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					Case 10-31607       Doc 1240       Filed 03/28/11 Entered 03/28/11 21:09:36                 Desc Main
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                    IN THE UNITED STATES BANKRUPTCY COURT
                  FOR THE WESTERN DISTRICT OF NORTH CAROLINA
                                 (Charlotte Division)

 In re:                                                               )   Case No. 10-31607
                                                                      )
 GARLOCK SEALING TECHNOLOGIES LLC, et al.,1                           )   Chapter 11
                                                                      )
                           Debtors.                                   )   Jointly Administered


      EMERGENCY MOTION OF THE OFFICIAL COMMITTEE OF ASBESTOS
       PERSONAL INJURY CLAIMANTS TO LIMIT SCOPE OF HEARING ON
      MOTION OF DEBTORS FOR AN ORDER PURSUANT TO BANKRUPTCY
         RULE 2004 DIRECTING PRODUCTION OF DOCUMENTS FROM
                  SPECIFIED PAST ASBESTOS CLAIMANTS

           The Official Committee of Asbestos Personal Injury Claimants (“the ACC”)

  respectfully applies for an order limiting the scope of a hearing scheduled for May 12,

  2011, on the Motion of the Debtors for an Order Pursuant to Bankruptcy Rule 2004

  Directing Production of Documents from Specified Past Asbestos Claimants.

                                PRELIMINARY STATEMENT

           1.     On December 9, 2010, this Court entered an Order denying the Debtors’

  Bar Date/Proof of Claim Motion without prejudice, granting the ACC’s Scheduling

  Motion in Part, and instructing, inter alia, that the parties should, for a period of six

  months, “conduct preliminary discovery related to estimation, for purposes of

  formulating a plan of reorganization, of the Debtors’ liability for pending and future

  asbestos-related claims for personal injury and wrongful death.” Order on Motion of the

  Official Committee of Asbestos Personal Injury Claimants for Entry of a Scheduling




  1
      The Debtors include Garlock Sealing Technologies LLC, Garrison Litigation Management Group, Ltd.
  and The Anchor Packing Company (collectively, the “Debtors” or “Garlock”).



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  Order and Debtors’ Motion for Establishment of Asbestos Claims Bar Dates, Etc., dated

  December 9, 2010 [Dkt. No. 853], ¶ 3.

           2.       On March 23, 2011, the Debtors filed the Motion of the Debtors for an

  Order Pursuant to Bankruptcy Rule 2004 Directing Production of Documents from

  Specified Past Asbestos Claimants (referred to below as the “R. 2004 Motion Regarding

  Past Claimants” and cited as “R. 2004 M”). That Motion seeks authority to issue

  subpoenas duces tecum to 500 named mesothelioma victims whose claims against

  Garlock have already been resolved by settlement or judgment (the “Past Claimants”).2

  As detailed below, the focus of discovery would be on such persons’ claims against

  entities unrelated to the Debtors. The Motion asks that the Debtors be permitted to serve

  the subpoenas by delivering them to law firms the Debtors believe represented the Past

  Claimants with respect to the claims they have already resolved against Garlock. The

  Debtors have denominated those lawyers the “Plaintiff Firms” and would have the Court

  treat them as “agents and representatives of” the Past Claimants based on resolved

  matters that ended as much as a decade ago. R. 2004 M. at 1, n.2. 3

           3.       The ACC intends to oppose the R. 2004 Motion Regarding Past

  Claimants.      It believes that the proposed discovery of claims made against entities

  unrelated to the Debtors on the part of persons whose claims against Garlock have

  already been resolved would be illegitimate, inappropriate, and outside the fair bounds of

  discovery for estimation of the Debtors’ own aggregate liability for pending and future

  asbestos claims.


  2
     Garlock engages in a subtle distortion by labeling these persons as “Claimants.” See R. 2004 M. at 1.
  They hold no claims against Garlock – those claims have already been resolved.
  3
       The life expectancy of a person diagnosed with mesothelioma is less than two years. Thus, it is likely
  that most of the Past Claimants are no longer living.

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          4.        For purposes of the hearing scheduled for May 12, 2011, on the R. 2004

  Motion Regarding Past Claimants, it is important to underscore that the targets of

  Garlock’s proposed discovery, the Past Claimants, are not parties to these estimation

  proceedings, or indeed to these bankruptcy cases, and are not on proper notice of that

  Motion. The Debtors, however, apparently purport to have “served” the Motion by

  sending copies to the lawyers they style as the “Plaintiff Firms.” See R. 2004 M. at 17,

  ¶ 33.

                                    RELIEF REQUESTED

          5.        The ACC hereby requests an order from this Court that no Past Claimants,

  and no law firm that represented such a person in his or her concluded Garlock claim, has

  any obligation to respond to the R. 2004 Motion Regarding Past Claimants, or to

  participate in the May 12 hearing thereon, and will waive no substantive or procedural

  rights by failing or declining to do so.

          6.        The Court should hear the R. 2004 Motion Regarding Past Claimants on

  the basis of arguments to be made by the Debtors, the ACC, and the FCR as parties to the

  estimation hearing. If the motion is denied based on the arguments of the parties, there

  will be no occasion for the Past Claimants or other non-parties to respond or object. The

  Court need not now address what procedures will apply if the R. 2004 Motion Regarding

  Past Claimants withstands the ACC’s and FCR’s attacks. With respect to those potential

  future issues, the order now requested would be expressly without prejudice to the rights

  of all persons.




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                                          ARGUMENT

         7.       The proposed discovery focuses on asbestos-related claims against entities

  unrelated to Garlock. More specifically, the Debtors would demand of each of the Past

  Claimants:

         (a) Ballots cast in bankruptcy cases by the Plaintiff Firms on behalf of asbestos

               personal injury claimants on or after January 1, 2000;

         (b) Proofs of claim or other documents filed in any asbestos bankruptcy asserting

               a claim by the Past Claimant against a bankrupt asbestos defendant;

         (c) Copies of all responses to discovery filed or served in any asbestos bankruptcy

               containing evidence of the Past Claimant’s exposure to asbestos-containing

               products for which the bankrupt asbestos defendant was responsible;

         (d) All trust claim forms submitted by or on behalf of the Past Claimant to any

               asbestos bankruptcy trust, as well as all exposure evidence submitted in

               support of such trust claims; and the status of those claims.

         8.       The Debtors propose that, rather than serving the subpoenas on the Past

  Claimants themselves, the Debtors should be permitted to serve them on the law firms the

  Debtors believe represented the Past Claimants with respect to their concluded claims

  against Garlock, whom the Debtors have labeled the “Plaintiff Firms.” In other words,

  Garlock would have this Court treat these law firms as continuing “agents and

  representatives of” the Past Claimants based on resolved matters that ended as much as a

  decade ago. R. 2004 M. at 1 n.2.

         9.       In the R. 2004 Motion Regarding Past Claimants, the Debtors state that

  they have served the Motion, not only on the adverse parties to the estimation proceeding,



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  i.e., the ACC and the Future Claimants Representative (the “FCR”), but also on the Past

  Claimants, through the Plaintiff Firms. R. 2004 M. at 17, ¶ 33

         10.     On March 25, 2011, the ACC requested the Debtors’ agreement that no

  Plaintiff Firm and no Past Claimant is required to respond to R. 2004 Motion Regarding

  Past Claimants at this time, and that the Motion should be debated in the first instance by

  the parties to the estimation proceeding (the Debtors, the FCR, and the ACC). The

  Debtors have not responded, making it necessary for the ACC to bring on this motion to

  limit the May 12 hearing and the accompanying motion to shorten notice.

                                  RELIEF REQUESTED

         11.     The ACC requests that this Court enter an order limiting the scope of the

  hearing on the R. 2004 Motion Regarding Past Claimants. In particular, the order should

  make clear that neither the Selected Past Claimants nor the Plaintiff Firms are under an

  obligation to respond to it.    The Plaintiff Firms are not parties to the estimation

  proceeding or the bankruptcy case in their own right, nor have they entered an

  appearance in the proceeding or these bankruptcy cases on behalf of any Past Claimants.

         12.     This Court has twice before made limiting orders similar to the one now

  requested when faced with the Debtors’ motions for authority to serve extraordinary

  discovery on non-parties. On January 13, 2011, the Court made an oral ruling with

  respect to the procedure to be followed for the Motion of the Debtors for an Order

  Pursuant to Bankruptcy Rule 2004 Directing Submission of Information by Current

  Mesothelioma Claimants [Dkt. No. 1006] (the “Questionnaire Motion”). The Court

  directed that the ACC should respond initially to the Questionnaire Motion, and that




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  individual claimants and their counsel would be heard, if they so desired, at a later date to

  be determined. See Jan. 13, 2011 Hr’ng Tr. at 116:2-9.

         13.     The Court dealt in a similar fashion with the Motion of the Debtors for an

  Order Pursuant to Bankruptcy Rule 2004 Directing Production of Information from

  Counsel Representing Garlock Claimants [Dkt. No. 1087] (the “Settlement Information

  Motion”). The Court ruled that, in the first instance, it would hear the arguments of the

  Debtors, the ACC and the FCR as to whether the discovery sought was appropriately

  tailored for estimation, for purposes of plan formulation, or was otherwise outside the

  reasonable scope of discovery for the present stage of these bankruptcy cases, and that

  the plaintiffs’ law firms against whom the discovery was directed would have an

  opportunity to respond later, upon notice, if the Settlement Information Motion was not

  denied. See Order Granting Motion by Official Committee of Asbestos Personal Injury

  Claimants to Limit Scope of Hearing on Motion of Debtors for an Order Pursuant to

  Bankruptcy Rule 2004 Directing Production of Information From Counsel Representing

  Garlock Claimants, dated February 4, 2011 [Dkt. No. 1136]. After conducting a hearing,

  the Court denied the Settlement Information Motion on its merits, without the

  participation of the plaintiffs’ law firms. See Order Denying Motion for Production of

  Information From Counsel Representing Garlock Claimants, dated March 4, 2011 [Dkt.

  No. 1201].

         14.     At the upcoming hearing on the R. 2004 Motion Regarding Past

  Claimants, the ACC will argue, inter alia, that the Debtors cannot validly serve a

  subpoena on a Past Claimant by delivery to a law firm that represented that individual




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  with respect to a claim against Garlock that has already been resolved. 4 The ACC will

  also argue that the proposed discovery would be inappropriate and irrelevant to the

  estimation proceeding, in any event. It would fly in the face of Garlock’s settlement

  obligations, predictably sparking costly and time-consuming disputes with third parties

  and disserving what should be the parties’ shared goal of achieving a confirmable plan of

  reorganization in a reasonable period of time.

         15.     The Past Claimants should not be expected to brief the R. 2004 Motion

  Regarding Past Claimants or appear at the hearing on that Motion. They have not been

  served with effective notice of the Motion. If the Debtors ever made a real effort to serve

  them, the complications and expense will be considerable, for most of the Past Claimants

  are dead and their claims, by the Debtors’ own admission, have been resolved. The

  Debtors have offered no authority for the facile notion that they can solve their

  procedural problem on the backs of the lawyers who represented Past Claimants in

  concluded matters. On the other hand, if the ACC’s arguments result in denial of the R.

  2004 Motion Regarding Past Claimants, it will prove unnecessary for the Court or the

  parties to address the difficulties of service upon Past Claimants or for those non-parties

  to respond.




  4
     As a general matter, “[a] lawyer’s actual authority to represent a client ends when: …
  the client dies or … the lawyer has completed the contemplated services.” Restatement
  (3d) of the Law Governing Lawyers, §31 (2) (b),(e) (2007). Nor can Garlock claim that
  the lawyers retain apparent authority on behalf of the past claimants with respect to the
  Debtors. Such apparent authority ends when Garlock “knows or should have known of
  facts from which in can be reasonably inferred that the lawyer lacks actual authority,
  including knowledge of any event described in Subsection (2) [such as the death of the
  client or the completion of the contemplated service.]” Id. at §31 (3).


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                                       CONCLUSION

         For the foregoing reasons, the ACC respectfully requests that this Court order that

  (i) neither the Past Claimants nor the law firms that represented them with respect to

  concluded claims against Garlock are required to respond to the R. 2004 Motion

  Regarding Past Claimants or participate in the hearing thereon scheduled for May 12,

  2011, and (b) that no substantive or procedural rights will be waived if they decline or

  fail so to respond or participate. A proposed Order accompanies this motion.

  Dated: March 28, 2011                         Respectfully submitted,

                                                CAPLIN & DRYSDALE, CHARTERED

                                                By: /s/ Trevor W. Swett III
                                                Trevor W. Swett III
                                                (Tswett@capdale.com)
                                                 Leslie M. Kelleher
                                                 (Lkelleher@capdale.com)
                                                 One Thomas Circle, N.W.
                                                 Washington, D.C. 20005
                                                 Telephone: (202) 862-5000

                                                   Elihu Inselbuch
                                                   (Einselbuch@capdale.com)
                                                   CAPLIN & DRYSDALE, CHARTERED
                                                   375 Park Avenue, 35th Floor
                                                   New York, NY 10152-3500

                                                   Attorneys for the Official Committee of
                                                   Asbestos Personal Injury Claimants

                                                HAMILTON MOON STEPHENS STEELE
                                                & MARTIN, PLLC

                                                By: /s/ Travis W. Moon
                                                Travis W. Moon (Bar No. 3067)
                                                201 South College Street
                                                Suite 2020
                                                Charlotte, NC 28244
                                                Telephone: (704) 344-1117
                                                Fax: (704) 344-1483


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