Asbestos: State Solutions

1. Asbestos: State Solutions Phil Goldberg Shook, Hardy & Bacon L.L.P.

2. Where We Are Today • US Supreme Court: “asbestos-litigation crisis.” • 300,000 pending claims. • $70B spent on claims through 2002. • Future costs: $130B-$195B (RAND, 2005). • 73 bankruptcies – and counting.

3. Asbestos Bankruptcies • Snowball effect from “piling on” nature of liabilities. • 37 filings in 1970s, 1980s & 1990s. • 36 filings from 2000 to mid-2004. • Nobel Prize economist Joseph Stiglitz (2003) • Bankruptcies = 60,000 layoffs between 1997 and 2000. • 25% reduction in employee retirement assets. • Nat’l Economic Research Associates (2003) • Workers, communities, and taxpayers will bear costs.

4. Peripheral Defendants • 1982 = 300 defendants • 2005 = 8,500 defendants • Richard Scruggs: “endless search for a solvent bystander.” • W.S. Journal: “companies far removed from the scene of any putative wrongdoing.”

5. Asbestos Litigation Phases • Establish Litigation (1970s-early 1980s) • Focus on cancer cases (mid 1980s-mid 1990s) • Recruit Unimpaireds (mid 1990s-2005) • Back to the Future?

6. Hallmarks of the“Unimpaired” Phase

7. Most Claimants Are Not Sick • Up to 90% of claimants have little/no impairment. • Claimants with nonmalignant conditions account for most of the growth in claims in recent years. • Mass Screenings: • “Find out if YOU have MILLION DOLLAR LUNGS!” • A.G. Bell: driving “claims by healthy plaintiffs.”

8. Mass Screenings = Unreliable Claims • Dr. Lawrence Martin: “[C]hest x-rays are not read blindly, but always with the knowledge that the lawyer wants to file litigation on the worker’s behalf.” • Dr. Gitlin/Johns Hopkins Study: plaintiffs’ x-ray readers found abnormalities in 95.9% of films used to support legal claims; independent radiologists found abnormalities in only 4.5% of the cases (2004). • Scholarship by Judy Pendell, AEI-Brookings Joint Center.

9. Non-Sick Take From Sick • Manager of the federal asbestos docket: “Only a very small percentage of the cases filed have serious asbestos-related afflictions,” but they “are prone to be lost in the shuffle with pleural and other nonmalignant cases.” • Steven Hantler, DaimlerChrysler: “The tragedy is that as plaintiffs’ lawyers enroll the healthy into their lawsuits in order to line their own pockets, less money is available for those who are actually sick and dying.” • Manville Trust is paying just five cents on the dollar to asbestos claimants; Celotex and Eagle-Picher trusts have reduced payments, too.

10. Lawyers for Cancer Victims Agree • Matthew Bergman, Seattle: “the genuinely sick and dying are often deprived of adequate compensation as more and more funds are diverted into settlements of the non-impaired claims.” • Peter Kraus, Dallas: Non-sick are “sucking the money away from the truly impaired.” • Randy Bono, Madison County: “Getting people who aren’t sick out of the system, that’s a good idea.” • Terrence Lavin, IL State Bar President: “Members of the asbestos bar have made a mockery of our civil justice system and have inflicted financial ruin on corporate America by representing people with nothing more than an arguable finding on an x-ray.”

11. Asbestos Litigation Rulings& Other Reforms

12. No Cause of Action for Unimpaireds • Maine (1986) • Arizona (1987) • Hawaii (1990) • Delaware (1994) • Pennsylvania (1996) • NJ, CT, NC?

13. Minnesota (2005) (coordinated litigation) St. Clair Co., IL (2005) Portsmouth, VA (2004) Madison Co., IL. (2004) Syracuse, NY (2003) Massachusetts (1986) (coordinated litigation) Cook Co./Chicago (1991) Baltimore City (1992) Inactive Dockets RAND (2005): one of the “most significant developments in asbestos processing” has been the “reemergence of deferred dockets as a popular court management tool.” • New York City (2002) • Seattle, WA (2002)

14. 3 fundamental parts • Work history • X-ray • Pulmonary Function Test • Other factors • Latency • Causation • Doctor-Patient Relationship Medical Criteria Legislation • States enacted • Ohio (2004) • Georgia (2005) • Florida (2005) • Texas (2005)

15. Addressing Unimpaired Asbestos Claimant Filings

16. Mass Screenings: On Way Out • Federal Silica MDL Litigation: Judge Janis Graham Jack dismissed nearly 10,000 claims due to fraud. • Manville and Eagle-Picher Trusts: will no longer accept screenings by doctors/ facilities in the Jack opinion. • Federal prosecutors in Manhattan are considering criminal charges and may be investigating plaintiffs’ asbestos firms involved in G-1 Holdings (GAF Corp.) bankruptcy case. • Congressional investigation (2005).

17. Other Tort Reforms • Joint Liability Reform • Noneconomic Damages Reform • Punitive Damages Reform • Innocent Seller Reform • Appeal Bond Reform • Venue Reform • Trial Consolidation Reform

18. Compare with State Court Filings

19. Future Direction ofAsbestos Litigation • Tort system: hostile to unimpaired claims • Bankruptcy courts: too long, failure of pre-packs • Congress: still no action • State legislation: creating solutions (Medical criteria bills in Mississippi & California?)

20. Future Direction ofAsbestos Litigation • Back to the Future: Focus on cancer cases • Number of claims ; Value of claims  • Have lawsuit will travel to ___ (DE, CA?) • Searching for the “next asbestos”? • Silica (unlikely after Judge Jack’s opinion) • Welding rods; Benzene; Pharmaceuticals • But “next asbestos” is probably asbestos

21. Asbestos: State Solutions Phil Goldberg Shook, Hardy & Bacon L.L.P.

22. Addendum: Solutions • Joint Liability Reform • Noneconomic Damages Reform • Punitive Damages Reform • Innocent Seller Reform • Appeal Bond Reform • Venue Reform • Trial Consolidation Reform

23. Joint Liability Reform • Problem: piling on of claims through joint liability can force existing defendants into bankruptcy and fuel the spread of the litigation to “peripheral defendants.” • Most states have abolished or modified the doctrine of full joint liability, but not all states have enacted reforms and loopholes remain in some states. • Reform: minimally at-fault defendants should not have to pay more than their “fair share” of the harm. • Juries could be instructed as to the effects of joint liability on defendants.

24. Noneconomic Damages Reform • Problem: pain and suffering is increasingly being used as a surrogate for punitive damages, increasing such awards and allowing for larger punitive damages awards based on ratio of punitive to compensatory damages. • Reform: require that pain and suffering awards serve their true compensatory purpose and are reasonable under the circumstances. • ALEC’s Full & Fair Noneconomic Damages Act requires heightened judicial review of noneconomic damages; it does not cap pain and suffering. • Ohio enacted the ALEC approach in 2004.

25. Punitive Damages Reform • Problem: punitive damages can strip defendants of their assets and jeopardize recoveries for later-filing claimants. Plaintiffs can use threat of punitive damages verdict at trial as a “wild card” to produce inflated settlements. • Reform: ensure proportionality between punitive and compensatory damages or prevent repetitive punishment based on same act or course of conduct. • Managers of the federal asbestos docket and New York City asbestos litigation, among others, have deferred, severed, or stayed punitive damages claims. • Florida abolished punitive damages in asbestos and silica cases in 2005.

26. Innocent Seller Reform • Problem: plaintiffs’ lawyers name innocent seller defendants to oust federal courts of diversity-of-citizenship jurisdiction and stay in state court. • Reform: product sellers (e.g., retailers, distributors, and wholesalers) should only be subject to liability if they are directly at fault for the plaintiff’s harm. • Innocent seller reforms have been enacted in a number of states. • Florida enacted innocent seller reform legislation for asbestos and silica cases in 2005.

27. Appeal Bond Reform • Problem: Exorbitant appeal bond requirements can prevent defendants from appealing unfair rulings and judgments that are excessive and potentially unconstitutional. • Reform: modify appeal bond rules to preserve defendants’ access to appellate courts. • Most jurisdictions have enacted legislation or changed court rules to limit bond requirements. • Some reforms apply to all civil defendants, while others are limited to tobacco Master Settlement Agreement signatories and their successors and affiliates.

28. Venue Reform • Problem: litigation tourists file claims in “magic jurisdictions” or “Judicial Hellholes.” Often, the claims have little or no logical connection to the forum. • Reform: provide that a claim may only be filed in the state and county where the plaintiff lives or was exposed. • Alabama, Florida, Georgia, Mississippi, South Carolina, Texas, and West Virginia, among other states, have enacted venue reform.

29. Trial Consolidation Reform • Problem: disparate claims are joined for trial, either in mass consolidations or in clusters. The sick and non-sick are lumped together at trial, forcing defendants to settle because they lack any real ability to defend the cases. • Reform: permit consolidation of claims at trial only if all parties consent. • Georgia and Texas enacted trial consolidation reform for asbestos and silica cases in 2005.

30. Beyond Legislation • Tort reform in the courts: Many reforms may require legislation, but some have been and can be achieved in state courts. The courts should not be overlooked; even in states that have enacted civil justice reforms, the courts make most of the law. • Courts should be encouraged to apply sound science and traditional principles of causation in mass tort litigation. • Defendants should support public and judicial education efforts.

31. Asbestos: State Solutions Phil Goldberg Shook, Hardy & Bacon L.L.P.