By now I trust everyone is used to many of he marketing approaches to reach mesothelioma victims. Here's a new one for me - some members of the asbestos plainiff's bar are now marketing themselve using social media and a "cause" to ask other people to go out and ceate videos to promote asbestos awareness. Go here to see the online version of the press release pasted below.
________________________________________________________________________________
"Nationwide Video Search Kicks off Ban Asbestos Campaign
Students Can Submit Videos for Chance to Win Trip to LA Film Festival
WELLESLEY, Mass., Feb. 10 /PRNewswire/ -- "Ban Asbestos Now," a campaign to build awareness of the continued use of asbestos in the United States, today launched the Ban Asbestos Now Video Search, asking students across the United States to use their creativity to draw national attention to the toxic, and often deadly, substance considered "the largest manmade public health crisis in history" according to the Asbestos Disease Awareness Organization (ADAO).
Each year, 2000-3000 people are diagnosed with mesothelioma, a rare form of cancer which is almost always caused by exposure to asbestos. Asbestos has been banned in some 50 countries, however it still exists potentially everywhere throughout the United States, including the ceilings and floors of building that were built before 1980, duct tape, caulking, textured paints, car brakes and automotive parts, and even children's toys.
To help eliminate this deadly killer, the "Ban Asbestos Now" Campaign asks students at colleges, universities and film schools across the United States to submit videos that drive attention to the national asbestos problem and compel Americans to join the movement to "Ban Asbestos Now." To enter the search, students, in teams of no more than 4, need to create a 90-120 second video vignette that addresses such questions such as, "Did You Know Asbestos Is Still Legal in the US?", "Where Can You Find It?", and "Do You Know What Diseases It Can Cause?"
The winning individual or team will be sent to the world famous 2010 Los Angeles Film Festival in Westwood Village, with $1000 cash per team member, and the winning video may become the viral platform of the "Ban Asbestos Now" campaign at www.BanAsbestosNow.com. The winner will be announced on May 19th, 2010 by a select judge's panel chosen by Sokolove Law.
Please visit www.BanAsbestosNow.net to view our Ban Asbestos Now Video Search Toolkit, which includes contest rules, video creation and submission guidelines, and promotional materials. You may also contact Sean Galliher at sgalliher@sokolovelaw.com.
About Ban Asbestos Now
The Ban Asbestos Now campaign is designed to generate awareness that asbestos is toxic, deadly and still legal in the United States, despite being banned in some 50 countries. Each year, 2000-3000 people continue to be diagnosed with mesothelioma, a rare form of cancer which is almost always caused by exposure to asbestos. The Ban Asbestos Now campaign urges Americans to draw attention to the national asbestos problem by joining the movement to ban the deadly substance in the United States. Learn more about Ban Asbestos Now at www.BanAsbestosNow.com.
About Sokolove Law
For nearly 30 years, Sokolove Law has reinvented how people obtain legal services. Our mission is to provide equal access to the civil justice system while ensuring superior quality legal representation. As a pioneer in legal advertising, Sokolove Law has grown to be the largest marketer of legal services in the country. Our proven business model matches particular client needs to the more than 400 law firms that we work with. The result is success for our clients and co-counsel. Sokolove Law operates as a limited liability company in all states except Virginia, California, Michigan, and Tennessee, where it operates as a limited liability partnership. Learn more about Sokolove Law at www.sokolovelaw.com.
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Saturday, February 20, 2010
Friday, February 19, 2010
Schemes of Arrangement - CSR's Demerger Effort Thwarted by Objections Regarding Its Potential Asbestos Obligations
What a great legal term of art - "scheme of arrangement." The term has multiple but related nuanced meanings and applications because "schemes" are essentially corporate law opportunities to end or alter the business life or structure of a corporation. Depending on the nation and the particualr use, schemes may have varying outcomes when used in the diverse ways that are possible in the various nations that arise from the former British Empire.
This post focuses on an attempted "scheme" under Australian corporate law. In this instance, the scheme consists of the efforts of a public company, CSR, to move forward with a "demerger" (a "spin-off" in the US) that would split one public company into two "more focused" public companies. Only one of the emerging companies would, they hope, be liable for asbestos bodily injury or property damage claims that will or may arise from past ownership of a crocidolite mine and sales of various asbestos-containing products. Thus, by dividing the ompany into two peices. the proposed demerger would reduce the amount of corporate assets available to pay the current and potential future asbestos claims that arise from past business operations. The opinin explains the numbers as follows: "In its financial statements for the half year ended 30 September 2009 CSR has recognised a provision of A$446.8 million for current and future asbestos liabilities. This comprises 10% of CSR’s total assets as at 30 September 2009 but, based on the pro forma balance sheet produced by CSR as at 30 September 2009, would comprise 18% of New CSR’s assets at that date."
To date, the scheme has not succeeded because the trial judge hearing the petition agreed with objections involving the ability to pay future asbestos claim expenses. Who were the objectors ? According to the opinion, " The proposed capital reduction has prompted considerable interest in, and opposition to, the Scheme. This was evidenced by the Australian Securities and Investments Commission (ASIC) and a number of objectors seeking, and being given, leave to intervene in the proceeding when it first came before the Court on 17 December 2009. The matter was then adjourned to allow the objectors and ASIC time to obtain expert assistance in reviewing the Scheme. The objectors were [underlying case co-defendants ] James Hardie Industries NV and James Hardie 117 Pty Limited (together “James Hardie”), the Asbestos Injuries Compensation Fund Limited (under NSW administered winding up), AMACA Pty Limited (under NSW administered winding up) and AMABA Pty Limited (under NSW administered winding up) (together “AICF”) and the Attorney-General for the State of New South Wales (NSW). The objectors all opposed the Scheme and argued against the Court making the orders sought by CSR. ...ASIC and the objectors were concerned only with potential prejudice to asbestos claimants, that is persons who now have, or in the future may have, a claim for compensation from CSR for injury sustained from exposure to asbestos." The trial court opinion rejecting the scheme certainly was less enjoyable for management than a succesful 2003 scheme,
The CSR scheme is interesting on a comparative law basis and a social basis. Thus, in the US, companies have often enough spun off liability-laden entities without the SEC and other entities seeking to block the spin-off, and instead simply reacting later, as was done with Tronox. In contrast, the objections here were a subject of popular media coverage as to objections of the Australian Securities and Investment Comission, regional Australian governments, and the various James Hardie interests that arise from James Hardie entities being co-defendants in underlying asbestos cases. The objections by codefendant Hardie entities arlso are noteworthy in view of Hardie previously undertaking to create a foundation to manage and pay for its own asbestos litigation and then moving from Australia to the Netehrlands as part of it's own asbestos-related scheme, a move more recently followed by Hardie moving from the Netherlands to tax-haven Ireland. Moreover, some of Hardie's officers and directors recently were convicted of criminal securities law violations arising from public statements on estimates of future asbestos expenses (this prior post links to the opinion/judgment) because the trial judge appears not to have believed the testimony of the directors. And as described yesterday, Hardie and CSR apparently now are quarreling over their respective obligations in particular asbestos cases.
Another noteworthy part of the opinion revolves around certainty. Thus, the opinion refers to a suggestion that the 2d demerger entity provide a guarantee for the entity holding the asbestos liabilities. See paragraphs 37-38. That suggestion was rejected, and thus the trial judge wrote: " I understand that CSR did not regard the suggestion as attractive. Its submissions in reply noted that the proposal “would significantly alter the commercial characteristics of the proposed demerger”. In particular it was said that the proposal would subject Sucrogen “to a contingent liability over which it had no effective control, which had no correlation to its business revenue and which offered no commercial return or benefit”. Thus, CSR's response seesm to illustrate a reality I mentioned yesterday in the context of entities emerging from bankruptcy : bankers and investors will always want and seek a predictable free cash flow to sell at a multiple.
The other side of that coin, however, is that the court was unwilling to give the business entities the certainty they want. Why? Because past conduct created enormous uncertainties for exposed persons, and unless science can change the outcomes, thousands of the currently uncertain individuals will in the future suffer painful deaths from mesothelioma, a point raised explicitly by counsel for the New South Wales region. Thus, the trial judge explained:
"There is one last issue to be addressed, namely the submissions made for NSW. Mr Oakes SC who appeared for NSW stated that from his client's point of view the central issue is:
[W]ho in the future should bear the risks if asbestos claims projections are too low, or that actual cash flow is too low because of the inherent uncertainties in long-term earnings and cash flow forecasts ... ? So the question is: should the risks be borne by the businesses that currently comprise the CSR group and, thus, indirectly by the CSR shareholders, or should the risks be borne by the current and future asbestos claimants? Our submission is the risks shouldn’t be borne by the current and future asbestos claimants ...
A final point. The opinion is frustrating because it alludes to various expert future expense predictions submitted by the parties, but does not go into detail, deeming the information confidential. As a lawyer for corporations, I understand the desires and arguments for secrecy. That said, the law develops through precedent, and it’s much harder to apply and learn from precedent when crucial facts are not on the public record and are not explicitly addressed in the opinion. Courts and companies face difficult issues ahead in trying to balance the competing considerations as to secrecy. Set out below are the statements the court did put on the record regarding the predictions of future expenses.
“Analyses of expert reports
31. It is not possible to give detailed analysis of the confidential reports, however, the flavour of the debate is reflected in submissions made on behalf of those commissioning the various reports. For example, the written submissions for ASIC contain 12 pages of detailed analysis of the actuarial material concerning asbestos liabilities and financial stress testing. The submissions analyse the CSR actuarial material including the expert reports and advice provided by Taylor Fry and Navigant, the expert reviews of that material by KPMG and Ernst & Young as well as the response of the CSR advisers. The submissions set out ASIC’s conclusions in relation to the actuarial material as follows:
First it is self evident that there is considerable uncertainty surrounding any process of actuarially assessing future asbestos liabilities. Notwithstanding that CSR ceased involvement in asbestos related activities in 1977 both [Taylor Fry] and Navigant have continually being [sic] revising their central estimates upwards from 2004 based on new information that emerges.
Second, as described above, there are limitations on the scope of the actuarial assessments which have the potential to under estimate the overall valuations.
Third, within the actuarial assessments there are significant matters of judgement over which reasonable minds may differ and which have considerable potential to adversely and materially affect the valuations. This is exemplified by the differences in professional opinion between KPMG and Taylor Fry in relation to both the central estimate and the 95th percentile estimate of the Australian liabilities.
Fourth, ASIC submits that in determining this application the Court need not embark upon the task of determining which expert is “correct” or to be preferred. Instead it should note the differences of professional opinion but, in the context of determining the application based on the approach outlined above, it should afford significant weight to the views expressed by KPMG at least so far as they affect the 95th percentile estimate provided by [Taylor Fry]. KPMG have significant expertise in the area and they have provided a detailed rationale for their opinion on these issues. Their views at least so far as they affect the 95th percentile estimates are supported by [Ernst & Young] and, in some limited respects, by Finity.
32. The submissions also analyse the financial stress testing that CSR had undertaken and the Ernst & Young review of this stress testing. The conclusion is stated as follows:
A review of the material concerning the financial analysis and stress testing undertaken by and on behalf of CSR reveals that there are a number of aspects of uncertainty surrounding such an exercise mainly:
(i) The obvious uncertainties that arise from any exercise of financial modelling the future performance of any business especially in the context of measuring its ability to meet long tail liabilities such as those that arise from asbestos use;
(ii) The limited external scrutiny of the assumptions and workings of the 5 year and 20 year financial models prepared by CSR management, the inputs to which most always primarily originate from CSR's management;
(iii) The judgements involved in identifying the various risks to the business, the relevant parameters for the “shock testing” and the exclusion of other forms of risk ...; and
(iv) The absence of any testing of the combination of a prolonged downturn and the high case estimates and the related questions of judgement as to whether it would be feasible for New CSR to respond to the various risks to the business under the shock scenarios that were stress tested.
33. CSR's submissions in reply make the following comments about the submissions made by ASIC:
In its written and oral submissions, ASIC ... sought to stress the uncertainties and limitations inherent in actuarial analyses of future events. Such a submission should not be taken too far.
By definition, any assessment of possible future events involves uncertainty and any attempt to actuarially assess such events will be subject to limitations. As the Court noted in argument, such uncertainties and limitations are equally applicable to CSR in its current structure as they are to CSR post-demerger. Provided that the advice provided to the CSR Board has been shown to be reasonable, the fact that the advice is subject to uncertainties does not warrant a conclusion that the advice should be rejected or lacks persuasive force.
Further, ... the doubts and uncertainties and the differences between the actuarial experts are of no relevance in circumstances where CSR's analysis has taken account of the full range of actuarial opinion. Cash outflows associated with the asbestos-related claims have been projected having regard to all “reasonable hypotheses”. Further, no party has sought to demonstrate a flaw in the other principal aspects of that analysis, namely the projection and “stress testing” of future cash inflows from CSR's de-merged business operations. That aspect of the analysis has been reviewed by PWC. It has also been reviewed on behalf of ASIC by [Ernst & Young] without unfavourable comment. In the light of the above, and as there is no correlation between risks attending the projected business cash inflows and the risks of under-estimation of the asbestos related cash outflows, the analysis provides a very high level of comfort that asbestos claims will be met.
ASIC's submissions should be read with this in mind. Its submissions are open to the criticisms that:
• they fail to reflect the conclusions of their own expert;
• they place undue focus on limitations and uncertainties that no actuary (including KPMG) can avoid without regard to the conclusions ultimately stated by the experts;
• they overstate the significance of the limitations and uncertainties ...
34. In addition to these criticisms CSR made detailed submissions in tabular form responding to the submissions made by AICF. Those submissions confirm that there is a genuine dispute between the experts as to the appropriate way to assess New CSR’s ability to meet future asbestos claims. The submissions made on behalf of James Hardie echoed the submissions of ASIC and AICF as well as making some additional criticisms of the provision made for New CSR to meet future asbestos claims.
35. In summary, the expert evidence presented by CSR, ASIC, and the other intervening parties brings into sharp relief the inherent uncertainty involved in any actuarial estimate of future asbestos-related claims and in particular the limitations and qualifications expressed in the actuarial reports relied on by CSR. In addition, specific issues raised by the experts retained by ASIC and AICF point to particular limitations in the material supplied by CSR’s experts in relation to future asbestos claims that cannot be reliably estimated at this time. The starting point in considering whether these flaws should lead to my not being satisfied that the provisions made in respect of asbestos-related claims following demerger are consistent with public policy or commercial morality must be:
(a) that New CSR will be the repository of all CSR's liabilities in respect of asbestos-related claims both present and future; and
(b) that it will suffer a significant reduction in the capital available to meet such claims.
36. The significance of those two factors increases with the uncertainty of the actuarial estimates and other expert opinion and is such that I cannot be satisfied that the provisions made are consistent with commercial morality or that the Scheme, if given effect, would not involve an unfair or oppressive result. Moreover, these same issues lead me to conclude that the material in the explanatory statement cannot provide adequate disclosure to CSR shareholders of New CSR's ability to meet these future liabilities. For both these reasons I have concluded that I should decline to make the orders for convening the Scheme meeting. In the circumstances, it is not necessary that I should consider the aspects of the Scheme that might otherwise be addressed at the first hearing.”
This post focuses on an attempted "scheme" under Australian corporate law. In this instance, the scheme consists of the efforts of a public company, CSR, to move forward with a "demerger" (a "spin-off" in the US) that would split one public company into two "more focused" public companies. Only one of the emerging companies would, they hope, be liable for asbestos bodily injury or property damage claims that will or may arise from past ownership of a crocidolite mine and sales of various asbestos-containing products. Thus, by dividing the ompany into two peices. the proposed demerger would reduce the amount of corporate assets available to pay the current and potential future asbestos claims that arise from past business operations. The opinin explains the numbers as follows: "In its financial statements for the half year ended 30 September 2009 CSR has recognised a provision of A$446.8 million for current and future asbestos liabilities. This comprises 10% of CSR’s total assets as at 30 September 2009 but, based on the pro forma balance sheet produced by CSR as at 30 September 2009, would comprise 18% of New CSR’s assets at that date."
To date, the scheme has not succeeded because the trial judge hearing the petition agreed with objections involving the ability to pay future asbestos claim expenses. Who were the objectors ? According to the opinion, " The proposed capital reduction has prompted considerable interest in, and opposition to, the Scheme. This was evidenced by the Australian Securities and Investments Commission (ASIC) and a number of objectors seeking, and being given, leave to intervene in the proceeding when it first came before the Court on 17 December 2009. The matter was then adjourned to allow the objectors and ASIC time to obtain expert assistance in reviewing the Scheme. The objectors were [underlying case co-defendants ] James Hardie Industries NV and James Hardie 117 Pty Limited (together “James Hardie”), the Asbestos Injuries Compensation Fund Limited (under NSW administered winding up), AMACA Pty Limited (under NSW administered winding up) and AMABA Pty Limited (under NSW administered winding up) (together “AICF”) and the Attorney-General for the State of New South Wales (NSW). The objectors all opposed the Scheme and argued against the Court making the orders sought by CSR. ...ASIC and the objectors were concerned only with potential prejudice to asbestos claimants, that is persons who now have, or in the future may have, a claim for compensation from CSR for injury sustained from exposure to asbestos." The trial court opinion rejecting the scheme certainly was less enjoyable for management than a succesful 2003 scheme,
The CSR scheme is interesting on a comparative law basis and a social basis. Thus, in the US, companies have often enough spun off liability-laden entities without the SEC and other entities seeking to block the spin-off, and instead simply reacting later, as was done with Tronox. In contrast, the objections here were a subject of popular media coverage as to objections of the Australian Securities and Investment Comission, regional Australian governments, and the various James Hardie interests that arise from James Hardie entities being co-defendants in underlying asbestos cases. The objections by codefendant Hardie entities arlso are noteworthy in view of Hardie previously undertaking to create a foundation to manage and pay for its own asbestos litigation and then moving from Australia to the Netehrlands as part of it's own asbestos-related scheme, a move more recently followed by Hardie moving from the Netherlands to tax-haven Ireland. Moreover, some of Hardie's officers and directors recently were convicted of criminal securities law violations arising from public statements on estimates of future asbestos expenses (this prior post links to the opinion/judgment) because the trial judge appears not to have believed the testimony of the directors. And as described yesterday, Hardie and CSR apparently now are quarreling over their respective obligations in particular asbestos cases.
Another noteworthy part of the opinion revolves around certainty. Thus, the opinion refers to a suggestion that the 2d demerger entity provide a guarantee for the entity holding the asbestos liabilities. See paragraphs 37-38. That suggestion was rejected, and thus the trial judge wrote: " I understand that CSR did not regard the suggestion as attractive. Its submissions in reply noted that the proposal “would significantly alter the commercial characteristics of the proposed demerger”. In particular it was said that the proposal would subject Sucrogen “to a contingent liability over which it had no effective control, which had no correlation to its business revenue and which offered no commercial return or benefit”. Thus, CSR's response seesm to illustrate a reality I mentioned yesterday in the context of entities emerging from bankruptcy : bankers and investors will always want and seek a predictable free cash flow to sell at a multiple.
The other side of that coin, however, is that the court was unwilling to give the business entities the certainty they want. Why? Because past conduct created enormous uncertainties for exposed persons, and unless science can change the outcomes, thousands of the currently uncertain individuals will in the future suffer painful deaths from mesothelioma, a point raised explicitly by counsel for the New South Wales region. Thus, the trial judge explained:
"There is one last issue to be addressed, namely the submissions made for NSW. Mr Oakes SC who appeared for NSW stated that from his client's point of view the central issue is:
[W]ho in the future should bear the risks if asbestos claims projections are too low, or that actual cash flow is too low because of the inherent uncertainties in long-term earnings and cash flow forecasts ... ? So the question is: should the risks be borne by the businesses that currently comprise the CSR group and, thus, indirectly by the CSR shareholders, or should the risks be borne by the current and future asbestos claimants? Our submission is the risks shouldn’t be borne by the current and future asbestos claimants ...
A final point. The opinion is frustrating because it alludes to various expert future expense predictions submitted by the parties, but does not go into detail, deeming the information confidential. As a lawyer for corporations, I understand the desires and arguments for secrecy. That said, the law develops through precedent, and it’s much harder to apply and learn from precedent when crucial facts are not on the public record and are not explicitly addressed in the opinion. Courts and companies face difficult issues ahead in trying to balance the competing considerations as to secrecy. Set out below are the statements the court did put on the record regarding the predictions of future expenses.
“Analyses of expert reports
31. It is not possible to give detailed analysis of the confidential reports, however, the flavour of the debate is reflected in submissions made on behalf of those commissioning the various reports. For example, the written submissions for ASIC contain 12 pages of detailed analysis of the actuarial material concerning asbestos liabilities and financial stress testing. The submissions analyse the CSR actuarial material including the expert reports and advice provided by Taylor Fry and Navigant, the expert reviews of that material by KPMG and Ernst & Young as well as the response of the CSR advisers. The submissions set out ASIC’s conclusions in relation to the actuarial material as follows:
First it is self evident that there is considerable uncertainty surrounding any process of actuarially assessing future asbestos liabilities. Notwithstanding that CSR ceased involvement in asbestos related activities in 1977 both [Taylor Fry] and Navigant have continually being [sic] revising their central estimates upwards from 2004 based on new information that emerges.
Second, as described above, there are limitations on the scope of the actuarial assessments which have the potential to under estimate the overall valuations.
Third, within the actuarial assessments there are significant matters of judgement over which reasonable minds may differ and which have considerable potential to adversely and materially affect the valuations. This is exemplified by the differences in professional opinion between KPMG and Taylor Fry in relation to both the central estimate and the 95th percentile estimate of the Australian liabilities.
Fourth, ASIC submits that in determining this application the Court need not embark upon the task of determining which expert is “correct” or to be preferred. Instead it should note the differences of professional opinion but, in the context of determining the application based on the approach outlined above, it should afford significant weight to the views expressed by KPMG at least so far as they affect the 95th percentile estimate provided by [Taylor Fry]. KPMG have significant expertise in the area and they have provided a detailed rationale for their opinion on these issues. Their views at least so far as they affect the 95th percentile estimates are supported by [Ernst & Young] and, in some limited respects, by Finity.
32. The submissions also analyse the financial stress testing that CSR had undertaken and the Ernst & Young review of this stress testing. The conclusion is stated as follows:
A review of the material concerning the financial analysis and stress testing undertaken by and on behalf of CSR reveals that there are a number of aspects of uncertainty surrounding such an exercise mainly:
(i) The obvious uncertainties that arise from any exercise of financial modelling the future performance of any business especially in the context of measuring its ability to meet long tail liabilities such as those that arise from asbestos use;
(ii) The limited external scrutiny of the assumptions and workings of the 5 year and 20 year financial models prepared by CSR management, the inputs to which most always primarily originate from CSR's management;
(iii) The judgements involved in identifying the various risks to the business, the relevant parameters for the “shock testing” and the exclusion of other forms of risk ...; and
(iv) The absence of any testing of the combination of a prolonged downturn and the high case estimates and the related questions of judgement as to whether it would be feasible for New CSR to respond to the various risks to the business under the shock scenarios that were stress tested.
33. CSR's submissions in reply make the following comments about the submissions made by ASIC:
In its written and oral submissions, ASIC ... sought to stress the uncertainties and limitations inherent in actuarial analyses of future events. Such a submission should not be taken too far.
By definition, any assessment of possible future events involves uncertainty and any attempt to actuarially assess such events will be subject to limitations. As the Court noted in argument, such uncertainties and limitations are equally applicable to CSR in its current structure as they are to CSR post-demerger. Provided that the advice provided to the CSR Board has been shown to be reasonable, the fact that the advice is subject to uncertainties does not warrant a conclusion that the advice should be rejected or lacks persuasive force.
Further, ... the doubts and uncertainties and the differences between the actuarial experts are of no relevance in circumstances where CSR's analysis has taken account of the full range of actuarial opinion. Cash outflows associated with the asbestos-related claims have been projected having regard to all “reasonable hypotheses”. Further, no party has sought to demonstrate a flaw in the other principal aspects of that analysis, namely the projection and “stress testing” of future cash inflows from CSR's de-merged business operations. That aspect of the analysis has been reviewed by PWC. It has also been reviewed on behalf of ASIC by [Ernst & Young] without unfavourable comment. In the light of the above, and as there is no correlation between risks attending the projected business cash inflows and the risks of under-estimation of the asbestos related cash outflows, the analysis provides a very high level of comfort that asbestos claims will be met.
ASIC's submissions should be read with this in mind. Its submissions are open to the criticisms that:
• they fail to reflect the conclusions of their own expert;
• they place undue focus on limitations and uncertainties that no actuary (including KPMG) can avoid without regard to the conclusions ultimately stated by the experts;
• they overstate the significance of the limitations and uncertainties ...
34. In addition to these criticisms CSR made detailed submissions in tabular form responding to the submissions made by AICF. Those submissions confirm that there is a genuine dispute between the experts as to the appropriate way to assess New CSR’s ability to meet future asbestos claims. The submissions made on behalf of James Hardie echoed the submissions of ASIC and AICF as well as making some additional criticisms of the provision made for New CSR to meet future asbestos claims.
35. In summary, the expert evidence presented by CSR, ASIC, and the other intervening parties brings into sharp relief the inherent uncertainty involved in any actuarial estimate of future asbestos-related claims and in particular the limitations and qualifications expressed in the actuarial reports relied on by CSR. In addition, specific issues raised by the experts retained by ASIC and AICF point to particular limitations in the material supplied by CSR’s experts in relation to future asbestos claims that cannot be reliably estimated at this time. The starting point in considering whether these flaws should lead to my not being satisfied that the provisions made in respect of asbestos-related claims following demerger are consistent with public policy or commercial morality must be:
(a) that New CSR will be the repository of all CSR's liabilities in respect of asbestos-related claims both present and future; and
(b) that it will suffer a significant reduction in the capital available to meet such claims.
36. The significance of those two factors increases with the uncertainty of the actuarial estimates and other expert opinion and is such that I cannot be satisfied that the provisions made are consistent with commercial morality or that the Scheme, if given effect, would not involve an unfair or oppressive result. Moreover, these same issues lead me to conclude that the material in the explanatory statement cannot provide adequate disclosure to CSR shareholders of New CSR's ability to meet these future liabilities. For both these reasons I have concluded that I should decline to make the orders for convening the Scheme meeting. In the circumstances, it is not necessary that I should consider the aspects of the Scheme that might otherwise be addressed at the first hearing.”
Thursday, February 18, 2010
Cross Claiming Among Asbestos Defendants and Asbestos Trusts - A $ 2 Million (AU) Mesothelioma Settlement; CSR and James Hardie Provide Examples for Consideration
Pasted below are key excerpts from a February 18 Wall Street Journal Australia article by Miland Rout which provides news of a $ 2 million (AU) asbestos mesothelioma settlement for the death of a young father. The amount is news in itself.
From my vantage point, however, the even more interesting part of the story is the assertion - assumed to be true for present purposes - that asbestos defendants CSR and James Hardie will now proceed against each other to resolve which entity should pay how much of the settlement. According to the articles's description of statements by plaintiff's counsel from Slater & Gordon, the companies apparently are no longer observing some sort of understanding or agreement on how much each should contribute.
So, what does one say about intercompany allocation battles? My personal view is that we will see more cross-claiming ahead because some companies need to transfer fault and expense to others in order to survive. In a related vein, more of the cross-claiming I think will involve claims by current tort sytem defendants against "asbestos trusts" or foundations established by entities that have used chapter 11 (rightly or wrongly) to exit the tort system.
Why cross-claim? One reason is that the asbestos tort system today is farcical in the sense that the most culpable defendants exited the tort system early and did so far, far too cheaply. Simply put, Manville, Unarco, Raymark, and various insulation and boiler makers (e.g. Eagle-Picher, Babcock & Wilcox), and some other "early movers," paid far too little to exit the tort system. The result? Some (not all) victims are undercompensated and many (not all) remaining tort defendants are now paying far too large a share for asbestos claims.
Why did early exits occur for too little money ? There are many reasons. In my opinion, the fundamental problem is that bankruptcy law and courts try to provide one time certainty through one time estimates of future "liability." Why? Well, because at its core, law is all about economics and money, and Wall Street wants fast, one time answers in order to have a business unit with a predictable cash flow that can be sold for a higher number of multiples of a predictable mulitple of EBIDA or some measure of free cash flow. That approach may be desirable in the short term for for bankers and investors, but it's not working well for the victims or co-defendants, and so bankruptcy law is too often being used to trump all the social and economic policy efforts inherent in common law tort rules and in recent state legislative "tort reform" efforts (some of which are in some ways flawed, but that's a different story).
Simply put, one time answers from bankruptcy courts are an idea that's been proven not to work at all well. At least to date, some but not all long-tail claiming problems (e.g environmental "contamination," asbestos litigation, chemical exposure claims) have proved to be far too unpredictable to be resolved well at one particularr moment in time. That's especially true because the future liability estimation proceedings in bankruptcy court have virtually nothing to do with science.
Want proof from sources othere than some lawyer writing on a blog? Read the Manville bankruptcy opinions and learn that the plaintiff's bar and co-defendants failed to get 100% of Manville's stock and took far too little future cash flow from New Manville. Also note that the first liability estimate in Manville was so low that the Manville trust was insolvent when it first opened its doors, and so it soon had to close its door and go back into into bankruptcy court for a "do over." (During the oral argument last year in the Manville/Travelers case at the Supreme Court, Justice Steven's accepted Mr. Ostrager's argument that Manville has been a "success." When I read that comment, (see transcript at 14), I didn't know whether to laugh or cry - it simply proved how little the Justices know or understand about mass torts, and why other lawyers called the Court's opinion very "narrow" (read as meaning "advisory"), a view I share. Far more apt, at page 12, was Justice Stevens' comment that the Manville appeal was "mysterious." With all due respect, Chief Justice Roberts is leading theCourt in the wrong direction with his avowed intent to reach out and resolve "business cases" when, as there, the record is at best scant and unclear, and the subject matter involves complex real world problems unfamiliar to the Justices)
Want more proof ? Read Judge Weinstein's paper confessing that courts have not done well with masss torts. Also, as to bankruptcy in particular, read this scathing indictment of the bankruptcy court "liability estimation " process. Who wrote the indictment ? Lawyers for W.R. Grace equity holders wrote the brief, but the meat of the indictment is in the expert witness report submitted by James Heckman, a University of Chicago PhD econmist who won a Nobel prize for his other work in economics. His opinion exposes most but not all of the flaws inherent in "estimates" submitted by Mark Peterson, an expert almost always used today by the asbestos plaintiffs.
After reading those materials, read the prior posts on this blog (e.g. here, here and here,) regarding the W.R. Grace ch. 11 settlement - it was a fabulous outcome for Grace because it fought hard and the asbestos plaintiff's bar wanted to end the case before Grace forced Judge Fitzgerald to write an opinion applying science to law and recognizing and acting on the massive and dubious claiming practices of the not sick. Those claiming practices dominated and distorted asbestos claiming in the the early 2000s, and other eras. Moreover, those practices are relatively alive and well today in the "asbestos trust" system as the not sick have taken massive amounts of money out of the Owens-Corning trust (and others), thus using the wonders of chapter 11 law to run roughshod over tort reform laws enacted in Ohio and elsewhere that seek to block recoveries by the not sick. (Reminder of prior disclosures - I used to represent W.R. Grace and others in asbestos litigation - my standard disclosure is here.) Sadly, the not sick retain some power because Congress unwisely enacted section chapter 11 section 524(g) to "codify Manville" and gave veto power to the holders of 75% of the claims (regardless of the value or merit of the claims, some say.)
Also see the Quigley chapter 11 case, and the battles of a few "cancer victim" lawyers to block or limit recoveries by the not sick; some information is in this prior post but the case is one that deserves far more attention. Further, see this prior post on the GIT/Narco appeal the 3rd Circuit should be deciding soon - note especially the "silica trust" conjured up from a handful of claims. And, finally, I'd refer you to this prior post on mass tort issues that lie ahead, and the flawed use of futures representatives. Note especially the Plevin article linked to in that post - it details the vast and unworkable conflicts of interest that bankruptcy courts tolerate in futures representatives.
Here are the key excerpts from the WSJ article:
_______________________________________________________________________________
Hardie seeks asbestos compo from CSR Milanda Rout From: The Australian February 18, 2010 12:00AM
AUSTRALIA'S two biggest asbestos-makers are fighting it out in court over a $2 million settlement reached with a Victorian man who contracted asbestos-related cancer as a child.
James Hardie -- now known as Amaca -- has launched proceedings against CSR to seek a contribution for the compensation after Amaca settled the case involving 48-year-old Robert Berengo in the Victorian Supreme Court this week.
***
Amaca agreed to pay the compensation claim before it reached the courtroom on Tuesday, saving Mr Berengo -- who is about to start another round of chemotherapy -- from having to go through a trial. The settlement will be paid by Amaca irrespective of its action against CSR.
The liability case, according to lawyers Slater & Gordon, is one of the first to go to trial in Victoria after the breakdown of what they call a gentlemen's agreement between the two companies to share the financial liabilities of asbestos compensation cases.
Steve Plunkett, the head of Slater & Gordon's asbestos litigation team, said that until last year, the companies had agreed to share the costs of compensation for victims who were not certain about which of the two had manufactured the asbestos products to which they were exposed.
This was believed to be based roughly on market share but details of the agreement and who withdrew from it is in dispute.
Mr Plunkett said a number of cases had been affected by this issue and he hoped the eventual judgment handed down on the split of costs between the companies would help avoid a recurrence of this situation.
Mr Berengo's lawyer, Tracy Madden, also from Slater & Gordon, said the $2m settlement from Amaca was a great result for her client. She said they claimed he was exposed to asbestos when he used to hug his father in his asbestos-clad work clothes, and when he would help his father on jobs and shake his father's painting sheets at home.
***
Neither company was prepared to comment on the case
From my vantage point, however, the even more interesting part of the story is the assertion - assumed to be true for present purposes - that asbestos defendants CSR and James Hardie will now proceed against each other to resolve which entity should pay how much of the settlement. According to the articles's description of statements by plaintiff's counsel from Slater & Gordon, the companies apparently are no longer observing some sort of understanding or agreement on how much each should contribute.
So, what does one say about intercompany allocation battles? My personal view is that we will see more cross-claiming ahead because some companies need to transfer fault and expense to others in order to survive. In a related vein, more of the cross-claiming I think will involve claims by current tort sytem defendants against "asbestos trusts" or foundations established by entities that have used chapter 11 (rightly or wrongly) to exit the tort system.
Why cross-claim? One reason is that the asbestos tort system today is farcical in the sense that the most culpable defendants exited the tort system early and did so far, far too cheaply. Simply put, Manville, Unarco, Raymark, and various insulation and boiler makers (e.g. Eagle-Picher, Babcock & Wilcox), and some other "early movers," paid far too little to exit the tort system. The result? Some (not all) victims are undercompensated and many (not all) remaining tort defendants are now paying far too large a share for asbestos claims.
Why did early exits occur for too little money ? There are many reasons. In my opinion, the fundamental problem is that bankruptcy law and courts try to provide one time certainty through one time estimates of future "liability." Why? Well, because at its core, law is all about economics and money, and Wall Street wants fast, one time answers in order to have a business unit with a predictable cash flow that can be sold for a higher number of multiples of a predictable mulitple of EBIDA or some measure of free cash flow. That approach may be desirable in the short term for for bankers and investors, but it's not working well for the victims or co-defendants, and so bankruptcy law is too often being used to trump all the social and economic policy efforts inherent in common law tort rules and in recent state legislative "tort reform" efforts (some of which are in some ways flawed, but that's a different story).
Simply put, one time answers from bankruptcy courts are an idea that's been proven not to work at all well. At least to date, some but not all long-tail claiming problems (e.g environmental "contamination," asbestos litigation, chemical exposure claims) have proved to be far too unpredictable to be resolved well at one particularr moment in time. That's especially true because the future liability estimation proceedings in bankruptcy court have virtually nothing to do with science.
Want proof from sources othere than some lawyer writing on a blog? Read the Manville bankruptcy opinions and learn that the plaintiff's bar and co-defendants failed to get 100% of Manville's stock and took far too little future cash flow from New Manville. Also note that the first liability estimate in Manville was so low that the Manville trust was insolvent when it first opened its doors, and so it soon had to close its door and go back into into bankruptcy court for a "do over." (During the oral argument last year in the Manville/Travelers case at the Supreme Court, Justice Steven's accepted Mr. Ostrager's argument that Manville has been a "success." When I read that comment, (see transcript at 14), I didn't know whether to laugh or cry - it simply proved how little the Justices know or understand about mass torts, and why other lawyers called the Court's opinion very "narrow" (read as meaning "advisory"), a view I share. Far more apt, at page 12, was Justice Stevens' comment that the Manville appeal was "mysterious." With all due respect, Chief Justice Roberts is leading theCourt in the wrong direction with his avowed intent to reach out and resolve "business cases" when, as there, the record is at best scant and unclear, and the subject matter involves complex real world problems unfamiliar to the Justices)
Want more proof ? Read Judge Weinstein's paper confessing that courts have not done well with masss torts. Also, as to bankruptcy in particular, read this scathing indictment of the bankruptcy court "liability estimation " process. Who wrote the indictment ? Lawyers for W.R. Grace equity holders wrote the brief, but the meat of the indictment is in the expert witness report submitted by James Heckman, a University of Chicago PhD econmist who won a Nobel prize for his other work in economics. His opinion exposes most but not all of the flaws inherent in "estimates" submitted by Mark Peterson, an expert almost always used today by the asbestos plaintiffs.
After reading those materials, read the prior posts on this blog (e.g. here, here and here,) regarding the W.R. Grace ch. 11 settlement - it was a fabulous outcome for Grace because it fought hard and the asbestos plaintiff's bar wanted to end the case before Grace forced Judge Fitzgerald to write an opinion applying science to law and recognizing and acting on the massive and dubious claiming practices of the not sick. Those claiming practices dominated and distorted asbestos claiming in the the early 2000s, and other eras. Moreover, those practices are relatively alive and well today in the "asbestos trust" system as the not sick have taken massive amounts of money out of the Owens-Corning trust (and others), thus using the wonders of chapter 11 law to run roughshod over tort reform laws enacted in Ohio and elsewhere that seek to block recoveries by the not sick. (Reminder of prior disclosures - I used to represent W.R. Grace and others in asbestos litigation - my standard disclosure is here.) Sadly, the not sick retain some power because Congress unwisely enacted section chapter 11 section 524(g) to "codify Manville" and gave veto power to the holders of 75% of the claims (regardless of the value or merit of the claims, some say.)
Also see the Quigley chapter 11 case, and the battles of a few "cancer victim" lawyers to block or limit recoveries by the not sick; some information is in this prior post but the case is one that deserves far more attention. Further, see this prior post on the GIT/Narco appeal the 3rd Circuit should be deciding soon - note especially the "silica trust" conjured up from a handful of claims. And, finally, I'd refer you to this prior post on mass tort issues that lie ahead, and the flawed use of futures representatives. Note especially the Plevin article linked to in that post - it details the vast and unworkable conflicts of interest that bankruptcy courts tolerate in futures representatives.
Here are the key excerpts from the WSJ article:
_______________________________________________________________________________
Hardie seeks asbestos compo from CSR Milanda Rout From: The Australian February 18, 2010 12:00AM
AUSTRALIA'S two biggest asbestos-makers are fighting it out in court over a $2 million settlement reached with a Victorian man who contracted asbestos-related cancer as a child.
James Hardie -- now known as Amaca -- has launched proceedings against CSR to seek a contribution for the compensation after Amaca settled the case involving 48-year-old Robert Berengo in the Victorian Supreme Court this week.
***
Amaca agreed to pay the compensation claim before it reached the courtroom on Tuesday, saving Mr Berengo -- who is about to start another round of chemotherapy -- from having to go through a trial. The settlement will be paid by Amaca irrespective of its action against CSR.
The liability case, according to lawyers Slater & Gordon, is one of the first to go to trial in Victoria after the breakdown of what they call a gentlemen's agreement between the two companies to share the financial liabilities of asbestos compensation cases.
Steve Plunkett, the head of Slater & Gordon's asbestos litigation team, said that until last year, the companies had agreed to share the costs of compensation for victims who were not certain about which of the two had manufactured the asbestos products to which they were exposed.
This was believed to be based roughly on market share but details of the agreement and who withdrew from it is in dispute.
Mr Plunkett said a number of cases had been affected by this issue and he hoped the eventual judgment handed down on the split of costs between the companies would help avoid a recurrence of this situation.
Mr Berengo's lawyer, Tracy Madden, also from Slater & Gordon, said the $2m settlement from Amaca was a great result for her client. She said they claimed he was exposed to asbestos when he used to hug his father in his asbestos-clad work clothes, and when he would help his father on jobs and shake his father's painting sheets at home.
***
Neither company was prepared to comment on the case
Tuesday, February 16, 2010
Australian Consumer Agency Warns Against Decorative Tile Said to Contain Tremolite ("Asbestos") - Snow White
Global awareness of asbestos continues to increase. An Australian government agency issued late last week an advisory warning consumers against a set of decorative stone-like wall tiles said to contain tremolite from China. The information provided is too skimpy to evaluate the real risks. That's too bad - one would like think that by now all government safety agencies could speak lnowledgeably and articulately about "asbestos" and risk. If you'd like to see the Snow White tile, go here.
Monday, February 15, 2010
Comparative Law - Various National Approaches to Personal Injury Compensation Payments
See the cite and link below for a recent online comparative law paper that provides a broad brush picture of the similarities and differences between personal injury compensation approaches of the United States, various EU countries using civil law, and the UK and New Zealand.
In particular, the paper addresses differences in approach to using "lump sum" payments versus a stream of future payments, calculation of future financial loss in relation to children, deductibility of collateral benefits from awards of damages, and approaches to comparative fault. The article also touches briefly on subrogation in some countries.The paper thus provides helpful context for evaluating the various national approaches to dealing with long tail tort issues.
Margaret Devaney, A Comparative Assessment of Personal Injuries Compensation Schemes: Lessons for Tort Reform?, vol. 13.3 ELECTRONIC JOURNAL OF COMPARATIVE LAW, (September 2009).
In particular, the paper addresses differences in approach to using "lump sum" payments versus a stream of future payments, calculation of future financial loss in relation to children, deductibility of collateral benefits from awards of damages, and approaches to comparative fault. The article also touches briefly on subrogation in some countries.The paper thus provides helpful context for evaluating the various national approaches to dealing with long tail tort issues.
Margaret Devaney, A Comparative Assessment of Personal Injuries Compensation Schemes: Lessons for Tort Reform?, vol. 13.3 ELECTRONIC JOURNAL OF COMPARATIVE LAW, (September 2009).
Sunday, February 14, 2010
More on the $ 37 Million Colorado Verdict for Rescinding a Health Care Policy
The lawyer who won the $37 million verdict is lawyer who usually defends insurance companies, but switched sides in this setting. BulletProof Blog includes this interview of the lawyer, Mark Levy.
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