Asbestos They Can?

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Waiting for Congress to forge an asbestos settlement has been like waiting for winter to end: hopes for clearing skies continually dashed by another storm of discontent.

For years, Sen. Arlen Specter has tried to negotiate details of a bill to establish a $140 billion privately financed asbestos trust fund to end asbestos litigation.

The bill proposes to resolve decades of asbestos litigation by establishing seven to nine classes of payments, topping out at $1.1 million for those who are most seriously ill. Funding for the trust would come from contributions by corporations such as General Electric and General Motors, which have had suits pending for years.

But while Congress has successfully packaged trust funds for victims of Agent Orange and coal mine dust, as well as for survivors of the 9/11 terrorist attacks, an asbestos agreement continually has gotten hung up. Legal observers have wondered just what it is about asbestos that makes an agreement so difficult to forge. Is it, as some have speculated, a perfect storm of unmanageable problems all colliding?

“That is the $64 million question,” says Deborah Hensler, who has studied asbestos litigation for 20 years, first at the Santa Monica, Calif.-based RAND Institute for Civil Justice, which she co-founded, and now as a law professor at Stanford. “I have become persuaded over the years that asbestos truly is sui generis as a mass tort, which is not the view I began with.”

According to Hensler, most torts are settled via class action litigation, or, less commonly, in the bankruptcy courts. However, its sheer size–with 8,400 defendants compared with no more than a dozen for most mass torts–makes asbestos litigation vastly more complicated and costly than other types of personal injury cases, Hensler says.

As a result, observers say, asbestos litigation has continually evolved, generating new claims, new venues and new valuations for what cases are worth. All those complications have held up an agreement from Congress.

“Our firm has been doing this for about 15 years and presently has about 3,500 cases,” says Kevin Dunne, chairman of Sedgwick, Detert, Moran & Arnold, based in San Francisco. The firm represents oil companies, brewing companies, aircraft manufacturers, utility companies and tobacco companies–all of them asbestos defendants. “I am very surprised we are still doing this. We thought we’d be out of the business several years ago. We’re surprised at how many filings there are, at this late stage, when asbestos exposures have ceased many, many years ago.”

Latent Symptoms

Initially, claims involved wrongful deaths from mesothelioma and asbestosis, diseases that can have latency periods of 20 to 40 years. That means, for example, shipyard workers and pipe fitters exposed as young employees wouldn’t suffer the consequences of that exposure until decades later.

As asbestos use was phased out, experts expected a decline in the number of claims. That didn’t happen. RAND forecast in 2002 that anywhere from 500,000 to 2.4 million additional claims would be brought on top of the 600,000 already filed.

More than half of the new claims are for exposure or noncancerous conditions, not for debilitating illness, and are eating up the bulk of payments made to claimants, according to RAND. Among the reasons for the litigation explosion are state court rules that toll the statute of limitations when a worker learns he or she was exposed, not when an actual illness develops, encouraging workers to file suit to preserve their claims, according to RAND.

In addition, while some jurisdictions have experimented with putting nondisease cases on inactive dockets, thousands of otherwise healthy plaintiffs have collected for exposure to asbestos. Now, in a large federal class action in Texas, some former asbestos victims are claiming they were exposed to silica, and allege they are suffering silicosis. According to published accounts, this dual diagnosis, deemed improbable by physicians for the defen- dants, has led to allegations of shoddy and possibly fraudulent mass screening of plaintiffs.

Venue Shopping

Shifting venues have also made it difficult to predict and corral asbestos claims. Initially, cases were filed in cities where there were shipyards and refineries, both heavy users of asbestos. But when some states passed laws to limit litigation by limiting punitive damages, as Texas did, litigation shifted to Illinois, West Virginia and Mississippi.

As venues within states became known as more plaintiff friendly and better able to handle the numbers of cases, plaintiffs flocked there.

In California, for example, the state’s cases are concentrated in Alameda and San Francisco counties. Verdicts in favorable counties averaged $3 million higher than those in less favorable jurisdictions, making it difficult to come up with an average value, according to one economist.

But claims and costs must be accurately projected even to contemplate a global agreement, and “no one has gotten that calculation right in the history of asbestos,” says Hensler. Average damage awards, for instance, have risen significantly over the life of the litigation, from $675,000 in 1991 to about $3 million by 2003, according to RAND economists.

“The risk appears to be changing all the time. It is a moving train and it keeps moving,” Hensler says.

The defendant class has also changed over time. Initially, asbestos manufacturers like Johns Manville were targeted. But as that company and others went bankrupt (85 corporations have filed for bankruptcy from asbestos liabilities), plaintiffs focused on secondary defendants, such as premises owners and suppliers. Defendants now include hospitals, universities and grocery stores.

“The asbestos defendant community is now Main Street America,” says Washington, D.C., attorney Patrick Hanlon of Goodwin Procter, who represents the Asbestos Alliance, one of two main trade groups seeking a federal solution to asbestos litigation.

While all defendants have been invited to the negotiating table, it is not necessary for all to agree for legislation to be brought.

“This is not a negotiated settlement,” says Seton Hall law professor Howard Erichson. “As a legal matter, Congress doesn’t need everyone to sign on.”

Defendants who oppose the bill tend to be those who still have insurance, which they estimate will be ample to cover future claims, negotiators say. Their fear is that they will end up paying more under the trust fund. Most, though not all, insurers also tend to be opposed to a federal trust fund. At least one significant player, Liberty Mutual, first endorsed a federal solution but then withdrew.

“There are a number of stakeholders with a lot at stake, and so ultimately, without the threat of trial, it’s hard to reach enough of a consensus to make the legislation politically feasible,” Erichson says. “It’s essentially impossible to satisfy everybody. Then the question becomes, is Congress willing to cram it down? Ultimately, Congress has the power to legislate.”

Courts or Congress?

Like Hensler’s, Erichson’s views on asbestos have changed. He used to believe, for instance, that the courts were incapable of handling asbestos litigation. The U.S. Supreme Court in Amchem Products v. Windsor, 521 U.S. 591 (1997), “called out loud and clear for Congress to act,” Erichson says. “I found myself sympathetic to that because asbestos litigation had such high transaction costs.”

But that doesn’t necessarily make legislation a better option, says Erichson. “I just don’t have a lot of confidence that Congress is well-positioned to resolve the tricky and nuanced issues of trying to handle mass tort liability fairly,” he says. “Not that I think the litigation process has worked well. It hasn’t. But right now I don’t have much faith Congress will do better.”

But if the ABA’s Tort Trial and Insurance Practice Section’s Asbestos Task Force is any indication, there is at least some hope for meaningful consensus, and therefore a federal solution.

Task force reporter Edward Sherman, a law professor at Tulane, says the group intends to make a final report at the ABA’s annual meeting in August. However, Sherman adds, the report might not contain a position on the legislation.

Meanwhile, the task force has agreed to recommendations, including a case management order, that would set up a uniform method for judges to deal with asbestos cases. In doing so, the task force suggests a medical-criteria model, allowing only those cases to proceed in which the plaintiff has an actual injury.

The recommendations also include a model statute of limitations to prevent forum shopping, and a suggestion that the federal government chip in to the trust fund, because many veterans were exposed while in the service.

“Consensus is possible. The feeling is that there is really some goodwill there. They are really trying” to reach a settlement, Sherman says.

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