Rising mesothelioma claims and expenses, exceeding projections. That’s the May 22, 2014 financial word from Australia’s James Hardie. An ABC News story is here. This “investors” page for James Hardie includes links to download Hardie’s May 22, 2014 press release, and KPMG’s March 31, 2014 report on expenses  for the James Hardie asbestos trust.

Unlike American bankruptcy trusts, the Hardie trust also offers significant transparency as to claims and payments, as detailed below.  As reported by ABC News, the gist was as follows as to asbestos claims for 2013:

“Asbestos exposures

James Hardie has reported $US195.8 million in adjustments for asbestos liabilities in its annual accounts, up from $US117.1 million last year.

The company says accounting firm KPMG’s current estimate of total asbestos liabilities for Australia, net of insurance claims, has risen to $1.547 billion this financial year from $1.345 billion last.

The main reason for the rise, according to the report, is a continued increase in claims by asbestos victims suffering mesothelioma, a rare form of cancer generally affecting the lungs and typically caused by asbestos exposure.

James Hardie says actuaries had previously assumed a peak in mesothelioma claims to have occurred in 2010-11, however the past two years of claims have been above expectations.

In the year to March 31, a total of 608 asbestos-related claims were received, a 12 per cent rise from 542 claims the previous year, and well above expectations of 540 claims.

James Hardie says 604 claims were settled in its 2014 financial year, with an average settlement of $253,000, resulting in a total payout of $140.4 million for the year.

Mesothelioma claims jumped almost 20 per cent in the year to March 31 2014, to 370, up from 309 the year before, 259 in 2011-12 and 268 in 2010-11.

KPMG had previously expected only 300 mesothelioma claims in its forecasts.

Mesothelioma claims are far more expensive for the company, with the average settlement sitting at $308,000, compared to around $100,000 for asbestosis or lung cancer.

There were also seven “large” mesothelioma claims over $1 million, worth a total of $11.6 million.

The company warns that, if claims do not start reducing until after 2018-19 the estimated claims total of more than $1.5 billion could rise a further 22 per cent on top of this financial year’s increase.

KPMG says it is too early to tell whether the higher number of claims will be sustained based on one year’s worth of increased claims.”

In Australian asbestos litigation, a recent $1.15 million jury verdict against James Hardie is reported here. The suit was by a former employee who developed mesothelioma. The key excerpts state:

 

"A Victorian Supreme Court jury has awarded compensation of more than $1 million to a man exposed to asbestos nearly 40 years ago.

Eric King, 62, developed mesothelioma after he was exposed to asbestos at a James Hardie factory in Western Australia in 1972.

Mr King’s lawyer, Andrew Dimsey, says his client was awarded $1.15 million, despite attempts by James Hardie to have the jury dismissed.

"This is a case where every issue was in dispute, from James Hardie’s duty of care, to its breach of duty of care, to the cause of the cancer and the damages claim by Mr King. So every issue was hard fought," he said."

 

It’s back to Australia. There, an important new appellate court opinion affirms a verdict for a brake mechanic who won a trial court judgment that his mesothelioma was caused by inhalation of chrysotile asbestos fibers from automotive brake linings.  A popular press article is here regarding the plaintiff, John Booth. The appellate opinion is here. The trial court opinion is here.

The appellate court opinion is noteworthy in multiple ways, and not all are covered here. Of note to me, the US Supreme Court’s Daubert opinion was acknowledged as interesting, but was not followed. Second, the Court rejected defendants demand for epidemiological proof. Third, it reached the obvious – but not always stated – conclusion that  tort damages may be awarded when scientists can explain some – but not all parts  – of exactly how a disease is caused. 

Key passages are set out below; the Australian system of numbering paragraphs makes it easy to find the quoted sections.

62 The objection must ultimately be resolved by reference to the contention that Professor Henderson failed to engage with the epidemiological evidence said to demonstrate that there was no causal link between exposure to asbestos in the course of undertaking brake repairs and mesothelioma. That proposition, however, fails at two levels. First, it fails because it assumed that epidemiological evidence is both relevant and dispositive of, or at least superior to, other evidence of causation. Secondly, it fails because Professor Henderson did not disregard the epidemiology.

63 The role of epidemiology in causation inquiries was explained by Spigelman CJ in Seltsam Pty Ltd v McGuiness at [93] in the following terms:

    “With respect to many diseases, medical science is able to give clear and direct evidence of a causal relationship between a particular act or omission and a specific injury or disease. There are, however, fields of inquiry where medical science is not able to give evidence of that character. There are cases in which medical science cannot identify the biological or pathological mechanisms by which disease develops. In some cases medical science cannot determine the existence of a causal relationship. Such a state of affairs is not necessarily determinative of the existence or non-existence of a causal relationship for purposes of attributing legal responsibility. Epidemiological evidence may be able to fill the gap. It is of particular potential utility in the field of what is often referred to as ‘toxic torts’, especially in case of diseases with long latency periods.”

64 Professor Henderson’s evidence in terms supported a causal relationship; accordingly, the epidemiological evidence was not essential or dispositive. (emphasis added).

 The opinion also includes a notable,  brief discussion of whether it matters that science cannot yet explain every part of the biological process that results in the cancer.  The Court emphatically said "no," and explained the holding as follows:

116 It is convenient to deal first with the challenge to the “biological process” evidence. The appellants submitted that such evidence was “incapable” of supporting a finding in favour of the respondent, for three reasons. First, it was said that the biological processes remain “incompletely understood”. That assessment of scientific understanding may be accepted; but it takes the appellants nowhere. The civil standard of proof, on the balance of probabilities, permits a yawning gap between complete understanding and sufficient understanding. There may be an even greater gap between that which is “capable” of supporting a finding on the balance of probabilities and that which the appellants would accept “does” support such a finding. The submission misconceives the nature of the proceedings. (emphasis added).

 

Estimates and disclosure of contingent risks are front and center these days in various contexts. Thus, asbestos-specific estimates and disclosures are prominently mentioned in a new  Australian appellate decision in CSR. The opinion was issued at the end of last week, and provides some narrow guidance on solvent schemes of arrangement for companies facing asbestos claiming. A prior post here  describes the trial court litigation regarding the efforts of CSR, an Australian business, to obtain judicial approval of a  reduction of its its asset base when it faces admittedly significant current and future asbestos claims.  The proposed reduction of assets would be accomplished through a "demerger" (in the US, we would call it a spinoff). 

The federal appellate court opinion in CSR is worth reading for those interested in the social and legal policy issues involving tort claiming and corporate transactions. That said,  the opinion is narrow. In short, the court did not approve the demerger, and did not find the demerger reasonable. Instead, it narrowly held that the trial court should allow the process to move forward to a meeting of creditors. 

The future developments in CSR will be interesting. At present, CSR’s demerger efforts are opposed by asbestos claimants, AISIC (the Australian counterpart to the SEC), a regional government  fund obligated to pay claims by persons suffering from asbestos-related diseases, and by a significant asbestos co-defendant, James Hardie.  To date, the objectors have not cross-examined various actuaries who prepared estimates of the future asbestos payments by CSR. it will important and interesting to see the substance that emerges from cross-examination of actuaries, if it occurs.  Cross-examination did not occur to date because the parties structured  the proceedings that way and allowed much of the information to remain "confidential."  The appellate court opinion seems to put the reasonableness of the actuarial reports squarely into play for  cross-examination and argument during future proceedings. Thus, the appellate court explained:

" 56  As to the argument advanced on behalf of the James Hardie parties, the reports prepared by CSR’s actuaries purport to quantify the present value of CSR’s future long term exposure to asbestos claimants. There is nothing in these reports which suggests that any category of asbestos claimant has not been included in their actuarial assessment. There is, accordingly, force in CSR’s argument that the learned primary judge erred in treating the disclaimer in the Grant Samuel report as indicating that the assessments made on behalf of CSR did not include persons who have not yet contracted an asbestos related disease as a result of exposure for which CSR is responsible. On the other hand, this important question could have been resolved beyond the possibility of doubt by cross-examination of the relevant authors. That did not occur in the proceedings before the learned primary judge. To say this is in no way to level a criticism at her Honour: the case was conducted before her in accordance with the wishes of the applicant and the interveners. To say this is, however, to recognise that an application for the convening of the first meeting of shareholders under s 411(1) of the Act is not an ideal occasion to attempt to resolve such issues.  " (emphasis added)

  

Look to the right under "James Hardie" for prior posts regarding legal issues related to James Hardie’s efforts to use a private foundation to resolve asbestos claims, and related claims against officers and directors that ended in convictions.  Appeals are now in argument for two weeks or so. Popular press articles on the appeal are here and here.

Here is an article updating this prior post on the effort to amend “collusion” claims against James Hardie and CSR in an asbestos personal injury trial. In short, the court denied the motion to amend on the eve of trial in this particular case, but is said to have indicated that similar amendments might  be allowed in other cases not so close to trial. See the full text below.
_________________________________________________________________________

Judge denies late changes in asbestos case

LEONIE WOOD



February 10, 2010 .


THE Victorian Supreme Court has declined late changes to an asbestos damages case in which a Melbourne man, who is dying from mesothelioma, planned to accuse James Hardie and CSR of joining forces to disguise the dangers of asbestos.

Justice Terry Forrest said the proposed amendments in their present form would not be allowed.


Although the judge said the proposed pleadings in the case of Robert Berengo were deficient, he also made it clear that litigants in the future might well be able to allege joint liability if they properly set out the material facts and the case that is to be answered.

Mr Berengo wanted to allege that the Australian asbestos manufacturers deliberately did not put their brand names on their asbestos-related products during the 1960s and 1970s, making it harder to identify which of the two should bear liability in cases of injury and disease.


He also wanted to allege that the companies had agreed to co-operate to dissuade regulators from restricting the use of asbestos and to influence public opinion about the dangers of their product.


Mr Berengo’s trial, in which he accused the two companies of negligence, begins on Tuesday

The asbestos litigation pot continues to boil in Australia. Over the last couple of weeks, CSR was denied the opportunity to split its business, a topic I keep hoping to get to, but life is busy. For now, here is a new article about plaintiff’s seeking to amend a complaint to seek to prove up purported collusion between Hardie and CSR. How much does that sound like US litigation ?  The text also is pasted below.

___________________________________________________________________________

Hardie, CSR ‘colluded’, sufferer says LEONIE WOOD

February 8, 2010 .

THE building products manufacturers James Hardie and CSR have been accused in court of joining forces during the 1960s and ’70s in a bid to dissuade regulatory authorities from restricting or controlling the use of their potentially lethal asbestos products.

The court has also heard allegations that James Hardie and CSR deliberately did not mark their company names on asbestos-laden products so that they could conceal which company manufactured them – a move which, the court heard, would make it harder to identify which company had liability for future claims of potential injury or disease.

The allegations emerged on Friday before Justice Terry Forrest in the Victorian Supreme Court during preliminary proceedings ahead of a trial in which a Melbourne man, Robert Berengo, is claiming damages from James Hardie’s asbestos liability fund, Amaca, and from CSR.

The fresh allegations come just days after Justice Margaret Stone in the Federal Court in Sydney cruelled CSR’s plans to spin off its sugar business, citing concerns about the company’s future ability to meet asbestos-related claims.

Justice Forrest will decide tomorrow if Mr Berengo’s lawyers can amend his statement of claim to incorporate the new allegations of collusive behaviour.

If the judge allows the allegations to proceed, it may pave a new route for claimants in asbestos-related cases who often struggle to prove which of the two Australian asbestos manufacturers was responsible for products that caused their asbestosis or mesothelioma.

Counsel for both James Hardie and CSR criticised the form of the proposed amendments, with Graeme Uren, QC, for CSR describing them in court as ”a porridge of assertions that don’t lend easily to a legal conclusion”.

Mr Berengo was a young boy in the early 1970s when he accompanied his father, a builder, to properties where asbestos-cement sheeting and other asbestos products would be sanded, altered or removed.

The proposed allegations are that James Hardie and CSR, which owned Wunderlich, had an agreement or arrangement about how they would influence Australian public opinion and regulatory authorities in the 1970s, and that they co-ordinated their lobbying of authorities and responses to media articles to stifle public concerns about asbestos.

Counsel for Mr Berengo, John Gordon, told the court that his client planned to allege that ”over a considerable period of time, the two companies … formed arrangements, agreements or an understanding to act together to influence the public debate on the dangers of asbestos, and to influence regulatory authorities on the control of, and the use of, the asbestos”.

He said that, as a result, the public was not warned by the companies of the risks and dangers of using asbestos products.

CSR sold Wunderlich to James Hardie in 1976. The case is due to begin on February 15.

Back to Australia, asbestos and James Hardie.

As described in this prior post, a rather dry paper by KPMG describes the history of James Hardie and its many intersections with asbestos and asbestos-containing products. That dry look is of course needed and appropriate in the sense that decisions need to be made based on technical information.

There are other sides to the story. A new expose/investigative journalism book is out regarding James Hardie. A book review is set out below from the Ban Asbestos web site run by Laurie Kazan-Allen, sister of an American plaintiff’s lawyer, Steve Kazan. The review is by Jock McCulloch, who also has written books on “asbestos companies.”  The words of the book review are  worth reading as a counterweight to the dry story told by KPMG.
_____________________________________________________________________________________

Book Review: Killer Company – James Hardie Exposed

Matt Peacock. Sydney: ABC Books, 2009

Reviewed by Jock McCulloch

Australia has the highest recorded incidence of mesothelioma in the world because in the period from 1945 until the mid 1970s Australia was one of the highest users of asbestos based products. The local market was dominated by a single firm James Hardie Asbestos and to a large degree the Australian asbestos story is the story of James Hardie.

James Hardie shares much in common with Johns Manville, Eternit and Turner & Newall. Hardie was a vertically integrated company which enjoyed great commercial success in the decades after 1945. That success was built on an ever widening range of building and insulation materials. Hardie owned asbestos mines in Australia, Canada and briefly in Zimbabwe and manufacturing plants in Australia, New Zealand, Malaysia and Indonesia. Like Johns Manville, it has survived the asbestos scandal to re-invent itself as a non-asbestos building materials manufacturer. Like Johns Manville, James Hardie has used a variety of strategies to inure itself from the people it has injured.

Killer Company is a major contribution to the literature on the asbestos industry. The book has grown out of Matt Peacock’s sustained engagement with the issue of asbestos and health. It is based on long hours of archival work sorting through Hardie’s internal correspondence. Peacock has also interviewed many of the key players. The result is an insight into the mentality and behaviour of an important asbestos company.

Matt Peacock has played a major role in publicising the risks of asbestos in Australia. In his work as a journalist he has helped to expose the behaviour of the asbestos industry toward its employees, and the consumers of its products. In 1977 Peacock broke the story of Baryulgil, a small chrysotile mine which Hardie operated in northern New South Wales. The work force at Baryulgil was drawn from the indigenous Bundjalung people who lived and worked under conditions every bit as severe as those endured by black workers in South Africa. It was Matt Peacock not James Hardie who warned the community of the risks of asbestos disease. He was also instrumental in forcing a Parliamentary enquiry into the operation of the Baryulgil mine.

In Killer Company Peacock reviews the extent to which Hardie’s senior management engaged in the same kind of behaviour that has been documented in British and US courts about Cape Asbestos, T&N and Johns Manville. Hardie knew far more about the risks of asbestosis, lung cancer and mesothelioma than did regulatory authorities or trade unions. Armed with that knowledge it refused over a period of decades to reduce the risks faced by its employees or the users of its products. When a flood of litigation began in the mid 1970s Hardie avoided bad publicity by settling cases out of court. When that failed it sought to move its assets out of the reach of potential claimants. The bad publicity surrounding a move of assets to The Netherlands in 2004 has seen James Hardie become probably the most reviled corporation in Australia. Peacock shows that such a reputation is well deserved.

The health risk of asbestos has taken many forms from workplace exposure, to the dumping of waste and the use of fibre in the most unlikely of products such dental amalgam and children’s play dough. Until the 1970s it was common for waste from Hardie’s Adelaide factory to be used to dress domestic driveways, pathways and garage floors. In New South Wales thousands of tonnes of waste was dumped into rivers and creeks and on roadways and football ovals. Such waste is virtually indestructible but at least when deposited outdoors by-stander exposure to airborne fibre is sporadic.

Each year thousands of tonnes of crocidolite, amosite and chrysotile arrived at Hardie factories which resulted in the accumulation of hundreds of thousands of hessian bags. In Sydney and Melbourne the bags were recycled by market gardeners to carry potatoes, carrots and onions. In Western Australia wheat farmers received fertiliser in the same bags. Over the period from 1944 to 1966 the Wittenoom crocidolite mine in Western Australia produced 160,000 tonnes of fibre. That fibre was transported in 45 kilograms hessian bags. Matt Peacock has discovered that hundreds of thousands of those bags ended up in domestic dwellings as carpet underlay. Consequently, an unknown number of Australian homes have been contaminated and an unknown number of residents continue to live at risk, every hour of every day.

There is no easy way to estimate the human and commercial cost of the asbestos industry. That is because in parts of Asia and SE Asia the industry is alive and well. It is also because as Matt Peacock has shown the extent of by-stander exposure in the OECD states is still unfolding.

Killer Company is an important book.

Jock McCulloch

School of Global Studies

RMIT University,

Melbourne,  Australia.

January 21, 2010

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There are several other ”business history” books related to ”asbestos companies.” Most of them include significant footnotes and bibliographies:

Blue Murder, by Ben Hills, describes in detail the situation related to the Wittenoom crocidolite mine in Australia, a mine owned for decades by CSR. The book discusses many things, including corporate fiber purchasers and uses.

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.

Mr.  McCulloch and Geofrey 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.