‘Outlier': Garlock Case Gives Traction to Asbestos Fraud Claims

Originally featured in the Huffington Post. 

Even if all you know (or ever want to know) about the world of asbestos litigation business comes from those unavoidable “if you or a loved one has been diagnosed with mesothelioma” commercials, you still ought to know that big changes are coming to what is called the longest-running personal injury litigation in the United States; some estimates (okay, mine) say it does about $10 billion a year, making it as big as the “industry” of pro football, the NFL.

Multiple defense lawyers have been alleging institutional and operational fraud for years, but lately those charges are gaining some credence. From North Carolina to New York, cases that were initially discredited by victims’ attorneys as mere “outliers” are gaining traction as federal courts allow lawsuits to advance.

For example, politically savvy New Yorkers are likely aware that Manhattan’s Sheldon Silver resigned his longtime post as State Assembly Speaker earlier this year after he was indicted on fraud and extortion charges in a $4 million influence-peddling scheme. However, they may not have made the connection that his fraud charges stemmed from how victims of mesothelioma, the “asbestos cancer,” found legal help. Prosecutors allege Speaker Silver steered taxpayer money to a clinic in exchange for the clinic steering victims to his law firm, in turn receiving millions of dollars in referral payments from a prominent asbestos litigation firm. Such referral fees are common, but the taxpayer implications are not.

Meanwhile, on a key civil litigation front, a North Carolina bankruptcy case initially branded as an “outlier” is gaining credibility. An NPR report noted that “Garlock” offered a look inside the “murky world” of asbestos litigation and a key issues was telling one story in civil cases and another story to any of some 60 to 100 “trust funds,” which were set up when companies declared bankruptcy over asbestos liability.

Judge George Hodges, in the Garlock case, identified significant issues in 15 of 15 cases. In his decision, Judge Hodges said that more research would no doubt have found more problems, although he stopped well short of what the lawyers call “the F bomb,” which to them is “fraud.” But Garlock has brought a civil RICO suit against several asbestos victim’s firms, alleging a pattern of misrepresentation over many years.

At first, the whole Garlock case, and its ancillary issues, were more or less dismissed by the plaintiff’s bar. The talking point was that the judge was new to the litigation and the allegations against the firms would dissolve upon contact with appeals courts. But the opposite has happened so far: Garlock has been upheld through multiple appeals, getting victories even from Democratic-appointed judges – it’s worth noting that asbestos litigation is so political that which party appointed your judge can be a big deal.

Just this month, U.S. District Judge Graham Mullen (a President George H. W. Bush appointee) upheld a lower court ruling that Trust Fund records being sought by Garlock Sealing Technologies should be produced. He also agreed with the complaint that the “requests are broad” but added: “Yet, so is the fraud in which plaintiffs are alleged to have engaged.”

The firm in that case — New York’s Belluck & Fox — made an argument that no doubt illustrates the strategy for those making cases of the Garlock discoveries, stating:

It is now clear that, while the complaint includes allegations about just 11 cases, plaintiffs are seeking to expand discovery to include all the trust claims of virtually every Belluck & Fox client that ever brought a claim against Garlock – whether the case was litigated in the tort system or not.

Belluck & Fox is not alone. Big national firms, like Dallas-based Simon Greenstone and Waters & Kraus and Philadelphia’s Shein Law Center, are also targets and no doubt will face similar discovery efforts.

Those court victories are likely to play a huge role as the U.S. House of Representatives takes up debate on what’s called the “FACT Act,” for “Fairness in in Asbestos Claims Trust,” later this month. That legislation has little chance that President Obama will ever sign it into law, but it does offer a platform and rallying point for those who would change how victims sue over asbestos. The FACT movement may be for “show” in Washington, but six states – Oklahoma, Wisconsin, West Virginia, Texas and Ohio – have passed some form of the legislation.

In what might be a “first use” in Texas, a judge in Harris County has granted a “stay” motion based on that state’s FACT Act legislation. The case involves a Navy veteran with mesothelioma and the judge has agreed that claims against bankruptcy trusts must be considered, even if those concerns are NOT part of the current trial.

Whatever asbestos “scandal” there is may be a slow-motion crisis, but I’ve made the argument that it’s about to exit the litigation world to involve hundreds or even thousands of innocent victims’ families. Some lawyers have turned their clients intoperjury pawns. Others may discover they might owe Uncle Sam some of their hard-won settlement and judgment money. And I truly believe that Democrats, who benefit from the plaintiff bar’s donations, are being slow to realize the gravity of the situation.

The common theme is that focus needs to shift to what it all means to victims.

I’m not the only one who thinks so. The journalist Paul Johnson, best known as a Washington correspondent for Canada’s Global TV and his documentary reporting from Afghanistan, is making asbestos litigation the topic of his next U.S.-based film. He says the project so far has been eye-opening.

“Our story begins with a small car dealership in central California getting sued for what seems to be no good reason,” says Johnson. “We follow that 7-year battle involving all kinds of twists and some serious allegations against a major firm; I will say that it shows that sometimes you might need a lawyer to keep an eye on your lawyer.”

Johnson said the movie, slated for 2016, is “… most unsettling when you find yourself sitting in a New York conference room at one of the more liberal universities on earth, and a professor is assuring you that this [asbestos litigation] scandal will one day be seen as bigger than Teapot Dome or Enron, but it’s what you want as a reporter to find a huge scandal that almost nobody outside the trade press is covering.”

We are anxiously awaiting the release of this film for the topic that “nobody is covering” could very well be the one “everyone is watching” in 2016.

(Sara Warner is publisher of the National Courts Monitor and California Courts Monitor. Disclosure: Although Ms. Warner has not participated in the Paul Johnson film mentioned, some Courts Monitor contract researchers and contributing editors have contributed to the documentary and the National Courts Monitor is in discussions to host the Washington, D.C. premier of the movie.)