No less than the Wall Street Journal called it a “radical tactic.” Manville corporation, a financially strong building materials giant, is seeking to escape liability in thousands of asbestos disease cases by filing under Chapter 11 of the federal bankruptcy law. It did so voluntarily, saying that “nothing is wrong with our business (which) will keepoperating, very smoothly.”
Maybe sales for the nation’s 181st largest company will continue running at a $2 billion plus rate this year, but there certainly is something wrong with Manville’s sense of responsibility. Thousands of very ill people, exposed to asbestos 20 or more years ago, want to use the personal injury laws to obtain compensation for their cancers or lung diseases. Many families have been waiting for years in the courts for some elementary justice. Their lawyers have shown that the company (formerly Johns-Manville) knew about the dangers of asbestos in the workplace as early as the 1930s.
Now, under the bankruptcy filing, no new cases can be brought against Manville (the company guesses that more than 30,000 more cases would have been brought) and pending cases will be handled by a bankruptcy court without a jury. Other companies facing asbestos claims can become responsible for some of Manville’s dollar exposure under the doctrine of joint and several liability. To escape their asbestos-disease lawsuits, more companies also may file for voluntary bankruptcy.
Manville’s assets over liabilities are $1.1 billion. It has been paying at the rate of around $24 million a year for verdicts or settlements in the asbestos litigation–about 1 percent of its gross revenues. Some of these sums have been paid by insurance, although presently insurance companies are balking at further payments, claiming that Manville obtained its policies without fair disclosure. Manville is suing several insurance companies to make them pay for the claims.
“The whole subject disgusts me,” said Manville’s boss, John A. McKinney. “Now, when we need the coverage, with one exception, the insurance companies are reneging…. As much as anything else, the bad faith of insurance companies has made it necessary for us to take this action,” he added.
McKinney also blamed the plaintiffs’ lawyers. But without these attorneys very few victims would have had any chance for monetary recovery. These lawyers worked for years and finally obtained the evidence to persuade judges and juries that Manville and other asbestos companies were responsible for the human damage. The costs of litigation have increased in no small part due to Manville’s deplorable stalling techniques and the estimated $2 million a month it is paying its own defense lawyers while the cases drag on.
Fred Baron, a lawyer for the victims, says that Manville’s bankruptcy filing will be opposed in an upcoming court hearing. “No company the size and wealth of Manville should be able to wash its hands of the human misery it has caused and ask the taxpayer to bail it out for a burden quite within the company’s means to carry,” he declared.
Manville’s dramatic action and the wide publicity it received can influence future jurors and pressure Congress to pass a fixed compensation system for asbestos injuries that would include making the government pay part of the costs.
There is a case to be made for the government paying for diseases which stem from government shipyards during World War II to the extent that the Navy actually was involved in causing the hazardous exposures to workers.
But private companies bear most of the blame in this matter. And Manville is setting a perilous precedent in escaping its obligations through voluntary bankruptcy. If it succeeds in this strategy, then any company that generates widespread damage can take the same route. The response to this staggering evasion will be calls for tighter controls on giant corporations through a federal chartering structure. It is one thing for the law to allow corporations to provide limited liability for shareholders; it is quite another extremism to permit the corporation itself to limit its own liability in this manner.
Manville’s McKinney seemed aware of the size of the gamble. “Our loyal suppliers, lenders and shareholders all may suffer losses for their credit and investment exposure…. Losses could be very, very large for our present shareholders. Then, too, the many people who do have disabling injuries from excessive exposure to asbestos will be hurt. Their claims will be delayed and reduced,” he predicted.
It is difficult to see who is left to be helped by this unnecessary maneuver.