UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA Charlotte Division. Chapter 11

Transcription

1 UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA Charlotte Division IN RE: GARLOCK SEALING TECHNOLOGIES LLC, et al. 1 Debtors. Case No Chapter 11 Jointly Administered DEBTORS OBJECTION TO PROOF OF SETTLED GST ASBESTOS CLAIM OF LEROY I. EISLER Pursuant to Section 502 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3007, Debtors Garlock Sealing Technologies LLC ( Garlock ); Garrison Litigation Management Group, Ltd. ( Garrison ); and The Anchor Packing Company (collectively, Debtors ), file this Objection (this Objection ) to the Proof of Settled GST Asbestos Claim of Leroy I. Eisler. The claim subject to this Objection is one asserted on behalf of Leroy I. Eisler, Claim Register No (the Subject Claim, and the holder of the Subject Claim, the Claimant ). In further support of this Objection, Debtors state: 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This proceeding is a core proceeding pursuant to 28 U.S.C. 157(b)(2). Venue of this Objection is proper under 28 U.S.C The statutory predicates for this Objection are 11 U.S.C. 105(a), 502(b), and 507 and Federal Rules of Bankruptcy Procedure 3001(a), 3001(c), and 3007(a). BACKGROUND 3. On April 28, 2014, Debtors filed a Motion for an Order (A) Establishing a Bar Date for Filing Settled GST Asbestos Claims, (B) Approving the Proof of Claim Form, and (C) 1 The three debtors in these jointly administered cases are Garlock Sealing Technologies LLC; Garrison Litigation Management Group, Ltd.; and The Anchor Packing Company. 1

2 Approving the Form of and Procedures for Notice to Settled GST Asbestos Claims (Docket No. 3590) (the Bar Date Motion ). 4. On July 7, 2014, Debtors amended Garlock s Schedules of Assets and Liabilities listing asserted settled asbestos claims (Docket No. 3846) (the Settled GST Asbestos Claims Schedule ). The Settled GST Asbestos Claims Schedule lists each claimant s name, attorney and address, the amount of the claim, and whether the claim is contingent, unliquidated, or disputed. The Settled GST Asbestos Claims Schedule filed by Debtors reflects Settled GST Asbestos Claims asserted against Debtors as of the filing of the Settled GST Asbestos Claims Schedule, even though Debtors may dispute the validity of such claims. 5. Following a hearing on the Bar Date Motion, on July 9, 2014, the Court entered the Order on Debtors Motion to Establish Bar Date for Settled Asbestos Claims and Related Relief (Docket No. 3854) (the Settled Asbestos Claim Bar Date Order ). The Settled Asbestos Claim Bar Date Order, among other things, established September 30, 2014 as the bar date (the Settled Asbestos Claims Bar Date ) for each Settled Asbestos Claim, defined as an asbestosrelated personal injury or wrongful death claim against Garlock or Garrison that remains unpaid but which the claimant alleges was, as of June 5, 2010, subject to a settlement agreement enforceable under applicable law between Garlock or Garrison and the holder of such asbestosrelated personal injury or wrongful death claim. 2(d). The Settled Asbestos Claim Bar Date Order further required holders of Settled Asbestos Claims 2 to submit proofs of claim on Official Form B Under the Plan, Settled Asbestos Claims are described as Settled GST Asbestos Claims and for that reason that term is used hereafter. 2

3 NATURE OF CLAIM AND OBJECTIONS 6. On or about September 22, 2015, the Claimant filed a proof of claim and attached documents asserting a Settled GST Asbestos Claim in the amount of $180, The Subject Claim was assigned Claim Register number The Subject Claim asserted, inter alia, that Claimant entered a written settlement agreement with Debtor Garlock as part of a group settlement of twenty asbestos personal injury claims. No other claimant who allegedly settled an asbestos personal injury claim in the agreement asserted by the Claimant has filed a proof of claim asserting a Settled GST Asbestos Claim. 9. Correspondence attached to the proof of claim demonstrated that Ron Eddins of Simon, Eddins & Greenstone, LLP (now known as Simon Greenstone Panatier Bartlett, P.C., Simon Greenstone ) negotiated the settlement agreement for the Subject Claim. 10. The conduct of attorneys for Simon Greenstone in litigation and negotiation of asbestos personal injury claims against Garlock, including the conduct of Mr. Eddins when he was a member of the Waters & Kraus firm (before forming Simon Greenstone), was the subject of findings by this Court in the Court s Order Estimating Aggregate Liability (the Estimation Order ) (Docket No. 3296), In re Garlock Sealing Technologies, LLC, 504 B.R. 71 (Jan. 10, 2014). The Court entered the Estimation Order following a trial that lasted seventeen days and included scores of witnesses, thousands of documentary exhibits, and hundreds of pages of preand post-trial briefing. 11. The conduct of lawyers for the Simon Greenstone and Waters & Kraus firms, including that of Mr. Eddins, is also the subject of adversary proceedings filed by Garlock and Garrison asserting claims under 18 U.S.C (Racketeer Influenced and Corrupt 3

4 Organizations Act), and claims for fraud and civil conspiracy (the Adversary Proceedings ). W.D.N.C. Case Nos. 3:14-CV & 3:14-CV Among the specific cases that the Court described in its Estimation Order was the Treggett case, a case where Mr. Eddins (while a member of the Waters & Kraus firm) represented the plaintiff at trial. Estimation Order 60. The Court cited the plaintiff s denial of exposure to Pittsburgh Corning Unibestos insulation, Mr. Eddins fight to keep Pittsburgh Corning off the verdict form, and Mr. Eddins affirmative representation to the jury that there was no Unibestos insulation on the ship during the litigation of that case. Id. The Court contrasted those representations with the plaintiff s later filing of fourteen Trust claims, including several against amphibole insulation manufacturers. Id. And, most important, the Court found, the same lawyers who represented to the jury that there was no Unibestos insulation exposure had, seven months earlier, filed a ballot in the Pittsburgh Corning bankruptcy that certified under penalty of perjury that the plaintiff had been exposed to Unibestos insulation. Id. (emphasis in original). 13. The Court also cited the Ornstein case, a case in which the plaintiff was represented by Simon Greenstone. In that case, the Court found that the plaintiff denied that he ever saw anyone installing or removing pipe insulation on his ship. Id. 63. After the plaintiff settled with Garlock, the Court found, the plaintiff s lawyers filed eleven Trust claims for him seven of those were based on declarations that he personally removed and replaced insulation and identified, by name, the insulation products to which he was exposed. Id. 14. In total, the Court allowed Garlock full discovery of fifteen settled cases. Of those fifteen, three cases were ones where the plaintiff was represented by Simon Greenstone. 4

5 Four were ones where the plaintiff was represented by Waters & Kraus, including one case where Mr. Eddins was counsel to the plaintiff at trial. 15. The Court found that, in the fifteen cases, Garlock demonstrated that exposure evidence was withheld in each and every one of them. Estimation Order 58.c. (emphasis in original). The Court further found that: [T]he fact that each and every one of [the cases] contains such demonstrable misrepresentation is surprising and persuasive. More important is the fact that the pattern exposed in those cases appears to have been sufficiently widespread to have a significant impact on Garlock s settlement practices and results. Id. 66. In discussing the plaintiffs and their lawyers practice of withholding evidence of exposure to other asbestos products and delaying filing claims against bankrupt defendants asbestos trusts until after obtaining recoveries from Garlock, the Court held: [W]hile it is not suppression of evidence for a plaintiff to be unable to identify exposures, it is suppression of evidence for a plaintiff to be unable to identify exposure in the tort case, but then later (and in some cases previously) to be able to identify it in Trust claims. Id. 69 (emphasis in original). 16. Counsel s negotiation of the asserted settlement on behalf of Claimant was a continuation of the same scheme and improper conduct that the Court identified in its Estimation Order and which forms the basis of the claims asserted in the Adversary Proceedings. 17. Because of such misrepresentations, unclean hands, bad faith, and malfeasance, the alleged agreement with Claimant cannot be enforced against Debtors. See, e.g., Bavelis v. Doukas (In re Bavelis), 490 B.R. 258, (Bankr. S.D. Ohio 2013) (disallowing proof of claim premised on contract because fraudulent inducement rendered contract unenforceable by putative creditor); Benninger v. First Colony Life Ins. Co. (In re Benninger), 357 B.R. 337, 351-5

6 52 (Bankr. W.D. Pa. 2006) (disallowing proof of claim premised on alleged contract due to doctrine of unclean hands). 18. Even if the asserted agreement could be enforced, the Subject Claim should be disallowed for the additional reason that the Claimant has not presented documentation that demonstrates that the claim would be payable by Debtors. Before Debtors paid settlements, claimants were required to provide a release, evidence of exposure, work history (documenting an acceptable occupation and exposure dates), medical records supporting diagnosis of an asbestos-related disease by an approved physician, and, where the injured party was deceased, letters of administration and a certificate of death. The Subject Claim omitted to include all such required documentation. See Fed. R. Bankr. P. 3001(c) (requiring copy of writing when claim based on writing); In re Andrews, 394 B.R. 384, 388 (Bankr. E.D.N.C. 2008) (When a claimant fail[s] to properly document a claim or assignment of claim under Rule the claim loses its prima facie presumption of validity and amount. ). CONCLUSION For the reasons set forth above, the Debtors objection to the Subject Claim should be sustained, and the Court should enter an order disallowing the Subject Claim. 3 3 This Objection is filed without prejudice to any alternative grounds Debtors may assert in objecting to or seeking disallowance of the Subject Claim, as a Settled GST Asbestos Claim or otherwise, all of which grounds are hereby expressly reserved, and nothing contained herein constitutes a waiver by Debtors of such grounds. See, e.g., In re Worldcom, Inc., No , 2006 WL , at *4 (Bankr. S.D.N.Y. 2006) (allowing Debtor to assert additional bases for objecting to proof of claim, other than those asserted in initial objection, in accordance with express reservation of rights). 6

7 This 12th day of April, Respectfully submitted, s/garland S. Cassada Garland S. Cassada N.C. Bar No Jonathan C. Krisko N.C. Bar No Richard C. Worf, Jr. N.C. Bar No ROBINSON BRADSHAW & HINSON, P.A. 101 North Tryon Street, Suite 1900 Charlotte, North Carolina Telephone: (704) Facsimile: (704) Special Corporate and Litigation Counsel to the Debtors Garlock Sealing Technologies LLC, Garrison Litigation Management Group, Ltd., and The Anchor Packing Company 7