‘People feel like the system is rigged against them. And here’s the painful part: They’re right. The system is rigged,” declared Elizabeth Warren in prime time at the Democratic convention—and she should know. By her own logic, she was one of the riggers.
One pleasure of the Massachusetts Senate race is that we are all learning about the remunerative outside legal work on behalf of corporate defendants done by Harvard Law School’s resident bankruptcy law expert. Let’s just say she doesn’t do this work pro bono. Everyone has to make a living, but Ms. Warren’s legal moonlighting does raise a question or two about her posture as the tribune of the powerless little guy.
One of her first important cases turns on Johns-Manville Corporation, which used to be America’s major asbestos manufacturer and distributor, and its primary insurance company, Travelers. Tens of thousands of personal injury lawsuits drove Manville into Chapter 11, where its Travelers policies were the estate’s most valuable and basically only asset.
A bankruptcy court ruled in 1986 that Travelers should pay into a $2.8 billion trust facility to cover future claims, in return for immunity from “any and all” future liabilities. This arrangement was upheld by the appeals court and codified in a 1994 law by Congress, which the Constitution invests with the power to write the bankruptcy code.
But in 2002, the tort bar started to bring so-called “direct actions,” asking the courts to overturn this well-settled legal principle by arguing that Travelers conspired with Manville to hide the health dangers of asbestos even though the Manville estate had been worked out. The Second Circuit Court of Appeals eventually endorsed this novel theory, and in briefs in 2008 and 2009 Ms. Warren asked the Supreme Court to hear an appeal from Travelers.