House Judiciary & Civil Jurisprudence Committee
Hearing on Interim Charge 6

February 8, 2012

To the Honorable Members of the House Judiciary & Civil Jurisprudence Committee:

The Texas Civil Justice League (TCJL) appreciates the opportunity to present this written testimony in response to the committee’s sixth charge to study whether the asbestos and silica multidistrict litigation courts should be allowed to dismiss, without prejudice, claims on the courts’ inactive dockets for want of prosecution under certain circumstances.

Introduction

Since the U.S. Fifth Circuit Court of Appeals ruling in Borel v. Fiberboard Paper Prod. Corp in 1973, which subjected asbestos manufacturers to strict liability for personal injury resulting from exposure to asbestos, asbestos litigation has become far and away the largest and most expensive products liability litigation in United States history. By the mid-2000s, more than 700,000 people had filed claims in federal and state courts across the country. As one of the leading heavy manufacturing, petrochemical, and energy production states, Texas attracted more asbestos litigation than any other state between 1988 and 2005.[1] Although no one knows for sure how many individual claims currently exist, the judge of the Texas multidistrict litigation (MDL) court for asbestos claims has reported that 7,959 cases are currently pending on the MDL docket, 1517 (about 19%) of which are active cases.[2] The number of individual asbestos claims is substantially greater, since many asbestos cases have multiple plaintiffs. The MDL judge has estimated the number of inactive claims at between 25,000 and 84,000.[3] The number of individual active claims is much smaller but still numbers in the thousands.

The vast majority of active claims involve malignancies allegedly caused by exposure to asbestos or asbestos containing products. Virtually all of the inactive claims are referred to as “unimpaired” because the claimants have no symptoms of an asbestos-related disease and do not meet the medical criteria for impairment established by the Legislature in 2005. Under prior law, a claimant could establish a claim based on an X-ray demonstrating markings inside the lungs allegedly “consistent with” asbestos or silica-related disease (the so-called “1/0” B-read). No actual diagnosis or symptoms of such a disease were necessary to file a lawsuit. It was common for plaintiffs’ firms to contract with litigation screening companies to take mass numbers of X-rays, often involving the use of mobile screening units (vans or trucks equipped with X-ray machines), to identity potential claimants.[4] These claimants were typically “bundled” into a single lawsuit for purposes of maximizing the pressure on defendants to settle them. Local trial court practices varied with respect to these bundled claims. This is why the current number of inactive claims is so much greater than the actual number of lawsuits.[5]

The Applicable Law: §90.010, Texas Civil Practice & Remedies Code

In 2005 the Legislature enacted Chapter 90, Texas Civil Practice & Remedies Code, which establishes a process for adjudicating claims involving asbestos and silica. Section 90.010 governs the applicability of the asbestos and silica multidistrict litigation (MDL) procedures to asbestos and silica claims that were pending on the effective date of the statute, September 1, 2005. The MDL rules do not apply to the following actions:

1. Actions filed before September 1, 2003, and trial had commenced or was set to commence on or before the 90^th day after the date Chapter 90 became law, except that the MDL rules applied to the action if the trial did not commence on or before the 90^th day;
2. Actions filed before September 1, 2003, and the claimant served a report that complied with the applicable medical criteria (§§90.003 and 90.004) or or before the 90^th day after Chapter 90 became law;
3. Actions filed before September 1, 2003, and the exposed person had been diagnosed with malignant mesothelioma, other malignant asbestos-related cancer, or malignant silica-related cancer.[6]

All other asbestos and silica claims pending on September 1, 2003 were transferred to the appropriate MDL courts. These claims include the vast majority of unimpaired claims currently populating the MDL dockets.

There is a statutory mechanism for voluntarily dismissing asbestos and silica claims. Section 90.008 allows a claimant, prior to serving a medical report, to dismiss the action without prejudice to the claimant’s right to file a subsequent action seeking damages for arising from an asbestos or silica-related injury. A defendant may also file a motion to dismiss an action if a claimant fails to timely serve a complying medical report on a defendant. [7]

Very few claimants have taken advantage of the voluntary dismissal without prejudice statute (§90.008). The primary reason is that claimants fear that a future claim will be barred by limitations. If the claim was filed prior to September 1, 2005 (which most inactive claims were), there may also be some uncertainty over which law may apply to claims that are voluntarily dismissed and refiled at a later date. Some plaintiffs’ lawyers also believe that prior law may still apply to claims on the inactive docket, but this issue has never been tested in the courts. They may take the position that an inactive claim may be activated in the future under the old law, so dismissing it may violate the ethical duties of the plaintiff’s counsel to prosecute the claim on behalf of the client.

A third reason for not voluntarily dismissing inactive claims is that the filing fees for the lawsuit have already been paid, and claimants may not wish to pay them again if the claimant meets the critera in the future. A more important consideration for plaintiff’s attorneys with substantial files of inactive claims, however, may be the administrative burden and expense of identifying inactive claimants who may still have a viable claim. There is no centralized method for determining the status of claimants with inactive claims; it is up to each attorney to keep track of their cases as best as they can.[8] For claims that have been pending in  the MDL since 2005—nearly seven years now—it may be very difficult to find the claimants, much less ascertain their current medical condition or even whether they are still living.

Though they can move to dismiss claims filed on or after September 1, 2005, defendants may not do the same for claims that were pending on that date. Section 90.010(d) prohibits the MDL court from dismissing pending actions and requires it to retain jurisdiction over them in accordance with MDL rules. Moreover, the MDL court cannot remand these claims to the trial courts in which they were originally filed unless:

1. the claimant serves a complying medical report[9]; or
2. the claimant serves an alternative medical report that verifies a physician’s conclusion, based on pulmonary function testing, that the claimant has an asbestos or silica-related physical impairment, and the MDL court finds that the report and medical opinions are reliable and credible, the statutory medical criteria do not adequately assess the claimant’s physical impairment, and the claimant has produced sufficient credible evidence for a finder of fact to reasonably find that the claimant is physically impaired as a result of exposure to asbestos or silica.[10]

It appears that few, if any, claims have been remanded or dismissed under this the second part of this provision. The statute thus effectively bars dismissal of inactive claims that were pending on September 1, 2005 as long as they do not have either complying medical reports or meet the alternative standards for demonstrating impairment. These are the claims that make up the “inactive docket.”[11]

 

Policy Alternatives: What Should Be Done with the Inactive Claims?

The policy objective of §90.010(d) was to toll the statute of limitations for an indefinite period of time, so that if currently unimpaired claimants developed an asbestos or silica-related disease in the future, they could proceed with their claims. This well-intentioned provision, however, has resulted in a situation in which tens of thousands of claims are essentially frozen on the dockets of the MDL courts with no mechanism for resolving them, creating potential concerns for both claimants and defendants and their attorneys.

From the claimant’s perspective, the existence of an inactive claim with little potential for becoming active in the future does not present a direct burden. If the claimant ultimately develops a disease that can be linked to asbestos or silica exposure, the claimant may proceed without the danger of the claim being time-barred. On the other hand, the existence of a claim that may have been actionable at one time but that does not meet the medical criteria for stating a cause of action under either §90.003 (asbestos) or §90.004 (silica) puts the claimant in a kind of legal limbo that does not benefit anyone in the system. It would seem that from a claimant’s point of view, some definitive action should be taken to resolve the claim. Understandably, reasonable minds may differ on how those claims should be resolved, but many participants in the process seem to agree that indefinite status is not the right answer.

From a solvent defendant’s point of view, the inactive docket may have real, substantial, and direct costs. As long as the claims remain inactive, there is little concern that they will create any significant liability in the foreseeable future. At the same time, a defendant may be obligated to report these claims to their insurance carriers, pay a third party administrator to monitor the inactive claims, reserve funds in the event of a liability in the future, or carry the claims on its books as a contingent liability (or all of the above). Even for solvent defendants reporting that they no longer have significant financial risk associated with these claims, they still carry administrative and legal costs associated with maintaining an inventory of unresolved litigation. The cost and burden of inactive claims thus varies widely from defendant to defendant, but in almost all cases there is some expense to defendants, their insurers, and their shareholders, and, consequently, to the marketplace itself. Moreover, defendants likewise have an interest in the final resolution of claims against them, and the indefinite holding of claims does not serve the interests of justice for them any more than it does for the claimants.

Attorneys on both sides of the docket are also negatively affected by the enormous number of claims on the inactive docket. These problems are both ethical and financial in nature. Ethical duties attach to attorneys for claimants and defendants as soon as an action is filed.[12] Claims that may have been viable under the old law are now inactive, and most of them will probably never meet the applicable medical criteria. This situation has given rise to questions about the attorney’s ethical duty with respect to these claims. What is the attorney’s duty to monitor the status of each claim? Keep track of the location and condition of each claimant? Advise claimants to seek periodic medical examinations? This kind of monitoring requires substantial administrative cost for plaintiff’s attorneys with little or no prospect for covering those costs in the future. On the other hand, if the plaintiff’s attorney dismisses the inactive claims without prejudice in order to clean up his or her docket, the attorney risks a malpractice lawsuit if a claimant later becomes ill but the claim is time-barred.

From the perspective of the defendant’s attorney, the maintenance of inactive case files incurs some administrative cost to be sure, but the ethical concerns are probably not as significant as they are for plaintiff’s counsel. Still, defense attorneys have an ethical duty to defend the suit zealously on behalf of the client, and this duty may entail a similar level of monitoring as well, for which the defendant’s counsel may or may not be reimbursed by the client or the client’s liability insurer. Without any recourse to the MDL court for the dismissal or remand of these claims, this ethical duty will continue to linger indefinitely.

One other interested group that may wish to see a resolution of the inactive claims are district and county clerks. At one point, all inactive cases were filed in a district court or county court-at-law. Those case files, which can be extremely voluminous, are still stored in courthouses all over the state. While this may or may not present a significant problem in many places, one might question the wisdom of requiring courts to maintain case files at some expense for thousands of lawsuits that will never be heard.

The policy alternatives for dealing with the problem of inactive claims might be summarized as follows:

1. One option is to leave the inactive docket alone. This outcome would continue to burden the civil justice system with tens of thousands of inactive, unimpaired claims, the vast majority of which will never meet the medical criteria and thus will never be remanded back to the trial courts for disposition. As the law currently stands, these claims may theoretically exist forever, well past the time when all active claims will have been disposed of. In this event, the asbestos and silica MDL courts themselves could exist solely for the purpose of warehousing these claims.
2. Another option would be to allow the MDL courts to dismiss the inactive claims without prejudice, as was proposed last session in HB 2034/SB 1202. Claimants who may develop an asbestos or silica-related disease that satisfies the medical criteria could be protected by continuing to toll the statute of limitations, allowing claimants to refile their cases. This seems like a relatively straightforward solution that would not prejudice either side, would address the ethical problems discussed above, and would leave the question of whether the old or new law should apply to pre-September 1, 2005 claims exactly where it is. Plaintiffs’ lawyers, however, may be concerned that allowing the court on its own motion, or by motion of a defendant, to dismiss these claims would create further administrative and ethical problems associated with notifying claimants who may no longer be located.
3. A third option may be to amend §90.010 to allow a defendant to make a motion to dismiss without prejudice the inactive claims, thereby creating a presumption that the claims should in fact be dismissed by the MDL court. The claimant would then have the opportunity, after notice and hearing, to “carve out” certain inactive claims for which some basis exists for the belief that they may ultimately develop into active claims. This approach would undoubtedly compel plaintiffs’ attorneys to cull their files at potentially significant administrative expense. But it also might give them an incentive to identify claims that may eventually be activated, thus justifying some financial investment in those claims. This process could also address some of the ethical concerns with dismissal for want of prosecution.
4. It may be possible to create a dual track of some kind, in which inactive claims would be dismissed by operation of law within a certain period of time, e.g., two years, unless the plaintiff’s attorney demonstrated to the satisfaction of the court good reason for retaining jurisdiction over the claim. This approach could be coupled with the appropriate protections for refiling the case in the future and provisions protecting counsel from any legal liability arising from the dismissal of an inactive claim that may later become active.[13]
5. It may also be possible to fashion distinct remedies for inactive claims in which the claimant is now deceased and claims in which the claimant is living. For example, if the MDL court determines that a claimant has been deceased more than two years from a date certain, then the inactive claim could be dismissed by operation of law. It would still be up to one side or the other to identify deceased claimants and provide the appropriate evidence to the court. Inactive claims involving living claimants could be treated separately, perhaps in the manner described in paragraph 4 above.

 

Conclusion

TCJL appreciates the opportunity to offer this written testimony and to work with the committee on the resolution of this issue. In an effort to provide the committee with the best possible information upon which to base a policy decision, TCJL has asked its members for responses to the following questions:

1.  How many claims are currently on the inactive docket that affect your company?

2.  In your experience with the MDL court, why don’t plaintiffs voluntarily dismiss them?

3.  Have any voluntary motions to dismiss been granted by the MDL court? If so, what were the circumstances?

4.  How are inactive claims carried on your books? Do you reserve for them?

6.  Do you insure inactive claims? If so, what does it cost to insure them?

7.  Are there any inactive claims that have been filed in other state courts?

8.  If so, why aren’t those claims nonsuited or dismissed in Texas?

9.  What are the applicable rules of ethics that come into play with respect to claims on the inactive docket?  For plaintiffs’ counsel? For defense counsel?

As we receive additional information related to this charge, we will share it with the committee and committee staff.

Respectfully submitted,

Texas Civil Justice League