Publish What You Pay. The theory is simple. Require oil companies and others to publish all payments of more than $ 100k to government entities and government-owned entities, such as state-owned oil companies. Then compare the inflow against budgets and payouts to taxpayers from the government agency or entity. If inflow does not match outflow, then corrupt officials apparently are skimming. 

The source of PWYP? The Dodd-Frank Act.

Who knew? Not me, but apparently big oil and others are very aware and have been using Eugene Scalia to attack the regulations. 

The next issue? Will big oil challenge the SEC's proposed regulations on economic analysis grounds.

AmLaw's Michael Goldhaber covers the story well, and argues that big oil will be making a mistake if it opposes the regulations.   

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The age of inter-connectedness and scrutiny is making it harder to control reputation and spin, and business impacts can be severe. Just ask the now bankrupt entities that until recently were happily and profitably "processing" the "pink slime" sold as some form of "meat." 

Law reviewers are now taking on larger targets, such as Chevron.  This news arrive from Kevin Jon Heller's post at Opinio Juris about a new law review article assessing Chevron and greenwashing. The abstract, provided in Kevin's post,  is as follows; see his post for more and for links. 

"As green business practices grow in popularity, so does the temptation to “greenwash” one’s business to appear more environmentally and socially responsible than it actually is. We examined this phenomenon in an earlier paper, using BP and the Deepwater Horizon catastrophe as a case study and developing a framework for policing dubious claims of corporate social responsibility. This Article revisits these issues focusing on Chevron, an oil company that claims in its advertisements to care deeply about the environment and the communities in which it operates, even as it faces an $18 billion judgment for polluting the Ecuadorean Amazon and injuring its people. After describing Chevron’s “we agree” advertising campaign, the Article sets out our framework for approaching “faux” corporate social responsibility, gauges whether misled consumers and investors might have a legal remedy as a result of Chevron’s advertising claims, and proposes refinements to better regulate corporate greenwashing."

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Kevin LaCroix of the D & O Diary has an interesting, new post on "benefit corporations." That is, companies aimed at achieving goals desired by its shareholders, regardless of "maximizing shareholder value."  (One might argue the two are one and the same, but that's a topic for another day). The post describes various state statutes aimed at defining roles of officers and directors for "benefit corporations," and provides helpful commentary and links. 

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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.

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 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.

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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.   

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You have to love Judge Rakoff's willingness to ask hard questions and make comments about public policy. His current questions  and comments - highlighted by this Dealbook article -  are related in this new opinion.    The question he posed goes to the SEC  practice of allowing defendants to settle claims  “without admitting or denying wrongdoing.”

Judge Rakoff's comments and history lesson are set out below, and are well worth considering. In fact, why does our government let crooks deny being crooks ?

"Actually, the history of the practice is a bit more complicated than the S.E.C.’s footnote suggests. See Tr. 12/22/10 at9.  Long before 1972, the S.E.C. had already begun entering into consent decrees in which the defendants neither admitted nor denied the allegations. This was strongly desired by the defendants because it meant that their agreement to the S.E.C.’s settlements would not have collateral estoppel consequences for parallel private civil actions, in which the defendants frequently faced potential monetary judgments far greater than anything the S.E.C. was likely to impose. But there were benefits for the S.E.C. as well. First, the practicemade it much easier for the S.E.C. to obtain settlements. And second, at a time (prior to 1972) when the S.E.C.’s enforcement powers were largely limited to obtaining injunctive relief, the S.E.C.’s focus was somewhat more centered on helping to curb future misconduct by obtaining access to the Court’s contempt powers than on obtaining admissions to prior misconduct.

But, by 1972, it had become obvious that as soon as courts had signed off on such settlements, the defendants would start public campaigns denying that they had ever done what the S.E.C. had accused them of doing and claiming, instead, that they had simply entered into the settlements to avoid protracted litigation with a powerful administrative agency. Thus, the real change effected by the S.E.C.in 1972 was the requirement that a defendant who agreed to a consent judgment “without admitting or denying the allegations of the Complaint” nevertheless agree that the defendant would not thereafter publicly deny the allegations. To this end, each of the proposed Consent Judgments now presented to this Court is accompanied by a formal written “Consent” of the defendant agreeing, pursuant to 17C.F.R § 205.5, “not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis.”

The result is a stew of confusion and hypocrisy unworthy of such a proud agency as the S.E.C. The defendant is free to proclaim that he has never remotely admitted the terrible wrongs alleged by the S.E.C.; but, by gosh, he had better be careful not to deny them either(though, as one would expect, his supporters feel no such compunction). Only one thing is left certain: the public will never know whether the S.E.C.’s charges are true, at least not in a way that they can take as established by these proceedings.

This might be defensible if all that were involved was a private dispute between private parties. But here an agency of the United States is saying, in effect, “Although we claim that these defendants have done terrible things, they refuse to admit it and we do not propose to prove it, but will simply resort to gagging the right to deny it.”

The disservice to the public inherent in such a practice is palpable. Confronted with the same choice, the United States Department of Justice has long since rejected allowing defendants, except in the very most unusual circumstances, to enter into pleas of nolo contendere, by which a defendant accepts a guilty plea to a criminal charge without admitting or denying the allegations. See U.S. Dep’t of Justice, U.S. Attorneys’ Manual § 9-16.010 (2008)(“United States Attorneys may not consent to a plea of nolo contendere except in the most unusual circumstances and only after a recommendation for doing so has been approved by the Assistant Attorney General responsible for the subject matter or by the Associate Attorney General, Deputy Attorney General or the Attorney General.”); U.S. Dep’t of Justice, U.S. Attorneys’ Manual § 9-27.500(2006) (“The attorney for the government should oppose the acceptance of a plea of nolo contendere unless the Assistant Attorney General with supervisory responsibility over the subject matter concludes that the circumstances of the case are so unusual that acceptance of such a plea would be in the public interest.”). As the great U.S. Attorney General Herbert Brownell, Jr. stated in a 1953 departmental directive:[A] person permitted to plead nolo contendere admits his guilt for the purpose of imposing punishment for his acts and yet, for all other purposes, and as far as the public is concerned, persists in his denial of wrongdoing. It is no wonder that the public regards consent to such a plea by the Government as an admission that it has only a technical case at most and that the whole proceeding was just a fiasco .See Comment, U.S. Dep’t of Justice, U.S. Attorneys’ Manual § 9-27.500(2006).

Moreover, as a practical matter, it appears that defendants who enter into consent judgments where they formally state, with the S.E.C.’s full consent, that they neither admit nor deny the allegations of the complaint, thereafter have no difficulty getting the word out that they are still denying the allegations, notwithstanding their agreement not to “make any public statement” denying the allegations. Reacting to the equivocal press releases issued by some defendants after such settlements, S.E.C. Commissioner Luis A. Aguilar recently expressed the “hope that this revisionist history in press releases will be a relic of the past,” but added “If not, it may be worth revisiting the Commission’s practice of routinely accepting settlements from defendants who agree to sanctions ‘without admitting or denying’ the misconduct.” See Commissioner Luis A. Aguilar, Speech by SEC Commissioner: Setting Forth Aspirations for2011, Address to Practising Law Institute’s SEC Speaks in 2011 (Feb.4, 2011).

For now, however, the S.E.C.’s practice of permitting defendants to neither admit nor deny the charges against them remains pervasive, presumably for no better reason than that it makes the settling of cases easier. Although this Court must give substantial deference to the Commission’s views, even if only embodied in a practice rather than in a fully articulated policy, the Court is ultimately obliged to determine whether such a practice renders any given proposed Consent Judgment so unreasonable or contrary to the public interest as to warrant its disapproval.

***

 Under these unusual  circumstances – but reserving for the future substantial questions of whether the Court can approve other settlements that involve the practice of “neither admitting nor denying” – the Court approves the proposed Consent Judgments."

 

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Karen Sloan's NLJ article summarizes "gl global" advice from some senior lawyers with reason to know. The advice seems obvious, and yet ......

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Yesterday, Paul Krugman used his NYT column to tee off on the failure of the Republican budget "plan" to acknowledge that health care costs drive long-term many budget disasters, and the system is not fixing itself. The lesson really should be simple to grasp - just look at the various bankrupt car companies, or any state that can't pay its health care bills.

Some simple truths are that health care costs are enormous, and science provides ways to reduce the human losses and economic costs. For example, as is detailed below,  perhaps 20 million children across the globe have died from pneumococcal diseases easily prevented by vaccines. That stunning number is but one illustrations of the insanity of the Republican axe-wielding "budget plan"  that reduces investment in science and impoverished nations.  TSimply put, the "plan"  is economically backwards and completely lacks compassion. 

In fact, investing in science produces major returns on investment in both human and economic turns.  For example, investing in vaccines for kids overseas will save and improve lives, millions of them, thus avoiding money wasted on needless health care and all the attendant time and effort invested in caring for a profoundly sick person. And, investing in science produces jobs and other results here and abroad - someone has to make and deliver all the vaccines that are today are not made and are not delivered.

Part of the story is presented in this article from a group funded by the Gates Foundation.  The group is BIO Ventures for Global Health.  The group's leaders are birght people, and its website provides a compelling list of "neglected diseases" and opportunities for social and business progress  through a focus on opportunities related to the neglected diseases. The group describes itself with this introduction:

"The developing world is in the midst of an ongoing health tragedy. Millions of people in poor countries die every year from potentially treatable diseases—because the medicines to treat those diseases are inaccessible, outdated, unsafe, ineffective, or simply have not yet been created.

BIO Ventures for Global Health (BVGH) is a non-profit organization whose mission is to save lives by accelerating the development of novel biotechnology-based drugs, vaccines, and diagnostics to address the unmet medical needs of the developing world. BVGH has a unique perspective – we are able to look at the health problems facing poor countries through a dual lens of expertise in both global health and the biopharmaceutical industry."

The group's entire story deserves reading and support. Here's the key statistic from one article that perhaps will provide motivation for all of us to demand intelligent budget decisions and support investing in science:

"For decades children in poor countries have received vaccines only after they had been on the market for 20 years or more; when they were off patent and thus available at commodity pricing. If you apply this standard wait time to pneumococcal disease, which kills about a million children a year, 20 million poor children would die needlessly while children in rich countries were protected by very good vaccines."

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Depakote. It's a drug for people with epilepsy, migraines and other miserable disease. It's also a drug that causes severe birth defects (e.g spina bifida) in a signficant percentage (perhaps 20%) of the children born to women taking Depakote during the first trimester of pregnancy.  Go here to see extracts from relevant articles. Go here to see Abbott's current, lame warning.

Science lessons from Depakote ? This drug provides yet another example of the lesson that the TIMING of the dose can be critical - e.g. during the first trimester.  That lesson was previously taught by DES daughters. Another lesson? We need the software and smart research aimed at predicting when drugs will cause genetic problems. One more lesson ? Some drugs and "toxins" are in fact causing harm to multiple-generations by altering genes and/or the epigenome.

A political lesson ? Rudy Giuliani used to campaign in favor of  "tort reform." But now his law firm (Bracewell & Giuliani) is representing Depakote plaintiffs, as shown by this website seeking Depakote plaintiffs and using the Bracewell & Giuliani name.  And as shown by this article, the Bracewell & Giuliani firm is filing cases from around the country, in St. Clair County, the sister county to the infamous Madison County.

Welcome to the plaintiff's side, Rudy. Stay awhile - it's sometimes great to represent real people who actually need help, and to hold people accountable for their actions.

__________________________________________________________________________

Go here to "ontheissues" for the link to a transcript with the following quotes:

Supports tort reform like “loser pays” rule

GIULIANI: Fred was the single biggest obstacle to tort reform in the US Senate. He stood with Democrats over and over again. He voted against $250,000 caps on damages, which they have in Texas. He voted against almost anything that would make our legal system fairer: loser pays rules, things that would prevent lawsuits like that $54 million lawsuit by that guy who lost his pants--you know? That cost that family $100,000 in legal fees. I think the man should have to pay the family for the $100,000. Fred Thompson, along with very few Republicans, blocked tort reform over and over and over again.

THOMPSON: I supported tort reform with regard to securities legislation. I supported tort reform with regard to product liability legislation, things that have to do with interstate commerce. I think it appropriately passed. I supported and worked for those things. Local issues belong at the state level. Most states have passed tort reform. That’s our system. It’s not all federalized.

Source: 2007 GOP primary debate in Orlando, Florida Oct 21, 2007 Continue Reading...

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The "tort reform" war cry drives me crazy. It's a meaningless set of words used - usually - in deceptive way to mask the imposition of damages caps. But the phrase sure excites the  uninformed, as illustrated by this post by Sarah Palin. Note  that Ms. Palin's post  cites as "authority" an ABA Journal article reporting that imposing liability caps reduces lawsuits. Duh - of course it does . But imposing caps on damages does not mean eliminating the "frivolous lawsuits" she says are targets. (In fact, few are frivolous - lawyers cannot afford to invest in bad claims) Instead, imposing damages caps simply makes many claims not worth suing about, and thus leaves the victims to suffer the financial loss and the pain. 

Damages caps are government intervention at its worst - protecting mistakes and shifting the value of the loss away from the doctor and the insurer, and onto the victim.  Damages caps are good for three groups  - actuaries who want certainty, insurers which want no risk, and investors in insurers who want the windfall profit created by damages capping statutes.  Damages caps are miserable and unfair to the hundreds of thousands of annual victims of medical malpractice. Sadly, the New England Journal of Medicine has studied the topic and finds that medical malpractice continues to hurt almost 18% of patients in some way. Go here for the prior post with links to the study itself, and summary information.

So, like many others, I'm glad to see Republican Senator Fred Thompson speak out and oppose the insurance industry's ceaseless cries for damages caps, which they like to call "tort reform." Fred's op-ed piece  is online  here at the Tennessean. Key excerpts are below:

"To me, conservatism shows due respect for a civil justice system that is rooted in the U.S. Constitution and is the greatest form of private regulation ever created by society. Conservatism is individual responsibility and accountability for damages caused, even unintentionally. It's about government closest to the people and equal justice with no special rules for anybody. It's also about respect for the common-law principle of right to trial by jury in civil cases that was incorporated into the Seventh Amendment to the Constitution."

***

"The legislature has made adjustments to our tort law from time to time. For example, in 2008 a law was passed requiring plaintiffs to get a written statement from a medical professional saying that the lawsuit had merit, thereby reducing medical-malpractice suits. This was reasonable and appropriate. However, never has the legislature imposed a dollar limit in cases where damages and negligence have already been proven."

 

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Foley Hoag's blog on CSR and the Law includes this year- end "top 5" post. It's well worth reading for an overview of big picture issues that in one or way another related to potential tort liability of companies.

One recent post from the same blog did not make the "top 5" list but it seemed significant. The post explained that the EU recently and overwhelmingly passed a resolution which highlights the potential power of CSR. Thus, the gist of the resolution brings to the forefront the reality that corporations are simply dumping costs when they fail to research adequately and distribute products which cause harms. Thus, the post explains:

• "First, European companies enjoying the benefits of trade must be asked to conduct themselves in a socially and environmentally responsible manner in developing countries and elsewhere. 
• Second, “non-compliance with CSR principles constitutes a form of social and environmental dumping” in developing countries to the detriment of companies and workers in Europe, who are required to meet more stringent social and environmental standards. 
• Third, the EU’s trade policy must be consistent with and complimentary of its other foreign policy priorities on matters such as environmental protection and development aid."

 

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When I'm outside the US and involved in political discussions, a frequent question/comment revolves around the way US voters elect  state court judges, and why the process is so polarized these days. I'm of course unable to explain exactly how we ended up as we are today. 

It is easier, however, to highlight examples of right-wing extremism at work on state court judges. Here's a new one on the efforts of right-wing extremists to raise money to try to force out more justices from the Iowa Supreme Court. They may also try having a few new zealot legislators hold "hearings" on the issues perceived by the right-wingers.  They will fail, but the effort exemplifies the extremism and why lawyers must have a thick hide in order to decide to become state court judges. 

One wonders how many good potential judges now refuse to even consider becoming a state court  judge. It's surely a large number.

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Suppose a new a business is planning to undertake global sales of  products that contain known or suspected carcinogens. Suppose also that the proposed seller declares that he has a clear conscience on the rationale that the products are desired by buyers, and that short-term measures may or will block  exposures during production, and during initial sale and use of the product. Suppose  also that the proposed products inevitably will cause exposures down the line ?  

Should that new business be allowed to go forward ? Should the business and its products be regulated by global corporate and tort law that does not yet exist ? Should the business and its products  be regulated solely by the law of the place of incorporation ?  The law of the place where people become sick? Should there be special rules that require the business to in essence buy and escrow real, collectible long-term insurance commensurate with the risks ? Or, should the business simply proceed ahead  with the freedom to disappear out of existence before long-term harms become apparent.   

To give context to the questions, consider a couple of examples from asbestos mining. For one, consider this article on an African mine that is a financial disaster. Consider this prior post with information from an article focused on a Russian-sponsored asbestos mine and industry in the town of Asbest.  And  consider also this latest Canadian article regarding the ongoing debate about whether there will or should be new investment in a Canadian asbestos mine. On one hand, scientists, doctors and some ngo advocates argue that  asbestos should be banned globally. But some mine workers, government officials, and capitalists argue that sales should continue because the fibers help to create building products for use in nations such as India. The proposed new business owner declares that he has a "clear conscience."  According to this Financial Times article on the mine:  "Expansion would boost production from the 100-year-old mine from an estimated 15,000 tonnes this year to 180,000 tonnes in 2012 and an eventual capacity of 260,000 tonnes, or about 10 per cent of global production."

Also consider tobacco. On the human  scale, the annual  global toll of cancer deaths by smoking is  predicted to soon each eight  million deaths.  On the financial scale, the annual global cost of all cancers is estimated at   $ 1.5 - 2.  trillion.   So, over a decade, we know that tobacco sales will cause tens of  millions of agonizing deaths, and some trillions of dollars of money spent on health care for humans poisoned by products sold for a profit. 

Conclusion? Globalization requires new legal rules. Traditional jurisdictional, corporate and choice of law rules are losing usefulness and fairness. Decisions to sell carcinogens on a global scale should be subject to at least minimum global rules. Business will complain that potential new global rules are presently unknown and create uncertainty. That's true. But the business knows that it is selling an actual or suspected carcinogen, and knows that the sales create uncertainty and risks of death for end-users and so-called "bystanders."   What moral claim does  the business have for certainty for itself when it knows it is creating uncertainty for human beings?

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Delaware certainly does what it can to bring people and entities  to the state to generate money for Delaware. This prior post noted the "race to the bottom"  initiated by Delaware judges seeking to make Delaware attractive as a forum for bankruptcy cases.  Now, from the Conglomerate, here's a brief summary of how Delaware deprives other states of tax revenue. The gist is that Delaware helps companies move income around by letting them create entities that own trademarks and are paid fees to help move income out of states with higher tax rates. According to the article, 22 states are now fighting back.  It surely seems difficult to respect financial engineering of this sort.

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Another interesting chapter is unfolding in Motley Rice's civil suit against alleged sponsors of the 9/11 attacks.  The issue now headed for the 2d Circuit - on a mandamus petition - is whether the district judge rightly sanctioned defendants for refusing to produce documents based on national laws intended to protect records against disclosure.

Various parallels are easy to envision, including, for example, Swiss secrecy laws, and old Canadian laws that created discovery issues in tort litigation. It's also not too hard to envision nationally important or sovereign-owned businesses operating under self-serving national statutes intended to thwart discovery. Think, for example, about Chinese drywall manufacturers.

AmLaw has been covering the story for some time. Go here for the current article with links to the petition, other briefs, and prior articles.  

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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.

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Today’s post highlights an upcoming academic conference as it relates to the use of asbestos in developing nations. Perhaps some of you have answers or thoughts to contribute to the conference.

As is illustrated by the work of investigative reporters referred to in this post from Friday, it is plain that that companies in so-called “developing nations” are repeating asbestos-related public health failures that previously occurred in the United States, Europe and Australia. Any compassionate, thinking person has to ask why the mistakes are being repeated, and what can be done to chart a different course.

Plainly, one part of the answer is that people need work. Over the years, I heard  scores of former asbestos-workers acknowledge that they knew their were some hazards, but they went ahead and worked with asbestos despite knowing of “dangers.” Simply put, they needed the work to support their families. Much the same story no doubt will be told in future years in the many different languages of Russia, China and South America.

Consider also this prior post with the same kinds of statements from Russians working with mammoth tusks, and at risk from the tusks. They stayed with the work because it included extra pay for working with a hazard.

One would hope that that corporations and developing nations would do better than repeating past mistakes, but that does not appear to be happening. Accordingly, it was strangely coincidental to read this Conglomerate post that describes a relevant October 29 and 30 academic conference aimed at addressing some of those types of questions. The conference is at Emory University School of Law, and is  titled:   Vulnerability and the Corporation. The conference’s call for papers is here, with an August 15 deadline. The conference is sponsored by the Vulnerability and the Human Condition Initiative and The Feminism and Legal Theory Project.

One possible topic mentioned  for conference papers is directly relevant to the subjects highlighted by the reports on asbestos use and/or working with dusty mammoth tusks. That topic is:

“Regulatory responses to the vulnerabilities produced by corporations including, in particular, questions of worker welfare, protection and environmental justice.”

The conference website page describes the conference as follows:

“Vulnerability, understood as a universal and constant part of the human condition, is an important paradigm within which to consider and evaluate the ways in which states respond (or fail to respond) to individual, structural and community catastrophes. This workshop will build on the notion of a responsive state and consider the relationship between corporate structures, vulnerability, and state responsiveness. In the first instance, we recognize that increasingly corporations—whether operating on a local, national or transnational basis—act in ways that can either exacerbate or alleviate human vulnerability. Corporations can cause or complicate the inherent vulnerability of their employees and their dependents, as well as exploit the ecology and vulnerability of our natural and created environments. How should the state respond to this powerful potential for benefit or harm that is lodged in a “private” institutional actor? In addition, corporations may themselves be conceptualized as vulnerable entities. The corporation itself has been recognized as a “person” under the US Constitution, entitled to legal rights and protections and as a holder of human rights under the European Convention on Human Rights. How does the concept of corporate personhood differ from that of the natural person in law and what are the implications of those differences for state responsiveness and regulatory policy?”

The conference website also provides a range of possible topics. The complete list is:

The identification as corporations as rights-bearers and the implications of the disembodiment of rights protection;

The transfer of power from the state to the corporation and implications for individuals as citizens/consumers/subjects/objects of state-like power;

The implications of the conceptualisation of corporations as legal persons with standing;

Regulatory responses to the vulnerabilities produced by corporations including, in particular, questions of worker welfare, protection and environmental justice;

State, regional and international responses to perceived corporate and market vulnerability and the vulnerabilities that may emerge from such responses;

Distinctions between human vulnerability and corporate vulnerability and implications of such distinctions for appropriate state responses;

The potential for the Corporate Social Responsibility and Business and Human Rights movements to enhance theories of appropriate state and corporate responses to vulnerability;

Connections and disconnections between experiences of vulnerability by and of the corporation between the Global North and the Global South.

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This recent NLJ article by Sheri Qualters caught my  eye because of the headline:

"Company president's conduct renders patent unenforceable

Split Federal Circuit panel made the ruling even though president was neither the inventor nor the patent filer"

According  to the article, an apparently respected patent lawyer explained the outcome as follows:

"The moral of the story is the Federal Circuit is defending the patent system by saying you're not allowed to hide things and lie. That's what inequitable conduct is about and what the duty of candor is all about."


One would like to think and hope that all legal systems do indeed  defend themselves, and prohibit inequitable conduct and deceit. But is that really the case ?

 

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Today is a soapbox day.  In my view, a recent jury verdict  in a car wreck case in Georgia nicely illustrates the very real tort system impacts that arise when entities such as Chrysler exit the tort system via chapter 11 without leaving behind insurance,  cash or other economic rights sufficient to pay valid underlying tort claims.  The exemplar case is identified in the caption shown to the left; see below for the full story from the Fulton County Daily Report, which includes links to the verdict form and the full pretrial order.   

In my view, as molded and shaped by a wise bankruptcy scholar, chapter 11 has many, many problems today. One is that it is badly in need of judges who actually apply existing law and do not acquiesce to deals that obviously violate due process and existing law.  In addition, critical thought is needed about what the chapter 11 statutes and common law rules should say in connection with entities using chapter 11 to escape product liability and other long-tail tort risks or obligations. The exemplar trial also exposes some aspects of the material lack of continuity and rationale economic and social policy thinking as  between chapter 11 law and state tort law.  In addition, facts not in the trial expose other problems related to the presence or absence of insurance, and thus implicate domestic and overseas law regulating insurance.  In my view,  statutes and common law rules on insurance (or the absence of insurance) also need much work to deal rationally with the chapter 11 system, as well as the insolvency laws of other nations. 

In the trial, the net result is that Chrysler's exit of the tort system left the plaintiff without full compensation as awarded by an apparently very rationale jury (see full story below), and also put a component supplier at what seems to be an unfair and unwise risk of being hit with a large verdict as indemnitor of Chrysler. As stated in the pretrial order, the facts are simple. A drunk driver's car hit another car with four occupants. Three occupants were essentially unhurt, but an 11 year old child suffered separation of her skull from her spine, and permanent injuries to her endocrine system. The child suffered the severe injuries because a car seat failed. The  plaintiff sued the drunk driver and the car seat supplier. The seat supplier's contract with Chrysler called for it to indemnify Chrysler if the component supplier had erred. 

Ultimately, the seat supplier was exonerated at trial. But, it surely was at risk that a frustrated jury might have decided to find against the seat supplier for Chrysler's failure. And, the jury might also have found against Chrysler. If that had happened, without Chrysler at trial, then Chrysler might later have sought to file new legal proceedings to invoke its indemnity rights against the component supplier, and in that new case (or arbitration) might have claimed that it was not bound by the jury verdict since Chrysler was not represented at trial.

In sum, the fact pattern illustrates some of the many flaws in the lack of a rationale interplay between chapter 11 and state tort law.  To see some of the other issues, ask yourself:  where is insurance for  the claim? Apparently there was no insurance, probably meaning Chrysler had  self-insured (or, perhaps it  had settled out all its polices through a lump sum settlement in which  the insurer paid a fee to Chrysler to terminate some or all of the old CGL policies, with Chrysler pocketing the money and using it for purposes other than tort claims.)  And, further yet, ask if it is is  wise to allow a self-insurance/no insurance approach by manufacturers when obviously cars will suffer defects and failures, causing devastating injuries to some number of unfortunate victims who were powerless to do anything to block their fate. Think also about how all that interplays with offshore manufacturers that may exit the US tort system under insolvency laws of other nations. Think too of  the offshore insurers (e.g. Lloyds) that may exit the tort system via British" schemes of arrangement" that allow insurers to almost completely avoid honoring long-tail insurance obligations.   

 

 

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Here's an invitation for readers to guest blog or comment on a question related to mass tort litigation, governments and substances that are extracted and exported despite known health risks and the absence of complete certainty regarding health effects. Feel free to reframe the question, but I see it as:  

when, if ever, should  government agencies and/or officials be held liable for statements or other actions taken in support of commercial mining, extracting, distributing or manufacturing of substances known to have some health risks. For example, mining , exporting and manufacturing involving chrysotile asbestos fibers. 

Obviously various sovereign immnunity doctrines already exist and tend to draw lines between tradtional government activties, discretionary functions, and commercial activities. Those lines and these issues seem to me likely to face renewed scrutiny over the next few years due to increased globalization and explicit government outreach to and involvement in commercial activities with international impacts.  For some context for the question, consider this prior post regarding "aiding and abetting" claims asserted against two goverments for assisting the Stanford ponzi scheme.  Consider also a recent article regarding Canadian physicians accusing Canadian officials of issuing misleading statements about the absence or presence of health hazards from chrsyotile asbestos fibers.  The text pasted below is  from this February 12, 2010 article by Michelle Lalonde from the Canadian Gazette. 

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Now it's west (from Chicago) to Australia, asbestos and the public company fiber cement business commonly known as James Hardie.

 The short story is that James Hardie and its officers and directors have been through a wringer as several were convicted of securities violations in connection with information disseminated regarding "asbestos liabilities" and a foundation set up by various former Hardie entities to manage and pay asbestos claims.   The convictions are on appeal. For more specifics on the past, look to the left for prior posts indexed under the topic "James Hardie." 

Rapid Global Movement Makes Local Policy Hard to Enforce:   Hardies actions are noteworthy for multiple reasons other than the securities convictions. For one, note that Hardie's recent global corporate "citizenship"  translocations from Australia to The Netherlands and now Ireland, all in just 9 years. The point? Money and ownership will move to wherever financial engineering offers a material opportunity to avoid taxes, achieve tax benefits, or avoid or limit liabilities. This point needs to be understood by policy makers, tort claimants, tort case co-defendants and insurers because of its implications for tort claiming and risk spreading.  Simply put, parochial local  approaches to tort law may be politically attractive at times (e.g. take action to save local jobs) but one should expect the tort system will be gamed just as some financiers play games with states in the US for financial incentives to relocate -  for a few years -  the corporate headquarters or a manufacturing facility. The wills of state legislatures, the long term abstractions of tort law professors, and the opinions of slow moving appellate courts are all much less relevant when, as now, ownership, the corporate "home" and money, can all be moved in a matter of  months.  (One wonders when an enterprising tropical island will enact legislation favorable to companies facing long tail tort claims. One might look to the precedent set in the  UK with FSA legislation that helped the "the names" and the Lloyds insurance market run away from their insurance obligations. Or, one might also consider states that set up rules considered unduly favorable to one side or another - some might say that West Virginia, Texas, New York, South Dakota, and Delaware all provide classic examples of this approach  ... )

Private Tort Claim Foundation as an Alternative to Chapter 11 ?  By any reasonable standard, current and former Hardie entities  Hardie entities face claims for  at least a billion or two of claims, and maybe much more, depending on how one defines claims (do overseas claims count; what about property damages claims). In the US, the now-defined answer would be to file one or two subsidiaries file a Chapter 11 case in Delaware or New York. Then, via the parent company chipping in some money and/or rights related to some "shared insurance," the parent and all subsidiaries likely would end up with an injunction  purporting to protect them against a future claim anywhere in the world. Thanks to the rampant lack of due process and the resulting lack of objectors in chapter 11 cases (highlighted most recently by GM and Chrysler), most such plans succeed, at least in the sense that confirmation is obtained.

Hardie, however, did not pursue that path and instead set up a private foundation to manage and pay claims, backed by some conditional promises of future cash flow from Hardie entities. The foundation has now been in place for almost a decade. Future posts will explore some specific aspects of the Hardie foundation. For now, for 213 pages of Hardie facts and history as narrated by KPMG as advisors, go here and read/skim through a 2006 liability estimate.

While reading, note, among other things, that Hardie entities have been selling asbestos products since the early 1900s, owned a chryotile asbestos mine in Australia, sold products internationally, participated in various international joint ventures, and sold a wide range of asbestos-containing products. Sales included a asbestos-cement building materials, pipe insulation, and friction products, as well as sales of raw chrysotile asbestos fiber. Note also that some of Hardie's cement and insulation products included one or both of  two types of the highly lethal amphibole fibers, which are crocidolite (apparently mined in Australia at Wittenoom) and amosite from Cape or others in South Africa (amosite being a sort of a contraction for "asbestos from the mines of  South Africa").

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A hat tip to Business Insurance for an email alert on Friday advising that a Scottish trial court had just issued an opinion rejecting insurer challenges to Scottish legislation reinstating claiming for pleural plaques. The article is here; it mainly says the insurers are not happy and may appeal. The opinion is online here at the court's website.

For those interested only in outcome, this is a potentially huge loss for both insurers and, in my view, for society. Set out below are some detailed comments on the opinion, and arguments apparently not made by the insurers. The short story is that the trial judge predictably upheld the law as a rational exercise of legislative judgment despite claims that the legislation violates Scottish law and EU law. Also bear in mind that the statute applies beyond pleural plaques and thus explicitly allows claiming compensation for "pleural thickening" and "asbestosis."

For more specifics on the opinion and some commentary see below. My personal view is that the legislation is misguided because societies have so many more pressing needs that we cannot afford to pay compensation for all biomarkers/conditions. Specifically, it seems to me lines must be drawn, and that societies and companies should not pay compensation for biomarkers/conditions that mark past "exposure" but do not impair day to day life, do not impair ordinary bodily function in general, and do not involve changes to the cellular mechanisms that actively regulate cells and, thus, regulate cancers and the endocrine system. Compensation instead should be reserved for the approaching waves of claims arising from new science and medical monitoring claims related to genetic alterations that really do matter.
On the topic of future claims and science, see Gary Marchant's many papers, which are for the most part collected here. Mr. Marchant is a lawyer, scientist, and former Kirkland litigator. He is now a professor of law at Arizona State University. His roles there include: Executive Director & Faculty Fellow, Center for the Study of Law, Science, & Technology, and Lincoln Professor of Emerging Technologies, Law and Ethics. See especially Marchant, Personalized Medicine and the Law, 44 Ariz. Att'y 12 (2007). See also Gary Marchant See Gary E Marchant, Robert J Milligan, & Brian Wilhelmi, Legal Pressures and Incentives for Personalized Medicine, 3 Personalized Medicine 391 (2006)(related topics in terms of litigation pressures)(the article is available here).

Overview

The opinion by Lord Emslie is long -- it runs about 116 pages and consists of 248 numbered paragraphs. The first 70 pages are devoted to some procedural history, and a significant amount of analysis regarding standing, with the latter encompassing analysis under applicable EU directives and UK law. The opinion also includes some interesting history and analysis regarding the role of the Scottish Parliament as a result of changes in the structure between the UK countries and the advent of EU law. For a US lawyer, the discussion was educational.

The scope of the legislation needs to be understood. To that end, here are key excerpts from the opinion.

"I. Introduction

General background

"[1] In these proceedings for judicial review the petitioners are major insurance companies. Together they challenge the lawfulness of a recent Act of the Scottish Parliament which came into force on 17 June 2009. Both prospectively and retrospectively the Damages (Asbestos-related Conditions) (Scotland) Act 2009 bears to make pleural plaques and certain other asbestos-related conditions actionable for the purposes of claims of damages for personal injuries. According to the petitioners, this unfairly burdens them with additional liabilities under indemnity insurance policies to the extent of hundreds of millions - perhaps billions - of pounds, and they now seek declaratory and reductive orders from the court in that connection. This is resisted by the compearing respondents who are (first) the Lord Advocate as representing the Scottish Ministers, and (third to tenth) a number of individuals with diagnosed pleural plaques who seek, or at least intend to seek, damages on that account from their former employers. A First Hearing on the parties' competing contentions has now taken place before me over periods totalling 22 days."

[11] So far as relevant for present purposes, the Damages (Asbestos-related Conditions) (Scotland) Act 2009 provides as follows:

"1. Pleural Plaques

(1) Asbestos-related pleural plaques are a personal injury which is not negligible.

(2) Accordingly, they constitute actionable harm for the purposes of an action of damages for personal injuries.

(3) Any rule of law the effect of which is that asbestos-related pleural plaques do not constitute actionable harm ceases to apply to the extent it has that effect.

(4) But nothing in this section otherwise affects any enactment or rule of law which determines whether and in what circumstances a person may be liable in damages in respect of personal injuries.



2. Pleural Thickening and Asbestosis

(1) For the avoidance of doubt, a condition mentioned in sub-section (2) which has not caused and is not causing impairment of a person's physical condition is a personal injury which is not negligible.

(2) Those conditions are -

(a) asbestos-related pleural thickening; and
(b) asbestosis.


(3) Accordingly, such a condition constitutes actionable harm for the purposes of an action of damages for personal injuries.

.....

3. Limitation of Actions

(1) This section applies to an action of damages for personal injuries -

(a) in which the damages claimed consist of or include damages in respect of -

(i) asbestos-related pleural plaques; or

(ii) a condition to which section 2 applies; and

(b) which, in the case of an action commenced before the date this section comes into force, has not been determined by that date.

(2) For the purposes of sections 17 and 18 of the Prescription and Limitation (Scotland) Act 1973 ... (limitation in respect of actions for personal injuries), the period beginning with 17 October 2007 and ending with the day on which this section comes into force is to be left out of account.

4. Commencement and Retrospective Effect

....

(2) Sections 1 and 2 are to be treated for all purposes as having always had effect.

(3) But those sections have no effect in relation to -

(a) a claim which is settled before the date on which subsection (2) comes into force (whether or not legal proceedings in relation to the claim have been commenced); or (b) legal proceedings which are determined before that date."

[12] As regards Scotland only, therefore, the Act confers on pleural plaques and on two other asymptomatic asbestos-related associated conditions the status of non-negligible and thus actionable injury. It is true that this mirrors the position de facto conceded in many claims over the previous twenty years or more but, given the asymptomatic, non-disabling, non-disfiguring and non-causative nature of these conditions, the petitioners now challenge this development as an unwarranted contravention of the established need for real or material "damage" in order to complete a cause of action in negligence. In this respect, according to the petitioners, the Scottish Parliament in passing the Act has contrived to do the opposite of many foreign legislatures which, faced with an intolerable escalation of claims by "... the worried well", have brought in measures to negate the actionability of pleural plaques. And, it is said, the Parliament has done so by means of a blatant controversion of established (and indeed agreed) medical fact."

Commentary

Insurers Held Back on Specifics

The opinion indicates the insurers held back on providing specifics on their policies, and on their estimates of the future amounts that will be paid as a result of this legislation. Thus, Lord Emslie explained as follows:

78] Another contention forcefully advanced by the respondents was to the effect that issues of locus standi could not be determined where the petitioners' position as insurers had not been the subject of detailed and precise averment, submission or vouching. Deficiencies in this area had, it was said, been flagged up months ago; calls for further specification had been made in the respondents' Answers; yet the petitioners had stubbornly declined to reveal their true hand. Even now only specimen policies had been produced (productions 6/65-68); there was no way of telling what policy terms would actually apply in any individual case; for the future, the petitioners had sought to reserve their position on the construction and application of policies; and, significantly, the proper law of relevant insurance contracts could not be ascertained. If such contracts were not subject to Scots law, so the argument ran, they might not even be engaged by the 2009 Act which had effect only in Scotland.

***
[218] Massive unresolved uncertainties as to cost levels: In the debate before me it was, I think, acknowledged on all sides that estimation of the overall costs associated with this legislation was far from straightforward. Given the long latency period for asbestos-related conditions including pleural plaques, it was hard to estimate the number of individuals who might have been exposed in past decades. Moreover no-one could predict what proportion would develop asbestos-related conditions, nor what percentage of asymptomatic conditions would actually come to light. Judging the number of pleural plaques claims which might emerge in future years was thus an inexact science with many uncertain variables. Even the approximate cost per claim was hard to pin down - understandable, perhaps, now that claims are apparently being intimated at levels several times higher than the pre-Rothwell average. Against that background, the Scottish Government's approach was largely based on evidence of the current situation as modified by actuarial and demographic considerations. The insurance industry, on the other hand, sought to rely on UK Government estimates (which were themselves uncertain) before taking a percentage which was said to represent Scotland. The latter approach may have allowed individual insurers to withhold commercially sensitive data which might be of value to competitors. In these circumstances, overall estimates ranged from perhaps £100 million, on the Government side, to the insurers' potential maximum of £8.6 billion. If the Scottish percentage were to be reduced, the figure of £8.6 billion would come down as well, but that would still leave an "order of magnitude" difference between the competing estimates. (emphasis added)

The Insurers Standard Approach Produced a Predictable Result

The opinion is a disappointment in the sense that there is really very little that is "new" in the opinion for persons familiar with the debate regarding whether compensation should be paid for pleural plaques, and so the legislation was not struck down. The trial judge, Lord Emslie, of course is not responsible for whether the parties present anything new or instead simply present the usual arguments. The absence of anything new in the opinion gives one the impression the insurers simply presented the usual arguments without attempting to present NEW evidence or argument on science and pleural plaques as it relates to the number of pleural plaques cases waiting to be identified, and the potential costs. Plainly, the insurers made a conscious decision not to present a comprehensive analysis of the potential loss, a decision one assumes is driven by concerns regarding public disclosures, financial statements, and general reticence to commit to a particular position on a particular topic.

I certainly will not claim expertise on Scottish law or EU law, and so my comments are worth the price you are paying for the analysis. That said, the opinion presents in essence a question that is familiar to US lawyers -- when will a court strike down a legislative act? The opinion uses some words and phrases different than we might use in the use in arguing that issue here, but makes plain the reality that deference is owed to the judgments of the elected legislative branch. Indeed, from the words and analysis, I took away the impression that UL law calls for even more deference than is shown under US law. I also was left with the opinion that the insurers merely put forth a pro forma challenge to delay a probably inevitable affirmance of the legislation, and so are managing the process so that litigation expenses are far less than the savings obtained from delaying or inhibiting the future onslaught of pleural plaques claiming.

What else might have been done by the insurers? From the perspective of this armchair quarterback, the insurers might have had a real chance to win - and might have done some societal good - if they presented a compelling case on the science to show that society cannot afford to pay for the presence of biomarkers (plaques) that are biologically inactive and instead are mere markers of a past exposure, much like a scar marks a past physical insult. On that basis, one could (I think) rightly distinguish pleural plaques from biomarkers that show actual cellular level changes that actually disrupt ordinary bodily functioning (e.g. genomic changes caused by chemical). One might also try to help the Court see that thousands of biomarkers out there, and to understand the differences between pure markers of past exposure, and genomic changes that disrupt cell function. A small part of that potential argument is laid out at section X (pages 31-33) of this paper I submitted in opposition to the pleural plaques Consultation in England.

The argument I would have pressed also would have shown that there are ample reasons to expect that pleural plaques claiming in the UK actually may be far worse than it is has been in the US. Why? In short, because the UK has had such a large shipbuilding industry that used so much asbestos, because amphiboles were widely used in the UK thanks to Cape Industries and T & N (among others), because EU use of asbestos vastly exceeded use in North America, because new CT scanners find 60% plaques far better than do x-rays, and because pleural plaques claiming is driven by lawyers and entrepreneurial behavior instead of science. Id at sections 2.2, 3.1-3.3, 7.10.1, 9.8.

Finally, the opinion (and thus, apparently, the insurers' arguments) do not address the availability of payments from asbestos trusts (chapter 11 trusts, the T & N trust in the UK, or private trusts). Id. at sections 5.1-5.3.

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Here is an unexpected but interesting non-asbestos example of conflict of interest issues arising from efforts to resolve "mass torts" for various persons around the world. The example arises from the airplane crash and airplane hijacking blamed on Libyan terrorists. The article describes a recently filed lawsuit in which two victims of the crash object to the terms of the settlement with Libya. In brief, the two plaintiffs argue that the lawyers who represented the crash victims, Crowell & Moring, operated under conflicts of interest and that the agreement improperly commingles the interests of the various different categories of claimants, including US and non US claimants. The article includes a link to the complaint itself. The complaint, however, does not attach a copy of a "joint prosecution" agreement apparently signed by the plaintiffs and many others.

Here are excerpts from the article by Roger Alford:

"The facts as alleged in the complaint of Davé v. Crowell & Moring are complex. In brief, Libya has been implicated in terrorist activities on numerous occasions, most notably the hijacking of Pan Am Flight 73 in Karachi, Pakistan on September 5, 1986 and the bombing of Pan Am Flight 103 over Lockerbie, Scotland on December 21, 1988. In 2005, victims of these terrorist attacks and their heirs--including American and non-American victims--retained the law firm of Crowell & Moring--known for representing victims of terrorism--to pursue litigation against Libya. The Davés were among those who signed the Crowell & Moring retainer agreement. As part of retaining Crowell & Moring, every client was also required to sign a joint prosecution agreement ("JPA"), a provision of which provided that the proceeds recovered by any signatory to the JPA shall be shared on a sliding scale based on type of injury with all signatories to the JPA, without distinction as to nationality. Only 23% of the victims who signed the JPA were American. A Liaison Group consisting of one American and four non-Americans was established as agents for the victims in their dealings with litigation counsel. The Liaison Group was represented by Latham & Watkins. In 2008, the United States government entered into a bilateral treaty with Libya for an award of compensation for all U.S. nationals harmed by Libyan terrorism, including the victims of the Pam Am Flight 73 hijacking, which included plaintiffs Gargi and Giatri Davé. The treaty provided for distribution of these funds through the Treasury Department's Foreign Claims Settlement Commission ("FCSC"). After the Davés successfully received notice of their entitlement to millions under the FCSC process, Crowell & Moring issued a demand letter to the Davés contending that under the retainer agreement and the JPA the funds secured by the United States government pursuant to the U.S.-Libya treaty on behalf of American victims are to be shared among all of the victims of Libyan terrorism, American and non-American alike. In other words, the vast majority of the funds secured by American nationals under the U.S.-Libya treaty are--approximately 90% according to Crowell & Moring--required to be paid to non-Americans pursuant to these private agreements."

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The point of today's post is to focus attention on issues and topics that arise from relationships between insolvencies and multinationals heavily involved in selling asbestos fibers and/or asbestos-containing products, and their implications for present and future tort claiming and the ability to enforce bankruptcy court injunctions. To illustrate that the topic is well-grounded in fact, the text below provides a specific example, plus the names of books that describe some multinationals which, in addition to Eternit (see last Friday's post), were very heavily involved in global sales of raw asbestos fiber and/or other products containing large amounts of asbestos.

The topic of multinational relationships vis a vis asbestos claiming and insolvencies has been largely free of careful, public attention during chapter 11 cases. As a result, when chapter 11 trusts were created, little or no provision was made for future international claims, meaning claims to be asserted from overseas against an entity now subsumed by a chapter 11 trust. Such claims were at most handled in name only, with virtually no specific anticipation of the volume of or value of future claims from other nations. What's my basis for saying that no one has ever publicly and specifically estimated the volume and value of overseas claims against US trusts? One basis is general knowledge from involvement in asbestos litigation for 25 years. But, more specifically, that also was the conclusion during an asbestos seminar panel discussion last year. The discussion was part of a March 2009 panel consisting of Steve Kazan (a senior member of the asbestos plaintiff's bar and a lawyer who is very active in international asbestos claiming), Francine Rabinovitz (a wonderful economics and policy expert who advises many trusts, companies and others on future asbestos claiming), and me.

Despite the absence of formal, public estimates of overseas claims, some of the chapter 11 cases have included broad injunctive orders granting debtor entities (and non-debtor entities) the widest possible injunctive relief to protect them against any and all possible future claims, on a global basis. Such orders purport to channel all such claims to the trust created in chapter 11. Issuing global injunctions without meaningful notice and due process is a procedure that is deeply flawed for all concerned, and so will not bind all future claimants, thereby leading to endless claiming and wasted attorney's fees.

On a short-term view, the broad shotgun injunction no doubt appeals to debtors because they (usually) want to exit chapter 11 quickly, and also seek maximum future certainty by obtaining the broadest injunctive protection against any and all future claims. But, the short term approach should be tempered by the reality that the company will not be able to enforce an overbroad, unconstitutional injunction issued without meaningful notice and due process. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812, n.24 (1985)(class action cannot bind persons who were not accorded due process); Stevenson v. Dow Chemical Co., 273 F.3rd 249 (2d Cir. 2001)(class action cannot bind persons who were not adequately represented). Thus, in fact, there is in fact uncertainty if a company is basing its future on an unenforceable injunction.

Overbroad injunctions issued without meaningful notice and due process procedures certainly are adverse for (and illegal as to) a future claimant whose claim may be enjoined when there was no person adequately representing the interest of the overseas claimants whose claims were not actually anticipated in and properly provided for in the insolvency proceedings . As described above, the chapter 11 cases to date have done nothing or very, very little to provide meaningful notice or fair compensation for future overseas claims or claims that arise from corporate interactions, such as joint ventures.

Recognize also that the future claimants also include other corporate entities that will or should be co-defendants in future underlying cases. Like future personal injury claimants, these entities also have not been given meaningful and timely prior notice of proceedings, much less an opportunity to be heard at a meaningful time. Accordingly, to my knowledge, there have not been any hearings to formally and publicly estimate the amount or value of contribution or indemnification claims that current and future co-defendants could or should assert against an insolvent multinational due to both allegedly contributing to the asbestos "exposures" that lead to "asbestos disease."

What kind of corporate interrelationships exist that ought to be carefully, explicitly and publicly considered in the insolvency cases? Consider, for example, the following excerpt from this paper on Eternit (see also last Wednesday's post on Eternit entities.) Specifically, note the assertion that Eternit entities had tight ties to two major asbestos producers that have now been through insolvency - Johns-Manville and T& N/Turner & Newall. Thus, the Eternit paper asserts:

"1960 Eternit Belgium, Johns-Manville (US), T&N and Eternit France together form TEAM, under whose auspices many new [asbestos-cement] firms are established in Asia.

"70-90 Influenced by the debate around the dangers of asbestos, British and American firms are the first to begin to withdraw from the market. T&N and Johns-Manville transfer their interests in TEAM to Eternit Belgium. In addition, Eternit Switzerland withdraws, selling a growing proportion of its interests to Eternit Belgium. By 1989 almost everything which was originally divided between a number of other firms is in Belgian hands. This includes the US firm Eternit Inc."

Want more? Plenty of facts on inter-corporate relationships are out there through books that describe extensive ties between multinational "asbestos companies." In general, the ties consists of joint ventures, sharing knowledge on manufacturing techniques, and sharing information on asbestos health effects. Companies also interacted with each other through inter-company sales of raw asbestos fiber and other products containing asbestos. All of these actions are ones that may give rise to shared liabilities and/or aiding and abetting liability. Here are some examples of the available books; most of them include significant footnotes and bibliographies:



Asbestos House - The Secret History of James Hardie Industries, by Gideon Harris, is a comprehensive account of that company. Numerous mentions are made of relationships between James Hardie, Turner & Newall, Cape Industries, Johns-Manville, and CSR.

The Way From Dusty Death, by Peter Bartrip, is a comprehensive discussion of Turner & Newall and asbestos regulations in the UK from the 1890s through 1970. This book also discusses interactions between various industry titans, including Cape Industries.

Jock McCulloch has written two books on asbestos, focused primarily on mines in South Africa that were the sources for all of the world's amosite fiber, and much of the world's crocidolite fiber. The mines were owned by Cape Industries entities and various other entities. One book is: Asbestos: It's Human Cost, and was published in 1986. McCulloch's second book was published in 2002, and is titled Asbestos Blues, Labour, Capital, Physicians and the State in South Africa.

Messrs. McCulloch and Tweedale combined to write a 2008 book, Defending the Indefensible, the Global Asbestos Industry and It's Fight for Survival.

In addition, Mr. Tweedale also has written extensively regarding Cape Industries and Turner & Newall/T & N. One of his publications is the book titled Magic Mineral to Killer Dust, Turner & Newall and the Asbestos Hazard.

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Monday's post (12/26) pointed out a variety of product liability, corporate law and compensation issues in the context of one nation (India) and a small group of apparently independent asbestos-cement companies. The point of today's post is to illustrate macro level complexities that arise due to the cross-border issues that arise from multinationals, globalization and immigration, among other factors. A few country-specific points also are noted.

Today's post focuses on the large number of Eternit, Etex and other related entities that for decades have comprised a literally global network of manufacturers of asbestos-cement. Today, some of these companies are in the news because of the recent start of an Italian trial to resolve combined civil and criminal charges involving over 2,500 injuries and deaths suffered by persons injured by asbestos inhaled at manufacturing facilities operated in Italy by Eternit entities. In the trial, individual officers and managers face Italian law charges that are more or less akin to reckless homicide, with the charges related to Italian laws requiring a safe workplace. Additional media stories exist because one of the defendants is a billionaire, and he is busy with actions that rightly or wrongly seek to portray Mr. Schmidheiny as a person who is both "green" and concerned about other people.

Global Scale, Decades Ago: What are sources for facts discussed in this post ? As to the entities in general, this substantial paper provides an extensive and apparently reasonably credible hundred year history of various Eternit entities sprawled around the globe (but note the paper is prepared by partisans plainly interested in causing Eternit entities to make compensation payments.) The paper can be skimmed in just a few minutes to obtain a basic grasp of the global scale and inter-connected nature of the operations. A basic summary is that the entities operated across Europe, Africa, South America and Asia. The paper also describes extensive transfers of business operations between and among entities. For more background and specifics on the trial in Italy, please look to the left for prior posts indexed under Eternit and/or go to this partisan website operated by persons who support the injured persons. Articles here and here relate to Mr. Schmidheiny and his image/actions.

The bottom line ? Actions of Eternit and Etex entities, and their officers and managers, plainly caused many deaths and injuries among plant workers around the globe, and no doubt more deaths and injuries of plant workers will follow in future years. One also may reasonably assume that so-called "take home" exposures have produced some number of deaths or injuries among spouses of plant workers through fact patterns such as a wife contracting mesothelioma due to having shaken out and washed a husband's work clothes laden with asbestos fibers. It also seems fair to conclude that injuries and deaths also have occurred and will continue among persons who worked for contractors who performed services at the plants, such as persons who installed, removed, or serviced a factory boiler. In the US, the latter incidents would give rise to "premises liability" claims. In addition, some additional number of current and future product liability claims will arise among persons who sawed, drilled, broke or otherwise worked directly with asbestos-cement or other Eternit products. For all of these groups of current and future victims of disease, one assumes that some significant number of persons and/or their families will have migrated to other nations.

The injuries and deaths arising from decades of global operations and transfers of business operations will provide the factual grist needed for plaintiff's lawyers, defense lawyers and insurance company lawyers to write and argue a wide range of legal positions on a wide range of liability, compensation and insurance issues. The various positions will be further colored by the years in which relevant action or inaction did or did not occur. The issues for example logically would require parsing which entities and/or officers and directors are directly liable to pay which claims, whether as defendants facing civil claims or via mitigation payments to reduce criminal sanctions ? Also, are those entities or persons financially protected by insurance or other indemnities ? Which entities, persons, insurance policies, or insurers are known, still exist , and are financially viable ? Can funds be obtained from solvent reinsurers who lurk behind insolvent primary insurers?

Other issues may arise regarding which entities or persons are entitled to make claims or decisions regarding insurance or other assets. And, all of these issues will arise under the laws of myriad nations. Moreover, health care costs associated with the injuries will be incurred in myriad nations under myriad legal rules regarding the recoverability of such expenses. To the extents the costs are not recovered from Eternit entities, they will have imposed a burden on the "economic commons" of many nations, and those burdens will be suffered for several future decades due to the 20-50 year latency periods associated with cancers caused by asbestos inhalation.

Also consider the impacts of corporate papers written in myriad languages, and myriad rules on discovery. And bear in mind that most of the paper will not be in digital form. Also think about if and when relevant papers were destroyed or preserved.

County-Specific Topics: To highlight just a few of the legal issues, one may look at the Italian trial to see both differences and similarities when compared, tor example, to the US legal system. One difference between US and Italian law is that Italy allows joinder of both criminal charges and civil claims, an approach that would set off shock waves if used in the US. Second, note that the trial includes claims by Italian government agencies seeking to obtain repayment of expenses incurred for medical care for injured persons. Thus, another example of the reality that diminishing government resources lead to more claiming, and that the US is not unique in being a home for lawsuits seeking government cost recoveries. Note also that the Italian system moves more slowly and in different ways than does the US system. Thus the prosecutors gather and share information and evidence in conjunction with testimony taken at various times before one or more judges. Note finally that the trial coverage highlights yet again the risk related to corporate reputation.

Macro Issues: So, who pays, when and how given a history of inter-related entities spread across the globe, many transfers of entities and assets, and many nations with an apparent interest in asserting jurisdiction and trying to provide due process for both claimants and defendants ? And, how does society cope with the reality that some of the victims probably have moved to other parts of the distant from where they inhaled fibers, and that faux victims will emerge ?

Litigation of course is an option. Consider, however, the incredible amount of wasted resources we saw in US asbestos litigation that took place mainly under one language and with mainly state-based rules of law that vary, but are not so terribly different in their general framework. Now consider the inefficiencies plainly ahead when the Eternit/Etex issues described above will unfold globally in myriad languages under rules of law that in some cases are now fixed but in other cases have yet to be written or decided in developing countries.

For all the above issues, who can or should speak for which future personal injury claimants? Who can or should speak for governments or others who incur health care costs resulting from Eternit-caused injuries ? Who can or should speak for other corporate defendants that will be called on to pay for some or all of the injuries caused by work at Eternit plants or by Eternit products? Who speaks for US and non-US asbestos trusts and/or foundations that will be called on to pay for some or all of the injuries caused by work at Eternit plants or by Eternit products? Who speaks for solvent or insolvent insurers or solvent insurers that are trying to cut off their future payments and risks by participating in "schemes of arrangement" in the UK, the United States or other nations?

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I keep falling off the "global" side of things. So, this week, I'll make a special effort to be more global. This week I'm also going to try to focus more on the wide range of issues regarding "future" claims. By future claims, I mean future tort or business to business claims that possibly, likely or probably will arise as a result of past and/or current and/or future sales of products that involve risks, whether known, knowable or evolving.

Issues to Ponder: The starting point is India and its booming production of asbestos cement products. As detailed in the articles described below, there are myriad entities involved in and expanding their businesses in India producing asbestos cement products. Plainly, the manufacturing process itself sales produces risks of future physical injuries, and so do sales of the products. So, given the asbestos injury debacles still ongoing in North America, Europe and Australia, what should one think about these processes and sales in other nations. Should asbestos fiber be sold at all since, without it, there is no industry ? Should asbestos-cement sales be allowed ? Should the manufacturers be required to issue warnings in languages geared at the likely readers ? How big should the warnings be? How permanent should the warnings be - after all, someone will dismantle or cut these sheets some day in the future ?

Should the manufacturers be required to buy minimum levels of insurance in case they are wrong in their hopeful assessment that risks are low ? Is insurance even available or is there an "asbestos exclusion" of the sort put into place in the US in the early to mid-1980s? Either way, should their be minimum capital requirements for conducting a business that plainly involves some level of risk? Should these companies be allowed to do business for 20 years and then fold up and exit before cancers arise after lengthy latency periods ? Should they exit through dissolution, insolvency, or chapter 11 like proceedings? Should we judge the actions of the companies, their insurers and their customers based on what we know and have been through in the US, Europe and Australia, or should a different standard apply?

If the risks prove to be greater than stated and/or expected, how much should be paid as compensation when future cancers arise? Should legislation be put in place now that will let insurers keep down premiums and that will warn asbestos-cement users that future damages for a potentially horrible death by mesothelioma will be capped at 1,000,000 rupees? But, what happens when exposed persons migrate to new nations, start families and then become sick (or at risk) in other nations? Will those caps apply ? Will the caps apply to risks of cancer or other disease, or just an actual, manifest disease itself?

If there is much future claiming, shall we (once again) blame the lawyers involved? Shall we blame the business persons who went ahead producing asbestos-cement, knowing they were exposing others to risks and failing to confront fully some very real issues with predictable possible future consequences? Or, shall we blame government officials who let the issues go ? Or, shall we just let the topic unfold on its own, trusting that there will be an economic market-based solution ? Will that solution involve litigation funders? Multinational plaintiff's firms?

Will science save the victims ? In 5, 10 or 20 years, will cancer be a manageable disease? Curable? Always? Sometimes ? For some genomes, but not others? For some cancers, but not others? Will it all depend on when the disease is first spotted as having started at the cellular level?

Simply put, we are now at a time where intelligent, sentient beings are not able to credibly deny the foreseeability of the future issues that may arise. Judge Weinstein and others have plainly said that we in the US have collectively done a lousy job dealing with tort law issues. "Conservatives" blame the trial lawyers. The trial lawyers blame "greed" and purportedly "heartless" business persons. Academics ponder and write, some are great but too many lack a real understanding of the real world of business, science and the litigation industries that thrive on insurance claims and tort claims. Those industries, however, do not have all the answers, and so there is the quagmire known as chapter 11

Myriad former manufacturers and sellers of risky products (not just asbestos) are now in chapter 11, some due to actual insolvency caused by product liabilities and some because chapter 11 is a great place to use legal and financial engineering to dump problems and move ahead without the burden of the past. To that end, our nation's bankruptcy judges have issued rulings creating $ 30 billion or more of asbestos trusts. In the process, the bankruptcy judges hear evidence (very loosely speaking) and make rulings about future tort "liabilities" even though they have little or no clue about the real rules of each of the 50 state court tort systems and/or the realities of insurance claiming or paying, and also have little or no clue why state court tort claim settlements and trials turn out as they do. Too often, they do not even allow objectors to appear and they just "bless" deals cut by interested people, all making money from the outcome. Meanwhile, state court trial judges continue to march asbestos cases to trial despite having little or no idea of or regard for what may or should happen with the $ 20 billion still left in the trusts, and the billions more that will be added. And, virtually no one does or says much for companies that stay in business and are stuck paying the financial tab for deaths and injuries that in fact were caused by companies now sheltered by purportedly world-wide chapter 11 injunctions.

All these abstract issues really do matter and need better answers than we have today. But, the answers are not arriving. Why ? In part because the issues quickly become moot for a person dying from (avoidable) cancer. All they may want to do is try to live, or to die gracefully, perhaps leaving some money behind to support a dependent spouse or children. So, they victims say very little, and their lawyers include some good people, but they are busy looking for the next case and in any event are not really the spokespersons for the future victims.

Who really speaks for these foreseeable future claimants? No one, because their interests are in fact not well-served by today's "future's representatives." Why is that so (in my opinion), when the ranks of the futures representatives include some genuinely good, smart and compassionate individuals? The realistic answer includes many factors. One is that futures representatives are hopelessly conflicted between really sick people and the not so sick. (On this topic, see the Amchem decision, the many law reviews after it, and this great article by Plevin, Epley (now Davis) and Elgarten on the specifics of futures representative conflicts in asbestos bankruptcies) The futures representatives also hit conflicts due to the desire to reach certainty, today or "soon," despite the changes science will bring tomorrow. They also are outnumbered and out muscled. And, finally, the bankruptcy code gives them far too little power, and pays far too little attention to current or future science.

Global Context for Why the Issues Matter: On the last two Sundays, The Toronto Star has published an extended pair of articles (here and here) that are well worth reading as they cover in some detail the topics of increasing use of asbestos in India as a "developing country," and plans to export more asbestos fiber from Canada's Jeffrey Mine. The first article focuses on the growing use of asbestos cement to provide less expensive and "better" housing for people living in massive slums in India. The author, Jennifer Wells, candidly confronts the disparities between the "talking points" offered by the manufacturers and government as compared to the reality of actual working conditions in factories and the reality that there are no safeguards on use in the slums. She also points out that all of the warnings on the products are in languages other than Hindi. Ms. Wells also identifies the manufacturers and fiber suppliers.

The second article focuses on the issues regarding Canada's continuing export of chrysotile fiber, and plans to expand the exports from the Jeffrey Mine. The mine was formerly owned by Johns-Manville and has been in use for decades. According to the article, the open pit phase of mining is drawing to a close, but an underground mining phase is perhaps approaching fruition. The article includes some of the needed dialogue regarding the distinctions between the different asbestos fibers. Unfortunately, the article does not report on whether the "new" fiber to be mined has or has not been tested for "contamination" with amphibole fibers.

These article are yet another example of the issues that evolve as "developing" countries face opportunities and choices. In part, they face choices between current and future health risks, and the demands/pressures of industry and a vast population. They also face choices between the financial and health costs and risks encountered by people aspiring to "better" living conditions.

For those interested in more on the topic of banning asbestos, consider Laurie Kazan-Allen's website that documents her many years spent campaigning with others to ban asbestos use around the world. Ms. Kazan-Allen works through an organization known as the International Ban Asbestos Secretariat (IBAS). Ms. Kazan-Allen is the sister of an American asbestos plaintiff's lawyer, Steve Kazan. She has accomplished a great deal to limit the harms that can arise from asbestos use. She also has organized many groups of victims seeking medical care. legislation and/or compensation. The website contains a vast amount of information and is well worth the time to browse for anyone interested in the issues. The website also highlights a paper on and an upcoming conference opposed to asbestos use in Asia. In addition, Steve Kazan provides a website known as the World Asbestos Report.

Others, of course, would say IBAS goes too far in seeking to ban all use of all forms of asbestos. That position is well laid out in the Toronto Star's second article.

Unfortunately, there is no website focused on those who will have the future risk or disease, or the interests of the companies that will in the future pay bills for other companies.

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Here is an interesting NLJ article on the state secrets privilege from a law professor and dean with an impressive background in both public interest litigation and academics. The law professor, Alan B. Morrison, currently is the Lerner Family Associate Dean for Public Interest and Public Service Law at the George Washington University School of Law. In short, he suggests that the price for exercising the privilege should be that the government pays for the harm caused. Here are two key paragraphs:

"The problem to date has been that the arguments have all been about whether the claims of secrecy are actually justified and who should decide that. The best way around that debate is for Congress to pass a law saying to the intelligence community, "You can keep your secrets, but you (the U.S. Treasury) must pay the claimant's damages if you won't allow the case to be tried in the ordinary fashion." That's what the law says will happen if the government wants to take my land to build a military base, and that same principle should apply in these cases as well.

Here's how such a law might work. Cases would be filed in the usual way, and if the government contended that state secrets might have to be divulged if the case were tried, it would make whatever efforts it could to dismiss the case on nonstate secrets grounds. But if that failed, the attorney general could formally invoke the state secrets privilege. At that point, the case would be transferred to the Court of Federal Claims, which hears claims against the government that it has taken someone's property without compensation. However, once the government invoked the state secrets defense, it would lose its right to contest its liability: The only issue remaining would be the proper amount of actual, but not punitive, damages."

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Here is an interesting AmLaw post on the Korean government seeking to deregulate legal services and end restrictions on nonlawyers investing in and providing legal services. The key excerpts say:

"The Korean government is planning a major deregulation of the nation's legal and other professional services markets, the Korea Herald reports.

At a government meeting Tuesday, Finance Minister Yoon Jeung-hyun explained the move as a way to boost employment in the high-value services sector.

"The government will lower entry barriers to the professional service market to spur competition and to boost the size of the market," Yoon said.

A number of measures aimed at reducing regulation have been recommended to the government by the Korean Development Institute, a think tank. Perhaps most controversially, the KDI has proposed that non-lawyers and conglomerates be permitted to own stakes in law firms. The institute has also recommended an end to restrictions on lawyers, patent agents and certified public accountants practicing together."

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Here is an AmLaw article about the apparently fairly real possibility of chapter 11 type legislation in Hong Kong. This is getting ahead of the game, but it does provide an opportunity to pause and think about what Hong Kong or other sovereigns might use as an approach to corporate failures caused by mass tort claims. After all, we've seen some serious mass tort issues arise from Hong Kong's nearby neighbors.

Let's hope other sovereigns do better than section 524(g) of teh US bankruptcy code. Otherwise, we may see a global spread of mass claiming by the least sick.

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This summer brought the Chrysler and GM chapter 11 cases in which bankruptcy courts issued wide-ranging injunctions that seek to block some or all tort claimants from pursuing some or all current and/or future tort claims against the insolvent entities and their successors and/or buyers. Now, as we move into fall, here's the latest example of the expanding use of chapter 11 injunctions and trust funds as the proposed means to resolve underlying alleged "mass tort" claims. These ongoing expansions make it even more important to scrutinize the rules to the process by which Wall Street is now able to use chapter 11 to eliminate or transfer financial responsibility for underlying mass tort claims. These ongoing expansions also make plain that there is a pressing need to pull down the veil of secrecy that blocks meaningful scrutiny of the operations of most, if not all, chapter 11 trust funds that resolve tort claims.

This latest example arises from this new motion filed in the Tousa home builder bankruptcy. The effort in Tousa parallels the approach taken in the WCI home builder chapter 11 case. The new motion in Tousa seek to continue the automatic stay to block tort and contract claims regarding buildings built with allegedly defective Chinese drywall. The motion seeks to continue to block the underlying lawsuits based on the prospect of creating a chapter 11 trust to resolve the same underlying lawsuits. Presumably the trust also would be used to resolve the claims that would arise if the court were to allow a proposed class action against Tousa by would-be drywall claimants . The proposed class action is the subject of other bankruptcy court motions.

The motion in Tousa is noteworthy for multiple reasons. For one, it asserts that the debtor will welcome the involvement of its insurers in creating the proposed trust. In contrast, in the asbestos chapter 11 cases, the debtors virtually always assert that trust are "insurance neutral," meaning that whatever happens in the bankruptcy court does not effect the rights of insurers. Based on that claimed neutrality, the debtors and plaintiff's lawyers almost always argue that the tort claim insurers lack "standing" to be involved in the bankruptcy court proceedings.

Insurers sometimes but not always disagree, depending on what view suits a particular insurer's interest in a particular chapter 11 case and its overall financial status. Usually, but not always, insurers that issued primary policies re heavily exposed to the tort claims, and so will seek to cut a deal with the debtor and the plaintiff's bar in order to achieve certainty. Other insurers that issued higher level excess policies tend to fight the debtor on the standing issue until they've created enough of a record that the debtor agrees to accept from the high-level insurer a nominal payment over time in return for a release of all obligations under the higher-level excess insurance policy.

The motion also is noteworthy for what it does not mention. For one, it makes no mention of the current or future rights of other, solvent companies that are now or will in the future end up as co-defendants in the underlying lawsuits. Co-defendant entities can be incredibly harmed by the terms of the bankruptcy trust if the terms cut off or in any way limits the right of co-defendants to bring cross-claims or equitable contribution claims against the debtor or the trust. In the chapter 11 asbestos cases, the trust terms almost always have imposed severe and unconstitutional limits on the rights of the co-defendants to bring cross-claims against the debtor or the trust. To be fair to co-defendants, bankruptcy courts can and should appoint at least one person to represent the interests of fat least future co-defendants.

Additional adverse impacts arise for co-defendants if secrecy is allowed regarding claims submitted to the trust fund and its payouts to particular claimants. Once again, the chapter 11 trust model should not be followed because in most such cases, the plan tosses a veil of secrecy over information regarding which claimants have made claims and what they have been paid. Co-defendants rightly argue that the veil of secrecy is poor public policy because court-ordered trusts should instead be transparent as a matter of public policy. Beyond pure policy issues, the veil of secrecy also is improper because it blocks the co-defendants from asserting state law rights. Secrecy also blocks legislators from understanding what really is or is not being done to compensate legitimate and illegitimate claimants.

The motion also is significant because it does not mention various other sources of conflicts between constituencies with interests in the terms of a trust created to resolve tort system claims. One source of conflicts is that persons with strong and serious claims do not want to see trust fund money frittered away on payments to spurious or marginal claimants. Once again the asbestos chapter 11 cases highlight the problem because most of the trusts have been put in place with terms that have allowed billions of dollars to be paid to claimants who are not "sick" in any meaningful way.

Here are key excerpts from the Tousa motion:

4. Among other things, the Debtors are aware of the recent plan of reorganization confirmed in the chapter 11 cases of WCI Communities, Inc. and certain of its affiliates (collectively, "WCI") in which WCI successfully managed its liability with respect to Chinese Drywall by implementing a global strategy that will address Chinese Drywall claims through the use of a trust, a channeling injunction and claims liquidation procedures. Additionally, the plan of reorganization permitted WCI to efficiently address its' claims against its insurance carriers as well as the installers and manufacturers of Chinese Drywall. While the Debtors continue to analyze their own Chinese Drywall cases and their prospects for a chapter 11 plan, the WCI approach offers one possible alternative to piecemeal litigation of Chinese Drywall claims.

5. The Debtors intend to work with their major creditor constituencies in an effort to establish a global strategy with respect to claims arising from or relating to Chinese Drywall. This global strategy will prevent a "race" to insurance proceeds by similarly situated claimants that will have the negative effect of depleting the amount of insurance available to satisfy other claims or, otherwise, impact the Debtors' ability, as a practical matter, to craft a more comprehensive resolution of the Chinese Drywall-related claims. To that end, the Debtors intend to involve the alleged holders of Chinese Drywall-related claims and the Debtors' insurance carriers in any such discussions. Based on the Debtors' desire to develop a global resolution of the Movants and similar claims, the Debtors have filed this objection.


Hat tip to LAW360 for noting the motion to continue the automatic stay.

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Are anti-bribery statutes actually trade sanctions that discourage investment, and should such statues be modifed? For more on that topic, see this post at Conglomerate and its link to a scholarly article on the topic.

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The tort litigation industry is seeing new battles emerge at the micro and macro level regarding the techniques and rules used on Wall Street, in tort trials, and by government to shift financial responsibility for payments for expenses arising from legitimate and illegitimate tort claimants. The battles are ongoing at both the micro and macro level, and will take years to resolve. Over time, billions and ultimately trillions of dollars are at stake when one considers direct and indirect payments, plus stock price changes, legal fees, and other associated costs and expenses of tort litigation and ancillary litigation. Posts over the next few weeks will present examples of the battles and their consequences. Throughout, one key is to look for whether, when and how one person/entity (or a group) are allowed to make deals that increase or decrease the risks and financial obligations for others involved in the same tort.

Today's example is a micro battle being fought in Illinois in a case arising from falling scaffolding killing Mr. Ready during a construction project at a power plant. One issue is whether fault can be apportioned at trial against defendants that settled before trial. Why does that matter? Because the plaintiff and one or more defendants can and may agree to a settlement contract because the settlement monies paid 1) will give plaintiff some level of financial certainty and 2) will shift to the remaining defendants the risk and financial obligation for the plaintiff's losses as determined at trial because the settlement, if approved, will by statute block the remaining defendants from suing the settling defendants for "contribution," and may block the trial defendants from asking the jury to apportion a percentage of fault to the settling parties. Further, the settlement also may influence whether the remaining defendants can offer trial proof of the actions of the settled defendant even if even if the jury is not allowed to apportion a percentage of fault to the settled defendants.

So, the most basic macro issue is whether and when this private settlement contract between three private parties will become the operative event that will enable the government (the courts) to take pre-existing claims and legal rights of the other defendants. In this instance, the defendants are Mr. Ready's employer, the general contractor and a subcontractor. In teh case, the employer and the general contractor settled, leaving the subsontractor exposed to a trial, which it lost. And, of course, lurking in the background are the insurers for those entities. But, for the macro level, bear in mind that some companies are self-insured, and some companies were insured but that insurance is or may be gone because the insurer actually is insolvent or may be trying to run away from "incurred but not reported" losses (that is, future losses) by ceasing its business operations and/or invoking a dissolution process specific to insurers. And, the issues arise in the context of events during a trial held during a period of time for which a "tort reform statute was said to be applicable.

In short, the Illinois Supreme Court held, under the statute, that the jury could not apportion fault against the settled defendants. Thus, the private settlement was converted into a government enforced agreement with legal consequences for the remaining defendant, which had not objected to the settlement. Left open by the Supreme Court was whether the jury should have been allowed to hear evidence about the actions (or inaction) of the settled parties. On remand, the appellate court held that the trial court should have allowed the jury to hear evidence of the actions of the settled defendants. The case may now be headed back to the Supreme Court of Illinois.

The Illinois Supreme Court's opinion from late 2008 is here (for now, but will move later when the opinion is archived.) Here is the June 30, 2009 opinion of the appellate court on remand. Here is a press article updating the case history, and explaining that the case is perhaps headed back to the Illinois Supreme Court. Here prior commentary by a large law law firm that represents corporate defendants.

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The following item from Crain's Chicago Business speaks for itself as to today's use of chapter 11 to manage/resolve risks and "liabilities." In some instances, though, the table is being set for constitutional law battles ahead on just how much a bankruptcy judge can do to alter rights arising under state law or the law of other nations.


http://www.chicagobusiness.com/cgi-bin/news.pl?id=34725&ba=1

Cubs may file for bankruptcy protection to speed sale: report
By: Todd J. Behme July 13, 2009

(Crain's) -- Tribune Co. may file for Chapter 11 bankruptcy protection for the Chicago Cubs to smooth the sale of the team, according to a report.

A short bankruptcy would be a legal move to prevent the Cubs from having any liability related to the bankruptcy case of Tribune, which filed for Chapter 11 protection in December, Bloomberg News said, citing four unnamed sources familiar with the matter.
Spokesman for Tribune, Major League Baseball and Tom Ricketts declined to comment to Bloomberg. The Ricketts family reportedly has reached a deal with Tribune to buy the team.
It's possible the team could be sold without a bankruptcy protection filing, the sources told Bloomberg.

A Chapter 11 filing could ensure that the team isn't tangled up with Tribune's creditors, Michael J. Cramer, an assistant professor of sports management at New York University and who formerly was president of the Texas Rangers, told Bloomberg.

"This would make sense for Major League Baseball," he told the news service. "They would like to see that asset be stand-alone, very clean, not tied up in other issues."

A filing by the Cubs would be meant to provide for quick selling of the team assets, the sources told Bloomberg.

Filing for bankruptcy protection would not mean that the Cubs are having financial problems, Gregory A. Cross, head of the bankruptcy practice at law firm Venable LLP, told Bloomberg.

"You do not have to be insolvent to be in bankruptcy," Mr. Cross, who is not involved in the matter, told Bloomberg. "All you need is a legitimate business reason."

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The world plainly is growing smaller and is more subject to empiric evaluation. To me, those are great trends for many reasons, including my preference for facts instead of hearsay and anecdote. So, I follow the Empirical Legal Studies blog. The following post is germane for lawyers around the world seeking to better understand the activities of the European Court of Justice.

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from Empirical Legal Studies by Jason Czarnezki
Alec Stone Sweet and Thomas Brunell have posted three data bases, on the activities of the European Court of Justice, and the adjudication of EU law, under Articles 226 (infringement proceedings - brought by the Commission against a Member State), 230 (annulment actions in administrative law brought by individuals and companies against the EU), and 234 (preliminary references from national judges to the ECJ). They collected these data over the course of 12 years, and they are unavailable outside of the Court, which does not provide public access to them. The home for these data is the Robert Schuman Centre, the European University Institute. The datesets, accompanying codebooks, and papers providing summary analyses of the data can be found here: http://www.eu-newgov.org/datalists/deliverables_detail.asp?Project_ID=26. Since 1996, scholars have used these data in a wide variety of research projects, including doctoral dissertations, books, articles in economics, law, sociology, and political science.

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What will the global litigation industry look like in 10 years? My bet is that it will look increasingly entrepreneurial, and more like the litigation industry as it presently exists outside the US.

In Australia, a personal injury law firm known as Slater & Gordon went public back in May 2007, as it describes on its history page. That development caught the eye of the WSJ - see here.

In Europe, there is an interesting variation on that theme as corporate law firms already include groups of lawyers working on contingent fees for personal injury claimants. Thus, Field Fisher Waterhouse looks like and is a corporate law firm with offices across Europe, as you can see by visiting its home page. In addition, however, the firm also has an apparently active, successful practice representing personal injury claimants in a wide range of claims. The website page for personal injury claims is here, and describes the firm representing plaintiffs in medical malpractice litigation and in asbestos litigation.

In the US, the move to entrepreneurial litigation is today the subject of a growing number of discussions about moving away from the billable hour to flat fees and contingent fees for litigation and corporate work. Indeed, there is an already active alternative entrepreneurial approach used by boutique law firms (e.g. Bartlit Beck; Valorem Law Group; Boies Schiller ) and some large law firms (e.g. Robins Kaplan for some time, with Saul, Ewing and Kirkland & Ellis now saying they are doing the same) working for corporations on contingent fees and various forms of flat fees. And, firms such as Robins Kaplan sort of took on personal injury litigation as plaintiffs when it represented the state of Minnesota in tobacco litigation. Take a read through the websites and note the wide range of cases handled for corporate Americas as plaintiffs.

Where will this end up in the US ? Hard to say due to state by state ethics rules, but plainly the American liitigation industry will become even more entrepreneurial, as it already is around the globe. And, with more and more corporations acting as plaintiffs, some traditional positions are going to become harder to sustain. It will be, for example, harder for corporate America to complain credibly about contingent fees and "trial lawyers" when corporate America is using the same approach.

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The UK is famous for assessing costs if a case actually goes to judgment. A new look at that topic is underway and is slated to produce a final report by year end 2009. A preliminary draft report has been issued and will be the subject of meetings and comments over the summer. More specifically, a press release from the British Judiciary explains that " Lord Justice Jackson has published the preliminary report in his Review of Civil Litigation Costs.The report is a major piece of work, deriving from four months of fact-finding, research and receiving submissions, and it extends to over 650 pages with three annexes and 30 appendices. It is available" online here.


A June 1, 2009 article in Business Insurance by Sarah Vesey provides a terse summary of the report. She comments:

"In the report, Justice Jackson said several potential changes to the existing cost regime for group actions "merit consideration."

Among them are instituting a no-cost-shifting rule; allowing cost-shifting for only part of the proceedings, for example only after the stage where a class wins certification; implementing a common funds doctrine, such as that used in the United States in which successful lawyers are entitled to have their fees reimbursed from the fund awarded to the class; public interest litigation, whereby the court has power to order that no cost-shifting occur when a group representative brings an action on an issue of public interest; and using a lower-cost scale for collective actions.

Justice Jackson said his "tentative view" to do away with cost-shifting for collective actions merits serious consideration in the second phase of his review and would, among other things, promote access to justice and be fairer for defendants."

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This month's ABA Journal includes an article that stunned me, and it is set out below. The gist is that some physicians are trying to use contracts to preclude patients from commenting in public media about the care they receive or do not receive. According to the article, the patient is limited by contract to filing a malpractice suit, complaining to the state regulator or telling friends (not clear what's ok there - can you email or just whisper softly to your friends in the confines of your home). Even more surprsing to me is that, according to the article, the AMA "takes no position" on the propriety of such contracts.


Even though I am a defense/corporate lawyer and am in general sympathetic to defense-side issues, the contract described by the article is to me a stunningly bad idea, and a contract of adhesion that courts can not and should not enforce when entered into prior to the care being provided. Suppose you have cancer and need treatment asap - how in the heck can anyone claim there is room for fair bargaining in such a situation ?

The AMA not taking a position is to me no correct. I cannot imagine our ethical rules for lawyers letting us do this sort of thing. I won't claim to be an ethics expert, but a quick flip through the rules brought caused me to focus on Illinois Rule 1.8(b. That rules specifically precludes lawyers from asking a client for rights related to publizing the facts of an engagement until the engagement is over. I presume that rule was aimed at blocking the lawyers from acquiring the rights to a sensational story as part of a retainer agreement, which is a somewhat different situation than teh doctor who is trying to avoid publicity. That said, the situations are alike in that clients cannot possibly know what is in their interest, or not, until the professional engagement is over, and so our rules block us from asking cleints to give up rights in advance. Rule 1.8(f) also is relevant as it precludes Illinois lawyers from seeking to limit our liability to our clients unless the client has separate counsel to evalaute that agreement.

I fail to see why doctors should be treated differently, especially when their mistakes actually can kill or badly injure a person. At least for civil lawyers, the worst we can usually do is to cost someone some moeny.

Comments anyone?


http://www.abajournal.com/magazine/a_prescription_for_silence/


Opening Statements
A Prescription for Silence
June 2009 Issue By Leslie A. Gordon

Once consumer websites began rating everything from restaurants to dog groomers, it was only a matter of time before doctors found their care and bedside manner critiqued online.
As many as 40 websites, including Zagat, Angie's List and RateMDs.com, now feature anonymous, patient-written doctor ratings. Physicians say these unpoliced sites often publish unfair accounts that can destroy professional reputations. And, because the ratings usually are anonymous, doctors argue that the "patients" rating them may really be disgruntled employees, ex-spouses or competitors. Federal and state privacy laws prohibit doctors from responding, even to legitimate posts.

Now one doctor has figured out a way to help his colleagues fight back, but his technique has left some wondering about the legality of his tool.

Dr. Jeffrey Segal, a neurosurgeon and founder of Greensboro, N.C.-based Medical Justice, created mutual privacy agreements that prohibit patients from rating their doctors. Wiggling through loopholes in the Communications Decency Act, the agreements transfer to the physician the copyright on any online content about the doctor. Segal's business has licensed the agreements to 2,000 physicians, and he says the "vast majority" of patients sign them.
If a patient violates the agreement, the doctor can try to enforce it by asking the ratings website to remove the post.

While the American Medical Association has no policy on these agreements, its president, Dr. Nancy Nielsen, says Web forums "have many shortcomings." Segal says a credible system, akin to the one used to produce Consumer Reports, would verify patient status, evaluate only technical competence and require a minimum of evaluations "to soften the extremes."
While First Amendment considerations don't factor in, Sam Bayard of Harvard University's Citizen Media Law Project questions whether copyrights to content that doesn't yet exist can be transferred. But, he adds, "private parties can do what they like."

So far the agreements have not been tested in court. But that has not stopped them from being--according to Segal--unfairly characterized as gag orders, even though nothing in them prevents unhappy patients from suing, speaking to friends or complaining to licensing boards.

Bayard says rating sites are valuable because "individuals can con- tribute to the dissemination of infor­mation. There are defa­ma­tion laws to redress speech that's really bad."
Invoking the "marketplace of ideas," Bayard adds that the remedy for reckless speech is to allow more. "They are truly open forums. Someone else can come along and add a positive comment. It's healthy."

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An article in The Hill reports that product liability claimants are not happy with the developments in the Chrsyler and GM chapter 11 cases, so they are taking the issue to new fora - the Senate and the media. A similar article is in the WSJ blog known as Deal Journal. Specifically, they are upset that money is not being set aside to pay damages for pending product liability claims. Set out below is the relevant text from the article. The claims are said to be worth over $ 1 billion. One assumes the asbestos claimants are happy to let the car wreck claimants lead the charge on this issue. One also wonders who purports to speak for product liability claimants who have not yet been hurt, but inevitably will be hurt.

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Lawyers cry foul over GM
By Ian Swanson
Posted: 06/02/09 08:19 PM [ET]
Consumer groups and trial lawyers are crying foul over the Obama administration's bankruptcy plans for General Motors and Chrysler.
Those plans would extinguish all ongoing auto accident claims that blame a death or serious injury on a defective GM or Chrysler vehicle.
"It's a raw deal for consumers," said Clarence Ditlow, executive director of the Center for Auto Safety.
Ditlow said the plans are unusual in that they would prevent anyone from bringing a future liability claim against GM or Chrysler if a car already purchased from either company is defective and results in an accident causing death or serious injury.
He and others said it was also unusual for no money to be set aside for liability claims. When companies producing asbestos went bankrupt, some funds were set aside for such claims, Ditlow said.
Pam Gilbert, of Cuneo Gilbert and LaDuca LLP in Washington, said Obama's auto task force should have looked out more for consumers and those with liability cases as it negotiated the complicated bankruptcy plans for both companies.
She notes that the administration is guaranteeing warranties issued by GM during its bankruptcy, meaning someone could get a broken exhaust pipe found to be defective fixed even while GM is in bankruptcy.
This means "they will fix the car, but if someone with a car suffers a serious injury or death because of a defection, we won't fix the person," Gilbert said.
Although a committee representing consumers and those with cases against the companies was involved in negotiations over Chrysler's and GM's bankruptcies, the group has received less attention compared to unions and those holding company debt.
That may change on Wednesday, when victims and families of victims with claims against the companies hold a press conference outside a Senate Commerce Committee hearing on GM's bankruptcy.
Those set to attend include the family of an ABC cameraman killed when the roof of his GM Suburban caved in during an accident, as well as the families of several children who suffered broken necks and blame faulty seatbelts, according to the Center for Justice and Democracy, a New York-based consumer group.
Three hundred plaintiffs seeking $1.25 billion in damages are affected, another attorney told The Wall Street Journal's 'Deal Journal' blog.
General Motors says claimants will have the opportunity to submit their claims and have them resolved "as provided by the Bankruptcy Code and other applicable law, both as to amount and priority."
"We won't discuss specific claims or the possible outcomes, as that will be determined by the court," it said in a statement.

But those claims must be made against the old GM company after bankruptcy, meaning people with the claims will need to stand in line with other unsecured creditors to seek compensation from the old company's remains, Gilbert said.
The new GM that arises out of bankruptcy will not be liable for those claims.
Ditlow blamed Obama's auto task force for the situation, which he said would ultimately add to other problems.
He cited the case of a young girl in New York left a quadriplegic from a car accident who has $500,000 in annual medical costs. That victim is likely to become a ward of the state, he said.

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An article on the BBC and an article on Scotsman.com report that trial has started on the insurance indsutry challenge to Scotland's recent legislation reallowing lawsuits seeking compensation for pleural plaques. According to the articles, trial is expected to end by June 12.



Meanwhile, London still has not announced a decision on pleural plauqes but campaigning about asbestos medical research continues to grow. A May 25 article reports that 22,000 Brits signed a petition to Downing Street to request a central medical authority to lead research efforts regarding mesothelioma, and yet another article reports on two lawyers and another person embarking on a 1,200 mile bike marathon aimed at encouraging medical research, with the journey to be chronicled on a blog.

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S. Todd Brown of Temple University has written an insightful law review article desribing in detail Congress' incredibly costly error in creating the bankruptcy code section (524(g)) with terms that have turned out to give a very small number of plaintiff's law firms "veto power" over asbestos-related chapter 11 plans. Strengths of the article include crisp writing, a great collection and distillation of relevant facts not well known to outsiders, cogent legal cites, and a logical organizational sequence that adds to the article's persuasive impact. The article is titled: Section 524 (g) Without Compromise: Voting Rights and the Asbestos Bankruptcy Paradox (Colum. Bus. L. Rev. (forthcoming 2008). The article is available on SSRN. Apparently the article is being published at 2008 Colum. Bus. L. Rev. # 3, at 841 but that link only takes you to an image of the cover of the law review.

I'm trying to figure out why the article has not been more widely publicized to date. Indeed, I found the article by accident while looking at results from a Google search for the cite for another article on section 524(g). When I Googled the article, all I found it mentioned in were mundane collections of lists of law review articles, and a slightly more extensive post on the Mass Tort Litigation Blog, with the post showing the article title and the abstract.

Various quotes and points from the article will soon show up here, but don't wait - go get and read the article if you are involved in asbestos litigation in particular or mass tort claiming in general.

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My friend Steve Sellick points out that UCLA and RAND are teaming up for and presenting an interesting June 2 seminar at RAND in Santa Monica on litigation funding. Litigation funding is a topic I've mentioned before in a Corporate Counsel  "special section "article and on this blog.  The existence of material amounts of capital available for litigation funding is in my opinion a huge development in and driver for litigation of all kinds, ranging from intellectual property to securities class actions to mass tort personal injury claiming. Moreover, this trend is only going to accelerate as the UK's legal reforms will soon (not later than 2011) allow direct outside investment in UK law firms.

The UCLA-RAND seminar speakers include some significant academics and a former President of the British Bar. An online invitation to the seminar is available here . Attendance is free, but advance registration is required by May 25, it says. The academic speakers include UCLA's Prof. Stephen C. Yeazell and Lynn M. LoPucki. I would love to attend but family activities dictate other priorities. Hopefully the papers will be published online after the conference. Sponsors include litigation funders Juridica, IM Litigation Funding and Oxbridge, with the latter explicitly saying on its website that it funds mesothelioma claims.

Professor LoPucki is well-known for his many papers on bankruptcy economics, including attorneys' fees. Even more interesting for me is Professor Yeazell's participation. Professor Yeazell is the author of wonderful 2001 law review article I cite time and again in discussions regarding the how and why of the nature of our litigation system in the United States. The paper was delivered as part of a seminar sponsored annually by one of Chicago's most respected plaintiffs lawyers, Robert Clifford. The paper is titled:

SYMPOSIUM ARTICLE: THE CHANGING LANDSCAPE OF THE PRACTICE, FINANCING AND ETHICS OF CIVIL LITIGATION IN THE WAKE OF THE TOBACCO WARS: Seventh Annual Clifford Symposium on Tort Law and Social Policy: RE-FINANCING CIVIL LITIGATION , 51 DePaul L. Rev. 183. The paper can be downloaded from this site.

Back to the seminar - the invitation describes the seminar as follows.

"RAND Institute for Civil Justice and UCLA School of Law recently forged a new initiative through which they identify and analyze the biggest and most influential trends in civil justice. One such trend--litigation claim transfer (also referred to as third party litigation funding)--has created the environment for litigation claim transfer to be evaluated as a component of the American civil justice system. The confluence of the recent credit shortage, the enormity of the overall market for legal services, and the search for investment opportunities unrelated to general economic risk has created the supreme environment for litigation claim transfer to expand and thrive.

UCLA-RAND Center for Law and Public Policy is bringing together stakeholders to not only discuss this phenomenon, but to frame how it is debated in government, law schools and state bars across the country. We are pleased to invite you to attend a conference designed to address these important issues on June 2, 2009 at RAND's Santa Monica headquarters. "

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Update: This post updates a Feb. 20 post. The new news is a Law.com article regarding a new Madoff-related lawsuit in Florida naming a feeder fund (Tremont) and KPMG as defendants for alleged failures in due diligence and monitoring of investments placed with Madoff. The same article includes links to yet another article on clawback suits by the Madoff trustee.

According to the Law.com article, the Florida lawsuit includes the following allegations:

"The lawsuit contends a number of red flags should have made Tremont wary of investing with Madoff.

The plaintiffs contend they depended upon the information supplied by Tremont in making their investment decisions and received false reports indicating the value of their investments was steadily rising.

Plaintiffs also said they were led to believe Tremont diversified its investments instead of putting all the money in one basket. The complaint contends Tremont promised clients it would monitor the investments and change the strategy if necessary. The lawsuit contends Tremont would have found the fraud with proper oversight.

Instead of finding problems, however, the complaint said Tremont's Rye Investment Management boasted its funds have "historically displayed steady and consistent performance, especially during market downturns," implying a conservative investment scheme.
The lawsuit also states several plaintiffs reached out to Rye managers about how the funds were doing. A supervisor told one plaintiff that his accounts had not lost value despite market weaknesses last fall. A supervisor told another investor around the same time that the fund had not suffered losses because it was shielded from the subprime crisis.

The plaintiffs also maintain KPMG did not adequately do its job as auditor despite saying it performed its audits to national standards.

"KPMG's audits failed to reveal the fact that the assets reported on each of the Rye funds' financial statements did not actually exist," the plaintiffs stated.

They sued for fraud, securities violations, negligence, negligent misrepresentation, breach of fiduciary duty, breach of contract and professional malpractice, and are seeking a jury trial.

"This is a case about the greed of investment professionals and their auditors taking priority over the most basic adherence to their contract, tort and fiduciary duties," the complaint contends."


________________________________________________________________
The DOJ's efforts against Stanford and UBS AG are much in the news these days, with a good UBS summary article here and images of DOJ litigation papers available here (look for links in the box on the right hand side.)



The question that occurs to me is: what kind of fall out and follow up lawsuits will emerge? We are seeing in the Madoff situation lots of efforts to pin financial losses and blame on advisers who connected investors to Madoff's enterprise, and thoughts from lawyers at Sonnenschein and elsewhere regarding potential clawback claims by trustees and/or others. One would think the same result will follow here. Some interesting law likely will evolve as to whether or how much one professional has a duty to investigate another before making a recommendation or referral. There are existing claims and case law. See for example a law firm (Brown McCarroll) website article addressing liability of call centers, and an American Bar Association page with links to articles on claims against lawyers for allegedly negligent referrals. This all should make for some fascinating legal wrangling, with global tort choice of law issues.

The situations also may be a boon for multilingual lawyers.

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Here is the link to the full text of the first ruling in the insurer's lawsuit seeking a declaration to invalidate to the Scottish pleural plaques legislation.

In the opinion, the trial judge (Lord Glennie) exercised his discretion not to grant the insurer's motion to stop the legislation from taking effect. In reaching that decision, the court considered various factors and somewhat assessed the merit of the insurers' two overall challenges. First, the insurers argue that the law is outside the "legislative competence of the Scottish Parliament on the grounds of its incompatibility with certain Convention rights. They rely in particular upon Article 6 of the European Convention on Human Rights (Right to a fair trial) and Article 1 of the First Protocol thereto (Protection of property). The petitioners also mount a challenge to the Act on grounds of irrationality, or Wednesbury unreasonableness, and arbitrariness."

In weighing the merits, the trial judge offered the following preliminary and summary assessment of the insurers' arguments:

"It is sufficient that I say that, in my opinion, the petitioners have demonstrated a prima facie case that both Articles 6 and Article 1 of the First Protocol are engaged in that the Act does appear to me to remove from the courts and determine in a manner adverse to the petitioners a critical question arising in all pleural plaque cases, namely whether the claimants in any such case have suffered damage so as to make the negligent exposure to asbestos actionable. Unless and until the Act comes into force, each of the cases currently sisted, at least insofar as it is based upon the existence of pleural plaques and not on other injury or damage, will fail, because at common law negligence is not actionable without proof of damage. If and when the Act comes into force, that line of defence will be removed. The pursuers in such cases will still, of course, have to prove other aspects of their case, such as negligent exposure to asbestos and quantum, but they will no longer have to prove, or attempt to prove, that the pleural plaques themselves constitute damage so as to make the negligence actionable. Mr Dewar submitted that it was always within the competence of the Scottish Parliament to alter the Scottish law of delict. I accept this. Insofar as the Act has prospective effect, this is a powerful point. But in so far as it has retrospective effect, the force of that submission is much reduced, since the Act retrospectively removes from the defenders in existing cases, and in new cases based upon exposure before the Act comes into force, a line of defence upon which they could legitimately expect to succeed. That brings Article 6 into play, or at least arguably so. Mr Dewar also argued, under reference to Article 1 of the First Protocol, that an immunity to a claim could not be a "possession"; however, it seems to me that if a certain claim is a possession (see Maurice v. France (2006) 42 EHRR 885 at paras.63-66), there is at least a good arguable case that a certain defence must fall into the same category.

[13] I have more difficulty with the petitioners' contention that the policy of the Act does not reflect any legitimate public or general interest. It is well-established that the courts will afford the legislature a wide margin of appreciation or, as it is put in the domestic context, will concede to the legislature a discretionary area of judgment in determining what is in the public or general interest: see e.g. Adams v. Scottish Ministers 2004 SC 665 at para.[27], per the Lord Justice-Clerk (Gill). The issue will always involve a detailed examination of the facts. I was initially attracted to the simple proposition underlying the Dean of Faculty's submissions, which emphasised the fact that the Act sought to compensate, at enormous expense to insurers, a narrowly defined class of persons who, although having been exposed to asbestos, had as yet suffered no illness or injury meriting compensation. But Mr Dewar explained that the Act seeks to compensate those in respect of whom it can be established, because of the presence of pleural plaques, that asbestos fibres has penetrated the lungs and the pleura. This seems to me to carry some conviction. While it appears to be true, on the available evidence, that such persons have suffered no physical injury or incapacity, they are more likely than others to suffer from anxiety that their exposure to asbestos dust, having caused penetration of asbestos fibres to the lungs and pleura (as evidenced by the existence of the plaques), will go on to cause an asbestos-related disease; and there is a risk, in such cases, that the penetration of asbestos fibres to the lungs and pleura will in fact cause such a disease. In those circumstances, the Scottish Parliament has taken the view that they ought to be entitled to claim compensation, if not for any present physical disability, then at least for that anxiety and the risk of the condition worsening. The arguments will no doubt be more fully developed at the first hearing. Whilst on a fact sensitive issue of this sort I cannot dismiss the petitioners' case as unarguable, and I therefore must hold that they have demonstrated a prima facie case, it does not seem to me on the arguments advanced so far that it is a prima facie case which should be regarded as particularly strong."

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Monday's post noted that the war on cancer is going slowly, at best. Little did I know that by the end of the day, President Obama would respond during a speech to the National Academy of Sciences by announcing a doubling of the budget for cancer research !!

Ok, ok, so the reality is that his speech was planned long before the blog post went up. But, it was still great to read the following excerpt from a White House post on the speech, and to read the following excerpt from his speech to the National Academy of Sciences:


Excerpt from Post: " Given the nature of the challenges the country faces in global economic competitiveness, energy, and health, the President will call for the U.S. to surpass its record investment in research and development, set in 1964 at the height of the space race, exceeding three percent of GDP. This goal would be met with both public and private investment."


Excerpt from Speech to the National Academy: "And that's why my administration is committed to increasing funding for the National Institutes of Health, including $6 billion to support cancer research -- part of a sustained, multi-year plan to double cancer research in our country."

That's great. In my opinion, it's still not enough money for cancer and other diseases when one considers the just under 600,000 US lives lost to cancer each year, and the hundreds of thousands of lives lost annually to other dread diseases. It is, however, great to see science becoming a national priority after so many years of neglect, if not antipathy.

The speech is well worth reading in full.

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The Friday April 24, 2009 New York Times included a thoroughly depressing article on cancer by long-time science writer Gina Kolata. The general point of the article is to document the lack of real progress on the "war on cancer."

The lack of progress is especially daunting when one considers some data on how much we spend on different wars. According to Ms. Kolata's her article, the National Cancer Institute has spent $ 105 billion on cancer since Richard Nixon announced the war on cancer in 1971. That's a paltry expenditure when one considers that 4% of Americans are cancer survivors, and detailed data showing lifetime cancer risks, such as the 1 in 8 women will develop breast cancer, and 1 in 13 men will develop lung cancer. Risks of course translate into deaths. Slightly under 600,000 people in the US will die from cancer during 2008 according to detailed statistics from the American Cancer Society. That means that every two days, more people die of cancer than died on 9/11/01. Incredibly, since 2001, we've spent spent trillions of dollars to stop the risk of a few thousand more 9/11 type deaths, but since 1971, NCI could only muster about $ 5 billion per year for diseases that take hundreds of thousands of lives per year. In my book, that's insane when considered only in terms of the human agony inflicted by cancer.

The failure to solve disease problems becomes even more incredible when one looks at the costs inflicted by disease. On that topic, consider data from an an April 27, 2009, Business Insurance article by Joanne Wojcik. Her article reports on a significant recent study on health care costs of employers. Some quotes are below, but note especially two points. In terms of costs for hospitals and drugs, cancer is the leading cause of expense. But, even those costs are exceeded by 2 to 1 by indirect costs.

"For every dollar spent on medical costs and pharmaceuticals, there is $2.30 of health-related productivity losses due to absenteeism and presenteeism, according to the study. For certain conditions, such as anxiety, employers lose as much as
$20 in productivity for every dollar they spend on medical care and pharmaceuticals.

The study, which researchers said is one of the largest to date on the subject, found that when medical and prescription drug costs are considered alone, the top five conditions driving employer health care costs are cancer, back/neck pain, coronary heart disease, chronic pain and high cholesterol.

However, when medical and drug costs and productivity losses are factored into the equation, the five costliest conditions for employers are depression, obesity, arthritis, back/neck pain and anxiety, researchers say."

BTW, this is not a lightweight study. Instead, according to Business Insurance:

"The study was conducted in two phases: The first phase used data collected between 2005 and 2006 from four employers with 57,000 employees. In the second
phase, between 2007 and 2008, researchers increased the number of employers to
10 and employees to 150,000 and investigated more subtle aspects of the relationship between the 25 targeted health problems and productivity. More than
1.1 million paid medical and pharmacy claims were included in the combined
analysis."


The article abstract is pasted below and also is available here. The same link may be used to purchase the article.


Health and Productivity as a Business Strategy: A Multiemployer Study.

Fast Track Article Journal of Occupational & Environmental Medicine. 51(4):411-428, April 2009.Loeppke, Ronald MD, MPH; Taitel, Michael PhD; Haufle, Vince MPH; Parry, Thomas PhD; Kessler, Ronald C. PhD; Jinnett, Kimberly PhD

Abstract: Objective: To explore methodological refinements in measuring
health-related lost productivity and to assess the business implications of a
full-cost approach to managing health.

Methods: Health-related lost productivity was measured among 10 employers with a total of 51,648 employee respondents using the Health and Work Performance Questionnaire combined with 1,134,281 medical and pharmacy claims. Regression analyses were used to estimate the associations of health conditions with absenteeism and presenteeism using a range of models.

Results: Health-related productivity costs are significantly greater than medical and pharmacy costs alone (on average 2.3 to 1). Chronic conditions such as depression/anxiety, obesity, arthritis, and back/neck pain are especially important causes of productivity loss. Comorbidities have significant non-additive effects on both absenteeism and presenteeism.

Executives/Managers experience as much or more monetized productivity loss
from depression and back pain as Laborers/Operators. Testimonials are reported
from participating companies on how the study helped shape their corporate
health strategies.

Conclusions: A strong link exists between health and productivity. Integrating productivity data with health data can help employers develop effective workplace health human capital investment strategies. More research is needed to understand the impacts of comorbidity and to evaluate the cost effectiveness of health and productivity interventions from an employer perspective.

(C)2009The American College of Occupational and Environmental Medicine

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The Australian SEC - known as ASIC - has posted on its website the charges it filed, and a document summarizing which charges were sustained and which were dismissed. All of the charges relate in one way or the other to James Hardie's contingent risks regarding asbestos claims.

Update: The opinion/judgment is available here.

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As class action statutes proliferate around the world, a key issue for corporations is whether they can block class actions through contract terms. The April 6, 2009 National Law Journal includes a good summary article by plaintiff's lawyer Linda Mullenix regarding the enforceability of class action waivers. She reviews specifically the recent decisions in Homa v. American Express, 2009 WL 440912 (3rd Cir. Feb. 24, 2009), and In re American Express Merchants' Litigation, 554 F.3d 300 (2nd Cir 2009). The Merchants' decision is especially interesting because of the court confronting and rejecting an attempt to apply the law of one state (Utah) remote to the transactions. Utah law apparently was chosen by Amex because of a state statute upholding the validity of class action waivers. The court declined to let Utah law control.

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The battle over pleural plaques claiming is continuing to evolve in the UK

With respect to the Scottish legislation allowing renewed pleural plaques claiming, an April 21, 2009 Business Insurance article by Sarah Veysey reports that four insurers have now filed the promised lawsuit challenging the pleural plaques legislation in Scotland. The article states: "the four insurers challenging the law represent more than half of the U.K. employers' liability market. They are Aviva P.L.C.; AXA Insurance, the U.K. arm of AXA S.A., RSA Insurance Group P.L.C.; and Zurich Financial Services Group." Much the same information is found on the website for the Association of British Insurers.


Meanwhile, the Brtish government still has not announced its position on pleural plaques. An April 8 article said that London is supposed to provide its answer on plaques "after Easter." The article states in pertinent part:

"Prime Minister (Gordon Brown) has issued a statement that a decision on pleural plaques will be made when Parliament resumes after the Easter recess.

During Prime Minister's Questions Brown was asked (by Jarrow MP Stephen Hepburn) what he planned to do to end the compensation injustice for pleural plaques sufferers. Brown replied: "Asbestosis is a terrible disease, and all those who suffer from it deserve the best of help from the public authorities. It is right that we look again at this as a result of legal actions that have been taken about the obligations of insurance companies. "The Justice Secretary will make a statement on this when we return after Easter."

I previously submitted to the government in London a detailed opposition the the pleural plaques claiming. You can see it here.

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This post follows up on a prior post that described the Manville asbestos trust halting its prior practice of licensing its claims data to third parties for uses such as estimating future claim counts, seeing evidence of claiming trends, and weeding out fraudulent claims.

After the original post, I heard two sets of comments through emails, phone calls and personal conversations. First, I heard multiple comments that fall into the general category of complaints that the Manville data cutbacks are exacerbating an already difficult claims management situation arising from the absence of verifiable public data on asbestos claim payments.

Second, I heard from professionals at Navigant regarding a database of asbestos claims it is licensing to users, and its ongoing efforts to expand the scope of the database. Navigant is the name of a consulting firm that today is home for scores of professionals with massive asbestos experience. Navigant's data and professionals have roots in extensive work for insurers and insureds on asbestos claims as the claim morphed in the late 1970s and early 1980s. I'm happy to give its database a bit of a plug here because I know from personal experience that Navigant's professionals do lots of great work on asbestos claims. Indeed, back in the 1980s, I worked with several of their professionals (then at Peterson & Co.) on the dinosaur known as "asbestos-in-buildings" claims. (That species of asbestos claims long ago became extinct in the tort system due to lack of merit, but - incredibly - those claims still live on in the alternative universe of asbestos trusts. Why that is so is a story for another day. )

Marketing material for the Navigant database is available here. The gist is that the database includes a variety of useful data, with two subsets that are especially valuable. One subset consists of all mesothelioma lawsuits filed in the United States beginning in 2005. The data can be organized by state and in time sequence. These are powerful tools to evaluate the scope of recent mesothelioma claims, which today are the claims driving the majority of the costs for asbestos defendants and/or insurers. The database also identifies the entities named as defendants in each case, and to the extent available from the complaint, the nature of the plaintiff's trade and alleged dates of asbestos exposure. This information also is highly useful for assessing the relative role of a particular defendant as compared to others, and for assessing insurance issues tied to exposure date allegations.

Navigant's Brad Drew and others are responsible for the database, and tell me they are working on trying to expand the database through cooperative efforts among defendants and others. Hopefully they succeed in the far less than simple task of herding together decision-makers and information from the key players among the thousands of asbestos defendants. (Once upon a time back in the late 1980s and early 1990s, the plaintiffs were at a disadvantage because the relatively limited set of defendants and insurers actually worked pretty well together to share claims data and war stories. That stopped being true as more and more of the original original defendants fell into bankruptcy and the number of defendants exponentially expanded as plaintiff's lawyers and experts started selling the notion that even the tiniest "exposure" constitutes a "cause" of disease.)

The Navigant database also includes hundreds of thousands of old asbestos claims assembled over the many years that Navigant has been processing claims for insurers and defendants. This data also can be very valuable for estimating claims, perceiving trends and proving up facts regarding the "elephantine mass' of asbestos claims. Old claims also may be used to find fraudulent multiple claims by one person.

It's great that Navigant is making this data available. That said, it seems incongruous that there is no free, national database of objective data regarding asbestos litigation.

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This post follows up on the amicus brief mentioned in yesterday's post regarding the GIT asbestos chapter 11 case that is set for oral argument on May 20 in the Third Circuit.

19 state AGs filed an amicus brief in the GIT case to urge the 3rd Circuit to block the efforts of the debtor and the asbestos and silica plaintiff's bar to use bankruptcy court preemption powers to give asbestos and silica claimants exclusive access to GIT's insurance policies. The AG's brief explains that the 19 states are concerned because their states may be claimants in environmental cases seeking damages from GIT. In their view, bankruptcy court orders should not preclude states from seeking monies from GIT insurance policies that otherwise should be available to pay damages. the states might win. In other words, the tiny number of silica claims described in yesterday's post, plus asbestos claims, should not be be used to ordinary preempt state law and should not leave the asbestos and silica personal injury claimants with exclusive access to insurance policy proceeds generated from GIT insurance policies.

The amicus brief explains in detail why that result is bad policy, and join with the insurers in attacking the broad preemption powers that the bankruptcy court purported to exercise under bankruptcy code section 1123. According to the amici, the conclusion of the lower courts is "extremely dangerous" because it allows bankruptcy court to become a "haven for wrongdoers."

The amicus brief is well worth reading in its entirety, and is available at the end of the compilation of GIT briefs available here. The following sets out some full text from the amicus brief, at 2-4, in order to provide a taste of intensity of the 19 states that disagree with the broad preemption result sought by the debtor and the asbestos and silica claimants:


"The conclusion of the bankruptcy and the district courts herein - that the opening phrase in Section 1123(a), "Notwithstanding any otherwise applicable nonbankruptcy law to the contrary," does impose such a broad preemptive effect -is deeply flawed in that it reads that language without any historical context, and without any attempt to harmonize that language with the rest of the Bankruptcy Code. And, by reaching that conclusion, the lower courts have created a situation by which an entity can use bankruptcy to escape from all regulatory authority if it can convince a bankruptcy court that doing so would allow it to implement its plan.

Such a result would fly in the face of the oft-repeated axiom that bankruptcy is not meant to be a "haven for wrongdoers." 1 Collier Bankruptcy Man. P 362.04 at 362-23 (4th ed. 1980); 2 Collier on Bankruptcy P 362.04 at 362-36 (15th ed. 1980) as cited by Securities and Exchange Commission v. First Financial Group of Texas, 645 F.2d 429, 439 fn. 16 (5th Cir. 1981) and numerous other circuit courts thereafter. It is certainly the case that many valid laws create operating difficulties for those who do not wish to follow their strictures. The Code, though, does not allow a debtor to flout those requirements during the case. Sections 362(b)(1) and (4), for example, except governmental criminal and civil regulatory actions from the automatic stay; 28 U.S.C. 959(b) requires debtors to obey the laws of the states with respect to the property of the estate during the case; and 28 U.S.C. 1452(a) bars debtors from removing regulatory actions to bankruptcy court from the state courts in which they are pending. Yet, under the interpretation espoused below, those constraints disappear as soon as the debtor proposes a plan under which it asserts that it needs to avoid the restrictions in order to successfully reorganize.

Such a reading of this language would destroy the Amici States' ability to preserve their regulatory authority in the face of a bankruptcy filing. It could allow a debtor to propose and confirm a plan with terms that provide for anything from ignoring the limits on charitable conversions, to barring enforcement of clean-up obligations for contaminated property that it retains post-petition, to denying state consumer protection agencies the ability to bar the debtor from continuing methods of operations that are unfair and deceptive and violate state law. The Amici States do not believe that any such result could possibly have been contemplated by Congress in adding this language to Section 1123 in 1984 as a "technical amendment." (see discussion below, pp. 15-17). They file this brief to urge this court to reverse the decisions below and find that the appropriate scope of preemption under Section 1123 is far narrower than that stated in the decisions at issue and, properly read, does not bar appellants from raising their substantive arguments. The Amici States are not concerned with the final outcome of that substantive litigation, and take no position on the merits of the insurers' antiassignment defense; their only concern is with the extremely dangerous consequences of the means by which the lower courts arrived at the conclusion that insurers are barred from even raising those issues. (footnotes omitted)."

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Here's my standard disclosure: I have in the past and do now represent non-insurer parties opposed to certain terms of asbestos bankruptcies. I also spent from 1984 - 1999 representing asbestos defendants, including GAF Corporation and then W.R. Grace. I also have represented entities that are financially tied to asbestos litigation through indemnity obligations or shared insurance. Further specifics are available on my bio at my law firm's website (http://www.butlerrubin.com/) or feel free to email me at work (khartley@butlerrubin.com ) if you need further information in order to understand my background as relevant to my views.

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Updated: An April 6 blog entry by Alison Frankel includes a letter from Cozen O'Conner responding to Mr. Ostrager.

Today's oral argument date in the Supreme Court for the Travelers/Manville case has drawn some massive hyperbole in a blog article. The article quotes Travelers' counsel, Barry Ostrager, as saying that the case is very important, but that one of his opponents, Chubb Insurance Company, has received the worst legal advice "ever" in arguing its position. It's true the case may have a massive impact on the use of bankruptcy court as a means to resolve "mass tort" litigation. As for the quality of the legal advice provided to Chubb by Jack Cohn, consider that an estimable group of bankruptcy and constitutional law professors disagree with Mr. Ostrager, and explained why in an excellent amicus brief that is available here for no cost through the SCOTUS wiki and the ABA's efforts to put SCOTUS briefs online.

The Travelers issue boils down to whether a bankruptcy court can issue a national (global?) injunction that bars any and all future claims against an insurer of the debtor after the insurer has paid money to settle coverage claims brought by the debtor. In my view, the correct answer is: no, for a variety of reasons. The main reason? Such a sweeping injunctive order is improper for a variety of reasons. The principal flaw is that government action that improperly takes away property rights (legal claims against the insurer) of third parties, and takes the claims away without providing a meaningful prior hearing or payment of just compensation, thereby violating the 5th amendment rights of the persons whose claims are extinguished.

I argued many of the same issues last year in the Federal-Mogul asbestos bankruptcy. The bankruptcy court judge, Judith Fitzgerald, has heard many of the asbestos bankruptcies pursuant to an appoint met order by the Third Circuit. She did not reach all the issues but did apply the "derivative" standard that is at issue in the Travelers/Manville case. There, in a September 30. 2008 opinion, Judge Fitzgerald blocked an effort to expand bankruptcy court jurisdiction. See In re Federal-Mogul Global, Inc, 2008 Bankr. LEXIS 3517. I've frequently disagreed with Judge Fitzgerald, but she ruled correctly in this instance and her ruling also supports Chubb/Jack Cohn. And, for what it's worth, I also agree with Chubb and Jack Cohn.


As always, please bear in mind my standard disclosure: I have in the past and do now represent non-insurer parties opposed to certain terms of asbestos bankruptcies, and also have represented and do represent entities that are defendants in or financially tied to asbestos litigation through indemnity obligations or shared insurance. Further specifics are available on my bio at my law firm's website (http://www.butlerrubin.com/) or feel free to email me at work if you need further information. .

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Reminder: Monday, March 30, 2009, is the date for oral argument in the Supreme Court on the Travelers/Manville case. The appeal presents important issues regarding the extent of bankruptcy court power and jurisdiction in a Chapter 11 case arising from asbestos litigation. The outcome may well apply to all mass tort bankruptcies.

All the briefs are collected at this page of the Scotus wiki built as a companion to the respected Scotusblog. Expert commentary also is provided.

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Monday, March 30, 2009, is the date for oral argument in the Supreme Court on the Travelers/Manville case. The appeal presents important issues regarding the extent of bankruptcy court power and jurisdiction in a Chapter 11 case arising from asbestos litigation. The outcome may well apply to all mass tort bankruptcies.


All the briefs are collected at this page of the Scotus wiki built as a companion to the respected Scotusblog. Expert commentary also is provided.

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The loss of the much discussed Wyeth decision has made this a bad week for pharma. It may get worse. A March 4, 2009 NYT article addresses Justice Department plans to prosecute of doctors for taking kickbacks, and states the following:

"... But within a few months, officials plan to file civil and criminal charges against a number of surgeons who they say demanded profitable consulting agreements from device makers in exchange for using their products."

One hopes the "consulting agreements" did not involve surgeries that ended up as data points in medical studies, and instead were limited to instances in which doctor x chose to use device A instead of device B. But if the surgeries ended up as part of studies on medical devices, then product liability issues may get even tougher for the involved institutions, especially if there are whistleblowers involved. Let's hope that is not the case.

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-- See also March 11, 2009 update on the entry below -------

___________________________________________________________________

 

Today's entry is unusual, and arises because of fact research I undertook in preparation for a presentation as part of panel focused on "global asbestos claiming" at a March 9-11 BVR/Mealeys seminar on Emerging Trends in Asbestos Litigation. Why write about fact research? Because the research unexpectedly yielded facts indicating that the Johns-Manville asbestos trust is cutting back on transparency regarding claims submitted to and/or paid by the trust.

Specifically, the court-created Manville Trust is now reducing transparency by limiting the availability of online and off-line data on the claims submitted to and/or paid by the trust. As is further detailed below, the Manville Trust is cutting the public availability regarding claims submitted from outside North America ("foreign" or "global" claims data'") and the trust also 2) is no longer allowing outside experts to purchase a license to use digital copies of an up-to-date, comprehensive database of all the data for Manville Trust claims.

In addition to limiting access to data, the Manville Trust also is impairing transparency by modifying its data collection activities. Specifically, as of November 2008, the Trust dropped its long-standing rule requiring claimants to provide their social security numbers. Without submission and tracking of social security numbers, it is harder to distinguish between claimants, and thus harder to detect duplicate and/or fraudulent claiming to the Manville trust, and/or to use the Manville Data as a comparative reference for databases containing other sets of asbestos claims.

Do these changes really matter? Yes.

Why? At the abstract level, the changes matter for those who embrace Justice Brandeis' advice that "sunshine is the best disinfectant." See also Graham, Mary, Is Sunshine the Best Disinfectant? The Promise and Problems of Environmental Disclosure (arguing that environmental disclosure requirements actually have improved environment and policy-making).

 

At the practical level, the transparency cutbacks matter because the Manville Trust data are embedded in much work that outside experts have for years performed in reliance on Manville Trust data. For example, my fellow blogger, expert witness Steve Sellick, previously licensed and used the Manville Data as part of consulting work involving estimating future claims and/or values. These estimates can matter because in some instances they may be used for evaluating or setting FASB 5 reserves. But, his Manville Data license was recently terminated, as were Manville Data licenses held by other experts, thus leaving the experts without access to up-to-date from a data resource that has been relied on for many years.

Of equal importance, outside experts have for many years relied on Manville Trust data in "liability estimation" proceedings in Chapter 11 asbestos bankruptcies. The liability estimates in these cases sometimes involve billions of dollars per case, and already involve tens of billions of dollars in the aggregate. See, e.g., In re Federal-Mogul Global Inc., 330 BR 133, 144, 149 (D. Del. 2005)(Rodriguez, J.)(opinion on "liability estimation" for Turner & Newall entities; court describes estimate presented for the Asbestos Creditors' Committee and the Futures Representative (Eric Green) by Dr. Mark Peterson, with his estimates of future claims based in part on data regarding claims against the Manville Trust, and a separate estimate for the Asbestos Property Damage Committee by Dr. Robin Cantor, with the future claims portion of the estimate also based in part on data regarding claims against the Manville Trust, and pending claims evaluated in part by imputing data to Turner & Newall claims by "matching data" to the Manville Trust data" ). In Chapter 11 liability estimates, the claiming history of the Manville Trust's may, for example, be pointed to as evidence proving that asbestos claiming rates are rising and falling in general or for certain categories of disease. Indeed, the claiming rate for "nonmalignants" have been and continue to be a key issue for liability estimates. The validity of future estimates also should matter to trustees who must make decisions on how much money to pay out today bearing in mind the amount of expected future claims and payouts. See generally Bates, Charles and Mullen, Charles, Have Your Tort and Eat It Too (PhD economists with extensive asbestos experience describe scope and impacts of the $ 30 billion or so of Chapter 11 asbestos trusts).

Accordingly, the Manville Trust data cutbacks may have extensive financial consequences because the absence of the data makes it harder for experts to provide the best possible predictions from the most comprehensive data. The absence of up-to-date also makes it harder for lawyers to cross-examine experts on their predictions. That matters because in general, claiming rates have fallen significantly since the height of asbestos claiming in the early to mid 2000s. The absence of up-to-date data also may hurt current and/or future asbestos claimants who are best paid fairly if reliable estimates can be and are in fact made. In short, billions of dollars may change hands based on estimates that are being impaired by the absence of the Manville Trust data.

 

The data cutbacks also matter with respect to duplicate and fraudulent claiming. By 1) terminating the Manville Trust data licenses and 2) allowing claims to be submitted without social security numbers as of November 2008, the Manville Trust is making it harder to weed out duplicate and fraudulent claims submitted to the trust itself. The cutbacks also making it harder for other trusts or defendants to use the Manville Trust data for comparative purposes with respect to their own databases. Making it harder to find claim duplication or fraud is surely the wrong result after all the time and effort that has spent on trying to shut down those particular bad actors who triggered and asserted thousands upon thousands of inaccurate asbestos claims in courts and to trusts. For those who have somehow missed that topic, it has been covered in great detail in law review articles by Professor Lester Brickman, and in Congressional testimony by, among others, Prof. Brickman and an asbestos plaintiff's lawyer who generally represents cancer claimants, Steven Kazan. See, e.g., Brickman, Lester, The Use of Litigation Screenings in Mass Torts: A Formula for Fraud? (August 11, 2008) available at SSRN: http://ssrn.com/abstract=1275406; Testimony of Lester Brickman before the U.S. Senate Committee on the Judiciary, re: Asbestos: Mixed Dust and FELA Issues, February 2, 2005, available at http://judiciary.senate.gov/testimony.cfm?id=1362 &wit_id=3963; Testimony of Steven Kazan before the U.S. Senate Committee on the Judiciary, re: The Asbestos Litigation Crisis Continues - It is Time for Congress to Act, March 5, 2003, available at http://www.kazanlaw .com /verdicts/articles/kazan_senate.cfm.

Further specifics are provided below regarding the Manville Trust data cutbacks, but first some background is provided for readers not burdened with the history of asbestos litigation and Johns-Manville.

Background on Johns-Manville and the Manville Asbestos Trust: The Manville Trust is the long-term "solution" created to pay tens of thousands of asbestos disease claims filed against the many Johns-Manville entities that comprised the largest U.S. seller of asbestos products. The various Manville entities filed for Chapter 11 protection in 1982 due to thousands of then-pending asbestos claims, and due to thousands of future additional claims expected to arise due to the immense breadth and volume of Manville's asbestos operations. Manville's operations ranged from mining asbestos fiber to manufacturing and selling literally thousands of asbestos-containing products containing asbestos fibers. The bankruptcy ultimately ended with an injunction that "channeled" all asbestos claims to a new court-ordered "Manville Trust." Once appeals were over, the trust was created, funded and left to pay then-pending claims and subsequent claims. See generally In Re Johns-Manville Corp, 68 B.R. 618 (S.D. N.Y. 1986). The Manville Trust's online home is http://www.mantrust.org/.

Fact Research Effort: For the upcoming panel presentation on global asbestos claiming, I went looking for 2008 data regarding "foreign" claims submitted to the Manville Trust by persons who lived and worked outside North America. It seemed that obtaining the data probably would be simple because the Manville Trust foreign claiming data was easy enough to find in the past. Indeed, my files include copies of previously public Manville Trust foreign claims data for 2006 and 2007. Some of the data were presented at prior asbestos seminars, and other data were available through the Trust's website by using its online links to semi-annual reports submitted to the Court with continuing jurisdiction over the trust. The data indicate that 2007 Manville Trust payments on foreign claims were well over $ 8 million. But, on checking the mantrust.org website for 2008 data, I could not find any 2008 data for the global claims. Moreover, I could not find any website links to or images of a report to the Court for the first six-months of 2008, much less a report for year-end 2008.

Trust Confirms Cutback on Transparency for Data Regarding Foreign Claims: Frustrated because I could not readily find the 2008 global claims data through the trust's webiste, I tried to obtain the 2008 global claiming data by sending a February 16, 2009 email to the Manville Trust through its web site's online submission portal . I approached the problem that way because the website explains: "The Trust's subsidiary and claims resolution facility services provider, the Claims Resolution Management Corporation (the "CRMC"), will respond to your questions about the Trust, its operations and policies at inquiry@claimsres.com or refer to the CRMC homepage at http://www.claimsres.com/."
With those easy to follow instructions in front of me, off went my email to the Trust asking about global claiming data for 2008.

In response, I received a prompt return email from Mr. Jared Garelick, who uses a signature line that describes him as senior attorney with the trust. The gist of his reply (full text pasted below) was to say that the foreign claiming data are no longer being made public, at least at this time. His email reported that the cutbacks in data availability "come as the Manville Trustees, working together with Trust constituencies, have reevaluated the Trust's policies regarding the release of claims filing information."

I sent an email back to ask if the Manville court had approved the cutback on transparency. The response from Mr. Garelick was that the Court had not been asked to approve the cutbacks in transparency. (again, full text of emails is pasted below)

Trust Also Confirms Virtual Elimination of Licensing of Comprehensive Manville Trust Data: I've been involved with asbestos litigation long enough to know that economists and other quantitative types have for years been licensing and using comprehensive Manville Trust claims data as a tool for various types of work, including predicting claim trends and analyses regarding data missing from other claims databases, as well as looking for duplicative or fraudulent claiming by some individuals. Accordingly, I thought perhaps the Manville Trust database would include the 2008 global claiming data I was after, and so made calls and sent emails to some people I believed were licensees of the Manville Trust database. The calls and emails, however, soon yielded the answer that the Manville Trust has been issuing letters terminating license agreements. It thus appeared that the comprehensive, up to date Manville Trust database is now largely or perhaps completely out of the public domain.
So, in my email to the Trust, I asked whether it is true that the Trust has been terminating licenses and is no longer licensing access to the comprehensive Manville Trust database. In response, Mr. Garelick's email confirmed that "CRMC [the administrator for the Trust] has cancelled licenses for comprehensive claims filing databases known as the Manville Trust Data. There is a possibility that licensing might be resumed on a very limited case by case basis when the data is urgently needed for experts in certain court proceedings. Again, I am unable to estimate when any change in this policy might occur." Thus, the Manville Trust once again has cut back on transparency, this time by at least for now having a practice that generally blocks outside experts from accessing previously-available comprehensive data on claims to and payments by the Trust.

Manville Trust No Longer Requires Use of Social Security Numbers by Claimants: While going through the Manville Trust website, I also learned that the trust recently dropped its long-standing rule requiring claimants to submit their social security numbers as part of a claim. Said another way, the Manville Trust has now dropped a rule requiring submission of data that no doubt makes it faster, easier and cheaper to match Manville data to data in other databases, or to find and identify duplicate or fraudulent claims. The rule change is described at the CRMC website (http://www.claimsres.com/), at the right hand side of the home page text block, in a field that includes text stating the following:

"Updated on 11/11/08

"---CRMC will now allow the filing of a claim for a claimant with US exposure without a SSN. However, in that instance you will be required to provide evidence as to how that individual was exposed to JM product within the US. If you are an electronic filer you will receive a notice via the message board indicating that a MV-Exposure Document is required. You must supply specific proof from the claimant detailing how they were exposed."

 

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Disclaimer and Disclosure: Statements of opinon on this blog and/or presentations at asbestos seminars represent my personal views, and are not views of clients. Clients do not pay for my time to write blog entries and do not see blog entries prior to publishing. Clients also do not pay for my time to write or give presentations on asbestos litigation, and do not see presentations prior to submission to the seminar sponsor. My perspective admittedly is shaped by my twenty-five years of work as a commercial litigator and "asbestos lawyer." Since 1984, I have represented and do represent entities that are defendants in asbestos litigation, or are financially linked to asbestos litigation through indemnity obligations and/or "shared insurance." In addition, I have represented and do represent non-insurer entities opposed to certain terms of certain asbestos bankruptcies. Further specifics are available on my bio at my law firm's website (www.butlerrubin.com), or email me at khartley@butlerrubin.com if you need further information.
______________________________________________________________________________________________________________________________________________

 

Set out below are cut and paste copies of the two emails I sent to the Manville Trust, and the two response emails sent by Mr. Garelick

 

 

_________________________________________________________________
From: khartley@butlerrubin.com [mailto:khartley@butlerrubin.com]
Sent: Monday, February 16, 2009 12:37 PM
To: Inquiry
Subject: Questions Regarding the Availability of Data Regarding "Foreign Claims" and Manville Claims Data in General

Dear Sir or Madam:

Pursuant to instructions on the Manville and CRMC websites, I am writing to this address to pose the questions set out below regarding the availability of data from the Manville Trust or its agents ( such as CRMC.) In general, I'd like to find about the availability of information on payments by the Manville Trust for "foreign" claims ( meaning claims for exposures outside the US or Canada), and whether the previously available "Manville Trust Data" will again be made available to experts through licensing or other arrangements. The specific questions are as follows.

1) In the past, Mr. David Austern occasionally provided country-specific Manville claims data at various asbestos-seminars, as illustrated by the attached image of data from a prior presentation. My office has searched across your website, but we could not find country-specific foreign claims data on your website or in the quarterly or annual reports. Is country-specific foreign claims and/or payment data available from you in some format for 2008 (or all years), and what do I need to do to obtain the data?

2) Past annual trustee's reports on your website, such as the 2007 report, provided some overall but not country-specific data regarding "foreign" claims (the generic data is set out in each report's Exhibit B regarding claims information. Examples are attached.) We've not been able to find such reports for the first or second half of 2008. Are such reports available for 2008, and what do I need to do to obtain them?

3) What is the status of the availability of the claims and payments data commonly known as the "Manville Trust Data"? And, does that data set include country-specific data on foreign claims and payments? I ask because I've heard for many years that most asbestos data experts used to have a license agreement to use the Manville Trust Data, and used that data to run comparisons to other databases of asbestos claims information in a process sometimes called "match to Manville." But today I've heard some experts say that Manville/CRMC has terminated license agreements for the Manville Trust Data and that the Manville Trust Data is no longer available for review and comparison by persons outside of the Trust/CRMC. Is is true that the Manville Trust/CRMC terminated data license agreements with such experts, and is it true that the Manville Trust Data is no longer being licensed today to outside users? If true, why were those actions taken? And, if true, was the bankruptcy court asked to approve those actions, when, and are the relevant papers available through you or PACER? When, if ever, do you expect the situation to change?

Thanks very much for your time and attention to these questions. I am giving an unpaid presentation regarding global asbestos claiming on March 11 at a Mealey's seminar on asbestos trends, and your answers of course would be helpful to have before the presentation.

Kirk
Kirk T. Hartley
Butler Rubin Saltarelli & Boyd
www.butlerrubin.com
3 First National Plaza - Suite 1800
Chicago, IL 60602
312-696-4471 (direct)
312-873-4382 (fax)
312-802-4471 (cell)



_________________________________________________________________
Jared Garelick
02/18/2009 10:45 AM
To
"khartley@butlerrubin.com"
cc
Subject
Re: Questions Regarding the Availability of Data Regarding "Foreign Claims" and Manville Claims Data in General

Dear Mr. Hartley,


The Manville Trust claims filing information you seek is not currently publicly available. As your research indicates, the Trust did make such information available in the past. The change has come as the Manville Trustees, working together with Trust constituencies, have reevaluated the Trust's policies regarding the release of claims filing information. During the pendency of the reevaluation, which is ongoing, the Trust has declined to make available certain information that it previously did. As you observed, this includes a reduction in the claims filing information the Trust provides in its reports. Whether or to what extent the policy will change is uncertain. You should not count on this type of information becoming publicly available again, at least in the near term.

You are also correct that CRMC has cancelled licenses for comprehensive claims filing databases known as the Manville Trust Data. There is a possibility that licensing might be resumed on a very limited case by case basis when the data is urgently needed for experts in certain court proceedings. Again, I am unable to estimate when any change in this policy might occur.
I am sorry we are not able to be of more assistance. Good luck with your presentation.
Very truly yours,
Jared S. Garelick
Senior Attorney
__________________________________________________________


From: khartley@butlerrubin.com [mailto:khartley@butlerrubin.com]
Sent: Wednesday, February 18, 2009 12:25 PM
To: Jared Garelick
Subject: Re: Questions Regarding the Availability of Data Regarding "Foreign Claims" and Manville Claims Data in General

Dear Mr. Garelick:

Thank you for your very timely response to my email inquiry of February 16 to the Manville Trust.

Your response is clear except that it does not explicitly address whether the Manville bankruptcy court was asked to or did approve any of the cutbacks in the availability of information. I infer that approval was not requested or received, but may I impose on you to explicitly address the topic.

Again, thank you for your assistance.

Very Truly Yours,
Kirk
Kirk T. Hartley
Butler Rubin Saltarelli & Boyd
www.butlerrubin.com
3 First National Plaza - Suite 1800
Chicago, IL 60602
312-696-4471 (direct)
312-873-4382 (fax)
312-802-4471 (cell)

____________________

Jared Garelick
02/18/2009 12:42 PM
To "khartley@butlerrubin.com"
cc
Subject RE: Questions Regarding the Availability of Data Regarding "Foreign Claims" and Manville Claims Data in General


Kirk,

Your inference is correct. The Manville Trust's supervising courts were not asked to approve the reduction in the availability of Trust claims filing information.

Very truly yours,

Jared

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The March 3, 2009, Wall Street Journal includes an interesting article on medical school students wanting disclosures from physicians regarding payments from and ties to pharma companies. Thus, the article identifies a wrinkle on the general topic of sponsored research and other ties to "industry." The article provides some interesting views on differing sides of the topic, and describes actions underway at Harvard and other schools to address the concerns.

For a January 22, 2009 update on the general topic in the New England Journal of Medicine, click here.

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James Hardie is an Australian building products company that made lots of asbestos-cement products, some of which were made from the especially lethal blue asbestos fiber known as crocidolite. In years past, it was being sued frequently. It then redomesticated to the Netherlands and established a trust to pay victims, perceiving the law there as favorable towards that end. The trust turned out to be grossly underfunded (which in my opinion was obvious from the start to anyone with a brain and any meaningful experience in asbestos litigation). Ultimately 10 of the senior officers were taken to trial by Australian securities regulators for misleading statements to investors. A recent newspaper article indicates the case is moving towards the end of the becn trial, with summations having started. A decision is expected in a few months. It will be fascinating to see how the judge assesses the situation.

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The cost of mistakes is daunting, and in my view, "tort reform" is not going to solve the problem of coping with large verdicts when major injuries are inflicted on relatively young persons. An illustration arises from a recent Cook County verdict of $ 29 million, a verdict entered after the plaintiff turned down a settlement offer of $ 16.5 million. The verdict was against Metra, the Chicago's areas mass-transit provider for the suburbs. I've been using Metra to commute for 15 years, and from personal experience would say it surely is not a slip-shod operation .

The claim is one of over 30 arising from a bad derailment. The verdict amount is eye-popping, but when the facts are considered, I can't sit here and say that the number is wrong for the injuries suffered by a 28 year old woman/mother. And, I also could not sit here and say that the compensation paid for "pain and suffering" injuries should be limited to $500,000 or some other similar "tort reform" type of number. No one should have to suffer what she has suffered, and it seems unrealistic to suggest that society should force a few individuals to take on the sole burden of a massive loss they did not cause and could not prevent. Indeed, even Metra offered $ 16.5 million, which is itself an eye-popping amount, regardless of the verdict.

The verdict and case are described in more detail in a March 2, 2009, article from the Chicago Daily Law Bulletin. The article is here, but will soon disappear behind a wall, so the full text is pasted below as a fair use.



Jury awards $29M to woman injured in Metra derailment
By Pat Milhizer Law Bulletin staff writer

A Cook County jury has awarded more than $29.5 million to a woman who was seriously injured in a Metra accident nearly four years ago.
Renea Poppel, 28, was a passenger on a double-decker, five-car Rock Island Metra train on Sept. 17, 2005, that was traveling from Joliet to downtown Chicago with 185 passengers on board.
That morning, the train came to a track crossover that had a maximum allowable speed of 10 mph.
But the train entered the section traveling at 69 mph, causing it to derail. The car that Poppel was riding in hit a support beam on a bridge, and the car was pushed 14 feet into the air before it crashed down on the tracks.
Two people died, but Poppel survived. At the time, Poppel was 13 weeks pregnant.
She suffered a traumatic brain injury, a broken pelvis, broken neck and other injuries and was in a coma.
Her unborn child survived the wreck, and was delivered via a Caesarean section in January 2006. Poppel already had a son at the time of the accident, and the girl is now a normal and healthy 3-year-old, said one of Poppel's attorneys, Daniel M. Kotin of Corboy & Demetrio P.C.
The brain injury prevents Poppel from walking without assistance, and she's confined to a wheelchair. She also suffers from blurry vision and slurred speech.
At the time of the accident, Poppel was a recent college graduate who was working as an admissions counselor at an online university.
She testified on the day before closing arguments for about 10 to 15 minutes, Kotin said. On Friday, the jury awarded $17.5 million for her injuries and $12 million for caretaking expenses.
''If anybody were to have sat through that trial and heard all the evidence and met Renea ... they would agree that this verdict represents justice,'' Kotin said.
Kotin and his colleagues presented eight doctors as witnesses.
''With injuries as catastrophic as these ... we felt it was important for the jury to meet everybody, and hear all the evidence firsthand from the individual doctors, rather than simply summarizing the story,'' Kotin said.
Metra offered a $16.5 million settlement shortly before trial, Kotin said.
Poppel also was represented by Thomas A. Demetrio and William T. Gibbs of Corboy & Demetrio P.C.
The Corboy firm was appointed lead counsel for plaintiffs in the accident. It previously has settled two wrongful-death cases, for $6 million and $5 million each. The firm has 33 pending injury cases from the accident.
Metra was represented by John W. Patton Jr. of Patton and Ryan Ltd. He couldn't be reached for comment Monday morning.
Cook County Circuit Judge Thomas L. Hogan presided. Bank of America, N.A. and Geraldine Edmonds, etc. v. Northeast Illinois Regional Commuter Railroad Corp., d/b/a Metra, No. 200 L 010320 E.

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How valuable are mesothelioma claims to plaintiff's firms? I can't tell you for sure but plainly they are much sought. An Internet site purports to list prices paid for clicks through Google's Adsense that allows bloggers to be paid through ads on their website. The top end of the list is dominated by search terms related to mesothelioma. The entire blog entry is at:
http://romilagupta.blogspot.com/

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The march of science continues, and so does its impact on tort litigation. For example, the American Bar Association's TIPS section is hosting an April 2-4 seminar in Phoenix that includes speakers focused on claimant specific genomes as they impact disease. The agenda is here. Plainly we are moving towards a world in which individuals and subgroups will receive more attention, and generalized tort class actions will be harder to justify, but specialized clas actions may be harder to avoid. The results probably will help some plaintiffs and some defendants.



On the subject of individualized disease and mediciane, also interesting is a very recent medical article about using individual DNA to predict the amount of blood thinner needed for particular individuals. The research is descibed in a February 18 wall Street Journal article by Keith J. Winstein. To date, the dosing process for using blood thinners apparently has involved much trial and error, but now there is apparently credible evidence that the needed dose frequently can be predicted using individual DNA, at least for one of the blood thinner drugs. The research also is described a showing that some individuals do not well with the drug due to their DNA. Thus, this would seem to be yet another example of why the FDA and the US medical system are going to have learn to work with both epidemiology and molecular biology at the same time. Double blind studies are a pretty blunt instrument when compared to personalized science regarding the drugs useful for a specific person.

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A prior post on this blog described the UK government issuing a Consultation paper requesting views and information on, among other things, whether it should support legisaltion to cause compensation to be payable persons diagnosed as having pleural plaques attributed to asbestos inhalation. The UK government had said it would provide its position during November 2008, but did not do so. On February 11, 2009, however, Gordon Brown publicly said the Government will "soon" announce its view.


I submitted to the UK government a detailed outline of reasons why my opinion is that payments should not be made for pleural plaques. The paper is available here.

Below is the Q and A that prompted the comments by Gordon Brown.

_______________________________________________
http://www.theyworkforyou.com/debates/?id=2009-02-11a.1360.3


House of Commons debates
Wednesday, 11 February 2009
Oral Answers to Questions -- Prime Minister



Michael Clapham (Barnsley West & Penistone, Labour) The Prime Minister will be aware that it is almost 18 months since the Law Lords made a decision denying compensation to people suffering from pleural plaques as a result of negligent exposure to asbestos. Does he agree with me that we can restore justice and fairness only if that Law Lords' decision is overturned?



Gordon Brown (Prime Minister; Kirkcaldy & Cowdenbeath, Labour) I met my hon. Friend last week and we talked about this very issue. It is very important that we get a resolution following the court judgment on pleural plaques. The Secretary of State for Justice has been looking at this matter and talking to his colleagues right across Government about the implications of what can be done, and I can assure my hon. Friend that an announcement will be made very soon.

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Some corporations that made or sold various allegedly "toxic" or harmful products are today looking for and pursuing all kinds of paths to try to exit the "tort system." One such entity is Crown Cork & Seal, which has been part of an ongoing saga in Pennsylvania that arises from a special statute limiting liability for an entity in its position. A recent lower court opinion is a victory for the corporation, but an appeal seems inevitable. The proceedings are described in a law.com article here. The opinion is online here.

One wonders whether or how much extra-territorial effect would be given to this statute by, for example, a court in a nation overseas that may have been place where the corporation's products were sold.

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A Mondaq article from the Deacons law firm provides an interesting example of how entrepreneurial claiming is changing the face of litigation. The article is a brief but illuminating account of current, ongoing competition between multiple securities class action claims brought by different law firms, with some of the litigation financed by professional litigation funders. As a result of the litigation funders, the class claims are not identical, adding a new wrinkle to the mix as to coordination of litigation.

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"Sponsored research" continues to be controversial. The topic will be squarely addressed next spring in a Friday March 20, 2009 session of the Defense Research Institute's annual seminar on toxic tort litigation. The full DRI seminar agenda is here, and the session is as described as follows:


Meddling with Science--Is Scientific Research
Manipulated for Purposes of Litigation or Regulation?


Plaintiffs' lawyers claim that corporations protect their profits
by suppressing or influencing scientific and medical research and
information. Defense lawyers fight what they call "junk science"
offered by plaintiffs' experts and environmental activists. Do
scientists who participate as experts in litigation tamper with
or improperly influence scientific investigation to bolster the
prosecution or defense of claims in litigation? Do corporations
underwrite research simply to cast doubt on the claims of
environmental advocates and the plaintiffs' bar, or are they
interested in legitimate research that may rebut unwarranted
claims? Two scientists at the center of this contentious dialogue
will engage in a lively debate.

Speakers are:

David Michaels, Ph.D., MPH, George Washington University
School of Public Health and Health Services, Washington, D.C.

Dennis J. Paustenbach, Ph.D., CIH, DABT, ChemRisk Inc.,
San Francisco, California

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A continuing topic of this blog is exploration of the ways that advances in science will change tort litigation tactics and may change tort law rules. The topic will be squarely addressed next spring in a Friday March 20, 2009 session of the Defense Research Institute's annual seminar on toxic tort litigation. The speaker is the well-known and always interesting Dennis Paustenbach. The full DRI seminar agenda is here, and the session is as described as follows:

Toxicogenetics and Toxicogenomics--Science
Fiction or the Future of Toxic Torts?

The genetic revolution is here and has the potential to transform
toxic tort law as we know it. From biomarkers
to DNA microarrays to individualized genetic testing, there
are technical and scientific advances being made that have
the potential to alter the way in which toxic tort causation
is established. Dr. Paustenbach will dispel the myths and
explain the realities about genomics and toxic torts.


Dennis J. Paustenbach, Ph.D., CIH, DABT, ChemRisk Inc.,
San Francisco, California

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What to do with sponsored research - take it at face value, disregard it completely, or use it subject to considering whether to reduce its weight due to the sponsorship (assuming the sponsorship is disclosed). The debate today ranges across a wide spectrum of information sources and decision-makers.

Of note yesterday, an NYT article by Reed Abelson reports that the Cleveland Clinic announced plans to make disclosure of all payments from drug companies and other sources. According to the article:

"It appears to be the first such step by a major medical center to disclose the industry relationships of individual doctors. And it comes as the nation's doctors and hospitals are under mounting pressure to address potential financial conflicts of interest that can occur when they work closely with companies to develop and research new drugs and devices.
The Cleveland Clinic's Web postings are the most recent part of a conflict-of-interest effort at the clinic after some of its leading doctors came under fire several years ago when the news media disclosed some of their financial links."

On the topic more generally, one good source for general reading is a cogent New York Times article by Adam Liptak regarding the Exxon Valdez case and its footnote 17 regarding the Court's refusal to rely on research sponsored by Exxon. Titled From One Footnote, a Debate Over the Tangles of Law, Science and Money," the article also details a like ruling by Judge Weinstein in a drug class action.

The sponsored research topic also is being aired through symposia, such as Cornell sponsoring a symposium on Empirical Legal Studies (agenda here). There also is a good blog devoted to Empirical Legal Studies.

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Much of the strict liability theory taught in law school in 1980-1983, and still today, invoked a rationale of risk-spreading, and assumed that manufacturers could and would purchase CGL insurance to spread the risk of loss. Risk-spreading of course makes sense, and most individuals will acknowledge that there it is difficult to articulate a moral and rationale basis for insisting that some limited number of unfortunate individuals should alone bear the physical, financial and emotional harms caused by defective products (at least when there is real harm and a real defect).

That said, tort theory needs to reflect the reality that the actual availability of CGL insurance does not always exist, and seems to continue to shrink. Non-availability of coverage dates back to the so-called "pollution exclusions" inserted in the 1970s and 1980s, and then the "asbestos exclusions" that became common in the mid-1980s.

Two recent articles highlight the further shrinkage of CGL coverage. The first is an article by David Lenckus in the December 1, 2008 issue of Business Insurance. Its gist is that CGL insurance is now being significantly limited by some insurers by using terms that preclude coverage for later-acquired operations, at least when the operations are not exactly the same as the current operations. Terms of this sort may well may life tougher for the M & A world.

The second is a blog article from PorterWright regarding insurers starting to issue exclusions that preclude coverage for harms arising from nano particles. Exclusions are being issued because some studies indicate that the risks associated with nano particles may equal or exceed the risks associated with the various types of asbestos fibers.

Article 1


Curb on CGL coverage creeping into market


By DAVE LENCKUS
Dec. 01, 2008

Restrictive commercial general liability insurance policies that are moving into the admitted market worry some experts that more policyholders with tough risks--particularly construction contractors--could unexpectedly find themselves with limited CGL coverage.

Experts also are concerned about the coverage the policies provide, because some critical coverage terms are linked to an insurance industry database that is modified periodically and is not directly accessible by risk managers.

Unlike traditional CGL policies, which provide broad coverage for claims arising from a policyholder's operations--except for excluded risks--the restrictive policies contain an endorsement with a "classification limitation" of operations that underwriters will cover.

Those endorsements are contained in the declaration pages of policies, which otherwise follow the traditional CGL policy language developed by the Insurance Services Office Inc. of Jersey City, N.J. However, ISO did not develop the classification endorsement, a spokeswoman said.

Under the policies, if a policyholder adds operations without notifying its underwriter, or if the policyholder's current operations do not fit squarely within the classification limitations, then related losses would not be covered, experts said.

Policyholders also could not expect insurers to provide a defense against those claims, noted Joe Underwood, a senior consultant with Albert Risk Management Consultants in Needham, Mass.

Such policies are common in the surplus lines market but have now begun to creep into admitted coverage, potentially leaving some buyers with less coverage than they thought they had, experts say.

Nonadmitted insurers have been writing the restrictive CGL coverage for construction risks for a few years, said Bruce MacDonald, also a senior consultant with Albert Risk Management.

And John DiBiasi, president, excess and surplus lines for XL America Inc. in Exton, Pa., said XL America writes the restrictive coverage for many other tough risks, including real estate ventures.

But policyholder attorney Kevin Connolly, a partner with Anderson Kill & Olick P.C. in New York, said he first saw policies from more than one insurer with the endorsements in the past few months and that the policies have not "carried the stamp of a nonadmitted carrier."

An XL America standard lines market subsidiary, Greenwich Insurance Co. in Stamford, Conn., writes CGL policies with the restrictive coverage, according to documents that Business Insurance obtained. Greenwich is admitted in all 50 states.

An XL America spokeswoman did not know how long Greenwich had been writing the coverage.

But several brokers at major brokerages said they had seen the restrictive coverage only in the surplus lines market.

Major change

The classification endorsement "turns the CGL policy upside down," Mr. Connolly asserted.

A CGL policy "should be covering everything you do, unless there's fraud in the policy application," said John Lubatti, an Atlanta-based senior vp in the casualty practice at Willis HRH, a unit of Willis Group Holdings Ltd.

XL America's Mr. DiBiasi disagreed. The classification limitations include all of the typical operations in which a policyholder would be involved, he said. But the limitations protect an insurer from being drawn into covering operations it never wanted to insure, he said.

Mr. Connolly said the endorsement is so unusual that policyholders were unaware of it until after he had conducted routine policy reviews at the outset of construction projects.

"That's 100% true," Mr. MacDonald said. "That's the principal part of the concern of this type of endorsement." He said he has encountered the endorsement when construction project owners have retained him to review contractors' coverage that would name the owners as additional insureds. Contractors often did not realize their coverage was restricted, he said.

Buyers of surplus lines coverage typically have their "antennae up" for unusual endorsements, but risk managers do not expect such coverage limitations from admitted market insurers, Willis HRH's Mr. Lubatti said.

XL America's Mr. DiBiasi asserted that buyers should either carefully read all of their policies or hold their brokers accountable for explaining their coverage.

Experts say another problem with the restrictive policies is that they do not give policyholders the flexibility to adjust their insurance to cover all operations.

With traditional CGL policies, an insurer typically conducts a premium audit and then requires a policyholder that adds operations during its policy period to pay additional premium to cover those operations, risk experts say.

Under the more restrictive policies, however, a policyholder with operations not covered by its policy is not given that opportunity, Mr. DiBiasi and other experts explained.

Mr. DiBiasi said the premium audit process should not force insurers to cover any risk.

But understanding what operations are and are not covered is somewhat challenging for policyholders, experts said. The policies do not clearly spell out which operations are covered in the "classification limitation," they said.

Instead, the policies refer policyholders to an ISO database for additional information, but that database is not open to policyholders. Policyholders could ask their brokers for that information, because brokers have access to the database, experts noted.

Still, experts raised concerns about insurers linking policyholder coverage to a database in which definitions of covered operations could be modified between a policy's inception date and the time a claim is filed. A modification could leave a policyholder with no coverage for operations that originally were covered, they said.

"We have to trust the insurance company to do the right thing when a claim comes in," said Mr. Connolly, the policyholder attorney.

XL America's Mr. DiBiasi said, "The policy stands as it was issued and will be handled for claims on the basis as it was issued even years after the fact."

He added that "ISO changes apply only to policies going forward and only if a specific company adopts the change."

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With election day in the US just 2 days away, this is a plea to all to get out and vote on Tuesday, if it's not already done.

This also seems an appropriate time to comment that it seems plain that both politics and tort litigation tend to inspire extreme views, generally to the detriment of society.

Our presidential campaign this year has been marked by ads and extremist emails too often filled with either outright lies or distortions of small nuggets of truth. On top of that come blatantly extreme attacks on each contender's personal life and views. I'll add my voice to the many who are asking for "better" from our politician and parties.



Sad to say, the same is too often true for discussion of tort litigation issues. Extreme views in tort litigation are illustrated by articles built around extreme cases instead of in depth looks at the overall facts. Extreme attacks on individuals are illustrated by comments posted beneath a Wall Street Journal blog post that noted the much too young death of Fred Baron, a very successful but sometimes controversial plaintiff's lawyer who spent decades on asbestos litigation, with his early work shaped and informed by his work related to cases arising from an infamously dirty place commonly known as the Tyler Texas pipe plant. In my view, debate about tort litigation issues also needs "better" than extremism.

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A prior post here noted that Canadian scientists recently criticized the Canadian government for continuing to support global sales of chrysotile asbestos fibers. The industry historically was very valuable for Canada in terms of jobs, taxes and revenues - the mining itself is graphically shown in a wonderful McCord Museum set of online photos of miners and the mines that show abysmal safety practices.


According to a front page Globe and Mail article on October 31, 2008, Canada took a formal position of silence this past week at proceedings under the Rotterdam convention to decide whether chrysotile asbestos fibers should be added to a list of the world's most dangerous substances and thereby banned to a large degree. In past years, Canada actively spoke against adding chrysotile to the list. The net result was the same because the convention calls for consensus, which was not achieved since nations such as Pakistan and India oppose the ban. Those nations are among many in which asbestos-cement board remains a popular building product despite hazards that may arise if good work practices are not used when the material is cut or destroyed. Cement board is a strong building material used for many roofs and walls in countries that lack trees and/or the infrastrcuture needed for lumber for use for building materials, and is flexible enough that scrpas of it were molded into a giant penguin shown here because of concerns about the asbestos in it.

This outcome is major disappointment to groups such as the International Ban Asbestos Secretariat that has worked for over a decade to obtain a global ban on asbestos fiber sales.

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The Canadian Medical Association has come out with an editorial, described here, that calls on Canada to join with other countries to further regulate "asbestsos" exports. The topic is of interest in Canada because its been a major exporter of asbestos for decades, and so the fibers produce jobs, corporate profits and tax revenue. The issue is in part caused by disputes about how safe or unsafe are the various types of asbestos fibers and their various end uses. The topic is relevant here because a recurrent issue in tort litigation no doubt will be whether and how health standards and practices in one country should effect what happens in another country or be applied in different countries.

The same issues also arise for politicans, as illustrated by the article. In the US, the issue has arisen during the US presidential election through Senator Obama has called for further and/or additional enforcement of terms intended to protect workers and "the environment" against processess that are not deemed as safe as practices in the US. Some have called it that a good idea, and others call it "protectionism." Some would say that it is short-sighted if the US and other "developed" economies do not push or "nudge" others to move towards less risky practices. Otherwise, it seems that industry is receiving a subsidy in the form of allowing it to undertake operations known not to be "safe." That said, others argue that the US should "let the free market" work and not "interfere."

Lots of room for debate in this area, and it will be interesting to see what happens.

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A new en banc 5th Circuit opinion from a strongly divided court grants the extraordinary remedy of mandamus to overturn perceived forum shopping related to a "rocket docket" in the Eastern District of Texas. Much is being made of this opinion in many contexts, including patent law and product liability cases.

Opinions on venues and "rocket dockets" are taking on even more importance as litigants seek fast outcomes and ROI. That said, the Illinois Supreme Court has been issuing rulings since 1983 trying to stop perceived forum shopping in Illinois with respect to Madison and St. Clair counties (and other venues) but those counties remain extraordinarily active venues.

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For some time now, I've been writing about potential changes in product liability law due to rapid changes in communication and science. In a February, 2007 article for Corporate Counsel, I addressed various changes, including the widespread availability of scientific information and its impact on information-related tort claims. The article included my prediction that "sophisticated intermediary" types of defenses would change in light of all the available information. I'll pat myself on the back and note that I was right - in a drug case in 2007, the West Virginia Supreme Court cast aside the "learned intermediary defense due to the wide availability of information to consumers. See Johnson and Johnson v. Karl, 220 W.Va. 463, 647 S.E.2d 899 (2007). The Court there said many things, including the following:

"When the learned intermediary doctrine was developed, direct-to-consumer advertising of prescription drugs was utterly unknown . . . Since the 1997 proliferation of drug advertising, only four high courts have adopted the learned intermediary doctrine . . . None of those courts gave thorough consideration to the changes that have occurred in the prescription drug industry with respect to direct-to-consumer advertising. We however, find such changes to be a significant factor in deciding this issue . . "

So, with that as background, I particularly enjoyed reading an excellent new article by Sarah (Sally) Olson of Wildman regarding the Johnson case and other additional specific examples of the Internet's effect on tort claiming. The article is titled: Net's Impact on Strict Product Laibility Law. The effects she describes include increased numbers of public consumer complaints of defects, consumer input into design, whether a company needs to monitor blogs, whether a company run blog or website will produce its own liability if a company is not accurate in what it says publicly, and various other points. Ms. Olson's article is well worth reading in full and considering how it might apply in your context.

After that, think also about reading a 2008 book titled: Stop The Presses: The Crisis and Litigation PR Desk Reference. Written by Richard Levick and Larry Smith of Levick Strategic Communications, the book's chapters 7 and * deal with blog strategies and lots of other "crisis" issues that did not exist 5 years ago in any material way. Then I'd suggest reading their chapter 9 on the impacts of media as related to increased prosecutorial activity. That's a topic I've also covered in a more limited context in a 2006 Corporate Counsel article focused on "toxic torts" and criminal prosecutions.

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For those interested in "mass tort" issues, well worth reading is today's National Law Journal article regarding the recent wave of manufacturing defect product liability claims arising from drugs manufactured in China. The interesting points discussed include whether or how federal preemption principles will apply, and some aspects of claiming against Chinese entities.

Not mentioned in the article are other interesting issues. For example, down the line, these suits could produce some interesting discovery into and facts regarding the manufacturing processes in China, and the efforts of US companies and the FDA to ensure that products are made well. It will be interesting to see how their practices compare to safety practices used in other industries. Consider, for example, McDonald's and its decades of "Happy Meal" toys made in China, but distributed without incident in the US and around the globe. The great success of the McDonald's system includes the system's foresight in many years ago implementing design and manufacturing standards well above minimum standards, and having put trained observers into factories, along with using significant testing of products before they leave the manufacturing plant.

________________________________________________________________

http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202423109561



Suits roll in over recalled drugs
China may factor in heparin actions.
Amanda Bronstad / Staff reporterJuly 21, 2008

Heparin medication is used to thin blood during surgeries.CMS Photo / Newscom
Baum Hedlund's Roger DrakePlaintiffs' attorneys have filed dozens of lawsuits in recent months involving two recalled drugs, generic blood thinner heparin and prescription medication Digitek, that could signal a clean break from past actions that were far less successful against drugs Vioxx and Paxil.In short, it's a different legal ballgame, attorneys say.In contrast to past pharmaceutical tort litigation, plaintiffs' lawyers aren't alleging that a company's "failure to warn" about possible risks of a drug caused injuries and deaths. In recent years, those arguments have been challenged in court, where several judges have sided with manufacturers in upholding federal pre-emption, or the concept that U.S. Food and Drug Administration (FDA) regulations override state liability claims.Lawyers anticipate that the new defective-product claims could duck the federal pre-emption argument altogether, increasing the chances of success for more plaintiffs.Also, plaintiffs' attorneys may have another edge: The heparin suits are the first to be brought against a pharmaceutical manufacturer with ties to China, which has been linked in other litigation to dangerous products such as toys, pet food and toothpaste."This is going to be the tip of the potential iceberg in terms of Chinese manufacturing and drugs," said William M. Audet of Audet & Partners in San Francisco, a plaintiffs' lawyer who has brought several drug cases and anticipates filing up to 60 lawsuits involving heparin and Digitek.But the recent drug lawsuits aren't all easy to swallow.Theodore Mayer, a partner at New York's Hughes Hubbard & Reed who defends pharmaceutical companies, said that plaintiffs' attorneys are likely to face challenges of causation. "Part of the challenge here is to distinguish between the cases that are actually caused by this contamination and the cases where the patient is just one of many, many patients in hospitals on heparin whose outcome may or may not be good for reasons that have nothing to do with the heparin," he said. Up to 700 casesMore than 40 lawsuits have been filed against the manufacturers of heparin, which is used to thin blood during surgeries. In the past six months, about a dozen manufacturers, primarily Baxter International Inc., as well as their distributors and suppliers, have recalled much of the nation's supply of heparin after a contaminant was discovered in the drug. The contaminant was tied to a supplier in China.In recent weeks, the lawsuits against Baxter, filed on behalf of those who claim that their loved ones died following a rapid drop in blood pressure, or that they suffered allergic reactions to the contaminated drug, have been consolidated in federal court in Ohio. According to the FDA, 124 deaths have been associated with the contaminated heparin.David Zoll, a partner at Toledo, Ohio-based Zoll, Kranz & Borgess, and liaison counsel in the heparin cases, said he expects 300 to 700 claims to eventually be brought involving heparin. "We think there are important ramifications on pre-emption that are raised by this case," he said. "The doctrine of pre-emption holds that we can rely on the FDA to keep us safe from dangerous drugs; the FDA will make sure the manufacturer does its job. This case shows that was not the case."Meanwhile, the U.S. division of generic pharmaceutical manufacturer Actavis Group hf. recently announced a nationwide recall of Digitek, a prescription drug used to treat congestive heart failure and abnormal heart rhythms, after several of the bottles contained more than the dosage as labeled.More than 40 lawsuits have been filed in federal and state court in Alabama, California, Louisiana, New Jersey, Ohio and West Virginia on behalf of patients who were injured or died.Tony O'Dell of Berthold Tiano & O'Dell in Charleston, W.Va., a lead plaintiffs' lawyer in the cases involving Digitek, said Actavis "ran the pill back through the process twice and ended up having twice the amount of active ingredient."He said his firm alone is evaluating about 100 potential lawsuits.The suits have few similarities to other drug cases in which he has been involved, O'Dell said. In those cases, the allegations against the drug were focused on "the way it was being marketed or being used or the fact that they had tested enough and had reactions," he said. Digitek has "been around for a long time. And it's a drug that has very good therapeutic reasons for its use. But it's a drug [for which] this company had very poor quality assurance in place."Matthew Moriarty, a partner at Cleveland-based Tucker Ellis & West, who represents Actavis and the other defendants in the case, declined comment.In the cases involving both drugs, plaintiffs' lawyers argue that a product defect, not a "failure to warn" about possible risks, caused injuries and deaths. Although heparin and Digitek were approved by the FDA, those drugs were never intended to be sold as they were -- allegedly with contaminated ingredients or in incorrect dosage amounts.The claims mark a shift in drug liability cases. "Most pharmaceutical litigation is based on a failure to warn," said Roger Drake, an attorney in the Los Angeles office of Baum, Hedlund, Aristei & Goldman who serves on the multidistrict litigation plaintiff's steering committee in the heparin cases. "This is a manufacturing defect, a different type of cause of action not subject to pre-emption problems that some of the failure-to- warn cases have," he said. "Because of that, it's unique in that respect from some of the pharmaceutical litigation out there."Although most lawyers agree that federal pre-emption could be a more difficult argument to prove in manufacturing defect cases, the legal defense remains a potentially major factor in all pharmaceutical products liability cases. Federal pre-emption has been successful in a substantial number of cases against pharmaceutical manufacturers. Even the FDA issued a preamble two years ago supporting federal pre-emption in cases involving the labeling of approved drugs.Earlier this year, the U.S. Supreme Court ruled that products liability claims against a medical device manufacturer were pre-empted by the Medical Device Amendments to the federal Food, Drug and Cosmetic Act. Riegel v. Medtronic, 128 S. Ct. 999 (2008). While the ruling is limited in scope -- addressing whether claims challenging the approved design and label of a catheter that burst during surgery were subject to a specific pre-emption clause -- some lawyers have interpreted the decision as having broader implications that could influence products liability claims involving drugs.Mark Robinson of Newport Beach, Calif.'s Robinson, Calcagnie & Robinson, and a member of the steering committee in the consolidated heparin cases, said the pre-emption issues in failure-to-warn cases and in cases accusing companies of design defects have little or no relevance in cases involving manufacturing defects, which allege entirely different claims."We're not claiming they designed it that way. This Chinese subsidiary, or Chinese supplier, changed the ingredients from the actual ingredient that makes the blood thin to an ingredient that looks like the same ingredient," he said. "But in reality, it's a lot cheaper version, and it doesn't thin your blood. In effect, that's a manufacturing defect."The suits involving heparin also are the first involving a pharmaceutical drug with ties to China. With the recent prevalence of defective-product cases involving China, plaintiffs' attorneys filing heparin lawsuits could have a stronger case than those concerning other drugs.Jeffrey Killino, a partner at Philadelphia's Woloshin & Killino who filed a heparin suit against Covidien Ltd., a supplier of medical devices and drugs, primarily handles cases involving defective tires and toys made in China. He said he anticipates jurors to be more receptive to the heparin cases than they were to previous pharmaceutical lawsuits. "Juries are outraged about what happened in China," he said."These pharmaceutical lawyers will get in a courtroom on a Chinese product case and be happy campers," Killino said. Zoll, liaison counsel of the heparin suits, said there is a potential for more liability suits against pharmaceutical drug manufacturers with links to China because the growth of companies in that country is "huge.""Will there be another case coming out of China? Absolutely," he said.Mayer, the defense attorney, hesitated to suggest that more suits would be filed outlining a similar set of facts that surround the heparin recalls. But, he said, the heparin suits could attract more pharmaceutical litigation, in general, involving Chinese suppliers."There's a lot of copycat effect in litigation," he said. "Once you see one of these lawsuits where people make an allegation that the Chinese supplier didn't do what it was supposed to, people may look harder at other such situations whether or not there is any basis for it."Baxter's lawyer, Leslie Smith, a partner at Chicago's Kirkland & Ellis, referred calls to a company spokeswoman, Erin Gardiner. In an e-mailed statement, Gardiner said that products liability suits generally involve allegations of a design defect, manufacturing defect or failure to warn. In this case, the heparin contaminant was the result of "deliberate and sophisticated tampering" that evaded internal tests of the drug."Because of the insidious nature of the heparin contamination that surprised heparin manufacturers around the world, we do not think the traditional product liability claims are valid," she said in the statement.Gardiner also said that, unlike other pharmaceuticals that have been on the market for years, the heparin at issue was in use for less than six months. Not all the heparin on the market was contaminated, either.Finally, she said, "we believe that only a very small number of people who received the heparin suffered significant injury caused by the contaminant, while the vast majority suffered no adverse event or only a transient reaction."A call to Michael Moeller, a partner at Kansas City, Mo.-based Shook, Hardy & Bacon, who represents Covidien, was returned by spokesman David Young, who declined to comment on the litigation.

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A significant topic for at least the next decade will be the interesection of criminal law, tort law and civil law (including the law on punitive damages). The issue is growing in prominence for many reasons, including new UK legislation on corporate manslaugher and U.S. Senate hearings held a couple of years ago on possible new criminal law legislation in the US for product liability claims. The topic will be covered here in more detail in future articles.

For now, however, a recent news article makes the general point as it describes the manslaughter indictment of a Connecticut area swimming pool contractor (that is, a seller of a service and a seller of component products) for a child's drowning death said to arise from failure to install a mandatory drain cover.

Is the indictment fair or "right?" Various people can and will argue a range of positions on that topic. One interesting and arguably well-informed view is set out in the the May 1, 2008 American Lawyer interview of Robert Bennett. Mr. Bennett, of Skadden Arps, was interviewed in connection with his autobiographical new book about his work as a white-collar defense lawyer, which included working for the Seante Ethics Commitee in prosecuting the Keating 5 and defending numerous cases for corporate America. Bennett expressed the view that indeed criminal law sanctions can and do change corporate behavior. He is quoted as having said:

R: You write that you are shocked by the rise in white-collar prosecutions. Why do you think it's happening? Are corporations more corrupt? Have prosecutors gotten bolder?

B: I don't think that companies have gotten more corrupt. I think it's more the approach taken by law enforcement. Years ago, when I was a federal prosecutor, a lot of these corporate issues were handled by regulatory agencies. Now, law enforcement is trying to reform how business is done. There is probably less corruption today because of the government's aggressive approach. [Corporate executives] know it's not just a matter of paying fines anymore.

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There is much room here for innovative thinking on all sides of the many issues. 

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The April 10 Economist included a brief article noting the issues regarding elected state court judges, and its text is set out below as a fair use. According to the article, some or all of the judges are elected in 39 of the United States.This topic has been debated for years, but little has changed except that more and more money is being spent on judicial elections. The article has specifics on the latter.


I would add three observations to the debate; the first one comes from the judge I clerked for, Howard C. Ryan, who was an elected state court judge. His point was a pragmatic one, which is that reformers need to be flexible in their proposed solutions and cannot expect to hit a "home run" on the first try. For example, the "reform" solution that works for the hundreds or thousands of judges in Cook County, Illinois probably will not work for a "downstate" Illinois county with only a handful of judges and perhaps only dozens of lawyers. Why? Because some reform proposals aimed at Cook County called for panels of X lawyers, with X being a small number in Cook County but an unattainable number in some farming counties with modest numbers of lawyers and judges. (During my clerkship way back in 1983, the issue was somewhat "hot" in Illinois and so Judge Ryan, as a "downstate" judge, explained to us some of the very real differences between Cook County courts and the courts in the rest of the state. In my opinion, he's absolutely correct that one size does not fit all. The Judge, by the way, also was open-minded. Indeed, to further the analysis, he asked me to research and present him with a memo summarizing how various nations around the world create their judiciary.)


Second, there is in my view much merit to ensuring that many of our appellate judges have spent meaningful time as trial judges. Trial courts are dynamic places with things said and unsaid because of the exigencies of the moment and many other factors. When an appellate court gathers to decide cases, it is I think important that there are some judges in the room who have a feel for the what is really "harmless error," and the pressures of long trial days. This is not to suggest creating a black letter rule requiring trial court experience - I join with those who say that it would be a grave mistake to exclude all academics, nor do we want to exclude the lawyers who never worked as judges but spent years trying cases, and so know the nature of trials.


Third, there is the question of why the topic has produced so little substantive debate (as opposed to sound bites and posturing), and so little meaningful change. On this topic, I commend to all Robert Reich's newest book: Supercapitalism. It's an insightful look at where we as a nation are today in terms of the political process. It's also refreshing to read a book with lots of facts, footnotes to the sources, and an absence of spin.

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