New York’s Rules Seen Among Most Restrictive in Manville Case : State Laws Bar Some Asbestosis Victims From Legal Relief

Remo Paternoster, 72, first learned that he had an asbestos-related terminal illness last May, two decades after he left the Navy shipyard where he had wrapped asbestos sheets around nautical boilers for 33 years. Since then, he and his wife, Margaret, have received bills from 49 doctors.

“It’s a horrible way to see a man die in that manner,” says Margaret Paternoster of her now wheelchair-confined husband. “He’d say, ‘I was so strong, Marge, and now I can’t even mow the lawn.’ ”

Not one doctor has doubted that asbestos is the cause of Paternoster’s mesothelioma, a virulent cancer. Under most circumstances, his claim for damages from Manville Corp., the giant asbestos maker now attempting to emerge from bankruptcy proceedings by establishing a multibillion-dollar fund for victims, would be equally certain.

But as those proceedings edge toward their conclusion in federal bankruptcy court here, possibly by the end of this year, the likelihood grows that Paternoster and at least 3,000 victims like him--possibly more than 5,000--will be barred from collecting any compensation from Manville.

The reason is New York law, which governs the cases of most of those exposed to asbestos at the once-active naval shipyards in Brooklyn and Staten Island. In some ways, New York’s product liability law is the most restrictive in the nation, for it requires those claiming injury from a product to file suit within three years of their exposure to the product that they believe injured them. For asbestos workers, that would be decades before any of them even knew they were ill.

As a result, personal injury lawyers estimate that, of the 3,000 to 5,000 victims of asbestos poisoning in the state, no more than 150 have been able to persuade a court to hear their claims. None of the remainder, lawyers say, will have access to any of the trust funds likely to be established to compensate victims of asbestos-related disability.

Several other states, including Utah, Alaska and Indiana, have similarly restrictive laws. But in no other do such stipulations affect such a potentially large pool of victims. (In California, the statute of limitations starts running only upon the onset of a product-related disability.)

“New York is the only state with such a Draconian interpretation of the exposure rules,” says Thomas Henderson, a Pittsburgh attorney who has filed suit for a handful of New York victims in Ohio, one of the few states that allow out-of-state residents to file under its own rules.

Overall, about 35,000 victims of asbestosis and related lung ailments have filed claims against Manville, once the largest asbestos maker in the country. The financial magnitude of those claims, as well as tens of thousands more that may yet be filed, led Manville three years ago to file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code. To emerge from the subsequent reorganization proceeding, Manville has agreed to establish a claims fund financed by up to 80% of its stock and $75 million annually from its profits.

Attorneys familiar with the negotiations to establish a fund for victims in the Manville case say that each claimant will probably have to meet his or her own state’s legal standards.

The situation exposes an important flaw in the legal area of product liability: The absence of any federal standards for judging claims and compensating victims means that claimants must confront the wildly varying peculiarities of laws in 50 states--even though many of these claims are now being heard in federal courts, chiefly because corporations facing heavy liabilities have sought bankruptcy protection like Manville.

Thus, victims with essentially similar disabilities caused by identical agents may fare much differently depending on where they sue. Standards differ from state to state on many fundamental issues.

In Massachusetts, for example, punitive damages can be sought in cases of wrongful death but not in personal injury actions, while in New York, the rule is exactly the reverse. Some states impose “standards of repose” that proscribe lawsuits involving a product after a given period has passed since its manufacture or distribution, while others do not. And not every state subscribes to the doctrine of strict liability, which allows plaintiffs to sue for damages without having to prove that a defendant was negligent in making or distributing a product.

Even the point at which the clock starts running on statutes of limitation varies arbitrarily. In New York, it begins with a victim’s first exposure to the damaging product; in Alabama, with the final exposure. In Virginia, when a disabling condition is first medically diagnosable (even if not actually diagnosed); in Ohio, when it first manifests itself, and in Wisconsin, when it is first correctly diagnosed. In California, plaintiffs have a year to sue after they first know or should have known that they have a disabling condition.

Attempts in Congress to impose a federal standard on product liability claims have inevitably foundered on conflicts between consumerists and manufacturers over what standard to spread nationwide. “I don’t think a standardized rule would be necessarily bad,” says Michael Thornton, a Boston attorney representing 2,000 asbestos victims, “but it has to be a fair one.”

Trust Fund Affected

These discrepancies affect even the so-called Wellington claims facility, a trust fund established by 50 asbestos companies and insurers. Although the facility is designed to give claimants an alternative to filing costly and time-consuming lawsuits in state courts, attorneys familiar with its provisions say that the legal stipulations of each claimant’s state are likely to govern his or her claim.

“My guess is that the facility won’t have the authority to borrow one state’s rules to apply to another jurisdiction,” said James Restivo, an attorney for Pittsburgh Corning Corp., one of the members of the facility. Manville has not yet joined the facility.

“My rule of thumb is New Yorkers shouldn’t be treated differently from anyone else,” says Stanley Levy, a New York attorney involved in the Manville negotiations. “But the law still requires a state claim, not a federal one.”

Levy and others say the predicament of New Yorkers and other claimants from restrictive states has been treated indifferently by negotiators in the Manville case, including those charged by the bankruptcy court with representing the rights of plaintiffs. “These people are really being treated as non-existent,” he said.

Although sources familiar with the negotiations say nobody is eager to add thousands of new claimants to the pool of potential plaintiffs, few really believe that adding 10% or 15% to the number of known asbestos victims will make much difference to Manville’s already devastated financial capacity.

“I think that is a real small drop in the bucket,” said Aaron Simon, a Los Angeles attorney representing about 800 California shipyard workers, “compared to the future plaintiffs (those whose claims have not yet been presented). Nobody has enough money to pay those claims.”

‘A Futile Effort’

Manville itself has no interest in enfranchising potential plaintiffs whose own states erect barriers to the courthouse. “If there is no valid claim in existence, then there is no authority to pay that claim,” said Manville General Counsel G. Earl Parker in an interview. He added that New York’s personal injury laws are not necessarily more restrictive than other states’ when taken as a whole: Its rules on strict liability, or the presumption that a company is responsible for injuries in which its product was even peripherally involved, are particularly liberal, for example.

“There’s been no real attempt to get Manville to give up that point,” says Henderson. “The sense on our part is it’s a futile effort.”

Personal injury lawyers have thus turned to the state legislature to relieve the inequity, perhaps at a special legislative session tentatively set for next month. A bill providing a one-year window for victims of latent product injuries--those that do not appear until years after exposure--to bring suits in state courts has been passed by the state Assembly, the lower house, in each of the last five years, but has been blocked in the state Senate despite the support of Gov. Mario Cuomo. A similar exemption for victims of Agent Orange, the Vietnam-era defoliant, was enacted several years ago.

But legislative aides say the broader bill has been blocked by objections from insurance companies, which fear being exposed to liabilities that they had not contemplated when they set their premiums on product liability policies, and by pharmaceutical companies and other makers of potentially toxic products.

“Unless there’s a miracle or some intervention from a new force,” said David Langdon, an aide to Cuomo, “passage doesn’t seem to be likely.”