Company in Bankruptcy Fights to Limit Asbestos Liability

A bankruptcy case underway here could settle a $1 billion dispute over asbestos.

Garlock Sealing Technologies says its liability to current and future asbestos victims is $125 million. An expert witness for the company testified last week that Garlock has already paid at least $1.3 billion in related damages.

Attorneys representing victims nationwide are not impressed. They say the company owes $1.3 billion more.

That leaves U.S. Bankruptcy Judge George Hodges to come up with his own number. For two weeks, Hodges has been hearing from heavyweights on all sides of asbestos litigation, the country’s longest-running liability tort.

Twenty-five years into the legal fight, the money changing hands over asbestos remains staggering.

Billions have already been paid to generations of asbestos victims. Now, hundreds of millions more swing on a single case.

Garlock, a Palmyra, N.Y. subsidiary of EnPro Industries of Charlotte, makes seals and gaskets for industries ranging from petrochemicals to power generation and mining and pharmaceuticals. Those products contain asbestos, a known carcinogen.

The company filed for Chapter 11 protection in 2010, one of dozens of otherwise-solvent businesses that turned to the courts for help in settling thousands of claims of asbestos poisoning.

To get out of bankruptcy, Garlock must come up with a figure to cover future payments to those who blame company products for their cancer or other illnesses.

In its filings, Garlock placed that liability “at or near zero.” It says its products are safe, but has agreed to set up a $270 million trust fund to cover claims.

But a committee of attorneys representing victims said the company’s estimate “has no foundation in reality.”

Federal law allows companies to shed their liability by setting up public trusts, and dozens were established a decade ago during a rash of asbestos-related bankruptcies.

As of 2010, the trusts have paid out some $18 billion, half their holdings.

Trickle-down-economic effects have also come into play. A Stanford medical professor, who appeared in Charlotte as an expert witness for Garlock, acknowledged under cross-examination that he’s made at least $4.5 million in the past decade consulting and testifying for companies in asbestos trials.

The hearing is expected to run for at least another week.

Asbestos causes mesothelioma, a rare and deadly form of cancer. According to Asbestos.com, between 1999 (when the government began tracking cases) and 2008, mesothelioma and the lung disorder asbestosis killed some 30,000 Americans.

Companies big and small have been accused of knowing about the risks but concealing them from their employees or the public.

Up until the mid-1980s, asbestos was widely used in insulation and as a fire retardant. But its tiny jagged particles can lodge in the linings of the lungs and other internal organs, causing the cells to mutate.

Last year, a California jury awarded $48 million in damages to a single asbestos plaintiff: an 86-year-old cancer patient.

The rhetoric continues to run hot. Brent Coon, a Texas-based attorney specializing in asbestos claims, recently told The Wall Street Journal that his clients are “victims of the worst corporate mass genocide in history.”

Asbestos trusts, which are heavily influenced by victims’ attorneys, now pay out some $3.5 billion annually, according to one Garlock witness.

The claims against them are increasing, even though the American Cancer Society says cases of mesothelioma have dropped since the 1990s.

Garlock’s bankruptcy strategy attacks the system that pays out asbestos claims. Garlock’s attorneys and witnesses say it operates with little oversight and is laced with fraud.

New York law professor Lester Brickman, who appeared as an expert witness for Garlock, said the waves of asbestos lawsuits against companies have been marked by phony diagnoses, hidden evidence, even attorneys and victims lying under oath.

During his testimony, Brickman dwelled on “double dipping” – or filing claims of asbestos poisoning against multiple products, one at a time. In those instances, Brickman said, a victim puts total blame for an illness on a single source, then makes the same claim against the next company and the next, collecting damages at each stop.

To bolster that accusation in court, Garlock subpoenaed dozens of the asbestos trusts. The gathered information, company lawyers said in pretrial filings, proves that some victims collected large settlements from Garlock and then sued other companies.

Now, the company wants to make that information public. Its attorneys have asked Hodges to lift a pretrial confidentiality order, so that “Congress, the public, state legislatures … get the full story on these issues of major public concern.”

But the judge refused. When the confidential information comes up in testimony, Hodges closes his courtroom to the public before he allows it to be discussed.

Meanwhile, the victims’ attorneys say that the charges of double-dipping and fraud levied by Garlock, Brickman and other critics single out isolated cases culled from thousands of legitimate claims.

“It turns the notion of fraud upside down,” said Charlotte attorney Gary Jackson, representing several asbestos trusts subpoenaed by Garlock.

“The real fraud was during the ’30s, the ’40s, the ’50s, the ’60s, when companies, with help from management and lawyers, concealed the dangers to which these people were exposed.”