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Monday, Jan. 29, 2001

One recent lawsuit that has been filed suggests that, at least in the area of litigation over asbestos—the source of America's oldest and largest ongoing mass tort—the situation has gotten pretty dire, and the players have gotten out of control. This lawsuit—G-I Holdings v. Baron & Budd, et. al.—might be viewed as the canary in the coalmine: that is, it should be a wake-up call to the bar that the logic of our current mass tort system leads to dysfunctional and antisocial results.

The G-I Holdings Suit: A Defendant Goes on the Attack

G-I Holdings

is a very unusual lawsuit, and it must be stressed that it may turn out that the allegations contained within it are not true. Nonetheless, it raises some very important questions that must be addressed.

G-I Holdings (which I will call "G-I") is the successor corporation to GAF Corporation, which is one of the largest defendants in ongoing asbestos litigation. G-I has brought suit against three of the largest, most prominent plaintiff-side law firms in America that represent asbestos victims (Baron & Budd; Ness, Motley, Loadholt, Richardson & Poole; and Weitz & Luxenberg).

The federal suit, which was filed in the Southern District of New York, is a bit like a "man bites dog" story. G-I, which has been the target of thousands of suits brought by these three firms is now turning around and suing the firms in tort and pursuant to the RICO statute—employing, that is, the very same sorts of actions that these firms typically bring against their favorite corporate targets.

The Claims in G-I Holdings: A Complaint Like a Grisham Novel

According to G-I's suit, the three named firms conspired to prevent G-I and other asbestos companies from supporting a bill that was pending in Congress last year. The bill was called the "Fairness in Asbestos Compensation Act" ("FACA"). It would have achieved, through federal legislation, a global solution to all current and future asbestos claims. The bill, which was opposed by President Clinton but supported by the Republicans and many prominent Democrats, languished in the House.

The suit alleges that at a meeting on April 8, 1999 the three law firms demanded that the asbestos companies withdraw their support of the FACA bill, and threatened "to financially cripple" any company who did not comply with their demands. The suit further alleges that G-I, which was the one asbestos company to continue to support the bill, has since then been "punished" for its support by being singled out for negative treatment in the ongoing settlement of the three law firms' backlog of asbestos cases.

G-I's complaint—which reads at times like a John Grisham novel—raises two questions. First, are G-I's allegations, if true, simply typical of the kind of rough play that happens during litigation? I will argue that the answer is no.

Evaluating G-I's Allegations

It is hard to know how to evaluate G-I's factual allegations. To begin, I will admit that, as someone who had followed the politics of tort reform in the United States closely, I was a bit surprised when FACA lost the support of almost all of the major asbestos companies.

It was well-known, for example, that the chairman of Georgia-Pacific, another major asbestos company, had supported the bill and was scheduled to testify before Congress in support of it. Georgia-Pacific led a tort reform group called the Coalition for Asbestos Resolution, which had enlisted the aid of some very respected academics to push for FACA. But Georgia-Pacific's chairman never testified, and then Georgia-Pacific left the Coalition.

By the middle of 1999 most of the major asbestos defendants had withdrawn from the Coalition. Within 18 months, FACA, which had virtually been written by the asbestos industry, was an orphan bill, even though not a single part of it had been changed by Congress.

Many of the factual allegations in G-I's complaint should be relatively easy to verify (although I doubt the suit will ever go to trial). Many people attended the April 8 meeting, and so there are third-party witnesses who can testify whether any of the plaintiffs' lawyers indeed threatened to recommend to their clients that they refuse to settle any current asbestos suits litigation with companies that supported FACA.

G-I also claims that, on April 12, two prominent members of the plaintiffs' firms met with its general counsel and said that if G-I persisted in supporting FACA, "the asbestos plaintiffs' bar would make [it] the main target in the asbestos litigation" controlled by these firms. Even if there are not third-party witnesses to this statement, this is the sort of testimony that the trial system is designed to evaluate.

If G-I's Allegations Are True, These Events Are Not Just Business As Usual

If these allegations are true, I believe they represent a very different kind of negotiation between mass tort plaintiffs and defendants. Usually, threats of retaliation in mass tort litigation have to do with trade-offs only within the suit in question.

For example, a threat by a plaintiff to pursue punitive damages puts tremendous pressure on the defendant, but it is pressure based on the defendants' own wrongdoing in the case. Similarly, the threat by a plaintiff to make available to the public damaging documents unless the defendant "sweetens" a settlement offer is also a trade-off rooted in the discovery of the defendant's own wrongdoing in the case (although confidentiality agreements ensuring no such disclosure occurs have come under criticism since they conceal from the public useful information).

If G-I's Allegations Are True, the Tactics Being Used Are Disturbing

If I am right, and what occurred on April 8 and 12, 1999 is something very new, what is wrong with it? G-I claims that the plaintiffs' firms committed a "prima facie" tort by intentionally interfering with their right to participate in political speech, and that the firms conspired to violate federal extortion statutes by threatening to punish any asbestos company that supported FACA. But it is not clear to me that it is illegal to do what the plaintiffs' firms are alleged to have done, nor should it be.

According to G-I, all the firms did is add to the price of settlement certain unusual requests, namely that the asbestos companies stop lobbying Congress. While this is certainly a peculiar demand, it is not clear in what way it is improper or coercive. The asbestos companies, like G-I, could have said no, and they would have been back to where they had started: the cases handled by the plaintiffs' firms would have to be tried. In theory, if the asbestos companies were not liable, they would win the cases, and if they were, they would lose and would pay damages, which seems only fair.

But, of course, there is something wrong with what the plaintiffs' firms are alleged to have done on April 8, even if it isn't illegal. FACA, in my view, would not hurt the firms' clients who are currently suffering from asbestos-related injuries; instead, it would primarily hurt the firms themselves, by cutting down on their fees. And if the firms used considerations of their own welfare as bargaining chips in their clients' suits, that tactic, if not illegal, was at least morally wrong.

Why FACA Should Have Passed

Asbestos is not a typical lawsuit; it is a mass tort crisis, in which there are hundreds of thousands of cases and billions of dollars at stake. Going to trial is not merely returning to the status quo, it is an admission of defeat — an admission that this crisis cannot be solved except by wasteful, piecemeal litigation.

The whole complicated asbestos tort system has been premised on the assumption that it would be better for everyone—especially the victims of exposure to asbestos—if there were a streamlined process that distributed the assets available to those who needed the money the most.

And the three plaintiffs' firms named in G-I Holdings have benefited tremendously from this assumption. They have been allowed by the courts to collect together "inventories" of tens of thousands of cases that they have settled, either one-by-one or in large group settlements. In the vast majority of these cases, their clients have not yet suffered, and may never suffer, any injury.

The plaintiffs' firms don't like FACA because it would limit their fees to 25% of their clients' award, and more importantly, because it would require their plaintiffs to prove injury before receiving any compensation. The asbestos industry, in contrast, liked FACA because it saved them money. Importantly, thought, it saved them money by taking money away from the plaintiffs' lawyers, not from people currently suffering from asbestos-related injuries.

My point is simple. The only defense for what the plaintiffs' firms are alleged to have done to derail FACA is that a lawyer is obliged to get the best deal for her client, and everything—including politics—is fair game when deciding what is "the best deal." But politics should not be treated as just another bit of treasure to be thrown onto the negotiating table when it comes time to settle.

FACA shows why: it is actually an attempt by the Congress to pick one group of plaintiffs (the currently ill) over another (the not-yet-ill). The lawyers representing all the plaintiffs might have private views (as citizens) over which group of plaintiffs is more worthy, but they should not use the settlement of any of their clients' views to express that preference. Mass tort litigation may be war, but there are still a few weapons that should be kept off limits.

Anthony J. Sebok, a FindLaw columnist, is a Professor of Law at Brooklyn Law School, where he teaches Torts, among other subjects. Professor Sebok has written several other columns on mass tort litigation for FindLaw; they can be located in the archive of his columns on the site.

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