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With increasing numbers of companies being sued in asbestos cases, more often now by plaintiffs with less serious or no present injuries, the asbestos crisis continues to worsen. However, recent court decisions, including two by the New York state court with jurisdiction over asbestos-related personal injury actions in New York City, suggest that a new wave of defendants may be provided some relief. In Tancredi v. A.C.&S. Inc., 750 N.Y.S.2d 469 (Sup. Ct. N.Y. Co. 2002), New York State Supreme Court Justice Helen E. Freedman limited the damages payable by defendants in asbestos cases when co-tortfeasors are in bankruptcy. Then, in In re New York City Asbestos Litigation, No. 40000/88 (Sup. Ct. N.Y. Co. Dec. 19, 2002), Freedman established a �”deferred docket” for claimants with minimal or no impairment, with proceedings stayed, and an “active docket” for cases of significantly impaired claimants. These decisions may provide some help to businesses that have been brought into the “elephantine mass of asbestos cases” ( Ortiz v. Fibreboard Corp., 527 U.S. 815, 821, 1999) now pending in New York and in other state and federal courts throughout the country. When the first asbestos claims were brought years ago, they typically were filed against companies that either mined asbestos or manufactured, sold, distributed or frequently used asbestos-containing products, including insulation, fireproofing, construction materials and boilers. Since 1982, at least 62 of these kinds of companies have filed for bankruptcy. They include UNR Industries Inc. (filed in 1982); Johns-Manville Co. (1982); Amatex Corp. (1982); Celotex Corp. (1990); National Gypsum Co. (1990); Standard Asbestos Mfg. & Insul. (1990); Eagle-Picher (1991); Harnischfeger Corp. (1999); Rutland Fire & Clay (1999); Babcock & Wilcox (2000); Armstrong World Industries (2000); and Kaiser Aluminum (2002). The bankruptcy rate is accelerating: The first 16 companies filed in the 1980s. In the 1990s, there were 18 filings. Since Jan. 1, 2000, more than two dozen of these companies have entered Chapter 11. GROWING DEFENDANT POOL With many of the traditional asbestos companies having entered bankruptcy, the defendant pool has grown beyond the core group of companies that processed asbestos or used it extensively to a group comprised of “downstream” users or distributors of asbestos-containing products or manufacturers of products in which asbestos was jacketed or encapsulated. Defendants today often are in industries with little asbestos connection and include premises owners; heavy- and light-equipment manufacturers whose products incorporated some asbestos; brake, gasket and sealant manufacturers; and general construction contractors. Indeed, there have been more than 6,000 companies spanning virtually every type of industry in the United States named as defendants in asbestos lawsuits. See Stephen J. Carroll et al., Rand Institute for Civil Justice, Asbestos Litigation Costs and Compensation: An Interim Report 49-50 (2002). This secondary wave of defendants, often referred to as “peripheral” defendants, is facing monumental numbers of lawsuits. By now, more than 600,000 people in the United States have filed claims for asbestos-related personal injuries. Id. at 40-41. About 30,000 filed cases are estimated to be pending in New York City alone. Tancredi, 750 N.Y.S.2d at 472 n.4. Many current claimants are not seriously ill or dying, but are asymptomatic or have less serious noncancerous conditions. See Rand Report 2002, supra, at 19-21. In short, much of the asbestos litigation battle has shifted to actions brought by functionally unimpaired claimants against defendants that have been only marginally involved with asbestos. Given the number of asbestos companies forced into bankruptcy, many of these new defendants naturally fear for their financial future. JOINT AND SEVERAL LIABILITY The issue in the Tancredi case stemmed from Art. 16 of New York’s Civil Practice Law and Rules (CPLR), which partially abrogates New York’s common law, under which any joint tortfeasor, whatever its share of fault, could be held jointly and severally liable for the entire judgment. The statute, CPLR 1601(1), limits a joint tortfeasor’s liability for the plaintiff’s noneconomic losses (pain and suffering for bodily injury) to its proportionate share, provided that the tortfeasor is found 50 percent or less at fault. If a defendant is found more than 50 percent culpable, however, it cannot benefit from the statute and remains liable as a joint and several tortfeasor. To illustrate, assume in a personal injury action that Defendant A is 30 percent at fault and Defendant B is 70 percent at fault for the plaintiff’s noneconomic loss of $100,000. Under Art. 16, Defendant A, whose share of fault is less than 50 percent, is liable for no more than $30,000 of the loss (30 percent of $100,000), while Defendant B, whose share exceeds 50 percent, could be liable for the entire $100,000. The first proviso in CPLR 1601(1) states that if a plaintiff in an action can prove that it could not with due diligence obtain jurisdiction over a tortfeasor and join it as a defendant, then that nonparty tortfeasor’s share of fault will not be considered when calculating the party-defendants’ percentages of fault under Art. 16. This can have the effect of greatly increasing the party defendants’ liability. As an illustration, assume that a plaintiff sues Defendant A and Defendant B in a personal injury action but is unable to obtain jurisdiction over C. Assume, too, that the plaintiff has noneconomic damages of $100,000. As to liability, assume that Defendant A is found to be 30 percent at fault, Defendant B to be 50 percent at fault and nonparty C to be 20 percent at fault. A’s and B’s liability to the plaintiff is calculated as follows: Pursuant to the proviso in CPLR 1601(1), C’s share of the total fault (20 percent) is not considered in determining A’s and B’s liability shares. Deducting 20 percent from 100 percent leaves 80 percent, which is used to determine the limit of A’s and B’s exposure pursuant to CPLR 1601(1). Thus, A’s share is adjusted from 30/100 to 30/80, or 37.5 percent; since 37.5 percent is less than 50 percent, A’s exposure is capped at 37.5 percent of $100,000, or $37,500. As for B, its share of fault is adjusted from 50/100 to 50/80, or 62.5 percent, which exceeds 50 percent; accordingly, B could be held jointly and severally liable for the entire $100,000. ‘EFFECTIVE JURISDICTION’ ISSUE The legal question decided by Freedman in Tancredi was whether, under the CPLR 1601(1) proviso, a plaintiff is “unable to obtain jurisdiction” over a tortfeasor simply because it has filed for bankruptcy, triggering the automatic stay of prosecution under � 362(a) of the Bankruptcy Code. 11 U.S.C. 362(a). The defendants contended that, as a matter of law, a bankruptcy filing by a tortfeasor did not divest a plaintiff of jurisdiction that it might otherwise obtain over the bankrupt, and accordingly the bankrupt’s share of fault should be included when calculating the defendants’ exposure under Art. 16. For their part, the plaintiffs argued that, because the automatic stay afforded by a bankruptcy filing precludes a plaintiff from obtaining “effective jurisdiction” over the bankrupt tortfeasor, the bankrupt tortfeasor’s shares should be excluded from the calculation. This dispute has great practical significance: If an adjustment causes a defendant’s liability to rise to above 50 percent, the defendant could become liable for the plaintiff’s entire noneconomic loss. In her opinion, Freedman agreed with the defendants. She acknowledged that one of the major decisions addressing how bankrupt tortfeasors are treated under CPLR Art. 16 was issued by the 2nd U.S. Circuit Court of Appeals in In re Brooklyn Navy Yard Asbestos Litig., 971 F.2d 831 (2d Cir. 1992), affirming In re E. & S. Dists. Asbestos Litig., 772 F. Supp. 1380 (E. & S.D.N.Y. 1991). In that case, the 2nd Circuit construed “jurisdiction” in CPLR 1601(1) to mean “effective jurisdiction” and held that the plaintiffs could not obtain “effective jurisdiction” over the bankrupt tortfeasors because they were precluded from continuing actions or processing claims against the bankrupts. For that reason, the 2nd Circuit concluded, the bankrupts’ shares were excluded from the CPLR Art. 16 calculation. Freedman rejected that analysis, finding first that the statute does not require “effective jurisdiction,” but merely “jurisdiction.” In Freedman’s view, “jurisdiction” means personal jurisdiction, which, Freedman held, is unaffected by a party’s bankruptcy filing and the attendant automatic stay. Freedman reasoned that a bankruptcy stay merely suspends other court proceedings outside the bankruptcy proceeding but does not divest those courts of jurisdiction over the bankrupt. Accordingly, Freedman found that the culpability of a bankrupt, nonparty tortfeasor should be included when calculating the defendant-tortfeasors’ exposure under CPLR 1601(1). A plaintiff still may be able to prove that he or she with due diligence could not obtain personal jurisdiction over the bankrupt or its estate, or that there is no basis for long-arm jurisdiction. DEFERRED DOCKET Another decision by Freedman could provide additional benefits for peripheral and other defendants in asbestos cases. In a Dec. 19, 2002, order in In re New York City Asbestos Litigation, Freedman observed that fewer than 2,000 of the claimants or decedents in pending personal injury or wrongful-death actions in New York City suffer or suffered from asbestos-related malignant diseases, and only a small percentage of the remainder have sustained functionally impairing asbestosis. She then created a deferred docket consisting of all actions brought by, or on behalf of, claimants who do not meet certain minimum criteria relating to malignancy and who are unable to provide a physician’s statement to the effect that “to a reasonable degree of medical certainty … the cancer in question is caused by asbestos exposure.” Essentially all proceedings with respect to cases on the deferred docket are stayed, but the order establishes a procedure for transferring cases from the deferred docket to the active docket should those claimants become significantly impaired. See “Ill Claimants to Go Before Unimpaired, N.Y. Court Orders,” Asbestos Litigation Reporter, Dec. 30, 2002, at 5. This decision should substantially lower the defense and settlement costs for peripheral defendants. other courts have taken similar action. Courts in Illinois, Maryland, Massachusetts, South Carolina and Washington have established similar methods for giving priority to the claims of some plaintiffs, ahead of those less impaired. Id. the Eastern District of Pennsylvania, in In re Asbestos Products Liability Litig., 2002 U.S. Dist. Lexis 16590 (E.D. Pa. Jan. 14, 2002), administratively dismissed numerous claims, including those brought on behalf of asymptomatic individuals. Thus, courts have been willing to provide at least some relief to secondary asbestos defendants if provided a reasonable basis. These defendants need to continue to provide courts with a basis for such relief as they are increasingly brought into asbestos litigation. Alan C. Eagle and Frank J. Giliberti are partners in the Uniondale, N.Y., office of Rivkin Radler (rivkinradler.com). They practice in various areas of litigation including construction, products liability, toxic torts, insurance coverage and other commercial litigation. They may be reached at [email protected] and [email protected] If you are interested in submitting an article to law.com, please click here for our submission guidelines.

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