Segal McCambridge Legal Blog

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August 10, 2010

Asbestos Is A Good Lesson For BP — To Avoid (Forbes)


BP's $20 billion oil-spill fund is a pre-emptive strike against plaintiff lawyers, an attempt to settle all conceivable claims from its Gulf of Mexico oil spill before they get to court. And it might just work, if BP can avoid getting dragged into a morass of tangential health claims like the ones that sank just about every company that manufactured or installed asbestos products as a main line of business.
A new report from the RAND Institute for Civil Justice shows just how unruly and devoid of systematic review the asbestos-claim process has been. Authors Lloyd Dixon, Geoffrey McGovern and Amy Coombe tried to pull detailed information about the 44 asbestos trusts. They were established under a special provision of the bankruptcy code Congress passed just to deal with the millions of lawsuits filed by people who claim to have been exposed to the substance, which can cause lung disease and a rare cancer of the chest wall lining called mesothelioma.
The RAND researchers quickly ran into a wall that critics of the asbestos-claim process have frequently pointed out: The trusts don't share important information such as who they've paid benefits to, and under what assumptions. That makes it virtually impossible to determine how many individuals have been paid or whether they've submitted conflicting work histories to obtain benefits from Johns Mansville, say, and a manufacturer in another state the claimant couldn't possibly have worked for at the same time.
It's hard to chalk this up to chance. The top five law firms whose lawyers serve as trustees overseeing these trusts each sit on eight or more of the 26 largest trusts, with the top two, Baron & Budd of Dallas and Oakland, California's Kazan, McClain, Abrams, Lyons, Greenwood and Harley each sitting on trusts with $11.6 billion of the $18.2 billion in total assets.
"Perhaps the most-significant limitation of the publicly available data is the inability to link payments across trusts to the same individual. It is not possible to use trust-level data to determine the number of trusts providing payments to the same individual or the amount the trusts together pay to an individual claimant," the RAND authors state. "This lack of information makes it difficult or perhaps impossible to evaluate the trusts' effect on the overall compensation provided to individual claimants and on the compensation paid by solvent defendants."
The average non-malignant claimant got $3,000 in 2008, the report says, while the average cancer claimant got $34,000. Claims totaled 575,000. If each one was an individual claimant that would make asbestos-related disease a scourge more than five times worse than lung cancer, according to the most recent CDC statistics. We don't know how many individuals claimed asbestos-related disease in 2008, or any other year, because the trusts don't take the simple measure of establishing a central database of Social Security numbers.
I've written about the games lawyers play with asbestos claims, including this tale of an Ohio man's remarkable work history that only unraveled after his attorneys had the audacity to sue Lorillard Tobacco, whose defense lawyers don't play so nice. Lorillard, it seems, manufactured a Kent cigarette in the early 1950s with an asbestos filter. It was marketed toward women.
The RAND report has numbers to put the BP blowout in perspective. Since the asbestos litigation wave began, companies have paid out an estimated $49 billion outside of the bankruptcy trusts. Another $10.9 billion has flowed out of the main trusts, to pay an estimated 2.4 million claims. By putting all its money under the central control of administrator Kenneth Feinberg, at least BP won't be left guessing where the money went.

The original story can be found here


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Op-Ed piece on Madison County, Illinois asbestos docket


The American Tort Reform Association (ATRA) said last summer that it no longer considered Madison County a “judicial hellhole” — thanks, in part, to a declining number of asbestos lawsuits on the docket.

Madison still has four times as many lawsuits filed as 100 other Illinois counties, and 90 percent of those cases have no connection to Madison. Nevertheless, given where we once were, things have improved dramatically.

Much of the credit goes to retiring Circuit Judge Daniel Stack. Over a 17-year period, his predecessor, Circuit Judge Nick Byron, made Madison the friendliest venue in America for asbestos litigation, docketing nearly a thousand cases in a single year (953 in 2003). Stack has been considerably less welcoming.

We hope that Circuit Judge Barbara Crowder, who is taking over for Stack, will be even less hospitable. Although filings had declined from Byron’s 2003 high mark, they’ve recently begun to rise again. Last year, 814 cases were added to the docket. In the first half of this year, 421 asbestos cases were filed. This is a troubling trend we cannot ignore.

Although we are not currently designated a judicial hellhole, Madison County remains on the ATRA “watch list” and could easily reclaim that dubious title. The consequences, we know from experience, are serious.

Being designated a judicial hellhole may be a welcoming sign for some trial attorneys, but it’s a “Keep Out!” sign for everyone else.

The original article is here


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GM’s Estate May Face Billions in Asbestos Claims


Aug. 9 (Bloomberg) — Creditors of General Motors Corp.'s bankruptcy estate won permission to seek data from new General Motors and other parties to estimate what could be billions of dollars in asbestos claims.
U.S. Bankruptcy Judge Robert Gerber in New York today granted permission to unsecured creditors to request documents, after they agreed to keep sensitive information confidential.
"This isn't like the formula for Coke or nuclear launch codes," Gerber said, after taking hours of testimony about the risks that the information could be misused if disclosed.
Motors Liquidation Co., the remains of General Motors still in bankruptcy, plans to create a trust, allowing it to exit bankruptcy with some funds set aside to pay future tort claims. While the estate recorded an estimate of $648 million for asbestos liability, a committee of creditors said in a court filing the estate may face claims for five to 10 times as much.
Macroeconomic Information
Gerber said today that the creditors' request is legitimate because it seeks "macroeconomic information." He directed lawyers for asbestos claimholders and creditors reach an agreement on a method for keeping information confidential.
A committee of holders of asbestos claims had objected to the release of the data. The committee said it would complicate the estimation process, by requiring information about more than 7,000 individuals, including medical records and parts of Social Security numbers.
Creditors said they need more information such as the age, work history and diagnosis of claimants in order to estimate the scope of liability claims for mesothelioma, a deadly cancer.
'Target' Defendant
GM's asbestos liability increased because "all of the traditional asbestos defendants that had not previously filed for bankruptcy did so in the years 2000 through 2003," turning GM into a "target" defendant, lawyers for creditors wrote.
Those traditional defendants "returned to the scene" from 2004 to 2009, in the form of trusts formed out of the companies' bankruptcies. Those trusts have funding of $30 billion to $60 billion for asbestos claims, creditors said.
Creditors said they need the claims information to determine whether future claims will be more like levels GM saw in the 1990s, when average annual asbestos-related indemnity costs were less than $2 million, and the company saw fewer than 40 mesothelioma claims per year. From 2000 to 2008, costs rose to an annual average of $30 million, with 850 claims submitted per year.
A trust for Johns Manville Corp., once the nation's largest maker of asbestos, which exited bankruptcy in 1986, objected to the GM creditors' request for information. So had Armstrong World Industries Inc.'s asbestos trust. Armstrong created a $1.8 billion trust to pay victims of asbestos exposure when it exited court protection in 2006.
Under GM's transfer of its assets to new General Motors, the debtor received 10 percent of stock in the new company and 15 percent of the warrants. Unsecured creditors say they expect the stock and warrants will be distributed to them.
The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

The original story can be found here


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August 9, 2010

Recent Michigan Supreme Court Ruling in Med Mal case on Causation and Lost Opportunity


On July 31st, the Michigan Supreme Court in O’Neal v. St. John Hosp. & Med. Center, held that Michigan’s statutory loss of opportunity provision (Section 2912a(2)) does not apply to medical malpractice cases. Specifically, the court stated:

“We hold that the Court of Appeals erred by relying on Fulton and determining that this is a loss-of-opportunity case controlled by both the first and second sentences of MCL 600.2912a(2), and instead hold that this case presents a claim for traditional medical malpractice controlled only by the first sentence of § 2912a(2). Further, we conclude that plaintiff established a question of fact on the issue of proximate causation because plaintiff's experts opined that defendants' negligence more probably than not was the proximate cause of plaintiff's injuries. Finally, we hold that Fulton did not correctly set forth the burden of proof necessary to establish proximate causation for traditional medical malpractice cases as set forth in § 2912a(2). Therefore, we overrule Fulton to the extent that it has led courts to improperly designate what should be traditional medical malpractice claims as loss-of-opportunity claims and has improperly transformed the burden of proof in a traditional malpractice case from a proximate cause to the proximate cause.”

The opinion can be found here


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August 6, 2010

New Jersey Superior Court Appellate Division Reverses $10.5 Million Accutane Verdict


Roche Holding AG won reversal of a $10.5 million verdict over its Accutane acne drug because a judge improperly barred the company from using evidence about the medication's use, an appeals court ruled.

Roche's lawyers should have been able to use data about how many acne sufferers had used Accutane over the years throughout Kamie Kendall's 2008 trial of her lawsuit over the drug, the New Jersey Superior Court Appellate Division ruled today. The decision prompted a judge in Atlantic City, New Jersey, to delay the trial of an actor's suit alleging the medication causes inflammatory bowel disease.

"Roche was unduly impeded at this trial from adducing and advocating numerical proofs that could have potentially and reasonably led a jury to reach a different verdict," the appeals court said in an 89-page unpublished decision.

The unpublished opinion from the Kendall v, Hoffman-La Roche, et al., case can be found here

A story on this decision from Bloomberg News can be found here


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August 5, 2010

Additional discussion of the recent Rand Report on Asbestos Bankruptcy Trusts


From the Madison Record
Rand’s asbestos report shows lucrative outcome for lawyer trust fund managers

Giants of asbestos litigation hold half the power in seven trust funds that paid $2.4 billion in claims in 2008, according to tables in a new Rand Corporation report.

At a 25 percent fee that authors reported as customary for asbestos, payments from the seven funds generated about $600 million for lawyers.

At all seven funds, Steven Kazan, of Kazan McClain in Oakland, served on advisory committees advocating payments for plaintiffs with current cases.

Each committee opposes an advocate who would preserve resources for the future.

Perry Weitz, of Weitz and Luxenberg in New York City, and John Cooney, of Cooney and Conway in Chicago, each served on six committees.

Russell Budd, of Baron and Budd in Dallas, served on five.

Joseph Rice, of Motley Rice in Mount Pleasant, South Carolina, served on four.

Matthew Bergman, of Bergman, Draper and Frockt in Seattle, served on three.

Theodore Goldberg and Mark Meyer, of Goldberg, Persky and White in Pittsburgh, each served on two.

The seven funds paid about two and a half times as much on claims as 37 other asbestos trust funds combined.

They ended 2008 with combined assets of $13.8 billion.

That represents about $3.5 billion in potential legal fees.

The entire article can be found here


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August 4, 2010

New Rand Report details issues with Asbestos Bankruptcy Trusts


Rand has released a new report entitled “Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts

As the preface to the report says, “This report provides an overview of asbestos personal-injury (PI) trusts. It describes how they are created, how they are organized and governed, and how they operate. It also compiles publicly available information on the assets, outlays, claim-approval criteria, and governing boards of the leading trusts. This report should be of interest to federal and state policymakers, lawyers, judges, and litigants concerned about the compensation of people injured by exposure to asbestos, the performance of the asbestos compensation system, and the economic impact of asbestos litigation on both defendants and the legal community.”

The U.S. Chamber of Commerce's Institute for Legal Reform (ILR) praised the study, saying it will help provide the foundation for debate over how to reform the asbestos bankruptcy trust system. Their press release about this recent Rand Report can be found here

An article from the P&C National Underwriter can be found here

Rand indicates that a second report will be forthcoming and will examine how trust compensation or the potential for such compensation is addressed by state liability laws and taken into consideration during court proceedings and settlement negotiations.