Hidden Garlock Asbestos Claim Evidence Will be Evaluated at Court Hearing

By Bill Rochelle and Sherri Toub | November 14, 2014

Whether Garlock Sealing Technologies LLC, plaintiffs’ lawyers, or both are responsible for suppressing evidence related to asbestos claims against an EnPro Industries Inc. unit is a question to be decided Dec. 4 at a hearing in U.S. Bankruptcy Court in Charlotte, North Carolina.

Garlock, the EnPro subsidiary, initiated a Chapter 11 reorganization in June 2010 to deal with asbestos claims. Last year, the bankruptcy judge held a lengthy trial to estimate the amount of valid claims.

In January, the case took a turn in favor of Garlock when U.S. Bankruptcy Judge George R. Hodges found that $125 million was a “reasonable and reliable estimate” of the total liability to pending and future mesothelioma claimants. Asbestos claimants thought the liability should have been 10 times larger.

In his opinion, Hodges ruled that the “impropriety of some law firms” representing asbestos personal-injury plaintiffs led to “unfairly inflating recoveries against” Garlock, in part by withholding evidence that should have been turned over.

n June, the asbestos claimants’ lawyers responded with papers telling the judge he should reopen the trial because Garlock “committed a fraud on the court.” The claimants contended that Garlock withheld evidence that would have helped their case. The issue is set for argument in bankruptcy court on Dec. 4.

In papers filed last week, Garlock said the claimants’ lawyers were the truly offending parties for showing a “startling pattern and practice of evidence suppression.”

Although Garlock admits it inadvertently failed to turn over some documents, the company said it didn’t matter because the claimants’ lawyers already had copies in their files or in the files of co-parties in prior lawsuits.

The asbestos lawyers, on the other hand, say it was Garlock that withheld evidence, allowing Hodges to incorporate “false testimony” into his factual conclusions. The withheld evidence, according to the claimants, includes experts’ reports and e- mails “undercutting the testimony of Garlock’s witnesses about how any why it settled cases.”

Garlock responded last week, turning the tables and trying to show that asbestos claimants’ lawyers failed to disclose their clients’ claims against other companies or didn’t turn over information known to them although it may not have been known by the creditors themselves. In sum, Garlock says the claimants want to “relitigate the estimation trial.”
Garlock has lawsuits pending against several law firms alleging they violated racketeering laws by withholding evidence in prior asbestos lawsuits. The suits against the firms were transferred from bankruptcy court to federal district court.

A hearing about who withheld evidence was delayed during parallel litigation to unseal the trial record, briefs, and evidence. Legal Newsline had appealed a sealing order and argued successfully that the estimation trial should have been open to the public.

U.S. District Court Judge Max O. Cogburn Jr. in Charlotte reversed Hodges and said the trial should have been public. The bankruptcy judge unsealed the evidence and briefs last month, allowing the hearing to go ahead on Dec. 4.

The January opinion allowed Garlock to file a Chapter 11 plan paying creditors in full, including those with asbestos claims. Full payment allows EnPro to retain ownership. For discussion of Garlock’s revised plan based on the January claim estimation, click here for the June 2 Bloomberg bankruptcy report.

EnPro makes engineered products, including diesel and natural-gas engines. It has operations in the U.S. and 10 other countries, with assets of $1.47 billion and liabilities of $744.3 million on the June 30 balance sheet. Net income last year was $27 million on revenue of $1.14 billion. For the first half of this year, net sales of $600.3 million resulted in net income of $9.6 million.

The Chapter 11 case is In re Garlock Sealing Technologies LLC, 10-bk-31607, U.S. Bankruptcy Court, Western District of North Carolina (Charlotte).

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