OUTRAGEOUS MISCONDUCT; The Asbestos Industry on Trial. By Paul Brodeur. Pantheon. 374 pp. $19.95.

THIS IS AN impassioned, well-reported book about the asbestos story which inadvertently turns into a gloss on the problems of America's civil litigation system.

Paul Brodeur, who has written about microwaves and other environmental issues, traces the recent rediscovery of asbestos-related diseases, from the first lawsuit brought by an East Texas asbestos insulator in 1961 to the bankruptcy of Johns-Manville, the leading asbestos manufacturer, 21 years later.

The first part of the story reads like a good detective novel. Digging away with little or no resources, several early plaintiff lawyers found that Manville and other companies had actually known as early as the 1920s that breathing asbestos dust led to lung disease. There was a spate of damage suits in the 1930s, which the industry neutralized by settling out of court and buying off the attorneys.

After that the industry adopted a paternalistic attitude toward the occupational disease, governed by the policy that "as long as the man feels well, is happy at home and at work, and his physical condition remains good, nothing should be said." When asbestosis (a disabling lung disease) or lung cancer eventually emerged, the companies tried to shuttle their employes into Workmen's Compensation programs, or left them with nothing. As one appalled plaintiff attorney phrased it, "You mean . . . you would let them work until they dropped dead?" That was about the size of it.

Then in World War II this pattern of industrial abuse reached national proportions. Tens of thousands of workers were enlisted to install asbestos insulation into warships in Navy dockyards. In the wartime rush for construction, workers were exposed to extremely high levels of asbestos dust. Some of the adverse effects are just beginning to emerge now.

In the 1960s, Ward Stephenson, an East Texas attorney, broke through the limitations of Workmen's Compensation -- which provides damage payments but restricts civil suits against employers -- by suing an asbestos manufacturer for marketing an unsafe product. In 1968 Stephenson won a $75,000 suit for a disabled asbestos insulator who would have collected only $7,500 through normal insurance payments. It was not long before dozens of other attorneys were jumping into the fray.

The work of these legal investigators led to remarkable discoveries. The 1930s outbreak of asbestosis-related disease was uncovered, along with the "hush-hush" policy that had followed. Smoking guns were uncovered, and guilty consciences poured forth.

The tort process, however, soon became an avalanche, with attorneys all over the country descending upon the industry like sharks in a feeding frenzy. The numbers are easy to add up. By the 1980s, Manville, the largest manufacturer, faced 16,000 suits from people claiming to be victims of asbestos. Whereas Ward Stephenson had won $75,000 for a client in 1968, juries in 1981 were handing out $1.5 million awards to people who had not yet suffered any disabling effects, but were only exhibiting early symptoms of asbestos-related diseases.

THUS, THE WHOLE situation became something of a lottery. Manville faced potential claims of $16 billion against only $2 billion in total assets. Several third parties -- including Sen. Gary Hart -- offered structured plans where all the victims of asbestos will get some reasonable settlement ($30,000 in one plan), paid for out of industry resources and insurance funds. But victims -- and particularly their attorneys, all collecting 30 percent contingency fees -- were unwilling to give up the shot at collecting millions in the courtroom. All offers at compromise were refused, and Manville and four other manufacturers eventually filed for bankruptcy.

Brodeur is entirely on the side of the plaintiff attorneys. He dismisses Sen. Hart's plan as an effort to protect a homestate industry (Manville headquarters are in Colorado) and diligently traces Hart's interest to a $999.11 campaign contribution by Manville's chief executive. Brodeur unswervingly defends each victim's "right to go to court," without acknowledging that there is not enough money in the whole asbestos industry to meet more than a small portion of these claims.

Most puzzling is his identification of the root cause of the problem as "private enterprise." Brodeur does not seem to realize that private enterprise is the only system that enables citizens to hold large organizations responsible for past wrongs. Governments traditionally protect themselves by the doctrine of "sovereign immunity." The U.S. government, for example, has never acknowledged any responsibility for what happened in the Navy shipyards during World War II. Its response was summed up by the Navy's director of occupational and environmental health, who said: "If I order an automobile and the way they make automobiles is to throw people into a furnace, I am not responsible for that."

There are other problems. Nowhere in this entire book does Brodeur evaluate asbestos' values as a fire retardant, or even suggest that it has any other use except to cause occupational diseases. Nor does it seem entirely fair to judge incidents from the 1930s and '40s by contemporary standards. In the Navy shipyards, for example, the people who sailed these boats into battle were regarded as much more at risk than the shipyard workers. Even if the hazards of asbestos had been well known, it is questionable whether, in the exigencies of wartime, things would have been done much differently.

In all, Outrageous Misconduct is a not entirely balaned book marred by a visceral dislike of private enterprise, plus a naive unwillingess to recognize the limitations of its resources.