Segal McCambridge Legal Blog

California’s official state symbols tell a story of a place of natural wealth and pioneering spirit, not to mention exploitable natural resources.

For example, there’s the redwood tree-a reminder of rugged coastlines and peaceful mountains. Then there’s the state mineral, gold, which tells of the hardy miners of the past. But what’s the meaning behind serpentine, the state rock? In 1965, leaders chose this mineral-packed stone as a symbol for the state’s mining prowess.

“We were the first state to have a state rock,” said State Geologist John Parish. “California leads the way.”

But now some activists are saying that designation was a mistake. So what’s not to like about shiny green serpentine? Well, it turns out that one of the minerals in the rock is asbestos, which has been blamed for causing mesothelioma, a form of lung cancer.

That makes serpentine not just a rock, but rather a political hot potato. When serpentine gets broken up-for example during construction or excavation-asbestos particles can go into the air and become a health hazard.

Enter State Senator Gloria Romero, (Dem-East LA). She took the carcinogenic matter into her own hands by introducing Senate Bill 624, which would take away serpentine’s title. On Monday, the bill received unanimous approval from the State Assembly’s Natural Resources Committee.

So how did serpentine become California’s pet rock in the first place? John Parish, the state’s geologist, explained in a phone interview that one of its core minerals-asbestos-wasn’t always considered a toxin. For years, it was prized for its heat-resistant qualities and widely used in construction and shipbuilding.

In short, not many people were talking about asbestos in 1965, when serpentine won its title.

“Forty-five years ago, asbestos was a very valuable commercial mineral,” Parish said.

That changed in the 1980s, when awareness of the health risks from asbestos began to grow. The U.S. Environmental Protection Agency largely phased out its use, but California’s state rock designation stuck.

Among cancers, mesothelioma is relatively rare, but some 2,000 to 3,000 new cases are diagnosed each year, according to the American Lung Association. The Asbestos Disease Awareness Organization estimates that 10,000 Americans die every year from asbestos-related diseases.

So how prevalent is serpentine? And how might it contribute to asbestos-related health concerns? Gennette Paauwe of the California Air Resources Board said serpentine is prevalent in upland areas throughout the state, such as the Sierra Nevada Foothills and the Pacific Coast Range. Coincidentally, those places are also hot spots for new home construction, Paauwe said, meaning it’s more likely that the serpentine will be disturbed and broken up into asbestos.

“As California’s been going through a building boom over the last 20 to 30 years, the rock, in certain parts of the state, is in regions that are being built that are being disturbed,” Paauwe said.

The whole article is available here

Courtesy of Law.com.

Southern District of New York Judge Alvin K. Hellerstein on Wednesday approved the settlement in the 9/11 respiratory illness litigation at the end of a nearly seven-hour-long hearing.

The judge and lawyers for the parties in the litigation pushed hard to persuade World Trade Center rescue and cleanup workers exposed to allegedly toxic dust at the site to accept a settlement that could run as high as $716 million.

Although billed as a “fairness hearing,” the session was clearly an effort to convince at least 95 percent of 10,000 claimants to opt into the settlement. The deal requires 95 percent acceptance in order to go into effect.

Kenneth R. Feinberg, who was appointed by Hellerstein to hear appeals from compensation decisions, spoke by conference call from Washington, D.C., and addressed the principal uncertainty confronting plaintiffs — legislation being negotiated on Capitol Hill to provide more money to 9/11 first responders and cleanup workers.

“If you opt out in the hope that there will be a better legislative alternative down the road, I believe personally, you will be making a mistake,” said Feinberg. “The legislative process grinds slowly and after waiting over five years for the legislation to be enacted, it is still not enacted.”

Hellerstein had rejected an initial settlement on March 19 as providing inadequate compensation to those injured at Ground Zero.

On Wednesday, he defended the latest deal during the seven-hour session that included emotional testimony from some plaintiffs as well as presentations by lawyers.

The settlement calls for the slotting of plaintiffs along four tiers based on the severity of their injuries, with tier four including the most serious health problems, such as lung cancer.

Warner explained that 50 percent of the 10,000 plaintiffs are expected to qualify for tier four and will received 94 percent of the cash in the settlement that will range between $625 million and $716 million, depending on the number of people who opt in and future claims made over the next five years.

The entire story is here

From Forbes.com’s On The Docket. The story is here

Congress has tried to ban them. Some judges even do their jobs and send the lawyers back in search of more money for their clients. But then there are judges like St. Louis County Judge Angela T. Quigless, who last month approved a class-action settlement against A.G. Edwards that rewards lawyers at Milberg and other firms $21 million in cash while their clients get mostly coupons they can use over three years to obtain discounts on mutual funds.

The St. Louis Today website article on this case is here

The 2008 Rand Report on Class Action transparency is here

Justice Scalia authored an opinion (5-4 with Justice Stevens in dissent) that relied principally on a 1967 decision called Prima Paint Corp. v. Flood & Concklin Mfg., Co., the Court held that if the employee had raised a challenge that was specific to the second part alone — that is, to the agreement to arbitrate validity — then a court would have had to decide the challenge. But because the employee's grounds for unconscionability applied equally to the initial agreement to arbitrate all employment disputes, the general unconscionability question should be decided by an arbitrator.

This is a new rule for determining who decides challenges to the validity of an agreement to arbitrate the validity of an arbitration agreement. The Court held that, depending on what kind of challenge to the arbitration agreement is made, that determines who (e.g. either the judge or an arbitrator) can hear the question. If the party resisting arbitration does so on grounds that go to the validity of the entire agreement, then the validity question goes to the arbitrator. But if the challenge is specific to the arbitration provision at issue in the case, then a court must decide that challenge.

The SCOTUS wiki page for his case is here
The SCOTUS opinion is here

From the Texas Public Policy Foundation
The article, “A Case Study on Tort Reform” can be found here
A Case Study on Tort Reform

Six thousand claimants in Texas silica lawsuits await their day in court. For most, that day will never come. Though it seems like justice is not being served, this is actually good news for courts and these claimants.

Silica is a naturally occurring mineral used in industrial processes and products. In its finest form, silica is dangerous to inhale and can cause serious damage to the lining of the lungs — and death in extreme cases. This danger has been known for so long that safety respirators and special work procedures have been required with silica's use for more than 60 years. Despite the effort towards safety, roughly 50 people each year are affected with silicosis.

However, in the 1990's, there was an explosion of lawsuits filed on behalf of thousands of claimants alleging they had been exposed to silica and were suffering from silicosis.

No medical or safety-related explanation existed for why silica exposure would have increased so dramatically. There is a darned good explanation why the number of lawsuits claiming silica exposure jumped suddenly.

Mobile trailers containing x-ray machines and paramedical personnel used to set up in mall parking lots screening for "patients". Remarkably, almost everyone screened was determined to have silicosis. Rather than being sent to doctors, the newly determined silicosis "patients" were referred to lawyers, at which time they became silicosis plaintiffs.

The reason these people sought out lawyers rather than doctors was that few, if any of them, were actually sick. Federal District Judge Janice Jack, the multi-district litigation judge in charge of the silica cases in federal court, held a multi-day hearing and determined that most, if not all, of the claims were fraudulent. She also found that several doctors who had examined many of these patients a decade before and diagnosed them with asbestosis were now submitting new reports based on the original x-rays and proclaiming the patients now had silicosis.

These new patient/plaintiffs each sued dozens of defendants. Since the medical and factual evidence was paper-thin, the goal of the plaintiff's attorney was to settle each case for an aggregate amount of $150,000 — collected $500 to $1500 at a time per defendant. The defendants found it cheaper to settle for small amounts than to go to trial.

Because of the multitude of silicosis cases being filed, the Texas Legislature in 2003 created a multi-district litigation rule, which placed all of the pending silica cases before one judge. After Judge Jack's hearing, the Texas Legislature in 2005 adopted a legal standard requiring anyone claiming to have silicosis show, by objective evidence in court, an actual physical impairment. In other words, plaintiffs must file a medical report establishing an illness before they could go to trial.

Amazingly, the prognosis for the 6,000 claimants suddenly improved. One attorney wrote his client that the attorney would no longer handle the lawsuit: "We had an independent physician re-read your x-ray and I'm sorry to inform you that you are not sick."

Such is the case for most of the claimants pending in the state multi-district litigation case. Their attorneys, who were once willing to settle with as many defendants as they sued for $500 each, are no longer willing to file a report saying that their client is actually sick.

This news is obviously good for the healthy claimants, but it is equally good news for those few claimants, less than 10, with legitimate claims whose cases have moved forward in courts no longer clogged by thousands of meritless lawsuits.

In a few months, the state district judge in charge of the silica MDL is required to submit a status report to the Texas Legislature on the effectiveness of the statute which created the medical criteria. It will be interesting to read the judge's report. One thing is certain: neither courts nor clients should be upset for getting a clean bill of health.

Judge Mark Davidson who presides over the Texas asbestos MDL denied summary judgment on the issue of whether a duty exists for take-home exposure to the spouse of a defendant's employee. In Carrie Ramsey v. Borg Warner Morse Tec. Inc., et al, he issued a letter ruling in which he determined that DuPont owed a duty to the spouse of one of its workers that development mesothelioma.

The plaintiff's ex-husband had worked at a DuPont facility from 1964 to 1974. He worked as an operator and later as a supervisor that patrolled the plant and worked in various areas during startups and shutdowns as needed. He did not work hands-on with any asbestos products but worked around those that did. Plaintiff laundered her ex-husband's clothes on a daily basis which he wore home from his work at DuPont. Before she placed his clothes in the washing machine she would shake the dust off his cloths which she breathed. She was diagnosed with pleural mesothelioma in 2008.

According to Judge Davidson's ruling, documents produced by DuPont indicated that DuPont knew of the dangers of asbestos by the early 1960s. DuPont knew of a link between small exposures to asbestos and cancer by June 2, 1966. A 1964 DuPont document authored by the Director of DuPont’s Haskell Laboratory for Toxicology and Industrial Medicine stated that cases of mesothelioma could be caused by “exposure to dust brought home by relatives working with asbestos." This report also identified three types of exposures to asbestos that are recognized as leading to an increase of mesothelioma: 1) factory workers manufacturing asbestos textiles; 2) insulating materials; and 3) "exposure to dust brought home by relatives working with asbestos."

A DuPont document dated May 21, 1968 detailed DuPont's knowledge of asbestos dangers and that "Wives and children of asbestos workers are also being involved because of the dust laden clothes a man wears home at night."

In his ruling, Judge Davidson stated that the evidence in this case went far beyond that in Behringer v. Alcoa in which the Dallas Court of Appeals held Alcoa owed no duty to an employee's spouse who developed mesothelioma. Davidson stated the following:

"If this isn't enough evidence to comply with Behringer, I really can't imagine what is. Mr. Ramsey's exposure continued for six years following the time interval DuPont documents show they were aware of the dangers to its employees' families. The Behringer case held that the [sic] Alcoa had no knowledge of the dangers of household exposure in the 1950s, and that no duty existed in the absence of that knowledge. In this case, there is some evidence that the Defendant knew as early as 1964 and certainly by 1968. Exposure continued until 1974.”

The Wall Street Jounral’s Daily Bankruptcy Review article is below can be found here

Garlock Sealing Technologies LLC, a maker of industrial gaskets and sealing systems, filed for Chapter 11 protection Saturday in North Carolina along with two affiliates in order to get a handle on its asbestos-related personal injury claims.

A wholly owned subsidiary of publicly traded industrial products maker EnPro Industries Inc., Garlock said its primary operations are not in distress but the company has been “overwhelmed” by more than 900,000 asbestos-related claims.

“Without Chapter 11 protection, the value of [Garlock's] core businesses and … ability to compete effectively in the marketplace will be irrevocably damaged,” Chief Financial Officer Donald G. Pomeroy said in papers filed with the U.S. Bankruptcy Court in Charlotte, N.C.

Garlock, based in Palmyra, N.Y., listed assets between $500 million and $1 billion and debts between $100 million and $500 million, on its Chapter 11 petition. Parent EnPro Industries, based in Charlotte, is not included in the bankruptcy case.

Pomeroy said the Chapter 11 filing will create a “single forum” under which Garlock can deal with its asbestos claims.

“Under a process that guarantees integrity through application of the rules of evidence and the rule of law, Garlock has sufficient insurance and other assets to fund a post-confirmation trust that will pay asbestos claims in full,” he said.

The company said it expects to file a Chapter 11 plan that will pay back all creditors in full.

Garlock and affiliates have already paid $1.4 billion in settlements and judgments in addition to spending $400 million on asbestos-related legal bills. The company says that despite those efforts it still has about 100,000 pending claims.

Until 2000, Garlock and its affiliates manufactured gaskets, pipe joints, valves and other equipment that contained “trace” amounts of asbestos.

The company believed it could avoid the problems that dragged several other manufactures of asbestos-containing products into bankruptcy protection because the items it produced did not easily break apart, and therefore were unlikely to contribute to asbestos-related diseases, Garlock said.

But the company continued to face claims from plaintiffs who said their injuries were caused by exposure to Garlock products and not from other more friable goods whose manufactures had already created asbestos trusts.

Garlock said it had about $194 million in available insurance coverage.

“The continued cost of resolving asbestos claims unfairly targeted against Garlock at values improperly inflated by bankruptcies of culpable producers of friable asbestos products threatens Garlock’s core business,” Pomeroy said.

Garlock will seek permission at a Tuesday court hearing to tap a $10 million bankruptcy loan from Bank of America. The company said the loan is necessary to ensure it has sufficient cash to run its business while in bankruptcy.

Founded in 1887, Garlock employs about 600 workers, primarily at manufacturing plants in Palmyra and Houston.

Last year, the company recorded global sales of $113 million. Garlock’s foreign subsidiaries in Canada, Mexico and Australia were not included in the bankruptcy filing.

The case, 10-31607, has been assigned to Judge J. Craig Whitley. The law firm Rayburn Cooper & Durham P.A. is representing the company.

Document DJFDBR0020100607e667000b5

Garlock Sealing Technologies LLC, a global leader in fluid-sealing products and a wholly owned subsidiary of EnPro Industries, Inc. , announced that it has taken a step toward a permanent resolution of asbestos-related personal injury claims against the company. Today, Garlock filed a voluntary petition in the U.S. Bankruptcy Court for the Western District of North Carolina in Charlotte to establish a trust to resolve all current and future asbestos claims against Garlock under Section 524(g) of the U.S. Bankruptcy Code.

The filing includes the Garrison Litigation Management Group, Ltd., which manages Garlock’s asbestos claims and relationships with its insurers, and The Anchor Packing Company, which ceased operations in the mid-1990s.

“With this action, we moved toward resolving asbestos claims against our company in a permanent, transparent and efficient manner,” said Dale Herold, president of Garlock Sealing Technologies. “We have begun a process that we believe will result in a comprehensive resolution of all current and future claims against Garlock while preserving the value and protecting the future of our company and without interruption of our normal business operations.”

Garlock previously manufactured products which contained asbestos. Despite the fact that the asbestos fibers were non-friable and encapsulated within the product, Garlock has defended claims regarding exposure to asbestos in gasket sealing products for 35 years. Garlock has processed more than 900,000 asbestos claims to conclusion (including judgments, settlements and dismissals) and, together with its insurers, has paid over $1.4 billion in settlements and judgments and over $400 million in fees and expenses.

Garlock anticipates that the process it initiated today will not disrupt service to customers, that suppliers will be paid in full, that employees will retain their salaries and benefits and that retiree pensions and other benefits will continue to be paid in the ordinary course. Garlock has obtained $10 million in debtor-in-possession (DIP) financing from Bank of America, which, subject to court approval, would provide additional liquidity, if necessary, during the process.

Herold stated, “Garlock’s cash flows should be sufficient for us to operate our business without interruption and to maintain our commitments to our employees, customers, and suppliers. The DIP financing would provide additional resources, should we need them. As we begin this process, we have complete confidence in the dedication of our employees, who are the core of our operation. We also greatly value our relationships with our customers and suppliers and appreciate their continuing support.”

“Most importantly, we remain committed to excellence in all that we do. We will continue to be a safe and productive company, a good neighbor, a good place to work and a strong competitor,” added Herold.

Garlock will operate in the ordinary course under court protection from asbestos claimants while in the claims resolution process available under Chapter 11. All pending litigation against Garlock will be stayed as the company seeks to develop and implement a court-approved plan to permanently resolve all asbestos-related claims. Garlock plans to negotiate with representatives of asbestos claimants to establish a trust to pay all valid claims. Absent a negotiated resolution, Garlock intends to ask the court to determine the amount necessary to fund the trust.

“This step is not an indication of current financial distress at Garlock,” Herold said. “Our company is strong. We believe we can fund a settlement trust in full with our own resources while maintaining our position as the leader in fluid sealing technology and preserving our opportunities for growth.”

Steve Macadam, president and chief executive officer of EnPro Industries, said, “We are completely committed to Garlock. It is a core investment, and we will continue to seek opportunities for growth in the markets it serves.”

The filing covers only Garlock operations in Palmyra, New York and Houston, Texas. Garlock Rubber Technologies, Garlock Helicoflex, Pikotek, Technetics, Garlock Europe and Garlock operations in Canada, Mexico or Australia are not affected by the filing, nor is EnPro Industries or any other EnPro operating subsidiary.

About Garlock Sealing Technologies

Headquartered in Palmyra, NY, Garlock Sealing Technologies LLC is an EnPro Industries, Inc. company . For more than a century, Garlock has been helping customers efficiently seal the toughest process fluids in the most demanding applications.

Forward-Looking Statements

Statements in this release that express a belief, expectation or intention, as well as those that are not historical fact, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. The words “may,” “hope,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” and other expressions which are predictions of or indicate future events and developments and which do not relate to historical matters identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that may cause actual events and results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to: Garlock’s ability to reach acceptable agreements with asbestos claimants and other creditors, Garlock’s ability to obtain court approval for a proposed plan, unforeseen developments affecting Garlock’s ability to pay creditors in full and adequately fund a trust to resolve all current and future asbestos claims. We do not undertake to update any forward-looking statement made in this release to reflect any change in management’s expectations or any change in the assumptions or circumstances on which such statements are based.

Source: Garlock Sealing Technologies LLC

On May 31st, Bondex and Specialty Products Holding Corp. declared bankruptcy. The Reuters story follows below.

WILMINGTON, Del., June 1 (Reuters) – Two subsidiaries of RPM International Inc (RPM.N) filed for bankruptcy as the chemical company seeks to resolve thousands of asbestos-related lawsuits, according to court documents.

The parent company also asked the bankruptcy court for an injunction to prevent it from becoming a target of plaintiffs who brought asbestos lawsuits against the bankrupt subsidiaries, according to court documents filed on Monday.

The bankrupt subsidiaries — Specialty Products Holding Corp and Bondex International Inc — plan to use Chapter 11 to establish a trust for the payment of asbestos-related claims.

However, the companies did not enter bankruptcy with a negotiated plan or outline of a settlement for claimants, and one plaintiff attorney said he was “very troubled” by the “motives and purpose of the bankruptcy filing.”

Specialty Products Holding is a direct parent to operating companies, that produce coatings and finishings, including DayGlo Color Corp, the world’s largest producer of daylight florescent pigments.

The operating companies and RPM International are not part of the bankruptcy.

Specialty Products Holding said in a statement that it had a commitment for $40 million from Wells Fargo Capital Finance to fund its bankruptcy. The company listed assets and liabilities of $100 million to $500 million.

The two bankrupt subsidiaries also want a permanent injunction against any further asbestos claims related to products they made or sold.

“This action has been taken to once and for all resolve the asbestos-related Bondex legacy liability,” Frank Sullivan, RPM’s chairman and chief executive officer, said in a statement.

Many of the alleged asbestos liabilities, at the heart of more than 10,000 lawsuits against the bankrupt subsidiaries, stem from Reardon Co, which was acquired in 1966. Reardon sold home patch and repair products that contained asbestos until 1977.

Asbestos is a naturally occurring mineral that was once widely used in manufacturing. It has been banned by the U.S. government after it was proven to cause cancer, often in people who were exposed by breathing in asbestos particles.

The bankrupt subsidiaries had fiscal year 2009 revenue of $329 million and pretax income of $19 million, which is less than 11 percent of RPM’s consolidated total.

Until 2003, insurance covered 90 percent of the asbestos-related costs, according to court documents. Since then, insurers have claimed exhaustion and have stopped making payments.

In addition, after many other companies with asbestos liabilities filed for bankruptcy, Specialty Products Holding and Bondex become more attractive as litigation targets, according to the court documents.

In the period 2005 to 2009, the bankrupt subsidiaries incurred asbestos costs of $60 million to $82 million annually, up from $8.2 million in 2000.

Joseph Belluck of Belluck & Fox, which is suing Bondex, said that recently, many companies facing asbestos claims and filing for bankruptcy have negotiated the terms of a trust or settlement prior to entering Chapter 11.

“Of the recent vintage (of bankruptcy filings), all companies with asbestos liabilities have done it with an agreement with plaintiffs’ counsel,” said Belluck.

“The fact of the matter is, these companies sold products that killed people and these companies should be held liable.”

Shares of RPM International were down 18 cents to $19.63 in early-afternoon trading on the New York Stock Exchange.

The case is In re Specialty Products Holding Corp, U.S. Bankruptcy Court, District of Delaware, No. 10-11780.

RPM Subsidiaries Move to Permanently Resolve Bondex Asbestos Liability

- Two non-operating subsidiaries housing all Bondex asbestos liabilities initiate reorganization proceedings
- Immediately halts asbestos liability payments
- RPM’s consolidated cash flow expected to improve by approximately $50 million annually
- RPM and all of its operating business units are not part of the reorganization and are unaffected by it

The link to the company website is here

The press release is here