Commentary

A Rare Chance to Control Junk Science

This article was published by Copley News Service, April 30, 2003.

Senator and trial attorney John Edwards is well-liked by the plaintiff’s bar. Too well-liked, perhaps, since the Justice Department is investigating apparently illegal contributions to his presidential campaign, since returned, from an Arkansas law firm.

Although Sen. Edwards is not culpable, the incident illustrates how tort lawyers play the political game, making liability reform so difficult. Yet the enormity of the disaster created by asbestos litigation is finally pushing Congress to act.

The first asbestos case was filed in 1966. There have since been 700,000 more — 200,000 in the last two years alone. About 8,400 firms have been sued. The process already has cost $54 billion; the bill could eventually hit $270 billion or more.

The litigation has overwhelmed many companies: 67 firms have gone bankrupt. Observes a recent study by economists Joseph Stiglitz, Jonathan Orszag and Peter Orszag for the American Insurance Association, “The staggering costs of asbestos liabilities have pushed many defendant companies into bankruptcy or to the brink thereof.”

Business failures hurt more than just corporate executives and shareholders. So far, asbestos bankruptcies have destroyed between 52,000 and 60,000 jobs and ruined innumerable 401(k) plans invested in company stock.

The litigation has constantly changed form. First was the move from workers’ compensation to tort action.

After the original asbestos producers were ruined, creative lawyers found more distant defendants. Today suits against non-traditional industries — beverage and food, glass, iron and steel, metal goods, paper and even textiles — account for six of every 10 dollars spent in asbestos litigation.

The lawsuit cascade has squeezed out more serious claims of harm. The Rand Corporation reports that cases involving mesothelioma and other cancers have stayed roughly constant over the last decade. But from 1991 to 2000, nine of 10 claims were for non-malignancies, and garnered two-thirds of compensation dollars.

Yet the Rand Corporation warns that another 1.7 million cases might eventually be filed. As a result, even judges have been crying for legislative help. In March, both majority and dissenting Supreme Court justices in Norfolk & Western Railway Co. versus Ayers, involving railway workers suing over their alleged fear of contracting cancer, chastised Congress for its inaction.

Capitol Hill finally seems to be listening. Today, a growing political coalition is pushing to limit litigation run riot.

Even the American Bar Association has called for restricting compensation to people who’ve been hurt.

Leading the reform efforts is Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, who is pressing for creation of a special court to administer an asbestos trust fund, which would offer compensation based upon the severity of medical distress.

Also in play are proposals by Sen. Don Nickles, R-Okla., and Rep. Calvin Dooley, D-Calif., to mandate a medical test for asbestos cases — in essence, to require the demonstration of injury before granting compensation. Rep. Chris Cannon, R-Utah, chairman of a key subcommittee of the House Judiciary Committee, wants to limit unnecessary litigation more broadly — for instance, restricting venue changes.

It is “a lot to expect Congress to fix such a tough issue,” observes one lobbyist. But Hatch has worked closely with Democrats, including Pat Leahy of Vermont and Chris Dodd of Connecticut, which has helped generate some political momentum.

Difficult issues remain. Although almost everyone agrees that compensation needs to be tied to medical harm, the desirability of a trust fund divides reformers.

Another question is the size of any fund. Industry has suggested $108 billion, contributed by insurers, current defendants and potential lawsuit targets. Organized labor is pushing for the range of $121 billion to $132 billion.

Moreover, the parties are debating how to avoid leaving some plaintiffs with nothing if the fund eventually runs dry. The one truly bad idea comes from Damon Silvers, associate general counsel of the AFL-CIO, who wants “a federal backstop,” that is, to shift the liability onto federal taxpayers. Yet, if there is a truly innocent party in the asbestos mess, it is the American people.

Another dispute involves whether the trust fund will be mandatory or plaintiffs can opt out. The latter preserves freedom of choice but, in doing so, risks defeating the goal of eliminating the abusive choices being made today.

Still, despite such disagreements, there is surprising consensus that something must be done.

“The story is a long one,” observed one industry representative, “but we’re in the last mile.”

Liability law is necessary to hold companies and individuals accountable for their actions in the marketplace. Alas, the current tort system has turned into a legal lottery with little relationship to harm or justice. Fixing it remains extraordinarily difficult.

But with the sick going uncompensated and companies going bankrupt, we can’t wait any longer to deal with the asbestos imbroglio. Congress must not waste today’s opportunity to settle the issue.

Doug Bandow is a senior fellow at the Cato Institute.