Kotalik v. A.W. Chesterton Co.

• Decision Date: 08 July 2020
• Docket Number: Case No. 3:18-cv-251,Case No. 3:18-cv-246
• Parties: Dorothy KOTALIK, Individually and on behalf of estate of John Kotalik, deceased, Plaintiff, v. A.W. CHESTERTON COMPANY, et al., Defendants. Catherine Selfors, individually and on behalf of estate of Duane Selfors, Plaintiff, v. Apollo Piping Supply, Inc., et al., Defendants.
• Court: U.S. District Court — District of North Dakota

471 F.Supp.3d 934

Dorothy KOTALIK, Individually and on behalf of estate of John Kotalik, deceased, Plaintiff,

v.A.W. CHESTERTON COMPANY, et al., Defendants.

Catherine Selfors, individually and on behalf of estate of Duane Selfors, Plaintiff,

v.Apollo Piping Supply, Inc., et al., Defendants.

Case No. 3:18-cv-246

Case No. 3:18-cv-251

United States District Court, D. North Dakota.

Signed July 8, 2020

Jeanette Boechler, Boechler, PC, Fargo, ND, David C. Thompson, Grand Forks, ND, for Plaintiff.

Elizabeth Sorenson Brotten, Jason Mohr, Joanna M. Salmen, Kyle B. Mansfield, Thomas M. Stieber, Foley & Mansfield PLLP, Minneapolis, MN, Elena D. Harvey, Houser LLP, Excelsior, MN,Kristi K. Brownson, Brownson PLLC, Minneapolis, MN, Cassandra A. Marka, Zimney Foster PC, Grand Forks, ND, Scott J. Landa, Zimney Foster PC, Grand Forks, ND, Jessica M. Rydell, Joel A. Flom, Flom Law Office, P.A., Fargo, ND, for Defendants.

ORDER

Alice R. Senechal, United States Magistrate Judge

Pending motions in the cases captioned above present identical issues. First, certain defendants (collectively, moving defendants) move to enforce plaintiffs' compliance with disclosure requirements of North Dakota's Asbestos Bankruptcy Trust Transparency Act (the Trust Transparency Act). Second, plaintiffs and some of moving defendants jointly request a hearing on that motion. Third, plaintiffs move for certification of a question to the North Dakota Supreme Court regarding constitutionality of the Trust Transparency Act.

Summary

The court determines plaintiffs do not raise a "close" question of state law that necessitates certification of a question to the North Dakota Supreme Court. Therefore, the court will deny plaintiffs' motions for certification.

As to moving defendants' motions, the court concludes the Trust Transparency Act's disclosure provisions are substantive state law, which thus apply to these proceedings. In this court's opinion, the disclosure provisions clearly and plainly require plaintiffs to provide the requested information to defendants. Accordingly, this court will grant moving defendants' motions.

Because the parties' briefs are sufficient for the court's analysis and decision, the joint motions for a hearing will be denied.

Facts

The underlying facts are set forth in prior reports and recommendations and, for brevity's sake, are not repeated here. Kotalik v. A.W. Chesterton Co., No. 3:18-cv-246, Doc. 109, 2019 WL 3758035 (D.N.D. May 13, 2019) ; Selfors v. Apollo Piping Supply, Inc., No. 3:18-cv-251, Doc. 110 (D.N.D. May 13, 2019). In Kotalik, forty-two defendants currently remain, and sixteen¹ of those move to enforce plaintiffs' compliance with the Trust Transparency Act; in Selfors, fifty-one defendants currently remain, and sixteen² of those move to enforce plaintiffs' compliance with the Trust Transparency Act. More specifically, moving defendants seek an order directing plaintiffs to comply with the disclosure requirements of the Trust Transparency Act set forth in North Dakota Century Code section 32-46.1-02(1). Kotalik, Doc. 159, p. 3; Selfors, Doc. 183, p. 3.

Moving defendants provide the following background information regarding the Trust Transparency Act:

North Dakota's Bankruptcy Trust Transparency Act was enacted in 2017, and became effective on August 1, 2017. In so doing North Dakota joined several other states—now sixteen in number—which have enacted similar legislation.³ The passage of North Dakota's Act, as well as that of the other states who have thus far done so, followed after nearly all major manufacturers of asbestos-containing thermal insulation products ... were forced into bankruptcy as the result of nationwide asbestos litigation.

....

In 1994, the United States Congress enacted 11 U.S.C. § 524(g) of the United States Bankruptcy Code, explicitly authorizing companies plagued by mass asbestos tort claims to establish and fund a trust to address and pay all present and future claims as part of their bankruptcy reorganization. This law codified the procedure used in the bankruptcy proceeding of Johns-Manville—the largest producer of asbestos-containing products and manufacturer of more than 50% of asbestos-containing insulation sold worldwide—which created a settlement trust for the express purpose of paying future asbestos claimants for their injuries. The trust operates on the basis of "Trust Distribution Procedures" (TDPs), which includes a schedule of diseases and exposure and medical criteria; once a claimant establishes that he or she is a trust beneficiary by satisfying a TDP's disease and exposure criteria, the claimant is entitled to have his or her claim paid out of that trust. ... [T]he only recourse against a bankrupt asbestos defendant is to file a claim with the trust.

....

Because of the amount of money available, one might assume that litigants would pursue bankruptcy trust claims, if available, as soon as possible. But, to Moving Defendants' knowledge, such is not the case. Instead, and while Moving Defendants have no evidence that this has happened in North Dakota litigation, a detailed opinion released by the United States Bankruptcy Court for the Western District of North Carolina in 2014 illustrates the prevalence of fraud in asbestos tort litigation, describing evidence from multiple states establishing that litigants have delayed the filing of trust claims in an attempt to withhold evidence of alternative sources of asbestos exposure. See ... In re: Garlock Sealing Techs., LLC , 504 B.R. 71, 82-86 (Bankr. W.D.N.C. 2014).

....

Ultimately, based on this discovery, the court concluded in In re Garlock that "on average, plaintiffs disclosed about two exposures to bankruptcy companies' products, but after settling with Garlock, made claims against about 19 such companies' Trusts." The court thus concluded that "the last ten years of [Garlock's] participation in the tort system was infected by the manipulation of exposure evidence by plaintiffs and their lawyers" and that "it was regular practice by many plaintiffs' firms to delay filing trust claims for their clients so that the remaining tort system defendants would not have that information."

In the wake of In re: Garlock , Judge Peggy L. Ableman—a former Delaware judge who was solely responsible for the asbestos docket in Delaware—released an article entitled "The Garlock Decision Should Be Required Reading for All Trial Court Judges in Asbestos Cases." ....

Judge Ableman went on to describe efforts to curb asbestos bankruptcy abuse by the judiciary (in the form of case management orders) and by legislation at both the federal level, and by some states. She concluded:

Although bankruptcy remains a viable option for otherwise healthy companies seeking relief from the debilitating effect of having to defend countless lawsuits, the trust mechanism established by § 524(g) has also had the undesirable effect of increasing the liability share of those solvent defendants that remain in the tort system. Indeed, there has been no other credible explanation for the phenomenon regarding liability of peripheral defendants that has taken place since the trusts were created. After the primary asbestos insulation manufacturers, who had previously been responsible in tort for the lion's share of the liability, went bankrupt, the payments by the peripheral defendants increased, even though the extent of their responsibility remained unchanged. And as plaintiffs reach out to more fringe levels of defendants it becomes increasingly difficult to know what other exposures have taken place. It is the trust submissions that will provide an efficient means of identifying those other exposures.

... It is against this backdrop that The Trust Transparency Act was enacted. Kotalik, Doc. 159, pp. 3-9 (citations and footnotes altered); Selfors, Doc. 183, pp. 3-9 (same).

Moving defendants seek plaintiffs' compliance with the following disclosure requirements in North Dakota's Trust Transparency Act:

1. Within thirty days after an asbestos action is filed, the plaintiff shall:

a. Provide the court and parties with a sworn statement signed by the plaintiff and plaintiff's counsel indicating an investigation of all asbestos trust claims has been conducted and all asbestos trust claims that could be made by the plaintiff have been filed. The sworn statement must indicate whether a request has been made to defer, delay, suspend, or toll any asbestos trust claim and provide the disposition of each asbestos trust claim.

b. Provide parties with all trust claims materials, including materials related to the conditions other than those that are the basis for the asbestos action and any materials from all law firms connected to the plaintiff in relation to the plaintiff's exposure to asbestos.

c. Produce all available trust claims materials submitted to any asbestos trusts by other individuals if the plaintiff's asbestos trust claim is based on exposure to asbestos through those individuals.

N.D. Cent. Code § 32-46.1-02.

Copies of correspondence in the record show at least one moving defendant has asked plaintiffs' counsel twelve times to comply with the statute "by providing the Court and all parties with, inter alia , a sworn statement indicating that an investigation of all trust claims had been conducted, and that all asbestos trust claims that could be made by the Plaintiff[s] have been filed." Kotalik, Doc. 159, p. 14; Selfors, Doc. 183, p. 14. Plaintiffs acknowledge they have not complied with section 32-46.1-02. Kotalik, Doc. 162, p. 5; Selfors, Doc. 186, p. 4. Moving defendants note the same issue arose previously in Wallock v. A.H. Bennett Co.—a North Dakota asbestos case involving different parties but the same attorneys—where the parties raised the same arguments and where the court ordered plaintiffs to comply with the Trust Transparency Act's disclosure requirements or face dismissal of the action. Kotalik, Doc. 159, pp. 12-13; Selfors, Doc. 183, pp. 12-13. Moving defendants therefore...