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In a decision that is sure to grab the attention of the asbestos personal injury bar, a Philadelphia Common Pleas judge has dismissed Crown Cork & Seal as a defendant in 376 pending asbestos cases. Judge Allan J. Tereshko found that Philadelphia-based consumer packaging company Crown Cork & Seal qualifies for relief under a new Pennsylvania law that limits the successor liability of asbestos defendants whose liability results only from merging or acquiring companies that produced asbestos products. Under the law, the company must be incorporated in Pennsylvania prior to May 2001 and must show that its liabilities in asbestos lawsuits have equaled or exceeded the “fair market value” of the company whose acquisition resulted in the successor liability. The ruling is a major victory for Crown Cork & Seal’s team of lawyers — Thomas A. Leonard, Paul S. Diamond and Mathieu J. Shapiro of Philadelphia’s Obermayer, Rebmann, Maxwell & Hippel. In his 30-page opinion, Tereshko found that the law is valid under both the federal and Pennsylvania constitutions. And since the law survived the constitutional attacks of the plaintiffs’ lawyers, Tereshko found that Crown Cork & Seal was entitled to summary judgment dismissal of all asbestos cases currently pending against it. THE ‘BIG PICTURE’ OF ASBESTOS LITIGATION Tereshko’s opinion opens with a description of the “big picture” of asbestos litigation, which he termed “the longest-running mass tort litigation in the United States.” In the “early stages” of the litigation, Tereshko noted, the defendants were primarily asbestos mining companies, and the manufacturers, distributors and installers of asbestos insulation products. But the list of 300 so-called “tradition defendants” was just the beginning, Tereshko noted, and the litigation gradually grew to include about 1,000 defendants. And the number of claims, originally estimated to be in the hundreds of thousands, “grew into the many millions,” Tereshko wrote. The cost of the litigation has proved crippling, or even fatal, to many of the defendants. So far, Tereshko noted, 41 asbestos defendants have declared bankruptcy, with a “recent surge” in the past two years. Between April 2000 and July 2001, Tereshko noted that seven of the most common defendants have filed for bankruptcy protection — Pittsburgh Corning, Owens Corning, Armstrong World Industries, G-I Holdings, W.R. Grace, U.S. Gypsum, and U.S. Mineral Products. Citing insurance company filings, Tereshko noted that asbestos litigation has already cost an estimated $72 billion and that “the amount of money required to resolve the remaining claims will push the cost to all insurers and corporations to $200 billion.” With that historical backdrop, Tereshko considered how Crown Cork & Seal came to be a defendant in hundreds of asbestos cases despite never manufacturing any asbestos products. In 1963, Crown Cork & Seal purchased Mundet Cork, a company that manufactured bottle caps, just as Crown did. As part of the purchase, Crown also acquired the other part of Mundet Cork’s business which was the “insulation” division that manufactured, sold and installed asbestos products. Tereshko found that Crown’s only interest was in the closure of the insulation division since Mundet had already shut it down prior to Crown acquiring the Mundet stock. Within 90 days after the acquisition, the insulation division was sold to another company. “As a result of this brief passive ownership, Crown incurred successor liability to Mundet Cork’s tortious activity in operating its insulation division,” Tereshko wrote. THE NEW LAW Tereshko then turned to the new law, an amendment to Title 15 of the Pennsylvania Consolidated Statutes titled “Limitations on Asbestos-Related Liabilities Relating to Certain Mergers or Consolidations.” Citing to the legislative record, Tereshko found that the law was designed, in the words of one state senator, to “make sure our corporate merger laws do not unfairly expose innocent companies to ruin solely because of a merger.” Tereshko found that lawmakers were trying to find a “legislative solution” for the “unprecedented avalanche” of asbestos-related claims and the “elephantine mess” they have created for the courts. One senator, Tereshko noted, stated that “it is an essential governmental interest and matter of public policy that the amount of assets available to satisfy asbestos-related claims be fairly limited to the value of assets of the person or company that actually caused the damage through the production, sale, or installation of asbestos.” Terming the law “an issue of fairness,” the senator stated that “the goal of this legislation [is] to achieve some measure of fairness for Pennsylvania companies like Crown Cork & Seal.” CONSTITUTIONAL ATTACKS Plaintiffs’ lawyers argued that the law violates the Commerce Clause and Equal Protection Clause of the U.S. Constitution. They also argued that the law violates the Pennsylvania Constitution because it is applied retroactively, amounts to a “special law,” and imposes limits on personal injury damages. Tereshko rejected each of the attacks. The Commerce Clause argument, Tereshko found, was premised on a “quantum leap of logic,” in which the plaintiffs’ lawyers argued that the law “constitutes a prohibition against treating a domestic corporation differently from a foreign corporation.” The flaw in the argument, Tereshko found, was the presumption that a tort action is an “article of commerce.” “A tort action is the state-created right of a citizen to redress a wrong or a harm suffered by the mechanism of compensatory damages,” Tereshko wrote. “Although the term ‘article of commerce’ has been defined in a broad fashion so as to incorporate many diverse aspects of our economy, [p]laintiffs fail to present any cases, and this court’s search fails to uncover any support for the proposition that a tort is an article of commerce.” Tereshko rejected the argument that the law violates the “dormant” Commerce Clause, which prohibits economic protectionism — regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors. Instead, Tereshko found that the plaintiffs affected by his ruling included 254 Pennsylvania residents and 122 non-Pennsylvania residents. “Thus, it is clear that both Pennsylvania and non-Pennsylvania residents are both affected without any attempt at distinction,” Tereshko wrote. And while the law grants protection only to Pennsylvania companies, Tereshko found that by protecting only those with successor liability, its impact is felt by any asbestos defendant with direct liability that remains in the litigation — a long list that includes numerous Pennsylvania companies. “The challenged legislation makes no distinction between Pennsylvania companies and foreign companies, whose liability arises out of direct culpability, and this group represents the most significant defendant group. Therefore, the local protectionist argument is unconvincing,” Tereshko wrote. And the protections in the law are not triggered until the successor company has spent an amount equal to the cost of the company it acquired, Tereshko said. “This is far from erecting the proscribed protectionist barrier. This is the Pennsylvania Legislature’s attempt to rationally relate the liability under the successor liability theory to some set of values which are determined by the value of the assets acquired,” Tereshko wrote. Although the law may have the effect of burdening other asbestos defendants with an increased share of the liability, Tereshko found that “this burden would be shared by both Pennsylvania companies and foreign companies whose liability arise from direct manufacturing, distributing or other non-successor acquired liability.” Tereshko found that the law doesn’t limit a plaintiff’s recovery since every case names multiple defendants who would have joint and several liability. “There can be no logical inference that plaintiff’s recovery will be diminished in any way. In the 378 cases included in this motion, there are over 7,000 defendants being sued, all of whom are subject to joint tort liability,” Tereshko wrote. Finally, Tereshko rejected the argument that the law violates the Pennsylvania Constitution’s prohibition against the passage of “special laws” since it was not passed to benefit Crown Cork & Seal alone. “Given the actual number of Pennsylvania defendants who may qualify and the lack of contrary evidence, and the clearly expressed basis for the legislation, that is, the limiting of liability of an asbestos defendant under a successor liability theory to the acquired assets, the legislation fails the test for a special law and passes the rational basis test,” Tereshko wrote.

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