The Challenge of Mass Personal Injury Litigation

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Asbestos Bankruptcy Trusts
and Tort Compensation
Lloyd Dixon
June, 2013
Email : [email protected]
Phone: 310.393.0411 x7480
There Is a Great Deal of Controversy About
the Interactions Between the Trusts
and the Tort System
 Are plaintiffs able to recover once in the tort system
and again from trusts?
 Is the liability of the remaining solvent defendants
adjusted to take account of trust payments?
 Is the information used to recover from the trusts
available in the tort case?
Plaintiffs Can Recover from Trusts
and Through the Tort Process
Plaintiff
Tort claims
Settlements
D verdict
Trust claims
Trial
P verdict
Claim evaluation
Payment
No
payment
Verdict
molding
Payment
RAND
3
The Are Multiple Linkages Between the
Two Systems
Plaintiff
Tort claims
Trust claims
Information
linkage
Settlements
D verdict
Setoff linkage
Trial
P verdict
Verdict
molding
Claim evaluation
Payment
No
payment
Trust payment
limitation linkage
Payment
Indirect claim linkage
RAND
4
We Investigated these Linkages
in Six States
 States with joint and several liability
 Illinois
 Pennsylvania
 West Virginia
 States with some form of several liability
 California
 New York
 Texas
Findings on Linkages
 Information linkage
 All six states require disclosure of trust claims that
have been filed
 But trust claims are frequently not required to be filed
before trial
 Setoff linkage
 Four of the states allow setoffs for all pre-verdict trust
payments
 California and Pennsylvania do not in some
circumstances
Findings on Linkages
 Indirect trust claims
 Allowed in joint-and-several-liability states if
defendant satisfies part of a trust’s liability and meets
trust payment criteria
 However, defendant often needs plaintiff’s
cooperation to develop exposure information
 Trust payment linkage limitation
 Provisions at some trusts prohibit payments to direct
claimants it trust’s liability has been satisfied by
another party
 Some trusts also require direct claimants to
indemnify trusts for future indirect claims
To Investigate Potential Outcomes, We
Constructed the Following Thought
Experiment
 Pre-reorganization scenario
 All potential defendants are solvent
 Jury returns plaintiff verdict allocating liability in
accordance with state law
 Post-reorganization scenario
 Same verdict, same state
 Some of the defendants are reorganized with
trusts paying claims in their place
Potential Effects of Trusts Depend
Importantly on the Liability Regime
Potential Impact of
Trusts
Joint and Several
Liability
Several
Liability
Total plaintiff compensation

Decrease
No change



Increase
Payments by defendants that remain solvent
Decrease

No change
Increase


Source: Asbestos Bankruptcy Trusts and Tort Compensation, RAND
Corporation, MG-1104, 2011.
RAND
9
We Identified Outcomes that Are Not
Consistent with Liability Principles
 In states with joint-and-several liability
 Defendants might not be able to take advantage
of all the resources available from the trusts
 In states with several liability
 Defendants might in effect pay the shares of
bankrupt parties
 Plaintiffs could fully recover fully in the tort case
and more from the trusts
Trust Overpayments in Several-Liability States
Could Adversely Affect Some Plaintiffs
 Trust payment percentage might need to be lower
 Particularly affected plaintiffs include
 Those exposed only to the products and
practices of bankrupt parties
 Those with non-malignant injuries
What Drives the Potential Increase in Plaintiff
Compensation in Several-Liability States?
 Potential increase in total plaintiff compensation is not
because setoffs for trusts are different than those for
other settlements
 What is different when trusts are involved?
 Plaintiff can recover trust payment after tort case has
been terminated
 No mechanism to adjust payments by solvent
defendants for post-verdict trust payments
 Indirect claims are not available to adjust for pre-verdict
trust payments that don’t result in setoffs
Key Determinant of Outcomes Is Availability
of Evidence on Exposures to Products and
Practices of Bankrupt Firms
 When evidence on such exposures is developed
 In joint-and-several liability states: payments by solvent
defendants will be adjusted to reflect compensation available
from the trusts
 In several-liability states: payments by solvent defendants will
not change
 When evidence on such exposures in NOT developed
 In joint-and-several liability states: defendants might not be
able to take advantages of resources available from the trusts
 In several-liability states: defendants can be required to pay
more than their share of the harm and plaintiffs can recover
more
We Found Considerable Disagreement Over
Who Is Responsible for Developing Exposure
Evidence on Bankrupt Firms’ Products
 Plaintiffs’ attorneys argue that defense attorneys can
use discovery tools to uncover exposure information
 Plaintiffs’ attorneys are not responsible for doing
the job of defense attorneys
 Defense attorneys respond that plaintiffs’ attorneys
can influence the exposures plaintiffs recall
 Without plaintiff co-operation, it is very difficult to
develop the information needed to recover from trusts
and assign fault to bankrupt firms
We Are Developing Evidence on Which
Potential Effects Occur in Practice
 Selecting mesothelioma claims for plaintiffs with
similar exposure histories
 Same primary jobsite
 Similar years worked at site
 Comparing exposures identified by plaintiffs in
 Claims filed before the bankruptcy of a firm
commonly named at the site pre bankruptcy
with
 Claims filed post bankruptcy
Findings Have Important Policy
Implications
 Substantial changes in product identification would
suggest that outcomes inconsistent with tort
principles would be occurring
 Legislative and court reforms would be warranted
to remove incentives for strategic behavior in
product identification
The Number of Trusts Grew Substantially
Between 2003 and 2007
100
90
80
70
Cumulative number of bankruptcies
filed
Cumulative number of trusts
established
60
50
40
30
20
10
0
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Trusts held $18 billion in assets at the end of 2011
Source: Dixon, McGovern, and Coombe, Asbestos Bankruptcy Trusts, RAND, 2010; GAO, Asbestos
Injury Compensation, 2011; Scarcella, 2012.
Trust Payments Are Likely a Significant
Proportion of Overall Compensation
10
9
Tort payments ($ billions)
8
Trust payments ($ billions)
7
6
5
4
3
2
1
0
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: Carroll et al., Asbestos Litigation, RAND, 2005; Dixon, McGovern, and Coombe, Asbestos
Bankruptcy Trusts, RAND, 2010; GAO, Asbestos Injury Compensation, 2011.
2010
Assigning Fault to Bankrupt Firms or Trusts
State
Can Bankrupt Firms or Trusts Be
Placed on the Verdict Sheet?
Joint-and-several liability states
IL
No
PA
No, except for a few older trusts
WV
Remains an open question
Several-liability states
CA
Yes
NY
Yes
TX
Yes
Filing and Discovery Requirements for
Trust Claim Forms
State
Are Plaintiffs Required
Is There a Requirement on
to Disclose Trust Claims When Trust Claims Must Be
that Have Been Filed?
Filed?
Joint-and-several liability states
IL
Yes
No
PA
Yes
No, except in Montgomery
County
WV
Yes
No, but Ps must identify all
trust claims 120 days before
trial
Several-liability states
CA
Yes
No
NY
Yes
Yes, claims must be filed 90
days before trial
TX
Yes
No
Setoffs for Pre-Verdict Trust Payments
State
Are Setoffs Allowed for
Pre-Verdict Trust
Payments?
What Type of Setoffs Is
Allowed?
Joint-and-several liability states
IL
Yes
Pro-tanto
PA
Typically no
Pro-tanto
WV
Yes
Pro-tanto
Several-liability states
CA
Not for noneconomic
damages
Pro-tanto
NY
Yes
Max of amt paid and % of fault
assigned to settling parties
TX
Yes when total recovered
would exceed verdict
Pro-tanto
Indirect Claims
 Available in joint-and-several liability states when
 Verdict is fully satisfied
 Indirect claimant satisfied payment criteria required
of the direct claimant
 Not available in states with several liability
Trust Payment Limitations
 Many trusts prohibit payment to direct claimants
when the trust’s liability has been satisfied by
another party
 Many trusts require the direct claimant to
indemnify the trust for future indirect claims
Bottom Line
 Identified circumstances under which replacement of
once-solvent defendants by trusts can
 Allow plaintiffs to recover fully in tort an then recover
more from trusts
 Prevent defendants that remain solvent from receiving
benefit of the funds available from trusts
 Also identified circumstances under which plaintiffs recover
less
 Highlighted importance development of information on
exposure to bankrupts’ products and practices
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