[Senate Hearing 107-993]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-993
 
                          ASBESTOS LITIGATION

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 25, 2002

                               __________

                          Serial No. J-107-105

                               __________

         Printed for the use of the Committee on the Judiciary


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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware       STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin              CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin       JON KYL, Arizona
CHARLES E. SCHUMER, New York         MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington           SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
       Bruce A. Cohen, Majority Chief Counsel and Staff Director
                  Sharon Prost, Minority Chief Counsel
                Makan Delrahim, Minority Staff Director



                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

Brownback, Sam, a U.S. Senator from the State of Kansas, prepared 
  statement......................................................   123
Cantwell, Hon. Maria, a U.S. Senator from the State of Washington    35
DeWine, Hon. Mike, A U.S. Senator from the State of Ohio, 
  prepared statement.............................................   167
Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa, 
  prepared statement.............................................   174
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......    11
Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin, 
  prepared statement.............................................   222
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................   223

                               WITNESSES

Austern, David T., General Counsel, Manville Personal Injury 
  Settlement Trust, Fairfax, Virginia............................    15
Baron, Frederick M., Baron ad Budd, P.C., on behalf of the 
  Association of Trial Lawyers of American, Dallas, Texas........    17
Baucus, Hon. Max, a U.S. Senator from the State of Montana.......     5
Dellinger, Walter E., O'Melveny and Myers, LLP, Washington, D.C..    19
Hiatt, Jonathan P., General Counsel, American Federation of Labor 
  and Congress of Industrial Organizations, Washington, D.C......    21
Kazan, Steve, Kazan, McClain, Edises, Abrams, Fernandex, Lyons 
  and Farrise, a Professioal Law Corporation, Oakland, California    24
Nelson, Hon. E. Benjamin, a U.S. Senator from the State of 
  Nebraska.......................................................     8
Voinovich, Hon. George V., a U.S. Senator from the State of Ohio.    13

                          QUESTION AND ANSWER

Response of Mr. Austern to a question submitted by Senator 
  Cantwell.......................................................    43

                       SUBMISSIONS FOR THE RECORD

American Academy of Actuaries, Jennifer L. Biggs, Chairperson, 
  Mass Torts Subcommittee, Washington, D.C., statement...........    47
American Chemistry Council, Arlington, Virginia, statement.......    70
American Conservative Union, W. Stephen Thayor, Director of 
  Legislative and Legal Policy, Alexandria, Virginia, letter.....    80
American Shareholders Association, Grover Norquist, President, 
  Washington, D.C., statement....................................    82
Asbestos Alliance, Washington, D.C., statement...................    84
Austern, David T., General Counsel, Manville Personal Injury 
  Settlement Trust, Fairfax, Virginia, prepared statement........    87
Baron, Frederick M., Baron and Budd, P.C., Dallas, Texas, 
  prepared statement.............................................    97
Baucus, Hon. Max, a U.S. Senator from the State of Montana, 
  prepared statement.............................................   107
Bergman, Matthew P., Partner, Senn Pageler & Frockt, Vashon, 
  Washington, statement..........................................   110
Coalition for Asbestos Justice, Inc., Washington, D.C., statement   129
Dellinger, Walter E., O'Melveny and Myers, LLP, Washington, D.C., 
  prepared statement.............................................   150
Heberling, Jon L., McGarvey, Heberling, Sullivan & McGarvey, 
  P.C., Kalispell, Montana, letter...............................   178
Hiatt, Jonathan P., General Counsel, American Federation of Labor 
  and Congress of Industrial Organizations, Washington, D.C., 
  prepared statement and attachment..............................   181
Kazan, Steven, Kazan, McClain, Edises, Abrams, Fernandez, Lyons 
  and Farrise, Oakland, California...............................   188
Manhatten Institute for Policy Research, Lester Brickman, Civil 
  Justice Forum, New York, New York, article.....................   226
National Association of Manufacturers, Washington, D.C., 
  statement......................................................   238
Nelson, Hon. E. Benjamin, a U.S. Senator from the State of 
  Nebraska, prepared statement...................................   245
Rutland Daily Herald, Ronald J. Gascon, commentary, September 25, 
  2002...........................................................   248
Small Business Survival Committee, Karen Kerrigan, Chairman, 
  Washington, D.C., letter and attachment........................   249
Washington Post, Albert B. Crenshaw, article, September 25, 2002.   262


                          ASBESTOS LITIGATION

                              ----------                              


                     WEDNESDAY, SEPTEMBER 25, 2002

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, Pursuant to notice, at 10:09 a.m., in 
room SD-106, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Durbin, Cantwell, Edwards, Hatch, 
Grassley, Specter, DeWine, Brownback, Carper [ex officio], and 
Voinovich [ex officio].

  STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Chairman Leahy. Good morning. Today, we are going to hear 
from experts representing all sides in asbestos litigation. We 
want to get a better understanding of how asbestos victims, 
defendants, and others fare in the courts. I hope today this 
can be the beginning of a bipartisan dialog that will result in 
a comprehensive review of the complex and competing issues 
involved in providing fair and efficient compensation to 
asbestos victims.
    I believe for a sense of history we should acknowledge the 
root cause of this litigation. For many years, many in 
America's labor force were secretly poisoned. Unbeknownst to 
the men and women who worked in our Nation's factories, 
shipyards, mines, and constructionsites, the worksite air was 
laced with a substance so harmful that they could become 
critically ill by simply breathing, and they risked 
contaminating their loved ones from their clothes after a hard 
day's work.
    In 1906, England adopted the first labor regulation warning 
about the health effects of inhaling asbestos. In 1924, a 
national insurance company studied the health effects of 
asbestos exposure of Johns-Manville workers and then hid the 
results.
    In 1949, the American Medical Association Journal 
editorialized on the harm from asbestos exposure. In 1989, the 
Environmental Protection Agency banned asbestos in 3,500 
products, only to see that overturned in an industry suit later 
on. Asbestos, a known carcinogen, is still used today in many 
products.
    Corporate America had been on notice that asbestos carried 
significant health risks for its workers and customers. Some 
corporate executives ignored these warnings and manufactured, 
mined, or used asbestos because it was inexpensive and 
profitable. As a result, the marketplace has punished more than 
50 companies that knew or should have known about the health 
dangers of asbestos, forcing them into bankruptcy because of 
asbestos-related liabilities.
    Three thousand Americans die every single year from 
mesothelioma, a horrible cancer caused only by asbestos. In 
addition, hundreds of thousands of Americans suffer from other 
injuries caused by asbestos exposure, including lung cancer, 
throat cancer, and other diseases.
    Perhaps the worst part of the asbestos nightmare is that 
many victims do not know yet that they will get sick. That is 
because of the long latency period for asbestos-related 
diseases. Some cancers take 30 to 40 years to develop and it is 
a ticking time bomb during that time. It is a time bomb ticking 
in the bodies of thousands of innocent victims.
    Approximately 120 million Americans have been or continue 
to be exposed to asbestos. With the long latency period for 
most asbestos-related diseases, simple math tells us that some 
will be suffering for years to come.
    Asbestos victims who filed claims with the Manville Trust 
this year were, on average, first exposed to asbestos in 1961. 
Since production in the U.S. did not slow until well into the 
1980's and asbestos is still being used today, that means we 
have decades to go before we know who is going to be sick. Many 
more Americans will be seeking compensation for their asbestos-
related injuries for decades.
    All this caused Supreme Court Justice Ruth Bader Ginsburg 
in the Amchem v. Windsor case to call for legislative 
intervention. I agree with Justice Ginsburg that Congress can 
provide a secure, fair, and efficient means of compensating 
victims. I believe that it is in the national interest to 
encourage fair and expeditious settlement between companies and 
asbestos victims, and that is why I have convened this hearing. 
Actually, it is the first full Judiciary Committee hearing 
since Justice Ginsburg urged congressional action.
    But it is not going to be easy. It is going to require a 
commitment by lawmakers and interested parties to conduct a 
full and open debate, an honest debate, to identify issues and 
craft possible solutions.
    Industry-related injuries have existed for a long time. 
Usually, industry eventually wakes up and takes steps to stop 
it from happening. Both of my grandfathers were stone cutters 
in Vermont, one emigrating to this country take up that work. 
Both died of silicosis of the lungs. It was at a time when 
many, many people knew the dangers, but did not want to spend 
the slight extra amount more to protect the workers from the 
dangers. Today, they are protected.
    We have to conduct a debate, something Congress has not 
done. The past failed efforts at legislative solutions were 
thinly veiled attempts by some to avoid accountability for 
their asbestos responsibilities through what they 
euphemistically called ``tort reform.''
    We could have a debate on tort reform, and probably should, 
but let's not lose sight of what we are talking about here. We 
are talking about these asbestos cases. If we keep it narrowed 
to that, we can come up with a legislative solution.
    Our first witness, Senator Nelson, talked to me over a year 
ago about that, or a couple of years ago, I think it was, and 
urged that why can't we come together for a legislative 
solution.
    We should learn from the past that any compensation plan 
has to be fair to asbestos victims and their families. I 
applaud the business leaders who met with me recently for their 
recognition that victims have to come first in an alternative 
compensation system.
    I know we are going to have an honest and constructive 
debate. Senator DeWine and I have attempted to prove in our 
bipartisan asbestos tax legislation that if you encourage fair 
settlements, it is a win-win situation for businesses and 
victims. Chairman Baucus and Senator Grassley have included our 
legislation in their small business tax package to be 
considered soon by the Finance Committee.
    Senator Hatch has written to me that he wishes to work in 
this same bipartisan spirit on the asbestos litigation issue, 
on that narrow issue, and not to include a lot of other 
controversial areas in the debate.
    It is going to take full-faith efforts of all the people--
the industry, workers, victims--to come to it. We are going to 
need full participation from the insurance industry. The press 
reported this month that many insurers have refused to pay 
claims that were related to the September 11 terrorist attacks, 
and even threatened to pull business coverage if such claims 
were filed. But we are going to need their participation and we 
are going to need cooperation to reach a better solution for 
asbestos litigation.
    I know the insurance industry enjoys a one-of-a-kind 
statutory exemption from our antitrust laws, but that special 
privilege has a special responsibility. I hope and expect that 
they will be up to the task. I hope this hearing will start us 
forward.
    I might add that a solution is not one that adds more 
corporate bankruptcies or creates artificial immunities or 
legal fees, but one that actually compensates victims. So I put 
all on notice on all sides of this issue that this chairman is 
primarily interested in the victims and that is what we will 
speak to.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Chairman Leahy. Senator Grassley, I understand you are just 
going to put a statement in.
    Senator Grassley. Yes.
    [The prepared statement of Senator Grassley appears as a 
submissions for the record.]
    Chairman Leahy. Senator DeWine, I know you are going to put 
a statement in, but you had something you wanted to say.
    Senator DeWine. Yes, Mr. Chairman. Thank you very much. I 
do have a full statement which I would like to have included as 
part of the record.
    Chairman Leahy. Without objection.
    Senator DeWine. Let me Mr. Chairman, thank you for holding 
this hearing. Your comments were very well taken. I look 
forward to working with you and the other members of this 
committee in trying to deal with a problem that candidly we as 
a country have ignored too long, and I think this Congress has 
ignored too long. We are the only ones at this point in our 
history that can help provide a solution, and the courts, as 
you have pointed out, have made that very, very clear.
    Just before I came here today, I was talking to a 
businessman from Ohio and I told him where I was going and what 
we were talking about, and he made the point to me--he actually 
grabbed me and he said, look, you need to understand this. One 
of the things that we always will have the great ability to 
make in this country is building material, he said, but that is 
an industry that is in peril and it is an industry, in all the 
jobs that it creates, that is in peril because of the asbestos 
problem, and you need to understand that. The current system, 
he said, is not fair to the victims and it is not fair to the 
people who are trying to create jobs.
    I must say, Mr. Chairman, that I totally agree. The status 
quo is just not fair. It is grossly unfair to the victims. What 
you find is an inconsistency in how victims are treated, a 
horrible inconsistency that I don't think you will find 
anyplace else in our country or in our judicial system.
    You have a situation or a system today in which the victims 
are treated differently. Their compensation is certainly not 
fast and it is not complete. Very rarely is it ever complete. 
You also have, at the same time, a dwindling number of 
companies, as you have pointed out, and obviously that means 
fewer jobs that can be created. Companies go out of business 
and you lose those jobs.
    But it also means, when you have fewer companies, that they 
have more liability, and when they have more liability, it puts 
them in danger, as well. It also means that they are in a less 
good position. When you have fewer companies or fewer people 
that you can call upon to pay the compensation, then the 
victims suffer.
    So we are in this downward spiral, and candidly only the 
U.S. Congress can begin to stop that spiral. So I just 
appreciate very much the fact that you are holding this 
hearing. I know that the witnesses today will be very, very 
helpful.
    As all of us do, I have other hearings and other 
obligations. I will be in and out, but I just wanted to thank 
you for your attention to this matter and holding this very 
timely hearing.
    [The prepared statement of Senator DeWine appears as a 
submission for the record.]
    Chairman Leahy. The Senator from Ohio has been one also who 
has encouraged me to do that.
    I will go to the first two witnesses by seniority, Senator 
Baucus and then Senator Nelson.
    Senator Baucus. Well, I appreciate that, Mr. Chairman, but 
actually Senator Nelson was here ahead of me and I would be 
fine to defer to Senator Nelson.
    Senator Nelson. Well, since I have some things I would like 
to get from Senator Baucus before he finishes his work with the 
Finance Committee, I would be very happy to defer to his 
seniority.
    [Laughter.]
    Chairman Leahy. I will tell you what, guys. You go ahead 
and start. I am just going to stay out of this one.
    [Laughter.]

STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM THE STATE OF 
                            MONTANA

    Senator Baucus. Well, I would be very honored to proceed 
first, then.
    Thank you, Mr. Chairman and distinguished members of the 
committee. I deeply appreciate, Mr. Chairman, your holding this 
hearing. I think we can all agree that asbestos litigation in 
this country is an enormous issue that will impact this Nation 
for many years to come, and I applaud your leadership in 
stepping up to address it head-on.
    I want the record to reflect my deep concern that we not 
lose sight of what is really at stake here, and that is making 
sure that people who are sick or people who are likely to 
become sick from exposure to asbestos are not denied the 
ability to fight for their rights against the companies or 
persons that injured them. That is absolutely the bottom line.
    I know you have all heard me talk about Libby, Montana, but 
Libby represents one of the grossest cases of corporate 
irresponsibility and down-right criminal negligence that I have 
ever seen. The extent of asbestos contamination in Libby, the 
number of people who are sick or who have died from asbestos 
exposure, is just staggering. The people of Libby suffer from 
the deadly asbestos-caused cancer, mesothelioma, at a rate 100 
times greater than the rest of the Nation. One in 1,000 
residents of Libby suffer from the disease. The national 
average is one out of a million.
    Mr. Chairman and Senator Grassley, I wish you were with me 
when I was in the living room of Les Scramstad. Les Scramstad 
and others in Libby were talking about coming down from the 
mine covered with dust from the mine, had no idea that they 
were affected with a cancer-causing disease. Les would go home, 
he would meet his wife, he would embrace his wife. His kids 
would jump into his lap. All of them are now dying from 
asbestos-related disease.
    I mean, just think of it. He is dying. The guilt he has in 
transferring the disease off to his wife and to his children--
it is one of the most heart-wrenching experiences I have ever 
encountered. And I vowed to myself that day that I was going to 
do all I can to make sure that justice is given to them.
    The company knew what was going on. The company knew that 
the asbestos dust from tremolite was causing this problem, and 
yet they did not warn their employees. It is an outrage, and 
the people of Libby, Montana, desperately need the help of this 
committee and the Congress.
    I might add, Mr. Chairman, that the Agency for Toxic 
Substances and Disease Registry has found that Libby residents 
suffer from all asbestos-related diseases at a rate of 40 to 60 
times the national average.
    Well, how could this happen? Well, a company named W.R. 
Grace owned and operated a vermiculite mining and milling 
operation in Libby. It just so happened that vermiculite was 
contaminated by a deadly form of asbestos called tremolite.
    W.R. Grace milling operations belched thousands of pounds 
of asbestos-contaminated dust into the air each day, dust that 
settled on the town of Libby, on cars, on homes, gardens, dust 
that settled on children. Workers brought the dust home on 
their clothes and exposed their families, as I mentioned. 
Hundreds have died and hundreds more are sick.
    The very worst part about this story is that W.R. Grace 
knew exactly what it was doing. It knew that vermiculite dust 
was contaminated with deadly asbestos. Yet, it told workers and 
the town that it was harmless.
    Now, W.R. Grace has filed for bankruptcy, wringing its 
hands over escalating asbestos claims involving the vermiculite 
products its produced, and shielding billions in assets from 
the bankruptcy proceedings. It is an outrage. Through all this, 
W.R. Grace has yet to step up and do the right thing in Libby.
    It has ungraciously fought any attempts to beg, plead, or 
cajole the company into living up to its responsibilities to 
the people of Libby, Montana. It is attempting to drastically 
scale back a paltry health care fund set up for former workers.
    All the while, Grace lawyers have filed for over $30 
million in fees accumulated in the past year alone defending 
Grace in the bankruptcy proceeding. That $30 million would sure 
go a long way in Libby, Montana, where health care costs are 
increasingly rapidly, threatening the ability of that town to 
get back on its economic feet after the blow it took from W.R. 
Grace.
    More worrisome still, many folks who have been diagnosed 
with asbestos-related disease, some of whom are in their 30's 
because they were exposed to asbestos as children, are now 
essentially ininsurable going forward, because the costs of 
securing private insurance are non-economical.
    The costs to the community and State government related to 
providing health coverage for uninsured sick people are 
creating significant pressures on the State Medicaid fund, and 
even causing workers' compensation problems for some private 
business owners in Libby, like Stimson Lumber and Lincoln 
County private enterprises already at marginal operations.
    In addition, the Federal Government, through the U.S. 
Environmental Protection Agency, will spend over $100 million 
to clean up the contamination caused by W.R. Grace's 
vermiculite mining operation. So everyone--taxpayers, local 
businesses, the State of Montana, and especially the victims 
themselves--everyone but W.R. Grace is bearing the burden and 
suffering the pain caused by W.R. Grace's actions. Granted, we 
can all agree that the State and Federal Governments should 
have done more to protect the folks in Libby, but ultimately 
the buck stops with Grace.
    So I apologize if I am skeptical and find it hard to be 
sympathetic to companies like W.R. Grace who claim they are 
overburdened by asbestos lawsuits. I would agree, however, that 
it is also not fair for companies like W.R. Grace to shift the 
burden of their actions onto other companies that have not 
filed for bankruptcy and that do not share Grace's liability or 
responsibility.
    But, again, this is where I would ask this committee to be 
very, very careful in how you address asbestos litigation. It 
would be so very easy to insulate bad actors like Grace from 
their fair share of liability and responsibility, and to cutoff 
rightful claimants like the Libby victims from ever receiving 
their fair share of compensation for the wrong done to them 
because, Mr. Chairman, it is a little too easy to say let's 
cutoff those folks who aren't sick yet.
    But we are talking about a disease that a 20- to 40-year 
latency period. Given the exposure of the folks in Libby and 
the type of exposure to deadly tremolite asbestos, it is very 
likely that many more people in Libby will become very sick in 
the future. We cannot cut them off.
    I am sure you remember my opposition, Mr. Chairman, to the 
Fairness in Asbestos Compensation Act of 2000. I believed very 
strongly at the time that the administrative procedures set up 
by that bill, particularly the medical eligibility criteria, 
would effectively eliminate the legal rights of many residents 
in Libby.
    I wrote you at that time letting you know that I would 
speak at length to any attempt to attach that legislation to 
bankruptcy legislation that would be on the floor. I would ask 
your permission to insert in the record a letter from some 
Libby representatives that raises similar concerns about what 
could be contained in revised asbestos litigation legislation 
that this committee my consider.
    Ultimately, Mr. Chairman, because W.R. Grace has filed for 
bankruptcy, the rightful claims of Libby victims may never be 
satisfied against W.R. Grace, no matter what this committee 
chooses to do about asbestos litigation reform.
    Perhaps part of this committee's review should include a 
review of the injustices inherent in corporate bankruptcies, 
like W.R. Grace's, that are related to asbestos litigation, 
particularly those injustices associated with the ease with 
which Grace hid a vast chunk of its assets from the reach of 
the bankruptcy court and, by extension, from Libby victims. 
Maybe some of those billions will be returned to the bankruptcy 
estate. Maybe not, but it is certainly an appropriate piece of 
the asbestos puzzle for this committee to take a very hard look 
at.
    Mr. Chairman, I have fought for every resource at the 
disposal of the Federal Government to help the people of Libby, 
Montana, get a clean bill of health. And despite W.R. Grace's 
resistance, we have actually been making real progress on the 
ground in cleaning up the town of Libby, cleaning up 
contaminated homes and screening more than 8,000 current and 
former Libby residents for asbestos-related disease or 
exposure.
    I am pursuing all other avenues to address long-term health 
care costs for those who have been devastated by asbestos-
related disease, and screening costs for those who are worried 
that they may become ill. This includes the possibility of 
setting up some type of white lung trust fund.
    These other avenues have to be pursued because W.R. Grace 
has side-stepped its responsibilities to the community of 
Libby. In your search for solutions to the real problems 
associated with asbestos litigation, Mr. Chairman, I would ask 
that you not make it easier for companies like W.R. Grace to 
shift their liability to others. In fact, I believe you should 
make it more difficult.
    The focus here should not be on cutting off the rights of 
victims, but on holding accountable those who are truly 
responsible for the pain and suffering of real people like the 
people of Libby, Montana.
    Thank you again, Mr. Chairman, for allowing me to testify.
    [The prepared statement of Senator Baucus appears as a 
submission for the record.]
    Chairman Leahy. Thank you. I appreciate it very much, and I 
know that the Senator from Montana has been outspoken in his 
feelings on this for years, and very articulate and very 
knowledgeable. So I appreciate you coming here. I also know you 
have another committee meeting you are supposed to be at, so we 
appreciate that.
    Senator Baucus. Thank you, Mr. Chairman.
    Chairman Leahy. Senator Nelson first approached me some 
time ago, actually almost from the time he came here, and said 
we have got to start looking at this asbestos issue, we have 
got to try to craft a legislative solution. He has been 
tireless in working with Senators on both sides of the aisle 
and I applaud him for that. It is in the best tradition of the 
Senate.
    Ben, we are delighted to have you here.

 STATEMENT OF HON. E. BENJAMIN NELSON, A U.S. SENATOR FROM THE 
                       STATE OF NEBRASKA

    Senator Nelson. Well, thank you very much, Mr. Chairman and 
members of the committee. I certainly appreciate, Senator 
Leahy, the way in which you have characterized the effort in 
compensating victims and making sure not only that the program 
that we will be talking about ultimately compensates victims, 
but making sure that at the end of the day they are, in fact, 
compensated.
    I want to thank you for this opportunity to appear here 
today. I was a little nervous when I saw Senator Grassley 
because I figured he would try to get some sort of a bet on the 
Nebraska-Iowa State game. I am relieved to see that he has now 
left and I will be able to escape that.
    I was also a little bit concerned about your reference to 
experts, and I was looking at the table and realized that you 
must be referring to somebody other than Senator Baucus and 
myself.
    I want to thank you, and Senator Hatch as well for his 
leadership as he walks in the door, for bringing together a 
group of individuals, I think, today who can share information 
that may lead to a legislative solution regarding the many 
issues surrounding asbestos litigation.
    These issues are of growing concern to people in my State 
and I suspect, as we have heard from Senator Baucus and from 
others, that the members of the committee have seen the same 
increase in letters and calls from constituents that I have 
about this issue.
    Historically, in the early 1970's, lawsuits against 
asbestos manufacturers opened the door for victims suffering 
from asbestos-related diseases to be justly compensated for 
their injuries. When Johns-Manville, the largest asbestos 
manufacturer, filed for bankruptcy in 1982, there were less 
than 20,000 asbestos cases, most on behalf of individuals with 
severe asbestosis or mesothelioma, a vicious asbestos-related 
cancer. The system worked. Sick people and their families were 
given the financial security that they deserved.
    But the system doesn't seem to be working anymore. It has 
been overwhelmed by a flood of cases, some from individuals who 
are not yet sick but could potentially get sick in the future. 
We don't want to prevent those individuals from recovering down 
the road, but we also need to work toward allowing those who 
are sick now to recover now.
    With the current docket load, that doesn't seem to be 
happening. Over 90,000 new asbestos lawsuits were filed in 
2001, representing an increase of 30,000 from the previous 
year. However, the American Academy of Actuaries estimates that 
there are only about 2,000 truly new mesothelioma cases filed 
each year, another 2,000 to 3,000 cancer cases that are likely 
attributed to asbestos, and a smaller number of serious 
asbestosis cases.
    As a result, we must work toward finding a way to address 
the lawsuits of seriously ill individuals immediately, without 
eliminating the ability for those who may become sick in the 
future from having their case addressed at the appropriate 
time.
    The unfortunate result of these tens of thousands of 
lawsuits is that people who are seriously sick and dying from 
asbestos must wait longer to recover less money than they 
deserve, if they recover anything at all. After transactions 
costs and fees for both plaintiff and defense lawyers, only 
about one-third of the money spent on asbestos litigation 
actually reaches the claimants. Moreover, as insurance is 
depleted and an increasing number of asbestos defendants 
declare bankruptcy, it is inevitable that many asbestos victims 
who develop cancer in the future will go uncompensated.
    One such victim from my State was Val Johns. Mr. Johns was 
born and lived his whole life in Bloomfield, Nebraska. It is 
the egg capital of the world. It is in the northwest corner of 
the State. He and his wife, Sharon, raised their three children 
there. Two still live in the area and have their own families.
    For 19 years before his death, Mr. Johns maintained the 
town cemetery. He served in the U.S. Navy from 1957 to 1960 as 
an electrician and he was exposed to asbestos pipe insulation 
aboard the destroyer USS Charles Ware. Mr. Johns was diagnosed 
with malignant mesothelioma in January 2000, and unfortunately 
passed away on November 5, 2001.
    He filed a lawsuit to pay his substantial medical bills and 
to do something for his wife to support her after his death. 
But all but one of the companies that made the asbestos he was 
exposed to were already bankrupt. As a result, the settlement 
for his family was a fraction of what it should have been.
    The economic fall-out from this situation, though, extends 
beyond sick victims. Because every company that manufactured 
asbestos is now bankrupt, plaintiffs have been forced to seek 
alternative defendants to take their place. According to the 
RAND Institute for Civil Justice, 300 firms were listed as 
defendants in asbestos cases in 1983. By 2002, RAND estimates 
that more than 6,000 independent entities have been named as 
asbestos liability defendants.
    Many of these new defendants are small businesses located 
in every community with little or no direct connection to 
asbestos. I have heard from scores of small businesses in my 
State--local hardware stores, plumbing contractors, auto parts 
dealers, lumber yards. None of these businesses manufactured 
asbestos. None sold or installed asbestos products, but these 
businesses and the jobs they create are all at stake. They are 
now afraid that as primary asbestos defendants declare 
bankruptcy, they will be next in line for the thousands of 
cases being filed and their businesses will not survive.
    As the number of asbestos claims filed each year has nearly 
tripled in the last 5 years, the pace of asbestos-related 
bankruptcies has also accelerated dramatically. Since 1998, 
more companies have filed for bankruptcy protection than in the 
previous 20 years combined. And in the first 7 months of 2002, 
12 companies facing significant asbestos liability filed for 
bankruptcy, more than in any other 3-year period before 1999.
    Firms declaring bankruptcy since 1998 employed more than 
120,000 workers prior to their filing, many of whom were 
significantly invested in their company's stock, pension, and 
401(k) plans. According to Fortune magazine, for example, at 
the time of Federal-Mogul's bankruptcy filing last year, 
employees held 16 percent of the company's stock, which had 
lost 99 percent of its value since January 1999. It was 
reported that Federal-Mogul employees lost over $800 million in 
their 401(k)'s. Similarly, about 14 percent of Owens Corning 
shares, which lost 97 percent of their value in the 2-years 
before its filing, were owned by employees.
    I think we can all agree that those individuals with legal 
claims who are very sick need to be taken care of in the most 
timely and equitable manner possible. That should be our No. 1 
priority. We must also work to ensure that those who are not 
sick now but may become sick in the future are not precluded 
from recovering, and that there are still funds available for 
such a recovery.
    Finally, we must consider the unpredictable economic impact 
the immense amount of pending litigation could have on 
secondary businesses and companies. The costs associated with 
increased bankruptcy filings to business owners, employees, and 
retirees could be devastating.
    In order to prevent future Enron disasters for our older 
workers nearing retirements, we must address the very real 
potential threat and adverse impact this type litigation can 
have on our economy if we don't address these inequities now. 
We cannot afford to see more 401(k) and pension plans become 
worthless if there is action that we can take to prevent that.
    I am a strong believer that every American has a right to 
his or her day in court. I believe also that people dying of 
asbestos-related diseases deserve just compensation for 
themselves and their families. Achieving the latter does not 
require a change in our tort system. It requires the 
restoration of the system's true purpose of providing relief to 
those who need it most.
    So, Mr. Chairman, I plan to work with you and the committee 
in any way that we possibly can for the remainder of the year 
and in the next Congress to help resolve these issues in a fair 
and comprehensive manner. I thank you for the opportunity and 
your attention to these very important issues today.
    Thank you very much.
    [The prepared statement of Senator Nelson appears as a 
submission for the record.]
    Senator Hatch. [presiding.] Thank you, Senator Nelson. We 
appreciate your testimony here today.
    We have a vote on, so the chairman has gone over to make 
the vote and I am supposed to make my statement. I think I only 
have about 6 minutes left, but let me see what I can do.
    If you would go vote and tell them to hold it for me until 
I get there----
    Senator Nelson. I will. Thank you, Mr. Chairman.

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE 
                            OF UTAH

    Senator Hatch. Thanks, Ben. I appreciate it.
    I appreciate the chairman holding this hearing today to 
examine the extremely important issue of asbestos litigation. I 
don't think there are any serious doubts that our Nation faces 
an asbestos litigation crisis. Nor do I believe that it can be 
seriously disputed that some type of comprehensive solution is 
necessary.
    Over the past decade, a variety of developments have 
greatly intensified the need and the urgency for a Federal 
solution. An exponential increase in asbestos claims has 
resulted in a wave of asbestos-related bankruptcies, and 
consequently threatens to leave hundreds of thousands of 
claimants without fair compensation and hundreds of thousands 
of workers without jobs. Moreover, this crisis is impacting not 
only the claims of those who are truly sick, but also the jobs 
and pensions of employees of the defendant companies. The 
Supreme Court has twice called upon the Congress to act and it 
is time that we do so.
    The current crisis is not going to get any better and it 
will continue to worsen unless we act. In fact, as all of you 
are aware, the RAND Institute for Civil Justice today released 
their study of the asbestos litigation crisis. RAND identifies 
that the number of claims continues to rise and that, to date, 
over 600,000 people have filed claims typically against dozens 
of defendants.
    In addition, more than 6,000 companies have been named as 
defendants in asbestos litigation. RAND also notes that about 
two-thirds of the claims are now filed by the unimpaired, while 
in the past they were filed only by the manifestly ill. Former 
Attorney General Griffin Bell recently denounced this type of 
``jackpot justice.''
    Because of this surge in litigation, companies, many of 
whom never manufactured asbestos nor marketed it, are going 
bankrupt paying people who are not sick, may never be sick, and 
who therefore may not need immediate compensation. Let me be 
clear. I do not advocate denying the deserving claimants timely 
and appropriate compensation, but I do think that we have to 
make some choices here about prioritizing who is paid now and 
who is paid later. If we don't, there won't be a ``later'' and 
true victims of asbestos exposure, as well as the companies, 
employees and pensioners, will pay the price.
    An editorial in the Wall Street Journal suggested, quote, 
``Seeing legislators pull their hair over Enron is a pleasant 
diversion, but if Washington is really interested in the jobs 
and livelihood of American citizens it might be better off 
paying attention to the runaway blob known as asbestos 
litigation,'' unquote, in its characteristically interesting 
language.
    Why do the number of claims continue to increase when 
actual asbestos exposure has decreased over the years? Because 
the current litigation system has in some instances required 
that those who are not yet ill file their claims now or risk 
being barred by the statute of limitations later. This is 
coupled with a, quote, ``enterprising,'' unquote, trial bar 
that has orchestrated mass asbestos screenings to identify 
potential clients.
    Don't get me wrong. Legitimate medical screenings can help 
to identify valid health concerns worthy of compensation. 
However, frequently these screenings are nothing more than an 
effort to generate large numbers of potential claimants in an 
effort to force a defendant to settle a case, regardless of 
culpability or causal relation to the claimants, rather than 
incur the costs of litigation.
    In a letter to the editor of the American Journal of 
Industrial Medicine in May of this year, Dr. David Egilman, 
M.D. relates that for the past several years, he has served as 
an expert witness in liability cases primarily at the request 
of plaintiffs' attorneys. Over the past 2 years, he has, quote, 
``noted that many of these individuals could not (due to 
inadequate latency or exposure) and did not manifest any 
evidence of asbestos-related disease,'' unquote.
    And he notes that, quote, ``most of these cases are 
generated by 'screenings' which plaintiff lawyers have 
sponsored over the past several years to attract new asbestos 
clients for lawsuits,'' unquote. He was, quote, ``amazed to 
discover that in some of these screenings, the worker's x-ray 
had been 'shopped around' to as many as six radiologists until 
a slightly positive reading was reported by at least one of 
them,'' unquote. And he points out that a payment plan for the 
reader is often based on the reading result--a higher price for 
a higher reading of exposure. Now, I doubt seriously that that 
encourages objectivity.
    In addition, the American Academy of Actuaries reports in 
its December 2001 Overview of Asbestos Issues and Trends that 
two recent estimates, quote, ``indicate that the ultimate costs 
arising from U.S. exposure to asbestos could range from $200 to 
$275 billion,'' unquote. By some estimates, this amount exceeds 
the current estimates for all Superfund clean-up sites 
combined, Hurricane Andrew, or the September 11 terrorist 
attacks. Now, that is incredible.
    As I am sure our chairman is aware, asbestos litigation has 
already bankrupted over 60 companies, and one-third of those 
bankruptcies have happened in the last two-and-half years. No 
one can credibly deny that this is a serious problem.
    As Mr. Austern will testify, the number of claims is 
outstripping the resources of bankruptcy trusts to pay the true 
value of a sick person's claim. Trusts such as Manville are 
today only able to pay approximately 5 percent of a claim's 
liquidated value because of the increased number of claims 
filed each year that defy all estimated projections.
    It is possible that some of these companies may be able to 
emerge from bankruptcy someday. However, what is the cost of 
the delay caused by a reorganization and approval of a 
bankruptcy trust? What about the vastly diminished resources 
available for deserving claimants? Those that are sick may die 
before they receive compensation.
    Incredibly, there are some who will attempt to claim that 
there is no crisis at all, even some who are here today. Some 
will contend that the current system will sort itself out and 
that therefore there is no need for reform. But the general 
consensus out there is that there is a real problem, and I 
refuse to bury my head in the sand.
    I am encouraged that there are those among the trial bar 
that recognize the problem and see the need for reform. I know 
that Mr. Kazan recognizes this problem, especially because it 
affects his clients most directly. I look forward to hearing 
him elaborate on how the current system results in those that 
are truly ill having their awards reduced.
    I am interesting in hearing about how the vast numbers of 
those who are not ill are draining the limited resources of the 
defendant companies, often driving them into bankruptcy, where 
the risk is that there will be little, if any, compensation 
left for the truly deserving.
    I submit for the record a copy of a full-page ad that was 
placed in Roll Call recently and signed by 20 of Mr. Kazan's 
colleagues in the asbestos trial bar. The ad urges simple 
legislative reform to ensure that the truly sick are 
compensated, while also guaranteeing those who are healthy 
their day in court, if and when they become ill.
    Senator Hatch. I would like the written statements from the 
American Academy of Actuaries, the Coalition for Asbestos 
Justice, the National Association of Manufacturers, as well as 
several letters that I have received, to be submitted for the 
record.
    Without objection, they will be. I think the information 
they provide is helpful to our analysis and essential to the 
debate of this issue.
    In conclusion, I would like to say that I sincerely hope my 
colleagues will agree to work together so that we can attempt 
to resolve this issue in a reasonable and straightforward 
manner before its crippling effects further endanger our 
economy and cheat true victims out of compensation and innocent 
employees out of their jobs and pensions.
    I appreciate those who will testify here today and I hope 
we can shed some light on this issue and I hope that this 
statement has helped to do that.
    With that, we will recess until the chairman gets back.
    [The Committee stood in recess from 10:50 a.m. to 11:14 
a.m.]
    Chairman Leahy. Many of you, as I look around this room, 
are very familiar with the Senate and understand why the bells 
have been buzzing and the votes have been underway, a series of 
them. The one thing that will get us out of the room, of 
course, is the votes.
    I did say I would recognize Senator Voinovich, who, while 
not a member of this committee, is a very valued member of the 
Senate, a former Governor, and one whose views I respect.
    Senator you wanted to make a statement.

STATEMENT OF HON. GEORGE V. VOINOVICH, A U.S. SENATOR FROM THE 
                         STATE OF OHIO

    Senator Voinovich. Thank you, Mr. Chairman. I want to thank 
you and Senator Hatch for holding this hearing and allowing me 
to sit in on it. I have had a longstanding interest in this 
issue since I was Governor of Ohio. I have had great concern 
about the victims of asbestos.
    I think the chairman will recall that I was in the 
forefront a couple of years ago of getting a worker's 
compensation bill passed for the victims of the cold war, those 
people who worked in our uranium enrichment plants and others 
that had been treated shabbily by our Government. I have also 
been concerned about this issue. I lost my uncle at the age of 
59 from leukemia, which I believe at the time would not have 
happened if he hadn't been exposed to things where he was doing 
his maintenance work.
    The point is that we have got to strike a balance between 
the rights of aggrieved parties to bring lawsuits and the right 
of society to be protected against frivolous lawsuits and 
judgments that are disproportionate to compensating the injured 
and made at the expense of society as a whole.
    I think, Mr. Chairman, that most would agree that the issue 
of asbestos litigation is presenting a crisis in our country. 
More than 50 companies have gone into bankruptcy, and I am 
really concerned about the companies in Ohio. I think it is 
hurting the victims and I think it is hurting society.
    Owens Corning, headquartered in Toledo, went bankrupt in 
2000 and lost 97 percent of the value of its stock; 14 percent 
of it was owned by the employees. Federal-Mogul was already 
mentioned by Senator Nelson, and they lost 99 percent of their 
stock value and 16 percent was held by the employees. Of 
course, Babcock and Wilcox is also headquartered in Ohio, and 
another Ohio company, Owen Illinois, of Toledo, is faced with 
asbestos liability as well. These bankruptcies have had 
negative impacts on the victims who are really sick and who do 
not receive compensation. Employees in my State lose their 
pensions and jobs, and solvent companies face even more 
financial strain.
    The chairman knows that the Government required the use of 
asbestos in building materials from before World War II until 
1986, long after the health risks were known. Consequently, the 
Government, I believe, has a role to play in making sure that 
the sick receive compensation without bankrupting all of 
corporate America.
    Again, Mr. Chairman, I thank you very much for allowing me 
to sit in on this hearing.
    Chairman Leahy. Well, I thank you, and I thank you for your 
interest in this.
    The panel today includes David Austern, who is the 
President of Claims Resolution Management Corporation. He is 
General Counsel of the Manville Personal Injury Settlement 
Trust. The Johns-Manville Trust is the bellwether for national 
asbestos claims. Mr. Austern has run the Trust since it first 
began paying asbestos claims in 1988. That was the result of 
the Johns-Manville bankruptcy. He is highly respected by all 
parties in the asbestos litigation debate as an independent 
voice with years of experience.
    He is joined by Fred Baron, who is a partner in the law 
firm of Baron and Budd, in Dallas, Texas. He represented his 
first claim with an asbestos-related illness in 1973. The 
National Law Journal named Mr. Baron as one of the most 
influential lawyers in the United States for his work in 
protecting the rights of victims of asbestos. He has twice 
represented asbestos victims before the Supreme Court in the 
Amchem v. Windsor and Ortiz v. Fibreboard Corporation cases.
    Mr. Walter Dellinger is joining us today. He served as 
Solicitor General for the 1996-1997 term of the Supreme Court. 
He is now a partner with O'Melveny and Myers. He is well-known 
to this committee. He argued nine cases before the Supreme 
Court as Solicitor General, including physician-assisted 
suicide, the Brady Act, the Religious Freedom Restoration Act, 
and the line item veto. This past July, he testified at our 
hearing on class action litigation on behalf of the Chamber of 
Commerce, and we welcome him back.
    Jonathan Hiatt is the General Counsel of the American 
Federation of Labor and Congress of Industrial Organizations. 
The AFL-CIO represents 13 million working men and women, many 
of them exposed to asbestos at shipyards, constructionsites, 
and other workplaces. Mr. Hiatt has served as General Counsel 
at the AFL-CIO since 1995, and committee members have relied on 
his expertise many, many times.
    Finally, Mr. Steven Kazan is a partner at the law firm of 
Kazan McClain, in Oakland. He represented for the first time an 
asbestos victim in 1974, if I am correct. He has represented 
thousands of the most seriously ill asbestos victims, and from 
1998 to the year 2000 he served as Co-Chair of the Mealey's 
National Asbestos Litigation Conference.
    I thank you all. Mr. Austern, why don't we begin with you, 
sir? And, again, I appreciate all of you coming here and I 
appreciate you taking the time on this hearing.

   STATEMENT OF DAVID T. AUSTERN, GENERAL COUNSEL, MANVILLE 
      PERSONAL INJURY SETTLEMENT TRUST, FAIRFAX, VIRGINIA

    Mr. Austern. Thank you, Mr. Chairman. As noted, I am 
president of the corporation which processes claims not only 
for the Manville Trust, for which I serve as general counsel, 
but we also handle asbestos claims for three other asbestos 
trusts.
    As reflected in my written submission to the committee, and 
as noted in the written in the written submissions of some 
other witnesses today, the Manville Trust has received more 
asbestos claims than any defendant in the tort system and more 
asbestos claims than any other asbestos trust. Thus far, we 
have received almost 600,000 claims.
    Our extensive asbestos claims data base has between 25 
percent and 30 percent more claims than any other entity. I 
would like to share with the committee some of what that 
asbestos claims data base shows.
    First, in addition to receiving almost 600,000 claims, we 
have paid almost 500,000 of these claimants approximately $2.9 
billion. From the beginning of the Trust to date, 11 percent of 
the people we have paid have had cancer claims and 89 percent 
have had non-cancer claims.
    Recently, the cancer versus non-cancer division has 
changed, so that in the year 2000, 9 percent of the claims we 
received were cancer claims and 91 percent were non-cancer 
claims. And in 2001, cancer claims were 6 percent of the claims 
filed and non-cancer claims were 94 percent of the claims 
filed.
    We pay claims as directed by our negotiated and court-
approved trust distribution process, and we pay non-cancer and 
cancer claims as directed by that. To date, approximately $2 
billion of our $2.9 billion in paid claims has gone to non-
cancer claims, and we, of course, have no flexibility in this 
matter.
    With respect to disease progression and how many of the 
non-cancers will eventually get cancer, of the over 400,000 
non-cancer claimants who have been paid by the Trust, 2,947 of 
them, after they received the non-cancer payment, then 
developed an asbestos-related cancer, for which they filed a 
claim. This is substantially less than 1 percent of all the 
non-cancer claims we have paid.
    Recently, there have been amendments to our claims 
processing system, and while these amendments, in my opinion, 
at least, are a substantial improvement over the existing 
system, they certainly don't please everyone. Although in the 
administration of our claims processing system and indeed in 
the recent amendments to it we try to be sensitive to the 
concerns that I know Mr. Baron will speak to, as well as the 
concerns I know Mr. Kazan will speak to, trying to meet the 
concerns of all these parties means that inexorably we are not 
going to please everyone all the time.
    But so much for history. Where are we in the life cycle of 
asbestos claims filings? It is abundantly clear that predicting 
how many future claims there are going to be is very difficult. 
It has always in the past been inaccurate and it has always in 
the past invariably underestimated the number of future claims.
    My written submission, which by the way I recently 
discovered overstates the Tillinghast-Towers Perrin predicted 
total asbestos liabilities and claims--my written submission 
presents the dismal history of trying to predict future claims.
    However, based on the predictions, first, of the expert 
asbestos claims forecaster employed by the plaintiffs' bar, we 
have received only about 45 percent of all the asbestos claims 
we will receive. Other forecasts of future asbestos claims 
suggest that we have received only 30 percent or so of the 
claims we will receive. And some future claims forecasts are 
even worse; that is, they predict we will receive over 3 
million asbestos claims, such that we have received only 20 
percent of the claims we will receive. Almost everyone agrees, 
however, with respect to asbestos claims we are not halfway 
there and we are looking at 20 years or so of substantial 
future claims filings, and thereafter even more years with some 
claim filings.
    Therefore, in exploring whether there is an appropriate 
legislative solution to this problem, I would encourage that 
the driving public policy consideration, first, not be 
constrained by the view that the asbestos claims filings are on 
their way down--they are not--and, second, that it not be 
constrained by how we or any other system processes asbestos 
claims. Rather, I would hope that the driving public policy 
consideration for any legislation and any legislative solution 
be based on an absolutely clean slate so that new ideas and new 
solutions can be considered.
    Thank you very much.
    [The prepared statement of Mr. Austern appears as a 
submission for the record.]
    Chairman Leahy. Thank you very much.
    Mr. Baron?

STATEMENT OF FREDERICK M. BARON, BARON AND BUDD, P.C., DALLAS, 
TEXAS, ON BEHALF OF THE ASSOCIATION OF TRIAL LAWYERS OF AMERICA

    Mr. Baron. Mr. Chairman, good morning. My name is Fred 
Baron. I am here today to present the views of the Association 
of Trial Lawyers of America on asbestos litigation, and, 
because of my own experience as a lawyer for asbestos victims 
for almost 30 years, offer my own personal observations. We 
have submitted a comprehensive written statement of our 
position which summarizes the positions of ATLA on asbestos 
litigation.
    In a nutshell, Senator Leahy, as you have pointed out, the 
principal problem is the fact that for over 50 years, tens of 
millions of American workers were unknowingly exposed to 
asbestos fibers occupationally and hundreds of thousands, if 
not millions, have suffered injuries that are compensable under 
the State common laws of all 50 States. ATLA's first and 
principal interest is to assure that there is a system in place 
that these victims can use to obtain adequate and expeditious 
compensation for their injuries.
    This morning, I would like to address three issues: first, 
the issue of the so-called court congestion; second, the issue 
of unimpaired claims; and, third, offer some suggestions as to 
what might be done to help asbestos victims.
    Let's talk about court congestion first. I filed my first 
claim for an asbestos victim in 1973. It was a long, hard, 
expensive litigation. Indeed, the first 10 or 15 years of 
asbestos litigation involved enormously expensive, costly 
litigation between the victims and the defendants. But that 
only matched the long, lengthy, costly litigation between the 
asbestos defendants and their insurance carriers over whether 
or not there would be coverage for these claims.
    Studies that were undertaken in the 1980's showed correctly 
that the amount of money that was being spent on asbestos 
litigation was enormous and the amount of compensation that was 
being paid to victims was relatively paltry in relation to that 
number. Over the last decade, after hundreds and hundreds of 
claims were tried to juries in the 1980's, that has changed.
    Senator Leahy, I'd like to refer to a chart regarding 
asbestos trials. There are about 50,000 asbestos claims filed 
in the State and Federal courts each year. Of that 50,000, 90 
percent of them are filed in the State courts rather than in 
the Federal courts, and 85 percent of the claims are filed in 
only 10 States.
    As you can see from this chart, the total number of trials 
involving asbestos claims in the United States during the 
period January 2000 to December 2000, was only 55 claims, and 
for last year, 2001, it was only 61 claims. So in terms of 
court time, only 61 trials were held in all of the State and 
Federal courts in the United States last year, and I believe 
that number will be less this year. That is matched against 
50,000 asbestos claims being filed in the State and Federal 
courts and 50,000 asbestos claimants settling their claims.
    Second, most of the courts in these impacted jurisdictions, 
the ten or so States, have developed special litigation 
processes for asbestos cases. If an individual presents with a 
significant disease such as mesothelioma, that individual goes 
to the head of the line.
    When a client comes into my office today with mesothelioma, 
I can assure that client that they will receive their first 
compensation within 90 days, and the likelihood is strong that 
their trial will occur in 12 months. As to an asbestosis 
victim, again because of the enormous number of administrative 
settlements that we have reached, victims get compensated 
usually within 6 months and their case is often completed 
within 24 months.
    Next, I would like to visit the issue of the so-called 
flood of unimpaired claims. First, and most important, is a 
definitional issue. No State in the United States permits a 
person who is exposed to asbestos but who has not been 
diagnosed with an asbestos-related disease to successfully 
prosecute a claim. There is no such thing as a claim for 
concern about ``I am worried that I'm going to get sick 
later.'' None of the 50 States permit such claims to be 
successfully prosecuted.
    Recently, I took the deposition of a claims manager of the 
largest group of asbestos defendants, and he told me with a 
straight face under oath that he did not believe he had ever 
paid a dime to anyone who did not have a diagnosed asbestos-
related disease.
    There are essentially three forms of asbestos-related 
disease. First is pleural disease. Pleural disease is a 
scarring of the lining of the lung. Admittedly, that does not 
cause disability, but it clearly is a diagnosed injury that is 
made by a physician.
    Second is asbestosis, which represents the largest number 
of claims. Asbestosis is a scarring of the lining of the lung 
and the interior of the lung. This is a disease that the 
medical textbooks say represent a significant problem. 
Asbestosis, by all accounts, is progressive, it is 
irreversible, and if it goes on long enough, it can be 
terminal. Certainly, victims of asbestosis deserve 
compensation.
    Third is cancer. Asbestos does indeed cause cancer. It 
causes mesothelioma and lung cancer. But in terms of the 
enormity of the problem, the National Cancer Institute believes 
there are only about 2,800 mesothelioma deaths a year in the 
United States. About 1,600 of those individuals file claims. I 
can tell you today that most victims of mesothelima receive 
compensation--not all of them--but most of them receive 
compensation in mid to high seven figures.
    As to the pleural claims, I have the numbers from the 
Manville Trust here on a chart and in terms of the percentage 
of all claims filed, it has gone from 24 percent, which was 
pre-1995, down to 14 percent in 2001. And in terms of the 
dollars paid by the Manville Trust, pre-1995 it was 7 percent, 
and since then only 4 percent. So all the dollars paid by the 
Manville Trust, only 4 percent have gone to pleural claims. All 
other moneys have been paid to individuals who have presented a 
physician's diagnosis of asbestosis or cancer.
    What can be done by Congress to help? It's my opinion the 
most important thing that needed to be done has been 
accomplished with the passage of Section 524(g) of the 
Bankruptcy Code. That provision assures funding for future 
claimants and permits bankrupt defendants to leave bankruptcy 
as solvent, reorganized companies.
    Remember, virtually every one of the asbestos bankruptcies 
has been a Chapter 11 bankruptcy, not a Chapter 7 bankruptcy. 
No jobs are lost. The best example is the Johns-Manville 
Company. When it emerged from bankruptcy in 1987, its assets, 
$2 billion, were placed into a trust for victims. To date, over 
$2.9 billion has been paid to victims, and over $2 billion 
still remains in the trust because of successful asset 
management. Berkshire Hathaway now owns Johns-Manville and it 
is a larger, healthier company than it was before it entered 
bankruptcy.
    Certainly, there are some things that can be done to help. 
Number one is tax relief for 524g trusts. There is no reason 
why the trusts who are paying money to victims should be taxed 
at the normal rates.
    I understand, Senator Leahy, you have sponsored a bill that 
would give a tax exemption to the asbestos-related trusts. That 
would be an excellent idea and a good start to provide more 
money for victims.
    Finally, there have been some suggestions involving the 
creation of a National compensation fund for asbestos victims. 
ATLA believes that such proposals are interesting and should be 
explored. But if this Committee is going to pursue such 
proposals the first and foremost thing that has to happen is a 
thorough investigation of the total resources that might be 
available from all sources.
    Again, ATLA believes the principal concern of this 
Committee should be to assure that victims of this 
unprecedented industrial tragedy are properly compensated.
    Thank you, Senator.
    [The prepared statement of Mr. Baron appears as a 
submission for the record.]
    Chairman Leahy. Mr. Dellinger, you are here representing--
--

  STATEMENT OF WALTER E. DELLINGER, O'MELVENY AND MYERS, LLP, 
                        WASHINGTON, D.C.

    Mr. Dellinger. Mr. Chairman, I was invited to appear by 
Senator Hatch, which I was pleased to accept. But I should also 
note that the law firm with which I am a partner, O'Melveny and 
Myers, has among its clients a number of companies who are 
defendants in asbestos cases.
    I further note that I personally filed a petition with the 
U.S. Supreme Court asking the Court to review the trial plan in 
West Virginia and a so far unsuccessful application to stay 
that trial of----
    Chairman Leahy. I mention that because as we let Mr. Baron 
go over a couple minutes, we will let you go over a couple 
minutes for balance.
    Mr. Dellinger. Thank you, Mr. Chairman.
    I think it is a great benefit to the Congress and to the 
country that you and Senator Hatch and the other members of the 
committee have set out to try to define the scope of this 
problem and to see if there is some bipartisan effort that we 
could make in order to ameliorate what I think everybody, with 
the possible exception of Fred Baron, thinks is a quite serious 
problem; indeed, what the U.S. Supreme Court has called a 
crisis.
    There are really several elements that have produced this 
as a crisis. Before I went into the Government in 1993, I 
looked at the asbestos situation and thought by the year 2002 
that it would be beyond us. Since heavy use of occupational 
asbestos ceased in the 1970's, we would be at that time seeing 
the end of the process. But, in fact, we have a full-blown 
crisis that has caused 60 bankruptcies and is threatening the 
viability of claims by people who are seriously impaired.
    Here is what has happened. I do think, in spite of Mr. 
Baron's statistics, that the system is being flooded by people 
who are not sick, and the RAND study which has been submitted 
to this committee shows that, as well as other claims.
    We know from the Manville Trust figures that we just heard 
this morning that 94 percent of the 2001 claims were non-cancer 
claims. Of that, there are no doubt some that are suffering 
from severe forms of asbestosis which indeed can impair a 
person. But every estimate--and I look in West Virginia--is 
that far and away there are claims of people who are not sick.
    Let me say precisely what I mean by that. I am using that 
term, ``people who are not sick,'' as the American Medical 
Association and the RAND study that term; that is, an 
individual who experiences no decrease in the ability to 
perform the activities of daily lives; in other words, as RAND 
says, an individual who would be assigned a zero impairment 
rating, according to the American Medical Association's 
definition.
    What has happened and the reason these claims are 
compensable is that, increasingly, one is able to forum-shop 
and go to a jurisdiction which will allow cases to be brought, 
first of all, by people who are not demonstrating that they are 
sick. The forum-shopping means that the problem is localized in 
a few States and a few counties which are themselves adopting a 
national legislative solution, when they are not a legislature 
and they haven't been chosen by the people of the other 49 
States and when the solution is itself flawed.
    What happens is that you have a mass-trial proceeding like 
the one in West Virginia where you set up a trial plan for 
8,000 claims to be tried against over 250 defendants in a 
single proceeding. It is going to be impossible to get a fair 
trial. That means that settlements are forced, as they have 
been this week, when no one knows whether those 8,000 claims 
would indeed show up as being valid claims or impaired claims, 
or whatever, because so many companies cannot afford to go 
through that kind of process. When payments are made to people 
who are not impaired, that then in turn brings another set of 
cases that will never be examined closely and will go through a 
mass-trial process.
    What are the effects of this? There are adverse effects on 
the defendant companies, on their employees, on their 
shareholders and on pension programs. There are adverse effects 
on plaintiffs who are seriously impaired, and Mr. Kazan will 
speak to that this morning.
    While there are some very strong companies who have now 
been brought in as defendants in this case, that doesn't help a 
victim suffering from severe mesothelioma or his or her 
survivors. Companies that they could sue have gone bankrupt.
    If you look at this morning's Washington Post, Mr. 
Chairman, it notes the case of the widow of electrician Dale 
Dahlke on the front page of the Business Section. He died of 
mesothelioma. She has brought suit against 11 companies and all 
11 have gone bankrupt. The fact that there are other companies 
out there in the economy whom she can't sue and against whom 
she has no claim that could be sued by other people does her no 
good whatsoever.
    I think Mr. Kazan will demonstrate that point quite 
effectively that people now have claims they cannot get 
reimbursed against companies that are in bankruptcy, when many 
of those companies, nearly all of those companies, have made 
payments to people who are not sick.
    The trial process, finally, I think, not only causes a 
problem for the economy, but it also calls into question that 
fairness of the civil justice system. As the Committee on the 
Judiciary, I think that is something about which you ought to 
be concerned.
    As someone who has taught civil procedure for many of the 
years I was at Duke, I don't see any semblance in a civil 
procedure book to the kind of trial plan that is going to go on 
where you have got hundreds of defendants trying to make 
defenses against thousands of plaintiffs at a single time. This 
trial plan doesn't exist in the same universe as the Due 
Process Clause of the United States Constitution. It is a trial 
plan that was never designed to produce a fair result. It is a 
trial plan that produces settlements. And I do not take the 
comfort that Fred Baron takes in the relatively few number of 
trials. I think the relatively few number of trials we see 
reflects the fact that the trial process that is anticipated is 
fundamentally unfair.
    Let me conclude, Mr. Chairman, by saying that I am pleased 
that you and the other members of the committee want to help 
achieve a solution to this. We know what we have to have--full 
and timely compensation for those remaining victims and future 
victims who suffer from serious illnesses. We need to stop the 
hemorrhaging of hundreds of millions of dollars going to those 
who are not sick, to protect American jobs, pensions, and 
shareholders. Finally, we need to ensure that there is no 
asbestos exception to the United States Constitution, and that 
we can be confident that our system of justice operates in a 
manner that is fairly designed to achieve justice.
    Thank you.
    [The prepared statement of Mr. Dellinger appears as a 
submission for the record.]
    Chairman Leahy. Thank you, Professor.
    Mr. Hiatt, as I noted earlier, the AFL-CIO has thousands of 
members. It also has a very large number of those members who 
have asbestos-related illnesses, and so we are glad to have you 
here and thank you very much.

   STATEMENT OF JONATHAN P. HIATT, GENERAL COUNSEL, AMERICAN 
 FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, 
                        WASHINGTON, D.C.

    Mr. Hiatt. Thank you very much, Chairman Leahy and members 
of the committee. I would like to thank the committee for 
providing this opportunity to present the Federation's views on 
the deficiencies of our current litigation-based system of 
resolving asbestos claims and on the need for Federal 
legislation that would adequately address the rights of workers 
suffering from exposure to asbestos.
    As you mentioned, Mr. Chairman, the AFL-CIO's member unions 
represent millions of active and retired workers who have been 
occupationally exposed to asbestos, hundreds of thousands of 
whom are living with the deadly consequences. For many, this 
exposure occurred while working in defense-related industries, 
in shipyards, for example, or in other public service, also in 
building and construction, in transportation, other 
manufacturing industries.
    More recently, we have seen an increase in asbestos-related 
diseases among those working in telecommunications and the 
service and maintenance trades. For far too many of these 
workers, the legal system has offered lengthy delays, followed 
by limited compensation, compensation which often comes much 
too late.
    The exposure of millions of working Americans to asbestos 
is one of the largest torts in this Nation's history. In the 
recent very comprehensive study that Senator Hatch alluded to 
earlier this morning, the RAND Institute estimated that as of 
the end of the year 2000, over 600,000 claims, as I think he 
said, have been filed, at a cost of $54 billion, less than half 
of which had actually been paid to the victims themselves. RAND 
now projects that up to 2.5 million more claims will be filed, 
at a potential cost of over $200 billion.
    I don't agree with Mr. Baron that there is any evidence 
that these transaction costs are going down. In fact, on pages 
60 and 61 of this RAND Institute study, they address this and 
say that, of the total cost of every dollar up until the 
1990's, about 37 cents was going into the pockets of the 
victims. And in the 1990's, that had only risen to about 43 
cents on the dollar. So I think it is still a major problem.
    The labor movement has been actively involved in efforts 
over the past several years to craft solutions to the tragedy 
of asbestos. We have sought to work with all the interested 
parties, with manufacturers, insurers and other defendants, 
counsel for both plaintiffs and defendants, the Johns-Manville 
Trust, and congressional leaders of both parties.
    In the last major attempt here on the Hill to address this 
issue, we worked closely with then-Chairman Hyde of the House 
Judiciary Committee and Ranking Minority Member Conyers, who 
both sought to forge a consensus among the various parties. And 
for reasons I have outlined in my written testimony, those 
efforts didn't succeed, but a lot was learned and we remain 
willing to participate in these efforts.
    We believe that there is a broad and growing recognition by 
all interested parties that there are serious problems with the 
way the civil litigation system has ultimately addressed the 
plight of asbestos victims. In addition to the high transaction 
costs and excessive delays that I have already alluded to, 
these problems include inequitable allocation of compensation 
among victims, caused in part by the so-called bundling of 
claims in consolidated mass settlements which Mr. Dellinger 
just talked about and a general climate of uncertainty that is 
damaging business far more than it is compensating victims. 
Also, uncertainty for workers and their families is growing as 
they lose health insurance and see their companies file for 
bankruptcy protection.
    Meanwhile, we think there is also a growing recognition 
that some of these problems could be eased by developing 
alternative methods of resolving the claims of asbestos 
victims. But we are convinced that any legislative solution to 
the asbestos crisis has to meet certain basic fairness tests. I 
have appended to my testimony the AFL-CIO's Executive Council 
statement on asbestos which lays these out, and I would just 
like to conclude by saying a few words about some of them.
    First, anyone who has been measurably affected by asbestos 
exposure has suffered a wrong and should receive some amount of 
monetary compensation for that wrong. We completely agree that 
those with serious disease--cancer, mesothelioma, advanced-
stage asbestosis--are in a completely different category and 
should be entitled to significantly more compensation than 
victims with less serious disease.
    Where one draws the line--that is, what medical criteria 
are employed--will be a critical determination. But for those 
elements of the business community who believe that asbestos 
reform simply means knocking out of the system victims with 
less serious forms of impairment, this is a non-starter as far 
as we are concerned.
    Here, I do agree with Mr. Baron and I don't agree with Mr. 
Dellinger. I don't think there are just two categories, people 
who are very, very sick and people who are not sick at all. It 
is not that simple, and I think there is a very large middle 
category of people who are impaired, who are sick, and who need 
to have some monetary compensation, even if they should be 
looked at differently from the most seriously impaired.
    Second, while an administrative system may have benefits 
for some classes of asbestos victims, those with serious 
asbestos-related medical conditions must have unimpeded access 
to the courts. Moreover, victims with early stages of asbestos-
related disease should not be required or pressured to waive 
their right to additional compensation if their conditions 
worsen.
    Third, any substitute reform system should be cheaper, 
speedier, and less adversarial than the present system for 
plaintiffs as well as defendants, and it can't be a device for 
re-litigating the broad issues that have effectively been 
settled in these past many years of litigation.
    Fourth, any new system has to provide for affordable 
testing and monitoring to all those who have been 
occupationally exposed. This is particularly important since, 
at present, the trial lawyer bar, as Senator Hatch mentioned, 
is offering this service at no cost to the workers in numerous 
locations throughout the country. So any substitute initiative 
which significantly reduces the need for legal services will 
remove this critical feature of the current system, leaving 
potential victims unable to adequately track the status of 
their medical condition.
    Finally, there has to be sufficient funding for any newly 
legislated system. As the RAND study that I cited earlier 
acknowledges, we are potentially talking about a very, very 
large amount of money that will be necessary to finance a 
substitute system. If the defendant community is unwilling, 
first, to provide the relevant financial information necessary 
to determine costs, which has been a continuing problem, and, 
second, to subsidize those costs, then it will be impossible to 
reach any sort of consensus solution.
    Of course, we strongly support a contribution from the 
Federal Government, which after all does bear its own 
significant share of responsibility for this catastrophe. But 
even with Government money, that will not remove the need for a 
major financial investment from the defendant community to fund 
any comprehensive solution, and that investment cannot be 
arbitrarily capped in such a way as to place the ultimate risk 
back on the victims, as we have seen with the Manville Trust 
experience.
    Even so, the goal would be for the costs to be more defined 
and more predictable than is true at present, and presumably 
the amounts involved would also be reflective of substantially 
reduced transaction costs in the asbestos compensation system, 
leaving more money for victims and for companies.
    Thank you, Mr. Chairman, and we are prepared, as I said at 
the outset, to work closely with you and the committee in 
trying to fashion a solution to this problem.
    [The prepared statement of Mr. Hiatt appears as a 
submission for the record.]
    Chairman Leahy. Well, we thank you, and we thank you for 
all the hours you have spent up here with us and other 
committees in representing your membership.
    Mr. Kazan, I am sure I am mispronouncing your name. Please 
give me the pronunciation.

  STATEMENT OF STEVEN KAZAN, KAZAN, MCCLAIN, EDISES, ABRAMS, 
       FERNANDEZ, LYONS AND FARRISE, OAKLAND, CALIFORNIA

    Mr. Kazan. Well, it is Kazan, Mr. Chairman, but I have been 
called lots worse than Kazan.
    Chairman Leahy. I try very hard to get names right. So, Mr. 
Kazan, I am delighted you are here and thank you for coming all 
the way across the country to join us.
    Senator Hatch. We all understand that situation of being 
called worse.
    [Laughter.]
    Chairman Leahy. Except for Senator Hatch, whom we all speak 
reverentially to.
    Senator Hatch. I would like to hear a little bit more of 
that.
    [Laughter.]
    Mr. Kazan. Thank you, Mr. Chairman and members of the 
committee. I am a plaintiffs' lawyer. I represent people who 
are dying from cancer caused by asbestos exposure. I speak for 
myself and other members of the asbestos bar who stand up for 
the interests of asbestos cancer victims. Some of these 
victims, including Ms. Dahlke, are here with us today.
    Asbestos litigation has become a national nightmare, as 
well as a national disgrace, and cries out for your attention. 
The legacy of asbestos disease is a tragedy for my clients and 
their families, made only worse by a legal system that is 
compounding their plight. Everyday, we see people who are 
seriously ill. Many have just a few months to live.
    In the past, I could promise a man dying of mesothelioma, a 
progressively debilitating and incurable cancer that kills 
within a year or two, that his lawsuit would guarantee his 
family's financial security after he was gone. Today, in many 
cases, I can no longer make that promise.
    How did we get here? It is a tragic tale that begins with 
outrageous corporate disregard for the health and safety of 
American workers and continues today with a betrayal by the 
justice system that is supposed to protect them.
    Industry knew by the 1920's that asbestos could harm the 
lungs and cause death, but did not begin to warn workers until 
the mid-1960's. Public concern, the establishment of OSHA, and 
fears of liability finally led to a drastic reduction in 
asbestos use after 1973. However, the earlier exposures have 
left a wake of incubating devastation that will be with us for 
decades.
    The health effects of asbestos exposure vary. It causes 
some cancers and non-cancer conditions as well. The two 
principal cancers are lung cancer and mesothelioma. There are 
2,000 or more mesothelioma cases expected each year for at 
least the next 15 years, with significant additional cases well 
into the 40's of this century. Asbestos also contributes to 
another 4 to 5,000 lung cancers each year. In my view, any 
serious look at the asbestos crisis must first focus on the 
needs of these victims.
    Asbestos exposure also causes two non-cancer conditions--
asbestosis and pleural changes. Asbestosis is a scarring of the 
lungs which can lead to disability and even death. Fortunately, 
such extreme cases are quite rare today. Pleural changes 
usually take the form of plaques, small thickened areas on the 
membrane between the lungs and the ribs. Plaques do not, 
however, cause any symptoms and have no effect on lung 
function. Neither asbestosis nor pleural plaques turn into lung 
cancer or mesothelioma.
    Asbestos victims began filing suit against manufacturers in 
the early 1970's, and by the late 1970's seriously ill victims 
were winning their cases. By the mid-1980's, a disturbing new 
trend began to emerge. Some of my colleagues began filing 
thousands of claims for people who just were not sick. Three 
years ago, this trend accelerated rapidly.
    Today, these claimants are often treated like commodities, 
recruited and bundled by hired-gun operators of mobile x-ray 
equipment or through websites that proclaim to people ``you may 
have million-dollar lungs.''
    We have gone from a medical model in which a doctor 
diagnoses an illness and the patient then hires a lawyer to an 
entrepreneurial model in which clients are recruited by 
lawyers, who then file suit even when there is no real illness. 
These are not patients; they are plaintiffs recruited for 
profit.
    Last year, some 90,000 asbestos claims were filed. Less 
than 7 percent were for cancer and 75 percent or more were 
filed by lawyers for people without any asbestos breathing 
problem whatsoever. The burden of paying people who are not 
sick has sucked billions of dollars out of the defendant 
companies, pushing more than 60 in bankruptcy; more than 20 
since January of 2000 alone.
    I have no sympathy at all for the asbestos defendant 
companies. The wrongs they did are the cause of this public 
health catastrophe, but these companies provide the only 
resources to compensate my clients and other asbestos victims. 
Bankruptcies delay compensation for years and severely reduce 
the amounts awarded to the sick.
    In 1991, the U.S. Judicial Conference called asbestos 
litigation a ``crisis,'' saying ``the worst is yet to come.'' 
If Congress did not act, they said, ``all resources for payment 
will be exhausted in a few years,'' leaving ``many thousands of 
damaged Americans with no recourse at all.''
    They were right, and it just keeps getting worse. The U.S. 
Supreme Court has called on Congress several times to act. As 
you consider this problem and its potential solutions, I ask 
you to think about those hurt most by asbestos, people who are 
seriously and often terminally ill. Think of their husbands or 
wives and of their children. I urge you to act quickly to fix 
this broken and abused part of our justice system before the 
real victims of asbestos lose everything. Only Congress has the 
power to end this national nightmare.
    Thank you.
    [The prepared statement of Mr. Kazan appears as a 
submission for the record.]
    Chairman Leahy. Thank you.
    Senator Carper, did you want to add something here before 
we go to the questions?
    Senator Carper. I simply want to say, Mr. Chairman, my 
heartfelt thanks to you for scheduling this hearing and for our 
witnesses that are here. This is a very important issue. There 
is a reasonable compromise that can be found on this issue that 
is fair to those who have been harmed and to the businesses. 
There is a fair compromise and it is just incumbent on us to 
find that.
    I thank you for this hearing.
    Chairman Leahy. I thank you, Senator, and I appreciate the 
time you have spent with us and the amount of time you have 
spent at these matters before this committee.
    Senator Voinovich, I thank you, too.
    Mr. Austern, let me ask you a question because I sort of 
think of you as the repository of a great deal of information, 
probably more than you would like to have, on these issues.
    We see all the things written about the types of victims 
filing claims, including these so-called unimpaired victims. As 
I read this, it almost depends upon who is writing it, what 
unimpaired means, so if I can ask you some specific questions 
about the unimpaired, especially as it refers to claims filed 
with the Manville Trust which is sort of the bellwether here.
    Some have claimed that anyone who does not have cancer has 
not been truly injured by asbestos. On the other hand, we heard 
what Senator Baucus said earlier about the family in Montana 
and some of the Libby, Montana, victims.
    Does the Trust have victims of asbestos exposure that don't 
have cancer, but do have serious physical ailments?
    Mr. Austern. In aggregate total, from inception to today, 
11 percent of all claims were cancer and 89 percent were not. 
Accepting Mr. Baron's pleural figures as I do, because they are 
accurate, of the actual claims filed in total thus far, 18 
percent have been pleural.
    With respect to the issue of whether the remaining 59 
percent suffer from impairment, I am not a medical doctor or a 
doctor of any sort. Clearly some do not, clearly some do. In 
our changed trust distribution process that I alluded to, the 
definition of a serious asbestotic has changed. It now requires 
that someone have a particular severity of the disease.
    We have attempted to model how many people that would be 
each year based on this new definition of severe asbestos 
disease. It would be 40 or 50. It is an irrelevant number in 
terms of how much we will be able to pay and all the others 
will not have a severe asbestos disease.
    Chairman Leahy. Well, help me a little bit further on this. 
There is an increase in filings for people with disabling 
asbestosis. It was about 25 percent in 1999 and it went to 39 
percent in 2000, and so on.
    What is disabling asbestosis and are these people impaired?
    Mr. Austern. The definition of disabling asbestosis in the 
system that we now have, not the changed system, not the one 
that goes into effect, requires that a person have an x-ray 
result that shows that they have an asbestos disease. Candidly, 
it is a low severity, but nonetheless an asbestos disease. As 
Mr. Baron said, it is scarring of the lungs.
    And, second, for severe asbestosis, they must have had a 
breathing test and that breathing test must show that at least 
one of the scores was below 80 percent of what would be 
expected for their age, their height, their weight, and certain 
other factors.
    Chairman Leahy. Let me start now at this end of the table 
and ask you about getting information. Mr. Hiatt had said that 
manufacturers and their insurers failed to provide full 
financial information on the funding needed to support an 
acceptable claims resolution system.
    Now, Mr. Kazan, I am going to ask you and Mr. Hiatt and Mr. 
Baron, could you comment on this and whether you agree that 
getting complete financial information from the manufacturers 
and insurers is critical to give any kind of intelligent 
evaluation of a reform proposal?
    Mr. Kazan?
    Mr. Kazan. Well, Mr. Chairman, these are mostly publicly 
traded companies and my understanding is that they are, in 
fact, required to publish financial data. We have never had a 
problem that I know of finding out what their assets, and so 
on, are.
    I can tell you that in many bankruptcies the plaintiffs' 
committees on which I and Mr. Baron usually serve vigorously 
investigate and go after hidden assets of the kind that Senator 
Baucus mentioned in his earlier remarks.
    Chairman Leahy. Are you including insurance companies in 
this, too?
    Mr. Kazan. Well, the insurance assets or the claims of 
insurance coverage are also discoverable and we know about 
them. I did come today, however, Senator, prepared to talk 
about the problem rather than the solutions because I thought 
that was what you had instructed us to do.
    Chairman Leahy. That is fine, but we have got to find 
solutions. But would you say that in finding those solutions, 
it is also necessary to know what the financial backgrounds 
are?
    Mr. Kazan. I think we have that information and I don't 
think that is a problem.
    Chairman Leahy. Mr. Hiatt?
    Mr. Hiatt. Well, my concern, Senator, was not so much on a 
company-by-company basis, and I did not make my statement from 
the perspective of difficulty we have had in a particular piece 
of litigation where there are legal obligations that the 
attorneys can take advantage of to provide the information, but 
rather in terms of the wholesale scope of this problem and what 
the business community as a whole and the insurer community as 
a whole would need in order to subsidize this problem.
    Admittedly, that is a very difficult task because nobody 
does know, as the RAND people acknowledge, what the long-term 
scope of this is going to be. But we don't want is another 
Manville situation where we start off thinking that we have a 
total sum that is a realistic figure, only to have within a few 
years that fund being able to pay only five cents on the 
dollar. That is what we are most concerned about.
    Chairman Leahy. That is also my concern. As Justice 
Ginsburg suggested in her case, if we are going to find a 
legislative solution, and I would think if we are going to set 
up a system for victims, we also have to know that the 
financial wherewithal is there. That is a question I have. I 
will stop with that, but I will leave it to anybody else to 
speak--Mr. Baron, you can, or Mr. Dellinger or Mr. Austern--to 
that question.
    I should also note in this that we are using a lot of 
statistics, a lot of figures, and shorthand on some things. I 
only want the results of this hearing to educate all of us. 
Look at your testimony afterwards. I will make sure, and I am 
sure Senator Hatch will have no objection to this, that the 
record will stay open so that each one of you can amplify in 
any way that you wish to on your answers.
    Mr. Baron?
    Mr. Baron. Well, I think you hit the nail on the head, Mr. 
Chairman. I think complete financial disclosure is the first 
and most essential piece to this effort because if a fund is to 
be created, we need to know what the financial parameters of 
the fund are.
    Indeed, we are here because so many of these companies and 
their insurance companies claim that they don't have adequate 
resources to cover the load. You need to look into that issue 
and identify what resources are available because it is 
essential that claimants have the ability to access a fund that 
is going to be adequate to pay fair compensation.
    Unfortunately, there have been numerous cases of fraudulent 
conveyances and years of litigation trying to bring back assets 
to companies that have been spun off or involved in a shell 
game essentially to eliminate liability exposure to asbestos 
claimants. I think that this investigation is going to be a 
long, tedious process, but I think it is the first thing that 
needs to happen before a fund is created.
    Chairman Leahy. Thank you.
    Mr. Dellinger?
    Mr. Dellinger. Mr. Chairman, just a personal word, speaking 
entirely for myself in this instance about the role of the 
Federal Government which I have reflected on for some years.
    In World War II, we faced a critical situation where we 
were going to lose control, I think, of both the Atlantic and 
the Pacific Oceans and we had to have ships. We asked shipyards 
to get ships out into the water to do battle in World War II, 
and we threw our workers into that situation, shipyard workers, 
and they got those ships out. There was huge exposure to 
asbestos. It is the source of some big portion of this claim.
    And we all benefited from that. Everybody in this room 
today benefits from the fact that we got those ships out there. 
So in terms of the appropriateness of a claim and that those of 
us in this generation have benefited from those World War II, 
there is actually a very good argument to be made that we as 
beneficiaries should contribute at least to that aspect of the 
problem that was caused by what we absolutely had to do in 
World War II.
    Chairman Leahy. Thank you.
    Mr. Austern. Mr. Chairman, if I could echo Mr. Dellinger's 
comment, not for a solution today, but I would like to make 
available to the committee at a future time the very 
substantial record that the Manville Corporation had in suing 
the Federal Government for the exact liability that Mr. 
Dellinger just mentioned. I think it would be of interest to 
the committee to see just how much the Government, in fact, 
knew about the very dangers of asbestos that Mr. Baron and Mr. 
Kazan have just spoken about.
    Chairman Leahy. Thank you.
    Senator Hatch?
    Senator Hatch. Well, thank you, Mr. Chairman. This is a 
very interesting hearing to me and I respect all of you 
greatly. But, Mr. Dellinger, I am having a hard time 
understanding how the court in West Virginia could consolidate 
or cojoinder the claims of 8,000 plaintiffs against 250 
defendants.
    Can you explain to me how this provides due process to any 
of the parties involved?
    Mr. Dellinger. Senator, that is a good question.
    Senator Hatch. Does this compromise the rights of asbestos 
victims?
    Mr. Dellinger. Here we have thousands of plaintiffs who 
worked at hundreds of locations all around the country. They 
worked in different kinds of jobs, they worked in different 
time periods over six decades. They had different individual 
health backgrounds. They were exposed to hundreds of different 
products with different applications, different instructions, 
different warning labels. They have, among the 8,000, different 
theories of recovery.
    But under the mass tort rule, the liability of hundreds of 
defendants to those thousands of plaintiffs was going to be 
resolved in a single mass proceeding where defendants would not 
have any opportunity to show that the claims against them had 
no relationship to the claims made against them, or to 
demonstrate the tremendous difference among defendants. In that 
setting, it is hard not to assume that the worst is going to 
happen and that you have to settle.
    Now, that has real consequences. If the tort system doesn't 
operate fairly, it doesn't achieve its goal of providing proper 
incentives to good conduct. If it is just a random shot as to 
whether you are found liable or not, so that companies that 
have little or no relationship to the exposure to asbestos are 
the ones that actually wind up paying a part of the costs, then 
the system simply won't work as an incentive to avoid risky 
behavior because it simply is going to be irrelevant whether 
you are at risk or not.
    Senator Hatch. I understand that the majority of defendants 
in the West Virginia cases, or mass action should I say, have 
settled their claims. Do those settlements affect your appeal 
to the U.S. Supreme Court?
    Mr. Dellinger. We still have our petition pending with the 
Supreme Court and the two claims we put before the Court are 
still there. One is that before you have a proceeding like 
this, you have to make a determination that the claims are 
sufficiently common, that they can be tried against this group 
of defendants in a way that allows the defendants to advance 
their rights without prejudice. West Virginia makes no such 
determination. They just throw the cases in.
    We are asking the Supreme Court to say, look, it could be 
that you can try cases of more than one plaintiff against more 
than one defendant, but it has always been the case that you 
have had to make a determination that could be done fairly. 
They have just dispensed with that in West Virginia.
    And the fact that there are a relatively few defendants 
left does not change the fact that no such determination was 
ever made, or the fact, Senator Hatch, that a Justice on the 
West Virginia Supreme Court estimates that at least 5,000 of 
the 8,000 cases have no connection to the State of West 
Virginia, the ones being tried there. So this is a West 
Virginia solution for the country.
    Senator Hatch. Mr. Kazan, where are all these new asbestos 
cases coming from? I thought that exposures had been reduced 
down to very low levels 25 years ago or more. How is it 
possible that we are seeing 90,000 new cases last year?
    Mr. Kazan. It is a function, Senator, of the vigor and 
strength of the free market system. There is an economic 
opportunity for my colleagues in the plaintiffs' bar and they 
are maximizing that opportunity.
    Senator Hatch. It sounds like a fairly strong indictment of 
the claimants' bar.
    Mr. Kazan. Well, it is not an indictment. If it was 
indictable, we would have a solution to the problem.
    [Laughter.]
    Senator Hatch. Are you suggesting that this legislation 
should provide some indictable----
    Mr. Kazan. Even I would not go that far.
    Senator Hatch. OK.
    Mr. Kazan. The reality is, Senator, that well over 50 
percent of the American adult population, if you took x-rays, 
would demonstrate changes that meet the requirements today to 
justify an asbestos lawsuit. That doesn't mean they have 
changes in their lungs that have anything whatsoever to do with 
asbestos.
    The bulk of these cases that are being filed today come out 
of these screenings where a doctor who gets paid piecework 
doing volume business reads these films as simply consistent 
with asbestos disease. That is not a diagnosis. It would never 
get to a jury as more probable than not.
    There are over 150 medical causes that produce these 
changes in the lungs, and that is why they can only say 
``consistent with.'' Nonetheless, those are the very claims 
that are being filed. They are being recruited. The Manville 
Trust and others are paying them. These are people who are not, 
by any rational definition of the word, sick. Their breathing 
is not affected, their lives are not affected. They simply have 
an x-ray that some for-hire doctor is prepared to say, in a 
medical-legal evaluation, not a physician-patient one, that 
there is a change that could possibly have come from asbestos.
    So, Senator, although the Manville Trust talks about 1 or 2 
or 3 million future cases, in fact, the number of potential 
future cases is virtually infinite--50 million, 70 million, 100 
million cases.
    Senator Hatch. Of these cases, how many are brought by 
people who are basically unimpaired from asbestos? How much 
money has gone to these claimants and how does that impact your 
clients?
    Mr. Kazan. Well, approximately, from what I understand from 
the Manville Trust, last year 75 percent of the claims filed 
were for people with no lung function impact of asbestos. There 
is a whole range of cases of people who have asbestosis that 
does affect their breathing, and I certainly believe those are 
legitimate cases. They have real value and they ought to be 
compensated.
    My guess is, based on the Manville data, there are 10 or 12 
or 15,000 of those cases a year nationwide, added to the maybe 
10,000 cancer nationwide each year, the 20 or 25,000 cases, 
which is the kind of volume we were getting up until 1997, 
1998.
    The system worked fine. We were doing well. The courts 
could handle that without difficulty. We wouldn't need your 
help if that were the case. The difference is mobile x-ray vans 
and entrepreneurial lawyers.
    Senator Hatch. Yes, Mr. Hiatt?
    Mr. Hiatt. Senator Hatch, I just wanted to say whatever 
merit there is to the factors that Mr. Kazan has just 
described, I think that also leaves out a very important factor 
that contributes to the increase in claims that are being 
filed, and that is that there are new sectors where workers who 
had never before had to worry or thought they had to worry that 
they had been exposed or that their exposure had been 
significant enough to possibly result in asbestos-related 
disease has now become clear.
    The Communications Workers of America union had never seen 
this as a major problem affecting their members, and recently 
they have done sampling and found extremely high exposure rates 
among installers, cable splicers, outside plant technicians, 
and auto mechanics who had been exposed to asbestos. This would 
be a whole category of workers that would not have known to 
even get themselves tested in the past. So I think that that is 
an important factor.
    We have just finished reading about the exposure by workers 
who helped with the clean-up of the World Trade Center 
disaster, and I am afraid that as long as asbestos is still 
around there are going to be new sectors and new places that 
these claims are going to come from.
    Senator Hatch. Well, maybe I should get down to real 
business here. I may be one of the few Members of Congress who 
really has worked around asbestos, because I worked in the 
building and construction trade unions for 10 years. Asbestos 
was used for pipe covering and I was a metal lather putting in 
suspended ceilings and partitions and corners and all kinds of 
other things.
    Mr. Dellinger. I would recommend Mr. Baron, Senator.
    [Laughter.]
    Senator Hatch. That is what I am getting to. I am going to 
forget about you three.
    Mr. Kazan. You don't want me, Senator. I would just 
reassure you that you are fine.
    Senator Hatch. Mr. Baron, I think maybe I need to retain 
you because some people have said that I look sick from time to 
time.
    Mr. Baron. Senator, you are obviously in very good health. 
The issue, though, is a really important one in terms of the 
number of claims.
    There is another factor that hasn't been mentioned. In 
addition to finding more workers who have been exposed to 
asbestos over their career that really didn't know they were 
exposed and therefore adding another group to the litigation 
mix, there is another factor that we lawyers and some of the 
statisticians call ``propensity to sue.''
    Harvard has studied propensity to sue in medical 
malpractice cases and found that maybe 10 or 12 percent of 
people who have sustained malpractice actually file suit. In 
automobile accidents, the generally accepted figure is about 15 
percent of individuals who have potential claims actually 
pursue them.
    In asbestos litigation, because of the enormous amount of 
publicity and discussion of the issue in the public, we are 
seeing that the propensity of individuals who have contracted 
asbestos-related diseases to sue is high. Indeed, the most 
telling statistic is the number of mesothelioma cases filed.
    Every year in the United States for the past 25 years, 
between 2,500 to 3,000 people have developed mesothelioma. That 
disease is caused only by asbestos and it is invariably fatal. 
Each individual arguably has a cause of action.
    Back in the 1980's and into the early 1990's, we would only 
see maybe 800 claims, 1,000 claims a year. Now, we are seeing 
1,600 to 1,800 claims. The propensity to sue among mesothelioma 
victims is very, very high. It is also getting higher among the 
victims of asbestosis and that accounts for the large number of 
filings.
    Senator Hatch. Well, my time is up, but let me just turn to 
Mr. Kazan. Do you have any response to that? I can see why Mr. 
Baron makes so much money every year. I mean, he is very 
persuasive. Now, what do you have to say about that?
    Mr. Kazan. Well, aside from the fact that he is wrong, 
certainly more and more of the cancer victims are coming 
forward with litigation. Doctors are more aware of this. There 
is more publicity. The Internet has made a significant impact, 
as well, in disseminating knowledge to the public.
    At the end of the day, however, it is not people deciding 
that they want to bring claims. What is fueling the increase in 
the last 3 years is lawyers going out and advertising for free 
screenings, sending out mobile vans, recruiting plaintiffs who 
feel fine, who don't know they have any claim, who never would 
have thought about it until the lawyer gets the x-ray and has 
somebody read it as showing that it might possibly have 
something to do with asbestos.
    These are not diagnosed cases of asbestos disease in any 
sense that any of you would think of when you think about 
illness, where you go to a doctor and you tell him what is 
wrong and he orders tests and he evaluates your condition and 
thinks through the process and reaches a conclusion. These are 
simply people who have an x-ray that somebody says might be 
from asbestos. They don't see a doctor in most cases, and when 
they do it is a for-hire screening doctor.
    Our materials include some depositions where there is an 
osteopath who has confirmed 14,000 consecutive diagnoses of 
asbestosis in people he has seen and he doesn't even know what 
the word means. So it is a fiction. That is simply what it is. 
These are not real illnesses. They are not real cases in large 
degree. That is not to say there aren't thousands of 
legitimate, non-cancer cases every year. There are. They 
deserve to be paid. That is not the problem.
    Senator Hatch. Mr. Baron, just one last comment. I have 
quite a bit of respect for you, but I agree with him; I think 
you are wrong in this area. I know that you must have been 
talking tongue-in-cheek when you said in June of this last year 
at the Mealey's asbestos bankruptcy conference, quote, ``I 
picked up my Wall Street Journal last night and what did I 
learn? The plaintiffs' bar is all but running the Senate. Now, 
I really strongly disagree with that, particularly the words 
'all but.'''
    Mr. Baron. Senator Hatch, that, as you correctly stated, 
was a comment I made very jokingly when somebody brought to my 
attention a copy of a Wall Street Journal editorial criticizing 
me for filing claims for asbestos victims.
    Senator Hatch. Look, don't get so defensive. I took it as 
humor. I thought it was pretty good humor----
    Mr. Baron. It was intended to be humorous.
    Senator Hatch [continuing]. Except that some of us do feel 
that the plaintiffs' lawyers and the plaintiffs' bar have an 
inordinate control in the Congress of the United States. Now, 
rightly or wrongly, we feel that way and I think we are pretty 
much right.
    I think that the plaintiffs' bar is a very important bar in 
this country, and I think it is important that the plaintiffs' 
bar realizes that there are all kinds of viewpoints up here and 
that we try to find some way of making sure that justice really 
occurs in this country.
    It is one thing to fight for the rights of people, to fight 
to correct injuries and wrongs. It is something that I applaud 
all of you for. It is another thing to make this a money-
grubbing, political, power-seeking approach which some are 
criticizing our plaintiffs' bar for.
    Mr. Baron. I agree with you, Senator Hatch.
    Senator Hatch. I belong to your organization. I was a 
plaintiffs' lawyer. I started out as a defense lawyer and I 
found out that was too tough, so I became a plaintiffs' lawyer. 
I found out that was just like rolling off a log compared to 
being a defense lawyer.
    But to make a long story short, I respect you and I respect 
the plaintiffs' bar. But I suggest that this is a serious set 
of problems. We have got to solve these problems, and you and I 
both know that sometimes problems like these have to be solved 
by good people getting together and resolving them.
    I would like as many good ideas as you can give us as to 
how we might do this, because I am sure that you recognize that 
if not all of what Mr. Kazan is saying is true, part of it is. 
I would like your help in this committee and I would like to 
have a good relationship in arriving at that, but I want a 
solution here.
    This clearly is not right. It is clearly not working. There 
are clearly people getting compensation who don't deserve it, 
while others are not getting compensation or won't get 
compensation who do deserve it. We have got to find some way 
out of this and I would like some help from all of you. I think 
this hearing is very, very important to try and lay this all 
out.
    Thanks to all of you. I wish I had more time.
    Mr. Baron. Senator, may I say that ATLA as an institution 
is absolutely committed to working with this committee to find 
a solution to these very significant problems. I have to say 
that sometimes we say things tongue-in-cheek and we are sorry 
we say them, and I apologize to anyone that was offended by 
that statement. It was meant jokingly and it was taken out of 
context.
    Senator Hatch. I was having some fun myself.
    Mr. Baron. I apologize. But one only needs to look around 
this room to see that the manufacturers and the insurance 
carriers are very well represented in this city. And as far as 
ATLA is concerned, we are a voice for victims and we need to go 
the extra distance to be sure that voice is heard, and we 
appreciate the opportunity to provide information to this 
committee and you have our solemn promise that we will 
cooperate with the committee in all respects on this matter.
    Senator Hatch. I look forward to that. Thank you.
    Mr. Dellinger. Can I make a 10-second comment?
    Senator Hatch. Sure.
    Mr. Dellinger. I think it has been apparent what a well-
balanced panel you have had today that you have collectively 
put together.
    The first essential question is, is there a serious 
asbestos litigation problem. Though the panel is well-balanced, 
I would note that four of the five people here today agree that 
there is a serious problem that makes a congressional response 
imperative.
    Senator Hatch. I apologize to Senator Cantwell for taking 
so long, but I felt that this is really a good panel.
    Chairman Leahy. I think it is, and this is, since I have 
been here, the only time we have ever had a full Judiciary 
Committee hearing on this matter and I have tried to give extra 
time to each Senator and each witness.
    Mr. Dellinger mentioned the World War II ships and the use 
of asbestos. The State Adjutant for the Vermont Department of 
Veterans of Foreign Wars, by coincidence, had an op ed piece in 
the Rutland Daily Herald, our Pulitzer Prize-winning, highly 
respected newspaper back home.
    He spoke of the insulation which continued even through the 
1960's while the Navy knew of the dangers and they still kept 
on doing it.
    His op ed ends by saying, ``Many victims of asbestos need 
his help, particularly veterans who already served their 
country--veterans who continue to fight battles every day 
against deadly illness and a system that doesn't seem to 
care.''
    I will put Adjutant Gascon's whole op ed piece in the 
record.
    Senator Cantwell, I appreciate you being here and I yield 
to you for whatever amount of time you would like.

STATEMENT OF HON. MARIA CANTWELL, A U.S. SENATOR FROM THE STATE 
                         OF WASHINGTON

    Senator Cantwell. Thank you, Mr. Chairman, and I also thank 
the Ranking Member for his questions and comments. I think it 
was very important that he get his questions out. And we found 
out some vital pieces of information that, in fact, Senator 
Hatch is not sick, and I think that was very important for us 
to establish.
    Mr. Chairman, this hearing is very important to my 
constituents. I think my State suffers from a disproportionate 
amount of sufferers from mesothelioma and a large number of 
cases because of our mill industry and because of our shipyard 
industry.
    Some of my constituents who suffer from this truly awful 
disease are here today and I want to thank them for making the 
trip. Brian Harvey, who, if not a medical miracle, I am sure he 
will be soon, is in his 36th month from diagnosis and serves as 
an inspiration to others who are undergoing experimental 
mesothelioma treatment. I would also like to thank Charisse 
Dahlke, who lost her husband in May, for being here as well and 
being part of giving input in this process.
    I would also like to enter into the record, Mr. Chairman, 
if I could, testimony from Matthew Bergman, an attorney from my 
State who has developed an expertise in this area, and I urge 
my colleagues to read his testimony.
    In my opinion, the most astounding part of this situation 
is that we have yet to ban asbestos. I have a colleague, 
Senator Murray, from Washington, who has a bill in the HELP 
Committee. I hope that this hearing today will encourage people 
to pass that bill out of the committee.
    In regard to compensation of those exposed to asbestos, I 
have reviewed the testimony of the various witnesses and I am 
convinced it is, in fact, a very complex issue. But I would 
remind my colleagues, and even those on the panel, there are 
the victims, and oftentimes those victims lose their lives, and 
then there are the victim survivors, oftentimes women, 
oftentimes young children, whose future lives will be 
determined by what this compensation outcome is. So I think it 
is very important that we not let the complexity of this issue 
deter us from getting to some of the specific solutions to the 
problem.
    Mr. Austern, you, I think, probably gave the best 
statistics that I just want to make sure I am reviewing 
correctly. Since the exposure to asbestos didn't peak until 
1973 and didn't significantly decline until the mid-1980's, am 
I correct that we are going to continue to see an increasing 
number of these cases? I think you number you have is until 
2013, and that cases aren't likely to decrease in number until 
2025.
    Is that correct?
    Mr. Austern. Based on our years of first exposure--and you 
can cut this almost any way you want, by industry, by injury--
really, all the statistics show that the year of first exposure 
is rising very, very slowly and we are going to see significant 
claims filing based on the consumption of asbestos in this 
country in those previous years for at least 12 or 13 more 
years and then for a period of time thereafter. It is a very 
discouraging picture when you look at the amount of asbestos 
that was used and how we are looking at claims that were only 
exposed in the 1950's and the 1960's.
    Senator Cantwell. Well, given that, I would like to ask Mr. 
Baron and Mr. Kazan a question about the fairness of this 
situation, given the two constituents that I have here today: 
one, Mr. Harvey, who was successful because the timing of his 
illness in actually receiving a settlement, and Ms. Dahlke. In 
both of these cases, some of the same companies now have 
declared bankruptcy and Ms. Dahlke's ability to get resolution 
on this issue is mitigated significantly.
    So what is the fairness in that? The timing of the illness 
becomes the determining factor?
    Mr. Baron. Senator, I think you make a very, very good 
point. And might I say before I answer the question that I 
agree with you completely that it is outrageous that we have 
not banned the use of asbestos in this country and I think that 
has to be a priority for this Congress.
    But back to your question, it is unfortunate that there are 
so many victims, and the mismatch here is obviously the number 
of victims and the amount of money available to be paid. I 
respectfully submit that the first thing that this committee 
should do is carefully investigate what resources are available 
to pay claimants; in other words, how much money is really out 
there in insurance coverage and how much money the companies 
who created this problem have available to pay for the damage 
that they have caused. There is indeed a mismatch and it is 
unfortunate.
    By passing 524(g) of the Bankruptcy Code, Congress has 
required that when a company goes into bankruptcy it must be 
required that they set aside assets to pay future victims, not 
just the present victims. That is a very, very important 
consideration.
    Senator Cantwell. But won't there be an inherent 
disadvantage to Ms. Dahlke in the sense of, again, because Mr. 
Harvey entered into--basically because we found out at a time 
in this process, he was able to get a settlement. Ms. Dahlke 
may be 5 percent, so Mr. Dahlke's surviving children will now 
be disadvantaged in this situation.
    I am very glad that my constituent, Mr. Harvey, has done so 
well, but I also think that we need to realize that there are 
other victims in this situation of those survivors and that 
they are going to receive a very, very small amount of what 
would be available compensation.
    Mr. Baron. It is not unlike the drunk driver who causes 
five or six different accidents and has no insurance. Maybe the 
first one or two victims will receive his assets, but the 
others may be left with nothing. Fortunately, it is my 
experience--and I represent almost 700 victims of 
mesothelioma--that only a very small number of mesothelima 
victims are left only with bankruptcy-related claims.
    Most mesothelioma victims were exposed to many different 
types of asbestos products and there are still solvent 
defendants who can pay these claims. Are they always going to 
get a hundred cents on the dollar? No, but that is also true of 
all of the other asbestos victims. They have the same problem 
to deal with.
    Senator Cantwell. Mr. Kazan, do you agree with that 
assessment?
    Mr. Kazan. Do I agree with Mr. Baron? No. Again, the 
problem is--you have put your finger on it--there is a very 
serious issue here. And the root cause of the fact that Ms. 
Dahlke is not getting paid now and is likely only to recover 
pennies in the future is that very bankruptcy provision that 
Mr. Baron speaks of, 524(g), which requires that when you set 
up a trust, you treat all claimants, present and future, alike, 
which means you have to estimate all the future claims so you 
can assign values to them and allocate their share.
    It is the problem that Mr. Austern has and it is the 
increasing trend in filings that causes revisions in 
projections which led Mr. Austern's trust last year to cut its 
payment percentage in half. As long as we leave the system the 
way it is, there will be more and more claims filed. That, in 
turn, leads to higher and higher estimates in the bankruptcies, 
which means a smaller and smaller percentage of payment not 
only to the currently sick people and all current claimants but 
to all the future claimants.
    We know the numbers of the cancer cases. We are going to 
have, as Mr. Austern says, 2 to 3,000 a year. We can calculate 
that. We have been predicting cancer correctly in asbestos for 
20 years, and the reason we have done that is it is science. It 
is based on medicine and epidemiology.
    We cannot predict the number of non-malignant, unimpaired, 
no-functional-change cases because those are not based on 
medicine. They are based on entrepreneurial zeal. As a result--
I hate to say it, especially in front of Ms. Dahlke, who is a 
lovely person that I have spent some time with--the chance of 
her getting significant recovery out of any of these 
bankruptcies is somewhere between slim and none.
    The tragedy here gets compounded every day in case after 
case. Mr. Harvey is an exception to the rule. I see clients all 
the time and I tell them I have good news and bad news. The 
good news is that you weren't diagnosed until just now, so you 
have been healthy for the last 5 years. The bad news is you 
have been diagnosed now and although you have had those 5 years 
of good health, you don't get any real compensation. If you had 
gotten sick 5 years ago, your case would have been worth a 
great deal of money. Unfortunately, you probably wouldn't be 
here today.
    The real tragedy in this, Senator, is that while most of us 
sitting up here view this as a serious public health problem 
and a public policy issue, I am afraid that some members of the 
trial bar, including those who have great influence over ATLA's 
policy--and I am an ATLA member for 30 years and it pains me to 
say this, but they view this simply as a business opportunity 
rather than a chance to deal with public policy issues. And I 
certainly hope this committee focuses on the public health 
issues.
    Senator Cantwell. Well, I definitely think you have stirred 
some followup interest and response from some of our panelists 
and I do want to get to that, but I would like to pose a 
question to the panel, as well, in making your response to 
those statements.
    I just want a yes or no answer on should people with 
exposure but no symptoms be compensated at the same level as 
those that are sick?
    Mr. Baron. Of course not, and they aren't in the present 
system.
    Senator Cantwell. I think that is the fundamental question 
that we have here. I know that we are talking about a process, 
but I want to give Mr. Austern a chance and the other panelists 
because I think what we really need to do is boil it down to 
what we do agree on and take this process from there.
    I think we all think we have a very complex problem, but I 
would beg to say that what we are failing to recognize is--Mr. 
Harvey's life is incredibly important, but the future 
opportunities for Mr. Dahlke's son--maybe it is the difference 
between whether he will ever get to go to college or not, or 
whether Ms. Dahlke will be able to support the rest of the 
family.
    I don't think you can treat them unfairly just because of 
an arbitrary date and time by which they found out that they 
were ill, when we know that there has got to be a better way to 
solve this.
    Mr. Austern?
    Mr. Austern. Senator, if I could make two responses to 
that, first, as Mr. Baron and Mr. Kazan know, we and virtually 
every other asbestos trust recognize economic differences in 
terms of recovery based on disease severity. Mr. Baron is 
right. We pay those whose symptoms are less severe less than 
those, to take the highest example, mesothelioma victims. I 
fear, however, that the devil is in the details and it is the 
extent of the difference that is probably going to be in 
dispute.
    With respect to the dilemma with the people you recognized 
in the room, as noted, we have paid 10 percent of Manville's 
liability, ordinarily recognized as 30 percent of the total 
liability because of Manville's very large share of the market. 
We paid 10 percent of that liability up until last year. As Mr. 
Kazan pointed out, we had to halve it last year, cut in half, 
based on the number of claim filings.
    So let me turn to your constituents. We have paid through 
the end of last year $336 million to mesothelioma victims, but 
we have to look at the other side of that. What haven't we 
paid? Well, the total Manville liability for that is 
$3,150,000,000. We will never pay that $3,150,000,000 to the 
people that you represent and to others because we have an 
asset/liability mismatch, and it is one that, as Mr. Kazan 
points out, is growing.
    Senator Cantwell. And so your recommendation is keep going 
in the direction that we are going?
    Mr. Austern. Well, I agree that looking at alternative 
sources of funding--and I was thinking when I said that, and 
continue to think, to look to the Government of the United 
States for the liability that might be appropriate for the 
reasons Mr. Dellinger mentioned. I fear, Senator, that when you 
look at the total potential victim population by disease and 
the total potential assets, there is going to continue, 
however, to be some asset/liability mismatch.
    Mr. Dellinger. Just a brief comment to emphasize what David 
has just said. When you ask the question, are those who are not 
sick, not impaired--should they receive as much as those 
suffering from serious illness like mesothelioma, of course 
everybody agrees the answer is no and they should not.
    That is one notch removed from where the real problem is, 
which is people who are not impaired are nonetheless getting 
far too great resources that are depleting resources that ought 
to go. And on that, you have differences among members of the 
panel in terms of how you define impairment or ``not sick,'' 
Senator, but there is a disinterested source.
    The RAND study, at page 19, summarizes this point by saying 
simply it appears that a large and growing proportion of the 
claims entering the system in recent years were submitted by 
individuals who have not incurred an injury that affects their 
ability to perform activities of daily living. That is the RAND 
conclusion.
    Senator Cantwell. Mr. Hiatt?
    Mr. Hiatt. Senator, I think a helpful way of looking at the 
universe of victims who have been occupationally exposed to 
asbestos at one time or another is to divide them into three 
broad categories.
    On one extreme, you have victims who suffer from cancers, 
mesotheliomas, very advanced stages of asbestosis. I think 
leaving aside the problem of what medical criteria you use to 
place people there, everyone would agree those are people who 
are seriously ill and should be adequately compensated.
    At the other extreme, you have people who can show that 
they were occupationally exposed. And as earlier testimony 
showed, those are people who do need to fear that they are 
sitting on what somebody referred to as a ticking time bomb. 
And at the very least, those people should be given adequate 
access to continuing testing and monitoring.
    In the middle, you have a category of people who some would 
blithely say are not sick, but are indeed sick. They simply 
aren't as impaired as those with cancers and the truly serious 
forms of disease.
    Now, admittedly, within that middle category there are 
gradations, and I think that is where, if this effort by 
Senator Leahy and your committee continues, there will have to 
be some real scrutiny paid. Where do you draw the lines in that 
middle category?
    I don't think that the answer is that they should not be 
compensated at all. I think that a consensus has to be found 
for how much should that middle category be compensated. Maybe 
there are different levels for people within that category, but 
they are impaired to some extent. It may not be as much as the 
folks at the top end, but it is certainly more than people in 
the bottom category.
    Too many in the business community, I think, would just 
like to write that whole category off and say the solution to 
this problem is just to worry about the people with cancer. 
That is not an adequate response to this crisis.
    Mr. Kazan. Senator, if I remember the question and your 
request for a one-word answer, the answer is no, but I can't 
resist saying a couple of other things, if I might. Mr. Hiatt 
is right in one sense. You can usefully divide the asbestos 
claimant population into three groups. I would group them 
somewhat differently.
    One group would be cancers, about which everybody agrees. 
The second group, in my view, would be people without cancer, 
the non-cancer claimants who have breathing problems, however 
you want to describe it, who from a physiologic or medical 
standpoint have some degree, however slight, of interference in 
their lives, in their breathing, as a result of asbestos 
exposure. I think those people also are entitled to 
compensation that is fair and adequate and reasonable in the 
light of the circumstances.
    My third group would be those who may or may not have some 
possible evidence of change in their lungs, but have no 
functional or physiological impairment whatsoever. They are 
not, by any ordinary definition of the word sick, what we would 
call sick.
    Mr. Austern is exactly right. The problem here is an asset/
liability mismatch, if you will. It started out as one in 
Manville and that is the microcosm. The problem that brings us 
here is that this is now an industry-wide, America-wide 
mismatch which has led to all these bankruptcies.
    Most of the companies going in say that they have been 
spending more than half their money on precisely these 
unimpaired, no-functional-limit cases. And an interesting 
question that I would like you to consider asking Mr. Austern--
you know, he is paying 10 percent, then 5 percent, and he has 
this $3 billion liability that he acknowledges to mesothelioma 
victims alone. He has paid them $336 million. An interesting 
question would be how many dollars has he paid to people who 
have absolutely no pulmonary function limitation because if the 
sickest should go first, maybe that is an illustration of where 
the problem is.
    Senator Cantwell. Well, I am sure that he heard your 
question and may respond.
    Chairman Leahy. In a similar one-word answer.
    Go ahead.
    Mr. Kazan. We are plaintiffs' lawyers, Mr. Chairman.
    Senator Cantwell. I am sure that the committee staff 
thought about that when they had all of you agree to being up 
here.
    There was a time in which we did have a fundamental 
agreement about medical impairment being demonstrated before 
compensation, right?
    Mr. Baron. May I speak to that, Senator?
    Senator Cantwell. Yes.
    Mr. Baron. The issue of the word ``impairment'' is the 
stumbling block. We learned in law school that if someone 
negligently causes an injury, the injured party is entitled to 
recover damages. Now, if you jumped across the desk and stabbed 
me in the arm, I would have probably a very large scar on my 
arm, but I would not be impaired in any real way. Would that 
prevent me from filing a claim for my damages? No, of course it 
wouldn't, as it would not if you caused scarring of my lungs. I 
may not have impairment because our lungs fortunately have 
extra capacity, but I would be just as damaged.
    And its true but that individuals who have minor injuries, 
like someone who breaks their arm in a car wreck, receive 
significantly less compensation than does someone who is 
rendered paraplegic in a car wreck or a mesothelioma victim.
    Today, a victim of pleural disease will generally recover, 
in the tort system, somewhere between $20,000 and $40,000. A 
victim of asbestosis usually recovers somewhere in the $50,000 
to $100,000 range. A victim of mesothelioma--and you can go 
directly to Mr. Kazan's website to verity this--will recover 
between $5 and $15 million, and occasionally more than $15 
million.
    Senator Cantwell. Are you guaranteeing that to Ms. Dahlke?
    Mr. Baron. In a case where there is an identifiable 
defendant that remains solvent, yes, I would almost guarantee 
to a mesothelioma victim a significant seven-figure recovery. 
That has been my experience with the hundreds and hundreds of 
mesothelioma victims or firm has represented.
    But, again, someone with pleural disease who comes into the 
office would be told to expect a $25,000 to $50,000 recovery. 
Whether those numbers are adequately balanced, I am not the one 
to say, but suffice it to say that there is an enormous 
difference.
    Anyone who says that the pleural cases are getting as much 
in the tort system as mesothelioma cases is just not telling 
the truth. If an identical victim with pleural disease sues the 
same defendants that the mesothelioma victim sues, the 
mesothelioma victim will get significanty more money, but it 
will remain at the same proportion in relation to the value of 
the claims.
    In other words, if the mesothelioma case has a value of $5 
million and only has 50 percent of the defendants available to 
seek recovery from, the case will settle for $2.5 million. If 
the pleural case has a valve of $25,000 and has the same 50 
percent of the defendants involved that case will receive, 
$12,500. And that is, in my judgment, an appropriate way to 
deal with it.
    Senator Cantwell. I guess I disagree in this regard. I 
don't think Ms. Dahlke now is the survivor of a victim that has 
been struck by mesothelioma. She is a victim of the calendar. 
She is a victim of an arbitrary date on the calendar by which a 
bankruptcy was filed.
    The difference between Mr. Kazan saying she is going to get 
pennies and you saying that somebody might get $15 million--I 
am sure she is more concerned about how to support her family 
today.
    Mr. Baron. I agree with you, Senator, and I think there 
should be a fund of some sort where people who have only claims 
against bankrupt defendants can go to receive benefits. My 
experience is that less than about 10 percent of the 
mesothelioma victims do not recover significant sums. As more 
companies go into bankruptcy, though, there may be more people 
in that position.
    Senator Cantwell. Mr. Chairman, I do think this is a 
critically important issue for our committee. I think with the 
talent that is at the table today testifying, obviously if 
there was an easy solution we would have come up with it by 
now.
    Constituents' lives are playing out before us, and I again 
just urge people not to forget the victim survivors and the 
consequences to their lives. Please help us in working on this 
issue.
    Thank you, Mr. Chairman.
    Chairman Leahy. I would hope you may think about some of 
the other questions which I won't raise here because the time 
has expired. What has always bothered me is the companies 
continued using products containing asbestos well into the 
1980's. Some even use such products today. They knew the grave 
dangers caused by this.
    The companies' insurers continued to cover them, knowing 
the liability that was being assessed to the companies who used 
these products. That is troublesome. The Adjutant General from 
our VFW and the questions he raised about the Navy are 
bothersome. He asked the question whether vessels should be 
banned.
    I will put into the record a statement by Senator 
Brownback, and I will leave it open for anybody else.
    [The prepared statement of Senator Brownback appears as a 
submission for the record.]
    Chairman Leahy. There has been reference to the RAND report 
that was raised today. I have a lot of respect for RAND. I have 
read their reports on many matters. I think it is only fair to 
note, because everybody keeps raising who is representing whom, 
that according to RAND's annual report last year the following 
organizations were benefactors of RAND--that means they 
contributed $50,000 or more; they don't say how much more--
Allstate Insurance; State Farm Insurance; Chubb Insurance; 
Coalition for Asbestos Justice, made up of a group of insurance 
companies; Farmers Insurance Group; Hartford Financial 
Services; Liberty Mutual Insurance; Massachusetts Mutual Life 
Insurance; USAA Insurance; and Alcoa.
    I do appreciate, gentlemen, your taking all this time. I 
appreciate all the lobbyists and their representatives in the 
audience. Not wanting to cutoff anybody's billable hours, I 
would point out that it is a very nice day outside and I hope 
you get a chance to also breathe the air and see the sights of 
Washington. It may be a little more hectic on the streets of 
Washington in the next day or so, so enjoy it today.
    All of you take my offer to add anything to your testimony 
or in reference to anybody else's. This hearing is not intended 
as a ``gotcha'' hearing. This is trying to find a way through a 
problem that, if I were given the power the write the solution 
today and had the whole Congress follow it, I am not sure what 
I would write. But I hope you understand that I and a number of 
other members on both sides of the aisle are trying to find an 
answer.
    We stand adjourned.
    [Whereupon, at 12:50 p.m., the committee was adjourned.]
    [Question and answers and submissions for the record 
follow.]


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