Beyond the rhetoric: The impact of asbestos litigation

By The SE Texas Record | Nov 17, 2008


The impact of asbestos litigation is etched in stone, even as the carving continues.

To date, more than $70 billion has been paid in legal awards and settlements with law firms receiving more than half of those rewards, and more than 80 businesses nationwide have been forced into bankruptcy, with the resulting loss of tens of thousands of jobs, according to a May 2008 report by the Manhattan Institute's Center for Legal Policy.

But the cases continue. As of 2003, a St. Louis Post Dispatch investigative report found that more than 300,000 cases remained open in courts across the country. Five years later, that number is believed to be still more than 200,000 according to the Manhattan Institute. Nearly 100,000 new cases were filed in 2001 alone.

All over a mineral named for its indestructible and inflammable qualities, used in everything from naval ships to floor tiles.

While asbestos lawsuits date back to the early part of the 20th century, the initial source of today's surging, seemingly never-ending river of litigation began with a single case started in 1965 for a single plaintiff, Claude Tomplait, filed by Orange, Texas, lawyer Ward Stephenson.

After four years of litigation, according to the Manhattan Institute, Stephenson won an award that paid Tomplait $37,500. Stephenson's fee, $30,000 failed to cover his legal fees and costs.

Stephenson's legal victories continued, with a 1973 case for another victim, Claude Borel. The legal precedence of this victory opened wide the door to mass tort litigation, according to the Manhattan Institute, with a ruling by the United States Fifth Circuit Court of Appeals:

"The court ruled that strict liability applied up and down the chain (i.e., that plaintiffs need not show defendant corporations were negligent), that the statue of limitations did not bar the claim (i.e., that defendants could be sued even for long-ago asbestos exposure), and that even though Borel bore some responsibility for his injuries, the defendants were not relieved of theirs."

What followed was an ever-increasing number of lawsuits, rising to a peak in 2001, as legal firms developed assembly line tactics to rapidly increase the number of plaintiffs, while expanding their lawsuits to defendants who did not have a direct link to asbestos contamination. The RAND Institute estimated that by 2002, 8,400 defendants had been sued by nearly three-quarters of a million plaintiffs.

"As of today," the Manhattan Institute reported, "as many as 10 million claims may have been filed, and the ultimate cost may hit $265 billion."

By 1999, the U.S. Supreme Court called asbestos litigation "an elephantine mass" that "defies customary judicial administration and calls for national legislation," according to court records.

The epicenter

Like contagious dust blowing in the wind, asbestos litigation has reached nearly every corner of the U.S. legal system. But ground zero in this so-called jihad is deep in the heart of Texas.

Just as Stephenson's cases opened the door, the Texas legal system has seen many of the most significant cases, and the Texas Legislature has pushed ahead attempts at reform. As Texas goes, so does Asbestos litigation.

"Texas has been very active," said Richard Epstein, law professor at the University of Chicago. "Huge numbers of cases started in that place."

Following Stephenson's signature cases, powerful legal firms in Texas -- most notably the firm of Baron & Budd, but also several of the state's leading tort lawyers like Southeast Texas' Walter Umphrey, and Wayne Reaud – began filing massive asbestos lawsuits.

Few firms rival Baron & Budd for the sheer number of cases, which earned the firm 30 to 40 percent plus fees on close to $200 million in settlements.

With the potential for massive awards, methods for pursuing these cases changed radically, according to the Manhattan Institute's Center for Legal Policy Director James Copland. These tactics include advertising for clients from across the country.

"It's important to realize that most of these asbestos plaintiffs have not sought out an attorney for representation but rather are people recruited by lawyers for mass lawsuits." Copland said in a recent interview.

People were given mass health screenings, a practice that Lester Brickman, a leading expert in asbestos litigation and a professor at the Cardozo School of Law, said directly led to thousands of claims made by people who were not truly sick. The end result, according to U.S. Sen. Jon Kyl, R-Ariz., is, "asbestos-injury legal claims have skyrocketed during a period when rates of actual asbestos injury have declined sharply."

Kyl, a member of the Senate Committee on The Judiciary, wrote about the Fairness in Asbestos Injury Resolution Act of 2003, that, "This phenomenon – of asbestos claims brought by people who are not sick – is quantified in several sources."

According to a 2005 article in Environment and Climate News, "Texas had become a magnet for speculative health claims."

Likewise the Insurance Journal wrote "Texas has become the national haven for questionable and frivolous asbestos lawsuits. An estimated 40 percent of the nation's asbestos claims are filed in Texas courts, although a vast number of these lawsuits have little, if any, connection to Texas."

Tactical problems

Just as Stephenson's initial victories opened the door to the "elephantine mass," ensuing legal victories in Texas began to swing the pendulum the other way.

First, a leaked memo from the offices of Dallas-based Barron & Budd provided legal fireworks as to the methods the firm used to prepare its plaintiffs for trial. Defense attorneys for asbestos manufactures claimed the 20-page memo coached clients to commit fraud.

Baron, who died from cancer at age 61 on Oct. 30, told newspaper reporters that legal experts found the memo "perfectly appropriate … there has been absolutely no foul committed here."

But defense attorneys, as could be expected, begged to differ.

"Step by step, it leads the client to the conclusion that in order to win money, the client must be free with his answers and in disregard of the truth," said Tom Riley, a Cedar Rapids, Iowa, attorney for Raymark Industries. "It tells how to lie. Do it with confidence. The more confident you are, the more money you'll get"

Sen. Kyl cited the Baron & Budd memo extensively in his report about the problems with asbestos litigation. Brickman offered the following assessment: "In my opinion … this is subornation of perjury." He also concludes that is a "principal, if not the principal, method of processing unimpaired asbestos claims today."

Brickman chronicled another major defeat for trial lawyers when five prominent Texas lawyers including Umphrey and Reaud formed a "special purpose law firm to pursue asbestos litigation."

Their most prominent case, Acre v. Burrow stemmed from a chemical plant explosion in 1989 that killed 23 workers. Representing 126 plaintiffs who were injured in the accident, the firm settled for $190 million.

When the attorneys received a contingency fee of more than $65 million, according to Brickman, 49 of the plaintiffs claimed their case had been mishandled and that they had been subjected to professional and judicial misconduct.

The disgruntled group sought an attorney to help them file charges against their previous law firm.

"Bringing such a claim would have required taking on some of the most powerful lawyers in Texas," Brickman wrote, "and no Texas lawyer was willing to represent them."

Eventually, William Skepnek, a plaintiffs' lawyer for Kansas that had represented corporations in previous asbestos cases, agreed to take their case.

"Skepnek," Brickman wrote, "prevailed against tremendous odds."

The court ruled that Umphrey, Reaud and partners had to forfeit their fee from the earlier court settlement.

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