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Saturday, March 29, 2003

Removing the shackles of asbestos litigation
Sen. Don Nickles (R-Okla.) -- Op-Ed -- 3/26/03

For many years, Congress has relied on economic incentives and tax savings to encourage investment, create jobs and stimulate growth in the economy. Such measures will, appropriately, become the centerpiece of proposed legislation to revive our dormant economy.

But first, we must face the economic realities of 2003. While traditional stimulus solutions offer fertile ground for future growth, they are faced with a plethora of negative influences that tend to drive the economy in the opposite direction. That is why we must be prepared to go beyond merely finding effective stimuli for growth to eliminating those factors that obstruct economic recovery.

One major inhibitor of economic recovery is the phenomenon of ever-expanding asbestos litigation, which threatens to siphon away much of the impact of any stimulus measures Congress might pass. Spawned in our courtrooms, the explosion of asbestos litigation is rapidly becoming an out-of-control stampede of civil suits that threatens to bankrupt scores of companies, displace thousands of workers and erode away sizable chunks of employee retirement plans.

An estimated 8,400 companies have already been named as defendants in asbestos suits, many of which have never been involved in the production of asbestos. Over 200,000 asbestos claims are pending in federal and state courts, with estimates that it could reach as high as a million. Companies have already paid out over $54 billion in claims and costs, and future payments could easily reach over $200 billion. The increasing burden of litigation costs and settlement pay-outs has already pushed at least 60 companies into filing for Chapter 11 bankruptcy protection, with many more likely to follow.

But the costs of litigation and eventual bankruptcy do not begin to reflect the true impact on a business, its investors and its employees. Aside from direct costs associated with litigation and bankruptcy, defendant companies, not surprisingly, suffer from significant declines in stock value, shortages of capital necessary for growth, reductions in long-term revenue and, ultimately, loss of jobs.

It is estimated that almost 60,000 workers have lost their jobs as a direct result of asbestos litigation and resulting bankruptcies. A recently published study co-authored by Joseph Stiglitz, a 2001 Nobel Prize-winning economist, estimates that each displaced worker will lose, on average, $25,000 to $50,000 in lost wages.

Furthermore, affected employees, many of them union members, are often shareholders and participate in the company 401(k) plan. It is estimated that workers of companies declaring asbestos-related bankruptcy will, on average, lose 25 percent of their plan value.

What makes all these developments so offensive is the fact that a majority of the asbestos plaintiffs have no medical injury. In essence, the courts are becoming log-jammed with cases involving claims of prior asbestos exposure that “may” someday develop into the symptoms of a true disease. In some cases, even exposure to asbestos is doubtful.

What has become clear is that asbestos litigation has become extremely lucrative for trial lawyers. A typical legal strategy involves finding one or two plaintiffs who have developed an asbestos-related malignancy, then add hundreds of plaintiffs to the suit who may have no medical impairments. Faced with having to settle, or endure lengthy and even more costly litigation to sort out who is sick and who is not, defendant companies often settle, or consider bankruptcy.

Sadly, one group that may suffer the most from this tidal wave of suits are claimants who are actually afflicted with asbestos-related malignancies such as mesothelioma, which is often fatal within two years of diagnosis. As hundreds of thousands of non-injured claimants continue to file questionable claims, and more companies file for bankruptcy, there may soon not be sufficient funds for those who deserve and need compensation.

Though this problem sprang up through the courts, the solution must be found in Congress. The U.S. Supreme Court has already made several pleas for Congress to step in and resolve this problem. Chief Justice William Rehnquist wrote that the asbestos problem “cries out for a legislative solution.” And a growing number of trial lawyers have called for congressional reform — primarily those representing claimants with malignant diseases.

Congress cannot ignore this problem any longer. It must act and not let itself become mired in a time-consuming search for the “perfect” solution. Some form of relief — even if it is interim relief — must be passed this year. At a minimum, federal law must establish clear medical criteria and compliance standards to be used immediately by courts in determining whether a claimant actually has an “injury” and, thus, may file a civil suit.

Second, because some asbestos-related illnesses will not develop until decades after exposure, federal law must suspend the running of statutes of limitations until a person discovers an injury or should have discovered the illness. Temporarily suspending, or “tolling,” the statute of limitations eliminates the need for thousands of unimpaired claimants to file premature lawsuits but preserves their legal rights if an injury should develop later. Other corrective measures could include steps to limit abusive venue shopping.

If Congress is to play a meaningful role in restoring our economy, it must address the problem of out-of-control asbestos litigation. Merely identifying stimuli for economic growth is not enough. We must also begin to cleanse our economy of the gremlins that thwart such growth. A good place to begin is with asbestos litigation reform.

Sen. Don Nickles (R-Okla.) is chairman of the Budget Committee and recently introduced the Asbestos Claims Criteria and Compensation Act of 2003.

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