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Full title: Motion to Compel Production of Claim Files and Compliance with Case Management Order. filed by Glenn C. Thompson, Felton Parrish on behalf of Sander Esserman. Hearing scheduled for 8/19/2021 at 09:30 AM at 3-LTB Courtroom 2A. (Attachments: # 1 Exhibit 1 # 2 Notice of Hearing) (Parrish, Felton) (Entered: 08/06/2021)
Document posted on Aug 5, 2021 in the bankruptcy, 26 pages and 0 tables.
Bankrupt11 Summary (Automatically Generated)
The Debtor’s recent expert disclosures state, for example, that the Debtor’s case-in-chief for estimation will involve, among other things, “[t]he extent to which past asbestos plaintiffs against Old GP and Bestwall failed to disclose evidence of exposures to asbestos, and the impact of any such practice on Old GP’s and Bestwall’s resolutions of asbestos cases.[D.I. 351] at Ex. A-3 (time entry dated November 8, 2017, described as “Review past case files in connection with estimation issues”); (time entry dated November 13, 2017, described as “Review and analyze asbestos litigation historical materials”); (time entries dated January 11, 12 & 15, 2018, described as “Review and analysis of historical asbestos claim files”); (time entries dated January 16, 2018, described as “Review and analysis of historical case files” and “Further review and analysis of certain asbestos case files”); (time entry dated January 19, 2018, described as “Review evidentiary record in historical asbestos cases”); (time entry dated February 27, 2018, described as “Review of historical case files”).The extent to which past asbestos plaintiffs against Old GP and Bestwall failed to disclose evidence of exposures to asbestos, and the impact of any such practice on Old GP’s and Bestwall’s resolutions of asbestos cases. Having put at issue the reasons why it and Old GP settled claims at the values they did, the Debtor has thus waived any privilege or immunity that may otherwise have applied to the Sample Claim Files. However, having chosen to put at issue the knowledge that Old GP or the Debtor had when they settled claims and the reasons they settled claims at the amounts they did, the Debtor has waived privilege to the extent necessary to give the Claimants’ Representatives a fair opportunity to respond.
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Document ContentsUNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF NORTH CAROLINA CHARLOTTE DIVISION In re: Chapter 11 BESTWALL LLC,1 Case No. 17-31795 (LTB) Debtor. THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS’ AND THE FUTURE CLAIMANTS’ REPRESENTATIVE’S MOTION TO COMPEL THE DEBTOR TO PRODUCE CLAIM FILES AND COMPLY WITH CASE MANAGEMENT ORDER The Official Committee of Asbestos Claimants (the “ACC”) and Sander L. Esserman (the “FCR” and, together with the ACC, the “Claimants’ Representatives”), as the legal representative for persons who have not yet asserted an asbestos-related personal-injury claim against the above-captioned debtor (the “Debtor”) but may in the future assert such a claim, hereby submit this motion (the “Motion”) for entry of an order compelling the Debtor to (1) produce the Sample Claim Files (as defined below), in full and without redactions, and (2) comply with its obligations under the Court-approved Case Management Order for Estimation of the Debtor’s Liability for Mesothelioma Claims [D.I. 1685] (the “CMO”). In support of this Motion, the Claimants’ Representatives respectfully state as follows: PRELIMINARY STATEMENT From day one of this chapter 11 case, the Debtor has made its strategy plain: to pursue estimation and put on a Garlock-style case for “legal liability.” See Informational Brief of Bestwall LLC [D.I. 12] at 41–42. As the Debtor has also made plain, the crux of its estimation case-in-chief is that plaintiffs suppressed evidence of exposure to other entities’ asbestos- 1 The last four digits of the Debtor’s taxpayer identification number are 5815. The Debtor’s address is 100 Peachtree Street, N.W., Atlanta, Georgia 30303.
1containing products and that, as a result of this suppression, the amounts that the Debtor and the former Georgia-Pacific LLC (“Old GP”) paid to resolve mesothelioma claims were inflated. The Debtor’s recent expert disclosures state, for example, that the Debtor’s case-in-chief for estimation will involve, among other things, “[t]he extent to which past asbestos plaintiffs against Old GP and Bestwall failed to disclose evidence of exposures to asbestos, and the impact of any such practice on Old GP’s and Bestwall’s resolutions of asbestos cases.”2 The Debtor seeks to blame plaintiffs for its and Old GP’s alleged informational deficit, accusing plaintiffs of deliberately withholding evidence of other exposures (accusations that conveniently distract from Old GP’s decades of misconduct). The Claimants’ Representatives believe these accusations are largely untrue—but they are also beside the point; they are a red herring. The question is not what evidence of other exposures plaintiffs provided but what the Debtor and Old GP actually knew (or should have known) about other exposures and whether the Debtor and Old GP actually settled claims based on plaintiffs’ identification of specific asbestos-containing products to which they may have been exposed. After all, if the Debtor and Old GP knew about other exposures (or did not care to know), or if the Debtor and Old GP settled cases for reasons entirely unrelated to plaintiffs’ exposure profiles, then the plaintiffs’ disclosures would have no impact on settlements. The Debtor and Old GP had every opportunity to pursue discovery in the tort system if they thought other exposures were relevant and to take appropriate action if they believed plaintiffs were less than forthcoming. By contrast, neither Claimants’ Representative was party to the underlying litigation or had any opportunity to take discovery in the tort system. 2 See Debtor’s Preliminary Disclosure of Expert Subjects and Fields of Expertise for Its Estimation Case-in-Chief at B.113 (the “Debtor’s Disclosure”). The Debtor’s Disclosure is attached hereto as Exhibit 1.
2The Court has allowed the Debtor to pursue third-party discovery from asbestos trusts to obtain the information that the Debtor contends it needs in order to discern what past plaintiffs may have known about their potential exposures. At the same time, however, the Debtor continues to deny the Claimants’ Representatives the information they need about what the Debtor and Old GP knew about plaintiffs’ potential other exposures and other factors impacting the Debtor’s or Old GP’s decision to settle. The Court has ruled that the Debtor would be denied due process if it were required to move forward with this chapter 11 case without the information it contends it needs. That is no less true for the Claimants’ Representatives. The Debtor cannot claim that it and Old GP settled claims without adequate information about past plaintiffs’ other exposures, while also denying the Claimants’ Representatives and the Court an opportunity to understand what information the Debtor and Old GP had and considered when settling these same claims. Having put plaintiffs’ disclosures at issue with its accusations of evidence suppression, the Debtor cannot invoke privilege to hide what it and Old GP actually knew. See, e.g., Dudley v. City of Kinston, No. 4:18-CV-00072-D, 2021 WL 1222798, at *7–8 (E.D.N.C. Mar. 31, 2021) (holding that accusations of evidence suppression waived privilege because they put at issue what the party making the accusations actually knew). Every day that the Debtor is allowed to continue to withhold its claim files is a day that the Claimants’ Representatives become less able to respond to the Debtor’s requested estimation. This estimation proceeding has already fallen well behind the schedule that the Debtor presented to this Court in support of its argument that the estimation it sought would not unduly delay this chapter 11 case. Given the Debtor’s ongoing refusal to produce the Sample Claim Files (defined below) and the pace of the Debtor’s discovery response to date, even the current estimation date of May 2022 is infeasible.
3If the Debtor wants to claim that settlements are unreliable because plaintiffs’ suppression of evidence affected historical settlements, and if the Court wants its estimate to be based on a full and fair record, the Sample Claim Files must be disclosed without redaction—and they must be disclosed with enough time to be of practical use to the Claimants’ Representatives. JURISDICTION The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). Venue of these proceedings and the Motion is proper under 28 U.S.C. §§ 1408 and 1409. The statutory and legal predicates for this Motion are § 105(a) of title 11 of the United States Code (the “Bankruptcy Code”); Rules 26, 34, and 37 of the Federal Rules of Civil Procedure (the “Federal Rules”); and Rules 7026, 7034, 7037, and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”). MEET AND CONFER CERTIFICATION In accordance with Federal Rule 37(a)(1), the Claimants’ Representatives certify that they have in good faith conferred with the Debtor in an effort to obtain the Sample Claim Files without court action. BACKGROUND I. The parties litigate the need for estimation. On November 2, 2017 (the “Petition Date”), the Debtor commenced this reorganization case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code. From the outset of the chapter 11 case, the Debtor has been collecting and reviewing documents in preparation for an estimation proceeding.3 Indeed, on the Petition Date, the Debtor 3 See, e.g., First Interim Application of Schachter Harris, LLP for Allowance of Compensation and Reimbursement of Expenses for Professional Services Rendered as Special Litigation Counsel for Debtor for the Period from
4stated in its Informational Brief that, absent a quick settlement with the Claimants’ Representatives, “the Debtor will ask this Court to estimate the aggregate amount of current and future asbestos liability for plan purposes.” D.I. 12 at 41. Moreover, “[a]s in Garlock, [the Debtor] will seek an estimation of its actual legal liability in respect of asbestos-related claims . . . .” Id. On June 19, 2019, the Debtor filed its Motion of the Debtor for Estimation of Current and Future Mesothelioma Claims [D.I. 875] (the “Estimation Motion”), asking the Court to hold a trial to estimate the aggregate amount of current and future mesothelioma claims against the Debtor and its non-debtor affiliates. According to the Estimation, Motion, “as in Garlock, the Debtor here believes its settlements were infected by the withholding and manipulation of exposure evidence.” Estimation Motion ¶ 40. On August 16, 2019, the Claimants Representatives each filed an objection to the Estimation Motion [D.I. 936 & 937], explaining that estimation (1) is unnecessary when the Debtor has adequate resources to pay all asbestos-related claims in full, (2) is part of a strategy to obtain a discount on claim values, and (3) would create, rather than prevent, undue delay in the administration of the Debtor’s estate. On September 12, 2019, the Debtor filed its reply in support of the Estimation Motion, asserting that the “purpose [of estimation] is to seek an impartial determination of Bestwall’s November 2, 2017 through February 28, 2018 [D.I. 353] at Ex. A-1 (November 30, 2017 time entry described as “Exchange correspondence with Worf regarding data needed for potential estimation”); First Interim Application of Robinson, Bradshaw & Hinson, P.A. for Allowance of Compensation and Reimbursement of Expenses for Professional Services Rendered as Special Counsel for Asbestos Claims Estimation Matters and Local Bankruptcy Counsel for the Debtor for the Period From November 2, 2017 through February 28, 2018 [D.I. 351] at Ex. A-3 (November 2, 2017 time entry described as “develop itemized list of potential offensive and defensive discovery items for estimation case”). As of February 2021, Bates White, alone, had charged the estate well over $12 million in fees associated with work in this case. See Summary of Tenth Interim Application of Bates White LLC for Allowance of Compensation for Services Rendered and for Reimbursement of Expenses as Asbestos Consultants to the Debtor for the Period from November 1, 2020 through February 28, 2021 [D.I. 1695].
5legal liability from this Court—a determination that will only be rendered after the ACC and the FCR have had a full and fair opportunity to present their case.” Reply of Debtor in Support of Motion of the Debtor for Estimation of Current and Future Mesothelioma Claims at 4 [D.I. 988] (the “Estimation Reply”) (emphases added). On October 23, 2019, the Court deferred a final ruling on the need for estimation and ordered the parties to mediation, observing that, by this point, “the debtor should have a pretty good idea of the value it places on its asbestos liability . . . .” Hr’g Tr. [D.I. 1022] at 13:20–22. On May 7, 2020, the Debtor filed the mediator’s report indicating that the mediation had been unsuccessful. The Debtor thereafter renewed its request for estimation. On July 30, 2020, the Debtor filed its Motion for Order Pursuant to Bankruptcy Rule 2004 Directing Submission of Personal Injury Questionnaires by Pending Mesothelioma Claimants [D.I. 1236] (“PIQ Motion”) and its Motion for Bankruptcy Rule 2004 Examination of Bankruptcy Trusts [D.I. 1237] (“Trust Discovery Motion” and, together with the PIQ Motion, the “Debtor’s Rule 2004 Motions”). The Debtor asserted that it and Old GP paid inflated values in their settlements because they lacked adequate information about the plaintiffs’ other exposures. See generally Tr. Discovery Mot. ¶¶ 25–33; Decl. of Charles E. Bates, Ph.D. ¶ 13 [D.I. 1236 at Ex. C] (“Another reason that settlement payments may not reflect actual liability is the effect of withholding plaintiff exposure information, which Bestwall believes it experienced in cases filed against it starting with the bankruptcy wave of the early 2000s.”); id. ¶ 23. According to the Trust Discovery Motion, the Debtor “has discovered that evidence manipulation took place in cases against Old GP, with the involvement of many different law firms across many different jurisdictions.” Tr. Discovery Mot. ¶ 25.
6On September 23, 2020, the Court held a hearing to determine whether to authorize estimation. At the hearing, the Debtor represented that it would be prepared to complete fact discovery in the first quarter of 2021. See D.I. 1419 at 56:8–16. From the Debtor’s perspective, that schedule was “doable.” Id.4 The Debtor had, after all, been reviewing claims files and preparing for estimation for at least four years. On October 22, 2020, the Court granted the Estimation Motion. Hr’g Tr. [D.I. 1435] at 11:2–3. As the Court explained, “Mr. Gordon forecast that if I granted the motion the parties could be ready for an estimation hearing in December of 2021. . . . I intend to hold Mr. Gordon to that and would like the estimation hearing to go forward as soon as possible.” Id. at 12:24–13:1; see also id. at 22:4–9 (“We just heard and processed your ruling and, and the first message is that, that the debtor and New GP are committed to doing everything we can to meet the December ‘21 trial date. As Mr. Gordon said during the hearing last month, we think it’s doable and we’re prepared and ready to get there . . . .”).5 According to the Court, “while I think an estimation hearing is appropriate, I intend to keep it on as short a leash as possible and that's a balance that I must strike to ensure that estimation itself does not cause undue delay.” Id. at 13:7–10. Taking its cue from the Court, on November 12, 2020, the ACC filed a series of motions designed to focus the parties’ efforts and provide guiderails for estimation. More specifically, the ACC filed motions for an estimation that would (1) focus on real-world liability as amply demonstrated by the Debtor’s and Old GP’s historic claim resolutions [D.I. 1449], (2) focus on 4 But cf. Debtor’s Supplemental Brief on Discovery and Limiting Motions at 1 [D.I. 1615] (proposing estimation in the first quarter of 2022 with fact discovery beginning in March 2021 and concluding in mid-September 2021). 5 Despite the Debtor’s assurances, estimation has already been delayed to May 2022. Given the Debtor’s refusal to produce the Sample Claim Files, and the pace of the Debtor’s discovery response to date, estimation is certain to fall further behind still.
7the most relevant claims-resolution data, covering the five years immediately prepetition [D.I. 1450], and (3) avoid re-litigation of medical science issues already decided in the tort system [D.I. 1451] (collectively, the “Shaping Motions”). The FCR later joined each of the Shaping Motions. See D.I. 1503, 1504 & 1505. On November 24, 2020, the Claimants’ Representatives filed a motion in limine, seeking to compel the Debtor to produce claim files for the claims that the Debtor had discussed in detail in its Trust Discovery Motion. D.I. 1481. The Debtor responded, however, that its motion was merely seeking discovery; the Debtor was not asking the Court to make any findings about the claims themselves. D.I. 1508. That would be reserved for estimation. The Court agreed and denied the Claimants’ Representatives’ motion as premature. Hr’g Tr. [D.I. 1544] at 140:21–23. On December 22, 2020, the Debtor objected to each of the Shaping Motions, arguing that focusing the estimation inquiry as the Claimants’ Representatives proposed would “deprive the Debtor of due process . . . .” D.I. 1551 at 43–44 (emphasis omitted). On January 19, 2021, the Court entered its Order Authorizing Estimation of Current and Future Mesothelioma Claims [D.I. 1577] (the “Estimation Order”). According to the Court, “the Debtor would be denied due process if it were required to move forward with this chapter 11 case without the information it contends it needs and which the Court determines is necessary.” Estimation Order ¶ 11. II. The parties prepare for estimation. In the months following entry of the Estimation Order, the Claimants’ Representatives negotiated with the Debtor regarding a schedule for estimation and related discovery. During these negotiations, it came to light that the Debtor’s expert, Bates White, had already selected a sample of 2,407 resolved mesothelioma claims (the “Bates Sample”) that the Debtor and its
8experts would focus on for purposes of their estimation case-in-chief.6 Further, the Debtor and its counsel had been compiling and reviewing documents related to the Bates Sample since the outset of the chapter 11 case.7 Accordingly, on March 19, 2021, to ensure that the Claimants’ Representatives would have timely access to the documents they contend they need to move forward with estimation, counsel to the FCR provided informal draft document requests to the Debtor, including the files that the Debtor maintained for each of the claims in the Bates Sample. The FCR’s counsel emphasized the “near term need for claim files,” which the Debtor could address by producing the claim files it had already reviewed for the Bates Sample. D.I. 1866 at 13; see also id. at Ex. 1. More specifically, the FCR’s counsel stated that “Greg’s proposal, whereby the Debtor produces the claim files for the 2200 claims it has already reviewed, or is in the process of reviewing, on a rolling basis over the next 4 weeks will address the near term need for claim files to be produced.” D.I. 1866 at Ex. 1. On March 23, 2021, the Court granted the Debtor’s Rule 2004 Motions, allowing the Debtor to pursue the information it contends it needs in order to discern what past plaintiffs knew, and current claimants know, about their other potential sources of asbestos exposure. 6 The CMO, at paragraph 3(e), refers to “reliance materials for approximately 2,200 resolved mesothelioma claims against the Debtor requested by Bates White as of the date of this Order.” CMO ¶ 3(e). The Claimants’ Representatives later learned that Bates White had requested materials for 2,407 claims but that the Debtor was unable to locate any documents related to 200 of the 2,407 claims. 7 See First Interim Application of Robinson, Bradshaw & Hinson, P.A. for Allowance of Compensation and Reimbursement of Expenses for Professional Services Rendered as Special Counsel for Asbestos Claims Estimation Matters and Local Bankruptcy Counsel for the Debtor for the Period From November 2, 2017 through February 28, 2018 [D.I. 351] at Ex. A-3 (time entry dated November 8, 2017, described as “Review past case files in connection with estimation issues”); (time entry dated November 13, 2017, described as “Review and analyze asbestos litigation historical materials”); (time entries dated January 11, 12 & 15, 2018, described as “Review and analysis of historical asbestos claim files”); (time entries dated January 16, 2018, described as “Review and analysis of historical case files” and “Further review and analysis of certain asbestos case files”); (time entry dated January 19, 2018, described as “Review evidentiary record in historical asbestos cases”); (time entry dated February 27, 2018, described as “Review of historical case files”).
9On March 31, 2021, the Court entered the CMO,8 and on April 15, 2021, the Claimants’ Representatives served formal discovery on the Debtor, including requests for the claim files. When the Claimants’ Representatives agreed to the CMO, they understood that the Debtor would begin producing all non-privileged documents related to the Bates Sample on April 15, 2021, and conclude on April 30, 2021, in accordance with paragraph 3(e) of the CMO. Instead, the Debtor produced only a selection of documents related to the Bates Sample. More specifically, on April 15 and 30, the Debtor produced 102,702 documents. Almost one-fourth (24,747 documents) were slip-sheets reflecting documents withheld from production entirely. Most of the withheld documents were not privileged or otherwise protected; the Debtor excluded them simply because Dr. Bates had chosen not to review them for his analysis. After receiving information from the Debtor on May 12, 2021, about the selection of claims for the Bates Sample, the Claimants’ Representatives and their experts determined that certain categories of claims were underrepresented in the Bates Sample. Accordingly, to ensure that the claims sample used at estimation presents a fair cross-section of the Debtor’s and Old GP’s claims-resolution history, the Claimants’ Representatives identified 500 additional claims (the “Underrepresented Claims”) to supplement the Bates Sample. See D.I. 1866. On May 27, 2021, the Claimants’ Representatives added these Underrepresented Claims to the documents they had requested on April 15. On July 15, 2021, the parties exchanged preliminary disclosures of the subjects of expert testimony and fields of expertise for their respective cases-in-chief. The ACC disclosed 13 topics, and the FCR disclosed 12 topics. The Debtor, by contrast, announced that its case-in-chief would cover 122 separate topics (plus another 25 sub-topics). According to the Debtor, its 8 The CMO incorporates the Joint Discovery Plan and Report (ESI Protocol) (the “Discovery Plan”) as Exhibit 1.
10case-in-chief includes numerous topics based on the Debtor’s and Old GP’s claims-resolution history: 103. General economic models of litigation, including models of incentives to litigate or settle cases, and conclusions to be drawn from historical verdicts in asbestos cases. The application of such models to Old GP’s and Bestwall’s history of asbestos litigation. 104. The economic impact of litigation costs on asbestos litigation against Old GP, Bestwall, and other defendants. 105. Economic models of the relationship among settlements, liability, and the costs of litigation. 106. The relationship between Old GP’s and Bestwall’s historical settlements in asbestos cases and Old GP’s and Bestwall’s liability under law. 107. The reasonable and necessary costs to Old GP and Bestwall of litigating mesothelioma claims to final judgment in state courts. 108. Differences between state procedure and the procedures under which asbestos claims would be litigated under Debtor’s plan of reorganization, and the impact on resolution costs and litigation costs. 109. Whether a mesothelioma plaintiff’s failure to disclose evidence of exposures from other asbestos-containing products affects a defendant’s costs to defend a case. 110. Whether a mesothelioma plaintiff’s failure to disclose evidence of exposures from other asbestos-containing products can materially affect a defendant’s substantial rights, including the defendant’s ability to fully and fairly present its defense. 111. Whether the number of asbestos-containing products to which a mesothelioma plaintiff was exposed and/or amount of such exposures affects a plaintiff’s likelihood of success against a single defendant. 112. Whether the number of asbestos-containing products to which a mesothelioma plaintiff was exposed and/or amount of such exposures affects the verdict amount against a defendant. 113. The extent to which past asbestos plaintiffs against Old GP and Bestwall failed to disclose evidence of exposures to asbestos, and the impact of any such practice on Old GP’s and Bestwall’s resolutions of asbestos cases.
11Debtor’s Disclosure at B.103–13. On July 16, 2021, the Debtor produced a privilege log purporting to provide the basis for withholding 7,058 of the 24,747 ship-sheet documents the Debtor had produced. As explained in more detail below, however, this privilege log is incomplete and deficient in multiple respects. Moreover, as of the date hereof, more than two months after the Claimants’ Representatives identified the Underrepresented Claims, the Debtor has yet to produce a single document related to those claims.9 RELIEF REQUESTED The Claimants’ Representatives respectfully request that the Court order the Debtor to produce, in their entirety and without redactions, (1) all documents in the claim files for the 500 Underrepresented Claims (the “Underrepresented Claim Files”), including any privileged documents or work product in the Underrepresented Claim Files, and (2) all documents in the claim files for the Bates Sample that the Debtor is withholding on the basis of privilege or work-product protection (the “Withheld Claim Files” and, together with the Underrepresented Claim Files, the “Sample Claim Files”). BASIS FOR RELIEF REQUESTED Where a litigation adversary fails to meet its discovery obligations, the Federal Rules of Civil Procedure permit the party seeking discovery to move to compel compliance. See Fed. R. Civ. P. 37; Fed. R. Bankr. P. 7037. Courts in the Fourth Circuit consistently hold that “the party opposing a motion to compel must demonstrate why discovery should not be granted.” Silicon Knights, Inc. v. Epic Games, Inc., 917 F. Supp. 2d 503, 533–34 (E.D.N.C. 2012), aff’d, 551 F. App’x 646 (4th Cir. 2014); see also Kinetic Concepts, Inc. v. ConvaTec Inc., 268 F.R.D. 226, 9 See also the Claimants’ Representatives’ Motion to Compel Production of Documents, filed concurrently herewith.
12243 (M.D.N.C. 2010) (“Over the course of more than four decades, district judges and magistrate judges in the Fourth Circuit have repeatedly ruled that the party or person resisting discovery, not the party moving to compel discovery, bears the burden of persuasion.”). To meet its burden, the party opposing the motion to compel must show, with particularity, why the discovery should be denied. Mainstreet Collection, 270 F.R.D. at 240. As a matter of law, conclusory or generalized statements fail to satisfy this burden. Id. The Debtor, moreover, as the party asserting privilege over the Sample Claim Files, has the burden of demonstrating both that a privilege or protection exists and that it has not been waived. See, e.g., United States v. Bolander, 722 F.3d 199, 222 (4th Cir. 2013); N.L.R.B. v. Interbake Foods, LLC, 637 F.3d 492, 501 (4th Cir. 2011). As explained in more detail below, the Debtor cannot meet its burden here, and the Motion should be granted. I. No privilege or protection excuses the Debtor’s failure to produce the Sample Claims Files. A. The Debtor has waived any applicable privileges and work-product protections by putting the Sample Claim Files at issue. The Debtor has waived any privilege or immunity that may otherwise have applied to the Sample Claim Files. The Debtor has made clear that it intends to argue at estimation that it and Old GP lacked knowledge of plaintiffs’ other exposures, and the Debtor has expressly stated that “the subjects of expert testimony . . . for its case-in-chief” include “the impact of [plaintiffs’ failure to disclose evidence] on Old GP’s and Bestwall’s resolutions of asbestos cases.” Debtor’s Disclosure at B.113. In other words, the Debtor’s case-in-chief requires the Debtor to show that it and Old GP did not know about plaintiffs’ other (potential) asbestos exposures. Having put at issue the reasons why it and Old GP settled claims at the values they did, the Debtor has thus waived any privilege or immunity that may otherwise have applied to the
13Sample Claim Files. The Lidoderm case is instructive in this regard. In re Lidoderm Antitrust Litig., No. 14-MD-02521-WHO, 2016 WL 4191612 (N.D. Cal. Aug. 9, 2016). In Lidoderm, the plaintiffs alleged that a settlement in a patent case was anti-competitive, and the parties to the settlement defended on the grounds that they entered into the settlement for reasons that were not anticompetitive. The plaintiffs argued that the defendants had put attorney-client communications at issue because the defendants’ argument that the settlement was not anticompetitive depended on what the defendants believed at the time of the settlement. The defendants unsuccessfully countered that “at issue waiver only occurs when a party makes an affirmative choice to rely on attorney advice for a claim or defense.” Lidoderm, 2016 WL 4191612, at *2. The court explained that the defendants’ conception of at-issue waiver was “too narrow”: “The privilege which protects attorney-client communications may not be used both as a sword and a shield. Where a party raises a claim which in fairness requires disclosure of the protected communication, the privilege may be implicitly waived.” Id. at *3–4 (quoting Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir. 1992)). According to the Lidoderm court, “in practical terms, this means that parties in litigation may not abuse the privilege by asserting claims the opposing party cannot adequately dispute unless it has access to the privileged materials. The party asserting the claim is said to have implicitly waived the privilege.” Id. at *3 (quoting Bittaker v. Woodford, 331 F.3d 715, 719 (9th Cir. 2003)). Accordingly, the court held that a party could not testify about its reasons for entering into a settlement and still rely on attorney-client privilege to block discovery into its reasons for entering into the settlement: “defendants’ position is essentially this: ‘Trust us. The justifications we are putting forward here are why we settled.’ But in order to test or rebut defendants’ assertions, in fairness, plaintiffs should be given access to contemporaneous information
14regarding those topics that necessarily implicate attorney-client advice.” Lidoderm, 2016 WL 4191612, at *6. The court explained that “the party holding the privilege [must] produce the privileged materials if it wishes to go forward with its claims implicating them.” Id. at *3. Effectively, “the holder of the privilege [has] a choice: If you want to litigate this claim, then you must waive your privilege to the extent necessary to give your opponent a fair opportunity to defend against it.” Id. The defendants offered a “sky-is-falling protest” that the choice offered by the court would “eviscerate” the attorney-client privilege and leave the defendants in an untenable position. Id. at *4, *6. The court would have none of it: “Defendants' position would put plaintiffs in a truly untenable posture – requiring them to challenge the subjective beliefs defendants assert to justify the [settlement] post-hoc without access to the contemporaneous information and documents defendants actually relied on.” Id. at *6. Here, as in Lidoderm, the Debtor’s position is, essentially: “Trust us. Old GP settled claims because it believed that plaintiffs were exposed to only those asbestos-containing products that they specifically identified.” As in Lidoderm, however, this puts the Claimants’ Representatives in an entirely untenable position. The Claimants’ Representatives were not there when the Debtor and Old GP settled these claims. The Debtor seeks to attack prior settlements post hoc, arguing that they are unreliable because it and Old GP believed that plaintiffs had no other potential exposures and that settling was cheaper than defending—but the Claimants’ Representatives cannot challenge that asserted belief without access to the contemporaneous documents and information showing what the Debtor and Old GP actually believed. As in Lidoderm, the Debtor had a choice: It chose to seek estimation, it chose to assert that plaintiffs’ suppression of exposure evidence affected settlement values, and it chose to
15oppose the Claimants’ Representatives’ Shaping Motions with respect to settlement history. However, having chosen to put at issue the knowledge that Old GP or the Debtor had when they settled claims and the reasons they settled claims at the amounts they did, the Debtor has waived privilege to the extent necessary to give the Claimants’ Representatives a fair opportunity to respond. The Claimants’ Representatives are entitled to investigate what Old GP actually knew. The Debtor has previously attempted to distinguish Lidoderm on the basis that the Ninth Circuit adheres to the Hearn formulation of at-issue waiver, rather than the formulation preferred by the Third Circuit in Rhone. To be clear, the Fourth Circuit has not adopted one approach over the other. See, e.g., Dudley, 2021 WL 1222798, at *6 & n.8 (“While the Fourth Circuit has cited Rhone-Poulenc with approval, it has not formally adopted one of these tests.”). For present purposes, however, the distinction is immaterial. Where attorney-client communications or work-product material form “an essential element of [a party’s] claim,” there will be at-issue waiver under either approach. Rhone, 32 F.3d at 864. A recent decision from the Eastern District of North Carolina, Dudley v. City of Kinston, is instructive on this point. There, the court held that a party’s assertion that evidence was improperly suppressed waives privilege because it puts at issue what the party making the assertion actually knew. In Dudley, the plaintiff (“Dudley”) spent more than two decades in prison before his conviction was overturned; Dudley thereafter sued the City of Kinston and one of its police officers for suppressing exculpatory evidence. The defendants subpoenaed Dudley’s counsel’s files, arguing that Dudley waived privilege by placing at issue what he and his attorney knew about the allegedly suppressed information. After all, if Dudley or his counsel knew that information, it was not suppressed. In other words, according to the defendants, Dudley’s
16alleged lack of knowledge was an essential element of his evidence-suppression claim, and thus, asserting that claim put his knowledge at issue and waived privilege. The court agreed, holding that Dudley had waived privilege under either Hearn or Rhone. Under Hearn, Dudley had put his knowledge and the knowledge of his counsel directly at issue by making his evidence-suppression claim. Under Rhone, Dudley would need to rely on privileged information to prove his lack of knowledge for purposes of his evidence-suppression assertion. As the court explained, because the evidence-suppression assertions that Dudley was making depended on his lack of knowledge, those assertions put his knowledge at issue and thus waived privilege regarding what he and his counsel actually knew: [U]nder Rhone, the court must look at whether Dudley's [evidence-suppression] claim requires him to make use of privileged information to prove it. Dudley bears the burden of establishing that suppression occurred. And to do that he will eventually need to show that neither he nor his attorney knew about the allegedly withheld information. Since Dudley will need to rely on privileged information to prove his claim, Rhone suggests that he has waived the attorney-client privilege by putting his attorney's advice at issue. Dudley v. City of Kinston, No. 4:18-CV-00072-D, 2021 WL 1222798, at *7–8 (E.D.N.C. Mar. 31, 2021) (citations omitted). Here, as in Dudley, the Debtor will need to prove that neither it nor Old GP, nor their attorneys, knew about plaintiffs’ other potential exposures. Indeed, “[i]t is a general rule of evidence that where the subject-matter of a negative averment lies peculiarly within the knowledge of the other party, the averment is taken as true unless disproved by that party.” Nayab v. Capital One Bank (USA), N.A., 942 F.3d 480, 494 (9th Cir. 2019) (internal quotation marks omitted)); see also Campbell v. United States, 365 U.S. 85, 96 (1961) (“[T]he ordinary rule, based on considerations of fairness, does not place the burden upon a litigant of establishing facts peculiarly within the knowledge of his adversary.”). After all, if the Debtor or Old GP, or their counsel, knew about other potential exposures, any contention that nondisclosures affected
17settlement values simply fails. Accordingly, under Rhone and Dudley, the Debtor’s assertion that plaintiffs suppressed evidence during settlement negotiations put otherwise protected information at issue and thus waived privilege regarding what the Debtor and Old GP actually knew during those settlement negotiations. The principles of fundamental fairness implicated in Lidoderm and Dudley apply with no less force here. Unlike the Debtor and Old GP, the Claimants’ Representatives were not involved in the settlements at issue—and the Claimants’ Representatives did not ask to be here in the first place. The Debtor chose to file a bankruptcy it did not need. The Debtor chose to seek an estimation. The Debtor chose a “case-in-chief” that attempts to prove that “past asbestos plaintiffs against Old GP and Bestwall failed to disclose evidence of exposures to asbestos, and the impact of any such practice on Old GP’s and Bestwall’s resolutions of asbestos cases.” Debtor’s Disclosure at B.113. The Debtor has made an issue of the reasons why it and Old GP settled claims at the values they did. See Informational Brief of Bestwall LLC [D.I. 12] at 1–2, 20–23.10 At the same time, however, the Debtor’s privilege log reflects that the Debtor is withholding material that discusses “settlement analysis” and “analysis of liability of other defendants.” The Debtor cannot assert that it and Old GP paid inflated settlement amounts because they lacked information about plaintiffs’ other exposures and settled because they were concerned about defense costs—but then shield the contemporaneous information that would 10 The Debtor has tried to suggest that the Claimants’ Representatives are the ones who put historical settlements at issue because their experts’ estimates rely on settlement history. This is not so. The Debtor is the party who sought estimation—over the objection of the Claimants’ Representatives—and asserted that “its settlements were infected by the withholding and manipulation of exposure evidence.” Estimation Motion ¶ 40. The Debtor is the party whose entire case-in-chief is based on “the impact of [plaintiffs’ alleged evidence suppression] on Old GP’s and Bestwall’s resolutions of asbestos cases.” Debtor’s Disclosure at B.113. As in Dudley, it is the party alleging evidence suppression who puts its knowledge at issue. The Debtor cannot attack the reliability of its settlement history and then argue that the Claimants’ Representatives put the settlement history at issue by defending it.
18allow the Claimants’ Representatives to test or rebut the Debtor’s assertions about the considerations underlying these settlement values. When a party makes such bare, factual allegations, the veracity of which are central to resolution of the parties’ dispute, its opponent is entitled to a fair and full understanding of those allegations. Otherwise, parties like the Debtor can present their version of the facts in a one-sided, misleading manner that prejudices their opponents and prevents courts from receiving a full, objective picture. Cf. In re Omnicom Grp., Inc. Sec. Litig., 233 F.R.D. 400, 413 (S.D.N.Y. 2006) (“Implied waiver of the privilege will also be recognized—even in the absence of a party’s disclosure of privileged material—when that party makes factual assertions, the truthfulness of which may be assessed only by an examination of the privileged communications or documents.” (internal quotation marks omitted)). Without the Debtor’s case files, the Claimants’ Representatives will be forced to litigate with a blindfold while the Debtor can pick and choose what the settlement history “says,” even if legitimate questions exist about whether the cases that the Debtor has (partially) presented support the Debtor’s contentions and whether those cases are representative of the Debtor’s and Old GP’s settlement history generally. The Claimants’ Representatives (and the Court) are entitled to a full and fair understanding of the veracity of the Debtor’s assertions. Accordingly, the Court should thus compel the Debtor to produce the Sample Claim Files without redactions and in their entirety, or else preclude the Debtor from offering any testimony that plaintiffs’ alleged nondisclosures had an impact on settlement values. B. The Debtor’s assertions of attorney-client privilege and work-product protection do not serve a legitimate purpose. Fundamentally, the Debtor’s assertion of privilege does not serve any legitimate purpose here. The purpose of attorney-client privilege “is to encourage full and frank communication
19between attorneys and their clients . . . .” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Similarly, work-product protection exists “to promote the adversary system by safeguarding the fruits of an attorney's trial preparations from the discovery attempts of an opponent.” Doe 1 v. Baylor Univ., 335 F.R.D. 476, 496 (W.D. Tex. 2020) (internal quotation marks omitted). Notably, it “does not exist to protect a confidential relationship . . . .” Id. Here, of course, the Claimants’ Representatives are not seeking documents prepared for purposes of the current estimation proceeding or the chapter 11 case generally. Rather, the documents and communications that the Debtor is refusing to produce concern personal-injury cases that have been resolved in the tort system, often many years ago. The Debtor’s refusal to produce these documents is inconsistent with the fundamental purpose underlying attorney-client privilege. Indeed, it defies reality to think that a defendant and its counsel would not have “full and frank communications” about a pending asbestos claim because they were concerned that their documents would be discoverable sometime in the future—long after the actual claim has been resolved—in the event that the defendant would someday choose to file bankruptcy, seek an estimation, and put the claim’s resolution at issue by arguing that it was ill founded. In other words, disclosure of the Sample Claim Files here would in no way discourage full and frank communication between the defendant and its counsel. As the Fourth Circuit has long held, an invocation of privilege “ought to be strictly confined within the narrowest possible limits consistent with the logic of its principle.” N.L.R.B. v. Harvey, 349 F.2d 900, 907 (4th Cir. 1965) (explaining that privileges are “an exception to the general duty to disclose” that pose “an obstacle to the investigation of the truth”); cf. Doe 1 v. Baylor Univ., 335 F.R.D. at 496 (“When a party seeks a greater advantage from its control over work-product than the law must provide to maintain a healthy adversary system, the privilege
20should give way.” (quoting Pamida, Inc. v. E.S. Originals, 281 F.3d 726, 732 (8th Cir. 2002))). Where, as here, a party’s assertion of privilege does not serve the fundamental purpose for which the privilege exists, the assertion of privilege must yield to a full and fair investigation of the truth. Cf. Estimation Reply at 4 (asserting that the purpose of estimation is to seek an “impartial determination” of liability “that will only be rendered after the ACC and the FCR have had a full and fair opportunity to present their case”). The Debtor’s efforts to block investigation of the truth begs the question what the Debtor is trying to achieve here. If its goal is a consensual plan, if the Debtor wants to convince claimants that its theory of liability has some merit, then the Debtor must stop hiding what it and Old GP knew when settling claims. The Debtor’s continuing refusal to be open and honest with claimants makes a consensual resolution of this chapter 11 case more difficult and less likely. Moreover, if the Debtor wants the Court to accept that past settlements are unreliable because they were based on inadequate information, the Debtor must show what information it and Old GP had. For instance, if the Debtor does not show that it and Old GP actually lacked knowledge about other exposures, the Claimants’ Representatives can only assume—and the Court must assume—that the Debtor had all of the information about other exposures that it needed in order to settle claims at a price that fairly reflected the Debtor’s liability. Cf. Nayab v. Capital One Bank (USA), N.A., 942 F.3d 480, 494 (9th Cir. 2019) (“It is a general rule of evidence that where the subject-matter of a negative averment lies peculiarly within the knowledge of the other party, the averment is taken as true unless disproved by that party.” (internal quotation marks omitted)); see also Campbell v. United States, 365 U.S. 85, 96 (1961) (“[T]he ordinary rule, based on considerations of fairness, does not place the burden upon a litigant of establishing facts peculiarly within the knowledge of his adversary.”).
21II. The Claimants’ Representatives have a substantial need for work product within the Sample Claim Files. Even if the Debtor has not yet waived its privilege or immunity, any work product in the Sample Claim Files is discoverable because the Claimants’ Representatives have a substantial need for the material in the Sample Claim Files and cannot otherwise discover equivalent information to satisfy that need. It is well established that work-product protection is “not absolute.” Nutramax Lab’ys, Inc. v. Twin Lab’ys Inc., 183 F.R.D. 458, 462–66 (D. Md. 1998) (explaining division between fact and opinion work product); see also Washington v. Follin, Civ. Act. No. 4:14-CV-00416 RBH-KDW, 2016 WL 1614166, at *13 (D.S.C. Apr. 22, 2016) (explaining that fact work product enjoys only qualified immunity and that even opinion work product can be discoverable in appropriate circumstances). Federal Rule of Civil Procedure 26(b)(3) provides that a party may obtain non-opinion work product where the party “has substantial need of the materials in the preparation of the party’s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means.” Parkdale Am., LLC v. Travelers Cas. & Sur. Co. of Am., Civil No. 3:06CV78-R, 2007 WL 4165247, at *10, *13 (W.D.N.C. Nov. 19, 2007); accord Nutramax, 183 F.R.D. at 462. Here, the Claimants’ Representatives’ need to evaluate, analyze, and test the Debtor’s expert’s estimation methodologies, assumptions, and calculations, and to test the veracity of the Debtor’s witnesses, constitutes a “substantial need” that warrants the production of work-product information.11 Because these claim files are solely 11 The Claimants’ Representatives also have a substantial need for any work product within the Sample Claim Files, because the Debtor seeks to use supposed deficiencies regarding claimants’ exposures within the files to attack the Claimants’ Representatives’ anticipated estimation methodologies and calculations. See Informational Brief of Bestwall LLC [D.I. 12] at 1–2, 20–23 (asserting that settlement values do not reflect claim values because “asbestos exposures attributable to defendants who have filed for bankruptcy are not being appropriately taken into account in  litigation” against remaining asbestos defendants); Decl. of Charles E. Bates, PHD [D.I. 1207] ¶ 21 (contending that information on claimants’ “exposure to other companies’ asbestos-containing products” . . . “is central to liability apportionment and for the estimation of the likelihood of plaintiff’s success against Bestwall,” but claims
22within the possession, custody, and control of the Debtor, the Claimants’ Representatives cannot obtain these materials elsewhere. Absent an opportunity to independently probe the veracity of the Debtor’s witnesses and the reliability of the Debtor’s experts’ work, this Court will be left with a one-sided, manipulated record, prejudicial to the interests of the only creditors with a stake in this chapter 11 case. The Claimants’ Representatives have a substantial need for the documents that would show why the Debtor and Old GP settled individual cases at the values they did. Without this information, the Claimants’ Representatives cannot test whether the Debtor’s and Old GP’s settlement decisions are as unreliable as the Debtor asserts. Documents reflecting what information was sought by, and available to, the Debtor or Old GP when resolving claims in the tort system are central to the Debtor’s claims and defenses in the Estimation Proceeding. Indeed, the heart of the Debtor’s legal liability theory is that it overpaid claims because it lacked information about plaintiffs’ other exposures. See, e.g., Estimation Motion ¶ 40 (“[A]s in Garlock, the Debtor here believes its settlements were infected by the withholding and manipulation of exposure evidence.”). Requiring the Claimants’ Representatives to respond to the Debtor’s asserted lack of knowledge while denying them access to the documents showing what the Debtor and Old GP knew would be severely prejudicial to the Claimants’ Representatives’ case at estimation. As the Debtor and New GP are the only entities with access to what the Debtor and Old GP knew, and why the Debtor and Old GP settled, the Claimants’ Representatives are unable to secure the substantial equivalent of the Sample Claims Files. It would not merely be difficult to do so; it would be impossible to do so. that information “is unavailable in the Debtor’s database”). The Claimants’ Representatives require the complete claim files to test the Debtor’s contentions.
23III. The Debtor’s privilege log is deficient. The Debtor’s at-issue waiver obviates the need for a privilege log, but even so, the privilege log produced by the Debtor on July 16, 2021, fails to comply with the requirements of the CMO and is materially deficient. The Debtor’s privilege log does not completely log the universe of documents withheld as privileged from the Bates Sample. The privilege log contains entries for 7,058 documents out of the 102,702 documents in the Bates Sample; however, the first and second bates numbers for documents with slip-sheets that say “Withheld for Privilege” are Bates stamped BW-CFR-000000066 and BW-CFR-000000280. These documents are not on the privilege log. Indeed, the bates numbers identified on the privilege log start at BW-CFR-000000407. Accordingly, the privilege log for the Bates Sample indicates that the Debtor continues to withhold a substantial number of documents that that the Debtor has not logged. Moreover, even when privileged documents are logged, the privilege log remains materially deficient. First, there is no obvious way to determine which claimant’s file was the source of a particular document. Second, the privilege log refers to “Associated Legal Personnel” without identifying what that refers to or explaining why these individuals are being included if they were not recipients of, or parties to, privileged communications. Third, there are substantive issues with certain descriptions that the Debtor uses on its privilege log. For instance, the privilege log describes correspondence “between parties who maintain a common legal interest regarding defense of asbestos-related personal injury claim”—but this correspondence may or may not be privileged depending on the nature and topic of the communications. From the Debtor’s description, it is not clear whether “regarding defense of asbestos-related personal injury claims” refers to the actual topic of the communication or is simply describing the purported “common legal interest.”
24Lastly, the Debtor’s privilege log does not comply with the plain language of the Discovery Plan in at least four respects. First, the Debtor has not provided the “Players’ List” required by paragraph 2 of Exhibit B to the Discovery Plan. It is unclear why this list has not been provided to the Claimants’ Representatives; the Debtor must have utilized a list of the relevant individuals when reviewing documents for privilege in the first place. Second, contrary to Exhibit B to the Discovery Plan, the Debtor’s privilege log combines “cc” and “bcc” designations, making it impossible for the Claimants’ Representatives to determine who was copied on an email and who was blind-copied. Third, the “Date” field in the Debtor’s privilege log does not identify the time of the document, as required by paragraph 1 of Exhibit B to the Discovery Plan. Fourth, the Debtor’s “Common Interest Assertions” fail to “describe the common interest with sufficient particularity, which description may include identification of: (a) the parties to such agreement (written or oral), (b) the date such agreement was created and/or effectuated, and (c) the shared common interest(s) that are subject to such agreement(s)” as required by paragraph 3 of Exhibit B to the Discovery Plan. Accordingly, even if the Debtor had not waived any privilege or immunity with respect to the Sample Claim Files, the privilege log provided by the Debtor fails to comply with the requirements of the CMO and the agreed Discovery Plan. CONCLUSION Unless the Sample Claim Files are produced immediately, the Claimants’ Representatives’ ability to prepare for estimation will face significant prejudice. The Court should grant the Motion and compel the Debtor to produce the Sample Claim Files.
25Dated: August 6, 2021 /s/ Glenn C. Thompson /s/ Felton E. Parrish Glenn C. Thompson (Bar No. 37221) Felton E. Parrish (NC Bar No. 25448) HAMILTON STEPHENS STEELE ALEXANDER RICKS PLLC + MARTIN, PLLC 1420 E. 7th Street, Suite 100 525 North Tyron Street, Suite 1400 Charlotte, North Carolina 28204 Charlotte, North Carolina 28202 Telephone: 704-365-3656 Telephone: (704) 344-1117 Facsimile: 704-365-3676 Facsimile: (704) 344-1483 Email: email@example.com Email: firstname.lastname@example.org -and- -and- James L. Patton, Jr. (Delaware Bar No. 2202) Linda W. Simpson (Bar No. 12596) Edwin J. Harron (Delaware Bar No. 3396) JD THOMPSON LAW Sharon M. Zieg (NC Bar No. 29536) Post Office Box 33127 Travis G. Buchanan (Delaware Bar No. 5595) Charlotte, North Carolina 28233 YOUNG CONAWAY STARGATT & Telephone: (828) 489-6578 TAYLOR, LLP Email: email@example.com Rodney Square firstname.lastname@example.org 1000 North King Street Wilmington, Delaware 19801 -and- Telephone: (302) 571-6600 Facsimile: (302) 571-1253 Natalie D. Ramsey (DE Bar No. 5378) Email: email@example.com Davis Lee Wright (DE Bar No. 4324) firstname.lastname@example.org ROBINSON & COLE LLP email@example.com 1201 N. Market Street, Suite 1406 firstname.lastname@example.org Wilmington, Delaware 19801 Telephone: (302) 516-1700 Counsel to the Future Claimants’ Email: email@example.com Representative firstname.lastname@example.org Counsel to the Official Committee of Asbestos Creditors