    [Senate Hearing 106-931]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 106-931

     FINDING SOLUTIONS TO THE ASBESTOS LITIGATION PROBLEM: THE FAIRNESS IN
                       ASBESTOS COMPENSATION ACT OF 1999

    =======================================================================

                                    HEARING

                                   before the

            SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS

                                     of the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                       on

                                     S. 758

       TO ESTABLISH LEGAL STANDARDS AND PROCEDURES FOR THE FAIR, PROMPT,
    INEXPENSIVE, AND EFFICIENT RESOLUTION OF PERSONAL INJURY CLAIMS ARISING
                OUT OF ASBESTOS EXPOSURE, AND FOR OTHER PURPOSES

                                   __________

                                OCTOBER 5, 1999

                                   __________

                              Serial No. J-106-49

                                   __________

             Printed for the use of the Committee on the Judiciary

                        U.S. GOVERNMENT PRINTING OFFICE
    70-244 CC                   WASHINGTON : 2001

                           COMMITTEE ON THE JUDICIARY

                         ORRIN G. HATCH, Utah, Chairman

    STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
    CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
    ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
    JON KYL, Arizona                     HERBERT KOHL, Wisconsin
    MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
    JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
    SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
    JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
    BOB SMITH, New Hampshire

                 Manus Cooney, Chief Counsel and Staff Director

                      Bruce Cohen, Minority Chief Counsel

                                     ______

            Subcommittee on Administrative Oversight and the Courts

                      CHARLES E. GRASSLEY, Iowa, Chairman

    JEFF SESSIONS, Alabama               ROBERT G. TORRICELLI, New Jersey
    STROM THURMOND, South Carolina       RUSSELL D. FEINGOLD, Wisconsin
    SPENCER ABRAHAM, Michigan            CHARLES E. SCHUMER, New York

                           Kolan Davis, Chief Counsel

                     Matt Tanielian, Minority Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------

                        STATEMENTS OF COMMITTEE MEMBERS

                                                                       Page

    Grassley, Hon. Charles E., U.S. Senator from the State of Iowa...     1
    Hatch, Hon. Orrin G., U.S. Senator from the State of Utah........    10
    Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont...    12
    Torricelli, Hon. Robert G., U.S. Senator from the State of New
      Jersey.........................................................    13
    Ashcroft, Hon. John, U.S. Senator from the State of Missouri.....    84

                        CHRONOLOGICAL LIST OF WITNESSES

    Statement of Hon. George W. Gekas, U.S. Representative in
      Congress from the State of Pennsylvania........................     3
    Statement of Hon. James Moran, U.S. Representative in Congress
      from the State of Virginia.....................................     5
    Statement of Hon. Robert Scott, U.S. Representative in Congress
      from the State of Virginia.....................................     7
    Panel consisting of Christopher Edley, Jr., professor, Harvard
      Law School, Cambridge, MA; Jonathan P. Hiatt, general counsel,
      American Federation of Labor and Congress of Industrial
      Organizations, Washington, DC; Samuel J. Heyman, chairman and
      chief executive officer, GAF Corporation, Wayne, NJ; Karen
      Kerrigan, chairman, Small Business Survival Committee,
      Washington, DC; Richard Middleton, Jr., president, Association
      of Trial Lawyers of America, Washington, DC; and Conrad
      Mallett, chairman, Coalition for Asbestos Resolution,
      Washington, DC.................................................    15
    Statement of Hon. Chris Cannon, U.S. Representative in Congress
      from the State of Utah.........................................   102
    Panel consisting of Michael D. Green, professor of law,
      University of Iowa College of Law, Iowa City, IA; Richard A.
      Nagareda, associate professor of law, University of Georgia
      School of Law, Athens, GA; and Paul Verkuil, dean, Benjamin
      Cardozo School of Law, New York, NY............................   103

                    ALPHABETICAL LIST AND MATERIAL SUBMITTED

    Cannon, Representative Chris: Testimony..........................   102
    Edley, Christopher, Jr.:
        Testimony....................................................    15
        Prepared statement...........................................    17
    Gekas, Representative George W.:
        Testimony....................................................     3
        Prepared statement...........................................     4
    Green, Michael D.:
        Testimony....................................................   103
        Prepared statement...........................................   105
            Appendix: Asbestos Reform: State and Federal Courts'
              Commentary About the Asbestos Litigation Crisis........   110
    Heyman, Samuel J.:
        Testimony....................................................    64
        Prepared statement...........................................    65
    Hiatt, Jonathan P.:
        Testimony....................................................    24
        Prepared statement...........................................    26
            Letter from Robert A. Georgine, president, Building and
              Construction Trades Department, American Federation of
              Labor, to Representative John Conyers, Jr., dated Aug.
              10, 1998...............................................    29
            Objectives to H.R. 3905 (``Fairness in Asbestos
              Compensation Act of 1998'')............................    30
            Letter from William G. Bernard, general president,
              International Association of Heat & Frost Insulators &
              Asbestos Workers, to Representative Henry Hyde, dated
              May 20, 1999...........................................    31
            Agreement Providing Administrative Alternatives for
              Claimants with Asbestos Related Conditions, dated Jan.
              9, 1998................................................    33
    Kerrigan, Karen:
        Testimony....................................................    68
        Prepared statement...........................................    69
    Mallett, Conrad:
        Testimony....................................................    77
        Prepared statement...........................................    79
    Middleton, Richard, Jr.:
        Testimony....................................................    71
        Prepared statement...........................................    73
    Moran, James: Testimony..........................................     5
    Nagareda, Richard A.:
        Testimony....................................................   115
        Prepared statement...........................................   116
    Scott, Representative Robert:
        Testimony....................................................     7
        Letter from Cylde R. Hoey, II, president and CEO, the
          Virginia Peninsula Chamber of Commerce to Keith Holman,
          U.S. Chamber of Commerce, dated June 22, 1999..............     9
    Verkuil, Paul R.:
        Testimony....................................................   124
        Prepared statement...........................................   125

                                    APPENDIX
                             Questions and Answers

    Responses of Prof. Christopher Edley, Jr., to questions from
      Senators:
        Grassley.....................................................   135
        Thurmond.....................................................   139
        Feingold.....................................................   141
    Responses of Jonathan P. Hiatt to questions from Senators:
        Grassley.....................................................   147
        Thurmond.....................................................   147
    Responses of Samuel J. Heyman to questions from Senators:
        Grassley.....................................................   148
        Feingold.....................................................   149
    Responses of Karen Kerrigan to questions from Senators:
        Grassley.....................................................   151
        Thurmond.....................................................   152
        Feingold.....................................................   153
    Responses of Conrad Mallett to questions from Senators:
        Grassley.....................................................   153
        Feingold.....................................................   155
        Thurmond.....................................................   157
    Responses of Michael D. Green to questions from Senators:
        Grassley.....................................................   160
        Feingold.....................................................   161
    Responses of Richard Middleton to questions from Senators:
        Thurmond.....................................................   162
        Feingold.....................................................   163
    Responses of Dean Paul R. Verkuil to questions from Senator
      Grassley.......................................................   164

                     Additional Submissions for the Record

    Prepared statements of:
        Susan K. Pingleton, M.D., president-elect, American College
          of Chest Physicians........................................   167
        Louis W. Sullivan............................................   168
        Brian Wolfman of the Public Citizens Litigation Group........   170
            Analysis of Proposed Federal Asbestos Legislation--The
              So-Called ``Fairness in Asbestos Compensation Act''
              dated April 1999.......................................   173
            Letter from Erika L. Baum, director, workplace policy,
              Associated Builders and Contractors to Senator
              Grassley, dated Oct. 5, 1999...........................   179
            Letter from Maura J. Abeln, senior vice president,
              general counsel and secretary, Owens Corning to Senator
              Grassley, dated Oct. 5, 1999...........................   180
            Addendum to the prepared statement of Owens Corning,
              House Judiciary Committee, July 1, 1999................   180
    Letter from Roger L. Sullivan, McGarvey, Herberling, Sullivan &
      McGarvey, P.C. to Senator Max Baucus, dated Oct. 4, 1999.......   184
        Letter from Louise McNair to Senator Max Baucus, dated Mar.
          3, 1999....................................................   191
        Letter from Robbin Redman, Troy, MT to Senator Max Baucus....   192
    Letter from White Lung Asbestos Information Center to Senator
      Grassley, dated Oct. 5, 1999...................................   193

     FINDING SOLUTIONS TO THE ASBESTOS LITIGATION PROBLEM: THE FAIRNESS IN
                       ASBESTOS COMPENSATION ACT OF 1999

                                  ----------

                            TUESDAY, OCTOBER 5, 1999

                               U.S. Senate,
           Subcommittee on Administrative Oversight
                                            and the Courts,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10 a.m., in
    room SD-226, Dirksen Senate Office Building, Hon. Charles E.
    Grassley (chairman of the subcommittee) presiding.
        Also present: Senators Sessions, Ashcroft, Torricelli, and
    Schumer.

     OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR
                         FROM THE STATE OF IOWA

        Senator Grassley. Good morning, everybody, I welcome you
    all to the hearing on the Fairness in Asbestos Compensation
    Act.
        My interest in this legislation stems from a desire to make
    sure that justice is being done and that people stuck in the
    current system who are truly sick can get compensated as
    quickly as possible. Asbestos litigation has bedeviled the
    Federal and State court system for almost 30 years. In the last
    decade, however, a crisis has developed and there appears to be
    no end in sight to the filings.
        The Administrative Office of the U.S. Courts says the
    number of asbestos suits filed between 1997 and 1998 has
    increased 27 percent. The current judicial rules and procedures
    do not appear to have resolved these claims in an effective
    manner. There are, of course, staggeringly high costs to
    asbestos litigation. Moreover, huge payments paid out to
    nonsick claimants and plaintiffs' lawyers have bankrupt many of
    the defendant companies, and that has essentially prevented
    many of the genuinely sick from ever receiving appropriate
    compensation.
        The problem is not new. The courts and the Congress have
    been struggling with this for some time. In the early 1990's,
    the Judicial Conference convened an Ad Hoc Committee on
    Asbestos Litigation and this is what they had to say about it,
    ``Dockets in both Federal and State courts continue to grow;
    long delays are routine; trials are too long; the same issues
    are litigated over and over again; transaction costs exceed the
    victims' recovery by nearly two to one; exhaustion of assets
    threatens and distorts the process; and future claimants may
    lose altogether.''
        At House and Senate Judiciary Committee hearings, witnesses
    reiterated their concerns with the ability of the judicial
    system to deal with the morass of asbestos cases, and urged
    Congress to find a national remedy.
        Even the U.S. Supreme Court itself has directly called upon
    Congress to formulate a legislative solution. In the 1997
    Amchem decision, Justice Ginsburg suggested that, ``a
    nationwide administrative claims processing regime would
    provide the most secure, fair and efficient means of
    compensating victims of asbestos exposure.''
        In that case, the Supreme Court rejected the settlement
    because the class failed to satisfy rule 23(b)(3) requirements.
    The group of plaintiffs was too dissimilar. Some members of the
    class had manifested symptoms of asbestos exposure, while
    others had not. So the Court concluded that the disparities
    among plaintiffs precluded class certification.
        Just this past June, in the Ortiz case, the Supreme Court
    again called for a national solution. Justice Souter said that,
    ``the elephantine mass of asbestos cases * * * defies customary
    judicial administration and calls for national legislation * *
    * to date Congress has not responded.'' Rehnquist then echoed,
    ``The elephantine mass of asbestos cases cries out for a
    legislative solution.''
        Today, we will hear about the problems and whether S. 758
    provides us with an efficient, equitable remedy. Clearly, the
    current system is not working. This bill before us today would
    create a nationwide administrative claims resolution process to
    compensate victims.
        Although I believe that most everyone would agree something
    needs to be done to fix the problems, people disagree about how
    to do it. Today we will hear from our colleagues from the other
    body about the bill currently being considered are going on
    before the House Judiciary Committee, but even they are
    suggesting changes in their original bill as originally
    introduced which was essentially identical to the Senate
    version introduced in the Senate.
        For the sake of the victims and their families, we need to
    carefully analyze the unique problems presented to devise the
    most fair process possible so compensation gets to those that
    have been truly injured by asbestos. Because of the different
    interests involved and the complexity of issues, crafting a
    balanced solution to the problem will take a lot of work and
    compromise, and we need to ensure that no one is unfairly
    disadvantaged by what we come up with. So I look forward, of
    course, to this hearing process to work through some of these
    issues and to seek a fair resolution of the problem.
        I now go to panel one. We have Congressman George Gekas,
    chairman of the House Judiciary Subcommittee on Commercial and
    Administrative Law. He is from the State of Pennsylvania.
    Congressman Jim Moran from the State of Virginia. Congressman
    Christopher Cannon, who isn't here yet, a member of the House
    Judiciary Committee from the State of Utah, will also testify.
    And we do have with us Representative Robert Scott from the
    State of Virginia. I would ask that we go in that order.

      STATEMENT OF HON. GEORGE W. GEKAS, A U.S. REPRESENTATIVE IN
                CONGRESS FROM THE STATE OF PENNSYLVANIA

        Mr. Gekas. Senator Grassley, we all wish to thank you for
    convening this special hearing so that we can discuss the
    mounting problem of the asbestos suits. Actually, I discerned a
    special reason that you and I are involved in this. We want to
    prevent bankruptcies among the companies that are dealing in
    asbestos, and we want to do so even before we pass the
    bankruptcy reform bill, on which we are acting as expeditiously
    as we can, because that is an important feature of the opening
    statement that the Senator has made.
        Looming bankruptcies among the very companies that deal
    with asbestos--if they are to proceed with abandon, these
    bankruptcies, jobs are lost. The economy suffers collaterally
    because of it. And at the same time, and most importantly for
    what we are trying to achieve here, less money is available.
    Because there will be fewer sources, less money would be
    available for an eventual pot from which the victims of
    asbestos and potential victims can garner some compensation.
        So the opening statement of Senator Grassley is the
    definitive foundation for this entire process, and I think it
    is worthy of wide publication. It covers all the salient
    problems and features of the massive problem that we have.
        I want to note that the hearing to which the Senator
    alluded that occurred in the House Judiciary Committee resulted
    largely, I felt from some of the witnesses, a critique, some of
    it nit-picking, I felt, on what the then bill contained as the
    medical standards which should be generally followed in the
    proceedings that were contemplated by the bill.
        In engaging in a colloquy with one of the witnesses, I
    ascertained at least to my satisfaction that the medical
    standards should not be cause for delaying or for obstructing
    completely the enactment of this type of legislation. And so I
    am happy to report that the members of the House Judiciary
    Committee, not all of them, but some, are daily working out the
    problems of the language that might be employed to further
    define the medical standards and make them more universally
    acceptable to those who opposed the original version or who
    oppose any kind of solution by the Congress to this massive
    problem.
        With that, the other portion of the opening statement
    centered on something that was very meaningful to me, and that
    was the dicta and actual statements issued by the Supreme Court
    relative to these cases, that indeed the sheer number of them
    cry out, as the Justices themselves have said, for a national
    solution. That is what we are about.
        Too often, we are criticized for offering a national
    solution, and we hear the cries also too often that in doing so
    we are running squarely into the face of the Supreme Court and
    previous decisions and what they might do with it. Well, here
    they are inviting us, practically. The Supreme Court is saying
    that national policy is required on that peg. I am willing to
    do those extra efforts that are required to pass the
    legislation that you have introduced and which we gratefully
    acknowledge has been introduced by the chairman of the
    Judiciary Committee, Henry Hyde. I think we are on our way to
    at least a full debate on this mammoth issue.
        Thank you very much, Senator.
        Senator Grassley. Thank you, Congressman Gekas.
        [The prepared statement of Mr. Gekas follows:]

              Prepared Statement of Representative George W. Gekas

        Senator Grassley, Thank you very much for the opportunity to appear
    before you here today. I am looking forward to again working with you
    on the Bankruptcy Reform bill once the Senate completes its action on
    that legislation.
        This morning, however, I am testifying in support of Senate Bill,
    758, the companion to H.R. 1283.
        The House Judiciary Committee held a hearing on the problems posed
    by asbestos on July 1, and on the companion legislation to S. 758, H.R.
    1283. That hearing made it clear to me that this is indeed an urgent
    problem, and that there is an opportunity for compromise that we cannot
    afford to squander. Indeed, the simple dictates of justice, as well as
    the command of the Supreme Court, propel us to act, and to do so
    quickly.
        There are over 200,000 asbestos cases pending in our federal
    courts, and an additional 20,000 cases are filed every year. This
    problem not only clogs our federal courts, increasing the time that it
    takes other litigants to get through the system, but results in efforts
    to simply move these cases, treating asbestos plaintiffs as mere
    statistics, often with little regard for the reality that every single
    one of these ``cases'' is really just a person or a family who has been
    exposed to asbestos.
        Further, over 15 asbestos companies have declared bankruptcy, not
    only resulting in lost jobs for their employees, but also in less money
    being available for sick plaintiffs. Additionally, a reduction in the
    number of defendant companies increases the liability faced by those
    companies that remain, increasing their chances of going bankrupt,
    resulting in a possible vicious cycle, leaving plaintiffs with
    decreased settlements. For example, the Manville Trust, which has over
    400,000 cases pending against it, went bankrupt as a result of the
    liability that it faced from asbestos claims, and only pays plaintiffs
    pennies on the dollar for their injuries. These unfortunate workers
    deserve better treatment than that.
        This is a system that is crying out for reform. And this
    responsibility rests squarely at our feet. In fact, the Ad Hoc
    Committee on Asbestos Litigation, appointed by Chief Justice Rehnquist
    in 1990, stated: ``The committee recognizes that virtually all of the
    issues relating to a so-called `national solution' are primarily
    matters of policy for the Congress.'' (Emphasis added.) This sentiment
    was reiterated last year, when the Supreme Court's Fiberboard decision
    called the asbestos system an ``an elephantine mass'' which ``defies
    customary judicial administration and calls for national legislation.''
    (Emphasis added.) We in the Congress who recognize a responsibility to
    act must take heed of this admonition.
        Any proposed solution must, at the very least, ensure that victims
    are compensated quickly, fairly and efficiently. That is one of the
    reasons that I agreed to cosponsor H.R. 1283/S. 758. The system that is
    set up under this legislation ensures that impaired claimants will
    receive compensation much faster than in any jury trial or any private
    settlement.
        However, let me be clear--I am not tied to any particular proposal.
    There are on-going, bipartisan discussions over different approaches,
    and I would like to commend Chairman Hyde and his staff for their
    diligent work in trying to forge a solution to this problem. I am
    optimistic that a compromise solution can be crafted, and that it can
    be enacted into law this session--even during an election year. This
    issue is too important to our federal courts, to the companies that
    have to deal with this morass, and, most importantly, to the victims,
    who face tremendous delays in receiving just compensation for their
    injuries, and then often witness a third or more of their settlement
    getting eaten up by lawyers fees and transactions costs.
        Thank you for your time today, and I hope that one day, I will have
    the opportunity to work on the Fairness in Asbestos Compensation Act of
    1999 with you, just as I look forward to completing our efforts on the
    bankruptcy bill.

        Senator Grassley. Now, to Congressman Moran.

        STATEMENT OF HON. JAMES MORAN, A U.S. REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF VIRGINIA

        Mr. Moran. Thank you very much, Mr. Chairman, for having
    this hearing. It is necessary, as Chairman Gekas has said, for
    the Congress to act on this issue. As I will say in my
    testimony, the judicial system is not capable or prepared to
    resolve the complexity and the number of cases that are
    pending. It cries out for a legislative solution, and the
    people whose cries should be heard the loudest are the actual
    victims of asbestos-related illnesses who are now receiving
    only pennies on the dollar.
        As Chairman Gekas said, over 15 asbestos companies have now
    declared bankruptcy, primarily as a result of the asbestos
    claims. So our legislation is designed to compensate true
    victims fairly while there is still an opportunity to do so.
    This legislation, S. 758 and H.R. 1283, is the way to do this.
    That is why I am an original cosponsor of the legislation in
    the House.
        I am glad to see Mr. Schumer here, who shows the bipartisan
    nature of the bill, as I am hoping to do with Mr. Gekas. This
    is not a partisan issue. This is an issue that screams out for
    a reasonable, responsible settlement.
        You have got nearly 200,000 cases pending in State and
    Federal courts, and tens of thousands of new cases are filed
    each year. There is no end in sight. The present asbestos
    litigation system contradicts every notion of how justice
    should be properly served.
        Imagine a courtroom where judges no longer preside over
    actual cases or sit in judgment over right and wrong, guilt or
    innocence, where claims are referred to, in the aggregate, as
    inventories and are forced to be paid without regard to whether
    the plaintiff has any impairment at all. Consider a system
    where a seemingly unlimited supply of claimants brings suit
    long before they are actually sick, often because of the
    running of the statute of limitations or because of the concern
    that available funds for compensation will be exhausted long
    before any disease manifests itself. Consider further a system
    of justice where two-thirds of every dollar spent goes to
    transaction costs rather than to the victims, and where the
    truly sick have to wait years to receive compensation.
        Mr. Chairman, this is the face of the current asbestos
    litigation crisis, a system where the truly sick, the
    defendants, and the courts themselves all suffer unnecessarily
    because of the overwhelming number of cases brought by the
    nonsick. With the promise of tens of thousands of additional
    cases to be filed just this year, we can only expect this
    problem to get worse.
        As my colleagues are aware, the Supreme Court ruled on a
    class action settlement in 1997 that would have largely solved
    the problem of compensating individuals with asbestos-related
    illnesses based on objective and fair medical criteria which
    would allow the true victims of asbestos to recover
    compensation whenever they are sick.
        The settlement was agreed to by industry, by members of the
    plaintiffs bar, and by key components of organized labor. Bob
    Georgine, president of the Building and Construction Trades
    Union, even lent his name to the agreement. But the Supreme
    Court said that while the Georgine settlement was a long-
    overdue and rational solution to the asbestos crisis, the class
    was too large and complex to certify.
        But it is the consensus of the judicial system today that
    the present system is indeed broken and that a congressionally-
    mandated solution is needed. Justice Breyer has concluded that
    Congress is the only body with the authority to create an
    administrative claims process to solve this crisis. Justice
    Breyer went further in his concern over the current system, a
    system where the victims of asbestos will be short-changed
    unless something is done. Justice Breyer echoed comments of the
    Judicial Conference Ad Hoc Committee on Asbestos Litigation,
    appointed by Chief Rehnquist in 1991. That has been quoted, but
    it is the key quote.
        Decisions concerning thousands of deaths, millions of
    injuries, and billions of dollars are entangled in a litigation
    system whose strengths have increasingly been overshadowed by
    its weaknesses. The ensuing 5 years have seen the picture
    worsen--increased filings, larger backlogs, higher costs, more
    bankruptcies, and poorer prospects that judgments, if ever
    obtained, can be collected.
        I will try to wrap this up now because I know we are going
    to start getting repetitive. But, in addition, on the last day
    of its session this past June, the Supreme Court once again, as
    you referred to, Chairman Grassley, called on the Congress to
    legislate a solution to the asbestos litigation crisis. The
    Court's ruling in Ortiz v. Fibreboard emphasizes the tremendous
    and immediate need for Congress to act on S. 758 and H.R. 1283.
    Justice Souter wrote the majority opinion and referred to
    asbestos litigation as an ``elephantine mass.'' He said the
    problem of asbestos cases defies customary judicial
    administration and calls for national legislation.
        This, as I said when I began my testimony, requires a
    legislative solution. The opponents are resorting to tactics, I
    think, of confusion and intimidation because they simply cannot
    make sound policy arguments against this legislation. Their
    argument that the legislation should be voluntary, where
    claimants can elect to either opt in or opt out, is
    superficially attractive, but it would only generate new
    problems for the system.
        Experts predict anywhere from 50 to 80 percent of the
    current claims filed are by individuals with no physical
    impairment. So you can see how a voluntary system would work.
    The people with legitimate claims would elect to go to the new
    system. They would go through the medical screen and would
    receive an award quickly. But individuals with no impairment
    would elect to file a claim in court, doing little to alleviate
    the tens of thousands of cases filed by the unimpaired every
    year.
        This legislation addresses the fundamental flaws of the
    present system and offers commonsense solutions that preserve a
    sick claimant's right to sue, requires defendant companies to
    make good-faith settlement offers, relieves trial court judges
    of their role as claims examiners which they shouldn't be
    having to do, and ensures that the victims and not their
    lawyers receive as much of the award as possible. That is what
    this is all about.
        If we can get this legislation through, the true victims of
    asbestos will get a much greater share of what they truly
    deserve and our judicial system will be better served. It is
    good legislation. We need it immediately, and I thank you for
    having a hearing on it, Mr. Chairman.
        Senator Grassley. Congressman Scott.

       STATEMENT OF HON. ROBERT SCOTT, A U.S. REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF VIRGINIA

        Mr. Scott. Thank you, Mr. Chairman. I am pleased to join
    you and my former colleague on the Judiciary Committee, Mr.
    Schumer. I am the Representative from the 3d Congressional
    District of Virginia and appear here as a Member who has been
    involved in legislative issues surrounding asbestos litigation
    for more than 15 years, and as a Representative of a district
    whose citizens have experienced firsthand the devastation which
    decades of corporate deceit has imposed on victims and
    families.
        I am here to speak in opposition to S. 758, and to urge in
    the strongest possible terms that this subcommittee reject a
    bill that is nothing more than a bailout for an industry
    responsibility for the disability and death of millions of
    Americans.
        First, we have to square the rhetorical claims of the
    problem with the realities of asbestos litigation today and the
    language of the bill. Supporters of 758 have said that the bill
    is necessary to relieve the burden of asbestos litigation in
    State and Federal courts. The plain fact of the matter is the
    crisis that did exist in the 1980's is clearly behind us.
    Today, only a handful of cases go to trial each year and
    thousands are settled under the present system.
        In the State of Virginia, I am only aware of one case that
    has gone to trial in the last 7 years. Yet, we have settled
    thousands of cases. In the early 1980's, Virginia, like many
    other States, did have a large asbestos case backlog. The legal
    struggle over the industry's attempt to avoid liability and the
    delaying tactics of the defense in court, which were encouraged
    by Virginia law, led to lengthy trials, multiple complex
    appeals, and little, if any, justice for the victims.
        We enacted two pieces of legislation, one involving the
    statute of limitations and another a consolidation bill, which
    resolved those. The consolidation bill allowed consolidation on
    issues such as when a particular company learned of the risk
    asbestos posed to workers, when they first warned workers of
    the risk, and whether the warning was adequate under the law.
    Those questions were well-known and did not require endless and
    repeated litigation.
        Following the enactment of those two bills, the State court
    judges ordered consolidation on these issues, and almost
    immediately and well before those cases could begin, virtually
    every manufacturer settled virtually every asbestos case with
    virtually every plaintiff in Virginia. And the framework for
    all future settlement agreements which apply in our State to
    this day were established.
        Unfortunately, S. 758 would undo all of that work. It would
    undo it, first, because the bill would eliminate all of the
    powers of consolidation which have been authorized by the
    courts, and would remove the incentives to settlement which
    have proved so beneficial to victims in Virginia and across the
    country.
        Second, it would create a new Federal bureaucracy with
    complex procedures that no one can navigate in order to achieve
    a prompt settlement, regardless of how sick they are or how
    compelling their case is. Today's plaintiffs can go into a
    lawyer's office and know almost immediately what they are going
    to get and when they are going to get it, many times as quickly
    as 6 months, without any complexity. With this bill, there is
    no telling when you would get any money or if you would get any
    money.
        Now, we have heard suggestions that the litigation expenses
    are expensive now. Right now, there are virtually no litigation
    expenses. The corporations are doing this with in-house
    counsel. There is no discovery or anything like that. It is a
    very streamlined situation.
        Also, Mr. Chairman, the bill's strict medical criteria will
    eliminate 50 to 80 percent of the claims now being compensated,
    and will make those victims ineligible to file a lawsuit, much
    less receive a settlement. It would permit asbestos companies
    to avoid their existing settlement agreements, denying victims
    money they may be currently receiving and companies have
    already agreed to pay, or in cases like they have agreed to
    pay, may not be able to get that.
        If you have a plaintiff who is unable to satisfy the bill's
    strict medical criteria, the bill shifts the cost of paying to
    those bills from the manufacturer to the employers who are
    strictly liable under workers compensation laws. For example,
    our Newport News Shipyard receives payments in subrogation
    averaging about $6 million a year because of subrogation
    agreements under the asbestos litigation. That is why many
    corporations like the Newport News Shipyard and business
    organizations like the Virginia Peninsula Chamber of Commerce
    do not support the bill. I strongly suspect that employers who
    have no-fault liability under workers comp laws will have the
    same reaction once they find out what is going on in this bill.
        The asbestos issue has a long and complex history. It is
    entirely appropriate that the committee look for new and
    perhaps innovative approaches. But great care must be taken to
    avoid recreating problems that have essentially been resolved
    to the benefit of asbestos victims, and there is no excuse for
    providing a windfall to this industry or for passing
    legislation like S. 758.
        Senator Grassley. Thank you, Congressman Scott.
        I have no questions of this panel. Does Senator Torricelli
    or Senator Schumer?
        Senator Torricelli. I do not, Mr. Chairman.
        Senator Grassley. Well, we thank you very much for
    participating.
        Mr. Scott. Mr. Chairman.
        Senator Grassley. Yes, Congressman Scott?
        Mr. Scott. I would like to submit for the record a letter
    from the Virginia Peninsula Chamber of Commerce, if I could.
        Senator Grassley. It will be received.
        [The letter referred to follows:]
                        Virginia Peninsula Chamber of Commerce,
                                            Hampton, VA, June 22, 1999.
    RE: The Hyde Bill--H.R. 1283

    Mr. Keith Holman,
    U.S. Chamber of Commerce,
    Washington, DC.
        Dear Keith: The Virginia Peninsula Chamber of Commerce is familiar
    with asbestos product liability litigation and its effects on our
    Peninsula communities. Dining the past (20) twenty years, several
    thousand local shipyard workers have developed asbestosis, lung cancer
    and mesothelioma from asbestos exposure that occurred in the 1940s to
    the 1970s. Hundreds of these workers have died (approximately 400 from
    mesothelioma alone), and asbestos deaths and disabilities are
    continuing due to the long latency period associated with these
    illnesses.
        Plaintiffs in these lawsuits are routinely and regularly receiving
    prompt settlements from the asbestos manufacturers pursuant to a broad-
    based settlement agreement that has been negotiated with substantially
    all of the asbestos manufacturers who are defendants in these lawsuits.
    The efficiency of the settlements that have been reached between the
    asbestos manufacturers and plaintiffs' counsel for these claims is
    demonstrated by the fact that there has not been a jury trial in an
    asbestos lawsuit in this area for (7) seven years; during this period
    of time, hundreds of asbestos victims have been promptly and
    voluntarily compensated with settlements; transaction costs of the
    defendants have been virtually eliminated; and there is no burden on
    the courts because most of the lawsuits are settled before they are
    even served on the defendants.
        Virginia employers have been a major beneficiary of the broad-based
    settlement agreements which exist in this jurisdiction because every
    dollar that is received by the asbestos worker reduces the liability of
    his employer to pay workers' compensation benefits for that asbestos-
    induced illness or death. For example, during the past three years, the
    Newport News Shipyard has received credits from hundreds of these
    settlements each year. The lawyers who represent the asbestos victims
    in this area are well known and respected for the work they have done
    in proving the liability of the asbestos industry and providing
    compensation for deserving victims.
        The Virginia Peninsula Chamber of Commerce opposes the Hyde Bill as
    it is deemed unnecessary legislation. In Virginia the parties have
    voluntarily resolved this litigation on terms that are acceptable to
    both the clients and the manufacturers. The qualified claimants are
    receiving prompt and certain payments, the settlement agreements have
    minimum medical and exposure criteria which assure that only legitimate
    claims are compensated, and there is no burden on the courts.
        In the event the Hyde Bill is made law, it will provide a windfall
    to asbestos manufacturers by first permitting them to void their
    settlement agreements and then by creating eligibility requirements
    that are so strict that more than one-half of the claimants who are now
    being voluntarily compensated will be ineligible to file a lawsuit much
    less receive any settlement. Additionally, it will create a new and
    burdensome federal bureaucracy which is clearly designed for one
    purpose and one purpose only--to delay and/or prevent asbestos victims
    from being compensated. These procedures will also drastically increase
    the transaction costs for all parties and eliminate the efficiencies
    that have been designed by the courts and the parties to resolve this
    litigation.
        We urge you to find a middle ground of common sense and avoid any
    action that will impact the current agreements in the Commonwealth of
    Virginia.
                Cordially,
                                              Clyde R. Hoey II,
                                                     President and CEO.

        Senator Grassley. We look forward to working with you.
    Obviously, if we move this bill in the Senate, we will see you
    somewhere in conference.
        I am going to put in the record the statements from
    Senators Orrin G. Hatch, Chairman of the full Judiciary
    Committee and Patrick Leahy, ranking minority member of the
    full Judiciary Committee, on this issue. I will put them in the
    record now.
        [The prepared statement of Senator Hatch follows:]

      Prepared Statement of Hon. Orrin G. Hatch, a U.S. Senator From the
                                 State of Utah

        Good morning, and welcome to today's hearing on finding solutions
    to the asbestos litigation problem. I first would like to thank Senator
    Grassley, Chairman of the Judiciary Committee's Subcommittee on
    Administrative Oversight and the Courts for his leadership and hard
    work in holding this hearing so that we may begin to examine the issues
    presented by the asbestos litigation crisis.
        I also would like to thank all of our witnesses today for their
    time and cooperation. Let me extend a particular welcome to my
    colleagues from the House of Representatives who are here today.
    Representatives Gekas, Moran, Cannon, and Scott: thank you for being
    with us to share your views.
        I am hopeful that this hearing will help us better understand the
    asbestos issue, and will give us an opportunity to examine S. 758, the
    Fairness in Asbestos Compensation Act of 1999.'' As an original sponsor
    of S. 758, I have been very concerned about the asbestos crisis, which
    has had a profound impact on individuals who were injured by asbestos
    exposure, as well as on the court system and on industry.
        I am very pleased that today's hearing will enable us to begin to
    address the problems presented by the current system. As S. 758 makes
    its way through the legislative process, I look forward to working with
    my colleagues to achieve the maximum public benefit from this
    legislation.

                                I. Introduction

        Mr. Chairman and members of the Subcommittee, I am Sheila F.
    Anthony, a Commissioner of the Federal Trade Commission (``FTC'' or
    ``Commission''). I am pleased to have this opportunity to describe the
    Commission's consumer protection activities in the area of scholarship
    services.\1\ The Commission applauds Senator Abraham and Senator
    Feingold for focusing on the serious law enforcement issues raised by
    fraudulent purveyors of scholarship services.
    ---------------------------------------------------------------------------
        \1\ This written statement presents the views of the Federal Trade
    Commission. Responses to questions reflect my views and do not
    necessarily reflect the views of the Commission or the other
    Commissioner.
    ---------------------------------------------------------------------------

                II. The Commission's Consumer Protection Mission

        The FTC is a law enforcement agency whose mission is to promote the
    efficient functioning of the marketplace by protecting consumers from
    unfair or deceptive acts or practices and increasing consumer choice by
    promoting vigorous competition. The Commission's primary legislative
    mandate is to enforce the Federal Trade Commission Act (``FTCA''),
    which prohibits unfair methods of competition and unfair or deceptive
    acts or practices in or affecting commerce.\2\ The FTCA generally
    provides the Commission with broad law enforcement authority over
    entities engaged in, or whose business affects, commerce and with the
    authority to gather information about such entities.\3\ The Commission
    also has responsibility under approximately forty additional statutes
    governing specific industries and practices.\4\
    ---------------------------------------------------------------------------
        \2\ 15 U.S.C. Sec. 45(a).
        \3\ 15 U.S.C. Sec. Sec. 45(a), 46(a).
        \4\ These include, for example, the Truth in Lending Act, 15 U.S.C.
    Sec. Sec. 1601 et seq., which mandates disclosures of credit terms, and
    the Fair Credit Billing Act, 15 U.S.C. Sec. Sec. 1666 et. seq., which
    provides for the correction of billing errors on credit accounts. The
    Commission also enforces over 30 rules governing specific industries
    and practices.
    ---------------------------------------------------------------------------

                            III. Project Scholarscam

        In the fall of 1996, the Commission launched ``Project
    Scholarscam,'' a joint law enforcement and consumer education effort
    aimed at fraudulent purveyors of so-called ``scholarship services.'' At
    that time, the Commission announced six law enforcement cases against
    companies we alleged falsely promised scholarships to students and
    their parents nationwide. In November 1997, the Commission followed up
    with two additional cases known as ScholarScam II. The Commission
    obtained the most recent settlements in the fall of 1998.
        These companies employed similar tactics: the sales pitch usually
    started with a postcard proclaiming ``FREE MONEY FOR COLLEGE'' and
    providing a toll free number for students or their parents to call. A
    telemarketing sales pitch ensued whereby the company told students and
    parents that, for an up-front fee $100 to $400, the defendant would
    guarantee that the student would get a scholarship or the company would
    refund the up-front fee. To further entice the students, telemarketers
    claimed the student had prequalified for scholarships and that the
    company would ``do all the work'' necessary to obtain the scholarship.
    Getting the scholarships was easy, the telemarketers explained, because
    the company would match the student's qualifications with a database of
    scholarships and would send the student a list of sources tailored to
    that student. The telemarketers proclaimed that the company had
    ``information you can't get anywhere else.''
        Naturally, the telemarketer would impress upon the student the need
    to act quickly and typically would press the student or parent to
    provide over the telephone a credit card number or checking account
    number. Once students and their parents paid the up-front fee, they
    would complete a questionnaire detailing their interests, school
    activities and other personal information. Subsequently, they would
    receive a list of available scholarships and sources of money--but the
    list was hardly ``tailored'' to the student's qualifications. In fact,
    as the Commission alleged, it was a useless list--containing outdated
    information, scholarships whose deadlines had passed, entries that were
    not even scholarships but were student loan programs, and scholarships
    that the student clearly could not qualify for (for example, a
    scholarship for children of veterans or residents of a particular state
    when the student was neither).
        When consumers sought refunds for these useless lists, the
    defendants foiled their attempts by putting hurdles up at every turn
    instead of honoring their much-heralded and unconditional ``money-back
    guarantee.'' Students were required, the defendants said, to apply to
    each and every source on the list and to obtain and send to the company
    all rejection letters received. In reality, this was an impossible
    condition to fulfill because scholarship organizations typically notify
    only those who are selected as recipients. In addition, because the
    list contained scholarships for which the students could not qualify,
    students had no reason to apply to those sources. In one FTC case, the
    defendant stopped providing any lists at all--leaving consumers to
    write futile complaint letters to a nonexistent ``scholarship
    foundation.''
        These cases were filed in federal district courts in Florida,
    Georgia, Maryland, and New York. A summary of these cases is provided
    to the Committee as an Appendix to my written statement. The Commission
    sought and obtained temporary restraining orders with asset freezes
    and, in some cases, the appointment of a receiver over the corporate
    defendants. All Commission litigation has been concluded with permanent
    injunctions obtained either through settlements or ordered by the
    court. The orders obtained either ban defendants from engaging in
    telemarketing or providing scholarship services or require defendants
    to post performance bonds in significant amounts to protect consumers
    from future fraudulent practices should defendants resume telemarketing
    of scholarship services.
        In several instances, the Commission obtained partial or complete
    redress for consumers. In two cases, the defendants posted $100,000
    telemarketing bonds pursuant to Florida law, which requires all
    telemarketers to make such commitments. We worked with the Florida
    Department of Agriculture and Consumer Services to revoke the bonds
    and, for the first time, Florida consumers received refunds derived
    from a Florida telemarketing bond. In another case, as part of the
    settlement, the defendant relinquished mail containing checks from
    almost 500 consumers which enabled the Commissioner to provide full
    refunds to those consumers. In many FTC cases, however, the defendants
    have depleted the monies received, leaving little, if any, for consumer
    redress. In addition, FTC defendants frequently attempt to use
    bankruptcy laws to avoid paying consumer redress required by our
    orders.
        We estimate that the companies involved in these cases scammed, in
    total, approximately 175,000 consumers to the tune of $22 million. In
    addition, one of the Scholarscam defendants, Christopher Nwaigwe, was
    criminally prosecuted by the U.S. Attorney's Office in Baltimore,
    Maryland. Commission staff provided substantial assistance to the U.S.
    Attorney's Office, including having a staff attorney testify at trial.
    Nwaigwe was convicted of seven counts of mail fraud in March of this
    year and in June was sentenced to 36 months in prison. Tough penalties
    are needed for these scam artists. The civil remedies afforded by an
    FTC action can deprive defendants of their ill-gotten gain through
    restitution, but only if the victims' money can be found. The penalties
    resulting from criminal prosecutions by the U.S. Department of Justice
    and state authorities send the strongest possible message, which is
    particularly needed because there is a never-ending pool of potential
    victims: college-bound students and their parents.
        The Commission has undertaken extraordinary efforts to educate
    consumers about scholarship scams. As part of this effort, we teamed up
    with a variety of private and public partners, including:

       Sallie Mae

       College Parents of America

       Who's Who Among American High School Students

       The College Board

       Educational Testing Service

       National Association of Student Financial Aid Administrators

       National Association of Secondary School Principals

       National Association of College Stores

        Our consumer education materials include bookmarks, posters, and
    consumer alerts warning students and their parents of the red flags to
    look for when evaluating scholarship service sales materials and sales
    pitches. We have distributed over 2 \1/2\ million pieces of our
    consumer education materials, including a mass mailing of bookmarks to
    2,000 college bookstores across the country and have the materials
    posted on our Web site. In addition, we posted a Web page of a
    fictitious scholarship service company that had the typical claims we
    saw in our cases and, when consumers clicked to sign up for the
    service, they were warned that they could have been scammed. We call
    this a ``teaser Web site'' and have used it to help disseminate our
    message on the Internet.
        The Commission continues to monitor the industry and to provide
    both consumer and business education. In May, we issued a new Consumer
    Alert to inform consumers about a recent trend: the seminar for
    financial aid or scholarships. We warn consumers to take their time
    when attending these seminars and to avoid high-pressure sales pitches
    that require them to buy now or risk losing out on the opportunity.
    Consumers should investigate the organization by 5 talking with a high
    school or college guidance counselor or financial aid advisor before
    spending money--many colleges and universities are offering Web-based
    scholarship searches for free to potential students. Consumers
    shouldn't rely solely on ``success stories'' or testimonials of
    extraordinary success offered by the seminar company. Instead, they
    should ask for a list of three local families who have used the service
    in the last year and then contact them to find out if they were
    satisfied with the products and services received. As always, consumers
    should keep in mind that they may never recoup the money they give to
    an unscrupulous operator, despite stated refund policies.

                            IV. Proposed Legislation

        S. 1455, the ``College Scholarship Fraud Prevention Act of 1999,''
    provides some useful tools to help combat scholarship fraud. It would
    enhance criminal penalties for fraud in connection with the obtaining
    or providing of scholarships. Also, it would prevent purveyors of
    college scholarship fraud from using the bankruptcy laws to shield
    their ill-gotten gains while their victims go without recompense. The
    Bankruptcy Code allows debtors to retain certain property even when
    their creditors receive little or no recompense. In particular, debtors
    can use state-law exemptions, including homestead exemptions that in
    some states can have no dollar limit, to shield their assets. S. 1455
    would deny these exemptions to the extent that debts resulted from
    college scholarship fraud.

                                 V. Conclusion

        The story of Project ScholarScam has garnered tremendous coverage
    in the media. Through this coverage and by enlisting those who are on
    the front lines--financial aid advisors and guidance counselors--we
    have spread the word about these pernicious scams. The Commission's
    strong record of enforcement and education has served as an effective
    deterrent in this industry. But, as education costs continue to rise
    and, given the unlimited supply of potential victims, fraudulent
    operators will always have an interested audience and an enticing sales
    pitch. Thus, we will continue our efforts and will also continue to
    provide cooperation to any criminal investigation or prosecution of
    ``ScholarScam'' defendants.

        [The prepared statement of Senator Leahy follows:]

     Prepared Statement of Hon. Patrick J. Leahy, a U.S. Senator From the
                                State of Vermont

        I am concerned that the Fairness in Asbestos Compensation Act S.
    758, unfairly sacrifices the legal rights of hundreds of thousands of
    workers and their families.
        This complex legislation transfers the legal rights of asbestos
    victims and their families to a new byzantine bureaucracy in a quasi-
    governmental entity called the Asbestos Resolution Corporation (ARC).
    An asbestos victim, under the bill, would be forced to file his or her
    asbestos-related claim with the ARC instead of a court of law of the
    victim's choice. Then, the legislation: prohibits any form of asbestos-
    related class action lawsuit unless all defendants agree; bans any
    award of punitive damages; caps the victim's attorney's fees; and fails
    to provide any funding for the asbestos victim or the ARC.
        In short the bill is an asbestos defendant's dream. It is not
    balanced or fair to plaintiffs. Instead of enacting one-sided
    legislation, I believe Congress can play a more constructive role in
    helping to find more equitable solutions for all the parties involved
    in asbestos litigation.
        I agree with Supreme Court Justice Ruth Bader Ginsburg in the
    Amchem Products decision that Congress can provide a secure, fair and
    efficient means of compensating victims of asbestos exposure. I believe
    the appropriate role for Congress is to provide incentives for private
    parties to reach settlements, not to take away the legal rights of
    asbestos victims and their families. For example, Congress should
    consider enacting tax incentives for private parties involved in
    asbestos-related litigation to reach global settlements and to
    guarantee that asbestos victims and their families receive the full
    benefit of the incentives. This is an approach that encourages fair
    settlements while still preserving the legal rights of all parties.
        I commend Chairman Henry Hyde of the House Judiciary Committee for
    working with all the parties involved in asbestos litigation to try to
    reach consensus. I look forward to working with Mr. Hyde, Chairman
    Hatch, Senator Grassley, Senator Torricelli and others to fashion an
    appropriate Congressional response to encourage fair settlements for
    asbestos victims and the asbestos industry.

        Senator Grassley. Now, I will turn to Senator Torricelli to
    make an opening comment.

    STATEMENT OF HON. ROBERT G. TORRICELLI, A U.S. SENATOR FROM THE
                          STATE OF NEW JERSEY

        Senator Torricelli. Thank you very much, Mr. Chairman.
    First, I want to thank you for holding this hearing. This
    Congress has a responsibility to look at the asbestos issue in
    some depth, to do expeditiously, and we are all very grateful
    for your leadership in bringing us together today.
        I would also note that soon we are going to hear from a
    variety of witnesses. In particular, I would like to welcome
    Sam Heyman, of the GAF Corporation that is located in the State
    of New Jersey, and Rich Middleton, the president of ATLA. They
    will be joined by other distinguished witnesses, but to these
    individuals in particular I would like to welcome them before
    the committee today.
        I think, Mr. Chairman, we have all watched with some dismay
    the torrent of asbestos cases that are now before the Federal
    courts. We have a system which it appears to me is not working
    for anyone. There are 200,000 cases now clogging State and
    Federal courts, with 50,000 new cases being added every year.
    Victims have been waiting years to receive compensation, and it
    appears to me that there is very little relationship between
    the degree of injury or illness and the compensation that is
    actually being received. The truly sick are waiting up to 3
    years to receive compensation for their illnesses compared with
    other product liability cases where the average is 18 months.
        It is very difficult to mount a defense of the current
    system. Twenty-five of the largest manufacturers representing
    the majority of the defendents have already filed for
    bankruptcy. We are therefore facing a system in which the very
    sick are waiting a long period of time to mount cases against
    an industry which is dwindling, where those who have liability
    may no longer be in business and truly may not survive to ever
    recognize compensation, with a compensation that doesn't seem
    to have any relationship between the amount of the award and
    the amount of the injury. It would be difficult to design a
    system that is worse, less fair, or less likely to produce a
    result.
        As we know, in 1994 a class action settlement in the
    Georgine case did lead to a system which provided for a
    national facility to resolve the claims of future plaintiffs.
    We also know that it did not survive. I think, though, we have
    been led by the courts to recognize the potential and the need
    to succeed the Georgine settlement.
        It was instructive, I think, by Justice Ginsburg writing in
    that case when she wrote, ``The argument is sensibly made that
    a nationwide administrative claims processing regime would
    provide the most secure, fair and efficient means of
    compensating victims of asbestos exposure. Congress, however,
    has not adopted such a solution.'' That, Mr. Chairman, was, in
    my judgment, an invitation for this Congress to provide some
    leadership.
        If there was any doubt, this summer, in the Ortiz case,
    once again the Court signaled its beliefs. Justice Souter
    wrote, in describing the asbestos cases as ``an elephantine
    mess which defies customary judicial administration and calls
    for national legislation.'' It would be difficult to describe
    how the Court in any clearer manner could have described the
    need for the Congress to take some action.
        The bill we are looking at today is a first attempt to
    provide exactly such an answer. It establishes a national claim
    facility to provide fair and prompt compensation for persons
    suffering from asbestos-related illness. Eligibility for
    compensation would be determined by objective, predetermined
    criteria. I do not, Mr. Chairman, as one of the cosponsors of
    the legislation, believe it is a final answer. We are not
    closed to other suggestions on how to deal with an
    extraordinarily complex situation.
        I think we should simply recognize that the current system
    is not working for anybody. I do not believe it is fair for the
    attorneys involved. Clearly, it is not fair for those potential
    victims involved. It is not providing a timely or rational
    means of distributing benefits to people. It is damaging to the
    industry.
        I genuinely believe through these hearings, after hearing
    from the representatives of ATLA and the industry, this
    committee is in a position to fashion a fair and reasonable
    solution. I don't think any of us come to this hearing with a
    closed mind, but recognizing something must be done.
    Legislation is going to evolve from the House. This Senate
    should take leadership as well, and I am very grateful that you
    have, probably against all common sense and personal wisdom,
    put yourself in this position to provide leadership on this
    issue. Thank you for doing so.
        Senator Grassley. Let me associate myself with part of your
    remarks, and that is that I think you have given a very careful
    analysis of the parliamentary situation, and probably one in
    which, if we do move in any way, would have to be bipartisan.
    Obviously, you and I have been able to do that before and we
    would obviously explore doing that in this instance as well.
        Senator Torricelli. And, Mr. Chairman, if we do not, our
    extensive collaboration in legislation on bankruptcy will prove
    to be relevant.
        Senator Grassley. Very relevant.
        Senator Torricelli. The two issues will merge in the
    future.
        Senator Grassley. Yes; Congressman Gekas had already
    touched on that issue.
        Now, we will move on to our first panel, and you will see
    as I introduce them that we have a very impressive list of
    witnesses, very impressive backgrounds, and all well-qualified
    to testify in this area.
        We have Harvard Law School professor of administrative law
    and civil rights, Mr. Christopher Edley. We have the general
    counsel of the AFL-CIO, Jonathan Hiatt. Already introduced is
    Samuel Heyman, chairman and CEO of GAF Corporation. Ms. Karen
    Kerrigan, chairman of the Small Business Survival Committee,
    and Mr. Richard Middleton, Jr., president of the Association of
    Trial Lawyers of America. He is also a senior trial attorney
    with the firm Middleton, Adams and Tate in Savannah, GA. And
    then we are honored to have the Hon. Conrad Mallett, former
    chief justice of the Michigan Supreme Court, and currently
    chairman of the Coalition for Asbestos Resolution.
        We will proceed as I introduced the witnesses, so we go to
    Professor Edley.

    PANEL CONSISTING OF CHRISTOPHER EDLEY, JR., PROFESSOR, HARVARD
    LAW SCHOOL, CAMBRIDGE, MA; JONATHAN P. HIATT, GENERAL COUNSEL,
        AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL
     ORGANIZATIONS, WASHINGTON, DC; SAMUEL J. HEYMAN, CHAIRMAN AND
      CHIEF EXECUTIVE OFFICER, GAF CORPORATION, WAYNE, NJ; KAREN
        KERRIGAN, CHAIRMAN, SMALL BUSINESS SURVIVAL COMMITTEE,
    WASHINGTON, DC; RICHARD MIDDLETON, JR., PRESIDENT, ASSOCIATION
        OF TRIAL LAWYERS OF AMERICA, WASHINGTON, DC; AND CONRAD
         MALLETT, CHAIRMAN, COALITION FOR ASBESTOS RESOLUTION,
                             WASHINGTON, DC

                  STATEMENT OF CHRISTOPHER EDLEY, JR.

        Mr. Edley. Thank you, Mr. Chairman. I am Christopher Edley,
    Jr., a professor at Harvard Law School.
        Senator Grassley. Before you start, something that will
    avoid all of us some embarrassment later on, particularly me,
    who finds it very difficult to wield a gavel, I am sorry to
    say. It is a weakness; I like to hear people.
        But today the caucuses of our respective parties are
    scheduled, so we have to get done by a certain time. As such,
    we have asked for you all to have your entire written
    statements submitted for the record and for you to summarize
    your oral testimony in 5 minutes, please. If anybody didn't
    hear that, is that going to cause problems for anybody?
        [No response.]
        Senator Grassley. OK; would you please proceed, Professor
    Edley?
        Mr. Edley. Thank you, Mr. Chairman. I am Christopher Edley,
    Jr., a professor at Harvard Law School, where I have taught
    administrative law for 18 years.
        Two years ago, the Supreme Court noted the continuing
    seriousness of the asbestos litigation crisis and called for
    legislation. They repeated that message to you just this past
    June in Ortiz v. Fibreboard, holding again that class action
    rules are not flexible enough to fix the mess.
        S. 758 provides a fair, efficient means of compensating
    victims. Is it complicated? Absolutely not. The critics confuse
    complexity with careful design. There are just three steps:
    step one, a simple, nonadversarial administrative procedure for
    determining medical eligibility, keyed to objective clinical
    and pathological criteria for impairment and with safeguards
    making it easy to say yes to the claimant and hard to say no;
    step two, an aggressive alternative dispute resolution process,
    faster and less expensive than courts; and step three, access
    either to arbitration or to court at the claimant's option.
    That is it--3 to 5 months instead of 3 or more years in today's
    tort system.
        Here are just a few of the several policy goals that I
    think are achieved by the bill. No. 1, claimants who are
    impaired--that is, sick--get tortlike compensatory damages from
    the defendants, including pain and suffering, and they get it
    quickly.
        Point No. 2: claims by the nonsick are deferred until they
    actually become sick, and most don't. Point No. 3: the bill
    reduces transaction costs by using ADR and expert
    administrative decisionmaking. If mediation fails, however,
    claimants can opt out to the court, and this helps police
    administrative discretion and ensures that over time the awards
    are aligned with tort damages. Finally, defendant companies
    bear all the costs of compensating victims and of administering
    the system. No taxpayer funds are necessary.
        Now, why can't the courts sort all this out? Senators, it
    has been tried, but State and Federal judges themselves are
    telling you it can't work. Such expedients as case
    consolidations help somewhat to clear dockets, but only at the
    expense of the quality of individual justice. Plaintiffs'
    lawyers package hundreds and often thousands of claims,
    combining sympathetic sick claimants with unimpaired claimants,
    and refusing generous settlement offers for those who are sick
    unless defendants also make substantial payments to those who
    aren't.
        Alternatively, plaintiffs' counsel threaten to litigate
    every case, facing the defendants with a ``bet the company''
    jury lottery that can quickly involve hundreds of millions in
    awards to people who are not sick and never will be sick. And
    these coerced payments to nonsick claimants stimulate further
    waves of filings, diverting resources that should be focused on
    today's sick victims and on those who will need help tomorrow.
        Now, some have complained that this bill is not voluntary,
    like the hundreds of private deals that plaintiffs' attorneys
    have signed with companies over the years. But please look
    carefully. The private deals don't last and they make no sense
    as a national solution. Those deals haven't prevented a
    doubling in this decade of the backlog, a growing flood of
    claims, still long delays for victims, and more and more
    bankruptcies to boot.
        Moreover, you can't make voluntary the statutory medical
    criteria which draw the line between the sick and the nonsick
    because the nonsick, egged on by contingent fee counsel, would
    ignore the line, file their suits, clog the system, continue to
    drain the defendants, and leave themselves with no recourse in
    the future, if and when they become sick. The voluntariness
    that does make sense is in the bill--the claimant's choice of
    administrative arbitration versus court litigation once the
    medical line is drawn.
        This bill benefits almost everyone. Impaired claimants get
    fair compensation in months, not years. The nonsick who will
    eventually get sick benefit because the bill eliminates statute
    of limitations defenses. No one need file their claims
    prematurely or enter into inadequate settlements.
        Our courts will benefit, as will everyone who uses them.
    Defendant companies will benefit. With this litigation
    nightmare behind them, they can, consistent with their oft-
    stated wish, focus their resources on compensating the sick.
    And, finally, workers, shareholders, families and communities
    will benefit from the reduced risk of asbestos-driven
    bankruptcies. The only losers are a few lawyers and those
    individuals who are not now sick who never will become sick in
    the future and who would have won the jury lottery under our
    current tort system.
        As a matter of public policy, as a matter of sensible
    resource allocation for our courts and society at large, I urge
    you to move forward quickly to answer the Supreme Court's
    repeated call for action. Give victims and companies,
    shareholders and families a better justice. Fix the mess.
        Thank you, Mr. Chairman.
        Senator Grassley. Thank you, Professor Edley.
        [The prepared statement of Mr. Edley follows:]

             Prepared Statement of Professor Christopher Edley, Jr.

                                    SUMMARY
        The Supreme Court has, twice in two years, noted the continuing
    seriousness of the asbestos litigation crisis and called for Congress
    to adopt a legislative solution. The courts have said they cannot
    handle the flood of cases fairly and efficiently. And the flood is
    worsening, exacerbating each of the problems associated with asbestos
    litigation, including the growing number of claims by the unimpaired.
    Only half of all claimants are sick; the remaining half of claimants
    are not sick, and most will never become sick.
        S. 758 provides an imaginative and effective means of compensating
    victims of asbestos exposure. It features: (1) objective medical
    review, administered by doctors, (2) an aggressive alternative dispute
    resolution process to promote settlement, and (3) an optional
    streamlined arbitration process. The right to go to court is preserved
    for all impaired claimants. Compensation goes to impaired victims,
    while claims by the unimpaired are deferred until they become sick. The
    efficiencies of expert decisionmaking and of alternative dispute
    resolution are fully exploited to reduce litigation costs. Finally,
    defendant companies bear all the costs. No taxpayer funds are used.
        Other issues concerning S. 758 that are addressed in the statement
    include--

       A lack of trials does not mean all is well. Cases generally
            settle, but only after years of depositions, discovery, and
            pretrial motions--which is nothing new. Trials were never the
            major burden imposed by asbestos litigation.

       Private plans are no substitute for legislation. They are
            unenforceable, and do not bind future claimants.

       A collective fund for all asbestos liability is unworkable.
            The enormous diversity of asbestos defendants, and uncertainty
            regarding insurance coverage, make one seemingly attractive
            approach--a collective fund--unworkable in practice.
                                     ______

        I appreciate the opportunity to testify concerning S. 758, the
    Fairness in Asbestos Compensation Act.\1\ Asbestos litigation has long
    been a scandal, which poorly serves the interests of victims, as well
    as defendants and the employees and communities that depend upon them.
    Several years ago I published an article with Paul Weiler, my colleague
    at the Harvard Law School, advocating an administrative system for
    compensating people who are impaired by asbestos-related diseases.\2\
    Since then, my conviction that an administrative compensation system
    would do a better job of compensating the sick has grown even stronger.
    It is for that reason that I welcome S. 758.
    ---------------------------------------------------------------------------
        \1\ The Coalition for Asbestos Resolution has compensated me for my
    time and expenses in preparing this statement. My statements express my
    own views on the subject, which may in some respects differ from those
    of the bill's proponents. Please note that I am not the recipient of
    any federal grant or contract.
        \2\ See Christopher F. Edley, Jr. and Paul C. Weiler, Asbestos: A
    Multi-Billion-Dollar Crisis, 30 Harv. J. on Legis. 383 (1993).
    ---------------------------------------------------------------------------
        My testimony today will make three points. First, the asbestos
    litigation crisis not only remains with us, but has in important
    respects grown worse in the late 1990s. Second, S. 758 provides an
    innovative and practical administrative alternative to tort litigation
    which would be far more fair, prompt, and inexpensive than the present
    system. Third, after reviewing a number of concerns that have been
    expressed about the bill, I conclude that S. 758 is a necessary and
    effective response to the challenge of asbestos compensation.

                        THE ASBESTOS LITIGATION PROBLEM
        By the early 1970s, the widespread use of asbestos in shipbuilding,
    insulation and other industries without adequate precautions or
    warnings had led to what can only be termed a public health disaster.
    The tort system responded well to the tragedy. After years of struggle,
    imaginative trial lawyers established industry liability for the
    asbestosis and cancer that ruined the health and shortened the lives of
    workers. They were assisted in this by legal rulings from far-sighted
    judges that established many of the basic principles of modern product
    liability. The Fifth Circuit's decision in Borel v. Fibreboard Corp.,
    493 F.2d 1076 (1974), which elaborated the theory of strict liability
    for failure to warn users of the hazards of an inherently dangerous
    product, is just one example.
        In the 1980s, however, the defects of the tort system began to
    outweigh its advantages. The courts were flooded with asbestos claims,
    in which the same issues were litigated again and again. In 1982, the
    leading manufacturer of asbestos products, Johns-Manville, went
    bankrupt, and the Manville bankruptcy was followed by two dozen others,
    essentially wiping out much of the former asbestos industry. As the
    pool of available assets grew smaller, the asbestos trial bar sought to
    involve more companies, and more products, in the litigation. At the
    same time, the momentum of the tort system led to an ever increasing
    number of claimants who had pleural plaques and other non-impairing
    conditions. By the end of the decade, the focus had shifted from
    proving the asbestos defendant's responsibility for the harm their
    products had caused to ensuring that funds would be available to
    compensate workers when they became sick.
        In 1991, the Judicial Conference of the United States noted the
    seriousness of the problem:

              The most objectionable aspects of asbestos litigation can be
            briefly summarized: dockets in both federal and state courts
            continue to grow; long delays are routine; trials are too long;
            the same issues are litigated over and over; transaction costs
            exceed the victims' recovery by nearly two to one; exhaustion
            of assets threatens and distorts the process, and future
            claimants may lose altogether.\3\
    ---------------------------------------------------------------------------
        \3\ Report of the Judicial Conference Ad Hoc Committee on Asbestos
    Litigation 3 (Mar. 1991).

    The Judicial Conference strongly recommended that Congress create ``a
    legislative dispute resolution system to resolve asbestos personal
    injury disputes.\4\ That was my view as well.
    ---------------------------------------------------------------------------
        \4\ Id. at 27.
    ---------------------------------------------------------------------------
        Congress did not act in response to the Judicial Conference's
    recommendation. However, leaders of the plaintiffs' bar and a group of
    20 defendants attempted to achieve a similar result through a creative
    use of the class action device under the Federal Rules of Civil
    Procedure. The parties negotiated a settlement class action, the heart
    of which was medical criteria that provided compensation for people who
    were impaired by asbestos-related conditions and deferred the claims of
    the unimpaired. The settlement was approved as fair and reasonable by a
    federal district judge in Georgine v. Amchem Products, Inc., 157 F.R.D.
    246 (E.D. Pa. 1994). But, though the Third Circuit described the
    settlement class action as ``arguably brilliant,'' it held that the
    device was not authorized by the Federal Rules of Civil Procedure.
    Georgine v. Amchem Products, Inc., 83 F.3d 610 (1996). The Supreme
    Court, too, recognized that the ``settlement-class certification [it
    confronted] evolved in response to an asbestos-litigation crisis.''
    Amchem Products v. Windsor, 521 U.S. 591 (1997). But, it too
    invalidated the settlement on procedural grounds, while calling for
    Federal legislation. Justice Ginsberg, speaking for the Court, said:
    ``The argument is sensibly made that a nationwide administrative claims
    processing regime would provide the most secure fair, and efficient
    means of compensating victims of asbestos exposure.'' Id. at 628-29.
    This summer, in Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999), the
    Court returned to the same theme. Justice Souter wrote for the Court
    that ``the elephantine mass of asbestos cases * * * defies customary
    judicial administration and calls for national legislation. * * * To
    date Congress has not responded.'' Id. at 2302 & n.\5\
    ---------------------------------------------------------------------------
        \5\ Chief Justice Rehnquist's concurring opinion noted that the
    ``massive impact of asbestos-related claims on the federal courts'' had
    frustrated judicial efforts to resolve the asbestos crisis, despite
    ``the near-heroic efforts of the District Court in this case to make
    the best of a bad situation.'' ``Under the present regime,'' he
    observed, ``transactional costs will surely consume more and more of a
    relatively static amount of money to pay these claims.'' Noting the
    need to ``devis[e] a system for handling these claims on a clean
    slate,'' Chief Justice Rehnquist too concluded, ``the `elephantine mass
    of asbestos cases' cries out for a legislative solution.'' Id. at 2323-
    24.
    ---------------------------------------------------------------------------
        The flood of asbestos cases is worsening, In 1991 there were
    100,000 pending cases. Despite hundreds of thousands of settlements,
    the backlog has grown unexpectedly to well over 200,000 and the pace of
    new filings is even greater than before. Indeed, over 40,000 asbestos
    cases are filed each year in both state and federal courts; the
    nineteen defendants who are members of the Center for Claims Resolution
    report over 40,000 claims against them for the first eight months of
    1999 alone. Thus, today more cases are filed each year than were
    pending in the federal courts in 1991, when the Judicial Conference Ad
    Hoc Committee sounded the alarm.
        This stream of cases has exacerbated other defects of the tort
    system. First, bankruptcies have increasingly cast doubt on the ability
    of asbestos defendants to compensate people who contract cancer or
    disabling asbestosis in the future. For example, the Manville Trust,
    after protracted litigation in which all claims were barred, now pays
    only 10 cents on the dollar for claims against Johns-Manville. The
    record of many other trusts is worse.
        Second, the pace of justice remains agonizingly slow--with typical
    cases taking several years to reach settlement and many cases
    languishing for much longer.
        Third, lawyers' fees and other transactions costs continue to
    consume nearly two dollars for every one dollar paid to claimants.
    These transactions costs, in the words of Chief Justice Rehnquist,
    ``consume more and more of a relatively static amount of money to pay
    [asbestos] claims.'' See footnote 5.
        Fourth, as Justice Breyer noted in his separate opinion in Amchem,
    521 U.S. at 631-32, half of all claimants are not sick, and most will
    never become sick. Instead, they sue (often because they must, to avoid
    the statute of limitations) seeking compensation for pleural conditions
    which are a mere marker of asbestos exposure. Although these conditions
    can be detected by medical tests, they generally do not cause any
    impairment to lung function and they are not early warning signs of
    more serious conditions such as cancer. The substantial compensation
    some are receiving in the tort system threatens to exhaust all
    resources for future, seriously ill claimants.
        All of these problems impact our courts and create uncertainty for
    defendant companies and the employees and communities that depend upon
    them. Perhaps more importantly, however, these problems also have
    seriously impaired the ability of those injured by asbestos disease to
    recover compensation, creating what the Judicial Conference termed ``a
    massive denial of justice.''
       the fairness in asbestos compensation act: an innovative solution
        S. 758 provides an imaginative framework for compensating people
    who are impaired by asbestos-related diseases faster and at a lower
    cost than litigation. The bill establishes an independent public
    agency, the Asbestos Resolution Corporation (ARC), to resolve asbestos
    claims. The ARC would administer a process for determining medical
    eligibility, keyed to, objective medical criteria for asbestos-related
    impairment, and an aggressive alternative dispute resolution process to
    ensure timely resolution of claims.
        The administrative process has three simple steps. First, the
    claimant presents medical information sufficient to show that he has an
    asbestos-related disease. In most cases, compliance with the objective
    medical criteria in the bill will be obvious, and the claimant's
    application can be approved by a claims examiner without further
    review. Second, the ARC will gather together the defendants that are
    allegedly responsible for claimant's impairment and will require the
    defendants to engage in mediation to settle the claim. Mediation is
    subject to a strict 60-day time limit, and defendants are penalized if
    they do not make an adequate offer at its close. Finally, if the
    claimant is not satisfied with the defendants' settlement offers in
    mediation, the claimant can choose either to invoke arbitration under
    the auspices of the ARC or to go to court. In either case, S. 758
    eliminates traditional defenses--such as ``state of the art''--allowing
    the adjudicator to focus on a few narrow questions--medical
    eligibility, causation, and damages.\6\ The normal claim should be
    resolved in a few months rather than the years required in the tort
    system today.
    ---------------------------------------------------------------------------
        \6\ In this respect, S. 758 differs from its House counterpart,
    H.R. 1283. In my view, the broad elimination of defenses contained in
    S. 758 is appropriate only for ``core claims,'' and not, for example,
    for claims against distributors or premises owners. The Coalition for
    Asbestos Resolution has acknowledged the need to find a middle ground
    between the narrow limitation of defenses in the House bill and the
    much broader Senate provision. Although the issue is difficult, I am
    confidant that an appropriate solution can be found.
    ---------------------------------------------------------------------------
        In addition, the bill contains a number of provisions, especially
    in the medical review process, that protect claimants' rights and
    ensure that no claimant who suffers impairment from an asbestos-related
    disease will be deemed ineligible. Claimants may appeal adverse
    decisions by claims examiners to a panel of two doctors, with a third
    added to the panel if there is a disagreement. Claimants would also
    have the chance to qualify for compensation before an exceptional
    medical claims panel, composed of a number of qualified specialists,
    even if they failed to meet the standard medical criteria. Denials
    would be subject to judicial review in the federal courts. It is
    important to note that these procedures, which are essential to
    guarantee fairness to claimants, could not be abused by defendants in
    order to delay the proceedings, because the medical review process
    would involve only the claimant and the government's physicians. The
    defendants would not even be named until later.
        The bill achieves critical policy goals. Impaired claimants are
    assured full compensatory damages, now and into the future. Unlike
    workers' compensation and many other administrative programs, claimants
    need not be disabled from employment and are not limited to economic
    damages, but can recover for their pain and suffering as well.
    Compensation goes to impaired victims, while claims by the unimpaired
    are deferred. The efficiencies of expert administrative decision-making
    and of alternative dispute resolution are fully exploited, reducing
    litigation costs. Claimants, however, have meaningful access to courts
    as a check on administrative discretion and to ensure that, over time,
    the awards are ``aligned'' with tort damages as determined by a jury.
    The resources of the defendants are focused where they should be: on
    compensating those who are impaired from exposure to their asbestos-
    containing products, not on awards for the unimpaired, wasteful
    punitive awards, or on litigation costs. Transaction costs are
    controlled by limiting contingent fees to 25 percent. Finally,
    defendant companies bear all the costs of compensating victims and of
    administering the system. No taxpayer funds are used.
        This bill strikes an appropriate balance that benefits almost
    everyone. The most important benefits go to claimants. The impaired
    gain a streamlined and fair system which provides them full
    compensatory damages in months, not years. Moreover, the elimination of
    many defenses and the presumption of correctness accorded to the ARC's
    medical determination would make it much easier for impaired claimants
    to recover. On the other hand, most of the unimpaired also benefit from
    the increased assurance that the funds will be there to compensate them
    if they become impaired by an asbestos-related disease.
        Of course, the bill will benefit defendants too. By focusing
    resources on the sick, reducing transactions costs, and eliminating
    bet-the-company consolidations, the bill reduce the likelihood of
    bankruptcies. This is good news not only to the defendants, but also to
    shareholders, including pension funds, employees and their families,
    and to the communities that depend on these business for their
    prosperity.
        Finally, the public benefits. The burden of asbestos litigation
    will be lifted from the courts, freeing them to dispose of their other
    business more effectively. And asbestos defendants, rather than
    taxpayers, will pay the administrative costs of the new system.
        As in any legislation, there will be some who are better off under
    the status quo. Yet the only losers under this legislation are lawyers
    and those individuals who are not now sick, who will never become sick
    in the future, and who are able to navigate the ``jury lottery'' and
    obtain substantial compensation under the current system.

                 QUESTIONS THAT HAVE BEEN ASKED ABOUT THE BILL
        During the legislative process, several thought-provoking questions
    have been asked about the bill. In my judgment, further reflection
    merely confirms the need for S. 758.
        Doesn't the relative scarcity of trials mean there is no asbestos
    litigation problem? Some maintain that, despite the repeated calls for
    reform by the United States Supreme Court, all is well in the tort
    system. They point to the fact that the vast majority of cases settle--
    according to Mealey's Asbestos Litigation Reporter, only 55 asbestos
    trials went to verdict in 1998. Leaving aside for a moment that one of
    those trials was part of a complex, multi-phase mass consolidation
    involving thousands of plaintiffs, it is misleading to suggest that the
    rarity of trials indicates that the tort system is efficiently handling
    asbestos claims. While asbestos cases settle, they often do so on the
    court house steps, after years of pretrial proceedings, involving
    document requests, depositions, procedural motions, substantive
    motions, and sometimes appeals. In my testimony before the House
    Judiciary Committee, I described how a recent review of asbestos
    litigation dockets in several states continued to show a disturbing
    pattern of long delays, and I explained how the need for expensive
    legal services in our highly technical, highly adversarial legal system
    continued to swallow the lion's share of resources devoted to asbestos
    litigation. Indeed, when the Rand Corporation conducted a series of
    important studies on asbestos litigation in the 1980s--still the most
    comprehensive data on asbestos litigation available--they concluded
    that about two thirds of every dollar spent on asbestos litigation went
    to lawyers and other litigation expenses. At the time of the Rand
    Corporation studies, there were only about 50 asbestos trials a year,
    just as there are today, yet the expense of lawyers' fees and other
    costs was scandalously high. The number of trials has never been an
    accurate indicator of the resources consumed by asbestos tort
    litigation.
        Could the goals of legislation be achieved through private
    settlement plans, like Owens-Corning's National Settlement Plan? Some
    have suggested that settlement arrangements, created by contracts or
    other understandings between defendants and the relatively small number
    of key plaintiffs' asbestos firms, might resolve the asbestos
    litigation crisis without the need for federal legislation.\7\ To be
    sure, these arrangements have been around for some time and been of
    some use in managing a bad system. They do not, however, establish
    anything like an alternative to legislation.
    ---------------------------------------------------------------------------
        \7\ 1t is important to keep clearly in mind that Owens Corning's
    National Settlement Plan has two parts--a series of massive batch, or
    ``inventory'' settlements resolving pending claims and standing offers
    to future claimants, subject to significant restrictions. While the
    settlement of Owens Corning's 235,000 case backlog is dramatic because
    of its size (which, in turn is due to Owens Corning traditionally
    aggressive litigation strategy), it does not provide a means for
    resolving cases in the future. That depends on its ``futures
    agreements'' with the plaintiffs' trial bar.
    ---------------------------------------------------------------------------
        I note at the outset that agreements such as Owens Coming's are not
    new. Other defendants have entered into such agreements throughout the
    1990s. These deals have not prevented the backlog of cases from
    doubling in 8 years; nor have they restrained the rate of new filings.
        The reason for the ineffectiveness of these agreements is not hard
    to find. In the absence of a settlement class action like Amchem, it is
    impossible to bind future claimants. The best defendants can do is to
    enter agreements with plaintiffs' counsel requiring them to recommend
    the settlement to their future clients. Agreements like these raise
    serious ethical questions, which is why Owens Corning has conditioned
    its agreement on receiving a favorable opinion from an ethics expert
    and a judge chosen by the parties. But, even if the ethical problems
    can be overcome, such agreements are highly unstable. They can work in
    a region with a small number of lawyers who are willing to join
    together to limit asbestos plaintiffs' access to legal services (and
    who can prevent other lawyers from poaching on their territory). These
    conditions are rarely met, however. If the economics of asbestos
    litigation makes it profitable for lawyers to bring cases on behalf of
    the unimpaired, counsel who have signed futures agreements will find a
    way to withdraw from them, or the business will be captured by new
    entrants, who have not signed the previous agreement.
        This idea is proven by experience. In connection with the Georgine/
    Amchem settlement, lawyers for plaintiffs signed side letters promising
    to recommend to their future clients a settlement framework which
    required impairment for compensation, promised tolling of the statute
    of limitations for unimpaired claimants and offered alternative dispute
    resolution to sick claimants. The plaintiffs' lawyers promised to
    recommend this framework even if the Georgine/Amchem class action were
    rejected by the courts. Nevertheless, most of the lawyers who signed
    those agreements have either repudiated or ignored them.
        Shouldn't legislation establish a fund, from which claimants are
    compensated, and to which defendants would contribute in accordance
    with an estimate of their liability?\8\ A global fund for asbestos
    claimants is an idea that has been included in previous legislative
    proposals and that I have favored in the past. In theory, a fund could
    reduce transactions costs by eliminating the issue of individual
    liability from each case, and would provide greater security by
    guaranteeing compensation in the event that all defendants responsible
    for a victim's injuries went bankrupt. I have come to believe, however,
    that a fund of this type is completely impractical.
    ---------------------------------------------------------------------------
        \8\ Some have maintained that this is a difference between S. 758
    and Georgine/Amchem. This is not the case. Georgine/Amchem did not
    establish a fund. Instead it established a cap on total liability, and
    further caps on the amounts that could be paid each year--a very
    different thing.
    ---------------------------------------------------------------------------
        First, as a result of OSHA regulation and the drastic reduction of
    asbestos use in the 1980s, practically all asbestos liability arises
    out of conduct that occurred long ago. For this reason, a simple
    assessment or taxation scheme, in which producers pay a tax into a fund
    or (as in workers compensation programs) provide insurance to cover
    their future liabilities, would not work. Rather, the ARC would be
    required to estimate the appropriate share of liability of hundreds of
    potentially responsible parties, participating in many different
    product and geographical markets as manufacturers, wholesalers, or
    distributors. Moreover, many companies will be defendants as a result
    of their ownership of premises, which does not involve product
    liability at all. This would be an endlessly complicated task.
        Second, the ARC would have to address the responsibility of
    liability insurance companies (with their complex patters of
    reinsurance). Insurance contracts cover ``damages for personal injury''
    for which a particular insured company is found liable, and there is no
    guarantee an assessment for a government-created fund would be held to
    fit this definition. It is, of course, unthinkable to shift the burden
    of compensation from insurance companies to policy holders. That would
    not only be unfair to the policy holder but would drastically shrink
    the assets available for compensation of asbestos victims. On the other
    hand, a legislative fiat requiring insurance companies to make payments
    not founded by contract would ensure drawn out--and highly uncertain--
    constitutional litigation.
        Finally, because of the dynamic nature of asbestos litigation, even
    if these obstacles could be overcome, the agency would be required to
    update and adjust the shares formula constantly. This task could prove
    as costly as, or more costly than, case-by-case adjudication.
        It is not an accident that previous administration systems that
    have established a compensation fund which assesses a tax on companies,
    such as the Black Lung Disability Trust Fund, assigned liability to the
    fund only prospectively.\9\ Although I continue to believe that in a
    perfect world a legislative compensation scheme would include a fund to
    avoid case-by-case adjudications of liability and to guarantee
    payments, such a fund is impractical in the real world. I note, in this
    regard, that the legislation preserves joint and several liability,
    which effective ensures full payment by a solvent defendant of an
    insolvent defendant's share even without a fund.
    ---------------------------------------------------------------------------
        \9\ Liability for cases of black lung for past workers was assigned
    to the taxpayers under Part B of the program. No one suggests that
    solution for asbestos liability.
    ---------------------------------------------------------------------------
        Is the system in S. 758 too complicated? The short answer is no.
    Most claimants will file their application, obtain determination of
    eligibility, and quickly settle their claim with the help of a
    mediator. The few claims that are not resolved in this way could be
    tried in a court, of the plaintiffs choice, or in a streamlined
    arbitration process. Nothing could be simpler.
        Obviously, the process would be more complex in a hard case.
    Fairness requires claimants to have a right of appeal to medical
    experts; and claimants who do not meet the standard criteria may have
    to demonstrate to an exceptional claims panel that they have a
    qualifying condition. These rights of appeal are perfectly
    straightforward and are required for fairness.
        Why not make the system wholly voluntary for claimants? S. 758
    places a strong emphasis on voluntariness. Thus, every claimant who
    demonstrates to the ARC that he has an eligible medical condition can
    freely choose whether to obtain an adjudication from an ARC arbitrator
    or to exit to the tort system. Indeed, the fact that ARC would always
    have to compete with the courts for the claimant's ``business'' would
    help ensure the quality of justice dispensed by the ARC. In this
    respect, administrative claims process established by the bill is far
    more voluntary than the private agreements that have been touted as an
    alternative by some of the bill's opponents.
        The one thing that cannot be voluntary, however, is the medical
    criteria. No solution to the asbestos litigation mess is possible
    unless the claims of the unimpaired are deferred. If the medical
    criteria were voluntary, claimants who met the criteria would use the
    cheaper and faster administrative system, while the unimpaired would
    proceed to court. The stream of asbestos cases would be unstaunched,
    and dissipation of resources to pay claimants with no physical
    impairment would continue unabated.

                                   CONCLUSION
        S. 758 recognizes that social resources for the asbestos problem
    are not inexhaustible. The bill reflects a judgment that those
    resources should be spent on delivering full and prompt compensation to
    those who are, and will become, impaired by asbestos disease, and not
    dissipated on payments to those who are not sick and may never become
    sick, on punitive damages that seek retribution for the decisions of
    long-dead executives for conduct that took place decades ago, and on
    extraordinary transactions costs. I am convinced that that is the right
    judgment. The proposed Fairness in Asbestos Compensation Act is a truly
    innovative response to a crisis that has long evaded a solution. It
    deserves your careful consideration.
                                     ______

                        Professor Christopher Edley, Jr.

        Professor Christopher Edley, Jr. has taught at Harvard Law School
    since 1981. His book, Not All Black & White: Affirmative Action, Race
    and American Values (Hill & Wang), grew out of his work as special
    counsel to President Clinton, and director of the White House review of
    affirmative action. He is also the author of a treatise, Administrative
    Law: Rethinking Judicial Control of Bureaucracy (Yale University
    Press). He is founding co-director of The Civil Rights Project, a think
    tank based at Harvard University. Edley's academic work is primarily in
    administrative law, and in the role of law in the policymaking process,
    but has also included civil rights, federalism, budget policy, defense
    department procurement law, public interest litigation, and national
    security law. In June 1997 he was named, in a consulting capacity,
    Senior Advisor to President Clinton for the Race Initiative, and
    consultant to the President's Advisory Board on Racial Reconciliation.
    In May 1999, he was appointed to the United States Commission on Civil
    Rights by Representative Richard Gephardt, House of Representatives
    Democratic Leader.
        Following graduate school, Edley served in the Carter
    Administration as Assistant Director of the White House Domestic Policy
    Staff, with responsibility for welfare reform, social security and
    other antipoverty measures. He joined the Harvard Law School faculty in
    1981, and later served in the Dukakis presidential campaign as National
    Issues Director.
        Prof. Edley served in 1992 as a Senior Advisor on Economic Policy
    for the Clinton-Gore Presidential Transition, and then for two-and-one-
    half years in the Clinton Administration. First, as Associate Director
    for Economics and Government at the White House Office of Management
    and Budget, he oversaw development of the budget and participated in
    most major legislative and policy initiatives for a broad portfolio of
    agencies, including the departments of HUD, Justice, Treasury,
    Transportation, Commerce, and over 40 autonomous agencies, among them
    the Securities & Exchange Commission, the Small Business
    Administration, the Federal Emergency Management Agency, the District
    of Columbia, the EEOC, the U.S. Commission on Civil Rights and the bank
    regulatory agencies.
        Then, in February of 1995, he was asked to delay his return to
    Harvard in order to serve as Special Counsel to the President of the
    United States. In that capacity he led the White House review of
    affirmative action programs and participated in developing the
    President's July 1995 ``Mend it, don't end it'' speech on affirmative
    action. Shortly thereafter, he resumed his professorship at Harvard Law
    School. Among his past activities, Professor Edley served for a time as
    a member of the editorial board of the Washington Post, and as vice
    chairman of the board of the Congressional Black Caucus Foundation.
    Among his current activities: member, Council on Foreign Relations;
    executive committee of the board of People for the American Way;
    Adjunct Scholar at the Urban Institute; member, National Academy of
    Public Administration; member, Board of Testing and Assessment of the
    National Research Council.
        Professor Edley is a 1973 graduate of Swarthmore College, where he
    received high honors in mathematics and economics; and a 1978 honors
    joint-degree graduate-of-the Kennedy School of Government (M.P.P.) and
    of Harvard Law School, where he was an editor of the Harvard Law
    Review. In May 1999, he received an Honorary Degree from Swarthmore
    College.

        Senator Grassley. Mr. Hiatt.

                     STATEMENT OF JONATHAN P. HIATT

        Mr. Hiatt. Thank you, Mr. Chairman and members of the
    subcommittee. The AFL-CIO's member unions represent, we
    believe, over 1 million active and retired workers who have
    been exposed to asbestos. Hundreds and thousands of America's
    working families are living with the deadly consequences of
    this exposure, acquired often by working in defense industries.
    Compounding this tragedy, the legal system has offered lengthy
    delays, followed by limited compensation, compensation that
    often comes too late.
        Nonetheless, the AFL-CIO, as well as the Building and
    Construction Trades Department of the AFL-CIO, are opposed to
    S. 758 because we strongly believe that the approach of this
    bill would not constitute an improvement, but would instead
    make matters even worse. Building and Construction Trades
    Department President Georgine has written a letter to that
    effect which is attached to my written testimony.
        The AFL-CIO, its member unions, and its affiliated State
    federations of labor have been actively involved in efforts
    over the last 10 years to craft solutions to the tragedy of
    asbestos. We have sought to work with responsible elements
    among the asbestos manufacturers, and we continue to be ready
    to engage with the industry.
        There is, we believe, a broad recognition that the plight
    of asbestos victims might be eased by developing alternative
    methods of resolving their claims. Certainly, there is a real
    need for innovative approaches to obtaining justice for
    asbestos victims.
        Let me begin by outlining why the bill before the
    subcommittee today takes us in the wrong direction, and then
    briefly describe what we believe to be a more promising
    approach.
        Any asbestos legislation should meet certain basic fairness
    tests. Among those are, first, that the legislation should
    preserve asbestos victims' access to the courts. Alternative
    dispute mechanisms should be just that, voluntary alternatives
    to the courts, a right to opt out, as you had in the Amchem and
    Fibreboard settlements.
        Second, any alternative claim procedure should be
    structured to lessen the delay and uncertainty facing all
    parties, not increase those matters. Third, any alternative
    claims procedures should be minimally adversarial and minimally
    legalistic. Any provisions that seek to alter the financing of
    asbestos liability should be comprehensive, transparent, and
    should add to victims' recoveries. And a bill should not
    substitute a new set of major transaction costs for the
    existing set.
        S. 758 is at odds with these principles. First, it
    restricts both asbestos victims' access to the courts and their
    substantive rights under State law. It requires asbestos
    victims to file a claim with a new quasi-governmental agency
    and only allows victims to proceed once they have obtained a
    certificate of medical eligibility.
        But having obtained the certificate wouldn't be enough. The
    bill would then impose mandatory mediation and would require
    that the asbestos victim obtain a release from mediation
    certificate. Once a victim reached a court, he or she would be
    barred from bringing class actions, joining parties,
    consolidating actions, or aggregating claims--all standard
    procedures for lessening the costs and time involved in tort
    litigation--unless they obtained the defendant's consent.
        Finally, victims would be barred from seeking punitive
    damages or relief for emotional distress, medical monitoring or
    surveillance, increased risk of cancer or other diseases.
    Ironically, as the bill shuts the courthouse door to asbestos
    victims, it creates a new Federal cause of action for asbestos
    manufacturers to allocate dispute administrative costs. It also
    threatens to transfer a new set of transaction costs, allowing,
    for example, companies to start litigating issues that for
    years have been considered resolved--liability issues, product
    identification issues, and others. Further, the procedures
    provided for are highly adversarial, allowing the companies to
    challenge claimants at virtually every stage.
        There has been much discussion of the relationship of S.
    758 and its predecessors to the Amchem settlement, the so-
    called Georgine settlement. The crucial difference between the
    two is that the Amchem settlement was voluntary. This
    legislation is not. The AFL-CIO affiliates who were involved in
    Amchem settlement negotiations oppose this bill. Rather than
    proceed in the direction laid out here, we believe the
    committee would be better served by examining the approach now
    being worked out between the industry and plaintiffs'
    representatives in Louisiana.
        In that State, representatives of some of the major
    asbestos manufacturers like Owens Illinois, Owens Corning, and
    the attorneys representing a majority of Louisiana claimants
    have worked out a voluntary case resolution system. It defines
    levels of claims. It does include the medical criteria. It sets
    payments for levels of each type of claim. It creates certainty
    for all parties that is absent from these procedures. And
    though it is entirely voluntary, it allows for victims to
    receive certain and immediate payments, and for defendant
    companies to accurately estimate their exposures to claims.
        Finally, the GAF Corporation and its many representatives
    have been expressing their frustration at what they describe to
    be having to pay money to people who are not sick. The
    description of the unimpaired as people who are not sick can
    easily leave the mistaken impression that these people have not
    been injured.
        When GAF talks about the nonsick, they mean workers who
    have been exposed to asbestos and have suffered a medically-
    detectable effect--for example, the presence of pleural
    thickening--but whose bodies don't yet display the outward sign
    of disease such as impaired breathing. But make no mistake,
    these people have, in fact, been damaged by exposure to
    asbestos and there are testing procedures that can and should
    measure that damage.
        We believe that the not yet impaired have been injured and
    should be entitled to some form of compensation under any
    alternative system. In some States such as Louisiana, the
    industry and responsible elements within the plaintiff's bar
    have worked out settlement procedures that provide the
    unimpaired with regular testing and modest compensation, while
    preserving their claims if they have been impaired. In
    contrast, this bill is designed to prevent the unimpaired from
    receiving any compensation of any kind from the asbestos
    industry.
        The subcommittee, in considering whether to create
    exceptions to State tort law, should be mindful of the
    incentives it creates for industrial decisionmakers. I am sure
    the subcommittee would not want to suggest to business
    executives making decisions in the future that if the scale of
    the risk their product poses is truly awe-inspiring, Congress
    will step in in the form of single-industry tort reform to save
    them from the consequences of their actions under State tort
    law.
        Thank you.
        [The prepared statement of Mr. Hiatt follows:]

                    Prepared Statement of Jonathan P. Hiatt

                                    SUMMARY
        The AFL-CIO is opposed to S. 758, the Fairness in Asbestos
    Compensation Act of 1999 as is the Building and Construction Trades
    Department of the AFL-CIO, which has been actively involved over the
    years in representing workers exposed to asbestos. However, the AFL-CIO
    does not believe the current state of asbestos litigation is ideal and
    is committed to working with all interested parties to seek solutions
    to problems of delay and inequities in the treatment of victims of
    asbestos.
        The AFL-CIO believes any asbestos legislation should meet certain
    basic fairness tests. Among these are:

       The legislation should preserve asbestos victims' access to
            the courts--alternative dispute mechanisms should be just
            that--voluntary alternatives to the courts.

       The legislation should preserve asbestos victims' access to
            counsel.

       Any alternative claims procedure should be structured to
            lessen the delay and uncertainty facing all parties.

       Any alternative claims procedure should be minimally
            adversarial and minimally legalistic.

       Any provisions that seek to alter the financing of asbestos
            liabilities should be comprehensive, transparent and should add
            to victims' recoveries.

        The AFL-CIO believes that there is considerable promise in
    voluntary, state-based settlement agreements such as that worked out in
    Louisiana between leading asbestos manufacturers and the plaintiffs'
    bar in that state. These arrangements should be looked at carefully as
    models for any Congressional action.
                                     ______

        Good morning, Chairman Grassley. My name is Jonathan Hiatt, I am
    the General Counsel of the American Federation of Labor and Congress of
    Industrial Organizations. I would like to thank the Subcommittee for
    the opportunity to testify on the issue of federal legislation
    addressing the rights of workers suffering from exposure to asbestos.
        The Subcommittee has before it S. 758, the Fairness in Asbestos
    Compensation Act of 1999. The AFL-CIO is opposed to S. 758, as is the
    Building and Construction Trades Department of the AFL-CIO, which has
    been actively involved over the years in representing workers exposed
    to asbestos. I have attached to my written testimony a copy of a letter
    from Robert Georgine, the President of the Building and Construction
    Trades Department of the AFL-CIO, to Congressman Conyers, expressing
    his opposition to last year's House version of this bill, and a copy of
    a letter from William G. Bernard, President of the International
    Association of Heat & Frost Insulators and Asbestos Workers, to
    Chairman Hyde of the House Judiciary Committee expressing that union's
    opposition to H.R. 1283, the House version of S. 758.
        The AFL-CIO's member unions represent, we believe, over 1 million
    active and retired workers who have been exposed to asbestos. Hundreds
    of thousands of America's working families are living with the deadly
    consequences of this exposure, acquired often while working in defense
    industries. Compounding this tragedy, the legal system has offered
    lengthy delays followed by limited compensation, compensation that
    often comes too late.
        The AFL-CIO, its member unions, and its affiliated state
    federations of labor have been actively involved in efforts over the
    last ten years to craft solutions to the tragedy of asbestos. We have
    sought to work with responsible elements among the asbestos
    manufacturers, and we continue to be ready to engage in dialogue with
    the industry. There is, we believe, a broad recognition that the plight
    of asbestos victims might be eased by developing alternative methods of
    resolving their claims. Currently efforts are underway among the
    parties to asbestos litigation to craft innovative voluntary
    alternative claims procedures at the state level. One such agreement
    has been entered into in Louisiana. These efforts should be allowed to
    develop and be tested.
        The exposure of millions of working Americans to asbestos is one of
    the largest torts in the nation's history. It has led to hundreds of
    thousands of claims, and will lead to more. The judiciary has asked
    several times for Congress to consider how this case load might be
    managed, most recently in last summer's Fibreboard decision.\1\
    However, the need for innovative approaches to obtaining justice for
    asbestos victims must not be the basis for denying those same people
    effective access to our courts. The AFL-CIO is eager to work with the
    Subcommittee to craft such an innovative approach, but we must begin by
    outlining why the bill before the Subcommittee today takes us in the
    wrong direction.
    ---------------------------------------------------------------------------
        \1\ Esteban Ortiz et. al v. Fibreboard Corporation et. al. No. 97-
    1704 (1999). See The Report of the Judicial Conference Ad Hoc Committee
    on Asbestos Litigation (March 1991); Amchem Products, Inc. v. Windsor,
    138 L. Ed. 2d 689, at 716 (1997).
    ---------------------------------------------------------------------------
        Any asbestos legislation should meet certain basic fairness tests.
    Among these are:

       The legislation should preserve asbestos victims' access to
            the courts--alternative dispute mechanisms should be just
            that--voluntary alternatives to the courts. The legislation
            should preserve asbestos victims' access to counsel.

       Any alternative claims procedure should be structured to
            lessen the delay and uncertainty facing all parties.

       Any alternative claims procedure should be minimally
            adversarial and minimally legalistic.

       Any provisions that seek to alter the financing of asbestos
            liabilities should be comprehensive, transparent and should add
            to victims' recoveries.

        I would like to briefly discuss why S. 758 is at odds with each of
    these principles.
        S. 758 dramatically restricts both asbestos victims' access to the
    courts and their substantive rights under state law. It requires
    asbestos victims to file a claim with a new quasi-governmental agency,
    the Asbestos Resolution Corporation (``ARC''), and only allows victims
    to proceed once they have obtained a ``certificate of medical
    eligibility.'' Without this certificate, a victim cannot seek justice
    in the courts. But having obtained a certificate would not be enough.
    S. 758 would then impose mandatory mediation and would require the
    asbestos victim obtain a ``release from mediation'' certificate. Once a
    victim or, more likely in view of the delays these procedures would
    create, the victims' estate reached a court, they would be barred from
    bringing class actions, joining parties, consolidating actions, or
    aggregating claims--all standard procedures for lessening the costs and
    time involved in tort litigation--unless they obtained the defendants'
    consent.
        These procedural barriers significantly diminish asbestos victims
    current rights under state law. But the bill goes further. It would bar
    any recovery unless victims could prove they had the specific medical
    criteria listed in the bill. And finally, victims would be barred from
    seeking punitive damages or relief for emotional distress, medical
    monitoring or surveillance, increased risk of cancer or other diseases.
        Ironically, as the bill shuts the courthouse doors to asbestos
    victims, it creates a new federal cause of action for asbestos
    manufacturers to bring to allocate disputed administrative costs.
        As to the right to counsel, we are not supportive of excessive
    attorneys' fees, but we are all too well aware that unless assured of
    adequate risk-adjusted compensation, attorneys will not represent
    clients who are unable to pay hourly rates. S. 758 limits attorneys'
    fees to levels below those customarily awarded by courts in contingent
    litigation and the bars on consolidating cases effectively act as a
    barrier to economical representation of low-paid workers in asbestos
    cases. This would be appropriate if the bill envisioned a voluntary,
    non-adversarial process that allowed asbestos victims to obtain justice
    with limited assistance from counsel and limited fact finding.
        But S. 758 does just the opposite. The certification procedure is
    substantively rigid and technically demanding, and the mediation and
    arbitration procedures are highly adversarial and procedurally dense,
    with financial penalties for taking certain procedural and substantive
    positions in the process. No one would be well advised to enter into
    such proceedings without counsel.
        To take one example, to get through mandatory mediation, the
    asbestos victim would have to provide a detailed, company-specific
    exposure history, which would be subject to challenge by industry
    counterparties. This procedure, rather than eliminating a major cause
    of litigation expense, adds to it, by requiring asbestos victims to
    prove their exposure histories twice--once in mediation, then again in
    court if mediation fails. Ironically, this procedure appears to make no
    sense if the Act's intention is to address the enormous transaction
    costs of attempting to precisely prove all the sources of each
    individual victim's asbestos exposure.
        Finally, as to financing, to the extent S. 758 acts to limit the
    liability of asbestos manufacturers, it may merely succeed in
    transferring that liability to employers under the workers'
    compensation system, and to workers' health funds. Where the federal
    government is the employer, as is the case in federal shipyards, this
    will result in a direct transfer of financial responsibility from the
    asbestos manufacturers to the federal government. Where the employer is
    a federal contractor, such as in the private shipbuilding industry, the
    transfer will be indirect, but just as real. While there may be a role
    for the federal government in assisting asbestos victims, it should not
    be to use federal dollars to substitute for asbestos manufacturer
    dollars. In addition, S. 758 does not meet the comprehensiveness test
    to the extent that it fails to address issues such as the failure of
    the insurance industry to honor its contractual commitments to the
    asbestos manufacturers.
        There has been much discussion of the relationship of S. 758 and
    its predecessors to the Amchem settlement. The crucial difference
    between the two is that the Amchem settlement was voluntary, this
    legislation is not. The AFL-CIO affiliates who were involved in the
    Amchem settlement negotiations oppose S. 758.
        The AFL-CIO's opposition to S. 758 should not be interpreted to
    mean that we believe the current state of affairs in asbestos
    litigation is optimal. We are deeply concerned about the collusion of
    certain attorneys and asbestos manufacturers in ``screening programs''
    that settle cases for workers exposed to asbestos before they know
    whether they will suffer serious health consequences.
        But rather than proceed in the direction laid out in S. 758, the
    AFL-CIO believes the Committee would be better served by examining the
    approach now being worked out between the industry and plaintiffs'
    representatives in Louisiana. In that state, representatives of some of
    the major asbestos manufacturers like Owens-Illinois and Owens-Corning
    and the attorneys representing a majority of Louisiana claimants have
    worked out a voluntary case resolution system. This system defines
    three levels of claims, and sets payment levels for each type of claim,
    together with provisions allowing for higher level claims if the
    applicants' condition worsens. It creates certainty for all parties
    that is absent from the procedures in S. 758. Though entirely
    voluntary, it allows for victims to receive certain and immediate
    payments, and for defendant companies to accurately estimate their
    exposure to claims.
        We believe a program like this would be the appropriate context for
    limiting attorneys fees, since participants in this program would not
    need extensive adversarial representation or need to engage in time-
    consuming discovery. Similarly, the Louisiana program should do much to
    address the screening abuses, as it provides rights to additional
    compensation to those who have been exposed to asbestos but have not
    yet become ill.
        A copy of the Louisiana agreement is attached to my written
    testimony.
        Any voluntary national program along these lines would have to
    address certain issues that do not arise in a single state-such as the
    variation in award levels from state to state. It would also need to be
    constructed on the understanding that for a voluntary ADR program to
    succeed, it must offer value to both sides in potential litigation--
    value in the form of mutually reduced costs and reduced uncertainty.
    Such a program cannot merely be a vehicle for irresponsible elements in
    the industry to continue to fight core liability issues that have
    really long been settled in the hope of winning incremental victories
    through delay.
        Finally, the GAF Corporation and its many representatives have
    often expressed their frustration at what they describe as ``having to
    pay money to people who are not sick.'' The description of the
    unimpaired as ``people who are not sick'' can easily leave the mistaken
    impression that these people have not been injured. When GAF talks
    about the ``non-sick'' they mean workers who have been exposed to
    asbestos and have suffered a medically detectable effect--for example
    the presence of pleural thickening--but whose bodies do not yet display
    the outward signs of disease such as impaired breathing. But make no
    mistake--these people have in fact been damaged by exposure to asbestos
    and there are testing procedures that can measure that damage.
        The AFL-CIO believes that the ``unimpaired'' have been injured, and
    should be entitled to some form of compensation. In some states,
    including Louisiana, the industry and responsible elements within the
    plaintiff's bar have worked out settlement procedures that provide the
    unimpaired with regular testing and modest compensation, while
    preserving their claims if they become impaired. In contrast, S. 758
    appears designed to prevent the ``unimpaired'' from receiving any
    compensation of any kind from the asbestos industry.
        Before I close, I would like to make two larger systemic points.
    This Subcommittee in considering whether to create exceptions to state
    tort law, should be mindful of the incentives it creates for industrial
    decision makers. I am sure the Subcommittee would not want to suggest
    to business executives making decisions in the future that if the scale
    of the risk their product poses is truly awe inspiring, Congress will
    step in to save them from the consequences of their actions under state
    tort law.
        In addition, the AFL-CIO has always opposed efforts to deny working
    families access to state courts. One such effort was defeated last year
    in the Senate.\2\ S. 758's mandatory
    ---------------------------------------------------------------------------
        \2\ The Products Liability Reform Act of 1997, S. 648. provisions
    are in effect an effort at tort reform one class of plaintiffs at a
    time. We oppose so-called tort reform both in aggregate and in bite
    sized pieces.
    ---------------------------------------------------------------------------
        In conclusion, the AFL-CIO and its affiliates are ready to work
    with all concerned parties, and especially with this Subcommittee, to
    seek creative solutions in this area that are respectful of the rights
    of asbestos victims. We thank you for the opportunity to testify here
    today.
                                     ______

           Building and Construction Trades Department,
                                  American Federation of Labor,
                                       Washington, DC, August 10, 1998.
    Hon. John Conyers, Jr.,
    House of Representatives,
    Washington, DC.
        Dear Congressman Conyers: Your statement in the Congressional
    Record of June 25, 1998 agreeing to cosponsor H.R. 3905, the ``Fairness
    in Asbestos Compensation Act of 1998'', has been brought to my
    attention. For the reasons set forth in the enclosed list of
    ``Objections to H.R. 3905'', the Building and Construction Trades
    Department, AFL-CIO, strongly opposes this bill.
        It is apparent to me that erroneous information was provided to you
    concerning our position on the issues addressed by H.R. 3905 and its
    relationship to the settlement agreement reviewed by the Supreme Court
    in Amchem Products. Inc. v. Windsor. The settlement agreement in the
    Windsor case was voluntarily negotiated by several members of the
    plaintiffs' trial bar who over the years have represented thousands of
    building trades union members. The agreement applied only to those
    members who wished to be covered by its terms. Many members made the
    decision to be included in the covered class, and by lending my support
    to the settlement agreement I felt I was supporting their decisions
    while, at the same time, not interfering with the decisions of members
    who decided not to be included and, thereby, to retain all their rights
    in the tort system. Many members also decided not to be included. I did
    not directly participate in the negotiation of that settlement
    agreement, and to the best of my recollection, organized labor became
    involved only after the main agreement was negotiated between
    plaintiffs' attorneys and attorneys for the CCR companies. This
    involvement resulted in certain amendments to the agreement which
    provided organized labor with a role in the implementation and
    monitoring of the agreement.
        H.R. 3905 is a completely different matter. In the first place, it
    is, obviously, a piece of federal legislation rather than the
    settlement of a law suit, and it addresses certain issues, such as
    particularized medical criteria, which, in my view, should not be
    addressed by federal legislation. Second, H.R. 3905 is not voluntary.
    It would apply to every occupational asbestos victim in the future. It
    would even apply to those victims who already have filed lawsuits which
    are pending in the federal and state courts. Third, H.R. 3905
    substantially curtails victim' tort rights and remedies. Fourth, it
    requires victims who wish to use the tort system to pursue first an
    administrative process which is lengthy, costly, adversarial,
    cumbersome and technical. Our objections in these regards are set forth
    in the enclosure.
        I do not disagree that asbestos victims deserve, at their option,
    an alternative to the tort system because the tort system can often be
    lengthy, costly, adversarial, cumbersome and technical. However, I also
    know that many thousands of asbestos victims have received justice by
    reason of this tort system, and that many more victims will do so in
    the future.
        The Building and Construction Trades Department is prepared, as
    always, to discuss with any well-meaning person, organization, or group
    viable voluntary alternatives to the tort system for asbestos victims
    which will promote their interests in securing timely and adequate
    compensation for their injuries.
        With best wishes, I am.
                Sincerely,
                                            Robert A. Georgine,
                                                             President.
                                     ______

      Objections to H.R. 3905 (``Fairness in Asbestos Compensation Act of
                                    1998'')

        1. The bill eliminates a claimant's right to sue in the tort system
    unless the claimant first files a claim with the Asbestos Resolution
    Corporation (ARC), submits information to ARC, and awaits a
    determination by ARC on medical eligibility.
        2. The bill eliminates a claimant's right to sue in the tort system
    unless the claimant is successful in having ARC issue a ``certificate
    of medical eligibility''. This is true even with regard to pending
    civil actions which have not gone to trial prior to the ``operational
    date'' of the Act (the date on which ARC certifies that it is
    operational or the first business day following the seventh month after
    the date of enactment whichever comes first).
        3. The bill legislates specific and detailed medical criteria to
    govern ARC's determination.
        4. Even if a claimant is issued a certificate of medical
    eligibility, the claimant cannot sue in the tort system unless he first
    goes through a lengthy mediation procedure, and is successful in having
    ARC issue a ``release from mediation''.
        5. In the mediation procedure, the claimant is required to provide
    a detailed and company-specific exposure history. This defeats the
    purpose of having an alternative, expeditious compensation system which
    compensates claimants with asbestos-related diseases, regardless of
    their ability to identify the manufacturer of the asbestos to which
    they were exposed, or to recall the particulars about each and every
    job at which they were exposed.
        6. The mediation and voluntary arbitration procedures established
    by the bill are adversarial, cumbersome and extremely technical. This
    will make the process costly and time consuming and will require every
    claimant to be represented by an attorney. It would be preferable to
    make such an optional alternative process non-adversarial and
    streamlined by having companies pay monies into the facility on the
    basis of some formula (perhaps size and ability to pay and/or the
    formula set forth in the bill governing the assessment of
    administrative costs) for distribution to the claimants. This way, the
    companies would not participate in the proceedings, the proceedings
    would not be adversarial, cumbersome, or technical, and proof of
    particularized exposure histories would be unnecessary. Also, perhaps
    the claims facility can have on staff an independent group of attorneys
    who are available at the option of claimants to assist claimants at no
    cost or a minimal cost.
        7. The bill details each and every procedure in the administrative
    claims process. It would be better to leave the function of
    establishing rules of procedure to the administrators of the process.
        8. The bill allows companies to join forces in the claims process
    but bars consolidation of the claims of a group of claimants.
        9. Under the medical criteria established in the bill, exposures
    below OSHA PELs which were in effect in prior times but were later
    discredited by new scientific knowledge are disregarded in whole or in
    part.
        10. Under the medical criteria for lung cancer established in the
    bill, the installation, repair or removal of asbestos products in a
    shipyard during World War II is given more credit than the
    installation, repair or removal of asbestos products on a construction
    project.
        11. The bill establishes a new civil action in the courts of the
    United States to handle disputes between companies, or between
    companies and ARC, regarding the assessment of administrative costs.
    These new civil actions are likely to consume resources which should be
    applied to the purpose of the claims process (i.e. compensation to
    claimants).
        12. To succeed in their civil actions, claimants are required to
    prove (a second time) the existence of the medical criteria set forth
    in the bill.
        13. Even in pending civil actions that have gone to trial, but have
    not resulted in final non-appealable judgments, claimants are required
    to prove the existence of the legislated medical criteria.
        14. Courts entertaining civil actions by claimants are precluded
    from utilizing well-established procedures to expedite the handling of
    multiple-claimant cases, including class actions, joinder of parties,
    consolidation of actions, aggregation of claims, and extrapolations.
        15. Courts are restricted in providing damages or other relief to
    claimants for emotional distress, or any other form of mental or
    emotional harm, or for medical monitoring or surveillance.
        16. Courts are precluded from providing damages or other relief to
    claimants based on valid state law claims for increased risk of cancer
    or other diseases.
        17. Courts are precluded from providing punitive damages to
    claimants in appropriate cases.
        18. The doctrine of joint and several liability may be adversely
    affected by the Bill.
                                     ______

                   International Association of Heat &
                   Frost Insulators & Asbestos Workers,
                               Office of the General President,
                                          Washington, DC, May 20, 1999.
    The Hon. Henry Hyde, Chairman,
    House Judiciary Committee,
    Rayburn House Office Building, Washington, DC.
        Dear Chairman Hyde: The International Association of Heat and Frost
    Insulators and Asbestos Workers strongly opposes H.R. 1283, the
    ``Fairness in Asbestos Compensation Act of 1999 for the following
    reasons:

        1. The bill eliminates a claimant's right to sue in the tort system
    unless the claimant first files a claim with the AsbestosResolution
    Corporation (ARC), submits information to ARC, and awaits a
    determination by ARC on medical eligibility.
        2. The bill eliminates a claimant's right to sue in the tort system
    unless the claimant is successful in having ARC issue a``certificate of
    medical eligibility''. This is true even with regard to pending civil
    actions which have not gone to trial prior to the ``operational, date''
    of the Act.
        3. The bill legislates specific and detailed medical criteria to
    govern ARCs determination.
        4. Even if a claimant is issued a certificate of medical
    eligibility, the claimant cannot sue in the tort system unless he first
    goes through a lengthy mediation procedure, and is successful in having
    ARC issue a ``release from mediation''.
        5. In the mediation procedure, the claimant is required to provide
    a detailed and company-specific exposure history. This defeats the
    purpose of having an alternative, expeditious compensation system which
    compensates claimants with asbestos-related diseases, regardless of
    their ability to identify the manufacturer of the asbestos to which
    they were exposed, or to recall the particulars about each and every
    job at which they were exposed.
        6. The mediation and voluntary arbitration procedures established
    by the bill are adversarial, cumbersome and extremely technical. This
    will make the process costly and time consuming and will require every
    claimant to be represented by an attorney. It would be preferable to
    make the process non-adversarial and streamlined by having companies
    pay monies into the facility on the basis of some formula (perhaps size
    and ability to pay and/or the formula set forth in the bill governing
    the assessment of administrative costs) for distribution to the
    claimants. This way, the companies would not participate in the
    proceedings, the proceedings would not be adversarial cumbersome, or
    technical, and proof of particularized exposure histories would be
    unnecessary. Also, perhaps the claims facility can have on staff an
    independent group of attorneys who are available at the option of
    claimants to assist claimants at no cost or a minimal cost.
        7. The bill details each and every procedure in the administrative
    claim process. It would be better to leave the function of establishing
    rules of procedure to the administrators of the process.
        8. S. The bill allows companies to join forces in the claims
    process but bars consolidation of the claims of a group of claimants.
        9. Under the medical criteria established in the bill, exposures
    below OSHA PELs which were in effect in prior times but were later
    discredited by new scientific knowledge are disregarded in whole or in
    part.
        10. Under the medical criteria for lung cancer established in the
    bill, the installation, repair or removal of asbestos products in a
    shipyard during World War II is given more credit than the
    installation, repair or removal of asbestos on a construction project.
        11. The bill establishes a new civil action in the courts of the
    United States to handle disputes between companies, or between
    companies and ARC, regarding the assessment of administrative costs.
    These new civil actions are likely to consume resources which should be
    applied to the compensation of claimants.
        12. To succeed in their civil actions, claimants are required to
    prove (a second time) the existence of the medical criteria set forth
    in the bill.
        13. Even in pending civil actions that have gone to trial, but have
    not resulted in final non-appealable judgments, claimants are required
    to prove the existence of the legislated criteria.
        14. Courts entertaining civil actions by claimants are precluded
    from utilizing well-established procedures to expedite the handling of
    multiple-claimant cases, including class actions, joinder of parties,
    consolidation of actions, aggregation of claims, and extrapolations.
        15. Courts are restricted in providing damages or other relief to
    claimants for emotional distress, or any other form of mental or
    emotional harm, or for medical monitoring or surveillance.
        16. Courts are precluded from providing damages or other relief to
    claimants based on valid state law claims for increased risk of cancer
    or other diseases.
        17. Courts are precluded from providing punitive damages to
    claimants in appropriate cases.
        Asbestos victims deserve, at their option, an alternative to the
    tort system because the tort system can often be lengthy, costly,
    adversarial, cumbersome and technical. However, it is also true that
    many thousands of asbestos victims have received justice by reason of
    this tort system, and that many more victims will do so in the future.
        Our Union is prepared, as always, to discuss with any well-meaning
    person, organization, or group viable voluntary alternatives to the
    tort system for asbestos victims which will promote their interests in
    securing timely and adequate compensation for their injuries.
        With kind regards, I am
                Sincerely yours,
                                            William G. Bernard,
                                                     General President.
        Letter to go to all members of the Senate and House Judiciary
    Committees and sponsors of the bills as follows:

    Senate Sponsors:

    Ashcroft  Judiciary                 Grassley  Judiciary
    Hatch  Judiciary                    Torricelli  Judiciary
    Dodd                                Robert Smith, NH  Judiciary
    Sessions  Judiciary                 Schumer  Judiciary

    Lieberman
    House Sponsors:

    Hyde  Judiciary                     Bonilla
    James Moran, VA                     Norwood
    Richard Armey                       Folley
    Tom DeLay                           Deal
    James Sensenbrenner  Judiciary      Calvert
    Gekas  Judiciary                    Brady, TX (no Bradley of TX)
    Dan Burton, IN                      Weller
    Manzuloo                            Cannon
    Stenholm                            J.C.Watts, OK
    Hostettler
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        Senator Grassley. Mr. Heyman.

                     STATEMENT OF SAMUEL J. HEYMAN

        Mr. Heyman. Good morning. GAF's involvement as an asbestos
    defendant is typical of the story of hundreds of companies who
    find themselves enmeshed today in this asbestos nightmare.
    GAF's only connection to the production of asbestos insulation
    occurred when it acquired in 1967 Ruberoid, which included at
    the time a small noncore business which produced an asbestos
    insulation product, Calcilite.
        In point of fact, the U.S. Navy had asked Ruberoid during
    World War II to develop this product for use as an insulation
    material in its ships. After the U.S. Public Health Service
    concluded that Calcilite was safe, Ruberoid began to supply the
    product to our country's Naval shipyards pursuant to
    requisition in accordance with Government specifications, and a
    not insubstantial portion of GAF's Calcilite sales were made to
    the U.S. Government.
        After publication in the late 1960's of medical studies
    concerning the dangers of asbestos, GAF designed an asbestos-
    free product, but the Navy rejected it. Whereupon, GAF closed
    its Calcilite operation and has not produced these products for
    some 30 years now.
        Although there is no one with our company today who had
    responsibility for the production of this product, we have
    taken responsibility for what went before. We regret more than
    I can say the harm caused, and we are committed to fair, full
    and prompt compensation for the sick.
        Since the 1970's, GAF has paid out as a result of the
    Ruberoid acquisition whose asbestos insulation business has
    profits over a 30-year period, 3 years under the GAF ownership
    and 27 years under the Ruberoid ownership, no more than $1
    million and sales of only $30 million--we have paid out now
    more than $1.3 billion in asbestos claims and expenses, a
    substantial portion of which has gone to legal fees and people
    who are not sick.
        We come here to Congress today not in search of a bailout
    or to avoid responsibility, but because our experience has
    underscored that asbestos litigation has defied all other
    solutions. One might logically ask, why do we settle the
    nonsick cases. And I would cite for you an example which is
    typical of what we face.
        We currently have some 5,000 cases which have been
    consolidated in one local courtroom. By way of background, you
    should know that GAF and other co-defendants, after having
    attempted to settle, went to trial on 12 other cases in this
    same courtroom over a year ago. And the 12 plaintiffs, most of
    whom were not sick, received a jury award of $48 million. Now,
    emboldened by that result, asbestos lawyers are looking for $1
    billion to settle the remaining cases.
        Let's assume, which I think is not far from the fact, that
    of the 5,000 cases, 1,000 involve sick claimants, while the
    balance are not sick. Asbestos lawyers take the position that
    if the defendants are not willing to settle the nonsick cases,
    they will take the sick cases to trial. And your lawyer reports
    that there is a high probability of the jury awarding punishing
    compensatory awards to the nonsick, and even the possibility of
    a punitive damage award, which could bankrupt any defendant.
    What would you do? Would you pay legalized blackmail and settle
    the nonsick cases, or would you bet the company and the jobs
    and careers of your more than 3,400 employees around the
    country on what happens in a courtroom in any one of dozens of
    hostile jurisdictions around our country? Let me just share
    with you that whatever the choice may be, given the real world
    of asbestos litigation today, it will be a wrong one.
        The coalition has in recent months published in the media a
    series of reports which have outlined in some detail a pattern
    of the most serious asbestos lawyer misconduct, which
    incidentally have gone unrebutted to date, often at the expense
    of their own clients. We have done this in order to provide a
    sense of what happens in the asbestos world today and why
    asbestos victims and defendants can no longer afford the status
    quo.
        I should like to thank Chairman Grassley and ranking member
    Torricelli for inviting me to testify here this morning.
    Finally, there is a reason why this legislation has been
    gaining extraordinary momentum in the Congress and bipartisan
    support. We have an asbestos litigation system today where no
    one is being accorded due process. This is not a Republican,
    Democratic, liberal, or conservative issue. Rather, it is a
    question of elemental fairness.
        And there is a clear policy decision to be made. At the end
    of the day, do we want our duly-elected Congress to resolve
    this critical national problem or should we leave it to a
    handful of asbestos lawyers to continue to bend the system to
    their own ends?
        Thank you.
        Senator Grassley. Thank you, Mr. Heyman.
        [The prepared statement of Mr. Heyman follows:]

                     Prepared Statement of Samuel J. Heyman

                                    SUMMARY
        GAF Corporation's involvement as an asbestos defendant is typical
    of the story of the hundreds of companies, ranging from the largest
    Fortune 500 corporations to small, local businesses, who today find
    themselves enmeshed in the asbestos litigation crisis. GAF's only
    connection to the production of asbestos insulation occurred when it
    acquired, in 1967, a company engaged primarily in the manufacture of
    roofing materials but which also operated a small non-core business
    which produced an asbestos insulation product, Calcilite, a product GAF
    ceased manufacturing entirely several years after this acquisition.
        Although this asbestos insulation business had profits, we would
    estimate, of no more than $1 million aggregate over the 30 year history
    of the business, GAF has now paid out over $1.3 billion in claims and
    expenses, a substantial portion of which has gone to people who are not
    sick. Although there is no one left with our Company today who had
    responsibility for the acquisition of the business or the manufacturing
    or marketing of the product, you should know that we take full
    responsibility for what went before at GAF. We regret, more than I can
    say, the harm these products have caused thousands of Americans, and we
    are absolutely committed to making sure that anyone who may become
    genuinely sick as a result of our products will be fairly, fully, and
    promptly compensated.
        We come here today not in search of a bailout or to avoid
    responsibility for any harm our products have caused. Nor do we seek
    legislation which would impose caps on our liability or provide the
    right to continue to manufacture and market a dangerous product.
    Rather, our former industry has taken the position that it accepts its
    responsibility to fully, fairly, and promptly compensate those who are
    sick and were exposed to its products.
        Our extensive experience in litigating, and dealing with, these
    hundreds of thousands of claims over the past quarter century has now
    clearly revealed that the only solution to this crisis lies in
    congressional legislation.
        Finally, while our focus is primarily on the critical importance of
    reform, for sick claimants both now and in the future, we make no bones
    about the fact that this legislation will also be helpful for the many
    hundreds of companies caught up in this asbestos litigation mess.
    Companies currently facing asbestos litigation are estimated to employ
    more than 5 million Americans, have payrolls in the billions of
    dollars, and we would hope that the interests of defendants, their
    employees, shareholders, the communities who depend on them, and
    elemental fairness are worthy of Congress' consideration as well.
                                     ______

        Good morning. My name is Samuel Heyman. I'm Chairman and Chief
    Executive Officer of GAF.
        GAF's involvement as an asbestos defendant is typical of the story
    of hundreds of companies, who today find themselves enmeshed in this
    asbestos nightmare. GAF's only connection to the production of asbestos
    insulation occurred when it acquired, in 1967, Ruberoid, which included
    at the time a small, marginally profitable, non-core business, whose
    sales were no more than 1 percent of the Company's total sales or
    approximately $1 million per annum, which produced an asbestos
    insulation product, Calcilite.
        In point of fact, the United States Navy had asked Ruberoid during
    World War II to develop this product for use as an insulation material
    in its ships. After the United States Public Health Service concluded
    that Calcilite was safe, Ruberoid began to supply the product to our
    naval shipyards around the country, pursuant to requisition in
    accordance with government specifications, and a not insubstantial
    portion of GAF's total Calcilite sales over the years were made to the
    United States Government.
        Shortly after the Ruberoid acquisition, GAF designed an asbestos-
    free product, but the Navy rejected it. And finally, after an important
    medical study by Dr. Selikoff was published in the late 60's outlining
    the dangers of asbestos, GAF promptly closed its asbestos insulation
    operation and has never produced asbestos insulation products again.
        I do not recount this background to justify in any way our
    Company's manufacture of asbestos products. For although GAF has not
    produced these asbestos products for almost 30 years, and there is no
    one left with our Company today who had responsibility for the
    acquisition of the business, or the production or marketing of the
    product, you should know that we have taken full responsibility for
    what went before at GAF. We regret, more than I can say, the harm these
    products have caused thousands of Americans, and we are absolutely
    committed to making sure than anyone who may become genuinely sick as a
    result of our products will be fairly, fully, and promptly compensated.
        Since the late 1970's, when asbestos litigation as we know it today
    began, GAF has paid out, as a result of the Ruberoid acquisition, whose
    asbestos insulation business had profits over a 30 year period of no
    more, we would estimate, than an aggregate total of $1 million, and
    sales of only approximately $30 million during the same period, more
    than $1.3 billion in asbestos claims and expenses, a substantial
    portion of which has gone to people who are not sick and will never
    become sick. Despite both GAF and the industry having settled almost
    300,000 cases, more than 200,000 asbestos cases remain pending
    nationwide, 100,000 of which involve claims against GAF, with new
    claims being filed now at the rate of 50,000 per annum--with more to
    come and no end in sight.
        We are here today not in search of a bailout in any way, shape or
    form. Nor do we seek legislation that would impose caps on our
    liability or provide the right to continue to manufacture and market a
    dangerous product, like another industry sought to do here in the
    Senate last year. Rather, asbestos co-defendants have taken the
    consistent, simple, straightforward position that they accept their
    responsibility to fully, fairly, and promptly compensate those who are
    sick and were exposed to their products, with the proviso that those
    who are not sick be required to wait until they become sick. And we
    come here to the Senate because our experience over the last 20 years
    has underscored that asbestos litigation has defied all other solution.
        In this connection, we have tried, on the one hand, resisting the
    non-sick claims through litigation and, at other times, aggressively
    settling these claims in an attempt to substantially reduce the backlog
    of cases against our Company--each of which strategies I might add have
    proven disastrous and have only encouraged the further escalation of
    non-sick claims.
        We have been asked by members of the Senate over the last year--why
    do we settle the non-sick cases? Why don't we just draw aline in the
    sand and refuse to settle these cases? And in response, I would cite
    for you a concrete example of a current situation we face, which by the
    way is not unlike others we have encountered before, and ask you all to
    think what you would do if you were a CEO.
        We currently have some 5,000 cases, which have been consolidated in
    one state courtroom in Mississippi. By way of background, you should
    know that, after attempting unsuccessfully to settle with the sick
    plaintiffs, GAF and other co-defendants went to trial on 12 other cases
    in this same courtroom only a year ago, and the 12 plaintiffs, a number
    of whom were not sick, received a jury award of $48 million. And now,
    emboldened by that result, the asbestos lawyers are looking for a
    billion dollars to settle the remaining cases. And now let's assume--
    and I do not know this for a fact, but it can't be far from the truth--
    that of the 5,000 cases, no more than 2,500 involve sick claimants,
    while at least 2,500, and probably more, are unimpaired.
        In a recent effort to settle the cases on the courthouse steps
    before trial, the asbestos lawyers take the position, consistent with
    others they have taken in similar situations around the country, that
    if the defendants are not willing to settle the 2,500 non-sick cases,
    they will insist on taking to trial the 2,500 sick cases. And your
    lawyer relates, let's suppose, that there is a high probability of the
    jury awarding punishing, compensatory awards to the non-impaired, as
    well as the sick, and even the possibility of a punitive damage award
    which could bankrupt any defendant. And given that situation, what
    would you do? Would you settle the non-meritorious cases, which are
    inherently worth nothing, or would you ``bet the company'', and the
    jobs and careers of your more than 3,400 employees around the country,
    on what happens in one of thousands of potentially hostile
    jurisdictions across the country.
        Let me just tell you that whatever the answer of a CEO in this
    situation is, it will be wrong--because of the simple fact that both
    choices are simply intolerable. All of which underscores that short of
    legislation, asbestos litigation defies all conventional solution.
        As you may know, the Coalition for Asbestos Resolution has
    published, in Roll Call and other publications, 10 well researched and
    documented pieces. We have disclosed in these articles a pattern of the
    most serious misconduct on the part of asbestos lawyers (which
    incidentally has gone unrebutted to date), often at the expense of even
    their own clients, in order to provide some sense of what happens in
    the asbestos world today and why neither plaintiffs nor defendants can
    any longer afford the status quo.
        First, and undoubtedly most important to this Committee, because
    this legislation is primarily a victims' rights bill, is that these
    asbestos lawyers regularly exploit their own clients in violation of
    their professional and ethical obligations, including:

      (1) Charging their own clients exorbitant contingent legal fees
        (usually 40 percent of the recovery) in cases where there is little
        or no contingency or risk of non-recovery. This has resulted in
        effective hourly rates of sometimes more than $10,000 per hour,
        thereby contributing to a system today where more than 60 cents of
        every dollar spent on asbestos litigation is consumed by legal fees
        and transaction costs.

      (2) Holding their own genuinely sick clients ``hostage'' without
        their knowledge or consent, often for years, by refusing to settle
        their cases (resulting in many sick claimants dying before
        receiving compensation) while assembling huge inventories of non-
        sick claimants, as in the Mississippi situation to which I have
        previously referred.

      (3) Arbitrary allocation by asbestos lawyers of aggregate settlement
        amounts among their clients. These allocations, carried out without
        oversight or review, are made often with little regard to
        individual conditions or damages, creating a situation rife with
        cronyism, favoritism, and exploitation.

      (4) Since the pool of resources available to claimants is limited,
        asbestos lawyer schemes to extort huge settlements for non-sick
        claimants constitute an enormous diversion of resources from those
        claimants who are sick, or may become sick in the future, thereby
        jeopardizing compensation for the truly deserving.

        Finally, while our focus is primarily on the critical importance of
    reform for sick claimants, we would hope that the interests of these
    businesses, their employees, shareholders, the communities who depend
    on them, and elemental fairness are worthy of the Senate's
    consideration as well.

        Senator Grassley. Now, Ms. Kerrigan.

                      STATEMENT OF KAREN KERRIGAN

        Ms. Kerrigan. Good morning, Chairman Grassley and other
    members of the subcommittee. On behalf of the Small Business
    Survival Committee and its more than 50,000 members nationwide,
    let me express my appreciation for giving our organization, and
    more significantly small business, a voice and an opportunity
    to testify before this subcommittee today on the Fairness in
    Asbestos Compensation Act of 1999.
        SBSC is a national nonprofit, nonpartisan small business
    advocacy organization dedicated to advancing policies and
    legislation that encourage entrepreneurship, economic
    opportunity, job creation and innovation. Again, my name is
    Karen Kerrigan and I chair SBSC.
        Twice since 1997, in Amchem Products v. Windsor and Ortiz
    v. Fibreboard Corp., the Supreme Court has called for national
    legislation to address the asbestos litigation quagmire.
    Twenty-five companies have gone bankrupt or are in
    reorganization as a result of the massive caseload, leaving
    defendants with an increasingly tenuous relationship to
    asbestos holding the bag.
        Pressure to maintain a full and steady stream of money for
    what appears to be an unending flow of asbestos claims and
    lawsuits will inevitably force plaintiffs' attorneys to cast a
    wider net in an effort to identify additional companies to
    support the exorbitant financial requirements of current and
    future tort claims.
        It is only a matter of time that the asbestos litigation
    crisis is directly extended to America's small business sector.
    Already in some jurisdictions, automobile distributorships and
    repair shops, construction contractors, and other types of
    small businesses are routinely named in asbestos cases. Let me
    also add that many small businesses and their economic health
    are directly tied to the health of larger defendants whose
    bankruptcy would seriously disrupt small business operations,
    as well as their workforce.
        The perpetuation of this serious legal problem will lead to
    the snaring of many more small businesses into a system that
    has been deftly manipulated and abused, which has led to an
    overburdening of the court system, unacceptably high
    transaction costs, and most unfortunately nonsick claimants
    benefiting at the expense of the truly sick.
        Our membership consists of very hard-working men and women,
    family-owned businesses and the like who generate jobs in their
    communities and provide a solid financial and tax base in those
    communities. I fail to understand how potentially bankrupting
    these businesses equates to justice. Should the small hardware
    shop owner be forced into bankruptcy because they unknowingly
    sold a small amount of an asbestos-containing product 25 or 30
    years ago? Again, is bankrupting these small firms and the loss
    of jobs for their employees really an act of justice?
        The members of my organization, as is the case with most
    small businesses throughout the country, do not have the luxury
    of counsel at the ready, nor can many of them afford the
    insurance coverage that would be necessary to fend off an
    asbestos lawsuit. Similar to tactics used by the asbestos trial
    lawyers where the court system is overwhelmed to force case
    consolidation and then settlement, small businesses too are
    forced into a corner. They simply do not have the resources to
    fight costly and protracted legal battles.
        For this reason, we strongly support S. 758. This
    legislative remedy, whose concept has been strongly supported
    and suggested by the U.S. Supreme Court, represents a fair and
    efficient claim and recovery program, a system in which the
    true victims of asbestos can receive speedy compensation, the
    claims of people who are not sick can be deferred, courts can
    be unburdened, and defendant companies can remain solvent long
    enough to pay individuals who may become sick in the future.
        Again, no less than the Supreme Court of the United States
    has expressed strong support for the creation of a national
    asbestos claims facility to solve the asbestos litigation
    crisis. The ``elephantine mass''--I guess our two favorite
    words at the committee hearing today--as described by the
    Supreme Court, needs to get out of the courts. People who are
    victims need to be addressed on an individual basis for justice
    to be properly administered and served.
        Unless this solution is enacted, I have no doubt that more
    and more small businesses will become targets and unwilling
    players in the currently dysfunctional system. Currently, 60
    cents of every dollar spent on asbestos litigation goes toward
    attorneys' fees and transaction costs instead of victims.
    Moreover, many victims wait years to receive settlements that
    have little or no relation to their specific illness.
        The Fairness in Asbestos Compensation Act is an effective
    approach to address the current crisis. The bill creates a win/
    win situation. It is provictim, procommon sense, good for the
    U.S. Court System, and a sound approach for American business,
    both small and large.
        I have been working with dozens of associations
    representing hundreds of thousands of businesses nationwide to
    increase the visibility of this issue. The momentum is on our
    side, and I urge the committee to act quickly on this issue.
        Thank you very much.
        Senator Grassley. Thank you, Ms. Kerrigan.
        [The prepared statement of Ms. Kerrigan follows:]

                      Prepared Statement of Karen Kerrigan

                                    SUMMARY
        Mr. Chairman and members of the committee, I am Karen Kerrigan,
    Chairman of the Small Business Survival Committee (SBSC). On behalf of
    SBSC and its more than 50,000 small business members across the nation,
    I appreciate this opportunity to testify before the Senate Judiciary
    Subcommittee on Administrative Oversight and the Courts regarding the
    Fairness in Asbestos Compensation Act of 1999 (S. 758). SBSC is a
    national nonpartisan small business advocacy organization dedicated to
    advancing policies and legislation that encourages entrepreneurship,
    economic opportunity, job-creation and innovation.
        Twice since 1997--in Amchem Products v. Windsor and Ortiz v.
    Fibreboard Corp.--the Supreme Court has called for national legislation
    to address the asbestos litigation quagmire. Moreover Amchem Justice
    Breyer observed that over 50 percent of all asbestos claims involved
    pleural plaques which do not affect a person's breathing in any way.
    Although tens of millions of Americans have been exposed to asbestos,
    medical experts have testified before Congress that most will not
    contract an asbestos-related ailment. Despite this fact, tens of
    thousands will seek to recover damages this year even though they are
    not sick. Twenty-five companies have already gone bankrupt or are in
    reorganization as a result of the massive caseload, leaving defendants
    with an increasingly tenuous relationship to asbestos holding the bag.
        For this reason, the Small Business Survival Committee strongly
    supports S. 758, the Fairness in Asbestos Compensation Act of 1999. Our
    membership consists of hard-working men and women who generate jobs in
    their communities. More than 90 percent of our members have less than
    50 employees. Why should they wake up each morning fearing thousands of
    meritless lawsuits filed against them? Should mom-and-pop hardware
    stores in the heartland be forced into bankruptcy because they sold a
    small amount of an asbestos-containing product twenty-five years ago?
    Is bankruptcy really justice? Already in some jurisdictions automobile
    distributorships and repair shops, construction contractors, and other
    small businesses are routinely named in asbestos cases. The handwriting
    is on the wall for small businesses everywhere. The U.S. legal system
    should not be abused and manipulated in such a way that allows for the
    perpetuation and potential deepening of this legal quagmire.

                             BACKGROUND INFORMATION
        SBSC believes there is a better way to resolve these cases--a way
    in which the true victims of asbestos can receive compensation; the
    claims of people who are not sick can be deferred; courts can be
    unburdened and defendant companies can remain solvent long enough to
    pay individuals who become sick in the future. The members of my
    organization typically do not have an army of lawyers at the ready, nor
    do they have the insurance coverage necessary to fend off thousands
    upon thousands of asbestos lawsuits. Yet they know that the asbestos
    lawyers will not stop until they can no longer find anyone to sue.
        The Committee does not need to take my word for it, however, nor
    the words of the defendant companies. They need only look to the
    Supreme Court, where on two occasions, strong support was expressed for
    the creation of a national asbestos claims facility to solve the
    asbestos litigation crisis. In 1997's decision on Amchem v. Windsor,
    Justice Ginsburg has stated that ``the argument is sensibly made that a
    nationwide administrative claims processing regime would provide the
    most secure, fair, and efficient means of compensating victims of
    asbestos exposure.'' In the recent Ortiz v. Fibreboard ruling, the
    justices went so far as to refer to asbestos litigation as an
    ``elephantine mass'' which ``defies customary judicial administration
    and calls for national legislation.''
        The drain on the court system is a problem in its own right, with
    200,000 asbestos cases pending and 50,000 additional claims filed each
    year. Simply screening out the non-sick claimants would alleviate part
    of the administrative burden, allowing resources to be used for matters
    more pressing. The current process affords a great deal of power to
    asbestos trial attorneys, who reap a windfall by overwhelming the court
    system. They file hundreds or even thousands of cases in individual
    state courts and use these caseloads to leverage massive settlements
    from defendant companies. Instead of encouraging defendant companies to
    focus settlement dollars on sick claimants, the true victims of
    asbestos exposure, plaintiffs' attorneys force defendants to settle
    thousands of non-sick claims or risk going to trial in mass
    consolidations in which a company's survival may be at stake. Using
    sick claimants as a trap to collect billions of dollars for the non-
    sick does a great disservice to the true victims and to the system.
        After more than 30 years of constant litigation, claims against the
    former asbestos manufacturers can be considered a mature tort. The
    question before us today is how to put a system in place to
    differentiate between who is sick and who is not sick and to make sure
    that those who are impaired by asbestos-related diseases receive just
    compensation.
        Unless a solution is enacted, I have no doubt that more and more
    small businesses will become targets. Currently, 60 cents of every
    dollar spent on asbestos litigation goes toward attorneys fees and
    transaction costs instead of the victims. Moreover, many victims wait
    years to receive settlements that have little relation to their
    specific illness. It is a system that the Supreme Court has emphasized
    is beyond judicial repair and one that only Congress has the authority
    to fix.
        S. 758 is designed to answer the court's calls. Based on the tenets
    of the Amchem settlement, S. 758 incorporates medical criteria to
    determine the claimants who have impairments resulting from asbestos
    exposure. As a result, this legislation would correct today's most
    pressing problem relating to asbestos litigation--the high volume non-
    sick clogging the system. To eliminate pressures to file cases
    prematurely, S. 758 waives the statute of limitations. Moreover, it
    outlaws general releases that require people with asbestosis to give up
    their right to further compensation if they contract cancer in the
    future.
        The decades long history of asbestos litigation has proven that
    litigating 200,000 cases is not an option. Similarly, creating massive
    class action settlements is also off the table. The only viable
    alternative is the creation of a system outside of the courts, a system
    where victims are screened by objective medical criteria and paid
    promptly for their specific illnesses.
        The Fairness in Asbestos Compensation Act is an effective approach
    to address this crisis. This bill creates a win-win situation: it is
    good for asbestos victims, the U.S. court system and American
    businesses both large and small. I have been working with dozens of
    associations representing thousands of businesses nationwide to
    increase the visibility of this crisis. The momentum is on our side and
    I urge this committee to act expeditiously on S. 758.
        Again, thank you for the opportunity to appear before you today in
    strong support of this measure. I look forward to your questions.

        Senator Grassley. Now, Mr. Middleton.

                  STATEMENT OF RICHARD MIDDLETON, JR.

        Mr. Middleton. Thank you, Mr. Chairman. Members of the
    committee, central to the civil justice system is the idea that
    corporations always want to be considered the same before
    juries as individual persons. The incongruity that we are faced
    with is that we have here in this age of personal
    responsibility a few corporations, led by GAF, who want to
    avoid their personal responsibility for what they did.
        With regard to betting jobs that we heard from the other
    member of the panel, Mr. Heyman, in fact, GAF and its
    predecessor bet the jobs of their employees when they hid
    medical reports on how sick they were and didn't tell them so
    that they would continue to work and continued to be exposed to
    those products for years. Juries all over this country have
    listened to the evidence against GAF and other corporations and
    have decided that, in fact, the companies were wrong, that they
    were guilty of gross misconduct, gross negligence, and, in
    fact, deceit and hiding of the truth.
        With regard to this legislation, one thing that I haven't
    heard any discussion of today is the dormant docket situation.
    State and Federal courts all across this country have set up
    dormant dockets so that the people who met medical criteria in
    the specific States who are being diagnosed with asbestos-
    related diseases have their cases filed to preserve the
    statute. They are then placed in a dormant situation which is
    no expense to the court. No administrative delays are
    encountered, and they get to come back when they become sick,
    this allowing the truly very serious cases to be heard by the
    courts, except for the fact that there is no logjam because in
    1998 we know, and it has gone undisputed, that only 55 cases
    were, in fact, tried to a jury nationwide. So there is no
    problem in getting cases before a jury and, in fact, the cases
    are being settled.
        Throughout this country, jurors and courts, both State and
    Federal, have established product exposure levels, what would
    be allowed in as evidence concerning liability, what shares of
    liability the various companies have in different locales based
    upon their product sales, and the amount of damages that are
    appropriate.
        Many manufacturers such as Owens Corning and Owens Illinois
    and Babcock and Wilcox, who were the largest boiler
    manufacturer in World War II, have recognized their
    responsibility to compensate victims. In fact, Owens Corning
    settled 217,000 cases by private means, not through resort to
    Government interference or any bureaucratic development that
    has to take place. They did it because they recognized where
    they were in the litigation and they decided to settle those
    claims. It was good for employers and it is good for the
    manufacturers because these settlements that are private and
    that are ongoing allow the companies to continue in existence.
        The other problem is that employers who have to, under
    State workers compensation systems, pay out workers comp
    benefits, the criteria is different than what is under this
    bill. If you take the State of Virginia, the largest employer,
    Newport News Shipbuilding and Dry Dock Company, they have to
    pay out on cases that would not be considered to be legitimate
    claims under this bill. Those are medical expenses that are
    paid.
        Under the private agreements that have been achieved in
    this case, and not as a result of any clogging of the court
    system, those employers not only receive reimbursement for
    medical expenses already paid, they also receive credits for
    medical expenses that will be possibly incurred in the future.
        With regard to the Ortiz case, the Supreme Court, if you
    look at the entire case, made the quote and it came out of
    Chief Justice Rehnquist's panel from 1992. That panel found,
    based on a RAND study of 1985 that included statistics from
    1981 through 1983, that the courts were clogged. Those
    statistics are 16 years stale.
        This system works. The dormant dockets that have been set
    up by the courts allow the serious cases to go forward. The
    truth is that the green-carding system, the dormant docket
    system, works at the State and the Federal levels. The serious
    cases go first.
        GAF is virtually alone in refusing to accept its
    responsibility. What they are trying to do is to change the
    focus; engage in personal attacks on individuals; deny the
    medical truth that is established according to State law, State
    by State; eviscerate the laws of those States; and turn the
    concept of federalism completely on its head. I have to wonder,
    in light of cases that the Supreme Court has already stated
    they are going to review this term, if Congress has any ability
    to act in this particular area. And the women and violence
    legislation which they are going to review is but one example.
        The difference in the Amchem settlement is it was
    voluntary. There was money actually put on the table and there
    was prompt payment to be considered. Under this system, Mr.
    Chairman and members of the panel, in fact, there is no money
    on the table. This creates restricted medical criteria that
    violates the State laws. It creates longer delays before the
    people can then go into the court system they should have
    access to. It puts no money on the table. It blames others
    through the art of deflection for the harm that they caused,
    and it keeps these cases away from the jurors and the citizens
    of this country.
        In conclusion, what it does is create artificial, and
    indeed superficial barriers to the administration of true
    justice. I would state this, that ATLA, the Association of
    Trial Lawyers of America, has published three very flexible
    criteria which says if there is a system that should be
    considered, that system should be voluntary. It should put
    money on the table. It should result in the consideration of
    absolute liability by the manufacturers, not the reservation of
    all of their defenses while this bureaucratic administrative
    procedure is gone through. In fact, it should be something
    other than a full employment bill for the lobbyists here in the
    Beltway.
        Thank you, Mr. Chairman.
        Senator Grassley. Thank you, Mr. Middleton.
        [The prepared statement of Mr. Middleton follows:]

         Prepared Statement of Richard Middleton, Jr. on Behalf of the
                    Association of Trail Lawyers of America

        Mr. Chairman and members of the Committee, my name is Richard
    Middleton, Jr., and I am a practicing attorney from Savannah, Georgia.
    I am a senior trial attorney in the firm of Middleton, Mathis, Adams &
    Tate, P.C., with offices in Atlanta and Savannah, Georgia. I also have
    the very high honor of serving presently as the President of the
    Association of Trial Lawyers of America (ATLA). Mr. Chairman, thank you
    very much for this opportunity to present ATLA's views in opposition to
    S. 758, the proposed asbestos compensation legislation.
        ATLA believes that an objective evaluation of the history and
    present state of asbestos litigation will lead the Committee to
    conclude that:

      1. Workers who have been injured by exposure to asbestos in the
        workplace are entitled to receive compensation in the court system.
        There is no basis for providing legal relief to the companies who
        are responsible for their injuries.

      2. S.758 does not, as its proponents suggest, codify the settlement
        agreement in the Amchem litigation, and the bill is not supported
        by the parties who participated in that settlement.

      3. S. 758 is a bad bill that would deny compensation to tens of
        thousands of workers with cancer and disabling lung disease from
        workplace asbestos exposure and would provide a financial windfall
        to companies which willfully mislead the public about asbestos
        problems.

      4. The courts are well equipped to handle the pending and future
        asbestos cases that will require trial. A litigation crisis, as
        that term is usually understood, does not exist. In 1998, only 55
        asbestos trials, involving 125 individuals, were completed in all
        the states and federal courts, a 45 percent decline from 1997. 5.

      5. Both the state and federal courts, and the parties themselves,
        have, over time, devised a variety of mechanisms for processing and
        settling asbestos cases in a timely fashion. Over 25,000 cases were
        resolved last year by voluntarily negotiated settlement agreement,
        providing much needed relief to victims and their families. These
        private settlement agreements will continue to provide compensation
        to tens of thousands of victims each year and keep the docket
        burden of the courts to a minimum well into the future, unless
        Congress reduces or eliminates the incentive for defendant
        companies to settle.

      6. S. 758 would negatively impact and, in many cases, overturn the
        various state laws that have induced settlements. The bill's
        restrictive medical criteria would eliminate compensation for
        thousands of cases that are presently compensable under state laws.
        It would also delay the processing of all pending cases for many
        months, if not years, and bring all existing settlement activity to
        a standstill.

      7. It would be a mistake to interpret the Supreme Court's call last
        term in Ortiz v. Fibreboard for a ``national asbestos dispute
        resolution scheme'' as support for anything like S. 758. What the
        Court made reference to in Ortiz was a system modeled on the
        recommendations of the Judicial Conference's Ad Hoc Committee on
        Asbestos Litigation. That panel suggested creation of an
        administrative compensation mechanism that would control all of the
        defendants' available assets and apply principles of absolute
        liability in order to compensate claimants. Such a model bears no
        resemblance to the system proposed in S. 758, which provides no
        compensation to any asbestos victim.

      8. There are serious 10th Amendment problems with any federal
        legislation which, like S. 758, rewrite selective portions of state
        tort law and eliminate a claimant's existing right to seek
        compensation through the tort system without providing an
        alternative remedy. Although a constitutionally permissible
        comprehensive federal asbestos compensation program could be
        written, compensation levels approximating the value of litigated
        claims would require tax and spending decisions by Congress which
        it has been loath to undertake in the past.

        Twenty years ago, thousands of injured claimants had difficulty
    obtaining relief in the courts because the asbestos industry was
    involved in a lengthy and complex legal struggle with plaintiffs over
    responsibility for the diseases caused by their products. The issues
    that animated that litigation have long ago been resolved in favor of
    the claimants. Liability of the defendant companies is no longer
    seriously disputed. Juries across this country have demonstrated time
    and again that they will find the defendant companies liable at trial
    and impose substantial damages for their conduct.
        The last time Congress looked at this issue, in 1991-1992, the
    concept of a ``litigation crisis'' received support from a number of
    academic and official sources, notably from the Rand Institute of Civil
    Justice and later from the U.S. Judicial Conference Ad Hoc Committee on
    Asbestos Litigation. During the period in the 1980s that these groups
    studied asbestos litigation, the courts were, in fact, having
    difficulty handling the caseload or providing adequate and timely
    compensation for victims. This problem was caused by intense litigation
    over issues of causation, insurance coverage and apportionment of
    liability.
        Today the problems which the courts confronted during the last
    decade have largely been eliminated and the industry and the claimants
    have by and large accommodated themselves to the risk of litigation.
    Most of the major defendants have entered into master settlement
    agreements, jurisdiction by jurisdiction, that establish criteria for
    settlement based on the law, the medical standards of proof in each
    jurisdiction and the historical record of trial success. Tens of
    thousands of cases are settled every year, providing compensation to
    victims and their families in a fraction of the time it would take to
    process claims under the labyrinth proposed in S. 758.
        As a result, it is simply inaccurate to any longer claim that
    asbestos litigation is placing an undue burden on the courts. As the
    statistics clearly show, claims filed do not translate into cases
    tried. The vast majority of cases do not take up the time of the
    courts. Although many new cases are filed each year, large numbers are
    placed on inactive dockets and most other claims are settled under
    private agreements. In fact, according to Mealys Asbestos Litigation
    Reporter, during 1998 only 55 asbestos cases involving 125 individuals
    proceeded to verdict in the fifty states and all federal courts, a 45
    percent decline from 1997--and clearly a negligible number.
        The best way to ensure the continued orderly processing of future
    asbestos cases is to leave matters to the parties and to the state and
    federal courts under existing law. The way to end progress, produce an
    administrative nightmare, and create new and lengthy delay for injured
    victims is to consolidate all asbestos claims in one federally mandated
    facility.

                               UNIMPAIRED CLAIMS
        The lynchpin of the argument for the mandated medical criteria and
    other devices to limit access to the courts contained in S. 758 is that
    too many of the new claims filed each year involve conditions that have
    not yet met the defendants' definition of impairment--a definition of
    impairment that is less favorable to workers than accepted medical
    standards and the standards that have been adopted by most of the state
    and federal courts. By seeking to classify all claims filed by asbestos
    workers diagnosed with pleural plaques, pleural thickening or pleural
    calcification, and even many cases of asbestosis as unimpaired, this
    argument inaccurately suggests that none of these claims are deserving
    of compensation. Adoption of the medical criteria in S. 758 is not
    medically justified and would do great injustice to a significant
    number of claimants.
        Virtually all of the states permit recovery only by those asbestos
    workers who have been diagnosed with physical symptoms of disease. In
    Metro North Commuter Railroad Company v. Buckley (521 U.S. 424, 1997),
    the Supreme Court held that mere exposure to asbestos without
    manifesting injury would not support a recovery under federal law. More
    recently, the Texas State Supreme Court similarly ruled that
    compensation is not available without a physical injury. Temple--Inland
    Products v. Carter (1999 W.L. 254718). These courts identified only two
    jurisdictions where lower courts permit such claims.
        Elsewhere, the courts, by local rule or otherwise, and the parties
    have consistently taken steps to prioritize and manage the asbestos
    cases on their dockets. In the federal courts, the area of primary
    responsibility of this Committee, all asbestos cases are consolidated
    before a single federal judge who has administratively resolved tens of
    thousands of cases and remanded only a nominal number back to transfer
    courts for trial. Obviously, these cases do not impose a burden on the
    federal courts. Finally, in many other jurisdictions claims by these
    workers are placed on inactive dockets or pleural registers which
    prevent them from becoming a drain on the resources of either the
    courts or the defendants.

                        S. 758 AND THE AMCHEM SETTLEMENT
        S. 758 does not, as its proponents suggest, codify the settlement
    agreement in the Amchem litigation, and the bill is not supported by
    the parties who participated in that settlement. Amchem Products, Inc.,
    et al. v. Windsor, et al., 117 S.Ct. 2231 (1997).
        The basic consideration for the Amchem class action settlement was
    that if the settlement criteria were met, the claimant would receive
    prompt payment from the settling defendants. The defendants established
    a fund in excess of $1 billion to immediately pay claims to qualified
    claimants.
        In contrast, S. 758 fails to ensure prompt payment of any money to
    asbestos victims. The bill provides no guarantee of any payment at all
    to any injured worker. Amchem required that every qualified asbestos
    claim be paid within nine months. S. 758, however, includes no time
    period guaranteeing any resolutions or prompt payment of claims.
    Furthermore, Amchem applied to only a small portion of defendants (less
    than 25 percent) who agreed to share liability. Joint and several
    liability remained available as to defendants not included in Amchem.
    But, S. 758 eliminates joint and several liability for all asbestos
    claims.
        S. 758 is also less favorable to asbestos victims than Amchem and
    will unreasonably restrict access to the courts. In Amchem, plaintiffs
    waived the right to seek punitive damages in exchange for defendants'
    waiver of all traditional defenses to asbestos claims. S. 758, on the
    other hand, eliminates plaintiffs' right to seek punitive damages but
    provides plaintiffs nothing in exchange for these lost legal rights.
    Defendants retain the right to raise virtually all of their traditional
    defenses, including state of the art, comparative negligence,
    contributory negligence, intervening negligence, superseding
    negligence, employer fault, notice, and others. Amchem, in addition,
    applied only to those asbestos manufacturers and plaintiffs who agreed
    to it. Existing plaintiffs who did not agree to its terms were free to
    opt out of the settlement and to rely on the tort system for redress.
    Indeed, over 170,000 workers filed opt out notices from the settlement.
    S. 758 contains no such opt out provision. Its restrictions apply to
    all cases, both present and future. In fact, the bill applies
    retroactively to all cases pending in federal or state courts for which
    a final judgment has not been entered, including jury verdicts and
    unpaid settlements.
        In short, S. 758 stands the Amchem settlement on its head. It
    eliminates all of the benefit of the bargain that was offered to
    claimants, but grants none of the benefit that was provided in that
    settlement.
           s. 758--the fairness in asbestos compensation act of 1999
        The Fairness in Asbestos Compensation Act of 1999 is little more
    than an attempt by a small minority of the asbestos defendants to limit
    and, in most cases, eliminate their liability for payment of damages to
    both present and future victims of asbestos disease. S. 758 requires
    every claimant to meet the bill's medical criteria before compensation
    may even be demanded and before he or she has the right to file a
    lawsuit in any jurisdiction in the United States, even though such
    claims may meet state law requirements. As such, the bill represents an
    unprecedented assault on American citizens' common law right of access
    to state courts.
        By design, this legislation would eliminate most of the pending
    claims in the United States, create procedural delays for those claims
    that remain, impose numerous legal obstacles in the path of any
    claimant who is bold enough to prosecute a claim, and would, at the
    same time, obliterate existing incentives for defendants to settle
    cases.
        The bill creates the Asbestos Resolution Corporation, which is not
    a compensation board but simply a screening device to decide who may
    file law suits against asbestos defendants. Unless a claimant obtains a
    certificate of medical eligibility, access to the courts is completely
    foreclosed. Even when an individual receives a certificate of
    eligibility, no award or benefit is paid. That certificate merely
    entitles a claimant to participate in a lengthy and inconclusive
    mediation and arbitration procedure after which the claimant will
    likely be left with nothing--no money, no good faith, no timely
    settlement offer. The Corporation's procedures are open-ended and
    certain to provide almost endless opportunity for delay.
        The medical criteria themselves are arbitrary, do not represent.
    mainstream scientific opinion, and would leave thousands of desperately
    ill individuals with no legal remedies whatsoever. Most draconian is
    Section 203, which requires 15 years of exposure to asbestos prior to
    1979 for eligibility for non-asbestosis lung disease. OSHA standards
    did not adequately protect workers from significant asbestos cancer
    risk until 1994, and millions of workers continue to be exposed to this
    day. Yet the bill conclusively determines that asbestos exposures after
    1979 are not harmful.
        Lung cancer victims are denied eligibility unless twelve years have
    elapsed from their first exposure. In addition, a cancer victim must
    show either asbestos or bilateral pleural thickening before a
    certificate of eligibility is awarded. This is contrary to the
    mainstream medical literature on this issue. The consensus view is that
    asbestosis is not a precondition required before lung cancer can be
    attributed to asbestos. Numerous scientific studies indicate that less
    than five years latency to asbestos can cause asbestos-related lung
    cancer. A twelve year latency period is required to establish
    eligibility for non-malignant asbestos-related diseases. This is
    particularly unfair in light of the heavy exposures that have occurred
    in recent years as workers have removed asbestos from public buildings,
    and since the scientific literature has established that de minimis
    exposure to asbestos can cause the most lethal disease.
        Finally, even victims who successfully run the gauntlet of the
    bill's procedures and meet its medical criteria get nothing but the
    right to re-litigate their case in court under highly prejudicial
    procedural rules. Moreover, because the legislation applies to any case
    that has not gone to final judgment by the date of enactment, the bill
    would retroactively nullify awards in cases that have already been
    resolved by jury verdict or which are on appeal.
        Taken together, the administrative labyrinth established under the
    bill and the highly prejudicial changes in tort law will make pursuing
    asbestos-related damage claims substantially more time consuming and
    expensive, will greatly reduced the number of claims that defendants
    face and will significantly reduce the value of those claims.
        It is most important for this committee to realize that procedural
    changes in S. 758 inevitably will condemn the courts to relive the
    problems that created courthouse gridlock in the 1980s. In the early
    1980s, the courts were unable to resolve asbestos cases because the
    industry used procedural tools available to it at that time to delay
    trials and avoid settlement. It is axiomatic that delay serves the
    interests of the industry defendants. It allows firms to pay very few
    claims and permits them to use their superior economic power to force
    claimants to accept discounted settlements. Backlogs of thousands of
    cases are the inevitable result when legislation tips the scale in
    favor of the defendants' side of the bargaining table. By superimposing
    a bureaucratic, adversarial administrative mechanism on top of a
    reconstituted, pro-defendant court regime, S. 758 will recreate a court
    crisis which the parties themselves have already resolved. To cite but
    one of many concrete examples, by eliminating the risk of joint and
    several liability S. 758 will encourage each defendant to litigate its
    individual market share liability in individual cases, thereby greatly
    increasing the number and duration of litigated claims.
        In short, S. 758 would eliminate any incentive for defendants to
    continue their negotiated settlement agreements. These agreements
    ensure prompt, voluntary payment to tens of thousands of presently-
    impaired victims. Although this year's bill (in contrast to last year's
    version) appears to preserve the ability of the parties to enter
    private settlements, it nevertheless destroys the incentives for
    defendants to do so.

    ORTIZ V. FIBREBOARD--THE SUPREME COURT DID NOT ASK CONGRESS TO PASS S.
                                      758
        Proponents of S. 758 suggest that the Supreme Court decision in
    Ortiz v. Fibreboard (No. 97-1704, June 23, 1999) constitutes an
    endorsement of their proposal.
        What the court had in mind in asking Congress to consider ``* * *
    creating a national asbestos dispute resolution scheme * * *'' is a far
    cry from the legislation we are considering here today. In fact, a full
    reading of the opinion makes it clear that S. 758 is wholly
    inconsistent with the goals enumerated by the court.
        In Ortiz, the court spelled out its views by reference to the
    report of the Judicial Conference Ad Hoc Committee on Asbestos
    Litigation, a panel of federal judges appointed by Chief Justice
    Rehnquist to study the problem. Among other things, that panel
    recommended consolidation of all asbestos claims and defendants assets
    before a single judicial forum, called for elimination of burdensome
    proof requirements and for imposition of absolute liability on the
    defendants--all in order to increase and accelerate plaintiff
    compensation. In contrast, S. 758 purposely creates new time-consuming
    procedural and bureaucratic hurdles, and erases existing legal rights--
    all in order to avoid paying compensation. Clearly, the administrative
    scheme proposed in S. 758 bears no resemblance to the Judicial panel's
    recommendations or the goals of the Ortiz court.

                            CONSTITUTIONAL PROBLEMS
        In Ortiz, the Supreme Court also made clear that it would not
    countenance any scheme that compromises America's Seventh Amendment
    right to trial by jury or the sovereignty of the states under our
    federal system.
        The peculiar structure of S. 758 requires this Committee carefully
    to consider its potential constitutional defects. The most serious
    areas of concern include the rewriting of state tort law and those
    provisions which eliminate the right to seek compensation through the
    courts without providing an alternative remedy such as a fund for the
    payment of claims. As the Supreme Court indicated in Duke Power Co. v.
    Carolina Environment Study Group, 428 U.S. 59, 86-87, 91-93 (1978), and
    in other decisions, the abolition of common law tort remedies without
    providing alternative means of redress for injury violates due process.
    That appears to be precisely what S. 758 does.
        A second serious constitutional defect involves the rights of those
    asbestos victims who surmount the bill's procedural obstacles, obtain a
    certificate of medical eligibility and file a civil action. When they
    finally arrive at state court, they will find that their state's tort
    law has been rewritten specifically to limit their rights and that
    these changes were imposed by Congress, rather than their state courts
    or legislatures. While Congress may create a federal asbestos cause of
    action, it cannot write state tort law that must be applied by the
    states. As the Supreme Court Stated in Erie Railroad Co. v. Tompkins,
    304 U.S. 64, 78 (1938), the cornerstone of federalism in our civil
    justice system:

              There is no federal general common law. Congress has no power
            to declare substantive rules of common law applicable in a
            State, whether they be local in their nature or ``general,'' be
            they commercial law or part of the law of torts.''
              * * * * *

        Senator Grassley. Now, Mr. Mallett.

                      STATEMENT OF CONRAD MALLETT

        Mr. Mallett. Mr. Chairman, thank you very much. My name is
    Conrad Mallett. I appreciate the subcommittee's invitation to
    testify on Senate bill 758. This bill answers the U.S. Supreme
    Court's call for national legislation to address the
    elephantine mass of asbestos cases and provide a fairer, less
    expensive, more certain and faster way of providing
    compensation to people who are impaired by asbestos-related
    disease.
        I am appearing today in my capacity as the chairman of the
    Coalition for Asbestos Resolution. The Coalition encompasses
    over 200 companies and organizations nationwide interested in
    asbestos reform, including the U.S. Chamber of Commerce, the
    Small Business Survival Committee, the National Roofing and
    Contractors Association, Citizens Against Government Waste, the
    Business Council of Alabama, and the Petroleum Makers of Iowa,
    among hundreds of others.
        The breadth of the Coalition bears witness to the fact that
    asbestos litigation is no longer the problem of 10 or 20 core
    defendants. Any business, from a local automobile distributor
    to a giant oil or chemical company, can find itself a defendant
    in an asbestos case. Indeed, some who never thought of
    themselves as asbestos defendants, like a small hardware store
    owner in Saginaw, MI, can face virtually overnight the threat
    of compensatory and punitive damages amounting to tens of
    millions of dollars.
        Last February, I agreed to serve as the Coalition's
    chairman in part because of my abiding commitment to improve
    this Nation's justice system. I served the people of the State
    of Michigan for 8 years as a justice of the Michigan Supreme
    Court, the last 2 as the chief justice. During my tenure on my
    State's highest court, I was keenly aware of my responsibility
    to be sure the court system functioned efficiently and fairly.
        The Coalition's mission is to support congressional
    legislation to enact a workable administrative solution to the
    asbestos litigation crisis. And make no mistake, the enormous
    volume of asbestos cases is now more than ever impacting the
    quality of justice in our Federal and State court systems.
        In 1991, the year before I was first elected to the
    Michigan Supreme Court, the Judicial Conference of the United
    States estimated a backlog of 90,000 cases. The problem has
    grown worse. The current backlog of asbestos cases is well over
    200,000, and as many as 50,000 new cases are already filed this
    year. The problem is not getting better, but is indeed getting
    worse.
        Since the Judicial Conference's report, there have been
    innovative efforts to resolve this case crisis. Perhaps the
    most creative of these efforts was the 1994 class action
    settlement in what was then called Georgine v. Amchem Products.
    This settlement, which was negotiated by leading trial lawyers
    and endorsed by the AFL-CIO, would have provided for a national
    administrative claims resolution facility to resolve the claims
    of future plaintiffs against the participating defendants
    quickly and fairly.
        Eventually, however, the U.S. Supreme Court overturned the
    agreement on procedural grounds. Writing for the U.S. Supreme
    Court, Justice Ginsburg wrote, ``The argument is sensibly made
    that a nationwide administrative claims processing regime would
    provide the most secure, fair, and efficient means of
    compensating victims of asbestos exposure. Congress, however,
    has not adopted such a solution.''
        The Supreme Court returned to this theme only last June.
    Writing for the majority in Ortiz v. Fibreboard, Justice Souter
    said, ``[T]he elephantine mass of asbestos cases * * * defies
    customary judicial administration and calls for national
    legislation * * * to date Congress has not responded.''
        Justice Souter's call for national legislation has been
    echoed in other Federal and State courts. For example, the
    fifth circuit said, ``There is no doubt that a desperate need
    exists for federal legislation in the field of asbestos
    litigation.''
        The Florida Supreme Court sounded the same note: ``Any
    realistic solution to the problems caused by the asbestos
    litigation in the United States must be applicable to all fifty
    states. It is our belief that such a uniform solution can only
    be effected by federal legislation.''
        One key problem that has resulted from asbestos litigation
    has been the inability to cope with the disturbing quantity of
    claims that have been filed by individuals who are not now, and
    quite likely never will be impaired by any asbestos-related
    disease. This is a problem noted by numerous impartial
    observers, including U.S. Supreme Court Justice Stephen Breyer.
        Because the caseload prevents the trier of fact from
    delving into the medical condition of each of the thousands of
    plaintiffs, it becomes impossible to separate those who suffer
    from serious injury from those who are exposed but do not
    suffer any impairment.
        Sophisticated national asbestos law plaintiff firms have
    exploited the asbestos litigation crisis by filing waves of
    unimpaired claims together with claims by those who are
    seriously ill. Trial court judges are often forced to batch
    settlements, hoping to clear their dockets. In doing so, the
    system simply encourages another wave of unimpaired claims in
    an unending spiral, threatening the availability of funds for
    those who become seriously ill in the future.
        Champions of the status quo sometimes maintain that lawyers
    for plaintiffs and defendants can resolve the asbestos morass
    through private agreement. I strongly disagree. In Amchem,
    defendant and plaintiffs entered into many such agreements in
    1993 and 1994. Those agreements committed plaintiffs' lawyers
    to recommend individual settlements to their clients based on
    criteria for impairment by nonmalignant disease that were
    essentially the same as the Amchem criteria. Five years later,
    very few, if any, of those agreements are still being observed
    by the plaintiffs' lawyers who signed them.
        How can anyone be opposed to a system that fully
    compensates the impaired within 6 months of the date the claim
    is filed? To be sure, compensation will be, under Senate bill
    758, connected to present impairment, not just exposure. It
    should not be enough to say that all those who can collect from
    the system today have some right in perpetuity to collect from
    the system always.
        Let those who defend the current system explain why it is
    appropriate that persons who are not in any way impaired be
    compensated, thereby threatening more companies with bankruptcy
    that will not only cause great disruption to the companies,
    their employees and communities, but will seriously impair the
    ability of those companies to compensate those who become sick
    in the future.
        The time has come for Congress to recognize its duty to
    help overburdened courts and the parties to do a better a job
    of allocating costs and ensuring speedy and generous recovery
    for those who suffer illness from asbestos-related disease.
        Thank you, Mr. Chairman.
        Senator Grassley. Thank you, Mr. Mallett.
        [The prepared statement of Mr. Mallett follows:]

                   Prepared Statement of Hon. Conrad Mallett

                                    SUMMARY
        Former Chief Justice Conrad Mallett, of the Michigan Supreme Court,
    testifies today in his role as Chairman of the Coalition for Asbestos
    Resolution. The ``elephantine mass of asbestos litigation'' is
    seriously impacting the quality of justice in our state and federal
    courts, leading the Supreme Court of the United States, consistent with
    similar statements by numerous state supreme courts and other courts
    across the country, to call on Congress to enact a national
    legislation.
        A disturbing pattern of filings by unimpaired claimants has
    overwhelmed the system and threatens the ability of those with serious
    illness to recover. Although only a few cases go to trial, enormous
    resources are spent in pretrial litigation and victims must wait years
    to obtain a resolution of their claims. In fact, the lack of trials is
    itself a disturbing symptom of the problem. To manage their caseload,
    courts must aggregate thousands of cases in a way designed to avoid
    individual adjudication of any of them. Understandably, trial judges
    put great pressure on defendants to enter into mass settlements, but
    these settlements typically lack safeguards to ensure that compensation
    is focused on those who actually suffer from serious illness.
        Finally, Chief Justice Mallet expresses skepticism regarding
    private settlement plans that some have touted as an alternative to
    legislation. These plans have, in the past, proved ineffective as there
    is a powerful incentive for lawyers to continue to file unimpaired
    claims if the rules of the asbestos litigation system are not changed
    through legislation.
                                     ______

        I appreciate the Subcommittee's invitation to testify on S. 758,
    the ``Fairness in Asbestos Compensation Act of 1999.'' This bill
    answers the Supreme Court's increasingly insistent calls for national
    legislation to address the ``elephantine mass'' of asbestos cases and
    provides a fairer, less expensive, more certain and faster way of
    providing compensation to people who are impaired by asbestos-related-
    diseases.
        I am appearing today in my capacity as the Chairman of the
    Coalition for Asbestos Resolution. The Coalition encompasses over 150
    companies and organizations interested in asbestos reform, including
    United States Chamber of Commerce, the Small Business Survival
    Committee, the National Roofing Contractors Association, the Automobile
    Parts and Accessories Association, the Associated Builders and
    Contractors, Citizens Against Government Waste, GAF Corporation, and
    many other groups across the country. The breadth of the Coalition's
    membership bears witness to the fact that asbestos litigation is no
    longer the problem of ten or twenty core defendants. Any business, from
    a local automobile distributor to an giant oil and chemical company,
    can find itself a defendant in an asbestos case. Indeed, some who never
    thought of themselves as asbestos defendants can face, virtually
    overnight, the threat of compensatory and punitive damages awards
    amounting to tens of millions of dollars.
        Last February, I agreed to serve as the Coalition's Chairman
    because of my abiding commitment to improving the quality of this
    nation's justice system. I served the people of the State of Michigan
    for eight years as a justice of the Michigan Supreme Court, the last
    two years as the Chief Justice. During my tenure on my state's highest
    court I was keenly aware of my responsibility to be sure the court
    system functioned efficiently, and I have always approached justice
    system modification cautiously. The Coalition's mission is to support
    Congressional legislation to enact a workable administrative solution
    to the asbestos litigation crisis, and is in keeping with my
    philosophy.

                        THE ASBESTOS LITIGATION PROBLEM
        Make no mistake--the enormous volume of asbestos cases is now, more
    than ever, impacting the quality of justice in our federal and state
    court systems. In 1991, the year I was first elected to the Michigan
    Supreme Court, the Judicial Conference of the United States estimated a
    backlog of approximately 90,000 cases in federal and state courts. The
    result was not pretty:

              [D]ockets in both federal and state courts continue to grow;
            long delays are routine; trials are too long; the same issues
            are litigated over and over; transaction costs exceed the
            victims' recovery by nearly two to one; exhaustion of assets
            threatens and distorts the process; and future claimants may
            lose altogether.\12\
    ---------------------------------------------------------------------------
        \1\ Report of the Judicial Conference AdHoc Committee on Asbestos
    Litigation 3 (Mar. 1991).

    These problems have grown worse. The current backlog of asbestos cases
    is well over 200,000, and as many as 50,000 new cases are filed every
    ---------------------------------------------------------------------------
    year.

        Since the Judicial Conference's report there have been innovative
    efforts to resolve this torrent of cases. Perhaps the most creative of
    these efforts was the 1994 class action settlement in what was then
    called Georgine v. Amchem Products. This settlement, which was
    negotiated by leading trial lawyers and endorsed by the AFL-CIO, would
    have provided for a national administrative claims resolution facility
    to resolve the claims of future plaintiffs against the participating
    defendants quickly and fairly. After an exhaustive hearing, the federal
    district court approved the class settlement as fair and reasonable.
    Georgine v. Amchem Products, Inc., 157 F.R.D. 246 (E.D. Pa. 1994).
    Eventually, however, the Supreme Court overturned the agreement on
    procedural grounds. While the Court recognized that the settlement
    addressed a critical problem with an innovative solution, it ruled that
    only Congress had the power to enact that solution. Writing for the
    Court Justice Ginsburg wrote:

              The argument is sensibly made that a nationwide
            administrative claims processing regime would provide the most
            secure, fair, and efficient means of compensating victims of
            asbestos exposure. Congress, however, has not adopted such a
            solution.

    Amchem Products, Inc. v. Windsor, 521 U.S. 591, 628-29 (1997).

        The Supreme Court returned to this theme only last June. Writing
    for the majority in Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999),
    Justice Souter said:

              [T]he elephantine mass of asbestos cases * * * defies
            customary judicial administration and calls for national
            legislation. * * * To date Congress has not responded.'' Id. at
            2302 & n. 1.

        Justice Souter's call for national legislation has been echoed in
    other federal and state courts. For example, according to the United
    States Court of Appeals for the Fifth Circuit:

              There is no doubt that a desperate need exists for federal
            legislation in the field of asbestos legislation.'' Cimino v.
            Raymark Industries, Inc., 151 F.3d 297, 313 (1998).

        The Supreme Court of West Virginia agrees:

              Congress, by not creating any legislative solution to these
            problems, has effectively forced the courts to adopt diverse,
            innovative, and often non-traditional judicial management
            techniques to reduce the burden of asbestos litigation that
            seem to be paralyzing their active dockets. * * * ``[T]hese
            efforts have failed to expedite a substantial fraction of the
            caseload. Nor do they appear to have brought about significant
            reduction in transaction costs.'' State ex rel. Appalachian
            Power Co. v. MacQueen, 479 S.E.2d 300, 304 & n.8 (1996).

        The Florida Supreme Court sounds the same note:

              Any realistic solution to the problems caused by the asbestos
            litigation in the United States must be applicable to all fifty
            states. It is our belief that such a uniform solution can only
            be effected by federal legislation.'' W.R. Grace & Co.--Conn.
            v. Waters, 638 So. 2d 502, 505 (1994).\2\
    ---------------------------------------------------------------------------
        \2\ See also Appendix B of my statement, listing courts that have
    called for legislative action.

        All of this, of course, was hardly news to me. As a justice of my
    state's highest court, and as head of our state judicial system during
    my tenure as Chief Justice, I was well aware that asbestos claims have
    presented an unparalleled nationwide court management problem for at
    least twenty five years. In Michigan, we were forced during the late
    1970s and 1980s to redesign many of our court service delivery systems
    to handle the huge number of asbestos cases filed. The Michigan Supreme
    Court, through the State Court Administrators office, tried to cope
    with the caseload by assigning these cases to some of our best, most
    experienced trial court judges. The system moved cases, but some of our
    best judges were managing case flow as opposed to making reasoned
    decisions regarding difficult facts and complex areas of the law.
    Taxpayers, both individual and corporate, therefore, were deprived of
    the services of some of our best and brightest judges. The problem, of
    course was (and is) that the trial courts of this land are not designed
    to handle thousands of cases filed at the same time against the same
    defendants. It is no accident that administrative systems like workers
    compensation, unemployment compensation and the Social Security
    Administration function in place of the courts when the caseload strips
    the trier of fact of her ability to do her job appropriately. The
    judge's central function is to assist society to discover, as best it
    can, the truth of the matter before the court. In the Michigan court
    system, like other state court systems facing the onslaught of asbestos
    claims, we did not then and do not now have the person power to run, in
    effect, a workers' compensation system.

                     THE VICIOUS CYCLE OF UNIMPAIRED CLAIMS
        One key problem that has resulted from these caseload pressures in
    Michigan and around the country has been an inability to cope with the
    disturbing quantity of claims that have been filed by individuals who
    are not now, and quite likely never will be, impaired by any asbestos
    related disease. This is a problem noted by numerous impartial
    observers, including Justice Stephen Breyer. Such cases include well
    over half the total.\3\ Because the caseload prevents the trier of fact
    from delving into the medical condition of each of thousands of
    plaintiffs, it becomes impossible to separate those who suffer from
    serious injuries--many of whom receive inadequate or no compensation--
    from those who were exposed but do not suffer any impairment. Moreover,
    the rush of non-impaired cases diverts the limited resources of
    defendants away from compensating the victims of asbestos related
    disease--including, tragically, cancer cases that will be with us well
    into the next century.
    ---------------------------------------------------------------------------
        \3\ See Amchem, 521 U.S. at 631 (Breyer, J., concurring in part and
    dissenting in part) (``About half of the suits have involved claims for
    pleural thickening and plaques--the harmfulness of which is apparently
    controversial. (One expert below testified that they `don't transform
    into cancer' and are not `predictor[s] of future disease.')'').
    ---------------------------------------------------------------------------
        Sophisticated, national asbestos plaintiffs' law firms have
    exploited the asbestos litigation crisis by filing waves of unimpaired
    claims together with claims by those who are seriously ill from
    asbestos disease. Knowing that trial judges simply do not have the
    resources to screen the claims on a case-by-case basis, the law firms
    refuse to settle the sick cases without substantial compensation for
    their unimpaired cases. Trial judges are often forced to encourage such
    ``batch settlements,'' hoping to clear their dockets. In doing so, the
    system simply encourages another wave of unimpaired claims in an
    unending spiral--threatening the availability of funds for those who
    will become seriously ill in the future.

                  THE LACK OF TRIALS: A SYMPTOM, NOT A REMEDY
        Despite the crushing caseload, long delays, high transaction costs,
    and deep-seated inequities in the current asbestos litigation system,
    some will tell you that all is well. Some--primarily those with a
    financial interest in the present system--will say that there is no
    crisis in the courts because almost all asbestos cases eventually
    settle. According to Mealey's Asbestos Litigation Reporter, only 55
    asbestos trials went to verdict in 1998.\4\
    ---------------------------------------------------------------------------
        \4\ Of course, as often occurs, one of those trials represented one
    phase of an exceedingly complex consolidated case involving thousands
    of claims. And many other trials involved multiple claims and multiple
    defendants.
    ---------------------------------------------------------------------------
        The obvious answer to this observation is that trials are only the
    tip of the iceberg. Many cases settle on the courthouse steps, after
    substantial resources have been spent in pretrial document requests,
    depositions, procedural motions, substantive motions (including
    appeals), and the like. This is nothing new. The burden that asbestos
    litigation imposes on federal and state courts has never been the court
    time devoted to trials but rather the enormous judicial energy required
    to manage these cases through the pretrial stage. The 55 trials in 1998
    are comparable to the number of trials each year in the early 1980s,
    when Johns-Manville and the other big targets in the first wave of
    asbestos litigation began to crumble before the onslaught.
        The extraordinarily high settlement rate in asbestos cases is
    really a symptom of the underlying problem. Just think about a system
    that is supposedly adversarial, where 99 percent of the case settle.
    That settlement rate is duplicated nowhere else in the justice system
    (if we exclude family law and prisoner related cases). According to a
    survey conducted in 1992 by the National Center for State Courts, of
    the total civil cases filed, the settlement rate was only 61 percent.
    According to a survey of federal cases disposed of in fiscal year 1996
    and fiscal year 1997, the rate was only 35 percent.
        To some extent the extraordinary settlement rate in asbestos cases
    is the result of judicial pressure. Think about a trial judge who has
    dropped on her 5,000 asbestos cases all at the same time in 1999. At
    one case per week, she would need until the year 2095 to try all 5000
    cases. The judge's first thought then is ``How do I handle these cases
    quickly and efficiently?'' The answer, of course, is to manage the
    cases to ensure that they do not go to trial. The judge does not
    purposely ignore fairness and truth, but the demands of the system
    require that certain values be sacrificed. I am a defender of trial
    court judges. I know the pressures under which they work. But no judge
    could stand for her courthouse to be consumed by one set of cases that
    threatens its entire operation.
        Recent litigation in Mississippi provides a vivid example of the
    pressure that trial courts can place on defendants to settle cases
    through improper mass adjudication of asbestos claims. Cosey v. E.D.
    Bullard Co., Civ. No. 95-0069 (Miss. Cir. Ct. Jefferson Cty.) was filed
    in July 1995. The case eventually included thousands of plaintiffs and
    178 defendants. Trial of such an unwieldy group of claims raised
    obvious management problems. The court's solution was to schedule a
    series of mini-trials. The first trial involved 12 plaintiffs selected
    by plaintiffs counsel. The jury returned an extraordinary verdict of
    $48.5 million in compensatory damages--including multimillion dollar
    verdicts for some plaintiffs who were admittedly ``asymptomatic,''
    i.e., not sick.
        Faced with this verdict on compensatory damages, the defendants
    rushed to settle before the jury could return a verdict on punitive
    damages. The trial judge then twisted the arm of the defendants to
    settle the remaining several thousand cases--in most cases sight
    unseen. Since the plaintiffs' attorneys would not allow the defendants
    to settle each case on its merits, the defendants were forced either to
    settle wholesale or risk potentially crippling verdicts. And there was
    no way to know how the mass settlement would be divided between the
    plaintiffs--no way to ensure that the most seriously injured received
    appropriate compensation.
        This is one vivid example of the harmful affects of case
    consolidation. Confronted with a system that demands settlement,
    regardless of the merits, and taking into account the huge risks
    associated with imposition of punitive damages, rational company
    decision makers usually opt to settle all of their cases, as opposed to
    betting the company by settling none at all. This, of course, simply
    fuels the filing of new cases on behalf of the unimpaired. The only
    corrective response that will create balance and efficiency is the
    creation of the administrative entity called for in the legislation.

                   THE ROLE OF PRIVATE SETTLEMENT AGREEMENTS

        Champions of the status quo sometimes maintain that lawyers for
    plaintiffs and defendants can resolve the asbestos morass through
    private agreements. That claim is wrong, however, for at least three
    reasons.
        First, private settlements, including settlements that have
    established more or less formal, criteria-based claims processing
    systems for future cases, have been with us throughout the 1990s. The
    recently announced settlement agreements between Owens Coming and a
    hundred plaintiffs' lawyers are merely a recent instance of a long-
    standing practice. These agreements have not, however, prevented the
    asbestos caseload from doubling in the last seven years. They have not
    even slowed the pace of new filings. Most importantly, they have not
    focused resources on the sick--lawsuits by unimpaired claimants are at
    an all time high.
        Second, the root cause of the ineffectiveness of these agreements
    is that they cannot bind future plaintiffs or non-signatory asbestos
    plaintiffs lawyers. This was precisely the problem that the parties
    attempted to address in Amchem. If that class action settlement had
    been upheld by the Supreme Court, the medical criteria in the agreement
    would have applied to all future claimants, and the claims facility
    would have been able to produce quick and even-handed settlements for
    everyone. In the absence of a class action, defendants had to depend
    upon the promises of signatory asbestos plaintiffs' lawyers to
    recommend settlements based on the medical criteria to their future
    clients--not only when those clients qualify under the criteria, but
    also when they do not.
        In fact, the Amchem defendants and plaintiffs' lawyers entered into
    many such agreements in 1993 and 1994 while the Amchem class action
    settlement was being litigated in federal district court. Those
    agreements committed plaintiffs lawyers to recommend individual
    settlements to their clients based on criteria for impairment by non-
    malignant disease that were essentially the same as the Amchem
    criteria. Five years later, very few, if any, of those agreements are
    still observed by the plaintiffs' lawyers who signed them. And there is
    no practical way for the defendants to enforce such agreements, because
    the asbestos claimants were never parties to them.
        Third, as a judge, I find agreements such as the recent Owens
    Corning settlements disquieting. Serious questions are raised under the
    rules of professional responsibility when 9 lawyers agree with
    defendants to recommend a settlement to their future clients--that is
    why the Owens Corning agreements are conditioned upon the approval of
    ethics experts and judges selected by the parties. The agreements have
    to strike a delicate balance between protecting the future plaintiff's
    right to make his own decision on whether to settle, based on his
    lawyer's unfettered professional judgment, and the interest of the
    defendant in channeling future plaintiffs into the administrative
    framework established by the agreement. Moreover, these Owens Corning
    agreements can only work if practically all experienced plaintiffs'
    lawyers observe what is essentially an agreement not to represent
    clients who do not wish to participate in their National Settlement
    Plan--and if no one else enters the field to take their place. In any
    event, as long as the asbestos litigation system provides economic
    incentives for lawyers to file claims on behalf of a mass of unimpaired
    claimants, it is unlikely that any agreement that prevents some from
    doing so will long survive.

                                   CONCLUSION
        How can anyone be opposed to a system that fully compensates the
    impaired within six months of the date the claim is filed and preserves
    the right of all claimants to seek compensation whenever they are sick?
    To be sure, compensation will be connected to present impairment, not
    just exposure. It should not be enough to say that all those who can
    collect from the system today thereby have some right in perpetuity to
    collect always. Let those who defend the current system explain why it
    is appropriate that persons who are not in any way impaired be
    compensated--thereby threatening more bankruptcies that will not only
    cause great disruption to the companies (and their employees and
    communities), but will seriously impair the ability of companies to
    compensate those who actually become sick in the future.
        The Coalition for Asbestos Resolution agrees with the Supreme
    Court, numerous other federal courts and state supreme courts, the
    Judicial Conference of the United States, and countless independent
    observers that the resolution of this asbestos litigation crisis lies
    not with the judiciary and certainly not with the attorneys alone, but
    with Congress. Both those who are sick from asbestos exposure and the
    companies deserve the creation of a mutually fair system. The time has
    come for Congress to recognize its duty to help overburdened courts and
    the parties do a better job of allocating costs and ensuring speedy and
    generous recovery for those who suffer illness from asbestos-related
    disease.

    STATEMENT OF HON. JOHN ASHCROFT, A U.S. SENATOR FROM THE STATE
                              OF MISSOURI

        Senator Grassley. We will each have 5 minutes of questions,
    and I would like to do it in this way if it is no problem--me,
    Senator Torricelli, Senator Schumer, Senator Sessions, and
    Senator Ashcroft. Is that OK?
        Senator Ashcroft. Mr. Chairman, I want to thank you for
    doing this today. I have had a terribly conflicted schedule
    today. I may not be able to stay. I want to thank all these
    individuals. I want to indicate that I am very eager to go over
    their testimony. I want to thank you, and if I don't get a
    chance to stay for my questions, you can make that as my
    remarks.
        Senator Grassley. We will also have the usual process of
    accepting questions for answer in writing. So you can submit
    those in writing if you aren't able to do it orally.
        Before I start to ask questions, I have statements here
    from Louis Sullivan, President, Morehouse School of Medicine,
    and former Secretary of HHS; Susan Pingleton, President-elect
    of the American College of Chest Physicians. And Senator Baucus
    has asked us to submit a statement from Roger Sullivan, of the
    law firm of McGarvey, Heberling, Sullivan and McGarvey.
        [The statements referred to are located in the appendix.]
        Senator Grassley. We also are going to have coming, it is
    my understanding, other interested parties that might want to
    be filing some statements, like Owens Corning; Myles O'Malley,
    with the New Jersey White Lung Association; Paul Safchuk, of
    the White Lung Association. Their comments are very important
    to us as we address this legislation.
        My first question will be to Professor Edley. Some have
    expressed concern that S. 758 does not require the
    establishment of a trust fund from which victims are
    compensated. Thus, there is no guarantee that claimants will
    ever receive any money. I would like to have your response to
    that.
        Mr. Edley. Thank you, Mr. Chairman. There are a couple of
    things I should point out. First, let me note that Mr.
    Middleton, with respect, misspoke when he suggested that the
    class action settlement in Georgine included the creation of a
    fund. It did not. In fact, that settlement created a cap of $1
    billion per year that the 19 defendants who settled in Georgine
    would be obligated to pay. So there were flow controls on the
    amount of money that would be flowing to claimants from the
    defendant companies.
        There is no such cap in this bill, and to that extent, and
    others, this bill is more favorable to claimants than was the
    settlement in Georgine.
        More generally, here is the problem. First of all, in
    asbestos, unlike other products liability situations such as
    tobacco, we are not talking about defendant behavior that is
    going to continue into the future. You can't simply impose a
    tax on an industry to cover the costs of compensation that will
    arise going forward. Instead, we are focused on conduct that
    occurred in the past and there is no easy way--in fact, it is
    difficult to even contemplate a complicated way to assign
    liability to particular companies and then tax them in some way
    to have the money flow into a Government fund.
        The black lung program, for example, was created, in which
    there was a tax on coal companies to cover the prospective
    costs of the work and the injury that would result in the
    future. But liability arising out of previous conduct was not
    imposed on the industry through an industry tax, but was
    instead imposed on the taxpayers.
        Similarly, in this situation it simply isn't feasible to
    figure out what the shares would be. Remember, we are talking
    about hundreds of different kinds of defendants in scores of
    different lines of business whose liability arises from a
    myriad of different contexts. They may have been manufacturers,
    they may have been distributors, they may have simply owned the
    premises on which some asbestos exposure occurred. Calculating
    year by year, facility by facility, industry by sub-industry,
    what the appropriate share would be just boggles the mind--
    impossible.
        The second--and I will stop with this--the second, and to
    me absolutely conclusive reason why a fund of the sort that is
    often mentioned wouldn't work here is that it is critical that
    insurance companies continue to be at the table. Many
    defendants continue to have some insurance company coverage for
    their liabilities to asbestos exposure, and the question is how
    to make sure that insurance companies continue to pay on
    contracts which make them obligated to help defendants with the
    costs arising from tortlike compensation.
        Insurance companies for the most part probably would not be
    liable to contribute to a fund, and if you try to make them
    liable through some kind of legislative fiat, not only will
    there be a jihad in terms of the insurance company coming up
    here to try to tell you why that is wrong as a matter of the
    theology of the insurance industry, but I think there would be
    serious constitutional issues as well with tampering with their
    insurance contracts.
        Senator Grassley. Thank you very much. Now, I would ask Mr.
    Hiatt, but I would ask Mr. Mallett to listen to the questions I
    am going to ask Mr. Hiatt because I would like a response from
    you after his answer.
        Could you expand on what you consider to be the specific
    merits of the Louisiana plan and why you believe it might be a
    better approach than the Asbestos Resolution Corporation;
    specifically, what is your judgment of the success of the
    Louisiana plan, how many cases have been settled under this
    model, and then have all parties agreed to participate in that
    agreement?
        And then you might respond to that, Mr. Mallett, based on
    the effectiveness and its merits as compared to the process
    that we propose in S. 758.
        Mr. Hiatt. Thank you, Senator Grassley. Let me start with
    the second half of your question. My understanding at this
    point is that the virtues of the Louisiana plan are mainly on
    paper, that the program itself has not really had an
    opportunity to get off the ground in large part because very
    soon after the parties to that agreement, which included a
    large number of companies, trial lawyers, claimants' groups,
    including unions down there, had reached an agreement, word got
    around that some of the companies were going to seek a national
    legislative solution. And that sort of has put the
    implementation of that program pretty much on hold.
        The reason I think that the plan, at least as it is
    intended to work, makes a lot of sense is that it does contain
    several of the elements that are missing here. It is a very
    nonadversarial approach. The issues which have been litigated
    for years and years and now have been acknowledged by all
    parties to be resolved--the liability issues, the product
    identification issues, and others--are not raised anew. There
    are no attempts to bring in the hardware stores and other small
    businesses that Ms. Kerrigan cites. It is a very nonadversarial
    process.
        There are medical criteria that are there. Somebody either
    is found to be impaired and entitled to a certain dollar amount
    or they are found to be exposed, but not yet impaired, in which
    case they are entitled to subsidized testing and monitoring and
    a smaller amount of damages. And they have not waived their
    rights to come back with a claim if they are ultimately
    impaired.
        So I think, on balance, it is a much better approach and
    does give individuals the right to opt out if they choose. The
    unions down there believe that because it is such a superior
    approach, very few individuals would be inclined to exercise
    opt-out rights, just as would have been the case presumably
    under the Fibreboard and Amchem settlements.
        Senator Grassley. Mr. Mallett.
        Mr. Mallett. Mr. Chairman, there are a couple of things
    that I want to point out and make sure that the committee is
    well aware of. Mr. Hiatt and I agree that medical criteria are
    indeed a necessity. To the degree that you have a system whose
    foundation is indeed a line of demarcation between those
    persons who are sick and those persons who are not, the
    Coalition would leap to support that and be very enthusiastic
    in its endorsement.
        On the concept of voluntariness, again, as far as we look
    at 758, it is voluntary to the degree that a person who goes
    through a 1, 2, 3-step system, indeed should they be
    disappointed by the offers that have been placed on the table
    by the defendant companies, can opt to go to court.
        Now, in terms of dropping out of the system, which is I
    think how some persons would define voluntariness, the
    important point, Mr. Chairman, is this. Either the medical
    criteria is going to apply to every single person involved in
    the system or it is not. You can't gather people effectively in
    a system designed to organize a solution to this kind of
    problem and allow people to say, I will choose from aisle A but
    not from aisle B.
        The important point is that if there is agreement, and I
    think that I heard agreement that medical criteria should be
    assigned as the foundation upon which any program that you
    design rests, if we build from there, the imposition upon every
    person who comes to solve a particular personal health crisis--
    are you sick or are you not--should be the same for everybody,
    a critical point.
        On the voluntariness of the private agreements, all I can
    say is it has been the experience of the companies who are part
    of the Coalition that because they are voluntary, because the
    plaintiffs themselves do not sign the agreement, it is a wisp
    of paper upon which the defendants prayerfully hope that the
    agreements will be met. We are dealing with a nonregulated
    circumstance, and what we are asking for and what I think the
    bill is designed to provide is predictability.
        Senator Grassley. Mr. Heyman, and then I will go to Senator
    Torricelli.
        Mr. Heyman. Yes; Chairman Grassley, if I could make just
    one comment, the Louisiana settlement experience is a dramatic
    illustration that this notion of voluntary actions doesn't work
    at all because Louisiana has been set up 2 years ago and there
    hasn't been a single case, I understand, that has been settled
    pursuant to the arrangement. Only a handful of lawyers have
    agreed to enter into the arrangement.
        Major asbestos lawyers have refused to join it. It hasn't
    been replicated in a single other jurisdiction. And if this is
    labor's solution to the matter, it is pretty sad because it is
    not a constructive alternative. And the whole gist of Mr.
    Hiatt's testimony, as I understand it--and we ought to make
    this clear at the outset--is that he is in favor of what you
    would call a voluntary system. In other words, we should set up
    this administrative facility to compensate sick people and pay
    them promptly. But then with regard to nonsick people, they
    ought to be free to sue in the tort system.
        Well, unless you solve by means of this legislation the
    problem of the nonsick cases and the nonsick people filing
    claims and finite resources being squandered on nonsick people,
    thereby jeopardizing the ability of sick people to collect, you
    haven't accomplished, in my view, anything. And it is very
    interesting that this Louisiana settlement would be raised by
    Mr. Middleton and Mr. Hiatt as a classic example of what they
    would like to see. Let's talk about the success or failure of
    that settlement.
        Senator Grassley. Mr. Middleton, go ahead.
        Mr. Middleton. Thank you. I would like to respond to the
    problem with setting up artificial medical criteria, if I
    might, Mr. Chairman. The problem is that State workers
    compensation laws control who is going to be paid by the
    employers and by the employers' insurance companies when a
    person is diagnosed with disease.
        Those criteria, as established under State law, require
    that companies pay out medical benefits under the comp laws
    before they would qualify under this system. As it is currently
    in place, the employers and their insurers are properly
    reimbursed. This is the point that Congressman Scott was trying
    to make.
        You have this huge open area where employers are paying out
    the medical benefits, but under these artificial criteria there
    is no reimbursement, there are no credits available. And so the
    system that now allows for the proper payment to end up in the
    hands of the victims of this disease and for the payers of the
    medical benefits is prevented under this system because there
    is no way to dovetail the medical criteria which are completely
    artificial and out of whack with what the medical community
    sees with the State compensation laws and what it requires
    those companies to pay out.
        So it is really harmful to employers, and the Newport News
    Shipbuilding Company, the largest employer in Virginia, is a
    prime example. That is why they are so adamantly opposed to
    this bill because it takes away millions of dollars that they
    have actually paid out in benefits that they get reimbursed,
    and on Federal work the U.S. Government properly gets
    reimbursed for.
        Thank you.
        Mr. Mallett. Mr. Chairman, just for the record, I strongly
    disagree categorically with 99.9 percent of what Mr. Middleton
    just said. You can, in fact----
        Senator Schumer. Would you tell us the .1 percent?
    [Laughter.]
        Mr. Mallett. That is that somehow, under workers
    compensation, the system can be rationalized. Very quickly, Mr.
    Chairman, the medical criteria under State law can easily be
    matched with the medical criteria of Federal law. We see that
    every single day, and that which is going on now should not
    prevent a rational solution to the problem in the future.
        Senator Grassley. Senator Torricelli.
        Senator Torricelli. Thank you, Mr. Chairman.
        Mr. Hiatt, I am somewhat unaccustomed to having positions
    that are at significant variance with the AFL-CIO, and a good
    deal of that reason is I think we identify our constituencies
    similarly. And I would like to explore whether indeed our
    differences are as wide as they might appear.
        In Mr. Georgine's correspondence that you have submitted
    for the record, he says, ``I do not disagree that asbestos
    victims deserve at their option an alternative to the tort
    system, because the tort system can often be lengthy, costly,
    adversarial, cumbersome, and technical.''
        That is a broad statement. Does it necessarily mean that
    this alternative must be privately agreed upon, or that there
    is, if somewhat differently designed, a congressionally-
    designed system that could be fair to the workers?
        Mr. Hiatt. If this is all it takes to put our position back
    into a consistent line with your own, Senator, I don't think
    there is much of a problem. We have made it clear that we
    aren't opposed to the notion of a legislative solution, per se.
    In fact, I think that is where Mr. Heyman misunderstands the
    comparison we keep making with the Louisiana approach.
        We are not saying that a Louisiana-type approach would have
    to be done on a completely voluntary basis, and have indicated
    an openness to a legislative solution. But I think the key in
    that portion of Mr. Georgine's letter that you read was that it
    be at the individual's option, just as----
        Senator Torricelli. I have to guard my time here jealously.
    So, indeed, Mr. Georgine is open to an alternative system, and
    even open to it being a congressionally-designed system. It is
    a question that it be optional.
        You recognize that as we have written this legislation, if
    at the end of the day the worker is displeased and can meet
    certain criteria in the system, there still is a court option.
        Mr. Hiatt. Well, I mean there are two fundamental problems
    with saying that this bill is a voluntary approach. First of
    all, the number of hoops and the complexity of the hoops that
    workers have to go through, that claimants have to go through,
    to get back into the tort system, and then second there are all
    kinds of modifications to the existing tort system.
        Senator Torricelli. I understand that, but if indeed we do
    not philosophically disagree on there being a congressionally-
    designed system and if we both recognize that if the system is
    not working properly, there should be an option to return to
    the courts, then it would appear to me that what were our
    considerable differences have not narrowed to simply the
    criteria by which you reenter the tort system at the end of the
    process. So what began here as a significant gulf, to me, has
    just considerably narrowed to a writing of criteria and
    definitions.
        Mr. Hiatt. Well, I almost agree with that. I think that a
    lot has to do with----
        Senator Torricelli. Well, is it better than 99.9?
    [Laughter.]
        Mr. Hiatt. It is not just the criteria, but also what is
    that process that people are forced to go through before the
    criteria let them back into the tort system, and then what has
    been modified in the tort system itself.
        Senator Torricelli. But for all of us to recognize--I see a
    situation with 200,000 cases and 50,000 new filings, where a
    significant number of these workers' lives may expire before
    they ever reach settlement. You and I have a similar objective
    here to get this done.
        Mr. Hiatt. Absolutely, Senator.
        Senator Torricelli. Do you actually have the numbers of
    these workers whose lives are expiring before their cases are
    heard?
        Mr. Hiatt. I don't offhand. We can try to get that
    information for you.
        Senator Torricelli. Do you know the average award that the
    workers are receiving and the percentage of that that is not
    going to them or their families, but to costs?
        Mr. Hiatt. Not in dollars, but we certainly agree with the
    point that many of the companies make that it is an
    unfortunately high amount.
        Senator Torricelli. As you look at why this bill is
    bipartisan and crosses philosophical lines, just so we
    understand each other, that is what is going on here. I mean, I
    understand the Supreme Court's concern with the courts being
    overworked. Frankly, I think a lot of Federal judges could work
    a little bit harder. That doesn't bother me. What bothers me is
    that people who deserve this help may not get it, and when they
    finally reach an award they are not keeping their own money.
        Mr. Hiatt. We do agree and we are most willing to explore
    alternatives. We just don't want to substitute a system that is
    going to be even worse than the one that we have right now.
        Senator Torricelli. Mr. Heyman, a rather significant
    statement was made about you that I think you should respond
    to. If I get this right, ``GAF hid medical information so
    employees would keep working.''
        Mr. Heyman. There is no evidence of that that I know of,
    Senator, and I am sure the asbestos lawyers would have produced
    it in the 300,000 cases they have brought against us.
        We held the company business for 3 years. I think we acted
    pretty darn responsibly in shutting the business down as soon
    as the medical studies were published. And for us to be assumed
    to have more information on a business that had $1 million of
    sales a year than the U.S. Public Health Service which was
    requisitioning this product is really not credible.
        Senator Torricelli. So in addition to there being no
    evidence of this, you categorically state that this is simply
    not true. You were unaware of it?
        Mr. Heyman. Absolutely.
        Senator Torricelli. Why, Mr. Heyman, as a business
    judgment, given the potential liability, did GAF simply not
    adopt the Owens Corning model of a national settlement program?
        Mr. Heyman. Well, I would say that, in my view, Owens
    Corning has made a serious mistake in connection with that
    settlement. So that we all understand it, what the company has
    done essentially is to settle almost all its pending cases,
    about 250,000 cases in all, most of which involved nonsick
    claimants, for about $2.5 billion in upfront cash. About $1
    billion will go to the asbestos lawyers, which incidentally
    will make this one of the biggest pay days for lawyers in the
    history of tort litigation.
        Now, what Owens Corning is banking on in return is that
    they are receiving promises from 100 major asbestos firms
    around the country that these firms will use their best efforts
    to persuade nonsick claimants in the future not to file
    lawsuits against OC, and sick claimants to enter into
    prearranged settlement agreements. Obviously, the settlement
    does not bind the thousands of other lawyers who are not
    entering into these agreements, nor does it bind future
    claimants.
        And let me make three simple points about this settlement.
    First, and most important, the OC settlement is about as
    antithetical to the philosophy embodied in the proposed
    legislation as you can get, for it perpetuates rather than
    corrects all the flaws of the current litigation system by
    squandering finite resources on huge upfront cash payments to
    lawyers and current nonsick claimants at the expense of future
    sick claimants whose payments under the arrangement will be
    discounted from normal values and deferred over time, if, of
    course, there are sufficient financial resources left to
    satisfy them.
        Under the proposed Senate legislation, claimants, on the
    other hand, will receive full value--sick claimants, that is,
    will receive full value paid in a timely fashion. Second, GAF
    and 19 other co-defendants have been there, done that, and it
    doesn't work. In 1993, we entered into agreements with 50 of
    the Nation's leading asbestos firms, and this was aside from
    the Georgine settlement which was obviously subject to approval
    by the court. But this was supposed to be independent of the
    Georgine settlement.
        We entered into agreements with 50 of the Nation's leading
    asbestos firms to settle 50,000 cases for $750 million, and we
    received promises similar to those given to OCF under their
    settlement today. And as soon as the check cleared for the $750
    million, the lawyers, including Mr. Middleton, I might add,
    repudiated the agreements and began filing nonsick claims at an
    even faster and more furious pace than ever.
        Finally, there is just not enough money in the world to buy
    off all the asbestos lawyers. And what is to stop a lawyer with
    an asbestos firm who signed the agreement from going off on his
    own, opening a law office across the street, and making a
    specialty of bringing asbestos cases against Owens Corning?
        Senator Torricelli. Thank you. Mr. Chairman, I didn't get
    to ask Mr. Middleton anything. I had hoped that we might have a
    brief second round, if that is possible.
        Senator Grassley. We will take care of your concerns.
        Senator Torricelli. Thank you.
        Senator Grassley. Senator Schumer.
        Senator Schumer. Thank you, Mr. Chairman. I want to thank
    the witnesses for their testimony. Before I ask my questions, I
    guess I would like to just lay out a little scenario here.
        There are two levels that this legislation is debated at.
    One is the specific level which I would like to get to. The
    other is the larger level of what is the balance between
    litigation and--well, the litigation side and the corporate
    side. I have been sort of moderate on those issues because it
    seems to me that while the trial lawyer system we use is messy
    and inefficient and leads to frivolous suits, there are many,
    many instances where without it nothing would happen and real
    injustices would not come to light, that the legislature is not
    able to do it, that individuals alone are not able to do it, et
    cetera.
        So there is a real balance here and you have to weigh them,
    and it is one of the issues I think that this Congress has been
    struggling with. But it seems to me in this situation we have
    been through that, and the corporations who may have done wrong
    here, or at least injured people, have been basically brought
    to the realization they have to do something to compensate
    people. We are not at the first stage where people say, no, no,
    no, we did nothing wrong, we shouldn't have to pay a nickel.
        And once we get to that stage, it seems to me that
    settlement is the right way to go. To continue the litigation
    and continue everything, this is not the time that that is
    needed, and that is why on this issue I think there ought to be
    a strong lean in favor of settlement because the 75 or 60
    percent that will not go to the victims is necessary at the
    beginning to prove damage and to prove illness and to prove all
    these other things. But we have done that, and most of the
    industry in one way or another is willing to settle and pay out
    large amounts of money to truly injured people.
        So in these sort of mature claims, I think it is different
    than in the early stages. It is sort of like, I guess, in a
    certain way the tobacco settlement. The tobacco companies
    resisted and resisted and resisted, but then there was a time
    for settlement. And because probably there was a fewer number,
    or whatever reason, settlement at least in part came about,
    although these settlements are difficult.
        So my strong lean in this is to come to a settlement
    because the endless litigation which, Mr. Middleton, I have
    to--you say that it won't clog the courts, but all the Supreme
    Court Justices say it, and the number of potential cases is
    enormous. But that is not my issue. If it were to clog the
    courts and there were no alternative to producing justice for
    people who suffered, so be it.
        So then the nub of the issues boils down to once you
    believe that there ought to be some kind of settlement, the
    question is--Is it a fair settlement? And this relates to Mr.
    Hiatt's discussion with Mr. Torricelli. It seems to me the nub
    of it here is this, not how much of the settlement should go to
    lawyers versus victims--that is always out there and we are not
    going to settle all of that--but how much should go to victims
    who truly have been hurt by this system, as opposed to victims
    who might be hurt by the system.
        As I look at this settlement, it seems to me to do a darn
    good job of getting money to the people who are truly hurt, and
    getting it to them quickly and without delay, or without too
    much delay. It will never be without delay. And for those who
    might have something called pleural hardening, which has no
    effects on the person and has no cure, if, God forbid, that
    pleural hardening develops into something that makes someone
    sick, they can opt into that system even if it is 10 or 15
    years from now.
        So I think the settlement seems to me to be a good
    settlement. And, yes, if you want to say that every person who
    might get sick should retain their right to sue on a voluntary
    basis, I think you have to say that at the expense, because you
    are not going to get the corporations who settle to say, OK, we
    will pay all the people who are sick and we will let everybody
    who might become sick sue us--that is not a settlement at all,
    so what you are saying basically is we will make sure that
    everyone who truly is sick gets compensated in a fairly
    generous way, as I read the legislation, and keep everyone who
    might get sick in line, but now allow people who will not get
    sick, even though they have been exposed to asbestos, to just
    collect claims right now. That seems to me to be a pretty fair
    tradeoff.
        So my first question comes to Mr. Hiatt. I understand that
    there are people whom you represent, and ably represent, who
    might say, look, I would like to get some money now. But what
    is wrong with a basic compensation system that says we are
    going to put our first dollars, and they are limited, to those
    who are sick, and since this happened during World War II, much
    of it, may not be around in future years? That is where I have
    problems with this. That is why I thought Georgine was a good
    settlement because it did bring most everyone in, although it
    didn't have all the restrictions.
        But if you could answer for me why you--do you disagree
    with that premise, No. 1? And, No. 2, if you don't, then why
    aren't you supporting this type of settlement?
        Mr. Hiatt. Not only do I not disagree with the premise, but
    we do support that premise. At the risk of raising Mr. Heyman's
    hackles in mentioning Louisiana again, let me just say that I
    recognize the difficulty of a Louisiana settlement that applies
    only in Louisiana. But the notion behind the Louisiana
    settlement is exactly what you have just described. It does
    provide for a reallocation of the benefits to the people who
    are already impaired, who are truly impaired, but it does not--
    --
        Senator Schumer. Doesn't this settlement do the same?
        Mr. Hiatt. Maybe and maybe not. It purports to want to do
    that. We would argue, first of all, that the difficulty that
    claimants with real impairments have in processing those claims
    makes it questionable about whether they will have an even
    harder time in having claims satisfied--I am talking about the
    truly impaired--here than they do under the present system.
        But the other disadvantage is that we are not saying that
    the exposed but not yet impaired are entitled to the same kind
    of claims that the truly impaired are, but they should have
    their testing and monitoring provided for as they did in
    Georgine or in the Amchem settlement, as they do in Louisiana.
    They should have some kind of nominal damages because in many
    States this is recognized as a tort. What the companies don't
    like is the bundling of these claims of the nonsick or the not
    yet impaired and the impaired, where the not yet impaired are
    getting excessive settlements.
        Senator Schumer. Mr. Hiatt, wouldn't it be reasonable not
    to bundle those claims?
        Mr. Hiatt. Yes, yes. We agree with you.
        Senator Schumer. Forgetting that each side has its own
    economic interests which they are pursuing, it seems to me when
    you are trying to make policy, it would be a good idea not to
    bundle the two claims together. And as I understand it, one of
    the major problems in all the suits that are brought is that
    they do bundle the two claims together.
        Mr. Hiatt. Absolutely; we are in total agreement with you
    on that, and that is why we agree that one should look for a
    new approach. And the approach of distinguishing between the
    not yet impaired and the impaired in terms of damage
    entitlement is completely reasonable, but this bill is the
    wrong approach. This bill is not going to do that.
        Senator Schumer. Let me ask you, if we didn't have this
    bill, wouldn't all the things you say are wrong continue--the
    bundling together of the impaired and unimpaired; like Mr.
    Torricelli brought out, the continued attrition, if you will,
    or people dying who are ill?
        It seems to me at this stage of the game, as I mentioned
    earlier, this does the most good compared to not an ideal
    solution, but to the practical solutions out there for the
    people who are truly ill.
        Mr. Hiatt. Well, I guess we disagree at the point that we
    do not believe that this bill would represent an improvement.
    We believe this bill would make things even worse, but we do
    believe that one could fashion an approach, even a legislative
    approach, that would be better certainly than this bill, and
    certainly than the existing system.
        Senator Schumer. Could I just ask one of the people on the
    other side to respond?
        Senator Grassley. Yes.
        Senator Schumer. Mr. Heyman.
        Mr. Heyman. If I could say one thing, I just want to
    underscore something that you alluded to, Senator Schumer. This
    legislation is much better for nonsick people who will become
    sick in the future than under our current situation. There is
    no question about it. Under our current tort system, because of
    statute of limitations defenses, and so forth, nonsick people
    must bring premature lawsuits, which is one of the major
    problems here, before they get sick. And they are supposed to
    be compensated, of course, according to their physical
    condition at the time of the trial, and if they get sicker
    later on, they can't come back. Under our system, you can.
        The only people who lose here, as Professor Edley said, are
    the people who are not sick now and who will never become sick.
    And the question I think we are getting down to with Mr. Hiatt
    is if someone has a freckle on their lung because of asbestos
    exposure and there is no ailment, there is no physical symptom,
    there is no disability, and so forth--and believe me, three-
    quarters of America was exposed to asbestos. There is not
    enough money in the world to compensate everybody because they
    were exposed to asbestos, whether or not they are injured or
    not.
        Now, Mr. Hiatt would say, well, if he has a freckle on the
    lung, I want him to be able to continue to file a lawsuit in
    the tort system. And that is what is ruining this system, the
    inundation of these cases of people who are not sick. There is
    just not an unlimited amount of money to give to everybody.
        Mr. Hiatt. That is not what we have said. We have said that
    the not yet impaired, even if we could come up with an
    alternative dispute system, should be entitled to testing and
    monitoring. These people have been exposed and many of them
    will come down with impairments. It is fine for them to say
    that the statute of limitations is tolled and they will be able
    to come back in with claims. But most of these people won't
    know if and when their claims have matured and they do start
    having serious asbestos-related diseases if they do not have
    some kind of testing and monitoring system, which most of those
    people do today under the existing system. They know right now
    that many of their tort lawyers have provided free testing and
    monitoring. That is not going to be available anymore.
        Senator Schumer. Let me ask you a question. If they were to
    add to their proposal free testing and monitoring, which I
    understand is about $200 a test, which is far less than the
    sums we are talking about, would you support it?
        Mr. Hiatt. That is one of a number of things in our
    testimony, Senator, that we have said needs to be changed in
    this bill. On that one issue, that is an important aspect. It
    is not the only one.
        Senator Grassley. Here is what I want to do. I want to go
    to Senator Sessions, then I want to give Senator Torricelli an
    opportunity to ask a second round of questions, and then I hope
    that I can dismiss this panel and get on to the third panel.
        Senator Sessions.
        Senator Sessions. Mr. Chairman, I thank you for having this
    hearing. As a person who has spent a large portion of my
    professional life actively in a courtroom, and as a believer in
    the rule of law, a believer in justice and fairness, I think we
    have got to fundamentally look at what is happening in asbestos
    from that basis. We have got to ask ourselves is what is
    happening today just and fair for people who are dying from
    asbestos-related diseases.
        Now, we know the basic history of it; it is not
    complicated. Asbestos is a very effective substance for a lot
    of different reasons. Plaintiffs' lawyers determined and were
    able to prove in court that manufacturers of asbestos had
    learned that it had adverse health consequences, and they were
    able to then allege and prove that it was sold to distributors
    without any warning on it and that people's health had been
    damaged by it.
        We have now had over 200,000 lawsuits of this kind filed;
    over 200,000 apparently are pending, and maybe another 200,000
    expected. What we know from the numbers Ms. Kerrigan was using
    is only 40 percent of the money paid out by the asbestos
    defendants actually got down to sick people, or sick or not,
    actually got to the recipients of the payments.
        Now, as a person who believes in the rule of law and
    justice in America, that is not it, that is not acceptable. I
    do not condemn the lawyers who file the lawsuits because, in
    fact, they uncovered a big, bad problem in America and have
    gotten some people compensated for it.
        But as Senator Schumer indicated, we are not at the
    beginning of these cases anymore. We are past that point. We
    now have a situation in which who knows how many other people
    may have been damaged by asbestos, and how will they be
    compensated?
        Now, we have methods of compensation; we do it with workers
    compensation. We say precisely by legislation how monies should
    be distributed. I think we now have all the facts we need to
    know. Asbestos is bad for you; it causes sickness. The asbestos
    company manufacturers, many of them, deliberately hid the
    dangers when they were shipping it out and people are having
    serious problems with it.
        So I really feel strongly that this is a rational way to go
    about getting money to the people who need it. I don't see why
    we can't, in short order, get 90 percent of the money paid out
    by defendant companies directly to a sick person. And it was
    pointed out to me recently--when I said only 40 percent was
    getting to the victims, it was pointed out to me that a lot of
    the money is going to people who have not yet become sick. So,
    really, even less is going to people who have become sick as a
    result of this disease.
        So I am delighted that we have a bipartisan effort to
    analyze the problems that we are dealing with and see if we
    can't come up with a method to distribute justly and rationally
    proceeds to sick people.
        Mr. Edley, I think you have observed this fairly
    objectively as a person who cares about the system, you
    teaching at Harvard and all. Would you comment? Am I off base
    about this?
        Mr. Edley. Not at all, Senator. I think that you hit the
    nail on the head. I will say that much of the opposition to
    this legislation, I have to say regretfully, is kicking dust in
    the air. For example, the workers compensation issue that was
    raised by Congressman Bobby Scott--frankly, I think that the
    logic is somewhat tortured.
        The medical eligibility criteria in this bill are more
    generous to the victim than State workers comp laws. State
    workers comp laws hinge on disability, whereas the impairment
    line drawn by this test--people will receive compensation under
    this legislation who would not be eligible for compensation
    under workers comp. So I think that the argument that somehow
    this legislation is going to chase claims into workers comp is
    specious.
        I should also point out that the alleged complexity of the
    administrative process suggested in this statute strikes me as
    missing the ball completely. Three steps: medical eligibility,
    ADR, and your choice of arbitration versus litigation. Now, if
    the AFL-CIO or others want to eliminate a 60-day mandatory
    period of ADR, fine. I doubt that the defendants would have
    much objection to that.
        But I have got to tell you it sounds to me like that is a
    bad idea for victims because it is the period of mediation that
    forces the companies to come to the table, put a good-faith
    offer in front of the victim, and then face a penalty if it
    turns out that that offer was too low. That is good for
    victims. But if, for some reason, in a rush to get to the
    courthouse people want to dispense with that and make that
    completely optional, it doesn't seem to me it is the end of the
    world. But I just question whether that is a provictim change.
        With respect to the first step, determining medical
    eligibility, we are talking about simply submitting your tests
    to a set of independent people, claims examiners who would
    review it, independent doctors who would have to approve a
    denial, so it is easy to say yes to the victim and hard to say
    no. And that, it seems to me, is also beneficial to the
    claimant and not at all the kind of burdensome process that Mr.
    Hiatt described.
        And at the end of that medical eligibility system
    determination, what the victim gets is a certificate that is
    presumptively binding, unless clearly erroneous, in any
    subsequent litigation. It is not spinning wheels, it is not
    burning up time. It is producing something that is of value
    that will drive defendants to the bargaining table and that
    will be useful in any subsequent litigation. It is a simple 1,
    2, 3-step system, Senators.
        And I think that there are things that can be worked out
    that may be of more liking to the AFL-CIO. There are several
    things that are being discussed in, I think you call it the
    other body, but the elements of a consensus are certainly
    before you.
        Mr. Middleton. Might I respond briefly, Mr. Senator?
        Senator Sessions. All right, yes, sir.
        Mr. Middleton. If the rule of law is to be observed, then
    you have got to look at the complete language in the Ortiz
    case. What the court in Ortiz said--that is, the Fibreboard
    decision--was that any ADR resolution at all must ensure the
    seventh amendment right to trial by jury. By openly stating
    that this bill will knock out 50 to 80 percent of the claims
    that would otherwise be deemed eligible under State law, State
    case law, State statutory law, you are denying them that
    seventh amendment right if you administratively knock out that
    claim.
        I happen to agree with Senator Schumer that we have been
    there and done that. That is why for years the transaction
    costs were high because there were insurance coverage disputes.
    In every case, regardless of what the court ruled with regard
    to what was evidence and what was not, the defense lawyers came
    in, and time and time again, at the direction of their
    employers, the insurance industry, came in and disputed the
    same documents over and over and over.
        That is why the Owens Corning settlement is indeed so good
    because it knocks that out. The transaction costs now are
    nowhere near what they were in the early 1980's, where the
    figures that were quoted--and if you extrapolate backwards the
    1981 to 1983 figures that became the basis finally of the
    Supreme Court dicta in Ortiz, that is where those figures came
    from, when everybody was fighting every issue, the carriers
    were fighting coverage.
        Finally, Mr. Senator, I would like to say this to all the
    members of the committee. Many of the manufacturers actually
    want to pay the pleural disease claims. What is called a
    freckle by Mr. Heyman is indeed considered under State laws to
    be asbestos disease and recognizes the progressive nature of
    the problem. Therein lies the reason they want to settle now
    and pay those claims because they may have insurance problems
    which will preclude them from being able to handle those
    liabilities later on if their coverage ceases to exist.
        Senator Sessions. Mr. Chairman, I think we as a Congress
    can craft constitutionally a system to disburse benefits to
    people who need it. I don't think we can go along with a system
    that continues to have almost half of the money go to lawyers,
    plus additional costs, and only $1,700 out of $5,000 actually
    getting to the victim. That is just not acceptable.
        I know you will work with that. If we can work with Mr.
    Middleton and others to make sure that we are consistent with
    the request, Judge Mallett, of multiple courts that we do pass
    legislation--courts are begging us to do--I believe we can do
    it and I think it will be a good thing for those who have been
    injured.
        Senator Grassley. Senator Torricelli.
        Senator Torricelli. Did you want to ask something about
    that, Chuck?
        Senator Schumer. I was just going to ask Mr. Middleton a
    question. Do you disagree that the proposed settlement, if that
    freckle, so to speak, develops into full-fledged asbestosis,
    would compensate the person at that point for their illness,
    and compensate them rather well?
        Mr. Middleton. I don't agree, Mr. Senator, that this is a
    settlement of anything because if we have been there and done
    that, and if all those issues should have been resolved, then
    why, in crafting this bill, don't we waive the defenses that
    have already been resolved that you, Senator Schumer,
    acknowledge? Why don't we include putting the money that is
    available on the table?
        The Supreme Court stated that the resolution has got to be
    voluntary; they have to put money on the table and there has to
    be prompt payment. There is no money in this bill and all
    defenses are preserved. Every defense is preserved, so if you
    go through this 5-month--and that is very optimistic--
    procedure, then they still get to raise them if the person gets
    to go to court if he is one of the 30 to 50 percent that is not
    knocked out and his constitutional rights are not prevented in
    this case.
        Senator Grassley. Senator Torricelli.
        Senator Torricelli. Thank you very much.
        Mr. Middleton, if it is unusual for me to have a difference
    of view with the AFL-CIO, it is only somewhat less unusual for
    me to be at variance with the trial lawyers, and I wanted to
    see whether we couldn't also in some way narrow our differences
    here.
        As Senator Schumer had pointed out, this is a peculiar area
    for such a conflict. We have a situation where there is no
    dispute as to the cause of the problem. There is no dispute of
    a willingness to pay. There is no dispute over the people who
    are responsible. We are only talking about process. That is
    very unusual when the stakes are so high and the situation is
    so complex. The Supreme Court having made clear in very unusual
    terms that the Congress bears a responsibility to establish an
    orderly process, it would not be responsible for Congress not
    to deal with this issue, in my judgment.
        Now, I am a believer in the tort system. I am a believer in
    the system of contingencies as the only means of keeping the
    courthouse door open for indigent, or even middle-income
    people. I believe in the process, but you cannot expect this
    Congress to be idle, with 200,000 cases and an additional
    50,000 filed a year, and the Supreme Court on two occasions
    challenging us to act.
        Now, I want to narrow here is in my conversation with Mr.
    Hiatt, if we have an administrative procedure that nevertheless
    provides for claimants a chance to return to the court system
    if justice is not done and a threshold is not met, is our only
    dispute about the criteria by which you get a second bite at
    the apple to return to the system, or do you simply dismiss
    that there is any administrative procedure defined on any basis
    that we could have, no matter how we defined a return to the
    traditional tort system?
        Mr. Middleton. Senator, we have arrived at three
    principles--and when I say ``we'' I speak for the Association
    of Trial Lawyers of America--in conjunction and which have to
    dovetail with the Supreme Court's decision, not their dicta but
    the decision in Ortiz, and those recognize that any ADR
    mechanism must not trample the Seventh Amendment right to trial
    by jury. That gets into the inadequacy of the artificial
    medical criteria that are developed here.
        But here are the three principles. We believe that any ADR
    system has got to be voluntary and it has got to be non-
    exclusive. That was the Amchem settlement; it was voluntary. It
    should not interfere with a victim's access to the court
    system. It should not foreclose the available of any common law
    remedies or limit the victim's access to counsel.
        Number two, any alternative claims procedure must actually
    reduce delay and uncertainty for the victims. The only way that
    can be done is if you get rid of the defenses which this bill
    allows them to preserve. It has got to be minimally adversarial
    and legalistic. And so the substantive as well as the
    procedural defenses that Senator Schumer recognized that have
    been litigated and litigated and litigated and that have been
    established have got to be waived.
        The time period for eligibility determinations should
    absolutely be specific, and compensation amounts obviously
    should be fair. But in order to do that, the payment schedules
    should also be specified and fully disclosed to all the
    claimants so that they know what they are getting into before
    they enter into this voluntary process so they can judge
    whether they have to waste five months, which I believe is
    extremely optimistic under any program, or they can resort to
    the tort system which is compensating the most serious people
    now because of the docket.
        And finally I have a third point.
        Senator Torricelli. Excuse me. The chairman is being very
    generous with my time. However, his mood may change.
        Mr. Middleton. I understand. Finally, the third principle
    that we believe is critical is that financing provisions have
    got to be comprehensive. In other words, the funding has got to
    be sufficient to handle the projected flow of the cases and the
    allocation of that financial responsibility has got to be
    determined for the defendants and all the insurers, and that
    should be legislatively determined.
        Senator Torricelli. Mr. Middleton, under no circumstances
    would this committee design legislation that violated the
    seventh amendment right for people to access to these courts.
    That will not happen. We have provided for a return to the
    system. That is why I am suggesting that there may be less
    difference here than it appears.
        We are only debating the criteria by which a person gets
    back and what needs to be established. We recognize that
    ultimately we can put people into an administrative system, but
    we cannot take away, and do not seek to take away, their right
    to ultimately get to the courts if that is required.
        I would prefer that all parties to this work with us and
    try to design a system that meets everybody's obligations and
    is ultimately fair. It is not as if everyone now is getting
    their day in court and getting this settled. Waiting three
    years for a result on an application to the courts, 55 cases
    going to jury trials out of 200,000 that are pending--people
    are seeking settlement remedies, I suspect, in large measure
    because they do not think the courts in a timely fashion can
    deal with this or they can be dealt with fairly.
        Mr. Chairman, if I could just very quickly, Mr. Hiatt and
    then Mr. Edley, I know, wanted to respond. Mr. Hiatt, I simply
    also want to leave you with this. We have another area of
    common interest and it is the goose that laid the golden egg.
    Fifty corporations have gone bankrupt. If indeed we do not
    reach some settlement, we are not only going to lose the
    employment of the remaining corporations, but more importantly
    there is going to be no one left to make these claims.
        I have a responsibility to the GAF Corporation as a company
    in New Jersey with 3,000 employees. It is one of the larger
    employers in my State. I would regret to lose those 3,000
    employees in my State. I would regret even more if the 1,000
    claimants who have nothing else in life to pay their medical
    bills or future medical bills lose the source of that.
        I only urge then, finally, to work with us in trying to
    fashion something that is fair because the people we care about
    the most are going to be victimized again if these corporations
    are lost and seek bankruptcy protection and there is no one
    left to pay. I think that is an obligation on all of us.
        Mr. Edley, did you want to respond to a comment that was
    made?
        Mr. Edley. I did, Senator. Thanks very much. Just quickly,
    I think Mr. Middleton's discussion about the waiver of defenses
    is just flat wrong. He is describing some other piece of
    legislation on some other planet. This bill contains a broad
    waiver of defenses. The only thing that companies under this
    bill would be left to litigate are is the claimant really sick,
    and as to that there is a presumption from the medical
    eligibility determination that is all but binding; the product
    I.D., like was my product even in Seattle; and the amount of
    damages. I mean, that is called providing a little bit of due
    process to the defendants in this. There is a very broad waiver
    of defenses, as there was in the Georgine v. Amchem settlement.
        The basic problem here, I think, is that Mr. Middleton
    doesn't want to draw a line at all between the sick and the
    nonsick. The fundamental policy choice to which Mr. Hiatt
    agreed is not something that ATLA is willing to agree to. So
    make no mistake about it, if you want to compromise this out in
    a way that would be agreeable to ATLA, I think you have got a
    fundamental policy issue there about are you willing to draw a
    line.
        The argument with Mr. Hiatt, as best I can understand it,
    is less with where the line is drawn, because I think that
    drawing the line where it is drawn in Louisiana is only
    infinitesimally different from drawing the line where it is in
    this legislation and that is important.
        The question is, for the people who don't quite make the
    impairment line, will there be some extra provision, for
    example, to subsidize their costs of medical testing. That
    seems to me to be a somewhat separable issue from the basic one
    of will you draw a line.
        Finally, I just want to point out that the issue of
    voluntary ADR that Mr. Middleton spoke about--as it happens
    now, with the huge bundling of thousands of cases that can
    occur at the behest of plaintiffs' counsel, what goes on is
    that there is ADR between the plaintiffs' lawyers and the
    defendants. No one polices the way in which the plaintiffs'
    counsel then turn around and distribute the money to their
    hundreds and thousands of clients. No one polices it.
        So if you were to ask the question, what is the average
    amount that is paid to people with mesothelioma or people with
    pleural plaque under these voluntary arrangements that Mr.
    Middleton talks about, the answer is who knows? We don't know
    because the plaintiff's counsel basically has to make a deal
    and is trading off the interests of the sick and the nonsick in
    order to keep their client base, to keep their, quote,
    ``inventory'' going. There is no volunteerism to that because
    claimant victims don't really have all the information about
    what is going on. This is system in that respect is a major
    improvement in the ability of claimants to determine their fate
    in the adjudication of the damages that they deserve.
        Senator Torricelli. Thank you.
        Senator Grassley. Mr. Heyman.
        Mr. Heyman. If I could just make one comment, first, I
    wanted to endorse Senator Torricelli's notion that we ought to
    try to reach some constructive resolution if we can, and we
    have been endeavoring to do that. With regard to Mr. Hiatt's
    suggestion with regard to medical monitoring, we certainly
    would--I am only one member of the Coalition, but we certainly
    would be willing to consider that. The only problem is every
    time Jon has a suggested change and we meet it, there is
    another problem. But we live in hope and we would like very
    much to----
        Mr. Hiatt. I really resent that. That is not----
        Mr. Heyman. We would like very much to resolve this with
    you. We have discussions underway at the House Judiciary
    Committee and we are hopeful of doing that, but I would just
    way one thing. We have been working on this since, I think,
    1992, when we first began to negotiate the Georgine settlement.
    And this legislation, if you look at it on all fours with
    Georgine, is really much more favorable than Georgine. In fact,
    some of the features like the cap on annual payments, and so
    forth, were deleted in this legislation.
        So we have been at this process for 7 or 8 years. We are
    delighted to entertain any constructive solutions to see if we
    can reach legislation, but I think that time is of the essence
    here. Thank you.
        Senator Grassley. Mr. Hiatt, can you say something in 30
    seconds?
        Mr. Hiatt. Yes. I just want to say for the record that I
    did not understand that the purpose of this hearing was to get
    into discussions that have been going on in the House or
    anywhere else about concerns we have and possible changes that
    the parties would be willing to make in the bill. But we
    certainly have expressed to the companies a large number of
    areas that we find greatly deficient in this legislation and,
    with very few exceptions, GAF indicated a willingness to
    address that.
        Now, I can't say the companies because GAF is one company.
    There are many other asbestos companies out there that are much
    closer to our point of view on the deficiencies of this
    legislation than GAF, and I don't think that point should be
    lost, Mr. Chairman.
        Thank you.
        Senator Ashcroft. I want to again thank Senator Grassley
    for holding this hearing today on this important issue.
    Unfortunately, pressing matters require that I be elsewhere so
    I must excuse myself. I would just like to thank all of the
    witnesses for coming here to help us understand this problem
    better, and to express my hope that during the discussion today
    that some attention will be paid to the importance of
    explicitly protecting the stability of settlements in any cases
    that have settled prior to the enactment of any administrative
    regime. I look forward to reviewing the transcript of today's
    proceedings.
        Senator Grassley. I thank the panel very much for their
    participation, and I will call the next panel. Thank you all
    very much.
        Mr. Edley. Thank you, Mr. Chairman.
        Mr. Heyman. Thank you.
        Senator Grassley. Congressman Cannon is going to come to
    the table because he was not here when we first started. And I
    am going to let Congressman Cannon go first, but I want the
    other panelists to come as I introduce them.
        We have Prof. Michael Green, a professor at the University
    of Iowa School of Law, where he teaches torts, product
    liability, complex litigation, and mass torts. Then Mr.
    Nagareda is an associate professor of law at the University of
    Georgia Law School. He teaches administrative law, evidence,
    and torts. And then lastly we have Mr. Paul Verkuil, currently
    serving as dean and professor of law at Benjamin Cardozo Law
    School, where he teaches also administrative law and economic
    regulation.
        So, Mr. Cannon, we will probably have you give your
    testimony and if you want to stay and listen to all the rest of
    it, you can do that, but we want to go through the entire panel
    before we ask any questions.

       STATEMENT OF HON. CHRIS CANNON, A U.S. REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF UTAH

        Mr. Cannon. Thank you, Mr. Grassley. I have other things I
    need to do, so I will leave after my testimony.
        Mr. Chairman, I appreciate the opportunity to appear before
    you in support of the Fairness in Asbestos Compensation Act.
    This is important legislation designed to solve a substantial
    problem for people who are sick from asbestos.
        Part of the problem is that litigation is causing a
    disproportionate burden on our court system. I am one of the
    original cosponsors of the House companion bill, H.R. 1283.
    This legislation solves the asbestos litigation crisis in our
    courts.
        The first point I would like to make today is that our
    current asbestos litigation system is just not working. The
    system is not equitable to either the victims of asbestos or
    the defendant companies. Our State and Federal courts are
    clogged with over 200,000 pending cases and over 50,000 new
    cases being filed each year. The volume of cases is creating a
    tremendous backlog in our courts and it can take years for a
    victim to have his day in court. The Fairness in Asbestos
    Compensation Act will provide a speedy resolution that allows
    those whose health is affected by asbestos quicker
    remuneration.
        Over the last three decades, the courts have established
    the factual threshold for asbestos compensation, but we have a
    dire situation before us. The former asbestos manufacturers are
    willing to compensate the sick, but due to the sheer volume of
    cases before them, the courts have simply become inefficient
    claims processors.
        The courts are not designed for this overwhelming task, and
    as a result two-thirds of every settlement dollar is being
    diverted from deserving victims to lawyers and court costs. The
    courts have responded by encouraging the consolidation of
    cases. As a result, settlements do not take into account the
    strengths or weaknesses of an individual's claims, but rather
    lump the sick and nonsick together.
        This sets up a lose/lose situation in which the true
    victims of asbestos unnecessary wait years and receive less
    compensation than if their claims are addressed individually.
    The Fairness in Asbestos Compensation Act provides for an
    administrative claim system for those individuals who meet
    objective medical criteria. These criteria determine whether or
    not they have an asbestos-related impairment. They are
    administered in a nonadversarial manner by medical experts.
        It is important to note that the medical criteria in the
    legislation are virtually identical to the criteria in the
    Georgine settlement which was agreed to by defendant companies
    and key components of the plaintiffs' bar and organized labor.
    These criteria were also approved by the Federal courts as
    being fair and reasonable.
        In recent years, the Supreme Court has been asked to rule
    on two proposed asbestos class actions and on both occasions
    concluded that an administrative system would best serve the
    victims of asbestos. On the last day of its session this past
    June, the Supreme Court ruled in Ortiz v. Fibreboard. Justice
    Souter, speaking for the majority, held that asbestos
    litigation is an elephantine mass which defies customary
    judicial administration and calls for national legislation.
        Chief Justice Rehnquist stated in his concurring opinion
    that the current asbestos litigation system cries out for a
    legislative solution. Justice Ginsburg similarly stated in the
    Amchem decision which dealt with the Georgine settlement in
    1997 that an administrative claims process would provide the
    most secure, fair, and efficient means of compensating victims
    of asbestos exposure.
        Mr. Chairman, S. 758 is a good piece of legislation that
    would speed up and pay more to the sick as opposed to the
    current inequitable system. It would ensure that those who are
    truly sick from asbestos get paid in a timely manner, while
    preserving their right to go to court. And it would allow
    healthy victims back into the system if they get sick in the
    future. In addition, the bill would help keep the defendant
    companies financially able to continue compensating those who
    become impaired with asbestos-related ailments for decades to
    come.
        Twenty-five of the largest asbestos manufacturers have
    already filed for bankruptcy, leaving the peripheral asbestos
    players to continue paying the sick. This has cost thousands of
    jobs across the country. A bankrupt company cannot compensate
    victims. This legislation will allow a fair solution for
    companies and provide speedy compensation to those who are
    sick, while bypassing those who really aren't affected by
    asbestos-related infirmities. I support S. 758 and compliment
    this committee for its consideration of this legislation.
        Thank you.
        Senator Grassley. Thank you, Congressman Cannon.
        Now, Professor Green.

        PANEL CONSISTING OF MICHAEL D. GREEN, PROFESSOR OF LAW,
     UNIVERSITY OF IOWA COLLEGE OF LAW, IOWA CITY, IA; RICHARD A.
      NAGAREDA, ASSOCIATE PROFESSOR OF LAW, UNIVERSITY OF GEORGIA
      SCHOOL OF LAW, ATHENS, GA; AND PAUL VERKUIL, DEAN, BENJAMIN
                  CARDOZO SCHOOL OF LAW, NEW YORK, NY

                     STATEMENT OF MICHAEL D. GREEN

        Mr. Green. Thank you, Senator Grassley. The asbestos
    litigation system is broken. There is no reasonable observer of
    what is going on today that could conclude otherwise. I have
    heard a lot of mention of the Supreme Court's decisions in
    Ortiz and Amchem and their call for national legislation. In
    addition to the Supreme Court, dozens of Federal courts and
    State court judges, including trial judges who are down in the
    trenches and dealing with these repetitive cases, have
    criticized the current system and called for a legislative
    scheme.
        The goals of any legislative solution, I think, have been
    well articulated. We need to minimize administrative costs.
    They are far too high today. We need to preserve assets for
    future claimants. We need to ensure so far as possible payment
    for all asbestos victims, including those that develop
    asbestotic disease in the next century, and there will be some.
    We also need to speed the compensation process. We need to get
    dollars to people who are suffering impairment as a result of
    asbestos exposure.
        Well, how might we obtain those goals? I think one way is
    to simplify and minimize the criteria for recovery. Ideally,
    recovery would only require a showing of asbestos-induced
    disease and impairment. And upon showing of that, a claimant
    would be able to recover. Keep the parties out of court so far
    as possible. Litigation is far too expensive for the limited
    remaining resources available to compensate asbestos victims.
    Expert witnesses are being paid $7,500 and $10,000 a day to
    testify in asbestos cases about the same state-of-the-art
    defense over and over and over again.
        Cease compensating those who are asymptomatic. Resources
    need to be preserved for those who are truly sick. And the
    repeated and duplicative awards of punitive damages--even
    though cases are being settled, the prospect of punitive
    damages is reflected in those settlements. We need to stop
    paying punitive damages in order to preserve the assets that
    exist for future claimants.
        So how well does S. 758 accomplish these goals? In some
    respects, I think quite well. It seeks to screen out the
    unimpaired and it ends punitive damages. It does away with a
    number of tort law issues that drain resources. It does away
    with the statute of limitations, which has a perverse effect on
    encouraging premature claims. It does away with state-of-the-
    art claims. It does away with the questions of the defendant's
    culpability in order to recover.
        In some respects, though, S. 758 could be improved because
    it retains too much tortlike rules. The bill will not provide a
    lean administrative compensation system. It continues to
    require proof of exposure to each defendant's asbestos
    products. It encourages controversy over noneconomic damages.
    It requires resolution of the comparative fault of each
    defendant named in a claimant's case. Resolution of the
    comparative fault of each defendant in some States, given joint
    and several liability rules--and I am getting into details
    here, but I think there is a devil in some of the details--
    could require resolution of the comparative fault of all
    members of the asbestos industry; that is, nonparties. We
    really don't want to do that.
        All of those concerns could be resolved by getting the
    asbestos defendants together and creating a fund, resolving
    once and for all globally their liability. Will it be
    difficult, as Professor Edley suggested? Absolutely. Is it
    impossible? I think not. There are a number of ideas that might
    be explored in a way to get the fund in and to have a true
    compensation system. In short, the goal here should be to
    replace the elephantine masslike current system with a feline,
    lean, and quick compensation system.
        Thank you.
        Senator Grassley. Thank you, Professor Green.
        [The prepared statement of Mr. Green follows:]

                      Prepared Statement of Michael Green

        Mr. Chairman and Members of the Subcommittee: My name is Michael
    Green, and I am a Professor of Law at the University of Iowa. I have
    taught and written about toxic substances and their treatment in the
    tort system for almost 20 years. I represent no one in providing this
    statement and my testimony. I have never represented nor consulted for
    an asbestos victim or an asbestos defendant, and no one has compensated
    me for preparing this statement or testifying. I'm sure that, like all
    of us, I have my personal biases, but I am not an advocate for any of
    the parties interested in this legislation.
        There are three things I'd like to address in this Statement

       The State of Asbestos Tort Litigation

       The Goals Critical to an Asbestos Compensation Statute

       How S. 758 Measures up Against Those Goals

        Asbestos compensation through the tort system is broken-seriously,
    irreparably, and incontrovertibly.

       Everyone knows that the systems is broken, judges know it,
            commentators know it, asbestos victims know it, their families
            know it, the experts who testify over and over and over again
            know it, and, the lawyers who are litigating these cases know
            it.

       The Federal Judiciary for over a decade has hinted,
            requested, and implored Congress to take up the matter of
            asbestos compensation and enact a comprehensive system. State
            judges have also joined in the chorus seeking legislative
            resolution of the court-clogging, compensation-delaying, over
            bloated and underfunded system in place now. I have appended to
            my Statement an annotated bibliography of courts that have, in
            reported opinions, criticized various aspects of asbestos
            litigation and called for a solution from the only institution
            with the authority to provide it, the United States Congress.

       Perhaps the most persuasive evidence that a compensation
            statute is required is to appreciate that that is precisely
            what the plaintiffs' and defendants' lawyers have been
            attempting to craft within the tort system for the past decade
            in the form of class action settlements.

       Those class actions settlements are nothing more than
            asbestos compensation systems dressed up in litigation clothes.
            But the courts institutionally cannot craft compensation
            systems, as the Supreme Court has made plain in both Amchem
            Products Inc. v. Windsor \1\ and Ortiz v. Fibreboard Corp.\2\
    ---------------------------------------------------------------------------
        \1\ 521 U.S. 591 (1997).
        \2\ 119 S. Ct. 2295 (1999).
    ---------------------------------------------------------------------------
       This is an important point to appreciate. The failure of
            Congress to enact a legislative compensation scheme has placed
            enormous pressure on the courts to develop not only creative
            and unusual procedures and rules to deal with the mass of
            asbestos cases that were presented, but, in many respects, the
            judiciary has been involved in activism in inventing partial
            and imperfect compensation schemes that, from a separation of
            powers perspective, are appropriate for Congress not the
            courts.

       The solution, if it is to occur, is in the hands of
            Congress. Congress, and Congress alone, has the institutional
            authority and capacity to develop a rational, fair asbestos
            compensation system. I urge this Subcommittee, and each member,
            to work toward that goal.

       For more specific explanation of why the current system is
            broken, the proposed findings in section 2 of S. 758 capture
            the situation well.
                 principles or goals for a compensation system
        Minimize Administrative Costs: The tort system is an enormously
    expensive one for getting dollars from the asbestos industry to injured
    victims, with somewhere between 50 and 63 cents of every dollar paid by
    asbestos defendants being eaten up in administrative Costs,\3\ not to
    mention the burden on taxpayers who pay for the court resources
    required to resolve asbestos lawsuits.\4\
    ---------------------------------------------------------------------------
        \3\ See Peter Schuck, The Worst Should Go First: Deferral
    Registries in Asbestos Litigation, 15 HARV. J.L. & PUB. POL'Y 541, 558
    (1992); JAMES S. KAKALIK, ET AL., VARIATION IN ASBESTOS LITIGATION
    COMPENSATION AND EXPENSES (Rand 1984). The Rand Study, which was the
    most comprehensive, is based on early litigation in asbestos. That
    litigation likely was significantly more administratively inefficient
    than the situation today.
        \4\ See In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710,
    749 (E.D. & S.D.N.Y. 1991) (estimating that 70 percent of all funds
    expended for asbestos claims are for administrative costs, including
    the costs of court resources).
    ---------------------------------------------------------------------------
        In a day when the resources available to the remaining tens of
    thousands of legitimate asbestos victims are dwindling, that
    administrative expense is simply unacceptable and unconscionable.
        Keep Parties out of Court. There is no system like litigation to
    consume administrative expense. It requires expensive lawyers and
    experts and, because contested issues of fault, causation, exposure,
    and others must be resolved using these costly personnel, the tort
    system is the most expensive scheme for compensation in existence. Any
    legislative compensation system should consciously be constructed to
    minimize the instances when claimants have to go to court. Social
    security is an example of such a system. Age and payment into the
    system are the only conditions for qualification. And Social Security
    is an enormously efficient scheme for transferring dollars from those
    who pay in to those who are eligible.
        Some limited opportunity for court review must be provided, but
    incentives should be structured in a way to keep claimants from
    employing this option except in the most serious cases of error.\5\
    There are many creative ways to do this--but the key is a fair and
    simple compensation system based on a minimum of objective and easily
    verifiable criteria.
    ---------------------------------------------------------------------------
        \5\ A very good model for resolving the vast majority of claims
    through an administrative scheme, while providing a limited right to
    seek court review is the Dalkon Shield Trust, which was established in
    A.H. Robins bankruptcy proceedings. See Georgene Vairo, The Dalkon
    Shield Claimants Trust: Paradise Lost (or Found)?, 61 FORDHAM L. REV.
    617 (1992) Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53
    L. & CONTEMP. PROBS. 79 (1990).
    ---------------------------------------------------------------------------
        Reduce the Number of Contestable Issues to a Minimum. There are a
    number of specific aspects to this subgoal:

       Simple qualification criteria: suffering from asbestos-
            induced disease.
       Do away with requiring claimant to prove which company's
            asbestos products he or she was exposed to. This means a global
            resolution of the asbestos industry's contribution to the
            compensation scheme.\6\
    ---------------------------------------------------------------------------
        \6\ While estimations of total liability based on future claims are
    not easy, this task was successfully accomplished in the Dalkon Shield
    Trust. See Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53
    L. & CONTEMP. PROBS. 79, 89 (1990).
    ---------------------------------------------------------------------------
       Damage awards scheduled based on simple, objectively
            verifiable criteria: type of disease, lost income, age, etc. In
            fact, this already occurs in asbestos mass settlements and it
            was part of the plan in the settlement class actions to which
            plaintiffs' attorneys agreed.\7\ It is no secret that the ideal
            of individualized adjudication, with respect for the parties
            and attention to the details of the claim, the attorneys
            reflecting the interests and desires of their clients, and the
            arbiters listening carefully to the claims and stories of the
            parties is a myth.\8\ An asbestos compensation statute could
            have a range of awards within each category and leave
            discretion in the administering agency to adjust the award
            upward or downward within the authorized range based on the
            specific and unusual circumstances of a given case.
    ---------------------------------------------------------------------------
        \7\ Amchem Products Inc. v. Windsor, 521 U.S. 591 (1997); see also
    Hearings Before the House Judiciary Committee on H.R. 1283 (July 1,
    1999) (Opening Statement of Maura J. Abeln, Senior Vice-President,
    General Counsel and Secretary of Owens Corning).
        \8\ Mark A. Peterson & Molly Selvin, Mass Justice: The Limited and
    Unlimited Power of Courts, 54 L. & CONT. PROBS. 227 (Summer 199 1);
    Deborah R. Hensler, Resolving Mass Toxic Torts: Myths and Realities,
    1989 U. ILL. L. REV. 89, 96.
    ---------------------------------------------------------------------------
        Speed the Compensation Process: Compensating the heirs of an
    asbestos insulation worker who contracted asbestosis at 48, was
    incapacitated and unable to work at 55, and died at 60 because of
    mesothelioma, ten years after the death is a cruel hoax. There is
    evidence that asbestos cases take considerably longer to resolve than
    other civil cases, which is not surprising given the large number of
    cases backlogged in a number of jurisdictions.\9\
    ---------------------------------------------------------------------------
        \9\ Judicial Conference Report at 10-11.
    ---------------------------------------------------------------------------
        End Punitive Damages. The repetitive award of punitive damages for
    essentially the same industry conduct has been criticized by just about
    everyone familiar with the current situation. Deterrence and expressing
    society's disdain for the industry's conduct have more than been
    accomplished. No court or jury is situated to make a judgment that,
    however heinous the conduct of industry members, we are well past any
    further need to express society's disapproval of this conduct.
    Especially with compensation resources running dry, there is no
    justification for providing windfalls to current victims at the risk of
    leaving future victims without compensation. Because of our system of
    federalism, the state and lower federal courts cannot solve this
    problem. Either Congress acts or we will continue to squander the
    opportunity to assure compensation for all.
        Cease Compensating Those who Have Suffered No Loss. For perfectly
    understandable reasons-fear of running afoul of the statute of
    limitations and fear that the asbestos well will run dry in the future,
    we have created a situation in which claimants with no present disease,
    no present impairment, and no present monetary loss bring suit because
    physicians can detect abnormalities in their chest x-rays. These non-
    impairment cases are a significant majority of currently filed cases,
    and they constitute an increasing proportion of the asbestos
    caseload.\10\ While one can understand why those suits have been
    brought, it is difficult to fathom why some jurisdictions have
    permitted them to go forward, especially when there are victims with
    lung cancer, mesothelioma, and other serious diseases who wait behind
    them in line to pursue their claims.\11\
    ---------------------------------------------------------------------------
        \10\ See Lester Brickman, The Asbestos Litigation Crisis: Is There
    a Need for an Administrative Alternative?, 13 CARDOZO L. REV. 1819,
    1853 (1992).
        \11\ Schuck, supra note?
    ---------------------------------------------------------------------------
        Ensure, So Far as Possible, Payment for all Asbestos Victims,
    Including Those in the Future. This may be the most difficult goal to
    meet, but a good start would be to end the squandering of industry
    resources on punitive damages, conserve what funds are available by
    reducing administrative costs--by taking the lawyers and litigation out
    of the process--and by ceasing to provide compensation to those who,
    while they can be diagnosed as having abnormal chest x-rays, are not
    suffering any impairment in their activities or abilities.
        Fairness. Of course, any compensation system should be fair. But
    fairness, like beauty, is often in the eye of the beholder and, like
    raising children, to do the right thing, sometimes one must say ``No.''

       What's important in any statutory scheme enacted is balance.
            None of the parties can have everything, but some modest
            compromises by each can produce substantial social good for
            all, especially the unfortunate victims of asbestotic disease,
            who, even with compensation, cannot be made whole for their
            losses.
       A compensation system would enhance fairness for victims by
            getting compensation more quickly to injured victims and
            spreading the available resources to more victims, especially
            those who develop disease in future decades. The pot is not
            unlimited and a day will arrive when it is empty. I can think
            of nothing more unfair than leaving future victims
            uncompensated.
      Will some claimants have to give up punitive damages or their
            theoretical--the asbestos settlement rate reveals that the
            right to trial for asbestos claimants is largely a mirage--day
            in court? Yes. Will those who might recover some compensation
            today for abnormal x-rays (pleural plaque) have to wait until
            they suffer real losses? Yes. Will overall fairness be
            furthered despite these sacrifices? Absolutely and
            unquestionably.

        The Asbestos Industry and other defendants resist a compensation
    scheme because members do not want or think that they cannot agree on
    an overall resolution of their respective liability for asbestos
    claims, which is how any compensation scheme should be funded. But a
    compensation scheme would end the distraction of asbestos litigation,
    the disruption to company financial planning and operations, and
    provide a global resolution that would enable them to get on with their
    businesses instead of the business of litigation.\12\
    ---------------------------------------------------------------------------
        \12\ See Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53
    L. & CONTEMP. PROBS. 79, 81 (1990) (discussing loss of productivity of
    company involved in protracted, mass tort litigation).
    ---------------------------------------------------------------------------
        Will it be difficult to determine shares of liability among
    industry members for all future claims? Of course. Is there a risk of
    inaccuracy in that determination? Absolutely. Would the industry pay
    less and be better off with a compensation scheme that wraps up their
    involvement in asbestos litigation? No Question.
        Plaintiffs' Lawyers have made an important contribution. They took
    on Significant risk, undertook to represent asbestos victims in the
    early days when it was quite uncertain whether the courts would make
    the necessary adjustments to tort law to accommodate those claims, and
    uncovered a tale of reckless indifference to the health of generations
    of asbestos workers and active suppression of danger.\13\ They deserve
    to be well compensated for the risks that they took and the social good
    that they accomplished. Business schools will teach the asbestos matter
    as a case study, and corporate executives will think hard before
    engaging in such a massive exposure of workers to risk of this
    magnitude.
    ---------------------------------------------------------------------------
        \13\ PAUL BRODEUR, OUTRAGEOUS MISCONDUCT: THE ASBESTOS INDUSTRY ON
    TRIAL (1985).
    ---------------------------------------------------------------------------
        Will a compensation system reduce what plaintiffs' attorneys
    receive? Yes--necessarily and by design. But has the compensation
    obtained by the plaintiffs' bar for this work been less than handsome?
    No. Are we at risk of lawyers turning down the next victim of a toxic
    substance and refusing to pursue an industry? Emphatically Not. Indeed,
    what we have today in large part because of the recoveries in asbestos
    is a very will-financed plaintiffs' bar that is sophisticated,
    organized, and ready and anxious to attend to the next toxic disaster
    that may occur.
        There are a number of successful models for a compensation scheme
    that could serve as a template for an asbestos compensation scheme.
    Since the turn of the century, we have employed a no-fault compensation
    system for workplace injuries. The National Childhood Vaccine Injury
    Act\14\ was enacted by Congress when there was a temporary crisis in
    the availability of childhood vaccines and has worked quite well. The
    Dalkon Shield Trust set up in the A.H. Robins bankruptcy proceedings
    provides a number of lessons about how to develop and administer a
    toxic compensation fund in a successful and fiscally responsible
    manner.\15\
    ---------------------------------------------------------------------------
        \14\ 42 U.S.C. Sec. Sec. 300aa-33 et seq. (1997).
        \15\ See supra note?
    ---------------------------------------------------------------------------
        Enacting an Asbestos Compensation System would not set a precedent
    for Congress regularly and precipitously enacting compensation schemes
    for every new mass tort that comes down the road. Asbestos is unique in
    its quantity of victims, demands on the judicial system, and
    complexities.\16\ The common legal and factual issues have been
    litigated and relitigated, throughout the country in court after court
    in eye-glazing and mind-numbing fashion. No other mass tort has had the
    same impact on driving numerous, substantial, including Fortune 500,
    companies into bankruptcy. This is a true crisis, far more severe than
    what existed when the Childhood Vaccine Act was enacted or when the
    Black Lung Benefits Act was enacted in 1969.\17\ A number of mass toxic
    litigations have been resolved by the courts, if not perfectly, at
    least acceptably in the past several decades.
    ---------------------------------------------------------------------------
        \16\ See, e.g., Christopher F. Edley, Jr. and Paul C. Weiler,
    Asbestos: A Multi-Billion-Dollar Crisis, 30 HARV. J. ON LEGIS. 383, 386
    (1993).
        \17\ 30 U.S.C. Sec. Sec. 901 et seq. (1997).
    ---------------------------------------------------------------------------
        Asbestos stands in stark relief to DES, Bendectin, the Dalkon
    Shield, and similar mass torts.
        There is a certain ``closing the barn door after the horses have
    escaped'' quality to S. 758. Hundreds of thousands of claims have been
    resolved, billions of dollars have been paid (and billions more wasted
    in administrative expense), untold millions, nay billions, have been
    paid in punitive damages, and the number of asbestos victims who had to
    wait years and years before obtaining compensation or who died before
    their cases were resolved is unconscionable. But the number of pending
    claims is in excess of a hundred thousand, at least that many are
    likely to be filed in the next several years, and there will be
    seriously injured asbestos victims in the future, although the number
    is tapering off. But Congress must act now--in another decade there
    will be nothing left with which to try to fashion a compensation
    scheme.
           how well does s. 758 meet the goals that i have outlined?
        It does an excellent job in certain respects:

       Punitive Damages would cease, thereby preserving assets for
            future claimants.
       Claimants with only pleural plaque and no clinical symptoms
            would be required to wait until they developed real injury-
            clinical symptoms--before being permitted to pursue claims.
       It ends unnecessary and costly wrangling over ``discovery''
            of disease for statute of limitations purposes by abolishing
            this defense and, it thereby ends the unfairness of barring
            asbestos victims from recovery because they waited too long to
            file suit, even though the delay has little or no impact on the
            availability of evidence.\18\
    ---------------------------------------------------------------------------
        \18\ Sec. 502; see Michael D. Green, The Paradox of Statutes of
    Limitations in Insidious Disease Litigation, 76 CALIF. L. REV. 965
    (1989).
    ---------------------------------------------------------------------------
       It ends the need to try to predict the future under the
            single judgment rule, which requires that all damages-whether
            yet incurred or not--be awarded in a single proceeding.\19\
    ---------------------------------------------------------------------------
        \19\ Sec. 504.
    ---------------------------------------------------------------------------
        It does a mediocre to poor job in certain other respects:

       Administrative efficiency: This Bill retains too much of the
            adversarial-tort law framework, but privatizes initial phases
            within the corporation and attempts to use a liberal dose of
            ADR to lubricate the process of reaching a settlement.
      Certain requirements of tort law are retained-including proof of
            historical exposure to each defendant's asbestos products,\20\
            the causal role of those products, and individual
            determinations of damages. Defendants' fault or product defect
            is eliminated from the determination of whether the plaintiff
            can recover, and any affirmative defenses based on the
            claimant's conduct are eliminated--and that is positive.
    ---------------------------------------------------------------------------
        \20\ In response to an inquiry in the House hearings on the
    companion Bill to S. 758, HR 1283, Richard H. Middleton, President of
    the American Trial Lawyers Association, explained why lawyers are still
    charging contingency fees of 33-40 percent: ``Because you still have to
    prove the very complex work histories of these individuals who worked
    at many job sites, perhaps throughout the country. You have to prove
    the medical diagnostic requirements. You have to bring in all of their
    medical records. And so, it requires a great deal of staff time * * *''
    Hearings on HR 1283 Before the House Judiciary Committee (July 1,
    1999).
    ---------------------------------------------------------------------------
      However, in order to apportion liability among asbestos defendants,
            the Bill requires determination of the comparative fault of
            each defendant. So, even though the fault of a defendant is not
            relevant for purposes of liability to the claimant, we have
            injected into every case a potential dispute, requiring
            litigation, among the defendants as to their comparative share
            of fault for purposes of apportionment. And, as I understand
            it, that would occur in the mediation process, arbitration, if
            it occurs, and in any lawsuit that might occur.
      Another consequence of case-by-case defendant apportionment along
            with the adoption of the joint and several liability or several
            liability rule employed by the governing jurisdiction's law is
            the potential for requiring apportionment of comparative fault
            to nonparty asbestos defendants to whose products the plaintiff
            was exposed. Most jurisdictions that have adopted some form of
            several liability--a majority of jurisdictions in the United
            States--permit the submission of nonparties to the fact finder
            for purposes of apportioning comparative fault and determining
            the several liability share of each defendant.\21\ This is,
            quite frankly, a terrible idea: asbestos defendants or
            potential tortfeasors seeking to minimize their liability by
            pointing to asbestos manufacturers or distributors, who are not
            parties because they are outside the jurisdiction, or dissolved
            and liquidated. We might also see efforts to assign comparative
            responsibility to nonparties who are immune from suit, such as
            the federal government and plaintiffs' employers.
    ---------------------------------------------------------------------------
        \21\ See RESTATEMENT (THIRD) OF TORTS: APPORTIONMENT OF LIABILITY
    Sec. Sec. 28A-28E, cmt. a, reporters note (Proposed Final Draft
    (Revised) March 22, 1999).
    ---------------------------------------------------------------------------
      The adversarial nature of the mediation and arbitration procedures
            along with the tort framework for qualifying for compensation
            and the procedural requirements of the Act virtually mandate
            that claimants be represented by counsel and the cap on
            attorneys fees of 25 percent will be a floor as well. Twenty-
            five percent is better than 33 or 40 percent but even more of
            these costs could be squeezed out with a simpler, less
            adversarial, compensation system. This Bill should eliminate as
            much of the waste that bloats the current system as possible.
      The success of the ADR provisions will depend to a large extent on
            the response of asbestos defendants, at least some of whom in
            the past have taken a position of not settling until the right
            before trial.\22\ At best, this procedure might provide a
            modest reduction in transaction costs. At worst, it could
            increase certain inefficiencies in the current system by adding
            additional layers.
    ---------------------------------------------------------------------------
        \22\ See Francis E. McGovern, Resolving Mature Mass Tort
    Litigation, 69 B.U.L. REV. 659, 663-64(1989).
    ---------------------------------------------------------------------------
       Creating incentives to keep the parties out of court. A 10
            percent penalty for making a settlement offer that is less than
            75 percent of the actual award \23\ is a very modest stick,
            indeed. Much more powerful incentives need to be imposed on
            both sides to avoid resort to the courts and to encourage early
            resolution of claims. Pennsylvania, for example, imposes a 10
            percent per year penalty for delay against defendants who fail
            to settle a case.\24\
    ---------------------------------------------------------------------------
        \23\ Sec. 307(j).
        \24\ PA. R. CIV. PRO. 238.
    ---------------------------------------------------------------------------
       Balance. The Bill tilts the current playing field a bit too
            much toward defendants' interests at the expense of current
            claimants. It ends punitive damages and asymptomatic claims,
            imposes medical screening criteria for all diseases, and bans
            joinder, consolidations, and class actions that might be
            permitted under current law and which have some potential to
            reduce administrative costs. It does bar statute of limitations
            defenses, a very sensible proposition and it provides current
            claimants a unilateral right to binding arbitration and the
            potential of mediation, which may, depending on defendants'
            response, or may not be a benefit to claimants. Defendants gain
            substantially from this Bill--pushing them to remove the tort-
            like framework for compensation and requiring global resolution
            of defendants' liability is not too much to ask in exchange for
            eliminating punitive damages--which affect the settlement value
            of every case. Global resolution would save substantial
            attorneys fees and other administrative costs and provide a
            wrap on asbestos litigation once and for all.

                                    Appendix

    Asbestos Litigation Reform: State and Federal Courts' Commentary About
                         the Asbestos Litigation Crisis

                               I. FEDERAL COURTS
    A. United States Supreme Court
        A United States Judicial Conference Ad Hoc Committee on Asbestos
    Litigation, appointed by THE CHIEF JUSTICE in September 1990, described
    facets of the problem in a 1991 report: ``[D]ockets in both federal and
    state courts continue to grow; long delays are routine; trials are too
    long; the same issues are litigated over and over; transaction costs
    exceed the victims' recovery by nearly two to one; exhaustion of assets
    threatens and distorts the process; and future claimants may lose
    altogether.'' Report of The Judicial Conference Ad Hoc Committee on
    Asbestos Litigation 2-3 (Mar. 1991). Real reform, the report concluded,
    required federal legislation creating a national asbestos dispute-
    resolution scheme. See id., at 3, 27-35; see also id., at 42
    (dissenting statement of Hogan, J.) (agreeing that ``a national
    solution is the only answer'' and suggesting ``passage by Congress of
    an administrative claims procedure similar to the Black Lung
    legislation''). As recommended by the Ad Hoc Committee, the Judicial
    Conference of the United States urged Congress to act. See Report of
    the Proceedings of the Judicial Conference of the United States 33
    (Mar. 12, 1991). To this date, no congressional response has emerged.
        In the face of legislative inaction, the federal courts--lacking
    authority to replace state tort systems with a national toxic tort
    compensation regime--endeavored to work with the procedural tools
    available to improve management of federal asbestos litigation. * * *

    Amchem Products, Inc. v. Windsor, 521 U.S. 591, 599 (1997).

        * * * We noted in Amchem that the Judicial Conference Ad Hoc
    Committee on Asbestos Litigation in 1991 had called for ``federal
    legislation creating a national asbestos dispute-resolution scheme.''
    Ibid. (citing Report 3, 27-35 (Mar. 1991). To date Congress has not
    responded. * * * Thus, when ``calls for national legislation'' go
    unanswered * * * judges can and should search aggressively for ways,
    within the framework of existing law, to avoid delay and expense so
    great as to bring about a massive denial of justice.

    Ortiz v. Fibreboard Corporation, 119 S.Ct. 2295, 2303, 2325 (1999).
    B. United States Courts of Appeals
        [R]eform must come from the policy-makers, not the courts. Such
    reform efforts are not, needless to say, without problems, and it is
    unclear through what mechanism such reform might best be effected. The
    most direct and encompassing solution would be legislative action. * *
    * In a different vein, Congress might enact compensation-like statutes
    dealing with particular mass torts * * * Congress might enact a statute
    that would deal with choice of law in mass tort cases, and provide that
    one set of laws would apply to all cases within a class, at least on
    issues of liability. Such legislation could do more to simplify (and
    facilitate) mass tort litigation than anything else we can imagine.

    Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996).

        It is clear that the enigma of asbestos litigation is not readily
    susceptible to resolution under the standards and practices
    representative of traditional tort litigation (citations omitted). * *
    *
        What has been a frustrating problem is becoming a disaster of major
    proportions to both the victims and the producers of asbestos products,
    which the courts are ill-equipped to meet effectively. * * * This case
    also illustrates the need for a legislative response to the asbestos
    litigation crisis. As the majority opinion in this case notes, there is
    a dire need for legislative intervention in the arena of the asbestos
    litigation crisis.

    Cimino v. Raymark Industries, Inc., 1512 F.3d 297, 336 (5th Cir. 1998).

        The Supreme Court, as the only institution other than Congress
    capable of imposing the uniformity necessary to resolve this problem in
    a just manner, should be afforded the chance to deal with the singular
    problem presented by these cases. That Court has the power to formulate
    federal common law which will ensure equitable compensation for all
    claimants. Its ability to address the controlling issues with a single
    voice is not only necessary for just resolution of pending litigation;
    it is even more important to expeditious and equitable settlement of
    claims. A uniform set of rules would not only protect the rights of
    individual claimants and the effective functioning of the judicial
    system, but would also aid the efforts of the asbestos companies and
    their insurers to develop an effective procedure for resolving these
    disputes on a rational basis without resorting to the courts. The
    potential for disparate outcomes in the different states could
    encourage many plaintiffs to remain in the courts rather than resorting
    to a unified nationwide facility for resolving these disputes. * * *

    Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314, 1333 (5th Cir.
    1985).

        [T]he court is frustrated by lack of congressional action. A number
    of legislative solutions has been proposed for the problems we must
    confront today and tomorrow throughout America because of yesterday's
    production and use of asbestos. None has been enacted. Clearly the
    powers of Congress to tax and regulate give that forum the interstate
    reach and flexibility needed to allocate the relatively scarce
    resources that must be available to present and future claimants to
    achieve the greatest good for society. * * * Congress can refuse to act
    while the court cannot abstain from resolving a case presented.

    Jackson v. John Manville Sales Corp., 781 F.2d 394, 415 (5th Cir.
    1986).

        The national dimensions of the problem have led to calls for
    congressional action. Although the subject has attracted the attention
    of individual representatives and senators, no legislative response has
    garnered enough support to be enacted.

    In re School Asbestos Litigation, 789 F.2d 996, 1001 (3d Cir. 1986).

        There has been a lot of talk in Congress and even a little action--
    about unclogging the courts by setting up some sort of out-of-court
    claims-handling facility to resolve product liability problems
    involving substances that have injured hundreds, or thousands, of
    people. Much of the Congressional concern was prompted by the more than
    20,000 asbestos-related lawsuits now swamping the courts. In both the
    House and the Senate, legislation has been introduced to take those
    cases out of the courts and instead handle them through a fund offering
    fixed payments for different levels of injury. Those proposals are
    stalled, but there is some movement on separate legislation that would
    create an out-of-court mechanism to compensate people injured by toxic
    substances.

    In re A.H Robins Co., Inc., 880 F.2d 709, 744 (4th Cir. 1989).

        This kind of single-state action, however, is an ineffectual
    response to the problem, because one state cannot control what happens
    in other jurisdictions.

    Dunn v. HOVIC, 1 F.3d 1371, 1387 (3rd Cir. 1993).

        In both cases we expressed our view that relief from multiple
    punitive damage awards should not be sought from a federal court
    sitting in a diversity action but, rather, from the legislature under
    whose law the action is decided.

    Cantrell v. GAF Corp., 999 F.2d 1007, 1017 (6th Cir. 1993).

        [T]he problem is one better suited for solution by state
    legislatures, state courts, and Congress rather than through the
    creation of some federal ``presumption'' by federal courts sitting in
    diversity cases only.

    Backston v. Shook and Fletcher Insulation Co., 764 F.2d 1480, 1486
    (11th Cir. 1985).

        [F]ederal common law may at times be a ``necessary expedient,''
    under our federal system Congress is generally the body responsible for
    balancing competing interests and setting national policy. There is no
    doubt that a desperate need exists for federal legislation in the field
    of asbestos litigation. * * * Congress' silence on the matter, however,
    hardly authorizes the federal judiciary to assume for itself the
    responsibility for formulating what essentially are legislative
    solutions. Displacement of state law is primarily a decision for
    Congress, and Congress has yet to act.

    Woessner v. Johns-Manville Sales Corp., 757 F.2d 634, 648 (5th Cir.
    1985).

        A fully satisfactory solution would require properly crafted
    federal legislation.

    Jackson v. Johns-Manville Sales Corp., 727 F.2d 506, 529 (5th Cir.
    1986).
    C. Federal District Courts
        At this point it would be highly desirable to remove these types of
    mass tort cases from the courts entirely. One proposal that has been
    advanced is to consolidate the various trusts established to handle
    asbestos liability, and to turn over their claims processing functions
    to private companies. The most significant benefit of moving in this
    direction would be the potential to reduce transaction costs and
    possibly the courts' oversight functions. * * *

    In re Joint Eastern and Southern Dist, Asbestos Litigation, 878 F.
    Supp. 473, 573 (E.D. & S.D.N.Y. 1995).

        Given the dimensions of the perceived problem in federal asbestos
    litigation, it is not surprising that no ready solution has emerged.
    The Judicial Conference Asbestos Committee concluded that the only true
    solution lies in Congressional legislation.

    In re Asbestos Products Liability Litigation (No. VI), 771 F. Supp.
    415, 420 (J.P.M.L. 1991).

        Asbestos litigation in the federal and state courts has reached
    crisis proportions. Over 100,000 pending asbestos * * * cases have
    backlogged the courts--preventing many injured persons from obtaining
    much needed compensation in a timely and efficient manner. * * * A
    fundamental tenet of our legal system--equal treatment--no longer
    exists for asbestos victims.
        The national war over asbestos has produced unnecessary casualties.
    Many of the persons harmed by asbestos-containing products have been
    injured once again by our legal system's method of litigating tort
    cases. Case-by-case adjudications for each injured person has both
    delayed payment and consumed the bulk of the monies available for those
    injured. * * * Much of the billions of dollars in transaction costs
    going to attorneys could be used to compensate the suffering and
    injured. Judicial resources now unnecessarily tied up in these cases
    could be used for other pressing needs.

    In re Eastern and Southern Dist. Asbestos Litigation, 134 F.R.D. 32, 34
    (E.D. & S.D.N.Y. 1990).

        The courts and legal profession are under unacceptable pressures
    preventing attention to other matters. More than a hundred thousand
    present claimants will wait indefinitely for relief and an equitable
    share of the assets available to aid them under the present system of
    case-by-case adjudication. Two-thirds or more of the amounts paid for
    the injured are used for transaction costs, most in legal fees and
    expenses (some of it borne by the taxpayer supported court system).
    Business as usual in the law offices and courts is not possible in the
    case of the asbestos disaster. * * * A clearer fix on the extent of the
    problem and the assets available is necessary if a rational and
    workable compensation scheme is to be developed.
        Development of a broad-based consensus concerning the nature and
    extent of the problem is a fundamental step in planning.

    In re Joint Eastern and Southern Dist. Asbestos Litigation, 1990 WL
    115785, at * 1-2 (E.D. & S.D.N.Y. July 20, 1990).

        [T]he complexity of asbestos cases makes them expensive to
    litigate; costs are exacerbated when each individual has to prove his
    or her claim de novo; high transaction costs reduce the recovery
    available to successful plaintiffs; and the sheer number of asbestos
    cases pending nationwide threatens to deny justice and compensation to
    many deserving claimants if each claim is handled individually. * * *

    In re Joint Eastern and Southern Dist. Asbestos Litigation, 129 B.R.
    710, 750-751 (E.D. & S.D.N.Y. 1991).

        The [asbestos litigation] situation continues to deteriorate. * * *
    Despite an overall decrease in civil filings, there was a dramatic
    increase in the number of asbestos personal injury product liability
    filings in 1990. Despite the large number of cases terminated in the
    last two years and extensive efforts to increase efficiency and devote
    substantial resources to asbestos cases, the number of unresolved cases
    continues to escalate.
        The national dimensions of the asbestos problem has generated
    multiple calls for congressional action. * * * Although the subject has
    attracted the attention of individual representatives and senators, no
    legislation has garnered requisite support for enactment.

    In re Joint Eastern and Southern Dist. Asbestos Litigation, 129 B.R.
    710, 812-813 (E.D. & S.D.N.Y. 1991).

        The courts, attempting to provide fair, systematic relief to the
    parties litigant while other powers of government and sectors of
    society turn away from the problem, have become so overburdened as to
    risk denying justice in asbestos cases as well as other types of cases.
    On December 31, 1984, there were approximately 893 personal injury
    asbestos cases involving over one thousand plaintiffs pending in this
    District. This backlog persists despite such creative judicial efforts
    as master filings, detailed standing orders, and large-scale
    consolidations. * * *

    Jenkins v. Raymark Industries, Inc., 109 F.R.D. 269, 271 (E.D. Tex.
    1985).

        There is no projection as to when Congress will resolve the
    asbestos problems facing the federal judicial court system * * * It is
    not at all clear to me that congressional action or the Wellington
    Facility are functionally inconsistent with the class action mechanism
    proposed here. We can no longer allow asbestos litigation to creep in
    its petty pace from day to day.

        Jenkins v. Raymark Industries, Inc., 109 F.R.D. 269, 287 (E.D. Tex.
    1985).

        [T]he serious social problem presented by these many claims cry out
    for legislative resolution, not court imposed socio-economic solutions.

    Owens-Illinois, Inc. v. Aetna Cas. and Sur. Co., 597 F. Supp. 1515,
    1521 (D.D.C. 1984).

        Experience indicates that these features of mass torts conspire to
    hinder efficient judicial disposition. While in some instances
    legislative solutions have been proposed and adopted * * * our
    political system has left primary responsibility with courts and state
    legislatures to establish practicable and just rules for compensating
    mass tort victims.
        The litigation complexities raised by mass torts are legion. The
    place and manner of exposure to the alleged harm-producing agents are
    often impossible to determine for purposes of establishing a ``locus''
    state. Very complex-questions as to jurisdiction, choice of law,
    liability, causation and damage apportionment typically result.

    In re DES Cases, 789 F. Supp. 552, 562 (E.D.N.Y. 1992).

        Because of the vast numbers of asbestos personal injury and
    property damage suits which have been and are expected to be filed in
    state and federal courts throughout the country * * * [t]he problems
    associated with awarding exemplary damages in successive asbestos
    litigations are thus nationwide problems and call for a uniform
    solution. Resolution of this problem is better dealt with either by the
    federal legislature or through legislation on a state-by-state basis,
    with the proviso that all states adopt a uniform system for handling
    these claims, than on the judicial level.

    Leonen v. Johns-Manville Corp., 717 F. Supp. 272,285 (D.N.J. 1989).

                                II. STATE COURTS
        The civil court calendar in Philadelphia cannot cope with the
    volume of over 3,000 asbestos cases that have been filed. * * * Sick
    people and people who have died a terrible death from asbestos are
    being turned away from the courts, while people with minimal injuries
    who may never suffer severe asbestos disease are being awarded hundreds
    of thousands of dollars, and even in excess of a million dollars.
        The asbestos litigation often resembles the casinos sixty miles
    east of Philadelphia more than a courtroom procedure. And just as the
    casinos are the winners in Atlantic City, the lawyers are the winners
    in asbestos litigation since the costs of litigation far exceed
    benefits paid to claimants.
        The Philadelphia court system has focused a great portion of its
    civil resources on the asbestos litigation, devised methods of
    disposition of cases that have won national acclaim, and has processed
    record numbers of major civil cases. But the new cases are filed faster
    than any court system of Philadelphia's size can dispose of them.
        Ideally, the federal or state legislatures should address the
    problem. But even if legislation is enacted some time in the future, it
    may not solve the problems of the thousands of cases which have already
    been filed.
        Since legislative remedies seem remote, the courts should recognize
    that application of traditional tort law to the ``creeping disease''
    situation is often like trying to fit a square peg into a round hole.

    Doe v. Johns-Manville Corp., 471 A.2d 1252, 1256 (Pa. Super. Ct. 1984).

        [S]ingle-state action * * * is an ineffectual response to the
    problem, because one state cannot control what happens in other
    jurisdictions. In fact, the state that acts alone may simply provide
    some relief to out-of-state manufacturers at the expense of its own
    citizen-victims, a situation that hardly provides much law reform
    incentive for state legislators. [T]hese formulas, which give the
    lion's share of the punitive award to the first victim able to win a
    judgment against a particular defendant, are unfair to subsequent
    plaintiffs and concomitantly risk providing too little deterrence to
    behavior of this type. American Law Institute, Enterprise
    Responsibility for Personal Injury 261 (1991). As an alternative to
    state action, the Study supported a federal legislative solution ``to
    authorize mandatory class actions for multiple punitive damages arising
    out of large-scale mass torts.'' Id. at 263.

    Owens-Corning Fiberglass Corp. v. Malone, 972 S.W.2d 35, 50 (Tex.
    1998).

        [T]he last decade of the 20th Century, our judicial system faces an
    apocalypse in the guise of asbestos cases. As did the ``Apocalyptic
    beast,'' * * * asbestos rose up ``as from the depths of the sea,''
    after having lain dormant for decades, to plague our industries
    initially and our judicial system consequentially, spreading cancer and
    asbestosis to thousands of workers along the way. * * * [I]t seems
    quite possible that our dockets shall be visited with asbestos
    litigation well into the next century, each case presenting its unique
    yet similar tragic scenario.

    Eagle-Pitcher Industries, Inc. v. Balbos, 578 A.2d 228, 231 (Md. Ct.
    Spec. App. 1990).

        We believe neither our action nor legislative action in Iowa will
    curb the problem of multiple punitive damage awards in mass tort
    litigation. Other courts have reached this same conclusion. * * *
    [B]oth state and federal courts have recognized that no single court
    can fashion an effective response to the national problem flowing from
    mass exposure to asbestos products.

    Spaur v. Owens Corning Fiberglass Corp., 510 N.W.2d 854, 866 (Iowa
    1994).

        Congress, by not creating any legislative solution to these
    problems, has effectively forced the courts to adopt diverse,
    innovative, and often non-traditional judicial management techniques to
    reduce the burden of asbestos litigation that seem to be paralyzing
    their active dockets.

    Appalachian Power Co. v. MacQueen, 479 S.E.2d 300,303 (W. Va. 1996).

        Any realistic solution to the problems caused by the asbestos
    litigation in the United States must be applicable to all fifty states.
    It is our belief that such a uniform solution can only be effected by
    federal legislation.

    W.R. Grace & Co. v. Waters, 638 So.2d 502, 505 (Fla. 1994).

        We can perceive of no problem more in need of a legislative
    solution [i.e., the insurmountable problem of proof for victims of
    asbestos exposure].

    Sutowski v. Eli Lilly & Co., 696 N.E.2d 187, 196 (Ohio 1998).

        While we recognize that there are numerous cases that have been
    decided and numerous cases are pending concerning damages claims based
    upon exposure to asbestos, this Court cannot dictate policy in a mass
    tort context, but can only decide the cases involved in the present
    suit. Such broad policy considerations are left to the Supreme Court of
    this state and the United States and to the appropriate legislative
    bodies. * * * We * * * conclude that the higher courts and the
    appropriate legislative bodies should resolve such policy
    considerations.

    Keene Corp. v. Kirk, 870 S.W.2d 573, 582 (Tex. App. 1993).

        At the state court level we are powerless to implement solutions to
    the nationwide problems created by asbestos exposure and litigation
    arising from that exposure.

    Fischer v. Johns-Manville Corp., 512 A.2d 466, 480 (N.J. 1986).

        We commend the problem to the Legislature for imposition of a more
    rational solution than dissipating the defendant's corporate assets for
    the private enrichment of random fully-compensated victims.

    Ripa v. Owens-Corning Fiberglass Corp., 660 A.2d 521, 534 (N.J. Super.
    Ct. App. Div. 1995).

        The solution to the complex of issues generated by asbestos
    litigation is more within the province of the legislature.

    Goldman v. Johns-Manville Corp., 1986 WL 7374, at *11 (Ohio App., June
    30, 1986).

        Despite the fact that the current system sometimes provides what
    seems to be, and at times doubtless is, a less-than-adequate remedy to
    those who have been disabled on the job, all policy arguments regarding
    any ineffectiveness in the current compensation system as a way to
    address the problems of industrial diseases and accidents are within
    the exclusive province of the legislature.

    Millison v. E.I. du Pont de Nemours & Co., 501 A.2d 505, 515 (N.J.
    1985).

        Senator Grassley. Now, Professor Nagareda.

                    STATEMENT OF RICHARD A. NAGAREDA

        Mr. Nagareda. Thank you, Mr. Chairman. Since joining the
    legal academy in 1994, I have dedicated my career to studying
    the mass tort litigation problem, including the asbestos
    litigation. I think that a useful way to frame the discussion
    of this particular bill is to think about what would happen in
    a world in the absence of national legislation.
        It seems to me that a comprehensive nationwide solution of
    the sort that is set forward in this bill would be vastly
    superior to the patchwork quilt of private compensation plans
    that I would expect to arise in the absence of Federal
    legislation. Absent Federal legislation, I think the incentives
    of plaintiffs' law firms and the defendants will remain the
    same.
        Plaintiffs' law firms will have every reason to continue to
    bring forth claims on behalf of unimpaired persons, and
    defendants will have every reason to resist the expeditious
    resolution of those claims, at least without some assurance
    about the future. So without Federal legislation, my
    expectation is that the major plaintiffs' law firms in the area
    and at least the remaining asbestos defendants would each be on
    their own to seek to cut as advantageous a deal with their
    counterparts on the other side as they could manage.
        What is likely to emerge, in other words, is, I think, a
    patchwork quilt of agreements between particular firms and
    particular defendants, some of which might be more favorable or
    less favorable in some respects than the legislation currently
    before this committee.
        The significant practical advantage to S. 758 is that it
    would create a forum for one-stop shopping on the part of
    plaintiffs who are seeking redress from asbestos defendants.
    The compensation that they would receive would not depend upon
    sheer chance. It wouldn't depend upon the particular firm they
    go to. It wouldn't depend on whether or not that firm had an
    agreement in place with a particular defendant. It would depend
    instead upon an assessment by neutral medical and legal experts
    in the field, drawing upon standards that would be agreed upon
    in the legislative process.
        Now, to provide a chance for preserving the limited assets
    of defendants, there have to be some difficult value choices
    made. I do believe that this legislation makes the right value
    choice. The major point for present purposes that I wanted to
    underscore is that those sorts of value choices to prefer the
    impaired over the unimpaired, should be made openly through a
    process amenable to democratic discussion and oversight.
        It seems to me that a patchwork system of private
    agreements would neither be practicable nor desirable, not
    practicable because there are simply too many defendants in too
    many exposure situations that we are dealing with in this area.
    It is not one where you can have two or three defendants pursue
    these sorts of private arrangements and solve the problem that
    way.
        In addition, I am convinced that a patchwork quilt of
    agreements involving particular plaintiffs' firms and
    defendants would only to the confusion and the frustration of
    asbestos victims. I would describe it as a full employment bill
    for lawyers on both sides because only the lawyers would know
    the terms of the various deals which would not be matters of
    public record, and only they would have the legal expertise to
    manage their way through the multiple agreements that would be
    implicated in most asbestos cases which characteristically
    involve multiple defendants.
        It seems to me that the legislation before this committee
    makes a lot of sense. It does not impose a bureaucratic
    solution to the asbestos problem, but instead seeks to
    replicate private agreements that have already been fleshed out
    by experienced attorneys in the private sector. That, it seems
    to me, makes this bill a desirable piece of legislation that is
    long overdue.
        Senator Grassley. Thank you, professor.
        [The prepared statement of Mr. Nagareda follows:]

                   Prepared Statement of Richard A. Nagareda

                                    SUMMARY
        S. 758 represents a fair, practicable, and innovative solution to
    the asbestos litigation--one that merits enactment by this Congress.
        In the absence of federal legislation, the essential features of
    the asbestos litigation will not somehow go away: Plaintiffs' lawyers
    will continue to have a powerful economic incentive to bring forth
    large number of claims on behalf of unimpaired persons, having already
    expended the fixed costs to develop legal and factual expertise
    concerning asbestos in earlier phases of the litigation. At the same
    time, defendants have no reason to resolve expeditiously asbestos
    claims, absent some set of ground rules to govern the quality of claims
    to be presented for compensation in the future. The upshot is a kind of
    litigation gridlock, accompanied by what, to date, has been a fruitless
    search for some legal vehicle by which to resolve future asbestos
    claims.
        The framework established by this Act would be vastly superior to
    the legal environment likely to emerge in the absence of federal
    legislation. Specifically, a comprehensive solution to the asbestos
    litigation effected by way of federal legislation would be superior--
    from the standpoint of both asbestos victims and democratic
    accountability--to the patchwork quilt of private compensation plans
    likely to emerge otherwise. In addition, federal legislation to address
    specifically the asbestos litigation would reduce the pressure for
    dramatic, and potentially unwise, changes to general principles of
    civil procedure and bankruptcy law.
        The Act represents an appropriate--indeed, necessary--exercise of
    federal power. It places the federal government in the position of a
    facilitator and coordinator of private dispute resolution. It does not
    impose a bureaucratic solution to the asbestos problem but, rather,
    seeks to replicate arrangements already fleshed out by experienced
    attorneys in the private sector. Any workable national solution to the
    asbestos litigation will necessarily entail some degree of intrusion
    upon matters that otherwise would remain subject to state authority.
    This Act does so only as much as necessary to implement its underlying
    priorities for compensation and, even then, only as a last resort.
        Finally, the priorities set by the Act are right on the merits. The
    Act appropriately seeks to maximize the resources available for
    compensation of impaired persons by barring claims on behalf of persons
    who do not meet specified criteria for medical impairment as well as
    claims for punitive damages. The Act prefers private dispute resolution
    to the dead weight loss of continued litigation in the tort system; and
    it prefers to put money in the hands of asbestos victims rather than
    the pockets of their lawyers.
              * * * * *
        Mr. Chairman and Members of the Committee: My name is Richard A.
    Nagareda, and I am an Associate Professor of Law at the University of
    Georgia. Since joining the legal academy in 1994, I have dedicated my
    teaching and research to the subject of mass tort litigation. As
    indicated in the attached c.v., I have published three articles in
    major law reviews on the subject, addressing class action settlements
    in the asbestos area \1\ as well as ongoing litigation over silicone
    gel breast implants and tobacco products.\2\ My objective in these
    writings has been to examine comparatively the many vehicles--class
    actions, bankruptcy, federal regulation, and national legislation,
    among others--advanced in recent years to effect comprehensive
    solutions for particular areas of mass tort litigation. In addition to
    my academic writings, I regularly teach a seminar in which my students
    discuss a set of reading materials assembled by me on the subject of
    mass tort litigation and then proceed to prepare research papers under
    my supervision on unresolved legal issues in the area.
    ---------------------------------------------------------------------------
        \1\ See Richard A. Nagareda, Turning from Tort to Administration,
    94 Mich. L. Rev. 899 (1996).
        \2\ See Richard A. Nagareda, In the Aftermath of the Mass Tort
    Class Action, 85 Geo. L.J. 295 (1996); Richard A. Nagareda, Outrageous
    Fortune and the Criminalization of Mass Torts, Mich. L. Rev. 1121
    (1998).
    ---------------------------------------------------------------------------
        At the outset, let me emphasize that I seek to assist the Committee
    from the standpoint of an academic commentator interested in finding
    fair and practicable solutions to mass tort problems. At no point since
    joining the academy have I done any consulting work for any party, law
    firm, court, or other organization with respect to asbestos cases or
    any other area of mass tort litigation. Nor have I otherwise accepted,
    either directly or through my law school, any financial support from
    any such persons in connection with my academic research and writing.
    My views are, quite simply, my own.
        I have reviewed S. 758, the Fairness in Asbestos Compensation Act
    of 1999, and urge you strongly to enact it into law. In this era of
    divided government, I applaud the bipartisan effort to move forward
    this legislation. Indeed, I believe that S. 758 represents the last,
    best hope for a fair and comprehensive solution to the problems posed
    by asbestos litigation, not only for asbestos victims and defendants
    but also for the judicial system as a whole.
        The history and essential facts behind the asbestos litigation are
    both well known and ably documented in the testimony presented in favor
    of the legislation during the July 1, 1999 hearing before the House
    Judiciary Committee. The experience gleaned from the asbestos
    litigation over the span of recent decades establishes several starting
    points for the discussion of S. 758. After noting these points, I set
    forth the reasons for my conclusion that S. 758 stands as a fair and
    practicable solution--in particular, one superior to the legal
    environment likely to emerge in the absence of federal legislation.

                                STARTING POINTS
        There are three significant starting points for any debate over
    federal legislation in the asbestos area:

       Currently-pending asbestos cases involve large numbers of
            persons with little or no physical impairment. This feature of
            the asbestos litigation not only is likely to continue in the
            future, it also forms the basis for a kind of litigation
            gridlock capable of being broken only on a comprehensive basis.

        Leading commentators have observed that ``up to one-half of
    asbestos claims are now being filed by people who have little or no
    physical impairment. Many of these claims produce substantial payments
    (and substantial costs) even though the individual litigants will never
    become impaired.'' \3\ These claims, moreover, have considerable
    settlement value when bundled together in large numbers with claims
    brought on behalf of persons who are genuinely impaired.\4\ This
    feature of the ongoing litigation over asbestos is the predictable
    consequence of two underlying phenomena: the nature of latent disease
    and the economic incentives for both plaintiffs' law firms and
    defendants.
    ---------------------------------------------------------------------------
        \3\ Christopher F. Edley, Jr. & Paul C. Weiler, Asbestos: A Multi-
    Billion-Dollar Crisis, 30 Harv. J. Legis. 383, 393 (1993).
        \4\ See Prepared Statement of Professor William N. Eskridge, Jr.,
    Hearing on H.R. 1283 Before the House Comm. on the Judiciary (July 1,
    1999).
    ---------------------------------------------------------------------------
        Asbestos-related impairments can result from both cancerous and
    non-cancerous diseases--mesothelioma being a classic example of the
    former and asbestosis a common illustration of the latter. The crucial
    feature of these diseases consists of a latency period--typically,
    extending over decades--between asbestos exposure and the onset of
    physical impairment.\5\ The result is that, at a given time, there will
    be a group of persons with asbestos-related impairments and a
    comparatively larger group of persons who merely have been exposed to
    asbestos, only some of whom will ever become impaired.
    ---------------------------------------------------------------------------
        \5\ For a concise overview of the medical aspects of asbestos, see,
    e.g., In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710, 737-42
    (Bankr. E. & S.D.N.Y. 1991) (Weinstein, J.).
    ---------------------------------------------------------------------------
        From the standpoint of a plaintiffs' law firm, the economics of
    asbestos litigation are such that there is every reason to push forward
    not merely the claims of those who are physically impaired but also
    those of persons who merely have been exposed to asbestos and may never
    become impaired.\6\ This economic incentive flows from the repetitive
    character of the factual and legal issues in mass tort cases generally.
    To put the point briefly: The fixed costs associated with winning a few
    path breaking early victories in mass tort litigation are considerable,
    but the marginal costs of pursuing additional claims--that is, claims
    that raise similar legal and medical issues and that flow from similar
    factual situations--are comparatively low. Having expended the time and
    resources to win an initial set of victories, in other words,
    plaintiffs' law firms have every reason, from an economic standpoint,
    to attempt to spread their fixed costs over an ever-increasing number
    of claims.
    ---------------------------------------------------------------------------
        \6\ This discussion summarizes the analysis presented in Nagareda,
    supra note 1, at 904-14.
    ---------------------------------------------------------------------------
        It bears acknowledgment that early asbestos lawsuits--undertaken at
    considerable risk and personal expense by the plaintiffs' attorneys
    involved served to bring to light the misconduct of the asbestos
    industry more quickly and in greater depth than those misdeeds would
    have emerged in the absence of such innovative litigation. But
    acknowledgment of the considerable social good achieved by early
    asbestos lawsuits--now, decades in the past--should not blind one from
    the recognition that current asbestos litigation is increasingly
    focused upon unimpaired persons.
        All of this creates the makings for what can best be described as a
    form of litigation gridlock. In the absence of a long-term,
    comprehensive approach to the disposition of asbestos cases as a whole,
    defendants have little reason to seek the expeditious resolution of
    claims short of the approach of actual trial dates. From defendants'
    standpoint, settlements in pending cases--particularly, settlements in
    cases brought on behalf of as-yet-unimpaired persons--serve no purpose
    but to enhance the economic attractiveness of still more lawsuits with
    ever-decreasing merit. Defendants, in other words, have little reason
    to seek the resolution of current cases absent the development of
    ground rules for the types of claims that can be brought forward for
    payment in the future. Thus, the gridlock: Plaintiffs' law firms have
    economic incentives to bring more cases, which defendants have no
    incentive to resolve expeditiously absent some form of assurance about
    the quality of future claims.

       Reliance upon litigation in the ordinary tort system has
            resulted in an unconscionable dead weight loss of resources
            that could be better devoted to the compensation of asbestos
            victims.

        The litigation gridlock described above has genuine costs. The
    Judicial Conference Ad Hoc Committee on Asbestos Litigation reported in
    1991 that, for each dollar expended in asbestos litigation, only 39
    cents were paid to asbestos victims. The remainder was consumed by
    transaction costs--principally, attorneys' fees.\7\ In addition, the
    Committee reported that asbestos cases were subject to delays twice the
    length of those experienced by other civil litigants.\8\
    ---------------------------------------------------------------------------
        \7\ See Report of the Judicial Conference Ad Hoc Committee on
    Asbestos Litigation 13 (Mar. 1991) (crediting the findings of the Rand
    Corporation Institute for Civil Justice).
        \8\ See id. at 10-11.
    ---------------------------------------------------------------------------
        I am aware of no empirical research on transaction costs in
    asbestos litigation during more recent years an era in which the
    medical and legal issues involved in such cases have become familiar to
    the point of rote repetition. There is reason to doubt, however, that
    transaction costs have dropped precipitously from those observed
    earlier by the Ad Hoc Committee. Neither the influx of claims on behalf
    of unimpaired persons nor the economic incentives of plaintiffs'
    lawyers or defendants have changed in the interim.
        At the very least, there is considerable reason to doubt that
    transaction costs are anywhere, near as low as they could be.
    Notwithstanding that plaintiffs' law firms increasingly have assigned
    much of the day-to-day handling of asbestos claims to lower-cost
    paralegals \9\ and have developed a working knowledge of which sorts of
    claims have genuine settlement value based upon prior dealings with
    their defense counterparts, there is no indication that plaintiffs' law
    firms have correspondingly reduced the contingency fees that they
    retain from any compensation payments ultimately made by defendants.
    The result is a contingency fee system predicated upon the presence of
    substantial litigation risk but applied in a context in which such risk
    is no longer present.\10\
    ---------------------------------------------------------------------------
        \9\ See Nagareda, supra note 1, at 935.
        \10\ This problem is not unique to asbestos litigation. See
    generally Lester Brickman, Contingent Fees Without Contingencies:
    Hamlet Without the Prince of Denmark?, 37 UCLA L. Rev. 29 (1989).
    ---------------------------------------------------------------------------
        Apart from the costs borne by those actually involved in the
    litigation, the influx of asbestos cases in state and federal courts
    imposes a burden upon the judicial docket--one that affects not merely
    the handling of asbestos lawsuits but also the expeditious resolution
    of all other pending litigation in the court system.

       There is today a compelling need for a comprehensive
            solution through federal legislation, as previous efforts by
            the private sector alone have met with failure on legal grounds
            or with only modest practical success after lengthy delay.

        It comes as no surprise that the private sector would have tried to
    use existing legal mechanisms to put into place the kind of ground
    rules capable of breaking the litigation gridlock: namely, ground rules
    that limit the sorts of cases that can legitimately be presented for
    compensation in exchange for commitments from defendants to pay
    expeditiously legitimate claims. The principal vehicles for these kinds
    of ground rules have consisted of settlements in either mandatory class
    actions under Rule 23)(b)(1) of the Federal Rules of Civil Procedure or
    in opt-out class actions under Rule 23(b)(3). Recent Supreme Court
    decisions, however, have invalidated those efforts as inconsistent with
    the terms of Rule 23 in its current form.\11\ But, in so doing, the,
    Court has called upon Congress to consider the enactment of measures
    similar in substance through the more legitimate vehicle of federal
    legislation.\12\
    ---------------------------------------------------------------------------
        \11\ See Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997);
    Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999).
        \12\ See, e.g., Ortiz, 119 S. Ct. at 2302 (``[T]he elephantine mass
    of asbestos cases * * * defines customary judicial administration and
    calls for national legislation.'') (footnote omitted); id. at 2324
    (Rehnquist, C.J., concurring) (emphasizing that the asbestos litigation
    ``cries out for a legislative solution'').
    ---------------------------------------------------------------------------
        Apart from the class action arena, several firms within the
    asbestos industry--most prominently, Johns Manville--have sought to
    resolve their outstanding liabilities through reorganization
    proceedings in bankruptcy. The academic literature on these bankruptcy
    proceedings has long documented both substantial delays in the actual
    payment of compensation to asbestos victims and, more generally,
    formidable structural reasons to believe that such proceedings will
    systematically undercompensate future claimants.\13\ In addition to
    these significant practical problems, there remains uncertainty over
    the extent to which current law empowers the bankruptcy courts to
    resolve future mass tort claims at all.\14\
    ---------------------------------------------------------------------------
        \13\ For background on the Johns Manville proceedings in
    particular, see Frank J. Macchiarola, The Manville Personal Injury
    Settlement Trust: Lessons for the Future, 17 Cardozo L. Rev. 583
    (1996). On the structural biases of the bankruptcy process with regard
    to future claims, see Mark J. Roe, Bankruptcy and Mass Tort, 84 Colum.
    L. Rev. 846 (1984).
        \14\ The ongoing debate is reflected in the recent report of the
    National Bankruptcy Review Commission, Bankruptcy: The Next Twenty
    Years 323-26 (1997).
    ---------------------------------------------------------------------------
        In sum, wholly private vehicles short of federal legislation have
    sought to achieve comprehensive solutions for the asbestos litigation
    with only minimal success.

                     A FEDERAL SOLUTION, COMPARED TO WHAT?
        Consideration of S. 758 must begin with an informed assessment of
    what the world would look like in the absence of such legislation. Not
    even the most expert observer can predict the future with complete
    accuracy but, based upon the incentives of plaintiffs' law firms and
    defendants, one can advance two central points:

       A comprehensive solution to the asbestos litigation effected
            by way of federal legislation would be vastly superior--from
            the standpoint of both asbestos victims and democratic
            accountability--to the patchwork quilt of compensation plans
            likely to emerge otherwise.

        Absent federal legislation, the underlying economic incentives
    described earlier will not somehow go away. Rather, plaintiffs' law
    firms will have every reason to continue to bring forth claims on
    behalf of unimpaired persons, and defendants will have every reason to
    stonewall, absent some system of ground rules for future claims.
    Without federal legislation, the major plaintiffs' law firms in the
    asbestos area and the remaining asbestos defendants each would be on
    their own: Each would seek to cut as advantageous a series of deals
    with its counterparts as it could, simply as a way to break the
    litigation gridlock. What is likely to emerge, in short, is a patchwork
    quilt of agreements between particular plaintiffs' firms and particular
    defendants--some deals, perhaps, more favorable to asbestos victims in
    certain respects and some less favorable in others than S. 758.
        The significant advantage to S. 758 is that it would create a forum
    for one-stop shopping on the part of persons seeking redress from
    asbestos defendants. The compensation that any given victim ultimately
    receives would not depend upon sheer chance--namely, the particular
    plaintiffs' law firm that happened to represent the person and the
    particular deal that the firm might have in place with those defendants
    to whose products the person happened to be exposed. Instead,
    compensation would turn upon an assessment made by neutral medical and
    legal experts, drawing upon standards that would be debated in the
    ordinary legislative process, or--if the plaintiff ultimately chose to
    sue--upon an individualized determination by a jury.
        To provide the best chance for the preservation of resources to
    compensate those persons who happen to become impaired later rather
    than sooner, many difficult value choices are needed. As I detail
    later, I am confident that S. 758 makes the right value choices--most
    importantly, in its preference for the compensation of impaired persons
    over the unimpaired. The major point for present purposes is that these
    value choices should be made openly through a process amenable to
    democratic discussion and oversight, not through an intricate matrix of
    agreements insulated from the public eye.
        The notion that a patchwork quilt of compensation plans would
    emerge in the absence of federal legislation is not simply a matter of
    guesswork or speculation. In the aftermath of the Supreme Court's
    invalidation of the opt-out class settlement in Amchem Products v.
    Windsor, one prominent asbestos defendant--Owens Corning--announced the
    creation of a ``national settlement program'' precisely of the sort
    described: namely, a series of agreements between that company and
    particular plaintiffs' law firms, setting forth various means for the
    submission and payment of asbestos claims in the future.\15\ Were the
    asbestos litigation confined to a small number of defendant companies,
    agreements of the sort pursued by Owens Corning might make for a
    workable solution--one that would forestall the need for federal
    legislation. The simple fact, however, is that the asbestos litigation
    is not nearly so confined; rather, recent years have witnessed ever-
    expanding attempts to implicate still-solvent companies with only
    tangential involvement, if that, in the manufacture or sale of
    asbestos-containing products.\16\
    ---------------------------------------------------------------------------
        \15\ For a general description of the Owens Coming national
    settlement program, see Janet Morrissey, Owens Corning Fends Off
    Asbestos-Issue Worries, Wall St. J., Sept. 20, 1999, at B9A--See also
    http://www.owenscorning.com/owens/settlement.html.
        Although the enactment of federal legislation would--desirably--
    eliminate the need for a patchwork quilt of compensation plans, such
    legislation would not require the dismantling of those plans already in
    place. Rather, Sec. 804 specifically provides that ``[n]othing in this
    Act shall prohibit any claimant, plaintiff, respondent, or defendant
    from entering into a settlement agreement or any other agreement
    concerning a claim covered, in whole or in part, under this Act.''
        \16\ See Prepared Statement of Professor Christopher Edley, Jr.,
    Hearing on H.R. 1283 Before the House Comm. on the Judiciary (July 1,
    1999).
    ---------------------------------------------------------------------------
        Rather than effect a viable solution, a patchwork quilt of
    agreements involving a myriad of plaintiffs' firms and defendants would
    only add to the confusion and frustration of asbestos victims. Indeed,
    such a patchwork system would amount to a full-employment bill for
    lawyers on both sides: Only they would know the terms of the various
    deals, which would not be matters of public record. And only they would
    have the legal expertise needed to wind their way through the multiple
    agreements that would be implicated in most asbestos cases, which
    characteristically involve multiple defendants.

       Federal legislation to address specifically the asbestos
            litigation would reduce the pressure for dramatic, and
            potentially unwise, changes to general principles of civil
            procedure and bankruptcy law.

        In addition to a multitude of private compensation plans, the legal
    world without S. 758 likely would include a second, and potentially
    more troubling, feature: namely, intensified efforts to revamp in
    fundamental ways the legal principles that govern class action
    settlements and the treatment of future claims under the Bankruptcy
    Code. I mentioned earlier the legal obstacles encountered in recent
    years by those who have attempted to use class actions and bankruptcy
    proceedings as ways to impose a set of ground rules for asbestos
    claims. Confronted with the Supreme Court's unfavorable decisions in
    Amchem Products and Ortiz, those who would seek so to use class action
    settlements would have every reason to redouble their efforts to modify
    Rule 23 to permit such vehicles. In fact, that effort would not have to
    start from scratch, as the Advisory Committee on Civil Rules already
    has put forward a proposal that would loosen the strictures upon class
    certification under Rule 23 for purposes of settlement.\17\ Likewise,
    the National Bankruptcy Review Commission has advanced a proposal to
    amend the Bankruptcy Code to provide explicitly that reorganization
    proceedings may resolve future claims\18\--a move that prompted
    substantial criticism from one Commission member currently serving on
    the federal bench.\19\
    ---------------------------------------------------------------------------
        \17\ See Advisory Committee on Civil Rules, Proposed Amendments to
    the Federal Rules of Civil Procedure, Rule 23 (May 17, 1996), reprinted
    in 117 S. Ct. 352 (1996).
        \18\ See National Bankruptcy Review Commission, supra note 14, at
    316-17.
        \19\ See Edith H. Jones, Rough Justice in Mass Future Claims:
    Should Bankruptcy Courts Direct Tort Reform?, 76 Tex. L. Rev. 1695
    (1998).
    ---------------------------------------------------------------------------
        It is beyond the scope of the present hearing to address the legal
    intricacies of these reform proposals. The central point, for present
    purposes, is that the pressure upon plaintiffs and defendants to find
    some viable vehicle by which to establish ground rules for asbestos
    claims will not disappear in the absence of S. 758. To the contrary,
    that pressure will continue to build and could manifest itself in
    demands for far more sweeping changes in the law.
        From the standpoint of one who has studied mass tort litigation in
    its various recent forms, I remain open to the prospect that, over
    time, general lessons might be drawn from experience in multiple areas
    of mass tort litigation--lessons that might lead to worthwhile
    proposals for change in generally applicable bodies of law like Rule 23
    and the Bankruptcy Code. Whatever direction that process of legal
    reform might take, however, it should be based upon experience over a
    broad range of contexts--indeed, experience not confined simply to mass
    tort litigation but encompassing other problematic areas of the civil
    docket.
        There is a familiar adage in the legal world that ``great cases
    make bad law.'' Here, it would be exceedingly unwise and short sighted
    to set in motion a process of reform in generally applicable federal
    law based simply, or primarily, upon the unique experience of the
    asbestos litigation. The beauty of S. 758 is that it would enable this
    Congress to address the problem of asbestos litigation but to leave for
    another day the larger question of whether to reform in fundamental
    ways the law of class actions or bankruptcy.

                 THE APPROPRIATE ROLE OF THE FEDERAL GOVERNMENT
        In an era of widespread skepticism over the use of federal power,
    Congress rightly should take care before enacting national legislation
    in an area as hotly disputed as the asbestos litigation. Here, however,
    there are substantial reasons to consider federal legislation an
    appropriate--indeed, necessary--exercise of federal power.

       The Act places the federal government in the position of a
            facilitator and coordinator of private dispute resolution. It
            does not impose a bureaucratic solution to the abestos problem
            but, rather, seeks to replicate arrangements already fleshed
            out by experienced attorneys in the private sector.

        The fundamental policy choices and structure of S. 758 stem not
    from the mind of a federal bureaucrat--much less some law professor--
    but, instead, from arrangements hammered out through intensive
    negotiations between leading asbestos plaintiffs' and defendants'
    lawyers. Specifically, the determination to focus the limited remaining
    resources of defendants upon the compensation of impaired persons as
    well as the detailed medical criteria spelled out in the Act stem from
    the nationwide class action settlement entered into by some twenty
    defendants in Amchem Products.
        After an extensive hearing at which prominent opponents presented
    their strongest case against the settlement terms, the United States
    District Court for the Eastern District of Pennsylvania nonetheless
    approved those terms as fair.\20\ Subsequent decisions from the Third
    Circuit and ultimately the Supreme Court have made clear that a class
    action under Rule 23 is simply an impermissible means for such a
    settlement.\21\ But in so holding, both courts remarked upon the bold,
    innovative character of the compensation system crafted by class
    counsel and defendants.\22\ If anything, the need for fundamental value
    choices to be made about the allocation of compensation amongst
    asbestos victims underscored for these appellate courts the need for
    legislative action.
    ---------------------------------------------------------------------------
        \20\ See Georgine v. Amchem, Products, Inc., 157 F.R.D. 246 (E.D.
    Pa. 1994).
        \21\ See Georgine v. Amchem Products, Inc., 83 F.3d 610 (3rd Cir.
    1996); Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997).
        \22\ See, e.g., Amchem Products, 521 U.S. at 628-29 (``The argument
    is sensibly made that a nationwide administrative claims processing
    regime would provide the most secure, fair, and efficient means of
    compensating victims of asbestos exposure. Congress, however, has not
    adopted such a solution.'') (footnote omitted); Georgine, 83 F.3d at
    617-18 (noting that ``[t]he resolution posed in this settlement is
    arguably a brilliant partial solution to the scourge of asbestos'' but
    ultimately opting to ``leave legislative solutions to legislative
    channels'').

       The Act displaces state authority only as much as necessary
            to implement its underlying priorities for compensation and,
    ---------------------------------------------------------------------------
            even then, only as a last resort.

        In order to focus the resources of defendants upon the compensation
    of impaired persons, S. 758 necessarily bars those who have not met its
    impairment criteria from suing in state or federal court (Sec. 402)--As
    an additional safeguard against the bundling of stronger claims with
    weaker ones, S. 758 also prohibits--in the absence of defendants'
    consent--the use of procedural devices that would ``determine asbestos
    claims on a collective basis'' (Sec. 402). These measures undoubtedly
    tread upon matters of tort law and litigation procedure that, absent S.
    758, would remain within the province of state law. Any viable
    comprehensive solution for the asbestos litigation, however, must
    operate at both the state and the federal level. Limitations applicable
    only in the federal courts would simply have the effect of channeling
    the claims of unimpaired persons to the state court system.
        S. 758 displaces state authority only to the extent needed to
    implement the value choices that underlie the medical criteria therein.
    If anything, S. 758 reflects an abiding respect for state tort law,
    directing arbitrators in proceedings under Sec. 307(f) to ``apply the
    law * * * that would be applied by a court designated by the claimant
    which would have jurisdiction'' over the particular asbestos defendant
    whose liability is at issue.
        Whatever might be said about S. 758, one cannot claim that the
    federal government has rushed in to take charge of the asbestos
    litigation in preference to the states. Rather, the experience of
    recent decades has made it abundantly clear that reliance upon the
    traditional dual system of courts is prescription for continued chaos
    in this area.

                         MAKING THE RIGHT VALUE CHOICES
        Even if federal legislation would be preferable to the legal world
    that likely would emerge absent such action, it remains crucial for any
    federal legislation to make the right value choices in its compensation
    framework. I am confident that S. 758 does so.

       The Act appropriately seeks to maximize the resources
            available for compensation of impaired persons by barring
            claims on behalf of persons who do not meet the criteria for
            medical impairment as well as claims for punitive damages.

        The many bankruptcies that have already befallen member of the
    asbestos industry underscore dramatically that the goal of compensating
    asbestos victims must be pursued with sensitivity to the limited
    resources available for that purpose. Rather than risk a shortfall of
    resources for those persons who happen to manifest impairment later
    rather than sooner, S. 758 makes the safe and prudent choice to focus
    the available resources of defendants upon those persons who are
    actually impaired. Likewise, S. 758 focuses available resources upon
    compensation rather than punitive damages that--from the standpoint of
    asbestos victims--serve simply as a lottery-like windfall for a small
    number of individuals in the near term.

       The Act appropriately prefers to put money into the hands of
            asbestos victims rather than to enrich unduly their lawyers.

        A key feature of S. 758 consists of its Sec. 503(a), which limits
    to 25 percent the contingency fee that a plaintiffs' lawyer may obtain
    from compensation payments to asbestos victims. This limitation is
    entirely appropriate in the context of a mature mass tort, like
    asbestos. Here, there simply is not the level of legal or factual
    uncertainty that supports the use of higher contingency fee percentages
    in other areas of mass tort litigation. Upon enactment of S. 758, the
    ground rules for the bringing of asbestos claims in the future will be
    well known, such that the plaintiffs' bar--indeed, non-lawyers as
    well--can easily determine whether a given asbestos claim has merit.
    Under such circumstances, a failure to place a cap on contingency fees
    would amount to a substantial and unmerited transfer of wealth from
    future claimants to lawyers.\23\
    ---------------------------------------------------------------------------
        \23\ On the intensive, behind-the-scenes effort of the asbestos
    plaintiffs' bar to deter defendants from supporting national
    legislation, see Holman W. Jenkins, Jr., Now on Video: America's
    Scariest Special Interest, Wall. St. J., Apr. 21, 1999, at A23.

       The Act expresses an appropriate preference for private
            dispute resolution over litigation in the tort system. At the
            same time, the Act preserves asbestos victims' ultimate right
    ---------------------------------------------------------------------------
            to sue in court.

        S. 758 seeks to preserve the civil litigation system for those
    cases that raise novel factual or legal issues and, in so doing, to
    avoid the consumption of scarce judicial resources in the handling of
    repetitive claims in large numbers. Hence, the emphasis upon mediation
    as a necessary predicate to the filing of a lawsuit. In this respect,
    the mediation framework set forth in S. 758 does not differ markedly
    from common practice in other areas of civil dispute, where efforts at
    private dispute resolution routinely precede a trip to court.
        The essential deal embodied in S. 758 is that asbestos victims must
    meet the medical criteria for impairment and, in exchange, defendants
    must stop stonewalling. Specifically, once appropriately identified
    under Sec. 303, defendants--no less than asbestos victims--must
    participate in mediation, during which both sides are obligated to make
    ``good faith offers'' to resolve the claim in question (Sec. 306(e)).
    And the entire mediation process takes place under specified time
    limits, unlike the settlement process in the ordinary tort system. For
    defendants, in particular, the mediation process is not merely another
    avenue for delay rather, in the event that the plaintiff thereafter
    elects to submit his claim to arbitration, the arbitrator is empowered
    to penalize defendants for inadequate offers in mediation
    (Sec. 307(j)). Arbitration, however, is completely voluntary on the
    plaintiff's part (Sec. 306(f)(2)); one instead may proceed directly to
    litigation if unsatisfied with the results of mediation.
        The preservation of the plaintiff's ultimate right to sue serves to
    induce genuine compromise by defendants at the mediation stage.
    Likewise, the limitation of recovery to compensatory damages--and, of
    course, the prospect of further delay while a lawsuit works its way
    through the judicial docket--serve as appropriate inducements for
    plaintiffs to consider seriously the offers made to them in mediation.

       The absence of specific dollar amounts for compensation
            stands as a realistic response to the complexity of the
            compensation determination and will leave asbestos victims no
            worse off in terms of the resources available for redress.

        Some observers have criticized S. 758 for its failure to set forth
    particular compensation amounts for each asbestos-related disease or
    otherwise to specify an overall dollar amount to be set aside by
    defendants to compensate victims. Under this line, of reasoning, the
    Act forces victims to relinquish the opportunity to Seek compensation
    in the absence of impairment but does not give victims a ``sure thing''
    in return.
        There are two major flaws in this reasoning. First, the recitation
    of specific dollar amounts is meaningless in practical terms in the
    absence of resources on defendants' part to compensate those who meet
    the medical criteria of the Act. As to the resources that any given
    defendant has available for this purpose, the Act certainly will have
    no negative effect. If anything, the opposite is likely to be true:
    Because the Act will enhance the predictability of the asbestos
    litigation in the years to come and otherwise will reduce the need for
    continued expenditures in defense costs, the Act will enable defendants
    to draw more effectively upon the capital markets to support their
    ongoing business enterprises \24\--a development that can only enhance
    their ability to pay compensation in the future.
    ---------------------------------------------------------------------------
        \24\ The district court in the Amchem Products settlement so found.
    See Georgine, 157 F.R.D. at 291 (crediting testimony from expert
    witness presented by settling parties).
    ---------------------------------------------------------------------------
        Second, the complaint that the Act sets forth no ``sure thing'' in
    dollar terms dramatically underestimates the complexity of the
    compensation determination. The class action settlement in Amchem
    Products was able to include a detailed set of dollar amounts only
    because that settlement was limited to a relatively modest number of
    defendants (willing to share their historical settlement data) and
    concerned only occupational exposures to those particular defendants'
    products. S. 758 quite rightly describes a comprehensive framework for
    the asbestos litigation--one applicable to all defendants and all
    exposure settings. It simply is not possible--or, for that matter,
    desirable--to specify in advance a compensation grid when the potential
    combinations of defendants and factual circumstances are effectively
    infinite. That said, however, any determination of compensation for a
    particular victim--whether achieved through mediation, arbitration,
    settlement agreement, or judgment at trial--would remain just as
    enforceable in the courts as before the Act.

                                   CONCLUSION
        S. 758 represents a fair, practicable, and innovative solution to
    the asbestos litigation--one that merits enactment by this Congress.
    Indeed, in this instance, federal legislation is long overdue.

        [Editor's note: The Curriculum Vitae of Richard A. Nagareda is
    retained in Committee files.]

        Senator Grassley. Now, Mr. Verkuil.

                      STATEMENT OF PAUL R. VERKUIL

        Mr. Verkuil. Thank you, Senator. I have been working in the
    field of administrative law and constitutional law and
    separation of powers for many years beyond my colleagues here
    or Professor Edley, I must say, who has 18 years in. But let me
    focus for you on what I think are the crucial issues of
    constitutional concern, since they were raised by Mr.
    Middleton. And the two issues, I believe, that come most to the
    fore are the matter of federalism and the seventh amendment.
        First of all, you must appreciate that the Asbestos
    Resolution Corporation is a government corporation. As such, it
    is like any other administrative agency created by this
    Congress, if it were to do so, under its article I power. It is
    no different constitutionally from the Federal Trade Commission
    or the Federal Communications Commission or from Amtrak which,
    of course, is bound by the same constitutional constraints as a
    government corporation.
        Federalism concerns might be seen to arise because Congress
    would be acting under the Commerce Clause to grant powers to
    the ARC, the Asbestos Resolution Corporation, that partially
    preempts State authority. But there is no question that the
    asbestos industry affects interstate commerce. Indeed, all we
    have heard today is about the number of cases being brought in
    a number of States, and the number of businesses that are
    involved and the number of individuals that are involved. So
    there is no issue, it seems to me, that interstate commerce is
    implicated.
        That distinguishes us from the Lopez case and perhaps also
    from the case that was mentioned by Mr. Middleton concerning
    the women's rights case which will be an issue of interstate
    commerce, realizing that Lopez was the first case of its kind
    in the last 60 years. We are surely beyond and clearly beyond
    any issue there.
        Now, there is another issue with regard to the exercise of
    Federal power, and that is under cases such as Printz, the
    Brady bill case, and New York v. United States, which question
    the use of Federal power validly exercised under the Commerce
    Clause otherwise because it commandeers State officials. And
    the commandeering of State executive officials also has been
    rejected by the Court in the Brady case, for example.
        Well, these are not executive officials that are being
    commandeered here at all. The only thing that is going on is
    that the State judiciary will be required to hear these cases,
    and the judges in the States have to hear Federal claims. And,
    of course, to the extent this bill became law, it would be a
    Federal claim.
        Cases since Testa v. Katt more than 50 years ago have made
    it plain that State courts must hear Federal claims. Indeed, no
    other outcome would be acceptable to the constitutional plan
    drawn up over 200 years ago which contains the Supremacy
    Clause.
        As to the seventh amendment which was also mentioned by Mr.
    Middleton, the issue becomes whether the right to a jury trial
    which is available under State tort law can somehow derail the
    administrative solution proposed by S. 758 through the ARC. The
    key inquiry is whether Congress can validly establish this
    regime consistent with article III. If it does, as a practical
    matter the seventh amendment issue goes away.
        Ever since Crowell v. Benson, decided over 60 years ago, it
    has been plain that, ``public rights cases'' are valid
    exceptions to the seventh amendment. This is such a case. In
    fact, the application of the medical criteria is a classic
    exercise of a public rights doctrine at work. And I think later
    cases like Thomas v. Union Carbide and CFTC v. Schor would also
    support the notion that the intrusion upon the article III
    power is reasonable and not vast and broad, such as it was in
    the bankruptcy context earlier discussed by the Court. So these
    cases, it seems to me, are very clearly valid.
        I realize that ATLA mentions the seventh amendment a lot.
    Of course, they live by the seventh amendment. You can
    appreciate that, but these are not seventh amendment problems
    with this legislation, in my firm judgment. I think the
    legislation works.
        I think the Supreme Court, by the way--and I take comfort
    from Ortiz. I do not see in Ortiz a seventh amendment concern
    which Mr. Middleton mentioned. He cited that case in connection
    with that. I don't even see it there. I am very confident that
    Justice Souter in that opinion said, much like Senator Schumer
    said earlier, that we have been through that; we, the Court,
    want to see a solution. And an administrative solution which
    has been on the table since 1991 when the Judicial Conference
    Ad Hoc Committee first proposed it as a first choice is what
    the Court is now looking for, I really believe.
        My time is up. Thank you very much. I will be pleased to
    answer any questions.
        [The prepared statement of Mr. Verkuil follows:]

                     Prepared Statement of Paul R. Verkuil

                                    SUMMARY
        S. 758, the ``Fairness in Asbestos Compensation Act of 1999,'' is
    consistent with principles of federalism enshrined in the Tenth
    Amendment and with the Seventh Amendment of the Constitution.
        Federalism. Under the Commerce Clause, Congress may enact a
    national solution to the asbestos litigation crisis, which is both a
    consequence of and affects interstate commerce. Because of their
    special role in our federal system, state courts have the obligation to
    apply such federal law. S. 758 is thus fully consistent with recent
    Supreme Court decisions protecting state legislatures and
    administrative personnel from commandeering by the Congress.
        Seventh Amendment. The administrative scheme established by S. 758
    is consistent with the Seventh Amendment. Since the right to a jury
    trial applies only in judicial proceedings, the key question is whether
    Congress can establish an administrative claims resolution process
    without violating Article III of the Constitution. The answer to that
    question is clearly yes. Under the public rights doctrine, Congress can
    confer upon administrative tribunals the power to decide cases
    involving ``public rights'' under a Federal regulatory program. Medical
    eligibility determinations under S. 758 clearly fall within this
    doctrine, since they involve a Federal regulatory program and since the
    government is a participant in the proceeding. In this respect, such
    determinations are comparable to similar determinations made by the
    Social Security Administration and the VA in disability cases.
    Moreover, arbitrations under the statutory scheme (which are optional
    to the claimant in any event) are also acceptable as long as there is
    no threat to separation of powers. There is no such threat here.
                                     ______

        Mr. Chairman and Members of the Committee: My name is Paul Verkuil.
    I appear today in my personal capacity.\1\ I currently serve as Dean
    and Professor of Law at Benjamin N. Cardozo Law School in New York,
    which is part of Yeshiva University. I am also President Emeritus of
    the College of William & Mary, was dean of the Tulane Law School, and
    taught at the law schools of the University of North Carolina,
    University of Pennsylvania and Duke University. The subjects I teach
    include administrative law and economic regulation, both of which deal
    with the constitutional issues raised in my testimony. I have written
    (with colleagues) a treatise and casebooks on administrative law and
    regulatory issues, and I have also published more than 60 law review
    articles on these and related subjects, as my resume, attached hereto,
    describes in detail. Over the years, I have testified before House and
    Senate committees on several occasions, including the bill to provide
    Article I court review of Veterans Administration disability decisions
    which raised substantive issues similar to those involved in S. 758.
    ---------------------------------------------------------------------------
        \1\ I note for the record that I have been compensated by the
    Coalition for Asbestos Resolution for advice on issues of
    administrative and constitutional law. My testimony, of course, is
    based on my own experience, knowledge, and views, resulting from and
    reflected in work done over almost thirty years of academic activity.
    Please also note that I am not the recipient of any federal grant or
    contract.
    ---------------------------------------------------------------------------
        I appreciate the opportunity to discuss the constitutionality of S.
    758, the proposed ``Fairness in Asbestos Compensation Act of 1999.'' I
    shall focus on two issues. The first is whether the bill's
    modifications of state law are consistent with principles of federalism
    enshrined in the Tenth Amendment and with the substantive due process
    rights of claimants. The second issue is whether the bill violates a
    claimant's right to a jury trial under the Seventh Amendment. As we
    shall see, the answer to that question is intertwined with the question
    whether the use of an expert, non-adversarial administrative process to
    determine medical eligibility impermissibly vests the ``judicial Power
    of the United States'' in something other than an Article III court. I
    conclude that S. 758 is plainly constitutional.\2\
    ---------------------------------------------------------------------------
        \2\ I treated these and other issues at greater length in my
    Prepared Statement to the House Committee on the Judiciary, submitted
    for that Committee's hearing on the Fairness in Asbestos Compensation
    Act of 1999, H.R. 1283, held July 1, 1999.
    ---------------------------------------------------------------------------

      I. THE FAIRNESS IN ASBESTOS COMPENSATION ACT DOES NOT VIOLATE TENTH
                       AMENDMENT PRINCIPLES OF FEDERALISM
        This past June, the Supreme Court repeated its call for a
    congressional solution to the asbestos litigation crisis: ``[T]he
    elephantine mass of asbestos cases * * * defies customary judicial
    administration and calls for national legislation.'' Ortiz v.
    Fibreboard Corp., 119 S. Ct. 2295, 2302 (1999) (emphasis added). The
    Court's call for national legislation on its face presupposes at least
    some preemption of state law. S. 758 strikes a balance between state
    and federal interests that is in my view entirely consistent with
    constitutional principles of federalism.
        The threshold question is whether Congress has the power under the
    Constitution to adopt comprehensive legislation addressing the asbestos
    litigation crisis.\3\ Under our federal system,
    ---------------------------------------------------------------------------
        \3\ The legislation makes several changes to the substantive law of
    torts, long sought by proponents of asbestos litigation reform. First,
    the bill adopts medical criteria to separate those who are impaired by
    asbestos-related disease from those who are not. Second, the Senate
    bill, S. 758, adopts the waiver of defenses contained in the Georgine/
    Amchem stipulation, limiting the issues in asbestos tort cases to
    medical eligibility, product identification, and damages. Third, the
    legislation abolishes the statute of limitations and punitive damages
    and bars consolidation of cases without the consent of all
    parties.Congress' powers are limited to those enumerated under Article
    I, Section 8 of the Constitution. Article I, Section 8 does not give
    Congress any specific authority over the common law of torts, which is
    entrusted in the first instance to the States, nor does Article III
    give Congress or the federal courts any power to make common law in
    cases under the jurisdiction of the federal courts because of the
    diversity of the parties. See Erie R.R. v. Tompkins, 304 U.S. 64, 78
    (1938).
    ---------------------------------------------------------------------------
        Nevertheless, the power of Congress to override state rules of law
    to address a national litigation crisis, with serious and severe
    effects on interstate commerce, is beyond controversy. Article I,
    Section 8 of the Constitution gives Congress the power to regulate
    interstate commerce. Ever since Chief Justice Marshall's decision in
    Gibbons v. Ogden, 22 U.S. (9 Wheat.) I (1824), the Supreme Court has
    emphasized the necessity for Congress to protect national markets. Even
    in United States v. Lopez, 514 U.S. 549 (1995), a recent decision
    recognizing the limits of the Commerce Power, the Supreme Court
    explained that Congress may ``regulat[e] the use of the channels of
    interstate commerce,'' ``persons or things in interstate commerce,''
    and ``activity that substantially affects interstate commerce.'' Id. at
    558, 559. Asbestos litigation is a consequence of the interstate
    commerce in asbestos-containing products. Each case affects parties
    from numerous states, and the litigation is highly mobile as a
    relatively small number of sophisticated and highly profitable national
    law firms seek state courts that, at any given time, are considered
    favorable to plaintiffs. The bankruptcy of over twenty former asbestos
    producers, with serious consequences for workers, communities and
    future victims nationwide, makes it clear beyond doubt that this
    litigation substantially affects interstate commerce.
        Of course, even if Congress has the power to legislate in an area,
    it must use means that are consistent with the Tenth Amendment, i.e.,
    ``it must respect the sovereignty of the States.'' Alden v. Maine, 119
    S. Ct. 2240, 2268 (1999). The provisions of S. 758 that affect state
    court procedures are entirely consistent with this principle. Under the
    Supremacy Clause, state courts have an obligation to enforce federal
    law. Testa v. Katt, 330 U.S. 386 (1947). That obligation includes a
    duty to apply the purely substantive provisions of the bill. To be
    sure, the Tenth Amendment does not allow Congress to ``commandeer''
    state officials, institutions or resources as agents or instruments of
    federal law or policy. See Printz v. United States, 521 U.S. 898
    (1997); New York v. United States, 505 U.S. 144 (1992). But Congress
    does not ``commandeer'' state courts when it requires them to enforce
    rules of federal law. As the Printz Court noted, ``[T]he Constitution
    was originally understood to permit imposition of an obligation on
    state judges to enforce federal prescriptions. * * *'' Printz, 521 U.S.
    at 907.
        Of course, some provisions of the bill--e.g., requirements that
    asbestos claimants obtain a certificate of medical eligibility and
    release from mediation before filing or maintaining a tort action--are
    arguably procedural. While state courts are bound under the Supremacy
    Clause to enforce federal law, it is sometimes said that ```federal law
    takes the state courts as it finds them.''' Howlett v. Rose, 496 U.S.
    356, 372 (1990) (quoting Henry M. Hart, Jr., The Relations Between
    State and Federal Law, 54 Colum. L. Rev. 489, 508 (1954)). I do not
    believe, however, that this principle forbids Congress from requiring
    state courts to respect these provisions of the bill.
        The Supreme Court has held that the Constitution's Supremacy Clause
    authorizes Congress to establish procedures that affect the operation
    of state courts, if Congress does so expressly. See Johnson v. Fankell,
    520 U.S. 911, 921 n.12 (1997). Given the obligation of state courts to
    enforce federal substantive law, Congress may require the use of
    specialized federal procedures that are intertwined with the
    substantive provisions of federal legislation. A central goal of the
    legislation is to ensure that medical criteria are applied in an
    objective, medically appropriate, and consistent way. Requiring
    claimants to exhaust a federally-established, expert, non-adversarial
    medical review process as a prerequisite for filing suit is vital if
    that goal is to be achieved. In this sense, application of the medical
    criteria is really a substantive rather than a purely procedural
    requirement.\4\ Similarly, the requirement that claimants must exhaust
    the medical review process before filing suit is bound up with the
    achievement of the bill's core substantive goal. The exhaustion
    requirement in S. 758 is analogous to the exhaustion requirement in
    Title VII of the Civil Rights Act. Under Title VII, plaintiffs may not
    file suit in a state court for employment discrimination without first
    exhausting a prescribed administrative claims process. See 42 U.S.C.
    Sec. 20OOe-16(c). State courts have for many years enforced this
    federal exhaustion requirement under Title VII.\5\ So far as I am
    aware, no one has ever seriously maintained that it is beyond
    Congress's authority to impose such an exhaustion requirement on state
    courts.
    ---------------------------------------------------------------------------
        \4\ By way of analogy, under Erie, states are not permitted to make
    purely procedural rules for federal courts, but state statutes that
    require medical malpractice claims to be submitted to state screening
    panels are sufficiently ``substantive'' that the federal courts must
    respect them. See Wray v. Gregory, 61 F.3d 1414, 1417-18 (9th Cir.
    1995); DaigLe v. Maine Med. Ctr., Inc., 14 F.3d 684, 689 (1st Cir.
    1994); DiAntonio v. Northampton-Accomack Mem'l Hosp., 628 F.2d 287, 291
    (4th Cir. 1980). State courts would likewise be obliged to respect the
    federal rule requiring claimants to submit to the ARC medical review
    process.
        \5\ See, e.g., Duplessis v. Warren Petroleum, Inc., 672 So. 2d 1019
    (La. Ct. App. 1996); Roache v. District of Columbia, 654 A.2d 1283,
    1284 n.1 (D.C. 1995); Patrowich v. Chemical Bank, 470 N.Y.S.2d 599
    (App. Div.), aff'd, 483 N.Y.S.2d 659 (N.Y. 1984).
    ---------------------------------------------------------------------------
        Finally, the legislation's bar on consolidations without the
    consent of all parties does not violate the Tenth Amendment as
    interpreted in Printz and New York. The legislation does not force the
    states to create any new court nor does it require them to expand the
    jurisdiction of existing courts--the principal boundaries on
    congressional power over state courts that the Supreme Court has
    identified. See Howlett, 496 U.S. at 372. Indeed, the legislation does
    not regulate state court procedures at all. Rather, it gives an
    objecting party the right to remove a state court-ordered consolidation
    to federal court. As Professor Laurence Tribe observed in testimony
    before the Senate Judiciary Committee regarding a similar provision in
    last year's bill implementing the global tobacco settlement, Congress
    has broad power to regulate the jurisdiction of the federal courts, and
    may make cases removable so long as the case is within the federal
    judicial power under Article III.\6\ I agree with Professor Tribe on
    this point. There is, of course, no question that Congress may, under
    Article III, confer jurisdiction over these removed cases on the
    federal courts. Under S. 758, a central element of the plaintiff's
    case--medical eligibility--would be governed by federal law.
    ---------------------------------------------------------------------------
        \6\ A Review of the Global Tobacco Settlement: Hearing Before the
    Senate Comm. on the Judiciary, 105th Cong. 160 (1997) (Prepared
    Statement of Prof. Laurence H. Tribe, Harvard Law School).
    ---------------------------------------------------------------------------
        A final objection to the creation of a national asbestos dispute
    resolution system is the argument that Congress may not displace state
    tort systems without providing claimants with an adequate alternative
    remedy.\7\ This is not strictly a federalism issue, but instead raises
    the question whether the legislation's effect on common law rules
    invades the substantive due process rights of claimants. In Duke Power
    Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59 (1978), the
    Supreme Court explained that ```[a] person has no property, no vested
    interest, in any rule of the common law.' The `Constitution does not
    forbid the creation of new rights, or the abolition of old ones
    recognized by the common law, to attain a permissible legislative
    object[]' * * *'' Id. at 88, n.32 (citations omitted).\8\ In light of
    this principle, the Court strongly suggested (although it was not
    required to decide) that Congress is not required to provide any
    substitute for common law rights of action, as long as it has a
    rational basis for its changes to common law rules.\9\ Certainly, no
    court has ever suggested that Congress must provide a substitute remedy
    ``approximating the value of litigated claims'' for all affected
    parties (as the trial lawyers argue) \10\ so long as the remedy it
    provides is reasonable in general.
    ---------------------------------------------------------------------------
        \7\ Statement of Richard Middleton, Jr., President-Elect of the
    Association of Trial Lawyers of America, before the House Committee on
    the Judiciary, July 1, 1999, at 3, 11.
        \8\ This is true even when legislation changes the application of
    the law to already-accrued, and even to already filed causes of action,
    as long as no final judgment has obtained. Usery v. Turner Elkhorn
    Mining Co., 428 U.S. 1, 16 (1976); United States v. Heinszen & Co., 206
    U.S. 370, 387 (1907).
        \9\ Id. at 88 & n. 32 (``[I]t is not at all clear that the Due
    Process Clause in fact requires that a legislatively enacted
    compensation scheme either duplicate the recovery at common law or
    provide a reasonable substitute remedy. * * * Indeed, statutes limiting
    liability are relatively commonplace and have consistently been
    enforced by the courts.'' (citing cases)).
        \10\ Statement of Richard Middleton, Jr., at 3. Indeed, even during
    the now-discredited Lochner era, when the Supreme Court routinely
    invalidated congressional enactments that modified common law rules,
    the Court would uphold statutes that substantially affected common law
    liability if the government provided a ``reasonably just substitute''
    for common law rights. See New York Cent. R.R. v. White, 243 U.S. 188,
    201 (1917).
    ---------------------------------------------------------------------------
        In any event, the Fairness in Asbestos Compensation Act does
    provide a reasonable, and in many ways, superior remedy for victims
    than the current tort system. A federal court has already determined,
    after exhaustive hearings, that a settlement containing many of the
    basic provisions of S. 758 were fair and reasonable and offered
    substantial advantages over the tort system. Georgine v. Amchem Prods.,
    157 F.R.D. 246 (E.D. Pa. 1994). The appeals court praised the
    alternative system proposed by the settlement as ``arguably []
    brilliant,'' Georgine v. Amchem Prods., 83 F.3d 610, 617 (3d Cir.
    1996), and the Supreme Court noted that ``a nationwide administrative
    claims processing regime'' could well ``provide the most secure, fair
    and efficient means of compensating victims of asbestos exposure.''
    Amchem Prods. v. Windsor, 521 U.S. 591, 628-29 (1997).

      II. THE FAIRNESS IN ASBESTOS COMPENSATION ACT DOES NOT VIOLATE THE
                    SEVENTH AMENDMENT RIGHT TO A JURY TRIAL
        Finally, the medical eligibility process established in S. 758, and
    the provisions concerning alternative dispute resolution, do not
    violate the Seventh Amendment. The Seventh Amendment issue turns on the
    question whether Article III allows Congress to create a nationwide
    dispute resolution process for asbestos cases that would permit
    adjudication of those cases, in whole or in part, by a non-Article III
    tribunal. If it does, there can be no Seventh Amendment objection to
    administrative resolution of asbestos cases without a jury trial. The
    Supreme Court has determined that, where Congress properly places
    adjudicative authority in a non-Article III tribunal, there is no
    Seventh Amendment jury trial right. As the Supreme Court has observed,
    ```the Seventh Amendment is generally inapplicable in administrative
    proceedings, where jury trials would be incompatible with the whole
    concept of administrative adjudication.''' \11\
    ---------------------------------------------------------------------------
        \11\ Atlas Roofing Co. v. Occupational Safety and Health Review
    Comm'n, 430 U.S. 442, 454 (1977) (quoting Pernell v. Southall Really,
    416 U.S. 363, 383 (1974)); see Granfinanciera, S.A. v. Nordberg, 492
    U.S. 33, 52 (1989).
    ---------------------------------------------------------------------------
        Over the years, Article III has been interpreted to permit
    adjudication of a variety of claims by non-Article III federal
    tribunals. In particular, Article III has always been interpreted to
    permit adjudication of disputes between an individual and the
    government under the ``public rights'' doctrine. That doctrine is
    grounded in the understanding that, because Congress is free to commit
    certain matters ``arising `between the Government and persons subject
    to its authority''' to non-judicial executive determination, it may
    also employ the ``less drastic expedient of committing their
    determination to a legislative court or an administrative agency.''
    Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50,
    68 (1982) (citing Crowell v. Benson, 285 U.S. 22, 50 (1932)). Because
    the question whether to issue a medical eligibility certificate is a
    matter ``arising between the Government and persons subject to its
    authority,'' rather than a dispute involving private parties, there is
    no question that it can be committed to administrative resolution. The
    medical review process is entirely non-adversarial, involving only the
    claimant and the ARC, a government body; defendants do not participate
    at all in this stage. Although the review process will, at a later
    stage, affect the resolution of a private dispute, the process itself
    has the form and structure of a traditional ``public right'' involving
    only the claimant and the Government. In this sense the medical review
    process is like such programs as Social Security disability
    determinations, veterans' benefits, and workers' compensation programs.
        The alternative dispute resolution process brings in the defendants
    as additional parties, but is still permissible under Article III. I
    note at the outset that, under S. 758, eligible claimants are not
    required to submit to any non-Article III adjudication and that they
    fully retain a right to a jury trial in the courts of their choice.
    But, even if this were not the case, there would be no constitutional
    problem. The Supreme Court has expanded the traditional
    conceptualization of public rights to include a variety of what it has
    characterized as ``seemingly 'private''' rights that are related to a
    public administrative scheme. Thomas v. Union Carbide Agric. Prods. Co.
    473 U.S. 568, 594 (1985). The leading decisions are Thomas and
    Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833 (1986). In both
    of those cases the Court emphasized pragmatic flexibility--and its own
    openness to administrative adjudication--in applying Article III.
        In Thomas the Court upheld federal environmental legislation that
    required companies to disclose and share proprietary data, and that
    required arbitration of disputes regarding appropriate compensation for
    doing so. The Court held that when Congress creates a ``right that is *
    * * closely integrated into a public regulatory scheme,'' Congress may
    also select ``a quasi-judicial method of resolving matters'' arising
    under that scheme. Thomas, 473 U.S. at 589, 594. In Schor the Court
    upheld the Commodity Exchange Act's grant of authority to the Commodity
    Futures Trading Commission (``CFTC'') to decide state common law
    counter-claims to reparations complaints brought under the Act. The
    Court reasoned that ``limited * * * jurisdiction over a narrow class of
    common law claims as an incident to the [agency's] primary, and
    unchallenged, adjudicative function'' did not create a ``substantial
    threat to the separation of powers.'' Schor, 478 U.S. at 854. The Schor
    Court stressed that it has reviewed Article III challenges ``with an
    eye to the practical effect that the congressional action will have on
    the constitutionally assigned role of the federal judiciary.'' Id. at
    851.
        The provision of mediation and arbitration, entirely at the
    claimant's option, is linked to the medical eligibility process, and
    serves the legislation's public purpose of providing alternative
    resolution of asbestos disputes. In this respect, it resembles the
    arbitration provisions upheld in Thomas. Although the Supreme Court
    noted the voluntary nature of the process at issue in Schor, a
    claimant's consent to federal administrative adjudication is not
    necessary to make such adjudication constitutional. The Court has never
    held that a federal legislative scheme that involves legitimate
    regulation limited to a narrow class of cases--and which therefore
    poses no threat to the judiciary's co-equal role--must be invalidated
    because it provides a non-consensual administrative process.
        To be sure, the Court's willingness to accept administrative
    adjudication is not unlimited. In the extreme situation presented by
    Northern Pipeline, for example, the Court invalidated a statute
    granting broad powers to a bankruptcy court. The Court found that the
    legislation removed an essentially unlimited category and number of
    cases from the federal courts to a non-Article III tribunal, posing a
    credible threat to the federal judiciary's role under the Constitution.
    The Court also held that because the claims at issue arose ``entirely
    under state law,'' their adjudication by a non-Article III court could
    not be justified under the doctrine of ``public rights.'' Northern
    Pipeline, 458 U.S. at 90. The Court reached a similar result in
    Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989)--again, in the
    bankruptcy context--holding that the Seventh Amendment prohibited the
    adjudication without a jury (in a non-Article III forum) of a
    fraudulent conveyance claim that the Court deemed ```[w]holly
    private''' in nature. Id. at 51, 55 (citations omitted). In my view,
    these cases involving the bankruptcy courts involved a far broader
    category of cases, potentially touching on all areas of law, rather
    than the narrow class of cases in which claimants seek compensation for
    injury from asbestos products.
        Under Schor, the ultimate issue is whether the non-Article III
    adjudication poses a threat to the separation of powers. Where the
    ```essential attributes of judicial power' are reserved to Article III
    courts,'' Schor, 478 U.S. at 851 (citation omitted), the legislative
    scheme will generally be constitutional. Here, as in other
    administrative programs, those attributes are reserved to the judiciary
    through judicial review of the ARC's decisions.\12\ Striking down the
    scheme would celebrate purely formal concerns at the expense of
    pragmatic federal legislative problem-solving, a course that would be
    both foreign and contradictory to the Supreme Court's current
    jurisprudence. Indeed, the Supreme Court has, twice in the last two
    years, described asbestos claims as particularly unsuited to judicial
    resolution and appropriate for administrative resolution.\13\ In light
    of this history, I do not believe that the Supreme Court would now
    decide that confining review of asbestos claims for compensation to a
    nationwide dispute resolution process would pose a serious attack on
    the judicial power.
    ---------------------------------------------------------------------------
        \12\ See generally Paul Verkuil, Congressional Limitations on
    Judicial Review of Rules, 57 Tulane L. Rev. 733, 739-43 (1983)
    (discussing the relationship between judicial review and due process).
        \13\ See Ortiz v. Fibreboard Corp., 119 S. Ct. 2295, 2302 (1999);
    Anchem Prods. v. Windsor, 117 S. Ct. 2231, 2252 (1997); see also Report
    of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 27
    (Mar. 1991).
    ---------------------------------------------------------------------------
        In conclusion, I believe that proposed legislation is plainly
    consistent with the Seventh Amendment and Article III requirements for
    the following reasons:

       First, the medical review process involves only the claimant
            and the government--thus fitting squarely within the
            traditional category of ``public rights'' cases where
            administrative resolution is unquestionably constitutional.
       Second, the alternative dispute resolution process,
            including mediation and arbitration at the claimant's option,
            is closely linked with the medical eligibility process and
            serves the government's public goal of providing compensation
            to eligible claimants.
       Third, the legislation narrowly circumscribes the impact
            that its requirement of medical eligibility review has on the
            federal judiciary. The legislation affects only cases involving
            claims of injury or death flowing from asbestos exposure. That
            category does not involve anything like the wholesale
            displacement of federal jurisdiction involved in the bankruptcy
            cases and will, moreover, involve fewer cases over time as the
            class of those exposed or injured shrinks relative to the
            population as a whole.
       Fourth, the nationwide dispute resolution process provided
            in the bill is a solution to an urgent problem which the
            Supreme Court has said is particularly suited to administrative
            resolution. The Court's own pronouncements strongly suggest
            that the administrative process established by S. 758 would not
            be considered congressional aggrandizement at the expense of
            the judiciary's co-equal role in our constitutional system.
       Finally, because assigning the task of determining medical
            eligibility to the ARC, and the related alternative dispute
            resolution process, is valid under the ``public rights''
            doctrine, it is also necessarily consistent with the Seventh
            Amendment.

                                   CONCLUSION
        The Fairness in Asbestos Compensation Act is sound as a matter of
    constitutional law. Eight years ago, the Judicial Conference's Ad Hoc
    Committee on Asbestos Litigation recommended replacing tort litigation
    with a nationwide dispute resolution process in order to provide
    quicker and fairer resolution of asbestos claims and to shield the
    courts from a tide of asbestos cases. When Congress did not act, the
    parties to the Amchem class action settlement attempted to create an
    administrative claims processing system by voluntary agreement within
    the judicial system. In Amchem and, more recently, in Ortiz, the
    Supreme Court made it clear that the responsibility for creating an
    alternative system rested with Congress, not the courts. Congress has
    ample constitutional authority to do so.

        Senator Grassley. Thank you all very much. We will take 5-
    minute rounds and see how far we go, but we will have to be out
    of here very shortly.
        Professor Green, you indicate that S. 758, and these are
    your words, ``tilts the current playing field a bit too much
    toward the defendant's interest at the expense of current
    claimants.'' So I would like some suggestions on how you might
    rewrite the bill to improve that imbalance, or at least some
    suggestions.
        Mr. Green. Well, I think the difficult issue for the
    asbestos defendants right now, Senator Grassley, is to try and
    resolve to apportion liability among them, and that is
    something this bill does not resolve. This bill leaves that
    open. It will have to be resolved in the mediation, the
    arbitration, or litigation in each individual case.
        Now, what we are trying to do here, what this bill does go
    a ways toward is to create a system that will not eat up I have
    heard estimates of anywhere from 50 to 75 cents of every
    dollar. But what the failure of the asbestos defendants to come
    forward and try to work out a system by which we can globally
    resolve apportionment among them--that, I think, is the
    critical deficiency in this bill. That is something that, if I
    were rewriting it, I would try and come up with a mechanism to
    do that.
        Senator Grassley. Professor Nagareda, S. 758 establishes
    threshold medical criteria that need to be met before a
    plaintiff can enter the Resolution Corporation and then get
    compensation. Some have argued that this mechanism
    substantially curtails the victim's tort rights and remedies
    available in our system. Do you agree? Also, do you believe
    that the mandatory rather than voluntary nature of the program
    is problematic?
        Mr. Nagareda. No, I don't believe those are problematic,
    Senator. I think that there is a fundamental value choice that
    needs to be made in this legislation, and the choice that this
    legislation makes, I believe, is the right one to preserve
    resources for the payment of those who are genuinely impaired
    and not to devote resources to those who either aren't impaired
    or to fund punitive damages in a sort of lottery-like fashion.
    So I am comfortable with the underlying value choice that is
    made in the legislation.
        In terms of the notion of abridging or limiting some sort
    of rights that exist in the present system, it is true that
    people who are unimpaired can in some jurisdictions file
    certain sorts of tort claims. And that is why I am saying that
    a value choice does need to be made by this body under the
    commerce power to say that those claims are not preferred to
    the claims of those who are legitimately impaired and who meet
    the criteria set forward in the legislation. I think it is a
    question of prioritization, and I think that the legislation
    sets forward the right priorities.
        Senator Grassley. Mr. Verkuil, I would like to have a
    response from you in regard to his answer.
        Mr. Verkuil. To Mr. Green and to Mr.----
        Senator Grassley. No, no, just to Mr. Nagareda.
        Mr. Verkuil. Well, I think he is on the right track.
        Senator Grassley. OK; Professor Green, you criticized S.
    758 for retaining the adversarial nature of the tort system by
    requiring a determination of comparative fault for each
    defendant, essentially creating a potential issue which could
    be disputed at all phases of the Corporation's process.
        How would you change the process to address those concerns?
        Mr. Green. Well, one idea is for Congress to enact a
    compensation fund that would be voluntary for asbestos
    defendants. They could opt into it or not. If they didn't, they
    would be subject to suit in the tort system. If such a scheme
    were set up, I would venture to say every asbestos defendant
    would opt in. Once they opted in, we could then attempt to
    devise a mechanism, either arbitration or administrative
    process, that would resolve among all of them their respective
    liability for the claims that are made.
        Would it be difficult? Of course. But would it save an
    enormous amount of money over litigating comparative fault or
    resolving comparative fault in every case that comes down under
    this statute? I think unquestionably.
        Senator Grassley. What I was hoping to do was in regard to
    this same issue, to ask both Professor Nagareda and Professor
    Verkuil, if you share Professor Green's concerns, and whether
    there are any improvements that you believe can be made in this
    proposed process to alleviate concerns expressed by witnesses
    on the first panel?
        Mr. Verkuil. Well, let me say this, that the comparative
    fault problem could be fixed on one way that Congress could
    declare a Federal standard of liability that would apply in the
    States. But that would be more intrusion upon the States and
    the State courts than I think might be desirable.
        But we have to go back to the purpose of this bill. Most of
    these cases that come through, assuming you have your medical
    certificate and you had been declared to be sick and qualified
    to be entitled to reimbursement, will be settled. I mean, the
    great hope here is that return to State courts will be the
    occasional case rather than the massive cases. So, that is one
    answer.
        And if the medication is mandatory, or even if it is
    voluntary and if there is arbitration that follows, there will
    be a lot of incentive to settle these cases. And I think the
    Asbestos Resolution Corporation can begin to get a sense of
    values of settlements. They will have rulemaking power; it
    could determine rules over time. So a lot of the mystery will
    be taken out of these settlements, and I think maybe resort to
    the State court and the problem of definitions of fault will
    not be as great a problem over time.
        The other difficulty, though, with having a fund is, as I
    think Professor Edley said, it is just so hard to identify. It
    is either going to be overinclusive or underinclusive because
    there are so many potential defendants who have marginal
    connections to the asbestos world that if you draw them too
    broad, they have claims, I think, maybe undertaking due process
    issues. I mean, the defendants would have some interests, too,
    not to be brought in. And if you draw them too narrowly, you
    are letting people out.
        But bigger than that is the potential problem of insurance,
    and that would have to be fixed as well because otherwise it
    may be that the insurance carriers would no longer be liable,
    and certainly that would be an outcome none of us would want.
        Senator Grassley. Professor Nagareda, do you have anything
    to add?
        Mr. Nagareda. Yes, Mr. Chairman. It seems to me that the
    sort of regime that Professor Green is talking about is, I
    think, desirable in theory, but I think very, very difficult,
    possibly impossible, for this Congress to work out in a piece
    of legislation.
        We are dealing here in the asbestos area with multiple
    defendants, multiple exposure settings. This is unlike
    situations like, for example, in the breast implant litigation.
    We are dealing with a smaller number of defendants in which the
    exposure settings are very similar. So I think it would be very
    complicated as a practical matter to set forward the sort of
    fund that Professor Green would advocate.
        The other point that I would raise is simply as a matter of
    experience, when even individual asbestos manufacturers have
    tried to take this sort of approach of setting aside particular
    money and trying to decide in advance what their liabilities
    will be, projected over many decades, that has not proven very
    successful. That is the enterprise that courts pursue in the
    bankruptcy context, and I think that the results there have
    been quite mixed as a practical matter.
        Senator Grassley. After they have commented now, Professor
    Green, do you have any rebuttal to the point of view that they
    just expressed?
        Mr. Green. Well, I agree with Professor Nagareda that
    Congress probably cannot write this into a bill, that
    apportionment of global liability among defendants would
    require some sort of process outside of the statute, an
    administrative resolution or arbitration among the defendants.
    You often see defendants who avoid in cases deciding their
    respective liability and then they agree to arbitrate it
    afterwards. Binding arbitration might be a mechanism.
        I am becoming more and more enamored of the notion of
    leaving this optional with asbestos defendants. If they are
    really peripheral and they want to stay out, let them stay out.
    They would be subject to tort suit, and if they wanted to
    defend those, my guess is that this compensation scheme, leaned
    down, would be so attractive both to asbestos defendants and to
    their insures that all of the viable, realistic defendants that
    are paying money today would opt into it on a voluntary basis,
    including their liability insurers.
        Senator Grassley. Well, I thank you all very much. That is
    the end of my questioning. Let me ask this panel to be
    cognizant of a point I made to the first panel, that for
    members who were here or members who weren't here, there might
    be questions submitted to you for answer in writing. Hopefully,
    they will do that right away. We would like to keep the record
    open for about 15 days for that purpose.
        Thank you all very much.
        [Whereupon, at 12:41 p.m., the subcommittee was adjourned.]
                                A P P E N D I X

                                  ----------

                             Questions and Answers

                                  ----------

      Responses of Prof. Christopher Edley, Jr. to Questions From Senator
                                    Grassley

        Question 1. Does S. 758 provide the necessary incentives or dis-
    incentives for plaintiffs and defendants to resolve their claims
    promptly with the Asbestos Resolution Corporation? For example, Owens
    Corning argues that there are no set settlement values or payment
    schedules which would encourage plaintiffs to forgo court action and
    enter into settlements with asbestos defendants. Owens Corning proposes
    that tax incentives might be incorporated to encourage defendants to
    settle, while Professor Green suggests that penalties might encourage
    the early resolution of claims. What is your opinion?
        Answer 1. I believe that S. 758 is carefully drafted to encourage
    both plaintiffs and defendants to settle early in the process, and that
    adjudication, whether in the ARC or in the tort system, will be rare.
        The ARC system is designed to encourage settlement shortly after a
    claim is filed, and to facilitate the private negotiation of settlement
    schedules or ranges between defendants and plaintiffs' attorneys that
    will allow for routine payment of claims after a claimant has been
    found medically eligible and produces some evidence of exposure to the
    defendant's product. There is no need for the legislation to mandate a
    particular set of values. I believe that would work to claimants'
    disadvantage by capping their recovery at a particular value, rather
    than allowing those values to be continually ``aligned'' with the
    recovery available in the tort system. Instead, there is every reason
    to expect that major defendants would, in essence, establish ``standing
    offers'' for medically eligible claimants, thereby disposing of a great
    many cases--assuming the figures are reasonable.
        Defendants have important incentives to settle, and to settle
    early. As soon as a claimant completes the medical review process, the
    claimant has an opportunity to identify defendants who are responsible
    for the claimant's injury. Defendants have an incentive to settle with
    claimants at that point, because they bear the costs of mediation if
    that becomes necessary. At the close of mediation, defendants are
    required to make good faith settlement offers, and face a financial
    penalty if their offers are 25 percent less than the damages ultimately
    assessed by an arbitrator or a jury. If there is no settlement,
    defendants know that claimants will come into court or arbitration with
    a presumption that they are impaired by an asbestos-related disease.
    Thus, it will be greatly in defendants' interest to pursue a strategy
    of settling cases as soon as possible after medical review.
        I have not had the opportunity to review Owens Coming's tax
    incentive proposal and cannot comment intelligently about it. However,
    I do believe that defendants will have ample incentives to settle cases
    fairly, and early, without any additional tax incentives. Moreover,
    attaching tax provisions to this legislation will fuel delay in the
    Congress, invite criticism that the bill has become a ``corporate
    bailout'', draw objections from fiscal conservatives, and create points
    of order against the legislation under the Budget Enforcement Act.

        Question 2. Mr. Middleton and others have criticized the Asbestos
    Resolution Corporation to be a time-consuming process by which sick
    plaintiffs will be ``Jumping through hoops'' with no guarantee of
    timely compensation. Is this an accurate assessment of the process set
    up in S. 758? Does S. 758 create an open-ended procedure which provides
    endless opportunities for defendants to delay any compensation to the
    victims, as suggested by Mr. Middleton?
        Answer 2. No fair examination of the ARC process can lead to that
    conclusion. The process is really very simple for the vast majority of
    claimants. First, a claimant presents medical information to the ARC to
    show that he satisfies the medical criteria. In most cases, compliance
    with the objective criteria will be obvious, and the claim can be
    approved as a matter of routine by a claims examiner. Second, the ARC
    gathers together the defendants alleged to be responsible, and, if
    necessary, appoints a mediator to encourage all parties to settle. But
    this is key: Mediation cannot be used as a delaying tactic because it
    is subject to a 60-day time limit. Finally, a claimant can choose
    either (1) streamlined arbitration under the auspices of the ARC, or
    (2) traditional litigation in state or federal court, but now armed
    with a valuable certificate of medical eligibility.
        Of course, some cases will be harder than the typical case, such as
    cases where the claimant seeks designation as an exceptional claim
    because he cannot meet the statutory criteria. There are also appeals
    from a denial of medical eligibility. Fairness to the claimant requires
    this. But this does not allow any opportunity for delay. The entire
    medical review process is non-adversarial. Defendants are not involved
    in the medical review process at all. It is impossible for defendants
    to use the medical review process for delay. Most important, the
    various special procedures and appeals are all for unusual cases, all
    designed to benefit the victim, and all created to make it easy to say
    ``yes'' to eligibility and hard to say no.
        It is misleading to paint this process as ``jumping through hoops''
    or just burning time. Qualified claimants will emerge from the medical
    review process with a strong presumption that they are impaired by an
    asbestos-related disease. Defendants may only overcome that presumption
    only with ``clear and convincing evidence,'' which, in the real world,
    will probably require something like clear evidence of fraud.
        In addition, despite Mr. Middleton's confusion or misstatement at
    the October 5 hearing, S. 758 takes away all traditional defenses for
    asbestos defendants. Given this, virtually all defendants will settle
    quickly. If defendants insist on litigating, they are limited to
    contesting (1) medically eligibility (in the face of a strong
    presumption of correctness from the medical review certificate), (2)
    individual causation (usually, product identification), and (3)
    damages. This will virtually ensure compensation for any eligible
    plaintiff who was exposed to a solvent defendant's product. While I
    have reservations about applying this broad waiver language to non-core
    defendants (that is, premises defendants and others who are not among
    the major players), I do support the waiver in the Senate bill with
    respect to the principal defendants in this litigation.
        Finally, this system, which will provide compensation after only a
    few months, must be compared with the length and complexity of the
    process that occurs today in the tort system. Cases often languish for
    years before settlement, usually on the eve of trial, and are subject
    to the whims of court scheduling decisions. The ARC process, by
    contrast, is designed to promote settlement right away, as soon as the
    medical review process is concluded.

        Question 3. At the House Judiciary Committee hearing, a
    representative from Owens Corning expressed concern about the
    applicability of the bill's provisions to lawsuits pending at the time
    of enactment, specifically that Congress would be preempting state
    substantive law causes of action which have already been filed. In
    addition, Owens Corning objected to the provisions requiring that all
    funding be collected from existing asbestos defendants in proportion to
    the number of claims against them. Are these concerns valid and, if so,
    how can the bill be remedied?
        Answer 3. I do not believe that these concerns are valid. As far as
    the first question is concerned, it is important to keep in mind that
    well over 200,000 asbestos cases have been filed and that more are
    being filed at a rate approximating 50,000 per year. Any solution to
    the asbestos litigation problem must apply to these cases--the
    ``elephantine mass,'' as the Supreme Court calls them--as well as to
    future cases. Otherwise, the defendants' resources will continue to be
    misdirected until after the mass of pending claims is finally
    resolved--which will not occur until well into the next century.
        An effective solution requires that some changes be made to
    existing tort law for all pending claims. These include the abrogation
    of traditional defenses in favor of absolute liability (at least for
    core defendants), statutory medical criteria that focus resources on
    the impaired, the elimination of punitive damages, the guarantee of
    additional compensation for cancer if a claimant has been compensated
    for non-malignant disease (``come-back rights''), and the abolition of
    the statute of limitations. These changes will affect both plaintiffs
    and defendants, are appropriate, and are entirely within congressional
    authority under the Commerce and Due Process clauses of the
    Constitution.\1\ Of course, handling the transition to the new system
    requires care, in order to deal fairly with those who have already been
    waiting too long under the old system. Plaintiffs with early trial
    dates are permitted to forgo going into the administrative system and
    can remain in court if they choose.
    ---------------------------------------------------------------------------
        \1\ In Duke Power Co. v. Carolina Envtl. Study Group, Inc. 438 U.S.
    59 (1978), the Supreme Court explained that ```[a] person has no
    property, no vested interest, in any rule of the common law.''' Id. at
    88, n.32 (citations omitted); see also Usery v. Turner Elkhorn Mining
    Co., 428 U.S. 1, 16 (1976) (principle applies so long as no final
    judgment has obtained); United States v. Heinszen & Co., 206 U.S. 370,
    387 (1907) (same).
    ---------------------------------------------------------------------------
        As far as the second question is concerned, I believe that
    defendants who use the new system should be required to pay reasonable
    user fees and assessments to defray its costs. I regard this aspect of
    the legislation as one of its strengths. Taxpayers should not have to
    bear the costs of the asbestos tragedy. (The legislation does not
    affect sovereign immunity for the governments role in promoting--indeed
    commanding--the use of asbestos in ships and other requisitioned
    products.) The legislation's cost-assessment formula is fairly
    straightforward. It charges administrative and medical review costs to
    defendants based on the number of cases in which they are named,
    subject to a de minimis exclusion for defendants named in only a few
    cases. It would charge the costs of mediation and arbitration to
    defendants who participate, while excluding defendants who are
    dismissed early in the process. These assessments are entirely fair. If
    a defendant, such as Owens-Corning, is able to resolve cases early, it
    will pay correspondingly smaller user fees. If a defendant can resolve
    cases without the need for the administrative system at all, it will
    not be named, and will not have to pay administrative assessments for
    medical review for those cases.\2\
    ---------------------------------------------------------------------------
        \2\ The Supreme Court has upheld analogous user fees that defray
    the cost of the Iran Claims Tribunal. See United States v. Sperry
    Corp., 493 U.S. 52 (1989) (rejecting Takings Clause and due process
    challenges to a 1-2 percent ``user fee'' on prevailing plaintiffs
    before the Iran-United States Claims Tribunal).

        Question 4. Some have criticized S. 758 because they say that it
    forces claimants into a program in which they may not want to
    participate. Is this a problem? What are your thoughts on including an
    ``opt out'' provision or allowing participation on a voluntary basis?
        Answer 4. An ``opt out'' provision that permitted claimants to
    excuse themselves from the substantive medical standards in the program
    would render the legislation entirely ineffective. A critical aspect of
    the legislation's reform of asbestos litigation is to draw a line,
    based on objective medical criteria, between those who are impaired by
    asbestos-related diseases and those who are not. Under an ``opt out''
    system, those who satisfy the bill's medical criteria would file claims
    in the new system, leaving the unimpaired to continue to flood federal
    and state courts with a mass of filings. The bill provides expedited
    compensation for the sick and defers the claims of the unimpaired until
    they become sick. It is impossible to relieve the burden of asbestos
    litigation on the courts or to focus defendants' resources on
    compensating the sick without deferring the claims of the unimpaired.
    This is critical to resolving the crisis. If the system is made
    voluntary, the crisis in our courts will continue unabated, and future
    claimants may, as the Judicial Conference predicted, ``lose
    altogether.''
        There is another sense of voluntariness which relates to the use of
    the administrative system of the ARC. That is, claimants might be
    permitted to file tort actions in an appropriate court and have that
    court, or jury, apply the substantive medical criteria in the statute
    as a ``rule of decision'' preempting state tort law to that extent.
    There are serious problems with the procedural opt-out, however. The
    objective medical criteria are exceedingly complex for lay jurors to
    apply, making the advantages of expert administrative decisionmaking,
    in my view, quite compelling. It would not be possible to create a
    mechanism analogous to the exceptional medical claims panel in courts
    throughout the nation, and vesting such ``exceptional'' authority in
    those courts for lay decisionmaking would remove the decision from
    medical science and invite jury nullification that would undermine the
    statutory purpose. Victims would inevitably rely quite strongly on
    advice of counsel concerning the relative attractiveness of court-
    centered litigation versus the administrative system, and the
    likelihood of balanced and objective advice on this point is far from
    clear.
        I view this approach, which has been called a ``front-end
    administrative opt out,'' as a boon to lawyers. From the perspective of
    typical victims, however, it is mischief.

        Question 5. One of the concerns that has been raised by Owens
    Corning is that the administrative solution offered by S. 758 would
    adversely impact the settlement that they have negotiated with the
    plaintiffs, and that in effect, they would have to ``pay twice.'' What
    is your opinion? How can we make sure that we do not hamper successful
    private settlements, such as the one crafted by Owens Corning?
        Answer 5. It is perhaps helpful to explain what the National
    Settlement Plan is. It is not a single settlement agreement, but rather
    a single label for a variety of agreements with different plaintiffs'
    lawyers in different states. Since the terms of the individual
    agreements vary, it is difficult to make any generalizations. All of
    the agreements, however, involve settlement of a plaintiffs' lawyer's
    inventory of pending cases, usually with relaxed medical criteria, and
    a standing offer by Owens Corning to settle future cases on set terms.
    There are much stricter medical criteria for the future cases. The
    agreements impose a moratorium on the payment of future claims until
    after 2001, when payment on the pending cases is supposed to be
    concluded. The agreements also have various ``flow'' provisions that
    protect Owens Corning from being inundated with claims in future years
    that may threaten its financial stability.
        The NSP agreements are all between Owens Corning and plaintiffs'
    lawyers. The lawyers agree to recommend the settlement to their
    clients, but no case is finally settled until the claimant shows to
    Owens Corning's satisfaction that he meets the requirements of the
    applicable agreement and until a release is provided. Both future
    claimants and claimants with pending claims accordingly have a right to
    opt out of the agreement if they believe (contrary to the advice of
    their lawyers) that the agreement is not good for them individually.
        S. 758 will certainly not undo Owens Corning's National Settlement
    Plan. Section 804 of the bill is drafted specifically to ensure that
    the legislation would not override or invalidate any settlement
    agreement entered into by Owens Corning or anyone else. Therefore,
    claims that have been paid, or that have been accepted for payment,
    prior to the date of enactment cannot be reopened. I can see no basis
    for Owens Corning's assertion that it might have to pay twice.
        With respect to futures cases, and pending cases where the
    plaintiff has not yet agreed to the settlement worked out with his
    lawyer, the National Settlement Plan itself contemplates the
    possibility of opt-outs. Owens Corning has expressed concern that
    plaintiffs will be unwilling to accept the amount that Owens Corning
    has offered if they do not have to fear inordinate delays in the
    courts. As a matter of public policy, however, it would be undesirable
    to maintain the current level of delays to allow Owens Corning to
    benefit from discounted settlement values. Moreover, it is not clear
    that reduction of delay, by itself, would induce many plaintiffs (on
    the advice of counsel) to abandon the Owens Corning agreements. For
    example, structured pay-outs to ensure that asbestos claims do not
    undermine Owens Corning's ability to pay future claims would still be
    desirable.
        Basically, the National Settlement Plan will continue to be viable
    if plaintiffs who have not settled continue to believe that the plan is
    in their own best interests. It would make no sense deliberately to
    preserve the flaws of the present system in order to encourage
    plaintiffs to accept Owens Corning's offers. But, assuming that the NSP
    is in the interest of future claimants, there is nothing in S. 758 that
    would undermine its viability.

        Question 6. Mr. Middleton testified that the Supreme Court's ruling
    in Ortiz v. Fibreboard for a ``national asbestos dispute resolution
    scheme'' is nothing like what is provided in S. 758. Mr. Middleton
    testified that the Ortiz decision made reference to a system modeled on
    the recommendations of the Judicial Conference's Ad Hoc Committee on
    Asbestos Litigation, which he says suggested the creation of an
    administrative compensation mechanism that would control all of the
    defendants' available assets and apply principles of absolute liability
    in order to compensate claimants. How do you respond?
        Answer 6. The Supreme Court in Ortiz v. Fibreboard rejected the
    view of the Association of Trial Lawyers of America (ATLA) that
    consolidations and other judicial management techniques could establish
    a national dispute resolution scheme that would solve the asbestos
    litigation problem. The Court said that the mass of asbestos cases
    ``defies customary judicial administration'' and ``calls for national
    legislation.'' 119 S. Ct. at 2302. Likewise, the Judicial Conference Ad
    Hoc Committee on Asbestos Litigation stated ``no adequate procedures
    exist to enable the justice system to deal with the unique nature of
    asbestos cases.'' Report, at p. 26. Its primary recommendation for
    meeting the challenge was

              a national legislative scheme to come to grips with the
            impending disaster * * * with the objectives of achieving
            timely appropriate compensation of present and future victims
            and of maximizing the prospects for the economic survival and
            viability of the defendants.

    Report, at p. 27. S. 758 establishes absolute liability, contains a
    broad waiver of defenses, expedited claims procedure, and focuses
    defendants' limited resources on the sick. The legislation is
    specifically designed to achieve the Committee's objectives.

        Finally, as to whether a fund could be created to control
    defendants' assets, many observers, unfamiliar with the practical
    complexities of such an approach, have advocated that solution. I also
    considered such a fund to be attractive, so it is not surprising that
    the Judicial Conference recommended that Congress consider this
    solution. I discuss in my written statement and in my answer to Senator
    Feingold's questions why such a fund is simply not feasible, could
    jeopardize the availability of assets for recovery rather than protect
    them (by jeopardizing insurance coverage), and is not necessary.
                                     ______

      Responses of Prof. Christopher Edley, Jr. to Questions From Senator
                                    Thurmond

        Question 1. In your prepared testimony, you discuss S. 758's
    elimination of traditional defenses, such as ``state of the art--
    allowing the adjudicator to focus on a few narrow questions. ``Why do
    you believe that the elimination of traditional defenses is a necessary
    component of the solution to the asbestos litigation problem, and how
    would it affect defendants?
        Answer 1. I have always regarded the elimination of traditional
    defenses to asbestos litigation to be an important part of a fair
    resolution to the asbestos litigation crisis. The waiver of defenses in
    S. 758 focuses an asbestos case on only three questions. First, is the
    claimant impaired from an asbestos-related disease? Second, who is
    responsible for that impairment? Third, what damages should be awarded?
    In the House hearing, Congressman Nadler said,

              [A]ll you have to answer [in most asbestos litigation] are
            really three questions. One, is this person sick? Two, how sick
            is he, how damaged is he, and therefore how much should he be
            paid? And three, who should pay it?

    I agree with Representative Jerry Nadler that a system that focused on
    only these questions could reduce transaction costs and delay, thus
    ensuring more compensation for victims. This is what the waiver in S.
    758 seeks to accomplish.

        I also believe, however, that a waiver of defenses must be
    carefully targeted to cover only ``core'' asbestos defendants--mainly,
    large-scale manufacturers of insulation and other asbestos products.
    For this group of companies, the issue of their liability has been
    largely settled by decades of tort litigation. However, since the
    collapse of Johns Manville, the largest manufacturer of asbestos
    products, in the 1980's, asbestos lawyers have sought to expand the
    liability net as far as possible, in a search for ``deep pockets'' to
    supplement the dwindling assets of the principal wrongdoers. These new,
    peripheral defendants include large and small businesses--from IBM and
    General Motors to local hardware stores--which may have valid defenses
    to asbestos lawsuits. It would be unfair to strip defenses from these
    defendants. This is the reason that the House version of the
    legislation, H.R. 1283, did not contain the waiver of defenses
    contained in the Georgine/Amchem settlement.
        For this reason, I favor a compromise between the House version of
    the bill--which contains no waiver at all--and the Senate version,
    which goes too far by waiving defenses for all companies. The
    compromise should preserve the Senate waiver, but limit its application
    to ``core claims,'' i.e., claims against the principal asbestos
    defendants.

        Question 2. In your prepared testimony, you state that ``the only
    losers under this legislation are * * * those individuals who * * * are
    able to navigate the jury lottery and obtain substantial compensation
    under the current system.'' Could you elaborate on this point and
    explain whether and how people have been able to obtain compensation
    who did not truly deserve it?
        Answer 2. The inhaling of asbestos dust can cause a variety of
    conditions, some of which cause impairment and some of which do not.
    The impairing conditions include cancer and various non-malignant
    conditions which impair lung function, including asbestosis and some
    forms of pleural thickening. The benign conditions include most pleural
    plaques and mild pleural thickening. S. 758 contains objective medical
    criteria designed to separate those asbestos-related conditions which
    cause impairment to lung function from those that do not.
        Our current tort system is not designed to make this distinction.
    Instead, juries and judges are asked to determine whether a given
    asbestos-related condition has produced an ``injury''--generally
    defined not by impairment but merely by whether the condition has
    produced a physical change in the body, regardless of impairment--and
    whether to award damages. Compounding this, cases involving pleural
    conditions are often bundled together with cases involving very serious
    injury, such as cancer or advanced asbestosis. Juries are instructed to
    award damages not only for the benign condition, but also for the risk
    of future injury, as the law may not allow a plaintiff with a pleural
    condition to file a second lawsuit for additional compensation if the
    plaintiffs condition worsens. Both judges and juries, who feel sympathy
    for the seriously ill plaintiffs, award large amounts to the unimpaired
    as well, both out of confusion and out of a mistaken belief that the
    unimpaired will inevitably become sick--when most, in fact, do not.
        Whether the unimpaired ``deserve'' immediate compensation depends
    on the alternative. In the current system, many unimpaired plaintiffs,
    worried about the statute of limitations and the prospect that there
    may be no one left to compensate them in the future, feel compelled to
    file lawsuits now, even if they will lose their chance to receive a
    more generous recovery later if they become ill, when they and their
    families will need the money. This is perfectly understandable. Under
    the system established by S. 758, however, plaintiffs will have the
    statute of limitations abolished, will have the right to additional
    compensation for cancer even if they have already been compensated for
    non-malignant disease, and will have greater assurance that defendants
    will not go bankrupt in the interim. In that system, asking the
    unimpaired to defer their claims until they become sick seems fair and
    reasonable, particularly in light of the many deficiencies and even
    dangers (such as delays for the sick, and additional bankruptcies) in
    the present system.

        Question 3. Please explain in more detail why as your prepared
    testimony suggests, ``the economics of asbestos litigation makes it
    profitable for lawyers to bring cases on behalf of the unimpaired?''
        Answer 3. Plaintiffs' attorneys routinely sponsor ``mass
    screenings'' among healthy industrial workers to uncover usually benign
    pleural conditions. Although these screenings have no medical purpose,
    many workers, worried about asbestos exposure, take part. When the
    screenings uncover evidence of unimpairing pleural conditions, lawyers
    sign up the workers and add them to their ``inventories'' of
    plaintiffs. Asbestos lawyers then file mass complaints with hundreds or
    thousands of plaintiffs, mixing the cases of the seriously ill together
    with those of the unimpaired. When defendants are faced with settlement
    demands, asbestos lawyers generally give them no choice but to make
    substantial payments to all plaintiffs, both the impaired and the
    unimpaired. Advertisements of plaintiffs' attorneys and direct mail
    solicitations are straightforward about the economic purpose of the
    screenings. They ask, ``Do you have million-dollar lungs?'' \3\
    ---------------------------------------------------------------------------
        \3\ See attached advertising materials for mass screenings, and a
    labor notice warning against them.
    ---------------------------------------------------------------------------
        Although cases involving unimpairing conditions generally settle
    for far less per case than cases involving genuine illness, they can
    produce millions of dollars in mass settlements for a law firm when
    aggregated into large inventories. The Judicial Conference Ad Hoc
    Committee on Asbestos Litigation estimated that up to 21 million
    Americans were exposed to asbestos. Report, at page 7. There are far
    more potential claimants who are not impaired than those who will
    develop serious illness. As long as a system continues in which large
    groups of unimpaired claims can generate millions in contingency fees,
    simply with a modest investment in a screening program and paralegal
    time, plaintiffs' lawyers will continue to bring such cases.

        Question 4. Please evaluate the relative strengths and weakness of
    S. 758's compensation and dispute resolution system compared with the
    so-called voluntary alternative dispute mechanisms that Mr. Hiatt and
    Mr. Middleton discuss in their testimony.
        Answer 4. Because of the economic incentives I discussed in my last
    answer, I am skeptical about the ability of private settlement plans to
    solve the asbestos litigation crisis. In these plans, plaintiffs
    lawyers often agree to a settlement in exchange for a promise not to
    bring unimpaired cases in the future. In the Georgine/Amchem
    litigation, leading asbestos law firms signed such agreements, which
    were to remain effective even if the Georgine class action was rejected
    by the courts. Many law firms have refused to honor these agreements.
    Even if they did, nothing prevents an enterprising lawyer or law firm
    which did not sign the agreement from arranging mass screenings and
    amassing a formidable inventory of mostly unimpaired claims in order to
    force a large settlement.
        Secondly, these private settlement plans are not really voluntary.
    The Owens Corning plan, for example, relies on an agreement by a
    critical mass of asbestos plaintiffs' firms to recommend a settlement
    framework to their future clients and not to represent claimants if
    they reject the settlement framework. There are serious ethical issues
    involved when a lawyer agrees not to represent a future client, which
    is why the Owens Corning agreement is hinged on obtaining an ethics
    opinion from a court or ethics expert. Assuming the agreement is
    approved, however, the intent of the agreement is plainly to exert some
    pressure on claimants to use the system by depriving claimants of the
    services of their preferred lawyers if they choose not to use it.
        In his statement, Professor Nagareda observed that

              A comprehensive solution to the asbestos litigation effected
            by way of federal legislation would be vastly superior--from
            the standpoint of both asbestos victims and democratic
            accountability--to the patchwork quilt of compensation plans
            likely to emerge otherwise.

    I agree.

        Question 5. How do you respond to critics of S. 758, who argue that
    the bill's certification procedure is ``substantively rigid and
    technically demanding, ``that its mediation and arbitration procedures
    are ``highly adversarial and procedurally dense, with financial
    penalties for taking certain procedural and substantive positions in
    the process?''
        Answer 5. I think they must be reading a different bill. First, the
    medical review process is entirely non-adversarial--defendants are not
    even allowed to participate in this stage. The process is designed to
    make it easy to say yes to the claimant, but hard to say no. A claimant
    simply presents the results of medical tests showing that he satisfies
    the objective medical criteria in the legislation. Compliance with
    these standards should generally be obvious, and most eligible claims
    will be approved as a matter of routine, with no additional steps
    needed.
        If a claim is rejected, or if the claim is exceptional in some way,
    there are additional opportunities for review in fairness to the
    claimant. (Because defendants do not participate, these steps cannot be
    used by defendants to delay eligible applications, but are at the
    plaintiffs' option only). A claimant can appeal a denial to a panel of
    two doctors, with a third added to break the tie if there is a
    disagreement. A claimant can apply for relief to an exceptional medical
    claims panel, if the claimant has an asbestos-related illness that is
    not covered by the standard criteria. All of these decisions are
    subject to judicial review under the Administrative Procedures Act.
        Once a claim is approved, there is an immediate alternative dispute
    resolution process, which is neither technical nor complex. Following a
    grace period for voluntary settlement, the ARC will require all parties
    to engage in good faith negotiations under the auspices of a mediator,
    and defendants will have to make good faith offers. If defendants'
    offers later turn out to be less than 25 percent of the ultimate
    liability, the defendants face a penalty. Plaintiffs face no penalty
    for a failure to make a good faith offer other than an additional 60-
    day period of mediation. If mediation fails, plaintiffs have the choice
    of arbitration or court action. All of these provisions are designed to
    maximize the plaintiff's opportunity for receiving a fair settlement.
        The attacks by ATLA and others on this dispute resolution mechanism
    are very troubling to me because they fly in the face of more than 25
    years of experience in courts and agencies in which ADR methods have
    been developed, tested, and expanded to the point of widespread
    acceptance as a critical alternative and adjunct to judicial process.
    Many courts now require some process of conciliation as a precondition
    for using scarce trial resources. These criticisms of S. 758 would turn
    back the clock on decades of progress in creating more efficient
    dispute resolution tools.
                                     ______

      Responses of Prof. Christopher Edley, Jr. to Questions From Senator
                                    Feingold

        Question 1. In your prepared statement, you write: ``Impaired
    claimants are assured full compensatory damages, now and into the
    future.'' How does the bill ``assure full compensatory damages'' when
    the bill does not guarantee that a qualified claimant will receive any
    compensation at all?
        Answer 1. The legislation creates very powerful incentives for
    defendants to settle cases immediately after the medical review stage.
    Qualified claimants will receive a ``certificate of medical
    eligibility'' from the ARC, a certificate that they suffer an asbestos-
    related condition, which is presumed correct absent clear and
    convincing evidence to the contrary. Claimants then have the
    opportunity to name particular defendants who are responsible for their
    condition, and defendants are required to make good faith offers or
    face a financial penalty if they are later found liable. Finally,
    issues are limited so that defendants may only contest medical
    eligibility, individual causation (generally, exposure to the
    defendant's product), and damages. Facing these pressures, defendants
    will seek to settle virtually all cases in which they are identified
    soon after the medical review stage, usually even before mediation.
        If defendants refuse to settle in a timely fashion, plaintiffs can
    obtain a binding arbitration award in far less time than the tort
    system requires, or, at their option, take defendants to court. In
    pursuing a settlement strategy, defendants will seek to build upon
    settlement schedules and ranges they have negotiated with plaintiffs'
    attorneys, ranges which will be continually adjusted in light of tort
    awards, and which are not artificially limited by a schedule mandated
    by legislation.
        Although I am confident that the legislation will assure full
    compensatory damages for the vast majority of claimants, I believe the
    legislation could be amended to provide additional assurance of
    payment. A ``global fund'' in which all liability is apportioned up
    front is not feasible (see below). However, a more modest fund which
    permits a claimant to receive a settlement from the fund immediately
    after the medical eligibility phase, where the fund is then reimbursed
    by responsible defendants, is a viable idea. Because defendants remain
    jointly and severally liable to the fund for the full value of
    plaintiff's claim, the bankruptcy of one or another defendant will not
    deprive a plaintiff of compensation. If Congress appropriates funds to
    pay the claims of those few plaintiffs who only have claims against
    bankrupt defendants, as part of an ``orphan share program'' within the
    fund, no medically eligible plaintiff will ever go without appropriate
    compensation.

        Question 2. During your testimony, you stated that asbestos
    litigation can take several years to conclude. Could the long delays be
    due in part to the inactive docket system alluded to in Mr. Middleton's
    testimony?
        Answer 2. Delay in asbestos cases are a scandal. The Judicial
    Conference Ad Hoc Committee on Asbestos Litigation concluded that
    ``[t]he volume and complexity of asbestos cases have resulted in the
    violation of a basic tenet of American justice * * *: speedy and
    inexpensive resolution of cases.'' Report, page 10. The Judicial
    Conference concluded that asbestos cases, unlike other civil cases
    ``does not come close to meeting the 18-month standard'' for resolution
    of cases set by the Civil Justice Reform Act of 1990. Instead, the
    Judicial Conference concluded, asbestos cases took almost twice as
    long, on average, to resolve as other civil cases in federal court.
    This was not the result of an ``inactive docket system,'' but of the
    ``complexity of asbestos litigation'' as it is conducted in the tort
    system. Report, at page 11. A recent review of state court dockets in
    several key asbestos states, which was conducted in 1998 and described
    in my testimony to the House Judiciary Committee, shows a pattern of
    delays which is even more disturbing than the figures cited in 1991.
        In Cimino v. Raymark Industries, a consolidated trial in the
    Eastern District of Texas, over four hundred eighty-eight plaintiffs
    died during the pendency of the litigation. ``Under these
    circumstances, the principle of `justice delayed is justice denied' has
    added meaning.'' Report, at page 12.

        Question 3. In your prepared statement, you write: ``lawyers' fees
    and other transaction costs continue to consume nearly two dollars for
    every one dollar paid to claimants.'' What evidence do you have, aside
    from the RAND study of 1991, that transaction costs continue to consume
    more than 60 cents of every dollar paid to claimants?
        Answer 3. For evidence that transaction costs in asbestos
    litigation remain outrageously high, one need look no farther than the
    recent invoice exhibited at the Senate hearing on October 5. A
    plaintiff who received a settlement of $5,000 from one asbestos
    defendant was left with only $1,700 dollars after fees and expenses
    were subtracted. This includes, of course, only the plaintiff's side of
    the ledger; additional money was obviously paid for defense fees.
        After decades of litigation, asbestos cases have gone from
    difficult, risky tort cases to no more than case processing for most
    lawyers. Nevertheless, plaintiffs' lawyers do not charge
    correspondingly lower attorney's fees--fees of 40 percent or more (plus
    expenses) remain the norm. These contingency fees remain excessive for
    cases with little or no real contingency, or risk of non-recovery. When
    Mr. Middleton was asked to justify these fees in the House Judiciary
    Committee hearing, his only answer was that the cases required
    paralegal time. Cases that can be processed with paralegals cannot
    justify contingency fees that are typical of litigation requiring
    substantial attorney involvement and risk. While I believe that
    defendants' litigation costs have declined since 1982 (as I discussed
    in my statement to the House Judiciary Committee), there is no question
    that transaction costs remain much too high, and much higher than they
    would be under the bill. The cap on attorneys' fees is a consumer
    protection measure, and the evidence suggests that it is plaintiffs who
    are most in need of protection. Ultimately, it is the claimant who
    suffers from the excessive transaction costs of the current system.

        Question 4. In your testimony, you stated that you no longer
    support the idea of a ``global fund ``for asbestos claimants. One of
    the reasons you give is that estimating the appropriate share of
    liability for defendants would be ``an endlessly complicated task.''
    However, under the proposed system, liability must be apportioned on a
    case by case basis. Why do you think it is more efficient to do this
    complicated assessment thousands of times per year rather than once?
        Answer 4. There are several reasons why I have come to believe that
    a ``global fund'' which apportions liability among defendants in the
    aggregate, rather than case-by-case, would not be feasible. First, it
    would not be possible to apportion liability ``once.'' Because asbestos
    products do not constitute a single market with a few big players (such
    as some drugs, or tobacco products), but rather involve many different
    products made by hundreds, even thousands of companies which are
    alleged to cause harm in a myriad of ways, one could not use ``market
    share'' as an easy proxy for liability. Moreover, many defendants are
    not even product manufacturers, but are allegedly liable because they
    distributed asbestos, or asbestos products were used on their premises.
    A sharing formula that attempted to capture these nuances would not be
    very different in cost or complexity from case-by-case adjudication.
        Second, it is critical than any reform of asbestos litigation does
    not jeopardize the availability of insurance proceeds--a critical
    source of compensation for victims. Insurance contracts cover ``damages
    for personal injury,'' and insurance companies will say that this does
    not cover assessments for a government fund. Any attempt to require
    insurance companies to contribute money for a tax by legislative fiat
    would be subject to constitutional challenge.
        Finally, and perhaps most importantly from the claimants'
    perspective, a fund simply is not necessary to ensure compensation.
    Another approach, which I advocate, is to leave joint and several
    liability in place. Legislation would create a fund from which victims
    can be compensated immediately, and which can seek reimbursement from
    defendants, in accordance with principles of joint and several
    liability and comparative fault. From the plaintiffs' perspective, this
    is identical to a ``global fund,'' but it eliminates the problems that
    make a global fund impractical. Most importantly, it preserves the
    availability of insurance coverage as a source of assets for
    compensating victims.
    [GRAPHIC] [TIFF OMITTED] T0244.032

    [GRAPHIC] [TIFF OMITTED] T0244.033

    [GRAPHIC] [TIFF OMITTED] T0244.034

       Response of Jonathan P. Hiatt to a Question From Senator Grassley

        Question 1. Does S. 758 provide the necessary incentives or
    disincentives for plaintiffs and defendants to resolve their claims
    promptly with the Asbestos Resolution Corporation? For example, Owens-
    Corning argues that there are no set settlement values or payment
    schedules which would encourage plaintiffs to forgo court action and
    enter into settlements with defendants. Owens-Corning proposes that tax
    incentives might be incorporated to encourage defendants to settle,
    while Professor Green suggests that penalties might encourage the early
    resolution of claims. What is your opinion?
        Answer 1. We are very concerned that the structure of S. 758 would
    destabilize existing settlement incentives. We are also concerned about
    the allocation of any gains that could be realized from reducing
    transaction costs in asbestos litigation. From the victims'
    perspective, statutory changes that reduced transaction costs by
    radically weakening victims' rights would lead to decreased recoveries
    for victims even if victims were able to capture significant portions
    of the transaction cost savings.
        Specifically, the provisions of S. 758 that would bar punitive
    damages, consolidations, and class actions would considerably diminish
    the uncertainty defendants face when considering whether to litigate
    claims. Additionally, the opportunities the medical certification and
    mandatory arbitration processes provide for further delay and expense
    and would add to the uncertainties faced by victims seeking
    compensation, particularly those victims who are running out of time.
    These provisions might not only decrease settlement rates but might
    lead to the reassertion of defenses in litigation that have practically
    ceased to be raised by manufacturers.
        Thus while the settlement schedules suggested by Owens-Corning
    could be a helpful component of an alternative dispute resolution
    system for asbestos claims, their addition to S. 758, would not address
    what we believe are the primary disincentives to settlement within the
    bill. Similarly, tax incentives for settlement, while a positive step
    in several ways, would also not fundamentally alter the disincentives
    embedded in the remainder of the bill.
        Professor Green's suggestion is more disturbing. When combined with
    the bill's more general tilting of the playing field toward asbestos
    manufacturers, imposing penalties on asbestos victims for failing to
    settle would lead to even lower settlement amounts. While settlements
    can reduce transaction costs and lead to more funds being available to
    victims, if asbestos manufacturers have the ability under the bill to
    leverage low-ball settlements, the net result will be that victims will
    have been disadvantaged to the benefit of the companies that poisoned
    them.
                                     ______

       Responses of Jonathan P. Hiatt to Questions From Senator Thurmond

        Question 1. Your prepared testimony states that S. 758 dramatically
    restricts * * * asbestos victims access to the courts. How do you
    respond to Professor Edley's contention that claimants who are ``not
    satisfied with the defendants' settlement offers in mediation * * * can
    choose either to invoke arbitration * * * or go to court?''
        Answer 1. S. 758 requires that all asbestos victims go through
    lengthy, adversarial administrative proceedings replete with deadlines
    and penalties for failing to comply with those deadlines before they
    can even enter the courthouse doors. Large numbers of victims--people
    with evidence of damage to their lungs caused by asbestos--will be
    absolutely barred from the courts until their conditions worsen. These
    people--often and inaccurately referred to as the unimpaired--may never
    be compensated for real, measurable injuries under S. 758. Finally,
    under S. 758, ``impaired'' victims would be barred from exercising a
    number of rights typically available to victims in tort cases--punitive
    damages, the right to consolidate cases and to bring class actions--
    that make access to the courts a reality for individual tort victims.
    The combination of these features in S. 758 amounts to a dramatic
    restriction of asbestos victims' legal rights as compared to current
    law in most states.
        Of course, Professor Edley is correct in noting that S. 758
    contemplates that the victim (or that victim's estate) who manages to
    obtain a certificate of medical eligibility will eventually be able to
    file a tort case under its truncated tort regime. However, the
    substantive, procedural and economic barriers that S. 758 places in the
    way of that victim vindicating her rights in court in a timely manner
    are so numerous and material in their impact that the phrase
    ``dramatically restricts * * * access to the courts'' is an accurate
    description of the efforts of the bill as proposed.

        Question 2. Your prepared testimony states that ``[c]ompounding
    this [tragedy], the legal system has offered lengthy delays followed by
    limited compensation, compensation that often comes too late.'' Do you
    agree that, in view of your own assessment of the state of the asbestos
    litigation problem, some procedural modification of victims' access to
    the courts is necessary to ensure that truly asbestos-impaired people
    get timely compensation?
        Answer 2. The AFL-CIO believes that in the decade since the data
    the Supreme Court cited in its Fibreboard decision much progress has
    been made in both routinizing settlements between asbestos victims and
    asbestos manufacturers and in speeding payments to victims. However, we
    are concerned primarily about two features of the current asbestos
    litigation environment--first, and most importantly, we are concerned
    that asbestos victims with real but less serious symptoms, the so-
    called unimpaired, are entering into settlements that prevent them from
    seeking additional compensation if they later develop serious or life-
    threatening asbestos related conditions. Second, we are concerned about
    the length of time that asbestos victims wait before receiving payment
    in settlement--delays that may to some extent be the result of
    settlement structures. But we cannot see how the solution to delay in
    compensation to victims should be the creation of it multi-layered
    adversarial structure that appears to have the potential for further
    delays at every step.
        As we noted in our response to Chairman Grassley's question, we
    believe the incentives for settlement at fair values, whether through
    unstructured negotiations between the parties or through a structured
    alternative dispute resolution process, are heavily bound up with the
    availability of tort litigation as a viable though risky alternative.
    Consequently, we favor legislative models that have a voluntary
    structure.
        Furthermore, it is of great importance to the AFL-CIO that all
    asbestos victims be compensated for their injuries. We believe terms
    like the ``non-sick'' and ``truly asbestos impaired'' suggest that
    persons who have suffered real lung damage as a result of exposure to
    asbestos, damage that may very well increase with the passage of time,
    somehow have not been injured and are not deserving of compensation.
    Obviously, however, levels of compensation should be commensurate with
    levels of injury.
        Finally, the question as posed suggests an assumption that the
    resources of the defendants and their insurers in asbestos litigation
    today are so clearly limited in relation to the value of claims brought
    by asbestos victims that a sort of triage approach to compensation must
    be adopted by the federal government. It is our view that neither the
    testimony at the Subcommittee's hearing nor at the House's recent
    hearings on the same subject demonstrated that the current value, of
    these claims dramatically exceeds the value of the defendant companies'
    assets or future cash flows.
        In the course of discussions that we have been engaged in with a
    broad range of interested parties under the auspices of the House
    Judiciary Committee, we have become convinced that currently both we
    and the Congress have inadequate information about this and other
    critical questions to craft constructive, broadly supportive
    legislation. We, believe we need more information about the existing
    court dockets and settlement structures, about the variety of medical
    conditions that result from asbestos exposure, their impact on the
    lives of victims and the causal connections among these conditions,
    about the assets of the manufacturers and other defendants, including
    their insurance coverage, and the trends in all these areas. To take
    just one example, it would seem a precondition to any action in this
    area to have current data on the size of asbestos dockets by state and
    some information on how many of those cases are active and how many
    have simply been filed to preserve litigation rights.
        Let me conclude by emphasizing that while we are eager to work with
    the Subcommittee and any interested parties to craft solutions to the
    problems in asbestos litigation, the AFL-CIO completely rejects the
    notion that the appropriate response to the barriers asbestos victims'
    face in obtaining justice in the courts is to deny large numbers any
    ability to obtain compensation at all, and then to place substantial
    obstacles in the way of all asbestos victims'--including the
    desperately ill and the dying--obtaining compensation through the
    courts.
                                   __________

        Response of Samuel J. Heyman to a Question From Senator Grassley

        Question 1. Does S. 758 provide the necessary incentives or dis-
    incentives for plaintiffs and defendants to resolve their claims
    promptly with the Asbestos Resolution Corporation? For example, Owens
    Corning argues that there are no set settlement values or payment
    schedules which would encourage plaintiffs to forgo court action and
    enter into settlements with asbestos defendants. Owens Corning proposes
    that tax incentives might be incorporated to encourage defendants to
    settle, while Professor Green suggests that penalties might encourage
    the early resolution of claims. What is your opinion.
        Answer 1. S. 758 does provide necessary incentives for both
    plaintiffs and defendants to resolve asbestos claims promptly and
    fairly within the Asbestos Resolution Corporation (ARC), Under the
    bill, once a claimant receives his certificate of medical eligibility,
    a process that ordinarily should take only a few weeks, he enters a
    settlement stage that culminates, if necessary, in mediation that is
    subject to a 60 day time limit. At the end of the mediation stage, each
    identified defendant is obligated to make a good faith offer of
    settlement to the claimant. Any defendant who does not make such a good
    faith offer, defined as being an offer which, after being rejected by a
    particular claimant, falls more than 25 percent short of what that
    claimant ultimately recovers either by way of arbitration or in the
    courts, is subject to a penalty paid directly to the claimant.
        In addition, a defendant who does not reach a fair settlement with
    a claimant in this mediation stage would have to face the claimant
    either in arbitration or in the court system, at the claimant's
    election, with the claimant having a certificate entitling him to a
    strong presumption of asbestos-related disease and the defendant having
    most defenses waived. Furthermore, the costs of the mediation and
    arbitration components of the system are assessed to those defendants
    who use them, providing a further incentive to resolve cases early,
    once the ARC has determined that the claimant indeed is sick. These are
    strong incentives for defendants to resolve the cases quickly and
    fairly either during the mediation stage or even earlier. In addition,
    because the ARC provides this administrative system for claimants to
    recover fair settlements at full ``tort system'' compensatory values in
    a matter of months, rather than the years that cases can grind on in
    the tort system, plaintiffs as well would be incentivized to settle
    cases promptly within this administrative framework.
                                     ______

        Responses of Samuel J. Heyman to Questions From Senator Feingold

        Question 1. In your testimony, you refer to the ``bundling'' of
    sick and non-sick claimants. Have you encountered any suits by non-sick
    claimants alone? If so, how often and what was the outcome?
        Answer 1. It is extremely rare to encounter claims which proceed to
    trial on behalf of non-sick claimants alone, and we at least are
    unaware of any non-sick claimants who have proceeded to trial on their
    own against us. As reflected in my testimony before the subcommittee,
    asbestos lawyers almost always seek to bundle non-sick claims with sick
    claims--either in order to use the sick claims as leverage to obtain
    settlement of the non-sick claims or, in the case of trial, to confuse
    the jury and elicit sympathy for the non-sick claimants.

        Question 2. In your testimony, you argue that claimants who have
    developed medically detectable injuries from asbestos exposure and face
    increased chances of other more serious diseases such as mesothelioma,
    other cancers, and asbestosis, should not receive any compensation. Why
    isn't it fair to give these claimants modest compensation and to pay
    for medical monitoring for those conditions they are more likely to
    contract? Would you support a system that provided claimants with
    modest compensation and/or medical monitoring?
        Answer 2. I disagree with the premise of the question--that persons
    who have pleural plaques or diffuse pleural thickening but no
    impairment of lung function, have an increased chance of contracting
    serious diseases such as mesothelioma, other cancers or asbestosis
    compared to persons with comparable levels of asbestos exposure.
    Pleural changes, which can be caused by very low exposure, me just a
    marker of such exposure and by themselves do not increase the risk of
    cancer or other serious disease at all. In fact, given the same amount
    of exposure, there is no greater risk of cancer or other serious
    disease with regard to those who have pleural changes compared with
    those who do not. In any event, there is no dispute that the vast
    majority of people with pleural changes will never become sick.
        The purpose of S. 758 is to insure that people who are actually
    impaired by asbestos disease receive fair compensation. Providing
    compensation for the unimpaired would defeat this purpose, since if the
    defendants continue to spend billions of dollars paying claims of
    people who are exposed but not impaired, the true asbestos victims may
    be left without any recourse.
        With regard to medical monitoring, a substitute bill is being
    considered by the House Judiciary Committee providing for partial
    reimbursement of medical testing expenses for claimants who demonstrate
    certain asbestos related fibrosis or pleural changes but no impairment.
    I understand the criteria for reimbursement of such testing expenses
    under the substitute bill are based upon the so-called ``Louisiana
    agreement'' which the AFL-CIO endorsed at the hearing on S. 758. We may
    consider supporting such a provision.

        Question 3. In your testimony, you strongly condemn exorbitant
    plaintiffs' fees. In the RAND study on asbestos litigation costs,
    defendants' legal fees were 50 percent higher than plaintiffs' fees. Do
    you have any evidence that this situation has changed? If not why is it
    fair to limit plaintiffs' fees and not defendants' fees?
        Answer 3. As a preliminary matter, I would note that comparisons of
    aggregate plaintiffs, fees with aggregate defense fees really are
    comparing apples to oranges since for every plaintiff, there generally
    are dozens of defendants named, most of whom ordinarily have their own
    counsel. In any event, the real issue is not who spends more for
    lawyers, but how to reduce the transaction costs that exceed recoveries
    by a factor of two to one.
        First, the issue of plaintiffs' fees is not a financial issue for
    asbestos defendants in that they are not paying these fees but rather
    the claimants. Nevertheless, we have been supportive of the cap
    because:

      (1) The legislation seeks to track the Georgine settlement, where the
        23 percent cap was a pan of the settlement;
      (2) This is essentially a victims' rights bill, and it is our hope
        that sick claimants as a result of the legislation will be able to
        maximize their after cost recoveries;
      (3) Since it is expected that most cases brought after an enactment
        of this legislation will be settled in the administrative claim
        facility, where far less legal work will be required, a 25 percent
        cap does not appear very onerous; and
      (4) In the proposed administrative claims facility, where it will be
        immediately clear as to whether a claimant is sick or not, and if
        so the lawyers will not have any downside as they now have in the
        tort system, a 25 percent fee ought to be regarded as very
        attractive.

        Second, with respect to defense fees and costs, it should be borne
    in mind that asbestos defendants are highly sophisticated consumers of
    legal services, whereas asbestos claimants are often financially
    unsophisticated and are regularly taken advantage of by asbestos
    lawyers. Moreover, asbestos legal fees are invariably contingent on the
    outcome of the case, with asbestos lawyers receiving 40
    percent of the recovery. As most cases today are consolidated in a
    single action sometimes involving groups of literally thousands of
    claimants, asbestos lawyers are able to leverage their efforts time,
    and overhead over more and more cases. Defendants' lawyers, on the
    other hand, are paid at hourly rates, and therefore have not enjoyed
    the huge financial rewards that plaintiffs' asbestos lawyers have.
        Finally, courts and commentators have made it clear that there are
    currently no effective controls on the legal fees paid by asbestos
    claimants, as evidenced by the fact that asbestos lawyers continue to
    extract 40 percent contingent fees on cases where there is
    little or no risk of non-recovery. As a very concrete example of the
    scandalous attorney fees which continue to be extricated from asbestos
    claimants, I would refer you to the recent example referenced at the
    hearing where a claimant filing a routine administrative claim against
    the Manville Trust was forced to pay over 60 percent of his claim in
    attorneys fees and expenses.

        Question 4. S. 758 is often characterized as a victims' rights bill
    by its supporters. Are you aware of any significant support among
    asbestos victims for the bill? If not, how do you explain the lack of
    support?
        Answer 4. We believe that S. 758 is properly characterized as a
    victims' rights bill. Claimants who have asbestos related disease will
    receive full compensatory damages, with no caps or other limits,
    promptly. Those who have been exposed to asbestos, but are not sick
    today, may bring their claims whenever they may become sick without
    regard to the statute of limitations, and may then recover compensation
    fairly and promptly.
        While we would love to talk directly with asbestos victims,
    asbestos lawyers have gone to great lengths to prevent us from doing
    so. Given the refusal of asbestos lawyers to consent to such contacts,
    there are ethical constraints concerning communicating directly with
    asbestos clients represented by counsel. Notwithstanding these
    impediments, it is fairly clear that asbestos victims support this
    bill. First, physicians across the country, who care and speak for
    asbestos victims, wholeheartedly support the legislation. You have
    before you the written testimony of Dr. Susan Pingleton, the president-
    elect of the American College of Chest Physicians (``ACCP''), the
    largest association in the world of chest physicians, expressing her
    unequivocal opinion that this legislation is good for asbestos victims
    and that it will protect the best interests of these victims. In
    addition to Dr. Pingleton, seven past presidents of The ACCP have
    expressed in writing their unequivocal support of the bill as well.
        The doctors agree with the fundamental concept underlying the
    legislation--namely that the system is broken and these cases can no
    longer be handled by the traditional judicial system. Many of the
    doctors have expressed the patent frustration of their patients over
    the fact that their cases and compensation seem mired in continual
    difficulty and delay. One doctor told of a patient who suffered from
    mesothelioma for years and recently died--without receiving any
    compensation despite having had a lawyer and a case filed for years.
    His widow expressed to the physician extreme frustration with the
    entire process. Other doctors have told us of patients who have had
    exposure, but are not presently ill, and are fearful that if they
    become ill the statute of limitation will have run, or there will be no
    money left for them, and they will not be able to receive compensation
    for themselves or their families.
        It is important to emphasize that many physicians view this bill as
    a public health bill and a victims' rights bill--and not a fundamental
    alteration of the tort system. Dr. Louis Sullivan referred in his
    testimony to the need to prevent a legal crisis from becoming a public
    health crisis. The doctors clearly recognize the ramifications of this
    legislation, and they are clearly focused on the serious ways in which
    their patients are disadvantaged by the present system.
        Finally, the Coalition has received numerous unsolicited messages
    from asbestos victims who have called, or contacted our website,
    indicating that they are upset with the current asbestos litigation
    system and/or endorsing of the legislation.

        Question 5. Would you be willing to support a bill that apportioned
    liability ``up-front and created a global trust fund from which
    claimants would be compensated upon receiving a certificate of medical
    eligibility?
        Answer 5. It simply is not possible to apportion liability ``up
    front'' among defendants to create a single fund from which plaintiffs
    would be compensated. There are today more than 2,600 different
    asbestos defendants who are named in lawsuits. The number and identity
    of defendants is subject to tremendous variability depending on where
    the case is brought, the nature, place and time of the exposure, and
    the basis of liability. It must be recognized that asbestos liability
    can arise out of exposure to hundreds of products for which there was
    no single market, so it would not be possible to use market share as a
    proxy for estimated liability. The creation of a fund also could
    jeopardize the availability of insurance proceeds as a source for
    compensation of asbestos victims. Insurance companies would maintain
    that their contracts do not require them to cover an assessment or tax
    to a government fund that is not related to individual company
    liability. It simply is not possible, therefore, to come up with an up
    front sharing formula.
        I understand that a compromise bill being considered by the House
    Judiciary Committee, which we could perhaps support, provides for the
    creation of a fund from which a special master will provide sick
    claimants with the option of receiving a total award as soon as they
    receive their certificate of medical eligibility without themselves
    having to pursue individual defendants. The fund would then seek
    reimbursement from defendants, either by way of settlement or
    litigation in the administrative forum. In this way, a claimant would
    be able to seek a total settlement from a single fund, or pursue
    individual defendants in either the administrative system or in court,
    without their having to be an up-front apportionment of liability.
                                   __________

         Response of Karen Kerrigan to a Question From Senator Grassley

        Question 1. Does S. 758 provide the necessary incentives or dis-
    incentives for plaintiffs and defendants to resolve their claims
    promptly with the Asbestos Resolution Corporation? For example, Owens
    Corning argues that there are not set settlement values or payment
    schedules which would encourage plaintiffs to forgo court action and
    enter into settlements with Asbestos defendants. Owens Corning proposes
    that tax incentives might be incorporated to encourage defendants to
    settle, while Professor Green suggests that penalties might encourage
    the early resolution of claims. What is your opinion?
        Answer 1. We believe that S. 758 does provide adequate incentives
    for settlement of cases brought by individuals with impairing diseases.
    First, the bill would require plaintiffs' lawyers to make serious
    efforts to settle cases as soon as medical review is completed. Today,
    although the plaintiffs themselves have an interest in early
    settlement, their lawyers may be distracted by the challenge of
    managing hundreds, or even thousands of cases, and frequently do not
    focus on settlement until the lost minute.
        Second, the bill would facilitate (as well as require) early
    officers by defendants. For example, as a result of the non-adversarial
    medical review process, the medical condition of the plaintiff will be
    essentially established at the outset of the case, and information on
    product identification would be available much earlier than is the case
    today. This will enable defendants to formulate a reasonable settlement
    offer at the outset of the proceeding.
        Third, mediation under the auspices of the ARC should help bridge
    differences between parties who tire unable to reach agreement on their
    own. The provision of the bill requiring mediation takes advantage of
    the emergence of ADR in recent years as a means of promoting efficient
    and inexpensive resolution of disputes.
        Finally, in accordance with Professor Green's suggestion, the bill
    provides it penalty for defendants whose offers in mediation prove to
    be too low.
        Of course, S. 758 would eliminate the use of mass consolidations
    and the threat of punitive damages to coerce the settlement of cases
    regardless of their merits. From the prospective of the nation's small
    businesses, that can only be construed as a plus.
        Relative to the proposal that tax incentives be incorporated to
    encourage defendants to settle, I would tend to take a rather dim view
    of this approach for several reasons. As you know Senator Grassley,
    SBSC is a vocal proponent of tax relief and providing American business
    with tax incentives to maintain a high level of investment, job
    creation, and innovation. But it strikes me that the use of tax
    incentives to mask or correct abuses in our legal system is not sound
    public policy--nor will it solve the underlying problem in this current
    crisis. In addition to further complicating the tax code (and charges
    that such tax incentives amount to ``corporate welfare'') I would
    assert that using tax incentives to encourage defendants to settle
    might, in fact, skew the settlement process. I would encourage the
    Congress to leave the tax code out of the asbestos litigation quagmire.
        SBSC prefers Professor Green's approach.
                                     ______

         Response of Karen Kerrigan to a Question From Senator Thurmond

        Question 1. Do you believe that the current trend of asbestos
    litigation is to target, as you put it, ``defendants with an
    increasingly tenuous relationship to asbestos?'' If so, why in your
    opinion is this happening, and how many of such defendants have
    actually been held liable for harm to victims of asbestos exposure?
        Answer 1. I do believe that today's trend is to target those
    companies with an increasingly tenuous relationship to asbestos. Twenty
    years ago, asbestos cases were brought against such companies as Johns-
    Manville, Raybestas Manhattan, Celotex, Eagle-Picher and the like.
    These are the companies that come to mind when one thinks of asbestos
    defendants. Asbestos litigation has destroyed those companies, reducing
    the assets available to compensate plaintiffs. At the same time the
    flood of cases brought on behalf of unimpaired claimants has put more
    pressure on the assets that, are left.
        Plaintiffs' lawyers have therefore sought to expand the resource
    base by naming more and more peripheral companies. The list of
    peripheral companies that could someday find themselves trapped in such
    lawsuits is extensive. A reading of standard complaints shows many
    small businesses among the over 6,000 defendants that have been named.
    Small businesses such as automobile dealerships, hardware stores and
    car repair shops have found their way onto the standardized complaints
    filed by plaintiffs counsel.
        Few of these peripheral defendants have gone to trial. Rather,
    faced with huge defense costs, distraction of management attention and
    time, and the possibility of crushing awards, most small businesses
    settle.
        However, just last week a small family-owned business in Vermont
    was, pushed into bankruptcy by asbestos claims. This company was owned
    by the same family for five generations. It manufactured furnace and
    woodstove repair cements and ceased using asbestos in its products in
    the early 1970s. Nevertheless, the company was subjected to over 50,000
    claims 37,000 of which are currently pending. With combined assets of
    less than $3 million, the company's president estimated that current
    and future claims against the small company total more than $67
    million. It is a small wonder that this onslaught of litigation pushed
    the company over the edge.
        While most individual settlements are ``small'' by beltway
    standards, collectively they amount to a significant drag on small
    businesses as a whole. Individually these smaller settlements still
    place great economic hardship on small firms where cash flow and cash
    availability is less flexible than it is for larger firms.
                                     ______

         Response of Karen Kerrigan to a Question From Senator Feingold

        Question 1. Specifically, how many of the more than 50,000 small
    business in the Small Business Survival Committee have asbestos claims
    filed against them? How many have had asbestos-related judgments
    assessed against them? How many have paid to settle asbestos claims?
        Answer 1. Presently, we currently do not know how many of our
    members have been named as defendants in asbestos lawsuits. But we do
    know that the types of small businesses that have been named as
    defendants in asbestos lawsuits are well represented in the ranks of
    those members who belong to the Small Business Survival Committee
    (SBSC).
        A reading of standard complaints shows many small businesses among
    the over 6,000 defendants that have been named, Among those--car
    dealerships, car repair shops, hardware stores and others--have found
    their way into standardized complaints filed by plaintiffs' counsel. As
    you may or may not recall, I have personally visited your office with
    small business leaders who belong to the Independent Business
    Association of Wisconsin (IBAW), an affiliate of SBSC whose broad-based
    small business membership includes the type of businesses that are
    appearing with more frequency in asbestos lawsuits.
        As you know from your interaction with IBAW, and other small
    businesses in Wisconsin, most small businesses cannot afford to defend
    these claims. Even apart from litigation costs and possible judgments,
    small businesses do not have the personnel to devote attention to mass
    tort litigation. They need to focus their attention on doing business.
        Just last week, a small family-owned business in Vermont was pushed
    into bankruptcy by asbestos claims. This company was owned by the same
    family for five generations, It manufactured furnace and woodstove
    repair cements, and ceased using asbestos in its products in the early
    1970s. Nevertheless, the company was subjected to over 50,000 claims
    37,000 of which are currently pending. With combined assets of less
    than $3 million, the company's president estimated that current and
    future claims against the Small company total more than $67 million, it
    is a small wonder that this onslaught of litigation pushed the company
    over the edge.
        Even one such bankruptcy is too many for the small businesses that
    belong to SBSC. Legislation such as S. 758 is vitally needed to ensure
    that the real victims of asbestos exposure are compensated while
    leaving America's small businesses free to contribute to economic
    growth and jobs.
                                   __________

         Responses of Conrad Mallett to Questions From Senator Grassley

        Question 1. Does S. 758 provide the necessary incentives or dis-
    incentives for plaintiffs and defendants to resolve their claims
    promptly with the Asbestos Resolution Corporation? For example, Owens
    Corning argues that there are no set settlement values or payment
    schedules which would encourage plaintiffs to forgo court action and
    enter into settlements with asbestos defendants. Owens Corning proposes
    that tax incentives might be incorporated to encourage defendants to
    settle, while Professor Green suggests that penalties might encourage
    the early resolution of claims. What is your opinion?
        Answer 1. S. 758 encourages all parties to settle the cases as soon
    as possible after the medical review process has been completed.
    Defendants have important incentives to settle the cases and to settle
    them early. In the first place, defendants are given a short grace
    period for settling without the need for mediation. They have every
    incentive to do so, because they pay the mediator. As a practical
    matter, I would expect most of the major defendants would settle at
    this stage pursuant to futures agreements they have negotiated with
    plaintiffs' counsel in advance. Second, a mediator will assist the
    parties to settle cases that could not be resolved in the grace period.
    Mediators will be especially helpful in unusual cases, or cases in
    which the parties disagree on the strength of the evidence. Third,
    defendants face a significant penalty if their offers in mediation turn
    out, in hindsight, to be too low. Finally, defendants have an added
    incentive to settle without arbitration, because they bear the costs of
    arbitration.
        If they do not settle, defendants will face plaintiffs with a
    certificate of medical eligibility that is presumed correct and will be
    limited to contesting just three issues. These issues are (1) medical
    eligibility (again, with defendants having to overcome the presumption
    of correctness that attaches to the certificate), (2) individual
    causation (which for most defendants means product identification), and
    (3) damages.\1\ In many cases, defendants will want to settle because,
    under the new rules established by the bill, there is no point in doing
    anything else.
    ---------------------------------------------------------------------------
        \1\ The Coalition for Asbestos Resolution believes that the waiver
    of defenses contained in S. 758 is not appropriate for all defendants,
    but only for ``core claims'' involving the principal players. CAR
    stands ready to work with the Senate to craft an appropriate compromise
    waiver.
    ---------------------------------------------------------------------------
        The plaintiff's incentive to settle early is obvious. He gets his
    money quicker. Moreover, by tightening liability rules and eliminating
    punitive damages, the results of a trial or arbitration become more
    predictable and the temptation to gamble on a trial is thus reduced. I
    do not understand the suggestion that plaintiffs would not settle
    without a legislatively established schedule. In my long experience as
    a judge, I have seen plaintiffs settle every day without such
    schedules.
        I do not believe that tax incentives are necessary for the
    legislation to work. The Coalition has consistently maintained that the
    costs of S. 758 should be borne by the defendants, and not the
    taxpayer. Beyond that, I have not seen Owen Corning's tax proposal and
    have no comment on it.

        Question 2. As former Chief Justice for the Michigan Supreme Court,
    you have unique insight into what is going on in the state courts with
    respect to these asbestos claims. Could you explain the effect of the
    asbestos litigation crisis on the state court systems? Do you believe
    that this bill presents a Tenth Amendment problem? Also, what would be
    the effect if this legislation only operated at the federal level?
        Answer 2. In my written testimony, I described the experience that
    the Michigan Supreme Court had in handling the tremendous impact that
    asbestos claims had on the Michigan Court system. We designed a system
    whose main goal was to process the cases through our docket as quickly
    as possible. It became impossible in this environment for the cases to
    be treated on their individual merits.
        Our experience is hardly unique. Other courts, throughout the
    country, have been inundated with claims that they have been ill-
    equipped to handle. The reason for this is quite simple. Our state and
    federal court systems are not designed to handle thousands of claims
    filed at the same time against the same defendants. When caseload
    pressure strips the trier of fact of the ability to handle each case on
    a case-by-case basis, we generally assign cases to an administrative
    system. This is why workers compensation, Social Security disability
    decisions, black lung, and other repetitive injury cases are assigned
    to administrative programs. A similar administrative approach is
    necessary to handle asbestos litigation.
        I do not believe that this legislation presents any significant
    Tenth Amendment problems. Judges in state courts apply federal law
    every day. That is part of their job in our federal system. Moreover,
    if there were ever an area in which national legislation is desirable,
    it is asbestos legislation. Indeed, ``national legislation'' is exactly
    what the United States Supreme Court called for in Ortiz v. 119 S. Ct.
    2295 (1999), thus adding its voice to those of state judges themselves.
    For example, the Florida Supreme Court has said, ``Any realistic
    solution to the problems caused by the asbestos litigation in the
    United States must be applicable to all fifty states. It is our belief
    that such a uniform solution can only be effected by federal
    legislation.'' W.R. Grace & Co. v. Waters, 638 So.2d 502, 505 (Fla.
    1994).\2\ In my mind, there is no question that the rules of law
    established in S. 758 are well within Congress' power under the
    Commerce Clause and are necessary reforms that must be uniform across
    the states, as the state courts have said.
    ---------------------------------------------------------------------------
        \2\ See also State ex rel. Appalachian Power Co. v. MacQueen, 479
    S.E.2d 300, 304 & n.8 (W. Va. 1996).
    ---------------------------------------------------------------------------
        Finally, as to the third question, I believe that this legislation
    could not work if applied on the federal level alone. In 1991, the
    Panel on Multidistrict Litigation consolidated federal asbestos cases
    for pretrial purposes in the Eastern District of Philadelphia. The
    district court gave priority to claimants and severed punitive damages
    claims for future trials. As a result, plaintiffs' lawyers fled the
    federal system and filed record numbers of asbestos cases in state
    courts. The lesson is simply that asbestos litigation is not
    susceptible to partial solutions. Legislation must be national--
    applicable in all states and all courts--or it will be ineffective.

        Question 3. Mr. Middleton and others have criticized the Asbestos
    Resolution Corporation to be a time-consuming process by which sick
    plaintiffs will be ``jumping through hoops'' with no guarantee of
    timely compensation. Is this an accurate assessment of the process set
    up in S. 758? Does S. 758 create an open-ended procedure which provides
    endless opportunities for defendants to delay any compensation to the
    victims, as suggested by Mr. Middleton?
        Answer 3. Mr. Middleton has distorted the process by which a
    plaintiff goes through the system and obtains timely compensation. The
    process is really quite simple.
        First, the claimant will obtain medical certification from the ARC.
    This is a simple, non-adversarial process. The defendants will not even
    be parties at this stage. Usually there will be no question about the
    plaintiff's compliance with the medical criteria, and medical approval
    will occur in a matter of days.
        Second, the ARC will gather the defendants together and encourage
    settlement, as I have described in my answer to Senator Grassley's
    first question. Most cases will end here. Plaintiffs will receive
    prompt compensation reflecting values established by the tort system.
        Finally, for the few cases that cannot be settled, the plaintiff
    has his choice of taking the defendant to court, or choosing
    streamlined arbitration under the auspices of the ARC.
        This is a simple and straight-forward process. There is no point at
    which defendants can manipulate the ARC's procedures for the purpose of
    delay. Defendants are not involved at all in the medical review
    process, and alternative dispute resolution is subject to strict time
    limits. Moreover, there are, as I have explained in my answer to
    Senator Grassley's first,question, substantial penalties for defendants
    who fail to make objectively reasonable settlement offers at the
    mediation stage.

        Question 4. At the House Judiciary Committee hearing, a
    representative from Owens Corning expressed concern about the
    applicability of the bill's provisions to lawsuits pending at the time
    of enactment, specifically that Congress would be preempting state
    substantive law causes of action which have already been filed. In
    addition, Owens Corning objected to the provisions requiring that all
    funding be collected from existing asbestos defendants in proportion to
    the number of claims against them. Are these concerns valid and, if so,
    how can the bill be remedied?
        Answer 4. Well over 200,000 claims are pending in court today
    alleging injuries due to asbestos-related disease. The asbestos
    litigation crisis is not something which will happen in the future; it
    is something that has already happened. Any legislation which did not
    cover those pending case applied only to cases which are filed in the
    future, would be a missed opportunity for reform.
        Of course, the transition to a new system has to be handled with
    care. It is important to apply the medical criteria to as many cases as
    possible, in order to stop the diversion of resources from the sick to
    the non-sick. The bill therefore makes the criteria applicable to all
    pending cases. However, it would be unfair to apply the requirement
    that a plaintiff obtain a certificate of medical eligibility from the
    ARC who have waited for a long time, and are getting near a trail date.
    For these transitional cases, the legislation excuses claimants whose
    cases are ready for trial before the ARC is operational from this
    requirement.
        In answer to the second question, one of the objectives of S. 758
    is to solve the asbestos litigation problem without burdening
    taxpayers. The Coalition believes that the provisions of S. 758
    regarding allocation of costs are sensible and sufficiently flexible to
    take into account usage of the system. For example, if Owens Corning is
    named in few cases (because its National Settlement Plan functions as
    intended), its share of the costs will be low. And, of course, if Owens
    Corning settles without the need for mediation or arbitration, it will
    not have any responsibility for those costs.

        Question 5. Some have criticized S. 758 because they say it forces
    claimants into a program in which they may not want to participate. Is
    this a problem? What are your thoughts on including an ``opt out''
    provision or allowing participation on a voluntary basis?
        Answer 5. Observers of the asbestos litigation problem have
    uniformily come to the conclusion that it is critical to make a
    distinction between those plaintiffs who are sick from asbestos
    disease, and those who are not sick. Otherwise, the resources of
    defendants will not be focused on compensating the ``elephantine mass''
    of asbestos cases will continue to clog court dockets. A voluntary
    system could not effectively address the problem of lawsuits brought by
    the unimpaired. Under such a system, plaintiffs who lack any current
    impairment, and therefore could not satisfy the medical criteria, would
    continue to file cases in court, thus frustrating the purpose of the
    legislation.
                                     ______

         Responses of Conrad Mallett to Questions From Senator Feingold

        Question 1. In your testimony, you refer to S. 758 as ``a system
    that fully compensates the impaired within six months of the date the
    claim is filed.'' The bill, however, does not guarantee that an
    impaired person will receive any compensation nor that the claim will
    be settled within six months. How then do you support your contention?
        Answer 1. S. 758 contains important incentives for defendants to
    settle cases with all plaintiffs who have an asbestos-related disease.
    Once claimants have been granted a certificate of medical eligibility,
    a presumption of correctness attaches to that finding which defendants
    can overcome only with clear and convincing evidence. All traditional
    defenses are waived; the only questions that need to be answered in an
    asbestos case will be medical eligibility, individual causation, and
    damages. Defendants will be required to make good-faith offers during
    mediation sponsored by the Asbestos Resolution Corporation or face
    significant financial penalties. And it is to be expected that most
    major defendants will have futures agreements providing for routine
    settlement of medically eligible claims even before a mediator is
    appointed. It is therefore likely that the vast majority of claimants
    will be ensured full recovery very shortly after the medical review
    process is over.
        Indeed, there are important reasons to believe that plaintiffs will
    be more likely to receive full and prompt compensation under the
    legislation than under the Georgine class action on which it was based
    (which is sometimes said to have offered greater guarantees of
    compensation than S. 758). In Georgine, plaintiffs agreed to a $1
    billion cap on defendants' liability, and they also agreed to yearly
    caps on the amount of money that would be paid in any given year. There
    are no such caps in this bill, and for that reason, plaintiffs are
    ensured full and prompt compensation. In addition, while Georgine set
    settlement ranges (which were criticized as too low), the legislation
    would allow for full tort recoveries and would constantly adjust
    settlement values to maintain an equilibrium with the results of
    arbitrations and trials and with actual settlement experience.

        Question 2. In your testimony, you argue that defendants are forced
    to settle claims as a result of judicial pressure and the trial court
    system. You cite the Cosey case as support but admit that ``the
    defendants rushed to settle before the jury could return a verdict on
    punitive damages.'' Isn't the real pressure then emanating from the
    threat of large verdicts rather than from judges?
        Answer 2. The pressure in the Cosey litigation was a function of
    case consolidation, not of the ordinary jury system. In desperation
    over the caseload pressure, and the inaction of Congress, many state
    courts have turned to consolidation in order to attempt to clear the
    docket. Unfortunately, consolidations do, not work. What generally
    happens is that thousands of claims will be consolidated in one
    courtroom. Consolidation is designed to make sure that none of the
    cases are even actually tried or that only a handful are tried.
    Attorneys generally have control over which cases will be tried first,
    and will pick their strongest claims in order to put maximum pressure
    on the defendants to settle.
        Although the defendants may wish to settle these particularly
    strong claims, the plaintiff's attorneys will not allow the defendants
    to settle only those claims, but insist on settlement for all of the
    thousands of cases that have been consolidated, many of which involve
    claims without any impairment whatsoever. I described this in my
    written testimony. When the tactic works, unimpaired claimants receive
    substantial settlements, and this encourages a further waive of filings
    which prompts judges to ask for further consolidations in order to
    clear the docket.
        I strongly support our jury system. When thousands of cases are
    improperly joined before one jury, however, and plaintiffs' attorneys
    are given a free hand in determining which cases are going to be tried
    as allegedly representative of the whole, it is not surprising that the
    attorneys will select the most dramatic cases for trial, to put severe
    pressure on defendants to settle the remaining cases. If defendants
    choose to go to verdict, the stakes are raised to intolerable levels,
    because the risk of a punishing award is magnified thousands of times.
    This is simply inconsistent with basic fairness.

        Question 3. S. 758 would take away any current remedy for persons
    with asbestos-related physical changes, but without current functional
    impairment. The rationale for excluding all currently available state
    remedies, including funding for medical monitoring, is that funding
    must be conserved to pay those with greater impairments. This implies
    that there are limited funds available and that future bankruptcies
    among asbestos defendants are likely under the current system. What
    evidence do you have that future bankruptcies are likely to occur (as
    opposed to the bankruptcies of the 1980s)? In particular, are you aware
    of any asbestos company's 10(K) filings with the Securities and
    Exchange Commission that indicate their asbestos liabilities are out of
    control and threaten the companies' existence or future business plans?
    if defendants are not making this disclosure, upon what do you base
    your bankruptcy and its attendant limited funds argument?
        Answer 3. After the bankruptcy of well over 20 major defendants,
    the threat that the limited assets available to compensate asbestos
    victims will run out before all victims of serious injury can be
    compensated cannot be doubted. Just two weeks ago, a small manufacturer
    in Rutland, Vermont was the latest victim of the asbestos litigation
    problem. This company had been in the same family for five generations.
    It made an asbestos-containing product for wood stoves, which brought
    in about $1,000,000 per year. The weight of 33,000 asbestos claims,
    however, dragged it under. This is unconscionable. Nor is the
    experience of the Vermont unique. Over 25 percent of asbestos-related
    bankruptcies have occurred in the 1990s, including such defendants as
    Keene, Celotex, and National Gypsum.
        These bankruptcies have had a serious impact on the ability of
    asbestos victims to receive full and prompt compensation. When Johns
    Manville went bankrupt in 1982--without, I might add, giving warning of
    its impending bankruptcy in its Form 10K--many asbestos claimants were
    left without recourse. Historically, Johns Manville was the largest
    manufacturer of asbestos products and, by some estimates, was
    responsible for about 40-50 percent of the liability. Today, the Johns
    Manville Trust, which is responsible for claims against Manville, pays
    claims at 10 cents on the dollar.
        Apart from bankruptcies, there can be no doubt that resources for
    compensating asbestos victims are not unlimited. Workers, families and
    the communities that depend on today's asbestos defendants, cannot make
    needed investments in their businesses, create jobs, or invest in
    research and development if they remain burdened by a crushing caseload
    of asbestos claims. The legislation takes the public policy position
    that the resources of asbestos defendants should be focused on
    compensating those who have become sick because of exposure to their
    asbestos products. This reflects in appropriate balance of social
    priorities.
                                     ______

         Responses of Conrad Mallett to Questions From Senator Thurmond

        Question 1. How do you respond to Mr. Middleton's contention that
    ``S. 758 would negatively impact and, in many cases, overturn the
    various state laws that have induced settlements * * * [and that] [t]he
    bill's restrictive medical criteria would eliminate compensation for
    thousands of cases that are presently compensable under, state laws?''
        Answer 1. I am not sure what Mr. Middleton meant by the ``various
    state laws that have induced settlements.'' I assume, however, that he
    was referring to mass consolidations and the threat of punitive
    damages, which together raise the stakes of trial to the point where
    defendants have no choice but to settle, whether a case is meritorious
    or not. This sort of coercion is effective at inducing settlements,
    without a doubt. But the cost is a sacrifice of impartial justice in
    each case, and to high diversion of scarce resources to payments for
    the unimpaired and transaction costs, including high contingency fees.
    As a former judge, I consider this distortion of the judicial system to
    be one of the more significant problems of asbestos litigation.
        The proposed legislation has its own incentives for defendants to
    settle, and I have described these incentives at length in my answer to
    Senator Grassley's first question. Suffice it to say that I am
    convinced that a reasonable level of settlements will be achieved under
    the program established by S. 758, without the need for coercive
    measures that have already undermined the administration of justice in
    the interest of clearing overwhelmed court dockets, and that these
    settlements will be focused on providing compensation to the sick.
        Let me turn now to the second part of the question--whether the
    bill would eliminate claims that are compensable under state law. In
    most states today (Pennsylvania being a notable exception), a plaintiff
    can get to a jury by showing a legal ``injury,'' which is not the same
    as what most laymen understand to be an injury. Pleural plaques, which
    are an indicator of asbestos exposure and which themselves do not cause
    breathing impairment or increase the risk of future disease, normally
    count as a technical injury for this purpose. Since plaques are common
    in individuals exposed to asbestos, this means that hundreds of
    thousands of people can bring suit even though they do not have cancer
    or any other functional impairment. Plaintiffs' lawyers actively
    solicit such people through mass screening programs and flood the
    courts with claims on their behalf.
        That's the problem.
        The solution proposed by S. 758 is to establish medical criteria
    that require impairment by an asbestos-related disease as a
    precondition for recovery. The medical criteria contained in S. 758
    were carefully negotiated between lawyers for plaintiffs and
    defendants, were endorsed by leading members of the plaintiff's bar,
    and by organized labor. A federal district court held exhaustive
    hearings on the fairness of the medical criteria and rejected all of
    the arguments that were proffered by those who objected to the
    settlement. The federal district judge found that the medical criteria
    were fair and reasonable, and that, supplemented by the exceptional
    medical claim's panel, would not exclude any plaintiff who is deserving
    of compensation. That finding was never questioned on appeal.

        Question 2. Mr. Middleton contends that ``[t]he courts are well
    equipped to handle the pending and future asbestos cases that will
    require trial [and that] [a] litigation crisis, as that term is usually
    understood, does not exist.'' Based on your experience as a judge, do
    you agree?
        Answer 2. The numerous federal and state courts who have had
    occasion to comment on the asbestos litigation situation emphatically
    disagree with Mr. Middleton's opinion of the problem. Just this summer,
    the Supreme Court again described the seriousness of the asbestos
    litigation problem, and stated that only Congress could solve it.
        In my experience in Michigan, the asbestos litigation problem
    resulted not from trials, but from the tremendous judicial resources
    that had to be spent on managing hundreds of thousands of cases through
    the pre-trial stage. These resources require judges to manage a process
    involving depositions, expert reports, and other aspects of our costly
    litigation system. After these substantial judicial resources have been
    spent on the cases, the cases do generally settle, but only on the eve
    of trial.
        Indeed, I would venture to say that probably 99 percent of the
    cases settle. In my written statement, I described how this settlement
    rate is a symptom of the problem. It is not an indication that there is
    no problem. The extremely high settlement rate is a result of a system
    which has given up on handling cases on an individual basis, and
    instead prefers to encourage batch settlements which exacerbate the
    problem of diverting the resources of the defendants away from
    providing compensation for the sick and towards providing compensation
    for for the unimpaired.
        This is nothing new. Mr. Middleton agrees that during the 1980s,
    asbestos litigation was creating serious problems for federal and state
    courts, but says that the problem is no longer as serious--as evidenced
    by the fact that there were only 55 trials in the United States in 1998
    that proceeded to verdict. An examination of the RAND Corporation
    studies shows that this rate of 55 trials in a year is very similar to
    the rate of trials that occurred in the 1980s when Mr. Middleton says
    there was a problem. Most asbestos cases have always settled, but the
    existence of well over 200,000 cases pending on federal and state court
    dockets has nevertheless resulted in enormous problems in the state and
    federal judiciaries, problems that are only getting worse.

        Question 3. How widespread in your opinion is the phenomenon of
    juries awarding extraordinary verdicts for asymptomatic plaintiffs? Why
    do you think this is happening?
        Answer 3. I am a strong believer in the jury system, and I believe
    that the award of extraordinary verdicts for plaintiffs with little or
    no impairment is not a result of any failing of the jury system per se,
    but instead occurs because of the dynamics of case consolidation.
    Plaintiff's lawyers understand that sensible juries will not award
    extraordinary damages to plaintiffs who have very little visible signs
    of disease. Instead, they seek to package these plaintiffs with other,
    more sympathetic plaintiffs who have serious illness.
        Professor Eskridge of Yale Law School has provided a thoughtful
    analysis of why this may be happening in a statement that was submitted
    to the House Judiciary Committee.\3\ He describes how this dynamic
    creates a situation in which the unimpaired receive sizeable awards,
    awards that are much larger than the awards they would receive if their
    cases were tried alone. He notes two reasons, among others. First, both
    judges and juries have a difficult time in separating out the cases of
    more than just a very few plaintiffs and treating them each
    individually. Because the plaintiffs with serious injury have very
    dramatic stories to tell, it becomes difficult to separate their cases
    from the cases of those plaintiffs who do not suffer serious injury.
    Secondly, juries inevitably begin to assume--wrongly--that those
    plaintiffs who do not suffer serious injury will inevitably get sick.
    In fact, the vast majority of asymptomatic plaintiffs will never become
    sick.
    ---------------------------------------------------------------------------
        \3\ See Jumbo Consolidations in Asbestos Litigation: Prepared
    Statement by Prof. William N. Eskridge, Jr., Yale Law School, at a
    Hearing before the House Committee on the Judiciary, July 1, 1999,
    available at http://www.house.gov/judiciary/eskr0701htm.
    ---------------------------------------------------------------------------
        That said, the number of cases in which extraordinary damages were
    awarded to unimpaired claimants is comparatively small, because most
    cases settle. In the Cosey litigation, at least two plaintiffs were
    awarded between $2.5 and despite the lack of any impairment. In the
    Carborundum case, a Texas jury awarded $15.6 million in compensatory
    damages, and $100 million in punitive damages, to a group of twenty-one
    plaintiffs whose disease ranged from mild asbestosis to admittedly
    asymptomatic conditions. The risk of a hung verdict in the asbestos
    litigation lottery, multiplied by a mass consolidation, drives
    defendants to make substantial payments to the unimpaired in mass
    settlements.

        Question 4. Do you believe that the drive to enact legislation such
    as S. 758 reflects a consensus among jurists, scholars, and
    practitioners that the judicial system is no longer capable of making a
    meaningful distinction between sick and non-sick asbestos claimants?
        Answer 4. I do believe that the momentum which S. 758 has gained in
    this Congress is in part because of the consensus judges, and lawyers
    that one of the most serious problems in asbestos litigation today is
    the inability of the system to make a meaningful distinction between
    those who are sick from asbestos-related disease, and those who are
    not. All three law professors who testified in the third panel,
    Professor Green, Professor Nagaretta, and Dean Verkuil, agreed that of
    the most serious problems of asbestos litigation today. John Hiatt, who
    testified on behalf of the AFL-CIO and legislation, nevertheless agreed
    that the inability to make distinctions between the impaired and the
    unimpaired was a significant problem. Supreme Court Justice Stephen
    Breyer has commented that perhaps half of all asbestos claims physical
    impairment. There is no real debate among impartial scholars, judges,
    and lawyers that this is one of the principle problems with asbestos
    litigation today.

        Question 5. Please compare the actual benefits to both the impaired
    and unimpaired claimants that are offered by the settlements that the
    Association of Trial Lawyers of America advocates and the system that
    S. 758 would establish.
        Answer 5. I believe that both the impaired and the unimpaired
    claimants that are offered by the private settlement deals that the
    Association of Trail Lawyers of America (ATLA) has advocated as an
    alternative to the legislation.
        For the impaired, there can be no doubt that the system established
    by the legislation is far superior. The system allows an impaired
    claimant to proceed swiftly through a medical review process. Following
    that, the claimant is able to force the defendants to mediation and
    require that they make good-faith offers. If those offers turn out to
    be significantly lower than the amount the plaintiff can obtain either
    in arbitration under the auspices of the Asbestos Resolution
    Corporation suit and obtaining a jury trial, the defendant face
    penalties. Because of this, defendants will be required to offer
    realistic settlement figures to the plaintiff at an early stage in the
    process.
        The private deals advocated by ATLA are not an improvement on this
    system. Under such private deals, the current clients of a plaintiffs'
    lawyer nearly always receives a better settlement than future claimants
    (who generally have not yet walked into the lawyer's office). There is
    a fundamental problem of fairness here. Moreover, with regard to future
    claimants, the agreements are premised upon keeping experienced
    plaintiffs' attorneys from representing claimants who do not like the
    settlement agreements, a lawyer who has entered into a private deal
    would tell future claimants that they have two choices: they can accept
    the offer of the defendant under the private settlement deal or find
    another lawyer. If it is easy to find another lawyer, the private
    settlement will not work. If it is hard, the plaintiff's ``choice'' is
    illusory.
        It is also important to realize that a plaintiff who settles with a
    defendant such as Owens Corning has not finally settled his case--there
    are dozens more defendants with which to settle. Where (as has been the
    case with Owens Corning) there have been concerns about the ability of
    the defendant to continue paying the flood of asbestos claims while
    maintaining its financial health, it may make sense to settle for a
    relatively low value and attempt to make up the difference through
    recoveries from, or setlements with, other defendants. Thus, a global
    settlement with one company may make it that much harder to enter into
    similar settlements with other defendants.
        The Coalition believes that S. 758 is not inconsistent with
    appropriate private settlements. It establishes a framework--an
    authoritative medical eligibility process, elimination of the statute
    of limitations, extensive waiver of defenses, and provision of an
    administrative process that can cut down on delays--within which
    private agreements would be encouraged. The issue in short, is not
    whether we should have a government program or private settlements, but
    rather what kind of government program will best encourage private
    settlements that are fair and appropriate.
        The unimpaired will also benefit from the legislation as compared
    with the alternative private arrangements espoused by ATLA. As soon as
    the legislation is enacted, the statute of limitations will be
    abolished for all asbestos claims that are not barred by the date of
    enactment. On the other hand, in the Owens-Corning agreement, for
    example, plaintiffs who proceed in the Owens-Corning system will have
    the statute of limitations tolled only after they sign up with the
    system.
        To be sure, some of the private settlement arrangements that have
    been proposed involve some nominal compensation to the unimpaired. When
    the unimpaired receives such compensation, however, they are binding
    themselves to the settlement values that are contained in the
    agreements, and cannot obtain full compensation for their injuries. In
    the legislation, claimants who are unimpaired will receive full
    compensatory value for their claims when and if they ever become sick.

        Question 6. Do you believe that S. 758 will present any federalism
    or Tenth Amendment problems?
        Answer 6. The state supreme courts have recognized that Congress
    must act to solve the asbestos litigation crisis. Congress must act
    because any solution must be uniform, and such a solution can only be
    accomplished by Congress. National legislation does, of course, imply
    some preemption of state law. Congress has ample authority under the
    Commerce Clause to make the modifications to state law that are
    contained in S. 758 in order to solve the asbestos litigation crisis.
        In his written statement, Dean Paul Verkuil of the Cardozo School
    of Law provides a careful analysis of recent decisions which upheld the
    sovereignty of the state federal intrusion. I agree with Dean Verkuil's
    analysis of the legislation, and I believe that by preserving access to
    state courts for all impaired claimants, the legislation balanced to
    make only those changes to state tort law that are strictly necessary
    to solve the asbestos litigation. Instead of preempting state tort law
    altogether, and establishing a completely federalized system, S. 758
    works carefully with our existing state court systems to address those
    problems which the state courts have faced, and yet still preserve
    access to those courts for all impaired claimants who choose to file
    their claims in the state court. This is consistent with my philosophy
    as a defender of our state court systems.
                                   __________

        Responses of Michael D. Green to Questions From Senator Grassley

        Question 1. Professor Green, you indicate that because of its
    adversarial nature, S. 758 creates a procedurally complicated system
    where representation by counsel is almost essential. You state that
    these costs could be minimized by a ``simpler, less adversarial,
    compensation system.'' Do you have any specific suggestions that could
    improve the current process in the bill?
        Answer 1. Specific suggestions for simplifying the process so as to
    reduce administrative costs include:

      (1) Preparing a schedule for damages based on simple, objectively
      (2) Jettisoning the requirement that claimant prove which asbestos
        products he or she was exposed to. This means a global resolution
        of the asbestos industry's contribution to the compensation scheme.

        In general, the fewer, simpler, and more objective the criteria for
    recovery, the more efficient, inexpensive, and speedy the process will
    be.

        Question 2. Thousands of plaintiffs have already entered the legal
    system with stages in the process. What should happen to those claims
    in the event an administrative program is adopted? Do you think that S.
    758 should apply only prospectively and allow existing claims to
    proceed through the courts, should there be an option for claimants to
    either continue with their present claims or chose to enter the
    program, or should they all have to participate in this program?
        Answer 2. One of the major problems that S. 758 addresses is the
    proliferation of nonimpairment cases. The bill requires those with
    abnormal impairment to wait until they suffer from clinical symptoms.
    To exempt all of the cases that are currently filed from this provision
    of S. 758 would be unfortunate. On the other hand, if there are
    plaintiffs with serious disease who are close to trial, requiring them
    to start anew with the process set forth in S. 758would be most unfair.
    At the same time, barring those plaintiffs from recovering punitive
    damages (as the Bill does) would further the goal of making sure that
    the available resources are used to compensate all who suffer
    asbestotic disease. Overall, my preference would be to presume that all
    current cases would be subject to the Bill, but with appropriate
    exceptions for cases that are well advanced and involve serious
    diseases.

        Question 3. Some have criticized S. 758 because they say that it
    forces claimants into a program in which they may not want to
    participate. Do you believe that this is a problem? What are your
    thoughts on including an ``opt out'' provision or allowing
    participation on a voluntary basis?
        Answer 3. This statute must be mandatory for claimants. Overall,
    this statute will benefit all real asbestos victims by maximizing
    industry resources and ensuring that those resources are used to
    compensate the most seriously impaired victims. If the Bill provides a
    voluntary scheme, all those with abnormal chest x-rays but no
    impairment will opt out of the statutory scheme and file suit.
    Similarly, those with good prospects for a punitive damages claim would
    choose to go to court. In short, claimants will play their options
    strategically, which would result in the best cases being filed in
    court and the worst cases opting into the Bill's process. This would
    virtually gut the effectiveness of the Bill.
                                     ______

        Responses of Michael D. Green to Questions From Senator Feingold

        Question 1. One of the principal obstacles to the establishment of
    a fund is the argument that a corporation's insurance may not cover the
    cost of contribution. Is there a way to structure a fund so that
    insurance companies would continue to be liable?
        Answer 1. I believe there is. The standard CGL insurance policy
    provides coverage for ``all sums which the insured shall become legally
    obligated to pay as damages because of bodily injury or property
    damage.'' This language does not require tort liability. Courts have
    held that this language encompasses liability imposed by the
    Comprehensive Environmental Response, Compensation and Liability Act
    CERCLA''),\1\ I a federal statute imposing liability on those who
    generated, transported, or disposed of hazardous waste. In addition,
    liability insurers contributed to obligations of asbestos defendants
    who participated in the Wellington Agreement, in which global
    apportionment of each participating defendant was employed. And courts
    ruled that a decision to participate in the Wellington process was a
    reasonable mechanism for resolving liability for which insurers were
    obligated to provide coverage.\2\
    ---------------------------------------------------------------------------
        \1\ 42 U.S.C. Sec. Sec.  9601-75 (1997), amended by Superfund
    Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100
    Stat. 1613.
        \2\ See Stonewall Insurance Co. v. National Gypsum Co., No. 86 Civ.
    9671 [JSM] (S.D.N.Y. Dec. 22,1993)
    ---------------------------------------------------------------------------
        Perhaps more importantly, establishing a compensation fund and
    resolving each defendants' liability on a global basis will save a
    substantial amount of money that would otherwise be paid as costs of
    defending these suits. In addition, some states permit insurance
    coverage of punitive damages, which the Bill would end. These savings
    would redound to the benefit of insurers, which, after all, are
    concerned with costs and profits. This Bill should be very attractive
    to liability insurers. Indeed, I would venture the forecast that if
    participation in the administrative scheme were made voluntary for
    asbestos defendants and their insurers, with the option to participate
    or remain governed by current law, we would see a massive movement
    toward participation in the direction of the scheme set up in the Bill.
        Question 2. In your testimony, you state that ``asbestos cases take
    considerably longer to resolve than other civil cases.'' Could the long
    delays be due in part to the inactive docket system alluded to in Mr.
    Middleton's testimony? If not, please explain the cause for delays.
        Answer 2. First, I should disclaim having any empirical evidence on
    the length of time required to resolve asbestos cases. My impression is
    that they tend to take longer to resolve, and I believe that the
    Hearings held before this Subcommittee and the House Judiciary
    Committee bear that out. Surely one reason for the delay could be the
    inactive docket devices that some jurisdictions have adopted, although
    that would depend on whether the study measuring time-to-resolution
    included those inactive docket cases. Another reason is that most
    asbestos defendants are not anxious to settle cases and pay claimants
    until they are absolutely required to do so, which often is on the
    courthouse steps on the way to trial. Because, historically, asbestos
    cases tended to congregate in a few jurisdictions, they overwhelmed
    those courts and created long waiting lines for trial dates. Many
    asbestos plaintiffs in the Eastern District of Texas agreed to a
    variety of unusual procedures that were employed by Judge Robert
    Parker, because without such extraordinary efforts their cases would
    take many years or decades before called for trial.

        Question 3. You testified that one of the primary goals of any
    legislative solution to the asbestos problem is to expedite the
    compensation process. Do you believe that the proposed system will
    expedite compensation to victims? If not, what suggestions would you
    give for streamlining the process?
        Answer 3. It is very difficult to tell if the Bill's provisions for
    alternative dispute resolution (mediation and arbitration) will
    expedite resolution of claims. To a large extent, the answer to this
    inquiry depends on whether asbestos defendants participate in a good
    faith effort to resolve claims promptly. To they extent that they do,
    claims resolution could be accelerated. On the other hand, if one or
    more defendants decide that it is in their interest to delay payment
    for as long as possible, the Bill could actually build in further delay
    by requiring claimants to go through mediation before being able to
    assert their claims in court. I am also concerned about the provisions
    in the Bill that require apportionment of liability among multiple
    defendants on the basis of comparative fault. This requirement, which
    could delay resolution of the claim, will apparently exist whether a
    claim is resolved in mediation, arbitration, or in a lawsuit.
        For my suggestions for streamlining the process, please see my
    answers to Senator Grassley's first supplemental question.

        Question 4. In your testimony, you attack the proposed system as
    overly adversarial and as retaining too many ``tort-like'' elements.
    How could the system be altered to remove these elements while still
    protecting a defendant's legitimate interest in compensating only those
    it has harmed?
        Answer 4. I would resist the premise of this question that a
    defendant has a legitimate interest in compensating only those it has
    harmed significant interest is that they not be required to pay more
    than they would be required to pay under the current system. The more
    administratively efficient the process in this Bill, the more that
    defendants will ultimately save over what they would be required to pay
    if left to the common law tort system. Numerous major asbestos
    defendants voluntarily joined the Wellington Agreement which, decoupled
    defendants' payments from those injured by each defendant's asbestos
    products. They joined the Wellington Agreement because they anticipated
    they would save money from the joint defense to be employed under
    different premises from tort law. Thus, the National Childhood Vaccine
    Injury Act \3\ was enacted by Congress, and is funded by an excise tax
    on each dose of vaccine sold. There is no causal connection between
    payments by vaccine manufacturers and compensation to child victims. We
    should not impose tort principles--which often are modified by
    exigencies of particular cases \4\--on compensation schemes.
    ---------------------------------------------------------------------------
        \3\ 42 U.S.C. Sec. Sec.  300aa-33 et seq. (1997).
        \4\ See, e.g, Hymowitz v. Eli Lilly & Co., 539 N.E.2d 1069 (N.Y.
    1989) (adopting a ``market share'' theory of liability for DES victims
    that ensured that defendants would pay to compensate those that they
    did not harm).
    ---------------------------------------------------------------------------
                                   __________

       Responses of Richard Middleton to Questions From Senator Thurmond

        Question 1. Your prepared testimony states that S. 758's
    ``restrictive medical criteria would eliminate compensation for
    thousands of cases that are presently compensable under state laws.''
    Is this because there are statutes or reported judicial decisions that
    hold that non-sick plaintiffs are entitled to compensation? If so,
    please provide appropriate citations.
        Answer 1. Virtually every state court decision dealing with the
    issue of the appropriateness of permitting an award of damages to
    victims of asbestos-related diseases follows established principles of
    common law tort doctrine requiring that there must first be evidence of
    ``bodily harm'' or ``physical injury'' before a damage award is
    permitted. The American Law Institute's Restatement of the Law of
    Torts, 3rd, states that ``bodily harm'' is an essential element of a
    cause of action under Section 402A, which governs product liability
    actions. Section 15 of the Restatement defines bodily harm as ``* * *
    any physical impairment of the condition of another's body, or physical
    pain or illness.'' See, e.g., Verbryke v. Owens-Corning, Fiberglas
    Corp., 616 N.E.2d 1162 (Ohio App. 1992).
        To be sure, individuals whose lungs have been scarred by asbestos
    high risk of developing cancer (at least 3 times increased risk) have
    suffered bodily harm. Hillerdal, a Swedish researcher, recently stated
    that ``persons with pleural plaques have increased risk of
    mesothelioma, cancer of the bronchi and the gastrointestinal tract
    pulmonary fibrosis.'' Hillerdal, Pleural Plaques and Risk for Bronchial
    Carcinoma Mesothelioma, 105 Chest 144 (1994). And numerous researchers
    have concluded that individuals ``with pleural thickening appear to
    have more shortness of breath * * * and more dyspnea with major
    activities such as walking up a steep hill or climbing two flights of
    stairs.'' Bourbeau, The Relationship Between Respiratory Impairment and
    Asbestos-Related Pleural Abnormality in an Active Work Force, 142 Am.
    Rev. Respir. Dis. 837 (1990).
        Yet the medical criteria of S. 758 requires significant pulmonary
    function deficits to be present before victims of asbestos disease may
    be compensated. Most, if not all claimants with pleural disease and
    even a majority of those with full blown asbestosis will be excluded
    from compensation under the Bill because of the application of
    standards that were meant to measure, for medical treatment purposes,
    such things as oxygen exchange propensities and lung volumes rather
    subjective signs of illness and injury. Indeed, many researchers have
    concluded that even an attempted use of pulmonary function tests to
    measure impairment in victims of asbestos-related disease is
    inappropriate. See, Barnhart, Total Lung Capacity, an Insensitive
    Measure of Impairment in Patients with Asbestosis and Chronic
    Obstructive Pulmonary Disease, 93 Chest 299 (1988).

        Question 2. If, as your prepared testimony states, ``[l]iability of
    the defendant companies is no longer seriously disputed,'' why is it
    still necessary to limit asbestos claimants to seeking compensation
    from a system under which 60 cents of every dollar spent is consumed by
    transaction costs and attorney's fee?
        Answer 2. The basic premise of this question, that ``60 cents on
    every dollar spent [on asbestos cases] is consumed by transactions
    costs and attorneys' fees,'' is a fiction. The genesis of this oft-used
    quote is a report published in 1985 by the Rand Institute, which
    studied asbestos litigation during the years 1981 through 1983.
    Eighteen years ago, when the liability of the asbestos industry was
    being seriously disputed, the cost of prosecuting an individual
    asbestos-related claim was high. And it's true that in 1983, a
    relatively large percentage of the cases were tried to verdict, and
    were expensive. Things have changed considerably in the past 18 years.
    In 1998, only 55 cases were tried to verdict in all state and federal
    courts and over 25,000 were settled. Although no accurate statistics
    are kept, information available from anecdotal evidence would support
    the proposition that the cost of asbestos litigation, when spread among
    the population of resolved cases, is typically far less per case than
    in other types of civil litigation and certainly it is significantly
    less than the number reported by Rand in 1985.
        It is particularly disturbing to us that the proponents of this
    legislation are even raising this issue, since transaction costs and
    attorney's fees in asbestos litigation have been generated primarily by
    defendants not claimants. Even when the costs were as high as those
    cited in the Rand report, it was because defendants insisted upon
    raising false defenses, delaying discovery, seeking to withhold
    documents, and forcing claimants to relitigate settled issues.
    Moreover, at the same time, asbestos defendants were extensively
    litigating coverage disputes with their insurers, further elevating
    transaction costs and generating additional legal fees--for defense and
    insurance attorneys, not for plaintiffs' lawyers. It seems to us
    unconscionable for the proponents of S. 758 to now come before Congress
    and hide behind the transaction cost issue as justification for taking
    away the rights of claimants.
                                     ______

       Response of Richard Middleton to a Question From Senator Feingold

        Question 1. Mr. Edley testified that there are 200,000 pending
    claims and a heightened pace of new filings. During your testimony, you
    stated that in most jurisdictions cases of persons with no functional
    impairment are put on an inactive docket and therefore require no court
    resources. How many of the 200,000 pending claims are on these inactive
    dockets? To what do you attribute the heightened pace of new filings?
    How are the claims of those with no functional impairment handled in
    those jurisdictions that have not adopted an inactive docket system?
        Answer 1. To begin with, a serious question can be raised about the
    accuracy of Mr. Edley's assertion that there are 200,000 pending
    asbestos-injury claims. Although no empirical data is available from
    any source on the total number of cases that are currently pending in
    both the state and federal courts, annual reports of many companies who
    are traditionally named as defendants in asbestos cases would indicate
    that the number of open, pending cases may be far less than half of Mr.
    Edley's number. Owens-Illinois, for instance, a company that is often
    sued for asbestos-related injuries, reports that less than 25,000 cases
    are currently pending. Other often sued companies report less than
    50,000 pending cases. At a minimum, some inquiry should be made by
    Congress to determine this fundamental information before an attempt is
    made to fashion any remedy of perceived problems.
        Similarly, no exact statistics are available as to how many
    jurisdictions have adopted ``inactive'' dockets and how many cases are
    pending on such dockets. Anecdotal reports to ATLA would indicate that
    in both jurisdictions where ``inactive'' dockets are available and in
    others where they are not, statute of limitations tolling agreements
    have been entered into by litigants, on a private, consensual basis,
    which encompass a reasonably large number of cases. Again, however, it
    would be pure speculation to attempt to quantify this data.
        As to the alleged ``heightened pace'' of new filings, this would
    appear to be inaccurate information. The Manville Trust, which handles
    asbestos-injury claims filed against the Johns-Manville Company, the
    largest of the asbestos products manufacturers, recently reported that
    between July 1, 1998 and June 30, 1999 a total of 25,574 claims for
    compensation were filed against the Trust. This number represents a
    significant reduction from the previous period and throws into question
    the accuracy of the assertion that claims are being filed at an
    increased rate.
        Finally, as mentioned above, many claims are placed into an
    ``inactive'' status by voluntary tolling agreements that are routinely
    entered into by the parties to asbestos litigation. Although all
    jurisdictions require that an ``injury'' be sustained before a
    compensable claim may be pursued for individual damages, most states
    permit tort damages for asbestos-injuries even if they do not produce
    incapacity. As the medical literature uniformly states, even pleural
    thickening without accompanying loss of earning capacity is an
    ``injury'' and subjects a victim to maladies such as chest pain,
    shortness of breath, cough and, most assuredly, a significantly
    increased risk of developing cancer. See, e.g., Rosenstock,
    Roentgenographic Manifestations and Pulmonary Effects of Asbestos-
    Induced Pleural Thickening, 7 Toxicology and Industrial Health 81
    (1991).
                                   __________

      Responses of Dean Paul R. Verkuil to Questions From Senator Grassley

        Question 1. Thousands of plaintiffs have already entered the legal
    system with claims at varying stages in the process. What should happen
    to those claims in the event any administrative system is adopted? Do
    you think that S. 758 should apply only prospectively and allow
    existing claims to proceed through the courts, should there be an
    option for claimants to either continue with their present claims or
    choose to enter the program, or should they all have to participate in
    this program?
        Answer 1. S. 758 addresses the tremendous problems that have
    already been caused by over 200,000 pending asbestos claims, most of
    which have been filed on behalf of claimants who have only so-called
    pleural plaques, which do not lead to any breathing impairment or
    increased risk of cancer. These are the cases that the Supreme Court
    called an ``elephantine mass which defies customary judicial
    administration.'' Asbestos litigation is not a wreck that is waiting to
    happen, but one that has already occurred. S. 758 would be ineffective
    if it ignored the more than 200,000 cases that have already been filed.
        S. 758 would change the legal landscape immediately for all pending
    cases. Thus, new rules of law established by the statute would be
    applicable right away:

       the statutory medical criteria,
       the elimination of the statute of limitations and the
            imposition of absolute liability,
       the guarantee of ``come-back'' rights if asbestosis victims
            later contract cancer,
       the elimination of punitive damages, and
       limits on consolidations.

        The plaintiffs in pending cases would not, however, be required to
    obtain a certificate of medical eligibility from the ARC until the ARC
    is in operation. Cases could go to trial before that time under the new
    rules without the certificate, in which case the medical criteria would
    be applied by the court.
        It seems to me that this is an appropriate balance. The new rules
    established by the bill should generally be applied to pending cases.
    The legislation would be ineffective if the medical criteria were
    applied prospectively. Moreover, on balance the package of legal
    reforms in the bill are favorable to claimants with cancer or impairing
    non-malignant disease, and those individuals should obtain the benefit
    of the new rules as soon as possible. I recognize, of course, that
    there will be a few cases which are already in trial or possibly on
    appeal when the bill is enacted. There is a reasonable argument against
    changing the legal rules applicable to such cases. Grandfathering these
    cases would not seriously undermine the effectiveness of the bill,
    since, as other witnesses point out, very few asbestos cases are
    actually tried each year.

        Question 2. Some have criticized S. 758 because they say that it
    forces claimants into a program in which they may not want to
    participate. Is this a problem? What are your thoughts on including an
    ``opt out ``provision or allowing participation on a voluntary basis?
        Answer 2. A provision that allows claimants to opt out of the
    medical critiera would completely undermine the basic purpose of the
    legislation. If the medical criteria were made voluntary, the sick
    would participate in the program, while the unimpaired would still
    flock to the courts, as they do now. Judicial overload and the
    diversion of the resources of defendants would continue unabated, at
    the expense of the people who are impaired by their exposure to
    asbestos.
        Right now both the courts and the limited resources of defendants
    are being overwhelmed by a flood of claims by the unimpaired. This is a
    major source of the problems with asbestos litigation today which have
    so far eluded customary judicial administration, according to most who
    have studied the problem, including Professor Edley, Professor Green
    and Professor Nagareda who testified at the hearing. I agree with my
    colleagues on this point.
        According to studies and judicial decisions, at least 50 percent
    (and possibly many more) of the current claimants are not impaired by
    any asbestos-related disease. These cases involving unimpaired
    claimants are creating what the Supreme Court termed an ``elephantine
    mass'' of asbestos claims flooding state and federal court dockets.
    More troubling, as the Judicial Conference observed several years ago,
    diverting the resources of defendants to paying hundreds of thousands
    of claims by the unimpaired threatens defendants ability to pay
    seriously ill people in the future.
        The main contribution this bill makes to resolving the asbestos
    litigation crisis is focusing the resources of the defendant companies
    on those who are impaired by asbestos-related disease, instead of on
    those who have been exposed but are not now sick. This fundamental
    purpose cannot be achieved without requiring the unimpaired to defer
    their claims.

        Question 3. Some have criticized the bill on Tenth Amendment
    grounds. What would be the effect if this legislation only operated at
    the federal level?
        Answer 3. Applying the legislation only to cases filed in federal
    court would eviscerate its effectiveness. The vast majority of the over
    200,000 asbestos cases pending today are in state courts. Because the
    litigation is mobile, and litigation in each state affects the
    viability of defendants in all states, only a uniform, national
    solution to the problem could effectively ensure a policy of focusing
    defendants' resources on the sick, reducing transaction costs, and
    solving the other problems that the legislation addresses. A solution
    that applies only at the federal level would leave the great bulk of
    the litigation in the same state it is today.
        In W.R. Grace & Co. v. Waters, 638 So.2d 502 (1994), the Florida
    Supreme Court noted:

              Any realistic solution to the problems caused by the asbestos
            litigation in the United States must be applicable to all fifty
            states. It is our belief that such a uniform solution can only
            be effected by federal legislation. Id. at 505.

    Other state supreme courts have made the same observation. The Supreme
    Court of West Virginia notes that Congress's inaction has forced the
    state systems to cope with the crisis on their own.

              Congress, by not creating any legislative solution to these
            problems, has effectively forced the courts to adopt diverse,
            innovative, and often non-traditional judicial management
            techniques to reduce the burden of asbestos litigation that
            seem to be paralyzing their active dockets.* * * [T]hese
            efforts have failed to expedite a substantial fraction of the
            caseload. Nor do they appear to have brought about significant
            reduction in transaction costs.''' State ex rel. Appalachian
            Power Co. v. MacQueen, 479 S.E.2d 300, 304 & n.8 (1996).

    Likewise, the Supreme Court has said that the asbestos litigation
    problem requires ``national legislation.'' National legislation
    presupposes at least some preemption of state law.

        In my written testimony, I addressed in depth the Tenth Amendment
    issues that relate to this legislation. I concluded that the
    legislation did not present any serious Tenth Amendment concerns.
    Rather, I believe that the legislation was drafted with attention to
    the sovereignty of the states and their systems by moving incrementally
    to make only those reforms that are necessary to alleviate the asbestos
    litigation crisis.

        Question 4. Does S. 758 provide the necessary incentives or dis-
    incentives for plaintiffs and defendants to resolve their claims
    promptly in the first stages of the Asbestos Resolution Corporation and
    without proceeding to litigation? For example, Owens Corning argues
    that there are no set settlement values or payment schedules which
    would encourage plaintiffs to forgo court action and enter into
    settlements with asbestos defendants. Owens Corning proposes that tax
    incentives might be incorporated to encourage defendants to settle,
    while Professor Green suggests that penalties might encourage the early
    resolution of claims. What incentives or dis-incentives do you think
    might be appropriate to incorporate into this legislation to encourage
    prompt settlement of claims?
        Answer 4. I believe that S. 758 does provide appropriate incentives
    for early settlement. For plaintiffs, of course, early settlement
    should mean early compensation. A settlement schedule mandated by the
    legislation should not be necessary to encourage plaintiffs to settle.
    In practice, many defendants will have voluntary futures agreements
    with plaintiffs' lawyers, just as they do now, in order to administer
    claims efficiently and with a minimum of cost. Those agreements are
    likely to have either settlement schedules or ranges to promote early
    settlement and over time these arguments will establish settlement
    parameters.
        From the defendants' perspective, the bill removes a number of
    current obstacles to settlement. The bill requires disclosure of
    information necessary to formulate a sensible settlement offer, which
    now takes place only after discovery, typically on the courthouse
    steps. In particular, reliable information about the claimant's medical
    condition will be available early in the process. Second, the bill
    requires all of the parties to focus on settlement at or before the
    mediation stage, and by imposing the costs of mediation on defendants,
    it encourages settlement even before mediation begins. Third, the bill
    simplifies the issues for litigation, essentially eliminating defenses
    relating to product defect and the statute of limitations. Defendants
    will have an increased incentive to settle because the case against
    them will be stronger. Fourth, the bill eliminates the threat of
    punitive damages, a wild card that can undermine settlement
    discussions. And, finally, the bill requires defendants to make good
    faith offers following mediation and imposes a surcharge on the
    judgment if their final offer proves to be more than 25 percent short
    of the mark.
        Essentially, S. 758 is designed to create a framework in which all
    sides have an incentive to settle, and I believe that it does that. I
    am not familiar with and thus cannot comment upon Owens Corning's
    proposal for tax incentives to encourage early settlement. I believe
    that the current set of incentives are sufficient to make S. 758 work.

                     Additional Submissions for the Record

                                  ----------

       Prepared Statement of Susan K. Pingleton, M.D., President-Elect,
                      American College of Chest Physicians

        I am a physician specializing in pulmonary medicine. As my attached
    Curriculum Vitae reflects, I am Professor of Medicine and Director of
    the Pulmonary and Critical Care Division at the University of Kansas
    Medical Center. I am the President-Elect of the American College of
    Chest Physicians. I am also a Fellow in the American College of Chest
    Physicians and a Fellow in the American College of Physicians. I have
    taught and practiced in the area of pulmonary medicine for over twenty-
    five years and am the author of over one hundred publications. During
    my many years oil practice, I have treated many patients suffering from
    asbestos related diseases.
        I welcome the opportunity to submit to you my written testimony in
    support of S. 758, the Fairness in Asbestos Compensation Act of 1999
    (``Act''). I support the proposed legislation and, in particular,
    express my endorsement of the medical criteria contained in the Act.
        On a regular basis, I see patients, teach medical students and
    surgery residents, conduct research and write articles for the
    scientific literature in the field of chest diseases. Based on this
    experience, as well as my expertise as reflected in my Curriculum
    vitae, I have reviewed the act, and in particular the medical criteria
    in the act. It is my firm conclusion that the medical criteria in the
    act fairly and clearly distinguish between those individuals exposed to
    asbestos who are truly sick and those who are not. The Act's medical
    criteria reflect the mainstream of medical thinking and ensure that
    those truly injured as a result of asbestos will be compensated while
    at the same time it preserves the rights of those who, in the future,
    develop asbestos-related diseases. Below, I will discuss the medical
    criteria and the basis for my conclusion that they are fair.

        1. Mesothelioma: Mesothelioma is a relatively rare but essentially
    universally fatal cancer which is usually associated with a history of
    asbestos exposure. This cancer arises in the pleura which is the lining
    of the chest wall or the peritoneum which is the lining of the abdomen.
    The medical criteria described are designed to--and do--establish the
    reliability of the diagnosis of mesothelioma.
        2. Lung Cancer: Lung cancer has several known causes, the most
    common of which is cigarette smoking. The purpose of the lung cancer
    criteria are to be sure that a potential claimant's lung cancer is in
    fact related to the asbestos exposure, rather than to smoking or some
    other factor. It is important for this Committee to understand that the
    majority of epidemiological studies indicate that ``asbestosis'' is the
    only risk factor for asbestos-related lung cancer. The majority of
    these studies indicate that pleural abnormalities by themselves are not
    associated with an increase in lung cancer. Including these pleural-
    space criteria in the Act serves to broaden the criteria and increase
    the number of qualified claimants.
        3. ``Other'' Asbestos-Related Cancers: There is no consensus in the
    medical community on whether any ``other'' cancers may be related to
    asbestos exposure. Considerable evidence exists to suggest that such
    ``other'' cancers in fact are not caused by asbestos. Nevertheless,
    there is a contrary opinion among the minority of the medical
    community. The criteria included in the category are designed to ensure
    that the claimant has evidence of sufficient exposure to asbestos to
    make it reasonable to attribute the ``other'' cancer at least in part
    to asbestos exposure.
        4. ``Non-malignant conditions'' The non-malignant conditions
    criteria are established so that a potential claimant will qualify at
    the first signs of diminished respiratory capacity due to asbestos
    exposure. I believe that these criteria fairly described claimants who
    were exposed to asbestos and have been injured as a result of their
    non-malignant condition.

        As I understand it, the purpose of the Act is to ensure prompt and
    fair compensation to persons who are suffering from an asbestos-related
    impairment.
        I have reviewed in detail the medical criteria in the Act which
    relate to each of the four medical categories. Based on my experience
    as a physician who has treated hundreds of individuals exposed to
    asbestos, I am confident that these medical criteria are sufficiently
    inclusive to permit virtually all claimants with asbestos-related
    impairment to receive compensation. If anything, these criteria are
    conservative and protective of claimants. The Exceptional Medical Panel
    created by the Act further provides protection for those claimants who,
    for some reason, are unable to satisfy the Act's medical criteria can
    submit their claim to the Exceptional Medical Panel. As I understand
    the Act, this Exceptional Medical Panel would review these claims and
    identify which claimants who, notwithstanding their inability to
    satisfy the medical criteria, nevertheless could receive compensation
    for their injures. Thus, even if anyone were to argue that the medical
    criteria were somehow too exclusive, the Panel provides an additional
    safety net to ensure that claimants with asbestos-related impairment
    who fail to satisfy the Act's medical criteria nevertheless will be
    eligible to receive compensation under the proposed Act.
        It is for these reasons that I unreservedly support the Fairness in
    Asbestos Compensation Act of 1999.

        [Editor's note: Susan K. Pingleton's Curriculum Vitae is retained
    in Committee files.]
                                   __________

                    Prepared Statement of Louis W. Sullivan

        Chairman Grassley, Senator Torricelli, members of the Committee,
    thank you for the opportunity to submit to you my written testimony in
    support of S. 758, the Fairness in Asbestos Compensation Act of 1999,
    bi-partisan legislation sponsored by Senator Ashcroft and based on the
    Georgine asbestos-litigation settlement. I support the proposed
    legislation and applaud your efforts because I believe that Congress
    has a responsibility to resolve the judicial crisis caused by years of
    back-logged litigation and to ensure quick, fair, and efficient relief
    to hundreds of people suffering from asbestos-related illnesses. I
    hereby state that I personally have not received any federal grant,
    contract or subcontract in the current or preceding two fiscal years.
        S. 758 recognizes the fundamental flaws of a system which has
    previously defied resolution and, as a remedy, establishes
    straightforward and sound policy principles. The policy principles
    incorporated in this legislation are clear:

      (1) impaired claimants, those suffering now and those who develop
        asbestos-related illnesses in the future, must be assured adequate,
        timely, and fair compensation;
      (2) resources for compensating victims should go to those who are
        impaired, while the claims of those who have no current impairment
        are deferred until the on-set of any impairment;
      (3) claimants should be able to bring claims whenever they are sick
        and not be limited by any state statute of limitations;
      (4) defendant companies resources are better spent on compensation
        than on litigation costs; and (5) claimants should have meaningful
        access to court as a check on administrative decision making.

                               CONGRESS MUST ACT
        I urge this Committee, and Congress as a whole, to address this
    important issue. I believe that Congress must accept the responsibility
    to solve the asbestos settlement crisis and ensure that sick
    individuals are compensated while they are still living. Indeed, I
    believe that only Congress has the ability to ensure this resolution.
        The legislation under discussion is modeled after a Federal
    District Court order approving an innovative settlement in a class
    action suit alleging asbestos-related personal injury (Georgine v.
    Amchem Products, Inc.) The U.S. Supreme Court, when considering the
    appeal of the settlement terms, reversed on procedural and technical
    grounds, but called for legislative resolution of the asbestos crisis,
    stating that legally only Congress could create an out-of-court
    settlement process to help settle these asbestos lawsuits.

              The argument is sensibly made that a nationwide
            administrative claims processing regime would provide the most
            secure, fair and efficient means of compensating victims of
            asbestos exposure. Congress, however, has not adopted such a
            solution.'' (Georgine v. Amchem Products, Inc.)

        This past June, 1999, the Supreme Court (in Ortiz v. Fibreboard)
    specifically called for ``national legislation'' to solve what the
    Court called the ``elephantine mass of asbestos cases * * * which
    defies customary judiciary administration.''
        In response, Senator Ashcroft and others have crafted a bill which
    provides a creative and innovative solution to the asbestos litigation
    crisis. S. 758 creates a unique administrative mechanism to resolve
    asbestos claims funded entirely by the asbestos defendants. Claims for
    asbestos-related injuries should be resolved by administrative rather
    than judicial means. The claims process established by the bill would
    be administered by a quasi-governmental corporation whose board of
    directors would be appointed by the President and confirmed by the
    Senate. This inventive solution would eliminate lengthy trial
    proceedings and provide quick relief to individuals suffering from
    asbestos-related illnesses. The current system and its protracted
    judicial process has allowed sick individuals to die before they ever
    get their day in court. Congress must act to speed up the process and
    to ensure that sick individuals receive fair compensation before it is
    too late for them.

                         GENEROUS IMPAIRMENT GUIDELINES
        Others testifying or submitting written testimony today, will
    discuss the medical criteria set forth in the proposed legislation. I
    understand that Drs. Rosenow, Little, and Shure all of whom are past
    Presidents of the American College of Chest Physicians, and Dr. Susan
    Pingleton, President-Elect of the American College of Chest Physicians
    also have submitted written testimony to the Committee expressing their
    support for the proposed legislation and specifically discussing the
    medical criteria which it contains. These medical criteria were
    originally established in the Georgine settlement, agreed to by both
    the labor organizations and the trial lawyers, and approved by a
    Federal District Court as fair and reasonable. To ensure a fair system
    under the proposed settlement process, a distinction must be drawn
    between people who are impaired and those who are not impaired. Claims
    should be judged based upon the recognized medical criteria patterned
    after those agreed to by all sides in the Georgine settlement. I
    believe that these criteria provide an objective, workable, and
    equitable solution to get compensation to people who are actually sick
    now.
        Further, the ``impairment lines'' drawn by the legislation are
    generous to claimants and are designed to ensure that no individual
    suffering from asbestos-related impairment be excluded from
    compensation. Most administrative compensation programs are dependent
    upon disability--a far more restrictive concept--and use compensation
    schedules that do not reflect intangibles like pain and suffering. As
    Secretary of the Department of Health and Human Services, I was
    responsible for many programs that involved determining medical
    eligibility for certain remedies, and I believe that this bill sets
    forth a workable concept to ensure fair compensation.
        Finally, the original Georgine settlement proposal included a rigid
    compensation schedule which was subject to caps and other limits. The
    settlement ranges provided were some of the most highly criticized
    aspects of the settlement and resulted in complaints that the
    compensation levels were inadequate. S. 758 does not include such
    limitations on claims and will likely promote faster settlements
    through mediation without imposing caps on injured individuals'
    potential compensation.

                         STATUTES OF LIMITATION WAIVER
        I would like now to address the waiver of state statutes of
    limitation as contained in S. 758. I believe this is one of the most
    important policy aspects to ensure that individuals suffering from
    asbestos-related illnesses receive fair and adequate compensation.
    Currently, we see mass filings of cases on behalf of large groups of
    people who are not sick and may never become sick but who are compelled
    to file for remedial compensation simply because of state statutes of
    limitation. Previous exposure to asbestos material does not in all
    cases lead to illness. In fact, only a small percentage of individuals
    exposed to asbestos ever become impaired and may not become impaired
    for 20 or even 30 years after exposure. Most claims that have been
    filed to date are on behalf of people who are not sick from asbestos
    but are still seeking compensation.
        S. 758 waives state statutes of limitation and similar defenses and
    preserves individuals' right to file claims regardless of when they
    become sick or how long ago the exposure occurred. The proposed
    legislation sets no time limits for filing a claim. In addition,
    individuals would be able to re-enter the mediation process at any time
    to seek compensation for the on-set of new and additional asbestos-
    related illnesses. Finally, individuals would retain the right to enter
    the court system if they are unsatisfied with the mediation process or
    compensation award.
        With an additional 30,000 to 50,000 additional cases expected to be
    filed this year alone, on top of the 200,000 cases already filed, this
    provision is necessary to stem the flood of claims currently burdening
    our court systems. Most importantly, sick individuals would come first
    under the proposed out-of-court administrative system while still
    allowing people who become sick later to file appropriate claims.

                                   CONCLUSION
        I urge Congressional action to resolve the national asbestos
    litigation crisis and to ensure the adequate, timely, and fair
    compensation of individuals suffering from asbestos-related illnesses.
    The resolution proposed in S. 758 is based on sound policy goals and
    will provide adequate remedies for individuals currently seeking
    compensation and those individuals who will need compensation in the
    future. The U.S. Supreme Court has now twice recommended Congressional
    action to resolve this crisis. Further, the interested parties: unions,
    asbestos defendant corporations, and trial lawyers, all agreed to the
    Georgine settlement upon which S. 758 is based. Accordingly, I would
    urge Congress to act quickly to pass S. 758 and thus prevent a judicial
    crisis from becoming a public health crisis.
        Thank you.

        [Editor's note: Louis W. Sullivan's Curriculum Vitae is retained in
    Committee files.]
                                   __________

          Prepared Statement of Brian Wolfman of the Public Citizens
                                Litigation Group

        Chairman Grassley and Members of the Committee: Thank you for the
    opportunity to submit this testimony. Before explaining our concerns
    about S. 759, I want to describe the basis for our interest in the
    proposed legislation. I am a staff attorney with Public Citizen
    Litigation Group, a non-profit, national public interest law firm
    founded in 1972 as the litigating arm of Public Citizen, a consumer
    advocacy organization with approximately 150,000 members.
        The Litigation Group represented a group of objectors to the Amchem
    v. Windsor class action asbestos settlement, before the lower federal
    courts and in the Supreme Court. Our clients included individuals
    exposed to asbestos, advocacy groups, and labor unions. We objected to
    the settlement not only on legal grounds, including those adopted by
    the Supreme Court in rejecting the settlement, but also on fairness
    grounds--that the settlement terms would cause delay and would deny
    deserving asbestos plaintiffs proper compensation and, in many
    instances, any compensation at all. Because the substantive terms of
    the now-rejected, Amchem settlement have been adopted in large measure
    into S. 758, we have particular expertise in responding to that
    legislation.
        Attached to this testimony is Public Citizen's analysis of S. 758,
    and the companion House bill, H.R. 1283. That analysis, prepared in
    April of this year, sets forth our views on the legislation in
    considerable detail, and explains how many provisions of the bill will
    undermine the rights of individuals harmed by asbestos and unjustly
    benefit the asbestos industry. We urge Committee Members to consult
    that analysis.
        In addition, in this testimony, we wish to comment on several
    recurring justifications--or myths--used to bolster S. 758, and explain
    why none of them are correct. Those myths are (1) that the current
    volume of asbestos cases presents a unique litigation ``crisis''
    requiring national legislation; (2) that S. 758 will ameliorate the
    alleged crisis by streamlining litigation and reducing delay; and (3)
    that S. 758 will pay fair compensation to people injured by asbestos.
    We take up each of these myths in turn.
     (1) the alleged asbestos litigation ``crisis'' is not a justification
                                   for s. 758
        Without question, there are a large number of asbestos personal-
    injury cases in the federal and state courts, with the vast majority in
    state court. The fact that there are a large number of asbestos cases
    in the courts, in itself, is no reason to single those cases out for
    special treatment. The large number of cases is directly related to the
    magnitude of the harm inflicted; in other words, there are many cases
    because many people have been (and will be) injured.
        Thus, the real question is whether, on a per-case basis, asbestos
    cases are so costly and so difficult to resolve that special treatment
    in the form of sweeping federal legislation affecting primarily state
    cases is necessary.
        To be sure, in the early years of asbestos litigation, the
    complexity of the underlying liability issues, unresolved issues
    relating to insurance coverage, asbestos bankruptcies, and other
    matters made asbestos litigation costly. These factors gave rise to the
    oft-cited 1985 RAND study, which indicated that more than 60 percent of
    asbestos litigation costs went to lawyers and other transaction costs,
    not to asbestos plaintiffs. RAND, Asbestos in the Courts, The Challenge
    of Mass Torts iii. Significantly, RAND found that defendants' attorney
    fees and costs were 37 percent of each asbestos litigation dollar, 50
    percent more than plaintiffs' fees and costs (less than 24 percent).
        But no one has brought forth hard data showing that the current
    cost of asbestos personal-injury litigation is different from the cost
    of other product liability litigation or of litigation generally. Not
    only is there no evidence that asbestos cases are currently more
    expensive than other litigation, but there is reason to think that, at
    this juncture, they are less expensive to resolve. In the first place,
    unlike many product liability cases, because the asbestos litigation is
    very ``mature,'' generally no discovery about the defendants' liability
    is necessary, because that discovery has already been taken.
    Furthermore, the defendants' and the plaintiffs' bar have amassed large
    amounts of information about asbestos exposure--which products were
    used at which work sites in which years--and so discovery on those
    questions is limited or non-existent. An individual plaintiff's
    injuries and damages can usually be proved through a single deposition
    and/or medical records. In sum, asbestos litigation is unusually
    amenable to settlement (or in rare instances, trial) without large
    amounts of pre-trial litigation and discovery.
        Although asbestos trials, including consolidated trials, continue
    to take place, the vast majority of cases are resolved by settlement.
    The Center for Claims Resolution asbestos defendants--the 20 companies
    that were defendants in the Amchem case, and which represent about 25
    percent of the industry's liability share settle approximately 99.8
    percent, of the personal-injury cases filed against them. See Georgine
    v. Amchem, No. 93-0215 (E.D. Pa.), Doc. No. 173, Response of CCR
    Defendants to the Order to Show Cause, p. 27 n. 18 (filed Mar. 17,
    1993). This is because the CCR companies, and the plaintiffs that sue
    them, recognize that the issues in asbestos litigation have been
    greatly refined, and thus the case values have been fairly well
    established over time.
        In addition, asbestos defendants and court systems have become
    adept at managing their asbestos dockets. For instance, Owens Corning's
    voluntary settlement program demonstrates both that a federal program
    is not needed and that settlement, not costly litigation, is the norm.
    Indeed, Owens Corning in its testimony on the House bill made it clear
    that S. 758's federal bureaucracy would be more costly, and less
    beneficial to injured plaintiffs, than that company's voluntary
    settlement program. And, although some of the components of Owens
    Corning's program could be harmful to some plaintiffs (e,g., its
    restrictive medical criteria), in the context of a truly voluntary
    program plaintiffs are free to reject the program and go to court,
    without the restrictive medical criteria and other substantive and
    procedural impediments imposed by S. 7S8.
        In sum, although there are large numbers of asbestos cases in the
    courts, there is no evidence that, at the present time, on a per-case
    basis, those cases are either more costly or more likely to delay the
    administration of justice than other comparable cases.
     (2) s. 758 will not streamline case administration or provide quicker
                         justice for injured plaintiffs
        As explained in our attached section-by-section analysis, asbestos
    claims will not be dealt with more quickly if S. 758 is enacted. The
    bill requires asbestos claimants to file enormously detailed claims
    setting out their personal information (including smoking history and
    work history), their asbestos exposure, and medical information about
    claimed asbestos-related conditions. As a practical matter, because of
    the great complexity of the submission and the procedures involved, the
    claimant will be required to hire a lawyer, even though this process
    alone is simply a first step and cannot itself lead to recovery of
    damages.
        After the filing of the claim, the Asbestos Resolution Corporation
    (``ARC'')--the new federal bureaucracy established by the legislation--
    then determines whether the claimant meets the bill's stringent medical
    criteria. If the ARC allows the claim, it issues a ``certificate of
    medical eligibility.'' If the ARC denies the claim, the claimant must
    seek reconsideration to keep his or her claim alive. If the claim is
    again denied, the claimant enters ``round one'' of court proceedings by
    filing a suit in federal court seeking reversal of the ARCs denial of
    the certificate of medical eligibility. The bill contains no time limit
    on when the federal courts must decide these cases; indeed, it is
    likely, given the volume of asbestos cases, that thousands of new cases
    will be filed in federal district courts. These cases will not decide
    whether an asbestos victim will be compensated for his or her injuries,
    but only the threshold issue whether he or she is medically eligible to
    file suit. All of these cases must be filed in federal district court,
    thus effectively transferring a large number of cases previously filed
    in state court to the federal system.
        In addition to the delays caused by moving many state cases to
    federal court, further delays will be caused by the fact that these
    medical qualification cases will be entirely new to the federal courts.
    The courts will have had no experience interpreting the law's new
    medical criteria and the accompanying rules and regulations to be
    issued by the ARC. An entire new jurisprudence will have to be created
    by the district courts and, ultimately, the federal courts of appeals,
    much as currently exists in social security cases.
        Only if a claimant wins in federal court, or previously obtains a
    certificate of medical eligibility, can he or she file an ordinary
    civil action in state or federal court to collect damages. Thus, many
    claimants will have to go court twice.
        In many respects, these second suits will mimic the suits that
    already exist in federal and state courts around the Nation. But there
    is reason to think that they will engender somewhat more delay than
    current asbestos cases. First, under the bill no individual asbestos
    case may be made a part of a class action, or be subject to joinder or
    any other type of aggregation, without the consent of all defendants.
    Public Citizen interviews with officials of several courts, such as the
    Philadelphia state courts, have found that aggregating small numbers of
    cases where plaintiffs have suffered similar injuries and were exposed
    at the same workplaces has allowed the courts to eliminate the large
    backlog of asbestos cases that plagued them in the 1980s. Without any
    opportunity for courts to aggregate cases for any purposes, cases will
    take longer to resolve.
        Moreover, although a finding of medical eligibility is presumed
    correct, the defendant has the right to challenge that determination
    and, therefore, lawsuits may well involve substantial re-litigation
    over whether the claimant meets the bill's medical criteria, even
    though the plaintiff has already obtained a certificate of medical
    eligibility.
        The bill's proponents do not--because they cannot--dispute the
    existence of S. 758's Byzantine, multi-layered procedures. They argue
    instead that most cases will be resolved through the bill's mediation
    process, and therefore delay will not, as a practical matter, be a
    serious problem. That argument fails to support this legislation for
    two reasons. First, successful mediation is simply a form of
    settlement, and parties to litigation may always settle on terms
    agreeable to them. Many federal and state courts already have mandatory
    mediation programs. Those programs, like the one imposed by S. 759,
    require that the parties exchange information and discuss settlement,
    but they do not require settlement. And as noted above, certain
    asbestos defendants already have aggressive settlement programs. In
    short, we do not see how this legislation does anything that asbestos
    plaintiffs and defendants cannot already do, either at the behest of
    courts, or on their own.
        Second, mediation only makes sense for the injured worker against a
    backdrop of viable litigation that sets appropriate settlement values
    for individual cases. Until claimants go through S. 758's litigation
    process, there will be no basis for knowing the terms upon which to
    settle. Therefore, at least in the beginning, the mediation process
    established by S. 758 Will likely be less successful, not more
    successful, than the settlement processes established in current
    litigation.
                    (3) compensation levels will not be fair
        In the attached memorandum, we show that the bill's medical
    criteria and its elimination of certain types of claims compensable
    under state law are grossly unfair, and will severely harm asbestos
    victims.
        We wish to address a related issue. The bill's proponents have also
    made the claim that compensation levels for those who do qualify for
    compensation will be fair, perhaps greater than that which they
    presently obtain in the tort system. We strenuously disagree. The bill
    does not set forth minimum compensation requirements for particular
    diseases. Nor does the bill even require that awards take into account
    historical tort awards ill asbestos cases or in comparable personal-
    injury and wrongful death cases. Rather, S. 758 simply assumes that
    awards will adequately compensate victims. However, there is every
    reason to believe that asbestos defendants will make ``low ball''
    offers in the alternative dispute resolution system established by the
    legislation.
        Once the claimant enters S. 758's mediation program, he or she may
    have already gone through years of delay in obtaining a certificate of
    medical eligibility, including a full federal court review, thus making
    acceptance of a low offer much more likely. The only additional
    leverage available to the claimant is to file a lawsuit in state or
    federal court, in which (1) there is no opportunity to aggregate the
    claim for any purpose; (2) any defendant can still contest the
    existence of a medical condition that the claimant has already proved
    to the ARC or to a federal court; and (3) punitive damages may not be
    sought under any circumstances. Thus, with additional court delay ahead
    (recall that the ordinary suit to recover damages has yet to be filed),
    and the plaintiffs subject to S. 758's substantive and procedural
    disadvantages, it would be pure folly to think that defendants will
    offer anything approaching the damages that plaintiffs have
    historically obtained in the tort system. Put differently, S. 758 will
    greatly depress settlement values.
        Asbestos is a very dangerous product and our goal should be to
    ensure that those injured by it receive swift and fair compensation.
    Depressing settlement values and delaying resolution of claims will not
    achieve that goal.
              * * * * *
        Again, we ask the Subcommittee to consider our attached analysis of
    S. 758. For the reasons stated in that analysis and in the testimony
    above, we urge the Subcommittee to reject S. 758. Thank you for the
    opportunity to submit this testimony.
                                     ______

       Analysis of Proposed Federal Asbestos Legislation--The So-Called
                   ``Fairness In Asbestos Compensation Act''

                                   APRIL 1999
        This paper analyzes key provisions of two bills reintroduced in the
    106th Congress: H.R. 1283, sponsored by House Judiciary Committee
    Chairman Henry Hyde, and S. 758, sponsored by Senator John Ashcroft and
    others.
        Because the core provisions of both bills are similar in major
    respects, the bills are analyzed together, with significant variations
    noted.
        Before turning to a detailed analysis of the bills, there are a few
    general observations that should be underscored. As Public Citizen's
    analysis of the bills make clear, they are seriously flawed and
    represent a substantial step backward for the tens of thousands of
    American workers exposed to asbestos on the job who, through no fault
    of their own, may suffer serious illness or death as a result. Among
    the most serious problems with the bills are the following:

        1. Faulty Premise: We do not accept the premise on which both bills
    rest, namely that the volume of asbestos litigation has overwhelmed the
    ability of state and federal courts to dispense justice to asbestos
    victims in a fair and efficient manner. There are steps that could be
    taken to bolster the judicial resources available to resolve asbestos
    cases, and perhaps Congress and state legislatures should consider how
    best to strengthen our judicial system generally. But nothing in these
    bills is aimed at improving the administration of justice for asbestos
    victims.
        Nor is there any justification for the wholesale repudiation of
    state law called for in the bills. Our federalist system of government
    is predicated on the idea that no one-size-fits-all rule is necessarily
    best, and that the states should be free to establish their own
    substantive liability rules, as well as their own procedures for
    adjudicating cases. The bills cast that basic constitutional tenet
    aside, and substitute a congressionally-mandated liability scheme--both
    substantive and procedural--that governs all cases. Congress ought not
    displace state law on a wholesale basis so cavalierly.
        2. Denial of Existing Asbestos Claims: The bills' approach to
    reducing the burden of asbestos litigation is to adopt the most
    Procrustean solution imaginable--the bills simply deprive entire
    classes of asbestos victims of compensation. It is like ``solving'' a
    food shortage simply by saying that half the population gets no food.
    For one thing, the bills reverse state law by adopting very restrictive
    medical criteria for lung cancer. As many as half the lung cancer
    victims who currently recover damages under state law would be deprived
    of any remedies under the bills. Similarly, the bills set aside state
    law and deny recovery for victims with pleural plaques and pleural
    thickening (abnormalities of the outside lining of the lung), even
    though most states provide for recovery for people with these
    conditions. It appears that the bills may also be interpreted to
    eliminate loss of consortium claims by spouses, parents, and children
    of injured asbestos workers suggesting that Congress is unconcerned
    about the devastation that asbestos-induced disease and death inflicts
    on family members. Accordingly, the bills are mistitled; they are not
    ``compensation'' Acts, but Acts to deprive injured parties
    compensation.
        3. New Layers of Procedure and Delay: Despite the bills' promise to
    enhance efficiency, the bills actually handicap the litigation of
    asbestos claims, and will only add to the delays. To be sure, the bills
    place relatively short time frames on the administrative process they
    create for asbestos victims to establish eligibility. But then
    claimants are forced to undergo a lengthy ``alternative dispute
    resolution'' proceeding that forces the claimants, not the companies,
    to lay their case out in full. And if no settlement is reached, then
    the claimants are back to square one--they then may go to court and
    litigate their claims in precisely the same way asbestos cases are now
    litigated. Compounding the problem for claimants, although their
    medical eligibility will have been determined by a quasi-governmental
    entity after an exhaustive medical review in which the claimant bears
    the burden of proof, that determination is fair game for litigation by
    the companies--giving them a second bite at the apple on this pivotal
    point. In reality, all the bills do is add to the start of an asbestos
    victim's quest for compensation a cumbersome administrative process
    that will add delay and engender additional expense.
        To make matters worse, the bills do not resolve perhaps the most
    critical issue in asbestos litigation--how liability should be,
    allocated among the various defendants. Because most asbestos victims
    have been exposed to multiple products and because it is often
    difficult for the victim to identify which products he has been exposed
    to, asbestos litigation often involves 10, 15, or 20 defendants, and
    much of the effort in asbestos cases is litigation among the companies
    to apportion damages. Astonishingly, the bills ignore this problem.
        4. Tilting Civil Actions Against Injured Plaintiffs: Last, but not
    least, the bills sacrifice the needs of asbestos victims to save the
    asbestos companies money in ways apart from the bills' wholesale
    intrusion into state law to deprive meritorious asbestos claimants
    compensation. The bills reduce the financial burden on the industry in
    three ways. First, they establish increased procedural hurdles that
    will make asbestos litigation more costly for plaintiffs, while
    lowering defense costs. Second, they derogate state law by providing
    that plaintiffs are absolutely barred from recovering punitive damages,
    no matter how reprehensible, deliberate or malicious the company's
    conduct. And finally, although the bills' professed goal is efficiency,
    they guarantee inefficiency in asbestos litigation by forbidding
    plaintiffs from aggregating or consolidating their actions with other
    asbestos victims, unless the industry consents.

                      THE BILLS--A TITLE BY TITLE ANALYSIS
    Introductory materials
        Like most bills, these begin with lengthy congressional findings.
    Here, the ``findings'' are especially one-sided and unfairly portray
    the current state of affairs regarding asbestos litigation. In a
    nutshell, we agree with the findings insofar as they suggest that there
    are substantial numbers of asbestos cases pending in the courts, and
    that there have been significant delays in some forums. But we do not
    agree that the courts are incapable of dispensing justice to asbestos
    claimants in an orderly and swift manner. Indeed, in some jurisdictions
    that have seen a substantial number of asbestos filings, there is
    little or no backlog of asbestos cases.
        Both bills contain a detailed list of definitions; they are at the
    beginning of the Senate bill and in the last title of the House bill.
    Many have substantive import. For instance, the term ``asbestos
    claim,'' section 3(3), is defined in a way that loss of consortium
    claims, which are ordinarily treated as entire separate legal claims
    asserted by spouses, parents and children of asbestos victims, are
    defined as asbestos claims as well. As discussed in more detail below,
    the effect of this definition and provisions, particularly in the
    Senate bill, may eliminate or make it impossible to prove these
    consortium claims. The bills also contain detailed definitions of
    medical terms such as ``clinical evidence of asbestosis,'' ``evidence
    of bilateral pleural thickening with impairment,'' and ``FEV.'' These
    definitions mirror those adopted in Georgine v. Amchem, and many of
    them were criticized as unfair to claimants.
    Title I
        Both bills begin by creating a new federal entity called the
    ``Asbestos Resolution Corporation,'' a quasi-governmental entity to
    manage the administrative system that lies at the heart of the
    legislation. The Corporation is empowered to hire employees, contract
    for services, receive contributions of funds (presumably from the
    asbestos industry and its insurers), appoint medical claims policies,
    adopt rules for recovery of funds from responsible parties, sue and be
    sued, and manage its own affairs. In a nutshell, the Corporation's
    major functions are to screen asbestos claimants to determine whether
    they satisfy the Act's definitions of medical eligibility, and, if so,
    to subject their claims to a mandatory mediation process with the hope
    of reaching a settlement.
        The Corporation will be managed by a 7-member Board, appointed by
    the President with the advice and consent of the Senate, with the Board
    Chairperson designated by the President. The Board must be politically
    balanced: only four members may be of the same political party. Board
    members are appointed to staggered 6-year terms, and may be removed
    only ``for cause'' by the President. Board members are entitled to
    compensation not exceeding $50,000 per year, with the Chair's
    compensation set at an annual maximum of $15,000. These levels of
    compensation suggest that service on the Board will be significantly
    less than full time. Board members are given qualified immunity.
        Apart from managing the Corporation, the most significant
    responsibility entrusted to the Board is to appoint a ``Medical
    Advisory Board,'' which advises the Board on medical matters, including
    the retention, supervision, and removal of physicians, and the
    appropriateness of adding new diseases to the ``other cancer''
    category. The Advisory Board may have no fewer than five and no more
    than nine members, at least one Board member must be board-certified in
    each of four specialities--radiology, pulmonary, pathology, and
    oncology. The Board of Directors is instructed to set rules governing
    the operations of the Medical Advisory Board, and the Act provides
    expressly that the Advisory Board is not subject to the Federal
    Advisory Committee Act. There is, it bears noting, a conflict of
    interest provision that forbids members of the Advisory Committee from
    any role in proceedings before the Corporation. This provision may
    assume more importance than one might expect because the bills exempt
    the Corporation from the Ethics in Government Act.
    Title II--Medical eligibility determinations
        In order for a claimant to have a right to proceed through the
    alternative dispute resolution mechanism established in Title III of
    the Act, and ultimately have a right to go to Court (Title IV), the
    claimant must receive a certificate of medical eligibility from the
    Corporation. Title II deals with questions of eligibility, and sets
    detailed eligibility criteria that the Corporation must apply in making
    certification determinations. The, eligibility criteria set forth in
    Title II are the same criteria adopted in the Amchem settlement, many
    of which were criticized for being overly restrictive.
        For non-cancer cases, section 201 sets forth eligibility criteria,
    one of which excludes about half the current asbestos claimants. Under
    section 201(2)(C), in order to be eligible, a person exposed to
    asbestos who does not have either cancer or clinical or pathological
    evidence of asbestosis, must show ``evidence of bilateral pleural
    thickening with impairment.'' State law generally does not require
    impairment, and hence this provision will deny recovery to many
    claimants who currently have valid claims under state law.
        Mesothelioma cases are addressed in section 202. For non-
    mesothelioma lung cancer claimants, section 203 sets up Byzantine
    eligibility criteria that depend in large part on the dates of
    exposures, the nature of the exposures, the extent to which the exposed
    person's employer complied with then-existing OSHA exposure standards
    (without regard to whether the standards were later discredited), and
    many other factors. These criteria are weighted-in favor of defendants
    by heavily discounting certain types of exposures, and will result in
    the exclusion of as many as half the lung cancer claims that are
    currently compensated via settlement or court judgment.
        In order for a claimant to obtain a certificate of eligibility, he
    has to submit a detailed form to the Corporation. (Section 205).
    Although the statute says that the claimant ``is not required to retain
    an attorney in order to file and proceed with a claim,'' the sheer
    volume and detail of information required to be submitted may, as a
    practical matter, make it necessary for claimants to have lawyers. The
    application is to be submitted under oath. Once a claimant files a
    complete application, the Corporation, at its discretion, can require
    the submission of supplemental data, seek records from third parties--
    including records pertaining to the person exposed to asbestos--and
    order the exposed person to undergo further medical review.\1\
    ---------------------------------------------------------------------------
        \1\ There is a process for claimants who concede that the exposed
    persons' condition does not fit into any of the eligibility criteria
    laid out in the statute to nonetheless seek certification of their
    claims as ``exceptional.'' The procedures that the Corporation is to
    follow in considering these claims are, set forth in section 206.
    ---------------------------------------------------------------------------
        Within 60 days of accepting the application as complete, the
    Corporation shall issue either a certificate of eligibility or a
    finding of non-eligibility, accompanied by a brief statement of
    reasons. The claimant may seek reconsideration of the Corporation's
    decision, and may, at that time, submit additional evidence. Requests
    for reconsideration are referred to two-physician panels, who are
    instructed to reconsider, de novo, the application. In the case of a
    deadlock, a third physician is appointed to break the tie. If the panel
    accepts the request, then the Corporation issues a certificate of
    eligibility; if the panel denies the request, the panel is required to
    provide a brief statement of reasons. Reconsideration requests are
    supposed to be acted upon within 30 days.
        The bill recognizes that claimants unhappy with the eligibility
    determinations are entitled to judicial review, and the bills permit
    claimants to go to federal district court to challenge adverse
    Corporation eligibility decisions--except those that were not subject
    to reconsideration. The courts are instructed to uphold the
    Corporation's decisions where ``supported by substantial evidence on
    the record as a whole'' and ``not contrary to law. Due account shall be
    taken of the rule of prejudicial error.'' This standard, although
    somewhat oddly formulated, is typical for judicial review of actions of
    government administrative agencies.
        There is one point that merits emphasis. Although these appeals
    involve review of an administrative record, and therefore involve no
    new fact-gathering that is ordinarily the province of district courts,
    they are sent to district courts, not courts of appeals. This
    designation will substantially delay the resolution of these cases for
    two reasons. First, it squanders scarce judicial resources, because the
    party that loses in federal district court has every incentive to
    pursue an appeal, meaning that two levels of federal court review will
    ordinarily be required to conclusively adjudicate these claims. Most
    cases involving court review ``on the record'' are assigned to courts
    of appeals in the first instance, to avoid precisely this needless
    drain on resources. Second, district courts are already overburdened:
    these cases are not likely to be adjudicated quickly. Thus, the
    judicial review process laid out for these cases will be time- and
    resource-consuming.
    Title III--Alternative dispute resolution
        The Corporation is directed to establish detailed rules for a
    comprehensive alternative dispute resolution (ADR) process. (Section
    301). This process begins after the Corporation issues an eligibility
    certificate. At that point, the Corporation is to assign a ``motions
    officer'' to the claim; the motions officer is to determine procedural
    issues, to issue subpoenas, to resolve discovery disputes, and
    generally to ensure that the claim is expeditiously processed.
        After a motions officer is designated, all potential responsible
    parties--generally meaning asbestos companies--are given notice,
    including a ``verified particularized statement'' prepared by the
    claimant setting forth the basis for the allegations against that
    party. (Section 303(a)(2)).\2\ The Act describes the required contents
    in elaborate detail. (Section 303(a)(2)). In some cases, the motions
    officer is empowered to allow the claimant discovery to assist in the
    preparation of the verified statement. Once the statement is filed, the
    Senate bill specifically allows a respondent to identify additional
    likely responsible parties, and add them by filing a verified
    statement.
    ---------------------------------------------------------------------------
        \2\ Among other things, the statement must include the dates of
    exposure, each worksite, the nature of the exposure, an identification
    of each asbestos-containing product the person was exposed to, and
    other information that the Corporation may require by rule or
    otherwise.
    ---------------------------------------------------------------------------
        Remarkably, although the bills require the claimant to lay bare his
    entire case in the verified statement (the detail of which far exceeds
    the detail normally found in complaints), there is no requirement that
    the respondents formally respond. Although the Senate bill says that
    respondents ``may accept as true any assertion made by the claimant in
    a particularized statement'' neither bill requires the respondent to
    say anything.
        After the statements are submitted, the bills contemplate a ``grace
    period'' of 60 days to encourage the parties to reach a voluntary
    settlement. At the expiration of this period, the Corporation appoints
    a mediator to assist the parties. At this point, the parties are
    required to serve on one another a ``statement of the information
    required for the settlement.'' The Corporation is to prescribe by rule
    the information required for the parties to evaluate the claim (except
    for the disclosure of privileged information). The mediation is to be
    concluded within 60 days of the appointment of the mediator, with
    extensions allowed in limited circumstances. Statements made in the
    course of mediation are inadmissible in any subsequent trial or
    mediation.
        The mediation process is highly structured. At least 15 days prior
    to the, close of mediation, the bills put the onus on the claimant to
    make a ``good faith'' final demand of settlement. No later than 10 days
    prior to the close of mediation, each respondent is required to make a
    good faith settlement offer, except if a respondent fails to do so the
    statute deems the offer to be $0. In the event that the mediation
    fails, the mediator issues a ``release from mediation,'' which entitles
    the claimant to either go to court or to binding arbitration.
        Before turning to arbitration, it bears emphasis that the mediation
    process spelled out in the bills is nearly as onerous as litigation,
    and, compounding the problem for claimants, requires them to lay their
    cards on the table in a way that gives their adversaries a clear
    understanding of their case--warts and all--while permitting the
    defendants to hold back considerable information. Thus, the mandatory
    mediation process disadvantages claimants in two ways: (1) it saps
    their resources because it is protracted and resource-intensive
    mediation; and (2) it gives their opponents a detailed preview of their
    case in court.
        Should the mediation fail to bring about an acceptable resolution
    with regard to all of respondents, then, at the close of the process,
    the claimant is back to square one--the place he would be in absent the
    statute. At this point, the claimant finally is entitled to bring suit
    (civil litigation is addressed in Title IV).
        The bills also provide that, should he elect to do so, a claimant
    can invoke as an alternative to litigation a binding arbitration
    process that would involve all of the remaining respondents. The
    arbitration, which would be governed by the Federal Arbitration Act,
    would apply the law that would be applied by a court designated by the
    claimant and having jurisdiction over the respondents. Arbitrators,
    like motions officers, would have subpoena authority. Findings of
    medical eligibility would be conclusive and binding, unless rebutted by
    ``clear and convincing evidence'' by respondents.\3\ Arbitrators are
    empowered to render awards, but, in contrast to ordinary arbitrations,
    awards must be accompanied by `findings and fact and conclusions of
    law.''' \4\ With certain exceptions, respondents are jointly and
    severally liable to the extent provided by state law.\5\ Contribution
    rights by respondents are expressly retained. And arbitrators are given
    the power to add a ``penalty'' of 10 percent of the award where the
    respondents' final ``good faith'' offer was significantly less than the
    amount ultimately awarded.
    ---------------------------------------------------------------------------
        \3\ As discussed in more depth below, see n.6, infra, eligibility
    determinations are always subject to challenge by the companies,
    allowing them another bite of the apple.
        \4\ Arbitrators often do not issue findings and conclusions, in
    large measure because of the presumption that arbitration awards are
    conclusive and not subject to judicial review. If the bills'
    requirement of findings of fact and conclusions of law suggests that
    judicial review might be more widely available here, that would call
    into question the value of arbitration.
        \5\ As with awards in litigation, although the bills nominally
    retain joint and several liability, to the extent it is available under
    state law, there are certain modifications to the joint and several
    rule that might allow respondents to escape full liability and leave a
    claimant with less than full compensation.
    ---------------------------------------------------------------------------
    Title IV--Civil actions
        Section 401 sets forth the general prohibition against asbestos
    actions until a claimant has both obtained a medical certificate and
    completed the mediation process; it says ``no civil action may be filed
    or maintained unless the plaintiff has obtained a certificate of
    medical eligibility and release from mediation.'' Not only is
    litigation precluded outside this process, but a number of unique rules
    are created to constrain and govern these actions.
        First, the bills preclude plaintiffs from using collective
    actions--no class actions, joinder of parties, aggregation of claims,
    or any other device to enhance the efficiency of asbestos litigation is
    allowed for the plaintiffs, ``without the consent of each defendant.''
    No similar prohibition attaches to the defendants.
        Second, any asbestos case filed in violation of the rules--such as
    a case filed prior to the claimant obtaining an eligibility
    certificate, or one filed as a class action--is subject to removal to
    federal court. Insofar as we are aware, there is no precedent for this
    provision, and, to the extent that Congress is asserting power to
    dictate procedural rules to the states--such as the ``no class action''
    rule--we believe that such an arrogation of power presents serious
    constitutional problems.
        In addition to these special rules, this Title also establishes the
    presumption that medical eligibility determinations are conclusive and
    may be set aside only on the basis of ``clear and compelling
    evidence,'' except for cases involving questions of exposure, which are
    to be determined on the basis of state law.\6\
    ---------------------------------------------------------------------------
        \6\ This provision is especially troubling, because it suggests
    that the question of a claimant's medical eligibility may be, always
    open to relitigation when the question has been resolved in the
    claimant's favor. To use an illustration, assume that the claimant is
    initially found by the Corporation to be medically ineligible, and that
    determination is upheld on reconsideration by a medical panel. Assume
    further that the claimant then seeks review in a federal district court
    and the question of medical eligibility is fully litigated and that the
    claimant prevails. Normally, under the doctrine of res judicata, one
    might think that the court's judgment on eligibility would be
    conclusive and binding. Yet this provision drives home the point that
    medical eligibility determinations could nonetheless be open to
    relitigation by the companies--either in court, or in binding
    arbitration--in the event that the mediation process fails to achieve a
    settlement. Not only is this provision troubling in its own right but
    there is an asymmetry here that works to the claimant's disadvantage.
    If the claimant is found to be medically ineligible, loses on
    reconsideration, and then loses in court, that determination would bar
    the claimant from litigating his eligibility in court, unless new
    evidence came to light or his medical condition changed. Even then the
    claimant would have to start over in Title II and not Title IV of the
    bills. But the companies are not similarly bound by the court's ruling
    and have at least two bites at the eligibility apple.
    ---------------------------------------------------------------------------
        Finally, like the arbitration provision, judges are empowered to
    penalize respondents who failed to make an adequate offer in mediation
    (measured by the differential between the offer and the final award) by
    enhancing the award 10 percent.
    Title V--Rules applicable to arbitrations and civil actions
        This Title builds on Title IV, and lays down some general
    principles intended to guide the substantive decisions in arbitrations
    and civil litigation.
        First, section 501(1) sets up the basic rule that no one shall
    recover in any proceeding relating to an asbestos claim unless that
    person establishes the existence of an eligible medical condition. This
    provision, read in combination with other sections of the bill, is
    ambiguous. It could be interpreted to eliminate the asbestos companies'
    liability under state law to spouses, parents and children of injured
    workers, since they would not be able to establish ``eligibility''
    under the statute.
        In the Senate bill, section 501(2) provides that in proceedings to
    resolve asbestos claims, there are three main issues to be decided: (a)
    whether the exposed person with respect to whom a claim is made has an
    asbestos-related disease or condition; (b) whether exposure to asbestos
    or an asbestos-containing product was a ``substantial contributing
    factor'' in causing that disease or condition; and (c) the amount of
    compensatory damages, if any, that should be awarded. Although the
    claimant would be entitled to the presumption of eligibility, those
    issues would nonetheless be fair game in litigation. As discussed
    above, the consequences are that the asbestos companies have at least
    two bites at the liability apple, since the claimant is required to
    prove initially to the Corporation that he is medically eligible under
    the Act to receive compensation and then to defend the Corporation's
    ruling on medical eligibility in court or arbitration.
        Third, both bills forbid the award of damages or any other relief
    for emotional distress, mental harm, or medical monitoring, without
    proof of the exposed person's medical eligibility. The Senate bill adds
    the additional requirement of proving that the exposure to the
    respondent's product was a substantial contributing factor causing the
    injury.
        Fourth, both bills forbid the award of any damages or any other
    relief for the enhanced risk of contracting cancer or any other
    disease.
        Fifth, both bills categorically forbid the award of punitive
    damages on any asbestos claim, no matter how deliberate, malicious, or
    unconscionable the acts of the respondents.
        Sixth, section 502 abolishes a statute of limitation, laches, or
    statute of repose defense for any claim that was not untimely on the
    date of the Act's enactment.
        Seventh, section 503 abrogates existing attorneys' fees contracts
    and governs all future contracts by setting a fee ceiling of 25 percent
    of the compensation the claimant receives in any of the proceedings
    covered by the Act. This limitation applies even if the attorney
    represents the claimant in both the mediation proceeding and then in
    litigation. Attorneys will be required to submit to the Corporation an
    itemized statement of their fees and costs before recovering any fee,
    attorneys who violate this provision are made subject to serious civil
    and criminal penalties. There is no requirement that respondents'
    counsel disclose their fee arrangements, their costs and fees, and
    defense counsel are not subject to any cap or limit on the fees they
    can charge. This is particularly troublesome since the Rand Corporation
    study of asbestos litigation expenses found defendants' attorney and
    litigation fees consumed 37 percent of each asbestos litigation dollar,
    50 percent more than plaintiffs' fees (less than 24 percent). In the
    House bill, the attorneys' fee cap is not imposed on attorneys' fees
    for cases that settle before the mediation process has begun, creating
    a perverse incentive for attorneys to settle early, even if that is not
    in the best interest of the client.
        Eighth, and finally, section 504 provides that a judgment or
    settlement on a nonmalignant claim does not foreclose the right of a
    plaintiff to bring a claim based on a malignant condition, should one
    arise.
    Title VI--Funding
        The bills create a highly complex funding structure that allows the
    Corporation to assess, on a pro-rata basis, potential respondents for
    the cost of administering the, Corporation's medical screening, ADR,
    and other activities. There are provisions for ``transitional funding''
    that require potential respondents to use historical measures to
    determine their likely pro rata share to get the Corporation up and
    running. Thereafter, the assessments will be made based on the numbers
    of cases the respondents have pending. The Secretary of the Treasury is
    directed to establish a special Trust Fund for the Corporation's
    accounts. Mediation costs will be charged on a per capita basis to each
    participating respondent; the same appears to be true of arbitrations.
    The Corporation is empowered to bring suit to enforce these
    obligations, and is entitled to attorneys' fees, costs, and interest
    when it prevails. Moreover, the bills anticipate that there will be
    serious disagreements among the asbestos companies over their shares of
    mediation, arbitration, and general administrative costs. Accordingly,
    the Act sets up elaborate arbitration and litigation provisions to
    resolve these disputes.
    Title VII--Applicability; pending civil actions
        Section 701 sets forth the general rule that the Act applies to any
    case pending on the date of enactment that has not resulted in a final,
    nonappealable judgment. For pending cases, a certificate of eligibility
    is not required where a trial has already commenced, and no release
    from mediation is required if the action was pending, regardless of
    whether trial had begun. (Section 702).
        The upshot of this provision is that, except for the handful of
    claimants whose trials are actually ongoing on the date of the Act's
    enactment, every one of the more than 100,000 current asbestos
    plaintiffs will have to go to the Corporation to get a certificate of
    eligibility in order to proceed with their cases.
        Finally, and critically, the Act changes the rules of decision for
    pending cases by providing (in section 702(c)) that plaintiffs in cases
    being tried (who have not obtained certificates of eligibility) ``have
    the burden of establishing the existence of an asbestos-related
    condition that meets the criteria for an eligible medical category
    pursuant to sections 201 through 204.'' There is a serious
    constitutional question whether Congress can change a rule of decision
    in pending cases, and there is no doubt that is precisely what section
    702 seeks to accomplish.
    Title VIII--Miscellaneous provisions
        This Title is a grab-bag of unrelated administrative and
    housekeeping matters, some with real consequence. To begin with, it
    makes clear that directors and employees of the Corporation are not
    officers of the United States or government employees.
        The Corporation is required to comply with the rulemaking
    provisions of the Administrative Procedure Act; however the Corporation
    is made exempt from the Freedom of Information Act, the Ethics in
    Government Act, the Equal Access to Justice Act, and a host of other
    Statutes that govern the conduct of federal agencies and government
    controlled corporations.
        Title VIII permits, but does not require, any of the asbestos
    trusts in existence at the time of the enactment of the statute to be
    subject to the Act.
        Finally, the, Act contains a standard severability clause.
                                   __________
                           Associated Builders and Contractors,
                                          Rosslyn, VA, October 5, 1999.
    The Hon. Charles Grassley,
    Chairman, Subcommittee on Oversight and the Courts,
    Judiciary Committee, U.S. Senate Washington, DC.
        Dear Chairman Grassley: Associated Builders and Contractors (ABC),
    representing over 21,000 contractors, subcontractors, material
    suppliers and related firms across the country and from all specialties
    in the construction industry with a network of 83 chapters, strongly
    supports S. 758, the Fairness in Asbestos Compensation Act of 1999. We
    strongly support today's hearing and respectfully request that our
    statement of support for S. 758 be included in the hearing record of
    October 5, ``Finding Solutions to the Asbestos Litigation Problem.''
        ABC has a long-standing position in support of legal reforms that
    will ensure that businesses across the country can operate and compete
    based on fair, flexible and equal opportunities in the marketplace. Our
    litigious society has run amok and has subjected entrepreneurs as well
    as bureaucracies to costly and unproductive consequences. Congress must
    address excessive litigation, which is eating away at the United
    States' entrepreneurial society, and relieve businesses from having to
    defend against special interest groups who seek to invoke economic
    damages through the courts.
        ABC is very concerned about the rise in personal injury suits
    without an injury in asbestos cases filed in state and federal courts,
    and the impact these cases have on individuals who have contracted
    asbestos related illness and asbestos companies. Lawsuits by
    individuals whose health is unaffected by exposure to asbestos are
    clogging the courts and are delaying or preventing legitimate cases
    brought sick individuals from receiving adequate attention in the
    courts. Furthermore, the impact of such cases against companies are
    increased liabilities and high legal expenses. The need for this
    legislation is clear--to ensure sick individuals can be compensated in
    a timely manner and companies can be freed from lengthy and unnecessary
    litigation procedures.
        ABC supports the Fairness in Asbestos Compensation Act of 1999
    which seeks to establish a non-judicial Alternative Dispute Resolution
    System to resolve asbestos injury claims, based on a settlement in
    Amchem Products, Inc. v. Windsor, which established the medical
    criteria that individuals would have to meet in order to be eligible
    for compensation. ABC also supports the administrative process proposed
    in the legislation which is funded by the defendant companies to
    compensate persons who have asbestos-related illnesses and alleviate
    the delays and transactional costs of asbestos litigation while
    relieving the caseload burden on state and federal courts.
        The Fairness in Asbestos Compensation Act would provide a secure,
    fair and efficient means of compensating victims of asbestos, ABC looks
    forward to working with you on this important legislation.
        Thank you for considering our views on this issue.
                Sincerely,
                                                 Erika L. Baum,
                                            Director, Workplace Policy.
                                   __________
                                                 Owens Corning,
                                                       October 5, 1999.
    The Hon. Charles E. Grassley,
    U.S. Senate Washington, DC.
        Dear Senator Grassley: Thank you for your leadership and serious
    consideration in your efforts to resolve the complex matters resulting
    from asbestos litigation, Owens Corning, as you may know from my
    testimony before the House Judiciary Committee on July 1, 1999, has
    recently entered into a private national settlement plan. I have
    included with this letter an addendum that explains our plan.
        An integral and attractive element of our settlement plan lies in
    the fact that the vast majority of the dollars paid and to be paid go
    to plaintiffs with asbestos-related malignancies or asbestos-related
    non-malignant impairments that would satisfy the medical criteria in
    the proposed legislation. Claimants with pending cases who do not meet
    the medical criteria typically receive a modest cash payment in return
    for signing a binding settlement agreement. However, if they develop an
    asbestos-related malignancy or impairment meeting the medical criteria,
    they have the night (but only under the terms of their agreements) to
    receive additional payments. Importantly, these additional payments are
    for amounts negotiated at the time of the original settlements, thus
    helping Owens Corning achieve financial predictability.
        Future claimants only receive compensation if they have an
    asbestos-related malignancy or if they meet the medical impairment
    criteria.
        Contrary to proponents' intentions, the proposed legislation does
    not create a level of certainty superior to existing private solutions.
    For example, no manufacturer or other responsible party can know what
    its percentage share of liability on a particular claim will be under
    the proposed legislation, nor can any manufacturer or other responsible
    party know the annual level of dollar commitments it may be called upon
    to fund. These are serious problems better addressed in Owens Corning's
    private plan.
        We hope, as you explore solutions to this complex problem, that you
    will concur with Chairman Hyde that private settlement plans, like
    Owens Corning's, should not be adversely affected by well-intended
    legislation. We further hope that the legislative approach will
    continue to be thoughtful and measured, and that the views and
    interests of all parties will be considered as legislation is crafted.
        Thank you for the opportunity to provide this for the hearing
    record. If I can be of further assistance, I can be reached, or you may
    contact John Libonati, Director of Government Affairs. We assure you of
    our participation in the process and will make ourselves available upon
    your request.
                Sincerely,
                                        Maura J. Abeln,
                     Senior Vice President, General Counsel and
                                              Secretary, Owens Corning.
                                     ______

     Addendum to the Prepared Statement of Owens Corning, House Judiciary
                             Committee July 1, 1999

    Prepared by Maura J. Abeln, Senior Vice President, General Counsel and
                                   Secretary
    Introduction
        Owens Corning, headquartered in Toledo, Ohio, is a publicly-held
    U.S. company, founded in 1938. The Company manufactures composites and
    building materials, with production and research facilities located
    predominantly in the United States. We have more than 20,000 employees,
    the majority of whom reside in Ohio, South Carolina, Texas,
    Pennsylvania, Florida, Georgia, California and New York.
        The Company's building materials-such as fiberglas insulation,
    vinyl siding, windows, roofing shingles, and cast stone products--are
    used in residential remodeling and repair, commercial improvement, new
    residential and commercial construction, and other related markets; its
    composites products are used in diverse products in building
    construction, automotive, telecommunications, marine, aerospace,
    energy, appliance, packaging and electronics. Our products are widely
    recognized by our registered trademarks, including the name FIBERGLASS
    and the color PINK. We are the company people think of when they see
    the PINK PANTHER}TM a mascot we have licensed for use in our
    advertising and promotions.
    Asbestos litigation history
        Owens Corning is a co-defendant with other former manufacturers,
    distributors and installers of products containing asbestos and with
    miners and suppliers of asbestos fibers in personal injury litigation.
    Since 1987, the Company has been named as a defendant in almost 400,000
    cases. Virtually all of the asbestos-related lawsuits against Owens
    Corning arise out of its manufacture, distribution, sale or
    installation of an asbestos-containing calcium silicate, high
    temperature insulation product, the manufacture of which was
    discontinued in 1972. The personal injury claimants generally allege
    injuries to their health caused inhalation of asbestos fibers from
    Owens Corning's products. Most of the claimants seek punitive damages
    as well as compensatory damages. But for the operation of Owens
    Corning's National Settlement Program, described below, Owens Corning
    would be a defendant more than 200,000 cases that were pending at time
    of the programs announcement.
    The national settlement program
        In December 1998, Owens Corning announced its National Settlement
    Program (the ``NSP''). At that time, we had agreed with more than 50
    plaintiffs' law firms to resolve approximately 176,000 asbestos claims
    against the Company. We had also agreed to resolve more than 100,000
    claims against its wholly-owned subsidiary, Fibreboard Corporation, in
    the event that Fibreboard's global class action settlement, under
    review by the U.S. Supreme Court, was overturned.
        The NSP also established procedures for resolving future claims
    brought by plaintiffs' law firms participating in the NSP without
    litigation. As of June 30, 1999, settlement payments aggregating
    approximately $1.9 billion will be made over the next two to five
    years, with most payments occurring in 1999 and 2000. These payments
    will be made from the Company's available cash and credit resources.
        The NSP is designed to better manage Owens Corning's asbestos
    liability, and that of Fibreboard, and to enable the Company to better
    predict the timing and amount of indemnity payments for both pending
    and future claims. Under the NSP, each participating law firm has
    entered into a long-term settlement agreement (``NSP Agreement'')
    providing for the resolution of claims pending against both Owens
    Corning and Fibreboard for settlement amounts negotiated with each
    participating firm. Settlement amounts to each claimant vary based on a
    number of factors, including the type and severity of disease.
        As is true of the legislative scheme provided under H.R. Bill 1283,
    the NSP Agreements impose a number of Standards and procedures for the
    review and processing of the cases being settled. All payments to
    settling claimants are subject to satisfactory evidence of a qualifying
    medical condition, evidence of exposure to an Owens Corning and/or
    Fibreboard asbestos-containing product during a defined time period,
    and delivery of customary releases by each claimant. The NSP Agreements
    allow claimants to receive prompt payment without incurring the
    significant delays and uncertainties of litigation. Claimants settling
    non-malignancy claims may also be entitled to seek additional
    compensation if they develop a more severe asbestos-related medical
    condition in the future.
        Like H.R. Bill 1283, NSP Agreements require participating firms to
    agree to attempt to resolve all future claims outside the courts. Under
    each NSP Agreement, the participating firms have agreed (consistent
    with applicable legal requirements) to resolve any future asbestos
    personal injury claims against Owens Corning or Fibreboard through an
    administrative processing arrangement, rather than through litigation.
    Under such arrangement, no settlement payment will be made for future
    claims unless specified medical criteria and other requirements are
    met, and the amount of any such payment is based an the disease of the
    claimant and other factors. In the case of future claims not involving
    malignancy, such criteria require medical evidence of functional
    impairment.
        The medical criteria employed in the NSP are very similar to the
    criteria proposed in H.R. Bill 1283, and will have the effect of
    limiting future payments by Owens Corning and Fibreboard only to those
    claimants who present evidence of an asbestos-related lung disease and,
    as to non-malignancies, functional impairment. Claims will be processed
    for payment for both pending and future claims Integrex, a wholly-owned
    Owens Corning subsidiary that specializes in claims processing and
    other litigation support services.
        It is anticipated that payments for a limited number of future
    ``exigent'' claims (principally malignancy claims) under the
    administrative processing arrangement will generally begin in 2001.
    while payments for other future claims will begin in 2003.
    Participating plaintiffs' counsel have agreed that payments for future
    claims beginning in 2003 and Later years will be constrained by the
    availability of cash flow rather than the number of claims per year.
    The restrictions established by the covenants in the Owens Corning's
    Credit Agreement are designed to ensure the predictability of annual
    cash outflows for asbestos payments. Owens Corning will not be required
    to make any payments that would place in jeopardy those financial
    covenants. The NSP Agreements have a term of at least 10 years and may
    be extended by mutual agreement of the parties.
        Each NSP Agreement will also resolve claims against Fibreboard. The
    Supreme Court's recent decision in Ortiz v. Fibreboard Corporation
    (June 23, 1999) makes it appear virtually certain that the Global
    Settlement will be finally disapproved by the Courts. If as expected,
    the Global Settlement does not receive such approval, a back up
    Insurance Settlement will become effective. Under the Insurance
    Settlement (which has received final court approval), Fibreboard will
    have access to assets of approximately $1.9 billion, to be used to
    resolve pending and future Fibreboard claims. Approximately $1.0
    billion will be devoted to pending claims, and the remainder, plus
    interest, will be used to satisfy future claims. Each of Owens Corning
    and Fibreboard retain the right to terminate any individual NSP
    Agreement, if in any year more than a specified number of plaintiffs
    represented by the plaintiffs' firm in question opt out of such
    agreement.
        Owens Corning believes the NSP is working, and will work in the
    future, by (i) providing prompt, predictable settlement payments to
    qualifying claimants who would otherwise wait many years in the tort
    system to resolve their cases, (ii) providing Owens Corning a much
    higher degree of financial certainty by allowing it to better predict
    and control future annual settlement payments and defense costs, and
    (iii) decreasing the resources used to defend asbestos cases, thus
    freeing more money with which to pay claimants.
    Comments on H.R. bill 1283
        Owens Corning applauds the Chairman and other supporters of the
    proposed legislation for their leadership on this important issue.
    However, in fight of the success of the NSP, the Company does not
    believe that it is either necessary or desirable for the federal
    government to impose on plaintiffs and defendants a federal
    administrative scheme of the kind contemplated by H.R. 1283. Many
    specific aspects of the proposed legislation, while reflecting laudable
    goals, can either be better achieved by private negotiation among
    parties in the litigation or can be accomplished under existing laws
    and without the need of further legislation. The NSP is proof that
    plaintiffs' counsel and their clients are prepared to enter into
    private, non-traditional arrangements to resolve large numbers of
    pending and future cases without involving the courts. The NSP also
    demonstrates that mutually negotiated agreements among the parties,
    rather than the creation of a federal corporation and imposition of an
    additional level of bureaucracy, are achievable. In our view, the NSP
    represents for all companies a model that could be adopted to end most
    of the asbestos litigation.
        A voluntary, non-legislative resolution of asbestos cases such as
    the NSP avoids the many drawbacks inherent in the federal
    administrative scheme envisioned by H.R. Bill 1283. In particular, a
    voluntary program involves no government compulsion, no new federal
    bureaucracy and no interference with the legal rights of those who do
    not wish to participate. The NSP raises none of the serious federalism
    concerns that are presented by the proposed legislation.
        Owens Corning has the following brief comments on several of the
    major aspects of the proposed legislation:

        1. Establishment of a Federal ``Asbestos Resolution Corporation''.
    Owens Corning has reservations concerning the wisdom and workability of
    creating a federal administrative agency to evaluate and process
    asbestos personal injury claims. On the basis of its long experience in
    the asbestos litigation. Owens Corning believes that, as a practical
    matter, the creation of a federal bureaucracy will prove extremely
    cumbersome, while failing to achieve anything that cannot be
    accomplished through private negotiations between plaintiffs and
    defendants. Claims are currently evaluated and processed by the
    defendants, each of whom uses a unique system and unique standards--
    including medical and exposure standards--for determining whether to
    pay on a particular claim, and, if so, how much to pay. Often, group
    settlements of cases between defendants and plaintiffs' counsel are
    achieved on the basis of long-standing relationships, unique historical
    relationships and unique settlement criteria, and involve trading
    concessions in order to tailor mutually acceptable arrangements.
        The one-size-fits-all approach of H.R. Bill 1283 is not consistent
    with this practice, and may deprive parties of the flexibility needed
    to achieve settlements. Moreover, placing a large federal corporation
    at the helm of evaluating and processing hundreds of thousands of
    pending claims--many of which have been in the tort system for many
    years--will lead to even further delays in resolving the pending cases.
        For all of these reasons, Owens Corning believes that Congress
    should act with special caution in creating a new administrative regime
    to deal with asbestos claims. As many Members have recognized, an
    administrative agency, once created, often takes on a life of its own.
    Such a new administrative entity may well prove difficult to reform or
    rein in should it take a different course than its creators intended or
    anticipated.
        2. Medical Eligibility Criteria. Owens Corning has long recognized,
    as do the sponsors of the proposed legislation, that the limited
    resources available to provide compensation to individuals who are
    injured as a result of exposure to asbestos-containing products should
    not be diverted to pay claims of individuals who do not have
    demonstrable illnesses or actual physical impairment. As illustrated by
    the NSP, plaintiffs and defendants are capable of negotiating
    appropriate, mutually agreeable medical criteria that defer claims of
    those who are not impaired. Their rights are preserved in the event
    that they become ill in later years. Such a voluntary deferral system
    does not preclude those claimants who nonetheless want to pursue their
    claim even though they do not meet medical criteria. In our view, the
    NSP is preferable to a compulsory ``one-size-fits-all'' set of
    requirements imposed by the federal government.
        To the extent that some claimants still pursue litigation. Owens
    Corning believes that the tools necessary to appropriately prioritize
    the claims of truly sick plaintiffs already are available to the
    courts. These include inactive dockets--such as those employed in Cook
    County, Illinois and Baltimore, Maryland--for the claims of unimpaired
    plaintiffs, and the prioritizing of more serious claims as in the
    federal multi-district proceedings. Also, some jurisdictions, such as
    New York City, have what are called ``in extremis'' dockets for exigent
    cases of the most seriously ill who are likely to die within six months
    of an asbestos related disease. These cases are processed quickly to
    give these claimants their day in court. Most of these cases are
    settled. These techniques, together with others which have been
    successfully employed by many courts, provide far greater flexibility
    than can a federally mandated set of uniform medical criteria.
        3. Application to Pending Claims. One of the most troubling
    features of the proposed legislation is its applicability to pending
    lawsuits. By making the bill's provisions applicable to lawsuits
    pending at the time of enactment, Congress would in effect be changing,
    or completely preempting, state substantive law in a dramatically
    retroactive fashion, imposing new rules on state causes of action that
    not only have already accrued but have actually been filed. In many
    instances, plaintiffs have been waiting for trial for many years.
        There are serious federalism concerns any time Congress supercedes
    state law in areas in which the states have traditionally been free to
    adopt their own policies. As the Supreme Court made clear just last
    week in its opinion in Alden v. Maine, the federal government has been
    granted by The Constitution only ``limited and enumerated powers,''
    while a ``vital role'' is ``reserved to the States by the
    constitutional design.'' These federalism concerns are heightened
    immeasurably when state law is rewritten with respect to claims that
    are already in the courts. Moreover, this retroactive feature of the
    proposed legislation would have the effect of imposing a massive stay
    on all pending asbestos claims (except those actually on trial). This
    delays the resolution of these claims for what may be a number of
    additional years until the new agency is in a position to address the
    backlog of hundreds of thousands of pending claims.
        4. Alternative--Dispute Resolution (``ADR''). Owens Corning is not
    opposed to the use of ADR to process asbestos claims, on the contrary,
    the NSP Agreements 'include a privately-negotiated provision that
    requests claimants to mediate claims as a precondition to opting out of
    the program. Moreover, many courts already make effective use of ADR to
    resolve asbestos cases. However, Owens Corning does not perceive the
    need or justification for a new and compulsory ADR system under the
    aegis of a federal administrative bureaucracy.
        5. Limitations on Private Litigation. Once again, Owens Corning
    applauds many of the concepts reflected in the current legislation,
    particularly with regard to those provisions rejecting as inappropriate
    and unfair the consolidation of large numbers of individual asbestos
    claims and the continued imposition of repetitive punitive damages
    awards. Even without new legislation, however, courts have increasingly
    come to view these aspects of the asbestos litigation as counter-
    productive and improper. While Owens Corning welcomes further reform in
    this area, we believe that the creation of a new federal administrative
    bureaucracy is unnecessary to accomplish these goals.
        6. Funding from Existing Defendants. Owens Corning is particularly
    concerned with those provisions in the legislation that provide for all
    funding to be collected from existing defendants in proportion to the
    number of claims asserted against those defendants. There are two
    serious problems with this approach.
        First, the legislation ignores the well-documented central role of
    the federal government in exposing tens of thousands of individuals to
    asbestos-containing materials. As many Members are aware, although the
    use of such products was actually required by the federal government
    through such mandates as the Walsh-Healy Act, the government has
    invoked its defense of sovereign immunity to escape paying its fair
    share toward compensating injured plaintiffs. It is particularly ironic
    that the Congress should now contemplate the establishment of a federal
    bureaucracy for the resolution of these same asbestos claims entirely
    funded by private industry. We can not support federal legislation
    without federal funding.
        Second, the particular funding formula embodied in the pending
    legislation will have the effect of freezing into place the
    disproportionate level of payments by a relatively small percentage of
    the many hundreds of former producers and distributors of asbestos-
    containing products. Such an allocation is particularly unfair to Owens
    Corning, which has resolved the vast majority of claims against it and
    therefore has no need for such a program. Moreover, it is important for
    the Committee to understand that, although the asbestos litigation
    originally arose insulators and shipyard workers whose primary exposure
    involved high temperature pipe-and-block insulation, the litigation has
    expanded dramatically to encompass a wide range of occupations
    involving very different product exposures. Unfortunately, the
    traditional ``pipe-and-block'' defendants have continued to pay far in
    excess of their fair share in the litigation. No administrative
    procedure should be adopted that demands continued disproportionate
    contributions from these traditional defendants while permitting newer
    defendants, many of whom have substantial resources to escape paying
    their fair share.
    Conclusion
        Owens Corning suggests that this Committee give serious
    consideration to the NSP as a viable alternative to legislation,
    However, we would welcome the opportunity to discuss our concerns
    further, and appreciate the opportunity to be heard on this important
    subject. Thank you for your consideration.
                                   __________
                    Law Offices of McGarvey, Heberling,
                                    Sullivan, & McGarvey, P.C.,
                                        Kalispoll, MT, October 4, 1999.
    Re: 10/5/99 hearing on ``Fairness Asbestos Compensation Act of 1999''

    Hon. Max Baucus,
    U.S. Senate, Washington, DC.
        Dear Senator Baucus: We represent Montana mine workers and, family
    members who have been injured or killed by exposure to asbestos from
    vermiculite ore coming from W.R. Grace's Libby mine. The proposed
    legislation would take away substantial rights presently available to
    these people. The bill purports to address the problem created by
    thousands of asbestos claims pending around the country. The vast
    majority of this litigation consists of product liability claims
    arising out of exposure to asbestos insulation and other products. The
    legislation is being opposed, in toto by such organizations as Public
    Citizen and The Association of Trial Lawyers of America (ATLA). We
    support these efforts to defeat this legislation. However, we also seek
    your assistance in making sure that the Senate is fully apprised of the
    compelling reasons why this legislation should, in any event, be
    amended so that it does not displace the expeditious and efficient
    recourse presently available to hundreds of your injured constituents.
    I attach hereto (as exhibit 1) the amendatory language. Set forth below
    is additional information concerning the impacts of the proposed
    legislation on your Montana constituents, which I hope will be shared
    with your colleagues.

             1. THE MONTANA CLAIMS ARE NOT PRODUCT LIABILITY CLAIMS
        The proponents of this legislation point to the concern expressed
    by several Supreme Court justices in Amchem Products, Inc. v. Windsor,
    521 U.S. 591, 628-29 (1997) and Ortiz v. Fibreboard Corp. No. 97-1704,
    slip op. at 1 (June 23, 1999). Likewise, proponents point to the
    numerous cases pending in the federal court multi-district litigation
    entitled In Re Asbestos Products Liability Litigation. Amchem and Ortiz
    were large product liability class action lawsuits. Similarly, the
    multi-district litigation involves product liability claims. In
    contrast, the claims of your constituents are based on the intentional
    and negligent conduct of W.R. Grace & Co. in exposing Libby miners and
    their families to raw asbestos from the mining and milling process and
    the dust brought home on the miners' clothes. We are not asserting
    product liability claims on behalf of these victims.
        Unfortunately, through the unnecessarily broad scope of its
    definitional and applicability sections the bill would indiscriminately
    displace the claims not only of consumers and workers exposed to
    asbestos products, but would also preempt the very different exposures
    of the Montana miners and their families.
        We are requesting that you push for an amendment to the bill which
    would exclude from the definition of ``asbestos claim'' the claims of
    miners and their families arising from exposure to raw asbestos from
    the mining and milling process. (See exhibit 1, attached.)

    2. MONTANA'S STATE COURTS ARE RESOLVING THESE CLAIMS SWIFTLY AND FAIRLY
        Both Justice Dryer and Chief Justice Renquist expressed concern
    with ``the massive impact of asbestos-related claims on the federal
    courts.'' Ortiz, supra at 1 (emphasis added). Ironically, the proposed
    legislation would remove the Libby cases from Montana's state court
    system and place them first in a federal administrative process and
    ultimately in the federal courts.
        The claims of the grievously injured people from Libby receive
    prompt attention in our state court system. The state district court in
    Libby has special asbestos injury jury trial terms each February, May,
    August and November. The most seriously injured are allowed first
    access to the court. This system has worked remarkably well.
    Ironically, the proponents of the legislation purport to be concerned
    for plaintiffs being forced to wait years to recover for their
    injuries. However, the processing of your constituents' claims through
    the proposed new federal administrative bureaucracy, with appeals taken
    to the federal court, would be nowhere near as expeditious.
        Members of both political parties have justifiably expressed
    concern over federal encroachment into matters that have traditionally
    been governed by state law. Federal encroachment is particularly ill-
    advised here, where Montana's judicial system is dispensing justice
    swiftly.

           3. THE MONTANA CLAIMS ALL INVOLVE GRIEVOUS INJURY OR DEATH
        Another assertion of the bill's proponents', which does not apply
    to the Libby claims, is that many of the pending product liability
    claims involve individuals who are worried about their exposure to
    asbestos but who never will be affected by disease. This is in grim
    contrast to the situation here in Montana. Attached hereto (as exhibit
    2) is a list of 88 Montanans who have already died of asbestos-related
    diseases due to their exposure at the Libby facility. This list does
    not include family or community members, who have died from asbestos
    exposure arising from the Libby facility. The claims now pending here
    in state court all involve either lung cancer, mesothelioma,
    asbestosis--or death from one of these asbestos-related diseases. A
    brief sampling of the human misery caused to the involved families is
    described in several letters from victims' families (attached as
    exhibit 3).

     4. W.R. GRACE IS SOLVENT AND MUST BE HELD ACCOUNTABLE FOR ITS CONDUCT
        Proponents of the legislation contend that the major primary
    defendants have gone bankrupt, causing plaintiffs' attorneys to target
    tangentially involved ``deep pocket'' corporations as defendants. Not
    so here. W.R. Grace & Co. owned, operated and profited from the
    operation of its vermiculite mine and mill in Libby, Montana. While
    Grace has tried in recent years to spin off new corporate forms in an
    attempt to disguise and shelter the corporate entity that owned the
    Libby mine, W.R. Grace remains a large and solvent corporation.
        Moreover, compelling policy reasons argue against allowing a rogue
    corporation to benefit from federal legislation at the expense of those
    whom it negligently and/or maliciously injured. The vermiculite mine
    and mill in Libby was in operation since the 1930s. The mining and
    milling process produced a considerable amount of dust. In 1956 the
    Montana Board of Health issued a report based on its industrial hygiene
    study of the Libby facility. That report informed the company of
    numerous air quality violations, numerous violations of standard
    industrial hygiene practices, and informed the company in unequivocal
    terms that: ``The asbestos dust in the air is of considerable toxicity,
    and is a factor in the consideration of reducing dustiness in this
    plant.'' The report cited to the extant industrial hygiene literature
    and described the disease process set in motion by asbestos exposure.
    For decades after the issuance of this report, the Zonolite Company and
    W.R. Grace withheld this critically important information from its
    workers, their families, and, indeed, the community of Libby.
        It must be emphasized that the nature and degree of exposure to raw
    asbestos from the mining and milling operations in Libby, Montana is
    profoundly different from the exposures to asbestos from end-products
    such as insulation. For example, the asbestos dust levels measured in
    the Libby mine and milling operations were as much as 400 times greater
    than the applicable threshold limit values (TLV) and thousands of times
    greater than the current accepted TLV. Grace's own internal memos
    observed that 92 percent of workers with more than 20 years exposure
    had lung disease. It is hardly appropriate to place this type of direct
    exposure to extreme levels of raw asbestos in the same category as the
    insulation and other product-related exposures which comprise 90+
    percent of the litigation addressed by this legislation.

                                 5. CONCLUSION
        In. summary, we support efforts to defeat this legislation in its
    entirety. At a minimum the legislation must be amended to protect the
    rights of grievously injured Montanans, who presently have efficient
    and expeditious recourse through this state's judicial system. On
    behalf of the numerous miners and their families, I am requesting your
    assistance in carrying this message to each and every Senator. We trust
    that in this way justice will prevail.
        Please let me know if I can provide further information or
    assistance on this matter.
                Yours sincerely,
                                             Roger M. Sullivan,
                             McGarvey, Heberling, Sullivan, & McGarvey.
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                        White Lung Asbestos Information Center,
                                         New York, NY, October 5, 1999.
    Senator Charles Grassley,
    Chairman, Subcommittee for Administrative Oversight and the Courts,
    Hart Senate Office Building, Washington, DC.
        Dear Senator Grassley: The major portion of this testimony was
    prepared as a letter to Senator Torricelli and presented to him at a
    meeting in his office in Newark. I present for inclusion in the record
    that letter with some slight modification. In addition to the White
    Lung Asbestos Information Center, the current testimony represents the
    view of Consumers For Civil Justice, the largest consumer advocacy
    group in New Jersey. Since our meeting with Senator Torricelli in May a
    lot has transpired that directly pertains to S. 758 and its House
    companion H.R. 1283. Opposition to the House bill from unions and
    asbestos victim groups has made clear that the bill in its current form
    lacks consensus. Thus the American Trial Lawyers Association has
    developed a set of principles for the Review of Asbestos Personal
    Injury and Wrongful Death Cases and in apparent response Christopher
    Edley has structured a proposal that is markedly different from the
    bill that is before us today. It is time for asbestos victims to state
    some principles:

                                 False Premises

        The underlying premises upon which S. 758 or any of its future
    revisions are based are false. The first premise is that the defendant
    manufacturers are at risk of bankruptcy and that many jobs will be lost
    if these companies are not assisted. I know of no former asbestos
    manufacturers who are in danger of filing for bankruptcy. Most of those
    manufacturers who might benefit from the bill are members of the Center
    For Claims Resolution (CCR). The insurance coverage of these
    manufacturers is minimally 1.5 billion dollars. This we know from the
    Amchem settlement. The second premise is that asbestos litigation is
    cluttering the courts. As has been repeatedly pointed out, asbestos
    compensation is a mature tort. All the major legal issues have been
    resolved many times over and the value of claims has historically
    evolved. Few cases go to trial, less than 100 in 1998. The tort system
    has brought homeostasis between victims and the defendant
    manufacturers. It's not hard to determine why the latter are not happy
    with this equilibrium. They've lost and find the tort system no longer
    serviceable.

                             Maximized Compensation

        I have agreed to review and comment on the efforts of Mr. Edley and
    in general to keep an open mind concerning the possibility of a
    legislative surrogate for asbestos tort. There is only one valid reason
    for an asbestos victim advocate to do this and that is to maximize
    asbestos victim compensation. As you know, the bankruptcy filing of
    Manville Corporation has worked out wonderfully for the newly re-named
    Johns-Manville Corporation but not so well for its victims who receive
    no more than 10 percent of the historical value of their claims from
    the settlement trust. Asbestos victims are not adequately compensated
    for their injuries. To date Mr. Edley's very fertile mind has
    effectively scuttled H.R. 1283 but it has not made any headway in
    putting on the table a guaranteed amount of money. Indeed, there has
    been no estimate of the dollar value of present and future liability,
    no research into defendant insurance assets and no discussion of
    maximizing victim compensation.
        There are two tortfeasors who as yet have not been held responsible
    for their participation in the generation of asbestos disease. The U.S.
    Government and the Tobacco Industry. I suggest linkage between the
    Justice Department's suit against tobacco and the complicit role of the
    U.S. Government in suppressing information and its failure to
    adequately protect workers through regulation. A portion of jury awards
    to the U.S. Government might be set aside for asbestos victim
    compensation. Any legislative replacement of tort should stipulate its
    primary goal as the maximization of asbestos victim compensation.

           Prevention and Early Detection of Asbestos Related Disease

        Advances in CAT scan technology, especially in the area of early
    lung cancer detection, holds the promise of dramatically improving the
    five year survival rate of asbestos related lung cancer. Any federally
    sponsored asbestos disease compensation program should involve early
    detection lung cancer monitoring. (See the NY Times, July 9, 1999).
    Targeted smoking cessation programs should also be made available to
    asbestos victims.

                    Letter to Senator Torricelli (May, 1999)

        1 am writing in opposition to S. 758, the so-called ``Fairness in
    Asbestos Compensation Act of 1999.'' This bill is reminiscent of a long
    line of asbestos bailout schemes devised by the former manufacturers of
    asbestos products. The pillar, upon which asbestos victim litigation
    has been successfully brought, has not changed over the past three and
    a half decades. The industry that seeks your protection from our
    judicial system remains the same industry that knew of the health
    hazards of asbestos exposure and willfully, routinely, and
    energetically kept that information from the workers who manufactured
    and installed their products and from the consumers who ultimately used
    them.
        The ostensible purpose of S. 758 is to reduce markedly the number
    of tort claims filed against the former manufacturers of asbestos
    products, while providing fair and timely compensation for asbestos
    victims. In reality, the bill creates a class of citizens, asbestos
    victims, whose access to our civil justice system would be rendered far
    different and greatly inferior to that of all other citizens. It would
    also create a class of manufacturers--the former manufacturers of
    asbestos products--who would be afforded an unprecedented level of tort
    protection. The tobacco industry is keenly watching for the fate of
    this bill. What's good for the goose is good for the gander.
        The right to a jury trial and day in court is as good as eliminated
    in S. 758 which sets up an industry funded Asbestos Resolution
    Corporation (ARC). The ARC would require that the asbestos victim
    obtain a Certificate of Eligibility for his/her claim through meeting
    unprecedented and onerous medical criteria (discussed below). If the
    Certificate of Eligibility is obtained, the asbestos victim, who is
    unsatisfied with the settlement offer, must then submit to mediation.
    Only after mediation has failed is the victim allowed to file a civil
    action or proceed to Alternative Dispute Resolution. If the victim was
    unable to obtain a Certificate of Eligibility, he would have no right
    to file a civil action in any court, state or federal.
        The transference of such power to validate or liquidate the assets
    of victims, i.e., their claim under the law for compensation for
    injury, from our independent Judiciary to a Corporation whose
    independence would always be suspect because of its funding structure,
    demands close and careful scrutiny as to both its underlying
    justification and fairness.

                                I. JUSTIFICATION

        The asbestos manufacturers who have written this bill contend that
    asbestos personal injury litigation is ``unfair and inefficient and
    poses a crushing burden on litigants and taxpayers alike.'' There is
    little doubt that the defendants and their insurers have had to ante up
    billions of dollars as the result of asbestos litigation. They get no
    sympathy from this quarter.
        I have helped too many of my members die and have watched too many
    widows mourn and adjust, some successfully, some not, to the loneliness
    of life without a spouse. As for the burden of litigation (court costs
    largely) which the taxpayer must bear, keep in mind that this is an
    expense of a democratic society. If there are excesses unique to
    asbestos litigation, they are largely created by the stalling tactics
    of the asbestos defendants. In light of these tactics, the claim that
    asbestos litigation has not been able to provide compensation swiftly,
    truly bewilders. Once the die establishing the culpability of the
    manufacturers was cast, and it was cast early on, delay and deception
    became their overarching strategy.
        Keep also in mind that what economists call the externalization of
    costs has been put at $500 billion for the production of asbestos
    products. These are the costs which accrue to society at large and
    which are not paid by the manufacturers themselves. These are the costs
    associated with loss of income, worker compensation, asbestos related
    burdens on Social Security, SS Disability, Medicare, Medicaid and other
    social services, and the cost of asbestos abatement and control in the
    thousands of buildings where the material is in place and continues to
    deteriorate. In light of these costs the manufactures' concern for the
    taxpayer in the present instance hints of the disingenuous.
        The asbestos manufacturers also contend that 150,000 cases are
    currently pending and that tens of thousands of new cases are being
    filed each year, with the inference that these cases will finally be
    resolved through trial. This is not the case. As the defendants point
    out, asbestos litigation is a mature tort. This means that most cases
    are settled out of court with both parties having clear understandings
    as to the historical value of claims. In fact, the homeostasis wrought
    by years of litigation would be severely upset by the introduction of a
    mechanism entirely the product of only one of the parties to the most
    significant mass tort in history.
        The asbestos manufacturers contend that ``in many courts, the vast
    majority of pending asbestos claims are filed by individuals who suffer
    no present asbestos-related impairment'' and that ``these claims divert
    the resources of defendants from compensating individuals who are
    suffering from serious asbestos-related disease.'' This statement is
    not accurate.
        Asbestosis is a compensable disease and is usually accompanied by
    lung function impairment. Likewise in the majority of pleural plaque
    cases (72 percent according to one study) lung function impairment is
    involved.
        The manufactures' argument is a classic blame the victim argument.
    Asbestosis victims or pleural plaque victims with slight or no lung
    function impairment have the audacity, so the argument goes, to file
    their lawful claims and thus deny fair compensation to those who are
    really injured. Never mind that as much as 30 percent or more of their
    lung tissue might be affected by scarring and that their fiber burden
    is often in the millions per gram of lung tissue, or that their immune
    systems are compromised. Never mind that their exposures were known to
    the manufacturers and could have been prevented. Forgive the
    incredulity, but I do not believe that if the claims of the so-called
    non-impaired were wiped out in every state and federal court that the
    historical value of a mesothelioma case would rise by one penny as a
    result.
        The manufacturers also contend that ``in order to obtain
    compensation for non-malignant disease, claimants often must give up
    their right to obtain compensation later on, if they develop an
    asbestos-related cancer.'' The manufacturers have used the fact that
    asbestos victims are often economically stressed to buy protection
    against the liability of future asbestos-related cancers. They need to
    stop this inhumane practice.

                                  II. FAIRNESS

        Claims adjudication under S. 758 is fundamental unfair and
    manifestly an industry product:

    A. Medical criteria

        The medical criteria, which must be met for the Corporation to
    issue a Certificate of Eligibility, are more stringent than would be
    applied in most state jurisdictions. This is true for pleural plaques,
    asbestosis, mesothelioma and lung cancer.
        Asbestosis and pleural disease victims must not only have x-rays
    that definitively show disease but also pulmonary function tests that
    demonstrate significant lung impairment. The majority of asbestos
    victims who at present have viable court cases would not meet the
    bill's eligibility criteria. An individual could have 30 percent of his
    lung tissue scarred and lose as much as 20 percent or more of his lung
    capacity but not be injured sufficiently to warrant compensation.
        Mesothelioma victims must meet criteria, that no court requires for
    the diagnoses of Mesothelioma. First, an invasive procedure must be
    performed to obtain tissue for microscopic analysis and second the
    tissue must be evaluated by three Board Certified pathologists, one of
    whom must be a member of the United States-Canada Mesothelioma
    Reference Panel. For years courts have recognized that it is not always
    necessary to subject the mesothelioma victim to invasive procedures and
    when tissue is obtained, usually upon autopsy, the hospital pathologist
    is fully qualified to make the diagnosis.
        Asbestos Lung Cancer cases face in most instances insurmountable
    barriers to claim eligibility. First, the lung cancer claim must be
    accompanied by a diagnosis of asbestosis or pleural disease which meet
    the criteria for impairment stated above. The assumption here is that
    asbestos related lung cancer will not appear if non-malignant disease
    is not also present. This is simply unscientific. Asbestos exposure is
    the criterion for establishing a lung cancer as asbestos related.
        All lung cancer claims require the establishment (if a minimum 12
    year latency period and a minimum of 15 years of asbestos exposure. The
    latency period is unfair because the duration of latency is associated
    with the individual's background risk. Thus the older the lung cancer
    victim is at time of exposure the shorter is the latency period.
        The bill's criterion for establishing 15 years of exposure is
    unreasonable on many grounds. First, 15 years of exposure is not
    required to produce lung cancer. Greater intensity of exposure in a
    short time is just as productive of lung cancer as lesser exposure over
    a shorter time. Second, the way asbestos exposure is calculated for
    exposures occurring from 1972 onward is particularly cynical. Each year
    of exposure that occurred between 1972 and 1976 would count as only \1/
    2\ year toward the 15 year exposure criterion if the manufacturer could
    show that asbestos operations complied with the then current OSHA
    Permissible Exposure Limit (PEL) of 5 million fibers per cubic meter of
    air. By its own admission OSHA has stipulated that it did not intend
    for that PEL to substantially reduce the risk of asbestos related
    cancers. Indeed, at that PEL the risk of death is 150 per 1000 exposed
    workers for 20-40 years of work. Thus even one year of work at the PEL
    substantially increases the workers risk of asbestos cancer of all
    types.
        If the asbestos victim wishes to have his exposure from 1976
    through 1979 count as a full year of exposure, then he, the victim,
    must demonstrate that the employer's asbestos operations were not in
    compliance with the then current PEL of 2 million fibers per cubic
    meter of air. This is virtually impossible. In many circumstances the
    data does not exist, in other circumstances it does not reflect actual
    exposures. Even when the data legitimately show compliance with the
    PEL, the increased risk of lung cancer even for one year of exposure is
    substantial. A 2 million fibers per cubic meter of air the rate of
    death is 64 per 1000 workers exposed for 20-40 years of exposure. If
    the victim cannot show non-compliance with the PEL each year of
    exposure counts only as \1/2\ year.
        In lung cancer suits this is precisely the kind of information
    juries need to hear when companies offer the standard regulatory
    compliance defense. S. 758 raises acceptance of the regulatory
    compliance defense to the level of law. Indeed the bill goes far beyond
    that. Exposures that occur after 1979 do not count at all, unless the
    victim can demonstrate that for most of the year the employer's
    asbestos operations were not in compliance with the PEL. Thus the bill
    assumes that all employers are entitled to the regulatory compliance
    defense without demonstrating compliance. It is the victim's task to
    rebut.

                      WW II Shipyard Workers Badly Treated

        Of the bill's criteria for lung cancer, the most hurtful and
    irreconcilable with our American values of fair play is the treatment
    of our WW II shipyard workers. Over 15 million workers went into our
    shipyards nationwide after Dec 7, 1941; 4 million sustained significant
    exposure to asbestos. Many were there for several months only, while
    they awaited the draft or mobilization into the armed services. Some
    worked for a year, some for two years and others for three years. None
    were afforded information concerning asbestos hazards: none were
    provided with protective equipment and many thousands of them have died
    of asbestos related disease. Under the bill, the WW II shipyard workers
    would have to have worked for almost 4 full years to establish the
    fifteen year exposure requirement. The overwhelming majority of WW II
    shipyard workers would not meet the bill's lung cancer eligibility
    requirement.

    B. Consolidation of cases

        While complaining about the unwieldiness of asbestos litigation,
    the asbestos manufacturers would prohibit the consolidation of cases, a
    device, which many jurisdictions, have found effective in providing a
    speedy resolution of cases.

    C. Elimination of other causes of action

        Many jurisdictions allow damages for emotional distress caused by
    cancer diagnosis and prognoses of death. S. 758 eliminates such
    damages.
        It also eliminates compensation for medical monitoring, which is
    particularly important in light of the increased risk of cancer
    suffered by asbestos victims.

    D. Current and future cases

        S. 758 has the audacity to eliminate all currently filed asbestos
    cases, which have not resulted in a final, non-appealable judgment.
    Asbestos victims in certain jurisdictions have been waiting years for
    their day in court. This is unspeakable arrogance.
        In conclusion, S. 758 is the product of an asbestos industry, which
    has acted unilaterally to construct a totally self-serving deus ex
    machina. It is an industry that does not need the help, since its
    insurance coverage is ample to satisfy its present and future
    obligations. And certain of its members do not see it as a help at all,
    most notably Owens-Corning Fiberglass. Please abandon your support of
    this bill.
                Sincerely,
                                       Myles O'Malley,
                                               Director of Research.

                                       William Rausnitz,
                                               President.

                                       Berenice Rosenberg,
                                               Vice-President and
                                                   Treasurer.

                                       Barbara Zeluck,
                                               Secretary and Editor.