U.S. Appeals Court Rejects $1.2-Billion Asbestos Settlement
In one of the most complicated and closely watched mass injury cases in the nation, a federal appeals court in Philadelphia on Friday rejected a proposed $1.2-billion settlement of thousands of asbestos claims.
The U.S. 3rd Circuit Court of Appeals ruled 3-0 that the pact did not satisfy the requirements of a proper class action and would unfairly deny a day in court to people who may develop injuries from their exposure to asbestos in the future.
To resolve a tangle of lawsuits bogged down in the courts, plaintiffs’ attorneys and 20 asbestos manufacturers agreed two years ago to create an administrative procedure for processing injury claims against the companies. Proponents, including some leading plaintiffs lawyers, said the deal would be an efficient, creative solution to judicial gridlock.
But opponents, including other leading plaintiffs’ lawyers as well as consumer advocate Ralph Nader, alleged that the settlement was an unconstitutional sellout of the people it purported to help because it capped damages at too low a level and inadequately addressed the needs of those who have been exposed to asbestos but have not developed disease. Studies have shown that people exposed to asbestos have vastly higher rates of lung cancer and other diseases, which can take 15 to 40 years to emerge.
Circuit Judge Edward R. Becker described the importance of the litigation in sweeping terms.
“Every decade presents a few great cases that force the judicial system to choose between forging a solution to a major social problem on the one hand, and preserving its institutional values on the other. This is such a case,” Becker wrote.
He said the proposed settlement “is arguably a brilliant partial solution to the scourge of asbestos that has heretofore defied global management in any venue. However, against the need for effective resolution of the asbestos crisis, we must balance the integrity of the judicial system.”
Becker agreed with scholars who have contended that a settlement of this type improperly involves the judiciary in crafting what is essentially a legislative solution.
At the heart of the settlement was a provision that participants would be precluded, other than in exceptional cases, from suing the manufacturers. Instead, private medical panels would screen damage claims of workers and their families. The agreement called for 100,000 claims to be paid during the next 10 years, ranging from $5,800 to $60,000. The settlement would have affected between 250,000 and 2 million people.
The decision is just the latest development in the labyrinthine decades-old history of asbestos litigation. Judges throughout the United States have expressed frustration over how to process tens of thousands of pending suits. In 1991, a special committee of the Judicial Conference of the United States, appointed by Chief Justice William H. Rehnquist, said the litigation had become “a disaster of major proportions to both the victims and the producers of asbestos products” and urged a creative solution.
Becker acknowledged in his opinion that the court’s decision “undermines the partial solution to the asbestos litigation crisis.”
However, he and the other judges--Morton I. Greenberg and Harry W. Wellford--said the settlement presented many problems.
They found that the interests of the settlement class were too diverse and could not properly be lumped into “an amalgamation of factually and legally different plaintiffs.”
In particular, the judges said that the interests of someone who has been exposed to asbestos but isn’t sick may be different from the interests of someone who already has an injury.
Brian Wolfman, a lawyer for Nader’s Public Citizen organization, said he was elated about Friday’s ruling. “The victims of [these companies’] asbestos products will have their day in court in the future. The due process rights of future victims have to be scrupulously honored.”
He especially applauded Becker’s conclusion that if this settlement were approved, “some plaintiffs would be bound despite a complete lack of knowledge of the existence or terms of the class action.”
The settlement would have applied to people who were exposed to asbestos and hadn’t filed their own claims by the Jan. 15, 1993, filing date of the class action, and who didn’t remove themselves from the proposed settlement by Jan. 24, 1994. The companies participating in the plan included Amchem Products Inc., Armstrong World Industries Inc., GAF Corp., Pfizer Inc., and Union Carbide Chemicals and Plastics Co. Inc.
Becker stressed that potentially affected persons who know they have been exposed to asbestos “but manifest no physical disease may pay little attention to class action announcements” that could have a dramatic effect on them.
Becker also objected to the way the settlement would have allocated recovery among different kinds of plaintiffs, noting that it made no provision for medical monitoring or for payment for loss of consortium. And, he noted, “the settlement relegates those who are unlucky enough to contract mesothelioma in 10 or 15 years to a modest recovery, whereas the average recovery of mesothelioma plaintiffs in the tort system runs into millions of dollars. In short, the settlement makes numerous decisions on which the interests of different types of class members are at odds.”
Mesothelioma is a rare cancer of the lining of the lungs caused by exposure to asbestos, a mineral that during its industrial heyday had uses ranging from electrical insulation to brake linings. Some uses were banned starting in 1975.
Advocates of the settlement said they were disappointed in the ruling and that they would seek a rehearing from a larger panel of 3rd Circuit judges, or, failing that, seek review by the U.S. Supreme Court.
“We think it’s a wrong decision and a regrettable decision,” said Washington, D.C., attorney William R. Hanlon, who represented the Center for Claims Resolution, a consortium of the 20 companies.
Gene Locks, a Philadelphia plaintiffs’ lawyer who played a key role in negotiating the settlement, agreed. Locks and Hanlon said the court had taken an overly restrictive view of what is necessary for a fair class-action settlement.
Locks asserted that the ruling would lead to “an unfortunate, extremely costly waste of assets that would ultimately be available to victims. I believe everyone will be a loser, and I think the victims who have been kicked in the teeth all these years will be hurt much more by this type of interpretation.”
But Fred Baron, the Dallas plaintiffs’ lawyer who spearheaded the fight against the settlement, was jubilant. “The wicked witch is dead,” Baron said. “The thing that worried me the most was the concept of binding people who didn’t know they were in the case, and the court recognized that. This will make it more difficult for industry to enter into collusive settlements with other plaintiffs’ counsel to limit their future liability in tort cases.”
Also elated was Baron’s co-counsel, Harvard law professor Laurence Tribe, who gave the primary oral argument for the challengers. “The decision draws the curtain for the time being on a profound abuse of the class-action litigation device in mass tort cases.”
John Coffee Jr., a Columbia University law professor who specializes in class action lawsuits and who testified against the settlement as an unpaid expert, praised the ruling and said he hoped it would lead to further negotiations.
“I don’t think the judicial system can give all these people an individual trial, but the judicial system could require that there be separate counsel for the future claimants to make sure their interests are protected. They have separate needs and they shouldn’t have their claims tied to those currently injured,” Coffee said.
Near the end of the decision, Judge Becker suggested that the situation is ripe for a legislative solution. Coffee agreed but said that “Congress has refused to deal with this for years and is unlikely to do so in the current political climate.”
Saying the case posed “some of the biggest challenges to the operation of the legal system any judge has ever faced,” UCLA law professor Carrie Menkel-Meadow called the ruling courageous.
“In many ways it would have been easier to approve the settlement to deal with the important social problem of mass case management. This decision represents taking the judicial role of protecting the individual in our justice system very seriously,” Menkel-Meadow said. But she added that the decision left unresolved how the judicial system is to cope with mass torts.
