Managing legacy liabilities is never easy. For some, it can be a nightmare. Thus, James Hardie and its asbestos compensation fund took yet another hit yesterday through the loss of a tax appeal.  The loss is  described here in mass media in Australia. The mass media is focused on the fund's long term survival prospects in light of the adverse ruling and the continuing slumps in the building sector that buys product from James Hardie entities. 

The company issued a statement yesterday (go here to investor relations page), but did not include a link to the opinion. According to the statement. the loss will result in a charge of about $ 330 million (US) unless there is a successful further appeal. The company also says it will not violate loan covenants by taking the charge.

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This story from The Economist  explains an academic effort to formally look for "tells" on when executives were lying during investor conference calls. Key "tells" are said to be use of extreme adjectives, a lack of ums and ahs, and swearing. Some might think the same principles also could be applied to testimony of persons involved in the litigation industry.

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The Conglomerate includes this recent post picking up from from the SEC accusing New Jersey of securities fraud. Among other things, the post ask whether the US may soon see a wave of securities suits against sovereigns regarding their statements when selling debt.

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Perhaps someday Australia's James Hardie company will end up in textbooks as an example of poor handling of contingent product liability risks. For now,  James Hardie's investor relations group has a new challenge that follows after multiple other challenges. The company and corporate  officers and directors already have been through major problems, including convictions of senior officials for misleading investors about future asbestos payouts (the convictions are on  appeal).  Then, the company  was the subject of a new book:  Killler Company.

Now, Australia's Daily Telegraph reports that a made for TV movie may be created regarding the mesothelioma death of Bernie Banton, and the related "James Hardie asbestos saga."   The article is here. It states:

 A tribute to Banton

FREMANTLEMEDIA Australia is developing the James Hardie asbestos saga for a new TV drama, expected to be delivered to the ABC.

An ABC spokeswoman last week confirmed the venture, reiterating it was "in development at this stage and is yet to be commissioned".

The story of James Hardie - specifically the manufacturing company's multimillion-dollar liability payout to former employees as a result of its use of asbestos products - captivated the country the last decade, with stoic campaigner Bernie Banton (who died in 2007) becoming the public face of the David v Goliath battle.

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Tobacco sales continue today thanks to "big tobacco" long ago obtaining federal law preemption against most product liability claims. The industry strategy was both brilliant and deadly. Then, when litigation risks were closing in from cost recovery lawsuits by the states, the tobacco settlement kept the industry moving ahead as it locked states into enjoying the tax revenue being used to fund state budgets.

So, industry won a couple of times, and therefore people keep smoking and dying. In that light, it's good to see some potential offset ahead from a California ballot initiative to raise tobacco taxes by $ 1 per pack, with proceeds to fund cancer research. The initiative’s website is here. 

The initiative was officially certified on August 24, 2010 by the California Secretary of State, as described here. The net result is that the initiative will be on the ballot for the 2012 national election.

The organizers of the initiative would love financial support for the battle ahead to get the initiative passed. Set out below are key excerpts from the Secretary of State’s website:

The Attorney General’s official title and summary of the initiative is as follows:

IMPOSES ADDITIONAL TAX ON CIGARETTES FOR CANCER RESEARCH. INITIATIVE STATUTE. Imposes additional five cent tax on each cigarette distributed ($1.00 per pack), and an equivalent tax increase on other tobacco products, to fund cancer research and other specified purposes. Requires tax revenues be deposited into a special fund to finance research and research facilities focused on detecting, preventing, treating, and curing cancer, heart disease, emphysema, and other tobacco-related diseases, and to finance prevention programs. Creates nine-member committee charged with administering the fund. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Increase in new cigarette tax revenues of about $855 million annually by 2011-12, declining slightly annually thereafter, for various health research and tobacco-related programs. Increase of about $45 million annually to existing health, natural resources, and research programs funded by existing tobacco taxes. Increase in state and local sales taxes of about $32 million annually. (09-0097.)

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Last week's posts included this post on two recent Delaware Supreme Court rulings that may expand access to information useful to facilitate litigation. Here is an on line advisory from Willkie Farr that provides specific thoughts on the ruling involving access to information regarding directors. Hat tip to Lexology for identifying the advisory.

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Here is a new article from a UK newspaper that illustrates the argument that it's sophistry to claim to expect  "controlled-use" of most types of asbestos-containing products. In this instance,  a ship-breaking company apparently unknowingly had its employees dismantle ships without any respiratory protection. The workers, unfortunately, were working with boards made from brown (amosite) asbestos fibers, which are far more lethal than are white (chrysotile) asbestos fibers.

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FASB continues to work on Topic 450, a short-hand term accounting and disclosure issues for contingent liabilities, such as risks from tort litigation. Click here to go to the detailed FASB website page on Topic 450.

Topic 450 is the successor to prior proposals in this area. The topics continue to produce disputes. Groups and newspapers opposed to the disclosure proposals characterize them  as providing breadcrumbs to plaintiff's lawyers seeking grist for lawsuits, as illustrated by this Wall Street Journal editorial. On the other hand, as the WSJ acknowledged:

 "FASB says it is only undertaking this effort after receiving "strong and extensive input" from "investors who want greater transparency." But as the U.S. Chamber of Commerce has pointed out in a letter to FASB, the accounting board has declined to reveal "which investors—or even which categories of investors—were consulted." The likely sources are union pension funds that have since the derivative lawsuit reform of the 1990s become major abettors of lawsuits against business."  

The current staus of the process is summarized in this article from CFO.com.  Set out below are  two key paragraphs from the August 17  article by Marie Leone:

"Most of the controversy centers on the detailed table information that is required to explain any contingencies arising from potential and ongoing lawsuits. The thinking is that revealing this kind of information would make it difficult for companies to defend themselves, infringe on attorney-client privilege, and require companies to disclose nonpublic information that could be used by plaintiffs' lawyers to file additional lawsuits.

For example, the draft rule requires that companies disclose details about insurance coverage bought to protect them against losing a lawsuit, as well as the ordinarily confidential estimates of "average settlement amounts" related to suits. The proposal also requires companies to disclose any reputable scientific studies that indicate a potential significant hazard related to a company's product or operation. This disclosure, says the Chamber, essentially advertises a company's "potential vulnerability to an entire category of lawsuits, none of which have yet been asserted.""

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Two recent opinions from the Delaware Supreme Court provide rules for access to information that may facilitate litigation, depending on the application to a particular set of facts.

The  Delaware Corporate and Commercial Litigation blog summary is here, and includes links to the opinions. A National Law Journal article by Sheri Qualters is here, and includes more "color commentary" on the significance of one of the two rulings as a vehicle for making litigation more feasible in some instances.

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