Garlock mesothelioma liability set at $125 million as judge calls past cases inflated

New York, Jan. 10 - Garlock Sealing Technologies LLC's liability for present and future mesothelioma claims was set at $125 million by judge George Hodges of the U.S. Bankruptcy Court for the Western District of North Carolina in an order entered Friday.

In setting the liability, Hodges ruled that past settlements paid to mesothelioma claimants could not be used to set Garlock's future liability.

"The estimates of Garlock's aggregate liability that are based on its historic settlement values are not reliable because those values are infected with the impropriety of some law firms and inflated by the cost of defense," Hodges wrote in his order.

Past settlements cannot be considered fair representations of the company's liability, Hodges said, because "exposure evidence was withheld. While that practice was not uniform, it was widespread and significant enough to infect fatally the settlement process and historical data. It has rendered that data useless for fairly estimating Garlock's liability to present and future claimants."

Instead the judge accepted Garlock's proposed method of valuing its liability as representing "a reasonable and reliable estimate."

The company projected its total liability from a sample of current claimants which Hodges called "the most extensive database about asbestos claims and claimants that has been produced to date."

From this information, Garlock's expert, Charles Bates, estimated liability using the average award per claimant, Garlock's share of that award, the likelihood of recovery, the number of claimants, and a discount rate.

The order follows a trial in July and August of last year.

Garlock's parent, EnPro Industries, noted that the order applies to mesothelioma claims only. Additional amounts may be needed to resolve other disease claims and for trust administration costs.

The decision was welcomed as a "watershed" by the U.S. Chamber of Commerce.

"Fraud and abuse have plagued asbestos litigation for decades, as today's order by judge Hodges makes clear," said Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, in a news release. "Plaintiffs' lawyers are manipulating and withholding evidence, and judge Hodges recognizes that this is 'a regular practice by many plaintiffs' firms.'

"The Garlock bankruptcy order underscores the need for federal and state legislation to rein in asbestos litigation abuse. Because, as judge Hodges' states: 'It appears certain that more extensive discovery would show more extensive abuse.'"

Garlock is a subsidiary of Charlotte, N.C.-based EnPro Industries, which makes sealing products, bearings, compressors and engines. Garlock filed for bankruptcy on June 5, 2010, and its Chapter 11 case number is 10-31607.

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