The Journal Editorial Report | November 25, 2005 | PBS
November 25, 2005
President Bush delivers remarks in Clinton Township, Michigan, January 7, 2005. Claiming that asbestos lawsuits clog the courts and hinder economic growth, Bush urged Congress to change the way people are compensated for diseases caused by the deadly material. On the stage from left, Lester Brickman, law professor at Cardozo Law School, Yeshiva University, Frank Sullivan, president and CEO RPM International, Mary Lou Keener, of McClean, Virginia, daughter of an asbestos victim, and Bruce McFee, president and CEO of Saylor Beall Manufacturing Company. (AP/Susan Walsh)
If you need a perfect example of the need to reform the legal system, look no further than the continuing scandal involving asbestos lawsuits. There are so many of them, and so much money is at stake, they may bankrupt an entire industry -- even though there is no proof that most of the people suing for damages have been, or will be made, sick by exposure to asbestos. Kim Strassel reports.
When Frank Sullivan took over the company which his grandfather started in the 1960s, he expected to spend his time running a business. Instead, much of his day goes to something quite different: asbestos lawsuits.
"This is hitting hundreds, if not thousands, of public companies," says Sullivan. "And it's consuming a lot of time of board members. It's consuming a lot of time of executives. And it's unproductive time."
Asbestos was once used in more than 3,000 products -- everything from insulation to hair dryers -- because it handles heat so well. The federal government began regulating its use in the 1970s, after it became clear that asbestos exposure could cause deadly diseases such as mesothelioma or asbestosis. By 2002, more than 730,000 people had filed asbestos lawsuits.
"Asbestos litigation is unique," says Lester Brickman, a professor of law at Yeshiva University. "It's not just a mass tort, we have a number of mass torts, but it's the mother of all mass torts."
Some of the suits are by people who are dying of cancer and other diseases caused by asbestos. But as many as 90 percent of the claims are filed by people who may have been exposed to asbestos, but are currently not sick. Trial lawyers recruit these plaintiffs, put them together, and then use large lawsuits to force companies into settlements.
"Given the amounts of money that could be claimed, lawyers did not wait for people to come to them and say, 'Gee, I think I'm sick, A, and B, I think it was caused by this product,'" says Brickman. "They went out and sought these people. Clearly unethical under ethics rules in every state in the country. But ethics rules are not applied to asbestos litigation. When money talks legal ethics walks."
Critics argue that the cases drain companies of money and make it impossible for truly sick people to get compensated.
"These injured parties are getting much less than they should, and much later than they should, because so many billions of dollars have gone to pay these bogus claims," says Brickman. Thousands of companies have been named as defendants. Seventy-three have already declared bankruptcy, costing about 60,000 people their jobs. Shareholders have lost billions.
"If you put companies into bankruptcy, if you take away their cash flow, if you divert the attention of their executives, you are hurting the manufacturing base of this country and you're destroying jobs," says RPM's Frank Sullivan.
RPM manufactures dozens of products including such famous brands as Rust-Oleum, DayGlo, and Watco. In 1966, it bought a company that made a patch and repair joint compound called Bondex that contained a small amount of asbestos. "Our product was the type of product that somebody would buy at a hardware store and use once, use twice," says Sullivan. "They didn't have one percent market share. We discontinued the product in 1977 in conjunction with OSHA requirements."
But that didn't save RPM from the legal onslaught. Today it faces more than 8,600 asbestos related lawsuits, and last year it spent $67 million on asbestos-related costs.
"This last year was a bad hallmark," says Sullivan. "For the first time our asbestos cost exceeded our dividend to shareholders. Our employees enjoy a pension plan, matched 401k, comprehensive healthcare, and our asbestos costs this last year exceeded all of those."
Government officials are starting to pay attention. Last year Ohio became the first state to pass comprehensive asbestos tort reform, which basically says: if you're not sick, you can't sue. Congress is considering a bill that would halt asbestos injury suits and pay claims from a privately financed fund instead.
"We're talking about billions and billions of dollars, says Lester Brickman. "And there's no necessary end to this. It may be diminishing. But unless there is going to be some significant event, whether it's done by Congress or prosecutors or both, we can expect fraudulent claiming to continue because it's profitable." As for RPM, Mr. Sullivan continues to try to both run his business and protect it from lawsuits that threaten to overwhelm it. "What a handful of 100 millionaire or billionaire asbestos lawyers are doing is gaming the system to their benefit," says Sullivan. "And that's not the American way."
PAUL GIGOT: Joining the panel to discuss these lawsuits is Philip Howard, a lawyer and founder of Common Good, a national bipartisan coalition devoted to restoring common sense to American law.
We have heard that story of Frank Sullivan and RPM from an awful lot of other businesses over the recent months and years at the JOURNAL. I think a lot of viewers would like to know how people who are truly sick don't get compensated in the court system, but people who aren't sick do get their suits heard. What went wrong?
PHILIP HOWARD: Nobody here has been doing their job and let's start with the judges. They see mass claims where every indicia of unethical behavior is surrounding them: advertising for a potential plaintiff, mass screening in trucks that drive up to factory doors and such and invite people in.
GIGOT: Come on and get screened.
HOWARD: Come on in. In the case of one case in Texas, nine doctors giving the diagnosis for 9000 plaintiffs. You know, every fact off. Yet the courts exercise virtually no control. They let the lawyers argue anything.
HOWARD: Well, it goes back to a broader problem, which is, the judges have lost control of the courts and the society. They let anybody sue for anything, because after the 1960s they changed their philosophy to one in which they act like referees. Kind of "Who am I to judge?" And they let anyone claim anything. It didn't used to be that people sued for billions of dollars. This is a modern phenomenon. It's not because of inflation.
GIGOT: There is a turn in this now, Dan. There is a judge, Judge Janice Graham-Jack, a Texas federal judge, a Clinton appointee, who in a related case involving silicosis -- which is a disease that is caused by exposure to silica, tiny little particles -- she did throw out 10,000 silicosis claims recently. So at least one judge is getting into this. What happened there?
DAN HENNINGER: It's a very famous case. She did have these 10,000 cases and she held 20 months of evidentiary hearings. This is one judge who decided to dive into the bottom of one of these mass tort claims and see what the heck was going on. One of the things she discovered was that about 70 percent of the claimants in the silicosis case had been previously claimants in asbestosis cases, and she understood that it is virtually impossible to have contracted both of these diseases. So she hauled the attorneys in front of her in the court and said, "What are you actually claiming here?" They literally publicly had to stand there and say, "I don't think the asbestosis claims are what we're talking about, so we're just going to defend this." Now she subsequently wrote, I think it was a 249-page decision, in which she said such things as, "It is clear this diagnosing business is fraudulent." She also said the lawyers, doctors and screening companies were all willing participants in a scheme that manufactured diagnoses for money. This has been a monumental event in the tort claim business.
JASON RILEY: A lot of good has come out of this: two members of Congress are looking into this now, as well as the Justice Department. Led on by this decision, they have decided to take a look at this. I mean, the big tip-off that something fishy was going on here is that we haven't used asbestos for 30 years in this country. So asbestos-related illnesses and deaths are declining. The same is true with silicosis. Yet these claims are just ballooning. Something's not right here. Finally a judge was willing to take it on and document it. Now some Justice Department officials and Congress are following up.
GIGOT: There's a criminal grand jury that's been empanelled in Manhattan for the Southern District of New York looking into this, Phil.
HOWARD: The conduct was shocking. They would present doctors with forms where the diagnosis was already printed on them and the doctors would sign the pre-printed form. In some cases they had secretaries make the diagnosis as to whether it should be called silicosis or asbestosis. The secretaries just arbitrarily checking off boxes. It's literally a fraud. What is remarkable about this is, it's been obvious to everybody for a long time that this emperor has no clothes. It was a huge scam. Yet, as you said, the courts of America have done nothing about it for 20 years, while 60,000 people have lost their jobs.
GIGOT: There was even one judge who was thrown out of the hearing, the Owens Corning bankruptcy case, which involved asbestos -- Judge Alfred Wolin -- by the Third Circuit, because they said -- very unusual for an appellate court to do that, but they said he was too close to the asbestos attorneys in the case. Let's talk about the impact of this. We saw in the piece the impact on companies and their workers. They get hurt. But what about the impact on the civil justice system of this kind of behavior, and on the rule of law and respect for the rule of law?
HOWARD: There's very little respect for the rule of law any more. Common Good did a poll this summer where we asked Americans if they would trust the system of justice if someone brought a baseless claim against them. Sixteen percent said yes. What that means is, people have lost their freedom to do what is right, because if anybody has a disagreement with them they could haul them into court, and they don't trust justice to defend them.
GIGOT: Has a corrosive effect on people's faith in the law.
RILEY: Sadly, people who are genuinely sick because of asbestos or silicosis, have less of a chance of being properly compensated because so many frivolous claims are clogging the system.
HOWARD: It's throughout this society. We've helped defensive medicine, health care is suffering a nervous breakdown because of it. We have a crisis of childhood obesity because there's nothing athletic in the playgrounds because it's all been yanked out because people are scared they're going to get sued if somebody has an injury.
GIGOT: We can't leave our viewers here with all of this pessimism. What's the solution? What can be done to make this better?
HOWARD: Well, people like Judge Jack have to start doing their job - start making the value judgments and looking at what is going on here. Is this a scam or not? That's for starters. Congress has to do its job. In other words, if you have something affecting hundreds of thousands of people, it's not a litigation problem. It's not a dispute between parties. It's a social problem. The job of Congress is to resolve and balance the interests of everyone. They have it on the table for January, and maybe they will finally get around to doing their job.
GIGOT: I would guess one thing, though, you could also do is criminal sanctions. If people have committed genuine fraud, much as in business, business people who commit fraud get thrown in jail. What about lawyers who commit fraud on the legal system and have somebody finally arrested and charged, and perhaps prosecuted for this kind of fraud.
HENNINGER: If this plays out, I think Judge Jack is going to deserve the Presidential Medal of Freedom for what she has done for the country. If you have criminal indictments, this is going to end. It is just going to shut down the process if some of these trial lawyers end up in pinstripes.