Commentary: Will a Chance for Asbestos Reform Be Missed?

It's what Supreme Court Justice David H. Souter called "an elephantine mass"--some 600,000 plaintiffs, more than 6,000 defendants, 61 companies in bankruptcy, and up to $275 billion in liability costs.

Welcome to the booming business of asbestos litigation. Entrepreneurial lawyers are casting an ever-widening net to include plaintiffs who have been exposed to asbestos but show no signs of sickness, and to go after corporate defendants that never made or sold asbestos but might have used products that contain the fire retardant. The result: Cancer victims aren't getting compensated as payouts are diverted to other plaintiffs, companies are being pushed to the edge, and trial lawyers are making a mint.

The time is ripe for reform. Asbestos litigation has touched nearly every sector, and multimillion-dollar settlements are becoming almost routine. In recent weeks, Honeywell International Inc. (HON ) and Halliburton Co. (HAL ) said they would shell out billions of dollars to make their asbestos problems go away. And Republicans, who long have sought to curb what they see as litigation run amok, now control Congress. With President Bush on board as well, will beleaguered companies with ties to asbestos soon get a break?

Don't hold your breath waiting for reform. Even with the wind at their back, K Street lobbyists who represent insurers and other defendants can't agree on what they want. "You've got as many opinions as there are companies, CEOs, and lawyers," says Representative Chris Cannon (R-Utah), who aims to offer an asbestos bill next year.

That's despite an unprecedented rift among trial lawyers that should provide an opening for business lobbyists to get a congressional deal done. The Asbestos Alliance, a coalition of manufacturers and insurers, is pushing legislation requiring that a person actually be sick before collecting damages; unlike today, simple exposure wouldn't be enough. The idea has the backing of a group of about 100 plaintiff's lawyers who have broken from the trial bar. Steve Kazan, an Oakland (Calif.)-based plaintiff's attorney who leads the group, says exposed workers who aren't sick are collecting money that should rightfully go to cancer victims. The notion already is catching on in the judicial arena. On Dec. 19, New York State Judge Helen E. Freedman ordered that courts in New York City try cases according to plaintiffs' "sickness."

The support of even a handful of plaintiff's attorneys could tip the scales in Congress--especially in the closely divided Senate, where the powerful trial bar so far has been able to block the 60 votes needed to pass any legal reform bill. But Corporate America is missing an epic opportunity because it can't settle on the package of reforms it wants. Several large companies, including General Motors (GM ), DuPont (DD ), and Dow (DOW ), say that winnowing down the plaintiff pool to only those who are sick isn't enough. They want more ambitious measures, such as caps on damages or tax breaks for asbestos payouts.

But if business pushes too hard for a more ambitious plan, it could lose any chance for reform. If lobbyists insist on measures that start to look too much like broad tort reform, lawmakers could get spooked. Another problem: House Judiciary Chairman F. James Sensenbrenner Jr. (R-Wis.), who is still seething because the Senate didn't act in 2000 after the House worked on an asbestos bill for two years. Next year, he'll give priority to medical malpractice and class action reform. "I don't think the stars are yet in the proper alignment on asbestos," Sensenbrenner says.

The Alliance knows it has one shot at a bill and is working overtime to bring the rest of K Street on board. "We have to be unified," says Julie A. Rochman, a lobbyist for the American Insurance Assn. Meanwhile, Kazan warns that the ties binding him to the business lobby are weak. "We support reasonable legislation," the plaintiff's attorney says. But if the legal reformers overreach, all bets are off.

By Lorraine Woellert

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE