The Asbestos Pit

  • Share
  • Read Later

Ronald Huber spent 35 years as a steelworker, breathing in asbestos particles he never saw. In 1995, recruited by personal-injury lawyers he had never met, he joined a class action against 200 companies that made or distributed asbestos or products made with it. At the time, the only detail that really seemed to matter was that the lawyers were giving Huber a shot at what would become a $140 million settlement.

Yet Huber, who claims he is suffering from an asbestos-related illness, maintains that he never saw a dime. So on Feb. 7 he joined 2,644 other plaintiffs in another class action. This one charges six personal-injury attorneys and their firms in federal court in Pittsburgh, Pa., with fraud, malpractice and deception--or, as the complaint boldly states, "this case arises from corruption within the asbestos personal injury bar."

[an error occurred while processing this directive]

Welcome to the wild world of asbestos litigation. For all the lives asbestos has destroyed over the years, only now is it becoming clear how much additional ruin personal-injury lawyers caused by taking advantage of hapless plaintiffs and of the emotionally charged debate over corporate responsibility for unleashing the deadly substance. The first asbestos suits were filed in the 1970s and by 1982 had pushed Johns-Manville, the largest manufacturer, into bankruptcy. Wave after wave followed, forcing more than 50 companies into Chapter 11, including Owens-Corning and, last year, chemical and materials giant W.R. Grace.

Many of the lawsuits have been justified, aimed at redressing victims' unimaginable suffering. But some have appeared opportunistic, including a recent cluster filed on behalf of healthy plaintiffs against companies that have only peripheral connections to asbestos, among them media giant Viacom, baby-products maker Gerber (a subsidiary of Novartis) and Gallo Winery. If the cascade of litigation continues, according to a recent Tillinghast-Towers Perrin study, its financial toll could reach $200 billion, more than the damage attributed to the Enron debacle. "The liability--both projected and actual--is far in excess of Enron," says David Austern, general counsel for the Manville Trust, which was created from bankrupt asbestos maker Johns-Manville in 1988 to administer claims against the company. "Yet there seems to be very little congressional interest in this subject."

How did asbestos, the industrial scourge of the past century, bounce back into this one? In 1982 Johns-Manville declared bankruptcy, thwarting thousands of lawsuits on behalf of plaintiffs sickened by asbestos exposure. Two state supreme courts, New Jersey's in 1982 and Louisiana's in 1986, set crucial precedents by determining that defendant Manville was liable for asbestos-related illnesses even if the company had not been aware of the substance's danger. Two years later, the trust was established from the company's assets, and officials predicted that 80,000 to 100,000 people would file claims against it.

Instead, filing asbestos claims became a booming industry in its own right, and the estimated number of claimants has ballooned past 1.4 million people. Money-hungry lawyers took a connect-the-dots approach: drum up the standard legal precedents and then solicit clients through local ads or unions (which also sponsored mobile X-ray scans for asbestos-related illnesses). None of this required much investment, and the potential rewards were huge.

That's how in 1995 Ronald Huber became one faceless plaintiff among 5,000 class members--"They viewed their clients as mere inventory," the 2002 complaint says of its defendants. These mass tort cases typically involve dozens or even hundreds of corporate defendants and thousands of plaintiffs. There could be a core of wrenching cancer cases, but many of the plaintiffs are healthy people who could prove that they had been exposed to asbestos. Publicity about the evils of big corporations and asbestos cover-ups helped make for plaintiff-friendly juries, especially in states such as Texas and Mississippi, where the original Huber case was heard.

The results have been stunning. More than 2,400 companies have been sued, pushing at least 54 of them into bankruptcy. At least two companies filed for Chapter 11 just last month.

The corporate carnage is beginning to take some particularly odd twists. Consider oil-field-services company Halliburton. Its Dresser Industries subsidiary, which was acquired in 1998, may still face 200,000 lawsuits from a unit, Harbison-Walker, that was spun off in 1992 and that declared bankruptcy on Feb. 14. Then there is Viacom, which, via its purchase of cbs in 2000, inherited Westinghouse Electric's 130,000 lawsuits. When Dow Chemical bought Union Carbide last year, its executives were well aware that they would be inheriting litigation--but didn't expect liability concerns to push its stock down 30%, as they did during one week in January before recovering.

Certainly nobody predicted the effect the phrase "asbestos liability" has had on the stock prices of Viacom, Halliburton and 3M, which have also taken recent hits. What is more disturbing, however, is that evidence suggests the number of recent claimants who are actually ill is on the decline; in other words, the number of healthy claimants is climbing. "The bulk of these people have no impairment," says Steven Kazan, a lawyer who represents only patients sick with asbestos-related diseases. In 1999, 12% of the Manville Trust's 31,700 claimants were sick with asbestos-related ills. Last year the number of claimants soared to 91,000, only 6% of them sick.

  1. Previous Page
  2. 1
  3. 2