With approximately $30 billion collectively held in asbestos bankruptcy trusts, tension with the tort system continues.
Asbestos defense lawyer Kirk Hartley of the LSP Group in Chicago believes the two systems should be cooperating with each other.
Hartley and others recently spoke at a Perrins asbestos bankruptcy conference in Chicago.
"You have these two emerging compensation systems," Hartley said. "There should be some coordination 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 aren't courts 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.
Hartley said asbestos trust funds are important for another reason besides settling claims.
The procedures for asbestos Chapter 11 trusts 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, and the Dow Corning trust. And, the most famous of all, said Hartley, is the BP Gulf oil spill trust.
At the June asbestos conference, lawyers from both sides of the asbestos bar participated.
"How to successfully file an asbestos bankruptcy trust claim," among other things, looked at establishing medical and exposure requirements needed for trust claims. In other words, knowing what claims are worth under trust distribution procedures.
"The role of 524(g) trust discovery in asbestos bankruptcy cases" addressed the relevancy of discovery of trust data for bankruptcy estimation purposes and provided an update on past and ongoing cases requesting discovery of trust data.
Philip Bentley of the law firm of Kramer Levin Naftalis & Frankel in New York, said claims estimation is important for defendants, yet difficult to ascertain because past years' figures are highly variable.
"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."
He said that 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, according to Bentley.
He cited the GM bankruptcy case. As the company aimed toward becoming solvent, it wanted to know the value of claims filed against the trust and the amounts paid by the trusts. GM wanted to know if exposure and recoveries were comparable to pre- or post-2000 conditions.
When a judge permitted discovery of trusts in August 2010 in the GM asbestos case, that led to a negotiated settlement rather than the trusts turning over all the information.
The trusts objected to discovery claiming that it was too expensive to provide the information. The courts denied those objections, but leading to a settlement of $625 million which was less than the pre-discovery estimate of $648 million.
But the crux of the matter is how to estimate value.
Bentley believes the answer to be simple.
"If you want to project the liability for these claimants the courts should look to the 1990s not to the post-2000 era of claims," he said.