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September 2005
by James C. Musser, ASBA Washington Representative

An important bill will come before the U.S. Senate in October that could have a major impact on small businesses. The Fair Asbestos Injury Resolution Act of 2005 (FAIR Act), also known as S. 852, was introduced by Senator Arlen Specter (R-PA) to address the nationwide flood of asbestos-related lawsuits and establish a uniform system for handling the claims and stop frivolous lawsuits. The FAIR Act will establish a no-fault system of compensation for those claiming asbestos-related health problems and set uniform medical standards for awarding compensation to claimants with asbestos-related injuries. If enacted, the bill will create a new Office of Asbestos Disease Compensation within the U.S. Department of Labor to oversee the Asbestos Injury Claims Fund. This fund would pay claimants based on medical criteria established by the FAIR Act and eliminate nearly all lawsuits based on alleged asbestos-related injuries.

While many claimants have filed suits against big corporations, such as Exxon and Pfizer, the greatest impact is often felt by small, family-owned businesses, which have been swept into litigation despite having only a tangential relationship to the asbestos industry or use of products containing asbestos. A number of small businesses have been sued multiple times once the firm name has been mentioned in a single case. The cost of fighting the suits has proved crippling and even pushed some small businesses to the verge of bankruptcy.

The Preferred Utilities Mfg. Corporation of Danbury, Connecticut, a closely held company employing ninety people, has been named in 28,000 lawsuits despite never having mined or manufactured asbestos. The asbestos-related suits against this small manufacturer arise from the fact that asbestos may have been used in some component that was once incorporated into one of their engineered products. Clearly, even if Preferred Utilities Mfg. Corporation simply has to file a response in each of these cases the costs will be enormous. If the company has to go to trial on even a few hundred of these cases and prevails in each case, the legal fees for defending itself will still be ruinous.

Another example of the outrageous abuse of the legal system is the sixty-six suits against North Dakota-based Hedahls, Inc., a family-owned auto parts business. Hedahls, Inc. sells replacement parts for automobiles and performs auto repairs. The suits against this small business arise out the sale and replacement of brakes and brake pads despite the fact that the company deals in new parts that come packaged from the manufacturer. Twenty-two of the suits against Hedahls were dropped voluntarily, often shortly before trial, without any payment of damage claims by the company. Nevertheless, Hedahls still had the cost of attorney’s fees and the other cases are still pending.

The FAIR Act, if enacted, will go a long way toward cleaning up the litigation mess that benefits trial attorneys more than anyone else. Sick claimants wait for years to receive compensation for their injuries as cases wind their way through the court system. The FAIR Act will ensure that legitimate victims receive timely assistance without forking over forty percent of their award to a trial lawyer or getting pennies on the dollar if the defendant has gone bankrupt.

Small business owners need to let their U.S. Senators know that they support the FAIR Act. The FAIR Act is an important safeguard against financial disaster from frivolous lawsuits and the right thing for injured claimants.

James C. Musser, Esq. is a legislative consultant based in Falls Church, Virginia. His reports are updated monthly.