The world's most polluted places. Our Amazing Planet provided this eye-opening Earth Day story in words and pictures. The story shows that some mining and extraction operations create massive pollution. Some are government owned and some are private. One wonders whether and how they will be held accountable for harms caused.
Hat tip to Huffington Post for linking to the story.
Asbestos returned to the Supreme Court yesterday in the context of securities litigation. The case arises from Halliburton's purchase of Dresser Industries, a long-time asbestos defendant. Ultimately, the disaster known as Dresser forced a chapter 11 filing by Halliburton entities to deal with the asbestos problem. Along the way, Halliburton's stock price cratered. I remember it well because my we had hedge fund traders calling for advice on the scope of Halliburton's massive problems acquired via Dresser and other deals.
Former Vice-President Dick Cheney was the CEO of Halliburton when it made the decision to buy Dresser. The losses which ultimately befell Halliburton were eminently foreseeable and indeed cost the company many billions, although it later recouped some billions through settling insurance policies. (One wonders how Mr. Cheney and others made the decision to buy Dresser - in a stock deal - without meaningful indemnities. The purchase seems almost as ill-conceived as Federal-Mogul's decision to buy asbestos giant Turner & Newall, a purchase that also caused a bankruptcy.)
Anyway, the Dresser disaster's consequences for shareholders are now before the Supreme Court in a securities fraud case on class certification standards. Long story short, the shareholder suit involves claims that Halliburton failed to properly disclose the asbestos risks of Dresser (that's surely true). SCOTUS has the case because of the 5th Circuit 's aberrant views on class certification standards. It's aberrant standards frankly are a recipe for how to fail to disclose toxic tort risks and then try to game the system by making belated disclosures to muddy the waters.
The case is provoking much debate, including ongoing blogging at the Conglomerate by several law professors. The posts include all the links one might want.
The also produced many amicus briefs, including pro-shareholder briefs by the US government , and by Professor Coffee and others. The usual defense groups are of course applauding the 5th Circuit's view, including DRI and the Chamber of Commerce, but they may have lost some credibility for doing so because the accounts of oral argument say that Halliburton's counsel conceded the 5th Circuit was off the mark at least in part. The Fifth Circuit opinion is here.
My conclusion? One hopes the Justices have the wisdom to reverse the 5th Circuit. If they fail to reverse, or approve muddled mixes of disclosures, companies will have much more leeway to fail to make timely and accurate disclosures of toxic tort risks. That's a bad outcome for everyone, except insider traders. I'm optimistic in view of the Court's pro-disclosure opinion earlier this term in Matrixx . As covered in this prior post, the Matrixx Court held that drug companies are indeed required to fully disclose adverse facts and possibilities arising from science.
Engineers are creating better software for managing massive amounts of information in visual form. ScienceDaily has the story on new tools created at the University of Wisconsin. Go here to see the tool in use via any of several examples, such as a journey through a real vein and really seeing plants grow. The vein video brings to mind the 1966 movie, Fantastic Voyage. The body of science certainly has changed since then.
Piracy on the water is now attracting investment capital and it's being used to upgrade equipment, according to a U.S. Navy official and Bloomberg's account of the story. Bloomber's story has more detail, but the opening is set out below. As the Bloomberg story notes, crime flourishes when other work is not available.
The article notes that many ships fail to follow best practices, and thus make themselves easy targets. It's interesting to read this and wonder how much of a subsidy our nation and others are providing to the insurance industry by providing warships and soldiers to reclaim pirated ships and protect foolish ship owners. Insurers spend lots of time placing ads claiming they find and root out lots of fraud and crime. If all those words are true, one wonders why they can't manage their insured ships away from the pirates.
"Piracy syndicates are selling shares in planned attacks, fueled by a surge of ransom payments that help attract investors, the U.S. Chief of Naval Operations said.
Piracy syndicates in villages, mainly in largely ungoverned Somalia, solicit investors who buy shares in the attack missions and gain a corresponding share of ransoms paid by the shipping industry, Admiral Gary Roughead said.
“The ransoms fuel the business, the business invests in more capability, either in a bigger boat, more weapons, better electronic-detection means to determine where the ships are,” Roughead said in an interview in Bloomberg’s Washington Bureau today. “So it’s a business.”
The average ransom payment rose 36-fold over five years to $5.4 million last year, compared with $150,000 in 2005, according to the Louisville, Colorado-based One Earth Future Foundation. The payments are fueling increased raids, adding at least $2.4 billion to transport costs because vessels are being diverted onto longer routes to avoid attacks off east Africa, the non-profit group said earlier this year. "
Earth Day. A day to consider some of the consequences of the BP oil rig fiasco in the larger context of mass torts. One problem arising from mass torts is that the world's legal systems are doing a lousy job of dealing with the persons and entities suffering loss caused by the tort. Among other problems, the injured parties are rendered involuntary and unsecured creditors of the person or entity causing the tort. In that context, one might also think of Mother Nature, the Gulf waters and its creatures as members of the vast group of international, involuntary creditors. All of the victims/creditors face new challenges because BP has now filed suit , blaming the fiasco on the owner of the rig (Transocean) and the maker of the blowout preventer (Cameron International). Accordingly, at least in theory, BP also could be an involuntary creditor of the real problems.
A business professor recently wrote touched on the social and legal problem of torts creating involuntary creditors through an article focused on the BP oil fiasco. Dr. Jean Helwege's online article unfortunately is locked away behind the digital barrier the American Bar Association shortsightedly imposes for articles published in its magazines. The article is titled: The Gulf Oil Spill: Social Versus Legal Obligations Facing BP, and appears in the Winter 2011 issue of the SciTech Lawyer, at 6-7.
Dr. Helwege's article is notable for at least three reasons. First, she raises the prospect of raising the creditor status for involuntary tort creditors, or "going back to a Superfund structure where we tax likely polluters in advance of their expected crimes. Conversely, if we do not push at all, these "accidents" will occur too often from lack of care. The situation is reminiscent of drunk driving in America before the creation of Mothers Against Drunk Driving (MADD). Back then drunks, would get behind the wheels of their cars and kill people, and we used to call them accidents. MADD convinced us that these incidents were not entirely unpreventable." Dr. Helwege's well-stated argument obviously could (and should) also be applied to protect the interests of personal injury creditors, and not simply environmental creditors.
Dr. Helwege's article also is valuable for making that point that the uncertainty of future toxic tort injuries creates leverage that is in fact used in bankruptcy court to allow shareholders to create bargaining power over the sometimes likely but not well organized groups of likely future victims. In making this point, Dr. Helwege correctly points to asbestos bankruptcies as a prime example of tortfeasors using bankruptcy to evade paying full value for losses caused, and identifies Manville as one of the entities that paid too little.
And, finally, the article is notable for coming close to calling a spade a spade with respect to tobacco industry asset movement games in which the non-tobacco assets have been separated from the tobacco assets so that less money is available to pay future injured smokers. Thus, she notes: "By separating the pieces of the negligent company and calling into question the which parts of the legal entity have obligations to pay, BP can reduce the pool of assets available for negotiation in bankruptcy. This line of thinking undoubtedly spurred the boards of Phillip Morris and RJR Nabisco to shed their food businesses as they faced increasingly unfavorable tobacco litigation outcomes."
Conclusion? Involuntary tort victims deserve better than law gives them today. New solutions are needed, including small-scale answers such as described in this post on the corporate bonding suggestion of Professor Rhee as a means for dealing with small-scale tort victims of insolvent corporate entities. A recent article on a young and tragically injured drunk driving victim made me think that Professor Rhee's proposal could be slightly modified to create a fund to provide better care for persons paralyzed by under-insured drunk drivers. Professor Helwege further drives the point home with her pointed observations about MADD having changed the legal and social landscape. The law needs to do better for tort victims/involuntary creditors, including even Amoco if in fact the fault lies with the rig owner and the manufacturer of the blowout preventer.
How will mesothelioma tumors be treated in a decade ? Will lives be extended for many years? Will every person with mesothelioma seek gene therapy as a remedy ? Will Madison and St. Clair Counties find new cancers to focus on instead ?
The preceding questions are no doubt somewhat fanciful. But, science is pressing ahead. Thus, a Phase 2 clinical trial is now underway in the UK to try to stave off mesotheliomas by depriving the tumors of an amino acid (arginine) that some mesothelioma tumor cells need to grow. The theory is that an enzyme known as ADI-PEG 20 will block production of the arginine, and leave the tumor unable to grow. Set out below is the press release from the sponsor - Polaris Group, a San Diego based entity. The company also intends to try the same tactic against small cell lung cancer (SCLC), which is the basic name for forms of lung cancer almost exclusively tied to cigarette smoking.
Polaris' website includes a medical literature section, and it includes an abstract from which the following excerpt is drawn, as to a Phase 1 trial of ADI-PEG 20. The numbers are relatively encouraging:
"Results: In keeping with the cell line data, 63% (52 of 82) of patients had tumors displaying reduced or absent AS protein, as assessed using a tissue microarray. Cell viability declined markedly in the AS-negative cell lines 2591and MSTO but not in the AS positive cell line, 28.This response was apparent by day 4 and maintained by day 9 in vitro. Arginine depletion induced BAX conformation change and mitochondrial inner membrane depolarization selectively in AS-negative MPM cells.
Conclusions: In summary, we have identified AS negativity as a frequent event in MPM in vivo, leading to susceptibility to cytotoxicity following restriction of arginine. A phase II clinical trial is planned to evaluate the role of arginine depletion in patients with AS negative MPMding to susceptibility to cytotoxicity following restriction of arginine. A phase II clinical trial is planned to evaluate the role of arginine depletion in patients with AS negative MPM."
Hat tip to Genetic Engineering & Biotechnology News.
The Polaris press release is below.
_____________________________________________________________________
Date: March 18, 2011
Enzyme-Based Cancer Therapy Now Being Evaluated in Multiple Cancers
SAN DIEGO, March 18, 2011 -- Polaris Group announced today the enrollment of the first patient in a Phase 2 clinical trial of ADI-PEG 20 (pegylated arginine deiminase), the company's novel enzyme-based treatment for malignant mesothelioma. This randomized trial, called "ADAM" (Arginine Deiminase And Mesothelioma), will evaluate the treatment efficacy of ADI-PEG 20 as a single agent compared to the best supportive care. The primary endpoint of the study is progression free survival.Peter Szlosarek, M.D., Ph.D., of the Centre for Experimental Cancer Medicine, Barts Cancer Institute, Queen Mary University of London, is the lead investigator of the study. "It is with great anticipation that the ADAM trial has opened at Barts and other cancer centers in the U.K., including hospitals in Belfast, Cambridge, Hull, Manchester and Southampton." said Dr. Szlosarek. "We are pleased to be joining Polaris Group in exploring the potential benefits of ADI-PEG 20 in treatment of different cancers."
Malignant mesothelioma is a cancer of the lungs that frequently occurs in people who have been exposed to asbestos. The disease is usually diagnosed two to three decades after prolonged exposure and when it has generally spread beyond the stage for successful surgical treatment. The prognosis for patients with late stage malignant mesothelioma is poor with a median survival of less than one year.
Polaris Group scientists and colleagues have been investigating the metabolic enzyme argininosuccinate synthetase (ASS) and its presence or absence in relationship to growth of normal cells and tumor cells. ASS is required for the production of arginine, an amino acid needed for growth and replication of cells. Normal cells have normal levels of ASS and can produce sufficient arginine for their own growth and survival. However, many types of tumor cells cannot make their own arginine due to a deficiency in ASS and, therefore, must obtain it from external sources. ADI-PEG 20 depletes the external supply of arginine, causing these tumor cells to die.
The sensitivity of several ASS-deficient tumor cell lines to ADI-PEG 20 has been recently reported at the 2010 Annual Meeting of the American Association for Cancer Research. Previous studies supported by Cancer Research UK (CR-UK) and conducted by Dr. Szlosarek demonstrated that 63 percent of patients with malignant mesothelioma had low levels or no ASS in their tumor tissues. The study also demonstrated that viability of mesothelioma cell lines from these patients declined markedly when deprived of arginine if they were ASS-negative.
Robert Jackson, Ph.D., chairman of the CR-UK Discovery Committee, and a member of the Polaris Scientific Advisory Board, commented: "We are very excited to have started the study with ADI-PEG 20 in malignant mesothelioma. Dr. Szlosarek has been one of the leaders in researching and targeting ASS-deficient tumors with ADI-PEG 20. The initiation of this mesothelioma trial with ADI-PEG 20 is a good example of a CR-UK funded laboratory study forming the basis of a new experimental treatment. CR-UK is committed to such important translational research initiatives in cancer."
John Bomalaski, M.D., executive vice president, medical affairs, of Polaris Group, added, "We are very excited about the potential of using ADI-PEG 20 to treat multiple forms of cancer. We are already evaluating ADI-PEG 20 in a Phase 2 trial in small cell lung cancer, and we look forward to initiating additional trials in tumors with a high degree of ASS deficiency. Our belief is that ADI-PEG 20 will play a key role in the future as single agent therapy or in combination chemotherapy for several cancers that continue to evade effective treatment."
News is out here and here on a paraplegic young man who is part of Geron's first clinical trial on injecting stem cells to try to aid recovery from a devastating spinal cord injury injury suffered in a car accident. There are some ironies in the story as well. Young TJ was injured on the anniversary of the birthday of actor Christopher Reeve who, as most know, became a stem cell advocate following his own devastating injuries. TJ also is part of a Baptist family leaving in the deep south, and the story recounts a religious side to the decision to proceed. Here's the science and hope part of the story:
Special teams trained
"After many delays, Geron finally persuaded the Food and Drug Administration last July to allow the company to study 10 patients. Geron spent months training special teams of doctors at seven secret sites around the country so that they could be ready to act quickly. The teams then had to wait for a patient who met the study’s strict criteria — someone who had been paralyzed from the chest down within the previous two weeks.
Surgeons planned to use specially designed equipment to infuse into the first patient’s spine about 2 million “oligodendrocyte progenitor” cells, which Geron scientists had created in the laboratory from embryonic stem cells obtained from days-old embryos left over from fertility treatments. The hope is that the cells will form a restorative sheath around the damaged spinal cord. In tests in hundreds of rats, partially paralyzed animals regained the ability to move, according to Geron."
The Montreal Gazette is reporting that the Quebec government has now said it will guarantee a loan to continue asbestos mining and exports. The government acted despite signficant outcry by opponents. Much of the fiber apparently is bound for India for asbestos-cement boards, as is described in the article.
Here is an AmLaw Daily article describing a district court ruling that highlights logical inconsistencies in the tactics and law related to long term torts. The ruling is that the filing of a class action securities lawsuit does NOT toll statutes of repose for all class members. The defensive argument was advanced by directors and officers seeking to avoid fraud claims arising from sales of mortgage-backed securities.
The logical consequence of that ruling is that would-be members of a possible class that may be certified should not sit back and wait to see what happens with the class. Instead, they should file their own suit to make sure time bar statutes do not later preclude their claims.
Years ago, the US Supreme Court considered a similar issue in the American Pipe class action litigation. The reached the correct result of holding that the filing of the class action action tolled the statute of limitations for all class members. The rationale was that the tolling rule was needed in order to avoid deluges of lawsuits.
Today, the same issue is resurfacing, but the time bar rules at issue are statutes of repose instead of statutes of limitation. Some defendants rightfully argue the two forms of statute are "different," and claim that the difference means that American Pipe tolling than statutes of limitation. In this case, Judge Kaplan accepted that reasoning, in a bare bones ruling which mainly cites to another case that reached the same outcome.
In view of Judge Kaplan's ruling, plaintiff's securities lawyers could take the most conservative view and file a suit for each plaintiff they know about in order to stop the statute of repose from running. But, if that were to happen, imagine the headlines and complaints that will flow out defendants and the US Chamber of Commerce. All will complain bitterly that "greedy plaintiff's lawyers are piling on in search of fees," and that answering all the complaints will cost defendants way too much money. And, if the securities law plaintiff's bar goes to Congress for relief, the headlines will be similar.
The bottom line ? The US legal system and existing legal rules are lousy at coping with massive claims that arise over several years. That reality was first proved in mass tort personal injury litigation. The reality is being proved again by claims arising out of the massive financial fraud on Wall Street, and the dysfunctional approach to mortgage foreclosure cases.
Persons injured by torts are involuntary creditors of the entity which committed the tort. And, today, we see increasing examples of insolvent companies failing to pay anything close to full value for massive harms spread over many years and continents. For product liability examples, consider the American car companies which used bankruptcy to largely walk away from various tort liabilities (a position later modified), bankrupt former makers of asbestos products, and various insolvent entities which produced or sold "Chinese drywall" that ruin homes and businesses. On the financial side, consider insolvent financial fraudsters such as Madoff, Lehman, AIG, and Countrywide. All of the insolvent companies shifted their risks and losses to the tort victims, which is both unjust and lousy economic policy. Happily, there is more emerging academic discussion on means to end the injustice, human suffering, and economic folly which arise from tolerating limited liability corporations which fail without leaving behind assets sufficient to cover the risks they take, and the losses they cause.
One proposal for dealing with insolvent tortfeasors is a March, 2011 "Legal Workshop" article in the William & Mary Law Review: Bonding Limited Liability. The article is by Professor Robert Rhee of the University of Maryland. His cv describes a business law professor with an MBA, and a work background in law, finance and investment banking.
Professor Rhee's paper is interesting, but is limited to a modest proposal. The proposal is modest because his proposal includes the explicit assumption that ending limited liability is politically infeasible, and explicitly excludes "long tail" torts from the scope of the tort claims to be addressed by his proposal. In short, he proposes using state or federal law to impose a corporate bonding requirement to a create a trust fund of money that would generate interest . Accrued interest would be paid out only to tort victims who 1) file suit prior to insolvency and 2) win a judgment through trial or summary judgment (that is, no settled claims.)
Professor Rhee opens the article with an abstract statement of the problem:
"Limited liability is the essential attribute of the corporate form. Although abolishing limited liability is politically infeasible, the rule is troubling as to tort creditors. Unlike contract creditors, they are not factors of production in the “nexus of contracts.” Tort law is the wrench in the smooth machinery of the contractarian explanation of limited liability. With perfect information, no reasonable society would grant the right of limited liability if a firm would produce merely a transfer payment from tort victim to shareholder, or worse, the firm’s activity would impose a net social cost. Such a society would be morally or economically bankrupt. With uncertainty as the reality, the ex ante assumption must be that every firm would be socially productive. Limited liability marches in tandem with the spirit of enterprise—the expectation of profit, a residual gain after all liabilities are paid. A good faith belief that one will not externalize the cost of liability is implied. (emphasis added)."
Professor Rhee's statement of the issue is in my view far too narrow because he argues as if the world either has perfect information, or it does not. Reality, however, is not so binary.
On the side of financial fraud and insolvents, we collectively know, for example, that finance entities take massive risks which can collapse financial systems. The only uncertainty is when and how often some entities will fail. Surely these supposedly brave financial swashbucklers should pay the full price for the risks they create.
On the product liability side, we collectively know that cigarette companies and chemical companies are selling toxins. It is certain that too many cancer rates have been marching steadily upwards for decades, that the global costs of cancer exceed $ 1.5 trillion per year, and that multi-generational cancers are occurring. The uncertainty is how many people will die or suffer from which ones of the myriad different diseases caused by their products, and the financial costs of the diseases. Surely these merchants of death and pain should pay the the full price for harms caused by their continuing sale of known and suspected toxins.
On money and scale, Professor Rhee's proposal offers a perhaps useful means to address small scale problems, such as a car wreck and personal injuries caused by an employee of a small entity that failed financially. He calculates that if a corporate bond is $2,000 and returns are 6%, then "[b]ased on the number of corporations and LLCs in California, Delaware, and New York at the end of 2008, these states would have collectively held over $7 billion in bond principal and would earn over $400 million per annum, which would be available to compensate tort victims."
Professor Rhee's article is a positive, forward step on the journey towards confronting the reality that tort victims are involuntary creditors of insolvent entities, and that bankruptcy law is doing at best a lousy job of protecting their interests. Lawyers and policy-makers need to force the issues forward to create effective and creative solutions for coping with the massive annual, global human suffering and economic waste caused by insolvent limited liability entities.
The UK Bribery Act has been much discussed and feared by some businesses. SNR Denton this week published this new advice related to the latest government pronouncements, with links to the government guidance.
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