• Kirk Hartley

Tort Claim Resolution Trusts, Secrecy and Public Policy Will Go On Trial Some Day – – A

It’s ironic how views shift to fit the situation. Normally, plaintiff’s lawyers are complaining about corporations trying to keep secret the facts related to underlying bodily injury claim information. But when it comes to asbestos bankruptcy tort claim trusts, the world is turned upside down. In the tort claim trust world, it’s some plaintiff’s lawyers and some trust claim administrators who want to suppress access to information about underlying claims. These issues matter for far more than just asbestos cases because tort claim trusts are increasingly being recognized as a big deal due to the use of trusts for BP, for priest molestation cases, Chinese drywall cases, and others.

Do some plaintiff lawyers and some trusts really try to keep secret their claims informaton ? You bet. The proof ? Many prior posts on this blog detail efforts to keep secret information about claims submitted to trusts. See, for example, this post from March 2009 regarding the Manville trust taking trust claim information out of the relatively public domain it was in prior to the action by the trust. Anyway, of note today, more proof was just filed yesterday. It’s a declaratory judgment suit filed by several asbestos trusts that want to keep their claims data out of the hands of insurers and co-defendants in tort cases. Thanks to a friend sending it along, an image of the declaratory judgment complaint is here.

The suit is an obvious effort by some lawyers and some trusts to put a lid on the growing scrutiny of asbestos trusts. Why do they want a lid? Because lawyers and others around the country finally woke up and started paying attention to the fact that asbestos trusts hold tens of billions of dollars, and every year distribute several billion dollars, mainly in secret. As long-term readers know, I’ve been barking for a long-time about this secrecy and public policy travesty. To recap briefly on others paying attention, some insurers started paying attention and taking action, including Jack Cohn and others writing scholarly articles about asbestos trust secrecy, as previously described here, with links to their articles. RAND perceived the issue and has underway a major study of the asbestos bankruptcy trusts, as previously described here. The GAO also woke up and asked for investigation, as described here. Some state AG’s also started paying attention to bankruptcy trusts, as previously described here. The topic also has been covered in litigation conferences. As previously described here, we focused on the topic during an asbestos bankruptcy conference I co-chaired last June.

The new DJ complaint seeks to posture the suppression of information as a pious effort to save trust fund money. Saving money and being efficient is great, but secrecy is improper.

Less credible are the allegations that bankruptcy courts carefully weighed public policy issues and made careful choices about state law and state tor claims. That’s nonsense. Indeed, during the June 20, 2010 asbestos bankruptcy conference hosted by Perrin Conferences, we presented a panel of federal and state court "asbestos judges" who spoke to each other about how their court systems intersect. The unanimous view was that the conference panel was really the first time for any real discussion between court systems.. Moreover, all of the judges acknowledged that they have little or no clue about what happens outside their own court systems. The claim of careful prior consideration also fails when one considers Professor LoPucki’s detailed book and articles on forum shopping and other abuses in the bankruptcy system, as previously described here. In short, as he detailed, bankruptcy plan orders are entered when there are no objectors, every objector has a price, and many prior plan confirmations were later shown to be have been very badly done.

Ironically, I recently wrote this post asking if scholars will pay more attention to tort claim trusts. One hopez the scholars engage and weigh in as amici and witnesses in this new DJ case. Some eminent bankruptcy law scholars previously weighed in on the Travelers/Manville case. One hopes they weigh in again.


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