T H I N K G L O B A L LY

BPs Disaster a Tipping Point?

The Need for Better Intersections Between Claiming Systems for Mass Tort Claims
By Kirk T. Hartley

BPs oil rig disaster in surely of the enormous potenis one of the largest mass tort events in history terms

tial cost of the losses and potential cross-border impact. This column will explore some of the disasters lessons for mass tort claiming processes across borders. Hopefully BPs disaster will become a tipping point toward thinking about ways to efficiently and fairly resolve cross-border, mass tort claims. Mass tort events generate an over-arching problem of how to manage and pay the claims that rules of law and science define as legitimate claims. A critical but essentially ignored sub-issue is how to manage claims involving parallel claiming processes. To date, legislatures and courts in the United States have not established, much less considered, a useful means for effectively and quickly coordinating and managing mass tort claims between different court systems. In that light, it is not surprising that both the United States and UK systems also lack a uniform, effective means of coordinating their respective systems with claims submitted to trust funds created through Chapter 11 cases, or claims submitted to privately created trust funds, such as the BP fund. There also are very few useful papers from academics or groups such as the American Law Institute. Public or private funds are increasingly used to resolve mass torts Thus, BP is hardly alone in offering to pay claims through a more or less voluntary fund that isnt tied to bankruptcy. Moreover, such funds are not unique to the United States and and instead also are in use outside the United States. Other examples of public or private funds created to resolve mass tort claims include the 9/11 Fund and various private trusts created in Australia, Africa, and Europe to resolve asbestos claims.
Kirk T. Hartley is a partner in Childress Duffy, a Chicago-based litigation boutique with a national practice. He has over 25 years of experience practicing at the litigation intersections among insurance, corporate, tort, and bankruptcy law. Among others relevant to this article, Mr. Hartley has tried underlying asbestos cases, and an asbestos bankruptcy. Mr. Hartley is a member of DRI and its International Law Committee.
n

How widespread are the Chapter 11cases for managing mass tort claims? Although sometimes seriously flawed, Chapter 11 cases and resulting trusts or funds are in place or contemplated for dozens of former makers, sellers, or installers of asbestos-containing products. See generally Lloyd Dixon, Geoffrey McGovern, and Amy Coombe, Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts (available online at the RAND website, http://www. rand.org/pubs/technical_reports/TR872/; last visited August 17, 2010). Trusts and funds also are in use or contemplated for claims arising from sexual abuse by Catholic priests; and claims involving breast implants, silica claims, and Chinese drywall. Consider also the Chrysler and GM Chapter 11 cases that ostensibly leave virtually no assets behind to pay tort claims against the manufacturers. Will BP file for Chapter 11, or might it file a scheme of arrangement in the United Kingdom? Many, including me, think that some BP entities will soon enough choose to file for reorganization in some forum to obtain an injunction against claims. If BP files some entities for Chapter 11, other defendants likely will use the same tactic, invoking the related to rules of Chapter 11 courts. Consider also the possibility that BP will invoke United Kingdom financial reorganization procedures commonly known as schemes of arrangement. How has the Chapter 11 trust fund process worked as the default system for resolving mass tort claims? Some negative comments and answers are set out in a brief but thoughtful essay by Judge Jack Weinstein, a smart, veteran jurist previously responsible for myriad mass tort claims and Chapter 11 cases, including some issues related to the fiasco commonly known as the JohnsManville asbestos bankruptcy. See Jack B. Weinstein, Preliminary Reflections on Administration of Complex Litigations, 2009 Cardozo L. Rev. De Novo 1, available at http://www.cardozolawreview.com. The Chapter 11 claims estimation process also has been the subject of criticism in other forums. One is an expert witness report submitted by Nobel-prize winning Think Globally, continued on page 88

82 ForTheDefense September2010
n n

2010 DRI. All rights reserved.

Think Globally, from page 82 economist James Heckman in the W.R. Grace asbestos bankruptcy. In short, Heckmans report accurately blasts the bankruptcy court liability estimation process as having virtually nothing to do with science. Answers to FAQ Regarding Asbestos Bankruptcies, GlobalTort, (May 12, 2009), http://www.globaltort.com; then follow Archives; then follow May 2009 (last visited Aug. 11, 2010). My personal view is that the Chapter 11 process has proved to be deeply flawed when used to resolve tort claims. Myriad reasons for that conclusion are set out in posts on my blog, GlobalTort, http://www.globaltort.com. BPs problems illustrate why future cross-border mass tort claims apparently will be resolved by multiple tracks of roughly parallel claiming processes.

Claimants may be able to recover from the private trust funds or later, bankruptcy trusts, and through litigation in federal or state courts in the United States, plus local or national courts of other nations. Hopefully, the BP disaster will be the tipping point that will spur countries to build new legal constructs to effectively connect and manage intersections among some or all of these parallel systems. There are many reasons to build connections among the parallel systems. For one, connections are needed to create an effective means to allocate fault among multiple defendants or to allow, when warranted, offsets for payments received in each of the claiming systems. Connections among parallel systems also could usefully help coordinate when and how to apply science in mass disaster cases to determine liability

estimates, identify long-term, adverse health impacts, and assess the value of current or future medical monitoring. Serious attention also is needed for other issues. They include: How to reasonably provide effective due process notice in multiple languages and forums, How many futures representatives are needed to really protect the interest of diverse future claimants, How these cases can be managed in a way that respects and applies the laws of multiple nations in these cases, and How to ensure that applicable insurance does not disappear though policy commutations or insurer shut-down statutes, including the aptly named schemes of arrangement commonly used in the United Kingdom by insurers.

88 ForTheDefense September2010
n n