North Dakota Asbestos Bankruptcy Trust Transparency Act Deemed Constitutional, Plaintiffs Demanded to Disclose Bankruptcy Trust Filings

U.S. District Court for the District of North Dakota

In Kotalik v. A.W. Chesterton Co., several defendants filed motions to enforce the plaintiffs’ compliance with disclosure requirements of North Dakota’s Asbestos Bankruptcy Trust Transparency Act. Counsel for the defendants as well as plaintiffs moved the court for a hearing on the issue. Lastly, plaintiffs’ counsel moved for a certification of a question to the North Dakota Supreme Court regarding the constitutionality of the Trust Transparency Act.

In its analysis, the court held that plaintiffs did not raise a “close” question of state law that necessitated certification of a question to the North Dakota Supreme Court. Regarding the moving defendants, the court held that the Trust Transparency Act’s disclosures are substantive state law, which clearly and plainly require plaintiffs to provide the requested information to the defendants.

Underlying the Court’s ruling, there were two cases at issue: Kotalik v. A.W. Chesterton Co., No. 3:18-cv-246, Doc. 109 (D.N.D. May 13, 2019); Selfors v. Apollo Piping Supply, Inc., No. 3:18-cv-251. In Kotalik, 42 defendants currently remain, and 16 of those moved to enforce the plaintiffs’ compliance with the Trust Transparency Act. In Seifors, 51 defendants were remaining, and 16 of those moved to enforce the Act.

As background information, the Trust Transparency Act was enacted in 2017, and became effective on August 1, 2017. In enacting this legislation, North Dakota joined several other states which have enacted similar legislation. While defendants typically expect plaintiffs to pursue bankruptcy trust claims as soon as possible, a 2014 decision from the U.S. Bankruptcy Court for the Western District of North Carolina illustrated the prevalent fraud in asbestos tort litigation, describing evidence from multiple states where litigants have delayed the filing of trust claims in an attempt to withhold evidence of sources of alternate exposure. The North Dakota District Court found that trust submissions provide an efficient means of identifying alternate exposures, despite the plaintiffs’ minimal disclosure of such information.

In Kotalik, the plaintiffs argued that the Trust Transparency Act violated North Dakota’s constitutional provisions regarding separation of powers. In response, the defendants argued that the Trust Transparency Act is constitutional, does not conflict with applicable procedural or evidentiary rules, and does not conflict with several liability. The court ultimately held that the plaintiffs’ failure to explain why they sought certification of a question regarding the validity of an entire chapter of the North Dakota Century Code, coupled with the defendants arguments that the plaintiffs had not asserted any portion of the Trust Transparency Act which conflicted with any rule, led to the a decision that the plaintiffs did not raise a “close” question of state law.

Once the court determined that the Trust Transparency Act was constitutional, the court granted defendants’ motion for plaintiffs to comply with the Trust Transparency Act. The court ultimately issued an order demanding the production of asbestos trust claims from the plaintiffs, and indicated that if the plaintiffs failed to do so within thirty days of the order, could be subject to a sanction, up to dismissal. Lastly, the court denied the joint motions for a hearing, as the briefing was sufficient for a court ruling.