The Latest on Reform Efforts to Curtail Asbestos Tort Litigation

This article summarizes the recent developments
dealing with the incredibly high volume of asbestos lawsuits that are being
filed by plaintiffs that have been exposed to asbestos, but do not physically
manifest any asbestos-related illnesses or symptoms.

</p><p>There
is virtually universal agreement that asbestos lawsuits have caused a plethora
of problems in U.S. courts, some of which directly affect the world of
bankruptcy. However, there is no consensus approach for cleaning up this
epidemic of asbestos litigation. Instead, two countervailing approaches for
solving these problems have been developed, and it is uncertain which one, if
either, will emerge from the 108th Congress.

</p><h3>New Bill Introduced</h3>

<p>On
Feb. 14, 2003, S. 413, more commonly known as the "Asbestos Claims
Criteria and Compensation Act of 2003" (the Act), was introduced by Sen.
Don Nickles (R-Okla.). In addition to presenting a viable approach to solving
the problems arising from mass asbestos litigation, discussed <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&amp;vr=2.0&amp;cite=2…;, the Act also contains a helpful set of findings
that outline the problems that exist as a result of the litigation.

</p><p>As
the Act explains, asbestos is a mineral that was commonly used in the United
States during the middle of the twentieth century for things such as insulation
and fireproofing. Primarily between World War II and the 1970s, millions of
blue-collar workers and others were significantly exposed to the harmful
mineral, which over time has been linked to both malignant illnesses such as
mesothelioma and lung cancer, and nonmalignant conditions such as mineral
asbestosis and pleural plaques. During the 1970s, as the links between asbestos
and various illnesses were growing, the Occupational Safety and Health
Administration (OSHA) created regulations governing workplace exposure to
asbestos. As a result of the increased awareness of the detrimental effects
linked to asbestos, the use of and exposure to asbestos has declined
significantly since 1980.

</p><p>However,
as the Act states, the country and the courts are still feeling the effects of
the peak amount of asbestos exposure from the Cold War era. Today, many
Americans are suffering from asbestos-caused cancers or nonmalignant
disabilities. As a result of these harms, both state and federal courts have been
swamped with a high volume of litigation against asbestos tort-feasors.

</p><p>The
Act lists a number of problems that have resulted from this high amount of
litigation. One problem is that this extraordinary volume of cases imposes a
tremendous strain on both state and federal courts. Second, asbestos litigation
has played a part in forcing more than 60 companies into bankruptcy, and the
rate of asbestos-related bankruptcies continues to increase. Third, an
estimated 50,000 to 60,000 job losses have occurred due to asbestos litigation.
Fourth, employees of asbestos defendants will average a 25 percent loss in
value on their 401(k) plans because of loss of stock value. Fifth, courts using
joinder or consolidation processes in an attempt to effectively manage their
overburdened dockets are sometimes creating other problems such as fostering a
bandwagon effect where exposed plaintiffs who are not sick see an opportunity
to "hop on the litigation train" seeking riches. Sixth, many
plaintiffs have resorted to "forum shopping" to file in venues that
have developed pro-plaintiff reputations, notwithstanding the fact that these
plaintiffs often do not have legitimate ties to such forums.

</p><p>Most
everyone involved in the legal community or the asbestos industry have concluded
that these foregoing problems will likely persist unless some major legislative
reform is enacted. Therefore, asbestos reform has become a major priority of
the 108th Congress. However, enactment of such reform will not be easy because
two competing schools of thought are supporting two vastly different approaches
for suppressing rampant asbestos litigation. These two competing proposals are
commonly known as the "medical criteria" approach and the
"trust fund" approach.

</p><h3>Medical Criteria Approach</h3>

<p>While
a portion of this mass asbestos tort litigation involves plaintiffs alleging
non-malignant disabilities (non-malignant plaintiffs) who are legitimately ill,
most of the litigation involves non-malignant plaintiffs who do not physically
manifest any symptoms of harmful asbestos exposure. For example, according to a
recent RAND report on the costs of asbestos litigation, published in 2002, over
the last five years up to 90 percent of the asbestos lawsuits filed have
involved non-malignant plaintiffs who have incurred some exposure to asbestos,
but are not physically manifesting any symptoms.

</p><p>The
Act introduced by Sen. Nickles and supported by the American Bar Association
embodies the medical criteria approach, which is intended to weed out these
non-malignant plaintiffs who are not manifestly ill by forcing any asbestos
plaintiff to first establish that they have been inflicted with a
"physical impairment" as defined by the Act. The Act relies
primarily on objective evidence and standards that are set forth in great
detail in the Act. For example, qualified physicians rely on pulmonary function
testing, chest x-rays and the American Medical Association's <i>Guides to
the Evaluation of Permanent Impairment</i> (Fifth Edition 2000) when making their diagnosis of the patient to determine
whether they have a physical impairment related to asbestos. This primarily
objective criteria is intended to accomplish the Act's goals of assigning
priority, attention and resources to malignant plaintiffs' cases or cases
with nonmaligant plaintiffs who are truly ill, and curtailing the problems
resulting from the epidemic of mass asbestos litigation, such as the alarming
rise of bankruptcy filings by businesses. Also relevant is the fact that the
Act effectively tolls the statute of limitations for plaintiffs who are not
found to have a physical impairment. Such plaintiffs therefore will not feel
compelled to rush to court to protect their prospective legal remedies and will
not be time-barred from suing if they are not yet ill.

</p><p>However,
the medical-criteria approach is subject to criticism. One criticism is that
the medical criteria does not rely entirely on objective evidence. For example,
the results of breathing tests used under this approach to determine the
existence of a nonmalignant plaintiff's physical impairment can be skewed
by the patient-plaintiff's poor performance, which may or may not have
been feigned. Another critical consideration is the added layer of contested
litigation that may result from the Act's physical impairment
requirement, since defendants will likely contest whether the plaintiffs suing
them have made their respective <i>prima facie</i> case showing a physical impairment. The evidentiary hearing for such a
dispute may be lengthy if it involves the analysis of medical tests,
plaintiff's exhaustive medical history and/or convoluted expert testimony
from multiple doctors, and therefore will erode more of the courts'
scarce docket time. A final concern expressed by critics is that this approach
may exclude legitimate victims. For example, in a March 5, 2003, news account
published by Reuters, Susan Cornwell reported that Melvin McCandless, a North
Carolina man who suffers from asbestosis, a scarring of the lungs, testified to
the Senate Judiciary Committee that the medical criteria as set forth in the
Act would exclude any claim from him. Cornwell also reported that Sen. Max
Baucus (D-Mont.) told the committee that the medical-criteria approach would
exclude victims from the town of Libby, Mont., where hundreds have died from
exposure to asbestos-tainted dust from a vermiculite mine.

</p><h3>Trust Fund Approach</h3>

<p>While
many champion the medical-criteria approach as a viable solution for the
asbestos litigation problems, other influential organizations such as the
AFL-CIO and the Association of Trial Lawyers of America are backing an
alternative solution commonly referred to as the trust fund approach, which
would utilize a global trust fund to pay medical costs of victims who have
become ill as a result of their exposure to asbestos. A group of defendants
known as the Asbestos Study Group has been discussing the details of this
trust-fund approach with various unions. The study group's members
include Dow, Ford Motor Co., General Electric, General Motors, Halliburton, Honeywell,
Pfizer and Viacom.

</p><blockquote><blockquote>
<hr>
<big><i><center>
Most everyone involved in the legal community or the
asbestos industry have concluded that these foregoing problems will likely
persist unless some major legislative reform is enacted.
</center></i></big>
<hr>
</blockquote></blockquote>

<p>The
overall size of the program would likely be set by statute, and asbestos
defendants and insurance carriers would pay into the system on a no-fault,
yearly basis to cover the trust's annual costs. Estimates of the
trust's overall funding ranged from $150 billion to $300 billion and
would pay qualifying victims for a range of asbestos-related diseases.
Proponents of this approach, such as Sen. Baucus, envision such a trust fund to
be similar to the government's Black Lung Trust Fund for coal miners.

</p><p>While
the trust fund approach is well-intended, it too faces criticisms. One concern
that has been publicly expressed is how much money must be contributed and over
what period of time such contributions will be made. For example, Sen. Orrin
Hatch (R-Utah) has indicated that he could not support a trust fund that did
not have a cap on overall liability.
Without setting a ceiling, defendants participating in the trust fund will
still face the risk of bankruptcy.

</p><p>Even
assuming that an agreement can be reached on the issue of the amount necessary
to fund the trust, the defendants participating in the trust must also be able
to agree on how to apportion the amount of contributions between the various
defendants funding the trust. Critics say asbestos manufacturers and other
companies funding the trust would never agree on their respective trust share or contribution amount that would be necessary to fund the trust. Still
another concern is how to determine the amount each victim gets. Other than the
relatively objective bright-line distinction between malignant victims and
non-malignant victims, it is unknown what other factors would be considered in
determining the amount of a particular victims award. Because there is a degree
of subjectivity in determining the extent of an asbestos-related injury, it is
possible that the courts would end up with an added round of litigation where
plaintiffs would dispute the degree of their illness in hope of increasing
their awards. Moreover, the utilization of too many factors in determining a
plaintiff's entitled compensation could lead to preventing legitimately
ill plaintiffs from receiving a distribution.

</p><h3>What Does the Future Hold?</h3>

<p>We
don't know what asbestos reform, if any, will be passed by the 108th
Congress. What we do know is that there are a host of problems that have
developed due to the extraordinary volume of asbestos lawsuits, and that there
are at least two viable approaches that may help solve these problems. While
both approaches have problems of their own, these problems pale in comparison
to the present set of problems related to chronic mass asbestos litigation.
Moreover, the latter set of problems will likely persist and worsen if reform
of some sort is not implemented. Therefore, logic would dictate that Congress
should do something rather than nothing.

</p><p>If
public comments are any indication, it is fair to speculate that logic may
actually prevail as proponents of each approach speak of compromise. Susan
Cornwell reported in her March 5, 2003, story that Jonathan Hiatt, the
associate general counsel of the AFL-CIO, said talks with major asbestos
defendants and insurers left him optimistic that agreement among them was
possible. Notwithstanding his strong support for implementing reform using the
medical criteria approach, Sen. Hatch likewise has eluded to the importance of
compromise in a recent speech to a diverse group of asbestos reform lobbyists
that included defendant companies, insurers, unions and legal groups.

</p><p>Stay tuned for further developments in this area of the law.

</p><p><b>Author's Note:</b> A recent Supreme Court ruling
dealing with asbestos claims will likely add fuel to the fire calling for
legislative reform of asbestos litigation. In <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&amp;vr=2.0&amp;cite=2…
&amp; Western Railway Co. v. Ayers,</i> 2003 WL
888363</a>, the Court upheld a $4.9 million award to six
retired railroad employees who sued Norfolk Southern Corp. under the Federal
Employers' Liability Act (FELA), an old federal law that governs employee
suits against railroads. In its 5-4 decision consisting of an unusual majority
(Ginsburg, Stevens, Scalia, Souter and Thomas), the Court ruled that exposed
railway workers can win damages for their reasonable fear of eventually
contracting cancer. If the majority had held otherwise, the $4.9 million award
would have likely been reduced significantly, and a deterrent against future
"fear of cancer" lawsuits would be in place. Instead, the
Court's decision allows a finite pool of money to continue being eroded
by nonmalignant plaintiffs. Such erosion will, in turn, leave future asbestos
claimants who are stricken by serious cancer with little or no money to pursue
for their legitimate anguish.

</p><p>Although
this decision did not derail the asbestos litigation train, there is some minor
consolation that the Court recognized as it did previously in <a href="http://www.westlaw.com/find/default.wl?rs=CLWD3.0&amp;vr=2.0&amp;cite=5…
v. Fibreboard Corp.,</i> 527 U.S. 815, 821, 119
S.Ct. 2295 (1999)</a>, that this case was part of the
"elephantine mass of asbestos cases" that "defies customary
judicial administration" and calls for reform. <i>Norfolk</i> at 17. However, the Supreme Court maintained its
view that Congress, not the courts, must enact the much-needed reform. Time
will tell if Congress heeds the Court's advice.

</p><hr>
<h3>Footnotes</h3>

<p>^{<small><a name="1">1</a></small>} Board-certified in business bankruptcy by the American Board of Certification. <a href="#1a">Return to article</a>