He Fought the Tort Bar -- and Won

He Fought the Tort Bar -- and Won. By Kimberley A Strassel
Thanks to a CEO's persistence, a federal judge discovers massive lawsuit fraud.
WSJ, May 2, 2009

Berkeley Springs, W. Va.

Officially, John A. Ulizio is the CEO of U.S. Silica, one of the nation's largest producers of industrial sand. Unofficially, he's the man who fought the tort bar -- and won. It's a singular distinction in the world of runaway lawsuits.

Clad in a hardhat and boots, standing in a quarry in which giant haul trucks carry Flintstone-sized boulders, the 53-year-old Mr. Ulizio seems an unlikely foe of today's slick plaintiffs' bar. The son of a Pennsylvania steel worker, he is blunt-spoken, works in a little-noticed industry, and likes to point out he's a Democrat ("probably the only one in the building.") What a cursory observation of Mr. Ulizio misses is his own law degree, and his steely sense of right and wrong.

In 2003 alone -- the year he took the company's top job -- U.S. Silica was served with nearly 20,000 lawsuits claiming it had caused silicosis -- a serious, if rare, lung disease. The tort bar saw silica as the "new asbestos," says Mr. Ulizio, and he had visions of his century-old concern going bankrupt, along with dozens of others.

Instead what ensued was a legal thriller, in which the defendants not only beat the suits, but exposed a mob of lawyers and doctors who were fabricating cases, and who are now under investigation. This year his company has been hit by only one silicosis claim. "We hoped the truth would prevail eventually," he says, back in the conference room of the company's modest headquarters. The realist adds: "It worked, but it didn't have to."

And that might be the most disturbing part of Mr. Ulizio's tale. "When you have an entire system that condones these lawsuits, that does nothing to police its own, where there are no consequences, right or wrong has nothing to do with it. It's a coin flip."

In June of 2005, Texas federal Judge Janice Graham Jack -- who was overseeing 9,000 silicosis lawsuits aggregated in her court -- issued an opinion that shook the tort bar to its core. During depositions, the handful of doctors who provided nearly all these diagnoses began to crack, admitting they'd never seen patients, that their secretaries had filled out forms, and that lawyers had told them what to write. It came out that two-thirds of those claiming to have silicosis had previously claimed to asbestosis -- a near medical impossibility.

Judge Jack's 249-page scathing opinion unraveled a scam of giant proportions. She accused the doctors and lawyers of "diagnoses that were manufactured for money," provided evidence of fraud, required a Houston plaintiff's firm to pay defense legal costs, and issued sanctions.

Within a few months, Congress and a federal grand jury were investigating. For U.S. Silica, named in nearly every suit, it was a fairy tale end to a nightmare. Even Mr. Ulizio was shocked. "It was like, 'Oh my God, finally, after all these years, somebody is seeing the truth.'"

Years being the operative word. Mr. Ulizio is a humble guy, and gruffly waves off suggestions that he or his company played any special role in this victory. He ascribes the Texas success to all the defendants equally, as well as the willingness of insurers to join the battle, and to enlist top-notch attorneys. But that is to ignore the knowledge and the backbone Mr. Ulizio and U.S. Silica brought to this fight.

Silicosis litigation isn't new. Silica is one of those products that has been around forever and is used in just about everything, though nobody knows it. The West Virginia factory is a grinding operation: The company mills sand into different sizes, which is then used in everything from glass, to Kevlar, to paint, to the molds used to create steel forms. With silica comes silica dust, which has been health concern since well before 1936, when Labor Secretary Frances Perkins first held a conference on silicosis.

U.S. Silica has always been a prime target of these suits. Within its own factory, safety is intense. Workers aren't allowed on the floor without respirators (nor me, for that matter). Much of the plant has been automated to minimize contact with dust, and vacuums suck up particles. Plastered on every door leading into the plant, and on every bag of silica going out, are giant, neon warnings about the dangers of dust.

The company has nonetheless been militant in defending against lawsuits. This is Mr. Ulizio's history and specialty, having represented silica defendants prior to joining the company in 1991, and then handling U.S. Silica's litigation as its counsel. Says Mr. Ulizio: "There was a decision made here early on, and it was the right decision, that as a sand seller we have no duty to warn, say, the people who work in a foundry. Why? Because foundries . . . know all about silicosis -- there are documents showing that going back to the teens and '20s -- and foundries are the ones who create silica dust or control silica dust, and we have no control over that operation."

Over decades of litigation, the company picked its suits carefully, with an eye to setting broad legal precedents in key jurisdictions. It fought off successive waves of litigation -- in the 1980s from workers at a foundry in Lynchburg, Va., and later from steelworkers in Pennsylvania. Another of Mr. Ulizio's rules was "to treat cases like real cases," a tactic that would prove important in the later Texas litigation. "There is temptation amongst defendants to treat these as a claims process. We tried not to do that, even in cases we settled. We tried to treat each as a real case, where you take depositions, you have people who know what they are doing asking the questions, you demand real medical evidence," he says.

There were losses, some of which made Mr. Ulizio despair. "The first time we ever lost a case in trial, it was 2001. We tried it in Beaumont, Texas, and lost $7.5 million. . . . The judge sat there through the trial reading a newspaper. At one point an objection was made, the bailiff taps him on the shoulder and says 'judge, objection is being made.' He looks at our lawyer and says 'overruled.' The plaintiffs' lawyer raises his hand and says 'no, judge, it was me.' He says 'sustained' and goes back to reading the paper."

As it happens, the industry as a whole lost some big ones around that time, kicking off the tidal wave. "Understand, silica litigation isn't about whether people have silicosis; it's about whether the lawyers can use the legal system to make money. When there is no history of big verdicts, when the legal industry has been losing cases, then it has a limited desire to pursue a big model. But once you had a few settlements and verdicts . . . people got interested," says Mr. Ulizio.

Plaintiffs lawyer firms began sending out direct mailings, running ads, and going through their inventory -- all to gin up big numbers of claims, which they filed against dozens of companies. In 1998, U.S. Silica fielded 198 silicosis claims. In 2001: 1,356. In 2002: 5,277. In 2003: 19,865. The tort lawyers were smart, and filed in former judicial hell-holes like Mississippi, where U.S. Silica hadn't established legal precedents.

Mr. Ulizio painfully remembers those days. The cost of his litigation at one point equaled about 50 cents out of every ton of sand he sold. Credit-rating agencies fretted. Potential hires expressed concern about the company's future, and workers worried they'd lose their pensions. Workers' compensation rates soared. "It was doom-and-gloom bad," he says.

The company was also now a victim of a "mass" tort, designed to force settlements. Mr. Ulizio shares a memo that plaintiffs' lawyer Joe Gibson sent to silica defendants in 2004 with a blunt offer: Settle our 9,000 cases for $900 million, or pay $1.5 billion in pretrial discovery alone, plus an even bigger verdict. "That's the genius of the economics of litigation from the plaintiffs' perspective. Sue a lot of people, sue on behalf of a lot of plaintiffs, get into an adverse jurisdiction, and then don't make too big of a demand, so you can settle it for a relatively small percentage of the cost of defending the case," Mr. Ulizio says.

He didn't settle: He went public. Private companies tend not to air their litigation laundry, but the silica CEO talked to the media, detailed his lawsuit figures, ginned up coverage of the lawyers' tactics. The growing story emboldened other defendants to fight back. U.S. Silica also pushed hard, behind the scenes, to depose, investigate and fight.

The defendants had already made one bold move, receiving permission to aggregate the suits in front of Judge Jack. It raised the stakes, but in retrospect it was what also allowed defendants to connect the nefarious doctor-lawyer dots. "It was very important to the effort, because it allowed us to see the pattern, and present that pattern to the judge," he says.

Mr. Ulizio nonetheless credits a lot of the victory to luck, and mistakes by the other side. "The real advantage was simply that asbestos had preceded us, and the plaintiffs' side overreached. They had asbestos plaintiffs who were diagnosed with asbestosis but not silicosis, rediagnosed with silicosis but not asbestosis, by the same doctor, with the same X-ray. They laid the seeds for their own destruction."

Even with all that, Mr. Ulizio feared they'd lose. "There was no reason to believe Judge Jack would be as good as she was before she was as good as she was," he says. "One of the dirty little secrets of this litigation is that it didn't have to turn out the way it did. All's well that end's well is the cliché, right? First it's got to end well."

The lawsuits are over, but Mr. Ulizio remains furious that no one has been held responsible for the Texas mess. I note that some of the doctors lost their medical licenses. "That's fine," he says. "But at the end of the day, the lawyers are driving this. The lawyers are the ones who make the money. And nobody, absolutely nobody, does anything about it."

So what's the answer? Legislation reining in the tort bar? More Judge Jacks? "The court is part of the system, and its part of the problem. You can say, 'we should have more judicial supervision.' But hey, the judge in Beaumont, Texas, he supervised his court -- he just supervised it the wrong way. I'd also like to think you don't need to legislate everything."

He instead points to legal associations. "It starts with the organized bar. The American Bar Association, the state bar associations, they are supposed to be the self-governing bodies that govern lawyer behavior. Or, state disciplinary boards. If you are creating out of thin air a set of facts that leads you to file litigation, I would like to think that violates some state disciplinary rule," he says. "And look, too, you've got to prosecute crimes. There has to be something that results in a consequence for this behavior," adds Mr. Ulizio.

At times, Mr. Ulizio finds it all a bit surreal. "We mine and sell sand. Sand. That's all we do. We aren't the evil empire. We aren't manufacturing some exotic chemical that we're unleashing on the world. We're taking sand out of the ground. We don't even process it, except to clean it up a little and size it. And we are selling something that has been around forever, the dangers from which have been known since well before anybody involved in this litigation was even born," he says.

He looks at me as if to say, "Can you believe it?" I wish I could tell the tort warrior I couldn't.

Ms. Strassel writes the Journal's Potomac Watch column.