By Stephen Young
By Stephen Young
By Stephen Young
By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
The Fort Worth native had a knack for understanding mechanical things. So as an engineering student at the University of Oklahoma in the early 1960s, he took what he thought was a great work-study job repairing the school's boilers, cooling systems, pumps and pipes, which ran under the Norman, Oklahoma, campus in miles of tunnels. It was a hands-on education, and just as important for the penniless student, it paid overtime. "When we'd tear down one of those boilers, it was Annie bar the door. That was money-making time," Bailey recalled years later.
Bailey had little reason in the four decades since to think about his school-days job, but in the summer of 1999, after a lifetime of work as a mechanical engineer and landscape contractor, it came charging back. "He woke up one morning and he couldn't breathe," recalls his wife, Lynne Bailey. "They took an X-ray, and half his lung was covered with a malignancy."
Bailey had contracted mesothelioma, a rare and incurable form of cancer tied with scientific certainty to breathing asbestos fibers. At his college job, Bailey spent hours installing or tearing out heat-resistant asbestos pipe insulation and gaskets, or mixing floury, dusty asbestos-laden refractory cement--all in close spaces underground.
The fit, trim 59-year-old confronted his illness with stubborn optimism, refusing to accept an oncologist's estimate that he had less than six months to live. "He was sure they didn't know what they were talking about," says his wife, describing how he enrolled in an experimental cancer treatment trial in San Antonio and exhausted their savings on drugs and unconventional treatments.
But the hopeless prognosis proved spot-on. Ronald Bailey died in June 2000, becoming one of 2,500 Americans struck down that year from this particularly virulent occupational disease. "It engulfs the lungs and strangles them, like a belt being cinched up around the chest," says Mark Iola, a Dallas lawyer who specializes in representing people with malignant asbestos-related illnesses. "I can't think of a more painful way to die."
Since the 1980s, families of men such as Ronald Bailey have been able to sue and stand a good chance of collecting court-imposed judgments or settlements from companies that made asbestos products. (Asbestos was phased out of the workplace in the early 1970s.) After 30 years of intense litigation, there is a well-established body of evidence that the major asbestos product makers knew about hazards to workers by the 1940s but concealed that information and issued no warnings. All that was left to prove when Bailey and his wife brought their liability lawsuit was which companies' products he had used and who would be made to pay.
In a deposition taken at his house three months before he died, Bailey answered those questions in easy detail. Dressed in a plaid shirt and cardigan sweater, his nose fixed with an oxygen tube, he described how he installed various pipe coverings, valve packings, cements and gaskets on his university job. A smorgasbord of materials was on hand because distributors would sometimes donate surplus supplies to the university, he said.
"He was a great witness," Iola says. "The defendants weren't going to let a jury hear from him."
In August 2000, just as Bailey's case was set to go to trial in Cameron, Texas, the last of 14 defendants settled with his widow. Iola will only say the total amounted to "more than several millions of dollars. There were about $200,000 of medical bills and $500,000 of lost wages. But most of it was for his pain and suffering and the loss of consortium, of him being who he was to his family."
Over the next year, however, Lynne Bailey would witness firsthand what a lawsuit crisis looks like. Before they paid her anything, six corporate defendants that owed about half her total settlement filed for bankruptcy, saying they were being drowned by a flood of asbestos claims. The six--roofing-materials company GAF, refractories-maker A.P. Green, boilermaker Babcock and Wilcox, insulation materials company Owens Corning Fiberglass, chemical conglomerate W.R. Grace and building-products manufacturer U.S. Gypsum--were soon joined by one more, Houston-based Kaiser Aluminum, which filed for bankruptcy after it had paid Bailey.
The vast majority of the lawsuits burdening these and other companies are being filed on behalf of workers who, unlike Ronald Bailey, are not sick and will probably never get sick from their asbestos exposure.
The explosion of so-called "unimpaired" cases, filed en masse by some of the wealthiest and most enterprising law firms in the country, has troubled corporate defendants since the early 1990s. (See "Toxic Justice," an August 13, 1998, Dallas Observer special report.) But over the past two years, with nearly every former producer of asbestos products filing for bankruptcy, the corporations have been joined by new allies: asbestos' true victims and their lawyers, who say the crisis is harming them the most.
"The seriously ill now have no place to go for compensation," Iola says. "The companies that are responsible for their injuries are in bankruptcy, because they've had to pay billions of dollars to people who don't manifest any impairment or disability. Lawyers are the ones doing this, and they're doing it for money. They are stealing money from the very sick."
Earlier this year, 22 plaintiffs' law firms, most of them in Dallas or on the West Coast, threw in with their historic adversaries in the manufacturing and insurance industries to push Congress for reform. Their stand is causing an unprecedented rift among trial lawyers nationwide.
While the issue is obviously national in scope, Dallas is home to several of the most important legal players, including Iola and lawyer Peter Kraus, who advocate allowing only people with serious health problems to sue asbestos defendants.
Meanwhile, Fred Baron, a partner in Dallas' largest plaintiffs' firm and a force in the influential Association of Trial Lawyers of America, has taken up as a defender of the status quo. The ever-expanding, 80-lawyer, 500-employee Baron & Budd has a backlog of cases estimated to number between 10,000 and 20,000. The firm owns or has a major financial stake in a similar firm, Silber Pearlman, which has as many as 10,000 asbestos cases of its own. Together, the two control a double-digit percentage of the roughly 250,000 asbestos claims pending nationwide.
"Kraus and Iola would prefer only their cases get compensated to the exclusion of all others," Baron says. "That doesn't seem to be a very fair way to go."
For Baron, who has a national reputation as a brilliant legal strategist, these kinds of battles are getting to be old hat. Over the past decade he has twice challenged attempts to limit asbestos claims, appealed the issue to the U.S. Supreme Court and won both times. He expects to prevail again. "When you hear both sides of it, you see the system is working pretty well," he says.
Although the issue is rife with debate about fairness and legal rights, at its core it is about money: the solvency of a swath of American industry on one hand, and on the other the huge sums the big plaintiffs' firms collect via their customary 40 percent fees. The 25-lawyer Silber Pearlman firm, with its inventory of unimpaired asbestos claims, took in $100 million in revenue in 2000, according to Reagan Silber, who sold the firm that year. Baron & Budd, by extrapolation, undoubtedly made much more.
California attorney Steve Kazan, who has been representing asbestos cancer victims for nearly 30 years, says he expects reform of the type he is advocating to cost Baron and his partners several hundred million dollars. "And, you know, that's a lot of money," Kazan says. "I'd expect him to spend as much as he can spend to fight this. Fred is a smart businessman."
Kazan, whose Oakland firm stopped taking unimpaired cases more than two decades ago, equates the lawyers pushing the gush of lawsuits from unimpaired workers to rude dinner guests. "If you're first in the buffet line, you don't eat all the shrimp," he says. "You're supposed to take a few, but don't take them all."
If every person with minor workplace exposure to asbestos demands damages--a population that could number as many as 30 million--nobody will receive meaningful compensation, Kazan and other reform advocates say. Because no viable companies will be left to pay future claims, the approximately 7,000 people who each year come down with asbestos-related cancers will be shorted worst of all.
For most of the 1990s, the lanky 42-year-old was a partner and a top courtroom lawyer at Baron & Budd. In 1998, he started his own firm with Andy Waters, another Baron & Budd alumnus, and the two now specialize in representing those afflicted with mesothelioma and asbestos-related lung cancers.
There are multimillion-dollar fees in that work, too, and Kraus' firm now houses 24 lawyers at its offices on McKinney Avenue. A blend of high-dollar slick and laid-back casual, it's a place where the stone table in the waiting room is piled up with Mother Jones magazines and more than a few lawyers seem to prefer not wearing socks.
In Kraus' view, his former colleagues at Baron & Budd have reached so far into the pool of possible clients that they now are rounding up people who have no cause to be compensated.
"I had no problem feeling good about representing people with pleural plaques, with breathing problems, all the classic signs of asbestos exposure," Kraus says. "But then you got to where you had people with mild, nonspecific changes in their lungs that could be caused by any number of things. They have no breathing problems. Their exposure history to asbestos is questionable. That is when I wanted to find something else to do.
"As the '90s went on, you got more and more people with marginal exposure to the stuff. You went from insulators and pipe fitters to having the maintenance guys in a paper mill. Yes, there was asbestos in that mill equipment, but they didn't work with it, and the medical evidence you get reflects that."
As a Baron & Budd partner, he says, "I was pushing for more of a focus on the cancer cases when I left. I started a malignancy-based practice, and they went the other way. They bought Silber Pearlman. Once they did that, their economic incentives were set. They couldn't change now if they wanted to. They would have to let go hundreds of employees and scores of lawyers and radically restructure. Nobody wants to bite that bullet."
Kraus says his criticism isn't personal. Baron is the best lawyer he's ever met, he says. "He's a real street fighter when he's in a battle. I saw that. And he will make it personal. I hope this doesn't get personal, because I have great respect for him. But he's already tried to isolate those among us who have taken this stand from the larger body of lawyers around the country. I'm sure it has started to affect our referrals, but we can take that. We all compete for cases anyway."
Kraus says it is wrong to think corporate America has simply taken an unfair beating at the hands of some sharp lawyers, as Fortune suggested recently in an article labeling asbestos lawsuits a "$200 billion miscarriage of justice."
That gargantuan number is the latest estimate of total corporate asbestos liability projected by the actuarial firm Tillinghast-Towers Perin if the current trends remain. Stephen Carroll, senior economist at the Rand Institute for Civil Justice, says a quarter of that total has been paid out so far by the companies and their insurers in 600,000 settled claims. The circle of defendants, which now stretches out to everyone from toaster-makers and wineries to Sears, Roebuck, numbers about 5,000 in virtually every part of the U.S. economy.
Kraus says it is a mistake to oversimplify the multistage battle that has become the longest-running product liability fight in history. Corporate defendants will tell the public they are all for compensating the sick, he says, "But they fight like hell to pay as little as they can.
"I have pieces of paper come across my desk every day that are shameless. They will do anything to continue [or delay] a cancer case, because everyone knows the claim is less valuable after the plaintiff is dead. Some of these companies want to pay a mesothelioma claimant with substantial exposure [to their products] $25,000. That isn't what I call compensation. That's what they think it's worth if you're a blue-collar guy who has died catastrophically 20 years before the end of your natural life."
Iola says he gets many of his asbestos cases from lawyers who were clever enough to establish elaborate Web sites on asbestos. Ronald Bailey came to him that way. When he was diagnosed, his daughter typed the word "mesothelioma" into a search engine, hoping to learn more about the disease. Out came a lawyer-sponsored Web site giving an encyclopedia of information, plus the lawyer's phone number. The advertising-savvy lawyer in turn brokered the case to a trial lawyer, Iola, who did all the traditional legal work.
That same entrepreneurial zeal is behind the tens of thousands of claims from workers who are unimpaired but who claim to have mild asbestosis, small irregular scarring between the air sacs of the lungs caused by inhaling tiny shards of the asbestos mineral.
"You could see as early as a decade ago this unnatural proliferation of nonmalignant cases being filed around the country," says Iola, who began working on asbestos cases in 1982. "I say unnatural because malignant disease from asbestos is predictable. We can scientifically predict through epidemiological studies how many people will come down with mesothelioma in a given year. It's coded on death certificates, and the number has been constant--around 2,800 deaths each year for the past 25 years. Same with asbestos-related lung cancers. There's about 4,500 cases filed a year.
"What has proliferated have been these nonimpaired cases. Medical science would say there should be a decreasing trend, because controls in the workplace began in 1969 and became effective under federal law in 1972. We have decreased dramatically the amount of exposure, and asbestosis is a dose-response disease. So we should have fewer and fewer cases. But we have more and more because lawyers are very, very creative.
"That's why we have 10 times more nonmalignant cases being filed today than in 1990. A nonmalignant asbestos disease is whatever a willing physician says it is, so a lawyer and physician can go out and create however many cases they want."
Lawyers for a list of corporations that are being hit with new claims in an ever-widening search for solvent defendants--including General Electric, Exxon Mobil and Union Pacific Railroad--have been probing the medical side of that phenomenon.
Their target has been the medical screening companies that lawyers hire to find clients. As Paul Scrudato, a defense lawyer in New York, wrote in a brief earlier this month, "Hundreds, sometimes thousand of asbestos plaintiffs do not just happen to file lawsuits or bankruptcy claims on the same day, in the same place, represented by the same lawyers."
Most of the new filings are generated through free, lawyer-sponsored mass-screenings, often advertised with promises such as "A Picture Of Your Lungs Could Be Worth Millions," he says.
At the screenings, which are conducted in mobile trailers parked at motels or union halls, chest X-rays are taken by technicians, then a doctor spends a few minutes with the individuals.
In March, Dr. Gregory Nayden, an osteopath working for one such company in Florida, Georgia and Mississippi, testified in a deposition that he had evaluated approximately 14,000 people as part of these litigation screenings, for which he was paid more than $1 million. He concluded that every single one had asbestosis.
Nayden, the testimony showed, was not an expert in asbestosis, was unfamiliar with much of the medical criteria, was unlicensed in the states in which he was working, and he didn't even write up his own reports.
The medical evidence accepted in state courts where most of the suits are filed is hazy and imprecise, say Scrudato and breakaway plaintiffs' lawyers such as Kazan and Iola. X-ray findings that plaintiff-hired doctors will testify are "consistent with" asbestosis are consistent with a lot of other things. "'Consistent with' doesn't mean caused by," Kazan says. "When a doctor sees you for a broken arm, he can't diagnose from looking at it whether you fell off a skateboard or fell down the stairs. The X-rays in these cases show minimal changes consistent with a hundred other explanations, including smoking and air pollution, living in an urban setting, life on our planet."
"These aren't bankruptcies where they lock the doors and sell it all off; these are reorganizations," he says. Johns Manville, the biggest asbestos producer in history, employs more people now than it did in 1982, when it filed for bankruptcy and began setting up a trust to pay past and future claims, he says. The reorganized company is still in the building-products business as a division of Berkshire Hathaway.
Claimants to the trust get a nickel or a dime on the dollar, "but that's how it works," Baron says. "The bottom line is everybody stands in line and gets the same percentage."
Even after the 20 bankruptcies filed in the past two years, he says, money continues to flow. Last year, 60,000 claims were settled. Workers with no breathing impairment now collect an average of $60,000 total against multiple defendants, as opposed to the $80,000 to $100,000 two or three years ago, Baron says. "Mesothelioma cases that were getting 4 or 5 million are now getting 2. It's false to say there are people getting nothing."
Baron contends workers were victimized by asbestos even if they have not developed breathing problems, and they deserve their day in court. "The American system isn't set up so that if you don't have a $5 million claim, you don't get to sue," he says. To that end he is gearing up a constitutional argument against reform based on the principal that asbestos claims are brought in state courts, and the federal government has no power to tell the states who can sue.
Iola and his colleagues say Baron's legal argument sounds high-minded and principled, but it does not square with other moves he has taken lately, such as negotiating "prepackaged bankruptcies" with some of the still-solvent defendants. "We're the ones fighting that. We want access to the courts," says Iola, who says he is tired of Baron's tactics. "Fred likes the bankruptcies, because he can settle a bunch of his cases and pocket the fees. I used to admire him, but Fred's about the money and his huge homes and planes, the power and friends he has, the access. He's forgotten about the victims."
Despite what Baron says, there are a growing number of sick asbestos victims who will get next to nothing. The defendants with stark liability--companies with documented histories of callous behavior--are out of the game, Kraus and Iola say. Today, the Manville trust--which is named as a defendant in nearly every suit--settles mesothelioma claims for $200,000, pays $10,000 of that in cash and promises to pay the rest if and when it can.
In early September, Iola says, he turned away the case of a 46-year-old Tyler woman with the disease whose only exposure to asbestos was from dust her father brought home on his clothes from a Pittsburgh-Corning insulation mill. The company filed for bankruptcy last year under a crush of unimpaired claims, so all the mother of three will be able to collect is about $50,000 from a bankruptcy trust, Iola says. "There is nobody to sue."
Interestingly, as a junior lawyer at a Dallas firm in the early 1970s, Baron started into asbestos litigation on behalf of workers at the same mill. As recently as June, he retold the story at a legal conference in Washington, recounting the blows he struck for justice and workplace safety back when he was young.
This time around, reform proponents have dropped any hint of widespread legal reform and fashioned a narrow solution they think might pick up votes from moderate lawmakers, particularly Democrats who hold the swing votes.
Their proposal, which is yet to take the form of a bill, is to establish medical criteria defining who is sick from asbestos and guarantee people the right to sue if or when they become sick. The proposal would define anyone who has cancer or asbestos-related breathing impairment as defined under existing American Medical Association standards as eligible to file suit for compensation.
"No company has gone bankrupt paying people who are sick," says Mike Baroody, executive vice president of the National Association of Manufacturers, which is leading the reform push. "The awards that have been going to people who are not sick have turned into a scandal."
Multimillion-dollar verdicts in plaintiff-friendly venues such as Mississippi, Louisiana, West Virginia and South Texas, where jurors seem to relish clobbering Northern corporations, and accusations of fraud and cheating by plaintiffs' lawyers have made the topic popular in the general press.
Since 1998, when an internal memo got loose from the firm, Baron & Budd has been battling accusations that its staffers coach workers to lie about their claims and say they worked with products they never saw. In a civil case pending in New York, the former GAF, now G-1 Holdings, says it has evidence that Baron & Budd paralegals skipped the aggressive coaching altogether and simply "filled in the blanks" on workers' affidavits in about 200 cases. The suit alleges the clerks then forged the workers' signatures on the paperwork.
Baron says the accusations are baseless and, like others against the firm in the past, will be tossed out of court. A lawyer for G-1 did not return calls.
Whether or not false product identifications are to blame, claims from unimpaired workers tend to flood into solvent companies once others declare bankruptcy, toppling asbestos-troubled companies like dominoes. There is another perverse effect as well. Once a bankrupt company sets up a claims trust and streamlines its payments, as with Manville, it becomes a magnet for more and more claims.
Baroody concedes that the history of corporate behavior "does not endear us" on this issue. But the list of people affected by asbestos lawsuits extends beyond company executives and Wall Street investors to current and future victims, and union members whose retirement savings have been devastated when their companies have gone under. That's why he says he is optimistic his bill has a chance of passage, if not this election year, then the next.
"The plaintiffs' bar is not of one mind on this anymore, and that's significant," Baroody says.
Because problems confronting sick plaintiffs are novel and compelling, they have become the centerpiece for lobbying by the Asbestos Alliance, a group including the manufacturers, the American Insurance Association and the defecting trial lawyers. In July, they launched their campaign with a newspaper ad in Capitol Hill's Roll Call that centered on the human toll rather than the companies' economic woes. Meanwhile, some of the lawyers who signed the advertisement fanned out for meetings with lawmakers.
"I'm up there walking the halls of Congress and lobbying for a piece of legislation that in a vacuum is completely reasonable," Kraus says. "But it's a real eye-opener to see what power looks like. Democratic legislators are scared to death of getting crosswise with ATLA [the trial lawyer's lobby], and Fred Baron dictates to ATLA what their position will be on asbestos legislation."
Only a small percentage of trial lawyers has anything to do with asbestos, Kraus says. "It's only a tiny percentage of lawyers who thinks this legislation is a bad idea, but those people are Fred Baron, and Peter Angelos in Baltimore, and Perry Weitz in New York, and Joe Rice and Ron Motley in South Carolina. These are very wealthy, very powerful Democrats who can bring a lot of cash to bear for Tom Daschle and Dick Gephardt and rank-and-file Democrats. Nobody wants to get crosswise with those guys, so it's a tough fight politically."
According to the Center for Responsive Politics, a nonpartisan research group, Angelos, who got wealthy enough on asbestos to buy the Baltimore Orioles, contributed $2.3 million in soft money to the Democrats in the past two years; Baron & Budd, $1 million; Weitz & Luxenberg, $710,000; and Ness, Motley, $1.2 million.
Those totals don't include the $25,000 Baron & Budd and Silber Pearlman chipped in last year for the legal defense fund of New Jersey Senator Robert Torricelli, who sits on the key Senate Judiciary Committee. Or the $105,000 Baron gave a political action committee formed by North Carolina Senator John Edwards, who is considering a presidential bid in 2004.
On a recent afternoon, Baron said in the most muted terms that he plans to work against the reform proposal. He was more animated in a story that appeared the same day in the Financial Times of London. "There will be a jihad," he told the paper. "We will fight them with everything we've got."
Baron appears so confident he has Senate Democrats in his camp for the battle, he half-joked about the matter at a bankruptcy conference in June. Using a slide projector to highlight a line from a Wall Street Journal story, Baron read a sentence aloud: "It says, 'The plaintiffs' bar is all but running the Senate.'
"I really strongly disagree with that," Baron said, smiling. "Particularly the words 'all but.'"
"I know a 70-year-old lady who might get nothing," says the 62-year-old widow. "I also have an acquaintance who is in an asbestos suit, and he doesn't have anything wrong with him. He worked at a certain place where a bunch of people were suing and he put in. There's a lot of frivolous lawsuits, I think."
Bailey, who worked as an optician when her husband became ill, says he was on more than two dozen medications as his disease progressed, some costing as much as $1,000 a shot.
"Money was a big issue for us," she says. "It's horrible enough to face it, but it's even worse when you're struggling with the money situation. When they get sick, that's when they need the money."