T.K. Kim Aug. 10, 2013, 3:29pm
CHARLOTTE - Attorneys representing claimants suing Garlock Sealing Technologies for asbestos exposure presented a second consultant who estimated the company would need to devote $1,293 billion to a trust to settle pending and future claims against the company, a figure a Nobel prize winning economist testified was unreliable because of what he said was questionable methodology Friday.
Francine Rabinovitz, president of Hamilton, Rabinovitz & Associates, said she relied on the past five years of asbestos litigation data to come up with the figure. A Garlock consultant previously testified the company would need to devote a significantly less amount - $270 million. Rabinovitz said she arrived at her figure by estimating the size of the population exposed to asbestos, the proportions of persons exposed to asbestos who develop mesothelioma, and the cost of defending asbestos claims among other factors.
Rabinovitz's figure comes close to the estimate of Mark Peterson, a lawyer with a Ph.D. in social psychology who does estimations for trusts and was also called to offer his estimation in court by claimant attorneys. Peterson came up with a figure of $1.365 billion to cover liability Garlock would likely face from people who have pending claims against the company and future claimants who will develop cases of mesothelioma in the coming years.
Judge George Hodges will ultimately decide how much money the company will need to devote to escape bankruptcy. The bankruptcy trial, which began two weeks ago at the U.S. Bankruptcy Court for the Western District of North Carolina and is expected to end later this month, will determine the estimated liability of the company for current and future asbestos claims.
Rabinovitz criticized the $270 million figure arrived at by Charles Bates, chairman of the economic consulting firm Bates White LLC and former assistant professor in the economics department at Johns Hopkins University. Bates estimated $25 million was the net present value enough to sufficiently cover payouts for pending asbestos claims with $100 million being the net present value to cover claims by future mesothelioma victims. He said he arrived at that figure by taking into account factors such as the estimated number of future claimants. He said he used an epidemiological model to estimate how many more mesothelioma claims are likely to arise.
Rabinovitz said Bates' figure and report was unreliable because it employed an unaccepted methodology. She said Bates' report improperly excluded pending claims from his estimation and that the rates he used for his calculation were not consistent. She also criticized his decision not to include settled but unpaid claims in his figure.
Following Rabinovitz and Peterson's testimony, attorneys for Garlock called University of Chicago professor James Heckman, winner of the Nobel Prize in economics in the year 2000. Heckman, who was testifying at a billing rate of $2,300 an hour, challenged Rabinovitz and Peterson's respective estimation figures saying they were unreliable because the figures were based on only five years of recent data. He said using such a small sample while ignoring more historical trends was not "sound" because it assumes a stability that "doesn't exist" and is not reflected in the data.
Heckman also criticized their respective reports for not using "scientific methodology," saying their reports do not meet scientific standards. He also criticized their reports for not having some measure of variability, something he said an undergraduate taking a first-level statistics course would know was a necessary component for a reliable estimation.
On cross examination, Heckman acknowledged he was not giving an opinion on the actual figures the consultants arrived at, only on their methodology saying they could be "underestimates" or could be "overestimates." He also acknowledged that he was only evaluating Rabinovitz and Peterson's methodology but offered no critique of Bates report.