SACRAMENTO - A California Assembly committee put off a scheduled late April vote on legislation that would pull the curtain back on awards from bankruptcy trusts established for victims of asbestos exposure.

AB 1056 now becomes a “two-year bill.”

“Even minor improvements in (tort law) have a very hard time in the Judiciary Committee,” said Kim Stone, former president of the California Civil Justice Association (CJAC), who now lobbies for the group.

The proposed legislation would require lawyers to reveal that they have filed for awards with asbestos bankruptcy trusts before receiving “preference” when filing a separate action in a civil court. Absent preference, a civil action in California’s overburdened courts can take three years for a case to come to trial, legal experts say.

The bill’s two-year status means that it’s no longer on a fast track for approval in the California Legislature, but it’s still alive provided it clears the Judiciary Committee by January 2018.

Meanwhile, Stone said that educating lawmakers and the public about the extent of the “gaming” of the asbestos trusts by the trial bar, including the doubling up of awards by pursuing down-the-line solvent companies in the courts, is the key to getting the transparency law enacted, as 12 other states have.

“Before we just had defense lawyers accusing trial lawyers of gaming the system, and publicly it didn’t get much further than that,” she said. “But now we have the statements from a federal judge in the Garlock case that the accusations were well-founded. We need more of that.”

In 2014, in a case involving Garlock Sealing Technologies, a North Carolina federal bankruptcy judge found that gasket and packing manufacturer Garlock’s settlements of mesothelioma claims in the tort system were “infected by the manipulation of exposure evidence by plaintiffs and their lawyers.” The judge described an effort by plaintiffs and their lawyers to “withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants’ asbestos trusts until after obtaining recoveries from Garlock (and other viable defendants).”

In short, the judge said that the alleged victims had different stories for different venues. The lawyers first targeted Garlock in court, coaching their clients to tell one story of exposure. They then told a different story to the trusts, one that linked the manufacturers with the exposure.

Currently, nothing under current California law requires a lawyer to reveal to a court that a separate action for compensation has been filed with a trust, resulting in documented cases of lawyers and their clients receiving awards both from the trusts and the courts. The so-called “double dipping” leaves trusts with fewer funds for those with legitimate exposure claims, critics of the practice say.

And the CJAC says that California has been particularly hard hit by double dipping - most of it coming from out of state.  The group found that between January 2010 and May 2016 just in Los Angeles and San Francisco alone only 10 percent of 25,503 plaintiffs were from California.

“The influx of cases being filed by out-of-state plaintiffs in California is making our already over-burdened court systems less available to Californians,” said John Doherty, president of CJAC.

Proponents of AB 1056 say approval of the legislation is even more urgent in light of a December state Supreme Court decision that the duty for compensating victims of exposure could extend to household members.

The ruling stemmed from two lawsuits.

One was brought by Johnny Blaine Kesner Jr., who was diagnosed with mesothelioma, a lethal disease caused by asbestos exposure, in February 2011 and died at the age of 53 in 2014.

He sued Pneumo Abex LLC, a brake manufacturer where his uncle worked. From 1973 to 1979, Kesner spent at least three nights a week at his uncle’s home.

Lynne Haver, who was diagnosed with mesothelioma in March 2008 and died in April 2009, filed the other action. It was alleged that she was exposed to asbestos from her former husband’s clothing.

The rulings allow the actions to go forward, the outcomes of which are likely to set the parameters in determining who is considered a “household member,” Stone said.

“This could potentially create a whole new generation of actions,” she said. “The trusts were not established to handle this kind of load. That’s why we need transparency now more than ever.”

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Civil Justice Association of California
1201 K Street
Sacramento, CA 95814

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