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4/29/2024 By Kathrin Hashemi and Victoria Zmuda

A recent study by C. Anne Malik (Orrick Herrington & Sutcliff LLP), Peter Kelso (Roux), and Marc Scarcella (Roux) reviews a sample of asbestos lawsuits filed in the Philadelphia Court of Common Pleas between 2017 and 2021. Their findings highlight the continuing trend of over-naming defendant companies, necessity for bankruptcy trust transparency, and urgent need for litigation reform. 

Published by the U.S. Chamber of Commerce Institute for Legal Reform (ILR), the paper is titled, “The Asbestos Over-Naming and Trust Transparency Problem: A Philadelphia Case Study”. The 2024 study updates a prior analysis from 2012, which examined filings in Philadelphia as well, but from 2006 through 2010. 

The new study contains several notable findings:

  1. Each case filed in Philadelphia named an average of 38 defendant companies. However, during discovery, only about half of those companies were found to be a source of the plaintiff’s alleged asbestos exposure. This results in many companies having to pay the cost of defense, only to be dismissed. A study referenced in the paper estimated this could cost at least $20,000 per case to defend through the summary judgement phase.
  2. The 2012 study found that product exposure allegations against primary defendants (thermal insulation and refractory product manufacturers) dropped from 35% of filings in 1991-2000 filings to 12.5% in 2006-2010. The 2024 study discovered that allegations against primary defendants dropped even more significantly between 2017-2021, to 6.2%. Meanwhile, the overall number of defendants named and the claimant exposure profiles remained constant. 
  3. Across the sample of recent Philadelphia filings, only 25% of potentially qualifying bankrupt company exposures were disclosed in deposition testimony. Furthermore, as companies continue to file for bankruptcy, on average, an additional 2.5 peripheral defendants are brought into the litigation for each bankrupt defendant company exiting it. This emphasizes the need for asbestos bankruptcy trust transparency legislation or, in the interim, the use of bankruptcy trust reporting (e.g. KCIC’s BEV Tool).

KCIC recently announced publication of its 2023 Asbestos Litigation Year In Review report. The analysis provides a detailed review of asbestos litigation last year as well as key insights into changes over time, using the past 10 years of data. KCIC tracks the details of the defendants named on the lawsuits and counts each individual company named, because most of the companies defend and resolve the cases individually (e.g. Company A as successor in interest to Company B would count as two unique entities).  Counting them on that basis, in 2023, there were nearly 12,200 individual defendant entities named on complaints. By comparison, in 2014, there were almost 9,700 individual defendant entities. 

Utilizing KCIC’s filings data and combining it with the referenced study, it is possible to estimate the unnecessary economic burden on American commerce. Per KCIC’s study, at least 3,787 asbestos lawsuits were filed in 2023 and on average 74 individual defendants were named on each. Controlling for the number of successor entities, which likely would not require duplicative defense, we assumed 43 entities that would be defending the action. If we assume, per the 2024 study, that 50% will be dismissed as having no nexus to the plaintiff’s injury, then simple math tells us that in 2023 alone, $1.6 billion (3,787 * 43 * $20,000 * 50%) of unnecessary defense costs were incurred by corporate America due to the plaintiffs’ bar.  There is reason to think both the $20,000 per-case estimate and the 50% dismissal rates are low — and therefore, the real number is higher.

The number of defendants named on each complaint can vary. In observing the trends of the 2023 top 15 jurisdictions with the most filings, the average number of defendants named per complaint ranges from 32 (New Castle, Delaware) to 164 (Kanawha, West Virginia). Segmenting the data differently, when reviewing the average number of defendants named on each complaint by disease, there have been some interesting trends as well. The average number of defendants named on mesothelioma and lung cancer lawsuits has increased over the past several years. Lung cancer has shown the largest increase over a 10-year period, with the average increasing from 54 in 2014 to 81 in 2023.

Several states have taken steps to reduce the amount of over-naming in the tort system. As mentioned in the 2024 ILR study, legislative reform options have included requiring a plaintiff to file a sworn declaration of their potential asbestos exposure shortly after filing their case. KCIC blogged about West Virginia’s implementation of this reform and discussed the benefits. While filings in West Virginia’s top jurisdiction, Kanawha, remained high in 2023 (164 defendants), filings were down from what was observed in 2020 (192 defendants). The average number of defendant companies named nationwide continues to increase. Hopefully, reforms such as these will help reduce the litigation burden on peripheral defendants.

The other phenomenon discussed in the study is the diminishing exposure evidence of former asbestos defendant companies from the evidentiary record once they file for bankruptcy. According to KCIC’s data, more than 60% of post-bankruptcy asbestos trusts pay out 20% or less of their scheduled TDP values. A contributing factor to this low payout is that they expend an excessive amount of their assets on claims that would not see the light of day in the tort system. As an example, according to Combustion Engineering’s 524(g) PI Trust’s Annual Report, the company received 20,414 claims in 2022, over 65% of which were non-malignant claims. That is a stark contrast to asbestos filings in the tort system in 2022, which KCIC reported to be 3,699 (90% of which were known malignancy claims). Plaintiffs’ firms have an incentive to keep bankrupt defendants out of the evidentiary record, because if they are awarded a share of an eventual verdict, the recovery from the bankruptcy trust will be anemic. The study notes that in the Philadelphia cases, deposition testimony only named 25% of the potentially implicated bankruptcy companies and their products.

Studies and analysis are instrumental in helping legislatures understand the importance of key tort reform measures, and KCIC applauds the U.S. Chamber of Commerce for its work. KCIC will continue to do its part to monitor key statistics relating to defendant company over-naming and the transparency of asbestos bankruptcy trusts. 

 

Kathrin Hashemi

About Kathrin Hashemi

Kathrin Hashemi has partnered with her clients on a variety of matters including litigation management, insurer billing arrangements, claims administration, and asbestos bankruptcy trusts.  Much of her work has allowed her the opportunity to have a more holistic understanding of the litigation at hand, while simultaneously being able to solve complex problems for her clients.

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