June 24, 1999 WASHINGTON - Scuttling a $1.5 billion deal to settle
thousands of asbestos cases, the Supreme Court limited the authority of
federal judges yesterday to accept such deals that have been put together on
the theory that not enough money is available to pay every claim.
For the second time in two years, the court thwarted efforts by
attorneys and judges to settle masses of claims for injuries and deaths from
asbestos exposure.
As it did in 1997, the court suggested that Congress should
write a law to deal with "the elephantine mass of asbestos cases"
clogging the nation's courts. Congress has not responded.
The settlement that was rejected yesterday by a 7-2 vote, with
a slim chance of being saved by changes, is the first of its kind. It grew
out of a "class action" lawsuit filed to carry out a settlement
reached by lawyers, with every person who could make a potential claim
forced to accept the deal's terms. No chance existed to opt out.
The deal involved potentially 186,000 claims against one
asbestos manufacturer: Fibreboard Corp., a California-based company that has
been taken over by Owens Corning.
Corning said in a statement that "it appears unlikely that
the settlement can overcome the many hurdles" put up by yesterday's
ruling. As a result, it said, a separate deal it has made with its insurers
will take effect, providing about $1.9 billion to pay claims.
Federal Judges Limited
The court, in striking down the settlement, cast doubt on
federal judges' authority to ever approve a one-deal-fits-all settlement of
personal injury lawsuits like the one at issue yesterday. These settlements
are based on the theory that there is not enough money to go around, so it
must be divided.
The court was particularly troubled by the use of that theory
in the case before it, because it said the money put up was not a true
calculation of all that might be available. Rather, the court said, the
total was what lawyers had agreed to put into a payment fund; they then
claimed there was no more money available.
The case grew out of efforts by Fibreboard to find a way out of
major asbestos lawsuits it faced in Maryland and three other states. It
claimed it was running out of money from insurers to cover payments to those
suing it. |
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It was unclear last night what effect the demise of the
settlement would have on actual or potential claims in Baltimore. Attorneys
involved in lawsuits in Maryland courts could not be reached.
Deal Cut in Coffee Shop
Fibreboard had insisted that a settlement insulate it from all
potential asbestos claims. The company, its insurers and lawyers for people
who had sued it in tens of thousands of cases worked out the deal, agreeing
on the final terms at a meeting with a federal judge at a coffee shop in
Texas in 1993.
Soon after, a friendly lawsuit was filed, carrying out the
settlement already worked out. It set up a $1.53 billion fund to pay off all
personal injury or death claims against Fibreboard and its insurers in
asbestos-related cases.
The Supreme Court nullified the deal as an improper use of
federal class-action rules. The justices said the judge had done too little
to determine how much money could have been put into the fund and had simply
accepted the amount set out in the deal.
Terms Called Unfair.
The court, in a ruling written by Justice David H. Souter, also
said the lawyers who wrote the deal excluded tens of thousands of potential
claims. And, it added, some people who might have had claims to the fund
deserved to have lawyers of their own, to make sure their interests were
protected. The terms of payments, it concluded were not fair and equal for
everyone with potential claims.
The court, while saying that Fibreboard need not have been
pushed to the financial brink by a settlement, declared that the company
would have been freed from asbestos liabilities without having to put much
of its corporate assets at risk.
Justice Stephen G. Breyer and John Paul Stevens dissented.
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