Congress should stop hiding from asbestos legal debacle

Deborah R. Hensler & Gustave H. Shubert

April 16, 1991|By Deborah R. Hensler& Gustave H. Shubert

WHEN IS Congress going to stop hiding from the asbestos litigation mess? The first lawsuits were filed about 20 years ago, and for more than a decade we have known that a disaster is unfolding in the courts.

Early last month, the Judicial Conference of the United States issued a report that cited all the familiar evidence anew: courts unable to dispose of an enormous backlog of cases; nearly two new suits filed yearly for every one that is completed (14,000 filed in 1990 in the federal courts alone); victims dying before claims can be resolved; 11 companies in bankruptcy proceedings, and legal costs absorbing twice as many dollars as those that go to claimants and survivors of victims.

The report, citing predictions that asbestos-related deaths will reach 225,000 by 2015, urged Congress to enact a "national legislative scheme" to resolve the problem before the system collapses entirely.

What stands in the way?

First, the litigation itself is enormously complex and made even more so by the events that it has generated. Second, many of the major players have a financial stake in the continuing litigation (stretching it out helps companies cope with the cash-flow demands of compensating thousands of claimants and it rewards plaintiff and defense attorneys with an unbroken stream of fees). Third, the myth that the current system offers individualized justice provides a powerful argument against proposals that threaten individualization.

In reality, however, the myth already has become just that. Although issues are typically relitigated for every case -- reinventing the wheel every time -- each "case" can involve hundreds of plaintiffs, and their individual circumstances are often forgotten or ignored in what has become a freight-car processing system.

There are several ingredients to a solution:

* Stopping repetitive litigation on the issue of whether asbestos exposure causes certain diseases,

* Applying common substantive and procedural standards,

* Guaranteeing assistance in covering economic loss to individuals who develop asbestos-related injuries,

* Providing compensation proportional to loss,

* Giving priority to those who have already incurred economic loss, while preserving the ability to compensate those who incur losses later,

* Requiring manufacturers and other responsible parties to shoulder a fair share of the damages,

* Establishing fixed rules for determining how much responsible parties will ultimately pay,

* Reducing transaction costs

Most proposed solutions instead offer piecemeal remedies. As we see it, there are really only two contending strategies for achieving a comprehensive solution: a congressionally enacted administrative compensation scheme, and a congressionally mandated collective legal action.

The administrative solution would remove asbestos cases from the courts and establish a compensation program managed by government agencies. Congress would specify eligibility rules and payment schedules. Eligible claimants would apply for benefits when they experienced losses. The most serious practical objection to this strategy is funding. History suggests that the costs of alternative compensation programs are almost always underestimated and tend to escalate. However, we can learn from past mistakes, and specialized compensation programs could be supported, at least in part, by taxes on "responsible parties" -- as in the vaccine compensation program for children who suffer severe reactions to required shots.

The collective legal action remedy would grant the federal courts broad powers to gather all pending claims within a single court, where judges and the parties would develop and implement a comprehensive settlement. Although some believe this violates federalist principles, it occurs routinely when a manufacturer seeks bankruptcy protection. A collective asbestos action could take bankruptcy proceedings as a model: Widespread notice of the proceedings would be given; the number and severity of claims, as well as the total amount of available assets from all responsible parties would be determined, a plan would be developed to reserve funds for future claimants, and a claims payment mechanism would be established.

To be sure, neither the administrative solution nor the collective legal action remedy is perfect. Under the administrative scheme, compensation would be different from earlier awards and claimants might receive payments only for economic loss. With collective legal action, a substantial fraction of expenditures would still go toward attorney fees. And the time and costs of reaching agreement would be enormous. But the alternative is another 20 years of business as usual, meaning nothing will be done at all.

Only Congress, by rejecting inaction and piecemeal remedies, choosing one of these strategies and adopting a program to implement it, can finally confront the litigation mess. Unfortunately, those who have the most to lose if our representatives continue to duck the asbestos mess -- injured claimants -- are those who have the least voice in the decision process.

Deborah R. Hensler and Gustave H. Shubert are both with the Rand Corp. think tank.

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