U.S. Bankruptcy Court Exposes Plaintiff Scheme To Suppress Asbestos Exposure Evidence

On January 10, 2014, the Hon. George R. Hodges, United States Bankruptcy Court for the Western District of North Carolina, handed down a decision that promises to be a “game changer” for asbestos manufacturers facing potentially crushing mesothelioma death claims. Top Bloomberg BNA Toxics Law reporter, Perry Cooper, discussed the decision and its potential ramifications in her recent article titled, “Sides Fiercely Divided Over Impact of Garlock Asbestos Bankruptcy Court Order” (2/26/14).

The issue before the Bankruptcy Court was how to determine a reasonable and reliable estimate of Garlock Sealing Technologies, LLC’s (“Garlock”) liability for present and future mesothelioma claims. The court rejected the asbestos claimants’ $1.3 billion liability estimate in favor of Garlock’s $125 million estimate, an order of magnitude less.  Why did it do so?

The court initially determined that Garlock’s products resulted in a relatively low exposure to asbestos to only a limited population and that its legal responsibility for causing mesothelioma was relatively de minimis. During the early phase of the asbestos litigation in the 1980’s – when Garlock was generally named in complaints naming 20-50 more defendants – Garlock was very successful in settling its cases.

However, things changed for the worse by the early 2000’s, by which time large thermal insulation defendants had filed for bankruptcy and were no longer participants in the tort system. As the focus of plaintiffs’ attention turned to Garlock, as one of the remaining solvent defendants, evidence of plaintiffs’ exposure to other asbestos products often disappeared. As a result, plaintiffs’ law firms used their control over the evidence to drive up the settlements demanded of Garlock.

The crux of the court’s determination was that plaintiffs routinely denied exposure to other [bankrupt] companies’ asbestos products in pre-trial discovery and at trial, while often shortly thereafter filing multiple claims under oath with asbestos bankruptcy trusts. The “double-dipping” described by Judge Hodges where, for example, a plaintiff denies any exposure to insulation products, but after the case is settled, files 23 Trust claims, appears to be a widespread practice.

This conduct violates court rules and should be severely sanctioned if and when it comes to light. This decision shines a bright light on unethical practices in the plaintiff asbestos bar that may be a game changer particularly for manufacturers whose legal responsibility for causing mesothelioma, like Garlock, is relatively de minimis. It is the small players who are being pummeled by the lack of disclosure provided in these cases who should be seeking relief.

Garlock was able to demonstrate that in cases where it was able to obtain evidence of filed Trust claims and use them at trial, it generally had a successful trial result. In contrast, the thermal insulation defendants’ exodus from the tort system and the subsequent “disappearance” of evidence of exposure to their products, necessitated a sea change in Garlock’s negotiating and trial strategy.

Garlock demonstrated that the availability of comprehensive asbestos exposure information was often the difference between winning and losing at trial. If plaintiffs’ suppression of exposure evidence occurred in litigation against other defendants besides Garlock, it has likely resulted in higher asbestos settlements and judgments by as much as several hundred millions of dollars. At the same time, the contingency fees harvested by plaintiff lawyers in the asbestos litigation are staggering. But we should not assume that every plaintiff law firm improperly withholds exposure evidence. Cases should be examined on a case-by-case basis.

However, asbestos manufacturers are likely to bring increasing pressure on asbestos courts to compel plaintiffs to produce comprehensive evidence of asbestos exposure. The cookie-cutter management of large asbestos dockets often sweeps the legitimate concerns of asbestos defendants, particularly the smaller players, under the rug.

Trial courts should be encouraged to come up with creative means of ensuring judicial fairness. Depending upon the jurisdiction, this may involve having the trial court retain jurisdiction to reduce a verdict or settlement to account for post-verdict claims brought against other entities, who were not identified in the trial court. Alternatively, plaintiffs should be required to file Trust claims forms before trial or be judicially estopped from doing so after settlement.

RICO claims have been successfully brought against plaintiff law firms for fraud in the past. Judge Hodges’ decision, and the underlying evidence upon which it is based, provides Garlock with strong ammunition to pursue RICO claims. Additionally, the law firms identified by Judge Hodges may be subject to increasing scrutiny by the asbestos courts in the jurisdictions where they practice. Like the asbestos defendants of yesteryear, these well-heeled plaintiff law firms make for deep-pocketed defendants.

Contradictory Testimony No Basis for Denial Of Summary Judgment

All too often, a defendant in a toxic tort case loses a motion for summary judgment because the court determines that imprecise witness testimony creates a triable issue of fact that warrants denial of the motion. Indeed, it is the rule in California that the task of deciphering the meaning of “ambiguous” witness testimony is a role reserved for the jury. Reid v. Google, Inc. (2010) 50 Cal.4th 512, 541, 113 Cal.Rptr. 3d 327, 235 P.3d.988

Thus, quoting from this oft-cited case, plaintiffs routinely argue that “the task of disambiguating ambiguous utterances is for trial, not for summary judgment.” Other California holdings suggest that an inconsistency in witness testimony does not require that the testimony be disregarded in its entirety; rather, it is for the trier of fact to determine what weight the testimony should be given. Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865.

On May 4, 2012, the Bloomberg BNA Toxic Law Reporter reported on the recent  decision in Davis v. Foster Wheeler Energy Corp., Cal. Ct. App., No. B226089, 4/26/12, where the California Court of Appeal for the Second Appellate District drew a sharp distinction between testimony that was “ambiguous” and testimony that was “internally contradictory.”  In affirming summary judgment, the court found that no triable issue of fact was established where the witness testimony was contradictory. Here are the pertinent facts.

Ronald Davis worked at a chemical plant in Torrance, California in the 1960’s. He later developed mesothelioma, and died in 2009. Among others, the plaintiff sued Foster Wheeler, alleging negligence, strict liability, breach of warranty, and loss of consortium. Foster Wheeler moved for summary judgment, arguing that it did not manufacture, sell, or distribute any asbestos-containing product, and that the decedent was not exposed to asbestos dust by any Foster Wheeler product. The trial court granted summary judgment and plaintiffs appealed.

The plaintiffs argued that there was a triable issue concerning whether Davis was exposed to asbestos dust when Foster Wheeler employees, such a decedent, stripped old asbestos-containing insulation from the outside of boilers during maintenance activity. Key to the plaintiffs’ appeal was the deposition of Claude Chabot, a witness who initially claimed that he observed a maintenance worker stripping insulation wearing a hat with “FW” on the brim. However, in a later deposition, Mr. Chabot testified that he had no information whether any Foster Wheeler personnel removed or installed insulation on the boilers at the plant.

Under these circumstances, the trial court decided that “no reasonable jury considering this opposing testimony would conclude that the [Foster Wheeler] workers are the workers who removed the asbestos insulation around the Foster Wheeler boiler.” The appeals court agreed that Mr. Chabot’s internally contradictory testimony did not establish the existence of a triable issue of fact.

I have not examined whether other jurisdictions draw a similar distinction between “ambiguous” and “contradictory” or “internally inconsistent” testimony, but if they do not, perhaps they should. In many toxic tort cases, defense counsel may be confronted with potentially adverse testimony from a witness who is testifying to recollections that may be decades old. (Did the witness see that FW hat at the plant or at a UCLA football game?)

One school of thought is to leave adverse testimony alone. Pursuant to this view, taking an expanded deposition of plaintiff’s witness would only make the “record” worse. The holding in Davis suggests that this view may be shortsighted. The adverse witness who provides an affidavit to plaintiff’s counsel may be doing so out of sympathy for a co-worker who has died or suffers from a serious illness. A witness’s recollection of events is often different when the witness is deposed, possibly on videotape, in a formal deposition setting. It is possible that the witness, who provided the unhelpful affidavit, may be willing to admit in deposition that his recollection of long past events may be faulty or possibly inaccurate.

Eliciting contradictory testimony from a witness may not necessarily mean that the witness is dishonest or hostile. Rather, it reflects the tendency in all of us to want to be helpful. Foster Wheeler’s counsel skillfully developed inconsistencies in the witness’s testimony and thereby obtained dismissal from the case. There is no reason why “inconsistent” or “internally contradictory” testimony from witnesses, perhaps originally adverse, should not be disregarded by trial courts in other jurisdictions besides California.

US Supreme Court Rules Asbestos Claim Preempted

Guest Blogger Nicolas S. Allison  is an Associate in Epstein Becker & Green's Asbestos Group in New York. A graduate of Princeton University and Boston University Law School, in addition to his mass tort asbestos work, Nick also represents firm clients in a wide variety of industries, including financial institutions, health care providers and health care insurers.  He also defends environmental claims brought under the New York State Navigation Law.  In discussing the Supreme Court's recent decision in Kurns v. Railroad Friction Products Corp, Nick and I examine the reasoning of  the majority opinon, the concurring opinion and the concurring/dissenting opinion and how the justices address plaintiff's failure to warn and design defect claims in light of the preemption under the Locomotive Inspection Act . 

On February 29, 2012, the Supreme Court issued a preemption decision in Kurns v. Railroad Friction Production Corp, an asbestos product liability case. The case is noteworthy for product liability and toxic tort practitioners because of the Court's split analysis concerning the potential preemptive effect of federal legislation on failure to warn claims.

Plaintiff's decedent, George Corson, was a machinist for the Chicago, Milwaukee, St. Paul and Pacific Railroad. As a machinist, his duties included the removal and replacement of asbestos-containing brake shoes and insulation on the company’s locomotives. In 2005,  Corson was diagnosed with malignant mesothelioma, after which Corson sued several dozen manufacturers, including  part suppliers of the railroad company's locomotives. The trial court granted summary judgment to the railroad supplier defendants on preemption grounds and the Third Circuit affirmed. The issue before the Supreme Court was whether federal preemption should result in dismissal not just of the design defect claim, but to the failure to warn claim as well 

Writing for the 6-3 majority, Justice Thomas summarily rejected Plaintiff’s argument that, as a distinct cause of action, her failure to warn claim was not preempted by federal law. Thomas reasoned that “the ‘gravamen’ of petitioners’ failure to warn claims ‘is still that [Corson] suffered harmful consequences as a result of his exposure to asbestos contained in the locomotive parts.” By summarily rejecting the argument and conflating failure to warn claims with defective design claims, Thomas does little to present a concrete roadmap for evaluating the preemptive effect of federal law involving product liability causes of action.

Dissenting in part and concurring in part, Justice Sotomayor more or less adopted plaintiff’s approach, drawing a distinction between failure to warn claims and design defect claims. Sotomayor reasoned that "a product may be flawlessly designed and still subject its manufacturer or seller to liability for lack of adequate instructions or warnings."  Despite  a scholarly analysis of product liability jurisprudence,  Sotomayor did not persuasively explain how the distinction precludes the preemptive effect of the federal legislation at issue. It is noteworthy that her analysis failed to persuade six other justices on the Court.  .

In practical terms, Justice Kagan’s concurring opinion possibly articulates the strongest underpinning of the majority opinion.  Her preemption analysis examined the broad regulatory authority granted under the Locomotive Inspection Act.  Kagan reasoned that “if an agency has the power to prohibit the use of locomotive equipment, it also has the power to condition the use of that equipment on proper warnings.” Under this reasoning, Kagan determined that because the agency could have required warnings about the equipment's use, the petitioner's failure to warn claim, no less than her defective design claims, was  preempted.  Thus, under Kagan’s preemptive analysis, regulatory silence has the same preemptive effect as explicit regulation.

This case represents an unusual application of field preemption--unusual because there is no indication that Congress intended to foreclose all state action concerning railroad safety rather than just the regulation of equipment used by the railroad.  Some commentators have sought to isolate the case from other preemption jurisprudence by arguing that the outcome of the case may have been different  if the Court did not feel bound by the precedent established in a 1926 Supreme Court case, Napier v. Atlantic Coast Line. Still others have argued that the case represents an usual  departure for Justice Thomas, who generally narrowly construes the scope of  federal power over the states.

What is intruiging for product liability defense counsel is the idea, impliedly advanced by Justice Kagan, that warnings and instructions (the part of the product conveyed in print) should be treated as just another part of a product's design and not as the basis for an independent cause of action.  For the past several decades, plaintiffs have always had two bites at the apple--defectiive design and failure to warn. If the product was flawlessly designed, they could retreat to their warning claim.  If the product had terrific warnings, they could argue in the alternative that the poor design of the product could not be cured by strong warnings.  If this case is interpreted by future trial courts (in a non-preemption context) to mean that a failure to warn claim should be considered as part and parcel of a defective design claim, rather than a separate claim, manufacturers will have obtained an important precedent in Kurns.  Only time will tell.