California Court Rewrites Opinion on Asbestos Bankruptcy Trust Payments

As a result of Gordon & Rees’ amicus efforts (through California defense counsel organizations), along with those of other amici, the Court of Appeal issued an order modifying its opinion in Hernandezcueva v. E.F. Brady Co., Inc. (B251933) to delete a holding that asbestos bankruptcy trusts were subject to the “collateral source rule.” This is an important win for asbestos defendants in California.

As we recently reported, the original version of the opinion held that asbestos bankruptcy trusts were “collateral sources,” meaning that the often substantial recoveries plaintiffs obtain from such trusts could not offset judgments against defendants. The order modifying the opinion deletes the reference to the collateral source rule entirely. It also refers to asbestos bankruptcy trusts as “joint tortfeasors” for purposes of offsetting judgments, and cites several cases holding that recoveries from asbestos bankruptcy trusts are explicitly approved as offsetting a judgment. Equally importantly, the reference to the trusts as “joint tortfeasors” confirms and continues asbestos defendants’ ability to ask juries to assign shares of liability to bankrupt manufacturers.

The other problems we noted with the opinion remain, and California Supreme Court review is still possible.