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Journal of Bankruptcy Law and Practice
2005
Defining the Edge of Tort Law in Asbestos Bankruptcies: Addressing Claims Filed
by the Non-Sick
Victor E. Schwartz, Mark A. Behrens, and Phil S. Goldberg [FNa1]
Federal bankruptcy courts have become the newest growth forum for asbestos cases. More than 70 companies have
sought protection from asbestos litigation through the bankruptcy courts, and the pace is quickening. [FN1]
Consequently, bankruptcy judges increasingly will be asked to decide whether individuals who have been exposed
to asbestos but are not sick and have no present physical impairment have current claims for compensation. These
individuals are known in asbestos tort litigation as "unimpaired claimants," [FN2] and recent reports estimate that
they represent up to 90% of new asbestos filings. [FN3]
Many courts in non-bankruptcy asbestos litigation have held that unimpaired asbestos claimants have no injury
or damages in tort law. Unimpaired claimants do not suffer from pain or have objective changes in their appearance
or well-being from asbestos exposure. [FN4] They may have X-ray markings that are "consistent with" asbestos
exposure, [FN5] such as pleural plaques, pleural scarring, or pleural thickening, [FN6] but these markings are not
evidence of asbestos-related disease and may be from a number of other causes. [FN7] Medical studies have shown
that, on a probability basis, pleural markings are not likely to lead to actual injury. [FN8]
In bankruptcy, the issue of whether an unimpaired claimant has a tort law injury has significant implications.
Under the Bankruptcy Code, a person whose tort claim "arose" at or before the time of the debtor's filing of a
bankruptcy petition has a valid legal "claim" in bankruptcy (as that term is defined under 11 U.S.C.A. §
101(a)(5)), making that person a "creditor" (as that term is defined under 11 U.S.C.A. § 101(a)(10)) of the debtor's
estate. Therefore, if an unimpaired claimant is deemed to have a tort injury, all unimpaired claimants will have a
right to payment against that debtor in bankruptcy and can vote on the debtor's plan for reorganization.
Lawyers representing asbestos cancer victims have expressed concern that, because unimpaired claimants vastly
outnumber other asbestos creditors in bankruptcy proceedings, unimpaired claimants can use their superior numbers
to gain control of the trust distribution process and receive payments, threatening the ability of the truly sick to
obtain adequate compensation. [FN9] Their concern is well-founded, as the Third Circuit Court of Appeals observed
when it stated in a recent asbestos bankruptcy case that "manipulation [of the voting system] is especially
problematic in the asbestos context, where a voting majority can be made to consist of non-malignant claimants
whose interests may be adverse to those of claimants with more severe injuries." [FN10] Indeed, the trust
established after the Johns-Manville bankruptcy recently reported that "a disproportionate amount of Trust
settlement dollars have gone to the least injured claimants-many with no discernable asbestos-related physical
impairment whatsoever." [FN11] The Manville Trust is now paying out just five cents on the dollar to asbestos
claimants. [FN12]
This article provides the legal and public policy issues that bankruptcy courts should consider in deciding
whether an unimpaired claimant has a tort law injury, such that he or she properly holds creditor status. In the first
section, the article discusses the trend towards more asbestos-related bankruptcies and the impact that unimpaired
claimants are having on the bankruptcy process. The article then lays out the legal framework that bankruptcy courts
should use to assess whether unimpaired claimants have a right to payment. The article concludes that to state a
claim in a bankruptcy proceeding, an asbestos claimant should have to demonstrate physical injury or functional
impairment caused by asbestos exposure.
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I. Unimpaired Asbestos Claimants and the Bankruptcy Courts
A. The Trend Toward More Asbestos Bankruptcies
When asbestos product liability lawsuits emerged almost 30 years ago, many legal observers believed that
asbestos litigation would be a serious, but diminishing, problem. Instead, the United States Supreme Court has said
that courts today are facing an ever growing "asbestos-litigation crisis." [FN13] Former United States Attorney
General Griffin Bell has observed that the litigation "is worsening at a much more rapid pace than even the most
pessimistic projections." [FN14] In 2003, more than 100,000 claims were filed-"the most in a single year." [FN15]
The RAND Institute for Civil Justice (RAND) predicts that as many as one million more claims may be filed.
[FN16]
Already, scores of so-called "traditional" asbestos defendants have been driven into bankruptcy, leading the
asbestos personal injury bar to cast its litigation net wider to sue more "peripheral" defendants. [FN17] These
defendants have only attenuated connections to asbestos but are now targeted in the litigation because of their "deep
pockets." [FN18] According to Senior United States District Court Judge Jack Weinstein, "[i]t is not impossible that
every company with even a remote connection to asbestos may be driven into bankruptcy." [FN19] In fact, the
process has been accelerating due to the "piling on" nature of asbestos liability. [FN20] Each time a defendant files
for bankruptcy protection, "mounting and cumulative" financial pressure is placed on the "remaining defendants,
whose resources are limited. [FN21] RAND has now identified more than 8,500 asbestos defendants--up from only
300 in 1982. [FN22] Attorney General Bell predicts that half of the companies in the Dow Jones Index may soon be
affected. [FN23]
If the current course continues, asbestos-related bankruptcies will increase both in number and in frequency, as
many peripheral defendants will be forced to turn to the bankruptcy courts to resolve their own asbestos litigation
problems. [FN24] In addition, asbestos defendants have begun filing "pre-packaged" bankruptcies, which make
bankruptcy appear more attractive to corporate defendants because they can negotiate and come to a settlement with
their creditors before a bankruptcy petition is filed. At least in theory, this arrangement allows a company to emerge
from bankruptcy more quickly. [FN25] Whether companies opt for the bankruptcy route because of the promise of
being "cleansed" of asbestos liability or because they are forced into bankruptcy from the spiraling mass of
litigation, it is virtually certain that a large number of asbestos claims will be resolved in the bankruptcy courts.
B. The Special Bankruptcy Process for Asbestos Litigation
In the early 1990s, Johns-Manville Corporation was the first major asbestos defendant to use the bankruptcy
process to set up a trust fund to pay current and future claimants. [FN26] Through its plan of reorganization,
discharge injunction, and supplemental injunction entered pursuant to 11 U.S.C.A. § 105(a), all asbestos-related
personal injury claims against Johns-Manville were channeled to a trust, which assumed all of Johns-Manville's
asbestos liability. The asbestos claimants were enjoined from asserting claims against the reorganized
Johns-Manville, thereby allowing the company to emerge from bankruptcy without the crushing weight of asbestos
liability. Soon thereafter, Congress amended the Bankruptcy Code, 11 U.S.C.A. § 524(g) (also known as the
Manville Amendments), to codify the trust-injunction-discharge approach used in the Johns-Manville bankruptcy.
[FN27]
Under 11 U.S.C.A. § 524(g), a company seeking permanent relief from its current and future asbestos
liability can file a petition in bankruptcy and propose a plan of reorganization that defines the rights of the debtor,
the asbestos claimants, other non-asbestos creditors, and certain other parties in interest, thereby setting a course for
the company to emerge from bankruptcy reorganized and free of asbestos liability. [FN28] The creditors are grouped
into voting classes to determine whether to approve the debtor's plan, [FN29] which includes trust distribution
procedures (TDPs) that establish claim values and claim criteria for each category of asbestos claimants defined
therein. Seventy-five percent of the asbestos claimants-one claim, one vote, typically of equal weight regardless of
impairment-must approve the proposed plan before it can be confirmed. [FN30]
When Congress enacted § 524(g), most asbestos claims were filed by workers who sustained grave or
crippling maladies, such as a kind of cancer known as mesothelioma. [FN31] Now, as indicated, the vast majority of
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new asbestos claimants are "people who have been exposed to asbestos, and who (usually) have some marker of
exposure such as changes in the pleural membrane covering the lungs, but who are not impaired by an
asbestos-related disease and likely never will be." [FN32]
C. The Impact of Unimpaired Claimants on the Asbestos Bankruptcy Process
As a practical matter, § 524(g) has had the effect of granting unimpaired claimants more power against a
debtor company and a much greater ability to collect on their claims than they would receive pursuant to traditional,
non-bankruptcy litigation. [FN33] Plaintiffs' law firms with large "inventories" of unimpaired claimants can use the
bankruptcy process to negotiate TDPs with a debtor that require less evidence of exposure, causation, and injury
than are required in the tort system. As a result, the values of these unimpaired claims in bankruptcy can be inflated
beyond their historical litigation values. [FN34] There are several reasons that this can happen.
First, the validity of asbestos claims against a debtor is rarely checked. The bankruptcy courts do not review
individual claims before a claimant casts a vote on a plan of reorganization. [FN35] As a practical matter, a person
asserting a claim against a debtor need only indicate the type of injury that he or she is asserting to be given the
corresponding voting right. [FN36] Thus even the most marginal "claimants" receive the right to vote on a plan,
[FN37] and the votes of the unimpaired claimants count just as much as those of truly sick claimants. [FN38] In
addition, once the trust is established, in most cases, no party except the trustee is given the right to object to claims
submitted to the trust. [FN39] Because the trust is an administrative process with the sole purpose of paying-not
objecting to-claims, as long as claims are submitted with the basic information required in the TDPs, claims are not
substantively reviewed, much less rejected.
Second, during the voting process each class of creditors tries to use its voting power as a bargaining chip to
increase its share of the trust assets. Given the cost and damage that a prolonged bankruptcy can have for a debtor
company, even "the ability to delay the confirmation of a plan of reorganization creates bargaining power in itself."
[FN40] Should the creditor committees not reach agreement on the debtor's proposed plan, the court can allow any
creditor or group of creditors to file and prosecute their own plans for the debtor's reorganization. [FN41] If this
happens, the bargaining power shifts "rather drastically" in favor of the larger classes of creditors. [FN42] In
asbestos-related bankruptcies, unimpaired claimants tend to comprise the largest percentage of the asbestos claimant
constituency-usually in excess of the 75% needed to control a vote under § 524(g). Therefore, unimpaired
claimants have an effective veto power over any plan of reorganization they view as unsatisfactory. [FN43] As one
reporter for a national news magazine concluded, attorneys for physically unimpaired claimants "effectively have
more power than the bankruptcy judge" over the fate of a debtor and its plan of reorganization. [FN44]
Third, and most fundamentally, the compensation structure of any plan arising under a scheme dominated by
unimpaired claimants is going to disproportionately benefit those claimants at the expense of the truly sick. [FN45]
Because trusts are limited funds, the types and values of claims paid must be negotiated among the debtor, the
current asbestos claimants (in most cases, through their counsel), and the future claimants' representative. The
limited fund concept means that: (1) each dollar paid out under the TDPs to an unimpaired claimant is a dollar that is
no longer available to compensate a cancer victim or a claimant with an impairing asbestos-related condition; and
(2) the higher the value assigned to unimpaired claims, the less cancer victims and other claimants with impairment
will receive for their claims.
For each of the aforementioned reasons, "where it might not have been as financially attractive to pursue
unimpaired claims in litigation... mass filings of unimpaired claims in the bankruptcy process may appear attractive
to plaintiffs' attorneys," [FN46] particularly when the attorneys are allowed to determine how much their clients will
be paid. The bottom line is that when bankruptcy courts recognize demands made by unimpaired claimants against a
debtor as current "claims," which give those claimants standing as "creditors" to vote on a plan of reorganization, the
unimpaired are permitted to take advantage of, and dominate, the bankruptcy reorganization process in ways that
create a skewed plan of reorganization that is not fair or equitable in its treatment of the claims of the truly sick.
[FN47]
II. The Legal Framework for Unimpaired Claimants
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The disproportionate impact that physically unimpaired asbestos claimants can have on bankruptcy proceedings
has led a number of bankruptcy judges and legal observers to question whether asymptomatic claimants have valid
"claims" in bankruptcy. While some could argue that bankruptcy courts should have asked and answered this
question when the first asbestos related bankruptcies were filed, [FN48] there have been significant developments
that have clarified the proper course of action for bankruptcy judges. This section discusses the current legal
framework for bankruptcy judges to assess these claims.
A. The Meaning of "Claim" in Asbestos Bankruptcies
Generally, a "claim" in bankruptcy is defined as broadly as possible, theoretically to provide the most effective
relief for a debtor. [FN49] Latent diseases, such as those in asbestos cases, can put a strain on this definition, as only
a fraction of those exposed to a particular substance sustain an injury from the exposure. It also may take decades for
an exposure-related injury to develop. In drafting the Manville Amendments to the Bankruptcy Code, Congress
drew the distinction between those with actual "claims" against a debtor (who are considered "creditors") and those
with "demands" against a debtor (who are considered "future claimants"). The Manville Amendments only apply to
asbestos bankruptcies.
In other substantive areas of the law, there have been conflicting bankruptcy court decisions with respect to the
proper definition of a "claim." In Matter of M. Frenville Co., Inc., the Third Circuit Court of Appeals held that a
"claim" does not arise for bankruptcy purposes until it ripens into a cause of action under non-bankruptcy law.
[FN50] The Frenville court ruled that, "while federal law controls which claims are cognizable under the Code, the
threshold question of when a right to payment arises, absent overriding federal law, 'is to be determined by reference
to state law."' [FN51] Some courts and commentators have criticized this decision, arguing that the Third Circuit
ignored the Bankruptcy Code's definition of a "claim," which includes contingent and unmatured rights to payment.
[FN52]
The disagreement among bankruptcy courts over the definition of the term "claim" in other areas of the law
can be set aside because these cases do not account for the apparent disconnect between the Bankruptcy Code's
definition of "claim" and § 524(g)'s concepts of "claim" and "demand." [FN53] Specifically, the more expansive
definition of "claims" used by some courts, if applied to asbestos litigation, would include as current those claims
that § 524(g) classifies as "demands" (i.e., future claims). [FN54] Such a definition also would imply that virtually
every person who was exposed to a debtor's asbestos is a creditor of that debtor, regardless of whether that person
developed, or will develop, an asbestos-related injury from that exposure. If exposure to a debtor's asbestos was the
point at which one's claim arose, the inclusion of a "demand" in § 524(g) would be unnecessary. The use of
"demands" separately from "claims" makes obvious that a distinction lies between the two terms: whether a right to
payment exists at the time the bankruptcy petition is filed. [FN55]
One reason for this disconnect is that, in drafting the Bankruptcy Code, Congress may not have contemplated
the unique problems mass tort liability from asbestos could cause in bankruptcy. [FN56] With the Manville
Amendments, Congress sought to afford a reorganized debtor the most protection possible from asbestos litigation
in its effort to make a fresh start. Congress expanded the protection afforded to a reorganized debtor with asbestos
liabilities by adding "demands" to ensure that any and all possible asbestos liabilities against a company would be
channeled to the post-confirmation trust. Therefore, in the § 524(g) context, there is no threat (as there may be
outside of the asbestos bankruptcy context) that too narrow a definition of an asbestos "claim" would result in
additional liability for a reorganized debtor.
To hold otherwise would present two main inequities. First, a person exposed to, but not impaired by, asbestos
may never develop a cause of action against that company. Therefore, it would not be appropriate to give that person
a vote on the debtor's reorganization plan. Second, many people do not develop any impairing condition from their
asbestos exposure. Therefore, it would be unreasonable to expect such individuals to be aware that they have claims
against a particular company in bankruptcy and should comply with the simplest requirements in bankruptcy, such
as submitting ballots on proposed plans.
Therefore, bankruptcy judges must determine whether unimpaired claimants have current claims, i.e., rights to
payment that arose at the time that the bankruptcy petition was filed. If the answer is "no," the unimpaired claimants
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cannot be deemed creditors, they are not entitled to liquidate their asserted claims, and they cannot vote on a plan of
reorganization. [FN57]
B. The Application of the Erie Doctrine in Bankruptcy Law
To determine whether an unimpaired claimant has a tort law injury, such that he or she properly holds creditor
status, a bankruptcy court asks whether the claimant has a right to payment in tort law and, if so, whether that right
to payment "arose" at or before the time of the debtor's filing of a petition in bankruptcy. Pursuant to the 1994
Manville amendments to the Bankruptcy Code, bankruptcy courts addressing this issue should consider an Erie
doctrine analysis. [FN58] Such an analysis requires a bankruptcy court to apply the tort law of the jurisdiction that
would apply to individual claims outside of bankruptcy, unless there is a superceding federal law or overriding
federal interest. If the state law to be applied is not decided, the bankruptcy court must "stand in the shoes" of the
state court and determine how the state court would rule if faced with the question of whether an asymptomatic
asbestos claimant has a legal claim. [FN59]
In Butner v. United States, [FN60] the United States Supreme Court reinforced the need for bankruptcy judges
to abide by these instructions, writing that "[p]roperty interests are created and defined by state law. Unless some
federal interest requires a different result, there is no reason why such interests should be analyzed differently
simply because an interested party is involved in a bankruptcy proceeding." [FN61] The Court reinforced this
concept in Raleigh v. Illinois Department of Revenue, [FN62] laying out a two-part analysis: bankruptcy courts
should look at applicable state law where the individual claims have "arisen" and then determine if a federal interest
requires a different result. [FN63]
The public policy rationale for using applicable non-bankruptcy law in a bankruptcy court is to discourage
forum shopping and prevent a plaintiff "from receiving a windfall merely by reason of the happenstance of
bankruptcy." [FN64] In applying the Erie/Butner/Raleigh test, bankruptcy courts are to take "whatever steps are
necessary to ensure that the [debtor] is afforded in federal bankruptcy court the same protection he would have
under state law if no bankruptcy had ensued." [FN65] The burden of proof and the results should be the same.
[FN66]
Asbestos litigation is no different. In presiding over the USG Corp. bankruptcy in 2003, United States District
Judge Alfred Wolin said that state law should govern the validity of asbestos-related claims:
It is basic that federal bankruptcy jurisdiction does not oust state law governing claims on a debtor's estate.
The Bankruptcy Code only creates a forum for dividing inadequate assets among competing claims; it says
nothing about the law under which those claims arise. An unbroken line of authority holds that state law claims
remain governed by state law, even after the debtor invokes federal bankruptcy protection. [FN67]
United States District Judge Jack Weinstein and United States Bankruptcy Judge Burton Lifland came to the same
conclusion in In re Joint Eastern and Southern Districts Asbestos Litigation, [FN68] holding in their joint opinion
that, "Under the rule of Erie, state tort law governs whether individuals showing clinical evidence of such
asbestos-related conditions as pleural plaques or pleural thickening have actionable claims in the absence of
functional impairment." [FN69] Should bankruptcy courts reject this precedent and allow unimpaired claimants to
receive compensation from a § 524(g) trust even though they have no "right to payment" under state law, it would
directly violate the Supreme Court's two-part test, as well as the policy reasons behind the Supreme Court's decree.
In the first part of the following analysis, this article reviews the status of non-bankruptcy law as to when the
claims of unimpaired asbestos claimants arise, explaining that no right to payment has "arisen" if there is no
impairment. In the second part of this analysis, the article looks at the federal interest that bankruptcy courts have for
denying compensation to unimpaired claimants through trust distribution plans.
III. Nonbankruptcy Court Treatment of Unimpaired Claimants
Historically, when state courts have been pushed to the edge of tort law, as with the question of whether the
claims of unimpaired asbestos claimants have "arisen," they have looked to fundamental principles of tort law and
applied a "rule of reason" test. These courts also have considered other state courts' rulings on the issue.
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To date, state courts generally have defined the outer bounds of tort law as requiring asbestos claimants to
sustain some impairment from their exposure to asbestos in order to be eligible for compensation. The rationale for
this dividing line is that tort law exists to compensate individuals for actual harm-harm that results in some pain or
objective manifestation of actual injury.
A. Many Jurisdictions Exclude Unimpaired Claimants from Compensation
More than a dozen courts have addressed the question of whether a physically unimpaired asbestos claimant has
a current claim. Importantly, most of them have concluded that these claimants are not injured or have not sustained
compensable damages.
1. Jurisdictions That Have Denied Recoveries by Unimpaired Claimants
State courts in Arizona, [FN70] Delaware, [FN71] Maine, [FN72] Maryland, [FN73] Ohio, [FN74] and
Pennsylvania [FN75] have held that unimpaired claimants do not have a legally compensable claim as a matter of
substantive law. Federal district courts interpreting Hawaii [FN76] and Massachusetts [FN77] law have reached the
same conclusion.
a. Jurisdictions Where Unimpaired Claimants Have No Injury
The Supreme Judicial Court of Maine was the first state high court to decide when an asbestos claimant's cause
of action arises, holding that "the subclinical injury resulting from [asbestos] inhalation is insufficient to constitute
the actual loss or damage to a plaintiff's interest required to sustain a cause of action." [FN78] In that case, Bernier v.
Raymark Industries, Inc., two widows sued on behalf of their husbands' estates for wrongful death from exposure to
asbestos products. [FN79] To reach its holding, the court drew from the fundamental principle of tort law that
"[t]here is generally no cause of action in tort until a plaintiff has suffered an identifiable, compensable injury."
[FN80] The court also found support in two federal cases that involved similar settings: Schweitzer v. Consolidated
Rail Corp., [FN81] in which the Third Circuit Court of Appeals held that a Federal Employers' Liability Act cause
of action requires manifest injury, and Jackson v. Johns-Manville Sales Corp., a Fifth Circuit Court of Appeals case
holding that a claim under Mississippi law did not arise until "at least one evil effect of the inhalation became
manifest." [FN82]
The year after Bernier was decided, an Arizona intermediate appellate court reached the same conclusion in
Burns v. Jaquays Mining Corp. [FN83] There, residents of a mobile home park located adjacent to an asbestos mill
sued the mill for various damages allegedly resulting from their exposure to asbestos. [FN84] The court observed
that the plaintiffs presented the court with "no competent evidence of any physical impairment or harm caused by
this exposure." [FN85] The court also stated that it would be impractical to compensate these individuals because it
would be impossible to determine appropriate damages without a manifest injury. [FN86] Thus, the court held that
subclinical asbestos-related injury is not sufficient to constitute the "actual loss or damage required to support a
cause of action." [FN87]
Simmons v. Pacor, Inc., [FN88] a frequently cited Pennsylvania Supreme Court case, involved several plaintiffs
who were exposed to asbestos for a number of years and developed pleural conditions from that exposure. [FN89]
The court held that "asymptomatic pleural thickening is not a compensable injury which gives rise to a cause of
action" because "no physical injury has been established that necessitates the awarding of damages." [FN90]
Individuals with pleural conditions "lead active, normal lives, with no pain or suffering, no loss of an organ function,
and no disfigurement due to scarring." [FN91] The court also held that the discovery of pleural plaques or a
nonmalignant, asbestos-related lung pathology does not trigger the statute of limitations with respect to an action for
a later, separately-diagnosed disease of lung cancer. [FN92] Furthermore, "because asymptomatic pleural thickening
is not a sufficient physical injury, the resultant emotional distress damages are likewise not recoverable." [FN93]
In the Delaware case, In re Asbestos Litigation, [FN94] two plaintiffs with a history of asbestos exposure sought
medical attention for chronic coughs. Their X-rays revealed pleural thickening and pleural plaques, but their
pulmonary function tests were within the normal range. [FN95] In holding that pleural conditions alone are not
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compensable injuries, the appellate court made several additional points: pleural markings have other causes, such as
trauma, infection, and pneumonia; plaintiffs only discover the condition when X-rays are performed; and a person
who develops an impairing condition could file a claim at that time. [FN96] The court granted the defendants'
motion for summary judgment. [FN97]
In Owens-Illinois v. Armstrong, [FN98] two plaintiffs alleging exposure to asbestos presented the Court of
Special Appeals of Maryland with evidence of pleural plaques and pleural thickening. In ruling for the defendants,
the court said that it was "clear and uncontradicted" that pleural thickening and pleural scarring do not constitute any
loss or detriment. [FN99] In fact, when the plaintiffs' medical experts used the word "injury" to describe the
plaintiffs' conditions, the Maryland court appeared to take issue with the terminology. [FN100] The court stated that
the plaintiffs' own experts "testified that pleural plaques and pleural thickening do not affect the human body, do not
shorten life expectancy, do not cause complications or problems, do not cause pain and cannot be felt." [FN101]
Federal courts interpreting state law have reached the same conclusion. In In re Hawaii Federal Asbestos
Cases, [FN102] the United States District Court for Hawaii recognized the impact that unimpaired claimants as a
whole could have on the asbestos litigation landscape: the "long term impact of asbestos litigation on the judicial
system will remain foreboding unless and until the law determines when asbestos injuries are ripe for litigation."
[FN103] In deciding where this line should be drawn, the court said that "mere lung scarring or pleural plaques or
pleural thickening" do not necessarily reflect "objectively observable disablement which is traditionally the basis of
tort litigation" and should not be compensated. [FN104] In order to receive compensation, the court held, plaintiffs
must show some objective "functional impairment due to asbestos exposure. A claimant's subjective testimony as to
shortness of breath and fatigue without more is not sufficient." [FN105] Therefore, the court concluded, pleural
thickening or pleural plaques unaccompanied by an objectively verifiable functional impairment are not
compensable. [FN106]
The United States District Court for Massachusetts, interpreting Massachusetts law in In re Massachusetts
Asbestos Cases, [FN107] reached a similar conclusion when assessing whether a 1973 law should apply to asbestos
cases where the exposure took place before the law was enacted. The defendants urged the court to find that injury
and damage occurred at the time of exposure, before the state's privity law had been amended in 1973 to provide
that lack of privity would not be a defense in these types of cases. [FN108] Citing the definition of "injury" from the
official Webster Dictionary, the court said that injury means "hurt, damage or loss sustained," which makes it
"difficult to consider sub-clinical results to the lung to constitute injury." [FN109] The court then rejected the
defense of lack of privity for claims whose "first manifestation of physical symptoms attributable to an
asbestos-related disease" occurred after the 1973 amendments on privity took effect. [FN110]
b. Jurisdictions Where Unimpaired Claimants May Have No Damages
Courts in New Jersey [FN111] and Connecticut [FN112] chose to approach the compensability of pleural
conditions as a question of fact, as opposed to ruling that such conditions do not constitute an injury as a matter of
law. In both cases, however, the courts reached the same ultimate conclusion as the courts discussed above:
unimpaired plaintiffs are not due compensation.
Caterinicchio v. Pittsburgh Corning Corp., [FN113] a New Jersey Supreme Court case, involved a plaintiff
with asbestos-related pleural thickening and plaques and shortness of breath, but no impairment of lung function or
change in lifestyle from his conditions. [FN114] Plaintiff successfully argued at trial that he was entitled to a
directed verdict on this issue of liability, which would mandate a jury finding that his were compensable. The New
Jersey Supreme Court disagreed, stating that it was not aware of "any reported decisions holding that pleural
thickening or pleural plaques constitute a compensable injury as a matter of law." [FN115] "Indeed," the court said,
"there is substantial authority to the contrary." [FN116] The court then remanded the case for a new trial, holding
that the jury should not have been precluded from determining that the plaintiff has not sustained any compensable
harm. [FN117]
In Bowerman v. United Illuminating, [FN118] a Connecticut Superior Court focused on the claims of ten "test
plaintiffs" from fifteen separate lawsuits involving approximately 109 claimants who alleged they were exposed to
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asbestos while working at a power plant. The defendants filed a motion for summary judgment, arguing, among
other things, that the plaintiffs had not alleged an actionable harm because they were asymptomatic. [FN119] The
court held that "whether or not the scarring of lung tissue and implantation of asbestos fibers in the lungs constitute a
compensable legal harm is an issue of fact if there is evidence showing such conditions to be detrimental and if there
is evidence showing the existence of such conditions in the plaintiff." [FN120] Thus, the court required the jury to
find detriment or harm in order to award compensation to the plaintiffs. The court then stated that the plaintiffs and
their experts "failed to put this matter at issue" because they did not "characterize the conditions alleged... as
detrimental physical harms." [FN121] The court granted summary judgment in favor of the defendants. [FN122]
c. Legislative Enactments
Finally, state legislatures have begun requiring present physical impairment before one can have a legally
cognizable claim in asbestos litigation. In June 2004, Ohio became the first state to enact legislation requiring
claimants to demonstrate asbestos-related impairment in order to bring a claim in its state court. [FN123] One of the
reasons the legislature acted was because Ohio had been one of the few states to recognize claims by unimpaired
claimants. [FN124] As of this writing, other states, including Texas, are likely to consider similar legislation.
2. Jurisdictions that Would Most Likely Deny Recoveries by Unimpaired Claimants
A few courts, such as those in Wisconsin, [FN125] Indiana, [FN126] Iowa, [FN127] and Louisiana, [FN128]
have not specifically decided whether unimpaired asbestos claimants may state a cause of action, but have indicated
in other asbestos-related rulings that plaintiffs with asymptomatic conditions would not satisfy the injury
requirement for a tort cause of action.
For instance, in Sopha v. Owens-Corning Fiberglas Corp., [FN129] the Wisconsin Supreme Court struck down
the single-injury rule for latent diseases, thereby allowing plaintiffs to file multiple actions for different injuries
caused by the same exposure. In response, the defendant urged the court to "bar a cause of action for asymptomatic
pleural thickening." [FN130] While the court declined "to adopt the blanket ruling," it stated that a "decision
whether a claimant can recover for pleural thickening or asbestosis must be made by the circuit court on a
case-by-case basis" with one caveat: "If the claimant fails to prove damages, the circuit court should dismiss the
action." [FN131]
In AlliedSignal, Inc. v. Ott, [FN132] the Supreme Court of Indiana was asked about the applicability of a
10-year statute of repose with regard to certain asbestos claims. The court recognized that it was "difficult to
reconcile science and law" in latent disease cases: while injury does not occur upon mere exposure, it may occur
well before it is discovered. [FN133] During this discussion, the court favorably cited Burns v. Jaquays Mining
Corp., [FN134] Simmons v. Pacor, Inc. [FN135] and several of the other rulings discussed above, stating that there
is "substantial authority" that subclinical injury does not make a cause of action. [FN136] The court continued that
an injury occurs, for purposes of the repose law, when "when the disease has actually manifested itself," and, under
the state standards, the cause of action accrues only when this injury could be "diagnosed by a reasonably
experienced physician." [FN137] Ultimately, the court remanded the case to determine whether the plaintiff had a
diagnosable condition before the 10-year period expired. [FN138]
In a similar case, Kraciun v. Owens-Corning Fiberglas Corp., [FN1390] the Eighth Circuit Court of Appeals,
interpreting Iowa law, was asked whether the statute of limitations had begun to run when the plaintiffs experienced
some general physical ailments and were told by their respective doctors that they had some asbestos-related pleural
thickening. [FN140] Under the discovery rule governing Iowa claims, the statute of limitations would have begun
running when the plaintiffs knew or reasonably should have known of their injuries. [FN141] In allowing the claims
to go forward, the court held that even though the plaintiffs knew they had some pleural thickening and may have
had some minor impairment, they were not sufficiently on notice of an asbestos-related injury to trigger the statute
of limitations. [FN142]
Finally, in Atkinson v. Celotex Corp., [FN143] a Louisiana intermediate appellate court heard an appeal brought
by several asbestos plaintiffs who argued that their damages awards were too small. [FN144] Each of the plaintiffs
asserted various ailments, such as coughing, shortness of breath, asbestosis, cancer, and fear of cancer. [FN145]
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Each plaintiff also presented x-rays suggesting pleural plaques or pleural thickening. [FN146] While the court was
not asked to decide whether pleural conditions alone would be compensable, the court did acknowledge that pleural
conditions without any impairment may not amount to any damages and do not need to be part of the jury's damages
calculation. [FN147] The court then rejected the plaintiffs' appeal. [FN148] Subsequently, the Louisiana Supreme
Court, in a fear of cancer case, Bonnette v. Conoco, Inc. [FN149] gave more weight to the view that unimpaired
asbestos claimants are not due compensation, holding that plaintiffs alleging mere exposure to asbestos absent
manifest physical injury "failed to prove they are entitled to compensatory damages."
As a practical matter, it is highly unlikely that a claimant with an unimpairing condition would be able to prove
damages necessary to support a valid claim in any of these jurisdictions.
3. Jurisdictions that May Permit Recoveries by Unimpaired Claimants
Only a few jurisdictions have left the door open for unimpaired asbestos claimants to recover damages:
Minnesota, [FN150] Virginia, [FN151] and Idaho. [FN152]
In Karjala v. Johns-Manville Products Corp., [FN153] the Eighth Circuit Court of Appeals, interpreting
Minnesota law, said that it was up to the trier of fact to determine whether pleural thickening constituted sufficient
harm or impairment to give rise to a cause of action. In Karjala, the plaintiff sustained a lung tumor and other
ailments allegedly caused by asbestos. [FN154] In assessing when the six-year statute of limitations began running,
the court said that "in a personal injury action this occurs when some harm or impairment has manifested itself
which can be shown to have been caused by an act or omission for which the defendant would be liable.... The time
at which [the plaintiff's] impairment manifested itself was, of course, for the jury to determine." [FN155] The
Minnesota courts, in other latent disease cases, have supported this notion, stating that the jury could decide whether
asymptomatic cellular changes support a finding for compensable damages. [FN156]
The United States Court of Appeals for the Fourth Circuit, interpreting Virginia's single-injury rule to asbestos
litigation in Joyce v. A.C. and S., Inc. [FN157] held that the statute of limitations began to run when the plaintiff was
first notified of pleural thickening. The plaintiff developed pleural thickening and, two years later, was diagnosed
with asbestosis. [FN158] The court held that under Virginia's single injury rule, the two-year statute of limitations
began when the pleural thickening developed and, it was within those two years, that all asbestos related injuries
must be brought. [FN159] The court then dismissed the plaintiff's case for not being timely filed. [FN160]
The Supreme Court of Idaho in Brennan v. Owens-Corning Fiberglas Corp., [FN161] similarly ruled in favor
of the defense in a statute of limitations context. [FN162] In that case, the plaintiff sued to recover for asymptomatic
pleural thickening. [FN163] The court ruled that where the plaintiff seeks damages for pleural thickening, the statute
of limitations begins to run as soon as the plaintiff was told that he had scarring of the lung consistent with asbestos
exposure. [FN164] Again, the plaintiff's case was dismissed. [FN165]
It is not clear how much impact these three rulings will have on asbestos-related claims filed in bankruptcy, as
only a small percentage of all asbestos claims are filed in Minnesota, Virginia and Idaho. Ironically, in most of these
cases, it was the defendant, and not the plaintiff, who benefited from the courts' decisions.
B. Courts in Other Jurisdictions Likely Would Exclude Unimpaired Claimants
Bankruptcy court judges may be faced with claims that do not originate from the jurisdictions previously
discussed. In such instances, the courts, following the Erie doctrine, must "stand in the shoes" of the high courts in
those states and determine what those state courts would do if faced with the issue of whether unimpaired asbestos
claimants may obtain recoveries. To help fill those gaps, a bankruptcy judge would find guidance in the cases
discussed below which show how states have handled other latent disease cases, as well as where courts historically
have drawn the line in other types of tort litigation as to when a compensable injury may have occurred.
1. Jurisdictions Requiring Impairment to Satisfy the Injury Requirement in Other Latent Disease Cases
Judicial opinions from other latent disease cases, such as those involving exposure to pesticides or other toxic
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chemicals, provide some guidance as to how a state court may decide an analogous issue in asbestos litigation. As
with asbestos, it can take many years from the time of exposure for a disease or condition to manifest itself after
exposure has occurred.
For example, in Duarte v. Zachariah, [FN166] a California intermediate appellate court hearing a medical
malpractice case drew from asbestos case law involving asymptomatic plaintiffs to find that impairment or harm is a
necessary element of injury. In Duarte, the plaintiff alleged that the doctor's overdose of chemotherapy for breast
cancer harmed her bone marrow and damaged her immune system. [FN167] In assessing whether altered bone
marrow amounts to an injury for purposes of creating a cause of action, the court used the standard established in In
re Hawaii Federal Asbestos Cases, [FN168] and several of the other cases discussed in the previous section, that "a
cause of action in negligence requires 'harm' in the sense of detrimental physical changes to the body... nominal
damages are not awarded." [FN169] The court then held that, unlike with unimpaired asbestos claimants, the change
in the bone marrow "was an appreciable functional impairment of the immune system" giving rise to a claim for
damages. [FN170]
It appears that the California Supreme Court supports this distinction, particularly as it applies to asbestos
litigation. In Buttram v. Owens-Corning Fiberglas Corp., [FN171] the court was asked how Proposition 51, a
statewide voter referendum to abolish joint liability for noneconomic damages, would apply to latent disease cases.
The court ultimately held that Proposition 51 would not apply to claims where the injury was diagnosed or
discovered prior to the date Proposition 51 took effect. [FN172] During its discussion, the court stated, "Generally
speaking, to be actionable, harm must constitute something more than nominal damages, speculative harm or the
threat of future harm-not yet realized." [FN173]
In a pesticide case that could apply just as readily to unimpaired asbestos claimants, the Court of Appeals of
Georgia in Boyd v. Orkin Exterminating Co., Inc. [FN174] affirmed a directed verdict for the defense where
plaintiffs exposed to pesticides could not point to any injuries, even though they had elevated levels of chemicals in
their blood. Elevated blood levels with regard to pesticides would be comparable to pleural conditions in asbestos
litigation; there is an identifiable, measurable, internal change that does not result in any actual impairment. The
court held that "[a]bsent any indication that the presence of these metabolites had caused or would eventually cause
actual disease, pain, or impairment of some kind, this testimony must be considered insufficient to support an award
of actual damages in any amount." [FN175]
Federal courts interpreting North Carolina, Massachusetts, and Kansas law have reached the same conclusion.
In Carroll v. Litton Systems, Inc., [FN176] plaintiffs alleged exposure to various chemicals, including
trichloroethylene, emanating from a plant in North Carolina. The federal district court, interpreting North Carolina
law, cited asbestos case law for the proposition that subclinical changes do not satisfy the injury element of a cause
of action. [FN177] In dismissing the claims, the court held that plaintiffs must show "a disease or a clinical injury"
to have a cognizable claim and said plaintiffs cited "no foundation whatsoever in North Carolina law for the
recovery of damages for such alleged subclinical injuries." [FN178]
Likewise, a federal district court interpreting Massachusetts law held in Caputo v. Boston Edison Co., [FN179]
a radiation exposure case, that an injury "must be clinically evident with manifest symptoms of loss, pain, distress or
impairment." The plaintiff claimed exposure to radiation while working as a boilermaker in a power plant. [FN180]
The court noted that the only injury in the record was "cellular chromosomal damage," but that "such cellular
damage does not rise to the level of physical injury as a matter of law because nothing in the record relates them to
any objective symptoms of illness or disease." [FN181] Because all other claims were based on this "injury," the
court granted summary judgment in favor of the defendant. [FN182]
Similarly, a federal court interpreting the Kansas statute of limitations to a diethylstilbestrol ("DES") exposure
case held in Colby v. E.R. Squibb & Sons, Inc. [FN183] that asymptomatic undetectable cancer, without clinical
significance, is not a "substantial injury" and does not trigger the running of the statute. The court analogized this
situation to asbestos litigation, where a plaintiff may have asbestosis or other sign of exposure years before
developing mesothelioma. [FN184] If it allowed the statute of limitations to begin running upon the earlier
condition, the court said people would be forced to run to court upon the first sign of a potential injury without an
understanding of the full extent of any resulting harm. [FN185] This rationale often has been cited in asbestos
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litigation as a reason for denying compensation to unimpaired claimants.
2. Fundamental Principles of Tort Law Dictate that Unimpaired Claimants Should Not Be Compensated
A basic tenet of recovery in tort law has always been that liability should be imposed only when an individual
has sustained an actual injury. [FN186] Historically, when courts have dealt with issues where there was uncertainty
in tort law, such as what defines actual injury, they have drawn lines guided by fundamental principles of law, logic,
and sound public policy. Tort law principles concerning trespass, battery, slander, police brutality, and negligent
infliction of emotional distress all provide examples of where courts have applied a rule of reason to determine when
actual injury had occurred. In each of these situations, courts have taken steps, including employing objective
measures of actual harm, to put into place sensible limits to prevent a flood of unmeritorious claims that could
jeopardize recoveries by injured plaintiffs.
Trespass, for example, protects owners of land against any intentional invasions of their property. As trespass
claims moved toward the edges of tort law, however such as with the intangible trespasses of light, noise,
electromagnetic fields, and airborne gases, courts have allowed recovery only upon proof of actual and substantial
damages. Courts have found that what might be a theoretical trespass is, nevertheless, not a compensable tort. For
instance, the Oregon Supreme Court in Amphitheaters, Inc. v. Portland Meadows, [FN187] found that there was no
tort when the defendant's race track lights reflected on the plaintiff's outdoor movie theater. Similarly, a federal
district court in Vermont held in Graham v. Canadian National Railway Co., [FN188] that the emission of toxic
substances, even if they cross onto another's land, is not actionable unless the defilement causes physical harm to
person or property.
Likewise, the tort of battery occurs whenever there has been an unauthorized harmful or offensive contact, but
even this tort can be pushed to the edge. For example, the Restatement (Second) of Torts suggests that a court would
not find an actionable battery to have occurred where one pedestrian bumps into another on a crowded New York
City sidewalk, even if the contact was uninvited. [FN189] Similarly, if a hotel doorman is unsatisfied with his tip
and kicks the rear tire of a person's automobile as the guest drives from the hotel, it could be deemed a battery, as
the guest is in and connected to the vehicle and the doorman's contact was offensive. It is highly unlikely, however,
that a court would find that the contact could give rise to a battery claim. [FN190]
In police brutality cases, to have an actionable claim for excessive force in arrest, the plaintiff must show actual
harm and not simply state that the officer used more force than required to make the arrest. [FN191] In slander
cases, with a few minor exceptions, courts require a showing of harm or special damages in order for a person to
have an actionable claim. [FN192] In negligent infliction of emotional distress, recovery has been denied to persons
who have seen close relatives killed by a defendant's negligence. [FN193] Pure emotion might suggest that a tort
claim be allowed in these situations, but the law has recognized that such feelings are not tantamount to a cause of
action for actual harm.
The rationale for these decisions is that tort law exists to compensate individuals for actual harm-harm that
results in pain or some objective manifestation of injury that people can see, touch, or feel. So, while fundamental
principles of tort law would deem tortious certain conduct that caused a minor burn or external scar, the same
principles also would lead to the conclusion that conduct that may have caused an asymptomatic internal marking on
an x-ray with no accompanying pain or impairment is non-tortious. [FN194] For that reason, courts in states that
have not addressed the issue of whether unimpaired asbestos claimants may obtain recoveries should conclude that
these claimants do not have legally cognizable claims.
C. These Rulings Find Support in Docket Management Plans and Orders Dismissing Claims by the
Unimpaired
State courts are increasingly adopting inactive asbestos dockets (also called pleural registries, deferred dockets,
or unimpaired dockets) to procedurally reach the goal of not allowing asymptomatic claimants to recover damages.
[FN195] Courts in Boston; Chicago; Baltimore; Portsmouth, Virginia; Madison County, Illinois; Syracuse, New
York; New York City, New York; and Seattle, Washington have ordered the claims of individuals with no present
asbestos-related impairment, such as asymptomatic pleural thickening, to be placed on an inactive docket. [FN196]
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While on an inactive docket, claims are suspended, the corresponding statutes of limitations are tolled, and
discovery is stayed. [FN197] The courts will only allow a case to be removed to the active docket and set for trial
when the claimant presents the court with credible medical evidence of asbestos-related impairment. [FN198]
Unimpaired dockets, thus, relieve the pressure on courts to decide "claims that are premature (because there is not
yet any impairment) or actually meritless (because there never will be)." [FN199]
Other courts have entered orders requiring potential plaintiffs to meet certain objective medical criteria in order
to proceed with a claim in that court. [FN200] Claimants not able to demonstrate functional impairment will have
their claims administratively dismissed until an impairing condition develops. At that time, they are permitted to
re-file their claims.
These orders support the substantive rulings listed earlier in this article and provide further evidence of the
widespread judicial policy of not providing unimpaired claimants with compensation.
D. Federal Judicial Rulings
The decision to deny compensation to asymptomatic asbestos claimants is consistent with federal judicial
policy, both with regard to cases arising under federal law and with regard to cases before Senior United States
District Judge Charles Weiner of the Eastern District of Pennsylvania, the manager of the federal asbestos
multi-district litigation (MDL) docket.
1. Federal Law
When asbestos cases are brought pursuant to federal causes of actions, such as those under the Federal
Employers' Liability Act (FELA), [FN201] courts, including the Supreme Court of the United States, have denied
compensation to physically unimpaired claimants. For example, in Schweitzer v. Consolidated Rail Corp.
(CONRAIL), [FN202] the Third Circuit Court of Appeals held that "subclinical injury resulting from exposure to
asbestos is insufficient to constitute actual loss or damage to a plaintiff's interest required to sustain a cause of action
under generally applicable principles of tort law."
In two other asbestos-related cases arising under FELA, the United States Supreme Court's opinions reflect the
same line drawing that courts traditionally use in tort litigation. In Metro-North Commuter Railroad Co. v. Buckley,
[FN203] the Court held that exposure-only plaintiffs could not recover emotional distress damages or medical
monitoring under the FELA. The case had been brought by a pipe fitter against his railroad employer for
occupational exposure to asbestos. The Court expressed concern that permitting recoveries by claimants with no
present physical injuries would lead to a "flood of less important cases" that would drain the pool of resources
available for meritorious claims by plaintiffs with serious, present injury. [FN204] The Court concluded that
requiring proof of a present physical injury was important because litigants and the public "depend on a tort system
that can distinguish between reliable and serious claims on the one hand, and unreliable and relatively trivial claims
on the other hand." [FN205]
In Norfolk & Western Railway Co. v. Ayers, [FN206] the Court held that, under FELA, "a railroad worker
suffering from the actionable injury asbestosis caused by work-related exposure to asbestos" may collect fear of
cancer damages. The Court distinguished the Ayers plaintiffs, who had asbestosis and attendant pain and suffering,
from the unimpaired claimants in Metro-North. The Court explained that by drawing the line for FELA
compensation based on injury, it would "reduce the universe of potential claimants to numbers neither 'unlimited'
nor 'unpredictable."' [FN207]
2. The Federal Asbestos Docket
All cases under the federal asbestos (MDL) docket have been subject to a 1992 order from Judge Weiner that
administratively dismissed without prejudice the claims of the unimpaired. [FN208] Under the court's order, a select
number of cases were identified and placed into one of four disease categories: (1) mesothelioma, living and
deceased; (2) lung cancer, living and deceased; (3) other malignancies, living and deceased; and (4) asbestosis, total
disability deceased or total disability living. [FN209] In each case, plaintiff's counsel was required to have a written
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medical opinion by a board-certified specialist indicating that exposure to either asbestos or products containing
asbestos was a contributing cause to the claimant's condition. Cases in which the claimant suffered from
mesothelioma or lung cancer were given priority with respect to review, settlement, or further litigation. [FN210] In
1997, the court observed that approximately 3,200 non-impairment claims had been dismissed during the initial
five-year period. [FN211]
Also in 1997, Judge Weiner administratively dismissed thousands of maritime asbestos cases where the plaintiff
could not provide the court with sufficient medical evidence of a personal injury. [FN212] Judge Weiner noted that
"only a fraction" of the plaintiffs had an asbestos-related condition, "and many of these are open to question."
[FN213] Judge Weiner then said that it was "improper and a waste of the Court's time" for plaintiffs' lawyers to file
so many unsupported cases: "Other victims suffer while the Court is clogged with such filings." [FN214]
In January 2002, Judge Weiner went further and administratively dismissed without prejudice all asbestos cases
initiated through mass screenings, citing the unreliability of those claims. [FN215] Judge Weiner also has dismissed
without prejudice 20,000 claims for asymptomatic conditions, such as pleural thickening or scarring, brought under
the federal Jones Act, only agreeing to reinstate them if the claimants provide, among other things, sufficient
evidence of a "manifest injury." [FN216]
IV. Federal Interest
The second part of the Erie/Butner/Raleigh analysis is to assess whether there are any federal interests at stake
in the bankruptcy court's decision with regard to compensating unimpaired claimants and, if so, whether those
interests support or override the survey of applicable state law. The federal interest in how a bankruptcy court
handles unimpaired claimants can be divided into two broad categories: (1) the impact on a specific trust to
distribute compensation efficiently, effectively, and accurately; and (2) the impact on the larger landscape of
asbestos litigation.
A. The Impact on a Specific Trust of Paying Unimpaired Claimants
1. Providing Compensation for the Truly Sick
The federal government has an interest in ensuring that the bankruptcy process does not infringe on the vested
property rights of injured people to be made whole for their injuries. When a debtor's resources are diverted to pay
people who have no impairment, the bankruptcy process fails to adhere to this core principle. Judge Weiner has
warned that when unimpaired cases are not excluded from compensation, the "very small percentage of the cases
filed [with] serious asbestos-related afflictions... are prone to be lost in the shuffle with pleural and other
non-malignant cases." [FN217]
As referenced earlier, the bankruptcy process can worsen this predicament for the truly sick, particularly with
the recent and dramatic increase in filings by unimpaired claimants. [FN218] In bankruptcy, when unimpaired
claimants are granted creditor status and permitted to vote on a plan of reorganization, they can use their
overwhelming numbers to control the outcome of the reorganization. Thus, they can determine how much money
they receive and how much is left of the fund's finite resources for the truly sick. [FN219]
Massive filings by unimpaired claimants also can reduce a trust's resources more quickly than anticipated.
When that happens, most, if not all, TDPs allow the trustees, usually with input from a Trust Advisory Committee
(comprised of asbestos plaintiffs' attorneys) and the Legal Representative for Future Claimants, to modify
procedures and reduce payouts to ensure "fair compensation" for all who are supposed to receive the trust's funds.
[FN220] As a result, a rise in the number of claims filed against a trust by unimpaired individuals with speculative
claims can overwhelm the trusts and reduce payments to all claimants.
This has been the experience of the Manville Trust, which was formed when the Johns-Manville Company
emerged from bankruptcy to handle the asbestos liability of the company. During the last decade, the Trust has seen
payments to unimpaired claimants exhaust scarce resources that should go to those who are truly sick. [FN221] The
Manville trustees have reported that the Trust's payment system "made it too easy for people to claim injuries and
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receive money" and, as a result, a "disproportionate amount" of trust settlement dollars have gone to claimants with
"no discernible asbestos-related physical impairment whatsoever." [FN222] As stated in the introduction of this
article, the Manville Trust is now paying out just five cents on the dollar to asbestos claimants. [FN223] The trusts
created through the Celotex and Eagle-Picher bankruptcies have similarly reduced their payments. [FN224]
When all payouts are reduced by a certain percentage, the greatest impact can be felt by the truly sick whose
claims are likely to be worth more money in terms of raw dollars, and therefore have more to lose. The injustice can
be seen on the individual level. The widow of one man in Washington State who died from mesothelioma, for
example, has been told that she should expect to receive only 15% of the $1 million she might have received if her
husband had filed suit before the companies he sued went bankrupt. [FN225] Also, the widow of a mechanic in Ohio
will recover, at most, $150,000 of the $4.4 million award that she received for her husband's death. [FN226]
To protect recoveries for sick and dying plaintiffs, lawyers have jointly petitioned the bankruptcy courts, under
the name "Unofficial Committee of Select Asbestos Claimants" or the "Certain Cancer Claimants," to establish some
minimum level of impairment before claims can be counted or funds allocated, as part of trust distribution plans.
[FN227] This general issue has created a split in the plaintiffs' bar, with such high profile plaintiffs' lawyers as
Madison County, Illinois's Randy Bono and Mississippi's Richard Scruggs agreeing that getting people who are not
sick out of the system is a "good idea" [FN228] and that paying them is not sound public policy. [FN229] As
plaintiffs' attorney Matthew Bergman from Seattle, Washington has said, the "solution is simple: defer the non-sick
claims unless and until the claimants actually suffer an asbestos-related disease." [FN230]
If bankruptcy courts were to hold that unimpaired claimants do not have rights to payment that arose prior to the
filing of the bankruptcy petition and, therefore, do not have "claims" that entitle them to vote on a plan of
reorganization as creditors, unimpaired claimants could not hijack the trust distribution process and siphon off funds
that would otherwise go to the truly sick. [FN231]
2. Ensure Accuracy in Bankruptcy Trust Payments and Police Fraud
There also is a federal interest in ensuring that TDPs approved by federal bankruptcy courts pay claims
accurately and are not easily victimized by fraud. The problem is that the bankruptcy system offers few checks on
claims-both to ensure that they are compensable under state law and that their claims are accurate.
The bankruptcy courts, which have scarce resources, generally do not validate the mass of claims asserted
against a debtor before providing the asserted claimants with voting rights. [FN232] Moreover, the
post-confirmation trusts generally are required only to ensure that the claims submitted to the trusts meet the
standards set forth in the TDPs. [FN233] The trustees themselves have little incentive to examine individual claims
to ensure that x-rays or exposure histories submitted in support of a claim are accurate and truthful. [FN234] In fact,
trusts are designed to spend few resources contesting claims and, unlike with litigation, there is no adverse party
with a stake in defeating the claim to offer cross-examination or make sure the claim is valid. [FN235] Because
product identification and medical documents are unlikely to be scrutinized in the bankruptcy claims process, many
false claims may be paid by the asbestos bankruptcy trusts. [FN236]
This picture is further complicated by the mass screenings conducted by plaintiffs' law firms and their agents to
recruit claimants. [FN237] Such screenings are frequently conducted in areas with high concentrations of individuals
who may have worked in jobs where they were exposed to asbestos. [FN238] The use of mass screenings to drum up
unimpaired claimants for asbestos litigation has come under significant scrutiny. [FN239] As former United States
Attorney General Griffin Bell has pointed out, "[t]here often is no medical purpose for these screenings and
claimants receive no medical follow-up." [FN240] Mass screenings are a key source of increasing numbers of
asbestos filings. [FN241]
Of particular concern to the bankruptcy courts should be regular misdiagnoses of unimpaired claimants as
having asbestos-related disease. [FN242] Misdiagnosis of asbestos-related disease occurs when an expert
erroneously claims to have found a lung or chest abnormality related to asbestos exposure. [FN243] In one instance,
Federal District Judge Carl Rubin of the Southern District of Ohio studied the merits of 65 asbestos bodily injury
cases by appointing medical experts to evaluate their claims. [FN244] All of the plaintiffs had claimed some
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asbestos-related condition, but the court-appointed experts found that 65% of the claimants had no asbestos-related
conditions at all. [FN245] Of the remaining 35% of claimants, approximately 15% had asbestosis, and the rest
presented only pleural plaques. [FN246]
In August 2004, researchers at Johns Hopkins University found more dramatic results when they re-evaluated
551 x-rays and 492 matching interpretive reports used as the bases for asbestos claims. The x-ray readers who had
been retained by plaintiffs' lawyers found that 96% of the films revealed abnormalities. When six independent
radiologists reinterpreted the x-rays, they found abnormalities in less than 5% of the cases. [FN247] In another
similar study, two independent scientists appointed by the Manville Personal Injury Settlement Trust reviewed
claims of people with reported asbestos-related diseases. In 41% of the claims, both experts agreed that the
claimant's x-ray did not present evidence of asbestos-related disease. [FN248] Additionally, in one study of 439 tire
workers diagnosed as having abnormal chest x-rays from inhaled asbestos, an independent panel of three
radiologists confirmed a diagnosis in less than 4% of the cases. [FN249]
Recently, American Bar Association ("ABA") Board of Governors authorized the formation of the Commission
to craft a legal standard for asbestos-related impairment. [FN250] With the assistance of the American Medical
Association, the ABA Commission on Asbestos Litigation consulted some of the Nation's most prominent
physicians in the field of occupational medicine and pulmonary disease. The physicians confirmed that only a small
percentage of current asbestos claimants are functionally impaired:
Asbestos-related cancer and impairing asbestosis continue to occur, but they represent a small fraction of
annual new filings. According to the recent RAND report, somewhere between two-thirds and 90% of new
claims are now brought by individuals who have radiographically detectable changes in their lungs that are
"consistent with" asbestos-related disease (and with dozens of other causes), but have no demonstrated
functional impairment from those changes. In sum, it appears that a large and growing proportion of the claims
entering the system in recent years were submitted by individuals who have not incurred an injury that affects
their ability to perform activities of daily life. [FN251]
The ABA Commission also confirmed that a large percentage of asbestos claimants are found through litigation
screening companies. Plaintiffs' lawyers then uses x-rays with arguably minimal internal changes "consistent with"
prior asbestos exposure as the pretext for filing a large number of lawsuits:
For-profit litigation "screening" companies have developed that actively solicit asymptomatic workers who
may have been occupationally exposed to asbestos to have "free" testing done--usually only chest X-rays.
Promotional ads declare that "You May Have Million $ Lungs" and urge the workers to be screened even if they
have no breathing problems because "you may be sick with no feeling of illness." The X-rays are usually taken
in "x-ray mobiles" that are driven to union halls or hotel parking lots. There is evidence that many
litigation-screening companies commonly administer the x-rays in violation of state and federal safety
regulations. In order to get an x-ray taken, workers are ordinarily required to sign a retainer agreement
authorizing a lawsuit if the results are "positive."
The x-rays are generally read by doctors who are not on site and who may not even be licensed to practice
medicine in the state where the x-rays are taken or have malpractice insurance for these activities. According to
these doctors, no doctor/patient relationship is formed with the screened workers and no medical diagnoses are
provided. Rather, the doctor purports only to be acting as a litigation consultant and only to be looking for x-ray
evidence that is "consistent with" asbestos-related disease. Some x-ray readers spend only minutes to make
these findings, but are paid hundreds of thousands of dollars-- in some cases, millions--in the aggregate by the
litigation screening companies due to the volume of films read. [FN252]
In the wake of these studies, "considerable doubt" has been placed on the reliability of claims generated through
mass screenings. [FN253] As one physician has explained, "the chest x-rays are not read blindly, but always with
the knowledge of some asbestos exposure and that the lawyer wants to file litigation on the worker's behalf."
[FN254] To "reduce the likelihood that fraudulent or exaggerated claims would be successful," the court in In re
Joint Eastern & Southern Districts Asbestos Litigation, [FN255] suggested that bankruptcy courts should "tighten
up the criteria for proving an asbestos-related disease." Because x-ray readings alone may not detect sufficient
information to determine if someone has an asbestos-related condition or injury, [FN256] requiring a minimum level
of impairment as evidenced by pulmonary function tests is one way to cut down on such mistakes and the potential
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for fraud. [FN257]
B. The Impact Outside a Particular Bankruptcy of Paying Unimpaired Claimants
As part of the federal interest calculation, bankruptcy judges also should consider the ripple effects that
allowing payments to unimpaired claimants in any individual bankruptcy will have on other asbestos-related
bankruptcies, as well as asbestos litigation overall. [FN258]
1. Setting a Precedent for Pre-Packaged Asbestos-Related Bankruptcies
One of the most troubling developments in asbestos litigation in recent years is the effect that the treatment of
unimpaired claimants, as creditors, is having on pre-packaged asbestos bankruptcies. In pre-packaged bankruptcies,
companies negotiate with their creditors' attorneys to reach agreement on a reorganization plan before the
bankruptcy petition is filed. [FN259] As discussed earlier, this process, in theory, can be much quicker than
traditional bankruptcies, as the court is presented with a pre-approved plan. [FN260] But, pre-packaged bankruptcies
can amplify the negative characteristics of asbestos litigation, particularly massive "inventory settlements"-a
controversial technique that can result in payments to many people who do not have viable legal claims. Companies,
eager for the finality that the bankruptcy process gives them, may be willing to cut deals with certain attorneys with
large "inventories" of unimpaired claimants, [FN261] because this select group of attorneys can control the
bankruptcy process. [FN262] As Fortune Magazine reported in September 2004, "[t]he only ones who may get hurt
are the usual big losers in asbestos litigation: the insurance companies... and the tiny minority of asbestos claimants
who are severely sick and may get paid less than they need and deserve." [FN263]
Another problem with pre-packaged bankruptcies is that the future claimants' representative often is presented
with a "stacked deck" [FN264] and cannot adequately represent individuals who may develop mesothelioma or
cancer in the future. Such a distribution plan creates a perverted incentive for potential claimants to rush to file their
claims as soon as possible, even if they have no impairment. This is what happened in the AC&S bankruptcy, in
which United States Bankruptcy Court Judge Randall Newsome denied confirmation of a trust distribution plan that
had been negotiated with a "pre-petition asbestos plaintiffs' committee" prior to the company's filing for bankruptcy.
[FN265] Judge Newsome said it was "impossible to conclude that the plan was consistent with the objectives and
purposes of the Bankruptcy Code," namely that it was "the pre-petition committee that drafted (or more likely
directed debtor's counsel in drafting) the prepetition trust, and apparently chose the trustee for the trust... and it was
the pre-petition committee that decided who was going to get what." [FN266] Those decisions were skewed towards
the unimpaired, leading Judge Newsome to conclude that it was "fundamentally unfair that one claimant with
non-symptomatic pleural plaques will be paid in full, while someone with mesothelioma runs the substantial risk of
receiving nothing." [FN267]
2. Impact on Overall Asbestos Litigation
Moreover, paying unimpaired claimants actually provides plaintiffs' lawyers with a perverse incentive to accept
the most marginal of cases. That is because, as stated, reorganization plans with TDPs that entitle unimpaired
claimants to compensation generally have more lenient product identification, causation, and injury standards than a
claimant would find in the regular tort system. By naming several companies with bankruptcy trusts as defendants,
plaintiffs' lawyers can practically guarantee themselves income with minimal upfront costs and use their proceeds to
buy down the risk of filing these more speculative cases in the regular tort system. [FN268] In fact, David Austern,
the Trustee for the Manville Trust, has suggested that trusts "bankroll the litigation." [FN269]
Experience shows that plaintiffs' lawyers may try to bundle speculative claims together with claims of truly sick
plaintiffs as part of inventory settlements with individual defendants. [FN270] As previously discussed, settling
these cases may make short-term business sense for an individual company facing a finite set of claims, but in the
aggregate, such settlements give lawyers the incentive to recruit more unimpaired individuals to file claims. [FN271]
Such mass settlements also create a method of operation that can be misconstrued to legitimize payments to the
unimpaired in bankruptcy: plaintiffs' lawyers would argue that if unimpaired claimants can receive money from
asbestos defendants-regardless of why or how-they should be paid in bankruptcy. The reality is that these
settlements generally reflect no more than the business judgment of a company responding to the plaintiff-lawyer
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tactics, not the validity of the underlying claims or the true resolution of a legal or judicial matter. [FN272] In fact,
in bankruptcy estimation proceedings, debtors generally seek to exclude unimpaired claims when ascertaining the
number and value of asbestos claims against them. [FN273]
3. Impact on Businesses, Workers, and Communities
There also is an "indisputably significant" federal interest in the impact that asbestos bankruptcies have on
employees, the retirement savings of ordinary citizens, and the economy as a whole, as Harvard Law School
Professor Laurence Tribe said in testimony before the United States Congress. [FN274] In fact, a 2002 study by
Nobel Prize-winning economist Joseph Stiglitz and two colleagues on the direct impact of asbestos bankruptcies on
workers found that bankruptcies resulting from asbestos litigation put approximately 60,000 people-many of them
union workers-out of work between 1997 and 2000. [FN275] Employee retirement assets declined roughly 25%.
[FN276]
A similar study by National Economic Research Associates found that workers, communities, and taxpayers
will bear as much as $2 billion in additional costs due to indirect and induced impacts of company closings related
to asbestos. [FN277] Additional costs that were brought upon workers and communities include up to $76 million in
worker retraining, $30 million in increased healthcare costs, and $80 million in payment of unemployment benefits.
[FN278] Moreover, for every 10 jobs lost at a company from an asbestos bankruptcy, the community can lose eight
from the "spillover effect." [FN279]
V. Conclusion
Companies with actual or potential asbestos liability are increasingly being driven into bankruptcy. A core
responsibility for federal judges administering these bankruptcy proceedings is to decide whether the trusts should
compensate claims filed by "exposure only" claimants who have no asbestos-related impairment. Under the 1994
Manville Amendments to the United States Bankruptcy Code, the key issue for making this decision is whether the
claimant had a cause of action under otherwise applicable tort law at or before the time the debtor's bankruptcy
petition was filed.
Bankruptcy judges should follow an Erie Doctrine analysis of state law to determine whether unimpaired
claimants have the requisite injury in tort law in order to have a valid claim in bankruptcy. A vast majority of courts
applying non-bankruptcy law that have looked into this issue have concluded or suggested that unimpaired claimants
do not have an injury and should not be compensated. Bankruptcy courts following this precedent, therefore, should
classify unimpaired claimants as future "demand" holders against a debtor-that is, persons who have no current
"right to payment" under state law and thus hold no "claim" against the debtor. [FN280] Bankruptcy judges seeking
to apply uniform compensation standards in a trust distribution plan should be further guided by the strong federal
interest in protecting the integrity of the bankruptcy process and ensuring that claimants do not obtain a "windfall"
through bankruptcy TDPs.
As this article has demonstrated, drawing a line at impairment adheres to judicial precedent, logic, and medical
science. To state a claim in a bankruptcy proceeding, an asbestos claimant should have to demonstrate physical
injury or functional impairment caused by asbestos exposure. To hold otherwise would corrupt the bankruptcy
process, harm society, and adversely impact exposed persons who have or will develop asbestos-related cancers or
other impairing conditions.
Research References
Norton Bankruptcy Law and Practice (2d ed.) § § 154:7, 154:13, 154:15; Bankruptcy Service, L. Ed. § § 22:58,
23:348, 53:28
West's Key Number Digest, Bankruptcy
2825, 2828 to 2829, 2895, 2895.1, 2901 to 2902
[FN1]. See Mark A. Behrens & Rochelle M. Tedesco, Two Forks in the Road of Asbestos Litigation, Mealey's
Litig. Rep.: Asbestos, Vol. 18, No. 3, Mar. 7, 2003, at 1.
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[FN2]. The term "unimpaired" in the context of asbestos claimants refers to those who have been exposed to
asbestos and have not been physically impaired by their exposure. It should not be confused with the term of art in
the Bankruptcy Code as defined in 11 U.S.C.A. § 1123(b)(1) (2004).
[FN3]. See Stephen Carroll et al., Asbestos Litigation Costs and Compensation (Draft) 11 (RAND Inst. for Civil
Justice, Feb. 2004); Roger Parloff, Asbestos, Fortune, Sept. 6, 2004, at 186, available at 2004 WL 55184416
(reporting that "according to estimates accepted by the most experienced federal judges in this area, two-thirds to
ninety percent of the nonmalignants are 'unimpaireds"'); James A. Henderson, Jr. & Aaron D. Twerski, Asbestos
Litigation Gone Mad: Exposure-Based Recovery for Increased Risk, Mental Distress, and Medical Monitoring, 53
S.C. L. Rev. 815 (2002) (Professors Henderson and Twerski were the Reporters for the Restatement Third, Torts:
Products Liability).
[FN4]. See In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, 1567, Prod. Liab. Rep. (CCH) ¶ 12613 (D.
Haw. 1990) (recognizing that unimpaired claimants "lead active, normal lives, with no pain or suffering, no loss of
the use of an organ or disfigurement due to scarring.").
[FN5]. See Victor E. Schwartz et al., Addressing the "Elephantine Mass" of Asbestos Cases: Consolidation
Versus Inactive Dockets (Pleural Registries) and Case Management Plans that Defer Claims Filed by the Non-Sick,
31 Pepp. L. Rev. 271, 277 (2004).
[FN6]. The word "pleura" refers to the membranes in the lung that line the wall of the chest cavity that generally
secrete a liquid to moisten the lung and chest wall so breathing does not create painful friction. Asbestos fibers
inhaled into the lungs may pierce through the smallest airways into the pleura. Fibers that reach the pleura cause a
localized reaction, which results in a deposit of scar tissue. Localized scarring of the pleura is known as a pleural
plaque. Widespread scarring of the pleura is referred to as pleural thickening. See Owens-Illinois v. Armstrong, 87
Md. App. 699, 591 A.2d 544, Prod. Liab. Rep. (CCH) ¶ 12937 (1991), judgment aff'd in part, rev'd in part on other
grounds, 326 Md. 107, 604 A.2d 47, Prod. Liab. Rep. (CCH) ¶ 13128 (1992).
[FN7]. See Lester Brickman, On The Theory Class's Theories of Asbestos Litigation: The Disconnnect Between
Scholarship and Reality?, 31 Pepp. L. Rev. 33, 59, 61 (2004) (stating that a "doctor's statement that the X-ray is
'consistent with asbestosis'... is not a diagnosis or illness or injury" and explaining that there are more than 150 types
or causes of fibrosis which present similarly on X-rays).
[FN8]. See David W. Cugell & David W. Camp, Asbestos and the Pleura, Chest Mag., Mar. 1, 2004, at 1103
(scientifically concluding that asymptomatic asbestos pleural effusions have no specific prognostic implications for
future injury); see also In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, 1567, Prod. Liab. Rep. (CCH) ¶
12613 (D. Haw. 1990).
[FN9]. See Mark P. Goodman et al., Editorial, Plaintiffs' Bar Now Opposes Unimpaired Asbestos Suits, Nat'l L.J.,
Apr. 1, 2002, at B14 ("Sec. 524(g) funds necessarily are limited and therefore dollars paid to the unimpaired come
directly at the expense of claimants with serious injuries."). See also Christopher Edley, Jr. & Paul C. Weiler,
Asbestos: A Multi-Billion-Dollar Crisis, 30 Harv. J. on Legis. 383, 393 (1993) (stating that the presence of
unimpaired claimants on court dockets and in settlement negotiations "inevitably diverts legal attention and
economic resources away from the claimants with severe asbestos disabilities who need help right now."); Mike
Tolson, Asbestos Lawsuits Stir New Debate: Bankruptcies Seen as Convenient Way Out For Firms, Hous. Chron.,
Oct 31, 2004, at 1, available at 2004 WL 83676296 ("Many plaintiffs lawyers who handle the most serious asbestos
claims express concern that future cancer sufferers, the most deserving claimants, will get a small portion of what
they get in today's settlements because the unimpaired claimants are sucking so much money out of the system.").
[FN10]. In re Combustion Engineering, Inc., 2004 WL 2743565 (3d Cir. 2004); see also Lester Brickman,
Lawyers' Ethics and Fiduciary Obligation in The Brave New World of Aggregative Litigation, 26 Wm. & Mary
Envtl. L. & Pol'y Rev. 243, 273 (2001) (stating that "the 'asbestos litigation crisis' would never have arisen and
would not exist today" if not for the claims filed by the physically unimpaired).
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[FN11]. Quenna Sook Kim, Asbestos Trust Says Assets Are Reduced as the Medically Unimpaired File Claims,
Wall St. J., Dec. 14, 2001, at B6, available at 2001 WL-WSJ 29680683.
[FN12]. See Quenna Sook Kim, Asbestos Trust Says Assets Are Reduced as the Medically Unimpaired File
Claims, Wall St. J., Dec. 14, 2001, at B6, available at 2001 WL-WSJ 29680683.
[FN13]. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 597, 117 S. Ct. 2231, 138 L. Ed. 2d 689, 37 Fed. R.
Serv. 3d 1017, 28 Envtl. L. Rep. 20173 (1997).
[FN14]. Hon. Griffin B. Bell, Asbestos Litigation and Judicial Leadership: The Courts' Duty to Help Solve the
Asbestos Litigation Crisis, Briefly, Vol. 6, No. 6, June 2002, at 2 (Nat'l Legal Center for the Pub. Interest
Monograph), available at http://www.nlcpi.org (last visited Jan. 14, 2005).
[FN15]. Editorial, The Asbestos Blob, Cont., Wall St. J., Apr. 6, 2004, at A16, available at 2004 WL-WSJ
56925100.
[FN16]. See Stephen Carroll et al., Asbestos Litigation Costs and Compensation (Draft) 11, at 6 (RAND Inst. for
Civil Justice, Feb. 2004).
[FN17]. See Mark A. Behrens, Some Proposals for Courts Interested in Helping Sick Claimants and Solving
Serious Problems in Asbestos Litigation, 54 Baylor L. Rev. 331, 333 (2002).
[FN18]. Many of these newer peripheral defendants never made or sold asbestos-containing products. They are
sued, as plaintiffs' attorney Richard Scruggs acknowledged, as part of plaintiffs' lawyers' "endless search for a
solvent bystander." 'Medical Monitoring and Asbestos Litigation'--A Discussion with Richard Scruggs and Victor
Schwartz, Mealey's Litig. Rep.: Asbestos, Vol. 17, No. 3, Mar. 1, 2002, at 5 (quoting Mr. Scruggs); see also
Editorial, Lawyers Torch the Economy, Wall St. J., Apr. 6, 2001, at A14, available at 2001 WL-WSJ 2859560 ("the
net has spread from the asbestos makers to companies far removed from the scene of any putative wrongdoing.").
[FN19]. Remarks of the Hon. Jack Weinstein, at a symposium held at the Bar Association of the City of New
York, Asbestos: What Went Wrong?, Oct. 21, 2002, at 12.
[FN20]. See generally Mark D. Plevin & Paul W. Kalish, What's Behind the Recent Wave of Asbestos
Bankruptcies, Mealey's Litig. Rep., Vol. 16, No. 6, Apr. 20, 2001.
[FN21]. Christopher Edley, Jr. & Paul C. Weiler, Asbestos: A Multi-Billion-Dollar Crisis, 30 Harv. J. on Legis.
383, 392 (1993).
[FN22]. See Deborah R. Hensler, California Asbestos Litigation-The Big Picture, Columns-Raising the Bar in
Asbestos Litig., Aug. 2004, at 5; James S. Kakalik et al., Variation in Asbestos Litigation Compensation and
Expenses 5 (RAND Inst. for Civil Justice, 1984).
[FN23]. See Hon. Griffin B. Bell, Asbestos Litigation and Judicial Leadership: The Courts' Duty to Help Solve
the Asbestos Litigation Crisis, Briefly, Vol. 6, No. 6, June 2002, at 24 (Nat'l Legal Center for the Pub. Interest
Monograph), available at http://www.nlcpi.org (last visited Jan. 14, 2005); see also Stephen Carroll et al., Asbestos
Litigation Costs and Compensation (Draft) 11, at 42 (RAND Inst. for Civil Justice, Feb. 2004) (finding that asbestos
litigation "has spread to touch firms in industries engaged in almost every form of economic activity that takes place
in the American economy").
[FN24]. See Richard O. Faulk, Dispelling the Myths of Asbestos Litigation: Solutions for Common Law Courts,
44 S. Tex. L. Rev. 945, 951-52 (2003).
[FN25]. While pre-packaged bankruptcies are not new, their recent use in asbestos litigation has sparked
significant controversy. See, e.g., Editorial, The Latest Asbestos Scam, Wall St. J., June 1, 2004, at A16, available at
2004 WL-WSJ 56930544 (calling pre-packaged bankruptcy filings a "bilking gambit"). Moreover, few of these
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cases have fulfilled the promise of a "quick exit" from bankruptcy because of the asbestos defendants' failure,
prepetition, to include all interested parties in the bankruptcy negotiations, including the entirety of the current
asbestos claimant constituency and the insurers who are asked to pay for the global settlement of these claims. See,
e.g., In re JT Thorpe Co., No. 02-41487-H5-11 (Bankr. S.D. Tex. Oct. 1, 2002) (ultimately appealed to the Fifth
Circuit, where it remained pending until the debtor settled with the two appellant-insurers, who then withdrew their
appeal in March, 2004--a year and a half after the petition had been originally filed).
[FN26]. See Mark D. Plevin & Paul W. Kalish, What's Behind the Recent Wave of Asbestos Bankruptcies,
Mealey's Litig. Rep., Vol. 16, No. 6, at 4, Apr. 20, 2001.
[FN27]. See Mark D. Plevin et al., Don't Bankrupt Asbestos, Legal Times, Mar. 19, 2001, at 68.
[FN28]. See 11 U.S.C.A. §
1121(b) (2004).
[FN29]. The voting classes are arranged according to a party's priority level for receiving payments. For example,
secured creditors have a higher priority than unsecured creditors, so the two classes are grouped separately for
voting purposes. Despite the fact that asbestos claimants each have claims that differ greatly in severity and value,
those claims are generally lumped into a single category and given equal weight for voting purposes, giving
unimpaired claimants, whose claims far outnumber those of other (impaired) asbestos creditors, substantial power
over whether a plan succeeds or fails. See, e.g., Order (I) Establishing Procedures for Solicitation and Tabulation of
Votes to Accept or Reject Amended Plan of Reorganization; (II) Approving Forms of Ballots; (III) Approving Form
and Scope of Notice of the Plan and Confirmation Hearing; (IV) Establishing a Record Date for Voting Purposes
Only; and (V) Approving Retention of Voting Agent, Docket No. 5153, In re Federal-Mogul Global, Inc., No.
01-10578 (RTL) (Bankr. D. Del. Jun. 14, 2004); Order Establishing Solicitation and Voting Procedures, Docket No.
1002, In re Burns & Roe Enter., Inc., No. 00-41610 (RG) (Bankr. D.N.J. May 17, 2004); Order Establishing
Procedures for Solicitation, Submission and Tabulation of Votes, Approving Forms of Ballots and Establishing
Dates and Deadlines, Docket No. 394, In re A-Best Prods. Co., Inc., No. 02-12734 (JKF) (Bankr. D. Del. Mar. 1,
2004).
[FN30]. See 11 U.S.C.A. §
524(g)(2)(B)(i)(IV)(BB).
[FN31]. See Roger Parloff, The $200 Billion Miscarriage of Justice; Asbestos Lawyers Are Pitting Plaintiffs Who
Aren't Sick Against Companies that Never Made the Stuff and Extracting Billions for Themselves, Fortune, Mar. 4,
2002, at 158, available at 2002 WL 2190334.
[FN32]. The Fairness in Asbestos Compensation Act of 1999: Hearing on H.R. 1283 Before the House Committee
on the Judiciary, 106th Cong. at 5 (July 1, 1999) (statement of Christopher Edley, Jr., Professor, Harvard Law
School).
[FN33]. See generally Linda Bondi Morrison, An Overview of Asbestos Bankruptcy Issues (Distributed at the
Tenth Annual Conf. of The Nat'l Forum for Envtl. & Toxic Tort Issues Oct. 2, 2003) (on file with authors).
[FN34]. See Mark D. Plevin & Paul W. Kalish, What's Behind the Recent Wave of Asbestos Bankruptcies,
Mealey's Litig. Rep., Vol. 16, No. 6, at 3, Apr. 20, 2001.
[FN35]. 11 U.S.C.A. § 502(c) provides that claims should be estimated; however, it provides no mechanism for
doing so and does not require that claims be verified for accuracy.
[FN36]. See Francis E. McGovern, Asbestos Legislation II: Section 524(g) Without Bankruptcy, 31 Pepp. L. Rev.
233, 240-241 (2003).
[FN37]. See Linda Bondi Morrison, An Overview of Asbestos Bankruptcy Issues (Distributed at the Tenth Annual
Conf. of The Nat'l Forum for Envtl. & Toxic Tort Issues Oct. 2, 2003) at 4 (on file with the authors).
[FN38]. See Editorial, The Latest Asbestos Scam, Wall St. J., June 1, 2004, at A16, available at 2004 WL-WSJ
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56930544; see also cases cited at Richard O. Faulk, Dispelling the Myths of Asbestos Litigation: Solutions for
Common Law Courts, 44 S. Tex. L. Rev. 945, 951-52 (2003).
[FN39]. See, e.g., Third Amended Joint Plan of Reorganization, Docket No. 5122, In re Federal-Mogul Global,
Inc., No. 01-10578 (RTL) (Bankr. D. Del. Jun. 4, 2004) at 115; Third Amended Joint Plan of Reorganization as of
June 25, 2003, Docket No. 4294, In re Babcock & Wilcox Co., No. 00-10992 (Bankr. E.D. La. Jun. 25, 2003) at §
5.1.
[FN40]. Francis E. McGovern, Asbestos Legislation II: Section 524(g) Without Bankruptcy, 31 Pepp. L. Rev. 233,
238 (2003).
[FN41]. The Bankruptcy Code provides a debtor with a period of exclusivity within which to file a plan and
solicit acceptances of the plan. The courts may shorten or extend the period of exclusivity. In nonpre-packaged
asbestos bankruptcies, it is common for courts to extend the period for a number of years. See Mark D. Plevin et al.,
Pre-Packaged Asbestos Bankruptcies: A Flawed Solution, 44 S. Tex. L. Rev. 883, 907-908 (2003).
[FN42]. Francis E. McGovern, Asbestos Legislation II: Section 524(g) Without Bankruptcy, 31 Pepp. L. Rev. 233,
240 (2003).
[FN43]. Generally, a plan of reorganization must be approved by a two-thirds majority of each class of impaired
(that is, not receiving payment in full for their claims) creditors. However, a bankruptcy court may approve a plan of
reorganization over the objection of a class of creditors or equity holders if the court concludes that the plan is "fair
and equitable" to that class. 11 U.S.C.A. § 1129(b) (2004). Some view the 75% vote requirement of § 524(g) as
exempting asbestos claimants from the "cram down" provisions of the Bankruptcy Code, thereby preventing a
bankruptcy judge from confirming a plan of reorganization that the court finds to be "fair and equitable" over the
opposing vote of the asbestos claimants. See Written Statement of Lester Brickman, Professor of Law, Benjamin N.
Cardozo School of Law of Yeshiva University Before Subcommittee on Commercial and Administrative Law of the
U.S. House of Representatives Committee on the Judiciary, July 21, 2004, at 25; Roger Parloff, Asbestos, Fortune,
Sept. 6, 2004, at 186, available at 2004 WL 55184416.
[FN44]. Roger Parloff, Asbestos, Fortune, Sept. 6, 2004, at 186, available at 2004 WL 55184416.
[FN45]. See Roger Parloff, Asbestos, Fortune, Sept. 6, 2004, at 186, available at 2004 WL 55184416. (quoting
former United States District Judge Alfred Wolin, who oversaw several bankruptcy proceedings, that "without
compensating the 90%, you're never going to get a consensual plan, because you're not going to get the votes.").
[FN46]. Roger Parloff, Asbestos, Fortune, Sept. 6, 2004, at 186, available at 2004 WL 55184416 at 5 (noting that
plaintiffs' attorneys generally receive the same percentage of the claims regardless of whether the claims are filed in
court or with a bankruptcy trust).
[FN47]. See Editorial, Asbestos Fairness, Wall St. J., Dec. 9, 2004, at A16 , available at 2004 WL-WSJ 98743869
("Asbestos law firms team up and pool their plaintiffs, the vast majority of whom aren't sick. The exercise their clout
by taking over the reorganization plan, designing it to hand the bulk of the money to their own clients. Their
majority pool of plaintiffs (who each get a vote) then outvote everyone else in favor of their skewed plan.").
[FN48]. Resolving this issue earlier in the asbestos litigation could have relieved the pressure on defendant
companies, the bankruptcy courts, and the resulting trusts. While some judges may have had such foresight and
reached the same conclusions as are in this article, this article offers a forward-looking perspective as to how
bankruptcy courts and others can analyze the claims of the unimpaired.
[FN49]. The legislative history of the Bankruptcy Code refers to the definition of a "claim" under 11 U.S.C.A. §
101(5) as the "broadest possible definition" intended to ensure that "all legal obligations of the debtor, no matter
how remote or contingent, will be able to be dealt with in the bankruptcy case." H.R. Rep. No. 95-595, at 309
(1978).
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[FN50]. Matter of M. Frenville Co., Inc., 744 F.2d 332, 337, 12 Bankr. Ct. Dec. (CRR) 396, 11 Collier Bankr.
Cas. 2d (MB) 491, Bankr. L. Rep. (CCH) ¶ 70024 (3d Cir. 1984) (rejected by, In re Black, 70 B.R. 645, 15 Bankr.
Ct. Dec. (CRR) 849 (Bankr. D. Utah 1986)) and (rejected by, Neal-Crane Co. v. Trio Constr. Serv., Inc., 65 Ohio
App. 3d 234, 583 N.E.2d 993 (10th Dist. Franklin County 1989)) and (rejected by, In re Chateaugay Corp., 115 B.R.
760, 20 Bankr. Ct. Dec. (CRR) 984, 22 Collier Bankr. Cas. 2d (MB) 1673, 12 Employee Benefits Cas. (BNA) 1441,
Bankr. L. Rep. (CCH) ¶ 73512 (Bankr. S.D. N.Y. 1990)) and (rejected by, In re Piper Aircraft Corp., 162 B.R. 619,
25 Bankr. Ct. Dec. (CRR) 193 (Bankr. S.D. Fla. 1994)) (3d Cir. 1984).
[FN51]. Matter of M. Frenville Co., Inc., 744 F.2d 332, 337 (noting that a "bankruptcy proceeding stemming from
a mass tort--such as exposure to asbestos--may be a case in which the application of federal law is indicated").
[FN52]. See Grady v. A.H. Robins Co., Inc., 839 F.2d 198, 201, 17 Bankr. Ct. Dec. (CRR) 265, 18 Collier Bankr.
Cas. 2d (MB) 176, Bankr. L. Rep. (CCH) P 72188 (4th Cir. 1988) (declining to follow Frenville's "limiting"
definition of a "claim"); Kenneth N. Klee & Frank A. Merola, Ignoring Congressional Intent: Eight Years of
Judicial Legislation, 62 Am. Bankr. L.J. 1, 28-29 (1988) (noting that Frenville is "[b]y far the most frequently cited
and criticized case.").
[FN53]. See Matter of Penn Cent. Transp. Co., 71 F.3d 1113, 1117-18, 1995-2 Trade Cas. (CCH) ¶ 71194 (3d
Cir. 1995); Schweitzer v. Consolidated Rail Corp., 758 F.2d 936, 12 Bankr. Ct. Dec. (CRR) 1405, 12 Collier Bankr.
Cas. 2d (MB) 671, Bankr. L. Rep. (CCH) ¶ 70346 (3d Cir. 1985) (rejected by, Buckley v. Metro-North Commuter
R.R., 79 F.3d 1337, 11 I.E.R. Cas. (BNA) 897 (2d Cir. 1996)) (debtor's former employees who had not yet
developed injuries from their exposure to asbestos did not hold "claims"); In re Eagle-Picher Industries, Inc., 144
B.R. 69, 71-72, Bankr. L. Rep. (CCH) ¶ 749 (Bankr. S.D. Ohio 1992) (individuals exposed to asbestos, lead, and
silica prepetition but who had not manifested injuries did not have "claims"); In re Hoffinger Industries, Inc., 307
B.R. 112, 42 Bankr. Ct. Dec. (CRR) 220 (Bankr. E.D. Ark. 2004) (unknown persons who might in the future be
injured by products manufactured by debtor prepetition but not yet distributed to retailers do not have "claims").
[FN54]. See, e.g., Epstein v. Official Committee of Unsecured Creditors of Estate of Piper Aircraft Corp., 58 F.3d
1573, 1577-78, 27 Bankr. Ct. Dec. (CRR) 694, 33 Collier Bankr. Cas. 2d (MB) 1751, Bankr. L. Rep. (CCH) ¶
76574 (11th Cir. 1995) (a "claim" requires only conduct giving rise to liability and a relationship between the debtor
and the claimant); In re Chateaugay Corp., 944 F.2d 997, 1004-06, 22 Bankr. Ct. Dec. (CRR) 74, 25 Collier Bankr.
Cas. 2d (MB) 620, 34 Env't. Rep. Cas. (BNA) 1233, 21 Envtl. L. Rep. 21466 (2d Cir. 1991) (broadly defining a
"claim" in the environmental contamination context, but noting in dicta that "accepting as claimants those future tort
victims whose injuries are caused by pre-petition conduct but do not become manifest until after confirmation,
arguably puts considerable strain not only on the Code's definition of 'claim,' but also on the definition of
'creditor'--an 'entity that has a claim against the debtor that arose at the time of or before the order of relief
concerning the debtor.'").
[FN55]. See 11 U.S.C.A. §
filed).
502(a-b) (stating that a claim is valued as of the date the bankruptcy petition is
[FN56]. See Alan N. Resnick, Bankruptcy as a Vehicle for Resolving Enterprise-Threatening Mass Tort Liability,
148 U. Pa. L. Rev. 2045, 2046 (2000).
[FN57]. Instead, unimpaired claimants would be classified as "future claimants," e.g., holders of "demands" under
11 U.S.C.A. § 524(g)(5)-the term given to those who may have a future stake in a bankruptcy but do not have a
current claim against the debtor. See William P. Shelley & Jacob C. Cohn, Unraveling the Gordian Knot of
Asymptomatic Asbestos Claimants: Statutory, Precedential and Policy Reasons Why Unimpaired Asbestos
Claimants Cannot Recover in Bankruptcy, Mealey's Asbestos Bankr. Rep., Vol. 3 No. 10, May 2004, at 3.
[FN58]. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938) ("Except in matters governed by the Federal
Constitution or by Act of Congress, the law to be applied in any case is the law of the State.").
[FN59]. See generally Henry J. Friendly, In Praise of Erie-and of the New Federal Common Law, 39 N.Y.U. L.
Rev. 386 (1964).
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[FN60]. Butner v. U.S., 440 U.S. 48, 99 S. Ct. 914, 59 L. Ed. 2d 136, 19 C.B.C. 481, Bankr. L. Rep. (CCH) ¶
67046 (1979).
[FN61]. Butner, 440 U.S. 48, at 55 (holding that the court should look to applicable state law to determine
whether a security interest in a property in bankruptcy extends to rents and profits derived from that property).
[FN62]. Raleigh v. Illinois Dept. of Revenue, 530 U.S. 15, 20, 120 S. Ct. 1951, 147 L. Ed. 2d 13, 36 Bankr. Ct.
Dec. (CRR) 39, 43 Collier Bankr. Cas. 2d (MB) 869, Bankr. L. Rep. (CCH) ¶ 78182, 2000-1 U.S. Tax Cas. (CCH)
¶ 50498 (2000) (holding that company's liability is not altered from what it would have been outside bankruptcy).
[FN63]. See generally Thomas E. Plank, The Erie Doctrine and Bankruptcy, 79 Notre Dame L. Rev. 633 (2004).
[FN64]. Butner, 440 U.S. 48, at 55 (internal citation omitted).
[FN65]. Butner, 440 U.S. 48, at 56.
[FN66]. See Raleigh, 530 U.S. 15, at 26.
[FN67]. In re USG Corp., 290 B.R. 223 (Bankr. D. Del. 2003) (establishing a cancer-only bar date for
submission of claims and holding that unimpaired claimants likely would not receive funds from the resulting trust
because all resources would be expended paying claims of the truly sick. Judge Wolin sidestepped the issue of
whether unimpaired claimants should be excluded altogether, saying "the Court need not, at this juncture of the case,
delve into the troubled and occasionally metaphysical controversy of the so-called 'unimpaired' class of claimants.").
[FN68]. In re Joint Eastern and Southern Districts Asbestos Litigation, 237 F. Supp. 2d 297 (E.D. N.Y. 2002).
[FN69]. In re Joint Eastern and Southern Districts Asbestos Litigation, 237 F. Supp. 2d 297, at 317.
[FN70]. See Burns v. Jaquays Min. Corp., 156 Ariz. 375, 752 P.2d 2, 29- 31 (Ct. App. Div. 2 1987).
[FN71]. See In re Asbestos Litigation, 1994 WL 721763 (Del. Super. Ct. 1994), judgment rev'd on other grounds,
670 A.2d 1339 (Del. 1995).
[FN72]. See Bernier v. Raymark Industries, Inc., 516 A.2d 534, 543, Prod. Liab. Rep. (CCH) ¶ 11145 (Me.
1986) (determining for the purposes of applying a state law passed in 1973 that the cause of action from exposure to
asbestos arises only when exposure manifests in a way that causes loss, damage, or suffering).
[FN73]. See Owens-Illinois v. Armstrong, 87 Md. App. 699, 591 A.2d 544, Prod. Liab. Rep. (CCH) ¶ 12937
(1991), judgment aff'd in part, rev'd in part on other grounds, 326 Md. 107, 604 A.2d 47, Prod. Liab. Rep. (CCH) ¶
13128 (1992) (Md. Ct. App. 1991).
[FN74]. See H.B. 292, 125th Gen. Assem., Reg. Sess. (Ohio 2004).
[FN75]. See Simmons v. Pacor, Inc., 543 Pa. 664, 674 A.2d 232, Prod. Liab. Rep. (CCH) ¶ 14600 (1996)
(denying recovery for asymptomatic pleural thickening unaccompanied by impairment).
[FN76]. See In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, 1567, Prod. Liab. Rep. (CCH) ¶ 12613 (D.
Haw. 1990) (interpreting Hawaii law to require impairment to support a cause of action and observing that an
"award for physiological reactions to asbestos exposure without more" would be unreasonable).
[FN77]. See In re Massachusetts Asbestos Cases, 639 F. Supp. 1, 2-3 (D. Mass. 1985) (stating under
Massachusetts law that subclinical results from asbestos exposure did not constitute injury).
[FN78]. Bernier, 516 A.2d 534, at 543 (emphasis added).
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[FN79]. See Bernier, 516 A.2d at 536.
[FN80]. Bernier, 516 A.2d 534, at 542.
[FN81]. Bernier, 516 A.2d 534, at 543 (citing In re Waldron, 785 F.2d 936, 942, 14 Bankr. Ct. Dec. (CRR) 488,
Bankr. L. Rep. (CCH) ¶ 71069 (11th Cir. 1986)).
[FN82]. Bernier, 516 A.2d 534, at 543 (quoting Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314, 1336, 17
Fed. R. Evid. Serv. 305 (5th Cir. 1985).
[FN83]. Burns, 156 Ariz. 375, 752 P.2d 28 (Ct. App. Div. 2 1987).
[FN84]. See Burns, 156 Ariz. 375, 752 P.2d 28, at 29-30.
[FN85]. Burns, 156 Ariz. 375, 752 P.2d 28, at 30.
[FN86]. See Burns, 156 Ariz. 375, 752 P.2d 28, at 31.
[FN87]. Burns, 156 Ariz. 375, 752 P.2d 28, at 29.
[FN88]. Simmons, 543 Pa. 664, 674 A.2d 232.
[FN89]. Simmons, 543 Pa. 664, 674 A.2d 232, at 233-234.
[FN90]. Simmons, 543 Pa. 664, 674 A.2d 232, at 237.
[FN91]. Simmons, 543 Pa. 664, 674 A.2d 232, at 237.
[FN92]. Simmons, 543 Pa. 664, 674 A.2d 232, at 237.
[FN93]. Simmons, 543 Pa. 664, 674 A.2d 232, at 238.
[FN94]. In re Asbestos Litigation, 1994 WL 721763.
[FN95]. In re Asbestos Litigation, 1994 WL 721763, at *1-2.
[FN96]. See In re Asbestos Litigation, 1994 WL 721763, at *2.
[FN97]. See In re Asbestos Litigation, 1994 WL 721763, at *4.
[FN98]. See Armstrong, 87 Md. App. 699, 591 A.2d 544, at 560-561.
[FN99]. Armstrong, 87 Md. App. 699, 591 A.2d 544, at 561.
[FN100]. See Armstrong, 87 Md. App. 699, 591 A.2d 544, at 560.
[FN101]. Armstrong, 87 Md. App. 699, 591 A.2d 544, at 560.
[FN102]. In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563.
[FN103]. In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, at 1566.
[FN104]. In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, at 1566 (stating that it would be "sheer
speculation" to try to determine any damages for pleural conditions).
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[FN105]. In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, at 1567.
[FN106]. See In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, at 1567.
[FN107]. In re Massachusetts Asbestos Cases, 639 F. Supp. 1, at 2-3.
[FN108]. In re Massachusetts Asbestos Cases, 639 F. Supp. 1, at 2.
[FN109]. In re Massachusetts Asbestos Cases, 639 F. Supp. 1, at 2. (internal citations omitted).
[FN110]. In re Massachusetts Asbestos Cases, 639 F. Supp. 1, at 3.
[FN111]. See Caterinicchio v. Pittsburgh Corning Corp., 127 N.J. 428, 605 A.2d 1092, Prod. Liab. Rep. (CCH) ¶
13173 (1992).
[FN112]. See Bowerman v. United Illuminating, 23 Conn. L. Rptr. 589, 1998 WL 910271 (Conn. Super. Ct.
1998) (unpublished opinion).
[FN113]. Caterinicchio, 127 N.J. 428, 605 A.2d 1092 (N.J. 1992).
[FN114]. Caterinicchio, 127 N.J. 428, 605 A.2d 1092,at 1093-94. See Herber v. Johns-Manville Corp., 785 F.2d
79, Prod. Liab. Rep. (CCH) ¶ 10955, 20 Fed. R. Evid. Serv. 272 (3d Cir. 1986) (interpreting New Jersey law and
stating that it was appropriate for a jury to return a verdict for zero damages for a plaintiff with pleural thickening,
but who was "presently healthy and likely to remain so in the foreseeable future.").
[FN115]. Caterinicchio, 127 N.J. 428, 605 A.2d 1092, at 1096.
[FN116]. See Caterinicchio, 127 N.J. 428, 605 A.2d 1092, at 1096.
[FN117]. See Caterinicchio, 127 N.J. 428, 605 A.2d 1092, at 1097. See also Herber, 785 F.2d 79, at 81
(interpreting New Jersey law and upholding a jury finding that a plaintiff who alleged pleural conditions from
asbestos exposure "had suffered no loss for which compensation should be paid.").
[FN118]. Bowerman, 23 Conn. L. Rptr. 589, 1998 WL 910271.
[FN119]. See Bowerman, 23 Conn. L. Rptr. 589, 1998 WL 910271, at *2.
[FN120]. Bowerman, 23 Conn. L. Rptr. 589, 1998 WL 910271, at *5 (emphasis added); see also Burns v.
Hartford Hosp., 472 A.2d 1257, 1261 (Conn. 1984) (stating that "injury occurs when a party suffers some form of
actionable harm"); Asymptomatic Claimants: Failure to Show Present Injury Dooms Asbestos Claimants in
Connecticut, Andrews Asbestos Litig. Rep., Vol. 21, No. 2, Feb. 19, 1999, at 6.
[FN121]. Bowerman, 23 Conn. L. Rptr. 589, 1998 WL 910271, at*6.
[FN122]. Bowerman, 23 Conn. L. Rptr. 589, 1998 WL 910271, at *12.
[FN123]. See H.B. 292, 125th Gen. Assem., Reg. Sess. (Ohio 2004). See generally Kurtis A. Tunnell et al.,
Commentary, New Ohio Asbestos Reform Law Protects Victims and State Economy, Andrews Asbestos Litig. Rep.,
Vol. 26, No. 22, Aug. 26, 2004, at 10.
[FN124]. See Verbryke v. Owens-Corning Fiberglas Corp., 84 Ohio App. 3d 388, 616 N.E.2d 1162, 1167 (6th
Dist. Lucas County 1992) (expressly declining to follow Maryland's Armstrong decision and ruling that unimpaired
plaintiffs with pleural plaques or pleural thickening have suffered a compensable injury); but see Clutter v.
Johns-Manville Sales Corp., 646 F.2d 1151, 22 Ohio Op. 3d 201 (6th Cir. 1981) (interpreting Ohio law and holding
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that a cause of action in asbestos cases accrues at time of manifestation).
[FN125]. See Sopha v. Owens-Corning Fiberglas Corp., 230 Wis. 2d 212, 601 N.W.2d 627 (1999).
[FN126]. See AlliedSignal, Inc. v. Ott, 785 N.E.2d 1068, Prod. Liab. Rep. (CCH) ¶ 16567 (Ind. 2003).
[FN127]. See Kraciun v. Owens-Corning Fiberglas Corp., 895 F.2d 444, Prod. Liab. Rep. (CCH) ¶ 12362 (8th
Cir. 1990).
[FN128]. See Atkinson v. Celotex Corp., 633 So. 2d 383 (La. Ct. App. 3d Cir. 1994).
[FN129]. Sopha, 230 Wis. 2d 212, 601 N.W.2d 627.
[FN130]. Sopha, 230 Wis. 2d 212, 601 N.W.2d 627, at 641.
[FN131]. Sopha, 230 Wis. 2d 212, 601 N.W.2d 627, at 641.
[FN132]. AlliedSignal, Inc., 785 N.E.2d 1068, 1071.
[FN133]. AlliedSignal, Inc., 785 N.E.2d 1068, at 1075.
[FN134]. Burns v. Jaquays Min. Corp., 156 Ariz. 375, 752 P.2d 28 (Ct. App. Div. 2 1987).
[FN135]. Pacor, Inc., 543 Pa. 664, 674 A.2d 232.
[FN136]. AlliedSignal, Inc., 785 N.E.2d 1068, at 1075.
[FN137]. AlliedSignal, Inc., 785 N.E.2d 1068, at 1075.
[FN138]. See AlliedSignal, Inc., 785 N.E.2d 1068, at 1075.
[FN139]. Kraciun v. Owens-Corning Fiberglas Corp., 895 F.2d 444, Prod. Liab. Rep. (CCH) ¶ 12362 (8th Cir.
1990) (8th Cir.) (interpreting Iowa law).
[FN140]. See Kraciun, 895 F.2d 444, at 455.
[FN141]. See Kraciun, 895 F.2d 444, at 445.
[FN142]. See Kraciun, 895 F.2d 444, at 455; see also Johns-Manville Sales Corp., 781 F.2d 394, n.22 (5th Cir.
1986) (stating that the court generally agrees with the notion that subclinical injury is not sufficient to constitute
actual loss or damages).
[FN143]. Atkinson, 633 So. 2d 383.
[FN144]. See Atkinson, 633 So. 2d 383, at 388.
[FN145]. See Atkinson, 633 So. 2d 383, at 389-392.
[FN146]. See Atkinson, 633 So. 2d 383, at 389-392.
[FN147]. See Atkinson, 633 So. 2d 383, at 389, 392.
[FN148]. See Atkinson, 633 So. 2d 383, at 392.
[FN149]. Bonnette v. Conoco, Inc., 837 So. 2d 1219 (La. 2003) (stating that "[t]he problems inherent in awarding
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damages for mental disturbance in the absence of manifest physical injury are particularly pronounced in cases
involving exposure to asbestos or other carcinogens").
[FN150]. See Karjala v. Johns-Manville Products Corp., 523 F.2d 155 (8th Cir. 1975).
[FN151]. See Joyce v. A.C. and S., Inc., 785 F.2d 1200, 1205, Prod. Liab. Rep. (CCH) ¶ 10932 (4th Cir. 1986)
(Under the Virginia "single injury" rule, the statute of limitations for all potential damages from any exposure to a
toxic substance begins to run at the first sign of injury).
[FN152]. See Brennan v. Owens-Corning Fiberglas Corp., 134 Idaho 800, 10 P.3d 749, Prod. Liab. Rep. (CCH) ¶
15907 (2000) (dismissing a suit seeking asbestos related damages for pleural thickening on statute of limitations
grounds).
[FN153]. Karjala, 523 F.2d 155, at 160-161.
[FN154]. See Karjala, 523 F.2d 155, at 156.
[FN155]. Karjala, 523 F.2d 155, at 160-161.
[FN156]. See Bryson v. Pillsbury Co., 573 N.W.2d 718 (Minn. Ct. App. 1998) (holding, in case where plaintiff
was exposed to pesticides, that it is an issue of fact, not law, whether asymptomatic chromosomal damage is a
present injury); Werlein v. U.S., 746 F. Supp. 887, 901, 21 Envtl. L. Rep. 20277 (D. Minn. 1990), vacated in part,
793 F. Supp. 898 (D. Minn. 1992) (holding that plaintiffs alleging subcellular changes from exposure to
trichloroethylene will have the burden of proving present harm to the trier of fact).
[FN157]. Joyce, 785 F.2d 1200, 1205 (4th Cir. 1986).
[FN158]. See Joyce, 785 F.2d 1200, at 1203.
[FN159]. See Joyce, 785 F.2d 1200, at 1205.
[FN160]. See Joyce, 785 F.2d 1200, at 1205.
[FN161]. Brennan, 134 Idaho 800, 10 P.3d 749.
[FN162]. See Brennan, 134 Idaho 800, 10 P.3d 749, at 751.
[FN163]. See Brennan, 134 Idaho 800, 10 P.3d 749, at 750.
[FN164]. See Brennan, 134 Idaho 800, 10 P.3d 749, at 750-751.
[FN165]. See Brennan, 134 Idaho 800, 10 P.3d 749, at 750.
[FN166]. Duarte v. Zachariah, 22 Cal. App. 4th 1652, 1661-63, 28 Cal. Rptr. 2d 88 (3d Dist. 1994), as modified
on denial of reh'g, (Mar. 30, 1994) (holding in medical malpractice case under California law that subclinical
changes are not actionable injuries).
[FN167]. Duarte, 22 Cal. App. 4th 1652, at 1656.
[FN168]. In re Hawaii Federal Asbestos Cases, 734 F. Supp. 1563, Prod. Liab. Rep. (CCH) ¶ 12613 (D. Haw.
1990).
[FN169]. Duarte, 22 Cal. App. 4th 1652, at 1662.
[FN170]. Duarte, 22 Cal. App. 4th 1652, at 1663.
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[FN171]. Buttram v. Owens-Corning Fiberglas Corp., 16 Cal. 4th 520, 66 Cal. Rptr. 2d 438, 941 P.2d 71, 62 Cal.
Comp. Cas. (MB) 1031, Prod. Liab. Rep. (CCH) ¶ 15040 (1997) (internal citations omitted).
[FN172]. See Buttram, 16 Cal. 4th 520, 66 Cal. Rptr. 2d 438, 941 P.2d 71, at 83-84.
[FN173]. Buttram, 16 Cal. 4th 520, 66 Cal. Rptr. 2d 438, 941 P.2d 71, at 77 n. 4.
[FN174]. Boyd v. Orkin Exterminating Co., Inc., 191 Ga. App. 38, 381 S.E.2d 295, 297 (1989).
[FN175]. Boyd, 191 Ga. App. 38, 381 S.E.2d 295, at 298.
[FN176]. Carroll v. Litton Systems, Inc., 1990 WL 312969 (W.D. N.C. 1990).
[FN177]. See Carroll, 1990 WL 312969, at *48.
[FN178]. Carroll, 1990 WL 312969, at *47-48 (internal citations omitted).
[FN179]. Caputo v. Boston Edison Co., Nuclear Reg. Rep. ¶ 20510, 1990 WL 98694, *3 (D. Mass. 1990),
judgment aff'd, 924 F.2d 11 (1st Cir. 1991) (stating that "cellular damage does not rise to the level of physical injury
as a matter of law because nothing in the record relates them to any objective symptoms of illness or disease").
[FN180]. See Caputo, 1990 WL 98694, at *1.
[FN181]. Caputo, 1990 WL 98694, at *4.
[FN182]. See Caputo, 1990 WL 98694, at *4.
[FN183]. Colby v. E.R. Squibb & Sons, Inc., 589 F. Supp. 714, 717-718 (D. Kan. 1984).
[FN184]. See Colby, 589 F. Supp. 714, at 717.
[FN185]. See Colby, 589 F. Supp. 714, at 717.
[FN186]. See Prosser and Keeton on the Law of Torts §
30, at 165 (5th ed. 1984); see also Wood v.
Wyeth-Ayerst Laboratories, Div. of American Home Products, 82 S.W.3d 849, 852, Prod. Liab. Rep. (CCH) ¶
16426 (Ky. 2002) (citing cases dating as far back as 1925 that "a cause of action in tort requires a present physical
injury to the plaintiff" and that to hold otherwise would "stretch the limits of logic and ignore a long line of legal
precedent.").
[FN187]. Amphitheaters, Inc. v. Portland Meadows, 184 Or. 336, 198 P.2d 847, 5 A.L.R.2d 690 (1948).
[FN188]. Graham v. Canadian Nat. Ry. Co., 749 F. Supp. 1300 (D. Vt. 1990); but see Cook v. Rockwell Intern.
Corp., 273 F. Supp. 2d 1175, 57 Env't. Rep. Cas. (BNA) 1294 (D. Colo. 2003) (holding that plutonium and other
pollutants are tangible matters, and their migration onto another's property constitutes physical trespass).
[FN189]. See Restatement (Second) of Torts §
19 cmt. a.
[FN190]. See Armstrong, 87 Md. App. 699, 591 A.2d 544, at 735 (rejecting argument that two plaintiffs with
evidence of asbestos-related pleural plaques and pleural thickening had suffered a "battery" under the Restatement
(Second) of Torts).
[FN191]. See, e.g., Curd v. City Court of Judsonia, Arkansas, 141 F.3d 839 (8th Cir. 1998).
[FN192]. See, e.g., L & D of Oregon, Inc. v. American States Ins. Co., 171 Or. App. 17, 14 P.3d 617 (2000).
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[FN193]. See Thing v. La Chusa, 771 P.2d 814 (Cal. 1989); Restatement (Second) Torts §
Page 29
313(2) & cmt. d.
[FN194]. From a public policy perspective, legislators frequently have decided that causes of action under
workers' compensation arise after injury has manifested itself or when injury is such that an employee is no longer
able to work. See, e.g., Mofford v. Industrial Commission, 8 Ariz. App. 87, 443 P.2d 449 (1968) (Ariz. Ct. App.
1968) (holding that when incident appeared minor or trivial, workers' compensation did not accrue until about three
and a half years later when a worker became aware, or could reasonably be expected to have become aware, of full
import and significance of effect of the injury). This concept has been used in other types of tort cases as well. See,
e.g., Ford Motor Co. v. Rice, 726 So. 2d 626 (Ala. 1998) (in class action case for a design defect, court said it is well
established that there is "no legally recognizable claim where the alleged defect has not manifested itself in the
product."); Marin Healthcare Dist. v. Sutter Health, 103 Cal. App. 4th 861, 127 Cal. Rptr. 2d 113, 125 (3d Dist.
2002), review denied, (Feb. 25, 2003) (stating in a case over property damage that a cause of action arises when the
plaintiff sustains actual and appreciable harm: "manifest and palpable injury will commence the statutory period.").
[FN195]. See In re USG Corp., No. 01-2094, Mem. Op. and Order, at 8 n.3 (Bankr. Del. Feb. 19, 2003) ("The
practical benefits of dealing with the sickest claimants first have been apparent to the courts for many years and have
led to the adoption of deferred claims registries in many jurisdictions."); see also Dee McAree, States Are
Prioritizing Cases by Moving the Sickest Plaintiffs to the Front of the Line, Penn. L. Weekly, Sept. 29, 2003, at 10
("A growing number of state courts are adopting measures to reorganize their backlogs of asbestos cases to ensure
that the sickest plaintiffs have their cases heard first.").
[FN196]. See In re Massachusetts State Court Asbestos Personal Injury Litigation Order Establishing an Inactive
Docket for Asbestos Personal Injury Cases, Consol. Docket (Middlesex Super. Ct. Sept. 1986) (as amended Sept.
22, 1994); In re Asbestos Cases, 3 (Cir. Ct., Cook County, Ill. Mar. 26, 1991) (Order to Establish Registry for
Certain Asbestos Matters); In re Asbestos Personal Injury and Wrongful Death Asbestos Cases, Order Establishing
an Inactive Docket for Asbestos Personal Injury Cases, No. 92344501 (Cir. Ct. Baltimore City, Md. Dec. 9, 1992);
In re All Asbestos Cases, Order Establishing an Inactive Docket for Cases Filed by the Law Offices of Peter T.
Nicholl Involving Asbestos-Related Claims (Cir. Ct. Portsmouth, Va. Aug. 4, 2004); In re All Asbestos Litigation
Filed in Madison County, Order Establishing Asbestos Deferred Registry (Madison County Cir. Ct., Ill. Jan. 23,
2004); In re Fifth Judicial District Asbestos Litigation, Amendment to Amended Case Management Order No. 1
(N.Y. Sup. Ct. Jan. 31, 2003); In re New York City Asbestos Litigation, Order Amending Case Management Orders
dated Sept. 20, 1996 and amended as of July 23, 2001 (S. Ct. N.Y. City., N.Y. Dec. 19, 2002); Lerterfrom Judge
Sharon S. Armstrong, King County, Washington, to Counsel of Record, Moving and Responding Parties (Dec. 3,
2002) (placing a number of asymptomatic plaintiffs on an Inactive Status calendar).
[FN197]. See Mark A. Behrens & Monica G. Parham, Stewardship for the Sick: Preserving Assets for Asbestos
Victims Through Unimpaired Docket Programs, 33 Texas Tech L. Rev. 1 (2001).
[FN198]. See Paul F. Rothstein, What Courts Can Do in the Face of the Never-Ending Asbestos Crisis, 71 Miss.
L.J. 1 (2001).
[FN199]. Peter H. Schuck, The Worst Should Go First: Deferral Registries in Asbestos Litigation, 15 Harv. J.L. &
Pub. Pol'y 541, 555 (1992).
[FN200]. See In re Wallace & Graham Asbestos-Related Cases, Wallace & Graham Case Management Order
(Greenville County, SC 2002) (entering a case management order that dismisses without prejudice and tolls the
statute of limitations for all asbestos-related cases in South Carolina represented by the law firm Wallace & Graham
that do not meet the specified criteria.); In re Cuyahoga County Asbestos Cases, Special Docket No. 73958 (Sept.
16, 2004) (The Court of Common Pleas of Cuyahoga County, Ohio, established a case management order providing
that the court "will administratively dismiss the cases of those plaintiffs who have been diagnosed with pleural
plaques or with a condition 'consistent with asbestosis' and who have not failed a pulmonary function test. The court
will retain jurisdiction over these cases; if and when a plaintiff so classified becomes impaired, he/she may apply to
the court for reinstatement of the claim."); In re All Asbestos Exposure Cases Filed in Multnomah County, First
Amended Draft Gen. Order Re: Asymptomatic, Untreated, or Inchoate Disease Cases, No. 0003-0000B (Cir. Ct.
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Multnomah County, Ore. 2002) (circulating draft order).
[FN201]. See 45 U.S.C.A. § § 51 et seq. FELA is a federal statute that defines rights and duties in personal
injury cases brought by railroad workers against their employer railroads. FELA is the tort equivalent of workers'
compensation in the railroad field.
[FN202]. Schweitzer v. Consolidated Rail Corp., 758 F.2d 936, 942, 12 Bankr. Ct. Dec. (CRR) 1405, 12 Collier
Bankr. Cas. 2d (MB) 671, Bankr. L. Rep. (CCH) ¶ 70346 (3d Cir. 1985) (rejected by, Buckley v. Metro-North
Commuter R.R., 79 F.3d 1337, 11 I.E.R. Cas. (BNA) 897 (2d Cir. 1996)).
[FN203]. Metro-North Commuter R. Co. v. Buckley, 521 U.S. 424, 117 S. Ct. 2113, 138 L. Ed. 2d 560, 12 I.E.R.
Cas. (BNA) 1645, 17 O.S.H. Cas. (BNA) 2153, 1997 A.M.C. 2309 (1997).
[FN204]. Metro-North Commuter R. Co., 521 U.S. 424, at 442.
[FN205]. Metro-North Commuter R. Co., 521 U.S. 424, at 444.
[FN206]. Norfolk & Western Ry. Co. v. Ayers, 538 U.S. 135, 141, 123 S. Ct. 1210, 155 L. Ed. 2d 261, 19 I.E.R.
Cas. (BNA) 1217, 2003 A.M.C. 609, 33 Envtl. L. Rep. 20155 (2003) (holding that "mental anguish damages
resulting from the fear of developing cancer may be recovered under the FELA by a railroad worker suffering from
the actionable injury asbestosis caused by work-related exposure to asbestos.").
[FN207]. Norfolk & Western Ry. Co., 538 U.S. 135, at 141, 156-157.
[FN208]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Admin. Order No. 3, at 1 (E.D. Pa.
Sept. 8, 1992).
[FN209]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Admin. Order No. 3, at 1.
[FN210]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Order (E.D. Pa. Oct. 16, 1997) (on
file with the authors).
[FN211]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Order.
[FN212]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Civ. Action No. 2 (Maritime
Actions), Order, In re Asbestos Products Liability Litigation (No. VI), 1996 WL 239863, *5 (E.D. Pa. 1996).
[FN213]. In re Asbestos Products Liability Litigation (No. VI), 1996 WL 239863, *5.
[FN214]. In re Asbestos Products Liability Litigation (No. VI), 1996 WL 239863, *5.
[FN215]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Admin. Order No. 8 (E.D. Pa. Jan.
14, 2002).
[FN216]. See In re Asbestos Products Liability Litigation (No. VI), MDL 875, Civil Action No. 2 (Maritime
Actions), Order at 9, 13, 15 (E.D. Pa. May 1, 1996) (covering asbestos exposures during World War II).
[FN217]. In re Asbestos Products Liability Litigation (No. VI), 1996 WL 539589, *1 (E.D. Pa. 1996); see also
Larson v. Johns-Manville Sales Corp., 427 Mich. 301, 399 N.W.2d 1, 23, Prod. Liab. Rep. (CCH) ¶ 11212 (1986)
("We believe that discouraging suits for relatively minor consequences of asbestos exposure will lead to a fairer
allocation of resources to those victims who develop cancers."); Steven Hantler, Judges Must Play Key Role in
Stemming Tide of Asbestos Litigation, Andrews Asbestos Litig. Rep., Vol. 25, No. 14, May 22, 2003, at 12 (assistant
general counsel for DaimlerChrysler Corp., stating: "The tragedy is that as plaintiffs' lawyers enroll the healthy into
their lawsuits in order to line their own pockets, less money is available for those who are actually sick and dying.").
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[FN218]. See Richard Banks, Court Rulings Move the Asbestos Saga Along, Ins. Day, Jan. 30, 2004, available at
2004 WL 57514950 (reporting on the A.C. & S. bankruptcy plan, which was rejected by the bankruptcy court for
distorting payments to the unimpaired).
[FN219]. See Mark P. Goodman et al., Editorial, Plaintiffs' Bar Now Opposes Unimpaired Asbestos Suits, Nat'l
L.J., Apr. 1, 2002, at B14 ("Sec. 524(g) funds necessarily are limited and therefore dollars paid to the unimpaired
come directly at the expense of claimants with serious injuries.").
[FN220]. See, e.g., Form of Asbestos Personal Injury Trust Agreement and Asbestos Personal Injury Trust
Distribution Procedures, Exh. 1.1.154 to Third Amended Joint Plan of Reorganization, Docket No. 5122, In re
Federal-Mogul Global, Inc., No. 01-10578 (RTL) (Bankr. D. Del. Jun. 4, 2004); DII Industries, LLC Asbestos PI
Trust Trust Distribution Procedures, Exhibit 4 to Fourth Amended and Restated Joint Prepackaged Plan of
Reorganization dated May 17, 2004, Docket No. 1513, In re Mid-Valley, Inc., No. 03-35592 (JKF) (Bankr. W.D.
Pa. May 17, 2004); Annex B to Exhibit 2 of Plan of Reorg., Proposed A Best Prods. Co. Asbestos Personal Injury
Trust Procedures, Docket No. 382, In re A-Best Prods., Co., Inc., No. 02-12734 (JKF) (Bankr. D. Del. Feb. 23,
2004).
[FN221]. Following a recent TDP modification to adjust the payment percentage based on the influx of
unimpaired claims, the trustees of the Manville Trust set a "bar date" for claims to be filed pursuant to the earlier
(1995) TDPs. See Response to the Submissions of the Unofficial Committee of Select Asbestos Claimants, the
Solvent Co-Defendants and Steven Kazan, Docket No. 3468, In re Johns-Manville Corp., No. 82-11656 (BRL)
(Bankr. S.D.N.Y. Feb. 27, 2004) (Trustees asserting that the 2002 revised TDP had become necessary based upon
"an unexpected rise in the number of non-malignancy claims [leading] to a significantly increased portion of Trust
payments being made to settle non-malignant claims, rather than to those with the most serious asbestos-related
injuries. While claimants suffering from asbestos-related cancers received approximately 44% of Trust claims
settlement payments prior to adaptation of the 1995 TDP and for the first five years of TDP experience, the share of
settlement payments going to cancer claims has plummeted to 24% since 2000."). The trustees subsequently
reported that filings against the Trust increased 64% from 2002 to 2003, with 90% of those claims filed before the
October 2003 bar date for the 1995 TDP. See Rep. of the Manville Personal Injury Settlement Trust, Docket No.
3555, In re Johns-Manville Corp., No. 82-11656 (BRL) (Bankr. S.D.N.Y. Feb. 27, 2004).
[FN222]. Quenna Sook Kim, Asbestos Trust Says Assets Are Reduced as the Medically Unimpaired File Claims,
at B6.
[FN223]. See Quenna Sook Kim, Asbestos Trust Says Assets Are Reduced as the Medically Unimpaired File
Claims, at B6.
[FN224]. See Mark P. Goodman et al., Editorial, Plaintiffs' Bar Now Opposes Unimpaired Asbestos Suits, Nat'l
L.J., Apr. 1, 2002, at B14.
[FN225]. See Albert B. Crenshaw, For Asbestos Victims, Compensation Remains Elusive, Wash. Post., Sept. 25,
2002, at E1, available at 2002 WL 100084407.
[FN226]. See Stephen Hudak & John F. Hagan, Asbestos Litigation Overwhelms Courts, Cleveland Plain Dealer,
Nov. 5, 2002, at A1, available at 2002 WL 6382801.
[FN227]. See Mark P. Goodman et al., Editorial, Plaintiffs' Bar Now Opposes Unimpaired Asbestos Suits, Nat'l
L.J., Apr. 1, 2002, at B14.
[FN228]. Paul Hampel & Philip Dine, Asbestos Litigation Deal Could Force Law Offices to Find New
Specialties: Bill Would Substitute Trust Fund for Lawsuits, St. Louis Post-Dispatch, July 23, 2003, at A1, available
at 2003 WL 3596458.
[FN229]. See 'Medical Monitoring and Asbestos Litigation'--A Discussion with Richard Scruggs and Victor
Schwartz, Mealey's Litig. Rep.: Asbestos, Vol. 17, No. 3, Mar. 1, 2002, at 39.
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[FN230]. Matthew Bergman & Jackson Schmidt, Editorial, Change Rules on Asbestos Lawsuits, Seattle
Post-Intelligencer, May 30, 2002, at B7, available at 2002 WL-STLPI 5934774.
[FN231]. In 1993, when the same plaintiffs' lawyers who now represent the unimpaired claimants negotiated a
"settlement class action" with 20 asbestos defendants, the unimpaireds would not have received any compensation
from the settlement trust. The United States Supreme Court struck down the settlement in 1997, saying that this was
an improper class action and that congressional action would be needed to impose a legislative solution. See Roger
Parloff, Asbestos, Fortune, Sept. 6, 2004, at 186, available at 2004 WL 55184416.
[FN232]. See Francis E. McGovern, Asbestos Legislation II: Section 524(g) Without Bankruptcy, 31 Pepp. L.
Rev. 233, 240-241 (2003) and discussion that bankruptcy courts generally allow the claimants to indicate the type of
disease they are claiming and then provide those claimants with the corresponding amount of voting rights.
[FN233]. Under certain TDPs, unimpaired claimants are entitled to payment merely by providing to the trust: (1)
a statement from anyone asserting that the claimant came into contact with one of the debtor's products that
contained asbestos, and (2) an x-ray from the plaintiff with a physician's note stating that the x-ray could point to
evidence of asbestos exposure. See David Egilman, Asbestos Screenings, 42 Am. J. of Indus. Med. 163 (2002)
(stating that some attorneys reportedly pass an x-ray around to numerous radiologists until they find one who is
willing to say that the x-ray shows symptoms of an asbestos-related disease-a practice strongly suggesting unreliable
scientific evidence); see also Stephen Hudak & John F. Hagan, Asbestos Litigation Overwhelms Courts, Cleveland
Plain Dealer, Nov. 5, 2002, at 1, available at 2002 WL 6382801 (reporting that one plaintiff's expert medical
witness remarked, "I was amazed to discover that, in some of the screenings, the worker's x-ray had been 'shopped
around' to as many as six radiologists until a slightly positive reading was reported by the last one").
[FN234]. See Linda Bondi Morrison, An Overview of Asbestos Bankruptcy Issues (Distributed at the Tenth
Annual Conf. of The Nat'l Forum for Envtl. & Toxic Tort Issues Oct. 2, 2003), at 4 (on file with authors) (reporting
that "[t]rust administrators have developed claims processing procedures with a goal of minimizing transaction
costs.").
[FN235]. Insurers, who are asked to fund these trusts and pay for the claims submitted thereto, have become the
only parties apart from a small number of cancer claimants with a financial interest in ensuring that only valid
claims are paid pursuant to TDPs that are established in accordance with appropriate, state-law driven criteria in
these cases. Nevertheless, the standing of insurers to participate in these bankruptcies has been repeatedly called into
question through arguments that plans are purportedly "insurance neutral" such that the insurers' coverage defenses
are not affected or impaired by these cases. See, e.g., In re Mid-Valley, Inc., 305 B.R. 425, 42 Bankr. Ct. Dec.
(CRR) 164 (Bankr. W.D. Pa. 2004). This is so despite the fact that insurers are largely cut out of the plan and TDP
negotiation process which determine the treatment of claims for which the insurers will be asked to pay, and despite
the fact that the insurers are not permitted to participate in the processing of claims by the TDP, in violation of their
contractual rights to defend (or to participate in the defense of) claims, and in violation of provisions within their
policies that prevent settlements without the insurers' consent. See, e.g., Certain Insurers' Brief Responding to
Debtors' Standing Motions, Docket No. 629, In re Congoleum Corp., No. 03-51524 (KCF) (Bankr. D.N.J. Apr. 12,
2004); Mt. McKinley Insurance Co.'s Response to Plan Proponents' Supplemental Response to Mt. McKinley's and
Century Indemnification's Responses to Certain Insurers' Motion for a Clarifying Order, Docket No. 11886, In re
Owens Corning, No. 00-03837 (JKF) (Bankr. D. Del. Jun. 17, 2004); Memorandum of Points and Authorities In
Support Of Insurers' Standing To Participate In This Chapter 11 Case, Docket No. 234, In re Mid-Valley, Inc., No.
03-35592 (JKF) (Bankr. W.D. Pa. Jan. 5, 2004).
[FN236]. See generally Michelle White, Why the Asbestos Genie Won't Stay in the Bankruptcy Bottle, 70 U. Cin.
L. Rev. 1319 (2002) (arguing that companies have an incentive to increase the number of fraudulent or unimpaired
claims to ensure that the attorneys for the unimpaired can control enough votes so that the companies only have to
negotiate with them to reach a bankruptcy accord).
[FN237]. See Roger Parloff, The $200 Billion Miscarriage of Justice; Asbestos Lawyers Are Pitting Plaintiffs
Who Aren't Sick Against Companies that Never Made the Stuff and Extracting Billions for Themselves, Fortune,
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Mar. 4, 2002, at 154, available at 2002 WL 2190334 ("To unearth new clients for lawyers, screening firms advertise
in towns with many aging industrial workers or park X-ray vans near union halls. To get a free X-ray, workers must
often sign forms giving law firms 40 percent of any recovery. One solicitation reads: 'Find out if YOU have
MILLION DOLLAR LUNGS!"').
[FN238]. See Eagle-Picher Industries, Inc. v. American Employers' Ins. Co., 718 F. Supp. 1053, 1057 (D. Mass.
1989) ("[M]any of these cases result from mass X-ray screenings at occupational locations conducted by unions
and/or plaintiffs' attorneys, and many claimants are functionally asymptomatic when suit is filed."); In re Joint
Eastern and Southern Districts Asbestos Litigation, 237 F. Supp. 2d 297, 309 (E.D. N.Y. 2002) ("Claimants today
are diagnosed largely through plaintiff-lawyer arranged mass screening programs targeting possibly
asbestos-exposed workers and attraction of potential claimants through the mass media.").
[FN239]. See Andrew Schneider, Asbestos Lawsuits Anger Critics; Mass Medical Screenings, Run by Lawyers,
Reel in Many Who Don't Feel Ill, St. Louis Post-Dispatch, Feb. 9, 2003, at A1, available at 2003 WL 3554893
(quoting a mass screening participant who reported no ill health effects as saying, "It's better than the lottery. If they
find something, I get a few thousands dollars I didn't have. If they don't find anything, I've just lost an afternoon.");
David T. Austern, The Bankrupt Market, Mealey's Litig. Rep.: Asbestos, Vol. 17, No. 16, Sept. 18, 2002, at 35
(Trustee of the Manville Personal Injury Trust noting that "95% of the claims filed with the Manville Trust during
the past three years--nearly 200,000 claims--were not the result of the claimant becoming sick, going to a doctor,
and then being referred to an attorney. Rather, the overwhelming majority of non-malignant claims received by the
Trust were based on claimant screenings [which] sought to identify potential asbestos claimants who were
asymptomatic--assuming they had an asbestos disease at all.").
[FN240]. Griffin B. Bell, Asbestos & the Sleeping Constitution, 31 Pepp. L. Rev. 1, 5 (2003) ("These screenings
often do not comply with federal or state health or safety law.").
[FN241]. See Lester Brickman, On The Theory Class's Theories of Asbestos Litigation: The Disconnnect Between
Scholarship and Reality?, 31 Pepp. L. Rev. 33, 132 (2004).
[FN242]. See, e.g., David E. Bernstein, Keeping Junk Science Out of Asbestos Litigation, 31 Pepp. L. Rev. 11, 12
(2003).
[FN243]. See, e.g., Eddie Curran, Diagnosing for Dollars, Mobile Reg., Apr. 4, 2004 (citing Dr. Greg Nayden,
who worked for a testing company, as saying, "To be honest with you, I don't think many of these people had any
problems."), available at <www.al.com/news/mobileregister/index.ssf?/ base/news/1081071995288570.xml> (last
visited Jan. 14, 2005).
[FN244]. See Hon. Carl Rubin & Laura Ringenbach, The Use of Court Experts in Asbestos Litigation, 137 F.R.D.
35, 37-39 (1991).
[FN245]. See Hon. Carl Rubin & Laura Ringenbach, The Use of Court Experts in Asbestos Litigation, 137 F.R.D.
35, 37-39 (1991).
[FN246]. See Hon. Carl Rubin & Laura Ringenbach, The Use of Court Experts in Asbestos Litigation, 137 F.R.D.
35, 37-39 (1991).
[FN247]. See Joseph N. Gitlin et al., Comparison of "B" Readers' Interpretations of Chest Radiographs for
Asbestos Related Changes, 11 Acad. Radiology 843-56 (2004); see also Mark A. Behrens & Phil S. Goldberg,
Editorial, Asbestos X-rays: Study Points To Abuse, Nat'l L.J., Nov. 1, 2004, at 19 (discussing need for state courts to
police asbestos screening abuse and help preserve resources needed to compensate the sick).
[FN248]. See Hon. Griffin B. Bell, Asbestos Litigation and Judicial Leadership: The Courts' Duty to Help Solve
the Asbestos Litigation Crisis, Briefly, Vol. 6, No. 6, June 2002, at 14 (Nat'l Legal Center for the Pub. Interest
Monograph), available at http://www.nlcpi.org (last visited Jan. 14, 2005).
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[FN249]. See David E. Bernstein, Keeping Junk Science Out of Asbestos Litigation, 31 Pepp. L. Rev. 13 (2003).
[FN250]. See ABA Commission on Asbestos Litigation Report to the House of Delegates. As a result of its
findings, the ABA Commission proposed the enactment of federal medical criteria standards for nonmalignant
claims. The ABA's House of Delegates adopted the Commission's proposal in February 2003. See Asbestos
Litigation: Hearing Before the Senate Committee on the Judiciary, 107th Cong. (Mar. 5, 2003) (statement of Hon.
Dennis Archer, President-elect, American Bar Association).
[FN251]. Asbestos Litigation: Hearing Before the Senate Committee on the Judiciary, 107th Cong. (Mar. 5, 2003)
at 7.
[FN252]. Asbestos Litigation: Hearing Before the Senate Committee on the Judiciary, 107th Cong. (Mar. 5, 2003)
at 8.
[FN253]. Editorial, X-Raying an Asbestos Quagmire, Chi. Trib., Aug. 16, 2004, at 16, available at 2004 WL
89474404 ("Do doctors hired to be expert witnesses by plaintiffs' lawyers need better eyeglasses, or is something
more nefarious going on here?"); see also Murray L. Janower & Leonard Berlin, Editorial, "B" Readers'
Radiographic Interpretations in Asbestos Litigation: Is Something Rotten in the Courtroom?, 11 Acad. Radiology
842 (2004) (stating that "the radiological community itself clearly has an obligation to conduct further investigations
to determine whether the integrity of B-reader radiologists has indeed been breached and if so, to repair the breach,
implement measures to prevent it from happening again, and restore integrity to our noble and proud profession.");
Joseph Perkins, Editorial, The Great Asbestos Deception, San Diego Trib., Aug. 13, 2004, at B7, available at 2004
WL 59001133 (stating that the study "ought to be read by judges presiding over asbestos-related lawsuits...").
[FN254]. David E. Bernstein, Keeping Junk Science Out of Asbestos Litigation, 31 Pepp. L. Rev. 13 (2003)
(quoting Lawrence Martin, M.D.); see also Andrew J. Ghio, M.D., Editorial, Asbestosis: Over Diagnosed?, The
News & Observer (Charlotte, North Carolina), Apr. 12, 2004, at A11, available at 2004 WL 56033533; David M.
Setter et al., Why We Have to Defend Against Screened Cases: Now Is the Time for a Change, Mealey's Litig. Rep.:
Silica, Vol. 18, No. 20, Nov. 12, 2003, at 11.
[FN255]. U.S. v. Harding, 237 F. Supp. 317, 319 (D. Conn. 1964).
[FN256]. The Association of Occupational and Environmental Clinics, in 2000, stated concern that "medically
inadequate screening tests are being conducted to identify cases of asbestos-related disease for legal action. These
tests do not conform to the necessary standards for screening programs conducted for patient care and protection."
Association of Occupational and Environmental Clinics, Astestos Screening (2002), available at http://
www.aoec.org/asbestos-screen.htm (last visited Jan. 14, 2005); see also Greg Gordon, Have Asbestos Diagnoses
Been Exaggerated?, Star-Trib. (Minneapolis-St. Paul), Aug. 5, 2004, at 3A, available at 2004 WL 83077304
(quoting Dr. Michael Harbut, an occupational health specialist in Michigan, as saying that any lawyer who
"degrades the value of human health by relying only on X-rays for making a diagnosis of asbestosis is certainly
morally corrupt, if not criminally corrupt.").
[FN257]. U.S. Senator Don Nickles, Chairman of the U.S. Senate Committee on Budget, has called on the Federal
Trade Commission and the Food and Drug Administration to launch a federal inquiry into the "widespread use of
for-profit mass X-ray screening vans and trucks to generate lawsuits by claimants, many of whom are not sick."
Letter from U.S. Senator Don Nickles, Chairman, Committee on Budget, to Hon. Timothy J. Muris, Chairman,
Federal Trade Commission and Lester M. Crawford, D.V.M., Ph.D., Acting Commissioner, Food and Drug
Administration 1 (Apr. 28, 2004) (on file with the authors).
[FN258]. See, e.g., Tr. of Deposition of Perry Weitz, In re Congoleum Corp., No. 03-51524 (KCF) at 78:14-80:14
(Bankr. D.N.J. Jun. 25, 2004) (on file with the authors) (Asbestos plaintiffs' attorney testifying that "99.9% of the
[bankruptcy] plans that involve nonmalignant claims get paid regardless of what the law of the state is[of the
underlying claim]," and agreeing that, although the asserted unimpaired claims would not be cognizable in certain
state courts, " they get paid in Manville, and they get paid in all of the other trusts that are set up" because "there is a
negotiation between the debtor and the [asbestos-related] parties... and so there's a quid pro quo relationship.").
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[FN259]. See Mark D. Plevin et al., Pre-Packaged Asbestos Bankruptcies: A Flawed Solution, 44 S. Tex. L. Rev.
883, 907-908 (2003) ("The plan negotiations take place in secret, with the result that a select group of claimants
[generally the unimpaired claimants] whose lawyers know about the negotiations receive favorable treatment
relative to the interests of other similarly situated claimants.").
[FN260]. See Sandra E. Mayerson, Current Developments in Pre-packaged Bankruptcy Plans, 838 PLI/Comm
337, 353 (2002) (noting that the first pre-packaged bankruptcy in asbestos litigation was filed by the Fuller-Austin
Insulation Company in 1998. It took only nine weeks between the time the company filed the plan and when the
court approved it).
[FN261]. See Francis E. McGovern, Asbestos Legislation II: Section 524(g) Without Bankruptcy, 31 Pepp. L.
Rev. 233, 247 (2003) ("The [asbestos] plaintiffs' bar is represented by approximately twenty-five lawyers who serve
on the various asbestos bankruptcy committees. Roughly seven to fifteen of those lawyers can effectively speak for
all their peers. If those seven to fifteen lawyers can agree among themselves on the details of a pre-packaged
bankruptcy, there is a substantial likelihood that there will be no critical opposition from the plaintiffs to an eventual
plan of reorganization.").
[FN262]. See Mark D. Plevin et al., Pre-Packaged Asbestos Bankruptcies: A Flawed Solution, 44 S. Tex. L. Rev.
883, 920-921 (2003) (calling pre-packaged bankruptcies "insurance plays" because "the prospective debtor is able to
promise favorable payment terms at no cost to itself, because the cost would be borne by its insurers.").
[FN263]. Roger Parloff, Asbestos, Fortune, Sept. 6, 2004, at 186, available at 2004 WL 55184416.
[FN264]. Mark D. Plevin et al., Pre-Packaged Asbestos Bankruptcies: A Flawed Solution, 44 S. Tex. L. Rev. 883,
907-908 (2003).
[FN265]. See In re ACandS, Inc., 311 B.R. 36, 39 (Bankr. D. Del. 2004).
[FN266]. In re ACandS, Inc., 311 B.R. 36, at 43.
[FN267]. In re ACandS, Inc., 311 B.R. 36, at 43; see also Richard Banks, Court Rulings Move the Asbestos Saga
Along, Ins. Day, Jan. 30, 2004, available at 2004 WL 57514950.
[FN268]. See generally Michelle White, Why the Asbestos Genie Won't Stay in the Bankruptcy Bottle, 70 U. Cin.
L. Rev. 1319, 1330 (2002). ("Single plaintiffs may file claims against fifty to 100 defendants. This means that even
if new defendants pay less per claim, the loss of revenue from each defendant is made up by collecting from more of
them. ... With multiple defendants, small settlements add up. The economics of representing asbestos plaintiffs
suggests that suing additional defendants per plaintiff is very profitable, because most of the costs that lawyers incur
are fixed.").
[FN269]. HarrisMartin Publishing, Trends in Claim Filing and Asbestos Verdicts, Columns, Sept. 2004, at 70.
[FN270]. See Mark D. Plevin et al., Don't Bankrupt Asbestos, Legal Times, Mar. 19, 2001, at 68; see also Mary
McLachlin, Pros, Cons Argued on Court System for Asbestos Cases, Palm Beach Post, July 10, 2004, at 5B,
available at 2004 WL 85160738 (reporting that court is considering an inactive docket because current system
favors plaintiffs as "hundreds of cases [can be set] for trial at once, which pressures defendant companies to offer
settlements."); Patti Bond, Georgia-Pacific's Asbestos Nightmare, Atlanta J. & Const., Sept. 16, 2002, at A1,
available at 2002 WL 3738152 (reporting that Georgia-Pacific's attorneys tried to require proof of disease and proof
that plaintiffs were exposed to its products before agreeing to settle, but that "the company has had to succumb to
mass settlements involving the so-called 'unimpaired' just to get the cases off the books.").
[FN271]. Victor E. Schwartz & Rochelle M. Tedesco, Law of Unintended Consequences in Asbestos Litigation:
How Efforts to Streamline the Litigation Have Fueled More Claims, 71 Miss. L.J. 531, 536 (2001) (discussing the
unintended consequences of the expedient handling of asbestos claims).
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[FN272]. See In re Babcock & Wilcox Co., 274 B.R. 230, 235-36 (Bankr. E.D. La. 2002) (finding that Babcock &
Wilcox, prior to filing its bankruptcy petition, adopted a settlement strategy or "social engineering approach" to
handle its asbestos litigation in order to "keep transaction costs to a minimum" because asbestos personal injury
cases against the right group of defendants would "inflame a jury" and because the plaintiffs' firms "held the cards,"
even when the company's liability "was doubtful and in dispute"). In his expose on asbestos bankruptcies, Fortune's
Roger Parloff points out that the amount of money that unimpaireds had received from the bankruptcy process far
exceeds the settlements that companies were willing to pay during the pre-bankruptcy periods. For example, from
the early 1980s through 2002, Parloff observed, Congoleum Corp. settled unimpaired cases for an average of $102
each and resolved 33,000 cases for $13.5 million. During the asset transfer preceding its pre-packaged bankruptcy in
2003, Congoleum settled nearly 80,000 claims for $466 million. See Roger Parloff, Asbestos, Fortune, Sept. 6, 2004,
at 186, available at 2004 WL 55184416.
[FN273]. Disputes often arise regarding the method through which these claims will be estimated, with counsel
for asbestos claimants asserting that bankruptcy courts must estimate debtors' aggregate asbestos liability through a
known data set, namely, the debtors' prepetition settlement/claims resolution histories. Debtors, on the other hand,
seek to estimate by requiring each claimant to file individual proofs of claim, to which the debtors will assert their
objections and defenses individually or by groups of claims. See, e.g., Debtors' Consolidated Reply in Support of
Their Motion for Entry of Case Management Order, Establishment of a Bar Date, Approval of the Claim Forms with
Respect to Asbestos Personal Injury Claims and Approval of Debtors' Combined Notice Program, Docket No. 1666,
In re W.R. Grace Co., No. 01-01139 (JKF) (Bankr. D. Del. Feb. 12, 2002); Case Management Proposal of the
Official Committee of Asbestos Personal Injury Claimants, Docket No. 2421, In re W.R. Grace Co., No. 01-01139
(JKF) (Bankr. D. Del. Jul. 23, 2002); Motion for Case Management Order for Substantive Estimation Hearings,
Docket No. 2456, In re USG Corp., No. 01-02094 (JKF) (Bankr. D. Del. Jun. 21, 2002); Future Representative's
Informational Brief and Preliminary Response to Disclosure Statement, Docket No. 1809, In re Babcock & Wilcox
Co., No. 00-10992 (Bankr. E.D. La. Apr. 17, 2001).
[FN274]. See Solving the Asbestos Litigation Crisis: Hearing on S. 1125, the Fairness in Asbestos Injury Act of
2003, Before the Senate Committee on the Judiciary, 107th Cong. (June 4, 2003) (statement of Prof. Laurence
Tribe); see also The State of the Economy: Hearing Before the Senate Committee on the Budget, 107th Cong. (Jan.
29, 2003) (statement of Michael Baroody, Executive Vice President of the National Association of Manufacturers);
Lisa Girion, Firms Hit Hard as Asbestos Claims Rise, L.A. Times, Dec. 17, 2001, at A1, available at 2001 WL
28937452; Amity Shlaes, The Real-Life Tragedy of the Asbestos Theatre, Fin. Times, May 14, 2002, at 15, available
at 2002 WL 20299748; Eric Roston, The Asbestos Pit, Time, Mar. 11, 2002, at Y9, available at 2002 WL 8385920;
Michael Freedman, The Tort Mess, Forbes, May 13, 2002, at 95, available at 2002 WL 2214449; Quenna Sook Kim,
Firms Hit by Asbestos Litigation Take Bankruptcy Route, Wall St. J., Dec. 21, 2000, at B4, available at 2000
WL-WSJ 26620724.
[FN275]. See Joseph E. Stiglitz et al., The Impact of Asbestos Liabilities on Workers in Bankrupt Firms, 12 J.
Bankr. L. & Prac. 51, 73-74 (2003).
[FN276]. See 12 J. Bankr. L. & Prac. at 83.
[FN277]. See Jesse David, The Secondary Impacts of Asbestos Liabilities (Nat'l Econ. Research Assocs., Jan. 23,
2003).
[FN278]. See Jesse David, The Secondary Impacts of Asbestos Liabilities (Nat'l Econ. Research Assocs., Jan. 23,
2003) at 14-15.
[FN279]. See Jerry A. Lodge, Editorial, Leveling the Playing Field, Charleston Gazette, May 31, 2004, at P5A,
available at 2004 WL 59642956 (citing the statistic in representing the position of the West Virginia Manufacturers
Association in favor of a solution to asbestos litigation).
[FN280]. See Dean M. Trafelet et al., Section 524(g) and the Futures Representative, SH043 ALI-ABA 51 (Sept.
2002). (describing the role of the Futures Representative in the context of unimpaired claimants); see also Mark D.
© 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.
14 JBKRLP 1 ART. 2
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(Publication page references are not available for this document.)
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Taylor & Scott Alberino, Who Is Authorized to Vote on a Plan of Reorganization?, Mealey's Litig. Rep.: Asbestos,
Vol. 2, No. 6, Jan. 2003, at 4 (saying "[t]he time has come for bankruptcy courts to recognize that the vast majority
of unimpaired claimants are properly characterized as 'demands' because they do not possess a right to payment
under state tort laws.").
[FNa1]. Victor E. Schwartz is Chairman of the Public Policy Group in the Washington, D.C. office of the law firm
of Shook, Hardy & Bacon L.L.P. He co-authors the most widely used torts casebook in the United States, Prosser,
Wade and Schwartz's Torts (10th ed. 2000). He has served on the Advisory Committees of the American Law
Institute's Restatement of the Law of Torts: Products Liability, Apportionment of Liability, and General Principles
projects. Mr. Schwartz received his B.A. summa cum laude from Boston University and his J.D. magna cum laude
from Columbia University. Mark A. Behrens is a partner in the law firm of Shook, Hardy & Bacon L.L.P. in
Washington, D.C. He received his B.A. in Economics from the University of Wisconsin-Madison in 1987 and his
J.D. from Vanderbilt University in 1990, where he served as Associate Articles Editor of the Vanderbilt Law
Review. Phil S. Goldberg is an associate in the Public Policy Group in the Washington, D.C. office of Shook, Hardy
& Bacon L.L.P. Mr. Goldberg received his B.A. from Tufts University and his J.D. from The George Washington
University School of Law, where he was a member of the Order of the Coif.
Copyright 2005 Thomson/West
14 JBKRLP 1 ART. 2
END OF DOCUMENT
© 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.