Company's Fate Rests On Trial
By Michael Wright
The Facts
Published October 03, 2004
ANGLETON They sit in the courtroom like relics in a museum, cased in clear plastic boxes, innocuous-looking items like toys, bags and Christmas decorations. Only the red labels stamped with a white skull and crossbones hint at the pain they've caused.
They are exhibits in one of the largest asbestos trials in Brazoria County, but this time the plaintiff isn't a retired worker gasping rapidly toward death, but a large corporation fighting desperately for life.
Paint maker Kelly-Moore is suing Union Carbide for $1.3 billion, plus punitive damages, contending Union Carbide hid the dangers of asbestos when it sold the product to Kelly-Moore, which used it in joint compound.
"Carbide was the leader of a pack of groups that knew asbestos was not safe," said Mark Lanier, the Houston attorney representing Kelly-Moore. "Carbide would come out and test our products and tell us how good they were. We sold asbestos because Carbide told us it was safe."
John Gilbert, an Angleton attorney who is part of Union Carbide's defense team, said the argument is specious. Gilbert said the dangers of asbestos have been known since the 1930s, and if Kelly-Moore didn't know, it has no one to blame but itself.
Kelly-Moore, Gilbert said, was "a sophisticated user that's selling all types of products saying, 'Gosh, we didn't know how dangerous this product is.'"
The background
Kelly-Moore manufactured asbestos-containing joint compound from 1964-77. During that time, Union Carbide provided an average of 8 percent of Kelly-Moore's asbestos a year, though in some years it was as high as 75 percent and in others Union Carbide didn't sell the company anything.
The case hinges on what Union Carbide knew about the dangers of asbestos and what it told Kelly-Moore.
"The case is not about selling defective products," Lanier said. "The case is about what kind of information is given, and Carbide was our trusted supplier that we looked to for that information."
Union Carbide officials say the lawsuit is about trying to get the only asbestos manufacturer still in business.
"Union Carbide was only an 8 percent spot supplier to Kelly-Moore and yet Kelly-Moore seeks to shift 100 percent of their damages to Union Carbide," Dow spokesman Scot Wheeler said. Dow bought Union Carbide in 2000, and operates it as a wholly owned subsidiary.
Lanier contends documents uncovered in the suit show Union Carbide knew the thresholds the government set for asbestos exposure were unsafe but hid the information from the government and its customers.
"The documents have shown that Carbide knew back in the '60s that that fiber level was not safe," Lanier said. "Carbide participated in hiding those studies."
Gilbert said that's just not true.
"I still think there's just a lot of information out there about what all had been furnished to them again through the '60s and '70s," Gilbert said.
Union Carbide contends Kelly-Moore ordered its retailers to discount asbestos products in 1977 to get it sold before a federal ban went into effect.
Even today, after billions of dollars in liability, Union Carbide said the jury is still out on whether it's particular form of asbestos, Calidria, causes cancer and mesothelioma.
Gilbert said some recent research indicates that, because the fibers are so much shorter than other types of asbestos, they are blown out of the lungs as quickly as they are sucked in.
"There are scientific medical articles that support Carbide's position that it does not (cause disease)," Gilbert said. "I think it's still up in the air on that particular claim. There are articles on both sides."
Consequences
For Kelly-Moore, the consequences are as simple as they are stark, Lanier said. If it loses, the company will be driven to bankruptcy by the more than 40,000 asbestos suits it faces.
"Kelly-Moore will have to file bankruptcy and the victims will not get any money," Lanier said. "Kelly-Moore has gone through all its insurance."
Lanier did not directly answer a question about how much Kelly-Moore is seeking in punitive damages, but the Los Angeles Times put the number at $3.9 billion.
None of that money will go the company, Lanier said.
"Kelly-Moore has set up a relief fund and pledged any monies recovered in this case," Lanier said. "This case is not about Kelly-Moore making a red dime."
For Union Carbide, the consequences are less clear.
Union Carbide was a member of the Center for Claims Resolution, a group of asbestos producers that shared legal costs and negotiated settlements. However, by 2001, the CCR had shut down because the other companies had gone bankrupt.
In 2002, Union Carbide increased its liability insurance for pending and future asbestos claims to $2.2 billion, according to Dow's 2003 annual report. By the end of 2003, the report states, Union Carbide's receivable for insurance recoveries related to its asbestos liability was $1 billion.
That has led the company to seek legislative relief, Wheeler said in an e-mailed message.
"Defendant companies and insurers agree that meaningful legislation is absolutely essential to effectively addressing the worsening asbestos situation and that legislation is needed to ensure that an appropriate compromise can be forged," Wheeler said.
He declined to comment on the impact a loss would have on the company's finances, but the report said the future is uncertain.
"It is the opinion of Dow's management that it is reasonably possible that the cost of Union Carbide disposing of its asbestos-related claims, including future defense costs, could have a material adverse impact on the company's results of operations and cash flows for a particular period and on the consolidated financial position of the company," the 2003 report states.
Predictions
Both Gilbert and Wheeler are confident of victory.
"Kelly-Moore is testing a damage claim that is fundamentally flawed," Wheeler said. "Part of their claim rests on a flawed approach seeking recovery for speculative future damages claims not yet brought against their company."
Gilbert said there is a two-year statute of limitations for fraud. Even if Union Carbide loses in district court, Gilbert said, he's confident a verdict would be overturned.
"We have strong appellant points and we'll take this case as far as it needs be," he said.
Lanier said he's equally confident Kelly-Moore will win, not in the least because of Union Carbide's history. In 1984, the company's plant in Bhopal, India, leaked a highly toxic cloud of methyl isocyanate into the air. More than 2,000 people died overnight and 6,000 have died since. The company also is responsible for the death of about 700 miners in West Virginia in the 1930s. The workers contracted silicosis from breathing silica dust while blasting rock away from a dam.
"They're just not a good company," Lanier said. "There are documents we can't show (the jury) where Carbide admits that they have killed more people than any other company in our industry."
Lanier thinks the lawsuit could set a precedent. He said it's the first case to go to trial in the country that pits a manufacturer against its supplier, though two other cases are pending against Union Carbide, including one in which Lanier is representing the plaintiff.
Gilbert, who said Kelly-Moore filed a similar suit against Union Carbide in 1982, doesn't believe the trial will lead to a new rash of lawsuits because of the two-year statute of limitations.
"It's a very difficult one to begin with, and it's even become more difficult," he said.
The trial resumes at 10:30 Monday morning in the big courtroom on the fourth floor of the Brazoria County Courthouse. Visiting Judge J. Ray Gayle III is presiding.
Michael Wright covers Brazoria County courts for The Facts. Contact him at (979) 849-8581.
WHAT IS ASBESTOS?
Asbestos is the name given to a number of naturally occurring fibrous silicate minerals mined for their useful properties such as thermal insulation, chemical and thermal stability, and high tensile strength.
HOW WAS IT USED?
Asbestos use peaked from World War II through the mid-1970s.
It was considered an ideal material to use since it resembles fibers such as cotton and wool in its pliability and softness, yet it is inflammable and acid resistant.
COMMON USES FOR ASBESTOS
• Protection for firefighters and other people who work with high heat
• Gas masks
• Insulation and thermal proofing for pipes, boilers and electrical products
• Coating for brake linings and clutch friction plates
• Construction materials, including cement pipes, packing, jointing, gaskets, floor and ceiling tiles, paneling, roofing shingles, asphalt coats and sealant, and acoustical and decorative applications
RELATED DISEASES
Asbestosis: As asbestos fibers are inhaled, they may become trapped in the lung tissue. The body tries to dissolve the fibers by producing an acid. This acid does little to damage the fiber but might scar the surrounding tissue. Eventually, this scarring may become so severe that the lungs cannot function. The latency period is often 25-40 years.
Mesothelioma: A cancer of the outer lining of the lung and chest cavity and/or the lining of the abdominal wall. The only known cause is from asbestos exposure. The latency period is often 15-30 years.
Lung cancer: The effects of lung cancer often are greatly increased by cigarette smoking. Cancer of the gastrointestinal tract also can be caused by asbestos. The latency period is often 15-30 years.
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** POSTED OCTOBER 6, 2004 **