bankruptcy law

I'm writing several times a week about products liability for Law.com/The National Law Journal. Occasionally I cross-post a blog I find particularly interesting.

A judge who found widespread misrepresentation by plaintiffs in a gasketmaker’s bankruptcy has granted Ford Motor Co. access to the statements that parties must file to disclose their economic interests in bankruptcies.

U.S. Bankruptcy Judge George Hodges of the Western District of North Carolina said in a hearing on April 17 that Ford may access the Federal Rule of Bankruptcy 2019 statements, which must be filed by anyone participating in bankruptcy cases.

The statements are public records, Hodges said in ruling from the bench, and he did not find any improper purpose behind Ford’s request.

Hodges said his order will not go into effect until two weeks after law firms that the plaintiffs say have not been served with Ford’s request receive that service.

If those firms and their clients object, then the order will not go into effect against them, Hodges said. The order will be implemented “on a no protest basis,” Hodges said.

Hodges is presiding over the bankruptcy of Garlock Sealing Technologies, LLC.

The 2019 statements and other evidence in Garlock’s insolvency proceeding have been sealed after Hodges presided over a hearing to estimate the liabilities of Garlock for asbestos claimants who have mesothelioma cancer.

Hodges has denied access to the sealed transcripts of the estimation proceeding, which led to his findings of misrepresentation. In a prior ruling, Hodges noted that the district court already has an appeal about closing the proceeding to the public before it. He reasoned it would be more efficient for the district court to hear the appeals of Ford, online news outlet Legal Newsline, and others in one proceeding.

Ford’s counsel, K. Elizabeth Sieg of McGuire Woods LLP in Richmond, Va., argued that the names of the asbestos litigants suing Garlock are “at the very heart of the fraud Ford seeks to investigate. Ford suspects it has been defrauded in the settlement of asbestos claims” by plaintiffs who did not disclose they had claims against Garlock.

Rule 2019 statements bear directly on the “integrity and transparency” in bankruptcy proceedings, Sieg argued.

Sieg cited the Company Doe decision in the U.S. Court of Appeals for the Fourth Circuit this week in which the court held that an order sealing a company’s identity throughout an entire litigation violated the public’s right of access under the First Amendment.

Trevor Sweet III, a plaintiffs attorney with Caplin & Drysdale, Chartered in Washington, said disclosing the 2019 statements would expose plaintiffs to identity theft and the disclosure of their asbestos diseases. He also argued that settlement amounts should not be disclosed because they could not be disclosed in the civil tort system.

“In the tort system where Ford hopes to use this information, Ford is not entitled to know the amount of any settlement that a Ford plaintiff has reached with any other person unless and until Ford suffers a judgment in favor of that person and that court has been called upon to mold that judgment,” Swett argued.

The plaintiff’s attorney distinguished the Fourth Circuit decision because it was not a bankruptcy case but “a case in which a district court allowed an entire litigation from filing to judgment [to proceed] behind closed doors.”

The judge also granted Specialty Products Holding Corp. and Bondex International, Inc. access to the 2019 statements Thursday.

Hodges previously ruled that insurer Aetna, Inc., and Rawling Company LLC, a cost containment vendor for insurers, can have to the 2019 statements.

I'm writing several times a day about products liability for Law.com/The National Law Journal. Occasionally I cross-post a blog I find particularly interesting.

A bankruptcy judge, who found “demonstrable misrepresentation” by plaintiffs' lawyers in several asbestos cases, denied the motions of asbestos defendants and a media outlet to access that sealed evidence.

Ford Motor Co., joined by Volkswagen Group of America Inc, Honeywell International Inc. and Crane Co., filed a motion to unseal that evidence. In a separation motion, news outlet Legal Newsline sought to unseal the trial testimony and exhibits on which the judge based his Jan. 10, 2014, order, finding that plaintiffs' lawyers withheld evidence of their clients' exposure to other sources of asbestos in the bankruptcy case of Garlock Sealing Technologies, LLC.

Those cases included two that resulted in a $9 million verdict in California and a $1.35 million verdict in Texas, the judge said.

By denying the motions, U.S. Bankruptcy Judge George Hodges of the Western District of North Carolina said in a hearing on March 27 that he was hoping to “get all of us to an answer as simply as I can” on whether that evidence should be publicly accessible.

By denying the motions on their merits, the judge said he hoped that would get the motions to the U.S. district court on appeal for resolution at the same time.

Legal Newsline already has an appeal pending in the district court on being denied permission by Hodges to attend the hearing during which he heard evidence on the estimated liability Garlock faces for asbestos claims.

“The practical problem I have is this: if I granted the motions to unseal filed by Ford and Volkswagen and Legal Newsline it would essentially moot the appeal,” Hodges said.

Trevor Swett III, a plaintiffs attorney with Caplin & Drysdale, Chartered in Washington, argued that Hodges did not have subject-matter jurisdiction anymore because Legal Newsline has appealed the sealing of the evidence and the closing of the courtroom.

“They mean to unseal the evidence going to the supposed misrepresentation and suppression of evidence,” Swett argued. “That’s the same evidence implicated in their demands on appeal.”

Legal Newsline's attorney, Steven Pflaum, argued that jurisdiction was not divested because the district court only has to decide if the courtroom should have been closed during the estimation hearing.

Unsealing the evidence would allow public understanding of who has been victimized by a pattern of misrepresentation, said Pflaum, of Neal, Gerber & Eisenberg LLP in Chicago.

It is “vitally important that the public understand the courts,” Pflaum said.

Hodges ruled on a separate motion that insurer Aetna, Inc., and Rawling Company LLC, a cost containment vendor for insurers, brought to have access to Federal Rule of Bankruptcy 2019 statements. Those statements must be filed by anyone participating in bankruptcy cases.

Hodges said that social security numbers and the retention agreements law firms enter into with clients can't be disclosed.

“It appears to me ... that the interests of the opposing parties are not superior to the public rights to access and that there is a legitimate interest here on behalf of the movants” to protect their subrogation rights against asbestos defendants and reimbursement rights against members of insurance plans, Hodges said.

Read more: http://www.nationallawjournal.com/id=1202648736269/Judge-Denies-Access-t...

I'm blogging several times a day about products liability for Law.com. Each day I cross-post an excerpt of the day's blog I found most interesting.

A notice in a Chapter 11 reorganization bankruptcy, that tort claims would be barred after a date certain, applies to plaintiffs who did not know they would develop illnesses induced from a chemical producer's product, a federal judge has ruled.

Nine plaintiffs who worked for Chemtura Corporation's Firmenich plant filed lawsuits alleging they had been injured by exposure to diacetyl, a butter-flavor ingredient used in food products. Exposure to diacetyl can lead to lung disease.

The plaintiffs argued to U.S. District Jesse M. Furman of the Southern District of New York that they did not receive constitutionally adequate notice of the “bar date” for creditors because they did not know they had diacetyl-induced illnesses until after then. “The appellants argue that, while the notice may have been adequate as to people with reason to know they might have diacetyl-related claims, it was inadequate as to appellants because they 'had not yet been diagnosed with diacetyl-induced disease' and thus had no reason to know that they might have claims,” the opinion said.

Furman thought otherwise. “It cannot be said that, had the Firmenich claimants read the notice, they 'would have remain completely unaware that their substantive rights were affected' by the bar date,” the judge opined. “The notice, which was disseminated in a local newspaper circulated in the area of the Firmenich plant, advised that Chemtura had sold diacetyl to flood-favoring companies throughout the United States from 1998 to 2005, and specifically referenced Firmenich as one of those companies.”

The bankruptcy judge had barred from the plaintiffs from bringing tort actions.

The Oct. 31, 2009, bar date requires all creditors, including diacetyl claimants to file their proofs of claim. Notice included a publication in the Homes News Tribune, a newspaper circulated in Middlesex County, N.J. — the same county in which the plaintiffs filed their lawsuits. The notice alerted tort plaintiffs that they would have their claims barred for an injury that “becomes apparent either now or in the future,” the judge said.

The plaintiffs were on notice that they might have been exposed to diacetyl, that they might have been injured and that they would lose their rights to recover for injuries that had not yet manifested if they did not file a proof of claim form by the bar date, Furman said.