Show Me the (Asbestos) Money!

In recent years, Missouri courts, and St. Louis City courts in particular, have been getting attention for their large toxic tort verdicts. The legislature is responding. While Missouri’s official nickname is the “Show Me State,” some legislators have been referring to it as the “Sue Me State” to promote new tort reform measures. One such reform measure is Missouri’s Asbestos Bankruptcy Transparency Act, introduced in the 2018 session as House Bill 1645. Similar bills were introduced in 2017 and 2016 but did not become law.

Missouri is not the first state to seek disclosure of asbestos bankruptcy trust claims. Ohio was the first state to pass legislation requiring the disclosure of bankruptcy trust claims in an asbestos personal injury action. Since Ohio’s legislation became effective in March 2013, 12 states have followed suit. Today, a version of this legislation exists in:

  • Ohio (OH House Bill 380 (2011)
  • Oklahoma (OK Senate Bill 1792 (2012)
  • Wisconsin (WI Act 124 (2013)
  • Texas (TX House Bill 1492 (2015)
  • Arizona (AZ Rev Stat § 12-782 (2015)
  • Tennessee (TN Senate Bill 2062 (2016)
  • West Virginia (WV Code § 55-7F (2016)
  • Utah (UT House Bill 403 (2016)
  • South Dakota (SD Senate Bill 138 (2017)
  • North Dakota (ND House Bill 1197 (2017)
  • Iowa (IA Senate File 376 (2017)
  • Mississippi (MS House Bill 1426 (2017)
  • North Carolina (Senate Bill 430 (2017, which just became active on June 12, 2018)

The history of asbestos bankruptcy starts in 1982. In 1982, Johns-Manville became the first company in the United States to declare bankruptcy as a result of asbestos liabilities. When the company emerged from bankruptcy in 1988, it had just established the Manville Personal Injury Settlement Trust. In 1994, Congress enacted section 524(g) of the U.S. Bankruptcy Code (“Section 524(g)”) to allow companies with asbestos liabilities to establish and fund trusts to resolve current and future claims relating to liability for asbestos exposure. 11 U.S.C. § 524(g).

Since that first “asbestos bankruptcy,” nearly 100 companies have reportedly filed for bankruptcy protection because of asbestos liabilities. Many of those companies utilized Section 524(g) to establish a bankruptcy trust as part of their reorganizations to emerge from bankruptcy. Although there have been more in recent years, as of June 2010, there were 54 trusts that had been established. Dixon, Lloyd, et al., Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trust, RAND Institute of Civil Justice (2010).

Why is this legislation needed? Are asbestos bankruptcy transparency laws a solution looking for a problem?

One of the most frequent arguments made by legislators and supporters of bankruptcy transparency laws is that plaintiffs are “double-dipping.” That is, plaintiffs are filing and settling civil suits for asbestos related injuries, and then filing claims with the bankruptcy trusts and recovering additional settlements for the same injuries—a double recovery. On March 8, 2018, Missouri Representative Bruce DeGroot from St. Louis County and sponsor of House Bill 1645 stated on the Missouri House floor, “This is the asbestos transparency trust bill…it essentially stops double-dipping from going on in these asbestos, mesothelioma claims. It’s a tort reform bill, and it is designed, as all tort reform bills are, to keep us from being called the Sue Me State instead of the Show Me State.”

Under the 2018 version of the Missouri bill, a plaintiff–and the plaintiff’s counsel–would be required to provide the court and other parties in the civil case a sworn statement that an investigation of all possible asbestos trust claims was conducted and that all asbestos trust claims that can be filed have been. Further, the plaintiff would have been required to provide all parties copies of all trust claim materials that form the basis for the claim. Often times, these materials include sworn statements involving what products were used, where they were used, and when they were used.

Many defendants in asbestos litigation have long sought this information whether as evidence of alternative causation, for set-off information, or for impeachment. Missouri’s House Bill 1645 stated that defendants may introduce claim materials to prove, “without limitation,” alternative causation. In addition, under the amended statute courts would have been required to presume all trust materials and governance documents are relevant, authentic, and admissible in the asbestos action. For example, if your client’s products only contained chrysotile asbestos and the plaintiff had filed sworn statements with a trust claiming exposure to amphibole asbestos products, you may have the evidence necessary to establish a sole proximate cause defense.

Under the Missouri bill, a claimant would also have been required to investigate and file additional claims if information was learned during the civil case that would form a basis for a claim to be made against a bankruptcy trust. The legislation also would have allowed a defendant to seek a stay if it obtained information that would support the filing of a trust claim not previously filed. If the defendant made a sufficient showing, the court would have been ordered to stay the asbestos civil action until the claimant filed the trust claim and produced all related trust claim materials.

The legislation also would have allowed the court to impose sanctions for a claimant’s failure to comply with the disclosure requirements. A defendant would have also, within one year after a judgment, been allowed to move to reopen a judgment in an asbestos action if the claimant filed subsequent claims to a bankruptcy trust that was in existence at the time of judgment.

As you can imagine, not everyone favors asbestos bankruptcy transparency legislation. Opponents argue that the mandate on plaintiffs to file trust claims is complicated and time-consuming, which puts an unnecessary burden and delay on the claimants. Opponents also argue that this type of legislation will increase discovery and allow asbestos defendants to abuse the motion to stay provisions to prevent a living plaintiff from having his or her day in court.

In February 2018, the Kaufman Fund of St. Louis, whose mission is “[t]o support veterans and children in the St. Louis region who are at risk of abuse or poverty needing food, shelter, clothing, medical care and basic needs” wrote a letter to Missouri House Speaker, Todd Richardson opposing House Bill 1645. In its letter, the Kaufman Fund argued that it would “shield corporations from being held accountable for deadly asbestos-related diseases like Mesothelioma and delay justice for victims.” Id. It continued, “[t]hose suffering from mesothelioma, on average have 12 to 18 months to live. Unfortunately, the asbestos industry is seeking to take advantage of this fact. Their goal: To delay and deny until victims die.” Id.

On March 8, 2018, Missouri House Bill 1645 passed the Missouri House 126-15. On May 3, 2018, it was placed on the Missouri Senate Informal Calendar but never called for a vote before the legislative session ended.

As such, Missouri asbestos defendants will not obtain the statutory right to information regarding a plaintiff’s claims against asbestos bankruptcy trusts this year. If your jurisdiction has an asbestos bankruptcy trust transparency statute, or if you are defending a case where the law of that state may be applied, be sure to explore what information regarding the bankruptcy trust claims is available and whether that information may be helpful to your case.

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Kerri Forsythe

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