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.
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.
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.
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.)
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.
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.
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.""
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.
I'm biased, but I love Chicago. So, today I'll be a booster for Chicago and my law firm.
On Chicago boosterism, Foreign Policy has issued its 2010 list of the top global cities. Chicago now ranks # 6. Go here for the article, and go here for its photo essay on major cities from around the globe.
Need more convincing ? Click here for Wikipedia on the details of Frank Sinatra's recording of My Kind of Town (Chicago Is). Click here for the recording, or click here for the YouTube video.
The Chicago photo above? The night scene looking southeast from the roof deck of our law firm, Childress Duffy, three blocks north of Marina Towers. If you'd like to see that view in person, please stop by our open house at the new office at 500 N. Dearborn on Thursday, August 26, after 5.
Mass tort law today is badly flawed by the lack of connections between state court tort systems and the parallel but disconnected compensation systems that have arisen through trusts or funds that hold billions of dollars intended to pay tort claims. BP's oil rig fund is a recent, well-known example that highlights the growing importance of funds as a means for resolving massive tort claims. The new RAND study on asbestos bankruptcy trusts - at long last - highlights the importance of the $ 30 billion or so of asbestos bankruptcy trust funds created from asbestos litigation. A recent mandamus filing in the Supreme Court of Illinois illustrates the importance of forcing connections between trust fund payments and tort law claims.
In short, the defendants' papers ask the Court to require the Madison County trial court to modify asbestos docket orders to require pretrial and trial procedures that account for claims to asbestos trusts. The papers are on line here.
The gist of the problem is plain, and boils down to plaintiff's splitting causes of action. At present, asbestos tort claims can proceed ahead to settlement and trial without the claimants having to bring or account for asbestos trust claims they can and will bring. So, the claimants act economically rationally by delaying filing claims against the trusts. The result ? The tort system cases go to settlement and trial without the remaining defendants being able to obtain effective offsets or effective contribution claim rights regarding the monies that inevitably will be paid out by the asbestos trusts.
How much money are we talking about? Hundreds of thousands, or millions. Indeed, in one of the chapter 11 cases, well-known asbestos plaintiff's lawyer Peter Kraus submitted a declaration swearing to his understanding that all clients of his firm would be paid not less than $ 700,000. - by just one trust - if each could in good faith assert that they worked with a product that included asbestos sold by Thompson-Hayward. Go here to download the Kraus declaration and its exhibits. And, the record in the Illinois Supreme Court proceedings includes expert information from Bates White indicating that an "average" asbestos claimant may obtain $ 600,000 from asbestos trusts, with some obtaining much more.
Should the Supreme Court of Illinois act in order to force rational and timely economic connections between its state court system and the trust fund compensation system ? Absolutely.
Will it act? Time will tell.
Should academics be paying attention to forcing connections between the two parallel and disconnected compensation systems? Absolutely. Are they ? Not in any meaningful way that I can find.
One conseqence of the litigation industry is that lawyers are increasingly named as defendants by their adversaries in transactions or litigation. Here's a recent example from the National Law Journal. Many of the cases are based on "aiding and abetting" claims. Jenner & Block several years ago was unable to defeat claims of this sort on a motion to dismiss under Illinois law.; go here for the opinion.
The story line as follows for this latest lawsuit:
"Hunton & Williams has been hit with a $150 million lawsuit in Wisconsin claiming that the law firm maliciously squeezed a broker out of a contract and should pay up for the company's losses.
The lawsuit alleges that Hunton & Williams and client Insight Equity Holdings LLC ousted plaintiff Minerals Development & Supply Co. from a supply chain agreement in which Minerals Development was the middle man. Filed in Monroe County, Wis., Circuit Court, on July 30, the lawsuit seeks punitive damages for what Minerals Development asserts was the law firm's intentional and malicious conduct.
The Richmond, Va.-based law firm issued a statement through a spokeswoman in response to the action. "This suit was filed by an adversary of one of our clients," it said. "These allegations have no merit, and we plan to vigorously defend against them."
Asbestos claimants continue to pursue GM for asbestos-related recoveries. Here is a story from Bloomberg yesterday on a recent hearing that allowed plaintiffs to move forward with some discovery against GM. Plaintiffs predict possible claims for "billions."
Defendants remaining in the tort system will watch with interest. After all, if GM does not pay, then the plaintiff's will demand that other defendants pay GM's share.
Are you still wondering whether there is more litigation around the globe? Either way, consider this post from D & O Diary regarding the tremendous increase in the damages awards for securities litigation in Japan. The post starts out with the following strong statement:
"The amount of damages awarded in 2009 Japanese securities cases exceeded "the aggregate amount of securities litigation damages determined by court decisions in Japan for the entire previous decade," according to a new study of Japanese securities litigation from NERA Economic Consulting. The report, dated August 2, 2010 and entitled "Trends in Japanese Securities Litigation: 2009 Update," and which can be found here, updates the NERA report released last year that surveyed Japanese securities litigation from 1998-2008."
Global growth in the litigation industry seems assured by increasing use of “social media” to publish information regarding participants in a particular industry, and the broad spread of the information. Thus, litigation may arise when disseminated information is allegedly misleading or false. Claims also may arise when information is being disseminated by a source that is crafted to appear independent, but in fact is sponsored or controlled by another industry participant.
This AmLaw article by Charlie Mead provides a concise example of both types of claims. The story sets out the basic facts alleged in this recent complaint which initiated litigation between participants in the cranberry industry. The opening paragraphs of the complaint illustrate the issues, and are pasted below:
"SUMMARY OF CLAIMS
1. This complaint is based upon an unlawful and malicious campaign orchestrated
by Decas Cranberry, the John Doe Handlers and the John Doe Growers against Ocean Spray.
This campaign falsely accuses Ocean Spray of harming the cranberry industry that Ocean Spray has been an integral part of for more than 80 years. The campaign is designed to damage Ocean Spray’s reputation, to frustrate Ocean Spray’s relationships with its customers, and to undermine Ocean Spray’s dealings with its grower-owners and with other cranberry growers across the industry.
2. Decas Cranberry launched this campaign against Ocean Spray, its direct
competitor, in or about 2009, and has used a variety of tactics and media for its campaign,
including widely distributed letters and emails, internet blogs and websites, Facebook accounts, YouTube videos and Twitter postings.
3. Recently, as part of this campaign, Decas Cranberry, the John Doe Handlers and
the John Doe Growers have solicited cranberry growers (including Ocean Spray’s growerowners) not to work with Ocean Spray, and to join a lawsuit against Ocean Spray by falsely claiming that Ocean Spray is violating the law, including the federal antitrust laws. This conduct violates the Agricultural Fair Practices Act, 7 U.S.C. §§ 2301 et seq., which is designed to protect growers from precisely this type of conduct.
4. Decas Cranberry also recently attacked Ocean Spray in a marketing campaign
called Scamberry.org that Decas Cranberry misleadingly suggested emanated from an
independent consumer advocacy group, instead of from Decas Cranberry itself.
5. Each false and deceptive act of the campaign has been designed for the same
purpose, to smear Ocean Spray and to harm its relationships with growers, customers, and
consumers, all with the hope of increasing Decas Cranberry’s profits at Ocean Spray’s expense. These activities therefore also violate the Lanham Act, 15 U.S.C. § 1125(a), and the
Massachusetts Unfair and Deceptive Trade Practices Act, Mass. Gen. Laws ch. 93A."
Once upon a time, practicing law was local. Today, for some clients and lawyers, the issues are global. Indeed, they went global many years ago, and we were headed towards multi-state and multi-disciplinary practice in the US, until Enron.
Today, the ABA and others are focusing again on multi-state issues. One hopes real progress is quickly made in eliminating some of the useless and anti-competetive restrictions. A Lawcom article picks up a New York Law Journal article by Nate Raymond on this subject. That article includes this link to an ABA Commmission looking at the issues, and to a New York report on the subject.
From my perspective, changes are badly needed so that specialist trial lawyers can attack or defend entities in lawsuits that necessarily sprawl across state and national lines because the acting enties are multinational. Consider, for example, the Dole pesticide exposure claims that are now producing yet another chapter in the long-running saga of Dole's overseas use of a pesticide banned in some states. See this August 4 article by Alison Frankel. Or, consider multi-national insurers that for decades sold occurrence-based liability policies to US shareholders, but now are using UK courts to seek to dissolve and terminate their obligations to the policyholders.
In short, corporate entities can and do operate globally, and can bring massive resources to bear, Some irresponsible corporate managers will continue to mistreat individuals until lawyers are able to operate equally globally and are able to act with significant global resources. That's part of why some (but not all) global companies despise litigation funding - it starts to level the playing field. Ethical reforms are needed to further level the playing field.
Kevin LaCroix's blog, D & O Diary, includes informative recent posts that provide a point-counterpoint on plaintiff and defense views on the Supreme Court's recent Morrison uling on jurisdiction and global securities litigation.
Medical research often is "sponsored by industry," for obvious reasons. And, in general, more research is good. There are, however, said to be "controversies " about whether all medical study information should be required to be publicly published. The topic occasionally has been covered on this blog under the category of "sponsored research," which is available on the right side of the home page.
Now, we have scientists studying the subject and publishing objective data. The results? The authors call the results "stunning" in terms of a propensity to publish favorable data.
Specifics ? ScienceDaily brings this new article created from this press release regarding this full article.
Conclusion? Seems like publishing all research data would be a much better practice. And, publishing all data certainly would make it harder for plaintiffs to later claim that "industry" suppressed "data."
Here are key excerpts from the ScienceDaily article:
"Overall, allowing for a three-year lag time from the completion of the trial, two-thirds of the trials had published results. The industry-funded trials reported positive outcomes 85 percent of the time, as compared with 50 percent for government-funded trials and 72 percent for trials funded by nonprofits or non-federal organizations. In addition, among the nonprofit/nonfederal trials, those that had industry contributions (nearly half) were more likely than those without to report positive outcomes (85 vs. 61 percent). These differences were all statistically significant.
The researchers acknowledge that the pharmaceutical industry was probably more selective in which trials it funded, helping to account for their greater proportion of favorable outcomes. "Industry is very good at knowing what they want to study, and industry-sponsored studies are more efficient and well funded," says Bourgeois, the study's first author. "But despite these potential biases, this is a stunning result.""
Yesterday's post decried secrecy regarding claims submitted to asbestos bankruptcy trusts. One obvious question, then, is whether courts can and should go back and undo prior secrecy orders.
On that subject, there is a fairly analogous recent decision from a California appellate court that was asked to review a case involving one judge revisiting secrecy orders imposed by another judge. The In Re Nicholas opinion is here, and was brought to my attention by this recent article by Kate Moser from the Recorder.
Obviously bankrutpcy courts are not following California law, but the stated principles seem so sensible, one hopes they could be applied in bankruptcy. On that score, note especially the last line in the quotes below. The last line includes the court's reiteration of the rule that secrecy should not be allowed simply because it was agreed to by the parties, as is so often the case in bankruptcy proceedings.
The opinion's key excerpts state:
"We reject Nicholas‟s efforts to treat sealing orders as if they sealed caskets rather than presumptively open court records, “stamp[ing] upon our jurisprudence the unchangeableness attributed to the laws of the Medes and Persians.” (Hurtado v. State of California (1884) 110 U.S. 516, 529.)
Nicholas‟s arguments fail for three reasons. First, Nicholas‟s jurisdictional box runs afoul of constitutional principles, California Supreme Court decisions, and judicial rules concerning the sealing and unsealing of court records. A strong presumption exists in favor of public access to court records in ordinary civil trials. (NBC Subsidiary, supra, 20 Cal.4th at p. 1212.) That is because “the public has an interest, in all civil cases, in observing and assessing the performance of its public judicial system, and that interest strongly supports a general right of access in ordinary civil cases.” (Id. at p. 1210.)
Since the First Amendment guarantee of public access to the courts is at stake, family law departments may close their courtrooms and seal their court records only in limited circumstances, and only when they expressly identify the particular facts that support the existence of NBC Subsidiary’s constitutional standards. (Burkle, supra, 135 Cal.App.4th at p. 1052; see NBC Subsidiary, supra, 20 Cal.4th at pp. 1217-1218; Cal. Rules of Court, rules 2.550(d), 2.550(e).)
Open court records safeguard against unbridled judicial power, thereby fostering community respect for the rule of law. “If public court business is conducted in private, it becomes impossible to expose corruption, incompetence, inefficiency, prejudice, and favoritism. For this reason traditional Anglo-American jurisprudence distrusts secrecy in judicial proceedings and favors a policy of maximum public access to proceedings and records of judicial tribunals.” (Estate of Hearst (1977) 67 Cal.App.3d 777, 784 (Estate of Hearst).)
Since orders to seal court records implicate the public‟s right of access under the First Amendment, they inherently are subject to ongoing judicial scrutiny, including at the trial court level. “Due to its temporary nature and its infringement upon the public right to know, a sealing order in a civil case is always subject to continuing review and modification, if not termination, upon changed circumstances.” (Copley Press, Inc. v. Superior Court (1998) 63 Cal.App.4th 367, 374 (Copley Press) [issuing writ of mandate to compel trial court to grant newspaper‟s motion to unseal court file relating to settlement of school sexual assault case].)
In Estate of Hearst, supra, 67 Cal.App.3d 777, a probate court struggled over public access to periodic accountings and other material dealing with the testamentary trust of publishing magnate William Randolph Hearst, given terrorist threats to family members, including the kidnapping of granddaughter Patricia Hearst. On appeal, the Estate of Hearst court stressed the public‟s “legitimate interest in access to public records, such as court documents” (id. at p. 784), an interest that was best served by “temporary” limits on access, with a “continuing burden” on the party seeking to seal court records to “periodically show” the need for restricted access (id. at p. 785).
In this regard, sealing orders are akin to interim provisional orders like temporary restraining orders or preliminary injunctions, which are appealable. (Code Civ. Proc., §§ 904.1, subd. (a)(6); 904.2, subd. (g).) Nonetheless, unless the action is stayed pending appeal, trial judges retain the inherent power to modify a preliminary injunction “which is of a continuing or executory nature.” (City of San Marcos v. Coast Waste Management, Inc. (1996) 47 Cal.App.4th 320, 328.) “The fact that a preventive injunction purports to be „permanent‟ or „preliminary‟ in form is not significant. Unforeseeable circumstances necessitating modification or dissolution of the injunction may occur in either case. When the decree is continuing in nature, directed at future events, it must be subject to adaptation as events may shape the need.” (Union Interchange, Inc. v. Savage (1959) 52 Cal.2d 601, 604.)
Thus, the fifth sealing order was a way station, not a final destination. Acting in response to the Times‟s intervention, Judge Sarmiento set in place a process which would essentially outsource yet-to-be-made determinations regarding the sealing or unsealing of court records to the special master. Yet, as the Times points out, the fifth sealing order itself neither sealed nor unsealed a single document, and did not expressly identify the particular facts necessary to satisfy the constitutional standards for sealing court records, as detailed in rule 2.550 of the California Rules of Court. Instead, the fifth sealing order, like the fourth sealing order it purported to vacate, merely incorporated by reference the same rote recitation of the listed criteria that Judge Sarmiento incorporated in the fourth sealing order and the second sealing order. Such “findings” are not the same as facts supporting those findings. Indeed, Judge Sarmiento did not himself describe the fifth sealing order as a “final” collateral order. Neither do we.
Judge Firmat, the supervising judge of the family law department, confirmed the provisional nature of Judge Sarmiento‟s sealing orders when he transferred the Nicholas divorce proceedings from Judge Sarmiento to Judge Waltz. In stating that Judge Waltz‟s judicial responsibilities included the sealing or unsealing of court records, Judge Firmat specifically mentioned the Times‟s pending motion to unseal.
Second, we reject Nicholas‟s jurisdictional argument because it would eliminate the court‟s express authority to unseal records. California Rules of Court, rule 2.551(h), authorizes trial judges to issue orders to unseal records that previously have been sealed by prior court orders. Indeed, any person, not just litigants, can move, apply or petition to unseal any court record. In determining whether to unseal a record, the court is required to consider the elements outlined in rule 2.550(c)-(e). (Cal. Rules of Court, rule 2.551(h)(4).) No showing of changed circumstances is necessary on a motion to unseal. (Copley Press, supra, 63 Cal.App.4th at pp. 374-375.) Unsealing orders accomplish precisely what Nicholas contends judges should be barred from doing — revisiting preexisting sealing orders.
As the Copley Press court emphasized, the power to unseal is a critical safeguard for the public‟s right to know. “The public has a legitimate interest in access to court documents because „[i]f public court business is conducted in private, it becomes impossible to expose corruption, incompetence, inefficiency, prejudice, and favoritism.‟ [Citation.]” (Copley Press, supra, 63 Cal.App.4th at p. 373.)
Third and last, Nicholas‟s argument that Judge Waltz was powerless to modify sealing orders issued by Judge Sarmiento, his predecessor in the same dissolution proceeding, ignores an (albeit lamentable) “culture of rotation” in urban family law departments (see Alan S. v. Superior Court (2009) 172 Cal.App.4th 238, 247, fn. 10), as well as the express authority of successor judges to control their own case files and to alter or amend orders issued by their predecessors in the same case. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1097 (Le Francois); see also New Tech Developments v. Bank of Nova Scotia (1987) 191 Cal.App.3d 1065, 1069-1070 [second judge may dissolve injunction issued by first judge, who was unavailable].) Here, Judge Waltz inherited the case, and the attendant responsibilities to run an open and accessible courtroom. On his own motion, he initiated a hearing on the indecipherable and unmanageable recordkeeping process.
Given the judiciary‟s “core power to decide controversies between parties,‟” a trial court retains the authority to alter or amend its own rulings in the same case, whether made by the same judge or by his or her predecessor. Any other restriction “would directly and materially impair and defeat the court‟s most basic functions, exercising its discretion to rule upon controversies between the parties and ensuring the orderly administration of justice.” (Le Francois, supra, 35 Cal.4th at p. 1104.) “A court could not operate successfully under the requirement of infallibility in its interim rulings. Miscarriage of justice results where a court is unable to correct its own perceived legal errors. . . .”‟ [Citation.]” (Id. at pp. 1104-1105.)
Judge Waltz acted properly in issuing the seventh sealing order to revisit previous sealing orders, including the fifth sealing order, that impaired public access and hampered his ability to supervise the case. Plainly, the power to issue sealing and unsealing orders underscores the provisional nature of sealing remedies. A court is — or should be — “master of its own files.” (H.B. Fuller, supra, 151 Cal.App.4th at p. 889.)
Nicholas relies upon Church of Scientology v. Armstrong (1991) 232 Cal.App.3d 1060 (Scientology) to deprive Judge Waltz of any power to conduct what Nicholas contends amounts to an “appellate review” of Judge Sarmiento‟s fifth sealing order of December 2007. According to Nicholas, “Scientology — whatever the merits of its holding regarding the standards for issuance of an order to seal court records — establishes that one trial judge may not revisit and „overturn‟ the final orders of a prior trial court judge . . . .”
We lack Nicholas‟s faith in Scientology. There, a church and a former member settled their dispute at the end of the case-in-chief by stipulating that all court records would be returned to the church and the court files sealed from public view. Following the settlement, a litigant in another case against the church convinced the trial judge‟s successor to unseal the records. On the church‟s appeal, the Court of Appeal reversed, holding that too much time had passed “and the parties had the right to rely on the sealing order.” (Scientology, supra, 232 Cal.App.3d at pp. 1069-1070.)
The Scientology court‟s stated rationale cannot stand in the face of subsequent decisional and statutory law. Scientology predates the California Supreme Court‟s landmark decision in NBC Subsidiary that precluded trial courts from sealing the records of civil proceedings absent noticed hearings and findings to justify such restrictions. (NBC Subsidiary, supra, 20 Cal.4th at pp. 1181-1182.) Parties no longer can stipulate, as in Scientology, to seal certain records from public view. (H.B. Fuller Co., supra, 151 Cal.App.4th at p. 891 [sealing order must be based on facts, as found by the trial court, not stipulation by the parties]; see Cal. Rules of Court, rule 2.551(a) [a “court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties”].)"
According to a public statement that is on line here, the U.S. Chamber of Commerce is pleased that RAND has issued its Phase 1 report on the asbestos bankruptcy trusts. The Chambers' statement focuses on one of the issues related to the trusts.
The issue in focus is the reality that claims submitted to trusts are NOT treated as public information. This situation illustrates a perversity created in the bankruptcy trust system by the self-interested parties that cut deals that are almost always approved, even if they include lousy or illegal plan terms and even if the plan is destined to fail, as many do, as proven by Prof. Lynn LoPucki and others in a great book that highlights huge picture problems in the administration of bankruptcy law. The book, Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts is described in this prior post.
Tort lawsuits, in contrast, are matters of public record. Accordingly, tort claims are subject to public scrutiny that allows parties, legislators and courts to know which persons are filing claims against which entities. And, if parties want to know what is paid in verdicts or settlements, they usually (not always) have a state law right to acquire the information.
The lack of transparency in bankruptcy courts is a stunningly broad problem that goes well beyond asbestos trusts, as described in this and other prior posts. The specific problem of bankruptcy trust secrecy highlights just one of the many reasons why current bankruptcy practice is at best a lousy way to handle mass tort problems. The GAO was previously asked to study and report on bankruptcy trust secrecy, one hopes that a fair and scholarly report is issued. There also is a detailed, prior defense-side article on the subject; go to this prior post for links and commentary on the article.
Set out below is the full text of the Chamber's statement that focuses on the issue of secrecy. The double-dipping term is unfortunate, however, because under state law, there is nothing wrong with tort victims claiming money from more than one tort-feasor. The problem is the secrecy regarding which persons are claiming money from which entities.
There also is irony in the bankruptcy trust secrecy. How? Many members of the Chamber explicitly have been part of bankruptcy court deals that call for secrecy for asbestos bankruptcy trusts. Likewise, lots of insurers are today complaining about secrecy, but in the past (and even today) have consented to secrecy in order to get settlements done in the asbestos bankruptcy cases. Perverse? You bet, but that's how things go in bankruptcy - parties cut deals and the judges bless them, regardless of wisdom and sound public policy.
__________________________________________________________________________
WASHINGTON, D.C.—The U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) today applauded a new study released by the RAND Institute for Civil Justice that provides the foundation for debate over how to reform the broken asbestos bankruptcy trust system. The RAND study is the first phase of a major research project investigating the bankruptcy compensation system for asbestos claimants.
“While the bankruptcy trusts were created to compensate those with proven asbestos-related illnesses, they have become a playground for enterprising plaintiffs’ lawyers who have learned how to game the system,” said ILR President Lisa Rickard. “The RAND report underscores the level of trial lawyer control over the trusts and the inability to link payments across trusts to the same individual – encouraging some to dip into multiple trusts with impunity.”
In Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts, RAND compiled publicly available data on the history of the asbestos bankruptcy trusts as well as how they are organized, governed and payments are processed. Through its research, RAND identifies a trend where a small group of asbestos plaintiffs’ attorneys have become “repeat players” representing a large number of claimants.
The report also finds that there is typically no coordination between trusts to determine whether a claimant’s exposure evidence is consistent. As the report explains, “a claimant needs credible evidence that he or she worked with or around asbestos during the period of time when asbestos was in use.” However, while claimants have been found to submit conflicting exposure evidence to multiple trusts, the lack of coordination between trusts allows fraudulent claims to slip through the system.
“This study sheds further light on the growing problems surrounding these trusts, including their lack of transparency, coordination and oversight,” Rickard concluded. “Given the massive assets of these trusts, Congress, the Government and Accountability Office and state legislatures must begin to seriously investigate the trust system to prevent future abuses and better provide just compensation for those truly injured.”
ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the national, state, and local levels.
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.
Public scrutiny of mass tort trusts just escalated dramatically. The escalation arrives in the form of the Rand think tank releasing its Phase 1 report that is part of its major study of asbestos bankruptcy trusts. The Report is available on line here at no cost. The Report's authors are Lloyd Dixon, Geoffrey McGovern, and Amy Coombe. The Report is titled:
Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts
This Report is a big deal, in my view. So, over the next few weeks, readers can expect to see here various comments on the Report, and presentation of facts that help to put the Report in context. Today's post starts that process with some background and big picture comments on the importance of RAND's study.
For those new to asbestos, analysis starts with some relevant background. Rand’s website is here, and is worth browsing in order to observe in general the massive depth of its experience and expertise on many civil litigation subjects, among many topics it has covered. And, more specifically, RAND brings to the table enormous experience in asbestos litigation as it previously studied asbestos litigation and issued major reports that soon became definitive statements on the subject of asbestos litigation in the US. Here is a full list of RAND’s asbestos related publications. The RAND studies date back to a 1985 report and a 1992 report. A 2002 interim study is here. That study contains some of the information found in RAND’s major 2005 study, which is here.
What’s important about this Phase 1 study? Many things. Overall, this study is critical because it sets an indisputable factual platform for debate and decision-making regarding the now-enormous bankruptcy compensation system for asbestos-claimants. Why indisputable? Because RAND took in data on 26 trusts, analyzed the data through its own peer review processes, and offered an opportunity to comment to trusts, defense lawyers and plaintiff’s lawyers, among others. Comments were submitted by 23 trusts. See Report at xi – xii.
Comments also were submitted by counsel for asbestos defendants and plaintiffs. See Report at xix. More specifically, the asbestos plaintiff’s bar brought tremendous expertise and resources to the analysis and comments. Thus, the commenters included Elihu Inselbuch, who is the dean of the bankruptcy bar representing the interests of asbestos claimants. Mr. Inselbuch’s comments no doubt included comments from myriad asbestos plaintiff’s lawyers who represent the asbestos claimants. Mr. Inselbuch’s bio is here. It states, among other things:
“Highlights
Since 1985, when he was first retained to act for the Asbestos Claimants' Committee in the Manville reorganization, Mr. Inselbuch has been recognized for his extensive experience in asbestos creditors’ rights litigation. Working with the asbestos plaintiffs bar, Mr. Inselbuch has represented their constituency in a number of large bankruptcies and class actions, including Johns Manville, Jim Walter Corp., Raytech Corporation, Babcock & Wilcox, Pittsburgh Corning, Armstrong World Industries, G-I Holdings, W.R. Grace, United States Gypsum, Federal Mogul, Owens Corning, Ortiz v. Fibreboard, North American Refractories Company, Kaiser Aluminum, Global Industrial Technologies, Combustion Engineering, Dresser (Halliburton), ACandS, Congoleum, Flintkote and Quigley.”
The plaintiff’s bar and Mr. Inselbuch also were able to draw on strong connections to RAND. Why? Because Mr. Inselbuch and the trusts frequently use the services of an expert witness and advisor, Mark Peterson. Mr. Peterson previously was a senior research analyst at RAND (1976-2000), and authored portions of some of RAND’s reports on civil jury trials in general, among others. Mr. Peterson’s vita is available on line here from prior asbestos bankruptcy litigation. Mr. Peterson’s vita states the following as to engagements as an expert witness and advisor for asbestos claimants and trusts, as well as some non-asbestos trusts and situations. The vita states the following, among other things:
1984-Present--Legal Analysis Systems, Inc. Special master, expert consultant in complexlitigation.
Findley v. Falise, Findley v. Blinken (mandatory, limited fund class actions to reorganizeManville Personal Injury Settlement Trust): Special Advisor to U.S. District Courts for Easternand Southern Districts of New York, U.S. Bankruptcy Court for Southern District of New York.
Special master and technical consultant to the courts and parties.Fuller-Austin Settlement Trust: Trustee, Chairman of the Trust and expert on estimation of claims for trust created to allow and pay asbestos personal injury claims.
NGC Asbestos Disease and Property Damage Settlement Trust: Consultant for estimatingpresent and future asbestos personal injury claims and cash flow analyses of Trust’s ability to pay projected claims.
UNR Asbestos Disease Claimants Trust: Consultant on estimation of present and future asbestos claims and claims distribution procedures.
Eagle-Picher Asbestos Trust: Consultant on estimation of present and future asbestos claims and claims distribution procedures.
Celotex Trust: Consultant to Representative of Future Claimants regarding estimation of asbestos liabilities.
Keene Asbestos Claimants Trust: Expert of estimation of liabilities for asbestos personal injury claimants.
CNA: Expert for CNA insurance on liabilities of an asbestos defendant insured by CNA.
In re: H. K. Porter Inc. Asbestos Claimants Trust: Consultant on estimation of present and future asbestos claims and claims distribution procedures.
In re: Celotex and Carey Canada: Expert for Asbestos Claimants’ Committee on estimation and treatment of asbestos personal injury claims.
Ahearn v. Fibreboard (mandatory class action): Expert for CNA and Continental insurance Companies regarding estimation of values of future asbestos personal injury claims and likely performance of the proposed Fibreboard Trust.
In re Bankruptcy of Dow Corning Corporation: Expert for Tort Claimants’ Committee regarding estimation and treatment of breast implant and other medical implant claimants.
In re: Bankruptcy of Wallace and Gale Corporation: Expert for Asbestos Claimants’ Committee regarding estimation and treatment of asbestos personal injury claims.
In re: Bankruptcy of Fuller-Austin Insurance Company: Expert for Asbestos Claimants’ Committee regarding estimation and treatment of asbestos personal injury claims, negotiation of prepackaged bankruptcy plan and cash-flow analyses for proposed claimants’ trust.
In re: Bankruptcy of Raytech Corporation: Expert for Asbestos Claimants’ Committee regarding estimation and treatment of asbestos personal injury claims and for design of procedures to pay such claims.
In re: Bankruptcy of Raymark Corporation: Expert for Unsecured Claimants’ Committee regarding estimation of liabilities for asbestos personal injury claims.
In re: The Babcock and Wilcox Company et. al.: Expert for Asbestos Claimants’ Committee in bankruptcy proceedings regarding estimation and treatment of asbestos personal injury claims.
In re: Pittsburgh Corning Corporation: Expert for Official Committee of Unsecured Asbestos Creditors in bankruptcy proceedings regarding estimation and treatment of asbestos personal injury claims.
In re: Owens Corning, et. al.: Expert for Official Committee of Asbestos Claimants in bankruptcy proceedings regarding estimation and treatment of asbestos personal injury claims.
In re: Bankruptcy of Eagle-Picher Industries, Inc.: Expert for Injury Claimants Committee regarding estimation and treatment of present and future asbestos injury claims and design of
Trust distribution procedures to pay asbestos and potential lead claims.
In re: Bankruptcy of National Gypsum Corporation: Expert for Asbestos Claimants Committee regarding estimation and treatment of present and future asbestos injury claims and design of Trust distribution procedures to pay asbestos personal injury claims.
In re: Bankruptcy of H. K. Porter Company, Inc.: Expert for Unsecured Creditors Committee regarding estimation and treatment of present and future asbestos injury claims.
In re: Bankruptcy of Hillsborough Holdings Corporation: Expert for Asbestos Claimants regarding estimation of values of present and projected future claims against Celotex Corporation at various points in time.
In re: Bankruptcy of Keene Corporation: Expert for Asbestos Claimants Committee regarding estimation of present and future asbestos claims.
Manville Personal Injury Settlement Trust: Developed ‘‘expert system’’--rules for evaluating asbestos personal injury claims derived from plaintiffs and defense lawyers.
In re: Bankruptcy of A. H. Robins Company, Inc.: Neutral expert for the U.S. Bankruptcy
Court for Eastern District of Virginia. Developed ‘‘expert system,’’ data bases and statistical analyses to evaluate claims for personal injuries from Dalkon Shield.
Jenkins v Raymark (Voluntary class action): Neutral expert for the U.S. District Court, Eastern District of Texas to evaluate asbestos personal injury claims.
Ohio Asbestos Litigation Plan: Neutral expert for the U.S. District Court, Northern District of Ohio to valuate asbestos personal injury claims.
MGM Grand Hotel Fire Insurance Litigation: Expert for Frank B. Hall, Inc. to evaluate wrongful death and personal injury claims arising from MGM Grand Hotel fire.
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