Legislative Solutions to Toxic Torts: Congress and the Thimerosal and Asbestos Litigations

Part Two of a Two-Part Series

Part One of this article described the litigation and legislation surrounding thimerosal. The conclusion addresses asbestos litigation and the legislative response.

Legislating Away the Asbestos Litigation

It has been estimated that at least 600,000 people have brought asbestos-related personal injury suits. Typically, each plaintiff sues dozens of defendants, so the total volume of litigation has reached nearly astronomical proportions. The total amount spent on asbestos litigation (awards and expenses) to date is staggering and has been estimated to be on the order of $54 billion. Many critics have said that this litigation has been abused, leading to the enrichment of plaintiff lawyers at the expense of those actually injured by asbestos exposure. According to one study, only about 43% of total spending has reached the claimants as their net recovery. See Stephen Carroll, et al., Asbestos Litigation Costs and Compensation: An Interim Report, RAND Institute for Civil Justice, Santa Monica, Calif. (Sept. 2002). The RAND report is available at www.rand.org/publications/DB/DB397.

Most of the asbestos litigation has been financed by the defendant companies and their insurers. The resulting liabilities have forced some 60 companies into bankruptcy in the last 20 years, with more than 20 of those bankruptcies occurring since Jan. 1, 2000. Among the most prominent of these firms are Armstrong World Industries, Babcock & Wilcox, Federal Mogul, Johns Manville, Owens Corning, U.S. Gypsum and W.R. Grace.

The economic effects of the asbestos litigation extend beyond bankruptcy. For asbestos defendants that are still solvent, each dollar paid out in defense costs and damage awards or settlements reduces retained earnings. As a result, defendants have fewer internal dollars available to finance investment. This reduction in dollars can, in turn, lead to reductions in the creation of new jobs. It has been estimated that the asbestos litigation may have caused thus far the loss of more than 400,000 jobs. Such ripple effects are even more dramatic when one considers just how large the asbestos litigation may grow. It has been projected that the total number of asbestos claimants may rise to anywhere between 1 million and 3 million, with total costs climbing from the current $54 billion to as high as $265 billion.

The Courts and Asbestos

For the most part, the search for solutions to the asbestos litigation has been left to the courts ' particularly the bankruptcy courts ' and the parties themselves. The most notable judicial innovation has been the Manville Trust system, which has become so successful that it is a model for other solvent companies. The Manville Trust system has proven to be so adept at handling claims that Congress codified the process so that a bankrupt firm may resolve its liabilities for all pending and future claims via such trusts. See Section 111 of the Bankruptcy Reform Act of 1994 (P.L. 103-394).

Less successful, however, have been the parties' attempts to fashion “global” settlements to parts of the litigation. Two prominent asbestos settlements that were litigated up to the U.S. Supreme Court were overturned there. Amchem Products v. Windsor, 521 U.S. 591 (1997) [also known as the Georgine case] and Ortiz v. Fibreboard, 527 U.S. 815 (1999). Congress' recent efforts to fashion an “end” to the asbestos litigation grow directly out of these two cases. In her opinion for the Court in Amchem, Justice Ruth Bader Ginsberg wrote: “The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. Congress, however, has not adopted such a solution.” 521 U.S. at 628-29 (emphasis added). Writing for the Court in Ortiz, Justice David Souter wrote: “Like Amchem …, this case is a class action prompted by the elephantine mass of asbestos cases, and our discussion in Amchem will suffice to show how this litigation defies customary judicial administration and calls for national legislation.” 527 U.S. at 821 (emphasis added).

Congress and Asbestos

In 2003, Congress, as it had in the past, considered various bills focused on fostering the judicial settlement of asbestos claims. For example, several bills ' H.R. 1586 (Cannon), H.R. 1737 (Dooley), and S. 413 (Nickles) ' tried to limit the size of the asbestos litigation by closing the courthouse door to plaintiffs who could not show some asbestos-related physical impairment. While these bills differed in a number of important respects, the unifying concept was that before a plaintiff could proceed with a lawsuit, he or she would have to make a prima facie case that he/she suffers from a “physical impairment” and that exposure to asbestos was a substantial contributing factor to that impairment. The chief virtue of these bills is that they would postpone numerous claims ' many of which will never progress to debilitating disease ' and allow immediate resources to be concentrated on those with the most serious and most immediate medical problems.

What was different about Congressional efforts in 2003 was that legislators, in addition to considering legislation that would advance a judicial solution, took up for the first time the gauntlet laid down by the Supreme Court and tried to fashion a “nationwide administrative claims processing regime.” Two bills, H.R. 1114 (Kirk) and S. 1125 (Hatch) figured prominently in this effort.

Like the bills referenced above, H.R. 1114 would require all claimants to first establish that they have an eligible asbestos-related medical condition; failing that, their right to future action would be preserved until such time as impairment occurs. Unlike the other bills, the determination of impairment and causation would be made administratively rather than judicially, through medical review panels appointed by a new agency in the Justice Department, the Office of Asbestos Compensation (“OAC”). The OAC would perform a number of functions beyond determining medical eligibility, most importantly taking a direct part in litigation and settlement. First (upon issuing a claimant a certificate of medical eligibility), acting through a Trustee, the OAC would receive offers of settlement from both sides. The Trustee would also make offers of its own to claimants. If a claimant accepts the Trustee's offer, the Trustee would assume the claim and pursue it against the defendants. Claimants could accept or reject any offers they wish, and for cases not settled, they could either pursue a regular lawsuit or an administrative proceeding under the auspices of the OAC. A federal fund would be established for the purpose of facilitating the Trustee's assumption of claims, with the intention of the fund breaking even financially in the long run.

An even more ambitious approach to the asbestos litigation was embodied in S. 1125, the Fairness in Asbestos Injury Resolution Act (the “FAIR Act”). The FAIR Act, which was introduced on May 22, 2003 and reported out of the Senate Judiciary Committee on July 30, 2003, would, if enacted, “create a privately funded, publicly administered fund … that will provide compensation for legitimate present and future claimants of asbestos exposure” ('2). The fund would be called the “Asbestos Injury Claims Resolution Fund” ('223) (the “Fund”), and the bill would create the Office of Asbestos Injury Claims Resolution to administer it ('221). The Office would be headed by an Administrator, appointed by the president with the advice and consent of the Senate; the Administrator would serve a 5-year term. The FAIR Act would also create the Office of Special Asbestos Master within the U.S. Court of Federal Claims, to award damages to asbestos claimants ('101(a)). The chief judge of the Court of Federal Claims, with the concurrence of the majority of active judges of the court, would appoint the Special Master ('101(c)). Under the FAIR Act, asbestos claims could no longer be filed or pursued under state law, except for the enforcement of judgments no longer subject to appeal or judicial review before the date of enactment of the bill ('403(d)).

Under the FAIR Act, “[a]ny individual [or his representative or estate] who has suffered from an eligible disease or condition … may file a claim with the Court of Federal Claims for an award with respect to such injury” ('111(a)). The term “eligible disease or condition” would mean any illness that means the medical criteria for “asbestosis/pleural disease, severe asbestosis disease, mesothelioma, lung cancer I, lung cancer II, other cancers, and qualifying nonmalignant asbestos-related diseases” ('3(8)). Any claimant who proves by a “preponderance of the evidence” ('113) that he/she suffers from an eligible disease or condition and files his/her claim within the statute of limitations (4 years from the date the claimant first “received a medical diagnosis of an eligible disease or condition” or “discovered facts that would have led a reasonable person to obtain a diagnosis” ('111(c)) may receive an award; a claimant need not prove that his or her “injury resulted from the negligence or fault of any other person” ('112). The Office of Special Master would provide compensation to eligible claimants “in a nonadversarial manner” ('101(b)).

Within 20 days after a claim is filed, the Court of Federal Claims would refer it to a special asbestos master, who, within 60 days after receipt of all required information, would determine the amount of any award to which the claimant is entitled. ('114). The amount of the award would be determined pursuant to a benefit table ('131(b)), which prescribes different amounts for different medical conditions, and different amounts for smokers, nonsmokers, and ex-smokers. Awards “shall be reduced by the amount of collateral source compensation” ('134(a)). But the term “collateral source compensation” would refer only to the “compensation that the claimant received, or is entitled to receive, from a defendant or an insurer of that defendant … ” ('3(6)). The FAIR Act explicitly excludes workers compensation and veterans benefits from “ collateral source compensation” ('134(b)).

A claimant would have 30 days “after receiving notice of the decision” by the special master to file an appeal with the U.S. Court of Asbestos Claims (“Asbestos Court,” which would be a three-judge panel established by the Court of Federal Claims ('141(a)). The Asbestos Court could: 1) “sustain the special master's decision,” 2) “set aside any findings of fact or conclusion of law of the special asbestos master found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law and issue its own findings,” or 3) remand the petition to the special master for further action” ('141(b)). A claimant could then, within 30 days after the issuance of a final decision by the Asbestos Court, appeal that decision to the U.S. Court of Appeal for the Federal Circuit ('301). The Federal Circuit would have to uphold the claim unless it was “arbitrary and capricious” ('301). A claimant, finally, could ask the U.S. Supreme Court to review the case ('301).

Asbestos claimants would not receive lump-sum awards, but “should receive the amount of the award through structured payments from the Fund, made over a period of 3 years and in no event more than 4 years after the date of final adjudication of the claim” ('133(a)(1)).

The Asbestos Resolution Claims Fund would be paid for by “defendant participants” and “insurer participants”; the total contribution of all defendant participants over the life of the fund would be $52 billion; the total required of all insurer participants would be the same (”202(a)(2), 212(a)(3)(A)). The aggregate contribution of all mandatory participants could not exceed $5 billion in any calendar year unless otherwise provided ('223(b)). The minimum aggregate contributions of defendant participants would be at least $2.5 billion per year for the first 5 years, and lesser amounts for succeeding years, down to $250 million for year 27 ('204(h)). The bill specified no minimum aggregate contribution for insurer participants. In addition, the United States government would not be liable for any asbestos claims, even if the Fund is inadequate to pay them ('405(b)).

On Nov. 24, 2003, Sen. Bill Frist, the Senate majority leader, announced that he would not force a vote on the FAIR Act in 2003, but held open the possibility of a vote in 2004. According to various newspaper reports, the principal stumbling block to an up or down vote on the FAIR Act was that both organized labor and the insurance industry disagreed on the amount of money to be invested in the Fund.

On April 22, 2004, the U.S. Senate voted 50-47 to block a motion to proceed with floor debate on the FAIR Act (renumbered as S. 2290). News reports indicated that the negotiations had again broken down over the size of the proposed trust fund. According to those reports, labor's final offer was $134 billion with a $15 billion contingency fund, while the final offer by the business/insurance coalition was $116 billion with a $12 billion contingency. News reports further indicated that, due to the November elections, any further action was unlikely in the remainder of 2004.

Conclusion

Although the attempts in the last 12 months to find a legislative solution to the thimerosal and asbestos litigations failed, they are notable for the fact they were tried and came close to success. The prospect raised by these near successes is that someday ' perhaps someday soon ' this country will change dramatically how it responds to the waves of alleged mass torts that are, with increasing frequency, inundating our court system and weighing heavily on our economy.

Part Two of a Two-Part Series

Part One of this article described the litigation and legislation surrounding thimerosal. The conclusion addresses asbestos litigation and the legislative response.

Legislating Away the Asbestos Litigation

It has been estimated that at least 600,000 people have brought asbestos-related personal injury suits. Typically, each plaintiff sues dozens of defendants, so the total volume of litigation has reached nearly astronomical proportions. The total amount spent on asbestos litigation (awards and expenses) to date is staggering and has been estimated to be on the order of $54 billion. Many critics have said that this litigation has been abused, leading to the enrichment of plaintiff lawyers at the expense of those actually injured by asbestos exposure. According to one study, only about 43% of total spending has reached the claimants as their net recovery. See Stephen Carroll, et al., Asbestos Litigation Costs and Compensation: An Interim Report, RAND Institute for Civil Justice, Santa Monica, Calif. (Sept. 2002). The RAND report is available at www.rand.org/publications/DB/DB397.

Most of the asbestos litigation has been financed by the defendant companies and their insurers. The resulting liabilities have forced some 60 companies into bankruptcy in the last 20 years, with more than 20 of those bankruptcies occurring since Jan. 1, 2000. Among the most prominent of these firms are Armstrong World Industries, Babcock & Wilcox, Federal Mogul, Johns Manville, Owens Corning, U.S. Gypsum and W.R. Grace.

The economic effects of the asbestos litigation extend beyond bankruptcy. For asbestos defendants that are still solvent, each dollar paid out in defense costs and damage awards or settlements reduces retained earnings. As a result, defendants have fewer internal dollars available to finance investment. This reduction in dollars can, in turn, lead to reductions in the creation of new jobs. It has been estimated that the asbestos litigation may have caused thus far the loss of more than 400,000 jobs. Such ripple effects are even more dramatic when one considers just how large the asbestos litigation may grow. It has been projected that the total number of asbestos claimants may rise to anywhere between 1 million and 3 million, with total costs climbing from the current $54 billion to as high as $265 billion.

The Courts and Asbestos

For the most part, the search for solutions to the asbestos litigation has been left to the courts ' particularly the bankruptcy courts ' and the parties themselves. The most notable judicial innovation has been the Manville Trust system, which has become so successful that it is a model for other solvent companies. The Manville Trust system has proven to be so adept at handling claims that Congress codified the process so that a bankrupt firm may resolve its liabilities for all pending and future claims via such trusts. See Section 111 of the Bankruptcy Reform Act of 1994 (P.L. 103-394).

Less successful, however, have been the parties' attempts to fashion “global” settlements to parts of the litigation. Two prominent asbestos settlements that were litigated up to the U.S. Supreme Court were overturned there. Amchem Products v. Windsor , 521 U.S. 591 (1997) [also known as the Georgine case] and Ortiz v. Fibreboard, 527 U.S. 815 (1999). Congress' recent efforts to fashion an “end” to the asbestos litigation grow directly out of these two cases. In her opinion for the Court in Amchem, Justice Ruth Bader Ginsberg wrote: “The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. Congress, however, has not adopted such a solution.” 521 U.S. at 628-29 (emphasis added). Writing for the Court in Ortiz, Justice David Souter wrote: “Like Amchem …, this case is a class action prompted by the elephantine mass of asbestos cases, and our discussion in Amchem will suffice to show how this litigation defies customary judicial administration and calls for national legislation.” 527 U.S. at 821 (emphasis added).

Congress and Asbestos

In 2003, Congress, as it had in the past, considered various bills focused on fostering the judicial settlement of asbestos claims. For example, several bills ' H.R. 1586 (Cannon), H.R. 1737 (Dooley), and S. 413 (Nickles) ' tried to limit the size of the asbestos litigation by closing the courthouse door to plaintiffs who could not show some asbestos-related physical impairment. While these bills differed in a number of important respects, the unifying concept was that before a plaintiff could proceed with a lawsuit, he or she would have to make a prima facie case that he/she suffers from a “physical impairment” and that exposure to asbestos was a substantial contributing factor to that impairment. The chief virtue of these bills is that they would postpone numerous claims ' many of which will never progress to debilitating disease ' and allow immediate resources to be concentrated on those with the most serious and most immediate medical problems.

What was different about Congressional efforts in 2003 was that legislators, in addition to considering legislation that would advance a judicial solution, took up for the first time the gauntlet laid down by the Supreme Court and tried to fashion a “nationwide administrative claims processing regime.” Two bills, H.R. 1114 (Kirk) and S. 1125 (Hatch) figured prominently in this effort.

Like the bills referenced above, H.R. 1114 would require all claimants to first establish that they have an eligible asbestos-related medical condition; failing that, their right to future action would be preserved until such time as impairment occurs. Unlike the other bills, the determination of impairment and causation would be made administratively rather than judicially, through medical review panels appointed by a new agency in the Justice Department, the Office of Asbestos Compensation (“OAC”). The OAC would perform a number of functions beyond determining medical eligibility, most importantly taking a direct part in litigation and settlement. First (upon issuing a claimant a certificate of medical eligibility), acting through a Trustee, the OAC would receive offers of settlement from both sides. The Trustee would also make offers of its own to claimants. If a claimant accepts the Trustee's offer, the Trustee would assume the claim and pursue it against the defendants. Claimants could accept or reject any offers they wish, and for cases not settled, they could either pursue a regular lawsuit or an administrative proceeding under the auspices of the OAC. A federal fund would be established for the purpose of facilitating the Trustee's assumption of claims, with the intention of the fund breaking even financially in the long run.

An even more ambitious approach to the asbestos litigation was embodied in S. 1125, the Fairness in Asbestos Injury Resolution Act (the “FAIR Act”). The FAIR Act, which was introduced on May 22, 2003 and reported out of the Senate Judiciary Committee on July 30, 2003, would, if enacted, “create a privately funded, publicly administered fund … that will provide compensation for legitimate present and future claimants of asbestos exposure” ('2). The fund would be called the “Asbestos Injury Claims Resolution Fund” ('223) (the “Fund”), and the bill would create the Office of Asbestos Injury Claims Resolution to administer it ('221). The Office would be headed by an Administrator, appointed by the president with the advice and consent of the Senate; the Administrator would serve a 5-year term. The FAIR Act would also create the Office of Special Asbestos Master within the U.S. Court of Federal Claims, to award damages to asbestos claimants ('101(a)). The chief judge of the Court of Federal Claims, with the concurrence of the majority of active judges of the court, would appoint the Special Master ('101(c)). Under the FAIR Act, asbestos claims could no longer be filed or pursued under state law, except for the enforcement of judgments no longer subject to appeal or judicial review before the date of enactment of the bill ('403(d)).

Under the FAIR Act, “[a]ny individual [or his representative or estate] who has suffered from an eligible disease or condition … may file a claim with the Court of Federal Claims for an award with respect to such injury” ('111(a)). The term “eligible disease or condition” would mean any illness that means the medical criteria for “asbestosis/pleural disease, severe asbestosis disease, mesothelioma, lung cancer I, lung cancer II, other cancers, and qualifying nonmalignant asbestos-related diseases” ('3(8)). Any claimant who proves by a “preponderance of the evidence” ('113) that he/she suffers from an eligible disease or condition and files his/her claim within the statute of limitations (4 years from the date the claimant first “received a medical diagnosis of an eligible disease or condition” or “discovered facts that would have led a reasonable person to obtain a diagnosis” ('111(c)) may receive an award; a claimant need not prove that his or her “injury resulted from the negligence or fault of any other person” ('112). The Office of Special Master would provide compensation to eligible claimants “in a nonadversarial manner” ('101(b)).

Within 20 days after a claim is filed, the Court of Federal Claims would refer it to a special asbestos master, who, within 60 days after receipt of all required information, would determine the amount of any award to which the claimant is entitled. ('114). The amount of the award would be determined pursuant to a benefit table ('131(b)), which prescribes different amounts for different medical conditions, and different amounts for smokers, nonsmokers, and ex-smokers. Awards “shall be reduced by the amount of collateral source compensation” ('134(a)). But the term “collateral source compensation” would refer only to the “compensation that the claimant received, or is entitled to receive, from a defendant or an insurer of that defendant … ” ('3(6)). The FAIR Act explicitly excludes workers compensation and veterans benefits from “ collateral source compensation” ('134(b)).

A claimant would have 30 days “after receiving notice of the decision” by the special master to file an appeal with the U.S. Court of Asbestos Claims (“Asbestos Court,” which would be a three-judge panel established by the Court of Federal Claims ('141(a)). The Asbestos Court could: 1) “sustain the special master's decision,” 2) “set aside any findings of fact or conclusion of law of the special asbestos master found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law and issue its own findings,” or 3) remand the petition to the special master for further action” ('141(b)). A claimant could then, within 30 days after the issuance of a final decision by the Asbestos Court, appeal that decision to the U.S. Court of Appeal for the Federal Circuit ('301). The Federal Circuit would have to uphold the claim unless it was “arbitrary and capricious” ('301). A claimant, finally, could ask the U.S. Supreme Court to review the case ('301).

Asbestos claimants would not receive lump-sum awards, but “should receive the amount of the award through structured payments from the Fund, made over a period of 3 years and in no event more than 4 years after the date of final adjudication of the claim” ('133(a)(1)).

The Asbestos Resolution Claims Fund would be paid for by “defendant participants” and “insurer participants”; the total contribution of all defendant participants over the life of the fund would be $52 billion; the total required of all insurer participants would be the same (”202(a)(2), 212(a)(3)(A)). The aggregate contribution of all mandatory participants could not exceed $5 billion in any calendar year unless otherwise provided ('223(b)). The minimum aggregate contributions of defendant participants would be at least $2.5 billion per year for the first 5 years, and lesser amounts for succeeding years, down to $250 million for year 27 ('204(h)). The bill specified no minimum aggregate contribution for insurer participants. In addition, the United States government would not be liable for any asbestos claims, even if the Fund is inadequate to pay them ('405(b)).

On Nov. 24, 2003, Sen. Bill Frist, the Senate majority leader, announced that he would not force a vote on the FAIR Act in 2003, but held open the possibility of a vote in 2004. According to various newspaper reports, the principal stumbling block to an up or down vote on the FAIR Act was that both organized labor and the insurance industry disagreed on the amount of money to be invested in the Fund.

On April 22, 2004, the U.S. Senate voted 50-47 to block a motion to proceed with floor debate on the FAIR Act (renumbered as S. 2290). News reports indicated that the negotiations had again broken down over the size of the proposed trust fund. According to those reports, labor's final offer was $134 billion with a $15 billion contingency fund, while the final offer by the business/insurance coalition was $116 billion with a $12 billion contingency. News reports further indicated that, due to the November elections, any further action was unlikely in the remainder of 2004.

Conclusion

Although the attempts in the last 12 months to find a legislative solution to the thimerosal and asbestos litigations failed, they are notable for the fact they were tried and came close to success. The prospect raised by these near successes is that someday ' perhaps someday soon ' this country will change dramatically how it responds to the waves of alleged mass torts that are, with increasing frequency, inundating our court system and weighing heavily on our economy.