Conflict of Interests and International Tort Claims for Persons from Many Countries - The Libyan Terrorism Example

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."

Chapter 11 Cases Fail to Properly Deal with Future International Claims Against Multinationals Heavily Involved in Selling Asbestos Fibers or Products

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:


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.

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.

Contribution Claims Between Insurers After Paying Defense Expenses

Sometimes insurers pay all the defense expenses for underlying claims and then seek to apportion the costs among other insurers through contribution claims against the other insurers. In a recent case, a Massachusetts district court applied equity and ordered London insurers to pay 30% of expenses incurred for various underlying silica claims. The opinion is here.

Detailed Review of 2009 US Securities Class Actions

Here is a detailed review of 2009 securities class action, courtesy of Kevin LaCroix at the D & O Diary. Amazing, but not suprising, to see how much litigation is generated by companies that do not make anything tangible and instead are essentially finance companies.

Global Asbestos Claiming - Report on Asbestos Litigation in Nine Nations - Munich Re's Major Compilation of Information

Here is the online image of Munich Re's recent, comprehensive report on asbestos litigation, Asbestos: Anatomy of a Mass Tort. The 112 page report is authored by Nicholas Roenneberg, and is Order number 302-06142. The report can be downloaded and printed from this page.
The same page, on the right hand side, allows you to order a printed copy at no charge.

The report is quite good. It begins with a review of asbestos litigation in North America. The report goes on to explain and explore various factors relevant to reinsurers such as Munich Re.

Beginning at page 58, the report addresses asbestos claiming in other nations in the context of employers' liability. The report covers the UK, Ireland, Italy, Spain, France, Czech Republic, Japan and Brazil. These country-specific reports are well worth reading to better understand the global asbestos claiming situation.

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I owe a hat tip and thanks to Christian Lahnstein of Munich Re for bringing the report to my attention this past fall, and for provding value contributions to dialog regarding mass tort claiming. Christian is a very thoughtful thinker and speaker on the subject of asbestos claiming and its consequences. Indeed, he is thoughtful enough that at a dinner before an international asbestos conference this past fall in London, a smart plaintiff's lawyer listened to Christian for a while and then commented that he was surprised to learn that Christian works in the insurance industry.