40 billion reasons why asbestos litigation will grow

The Madison County Record Dec. 30, 2008, 10:15am





Forty billion dollars of designated funds currently available in court-established trust funds is providing abundant incentive to already rich attorneys with asbestos-settling know-how.

That could help explain why Madison County's asbestos docket is surging after some years of decline.

Dr. Charles Bates and Dr. Charles Mullin, in their report "State of the Asbestos Litigation Environment-October 2008," surveyed information obtained from roughly 40 asbestos personal injury bankruptcy trusts. The authors state the trusts have a combined value of $33 to $40 billion in liquid assets, not including insurance.

"The availability of such a large magnitude of assets in asbestos trusts is a relatively new phenomenon," the authors wrote. "Of the confirmed trusts, only 12 have been processing claims continuously for more than three years."

The first downturn in the continual rise of asbestos litigation came from roughly 2002 to 2006, when events conspired to increase the pressure on plaintiff's attorneys whose legal strategies raised questions and increased pressure for tort reform. Techniques like mass screenings, combining cases and suing on the behalf of those who had yet to become ill from asbestos exposure fell out of favor, leading to a decline in the overall number of cases being filed each year.

But the downturn was short-lived, especially in specific courts sprinkled throughout the country. Places like Los Angeles and San Francisco, Delaware and Illinois, where a combination of liberal courts and pro-worker juries have proved lucrative for those suing large corporations.

Couple that with billions in available cash in trust funds, not to mention the relative ease in which a settlement with a trust can be obtained, many believe the next big push in asbestos litigation is under way.

Thomas Anapol, a plaintiff's attorney from Philadelphia, summed up the trends saying "to paraphrase the immortal Mark Twain, the news of the demise of asbestos litigation has been greatly exaggerated. Asbestos litigation is alive and well."

The role of trust funds

Asbestos litigation reached a fevered pitch around the turn of the century, growing to as many as 300,000 new cases in 2003. The Manhattan Institute called asbestos litigation, the "longest-running mass tort in U.S. history and arguably the most unjust."

The RAND Institute estimated that by 2002, 8,400 defendants had been sued by nearly three-quarters of a million plaintiffs. In 1986, the Johns Manville Corp. – the world's largest corporate asbestos producer -- filed for bankruptcy. Roughly 80 major corporations soon followed, which led to the rise of asbestos trust funds. The Manville Trust, easily the biggest as the company had a market share of roughly 25-40 percent, was funded with more than $4 billion.

As other major companies began to emerge from bankruptcy, the courts established trust funds with specific terms of settling outstanding cases.

"For example, asbestos manufacturer Owens Corning and its Fiberboard subsidiary's six-year bankruptcy proceeding resolved in October 2006 with the Bankruptcy Court requiring the company to fund the Owens Corning Asbestos Trust in the amount of roughly $4.5 billion," Anapol said.

"Several dozen other former asbestos suppliers and manufacturers have followed the route of bankruptcy and now have trusts approved by the court."

Case in point, W.R. Grace, a global specialty chemicals and materials company that faced roughly a million asbestos-related lawsuits, emerged from bankruptcy court in 2008 with a trust estimated at $2 billion in assets to be paid over a 30-year period.

The cases are refiled against the trust, rather than the actual business. Filing a claim is now highly organized, and streamlined, according to Anapol. "When claims are approved, each trust has a specific payment schedule and amount, which is based on the severity of the injury. Depending on the fundings in the trust, each claim ranges in value from a few hundred dollars for mild asbestosis … to tens of thousands of dollars for mesothelioma."

Volumes of legal briefs and mountains of paperwork have been replaced by online processing forms that streamline the settlement process.

The one quirk in the system is that the actual amount of settlements is rarely made public, for very practical reasons.

"They don't want the solvent defendants to know how much dough they are getting from the trusts," a Chicago defense attorney said of the plaintiff's attorneys he opposes in court.

But some data from the trusts has been made public.

In their study, Bates and Mullin relied heavily on the example set by the Manville Trust, which saw a high of more than 70,000 new claims against it in 2000, drop to a low slightly more than 4,000 in 2005.

While claims by those already sick from asbestos exposure stayed relatively stable, "most of the change has been driven by falling levels of recruiting nonmalignant claims. By comparison, mesothelioma diagnoses have been stable."

The Manville trust is an illustration, not a whole picture of all claims. But, as the authors point out, it is the only trust that has made data about the date of diagnosis publicly available. But, "this is not a serious drawback," the authors wrote. "Virtually all claims do eventually file against the Manville Trust. Thus the trust's experience is a good approximation of the overall asbestos litigation universe."

In courts across the country settlements of a consistent amount are documented. Most are sealed, but some are not. For example, in Cook County any wrongful death settlement must be filed in the court, making them public. While they don't stipulate the death was specifically asbestos related, attorneys on both sides are paying close attention.

"It seems some trusts are paying better than others," a Chicago defense attorney said. "You look through the dockets and you see the same companies paying the same amount, like Owens Corning paying $203,000 and change in case after case. It's really good money and all you have to do is file some paperwork and say some doctor said the guy died from asbestos exposure."

The rise of cases

With money in trust funds available and easily obtained, it makes sense that a court like Madison County, known as friendly to plaintiffs, has grown along with the revenue increase of the asbestos trust funds. Madison County's docket hit a low around 260 in 2006. The number of cases filed by the end of 2008 is expected to be nearly three times that amount.

The National Cancer Institute estimates that roughly 2,000 new cases of mesothelioma are filed each year.

But plaintiff's attorneys say the rise is not just fueled by money. The latency period for the development of mesothelioma ranges from as little as 10 years to as many as 50 years.

"As a result, mesothelioma continues to rear its ugly head decades after the world learned of the dangers of asbestos and decades after asbestos products were removed from the market," Anapoli said.

Medical advances have also shown a greater range of diseases that stem from asbestos exposure in recent years, according to published reports.

That said, plaintiff's attorneys are well aware that every client signed means another chunk of the billions in trusts can be obtained.

"Once a person with mesothelioma hires a law firm, that law firm has acquired an economically valuable asset," Kirk Hartley, a Madison County defense attorney said. "Once the asset is in hand, it seems pretty obvious that a well-run plaintiff's firm acts like an investment banking firm in that the firms seeks to leverage up the value of the asset by running through a decision tree analysis touching on numerous factors that may influence the value of the asset."

The more "assets" a firm has, the greater its leverage. Recruiting clients to gain a greater share of that $40 billion trust fund pie remains, as it was in the feverish days of the 1990s, a critical component in the asbestos industry.

"Internet recruiting of mesothelioma claimants is a big part of the tort litigation industry," Hartley said. "The word 'mesothelioma' generates annual seven-figure revenues for Google and perhaps other providers of search engines."

At the time W.R. Grace announced its final settlement, Grace defense attorney David Bernick said the asbestos trust was necessary because of the high number of frivolous lawsuits filed against the company. Bankruptcy, he said, was the only way for the company to survive the "money machine" of plaintiff's attorneys.

"It was a total money machine based upon the ability to name the same companies again and again and again," Bernick said of the asbestos lawsuit craze.

"It was driven by the whole idea that the more people you can name, the more people you can settle with, the more money there is to be made," he said.

The defense rests

With 40 billion reasons to continue to obtain clients and seek settlement claims, the hope for slowing the renewed growth of the asbestos industry needs something drastic to change the course of events.

That drastic change, many say, is easier said than done. However, as judges, lawyers and lawmakers agree, the only way to impact genuine change is to stop the trend of easy settlements and instead challenge cases in court.

Judge Daniel Stack of Madison County said plainly that defendants must take cases to court if they hope to limit the number of cases processed by the court, and to change the pattern of financial settlements.

"If more and more people pushed to trial rather than settling, the judges would have to reconsider the convenience," Stack said.

Corporations have always been afraid of trials where a jury could award enormous sums, far greater than the actual amount paid by settling with a trust. If some settlements go larger, the rest could all gain in value, according to attorneys on both sides.

The Chicago defense attorney said the most recent verdicts in Madison County, albeit on smaller cases, "have been defense verdicts or settlements that are very low."

Still the major corporations are unwilling to push the issue in court, he said.

"Judge Stack has said the defense has to take it to trial," the attorney said. "But basically no one big enough has said 'this has got to stop' and taken the risk to take it court. It's a lot to ask of a defendant to be willing to take that risk. I have not yet had a client who said 'screw this, I'm going to take that risk.'"

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