The Wall Street Journal is running another series of articles on Asbestos, titled the Long Trial. I say another series because this subject has been written about in detail for the last forty years.

Asbestos is, like many good and bad things, a mineral combination from the earth that had been used for its fire retardant abilities back to the Romans. Historically, asbestos was used in various products or processes in manufacturing, construction, ship building and automotive brakes.

The fact that it can be a major contributor to lung cancer, mesothelioma and other illnesses took a lot longer to be understood. We now know that small asbestos fibers can be inhaled and lodged in your lungs. Two of my friends died who worked in these environments.

Because of this potential terrible toll on workers who were exposed to asbestos, most of the companies who used it in their products have gone bankrupt. Initially both individual and class action suits were brought by law firms representing these plaintiffs. The law firms received about one third of each settlement.

And it was not just workers who claimed a possible injury; it was office buildings, schools, or hospitals where products containing asbestos may have been installed. The plaintiffs’ bar, as these lawyers are called, filed suits on behalf of most states and named every solvent asbestos manufacturer they could find. The law firms received about one third of each of these court or jury awards.

One of the first firms involved in litigation was Johns-Manville who made building insulation. Manville was sued for over a decade and payed out hundreds of millions to billions in settlements and trials; with law firms receiving one third. To consolidate their lawsuits and put a limit on their exposure, Manville setup a trust fund and funded it twice. Today, over 40 firms, including my former employer USG Corp., have setup similar trusts funded initially with almost $40 billion to pay for these personal injury claims. The law firms who negotiated these trust fund settlements received about one third as fees.

The Journal notes that asbestos became  the source of  billions of dollars in fees for the plaintiffs’ lawyers.

So, what’s wrong with that if the purpose is to properly compensate someone who was made seriously ill by this toxic substance called asbestos?  Or to repair a building or school that might be unsafe to use?

In a strong word, Fraud. In a weaker word, Misrepresentation.

The Journal article cites a number of instances that could fall into one of these categories:

  • claims filed by workers who do not exist.
  • the lack of any oversight of the Trusts that are run by the very lawyers who benefit from the payments.
  • workers, who through their lawyers, claimed to have different illnesses depending on which firm’s trust they were filing a claim against.
  •  workers with different or conflicting work dates at various employers.
  • or my favorite, that 4,000 claimants were 12 years old when they presumably worked for one of these asbestos related firms. Hm.

As the one-time CFO of USG Corporation, before the firm setup its own trust, I can recall some similar episodes:

  • claimants, who upon being deposed before trial, were not sure which of the several gypsum companies they worked for, even though they were suing USG.
  • or which specific plant of USG they worked at or even when exactly it was they worked for us.
  • or my favorite story from the days of settling property damage suits; USG paid tens of millions of dollars to several different states to safely remove asbestos products in their office buildings and schools. Most of the asbestos was wrapped and actually safe if left alone. And that is exactly what these states did. They took the money, put it in their state coffers and never to this day, removed it from their buildings. Hm.
  • and, of course, in all these instances, lawyers received about one third of the payments.

So, in conclusion, the medical implications of asbestos exposure are terrible. And a number of sick or dying people have properly benefited from the payments that many building material, mining, auto or shipbuilding companies have paid over the years. But parts of the legal world have unfairly benefited from overzealous claims and suits or mismanagement of the claimants or their funds they were entrusted to protect.

In my forthcoming book, The Business Zoo, we will look at Lawyers as part of our study of Advisors. We will discuss what lawyers do well and what they do poorly. Sadly, these examples of the plaintiffs’ lawyers work on asbestos falls into the latter category. We will also examine numerous examples of Management Fraud, a popular subject these days. But don’t we have the right to expect a higher standard of behavior from the legal profession? Two of my personal Mentors and a number of close friends are lawyers and they would agree.