State House News Service
BOSTON — A seemingly innocuous merger between two bottle cap manufacturers in 1963 cost thousands of jobs around the country over the years and now, without a change in state law, could threaten 125 jobs in Lawrence, company officials told lawmakers yesterday.
Officials from Crown Cork and Seal, a bottle manufacturing company founded in 1892 by the inventor of the bottle cap, urged members of the Legislature's Economic Development Committee to back legislation they said would limit the company's liability in asbestos-related lawsuits it inherited as a result of a 48-year-old, $7 million merger with Mundet Cork Company.
Crown officials say they acquired Mundet, a competitor, in 1963 to merge their bottle cap operations. But Mundet also included a "side business" in which it manufactured asbestos insulation. Mundet had already closed down that operation at the time of the merger, but the company still owned the "idle machinery."
In 1972, federal officials determined that asbestos presented a danger to human health and the U.S. Occupational Safety and Health Administration adopted regulations to limit exposure in facilities across the country, according to Crown officials. That change, they said, opened up companies with asbestos-producing operations to lawsuits.
Although Crown never produced any asbestos and the Mundet operation had long been defunct, the company has still been forced to pay $700 million in legal claims and its bond rating has been reduced to junk status, costing another $1 billion in higher interest costs over the years, according to Patrick Szmyt, Crown's chief financial officer. The company, which employed 12,000 people across the U.S. in 1998, now has 4,000 workers, including a 125-person operation in Lawrence, where bottles for Pepsi and Ocean Spray are produced.
"It's criminal, what has happened to us," said Robert LeLacheur, vice president of North American sales for Crown.
Under the legislation, according to proponents, any company that merged with another prior to the 1972 regulations and as a result became mired in legal liability over asbestos production would be able to treat the acquired company as a separate subsidiary. Lawsuits would be capped at the total value of the subsidiary company, rather than the value of the parent company. In the case of the Mundet merger, claims would be capped at $60 million, according to Szmyt, when the $7 million merger is adjusted for inflation.
"Crown Cork & Seal is a poster-child example of an innocent successor company who would benefit by the fair limit of liability in the proposed legislation. Crown has been named in asbestos litigation even though we never manufactured or sold any asbestos-containing products in our long history," Szmyt said, according to prepared testimony, adding, "Claimants harmed by a predecessor's asbestos products would still have the right to collect from the innocent successor what they could have collected if no merger had ever occurred ... But claimants will not get a potentially unfairly devastating windfall recovery from the deep pockets of the innocent parent company."
Similar legislation, backers said, has passed in 15 states, including Pennsylvania and Texas, although supporters said they knew of no other company that would be subject to its provisions. Crown paid $31,000 to the firm of Shanley Fleming Boksanski & Cahill to lobby in support of the legislation.
Backers of the bill pointed to Halliburton, the energy company famously run by Dick Cheney before he became vice president, to make their case. In the 1990s, Halliburton acquired a company subject to lawsuits as a result of asbestos claims, but Halliburton kept its acquisition — Dresser Industries — as a separate subsidiary, ensuring that when Dresser went into bankruptcy, it didn't affect its parent company's books.
Rep. Kevin Kuros, R-Uxbridge, said the proposal (S 154) "makes a lot of sense," and no other lawmakers on the committee raised concerns about it, although they noted it may require additional review to ensure it conforms with federal and state laws. No one testified against the bill during the hearing. The proposal was originally filed by Sen. Barry Finegold, D-Andover, whose district includes a portion of Lawrence.
Crown workers defended the bill as well, arguing that the company treated workers well but has been prevented from upgrading its equipment and has been closing down branches for years.
"To us, it's all about fairness," said Michael Vartabedian, an official with the International Association of Machinists, a union that represents the Lawrence plant's 125 workers. The company also pays benefits to 135 retirees in Massachusetts.