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By James R. Copland, 05-21-2004

In 2003, approximately 110,000 individuals filed claims alleging injury from exposure to asbestos-the most claims ever filed in a single year. To date, this longest running mass tort in American history has involved some 700,000 claimants filing suit against over 8,000 companies representing 91% of the industries in the United States.

The cost of asbestos litigation is high. Asbestos litigation has so far bankrupted over 70 corporations and cost $70 billion; studies show that companies bankrupted by asbestos have slashed an estimated 60,000 jobs, failed to create 128,000 new jobs, and foregone an estimated $10 billion in investment. This damage is expected to escalate. Experts predict that total claims could reach 1.3 million to 3.1 million. If current estimates of the eventual payout prove accurate, the final price tag of asbestos litigation could be $200 billion to $275 billion, with an additional $33 billion in foregone investment and 423,000 jobs not created.

Of course, measuring the cost of asbestos litigation is insufficient to judge its usefulness, without accounting for its benefits. A properly functioning tort system is intended (1) to compensate those injured by others and (2) to deter future wrongful behavior and thereby reduce the social cost of accidents. Unfortunately, the weight of the evidence tends to suggest that asbestos litigation has done a poor job of meeting both the compensatory and the deterrence goals.

The most serious injury attributable to asbestos exposure, mesothelioma, is a rare cancer in which malignant cells attack the sac protecting the body's internal organs, the mesothelium. Mesothelioma is a deadly cancer, and 70 to 80 percent of all mesothelioma cases involve some asbestos lung exposure at the workplace.

Handling asbestos-related illnesses is difficult, given that asbestos in the workplace was so ubiquitous, especially during and after World War II. Millions of Americans have been exposed to asbestos in the workplace. The U.S. government once mandated the use of asbestos in its military equipment contracts.

Further complicating the ability to deal with asbestos-related injury is its long gestation period: mesothelioma can have a gestation period of 30 to 50 years. Thus, asbestos claims involve very old exposures on old worksites, often involving companies that no longer exist.

We do know, however, that even as new asbestos injury claims have escalated, the incidence of new mesothelioma cases has remained fairly constant at about 2,000 per year-or less than 2 percent of the new claims filed in 2003. Why this disconnect? As Professor Lester Brickman notes, "80-90% of asbestos claimants have no asbestos-related illness recognized by medical science."

How are these claims brought? First, claimants are recruited. In his new exhaustive study of asbestos litigation, Professor Brickman describes how asbestos law firms have recruited plaintiffs through screening companies that perform tests for injury "at local union halls, hotel and motel rooms, shopping center parking lots, and other locations."

Next, questionable evidence of injury is produced through what appears to be dubious methods. According to Professor Brickman, this "evidence [is] generated by the entrepreneurial screening enterprises and B-readers-specially certified x-ray readers that the plaintiff lawyers select, who receive millions of dollars a year in income for producing bogus medical evidence which is not a product of good faith medical judgment, and [it involves] pulmonary functions tests which are often administered in knowing violation of standards established by the American Thoracic Society and result in findings of impairment which would not be found if the tests were properly administered."

Then, claims are brought in so-called "magnet courts" or "magic jurisdictions." According to long-time asbestos plaintiffs' lawyer Dickie Scruggs, "[W]hat I call the 'magic jurisdiction' . . . [is] where the judiciary is elected with verdict money. The trial lawyers have established relationships with the judges that are elected. . . . And so, it's a political force in their jurisdiction, and it's almost impossible to get a fair trial if you're a defendant in some of these places. . . . The cases are not won in the courtroom. They're won on the back roads long before the case goes to trial. Any lawyer fresh out of law school can walk in there and win the case, so it doesn't matter what the evidence or the law is."

Finally, plaintiffs are often "coached" by their attorneys to manufacture "new" evidence as the passage of time and bankruptcy of defendants requires. In one noted case, defense attorneys discovered a memo from one of the lawsuit industry's biggest asbestos litigation firms, Baron and Budd, coaching plaintiffs on their testimony. Among other things, the memo urged plaintiffs "to maintain that you NEVER saw any labels on asbestos products that said WARNING or DANGER."

Faced with a seemingly bottomless pool of claimants, defendants are increasingly electing to settle, abandoning any attempt to verify the claims pouring in or to defend themselves at the risky mass trials in which evidence of illness or fault plays no discernible role. Between 1993 and 2001, only 1,598 out of hundreds of thousands of asbestos claimants received jury verdicts.

The avalanche of new claims has experts questioning whether there will be any money left to pay future claims. Often, non-malignant claims have so drained the pot of money that seriously ill, more deserving claimants have been left to squabble over the crumbs. Claimants suffering from deadly mesotheliomas get a scant $10,000 from the trust set up by Johns-Manville to settle its asbestos claims.

Viewed in this light, asbestos litigation as it exists today cannot be viewed as meeting tort law's goals. A system in which most of the individuals being enriched are not sick and many individuals who are sick are being undercompensated cannot be fair. A system that randomly and harshly penalizes thousands of manufacturing companies for a product used ubiquitously in the past, with exceptionally high administrative costs, cannot be a very efficient deterrent of the social costs of future accidents.



Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.