Appointment of a Receiver? The New Sanction in South Carolina? - Maron Marvel
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Appointment of a Receiver? The New Sanction in South Carolina?

June 2, 2023

Sanctions for perceived shortcomings in document productions and corporate representative depositions have long been a real threat in asbestos litigation in South Carolina. The plaintiffs’ bar has regularly filed Motions to Compel and Motions for Sanctions in response to document productions and corporate depositions. Justice Toal has ordered sanctions on several occasions, including monetary, additurs, and the striking of pleadings.

In Melvin G. Welch and Donna B. Welch v. Atlas Turner, a new sanction has been proposed – the appointment of a receiver for a viable defendant. Dean Omar recently requested that Justice Toal strike the pleadings of Atlas Asbestos, Ltd., aka Atlas Turner, Inc. (Atlas), and subsequently appoint a receiver for Atlas for failing to participate in discovery.

Atlas, a company organized and existing according to the laws of Canada, moved to dismiss the Complaint based on lack of personal jurisdiction. On December 6, 2022, the Plaintiffs served Atlas with a Notice of 30(b)(6) Deposition and an accompanying subpoena duces tecum, after which Atlas filed a motion for a protective order, requesting that the court stay discovery until ruling on the outstanding motion to dismiss due to concerns of waiver and the Quebec Business Concerns Records Act (QBCRA), which Atlas argued, prohibits it, in light of the potential imposition of criminal penalties, from producing, in United States litigation, information and documentation contained within their files located in Quebec.

On April 19, 2023, Justice Toal denied Atlas’ motion to dismiss and ordered Atlas to appear for a deposition. Atlas, however, failed to produce a witness, otherwise identify a witness or alternative date in which it would produce a witness, or produce documents under the Notice of 30(b)(6) Deposition and accompanying subpoena duces tecum. On May 11, 2023, less than a month after the hearing on Atlas’ motion to dismiss, Justice Toal held Atlas in contempt of court and further directed counsel for the Plaintiffs to submit a briefing identifying the requested sanction the Court should impose on Atlas. Dean Omar subsequently moved for the following: (1) an order striking Atlas’ pleadings and (2) an order appointing a receiver to marshal Atlas’ insurance assets and satisfy claims pursuant to S.C. Code Ann. §15-65-10(4) and (5).

Dean Omar argues the absence of any evidence “which suggests that Atlas currently operates in any way to do anything other than defend and indemnify lawsuits, thus, making Atlas nothing more than an insurance company[,]” They further argue that Atlas unjustifiably refuses to participate in litigation under the guise of both a “debunked” personal jurisdiction defense and the provisions of QBRCA. Atlas, on the contrary, contends there is no evidence of any factual predicate (dissolution, insolvency, imminent danger of insolvency, or forfeiture) required to appoint a receiver, no evidence of any property of Atlas located within South Carolina upon which the court may act, and a lack of personal jurisdiction over Atlas, generally.

Justice Toal has regularly appointed receivers for defunct companies who supplied, installed, manufactured asbestos products, etc., and has regularly ruled that a company’s insurance policies, which would cover claims in SC, give her the authority to appoint a receiver.

Several months ago, Justice Toal appointed a receiver for Whitaker, Clark & Daniels (WCD), which was an ongoing concern, after Dean Omar made a showing that WCD was in financial distress. WCD has now filed for bankruptcy protection, and the Receiver has filed a Motion to Dismiss the bankruptcy filing, arguing that WCD doesn’t have the authority to file for bankruptcy.

Discovery sanctions have become all too common in asbestos litigation in South Carolina. The appointment of a receiver for Atlas would be a draconian sanction.