Asbestos Claims Resolution Tort System and Trust System

Transcription

1 Asbestos Claims Resolution Tort System and Trust System Two Ships Passing in the Night Eliot S. Jubelirer Schiff Hardin, LLP San Francisco

2 Basic Principles We All Agree Upon Every asbestos case presents one claim with one value, yet it gets compensated by two systems: Tort System; Asbestos Trust Compensation System. The Courts have an important interest in insuring that the tort system operates fairly and openly for both plaintiffs and defendants. Plaintiffs have a right to pursue all sources of compensation for their injuries. Defendants have a right to discover all relevant evidence about plaintiff s exposure.

3 The Problem The Asbestos Bankruptcy Trusts are operating out of sight of the tort system, yet: 1. They pay large amounts of $ for the same claim as defendants in the tort system; 2. Plaintiffs only seek Trust money after their tort claims are over, preventing defendants from learning about product ID evidence and settlement credits.

4 The Solution Make the Bankruptcy Trust claims visible to the tort system. Get the Bankruptcy Trust claims filed while the tort claims are ongoing.

5 The Past When most of the original insulation companies went bankrupt, plaintiffs responded two ways: They sued new and more companies, not formerly in the cases (e.g., Alameda County plaintiffs sued up to 60 defendants in each case); or They demanded the tort defendants make up the difference (i.e., pay the money they used to get from the traditional defendants).

6 The Present The money from the Traditional Defendant Companies is back.

7 What is the Asbestos Trust Compensation System? Collection of trust funds established pursuant to 524(g) of the Bankruptcy Code against which plaintiffs can make claims for their injuries caused by products or conduct of the trust settlors.

8 Trust Characteristics 1. They exist outside the litigation system. 2. They have huge amounts of money that must be paid to plaintiffs over the next 30 years. 3. They are easy to obtain payments from. 4. Their rules were written by plaintiff s lawyers. 5. They operate without oversight of the courts. 6. They are controlled by trustees appointed by plaintiffs counsel and consult with the TACs composed of plaintiffs lawyers.

9 How Many Trusts Are There?

10 More Than 50 Trusts Are Operating and Paying Claims or Planned OPERATING TRUSTS (36) NOT YET OPERATING (21) ABB Harbison Walker AC&S Skinner Engine A-Best H.K. Porter Aparco U.S. Minerals A&I Corp. Johns-Manville A.P. Green W.R. Grace Amatex J.T. Thorpe Brauer Supply API Kaiser Aluminum Burns & Roe Armstrong Keene Congoleum Artra Group Muralo Federal Mogul Babcock & Wilcox National Gypsum Flintkote Company Carey Canada Owens-Corning Forty-Eight Insulation Celotex Pilbrico GAF C.E. Thurston Porter Hayden Hercules Chemical Combustion Engineering Shook & Fletcher M.H. Detrick Dresser Industries Stone & Webster NARCO Eagle-Picher Swan Transportation Pittsburgh Corning E.J. Bartells Unarco Quigley Fibreboard U.S. Gypsum Raybestos Fuller-Austin Utex Industries Rock Wool Halliburton Western MacArthur Rutland

11 How Much Money Do The Trusts Have?

12 Cash and Equity Assets from Bankruptcy Trusts Halliburton/DII Industries Owens-Corning/Fibreboard US Gypsum Pittsburgh-Corning Armstrong Western MacArthur Manville Babcock & Wilcox Others TOTAL $ 5.34 B 4.99 B 3.95 B 3.50 B 2.11 B 2.00 B 1.06 B 1.00 B 6.41 B $30.36 Billion

13 Asbestos Bankruptcy Trusts Hold More Than $30 Billion To Be Paid Out Over 30 Years The amount of money held by the trusts will grow to $50 billion over time as trust funds are invested. The trust s funds will be paid to claimants. Money will not be left over.

14 Trusts Currently Pay a Percentage of Scheduled Value: *operating, paying claims Scheduled Value Amount Currently Paid OCF* 215,000 21,500 Fibreboard* 135,000 14,850 USG* 155,000 69,750 Philip Carey* 11,000 11,000 Western MacArthur* 276, ,000 Pittsburgh-Corning 175,000 41,475 Eagle Picher* 6,500 6,500 AC&S 150,000 8,670 NARCO 75,000 75,000 Harbison Walker* 51,300 51,300 W.R. Grace 180,000 45,000 Kaiser Aluminum* 70,000 27,650

15 Trusts Will Pay Mesothelioma Plaintiffs Large Awards In mesothelioma cases, industrial workers, shipyard workers, Navy boilermakers, construction workers can get $300,000 to $1,000,000 or more from the bankruptcy trusts + make-up payments later.

16 Amounts Paid Can Be Far Higher Than Scheduled Amounts Individual review of claims can boost payments, e.g., Western MacArthur scheduled payment = $110,000 but can go as high as $838,440. Trusts can give make-up payments, i.e., if projections and investment returns are better than expected or the number of claims is lower, trusts can pay additional $ to claimants.

17 Last year, Manville Trust alone paid out $419 million for past and currently-filed claims, including hundreds of millions of dollars in make-up payments: $18 million in California $16 million in Florida $44 million in Mississippi $22 million in New York $68 million in Texas $23 million in Illinois In 2006, all Trusts paid out $283 million In 2007, all Trusts paid out $1.1 billion In 2008, all Trusts paid out $2.89 billion

18 Trusts Channel Claims Against Former Tort System Defendants Into A Claims Processing System; Not An Adversary Litigation System

19 Trust Distribution Procedures (TDP) Rules Trustee evaluates the claim without regard to the outcome of the claim in the tort system. Exposure is established by a claim of the presence of the bankrupt s product and the claimant at a particular site at the same time. Low thresholds of proof of exposure and causation mean claims are easy to make, easy to qualify. Payments are usually made based on a matrix.

20 Reliable Medical Evidence Evidence that is of a kind shown to have been received in evidence by a state or federal judge at trial, that is consistent with evidence submitted to the bankrupt company to settle similar disease cases prior to the bankruptcy filing or a diagnosis by a physician shown to have been previously qualified as a medical expert before a state or federal judge using the same methodology.

21 Meaningful and Credible Evidence of Exposure May be established by an affidavit or sworn statement of the claimant, by an affidavit or sworn statement of a co-worker, or the affidavit or sworn statement of a family member in the case of a deceased claimant, by invoices, employment, construction or similar records, or by other credible evidence.

22 Presumed Exposure Sites Some trusts have lists of job sites and ships where exposure to their companies products is presumed. e.g., OCF Trust lists 22,600 presumed exposure sites. Fibreboard Trust lists 8,600 presumed exposure sites. Western MacArthur lists 66 pages of presumed exposure sites and 24 pages of ships where exposure to Western s products occurred.

23 Trusts Operate Out of Sight (and Oversight) of the Courts and Defendants: Why? Trust rules are set forth in the TDP. TDPs allow claimants to delay or defer their claims until after tort claims are resolved, e.g., OCF Trust allows 3-year deferral without affecting statute of limitations or place in processing queue.

24 TDPs assert the claims forms are confidential and constitute settlementrelated materials and the Trusts will object to subpoenas to them (e.g., OCF TDP 6.5). TDPs provide: failure to identify the Trust s products in tort litigation against third parties does NOT preclude a claim against the Trust.

25 Trust Procedures Create a Shadow Compensation System That Operates Beyond Court Control and Public Scrutiny Trust claims are not filed in any public forum. When plaintiffs are allowed to file trust claims after their tort claims, it prevents defendants from getting product ID admissions or settlement credits. This impedes settlements and manipulates the evidence.

26 The Need for Trust Transparency Because the same claim is presented in both the tort system and the trust system, the systems should operate together. Trust data should not be allowed to hide in the dark. The trusts are not litigants and they are unaffected by the tort system, but NOT vice versa.

27 Defendants in Litigation System Are Entitled to Trust Application Evidence of Exposure and Causation Trust applications claiming exposure to products made by bankrupts are admissions. Trust applications, whether verified or not, can be used to: Impeach the plaintiff; Establish alternate exposure/causation; Establish several liability shares, e.g., California noneconomic damages are several; admissions of exposure to other companies products establishes those shares.

28 Methods for Obtaining Trust Application Information CMO rules requiring automatic disclosure; the claims are going to be filed; there is no legitimate reason to delay making the claims. Interrogatories to Plaintiffs. Deposition questions. Requests for production of trust applications materials from the plaintiff. Subpoenaing the trusts for the application materials.

29 California and Illinois appellate decisions make claims forms and supporting documents discoverable from the plaintiff: California: Volkswagen of America v. Superior Court (2006) 139 Cal.App.4 th Illinois: Shonberg v. Owens-Corning Fiberglas Corp. (1991) 215 Ill.App.3d 735.

30 Trial courts in major jurisdictions have also ruled the claims forms discoverable: New York City Cuyahoga County, Ohio Philadelphia Harris County, Texas

31 What have the courts already done? Judge Freedman s NYC CMO requires: Any plaintiff who intends to file a proof of claim form with a bankrupt entity or trust shall do so no later than 10 days after trial designation, and no later than 90 days before trial in in extremis cases.

32 What have judges already done? Judge Hanna s Ohio CMO requires: Immediate production of bankruptcy claim forms/supporting documents, Authorization for defendants to get information from trusts, Duty of supplementation.

33 What have the courts already done? Judge Wilson s West Virginia CMO says: Plaintiff must file affidavit which identifies trusts to which applications HAVE OR WILL BE FILED; Non-compliance results in case being stricken from trial calendar.

34 What have the courts already done? Judge Armstrong s Washington order provides for: Credits for amounts ACTUALLY OBTAINED from trusts AND for amounts that WOULD HAVE BEEN OBTAINED HAD PLAINTIFFS DILIGENTLY APPLIED.

35 The Courts Should Do More To Ensure Transparency CMOs should require Trust applications to be filed before or at the same time as civil actions: Plaintiffs benefit by increasing their recoveries and getting paid sooner. Defendants benefit by obtaining vital product ID information and share information. Courts benefit by increasing chance of early settlement by recognizing the trust money in the tort system. It helps settlement!

36 Methods to Obtain Disclosure of Trust Information Automatically Seek Case Management Orders that: Require automatic disclosure of previously-filed claims by the plaintiff (not just by the current attorney); Require the plaintiff to set forth all pending and anticipated claims supported by a statement by plaintiff s counsel under penalty of perjury that he/she has made a good faith investigation of all potential claims against Bankruptcy Trusts with the results of that investigation (claims will be filed or not); Sets forth the amount of the value and the amount paid or to be paid by each trust.

37 If the court decides the claim should be filed, plaintiff shall promptly file it and produce the claim forms to the defendants; Allow the defendants to make a prima facie showing that plaintiff s claim qualifies for trust payments if plaintiff s counsel refuse to do so; The court should not set a case for trial until this claim review process is complete;

38 Trust claim forms should be presumptively authentic and admissible; they are statements of a party and/or admissions; Each trust for which a finding was made that there was an actual or potential claim shall be included in the verdict form where non-parties are allowed by state law (e.g., California); Require disclosure of trust claims (made or projected) at settlement conferences.

39 Goal: to bring the parallel compensation system out into the open and prevent delaying claims to deprive defendants of settlement credits and product ID information. Seek enactment of state statutes that codify early disclosure requirements.

40 Trust Payments as Settlement Credits No reported decisions on how trust payments should be credited; Will probably depend on law of the state where civil case is pending rather than law of state where trust is located; Trust payments are not broken down between economic and non-economic damages or between lost incomes versus pain and suffering; Allocations among types of damage will also follow state law where civil case is pending.

41 Conclusion It is fair for claimants to ask for quick resolution of their claims in the tort system, but unfair to seek expedited trials against solvent defendants while delaying resolution of trust claims. The Courts and members of the bar should continue to work to synchronize the two systems in a fair and responsible manner.

42 END