The Asbestos Settlement Fraud That Wasn’t There

[Update, December 2012: Daniel Fisher at Forbes links to this post in his article about a new bill pending in Ohio that would require asbestos trust claimants to disclose payments made by other trust. I give him credit for linking to my criticism (and, correspondingly, I'm linking back to his), though I continue to believe claims of widespread asbestos trust fraud are overblown, for the same reasons argued below.]

Asbestos use in a wide variety of products, and all new products, has been banned for more twenty years, and yet asbestos litigation continues to be a multi-billion dollar business because asbestos was used everywhere and remains all around us. Even if you were never exposed to asbestos as part of your work, you still have “millions of [asbestos] fibers and tens of thousands of asbestos bodies” in your lungs. The difference between an average person and an asbestos plaintiff is often just one thing: a diagnosis of mesothelioma. (For any die-hard tort reformers out there who doubt that link, consider this 2011 study identifying the specific way asbestos alters proteins in mesothelial cells. If someone has mesothelioma, it’s virtually guaranteed it was caused by asbestos exposure.)

By coincidence, two separate articles yesterday touched upon a subject that has kept injury lawyers (both plaintiffs’ and defense) interested for more than a generation: figuring out which asbestos exposure caused a particular person’s mesothelioma and thus who, if anyone, is responsible.

At Corporate Counsel:

The Government Accountability Office released a new report on Wednesday analyzing asbestos injury trusts, shining some light on a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

The report, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts [PDF], reviewed 52 asbestos-related bankruptcy trusts that “have paid about 3.3 million claims valued at about $17.5 billion.”

The GAO found that while the majority of the trusts made general data available, very few provide detailed information about their activities without being directed to by a court of law: “Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid.  Other information in the possession of a trust, such as an individual’s exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena.”

More on that in a moment. The Legal Intelligencer reported on arguments before the Pennsylvania Supreme Court in Betz v. Pneumo Abex:

The [appeal] follows an Allegheny County judge’s decision to grant a global Frye motion on behalf of several friction-based product defendants, subsequently granting summary judgment in their favor. …

According to the defense, one expert’s testimony was a “bad science” assertion that summed up to this: If a lot of asbestos can cause harm, so too can a little.

The expert under scrutiny, Dr. John C. Maddox, had relied upon an analysis the defense said gave unsupported weight to “each and every breath” one takes of asbestos. Under such an approach, they said, Maddox opined every breath one takes of friction-based products can contribute to developing mesothelioma.

Let’s start by going back to that GAO report. As if on cue, Daniel Fisher at Forbes and the U.S. Chamber of Commerce both chimed in to hurl unfounded attacks at trial lawyers, like:

“It is becoming clear that rather than acting to prevent abusive claims, the asbestos trusts are effectively encouraging fraud by inhibiting claims information sharing between the trusts and the tort system. We hope that Congress’s growing attention to this important issue will ensure that the trusts operate in a manner fair to asbestos victims and job-creating businesses, not plaintiffs’ lawyers and fraudulent claimants.”

It’s part of an attack on trial lawyers in general, who asbestos defendants have started suing to intimidate them out of taking asbestos cases. Fisher helped get this “asbestos claim fraud” ball rolling years ago, with assertions like:

Even as states crack down on frivolous lawsuits by people with no symptoms at all, trusts established by bankrupt asbestos manufacturers are paying tens of thousands of claims each year based on inflated or downright false stories of how people were exposed to their products.

Shocking. Tens of thousands of inflated or false claims?

There’s just one problem with this theory, as Corporate Counsel pointed out:

The report itself does not claim to have documented any regular occurrences of fraud, however, and includes review of the trust distribution procedures (TDP) that each trust has in place: “Although the possibility exists that a claimant could file the same medical evidence and altered work histories with different trusts, each trust’s focus is to ensure that each claim meets the criteria defined in its TDP, meaning the claimant has met the requisite medical and exposure histories to the satisfaction of the trustees. Of the trust officials that we interviewed that conducted audits, none indicated that these audits had identified cases of fraud.”

Fraud? What fraud?

Sure, the anti-asbestos-victim forces can name a handful of the same cases over and over again, like the Kananian case, which Fisher references again, thinking it proves his point that asbestos trusts are rife with fraudulent claims and easy, unjustified settlements. It doesn’t. The Kananian case showed how, even if a few bad actors try to manipulate the process, they’ll just end up getting caught. As soon as the Kananian estate tried new claims with a new trust, their new lawyers caught the “outright fabrications” — those were the plaintiffs’ lawyers’ words — and sent out “immediate” instructions to everyone to be wary of the claims and to ensure all future claims were accurate. They then amended their schedules.

Based on one example — in which the system worked — the big corporate interests, the asbestos-cement, roofing, flooring, car manufacturers, and friction product companies, want to change the system completely to cut off even more people. It’s at best the boy who cried wolf, more likely just another strawman argument.

Which brings me back to the Betz v. Pneumo Abex case. An “every breath you take” medical opinion in support of asbestos causing mesothelioma might run into some evidentiary challenges — even though, like with all cancer-causing agents, it happens to be true — that wasn’t actually the issue in the case:

For Betz’s attorney, David B. Rodes of Pittsburgh firm Goldberg Persky & White, the defense was pulling a “classic bait and switch.”

Nobody was arguing that “one breath” of asbestos caused Simikian’s cancer, he said. Rather, there was a cumulative picture — more than 40 years of exposure to friction-based products — he urged the court not to ignore.

From the reports, it seems the Pennsylvania Supreme Court ‘gets it’ and recognizes the “every breath you take” theory isn’t even at issue there. Moreover, it wouldn’t be improper to permit that evidence; as the court reaffirmed just two years ago, Abrams v. Pneumo Abex Corp., 981 A.2d 198 (Pa. 2009), the mere increased risk of harm from asbestos exposure is itself enough to state a viable cause of action.

The real question is if Congress will intervene in the trusts to placate a handful of business interests. “If it isn’t broken, don’t fix it” doesn’t seem to apply where there’s corporate money at stake.

The Asbestos Fraud That Wasn’t There

By coincidence, two separate articles yesterday touched upon a subject that has kept injury lawyers (both plaintiffs’ and defense) interested for more than a generation: asbestos litigation.

At Corporate Counsel:

The Government Accountability Office released a new report on Wednesday analyzing asbestos injury trusts, shining some light on a multi-billion-dollar system of plaintiff claims and payouts that operates largely in secret.

The report, Asbestos Injury Compensation: The Role and Administration of Asbestos Trusts [PDF], reviewed 52 asbestos-related bankruptcy trusts that “have paid about 3.3 million claims valued at about $17.5 billion.”

The GAO found that while the majority of the trusts made general data available, very few provide detailed information about their activities without being directed to by a court of law: “Most asbestos trusts we reviewed publish for public review annual financial reports and generally include total number of claims received and paid.  Other information in the possession of a trust, such as an individual’s exposure to asbestos, is generally not available to outside parties but may be obtained, for example, in the course of litigation pursuant to a court-ordered subpoena.”

More on that in a second. The Legal Intelligencer reported on arguments before the Pennsylvania Supreme Court in Betz v. Pneumo Abex:

The [appeal] follows an Allegheny County judge’s decision to grant a global Frye motion on behalf of several friction-based product defendants, subsequently granting summary judgment in their favor. …

According to the defense, one expert’s testimony was a “bad science” assertion that summed up to this: If a lot of asbestos can cause harm, so too can a little.

The expert under scrutiny, Dr. John C. Maddox, had relied upon an analysis the defense said gave unsupported weight to “each and every breath” one takes of asbestos. Under such an approach, they said, Maddox opined every breath one takes of friction-based products can contribute to developing mesothelioma.

Both articles generally address the same question lawyers and judges have grappled with for years now: we know that asbestos exposure causes mesothelioma, but how do we determine who qualifies for compensation?

(For any die-hard tort reformers out there who doubt that link, consider this 2011 study identifying the specific way asbestos alters proteins in mesothelial cells.)

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  • Jim Beck

    Betz was reversed by the Pa. Supremes yesterday. There’s some analysis on my blog.

    - Bexis

    • http://www.litigationandtrial.com/ Max Kennerly

      Thanks. I’m not sure if Disqus will let me post the link to your site, but here it is:
      http://druganddevicelaw.blogspot.com/2012/05/bexis-brings-home-some-frye d-bacon.html

      I’ll have some thoughts later. For now, the PA Supremes punted on the issue I raised in my post, i.e. that Betz wasn’t really an “each and every breath” case but a continuous exposure over many years, because the plaintiff’s lawyers had limited their expert to the “each and every breath” approach, and hadn’t bothered to get individual exposure opinions as well. I guess that limit on the opinion’s reach is good for plaintiffs in general (so long as they’re not “any breath” cases), but probably not so good for Betz unless the trial judges lets them amend Maddox’s report.

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