By: Scott Hobson – Lawsuit Reform Alliance of New York
Today, plaintiffs’ attorneys from across the nation will meet to discuss the future of asbestos litigation. The event, “Litigating Asbestos Cases in Today’s Economic Environment”, highlights that the lawsuit industry is increasingly concerned about the public perception of massive legal judgments in today’s economy. The program is chaired by New York attorneys Julie R. Evans of Wilson Elser Moskowitz Edelman& Dicker, and Perry Weitz of the asbestos powerhouse Weitz and Luxenberg, a firm which recently obtained a $22m asbestos verdict against Goodyear for causing lung cancer in two men, despite the fact that the jury found their smoking habits mostly to blame for their disease.
Since litigation has bankrupted most American asbestos manufacturers, the discussion will likely center around recoveries from the asbestos injury trusts funds which are often established as part of the bankruptcy process of asbestos-producing companies. These funds are used to compensate the victims of asbestos-related illnesses. To date, approximately 100 companies have been bankrupted by asbestos related liability, and the number of trusts has grown from 16 to 60 in the past 11 years. Currently the trusts have a total of $36.8 billion in assets a number that will increase to an estimated $60 billion once trusts in the formation stages begin paying claims.
A recent report by the Government Accountability Office (GAO), highlighted the secretive nature of these funds. The GAO report studied 52 of the 60 asbestos trusts in existence and found that they have paid out approximately 3.3 million claims totaling $17.5 billion. Amazingly, only one trust publically disclosed the how much and to whom payments were made.
With so little disclosure, the potential for fraud is great. By alleging exposure from multiple sources, a claimant may receive payments from one or more trusts and still file a lawsuit for the same injury. In January 2007, Ohio Court of Common Pleas Judge Harry Hanna banned an asbestos law firm from practicing in the state after it was revealed that firm had filed multiple conflicting claims on behalf of their deceased client. Despite this, the firm still collected an estimated $700,000 in legal fees.
The practice of inconsistent claiming – saying one thing about the “facts” underlying an injury to the trusts, and a different, and often contradictory, thing to tort defendants has major impacts beyond the clear ethical issues raised. Every dollar that is collected under such suspect – and often fraudulent circumstances is one less dollar available to those who are truly sick, and once the funds are depleted, they’re gone for good.
Equally troubling is the connection between asbestos law firms and the trusts they seek recovery from. A 2010 report by the RAND Institute for Civil Justice uncovered several such connections that should raise suspicion – demonstrating that the plaintiffs’ law firms effectively control the trusts through their management of the Trust Advisory Committees. For example, Weitz and Luxenberg has influence over 42% of the asbestos trusts reviewed in the study, serving as Trust Advisory Committee members.
Many states, including Texas and Florida have taken steps to curb the practice of “double dipping.” The recent GAO report highlights the need for New York to follow suit. New York must pass legislation to create transparency in the process, prevent unfair duplicative recoveries, and shed light on firms which routinely abuse the system. Otherwise, financial incentives will continue to invite rampant abuse of the system and will hasten the depletion of funds intended for the truly sick.