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Look Who's Talking Settlement


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LOOK WHO'S TALKING SETTLEMENT

Ronald L. Motley has been like an airborne toxin to the asbestos industry. In as many as 100 trials, the 50-year-old plaintiff attorney has made a career out of vilifying asbestos manufacturers. Once, Motley donned a doctor's white coat and toy stethoscope in the courtroom to belittle the testimony of an industry expert witness. Another time, the flamboyant South Carolinian lugged a box covered with a giant skull and crossbones into a courtroom to illustrate the shortcomings of one manufacturer's warning labels. And though he was admonished by a judge for that prank, Motley's ingenious trial tactics, devised on behalf of some 75,000 asbestos victims over the past 20 years, have made him one of the most feared and respected attorneys in the country.

So why are so many of the plaintiff lawyers and legal scholars who once admired Motley suddenly scorning him? They say it's because he has joined a growing movement among companies to use class actions to cut off liability from seemingly endless litigation. The recent settlements involve such minefields of liability as asbestos and silicone breast implants. The problem is, Motley's critics charge, the new class action settlements may all but eliminate the rights of plaintiffs to sue manufacturers in the future. "The courts have sold [future] plaintiffs down the river," declares Columbia University law professor John C. Coffee, who has been involved in the asbestos litigation.

Motley, who helped negotiate a $1 billion settlement last year with 20 of the largest asbestos manufacturers, says the settlement is actually better for plaintiffs than the court system. He points out that plaintiffs will no longer have to wait years to collect their awards, companies get to cap their liability forever, and judges can clear their crowded dockets. "It's time to stop spending $2 in transaction costs for every $1 that goes to victims," says Motley. "It's a sin to reinvent the wheel thousands of times a year."

"THE EXTRA MILE." Yet the settlement Motley helped craft with such asbestos makers as Pfizer Inc. and GAF Corp. (now called ISP) and the $4.2 billion implant deal hammered out this April have raised questions about whether victims' rights are being sacrificed for an efficient end to troublesome litigation. Unlike most class-action deals, which cover the plaintiffs who file the suits, these settlements cover future plaintiffs. Critics say benefits for individuals who aren't yet sick seem to pale in comparison with those for present plaintiffs who are represented zealously by advocates such as Motley.

In the asbestos deal, manufacturers insisted that future claimants demonstrate more serious medical conditions than current plaintiffs are required to before they can qualify for compensation. Critics say Motley agreed to those terms in return for a generous $215 million settlement for his 14,000 present clients. What's more, Motley and his Charleston (S.C.) firm, Ness, Motley, Loadholt, Richardson & Poole, will split an estimated $75 million with their co-counsel as a result of the $215 million deal. Motley defends the pact but says it is ultimately up to "the judge to decide if anything is wrong."

As part of the asbestos accord, defendants are required to notify potential plaintiffs about the settlement and their options through national advertising and letter campaigns. Anybody who does not want to be part of the deal can opt out by submitting a form to the court. "We walked the extra mile to give notice on a broader scale than anyone has done in the past," says Lawrence Fitzpatrick, president of the Philadelphia-based Center for Claims Resolution, an industry group formed to manage asbestos litigation.

The problem is, there's little way of knowing who future claimants will be. Victims of asbestos-related ailments often don't develop diseases for years and in some cases aren't even aware that they have been exposed. That makes it difficult for them to know whether to forgo the deals being cut now. So far, some 260,000 out of potentially millions of plaintiffs have opted out of the settlement. Those who didn't may now have a hard time getting out and will have to abide by the terms of the $1 billion deal. And unlike Motley's current clients, victims who suffer less serious symptoms such as spots on the lungs won't qualify for compensation.

FRUSTRATED FOREIGNERS. The breast-implant settlement, which was spearheaded by Dow Corning Corp. and Baxter Corp., has also come under attack. Under the agreement's terms, future victims may find that the fund set up to pay them will be depleted by the time they get sick. Foreign women, who bought half of all U.S.-made implants, receive only about 3% of the compensation set up for women who become ill. Their lawyers say that's because they were excluded from talks the companies held for 18 months with plaintiffs' attorneys Stanley M. Chesley and Ralph I. Knowles. By the time attorneys for the foreign women were allowed in, "the cake was baked," gripes Manhattan attorney Sybil Shainwald, who represents many foreign women.

Knowles and Chesley say the deal is fair, noting that women could opt out of the settlement. But to some foreign women, that's little consolation. By law, they then could only sue manufacturers in their own countries, which traditionally reward plaintiffs less money than do courts in the U.S.

Whether these increasingly common--and controversial--settlements will stand up in court remains to be seen. Both the silicone-breast-implant accord and the asbestos settlement will be reviewed later this summer by district court judges. But many legal experts believe that ultimately it will take a decision by the Supreme Court to balance the rights of individuals with the need for efficient settlements.

Motley isn't waiting around to see what happens. He's already hot on the trail of the next class-action frontier: tobacco. With the cigarette industry's avowed policy never to settle, Motley's toughest battle may be yet to come.

REVERSAL OF FORTUNE

Many companies that once vigorously fought class-action settlements are now welcoming them as a means of ending their litigation nightmares. Here's why:

FUTURE VICTIMS ARE COVERED Companies increasingly demand inclusion of both current and future plaintiffs as a way to cap their overall liability.

PAYMENT SCHEDULES Standardized payouts eliminate the prospect of wildly disparate jury verdicts, thus enabling companies to plan better for their future liability.

SELECTIVE COMPENSATION Certain victims, who otherwise would be entitled to payments, will no longer be able to collect damages for their injuries. For example, asbestos victims diagnosed with less serious conditions are excluded from compensation in a new agreement with defendants.

TRUNCATED LITIGATION Suits and settlements are filed on the same day, eliminating the need for lengthy legal maneuvering.

DATA: BUSINESS WEEKCatherine Yang in Washington


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