The New York City Asbestos Litigation Just Became More Complicated

Pursuant to the Decision and Order of the Hon. Sherry Klein Heitler, dated April 8, 2014, asbestos plaintiffs for the first time since 1996 may seek permission from the New York City trial judges to charge the jury on the issue of punitive damages. Until Judge Heitler’s ruling, the New York City Asbestos Litigation (“NYCAL”) Case Management Order, as amended May 26, 2011 (“CMO”), provided that counts for punitive damages were to be “deferred” until such time as the Court deemed otherwise, upon notice and hearing. Therefore, punitive damages still could be sought, but only after a hearing to determine if it was appropriate to award them.

The importance of Justice Heitler’s ruling cannot be understated. As she notes, “tens of thousands of complex, time-consuming asbestos personal injury actions have been filed in New York County Supreme Court alone.” Her ruling is likely to have an impact on the thousands of future or presently pending cases.

Justice Helen E. Freedman, who oversaw the creation of the CMO in 1988, which governs all NYCAL cases, explained in a well-reasoned Southwestern Law Review article published in 2012, why she added the provision in 1996 that punitive damages claims should be deferred. According to Justice Freedman:

1. Punitive damages have little or no place in asbestos litigation. To charge companies with punitive damages for wrongs committed twenty or thirty or more years before, serves no correct purpose. In many cases, the wrong was committed by a predecessor company, not even the company now charged, and the responsible individuals are long gone;

2. Punitive damages only deplete financial resources that are better used to compensate injured parties;

3. Since some states do not permit punitive damages, and the federal MDL, precludes them, disparate treatment among plaintiffs would result if permitted in New York City; and

4. No company should be punished repeatedly for the same wrong.

Justice Freedman’s rationale is as valid today as it was in 1996. The only thing that has changed is that multiple bankruptcies, oftentimes involving companies whose only wrongdoing was to acquire the stock of another entity with some asbestos involvement, continue to corrode the fiber of American industry and plaintiffs have look farther and farther afield to find “fresh” defendants, many of whom have only de minimis relationship to asbestos.

Although Justice Heitler contends that the defendants, in opposing the motion, failed to provide empirical proof that punitive damages awards have contributed to bankruptcies, she overlooks the reality that defendants make oversized settlements based upon their potential exposure and that the threat of punitive damages increases that exposure calculus exponentially. One only need read the Garlock decision written by the Hon. George R. Hodges, United States Bankruptcy Judge for the Western District of North Carolina, to appreciate how settlement negotiation leverage in asbestos litigation can contribute to corporate insolvency.

Justice Heitler bases her ruling on constitutional equal protection grounds. And yet, paradoxically, she seeks to minimize the potential repercussions of her ruling (and reassure defendants) by demonstrating how other New York asbestos courts have been restrained in awarding punitive damages due to both New York’s “heavy burden” for seeking punitives and federal due process standards. If the award of punitives in New York courts outside NYCAL’s jurisdiction is so difficult to obtain, where is the loss of equal protection by requiring the filing of a notice and conducting a hearing in NYCAL?

Justice Heitler was reassured by the plaintiff asbestos lawyers that, if punitives were to be permitted, they would not abuse this long sought after opportunity and only seek punitives in the most egregious cases. However, after giving the foxes the keys to the hen house, what leverage did she retain to ensure restraint? The Decision and Order seems to suggest that these particular foxes would be content to take one plump hen and be content. She writes:

“While Plaintiffs have evinced their intention not to abuse this opportunity, it is appropriate for the court to caution the plaintiffs’ bar not to overstep this permission by attempting to seek punitive damages indiscriminately. Punitive damages should only be sought in the most serious cases to correct for the most egregious conduct, and must present a valid reference to corrective action.”

Every plaintiff lawyer has a duty to maximize his client’s recovery in a personal injury action, particularly when the client is suffering from a horrific illness like mesothelioma. If the lawyer believes he can elicit a more attractive offer from a defendant by threatening to seek punitive damages, how could he not do so within the bounds of ethical conduct? Justice Heitler notes that the use of asbestos peaked in the 1960’s and 1970’s when asbestos was used in the more than 3,000 industrial applications. Today, there are probably none. If that is the case, how can a plaintiff make a “valid reference to corrective action” in any demand for punitive damages?
 

When Should Data Underlying Scientific Studies Be Discoverable?

There is significant tension between the goals of scientific research and the demands of litigation. For scientific researchers, the amount of time required to respond to discovery takes away valuable time that might be otherwise devoted to research. Injustice and unfairness may result when a scientist, who has taken no part in a litigation, is served with a lengthy subpoena requiring him to devote large chunks of time to produce the required information. 

In an article published in the journal Neurology by Brad A. Racette, MD; Ann Bradley, JD; Carrie A. Wrisberg, JD; and Joel S. Perlmutter, MD, titled “The Impact of Litigation on Neurologic Research,” Neurology 67(12):2124 (Dec. 2006), the authors complain about the burden of time responding to discovery demands:  

"Any hint of scientific data that support such a cause and effect relationship often encourages plaintiffs' attorneys to file suits against corporations alleging harm to their clients forcing corporations and employers to defend themselves. Both plaintiff and defendant teams hire expert witnesses who are frequently active investigators in relevant fields to bolster their positions. These legal proceedings can influence investigators and hamper research. Interactions with researchers can lead to personal financial or career gain that may bias research findings or impugn other investigators. Even researchers who have not been retained by either side of a legal dispute may be forced to respond to subpoenas for research data causing a substantial loss of research time for investigators and financial burdens on universities. Courts may require release of research records containing personal health information that could sully the trust research participants have in investigators. Litigation and its peripheral effects may bias investigators, impede research efforts, and harm research participants, thereby undermining efforts to understand the cause of neurologic disease."

In a rejoinder to this article, defendant’s counsel in the Welding Fume  Products Liability Litigation, Nathan A. Schachtman, wrote in a reply titled, “Response: The Impact of Litigation on Neurologic Research,Neurology 69(5):495 (Apr. 2007), that the Racette article offered a one-sided, incomplete picture of the interaction between scientific research and the law. 

Schachtman observes that the authors failed to disclose that the welder screenings for their study were funded by plaintiffs as part of an effort to solicit personal injury clients. Defendants served subpoenas to obtain the study’s underlying data only after plaintiffs’ counsel heavily relied on the authors’ study. Thus, Schachtman argues, the authors were not disinterested researchers inadvertently caught up in litigation. He states, “the authors collaborated with plaintiffs’ counsel so closely that counsel invoked litigation privileges to cloak the work in secrecy.” 

 In what might be characterized as a sur-reply, Dr. Racette responded that his early collaboration with the plaintiffs had been greatly overstated.  Perhaps the best advice, albeit cynical,  to scientific researchers may be to steer completely clear of lawyers at all costs and to avoid the temptation to be "helpful" to lawyers involved in litigation. Of course, the legal profession is the worse off if the best scientists are fearful of becoming involved in the judicial system. 

How then  is a court to balance the competing needs for transparency in litigation and permitting scientific researchers, often unrepresented by counsel, with the peace and tranquility necessary to perform their research?  As the court observed in In Re Welding Fume Products Liability Litigation, 534 F.Supp.2d 761 (2008), Dr. Racette had performed some assessments for plaintiffs’ counsel during the nascent stages of the MDL, but later severed his ties with plaintiffs and took no more payments from them. Under these circumstances, the MDL court opted in favor of disclosure. The MDL court reasoned that where an author publishes an article with a view toward litigation, a probability of bias exists which undermines the logic supporting the admission of this material through the “learned treatise” exception to the hearsay rule. In some cases, the “learned treatise” is excluded from evidence due to the taint of suspected bias. On other occasions, the treatise is admitted but subject to impeachment on cross-examination. 

The difficulty arises when a party’s expert reaches his expert opinions by relying on a study performed by a scientific researcher who is completely disinterested in the litigation. In this instance, what intrusion into this scientist’s life will be permitted? Merely because an author has reached a conclusion that dissatisfies one side or the other in litigation should not make that scientific researcher a “target” of a burdensome subpoena.

Pursuant to a very different set of facts, the Appellate Division, First Department, recently ruled in Weitz & Luxenberg v. Georgia-Pacific LLC, 2013 N.Y. Slip.Op. 04127 (6/6/13), that Georgia-Pacific must turn over for in camera review by the Court internal communications related to scientific studies it commissioned into the safety of its products. This discovery dispute arose in the context of the Weitz & Luxenberg  New York City Asbestos Litigation (“NYCAL”) cases in which Georgia-Pacific is a defendant. 

In 2005, Georgia-Pacific funded eight published research studies to aid in its defense of asbestos-related litigation. To facilitate this endeavor, Georgia-Pacific entered into a special employment relationship with Stewart Holm, its Director of Toxicology and Chemical Management, to perform expert consulting services under the auspices of in-house counsel, whom the Court found was significantly involved in the pre-publication process. 

The studies at issue were designed to cast doubt on the capability of chrysotile asbestos to cause cancer. The Court observed that despite the extensive participation of in-house counsel, none of the articles disclosed in-house counsel’s involvement. Citing the In Re Welding Fume Products Liability Litigation,  the Appellate Division determined that, “large corporations often invest strategically in research agendas whose objective is to develop a body of scientific knowledge favorable to a particular economic interest or useful for defending against particular claims of legal liability.” 

In determining that the studies and related documents should be subject to in camera scrutiny, the Court stated that the trial court was rightfully wary of prejudicing plaintiffs by permitting the sudden introduction of the studies or experts on the eve of trial, or in the many other pending asbestos cases. Therefore, the principles of fairness, as well as the spirit of the Case Management Order, required more complete disclosure. The Court held that it would be inappropriate to permit Georgia-Pacific to use its expert’s conclusions as a sword by seeding the scientific literature with Georgia-Pacific-funded studies, while at the same time using the privilege as a shield, by withholding the underlying raw data that might be prone to scrutiny by the opposing party which may affect the veracity of its expert’s conclusions. In its in camera review, the court will evaluate whether the crime-fraud exception to the attorney-client privilege applies to certain of the client communications in dispute. 

In high stakes toxic tort litigation, such as the NYCAL or Welding Fume litigations, it is not unusual for both well-heeled plaintiffs and defendants to fund studies to support their positions in litigation. In such instances, most courts will require extensive disclosure of the data underlying these studies’ findings. 

However, this is very different from the situation  where an independent scientist, who is uninvolved in any litigation, finds that his scientific research and underlying data is the subject of litigation scrutiny. Although some discovery may be appropriate in these instances, forcing scientific researchers to devote an inordinate amount of their time complying with litigation requests may have a chilling effect on the research community’s willingness to take on scientific challenges relating to important public health issues.