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Asbestos offset argument fails in Court of Appeals

Defendants who lose an asbestos lawsuit have no right to an automatic credit for money the plaintiff received by settling with another company’s asbestos trust, the state’s highest court has held.

Instead, the Court of Appeals affirmed that the verdict is subject to a dollar-for-dollar offset only if the prior settlement agreement says so.

The decision sent Carl L. Saville’s $1.69 million verdict back to Baltimore City Circuit Court, where his settlements with several asbestos trusts will be subject to review.

The settlements that provide for offsets will be subtracted from the judgment to determine the amount owed by defendant Scapa Dryer Fabrics Inc., which manufactured the dryer felt used on a machine at the Westvaco paper plant where Saville worked between 1968 and 1978.

Scapa claimed the very creation of an asbestos trust established the creator’s status as a joint tort-feasor, or liable party. Asbestos trusts, also known as 524(g) trusts for the bankruptcy code section that authorizes them, are created to pay claims related to asbestos exposure in exchange for an injunction against litigation.

The unanimous Court of Appeals held last Wednesday that the creation of the trust is not an admission of liability, nor is it similar to a default judgment.

“Consequently, Scapa must rely on the language of the settlement agreements to determine whether the Trust may be treated as a joint tort-feasor for the purposes of an offset to a judgment,” Judge Clayton Greene Jr. wrote.

Michael T. Edmonds, one of Saville’s lawyers, said he did not expect his client’s award to be significantly lowered on remand.

“As long as it’s a dollar-for-dollar reduction, it’s staying in place,” said Edmonds, of The Law Offices of Peter T. Nicholl in Baltimore.

Clarifying Bullinger

Lawyers involved in asbestos litigation said last week’s opinion reinforces one the court issued in 1998, Porter Hayden v. Bullinger.

“The court was taking pains to try to go through everything very methodically to clarify existing law while not making new law,” said George G. Tankard III, a plaintiffs’ lawyer not involved in this case.

Among other refinements, the court noted that it was “equitable and consistent” to extend Bullinger to all asbestos trust settlements, not just those between one-time parties to the litigation.

It also rejected Scapa’s argument that an automatic offset would be consistent with the way courts elsewhere have interpreted the Uniform Contribution Among Joint Tort-feasors Act.

“No appellate state court … has rendered an opinion about the proper handling of a §524(g) Trust settlement agreements in concert with state laws implementing the Uniform Contribution Among Joint Tort-feasors Act,” Greene wrote in a footnote.

Jonathan Ruckdeschel, another plaintiffs’ lawyer not involved in Saville’s case, said the opinion conforms to what has been understood in Maryland law for years.

“The court has confirmed that there is nothing different about how you treat a settlement in an [asbestos] bankruptcy trust with any other settlement,” said Ruckdeschel, of The Ruckdeschel Law Firm LLC in Ellicott City. “The language of the settlement agreement is the language of the settlement agreement.”

Transparency sought

Although the Court of Appeals has consistently held that asbestos defendants have a “need to inspect” the settlement agreements as part of discovery, it has said only that settlements are “relevant and discoverable” after the verdict.

Scapa argued the lack of transparency creates “perverse incentives” for plaintiffs, who hold off filing trust claims until after they obtain judgments.

“That way, the plaintiffs can avoid having their judgments reduced and avoid being confronted at trial with inconsistent statements that they may have made in their sworn bankruptcy claim forms,” the company’s lawyers wrote in its brief.

Defendants in asbestos cases have been trying for years to get full disclosure from plaintiffs before the start of a trial and have started subpoenaing trusts for information with mixed success, said F. Ford Loker, a defense lawyer who was not involved in Saville’s case. The information discovered helps defendants plan a trial strategy or even determine if the case is worth pursuing at all.

“To be useful, it has to happen prior to trial,” said Loker, a principal with Miles & Stockbridge PC in Baltimore.

Edmonds said his client turned over releases for all of his settlements. Ezra S. Gollogly, a principal at Kramon & Graham P.A. in Baltimore and a lawyer for Scapa, declined to comment on the case or the opinion.

Tankard said there is often no need to sort through all of the settlement information prior to a verdict but understands the defense perspective.

“It puts them in an awkward position of having to prove a case against other defendants,” said Tankard, of counsel to Waters & Kraus LLP in Baltimore. “They don’t want to spend more time underscoring the dangers of asbestos.”

Sufficient evidence

The Court of Appeals also rejected Scapa’s claim that, due to insufficient evidence, it was entitled to judgment notwithstanding the jury’s verdict.

Saville worked at Westvaco’s paper mill in Western Maryland as a broke-hustler, gathering unusable paper from a machine and recycling it, according to the opinion. He suffers from asbestosis, lung cancer and mesothelioma, the opinion said.

He filed suit in 2002 and was awarded $3 million after a trial the following year, only to have the judgment vacated by the Court of Special Appeals.

After a new trial in January 2008, the jury awarded Saville more than $1.7 million. Baltimore City Circuit Judge John M. Glynn reduced that award by approximately $34,000 based on settlement agreements Saville reached with three trusts.

Scapa, though, argued that the reduction should have been at least $114,000 to reflect settlements Saville reached with six trusts.

Scapa is entitled to post-verdict discovery “to procure … evidence” that the settlements provide for joint tort-feasor status. The substance of those agreements “will determine the amount of the reduction of the judgment,” Greene wrote for the court.

Edmonds said Saville was “grateful and satisfied” with the Court of Appeals opinion.

“He has maintained Scapa was the one company he used directly and was exposed to asbestos at arms’ length,” Edmonds said.

WHAT THE COURT HELD

Case:

Scapa Dryer Fabrics, Inc., v. Carl L. Saville, No. 39, Sept. Term 2010. Opinion by Greene, J. Filed March 23, 2011.

Issue:

Should the judgment against the petitioner be reduced under the state’s Joint Tort-Feasors Act to account for payments already received by respondent from asbestos settlement trusts?

Holding:

Yes; the settlement should be reduced if language in asbestos settlement trust agreement creates a joint tort-feasor status even if such settlements are not discovered until after the trial.

Counsel:

David J. Shuster for petitioner; Michael T. Edmonds for respondent

RecordFax#11-0323-20