UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE x : In re : : Chapter 11 Case No. ARMSTRONG WORLD INDUSTRIES, : INC., et al., : 00-4471 (JKF) : Debtors. : (Jointly Administered) : x EXPERT REPORT OF LESTER BRICKMAN 1. I am a professor of law at the Benjamin N. Cardozo School of Law and have been qualified by a number of courts as an expert on the history of asbestos litigation, asbestos claim settlement practices, asbestos bankruptcy trusts and the effects of changes in trust distribution procedures ( TDPs ) on asbestos claiming activity. I have researched, written extensively and taught courses and seminars on legal ethics and the legal profession for 40 years, including a seminar on the ethics of legal fees and the impact of contingency fee financing of tort litigation on the tort system. 2. I have been retained by counsel for the Unsecured Creditors Committee to prepare an expert report and provide expert testimony in connection with the Armstrong World Industries, Inc. et al. ( Armstrong ) Chapter 11 proceedings. For my time in preparing this report, I am being paid my current customary fee of $825 an hour. I attach, as Appendix A, a list of materials that I have considered for purposes of preparing this report. 3. For the past fifteen years, I have studied the rise of asbestos claims generated by mass screenings (the primary method of recruitment of asbestos claimants). I have also 1
studied the processes by which medical evidence has been created in support of the hundreds of thousands of nonmalignant claims generated by such screenings, and as well, the judicial treatment of these claims. 4. My studies have led me to the conclusion that, from a systemic perspective, asbestos litigation is undoubtedly distinctive. In particular, state court asbestos litigation has distinct characteristics because of the volume of claims improperly generated by plaintiff law firms at relatively low cost per claim against scores of different defendants generally named by these claimants and because of the judicial responses to mass filings of claims. In studying the manner in which asbestos litigation has been handled by state courts, I generally do not focus on the merits of specific judicial decisions in individual cases or on the specific facts of individual claims. Rather, I discuss cases to the extent they highlight or portend broader trends in asbestos litigation that are the subject of my study. I describe my findings and the bases for them, in detail below. 5. My study of asbestos litigation has led me to identify an entrepreneurial asbestos litigation model that began to emerge in the mid to late 1980s. The elements of this model include: (a) the recruitment of hundreds of thousands of litigants who are first X-rayed by screening enterprises hired by plaintiffs law firms; (b) the use of a comparative handful of B Readers 1 and doctors selected by these law firms who read the X-rays in contravention of published guidelines and established protocols, 1 A B Reader is a doctor, usually a radiologist or a pulmonologist, who has been certified by the Public Health Service s National Institute for Occupational Safety and Health ( NIOSH ) as having competence in reading chest radiographs (X-rays) for lung changes that might be consistent with a lung condition (pneumoconiosis) caused by the inhalation of dusts and grading them on the International Labour Office ( ILO ) classification system. See infra note 2. Currently there are 387 B Readers though the number has been as high in recent years as 627 in 1998. See 2
reliably grade the X-rays as 1/0 on the ILO scale 2 and consistent with asbestosis, and then diagnose the hundreds of thousands of claimants so recruited with asbestosis despite considerable evidence that there is no valid medical basis for such X-ray readings and diagnoses; (c) the administration of pulmonary function tests ( PFTs ), 3 usually by screening enterprises, to generate tens of thousands of findings of lung impairment which qualify the litigant for higher settlement values, but which tests frequently fail to comply with American Thoracic Society standards and, for that reason, have been shown by several studies to be invalid; (d) the use of witness preparation techniques to implant memories with regard to product identification as a means of constantly renewing the supply of solvent defendants to replace and supplement those that have entered bankruptcy; infra note 5. The NIOSH B Reader program was established to reduce the level of variability among X-ray readers by objectively documenting proficiency in evaluating the characteristics and patterns of images on chest X-rays for occupationally related lung disease using the ILO classification system. 2 Because of the need for a valid, reproducible categorization system for chest radiographs, in 1950, the ILO developed a standardized classification system to facilitate international comparisons of data on pneumoconiosis. On the ILO scale, chest X-rays are classified according to the number of abnormalities (termed opacities ) in a given area of the chest film. A zero corresponds to no abnormalities, one to slight, two to moderate, and three to severe opacities. While the ILO has devised a grading scale designed to reduce the amount of variability in such X- ray readings, the process remains to some degree subjective. For this reason, B Readers give two classifications: the category that they think most likely and the next most likely. The result is a twelve point scale, with results ranging from 0/0 (normal X-ray appearance), to 3/3 (severe abnormalities). See In re Joint East. & S. Dists Asbestos Litigation, 237 F.Supp.2d 297, 308 (E.D.N.Y. 2002). The vast majority of X-rays generated by asbestos screenings are read as 1/0 which means the X-ray on first impression is abnormal ( 1 ) but may be normal ( 0 ). A reading of 1/1 is stronger than a 1/0 and means that the Reader found clear evidence of irregularities. For purpose of identifying and locating opacities, the ILO form divides the lungs into six zones, upper, middle and lower, left and right. For a diagnosis of asbestosis, the opacities should be found bilaterally in the lower zones. Nonetheless, a B Reader may assign a 1/0 grade even if he finds irregular opacities in only one of the six zones. 3 Pulmonary function tests are used to measure the severity of pulmonary dysfunction and whether the condition is obstructive (a condition caused by cigarette smoking) or restrictive (a condition caused by substantial exposure to a variety of dusts, including asbestos). If the battery of lung function tests indicates that the subject falls more than 20% short of what is projected as normal for one of that age, race, height and sex, then the subject is regarded as impaired -- a condition which materially increases the value of nonmalignant claims. Evidence described in section II(C)(9) of this report indicates that tens of thousands of PFTs have been misadministered in order to generate false findings of impairment. 3
(e) the mass filings of these claims in a small number of jurisdictions in order to (1) overwhelm state court dockets, causing courts to adopt procedural strategies which have perversely served to reward mass recruitment efforts, and (2) overwhelm defendants by imposing upon them the enormous litigation costs required to prove the absence of disease and the lack of exposure to their products; and (f) the resultant adoption of settlement strategies by defendants that are less a function of the merits of claims and more a function of the massing of claims. 6. My qualifications include publication of seven articles on asbestos litigation which are listed and described in Appendix B to this report, including one being published in summer 2006. In an article published in July 2005, I studied the ethical conflicts generated in the course of asbestos bankruptcy proceedings, the creation of asbestos bankruptcy trusts and the adoption of trust distribution procedures drafted mostly by plaintiffs lawyers. My analysis of the conflicts of interest generated by one plaintiffs firm which has played a unique role in prepackaged asbestos bankruptcies was effectively endorsed by the Third Circuit Court of Appeals when it shortly thereafter disqualified that firm and denominated certain of the self-interested practices of the lawyers involved as perversions of the bankruptcy process. See Lester Brickman, Ethical Issues in Asbestos Litigation, 33 HOFSTRA L. REV. 833, at 875 (2005) ( the [self-interested] practices that [lawyers] have developed [with regard to pre-packaged asbestos bankruptcies] reveal serious distortions and perversions of the bankruptcy process. ) (emphasis added); In re Congoleum Corp. et al., 426 F.3d 675, at 693 (2005) ( For a court to approve a prepackaged [asbestos bankruptcy] plan whose preparation was tainted with [lawyers ] overreaching,... would be a perversion of the bankruptcy process. ) (emphasis added). 4
7. My relevant experience includes: testimony on three occasions before congressional committees on asbestos litigation and asbestos bankruptcy issues; publication of four widely cited articles on the subject, as well as a fifth article published in July 2005, a sixth in October 2005, and a seventh in mid 2006; organizing a colloquy for the Administrative Conference of the United States, an agency in the executive branch of the federal government, on an administrative alternative to asbestos litigation; participating in a Presidential event in which my role was to explain abuses that have permeated asbestos litigation; having been qualified by Federal Judges on two prior occasions as an expert on the history of asbestos litigation and the effect of TDPs on claims estimation; and having supplied written expert testimony in a third asbestos bankruptcy proceeding which was not challenged. A fuller statement of my qualifications is set forth in Appendix B. 5
TABLE OF CONTENTS I. Scope of My Report... 8 II. An Overview of Asbestos Litigation... 14 A. The Onset of Asbestos Litigation... 14 B. The Aftermath of the Johns-Manville Bankruptcy... 15 C. The Rise of the Entrepreneurial Model... 16 1. Mass Asbestos Screenings... 17 2. The Comparative Handful of B Readers Consistently Hired by Plaintiffs Lawyers... 20 3. Medical Studies of the Incidence of Mild Asbestosis Compared to X-Ray Interpretation by Lawyer-Selected B Readers... 28 4. The Percent of Screened Litigants Found Positive for Mild Asbestosis... 33 6. Inter-Reader Variability and the Gitlin Study... 35 7. B Readers Sea Change from Pleural Plaques to Mild Asbestosis... 36 8. The Silica MDL: The Entrepreneurial System Exposed... 39 a. The Silicosis Story... 41 (1). Mass Filings... 43 (2). Taking the Occupational History... 44 9. Administration of Pulmonary Function Tests by Screening Enterprises... 46 10. Witness Coaching... 51 11. Entrepreneurially Driven Mass Filings Against Massive Numbers of Defendants Using Fungible Product ID Testimony and Work Histories... 54 12. An Analysis of the Financial Incentives that Underpin the Entrepreneurial Model... 58 D. The Judicial Response To Mass Claims: An Element of the Entrepreneurial Model... 60 E. The Role of Punitive Damages in Furthering the Entrepreneurial Model... 67 F. The Rational but Futile Resort to Inventory and Matrix Settlements... 70 G. The Role of Asbestos Bankruptcy Trusts in Furthering the Entrepreneurial Model... 74 6
1. The Creation of the Manville Trust... 75 2. The Effect of the Failure of The Manville Trust to Implement an Audit Program... 77 III. The Applicability of the Entrepreneurial Model to Armstrong... 80 A. The Basis for Armstrong s Exposure to Tort Liability... 80 B. Entrepreneurial Claiming Against Armstrong... 82 C. The Effect of Armstrong s Membership in the CCR... 83 IV. Projections of Future Asbestos Claims: The Past Is No Longer Prologue... 84 A. Introduction... 84 B. The Dramatic Reduction in Claims Against the Manville Trust as Well as Other Trusts and Defendants in the Tort System... 87 C. The Effects of the Silica MDL Waiting for the Other Shoe to Drop... 93 1. The Federal Grand Jury Investigation... 93 2. The House Investigation... 94 3. The Effects of the Silica MDL on Judicial Decisionmaking... 94 D. Innovative Judicial Strategies: The Loss of Innocence... 95 1. Substantive Law Changes... 96 2. Procedural Rule Changes... 97 a. Forum Non Conveniens Rulings... 98 b. Inactive (Deferred) Dockets... 99 E. State Tort Reform Legislation... 101 V. Conclusion... 108 7
I. Scope of My Report 8. This report begins with an overview of asbestos litigation based on my scholarly research into the unique historical circumstances of asbestos litigation in the state court system between 1970 and the present. In that overview, I focus on systemic aspects of asbestos litigation, from the way plaintiffs lawyers recruit claimants and generate supporting medical and product exposure evidence, to judicial methods of aggregating claims, and most recently, to judicial and legislative initiatives to correct systemic flaws. 9. My report first discusses how, in the aftermath of the Johns-Manville bankruptcy in 1982, asbestos litigation underwent a radical shift, giving rise to an entrepreneurial model for nonmalignant asbestos claiming. This model accounts for substantially all of the hundreds of thousands of nonmalignant asbestos claims filed in the past fifteen years which comprise approximately 90% of all asbestos claims filed in that period. 10. The core of the entrepreneurial model I identify is the mass screening by approximately 15 screening enterprises which have been paid tens of millions of dollars by law firms to recruit clients for those firms. I describe the use of a comparative handful of B Readers and diagnosing doctors who produce most of the medical evidence used to support the nonmalignant claims generated by screenings, the improper reading of these X-rays in violation of ILO Guidelines, and the extensive peer-reviewed medical literature and judicial findings to the effect that these X-ray readings, diagnoses, as well as pulmonary function tests administered by the screening enterprises, are at least unreliable if not fraudulent. The same exact model is being applied to the generation of silicosis claims, involving many of the same plaintiffs law firms, B Readers and screening companies. U.S. District Court Judge Janis Jack, who presides over the silica MDL proceeding, In re Silica Products Liability Litigation, 398 F.Supp.2d 563 (S.D. Tex., 8
2005) (hereinafter Silica Prods. Liab. Litig.). Judge Jack has described this claim generation process as a scheme [by] lawyers, doctors and screening companies... to manufacture... [diagnoses] for money, 398 F.Supp.2d at 635 -- the equivalent of a judicial finding of fraud. Epitomizing the lack of good faith that characterizes the medical reports of this comparative handful of B Readers and diagnosing doctors, Judge Jack observed that Dr. Ray Harron, who has provided medical reports for over 88,000 asbestos claimants, [found] evidence of the disease he was currently being paid to find. 398 F.Supp.2d at 638. I also describe below the economic incentives which lead to the generation of this unsupportable medical evidence as well as other practices (such as improper witness coaching) which have cast substantial doubt on the validity and veracity of nonmalignant asbestos claims. 11. I also discuss the silica MDL proceeding referred to in the above paragraph, and how the extensive discovery undertaken in that proceeding and Judge Jack s findings, not only corroborate the existence of the entrepreneurial model that I advance for nonmalignant asbestos litigation but also support the conclusion that the vast majority of the B readings and diagnoses rendered by the same comparative handful of doctors in asbestos litigation are, at the very least, unreliable. Indeed, taking note of peer reviewed literature to the effect that the X-ray readings and resultant diagnoses of asbestosis are not medically sound, Judge Jack found that the evidence of the unreliability of the B-reads performed for this [silica] MDL is matched by evidence of the unreliability of B-reads in asbestos litigation. 398 F.Supp.2d at 629. 12. Next, I discuss the mass filings of these claims in selected jurisdictions for the purposes of overwhelming both the judicial system and defendants and how the judicial response to mass claims filings inadvertently furthered the purposes of the entrepreneurial model and pressured defendants to settle claims despite the lack of valid evidence of injury, impairment and sufficient 9
exposure to a specific defendant s products to cause the alleged injury. In this regard, I note that U.S. District Court Judge John P. Fullam acknowledged the relevance of the factors I identify in his estimation decision in the Owens Corning bankruptcy, a proceeding in which I submitted a report and testified on behalf of certain prepetition bank lenders. Owens Corning, et al. v. Credit Suisse First Boston, et al., Memorandum And Order, ( Litigation History ), March 31, 2005, Bankr. D. Del. No. 04-00905. 13. I then discuss how multiple punitive damages awards furthered entrepreneurial claiming and added to the pressures on defendants to adopt mass settlement strategies irrespective of the merits of the masses of asbestos claims. I also discuss how the availability of punitive damages increased settlement values. 14. I next present an overview of the development and operation of asbestos bankruptcy trusts established to resolve claims by those alleging that they were exposed to (and harmed by) the product(s) of a particular company and their role in furthering the objectives of the entrepreneurial model. I review how the Manville Personal Injury Settlement Trust (the Manville Trust or the Trust ) was created, the consequences of adopting TDPs that failed to distinguish between claims that presented valid evidence of actual injury and exposure to Manville products and those that did not, the effect of that Trust s failure to be able to implement an audit program and how that failure had a substantial impact on asbestos claiming rates, including claims filed against Armstrong, and was one of a number of factors that led to Armstrong s filing under Chapter 11. My research shows that where even modest medical standards are imposed (such as the requirement that a claimant provide an X-ray to establish the validity of his claim), far fewer claims are filed. I also discuss conclusions that can be drawn from the experience of the Manville Trust and other asbestos bankruptcy trusts which largely followed the Manville Trust model. 10
15. I then discuss the applicability of the entrepreneurial model to Armstrong s claim experience in the tort system. I note that the claims filed against Armstrong follow the same patterns and are consistent with the results of the entrepreneurial model. For example, the percent of Armstrong s pending claims that are nonmalignant, 91%, closely aligns with the percentage of nonmalignant claims that are the product of the entrepreneurial model. See STEPHEN CARROLL ET AL., RAND INSTITUTE FOR CIVIL JUSTICE, ASBESTOS LITIGATION (2005) at xxv, 75-76. I further note that 57.6% of Armstrong s pending claims were filed in just five states, Mississippi, Texas, West Virginia, Ohio and Florida, which is consistent with the high percentages of entrepreneurially generated claims filed in these magnet jurisdictions. (As discussed infra at section IV(E), four of these five states have recently enacted substantial tort reforms that will largely eliminate the filing of entrepreneurially generated claims in those states). 16. I also note that approximately 85% of Armstrong s pending claims match up with claims filed with the Manville Trust. The significance of this high matching rate is that studies by the Manville Trust of the characteristics of claims in their database can be considered as also applying to Armstrong s pending claims. These characteristics include the identities of the comparative handful of B Readers and diagnosing doctors who provided medical reports for a substantial percentage of all of the entrepreneurially generated claims filed with the Trust. In fact, a number of the doctors on the Manville Trust lists are the same doctors whom U.S. District Court Judge Janis Jack in the silica MDL determined were part of the scheme... to manufacture [diagnoses] for money. 398 F.Supp.2d at 635. I conclude that, based on the evidence reviewed, the entrepreneurial model characterizes Armstrong s claims experience in the tort system. 17. I also discuss why Armstrong s membership in the Center for Claims Resolution ( CCR ) undoubtedly increased its exposure to entrepreneurially generated claims over what it 11
would have been otherwise and why plaintiffs lawyers had substantial incentives to include Armstrong as a defendant in filings with the CCR even though they had generated no information that tied the claim to any of Armstrong s products or services. 18. While the focus of my report is on nonmalignant claims, I note that some of the elements of that model apply to malignant claims as well. In particular, my discussion of how testimony identifying manufacturers and installers of products appears to be more a function of their state of solvency than actual exposure of a claimant to specific products or activities, applies as well to malignant claims. 19. After discussion of the entrepreneurial model and its applicability to Armstrong s claim experience, I examine recent judicial rulings and legislative enactments which are accounting for substantial decreases in the numbers of nonmalignant claim filings. These changes -- clear signs that the tort system is reacting to curb some of the more abusive aspects of the entrepreneurial model -- include: substantial changes in the special asbestos law that certain jurisdictions devised to allow asbestos plaintiffs claims to reach juries despite the claimant s inability to prove causation by standards that are usually applied to tort claims; procedural rulings by courts eliminating abusive joinder practices and establishing inactive or deferred dockets; and adoption of state legislation aimed squarely at eliminating entrepreneurial claim generation, establishing medical criteria which must be met before asbestos claims can proceed and setting other requirements specifically directed at curbing asbestos litigation abuses. I also discuss recent structural changes in the medical and impairment criteria applied by asbestos bankruptcy trusts, including: raising the standard of proof for medical injury and impairment that must be satisfied in order to assert claims against the trusts; and restricting payment of significant compensation to those who are functionally impaired 12
due to actual asbestos related illnesses, and who can provide valid evidence of significant exposure to specific products and activities. 20. As a consequence of these changes, the number of nonmalignant claim filings against defendants in the tort system and bankruptcy trusts began to decline substantially in 2004 and continued to decline in 2005 from the historically high levels in the 2000-2003 period. I present evidence that this precipitous decline is not a short term phenomenon and quote a leading plaintiff lawyer s concurrence. 21. Based upon this evidence, I state my opinion that, if Armstrong were still in the tort system, it would be experiencing a decline in nonmalignant claim filings of a similar magnitude. I further state my opinion that projections of future claims and claim values which are based on the assumption of a continuation of historical nonmalignant claims filing and settlement patterns, and which do not take these judicial, legislative and trust distribution procedure changes into account, are likely to substantially overstate the extent of a company s future liability for such claims. 22. Finally, I raise the question whether claims being asserted against Armstrong which are based on such unrealiable if not specious medical evidence as that identified in this report and by Judges Fullam and Jack, constitute a right to payment under any federal or state law, as mandated by bankruptcy law. 11 USC 101(5)(A) (2005). For the same reason, I note that prepetition settlements of asbestos related claims entered into by Armstrong may not be a valid basis for projecting the number and value of future claims in a bankruptcy proceeding if they, too, were the product of a scheme to manufacture... [diagnoses] for money. 398 F.Supp.2d at 635. 13
II. An Overview of Asbestos Litigation A. The Onset of Asbestos Litigation 23. The modern era of asbestos litigation began in 1973 when the United States Court of Appeals for the Fifth Circuit allowed workers injured by exposure to asbestos to hold manufacturers of those products and others strictly liable for failure to warn that their products were unreasonably dangerous. Borel v. Fibreboard Prod. Corp., 493 F.2d 1076 (5 th Cir. 1973), cert. denied, 419 U.S. 869 (1974). That holding transformed what had been workers compensation claims against employers into products liability claims against manufacturers, distributors, installers and sellers of asbestos related products and services. 24. Most of the ensuing litigation targeted the Johns-Manville Corporation ( Johns- Manville ), a Fortune 500 company, which was the principal miner of asbestos and fabricator of materials containing asbestos. In 1982, after some 16,000 suits were filed, the company declared bankruptcy. After a protracted bankruptcy proceeding, the company emerged from bankruptcy in 1988 under a plan in which almost $2 billion of cash and other assets, including 80% of the company s stock, was transferred to the Manville Trust and all asbestos claims were to be channeled to the Trust. This Trust (and the UNR Trust) were the first in a succession of approximately seventeen such trusts thus far created. More than 74 companies have declared bankruptcy to date as a result of asbestos litigation. 25. Lawyers with the greatest number of claims against Johns-Manville generated substantial rewards for themselves by establishing claiming procedures against the Manville Trust that elevated ease of filing over accuracy in claiming. See infra 154. Claimants alleging injury by asbestos products manufactured by Johns-Manville would need to submit only minimal proof to the Trust of exposure to a Johns-Manville product and of the existence of an asbestos-related medical 14
condition in order to be paid a fixed sum in accordance with the classification of the claimants medical conditions. The absence of effective TDPs, limiting claims to those who could demonstrate actual asbestos related disease and sufficient exposure to Johns-Manville products to have been a substantial factor in the development of the disease, discussed infra at section II(G), has profoundly affected both the Manville Trust and asbestos litigation generally. (Later in this report, I discuss the high percentage of claims which have been paid out by the Manville Trust which were based on the same quality of medical evidence that Judge Jack found unreliable if not fraudulently produced. I also discuss in section II(G)(2), recent modifications to the Manville Trust designed to limit payments to only those individuals truly made sick by exposure to Johns-Manville products.) B. The Aftermath of the Johns-Manville Bankruptcy 26. The Manville bankruptcy halted the flow of funds from the largest asbestos defendant for over six years. In response, plaintiffs lawyers who had invested in asbestos litigation retooled their litigation strategies to focus on other producers and distributors of asbestos containing products, most of which had purchased raw asbestos mined by Johns-Manville. 27. The changes in litigation strategies starting in the mid-1980s because of the Manville bankruptcy, combined with the enormous amounts of assets that were becoming available because of successor liability and insurance coverage decisions, see, e.g., Keene Corp. v. Ins. Co. of N. Am., 667 F. 2d 1034 (D.C. Cir. 1981), cert. denied, 456 U.S. 951 (1982), radically refocused asbestos litigation and substantially changed the way courts would deal with asbestos litigation. Until that point, most asbestos litigation involved seriously injured claimants where exposure and causation could readily be established: those stricken with mesothelioma, a deadly cancer, and serious cases of asbestosis, which could also be deadly or, at least, debilitating. In addition, because concentrated 15
exposure to asbestos markedly increased smokers risks of contracting lung cancer, several thousand lung cancer claims had been asserted, mostly by those who had been heavy smokers. 28. Beginning in the mid 1980s, quickening in the early 1990s, and continuing through 2003, however, the focus of asbestos litigation underwent a radical shift. Increasingly, claims alleged nonmalignant conditions and did not present any valid evidence of lung impairment on the basis of pulmonary function tests administered in accordance with American Thoracic Society standards. C. The Rise of the Entrepreneurial Model 29. The enormous financial incentives attendant to these developments transformed the basis for asbestos litigation from a traditional model of an injured worker seeking out a lawyer to sue for compensation for an injury to an entrepreneurial model under which screening enterprises working for lawyers systematically recruited hundreds of thousands of claimants who were mostly asymptomatic and had no injury recognized by medical science. One plaintiffs attorney, describing the transformation into an entrepreneurial model to generate claims on a mass basis, notes that mass screenings for asbestos litigation are different from the model of traditional toxic tort litigation [,which] follows a medical model: a plaintiff sees a doctor to treat his illness of injury and then is referred to, or otherwise finds, a lawyer. [Asbestos] screening substitutes an entrepreneurial model: the lawyer recruits the plaintiff -- who usually feels fine, has no symptoms or impairment, and is unaware of any injury -- and sends him to a screening company for an X-ray. Hearings on Asbestos Litigation before the Senate Committee on the Judiciary: Prepared Statement of Steven Kazan, 107th Cong., 19-20 (Sept. 25, 2002) (the Kazan Statement ). 30. Mass recruitment and mass filings of claims have the effect of overwhelming both the state court systems and defendants and distorting the normal workings of the adversary system. 16
By inflating the number of claimants into the hundreds of thousands, plaintiffs lawyers have been able to induce courts to aggregate claims and coerce defendants into adopting mass settlement strategies because of the enormous costs of defending against such an elephantine mass of claims. This is confirmed by Judge Jack in the context of silica claims. Silica Prods. Liab. Litig., 398 F.Supp.2d at 676. This subject is discussed in greater detail at infra sections II(C)(11) and II(D). 31. There is considerable medical evidence (which is reviewed in section II(C)(3)) to the effect that (a) many if not most of those so recruited would not have been found to have an asbestos-related disease if they had been examined by neutral medical experts rather than by the doctors selected by the screening enterprises and plaintiffs lawyers; and (b) that these doctors are not engaged in good faith medical practice but rather are motivated by the millions of dollars of fees available to those who consistently find an asbestos related disease. 1. Mass Asbestos Screenings 32. My research has established that the core of the entrepreneurial model is the attorney-sponsored asbestos screening. Individuals who generally lack any health care knowledge or experience have set up approximately fifteen enterprises to screen hundreds of thousands of workers who could then claim exposure to asbestos in their workplaces. Many of the screening entities administer X-rays and several also administer PFTs for the sole purpose of generating evidence for litigation purposes. Mobile X-ray vans are brought to motels, strip malls and other locales to take X-rays at an assembly line rate of one every five to ten minutes and to administer the PFTs. When X-rays are done in mobile vans, many are read immediately on site by B Readers selected by plaintiffs lawyers while others are sent to the sponsoring lawyer to be sent to the chosen B Reader(s). 17
33. An integral part of the mass screening process is the use of mass mailings and advertisements in the local media. These mailings and advertisements tout free screenings that can provide individuals with a little cash to add to their retirement funds, or to buy the fishing boat. As one screened worker noted, It s better than the lottery. If they find something, I get a few thousand dollars I didn t have. If they don t find anything, I ve just lost an afternoon. Andrew Schneider, Asbestos Lawsuits Anger Critics, ST. LOUIS POST-DISPATCH, Feb. 9, 2003. With such promotional come-ons as Find out if YOU have MILLION DOLLAR LUNGS, see On the Theory Class s Theories of Asbestos Litigation: The Disconnect Between Scholarship and Reality, 31 PEPP. L. REV. 33, at 77 n.124 (2003-2004) ( Theories of Asbestos Litigation ), millions of mailings announcing the screenings have been sent out to employees and former employees promising free X-rays and the opportunity for potential claimants to cash in irrespective of the absence of any symptoms. 34. The first step in the asbestos screening process is for the litigant 4 to sign a retainer agreement with the law firm that hired the screening enterprise. A work and health history is then taken, usually by individuals who have little or no training, even though that information is a critical component of the medical diagnoses of asbestosis. (A more detailed analysis of this element of entrepreneurial claim generation is set forth in infra section II(C)(8)(a)(2)). To assist in identifying the right products, potential litigants are often provided with picture books containing pictures of the packaging of various asbestos containing products that they can then identify as having been exposed to. 35. As might be expected in the market economy that is operative in the production of medical documentation for use in asbestos litigation, these screening enterprises generate millions 4 Litigant is the term used by those engaged in the screening business to refer to the persons being recruited. 18
of dollars in revenue and additional millions of dollars for the comparative handful of B Readers and diagnosing doctors regularly selected by plaintiffs lawyers. Just one screening company, N&M, has been paid more than $25 million for asbestos and silica screenings. See Eddie Curran, Local Men to Face Congress at Hearing, MOBILE REGISTER, March 7, 2006. So far, these enterprises have screened hundreds of thousands of industrial plant, shipyard and construction workers who could claim exposure to asbestos containing products at their job sites before 1972. 36. Most, if not virtually all of the nonmalignant asbestos claims that have been filed have been generated by these screenings. Moreover, a comparative handful of B Readers and diagnosing doctors account for a substantial portion of the B reads and diagnoses of nonmalignant claims that have been generated for litigation purposes. For example, more than 90% of the 91,000 new claims presented to the Manville Trust in 2001 were 1/0 asbestosis claims mostly generated by attorney-sponsored asbestos screenings and mostly read by the same comparative handful of B Readers. See THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2003, S. Comm. on the Judiciary, 108th Cong., Report on S. 1125 (2003) (hereinafter the FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2003 ) (citing Hearing on Asbestos Litigation, Before the Senate Comm. On the Judiciary, 107 th Cong. (2002) (statement of David Austern)); id. at 84 (citing Letter from Steven Kazan to the Honorable Jack B. Weinstein, which states that 90% of the [Manville] Trust s last 200,000 claims have come from attorney-sponsored X-ray screening programs ); see also Kazan Statement at 20. 37. There is a fundamental distinction between asbestos screenings and medical screenings. Medical screenings seek to detect early signs of disease for the purpose of instituting a medical regime or treatment. Asbestos screenings are not undertaken for any medical purpose but rather are done solely to generate asbestos claims. In fact, the comparative handful of B Readers 19
regularly selected by plaintiffs lawyers to read the X-rays as well as the doctors who perform the diagnoses provide no health services and do not communicate their findings to the litigants; indeed, they adamantly deny the existence of a doctor-patient relationship. Instead, as noted, films, CT scans, B readings and diagnoses are sent to the lawyers who sponsored the screenings. As acknowledged by the largest of the screening enterprises, Most Health Services, Inc., which performs no health services, the sole purpose for [law firms ] contractual relationship with Most... is anticipation of... collecting evidence for future asbestos litigation. Brief of Appellants at 19, In re Asbestos Prods. Liability Litig., Nos. 98-1166 and 98-1165 (3d. Cir. 2000) (emphasis added) (quoted in Memorandum In Support of Motion For Case Management Order Concerning Mass Litigation Screenings, In re Asbestos Prods. Liability Litig., (No. VI), Civil Action Nos. MDL 875 (E.D. Pa. 2001)). 2. The Comparative Handful of B Readers Consistently Hired by Plaintiffs Lawyers 38. Although there are approximately 400 NIOSH-certified B Readers, 5 only a comparative handful, about 5%, are consistently chosen by plaintiffs lawyers to read most of the hundreds of thousands of X-ray films generated by screenings. As indicated below, this small number of B Readers have accounted for a dramatically disproportionate number of nonmalignant asbestos personal injury claims. 39. The reliance on a comparative handful of B Readers is a defining characteristic of the entrepreneurial model. A study of a stratified sample of claims submitted to Owens Corning 5 As of December 15, 2005, NIOSH listed 387 B Readers on its website; on July 22, 2003, it listed 431; on April 25, 2002, it listed 535; and on February 20, 1998, NIOSH listed 627 B Readers. www.cdc.gov/niosh/topics/ chestradiography/breader-info.html. 20