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  • Writer's pictureKirk Hartley

Some State Court Asbestos Trial Judges Moving Forward To Account for Billions in Asbestos Bankuptcy

As explained before in many posts categorized under "asbestos bankruptcy," the situation in the US today is that we have two different compensation systems for persons suffering from asbestos-related disease. They are the tort system and the bankruptcy trust system. The two have been operating largely independently, but real change is starting to bring the two systems together.

Specifically, two recent orders from state court "asbestos docket judges" mark meaningful and much needed progress in accounting for the billions of dollars that are being paid out annually through asbestos bankruptcy trusts. Both orders are part of "Case Management Orders" (CMOs) that are used by trial judges to streamline case management by providing one set of rules applicable to all (or most) cases on an asbestos docket in a particular county or state (Texas has a statewide asbestos MDL).

In short, both of these recent orders require disclosure of claims submitted to trusts by asbestos claimants. This is an important first step. The order from West Virginia is especially important because it goes on to include several additional terms that are much needed to create an intersection between the two now separate systems. The following provides a summary.

In Pennsylvania, the Court of Common Pleas of Montgomery County issued a February 22, 2010, CMO requiring plaintiffs to disclose all bankruptcy trust claims at least 120 days prior to trial. See paragraph 10.

In West Virginia, the Kanawha County Circuit Court, issued a March 3, 2010 CMO order that adds a lengthy new paragraph 22 to deal with asbestos trusts . Like the February 22 order in Pennsylvania, this order require plaintiffs to disclose all existing bankruptcy trust claims at least 120 days prior to trial. The West Virginia order also goes much further, and appropriately orders plaintiffs and their counsel to take several other affirmative steps to ensure that tort system defendants are fully aware of and benefit from future recoveries in the trust system. Specifically:

1. Section 22(A)(2) requires counsel to disclose whether any claims to trusts have been submitted to a trust but deferred or delayed, This provision is pertinent because delays and deferrals are permitted by the terms of some trusts and/or their Trust Distribution Procedures (TDPs, as they are known). Defense counsel typically view such terms as having been crafted to allow gaming the two systems by allowing the plaintiff to bring and resolve state law tort claims before pursuing trust claims. Plaintiff’s counsel are of course free to argue a plausible alternative reason for allowing plaintiff’s to delay or defer submitting claims until after the tort claim is over

2. Section 22(A)(2) requires a good faith investigation of potential claims against trusts and requires an affidivait from plaintiff or plaintiff’s counsel to affirm the good faith investigation of potential claims against trusts.

3. Section 22(C) addresses trial use of the claim forms and ancillary documents. Among other things, Section 22(C) precludes plaintiff from arguing privilege or confidentiality to try to keep the claims out of evidence.

4. Section 22(D) explicitly allows underlying case co-defendants to pursue discovery against asbestos trusts (subject to federal law limits, if there are any that apply in this setting), and explicitly requires plaintiff to provide any consents or permissions that any trust may request.

5. Section 22(E) specifies that defendants that lose a trial judgment to a plaintiff are entitled to offsets for liquidated amounts paid by trusts, and requires related disclosure of the total amounts recovered or “reasonably expected to be recovered” from bankruptcy proceedings or settlements with tort system defendants.

7. Section 22(E) further provides that if a plaintiff obtains a judgment against a defendant, then the plaintiff must assign to the judgment defendant the right to all future asbestos trust payments.

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