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Order makes W.Va. asbestos trust dealings more open

By Chris Dickerson | Mar 3, 2010


CHARLESTON, W.Va. (Legal Newsline) -- An order filed Wednesday will ensure asbestos plaintiffs don't get paid twice for the same alleged injuries.

Circuit Judge Ronald Wilson's order essentially ensures that defendants in asbestos cases receive proper credit when plaintiffs are paid by trusts of bankrupt defendants. In asbestos cases that go to verdict, money paid by such trusts would reduce the amount of the money paid out.

The order is meant to make the process of dealing with trusts of bankrupt asbestos defendants more open and to make it easier for all parties involved to see what plaintiffs in such cases told the trusts.

The issue has been lingering for years in West Virginia, according to state Sen. Jeff Kessler. The business community, including the West Virginia Chamber of Commerce, has been pushing for such legislation, as has Kessler.

Under this case management order, plaintiffs now must disclose which bankruptcy trusts they have talked to and against any trusts he or she might have a claim.

Kessler, D-Marshall and chairman of the Senate Judiciary Committee, said Wednesday the order is the product of negotiations related to a bill (SB486). He said parties involved were working on the proposed legislation, but it was decided that the situation would best be handled with a court order "instead of the Legislature telling the judge how to run his courtroom."

"We were working with the the same group of folks," said Kessler, who already has announced plans to run for governor in 2012. "The legislation that was aimed at more transparency is mooted by this court order. I've always been concerned about the Legislature telling another branch of government how to do its job."

Kessler said the order "adds structure to the process of knowing what claims are paid."

"It lends more transparency and a clear method of sharing the information and to seeking contribution and payment from other parties and trusts that satisfy claims," he said. "I'm thrilled because this has been an issue that has come up repeatedly in the 12 years I've been here (in the state Senate)."

Steve Roberts, president of the West Virginia Chamber of Commerce, also was pleased with Wilson's order.

"While we're still studying the exact ramifications, we applaud the attention and effort," Roberts said. "We see it as a step toward fairness."

Jim Stengel, a New York attorney with Orrick, Herrington & Sutcliffe who testified before a West Virginia Senate Judiciary Committee last year about this issue, called the order "an important development."

"It creates a position that is fair, so the court and litigants can properly evaluate cases," said Stengel, whose firm's Global Operations Center is in Wheeling. "There isn't a justification for the claims to not be available."

Jacob Cohn, a Philadelphia attorney and expert on the topic, also said the order is a good one.

"It goes a good way along, but it doesn't address the problem of plaintiffs not submitting trust claims until their tort claims have been adjudicated or settled," he said. "Yes, they're supposed to tell you who the trusts are they are going to be claiming against. But it's difficult to police who they have submitted claims to."

Since 2000, most major defendants historically targeted in asbestos litigation have resolved their asbestos liabilities by establishing trusts under Section 524(g) of the Bankruptcy Code. With more than $30 billion in assets, asbestos trusts represent a major funding source for asbestos claimants. With the most culpable defendants gone from the tort system, plaintiffs target companies with peripheral involvement with asbestos and use the prospect of joint and several liability to extract settlements.

Cohn also referenced the infamous Kananian vs. Lorillard Tobacco Company case in Ohio.

He has called the case "the poster-child for abuses flowing from the opaque nature of the trust claiming process."

In that case, Harry Kananian claimed in he developed mesothelioma solely from smoking Lorillard's asbestos-filtered cigarettes. But he and his attorneys simultaneously filed claims with numerous asbestos trusts alleging that their products caused the disease. Despite Kananian's attorneys' attempts to hide this information, Lorillard eventually learned that these lawyers had obtained hundreds of thousands of dollars by submitting contradictory -- even bogus -- trust claims, leading the judge to revoke counsel's pro hac vice privileges.

"Judge Wilson's order is good, but it still potentially allows for the gaming of the system by deferring the submissions," Cohn said of Wednesday's West Virginia order. "The problem, especially in joint and several jurisdiction, there are fewer and fewer solvent defendants. The share they might end up paying is bigger and bigger. These defendants are looking down the barrel of a gun in joint and several jurisdictions."

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