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Tue February 4, 2014

Case Sheds Light On The Murky World Of Asbestos Litigation

Originally published on Tue February 4, 2014 7:00 pm

This is a case about a bankrupt company, legal shenanigans, and a rare type of cancer.

You may have seen TV commercials about mesothelioma, mainly caused by inhaling asbestos — minerals many companies once used in insulation and other products.

According to a 2011 report from the U.S. Government Accountability Office, companies have set aside more than $30 billion for mesothelioma victims since the 1980s. Asbestos lawsuits have played a role in about 100 companies' going bankrupt.

One of those is a gasket manufacturer called Garlock. Its parent company, EnPro Industries, is based in Charlotte, N.C. As part of Garlock's $1 billion bankruptcy case, a judge has slashed what the manufacturer owes asbestos victims after finding that the victim's lawyers abused the system.

Some call Garlock's bankruptcy case a watershed moment.

"It's laid bare the massive fraud that is routinely practiced in mesothelioma litigation," says Lester Brickman, a Cardozo law school professor who has researched asbestos litigation for more than 20 years and who testified on behalf of Garlock.

In Texas, one plaintiff said his only exposure to asbestos was from Garlock — after his lawyers filed a claim with another company. In California, a plaintiff's lawyers misled a jury to make Garlock look worse. And in Philadelphia, lawyers made evidence of their client's exposure to 20 different asbestos products disappear.

Those are just a few of the old cases that federal bankruptcy judge George Hodges gave Garlock's lawyers permission to re-examine back in late 2012.

"As [Hodges] says in his order," says Rick Magee, one of Garlock's attorneys, "we were able to demonstrate in all — each and every one of those 15 cases — that there was extensive suppression of exposure evidence."

In doing so, Garlock persuaded Hodges to drastically reduce the estimate for how much the company still owes victims.

No one argues that people suffering from mesothelioma shouldn't get compensated. Instead, it's a matter of the right companies paying the right amounts.

The victims' lawyers argued that the company still owes about $1 billion, based on Garlock's past settlements. But in his January decision, Hodges wrote that that estimate is "infected with the impropriety of some law firms and inflated by the cost of defense."

The head of one of those firms, Peter Kraus, managing partner of Waters & Kraus in Dallas, disagrees.

"There are some of those cases that involve my firm," he says. "So I know for a fact from those cases that the judge's description of what happened is simply not correct."

Kraus says Hodges took a radical approach with his decision. "It's very, very different from the rulings and findings by judges with a good deal more experience in this area."

But that argument doesn't fly with folks at the Institute for Legal Reform at the U.S. Chamber of Commerce.

"When you start building the case, when you start seeing more and more of these instances, you got to really question whether this is an outlier or not," says Harold Kim, the organization's executive vice president.

Judges in Delaware, Ohio and Virginia have also noted dubious legal maneuvering in asbestos litigation, though not on the scale of the Garlock case. Kim says the case will be a wake-up call for other judges, which will lead to more accurate estimates of what companies really owe.

For Garlock, the judge estimates that's $125 million. But the case isn't finished, and victims' lawyers are likely to challenge that amount.

In the meantime, Garlock is suing some of the people who are suing it. The company is going after six law firms for the types of practices it uncovered in its bankruptcy case.

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Transcript

MELISSA BLOCK, HOST:

A decision in a billion-dollar bankruptcy case is a landmark moment in the murky world of asbestos litigations. The case was before a federal court in North Carolina. The judge slashed what a manufacturer owes asbestos victims, after finding the victims' lawyers abused the system.

Michael Tomsic has the story from member station WFAE.

MICHAEL TOMSIC, BYLINE: This case involves a bankrupt company called Garlock, legal shenanigans, and a rare type of cancer.

(SOUNDBITE OF A COMMERCIAL)

UNIDENTIFIED MAN: Attention mesothelioma victims...

TOMSIC: You may have seen TV commercials about it. Mesothelioma is mainly caused by inhaling asbestos, which are minerals many companies use in insulation and other products.

(SOUNDBITE OF COMMERCIAL)

UNIDENTIFIED WOMAN: Hold the big multimillion dollar companies responsible for their actions.

TOMSIC: According to a government report, companies have set aside more than $30 billion for victims since the 1980s, and asbestos lawsuits have played a role in about 100 companies going bankrupt. One of those is a gasket manufacturer called Garlock. Its parent company, EnPro, is based in Charlotte. And some call Garlock's bankruptcy case a watershed moment.

LESTER BRICKMAN: It's laid bare the massive fraud that is routinely practiced in mesothelioma litigation.

TOMSIC: That's Cardozo Law School professor Lester Brickman, who testified for Garlock. He's researched asbestos litigation for more than two decades. In Texas, a plaintiff said his only exposure to asbestos was from Garlock, after his lawyers filed a claim with another company. In California, a plaintiff's lawyers misled a jury to make Garlock look worse. And in Philadelphia, lawyers made evidence disappear of their client's exposure to 20 different asbestos products. Those are just a few of the old cases bankruptcy Judge George Hodges gave Garlock's lawyers, including Rick Magee, permission to re-examine.

RICK MAGEE: And as he says in his order, we were able to demonstrate in all, each and every one of those 15 cases, that there was extensive suppression of exposure evidence.

TOMSIC: In doing that, Garlock convinced Judge Hodges to drastically reduce the estimate for how much the company still owes victims. The victims' lawyers argued it should be about $1 billion based on Garlock's past settlements. But Hodges wrote that estimate is, quote, "infected with the impropriety of some law firms." The head of one of those firms disagrees. Peter Kraus is managing partner of Waters and Kraus in Dallas, Texas.

PETER KRAUS: There are some of those cases that involve my firm. And so I know for a fact from those cases that the judge's description of what happened is simply not correct.

TOMSIC: Kraus says the judge took a radical approach.

KRAUS: It's very, very different from the rulings and findings by judges with a good deal more experience in this area.

TOMSIC: But that argument doesn't fly with folks at the U.S. Chamber of Commerce's Institute for Legal Reform. Harold Kim is executive vice president.

HAROLD KIM: When you start building the case, when you start seeing more and more of these instances, you got to really question whether this is an outlier or not.

TOMSIC: Judges in Delaware, Ohio, and Virginia have also noted dubious legal maneuvering, though not on the scale of the Garlock case. Kim says it will be a wake-up call for other judges and that'll lead to more accurate estimates of what companies really owe. No one argues people suffering from mesothelioma shouldn't get compensated. It's just a matter of the right companies paying the right amounts.

For Garlock, the judge estimates that's $125 million. But the case isn't finished and victims' lawyers will likely challenge that amount. In the meantime, Garlock is suing some of the people who are suing it. The company is going after six law firms for the types of practices it uncovered in its bankruptcy case. For NPR News, I'm Michael Tomsic in Charlotte.

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