Key takeaways:

• Judge Hodges of the Bankruptcy Court for the Western District of North Carolina ruled that Garlock Sealing Technologies, Inc. is only liable for a fraction of the asbestos liability alleged against it by current and future mesothelioma claimants.
• The court applied Garlock’s proposed “legal liability” approach to estimate the aggregate amount of Garlock’s asbestos liability, focusing on the merits of the claims at issue, rather than basing the estimate on Garlock’s past settlements and verdicts. Discovery showed that Garlock’s settlement history does not accurately represent its actual asbestos liability due to the “startling pattern of misrepresentation” employed by plaintiffs’ counsel.
• This noteworthy decision exposes improprieties by plaintiffs’ counsel that have long been suspected and has the potential to alter significantly the negotiating dynamics between defendants and claimants, both in and out of bankruptcy.