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42.4 Liability

The Johns-Manville Corporation was a profitable company that made a variety of building and other products. It was a major producer of asbestos, which was used for insulation in buildings and for a variety of other uses. It has been medically proven that excessive exposure to asbestos causes asbestosis, a fatal lung disease. Thousands of employees of the company and consumers who were exposed to asbestos and contracted this fatal disease sued the company for damages. In 1983, the lawsuits were being filed at a rate of more than 400 per week.

As a response, the company filed for reorganization bankruptcy. It argued that if it did not, an otherwise viable company that provided thousands of jobs an served a useful purpose in this country would be distroyed, and that without the declaration of bankruptcy, a few of the plaintiffs who first filed their lawsuits would win awards of hundreds of dollars, leaving nothing for the reaminder of the plaintiffs. Under the bankruptcy court’s protection, the company was restructed to survive. As part of the release from bankruptcy, the company contributed money to a fund to pay current and future claimants. The fund is not large enough to pay all injured persons the full amount of their claims.

**Question: 1. Was it ethical for Johns-Manville to declare bankruptcy?

2.Did it meet its duty of social responsibility in this case?

3. If you were a member of the board of irectors of the company, would you have voted to place the                                         company in bankruptcy? Why or why not?

4.7 Equal Protection Clause

The state of Alabama enacted a statute that imposed a tax on premiums earned by insurance companies. The statute imposed a 1 percent tax on domestic insurance companies. The statute imposed a 4 percent tax on the premiums earned by out of state insurance companies that sold insurance in Alabama. Out-of-state insurance companies could reduce the premium tax by 1 percent by investing at least 10 percent of their assets in Alabama. Domestic insurance companies did not have to invest any of their in Alabama. Metropolitan Life Insurance Co., an out-of-state insurance company, sued the state of Alabama, alleging that the Alabama statue violated the Equal Protection Clause of the U.S. Constitution.

**Question: Who wins and why?

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