Rand's asbestos report shows lucrative outcome for lawyer trust fund managers

Steve Korris Aug. 5, 2010, 1:43pm


Giants of asbestos litigation hold half the power in seven trust funds that paid $2.4 billion in claims in 2008, according to tables in a new Rand Corporation report.

At a 25 percent fee that authors reported as customary for asbestos, payments from the seven funds generated about $600 million for lawyers.

At all seven funds, Steven Kazan, of Kazan McClain in Oakland, served on advisory committees advocating payments for plaintiffs with current cases.

Each committee opposes an advocate who would preserve resources for the future.

Perry Weitz, of Weitz and Luxenberg in New York City, and John Cooney, of Cooney and Conway in Chicago, each served on six committees.

Russell Budd, of Baron and Budd in Dallas, served on five.

Joseph Rice, of Motley Rice in Mount Pleasant, South Carolina, served on four.

Matthew Bergman, of Bergman, Draper and Frockt in Seattle, served on three.

Theodore Goldberg and Mark Meyer, of Goldberg, Persky and White in Pittsburgh, each served on two.

The seven funds paid about two and a half times as much on claims as 37 other asbestos trust funds combined.

They ended 2008 with combined assets of $13.8 billion.

That represents about $3.5 billion in potential legal fees.

According to Rand report authors, trustees who manage asbestos trusts aren't under the control of claimants.

"Instead, a committee of advocates represents the claimants' interests," they wrote.

"The interests of current and future claimants are often divergent.

"Current claimants seek speedy payment at a claim's full value.

"From the future claimants' perspective, the highest priority is preservation of the trust's assets until future claimants apply for compensation."

An advisory committee and a future claimant representative have equal authority, they wrote, and both must consent before taking substantial action.

Among smaller trust funds, Kazan serves on six committees, Budd on five, Cooney on four, and Weitz and Rice on three each.

The famous names appeared on tables in an appendix but not in the text of the report.

Overall, according to the report, trusts paid about $3.3 billion in claims in 2008.

Trusts paid about 575,000 claims, averaging about $5,800 each.

"It is not possible to use trust level data to determine the number of trusts providing payments to the same individual or the amount the trusts together pay to an individual claimant," authors wrote.

"This lack of information makes it difficult or perhaps impossible to evaluate the trusts' effect on the total compensation provided to individual claimants, as well as on the compensation paid by solvent defendants," they wrote.

They wrote that amendments to bankruptcy law from 1994 allow a company to fund a trust in exchange for an injunction shielding it from tort actions.

A trust, funded by the company's securities or debts, takes ownership of most of the company's voting stock.

"The result is a confluence of interests between debtor and trust," authors wrote.

They detected considerable acceleration in the total number of trusts in the second half of this decade.

"Nine more trusts are in the pipeline, and there are undoubtedly more to come," they wrote.

They found that trusts cover claims that no longer make headway in courts.

"While it has become increasingly difficult to obtain compensation for nonmalignant injuries in the tort system, the large number of nonmalignant claims paid by trusts indicates that the trust system remains a source of compensation for such injuries," they wrote.

They wrote that "an increase in the number of trusts means that a claimant may be able to obtain compensation for nonmalignant claims from more trusts."

They promised a second report examining how trust compensation or potential compensation is taken into consideration in court proceedings or settlement negotiations.

They wrote that information on settlements is very difficult to obtain.

"The ability to understand the trusts' effects on overall claimant compensation and the compensation paid by solvent defendants will depend to a large extent on whether the solvent defendants, trusts, and plaintiffs' attorneys are willing to release individual compensation information on a confidential basis for research purposes," they wrote.

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Organizations in this Story

Weitz and Luxenberg
700 Broadway
New York, NY 10003

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