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.

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.

New Bill Introduced

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 infra, the Act also contains a helpful set of findings that outline the problems that exist as a result of the litigation.

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.

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.

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.

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.

Medical Criteria Approach

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.

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 Guides to the Evaluation of Permanent Impairment (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.

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 prima facie 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.

Trust Fund Approach

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.

---

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.

---

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.

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.

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.

What Does the Future Hold?

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.

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.

Stay tuned for further developments in this area of the law.

Author's Note: A recent Supreme Court ruling dealing with asbestos claims will likely add fuel to the fire calling for legislative reform of asbestos litigation. In Norfolk & Western Railway Co. v. Ayers, 2003 WL 888363, 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.

Although this decision did not derail the asbestos litigation train, there is some minor consolation that the Court recognized as it did previously in Ortiz v. Fibreboard Corp., 527 U.S. 815, 821, 119 S.Ct. 2295 (1999), that this case was part of the "elephantine mass of asbestos cases" that "defies customary judicial administration" and calls for reform. Norfolk 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.

---

Footnotes

¹ Board-certified in business bankruptcy by the American Board of Certification. Return to article