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Is Asbestos Defense Anti-Consumer?

posted by Adam Levitin

The Boston Herald has a piece questioning Elizabeth Warren's consumer bona fides because she worked on a 2008 Supreme court appeal for Traveller's Insurance involving the validity of Traveller's settlements for asbestos liability relating to Johns Manville's bankruptcy in the 1970s. The Supreme Court ruled for Traveller's 7-2.  

The Herald piece portrays Professor Warren's involvement in the Traveller's case quite unfairly. The article quotes an angry asbestos victim as damning all of "those lawyers [who] are trying to keep every penny away from people who are faced with this disease." That angry sentiment, however, has nothing to do with what the Traveller's case was about or Elizabeth Warren's involvement.  

The biggest problem is that the article doesn't really address what the Supreme Court case was about.  Once one understands what the case was about, it simply cannot stand as evidence that Elizabeth Warren is somehow anti-consumer.  The Traveller's case was not about whether asbestos victims deserve compensation.  Nor was it about how much compensation they deserve.  Instead, it was about the finality of a court order approving a bankruptcy plan--a procedural matter of enormous importance to all bankruptcy cases, not just those involving asbestos. 

A bankruptcy plan confirmation order is like the conclusion of the Godfather: "today I settled all family business". A bankruptcy plan settles all claims against the debtor. (Yes, there are some technical exceptions, but they need not concern us here). Being able to do so is hugely important to making the bankruptcy process work. If bankruptcy court orders can be reopened years later, the entire bankruptcy process is undermined. In a typical bankruptcy case involving asbestos, the court issues an injunction that directs all future asbestos claims to be paid from a trust established by the debtor company.  The trust is usually funded with a significant portion of the debtor company's stock. The impact of this injunction is to free up the debtor company itself from asbestos liability going forward and to make sure that there is a dedicated pool of funds (the trust) to pay asbestos victims.  

Supporting the finality of bankruptcy court rulings is hardly an anti-asbestos victim stance. If insurers like Traveller's don't think that the deal they strike as part of a bankruptcy case will be honored, they won't cut deals.  And the result will be that asbestos victims will face years of litigation and maybe no better outcome. 

There are legitimate and thorny questions about exactly who can be bound by a bankruptcy court order, particularly in the case of future claimants--those who might have been exposed to asbestos, but haven't manifested any symptoms of asbestosis or mesothelioma--but it isn't a question of being pro-or-anti-asbestos victims. Instead, it's a question of trying to find a system that adequately balances the rights of present claimants (those already sick) and future claimants (that unknown number of people who will become sick). Recall that Traveller's was being sued not by all the asbestos victims, but by a subset among them who didn't like the deal. As the Supreme Court noted, "Some individual claimants and Chubb Indemnity Insurance Company (Chubb), respondents before this Court,objected to the settlement and subsequently appealed." In other words, most of the asbestos victims supported or at least didn't object to the deal.

Professor Warren's involvement in the Traveller's litigation has been public knowledge for quite some time, yet it has never previously generated any news interest. That it popped up in the Boston Herald of all places makes me wonder if this was a preemptive strike by Massachusetts Republicans worried about a possible Warren Senate run against Scott Brown. 

The truth of this is that this is a non-issue. Elizabeth Warren's pro-consumer bona-fides are second to none, and trying to twist her involvement in a Supreme Court appeal of a critical bankruptcy procedural matter into evidence that she is anti-consumer is just ridiculous.

Warren's involvement in the appeal is not even evidence that she's anti-asbestos victims.  I vividly remember as a student in Professor Warren's bankruptcy class the great personal sympathy she has for asbestos victims when discussing the problems of dealing with mass torts in the bankruptcy system. She took great pains to make sure the class understood what a particularly terrible death mesothelioma causes.

The irony with this case is that had Professor Warren worked on the brief for the non-settling asbestos victims, I'm sure we'd be hearing claims that she's a tool of the asbestos plaintiffs' attorneys. I actually find this episode reassuring evidence that Elizabeth Warren evaluates policy issues on their merits without passion or prejudice. I wouldn't want to have a person who is knee-jerk pro-consumer as CFPB Director (or Senator) any more than I would want a knee-jerk supporter of financial institutions. 

Comments

Adam, as soon as the Cape Wind project gets built, you can take a boat and a giant harpoon and tilt at the 130 windmills in Nantucket Sound to your heart's content.

Dude, seriously. Hillary Chabot is a local Fox political pundit and the "post-Murdoch" Herald is still pretty Murdoch-y. Please save your very valuable brain activity for bigger fish.

This is an excellent and intelligent post. Readers should ALSO know that this has been a stage-managed bit of oppo work done by the Brown people and swallowed whole by the Herald (and now Politico). The smearer is Eric Fehrnstrom of Brown's team, who concocts this horse manure for a living. What is also silly here is that Warren has in fact taken the position that the GOP and Brown endorse: the need to resolve tens of thousands of suits in an orderly way so real victims can get compensated now. This is the position the trial lawyers would in fact OPPOSE. So in order to smear Warren, Brown's people have dumped on a basic GOP tenant: curtailing the excesses of trial lawyers. That is why this is such a lame smear. And it is equally clear that no one at the Herald or Politico actually read the suit or what Warren in fact wrote. And do not think the Herald cares -- they care only about the hits they generated, not the empty reporting.

The Hair-Oil wringing its hands about Warren being insufficiently pro-consumer? Talk about "concern trolling".

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