On Valentine's Day, 2002, A.P. Green and Harbison-Walker Refractories
Company filed for bankruptcy protection, citing asbestos-related liabilities.
This filing follows close on the heels of the bankruptcy filing by Kaiser
Aluminum Corporation two days earlier. North American Refractories Company
(NARCO) filed on January 4, 2002, Federal Mogul on October 1, 2001, U.S.
Mineral on July 23, 2001, U.S. Gypsum on June 25, 2001 and W.R. Grace
& Co. on April 2, 2001. For a complete list of bankruptcy filings,
click here.
Many feel that the current bankruptcy tide began with the bankruptcy filing
by Owens-Corning Fiberglas on October 5, 2000. Owens-Corning, which manufactured
pipe covering and block insulation called Kaylo, used to pay a sizable
share of the settlement and verdict monies in asbestos cases. Some point
as far back as the February 22, 2000 filing by Babcock & Wilcox, a
manufacturer of huge boilers widely used in the US Navy, powerhouses and
industry. B&W also paid a sizable share of settlement monies.
The above was taken from a Los Angeles Times Article,
'
Firms Hit hard as Asbestos Claims Rise',
December 17, 2001, by Lisa Girion
Each new bankruptcy filing ratcheted up the pressure on remaining, solvent,
former asbestos manufacturers, as plaintiffs' lawyers asked them to
"make up the difference" for what the recently bankrupt would
have paid. Armstrong World Industries and G-I Holdings, the parent company
of GAF-Ruberoid, fell into bankruptcy after Owens-Corning, and the companies
have continued to fall like dominoes.
As the bankruptcies mounted, plaintiffs' attorneys looking to make
their clients whole started to follow the paper trail from the asbestos
company -- which is often a subsidiary of a larger company -- to its parent
company, such as Honeywell, PPG (Pittsburgh Paint & Glass), and Halliburton,
the oilfield services giant formerly run by Vice-President Dick Cheney.
These successors or parent companies commonly acquired asbestos liabilities
with the purchase of a smaller asbestos company.
Now, most of the former manufacturers of asbestos-containing pipe covering,
block, insulating cement, and refractory cement are in bankruptcy. Many
insulators, pipe coverers, sailors, powerhouse workers and others must
turn to the bankruptcy courts and hope that some day in the future, their
families will obtain a small measure of justice. The B&W bankruptcy,
which was the first in time, has after close to two years yet to produce
a penny of compensation to the injured, despite the expenditure of around
$50 million in legal fees by B&W's attorneys, Kirkland & Ellis.
(This is the law firm of Kenneth Starr, who ran up quite a bill as the
Whitewater/Travelgate/Monica Lewinsky special prosecutor). Kirkland &
Ellis is reported to be billing the BW debtor about $2 million per month
-- money which otherwise would be available to compensate asbestos creditors.
The past three years have seen an explosion of asbestos claims by those
who have signs of asbestos exposure on x-ray, but are otherwise asymptomatic.
These claims, called unimpaired claims, are commonly solicited by law
firms sponsoring mass screenings, which can produce thousands of claimants
who otherwise might not have filed suit. While the individual value of
unimpaired claims can be very small, collectively the claims can have
a large impact -- not only on the defendants, but also on the state and
federal court systems.
Currently, there is no economic disincentive for these "mass filer"
law firms to continue screening exposed workers and unloading thousands
of unimpaired claims in the court system. In 2001, of the approximately
70,000 claims filed with the Manville Personal Injury Trust, only about
six percent were for malignancy claims, and of that only a fraction were
for mesothelioma claims. The Manville Trust claims filing history for
the last five years looks about like this:
Number of New Claims
Percentage of Cancer Claims
2001
70,000 (estimate)
approximately 6
Currently, most of the money paid by the asbestos manufacturers goes to
unimpaired claims, and there is little doubt that the increase in filing
of these claims has been a major factor behind the spate of recent bankruptcies,
as well as the current drain on established bankruptcy trust funds for
those with asbestos diseases.
For example, the standard Manville Personal Injury Trust offer of compensation
for a mesothelioma claim is $200,000, and for years that offer was "discounted"
to a present, 10 percent payment ($20,000), along with a "promissory
note" to pay the remainder in the future. While the levels of mesothelioma
and lung cancer claims lodged against the Trust have remained relatively
constant over time, the levels of unimpaired claims have exploded over
the past three years. Because of the torrent of claims against the Trust,
the promissory notes issued to mesothelioma claimants will never be paid.
In fact, last year, citing the rise in nonmalignant claims filed against
the Trust by a handful of law firms, the Trust cut its discount rate in
half. TheTrust now pays victims of the worst form of cancer on the planet
a pitiful $10,000.
In a perfect world, unimpaired claimants would be entitled to fair and
immediate compensation. No sane person would want asbestos in his body.
The mineral is an indestructible, disease-causing time bomb; once lodged
in the lungs, only surgery will remove an asbestos fiber. But there is
no surgery which will remove all asbestos from the body, short of removal
of both lungs and the abdomen, which, for obvious reasons, is not an option.
Nobody can credibly argue that the asbestos companies deserve our sympathy
or our mercy, since it was their greed that created this epidemic in the
first place.
However, in this climate of bankruptcy, I very strongly feel that the very
sick should be paid first, and paid in relative proportion to their injury.
For example, the ratio of payouts by the Manville Personal Injury Trust
for malignant versus nonmalignant claims currently is four to one. Many
feel that a ratio of 100 to one would be more appropriate. As the MARF
doctors advised the court, after offering their expert services:
Although there is no universal standard for measuring "suffering,"
we submit that on a scale of 1 to 100, mesothelioma patients -- who experience
severe suffering not only of a physical nature but also form the emotional
trauma due to inadequate and uncertain therapies -- typically are at the
highest range of this scale. We are not certain whether pleural disease
claimants without lung impairment -- proved objectively via spirometry,
lung volume measurements and diffusion tests -- rate at all.
My firm is fighting in the bankruptcy courts for those with mesothelioma
and other asbestos-related cancers by seeking to prioritize payment to
the seriously ill. One of the issues in the bankruptcy courts will be
the appropriate compensation formula, and there is some good news. The
bankruptcy court for Pittsburg Corning Corporation, former makers of Unibestos
pipe covering and block insulation, recently approved a ratio of just
over 40 to 1. This ratio in my view does not fairly account for the vast
differences in damages between mesothelioma victims and unimpaired asbestotics,
but it is a step in the right direction. Further, a Federal Court Judge
in Philadelphia recently
ordered that all unimpaired asbestosis claims be transferred to an inactive docket
where they must reside until such time (if ever) the claimant produces
a verifiable disabling injury, such as cancer. The ruling flows from the
principle that the courts should give priority to the needs of those who
suffer the most.
While there is hope that the bankruptcy courts will try to preserve dwindling
compensation resources, there appears to be little hope that Congress
will act this year to stem the tide of bankruptcy. There is reform legislation
which would establish a registry for unimpaired asbestos claimants. Such
claimants would only be able to file suit if they developed symptoms of
asbestos disease defined by objectively verifiable criteria. This legislation
would effectively stem the flood of nonmalignant claims and re-direct
compensation to those with the direst need.
Unfortunately, despite broad support from former asbestos manufacturers,
the insurance industry, and plaintiffs' attorneys who represent only
those with asbestos-related malignancies, the prospects for reform legislation
in 2002 are bleak -- perhaps because of the enormous wealth and political
influence of the handful of law firms which represent tens of thousands
of unimpaired claimants.
Even today, the "mass filer" law firms continue to saturate newspapers,
television and radio with advertising soliciting more unimpaired claims.
While Congress slumbers, the torrent of unimpaired claims continues to
strain the assets of former asbestos manufacturers, and the odds of meaningful
compensation for the seriously ill diminish with each passing day.
It was no coincidence that as soon as the "not this year, maybe next
year" message from Congress hit the streets, three companies (again,
Kaiser Aluminum, A.P. Green and Harbison-Walker) filed for bankruptcy
protection within a week. More bankruptcies are certain to follow, as
bankruptcy protection increasingly looks like a viable, attractive alternative,
particularly to Halliburton, Dresser Industries, Honeywell, PPG, and other
solvent corporations seeking to escape liability for their acquisition
of asbestos corporations.
These and other solvent parent corporations have turned to a provision
of bankruptcy law which permits them to avoid filing bankruptcy while
obtaining full protection from the bankruptcy courts. The subsidiary asbestos
company will file for bankruptcy and simultaneously file for temporary
injunctive relief, prohibiting suit against the parent, non-filing company,
supposedly to preserve funds for payment to asbestos claimants. This legal
legerdemain places a premium on corporate shell games intended to rob
asbestos claimants of compensation from responsible parties, and will
continue as long as the bankruptcy courts permit it.
In each of the new bankruptcy proceedings, there are deadlines, called
bar dates, for the filing of proofs of claim. You must be vigilant and
expeditious in filing proofs of claim if you feel you have been exposed
to a product manufactured by a company in bankruptcy. Time is also of
the essence in pursuing claims against the remaining solvent defendants,
as we foresee the trend of bankruptcy filings continuing.