The Garlock case: a $1.3 billion question
Garlock Sealing Technologies, a manufacturer of industrial gaskets, had been named as a defendant in thousands of asbestos personal injury lawsuits. When the company entered bankruptcy proceedings, the central question was the valuation of its aggregate asbestos liability. Plaintiffs' representatives argued that Garlock's total liability should be set at up to $1.3 billion. Garlock itself estimated $125 million.
Judge Hodges allowed Garlock to conduct full discovery into the claims of 15 individual plaintiffs and partial discovery into hundreds more. What emerged was a systematic pattern: plaintiffs' attorneys had introduced exposure theories in tort court that blamed Garlock's gaskets while suppressing evidence that their clients had also been exposed to asbestos products made by companies that had already gone bankrupt and established compensation trusts.
After securing verdicts or settlements from Garlock based on these incomplete exposure histories, the same attorneys would then file claims with the bankruptcy trusts for the very exposures they had denied in court. Judge Hodges found Garlock's $125 million estimate to be the reliable figure — roughly one-tenth of what plaintiffs had demanded.
The mechanics of "double dipping"
The US asbestos compensation landscape operates through two parallel systems. In the tort system, plaintiffs file lawsuits against solvent companies, arguing that those companies' products caused their disease. In the bankruptcy trust system, companies that went bankrupt due to asbestos liabilities established trusts to compensate claimants who were exposed to their products.
The fraud identified by Judge Hodges worked as follows: plaintiffs' attorneys would selectively present exposure evidence in tort cases, blaming only the solvent defendants before a jury. Evidence of exposure to products made by bankrupt companies — which would have diluted the solvent defendants' apparent share of responsibility — was withheld. After trial, the attorneys would file trust claims for the previously concealed exposures, effectively recovering compensation twice for the same alleged harm.
As Judge Hodges wrote: "While 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 to be able to identify it in trust claims."