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Speaker's Resource: 8. The Asbestos Crisis, p 2



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The Story of Crown Cork & Seal

When Crown Cork & Seal, a Philadelphia-based packaging company, purchased one of its competitors in 1963, no one could have predicted the legal tidal wave that would engulf it for the next four decades. But the company’s experience has made it a clear example of how our current tort liability system is hurting America’s economy.


Crown Cork & Seal was founded in the 1890s by the inventor of the bottle cap. Over the past 100 years, the company has been a pioneering manufacturer of beverage and food packaging, currently employing about 27,000 people. Although Crown has remained successful in a competitive market, excessive litigation has plagued the company for years. The troubles started in 1963 with the purchase of Mundet Cork, another bottle-cap maker.


For $7 million, Crown obtained a majority stock interest in Mundet. Before the purchase, Mundet had run a small side business manufacturing asbestos insulation. By the time Crown became involved with the company, Mundet had already shut down its insulation production, focusing solely on its bottle-cap production.


Within 93 days of Crown’s obtaining its interest in Mundet, what was left of the Mundet insulation division — idle machinery, leftover inventory, and customer lists — was sold off to a New Jersey insulation company. With only its bottle-cap business remaining, Mundet was merged into Crown in 1966 when Crown acquired the remainder of the Mundet stock.


Although Crown never manufactured, sold, or distributed any asbestos-containing products, its brief involvement with Mundet made it a target of asbestos-related lawsuits. Because of existing successor liability rules (which state that successor companies can be liable for the actions of the predecessor company), Crown has been hit with more than 300,000 asbestos tort claims during the past 40 years. Crown’s initial $7 million investment in Mundet has resulted in more than $600 million in asbestos-related payments. Crown’s corresponding investment in new plants and in new job creation has suffered enormously. Also, Crown’s credit rating has been reduced and the company has been forced to pay higher interest rates on the money it borrows.


Crown is a poster child of the unfairness of the existing system of successor liability, which has a negative impact on companies like Crown, destroying our manufacturing base and eliminating good manufacturing jobs in the economy.


(KRC:  Pacific Research Institute, "JACKPOT JUSTICE...” p. 42)




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