Elizabeth Warren’s implausible Dow Chemical claim

Elizabeth Warren’s implausible Dow Chemical claim

Elizabeth Warren did not disclose her work for Dow Chemical on the list of cases she produced minutes before the last debate.

Dow Chemical was disclosed, however, on a sworn statement Warren filed in a 2002 bankruptcy case where she was being hired as legal counsel for one of the Committees of the bankruptcy estate, and revealed on this blog.  The description Warren gave in that 2002 sworn statement was:

I served in an advisory capacity to Dow Chemical, the parent company of Dow Coming, in the early days of the Dow Coming bankruptcy

I examined the likely role of Warren in protecting parent company Dow Chemical from claims against Dow Corning by breast implant claimants.

When the Brown campaign picked up a similar theme, Warren defended by claiming all she did was help set up a trust fund for breast implant claimants, in other words, she was looking out for the women not the big chemical company paying her.  Via The Boston Globe:

Warren had declined Tuesday to specify what she did for the company, saying she was bound by attorney-client privilege. But Wednesday she suggested during a press conference that she had advised the company in setting up a trust, which eventually required the firm to establish a fund to pay out $2.3 billion to victims. The 240,000 claimants were expected to receive between $2,000 and $250,000 each, according to a 2004 Houston Chronicle article provided by the Warren campaign. The campaign would not say how much Warren was paid for her work.

Similarly, in MassLive:

Edwards said Warren was consulted when Dow Corning went bankrupt in 1995. The bankruptcy plan ultimately set up a fund to pay $2.3 billion to settle claims filed by women who were injured by the company’s breast implants.  The Houston Chronicle reported that the victims received between $2,000 and $250,000 from the fund. The Warren campaign says establishing the trust fund was the only way to ensure all the victims would be compensated. It is unclear what role if any Warren played in establishing the trust, which was formed only in 1998, according to news reports.

The timing, however, makes clear that Warren’s story is completely implausible.

For years, including in the “early days of the Dow Corning bankruptcy,” to use Warren’s terminology, Dow Chemical fought vigorously to evade any legal responsibility for the breast implant liabilities.

In a March 24, 1994, article in the Baltimore Sun, which would have predated Warren’s involvement, a tentative setttlement involving Dow Corning was detailed,  Settlement details OK’d for silicone leak victims:

Three major U.S. corporations signed a record-breaking $3.75 billion settlement yesterday with lawyers representing thousands of women who contend they were seriously injured by silicone gel breast implants.

Dow Corning Corp., Baxter International Inc. and Bristol-Myers Squibb Co. agreed to fund the largest settlement of a products liability case in U.S. history.

That settlement fell apart, and in May 1995, Dow Corning filed for bankruptcy, as detailed in The New York Times, Dow Corning In Bankruptcy Over Lawsuits (emphasis mine):

Overwhelmed by injury claims filed against it by hundreds of thousands of women who used silicone breast implants, the Dow Corning Corporation filed for bankruptcy protection in a Federal court in Bay City, Mich., today.

Dow Corning’s legal move will abruptly halt all new lawsuits and indefinitely delay settlement of existing litigation against the company. Dow Corning said that seeking the protection of the bankruptcy court was the only way it could devise an enforceable plan to deal with the billions of dollars of claims against it. The decision also means, however, that the bankruptcy court will have the final say in how much Dow Corning pays to compensate claimants….

The filing also focused new attention on Dow Chemical as a defendant. Dow Chemical, which is also based in Midland, Mich., has repeatedly denied that it ever played any role in the design, manufacture or testing of implants and has refused to contribute to the class action settlement. However, Judge Pointer ruled on April 25 that Dow Chemical may have been negligent in how it handled information about potential problems, based on its silicone research dating back to 1948.

Plaintiffs’ lawyers have said that the ruling gives them the ammunition to force Dow Chemical into a major contribution to the settlement talks. Now, however, Dow Corning is expected to ask the bankruptcy court to stop all claims against Dow Chemical. The argument would run that Dow Chemical would have a right to sue Dow Corning for contributing to any liability Dow Chemical had. Thus, Dow Corning could argue, any breast implant claim against Dow Chemical could worsen Dow Corning’s financial health and should be halted until the bankruptcy reorganization plan pinning down Dow Corning’s liabilities has been approved.

See also, Dow Chemical Found 20% Liable in Breast-Implant Injuries Case.

It was then that Dow Chemical, the parent corporation was put in the legal hot seat, Dow Chemical in the Center of a Storm (NYT 11/1/95):

Earlier this year, executives of the Dow Chemical Company regarded the legal storm over silicone breast implants with a certain level of calm. But suddenly the company is finding itself heading down the treacherous road already traveled by several implant makers.

Just a few months ago, the giant chemical company figured that its liability would be, at worst, the $330 million value of its 50 percent stake in the Dow Corning Corporation. Dow Corning was the largest producer of breast implants in the country, but a much smaller company than Dow Chemical, which last year had $20 billion in revenues.

Also, Dow Chemical had not had to contribute to the $4.25 billion class action settlement on implant claims reached in late 1993, and Judge Sam C. Pointer Jr. of Federal District Court in Birmingham, Ala., had effectively dismissed it from liability in other breast implant lawsuits.

But in the world of high-stakes litigation, events can quickly turn.

In rapid succession, Judge Pointer reversed his decision, the global settlement failed and Dow Corning plunged into bankruptcy.

Then, this week, a Nevada jury ordered Dow Chemical to pay $14.1 million in compensatory and punitive damages to a woman who said she was injured by breast implants, the first time the company has been held solely liable in such a case.

The company, which contends that it had nothing to do with the development or testing of the implants, has said that it will appeal and will fight every breast implant case.

The Nevada case has focused a sudden light on the long and sometimes tangled relationship between Dow Chemical and Dow Corning. And it has raised questions about Dow Chemical’s strategy in the litigation and its eventual cost.

More than 13,000 implant suits are pending in which Dow Chemical is the defendant or co-defendant, and even company lawyers acknowledge that it is only a matter of time before some more come to trial.

Referring to the Nevada case, Herbert L. Zarov, a lawyer for Dow Chemical, said, “This decision will encourage plaintiffs.” ….

Initially, lawyers representing women with implants tried to shift liability by holding the larger and richer Dow Chemical and Corning responsible for the action of their offspring. But Judge Pointer turned back that bid in late 1993, holding that traditional “corporate control” theories were not applicable because Dow Corning was not a joint venture or partnership.

Undeterred, plaintiffs’ lawyers returned to Judge Pointer’s courtroom last year, providing what they said was new evidence showing that Dow Chemical was involved in the development of silicone and knew about the dangers of breast implants.

Earlier this year, Judge Pointer held that Dow Chemical could be held directly liable in breast implant cases because of its involvement in silicone work. Mr. Zarov, the Dow Chemical lawyer, said the company had asked Judge Pointer to reconsider because of what he said was misleading information provided by plaintiffs’ lawyers….

Whatever the case, a legal storm has broken over Dow Chemical, which appears headed for skyrocketing legal costs and, potentially, more jury awards. With lawsuits against Dow Corning frozen, Dow Chemical is the stuff of a plaintiff lawyer’s dream. That raises the prospect that Dow Chemical may change its tactics, said Judith Resnik, a law professor at the University of Southern California in Los Angeles.

“In this litigation, the science is still new, and when there is a battle of experts who disagree, juries say, ‘Manufacturers, you bear the risk,’ ” Ms. Resnik said. “Dow Chemical’s choices are to take the line that this didn’t happen on our watch, or explore forms of settlement that adequately recognize any role they may have played.”

Dow Chemical, however, continued to fight vigorously for years.  See ABA Journal October 1997, PBS History of Breast Implant litigation; Breast implant makers offer new settlement; Dow Chemical stays out.

And Dow Chemical was doing pretty well in its defense, as detailed by Joe Nocera for Fortune Magazine in September 1997, The Reversal of Fortune on Breast Implants:

What’s most surprising, perhaps, is that no one in the defense camp seems overly concerned about the Louisiana verdict against Dow Chemical. The company, you’ll recall, was dragged into the suit on the slenderest of reeds: back in the 1950s–nearly a decade before Dow Corning made its first breast implant–Dow Chemical did some testing of silicones for the smaller company. (It is also a 50% shareholder of Dow Corning.) Only after it became clear that Dow Corning didn’t have deep enough pockets to satisfy the plaintiffs’ lawyers did Dow Chemical become a target.

But in three states, California, New York, and Michigan, judges have dismissed all the cases against the company–a total of some 4,000 lawsuits–precisely because Dow Chemical’s involvement with implants was so tangential. In addition, with the sole exception of the Louisiana trial, all the other cases against Dow Chemical have been moved to the bankruptcy court in Michigan, where they are now, in effect, joined at the hip with Dow Corning’s bankruptcy proceedings. “It’s really quite possible there won’t be any more trials against Dow Chemical,” says Herbert Zarov, Dow Chemical’s chief outside counsel….

Most important, the Louisiana trial will almost surely fail at its real purpose: to force Dow Chemical to put up money to help settle the thousands of cases that have been in limbo ever since Dow Corning filed for bankruptcy. Dow Chemical insists that it will never ante into any larger settlement. Precisely because it seems so out of kilter with the general trend in breast implant cases, the Louisiana verdict was simply not the kind of hammer blow that the plaintiffs had originally hoped it would be.

In 1999, the Dow Corning bankruptcy was settled, although it took years for litigation over the settlement to resolve.

There are multiple problems with Warren’s narrative that she was trying to help the women:

First, the notion that Warren was representing anyone other than her client is preposterous.  As an attorney, she had a duty of loyalty to Dow Chemical.  If she explored possible ways in which Dow Chemical could extricate itself through settlement, her services were on behalf of and for the benefit of Dow Chemical, not the women.

Second, Warren did not represent Dow Corning, the entity which eventually set up the trust.  Again, there may have been strategizing in the early days about how and whether Dow Chemical, the parent corporation, might have to contribute, but there was no resolution in the early days.

Third, during the time Warren was providing legal advice to Dow Chemical, Dow Chemical was fighting liability.   As the Dow Corning bankruptcy case wound down, one of the most controversial provisions involved the release of Dow Chemical from liability as part of the Dow Corning reorganization plan which set up the trust.  (Analysis here, summary here, Plan here)  It also appears that Dow Chemical did not make any payments beyond its equity stake in Dow Corning and its insurance coverage to the trust (I’m still confirming this last point).

In short, in the early days of the Dow Corning breast implant litigation Elizabeth Warren was providing legal advice to Dow Chemical, which was denying liability and fighting breast implant claims for many years to come. Warren was not a legal adviser to Dow Corning, the entity which years later set up and funded a trust for implant claimants.

Absent specific additional disclosures by Warren, there is no plausible reason to believe that Warren was looking out for the interests of breast implant claimants at the time she was providing legal services to Dow Chemical.

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[Special thanks to Morgen Richmond, who used to blog at Verum Serum, for helping locate certain of the information and documents referred to here and which will be referred to in upcoming posts.]

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