Asbestos Claiming - British Government Apparently Takes a Wise Decision Not to Reinstate Compensation for Pleural Plaques

A July 10 article in the Mirror reports (bitterly) that the British government has taken a decision not to reinstate compensation for pleural plaques. The decision follows up on last summer's government Consultation paper available here. The decision apparently will be formally announced this coming week ahead of the July 20 recess date for Parliament. The apparent decision in London stands in marked contrast to Scotland's mistaken decision to legislate to reinstate compensation for pleural plaques, a decision presently under legal attack as described here back in April.

According to the Mirror article, the government in London has made the wise decision not to encourage pleural plaques claiming. Specifically, the government apparently will not pass legislation to overrule the Rothwell decision by the House of Lords. The gist of the Rothwell was the holding that pleural plaques are not compensable because they virtually never cause any physical impairment or pain, and therefore there is no compensable injury. According to the Mirror article, the government will, however, establish an online research center for asbestos-related disease and will pay compensation of £5,000 to about 6,500 persons whose claims predate Rothwell.

According to the Mirror article, unions are unhappy with the decision taken by the government. However, one hopes that on reflection, the unions and their members will appreciate the wisdom of the long-term decision. Why? There are myriad reasons, most of which I described in a detailed paper submitted last fall in opposition to the extreme parts of the proposals set out in the UK government's Consultation paper. Overall, the big picture point is that experience in the US has proven that paying compensation to persons without impairment is bad policy that drains away resources (medical, financial, judicial, and governmental) that should be focused instead on coping with the terrible burdens inflicted by mesothelioma tumors and certain other asbestos-related cancers that tend to arise in some parts of the body for persons with material amounts of work in certain occupations.

Ultimately, the folly of paying compensation to the unimpaired is evidenced by the tidal waves of claims that swamped US courts and asbestos trusts to the point they ceased to provide anything even remotely close to justice for injured persons or corporate defendants, as has been detailed by Professor Lester Brickman, with key excerpts set out in the opposition paper. Ultimately, claiming by the unimpaired became so enormous and costly it rendered the Johns-Manville asbestos trust insolvent more or less on the day it opened its doors, causing it to shut down operations in 1990, two years after it opened in 1988 after 6 years of legal wrangling. Then, after about 5 more years of lawyering, the Manville trust reopened but paying only a tiny fraction of the amounts that would otherwise be available to mesothelioma victims.

For more specifics, read the Manville trust history here on the Manville Trust website. Then read Judge Weinstein's 2009 paper lamenting the reality that the US legal system has done at best a lousy job dealing with mass tort issues. Judge Weinstein's words deserve special heed because he was central to Manville, Agent Orange and other mass tort cases described in his thoughtful paper. Also read the 2005 RAND report that details developments in the US asbestos claiming process. Finally, read through at least some of Professor Lester Brickman's voluminous law review articles and Congressional testimony regarding the disastrous developments in mass asbestos-claiming by unimpaired persons.

The unions and their members also should heed the growing need to focus on cancer because the cancer situation is only going to get worse in the UK for - at least - another decade and perhaps much longer. Specifically, after the UK Consultation was issued last summer and after oppositions to the Consultation were submitted in fall 2008, the case against paying compensation for pleural plaques became even more compelling when a cadre of highly qualified and experienced UK researchers published a landmark medical article further detailing the growing UK epidemic of mesothelioma tumors. The article explains that widespread and long-running use of amphibole asbestos fibers in the UK has resulted in the UK having the highest mesothelioma rate in the world. The conclusions and work of the group, lead by the much-honored Professor Julian Peto, are summarized here, and an online paper is here. The work of the research group is ongoing until at least 2015 - a clinical research description for the ongoing work is here. The citation for the landmark paper and related online paper are:

Rake C, Gilham C, Hatch J, Darnton A, Hodgson J, Peto J. Occupational, domestic and environmental mesothelioma risks in the British population: a case-control study. British Journal of Cancer. 2009;100:1175-1183.

Peto J, Rake C, Gilham C, Hatch J. Occupational, domestic and environmental mesothelioma risks in Britain: a case-control study. Health And Safety Executive Research Report RR696 (2009) published online here.

Germany Tries to Change D + O Behavior With Limits on D + O Insurance

The D + O Diary, a blog on D + O liability, includes this post about a new German law that seeks to change behavior of corporate officers and directors by imposing 10% of a loss on the individual officers subject to an annual cap. Here's the gist of the law as described by the post:

"Among other things, this new Act will impose a new requirement that German Stock Corporations (Aktiengesetz) purchasing D + O insurance for their executives must impose a personal deductible to be borne by the directors in an amount equivalent to at least 10% of the relevant loss, up to an annual cap. Comments accompanying the Act specify that the annual cap must be set at not less than one and one half the annual fixed remuneration of the director."

The post goes on to cover issues/methods that may come into play if Ds and Os and their companies seek to skirt the new law. In short, an interesting article about an interesting new law, but perhaps the ultimate point is that the article proves that most any government has a heck of a time actually regulating business because lawyers and business persons often can find or create a way to skirt many laws, for better or for worse.

No Recession in Fees for Massive Bankruptcies - $ 262 Million to Date for Lehman

Wow - see here for a basic article on the Lehman fees, and here is a link saying that Prof. LoPucki thinks fees may end up at slightly less than $ 1 billion.

Among the fee earners, lawyers are doing well as shown by the exceprt below from an article on Lehman by LAW360 is a subscription service.

http://bankruptcy.law360.com/articles/110521

By Anne Urda

***
Thus far, Lehman has paid the firm an estimated $114 million for its services, which has included Marsal taking over the reins at Lehman and guiding it through the bankruptcy process.
In May and June alone, the firm earned $18 million for the interim management provided, according to the report.

Lead counsel Weil Gotshal & Manges LLP has also raked in an estimated $63 million for the work it has performed on the massive bankruptcy case thus far, with special conflicts counsel Curtis Mallet-Prevost Colt & Mosle LLP collecting an estimated $6 million over the past few months for the work performed, the report revealed.

Milbank Tweed Hadley & McCloy LLP, which serves as lead counsel for the creditors committee, reaped just over $17 million for the hours logged, while court-appointed examiner's lead counsel Jenner & Block LLP has been paid more than $6 million for services rendered so far, according to the report.

The Future of Legal Education in the US ?

An interesting and detailed post here from Empirical Legal Studies on the future of legal education, including recent "radical" but great questions/issues posed by maverick Paul Lippe of Legal Onramp.

$ 700,000 + per Claimant Expected Payouts for Certain Claimants to An Expected Chapter 11 Asbestos Trust

Updated: Nothing is simple. Some links below are not working to see the underlying documents were uploaded as "pdf packages" instead of simple .pdf files. So, while the link provider figures why a package is a problem at least on some browsers, you may find it easier to see the papers on the free THAN website, which is here. See docket numbers 453 (objection of Waters & Kraus), 454 (Kraus Declaration), 455 (Debtor's response), 456 (Bae declaration), and 457 (Kozen declaration). My apologies for the hassle.

How much money are asbestos claimants obtaining from asbestos bankruptcy trusts ? Unfortunately, different people will give you different answers, and they can sometimes get away with it because most if not all of the asbestos trusts fail to act in a transparent manner. However, some concrete facts about payouts from one trust in formation have now surfaced in papers filed in the Thompson-Hayward asbestos-driven chapter 11 case (commonly known as the THAN case). The papers are especially significant because they include facts about asbestos payments that are set out in a declaration from a credible source - highly successful plaintiff's lawyer Peter Kraus. And, his declaration is backed by confirming emails and spreadsheets. The bottom line, further explained below, is that his declaration and supporting spreadsheets prove significant tort system payments by THAN to Waters + Kraus clients, and that his law firm expects equally large payments for the firm's clients when the THAN trust starts operation. How much? Over $ 700,000, per Waters + Kraus claimant.

How has this information surfaced ? Claimants represented by the Waters + Kraus firm filed with the bankruptcy court late last month a last minute and technically untimely objection to plan confirmation ( I say technically untimely because bankruptcy court deadlines are often absurdly short, and one could very well make that argument here.) The facts about present and expected payments are set out in the Waters + Kraus objection and related papers. The objection already has been denied by Bankruptcy Judge Gerber (yes, the same Bankruptcy Judge Gerber who is hearing the GM case). But, denial of the objection does not change the facts stated in the papers. Meanwhile, Waters + Kraus has filed an appeal to the district court.

What do the papers show about tort system payments? The papers show that the THAN-related entities and Waters + Kraus agree that there was an average tort system payment of at least $ 710,000 per claimant to about 65 mesothelioma claimants represented by the Waters + Krause firm. Why so much ? Mr. Kraus' declaration attributes the average to his firm's zealous investigation of and ability to prove up THAN's history as a seller of asbestos fibers (fyi, THAN also was a maker of Agent Orange). Mr. Kraus' declaration includes supporting spreadsheets listing the claimants represented by his firm by name, along with the 4 digits of their social security numbers. His declaration also includes an interesting form of agreement with respect to solicitation of votes for the prepack.

What do the papers say about payouts from the upcoming THAN trust? read it for yourself, but to me the essence of Mr. Kraus' declaration is the assertion that the Waters + Kraus lawyers agreed to recommend that their asbestos clients vote in favor of the THAN plan based on prepack negotiations in which lawyers for THAN and related entities assured Mr. Kraus that the trust would be created so that payouts to clients of his firm would be on average at least as ample as the tort system payouts.

What are the exact numbers? The papers, indicate a slight disagreement as to the average amount of tort system payments to the 65 claimants. Mr. Kraus asserts that the average payment in the tort system for Waters + Kraus claimants was $ 721,000 per claimant. But, as Mr. Kraus acknowledges, counsel (Mr. Kozen) for an entity known as PENAC (a Phillips Electronics entity) had asserted $ 710,000 as the average, with this modest disagreement apparently never brought to a close.


What other testimony is in the record? Lawyers for THAN (Mr. John Bae) and PENAC (Mr. Michael Kozen) submitted declarations to counter Mr. Kraus' testimony as to exactly how the deal was negotiated and expressed. I commend reading the papers to make your own decision about whether they actually assert a meaningful distinction from the statements of Mr. Kraus. But, plainly their testimony does not take issue with Mr. Kraus' fundamental assertion that he ended the negotiations understanding that the trust is expected to make payments to Waters + Kraus claimants that are consistent with the tort system payments of well more than $ 700,000 per Waters + Kraus claimant. Under the "forthright negotiator" line of reasoning, what he and they knew about the negotiations are relevant facts.

Where are the papers? At least for now, all the papers are available on the free THAN website, which is here, or of course are available through PACER. In addition, copies of some of the papers I thought relevant have been posted to a hopefully permanent spot on the web. Mr. Kraus' Declaration (with exhibits) is here. Briefs and other motion papers are here. And here are the declarations from Messrs. Bae and Rozen.

A future post will provide more on why these numbers are so important in underlying tort cases, and why the numbers and papers provide yet another example of why it is poor policy to allow most if not all of the chapter 11 trusts to operate, as they do now, with virtually no automatic transparency at the claimant by claimant level and with layers of hoops and burdens "baked in to" trust distribution procedures to thwart, delay and increase the expense and difficulty of obtaining meaningful information from the trusts. As always, please bear in mind my continuing disclosure about my work and history to the extent anyone wishes to say they color or inform my statements.

GM - Denial of Stay of Asset Sale and Denial of 2d Circuit Direct Appeal - "Equitable Mootness" to Follow and Defeat Appeals ?

Judge Gerber denied a stay of the asset sale and denied a direct appeal to the 2d Circuit; the order is here (Docket No. 3046). Basic news articles are here (WSJ) and here (NYT).

What the news articles do not mention is a bankruptcy appeal doctrine known as the "equitable mootness" doctrine. Under that doctrine, appeals are sometimes dismissed as moot after the relevant bankruptcy event has happened. Here, the relevant event would be the consummation of the upcoming asset sale that Judge Gerber has refised to stay.

For a recent, cogent and free law review article explaining the "equitable mootness" doctrine and why some say it is unconstitutional, go here for a Santa Clara Law Review article by a law student, Katelyn Knight.

There is irony to the current events in GM. Why? Because in various asbestos chapter 11 cases, counsel for asbestos claimants and counsel for futures representatives have argued and used the equitable mootness doctrine as a leverage point to try to shield chapter 11 plans they approved when many, many millions were being set aside for asbestos claimants. Now the equitable mootness doctrine may hit them as a sword. So goes life in litigation where much time is spent trying to dance on both sides of a sharp edge.

Aiding & Abetting Investigation - Madoff and Austrian Interests

An Amlaw article here details global government cooperation with respect to potential claims arising from the Madoff ponzi scheme. Accoridng to the article:

"Gerhard Jarosch, spokesman for the Vienna public prosecutor's office, told The Associated Press his office is aiding the U.S. Justice Department and Britain's Serious Fraud Office in separate investigations of Bank Medici AG and its chairwoman, Sonja Kohn."

***
"The Wall Street Journal, citing affidavits filed in the case, reported Friday that prosecutors from all three investigations believe Madoff -- sentenced a week ago to 150 years in prison -- paid Kohn in exchange for allegedly funneling billions of dollars in European investments to Madoff. "

Some Bondholders Give Up in GM

An AmLaw blog article here reports some GM bondholders are not appealing because they lack funds to fight after Judge Gerber refused to appoint an official committee for which legal fees would be paid by the estate. The article includes a helpful link back to a prior article regarding the refusal to allow an official committee.

According to the article:

"Second, and perhaps most interesting for bankruptcy gurus, Richman argues that the sale of GM under §363 of the bankruptcy code stretches §363 to a place it wasn't supposed to go. Here's his direct quote: "Our position on appeal would have been that in enacting section 363 as part of Chapter 11, Congress intended that it would only be used for legitimate sales to commercial purchasers, and not for a government-sponsored rescue where the government is the only purchaser."

$ 1 Billion Class Action Suit for Mexican Investors Invokes Aiding + Abetting Claim Against Stanford Insurer and Broker

The AmLaw blog post here describes and includes a link to a newly filed complaint that seeks $ 1 billion and a class action for Mexican investors hurt by the Stanford ponzi scheme. The complaint invokes aiding and abetting claims against Willis and an insurance broker. Of note, the complaint was not filed by a typical class action firm and instead was filed by Strasburger & Price, an old-line and full-service Texas law firm typically aligned with corporate interests that some might think would indicate the firm would not file a class action suit. According to the article:

"The complaint states that the defendants gave Stanford Financial "safety and soundness" letters designed to help it market its investments. "Willis and BMB crossed the line from being mere insurance brokers for the Stanford Financial Group," the complaint alleges. "In creating and submitting these letters into the stream of commerce, [the defendants] actively and materially aided Stanford Financial to perpetrate the massive Ponzi scheme now alleged by the SEC."

Asbestos Claimants Appeal in GM and Seek Appeal to the Second Circuit, as Do Individual Accident Victims

The Ad Hoc Committee of Asbestos Claimants notice of appeal in GM is here but says only that an appeal is taken(Docket No. 2988). The appeal lists as counsel both Stutzman, Bromberg, Esserman + Plifka, as well as the Caplin + Drysdale firm. Like the other product liability claimants, the Ad Hoc Asbestos Claimants also have moved for a direct appeal to the Second Circuit. The Ad Hoc Committee also has moved for a stay of the sale approval order entered on Sunday night the 5th of July.

The core of the Ad Hoc Committee's substantive argument is as follows:

"12. Congress has proscribed the very conduct that the Debtors seek to accomplish through their improper Section 363 Sale—i.e., the transfer of substantially all of their assets to a “new” entity that will simply continue operating free from the liabilities of the old entity—in two parallel provisions of the Bankruptcy Code: Sections 1141(d)(3) and 727(a)(1). The Second Circuit has held that claims—and specifically successor liability claims—are not discharged by a corporate iquidation in bankruptcy. In re Goodman, 873F.2d 598, 602 (2d Cir. 1989). The Bankruptcy Court’s erroneous interpretation of Section 363(f) effectively nullifies Sections 1141(d)(3) and 727(a)(1) by improperly allowing the Debtors to circumvent these Code provisions under the guise of a Section 363 sale.


13. Furthermore, the Sale Order purports to allow the Debtors to sell substantially all of their assets free and clear of “claims.” However, successor liability is not a “claim,” but rather is a status a purchaser has under applicable state law. Thus, Section 363 cannot apply to strip a purchaser of that status."


The Goodman case is a chapter 7 case, not a chapter 11 case, so GM presumably will argue it does not apply. Goodman, however, is a fairly compelling case for the product liability claimants. In Goodman, a businessman and his wife cover a period of years created a series of three businesses to do essentially the same work. The first company was party to labor contracts the later companies did not want to honor the prior labor obligations that had become inconvenient and expensive, and the first company had tried to discharge the obligations through chapter 7.

The Second Circuit held that the bankruptcy court order could not oust the jurisdiction of the NLRB to determine if the later entities were in fact successors to the old business regardless of the corporate niceties that purported to create differences between the different entities. So, in GM, the argument for the claimants runs that just as the bankruptcy court in Goodman could not deprive the NLRB of its power to consider whether the new entities should suffer successor liability under labor laws, the bankruptcy court in GM can not oust state courts of their traditional jurisdiction to decide whether and when to impose state law tort liability on alleged successor entities. The issues could be decided as matters of statutory construction grounds or constitutional law grounds (due process, 5th amendment takings , and maybe even equal protection under Bush v. Gore), but standard legal rules urge courts to resolve issues as a matter of statutory construction before reaching constitutional issues.

(Ironically, by the way, the Goodman case was argued and lost by Mr. Bruce Zirinsky while at Weil, Gotschal. Today, Mr. Zirinsky is with Greenberg Traurig and is the lead lawyer for the debtor in the Thompson -Hayward Chemical Co. asbestos chapter 11 case for which a chapter 11 plan was recently approved by the same Judge Gerber. Thompson-Hayward is a former manufacturer of Agent Orange and seller of asbestos fibers that is using chapter 11 to end its asbestos litigation issues and to settle out hundreds of millions of dollars of insurance policies that might otherwise be available to future claimants who could file direct actions against insurers.)

Meanwhile, the Individual Accident Litigants in GM also have sought a direct appeal to the 2d Circuit; the papers are here (Docket No. 2990). The accident litigants point out that the 2d Circuit still has not issued an opinion in Chrysler to explain the reasoning behind its judgment to approve the 363 asset sale. The accident litigants argue that this appeal in GM may also inform the Chrysler opinion the 2d Circuit said it would issue in due course, thus sharpening the issues for ultimate appeals to the Supreme Court in both Chrysler and GM.

The Individual Accident Victims further frame the issue in broad societal terms, arguing that society has a real stake in whether Code section 363 can be used to indestructible asset sales followed by de facto liquidations, a technique Wall Street can and does use to cause the bankruptcy code to cause immediate distributions of remaining assets before long tail tort claims emerge and are compensable. The Accident Victims frame the 363 issue as follows:

Indeed, this issue is one of the most important issues facing bankruptcy practitioners and distressed debtors generally.Satisfactory uniform resolution of the scope of Section 363 is critical for the entire nation, particularly since, as Professors Baird and Rasmussen wrote in The End of Bankruptcy, 55 Stan. L. Rev. 751, 752 (2003):

"Corporate reorganizations have all but disappeared. Giant corporations make head-lines when they file for Chapter 11, but they are no longer using it to rescue a firm from imminent failure. Many use Chapter 11 merely to sell their assets and divide up the proceeds…. Rarely is Chapter 11 a forum where the various stakeholders in a publicly held firm negotiate among each other over the firm’s destiny"

New Science - Danish Industrial Compensation for Breast Cancer from Night Work

Here's a new example of changes in science causing changes in law. An article here reports the Danish government has now paid industrial compensation to some 40 women for incidents of breast cancer when they had 20-30 year careers working night shifts. The article includes a UK defense lawyer at Eversheds warning that studies by IARC and the Danish decision may put UK employer's on notice of the risk. Here are key excerpts:

"Are workers at risk of developing cancer because of their shift patterns? That is the question that will be troubling UK employers now a UN study by the International Agency for Research on Cancer (IARC) has concluded that working night shifts raises the risk of breast cancer.
The UN study found in particular that nurses and flight attendants involved in night-shift working over a period of 30 years had an increased incidence of breast cancer.

The study is not definitive – for one thing, it only looked at a limited number of occupations – and the IARC itself has called for further research. However, the Danish government has been sufficiently concerned to recognise as an industrial injury breast cancer developed after night-shift work. That finding cleared the way for compensation payments to approximately 40 women who had worked night shifts for some 20-30 years where there was no other significant factor to explain the development of the cancer.

But even though employers may not yet have the full picture, the courts have decided that it is only necessary to know that some harm is foreseeable to its workers – not the exact type of harm.

The HSE has issued no guidance in this country, and its own research into the potential link is not expected until 2011, but that is not a complete defence when an EU government is already paying out on such claims. Employers cannot ignore this research when assessing the risks to which they expose their workforce. Employers who have made such assessments and given warnings are in a better position to ward off claims."

GM Asset Sale Plan Approved by Judge Gerber; Some Individual Car Crash Victims Already Have Appealed

The General Motors chapter 11 asset sale was approved on Sunday night in an opinion that is 50 pages, plus appendices. The opinion is here. A first read of the opinion indicates that Judge Gerber agreed with GM on all material issues regarding freeing GM from liability for tort claims except to the extent "New GM" agreed to assume financial responsibility for some but not all future claims. More later wth additional specifics.

A notice of appeal was filed this morning by individual auto accident victims, and is here.

Promoting Asbestos-Cement Manufacturer as Providing a Good Stock to Purchase

Ironic the difference a continent can make. In the US, companies usually do not promote their involvement in current or past production of asbestos-containing products. Not so in India, where an online stock analyst item regarding Eternit Eeverst Ltd. lauds the profit in the company's production of asbestos-cement products. It states:



"The Tatas and the Eternit Group of Belgium set up the pioneer of asbestos fibre products in India, Eternit Everest Ltd . The company is a pioneer in the manufacture of fibre cement roofing products and flat sheets. Eternit enjoys a market share of over 20%. Everest Industries Limited provides you with the world-class building solutions to meet your construction requirements, in the Industrial, Commercial and Residential sectors. Historically, Everest has provided rural shelters by making corrugated roofing sheets available to farmers at a competitive price. The company is poised to capitalize on the opportunities in rural India where various housing and infrastructure initiatives are envisaged by the Government.
Products & Services

Everest offers a complete range of building solutions which includes Ceilings, Walls, Flooring, Cladding, Doors, Roofing and Pre-Engineered Steel Buildings. These are produced at Everest's state-of-the-art ISO: 14000 certified manufacturing facilities at Kymore, Nashik, Coimbatore, Kolkata and Roorkee. With over 4000 retail points spread across the nation together with the strength of over 1285 highly qualified and experienced engineers, designers and technicians, Everest provides you building solutions that successfully meet the highest standards of quality and durability.

Everest, the second largest player in the roofing industry, manufactures various asbestos and non-asbestos based products like roofing sheets, flats and boards that find application in housing, false ceiling, partitioning, interior etc. The company has embarked on a project to add capacities of non-asbestos products that also demand higher margins. It expects to capture square meter corrugated sheet market in the country. Following the break through in exporting this product in the Sri Lankan market, the company plans to tap the export market as well.
However the company is increasingly looking at international markets to widen its revenue base; it expects exports to increase in the coming years. Everest is actively looking at opportunities in African and European markets (where asbestos is banned) to widen its geographical reach. With the increasing share of exports in its total sales, the operating profit margin of the company will improve, as exports fetch better margins than domestic sales.

Valuations

At current market price, stock is trading at 7.82 P/E multiple of its FY2010 estimated earnings. We recommend investors to buy “Everest industries Limited” with medium to long term investment horizon."

UK Advisory Panel Advises Against Treating Pleural Plaques as a Compensable Industrial Disease

After an updated review, the UK's Industrial Injuries Advisory Council (IIAC) has issued a June 30, 2009 paper announcing that it continues to recommend against paying compensation for pleural plaques because plaques are not actually disabling. The IIAC announced online last fall that it was considering the topic and invited comments. The panel concluded that plaques should not be compensated as an industrial disease because the plaques are very seldom symptomatic and do not by themselves correlate to an increased risk of cancer. Instead, they are simply markers of past inhalation of asbestos fibers. The paper is 60 pages long, and includes a detailed review and table summary of medical literature on pleural plaques as they relate to disaility or cancer risk.

According to a very pro-claimant article in the Scotsman, the UK government will consider this report before meeting its self-imposed deadline of July 21 for stating a view on the pleural plaques consultation that was started last year. Specifically, the article states:

"Though the IIAC said its report was not meant to advise on the issue of civil compensation, the Ministry of Justice said its decision would be "informed" by the report, which would "make an important contribution to the debate".