More than 1,800 product liability lawsuits have transformed Pacor Inc. into a legal battlefield.
It is hard to imagine how Jim Sullivan lives each day with the knowledge: He is dying, and Pacor Inc., the $20 million-a-year company over which he presides, is succumbing to a legal blood-letting. The Philadelphia-based firm, which distributes and installs insulation in commercial and industrial settings, has been sued more than 1,800 times during the past five years. Sullivan, 52, now spends all of his time on litigation, and Pacor earmarks approximately 20% of its annual expenses for legal expenditures, up from about 1% before the onslaught began.
Sullivan and Pacor are both victims of asbestos, a material much more dangerous than most people realized until barely a decade ago, and of tort law, which, beginning in 1965, has been interpreted in an increasing strict manner. In 1973, the Supreme Court of California ruled that anyone who handles a defective product before it reaches the consumer -- including jobbers, distributors, retailers -- may essentially be considered a manufacturer, and therefore share the liability. Other states have followed California's lead, among them Pennsylvania, one of the tougher states in which to defend product liability suits (see The Law, page 93).
It is a personal and business tragedy that involves thousands of Jim Sullivans and millions of Americans. The Department of Health and Human Services estimates that from 8 million to 11 million workers have been exposed to asbestos since the beginning of World War II; of that number, approximately 1.6 million will die of asbestos-related diseases. Already, some 25,000 to 30,000 lawsuits have been filed. "And things are just beginning to heat up," notes Robert Copeland, head of a Labor Department office on health and disability issues.
But the truly sobering fact is that the problem transcends asbestos. Strict liability interpretations, an improved ability on the part of the scientific community to trade medical cause-and-effect, and juries that are more and more likely to look with favor upon the injured have created a climate that is increasingly fraught with risk for business, and small business in particular. While companies that handled asbestos watch their profits shrink and contemplate bankruptcy, half a dozen different industries are preparing for their decade in court. Lead, hydrocarbon compounds (used in a wide variety of products, including fertilizers and insecticides), and ionizing radiation (found in medical and nuclear power areas) loom as the asbestos of the future, and few businesses are completely safe.
The growing danger of what today is essentially unlimited liability is a business problem with few precedents and no clear-cut solutions, and the lessons are ones that each businessperson teaches himself. Jim Sullivan has learned the hard way, defending Pacor on a daily basis, trying to preserve it for his family -- he is one of three principal stockholders of the closely held company -- and for his 225 employees. "I'm about the oldest guy in the group," he explains," and if I can stay in there and save it, then the younger guys will have something to hang in there and work for."
Thus far, Sullivan has been successful. Both he and Pacor have survived. But each day has been a battle, and each battle has taken its toll. At the end of a particularly trying day in late March -- he had spent the entire afternoon with insurance company attorneys ("Who wants to deal with attorneys?" he groused) -- he is sitting at the kitchen table at his home in Pennsauken, N.J., discussing his situation. The house is alive with activity; as Sullivan nurses a mug of coffee, his wife finishes up the dinner dishes, two grown daughters watch television in the living room, and Danielle, his seven-year-old granddaughter, pads from room to room in her Dr. Dentons.
"The insulation business has been good to me," he admits. "It's killed a lot of people, but it's been good to me." C. B. Wheatley, who preceded Sullivan as chairman of the board of Pacor, died from an asbestos-related disease four years ago. A year ago, Sullivan was diagnosed as having mesothelioma, a cancerlike growth in the lungs associated with exposure to asbestos. The doctors have since reconsidered; they're not sure it's mesothelioma, but they know that a growth triggered by asbestos is there, and they're certain that it's going to kill him. A year ago doctors gave Sullivan eight months to live. Now Sullivan is living on determination alone, defying all the odds.
Sullivan is a short, stout man with a solid smile and blond hair that has thinned to the point of extinction. "I enjoyed business too much to worry about exercise," he explains, acknowledging his ample gut with a pat. "My life was nothing but work." Sullivan accepts the fact that the work, which at one point involved installing insulation containing asbestos, will cause his death; what he cannot accept is the prospect of the death of his company.
"I guess I get bitter at times," he says. "When your company gets sued 1,800 times in five years -- unfairly -- and there's no end in sight, you feel bitter. And when the suits come in, pile after pile, and you know that you're just working for lawyers, it gets to you." Pacor had been averaging 75 new lawsuits per month, but recently the pace has picked up; on one day in mid-April, 50 arrived in the mail.
Sullivan has been in the business since he was 18. "I started out in the field applying insulation for Johns-Manville. I worked with it and breathed it. In those days we breathed it like it was something you were supposed to do -- and the asbestos products were really dusty then, especially in the holds of ships. The dust in the holds was so thick the air was cloudy. And, in the early days, there weren't any air masks, disposable gloves, boots, or clothing; we went home and took off our clothes in the backyard, and gave them to our wives to put in the washing machine." (Though asbestos is used in more than 3,000 products, including wallboard, pot holders, and brake drums, one of its principal applications was as a binder in insulation, for example, on ships; approximately 85% of Pacor's lawsuits were filed by former Philadelphia Naval Shipyard employees.)
Sullivan worked his way up through the ranks, joined the Mechanical Insulation Co. of Philadelphia in 1960, and four years later was named executive vice-president of the company. At about the same time, the first extensive statistical evidence demonstrating the magnitude of the health problems associated with asbestos -- a report by Dr. Irving Selikoff, of New York City's Mount Sinai Hospital -- was published. Insulation manufacturers began printing a warning on their cartons, but it wasn't until 1971 that the Occupational Safety and Health Administration (OSHA) issued emergency standards on asbestos, primarily at the urging of the AFL-CIO. But, as late as 1972, the federal government was still awarding contracts that called for asbestos insulation, and it wasn't until 1973 that the industry produced asbestos-free insulation.
