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Robert Panzenbeck
Legal Intern, Manhattan Institute's Center for Legal Policy

The Wall Street Journal notes a particularly interesting case out of federal bankruptcy court in North Carolina, where Judge Roy Hodges handed down a decision that strikes a blow against deceptive practices in asbestos litigation.

Garlock Sealing Technologies,a manufacturer of gaskets and packing,entered into bankruptcy in 2010 under the weight of pending and future asbestos claims. When manufacturers like Garlock file Chapter 11 in the face of asbestos claims, these firms are granted immunity on the condition that they meet a number of requirements. Among these requirements is the establishment of an asbestos trust, which establishes payments to be made to past and future victims based on the severity of their illness.

In this case, plaintiff's attorneys demanded that Garlock set aside 1.3 billion dollars for the settlement of mesothelioma related claims. Garlock believed the figure should be much lower, and earlier this month, federal judge Roy Hodges agreed, reducing their liability 90 percent, to 125 million dollars. This is significant, because for years, critics of this system have pointed out an exploitable information gap between the legal system and the trusts. In his opinion, Judge Hodges criticized the plaintiff's attorneys and their methods, noting that the larger number of 1.3 billion dollars was based on various forms of deceit by plaintiff's lawyers and clients, including the deliberate concealment of evidence that might suggest that plaintiff's injuries were the result of exposure to products other than Garlock's asbestos lined gaskets. The Journal notes one particularly poignant incident illustrating the extent of plaintiff misconduct:

Garlock had paid $9 million dollars in a California case involving a former Navy machinist mate. Garlock had attempted to show that the plaintiff had been exposed to asbestos-containing insulation, Unibestos, made by Pittsburgh Corning. The plaintiff denied exposure to insulation products, while his lawyer told the jury there was no Unibestos insulation on the ship. But Judge Hodges found that after the $9 million dollar verdict, the lawyers for the machinist filed 14 claims with other asbestos trusts, including several against insulation manufacturers. The same lawyers who told the Garlock jury there was no Unibestos exposure had claimed in the Pittsburgh Corning bankruptcy that the same plaintiff had been exposed to Unibestos. Judge Hodges wrote that the plaintiffs lawyers "failed to disclose" in court that their client had been exposed to 22 other asbestos products.

The Garlock case is a textbook instance of double dipping, a practice common in the asbestos litigation world. For years, critics of the system have alleged that plaintiff's attorneys "double dip," making claims to multiple asbestos trusts for the same injury. In this case, plaintiff's attorneys distorted or withheld facts while making claims with multiple asbestos trusts, even making allegations that were, as noted above, wholly inconsistent with the basis for rewards in prior decisions. As expected, companies forced into bankruptcy have decided to take action. Prior to this decision, EnPro Industries, Garlock's parent company, filed suit against four prominent asbestos law firms alleging they had concealed evidence about exposure to other products in litigation against Garlock. Judge Hodges' opinion provides significant ammunition for this claim.

The verdict is viewed as a major victory for Garlock, and is not without its critics. Paul Barrett of Bloomberg notes that the decision "obfuscates the long term wrongdoing by companies that didn't swiftly own up to the unintended harm caused by asbestos," while acknowledging that the circumstances present evidence that "influential members of the plaintiff's bar have lost their moral bearings."

It's not just companies like Garlock who have taken note. Congress, in an effort to solve the double dipping problem recently moved on the issue. In November, the House passed H.R. 982, the Furthering Asbestos Claim Transparency (FACT) Act, by a vote of 221 to 191. As BusinessWeek notes, the bill would require asbestos trusts around the country to file quarterly reports about who receives payments and how much they get. The bill is specifically designed to limit double dipping, and ensure that funds set aside for legitimate claims aren't unjustly dispersed to fraudulent claimants.

Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

In the midst of the myriad political battles going on in Washington, there is some good news:

On Wednesday, November 13th, the Furthering Asbestos Claim Transparency (FACT) Act, H.R. 982, was passed by the U.S. House of Representatives on a 221-199 vote. The FACT Act is designed to curb fraud and abuse in asbestos litigation by addressing the problem of false and/or inconsistent claims submitted to asbestos bankruptcy trusts and in the civil justice system.

The legislation would amend federal bankruptcy law to require asbestos bankruptcy trusts to submit quarterly reports to the overseeing bankruptcy court which detail each demand made against the trust by a claimant. The Act would, therefore, provide a link between the separate personal injury compensation systems of the bankruptcy trusts and the civil justice system.

The House's passage of the bill serves as an admirable first step in redirecting trust funds to those who are rightfully entitled to them. The Senate should take this signal from the House and pass the bill with all deliberate speed. The interests of the plaintiffs' bar cannot take precedence over justice for aggrieved individuals with legitimate claims. The interests of commerce and the worker are in perfect alignment. The only loser here would be those lawyers who can no longer make fraudulent claims and get away with it.

Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

One of our fundamental rights as citizens is the ability to seek redress of our grievances. Over time, this practice spread from government to private industry, as workers' rights against their employers in abusive or harmful situations were codified in legislation.

The establishment of the asbestos bankruptcy trust was meant to offer a compromise path through which employees could achieve restitution for their asbestos-related injuries, and employers could avoid cost overruns and premature bankruptcies.

However, the surreptitious manner in which the trusts have been run has allowed for opportunistic lawyers to take advantage of them by submitting frivolous, fraud-riddled claims.

The goal of the trusts stand as the fulfillment of just compensation for injured workers, but the main beneficiaries are turning out to be lawyers who make claims on behalf of "clients."

To remedy this injustice, the FACT Act was meant to mandate quarterly reporting of claims made on the trust, as well as allow for more compliance with third-party discovery requests made on the trust.

Because there are no compliance costs or other significant burdens associated with the law's passage, we can assume the asbestos industry's opposition to the FACT Act stems from a desire to lessen transparency. If there is no transparency, the industry can continue to make baseless claims and reap fraudulent profits.

Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, has written an op-ed detailing the reasons for the asbestos industry's continued obfuscation.

Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

In the June 30th letters to the editor section of the New York Times, Lisa A. Rickard, president of the U.S. Chamber of Commerce's Institute for Legal Reform, made her feelings clear about a June 19th editorial entitled "One-Sided Bill on Asbestos Injuries":

There is plain evidence that fraud and abuse already exist in the trusts set up by companies to pay asbestos claims.

A 2012 House Judiciary Committee report detailed highly questionable claims, citing numerous examples. In March, The Wall Street Journal chronicled thousands of highly questionable trust claims in a major front-page article.

The Furthering Asbestos Claim Transparency Act simply requires the trusts to make public information that they already collect about who has made claims against what trusts. And we believe that it places zero burden on claimants.

Most asbestos trusts have recently lowered their payouts to claimants because they are running out of money because of increased claims. Those who are indeed pro-claimant should support legislation that will ensure money for legitimate future claimants. Those defending the status quo are really supporting the current cash machine system that primarily enriches plaintiffs' lawyers.

Before concluding that a bill is "one-sided," the NYT may find it prudent to scrutinize the compendium of information available on both sides of the issue to ensure they are not advocating against the interests of the very claimants they profess to be protecting.

"A West Virginia jury found two members of a Pittsburgh law firm liable of civil racketeering for conspiring with a radiologist to fabricate evidence in asbestos lawsuits against railroad operator CSX." [Fisher @ Forbes; earlier on POL]

The verdict of $429,000, subject to possible trebling and attorneys' fees, is, of course, just a drop in the bucket of asbestos fraud, which has essentially gone unprosecuted criminally as it has sapped billions of dollars belonging to actual asbestos victims and to productive sectors of society. Congratulations to POL reader Marc Williams for his role in the victory. Lester Brickman, of course, has written widely on the problem of mass tort screening fraud.

More could be done to protect the innocent if Congress passed asbestos trust reform requiring more transparency in the notoriously corrupt process.

The Lawyer as Racketeer
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Two Pennsylvania attorneys and a West Virginia doctor they hired to read clients' X-rays have just been found liable by a federal jury in Wheeling, WV for violating the (federal) Racketeer Influenced and Corrupt Organizations Act, and for (state-law) fraud, in connection with asbestos claims made against CSX Transportation. The jury awarded $429,240.47, which was the amount CSX said it had spent to defend the 11 claims, against Pittsburgh attorneys Robert Peirce and Louis Raimond and Bridgeport, WV radiologist Ray Harron.

Peirce had filed more than 14,000 asbestos cases against CSX. Harron had diagnosed tens of thousands of asbestos claims for the attorneys. Harron's diagnoses were first called into question in 2005 by a judge in Texas that heard cases involving the lung disease silicosis. CSX filed its lawsuit later that year, claiming Kentucky railroad worker Earl Baylor was fraudulently diagnosed with asbestosis. At the trial, CSX attorneys argued that Harron had initially found hundreds of patients clear of asbestosis, but later switched his diagnosis. It presented only 11 of those cases, likely because of statute of limitations or solvency issues.

The West Virginia verdict follows a May 2012 federal appeals court ruling upholding a $420,000 fraud verdict against two Mississippi lawyers, William Guy and Thomas Brock, for committing fraud during an asbestos lawsuit they filed in 2001.

Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Last month the Pennsylvania Supreme Court raised the bar for proving causation in asbestos cases. Previously, plaintiff attorneys could argue that any exposure to a product that contained asbestos was sufficient to establish substantial causation for asbestos-related diseases.

The defendants in Betz v. Pneumo Abex LLC et al., 2012 Pa. LEXIS 1208, filed a motion challenging this so-called "any exposure" theory. "Any exposure" causation is problematic because it seems to fly in the face of the general scientific consensus that asbestos-related diseases are "dose responsive" - meaning there is a relationship between the amount of a person's exposure to asbestos and the amount of the disease that person is likely to have.

If asbestos-related diseases are dose-responsive, then this would suggest that small levels of asbestos exposure may not cause asbestos-related diseases. The plaintiff's expert in Betz tried to claim both that asbestos-related diseases were dose responsive and that "any exposure" to asbestos was enough to establish substantial causation. The court rejected this argument:

In this regard, Dr. Maddox's any-exposure opinion is in irreconcilable conflict with itself. Simply put, one cannot simultaneously maintain that a single fiber among millions is substantially causative, while also conceding that a disease is dose responsive.

Given this recent ruling, it will be interesting to see how asbestos cases that rely on dubious causation arguments fare in the state of Pennsylvania.

According to government mortality tables, an 85-year-old male has a life expectancy of another 5.65 years. Unfortunately for Bobbie Izell, who worked in construction in the 1960s and 1970s, he was diagnosed with mesothelioma when he was 85, so his expectancy is a couple of years shorter. A year later, this month, a Los Angeles jury decided that this entitled him to $30 million in "compensatory" damages from ten defendants; coincidentally, the jury also found that the five defendants who were bankrupt or had otherwise settled were only 5% responsible collectively, while the deepest pocket, Union Carbide, was 65% responsible. Another $18 million in punitive damages were awarded against Union Carbide, on the theory that it should have unilaterally stopped selling asbestos in 1967, but didn't do so until 1985. Union Carbide denies liability entirely; the press coverage doesn't give any evidence on that one way or the other, or bother to explain the defendant's likely legitimate grievance. (Though precedent pretends otherwise, a jury that awards an irrational amount of damages almost certainly assigned irrational amounts of liability.) But the $30 million compensatory damages, nearly all of which is non-economic damages, is obviously absurd. What's the point of constitutional limits on punitive damages if the jury can effectively assess punishment twice under the guise of compensatory damages? [Similar on POL in 2006; law.com/NLJ]

Note that we have apparently gotten to the point where a $48 million verdict is dog-bites-man, and not especially newsworthy; this didn't make the Los Angeles Times or national news coverage other than specialty legal papers; the only blogs to cover it are the splogs that are advertising for asbestos attorneys.

The attorneys were from Baron & Budd; press coverage doesn't indicate whether they'd be sharing what would be millions of dollars of their fee with a "chicken catcher" lawyer who did nothing but recruit the client and pass along the file. Press coverage also doesn't indicate whether Izell has made paid claims with asbestos bankruptcy trusts inconsistent with the claims made at trial, or whether the defendants were able to obtain discovery from the trusts.

We've previously noted the extent of the problem of asbestos bankruptcy trusts being used as trial-lawyer piggy banks to fund litigation against third parties on legal and fact theories different than those used to obtain recovery from the trusts. The May 10 hearing on the subject created some fireworks when Democratic Rep. Steve Cohen called chicken-catcher attorneys who contacted him about a potential case "parasites." [LNL; ILR; Professor Todd Brown testimony; more from ILR; unpersuasive SE Texas Record editorial]

StlToday.com reports:

Judge Clarence Harrison dealt a swift blow to the Madison County asbestos litigation system by ordering all 2013 asbestos cases to be set on a "case-by-case basis." The order came just three days after Harrison heard arguments for and against a previous judge's order allowing certain law firms to reserve trial dates in 2013, even though many of the cases weren't on file with the court.

Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform (ILR), issued a statement applauding Madison County Circuit Judge Clarence Harrison's decision to end the pre-assignment of asbestos trials to plaintiffs' law firms. After recent controversy involving Judge Barbara Crowder, who was removed from the asbestos docket after her campaign committee received $30,000 from plaintiffs' lawyers shortly after she awarded their firms most of the court's 2013 trial times, asbestos trials will now be set on a case-by-case basis.






On the Theory Class's Theories of Asbestos Litigation: The Disconnect Between Scholarship and Reality

The Asbestos Litigation Crisis: Is There a Need for an Administrative Alternative?

The Asbestos Claims Management Act of 1991: A Proposal to the United States Congress

Review of Paul Brodeur's Outrageous Misconduct: The Asbestos Industry on Trial


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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.