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NYC asbestos firm fighting subpoenas in RICO case; Philly firm has motion to transfer its case denied

By John O'Brien | Apr 9, 2015

CHARLOTTE, N.C. (Legal Newsline) – The New York City asbestos firm Belluck & Fox is fighting to keep the company that has accused it of racketeering from gathering more information.

Meanwhile, a federal judge recently denied Philadelphia firm Shein Law Center’s motion to transfer the similar racketeering case against it to Pennsylvania.

After a federal magistrate judge decided Garlock Sealing Technologies’ recent subpoenas were relevant to the racketeering lawsuit it filed against the firm, Belluck & Fox has filed an objection that says the order is “clearly erroneous.”

“Ignoring its own allegations, Garlock is now seeking through third-party subpoenas the confidential trust claim information of 157 individuals who are not mentioned anywhere in the complaint,” attorneys for the firm wrote in its objection.

“Yet Garlock has never alleged – whether in the complaint or otherwise – that Belluck & Fox made any misrepresentations to Garlock about any of those 157 individuals. Nor could it.”

Garlock began the bankruptcy process in 2010 to set up its own trust to compensate asbestos victims.

While doing so, the company alleged plaintiffs lawyers had been manipulating evidence of their clients’ exposures by telling one story in civil lawsuits against the company and telling another to asbestos trusts of other companies after the lawsuits resolved.

This had the effect of driving up settlements with and verdicts against Garlock, the company claimed. A federal bankruptcy judge agreed in January 2014 after the company was allowed full discovery into 15 cases.

The judge ordered Garlock to put $125 million in its trust – more than $1 billion less than plaintiffs attorneys had requested.

About the same time as the judge’s ruling, Garlock filed four Racketeer Influenced and Corrupt Organization Act lawsuits against Belluck & Fox, Waters & Kraus of Dallas, Shein Law Center of Philadelphia and Simon Greenstone in Dallas.

Garlock used the evidence obtained from discovery into the 15 cases as the basis of the cases.

Now, according to Belluck & Fox, Garlock has issued 24 subpoenas to 55 trusts and claims processing facilities seeking information on Belluck & Fox clients.

Cayer denied Belluck & Fox’s motion for a protective order on March 23.

The firm’s objection says Garlock typically sought to resolve cases all of the firm’s cases at one time each year.

“Garlock never asked Belluck & Fox, during these inventory settlement negotiations, to represent or prove whether the firm’s client had been exposed to other companies’ products; that issue was simply not part of the settlement discussions,” the objection says.

By 2009, the settlement values were determined by a matrix. The Belluck firm Garlock did this to avoid the costs of discovery.

It called Garlock’s stance during its bankruptcy estimation trial an “about-face.”

“Under Garlock’s own theory, bankruptcy trust claims matter only because they purportedly show that the discovery responses were false,” the objection says.

“Garlock does not – and cannot – allege that bankruptcy trust claims, in and of themselves, are fraudulent, or that there is anything wrong in principle with a claimant settling with a solvent defendant and also making a claim to a bankruptcy trust.”

Specific objections to the order, as written by the firm’s attorneys, are:

-Trust claims of 157 individuals who are not alleged to have made any misrepresentations to Garlock are not relevant;

-The creation and internal deliberations of the trusts are not relevant;

-The trusts’ communications with firms or individuals with no connection to the lawsuits are not relevant;

-Discovery into the trust claims of the 157 individuals is unreasonably cumulative and duplicative;

-Evidence of the trusts’ procedures can be obtained from more convenient sources; and

-The burden and expense of including discovery into the 157 cases outweigh any likely benefit.

On March 9, U.S. District Judge Graham Mullen denied Shein Law Center’s motion to transfer venue of the RICO case against it to Philadelphia federal court.

Similar motions filed by the other firms in their respective cases were also denied by a Charlotte, N.C., federal judge.

“The pendency of (Garlock’s) bankruptcy in this district further supports the denial of Defendants’ motion,” Mullen wrote.

“Other courts have held that centralizing related proceedings in the district where the bankruptcy is pending benefits the economic administration of the estate.

“Likewise, having these claims centralized in this district promotes the economic administration of the underlying bankruptcy, as Plaintiffs would otherwise be forced to litigate substantially the same issues in three or four separate districts at substantial costs.”

From the Pennsylvania Record: Reach editor John O’Brien at 

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