U.S. Bankruptcy Judge George Hodges

Judge Finds Fraud and Deceit by Plaintiffs' Lawyers in Asbestos Cases


Judge Finds Fraud and Deceit by Plaintiffs' Lawyers in Asbestos Cases

Photograph by Scott Krycia

The long, sad tale of asbestos insulation, worker injury, and courtroom excess has reached a truly repulsive phase. Recent developments in the case of gasket manufacturer Garlock Sealing Technologies offer a window on the dismaying situation.

First, the backdrop: After decades of industry denial, plaintiffs’ lawyers revealed in the 1980s the now well-known deleterious effects of exposure to building materials containing asbestos. When Congress failed to forge an administrative process that might have fairly and efficiently compensated suffering workers, asbestos litigation ballooned, with the arbitrary results courtroom combat often produces: overcompensation of some victims, underpayment of others, huge legal fees, and endless delays. Dozens of companies were forced into debilitating bankruptcy proceedings even though their continuing operation could have benefited the very sort of blue-collar individuals hurt by asbestos-laden products. And the plaintiffs’ lawyers who marshaled the largest pools of alleged victims enjoyed windfall profits that paid for private jets and luxury vacation homes rather than doctors’ appointments for former pipe fitters.

In the 1990s, as asbestos defendants retreated to bankruptcy court or disappeared altogether, making recoveries from them much more difficult, some plaintiffs’ lawyers stepped up their offensive against the remaining companies, regardless of whether the live targets had been the most venal or plaintiffs’ ailments could be traced to their particular products. Such was the fate of Garlock, which faced increasing pressure until it, too, succumbed to bankruptcy in 2010.

Filing for Chapter 11 protection from creditors doesn’t entirely eliminate an insolvent company’s debts, of course. Garlock remained on the hook for what plaintiffs’ lawyers estimated at $1.4 billion for present and potential future victims of mesothelioma, a fatal cancer caused by exposure to asbestos.

In a potentially important ruling released late on Jan. 10, U.S. Bankruptcy Judge George Hodges of North Carolina reduced Garlock’s liability by 90 percent, to $125 million, finding that the larger amount had been based on various forms of deceit by plaintiffs’ lawyers and their clients. Hodges cited, for example, what he called widespread evidence that many plaintiffs’ attorneys had for years concealed evidence that victims were exposed to potential carcinogens other than Garlock’s asbestos-lined gaskets. The judge said that over the past decade, Garlock’s “participation in the tort system was infected by the manipulation of exposure evidence by plaintiffs and their lawyers.”

Hodges’s ruling provides potent ammunition in civil fraud and racketeering lawsuits Garlock filed on Friday against four of the plaintiffs’ firms in question. The phenomenon of corporate defendants counter-punching against plaintiffs’ lawyers by launching fraud suits against them is becoming more common. Judicial findings such as Hodges’s can only fuel the wider use of that strategy.

Corporate advocates will cheer the judge’s opinion, obfuscating the long-ago wrongdoing by companies that didn’t swiftly own up to the unintended harm caused by asbestos. Plaintiffs’ lawyers and consumer advocates will condemn the ruling—and the proliferation of corporate fraud suits against plaintiffs’ attorneys—even as ever-more-troubling evidence emerges that influential members of the plaintiffs’ bar have lost their moral bearings. All in all, it’s a depressing tableau.

Barrett_190
Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, which tells the story of the Chevron oil pollution case in Ecuador, will be published by Crown in September 2014.

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