The Limits of Lawsuits

The litigation crisis in America has reached a milestone. In the wake of three decades of asbestos litigation—a trail marked by bankruptcies, hundreds of thousands of lawsuits, multibillion-dollar judgments, and real victims who have yet to be compensated—even the American Bar Association and some trial lawyers are admitting that something might be wrong.

Asbestos provides a good example of the crisis in the courtroom, because it was here that trial lawyers honed their skills of mass tort litigation, where large class action lawsuits are brought against companies, or even entire industries. Asbestos was in widespread use throughout much of the 20th century, due to its abundance, low cost, and heat-resistant properties. Unfortunately, it was found to pose real health risks, including the fatal cancer mesothelioma, lung cancer and other cancers, debilitating and potentially fatal asbestiosis, and injuries or scarring to the tissue surrounding the lungs.

For a long time, these cases were addressed under workers’ compensation, but in 1973, a legal decision in the Fifth Circuit of the U.S. Court of Appeals moved the issue into the courtroom. Originally, there were roughly 40 companies involved in the legal proceedings. However, as these companies went bankrupt and no longer had funds to pay awards, trial lawyers cast a wider net, targeting “peripheral” companies that did not manufacture asbestos but may have used products that contained it (even companies where any asbestos was encapsulated in the product and not likely to pose a significant risk). Today, there are over 8,000 companies mired in the legal process according to Marcia Coyle of the National Law Journal, with many having only a tangential link to the original health risks.

Despite the fact that the use of asbestos peaked in the early 1970s, the number of claims continues to rise, and the flood of lawsuits is not helping the victims. According to the American Academy of Actuaries, there were 60,000 asbestos lawsuits filed in 2000 —up from the 20,000 filed in 1990. Of these, 54,000 are suits for non-malignant injuries, which pose a particular challenge, because many claimants may have no symptoms that in any way hamper their life or pose a definite threat. It is the potential future risk that is the source of the claim. Yet, for many, this future risk may never materialize. As president-elect of the American Bar Association, Dennis Archer, described the problem, “In retrospect, however, it is clear that a countervailing trend was emerging and accelerating in the 1990s: for profit litigation screenings began systematically generating tens of thousands of new non-malignant claims each year by individuals who had some degree of occupational asbestos exposure, but did not have, and probably would never get an impairing asbestos-related disease “ The challenge this creates is that lawsuits by victims without symptoms are draining funds that could be better used to compensate real victims.

With respect to asbestos, the legal system has ground to a halt, so much so that almost all parties are looking for some type of reform. In fact, there is bipartisan support in the Senate; Judiciary Chairman Orrin Hatch (R-Utah) and ranking member Patrick Leahy (D-Vt.) are working to produce a legislative solution. Some are looking to establish a trust fund to compensate victims; others are looking to establish a “medical criteria” that would narrow litigation to claimants diagnosed with asbestos-related symptoms.

But asbestos litigation also highlights the need for more fundamental reforms to the civil justice system. For example, joint and several liability rules that allow trial lawyers to search for the deepest pockets and biggest awards and ill-defined classes often make their members placeholders in legal proceedings initiated by lawyers. Procedural issues, such as the use of questionable science, have crowded the courts with many cases of dubious merit. While resolving the asbestos issue is important, an asbestos-specific solution does little to alter the future of mass tort litigation. The fast food industry, gun manufacturers, automakers, and a host of other industries are all vulnerable to similar class action lawsuits.

In the current system, awards are uncertain and unpredictable, often determined more by where the case is filed than the true need for compensation. In an effort to maximize the award and their share of legal fees, trial lawyers engage in “forum shopping,” seeking out courts with favorable judges and juries. As the American Academy of Actuaries noted, for example, Mississippi has only 1 percent of the U.S. population, but 20 percent of the asbestos claims are filed there. In fact, only five states are responsible for two-thirds of all asbestos filings between 1998 and 2000, according to David Austern, general counsel for the Manville Personal Injury Settlement Trust.

The courts play a valuable role in deterring dangerous behavior and compensating victims. But a legal system clogged with cases and unpredictable decisions serves no one—not the sick, not consumers, and not companies and their employees. Sensible reforms to the civil justice system would serve victims better while reducing the costly burden of litigation in America. The asbestos case has reached the point where almost everyone sees some reforms as necessary. Elsewhere, the House and several states are pursuing legal reforms to address the growing crisis in health care due to the rising costs of medical malpractice insurance. Is it possible that these efforts are the first stirrings of a real attempt to reform a legal system that has lost its mooring?