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:

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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

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.

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).

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.

New Science - Future Biomarker Chips for Cancer at Even Lower Protein Levels

This part of the future is not yet here,  but the story pasted below illustrates part of the promise of biomarkers.....


ScienceDaily (Feb. 9, 2010) — The earlier the doctor finds the tumor, the better the patient's chances of recovery. A new testing method aims to detect the disease in its initial stages. The technology is based on a microfluidic chip with tiny channels in which a blood sample from the patient circulates. The chip traces marker proteins which are indicative of cancer. The measured concentration of the tumor marker in the blood will help doctors to diagnose the disease at an early stage.

Similar testing systems already exist but their measurements are not very precise and they can only detect molecules that are present in the blood in large quantities. What's more, the tests have to be carried out in a laboratory, which is time-consuming and costly.


A project funded by the German Ministry of Education and Research and coordinated by the Fraunhofer FIT aims to improve matters. Biofunctionalized nanoparticles developed by research scientists at the Fraunhofer Institute for Silicate Research ISC in Würzburg are the key element in the new sensor. "We have improved the detection limit compared with the present state of the art by a factor of one hundred," explains Dr. Jörn Probst, Head of the Business Unit Life Science at the ISC. "Whereas previously a hundred molecules were needed in a certain quantity of blood to detect tumor markers, we now need only one. This means that diseases can be diagnosed much earlier than with present methods."


But how does the biosensor integrated in the chip register the few biomolecules swimming around in the blood that are indicative of a certain disease? "We have placed antibody-occupied nanoparticles on the sensor electrode which fish out the relevant proteins. For this purpose, we repeatedly pump the blood across the electrode surface. As with a river, the flow is fastest in mid-channel and the water runs more slowly near the bank. We have therefore made a sort of fishing rod using nanoparticles which registers the antibodies in the middle of the blood flow where most proteins swim by per unit of time.« If an antibody catches the matching protein, a tumor marker, the electrical charge distribution shifts and this is picked up by the electrode."

The researcher groups are now developing a first demonstrator combining four independent single-molecule-sensitive biosensors. The experts are also working on the simultaneous detection of several tumor markers, which will increase the clarity of tests. The system will be ready to enter the market in a few years' time

Hazards from 3rd Hand Smoke Residue - Generating "Toxins" ?

The online story pasted below is noteworthy for the the conclusion that cigarette smoke residue from nicotine causes the presence of excess  "toxins" on furnishings inside buildings. It seems premature to conclude that tobacco companies will soon face property damage claims for contaminating property, but it does make one wonder. Note also the closing paragraph's reference to developing biomarkers to prove the presence of the "toxins." Biomarker science is the subject of today's second post.

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ScienceDaily (Feb. 9, 2010) — Nicotine in third-hand smoke, the residue from tobacco smoke that clings to virtually all surfaces long after a cigarette has been extinguished, reacts with the common indoor air pollutant nitrous acid to produce dangerous carcinogens. This new potential health hazard was revealed in a multi-institutional study led by researchers with the Lawrence Berkeley National Laboratory (Berkeley Lab).

"The burning of tobacco releases nicotine in the form of a vapor that adsorbs strongly onto indoor surfaces, such as walls, floors, carpeting, drapes and furniture. Nicotine can persist on those materials for days, weeks and even months. Our study shows that when this residual nicotine reacts with ambient nitrous acid it forms carcinogenic tobacco-specific nitrosamines or TSNAs," says Hugo Destaillats, a chemist with the Indoor Environment Department of Berkeley Lab's Environmental Energy Technologies Division. "TSNAs are among the most broadly acting and potent carcinogens present in unburned tobacco and tobacco smoke."


Destaillats is the corresponding author of a paper published in the Proceedings of the National Academy of Sciences (PNAS). Co-authoring the PNAS paper with Destaillats were Mohamad Sleiman, Lara Gundel and Brett Singer, all with Berkeley Lab's Indoor Environment Department, plus James Pankow with Portland State University, and Peyton Jacob with the University of California, San Francisco.


The authors report that in laboratory tests using cellulose as a model indoor material exposed to smoke, levels of newly formed TSNAs detected on cellulose surfaces were 10 times higher than those originally present in the sample following exposure for three hours to a "high but reasonable" concentration of nitrous acid (60 parts per billion by volume). Unvented gas appliances are the main source of nitrous acid indoors. Since most vehicle engines emit some nitrous acid that can infiltrate the passenger compartments, tests were also conducted on surfaces inside the truck of a heavy smoker, including the surface of a stainless steel glove compartment. These measurements also showed substantial levels of TSNAs. In both cases, one of the major products found was a TSNA that is absent in freshly emitted tobacco smoke -- the nitrosamine known as NNA. The potent carcinogens NNN and NNK were also formed in this reaction.
"Time-course measurements revealed fast TSNA formation, up to 0.4 percent conversion of nicotine within the first hour," says lead author Sleiman. "Given the rapid sorption and persistence of high levels of nicotine on indoor surfaces, including clothing and human skin, our findings indicate that third-hand smoke represents an unappreciated health hazard through dermal exposure, dust inhalation and ingestion."


Since the most likely human exposure to these TSNAs is through either inhalation of dust or the contact of skin with carpet or clothes, third-hand smoke would seem to pose the greatest hazard to infants and toddlers. The study's findings indicate that opening a window or deploying a fan to ventilate the room while a cigarette burns does not eliminate the hazard of third-hand smoke. Smoking outdoors is not much of an improvement, as co-author Gundel explains.

"Smoking outside is better than smoking indoors but nicotine residues will stick to a smoker's skin and clothing," she says. "Those residues follow a smoker back inside and get spread everywhere. The biggest risk is to young children. Dermal uptake of the nicotine through a child's skin is likely to occur when the smoker returns and if nitrous acid is in the air, which it usually is, then TSNAs will be formed."


The dangers of mainstream and secondhand tobacco smoke have been well documented as a cause of cancer, cardiovascular disease and stroke, pulmonary disease and birth defects. Only recently, however, has the general public been made aware of the threats posed by third-hand smoke. The term was coined in a study that appeared in the January 2009 edition of the journal "Pediatrics," in which it was reported that only 65 percent of non-smokers and 43 percent of smokers surveyed agreed with the statement that "Breathing air in a room today where people smoked yesterday can harm the health of infants and children."

Anyone who has entered a confined space -- a room, an elevator, a vehicle, etc. -- where someone recently smoked, knows that the scent lingers for an extended period of time. Scientists have been aware for several years that tobacco smoke is adsorbed on surfaces where semi-volatile and non-volatile chemical constituents can undergo reactions, but reactions of residual smoke constituents with atmospheric molecules such as nitrous acid have been overlooked as a source of harmful pollutants. This is the first study to quantify the reactions of third-hand smoke with nitrous acid, according to the authors.

"Whereas the sidestream smoke of one cigarette contains at least 100 nanograms equivalent total TSNAs, our results indicate that several hundred nanograms per square meter of nitrosamines may be formed on indoor surfaces in the presence of nitrous acid," says lead-author Sleiman.


Co-author James Pankow points out that the results of this study should raise concerns about the purported safety of electronic cigarettes. Also known as "e-cigarettes," electronic cigarettes claim to provide the "smoking experience," but without the risks of cancer. A battery-powered vaporizer inside the tube of a plastic cigarette turns a solution of nicotine into a smoky mist that can be inhaled and exhaled like tobacco smoke. Since no flame is required to ignite the e-cigarette and there is no tobacco or combustion, e-cigarettes are not restricted by anti-smoking laws.






"Nicotine, the addictive substance in tobacco smoke, has until now been considered to be non-toxic in the strictest sense of the term," says Kamlesh Asotra of the University of California's Tobacco-Related Disease Research Program, which funded this study. "What we see in this study is that the reactions of residual nicotine with nitrous acid at surface interfaces are a potential cancer hazard, and these results may be just the tip of the iceberg."


The Berkeley Lab researchers are now investigating the long-term stability in an indoor environment of the TSNAs produced as a result of third-hand smoke interactions with nitrous acid. The authors are also looking into the development of biomarkers to track exposures to these TSNAs. In addition, they are conducting studies to gain a better understanding of the chemistry behind the formation of these TSNAs and to find out more about other chemicals that are being produced when third-hand smoke reacts with nitrous acid.


"We know that these residual levels of nicotine may build up over time after several smoking cycles, and we know that through the process of aging, third-hand smoke can become more toxic over time," says Destaillats. "Our work highlights the importance of third-hand smoke reactions at indoor interfaces, particularly the production of nitrosamines with potential health impacts."


In the PNAS paper, Destaillats and his co-authors suggest various ways to limit the impact of the third hand smoke health hazard, starting with the implementation of 100 percent smoke-free environments in public places and self-restrictions in residences and automobiles. In buildings where substantial smoking has occurred, replacing nicotine-laden furnishings, carpets and wallboard can significantly reduce exposures.

Asbestos Ban Sought in Phillipines, Along with Some Kind of "Early Detection" Program

The article is here. Note also that the article says the legislation would provide money for an early detection program for cancers. One wonders exactly what is contemplated.

Note further that the article is part of a stream of asbestos information pouting forth every day from various social media. The plaintiff's bar is doing very well at using social media to make people very conscious of asbestos.