The Intersection Among Torts, Science, Corporate Law, Insurance & Bankruptcy

Costs of the Asbestos Wars – the Garlock Bankruptcy Professional Fees are at $105 Million, and Rising – Let’s See All the Data Generated by All Those Fees

Posted in Asbestos, Asbestos Bankruptcy

As RAND and others long ago explained, the asbestos litigation wars generate massive expenses.  With aggregate professional fees now at $105 million and rising, the expenses for the Garlock asbestos bankruptcy perhaps will now enter the asbestos hall of fame.   The expense point is highlighted by a new motion filed by Coltec – the parent of Garlock – seeking an examiner to look at fees. The motion is described in and linked to in a National Law Journal article of August 29, 2014.  One might think that a reason for the motion is that Coltec likes things where they stand, and wants to limit the risk of future change by limiting the amount of future expenses. That inference especially follows from Coltec carping specifically about fees spent by the asbestos personal injury claimants’ committee but not the fees for Debtor’s counsel or Debtor’s experts, such as Bates White.

One could put different spins on all that expense. The spin that occurs to me is to suggest that all the fruits of all that expense should be made very public and very accessible, instead of being sealed up. More specifically, the professionals in Garlock took all kinds of discovery on all kinds of facts on many topics that are the subjects of much speculation and rumor that many lawyers and interested others will speculate about but cannot discuss factually because many of the key facts in the recent asbestos bankruptcies are hidden by or tangled up in large piles of meritless sealing orders and confidentiality orders.  So, let’s see all that expense put to good use through full publication of all the Garlock trial testimony, deposition testimony, expert reports, and underlying data gathered by all parties. In short, let sunshine in and create transparency. After all, courts will make doctors and researchers produce data underlying medical studies.  The Garlock experts claim to have studied the asbestos litigation system – let’s see out in public all the data from all sides so  it can subjected to peer review and review by any interested academics.  

As to the scale and timing of all the expense, the motion asserts the following:

The Debtors, the ACC, the UCC and the FCR have each been authorized to engage multiple professional firms to assist and advocate for them in this case. There are currently over twenty professional firms engaged by these parties, each of which regularly submit fee applications under the Interim Compensation Order. For reference, a listing of those firms, grouped by their associated party, is provided in Exhibit A attached hereto.

 By April 13, 2012, the date on which the Court set a schedule and a process for conducting an aggregate estimation of mesothelioma claims, professional fees and expenses submitted for payment from the Debtors’ estates had already reached over $17.8 million. At that time, Coltec was already considering this motion. In its April, 2012, Order for Estimation of Mesothelioma Claims Docket No. 2102], the Court signaled its intent to permit the contending parties wide latitude to explore and develop, to conduct discovery relative to, and to present at trial their respective theories of aggregate estimation. In deference to that intention, Coltec elected to postpone this motion, knowing that the process and schedule set for the estimation would necessarily involve extensive efforts by the various professionals representing or advising the contending parties.

 Since the entry of the Court’s January 10, 2014, Estimation Order, the activity level has scarcely abated, and incessant litigation over subsidiary and collateral issues unrelated to the formulation and presentation of plans of reorganizations for the Debtors have given new impetus to the need for an independent evaluation of the professional fees and expenses being incurred in these cases. Strikingly, in the first five months of 2014, $7.1 million in fees and expenses have been generated; almost all after the Estimation Order was entered on January 10, 2014.3 Based on  interim fee applications filed and monthly fee statements submitted covering periods through June 30, 2014, over $105.2 million in professional fees and expenses have been generated by various professionals in the four years of these cases.

 A comparison of the professional fees in these cases to the fees incurred in other Chapter 11 cases dominated by asbestos personal injury claims demonstrates the degree to which the professional fees in these Debtors’ cases are atypical and call for the heightened scrutiny provided by an independent examiner. To take only one illustration, counsel for the ACC in these cases also represented the asbestos personal injury claimants’ committee in In re W.R. Grace & Co., et al., Case No. 01-01139 before the United States Bankruptcy Court for the District of Delaware, a highly contentious asbestos chapter 11 case that has been pending for some thirteen years. The W.R. Grace case involved assets and alleged asbestos-related liabilities that are multiples of these Debtors’ assets and their alleged liabilities. Indeed, counsel for the ACC has stated to the Court that the stakes in these cases are “a fraction of the value that was at stake in Grace.” [Transcript, Dec. 15, 2011, at 68:17-18, as shown on the attached Exhibit B.] Significantly, the W.R. Grace case included both a contested estimation trial and a contested confirmation trial that lasted several weeks and was followed by extended appeals in the United States District Court for the District of Delaware and the Third Circuit Court of Appeals. Fee applications filed by counsel to the asbestos personal injury claimants’ committee in the W.R. Grace case for the thirteen-year period through December 31, 2013 totaled $21,394,103.00 in fees alone. By comparison, as of June 30, 2014, the same firm’s fee applications as counsel for the ACC had already reached $26.9 million in fees (excluding expenses), and these Debtors’ cases are far from being concluded.”

“Standing Up to Patent Trolls” – Will It Happen?

Posted in Litigation Industry

Now that the litigation industry is just another business, there are problems with low end claimants in various specialty areas of litigation. For example, the asbestos litigation industry went through a period of mass filings involving persons who were not sick. Some insurers and defendants stood up and defended aggressively. Others rolled over and paid, saying it was cheaper in the long run. Yet others paid some nominal money to drive down their overall averages for asbestos settlements.

Similar low end claimant issues exist in the patent world. One result is a new article in Corporate Counsel arguing that “small business” owners should stand up to “patent trolls.”  One might also ask if insurers will do the same, when coverage is triggered. Time will tell.

Financial Benchmarks Manipulation – Are Regulators and Litigators Looking at the Wrong Activities?

Posted in Liability Standards, Securities

What happens when financial regulators are trying to look at and regulate the wrong subject? Even more financial fraud? The point is raised by an new article on the various “benchmark manipulation” cases, such as LIBOR.    The thesis is outline in an August 27, 2104 Blue Sky blog post by Andrew Verstein, and the article itself is on SSRN.  The article

Manipulation is all too common in financial markets. Reports of brazen schemes have rocked the markets for gold, aluminum, foreign currency, and interest rates, to name just a few from the last twelve months. These scandals are surprising in light of substantial scholarship that has long argued that market manipulation is impossible. Perhaps you can bid up the price of an asset by buying a large amount, but the price will fall as you try to sell it. Taking into account of your trading costs, you should not even break even. Regulation of manipulation is unnecessary since it cannot be profitable.

This Article challenges orthodox understandings of manipulation, showing that they reflect an obsolete view of markets. While manipulation skeptics discuss prices, markets focus on benchmarks of price – and so do the manipulators who prey upon them. Benchmarks such as Libor or the S&P 500 summarize market prices, and they have become essential to contemporary markets. They are written directly into industrial contracts, financial derivatives, statues, and regulations, and so their accuracy affects the economy every bit as much as the prices themselves. They are also are much easier to manipulate than underlying prices, because such benchmarks are typically derived from only a small slice of the market. For example benchmarks of exchange rates – the price of Euros and Yen – reflect only trade prices in a single venue, during a two-minute period of trading. If a manipulator can strategically position trades – placing aggressive purchases on that venue and aggressive sales elsewhere – she can bias the benchmark and therefore project influence over the market as a whole.

This theory – that market manipulation is increasingly synonymous with benchmark manipulation – has many important implications. It shows that the recent push by regulators and courts to require fraud in manipulation cases is fundamentally misguided since benchmark manipulation does not depend on anyone being “defrauded.” Likewise, recent proposals to extensively regulate the creation of benchmarks are shown to misunderstand the mechanics of benchmark manipulation.”

Obtaining Access to Underlying Data for Medical Studies

Posted in Litigation Industry, Science

Can/should lawyers be able to use subpoena power to access underlying data from medical research studies at issue in litigation?  The subject is reviewed under the Illinois Medical Studies Act  in an August 2, 2014 post by Nathan Schactman at his Tortini blog. As he notes, the case law leans towards requiring production, and one can say that current trends towards open access data suggest that data should be subject to production. 

Delaware Jurists Write on Contracts and Alternative Entities – Presumably Many Will Listen

Posted in Law Review Articles, Liability Standards, Securities

“No brainer.” That phrase often was used when I was a baby lawyer.  It’s an apt phrase regarding whether to read a new article from leaders of the Delaware court system.  Francis Pileggi at his blog on Delaware law offers a different set of words to explain the situation (his post is where I learned about the new article).   In an August 23, 2014 post, he explained:

“To paraphrase a former tag line for a former investment management firm, when Delaware Supreme Court Chief Justice Leo Strine, Jr. and Vice Chancellor J. Travis Laster of the Delaware Court of Chancery co-author an article on a cutting-edge topic of Delaware law, those lawyers who practice in the relevant field need to “pull up their socks”and take notice.”

Obviously Francis right. It’s a no-brainer.  See his post for more specifics.  The bottom line is that the new article focuses on whether its a good idea to have absolute freedom of contract for alternative entities. The article is online, and is titled: “The Siren Song of Unlimited Contractual Freedom“, available on SSRN.

Modern Day Debtor’s Prisons – Towns Such as Ferguson

Posted in Uncategorized

Law is about economics. Therefore, Alex Tabarrock and others are writing about towns that impose heavy fines against the people least able to pay. Ferguson, Missouri is an example, according to Tabarrock and others, as described in an August 21, 2014 post at Marginal Revolution.

I hear similar stories from a friend who frequently defends DUI cases. He explains that Cook County and various local towns typically impose fines of $2,000 or so to retrieve a car after a DUI arrest.

Tabarrock and others provide the following example, among others:

If you have money, for example, you can easily get a speeding ticket converted to a non-moving violation. But if you don’t have money it’s often the start of a downward spiral that is hard to pull out of:

“For a simple speeding ticket, an attorney is paid $50-$100,
the municipality is paid $150-$200 in fines and court costs, and the
defendant avoids points on his or her license as well as a possible
increase in insurance costs. For simple cases, neither the attorney nor
the defendant must appear in court.

However, if you do not have the ability to hire an attorney or pay
fines, you do not get the benefit of the amendment, you are assessed
points, your license risks suspension and you still owe the municipality
money you cannot afford….If you cannot pay the amount in full, you must appear in court on that night to explain why. If you miss court, a warrant will likely be
issued for your arrest.

People who are arrested on a warrant for failure to appear in court
to pay the fines frequently sit in jail for an extended period. None of the
municipalities has court on a daily basis and some courts meet only
once per month. If you are arrested on a warrant in one of these
jurisdictions and are unable to pay the bond, you may spend as much as
three weeks in jail waiting to see a judge.

Of course, if you are arrested and jailed you will probably lose your job and perhaps also your apartment–all because of a speeding ticket.

Memoirs of Former NCAA Commissioner Became Evidence for the Player Image Antitrust Suit Against NCAA

Posted in Antitrust, Litigation Industry

As any asbestos lawyer knows, the  writings of former executives often provide material evidence for litigation. It turns out the same is true for the antitrust suit against the NCAA regarding payment for use of player images.  The information is set out in an August  21, 2014 article in Bloomberg by Paul Barrett.  According to the article:

“Vaccaro gave Hausfeld a homework assignment: Read the confessional memoir of Walter Byers, the NCAA’s executive director from 1951 to 1987 and the man known as the governing body’s master builder. Published eight years after Byers left office, Unsportsmanlike Conduct: Exploiting College Athletes became a Rosetta stone for NCAA dissidents.

“Prosecutors and the courts,” Byers wrote, “should use antitrust laws to break up the collegiate cartel—not just in athletics but possibly in other aspects of collegiate life as well.” As Byers argued, “The college player cannot sell his own feet (the coach does that) nor can he sell his own name (the college will do that). This is the plantation mentality resurrected and blessed by today’s campus executives.” To Hausfeld, the memoir amounted to an invitation wrapped in a confession.”

Ken Feinberg Provided a Catalyst for the Player Image Antitrust Suit Against NCAA

Posted in Antitrust, Litigation Industry

Ken Feinberg draws lots of attention for his settlement broker role in mass tort situations. However, there is more – according to an August  21, 2014 article in Bloomberg by Paul Barrett.  Ken was an indirect catalyst for change at the NCAA. More specifically, the article explains that Ken arranged for a meeting between a plaintiff’s lawyer (Michael Hausfeld) and long-time  shoe person (Sonny Vacaro) who became a foe of the NCAA  after he retired. According to the article:

“After lucrative stints with Adidas (ADS:GR) and Reebok, Vaccaro retired in 2007, he says, “to do some good.” Whatever his mix of motives—redemption, attention seeking, maybe altruism—he began delivering speeches on how the college athletes he’d turned into human billboards deserved a share of the revenue. “I didn’t get very far at first,” he says. “Make a speech, one-day story, it disappears.”

That changed after he visited Howard University in Washington in 2008 to deliver one of his stemwinders about athletic inequities. An old friend in the audience introduced Vaccaro to Kenneth Feinberg, a prominent Washington attorney who oversees mass-disaster settlements. Feinberg, in turn, connected Vaccaro to Michael Hausfeld.

A professorial plaintiffs’ lawyer based in Washington, Hausfeld wears pastel bow ties and rarely speaks above a whisper. He has successfully challenged ExxonMobil(XOM) on behalf of Native Americans and Swiss banks on behalf of the survivors of Holocaust victims. “I have to confess that at first I didn’t understand a lot of what Sonny told me,” Hausfeld says, “both because he speaks so quickly and because I’m not a sports nut.”

Political Donations and Asbestos Litigation – a 2014 Update on One Side of the Coin

Posted in Asbestos, Elected Judges, Litigation Industry

Years ago, Joe Rice very correctly said something to the effect of:  ”Why would Congress ever end asbestos litigation. It’s the nation’s most consistently big fundraising and lobbying topic, ever.”

For 2014, Legal Newsline provided an August 15, 2014  report on contributions from some asbestos plaintiff’s firms to politicians. The numbers are impressive and telling in some ways. More or less the same report also was issued by the Madison-St. Clair Record.

As is typical, however, the two pro-insurer publications  failed to cover the other side of the topic, which of course is the corporate side of the political giving coin.