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A decision in a billion-dollar bankruptcy case is a landmark moment in the murky world of asbestos litigations. The case was before a federal court in North Carolina. The judge slashed what a manufacturer owes asbestos victims, after finding the victims' lawyers abused the system.

Michael Tomsic has the story from member station WFAE.

MICHAEL TOMSIC, BYLINE: This case involves a bankrupt company called Garlock, legal shenanigans, and a rare type of cancer.

(SOUNDBITE OF A COMMERCIAL)

UNIDENTIFIED MAN: Attention mesothelioma victims...

TOMSIC: You may have seen TV commercials about it. Mesothelioma is mainly caused by inhaling asbestos, which are minerals many companies use in insulation and other products.

(SOUNDBITE OF COMMERCIAL)

UNIDENTIFIED WOMAN: Hold the big multimillion dollar companies responsible for their actions.

TOMSIC: According to a government report, companies have set aside more than $30 billion for victims since the 1980s, and asbestos lawsuits have played a role in about 100 companies going bankrupt. One of those is a gasket manufacturer called Garlock. Its parent company, EnPro, is based in Charlotte. And some call Garlock's bankruptcy case a watershed moment.

LESTER BRICKMAN: It's laid bare the massive fraud that is routinely practiced in mesothelioma litigation.

TOMSIC: That's Cardozo Law School professor Lester Brickman, who testified for Garlock. He's researched asbestos litigation for more than two decades. In Texas, a plaintiff said his only exposure to asbestos was from Garlock, after his lawyers filed a claim with another company. In California, a plaintiff's lawyers misled a jury to make Garlock look worse. And in Philadelphia, lawyers made evidence disappear of their client's exposure to 20 different asbestos products. Those are just a few of the old cases bankruptcy Judge George Hodges gave Garlock's lawyers, including Rick Magee, permission to re-examine.

RICK MAGEE: And as he says in his order, we were able to demonstrate in all, each and every one of those 15 cases, that there was extensive suppression of exposure evidence.

TOMSIC: In doing that, Garlock convinced Judge Hodges to drastically reduce the estimate for how much the company still owes victims. The victims' lawyers argued it should be about $1 billion based on Garlock's past settlements. But Hodges wrote that estimate is, quote, "infected with the impropriety of some law firms." The head of one of those firms disagrees. Peter Kraus is managing partner of Waters and Kraus in Dallas, Texas.

PETER KRAUS: There are some of those cases that involve my firm. And so I know for a fact from those cases that the judge's description of what happened is simply not correct.

TOMSIC: Kraus says the judge took a radical approach.

KRAUS: It's very, very different from the rulings and findings by judges with a good deal more experience in this area.

TOMSIC: But that argument doesn't fly with folks at the U.S. Chamber of Commerce's Institute for Legal Reform. Harold Kim is executive vice president.

HAROLD KIM: When you start building the case, when you start seeing more and more of these instances, you got to really question whether this is an outlier or not.

TOMSIC: Judges in Delaware, Ohio, and Virginia have also noted dubious legal maneuvering, though not on the scale of the Garlock case. Kim says it will be a wake-up call for other judges and that'll lead to more accurate estimates of what companies really owe. No one argues people suffering from mesothelioma shouldn't get compensated. It's just a matter of the right companies paying the right amounts.

For Garlock, the judge estimates that's $125 million. But the case isn't finished and victims' lawyers will likely challenge that amount. In the meantime, Garlock is suing some of the people who are suing it. The company is going after six law firms for the types of practices it uncovered in its bankruptcy case. For NPR News, I'm Michael Tomsic in Charlotte.

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