Insurer asks for relief in Pittsburgh Corning bankruptcy, cites evidence against asbestos lawyers

PITTSBURGH – Fallout from a 2014 landmark ruling has led to Pittsburgh Corning’s insurer asking a bankruptcy court for relief from an earlier decision because, it claims, asbestos plaintiffs attorneys have been engaging in fraud.

On March 26, Mt. McKinley asked a federal bankruptcy court in Pittsburgh for relief from its approval of a $3 billion trust designed to compensate asbestos victims.

Pittsburgh Corning has faced claims that it exposed individuals to Unibestos, a particularly dangerous material.

“Since this Court’s confirmation ruling, stunning new evidence became public showing that multiple law firms voting hundreds of millions of dollars in claims in this bankruptcy have engaged in a systematic practice of fraud, telling two different stories concerning their clients’ asbestos exposures,” says the motion, which was also filed by Everest Reinsurance Company.

“While they certify exposure under the penalty of perjury in this and other bankruptcy cases, they conceal or deny such exposures in tort litigation against non-bankruptcy defendants.

“Regardless of whether they are telling the truth in the bankruptcy cases, or in tort cases, this pervasive fraudulent conduct warrants relief…”

The motion refers to conduct uncovered in Garlock Sealing Technologies’ bankruptcy in a Charlotte, N.C., federal court.

In January 2014, Judge George Hodges ruled that asbestos plaintiffs attorneys had been gaming the system by waiting until their clients had recovered the most amount possible in lawsuits against Garlock before filing bankruptcy trust claims with other companies.

Doing this allowed the asbestos plaintiffs lawyers to tell two different versions of how their clients were exposed to asbestos.

Also that month, Garlock filed racketeering lawsuits against four plaintiffs firms.

The evidence was originally sealed, but Legal Newsline appealed and eventually earned a ruling that made the information public.

It is that information on which Mt. McKinley and Everest Reinsurance rely.

“The New Evidence further shows that asbestos plaintiffs’ firms are using the separateness of the bankruptcy and tort systems (and the confidentiality provisions to which Mt. McKinley objected in PCC) to hide the fact that they are telling two different stories about their clients’ asbestos exposures depending on the audience,” the motion says.

“The New Evidence shows that the law firms make calculated decisions to vote ballots and file trusts claims certifying their clients’ exposure to bankrupt companies’ asbestos products, including PCC, after previously denying or subsequently denying those very same exposures in tort litigation.

“In short, officers of the court are telling two conflicting stories, often under penalty of perjury, in order to better line their products.”

The insurers say plaintiffs firms that voted nearly $650 million in claims have been committing fraud.

Those firms are Waters & Kraus, The David Law Firm, Shein Law Center, Early Lucarelli and Motley Rice.

The insurers believe a full investigation and discovery will potentially reveal more fraud. Garlock was allowed full discovery into less than 20 cases.

From the Pennsylvania Record: Reach editor John O’Brien at jobrienwv@gmail.com.