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South Carolina’s “asbestos court” is a state trial court that handles all asbestos-related personal injury suits filed in that state. The asbestos court is controversial for a number of reasons. One is that in numerous asbestos suits, the presiding judge, former South Carolina Supreme Court Chief Justice Jean Toal, has assigned a receiver—a private attorney—and vested him with sweeping powers to control the internal affairs, including litigation-related decisions, of solvent, out-of-state corporate defendants. The receiver’s mandate essentially is to generate recoveries for South Carolina claimants from the corporations he purportedly represents.
Case Background
The lead petitioners in Charter Consolidated, Ltd. v. Cape Intermediate Holdings Limited (26-328) & Altrad Investment Authority S.A.S. v. Cape Intermediate Holdings Limited (26-350) are English and French companies, respectively. The asbestos court assigned the receiver to control the litigation decisions and other internal affairs of Cape Intermediate Holdings Limited (CIHL) (formerly Cape plc), a defendant in an asbestos personal injury suit. The receiver, purporting to act on behalf of CIHL, filed a third-party complaint against Charter Consolidated, Altrad, and others.
Charter Consolidated and Altrad challenged the receiver’s authority over out-of-state corporations on Due Process, Commerce Clause, and interstate federalism grounds. The South Carolina Supreme Court rejected that challenge, and Charter and Altrad now are seeking U.S. Supreme Court review. They urge the Court to hold that a state-court receiver may control the internal affairs of an out-of-state corporation only when the receiver has been duly recognized in the courts of the corporation’s place of incorporation.
ALF's Amicus Brief
ALF has filed a dual-captioned amicus brief in each case urging the Court to grant review. The brief was authored by ALF Vice President & Associate General Counsel Sarah Elizabeth Spencer.
ALF’s brief explains that this is not an asbestos case; instead, it is about whether a state court can control the Board or the Chief Executive Officer of a solvent company chartered somewhere else. The brief argues that the limit on a state court’s power over an out-of-state corporation is not, as the South Carolina Supreme Court held, a “choice of law principle” that each state may define for itself. It is a constitutional allocation of authority among sovereigns, and only the U.S. Supreme Court can enforce it.
Corporations are creatures of the sovereign that charters them. Who speaks for a corporation, including whether it will sue, defend, or submit to another sovereign’s courts, is a question for the chartering sovereign’s law. For more than 170 years the Supreme Court has held that a receiver’s authority stops at the border of the court that appointed him; a receiver who wants to act for a corporation elsewhere must be recognized by the courts of the place of incorporation. The South Carolina model is built to skip that step.
ALF's brief also shows that the model is not limited to asbestos, to South Carolina, or to companies chartered abroad: The same trial court has imposed receiverships on 24 asbestos defendants, 16 of them incorporated outside South Carolina, including in Florida, New Jersey, North Carolina, and Texas, and has already extended the model to a post-judgment receivership. If South Carolina can do this, every other state can do it too, and the first state to appoint a receiver will control a corporation everywhere.
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