Results matching “bankrupt asbestos”

Systemic Indifference - PointOfLaw Forum

At the Huffington Post, Karen Weise has collected a series of criticisms of mortgage company collection practices. The concern is a legitimate one for bankruptcy purists: whether by design or "systemic indifference", the methods used by some mortgage companies and servicers to track and calculate the debts they are owed often lead to the filing of unwarranted or inflated claims. In one case, for example, bankruptcy Judge Marilyn Shea-Stonum blasted the mortgage company's "reckless" system that appeared to be "designed to allow each actor in the process to act with indifference to the truth, and to rely solely on the limited information made available at each step. ... [The errors in this case] evidence Countrywide's disregard for diligence and accuracy."

This problem, however, is not limited to mortgage companies and service providers. In my former life as a corporate debtor attorney, I was frequently stunned by the cavalier attitudes that some organizations appear to have with respect to maintaining accurate debt collection records. They would usually take whatever figure their records spit out and file a claim; the debtors would go to their own records and often come back with very different numbers. True, we usually managed to reconstruct everything to reach numbers we were all comfortable with, but at a fairly high cost. If time and money are not huge obstacles, the bankruptcy process allows the adversarial truth-seeking process to run its course. In many bankruptcies, however, time and money are not in sufficient supply to make this possible. Thus, it should come as no surprise that some creditors may be willing to roll the dice by filing unwarranted or inflated claims. The transparency of the bankruptcy process, together with properly functioning judicial and trustee oversight, allow us to identify patterns such as these and take corrective action.

Of all of the horrific claiming practices that I saw in private practice, none were more pervasive and egregious than in asbestos personal injury claim filing. Some issues - filing new claims years or even decades after the statute of limitations had run, alleging wholly inconsistent work histories from one case to the next, etc. - may be just poor record keeping or a "reckless" system intended to provide those involved with deniability. Unlike other claims, however, asbestos claims are typically allowed without the filing of a proof of claim or other documentation that will open them to system-wide review. After a bankruptcy trust is established by a confirmed plan, access to claims filed is even less likely due to confidentiality restrictions. The net result - it is virtually impossible to conduct an extensive review of trust claiming and administration practices.

Courts and officials are right to criticize "systemic indifference" that leads to abusive filing practices. At the same time, however, some judges and trustees offices are at least as guilty of "systemic indifference" to the signs of fraud and abuse in asbestos bankruptcies; placing far too much emphasis on the false efficiencies of looking the other way and obstructing efforts to evaluate system-wide recklessness. And until these processes become at least as transparent as other claim processes in bankruptcy, we can hardly expect advocates to become more vigilant in their claim filings.

Chrysler and Sales Free and Clear - PointOfLaw Forum

As readers may recall, the Second Circuit affirmed the sale of Chrysler's assets to Fiat last month "for the reasons stated in the opinions of Bankruptcy Judge Gonzalez," and promised that a detailed opinion would follow. That opinion is available here.

For the sake of brevity, I will focus today on two of the issues addressed by the panel. First, the panel concluded that the sale was not a "sub rosa plan" but a legitimate use of Section 363 of the Bankruptcy Code to sell assets promptly (so as to maximize their realized value):

With its revenues sinking, its factories dark, and its massive debts growing, Chrysler fit the paradigm of the melting ice cube. Going concern value was being reduced each passing day that it produced no cars, yet was obliged to pay rents, overhead, and salaries. Consistent with an underlying purpose of the Bankruptcy Code--maximizing the value of the bankrupt estate--it was no abuse of discretion to determine that the Sale prevented further, unnecessary losses.

With respect to the complaint that the structure of the deal effectively elevated unsecured creditors (particularly the union) above secured creditors, the panel relied on Judge Gonzalez's conclusion that "all the equity stakes in New Chrysler were entirely attributable to new value--including governmental loans, new technology, and new management--which were not assets of the debtor's estate." Put another way, all of the bankruptcy estate's interest in the assets sold are reflected in the price received for those assets, and all of that money is going to secured creditors. It could be argued that the sale price received is lower than it would have been but for the benefits to accrue to the union under the deal (i.e., if the new company was not saddled with those obligations, would the estate have been able to get more cash from the purchaser?), but that is a very difficult path to carve out effectively given the going-forward benefits from the deal (for example, the reworked union agreement with the no strike clause).

Second, the panel addressed the various arguments that the Chrysler assets could not be sold free and clear of successor liability for various personal injury type claims. Here, the panel adopted a fairly broad reading of the "interests" that can be cleansed in a Section 363 sale, reasoning that this interpretation is more consistent with the purpose of this section and the priority scheme of the Bankruptcy Code.

The panel refused to weigh in on the question of whether a Section 363 sale can cleanse future claims (such as those that might arise from asbestos exposure). This not only makes sense in the abstract; it is the right approach for future claimants. As we have seen in the 524(g) context (which requires setting aside funds to pay current and future asbestos claims, among other things), future claimants' interests are often sacrificed by those currently asserting asbestos claims against bankruptcy estates. Now that courts have started taking a harder line against these schemes, it is easy to see how the 363 sale approach might be viewed as a possible end-run around 524(g)'s limitations on front-loading recoveries. Until the "free and clear" sale's applicability to future claimants is clarified, however, such an end-run remains, at best, extremely risky for most asbestos defendants.

W.R. Grace Chapter 11 - PointOfLaw Forum

At one point, the Grace chapter 11 appeared to be more of a trial of the asbestos litigation industry than a bankruptcy case. Halfway through the hearing on these issues, however, the asbestos committee (whose previous estimates of long-term trust liability reached as high as the $7 billion range), agreed to a deal providing only $3 billion of funding. Grace has received praise for the settlement and for the hard-line approach that led to it. Still, as Kirk Hartley notes, significant objections to the reorganization plan built around the settlement remain.

Clear as Mud: Asbestos Trusts and Empirical Evidence - PointOfLaw Forum

One of the most frustrating things about studying the intersection of bankruptcy and asbestos personal injury is the lack of transparency concerning the asbestos claims filed against the debtor and, ultimately, the asbestos trusts established by asbestos bankruptcy plans.

This is particularly troubling in recent years because lawyers and firms that submit claims to the trusts have increasingly argued that the trust distribution procedures, whose terms are generally left to the discretion of leading plaintiffs' tort lawyers, are nonetheless excluding valid claims and/or requiring more information that the tort system. In other words, these highly-sophisticated players in the tort bar could not maximize payouts and minimize time to payment when left almost entirely to their own devices.

As ridiculous as this may sound on its face, the representations may "ring true" when framed in the proper venue or manner - plaintiffs' bar presentations about "pitfalls" to avoid, selective representation of facts about claims that were denied, etc. - but that does not make them so. Adverse parties that obtain access to this information are bound by strict confidentiality orders concerning the information they may disclose, so they may not be able to fight this particular P.R. battle even when they know the facts are being misrepresented. And the information available publicly is, at best, sparse. In short, the evidence framing these debates is mostly anecdotal and inevitably far from complete - self-serving representations about the "true" state of affairs, largely unhelpful macro disclosures concerning operations, and "common sense" assessments of how trust distribution procedures seem to work.

If we are going to continue to rely upon privately-designed and administered trusts to address the asbestos injury and litigation crises, we need sufficient information made available for PUBLIC discussion. The parties that design these trust procedures again and again are in the best position to ensure that this happens. It's one thing to be forced to rely on anecdotal evidence because that's all that is available; it's another when that's all you choose to make available. Indeed, as we saw in the asbestos injury conspiracy, it speaks volumes about the reliability of the "evidence" deemed suitable for public consumption.

Guestblogger this week: S. Todd Brown - PointOfLaw Forum

I'm pleased to announce that S. Todd Brown, an associate professor at Buffalo Law School, will be joining us as guestblogger this week. He's practiced at such leading law firms as Jones Day and Wilmer Cutler Pickering Hale and Dorr, and his writings have often focused on the intersection of bankruptcy and mass torts, a subject of perennial interest to us here. He's also profiled in a recent issue of the UB Law Forum.

Here's a little exercise using Google News Search, seeking the terms: "automated, external, defibrillator, saved, life." We learn that indeed the devices do -- save lives, that is. For example...

It just occurred to us to conduct the search after looking through the litigation groups meeting at the American Association for Justice's upcoming summer convention in San Francisco. And there it is, 10 a.m., Tuesday, July 28, "Automated External Defibrillator (AED) Litigation Group Meeting."

Wonder how many lives that meeting will save?

Which is our way of offering the list of the 75 litigation group meetings cited in the AAJ's convention schedule:

NuvaRing Litigation Group Meeting
Welding Rods Litigation Group Meeting
Vaccines Litigation Group Meeting
Pain Pump-Chondrolysis Litigation Group Meeting
Child Sex Abuse Litigation Group Meeting
Complex Regional Pain Syndrome (RSD) Litigation Group Meeting
Nursing Home Litigation Group Meeting
Benzene/Leukemia Litigation Group Meeting

Payouts by bankrupt asbestos trusts - PointOfLaw Forum

Despite the famously opaque nature of the administration of bankrupt asbestos defendants' trusts, Kirk Hartley has been doing some digging and finding surprisingly large payout numbers (more than $700,000/claimant) in one case whose details made it into court documents.

Asbestos claimants and the GM bankruptcy - PointOfLaw Forum

Kirk Hartley has been tracking developments.

Left holding the asbestos bag - PointOfLaw Forum

Longtime asbestos defendants enter bankruptcy trusts, while smaller not-yet-bankrupt companies can be left holding the bag, explains prominent reformist attorney Mark Behrens [Madison County Record].

Around the web, June 3 - PointOfLaw Forum

  • "Court of Appeals Affirms Exclusion of Junk Science In Mold Case" [Cal Biz Lit]
  • "GM Bankruptcy Underway and the Asbestos Plaintiffs' Lawyers Already Have Appeared in Force" [Hartley]
  • On Thursday, House Judiciary holds hearing on trial-lawyer-backed bill to crack open settlement confidentiality and protective orders [Wood, ShopFloor]
  • Institutional investors vs. Royal Dutch Shell: sign of things to come in European class actions? [Ben Hallman/AmLaw Litigation Daily, Karlsgodt]
  • In hot pursuit of drywall: "Florida builders and the not-so-Great Wall of China" [James Thorner, Popular Mechanics via ShopFloor]
  • Jump into a schoolyard fight? You probably can't win damages from the school for your injury [Hochfelder]

"Skinner Asbestos Bankruptcy Rejected As Collusive" - PointOfLaw Forum

Kirk Hartley has the story on a Western District of Pennsylvania bankruptcy judge's decision. For a few samples of our criticism of less-than-fully-adversarial practices in asbestos bankruptcies, see links here, here, and here. Related post here (summarizing article in Columbia Business Law Journal by S. Todd Brown of Temple). More: ABA Journal.

Asbestos lawyers in the Chrysler bankruptcy - PointOfLaw Forum

They could exert significant influence, as Kirk Hartley explains at GlobalTort (with a followup).

No more prepack asbestos bankruptcies? - PointOfLaw Forum

We and others (above all Prof. Lester Brickman) have been consistently critical of the gamesmanship and power plays involved in the "prepackaged" bankruptcies of various companies sued in asbestos litigation, in which asbestos plaintiff's lawyers have sometimes effectively seized control of the bankruptcy process (in cooperation with current management) to frustrate the legitimate interests of non-asbestos creditors and insurers. Now New Jersey bankruptcy judge Kathryn Ferguson has dismissed the attempted prepack of the Congoleum Corporation, a flooring manufacturer, in what American Lawyer's David Bario calls a "feisty" ruling (PDF) that could discourage such attempts in future. Check out Bario's article for reminders of the far from attractive conduct of (among others) Joe Rice of Motley Rice and Perry Weitz of the Sheldon Silver law firm, Weitz & Luxenberg.

Around the web, December 16 - PointOfLaw Forum

All-blog edition:


  • "Deeply troublesome" decree by New York regulator: directors' and officers' insurers can't disclaim duty to defend, no matter how explicitly [LaCroix]
  • Supreme Court grants certiorari on question of whether bankruptcy court can stop asbestos injury suits [Burch, Mass Tort Lit]
  • A passing moment of anger after a day that didn't go right, post-EFCA -- and then the union's got your card to hold on to [Laboring at the Institute via Fox, Jottings]
  • One source of demand for financial regulation: "Many in the securities business want investors who feel safer than they are." [Carney]
  • Britain's experiment with consumer class actions isn't getting much refund money into consumer hands, but it's not as if our system excels at that either [Karlsgodt]
  • First step for lawyer to take in defending any lawsuit: the "Stupid Call". [CalBizLit]

The report has just been published. Here's a link to the free pdf file. http://www.ojp.usdoj.gov/bjs/pub/pdf/cbjtsc05.pdf

Highlights:

1) In 2005 plaintiffs won in more than half (56%) of all general civil trials concluded in state courts.

2) Interestingly, plaintiffs were significantly more likely to win bench trials compared to jury trials. [Perhaps plaintiffs choose juries when their cases are much weaker, however?]

3) Approximately 4% of victorious plaintiffs won over $1,000,000. The median tort award was $24,000.

4) The total number of civil trials declined by over 50% from 1992 to 2005 in the nation's 75 most populous counties. Tort cases decreased the least (40% -- (perhaps because of asbestos bankruptcies) while real property (77%) and contract (63%) cases registered the largest declines.

5) In the 75 most populous counties, two tort categories saw marked increases in median jury awards. This was particularly the case for product liability trials, where median awards were about 5 times higher in 2005 than in 1992, and for medical malpractice trials, where median jury awards more than doubled from $280,000 in 1992 to $682,000 in 2005 (an increase over 60% greater than inflation alone would predict).

Around the web, October 24 - PointOfLaw Forum

  • If you think the card check provisions in EFCA are outrageous, wait till you hear about the mandatory arbitration [Kirsanow, NRO Corner]
  • "Prohibition of Excessive Overtime in Health Care Act will Exacerbate Nursing Shortage" [Pennsylvania Labor and Employment Blog]
  • Suppose plaintiffs win Wyeth v. Levine and Vermont juries can second-guess FDA on medication's labeling for IV use. What then? [ER Stories]
  • Other pre-emption issues are bustin' out all over [Beck & Herrmann (U.S. Supreme Court, food regulation), NLJ (NHTSA, seat belts), Mundy/WSJ, Carter/ABA Journal (various federal agencies), Cal Biz Lit (autos, California court of appeal)]
  • Must be those awful deregulators at work: workplace injuries decline for sixth consecutive year [Henke, Next Right via Friedersdorf]
  • Emergence of Delaware as favored asbestos plaintiff's forum could dull the state's edge in corporate law, gee thanks Senator Biden [Bainbridge, WSJ edit, SE Texas Record]
  • Annulling credit default swaps as void: could this be Ben Stein's worst idea yet? [Salmon]

A "total money machine" - PointOfLaw Forum

David Bernick, an attorney for defendant/debtor W.R. Grace, tells the bankruptcy court about the mechanics of asbestos litigation.

Behind one Texas asbestos case - PointOfLaw Forum

Russell Allen et al vs. American Petrofina Inc. et al was filed in 1987 by attorney Joseph Blanks, then of the prominent Beaumont, Texas firm of Reaud, Morgan & Quinn and named 101 plaintiffs and 10 defendants. Its two-decade history since then is told by Scott Sabatini in the pages of the (U.S. Chamber-backed) Southeast Texas Record, in a lengthy account that touches on many of the key problems of asbestos litigation. Among the points touched on: the vast growth of the caseload, constantly running ahead of defendants' hopeful assumptions; the increasingly "colorful, provocative and accusatory" tone of plaintiffs' filings; the assemblage of relatively meritorious and relatively unmeritorious cases into unified convoys, to the tactical benefit of the latter (the "aggregate settlement model"); the eagerness of many business defendants to settle even as it became evident that dubious cases were multiplying; the bankruptcy of leading defendants and successful refocusing on others who had been more peripheral; and, finally, the legislative reaction in Texas, turning one of the nation's most attractive states for asbestos lawsuits into one of its most inhospitable. Among those interviewed: noteworthy defense-side attorneys Bill Skepnek and Mark Behrens.

We've discussed Lester Brickman's important work on rampant fraud and misdiagnosis in asbestos, silicosis and fen-phen mass screenings, and now the Cardozo lawprof is out with an SSRN paper entitled "The Use of Litigation Screenings in Mass Torts: A Formula for Fraud?" with some sobering estimates of the scope of the problem. Abstract:

Lawyers obtain the "mass" for some mass tort litigations by conducting screenings to sign-up potential litigants en masse. These "litigation screenings" have no intended medical benefit. Screenings are mostly held in motels, shopping center parking lots, local union offices and lawyers' offices. There, an occupational history is taken by persons with no medical training, a doctor may do a cursory physical exam, and medical technicians administer tests, including X-rays, pulmonary function tests, echocardiograms and blood tests. The sole purpose of screenings is to generate "medical" evidence of the existence of an injury to be attributed to exposure to or ingestion of defendants' products. Usually a handful of doctors ("litigation doctors") provide the vast majority of the thousands and tens of thousands of medical reports prepared for that litigation.

By my count, approximately 1,500,000 potential litigants have been screened in the asbestos, silica, fen-phen (diet drugs), silicone breast implant, and welding fume litigations. Litigation doctors found that approximately 1,000,000 of those screened had the requisite condition that could qualify for compensation, such as asbestosis, silicosis, moderate mitral or mild aortic value regurgitation or a neurological disorder. I further estimate that lawyers have spent at least $500 million and as much as $1 billion to conduct these litigation screenings, paying litigation doctors and screening companies well in excess of $250 million, and obtaining contingency fees well in excess of $13 billion.

On the basis of the evidence I review in this article, I conclude that approximately 900,000 of the 1,000,000 claims generated were based on "diagnoses" of the type that U.S. District Court Judge Janis Jack, in the silica MDL, found were "manufactured for money."

Criminalizing asbestos cases - PointOfLaw Forum

Given the Supreme Court's high-profile rulings in Heller and the Exxon Valdez cases, little national media attention was paid to the Court's June 23rd decision to not consider W.R. Grace's challenge to the criminal indictments of top executives. The Missoulian quotes W.R. Grace spokesman Greg Euston: "We are disappointed. We take this seriously. When Judge Molloy sets a trial date, we will be prepared to defend ourselves." (Washington Post story.)

The criminal case begin with a federal grand jury indictment in Montana in February 2005, charging six executives and the company with conspiracy, Clean Air Act violations, wirefraud and obstruction of justice. (Indictment here; Seattle Post-Intelligencer story here.) As the case progressed, the Ninth Circuit overturned the trial court's decision to exclude evidence about those forms of asbestos that do not fall within the EPA's definition.

The National Association of Manufacturers -- my employers -- the American Chemistry Council and National Association of Criminal Defense Lawyers filed an amicus brief in May (available here) asking the Supreme Court to hear the case. The brief argued that the prosecution used a definition of asbestos far broader than the long-standing definition in EPA's regulations, subjecting the defendants to potential jail time without due process. The brief also contended that the Ninth Circuit ruling threatened to treat defendants there more harshly than those elsewhere, using broad interpretations of hazardous materials, and refusing to recognize the rule of lenity, which requires that criminal statutes be clear and provide fair warning. It also undermines the requirement of mens rea when assessing blame, which will cause businesses to over-invest in regulatory compliance.

The U.S. District Court in Montana maintains a website with all the case documents here. And, of course, the criminal case is separate from the civil personal injury claims, which W.R. Grace settled in April in a deal worth about $1.8 billion, settlements which will allow the company to emerge from the bankruptcy declared in 2001.

The media coverage has been interesting in its own right. The W.R. Grace case is understandably high profile in Montana -- the vermiculite was mined in Libby - and the Seattle Post-Intelligencer has made the company the subject of an aggressive multiyear reporting initiative (i.e., campaign). There was a special report by the PI, "Uncivil Action," about the suffering of the workers and others associated with the Libby mine - health and economic pain - as well as the package, "Forgotten Killer," about the legacy of asbestos. And here's a lengthy chronological list of all the stories between 1999 and 2002. Putting my former cynical reporter's hat on, I'd say, "All designed to win the Pulitzer." (Hopes dashed.) But in any case, the coverage must have certainly influenced the major players.

We mention the coverage after reading the blog post by the PI's national correspondent Andrew Schneider -- author of the book on Libby and W.R. Grace, "An Air that Kills" - in commenting on the Supreme Court's decision last week: "After almost three years of stalling, questionable court rulings and a flood of appeals, it looks like the criminal trial of W.R. Grace and six of its top executives may actually happen."

One man's stalling is another man's due process, one might observe.

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