K&LNG JULY 2006 Alert Toxic Tort Early Case Assessment in Mass Asbestos Cases: Identifying Needles in the Haystack (Before They Find You)1 In recent weeks, renewed prospects of federal reform legislation concerning asbestos litigation have dimmed. As Congress moves on to other matters on its legislative agenda, plaintiffs’ counsel are concentrating their time and resources on the many thousands of asbestos cases pending in courts across the United States. However, the threat of a comprehensive federal intervention and the fact of new rules recently promulgated in several states to help manage court dockets clogged with asbestos cases have dramatically altered the landscape of asbestos litigation in the United States. The new paradigm of asbestos litigation is turning away from mass dockets. In its place, the tort system has shifted focus to serious malignancy claims which are proceeding with alarming speed and frequency to trial settings in courtrooms across the country. Accordingly, to avoid potentially embarrassing and costly litigation “surprises,” to manage limited resources and to control expenses, savvy defendants and their counsel must consider employing Early Case Assessment (“ECA”) tools to separate the “ordinary” claims from the ones requiring more extensive defense efforts. The shift in asbestos litigation from mass tort claims management to trial by fire presents new challenges and costs to defendants, even those companies which have been entangled in asbestos litigation for many years. Asbestos defendants must establish the means to identify specific cases that present significant trial risks. The process of identifying such cases is not, however, an easy task. Plaintiffs’ 1 counsel unilaterally controls not only which cases go to trial, but also where and when they will be presented. Potential trial risk cases are spread throughout the country in various jurisdictions. Moreover, just because a case is scheduled for trial, it does not necessarily mean that every defendant in the case is a target. In any given month, a defendant may be scheduled for multiple trials in several states, but that defendant may be a target in only a few. But which ones? Indeed, defendants are left alone to anticipate which cases in their portfolios present true risks of adverse verdicts at trial. Defendants must find the proverbial needles in the haystack. It is necessary, therefore, for defendants to obtain an accurate and meaningful assessment of cases as early as possible in order to manage trial risk cases in an asbestos tort claim portfolio. ECA is the essential tool for managing modern asbestos litigation. ASBESTOS LITIGATION: THE NEW PARADIGM Perhaps the most important feature of recent tort reform initiatives at the state and local court level has been the creation of inactive case dockets. Cases where plaintiffs are generally not sick, but were often filed for administrative reasons, such as to toll a statute of limitations, can now be transferred to an inactive docket where they remain until activated. While on an inactive docket, neither plaintiffs nor defendants need expend resources to develop or to monitor the cases. With thousands upon thousands of cases “parked” in inactive dockets, plaintiffs’ counsel are free to concentrate For a more general discussion of the use of Early Case Assessment, see also “You Can’t Hit What You Can’t See: The Case for Early Case Assessment,” Eighth in a series entitled “Conversations on the Business of Law", Corporate Legal Times, by Peter J. Kalis, December 1996. Kirkpatrick & Lockhart Nicholson Graham LLP their efforts on their clients who are indeed ill. Most of these cases, particularly those with appealing fact patterns, are pressed forward to a jury trial date as soon as possible. In some states, for example, a trial can be scheduled within only a few weeks or months from the filing of the original complaint. Many defendants which have grown accustomed to the frustratingly slow progress of civil cases in most contexts are astonished and sometimes caught offguard by the relatively rapid pace of asbestos litigation these days. Evaluation of the relative risk presented by asbestos claims headed for trial depends on a series of factual indicators about the plaintiffs, the facts of the case, and plaintiffs’ counsel. The following is a general discussion of some key indicators; however, it is worth noting that several defendants present issues that are not necessarily addressed by this noncomprehensive list. The Alleged Disease: Because mesothelioma claims are often considered the signature disease of asbestos exposure and because the disease is most often fatal, a “meso” claim generally presents a higher trial risk than any other cancer claim, such as lung cancer, which has multiple other causes. That said, certain kinds of non-meso lung cancers are every bit as dangerous of a trial risk. n Amount of Economic Losses: The potential for economic loss involves a number of subfactors, including the plaintiff’s age, his work status, the age and identity of any dependents, and future earning capacity. The more the economic loss, the greater the potential damages and, perhaps more importantly, the more sympathetic a plaintiff may appear to a jury. As with mesothelioma claims, cases that naturally appeal to jurors’ sympathy present greater potential trial risks. n Product Identification: The fact remains that many asbestos suits are originally filed against defendants based on preliminary, unconfirmed information. As a case proceeds toward trial, actual identification of a defendant’s product as an alleged source of asbestos exposure may or may not surface. In those cases where a defendant’s product is identified, it is important to know the extent to which such product, and its ability to generate potentially hazardous forms of asbestos, is known by the prescient witnesses. n Occupational Relevance: The relationship, if any, between the plaintiff’s occupation and work with or around the company’s product further characterizes the product identification. So-called “rocket dockets” allow plaintiffs’ counsel to maximize the overall values of cases by leveraging trial risks against defendants in two important ways: first, a defendant is forced to engage in extensive and very expensive pretrial and trial preparation over a condensed period of time; and second, since plaintiffs’ counsel often migrate their trial claims toward courts and jury pools known for plaintiff-friendly rulings and verdicts in asbestos cases, the potential for adverse jury verdicts against defendants— even in a marginal case—is very real. If nothing else, the plaintiffs’ new strategy in asbestos cases certainly gets defendants’ attention with huge increases in costs of defense and everincreasing risks of adverse jury verdicts. n MEETING THE CHALLENGE OF THE NEW PARADIGM: EARLY CASE ASSESSMENT Any ECA system should be a highly customized tool used to identify trial risk cases in time sufficient to bring appropriate litigation resources where they are needed and to keep always vigilant to new, and sometimes unexpected, challenges facing asbestos defendants. One size does not, however, fit all circumstances. This Alert, therefore, not only promotes the concept of ECA in asbestos cases, but it also discusses some core features that any ECA should embrace. A trial risk case is any claim that has a likelihood (or certainty) of overcoming summary judgment and proceeding to a trial call. Trial risk cases also typically feature a substantial settlement demand and the potential for an adverse verdict. Individual cases, however, present different degrees of trial risk. An ECA program must, therefore, be flexible enough to measure risks on a relative scale. 2 Kirkpatrick & Lockhart Nicholson Graham LLP | JULY 2006 Plaintiffs’ Counsel: As a general proposition, the plaintiffs’ bar in the asbestos tort system is highly organized and skilled, particularly at preparing cases for trial efficiently. A few firms are also particularly adept at trying asbestos cases and fewer still are a constant threat to take almost any claim to a jury. Plaintiffs’ firms are equally entrepreneurial in the sense that the value of any case to the client (and by virtue of the contingency fee arrangements, to the plaintiffs’ lawyers themselves) is constantly measured against costs. The accurate assessment of plaintiffs’ counsel’s abilities and approach to cases is a necessary tool in measuring litigation risk. n n Jurisdiction: For asbestos defendants, the fact is that all jurisdictions where asbestos claims are pending pose some litigation risks. It is equally true, however, that some jurisdictions impose greater risks on asbestos defendants than others. Assessing jurisdictional factors goes well beyond a review of the United States Chamber of Commerce’s annual “judicial hellhole” list, where the composition of jury pools, judicial predilections, and verdict experience earn some courts a place on the infamous list. In the asbestos tort system, the inquiry is far deeper and requires careful consideration of choice of law analysis as well as a comparison of the case facts to the substantive, procedural, and evidentiary rules applicable in any given court. In the same type of case, an asbestos defendant can be dismissed from a judicial hellhole, but suffer greatly in a so-called “good court” when all relevant factors are considered. Other factors to consider are the plaintiff’s health status, proof of asbestos product content, potential for asbestos release, plaintiff’s proximity to potential release, and/or the plaintiff’s settlement demand. As noted, some defendants have particular issues, which must be assessed and factored into a proper ECA program. 3 THE BENEFITS OF ECA As noted above, the risks and costs associated with managing a large portfolio of asbestos cases are fraught with an inherent level of uncertainty. Of the myriad of pending asbestos cases, plaintiffs’ counsel unilaterally chooses which cases will or will not be pressed toward trial. In contrast, defendants typically have little ability to influence the timing or the pace of trial dockets. Because even the most aggressive of plaintiffs’ firms cannot bring all of its cases to trial at once, anticipating plaintiffs’ counsel’s intentions becomes a critical function. Moreover, experience teaches that defendants and their insurers hate surprises. Decision makers faced with risky propositions prefer advance notice of the circumstances and conditions giving rise to their plight. Asbestos litigation foists sufficient pressure as a general proposition without forcing important client decisions on short notice. Sometimes last minute responses are unavoidable, but an ECA system strives always to lengthen the time for assessing the risk and deliberating on its management. For companies whose asbestos risks are insured, an ECA provides the means by which insurers can be appropriately advised of individual trial risks and given suitable time to consider recommendations for the defense or settlement of such claims. Typically, insurers not only appreciate advance notice of developments, they also appreciate the efficient management of claims, particularly for trial risk cases. Finally, sound fiscal management of asbestos litigation requires the proper allocation of resources. Unlike typical commercial litigation or one-off product liability cases, asbestos litigation presents a deluge of cases, some of which are risks while others are not. Resources cannot be allocated to all cases; instead, resources are limited and must be carefully conserved and directed appropriately. Limited resources include, by way of example: client personnel time, including witnesses and inhouse legal personnel; outside attorney’s fees; expert witness costs; and, put simply, client attention. Kirkpatrick & Lockhart Nicholson Graham LLP | JULY 2006 ECA: THE ART OF NO SCIENCE An effective ECA system in a mass asbestos portfolio is less of a science and more of a practiced art. The inherent risks and costs of being an asbestos defendant in the new paradigm justifies a customized and sophisticated approach to satisfy any company’s desire and need to manage asbestos liability risks. Although the factors that go into the analysis may be varied and complex, the end result is straightforward: the prompt identification of needles in the haystack. Chris M. Temple ctemple@klng.com 412.355.6343 Michael J. Zukowski mzukowski@klng.com 412.355.6397 K&LNG assists clients with toxic tort claims in multiple ways, including serving as lead or special trial counsel in individual cases tried to juries and as National Coordinating Counsel and/or National Trial Counsel in mass tort cases involving multiple, repetitive claims for exposures to substances such as asbestos or silica. As such, the firm is intimately involved nationally in all facets of trial and pretrial preparation, the development of strategic approaches to complex problems, and the management of information in cases. If you would like more information on our toxic tort litigation and trial capabilities, please contact one of the lawyers listed below: NATIONAL COORDINATING/NATIONAL TRIAL COUNSEL Terry Budd James A. Lowery, III Mary M. O’Day Michael J. Ramirez Chris M. Temple 412.355.8672 214.939.4983 412.355.6700 214.939.4946 412.355.6343 CALIFORNIA Raymond L. Gill PENNSYLVANIA/OHIO 415.249.1088 rgill@klng.com 305.539.3324 dcasey@klng.com James A. Pranske Warren R. Westberg 617.261.3179 jking@klng.com UNITED KINGDOM FLORIDA Daniel A. Casey tbudd@klng.com jlowery@klng.com moday@klng.com mramirez@klng.com ctemple@klng.com Nicholas P. Vari 412.355.8365 nvari@klng.com TEXAS 214.939.4985 214.939.4984 jpranske@klng.com wwestberg@klng.com MASSACHUSETTS Jeffrey S. King Jane Harte-Lovelace +44.20.7360.8172 jharte-lovelace@klng.com NEW YORK/NEW JERSEY Michael E. Waller 973.848.4132 mwaller@klng.com WASHINGTON, D.C./VIRGINIA David T. Case 202.778.9084 dcase@klng.com www.klng.com BOSTON • DALLAS • HARRISBURG • LONDON • LOS ANGELES • MIAMI • NEWARK • NEW YORK • PALO ALTO • PITTSBURGH • SAN FRANCISCO • WASHINGTON Kirkpatrick & Lockhart Nicholson Graham (K&LNG) has approximately 1,000 lawyers and represents entrepreneurs, growth and middle market companies, capital markets participants, and leading FORTUNE 100 and FTSE 100 global corporations nationally and internationally. K&LNG is a combination of two limited liability partnerships, each named Kirkpatrick & Lockhart Nicholson Graham LLP, one qualified in Delaware, U.S.A. and practicing from offices in Boston, Dallas, Harrisburg, Los Angeles, Miami, Newark, New York, Palo Alto, Pittsburgh, San Francisco and Washington and one incorporated in England practicing from the London office. 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