WILMINGTON, Del. (Legal Newsline) - The planned destruction of evidence in asbestos cases would keep defendants from finding fraud by plaintiff lawyers, defendants say, as a group of state attorneys general have joined their fight to preserve it.
Dozens of companies that faced overwhelming liability for asbestos have formed trusts in bankruptcy court to pay asbestos victims rather than going through costly litigation. And there are still companies doing the same, like a spinoff company of Georgia-Pacific's called Bestwall.
The information that will possibly soon be wiped from 10 trusts is used by companies like Bestwall to allege plaintiff lawyers have double-dipped in the past - blaming companies in the bankruptcy system while also blaming others in lawsuits.
"As an initial matter, several of our states have passed asbestos trust transparency laws that impose various transparency and disclosure requirements," a coalition of state AGs led by South Carolina's Alan Wilson wrote on April 11.
"Your planned document destruction may very well impede the efficacy of these laws, which are intended to ensure fairness to claimants, defendants and trust funds themselves. Further, your planned document destruction may impede the ability of individuals to fairly adjudicate claims in our state courts.
"As you well know, the data and documents retained by the trusts are often essential to validating (or invalidating) claims in separate litigation."
Though the trusts, which are operated by boards that are aided by trust advisory committees that often feature plaintiffs lawyers, claim destruction of old records is key to protecting the privacy of claimants, other companies think there is an ulterior motive.
A group featuring Bestwall and Johnson & Johnson wrote the trusts are hoping to delete evidence that could pop up in future bankruptcies. Judges make the ultimate determination on how much money needs to be placed in trusts, and the companies going through the process often argue figures recommended by plaintiff lawyers are excessive because they rely on a history of double-dipping.
Before Garlock Sealing Technologies convinced a judge in 2014 this was happening, companies facing lawsuits had no way to prove the same clients were telling different exposure histories in claims made to bankruptcy trusts and in lawsuits filed in various courts.
After the Garlock ruling, which came after the company showed exposure history contradictions in the 15 cases it was permitted to investigate, 16 states passed laws requiring automatic disclosure of trust claims to civil defendants so they could find out who was being blamed for what.
Georgia-Pacific's Bestwall is hoping to show the same in its bankruptcy. It issued subpoenas to the trusts, the Delaware Claims Processing Facility and Verus LLC, a mass tort litigation support company.
"The Document Destruction Policies appear to be designed to avoid the production of data and documents responsive to future subpoenas from the Affected Entities and other similarly situated parties," the firm Jones Day wrote for the group of businesses on April 1.
The AGs say the evidence can be used as both a "sword and shield" in asbestos lawsuits when determining what products a plaintiff was exposed to, and how much they are to blame for the resulting illness.
As for the claim destruction is intended to hide this evidence from defendants, the AGs wrote, "we find such reporting to be deeply troubling, and we trust you understand the seriousness of those allegations."
The destruction was supposed to start on April 15. Three months earlier, the trusts filed notices of record destruction that said information would be eliminated in cases that have resulted in a payment, withdrawn by counsel or deemed withdrawn by the trust.
The firm Gay Jones & Kuhn issued objections on April 1 on behalf of several asbestos defendants, writing the notices appear "to be an attempt to willfully and intentionally circumvent legislative requirements and litigation trust discovery orders, destroying information that courts and trusts have utilized to evaluate trust claims."
It also faulted the notices for not providing legal notice to claimants. The trusts planning destruction are Armstrong World Industries, Babcock & Wilcox, Celotex, Federal-Mogul, Flinkote, Owens Corning, Pittsburgh Corning, Quigley, United States Gypsum and WRG.
"In the last 10 years, these historical claims records have been the source of uncovering fraud in the tort system, in trust claims administration and in federal bankruptcy court," the firm wrote.
Joining Wilson's letter on behalf of AGs are Steve Marshall of Alabama, Austin Knudsen of Montana, Chris Carr of Georgia, Dave Yost of Ohio, Brenna Bird of Iowa, Marty Jackley of South Dakota, Liz Murrill of Louisiana, Jonathan Skrmetti of Tennessee, Lynn Fitch of Mississippi, Ken Paxton of Texas, Andrew Bailey of Missouri, Derek Brown of Utah, Jason Miyares of Virginia and John McCuskey of West Virginia.