BUSINESS/ECONOMY

Aftermath of a poison cloud

Ian Austen December 24 1984
BUSINESS/ECONOMY

Aftermath of a poison cloud

Ian Austen December 24 1984

Aftermath of a poison cloud

BUSINESS/ECONOMY

Ian Austen

When he entered the grief-stricken area around Bhopal last week in the wake of India’s poison gas disaster, flamboyant California lawyer Melvin Belli was an incongruous presence; dressed in a black suit with a red lining, alligator-skin boots and a polka-dot tie, he strode among the thousands of suffering survivors and the grieving relatives of about 2,500 people who died during the worst industrial disaster in history. But he had personal reasons for wanting to be in the area where tragedy struck on Dec. 3, when poison gas seeped out of Union Carbide India Ltd.’s insecticide plant. The bulky civil litigation lawyer had travelled from his San Francisco base —along with other U.S. attorneys—to boast about his latest, and potentially most lucrative, case. Declared the lawyer: “We’ll knock the stuffing out of them. There is no doubt we will win, for Union Carbide has absolute liability.” Belli has launched a $19.5-billion suit against the chemical company’s U.S. parent in a West Virginia court. And he is outspoken about his motivation:

“These people in India are nobodies. Some poor little bastard living in a railroad shack goes home to find his wife and child dead. Now Union Carbide has the effrontery to offer a f-----g orphan-

age and a million dollars. It is a monumental goof.”

The claims against Union Carbide Corp.—it owns 50.9 per cent of the Indian company—remain to be tested. And not even Belli, or the other U.S.-based attorneys who descended on Bhopal last week, would deny that the massive tragedy poses major problems for the sluggish U.S.-based chemical multinational. Indeed,

Wall Street, apparently jittery about the enormous potential that lawsuits could force Union Carbide into bankruptcy, has created a billion-dollar paper loss by driving down the price of Union Carbide stock about $15 a share since the choking cloud of methyl isocyanate gas passed over Bhopal. Union Carbide

chairman Warren Anderson, whom Indian authorities arrested and later released last week, said the disaster will leave the company with a “stigma for years to come.”

Indeed, mistrust of Union Carbide —best known to North American consumers for the market-leading Glad trash bags, Eveready batteries and Prestone antifreeze—pervaded surviving residents of Bhopal. Last week the

survivors began to flee the city—located about 750 km south of New Delhi—for the second time in as many weeks. Jamming the railway station, bus depot and roads, about 200,000 people— nearly one quarter of the city’s population —set out for special refugee camps or relative’s homes, leaving the area around the plant a virtual ghost town. The reason for the flight: an Indian

government plan to eliminate the seven-year-old

plant’s remaining 15-ton

inventory of deadly

methyl isocyanate gas by converting it into insecticide.

Planning for the operation was extensive. When the temporary operations resumed, helicopters sprayed a protective mist of water over the complex, which has been screened off from public view. But few residents appeared willing to believe the government’s assertion that their exodus was unnecessary. In the sweltering heat of the bus terminal, N.K. Sinha, a government clerk, waited with five members of his family for transportation to a city 125 km to the north. Said Sinha: “I live in an affected area only three kilometres from the plant. About 40 per cent of the people from that area have gone. They’re dead. Look at my small children.

How can I let them stay here?”

In Danbury, Conn., at Union Carbide’s bunkerlike headquarters, flags were raised from halfmast after six days of symbolic mourning for the victims of the toxic leak. The multinational’s management—aided by outside crisis-management experts—reviewed the corporation’s complicated situation. Publicly, at least, the company remained optimistic. Insisted spokesman Jackson Browning: “The financial structure of Union Carbide Corp. is not threatened in any way.”

Still, the history of the Colorado-based Manville Corp. haunted Union Carbide’s executive planning sessions. Faced with $1.9 billion in lawsuits arising out of asbestos-related deaths and disabilities, Manville, producer of the fire-resistant material, declared bankruptcy in 1982. The firm hoped that the move would enable the company to reorganize without the menace of staggering lawsuits. Manville’s operations are continuing despite the bankruptcy, but the ultimate fate of the company—and the lawsuits —is still to be decided.

While stock analysts do not share Union Carbide’s optimism about the future, they are not as pessimistic as some Wall Street traders. Said James Meyer of Philadelphia-based Janney Montgomery Scott Inc.: “Bankruptcy is possible if a whole lot more goes wrong, but I don’t see that happening.” Meyer argues that there is one key difference in Union Carbide’s legal battles from those that put Manville Corp. into bankruptcy: U.S. courts have already determined

that Manville was aware of the health hazards of its product, but did little to protect users and employees.

Although inspectors from Union Carbide’s headquarters declared that the Bhopal operation’s safety systems were below U.S. standards in a 1982 report, Meyer argues that it will be a long and difficult legal process to prove that the company failed to correct the problems. If those efforts are not successful, Carbide would then likely only be liable for human or mechanical error—and not other forms of negligence.

For their part, the lawyers arriving in Bhopal left no doubt about the object of their assault on the third-largest U.S-

based chemical company. Said John Coale of the Washington, D.C.-based Coale and Associates: “ ‘Get Union Carbide’ is the slogan.” Coale, who recently lost a prolonged court battle that sought compensation for the hostages held in the Iranian takeover of the former U.S. Embassy in Tehran, is among the growing number of lawyers who filed lawsuits in the United States seeking at least $110 billion from Union Carbide.

Coale, accompanied by another American and two Indian lawyers, claimed to have gathered signatures authorizing him to represent 20,000 victims in the slum areas surrounding the plant. Other U.S. lawyers, acting on information provided by relatives of victims living in the United States, have filed claims on behalf of plaintiffs they have not yet met, and who have not yet signed authorizations to be represented. Indeed, the California-based firm of Gould and Sayer

filed a $26-billion suit in New York last week on behalf of four plaintiffs whom the firm had been unable to locate.

Whatever the recruiting methods, the U.S. lawyers are, without exception, seeking permission to convince various courts in the United States that they should hear their clients’ cases. One reason is that Indian courts follow British common law procedures. As a result, noted Frank Grad, a professor of litigation at the Columbia University Law School in New York, damages are generally determined by multiplying the salary of a disabled or dead person by the number of work years the victim had remaining. With the average Indian

wage of about $250 a year, a victim with 30 years left before retirement could only expect a $7,500 settlement. U.S. courts, on the other hand, allow so-called punitive damages, which can dramatically exceed a victim’s actual losses.

But Coale and his colleagues also stand to gain greater benefits themselves if U.S. courts agree to hear their cases. Lawyers in India are not allowed to take cases on a contingency basis—in effect for a commission—as U.S. lawyers are. That means that Coale, Belli and the others are proposing not to charge clients for their services—in exchange for a guarantee of one-third of any eventual settlement. In addition, since 1968 U.S. courts have permitted a number of related lawsuits against a single defendant to be grouped into a single so-called class action, making collaboration on large claims easier.

Despite the flamboyance and large

staffs, the U.S. lawyers will likely find it difficult persuading a U.S. court to hear their complaints: almost all of the witnesses and plaintiffs in the suits reside in India. In the past, U.S. courts have held that the prospect of achieving a higher level of damages does not justify the expense and bother of bringing in witnesses from abroad. That was the finding in a recent landmark decision by the U.S. Supreme Court involving a U.S.-built airplane which crashed in Scotland: it ruled that the action should be handled by the Scottish court system. Willis Reece, a Columbia University Law School specialist in international law, also notes that U.S. legal precedent, unlike in Britain, does not become constitutional law, and the possibility of reversing past rulings thus remains open.

Whatever route the court actions take, Union Carbide’s Anderson already acknowledges that his corporation will have to reach some form of settlement with the victims. To date, the company has donated $2.3 million to a special relief fund for disabled survivors of the tragedy and offered to set up a home for orphaned children. But Anderson refuses to speculate on how much the disaster will eventually cost the firm. In any case, it is unlikely that insurance will cover much of the settlement costs. While the company will not disclose the level of its insurance coverage, unofficial reports last week indicated that it is within a range of $250 to $350 million for the kind of liability caused at Bhopal.

The disaster struck at a time when many of Union Carbide’s key operations—particularly those relating to chemicals and supplies for the ailing U.S. steel industry—are in a slump. (Last year the firm had sales of $11 billion and controlled worldwide assets worth $13.4 billion.) But stock analyst Meyer says that given the long period of time any action will be before the courts, even a settlement costing Union Carbide $1 billion would be manageable. Added Meyer: “Insomuch as they might have to sell off some weaker operations, it could turn out to be a long-term plus.”

But when the final court actions have run their course—and after the lawyers have collected their fees and Union Carbide has paid the settlements and adjusted its operations—it is unlikely that the poor of Bhopal will be much further ahead. Said Rehman Patel, who lost his wife and a son in the fatal cloud and now is a plaintiff in one $15-billion suit: “Don’t talk to me about compensation. Money cannot bring back the dead.”

Ajoy Bose

William Lowther

Bob Scott

David Lindorff