Against Backdrop of Rash of Chapter 11 Bankruptcies, Time to Consider Legislation That Preserves Right of Access to Courts for Malignancy - Disabled Asbestos Victims
November 27, 2000
Dear Plaintiff Asbestos Lawyers:
As you should be aware, discussions are underway involving some of our colleagues and representatives of the asbestos industry, its insurers, and organized labor. These talks focus on the question of whether, under certain circumstances, some form of asbestos legislation would be favored by each of these constituencies. Despite the fact that a 50/50 split in the United States Senate and nearly the same in the House makes it unlikely that any contentious legislation (asbestos or otherwise) will get through the next Congress, this is a matter which should be of concern to all.
The past couple of months have seen some interesting financial developments. The stock of Owens-Illinois (OI) sells for $3.50, down from a 52-week high of $26.00; Federal Mogul (FMO) the parent of T&N, Flexitallic, Abex, Wagner, Ferodo, et al., sells for $2.65, down from a 52-week high of $25.00; Armstrong World Industries (ACK) sells for $1.25, down from $33.00; WR Grace (GRA) lists for $2.65, down from a 52-week high of $15.00; and, US Gypsum (USG) trades for $14.00, down from a 52-week high of $52.00.
These declines in stock price are not attributable merely to the cost of fairly compensating victims of asbestos disease. Questionable business decisions over the past couple of years and a downturn in certain sectors of the economy play a role in what is happening. Some of these companies are having trouble refinancing debt, which they blame, in part, on asbestos litigation and the hesitancy of banks and the investment community, after the Owens Corning bankruptcy, to loan money at favorable interest rates.
Owens Corning (OWC) (and Fibreboard) as you know are in Chapter 11 and trade for $1.25 a share, down from a 52-week high of $22.00; Babcock and Wilcox, Pittsburgh Corning (along with PPG Industries and Corning Glass), National Gypsum and Rapid American are effectively out of litigation, either through bankruptcy filings, court orders or (in the case of Rapid American) self-professed insolvency. (Rapid will likely propose a matrix approach to future asbestos cases).
The sky may not be falling as Fred Baron commented in his recent letter, but it does appear a bit cloudy.
Bankruptcies have not been good for any of our clients. They have proven particularly unfair for persons who have suffered the most substantial and serious injuries. Thus, with the departure of four to six defendants (depending on how you count) from the litigation during the past year; knowing how persons with cancer and other serious injuries are treated in bankruptcy plans; and seeing the current financial status of various asbestos defendants; questions are raised as to whether further bankruptcies are in the offing and, if so, whether some form of legislation might be preferable to additional insolvencies.
Efforts by asbestos companies and their insurers to pass bail out legislation go back twenty years. Every such proposal (including last session's GAF sponsored bill) has evidenced a level of greed and selfishness not surprising from an industry which has done so much harm to so many. If similarly draconian legislation is presented to the next Congress, consumer groups, victims organizations, trial lawyers, organized labor and fair minded people everywhere will stand united to defeat it. However this begs the question of whether some form of legislation might be better than additional Chapter 11 filings, at least for persons with serious injuries and substantial damages.
One thing is for certain: the legislative process, once under way in the Congress, cannot be controlled by any single constituency. If there are to be discussions regarding legislation, within and without the plaintiffs' bar, they must be broad based and open to participation from all. Our clients and the future victims deserve nothing less.
Sincerely,
Shepard A. Hoffman
Law Offices of Shepard Hoffman
36 S. Charles Street, Suite 2200
Baltimore, MA 21201
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3100 Monticello Avenue, Suite 750
Dallas, TX 75205
** POSTED DECEMBER 4, 2000 **
An Addendum -- March 6, 2001
As of this writing, another former asbestos manufacturer, GAF Corp., which assumed the liabilities of Ruberoid Corp., has sought Chapter 11 protection.
Despite the decreasing number of solvent defendants, the filing of claims nationwide has continued to escalate. In 2000, there were 40,000 new cases. The number of mesothelioma claims filed for each of the past ten years has remained steady at about 700 and 1,000 per year. There has been an increase in the number of other malignancy claims filed, such as lung cancer and colon cancer, but the overwhelming majority of the claims filed were on behalf of non-malignant claimants.
According to the Manville Trust and Owens Corning Fiberglass, roughly 1.4% of all filings are mesothelioma claims, 1.8% are other cancers, 4.8% are lung cancers and the rest -- 92% -- are non malignant, such as asbestosis and pleural disease. It's been reported that approximately 27 million Americans were occupationally exposed to enough asbestos fibers to ultimately show evidence of asbestos scarring on chest films.
In previous bankruptcy proceedings, the ratio of compensation allocated to mesothelioma victims as compared to non impaired asbestos disease claimants has been about 9 to 1. As the number of bankruptcies increases, we will need to revisit this ratio, which does not accurately reflect jury verdicts. Jury verdicts and/or settlements for mesothelioma patients, depending on factors such as age, lost income, and jurisdiction, are usually over 50 times greater than average settlement values for non malignant claims. In certain jurisdictions, such as Texas, New York and California, the average settlement values are sometimes 75 times greater.
If the facts warrant, the amount of compensation allocated to mesothelioma patients should be at least 50 times greater than the amounts allocated to unimpaired asbestos disease claimants.
** POSTED MARCH 7, 2001 **