Asbestos liability claims set at $125 million as judge sides with Garlock

CHARLOTTE, N.C.—Chalk one up for Garlock Sealing Technologies L.L.C. and parent EnPro Industries Inc.

They walked away as the initial victors in a court battle over asbestos-related mesothelioma liability claims Jan. 10 when a federal bankruptcy court judge estimated Garlock's liability to cover current and future mesothelioma claims against the company at $125 million.

The plaintiffs' lawyers were seeking around $1 billion to $1.3 billion. They could not be reached for comment but are expected to appeal the ruling.

Garlock officials said the estimate of $125 million is consistent with the positions the firm put forth at trial.

Judge George Hodges of the U.S. Bankruptcy Court for the Western District of North Carolina also criticized some of the claimants' law firms, maintaining they withheld evidence about plaintiffs' exposure to other asbestos products during court hearings, controlling the evidence to drive up Garlock's settlements for mesothelioma over a 10-year stretch.

Garlock sued four law firms charging them with fraud a few days before Hodges made his ruling.

In the company's lawsuit, it claims that the law firms concealed evidence about their clients' exposure to asbestos products, alleging their clients already had made conflicting claims about exposure to asbestos against other businesses.

Named in the suit were Belluck & Fox and Shein Law Center, both based in Philadelphia, and Waters & Krause and Simon Greenstone of Dallas.

Hodges said "the estimates of Garlock's aggregate liability that are based on its historic settlement values are not reliable because those values are infected with the impropriety of some law firms and inflated by the cost of defense."

Hodges issued his ruling after a four-month review of evidence presented at an estimation trial held in his court during July and August. The purpose of the hearing and Hodges' order was to determine Garlock's responsibility for causing asbestos-related mesothelioma and the aggregate amount required to cover present and future claimants.

Hodges' liability estimate is for mesothelioma claims only, and additional amounts may be needed to resolve other disease claims and for trust administration costs, the company said.

The federal judge said $125 million "is sufficient to satisfy Garlock's liability for the legitimate present and future mesothelioma claims against it."

He said in a 65-page opinion it was clear that Garlock's products resulted "in a relatively low exposure to asbestos to a limited population" and that its legal responsibility for causing mesothelioma was minor.

Garlock demonstrated that a large number of other manufacturers more likely were responsible for mesothelioma cases that cropped up than the small doses of asbestos associated with Garlock's gaskets and seals, the judge said.

But in the early 2000s, many large thermal insulation defendants that hadn't closed their doors previously filed for bankruptcy and were no longer participants in the tort system, Hodges said, which put the still solvent Garlock in the spotlight and "evidence of the plaintiffs' exposure to other asbestos products often disappeared."

"Certain plaintiffs' law firms used this control over the evidence to drive up the settlements demanded of Garlock," the judge said. "And Garlock suffered a few large jury verdicts when such evidence was not available.

"Garlock continued settling cases with relative success, but at higher amounts, until its insurance was exhausted," and it filed for bankruptcy protection in June 2010.

The withholding of exposure evidence by the law firms "was significant and had the effect of unfairly inflating the recoveries against Garlock from 2000 through 2010," Hodges claimed.

Victims of various asbestos-related diseases started suing Garlock in the tort system in the early 1980s, with many of the suits naming 20 to 50 defendants. It was successful in settling the majority of those cases.

"By the early 2000s, the focus of the tort litigation had become mesothelioma wrongful death cases," Hodges said. "Such cases presented an extraordinary environment because of the disastrous consequences of a plaintiff's verdict."

Even when it was likely the adverse verdict would be small, the possibility of a huge verdict and the large expense of defending itself drove Garlock to settle cases regardless of the company's actual liability, he said, which led to big settlements paid by Garlock.

Many of the law firms involved in actions against Garlock are represented by two committees, one focusing on asbestos and the other on future claims. The company will have to deal with them when it eventually presents its plan to exit Chapter 11 bankruptcy, which it hopes is sooner rather than later.

Following the ruling, a spokesman for Garlock said the company was pleased with the outcome but cautioned that the matter is not resolved yet.

During a Jan. 13 conference call, EnPro CEO Stephen Mac-adam maintained that the ruling by Hodges was a game changer for Garlock. "We passed an important milestone. This allows us to move forward (in the company's bid to exit Chapter 11 bankruptcy) in a fundamentally different way."

He said the firm will use the $125 million figure as it puts together its reorganization plan. Garlock also will have to set some funds aside for other related health claims and administrative costs, but Macadam said the amount had not been determined as yet, and the judge did not rule on other asbestos claims.

Richard Magee, a legal consultant for EnPro and retired general counsel for the company, said the legal battle is far from over and could stall the company's efforts to emerge from Chapter 11. "We'll move forward and propose a reorganization plan ... and remain open to a consensual deal" with creditors, including the law firms.

He admitted if the legal fight stretches out for a long period, then it could take a number of years for the company to emerge from Chapter 11.

If all the parties do reach a settlement soon, then the company will remain under bankruptcy protection for a much shorter period.