Costs of the Asbestos Wars – the Garlock Bankruptcy Professional Fees are at $105 Million, and
As RAND and others long ago explained, the asbestos litigation wars generate massive expenses. With aggregate professional fees now at $105 million and rising, the expenses for the Garlock asbestos bankruptcy perhaps will now enter the asbestos hall of fame. The expense point is highlighted by a new motion filed by Coltec – the parent of Garlock – seeking an examiner to look at fees. The motion is described in and linked to in a National Law Journal article of August 29, 2014. One might think that a reason for the motion is that Coltec likes things where they stand, and wants to limit the risk of future change by limiting the amount of future expenses. That inference especially follows from Coltec carping specifically about fees spent by the asbestos personal injury claimants’ committee but not the fees for Debtor’s counsel or Debtor’s experts, such as Bates White.
One could put different spins on all that expense. The spin that occurs to me is to suggest that all the fruits of all that expense should be made very public and very accessible, instead of being sealed up. More specifically, the professionals in Garlock took all kinds of discovery on all kinds of facts on many topics that are the subjects of much speculation and rumor that many lawyers and interested others will speculate about but cannot discuss factually because many of the key facts in the recent asbestos bankruptcies are hidden by or tangled up in large piles of meritless sealing orders and confidentiality orders. So, let’s see all that expense put to good use through full publication of all the Garlock trial testimony, deposition testimony, expert reports, and underlying data gathered by all parties. In short, let sunshine in and create transparency. After all, courts will make doctors and researchers produce data underlying medical studies. The Garlock experts claim to have studied the asbestos litigation system – let’s see out in public all the data from all sides so it can subjected to peer review and review by any interested academics.
As to the scale and timing of all the expense, the motion asserts the following:
The Debtors, the ACC, the UCC and the FCR have each been authorized to engage multiple professional firms to assist and advocate for them in this case. There are currently over twenty professional firms engaged by these parties, each of which regularly submit fee applications under the Interim Compensation Order. For reference, a listing of those firms, grouped by their associated party, is provided in Exhibit A attached hereto.
By April 13, 2012, the date on which the Court set a schedule and a process for conducting an aggregate estimation of mesothelioma claims, professional fees and expenses submitted for payment from the Debtors’ estates had already reached over $17.8 million. At that time, Coltec was already considering this motion. In its April, 2012, Order for Estimation of Mesothelioma Claims Docket No. 2102], the Court signaled its intent to permit the contending parties wide latitude to explore and develop, to conduct discovery relative to, and to present at trial their respective theories of aggregate estimation. In deference to that intention, Coltec elected to postpone this motion, knowing that the process and schedule set for the estimation would necessarily involve extensive efforts by the various professionals representing or advising the contending parties.
Since the entry of the Court’s January 10, 2014, Estimation Order, the activity level has scarcely abated, and incessant litigation over subsidiary and collateral issues unrelated to the formulation and presentation of plans of reorganizations for the Debtors have given new impetus to the need for an independent evaluation of the professional fees and expenses being incurred in these cases. Strikingly, in the first five months of 2014, $7.1 million in fees and expenses have been generated; almost all after the Estimation Order was entered on January 10, 2014.3 Based on interim fee applications filed and monthly fee statements submitted covering periods through June 30, 2014, over $105.2 million in professional fees and expenses have been generated by various professionals in the four years of these cases.
A comparison of the professional fees in these cases to the fees incurred in other Chapter 11 cases dominated by asbestos personal injury claims demonstrates the degree to which the professional fees in these Debtors’ cases are atypical and call for the heightened scrutiny provided by an independent examiner. To take only one illustration, counsel for the ACC in these cases also represented the asbestos personal injury claimants’ committee in In re W.R. Grace & Co., et al., Case No. 01-01139 before the United States Bankruptcy Court for the District of Delaware, a highly contentious asbestos chapter 11 case that has been pending for some thirteen years. The W.R. Grace case involved assets and alleged asbestos-related liabilities that are multiples of these Debtors’ assets and their alleged liabilities. Indeed, counsel for the ACC has stated to the Court that the stakes in these cases are “a fraction of the value that was at stake in Grace.” [Transcript, Dec. 15, 2011, at 68:17-18, as shown on the attached Exhibit B.] Significantly, the W.R. Grace case included both a contested estimation trial and a contested confirmation trial that lasted several weeks and was followed by extended appeals in the United States District Court for the District of Delaware and the Third Circuit Court of Appeals. Fee applications filed by counsel to the asbestos personal injury claimants’ committee in the W.R. Grace case for the thirteen-year period through December 31, 2013 totaled $21,394,103.00 in fees alone. By comparison, as of June 30, 2014, the same firm’s fee applications as counsel for the ACC had already reached $26.9 million in fees (excluding expenses), and these Debtors’ cases are far from being concluded.”