Asbestos Absurdity

Editorial comment: Although FIN strongly believe corporate polluters and killers should pay for their crimes, the asbestos litigation situation has long since surpassed the point of absurdity. People who are not ill are getting paid by companies who likely had no role in their injury, forcing them into bankruptcy. These greedy lawsuits dishonor the legitimately injured, the dying, and those who already gave their lives to put a roof over their family's head and food on the dinner table. These mockeries of justice tie up the courts and take limited restitution money away from the truly deserving workers and their families. Continuation of this trend will mean that fiberglass victims will get nothing when courts finally start awarding damages for "man-made asbestos." Continuation of this inane feeding frenzy could well prompt a legislative and popular movement toward tort reform which will put consumers and workers at greater risk for decades to come.

As Asbestos Mess Spreads, Sickest See Payouts Shrink

By SUSAN WARREN
Staff Reporter of THE WALL STREET JOURNAL
This article ran in the Wall Street Journal on April 25.

Soon after Jimmie Harrison died in early 2000 of asbestos-related cancer, his wife fulfilled one of his last wishes: She sued a raft of asbestos-product makers.

As recompense for the death of her husband, a retired 76-year-old pipe fitter, Ruth Harrison was awarded an impressive-sounding $4 million in settlements. But she has seen little of that so far, and now her chances of seeing much more are shrinking. She has sold her car and home in Tulsa, Okla., to help pay a stack of bills.

Since Mrs. Harrison filed suit in an Illinois state court, 14 of the 27 defendants she named have sought bankruptcy-court protection -- two on the same day this February. "I lost a million dollars that day," she says.

The asbestos battleground has shifted. In the past two years, desperately ill plaintiffs have been eclipsed by a huge and growing number of relatively healthy people seeking awards for possible future illnesses. Since January 2000, the wave of less-severe claims has pushed at least 20 companies that sold or used asbestos products into bankruptcy protection. That's on top of 40 other asbestos-related corporate bankruptcies since the mid-seventies.

The upshot: There are fewer unencumbered companies to pay claims. The sickest asbestos victims are now collecting far less than comparable victims did in the 1990s. And the whole asbestos mess, which was supposed to be largely resolved by now, instead is spreading and could drag on for decades.

The morass has increasingly pitted the interests of mortally ill plaintiffs against those who are much healthier. Dallas lawyer Peter Kraus, who files asbestos suits only for cancer victims, condemns rivals who represent those who aren't sick. "They're sucking the money away from the truly injured," he says.

"You can't help but feel a little bit angry," says the widow Mrs. Harrison of suits on behalf of those who aren't suffering.

Last year alone, 89,438 new claims were filed against the Manville Personal Injury Trust, which is a good proxy for the entire asbestos scene because almost all claimants seek payment from the trust. The trust, which pays liabilities on behalf of Johns Manville Corp., a maker of construction products, saw new claims double in 2000, and rise by 54% last year. Over the trust's 14-year life, 11% of claims have involved cancer. Last year, only 6.6% did.

Claimants obtain money from the trust through an administrative process in which injuries are assigned dollar values. Because of the mounting number of claims on behalf of people who aren't sick, the trust in June cut its payment rate in half across the board, to five cents on the dollar, for an overall average payout of $2,000 a claim.

Some companies that had only attenuated dealings with asbestos now find themselves swamped by lawsuits because other potential targets are shielded by Chapter 11. While complaining that plaintiffs' lawyers are abusing the legal system with legions of dubious claims, some companies continue to fight even the most seriously harmed plaintiffs -- a response that adds further delay and expense. Meanwhile, perennial discussion of congressional intervention to limit asbestos litigation appears to be bogged down in a broader logjam over proposals to curb civil lawsuits.

Insidious Diseases

The recent exacerbation of the asbestos problem stems partly from the insidious nature of the diseases involved. Commonly used as a fire retardant and insulator from the 1900s through the 1970s, asbestos is a mineral made of fibers that can lodge in the lungs and cause mesothelioma, an especially deadly cancer. Severe lung scarring from inhaled asbestos fibers can progress until it slowly suffocates its victim.

But symptoms may take decades to show up, and not everyone who has scarring becomes truly sick. In the vast majority of cases, exposure to asbestos has milder effects, ranging from benign tissue changes outside the lung to scarring inside that can cause shortness of breath. Often, symptoms appear late in life, when it can be difficult to separate the effects of asbestos from those of other ailments or smoking. "Many victims are quite active and live pretty much a normal life," says Dr. William Beckett, a lung-disease expert at the University of Rochester.

William "Bud" Bishop of Fort Worth, Texas, has been diagnosed with mild asbestosis, a scarring of the lungs. Slender and athletic-looking at 55, he takes long walks to stay fit and works at his job as a city building-code inspector. This year, he enjoyed a rare Texas snowball fight with his grandchildren. But he doesn't ride his bicycle anymore because of shortness of breath, and he can't do heavy labor without stopping to rest frequently. He fears he will die early from an asbestos-related disease. He says he was exposed to the mineral almost every day in his early career as a welder, when he wrapped himself in asbestos blankets to make repairs beneath industrial boilers.

In November, Mr. Bishop received tens of thousands of dollars in settlements from a slate of more than 20 companies he had sued. "It may seem to corporate America that we're just a bunch of money-grubbers," he says, "but when I was crawling underneath those giant boilers and the bigwigs drove up in their limousines, I know damn well they knew about asbestos ."

State laws generally allow anyone with evidence of an injury to file suit against defendants whose products plausibly can be linked to the harm. Because asbestos was ubiquitous at many work sites, and plaintiffs typically can't name all of the products they were exposed to, the law allows them to sue multiple defendants -- often dozens. If some defendants are defunct or in Chapter 11, the others can be held liable for the entire amount of an award.

A suit can be based on evidence as scant as a shadow on an X-ray, seen by a single doctor hired by a plaintiff's attorney. "To an ordinary person, the idea that we're spending all this money on people who don't seem to have an impairment seems egregious," says Deborah R. Hensler, a Stanford Law School professor who has studied asbestos litigation for Rand Corp., a research group based in Santa Monica, Calif. "But in fact, we have a legal system that says these people have claims."

These claims aren't necessarily winners in court, but many companies prefer to limit legal fees and jury risks by settling. Settlement of marginal cases seemed less controversial years ago, when there were more defendants with more money to go around. The resolution of such claims has taken center stage since 2000, as thousands of relatively healthy people have lined up at the courthouse. Many realized they might have claims following mass X-ray screenings of factory workers sponsored by plaintiffs' lawyers and unions.

Babcock & Wilcox, a unit of McDermott International Inc., which filed for protection under Chapter 11 in 2000, complained in a filing last October with the U.S. bankruptcy court in New Orleans that only 9% of the 221,375 claims it faces involve cancer. Nearly 60% involve no impairment at all, the company said. Babcock, which used asbestos in the construction of power plants, had paid $1.6 billion to claimants from 1982 to 2000.

The Manville settlement trust says that two-thirds of the $320 million it disbursed last year went to people with mild symptoms or none at all. The trust says it typically pays cancer victims $2,000 to $10,000 apiece, or an average of 6.5 times as much as it pays people with less severe claims. The trust has paid a total of about $2.8 billion to 465,000 claimants so far. It has $2 billion in reserve and anticipates 1.5 million additional claims in coming years.

The Manville trust grew out of the since-concluded bankruptcy proceedings of Manville. As the onslaught of suits accelerates, more and more companies are similarly seeking the shelter of Chapter 11. While reorganizing under court protection from creditors, companies can freeze legal claims and arrange to resolve them at steep discounts.

In Beaumont, Texas, last year, 22 men diagnosed with asbestos-related lung scarring sued a similar number of companies that had made insulation and other products used at the refinery where the plaintiffs once worked. The plaintiffs collected an average of $66,000 each in settlements with 20 defendants. Two companies, USG Corp. and a unit of Federal-Mogul Global Inc., chose to go to trial, where they argued their products weren't to blame.

A jury ruled for the plaintiffs, awarding the men a total of $35.2 million, or about $1.6 million each. Following the verdict, both USG and Federal Mogul sought bankruptcy protection.

The case had an unanticipated side effect: The Mesothelioma Applied Research Foundation lost $900,000 in research donations USG had pledged before going into bankruptcy, says Christopher Hahn, executive director. His Santa Barbara, Calif., group avoids taking sides in the litigation wars, he says, but fears mesothelioma claims are being overshadowed "by the general discussion of unimpaired claims."

Fred Baron, a Dallas plaintiffs' attorney who represents a mix of clients, including those without serious symptoms, says he prefers not to debate the relative moral arguments for different categories of plaintiffs. "What I fall back on and ask is, 'What are their legal rights?' " says Mr. Baron, who helped pioneer asbestos litigation in the 1970s. His firm, Baron & Budd, now represents Mr. Bishop, the former welder with mild symptoms, among thousands of others.

In a Philadelphia federal court, Baron & Budd recently butted heads with lawyers representing only cancer victims. The issue: the legitimacy of cases generated by mass X-ray screenings. The screenings-based cases, advocated by Baron & Budd and most other plaintiffs' attorneys, are flooding the courts and "imperiling the availability of compensation to those who have been seriously injured by asbestos exposure," argued attorney Steven Kazan, who represents only cancer victims. U.S. District Judge Charles Weiner, who is presiding over thousands of consolidated federal cases, agreed, ruling that cases would be subject to dismissal if not supported by convincing evidence.

Mesothelioma, whose only known cause is asbestos , takes a brutal physical, financial and emotional toll on its victims. Yearly medical costs can easily exceed $200,000. Insurance companies typically don't pay for some treatments because they are still considered experimental.

James Crawford of Wood River, Ill., who was 57 when he was diagnosed with mesothelioma in February 2001, had surgery last year that his insurance carrier wouldn't pay for. Doctors scraped tumors from his heart and abdomen. Taking out a mortgage on his paid-off home to cover the $70,000 surgery bill "broke his heart," says Terry Crawford, his wife of 34 years. Exposed to asbestos as a factory worker years ago, he died in January, 30 days after securing a $16 million award from an Illinois state-court jury.

Her husband "wanted the companies to be responsible for what they'd done to people's lives," Ms. Crawford says. With 12 of the 32 companies that were supposed to pay now in bankruptcy court, she expects to see less than half of the award and feels that what James went through "was all for nothing."

In recent months, companies that are being sued have taken the side of the sickest victims. In comments to Wall Street analysts in late January, Dow Chemical Co.'s chief executive, Michael Parker, condemned what he said were the frivolous suits that make up the vast majority of claims against its Union Carbide unit. He also lamented delayed settlements for the truly sick. "We have the utmost of care and concern for those people," he said.

Echoing a common industry view, he said he backs a legislative solution. Most legislative proposals entail paying the sickest plaintiffs first and making others wait until they actually fall ill before they get compensation. That approach would diminish Union Carbide's payouts overall. The company reported pending asbestos liabilities of $233 million as of Dec. 31, most of it covered by insurance.

As the identity of those responsible for asbestos products is increasingly obscured by a spider-web of corporate spin-offs, mergers and acquisitions, companies defend themselves by arguing that plaintiffs have sued the wrong target. Companies often contend that plaintiffs weren't exposed to their products, or that their products didn't cause the illness in question. These defenses often entail grueling depositions, protracted exchanges of paperwork and, occasionally, taxing trials.

In February 2000, about 20 lawyers crowded into Henry Plummer's small Grand Prairie, Texas, living room for the first deposition in his suit, filed about a month earlier in Texas state court in Dallas. In a videotape of the event, the 67-year-old sat in his rocking recliner, wearing a striped Polo shirt and aviator-style glasses. White stubble covered his head, betraying recent chemotherapy.

Painstaking Recital

For seven-and-a-half hours, a series of lawyers took Mr. Plummer through a painstaking recital of his three-decade Navy career. His duties as a machinist on warships continually exposed him to asbestos in insulation, gaskets and pipe coverings.

Three months earlier, a biopsy had confirmed that fluid gathering around his lungs was caused by mesothelioma -- a word he had never heard. He called Mr. Kraus, the Dallas attorney who represents only the seriously ill. Mr. Plummer saw a suit as one last thing he could do for his family, says his wife, Eula Plummer.

In April 2000, Mr. Plummer traveled to Boston to have his left lung removed, which doctors said might grant him a few more years of life. But the surgeons found the cancer had spread to his diaphragm. Just as his strength returned after surgery, a blood clot set him back. "It was one thing after another," recalls Mrs. Plummer. "But he was a fighter."

Mr. Kraus named more than 20 makers of asbestos products in the suit. Some were dismissed because he failed to find proof that Mr. Plummer had been exposed to their products. Settlement negotiations began with the rest, and an August 2001 trial date was set.

Early last year, Mr. Plummer's doctor told him the cancer was back -- on his other lung. "We just sat in the office and cried and cried," says Mrs. Plummer, "and then he really gave up." He arranged for his funeral and reviewed with his wife the things she would need to know after his death. But he held on until his trial.

Mr. Kraus negotiated several settlements. But some of the companies waited to settle until shortly before the trial in August. Three of them -- Halliburton Inc.'s Dresser Industries Inc. unit, Goodrich Corp.'s Garlock sealants business, and IREX Corp.'s AC&S Inc. -- decided to take their chances before a jury.

The companies, or their units, all once made products that incorporated asbestos . Halliburton, based in Dallas, is grappling with about 275,000 asbestos-related claims. Charlotte-based Goodrich and its units face more than 95,000 claims.

At the trial in August, a huge poster of a black-and-white photo of a smiling Mr. Plummer in his young Navy days was set before the jury. He was standing arm in arm with a buddy in the bowels of a ship, asbestos-insulated pipes running overhead. Mr. Plummer had recently discovered that his friend had died of mesothelioma some years before.

In the end, Garlock won its case by arguing that its gaskets couldn't have released enough asbestos to cause Mr. Plummer's cancer. The judge dismissed Dresser after the company argued that Mr. Plummer hadn't proved a connection between the company and the asbestos-containing pumps he worked with.

But the jury found AC&S Inc.'s pipe insulation had contributed to the plaintiff's injury and awarded him $3.1 million. After the trial, Mr. Plummer's health deteriorated quickly. Attached to an oxygen tank, he died at home in October.

In December, the judge made routine deductions reflecting the settlements Mr. Kraus had negotiated, arriving at a final judgment against AC&S of $1.7 million. But the money kept shrinking.

Several of the settling defendants, including G-I Holdings Inc., Owens-Corning and Fiberboard Inc., had begun Chapter 11 proceedings. That is expected to reduce the total settlement amount by almost $1 million, to about $500,000.

Now, AC&S says it is likely to file for bankruptcy protection this year, too. That prompted Mrs. Plummer to settle confidentially with the Lancaster, Pa., company for much less than the court award.

After paying her lawyer 33% of her total recovery, on top of other court costs and medical bills, the 63-year-old widow will have hundreds of thousands of dollars left over to live on. Still, she adds, "I would have rather had him and no money."