Asbestos Bankruptcy Trusts and Tort Compensation
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Transcript of Asbestos Bankruptcy Trusts and Tort Compensation
Asbestos Bankruptcy Trusts and Tort Compensation
Lloyd Dixon
June, 2013
Email : [email protected] Phone: 310.393.0411 x7480
There Is a Great Deal of Controversy About the Interactions Between the Trusts
and the Tort System · Are plaintiffs able to recover once in the tort system
and again from trusts?
· Is the liability of the remaining solvent defendants adjusted to take account of trust payments?
· Is the information used to recover from the trusts available in the tort case?
RAND3
Plaintiffs Can Recover from Trusts and Through the Tort Process
Plaintiff
Tort claims Trust claims
Settlements Trial
D verdict P verdict
Claim evaluation
Payment No payment
Verdict molding
Payment
RAND4
The Are Multiple Linkages Between the Two Systems
Plaintiff
Tort claims Trust claims
Settlements Trial
D verdict P verdict
Claim evaluation
Payment No payment
Verdict molding
Payment
Setoff linkage
Indirect claim linkage
Information linkage
Trust payment limitation linkage
We Investigated these Linkages in Six States
· States with joint and several liability- Illinois- Pennsylvania- West Virginia
· States with some form of several liability- California- New York- Texas
Findings on Linkages
· Information linkage- All six states require disclosure of trust claims that
have been filed- But trust claims are frequently not required to be filed
before trial
· Setoff linkage- Four of the states allow setoffs for all pre-verdict trust
payments- California and Pennsylvania do not in some
circumstances
Findings on Linkages
· Indirect trust claims- Allowed in joint-and-several-liability states if
defendant satisfies part of a trust’s liability and meets trust payment criteria
- However, defendant often needs plaintiff’s cooperation to develop exposure information
· Trust payment linkage limitation- Provisions at some trusts prohibit payments to direct
claimants it trust’s liability has been satisfied by another party
- Some trusts also require direct claimants to indemnify trusts for future indirect claims
To Investigate Potential Outcomes, We Constructed the Following Thought
Experiment· Pre-reorganization scenario
- All potential defendants are solvent- Jury returns plaintiff verdict allocating liability in
accordance with state law
· Post-reorganization scenario- Same verdict, same state- Some of the defendants are reorganized with
trusts paying claims in their place
RAND9
Potential Effects of Trusts Depend Importantly on the Liability Regime
Potential Impact of Trusts
Joint and Several Liability
SeveralLiability
Total plaintiff compensation Decrease No change Increase Payments by defendants that remain solvent Decrease
No change Increase
Source: Asbestos Bankruptcy Trusts and Tort Compensation, RAND Corporation, MG-1104, 2011.
We Identified Outcomes that Are Not Consistent with Liability Principles
· In states with joint-and-several liability- Defendants might not be able to take advantage
of all the resources available from the trusts
· In states with several liability- Defendants might in effect pay the shares of
bankrupt parties- Plaintiffs could fully recover fully in the tort case
and more from the trusts
Trust Overpayments in Several-Liability States Could Adversely Affect Some Plaintiffs
· Trust payment percentage might need to be lower
· Particularly affected plaintiffs include- Those exposed only to the products and
practices of bankrupt parties- Those with non-malignant injuries
What Drives the Potential Increase in Plaintiff Compensation in Several-Liability States?
· Potential increase in total plaintiff compensation is not because setoffs for trusts are different than those for other settlements
· What is different when trusts are involved?- Plaintiff can recover trust payment after tort case has
been terminated- No mechanism to adjust payments by solvent
defendants for post-verdict trust payments- Indirect claims are not available to adjust for pre-verdict
trust payments that don’t result in setoffs
Key Determinant of Outcomes Is Availability of Evidence on Exposures to Products and
Practices of Bankrupt Firms· When evidence on such exposures is developed
- In joint-and-several liability states: payments by solvent defendants will be adjusted to reflect compensation available from the trusts
- In several-liability states: payments by solvent defendants will not change
· When evidence on such exposures in NOT developed- In joint-and-several liability states: defendants might not be
able to take advantages of resources available from the trusts- In several-liability states: defendants can be required to pay
more than their share of the harm and plaintiffs can recover more
We Found Considerable Disagreement Over Who Is Responsible for Developing Exposure
Evidence on Bankrupt Firms’ Products· Plaintiffs’ attorneys argue that defense attorneys can
use discovery tools to uncover exposure information- Plaintiffs’ attorneys are not responsible for doing
the job of defense attorneys
· Defense attorneys respond that plaintiffs’ attorneys can influence the exposures plaintiffs recall
- Without plaintiff co-operation, it is very difficult to develop the information needed to recover from trusts and assign fault to bankrupt firms
We Are Developing Evidence on Which Potential Effects Occur in Practice
· Selecting mesothelioma claims for plaintiffs with similar exposure histories- Same primary jobsite- Similar years worked at site
· Comparing exposures identified by plaintiffs in - Claims filed before the bankruptcy of a firm
commonly named at the site pre bankruptcywith
- Claims filed post bankruptcy
Findings Have Important Policy Implications
· Substantial changes in product identification would suggest that outcomes inconsistent with tort principles would be occurring
· Legislative and court reforms would be warranted to remove incentives for strategic behavior in product identification
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Cumulative number of bankruptcies filed
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The Number of Trusts Grew Substantially Between 2003 and 2007
Trusts held $18 billion in assets at the end of 2011Source: Dixon, McGovern, and Coombe, Asbestos Bankruptcy Trusts, RAND, 2010; GAO, Asbestos Injury Compensation, 2011; Scarcella, 2012.
Trust Payments Are Likely a Significant Proportion of Overall Compensation
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Tort payments ($ billions)
Trust payments ($ billions)
Source: Carroll et al., Asbestos Litigation, RAND, 2005; Dixon, McGovern, and Coombe, Asbestos Bankruptcy Trusts, RAND, 2010; GAO, Asbestos Injury Compensation, 2011.
Assigning Fault to Bankrupt Firms or Trusts
State Can Bankrupt Firms or Trusts Be Placed on the Verdict Sheet?
Joint-and-several liability statesIL No
PA No, except for a few older trustsWV Remains an open question
Several-liability states
CA YesNY YesTX Yes
Filing and Discovery Requirements for Trust Claim Forms
State Are Plaintiffs Required to Disclose Trust Claims that Have Been Filed?
Is There a Requirement on When Trust Claims Must Be Filed?
Joint-and-several liability statesIL Yes No
PA Yes No, except in Montgomery County
WV Yes No, but Ps must identify all trust claims 120 days before trial
Several-liability states
CA Yes NoNY Yes Yes, claims must be filed 90
days before trialTX Yes No
Setoffs for Pre-Verdict Trust Payments
State Are Setoffs Allowed for Pre-Verdict Trust Payments?
What Type of Setoffs Is Allowed?
Joint-and-several liability statesIL Yes Pro-tanto
PA Typically no Pro-tantoWV Yes Pro-tanto
Several-liability states
CA Not for noneconomic damages
Pro-tanto
NY Yes Max of amt paid and % of fault assigned to settling parties
TX Yes when total recovered would exceed verdict
Pro-tanto
Indirect Claims
· Available in joint-and-several liability states when- Verdict is fully satisfied- Indirect claimant satisfied payment criteria required
of the direct claimant
· Not available in states with several liability
Trust Payment Limitations
· Many trusts prohibit payment to direct claimants when the trust’s liability has been satisfied by another party
· Many trusts require the direct claimant to indemnify the trust for future indirect claims
Bottom Line
· Identified circumstances under which replacement of once-solvent defendants by trusts can
- Allow plaintiffs to recover fully in tort an then recover more from trusts
- Prevent defendants that remain solvent from receiving benefit of the funds available from trusts
· Also identified circumstances under which plaintiffs recover less
· Highlighted importance development of information on exposure to bankrupts’ products and practices