A Georgia-Pacific LLC unit is blaming “abuses in the tort system” for the skyrocketing number of lawsuits that forced it to file for Chapter 11 bankruptcy on Thursday.
Bestwall LLC, which was created in July to manage Georgia-Pacific’s asbestos docket, is the latest firm to file for bankruptcy due to rising numbers of lawsuits brought by plaintiffs who claim they or their family members got mesothelioma from exposure to asbestos in their products. But, in a refrain popular among tort reformers, Bestwall alleges plaintiffs lawyers aren’t being truthful about all the products their clients were exposed to that might have contained asbestos.
“The breadth and magnitude of the asbestos litigation pending against Bestwall are wildly disproportionate to any legal liability Bestwall could possibly have,” wrote Garland Cassada, an attorney for Bestwall, in an information brief filed in bankruptcy court. Cassada, of Robinson, Bradshaw & Hinson, is working alongside Bestwall’s lead bankruptcy counsel, Greg Gordon, a partner in Jones Day’s Dallas office. “The massive increase in the number of claims against, and the size of the plaintiffs’ settlement demands to, Bestwall have been driven by various interrelated shortcomings of and abuses in the tort system.”
Specifically, the company cites an “inexplicably large numbers of plaintiffs and their counsel” who have identified Bestwall’s product, a joint compound used on construction sites, as having contributed to their mesothelioma but failed to disclose exposures to other products made by companies in whose bankruptcy trusts they have filed claims. In 1977, Georgia-Pacific, now a subsidiary of Koch Industries Inc., stopped selling the product.
“Each of these practices substantially impacted the cases against Bestwall, requiring it to defend cases in which it never should have been identified,” Cassada wrote.
Bestwall listed 25 of its top creditors — all law firms — as it intends to set up a bankruptcy trust to resolve the asbestos claims and has asked for a Nov. 7 hearing before U.S. Chief Bankruptcy Judge Laura Beyer, according to its bankruptcy filings.
They include Simmons Hanly Conroy, The Lanier Law Firm, Motley Rice, Napoli Shkolnik, Simon Greenstone Panatier & Bartlett, Waters & Kraus and Weitz & Luxenberg. Representatives and lawyers from those firms either did not respond to calls or emails, or declined to comment.
But Matthew Bergman of Bergman Draper Oslund in Seattle, whose firm has dozens of cases pending against Bestwall, said allegations that plaintiffs lawyers aren’t disclosing trust claims simply aren’t true.
“This is a tried-and-true method that’s utilized by asbestos defendants: Essentially, shoot the messenger,” he said. “From the experience of our law firm, trust claims are routinely disclosed in discovery or, if they’ve not been filed, at the conclusion of trial, they’re assigned to the defendant.”
In a 2015 study involving 86 plaintiffs, Rand Corp. found that references in asbestos lawsuits to other companies, both in interrogatories and depositions, disappeared significantly once those firms filed bankruptcies. But Lloyd Dixon, a senior economist at Rand, said both sides bear some responsibility.
“From the plaintiffs’ point of view, if they identify exposures to bankrupt parties during the allocation process, that would lower their award,” he said. “And from the defense side, the defendants say that it’s expensive to probe these extra exposures, and also that even if they do, whatever they come up with is really less persuasive than having the plaintiffs say something. So the defendants say it doesn’t particularly pay off to probe these during the depositions.”
Part of the problem, said University of Buffalo School of Law professor S. Todd Brown, is that the asbestos trusts and courts weren’t designed to work together, even if they should.
“They weren’t set up in a way that would make this interaction with the tort system very easy,” he said. “If you want to get this documentation, you have to either have the plaintiff produce it to you or you have to get those records from the trust themselves.”
According to bankruptcy filings, Bestwall and its predecessor companies have spent $2.9 billion in the past 40 years defending 430,000 personal injury lawsuits tied to asbestos, and 64,000 claims remain as of Sept. 30. Bestwall historically paid $6 million a year in settlements and judgments, but from 2012 to 2016, its legal defense costs “skyrocketed” to an average of $160 million per year as the company became a defendant in up to 80 percent of all mesothelioma cases.
Bestwall, based in Atlanta, filed in the Western District of North Carolina, the same court where U.S. Bankruptcy Judge George Hodges in 2014 found that plaintiffs attorneys had failed to disclose, or delayed filing, claims against asbestos trusts in order to collect disproportionately large settlements and jury awards in court against gasket maker Garlock Sealing Technologies. Bestwall even brought in one of the law firms that represented Garlock: Robinson, Bradshaw & Hinson in Charlotte, North Carolina.
The ruling has long been espoused by the U.S. Chamber of Commerce and other tort reformers as evidence of fraud in asbestos litigation. In May, the U.S. House of Representatives passed legislation that required asbestos trusts to file quarterly reports disclosing payments to victims of mesothelioma and other cancers caused by asbestos.
Earlier this year another company, John Crane Inc., began litigation against two plaintiffs firms, the Shein Law Center in Philadelphia and Dallas-based Simon Greenstone, alleging that they withheld evidence in asbestos cases and violated the U.S. Racketeer Influenced and Corrupt Organizations Act. The firms have asked for those lawsuits to be tossed.
In bankruptcy filings, Bestwall relied on the Garlock court record to argue that plaintiffs lawyers had done the same thing against it.
The Garlock record “contains numerous examples of highly questionable claiming practices in Bestwall cases, demonstrating that Bestwall was plagued by the same conduct that injured Garlock after the bankruptcy wave,” Cassada wrote.
Borrowing from the Garlock case, Bestwall referenced a 23-page set of directions that Baron & Budd gave its clients instructing them “about how to construct convincing testimony of joint compound exposure,” Cassada wrote. Steve Baron, head of Baron & Budd’s asbestos and mesothelioma law practice, did not respond to a request for comment.
The filing also cites five unnamed cases in which plaintiffs failed to disclose exposures to asbestos products made by other companies. But, according to Bestwall’s filing, one of those cases involved a plaintiff in Los Angeles whose case was featured anonymously in a prominent 2012 article as one of three in which the only known exposure to asbestos was from joint compound. The article, authored by James Dahlgren, a medical doctor who has testified for plaintiffs, has been used in cases against Bestwall.
In addition to Jones Day and Robinson, Bradshaw & Hinson, the firm has brought in Atlanta’s King & Spalding and Texas-based Schachter Harris, which have defended Bestwall in asbestos cases.
In filings, Bestwall said it managed 50 outside defense firms, with an average of 660 attorneys, paralegals and timekeepers billing from 2012 to 2016. In 2016, Bestwall spent more than $40 million defending the cases.
“Despite longstanding (and successful) efforts to cut costs, improve efficiencies and resolve cases, the overall costs of the litigation are not improving,” Cassada wrote. “Although the debtor has resolved asbestos claims in the tort system for over 40 years, the burden of the litigation only worsens — and no end is in sight.”