2014 garlock presentation by nick vari

8/21/2019 2014 Garlock Presentation by Nick Vari

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© Copyright 2014 by K&L Gates LLP. All rights reserved.

Nicholas P. Vari

K&L Gates LLP

GARLOCK AND TRUST TRANSPARENCY:

WHAT IS THE END OBJECTIVE?


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As year-end 2012, bankruptcy trusts held over $18 billion incash, with another $11-12 billion in bankruptcies still

pending confirmation. Scarcella, M, Kelso, P, AsbestosBankruptcy Trusts: A 2013 Overview of Trust Assets, (2013)

From 2006-2012, the trust system paid out over $15 billion

to asbestos claimants.Id

. Contribution remedies through the bankruptcy trust system

do not provide a remedy for tort system defendants.

Legislative remedies at the state level are difficult tofashion, even if they could be passed.

Equitable solutions are available in the tort system underexisting law.


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© Copyright 2014 by K&L Gates LLP. All rights reserved.

CONTRIBUTION REMEDIES UNDER THE

BANKRUPTCY TRUST PROCEDURES


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(i) The Indirect Claimant has paid in full the liability andobligations of the Trust to the Individual to whom the

Asbestos PI Trust would otherwise have had a liability

or obligation under the TDP (the “Direct Claimant”); (ii) The Direct Claimant and the Indirect Claimant have

forever released the Trust from all liability to the DirectClaimant; and

(iii) The claim is not otherwise barred by a statute oflimitation or repose or other applicable law.

CONDITIONS OF PAYMENT (FROM COMBUSTION

ENGINEERING 524(g) ASBESTOS PI TRUST

DISTRIBUTION PROCEDURES)


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In no event shall any Indirect Claimant have any rightsagainst the Asbestos PI Trust superior to the rights ofthe related Direct Claimant against the Asbestos PITrust, including any rights with respect to the timing,amount, or manner of payment.

The Direct Claimant’s claim against the Asbestos PITrust must also have been liquidated by the Indirect

Claimant by settlement … or a Final Order, and hasbeen paid by the Indirect Claimant.

HOWEVER


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Provided an Indirect Claimant supplies a release in a

substance and form acceptable to the Trustees, butcannot meet the presumptive requirements set forth

above, the Indirect Claimant may request that the Asbestos PI Trust review the Indirect Asbestos PI TrustClaim individually to determine whether the IndirectClaimant can establish under applicable state law that

the Indirect Claimant has paid all or a portion of aliability or obligation that the Asbestos PI Trust has onthe Direct Claim as of the Effective Date at the TDP.

ALTERNATIVE PROCEDURE


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However, in no event shall any reimbursement to theIndirect Claimant be greater than the amount to whichthe Direct Claimant would have otherwise been entitled.

Any dispute between the Asbestos PI Trust and aIndirect Claimant over whether the Indirect Claimanthas a right of reimbursement for any amount paid to aDirect Claimant shall be subject to the arbitration

procedures as adopted by the Asbestos PI Trust. If such dispute is not resolved by said arbitration

procedures, the Indirect Claimant may litigate thedispute in the tort system…

ALTERNATIVE PROCEDURE (cont.)


8/17© Copyright 2014 by K&L Gates LLP. All rights reserved.

LEGISLATIVE REMEDIES


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Transparency legislation has been passed incertain states, the but the transparencylegislation introduced, on its own, is insufficientto create a remedy for tort system defendants.

Wisconsin

Oklahoma

FACT Act


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American Legislative Exchange Council(“ALEC”) has proposed legislation (“AsbestosClaim Transparency Act of 2007”), which hasnot been advanced before any state legislature.

Transparency Compelled submissions at risk of dismissal

Admissibility of trust forms

“Attributed values” for set-off purposes, with

presumption that the claim will paid, with correctivemechanism in place.


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Uniform legislation is problematic, because it cannot bereadily adapted to the allocation nuances of a particular

jurisdiction.

The combination of federal bankruptcy law and tortsystem liability allocation mechanisms is likely toocomplex to lend itself to a legislative solution.

PROBLEMS WITH LEGISLATIVE SOLUTIONS


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Bankruptcy trust recoveries do not have a specificparallel in existing law.

- Not comparable to workers’ compensation remedies

- Not collateral source recoveries

Through existing law and the use of existing equitabledoctrines, courts can create mechanisms that addressfairly the bankruptcy trust recoveries in the tort system.


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To treat bankruptcy trust recoveries as closely aspossible to recoveries from active tort defendants.

OBJECTIVE


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While, by far, the most popular means of addressingthe issue, transparency in the bankruptcy tortsubmission process is a starting point, not an endpoint.

Transparency relief has been provided by courts innumerous jurisdictions.

I. TRANSPARENCY


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Compelling trust recoveries can be cumbersome andobjectionable.

Permitting courts to estimate trust recoveries and

allocating set-off credits for estimated recoverieswould give defendants the benefit of the recovery,without forcing plaintiff to seek the funds.

Assignments of trust claims that plaintiffs choose notto pursue may also be a viable solution.

Pursuing a failure-to-mitigate defense can be a viableoption. Paulus v. Crane Co., 224 Cal. App. 4th 1357(2014).

II. ADDRESSING DELAYED CLAIMS SUBMISSIONS


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Pure joint-and-several liability jurisdictions will seek tobring as much money as possible into the verdict set-off calculation.

Pure several liability and UCJTA jurisdictions will beconcerned with allocating fault to non-bankruptentities.

“Split” jurisdictions will seek both remedies in different

damage contexts.

III. TAILORING REMEDIES TO ADDRESS VARIOUS

LIABILITY ALLOCATION MECHANISMS

2014 garlock presentation by nick vari

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