On December 20, 2012, Ohio Governor John Kasich signed into law House Bill 380, which is aimed at remedying inequities in asbestos litigation. HB 380 addresses the issue of bankruptcy trust claims and their impact on pending asbestos litigation. The legislation will require civil litigants to disclose under penalty of perjury any existing asbestos trust claims during the pendency of the litigation.
Asbestos personal injury trusts proliferated after many of the early primary asbestos product manufacturers reorganized under bankruptcy law. Bankruptcy trusts pay out billions of dollars each year to claimants who allege exposure to particular asbestos-containing products. This money is paid out independently of any civil litigation, be it past, pending or future. Therefore, plaintiffs may obtain compensation for asbestos-related personal injuries or death without ever reporting it to named defendants. Nonetheless, compensation received from bankruptcy trusts is relevant to a determination of causation and setoffs, and can implicate the plaintiffs’ credibility if the allegations plaintiffs make in their bankruptcy trust submissions are contradicted by the allegations made in their civil action.
In asbestos litigation, plaintiffs must establish that the defendants’ products caused the alleged harm. Therefore, all exposures to asbestos-containing products are probative to a determination of fault. A submission of a claim for compensation to a bankruptcy trust constitutes an admission of exposure to asbestos to the product or products for which the bankruptcy trust was formed. In some jurisdictions, a plaintiff’s admission of these exposures is admissible for purposes of allocating fault. Information regarding exposures to asbestos-containing products manufactured or distributed by a bankrupt entity can implicate the manner in which defenses are presented, and how discovery is conducted.
The enactment of HB 380 recognizes that the lack of coordination between civil litigation and the bankruptcy trust system is problematic. The law will increase transparency between the two arenas by requiring plaintiffs to disclose bankruptcy trust claims submitted before and during litigation. HB 380 also provides a mechanism for a stay of proceedings when additional information regarding bankruptcy trust claims is disclosed within 75 days of trial. Importantly, the legislation will allow the parties to introduce evidence at trial regarding bankruptcy trust claims filed to prove alternate causation and for allocation of fault purposes.
A problem arises with bankruptcy trust claims filed after the pendency of litigation. HB 380 seeks to address this issue but falls short. Under the law, if, after judgment is entered, a claimant files an additional claim with a bankruptcy trust, the law would provide a mechanism for adjusting the judgment entered to reflect the additional claim. However, the law requires a defendant or judgment debtor to file a motion to adjust the judgment within one year of entry of the judgment.
This provision does not fully address the problem created by future trust claims. First, HB 380 only provides a remedy in the rare cases in which a final judgment is entered. It does not provide a remedy for defendants who settle before verdict. The law implicitly suggests that only defendants who obtain an adverse judgment are entitled to complete information regarding future bankruptcy trust claims. In addition, the law presupposes that the post-judgment plaintiff will timely disclose the filing of an additional trust claim. There is no guarantee that such information would be disclosed in a timely fashion. Moreover, the law encourages plaintiffs to wait to file additional bankruptcy trust claims until the one-year post-judgment period has expired. Finally, HB 380 simply does not address future bankruptcy trust claims. It is notable that bankruptcy trust claim submissions are not subject to statutes of limitations; there is no obligation for plaintiffs to file asbestos bankruptcy trust claims before the conclusion of their civil litigation.
HB 380 does represent an important step in increasing the coordination and transparency between civil litigation and the bankruptcy trust claim process. It is the first legislative recognition of the issue created by bankruptcy trust claims that provides viable mechanisms for enforcing disclosure of past bankruptcy trust submissions. However, the law does not solve the nearly intractable problem of forcing disclosure of future bankruptcy claims. Thus, HB 380 does not ensure that named defendants in Ohio asbestos litigation will obtain full, complete and timely information regarding personal injury and death claims filed. In summary, HB 380 is a positive first step on the long road of remedying the issue created by asbestos bankruptcy trust claims.