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NYCAL

Since 2013 the Judicial Hellholes report has faithfully if discouragingly reported on the brazenly plaintiff-favoring ways of New York City’s Asbestos Litigation court known as NYCAL.

Last year’s report reminded readers that NYCAL trial judges who aspire “to appellate court appointments dare not displease certain members of the plaintiffs’ bar … who exercise significant influence over judicial appointments through their involvement in judicial screening and departmental disciplinary committees. In fact, New York Gov. Andrew Cuomo himself has sheepishly conceded that ‘[t]he trial lawyers are the single most powerful political force’” in the state.

And the governor ought to know. Presumably feeling some of that political force, he actually appointed to chair New York’s Commission on Judicial Conduct one of NYCAL’s most notorious plaintiffs’ lawyers, Joseph Belluck, whose firm Belluck & Fox is a once and potentially future defendant in asbestos fraud litigation brought under the federal Racketeer Influenced and Corrupt Practices statute known as RICO. The governor also appointed former NYCAL Justice Paul Feinman to New York’s highest court.

But rather than provide another comprehensive analysis of all the unseemly self-dealing that has long sullied NYCAL’s reputation and otherwise results in extraordinarily good outcomes for asbestos plaintiffs and their lawyers relative to outcomes in other jurisdictions nationwide, this year’s report – due to space limitations – will focus largely on a much anticipated and ultimately disappointing new Case Management Order (CMO) issued in June 2017 by then outgoing administrative judge, Justice Peter Moulton.

For those seeking a refresher on the historical context of NYCAL, they may consult both the Judicial Hellholes archives or a thorough report published earlier this year by the American Tort Reform Association’s allies at the U.S. Chamber Institute for Legal Reform (ILR).

JUSTICE MOULTON’S TURN AS ‘HAMLET’

To be fair to asbestos defendants, or not to be fair?

That was the question Justice Moulton appeared to agonize over for nearly two years as he contemplated a new CMO that would govern NYCAL’s procedural rules, including pretrial discovery, the selecting and scheduling of cases for trial, disclosure of claims made on bankruptcy trusts and limits, if any, on available damages.

It should be noted that Justice Moulton was put in charge of NYCAL in early-2015, just as the state’s political establishment in Albany had been shaken to its core with the conviction on federal corruption charges of former New York State Assembly Speaker Sheldon Silver. In addition to obstructing every reasonably crafted tort reform bill in the legislature for more than 20 years, Mr. Silver moonlighted for Weitz & Luxenberg, the plaintiffs’ firm with the most pending cases at NYCAL. Federal prosecutors charged that he earned millions of dollars in referral fees after using taxpayer money to provide research grants for a doctor who steered asbestos cases to the powerful firm.

The Silver scandal effectively pushed out Justice Moulton’s predecessor, Justice Sherry Klein Heitler, amidst assertions that she had given “red-carpet treatment” to Mr. Silver’s associates at Weitz & Luxenberg. For example, she granted the firm’s request to lift NYCAL’s longstanding ban on punitive damages in asbestos cases, giving plaintiffs greater leverage over asbestos defendants in pretrial settlement negotiations. So initially there was hope among those defendants that Justice Moulton would end, or at least reduce the one-sidedness of NYCAL’s procedures.

But even as he conducted open “town hall” meetings at which both plaintiff and defense counsel were heard from on proposed changes to the CMO, and even as he spoke publicly of a desire to broker an evenhanded conciliation between the two sides, Justice Moulton’s rulings from the bench were much like those of Justice Heitler before him, and this began to erode hope among asbestos defendants that his promised new CMO would really make NYCAL proceedings any more fair.

Justice Moulton ultimately imposed a new CMO on the parties when he wasn’t able to achieve agreement from both sides. The new CMO was issued just before Justice Moulton was appointed to the Appellate Division by Gov. Cuomo, where, it’s worth noting, he failed to recuse himself from an appeal of a NYCAL case he’d presided over at trial. Nonetheless, defendants quickly united in their opposition to several key provisions of the CMO, including the availability of punitive damages and a lack of meaningful requirements for plaintiffs to file and disclose all available asbestos trust claims before trial. Appeals have been filed by defendants with strong amicus brief support challenging the new CMO. Defendants have asked the Appellate Division to vacate the CMO or, at a minimum, modify it to address their concerns.

THE RETURN OF PUNITIVE DAMAGES

Of all the new CMO’s provisions – an extensive analysis of which by attorneys at Hawkins Parnell Thackston & Young is recommended – it is the return of punitive damages to NYCAL litigation that defense counsel oppose most fervently. Why? For nearly two decades beginning in 1996, plaintiffs were not permitted to pursue punitive damages because judges had wisely recognized that depleting resources through jackpot awards hurts those afflicted with slow-to-develop asbestos-related diseases in the future and that repeatedly punishing companies for the same conduct serves no purpose.

Furthermore, many of today’s asbestos defendants are far removed from any putative wrongdoing. In fact, in many NYCAL cases the asbestos related activities were committed by a predecessor company, not the company now facing litigation. So the availability of punitive damages in the new CMO puts a fat judicial thumb on the scales of justice, empowering plaintiffs’ lawyers to exert more pressure on defendants in settlement negotiations or otherwise win even bigger verdicts and get richer still.

As noted above, however, in April 2014 Justice Heitler lifted a long-standing ban on punitive damages and an appellate court upheld her authority to do so. But the appellate court left to her successor, Justice Moulton, to determine whether punitive damages should be allowed. His new CMO does allow them and, naively or otherwise, it trusts plaintiffs’ lawyers to pursue punitive damages only on a “good faith basis.” That’s a bit like asking a pack of hyenas to attack a wildebeest calf only if they’re hungry.

And talk about deep-pocket justice, according to the Hawkins Parnell analysis, “In quantifying an award of punitive damages,” the new CMO would allow NYCAL juries to “consider the ability of a defendant to pay” such damages. “Thus ‘immediately prior’ to jury selection in a trial where plaintiff asserts punitive damages, defendant must provide plaintiff with reliable financial disclosures, such as SEC disclosures, an audited profit and loss statement or a corporate representative affidavit attesting to the defendant’s net worth with supporting documentation.”

Though the new CMO would prevent any case in which punitive damages are being sought from being consolidated with other asbestos cases, that’s a rather small consolation for today’s defendants and seems to have less to do with providing just compensation for the injured than it does with favoring politically powerful plaintiffs’ lawyers.

In any case, an October 2017 amicus brief filed in support of the asbestos defendants’ appeal of the CMO points out that other jurisdictions across the country have deferred punitive damages for several reasons:

  • Punitive damages windfalls deplete resources for people who develop asbestos-related diseases in the future;
  • Repeatedly punishing companies for the same conduct serves no purpose;
  • Punitive damages in asbestos litigation do not deter misconduct because the exposures at issue occurred decades ago, before federal health and safety regulations were established, by companies that are largely bankrupt, leaving as solvent defendant companies today mainly peripheral defendants who have generally not engaged in conscious, agrant wrongdoing; and
  • Putting punitive damages back in the mix gives plaintiffs’ lawyers more leverage over risk-averse defendants and will lead to in ated settlements.

TRUST CLAIMS LOOPHOLE

As noted above, many former asbestos defendants have gone bankrupt and have established trust funds through which those with injuries can administratively seek compensation, apart from the filing of lawsuits.

Needless to say, plaintiffs’ lawyers pursue both avenues. But some hide evidence of the true sources of their clients’ exposure to asbestos by waiting to file trust claims until after their lawsuits conclude, keeping useful information from defendants and manipulating the value of the civil court cases by only allowing a small portion of a plaintiffs’ total asbestos exposure to be shared with a jury. Recent data, including NYCAL data, make clear that greater transparency is needed to address this costly gamesmanship and suppression of evidence.

As noted in past Judicial Hellholes reports, a North Carolina federal bankruptcy judge in In re Garlock Sealing Technologies, LLC found that a gasket and packing manufacturer’s settlements of mesothelioma claims in the tort system were “infected by the manipulation of exposure evidence by plaintiffs and their lawyers.” The bankruptcy judge noted a NYCAL case Garlock had settled for $250,000. The plaintiff in that case had denied any exposure to insulation products, implying that the bankrupted major producers thereof were not a source of his alleged exposure. But once the case settled, the plaintiff’s lawyers filed 23 claims with trusts set up to pay people exposed to those companies’ products, including eight trust claims filed within 24 hours of completing the settlement with Garlock.

A more recent analysis of the discovery data from Garlock’s bankruptcy case in relation to asbestos defendant Crane Co. showed “a similar pattern of systemic suppression of trust disclosures.” The study discussed a NYCAL case – the Gerald Moors case – as an example. Mr. Moors testified at his deposition that he never worked with asbestos containing products from 11 now-bankrupt companies including Owens Corning. Just before opening statements Mr. Moors’ attorneys successfully moved to prevent defense counsel from mentioning Owens Corning’s asbestos insulation product during the trial, arguing that their client never said he was exposed to the product. But Garlock discovery data showed that the asbestos specialists at Belluck & Fox – the same Belluck & Fox whose top partner now chairs New York’s Commission on Judicial Conduct – led 26 trust claims on Mr. Moors’ behalf, including a claim against Owens Corning, “despite Moors’ sworn testimony that he did not work with the products from those (now bankrupt) companies.”

The trust claims filed in the Moors case also reveal site exposure inconsistencies. In his lawsuit, Moors denied being exposed to asbestos at the Ravenswood Powerhouse. In trust filings, however, Belluck & Fox listed Ravenswood Powerhouse as a site where Moors was exposed to asbestos.

Such “double-dipping” duplicity in NYCAL was made possible by a “loophole” inserted into the old CMO by Justice Heitler. And the loophole survives in Justice Moulton’s new CMO, which again naively assumes that plaintiffs’ lawyers will act in good faith in declaring before an asbestos trial begins whether they “intend” to file additional claims with asbestos trusts after trial. If they do, they’re required to declare those intentions with specificity before a trial begins.

But as Joseph Belluck coyly explained during a June 2014 hearing before the American Bar Association’s Asbestos Litigation Task Force:

[Judge Heitler] put in what is in effect an intent standard into the … filing requirement … . So … even though claims against bankruptcy trusts may be probable, … I only have to file the claims that my client intends to file before the trial. It is incredibly nuanced, and she did it for a reason. I am not going to get into all of the reasons behind it, but she did it for a reason.

The reason was plain enough, Mr. Belluck: she wanted to curry favor with plaintiffs’ lawyers by letting them cheat the system. Because short of performing a Vulcan mind meld, it’s impossible to know what someone intends to do tomorrow, the next day or next month. And that Justice Heitler’s aiding and abetting of the bilking of both civil defendants and asbestos bankruptcy trusts was not stopped in the new CMO is unfathomable. Which is why the previously mentioned amicus brief supporting NYCAL defendants’ pending appeal argues if the appellate court does not vacate the new CMO altogether, it “should, at a minimum, modify the CMO to require plaintiffs to file all eligible asbestos trust claims early in the discovery process and specify that trust claims materials are admissible.”

Of course, if the appeals court won’t step in to demand that NYCAL and other state trial courts deal transparently with all asbestos claims, state lawmakers may finally be ready to step up themselves. In fact, state Sen. John Bonacic, chair of the Senate Judiciary Committee and a former trial lawyer himself, has introduced a bill to address this glaring need. And Assemblymember Aravella Simotas, a rising political star from Queens, is sponsoring an identical bill on her side of the Capitol building. So there may be hope yet.

LIMITED CONSOLIDATIONS CONTINUE

Consolidation of asbestos cases for trial, even on a small scale, “significantly improve[s] outcomes for plaintiffs.” But New York’s highest court, the Court of Appeals, let slip an opportunity in 2016 to make NYCAL conform to the national trend of ending consolidation in asbestos litigation, technically finding that the question of consolidation had not been preserved on appeal from a lower court decision.

Not surprisingly then, Justice Moulton’s new CMO allows NYCAL consolidations to continue, albeit with limits. Despite a 2015 empirical study showing, among other things, that NYCAL’s “consolidated trial settings create administrative and jury biases that result in an artificially inflated frequency of plaintiff verdicts at abnormally large amounts,” the new CMO would allow for consolidation of two to three cases in certain circumstances.

And quite disappointingly, the new CMO would forever forsake the eight so-called Malcolm factors or criteria that previously established rules and case law had required be met in determining whether asbestos cases are sufficiently similar to be consolidated. Rather than require that all eight criteria be met, Justice Moulton’s new CMO creates a three-is-enough rule.

SUMMARY JUDGMENT

Again, space here precludes a comprehensive analysis of every element of the new NYCAL CMO now being appealed by asbestos defendants. But this report would be remiss were it not to remind readers of the court’s reflexive denials for several years of defendants’ motions for summary judgment. NYCAL defendants face an upside-down, virtually impossible-to-bear burden of proving a negative – namely that their products were not present at a claimants’ worksite when alleged exposure to asbestos occurred – if their motions for summary judgment are to be granted. This standard leaves NYCAL defendants facing an uphill fight, bearing the significant costs and risks of a trial, even when plaintiffs can’t specifically recall being exposed to their products.

ENDNOTES

New York State taxpayers have also faced a costly uphill fight against corruption during the long and sordid political career and subsequent criminal prosecution of the aforementioned former New York State Assembly Speak Sheldon Silver.

Since last year’s report, Mr. Silver appealed his 2015 conviction on federal fraud charges. But his attorneys only managed to convince the appellate court that misleading jury instructions in his first trial warranted a retrial, which is now expected to get underway in April 2018. Likely inadmissible at that second trial will be a federal prosecutor’s July 28 statement calling the aging ex-pol’s efforts to delay his second trial “little more than a delay tactic … motivated by his recognition that, as time passes, necessary witnesses and other evidence may be lost.”

In fact, as the New York Post reported, the prosecutor noted that the principal witness against Mr. Silver is 81-year-old Dr. Robert Taub, “who told the [original] jury he referred patients suffering from asbestos-related health problems to Silver’s law firm in exchange for favors, including state-funded research grants.”

This ghoulish sidebar speaks to the spirit of self-interest that Mr. Silver personifies and which has long animated New York politics. This spirit also has permeated NYCAL courtrooms. And powerful plaintiffs’ lawyers there will continue to exert their influence and have their way unless the appellate court now considering asbestos defendants’ appeal of Justice Moulton’s lopsided CMO push back. It’s also possible that Justice Moulton’s successor, Justice Lucy Billings, won’t let her past as a plaintiffs’ lawyer, crusading in part for “environmental justice,” unduly in uence her treatment of NYCAL defendants.

But should the courts fail to reclaim balance in the name of justice, perhaps lawmakers and the voters who send them to Albany may yet rise to the task. Of course, knowing what we know of NYCAL and the political milieu in which it exists, it is difficult to be optimistic.

That said, New York voters on Election Day 2017 overwhelmingly supported Proposal 2, a ballot measure adopting an amendment to New York’s constitution that will now allow judges to strip generous state pensions from politicians and other government officials convicted of felonies in connection to their public duties. Let’s call it “Shelly’s Law” and hope that it’s a sign of less corrupt things to come.

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