If there's anyone out there who thinks that unwarranted asbestos litigation is the root cause of America's economic troubles, I think Bank of America may want to hire you as a spokesperson. With mortgage crisis liability looming over U.S. businesses like a Stage IV cancer diagnosis, it's almost quaint to hearken back to 2003, when Congress seemed to think asbestos litigation was Corporate America's biggest problem. Clearly it wasn't, since lawmakers failed to pass a reform bill and U.S. businesses survived long enough to create and invest in trillions of dollars of toxic mortgage-backed securities. Nevertheless, the House Judiciary Committee is determined to quell the threat of asbestos litigation. On Friday, the Subcommittee on the Constitution is scheduled to hold a hearing entitled "How Fraud and Abuse in the Asbestos Compensation System Affect Victims, Jobs, the Economy, and the Legal System."
My native skepticism aside, the hearing comes a couple weeks after Moodys put out a credit alert warning of an uptick in reports of asbestos claims. Moodys cited reports by three insurers, including MetLife's statement that new asbestos claims were up 14 percent in the first half of 2011, as compared to 2010 claims.
Friday's hearing is expected to focus on plaintiffs lawyers' alleged abuses, a familiar list that includes forum-shopping, witness coaching, and over-expansive legal theories. In a new wrinkle, there will also be testimony on supposed improprieties in the dozens of asbestos trusts that companies set up as a means of isolating their asbestos liability. Reuters has obtained an advance version of the written statement of Judiciary Committee witness James Stengel of Orrick, Herrington & Sutcliffe. Stengel's statement alleges that the trust system may encourage plaintiffs to double-dip, obtaining recoveries for the same injury from multiple defendants. Trusts also allocate damages unfairly, Stengel's statement says.
"The compensation by the trusts proceeds in a parallel universe not fully integrated with the tort system," the statement says. "Distortion, waste, and unfairness continue to be the most accurate descriptors of the system."
It's a good bet that two other scheduled witnesses, Lester Brickman of the Cardozo School of Law and Michael Carter, president of the Monroe Rubber & Gasket Co., will echo concerns about asbestos litigation; Brickman is a longtime critic of asbestos plaintiffs lawyers, and Monroe Rubber is a small business hit hard by asbestos suits.
One plaintiffs lawyer will be on hand to counter assertions of a fraud-ridden system. I've gotten an advance version of the written testimony of Charles Siegel of Waters & Kraus, a leading asbestos plaintiffs firm. Siegel will argue that asbestos victims don't abuse the trust system, which is rigidly designed to allocate limited funds in a fair way. "[That] claims is false, and reflects a basic, fundamental misunderstanding of the way both the bankruptcy system and state court lawsuits operate," his statement said. "If any court anywhere-any state or federal, trial or appellate court hearing asbestos cases, or any bankruptcy court-had found any merit in this contention, it might have credibility, but no court ever has."
(Reporting by Alison Frankel)
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