An Asbestos Exit

November 17, 2004

 

One of the great underreported stories of the year is that, after decades of playing ringmaster to the asbestos litigation circus, the tort bar has recently suffered a few important defeats. The biggest one could come soon if a federal judge orders a fresh look at the claims of "sick" plaintiffs.

What a welcome change that would be. For years trial lawyers have so dominated this legal arena that the companies they sued have taken to collaborating with their persecutors -- just to be put out of their misery. Some 70 of these firms are in bankruptcy, many of them willing partners in a racket that hands most of their assets to the tort bar and the 90% of plaintiffs who aren't ill, while the truly sick waste away in an overcrowded court system.

Yet there are a few hopeful signs. Most concrete is Ohio's decision to pass the first statewide reform demanding that plaintiffs meet certain medical criteria to proceed with claims. Also encouraging are developments in federal bankruptcy court, where trial lawyers have conducted their most outrageous asbestos scams. A group of commercial creditors -- who stand to lose if the trial bar and healthy plaintiffs gobble up every last corporate asset -- are waging a principled battle against asbestos shenanigans, and have made some headway.

This includes the retirement this summer of federal District Court Judge Alfred Wolin. He had been overseeing some of the largest asbestos bankruptcy cases in the country, until creditors in the Owens Corning case took the brave if risky step of asking the Third Circuit to remove him. His critics noted that a few of Judge Wolin's "advisers" were simultaneously representing asbestos plaintiffs in another bankruptcy case, and that the judge routinely met outside the courtroom with trial lawyers. The appeals court dismissed Judge Wolin for a "perception of bias," and within a few months he had gone to work at the law firm of one of the very "advisers" who caused the conflict.

His replacement is Judge John P. Fullam, who now has a huge opportunity to reshape the asbestos landscape. The creditor banks have asked that he order a look at a random sample of the medical records of those plaintiffs with non-malignant (non-cancerous) claims against Owens Corning. These are the vast majority of asbestos claims -- and the most suspect.

Judge Fullam almost has a duty to grant this request, considering how it came about. It turns out that back in 1999, Owens Corning hired a pulmonologist named Gary Friedman, who later went on to review a sample of non-malignant claims submitted to the company as part of an earlier settlement program.

Mr. Friedman selected a statistically random 1,691 files to study from a pool of about 23,000 claims. The files didn't contain the actual X-ray films from plaintiffs, but did include various other tests and reports used to diagnose medical problems. Mr. Friedman found that 87% of these claims didn't satisfy the minimum medical requirements to claim under the settlement program. Yet Mr. Friedman didn't render his report until 2002, by which time Owens Corning was in bankruptcy and had ostensibly thrown in its lot with the trial bar. The report was kept quiet, and it was only through a court discovery process that the creditors found out about the study, and obtained a copy this September.

In light of this damning evidence, the banks are now asking Judge Fullam to order a transparent study of a random sample of plaintiffs' actual X-rays films -- which will prove even more informative than the data in the Friedman study. The trial lawyers are unsurprisingly fighting this request tooth and nail, arguing that it will take too long and that there's no need to re-evaluate claims.

That's a bit rich coming from a crowd that has slowed down the process for years in order to wear down companies and round up more plaintiffs. And there most certainly is a reason to ascertain whether the vast majority of claims against a company are real or bogus, given that Judge Fullam will ultimately have to rule on Owens Corning's broad "liabilities" to tort plaintiffs. The tort bar wants that number to be $11 billion; creditors are arguing it's closer to $2.6 billion. A fair X-ray study could help decide between the two.

This is more than just an isolated chance to do justice. Because Owens Corning is among the first asbestos cases to reach this stage, Judge Fullam's ruling could have a profound precedent-setting effect on other suits. Congress is also now busy discussing a legislative solution to the asbestos blob. But by far the simplest and quickest way out of this destructive mess would be for judiciary to set its own house in order. An X-ray study would be a great first step.

 
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