TCS Daily

The Robber Baron

By Duane D. Freese - July 15, 2005 12:00 AM

How much should drivers be forced to pony up at the pump to pay off trial lawyers? A penny a gallon? Two cents? How about $66 million?

Most motorists would vote for nothing, and by a pretty wide margin.

But unfortunately, motorists aren't organized politically to influence election campaigns. Toxic tort law firms are, and do.

And if Fred Baron, ringleader of the infamous Baron & Budd law firm, can keep Republicans and truly consumer-minded Democrats in Congress at bay on the Energy Bill now before Congress, motorists can expect to be stuck paying him and his fellow attorneys a penny or two every time they gas up for decades to come.

Baron's 80-member law firm has made hundreds of millions keeping asbestos litigation alive and kicking -- including kicking dozens of businesses into bankruptcy. His ethics to win cases have been called into question, particularly after the unearthing of a remarkable memo in 1997. As Sen. John Kyl, R-Ariz., described it, the B&B paralegals memo went "well beyond what one would think necessary to refresh the memory" of a client that had worked with an asbestos product. When Baron himself asked about whether his firm implanted memories, rather than just refreshed them, he defiantly said: "Do we implant memories? Yeah, probably we do. Is that something that is wrong? I don't believe it is." So, witnesses should just be puppets for legal ventriloquists? Yet, such answers apparently made him a hero to the trial bar, which named him president of the Association of Trial Lawyers of America in 2000.

And B&B has invested wisely in politicians. Baron and his firm were the largest contributors to Sen. John Edwards, a fellow trial attorney, in his presidential bid; they gave hundreds of thousands to other candidates (only $15,250 to Republicans), and Baron himself co-chaired the Democratic National Committee's Kerry Victory '04.

Such generosity was one reason Baron could joke at an asbestos bankruptcy conference for lawyers in June 2002 about a legislative solution that would have provided a trust fund for victims without going through lawyers: "Lastly, there is another reason [the legislative solution] won't happen. I picked up my Wall Street Journal last night ... and what did I learn? 'The plaintiff's bar is all but running the Senate.' Now, I really, strongly disagree with that, particularly the words 'all but.'''

Now, Baron "all but" hopes his Senate muscle will keep open his pipeline to what he believes is another financial windfall -- municipal lawsuits over MTBE water contamination. The House has passed an Energy Bill that would exempt MTBE makers from liability in suits claiming their product is defective. The Senate has no such provision. Baron wants to keep it out and prevent any compromise such as one now proposed to create a trust fund to deal with contamination from the bill.

Why? Not public health, nor municipalities' interests. It's money for him and his firm; they are involved in more than half the 90 outstanding MTBE suits.

MTBE stands for methyl tertiary butyl ether. It became an additive in gasoline as a replacement for toxic lead to eliminate engine knock in 1979. But MTBE really became pervasive when Congress, in the Clean Air Act of 1990, ordered gasoline contain 2% oxygenates by volume in those areas that had carbon monoxide and smog problems. There were really only two such oxygenates available, MTBE and ethanol. And MTBE became the additive of choice because it cost less, could be easily mixed and refined into gasoline and then shipped by pipeline for distribution. Most important, it was available in sufficient quantities so there would be no supply disruptions. Any other choice at the time would have required a major shift in agricultural practices and left drivers paying higher prices and in long gas lines.

As far as the clean air benefits, MTBE delivered them. According to EPA back in 2000, the reformulated gasoline, 90% of it blended with MTBE, cut smog-forming pollutant emissions by more than 17% -- 64,000 tons of harmful pollution -- the equivalent of taking 10 million vehicles off the roads. It was particularly effective in cutting emissions of benzene, a known human carcinogen, by some 43%.

But while good for the air, MTBE proved bad for the water in a small number of places with leaky underground gasoline tanks.

The same thing that made it good in blending in gas, unfortunately also made it spread faster than other gasoline components in water. And even at levels as low as 20 to 40 parts per billion -- far less than the proverbial drop in a bucket -- it could produce water that smelled of turpentine and tasted the same, although such contamination remained 20,000 to 100,000 times below what studies had shown for MTBE to have an adverse health effect on rodents.

But P-U is P-U, and no one wants to hold his nose when he drinks water. And when the South Tahoe Public Utility in California found some of its water wells contaminated by MTBE, it hired trial lawyers to get the water fixed. But they didn't target the gas stations with the leaking tanks. Those mom and pop places didn't have deep enough pockets to attract high powered lawyers. The lawyers went after the oil companies instead.

Never mind that MTBE did what it was supposed to do -- clean the air. Never mind that Congress "all but" mandated it. Never mind that gasoline distributors can't deny sales to independent dealers without violating antitrust. Never mind that gas stations are licensed to operate by states and localities for safety and health purposes. And never mind that, as Robert Hirsch, associate director for water at the U.S. Geological Survey, told Congress, "MTBE is primarily an aesthetic (taste and odor) problem," not a serious health concern.

The lawyers argued MTBE was a defective product because of its water solubility, and as such the oil companies were strictly liable -- meaning they had to pay no matter the culpability of others or the benefit that MTBE provided.

And they got a well-vetted San Francisco jury to agree with them. Only before the jury could make an award, the oil companies settled: Tahoe got $69 million -- and the trial lawyers got a whopping $23 million for their work.

The oil piggy bank got bigger in the next case in Santa Monica, Calif. Santa Monica in 1996 found MTBE in the highest concentrations in its wells of any place in the country, about 610 parts per billion in one place. Still not hazardous to health, but smelly. The oil companies offered to ship water in until a solution was found, but Santa Monica wanted to keep its water self sufficiency. After years of going back and forth, it hired Baron & Budd in 2000.

The case never went to trial. But with the jury's defective product finding in the Tahoe case hanging heavy over the oil companies, a settlement was finally reached in 2003. The oil companies agreed to a total of $121 million in cash payments plus a new water treatment plant -- estimated cost over $300 million.

And for this effort, how much did Baron & Budd and their co-counsels bill Santa Monica? "[A]s much as $66 million in public funds," the city reported, after it recovered from the shock at the price tag and filed a suit against the attorneys. That suit alleges that the trial lawyers had caused or permitted delays that "increased the amount of attorney's fees ... by tens of millions of dollars." In short, Santa Monica claims it could have gotten its money and clean water sooner if the lawyers it had hired hadn't held things up. The lawyer for the attorneys claims the fees are covered by the cash payment and that the city has no legal defense. A trial conference is scheduled for Aug. 1.

Santa Monica provides a warning flag to other communities about jumping on this toxic tort train. It also should inform politicians' actions.

In opposing the provision to limit defective product claims against oil companies, Sen. Barbara Boxer, D-Calif., intoned: "It is bad public policy to put special interests above public health concerns. Companies need to be held accountable when their product or their misconduct causes the public harm."

Will Boxer, who received $909,033 from lawyers and law firms for her 2000 election run, including $5,500 from Baron & Budd, now apply that standard to Baron & Budd and support a compromise creating a trust fund to clean up the water that would serve everyone but the lawyers? Will other senators?

Or will they simply hold their noses at the smell and implant this memory on drivers and local communities, who ultimately will pay these lawyers' bills?



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