(g) Trust settlement
agreements and payment amounts are discoverable….”);
•
Cardella v. A.W. Chesterton, Inc., No. 09-L-434, at 4 (Ill. Cir. Ct. Madison County
Apr. 18, 2011) (Order on Motion to Compel Disclosure of Claims Submitted to and
Payments Received From Asbestos Bankruptcy Trusts) (“Plaintiff must answer whether a
[bankruptcy trust] claim has been made, the name and address of the person or entity, the
date the claim or suit was filed, the nature of the injury, and whether the claim or suit is
presently pending.”);
•
Reed v. Honeywell Int’l, Inc., 2011 WL 6645694, *10 (Pa. Super. Ct. Dec. 6, 2011) (“We
find the affidavits, claims forms, releases and other materials related to the 524(g)
bankruptcy trusts at issue were indeed ‘otherwise discoverable.’”), appeal denied, 51
A.3d 839 (Pa. 2012).89
89
Earlier decisions include Casper v. Dow Chem. Co., No. 49D02-9801-MI-001-295 (Ind.
Super. Ct. Marion County Oct. 5, 2005) (Ruling on Defendant Dow Chemical Company’s
Motion to Compel Production of the Proof of Claim Forms to Any/All Bankruptcy Trusts)
18
Federal court decisions ordering the production of trust claims information include:
•
In re Asbestos Prods. Liab. Litig. (No. VI) (Lyman v. Union Carbide Corp.), MDL 875,
2009 WL 6869437, *1 (E.D. Pa. Sept. 18, 2009) (Rueter, Ch. M.J.) (“[P]laintiff shall
produce to defendants all claim forms and other documentation submitted by plaintiffs or
their attorneys to asbestos bankruptcy settlement trusts relating to their claims for injury
from asbestos exposure (the ‘Bankruptcy Trust Documents’)”);
•
Shepherd v. Pneumo-Abex, LLC, MDL 875, 2010 WL 3431633, *1, *2 (E.D. Pa.
Aug. 30, 2010) (Hey, M.J.) (“Recently, Chief Magistrate Judge Thomas Rueter, one of
my colleagues in the asbestos MDL, found that such [claim forms] information was
discoverable….’ See Lyman v. Union Carbide Corp., MDL 875, No. 09-62999 (E.D. Pa.
Sept. 18, 2009). I find the reasoning of Judge Rueter’s Order and the cases upon which it
relies sound and applicable to the matter before me.... Based on Judge Rueter’s Order
and the cases cited therein, I agreed that a claim made to a bankruptcy trust is more
analogous to a complaint than an offer of settlement or compromise. Thus, I find that
Rule 408 does not bar production of certain information contained in the claim.”);
•
In re Asbestos Prod. Liab. (No. IV), MDL 875 (E.D. Pa. Aug. 4, 2011) (Strawbridge,
M.J.) (Relates to All Cases in Which the Cascino Vaughan Law Office is Listed as
Plaintiffs’ Counsel) (overruling plaintiff’s objection to interrogatories “asking whether
plaintiff ‘[has] filed’ a claim” and “asking whether plaintiff ‘[has] in the past’ received
any compensation” and ordering production of “any all correspondence to any Bankrupt
Entity and/or 524(g) Trust sent from you, or on your behalf”);
•
Ferguson v. Lorillard Tobacco, Co., Inc., MDL 875, 2011 WL 5903453, *1 (E.D. Pa.
Nov. 22, 2011) (Hey, M.J.) (“Plaintiff shall respond to the discovery seeking information
(“Plaintiffs shall produce said Claim Forms.”); In re Personal Injury and Wrongful Death
Asbestos Litig. (Poole v. AC&S, Inc.), No. 24X0400077 (Md. Cir. Ct. Baltimore City Jan. 6,
2005) (Order at Motions Hearing, Trans. at 20-22) (“Concerning all the facts and circumstances
in evidence before the Court, in light of the case law that’s been cited and the Maryland
rules…these [trust] documents do have some value to the defense…the Defendant Garlock’s
motion to compel discovery…is granted.”); Negrepont v. A.C.&S., Inc. (In re New York City
Asbestos Litig.), No. 120894/01 (N.Y. Sup. Ct. New York City Dec. 11, 2003) (Order at Motions
Hearing, Trans. at 3-4) (“[A]ny factual statements made in the proofs of claim about alleged
asbestos exposure of the plaintiff to one of the bankrupt’s products should be made available to
the defendants who are still in the cases.”); In re Asbestos Personal Injury Litig. (Ky. Jefferson
County Cir. Ct. Mar. 6, 2002) (ordering plaintiffs to answer Master File interrogatory requiring
identification of all entities with which plaintiff has reached a settlement or filed a claim, or from
which plaintiff has received compensation for alleged asbestos-related injuries, and Master File
Request for Production of Documents calling for production of asbestos trust clam forms)
(attached as Exhibit to Motion to Compel Discovery in In re Asbestos Personal Injury Litig.
(Jones v. Cardinal Indus. Insulation Co., Inc.), No. 02-CI-06573(10) (Ky. Jefferson Cir. Ct. May
5, 2004)).
19
and documents relating to other claims submitted by Plaintiff to recover compensation for
asbestos-related injuries, including claims submitted to bankruptcy trusts.”);
•
In re Asbestos Prod. Liab. (No. IV), MDL 875 (E.D. Pa. Dec. 13, 2011) (Strawbridge,
M.J.) (Pretrial Order Relating to All Actions Filed by Cascino Vaughan Law Office
Referred to the Hon. David R. Strawbridge) (“It has been determined by all parties that
there is a need to standardize the written discovery related to bankruptcy trust
information as well as a standardization of authorizations previously done by this Court
in the collection of medical records. The purpose of this Order is to provide for a simple,
uniform, and cost-effective process for the collection of records relevant to cases pending
before this Court.”);
•
National Union Fire Ins. Co. of Pittsburgh, PA v. Porter Hayden Co., 2012 WL 628493,
*4 (D. Md. Feb. 24, 2012) (“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.”).
Several major asbestos litigation jurisdictions have adopted case management orders
(CMOs) that order the production of trust claims information submitted by plaintiffs. For
example, a CMO adopted in 2012 for San Francisco asbestos cases provides:
6. Disclosure of Information
B. Standard Discovery
Defendant’s Standard Discovery to Plaintiff’s [sic]
(1)
Within twenty-one (“21”) days after service of the complaint,
plaintiff shall serve on all defendants responses to Standard Asbestos Case
Interrogatories, Set 1.
(See attached Exhibit C: Defendants’ Standard
Interrogatories to Plaintiff (Personal Injury), Set 1).
*
*
*
Defendants’ Standard Interrogatories to Plaintiff (Personal Injury), Set 1
Introduction
Each plaintiff in the above-captioned asbestos litigation is required to respond to
the following standard interrogatories separately and fully in writing, under oath,
pursuant to Code of Civil Procedure Section 2030.010 et seq. In responding to
these standard interrogatories, YOU are required to furnish all information that is
available to YOU or YOUR attorney(s). If YOU cannot answer a standard
interrogatory completely, answer it to the fullest extent possible and specify the
reason(s) for YOUR inability to respond fully.
20
¶ 49. Have YOU received any payments or reimbursements or have any
payments been made on YOUR behalf from any source as a result of YOUR
alleged exposure to asbestos, including without limitation settlements with
defendants in this action, potential defendants, a bankrupt company, or any
RESPONSIBLE PARTIES? If so, for each payment, please state:
A.
The name of each person or company making said payment(s);
B.
Total amount of payments from all sources; and
C.
Either (1) attach all DOCUMENTS evidencing the information
sought in this interrogatory and its subparts to your answers to these
interrogatories, or (2) attach disks containing such data, or (3) describe such
DOCUMENTS with sufficient particularity that they may be made the subject of
a request for production of documents.
¶ 53. Have YOU filed a claim against a bankruptcy trust? If “yes,” state for
each claim:
a.
The name and address of that trust;
b.
The date YOUR claim was filed;
c.
Either (1) attach all DOCUMENTS evidencing the information
sought in this interrogatory and its subparts to your answers to these
interrogatories, or (2) attach disks containing such data, or (3) describe such
DOCUMENTS with sufficient particularity that they may be made the subject of
a request for production of documents.90
A 2010 amended CMO governing Philadelphia asbestos cases states: “[P]laintiffs shall
serve responses to the attached Interrogatories and Requests for Production of Documents of
Defendants Addressed to Plaintiffs Relating to Bankruptcy Trust Filings by the deadline for
service of plaintiffs’ responses to Defendants’ Master Interrogatories and Requests for
Production Directed to plaintiffs.”91
A 2009 CMO governing Wayne County (Detroit), Michigan, asbestos cases provides:
It is ordered, Order No. 14, is amended as follows:
90
In re Complex Asbestos Litig., No. CGC-84-828684, ¶ 6(B), Exhibit C ¶¶ 49, 53 (Cal.
Super. Ct. San Francisco County June 29, 2012) (Case Management Order).
91
In re Asbestos Litig., No. 0001 (Pa. Ct. Com. Pl. Phila. County Apr. 5, 2010) (amending
Master Case Management Order for Asbestos-Related Personal Injury Claims).
21
Section II. Q. is added to read:
Q.
Bankruptcy Claims
At the time of filing the Brochure, it shall be the duty of the plaintiff’s
attorney, or the plaintiff if not represented by counsel, in all malignancy
cases to serve a copy of all submitted bankruptcy claim forms to all
defendants, this is a continuing obligation until the conclusion of a trial or
settlement. In all other cases, bankruptcy claims forms shall be submitted
48 hours before trial.92
A 2007 CMO governing Delaware asbestos cases provides:
7.
[W]ithin 30 days of the filing of an asbestos action, plaintiff shall serve
upon the Defense Coordinating Counsel the following:….
(l)
Copies of all claim forms and related materials related to any
claims made by plaintiff to any insurance carrier, employer, governmental
agency, trust, entity or person related to or in any way involved with asbestos
claims, or other agency, entity, or person wherein plaintiff directly or indirectly
asserts, suggests, advocates, or requests investigation into potential entitlement to
compensation or benefits of any type as a result of exposure to and/or injury
related to asbestos. This shall include, but is not limited to, copies of all materials
related to applications for Social Security benefits, worker’s compensation
benefits, military service benefits, disability benefits, and claims made to trusts
for bankrupt asbestos litigation defendants.
*
*
*
Plaintiff shall supplement and update the production mandated above up to and
including the time of trial.93
A 2010 amended CMO applicable to West Virginia asbestos cases requires plaintiffs to
not only produce trust claims that have been filed but also to provide information about potential
trust claims.94 The West Virginia CMO provides:
92
In re All Asbestos Personal Injury Cases, No. 03-310422-NP (Mich. Cir. Ct. Wayne
County Mar. 27, 2009) (Order No. 16 (Case Management Order) Requiring Service of
Bankruptcy Claims Forms in Malignancy and Nonmalignancy Cases).
93
In re Asbestos Litig., No. 77C-ASB-2, Amended Standing Order No. 1, ¶ 7(l) (Del.
Super. Ct. Newcastle County Dec. 21, 2007).
94
In re Asbestos Personal Injury Litig., Master File Civil Action No. 03-C-9600, § 22
(W. Va. Cir. Ct. Kanawha County Mar. 3, 2010) (Amended Case Management Order).
22
22.
Claims Against Bankruptcy Trusts
(A)
Required Disclosures - For any asbestos action with a trial date
established after the October, 2010 Trial Group:
(1)
Upon the designation of a claim for trial, claimant shall
provide the parties a disclosure setting forth at a minimum the name of plaintiff;
name of spouse, address, date of birth, the nature of diagnosis of the asbestos
related disease, the civil action number, the work history and/or exposure history
including the worksites, employer and trade or occupation. The court may require
other items for disclosure.
(2)
No later than one hundred twenty (120) days prior to the
date set for trial for the asbestos action, a claimant shall provide to all parties 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.
(4)
In the event information obtained subsequent to the
submission of the statements supports the filing of additional claims against
asbestos trusts, the claimant shall update the statement by amendment filed and
served within thirty (30) days of the receipt of the information but in no event
later than the commencement of the trial.
(B)
Sanctions for Non-Compliance
(1)
Any defendant after thirty days of receipt of the statement
from the claimant may proceed by motion that the plaintiff has failed to comply
with the requirements set forth in subsection (A)(2) above. The burden remains
with the defendant to show lack of compliance. If the court determines lack of
good faith compliance. the failure of the plaintiff to abide by the disclosure
requirements may result in the case being stricken from the trial group and
whatever other sanctions the court deems appropriate. The Court may also
impose sanctions if it determines the Motion was not brought in good faith by
defendants.
(2)
Motions regarding noncompliance with the disclosure
requirement shall be heard no later than thirty (30) days prior to the trial date.
23
(C)
Treatment of trust claims and claims material - Trust claims and
claims material (as well as related discovery materials) may be relevant to and
shall be discoverable in an asbestos action and shall be presumed by the court to
be authentic, and counsel for Plaintiff may not raise work product or other
privileges and such trust claims and claims materials may be used by the parties in
the asbestos action to prove alternative causation for the claimant’s asbestos
exposure as well as any other purpose provided for under the laws of the State of
West Virginia. Notwithstanding the above, before any such material is admitted,
the Court may issue a limiting instruction setting forth the fact that the trusts’
requirements for exposure may differ from the exposure required by the Court of
the remaining defendants. Furthermore, the Court may note, that an application to
a trust for compensation only requires providing information about the specific
product alleged to have contributed to injury and not the fact that claimant may
have been exposed to other products. Nothing contained in this CMO shall be
deemed to affect the authority of a Federal Bankruptcy Court.
(D)
Discovery of other materials - In addition to the mandatory
disclosure requirements of this CMO, additional disclosure and discovery of
information relevant to the asbestos action may be sought by any mechanism
provided by the applicable Rules of Civil Procedure. Defendants in an asbestos
action may also seek discovery from the asbestos trusts. The claimant shall assist
in any discovery from the asbestos trusts and provide whatever consent or
expression of permission may be required by the asbestos trusts for release of
such information and materials.
(E)
Set-offs and Assignments - The defendants will be entitled to setoffs or credits of the paid liquidated value of the trust claims against any judgment
rendered against them in the asbestos action and the Court shall provide a hearing
for this purpose. The Court can require each claimant to disclose the total amount
received or reasonably expected to be received from the bankruptcy proceedings, or
any settling defendant. In the event that a judgment is rendered in an action before
a claimant has received a payment, the claimant shall assign to all defendants
against whom the judgment is rendered his or her rights to all unpaid bankruptcy
claims, whether filed with trust or not, and the claimant shall cooperate with and
assist the defendants in obtaining damages due and owing to claimant from each
asbestos trust as provided by each trust’s trust distribution process. It shall be the
intention of the claimant and of the court that any such defendant’s claim filed
with any such asbestos trust will be treated exactly as if the claimant had
submitted the claim for any and all purposes under the terms, conditions and
provisions of the trust claim procedures. To the extent that any applicable law
provides broader relief to the defendants than is set forth herein, nothing in this
provision shall prohibit any defendant from pursuing such broader relief.
(F)
meanings:
As used in this section 22, terms will have the following
24
(1) “Trust claims and claims material” means all documents and
information including, but not limited to, claim forms and supplementary
material, relevant or related to pending or potential claims against asbestos trusts.
(2) “Asbestos trusts” means all trusts or claims facilities created as
result of bankruptcies, including but not limited to, all trusts created pursuant to 11
U.S.C. §524(g), intended to provide compensation to claimants alleging claims as a
result of asbestos exposure.
Similarly, a CMO from the Texas MDL court states:
Interrogatory No. 10: With regard to any claim or settlement made or anticipated
to be made with any entity or trust (including but not limited to claims made in
conjunction with a bankruptcy proceeding such as those for Johns-Manville,
UNARCO, and Celotex, and including any claims made to or though the Center
for Claims Resolution) in which the plaintiff/decedent claimed or will claim a
personal injury affecting his/her lungs (including but not limited to any asbestosrelated, silica-related, mixed-dust related, or welding-fume related condition), the
plaintiff shall identify:
(a) the full identity of the entity against whom such claim was or will be
made;
(b) the amount, if any, paid or agreed to be paid, in compensation for the
claim of the plaintiff/decedent; and
(c) the date such claim was made and current status (e.g., claim made and
pending).
Request No. 46: With 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,….
(d) copies of any affidavit, statement, claim form, or any document submitted
to “prove up” or confirm exposure for purposes of obtaining payment or a
promise to pay consideration in resolution of such claim.
Request No. 49: Please complete and sign all authorization forms attached hereto
as Exhibits A through J.
Exhibit J – Authorization for Release of Records of Bankruptcy Trusts and
Claims Resolution Facilities.95
95
In re Asbestos Litig., MDL No. 2004-03964, § VII (Tex. Harris County Dist. Ct. Apr. 5,
2007) (Third Amended Case Management Order) (incorporating Master Discovery to All
Plaintiffs, July 29, 2004).
25
Some CMOs go even further and compel the filing of trust claims before trial. For
example, a 2012 CMO governing Massachusetts asbestos litigation provides:
o)
Bankruptcy Trust Claims Discovery
1)
Limitations and Effect
In recognition of the confidentiality provisions of the various bankruptcy
trusts and trust distribution procedures, and in recognition of the existence of the
differing methods of proof in bankruptcy claims versus civil litigation, the
information produced hereto may be used only for purposes related to the
litigation of cases under the Massachusetts Asbestos Litigation Docket, and shall
not be disclosed or used for any other purpose without Order of the Court. Leave
of Court should not be granted absent extraordinary circumstances. Unauthorized
disclosure of this information shall be subject to sanctions. Further, admissibility
and weight of any document or information produced hereto shall be determined
on a case-by-case basis, and shall not be introduced at trial except as specifically
directed by the Court.
2)
Procedure
a)
Plaintiffs will produce the product exposure section of
bankruptcy claim forms that have been filed on behalf of the Plaintiff
within ninety (90) days of a determined trial date. Plaintiffs have a
continuing duty to supplement this information through trial. Any
amounts received will be redacted from the documents provided to
Defendants.
b)
Any payment made to a Plaintiff by an asbestos bankruptcy
trust acts as a dollar-for-dollar set-off of any damages awarded to a
Plaintiff in a tort trial in those cases in which Massachusetts law is
applied.
c)
Plaintiffs will assign to Defendant all asbestos bankruptcy
trust claims to which a Plaintiff is entitled upon payment of a verdict in
favor of a Plaintiff. Plaintiff agrees to cooperate in good faith with a
Defendant(s) against whom a verdict is rendered in determining and filing
any asbestos bankruptcy trust claims to which a Plaintiff is entitled to
compensation.
d)
Notwithstanding the foregoing, nothing in this Pre-Trial
Order shall preclude any party from seeking the disclosure, after jury
empanelment, of the amounts Plaintiff has received in connection with the
bankruptcy forms.
26
e)
Within thirty days of trial, Plaintiff will serve a certification
with the [court] that all known bankruptcy claims have been filed.96
The CMO governing New York City asbestos cases, provides: “Any plaintiff who intends
to file a proof of claim form with any bankrupt entity or trust shall do so no later than ten (10)
days after plaintiff’s case is designated in a FIFO Trial Cluster, except in the in extremis cases in
which the proof of claim form shall be filed no later than ninety (90) days before trial.”97
Additionally, a 2010 ruling applicable to asbestos cases in Montgomery County,
Pennsylvania, near Philadelphia, states:
10.
No later than one hundred twenty (120) days prior to trial, each plaintiff
shall have filed any and all Asbestos Bankruptcy Trust claims available to him or
her. Contemporaneous with all such filings, Plaintiff(s) shall provide complete
and accurate copies of all such filings, including but not limited to all affidavits,
medical records and reports, employment documentation, etc., to all Defendants.98
Another trend is for state legislatures to enact legislation requiring plaintiffs to produce
trust claims materials and to compel the filing of trust claims before trial. In December 2012,
Ohio became the first state to adopt such legislation.99 The Ohio law expanded and strengthened
96
In re Massachusetts State Court Asbestos Litig., Amended Pre-Trial Order No. 9,
¶ XIII(C)(7)(o) (Mass. Super. Ct. Middlesex County June 27, 2012) (Case Management Order
entered for all asbestos personal injury litigation in Massachusetts); see also Mark Behrens et al.,
Asbestos Litigation “Magnet” Courts Alter Procedures: More Changes on the Horizon, 27:8
Mealey’s Litig. Rep.: Asbestos 1, 8-9 (May 16, 2012).
97
In re New York City Asbestos Litig., No. 40000/88, § XV(E)(2)(l) (N.Y. Sup. Ct. N.Y
County May 26, 2011) (Amended Case Management Order); see also In re New York City
Asbestos Litig., 37 Misc. 3d 1232(A), 2012 WL 6554893, *10 (N.Y. Sup. Ct. N.Y County Nov.
15, 2012) (rejecting Plaintiffs’ challenge to CMO §XV(E)(2)(l) and declining “their request to
strike this provision from the CMO”).
98
Thibeault v. Allis Chalmers Corp. Prod. Liab. Trust., No. 07-27545, ¶ 10 (Pa. Ct. Cm. Pl.
Montgomery County Feb. 22, 2010).
99
See Ohio Rev. Code §§ 2307.951 to 2307.954 (Ohio Am Sub. H.B. 380 (2012)).
27
a previous CMO adopted for Cleveland asbestos cases.100 In 2013, Oklahoma enacted a reform
similar to Ohio’s asbestos bankruptcy transparency law.
The Oklahoma law provides for
disclosure of any personal injury bankruptcy trust claims, and is not limited to asbestos
bankruptcy trusts claims.101
V.
THE IMPORTANCE OF TRUST TRANSPARENCY REQUIREMENTS
Beyond curbing fraud in asbestos litigation through inconsistent filings to trusts and the
courts, discovery of trust claims information can benefit defendants by promoting a fully
informed jury and greater fairness in the adjudication of an asbestos personal injury claim.
“Sunshine” requirements that improve bankruptcy trust transparency provide tort defendants a
tool to (1) identify fraudulent or exaggerated exposure claims; (2) establish that a debtor
company was partly or entirely responsible for the plaintiff’s harm; and (3) allow judgment
defendants to obtain set-off credits for trust claim payments received by the plaintiff.
Several courts and the Ohio and Oklahoma legislatures have recognized that trust
transparency requirements can help defendants prove alternative causation. For example, West
Virginia’s asbestos litigation CMO expressly states that “trust claims and claims materials may
be used by the parties in the asbestos action to prove alternative causation for the claimant’s
asbestos exposure.”102 Texas asbestos MDL Judge Davidson also stated in a letter ruling:
100
See In re All Asbestos Cases, No. CV-073958, ¶¶ 18, 20(f) (Ohio Ct. Com. Pl. Cuyahoga
County May 8, 2007) (Amendment to CMO) (requiring plaintiffs, within seven days of a case
being grouped for trial, to provide copies of asbestos bankruptcy trust claims and authorization
permitting defendants to seek information directly from the trusts).
101
See Okla. S.B. 404 (2013); see generally Editorial, Busting the Trust Fraud, Wall St. J.,
Dec. 12, 2012, at A18 (“The asbestos blob is still too big, but state reformers are melting it at the
edges.”).
102
In re Asbestos Personal Injury Litig., Master File Civil Action No. 03-C-9600, § 22
(W. Va. Cir. Ct. Kanawha County Mar. 3, 2010) (Amended Case Management Order).
28
I have consistently received into evidence BTFs [bankruptcy trust forms] (when
offered by the Defendants over the objection of the Plaintiffs) 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. If a BTF claim form has any statement that alleges
causation, or any phrase that can be interpreted to be words to that effect (i.e. “led
to”, “resulted in”, “is partially responsible for”) I will find that to be sufficient
evidence to defeat a summary judgment motion.103
Ohio’s trust transparency statute states that “parties in the asbestos tort action may introduce at
trial any trust claims material to prove alternative causation.”104 Oklahoma’s statute provides
that “[a]ny party may present trust claims materials to prove alternative causation for a plaintiff's
injuries or to allocate liability for the plaintiff's injury.”105
Similar considerations apply with regard to using information contained in bankruptcy
trust submissions to apportion fault among multiple asbestos defendants. Where alternative
causation cannot be shown, asbestos defendants can nevertheless benefit from information found
in trust claims disclosures to reduce their share of the total liability and damages. Claims filed
with asbestos trusts may identify significant exposures to a bankrupt defendant’s asbestoscontaining products, and a solvent defendant in the tort system may be able to present this
information to a jury so the jury can more justly apportion fault among what may be numerous
defendants and bankruptcy trusts.106
103
In re Asbestos Litig., MDL No. 2004-03964 (Tex. Harris County Dist. Ct. Jan. 16, 2009).
104
Ohio Rev. Code § 2307.954(B).
105
Okla. S.B. 404 (2013).
106
See In re Eighth Judicial Dist. Asbestos Litig. (Drabczyk v. Amchem Prods., Inc.), No.
2005/1583, at 5 (N.Y. Sup. Ct. Erie County Jan. 18, 2008) (Decision and Order) (“It seems likely
that proof of claim forms submitted by plaintiffs in asbestos litigation to trusts established by
bankrupt entities may contain information concerning…causation and apportionment of fault.”).
29
Another use of trust claims information for defendants is to identify amounts that have
been paid by bankruptcy trusts to apply a credit or set-off of any amount owed as the result of a
judgment. Under general principles of joint and several liability, defendants receive credit for
payments received from other alleged tortfeasors, including asbestos bankruptcy trusts.
In recognition of this fact, several CMOs include provisions which expressly authorize credits or
set-offs for payments made by asbestos bankruptcy trusts. In Massachusetts, for example, the
asbestos litigation CMO states that “[a]ny payment made to a Plaintiff by an asbestos bankruptcy
trust acts as a dollar-for-dollar set-off of any damages awarded to a Plaintiff in a tort trial in those
cases in which Massachusetts law is applied.”107 West Virginia’s asbestos litigation CMO
similarly provides that “defendants will be entitled to set-offs or credits of the paid liquidated
value of the trust claims against any judgment rendered against them in the asbestos action and the
Court shall provide a hearing for this purpose.”108 In addition, West Virginia’s CMO states that a
court “can require each claimant to disclose the total amount received or reasonably expected to be
received from the bankruptcy proceedings, or any settling defendant.”109
The CMO further
provides that if a “judgment is rendered in an action before a claimant has received a [trust]
payment, the claimant shall assign to all defendants against whom the judgment is rendered his
or her rights to all unpaid bankruptcy claims, whether filed with trust or not….”110
107
In re Massachusetts State Court Asbestos Litig., Amended Pre-Trial Order No. 9,
¶ XIII(C)(7)(o)(2)(b) (Mass. Super. Ct. Middlesex County June 27, 2012).
108
In re Asbestos Personal Injury Litig., Master File Civil Action No. 03-C-9600, §l22(E)
(W. Va. Cir. Ct. Kanawha County Mar. 3, 2010) (Amended Case Management Order).
109
Id.
110
Id.
30
Courts and policymakers have also authorized credits or set-offs against a judgment for
payments received from asbestos bankruptcy trusts.111
Ohio’s recently enacted trust
transparency law permits trust claims information obtained subsequent to a judgment to be used
to “reopen” a court’s judgment in an asbestos tort action.112 If a claimant submits an additional
trust claim following the tort action, the law authorizes courts to either: “(a) Adjust the judgment
by the amount of any subsequent asbestos trust payments obtained by the claimant; [or] (b)
Order any other relief to the parties that the court considers just and proper.”113 Oklahoma’s
recent trust transparency law entitles a defendant to a set-off or credit in the amount of any trust
claims that have been paid (or, for pending claims, the liquidated value of the trust claim
specified in the trust governance document applicable to his or her claim at the time of trial).114
Trust claims materials provide other benefits of practical importance for tort defendants.
By the time an asbestos tort action is filed and the parties begin discovery, plaintiffs may be
deceased or unable to recall with precision all past exposures to asbestos-containing products,
particularly if those exposures took place decades prior. Obtaining copies of bankruptcy trust
proof of claim forms and other submitted materials can allow defendants to discover information
that may not otherwise be available.
111
See, e.g., In re New York City Asbestos Litig. (Dummitt v. A.W. Chesterton), 36 Misc. 3d
1234(A), 960 N.Y.S. 2d 51, 2012 WL 3642303, at *24 (N.Y. Sup. Ct. N.Y County Aug. 20,
2012) (“Turning to the issue of set-offs...plaintiff and defendant agree that the verdict must be
reduced by the amount plaintiff has received in settlement.”); Reed v. Honeywell Int’l, Inc., 2011
WL 6645694, at *11 (Pa. Super. Ct. Dec. 6, 2011) (“[W]e find no error by the trial court in
considering the...claims and monies paid to [plaintiff] by the multiple asbestos bankruptcy trusts,
and in considering said entities as tortfeasors for the purposes of reducing the verdict.”), appeal
denied, 51 A.3d 839 (Pa. 2012).
112
See Ohio Rev. Code § 2307.954(E)(1).
113
Id.
114
Okla. S.B. 404 (2013).
31
Discovery of information submitted to an asbestos bankruptcy trust can also help to
correct any misinformation provided to a defendant, such as from a deposition. There have been
reports that some law firms may have “coached” plaintiffs regarding asbestos product
identification.115 One recent study of claiming activity in Philadelphia from 1991 to 2010 found
that “the number of peripheral and new defendants positively identified during plaintiff
deposition has increased significantly while the number of Reorganized Defendants identified
has declined.”116
Further, required disclosure of trust claims information reduces the burden and expense
on defendants of subpoenaing third parties, including the trusts themselves, for information
relevant to the plaintiff’s work and exposure history or medical condition. Required disclosure
also spares judicial and trust resources in such situations.
As legal commentators have recognized, “the plaintiffs’ asbestos bar has heavily
mobilized in a concerted effort to prevent tort defendants from obtaining discovery…about their
claims against and recoveries from 524(g) [asbestos] trusts.”117 One way plaintiffs’ counsel have
done so is by drafting trust distribution procedures (TDPs) which state that all claimant
submissions to and communications with the trusts, including medical and exposure evidence
115
See Christine Biederman, Toxic Justice, Dallas Observer, Aug. 13, 1998, available at
http://www.dallasobserver.com/1998-08-13/feature/toxic-justice/; Lester Brickman, On the
Theory Class’s Theories of Asbestos Litigation: The Disconnect Between Scholarship and
Reality, 31 Pepp. L. Rev. 33, 141-47 (2004).
116
Marc C. Scarcella et al., The Philadelphia Story: Asbestos Litigation Bankruptcy Trusts
and Changes in Exposure Allegations from 1991-2010, 27:17 Mealey’s Litig. Rep.: Asbestos 1,
4 (Oct. 10, 2012).
117
Shelley et al., supra, at 272-73.
32
and payment information, are confidential and provided in the context of settlement
discussions.118 As commentators have further recognized,
TDPs rely on this [confidentiality] language and other privilege theories (such as
work product, attorney-client, claimants’ federal Health Insurance Portability and
Accountability Act (HIPAA) rights, claimants’ state law physician-patient
privilege as to medical records) to provide bases for trusts’ refusal to produce
information requested by other asbestos defendants—even though the claimant
himself has placed such information at issue by suing the tort defendants.119
In response to such attempts to preclude discovery of trust claims submissions, courts
have designed their CMOs to specifically authorize disclosure of this information. For example,
the Massachusetts asbestos litigation CMO states that “[i]n recognition of the confidentiality
provisions of the various bankruptcy trusts and trust distribution procedures, and in recognition
of the existence of the differing methods of proof in bankruptcy claims versus civil litigation, the
information produced hereto may be used only for purposes related to the litigation of cases
under the Massachusetts Asbestos Litigation Docket….”120 West Virginia’s asbestos litigation
CMO similarly provides that plaintiffs may not raise privileges to prevent disclosure of trust
claims materials.121
Ohio’s trust transparency law also states that “[n]otwithstanding any
agreement or confidentiality provision, trust claims material are presumed to not be
privileged.”122
118
See id. at 262-63.
119
Id. at 262; see also S. Todd Brown, Section 524(g) Without Compromise: Voting Rights
and the Asbestos Bankruptcy Paradox, 2008 Colum. Bus. L. Rev. 841, 862 (2008) (“In some
cases, the Controlling Firms enjoyed largely unchecked control over key settlement terms….”).
120
In re Massachusetts State Court Asbestos Litig., Amended Pre-Trial Order No. 9,
¶ XIII(C)(7)(o) (Mass. Super. Ct. Middlesex County June 27, 2012) (Case Management Order).
121
See In re Asbestos Personal Injury Litig., Master File Civil Action No. 03-C-9600,
§ 22(C) (W. Va. Cir. Ct. Kanawha County Mar. 3, 2010) (Amended Case Management Order).
122
Ohio Rev. Code § 2307.954(B).
33
Another practical benefit for defendants from the disclosure of trust claims information
relates to settlement. Where “sunshine” requirements provide a defendant with more complete
information regarding trust payments that have been collected and can be applied as a credit or
set-off against a judgment, a defendant may use this information to more accurately calculate
expected liability and evaluate the risks of trial. For instance, if a defendant learns from the trust
claims disclosures that the plaintiff has already recovered sums from multiple trusts, the
defendant’s expected cost of the tort action in terms of damages may be lower taking into
account those set-offs. The expected value of the tort action will also be less to the plaintiff who
is aware that any amounts awarded by the court will be credited by amounts previously collected
from the trusts. This, in turn, provides the defendant with greater leverage in negotiating a
settlement because both parties understand that the expected value of the tort action is lower than
if the court and defendant were unaware of the trust payments. A defendant can use this leverage
to negotiate a reduced settlement value or, alternatively, proceed to trial with a lower expectation
of damages to be paid.
VI.
POLICY RECOMMENDATION
The Task Force should recommend the adoption of trust transparency requirements that
compel the filing and disclosure of asbestos bankruptcy trust claims before trial. These reforms
can and should be accomplished by both courts and legislatures. This is the trend and reflects the
manner in which both branches worked to address mass filings by unimpaired claimants by the
mid-2000s.
34