Segal McCambridge Legal Blog

In a decision available here, the Florida Supreme Court held in American Optical Corp., et al. v. Williams, et al., No. SC08-1617; American Optical Corp., et al., v. Spiewak, et al., No. SC08-1616 (Fla. Sup. Ct. July 8, 2011) that the Asbestos and Silica Compensation Fairness Act (the Act) could not be retroactively applied. The Court found that those who had filed cases had vested rights such that, as found the Fourth District, “new legislation enacted after that accrual which substantially affects the cause of action may not be retroactively applied to that cause of action.”

In determining that the claimants had a vested right, the Court cited to case law that “clearly demonstrates that particular physical symptoms were not required, and changes in the lung evidencing asbestos-related disease were sufficient to trigger a cause of action.” It further found that development of symptoms of impairment “has never been the legal factor in determining ‘manifestation’ or accrual under Florida law.” The Court stated that the inhalation of asbestos fibers, which “became embedded in the lungs of the plaintiffs” constituted an actual injury. Thus, with this vested cause of action, the Act did not meet the two-part test to determine if a statute may be applied retroactively.

First, the Court determined that the Legislature did specifically intend for the Act to apply retroactively. However, next, the Court determined that the Act violated the Florida Constitution. Despite the Legislature’s statement that the Act was remedial in nature and did not impact vested rights, for the reasons set forth above, the Court disagreed, stating that under the Act, “vested rights simply vanish.”

The Court further concluded that the unconstitutional portion of the Act could not be severed in regard to the Appellees, thus the entire Act could not be applied in regard to their cases.

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From the Dow Jones Daily Bankruptcy Review
Insurers Win Right To Attack Global Industrial Chapter 11 Plan
Peg Brickley
04 May 2011

A split appeals court in Philadelphia Wednesday voted six to four to give insurance companies a shot at upsetting the confirmation of the Chapter 11 exit plan of Global Industrial Technologies Inc., one of many companies that resorted to bankruptcy to deal with massive claims for asbestos damages.

The majority said the insurance companies didn’t get a full hearing on their contention that improper collusion swelled the number of claims for silica-related injuries that were dealt with in Global Industrial’s Chapter 11 emergence plan.

A maker of refractories and other industrial products, Global Industrial filed for Chapter 11 protection in 2002. The Chapter 11 plan that was confirmed about five years later proposed to deal with both asbestos-related and silica-related injuries.

Silica, like asbestos, is a toxic material blamed for lung injuries. Global Industrial’s Chapter 11 plan proposed to let the company escape the overhang of hundreds of millions of dollars worth of potential liabilities by setting up trusts that would pay damage claims for both silica and asbestos.

The number of silica-related claims boomed once Global Industrial made it known its Chapter 11 case would set up a way to address silicosis damages. As a result, Global Industrial’s Chapter 11 plan affected the pocketbooks of Hartford Accident & Indemnity Co. and other insurers, the Third Circuit Court of Appeals found.

“When a federal court gives its approval to a plan that allows a party to put its hands into other people’s pockets, the ones with the pockets are entitled to be fully heard and to have their legitimate objections addressed,” the majority wrote.

A bankruptcy judge in Pittsburgh, backed up by a federal district court judge, said the insurance companies’ rights weren’t affected by Global Industrial’s Chapter 11 plan because whether the insurers would have to pay for silicosis damages depended on the terms of their policies, not on whether the claims were made against the company or against a bankruptcy trust. Invalid claims presented for payment to the asbestos trust are subject to challenge, just like claims presented against a company.

The appeals court majority, however, said the insurance companies should have been given a chance to prove their potential liability was increased as a result of Global Industrial and plaintiffs’ lawyers working together to create an “explosion of new claims.”

A four-judge minority said the bankruptcy court was “fully aware of past abuse in the realm of silicosis claims” and required evidence under penalty of perjury that the claims filed in Global Industrial’s case were legitimate before signing off on the company’s Chapter 11 plan.

Wednesday’s ruling will only prolong the period of uncertainty dogging Global Industrial, “a move that may very well imperil the financing on which the reorganized entity is relying to succeed,” according to the dissenting judges.

Global Industries Technologies Inc. (GIT) (In re: Global Industrial Technologies, Inc., et al., No. 08-3650, 3rd Cir.).

As of May 6, 2011, the Third Circuit Opinion can be found here

The Texas Civil Justice League recently released a Special Report on Texas Asbestos and Silica lawsuit reform. The purpose of this special report is to document the current state of asbestos and silica litigation in Texas state courts.

The first part of the report provides a brief history of asbestos and silica litigation in the United States and an overview of the legislative efforts in Texas to address abuses in asbestos and silica litigation. The report describes asbestos and silica litigation in Texas’s two multidistrict litigation courts handling asbestos and silica cases, and the impact of reform legislation (S.B. 15) on the state MDLs.

The report also discusses recent issues in Texas asbestos litigation, including the science-based evidentiary standards required by the Texas Supreme Court’s decision in Borg-Warner Corp. v. Flores.

Also included in the Special Report is a discussion of the issues relating to asbestos claimant compensation, the role of bankruptcy trusts in compensating asbestos claimants including the lack of transparency in that trust payment system that can provide substantial compensation to asbestos victims, but has inherent conflicts of interest and lack of oversight.

You can access the entire report “A Texas success story: Asbestos and silica lawsuit reform” here

Legal Newsline.com has an article entitled “Report: Texas tort reform a success”

From the Texas Public Policy Foundation
The article, “A Case Study on Tort Reform” can be found here
A Case Study on Tort Reform

Six thousand claimants in Texas silica lawsuits await their day in court. For most, that day will never come. Though it seems like justice is not being served, this is actually good news for courts and these claimants.

Silica is a naturally occurring mineral used in industrial processes and products. In its finest form, silica is dangerous to inhale and can cause serious damage to the lining of the lungs – and death in extreme cases. This danger has been known for so long that safety respirators and special work procedures have been required with silica’s use for more than 60 years. Despite the effort towards safety, roughly 50 people each year are affected with silicosis.

However, in the 1990’s, there was an explosion of lawsuits filed on behalf of thousands of claimants alleging they had been exposed to silica and were suffering from silicosis.

No medical or safety-related explanation existed for why silica exposure would have increased so dramatically. There is a darned good explanation why the number of lawsuits claiming silica exposure jumped suddenly.

Mobile trailers containing x-ray machines and paramedical personnel used to set up in mall parking lots screening for “patients�. Remarkably, almost everyone screened was determined to have silicosis. Rather than being sent to doctors, the newly determined silicosis “patients� were referred to lawyers, at which time they became silicosis plaintiffs.

The reason these people sought out lawyers rather than doctors was that few, if any of them, were actually sick. Federal District Judge Janice Jack, the multi-district litigation judge in charge of the silica cases in federal court, held a multi-day hearing and determined that most, if not all, of the claims were fraudulent. She also found that several doctors who had examined many of these patients a decade before and diagnosed them with asbestosis were now submitting new reports based on the original x-rays and proclaiming the patients now had silicosis.

These new patient/plaintiffs each sued dozens of defendants. Since the medical and factual evidence was paper-thin, the goal of the plaintiff’s attorney was to settle each case for an aggregate amount of $150,000 – collected $500 to $1500 at a time per defendant. The defendants found it cheaper to settle for small amounts than to go to trial.

Because of the multitude of silicosis cases being filed, the Texas Legislature in 2003 created a multi-district litigation rule, which placed all of the pending silica cases before one judge. After Judge Jack’s hearing, the Texas Legislature in 2005 adopted a legal standard requiring anyone claiming to have silicosis show, by objective evidence in court, an actual physical impairment. In other words, plaintiffs must file a medical report establishing an illness before they could go to trial.

Amazingly, the prognosis for the 6,000 claimants suddenly improved. One attorney wrote his client that the attorney would no longer handle the lawsuit: “We had an independent physician re-read your x-ray and I’m sorry to inform you that you are not sick.�

Such is the case for most of the claimants pending in the state multi-district litigation case. Their attorneys, who were once willing to settle with as many defendants as they sued for $500 each, are no longer willing to file a report saying that their client is actually sick.

This news is obviously good for the healthy claimants, but it is equally good news for those few claimants, less than 10, with legitimate claims whose cases have moved forward in courts no longer clogged by thousands of meritless lawsuits.

In a few months, the state district judge in charge of the silica MDL is required to submit a status report to the Texas Legislature on the effectiveness of the statute which created the medical criteria. It will be interesting to read the judge’s report. One thing is certain: neither courts nor clients should be upset for getting a clean bill of health.