A Case Study from a Judicial Perspective: How Fairness and Integrity in Asbestos Tort Litigation Can Be Undermined by Lack of Access to Bankruptcy Trust Claims

While serving as a trial judge in the state of Delaware for twenty-nine years, I developed the habit of viewing every case, and particularly each case over which I presided at trial, as one that could always possess great potential for the unexpected or unforeseen.  A seemingly garden-variety automobile accident personal injury case could easily become the vehicle for drastic amendments to the rules governing the presentation of biochemical witness testimony.  An otherwise straightforward medical malpractice cause of action could trigger a movement to legislate attorney behavior.  A vigorously litigated breach-of-contract case skillfully tried by competent advocates on both sides could, in the final days of trial, uncover the fraudulent withholding of highly probative and incriminating documents. And so it was for this former trial judge when I entered the courthouse on a November morning in 2011, fully prepared and expecting to try the case of Montgomery v. American Steel & Wire Corp.  Little did I know that this case and the events that had transpired during the preceding weekend would place me squarely at the center of one of the most controversial national issues in the history of asbestos litigation.  The saga began when my expectation of spending several weeks in a routine asbestos personal injury trial was foiled by the revelation that the plaintiff had failed to disclose to the Delaware Superior Court and defense counsel the existence of claims that had been submitted to a total of twenty asbestos bankruptcy trusts.  Even more significant was the fact that the plaintiff had also withheld all of the factual circumstances that justified those claims.

Unwittingly, the case was to become a striking example of the lack of coordination and transparency between the tort system and the trust claims process, as well as the incentives that this situation presents for fraud and abuse.  By virtue of this disconnect, the plaintiffs in Montgomery had been able to distort the facts to allege different theories of exposure in the tort case from those claimed in the bankruptcy court—a circumstance that resulted in cancellation of the trial, dismissal of the plaintiffs’ case, substantial and irreparable prejudice to the remaining defendant, and yet another example justifying the defense bar’s quest for reform.

The case has ultimately received national attention because it highlights the ease with which a plaintiff can use two different inconsistent fact patterns to receive maximum recovery from the trusts while seeking compensation for injuries against solvent companies in tort litigation.  It ignited the growing clash between asbestos plaintiffs and defense attorneys.  At issue is not just the potential for claiming as between a bankruptcy trust and the state court action, but inconsistent claiming among the various trusts themselves.  Solvent defendants continue to believe that their payments in settlement are not being properly adjusted to account for compensation from the trusts and that their share of liability has substantially increased by the absence of some of the most culpable defendants from the litigation, where the focus tends to remain on the “last man standing.”  Also at issue is whether trust payments to current plaintiffs will result in fewer trust resources for future claimants and whether the ability to delay trust claims to avoid disclosure distorts both the discovery record and the administration of justice in asbestos lawsuits.

The case scheduled for trial before me that Monday morning is illustrative of all of the elements of this controversy.  It was and remains a powerful example of why transparency between the two systems has been the focus of legislation in several states and the United States Congress, has resulted in the passage of legislation in at least three states (Ohio, Oklahoma, and Wisconsin), and will continue to be debated for years to come.  By virtue of my experience in this case and my now-retired status, I have been in the unique position to advocate for legislative action to curb the abuses that do not appear to be limited to cases like Montgomery, where the fraud was exposed by chance.  Instead, it appears increasingly to be a matter of systemic concern.

In this Article, I will discuss the unfortunate details of the unethical conduct that allowed the case to proceed almost to trial, as well as the various judicial and legislative measures that have been proposed or passed to eliminate this lack of transparency and to curb the incentive to profit from it.  In the final analysis, my utmost concern as a former Delaware trial judge is that the very integrity of the judicial process and its truth-finding function can be so easily compromised because of the independence of these two systems.