Trust or tort, which system do you use if you are a representing a claimant in an asbestos case. Should the two systems be coordinated?
This was among the many subjects discussed at a Perrin Conferences , June Abestos Bankruptcy Conference, at the Peninsula Hotel in Chicago on June 20. Among the speakers were Kirk Hartley, Esq., LSP Group LLC., Chicago, IL; Philip Bentley, Esq., Kramer Levin Naftalis & Frankel LLP, New York, NY; Jacob Cohn, Esq., Cozen O'Connor, Philadelphia, PA; and Natalie Ramsey, Esq., Montgomery, McCracken, Walker & Rhoads, LLP, Philadelphia, PA.
Topics included:
Staking Your Claim: How to Successfully File an Asbestos Bankruptcy Trust Claim, which talked about "establishing the medical and exposure requirements needed for trust claims 'knowing what your claim is worth under the trust distribution procedures and contribution claims ' answering the question can defendants really recover from indirect claims to the trusts."
The Role of 524(g) Trust Discovery in Asbestos Bankruptcy Cases, which addressed the "relevancy of discovery of trust data for bankruptcy estimation purposes." It also provided an "update on past and ongoing cases requesting discovery of trust data."
Philip Bentley of the law firm of Kramer Levin Naftalis & Frankel LLP, New York, NY, was one of the panel members. His take on this is quite insightful.
" The key elements of asbestos estimation are the number of claims ' both present and future, the value of the claims and then the number multiplied by the value which is the aggregate liability," Bentley said during an interview. "The challenge is how will future claims experience compare to past claims experience."
This is difficult to ascertain because the past years are highly variable. There how is it determined which years establish the baseline claims amounts.
The defendants today were peripheral defendants prior to 2000. "The low hanging fruit is all gone," Bentley said. "Prior to the year 2000 there were minimal asbestos-related claims and expenditures."
But after 2000 these claims and expenditures increased tremendously. So, do future claims mirror the pre-2000 era or the post-2000 era?
This is where trust discovery comes in said Bentley. He cited the GM case. They wanted to know the claims filed against the trust and the amounts paid by the trusts. This was relevant because GM wanted to know if the GM claimants exposure allegations comparable to their pre-2000 allegations. They also wanted to know if the recoveries were comparable to pre-2000 recoveries. Simply put, are the "conditions comparable to the 1990's or the 2000's?"
When Judge Gerber permitted discovery of trusts in August 2010 in the GM asbestos case led to a negotiated settlement rather than the trusts turning over all the information. The trusts objected claiming that it was too expensive etc., to provide the information. The courts denied there objections. This led to the settlement of $625 million which was less than the pre-discovery estimated amount of $648 million.
But the crux of the matter here is how to estimate the value. Mr. Bentley believes the answer to be simple. "If you want to project the liability for these claimants the courts should look to the 1990's not to the post 2000 era of claims," he said adamantly.
But the whole system in general needs to be reworked so that there is more cooperation between the tort system and the trust system. So believes Kirk Hartley of the LSP Group in Chicago He makes a significant point. He believes the two systems should be cooperate with each other.
"You have these two emerging compensation systems," Mr. Hartley said. "There should be some coordination between the two systems."
There are $30 billion currently in these trusts. It is an enormous amount of money to be parceled out. The most important thing is to do it an effective and fair manner.
Hartley the asbestos trust funds are important for another reason. The procedures for the asbestos Chapter 11 trust are being used as the model for other mass tort claims. Seven Catholic Dioceses are using trusts to resolve claims There are the Chinese Drywall claims trust, the September 11 victims trust, there is the Dow Corning trust. The most famous of all, said Hartley is the BP Gulf oil spill trust.
Trusts are also in use outside of the United States in countries such as the United Kingdom. There are also cross-border suits.
Trusts are even defendants. The Mansville Trust and the Allis-Chalmers Trust are examples.
So trusts play a major role. But so does the tort system which is why Hartley still feels it is paramount that there has to be reconciliation between the two systems.
"Defendants want to say sue me but put on the table of all your trust claims so we can an offset if you get paid," said Hartley. "But plaintiff attorneys are saying that they can collect from both. It is not double-dipping, it is not unethical and it is not illegal."
So why is it that the courts are not stepping in and saying what should and should not be done.
"Because the courts want to leave it up to the legislatures and the legislatures are in gridlock," Hartley noted.
It seems that until such time as a judge or a legislature or both want to lead the way the present system will continue.
It is not trust or tort. It is trust and tort.