Legal Services Membership

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1 ::::: :: :~.w.,~.~!~i~:::: :~.:, Legal Services Membership LEGAL NOTES James F. Clark Isaksen, Lathrop, Esch, }{art & Clark September, 1986 ASBESTOS IN THE SCHOOLS -- AN UPDATE The Nationwide Class Action Lawsuit National attention is currently focused on the class action suit pending in the United States District Court for the Eastern District of Pennsylvania. In September, 1984 the trial judge certified a nationwide mandatory class for punitive damages and an opt-out class for compensatory damages. On May l, 1986 a three-judge panel of the Third Circuit Court of Appeals affirmed the voluntary class action to resolve common issues of liability but refused to approve a mandatory class for purposes of a single punitive damages award. Although defense lawyers are seeking further appellate review, attorneys for the plaintiff school districts plan to begin work on class notification and discovery. While the Third Circuit panel expressed "misgivings on manageability" of the litigation, it deferred to the trial court's opinion that the problems could be overcome and that the substantive tort law variations of many jurisdictions could be accommodated by the creation of a reasonable number of subclasses. The panel emphasized that resolving at least some of the issues on a class basis would result in a substantial savings in time and resources even if the action thereafter "degenerates" into a series of individual damage suits. Moreover, the class certification is conditional. At such time as the trial court is convinced that the litigation cannot be managed, decertification is proper. Litigation in Wisconsin The "pipe and boiler" asbestos case pending in the Milwaukee County Circuit Court is proceeding on a non-class Wisconsin Association of School Boards, 122 W. Washington Ave., Madison, W (608)

2 action basis and the deadline for joining this consolidated action as a party-plaintiff has expired. Of the 84 named plaintiffs, approximately 25 are Wisconsin public school districts. Claims for damages are based on the presence of asbestos pipe, boiler and/or duct lagging materials in the school buildings. Although the case is scheduled to be tried in October of this year it is likely to be rescheduled since the parties have not completed discovery and a new judge may be assigned to the case. Discovery has been coordinated by court order with the discovery in the Pennsylvania class action. Cluster actions have also been filed in the circuit courts sitting in Sheboygan, Green Bay and Eau Claire. Ten Wisconsin public school districts are involved in these cases. Damages are claimed for the use of an asbestos material which was sprayed on ceilings for acoustical and fireproofing purposes. These lawsuits are also proceeding on a non-class action basis and it is not anticipated that they will be open for joinder by additional plaintiffs. To Stay In Or Opt Out? At the present time the only alternatives available to school districts having asbestos-related property damage claims are to remain in the voluntary class action or to opt out and pursue individual lawsuits. Within due course the federal court will establish a cut-off date for opting out and notice of such date will be given to the class in a manner to be determined by the court. The extended deadline for filing asbestos-related property damage claims in the Manville Bankruptcy expired January 31, The factors to be considered in reaching a decision as to whether to do nothing and, therefore, remain in the class or to opt out and go it alone are varied, the single most important being the size of the claim. However, attorneys actively involved in school asbestos litigation are in disagreement as to whether the:minimum damages should be ~i00,000 or ~5 million to justify a decision to opt out. A report compiled by the Rand Corporation, Asbestos in the Courts (1985), points out the high cost and inefficiencies in handling these claims on an individual basis as well as the uneven, inconsistent and unjust results often achieved. The report observes that "loin the average, the total cost to plaintiffs and defendants of litigating a claim was considerably greater than the amount paid in compensation." A second factor is control over the litigation. In the class action lawsuit, individual school districts will have -2-

3 little to say in influencing litigation and settlement decisions. In terms of net recovery, a school district with an above average case may fare no better than a district with a weak case. However, a class action is a slow, burdensome process which faces the possibility of being decertified somewhere down the road because of unmanageability. Some experts believe that opting out of the class will result in a much larger recovery much sooner. Others, however, believe that if an individual action is filed, the trial judge may put the case on the same schedule as the class action in order to coordinate discovery and other scheduling matters. A third factor which must be weighed is the availability of skillful counsel to handle a district's separate claim. The class action plaintiffs are being represented by a number of attorneys who are regarded as highly competent, experienced and specialized. Any school district which opts out of the class should have a carefully worked out litigation strategy at the time. A fourth factor to be considered is the immediate cost of litigation expenses in pursuing an individual action. Expert witness fees andcosts associated with discovery could be enormous. The attorney representing the district may expect to be reimbursed for these costs on a monthly or other periodic basis. The foregoing criteria are not exhaustive. An evaluation of the merits of a school district's claim must also be made before any decision to stay in or opt out of the class action. Building construction dates must be coordinatedwith the then industry knowledge of the dangers of asbestos. Statute of limitations problems must be addressed. The applicability of Wisconsin's "market share liability" theory must be considered if manufacturers of the asbestos cannot be identified. Pending Federal Legislation Senate and House subcommittees have approved bills which would force the Environmental Protection Agency (EPA) to provide standards for inspection and abatement of friable asbestos in public and private schools. The House version was passed by the House just recently and now goes to the Senate where it could be acted upon as early as September of this year. Perhaps, as a pre-emptive move, EPA has informally issued advance notice of proposed rulemaking on the same subject matter targeted for publication in September. Under the bill approved by the House, school districts would be required to adopt an asbestos management plan for the -3-

4 abatement, by removal or encapsulation, of all friable asbestos. The management plan must also provide for the identification and on-going inspection of all asbestos containing material not required to be abated. Should the bill become law, school districts will have months to develop their plans. Since the proposed legislation will also require the states to set up a program for certifying inspectors, labs and contractors involved in the abatement process, no deadline is proposed for implementation of the management plans. An interesting feature of the House version of the new asbestos legislation is the abolition of the doctrine of joint and several liability. While school districts will remain severally liable for asbestosis claims, they will be relieved of the potential responsibility of paying the damages attributable to the fault or neglect of the contractors who undertake abatement projects. Both the Senate and House bills raise the funding limits for abatement programs to 5125 million annually. %~hether the funding limits will survive the legislative process, and whether Congress will make any appropriations if they do survive, remain thorny issues. Toxic Substances Control Act Meanwhile, under the school asbestos program of the Toxic Substances Control Act, the EPA continues its vigilence in inspecting school buildings for compliance. Although the present EPA regulations do not require abatement of friable asbestos containing materials, all school districts were required to inspect buildings for friable materials, to have those materials sampled and analyzed, to maintain certain records of inspection results, and to post notices for employees and parent-teacher associations. A violation of these rules could result in a penalty assessment of up to 525,000 for each day such violation continues. If an EPA inspector uncovers a violation a formal complaint is prepared by the director of the EPA's regional office in Chicago and served upon the offending school district. The district must file an answer and request for hearing within 20 days after service of the complaint or a default order will be issuing imposing the penalties proposed in the complaint. Whether or not a hearing is requested, an informal conference may be requested for the purpose of discussing the facts of the case and arriving at a settlement. If the EPA's claim is -4-

5 contested a hearing will be held by an EPA regional hearing clerk. In meeting the EPA's mandated inspections, school districts have relied upon the building surveys conducted by the Safety & Buildings Division of the Department of Industry, Labor and Human Relations. Recent experience suggests that even where the department found school buildings to be free of friable asbestos, these findings may not insulate the district from a proposed EPA penalty assessment. In one case, a district's buildings were inspected this year by an EPA environmental specialist who found friable pipe insulation or friable ceiling material in four of the schools. Even though the schools were inspected in 1982 by DILHR and found to be free of friable materials, the EPA issued a complaint charging the district with failure "to properly inspect to locate friable material by June 28, 1983." Civil penalties of 59, are proposed. Conclusion The decision to stay in or opt out of the nationwide class action should be considered now. For some school districts there will not be adequate time to study all of the relevant factors once the notification to the class is given Since asbestos is a documented health hazard, legislation requiring eventual abatement is probable. Federal funding, if any, may not be sufficient to defray all of the costs associated with abatement programs. Financial planning by school districts may help ease the trauma of implementing a management plan. Finally, to reduce the threat of EPA sanctions, districts should consider the warning contained in DILHR's building survey reports: "Such areas [pipe wrapping, boiler lagging, etc.], if damaged or allowed to deteriorate, could present a potential hazard, and should be routinely inspected and maintained in good condition." -5-

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