When the bankruptcy hearings of Garlock Sealing Technologies LLC begin Monday, the maker of asbestos gaskets hopes to show that plaintiffs' lawyers have already found someone else to blame for cases of cancer caused by the fibers.
To further its case, the company has used subpoenas to peer into dozens of trusts set up by other corporate defendants of asbestos litigation, hoping to prove that some victims and their lawyers have accused multiple firms at the same time of single-handedly causing victims' cancer.
It is a $1 billion debate that will play out over the next three weeks in federal bankruptcy court in North Carolina between Garlock and an asbestos claimants committee made up of plaintiffs' attorneys whose clients are victims of asbestos exposure.
Garlock filed for Chapter 11 protection in 2010 under the crush of thousands of lawsuits from people who had inhaled cancer-causing asbestos fibers and pinned the blame on working with its gaskets and packing materials.
The company has already paid millions of dollars to settle many of those claims. In order to exit bankruptcy, Garlock must establish its future liability for people expected to fall victim to mesothelioma, a fatal cancer of the lining of the lungs caused by asbestos exposure.
A special provision of the bankruptcy code was created to allow companies to shed asbestos liability by setting up trusts to pay the claims of people who fall ill in the future.
Garlock estimates its future claims will total $125 million; the claimants committee predicts claims against Garlock will reach about $1.3 billion.
The company hopes to limit liability by showing federal bankruptcy judge George Hodges that plaintiffs who filed suits solely blaming Garlock for their asbestos illness—and in some cases extracting large settlements from Garlock—went on to blame other companies, too.
To bolster its case, Garlock has successfully subpoenaed details about plaintiffs' claims to numerous bankruptcy trusts set up by companies that also made asbestos products and went bankrupt when inundated with lawsuits. Garlock company officials didn't respond to requests for comment.
Garlock has cracked open the secretive trust system in hopes of showing it has paid more than its fair share for exposing people to asbestos. In court filings, Garlock says its gaskets and packing material had a "low-dose" of asbestos and were barely responsible, if at all, for causing anyone's mesothelioma.
It says it settled mesothelioma lawsuits because fighting them would have been too costly. In a July 8 filing Garlock said it was paying an average of $70,000 to settle each claim in 2010 when it filed for bankruptcy protection.
Garlock obtained details about trust claims and claims to other companies in bankruptcy, and according to court filings, it plans to show that some plaintiffs suing it were exposed to products that had higher levels of more dangerous types of asbestos that were far more likely to sicken victims than Garlock's products.
Asbestos fibers lodged in lungs can't simply be traced to a specific product, and most doctors in the U.S. say there is no known minimum threshold that causes disease.
Failing to disclose claims to trusts "artificially inflated Garlock's cost of defense and its trial risk in the cases that presented the greatest financial burden over the past decade," the company said in a court filing earlier this month. Garlock has proposed putting aside $270 million for personal-injury claims.
More than 45 trusts have been established by makers of asbestos tile, insulation and other products, altogether holding roughly $18 billion. A recent government study said that at the end of 2010, the trusts had paid out 3.3 million claims valued at $17.5 billion, and more trusts have been established in the years since. As lawyers for the claimants, plaintiffs' attorneys play key roles in overseeing the trusts.
Despite the massive amount of money changing hands, most trusts don't disclose details about the claims they pay, leading to allegations of fraud. A Wall Street Journal analysis earlier this year found numerous inconsistencies in claims to trusts that often benefited asbestos victims and their attorneys, who collect contingency fees.
Plaintiffs' attorneys who have key roles in many trusts dispute accusations of outright fraud but say there are bound to be errors considering the huge volume of claims.
Attorneys defending companies in civil court cases have stepped up their fight for more disclosure of trust claims to try to limit liability for their clients. By seeking to subpoena various trusts, they hope to show their clients weren't alone in exposing plaintiffs.
Asbestos victims often tap numerous defendants because typically they worked as shipbuilders, construction workers or in other fields where worksites contained numerous asbestos products.
At least two states in recent months have passed laws requiring more disclosure of trust claims in court cases, and Congress is considering a measure that would mandate more detailed information about claims.
Elihu Inselbuch, an attorney at Caplin & Drysdale, argued before a House Judiciary panel earlier this year that such measures would stall payments to mesothelioma victims who have only months to live. Plaintiffs' attorneys view trust claims as settlements and say they should be secret.
Caplin & Drysdale is leading the claimants committee in the Garlock bankruptcy case. The committee said in court filings that Garlock's estimate of its future liability "has no foundation in reality."
Mr. Inselbuch didn't respond to requests for comment.
Write to Dionne Searcey at dionne.searcey@wsj.com
A version of this article appeared July 22, 2013, on page B5 in the U.S. edition of The Wall Street Journal, with the headline: To Fight Asbestos Cases, Other Claims Are Defense.
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