HB 477 Seeks to Stop Double Recovery & Windfall Lawyers' Fees in Asbestos Cases

After more than 40 years of asbestos litigation, most of the companies responsible for asbestos exposure in the workplace have gone out of business. Many would say that's a good thing. They might also argue that the massive trust system that's been set up to collect resources from companies that have gone bankrupt is a good thing. The mission of these bankruptcy trusts- to ensure that asbestos victims are fairly compensated- is certainly a noble one, and it is imperative that this system operates with efficiency, transparency and accountability. The problem is that under the current rules and management system, that is not happening. And when some personal injury lawyers "game the system," some asbestos victims who are truly injured may not get the compensation they deserve at a time when they really need it.

Today, it's estimated more than 60 different trusts have been established to collectively form a $38 billion privately funded asbestos personal injury compensation system that operates with very little oversight. Most of these trusts are run by the very same plaintiffs' attorneys who profit from them, in essence allowing the "fox to guard the hen house."

Furthermore, a lack of coordination between the trusts and the tort system allows asbestos claimants to "double dip"—or recover twice for the same injury. In fact, it seems the current process actually provides a financial incentive for plaintiffs' lawyers to "game the system" by recovering once in the tort system and then again from the bankruptcy trusts. Because their contingency fees are based on payouts, these plaintiffs' attorneys have no incentive to ensure that applicants for compensation were actually harmed, or, if they were, to prove that it was because of a particular product. Their only incentive is to rake in as much as possible from this $38 billion cash cow.

This abuse can delay the process of recovery for existing asbestos claimants and unnecessarily deplete the amount of resources available to future claimants.

Judge Harry Hanna, a County Court judge in Cleveland Ohio, discovered one of the most egregious examples of double dipping abuse in a case centered on Harry Kananian who passed away of mesothelioma—a cancer almost always caused by asbestos—in 2000. Prior to his death, Mr. Kananian sought help from the law firm of Early, Ludwick, Sweeney & Strauss to collect compensation for his injuries. According to a Wall Street Journal article chronicling the case, the law firm subsequently filed claims to several different trusts telling a different story in each about how their client got sick. The firm filed a claim to one trust saying, "Kananian had worked in a World War II shipyard and was exposed to insulation containing asbestos. It also filed a claim to another trust saying he had been a shipyard welder. A third claim, to another trust, said he'd unloaded asbestos off ships in Japan. And a fourth claim said that he'd worked with 'tools of asbestos' before the war. Meanwhile, a second law firm, Brayton Purcell, submitted two more claims to two further trusts, with still different stories. The two firms swept up as much as $700,000 for Kananian and his estate from trusts and settlements."

When Judge Hanna became suspicious and started asking questions, lawyers involved with the case began telling even more stories, and now they stand accused of lying to the court, defrauding asbestos trust funds and obstructing discovery.

Unfortunately, this is not an isolated incident. Since 2005, a number of similar cases have popped up all across the United States, and it has become clear the system that was set up to fairly and efficiently compensate asbestos victims for their injuries has gone awry and now resembles a vast commercial enterprise much more than an instrument of justice.

If you have watched television or gone on the Internet anytime in the last decade, there's no doubt you have been subjected to countless ads from plaintiffs' lawyers asking, "Sick? How much are you entitled to?" A recent analysis of Google keywords found the trial bar spent roughly $52 million on keyword search Internet advertising last year—that's more than triple the total amount the 2008 Obama presidential campaign spent for all online advertising. The study, conducted by New Media Strategies on behalf of the US Chamber's Institute for Legal Reform also showed that "mesothelioma" is the most expensive word on the Web for lawyers, with firms paying as much as $79 per click by people researching the term.

Indeed, it is clear the advertising is working and the asbestos litigation business is booming. A 2010 report by the global research firm Towers Watson found the number of new mesothelioma claims has increased significantly since 2008. This is particularly notable given the fact that "the underlying disease incidence count appears to be declining," the report concludes.

While we can't stop the endless barrage of lawyer advertising, we can make simple changes to Louisiana law that would create more transparency and accountability in the bankruptcy system. House Bill 477 by Representative Neil Abramson seeks to do this by requiring that any plaintiff claiming injuries related to asbestos or silica exposure to disclose all existing or potential claims against a trust or a fund at least 180 days before trial. This bill does not prevent asbestos claimants from recovering from multiple sources. Indeed, there may be some instances where some industrial workers were exposed to asbestos in multiple ways. The bill simply requires disclosure to the courts so that judges and juries can use this information to properly compensate asbestos claimants. At its core, HB 477 will help to stop plaintiffs' lawyers from gaming the legal system to enrich themselves at the expense of asbestos victims. Who could argue with that?

We will soon find out. HB 477 is expected to be considered- along with several other asbestos litigation reform bills- by members of the House Civil Law & Procedure Committee this Monday, April 16th.