A largely sensible article in Fortune magazine (via Slate’s Moneybox) dissects unintended consequences run amok in the tremendously complicated issue of asbestos litigation in America. It’s tainted, however, by the incredibly deceptive description of the reason for W.R. Grace’s bankruptcy. (For the record, it reads: “The chemical giant paid nearly $2 billion for using asbestos in its fire-protection products.”) Poor Grace, a mere asbestos consumer, a victim as much as anyone! W.R. Grace, once a conglomorate involved in everything from cement to shrinkwrap, owned and operated a vermiculite mine in Libby, Montana, for 27 years; the vermiculite was contaminated with asbestos, and both the miners and the general citizenry of Libby have had health problems ever since. In 1999, the direct death toll was estimated to be 192, with hundreds more contracting severe cases of asbestositis, many of which will probably prove to be fatal. An award-winning article in Mother Jones suggested that executives at the mining company that Grace purchased knew about the effects of asbestos exposure on their workers’ lungs as early as 1959. Grace knew by 1976. Neither company did a thing other than stonewall OSHA and write memos. I think the Fortune article is right that the general situation needs to be fixed. A confluence of factors has made it a minefield. Judges and juries were faced with a disease that could take decades to begin killing its victims, and so erred on the side of generosity towards claimants. The federal judiciary wasn’t up for the task of dealing with tens of thousands of suits, so they began combining them willy-nilly, always a practice sure to bring class action lawyers sniffing about. The principle of joint and several liability holds that when multiple parties are at fault in a civil lawsuit, any one of them can be held responsible; for instance, if a landlord and a management company are both at fault in a case, either one can be made to pay for the entirety of the damages, and it’s then up to that party to recoup it from the other. This rule is useful in a lot of cases; it prevents quibbling about whether the management company is 50% or 60% at fault for hiring a bloodsucking creature of the night as a building super, and if a defendant goes under, it insures that the injured parties will get paid.
Once insulation giant Johns Manville went under (the company was indemnified against future claims by the bankruptcy court and ownership was turned over to a trust designed to pay off victims; Warren Buffett’s Berkshire-Hathaway eventually bought the company from the Manville Trust), lawsuits began working their way down the chain of asbestos usage. Owens Corning, the pink fiberglass insulation company, was hit, then auto and car part makers, General Electric, Westinghouse (the corporate shell of which is now CBS), and so on down the line — basically any company which was involved in the making of anything dirty and heavy before the 1970s. It’s a mess.
The complexity of corporate interactions doesn’t help. Sealed Air, the bubble wrap company, purchased Grace’s Cryovac subsidiary, but rather than just purchase it (in which case they’d be in the clear), they went through a complicated dance of corporate ownership to minimize taxes. (The summary version is that Grace spun off all of its non-Cryovac businesses, then acquired Sealed Air. The Sealed Air/Grace combination was then renamed "Sealed Air" and the new company was renamed "W.R. Grace" Voilà! This is how investment bankers earn their six-figure salaries.) Grace signed an agreement promising to compensate Sealed Air for any asbestos liability, but nobody’s sure how much that is worth now that Grace has filed for bankruptcy. Dozens of companies employing thousands of people are going to be hurt by this eventually if something doesn’t fix the situation. But I can’t read those articles from the Seattle Post-Intelligencer‘s lengthy and excellent series (go read the whole thing) without feeling my blood boil. Those people at Grace, from everything I’ve read, cheerily denied that there was any concern while they poisoned an entire community and, in effect, sent hundreds of people to their deaths. Losing their company isn’t the worst thing that should happen to them.