Lawmakers in Both Parties Monitor Negotiations as Cases Take Economic Toll

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By Jim VandeHei

Washington Post Staff Writer

Wednesday, February 5, 2003;

Lawsuits over cancer-causing asbestos are wreaking so much economic and human damage that longtime political enemies are discussing a controversial détente to end the suits once and for all.

Union leaders and a few trial lawyers have been talking privately with representatives of General Electric Co. and other Fortune 500 companies about creating a privately financed, multibillion-dollar compensation fund for asbestos victims, according to people familiar with the talks. Under the nascent plan, which would require congressional action, asbestos victims would forfeit their right to sue in exchange for an immediate cash payment from the fund.

The discussions have grabbed the attention of strange legislative bedfellows. Senators including liberal Patrick J. Leahy (D-Vt.) and conservative Orrin G. Hatch (R-Utah) are monitoring the talks in hopes of possibly turning the idea into a new law early this year.

A deal to settle the ever-growing pile of asbestos lawsuits would have broad ramifications for plaintiffs and the thousands of companies they sue. It also would touch the lives of millions of Americans unknowingly hit by the economic side effects of the dispute.

Asbestos -- the cancer-causing fiber that most Americans associate with the dusty wrappings around pipes in schoolrooms, factories and basements -- is driving dozens of companies into bankruptcy and costing tens of thousands of workers their jobs. The deadly fiber, until 25 years ago widely used in products as varied as insulation and brake linings, causes mesothelioma, a cancer of the chest and abdomen, and damages the lungs when inhaled.

There are many obstacles to a deal. Some corporate leaders remain divided over the best approach to fix the asbestos mess, and others are locked in a dispute over how much each company would contribute to a compensation fund. Participants must also decide who would administer the fund, what role judicial officials would play in overseeing it and what medical criteria would be used to determine how much each victim would get. At the same time, many congressional Democrats are wary of striking a deal that would bar victims from seeking damages by suing businesses.

But for the first time in 20 years, key Republicans and Democrats say they are nearing a solution that could save jobs and promptly compensate thousands of cancer sufferers

."I am convinced we can get a fair solution -- fair for companies and fair for victims," Leahy said. "Just the sheer weight of all this coming down" will force Congress to play a role.

Creation of a government-run compensation fund is the most popular solution among union leaders, many influential corporate executives and key Democrats, but insurance companies want an alternative approach that would focus on establishing medical criteria to settle lawsuits through the courts.

Mark Iola, a Dallas-based lawyer for asbestos victims, says he and other trial lawyers are working with insurance companies and the National Association of Manufacturers to convince lawmakers that establishing new medical criteria would root out frivolous lawsuits and most quickly get money to the sickest victims. The American Bar Association, the nation's largest lawyers' group, is close to formally endorsing a similar proposal.

Corporate leaders say they will settle on one plan in coming weeks before asking congressional leaders to enact it.

Either way, a compromise would serve as a model for resolving future disputes over mass lawsuits, both sides say.

The backlog of court cases is so long that many cancer victims are not being compensated for their illnesses in a timely manner. Those hit hardest by asbestos have been workers who have had direct contact with the substance, such as those involved in asbestos mining or the manufacture or installation of products containing asbestos. Some family members have been affected, however, when workers have come home with asbestos fibers in their clothes and hair.

Most of the country's original asbestos makers, such as W.R. Grace & Co., have declared bankruptcy as a result of lawsuits from people exposed to their products. So plaintiffs' lawyers, in an effort to win money for asbestos victims, are increasingly turning to companies that used products containing asbestos, or that own subsidiaries that did, over the past several decades.

The result: 8,000 companies -- including General Electric, Viacom and the Big Three automakers -- face litigation over asbestos.

The lawsuits are costing companies billions of dollars in settlement and insurance costs and pulling down the stock prices of many of the nation's biggest businesses. Rand Corp., a California think tank, estimates that future costs from asbestos litigation could top $200 billion. Columbia University professor Joseph E. Stiglitz, chairman of the Council of Economic Advisers during the Clinton administration, recently estimated that as many as 60,000 people have lost their jobs and more than $8,000 each in pension funds as a direct result of the litigation.

Corporations such as General Electric are underwriting a multimillion-dollar lobbying campaign to win federal protections from the lawsuits. At the same time, insurance companies plan to spend millions of dollars on advertising to highlight the gravity of the problem facing U.S. businesses and consumers. "This begs for a global solution," said Sen. Ben Nelson (D-Neb.).

Yet it is the human damage that is attracting liberal Democrats, labor unions and even a few big-name trial lawyers to a pet cause of corporate America.

Union leaders are motivated by two pressing concernsjob losses and worries that some of the sickest victims are unionized workers who cannot recoup damages because courts are clogged with asbestos suits. About 200,000 cases are pending in U.S. courts, many of which involve people who have shown no sign of illness from their exposure but worry that the statute of limitations will expire before ill effects become apparent.

Top officials at the AFL-CIO, the nation's largest union, are holding talks with the Alliance Study Group (ASG), which represents General Electric, General Motors Corp., Viacom and many more Fortune 500 firms, about the compensation fund. The ASG, in turn, has retained several former staff members for key lawmakers, including Joel P. Johnson, a former top adviser to President Bill Clinton and Senate Minority Leader Thomas A. Daschle (D-S.D.), and Kevin McGuiness, a former staff director for Hatch. Hatch's committee has jurisdiction over the proposed compensation fund.

The AFL-CIO, a longtime opponent of federal limits on lawsuits, is a key player. Trial lawyers give 90 percent of their political donations to Democrats, so Democratic lawmakers are looking for union leaders to provide political cover if they decide to turn on some of their biggest political backers. It will take 60 votes in the Senate to pass an asbestos bill, so corporate America cannot rely solely on its friends in the GOP.

"We are interested in any approach that addresses the major problems of so many victims not getting the compensation they deserve. What little they get, they don't get quick enough," said Jon Hiatt, general counsel of the AFL-CIO, a key participant in the talks.

Most trial lawyers, who stand to lose millions of dollars in fees if a fund is created, oppose the idea. Several are pressing Democratic leaders to oppose the plan.

But a small number of trial lawyers who think the explosion of asbestos cases is hurting the most seriously afflicted victims are privately expressing support for it. An even larger number are breaking with their colleagues and publicly backing the insurance industry's proposal to set medical criteria, which could lead to quicker settlements for victims and big paydays for the lawyers.

"The sheer magnitude of the problem, for both victims and the economy, is forcing both sides to throw away their old tort reform talking points," said Johnson. "This issue is fundamentally different, and I think you'll see an unusual mix of allies come together behind a solution."