Behind the paperwork- Following two decades of asbestos legal strategy

Legal News Line Sep. 24, 2008, 9:00am

BEAUMONT, Texas-Case No. B-126,986, filed in the District Court of Jefferson County, Texas was just one of hundreds of thousands of similar cases filed over a period of 30 years on behalf of plaintiffs injured from exposure to asbestos.

The case, Russell Allen et al vs. American Petrofina Inc. et al, filed by Joseph C. Blanks, an attorney then with the firm of Reaud, Morgan and Quinn, began a 20-year asbestos case that mirrors the peak years of asbestos litigation in the state of Texas.

The strategies from this one case shed light on the entire asbestos litigation industry while helping to explain tactics that have threatened the foundations of the American legal system.

Born in the Golden Triangle

Blanks filed his lawsuit on July 24, 1987, naming 101 plaintiffs and 10 defendants. The list of 101 plaintiffs were Southeast Texas residents who spent much of their lives working in the Golden Triangle, a stretch of land between the cities of Beaumont, Port Arthur and Orange that is home to refineries, chemical plants and industrial facilities.

By 1987, asbestos litigation had expanded into a billion-dollar industry, according to the Manhattan Institute. More than 200 companies had been sued, most notably, manufacturer Johns-Manville, which filed for bankruptcy protection in 1982 despite its ranking in the top 200 American companies by Fortune magazine in 1981.

Asbestos use in the United States, which reached its peak during the 1970s, had fallen off dramatically by 1987. But, legal victories among plaintiffs' attorneys in the early 1980s exposed businesses to "unprecedented liability," according to the Manhattan Institute.

Blanks' original lawsuit was a straight-forward document that quickly laid out the basis for the lawsuit. The plaintiffs, some of whom had already died, had allegedly worked in "unsafe places" due to the "ubiquitous presence of asbestos-containing insulation." According to their lawyers, they had "suffered serious and debilitating injuries, and in some instances, death, as a result of that exposure."

The companies were liable, the lawsuit alleged, because of "gross negligence," due in part by their failure to warn their workers of the extreme health risk, and also because they failed to protect their employees from exposure.

"Defendants willfully and with conscious indifference to Plaintiffs' safety failed to warn or protect the Plaintiffs from such toxic substances known by them to be abundantly present on the premises," the lawsuit stated.

The suit sought unspecified damages for loss of earning capacity, quality of life, life expectancy and suffering, in addition to punitive damages "from each of the Defendants in sufficient amounts to deter such antisocial conduct exhibited by these defendants in the past."

Advocates of tort reform hadn't traditionally challenged the facts of cases like this one. Asbestos exposure, wherever the blame may lie, caused life-threatening diseases. Facing sick plaintiffs, rather than risk potentially giant jury verdicts, businesses preferred to settle quickly with plaintiffs attorneys.

"When the first asbestos cases were filed in the 1970s," a ground-breaking story by the Dallas Observer in 1998 reported, "the victims were horribly ill with cancer, asbestosis, or lung ailments. The original targets of those suits were the asbestos manufacturers who had held the largest share of the market."

But just as Allen v. American Petrofina would grow and change over the years, the shift in mass asbestos litigation had already begun, creating a lawsuit climate far different than originally intended. The specific change in this case would be evident in just a few short months.

The shift: 'Finding anyone with any tie to asbestos'

The Southeast Texas firm of Reaud, Morgan and Quinn amended the case first filed by Blanks in December, just a few months after its original filing. While the language of the case remained the same, the number of plaintiffs mushroomed. The amended version of Case No. B-126,986 grew from 101 plaintiffs to 656, according to court documents.

Legal experts said few things spurred asbestos litigation like the recruitment of plaintiffs. Where lawyers historically had waited for aggrieved clients to find them, the potential for big settlements in asbestos cases -- coupled with a court ruling in the late 1970s that made advertising for clients legal -- sent lawyers out aggressively in search of clients.

Ironically, the tactics of defense lawyers greatly assisted in that effort.

"For many years defense lawyers though it was cheaper to settle than to fight," Washington D.C.-based attorney Mark Behrens said during a recent phone interview. "When you know it is going to cost substantial money to defend a case, then it is a business judgment to settle even a frivolous case because it will cost many thousands more to win it."

The flaw in the tactic came when businesses grossly underestimated the sheer number of plaintiffs that could come forward. Also, unsuspecting companies beyond the direct manufacturers, those with an indirect link to the substance, never imagined they'd soon be in the cross hairs of plaintiffs attorneys.

"The lesson over 20 years," Behrens said, "is if you make it easy to sue and easy to get a recovery, it attracts more people who sue. It didn't make the litigation go away. It radically increased the number of cases."

Plaintiff attorneys shifted their focus from finding plaintiffs with a strong case, to finding anyone with any tie to asbestos, no matter how small that association might be. By increasing the number of plaintiffs on a given case, the eventual financial reward grew exponentially.

Assembly line approach

Lawrence, Kan.-based attorney William Skepnek became involved in what he called the "asbestos wars" by challenging large Texas plaintiff firms in several high profile cases. He cautions that attorneys on both sides of the case found the practice of settling cases quite lucrative.

"I think there is a tremendous amount of blame to go on to both sides," Skepnek said in a recent phone interview. "I'm very critical of the plaintiffs and the defendants (lawyers). A lot of the complaints from the defendants are sort of self-inflicted."

Knowing settlements were there for the taking, winning in court became a distant theoretical concept. Instead, mass recruitment of plaintiffs began in earnest, including an assembly-line approach of processing the claims. Enormous payoffs for lawyers ensued.

Plaintiff lawyers created slick advertisements seeking plaintiffs by the thousands. Some used recruiting vans that would offer quick medical tests to determine if the potential for harm could be proven.

Prior to medical screening laws, the use of these quick tests built what plaintiffs attorneys called "their inventory," according to Behrens, adding thousands of plaintiffs to already established cases.

"They had these giant semi-trucks that might have an X-ray machine or a tube that measures how much air a person blows out," Behrens said. "They'd go to union halls and places where there are a lot of workers who may have been exposed to conduct the tests."

The building of inventory led to a spike in cases, many frivolous in nature, say critics.

"Asbestos lawsuits in the 1990s were characterized by mass filings by people who were not sick," Behrens said.

Morphing complaint: Defendants called "Machiavellian"

The next turn of the dial in Case No. B-126,986 -- Russell Allen et al vs. American Petrofina Inc. et al, -- came in 1988 when RMQ amended its lawsuit for a third time. The list of defendants nearly doubled, as nine new businesses were added to the same lawsuit. By years end, following two more amendments, the list exploded to include 48 defendants now being sued.

The lawsuit's language also changed significantly, according to court records. The previously parsimonious wording had grown more colorful, provocative and accusatory. It also widened the geographic boundaries of the case. The Golden Triangle from the initial lawsuit had been revised to include, "industrial facilities of the defendants in Texas, including Jefferson, Orange, Jasper, Galveston, Harris, Brazoria and Matagorda counties."

Also, plaintiffs were, according to the amended lawsuit, "required to work while the poisonous asbestos-laden material was being installed and removed."

Plaintiffs now sought punitive damages, the lawsuit stated, "in an amount sufficient to deter such evil conduct in the future by these and other corporate behemoths."

The language of evil vs. good permeated the now explosive asbestos wars.

Over the next three years, Russell Allen et al vs. American Petrofina Inc. et al, would be amended and revised five more times, each with the heightened use of inflammatory language about the defendants, even go so far as to allege an ongoing conspiracy, in bold letters.

The eighth amendment offered even more color. Filed on Aug. 10, 1990, the case adds several pages about a new defendant, Pittsburgh-Corning. Defendants are now referred to as "rapscallions" who engaged in conduct "known to them through their minions and henchmen."

In support of its conspiracy claims, the RMQ lawsuit stated, "Evidence developed in the case now establishes that defendants knew of the hazards of asbestos over 50 years ago, of its carcinogenicity at least 48 years ago, and of its propensity to cause mesothelioma, some 30 years ago. As they conspired years ago, so do they now." The last four words appear in bold type in the original court documents. In another amended complaint, Blanks goes so far as to add "Know they no shame?" also in bold type.

The defendants are called "the evil empire of asbestos manufacturers" despite the fact that most of the actual manufactures of asbestos had already become bankrupt under the weight of legal settlements. Defendants now were, according to Behrens, "companies with fewer direct connections to asbestos," in most cases.

"When the litigation started, the plaintiffs lawyers went after the companies that made and sold asbestos products," Behrens said of common practices used at that time. "Virtually all of those companies had been forced into bankruptcy. So they started suing people who were more remote. That could be a company that was a distributor or a supplier of those products, or a property owner that had these products on it."

Any of these companies, from manufacturers of brake pads to contractors who might use a compound that has minute traces of asbestos became targets for plaintiffs' lawyers.

The eighth amendment of Allen v. American Petrofina declared these companies had been a part of a "Machiavellian plan."

"Having so long prospered at the expense of plaintiffs' health," the court document stated, "the rascals ultimately confronted the spectre of countless corpses, diseased lungs, and shattered lives wrought by their products."

As this one case moved into the 1990s, asbestos litigation in Texas reached a fevered peak. Reaud joined Walter Umphrey and four other powerful Texas-based plaintiff attorneys in forming a single firm with the sole purpose of filing massive asbestos and personal injury claims.

Settlements shrink: Lawyers' take grows

By 1996, court documents in Case No B-126,986 show the costs of the six-year legal battle. Court documents show a list of the defendants that declared bankruptcy. Settlement agreements document plaintiffs receiving around $180,000.

But some plaintiffs are also dismissed from the case because they showed no signs of illness, something that Behrens said became the norm in the 1990s.

"In the past, the vast majority of clients were not sick," Behrens said of the 1990s. "There was nothing physically wrong with them but they were filed by the tens of thousands."

Many of the plaintiffs in these cases received a relatively small amount of financial return. The Dallas Observer article reported that the bankruptcy trust established for asbestos manufacturer Johns-Manville, paid more than $1.8 billion in legal settlements from 1986 to 1998. But after settling hundreds of thousands of claims, the average settlement per person was just $5,000.

Attorneys, however, were making millions, charging up to 40 percent commission on all approved settlements, just as Wayne Reaud requested of the court in 1996.

By that time, Case No B-126,986 had morphed to include Case No. A-135,236 and Case No. A- 134,614, all filed by RMQ. As the multi-million dollar settlements began to be reached, Reaud personally submitted a court request that in all of these cases his firm be paid attorney fees of 40 percent.

The three cases, according to 1996 court documents, included more than 1,500 plaintiffs suing close to 250 defendants. Plaintiffs are referred to as "sets" of people with similar cases, which RMQ has agreed to settle their claims against "most of the defendants in these lawsuits."

Skepnek said the aggregate settlement model used by asbestos attorneys significantly hurt the actual plaintiffs while making their lawyers wealthy. Cases would be lumped together, Skepnek said, lumping legitimate cases in with frivolous ones.

"When the clump of cases would ripen on the docket," Skepnek said, "then there was a preset deal between the company and the lawyers as to payments for particular kinds of cases."

The result proved negative for both the defendants and many of the actual plaintiffs, Skepnek said.

"You ended up with various companies paying lots of people without legitimate claims real money," he said. "But people with real claims -- and there were people with real concern -- were being watered down."

Skepnek said the practice was "a matter of ethics," but if a lawyer is "just a businessman looking at the bottom line then it doesn't make any difference to him."

Changing times: Reforms in Texas

Those initial settlements were just the beginning of the end for Case No B-126,986. Legal wrangling continued for another decade.

The last settlement of Case No B-126,986 came on Dec. 13, 2007, more than 20 years after the case opened in District Court of Jefferson County.

Attorney Joseph C. Blanks had left the firm more than a decade before. Blanks online biography lists Russell Allen et al vs. American Petrofina Inc. et al, first among his legal accomplishments.

Neither Blanks nor Reaud responded to requests to be interviewed for this article.

In 2007, Reaud was named for the one Texas' Super Lawyers for a third time.

Most significantly, the decade brought legislative changes in Texas that dramatically altered the landscape of asbestos litigation. Unscrupulous legal tactics were exposed, as plaintiff attorneys methods came under intense legal scrutiny. Texas passed significant legislation that has proved effective in curbing asbestos legislation in the state.

In 2007, the Dallas-based law firm of Baron & Budd that made hundreds of millions in asbestos cases announced it would have to lay off more than 100 employees.

"Texas was once among the most attractive states in the country for plaintiffs' attorneys to pursue," Behrens said. "It has now become the most unattractive state in the county for plaintiffs' attorneys to pursue."

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