***FOR PRINT*** Link between asbestos trusts, courts hard to pinpoint

By Steve Korris | Aug 25, 2011


SANTA MONICA, Calif. (Legal Newsline) - Researchers who set out to explore connections between asbestos trusts and asbestos courts returned with guesswork because of a lack of factual evidence.

Lloyd Dixon and Geoffrey McGovern of the Rand Institute for Civil Justice couldn't find enough facts to learn whether bankrupt businesses shift liability to solvent businesses.

"Data over time on the expenditures by defendants that remain solvent are needed to better understand both the direction and magnitude of the effects," they wrote. "Such data, however, are currently unavailable.

"Settlements, which constitute the lion's share of asbestos resolutions, are kept confidential."

They couldn't begin to answer the burning question of how often a plaintiff recovers twice, once through trusts and once through court.

They found some courts don't require a plaintiff to disclose trust payments, while others require disclosure but don't enforce it. They also found that where courts enforce it, some lawyers delay claims for trust payments until they have concluded litigation.

Though short on facts, Dixon and McGovern hit a nail on the head by observing that any scheme to shift costs to solvent businesses would require secrecy in the trusts.

"Less information can mean fewer trust claims and higher payments by defendants that remain solvent," they wrote. "There is a great deal of dispute between plaintiff and defense attorneys over who is responsible for developing evidence on the products and practices of bankrupt firms."

They wrote that according to plaintiffs, defendants can employ discovery tools. And according to defendants, plaintiff lawyers influence the exposures their clients recall in court.

"We have not examined the dynamics of the discovery process," they wrote.

They wrote that from the 1970s through 2002, defendants paid $49 billion to about 730,000 people in asbestos lawsuits. They wrote that 56 companies filed for reorganization and set up asbestos trusts. They wrote that the largest 26 trusts paid $10.9 billion through 2008.

"Trust outlays have grown rapidly since 2005, reaching $3.3 billion in 2008," they wrote.

The report covered California, Illinois New York, Pennsylvania and Texas, states with heavy asbestos dockets and varying laws and court rules.

They added West Virginia for its innovative approach to dealing with trusts.

They wrote that in California, New York, and Texas, a defendant can limit its portion of liability to the portion of harm for which it is responsible.

They wrote that in Illinois, Pennsylvania and West Virginia, a plaintiff can recover an entire judgment from any one of the liable defendants.

"It is then up to the paying defendants to recover the entire judgment from any one of the liable defendants," they wrote.

They wrote that according to attorneys, Illinois courts don't allow either side to place bankrupt firms or trusts on a verdict sheet.

They wrote that in keeping trusts off verdict sheets, Illinois courts treat them no differently from parties that settled out of suits.

They wrote that two or three trusts can appear on verdict sheets in Pennsylvania by operation of their governing rules, but that bankrupt firms never appear.

"Practices may change under the modifications in Pennsylvania liability that were enacted on June 28," they wrote.

They wrote that defense lawyers in California and New York said they usually lack evidence to put bankrupt firms on a verdict sheet.

"The plaintiff is often the best source of the information needed to assign fault to the bankrupt firm, but plaintiffs have an incentive to withhold cooperation," they wrote. "In the view of most defense attorneys, plaintiffs' attorneys control the testimony provided by the plaintiffs and coach plaintiffs not to mention the products of bankrupt firms.

"Whether the inability to name trusts makes it more difficult for solvent defendants to show that they were not responsible for a plaintiff's injury needs further investigation."

They examined contradictory affidavits for trusts and courts in two cases, but added that no one has systematically analyzed the prevalence of such behavior.

They found division among plaintiff lawyers on the timing of trust claims.

"Several plaintiffs' attorneys have concluded that the benefit of distributing money to their clients sooner rather than later outweighs any potential strategic advantage of delayed trust filings," they wrote. "Other plaintiffs' attorneys indicated that it was their ethical obligation to their clients to delay filing if the information would assist the defendants in assigning liability to the bankrupt firms."

Plaintiff lawyers in New York told them they wouldn't obtain recovery from trusts once a verdict had been fully satisfied, even if there were no bar to recovery.

"They felt that bringing a trust claim in such circumstances would be ethically inappropriate because the plaintiff was compensated in full and that doing so would damage the firm's reputation," they wrote. "There is no guarantee, however, that other plaintiffs' attorneys would feel the same way."

They wrote that last year, West Virginia started requiring plaintiffs to complete a good faith investigation of potential claims against trusts 120 days before trial.

They wrote that in West Virginia, plaintiffs assign to verdict defendants the right to bring indirect trust claims.

They wrote that Garlock Sealing Technologies received indirect payments from five or six trusts in 2009 and last year.

They examined releases allowing trusts to recover direct payments, but they didn't find out if any trust ever recovered a direct payment.

They concluded that information on total compensation for cases before and after reorganization in different jurisdictions would be tremendously valuable.

They recommended an assessment of how well the system works.

"Such an assessment would require a set of goals for the performance of the asbestos compensation system," they wrote. "Goals pertaining to transaction costs, the intent of the liability standard, time to disposition, and single satisfaction for a wrong might be considered."

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