2018: Trump-era Justice Asked to Turn The Tables in Asbestos Litigation

01/05/2018 10:02 am ET

As 2018 gains full speed, it’s time for my annual look at trends in the nation’s longest-running personal injury litigation – asbestos. You may have peripheral awareness of it due to those “if you or a loved one has been diagnosed with mesothelioma” ads, but its reach is beyond those sound bites playing on loop.

Actually, asbestos lawsuits are the nation's longest-running personal injury litigation and have driven nearly 100 companies into a special form of banktruptcy, where trust funds are set up to pay future liabilities. Those funds have become controversial and, in 2017, more than a dozen state attorneys general launched an investigation into whether asbestos trusts were skipping required payments to Medicaid or other agencies providing health care to asbestos victims. (When victims receive compensation for asbestos injuries, some of the money may be owed to repay agencies that provided health care, like Medicaid and veteran’s hospitals.)

Likely even more ominous for the plaintiff's bar in 2018, the state AGs are asking President Trump’s Justice Department to join their investigations of the repayment issue. The letter making that ask was even noted during a U.S. Senate committee hearing.

I should note the AG political affiliation: They are Republicans, perhaps because the victims’ attorneys as a group are generally a major funder of Democrats.

If any shred of evidence arises that the trust funds or victims’ attorneys somehow violated federal False Claims Act provisions, then some major national law firms might face federal queries.

The milestone investigations are tied, in large part, to a 2014 North Carolina case known as “Garlock,” where a gasket maker sought bankruptcy protection over its asbestos liability. The judge in the case allowed unprecedented discovery into cases and found a pattern where victims recalled one history of asbestos exposure in civil litigation and another when applying to the trust funds. The subsequent release of the Garlock research has brought civil racketeering cases and was specifically noted in the aforementioned AG investigation.

More Garlock fallout also hit my inbox toward the end of 2017, with the prominent right-leaning Washington Legal Foundation, or WLF, issuing one of its “legal letters.” Like white papers and other documents, the letters often build a policy case for Washington insiders.

Authored by an attorney and former counsel to the U.S. House of Representatives Judiciary Committee, the WLF letter effectively puts trust funds on notice. Of course, the trust funds must technically be approved by the federal bankruptcy court, but have come under fire for a lack of oversight.

For example, the WLF letter asserts that that “… the Director of the U.S. Trustee program, Clifford J. White has stated ‘[t]here is a general lack of transparency in the operation and oversight of post-confirmation trusts, especially asbestos trusts. Among other things, there is a lack of reporting on the operations of such trusts and no clear recourse for stakeholders to challenge the claims review process or the administration of trust operations.”

In that same testimony, Director White also said that it was very clear for asbestos trusts that “there is no independent policeman, there is no watchdog ... neither the court nor the U.S. Trustee program have [sic] significant jurisdiction post-confirmation…”

However, the WLF letter also contends that there can be post-confirmation oversight and, more assertively, that law allows notification to “… the appropriate United States attorney of matters which relate to the occurrence of any action which may constitute a crime under the laws of the United States… Indeed, 20 state attorneys general recently wrote to U.S. Attorney General Jeff Sessions asking the Department of Justice to investigate and prosecute potential fraud in the asbestos bankruptcy trust system.” This all played out at a Senate Judiciary Committee hearing in November where Senator Tom Tillis (R-NC) submitted the State AG request to the Justice Department into the congressional record.

Ready to plot some points on a curve?

Reuters news service reported last fall that “… an affiliate of Georgia-Pacific LLC, which makes Brawny paper towels, has filed for U.S. Chapter 11 bankruptcy amid soaring litigation costs to defend against claims that  its products caused asbestos-related diseases.”

The affiliate, Bestwall LLC, is part of Georgia-Pacific which is owned by Koch Industries, and Bestwall said its joint compound in total never amounted to more than 1.5 percent of asbestos-containing products sold in the U.S., yet the company is now named in from 70 to 80 percent of all lawsuits over mesothelioma.

Reuters also noted that “… allegations of fraudulent asbestos claims were a central part of the bankruptcy of Garlock Sealing Technologies LLC, which filed in 2010 the same court in Charlotte as Bestwall.”

Another point: “Garlock” is context in a Texas open-records case, where a Dallas-based journalist is trying to unseal a decades-old deposition about a controversial “client coaching” memo. The Garlock judge cited the memo, devised by the famous Baron & Budd law firm, and now Christine Biederman, who covered the memo as a reporter for the Dallas Observer newspaper nearly 20 years ago, is asking the court to make public some testimony about the document.

An Austin court said it lacked jurisdiction. However, Biederman is appealing with the help of prominent first amendment attorney Paul Watler.

Verbal argument could come in the first quarter of 2018. 

So, to review: We began 2017 wondering what the new Trump administration might do in the asbestos arena. We begin 2018 with the same question, yet now fueled with Koch Industries in the mix, an effort to unearth decades-old documents in Texas, a WLF research letter and state attorneys general formally seeking DOJ involvement.

That is a lot of activity, and the Trump administration will very likely take notice. Given the midterm election tensions and Democrat-Republican funding implications from victims’ lawyers, that could move asbestos issues well beyond mere "peripheral awareness" to become the most unlikely political issue of 2018.

Sara Corcoran is publisher of the National Courts Monitor website, “Your Daily Ration of Civil Justice Rationing,” and a frequent commentator on national legal policy and civil courts issues.

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