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Asbestos And Criminal Liability Nov
- 1. Asbestos and Criminal Liability
- 6. In 2002 Libby, Montana Declared Superfund site
- 14. W.R. Grace PRP Liability= $250 Million
- 15. THE PLAYERS
- 16. THE JUDGE DONALD MOLLOY
- 19. THE DEFENDANTS
- 20. W.R. GRACE
- 26. Alan Stringer
- 27. O. Mario Favorito Legal counsel for W.R. Grace
- 29. THE CHARGES
- 34. CONSPIRACY
- 41. Paul Peronard EPA On- Scene investigator
- 43. Robert Locke
- 46. Richard Lemen
- 52. Defense’s Case
- 56. The Verdict
- 80. Asbestos and Criminal Liability
Notas del editor
- Video showing how Libby was declared an EPA Superfund site.
- Road to Criminal Court Uncivil Action EPA Responds Paul P. files charges W.R. Grace’s long road to criminal charges actually began with the EPA. In 1999 the EPA sent a team of investigators to Libby primarily in response to a series of articles entitled Uncivil Action published in the Seattle P-I. Uncivil Action detailed the high incidence of lung disease in Libby and the connection of that disease rate to the W.R. Grace vermiculite mine. Ultimately, the EPA would declare the entire town of Libby a superfund site. And it would later be an EPA investigator, Paul Perranoud, who would file criminal charges against W.R. Grace.
- Worst disaster Libby high profile lots of asbestos superfunds single building to JM-- meso clusters asbestos defendants of today n 2002 Libby was officially declared a superfund site. The EPA would go on to call Libby the worst environmental disaster in U.S. history. But not every superfund site has such a high profile. Superfund sites vary from a single abandoned building to former JM plants. Parties also vary from premises owners to product manufacturers and it is for these reasons we have chosen to briefly cover superfund liability.
- Superfund liability is governed by the Comprehensive Environmental Response, Compensation, and Liability Act also known as CERCLA. You make a mess you clean it up Govt. can start clean up- The term for liable parties under CERCLA- PRP Congress enacted CERCLA to establish and fund enforcement mechanisms for the cleanup of environmental hazards. Under CERCLA, the government has the right to begin the clean up of toxic waste and then seek reimbursement and further contribution from Potentially Responsible Parties or PRPs. Potentially Responsible Parties is the statutory term used for the liable party. CERCLA has a reputation for vaguely-drafted provisions and an ambiguous, often contradictory legislative history. As a result, the answers to key issues are sometimes obscure. Including who can be a PRP which is essential to determining the party on the hook for funding the clean up. CLICK It’s also important to note that unlike most laws, CERCLA is retroactive. NEXT SLIDE
- There are four categories of PRPs. Pretty self-explanatory Generators/Arrangers requires a little bit more discussion 1. you might be a PRP if you are the current owner and operator of a facility. The government need only prove you are the owner to prove PRP liability. If a party purchases land that was contaminated by the prior owner, the current owner can assert an innocent owner defense, but will have the burden of proof in showing that a past owner was in fact the contaminating party. CLICK 2. You might be a PRP if you are a past owners and operators of a facility. In asbestos litigation we tend to think of premises v. product defendants. But as current or past operators of a manufacturing facility where an asbestos-containing product was manufactured there exists the possibility for PRP liability. CLICK The third category of PRP is generators or parties that arranged for disposal or transport of the hazardous substance. This is a category that some courts have interpreted broadly, giving CERCLA a wider net to snag more PRPs. CLICK Finally, transporters of hazardous waste that selected the site where the waste was brought. This category is directed primarily waste disposal companies.
- Traditional or direct- arranger- the PRP is the party contracting for the disposal some courts have expanded this category CERCLA does not address product defendants specifically. CERCLA defines “arranger" as anyone who by contract, agreement, or otherwise, arranged for the disposal, treatment, or transport for disposal, of hazardous substances. The traditional view of the “arranger” involves transactions in which the central purpose of the transaction is disposing of the waste. But courts utilizing the broader definition of “arranger” have extended it to include a party contracting for the sale or transfer of the hazardous substance even when they had no intent to dispose of the product. Arguably, product and equipment manufacturers are “arrangers” of the asbestos within or affixed to their product as sellers of those products. The Supreme Court has held that to qualify as an arranger the party must have intended that at least a portion of the product be disposed of during the transfer process. A manufacturer is presumed to be on notice that the intended use, installation, or application of it’s product or equipment results in the release of asbestos. However, according to the Supreme Court knowledge alone is not enough to prove intent to despose of the hazardous substance, particularily when the disposal occurs as a peripheral result of the legitimate sale. In the event an asbestos product defendant was held to be a PRP, they could also assert the “useful-product defense”. The court would then look to a variety of factors to determine liability- if it leaked, when it leaked, how leakage occurred, if such leakage resulted in hazardous conditions, and if the manufacturer intended some portion of the product to be disposed of under CERCLA.
- Investigation begins with SEc. 104(e) Must respond Nasty letter Under section 104 (e) of CERCLA, the EPA is authorized to seek information involving sites containing hazardous substances. Early in the clean up process the EPA conducts a search to find all PRPs. The EPA looks for evidence to determine liability by matching wastes found at the site with parties that may have contributed wastes to the site. The EPA uses a variety of tools to develop this evidence, including the use of information request letters. Information request letters are tailored to the type of PRP and their involvement at the site as well as sophistication of the recipient, and insurance coverage. Failure to respond will get you a very nasty letter from the EPA threatening to seek judicial enforcement and a fine for each day of non-compliance, not to exceed $25,000. They will also advise you that false or fraudulent statements may subject you to criminal sanctions!
- A PRP is liable for the cost of the clean-up, any necessary health assessments for exposed individuals, as well as the cost of any injunctive relief. CLICK And once identified as a PRP, you are jointly and severally liable and may be held responsible for the entire clean-up of a site despite the contribution of other parties if the contamination sources are not easily divisible. CLICK And another fun fact about being a PRP is that CERCLA liability is not just strict, but super-strict.
- A PRP does have a few defenses. Under the statute a PRP may avoid liability if the contamination was caused by an Act of God, War, or interference by a third party as long as that party is not an employee or agent of the PRP.
- The courts have also recognized the implied defense of a “useful product.” The useful-product defense is designed to exclude manufacturers who sell products that are eventually disposed of following use. Of course, like any good implied defense there is an exception to the rule-- does not apply where the sale of a product necessarily and immediately results in the leakage of hazardous substances- Example would be gasoline- clearly useful, but if it leaks onto the ground it stops being useful and starts being a contaminant.
- Long negotiations $250 million Superfund liability can be significant Grace trial
- Introducing all the major players at trial.
- The person presiding over the case - Judge Donald Molloy. Judge Molloy was appointed to the bench in 1995. Prior to that he was plaintiff’s lawyer with a background in product’s liability cases.
- The government was represented by Asst. USA Andrew McLean of the U.S. Attorney’s Office in Montana and Department of Justice attorney Kevin Cassidy.
- The Defense team included seven attorneys. Five attorneys representing each individual remaining defendant and the two attorneys for Grace.
- In 1963 W.R. Grace acquired the property and assets of the company who originally mined and processed the vermiculite from the Libby Mine. Grace opertatd that mine up until 1992. From 1976 to 1990, the directors, officers and shareholders of Grace shared $140 million from profits made on products made with asbestos-contaminated vermiculite from the Libby mine.
- Henry Eschenbach was an industrial hygienist for W.R. Grace starting in 1971. He was promoted to Director where he served from 1977-96. Eschenbach was instrumental in commissioning many of the confidential medical studies performed by Grace analyzing mortality rates amongst workers of Grace from exposure to the contaminated vermiculite. Just before his promotion, he surveyed the chest x-rays of 17 retirement-age employees at Grace’s vermiculite mine in Libby, Mont. Fourteen showed what he called, in a memo to Vice President Jack Wolter, “significant scar tissue or fibrosis” – common characteristics of asbestosis. Broadening his study, he found that nearly two thirds of miners who’d worked 10 years or more tested positive for asbestos-related disease. This survey of company-kept medical records is known as the “Eschenbach Study.” Neither the medical records nor the findings of the study were released to Grace employees.
- Robert Bettachi was a Senior Vice President at Grace. he had been there 37 years when he was indicted in the case. Mr. Bettachi has a background in chemical engineering and holds several patents including one for sprayable fireproofing.
- Walsh served as Grace’s senior vice president until 1994. Before that, he was the president of Grace’s Massachusetts-based construction projects division from 1982 to 1989, and then executive vice president of Grace Specialty Chemicals Co.
- Mr. McCaig served as the Maintenance Engineer of the Libby mine from 1971-75; maintenance superintendent from 1976-79; and General Manager of Operations from 1979-88; Retired from Grace in 1995.
- Jack Wolter served as the vice president of Grace’s construction products division from 1975 to 1994. That division included the vermiculite mine in Libby, Mont. The federal indictment alleges that Wolter acted with Grace in leasing and donating the mine’s export plant to the town of Libby without disclosing the asbestos contamination. The property was used for decades as the town’s little league baseball fields. He is also thought to have acted in the sale of the mine’s screening plant to a local family for their commercial nursery business, again without disclosing the contamination. After Grace sold the mine site to Kootenai Development Company in 1994, Wolter bought $600 worth of KDC stock. In 2000, Grace bought every share of KDC stock to retake possession of the mine, paying $2.3 million for the acquisition. As payment for his shares, Wolter received $1.1 million, a gain of more than 180,000 percent in just six years.
- Mr. Stringer was a general manager at the Libby mine. He was also Grace’s representative during the Government’s Superfund cleanup. He died of cancer in 2007 at the age of 62. It has been reported that it was not asbestos-related.
- Mr. Favorito was the general counsel for Grace. Mr. Favorito was granted a separate trial due to attorney client privilege issues as part of his defenses would likely require him to testify against some of the other Defendants. After the acquittal, the government dismissed the charges against Mr. Favorito.
- And finally the jury. What we know about them is very little. Just 12 members of the Missoula, Montana community.
- Grace and the Defendants were charged with 4 counts of Obstruction of Justice. You can read along in the paper as the the actual elements of Obstruction of Justice but basically Obstruction of Justice is the intention of evading, obstructing, or impeding the proper administration of law under which any pending proceeding is being had before any department or agency of the U.S. - in this case - the EPA.
- The specific allegations that were alleged regarding Defendants obstructing justice was that the Defendants impeded an ongoing EPA investigation
- The government alleged that the Grace Defendants provide false information regarding the following matters as well as actions the following actions which prevented the EPA from performing its duties:
- There were 1 count of Conspiracy charged in the indictment. Conspiracy is defined as two or more persons conspiring to commit and offense or defraud the U.S. or any agency, again in this case the EPA and NIOSH in any manner or for any purpose.
- The specific allegations of conspiracy were that the Grace defendants conspired to release asbestos in the air and they conspired to defraud the U.S.. more specifically, the EPA and NIOSH by concealing and misrepresenting the hazardous nature of the tremolite.
- And why did they do this? For the purpose of increasing their profits and avoiding liability.
- The Clean Air Act of 1990 was the bite of the of the criminal charges. Essentially the CAA charges that: Any person who knowingly release asbestos fibers in the air and knows that doing so will place others in danger. The current version of the law was enacted in 1990. It was not made retroactive, so the government had to prove that the Defendants knowingly endangered the Libby residents (knowing released and knowingly endangered) starting in 1990 and then continued to do after they knew that they were placing the residents in danger. The jury was allowed to take into account evidence of knowledge of the dangerousness of releasing tremolite dating back to the 1960’s. This is more than reckless standard. It is specific intent. There were 3 counts of violations of the CAA.
- Distributing the vermiculite material to the community and selling Grace owned property to unsuspecting local Libby citizens and the City of Libby.
- Regarding the exhibits - the judge commented after denying the admission of many of the exhibits that they were more probative of a products liability case and that he was missing the connection to any element of the criminal charges.
- Paul Peronard was the EPA on scene investigator that was sent to Libby in 1999. Mr. Peronard went out ot Libby to investigate as part of the Superfund action and sort of became an activist for the Libby residents. He even became a somewhat star of the Libby Montana movie.
- Paul Peronard was the first EPA investigator to arrive in Libby. Peronard, a veteran EPA employee, was the on scene coordinator for Libby from 1999-2002 and again from 2006-2008. His job was to help identify and gather asbestos samples to be tested throughout the Libby community. The Prosecution attempted to offer Peronard as an expert on risk assessment. However, the Defense immediately voir-dired Peronard on his experience, pointing out that Libby was the first place in which Peronard had performed any work with asbestos.
- Robert Locke was employed with Grace in various capacities since 1974. Educated at Harvard, Locke had a background in industrial engineering, finance, and technology commercialization, Locke worked his way up through the Grace corporate ladder. He bitterly left Grace in 1999, and filed suit against the company that same year for ADA discrimination. The lawsuit is still pending. As Locke provided testimony regarding his employment history with Grace, it became increasingly clear that Locke provided the necessary link to the internal structure of the day-to-day activities at Grace. Near the end of his career at Grace, he worked in upper level management positions dealing directly with tremolite and vermiculite. Mr. Locke gave insight into how the vermiculite was mined and in what products it was used and finally provided details regarding his personal relationships and interactions with each of the Defendants. He then testified that in 2004, government agents interviewed him regarding the Libby investigation. Seeing the writing on the wall, and knowing that he could be implicated, Locke decided to provide the government with testimony and documents. When he left Grace, Locke took several boxes of documents from the company and stored them in his basement. He then testified that per the advice of his attorney, he declined any offer of immunity from the government.
- Locke made some bold misstatements while testifying on the stand, as well as it became that he spent more time working with the U.S. Attorney’s investigators than a witness should and that they were a series of email floating back and forth between the witness and the investigators that the government failed to turn over. There was also a note which showed that the government basically told Locke to refuse the offer immunity, thereby guaranteeing his immunity from prosecution so that he would look credible on the stand.
- Dr. Richard Lemen. We all know him well in this arena. Dr. Lemen was called by the prosecution as a industrial hygienist and epidemiologist, although he was not allowed to testify as an IH because he was not disclosed as such in discovery.
- However, Federal Rule of Evidence 615 allows a court to “sequester” trial witnesses, i.e., exclude them from the courtroom to prevent them from hearing the testimony of other witnesses and possibly changing their stories as a result. Judge Molloy routinely sequesters witnesses under Rule 615. I told you four years ago that if (victim-witness exclusion) was going to be an issue, raise it. Now, at the last minute, this goes up to the circuit and now we have a mandate telling me what to do. And now you’re telling me to ignore the mandate.” Molloy then said that whether the Parkers waived their right or not, he had to follow the lengthy procedure outlined in the court order. “It says the court shall. I don’t have any room — SHALL. During Locke’s testimony, he recited a conversation with Defendant Bettachi regarding whether or not it was prudent to sell Grace property. According to Locke, Bettachi responded “Buyer Beware”. This directly contradicted his testimony before the grand jury, in which Locke testified that he had never discussed Grace property with Bettachi. It was then discovered that the Prosecution failed to produce a note discussing Locke’s offer of immunity from the government. Defense argued that this material was exculpatory Brady material relevant to his testimony.
- Due to finding out the the Government had not disclosed its ongoing relationship with Mr. Locke, as well as did not disclose that they essentially told Mr. Locke to refuse the government’s offer of immunity to make him appear more credible, the judge issued the following instruction to the jury. While this is only part of the instruction, this part places the government in a very bad light and had to have been a factor in the jury’s ultimate decision.
- After the close of the Government’s case, Defense made various motions including a motion to dismiss based on prosecutorial misconduct and motions for acquittal - the equivalent of our motions for directed verdict. While the Motion to dismiss for Prosecutorial misconduct was ultimately denied, the MFA proved victorious for two defendants: Robert Walsh and Will McCaig.
- 13 witness were called to the stand. None of the Defendants testified in their defense, but they called a truncated list of expert witnesses to refute the prosecution’s expert testimony, as well as former Grace employees who could fill in the gaps of the testimonies of Grace employees that the prosecution provided.
- Two such witnesses that the Defense provided were the son of Defendant Will mcCaig who testfied that he grew up in Libby and went to the Junior High and High Schools and ran on the tracks. This showed that the Defendants were themselves Libby residents and would not have put themselves or their families in danger if they actually knew the dangers of the tremolite. Also they called two former Grace employees - Chip Wood and William Corcoran who showed that they had a plan in place at the mine for dealing with the vermiculite issue and that there was no secrecy regarding. Also in dealing with the EPA, that Grace was working with the EPA to recommend a course of action.
- David Krakoff, counsel for Henry Eschenbach, made the following quote to the National Law in response to the criminal prosecution of environmental crimes case. Next, Misti is going to explore the potential alternative liabilities that are available and what new laws could come and whether the lack of criminal liabilities is giving rise to gross negligence verdicts.
- Looking to future of asbestos litigation increase in regulatory seems most likely scenario PAWA- increase in fines and criminal penalties- Dr. David Michaels The current Administration and the current economic crisis give us some context clues in determining where we might be headed in asbestos litigation. CLICK President Obama has previously supported legislation to strengthen OSHA’s authority. CLICK He has stated the OSHA Act should be amended to strengthen penalties- to enable the Department of Justice to prosecute a felony when an employer willfully causes the death or serious bodily injury to a worker. Such amendments have been attempted through the Protecting America’s Worker’s Act, though the ACT has not passed it is evidence of a push to increase corporations' liability and increase OSHA’s punitive power. CLICK We also have a new head of OSHA, Dr. David Michaels, who is familiar with asbestos and has strong opinions on the science used in the litigation. It’s clear that a more aggressive OSHA and expanded regulatory liability, either through an amendment to OSHA, better enforcement of current regulations, or even a more creative use of CERCLA, are the goals of the current administration. CLICK TO NEXT SLIDE
- epidemiologist conducted numerous studies of the health effects of occupational exposure to toxic chemicals, including asbestos and has written extensively on science and regulatory policy. Doubt is Their Product, Michaels writes, “They (asbestos industry) played fast and loose with the science with a vengenance, and they reaped what they sowed, but only after thousands of workers had died.” Michaels criticizes studies done at the behest of a corporation as “litigation-generated” science. GO TO VIDEO
- A number of countries enacted public dissatisfaction with the With an Administration determined to re-focus OSHA to be an agency with a bite to match it’s bark, we may see efforts to penalize asbestos defendants beyond civil or current regulatory liability. President Obama is a leader with a global perspective and it is worth looking at how our greatest ally, Great Britain, to see their methods of dealing with corporate liability. In 2008, Great Britain enacted the Corporate Manslaughter Act which makes an organization guilty of corporate manslaughter if the way that its activities are managed or organized causes a death and amounts to a gross breach of duty of care to the person who died.
- Several factors for the jury to consider corporate culture In determining if a gross breach has occurred the jury is to consider several factors including whether any health and safety regulations have been violated, CLICK
- If found guilty of Corporate Manslaughter, a company will face an unlimited fine and a publicity order- requiring the company to publish the details of the conviction and fine.
- director charged with common law manslaughter trial on Feb. 10 Great Britain has initiated the first prosecution under the new law against Cotswold Geotechnical holdings for the death of an employee who was killed when a pit collapsed on him while taking soil samples. The company and the company director have been charged with gross negligence manslaughter. Trial is set for February 2010. Canada & Australia
- Don’t have corp manslaughter in the U.S. But corp. can be charged criminally The United States has yet to enact a Corporate Manslaughter law, but prosecution under existing criminal statutes could be used to penalize corporations and their executives. Corporations are suffering from negative public perception thanks to bad behaving corporations like Enron and the current economic crisis that has seen companies seek government funding while paying top executives large bonuses. Add to this the belief that civil remedies are not enough to punish corporate wrongdoing and we may see the state criminal charges being brought against companies and directors. The distance between civil gross negligence and negligent homicide is not as far as it may seem-- just ask Ford. GO TO VIDEO
- In 1971, Ford introduced the Ford Pinto.
- recklessly designing, manufacturing, and marketing the Pinto’s unsafe fuel tank system. The prosecution argued that the design was defective, Ford officials knew it, and failed to warn. Ford was ultimately acquitted. in a separate civil action civil Ford was found grossly negligent to the tune of $125 million.
- In 1985, an Illinois judge found three executives guilty of the cyanide poisoning of a worker. The evidence shoed the workers were deceived about the hazards of working with cyanide, provided virtually no safety equipment, and woefully poor ventilation.
- California courts have also upheld indictments of corporations for manslaughter, reasoning in the case of Granite Construction, that corporations can form intent, be reckless, and commit acts through their agents. As recently as 2008 president of a swimming pool company was charged with manslaughter.
- In Texas Plaintiffs routinely file petitions (complaints for some of you) alleging aggravated assault. Though the charge has yet to be pursued in a criminal court, the allegation is there. It is clear that corporations and directors can be subject to state prosecution. While most of these cases are employer-employee and not product related, they may be used as precedent for bringing criminal charges against manufacturers of asbestos-related products and most certainly show that a premises owner may be exposed to criminal liability for the asbestos-related death of an employee.
- Where a jury fails to convict they may still award punitive damages. looking at where we might be headed take a look at verdict trends of the past Since the start of asbestos litigation, approximately 70 companies have filed for bankruptcy protection against the multitude of personal injury claims. These bankruptcies removed most of the major players from the asbestos-litigation field. With those deep pockets gone, Plaintiffs have shifted their focus to second and third tier targets, and so we have the defendants of 2009. We were curious if a review of verdicts over the last several years would reflect the change in defendant target. So we took a look at every verdict taken in an asbestos case over the last 5 years.
- The public may be willing to support not only increased economic penalties, but also morally symbolic criminal sanctions to deter businesses from endangering human life when civil and regulatory penalties seem unable to adequately punish a corporation. However, civil liability remains the preferred method for dealing company wrong-doing for a variety of reasons. CLICK The burden of proof in a criminal case of beyond a reasonable doubt is significantly higher than preponderance of the evidence and higher even than the heightened standard required for gross negligence. CLICK It CLICK Juries hesitate to hold individuals responsible for the collective acts of a corporation.
- What we found was there is a rise in both the number of verdicts taken and the number of times punitive damages are awarded. Top tier defendants no deep pockets better defenses but still more punitives? How people feel about corporations- Bring it back to Ford- number analysis Are you a corporation that puts profit over people? One reason for this, is because the remaining asbestos defendants have better defenses and are more likely to try a case to verdict because they have a far greater chance at success then say a JM would have. Another reason we may see more verdicts is because with so few viable defendants to obtain money from, Plaintiff's demands have increased to the point defendants are unable to settle. are you a corp that values profit over human life? run the numbers like Ford.