GlobalTort : Commentary from lawyers and experts on mass torts, law, insurance and science

The US Supreme Court issued two end of term opinions which in the long-term ultimately will stimulate the global expansion of the plaintiff's bar.  In the short-term,  the result ultimately may hurt US businesses by allowing overseas competitors to dump defective products into the US with less fear of being sued. The opinions address issues regarding when a non-US company is subject to suit in the US for injuries caused by allegedly defective products. This prior post collected links to the oral arguments for both cases. 

In one case, the injuries occurred outside the US, but the parents of the injured child brought suit in the US. In the second case, the injuries were suffered in New Jersey. The opinion was unanimous in the overseas injury case, but a fractured plurality opinion was issued for the case arising from injuries in New Jersey. Both opinions held that suit in the US was not proper.  A detailed summary from ReedSmith is here.

These cases are notable as the Court tries to define jurisdictional principles in an increasingly small world with increasing globalization. Of special note, the result reached conflicts with the expressed hopes of both the US Chamber of Commerce and the US plaintiff's bar. Really? Yes. As described in this prior post, both asked Congress to make it easier to sue overseas companies in the US.  The plaintiff's bar of course wants more targets, and the US Chamber of Commerce wants a "level playing field" in terms of exposure to product liability risks.

Lessons from the rulings ?  For US importers of products made overseas, it's time to look carefully at the contracts and think about litigation and insurance possibilities. For example, if the injured person sues only the US importer, can the US importer bring in that case a contribution claim against the manufacturer, or is doing so blocked by an arbitration clause or a forum clause.  Does the US entity have explicit rights to indemnification from the manufacturer? Does it have insurance coverage? 

For the plaintiff's bar, this is simply the latest in a series of cases that force the US plaintiff's bar to look outwards towards partnering with lawyers overseas. Such partnerships seem inevitable to reach the deep pockets.  The plaintiff's bar also will have to think harder about when and how discovery can be obtained. For example, do these opinions protect an overseas manufacturer from a  subpoena for documents or deposition testimony in an underlying case filed in the US? If not, one may see a pattern of discovery-intensive US suits against "middlemen,"  followed by suits overseas against the manufacturer.

Overall the lesson seems to be that domestic lawyers for manufacturers must increasingly think critically about international issues, and how to deal with litigation realities. 

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The future is starting to arrive. The new issue of Nature (online June 26, 2011) and ScienceDaily bring the significant news that scientists have now actually fixed a disease by editing a chromosome in a mouse. In short, they researchers designed a way to target - and then edit (replace) -  a particular segment of DNA.

In short, the targeted sequence  was missing the instructions to create  blood clotting protein. The absence of the clotting protein creates the disease we call hemophilia. The "fix" involved inserting the genetic coding needed to cause the mouse body to generate the clotting factor. An engineered virus was used to find the errant section, cut it out, and then insert new instructions. It worked - the mouse now produces the clotting factor and so is no longer  a hemophiliac ! 

This is just one step down the path for science, but it is a symbolically large step.  Key quotes are set out below from ScienceDaily's summary of the full article.

ScienceDaily (June 26, 2011) — Using an innovative gene therapy technique called genome editing that hones in on the precise location of mutated DNA, scientists have treated the blood clotting disorder hemophilia in mice. This is the first time that genome editing, which precisely targets and repairs a genetic defect, has been done in a living animal and achieved clinically meaningful results.

As such, it represents an important step forward in the decades-long scientific progression of gene therapy -- developing treatments by correcting a disease-causing DNA sequence. In this new study, researchers used two versions of a genetically engineered virus (adeno-associated virus, or AAV) -- one carrying enzymes that cut DNA in an exact spot and one carrying a replacement gene to be copied into the DNA sequence. All of this occurred in the liver cells of living mice.

"Our research raises the possibility that genome editing can correct a genetic defect at a clinically meaningful level after in vivo delivery of the zinc finger nucleases," said the study leader, Katherine A. High, M.D., a hematologist and gene therapy expert at The Children's Hospital of Philadelphia. High, a Howard Hughes Medical Institute Investigator, directs the Center for Cellular and Molecular Therapeutics at Children's Hospital, and has investigated gene therapy for hemophilia for more than a decade.

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Who gets the money - that's an important issue for tort lawyers and is not always a simple subject.     For example, mass tort claims  and/or class actions often are settled through the creation of trust funds or claiming funds. Sometimes the claims do not use up all the money in the fund or the trust. When that happens, where does the money go? 

The leftover funds sometimes are the subject of "cy pres" awards.   Cy pres awards are court-approved awards intended to disburse the money in a manner reasonably close  to the original intent of the creator of the fund or trust. The awards are often made to public interest litigation groups, if the money is not required to revert to the creator do the fund.

Some states regulate the standards for cy pres awards. This online summary from Jones Day provides a very useful summary of existing state statutes on cy pres awards, and some discussion of the applicable standards.  The article is by  Emily C. Baker and Lynsey Morris Barron.  

Hat tip to Lexology for circulating news of the article. 

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Here's an example of the litigation industry at work. The example is this free website known as the Ace Insurance Litigation Watch.

What's the point of the website? To gather and organize information on lawsuits against Ace Insurance and its many affiliates.  Among other things, the website presents a still-growing collection of information on 237 coverage lawsuits filed against Ace. For many if not all of the lawsuits, the website includes free access to complaints and other key litigation documents.

Who is Ace Insurance?  It's a massive, international  insurance company  with many affiliates - annual premiums exceed $ 19 billion. It's also run by Evan Greenberg, son of Hank Greenberg of AIG fame.  Both Ace and AIG entities have reputations for not paying claims. Among other stories covered by the website, one focuses on ACE having been sued in this RICO suit arising from failure to pay claims related to the BP oil rig disaster.

How do the website's sponsors explain their mission ?  

"Our goal is to help policyholders help themselves. Companies and individuals who unfortunately find themselves up against the ACE litigation machine understand the long and expensive effort required to gain justice against an adversary with ACE's vast resources. Furthermore, individual litigants are normally isolated from each other even though they are often looking for the same information and asking the same questions. This gives ACE a significant advantage in the courtroom while the company acts through lawyers who excel at litigation by attrition.

 Some of the index and other portions of the Ace Litigation Watch website are freely available to public visitors. However, other sections of the database are reserved for members of ACE Litigation Watch. Membership is reserved for ACE policy holders or other parties and their counsel who are either actively engaged in or eminently anticipating litigation against a member of the ACE Limited Insurance Group. The only price of admission is a pledge to participate in the growth of the index.

As for the FOIA project, the press release describes an aggresive effort to compile information on Ace. Thus, the press release states:

June 10, 2011 - ACE Insurance Litigation Watch, the online repository for lawsuits and other claims against the ACE Ltd. insurance company (NYSE: ACE) and its ACE Group subsidiaries, today announced that it is archiving up-to-date insurance regulatory documents from all fifty states and the federal government for free and easy public access.

The ACE Litigation Watch website aims to provide a secure and convenient platform through which policyholders and litigants can collaborate. By adding the information accumulated as a result of comprehensive FOIA requests to the ACE Litigation Watch databases, there will be a substantial expansion in the scope of information ACE Litigation Watch is able to make public.

The information that is being compiled from—among other places—State insurance regulators, the SEC, IRS, DOJ, and FTC, although technically considered public information, is often difficult and costly for the public to access. The process of taking that information and making it available to the public in a user-friendly format, whether the user is a financial analyst, a litigant, or a prospective policy-holder, should be a major step forward in achieving corporate transparency and accountability with respect to the Swiss insurance giant ACE Ltd.

ACE has a very extensive litigation history that spans across all U.S. jurisdictions. An analysis conducted by ACE Litigation Watch of available court records revealed more that 16,000 cases involving ACE Group companies. Many of those cases involve policyholders who contend that ACE claims specialists have improperly delayed, denied, or diminished the benefits owed under policies issued by ACE Group companies. For example, in the past year, lawsuits have involved such prominent companies as Pepsi (NYSE: PEP), Masco (NYSE:MAS), and NRG Energy (NYSE: NRG). Furthermore, ACE has recently been involved in litigation for failure to cover policyholders in the BP Oil Spill litigation, FEMA Toxic Trailer Cases, and numerous state Workers Compensation cases.

The ACE Group’s North American insurance operations are overseen by executive John Lupica. ACE Limited (NYSE:ACE), which is included in the S&P 500 index, is the ultimate parent of U.S. insurance companies ACE American Insurance Company, ACE American Lloyds Insurance Company, ACE American Reinsurance Company, ACE Capital Title Reinsurance Company, ACE Commercial Risk Services, ACE Employers Insurance Company, ACE Fire Underwriters Insurance Company, ACE Indemnity Insurance Company, ACE Insurance Company of Illinois, ACE Insurance Company of Ohio, ACE Insurance Company of Texas, ACE Insurance Company of the Midwest, ACE Property and Casualty Insurance Company, ACE Tempest Reinsurance USA, ACE USA, ACE Westchester, Allied Insurance Company, Atlantic Employers Insurance Company, Bankers Standard Fire and Marine Company, Bankers Standard Insurance Company, Century Indemnity Company, Century Reinsurance Company, Combined Insurance, Combined Life Insurance Company of North America, ESIS, Inc., Illinois Union Insurance Company, INA Surplus Insurance Company, Indemnity Insurance Company of North America, Insurance Company of North America, Pacific Employers Insurance Company, Rain and Hail Agricultural Insurance, Westchester Fire Insurance Company, and Westchester Surplus Lines Insurance Company.

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Update on Capital One

Set out below is my quick rant about lousy service by the credit card giant, Capital One.  As I expected, Capital One never has bothered to contact me to confirm that it closed the account, as I had requested.  

Capital One's latest failure came to mind when I saw this Dealbook article about Capital One claiming to offer great, transparent to its customers. However, other views of CapitalOne alos were expressed, including Capitol Hill testimony about for predatory lending practices for  persons with subprime credit ratings. 

“Is the Federal Reserve really prepared to turn a blind eye again and watch a new subprime crisis unfold?” Ed Gorman, chief membership officer at the National Community Reinvestment Coalition, said in written testimony to the Fed, which hosted the third and final public hearing to scrutinize the deal. “Capital One’s risky and subprime credit cards generate stellar earnings three times the size of their asset base through predatory interest rates, questionable fees and confusing terms.”

That is not the case, Capital One’s lawyers say.

“Our products are the most customer-friendly and transparent in the industry,” John Finneran, Capital One’s general counsel, told the Fed. “Given the size of this market, responsible lending to these borrowers is not only acceptable, but also provides a source of credit and purchasing power for these customers, and is thus necessary to the functioning of our economy.”

Still, Mr. Finneran acknowledged that about a third of Capital One’s credit card portfolio carries the subprime label, defined as loans to borrowers with credit scores below 660. The bank also has a heavy hand in the subprime car loan business.

_________________________________________________________

Like all of us, I've dealt with more than a few idiotic business organizations that lack any semblance of real customer service.  Today a new low was reached. In my opinion, Capital One may be the worst customer service company I've ever encountered.  So, I decided to write.

What happened? I tried to cancel a credit card account  I've never used.  I've tried to cancel this account a few times, but the account refuses to dies because CapitalOne never honored my prior  requests to cancel the account, and so I keep getting statements. As detailed below, it took 22 minutes to obtain an address to which I can mail my latest cancellation request. 

According to the monthly statement, a card owner can cancel by phone or in writing. But the statement does not provide an email address or snail mail address. So, my secretary called to get an address. The "customer service" representative refused to provide an address.

Needless to say, that did not sit well. So, I called the phone number listed on my statement. I spoke first  to WER294. He could not provide an address. He kept putting me on "1-2 minute holds" so that he could connect with someone who could provide an address.  After 16  minutes  on hold (timed on my phone) we finally reached  KDR027. He too could not provide an address, and also needed to transfer  me to a supervisor. At the 21 minute mark, I reached finally reach  LInda - MYE939, and she provided the address below.

Care to bet on whether CapitalOne actually honors this request to cancel ?   

To cancel a credit card account with CapitalOne, the address provided to me is:

 CapitalOne - General Correspondence

PO Box 30285

Salt Lake City,   Utah 84130

To use a well-known form of expression: CapitalOne Sucks !! 

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Bravo, again ! Last month Galleon's boss was convicted on multiple counts of insider trading.  This week,  AUSA's in New York  obtained additional insider trading convictions against former Galleon traders, as described here in Dealbook.

Now,  the NYT's insightful and provocative financial reporter, Joe Nocera, is asking the right questions. They include asking whether  we will or should see efforts to claw-back from investors the ill-gotten gains achieved through insider trading.  After all, aren't investors aiding & abetting when they invest in businesses operating outside the law? 

Mr. Nocera does not cover the topic, but RICO law provides analogies, and may even be applicable. Under RICO,  the financial fruits of crime are frequently subject to forfeiture, including forfeiture by "innocent" persons, such as the family members of criminals. For historic perspective, go here for paid access to an early 1980s law review on RICO, go here for a 1990s article on RICO, and go here for a 2010 article on property rights, divorce and property subject to RICO forfeiture.

Perhaps Judge Rakoff  would cover the topics during his teaching at Columbia - he is a scholar as to RICO, white collar crime and other subjects, including science, as is described here by Wikipedia. Indeed, Judge Rakoff wrote this treatise on civil and criminal use of RICO. 

Mr. Nocera artfully raises the issues relevant to public policy, such as deterring the creation of wealth through illegal and/or fraudulent investment tools. Thus, he writes:

But there were plenty of red flags around Rajaratnam, too. Hedge fund managers will tell you that there were always rumors about insider trading at Galleon. Indeed, it was at the heart of Rajaratnam’s business model.

It is implausible that every one of Rajaratnam’s sophisticated investors were in the dark. Yet the law says that, unlike the Madoff investors, they bear no responsibility for ignoring red flags. On the contrary: They are being rewarded for looking the other way. And even though Rajaratnam is likely to spend years in prison — and will have to pay tens of millions of dollars in restitution and fines — he will remain supremely wealthy, as will his family. This is one more contrast to Madoff, whose family is likely to be penniless by the time the trustee is finished.

The phrase I find myself muttering a lot these days is: “There oughta be a law.” There oughta be a law, for instance, that executives who create corporate cultures that encourage employees to commit fraud, as Angelo Mozilo did at Countrywide, should be held criminally liable for fostering that culture. But there isn’t any such law, so Mozilo gets a pass, despite all the fraudulent mortgages Countrywide underwrote.

The more I think about it, the more I’m convinced that there ought to be a law that says that if a fund manager’s “edge” is insider trading, his investors should have to pay a price, too. Maybe then, they’d be less willing to look the other way when their fund manager starts doing things he shouldn’t.

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The intersecting worlds of cancer and litigation changed last week. Why  ? The US government issued its 12th Report on Carcinogens. The report adds eight new substances to the lists, including "certain inhaled glass fibers."  This is not landmark news -  there have been decades of suspicion and argument that some glass fibers are carcinogens. But now the argument is stronger and more specific.

What is the RoC, as its known ?  "The Report on Carcinogens (RoC) is a congressionally mandated, science-based, public health document that is prepared for the HHS Secretary by the National Toxicology Program. The report identifies agents, substances, mixtures, and exposure circumstances that are known or reasonably anticipated to cause cancer in humans."  Here and here are summary NYT summary stories by Gardiner Harris.

What substances were added?  "The industrial chemical formaldehyde and a botanical known as aristolochic acids are listed as known human carcinogens. Six other substances — captafol, cobalt-tungsten carbide (in powder or hard metal form), certain inhalable glass wool fibers, o-nitrotoluene, riddelliine, and styrene — are added as substances that are reasonably anticipated to be human carcinogens. With these additions, the 12th Report on Carcinogens now includes 240 listings."

For asbestos litigation, the RoC matters because it further pushes open the door to exploring non-asbestos fibers as causes of diseases, including mesothelioma,  the so-called signature disease for asbestos inhalation. The report's pertinent general statement is as follows:

"Certain inhalable glass wool fibers made the list based on experimental animal studies. Not all glass wool or man-made fibers were found to be carcinogenic. The specific glass wool fibers referred to in this report have been redefined from previous reports on carcinogens to include only those fibers that can enter the respiratory tract, are highly durable, and are biopersistent, meaning they remain in the lungs for long periods of time. Glass wool fibers generally fall into two categories for consumers: low-cost, general purpose fibers, and premium, special purpose fibers. The largest use of general purpose glass wool is for home and building insulation, which appears to be less durable and less biopersistent, and thus less likely to cause cancer in humans."

The RoC includes a "profile" for each substance. For the wool fibers, the profile is here.  And, here's a more specific statement from the profile:

"Insulation Glass Fibers

Types of insulation glass wool fibers tested in experimental animals included Owens-Corning glass wool, MMVF 10 and 10a (both of which represent the respirable fraction of Manville 901 glass fiber), MMVF 11 (the respirable fraction of CertainTeed B glass fiber), and unspecified glass wool fibers. Inhalation exposure of F344 rats to Owens-Corning FG insulation fiberglass with binder (4 to 6 μm in diameter and > 20 μm long) significantly increased the incidence of mononuclear-cell leukemia in rats (males and females combined). Glass-fiber-related pulmonary and tracheal-bronchial lymph-node lesions were observed but were less severe than for exposure to special-purpose fibers. As with the findings for Tempstran 100/475 glass fibers in this strain (discussed above), these findings were considered to be exposure-related (Mitchell et al. 1986, Moorman et al. 1988). Intraperitoneal injection of MMVF 11 glass fibers caused mesothelioma of the abdominal cavity in male and female Wistar rats (Roller et al. 1996, 1997), and intraperitoneal injection of MMVF 10 glass fibers increased tumor rates in male Wistar rats (Miller et al. 1999)."

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For better or worse, opinions from lawyers  are now tightly woven into management of government agencies and private businesses.  Indeed, opinions of lawyers are frequently cited to justify dubious behavior. For a recent, famous example, consider the massive AIG bonuses paid on the rational that non-payment might cause breach of contract claims. That pathetic explanation was nicely skewered in this New York Times opinion article by Lawrence A. Cunningham, a law professor at George Washington University School of Law. 

In that light, the American Bar Association Journal recently highlighted a March 2011 opinion on the extent of privilege waivers arising from a township publicly trumpeting an investigation's exculpatory conclusion after a police shooting. In Sullivan v. Warminster Township, the district court applied mainly Third Circuit  law and found only limited waiver. It's a brief but interesting opinion, and includes useful citations to cases involving government agencies. The ABA article quotes some ABA discovery committee members who think the opinion is flawed.

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Asbestos bankruptcies are down in number, but the current cases present some great issues with significant ramifications for future cases. Accordingly, Perrin Conferences and Chicago will once again be the hosts for a June Asbestos Bankruptcy Conference. This year's seminar is on Monday June 20 at the Peninsula on Michigan Avenue.

The conference agenda is here, and also is pasted below. The roster of speakers is strong, despite including me.  To register, click here. 

See you in Chicago on Monday, June 20 ?

Event Agenda

Continental Breakfast and Registration Opening Remarks

John D. Cooney, Esq.,

Cooney & Conway, Chicago, IL Michael K. Rozen, Esq., Feinberg Rozen, LLP, New York, NY National Update on Chapter 11 Asbestos Bankruptcy Proceedings New filings, confirmations and dismissals: overview of Quigley, W.R. Grace, G-I Holdings, Pittsburgh Corning, NARCO, Lloyd Mitchell, Plant and other bankruptcy cases

Leslie Davis, Esq.,

8:45 AM –

8:00 AM -



 Overview of current trust assets and payments

 Update on Garlock and Bondex – contested v non-contested bankruptcy cases

 Emerging trends in asbestos bankruptcy law

8:30 AM -

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