Since 1988, California juries have awarded approximately $42 billion in damages to victims of mesothelioma that have dealt with the cancer that manifests itself two to four decades after asbestos exposure.
Unfortunately for the victims, companies have been able dodge asbestos liability by filing for bankruptcy, establishing a trust fund for future mesothelioma litigation which limits the recovery potential for the affected persons that bring the lawsuit, and then continue on with their business as if they didn’t leave behind a trail of cancer-inducing harm in their wake.
You see it in instances like the 1982 bankruptcy of Johns-Manville. It went through a five-year bankruptcy, created the Manville Personal Injury Trust Fund in 1988 that would be responsible for all asbestos-related lawsuits, and then re-emerged under the name Manville Corporation that year. By 2001, it had renamed itself Johns-Manville, got purchased by Warren Buffett’s Berkshire Hathaway for $2 billion, and now generates approximately $400 million in annual profits.
If you were a former employee of Johns-Manville that contracted mesothelioma, your tort action can’t touch that $400 million in annual profits that are flowing into Warren Buffett’s Berkshire Hathaway. Instead, your ability to receive asbestos compensation is limited to the much lower amount of money that is provided for by the Trust which allocates fixed percentages per claim such as a 5.1% payout. In other words, if you have a $600,000 mesothelioma claim against Johns-Manville that was the result of doing insulation work in 1975, collection is limited to $30,600.
California law is interesting in that there is no state statute limiting the amount of compensation that a person can receive for pain and suffering as part of a mesothelioma lawsuit for personal injury or wrongful death (if litigated by the surviving estate of the deceased.)
But this lack of a cap for asbestos injury is offset by the sheer amount of bankruptcies that have occurred from the companies that are liable for asbestos injuries. If you win a $2,000,000 judgment against a construction company that only has $300,000 in net assets, the company is just going to file for bankruptcy which will cost a substantial sum and limit the potential recovery to the $100,000-$200,000 range.
At this intersection of bankruptcy meets no maximum liability cap are the California lawyers that are earning extremely prosperous incomes by taking on these cases for a 33-40% contingency basis.
It is crazy to see how quickly the money gets made in this field. For instance, in 2014, the California asbestos law firm of Brayton Purcell, LLP was able to receive an award of $70 million on behalf of a retired machinist who had a claim against asbestos packing and gasket manufacturer John Crane, Inc.
From the time that a client visits a lawyer’s office to discuss a mesothelioma lawsuit until it goes through trial, the typical California law firm will spend approximately 2,100 working on the case. Much of this time is spent prepping expert testimony, settlement negotiations, and building a coherent case built on medical records. If it is the first case against a company that has never before been accused of asbestos-related injuries, there can be an additional few hundred hours of legal manpower dedicated to providing the causation element (e.g. that employment at place X by Company Y is what caused the mesothelioma injury).
This mean that, even assuming that 2,500 of legal work went into that case, the law firm still stood to collect at least $23 million from that cause of action. That’s an hourly rate of $9,200 per hour. Nice work if you can get it.
The strongest argument in favor of why that type of compensation should be permissible is because (1) firstly, that case is an outlier and most asbestos litigation settles or results in a judgment for a fraction of that amount, and (2) the lawyers assumed the risk in the event of an adverse jury verdict. If they lost the case, there would be 2,100-2,500 hours of work in which the compensation would be $0. There is also (3) another issue which is that collection can be extremely difficult because, upon a lucrative trial success, bankruptcy for the liable company has a realistic chance of following.
But other law firms have found similar success. At Kazan, McClain, Satterley, and Greenwood, this law firm seems to achieve a million-dollar judgment on behalf of some Californian each month. In June, a former pipefitter named Michael Burch was diagnosed with pleural mesothelioma in May 2016 that resulted from handling asbestos cement pipes that were manufactured by a corporation called CertainTeed.
The result was a $10 million personal injury judgment in Burch’s favor. Of that, the lawyers stand to collect $3 million or so. This is roughly $1,200 per hour compensation, and possibly a bit higher.
And the law firm that seems most enthused about collecting as much of that $42 billion pie as possible is the Los-Angeles based law firm of Gori Julian & Associates which has collected over $2.5 billion in 18,000 asbestos cases since 1991. It has averaged bringing in about $100 million per year or so from settling and trying these cases.
It really is fascinating to watch from afar because there are so many moving parts interacting together. The average settlement amount for a California mesothelioma claim is $121,028 and the average collection amount is $32,480 due to the bankruptcies and the limitations created by the existing Asbestos Trust Funds.
It can require hundreds of hours of legal work, so it is understandable that lawyers peg their rate in the 33-40% range. If a personal injury results in $32,480 that actually gets collected, and the LA attorney collects 33% in compensation, the total amount for the firm is $10,718. If they spend 700 hours getting to that point, the compensation is only something like $15 per hour. It is those million-dollar cases that actually result in commensurate payouts that justify the poor compensation when the actual amount collected is a pittance of what is originally sought (this business model may remind some of the music industry, where the payoff from signing a teenaged U2, Bruce Springsteen, or Taylor Swift to a five-year deal makes so much money that you can afford thousands of poor bets on signing “The Bloated Clamfish Band” and still earn a profit.)
If the percentage is appropriate, then the only other realistic alternative would be to operate on an hourly model. In the cases that result in actual million-dollar payouts, this is no doubt preferable. The guy who collects $20,000,000 would benefit from paying 2,100 hours at $450 per hour for a total legal bill of $945,000 rather than giving up approximately $7 million as is the case on the contingency fee basis.
But in other cases, the consequences of an hourly bill would be far worse. If a mesothelioma personal injury claimant only gets a $100,000 settlement, but it took 250 of legal preparation work that precedes the date on which that settlement was reached, we are talking about a $112,500 bill such that the costs of success left the person worse off than had he done nothing.
And this cannot realistically be side-stepped because it does require a great deal of legal sophistication to succeed on a mesothelioma claim because it is necessary to have deep investigative abilities to identify a causal connection between the employer’s working conditions that resulted in the asbestos exposure that caused the injury, and it is also requires sophistication to bring in experts and identify a dollar amount for lost wages and pain and suffering.
Really, the biggest risk with trying to bring a claim is dealing with the short statute of limitations. In California, a mesothelioma lawsuit has to be initiated within one year of the diagnosis in both the personal injury and wrongful death cases. It is a strange aspect of law—it takes decades for the illness to materialize which does not affect your need to file a suit, but once you have knowledge that you’ve been affected by asbestos, the clock starts ticking fast.
Out of all of this ruin that has resulted in blue-collar deaths and corporate bankruptcies, a real cottage industry for lawyers has emerged. California’s mesothelioma attorneys are among the most highly compensated in the nation because they get to collect upwards of a third from the claims that result in million-dollar payouts (which is fueled by California’s lack of a state cap on mental anguish damages, compared to a state like Texas which places a hard $750,000 cap on non-medical related expenses). It is amazing to observe how much death and redistribution of wealth has occurred due to the presence of tiny asbestos dust.