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La. business' growth stunted by asbestos lawsuits

By Jessica M. Karmasek | Sep 9, 2011


WASHINGTON (Legal Newsline) - Michael Carter, a small business owner in Louisiana, says a corner in his office is, literally, stacked high with asbestos lawsuits.

So many, in fact, he can't even think about hiring any more employees.

Right now, his business employs about 25 people. He needs at least four more. But he's scared to hire any additional help.

"I'm not in a position because I'm inundated with lawsuits. I'm not going to grow this company any more because I don't know what tomorrow's going to bring," Carter told a House subcommittee Friday morning.

"I just don't know how much longer I'm going to be here."

Carter, owner of Monroe Rubber & Gasket Co., was one of four witnesses who testified Friday before the House Judiciary Committee's Subcommittee on the Constitution. The subcommittee held a hearing titled, "How Fraud and Abuse in the Asbestos Compensation System Affect Victims, Jobs, the Economy and the Legal System."

The subcommittee has jurisdiction over tort liability and legal reform. Trent Franks, R-Ariz., is the chairman.

Others on the subcommittee include vice chairman Mike Pence, R-Ind.; Steve Chabot, R-Ohio; Randy Forbes, R-Va.; Steve King, R-Iowa; Jim Jordan, R-Ohio; Jerrold Nadler, D-N.Y.; Mike Quigley, D-Ill.; John Conyers, D-Mich.; and Bobby Scott, D-Va.

The three other witnesses who testified were Lester Brickman, a professor at Yeshiva University's Benjamin N. Cardozo School of Law; Charles S. Siegel, a partner at Dallas-based law firm Waters & Kraus LLP; and James L. Stengel, a New York litigation partner at firm Orrick, Herrington & Sutcliffe LLP.

Carter, whose first lawsuit was filed against him in March 2002 and has since ballooned to 104 separate suits with 2,200 plaintiffs, called the current system of asbestos compensation "broken."

He said his company doesn't even manufacture asbestos products. In his case, he bought a product from another manufacturer and sold it to a user who asked for it by name.

"I didn't make anybody sick," he said. "Not one person who's been affiliated with my company has contracted any sort of asbestos related disease."

Carter contends he is just the next tier that trial attorneys are going after.

"I am very sympathetic to those who are sick," he said. "But I say let's go after the people we have to go after."

Instead, he said the system is "caught up in a feeding frenzy of trial attorneys" and, in turn, is threatening to shut down small businesses like his own.

"We are the backbone of America," Carter told subcommittee members. "It's just an unfair thing that's happening right now. We need someone to step up and help us."

Franks seemed to agree.

In his opening remarks, he pointed to a new generation of diagnosing doctors who are helping to falsify claims and potential "double-dipping" of the tort system and asbestos bankruptcy trusts.

He noted that more than 90 percent of American industries have been sued for asbestos related claims.

"America cannot create jobs when they are being drained by abusive asbestos litigation and lost to legal fees," he said.

Even worse, Franks said, is that some employers are being driven into bankruptcy, forced to shut their doors.

"Fraudulent claims hurt future and present victims, American companies and the American legal system," he said.

Brickman, acknowledged by four federal courts as an expert on asbestos litigation, said law enforcement is much to blame.

He said the government should go after the doctors who have created hundreds of thousands of false medical reports and the lawyers who hired them to do so.

Until then, these doctors and lawyers have "a free pass" to commit fraud, he said.

Nadler, the subcommittee's ranking member, pointed to the administration of the asbestos trusts.

Over the past 30 years, dozens have been set up on behalf of companies that have filed for reorganization.

Brickman argues that there's no transparency.

"There has been a huge increase in non-malignant claims beginning about 2007 -- almost doubling every year," he said. "But trusts don't publish this information."

Instead, trusts are the "model of non-transparency," Brickman said.

"They're run by plaintiffs lawyers," he said. "So this information is very hard to come by."

Stengel, who once represented the Manville Personal Injury Settlement Trust, agreed that more information is needed.

"I don't think anyone here takes issue with the fact that this is a health crisis," he said. "I think what you're hearing from all of us is that there needs to be a level playing field.

"All we ask is transparency -- full disclosure as to what's happening in the tort system and on the trusts' side."

According to a study released this year by the Rand Institute for Civil Justice, the issue is whether a lack of coordination between the trusts and the tort system allows plaintiffs to, in effect, recover once in the tort system and then again from the trusts.

Also at issue is whether the payments by solvent defendants are being properly adjusted to account for the compensation available from the trusts.

Higher trust payments to current plaintiffs mean fewer trust resources for future plaintiffs, so another concern is whether a lack of coordination between trusts and the tort system advantages present plaintiffs relative to future plaintiffs.

"I think the enormous amounts of money paid out to bogus claims -- easily $25 billion to $30 billion, or more -- has deprived claimants who have actually been injured by asbestos from a level of compensation that could've been accorded them if not for these billions that had been paid out to hundreds of thousands of persons who could not legitimately show an injury from asbestos," Brickman told subcommittee members.

Siegel, who has represented asbestos victims for the last 25 years, testified that there is no such thing as "double-dipping."

"The jury hears all of the evidence. The jury then allocates significant shares of the responsibility to the bankrupt defendants," he said.

"Pervading all of this is a very elitist notion that the jury will never get it right, and we know that's not true."

Juries, he said, are perfectly capable of deciding who is liable and who isn't.

Siegel also noted that trust payments are "minimal." They are assigned a scheduled value and a payment percentage, he explained.

In terms of payment percentage, some trusts pay as low as 0.8 percent, he said.

"Asbestos victims should not have to apologize for seeking compensation for their injuries," he said.

Stengel, who currently is part of a team representing Union Carbide in asbestos litigation, agreed.

"We're not saying asbestos plaintiffs shouldn't have their day in court," he said. But they have to be able to establish and show a causal link, he said.

Members of the House subcommittee now have five legislative days to submit additional written questions to the witnesses.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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