Will Fourth Circuit Decision to Unseal a CPSC Case Be a Boon to Asbestos Defendants?

4th CircuitThe U.S. Court of Appeals for the Fourth Circuit issued a decision on April 16 in a case called Company Doe v. Public Citizen that signals hope for asbestos defendants who are seeking to combat fraudulent claims in North Carolina. Those claims were brought in connection with a bankruptcy proceeding styled as In re: Garlock Sealing Technologies, LLC et al. (“Garlock”). How could an anonymous CPSC case from Maryland affect a gasket company’s asbestos bankruptcy from North Carolina? In a word: transparency. Both cases involve the ability of third parties to gain access to documents enmeshed in public litigation.

In issuing its ruling in Company Doe, the Fourth Circuit surely had no inkling that its words might cheer long-suffering asbestos defendants. However, that court’s insistence on transparency and public access to the judicial process bodes well for an asbestos case in which similar issues have been percolating. When the district court (and perhaps eventually the Fourth Circuit) hears motions from asbestos defendants and others about divulging sealed documents from the Garlock asbestos bankruptcy docket, the recent decision in Company Doe will surely loom large. There is no guaranty as to where the Fourth Circuit ultimately will come down on the sealing issues in Garlock. But it does appear that a new day is dawning, and—if the Court of Appeals acts consistently with its stated policy favoring public access in Company Doe—it just might prove to be the Day of Reckoning for fraudulent asbestos plaintiffs and their trial lawyer accomplices.

Company Doe Takes Two Steps Forward in District Court

Company Doe v. Public Citizen, No. 12-2209 (“Company Doe”), started when the U.S. Consumer Product Safety Commission received a “report of harm” and sought to post it on its new government-run product safety database website. [Full disclosure: I worked as legal counsel to CPSC Commissioner Anne Northup from 2009 through 2010, but left before this report of harm was received.] The report alleged that a company’s product was related to the death of an infant, but the company strongly objected that the report of harm was not accurate. When the company could not obtain satisfaction through direct negotiations with the Commission, it was forced to file suit against the CPSC in federal district court in Maryland (where the CPSC is located) to enjoin the Commission from posting the erroneous report of harm.

In an unusual twist, the company asked the district court to proceed under two special conditions. First, the company sought to remain anonymous (hence, the “Company Doe” title of the case). Second, the company asked to seal most or all of the proceedings. Because the entire point of the company’s case was to prevent its being falsely associated with an infant’s death, the company argued that allowing its identity to be disclosed in court—and then immediately in the newspapers and across the internet—would defeat the very relief that it sought. Furthermore, the company contended that the court should seal any documents in the case that could be used to deduce its identity. The agency and several self-appointed consumer groups objected to both conditions. Nevertheless, the district court granted the company’s request for anonymity, sealed many records, and kept most filings off the court’s public docket.

Not only did the court rule in Company Doe’s favor on anonymity-related issues, but it ultimately sided with the company on the merits too. The court significantly redacted its opinion in Company Doe v. Inez Tenenbaum et al., as well as portions of other documents that became public. But Judge Alexander Williams Jr.’s decision made it abundantly clear that, by trying to post a report of harm that was not related to the company’s product, the CPSC’s actions were arbitrary and capricious, an abuse of agency discretion, and in violation of the Administrative Procedure Act:

The Commission’s position that the report should be published is untenable. In violation of statutory and regulatory mandates, the report is misleading and fails to relate to Plaintiff’s product in any sensible way … In short, the Commission’s decision is unmoored to the CPSIA’s public safety purposes and runs afoul of bedrock principles of administrative law and the sound policies that buoy them. (pp. 53-4)

Judge Williams issued a permanent injunction barring the agency from posting the report of harm. Following this devastating, point-by-point account of agency misfeasance, the CPSC tucked its tail and chose not to appeal the decision. However, the same consumer groups that had filed objections sought to appeal the district court’s rulings granting Company Doe’s requests to retain its documents under super seal and to proceed under a pseudonym.

Company Doe Takes One Step Back in the Court of Appeals

Here is where things get interesting for asbestos defendants—and uncomfortable for the asbestos plaintiffs’ bar. First, the Fourth Circuit recognized the objectors’ standing to appeal:

Although Consumer Groups were neither parties to, nor intervenors in, the underlying case before the district court, we nevertheless conclude that they are able to seek appellate review of the district court’s sealing … orders because they meet the requirements for nonparty appellate standing and have independent Article III standing to challenge the sealing … orders. (pp. 4-5)

Having recognized the consumer groups’ ability to appeal, the Fourth Circuit reversed the district court’s decisions to proceed under seal and pseudonym: “We hold that the district court’s sealing order violates the public’s right of access under the First Amendment…” (p. 5). The Fourth Circuit remanded the case to district court and ordered all documents to be unsealed, unredacted, and made available to the consumer groups and, indeed, the general public. “We see no reason why the standing of news media to seek appellate review of a district court’s sealing order should differ from that of a member of the general public.” (p. 30). This partial appeal could not disturb Company Doe’s successful permanent injunction against the CPSC, but the Court of Appeals ruling no doubt will discourage future companies aggrieved by the prospect of erroneous reports of harm being posted on a public government database from suing the Commission.

Meanwhile in the Garlock asbestos case, Ford Motor Co., Volkswagen Group of America Inc., Honeywell International, and Crane Co., among others, have all filed motions seeking access to documents held by the district court. What we already know about the documents indicates that asbestos plaintiffs and/or their attorneys have quite possibly committed fraud. The plaintiffs swore in cases against Garlock that they had no known exposure to asbestos other than from Garlock gaskets, but they then subsequently filed claims with more than a dozen bankruptcy trusts claiming exposure to the bankrupt companies’ asbestos-laden products as well. If Garlock was indeed victimized, then Ford Motor and other companies have every reason to believe that they were defrauded too—and obtaining access to these documents could prove that. Past efforts by third parties to obtain documents from asbestos plaintiffs have typically not fared well. However, given the Company Doe decision, other companies may want to jump into the fray now, asserting their own interest in seeing the sealed documents at issue in the Garlock case.

Something tells me that asbestos defendants can’t count on Public Citizen, the Consumer Federation of America, and Consumers Union to unseal documents for them here. However, if and when Garlock does make it up to the Fourth Circuit, perhaps it is not too much to hope that Bloomberg, Inc., Dow Jones and Company, Inc., Gannett Company, The New York Times Company, NPR, Inc., The Reporters Committee for Freedom of the Press, Tribune Company, and The Washington Post will renew the amicus position in favor of disclosure that they took in the Company Doe case with equal vigor and demand that the light of public scrutiny finally be shone on documents held under seal for so long in asbestos cases.

How the Fourth Circuit’s Company Doe Reasoning Applies to Garlock

Leaving to one side the merits of the Fourth Circuit’s decision as pertains to Company Doe—whose identity remains undisclosed as of this posting—the opinion is an unalloyed positive for asbestos defendants everywhere. By emphatically ordering the entire district court docket unsealed, the Fourth Circuit broadcast just how paramount it views the public’s interest in keeping court proceedings public. In particular the Court of Appeals relied on three main points that should carry equal or greater weight in the context of asbestos documents: (1) The Court invoked a “presumption favoring public access to judicial documents …” (p.10); (2) The Court indicated that it is especially important to unseal documents to “promote[] the institutional integrity of the Judicial Branch.” (p. 30); and (3) The Court indicated that privacy interests are diminished where plaintiffs have voluntarily invoked the public process by going to court.

The first argument, rooted in the First Amendment, is just as strong if not stronger here than it was in Company Doe. The district court ruled that Company Doe overcame that presumption because of the harm it would suffer from disclosure, but the Court of Appeals disagreed. Even the concurring judge reluctantly agreed that it was not enough to assert a privacy interest, but that Company Doe would have had to introduce evidence quantifying the harm it would suffer from its identity being divulged in order to carry its burden and prevail against the presumption of public access to court documents.

Hence, the Court of Appeals ordered the Company Doe documents to be unsealed even though the company won its case against the CPSC, its permanent injunction was left intact, and Company Doe stands accused of no wrongdoing in the matter whatsoever. If an already-vindicated company’s reputational interest does not justify keeping documents sealed that threaten to besmirch it, then a fortiori the potential evidence of guilty conduct on the part of asbestos plaintiffs and their trial lawyers should not remain sealed by the Fourth Circuit’s reckoning.

The second argument in Company Doe likewise resounds even more strongly in Garlock. The Court of Appeals noted that the statute at issue in Company Doe was being reviewed in district court for the first time and found that public interest in disclosure is heightened “by the fact that this legal action marked the first challenge to the accuracy of material sought to be posted on the Commission’s database.” (pp. 52-3). The court was concerned that the public be able to assess the district court’s decision properly, and it noted that public confidence in judicial outcomes may flag if “important judicial decisions are made behind closed doors and then announced in conclusive terms to the public, with the record supporting the court’s decision sealed from public view.” (p. 30, cite omitted).

Given the potential in Garlock for explosive revelations, and access for one of the first times to documents showing plaintiffs’ contradictory asbestos exposure claims, the public’s interest in access is also high here. The Garlock asbestos plaintiffs want to keep documents sealed that may well contain solid proof of their fraudulently induced and inflated settlements in asbestos cases against numerous defendant companies who were sued more because they were solvent than because their products are likely to have led to any single plaintiff’s asbestos-related disease. If that does not go directly to the heart of the integrity of the Judicial Branch, then it is hard to imagine what would.

The third argument regarding privacy is also every bit as strong in the asbestos context. The Fourth Circuit argues that Company Doe’s privacy interests are diminished because it sought to utilize the courts. Some might argue that Company Doe’s use of the court was a last resort forced upon it by a statutory scheme and improper conduct by an agency that attempted to post factually inaccurate information about Company Doe and/or its product on the CPSC’s saferproducts.gov website database. In any event, asbestos plaintiffs have an even smaller privacy interest given their aggressive and repeated resort to the courts to seek damages for alleged asbestos-related injuries from multiple defendants.

Plaintiffs’ lawyers may try to distinguish Company Doe by arguing that individual asbestos claimants have a greater right to privacy because plaintiffs’ medical histories are inherently more private than product safety complaints against a company.  But the key potential fraud in these lawsuits involves whether plaintiffs lied about being exposed to more than one product; that has nothing to do with private medical history. Besides, the key legal principle on which the Fourth Circuit relied remains the same here. One who brings a claim into federal court thereby voluntarily surrenders his privacy interests to the extent he wants the court to vindicate his legal claims.  And every asbestos claimant can be said to have voluntarily invoked the court’s jurisdiction by filing a claim with the bankruptcy court. It would be exceedingly odd if the Fourth Circuit were to conclude that the privacy interests of apparently fraudulent plaintiffs acting for their own financial benefit are stronger than the privacy interests of a wrongly-accused company facing a federal agency not acting in accordance with the law.

Where Things Stand Now

Bankruptcy Judge George Hodges ruled on April 11 that Legal Newsline’s appeal to the district court counseled against his ruling on the unsealing motions right now, and he was willing to have them all go up to the next level to be decided together instead:

The Unsealing Motions either involve issues that are directly before the District Court on Legal Newsline’s appeal or are so closely related that they are inextricably intertwined. That appeal appears to be on a track to a timely resolution. The court believes that … the most expeditious route to resolution of the issues is to have all these matters presented to the District Court when it considers the present appeal.

Whichever North Carolina district judge hears that appeal, it is likely that the slap-down Judge Williams received for sealing the records in the Company Doe case will be fresh on that fellow judge’s mind:

[W]e hold that the district court’s sealing order violated the public’s right of access under the First Amendment and that the court abused its discretion in allowing Company Doe to proceed under a pseudonym. We therefore reverse the district court’s sealing and pseudonymity orders and remand the case with instructions for the district court to unseal the record in its entirety. (p. 61).

On the other hand, if the reviewing judge were to order disclosure, she could become the next Hon. Janis Graham Jack (S.D. Tex.), a federal district court judge who is justifiably famous for exposing the rampant fraud in silicosis cases, which came before her bench. Fraud in the asbestos docket is long overdue for a similar, thorough examination. The timing of the Company Doe decision may finally ensure that such an examination occurs.

Also posted at WLF’s Forbes.com contributor page

2 thoughts on “Will Fourth Circuit Decision to Unseal a CPSC Case Be a Boon to Asbestos Defendants?

  1. Excellent analysis by Mr. Chenoweth. We’ll know soon enough if judges within the Fourth Circuit are consistent and unbiased in their application of the law, or if instead they’re situational jurists determined to contort the law as needed to rationalize outcomes favoring the plaintiffs’ bar. (NOTE: the CPSC created its so-called safer products website in cahoots with plaintiffs’ lawyers who wanted to use its postings as grist for their lawsuit mill.) Meanwhile, asbestos fraudsters’ lives must be flashing before their eyes.

    -Darren McKinney, American Tort Reform Association, Washington, D.C.

  2. Pingback: Ethics roundup - Overlawyered

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