Mesothelioma Legal Information: Carey / Celotex / Rapid American's Actions To Minimize Asbestos Compensation

Asbestos Victims: Caveat Emptor

How one set of companies in the asbestos industry contrived to minimize compensation to mesothelioma victims and other asbestos plaintiffs.

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The Carey / Celotex / Rapid American Story

The Phillip Carey Manufacturing Company was a manufacturer of industrial thermal insulation for pipes and boilers, and was a dominant player in that market, especially in the Northeast and Midwest. This was a "vertically integrated" company. The raw asbestos was mined in Canada by the Quebec Asbestos Mining Company, a part of Phillip Carey. The products were then applied in the field by Phillip Carey's contracting division, which had offices in a number of States. In June of 1967, Phillip Carey went through a restructuring, in which the then-existing liabilities of Phillip Carey wound up with a company known as Rapid American (it's actually more complicated than this, but we don't have all day). Phillip Carey also sold off its contracting division to an established insulation contractor known as Brand Insulation, located in Chicago. Brand took over the local offices of Phillip Carey's contracting arm nationwide. Phillip Carey itself went on manufacturing asbestos-containing industrial products. In 1972, there was another set of mergers, resulting in Phillip Carey's transformation into a company called Celotex. As a part of the same restructuring, the old Quebec Asbestos Mining became known as Carey Canadian Mines.

In the very early stages of the asbestos litigation (classified as anything pre-1982 — the year that Unarco and Johns-Manville filed for bankruptcy) both Rapid American and Celotex were sued for injuries caused by Carey products. Celotex ended up taking over for Rapid, which dropped out of the litigation, at least for awhile. It is important to remember that Rapid American itself never manufactured an asbestos-containing product. Its liability for asbestos claims results solely from the 1967 mergers.

In the meantime, Celotex became one of the most aggressive litigants on the defense side of the asbestos wars, trying many cases, and appealing those that it lost. This stance was noticed and commented on by a federal appeals court in the late 1980s, when the judges were deciding yet another one of Celotex's losing appeals. Very soon things were going to get much, much worse, especially for mesothelioma victims.

Celotex and Carey Canada had, since 1972, been part of a conglomerate known as the Jim Walter Corporation. The companies had one thing in common — a shrewd businessman named Jim Walter. Parts of the Jim Walter organization had tremendous assets, but other parts, namely Celotex and Carey Canada, had astronomical asbestos liabilities, and not enough insurance to cover them over the long haul. The question, of course, was how to separate the good parts from the bad parts?

Enter Kohlberg, Kravis & Roberts, henceforth known as KKR, the omnipresent leveraged buyout firm. A short time later KKR would be made famous in the buyout of RJR-Nabisco, about which the best-seller "Barbarians at the Gate" was written (it was also made into a movie — no movies about the asbestos litigation — yet). To make a long and extremely complex story short, Celotex and Carey Canada were "spun off" as independent entities, and left to disintegrate in the asbestos litigation. There were lawsuits galore, to try and stop these transactions, which were blatantly conceived to leave mesothelioma victims and other asbestos plaintiffs holding an empty bag, but all attempts do undo the transactions ultimately failed. The next step was to take a page from the playbook of Raymark Industries, another asbestos defendant noted for its "scorched earth" litigation strategy for dealing with asbestos claims. Celotex and Carey Canada simply went to what is known as a "matrix" for making settlement offers. The highest amount in the matrix was for mesothelioma — $5000.00 !

Of course, not very many cases settled, and, as result, Celotex and Carey Canada were hit with numerous large verdicts. They both filed for bankruptcy in 1990, which was probably the idea from the beginning. Mesothelioma victims who had gotten judgements that were not yet collected had to suck wind, along with everybody else.

Which brings us back to good old Rapid American. Remember them? Plaintiffs' attorneys went back to suing Rapid American, which was still stuck with the liabilities of Phillip Carey. And that's where things stand today. There is a fund for the Celotex/Carey bankruptcy, but the payouts, especially on mesothelioma cases, will be very limited.

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