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Signing away justice: Legislation may change how victims of asbestos exposure are compensated for their injuries

By Jessica Centers and Matthew Korade
Anniston Star, March 29, 2005

Overgrown weeds are visible around the front entrance to the former Capco plant in Ragland. Photo: Trent Penny/The Anniston Star Capco plant

President Bush has made resolving asbestos lawsuits a central issue of his second term, and Republicans in Congress have rallied behind the call. Supporters in business say excessive litigation is driving companies into bankruptcy, and costing the U.S. economy billions of dollars.

Legislation making its way through Congress could change the way current — and future — victims of asbestos exposure are compensated for their injuries.

For Julia Golden, Richard Archer and those who’ve lived and died by an asbestos plant in Ragland, such legislation could remove the one thing they share with millions of others exposed to asbestos in the United States: the right to sue companies for the damage they have caused.

A version of the Fairness in Asbestos Injury Resolution Act of 2004 could come before Congress in the next few weeks. Victims say they fear a stroke of a pen will sign their hopes for justice away.

"I don’t think they should get protection," said Johnny Southern, a Ragland resident with an illness born from his work in asbestos. "These big companies, they’ve known it all along. Intentionally knowing — knowing — something would cause cancer, would you intentionally hire a bunch of men, open a plant up down South? They just came down here and started killing people."

Capco plant closed A rusty chain is bound by a padlock at the now-closed Capco plant in Ragland. Photo: Trent Penny/The Anniston Star

‘Business as usual’

On Nov. 22, 2003, Senate Majority Leader Bill Frist stood before the Senate and condemned what he called a torrent of lawsuits wreaking havoc on asbestos victims, American jobs and the economy.

The litigation bankrupted nearly 70 companies, the Tennessee Republican said, one-third of them in the last few years. These were firms with thousands of employees, companies like Johns-Manville, Owens Corning, W. R. Grace.

Left unabated, the pace of asbestos bankruptcies would “spell doom” for workers, their families, and, of course, in-comes and retirement savings.

“The economic reality of this crisis is not lost on my colleagues in this body,” Frist warned. “They understand that under the status quo, the national asbestos crisis could [cost] our economy more than the savings and loan crisis of the 1980s and 1990s, and more than the Enron debacle or the WorldCom debacle.”

The solution, Frist, a physician, said, was one national trust fund to streamline asbestos claims by taking them from the court system.

The idea isn’t new; Congress has tried legislating a fix to asbestos litigation since the 1970s. Now, with Republicans controlling the White House and Congress, a national plan might be forthcoming, industry analysts say.

Supporters of the legislation say a bill providing fair compensation for people injured by asbestos is an idea whose time has come. A “no fault” solution, the proposed legislation would require asbestos companies and their insurers to pay hundreds of thousands of qualified claimants a total of $140 billion in return for taking away their right to sue. The U.S. Department of Labor would administer the fund.

Those in the business community echo Frist’s reasons for passing a national asbestos trust fund, citing the economic ripple effect the bankruptcies create.
“Between 52,000 and 60,000 jobs have been lost due to asbestos related bankruptcies,” the U.S. Chamber of Com-merce has reported. “Each displaced worker will lose, on average, between $25,000 and $50,000 over the course of his or her career because of periods of unemployment and the likelihood of having to accept a new job at a lower salary.”

The Chamber calculates indirect costs to communities of asbestos-related bankruptcies. It says eight more jobs are lost for every 10 that asbestos companies cut. It calculated losses from decreased property values, increased unem-ployment rates, health care costs and worker-retraining expenses. The toll on communities: $2.1 billion.

However, despite calls for congressional action to block asbestos lawsuits, an examination of the statements of the bankrupted companies, as posted on Web sites and in annual financial reports, reveals a different economic picture. The companies haven’t shut down or had massive layoffs after asbestos bankruptcy under Chapter 11.

Their numbers show they’ve thrived.

Many have increased market shares.

Employment levels overall have stayed steady since the bankruptcy filings; some companies have seen increases.

As Glen H. Hiner, chairman and chief executive officer of Owens Corning, remarks, “With the Chapter 11 process, we can finally put this difficult issue behind us in a fair and responsible manner and move forward with our re-sources and energies focused on competing successfully in the global marketplace.”

Halliburton, the largest company involved in asbestos-related bankruptcy in the last few years, reflected on its Chapter 11 experience. The company’s two subsidiaries, DII Industries (formerly Dresser Industries) and Kellogg Brown & Root Inc., agreed in January to pay a portion of equity into a trust fund for victims of their asbestos prod-ucts. The fund, established last January, will pay as much as $4.5 billion to settle some 400,000 asbestos claims.

Halliburton’s Web site lays out how Chapter 11 reorganization has affected its subsidiaries.

Under reorganization, most aspects of the business do not change, the Web posting says. Among the observations, the company and its subsidiaries will not go out of business, and no changes are noted at business units, whether they are in Chapter 11 proceedings or not.

No facilities would close and no jobs need to be eliminated. No pension or benefits programs are being reduced or eliminated. No employees have their salaries cut or promotion opportunities restricted.

“In other words,” Halliburton’s bankruptcy primer says, “outside of the asbestos and silica settlement, it will be business as usual.”

Charting a law’s course

Chapter 11 isn’t like the liquidation or reorganization of assets that comes under personal bankruptcy law, Chapters 7 and 13.

Chapter 11 is a restructuring of company debt, or, in the case of an asbestos company, its liability.

Congress in 1994 amended the U.S. code to grant asbestos companies relief from the mountain of personal injury claims. The load started in 1973 when the 5th Circuit Court of Appeals ruled in Borel v. Fibreboard that employees could hold manufacturers liable for not warning them the fibrous mineral was dangerous.

Under the provisions, if a company can prove that its future liabilities exceed its assets, then it can reorganize. The company must channel at least half of its equity into a trust fund to pay its asbestos claims, and it typically is granted a court injunction on future lawsuits, ensuring that it won’t be sued out of existence.

In the meantime, the business receives an “automatic stay” on payments to asbestos claimants and current litigation, giving it room to reorganize its debt. The stay applies to parent and subsidiary companies, shielding them from liti-gation.

“Frist sounds like all these companies are Tiny Tim, without a penny to their name,” said Gene Marsh, professor of law and business at the University of Alabama. “Yet some of these companies he’s mentioned, if you look at their own PR, they’re robust.

“But, of course, if you’re trying to get legislation (passed), everybody knows if you go to Washington and sound completely moderate the chances of getting something passed are nil. So the Chicken Little strategy is the one that’s preferred.”

A history of damage

Critics of trial lawyers suing these companies say excessive litigation clogs the system; unfairly targets businesses remotely related to asbestos; and results in an uneven system where a handful of lawyers line their pockets with ex-cessive jury awards while the majority of claimants gets little.

Others argue that economic and legal critiques only divert attention from the people who’ve suffered the most, the victims — workers and millions of other men, women and children exposed to asbestos in the workplace, school and home.

They say that though many victims suffered excruciating pain before dying, the companies weren’t killed, they merely reorganized.

Research shows that even before the government realized the scale of the asbestos disaster, manufacturers knew it could kill. Health problems associated with asbestos were illuminated in medical and industry literature dating back to the turn of the 20th century.

British doctor H. Montague Murray made the first diagnosis of acute pulmonary fibrosis in a man who died at age 33 after working 14 years in an asbestos mill. Another English physician, W. E. Cooke, wrote the first published re-port of death from asbestos in 1924. Studies in the 1930s through the 1960s showed hundreds of asbestos workers in Britain and America developed high rates of lung cancer, even as the U.S. asbestos industry ignored or suppressed warnings.

Asbestos manufacturers admitted so themselves.

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