Asbestos compensation in the United States

Chapter 5
Asbestos compensation in the United States

Asbestos compensation in the United States is highly controversial. Compensation is delivered to asbestos victims primarily by deployment of litigation. Thousands of claims have been filed year after year since courts established that asbestos victims had viable personal injury claims under product liability theories in the early 1970s.1 By 1999, the US Supreme Court called asbestos litigation “an elephantine mass [that] defies customary judicial administration and calls for national legislation.”

Initially, victims only obtained compensation in the form from workers’ compensation benefits or money paid out of confidential settlements with large asbestos manufacturers. In 1973 asbestos litigation took a turn when courts recognized the viability under product liability law of asbestos personal injury claims against asbestos manufacturers. This second wave of asbestos litigation targeted leading manufacturers of asbestos insulation materials, including industry titan Johns-Manville and ended when all major defendants had disappeared after filing for bankruptcy. The litigation however did not stop. New targets were found in firms that had manufactured, distributed, sold, or applied any products containing asbestos. As defendants crumbled under the pressure of the heave number of cases filed against them, asbestos victims found news litigation targets in firms that manufactured boilers, pumps, valves, automobiles that incorporated components that contained asbestos. Litigation also targeted owners of industrial facilities that had products containing asbestos in their manufacturing plants and employers whose workers brought asbestos into the home thus causing household exposure.

As the various waves of litigation were coming and going, legislative and other attempts to establish alternative compensation paths that would stop filings of traditional personal injury cases have been unsuccessfully tried for decades. Congress examined a number of bills barring asbestos claims and offering administrative compensation to asbestos victims. None of these bills became law. Although state workers’ compensation systems pay out asbestos victims (and many victims do claim these benefits), the bulk of compensation comes from personal injury cases that are either settled out of court or reach a verdict as well as payments made by the various bankruptcy trusts that have been set up by bankrupt asbestos defendants and are endowed with substantial reserves to allegedly compensate victims/creditors for the foreseeable future. In this chapter I discuss the use of asbestos in the United States, the emergence of asbestos compensation and its developments, with particular attention to the various waves of litigation and the controversy that they generated.

Asbestos use and disease epidemic in the United States

Asbestos was extensively mined in the United States. One of the chrysotile asbestos mines was located near Coalinga, California (now a US EPA Superfund reclamation area). The world’s largest vermiculite mine was located near the town of Libby, Montana. The mine opened in 1923, and was owned and operated by the W.R. Grace & Company from 1963 until it closed in 1990. Finally, the Great Valley of California hosted at least 26 asbestos mines or asbestos prospects.2 Asbestos was also easily imported from neighboring Canada.

The consumption of asbestos in the United States has been massive. With over 20 million tons, its cumulative use between 1920 and 1970 is the highest of the world: four times more than the United Kingdom, 10 times more than Italy, and 20 times more than Belgium.3 Interestingly for the purpose of comparative analysis, the historical use pattern of the United States differed from that of other countries.

The United States recorded the earliest and maximal peak use at 4.2 kg per capita/year in 1950, followed by progressive reduction over four decades and approaching 0.02 kg per capita/year in 2003, equating to a reduction rate of −1.9%/year.4

Asbestos use grew significantly in the 1940s due to the need to build ships and submarines to be deployed in World War II. This wave of asbestos consumption caused disease among Navy soldiers and shipbuilding workers. Cities with large ports were major asbestos consumption sites. The incidence of pleural mesothelioma among white males residing in Seattle, San Francisco-Oakland, and Hawaii was higher than other parts of the country. Asbestos use continued to grow in the aftermath of the war. Nishikawa and colleagues add that the “‘bubble’ in asbestos use occurred in the mid-twentieth century because of early manufacturing research, industrial demand, and ready supply from Canada.”5 During these years asbestos was installed in America’s homes, offices, post offices, and schools.

These are golden years for manufacturers of insulating products containing asbestos. The major player in this industry was Johns-Manville. The largest asbestos firm in the United States and one of the major asbestos companies at the global level, Johns-Manville was established in 1858 by entrepreneur Henry Ward Johns, who at that time was 21 years old. Henry Ward Johns, who was starting up a roofing business, began creating roofing products with asbestos that he had found in deposits in Staten Island, New York, The products become a success. In 1881 Scientific American profiled the products and by 1990s Henry Ward Johns had entered into an agreement with the Manville Covering Company, which distributed the products in the Midwest. In 1901, three years after Henry Ward Johns’s death in 1898, the two businesses were merged and Johns-Manville was born.6 Its major manufacturing plant was located in New Jersey in the town of Manville, which was formed by an act of the New Jersey Legislature in 1929 and named after the company that brought jobs to the community. Throughout the years, the firm expanded the range of its products by manufacturing asbestos textiles, roofing, and insulation materials.

After World War II, its profits grew significantly. The company stopped producing products containing asbestos only after the growing number of lawsuits forced the company to file for bankruptcy on August 26, 1982. It did so reluctantly since only two years before its CEO had told Forbes Magazine that “[t]he day asbestos isn’t good business for us, we’ll get out of it.”7 With all asbestos liabilities transferred to the Manville Personal Injury Settlement Trust, the firm emerged from bankruptcy in 1988. Its business, which was reoriented towards commercial and industrial fiberglass insulation and roofing systems during the bankruptcy, was acquired by Warren Buffet’s Berkshire Hathaway in 2001.

In the twentieth century, other firms manufactured asbestos in the United States: Raybestos-Manhattan (a leader in asbestos friction products and textiles), Owens-Illinois and its successor Owens-Corning Fiberglass (manufacturers of Kaylo, a pink insulation material made of asbestos and quartz mixed together), Unarco and its successor Pittsburg Corning (manufacturers of Unibestos, an insulating material that contained amosite fibers extracted in South Africa and supplied by Cape Asbestos), United States Gypsum (manufacturer of insulating materials), Southern Textile and its corporate successors Thermoid and H.K. Porter (manufacturers of asbestos-cement), Eagle Picher (manufacturer of asbestos-cement), and W.R. Grace & Company. This last company, also (in)famous for its role in the Woburn contamination case on which the 1996 nonfiction novel by Jonathan Harr A Civil Action is based,8 acquired an asbestos brake lining business in 1954 and the Libby vermiculite mines, the largest in the world, in 1964.9

The first wave of litigation

The first wave of asbestos litigation involved asbestos workers filing workers’ compensation claims and receiving money by the way of occasional settlements with asbestos manufacturers. Asbestos workers started getting sick in the late 1920s. This wave of asbestos disease, the first one, occurred in other industrialized nations (particularly in England) in which asbestos had been extensively used since the late nineteenth century. In 1929, the widow of a Johns-Manville’s employee and mother of six began legal proceedings in federal courts in New Jersey seeking damages for the asbestosis that killed her husband.10 This case, Pauline Lasin v. Johns-Manville Corporation, is the first personal injury case for an asbestos disease recorded in the United States. The case never went to trial though as Ms. Lasin abandoned the case.

The industry’s reaction to the emergence of asbestos victims’ claiming was twofold. First, companies put pressure on plaintiffs to abandon the litigation or, if pressure was ineffective, to settle the cases with confidential awards. In 1933, Johns-Manville settled cases involving 11 employees with asbestosis. Fearing the settlement could fuel more litigation, the company settled on the condition that their attorney would never “directly or indirectly participate in the bringing of new actions against the Corporation.”11 Johns-Manville was not the only target of litigation. In the 1940s, Unarco paid off the widow of a former employee who had died of mesothelioma. Raybestos-Manhattan, on the other hand, paid compensation to employees for disability from asbestosis since the 1930s, from carcinoma since the 1950s, and from mesothelioma since the 1960s. Overall, this strategy successfully contributed to asbestos companies’ efforts in limiting their liability exposure. John Fabian Witt noted that very few cases reached large monetary awards or settlements: “With rare exceptions, settlement and judgement values appear to have remained low or medium-sized.”12 Witt’s research reveals that the largest asbestos verdict of this wave of litigation was rendered in Jacque vs. Lock Insulator Corporation. The award amounted to USD 15,000. However the Second Circuit reversed it on appeal.13

Second, the engagement in a campaign of suppression of evidence of asbestos toxicity and of dissemination of questionable studies that disproved asbestos dangers. Along with Raybestos-Manhattan, a leader in asbestos friction products and textiles, Johns-Manville executives edited an article about the diseases of asbestos workers written by Anthony Lanza, a doctor at Metropolitan Life Insurance Company, and instructed the editor of the magazine Asbestos to publish nothing about asbestosis.14 Indeed, the most effective way to contrast the growing body of medical evidence was to gain control of the production of scientific knowledge itself. To this end, Johns-Manville along with other asbestos firms established the Trudeau Foundation’s Saranac Laboratory in Saranac, NY, for the purpose of studying the health effects of asbestos dust. Research at Saranac led to important discoveries. In 1942, its director Leroy Gardner discovered that white mice exposed to asbestos experienced excessive incidence (81.8 percent) of malignant tumors of the lungs.15 However, Gardner was not able to publish his findings right away. For years, the firms behind the Saranac Laboratory, which stopped funding research on the link between asbestos and lung cancer, withheld their consent to publication.16 The findings were published only in 1951 in redacted form that contained no reference to cancer. In the 1950s and 1960s other companies contributed to the cover up. These firms, which included Armstrong Cock, Fibreboard, Ruberoid and its successor GAF, and Philip Carey Manufacturing and its successor Celotex, become concerned with their asbestos liabilities as an increasing number of workers were becoming sick and filed workers’ compensation claims.

The most significant help to minimize exposure to asbestos liabilities came from state legislatures. Encouraged by asbestos companies’ lobbying efforts, most states expanded the exclusive remedy provisions of workers’ compensation statutes to include industrial diseases such as asbestosis and silicosis. Workers’ compensation put an end to the first wave of asbestos litigation. In fact victims were no longer able to bring a claim for damages under common law. For three decades the exclusive source of compensation would be workers’ compensation.

The second wave of litigation

Since the late 1930s, victims could only claim exclusively workers’ compensation benefit since state laws barred common law claims against the employer. However, towards the late 1960s, a second wave of asbestos cases hit the courts as a consequence of how the asbestos epidemic had developed and of changes in the legal environment of asbestos compensation. A new wave of asbestos disease and the publication of evidence that strengthened our understanding of asbestos toxicity changed the counters of the asbestos epidemic. In the 1960s asbestos, the consumption of which had reached its peak in the 1950s, was causing more deaths that ever before. Victims were increasingly counted among veterans who had been exposed to asbestos while serving the military in World War II. Furthermore, new medical studies reinforced the notion that asbestos was linked to various diseases. The publication of epidemiological studies in particular contributed to asbestos disease awareness among medical professionals and beyond. In New York, Selikoff and colleagues conducted research that changed our perception of asbestos.

Beginning in the early 1960s, with financial support from sources as diverse as the insulation workers’ union and (from 1968) the Johns-Manville Corporation, Selikoff and his colleagues produced a stream of publications indicating, among other things, that insulators who worked with asbestos material in the USA faced an “important risk” of contracting asbestosis, lung cancer or mesothelioma, and possibly also gastrointestinal cancer.17

Parallel to these changes in the asbestos epidemic, significant changes had also taken place in legal culture. The most important innovation was the gradual emergence of product liability in courts. Since Cardozo’s path-breaking opinion in MacPherson v. Buick Motor Co. in 1916,18 courts throughout the country had recognized innovative new paths to tort compensation that eroded contractual privity, the lack of express warranties, and the requirement to establish negligence and other obstacles that had traditionally barred recovery at common law. These changes were eventually captured in Section 402A of the second edition of the American law Institute’s Second Restatement of the Law of Torts:

One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.19

The revolutionary idea that liability followed a defective product rather than privity of duty of care offered creative opportunities to pursue compensation beyond the narrow confines of workers’ compensation. This opportunity was soon grabbed by attorneys engaged in representing the new wave of asbestos victims who pioneered a new litigation strategy—suing asbestos manufacturers as third party producers of a defective product. The first case that successfully established the viability of such claims is Borel v. Fibreboard Paper Products Corporation. Clarence Borel, who had worked for over thirty years as an insulator of steam pipes, boilers, and other devices in shipyards and oil refineries, was diagnosed with mesothelioma, asbestosis, and pneumonia at the age of 57. A father of six, Borel, when alive, received approximately USD 13,000 after settling his workers’ compensation claim. After receiving the settlement money and realizing that it was not sufficient to pay for his medical bills and provide for his family, Borel approached Ward Stephenson, a Texas trial lawyer who had recently settled a case on behalf of another pipe insulator and who agreed to represent Borel on a contingency fee basis. Stephenson filed a complaint in federal court for the Eastern District of Texas capitalizing on the recent adoption on part of Texas of section 402A. The case was brought in strict liability under the theory that Fibreboard had failed to warn Borel of asbestos toxicity. The jury returned a verdict in the amount of USD 79,436.24 in favor of Borel thus holding an asbestos manufacturer liable under product liability for the first time in American history. The defendant appealed the verdict and hired tort expert W. Page Keeton, who was the dean of the University of Texas School of Law and became one of the architects of Section 402A, to brief and argue the case. Keeton’s advocacy however did not change anything: on September 10, 1973, the Fifth Circuit upheld the verdict and kicked off the second wave of asbestos personal injury litigation.20

The Fifth Circuit’s opinion did not go unnoticed. The large number of victims becoming ill and approaching lawyers for legal advice as well as a litigation environment that was ripe of opportunities for plaintiff lawyers to start lucrative practices on behalf of injured consumers created a fertile context for law firms to develop asbestos practices. Law firms in Texas and elsewhere in the country followed the litigation template inaugurated by Stephenson and successfully extended Borel principles to many other jurisdictions. Many of these lawyers had already been involved with representing asbestos victims in front of workers’ compensation boards and administrative judges and expanded their practices to personal injury litigation. Other firms, already specializing in personal injury cases, received referrals from workers’ compensation attorneys.

During the first years of post-Borel litigation defendants were however able to raise defenses to liability. The strongest was the “state of the art” defense. Under this doctrine, defendants are not required to possess information that goes beyond state of the art knowledge. Asbestos firms raised the defense by claiming that they were unaware of studies demonstrating asbestos toxicity before Selikoff’s publication. The defense did not stand the test of time. In the course of discovery in a case against Raybestos-Manhattan, correspondence between the president of Raybestos and asbestos executives at other firms showed that companies had engaged in a cover up of asbestos toxicity since the 1930s. These papers, collectively known as the “Sumner Simpson Papers,” put an end to the state of the art defense and allowed asbestos litigation to reach its maturity.

The Borel opinion established the principle that asbestos was a defective product and that firms in the business of marketing it were strictly liable for harm caused by exposure to it. Its holding, formally sanctioning the viability of personal injury claims against asbestos manufacturer, constituted the foundation of asbestos personal injury litigation for the years to come, which reached its maturity in the 1980s.

Judicial opinions alone do not mobilize claims. Unions and medical professionals were instrumental in the growth and routinization of asbestos litigation. As Durkin demonstrates in his thorough research on asbestos litigation in the early 1990s, in the path to naming, medical research—epidemiologists in particular—used their resources in a particularly powerful and effective manner. Researchers activated their “weak ties lining them to the victims by way of asbestos worker unions. They contacted affected unions directly, persuading union officials to participate in the research.”21 Unions effectively contributed by the growth of litigation by using their networks to distribute and favor sharing of information between doctors, lawyers, and victims. Unions’ endorsement made naming information “more trustworthy.”22 In contrast to asbestos litigation in Europe, unions rarely became involved with claiming. They did fund litigation—US lawyers pushed cases ahead by relying on contingency fee agreements and self-funding—and thus they played no role in claiming gatekeeping, litigation strategies, or settlement offers.

Victim support groups played a less prominent role in the United States. In the first years of asbestos litigation, the bulk of the victims secured legal representation by way of networking among lawyers, unions, and medical professionals. As the litigation progressed, plaintiff law firms established asbestos law practices, which directly attracted clients. Victims who were “desperate,” as Durkin refers to them, for the most part widows of victims who fell outside the unions/lawyers/doctors complex, created support groups to help other victims in their attempts to receive compensation.23

The result was a wave of personal injury cases—the second wave of litigation—targeting leading manufacturers of asbestos insulation materials, including industry titan Johns-Manville. In the 1970s, about 950 cases were filed in federal courts alone.24 In the mid-1980s, the authors of the first RAND study on asbestos litigation indicated that approximately 30,000 asbestos personal injury suits had been commenced and that these cases made up between 10 to 20 percent of the docket of civil cases in the United States. USD 1 billion had been spent for compensation and litigation expenses.25 By 1991, the cases numbered 115,000.26 During the 1980s asbestos litigation underwent a drastic transformation from pioneering litigation to a mature yet contested mass tort.

The maturity of asbestos litigation

Maturity of mass torts is a concept developed by Professor Francis McGovern in the 1980s to frame the stage in which a litigation involving consistent personal injury claims becomes routinized.27 McGovern is a proponent of maturity as a prerequisite of courts’ use of collective procedures to resolve the mass tort. Whether or not maturity should be used as proposed by McGovern, the concept is helpful in analyzing asbestos litigation. In fact McGovern uses asbestos litigation as an example of a mass tort litigation that reached maturity. Peter Schuck summarizes the point as follows:

In its early years, asbestos litigation was so fragmented, chaotic, costly, and unpredictable that it resembled an unruly, erratic adolescent. During that period, relatively few asbestos cases went to trial, but those that did, coupled with the numerous settlements, created patterns that the lawyers discerned and used. Asbestos litigation crossed a kind of developmental threshold in the early 1990s; thereafter cases could be resolved more readily in a more systematic, inexpensive, predictable—and therefore equitable-fashion.28

What factors contributed to the maturity of asbestos litigation and what were its traits as a mature mass tort? Law firms’ specialization and coordination as well as judicial management of the caseload contributed to the high volume of lawsuits.

Lawyers found effective ways to specialize, expand their client base, litigate cases in victim-friendly jurisdictions,29 and maximize revenues by settling cases without overburdening firms’ infrastructure. Forum shopping practices allowed a limited number of law firms to dominate asbestos litigation and concentrate claims to victim-friendly jurisdictions. Three or four firms handled most cases in each litigation-friendly jurisdiction. Over the years, plaintiff firms with most clients have been particularly creative in finding new, more aggressive strategies in stretching the boundaries of asbestos litigation to include within the scope of compensation individuals who had been exposed to asbestos but were not sick and to force companies with minimal involvement with asbestos to share liability. With regard to the first aspect of asbestos compensation expansion, some of the plaintiff firms used litigation screening to recruit as many clients as possible.30 This practice is highly contentious, and has eventually been curbed by courts through structural stratagems such as inactive or non-impaired dockets.31 Professor Brickman, a very vocal critic of this practice, summarizes it with these words:

Entrepreneurial screening companies have been hired by lawyers to seek out persons with occupational exposure to dusts such as those containing crystalline silica or asbestos. Mobile X-ray vans are brought to local union halls, motels, or strip mall parking lots where X-rays are taken on an assembly line rate of one every five to ten minutes. In addition to the X-rays, most screening companies also administer pulmonary function tests (PFTs) to determine lung impairment for the sole purpose of generating evidence for litigation purposes.32

This practice contributed to the creation of long inventories of asbestos victims. These inventories would be mobilized by mass filing of claims involving a mix of a few impaired and a large number of “exposure-only” cases, that is, claims based on the possibility of developing a disease as a result of exposure to asbestos rather than an actual bodily injury caused by asbestos exposure. Facing the risk of losing the few impaired claims, defendants often opted for settling all claims, thus reinforcing the practice of litigation screening and victim inventories. Among the critiques launched against this practice, two strands are particularly compelling. The first strand of critiques revolves around the fact that these screenings might have generated a multitude of falsely positive results and that defendants have been unable to expose and challenge false positives because plaintiff lawyers refuse to disclose these data, in some cases by refusing to comply with discovery orders compelling their disclosure.33 The second strand of critiques focuses on questions of equity: assuming that asbestos funds available for compensation are limited, is it fair for victims of asbestos exposure with no medical conditions to subtract these limited resources from victims who are sick, often with deadly forms of cancer? The issue of equity in distribution are particularly compelling to the point that it has divided the plaintiff bar by splitting firms among those who represent both kinds of clients and those who focus on sick asbestos victims.34

Whether ethically defensible or not, litigation screening changed the face of asbestos litigation. The issue is not unique to the United States but the relatively low barrier to access the court system and approaching defendants for settlement negotiations have heightened the problematic nature of these cases. The Manville Trust, as we will see shortly, has been one of the victims of litigation screenings: in 2002, Steven Kazan, a renowned plaintiff lawyer who belongs to the group of firms that has not represented exposure-only victims, reported in a 2002 letter to judges Weinstein and Lifland that “90% of the Trust’s last 200,000 claims have come from attorney-sponsored X-ray screening programs … 91% of all claims [against the Trust] allege only non-malignant asbestos ‘disease,’ and … these cases currently receive 76% of all Trust’s funds.”35 Over time, the critiques of this practice have found their way in the litigation process, and courts have reacted by establishing institutional barriers directed towards reducing the flow of less meritorious claims. One such barrier is to list exposure-only claims in a deferral docket. Their inclusion in the list preserves the claim against the running of the statute of limitations but postpones the trial at an uncertain future date upon the victim developing some impairment due to asbestos exposure. Another example is represented by the implementation of an inactive asbestos docket: exposure-only cases are added to the inactive docket upon dismissal without prejudice by agreement of the parties, meaning that the case can be re-filed and the defendant cannot raise the statute of limitations defense.

Courts’ efficient management of this wave of cases had the unintended effect of contributing the claiming rates’ growth. Procedures for handling heavy dockets were streamlined, cases consolidated, and asbestos dockets assigned to single judges who would adjudicate asbestos cases on a full time basis thus developing expertise in how to push the process ahead and speed up litigation. A well-known example of court management of asbestos litigation is the transfer in 1991 of all asbestos personal injury cases to the Eastern District of Pennsylvania ordered by the Judicial Panel on Multidistrict Litigation.36 By 2008, MDL875 had collected claims of about 110,000 plaintiffs, each of whom had sued, on average, over 50 defendants.37 In the same year, more than 10,000 of those 110,000 cases were still pending.38 These judicial management strategies, which were primarily designed for courts to survive with limited resources in the face of high volume litigation, ultimately had the unintended consequence of favoring asbestos plaintiffs in courts.

The defense side also contributed to the growth of asbestos litigation in a mature mass tort primarily by failing to coordinate any litigation strategy. McGovern argues that the lack of cooperation has been a “major factor” in the success of asbestos plaintiffs: “Some defendants have tried bad cases with disastrously high verdicts being returned, while others have settled cases regardless of merit or risk, thereby funding the litigation against other defendants.”39 Indeed, the great majority of asbestos cases have traditionally being settled rather than litigated at trial, whether or not they would have had a chance should they have been tried in front of a jury. Carrington notes that, between 1982 and 1991, “not more than 5 out of 1000 asbestos cases could be expected to conclude with a trial on the merits.”40

Large inventories of clients and efficient judicial management of the litigation put workers’ compensation in the corner as a path to compensation that lacked appeal. Seeking damages in court became the prevalent path to compensation for asbestos victims. Fewer and fewer workers’ compensation claims were filed in the 1980s and 1990s. Field and Victor’s research about filing patterns in Massachusetts between 1984 and 1985 revealed that lawyers filed workers’ compensation claims in approximately 50 percent of the cases. Their research also showed that, although workers’ compensation was “not entirely neglected for asbestos claims,” many of the workers’ compensation cases were filed (to prevent the statute of limitations from barring the claim) but not actively pursued by lawyers until a settlement in the tort case was reached.41 Litigation was given priority because workers’ compensation state statutes often imposed substantial restrictions, in the form of a lien on any recovery, or on lawyers’ freedom to negotiate an out of court settlement with asbestos firms. Field and Victor refer to them as “placeholder cases.”42 The few cases that were actively pursued usually involved serious diseases affecting clients who needed early benefits often because they did not have medical insurance or were not eligible to receive medical care under Medicare.

The result of asbestos litigation becoming a mature mass tort is what McGovern labels as “the worst of all possible worlds: high verdict values, an unlimited supply of plaintiffs, rapid resolution of cases, and well-funded lawyers.”43 The incessant volume of cases, some of which with minimal or no merit, pushed all major defendants of the second wave to seek protection under bankruptcy law. In 1985, Hensler and colleagues indicated that six asbestos producers had already filed for bankruptcy. This early casualties among asbestos firms also triggered more litigation and eventually more bankruptcies. Bankruptcy protection afforded to major asbestos defendants subtracted substantial funds to court-based compensation with the effect of reducing the value of settled claims up to 30 percent less than in the event Manville had not filed for bankruptcy. The disappearance of major defendants from the court system pushed plaintiff lawyers to creatively pursue new classes of defendants, which over time became the target of high volume of cases and increasingly sought protection under Chapter 11. In 2010, researchers at RAND reported that “claim payments by the 26 largest trusts totaled at least $10.9 billion through 2008.”44

Because of its undesirable features, asbestos litigation in its maturity became increasingly perceived as a problem that needed to be resolved. Two strategies were attempted, albeit unsuccessfully, to resolve it: global settlements and legislation.

Global settlements

Between the early 1980s and the 1990s, the amount of filings of asbestos claims grew significantly. By the year 2002, as Senator Hatch reported to Congress, 730,000 personal injury claims alleging personal injuries caused by the use of asbestos had been filed in state and federal courts.45 Carrington adds more data:

Approximately 8,400 businesses had been named as defendants in asbestos cases. A total of $54 billion had been paid to claimants. In each of the last three years, over 100,000 additional claims were filed. To date, fewer than two thousand out of almost a million asbestos cases have been tried on the merits.46

By the mid-1990s, asbestos litigation was in crisis mode. Courts in victim-friendly jurisdictions were swamped with cases. Judicial management of cases had proven to be ineffective: it did not speed up litigation to guarantee that victims with cancer could see the resolution of the case and it did not slow down the growth of filings. With dubious claiming practices, some firms routinely bundled up claims of sick victims with claims of unimpaired plaintiffs to push defendants to settle all bundled claims in fear of a trial that could result in a significant unfavorable verdict of the single case with a mesothelioma victim.

By the 1990s, debates on the merits of asbestos litigation involved old issues of efficiency and fairness, which RAND researchers had raised issues in the 1980s, and new issues of impact for the economy, abuses on part of the plaintiff bar, and prospects of compensation for future victims. Scholars, practitioners, judges, business associations, and politicians started looking at ways to “resolve” asbestos litigation other than mere reliance on judicial adjudication.

Some of these attempts to resolve asbestos litigation came from practitioners, litigants, and the insurance industry. The first attempt took place in 1985 when 34 asbestos defendants and 16 insurers signed the Wellington Agreement. The Agreement created the Asbestos Claims Facility, an entity that would make offers to claimants who would furnish evidence of exposure to asbestos and of physical harm caused by asbestos. Claimants could accept the offer or reject it and go to court. The signatories of the Agreement agreed to contribute to compensation even if their product had not been named in the complaint or if the claimant could not prove that a product manufactured by the producer caused the injury. Instead they agreed to use a formula based on each producer’s previous litigation experience to allocate the liability for each new claim. After accepting and assessing claims for three years, the Facility dissolved after seven producers withdrew their membership as a result of dispute among the signatories of how to allocate shares of costs.

Twenty asbestos defendants, the majority of which had supported the Wellington Agreement, pursued a second attempt to settle all of their asbestos liabilities. In 1988, they established the Center for Claims Resolution, which were to settle pending claims against the signatories. In 1991, the Center’s scope was expanded to include all possible future injured parties who had not yet developed any perceptible disease. The plan was backed up by two prominent plaintiff lawyers, Ron Motley and Gene Locks, who represented 14,000 claimants who were offered a USD 215 million settlement, with USD 70 million going to the two attorneys and their co-counsel as legal fees. However, after the proposed class action settlement was filed, more than 236,000 people rejected the proposal. The case was heard as Amchem Products Inc., v. Windsor by the Supreme Court in 1997.47 The Court rejected the settlement holding that due proceed considerations precluded litigants from settling claims of personal injury victims parties who were not yet sick and therefore not in condition to exercise their right to recovery. The settlement agreement did not meet the requirements of “common issue predominance and adequacy of representation.”48

In 1993, a single defendant, Fibreboard, negotiated the so-called Global Settlement of a class action comprised of approximately 186,000 pending claims and any future claim. The maximum amount of the fund was determined by the defendant’s insurance policy limits. To this end, Fibreboard’s insurers agreed to allocate USD 2 billion to the settlement. However, class members had very limited opportunities for opting out. Several class members objected to the settlement, which reached the Supreme Court. The Court concluded that the settlement violated the law to the extent to which the allocation of funds negotiated as part of the settlement was in breach of the law because it excluded some potential plaintiffs, it failed to address the conflict of interest between present victims and future victims, and funds’ distribution raised questions of fairness.49

In 1998, Owens Corning Fiberglas established a National Settlement Program to resolve claims against Owens Corning and the recently acquired Fibreboard. The Program was successful in the sense that many claimants applied for compensation. However, Owens Corning Fiberglas had underestimated its liabilities and ended up filing for bankruptcy in 2000.

Legislative efforts to resolve asbestos litigation

Legislative efforts to resolve asbestos litigation date back to the emergence of the second wave of litigation. These reform efforts fall within three of the four labels proposed by Thomas Burke to categorize antilitigation efforts: replacement, discouragement, and management reforms.50 Efforts at federal level have aimed primarily at either replacing litigation with alternative paths to compensation—workers’ compensation, schemes funded and managed by governmental agencies, and private trusts—or discouragement—legislation imposing threshold levels of disablement, medically proven, for personal injury claims to be litigated. Parallel to attempts to legislate asbestos compensation at federal level—all of which fell short of becoming federal law—reforms were pursued and implemented at state level. Before turning to reforms at state level, we shall however look at attempts to pass federal legislation first.

The first effort to implement replacement reform at the federal level took place quite early. Aware that after Borel

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