By HEATHER ISRINGHAUSEN GVILLO

WILMINGTON, Del. (Legal Newsline) – A law professor and bankruptcy attorney agree that a loss for asbestos plaintiffs attorney earlier this year in the Garlock Sealing Technologies proceeding could have been a major factor in Bondex’s recently announced bankruptcy settlement.

RPM International’s bankruptcy settlement of its subsidiary Bondex’s asbestos liability is roughly $660 million more than it believed was appropriate and came during what could have been a successful appeal, but it is also roughly $800 million less than a judge ordered the company to pay in 2013.

On July 28, RPM International Inc. announced an agreement with the bankruptcy representatives of current and future claimants in order to resolve Bondex-related asbestos liability. According to the agreement, RPM would pay $797.5 million over four years and resolve all present and future asbestos personal injury claims related to Bondex International, Inc. The case is currently being litigated in the U.S. Bankruptcy Court in Delaware.

Bondex manufactured joint compound, which formerly contained chrysotile asbestos, for do-it-yourself home projects.

Bondex’s agreement stemmed from a May 2013 ruling by former U.S. Bankruptcy Judge Judith Fitzgerald, in which she estimated Bondex’s liability at $1.166 billion. However, Bondex argued during the estimation proceedings that its actual liability amounted to $135 million.

RPM appealed the decision to the U.S. Court of Appeals for the Third Circuit, arguing Fitzgerald reached an escalated number by placing too much weight on past settlement agreements. Many of those settlements were reached to push aside nuisance lawsuits, Bondex said.

The appeal could have ended well for the debtors, especially on the heels of this year’s landmark Garlock Sealing Technologies Ruling, in which Judge George Hodges’ ruled that Garlock’s liability to current and future asbestos claimants amounted to $125 million – which is more than $1 billion less than what plaintiffs attorneys estimated.

Professor Lester Brickman, with the Benjamin N. Cardozo School of Law of the Yeshiva University, said the Garlock decision could have been the driving force behind the agreement.

In fact, Brickman said Bondex’s appeal would have stood “little chance of succeeding” if not for the Garlock case. He opined that it’s possible that the counsel for the Bondex ACC were concerned about the potential effects the Garlock bankruptcy decision could have on the Bondex appeal.

“Indeed, had it not been for Judge Hodges’ decision in the Garlock bankruptcy, it is my view that the Bondex (Asbestos Claimants Committee) counsel would have offered little or nothing to avert the appeal,” he said.

Bankruptcy attorney David Christian, founder of the David Christian Attorneys firm, agreed, saying the Garlock ruling could have provided Bondex with an opportunity for settlement.

“It may be the fact that Bondex gained an arrow in its quiver,” he said.

However, Christian said there was still a risk that RPM could have lost on appeal and could have been ordered to pay what Fitzgerald estimated its liability at.

He added that Bondex had to consider whether the appeal was worth threatening the “livelihood of the parent.”

Christian said that while the agreement may seem unfair to the debtors, Bondex had its own agenda to carry out.

“The public wants to see justice done,” he said. “We want to see the right result. But that’s not necessarily the goal of the litigants.”

He explained that the debtors’ primary concern was to protect the parent company, RPM, so the settlement agreement was more of a business agreement.

“Bondex has accomplished what it set out to do,” Christian said. “So, that’s a win. They accomplished their objective.”

The Official Committee of Asbestos Claimants also supports the agreement. Attorney Natalie D. Ramsey of the Montgomery, McCracken, Walker & Rhoads law firm is part of the committee’s counsel and said she is satisfied by the positive step towards compensation.

“The committee is pleased with the settlement, which creates a substantial fund for the asbestos victims,” Ramsey stated.

“Nothing can adequately compensate those who have developed a fatal or debilitating injury as a result of exposure to asbestos; however, the settlement will enable those individuals or their families who were exposed to the debtors’ asbestos products to receive remuneration without additional delay.”

Fitzgerald was unconvinced by Bondex’s arguments during the estimation trial.

In her opinion, she explained that the debtors would settle claims even when a plaintiff’s argument was weak, the risk of trial was too high or if the plaintiff’s product identification was sufficient enough to survive summary judgment. Therefore, she held that the debtors’ market share was not accurate enough to govern liability.

“[I]f a mesothelioma claim was settled by debtors for a nominal amount, there must have been some evidence of exposure against other defendants in the tort system but, because debtors made a payment nonetheless, debtors must have determined that the claimant either was exposed to a Bondex product or that Bondex was not going to contest exposure,” Fitzgerald wrote.

“That is, the settlement indicates that Bondex was either agreeing that there was some liability, which would be its defense in the tort system. Therefore, the settlements are relevant to estimation because they place a value on the claims.”

Prior to the RPM/Bondex estimation proceeding, the debtors filed discovery requests for access to information from the plaintiffs’ firms that had filed asbestos claims against them.

The debtors wanted the information so its expert, the Bates White economic consulting firm, could determine their appropriate liability. The information would help the debtors “compare the magnitude of recovery from asbestos trusts with the claimants’ ‘expected aggregate tort system recoveries.’”

The debtors alleged that the information would show they settled pre-petition claims on an inflated basis, even though they conceded they investigated the claims before they settled.

The plaintiffs objected, claiming discovery would be burdensome and beyond what the debtors needed in order to establish a trust.

They also argued that the information was confidential and had no relevance to the debtors’ liability.

Fitzgerald agreed and denied the debtors request for discovery.

From Legal Newsline: Reach Heather Isringhausen Gvillo at asbestos@legalnewsline.com