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June 19, 2018

Unsealed U.S. lawsuits tell of alleged fraud by asbestos law firms

By Tom Hals

Jan 20 (Reuters) – U.S. personal injury lawyers allegedly concealed evidence and induced clients to commit perjury to drive up asbestos-related settlements and garner bigger fees, according to lawsuits unsealed on Tuesday in the bankruptcy of a gasket maker.

The unsealed racketeering complaints alleged that four law firms sued Garlock Sealing Technologies, which made asbestos-lined gaskets, while hiding evidence that their clients were exposed to asbestos products made by other companies.

The evidence was allegedly hidden because the other companies were bankrupt, making Garlock a much more attractive target for an asbestos lawsuit, according to the complaints.

Garlock, a unit of EnPro Industries, filed for bankruptcy in 2010 in Charlotte, North Carolina, in the face of the mounting cost of asbestos lawsuits.

The unsealed complaints cite many examples of alleged fraud, including the Shein Law Center’s handling of a lawsuit by Vincent Golini, who was diagnosed with deadly mesothelioma in 2009.

Golini allegedly told Philadelphia-based Shein he was exposed to 14 asbestos products made by bankrupt companies including Owens Corning and Armstrong World Industries. But when Golini sued Garlock he denied exposure to any products made by a bankrupt manufacturer, according to the complaint.

After Garlock settled with Golini, Shein had Golini file claims with the asbestos trusts that were set up by Owens Corning and other bankrupt makers of asbestos products. Those trusts often pay only a small fraction of a claim.

Shein’s lawyer, Daniel Brier of Myers Brier & Kelly, said the racketeering lawsuit is completely without merit and Shein represented its clients “ethically and properly”.

Garlock’s Chapter 11 case has drawn national attention due to the company’s allegations that personal injury lawyers fraudulently inflated judgments and settlements.

The racketeering lawsuits were originally filed in early 2014. They were ordered unsealed last summer but only became available to the public on Tuesday.

The allegations in the unsealed documents appeared to have already been discussed publicly in an opinion in 2014 by Judge George Hodges. That opinion set Garlock’s liability for asbestos at $125 million and said the company’s past settlements were tainted by fraud.

The others were Belluck & Fox of New York; and Waters Kraus & Paul and Simon Greenstone Panatier Bartlett of Dallas. Mark Iola, a partner at Iola Galerston, also in Dallas, was also sued.

Attorneys for the law firms said Garlock was trying to relitigate settled cases and blame others for the consequences of its own conduct.

(Reporting by Tom Hals in Wilmington, Delaware; Additional reporting by Jessica Dye in New York)

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Unsealed U.S. lawsuits tell of alleged fraud by asbestos law firms

Ford Seeks Garlock Bankruptcy Information To Fight Its Own Asbestos Suits

Ford Motor Ford Motor Co. has filed a motion to unseal the records in the Garlock bankruptcy case, hoping to obtain evidence it needs to derail asbestos lawsuits against itself.

In a motion and accompanying memorandum of law filed with the federal bankruptcy court in Charlotte, N.C. late Friday, Ford is seeking access to sealed testimony and exhibits that Judge George R. Hodges relied upon to conclude that plaintiff lawyers had withheld evidence their clients had made conflicting statements about their asbestos exposure to different courts and bankruptcy trusts set up to pay claimants.

Ford, like many manufacturers, has been named in thousands of lawsuits as plaintiff lawyers mount an aggressive search for solvent defendants to sue, after most of the companies that made and sold dangerous asbestos products like pipe insulation have filed for bankruptcy protection to settle claims. Plaintiff lawyers target car manufacturers because they sold vehicles with brake pads containing asbestos. Epidemiological studies have failed to show that car mechanics have higher levels of mesothelioma, the cancer most closely associated with asbestos exposure, so Ford has an interest in showing that plaintiffs suing it for such cancers have claimed exposure to more dangerous substances elsewhere.

In his January ruling slashing Garlock’s asbest0s-related liabilities to $125 million, Hodges cited the results of an examination of 15 plaintiff files which found that lawyers had withheld potentially important evidence of asbestos exposure from each of them. The judge stopped just short of calling the activity fraudulent, but said the process “was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.”

Such manipulation is possible because plaintiff lawyers largely control the trusts asbestos manufacturers set up to pay claims, and those lawyers have maintained a system of confidentiality that allows them to tap numerous trusts, often with conflicting stories about how their clients got sick, without fear of having anybody match those claims up against each other. The secrecy also allows them to file lawsuits against solvent companies first and negotiate larger settlements than they otherwise might obtain by failing to acknowledge the more serious exposures their clients will later allege against the bankruptcy trusts.

In the memorandum, Ford says it has been a co-defendant with Garlock, which made asbestos-containing gaskets, in numerous lawsuits. It said it suspects it has been induced to pay out more than it should “in reliance upon similar misrepresentations of asbestos exposures and asbestos trust claims.” It said it believes there is evidence it can use to defend itself among the files of thousands of claimants in the Garlock bankruptcy.

By court order, the statements of those plaintiffs include their law firm, address and partial Social Security numbers, Ford said, information it could use to match up against plaintiffs suing it for asbestos exposure. Lawyers have managed to keep such records secret, citing the privacy of health records. But they also began requesting secrecy in the early 2000s after judges started concentrating thousands of cases in a single court, making it easier to expose unethical fee-splitting arrangements and other practices they’d prefer to keep out of the eyes of the public.

In its filing, Ford said the company, “like everyone else, enjoys a presumptive right to inspect judicial records, or documents filed in the Nation’s courts to adjudicate rights.” Since public access is presumed, the company said, it’s the burden of the plaintiffs to show why the records should remain sealed. Concerns about privacy and identity theft “may be preserved by more reasonable, less restrictive measures.”

Reuters reported last month that Ford cited Hodge’s ruling in another, unrelated case in North Carolina. And health insurers including Humana Humana, Aetna Aetna and Blue Cross have filed motions in Philadelphia and New York seeking the records of bankruptcy trusts so they try and recover money they’ve spent treating diseases plaintiffs blame on asbestos exposure.

If Ford is successful, it may help undermine a strategy that has allowed lawyers to earn billions of dollars in fees by suing multiple companies over asbestos exposure with often conflicting stories about how their clients got sick. While some scientists argue in court that even one stray asbestos fiber can cause cancer, most epidemiological studies have found that continuous, heavy exposure to long-fiber amphibole asbestos is necessary to develop asbestosis and mesothelioma.

In order to prevail in court — or to make a legal argument sufficient to obtain a large settlement — plaintiffs must show the company they are suing was the most likely cause of their illness. So it is important to defendants like Ford, whose products have little or no connection to asbestos disease, to be able to show that the person suing them has previously claimed exposure to more potent compounds.

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Ford Seeks Garlock Bankruptcy Information To Fight Its Own Asbestos Suits

The Judge Won't Call Asbestos-Lawyer Shenanigans Fraud, But It Sure Smells Like It

Asbestos (chrysotile)

License to mislead? (Photo credit: Wikipedia)

License to mislead? (Photo credit: Wikipedia)

There’s an old journalistic turn of phrase that keeps us on the right side of the libel laws, while getting the point across: Sometimes it’s a crime what’s legal.

That is an apt description for the shenanigans plaintiff lawyers have engaged in for years as they sucked billions of dollars out of otherwise solvent companies in search of money they say their clients are owed for asbestos-related diseases.

Hold your comments about how asbestos companies engaged in subterfuge. That is true, but it doesn’t relieve lawyers of the responsibility to act like professionals.

There are a few thousand mesothelioma deaths a year in the U.S. that can definitely be attributed to asbestos, and lawyers fight like sharks over those golden tickets, each of which is worth a couple hundred thousand dollars in fees. One measure of this is the word “mesothelioma” is one of the most expensive keywords on Google Google AdWords.

A bankruptcy judge’s 65-page order released late yesterday in the case of gasket manufacturer Garlock Sealing Technologies illustrates, in unambiguous detail, the depths lawyers are willing to plumb to go after those golden tickets. They routinely engage in the type of behavior that would subject them to the fiercest sort of liability were they practicing any other profession. It may be legal — indeed, U.S. Bankruptcy Judge George Hodges was careful to note he made “no determination of the propriety” of the practices he described — but that doesn’t remove the stench.

The law is supposed to be a profession devoted to finding out the truth. In that regard, lawyers are a lot like journalists, only they are also officers of the court, given special powers to ferret out information their opponents would prefer to leave hidden from view. What the Garlock bankruptcy shows is lawyers in the asbestos trade abused these powers to hide information from defendants as well as judges and jurors, to the point that they made a mockery of their duties as officers of the court. If they were engineers, doctors, or corporate executives, these shenanigans would probably cross the line into civil fraud. They might even lose their licenses. But lawyers are particularly bad at disciplining themselves, so I’ll just throw these examples out there for readers to decide whether their activities are compatible with retaining the license to practice law.

As I noted yesterday, Judge Hodges granted Garlock permission to perform full discovery on 15 closed asbestos cases against the company. He conducted this inquiry in secrecy, even throwing reporters out of his courtroom in Charlotte, N.C. when lawyers were discussing what they found. That led reporters like me to think maybe the judge wanted to sweep the evidence under the rug. But his ruling yesterday slashing Garlock’s asbestos liability to a tenth of what plaintiff lawyers were seeking was devastating, and shows that companies can disrupt the asbestos racket if they are willing to fight.

Some background: The game in the Garlock case was to convince the judge that a company whose products almost certainly never injured anyone were responsible for more than $1 billion in asbestos-related liability. In a fierce statement yesterday, one Dallas law firm Garlock is suing for fraud accused the company of being complicit in “deaths of thousands of Navy veterans.” To gin up the numbers, lawyers pointed to a string of jury verdicts and settlements, at escalating amounts, as evidence that Garlock would have to pay at least a couple hundred thousand dollars for each and every one of the 2,500 or so mesothelioma deaths in America each year.

The problem is Garlock made a product where the asbestos was of a type believed to have 1/100 the risk of straight amphibole fibers that lodge in the lungs and pleural cavity and eventually cause cancer. Garlock’s fibers were encased in plastic. And to get to those supposedly deadly gaskets, workers would typically have to peel away flaky pipe insulation exposing themselves to far more dangerous amphibole dust.

To get around these inconvenient facts, asbestos lawyers coached their clients to “forget” having worked with any products but Garlock gaskets when they were suing Garlock, then change their stories when they were suing somebody else. They were helped in this subterfuge by the peculiar nature of bankruptcy trusts set up to pay claims of insolvent manufacturers. Plaintiff lawyers control these trusts, and they have successfully resisted most attempts to open up their records to uncover fraud and double-dipping. That makes it easy for the lawyers to sue the companies that want to fight in court first, with their well-coached clients displaying a highly selective memory of whose products they handled. Then they tap the trusts for money using completely different stories of how they got sick.

Here’s some examples of what Judge Hodges found in the 15 cases he allowed Garlock to examine. In every one of the 15, lawyers withheld evidence of conflicting stories. Bear in mind this company has settled more than 20,000 cases so far.

  • A former Navy machinist won a $9 million jury verdict in California, claiming that 100% of his work in a nuclear submarine was on gaskets. He denied any exposure to amphibole insulation, after Garlock tried to prove he’d been exposed to Pittsburgh Corning’s Corning’s Unibestos amphibole insulation. His lawyers even told the jury there was no Unibestos insulation on the ship. What they didn’t tell the jury was seven months earlier, they’d filed, under penalty of perjury, a claim with Pittsburgh Corning that their client had been exposed to Unibestos. Once the verdict was in, they filed 14 more claims including several against insulation manufacturers.
  • A former pipefitter in Philadelphia settled a case for $250,000 after claiming he had “no personal knowledge” of exposure to other companies’ products. Apparently his lawyers found that not incompatible with his claim six weeks earlier with the Owens Corning Owens Corning bankruptcy trust, in which he “frequently, regularly and proximately breathed asbestos dust emitted from Owens Corning Fiberglas’s Kaylo asbestos-containing pipe covering.” This lawyer filed 20 different trust claims on his client’s behalf, 14 of them supported by sworn statements that contradicted what he said in the Garlock case.
  • A Texas plaintiff won a $1.35 million jury verdict by claiming his only exposure was to Garlock gaskets. He specifically denied even knowing the name “Babcock & Wilcox,” a boiler company that was driven into bankruptcy by asbestos claims. His lawyers told the jury there was no evidence of exposure to Owens Corning insulation. One day before the client denied knowing anything about Babcock & Wilcox, he’d filed a claim against that company’s trust. After the verdict, he filed a claim against Owens Corning. Both were paid, based on his sworn statements he’d handled raw asbestos on a regular basis.

These tales are old news by now, of course. And judging from the traffic on yesterday’s story, most readers just look at the headlines and yawn. But the behavior detailed above is exactly, precisely the sort of subterfuge that subjects companies to fraud lawsuits on a daily basis. Imagine what would happen if a corporate executive told shareholders her company was poised to record the best profits in its history at the same time as she was preparing a bankruptcy filing. Or a food executive who testified in a lawsuit that his products contained no toxins, at the same time as he was reviewing a consultant’s report detailing the exact amount of those toxins in his company’s products.

Lawyers can’t hide behind the claim of zealous representation here. They know what they’re doing is wrong. The shame is their profession lets them get away with it. Self-regulation is always a problem, and it is long since past the time when lawyers need the presence of non-lawyers on their disciplinary committees, as is the practice in the U.K. The asbestos racket shows what happens when lawyers are in charge of disciplining themselves.

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The Judge Won't Call Asbestos-Lawyer Shenanigans Fraud, But It Sure Smells Like It