Why Is Asbestos STILL The Most Massive Of Mass Torts?

Why Is Asbestos STILL The Most Massive Of Mass Torts?

Back in the ‘80s when I was desk-to-desk with legal journalist and publisher Mike Mealey reporting on asbestos litigation (and even Swine Flu vaccine litigation!), some smart and informed attorneys thought the litigation would be over by now, or at least winding up.

Some would joke that they hoped not. “Hey, I’ve got kids to send to college.” Well, some of those kids are now practicing law with kids of their own.

But most attorneys, when not being glib, expressed passionate beliefs that their clients were wronged (in the case of plaintiffs) or, in the case of defendants, should not be put out of business or held fully or even partially responsible in every case. And the insurance fights sparked a whole other layer litigation unto itself, resulting in landmark decisions based, in part, on something unexpected in the world of tort law: an incident and an injury that didn’t take place even remotely at the same time. Even my lame attempt to sum that up can be diced up by attorneys who know that the interpretation of every syllable can mean a billion dollars one way or the other.

There certainly have been attempts to end asbestos litigation in one fell swoop – through large settlement systems and, more recently, through federal legislation, but they have either failed or only managed to resolve a small percentage of claims.

So why is it still going on? What’s different about it? And what are the most contentious issues? Aren’t dozens of companies now in bankruptcy?  I interviewed the three chairmen of our upcoming National Asbestos Litigation Conference, set for Sept. 23-25 at The Four Seasons Hotel in San Francisco.  Here’s what they had to say. . . .

First, why is asbestos litigation still going on? According to plaintiff attorney Joseph W. Belluck of Belluck & Fox LLP, while a lot of factors come into play, key drivers are: 1) longer life expectancies of people exposed to asbestos; 2) advances in diagnostic tools; and 3) broad awareness of asbestos-related diseases among physicians and patients.

If people live longer there is more time for mesothelioma or lung cancer to develop. With a disease that can take as long as 50 years to manifest, a 21-year-old shipyard worker in the 1950s can be diagnosed with an asbestos-related disease in his 70s or 80s, Belluck said, noting that asbestos was widely used in products even in the U.S. into the 1980s. It’s still used to some extent in the U.S. today.

Diagnostic improvements, particularly with mesothelioma, he said, and the fact that doctors and patients are now well aware of asbestos-related illnesses, means it is less likely that respiratory ailments caused by asbestos fibers will be blamed on pneumonia or mere infections.

“These things off-set any decline you might expect from the end of widespread use of asbestos products in factories,” Belluck said. “At least in my practice, there actually is an uptick in mesothelioma cases.”

And you have to add in the emergence of claims against relatively new – and solvent – defendants, he said, such as suppliers, distributors, and manufactures of pumps, valves and turbines that contain asbestos components.

Another important factor – and an important distinction from asbestos litigation during the last century – is the focus on malignancy claims.

“An ironic twist on the [defendant] companies’ efforts to limit liability for non-malignancy cases as a way to take out lower value cases they were paying money on,” Belluck said, “is that it left in the tort system the higher value, mesothelioma and lung cancer cases.” That means, he said, “almost every asbestos case being litigated has high value with multimillion dollar recovery potential. That gets everyone’s attention.” It also means plaintiff attorneys can throw more resources at fewer cases.

You have to add to this (let’s face it) the revenue asbestos litigation generates for attorneys and litigation support companies, the revenue generated in administrative fees, the number of manufacturers who are paying BILLIONS into bankruptcy trusts, the number of highly skilled “true believers” who will fight tooth and nail for their injured claimants, skilled defense lawyers who believe just as strongly in their clients’ defenses, and, of course, a tort system in which mass resolution of these claims has been rejected over individual treatment of claims – never mind the fact that asbestos is STILL used in developed countries (e.g. the U.S.) and shipped in massive quantities by developed countries (e.g. Canada) to undeveloped ones – and you have all the elements of a litigation that can still be around for another decade or two or more.

Trouble Spot Centers On Transparency, Trusts And The Tort System

Perhaps the starkest difference between asbestos litigation 10 years ago and today — and probably the most difficult to untangle — is the proliferation of asbestos bankruptcy trusts overseen at the federal level and the amount of money being paid to injured plaintiffs apart from what they receive in the predominantly state-based tort system. When the bankruptcies occurred, those companies disappeared from the underlying litigation and the remaining solvent defendants were required to pick up their liability share.

It is not shocking that so many of the companies actually responsible for the epidemic of asbestos disease are in bankruptcy.

“What is shocking,” according to Joseph J. O’Hara Jr., Vice President and Associate General Counsel of Owens-Illinois Inc., “is that now that the bankruptcy trusts are up and running, paying out billions of dollars to asbestos claimants, the financial demands on the solvent defendants have not changed.

Where O’Hara says the bankruptcy money “seems to change hands in the dark of night,” people like plaintiff attorney John Cooney of Cooney & Conway says defendants’ complaints about the trust system are just meant to “create perhaps a little mischief.”

The problem that O’Hara and others on the defense side claim is that the federal bankruptcy trusts are designed to make it hard for the tort system to track the bankruptcy trusts payments and the product exposure evidence upon which those amounts are based.

“The bankruptcy rules, drafted by committees of plaintiffs’ lawyers,” O’Hara says, “declare trust submissions alleging exposure to the bankrupt’s asbestos products ‘confidential’ and immune from discovery. These same rules also encourage delay of trust claims while the tort case proceeds.

“Without a requirement requiring claimants to declare what they are actually getting and likely to get, there is potential for double-dipping,” O’Hara says. The two systems — bankruptcy courts and state courts — are not operating in sync or with the same goals. He says, “state court judges need to know what’s going on in the trust side.” There are nearly 50 asbestos trusts with as much as $40 billion set aside for victims. “The tort system needs to account for this enormous amount of money that will be paid for asbestos injuries by the trusts.”

If you want to see how much passion there is behind this on the defense side, see what prominent defense lawyer Larry Cetrulo of Cetrulo & Capone, who spoke at our March asbestos conference, had to say.

“The reward that we’ve gotten for care-tending the scarce resources of our clients,” Cetrulo argued, “is to be the last person standing at the end of the day while the people who didn’t know how to shepherd their resources scurried into bankruptcy – and we’re left standing holding the liability.”

He went on to say, poking a finger into the speakers’ table so hard it left a dent (no it didn’t, but it makes for good story tellin’), that there is no transparency in what claimants are receiving. “There isn’t transparency in seeking a merits-based valuation system. When you’re looking to pay 100 cents on the dollar on true value, if you don’t know what the bankruptcy trusts are paying, you don’t know what the product identification is there, you don’t know what their share of liability is, and this isn’t even getting to the causation issue . . . those issues are important in a merits-based system. . . . Where I believe most of the plaintiffs’ attorneys are coming from is a risk-based valuation system which unfairly exempts the bankruptcy trusts. . . ."

To see Cetrulo for yourself, click here: Lawrence Cetrulo on the Fairness of Asbestos Claim Valuations.  (Note:  We’ve pick Cetrulo to chair our first 2010 asbestos conference.)

O’Hara told me that the sole purpose of the bankruptcy trusts is to pay compensation to asbestos plaintiffs for the same indivisible injury that is the basis for their tort claim. “They [the trusts] are open for business,” O’Hara said, “and their job is to pay the claims. The money is there to be moved. It is moving, but the lack of disclosure requirements and the timing of the trust payments can prevent those payments from being accounted for in the tort system.”

We’re not talking chump-change here. The tort system is already paying out several BILLION dollars a year on the mesothelioma claims, and the trust system is paying ANOTHER billion on those claims.

“We have duel compensation systems working blind to each other,” O’Hara said, “even though all the money is moving for the exact same injuries.”

Defendants raise the issue that plaintiffs can strategically sequence their claims in a way to get higher combined payouts from the two systems and often don’t reveal what amounts they are getting and are likely to get from each and all the trusts. O’Hara argues that “lawyers on both sides of the aisle need to work with the courts to make the trust payments visible and provide proper credits and set offs for such payments in the tort system.”

Plaintiff Attorneys See It a Tad Differently

No one gets more passionate in response to defense criticism of the failure to sync the trust and tort systems than well-known plaintiff attorney John Cooney of Cooney & Conway. Speaking at our conference back in March 2009, Cooney said claims that plaintiffs need to reveal what they’re getting paid and sequence their claims were “specious” arguments falsely dressed up in a cloak of fairness.

Cooney said that when a plaintiff applies to a trust and recovers money, defense attorneys want it done in a way that helps their clients. Cooney said, speaking from the claimant’s perspective, “Why would I sequence my claims so I can help the companies that poisoned me?”

Cooney also lobs the “secrecy” attack back at the defendants: “When I settle with [most defendants], they ask me to keep the amounts secret. If I tell anyone what [that defendant] paid, I’d be in court, probably under a contempt citation. So,” he said sardonically, “secrecy is good for defendants in some situations, but not in others. I’ve got a problem with that.”

Cooney hears some defense attorneys argue that they should have standing to come to a bankruptcy court so they can “ask a few questions.” “Sure,” he said, “that sounds like good ol’ ‘street justice’” – except that without a judgment against it, that defendant is not a judgment creditor. “If he had a verdict against him, then he’d have a point. But that isn’t what he wants to do. He wants to come in and say, ‘You know what, I really want to settle this poor man’s mesothelioma cases, but I’d like to do it with someone else’s money.’” If a verdict is taken, then Cooney agreed that a defendant has a place at the table in bankruptcy court. Otherwise, Cooney thinks the answer to that defendant is it’s “none of your business.”

“The claim that ‘the tort system doesn’t account for the bankruptcy money,’ I think is specious,” Cooney continued. The tort system does not always work the way a particular defendant would like it to work. The tort system does not always work for a particular plaintiff. The tort system is what it is.” What Cooney doesn’t accept is that the defendants are doing this out of any “overarching sense of fairness.” “This is just advocacy, and it needs to be identified as advocacy

And it is advocacy that both plaintiff and defense lawyers in this massive litigation do extremely well. So now what? I spoke next to Michael J. Pietrykowski of Gordon & Rees LLP.

Communication’s Role In This Continuing & Complex Arena

Asbestos litigation is not only complex and, as people well know, big.  But I am not sure people other than those touched by the litigation or who have studied it really appreciate just how big it is.

“There literally are hundreds of thousands of people domestically and internationally affected by asbestos exposures that have taken place over decades, with decades more of it to come,” said Pietrykowski. Pietrykowski, who represents equipment manufacturers in asbestos litigation, said that alone makes asbestos litigation unique. “There is nothing even close,” he said.

One would hope . . .

So, a lot of people seem to think there is a lot wrong with how it’s going. Others are fairly fine with the status quo. Should anything be done? If so, what?

Pietrykowski says better communication by the players in the litigation, which, he said, is a defined group of lawyers and to some extent judges, is a must.

“With a line of communication in place we can start talking about important issues like the trusts, and how to determine which cases have to be tried and which can be resolved without spending lots of money,” he said.

“We all have limited resources. Let’s use them to make the system work as efficiently as possible and everybody will benefit,” he said.

Is Pietrykowski saying that if everyone just talked things would be better? “I am not naïve,” he said. “Not every issue has an answer. But we need to spend time understanding what we – including both lawyers and judges – agree upon and what we don’t agree upon, then decide the best method to resolve what we can.”

Pietrykowski said informal conversations help, but what really is needed is a formal way for lawyers and judges across the country – because this truly is a “national litigation” – to share what’s going on and what’s ahead. He means this as a two-way communication that includes judges. “Both the plaintiff and defense lawyers could do a better job helping the courts understand what’s coming. And courts, while they deal with these cases as best they can, could do a better job helping the attorneys too.”

Helping one another? But aren’t plaintiff attorneys supposed to maximize their clients’ awards? Aren’t defense attorneys around to reduce or even eliminate what a company pays out? Aren’t we asking advocates to stop advocating and try to be more, well, agreeable?

“No one is stopping advocacy,” Pietrykowski said. He pointed to a recent California decision recognizing the sophisticated-user defense in personal injury cases. When defense attorneys started pursuing summary judgments with motion judges in San Francisco, the first judge, recognizing that in asbestos nothing stops with just one case, took the time to examine the issue thoroughly, asked for briefing, allowed input from other parties, and paused so it could write a thoughtful opinion everyone could see.

“That didn’t stop defendants from appealing. Nobody’s rights were limited,” he said. “There are reasons for a lot of what goes on in asbestos litigation beyond simple efficiencies.”

But if you really want to advocate for your client, isn’t chaos and confusion sometimes a good thing? “I understand that from an adversarial approach there are times and reasons you want uncertainty. From both sides. But, again, with asbestos litigation you have to appreciate the finite number of people involved and certainly the finite resources available to handle it.”

So that takes us back to communication, which Pietrykowski says has to take place on two levels.

First, there is the practical level. What is being done in the bankruptcy system? Each time an entity files for Chapter 11, “it is their own bankruptcy” with unique nuances depending on the company. There needs to be communication about how much is out there in each proceeding and what the timing is. Second, and something that will be addressed at our conference in September, is whether there should be a merger of the systems. “Is recovery under a bankruptcy trust really their own business and has nothing to do with the court system? Or, is the answer, ‘Yes, it does matter because the amount of money is very significant and people are collecting lots of it.’ Should there be recognition in the litigation of credits in the bankruptcy system?”

What Pietrykowski hopes to do at HB’s National Asbestos Litigation Conference next month – along with chairmen Joseph J. O’Hara Jr. of Owens-Illinois and Joseph W. Belluck of Belluck & Fox – is at least come away with possible solutions to what seems like an impossible challenge.

Here is the mission statement our chairmen prepared for the event:  “We know many of the faces in this long-standing litigation very well. For better or worse, we are a family of sorts! Regardless of the side of the table, we all face similar issues and need to work together to resolve some of the recurring problems in “our” asbestos world. Therefore, as the chairs of HB’s National Asbestos Conference, we propose that part of our program be dedicated to a discussion of possible solutions to key issues. Throughout the day, we will dedicate time to this goal, in an effort to move towards improving the litigation landscape.”

For more information about HB’s National Asbestos Conference taking place Sept. 23-25 at The Four Seasons in San Francisco, as well as the list of attorneys, companies and judges who will be there, CLICK HERE. You also will find a number of free videos of judges discussing many of these same issues at HB programs held earlier this year.

[Tom Hagy is president of HB Litigation Conferences LLC. He was once publisher and managing editor at Mealey Publications, and was a contributing editor for Mealey’s Litigation Report: Asbestos (now published by LexisNexis) and before that the Asbestos Litigation Reporter (now published by Thompson West).  You can reach Tom at tom.hagy@litigationconferences.com.]