Asbestos Factions Struggle To Settle Their 30-Year War
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By Shailagh Murray and Kathryn Kranhold
October 15, 2003 WASHINGTON -- Manufacturers, trial lawyers, insurers and labor unions have been fighting over asbestos liability for 30 years. Now all the warring camps are as close as they've ever been to agreeing on a Congressional truce for one of the most expensive battles in industrial history. But the uneasy pact could still come unglued. The bill, which next faces a full Senate vote, proposes creating a trust fund for asbestos victims and giving priority to patients with the greatest medical need. Two camps of asbestos makers, long bitter rivals, have come together to support the bill. But insurers want to be sure the fund doesn't raise their costs. Unions want the fund to grow bigger. And trial lawyers are fighting the bill, opposed to a proposed cap on total payments to plaintiffs. Tuesday night, Senate Majority Leader Bill Frist of Tennessee put a deal on the table that would slightly increase the size of the fund, to appease the unions. He has made it clear that, without a major breakthrough this week, any legislation will probably be shelved until after the 2004 election. "The substance is complicated, the politics are confusing, the alliances are unprecedented, and the money involved is staggering," says Joel Johnson, a Democratic lobbyist working on the asbestos bill. The latest chapter in this saga focused on two solutions for curtailing asbestos lawsuits from rival business camps. A group called the Asbestos Alliance, comprising old-line asbestos manufacturers and insurers, proposed a plan in which plaintiffs with fatal cancer would be first in line in the courtroom and those who had been exposed but were still healthy would be last. This "medical criteria" approach appealed to trial lawyers who represent the sickest victims, because it wouldn't ultimately limit the number of cases or the size of awards. The manufacturers liked it because it would have raised the bar on who receives compensation. The other camp includes companies who were uncertain of their legal vulnerability because they had inherited liability in acquisitions or were otherwise less directly tied to making asbestos. They wanted to establish a trust fund from which victims would be paid based on the severity of their condition. The fund would eliminate the uncertainty hanging over these companies by putting a cap on how much they each paid into the fund to compensate victims. This camp, dubbed the Asbestos Study Group, found a politically valuable ally in organized labor, which tempered its natural allegiance to sick workers because it wanted to stem the rising numbers of jobs lost at companies seeking bankruptcy protection. Trial lawyers, though, hated the idea, and insurers were cool because it required a hefty contribution from them. The 60-year asbestos saga has its roots in America's post-World War II economic boom, when the fibrous mineral -- an excellent insulator and fire retardant -- became a staple ingredient in hundreds of products from insulation, floor tiles and roofing shingles to blankets, aprons and corks. Medical articles had linked asbestos with lung cancer as early as the 1930s, but neither employees nor the broader public began learning much about the dangers until the 1970s. That's when trial lawyers began filing lawsuits on behalf of sick miners, shipbuilders and construction workers, along with their wives and children, who had inhaled asbestos dust from contaminated lunchboxes and clothing. During the next three decades, more than 600,000 people would file asbestos lawsuits, according to a study by the Rand Institute of Civil Justice. Lawsuits have forced business giants such as Johns-Manville Corp. and W.R. Grace & Co. to seek bankruptcy protection. About 300,000 settlements are pending around the country, defendants estimate. The Rand study says there could be as many as 2.4 million asbestos victims yet to be found. Their claims, according to the study, could total $210 billion. Companies warn of many more bankruptcies and resultant job losses, a warning labor unions take seriously. Grim Prospects Many of those seeking compensation haven't even gotten sick, since it can take 30 years for asbestos diseases to catch up with victims. But the prospects -- including lung-scarring asbestosis and the lethal cancer mesothelioma -- are exceptionally grim. One Mississippi jury awarded $150 million to six people who had been exposed to asbestos and had sought redress for their fear of future illness. More than half of the $54 billion in asbestos compensation paid out by the end of 2002, the Rand study found, went not to victims but to attorney fees and other administrative costs. The situation has generated political warfare for years. Tapping Republican allies in Congress, companies with heavy asbestos liability tried to limit their exposure through legislation restricting access to the court system. Trial lawyers and labor unions enlisted their Democratic allies to block those efforts. A few years ago, however, the resulting partisan stalemate began to crack with the broadcast of the now-infamous "Libby ads." Discharge from a W.R. Grace mine had left the small town of Libby, Mont., blanketed by asbestos dust, from gardens to the high-school track. Like most other Republicans in Washington, Montana Sen. Conrad Burns had lined up with industry in seeking to curb lawsuits after local residents began suffering unusually high rates of cancer and other illnesses. But when Mr. Burns sought re-election in 2000, trial lawyers targeted him with evocative ads about the asbestos toll. "Over 100 dead," the voice-over said, as the camera panned across a cemetery. "Hundreds more facing death. Now, Senator Conrad Burns is pushing legislation to let W.R. Grace off the hook." The Libby ads persuaded Mr. Burns to remove his name from an offending Senate bill. Other members of the Senate Republican majority also shifted their views, once they saw the potential political toll. Meanwhile, their Democratic adversaries were becoming more open to a legislative compromise because of concerns that mounting business problems would lead to widespread job losses. A new spate of bankruptcies got under way with the February 2000 Chapter 11 filing by Babcock & Wilcox Co., which made boilers with asbestos insulation. A total of 22 companies filed for asbestos-related bankruptcy protection between January 2000 and spring 2002, according to Rand, including W.R. Grace, which entered Chapter 11 in April 2001. But while Congress was beginning to come together, the business community was becoming more divided on the issue. The old-line manufacturers and insurers behind the Asbestos Alliance, including U.S. Gypsum Corp. and Hartford Financial Services Group, assembled an all-star lobbying team in 2001 to push their medical-criteria proposal. To supplement Republican advocates with strong Senate ties, the alliance and other business allies relied on former top Clinton White House aides Harold Ickes and John Podesta, among other Democratic lobbying heavyweights. The alliance's medical-criteria proposal also had the backing of the American Bar Association. The rival Asbestos Study Group hired its own political gunslingers to push its trust-fund approach, including former aides to House Republican leader Tom DeLay of Texas. To woo the Democrats' powerful organized-labor constituency, the group signed up Mr. Johnson, a former chief of staff to Senate Minority Leader Tom Daschle, and Thurgood Marshall Jr., a former Democratic Judiciary Committee staffer and son of the Supreme Court justice. The group hired Goldman Sachs to crunch trust-fund numbers. Among the companies in the group were Viacom Inc., which had inherited the liability of Westinghouse Electric Co., a company that had used asbestos blankets to insulate power turbines; General Electric Co., which had also manufactured power turbines using asbestos insulation; and Pfizer Inc., one of whose subsidiaries had once made protective gloves containing asbestos. As the two sides battled without making much legislative progress, their advocates made a lot of money. A total of 88 companies and groups, from the leading trial lawyers to major defendants such as Federal Mogul Corp. and GAF Corp., hired lobbyists in 2002, according to federal records. The prospect of a breakthrough emerged unexpectedly at a Senate Judiciary Committee meeting in March this year. The surge in new bankruptcies convinced some union leaders that asbestos litigation was more of a threat to their members than a solution. Jonathan Hiatt, the AFL-CIO's general counsel, announced that labor had begun talks with Asbestos Study Group members on the trust-fund approach. To Senate Judiciary Chairman Orrin Hatch, a Utah Republican, a deal that could bring Democrats and Republicans together in the narrowly divided chamber was irresistible. He instructed labor officials and the Asbestos Study Group members to craft a settlement so their views could be taken into account in the Senate bill. Fed up with the bickering between the camps, Mr. Hatch admonished the lobbyists to overcome their differences and rally round the trust-fund approach. "And when we come up with it," the senator told Mr. Hiatt and others, "it's going to be your last chance to have this thing resolved as far as I'm concerned." With that, the companies that had backed the medical-criteria approach quickly jumped over to the trust-fund side. But the trial lawyers that had been allied with them refused and set out to kill the trust fund. The trial lawyers sought to build resistance among Judiciary Committee Democrats by fomenting a grass-roots backlash among unionized industrial workers that would force the AFL-CIO to abandon trust-fund negotiations. Trial lawyer John Cooney escorted some victims around the Capitol. One was recently widowed Cindy Casanova, whose husband Scott, had died of mesothelioma in his 40s. He'd been exposed to asbestos while working as a brake mechanic. The trial lawyers didn't stop negotiators from crafting a blueprint for a $108 billion fund, including $52 billion to come from insurers. Mr. Hatch's committee narrowly approved that legislation, sending it along to the Senate floor. The proposed fund would make payments that vary with the severity of illness. Terminal-cancer patients would receive $1 million, for instance, while people with lung damage that wasn't life threatening would receive $20,000. The government wouldn't contribute, although conservatives worry that it will end up on the hook eventually if defendants become unable to pay. But the trust fund's opponents did succeed in persuading all but one Judiciary Committee Democrat to oppose the bill -- guaranteeing that Democrats would block it if it were brought to the floor in its present form. Second Thoughts Meanwhile, labor began to have second thoughts about backing the Senate bill. Mr. Hiatt now says the AFL-CIO considers the size of the trust fund inadequate. "Without significant additional changes to the bill, the AFL-CIO would strongly urge you to vote against its passage," William Samuel, the AFL-CIO's top lobbyist, urged senators in a July 31 letter. Mr. Hatch dismissed the union's bid for a bigger fund. "If they think there's going to be more money added to this, they're nuts," the Utah Republican said. But privately, Senate and industry officials said the total has been pushed to about $114 billion, to satisfy union demands. The political reality is: All it takes is one unhappy faction to hold up a final deal. For instance, the insurers want to pay less than the Senate bill requires. Their friends include Sen. Chris Dodd of Connecticut, an influential senior Democrat whose state is home to insurance giants Hartford and Travelers, and Republican Sen. Jon Kyl of Arizona, who sits on the Judiciary Committee and is a member of the Senate leadership. The insurers want $7 billion subtracted from their initial contribution, trimming it to $45 billion. They also want to erase a contingency fund that the bill would create if the trust fund runs out of money, which could cost them an additional $22.5 billion. If the trust fund runs dry, insurers want victims to return to federal court, but with strict new medical-criteria guidelines. Executives with the Asbestos Study Group corporations are among the optimists who believe that the outstanding issues, specifically those centered on money, can be resolved. But trial lawyers may counter with a big ad campaign. An adviser to the trial lawyers says that they may broadcast "Libby times 100." Business backers have tried to pre-empt such attacks with their own TV ads that paint the companies as the victims' champions. "American workers made our nation strong," said a recent spot, as battleships at sunrise flashed across the screen. "Today many are sick from asbestos exposure and their time for fair compensation is running out." The sponsors: the Asbestos Study Group. Senate Majority Leader Frist and Democratic Minority Leader Daschle both say they want a deal, and offers are flying back and forth. Ordinarily, such a logjam might be broken by the Bush White House, a zealous advocate of lawsuit curbs. But the administration is stuck awkwardly on the sidelines because Vice President Dick Cheney's old employer, Halliburton Co., stands to save billions from the deal. Halliburton has already reached an agreement with lawyers representing victims with asbestos-related diseases to establish a trust fund, valued at more than $4 billion. But Halliburton has hedged its bets: The company helped Viacom and GE form the Asbestos Study Group, and if the Senate legislation that they pushed passes, some estimate that Halliburton would have to pay a small percentage of that amount into the new national trust fund. Write to Shailagh Murray at shailagh.murray@wsj.com and Kathryn Kranhold at kathryn.kranhold@wsj.com A COSTLY SAGA
Source: Rand Institute for Civil Justice *** POSTED OCTOBER 15, 2003 *** |