Segal McCambridge Legal Blog

The original article can be found here

OPINION: Asbestos trusts need transparency to end fraud

THE SYSTEM of asbestos bankruptcy trusts created by Congress nearly 20 years ago was designed to make sure people injured by exposure to asbestos could be compensated.

But over the years, concerns have arisen that the current system can be gamed. There’s a concern that claimants can seek multiple recoveries from different funds, or tap funds and the tort system. That’s why we welcome the introduction of the Furthering Asbestos Claims Transparency Act.

As we report on page 4, the act would require asbestos trust funds to make quarterly reports about claims and exposure allegations. The measure also would provide protection for claimants’ identities and personal medical information. These are hardly radical ideas, but such disclosures could help deter duplicate claims.

A report issued by the Government Accountability Office last September said that between 2000 and 2011, the number of asbestos personal injury trusts increased from 16 to 60. The trusts’ collective assets increased from a little over $4 billion to nearly $37 billion during the same period. That’s a significant amount of money.

But one of the major problems is that the 60 trusts operate independently of each other, and there’s no central clearinghouse for claims data and other information.

In addition, there’s no linkage between the trusts—which represent the assets and liabilities of companies that sought bankruptcy protection because of asbestos claims—and the tort system, where solvent companies must defend asbestos claims.

No one knows how much fraud is involved in the system. But given the amount of money involved, greater transparency strikes us as a worthy—and imperative—goal.

It’s a matter of fairness, and not just for those who are paying the claims, be they trusts, insurers or companies that are defending themselves in the tort system.

It’s a matter of fairness for the claimants themselves. The purpose of the trusts is to compensate the injured. As we noted, there’s an impressive amount of money involved, but it’s not unlimited. Curbing even potential double-dipping and other fraudulent acts will help ensure there are adequate funds to compensate the truly ill.

From LegalNewsline.com

Dem. Congressman calls attorneys who contacted him ‘parasites’
5/11/2012 11:00:00 AM
By John O’Brien

WASHINGTON (Legal Newsline) – At a House subcommittee hearing on legislation concerning asbestos bankruptcy trusts, U.S. Rep. Steve Cohen on Thursday referred to plaintiffs attorneys who contacted him about the illness of his friend as “parasites.”

Cohen — a Democrat from Tennessee and the ranking member of the House Judiciary Committee’s Subcommittee on Courts, Commercial and Administrative law — recounted the story of the death of his friend, singer/songwriter Warren Zevon, from mesothelioma.

Cohen called Zevon, perhaps best known for the song “Werewolves of London,” one of his best friends.

“He did not seek a lawyer, didn’t want damages,” Cohen said. “I had a few parasites — I’m an attorney — but I had a few people call me and talk to me, quote-unquote friends.

“Friends, because they wanted to get to Warren to take his case. And Warren was good and didn’t do it.”

Despite his feelings about the attorneys who reached out to him about Zevon’s illness, Cohen spoke out against the bill.

House Resolution 4369 would require bankruptcy trusts, which were created by companies that went bankrupt from asbestos litigation, to disclose claims and exposure allegations while providing third-party discovery in civil lawsuits.

The trust system operates independently of the tort system. More than 90 companies have gone through bankruptcy as a result of asbestos litigation, creating at least 60 trusts. Solvent companies facing asbestos lawsuits in civil court would be able to obtain information from plaintiffs’ trust claims.

The legislation was introduced in April by two Republicans, Ben Quayle of Arizona and Dennis Ross of Florida, and Democrat Jim Matheson of Utah.

Cohen called the legislation “a solution looking for a problem.” The same phrase was written in the statement of an asbestos attorney who testified and also appeared on the website of the American Association for Justice, the lobbying firm of plaintiffs lawyers that is against the bill, the night before the hearing.

The AAJ gave Cohen $5,000 for his 2012 re-election campaign.

Cohen graduated from the Cecil Humphreys School of Law at the University of Memphis and was a longtime state lawmaker before his election to the U.S. House of Representatives in 2006.

Charles Siegel of Dallas’ Waters & Kraus testified against the bill. He calls it an attempt at delaying and denying compensation to asbestos victims.

“The assertion is that large amounts of money are recoverable from bankruptcy trusts, and that plaintiffs routinely game the system so that they receive a full recovery in the bankruptcy system, and then a second, ‘double’ recovery in the tort system,” he said. “Neither premise is correct.

“There is no windfall of money available to claimants, and plaintiffs cannot and do not ‘game the system’ such that solvent tort defendants pay the liability shares of bankrupt companies.”

Todd Brown, a professor at SUNY-Buffalo Law School, testified in support of the bill.

“As a matter of bankruptcy policy, the very idea that a bill intended to advance transparency would be in any way controversial is striking,” Brown said.

“The need for comparable transparency in the asbestos bankruptcy trust context is compelling. As the assets under trust control approach $40 billion… other defendants, many of whom were peripheral defendants until recently, find themselves exposed to far greater defense costs and tort liability.

“Early trusts were flooded with specious unimpaired claims, and though state courts and legislatures have taken steps to reign in the perceived abuses in asbestos litigation, new trusts continue to be flooded with unanticipated claim volumes.

“We know that dubious claims continue to slip through the cracks, and the lack of communication between the trusts and state tort systems fuels concerns that some lawyers may be gaming the system to obtain unwarranted recoveries either in state court or from the trusts.”

The legislation was introduced in April by two Republicans, Ben Quayle of Arizona and Dennis Ross of Florida, and Democrat Jim Matheson of Utah.

In April 2010, U.S. Rep. Lamar Smith, R-Texas, asked the Government Accountability Office to investigate the trust system. He pointed to an oft-cited 2007 instance in Ohio, where in Cuyahoga County the California law firm of Brayton Purcell claimed the late Harry Kanania died in 2000 of mesothelioma solely from smoking cigarettes made by Lorillard Tobacco, while simultaneously seeking compensation from multiple asbestos trusts, claiming their products led to Kanania’s fatal lung condition.

The GAO released its report in October, finding no fraud in the system. It did note that the trusts operate in secrecy.

“Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust’s focus is to ensure that each claim meets the criteria defined in its (trust rules), meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees,” the report says.

“Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud.”

At least two states have proposed similar trust reform. Ohio’s senate heard testimony in March on a bill already passed by the House of Representatives, while Oklahoma’s senate passed a bill on March 14.

The Oklahoma bill is currently sitting in the House Judiciary Committee.

The U.S. Chamber of Commerce Institute for Legal Reform supports the bill. The ILR owns Legal Newsline.

The entire article can be found here

By Ben Berkowitz

BOSTON (Reuters) – As anyone in the United States with a TV or Internet connection probably knows, lawyers want you if you’ve been exposed to asbestos, and they’re paying to get you.

At one point earlier this year, 15 of the 100 most expensive keyword search phrases for click-through ads on Google contained the word “mesothelioma,” the deadly cancer caused by asbestos exposure. The single most expensive phrase, online marketing firm SpyFu reported, was “Florida mesothelioma lawyers,” at $177.74 per click.

The hard sell reflects a troubling truth: Half a century after the first wave of lawsuits were filed for illnesses linked to exposure to asbestos and 40 years after new regulation sharply curtailed use of the insulating and fire-resistant mineral, the asbestos-litigation business is booming.

Some of the country’s biggest and best-known law firms — many of them handling asbestos cases almost exclusively — say the number of lawsuits filed annually, after falling off from a peak, has picked up in recent years. More important, they say, is that payouts for plaintiffs who win their cases have soared.

“It’s easy to see why they’re buying time on CNN and the like. All you need to get is a couple of claims in to make that commercial buy worth the money,” says Marc Mayerson, a litigator with the Orrick law firm in Washington and a professor of insurance law at George Washington University, who has represented defendants in asbestos-related cases since the 1980s.

No central registry keeps track of asbestos lawsuits filed yearly or their outcomes. A tabulation of jury verdicts and settlements, based on an average of all asbestos-related lawsuits reported in Westlaw Journal Asbestos, a Thomson Reuters publication, found that the average award was $6.3 million in 2009, $17.6 million in 2010 and $10.5 million in 2011 — amounts much greater than what lawyers say was the norm more than a decade earlier.

Clearly, mesothelioma and other asbestos-related payouts persist at levels companies and their insurers never expected. Insurers have been adding hundreds of millions of dollars to their asbestos-claim reserves. Travelers Cos, in its annual report for 2011, echoed its peers when it cited a “high degree of uncertainty with respect to future exposure from asbestos claims.”

Meanwhile, the dozens of trusts set up by companies forced into bankruptcy by asbestos liabilities are facing such heavy claims that many are paying only a few cents on the dollar. Some have had to suspend settlements. That has created inequality among victims.

UNEXPECTED TARGETS

Some doctors and lawyers attribute the recent rise in asbestos suits to the unexpected emergence of “asbestos wives and daughters,” women exposed to the mineral by male relatives who worked in asbestos-heavy industries.

David Sugarbaker, a thoracic surgeon at Brigham & Women’s Hospital in Boston who is highly regarded among mesothelioma patient groups, says he’s been seeing more women among new patients every year, but “nobody has been able to quite pin it down.”

No hard data show that the incidence of mesothelioma among women has risen significantly. Indeed, the incidence of the disease overall remained largely flat at about 1 person per 100,000 from 1980 to 2008, while the rate for women held steady at roughly one-sixth that of men, according to the National Cancer Institute.

No matter who is doing the suing, lawyers say plaintiffs are increasingly targeting a new set of deep-pocketed “tertiary defendants” — companies that used asbestos products manufactured by others or were otherwise indirectly linked to asbestos. Such companies can now “find themselves in the midst of a lawsuit where the jury verdicts in the plaintiff-favorable jurisdictions are probably averaging $15 million to $25 million each,” Orrick’s Mayerson says.

Nearly everyone involved in asbestos litigation agrees on one dismaying fact: Most plaintiffs today are sick.

About a decade ago, “unimpaired” plaintiffs — people who had some asbestos exposure but weren’t sick and had no evidence they were getting sick — accounted for “literally hundreds of thousands of claims,” says Mike Angelides, managing partner of the Simmons Law Firm, which by its own estimate accounts for 20 percent of all asbestos-related lawsuits filed in the U.S. every year.

Matt Bergman, a Seattle attorney who specializes in asbestos litigation, says the number of lawsuits probably peaked in 2005, when he estimates 16,000 cases were filed, most from people without any illness.

As courts began to take a dim view of such suits, lawyers focused on sick plaintiffs. Now, Bergman says, only about 2,000 new cases are filed each year, most of them to do with mesothelioma. “I think the system works best when the people who are bringing the cases are the people suffering the most,” he says.

The Institute for Legal Reform, an arm of the U.S. Chamber of Commerce that has been a vehement critic of asbestos litigation, recognizes the shift. In recent years, “there were more cases with more people that were more severely impaired, and the numbers on those claims went up,” says Lisa Rickard, president of the institute.

Angelides says his firm estimates the number of new cases filed a year at around 1,800, way down from the peak but up from more recent years. “Everybody wishes these claims would go down,” he says, “but it’s not time yet.”

DANGEROUS HUGS

Mesothelioma is a particularly lethal cancer. It arises in the delicate tissue that lines body cavities, most often around the lungs, but also in the abdomen and elsewhere.

Years of research have shown that exposure to asbestos — defined roughly as two weeks of constant contact, usually in the air in a workplace — is a primary cause of mesothelioma. (Exposure also causes asbestosis, a chronic, potentially life-shortening lung disease.)

Once exposed, a person has a one-in-20 chance of developing mesothelioma. The average patient is dead within two years of diagnosis, and more than 90 percent are dead within five years, according to the National Cancer Institute.

The reason people who were exposed in the 1960s and 1970s are still being diagnosed is mesothelioma’s long latency period —- the time between exposure and manifestation of disease -— of between 30 and 50 years. Thus people who worked in tainted industrial settings in the 1960s are still getting ill, as are some family members.

Heather Von St. James, a resident of St. Paul, Minnesota, in her early 40s, is an asbestos daughter.

Many nights while growing up, she says, she greeted her father with a hug at the door when he returned home from his job sanding drywall, a fine white dust powdering his jacket. She often put on that jacket before running outside to feed her pet rabbits.

In 2005, just after the birth of her daughter, she was diagnosed with mesothelioma. She immediately remembered those lawyers’ TV ads she had seen late at night. “I called them at 1 o’clock in the morning when I got the diagnosis because I thought, ‘I’ve got nothing to lose,’” she says.

To fight her disease, she had to have a lung removed. That left her chronically weak and easily fatigued, unable to care for her daughter or continue working as a hair stylist and salon owner. She considers herself lucky, compared to other mesothelioma victims, but hesitates to describe herself as “cured.”

The court that heard her lawsuit estimated that the disability caused by her mesothelioma cost her more than $5 million in lost lifetime earnings. “We didn’t get $5 million. It can never replace what I lost,” says St. James, who is bound by confidentiality agreements not to disclose whom she sued or the precise amount she received. Court records indicate that 3M Co was a defendant — not one closely associated with the decades-long morass of asbestos litigation.

3M did not respond to a request for comment.

LIKE “DEATH AND TAXES”

Asbestos — actually a family of half a dozen fibrous minerals — has been valued since Roman times for its heat-resistant properties. For much of the 20th century it pervaded construction sites, ship and rail yards, and many industrial settings. Canada, Russia and South Africa have been major producers, as was the United States.

Concerns about the health risks of asbestos exposure were raised as early as the 1920s. In a September 1958 memo that plaintiffs lawyers are wont to cite, a National Gypsum Co executive wrote: “We know that you will never lose sight of the fact that perhaps the greatest hazard in your plant is with men handling asbestos. Because just as certain as death and taxes is the fact that if you inhale asbestos dust you get asbestosis.”

The first asbestos-related personal-injury claims popped up in federal courts in the 1960s, but asbestos use continued. According to the U.S. Geological Survey, consumption of asbestos in the United States peaked in 1973 at 803,000 metric tons, out of global production of around 4.2 million metric tons.

Within a few years, mounting litigation, as well as scientific evidence linking asbestos to disease, prompted new government and industry regulations on safe handling and use of the mineral. Since 1973, according to the USGS, U.S. consumption has fallen 99.9 percent, though global use is down only around 50 percent.

In the ensuing decades, asbestos litigation overwhelmed one company after another. By government estimates, about 100 companies have been forced into bankruptcy proceedings because of asbestos liabilities — including construction-materials and industrial heavyweights such as Johns Manville (now a part of Berkshire Hathaway Inc), USG Corp and Owens Corning.

The U.S. Bankruptcy Code, amended specifically for the purpose, allows a company to put current and future asbestos liabilities in a trust, fund the trust with certain assets, and walk away to start fresh. Trust administrators determine whether a claim is valid and pay out accordingly. Their decisions can be appealed, but generally, trust claims are more open-and-shut than court litigation.

Each trust values claims differently. The Johns Manville trust values mesothelioma at $350,000, while the Owens Corning trust values it at $215,000, says Steve Kazan, managing principal at Kazan, McClain, Lyons, Greenwood & Harley in Illinois, who litigated his first asbestos case in 1974 and has kept at it since. None of the trusts, lawyers say, come close to paying what the courts do.

The problem for the trusts — and for claimants — is that as claims persist, many of the trusts have to pay out cents on the dollar for each valid claim in order to save for future claims.

Take the example of the Johns Manville trust. In the 23 years since it started, the Manville Personal Injury Settlement Trust has received more than 878,000 claims — 10 times the number initially predicted — and made payments nearing $4.23 billion. The Manville trust’s most recent filing with the U.S. Bankruptcy Court in Manhattan shows claims rose 57 percent in the first nine months of 2011 from a year earlier, to 27,300. Over that time the trust’s assets fell more than 12 percent, to $925.6 million.

As a result, the trust is now paying out approved claims at a rate of 7.5 cents on the dollar. A person with an approved $100,000 claim would receive $7,500.

The USG trust cut its payout rate to 35 cents on the dollar in April 2010 and lowered it again to 30 cents in November 2010. The NGC Bodily Injury Trust, which handles National Gypsum Co claims, warned last November that claim filings were running much higher than expected and cut payments to 18 cents on the dollar.

Last January, the C.E. Thurston & Sons Asbestos Trust suspended all new settlement offers while it recomputed how much it can afford to pay while retaining enough for the future, the trust said on its website.

Reuters sought comment by phone or email from trustees or lawyers for half a dozen asbestos trusts; none responded.

THE INSURERS PAY

Unlike the trusts, the insurance industry thought it had largely solved its asbestos problem through big increases to reserves 10 years ago. It misjudged. “All these insurance companies have dedicated asbestos units, and they’re staffed and they’re busy,” says Larry Reback, an insurance broker with Integro in San Francisco.

Last year, when insurers AIG and The Hartford announced additions of $1.3 billion and $290 million, respectively, to their asbestos reserves, the companies blamed tertiary defendants that never anticipated litigation and now are being sued. AIG and Hartford have repeatedly declined to comment on the additions to their reserves.

Major oil companies are on the list, as people who were working decades ago challenge what the companies knew about asbestos safety at the time. Automakers are being hit with asbestos lawsuits, too, largely related to the asbestos lining in many vehicle brakes. Just this month a federal appellate court said lawsuits could proceed against drugmaker Pfizer Inc over asbestos-linked materials a subsidiary made a generation ago. “We strongly dispute” those lawsuits, Pfizer said.

In February, Travelers said it put $175 million into its asbestos-claim reserves in 2011, up 25 percent from 2010, citing more litigation and larger payouts because of those lawsuits. While announcing an increase in its own reserves, MetLife said in August that it saw asbestos-related claims rise 11 percent in the first half of the year after dropping steadily from 2003 through 2010.

In 2009, A.M. Best, the major rater of insurers, raised its estimate of future industry asbestos liabilities to $75 billion from $65 billion. The number may rise again in the next year, mainly because of mesothelioma claims, says Brian O’Larte, an A.M. Best analyst in New Jersey. All told, by its assessment, the industry is about 4 percent underfunded for the $75 billion in liabilities it faces.

Insurers keep assuming, mistakenly, that liabilities will taper, O’Larte says. “Every time they do a ground-up study, they say, ‘We got it right this time.’” he says. “We don’t assume that.”

(Editing by John Blanton and Prudence Crowther)Reuters

Two articles from Law.com and Forbes.com on the recent GAO report detailing the secrecy issues surrounding asbestos bankruptcy trusts

LAW.com: GAO Reports Shines Light on Secretive Asbestos Trusts

GAO Reports Shines Light on Secretive Asbestos Trusts
The Government Accountability Office released a new report on Wednesday analyzing asbestos injury trusts, detailing a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

By Brian Glaser

10-20-2011

The Government Accountability Office released a new report on Wednesday analyzing asbestos injury trusts, shining some light on a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

The report, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts [PDF], reviewed 52 asbestos-related bankruptcy trusts that “have paid about 3.3 million claims valued at about $17.5 billion.”

The GAO found that while the majority of the trusts made general data available, very few provide detailed information about their activities without being directed to by a court of law: “Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid. Other information in the possession of a trust, such as an individual’s exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena.”

In fact, the report found that only “one trust’s financial report contained claimant names and amounts paid to these individuals.”

Forbes reporter Daniel Fisher, in a review of the GAO findings, wrote that the report “gives fuel to critics who say the plaintiff lawyers who largely oversee the operation of these trusts prevent them from sharing information about how much their clients have been paid. That allows some plaintiffs to hit up multiple trusts with claims that may contradict each other.”

The month-old report was given to the House Judiciary Committee on September 23, at the request of Texas Republican Lamar Smith, the committee chairman, and is now being released to the public following a 30-day hold.

Accompanying the release of the report was a statement from Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform. Rickard said, “It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress’s growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs’ lawyers and fraudulent claimants.”

Fisher’s analysis of the report pinpoints several findings of processes in the current trust system that could result in fraudulent claims:

The GAO report said 98% of trust claims go through “expedited review” process that requires only a claim form with “documented evidence” of exposure such as work history, invoices, or deposition testimony of plaintiff or coworkers plus a medical report. Prior investigations have shown how a tiny number of physicians have submitted tens of thousands of diagnoses of asbestos-related disease, many of them subsequently found to be incorrect.

One solution would be to require the trusts to share basic claims information in a central database. But the GAO said 65% of trusts reviewed treated claims information as confidential under rules that consider information submitted as part of a legal settlement process as privileged. Defendants and insurers say the trusts should be treated as non-adversarial settlement vehicles. They frequently seek information about claims paid so they can set off any court award by the amount the plaintiff has already obtained elsewhere.

The report itself does not claim to have documented any regular occurrences of fraud, however, and includes review of the trust distribution procedures (TDP) that each trust has in place: “Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust’s focus is to ensure that each claim meets the criteria defined in its TDP, meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees. Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud.”

Forbes.com: GAO Report Details Secrecy Of Asbestos Trusts

By Daniel Fisher

A General Accountability Office study of asbestos injury trusts released today shows that trusts with some $36 billion in assets operate largely in secret, submitting annual financial reports to bankruptcy courts but only revealing information about claims under the threat of subpoena.

The report, conducted at the request of Rep. Lamar Smith (R-Texas), the chairman of the House Judiciary Committee, gives fuel to critics who say the plaintiff lawyers who largely oversee the operation of these trusts prevent them from sharing information about how much their clients have been paid. That allows some plaintiffs to hit up multiple trusts with claims that may contradict each other. The trusts paid 461,000 claims totaling $3 billion in 2010. They have disbursed $17 billion so far to millions of workers who claim they came down with breathing disorders or cancer due to asbestos.

The report looked at 52 of the 60 trusts created in the wake of asbestos-related bankruptcies and found that only one publicly disclosed the identity and claims of people it had paid. Most of the rest resist such disclosure, citing the confidentiality of claimant medical records. The report’s authors downplayed the risk of fraud, however, saying most trusts audit claims.

“Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust’s focus is to ensure that each claim meets the criteria defined in its (trust rules), meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees. Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud.

The U.S. Chamber, which represents companies targeted by asbestos lawsuits, wasn’t convinced. In a release accompanying the report Lisa Rickard, president of the Chamber’s Institute for Legal Reform, said:

“It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress’s growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs’ lawyers and fraudulent claimants.

The report was completed Sept. 23 but only became available today after a 30-day hold.

Critics of the asbestos-trust system point to examples like the Kananian case in Ohio, where lawyers were sanctioned for submitting conflicting work histories to multiple trusts on behalf of a man who died of mesothelioma, which is usually attributed to asbestos. In that case lawyers filed papers placing their client in harm’s way throughout his life, from laying on the top berth of a ship with rattling asbestos-clad pipes above his head in World War II, to removing asbestos-laced linoleum flooring in his basement himself, to smoking Camel cigarettes with asbestos filters that were marketed toward women for a couple of years in the 1950s. Internal documents revealed one of Kananian’s lawyers telling colleagues to “immediately brief all personnel … that they are not to ‘make up’ information to make a claim qualify.�

A similar scandal erupted in Texas after a federal judge demanded the records for thousands of plaintiffs claiming they’d come down with silicosis and found most had already hit up the asbestos trusts for money. Doctors say the two conditions almost never occur in the same patient and the outbreak of silicosis claimed in the lawsuits would have dwarfed any recorded in the medical literature.

Approximately 100 companies have declared bankruptcy at least partly due to asbestos-related liability so far. In the usual pattern lawyers for asbestos plaintiffs claim they represent the largest class of creditors and set up a trust to hold the bankrupt company’s assets and disburse them to their clients over time. The trusts have grown from 16 with $4.2 billion in assets in 2000, to 60 with $36.8 billion in assets this year.

The GAO report said 98% of trust claims go through “expedited review� process that requires only a claim form with “documented evidence� of exposure such as work history, invoices, or deposition testimony of plaintiff or coworkers plus a medical report. Prior investigations have shown how a tiny number of physicians have submitted tens of thousands of diagnoses of asbestos-related disease, many of them subsequently found to be incorrect.

One solution would be to require the trusts to share basic claims information in a central database. But the GAO said 65% of trusts reviewed treated claims information as confidential under rules that consider information submitted as part of a legal settlement process as privileged. Defendants and insurers say the trusts should be treated as non-adversarial settlement vehicles. They frequently seek information about claims paid so they can set off any court award by the amount the plaintiff has already obtained elsewhere.

Lawyers have a way around that, however: They simply wait until the trial is over before submitting claims to the bankruptcy trusts.

During hearings, three plaintiff attorneys said everything the defendants want is available through discovery in litigation and the trusts are “analogous to ay other settling party and related negotiations and payments are privileged.�

Defendants argue more information should be disclosed because payment information might reveal plaintiffs have already gotten more than the claims are worth.

The Institute for Legal Reform proposes quarterly reports disclosing every claim made and details including exposure history. The GAO report said quarterly reports won’t necessarily root out fraud and one person receiving payments from several trust “does not itself reveal impropriety.�

Congress Examines Alleged Fraud by Asbestos Claimants
September 9, 2011
By Dionne Searcey

Asbestos litigation may seem like a blast from the mass tort past, but it continues to be the key breadwinner for many a plaintiff attorney’s family.

Aided by a bevy of advertising on the Internet and TV, asbestos claims are on the rise. And the payouts are still big. Today in Congress, a House Judiciary Committee heard testimony on alleged fraud and abuse in the asbestos compensation system.

The committee reviewed transparency issues in asbestos trusts, which are massive pools of money set up by companies in bankruptcy to pay off asbestos claims. Defense attorneys have long claimed that plaintiffs double dip and get inflated payouts by filing multiple asbestos claims, both in court and with asbestos trusts, for the same injury. Because settlements are secret and the trusts aren’t required to make public their payouts, it’s difficult to verify whether claimants are getting overpaid.

In a written statement, Charles Siegel, a partner at the Dallas plaintiffs’ firm Waters & Kraus LLP, disputes that point, saying, “there is no windfall of money available to mesothelioma claimants, and plaintiffs cannot and do not ‘game the system’ such that solvent tort defendants pay the liability shares of bankrupt companies.�

See Reuters advanced take on the Congressional hearings here.

Reuters points out that complaints about asbestos litigation have been mounting for years on the Hill yet lawmakers never passed any kind of reform bill. It remains to be seen what the outcome will be of today’s hearings.

For now the asbestos litigation train keeps rolling. Later this month in San Francisco, attorneys will gather for a Perrin conference to hear about the state of the asbestos litigation, a roundup of legislation affecting asbestos suits, and a discussion about the future of asbestos bankruptcies.

From the Madison County Record

Med mal case belonged in Missouri – not Madison County, appellate court rules

10/18/2011 By Steve Korris

MOUNT VERNON – Madison County Circuit Judge Andy Matoesian kept a medical malpractice case that belonged in Missouri, Fifth District appellate justices ruled.

On Oct. 14, they directed Matoesian to dismiss a suit Cheryl Unterreiner filed against Missouri physician David Pernikoff and his professional corporation.

They rejected Matoesian’s conclusion that a telephone call from Pernikoff’s office to Unterreiner’s home in Highland established sufficient contact with Illinois.

“Cheryl could have returned the defendants’ phone call from any number of jurisdictions, including Missouri,” Justice Stephen Spomer wrote.

“A rule of law that allowed personal jurisdiction over a physician on the basis of a single phone call would effectively ensure that no physician ever delivered instructions over the telephone, or via email, for that physician could never know with certainty where they might eventually be haled into court as a result of those instructions,” he wrote.

“The defendants have never advertised for clients in Illinois and have never owned or leased any real or personal property in Illinois,” he wrote.

“The defendants’ contact with Illinois is simply far too attenuated and fortuitous to support jurisdiction,” he wrote.

Justices James Donovan and James Wexstten agreed.

Unterreiner underwent a heart valve replacement in 2002, and for the next six years she took Warfarin as an anticoagulant.

She traveled to Missouri for appointments at Pernikoff’s office.

In 2008, an employee left a phone message that her anticoagulant levels were low.

Unterreiner returned the call, and an employee told her to keep taking Warfarin and return in a month.

Within a month, Unterreiner suffered a stroke resulting in serious injuries.

She and husband Kim Unterreiner sued two years later, and Pernikoff moved to dismiss.

Matoesian denied the motion last December, but now he must grant it.

Spomer wrote, “Before an Illinois court may exercise jurisdiction over a nonresident defendant, that court must ensure its exercise of jurisdiction comports with traditional notions of fair play and substantial justice.

“A plaintiff may not lure a nonresident defendant into a jurisdiction, and the mere unilateral action of the plaintiff in seeking and obtaining the service of the defendant cannot serve to satisfy the jurisdictional requirement of minimum contacts.”

He wrote that Unterreiner sought out Pernikoff and traveled to Missouri for treatment.

He wrote that he couldn’t equate a solitary phone call with voluntary invocation of the protections and benefits of Illinois laws.

Lisa Howe and Thaddeus Eckenrode represented Pernikoff.

Drew Baebler and Philip Denton represented the Unterrreiners.

On October 19, 2011, the the U.S. Government Accountability Office (GAO) issued the report “Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts”

From the GAO website:

Summary
Asbestos litigation arose out of millions of Americans’ lengthy occupational exposure to asbestos which is linked to malignant and nonmalignant diseases. To date, about 100 companies have declared bankruptcy at least partially due to asbestos-related liability. In accordance with Chapter 11 and 524(g) of the federal bankruptcy code, a company may transfer its liabilities and certain assets to an asbestos personal injury trust, which is then responsible for compensating present and future claimants. Since 1988, 60 trusts have been established to pay claims with about $37 billion in total assets. GAO was asked to examine asbestos trusts set up pursuant to 524(g). This report addresses: (1) How much asbestos trusts have paid in claims and how trusts are administered, (2) How trust claim and payment information is made available to outside parties, and (3) Stakeholder–plaintiff and defense attorneys, trust officials, and other interested parties–views on whether more trust and claimant information should be made available to outside parties and efforts to change the trust system and processes. GAO analyzed trust agreements for 44 of 60 trusts and trust distribution procedures for 52 of 60 trusts, as well as financial reports for 47 of 60 trusts for 2009 and 2010. GAO also interviewed U.S. Bankruptcy Court judges and the trustees, general counsels, or directors from 11 trusts.

From 1988 through 2010, GAO’s analysis of available trust payment data show that trusts have paid about 3.3 million claims valued at about $17.5 billion and that each trust has trust distribution procedures (TDP) that govern its administration and establish the process for assessing and paying claims. Typically, TDPs include sections related to the intake and evaluation of claims, payment processes, and audit programs. Claims that meet the TDP’s criteria for a particular disease are paid in the amount specified in the TDP. Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid. Other information in the possession of a trust, such as an individual’s exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena. The 44 trust agreements GAO reviewed all required that trusts submit annual financial reports to the U.S. Bankruptcy Court of jurisdiction. Although TDPs typically provide that the trusts will make claim and payment information available to claimants and other parties, each trust ultimately determines what information it will make available. Of the 47 trust annual financial reports for 2009 and 2010 that GAO reviewed, all included the total amount of payments made and most included the total number of claims received and paid. One trust’s financial report contained claimant names and amounts paid to these individuals. Of the 52 trust TDPs GAO reviewed, 33 (64 percent) included sections related to protecting the confidentiality of claimants’ information and these sections often state that the trusts will only disclose information to outside parties with permission of the claimant or in response to a valid subpoena. Views differ on whether more trust and claimant information should be made available and there have been efforts to change the trust system. Plaintiff attorneys and trusts oppose proposals that would require additional disclosure of claimant information, such as amounts paid to individual claimants, stating that such information is available to the defense through subpoenas and that disclosure otherwise could compromise the confidentiality of claimants’ private information. Defense attorneys support additional disclosure, stating that such information could be used to offset asbestos defendants’ settlements in court and reduce fraudulent claims. In recent years, there have been various proposals to require additional disclosure of claimant information. One of these proposals was recently brought before the Judicial Conference of the United States, the primary policy making body of the U.S. courts. In commenting on a draft copy of this report, the Department of Justice and the Administrative Office of the U.S. Courts provided technical clarifications, which GAO incorporated where appropriate.

The highlights of the report can be found here

The full report can be found here

A link to a recent article quoting Segal McCambridge shareholder Jason Kennedy

Our article is here

The entire article at Inside Counsel can be found here

The Daily Docket: Garlock Loses Bid to Look into Old Asbestos Bankruptcies.

Judge Denies Garlock Bid To Revisit Old Asbestos Bankruptcies

Jacqueline Palank 10 October 2011

A judge denied Garlock Sealing Technologies LLC’s bid to obtain legal documents from decade-old asbestos bankruptcies, warning the consequences of doing so would upend previously struck resolutions to billions of dollars in claims.

U.S. Bankruptcy Judge Judith K. Fitzgerald on Friday denied Garlock’s request to reopen old bankruptcies and to page through documents in which law firms disclosed their clients in those cases, according to court papers.

The judge decided that Garlock failed to provide a valid reason to support its request, which she warned would result in “enormous” consequences if granted.

“The negative publicity with the likely effect on stock and bond prices for those publicly traded entities, employee morale, resulting management issues and administrative burdens…cannot be justified in these circumstances where Garlock did not appear or participate in while the cases were open and active and did not seek access to the 2019s during the life of the cases,” Fitzgerald wrote.

An attorney for Garlock couldn’t be reached for comment Monday.

Garlock sought to pull records from and intervene in bankruptcies filed between 2000 and 2004 by 12 manufacturers that, like Garlock, had been hit with hundreds or even thousands of personal-injury claims by individuals exposed to asbestos in their products.

Until the “bankruptcy wave” began, Garlock said it was able to defend itself from many of these claims by arguing that its products didn’t release “medically significant” amounts of asbestos into the air. Instead, Garlock argued, plaintiffs were likely more harmed by the larger amounts of asbestos contained in other manufacturers’ products.

But once those other manufacturers sought court protection, all pending litigation against them ground to a halt. Since Garlock wasn’t in bankruptcy, plaintiffs were free to continue pursuing litigation and settlement talks against it.

Garlock now questions the resulting settlements it struck with plaintiffs, arguing that law firms and plaintiffs may have lied about whose products exposed them to asbestos in order to collect what they could from Garlock rather than take their chances in bankruptcy.

That’s why Garlock sought the client lists filed in the bankruptcies of such manufacturers as Armstrong World Industries Inc., Pittsburgh Corning Corp., USG Corp. and W.R. Grace & Co. Garlock, which filed for Chapter 11 protection in June 2010, thought the documents could possibly show evidence of plaintiffs’ exposure to asbestos through the bankrupt manufacturers’ products, potentially reducing Garlock’s liabilities.

Fitzgerald, however, discredited this argument as “disingenuous” and said the harm Garlock is alleging it suffered is “imagined.”

“To date [Garlock] has not identified a creditor in its case who also was a creditor in one of these bankruptcy cases and whose exposure evidence was allegedly concealed,” Fitzgerald wrote.

Garlock, of Palmyra, N.Y., manufactures hydraulic and metallic gaskets, conveyor belts and other products. It has been a defendant in asbestos personal-injury lawsuits for more than three decades.

From LegalNewsline.com

The science of asbestos: A survey of experts

WASHINGTON (Legal Newsline) – There are some who say all forms of asbestos are unsafe and to be exposed to any amount is hazardous, while others say that one form of asbestos can be handled safely. Then there are some who are not sure.

Some of the leading scientific researchers, experts in the field of mesothelioma research and occupational medicine, have divergent opinions on the nature of the hazards caused by asbestos.

Four scientists were asked four questions about asbestos. Each one of them has distinguished themselves in some way in the field of asbestos science.

One of them was an American Cancer Society Research Scholar. One was the recipient of the Collegium Ramazzini’s Irving Selikoff Award and recently made a discovery in the field. One is an official with the National Institute of Environmental Health Sciences. One received an award by the American Thoracic Society.

The questions asked of the researchers were:

-Is it true that there is no general consensus that chrysotile causes mesothelioma?

-Is it true that there is controversy that crocidolite is the most dangerous type of asbestos in terms of causing mesothelioma?

-Is it true that much of the science, about asbestos and its toxicity, has been influenced by the litigation? Have studies funded by companies and or lawyers or politically ideological groups been tendentious because of the money involved? and

-Is it possible to reconstruct how someone who has mesothelioma was exposed to asbestos by working with brake shoes or in some other occupationally related manner, if it occurred several decades earlier?

None of the scientists interviewed currently participate in asbestos litigation for defendants or for plaintiffs.

The scientists interviewed are:

-Michele Carbone, M.D., PhD. He is the Director of the Cancer Research Center of Hawaii, University of Hawaii, Honolulu. He was an American Cancer Society Research Scholar in 2004;

-Joseph R Testa, PhD, FACMG, is the Chair in Human Genetics and the Chair of the Mesothelioma Working Group at Fox Chase Cancer Center, Philadelphia. He was the 1999 recipient of the Collegium Ramazzini’s Irving Selikoff Award. He received the award for “outstanding contributions in understanding the origins of mesothelioma.”;

-Brooke T. Mossman, PhD., is the Director of the Environmental Pathology Program, University of Vermont, College of Medicine. She was the recipient of the 2008 Wagner Award from the International Mesothelioma Interest Group Meeting, Amsterdam, NL, for Historic Contributions to Mesothelioma Research. She was also awarded Career Achievement Recognition Award for Scientific Accomplishments by the American Thoracic Society in 2007; and

-Dr. Aubrey Miller, MD, MPH, is the Senior Medical Adviser at the National Institute for Environmental Health Sciences. A medical epidemiologist and a captain in the U.S. Public Health Service, he has worked as a Senior Medical Officer and Regional Toxicologist for the U.S. Environmental Protection Agency.

Here are their responses:

Is it true that there is no general consensus that chrysotile causes mesothelioma?

Prof. Carbone: There is unanimity that amphibole causes mesothelioma. There is no agreement that chrysotile causes mesothelioma.

Prof. Testa: Regarding chrysotile, there is much controversy about whether it causes mesothelioma. I am not sure the controversy is based on strong science. Based on my reading of the literature, there seems to be considerable evidence that chrysotile can cause mesothelioma based on epidemiological and rodent studies.

Prof. Mossman: Correct. The majority of scientists acknowledge that chrysotile is less pathogenic than crocidolite or amosite (amphibole) types of asbestos and must be inhaled at larger amounts to cause mesothelioma, as supported by lung fiber burden studies (see data by A. Churg and V. Roggli), but the difficulty is that we all have chrysotile (the most common type of asbestos) predominately in our lungs and the workers who have mesothelioma have been largely exposed to mixed types of asbestos fibers.

Dr Miller: I would say that is not true in terms of government and public health people from our standpoint at the National Institute of Environmental Health Sciences and the Center for Disease Control it is clear that it does.

Is it true that there is controversy that crocidolite is the most dangerous type of asbestos in terms of causing mesothelioma?

Prof. Carbone: Crocidolite is the most dangerous of the asbestos minerals in terms of causing mesothelioma.

Prof Testa: I don’t think that there is much controversy that crocidolite is the, or at least one of the, most dangerous forms of asbestos in terms of causing mesothelioma. Crocidolite and other types of amphibole asbestos are thought to be more carcinogenic than chrysotile.

Prof. Mossman: No, I think the vast majority of scientists believe this is true

Dr. Miller: I would ask what is the most dangerous? We have seen more in those exposed to crocidolite. The animalsstudies indicate that crocidolite is the worse.

Is it true that much of the science has been influenced by the litigation? Have studies funded by companies been tendentious? Have studies been ideological?

Prof. Carbone: Some of the scientific literature has been influenced by the litigation. Read the acknowledgment section of many papers and see who financed the study, check whether the writer is a true scientist, someone with NCI or NIH or ACS or other credible peer-reviewed funding, whether the author has ever published anything important in a high impact journal (as defined by impact factor journal). (These are) all things easy to spot if you are in science but difficult to spot if you are not.

Prof. Testa: I think that it is likely that a small amount of science has been influenced by asbestos litigation. I have read that some studies funded by asbestos companies are biased, but I have no personal experience about this. As to whether some studies have been ideological, it is possible, given the enormous amount of money at stake, between product sales and asbestos litigation.

Prof. Mossman: Absolutely, this is why I have never participated as an expert witness in this arena. The legal community attends, advertises at, and supports a number of scientific meetings on asbestos. The Collegium Ramazinni meeting on the “Third Wave of Asbestos Diseases” held in NYC and organized by Philip Landrigan in the early 1990s… was supported by the plaintiff bar, labor unions and asbestos removal companies. It was questioned in a Science article.

Dr. Miller: Science which is funded by biased interests give biased results. We try to bring the best science to bear to find the effects of exposures. But clearly asbestos is one of those areas which has a lot of interest groups. Findings are questionable based on influences and biases.

Is it possible to reconstruct how someone who has mesothelioma was exposed to asbestos by working with brake shoes or some other occupationally related manner if the exposure occurred several decades earlier?

Prof. Carbone: If I ask you how many hours you spent working on a given task some 40-60 years ago, how accurate would your answer be? Now, imagine if you ask the question to the wife or friends of the subject because he is deceased. Imagine you ask my mom and my high school friends if when I grew up if I was exposed to asbestos, how accurate would the answer be? In short, these kinds of questions have some value when you look at a cohort, but individually? Well unless you are lucky to have good records, that almost never are available, then you are guessing.

Prof. Testa: With regard to your question about reconstructing how someone who has mesothelioma was exposed to asbestos occupationally several decades earlier, I would say the following: If a person were working occupationally with an amphibole fiber, and that type of fiber were persistent in the lung 40 years later, one could deduct that there was a causal connection. For chrysotile, the physical parameters of the fiber are such that they may not be found in the lung after several decades, but a carcinogen does not have to remain in the lung to cause mesothelioma. It could cause the initial genetic damage and disappear.

Prof. Mossman: No.

Dr. Miller: It is not difficult. We reconstruct exposure history all the time. This is how it is done for epidemiology studies.

After having read the answers of four distinguished scientists to four questions that are often at the center of asbestos litigation, one learns that there is near unanimity on some issues. But while there is unanimity on some things there are also divergent opinions on others – such as the gravity of the danger caused by chrysotile and if exposure history can be reconstructed.

While these are not scientists who work for or are funded by special interests groups, the same cannot be said uniformly about advocacy groups. Industry organizations that favor the use of asbestos, such as the Chrysotile Institute, will be criticized in the media as being biased.

The same type of scrutiny and the same standards could also be applied to those groups that oppose the use of asbestos.

For example, the website of the Asbestos Disease Awareness Organization – “the voice of the victims” – listed its 2011 conference sponsors. The list included, Shein Law Center, Simmons Attorneys at Law, the law firm of Belluck and Fox, the law firm of DeLuca and Nemeroff, and the Canadian Autoworkers Union.

But as the responses by the four scientists interviewed for this article indicate, even science has its controversies about asbestos.