[Senate Hearing 108-141]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-141
 
                       ASBESTOS LITIGATION CRISIS

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

                                HEARINGS

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                        MARCH 5 AND JUNE 4, 2003

                               __________

                           Serial No. J-108-4

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa            PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania          EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho                CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia             RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas                   JOHN EDWARDS, North Carolina
            Makan Delrahim, Chief Counsel and Staff Director
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director


                            C O N T E N T S

                              ----------                              

                        WEDNESDAY, MARCH 5, 2003
                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

DeWine, Hon. Mike, a U.S. Senator from the State of Ohio.........    34
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     1
    prepared statement...........................................   111
Kennedy, Hon. Edward M., a U.S. Senator from the State of 
  Massachusetts..................................................    36
Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin, 
  prepared statement.............................................   147
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     4
    prepared statement...........................................   149
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama....    39

                               WITNESSES

Archer, Dennis, President-Elect, American Bar Association, 
  Chicago, Illinois..............................................    21
Austern, David T., Claims Resolution Management Corporation, and 
  General Counsel, Manville Personal Injury Settlement Trust, 
  Fairfax, Virginia..............................................    19
Baucus, Hon. Max, a U.S. Senator from the State of Montana.......     6
Harvey, Brian T., Marysville, Washington.........................    17
Hiatt, Jonathan P., Associate General Counsel, American 
  Federation of Labor and Congress of Industrial Organizations, 
  Washington, D.C................................................    23
Kazan, Steven, Kazan, McClain, Edises, Abrams, Fernandex, Lyons 
  and Farrise, Oakland, California...............................    25
McCandless, Melvin, Plymouth, North Carolina.....................    14
Voinovich, Hon. George V., a U.S. Senator from the State of Ohio.    11

                         QUESTIONS AND ANSWERS

Responses of David Austern to questions submitted by Senators 
  Leahy and Kohl.................................................    46
Responses of Steven Kazan to questions submitted by Senators 
  Leahy and Kohl.................................................    51

                       SUBMISSIONS FOR THE RECORD

Archer, Dennis, President-Elect, American Bar Association, 
  Chicago, Illinois, prepared statement..........................    61
Asbestos Study Group, statement..................................    88
Austern, David T., Claims Resolution Management Corporation, and 
  General Counsel, Manville Personal Injury Settlement Trust, 
  Fairfax, Virginia, prepared statement..........................    93
Baucus, Hon. Max, a U.S. Senator from the State of Montana, 
  prepared statement.............................................   102
Harvey, Brian T. Marysville, Washington, prepared statement......   107
Hiatt, Jonathan P., Associate General Counsel, American 
  Federation of Labor and Congress of Industrial Organizations, 
  Washington, D.C., prepared statement and attachment............   114
Kapnick, Scott B., Managing Director, Goldman, Sachs & Co., New 
  York, New York, statement......................................   124
Kazan, Steven, Kazan, McClain, Edises, Abrams, Fernandex, Lyons 
  and Farrise, Oakland California, prepared statement............   136
McCandless, Melvin, Plymouth, North Caroline, prepared statement.   151
National Association of Manufacturers, Michael Elias Baroody, 
  Executive Vice President, Washington, D.C., prepared statement.   154
Voinovich, Hon. George V., a U.S. Senator from the State of Ohio, 
  prepared statement.............................................   157

                        WEDNESDAY, JUNE 4, 2003
                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Durbin, Hon. Richard J., a U.S. Senator from the State of 
  Illinois.......................................................   183
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......   159
    prepared statement...........................................   362
Kennedy, Hon. Edward M., a U.S. Senator from the State of 
  Massachusetts, prepared statement..............................   365
Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin, 
  prepared statement.............................................   370
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.   163
    prepared statement...........................................   372

                               WITNESSES

Biggs, Jennifer L., Tillinghast-Towers Perrin, St. Louis, 
  Missouri.......................................................   207
Crapo, James D., M.D., Professor of Medicine, National Jewish 
  Center and University of Colorado Health Sciences Center, 
  Denver, Colorado...............................................   189
Dunbar, Frederick C., Senior Vice President, National Economic 
  Research Associates, New York, New York........................   214
Green, Eric D., Professor, Boston University School of Law, 
  Boston, Massachusetts..........................................   216
Hagel, Hon. Chuck, a U.S. Senator from the State of Nebraska.....   166
Hartwig, Robert P., Senior Vice President and Chief Economist, 
  Insurance Information Institute, New York, New York............   219
Murray, Hon. Patty, a U.S. Senator from the State of Washington..   181
Parker, John E., M.D., Professor and Chief, Pulmonary and 
  Critical Care Medicine, Robert C. Byrd Health Sciences Center 
  of West Virginia University, Morgantown, West Virginia.........   195
Peterson, Mark A., Legal Analysis Systems, Thousand Oaks, 
  California.....................................................   210
Tribe, Laurence H., Professor, Constitutional Law, Harvard Law 
  School, Cambridge, Massachusetts...............................   170
Welch, Laura, M.D., Medical Director, Center to Protect Workers 
  Rights, Silver Spring, Maryland................................   192

                         QUESTIONS AND ANSWERS

Responses of Jennifer L. Biggs to questions submitted by Senators 
  Hatch, Specter and Leahy.......................................   228
Responses of James D. Crapo, M.D. to questions submitted by 
  Senator Specter................................................   238
Responses of Frederick C. Dunbar to questions submitted by 
  Senator Hatch..................................................   242
Responses of Robert P. Hartwig to questions submitted by Senator 
  Specter........................................................   249
Responses of Mark A. Peterson to questions submitted by Senators 
  Leahy, Hatch and Specter.......................................   251
Responses of Laurence H. Tribe to questions submitted by Senators 
  Kyl, Durbin and Specter........................................   264
Responses of Laura Stewart Welch, M.D. to questions submitted by 
  Senators Hatch, Leahy and Specter..............................   271

                       SUBMISSIONS FOR THE RECORD

Baucus, Hon. Max, a U.S. Senator from the State of Montana, 
  statement......................................................   282
Biggs, Jennifer L., Tillinghast-Towers Perrin, St. Louis, 
  Missouri, prepared statement...................................   287
Crapo, James D., M.D., Professor of Medicine, National Jewish 
  Center and University of Colorado Health Sciences Center, 
  Denver, Colorado, prepared statement...........................   297
Dunbar, Frederick C., Senior Vice President, National Econimic 
  Research Associates, New York, New York, prepared statement....   313
Feinstein, Hon. Dianne and Hon. Herb Kohl, additional views on S. 
  1125...........................................................   329
Green, Eric D., Professor, Boston University School of Law, 
  Boston, Massachusetts, prepared statement and attachment.......   334
Hartwig, Robert P., Senior Vice President and Chief Economist, 
  Insurance Information Institute, New York, New York, prepared 
  statement......................................................   358
Murray, Hon. Patty, a U.S. Senator from the State of Washington, 
  prepared statement.............................................   376
Parker, John E., M.D., Professor and Chief, Pulmonary and 
  Critical Care Medicine, Robert C. Byrd Health Sciences Center 
  of West Virginia University, Morgantown, West Virginia, 
  prepared statement and attachment..............................   378
Peterson, Mark A., Legal Analysis Systems, Thousand Oaks, 
  California, prepared statement.................................   398
Phillips, Carter G., statement...................................   405
Tribe, Laurence H., Professor Constitutional Law, Harvard Law 
  School, Cambridge, Massachusetts, prepared statement...........   414
Waxman, Seth P., Wilmer, Cutler, & Pickering, Washington, D.C., 
  prepared statement.............................................   440
Welch, Laura, M.D., Medical Director, Center to Protect Workers 
  Rights, Silver Spring, Maryland, prepared statement............   449


 THE ASBESTOS LITIGATION CRISIS CONTINUES--IT IS TIME FOR CONGRESS TO 
                                  ACT

                              ----------                              


                        WEDNESDAY, MARCH 5, 2003

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, Pursuant to notice, at 2:05 p.m., in 
room 216, Hart Senate Office Building, Hon. Orrin G. Hatch, 
Chairman of the Committee, presiding.
    Present: Senators Hatch, Specter, DeWine, Sessions, 
Chambliss, Cornyn, Leahy, and Kennedy.

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

    Chairman Hatch. Good afternoon. I would like to welcome 
everyone to this hearing as the Committee continues its 
examination of the asbestos litigation crisis.
    At the outset, I want to make everybody know or I want 
everybody to know that I intend to make every effort to resolve 
this issue, this Congress. We simply cannot wait any longer, 
and we have to resolve it.
    I am encouraged by the level of interest in this issue as 
expressed to me by my colleagues on both sides of the aisle, 
and I hope that the Ranking Member, Senator Leahy, and I along 
with other colleagues will be able to work in a bipartisan 
manner to resolve this issue.
    As he indicated at the last hearing, Senator Leahy also 
recognizes that this is a situation that requires our 
attention, and he conducted a very good hearing as Chairman of 
this Committee.
    It is not too often that an issue has such bipartisan 
interest in Congress, but this one does. The question is can we 
put it together. It is very complex and that is one reason for 
this follow-on hearing, and this will be the last hearing that 
we are going to hold that I can think of.
    I don't think there can be any doubt that the crisis in 
asbestos litigation is a serious problem, and it continues to 
get worse as the abuse continues and Congress has failed to 
act, even as the Supreme Court has suggested that we must act 
in order to resolve this train wreck.
    It is my sincere hope that we can do better this time 
around. As I stated in our hearing last fall, which Senator 
Leahy chaired, skyrocketing bankruptcies of companies being 
sued hurt not only those who are truly sick and deserving of 
appropriate compensation, but also those many hardworking 
Americans whose jobs and pensions are lost or put at serious 
risk.
    We have all heard the statistics by now, but they bear 
repeating, and I would like to use some charts here. Chart No. 
1, as the New York Times has reported, the number of cancer 
cases has remained virtually stable sine 1995, while the number 
of non-cancer cases has spiked dramatically just in the last 
few years. This defies common sense.
    Let me go to Chart No. 2. According to a recent study 
published by RAND, almost 90 percent of the pending asbestos 
claims are brought by persons with nonmalignant injuries. 
Nonmalignant cases get 65 percent of the compensation awards 
compared to 17 percent for mesothelioma and 18 percent for 
other cancers.
    Now, there is something wrong with that, and the 
consequence is that more than 67 companies have been forced 
into bankruptcy, 67 companies and thousands and thousands of 
jobs, and more than 20 of those bankruptcies have occurred in 
just the last few years, as you can see from Chart No. 3.
    Moreover, the scope of the litigation has increased 
exponentially and is mind-boggling to anyone. This has become 
such a gravy train for some abusive trial lawyers that over 
2,400 additional companies were named in the last year alone as 
defendants.
    One company recently shared their story with me. This 
company never engaged in the business of manufacturing, 
producing, distributing, or selling asbestos or asbestos-
containing products, nor did this insurance company ever issue 
liability or worker's compensation insurance to companies in 
the business of manufacturing, producing, distributing, or 
selling asbestos or asbestos-containing products.
    They did, in fact, lead the way in researching and issuing 
one of the first reports that exposed the true health risks of 
asbestos, a report that is actually cited by many plaintiff's 
attorneys in current cases and has saved lives. And how are 
they rewarded? They have been named in thousands of cases, more 
than 60,000 per year, alleging that they were not aggressive 
enough in revealing these dangers of asbestos, and they have 
been brought in as coconspirators.
    Now, they told me it is cheaper for them to settle 
frivolous cases than to defend them in court. They could win 
every one of these 60,000 cases, but the last one they defended 
cost, just in defense costs alone, $1.4 million. So it is 
cheaper to pay a few thousand bucks per case and to pay what 
really is extortion money in order to resolve what really is a 
horrendous problem to them. This sounds ridiculous, and it is, 
but it is what is happening.
    We have a tort system that is out of control here, 
especially in these asbestos cases, and I am encouraged by some 
recent developments that illustrate more widespread recognition 
of the problem. The American Bar Association recently adopted 
the findings of the Special Committee on Asbestos Litigation.
    I look forward to hearing from our witness, Dennis Archer, 
the president-elect of the ABA, on their findings regarding 
medical criteria, which would defer the claims of those who are 
not currently sick in favor of those who are truly ill and 
require urgent compensation. That just seems logical. It just 
seems right.
    We will also hear from David Austern, trustee of the 
Manville Trust, on the problems encountered by Manville and his 
ideas on how to resolve this issue.
    We look forward to hearing from organized labor. Jonathan 
Hiatt kindly is making a return appearance before our Committee 
on this issue, as is Steven Kazan, an attorney who represents 
the truly sick claimants who are most adversely affected by 
this current system.
    I know Senator Leahy joins me in my concern that the 
current system is hurting the victims of asbestos.
    Our panel of witnesses include two physically impaired 
individuals, Brian Harvey and Melvin McCandless. We very much 
appreciate the effort it must have been for them to come here 
today to share their stories.
    In addition, we have victims of another sort present in the 
audience, people like Mike Carter of Monroe Rubber and Gasket, 
who flew here from Louisiana. He is a small businessman whose 
business is being threatened by endless asbestos litigation.
    In addition, and perhaps most importantly, we will hear 
from some victims who could not make it here today, victims who 
were unable to be here.
    The video you are about to see, which we are putting on 
this video player here, was provided to us by an attorney 
representing these victims. Perhaps we can just take time and 
play that right now.
    [Videotape shown.]
    Chairman Hatch. Well, in conclusion of my remarks, let me 
just say that I believe that today's hearing is an important 
step toward finding the right solution, and I am committed to 
doing so.
    I am going to keep an open mind about how to approach the 
best solution or solutions to this problem. We have heard from 
some who have proposed the creation of a trust fund. We also 
have heard from those who would support a court proposal 
requiring medical criteria, among other things, to manage the 
cases and to minimize abuses. Both are very intriguing matters 
to me, and I am looking at those and I know Senator Leahy is as 
well.
    I have asked the various interested parties to meet over 
the past month and provide the Committee with their 
suggestions. We have received some recommendations as late as 
this past week, and I would encourage the various interest 
groups to take the next 2 weeks to try to come to a single 
approach that all can support, the sick victims, the companies 
who are targeted and their insurance companies who are at risk, 
and hopefully the labor unions who would be affected by the 
loss of jobs, the loss of pensions that result from these 
abusive suits.
    Folks, time is running out before literally thousands of 
our most productive companies in this country and hundreds and 
thousands of jobs are put at serious risk by these suits, and 
there are enough people who have suffered enough here that we 
have got to try and figure out how to resolve this problem 
without having all the moneys supped up by those who aren't 
sick and by runaway juries.
    Now, it is time to get together. It is time to come up with 
a solution. I will invite your input and look forward to 
working with anybody toward a solution here, but we have got to 
find a solution and if we don't have the help from the folks in 
this audience and others, then we are going to find ourselves 
and we are going to come up with a bill here within the next 
short while, hopefully before the end of the month of March, 
and we are going to proceed with it. I hope that we can come up 
with something that will have the vast majority on board that 
we can proceed with and we can get these problems resolved.
    With these remarks, I will turn it over to our 
distinguished ranking minority member, the former Chairman of 
this Committee, Senator Leahy, and then will look forward to 
hearing our witnesses.

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

    Senator Leahy. Thank you, Mr. Chairman, and also thank you 
for the video you showed. I know for some here, that was 
probably difficult to watch, but I thank you for allowing us to 
do it.
    Today's hearing is aptly titled. It is a time for Congress 
to act on a fair and effective solution to the asbestos 
litigation crises.
    Thousands of workers and their families have suffered 
debilitating diseases and death resulting from exposure to 
asbestos, and with the latency periods for asbestos-related 
illness of up to 40 years, the damage done by asbestos will not 
end for decades.
    As the chairman said, I called the first Senate Judiciary 
Committee hearing last September on this to see if we could get 
a bipartisan dialog going about the best means to provide fair 
and efficient compensation to the current victims, but also 
those yet to come. When we had the hearing last year, Senator 
Hatch and I discussed the fact that at that time, we knew we 
could not go forward with legislation because of the time of 
the year, but that we ought to work on this in this year.
    Senator Hatch and I have had a number of discussions on 
this, and I think it is fair to say we both want legislation to 
pass. I would join with the chairman in urging all of the 
interested parties to get together if they can.
    I spend a lot of time with people who are involved in this 
from victims to insurance companies to manufacturers to labor 
unions to lawyers to everybody involved in it, and I think it 
is possible. I really do think it is possible to come together 
on a piece of legislation.
    It will not be everything that every single side wants, not 
by any means. In fact, if anybody gets everything that they 
want, it means that enough others will be disappointed that 
nothing will pass. This is not a magnet for every single 
special interest from the left to the right by any means. If 
that happens, the legislation just would not be able to get 
through, and no matter how well-intentioned it is, we have to 
work together.
    Mr. Chairman, you and I have worked together on this, and I 
would suggest, Mr. Chairman, that your staff and my staff just 
continue to work as closely together because, if we came out 
with a piece of legislation that both you and I supported, I 
have a feeling that it would pass the Senate. I really do.
    Chairman Hatch. We will certainly work with you, Senator, 
and we hope we can put it together.
    Senator Leahy. I know you are committed to that, and I 
appreciate that.
    We have all learned a great deal about the harms wreaked by 
asbestos exposure since last fall. Not only do the victims 
continue to suffer and their numbers to grow, but the 
businesses involved in the litigation, along with their 
employees and retirees, are suffering from the economic 
uncertainties surrounding this litigation. More than 50 
companies have filed for bankruptcy because of their asbestos-
related liabilities. These bankruptcies, of course, create a 
lose-lose situation. Asbestos victims deserving fair 
compensation do not receive it, and the bankrupt companies 
cannot create new jobs nor invest in the economy.
    Now, as a general matter, our tort system is well-equipped 
to handle the resolution of conflicts. I have long battled the 
misguided attempts, hidden beneath the guise of ``tort 
reform,'' to limit the access that American people have to 
courts, and I will continue to do so because one of the 
distinguishing characteristics of our judicial system is its 
openness to legitimate claims of injury, its availability to 
all aggrieved plaintiffs, but in this case, because of the 
particular circumstances of the harm caused by asbestos, the 
system is not working as it should.
    These circumstances are causing the failure of asbestos 
litigation to meet the needs of many victims and the 
capabilities of many defendants. That is why, as I have said, 
if we work in good faith toward a bipartisan solution, we can 
meet the challenge created by this litigation. I agree with the 
U.S. Supreme Court's conclusion that the number of claims 
defies ``customary judicial administration and calls for 
national legislation.'' The Supreme Court is right. We can put 
together such legislation. It is going to have to be one where 
people on both sides of the aisle and across the political 
spectrum come together or it won't work.
    An effective solution is not one that would create more 
corporate bankruptcies. It would not erect arbitrary barriers 
to recovery, and it would not generate excessive legal fees. An 
effective solution will fairly and efficiently compensate 
victims. It will eliminate the financial uncertainty that 
hinders defendants and their insurers from resolving their 
liabilities. That is what we have to find. It is going to take 
creative ways to do that in a fair and efficient manner, and I 
am wide open to such suggestions and solutions.
    As I said earlier, the one thing that could kill any chance 
for a real bipartisan reform is overreaching by special 
interests for immunity from legitimate asbestos claims. For 
Congress to enact reforms this year, all the stakeholders are 
going to have to come to the table. They have got to be willing 
to work with open minds toward a realistic and reasonable 
solution. The answer will require the full participation, both 
of the victims and the corporate defendants and then their 
insurers as well. It is not going to be a stacked solution that 
attempts to shoot the moon for one side to the other. It has to 
be narrowly targeted. It has to be balanced.
    We began this discourse last September on the problem of 
asbestos injuries and the litigation that has ensued. It has 
been a good one. Senator Hatch and I and others--I see Senator 
Baucus here, Senator Voinovich, Senator Ben Nelson, and 
others--have worked with us on this. We want a solution that is 
going to bring fair and adequate compensation to victims in a 
timely fashion, one that will resolve the financial uncertainty 
for corporate defendants and one that is going to enable 
insurers to predictably meet the obligations of the policies.
    So, Mr. Chairman, you know, as I had before, I will 
continue to work with you. I think you and I have an 
opportunity, if all the parties will cooperate, to bring 
legislation that can not only pass the Senate and the House, 
but then could go to the President and be signed.
    Chairman Hatch. Thank you, Senator. We are honored to have 
with us the Honorable Max Baucus of Montana and the Honorable 
George V. Voinovich of Ohio. Both of them, I know, share our 
concern for this issue. So we will hear first from Senator 
Baucus. Then we will hear from Senator Voinovich. We welcome 
both of you to the Committee.

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

    Senator Baucus. Thank you, Mr. Chairman and Senator Leahy. 
Thank you for allowing me to testify before your Committee.
    This is an issue that raises a lot of passion on both sides 
because so much is at stake, and I applaud you for continuing 
to address and to examine the status of asbestos litigation in 
this country and where it may or may not be appropriate for 
Congress to become involved.
    However, Mr. Chairman, I am concerned that in a rush to 
address a real or perceived crisis in our courts, Congress may 
do an injustice to hundreds or thousands of injured people by 
arbitrarily denying those people the ability to protect their 
rights. Our number-one concern here should be justice, how do 
we ensure that asbestos victims, all asbestos victims, are 
treated fairly and compensated for their injuries.
    Why am I so concerned about where we are headed? Because we 
seem to continue to circle back to the idea of requiring all 
claimants to meet strict medical criteria before they can file 
an asbestos-related claim. It sounds clean, orderly, and 
logical. People can't file for compensation until they are 
actually sick, theoretically allowing defendant companies to 
protect their assets and ensuring a greater chance that victims 
will be able to recover some compensation if and when they 
become sick.
    Mr. Chairman, as with all issues as complicated as this 
one, the devil is in the details. What constitutes an injury? 
What does being sick mean? How can we know that money will be 
around the next 5, 10, 15, 20 or more years to compensate those 
who become sick in the future? And how do we address the 
concern that some people are far more likely to become 
seriously sick than others, depending upon when, where, or how 
they were exposed to asbestos? And frankly, how do we address 
the fact that there is still a lot that we just don't know 
about the causes and the effects of different types of asbestos 
exposure?
    As I understand it, a major concern about the current 
asbestos litigation crisis is the repeated attempts to reduce 
procedural bars to claims. Too often, hundreds and thousands of 
people are being lumped together in a class action, even though 
those people may have little relation to each other in terms of 
when and where they were exposed to asbestos, how they were 
exposed, how long they were exposed, and what kind of injuries 
they suffered.
    The Supreme Court has noted that this approach in many 
cases was unfundamentally unfair to the claimants involved. 
Yet, the asbestos litigation reform that the American Bar 
Association and others have proposed would have exactly the 
same effect.
    Strict medical criteria would treat all people in the same 
manner, regardless of their circumstances, regardless of when, 
where, and how they were exposed to asbestos, and in many 
cases, regardless of what kind of injury they have suffered. 
The proposal would narrowly define an acceptable injury, but 
also impose significant costs on claimants before they have any 
assurance that they can file a claim for compensation. The 
point is no matter how a medical criteria standard is 
developed, Congress will have to choose a, more or less, 
arbitrary standard that will cutoff people who have been 
injured or who ar about to be injured.
    We had better be very, very sure that this is the only just 
way to address the asbestos litigation, and I have a hard time 
believing we can't be more creative.
    I have spoken in detail about the little town of Libby, 
Montana, before this and other Committees, and on the floor of 
the Senate. I won't go back into the details of the terrible 
things that happened to the people of this town, that is, at 
the hands of a company called W.R. Grace, but this town and the 
people who live there, or used to live there, dramatically 
illustrate the points I have been trying to make. So I would 
like to touch upon a couple of facts.
    The vermiculite mining and milling operations at W.R. Grace 
blanketed the town of Libby with asbestos-tainted dust for 
decades, until the early 1990's. The dust was everywhere, on 
clothes, on cars, on children, on the clothes of workers when 
they came home from the mine.
    I can remember seeing miners years ago come off the mine, 
got off the bus. The bus itself was just one big dust bag, and 
the miners themselves were lots of little smaller dust bags, 
just covered with vermiculite dust.
    It was on the high school track, this stuff, on the Little 
League field, in people's homes, in their gardens. They didn't 
know the dust was poison, but W.R. Grace new. What W.R. Grace 
knew was that this dust was contaminated not just with 
asbestos, ordinary asbestos, but with deadly tremolite asbestos 
fibers, much worse than the chrysotile asbestos that most of us 
are aware of. These fibers have killed hundreds of current and 
former Libby residents. Hundreds more are sick, and many of 
these people will die from asbestos-related diseases and 
cancers. Thousands may become sick in the future, and unlike 
most any other place in the country, many of these people were 
significantly exposed not as workers, but as children.
    W.R. Grace lied to these people. Now the town of Libby is 
watching their families. Their friends and neighbors die or 
steadily become more sick. They have to watch them struggle to 
tend to their gardens or just take a walk to the local cafe. 
They have to watch them struggle to provide a secure future for 
their children, all the while wondering if their children will 
become sick, too.
    At the same time, these people are struggling to rebuild 
their community, to make it a vibrant, prosperous town, to keep 
local businesses and help their friends and neighbors. Many of 
them wonder if and when they will become sick.
    They have to do all of this with little or no help from 
W.R. Grace.
    I have requested that a letter from the representatives of 
many of the Libby claimants, as well as two letters from 
doctors who have treated or screened many of the folks in Libby 
for asbestos-related disease, be included in the hearing 
record. These documents outline how the experience of the 
people in Libby, Montana, is unique and demonstrate that the 
pattern and progression of their disease--and this is very 
important--does not fit within the ABA or other proposed 
medical criteria.
    These documents speak for themselves, including 
illustrating the simple fact that tremolite-related lung 
disease does not appear on a chest x-ray like chrysotile-
related lung diseases. Chrysotile is the most common form of 
asbestos that most people have been exposed to in this country.
    I would like to quote in detail from Dr. Brad Black's 
letter because he makes some very important points. Dr. Black 
is the medical director of the Center for Asbestos-Related 
Disease in Libby, Montana, and Dr. Black states, ``I entered 
medical practice in the [Libby] community in 1977.  .  .At that 
time, like most physicians, I was trained to recognize disease 
due to chrysotile asbestos, from which significant lung disease 
manifested as.  .  .scarring in the lung tissues. This 
[scarring in the lung tissues] has a characteristic pattern on 
a chest x-ray.  .  .  .''
    Continuing the letter, ``During the period of 1979 to 1999, 
asbestos-related disease was incubating in a large number of 
Libby residents, but remained undiagnosed. Why did our 
community physicians not recognize it? Simply because 
tremolite-related lung disease does not appear on a [chest x-
ray] like chrysotile-related lung disease.  .  .[T]remolite 
usually causes scarring in the lining around the lungs (pleura) 
and infrequently shows up on x-ray as scarring inside the lung, 
even in the heavily exposed'' W.R. Grace ``workers.  .  .and is 
much better seen on'' a CT scan.
    Continuing the letter, ``In the last 18 months, I have 
observed the diagnosis of five mesotheliomas, with three 
individuals already having died. Four of these individuals 
(nurse, office receptionist, forest service administrator, a 
no-resident who traveled to Libby for basic services) were 
exposed to tremolite simply by living and working in Libby.'' 
That is the only reason they got it, just because they are 
living there.
    Continuing, ``Another gentleman who lived near a 
vermiculite processing facility in the residential area of 
Libby died from progressive pleural fibrosis. His spouse has 
advanced asbestos-related disease. A significant number of 
residents who were exposed environmentally are experiencing 
advancing lung disease, some of whom require supplemental 
oxygen. Based on past observations with chrysotile exposure, 
one would not expect non-occupationally exposed individuals to 
develop such extensive asbestos-related disease.  .  .The 
relative potency of tremolite fibers in causing disease 
(progressive lung disease, mesothelioma, and lung cancer) has 
been striking,'' end quote, end Dr. Black's letter.
    This is all included in Dr. Black's letter. It is only two 
pages long, and I would respectfully ask that all members of 
the Committee personally read Dr. Black's letter. It will be 
very instructive to a solution.
    Mr. Chairman, medical criteria, such as that proposed by 
the ABA or in the Fairness in Asbestos Compensation Act of 
1999, would devastate the people of Libby, Montana. The 
standard in the 1999 Act would exclude 73 percent of the Libby 
patients from filing a claim for compensation. The remaining 27 
percent are either dead or in the end stages of asbestos-
related disease and in the process of dying.
    It has been made clear to me that we have likely lost 
ground under the ABA medical standard, with even more Libby 
patients barred from filing a claim under the ABA standard than 
were barred under the 1999 Act. I would refer members of the 
Committee to a letter from Dr. Whitehouse that I have submitted 
for the record where he describes in detail the arbitrary 
nature of the ABA standard as applied to tremolite asbestos 
patients.
    I would also like to include in the record a list of 10 
people in Libby who would be excluded from seeking compensation 
under medical criteria such as that proposed by the ABA, so 
that the Committee can get some idea of the human cost here.
    Mr. Chairman, we are no better off today than we were in 
1999 when we battled the Fairness in Asbestos bill. The 
differences between tremolite and chrysotile continue to be 
ignored. The sheer magnitude of the tragedy in Libby 
illustrates how hard it is to define the nature of an asbestos-
related injury.
    Am I frustrated when I hear about the thousands of people 
who have had little or no real exposure to asbestos, but who 
have filed asbestos-related claims for compensation? Yes, 
because I know that many of those people will be competing 
against the folks in Libby for compensation. However, do I know 
with any real certainty that some of those people aren't sick 
now, or won't become very sick, depending on where they are 
from, when they were exposed and for how long? Do I know if 
most of those people will be treated fairly by medical criteria 
such as that proposed by the ABA or the Fairness in Asbestos 
Act or similar legislation proposed in this Congress? No, and 
neither does the Congress.
    I have stated before that I am sympathetic to the concerns 
of companies that have not filed for bankruptcy. These 
companies may not share W.R. Grace's or other defendants' 
liability or responsibility for asbestos-related disease and 
death, but they have been tagged with liability precisely 
because they are solvent. These companies are also being 
treated unfairly and unjustly by the actions of W.R. Grace and 
other companies that are able to hide their assets and declare 
bankruptcy; in essence, shifting their rightful share of 
liability and responsibility to other businesses.
    I have also told this Committee before that I think a 
review of the injustices inherent in corporate bankruptcies 
would be an appropriate piece of the asbestos puzzle for this 
Committee to take a hard look at.
    It is pretty clear that W.R. Grace hid a vast amount of its 
assets, up to 4- to $6 billion, from the reach of the 
bankruptcy court and, by extension, from Libby victims. About a 
billion of those assets will be returned to the bankrupt 
estate, but W.R. Grace didn't suffer for this. The Department 
of Justice had to do all the work, at taxpayer expense, to 
unravel this transaction.
    At the end of all this, W.R. Grace will likely emerge from 
bankruptcy lean and whole and able to continue to prosper as a 
business. The Libby victims, unless we are able to protect them 
in some fashion, will receive pennies on the dollar. This is 
just disgusting.
    Add to this the fact that many of them can't get medical 
insurance, and that the total cost of treating all those who 
have been sick, who are sick or who will become sick, as a 
result of their exposure to asbestos in Libby is just 
staggering. The cost of treating the former W.R. Grace mine 
workers alone threatens to bankrupt the State of Montana's 
Medicaid program, another case of W.R. Grace masterfully 
shifting liability and responsibility to someone else.
    So many people have come together to do the right thing in 
Libby. The Montana delegation, the State of Montana, the 
Federal Government, the community of Libby, and many concerned 
private citizens have been working so hard to bring new 
economic development and much-needed health care resources to 
Libby. This has been our, practically, number-one goal for the 
last couple or 3 years, I must tell you, all four of you. It is 
that important. Federal dollars have flowed to Libby for 
cleanup, for health care, and revitalizing the economy. There 
has been significant progress for the community.
    Dr. Brad Black has called for developing a leading-edge, 
world-class research facility with the mission of 1 day 
developing cures for asbestos-related diseases. The silver 
lining is that Libby's tragedy could be used to protect the 
health of men, women, and children across the country.
    It is just amazing to see how everyone has come together in 
Libby to create something positive from a terrible situation, 
everyone, that is, except W.R. Grace.
    I say all of this because I want to circle back to the idea 
of making sure that when we attempt to step into the middle of 
the asbestos litigation debate that we are doing justice by the 
people of Libby and by the people of this country.
    We keep being drawn away from the key issue here, which is 
that asbestos companies like W.R. Grace caused the death and 
serious illness of hundred if not thousands of people. We 
shouldn't be overly concerned about protecting companies like 
W.R. Grace. However, are there others who ultimately bear a 
share of responsibility for what happened to these hundreds and 
thousands of people? There is a good argument to be made that 
the Federal Government does share some of the responsibility 
for failing to take action to protect its citizens when the 
hazards of asbestos became known many decades ago. That is 
something for this Committee to consider.
    Clearly, we won't be able to come up with an acceptable 
resolution to the problems that is perfect or where everyone 
will agree, but we have to do our best. We have to put the 
victims first. That is the key.
    The medical criteria put forward by the ABA and others does 
not meet this standard. Their criteria are arbitrary. They are 
unfair, excessively burdensome, particularly to the people like 
those in Libby who have every right to demand that W.R. Grace 
make their town whole and pay for their medical expenses and 
suffering.
    Thank you, again, Mr. Chairman, Senator Leahy, ranking 
member of the Committee. I apologize for such a long statement. 
I thank you for your indulgence, but I can tell you that this 
is critically important.
    If you could sit in the living room of Les Scramstad, as I 
did a couple, 3 years ago, and other people from Libby who are 
suffering from termolite-related asbestos diseases, you would 
understand why I am so passionate about this. I pledged to 
myself that moment that I was going to do everything humanly 
possible to make sure the people of Libby, Montana, are made 
whole again, and I am going to do my very best until it 
happens.
    I ask the Committee, I beseige the Committee, in drafting 
legislation, recognize the main points I have made, namely that 
the medical criteria proposed by the ABA will exclude most of 
the people of Libby, Montana, who through no fault of their own 
have just gone through the biggest tragedy and are suffering 
the greatest calamity that I have ever seen in my State.
    Thank you.
    [The prepared statement of Senator Baucus appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Senator. We appreciate having 
your powerful testimony.
    Senator Leahy. Mr. Chairman?
    Chairman Hatch. Yes.
    Senator Leahy. Mr. Chairman, I just wondered if I could put 
in the record a statement by Senator Kohl and the testimony of 
The Asbestos Study Group, whose members include Dow and Ford 
Motor Company.
    Chairman Hatch. Without objection, we will put that all in 
the record.
    Senator Voinovich, we will turn to you.

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 Leahy for holding this hearing and allowing me 
to testify.
    I am most impressed with your remarks and Senator Leahy's 
remarks about a bipartisan solution to this problem that is 
confronted by the victims and also the businesses in this 
country. I think that everyone involved has to understand that 
they have a symbiotic relationship with each other, and if 
everyone could get in the room and work together, that somehow 
we could come up with something that is fair.
    I would say it would help also if The Asbestos Study Group 
and the Asbestos Alliance would get together and speak with one 
voice, so that you would have a clear point of view from their 
perspective.
    I want to preface my remarks by saying that my thoughts are 
with the victims of asbestos exposure. Those families who have 
lost loved ones and have to live with the debilitating illness 
caused by asbestos, they are in the forefront of my mind and in 
my heart as I discuss the issue of asbestos liability.
    I want to be sure that the solution we craft is one that 
will ensure that these truly sick individuals are allowed fair 
and just compensation, and, Senator Baucus, you have done a 
marvelous job of speaking eloquently on their behalf.
    I think, Mr. Chairman, most people would agree that the 
issue of asbestos litigation and its aftermath is presenting a 
crisis in our country. With over 50 companies already in 
bankruptcy and a slew of bankruptcies soon to follow, the U.S. 
Supreme Court had it right when they called this an 
``elephantine mess.'' What people need to understand, though, 
is that the mess has far-reaching effects, and the ripples are 
being felt way beyond the corporate board rooms.
    Corporate bankruptcies affect victims' compensation so that 
truly sick asbestos victims, in too many cases and more and 
more frequently, only receive pennies on the dollar.
    Employees of bankrupt companies suffer as they watch their 
jobs disappear and their pensions in 401(k) plans decrease 
dramatically. For example, take the case of Federal Mogul, a 
company that employs over 1,200 people in six cities throughout 
my State. Employees held 16 percent of the company's stock and 
then watched as that stock lost 99 percent of its value. Not 
only current employees, but also retirees are feeling the 
effect of these bankruptcies. Many retirees depend on company 
stock and dividends for income. When this value heads south, 
retirees feel it immediately.
    Ohio is a manufacturing State, and along with agribusiness, 
our manufacturers are the back bone of our economy. In fact, 
when you compare Ohio's manufacturing production with New 
England States, Ohio's gross State manufacturing is higher than 
all six of our New England States combined. Unfortunately, we 
have lost a lot of companies facing asbestos liability in many 
instances only because of companies that they acquired.
    One company which does a lot for the Toledo area is Owens 
Corning. As Governor, I worked hard to get Owens Corning to put 
their new corporate headquarters in downtown Toledo to help 
facilitate the city's renaissance. Owens Corning unfortunately 
went bankrupt in 2000. In the 2 years preceding this 
bankruptcy, the stock lost 97 percent of its value, and 14 
percent of the stock was owned by company employees.
    Now Owens Corning has been making a comeback, and I 
recently read an article in the Toledo Blade stating that they 
saw their sales rise to $4.9 billion in 2002. This is a well-
managed, profitable company. However, accounting charges to 
cover their asbestos liability expenses contributed to be what 
the Toledo's firm's biggest loss has been, a report of $2.8 
billion for the year. The biggest factor in the loss, a $2.4-
billion charge taken in the third quarter to reflect estimates 
of its asbestos liability over the next 50 years, and more and 
more companies, Mr. Chairman, are going to have to be reporting 
those liabilities and you are going to see a lot more of what 
has happened to Owens Corning in this country.
    Another company recently spoke to me off the record about 
its growing asbestos liability. When this company announced 
that it had limited asbestos liability, the stock dropped by 
about 20 percent and its debt rating was lowered. This began a 
chain ripple effect, which included the loss of over 100 jobs, 
the sale of assets, a 50-percent cut in capital investments, 
and a huge cut in the amount of contributions to the 
surrounding community.
    As a former mayor, I know firsthand the impact of decreased 
contributions to the community. Many of us forget that these 
companies make significant contributions to the tax revenues of 
the cities in which they are located and the States, 
contributions to the United Way, arts, education, health care, 
and many other forms of community involvement.
    As I have said before, companies like this one make up the 
back gone of our State's economy. They don't want to shirk 
their responsibilities to those victims who have or will become 
sick because of asbestos exposure. They just want to know that 
they are not compensating those individuals who are unimpaired.
    What I am hearing from Ohio companies is they support 
taking the medical criteria approach advocated by the American 
Bar Association. As you probably know, in coming to this 
decision, the ABA formed a commission chaired by Judge 
Nathaniel Jones, a distinguished Federal jurist from Ohio and 
former general counsel of the NAACP. This commission included 
seven members of the legal community representing the 
plaintiff, defense, and corporate bars. The commission heard 
extensive medical testimony from the Nation's leading 
physicians in the area of pulmonary function, and the ABA's end 
result, one that I support, is one that prevents resources from 
being misdirected because of a flood of premature claims. It 
helps companies avoid bankruptcy, and most importantly of all, 
it protects the rights of victims who suffer from a serious or 
functionally impairing asbestos-related disease.
    I am not going to go into the details of that 
recommendation. Mr. Archer, who is on the next panel, can 
explain it much more eloquently than I can.
    I am sure that there must be some way to accommodate the 
concerns that Senator Baucus raised here today before this 
Committee.
    On a broader scale, the litigation crisis in this country 
is like a tornado ripping its way through our economy, an 
economy already on the ropes primarily because of the 
geopolitical situation that we are confronted with.
    The American Tort Reform Association published a study last 
year of impact of litigation on my State and found that it cost 
every Ohioan $636 per person. A large part is due t the issue 
before you today, asbestos.
    We need, Mr. Chairman, to move immediately on this issue. 
In my opinion, passing responsible asbestos reform legislation 
to ensure that the truly injured receive fair and just 
compensation and to prevent more companies from sliding into 
bankruptcy will do far more for my State than any of this so-
called stimulus proposals that we are hearing about today.
    We must stop the hemorrhaging for our victims of asbestos 
and the companies, their employees, their retirees, and their 
communities.
    Mr. Chairman, I want to thank you very much for allowing me 
to testify here today.
    [The prepard statement of Senator Voinovich appears as a 
submission for the record.]
    Chairman Hatch. Thank you. We appreciate having the 
testimony of both of you fine Senators, and we appreciate the 
efforts that you have made to be here with us and to give us 
these statements. They are important, and we are paying strict 
attention to them. Thank you very much.
    Senator Voinovich. Thank you.
    Chairman Hatch. Our first panel will be made up of Melvin 
McCandless. Mr. McCandless came here from Williamston, North 
Carolina, to be here today. We want to thank him for agreeing 
to be with us. I know it is not easy for him. So we are 
grateful to have him here.
    The second witness will be Mr. Brian Harvey. He has 
traveled all the way from Marysville, Washington, with his wife 
to share his story with us today, and we are very appreciative, 
especially given the hardship it must be with his medical 
condition. I know that mesothelioma is a very terrible disease. 
So we will listen to these two.
    Plus, David Austern, Esquire, he is president of the Claims 
Resolution Management Corporation and general counsel for the 
Manville Personal Injury Settlement Trust in Fairfax, Virginia, 
which as we know has been dealing with asbestos claims for 
years.
    Dennis Archer, Esquire, the president-elect of the American 
Bar Association. We are honored to have you with us, Mr. 
Archer. He is currently chairman of the firm Dickleson Wright 
in Detroit, Michigan. Mr. Archer initiated the ABA's Committee 
on Asbestos Litigation.
    Jonathan Hiatt, Esquire, is general counsel for the 
American Federation of Labor and Congress of Industrial 
Organizations, the AFL-CIO, in Washington, D.C.
    We are pleased to have all of you here with us today.
    Finally, once again, Mr. Kazan, we are very pleased--am I 
pronouncing that name right?
    Mr. Kazan. ``Kazan,'' Your Honor.
    Chairman Hatch. ``Kazan.'' That is what I thought.
    You are a partner with the firm Kazan, McClain, Edises, et 
al., in Oakland, California. Mr. Kazan has represented asbestos 
cancer victims for years, has testified before. We decided to 
bring him back because of his tremendous experience in this 
area and his ability to help this Committee to try and arrive 
at, hopefully, some solutions. I intend to get there, and, 
hopefully, I will have the cooperation of our colleagues on 
both sides of the table.
    So we will start with Mr. McCandless. Then we will go to 
you, Mr. Harvey, Mr. Austern, Mr. Archer, Mr. Hiatt, and then 
Mr. Kazan.

    STATEMENT OF MELVIN MCCANDLESS, PLYMOUTH, NORTH CAROLINA

    Mr. McCandless. Mr. Chairman and Honorable Members of the 
U.S. Senate Judiciary Committee, let me thank you for the 
opportunity to be here today to tell you about my family and my 
story. My name is Melvin McCandless, and I am from Williamston, 
North Carolina.
    I am here today to address the unfairness in the bill that 
has been introduced by Senator Nickles, the Asbestos Claims 
Criteria and Compensation Act of 2003, Senate bill 413, and in 
the medical criteria proposed by the American Bar Association.
    I suffer from asbestosis, and I was found by the deputy 
assigned by the North Carolina Industrial Commission to be 
permanently and totally disabled because of my asbestosis. 
Although I have been found permanently and totally disabled by 
the deputy who heard my case, I would be unable to recover in a 
court of law for the very same disease if this bill or the ABA 
proposal became law.
    I worked for one of the largest employers in North 
Carolina, a large mill in eastern North Carolina. It is lined 
literally with miles of asbestos-containing insulation around 
pipes, conduits, turbines, and boilers. I worked there 35 
years, and for years, almost every day, you could see the dust 
in the air.
    I worked there as a supervisor. None of us had any idea 
about how dangerous asbestos was. We worked around it every 
day. Down in eastern North Carolina, the plant where I worked 
is one of the few places where you could get a good-paying job.
    None of the workers had respiratory protection. We were not 
given any special clothing to keep the asbestos off of us or to 
prevent us from taking it home to our families. I did not know 
asbestos was dangerous until after I already had the disease. I 
was required every month to have a safety meeting, but at no 
time did the company ever mention anything, nothing about 
asbestos, in any meeting that I ever attended. I did not see 
any warnings on any boxes of asbestos products.
    For several years before I went out of work, I was short of 
breath while trying to do my job. At any time I was in dust or 
steam, which was really every day at work, it would affect my 
breathing. At any time I was in the heat or around the steam 
insulation, the coughing would be the same.
    As a supervisor, I had to walk around various parts of the 
mill, including up and down stairs. I got to where I could not 
do my job anymore because I was so short of breath. At any time 
I had to exert myself, I would get winded almost immediately. 
my work environment aggravated all my breathing problems. In 
fact, because of my breathing, I couldn't wear a respirator 
because it would suffocate me.
    To work as long as I did, I had the other guys help me do 
my job, and that was not right.
    Although the company gave me a couple of chest x-rays, no 
one ever told me of any abnormalities. I did not know what was 
wrong with me, but my employer did. See, they had been 
monitoring my lungs sine 1985. In 1989, they started seeing 
changes on the x-rays the company doctor took, but they never 
told me. They just moved me out of the mill onto the woodyard. 
Then, 4 years later in 1993, they moved me back into the dust 
inside the mill, and that is where my breathing went downhill.
    My doctors testified that I should not have been further 
exposed to asbestos after the chest x-ray showed I was 
developing the disease. After my chest x-ray showed up, the 
company took me out of the medical monitoring program.
    There is not a lung doctor in my county or a B reader. The 
few doctors that are there are just general doctors who usually 
don't stay long because of our location. The only reason I ever 
found out what was wrong with me is because I contacted a 
lawyer who I heard represented by coworkers.
    I was sent to a pulmonologist first and then to an 
independent State doctor who is an associate professor of 
pulmonary medicine, who also confirmed that I had asbestosis. I 
also had the B reader who read chest films for the company 
confirm that I had it, as did other B readers. Yet, my lawyer 
tells me that despite all this, I wouldn't qualify to even file 
a claim for compensation in a court of law under the Nickles 
bill or the ABA proposal.
    The North Carolina Industrial Commission found the reason I 
cannot work is because of my asbestosis. I am short of breath, 
and I cannot do my job. I could not do my job.
    In fact, the dust was so bad, it would come home on my 
clothes. While washing these clothes and being around me, my 
wife of 37 years, Janice, started inhaling the asbestos as 
well. In fact, now my wife has been diagnosed with asbestosis, 
too. She is having breathing problems which are getting worse, 
and she has a terrible cough.
    I am here today because my lawyer told me that if Senate 
bill 413 or the ABA proposal is passed, neither I nor my wife 
nor most of our friends would be able to recover in a court of 
law for asbestosis. Even though the North Carolina Industrial 
Commission has ruled I am permanently and totally disabled, I 
couldn't recover because my pulmonary function test is ``within 
the range of normal,'' and I would, therefore, be excluded 
under the Nickles bill or the ABA proposal.
    I cannot do any amount of exertion for over a very short 
period of time. Just pushing the garbage from the house to the 
road makes me short-winded and uneasy. My wife's condition is 
similar to mine, but she also would be excluded under the 
Nickles bill or the ABA proposal.
    I had not planned to be here today because one of my 
coworkers was going to testify, but he was put in the hospital 
last week due to his asbestosis. He is on oxygen. Like me, his 
chest x-ray report would not allow him to qualify for access to 
a court under the Nickles bill or the ABA proposal.
    I have worsening shortness of breath, a dry cough, and I am 
severely limited in what I can do. I cannot be around dusts, 
fumes, chemicals, and I truly believe that I may 1 day be like 
my friend who could not be here because he is on oxygen in the 
hospital.
    That is wrong. It is wrong for me, it is wrong for my wife, 
and it is wrong for my friends at the mill and all the others 
whose lives have been hurt by asbestos.
    Thank you for this opportunity to be here today to tell you 
my family's story and the story of a lot of my coworkers who my 
lawyers say would also not be allowed access to a court under 
the Nickles bill or the ABA proposal. Thank you.
    [The prepared statement of Mr. McCandless appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Mr. McCandless.
    We will turn to you, Mr. Harvey, and look forward to 
getting your testimony as well. If you will pull that mic up 
close to your mouth, that will help a little bit for everybody.

      STATEMENT OF BRIAN T. HARVEY, MARYSVILLE, WASHINGTON

    Mr. Harvey. Mr. Chairman, my name is Brian harvey, and it 
is a privilege for me to address you here today.
    In some respects, this is a little bit like being at home. 
My wife has already had the first word about being at this 
testimony, as you may have noticed in the video. That is not 
all bad. I should be dead today. The reason I am not dead today 
is my wife loved me enough to push me, prod me, and all but 
carry me across the State of Washington until I got to the 
chest clinic at the University of Washington Medical Center.
    After I was in the center, 8 days later, I was presented 
with the fact that I was a victim of mesothelioma. I now had to 
face the facts as we knew them about mesothelioma. It has been 
considered a death sentence, and that is what I felt.
    Then I was told, well, if you fight it, you might be able 
to string it out from 8 months, which is what they expected if 
you didn't fight, to maybe 18 months, but only one in 20 ever 
make it to 5 years. The doctor who is responsible for my care 
said due to the fact your diagnosis was early and your tumor is 
not too advanced, I have a very aggressive campaign that you 
would qualify for. I chose that course. That course included, 
first, chemotherapy to try to reduce size of the tumor and 
reduce its activity, follow that with surgery where he removed 
my entire left lung, the left side of my diaphragm, the left 
side of my pericardial sack, rebuilt the diaphragm with gortex.
    Chairman Hatch. With what?
    Mr. Harvey. With gortex.
    Chairman Hatch. I see. I missed that.
    Mr. Harvey. So that my left chest is now filled with fluid. 
You want the fluid there. If that were air, I would have 
trouble with infection. And he now followed that with neutron 
radiation in an effort to clean out any single cell of the 
mesothelioma tumor that might remain.
    I am now 42 months from the time of my diagnosis, and I 
don't plan on checking out any time soon.
    Every 6 months, I return to the University of Washington 
for a CAT scan, blood work, and a general checkup. It is a lot 
like playing Russian roulette. All of the treatments I was 
given were an effort by the doctors of the University of 
Washington to remove the bullets from the cylinder of the gun, 
but every time I go back, it is like the technicians take out 
the gun, spin the cylinder, and hand it to my doctor. He points 
it at my head and pulls the trigger. I have been lucky so far. 
It has always gone ``click,'' and I remain at no evidence of 
disease.
    Every day, I rejoice in the fact that I am alive, that I 
can still hear the birds in the park behind my house and the 
children playing in the yard across the street, and I have at 
least one more day to be with my family.
    After being diagnosed with mesothelioma, I hired a lawyer 
and filed a lawsuit against several companies who manufactured 
some of the asbestos products that I worked around. Neither my 
wife nor I had ever filed a lawsuit before. However, when we 
learned that the asbestos industry had been aware of the 
dangers of their products by the 1930's, I felt justified in 
seeking compensation for my family and myself. After 6 months 
of litigation, my lawyers were able to obtain several 
significant settlements in my case.
    My wife and I aren't wealthy. My wife still works so that 
she can maintain my health insurance. However, our settlement 
enabled us to relocate to Seattle where I could be close to the 
doctors who are responsible for my still being alive and to put 
some money away so that my wife and family are covered if I 
die.
    Over the past several years, I have worked with the 
University of Washington and the Mesothelioma Applied Research 
Foundation to counsel other mesothelioma victims. I discuss 
possible treatment options and try to prepare the victims for 
the devastating effects of the disease. Many victims talk to me 
about financial disruption that follows a mesothelioma 
diagnosis. When I suggest that they pursue legal remedies, I am 
saddened to hear that all the companies from whom I received 
compensation have filed for bankruptcy in the past 2 years.
    I have read many articles and magazines that tell me that 
the vast majority of asbestos claims filed in America today are 
brought by people who are not currently sick as a result of 
asbestos disease. It makes me angry that these cases are 
forcing the defendants into bankruptcy and diverting funds from 
the people who are truly sick and dying from asbestos disease. 
I am angry that the true victims of asbestos are not getting 
the compensation they need and deserve.
    Congress must act comprehensively to address the asbestos 
crisis in America at four different levels: prevention, 
detection, treatment, and compensation.
    Congress must act to ban asbestos in America. It is 
unbelievable that asbestos is still being used in this country 
when its dangers are so well known. My Senator, Patty Murray, 
has proposed legislation to ban the use of asbestos in America, 
and I ask the members of this Committee to join Senator Murray 
in this effort and stop people from being exposed to this 
deadly material. The best way to solve the asbestos litigation 
crisis is to prevent people from getting sick in the first 
place.
    Detection. Asbestos disease is very difficult to diagnose 
and even more difficult to treat. Congress needs to establish a 
medical monitoring program to ensure that the 40 million 
Americans who have been exposed to asbestos receive regular 
examinations by qualified physicians. Most Americans were 
exposed to asbestos while serving in the military or, like 
myself, as a union member working in the trades. The Veterans 
Administration and AFL-CIO could provide the organization to 
administer an asbestos monitoring program for millions of these 
exposed individuals.
    Treatment. Many individuals diagnosed with mesothelioma are 
simply told by their physicians to go home and prepare to die. 
Congress needs to appropriate funds for the research and 
treatment of asbestos-related disease. Asbestos victims need 
real treatment options when they become ill.
    Compensation. Although the hazards of asbestos were well 
documented from the 1930's, asbestos was widely used by 
manufacturers through the 1970's, and it is still used by some 
today. People whose lives are disrupted or destroyed by 
asbestos disease should be able to seek compensation from the 
responsible companies for their injuries. Individuals who are 
not suffering a real disease caused by asbestos should be 
eligible for medical monitoring, but not monetary compensation. 
The American Bar Association has developed criteria to 
distinguish individuals suffering from a real asbestos disease 
from those who are not impaired. Congress should act now to 
enact the ABA standards into law.
    Asbestos has had a devastating impact on the lives of 
countless Americans. I ask that Congress adopt this 
comprehensive approach to the asbestos crisis for the benefit 
of all Americans.
    Thank you.
    [The prepared statement of Mr. Harvey appears as a 
submission for the record.]
    Chairman Hatch. Thank you. We appreciate both of your 
testimonies. They are very dramatic and important to us on the 
Committee.
    For the remaining witnesses, I have these lights. We have 
given each of you 5 minutes, and when that red light goes on, I 
would sure like you to wrap up, if you could, because we do 
have a lot of questions and we would like to be able to 
elucidate this matter a little bit more with some of the 
questions we have. If you need more time, just ask me, but if 
you can do it within the 5 minutes we have allotted, I would 
appreciate it.
    We will start with you, Mr. Austern.

  STATEMENT OF DAVID T. AUSTERN, PRESIDENT, CLAIMS RESOLUTION 
MANAGEMENT CORPORATION, AND GENERAL COUNSEL, MANVILLE PERSONAL 
           INJURY SETTLEMENT TRUST, FAIRFAX, VIRGINIA

    Mr. Austern. Chairman Hatch, Ranking Member Leahy, and 
members of the Committee, thank you for the opportunity of 
being here today. I am David Austern, and I am president of the 
Claims Resolution Management Corporation, and I am also general 
counsel of the Manville Personal Injury Settlement Trust, which 
is the oldest and at least right at the moment the trust with 
the most money.
    I appeared here 5 months ago and testified about the status 
of asbestos litigation and particularly claims, and I had some 
rather dire numbers at that time. I must tell you, after 5 
months, things have not improved one single bit.
    The CRMC has received on behalf of the Manville Trust well 
over 600,000 claims in the last 15 years. We have paid 520,000 
of these people over $3 billion, and that sounds like a lot of 
claims and a lot of money, but we are not halfway there. Our 
future claims forecasters tell us we will receive between 1 
million and 2.5 million additional claims. So, arguably, we are 
not halfway there. We are barely a quarter there.
    Most distressing of all, numbers aside, this is a 
fortuitous system, and, unfortunately, the victims are a 
function of that fortuity. Whether a victim is paid and how 
much or, for that matter, if at all is a function of whether 
defendants are solvent, where those defendants are, whether 
they are in bankruptcy court, who the lawyer is, and a whole 
host of other idiosyncracies including jurisdiction.
    In fact, that fortuity is before you here today. Both Mr. 
McCandless and Mr. Harvey have filed claims, and I will tell 
you that they have both been paid, but because of the 
fortuitous-ness of this, one of them was paid at a 10-percent 
rate by the Manville Trust because we only pay at a 10-percent 
rate at that time, and because of the increase in claims, we 
had to cut that pro rata rate to 5 percent. And one of these 
gentlemen, disease aside, got only 5 percent of the value of 
his claim, and that is so with every single extant asbestos 
trust. We pay 5 percent for the Manville Trust, and, yet, 
Manville, it is generally thought, had 30 percent of the 
liability for asbestos exposure in this country, and not one 
single, solitary extant asbestos trust pays more than a 
fraction. Indeed, one of them pays, if I remember my math 
right, less than a fraction because they pay less than 1 
percent of the liquidated value of those claims.
    And by the way, we have 18 trusts in bankruptcy court about 
to be formed, and not one single one of them will pay anything 
more than a small fraction of the liquidated value of those 
claims.
    Why is there so little money for Mr. Harvey and Mr. 
McCandless and the other victims of asbestos? Well, you have 
been told before, and I will not reiterate, that the tort 
system eats up about 50 percent of all of the funds that get 
spent.
    Let me turn to something else. We have 18 bankruptcies 
ongoing, and they are chewing up substantial sums. In the 
Manville bankruptcy, which emerged in 1988, the costs of the 
bankruptcy were $100 million in 1988 funds, and if you look at 
the market cap of the 18 companies that are now in the 
bankruptcy courts and try and figure out what it will cost, I 
predict for you, never mind future bankruptcies, those 18 
bankruptcies are going to chew up in excess of $1 billion in 
trying to resolve the bankruptcy itself and, thus, Mr. 
McCandless and Mr. Harvey and their colleagues will have less 
than that billion dollars.
    You have before you what are arguably some competing 
legislative initiatives, and I don't think it is particularly 
keen advocacy for me to sit here and be critical of one or the 
other. Others may have a different view of that, but U.S. 
policymakers have some tough decisions. So I would like to 
spend the rest of my time on the trust fund or what some call a 
national asbestos claims facility because I feel that, by far, 
it is the better of the proposals.
    It would, in fact, create a one-payer system, and by the 
way, based on no fault, it would be private funded. It would, 
in fact, prioritize diseases, and it, in fact, would set, with 
your help, legislative standards for funding and for funding 
caps.
    I would like to be able to sit here and tell you what I do 
for a business in paying claims requires the knowledge of a 
rocket scientist, but in candor, it does not. This can be done 
fast. It can be put together expeditiously, and I would 
guarantee to you that from the date of enactment to the payment 
of claims would probably not exceed 90 days. In short, those 
who criticize this proposal because they think it is 
complicated simply have never run an asbestos trust, as I have 
for 15 years. I promise you, it is not that difficult to do 
this sort of thing.
    Let me make one last point before that red light goes on. 
We are in a situation in which we are paying fractions of 
asbestos trusts, and we will continue to do so. This is the 
only proposal that will remove these cases from a litigation 
and bankruptcy system, the only proposal that will provide 
criteria that are meaningful to the payment of claims.
    Now, competing, I realize, legislative initiatives before 
you lead to hard choices. This is the only one that, in fact, 
will save the money from bankruptcies and will save the money 
from the tort systems that Mr. Harvey and Mr. McCandless and 
their colleagues can look to further payments in the future.
    Thank you.
    [The prepared statement of Mr. Austern appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Mr. Austern. That was 
interesting testimony.
    Mr. Archer, we are honored to have you here now. I 
understand you have Dr. Crapo with you. Feel free, Dr. Crapo, 
to advise him anywhere through is testimony or questions.

   STATEMENT OF DENNIS ARCHER, PRESIDENT-ELECT, AMERICAN BAR 
                 ASSOCIATION, CHICAGO, ILLINOIS

    Mr. Archer. Thank you, Senator Hatch, Senator Leahy, 
Senator Kennedy, and all Senators present.
    My name is Dennis Archer, and I am president-elect of the 
American Bar Association. I appear before you today in that 
capacity on behalf of the American Bar.
    As you have noticed, Mr. Chairman, in the audience with me 
today is Dr. Robert Crapo, an expert in pulmonary testing and 
pulmonary physiology. He chairs the American Thoracic Society 
Committee that sets these standards. He has been chair for 15 
years. He is currently on the Committee that is writing 
international standards. He was one of 10 physicians 
interviewed by our Commission on Asbestos Litigation when it 
developed a medical criteria standard. Also in the audience is 
Philip McGuine, a member of the ABA Commission on Asbestos.
    We cannot protect victims of asbestos like Brian Harvey and 
his wife unless we fix the system. Asbestos litigation, as both 
you and Senator Leahy pointed out in your remarks, is spiraling 
out of control. 600,000 claims have been filed, with 200,000 
currently pending, and in New York City alone approximately 
30,000 cases. Increasing caseloads lead to longer delays, which 
means people are, frankly, dying before they get their day in 
court, as 65 companies have bankrupted. Sometimes bankrupt 
companies can only pay, as you heard, pennies on the dollar. 
Workers have lost 60,000 jobs and an average of $8,000 in 
pension accounts. The courts are overwhelmed, and there may not 
be anyone left to pay victims.
    There is a simple principle here: Help people who are sick 
when they are actually sick. We need to triage the mass of 
cases. Sick people are not getting the help they need. For 
victims, short-term windfalls can cause massive, long-term 
shortfalls. We should use more than three decades of medical 
and scientific research to craft a medical standard for 
sickness, concentrate on those who are sick and need our help 
today.
    We need to implement a medical standard which will restore 
order to the system, and there needs to be a change of the 
Statute of Limitations. Implementing a Federal medical 
standard, a clear, consistent, medically sound standard for 
those who are sick, change the Statute of Limitations that the 
clock will not start ticking when and if a person actually gets 
sick.
    Debate should be about the system. Today, the system says 
file now or never. A better way is to file when you actually 
need it. Too often, there is no justice for victims or for 
corporations.
    The American Bar Association House of Delegates is made up 
of lawyers who come from small law firms. They do plaintiff's 
work. They do general practice work. There are representatives 
there from State and local bar associations. There are 
representatives there from sections and divisions like labor 
and employment and litigation and health law, and 70 percent of 
the lawyers were present who heard the debate. I might add that 
we are a very engaging body.
    We invited and had privileges of the floor, the president, 
the distinguished president of the American Trial Lawyers, Mary 
Alexander, who came in and shared her views as to why the 
standards should not be passed by the House.
    There was an outstanding lawyer, I believe his name is, 
Roger Sullivan, who represented plaintiffs from Libby, Montana, 
who shared his views.
    There was a young woman whose name escapes me, but she was 
from California, and her partner, interestingly enough, was a 
board-certified physician who shared their views. She shared 
their collective views as to why it should not be passed.
    There was a former president of the State Bar of West 
Virginia who stood at the well of the House and said why he 
felt the standard should not be passed.
    On the other hand, there were others who advocated the 
reason and rationale for the medical standards, and 70 percent 
of the people who voted, voted in favor of the standard.
    I believe, as Mr. Austern has said, that perhaps one of the 
key elements to solve this may very well be a trust fund, but a 
trust fund without medical standards will have them going back 
to the well and having him paying 5 percent on a claim, and his 
prediction is others who are in bankruptcy and coming out with 
trust funds will be paying even less.
    I believe you can solve this. You should know that I spoke 
to Senator Baucus' staff, and I spoke to the Senator. I have 
indicated to him that we believe, as I close, that the medical 
standards actually cover and respect the concerns of his 
constituency in Libby, Montana, but if, for some reason, that 
is not the case, I have offered and the Commission has offered 
to work with him to find a solution so that his constituents in 
Libby, Montana, and those similarly situated can be protected, 
but not to denigrate the standards in such a way that the 
status quo remains.
    Thank you.
    [The prepared statement of Mr. Archer appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Mr. Archer. We are really 
pleased you would take time from a busy schedule to be with us 
today.
    We are honored to have you, Mr. Hiatt, here representing 
the AFL-CIO, and we appreciate you taking time to be with us.

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

    Mr. Hiatt. Thank you very much, Chairman Hatch. Thank you, 
Ranking Member Leahy, and the other members of the Committee. I 
am very pleased and honored to be invited back, and I do want 
to thank the Committee for its interest in this major public 
policy issue and its clear intention and desire to see if we 
can't figure out some fashion of reaching closure and one that 
is, most importantly, based on as much consensus as possible.
    Last fall, when you were kind enough to invite me to 
appear, you may recall I talked about three things. First, as a 
representative of the AFL-CIO that estimates having well over a 
million active and retired members of our affiliated unions who 
are victims of asbestos-related disease, we acknowledge that 
the system, as it presently stands, is broken.
    We talked about how it is a system that does not, with very 
few exceptions, provide fair compensation to the people who 
deserve compensation. It doesn't provide compensation quickly 
enough. It doesn't provide it with the certainty that is 
necessary, the predictability, and it isn't providing with the 
certainty in predictability to companies either that is 
necessary.
    We indicated, second, that we were open to a legislated 
solution as long as it wasn't imposing a system that was as bad 
or worse than the current system, that it would only make sense 
to go through this exercise if we could end up with a solution 
that did truly represent an improvement. We didn't espouse any 
one particular approach, but we shared with you a set of 
principles that the AFL-CIO's executive counsel had passed at 
its meeting last summer in which we talked primarily about the 
importance of reducing costs, reducing delay, reducing 
uncertainty, No. 1; No. 2, a system that, while it would make 
distinctions in terms of compensation levels based on severity 
of sickness, it wouldn't just take out of the system completely 
victims who may not be as sick as the mesothelioma victims or 
the victims represented by Mr. Kazan in many cases, but would 
still provide compensation as deserved to compensation victims 
who are still, indeed, sick, like Mr. McCandless, even if they 
are for the moment at a lower level of severity.
    We talked about the need to make sure that testing and 
monitoring is built into the system to make sure that victims 
have a way of learning when their disease progresses. We talked 
about how any system should have at the end of the day some 
form of ultimate access to the courts, and we talked, finally, 
about the value of some role for the Federal Government, given 
the Federal Government's involvement in the early stages of 
this whole problem.
    Since the hearing last fall, we have, at your urging, been 
very engaged with defendants, with defendant companies, with 
insurers, with trial lawyers, and with other interested parties 
across the board, but I want to report today on what really has 
for us become the most hopeful, I think, set of discussions 
that we have been having with a range of major asbestos 
defendants and insurers on a very comprehensive reform 
proposal, and it is the one that Mr. Austern described as the 
so-called trust fund approach.
    It is extremely complicated. There are many still-
unanswered questions, but I do feel that we are more optimistic 
that it would be possible to reach some form of a consensus 
approach here than I would have thought and certainly than is 
the case with respect to the Nickles bill or some of the other 
approaches that have also been proposed.
    You have not only the testimony of Mr. Austern, but you 
have the written testimony from the so-called Asbestos Study 
Group, which consists of a large number of major companies, 
including, Dow, Viacom, Ford, General Motors, General Electric, 
Honeywell, Halliburton, and a number of major companies that 
have taken a very serious role in these discussions. I would 
urge that you read carefully their written testimony because I 
think that what is most notable is that we do at least in 
concept have agreement on a number of very basic features that 
this no-fault administrative compensation approach would have 
to have.
    First of all, that the basic payment structure would, 
indeed, be a national no-fault administrative system with a 
payment schedule for asbestos-related conditions that would 
provide victims with fair compensation.
    Second, with reference to Mayor Archer's comments, even in 
this trust fund approach, the payments would have to be based 
on medical criteria, we completely agree with that. We don't 
agree with the medical criteria that the ABA and the Nickles 
bill contain. We think that they are too restrictive in a 
number of ways, which I would be happy to discuss, but even 
there, it seems to me that it should be possible to reach 
consensus if you truly bring in representative doctors from the 
different groups. It should be possible to reach an agreement 
on what medical criteria should be used to distinguish between 
the different types of asbestos-related disease and the 
different levels of severity within certain types of asbestos-
related disease.
    Third, I think we have an agreement in concept that, while 
the schedule would take account of victims whose condition may 
have involved a variety of causes, it wouldn't deny 
compensation to those with asbestos-related disease who also 
smoked or were exposed to other harmful substances, which the 
ABA's approach and the Nickles' approach would eliminate.
    Fourth, the administrative system would be funded by 
statutorily mandated payments from asbestos defendants and 
insurers, including the bankrupt defendants, and existing 
asbestos trusts, and that is something where I understand there 
is a good deal of discussions going on right now among the 
insurers, among the corporate asbestos parties as well.
    Fifth, the Statute of Limitations would be revised so that 
the victims who received a payment for one asbestos-related 
condition and then developed a second condition would receive 
another payment for a different condition.
    Sixth, that there would be some ultimate access to the 
court structured in, so as not to undermine, but one that 
wouldn't undermine the overall integrity of the system.
    Seventh, that companies contributing to the funding of the 
system would have no standing to contest eligibility issues, 
such as product identification or causation, and that this 
would truly be a no-fault system.
    Finally, that the Federal Government would hopefully be 
able to play some significant role if we could find one that 
the Federal Government agreed made sense.
    I want to just conclude by saying there are two critical 
issues that we still are working on very much and would be of 
utmost importance to us. One is the risk issue. We believe that 
all parties have a legitimate concern about bearing the 
ultimate risk here and not miscalculating how much this is 
going to cost and what that would mean 10 years from now, 20 
years from now. However, we would not be able to agree to a 
system that risks ending up where Manville is today, where in 3 
years we find ourselves, the victims only receiving 50 cents on 
the dollar and in 10 years receiving a nickel on the dollar. So 
the risk issue is clearly a critical one.
    Finally, as I said at the beginning, any system has to 
really address the fairness of the compensation schedule. We 
recognize that no compensation schedule can meet the highest 
levels of compensation that some of the most successful 
lawsuits have resulted in, but by the same token, the numbers 
have to be fair. They have to be fair not only to those who 
have the most serious illnesses, such as mesothelioma and 
cancer, but also to others who are, indeed, impaired and cannot 
participate in regular life activities the way that you and I 
expect to be able to do.
    Thank you very much.
    [The prepared statement of Mr. Hiatt appears as a 
submission for the record.]
    Chairman Hatch. Thank you.
    Mr. Kazan, we were very appreciative when you testified 
before. We had kind of a give-and-take between you and Mr. 
Baron, who differed, but we would like to hear from you again 
because you have been representing a lot of people who really 
suffer from this disease, and we would like to have your 
viewpoint once more and anything else you can add to what you 
said before.

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

    Mr. Kazan. Thank you, Mr. Chairman, and members of the 
Committee. I am honored to join you again as you consider this 
important issue.
    The title of this hearing----
    Chairman Hatch. Please pull your mic over just a little bit 
so everybody can hear you. That is good.
    Mr. Kazan. The title of this hearing says it best: It is 
time for Congress to act. As I emphasized when I sat here 5 
months ago, asbestos litigation has become a national nightmare 
as well as a national disgrace, and it cries out for your 
attention. I sincerely hope that this hearing will be a 
springboard for action and that meaningful legislation soon 
reaches the President's desk.
    At that September hearing, all of the panelists from the 
AFL-CIO to the Association of Trial Lawyers of America agreed 
that asbestos litigation was a serious problem requiring 
congressional intervention, and we all pledged to work with you 
to find a solution.
    Since then, others have joined the chorus, including your 
colleague, Senator Nickles, who has introduced an asbestos 
bill, and the American Bar Association. As Mr. Archer 
explained, the ABA recently adopted recommendations for 
asbestos legislation. So the debate has now shifted.
    We are not just talking about the problem anymore. We are 
discussing how to solve it, and that is what I will address 
today from the point of view of someone who has represented 
asbestos victims for nearly 30 years.
    My view is simple. Like Senator Leahy, I believe in our 
civil justice system. It is the best in the world, and we can 
solve the asbestos litigation nightmare simply by making some 
small adjustments in that system.
    The heart of the asbestos problem is that tens of thousands 
of questionable claims, many generated by mass, for-profit x-
ray screening programs are filed every year. These are not 
diagnosed cases of asbestos disease in any real sense. The vast 
majority of the claimants today have no real illness and no 
real symptoms. All they have is an x-ray that shows marks that 
could have been caused by asbestos. In most cases, they have 
not even seen a doctor. In short, Mr. Chairman, they aren't 
really sick. If they were your children, you would not even 
keep them home from school.
    Unfortunately, in many States, this x-ray report can 
trigger Statutes of Limitations, forcing the premature filing 
of thousands of claims. These claims prevent the courts from 
doing their job, resolving the cases of those really injured by 
asbestos.
    The first essential step toward solving this problem is to 
defer the claims of those who are not yet sick, but preserve 
their rights to sue if and when they become sick in the future. 
Congress could make this possible by tolling the Statutes of 
Limitations. This would allow the courts to focus on the 10 to 
15 percent of current claims where the plaintiff has cancer or 
some breathing problems caused by asbestos. These claims would 
continue as they are today, without limitation. I know our 
courts can provide fair and even-handed justice in those cases.
    Another important element of any legislation is the 
establishment of medical criteria to distinguish between those 
who are sick from asbestos exposure and those who are not. 
Unlike other proposals which would take claims out of the 
courts, this simple approach would create the conditions that 
would allow the civil justice system to work.
    It is also the approach taken by Senate bill 413 and the 
ABA. Their criteria are very similar and address the unique 
problems involved in integrating medical standards into the 
legal system.
    Any legislation should require that a doctor obtain 
information about the plaintiff's work exposure and medical 
history. The doctor should also examine the plaintiff, review 
x-rays and lung function tests, and write a report that 
includes a medical diagnosis. Believe it or not, there is no 
real medical diagnosis made in most of today's claims, and, 
Senator, that is a travesty.
    It is also important that Congress set out some sort of 
workable standard to objectively measure whether someone is 
functionally impaired and whether that impairment is actually 
related to asbestos exposure. Unfortunately, many sick asbestos 
claimants are not sick from asbestos. They may have been 
smokers or have some other illness which has caused their 
problems. While the ABA resolution and Senate bill 413 differ 
in specifics, they both take a reasonable approach to this 
question.
    The bottom line is that reasonable medical criteria will 
ensure that the truly sick have immediate access to the courts 
and will get the compensation they deserve. This would go a 
long way toward putting the brakes on the bankruptcies that 
delay and reduce compensation to those who deserve it the most.
    It would also ensure that those companies already in 
bankruptcy could allocate their resources toward the truly sick 
claimants and emerge more quickly from reorganization. Since 
your last hearing, we have seen more studies quantifying the 
crisis, a lot of great discussions about solutions, and even 
proposed legislation, but in those same few months, more 
defendants have filed for bankruptcy and thousands more 
Americans have learned that they have serious asbestos disease. 
They face devastating illness and great uncertainty about 
whether they will receive just and fair compensation so that 
their families will be taken care of.
    Congress cannot let this scandal continue. I urge you to 
pass legislation establishing medical criteria, and I urge that 
it be done soon.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kazan appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Mr. Kazan.
    We will have 5-minute rounds, so each of us will have a 
crack at this.
    As I have been listening here--and we have listened to our 
two folks who are suffering--it suggests that there is a split 
in the business community on this issue.
    I think the only difference is in approach, but it is 
difficult to get to unanimity on any particular problem or a 
recognition. There ia unanimity that we need to reform. The 
question is what form to we reform in.
    I am going to go to you, Mr. Austern, because you have been 
dealing with these type of problems, and you made a pretty 
dramatic statement on why the victims are really getting the 
short end of the stick here.
    First of all, it looks to me like we are talking about 
coming up with some reasonable medical criteria that really 
will say who is sick and who isn't, and, yet, at the other end 
of that spectrum is the hope that we can maybe have an 
actuarily sound trust fund. And I presume that all of you would 
agree that trust fund is going to have to have a finality to 
it, so that all of these companies know just what their limits 
of liability are in the end. That is going to be hard to do.
    In fact, I am not quite sure that the trust-fund approach 
is as easy as some have said, but I am very interested in it 
because, if we could get a finality to it and we have enough 
money there--let me just ask you this. Do you agree that this 
is kind of a generalized statement of where we are, that we 
have got to find some way of melding those two things together 
or at least try to come up with some way of adding finality to 
this, while getting most of the money to the victims rather 
than to the lawyers?
    Mr. Austern. I think that is exactly right.
    Let me say to you that the finality approach can be looked 
at in two different ways. One of them is a paper delivered to 
this Committee by a representative--in fact, I guess not a 
representative, a partner of Goldman Sachs makes the point--and 
makes several points, but makes the point that certainty or a 
lack of certainty is what is driving the stock market and 
driving the financial community.
    Chairman Hatch. If we could solve this problem alone, it 
would be very helpful, it seems to me.
    Mr. Austern. If you could give certainty to what the total 
liability will be in some meaningful way, that would be very 
productive.
    May I also point out--and I realize how inexcusably self-
serving this is, but that is not going to deter me--a national 
fund can dispose of these cases and can pay fair compensation 
much more cheaply than the tort system. It costs the 
beneficiaries of the Manville Trust, including Mr. Harvey and 
Mr. McCandless, 3 cents on the dollar to, in fact, pay the 
claims, 3 cents on the dollar compared to 50 percent. Now, that 
is the transaction cost when you have a trust fund, 3 cents.
    I am not here to criticize good-faith efforts that are 
otherwise, but the ABA proposal does not remove anything from 
the tort system, and my fear is that were you to merely adopt 
medical criteria, we would be right back here in 3 years.
    Chairman Hatch. Well, if I understand you correctly, you 
are saying that it would be wise to have a trust fund if we 
could bring one about. It would be wise to have medical 
criteria. Would you accept the ABA's recommendations on medical 
criteria?
    Mr. Austern. I would not.
    Chairman Hatch. OK. Why?
    Mr. Austern. Well, Senator, I have a fair number of 
problems with it. Let me mention just two.
    Chairman Hatch. Can I ask one other question that you can 
weave into your discussion? How would this trust fund work? 
Would it be an opt-in situation where people can opt in and 
become part of it and have a finality to their obligations and 
be free of them in that sense once they have paid their money 
to the trust fund, or would you try to get every company that 
is involved--and I understand there are a thousand or so 
companies--to sign on right off the bat? How would you work 
that?
    Mr. Austern. Can I answer the criteria question first?
    Chairman Hatch. Sure.
    Mr. Austern. Because the second one is much more difficult.
    With respect to the criteria, Mr. Chairman, a 2/1 ILO 
profusion level, which is the way the ABA approaches the 
problem that Mr. McCandless has of not qualifying for pulmonary 
function tests, with all due respect, is not an escape clause. 
It is absolutely not an escape clause.
    We got 56,000 claims last year. 51,000 of them were from 
people with some form of asbestosis. We didn't have thirty-five 
2/1's. We are not talking about a way of creating a system 
that, in fact, will excuse people that they do not qualify, as 
Mr. McCandless doesn't, with respect to the PFTs.
    And second and even more importantly, as some people behind 
me in this room know, because they sued me over this question, 
we used to have medical criteria in which we hired our own B 
readers and our own B readers looked at x-rays, and they 
determined whether the x-rays submitted by the other B-readers 
who represented the claimants were correct.
    Senator this is not an exact science. Our own B readers had 
a 50-percent inter-reader variability. It was 50 percent of the 
time, our own B readers disagreed with each other as to whether 
somebody would have qualified under the ABA standard. 
Essentially, the ABA standard is a binary system. You are in or 
you are out, and if you are out, you are out because somebody 
looking at a soft-tissue disease x-ray has reached a decision 
and that is a decision about which reasonable people can 
disagree.
    Now let me turn to the second question. You can have an 
opt-in program in which people with asbestos liabilities can 
opt in, and then you have to get to a certain number of what 
the political scientists call decision trees. Are you going to 
make it an opt-in program in which everyone is eligible, no 
matter what their liability is? Are you going to make it 
compulsory so that you have to opt in? And although I realize 
there are constitutional limitations on that, I am much more 
concerned with the opposite end of the spectrum, and that is, 
are you going to have eligibility criteria for people to opt 
in, but if they are too small, they can't.
    Chairman Hatch. Well, if they don't opt in and we don't 
provide a means for them to opt in, then they can be sued.
    Mr. Austern. That is correct, and, obviously, there will be 
important incentives, not to be sued----
    Chairman Hatch. Sure.
    Mr. Austern [continuing]. To opt in.
    My own view of this--and, Senator, I am not an economist, 
but my own view of this is that there are sufficient funds out 
there to, in fact, have enough people opt in and to have some 
finality to this system. I do not suggest, as I sit here, that 
in 4 hours we can solve that problems in terms of shares and in 
terms of the amount of money, but we can certainly have an opt-
in system that will work.
    Chairman Hatch. Mr. Archer, my time is up, but if you would 
care to comment about any of that----
    Mr. Archer. Thank you, Senator.
    Chairman Hatch.--I think all of us would appreciate it.
    Mr. Archer. Let me just concede at the outset, by the very 
nature of having some standards, there will be those, depending 
upon the level of standards, that will be omitted. They will be 
deferred.
    Chairman Hatch. You have indicated some flexibility, 
though.
    Mr. Archer. Absolutely.
    The other thing that I think is important to acknowledge is 
that what is going on in our State courts right now in New 
York, Baltimore, Chicago, other cities, is that judges, without 
any guidance from this Congress or anybody else, they have got 
so many cases that have been filed that they have simply said 
to the lawyers that are representing the plaintiffs, if your 
client is not sick, we are going to put them on a deferred 
status because we need to get to the cases where people are 
sick and are dying. We are merely talking about deferring. When 
the person becomes sick, they are able to come into the system, 
so that there will be money there for them when they are sick.
    As it relates to Mr. McCandless, we care deeply about Mr. 
McCandless and his concerns and his health care, but I can tell 
you sitting here, I can't admit or deny or suggest that the 
doctor or his lawyer, who is not a doctor I don't believe, was 
accurate in whether or not he would meet the medical standard 
or not. I don't know about Mr. McCandless' history, whether he 
happens to be someone who has emphysema or someone who smokes 
or didn't smoke or what his history might be, but we want to 
make sure that the victims who are sick are compensated.
    If you have ever prayed with, prayed over someone who is 
dying of cancer, you would have an appreciation of the deep 
sensitivity that I and others in the American Bar Association 
share, even if they are not dying, but their lives are impaired 
so that the quality of their lives are impacted. We care about 
them, and so we want money there.
    Chairman Hatch. We appreciate that.
    What I wanted to just establish is that you are flexible.
    Mr. Archer. Yes.
    Chairman Hatch. We have got to put something together here 
that will work.
    Mr. Archer. But the flexibility, Senator--I apologize. The 
flexibility is not to weaken the standard, so that the status 
quo remains the same.
    Chairman Hatch. I understand. Sure.
    Senator Leahy?
    Senator Leahy. Thank you.
    The chairman had mentioned Mr. Kapnick's statement. Can we 
make sure that is part of the record? I have it here.
    Chairman Hatch. Yes. Without objection.
    Senator Leahy. Mr. Mayor, I understand the scope of the ABA 
Commission report, and resolution on asbestos litigation was 
narrow. Am I correct? It only considered medical criteria and 
Statute of Limitations issues. Is that a fair statement?
    Mr. Archer. That is correct.
    Senator Leahy. So the ABA Commission did not consider how 
victims of asbestos exposure might be compensated, such as 
medical monitoring for some of the asbestos victims?
    Mr. Archer. That is correct.
    Senator Leahy. Mr. Mayor, incidentally, I also appreciate 
you taking the time to come here. I imagine you have more than 
enough to say grace over, and we appreciate you being here.
    Some concerns have been raised--and I am sure you have 
heard them--that the composition of the ABA Commission may 
revise its recommendations. The commission did not include an 
attorney who represents organized labor, and, yet, so many of 
the members of organized labor have been exposed to asbestos. 
It did not have a member of the labor and employment section of 
the ABA. I wonder why that is so, and why didn't the ABA 
Commission include an attorney who represents nonmalignant 
asbestos victims? Should the ABA Commission have been broader 
in its representation?
    Mr. Archer. With all due respect, no. As it relates to 
lawyers who represent those who have asbestos, but may not have 
the cancers and more serious problems, let me suggest that 
there were several, including Mr. Kazan. He didn't start 
practicing law on the complex cases. He gravitated through and 
tried other cases and handled other cases. So, therefore, that 
aspect was quite covered, and I was completely satisfied.
    Let me also say that the House of Delegates was completely 
satisfied. The employment and labor section was given every 
opportunity to be heard, to speak on the floor of the House, as 
would anyone.
    In fact, if Mr. Hiatt, for example----
    Senator Leahy. If I might on that----
    Mr. Archer. Sure.
    Senator Leahy.--Mayor Archer. I offer the chance to speak, 
certainly. Somebody from the antitrust section could speak, 
somebody from the juvenile justice, but that is a little bit 
different than being part of the commission where a lot of the 
negotiations go on long before the matter is ever on the floor. 
Isn't that correct?
    I mean, I think it is like here. At any time we bring up a 
piece of legislation on the floor, this piece if it comes out 
of here, any member of the Senate, all 100, can speak on it, 
but it is going to be those of us in this Committee who are 
going to craft the basic part of the legislation before it goes 
there.
    Mr. Archer. Well, we work just a little bit different, 
Senator, and that is, that members of the House or sections and 
divisions have every opportunity in the well of the House to 
raise issues and concerns that they felt were not there, as 
well as to make amendments, to make amendments----
    Senator Leahy. We do, too, in the Senate. We do, too, in 
the Senate, but it still gets written primarily here.
    Mr. Archer. Well, it has been primarily written by a 
commission that I believe was quite fair.
    Senator Leahy. And you don't think it needed somebody 
representing organized labor, even though they had so many 
members exposed?
    Mr. Archer. Senator, let me just simply suggest that in 
1983, when the American Bar Association issued its first policy 
and said that there needs to be Federal legislation, the labor 
and employment section, to my knowledge, has never advanced not 
one resolution before the House to have a policy. Others who 
have the same opportunity did not do so.
    I chose to make sure that this was brought before it so we 
would have a voice at the table to work with this honorable 
Committee and the Senate, to make sure that we had a voice.
    Senator Leahy. Thank you.
    Mr. McCandless, I was greatly moved by your testimony. We 
have heard a lot today about preventing unimpaired people from 
filing lawsuits based on asbestos exposure, either under the 
ABA proposal or Senator Nickles' bill. Do you consider yourself 
or your wife or your coworkers to be unimpaired, or would you 
consider yourself impaired?
    Mr. McCandless. I am impaired.
    Senator Leahy. I think so. Based on your testimony, I would 
agree with you.
    The use of asbestos has been banned in 20 countries, 
Argentina, Australia, Belgium, Chile, Croatia, Denmark, 
Finland, France, Germany, Iceland, Ireland, Italy, Latvia, the 
Netherlands, Norway, Poland, Saudi Arabia, Sweden, Switzerland, 
and the United Kingdom. Most of the European Union have banned 
it by 2005. Asbestos is still being used in some consumer 
industrial products in this country.
    Let me ask you, yes or no: Should asbestos be banned here 
in the U.S., like it has been in all these other countries?
    Mr. McCandless?
    Mr. McCandless. Yes.
    Senator Leahy. Mr. Harvey?
    Mr. Harvey. Yes.
    Senator Leahy. Mr. Austern?
    Mr. Austern. Yes.
    Senator Leahy. Mr. Archer?
    Mr. Archer. It is going to be up to this Senate.
    Senator Leahy. Do you have any feeling? You are a citizen 
of this country. What would you want?
    Mr. Archer. Oh, I am a citizen of this country. We have no 
policy on it for me to speak to.
    Senator Leahy. I am asking you individually. Do you think 
it should be banned?
    Mr. Archer. I think it is going to be up to our national 
interests and what you best decide. You will have more 
knowledge base on this issue than I will have.
    Senator Leahy. Fair enough.
    Mr. Hiatt?
    Mr. Hiatt. Your Honor, I think I will pass on this because 
I am just a lawyer, and I would be a little nervous taking a 
position that might be at odds with the Federation's official 
position. So I think I had better hold back.
    Senator Leahy. I understand.
    Mr. Kazan?
    Mr. Kazan. My sister who lives in London is the executive 
director of an organization called the International Ban 
Asbestos Secretariat.
    Senator Leahy. And you want to go to the next family 
gathering. Is that about the way you are leading here?
    Mr. Kazan. She is my smarter, younger sister, and I think 
it would be great, but I hesitate to go down the road that both 
you and the chairman promised each other last year, that we are 
not talking about broad issues and Christmas tree bills. I 
would be happy if we solve this problem----
    Senator Leahy. No, I am not----
    Mr. Kazan [continuing]. But I want to come back to talk 
about the ban.
    Senator Leahy. I understand. I am not suggesting to go in 
this bill, and no matter how I might feel about it, I would not 
want it in this bill because I do not want this to be a 
Christmas tree bill. But I am just curious while you are here. 
I remember what Mr. Harvey said very strongly. I happen to 
agree with him, but I don't want it in this bill.
    In the last Congress, Senator Hatch and Senator DeWine, who 
is here, and I introduced legislation to exempt investment 
income in asbestos bankruptcy trust funds from Federal income 
tax, doing this to increase the funds available to compensate 
victims and the like, investment income and 401(k) is treated. 
I thought it was particularly appropriate, given the Federal 
Government's role in exposing veterans to asbestos-related 
products. Should we exempt investment income from Federal 
income tax in order to increase the funds available under these 
things?
    If I might just ask this of Mr. Austern and Mr. Hiatt.
    Mr. Austern. Senator, I cannot think that this would 
constitute a Christmas tree or bells and whistles, and I would 
strongly urge you to do this.
    I will give you an example. The Manville Trust has about a 
$1.7 billion left. Our tax liabilities for capital gains and 
income tax over the next years if we do not get relief will be 
$100 million. If we can have that $100 million without paying 
taxes, then, in fact, it would make a big difference to Mr. 
McCandless and Mr. Harvey.
    Now, we are just one trust, and we happen to pay a lower 
tax rate than other trusts. So I can tell you, speaking for the 
other trusts, you will provide hundreds of millions of dollars 
to victims of asbestos if that legislation is passed.
    Senator Leahy. I take it that you agree with Senator 
DeWine, Senator Hatch, and myself on this one?
    Mr. Austern. I cannot tell you how strongly I agree.
    Senator Leahy. Mr. Hiatt?
    Mr. Harvey. Yes. I think we agree, Senator, and I think 
this also goes to the question that Senator Hatch was asking 
about at the end of the day, any kind of a trust-fund approach 
is going to have to minimize if not completely do away with the 
risk factor that all the parties are going to be expected to 
bear. And the kind of cushion that this kind of a measure would 
be provide I think will certainly not be the entire answer, but 
would be helpful in that regard.
    Senator Leahy. Put my other questions in the record.
    Chairman Hatch. Yes.
    I am not convinced that this trust-fund approach can be put 
together. I have met with a lot of people who think it can be, 
and if it can, that is an interesting thing, but you are still 
going to have to have the other side of that coin, too. We are 
going to have to split the baby, so to speak, in order to 
figure out what to do to make this as reasonable and good as we 
possibly can for the benefit of those who are victims.
    Senator Leahy. But, Mr. Chairman, I am convinced that it is 
possible to get a legislative solution. I truly am convinced of 
that.
    Chairman Hatch. I didn't say that.
    Senator Leahy. I know you are not. I know you are not.
    Chairman Hatch. Legislation solution, I think it is 
possible. The question is what.
    Senator Leahy. You and I have been working on that, and I 
am convinced. And I just urge that all our staffs work closely 
together on this. I think you and I can work on that.
    Chairman Hatch. I am going to count on us working together.
    Senator DeWine?

STATEMENT OF HON. MIKE DEWINE, A U.S. SENATOR FROM THE STATE OF 
                              OHIO

    Senator DeWine. Well, Mr. Chairman, let me just thank you 
for holding this hearing and salute you for that, and also 
Senator Leahy. Senator Leahy held a hearing last year on this, 
and I know how interested he is in this issue.
    I can't think there is much more important this Committee 
is going to do this year than get a bill out, and I appreciate 
your commitment not only to hold a hearing, but to move a bill.
    The status quo is simply intolerable. It is unfair to the 
victims. It is unfair to the employees of the companies that 
are being hurt.
    We need to worry about, first of all, the victims. The 
victims need to be paid fully and they are not, and they need 
to be paid quickly and they are not. We need to worry about the 
companies that don't really have much of a future because of 
the uncertainty and the employees who work for these companies 
who don't have much of a future because of the uncertainty.
    This has a tremendous impact, as Senator Voinovich has 
indicated, on many, many States. It certainly has an impact on 
my homestate and Senator Voinovich's State of Ohio. We have a 
number of victims in Ohio who this directly affects.
    We also have a number of companies who this impacts. Let me 
just give an example. In one county in the State of Ohio, 
Cuyahoga County, there are 745 companies that have been sued in 
Cuyahoga County, and this is the list just in Cuyahoga County. 
None of these companies, Mr. Chairman, not one of these 
companies ever manufactured asbestos, not one company.
    We talked about several different options. I don't know 
what is the most viable option. I think either option would be 
a vast, vast improvement over the status quo. I suspect that 
the medical criteria bill is probably the easiest bill to pass, 
but I certainly have an open mind about this. I am going to 
continue to listen to the testimony. I think the testimony so 
far today has been very, very helpful and very, very 
enlightening, and I am going to ask some additional questions 
beyond those that have already been asked.
    Mr. Archer, let me start with you, if I could. You heard 
the testimony of Senator Baucus, and you commented a little bit 
on that. Let me just ask you and maybe Mr. Kazan about that, if 
I could, if you would go on a little bit further.
    In the Senator's written testimony, he says: It has been 
made clear to me that we have likely lost ground under the ABA 
medical standard with even more Libby patients barred from 
filing a claim under the ABA standard than were barred under 
the 1999 Act.
    I would refer members of the Committee to the letter from 
Dr. Whitehouse that I have submitted for the record, and this 
is a very lengthy letter. I am not going to reference it. It is 
in very tough medical language, but I don't know whether the 
two of you have had an opportunity to look at the letter. I 
would reference it to you, if you haven't. The Committee would 
appreciate your taking a look at the letter, and I would wonder 
if the both of you and any other members of the panel could 
comment on that.
    Mr. Archer. Senator, at the time the doctor's letter was 
released, it was at a press conference in Seattle, Washington, 
during the midyear meeting of the American Bar Association. 
There was a dynamic trial lawyer by the name, I believe, of 
Roger Sullivan who is representing Libby, Montana, clients. 
They were there tethered to oxygen, and Mr. Sullivan asked of 
the six patients or clients who were there, how many would not 
meet the ABA standards and all six raised their hand.
    At that press conference, there was a lawyer from Chicago, 
the chair-elect of the Illinois State Bar, Mr. Lavin, who 
practices law as a plaintiff and represents sick people who 
have been exposed to asbestos. He was asked after the press 
conference what he thought. His observation was: On the basis 
of what I see, these people are sick.
    We took a look at the letter. In fact, one of the members 
of our commission, Robert Clifford, the immediate past chair of 
the litigation section of the American Bar, called several 
doctors, one of which was a physician at Northwestern 
University, who came in and offered testimony to our 
commission. He said under the facts that you were just reading 
to me, every one of these people are sick and they would 
clearly qualify under the standards.
    It is consistent with what I shared with Senator Baucus 
that we believed that on the basis of the standards that have 
been set forth by the American Bar Association that the good 
citizens and the people who have suffered so badly in Libby, 
Montana, would be taken care of, but if, for some reason, that 
after looking at it further and if he had some physicians----
    Senator DeWine. You are willing to work with him.
    Mr. Archer. Absolutely.
    Senator DeWine. All right. Thank you. Mr. Archer, thank you 
very much.
    Mr. Kazan?
    Mr. Kazan. Senator, I have not ever seen that letter. I 
would be glad to look at it in writing.
    Senator DeWine. We would like for you to look at it.
    Mr. Kazan. I have, however, reviewed Dr. Whitehouse's past 
work and an article he has in press, and I can tell you that 
Dr. Whitehouse himself recognizes that people with clear x-ray 
abnormality, such as the pleural plaques that we have been 
talking about that are caused by asbestos, that that is very 
different from considering those people to be sick. He, in 
fact, has recognized that those findings alone really are not a 
form of sickness, without pulmonary function abnormalities.
    To talk for a moment about Senator Baucus' concern, if this 
is the appropriate time to address that, I don't know, but, 
clearly, he has a passionate concern for the people of Libby, 
and I share that concern.
    I have been representing people like his constituents for 
30 years, and I have represented factory workers, asbestos 
manufacturing workers by the hundreds who have been in a 
similar situation. I would agree with every bad thing he wants 
to say about W.R. Grace, and I could add things that he doesn't 
even know about that make it sound even worse, but the irony is 
that the only hope for any compensation of meaningful amounts 
for the people of Libby, unless you all want to pass some 
separate appropriations provision, is, in fact, the enactment 
of something like the ABA criteria because what is going to 
happen with the Libby people is they have claims only against 
W.R. Grace which is in bankruptcy.
    W.R. Grace has historically gotten about 75 percent of the 
volume of cases filed against it that the Manville Trust gets. 
What that means is that in that bankruptcy, the bankruptcy 
trust, unless we change the rules, will have to make provision 
to compensate something like a 1.25 million future claims or 
more. By the time you do that, everybody in that trust will get 
pennies or fractions of pennies on the dollar.
    If you impose the medical criteria, as the president of 
ATLA herself said to the ABA, that will eliminate 90 percent of 
pending claims, you will then concentrate the available moneys 
for those who are ill, who have symptoms, not only cancers, but 
people with real breathing problems.
    Further, what Dr. Whitehouse makes clear is that the people 
in Libby, because of the tremolite exposure and the kind of 
disease they get, have an unusually virulent and progressive 
form of disease, and he says at least 75 percent of those 
people progress to have significant impairment. What that 
means, then, is that the great majority of people in Libby will 
qualify right now under the ABA criteria. They will share in a 
fund with far fewer people, and those of them who don't yet 
qualify will have a fund available for when they do get sick if 
they are unfortunate enough to progress.
    I have done some rough calculations, and I can tell you 
that the ABA criteria will increase the payments to the 
citizens of Libby who have any level of functional impairment 
somewhere between 10fold and 20fold at a minimum. That is the 
way to take care of the people of Libby, and while it may be 
counterintuitive, that is just the reality.
    Senator DeWine. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Hatch. Thank you, Senator.
    Senator Kennedy?

  SATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE 
                     STATE OF MASSACHUSETTS

    Senator Kennedy. Thank you very much, Mr. Chairman, and 
thank you for having the hearing. A panel such as this has been 
enormously helpful.
    I listened carefully to the testimony of Mr. McCandless and 
Mr. Harvey. Both of the stories are compelling, and both of 
them deserve access to justice. And both of them are entitled 
to fair compensation. No proposal that would make us choose 
between them, I think, deserves the consideration by this 
Senate. Only reforms which would provide fair and timely 
compensation to both of them and to the thousands of victims 
with similar conditions deserves our support.
    Nice to see you, Mayor Archer.
    I am concerned, Mayor Archer, your proposal about the 
criteria which you have included, and we have heard concerns 
that have been expressed. You have indicated a willingness to 
consider alternatives, but on the other side, you have also 
said that you had to have some kind of a standard.
    What kind of assurance can you give to those who, in the 
future, may not reach your standard, but still may get sick in 
the future, that there is going to be some resources or funding 
that will be available to them for their compensation?
    Mr. Archer. Senator, I think on the basis of what you have 
heard here today and from the comments made by your colleagues 
on the Senate Judiciary Committee that there are a number of 
lawsuits being filed today without any standard, where people 
are not sick, and what has not been discussed is what occurs if 
they happen to be a publicly traded company, where an analyst 
reviewing their report suggests that--and I think Senator 
Voinovich did say this, that they downgrade their stock price 
and it becomes a self-fulfilling prophecy, that they are forced 
to either settle the cases, try the cases en masse, and 
ultimately what occurs is that the companies go out of 
bankruptcy. It is being driven, regrettably, by people who, 
frankly, are doing what they think is right, and the lawyers, 
frankly, representing them think that they are doing right.
    If they have some evidence that they have been exposed to 
asbestos and under the present system the Statute of 
Limitations begins to run, they file. By setting up a standard, 
if the Senate Judiciary Committee and then the House and Senate 
were to concur and the President signs, it would prevent 
bankruptcies in the way that they have been coming. It would 
preserve assets, much like Steve Kazan I think has just 
responded to the last question from Senator DeWine, and that 
there would be more dollars there. I wish I could promise you 
and say this is what is going to occur. I don't know what is 
going to happen in the near future. We are all waiting, for 
example, to see what occurs as to the concerns of the Middle 
East and what is occurring in Korea and what is occurring in 
our economy. All of those kind of things will impact how we 
live now and in the future, and so I can't give you the kind of 
assurances that I wish I could.
    But if all goes well, as I believe it will, for America, I 
think you will have the funds there.
    Senator Kennedy. We all hope that is going to be the 
outcome, but we wanted to try to make sure in terms of 
eligibility, that it is going to be there.
    Are we looking at a problem where there is just too many 
legitimate claims and too little money, resources?
    Mr. Archer. Senator, what we are looking at is you have got 
some entrepreneurs who drive up in a tractor trailer rig next 
to a Holiday Inn or next to a union hall. Everybody is invited 
to go in. They take a look at the x-ray. If there is something 
there and they are told that there might be something there, 
you ought to see a lawyer because there is a Statute of 
Limitations and people are not sick. If they are joggers, they 
still jog. If they walk up and down the steps, as Mr. 
McCandless used to be able to do before he became breathing-
impaired, that is what is driving the system.
    In an effort, I think someone stated, if it was not Senator 
Hatch, that it is cheaper for some of these companies to settle 
the case than for----
    Senator Kennedy. Let me--OK. I hear you. I see Mr. Hiatt. 
Did you want to make a comment?
    Mr. Hiatt. Thank you, Senator.
    We have had conversations with numerous companies and 
business associations, the major business associations. Each 
one of them tells us, it is not a question of there not being 
enough money in the system.
    The problem is the predictability and the certainty issue. 
This year, we may not need to spend more than a small fraction 
of what we will have to spend the year after, but we don't know 
that ahead of time. So everyone claims that they are looking 
for a system not that will reduce the total amount that is now 
being spent, but rather that will spread it out in a more 
rational way, in a more predictable way, and a more certain 
way.
    The problem with the medical criteria bill is I think it 
keeps getting hung up on this false dichotomy of sick and not 
sick. It is very easy to say that not-sick people shouldn't be 
compensated under any of these approaches, but that is begging 
the question. As you say, it shouldn't be having to choose 
between a Mr. McCandless and a Mr. Harvey. These are both sick 
individuals. They have different levels of severity, but we are 
not talking about false claims. We are not talking about claims 
of people who do not have any kind of impairment. Those are the 
easy ones.
    The way that Mr. Kazan and even the ABA criteria would have 
it is that you would virtually limit claims to people who are 
clients of Mr. Kazan or people who are of that level of 
severity and everyone else would have to take a back seat.
    Furthermore, the problem with the medical criteria approach 
as it is now structured is we would go back to a system where 
companies would not be incentivized to pay claims quickly, in 
the 60 to 90 days as Mr. Austern talks about, but rather they 
would be incentivized to start raising all of the old product 
identification issues, the old causation issues, all of these 
other defenses that they haven't been raising in the context of 
the settlements which I agree have major problems with them as 
they now stand. But that has meant that people like Mr. 
McCandless and Mr. Harvey haven't had to prove which company's 
asbestos was it, which actually did the causing, if they have a 
history of smoking and asbestos, how much of it was one and how 
much of the other.
    The medical criteria bill is going to open up all of those 
issues again in a way that I don't think is good public policy.
    Senator Kennedy. My time is up, but, Mr. Hiatt, one of the 
areas that you indicated is the Federal Government should 
accept a share of the responsibility of harm caused by the use 
of asbestos in the workplace. I assume this would require 
substantial appropriations of public dollars. Has any various 
work been done in terms of what would be a fair contribution 
from the Federal Government in dollars or in percentage terms?
    Mr. Hiatt. Not in terms of actual dollars, but, for 
example, Senator, we have talked about how critical it is that 
testing and monitoring be built into any approach. The fact 
that we have an infrastructure, for example, with VA hospitals 
around the country or other types of facilities where possibly 
there would be a major economy of scale that could be served by 
having the Government play some role in some aspect of this 
such as in the testing and monitoring functions might be an 
area that would be worth exploring with your respective staffs. 
That just comes to mind as one possible area. We don't have any 
actual dollars.
    Senator Kennedy. Thank you, Mr. Chairman.
    Mr. Archer. Senator, may I just respond, just briefly? And 
that is, I believe that part of the policy that has come out of 
the AFL-CIO on principles of asbestos compensation reads in 
part--and this was passed out, I believe, in Chicago on August 
7th, 2002, and I quote from the paragraph on the first page, 
``However, the labor movement has long recognized, and under 
current law and legal processes, many asbestos victims are not 
being treated fairly or receiving fair and timely compensation. 
Some victims with early stage asbestosis are settling their 
claims prematurely. Some victims who are dying from asbestos-
related diseases are unable to get timely resolutions of their 
cases.''
    ``On the second page, it reads in pertinent part dealing 
with asbestos-related principles or initiatives: While 
administrative payment systems have benefits for some classes 
of asbestos victims, all those who suffer from serious 
conditions as cancers, mesothelioma, and advanced asbestosis 
much have unrestricted access to the courts. There should not 
be incentives for victims with early stages of asbestos-related 
diseases to give up their right to compensation should their 
condition worsen. Asbestosis is a disease that progresses, and 
you run the real risk of getting sicker''
    What happens is you have victims who accept little money 
from a settlement or from a jury verdict because it is 
commensurate with their disease, but when they get sick later, 
there is nothing there for their families or for them. That is 
wrong. There needs to be something in place.
    We said we believe our standards are fair, but we have also 
said, Senator Kennedy, or other similar standards. I am not 
saying this is the Bible, the Torah, or the holy Koran, but 
what I am saying is that there needs to be a medical standard 
that will preserve at the end of the day, if there is a trust 
fund, those kinds of dollars, so that there will be something 
there for the victims.
    Chairman Hatch. And allocate the funds for those who are 
sick. I mean, that just makes sense to me.
    Senator Sessions?

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE 
                           OF ALABAMA

    Senator Sessions. Thank you, Mr. Chairman.
    You know, this is a matter that I became first acquainted 
within the late 1970's. I represented a shipyard worker who had 
worked in submarines, and that is a very closed area. He sawed 
asbestos as they sealed it around the pipes for insulation, and 
I remember tears coming to my eyes as he described it being so 
thick you couldn't breathe. They would let you go out for 
periods of time to get some air, and then you had to go back in 
there to do that work. Here he was in his early fifties on 
oxygen.
    Somebody at that time knew that asbestos was far more 
damaging to health, and they should have made that known. This 
was a Government ship. The Government should have known and 
helped to put the word out. So there is a real problem here.
    But it was bizarre how the cases proceeded. People just 
simply copied the defendant list that somebody else in their 
lawsuit had filed and sued 60 people because somebody may have 
at one time sent asbestos to Engel Shipyards. So it was a 
bizarre thing as it developed to me.
    All of which I would say, I have watched this thing now 
through the years. It seems to me that it is a fortuitous 
occurrence who gets paid and who doesn't. There is too little 
certainty and structure here. We have had 600,000 lawsuits 
filed, expecting another 1.2 million to be filed, people that 
are dying and ill or having compensation not be paid or dying 
before it gets paid, people who ar at this point healthy are 
being paid and clogging the system.
    As you said, Mr. Archer, I can't blame a lawyer from filing 
a lawsuit. I mean, I went out and filed it within days because 
I didn't know when the Statute of Limitation was going to run, 
and I didn't want to be the one who failed to file the lawsuit 
because the statute had run.
    Mr. Chairman, when they come in to you and they have a 
tendency to asbestos and exposure to asbestos, lawyers feel 
almost obligated, since they are on notice, the client is on 
notice, the Statute of Limitation is running, to file the 
lawsuit, but we can fix that through statutes.
    We can create a statute that says if you have been exposed, 
you can come forward, the statute doesn't start running until 
you reach a certain degree of illness, and then you can seek 
compensation.
    I have felt that we need to do something different in this 
country about a mass tort. For example, it took a while, a lot 
of lawsuits, and a lot of battles--and I have to give some of 
the plaintiff lawyers that I associated with in that day some 
credit because they proved the companies knew and they proved 
that the companies should have informed the people, but once 
the facts are all clear, every case then becomes basically how 
much they should be compensated.
    So I think we need to create a system in which compensation 
can be readily made to the victims. Frankly, if someone has 
mesothelioma, I think they ought to be able to just file a 
claim and get a check. I mean, I just don't understand this, 
why this is happening the way it is.
    I charged a legal fee, and I suspect at that time I had no 
idea what would happen, but as I look at it now, I can't 
justify morally a legal system that says only 40 percent of the 
money paid out by the asbestos companies actually gets to the 
victims.
    And I think that is, Mr. Archer, what the ABA has realized, 
and I salute them for it. You just simply can't justify that 
when there is no dispute about liability. It is just a question 
of damages.
    So I think, Mr. Chairman, you are wise to pursue this. We 
should have done something earlier. We got to stay at it until 
something gets done. I don't think anybody here will say we 
don't need to fix it. We disagree some about how to do that, 
and that is understandable, but it is time to bring this to a 
conclusion.
    Mr. Austern, let me ask you. On the differences between the 
national trust and the criteria bill, wouldn't the national 
trust also need some sort of medical criteria to distinguish 
people who have impairments and who don't? Aren't we always 
faced with that challenge?
    Mr. Austern. Certainly, we would have to have criteria, and 
I would like to suggest that I think that the ABA criteria can 
be improved upon, but Mr. Archer has already said that he is 
willing to work with us on this and I think it can be solved.
    Senator Sessions. So, in your view, then, that puts us in a 
route to maximizing an amount of money, the percentage of money 
paid out by the defendants, maximizing the percentage they pay 
out, that actually gets to the victims, and it would improve 
the distribution by ensuring that the money got to those most 
needy?
    Mr. Austern. It would assure that it would get to those 
most needy. It would do it expeditiously, and, in fact, we 
would be very close to what you just described. You could file 
a mesothelioma claim, and you could get a check.
    Senator Sessions. Well, I think we have got to get to that 
point. These cases no longer require long, complicated jury 
trials. I mean, they are just not that way. The law is settled. 
We know what the cases are about.
    Mr. Harvey here, if he were just filing his claim, you know 
meso is called by asbestos, and he ought to get a check and it 
ought not to be years going by and tremendous amounts of 
expense.
    Thank you, Mr. Chairman.
    Chairman Hatch. Thank you, Senator.
    Let me just wind this up this way. First, Mr. Hiatt, I 
would just like to ask you one question that still sticks in my 
mind. You mentioned that the trust that you envision would 
compensate claimants based on medical criteria. Does the AFL-
CIO support deferring any of these cases?
    Mr. Hiatt. We would agree, just as Mr. Austern has just 
said, that while there should be a compensation schedule that 
is differentiated based on levels of severity, that the 
quickness of payments, the expeditiousness of the payment 
system should very much be triggered toward the most seriously 
sick.
    Chairman Hatch. What I am concerned about here is that Mr. 
Kazan says that you can pretty definitely determine who is sick 
and who isn't. Now Mr. Austern says that that is true, too, 
except that you have got to have the right medical criteria to 
be fair, which is I think basically the way I interpret your 
thing.
    Mr. Hiatt. I think that is correct.
    Chairman Hatch. I have been very impressed with Mr. Archer. 
I always have been, before he got here today, but especially 
today. I think the ABA is very fortunate to have you as their 
upcoming president.
    Isn't it wonderful that Republicans are finding all kinds 
of good things, and the Democrats are finding all kinds of 
rotten things about you? I will tell you, it is just wonderful. 
I am working on you, I will tell you.
    Let me just say this. You have expressed an interest in 
modification here. Let me just throw it out here. There are a 
lot of people in this audience who could help on this. I have 
real questions whether a trust could be done. I have real 
questions what the medical criteria should be that everybody 
agrees we ought to have. I mean everybody on this panel 
certainly does. There are others who feel like if you do a 
strict medical criteria bill, you are not going to make it. If 
you do a strict trust, you are not going to make it because it 
is hard to get people together.
    We understand that there are splits within the business 
community. There are splits within the insurance community, and 
there are splits even in labor. Perish the thought, but there 
are. There are a number of companies, a number of labor unions 
that are really concerned about their employees losing their 
jobs, their pensions, and everything else, and there are some 
in the labor union movement, unless it is done in such an 
expensive way that nobody can really do that they are not for 
it.
    Look, this is almost an impossible job unless I throw out 
this challenge. I am going to get a bill here. I believe as 
Senator Leahy has indicated, he will work very closely with me 
on a bill. That means you are covering two ends of the 
spectrum, to a large degree. I would hope Senator Kennedy and 
other Democrats would help on this as well. I would hope my 
colleagues on the Republican side would help.
    But I am going to challenge the business community. I am 
going to challenge the insurance community. I am going to 
challenge the unions. I got to have some help here because I 
have no desire to hurt anybody. I don't have any desire to 
leave anybody out of the system, but I will tell you this. What 
we have is a doggone stinking mess. We have got all kinds of 
people getting compensation, sometimes exorbitant compensation, 
while really hurt people, really sick people aren't getting 
anything, or if they get anything, it is pennies on a dollar. 
The costs of this thing are just astronomical because, I 
understand, it is about 60 percent that really goes for the 
costs and attorney's fees.
    Now, you are looking at the guy who helped put together 
something that was unputtable together. I think that is a 
phrase that can be used. It was the radiation compensation 
matter. That took years. Today, all over the world, they use 
those standards that we set for radiation compensation. That 
was a very difficult thing, but that was a Government thing, 
and I am not so sure our Government should be paying for this. 
In fact, I am pretty sure the Government should not be paying 
for this, even though we might say the Government should have 
known, just like everybody else should have known.
    I am going to challenge the various factions here. You had 
better get together, and I want support for whatever we come up 
with. I don't want to have to go to all of this work and then 
have little, itty-bitty arguments and fights and infights that 
destroy this because this is the year to do it, if it is going 
to be done. If we can't do it this year--and it is going to be 
within the next month--if we can't do it within that period of 
time, it ain't going to be done. That means that thousands and 
thousands of people who should have rights aren't going to have 
them the way they should have them. I will put it that way. It 
means that many people who are sick are not going to get 
compensated, while others who don't have a claim that is 
legitimate are going to get money because of this really out-
of-control tort system.
    I belong to ATLA, and I support ATLA when they are right, 
but it is not right to have 50 to 60 percent of these moneys 
going to lawyers. If we have a no-fault system, that means we 
can have a reasonable set of attorney's fees, but it is not 
going to be 50 or 60 percent of whatever this pot is, and I 
think everybody needs to understand. Lawyers will be able to 
make a very good living by a no-fault system if they have 
people who are truly sick.
    I think you would agree with that, Mr. Kazan, although you 
would prefer it in the regular system.
    Mr. Kazan. Well, Senator, what I would say about that is 
that the concept of a trust fund has implicit in it the need 
for medical criteria, just like we have been talking about. The 
irony is that if you had the medical criteria, you probably 
don't need the trust fund because every company that has gone 
bankrupt has said if it weren't for the volume of the 
unimpaired cases they were facing, they would be able to handle 
the relative small number of people with illness in the 
ordinary course.
    Chairman Hatch. That may be so, except that I believe there 
are those who believe that a pure medical criteria bill might 
be very difficult to get through, probably because organized 
labor might not go for it and might not agree with it or other 
groups might not go for it. I don't know. I don't know, but I 
just think of one case that everybody talks about, and that is 
that $150 million was awarded to six plaintiffs who claimed 
that asbestos exposure might some day make them ill. I mean, 
they weren't even sick, and now we have doctors fleeing 
Mississippi because 71 companies stopped writing insurance in 
the State.
    Mr. Kazan. And, Senator, those cases would not have 
qualified under----
    Chairman Hatch. That is right.
    Mr. Kazan [continuing]. The ABA or other criteria.
    The idea of finding a way to assess the contributions to a 
trust fund for the 8,400 presently active defendants, to say 
nothing of all the other companies who have not yet been sued, 
and getting that done this sessions seems to me to be rather a 
daunting task, and I think that is the problem. A trust fund 
would either have to be a defined benefit plan which leaves 
open-ended contribution issues or a defined-contribution plan 
which leaves the risk of a shortfall on the victims. They both 
have problems, and I, frankly, don't know that you can square 
that circle.
    Chairman Hatch. Well, I am not for a trust fund that has an 
open-ended situation because----
    Mr. Archer. Senator, if I may interject, and I apologize 
for doing so.
    Chairman Hatch. Sure.
    Mr. Archer. I think your admonition to everyone should be 
heeded. You have a very fine staff. Senator Leahy has a very 
fine staff. They have obviously been working together prior to 
this, witness the fact that there was a hearing in September--
--
    Chairman Hatch. Right.
    Mr. Archer [continuing]. Where you both spoke. I think the 
insurance industry, I think those who are involved in the study 
group ought to be given every opportunity to see if they cannot 
come to the table, to see whether or not, in fact, a trust fund 
could be put together, whether or not the medical standards 
that the American Bar Association or something similar to it 
would be able to put something together, and given the 
timeframe that you have given and the fact that if something is 
going to be done, it should be done as quickly as possible, may 
be just the initiative to bring everybody, to get them closer.
    As I hear Jonathan Hiatt say, they were close on almost 
every issue, but two, and perhaps with your observation and 
that of Senator Leahy, there might be enough incentive to do 
the right thing.
    Chairman Hatch. Is today the 5th? It is the 5th of March. I 
am just going to challenge the business community and the labor 
community and the insurance community and any others who are 
interested, including the legal community, you better make your 
case to us within the next 2 weeks because that is going to be 
the time we are going to come up with a bill. When we come up 
with it, it is going to be your last chance to have this thing 
resolved, as far as I am concerned.
    Nobody wants to be more fair than I, but on the other hand, 
you have to cut the rug sometimes and you got to get things 
done.
    I would like to do it. I would like to do it so that 
victims are helped. I would like to do it so that there is some 
stability in the marketplace. I would like to do it so 
companies can come out of bankruptcy. The unions would benefit 
greatly from that. I would like to do it so that this system 
will start to work. I would like to do it so that attorneys 
aren't continuously maligned because of what appears to be a 
milking of a system.
    I like having the American Bar Association work with us, 
and I commend you for leading out on this issue. We will look 
at the criteria situation that you have called for and see if 
it can be modified or it can be improved, and we would 
appreciate you looking at it again with your expertise and your 
Committee's expertise and let's see what we can do.
    I would like some help from labor here because you are the 
ultimate beneficiary if we can get this done, but I will tell 
you this. I am not for a trust fund if there isn't a finality 
to it because, if you don't have that, you don't have anything. 
These businesses are all going bankrupt because they don't have 
any choice, and union jobs are being lost because these 
businesses are going bankrupt. The more they go bankrupt, the 
less people are going to get, and I would like to see those 
businesses knowing actuarily where they stand and what they can 
do and how they factor that into a business plan. I would like 
to see the insurance companies factor this. If they have time 
to pay, they can do a lot of things that they can't do by 
asking for big, whopping judgments right now.
    I would like to see the legal community shape up its act a 
little bit. I am very appreciative of you, Mr. Kazan, because I 
think you have made some very, very important points here. Mr. 
Baron, who was here before, if I recall it correctly, he said 
he would try and help me with this.
    I am going to count on ATLA waking up and realizing that 
they are killing our profession if they continue to go the way 
they are currently going on matters like this. I have a lot of 
respect for a number of the attorneys in ATLA who are leading 
plaintiff's attorneys, but these are attorneys who understand 
that the system has to be a fair and adequate and right system 
and not just a windfall for attorneys, which is what this is 
turning out to be.
    When I think of this one company that has never had an 
asbestos--and you heard other Senators talk about this--never 
done anything with asbestos, never insured for asbestos, never 
had anything to do with it other than they were the ones that 
came up with the medical knowledge that mesothelioma comes from 
asbestos and they are brought in as a coconspirator and wind up 
with an extortion of 60,000 claims, where they just, as a 
business matter, have to pay blood money just to get rid of 
those claims, even though they don't owe a dime and would win 
every one of those cases with a fair jury, I mean, that is just 
not right. It is one of the things that makes this such an 
intriguing and difficult thing for me.
    So I am asking everybody to get your act in order and get 
with us. We are going to come up with a bill, and I just hope 
that it will be something, even though it won't be perfect, as 
Senator Leahy has said, that all of you will be able to get 
behind and help us to resolve. It is the art of the doable. It 
is the art of doing what we can.
    This has been a very good hearing. It has sharpened up some 
things for me that I was worried about, and it has raised some 
other issues that I will be working on as we work on this bill.
    I want to thank each of you for coming. I want to thank 
you, victims, for taking time out. I know it has been an 
inconvenience to you. It has been a very, very difficult thing 
for you, and I appreciate you coming very much. We all do, and 
not only do we welcome you, but we are very appreciative that 
you would take time to be with us.
    With that, we are going to keep the record open for 2 
weeks. We want everybody who has an interest in this to help us 
on this.
    Thanks so much.
    [Whereupon, at 4:37 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]
    [Additional material is being retained in the Committee 
files.]

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   SOLVING THE ASBESTOS LITIGATION CRISIS: S. 1125, THE FAIRNESS IN 
                 ASBESTOS INJURY RESOLUTION ACT OF 2003

                              ----------                              


                        WEDNESDAY, JUNE 4, 2003

                              United States Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, Pursuant to notice, at 10:07 a.m., in 
room SH-216, Hart Senate Office Building, Hon. Orrin G. Hatch, 
Chairman of the Committee, presiding.
    Present: Senators Hatch, Specter, DeWine, Sessions, Leahy, 
Feinstein, Feingold, Durbin.

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

    Chairman Hatch. Could I have your attention? I would like 
the officers to let in as many people as they can within the 
fire safety rules. There are a lot of people out there who have 
not gotten in, so if we can line them up along the side, let as 
many people in as we can because this is an important bill, 
maybe one of the most important bills that we could possibly 
do.
    Good morning and welcome to this very important hearing on 
possible solutions to resolve the asbestos litigation crisis.
    I want to thank all of our witnesses for providing their 
expertise and suggestions to the Committee so that we can 
arrive at the best possible solution as soon as possible. And 
time really is of the essence in this matter. This bill may not 
make it if we do not move with expedition.
    Also, I want to thank my partner on this Committee, the 
leading Democrat on the Committee, Senator Leahy, the ranking 
member, for his continued efforts and interest in this subject 
matter. He along with Senators Dodd, Feinstein, Levin, and 
others continue to provide helpful suggestions that will help 
us all arrive at a bill that will truly help the hundreds of 
thousands of victims of asbestos exposure who currently get 
pennies on the dollar in compensation and whose pensions are in 
serious jeopardy as more and more companies continue to file 
for bankruptcy.
    In addition, these workers are losing their health care, 
their pensions, their salaries, and we have got to find some 
way of solving this problem.
    I have to say that I want to pay particular tribute to 
Senator Nelson and Senator Miller, who have been prime 
cosponsors on this bill, and also to Senators DeWine and 
Voinovich. We have not tried to get a number of cosponsors, but 
these are people who have been concerned about this right from 
the beginning and who deserve a lot of credit.
    Senator Leahy along with Senator Dodd, Senator Kennedy, and 
others have shown true courage in standing up and tackling the 
complex policy issues involved. And they are complex. To get 
this resolved, we have to dig deep, face the realities of the 
alternatives, and work together in a bipartisan manner to come 
up with the best possible solution, one that is fair to the 
claimants, one that recognizes the limitations of our economy.
    The private sector has been trying to resolve the asbestos 
situation for nearly 25 years. Several times major settlements 
were challenged by a few members of the trial bar and various 
efforts have been curtailed, prompting the Supreme Court, among 
others, to call on Congress to ``fix'' this serious problem. We 
are very fortunate today to have one of our top constitutional 
experts in the country, Larry Tribe, Professor Tribe, here 
today to educate us on the constitutional implications of this 
pending legislative solution and perhaps on the private efforts 
in the past that have failed.
    The private sector and the labor movement have had very 
important and constructive dialogues, and much has been gained 
by their efforts, and we have gained a lot from them. But we 
are now at a stage where, given the importance of this issue to 
our victims, our workforce, and our economy, we have to act. 
Now, it is time for legislators to legislate in the public 
interest, and that is why we are here today at our third 
hearing on this issue and why I commend my colleagues for their 
interests and courage to support efforts to arrive at an 
acceptable solution.
    I should also say that the legislation we are examining 
today, S. 1125, is a product of much discussion and input from 
all interested parties. We introduced S. 1125, the bipartisan 
Fairness in Asbestos Injury Resolution Act of 2003, in an 
effort to move the legislative process along. I have said that 
we are open to constructive suggestions to aid us in improving 
this bill. I have heard many suggestions from outside affected 
parties and from my colleagues here on the dais and elsewhere. 
This has been very positive, and I think the legislative 
process is working and working well.
    We had to bring it to a head. That is why we filed the 
bill, knowing that it is not going to be the absolute final 
bill. And we are open to these suggestions and to your 
suggestions.
    Keep in mind, though, we have to get it through both Houses 
of Congress. We have to bring together a bunch of disparate 
people who do not agree on a lot of these things. So it is a 
tough, tough issue and battle as well, or at best, I should 
say.
    This bipartisan bill, as I noted when we introduced it, is 
not without flaws, and this hearing today is intended to 
provide expert advice on how best to improve the bill. With 
that, I would hope that all of our witnesses today will provide 
specific solutions to possible problems or flaws they believe 
the legislation may have. It will not help anyone to point out 
flaws without suggesting reasonable and workable solutions for 
those flaws. In short, we want constructive criticism if there 
is going to be any criticism. Now, there is always the other 
kind and we can live with that, too, but we would prefer 
constructive criticism. If we all commit to that and to be open 
on solutions, we will get a bill and we will get one soon, and 
we will be on our way to helping our economy immeasurably and 
helping our workers and our businesses.
    On S. 1125, I want to say that the support around the 
country we have gotten has been overwhelming. Many recognize 
that it may not be the perfect solution, but it is close to 
being one of the best workable solutions. It establishes a 
system to pay victims faster, ensure that it is the truly sick 
getting paid, and provide the business community with the 
stability it needs to protect jobs and pensions. Now, I 
appreciate the bipartisan support of the cosponsors of the bill 
so far. Prior to introduction of this bill, we incorporated a 
number of very constructive suggestions by Senators Leahy and 
Dodd, and I look forward to continuing to work with them and 
our other colleagues so that we can win full support for this 
bill.
    Moreover, we continue to address other helpful suggestions 
and concerns raised since we introduced the bill. For example, 
we are working with Senator Baucus to address the compensation 
for those victims who are in Libby, Montana. Senator Baucus 
testified at our two prior hearings on this issue, and I know 
that it is a serious concern for his constituents. We have also 
heard from some of those who are truly sick and suffering from 
asbestos-related diseases who are concerned that this bill as 
currently drafted would require reductions in awards for 
amounts received from collateral sources. We will look to 
address as many of those concerns as possible.
    Now, I should note on that point that prior to introduction 
of the bill, at Senator Leahy's suggestion, we specified that 
life insurance proceeds would not be offset. Others, including 
Senator Murray, who will provide testimony today, have asked us 
to look at enacting a ban on asbestos and provide for research 
funding to find cures for these horrible diseases caused by 
asbestos exposure. All are laudable, all are well intentioned, 
and I would like to work with my colleagues to see if we can 
address these issues.
    Unfortunately, I also recognize that there will be special 
interest groups who benefit handsomely from the current broken 
system and have every incentive to stop our efforts on behalf 
of victims. That is their right, and I know we will hear all 
sorts of parades of horribles on anything we do. I hope their 
efforts will not succeed and that we do what is best for the 
country and the victims as a whole. We need to recognize where 
we will be if we do not get this done.
    I want to say to labor, already you have very sick members 
that are either being shortchanged in the current tort system 
due to the flood of claims and dwindling resources or those who 
may receive nothing at all, and members whose jobs and pensions 
and health care have suffered as a result of the skyrocketing 
bankruptcies. What will your union membership say if that is 
allowed to continue because we do not have the guts to do what 
we have to do here today and thereafter?
    To the business community, I ask, how many of you will 
still be around in the next few years if we do not do something 
to resolve this crisis now? These are large companies, 
employing a lot of people, mostly union people. Let me caution 
that many that have gone before you thought that they would 
survive, that they would not be flooded with claims, or that 
they had enough insurance to cover their claims.
    Almost 70 companies have gone bankrupt, nearly a quarter of 
which occurred in just the last 2 years. And I should note, 
those companies thought it would not happen to them. I know. I 
worked with some of them on a legislative solution 5 years ago, 
which I introduced with Senators Lieberman and Dodd. And the 
insurance companies, I know you have exactly the same concerns. 
There has to be some certainty in this process or you cannot 
live with it.
    One insurance company I know of never had anything to do 
with asbestos other than they did some of the medical research 
that said that mesothelioma may come from asbestos exposure. 
They are now brought in as a co-conspirator in some 60,000 
cases. They can win every case; but, the last one they tried, 
they paid out $2 million in defense costs. They should not have 
to pay a dime, but they are part of this group trying to find 
some solution and some certainty to be able to continue in 
their business. And, unfortunately, I think they are going to 
have to pay something. And there are a number of companies in 
that same category who are just going to have to participate in 
order to help bring about and effectuate this settlement of 
these problems.
    All of that being said, I hope this hearing and the fact 
that we have a bill to work from will encourage the interested 
parties to work with us to support a workable solution that 
will benefit the common good. We need to ensure that the truly 
sick get compensated first and foremost. But we can do that 
without bankrupting companies so that jobs and pensions will 
not suffer needlessly.
    Now, I look forward to all of the constructive criticisms 
and views to be presented here today. I also invite anyone in 
the public and victims groups to provide any suggestions and 
improvements that you have to us by the close of business this 
week. As the interest from each member of this Committee 
indicates, we are serious about this, and we intend to get this 
done and make tough policy calls, where necessary.
    Now, this is the last hearing we are going to hold on this, 
and we are going to go to a markup probably next Thursday--not 
this Thursday but the Thursday after this one. Now, we will see 
what happens at that markup. It may be put over for one other 
week, but that is going to be the due date. And I hope we don't 
have to put it over because I hope we can get enough consensus 
to be able to really go and get this done in this time frame 
where we have to get it done or perhaps it will never be done.
    So we are very appreciative to have all of you here, all of 
you witnesses, and we look forward to hearing your testimony 
and hope that we can move on from here.
    [The prepared statement of Senator Hatch appears as a 
submission for the record.]
    The only other opening remarks before we go to Senator 
Hagel will be the ranking member of the Committee, Senator 
Leahy.

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

    Senator Leahy. Well, thank you, Mr. Chairman, and I thank 
you my friend from Utah for calling this hearing on the 
asbestos litigation crisis. This is the third hearing we have 
had since the one I convened last September. Last fall, I had 
hoped to begin a bipartisan dialogue about the best means for 
providing fair and efficient compensation to the current 
victims and those yet to come.
    I have a simple message for everybody who is here today, 
and I know you are all very interested in the outcome of this 
legislation, so I am going to say it right up front: To end 
this crisis we need to restart negotiations among the 
stakeholders and interested Senators to finish hammering out 
the details of an effective national trust fund for victims of 
asbestos-related diseases.
    Our knowledge of the harms wreaked by asbestos exposure has 
certainly grown since last fall, and so have the harms 
themselves. Not only do the victims of asbestos exposure 
continue to suffer and their numbers to grow, but the 
businesses involved, along with their employees and their 
retirees, are suffering from the economic uncertainty 
surrounding this litigation. More than 60 companies have filed 
for bankruptcy because of their asbestos-related liabilities. 
These bankruptcies create a lose-lose situation. Asbestos 
victims deserving fair compensation do not receive it, and the 
bankrupt companies can neither create new jobs nor invest in 
our economy.
    Chairman Hatch and I have been working for months with 
Senators Dodd, DeWine, Carper, Ben Nelson, Feinstein, and 
others to encourage representatives from organized labor and 
industry to reach a consensus solution, and to bring our own 
ideas and efforts to the table. And I want to say the 
stakeholders have made real progress in finding common ground 
around a national trust fund. But they have not yet reached 
consensus. Without consensus--and I would say this to my 
friends on all sides of this. Without consensus, we are not 
going to end this crisis.
    I do commend Senator Hatch for his hard work in drafting 
this legislation. I agree with him that the most effective 
solution to the asbestos litigation crisis is taking all the 
asbestos cases out of the tort system and establishing a 
national trust fund. Our courts cannot handle these, and you 
are not going to get finality if we leave these in the normal 
tort system. That is what I urged at our last hearing. I still 
believe this. And I am continuing to work to develop medical 
criteria for use with such a trust fund that is going to be 
fair to all asbestos victims and can lead to the quick 
compensation of legitimate claims, but will also weed out 
frivolous claims.
    Now, there are some areas where I disagree with the 
legislation before, and, thus, I do not support it as it is 
currently written. And I know, as the Chairman said, it is a 
work in progress. Senator Hatch has asked for suggestions to 
improve the legislation, and I know he is sincere in that. I 
have made a number of detailed suggestions already, but I want 
to point out a few of the remaining major issues.
    First, this bill shifts the financial risk from defendants 
and insurers to victims. The bill guarantees businesses a 
lifetime of absolute legal and financial certainty, but it 
leaves asbestos victims completely out of luck if the trust 
fund runs out of money at any time in the next five decades. 
The one constant in our experience with projections of asbestos 
liabilities is that the projections of today are going to be 
wrong tomorrow. Twenty years ago, all the experts predicted 
that the Manville Trust Fund would be paying asbestos victims 
full compensation for many years. Now, as they testified here, 
asbestos victims get 5 cents on the dollar because the Manville 
Trust Fund is nearly insolvent. The risk of insolvency, in 
fact, the risk of inadequate funding short of insolvency, in a 
national trust fund must be addressed in order to provide 
certainty to asbestos victims as well as certainty to 
defendants and insurers.
    The bill does not cover victims, not yet, who were exposed 
to asbestos outside the workplace, such as spouses and family 
members who get exposure from workers' clothes and community 
poisoning cases like the one the Chairman has referred to in 
Libby, Montana, something Senator Baucus has spoken about. And 
I have heard from Senator Murray about the importance of 
addressing ``take home'' exposure, and Senator Murray will be 
testifying here later today. And I commend the Chairman for his 
usual courtesy in making the time available. We have talked 
with Senator Baucus about the basic fairness of covering 
victims of tremolite asbestos exposure in Libby.
    I think the bill raises unnecessary hurdles that would bar 
many legitimate asbestos victims from receiving any 
compensation. For example, the bill does not compensate anyone 
who was exposed to asbestos in the workplace after December 31, 
1982. Now, I see no reason to deny asbestos victims their 
rightful recovery because their exposure occurred after an 
arbitrary date, particularly because asbestos is still used 
today. An arbitrary cutoff in a national trust fund will just 
create more injustices later on.
    The bill offsets any compensation to asbestos victims by 
collateral sources such as previous payments from disability 
insurance or health insurance, Medicare, Medicaid, and death 
benefits programs. This is really a dramatic change from 
current law, and it would result in a cost shift of millions, 
even billions of dollars. The cost shift is from defendants and 
their insurers to other insurance companies or health care 
plans and the Federal Government.
    The use of these collateral sources would also reduce or 
eliminate compensation pledged to asbestos victims. For 
instance, a mesothelioma victim who had disability and medical 
insurance and who lived more than the usual 18-month survival 
time might not receive any of the aware under the bill because 
of these collateral source offsets. I cannot support reducing 
compensation to asbestos victims simply because they survived 
or because they had the good fortune and foresight to purchase 
insurance.
    Moreover, the bill requires a physician to independently 
verify a victim's exposure to asbestos that may have occurred 
10, 20, 30, even 40 years ago. That is an impossible bar to 
clear to be eligible for compensation.
    Finally, I believe that any alternative compensation system 
must be truly no-fault to be fair to those victims who will no 
longer have recourse to the courts. Under this bill, before the 
thousands of pending asbestos victims may receive any 
compensation, Congress would have to create and put together 
the bureaucracy of a brand-new asbestos court and do it at the 
Federal taxpayers' expense. If this is truly no-fault, we do 
not need that. I think such a court appears to be inconsistent 
with a no-fault system, and if past experience is any 
predictor, it would be unworkable.
    So we need to work with all the stakeholders to resolve the 
remaining complex and interrelated issues--such as medical 
criteria, award values, and insolvency risks--necessary to 
enact an effective trust fund solution. I look forward to 
hearing from our expert witnesses as we try to craft that kind 
of a bipartisan piece of legislation.
    Our undertaking is complex. It is unprecedented. It is not 
going to be easy to work out the details necessary for 
consensus. But I would tell everybody in the room the stakes 
are too high for us to leave the field before we try our utmost 
to complete this. I would urge everybody--industry, labor, 
victims, lawyers, everybody involved--keep on working for a 
consensus. If we have consensus, we pass a piece of 
legislation. If we don't have consensus, we don't.
    You know, my two grandfathers were stonecutters in Vermont. 
One grandfather emigrated to this country from Italy, not 
speaking any English, worked as a stonecutter until he earned 
enough money to bring his wife and children over. My paternal 
grandfather, my Irish grandfather, whose grandfathers 
themselves were immigrants, worked as a stonecutter. They both 
died of silicosis of the lungs because of their workplace 
exposure to stone dust. I never knew my paternal grandfather. 
He died long before my parents met at a very young age. I do 
know his tombstone in Barre, Vermont, where it says ``Patrick 
J. Leahy.'' Every time I see that, it reminds me that we can do 
better in the workplace. So I think of them. I think of the 
hundreds of thousands of present and future asbestos victims. I 
want to make every effort to solve this crisis, and I commend 
and encourage all those who are working in good faith to do it.
    If we act together, if we encourage the private 
negotiations to resume, in my view that is the best way to move 
a consensus bill through the legislative process and into law. 
Both the Chairman and I want very much to get a piece of 
legislation on the President's desk that he can sign. There are 
a number of important issues on which we need to find common 
ground. But if we work together as we have in the past, we have 
the best chance of success. Our guiding principles should be 
fairness to the victims and certainty for the corporations 
involved, through a workable process that will function 
effectively over time.
    Mr. Chairman, I look forward to continuing to work with 
you, Senator Dodd, Senator Hagel, Senator Murray, Senator 
DeWine, Senator Carper, Senator Nelson, Senator Feinstein, and 
other members of this Committee to craft an effective solution 
to the asbestos litigation crisis.
    Mr. Chairman, there are a whole lot of other things you 
could be doing with your time. I applaud you for holding the 
hearing and keeping us moving forward.
    The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you, Senator.
    We have a variety of witnesses, so we are going to limit 
witnesses to 5 minutes, although, Senator Hagel and Senator 
Murray, we will grant more time to you. We are honored to have 
Senator Hagel here with us, and Senator Murray, when she does 
show up, regardless of who is testifying, we will interrupt to 
allow her to testify. Since we are all so busy around here, I 
want to accommodate her.
    We are honored to have you here, Senator Hagel. You have a 
lot of experience in this area since you worked with Manville 
Trust, and we will be interested in what you have to say about 
this bill. So we will turn the time over to you.

STATEMENT OF HON. CHUCK HAGEL, A U.S. SENATOR FROM THE STATE OF 
                            NEBRASKA

    Senator Hagel. Mr. Chairman, thank you, and to the 
distinguished ranking member, Senator Leahy, and all the 
distinguished members of this Committee, I appreciate an 
opportunity to share some thoughts with you on a subject that 
is very important, I would say even critically important.
    Chairman Hatch. Would you pull the mike up a little bit 
closer, Chuck?
    Senator Hagel. As you noted, Mr. Chairman, I served as a 
trustee of the Manville Personal Injury Settlement Trust for 
over a year and a half, between February 1994 and June 1995. I 
was appointed by the trustees on the recommendation of the 
Honorable Jack B. Weinstein, U.S. District Judge for the 
Eastern District of New York.
    Judge Weinstein and I were first acquainted in the 1980's 
when he appointed me chairman of the $240 million Agent Orange 
Settlement Fund. I am not an expert, Mr. Chairman, on any of 
this, but I do have some real-life experience in making a 
number of mistakes, knowing a little bit about what works, what 
does not work, and how imperfect the process is and how there 
are always questions and concerns, just as Senator Leahy noted. 
But this is an issue that affects hundreds of thousands of 
Americans, and we need to come to some resolution with some 
assistance that is realistic and practical and workable.
    I would like to discuss today some of my experiences and 
thoughts on this subject and how it relates to your 
legislation, S. 1125, the Fairness in Asbestos Injury 
Resolution Act of 2003. Mr. Chairman, I am pleased that the 
medical and exposure criteria contained in your legislation are 
based on the 2002 Manville Trust Distribution Process, because 
I think that process, as imperfect as it is, was arrived at 
over years of experience in dealing with a very complicated 
issue.
    The history of the Manville Trust illustrates the problems 
facing asbestos claimants and defendants everywhere. And 
because the Manville Trust is the largest and the oldest of the 
asbestos trusts, it is in the unique position of being the 
bellwether for asbestos claims filings. I would like to share 
with you some of what I learned based on my experience on that 
trust and why I believe Federal legislation is needed to 
correct the shortcomings of the current system.
    Allow me to begin by discussing three of the major problems 
facing the Manville Trust and others like it: first, 
insufficient payments to claimants, as we heard this morning; 
second, inability to accurately predict the number of future 
claims, as also heard this morning; and, third, depletion of 
resources by non-sick claimants.
    First, insufficient payments to claimants. During the 15 
years of the Manville Trust existence, the trust has received 
over 620,000 claims and has paid over $3.1 billion to 
approximately 530,000 claimants. This is substantially more 
than any other asbestos trust has paid to beneficiaries.
    Unfortunately, only 27,000 of the total 530,000 paid 
claimants have received the full value of their claims. The 
remaining 500,000 claimants have received far less than the 
fair value of their claims as determined by the courts that 
established the trust. Because of a very serious asset/
liability mismatch, approximately 400,000 claimants have been 
paid only 10 percent of the value of their claims, while an 
additional 100,000 claimants--those who have most recently 
filed claims--have been paid only 5 percent of the value of 
their claims. Like the Manville Trust, none of the existing 
asbestos trusts pay more than a few cents on the dollar when 
compared to the court-approved claim values. It appears that 
none of the 20 or so asbestos trusts pending bankruptcy 
confirmation will pay anywhere near full claim value.
    Why does the Manville Trust and every other asbestos trust 
pay only a few cents on the dollar? And why do they all have an 
asset/liability mismatch? Again, the history of the Manville 
Trust illustrates the second problem affecting the fairness and 
solvency of the trust: the inability to predict future claims.
    The Johns Manville Corporation declared bankruptcy in 1982 
because of its asbestos litigation lawsuits. Since then, over 
60 corporations have also declared bankruptcy because of 
asbestos liabilities. During 1986, expert claims forecasters 
testified in the Manville bankruptcy court that between the 
late 1980's and 2049, the Manville Trust would receive between 
83,000 and 100,000 claims. The trust began operations in 1988 
and as of today, only 15 years later, the Manville Trust has 
received, as I mentioned, over 620,000 claims, and 2049 is 
almost half a century away.
    During 2001, the Manville Trust commissioned the fourth 
future claims forecast it has undertaken during its 15-year 
history. That recent forecast predicted that by 2049 the trust 
would receive between 750,000 and 2.7 million additional 
claims, in addition to the nearly one-half million claims it 
already has received. As you can imagine and know, a future 
claims forecast of between 750,000 and 2.7 million additional 
claims is essentially a useless prediction if you are trying to 
adjust claims payments on a pro-rata basis.
    We learned from the Manville Trust that forecasting future 
asbestos claims is, at best, very difficult. When considering 
the pending legislation, all of us should try to become 
comfortable with the inevitable uncertainty associated with 
trying to determine the number of future asbestos claims. This 
hangs heavy over any final determination of legislative 
remedies.
    The third problem, depletion of resources by non-sick 
claimants. In the morass of asbestos claims data and 
statistics, we must remember that behind the numbers are real 
people. Senator Leahy mentioned how close he and his family are 
to this point, using examples of his grandparents. Some of 
these people are suffering from the inevitably fatal illnesses 
caused by their asbestos exposure. These claimants, drawn from 
a claimant population with an average age of over 66, have had 
their lives shortened by their asbestos exposure. Other 
claimants, while not terminally ill with an asbestos-related 
disease, nonetheless have had the quality of their lives 
destroyed.
    These claimants have not received the full value of their 
Manville compensation. I noted earlier that the trust has paid 
its beneficiaries over $3.1 billion, almost all of that at 
either a 10-percent or a 5-percent share of claim value. 
Currently, the unpaid portion of the Manville claim values is 
over $23 billion. Every asbestos trust also has billions of 
dollars of unpaid and never-to-be-paid liabilities. While it is 
true that some underpaid claimants may have received funds from 
defendants in the tort system, it is doubtful that very many, 
if any of them, have or will receive the fair value of their 
claim.
    Why do these huge liabilities remain unpaid? There is, of 
course, an ongoing debate as to whether all of the claimants 
who have been paid were impaired; what ``impairment'' means; 
whether too much money has been paid to claimants with non-
malignant diseases versus the dollars paid to claimants with 
malignant diseases; and how many manufacturing and insurance 
dollars this country can afford to pay to the victims of one 
toxic substance.
    Regardless of the definition of impairment, some claimants 
are seriously ill, and the proposed legislation you are 
addressing today appears to strike an appropriate balance 
between those potential asbestos victims who are seriously ill 
and those who are not, by codifying the Manville medical and 
exposure criteria.
    Mr. Chairman, because S. 1125 incorporates the Manville 
Trust 2002 Trust Distribution Process, I wish to discuss 
briefly what I believe the trust has done right and should be 
emulated in any Federal legislation.
    During 2002, the trust's administrative costs were less 
than 3 percent of claims payments. This is lower than the 
administrative costs of any other asbestos trust and lower than 
the administrative costs of practically all casualty insurance 
companies. The Manville trustees are appropriately proud of 
these very low administrative costs. The principal reason these 
costs are low is that the trust's operating subsidiary, the 
Claims Resolution Management Corporation, employs an 
interactive, web-based electronic claim filing system. Federal 
legislation, in my opinion, should maintain as low an 
administrative burden as possible.
    Finally, I would like to conclude with a few short comments 
regarding why I believe your legislation, the FAIR Act, is 
needed. Some have raised relevant questions related to your 
legislation, and many more questions will be raised and should 
be raised. You will hear from the experts behind me, as you 
know, and they will raise questions and, I hope, provide some 
solutions and answers. I also hope we can work through these 
issues and move toward a solution to this critical and urgent 
problem.
    With six operating asbestos trusts and with 20 or so 
companies pending bankruptcy confirmation, a national trust and 
its single-payer format, such as the one in S. 1125, is long 
overdue. No useful purpose is served by having multiple 
asbestos trusts, each with their administrative burden, coupled 
with the economic burden of the tort system. Such a system 
depletes the funds that are available for victims of asbestos 
exposure, as I previously discussed.
    Where bankruptcies have not occurred, asbestos plaintiffs 
and defendants are left to the tort system. In addition to 
being costly, the tort system is very uncertain. The tort 
system has many equitable attributes, but its uncertainties and 
unfairness for some asbestos personal injury victims, 
particularly under circumstances where there are insufficient 
funds for tens of thousands of injured asbestos workers, is not 
a system that should be perpetuated. To say it straight, Mr. 
Chairman, some claimants are doing very well under the system, 
yet others--many--equally deserving, are receiving little or 
nothing. It is obvious that a single-payer system is needed to 
bring equity and fairness to current and future asbestos injury 
claimants.
    In conclusion, I encourage this Committee to focus on the 
fact, as you have, that the fair resolution of our asbestos 
crisis is not the province of one political party or one 
economic point of view but, rather, is an issue that should 
unite all of us in a common goal. I believe that S. 1125 
accomplishes this objective in an imperfect but yet realistic 
and efficient way. And I applaud, Mr. Chairman, you and Senator 
Leahy and your Committee for taking this difficult task on. It 
is not only complicated, but it has many tentacles wrapped 
around it, and it is one that is confounding. And many of us 
appreciate the leadership this Committee has given to this 
issue and wish you well and stand by to serve or consult or 
advise in any way we can.
    Once again, I appreciate an opportunity to share my 
thoughts with the Committee.
    Chairman Hatch. Well, thank you, Senator Hagel. As I 
understand it, you are a cosponsor of the bill.
    Senator Hagel. I am, yes, sir.
    Chairman Hatch. We are honored to have you on this bill and 
appreciate your testimony.
    With that, we know how busy you are. We will let you go.
    Senator Hagel. Mr. Chairman, I would be very glad if any of 
your colleagues on this Committee would have questions--I have 
got to get back to another committee meeting, but I would be 
very happy to respond to those personally or in writing, and my 
staff would as well. I am available to any members of your 
committee.
    Chairman Hatch. Thank you, Senator. We will keep the record 
open until the end of the day.
    Senator Hagel. Thank you.
    Chairman Hatch. Thanks so much. We are grateful to have you 
here and grateful for your experience as well.
    Our next witness, we would like to welcome to the Committee 
Professor Laurence Tribe. He is the Ralph S. Tyler, Jr., 
Professor of Constitutional Law at Harvard Law School and is 
known here and throughout the country as one of the most 
respected constitutional scholars and practitioners.
    Professor Tribe graduated summa cum laude from Harvard 
College and magna cum laude from the Harvard Law School, 
clerked for Supreme Court Justice Potter Stewart, and has 
authored what many of us feel are countless books and scholarly 
articles regarding many issues under our Constitution.
    Professor Tribe has also argued asbestos matters before the 
Supreme Court in the landmark cases Ortiz v. Fibreboard 
Corporation and Amchem Products v. Windsor. I think it is safe 
to say that his practical experience here gives him a unique 
perspective on the constitutional issues presented by the bill.
    Professor Tribe, we know you are a very busy man, and we 
are very grateful that you would take time from your busy 
schedule to come and be with us today and help to educate the 
Committee on where we are in this bill and what we might be 
able to do in the future. So we will turn the time over to you.

      STATEMENT OF LAURENCE H. TRIBE, TYLER PROFESSOR OF 
      CONSTITUTIONAL LAW, HARVARD LAW SCHOOL, CAMBRIDGE, 
                         MASSACHUSETTS

    Mr. Tribe. Chairman Hatch, Senator Leahy, members of the 
Committee, I think I am the one who should be grateful. I am 
really very honored that the Committee is interested in hearing 
my views. And I certainly would join Senator Hagel and the many 
others who applaud the effort that you, Mr. Chairman, and the 
ranking member and others have made to untie this terrible 
Gordian knot, a really intractable problem.
    I have a rather lengthy prepared statement that I will 
hopefully just have read into the record so that I----
    Chairman Hatch. Without objection, we will put all prepared 
statements in the record, but we are happy to hear from you.
    Mr. Tribe. Thank you, Mr. Chairman. And I would like to 
speak really very briefly and want to focus on answering 
whatever questions members of the Committee may have.
    The sole subject of both the statement that I have 
submitted in the prepared form and of my brief oral 
presentation this morning is whether the Constitution of the 
United States prevents Congress from doing what the United 
States Supreme Court on three occasions within the past half-
dozen years--Amchem in 1979, Ortiz in 1999, and most recently, 
in Norfolk & Western just this year--implored, almost begged 
Congress to do, and that is, to replace a plainly dysfunctional 
system for processing what the Court itself called ``an 
elephantine mass''--the word is almost as awkward as the use of 
the judicial system to achieve it--an elephantine mass of 
asbestos cases lodged in the State and Federal courts, to 
replace that mass with a more streamlined and certain 
administrative procedure for the orderly payment of newly 
created, exclusively Federal claims, claims against a national 
trust fund where the system rests on the recognition that the 
reality of approximate justice, swiftly and surely delivered, 
is sometimes vastly preferable to the illusion of precise 
justice, that is often delayed until the most grievously 
injured risk receiving no justice at all, because by the time 
the wheels of litigation grind their way to the most deserving 
victims, the finite funds available to satisfy their claims 
will often have been used up by payments to the relatively 
unimpaired, or used up by the absolutely enormous transaction 
costs, as the economists call it, often payments to lawyers, 
and often amounting to about $1 of payments on the side for 
every $1 that any victim ever sees. It is really a case of the 
classic race to the bottom.
    Now, I yield to, I think, very few in my admiration for the 
judicial system. I think it does a marvelous job with many 
problems. But this is not among them. And I think if there is 
anything on which there is consensus, it is surely that the 
illusory search for perfection, for absolute certainty, for 
making sure that everyone with a just claim can get every cent 
on the dollar or is somehow satisfied is nothing more than the 
hopeless attempt to seek perfection. And I think in this area, 
as in many others, the perfect is the enemy of the good.
    This particular proposal, as you have said, Mr. Chairman, 
is a work in progress; it is not meant to be the final version 
of a final bill. But many of those whose real objection is that 
they think they could do better in the litigation system 
somehow, or that they could do better with a bill that is 
tweaked in one way or another--many of those people couch their 
objection in constitutional terms. I think those who make the 
objection forthrightly in policy terms, who propose 
constructive ways of moving the bill in a favorable direction, 
are to be commended. But those who cheapen the constitutional 
currency by suggesting somehow that Congress is without power 
to provide a rational administrative scheme here, simply 
because in some instances and for some claims the theoretical 
availability of relief under the judicial system is replaced 
with no relief under this scheme. Or for some people who might 
get $3 million, possibly, under the existing system, they may 
end up with less than $1 million under this scheme.
    The fact that those things happen is simply testament to 
the absence of perfection in any administrative operation. And 
if one were to fine-tune the administrative process to the 
point where it tries to replicate what the idealized judicial 
system can achieve, if you imagine just one case and with all 
the time in the world, the thought that you can do that is 
itself a profound illusion. Because if you replicate the way 
common law claims for tort or contract are treated in the 
judicial system within the administrative apparatus that you 
have created, you will simply replicate all of the problems, 
all of the delays, all of the transaction costs.
    And so it is unfortunately necessary that in order to make 
an omelet, some eggs are going to be broken. And I feel 
terrible for the victims who are not going to ultimately 
achieve the full measure of justice that a perfect system would 
deliver. But the Constitution does not promise perfection and 
can't deliver it. And the fact that some of the lines that have 
to be drawn in this bill are merely approximate, the fact that 
people could argue about whether the amount of money that the 
insurers pay and the amount of money that the asbestos 
defendants pay should be exactly equal, or whether some other 
ratio is better, the fact that people can argue about the 
precise formulas by which these tiers of defendants are 
established, should not distract attention from the proposition 
that this is a classic case of economic regulation and economic 
distribution.
    And it is in that area where the Constitution is most 
forgiving of approximation and least demanding of perfection, 
that area where the watchword is rationality. And unless it can 
be argued that this scheme actually takes property from some 
people in order to achieve the common good when, in fact, the 
taxpayers should be picking up the bill, the beleaguered 
taxpayer, unless it can be shown that there is a confiscation 
of private property--and I don't think there is that 
confiscation here--it seems to me that all of the other 
objections, whether they are couched in terms of equal 
protection or substantive due process or the non-delegation 
doctrine by some who would like a more precise set of 
guidelines as to how these burdens are to be allocated, 
whatever the label, it comes down to the same thing, the 
counsel of perfection, which I think the Chairman and the 
ranking member and those who have worked hard on this 
legislation have realized would be the death knell for any 
realistic solution.
    I think I have overstayed my 5 minutes. I probably could 
lean harder on the Chair for more time, but I do not want to. I 
would rather be responsive to whatever questions any member of 
the Committee might have.
    Chairman Hatch. I could listen to you all day. We 
appreciate your testimony because I think on the constitutional 
issues some people have been very concerned about that, and, 
you know, I believe you are right. But, Professor Tribe, we 
will ask some questions. Maybe we can elucidate even a little 
bit further, which would be, I think, pleasing to you.
    People who know you think of you--and so do I--as a 
champion of victims rights because you have argued and won two 
leading Supreme Court decisions about the right of asbestos 
claimants to have their day in court. And you are now working 
with our colleagues, Senator Feinstein and Senator Kyl, on a 
victims rights amendment to the Constitution. Yet you are here 
today defending the constitutional validity of this 
legislation, which has been openly criticized as allegedly 
depriving victims from having their day in court even though we 
give all legitimate victims a quick and efficient access to the 
newly created fund.
    Now, some may think that this represents a departure from 
your basic approach to the rights of victims to be fully and 
fairly heard, and I would just like to have you respond for the 
benefit of everybody here.
    Mr. Tribe. Well, I do care very much about victims, 
including the victims of crime; it is for that reason that, to 
the dismay of many people both to my right and my left, I favor 
a victims' rights amendment to the Constitution. And I care 
about the victims of torts and the victims of all kinds of 
injustice. But it is one thing to believe in somehow 
vindicating the rights of victims, and it is another thing to 
believe that you can get blood from a stone, that you can 
somehow make everyone whole by a system that promises 100 cents 
on the dollar but does not deliver; that is, a real concern for 
victims and their welfare, I think, has to be tempered with a 
measure of pragmatism.
    I think it was Justice Jackson who talked about the 
illusory promise, a ``promise to the ear to be broken to the 
hope, like a munificent bequest in a pauper's will''. That is 
the promise that the present system has made to victims, the 
promise that many of the asbestos trusts make. And as we have 
already heard, they promise 100 and they deliver 5.
    I think that a realistic concern for victims means that one 
must be open to accommodation and compromise, and to insist on 
purity for the sake of purity when in the end people are more 
grievously hurt I think would be a terrible mistake.
    And let me add one other thing. I think that the most 
important system that this country has for protecting those who 
are genuinely victimized is ultimately in the most extreme 
cases the judicial system. Of course, as you point out, Mr. 
Chairman, it is not as though people are completely frozen out 
of adjudication here. They have access to an Article III court 
to review the determinations of the administrative body. But in 
the end, the ability of the Article III judiciary, which is in 
some ways the last stop on the train before people are 
ultimately abandoned to their fate, the utility of the Federal 
judiciary is compromised by the kind of cynicism and corrosion 
that is generated by the avalanche of asbestos cases.
    I am not one who always agrees with the tort reform 
movements and putting this or that kind of cap on damages. 
Sometimes it is a good idea, sometimes not. But when you really 
do have an area where the experience of well over a quarter 
century plainly demonstrates that to promise that we will take 
care of victims through the judicial system and then simply to 
overwhelm the courts and give people who want to take potshots 
at the courts an excuse by saying, look, look how terribly the 
courts perform, we have got to get rid of judicial processing, 
that I think is a terrible mistake.
    And one of the most serious costs of the asbestos crisis, a 
cost not measured in dollars, not measured in bankruptcies, not 
measured always in unsatisfied victims' claims and in more and 
more bankruptcies and in harm to the economy, is the cost of 
essentially using the scarce resource of our judiciary to solve 
a problem that it was never adapted to solve, leading more and 
more people to be cynical about its ability to do what it is 
ultimately best at doing, and that is, protecting ultimate 
human rights.
    Chairman Hatch. Well, the bill that I have proposed would 
not affect any of those cases that have gone all the way to 
judgment. But it would require the dismissal of asbestos cases 
that are still pending in various stages of litigation, and it 
would direct those claims to the fund itself, which I would 
like to have $108 billion.
    Now, the companies are not happy with that, and naturally 
the labor movement is not happy with that. But it is about $18 
billion more than the companies are willing to pay, but that is 
what it is going to be, and less than what the trade unions 
would like, in any event. But some have argued that this 
interferes with the judicial process in those cases.
    Now, do you have any concerns about Congress' authority to 
do this under the separation of powers principles?
    Mr. Tribe. No, I don't, Mr. Chairman. It seems to me well 
established through a series of cases, including those 
involving environmental law and those involving financial 
matters, that even where Congress takes aim at a number of 
pending cases by docket number and by name, as opposed to 
generically as you are doing here, as long as it affects those 
pending cases by changing the underlying rule of law that is to 
be applied, there is no invasion of the judicial province, no 
usurpation of the judicial power. That is, it is not a matter 
of telling the courts how to decide a pending case. It is a 
matter of pulling the rug out from under those cases by saying, 
look, that rug is well worn, it won't support the weight that 
people are putting on it. We have got to change the law, 
replace the State and Federal bodies of law, primarily State, 
on which people have rested asbestos claims with a new Federal 
cause of action under a statute with an administrative remedy. 
And because the law itself is being changed, the fact that 
those cases disappear the way Cinderella turned into a 
pumpkin--I guess it wasn't Cinderella. It was her chariot, 
wasn't it?
    [Laughter.]
    Senator Leahy. Don't you have grandchildren, Professor?
    Mr. Tribe. Not yet. Not yet. And this proves that my 
children are a little bit too old for me to remember the 
stories that I used to tell them.
    The point is that when these claims evaporate, they don't 
evaporate because Congress has zapped them one by one, sort of 
taking potshots at specific cases pending in the courts. It is 
because Congress has said the body of law on which they rest 
really won't bear the weight. So we are supplanting with a new 
body of law, and as such, of course, that body of law is 
processed administratively without juries, no invasion of the 
separation of powers.
    Chairman Hatch. Thank you, sir.
    I am going to turn to Senator Leahy. I will submit other 
questions in writing that you have, I think, more than 
answered, perhaps, but I will still submit some.
    Senator Leahy?
    Senator Leahy. Professor, if and when the grandchildren 
arrive, I have a whole library of books that----
    Mr. Tribe. I will take you up on it.
    Senator Leahy [continuing]. Mine are going through, and I 
will send them on to you.
    Chairman Hatch. If only he would study the law books, you 
know, we would----
    [Laughter.]
    Chairman Hatch. I am only kidding.
    Mr. Tribe. I think he has done pretty well.
    Chairman Hatch. Yes, he does very well. I am just kidding.
    Senator Leahy. Professor, you have experience in litigating 
a number of these asbestos cases, and that is valuable. And, of 
course, here we are asking about your constitutional 
experience. And what you are doing is you are--I want to make 
sure I understand. Your opinion today is that this legislation 
is constitutional. You are not going into all the policy 
aspects of it. Is that correct?
    Mr. Tribe. That is right, with one exception, Senator. I am 
saying that I think as a policy matter, which is sometimes a 
little hard to separate from the issue of fairness, as a policy 
matter a national trust of some kind with an administrative 
streamlined procedure makes sense. The Supreme Court has called 
for it. Observers on all sides think it is necessary. To that 
degree, I am offering, I guess, an opinion where I am not 
exactly an expert.
    The one thing that I guess I learned in those asbestos 
cases I litigated, they weren't cases of individual claimants. 
They were whole class actions, and they were class actions in 
which the people involved were not fairly and effectively 
represented. They weren't represented because the classes were 
so heterogeneous and so diverse that only a legislative body 
under a rule of one person, one vote could represent them. And 
that is why I think the Court basically said you can't do it 
this way in the judicial system. You can't appoint a few 
champions for this kind of class. You have got to do it 
legislatively.
    Senator Leahy. Of course, the reason we are here is we are 
trying to do something legislatively. Justice Ginsburg and 
others have suggested that. But you are not necessarily saying, 
for example, that we have to create a whole new court just to 
handle something that we work out as a no-fault type of 
recompense. Is that correct?
    Mr. Tribe. No, I do not have an opinion on whether a court 
is necessary, but just calling it no-fault doesn't----
    Senator Leahy. I understand.
    Mr. Tribe. It doesn't mean it is going to solve itself. It 
is not self-executing.
    Senator Leahy. Let me ask you this: The bill offsets 
compensation to asbestos victims by collateral sources, for 
example, previous payments from disability insurance or health 
insurance, Medicare and so on. Now, that is a shift of millions 
of dollars, maybe even billions of dollars. Nobody knows for 
sure. The cost shift is from defendants and their insurers to 
other insurance companies and health care plans. It could 
reduce or eliminate compensation to asbestos victims.
    Do you have any take on that part of the legislation?
    Mr. Tribe. Certainly I believe that it is constitutional. 
Whether it is the best solution, given that the resources are 
finite and that one is trying to conserve them, is something I 
don't have any expertise in or opinion on.
    Senator Leahy. You talked about the propriety of 
eliminating a traditional common law claim in the State court 
systems. I just want to make sure I understand your testimony 
correctly. You say that Congress has the power to do away with 
these kind of suits, replace them with claims in an Article I 
tribunal. Those new claims involve public rights. Am I correct 
so far?
    Mr. Tribe. Yes, you are, Senator.
    Senator Leahy. And you say these public rights are rights 
against the Federal Government or they are closely intertwined 
with the regulatory scheme?
    Mr. Tribe. Correct.
    Senator Leahy. In S. 1125, what particular characteristics 
of it give that Federal nexus?
    Mr. Tribe. That it is a cause of action which is entirely a 
creature of Federal statute and not a derivative of some 
preexisting common law right. That is, there is a resemblance, 
a family resemblance between the torts claim of an asbestos 
victim, whether one who comes down with mesothelioma or 
something less severe, and a claim through the asbestos trust 
fund, but it'll be a pretty disparate and far-flung family, 
because claims against the statutory fund are not based on any 
finding of fault. These claims also do not require an 
attribution of causation to any particular company. They do not 
require the same kind of proof. They are claims every bit as 
novel and statutory in origin as those in the Atlas Roofing 
case.
    Senator Leahy. But is it enough that the Congress just 
directs assets into the fund; is that enough to do it?
    Mr. Tribe. Well, the mere movement of assets, if it was the 
same old claims, and we said, well, those old claims are simply 
going to be moved to a new place, no change, they are grounded 
in State law. That probably would not be enough, but that is 
something like this statute.
    Senator Leahy. You have probably seen the plan based on the 
United Mine Workers Combined Pension Fund. As a practical and 
constitutional matter, would that work in the asbestos context?
    Mr. Tribe. Well, you say as a practical and constitutional 
matter. First of all----
    Senator Leahy. Let me ask you as a constitutional matter. 
Would it work in the asbestos context?
    Mr. Tribe. I have to admit, Senator, you will have to 
remind me of more of the details of the United Mine Workers 
solution, but it is certainly not a solution that I think could 
easily be extrapolated to the whole Nation with all of the 
diversity that exists in the sources of harm and the nature of 
exposure.
    Senator Leahy. I have been advised that my time is up. I am 
going to submit that to you, because I realize this is 
something that came out of the blue for you, and I will submit 
it for the record, and if you could get back to me on that.
    Mr. Tribe. I would be delighted to.
    Senator Leahy. Thank you.
    Chairman Hatch. Thank you, Senator Leahy.
    Senator--Is Senator DeWine here? Senator Sessions.
    Senator Sessions. Thank you, Mr. Chairman.
    Mr. Tribe, I thank you for your wise insights. I think they 
are full of value for all of us. I think it was Justice Macklin 
Fleming in California that wrote that perfect justice is a 
mirage. In the pursuit of perfect justice we lose the 
possibility of what justice we can achieve. I do not know how 
we are going to do this and how we will get to it, but when we 
have a legal system that is unable to compensate adequately 
victims, and when our analysis of that legal system shows that 
as much as 60 percent of the amount paid out by the defendant 
companies does not get to the victims, we have really got 
something that is indefensible morally.
    Would you not agree that is the fundamental problem, one of 
the fundamental problems we are dealing with is that we are not 
getting enough of the limited resources to the victims in need?
    Mr. Tribe. I completely agree, Senator.
    Senator Sessions. And this Congress would have a moral 
obligation to try to create a system that gets as much of those 
limited resources to the people in true need as possible?
    Mr. Tribe. I think that is right.
    Senator Sessions. I have a difficult with the concept that 
somehow the Government should be a last payer here, resource of 
last resort. I think about the case, I represented a young 
widow whose husband was killed in an automobile accident. 
People had crossed the center line and hit him head on. They 
had no money. They were not compensated. You could not recover 
against those victims, and all over America there are thousands 
and hundreds of thousands of cases brought or even not brought 
because there is no money by the criminal or whoever committed 
the act against them.
    So do you see an erosion of that--do you see a problem if 
the Government becomes a payer for the wrongdoing of an 
individual actor, and does it impact our whole philosophy of 
jurisprudence?
    Mr. Tribe. Well, I suppose it would if it relieved the 
actor of liability, but I think I said earlier that you cannot 
get blood from a stone. When it turns out that these funds, 
maybe even the $108 billion, prove at the end of the day not to 
be enough, it is not inconceivable to me that some creative 
solution might be worked out in which the Government, in the 
end, provides some kind of backstop so that the concern of 
insufficient funds that Senator Hagel expressed is in some way 
met. I mean I think personal responsibility and corporate 
responsibility are things we have given insufficient attention 
to, but responsibility is one thing and leaving people 
completely out in the cold is another.
    Having said that, I recognize that there are lots of 
competing demands for scarce public dollars. The taxpayer can 
be squeezed only so much. And so in the end there may have to 
be some problems that are left undealt with for the time being. 
That is sad but not always avoidable.
    Senator Sessions. These companies that are in bankruptcy, 
the creditor committees that work with the bankruptcy judges 
and have certain powers, those committees could sell the assets 
of that company, eliminate it if they chose, but they are 
allowing them to continue to function, I assume, on the theory 
they will get more money that way than selling them.
    Mr. Tribe. Well, that is sometimes the case. That is 
liquidation, and a fire sale is not necessarily the best way to 
maximize resources, and so the whole theory of replacing the 
liquidation with a debtor in possession and a confirmed plan of 
reorganization is to try to maximize asset value. But even 
having done that, sometimes there is not enough there to meet 
the just demands of various concerned individuals with rights 
at stake.
    Senator Sessions. I guess just for those that suggest that 
companies have not paid all they can pay, they are under the 
gun right now, they are under the power of the bankruptcy 
courts, at least 60 of them are, and all their assets could be 
liquidated if the court and the creditors thought that was the 
best way to maximize their resources; is that not correct?
    Mr. Tribe. That is correct, but of course, part of what we 
are trying to do, Senator, I assume, what you are trying to do, 
is keep that number of 60 from mounting without limit. And the 
way we are going now, of course, the number of bankruptcies is 
going to escalate dramatically, and that certainly is not a way 
of maximizing the effective use of assets, returning on the 
investors' investment and ultimately satisfying the claims of 
those who have been injured by the companies involved.
    Senator Sessions. Finally, it seems to me that this mass 
tort--and we have had others of breast implants and certain 
medications, mass tort cases. Should we as a Congress now, 
separate from this, maybe in the cool light of day, create a 
system from which once liability has become clear and it is a 
question of damages and payment, that we could create some sort 
of system that would apply in these kind of cases in the 
future? Is that possible in your opinion?
    Mr. Tribe. I think trying to do it, Senator Sessions, in a 
very generalized way, would move very far in the direction of 
having sort of a mass tort administrative body, some court of a 
rather--it might become an elephantine court in itself, a 
hydra-headed court. It seems to me that dealing with problems 
in a somewhat more surgical way, targeted way, when we have had 
the kind of experience that we have had with asbestos so that 
we now can see to the horizon and recognize that there is no 
end in sight, that it is a mushrooming, ballooning problem, a 
problem in which compromise is indispensable, and we now know 
that the judicial system cannot handle it.
    There are very few mass torts of which we can say with that 
kind of confidence that it is beyond the capacity of the 
judiciary. When we come to that point, it seems to me then it 
is time for Congress to act. I think we have come to that point 
with respect to asbestos, but I do not think it is the case 
that the whole tort system is broken, that the system is broken 
for all cases of mass exposure to injury. I would be hesitant 
to reach that conclusion, and trying to create a machine that 
is sufficiently diversified and flexible, that it could address 
all of those problems, would make the political bargaining that 
you are having to engage in here look like child's play. That 
is, getting agreement on a system to replace really the 
judicial system in a much broader way I think might be just 
about impossible.
    Chairman Hatch. Senator, your time is up.
    Senator Sessions. Mr. Chairman, thank you. Thank you for 
your leadership and hard work on this issue.
    Chairman Hatch. Thank you, Senator. I can assure you it is 
not child's play.
    Mr. Tribe. I say it would look like----
    Chairman Hatch. No, no. I know. I thought you were 
supportive.
    Mr. Tribe. I am sure it is not, no.
    Chairman Hatch. Senator Feinstein, we will turn to you.
    Senator Feinstein. Thanks very much, Mr. Chairman. I want 
to thank you and the ranking member as well for your work in 
this area. I know the frustrations that both of you have had. I 
know a little bit about the discussions that you have had, and 
I know the extraordinary difficulty that rests in this in 
finding a solution to this.
    I wanted to just make a couple of comments, and then 
welcome an old friend, Professor Tribe, and ask him a question 
about the backstop.
    But I have just been reading Senator Murray's bill, her 
congressional statement, record statement, as well as the May 
30th letter that she wrote to you, Senator Hatch, and she 
actually had developed I think a very positive bill to ban the 
use of asbestos in America. It is amazing I think to many of us 
to know that asbestos is still used, despite the fact of all 
the problems we have, and the long line that is outside this 
door waiting to come into this Committee room. I would just 
like to indicate that it would be my intention to move her bill 
as an amendment in markup to any bill that does come out.
    Chairman Hatch. Senator, Senator Murray is here. If I 
could, as soon as Senator Feinstein is finished, maybe I could 
call on Senator Murray because of her busy schedule.
    Senator Feinstein. I think that would be excellent.
    Chairman Hatch. And if you will stay there for Senator 
Durbin's questions. Do you mind if we do that?
    Senator Durbin. That will be fine.
    Chairman Hatch. Okay, I appreciate that.
    Senator Feinstein. I really want to salute her for her work 
in this area, because I think it is also very timely right now.
    Now to Professor Tribe. One of the problems is the concern 
that $108 billion is not enough, and we are just talking about 
occupational asbestos. We are not talking about all the other 
people out there, whether they be children or housewives or 
anyone else that comes into contact with asbestos and gets very 
sick from it, but the question that I have is how do we provide 
after the 25 years is up? And in 1996 the Supreme Court 
decision in U.S. v. Winstar may offer an option. As I 
understand the case, Winstar held that future congresses may be 
prohibited from passing regulations that interfere with an 
existing contract between the Government and a private 
business, which might offer the opportunity to make a contract 
for a voluntary payment from year 26 to year 50 from defendant 
companies, and that we would set the level of that voluntary 
payment, and the exchange would be a nonreturn for that period 
to the tort system. Would that be held legally viable?
    Mr. Tribe. I think with one qualification I would say that 
it would be. Let me just go back for a moment to the 
description you gave of the Winstar case. It is not so much, as 
I understand that decision, that Congress can be prevented from 
passing new rules and new laws because someone's contract with 
the Government says that they have a special deal. That is, 
Congress is always free to legislate, and one Congress cannot 
bind a succeeding Congress. But what Congress can do is 
authorize an official of the United States unmistakably and 
clearly, like the administrator in a scheme of this kind, or an 
insurance commission that is set up, the Asbestos Insurance 
Commission, to make specific arrangements with particular 
parties under which the risk of financial loss resulting from 
new congressional legislation no longer falls on the private 
contracting party. In effect, the Government insures that party 
against the loss that the party will incur if a future Congress 
changes its mind. That kind of arrangement can be binding on 
the United States, and the holding in Winstar was that, even 
though Congress acted within its rights in passing FIRREA, 
despite various promises about goodwill, those particular 
savings and loan institutions that were induced by government's 
specific loss-shifting promise to take steps in reliance on 
that promise were to be held harmless, and could sue the United 
States for the damages that they experienced when, because 
Congress saw a different or a better way of doing business, 
they suffered losses. That kind of arrangement, I think, could 
achieve the sort of thing you are talking about, that is, it 
could make the voluntary bilateral agreements effectively 
enforceable no matter what Congress did because the United 
States Treasury would make good the loss.
    Senator Feinstein. So you are saying the Treasury would 
become the bank, so to speak, at the end of the 25 years. That 
is not what I am suggesting. What I am suggesting is could 
there be a contract entered into after that period of time, 
that voluntary payments from the defendants would continue?
    Mr. Tribe. There is no question that could be done. The 
defendants would certainly be bound, but I am wondering what 
the quid pro quo is, that is, what are they getting in return?
    Senator Feinstein. If I understand it, the concerns is that 
the companies involved, after the 25-year period do not want to 
return to the tort system. Ergo----
    Chairman Hatch. They do not want to have unlimited 
liability. That is what the companies are concerned about.
    Senator Feinstein. I beg your pardon?
    Chairman Hatch. They want to have certainty. They do not 
want to have unlimited liability. They want to have certainty 
in what--if they are going to put up this kind of money, $108 
billion, they sure as heck want certainty that that is all they 
have to put up.
    Senator Feinstein. But let me just--I see the red light. 
Just for 1 minute. The fact is, asbestos is still legal. It is 
still being used in building materials in one way or another, 
and yet--so the possibility of this becoming an ongoing and 
continuing problem is there. So to say just for 25 years we are 
going to solve the problem and then it is all gone, I do not 
think that works, Senator. It seems to me there have has to be 
some proviso----
    Chairman Hatch. Let me assure the Senator that I understand 
there is an end game here that I have to resolve. The trade 
union movement is upset about it, and frankly, we are going to 
have to come up with some way of resolving that. I have to 
resolve it in a way that brings people together, not tears us 
apart.
    Senator Feinstein. All I am asking is if that is legal, if 
it would be legal to have an ongoing voluntary contribution 
commitment for another period of time.
    Chairman Hatch. He said it is.
    Mr. Tribe. I do not have any problem with that.
    Senator Feinstein. Thank you. Thank you, Mr. Chairman.
    Chairman Hatch. But the companies do, as you can see. That 
is the problem. And I have got to be able to bring both sides 
together to pass this so we can get it through the House.
    Senator Leahy. As we have always said, everybody has got to 
give a little bit or even a lot of bit to get a bill through 
here. We are not quite there yet. I am encouraged that we are 
getting closer all the time. I think people of goodwill on both 
sides of the aisle, as well as all of the affected parties, are 
trying to bring us together.
    Chairman Hatch. Well, good. I intend to come up with some 
sort of an end game. We are going to have to do that to bring 
everybody together, but hopefully that will bring them together 
if we can do that. And we will just have to see what we can do 
and what will get us the most Senators voting for this because 
I would like to be able to get it through the Senate and then 
hopefully get the House to take it as well. It is a 
tremendously difficult set of problems.
    Mr. Tribe. I do not envy you the task.
    Chairman Hatch. It is a tough task. If you do not mind 
waiting, just stay there at the table.
    Mr. Tribe. I do not mind at all.
    Chairman Hatch. I would like to call on Senator Murray. I 
apologize, Senator Murray. I thought we would be through----
    Mr. Tribe. I would be happy to move.
    Chairman Hatch. Stay right there, stay right there.
    I thought we would be through a little earlier, and I 
apologize to you, so we will take your statement.
    Senator Leahy. Mr. Chairman, Senator Feinstein mentioned 
Senator Murray's legislation, which I have also co-sponsored, 
and I thought Senator Feinstein's comments were ones I 
certainly ascribe to.
    Chairman Hatch. Senator Murray.

 STATEMENT OF HON. PATTY MURRAY, A U.S. SENATOR FROM THE STATE 
                         OF WASHINGTON

    Senator Murray. Thank you very much, Mr. Chairman, for 
allowing me to testify at this important hearing today on an 
issue that obviously has consequences for thousands of 
Americans.
    And I do want to thank Senator Leahy for his support for my 
bill to ban asbestos, and Senator Feinstein for her comments 
just previously to this as well.
    Mr. Chairman, I do have a longer statement I would ask to 
add to the record. As you know, I have already outlined many of 
my concerns in a letter to the Committee dated May 30th.
    Chairman Hatch. Without objection, we will put it in the 
record.
    Senator Murray. But today let me emphasize my greatest 
concern, and that is, if we are going to protect companies from 
asbestos lawsuits well into the future, then we must also 
protect all current and future asbestos victims into the future 
as well. If Congress is going to prevent any future lawsuits, 
then Congress must try to prevent any more asbestos casualties 
by banning the use of asbestos. More than 30 other countries 
have banned asbestos.
    Mr. Chairman, this is the elephant in the room for this 
legislation. It is the most obvious, yet least discussed 
aspects of asbestos.
    In 2001 America consumed 13,000 metric tons of asbestos in 
brake pads, gaskets and roofing sealants. Like most Americans I 
thought asbestos was already banned. The Environmental 
Protection Agency banned it in 1989, but the asbestos industry 
sued and that ban was overturned in 1991. That is why I 
introduced the Ban Asbestos in America Act, S. 1115. My bill 
would finally ban the use of asbestos and prohibit the import 
of asbestos products. S. 1115 creates a National Mesothelioma 
Registry to track where Americans are still developing this 
deadly disease. The bill would require us to raise awareness 
through an education campaign. In addition, it would require 
Federal agencies to improve protections for workers and 
consumers, and I greatly appreciate the support from Senators 
Leahy and Baucus, who are co-sponsors.
    I do not believe that asbestos can be safely used in most 
consumer products. The terrible legacy of asbestos disease has 
shown us all that. According to the Occupational Safety and 
Health Administration, about 1.3 million workers are still 
today exposed to asbestos on the job. Between fiscal years 1996 
and 2001, 3,000 of OSHA's inspections and more than 15,000 of 
its violations involved asbestos. Ultimately, the best way to 
protect people from asbestos is to ban it. I do not see how 
Congress can end liability for companies that used asbestos 
while still allowing asbestos to be legal in America. Congress 
needs to pick up where the EPA and the courts left off by 
finally fully banning the deadly material.
    Mr. Chairman, let me just talk briefly about my other 
concerns about S. 1125, which is before your Committee today In 
order for an asbestos liability reform bill to be truly fair to 
victims, it must ensure adequate compensation for all the 
people that are hurt by asbestos.
    I want to share with the Committee today a photo that I 
brought from the late 1970's, and it is of Justin and Tim 
Jorgensen. These boys, as you can see, are climbing on waste 
rock. It is from the Western Minerals Plant in Minneapolis, 
Minnesota. This plant processed asbestos contaminated 
vermiculite from W.R. Grace's plant in Libby, Montana. The 
company knew, when it bought that mine in 1963, years before 
this photo was taken, that the mine was full of asbestos, but 
chose not to warn the workers or their families. The 
Jorgensens' grandparents lived across the street from Western 
Minerals. The pile that you see Justin and Tim playing on 
contains up to 10 percent friable tremolite asbestos. Their 
father, Harris Jorgensen, died at the age of 44 from asbestosis 
and lung cancer.
    Under the bill being considered, if Justin and Tim get sick 
from asbestos from playing on this rock, neither one will 
receive a dime. Mr. Chairman, this picture breaks my heart. 
These kids were just playing outside and they were exposed to 
asbestos like many other children in Libby until last year. We 
should not abandon them in this bill.
    Asbestos exposure can also occur when people work on their 
cars or in their homes. I have a constituent in Spokane, 
Washington, Mr. Ralph Busch, who while renovating his home, 
unknowingly was also regularly disturbing asbestos contaminated 
attic insulation. He is now very fearful that 1 day in the 
future he will suffer from asbestos related diseases. And Ralph 
Busch is not alone. As many as 35 million homes, schools and 
businesses could have this asbestos tainted zonolite 
insulation. In fact, just a few weeks ago, EPA, finally after 
much urging, launched an education campaign warning people not 
to disturb this material if it is in their attics.
    Mr. Chairman, under the bill before you people like the 
Jorgensens and Ralph Busch would not get any compensation, and 
companies like W.R. Grace, which knowingly exposed workers and 
their families to asbestos, would be protected. I hope you will 
consider amending your bill to take in a much larger universe 
of existing and future asbestos victims.
    In addition, the legislation sets restrictive medical 
criteria to determine who would qualify for compensation. I 
strongly urge the Committee to redraft the medical criteria 
section of this bill. The Committee should base the criteria on 
the latest information from the American Thoracic Society and 
from the doctors who have been working in Libby and know this 
better than any of us.
    Finally, the total size of the trust fund, even at 108 
billion, may not be sufficient. There is no Federal backstop to 
guarantee compensation like the FDIC does for a bank, to ensure 
that future victims would be covered, and furthermore, the 
funding levels to me seem arbitrarily low. Any legislation to 
fix the litigation crisis must be balanced in its protections 
for present and future asbestos victims. Protecting these 
people is at least as important as protecting companies from 
liability. We need to ensure that an end to asbestos liability 
also means an end to the creation of new asbestos victims. This 
should be the charge to this Committee.
    Thank you very much, Mr. Chairman, for allowing me to 
testify before you today on an issue that is of great 
importance to me and to my constituents.
    [The prepared statement of Senator Murray appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you, Senator. As you know, your 
staff is working with our staff to see what we can do. And 
there is only so much we can do, but we are going to try and do 
the very best we can.
    Senator Murray. Thank you very much.
    Chairman Hatch. Thank you for coming.
    Senator Leahy. And, Mr. Chairman, I thank you also for your 
courtesy in making sure Senator Murray could testify. I think 
it is very important what she is saying. If we don't have a 
bill that covers spouses and children who were exposed to 
asbestos outside the workplace, as we see in this picture, home 
or in the community, that bill is not going to have my support. 
And I would not work to pass it unless it does have the spouses 
and children covered. So I thank you very much for your 
statement.
    Senator Murray. Thank you very much.
    Chairman Hatch. Thank you.
    Senator Leahy. Mr. Chairman, could I put into the record 
statements by Senators Baucus and Kohl?
    Chairman Hatch. Without objection, we will put those in the 
record at the appropriate place.
    Senator Durbin? Or, excuse me, we better go to Senator 
DeWine. I didn't realize----
    Senator DeWine. I don't have any questions.
    Chairman Hatch. Okay. Senator Durbin?

 STATEMENT OF HON. RICHARD J. DURBIN, A U.S. SENATOR FROM THE 
                       STATE OF ILLINOIS

    Senator Durbin. Thank you very much, Mr. Chairman, and 
thank you for your efforts on this bill.
    Let me say at the outset that my background before coming 
to Congress many years ago was in trial law practice, and I 
don't profess to be an expert at it, but I was exposed to it 
for some period of time.
    Mr. Tribe. Like being exposed to asbestos?
    Senator Durbin. I hope it was a more salutary----
    Chairman Hatch. It was worse than that.
    [Laughter.]
    Senator Durbin. But I do want to commend Senator Hatch, 
though I have some serious disagreements with major portions of 
this bill. I think that he has provoked the debate which needs 
to take place. Twenty years ago, when I came to Congress in the 
House, I was invited by a company known as Johns Manville to 
come out to their national headquarters in Colorado. Of course, 
they are long gone now. Two years ago, U.S. Gypsum Company in 
Chicago, Illinois, came to me and said unless something is done 
about asbestos, we will be gone. And they are.
    I believe in the court system. I believe in the tort 
system. I believe that people have a right to recover. We have 
reached a national crisis when it comes to asbestos, and I do 
believe that if there is going to be any compensation for the 
many victims, we have to do something. And I am looking for 
that solution, and that is why I come to this discussion with 
an open mind in the hopes that we can truly have a markup of 
this bill that is bipartisan and open. And I have said this to 
Senator Hatch personally, and I will repeat it now. I want to 
be a positive and constructive part of that conversation. I 
hope we can reach that point.
    Let me address two or three points here that particularly 
stand out as I look at the first draft on the Hatch bill, 
Section 134, the collateral source rule. I remember collateral 
sources as a practicing attorney because it basically said we 
are not going to penalize you as a plaintiff if you had the 
foresight to buy protection. If you decided that you were going 
to have health insurance to pay your medical bills or life 
insurance to protect your family, if someone wrongly injured or 
killed you, that person, the defendant in the lawsuit, won't 
benefit from your good judgment and your personal sacrifice.
    But this bill, unlike the law in every State in America, 
says exactly the opposite. It says that the defendant 
corporations found responsible and liable for the injury, for 
the death, will benefit if the person who was injured had the 
foresight and made the sacrifice to have collateral sources of 
compensation: health insurance, life insurance, Medicare, 
Medicaid. The list is pretty long. The only exception, as I 
understand it, is workers' compensation and veterans' benefits.
    Tell me, Professor Tribe, how does this square with due 
process and equal protection that we would say in this one law 
we will provide that collateral sources can be deducted from a 
defendant's liability?
    Mr. Tribe. Well, until you came to your question, Senator 
Durbin, I was troubled because, as a matter of policy, I think 
there is much to be said for the trend in the States not to 
penalize people for having foresight, and certainly not to 
reward someone who has been found liable for the foresight of 
the victim.
    Of course, in this case, we don't have a finding of 
liability. We don't have a finding at all. We have an 
administrative scheme in which approximation is the name of the 
game. And when you ask not is it a good idea but how does it 
square with due process and equal protection, I think there, 
whether one likes it or not, one would have to turn the clock 
back to well before 1937, at a time when the Supreme Court of 
the United States treated the Constitution as imposing very 
stringent limits on the kinds of lines that could be drawn, the 
kinds of compromises that could be reached with respect to 
economic matters.
    The law now looks very different. The law now basically 
says that unless the legislature is drawing a classification 
that is itself suspect in the sense that it draws on 
characteristics that have been the source of prejudice and 
victimization--race, religious minority, perhaps disability--
or, on the other hand, the law deals with fundamental personal 
rights--speech, religion, certain aspects of privacy--unless 
one of those things is true, the fact that the law may draw 
lines that the ideal legislator in the sky with infinite 
resources might never draw, the fact that it might not seem 
optimal not to reward foresight, that doesn't bear on 
constitutionality.
    Take the railroad retirement system. In a case called 
Railroad Retirement Board v. Fritz, Congress drew some very 
rough and ready lines. It drew distinctions ultimately between 
a group of railroad workers who were lucky enough to have an 
effective lobbyist at the bargaining table and, therefore, they 
were ruled in, and a bunch of others were ruled out. Congress 
was literally bamboozled in that case. There was no particular 
rationale for that line, but the Supreme Court by an 
overwhelming majority said if that was the test, that you have 
to have a really good reason for each line that is drawn when 
you are making these difficult economic compromises, and that 
Congress has to know exactly what it is doing in every detail, 
very few laws would survive. That was the Chief Justice of the 
United States speaking. I don't think there is a constitutional 
problem.
    Senator Durbin. Well, Professor Tribe, you are the 
acknowledged expert, and it has been many years since I took my 
con law course a few blocks away, so I am not going to quarrel 
with that. But I am going to tell you that I think there is 
something fundamentally wrong then with this bill. If we can 
take an established precedent, an established rule of law that 
has been found by 50 States to be a fundamental of fairness in 
America, that says if you make the sacrifice, if you have the 
foresight to have health insurance, you will not be penalized, 
you will not lose your right to recover as a person would have 
in a court of law when you find out that someone else has 
injured or killed you. And this bill, this proposed law, would 
make that distinction. And I think--let me just give you a 
couple examples, and, frankly, they are not my own. They come 
from a witness who will be testifying later, but I have read 
through them, and they are compelling.
    A mesothelioma victim who receives medical treatment in 
excess of $750,000, which I do not believe is out of the realm 
of possibility, that is covered by their own medical insurance 
that they had would receive nothing under this bill.
    A 49-year-old non-smoking lung cancer victim who underwent 
$350,000 in surgery and chemotherapy and radiation would have 
his compensation capped at $50,000 because he has already 
received $350,000 from his own health insurance.
    That just isn't the case in any State in the Union in any 
physical personal injury case or a wrongful death case.
    Mr. Tribe. Senator, without undertaking to defend the 
policy of this part of the bill, I just want to say that you 
are comparing apples and oranges a little here. It is not the 
case within the tort system when we are trying to do something 
very different. We are trying to figure out who is really 
responsible for this person's harm and whether the responsible 
party fell below a certain level of care. We are putting all 
kinds of burdens of proof on the plaintiff, which this system 
doesn't do. And we have a whole bunch of rules that go along 
with that.
    Now, the fact that in that kind of system the States have 
marched to a different drummer and have said when you are going 
to be--trying to achieve individualized justice, it just isn't 
fair to penalize someone in this way, you can't quite jump from 
that to the conclusion that when you are trying to achieve a 
degree of certainty and a degree of predictability and 
conserving finite resources, that some of the compromises that 
you make are not going to be very fair.
    Senator Durbin. I don't disagree with you----
    Mr. Tribe. It doesn't make it analogous to the tort system.
    Senator Durbin. I don't think the creation of a no-fault 
system, which clearly benefits a plaintiff--and you have 
outlined it. The burden of proof is dramatically less in a no-
fault system. But I don't think creating a no-fault system 
means that the aggrieved, injured, perhaps deceased party gives 
up everything. And in this bill----
    Mr. Tribe. Surely not.
    Senator Durbin [continuing]. They clearly give up a lot 
because they are capped in their recovery, their individual 
recovery. There is a limit to how much they can recover under 
the system.
    And yet we have added another factor here with the 
collateral source rule that I think goes beyond penalizing. It 
really is totally and fundamentally unfair under the system to 
ignore the reality that some defendants and this system will 
get off the hook because a union bargained and bought health 
insurance to protect an employee who died an excruciating and 
long death with lung cancer.
    Mr. Tribe. You are preaching to the converted if you are 
asking me if I had the power, if I were the legislator of the 
world, would I avoid that? Sure. But no one of us has that 
power.
    Senator Durbin. Well----
    Mr. Tribe. And if you solve this problem, the question is 
what other problem are you going to create. That is, if you 
give these added dollars--which I would love to see these 
victims get--where are they going to come from exactly? They 
might come from another set of asbestos victims. I don't know 
that they will. But I take it that the problem that all of you 
have is to figure out how best to minimize the total of 
injustices, and there are going to be plenty no matter what is 
done.
    Senator Durbin. Fair enough. But I think we have that 
responsibility
    Chairman Hatch. Senator, your time is up.
    Senator Durbin. I think we have to stand behind some 
fundamental principles that 50 States agree on in collateral 
sources.
    Thanks for your testimony.
    Chairman Hatch. Senator, your time is up.
    Let me just mention one thing before I go to Senator 
Feingold. You know, Carter Phillips, who also is an excellent 
lawyer and constitutional expert, wrote to us and sent a 
statement in, and basically he said, ``In order to address the 
underlying causes of the asbestos litigation crisis and bring 
some rationality and equity to compensation of the injured, 
Congress must engage in some line-drawing.'' And then he quotes 
directly from the Beach Communications case, which said, ``This 
necessity renders the precise coordinates of the resulting 
legislative judgment virtually unreviewable.''
    Do you agree with that?
    Mr. Tribe. Well, I agree with that, but I do want to say--
and I imagine you agree with this, Mr. Chairman. Even if you 
knew for sure that no court in the world would touch this law, 
because perhaps somebody would say, oh, this is all a political 
question, you still have to worry, obviously, about the 
Constitution as a fundamental charter that binds this body as 
well as the court. So that if I thought it was fundamentally a 
deviation from principles of rock-bottom fairness, even in an 
administrative scheme, I think that would bear ultimately on 
the constitutional question, even though Carter Phillips and I 
agree that as a matter of judicial institutional role, the 
courts are simply not going to touch that kind of calibration.
    Chairman Hatch. So it is constitutional. Let me just say 
this: We can't solve every problem with this bill. You have 
made that case, I think, very persuasively. With regard to 
children and families who may or may not ever suffer from 
asbestosis, this bill would not, I do not believe, prevent them 
later, if they actually could make a case, from utilizing the 
system.
    So what we are trying to do here is solve the problem for 
workers who have been exposed to it. And, you know, it is--like 
you say, perfection can sometimes be the enemy of the good. And 
if we could get this done, it would be very good for society. 
And we intend to do it.
    I think Senator Murray brings forth a good point when she 
think that asbestos ought to be banned, and probably she will 
win on that, and we may very well put that in this bill. But 
that is where we are.
    Let me go to Senator Feingold.
    Senator Leahy. When you bring that up, if I might, Mr. 
Chairman, we also have the concern that this might repeal FELA 
for railroad worker asbestos claims. I don't know if that is 
what is intended or should be intended. I definitely don't want 
it to be intended. But the way it is written, it would 
effectively repeal the Federal Employees Liability Act with 
respect to Federal workers' claims for injuries, for railroad 
workers' claims for injuries due to asbestos. That is why we 
want to be very careful when we write this because if you start 
taking care of people's rights, that is important, but if you 
also cut off other people's rights, that has its own 
consequences.
    Chairman Hatch. Okay. Senator Feingold?
    Senator Feingold. Mr. Chairman, I hope to come to ask some 
questions of panel three, and I don't have any at this point 
for Professor Tribe. It is good to see you again.
    Mr. Tribe. Good to see you, Senator.
    Chairman Hatch. That would be fine.
    Senator Feingold. Let me just comment briefly. I certainly 
agree with Senator Durbin's remarks. It is really quite 
exceptional to hear the level of concern on this issue from all 
sides. It is almost like a fever pitch kind of issue. And so I 
am hoping to spend more time at the hearing later, and I am 
very pleased that the hearing is being held.
    This is a very important issue with very difficult and 
complex problems to try to work through. I think most of us can 
agree that it would be a wonderful result if we could craft a 
global solution to the asbestos liability issue. But that 
solution must be fair and equitable to all the stakeholders, 
companies that face liability, their insurers, and, of course, 
those who have been injured by asbestos, whether their illness 
is now apparent or will arise in the future.
    And I also acknowledge that a lot of people have been 
working very hard on this, and I commend them for their 
efforts. It seems to me, though, that the current bill falls 
short in a number of ways from being the actual global solution 
that we can all unite around. But I am hopeful still that the 
process will yield a consensus bill that we can all support.
    Thank you, Mr. Chairman.
    Chairman Hatch. Thank you, Senator.
    We have been delighted to have Senator Carper here, who has 
taken a particularly important interest in this bill, and we 
are glad to have you here, Senator.
    Senator Carper. Thank you very much.
    Chairman Hatch. Thank you.
    Well, Professor Tribe, let me just say this: Fortunately, 
as the Supreme Court's repeated calls to action on this 
particular issue suggest, the Constitution does give Congress 
broad powers to address national economic issues such as the 
current asbestos litigation morass. Seth Waxman wrote a 
statement as well, the former Solicitor General under the 
Clinton administration, for whom I have a very high opinion, as 
I do of you. He said, ``Some claimants might argue that they 
will receive less under the new national system than they might 
have recovered, even net of attorney's fees and other costs, by 
pursuing their claims against various potentially responsible 
defendants through the tort system. The courts should not, 
however, be receptive to such arguments if they are raised in 
an attempt to challenge the constitutionality of the act. No 
individual claimant has any vested right in the continued 
existence or application of any particular rule of law when 
Congress has otherwise validly chosen to preempt that law as 
part of its decision to enacted a comprehensive national 
solution to a national problem.''
    Do you differ with any of that?
    Mr. Tribe. Not at all.
    Chairman Hatch. He also said, ``While the funding 
allocation mechanisms must not, of course, be arbitrary, 
irrational, or fundamentally unfair, the courts clearly would 
not hold them to any standard of `mathematical precision.' 
There is, accordingly, no constitutional requirement that 
Congress allow the perfect to become the enemy of the good in 
the process of designing a comprehensive solution to this 
complex national problem.''
    You agree with that as well?
    Mr. Tribe. It is very much my view, Senator.
    Chairman Hatch. Well, the two of you are great leaders in 
this field, and we are just very grateful that you would take 
time from what we know is a busy schedule to come here and help 
us to understand this better. Thank you, sir.
    Mr. Tribe. I am grateful to you, Senator.
    Chairman Hatch. We are honored to have you here.
    Mr. Tribe. Thank you, Mr. Chairman.
    Chairman Hatch. Thanks so much.
    Senator Leahy. Take care.
    [The prepared statement of Mr. Tribe appears as a 
submission for the record.]
    Chairman Hatch. We are going to keep going until about 
12:30, and we will break for about an hour. I apologize to 
those of you who are here to testify, but let's go to panel 
three.
    Dr. James Crapo is Professor of Medicine at National Jewish 
Medical Research Center Hospital in Denver, Colorado. He has 
treated many patients exposed to asbestos and has extensive 
experience in asbestos-related illnesses.
    Dr. Laura Welch is the Medical Director for the Center to 
Protect Workers Rights. She has treated many workers with 
asbestos-related disorders as part of her medical practice.
    Dr. John E. Parker is Chief of Pulmonary and Critical Care 
Medicine at West Virginia University Hospital. In addition to 
treating numerous asbestos patients, he has extensive 
experience with the ILO classification system and the NIOSH B-
reader program.
    So you doctors, we are very grateful to have you here today 
to help us to understand this better and appear before the 
Committee. So why don't we get started with Dr. Crapo and move 
to each witness in the order that they were introduced, Dr. 
Welch, then Dr. Parker.
    I have to step out for a minute, but I will be right back, 
and I naturally have read your statements. So we will turn to 
you, Dr. Crapo; then as soon as he is through, Dr. Welch; as 
soon as she is through, Dr. Parker.

   STATEMENT OF JAMES D. CRAPO, M.D., PROFESSOR OF MEDICINE, 
   NATIONAL JEWISH CENTER AND UNIVERSITY OF COLORADO HEALTH 
               SCIENCES CENTER, DENVER, COLORADO

    Dr. Crapo. Thank you. Good morning, Chairman Hatch, Ranking 
Member Leahy, and members of the Committee. I really appreciate 
the opportunity to be here to share my views today. I am Dr. 
James Crapo. I am currently professor and chairman of the 
Department of Medicine at the National Jewish Medical and 
Research Center in Denver, Colorado. It is affiliated with the 
University of Colorado. I am a board-certified physician in 
internal medicine and in pulmonary disease.
    I am here to speak to you about some of the provisions of 
S. 1125, and I have provided a more detailed written statement, 
which I ask be included in the record.
    Senator Leahy. [Presiding] Without objection.
    Dr. Crapo. Upon review of the medical criteria in S. 1125, 
it is my opinion that this legislation is drafted to 
appropriately include those individuals who are genuinely sick 
from asbestos exposure and who should recover from this fund.
    One of the primary diseases caused by asbestos exposure are 
asbestosis. It is a type of pulmonary fibrosis that can produce 
severe breathing impairment and even death in some individuals. 
However, in most cases it has few or minimal symptoms. Second, 
asbestos exposure causes lung cancer and it causes 
mesothelioma, which is a very rare tumor of the lining of the 
chest cavity and the lining of the abdomen.
    These are the major health effects of asbestos, and they 
are the ones to which this bill is appropriately targeted. 
There are also asbestos-related pleural changes--pleural 
plaques and pleural thickening--that are considered markers of 
asbestos exposure. These generally do not have an association 
with impairment, and they have not been identified as a cause 
or a precursor of more serious conditions. In addition, there 
are a variety of other cancers that have been associated with 
asbestos, but there, in my opinion, is not clear scientific or 
medical evidence that asbestos exposure is the cause of those 
cancers.
    The medical criteria in this bill, while in some cases a 
little bit overbroad, are appropriate and reasonable in the 
context of a national solution to the asbestos litigation 
crisis, in my opinion. I would like to discuss some of the 
diagnostic criteria in the bill.
    As a physician, I believe the criteria to be, in general, 
appropriate. In particular, I agree that the diagnosis of an 
asbestos-caused disease should be made with the requirement 
that a physician exclude other likely causes of the claimant's 
condition. This is important because asbestos is only one of 
the causes for each of the diseases being considered.
    With respect to medical criteria, the bill establishes 
eight categories of asbestos-related diseases. Levels I through 
IV generally address non-cancerous conditions, while Levels V 
through VIII deal with cancers. Levels I and II cover 
asymptomatic conditions, including pleural plaques and pleural 
thickening, for which medical monitoring is provided but no 
other compensation. Compensating individuals in these 
categories could divert funds away from people who are 
genuinely sick and transfer them towards people who are 
basically unimpaired.
    Level III is the first category that provides a 
compensatory award, and the medical criteria for Level III seem 
appropriate in the context of a compromise to me. The measure 
of impairment, however, is fairly broad and would allow many 
people to qualify for an award even though their breathing 
impairment is due to diseases caused by factors such as 
smoking.
    In addition, the diagnosis of significant occupational 
exposure is quite broad, and it treats persons in various 
occupations and industries today as if they were the same as 
occupations and industries that had vastly different exposures. 
For example, exposures in the 1980's and 1990's are not 
equivalent to the heavy exposures that occurred in the 1940's, 
1950's, and 1960's, primarily due to Federal regulations that 
were put in place that brought down the levels of occupational 
asbestos exposures. In fact, the Federal regulations largely 
eliminated the really high levels of exposures were initially 
strongly associated with very high incidences of asbestosis and 
lung cancer. Because the types of exposures are different in 
different decades in our country, the bill should probably be 
designed to account for those historic differences in exposure 
conditions.
    Cancer claims are also divided into four levels. Level V 
consists of other cancers, primarily cancers of the larynx, the 
pharynx, the esophagus, and the stomach. I think it is 
important to recognize that the weight of the medical evidence 
is that asbestos is not a cause of these cancers, many of which 
are very prevalent today. Including this category in a national 
asbestos program, if not constrained appropriately, creates the 
risk of compensating claimants whose medical condition is not 
associated with asbestos exposure. I think it is fortunate that 
Level V does not include colorectal cancer, which is also has a 
very weak link to asbestos exposure and is a very widespread 
cancer in the country today.
    Levels VI and VII deal with lung cancer, and I have 
concerns with Level VI because it requires neither a 
significant occupational exposure nor underlying asbestosis as 
an indicator of an asbestos-related cancer. There is no causal 
link to asbestos as a cause of the lung cancer in Level VI, and 
the weight of the medical evidence is that lung cancer cannot 
be attributed to asbestos unless asbestosis is present or at 
least enough exposure to have caused asbestosis.
    Also, there is some concern that compensation is limited to 
non-smokers, defining non-smokers as individuals who have quit 
smoking 12 years prior to diagnosis. This is problematic 
because heavy smokers continue to have an elevated risk of 
cancer even decades after stopping smoking.
    Level VII, on the other hand, I think is appropriate and 
subject to my reservations of the broad definition of 
significant occupational exposure, I think it is appropriate.
    Level VIII addresses mesothelioma claims and requires only 
some exposure to asbestos prior to December 31, 1982. Although 
the language of the bill is not clear, I think the bill should 
be interpreted as requiring a discrete and identifiable 
exposure for mesothelioma that goes beyond background. A 
majority of mesothelioma cases in men are caused by asbestos 
exposure, but a majority of the cases in women are considered 
to be idiopathic, or not caused by asbestos exposure.
    So, in summary, I believe that S. 1125 will allow 
compensation for virtually all asbestos victims, although some 
provisions in the bill should be tightened to protect the 
integrity of the fund and avoid compensating those whose 
medical problems are not related to asbestos.
    The medical criteria in the fund appropriately allow most 
fund resources to be directed to the appropriate categories, 
which are severe asbestosis, lung cancer, and mesothelioma. I 
think this is an excellent first step to providing a solution 
to our asbestos litigation crisis and should result in fair 
compensation to victims of asbestos exposure.
    Thank you for listening to my testimony. I look forward to 
your questions.
    [The prepared statement of Dr. Crapo appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you so much, Dr. Crapo. We know 
that you are personally serving as chairman and professor of 
the Department of Medicine at the National Jewish Center and 
University of Colorado Health Sciences Center. Dr. Crapo 
graduated from the University of Rochester School of Medicine 
in 1971, subsequently trained at the Harbor General Hospital in 
California, the National Institute of Environmental Health 
Sciences, and Duke University. And prior to his tenure at the 
National Jewish Center, he served for over 20 years on the 
medical faculty at Duke University. Of those 20 years, Dr. 
Crapo served for 17 as chief of Duke's Division of Pulmonary 
and Critical Care Medicine. And, of course, you do maintain 
affiliation with several professional societies. You are board-
certified in internal medicine and pulmonary diseases and have 
published all kinds of articles and several textbooks. So we 
are honored to have you here.
    We are also honored to have Dr. Welch here. Dr. Welch also 
has a great deal of experience, and I don't quite have the same 
information on Doctor--well, I have got it. Dr. Welch is the 
director for the Center to Protect Workers Rights. She has 
personally treated many workers with asbestos-related disorders 
as part of her medical practice, and so we are very interested 
in your testimony as well here today, and we will turn to you 
at this time.

  STATEMENT OF LAURA WELCH, M.D., MEDICAL DIRECTOR, CENTER TO 
        PROTECT WORKERS RIGHTS, SILVER SPRING, MARYLAND

    Dr. Welch. Thank you. Thank you, Chairman Hatch, Senator 
Leahy, and other members of the Committee. I want to thank you 
for the opportunity to testify here today. As you mentioned, 
asbestos-related disease is an area that I have been involved 
in the whole time I have been practicing medicine.
    My name is Laura Welch. I am a physician. I am board-
certified in internal medicine and occupational medicine. I 
have been on the faculty at Yale University and at George 
Washington University School of Medicine prior to my current 
position as medical director for the Center to Protect Workers 
Rights here in the Washington, D.C., area.
    I think it would help, before I really talk about the 
specifics of the bill and medical criteria, to just state a 
couple sentences why we are here today.
    From 1940 to 1979, more than 27.5 million workers were 
exposed to asbestos in shipyards, manufacturing operations, and 
construction work, among other activities. Hundreds of 
thousands of workers and their family members have suffered or 
died from asbestos-related cancers and lung disease, and more 
than a million more cases are expected. In this year alone, 
over 10,000 people will die of asbestos-related disease. These 
are not insignificant cases. These are not people without 
impairment. These are people who are going to die, and we can 
use all sorts of different projections, and everybody agrees on 
those numbers.
    So let me turn to the medical diagnosis, and I want to 
thank you, Chairman Hatch, and everyone else on the Committee 
for your hard work up to now to getting this bill to this 
point. As you know, I have been involved in some of the 
discussions that were going on to try to develop a consensus in 
this area.
    The current bill mirrors in large measure the medical 
criteria, the Manville 2002 Trust Distribution Process, but I 
am concerned that it adds some additional requirements in 
addition to the medical criteria that narrow the group of 
workers who are eligible and make the application process more 
burdensome on people who are currently applying to the Manville 
Trust. It also sets levels of compensation that are lower than 
the total claims values and awards that are available. So, in 
my opinion, we have to first look at the medical criteria, see 
what compensating those people fairly will cost, and set a bill 
that is based on fair medical and claims values.
    As now constructed, I think the bill will exclude the vast 
majority of workers with asbestos-related diseases from 
receiving any compensation and provide relatively low levels of 
compensation for workers with significant impairment and fatal 
diseases.
    The Manville 2002 TDP criteria were a revision from 1995, 
and I think that the 1995 Manville medical criteria were 
medically sound. The changes between 1995 and 2002 remove the 
tests that are most sensitive for the diagnosis of asbestos-
related diseases, which include oxygen diffusion and CT scans. 
Such changes may be appropriate in the context of a bankruptcy 
trust that is running out of money and has to decide how to 
allocate limited resources, and that is a decision to be made 
by that trust. But a new system should be soundly based in 
medicine and use the medically recognized diagnostic tests that 
are recommended by the American Thoracic Society and by the 
American Medical Association.
    The American Medical Association has guidelines for the 
evaluative impairment for lung disease, and I think that any 
bill that is crafted should be based on those guidelines. I 
think the current bill does deviate in some significant ways 
from the AMA guidelines.
    Let me give you an example. The Manville 2002 TDP and S. 
1125 require what is called a 2/1 film as part of the 
definition of severe asbestosis. That is using a classification 
system that is used internationally to grade the amount of 
scarring on x-ray. And a 2/1 film is very significant scarring. 
But using that as a determination of the amount of impairment 
in the lung is really not medically based. The density of 
scarring from asbestos on the chest x-ray doesn't correlate 
well with impairment, and we can use pulmonary function tests 
to measure impairment. The x-ray can be used to determine that 
asbestos-related disease is present, but I think we should then 
use the approach recommended by the AMA to determine if 
impairment is present and how significant the impairment is.
    Let me give you an example of the impact of this. If you 
use the AMA Guides, at the highest level of impairment you can 
have a worker who has lost more than 50 percent of his lung 
function, and in that guide they describe the worker would be 
unable to perform activities of daily living, such as getting 
dressed, taking a shower, cooking dinner, or doing any minimal 
work around the house.
    If you take a man with clear asbestosis using ATS criteria 
for diagnosis and have him in that impairment category, he 
could still have a very high likelihood of still being in Class 
III under S. 1125. The payment schedule is $40,000. He will 
have received more than $40,000 from Social Security disability 
because he will be eligible for SSDI given those pulmonary 
function tests. So you are taking someone who has asbestosis, 
has a significant impairment, and he gets no compensation under 
the bill, and that is because it is keyed to that x-ray 
criteria for entry. It is something we can fix. It is something 
that is in the Manville Trust. But it is really not medically 
based, and I think we have to go back to the beginning and make 
sure that these criteria are very medically based.
    One other thing that I am really concerned about is this 
bill states that the physician should independently verify the 
duration, proximity, regularity, and intensity of exposure. The 
physician has no way of knowing what that individual worker did 
30 years before. There is not air monitoring. There are no 
independently verifiable ways, and it is generally not 
something the physician does. The physician takes a history 
from the worker and uses his or her experience and judgment to 
determine whether that history of asbestos exposure is 
sufficient to cause a disease. So a requirement for independent 
exposure verification I think is really an impossible one that 
could be a real problem in this bill.
    This bill incorporates the 2002 criteria for lung cancer, 
which are probably in some ways okay, but sets different levels 
of compensation for those. This essentially would set a value 
of $100,000 for lung cancer in a smoker, where in the current 
system, in the Manville system as well, it is more in the range 
of $300,000. Smoking and asbestos act in concert together to 
cause lung cancer, each multiplying the risk conferred by the 
other. And it is important to treat smokers fairly. We should 
not assume that every lung cancer that occurs in a smoker is 
not contributed to by asbestos. And any compensation system 
really must affirm when a worker has significant exposure to 
asbestos, however we define that, he is eligible for 
compensation for lung cancer.
    Then the Level II, as defined by S. 1125, includes workers 
with significant impairment. There are people in there--it is 
not people who are asymptomatic. The way the bill is defined, 
people with significant impairment can be in that category, and 
I am particularly concerned about people who have definite 
asbestosis but have asbestosis combined with some other lung 
disease. This group of workers who may have a combination of 
asbestosis and disease from smoking are currently getting 
compensation in the Manville Trust, from the current tort 
system, and I don't think it is appropriate that we should 
completely deny those people compensation. But under the 
current bill, someone with definite asbestosis but who also has 
some disease from smoking would receive no compensation.
    Then finally, we must remember that not everybody is going 
to fit the specific criteria set by the legislation. The 
Manville Trust and other bankruptcy trusts have a physician 
panel that allows individuals to come in for medical review if 
they can demonstrate that they meet in essence the criteria 
that--the intent of the legislation, even though they may not 
have the specific x-ray finding of a specific pulmonary 
function finding. And I think we should be sure that that is 
included because you can't write medicine into a bill. There 
needs to be a way for an independent review for people who 
don't meet the criteria.
    So I appreciate the opportunity to appear before the 
Committee today, and I hope I have helped you understand that 
these diseases are real and affecting thousands of Americans, 
and that we can use the accepted medical criteria set by the 
AMA and the American Thoracic Society to guide us. I think a 
system that is based on these medical criteria will provide 
fair, timely, and good compensation to workers and others who 
have been made sick as a result of asbestos exposure. So thank 
you very much.
    [The prepared statement of Dr. Welch appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you, Dr. Welch.
    We will turn to Dr. Parker now.

    STATEMENT OF JOHN E. PARKER, M.D., PROFESSOR AND CHIEF, 
  PULMONARY AND CRITICAL CARE MEDICINE, ROBERT C. BYRD HEALTH 
 SCIENCES CENTER OF WEST VIRGINIA UNIVERSITY, MORGANTOWN, WEST 
                            VIRGINIA

    Dr. Parker. Thank you, Mr. Chairman. I appreciate the 
opportunity to talk to the Committee, and I am flattered by the 
invitation. Again, I am John Parker. I am a board-certified 
internist as well as a pulmonologist and a NIOSH-certified B-
reader. I am currently the professor and chief of Pulmonary and 
Critical Care Medicine at West Virginia University. In my 
current position, I care for patients at the hospital and also 
teach medical students, residents, and fellows. From 1976 
through 1998, I held various positions in the United States 
Public Health Service, including positions in the Indian Health 
Service, the CDC, and NIOSH. While at NIOSH, I assisted in the 
administration of the B-reader certification program, and I 
also have conducted research on the respiratory system, on lung 
disease and chest imaging issues, and published articles and 
presented a number of invited presentations about the ILO 
classification system as well as the NIOSH B-reader program, 
and high-resolution CT scanning and other imaging techniques. I 
am also the co-author of a textbook on occupational lung 
diseases, and I have typically not served as an expert witness 
in asbestos litigation.
    I want to address certain medical aspects of the bill, 
mainly those involving the non-malignant claims, and at the 
outset let me make it clear that I firmly believe that the 
medical science overwhelmingly confirms serious adverse health 
effects do indeed result from significant asbestos exposure. 
These, of course, include lung cancer, mesothelioma, and two 
non-malignant diseases of the pulmonary parenchyma and the 
pleura.
    Overall, the proposed medical criteria in this bill create 
a medical criteria in this bill create a medically supportable 
system to compensate those that have been substantially exposed 
to as well as those substantially injured by exposure to 
asbestos. Importantly, this legislation adequately protects the 
rights of those who are sick and impaired while providing 
safeguards and balance against spending limited resources on 
claims by individuals who are not impaired.
    It does this by requiring a person who is seeking 
compensation for non-malignant claims to meet several criteria. 
These, of course, include a detailed occupational and exposure 
history. They also include an abnormal chest radiograph as well 
as breathing impairment, as shown by pulmonary function tests; 
and, finally, a physician's conclusion that the impairment was 
not more probably the result of other causes.
    In order to explain why these criteria are necessary, I 
would, of course, refer you to an attached paper to the 
submitted written information.
    The first requirement for a respiratory history includes a 
detailed work and exposure history to identify exposure to 
contaminants at the workplace, including asbestos. And, 
unquestionably, the chest x-ray is also a valuable tool in 
diagnosing asbestos-related disease. And the International 
Labor Office in Geneva has attempted to standardize the reading 
of chest x-rays when establishing this classification system.
    The ILO system consists of written guidelines, standard or 
reference films, as well as a specific form for recording the 
interpretation. For asbestos, the important findings include 
abnormalities of the lung parenchymal as well as abnormalities 
of the pleura.
    NIOSH through the years has made attempts to improve upon 
the ILO classification system by administering a program of 
training, testing, and certification of physicians, and it was 
this training and testing that I helped oversee during my NIOSH 
career. This experience has provided me with firsthand 
knowledge of the ILO classification system as well as certain 
issues about variability among people that interpret chest 
radiographs.
    Although the chest x-ray remains an important component in 
any medical criteria, over-reliance on the chest x-ray has its 
flaws. First, any interpretation of a chest x-ray remains at 
times inconsistent and subjective. The interpretation is 
subject to inter- and intra-reader variability.
    Another problem with relying too heavily on chest x-rays is 
the x-ray interpretation is not specific to asbestos exposure 
or injury. There are many abnormalities associated with 
asbestos that are actually the same as abnormalities seen on 
the chest x-ray in other pulmonary diseases. For these reasons, 
the chest x-ray alone cannot support a finding of asbestos-
related disease. And although computer tomography may be useful 
in many cases and add detail that the chest x-ray may miss, 
there is no universally accepted standardized interpretation 
scheme for CT scans. They are also expensive and do introduce 
additional radiation risk.
    A third requirement in this current scheme is to have lung 
function that demonstrates impairment through the use of 
pulmonary function tests. Asbestos-related diseases cause a 
specific form of lung injury called ``restriction,'' and it is 
because the lungs are fibrotic are scarred that breathing is 
restricted, and pulmonary function tests that include 
spirometry, lung volumes, and diffusing tests can separate 
obstructive from restrictive lung diseases.
    Lung fibrosis such as asbestosis causes primarily this form 
of restriction, whereas chronic tobacco smoke exposure causes 
primarily expiatory air flow obstruction. Clearly, some 
asbestos-exposed workers have also been chronic smokers, and 
the separation of these two functional injuries is rarely 
difficult as the overwhelming injury from severe fibrosis 
causes restriction with a reduction or decrease in the forced 
vital capacity or total lung capacity.
    When using pulmonary function tests, it is important that 
these test results are determined to be normal or abnormal 
based upon a statistical determination of lower limits of 
normal. The lower limits of normal are published reference 
values that are adjusted by a statistical confidence interval. 
The use of arbitrary cutoffs such as 80 percent of predicted 
for FVC and total lung capacity has no statistical basis, and 
most would agree are medically and statistically unreliable.
    The final requirement in the current proposal that I would 
like to mention is the requirement that a physician concludes 
that the impairment was not more likely the result of other 
causes. As I have mentioned, there are other causes for 
abnormal chest x-rays as well as impairment, and a physician 
must, as he or she would in any clinical setting, rule out 
other more probable causes.
    In closing, I would like to reiterate that it is my opinion 
the proposed medical criteria are medically supportable, and I 
welcome this opportunity to answer any questions that you may 
have to further help explain these medical criteria or the lung 
injury that is associated with asbestos exposure.
    [The prepared statement of Dr. Parker appears as a 
submission for the record.]
    Chairman Hatch. Thank you so much. You three doctors have 
been excellent, and we really appreciate the advice that you 
have given.
    I guess a big question that we want to ask--and you have 
tried--I think you have address it to a degree, is: How do we 
know who is sick and whose sickness is due to asbestos and 
whose is not? What is the best way to ensure that those sick 
due to asbestos get paid? Why don't we just start with you, Dr. 
Welch, and then go across the table?
    Dr. Welch. Well, I think that is a good way to divide it 
up. I think we can--we know who is sick primarily by using 
their pulmonary function test to measure impairment. And I 
mentioned that the American Medical Association has a series of 
guidelines for using pulmonary function tests for impairment of 
lung disease and puts people into different categories, because 
the pulmonary function tells you if they are sick or not, and 
then you know they are sick, you have to independently decide 
whether this sickness is related to asbestos. And I think it is 
important to keep them separate. That was my concern about the 
severe asbestosis, is it is trying to mix both at the same 
time.
    Determining whether someone is sick from asbestos, has 
asbestos-related disease is the x-ray findings in the setting 
of a history of exposure to asbestos, and there are some 
characteristic pulmonary function abnormalities that are due to 
asbestos, although I was making the point before--and I do 
think it is important--that in people who have history of 
exposure to asbestos and an x-ray that shows asbestosis, their 
pulmonary function tests may show mixed disease. It may show 
some evidence of restriction from asbestos and some evidence of 
obstruction from smoking. And those are people that I think 
require medical evaluation. But they can have a very 
significant impairment, and in a physician's opinion, the 
impairment could be substantially contributed to by asbestos 
because in a way they already have smoking-related disease; the 
asbestos disease on top of that makes them sicker.
    But the pulmonary function test really is most valuable for 
saying what level of impairment they have, and then the 
exposure and the x-rays, and the pulmonary functions for the 
pattern of impairment they have, and exposure and the x-rays 
tell you whether it is asbestos-related, in my opinion.
    Chairman Hatch. Thank you.
    Dr. Crapo, do you differ with any of that?
    Dr. Crapo. I would agree with Dr. Welch that the pulmonary 
function tests are the critical element that we should use to 
determine if the patient is impaired or an assessment of how 
sick they are. The biggest problem we have here is making the 
proper diagnosis and knowing the causation related to asbestos. 
For the three major diseases we are talking about--for example, 
asbestosis is a fibrotic disease of the lung. Asbestosis is 
only one of about a hundred different causes of lung fibrosis. 
And if we go into one of my clinics that have--let's say a 
pulmonary fibrosis clinic at National Jewish, the vast majority 
of the patients there would not have asbestosis. And the 
challenge is determining which ones are caused by asbestos.
    For lung cancer, the biggest cause is smoking. By far and 
away most cancers are caused by smoking compared to asbestos 
exposure. And for mesothelioma, a small component are 
idiopathic and not caused by asbestosis or asbestos exposure.
    So the challenge----
    Chairman Hatch. Most of them are?
    Dr. Crapo. In men, most mesotheliomas are caused by 
asbestos exposure. In women----
    Chairman Hatch. Especially if they have been working around 
asbestos, you would probably be readily able to conclude that.
    Dr. Crapo. That is correct, and that is why I am coming to 
the critical aspect of the diagnostic criteria which is to 
determine if a disease is caused by asbestos is the exposure 
history. There are some other pathologic ways we can do it, but 
they require lung biopsy, and we cannot--it is not really 
feasible in the context of this type of settlement.
    Absent that, the exposure history is the critical element 
that lets the physician determine whether the disease is more 
likely than not associated with asbestos exposure.
    Chairman Hatch. Dr. Parker, anything you care to add?
    Dr. Parker. I fundamentally agree with both the other 
panelists.
    Chairman Hatch. Let me ask you this: Dr. Parker, are Level 
I and Level II claimants impaired, in your view? Do you think 
they require compensation?
    Dr. Parker. In the bill that I have seen, Level I and Level 
II do not have functional impairment as measured by lung 
function testing. So most would say those are unimpaired, and 
currently the existing AMA guidelines would say those are 
unimpaired individuals.
    Chairman Hatch. Dr. Crapo? And then I will come back to----
    Dr. Welch. Could I comment on that, though? Because if 
their FEV1/FVC ratio is lower than 65 percent, they are in 
Level II. If they don't meet the other criteria, then Level II, 
so you can have people with significant medical impairment 
where the pattern is more obstructive.
    Now, you may say that is fine, but I don't think it is fair 
to say people in Level II have no impairment. People in Level 
II have no impairment and have obstructive disease or mixed 
obstructive-restrictive because they can only move up to Level 
III if they meet this requirement. And we know what we are 
talking about.
    Chairman Hatch. I have an idea.
    Dr. Parker. And Level II makes a provision for medical 
monitoring of those individuals.
    Chairman Hatch. Yes, in our bill we do provide for medical 
monitoring, but we treat those levels, I guess, as unimpaired 
or not sick and not compensable under those circumstances. But 
we do monitor them, and we provide the money to monitor them, 
too, which is, I think, the right thing to do.
    Dr. Crapo, can you add anything to this?
    Dr. Crapo. Yes. I think that when we are looking at a chest 
x-ray which shows minimal changes or early diagnostic changes 
that are consistent with this diagnosis, when the patients have 
pulmonary function changes that are primarily obstructive, that 
tells us that the primary disease driving that process is an 
obstructive disease, the most common of which is smoking-
induced lung disease. In my experience, when these patients 
have significant asbestosis that will also contribute in a 
significant way to their impairment, the FEVI/FVC ratio moves 
upwards toward normal, and it is generally higher than a ratio 
of 65 percent. It is generally in the 70- to 80-percent range.
    I agree with Dr. Welch, though, that diagnosing the mixed 
diseases is the most challenging thing that the physician 
faces.
    Chairman Hatch. Let me ask you this, starting again with 
you, Dr. Welch. Would a finding that x-rays are consistent with 
a particular condition constitute a medical diagnosis? And, if 
not, what else is needed?
    Dr. Welch. Well, I think Dr. Parker did cover that in his 
testimony in a way. I mean, as a physician, I don't think any 
of us would say an x-ray is consistent with, is the same as 
saying I am diagnosing. It is very different, because the 
diagnosis takes into account all the information you have.
    You could have some x-ray findings that are 99 percent 
likely to be one particular thing. I mean, sometimes you look 
at an x-ray, and although you don't have pathology, you say 
that is a lung cancer. You know, it is hard to be anything 
else.
    But, generally, we don't like to work with just one piece 
of information. You have a medical history and, for asbestos, 
exposure history is really very important.
    Chairman Hatch. Medical history and exposure are very, very 
important.
    Dr. Welch. And then the x-ray and then the pulmonary 
function tests, and the pulmonary function tests serve both the 
purpose of looking at the pattern of disease and also telling 
you the level of impairment.
    Chairman Hatch. We provide for monitoring under this bill 
for those who think they might have or have feared that they 
might have asbestosis-causing diseases.
    Let me ask you this, Dr. Crapo: What level of exposure to 
asbestos do you believe is required in order to contract an 
asbestos illness?
    Dr. Crapo. It is widely different depending on which 
disease you are talking about. For mesothelioma, fairly low 
levels of asbestos exposure can cause it. If we are talking 
about the disease asbestosis and its contribution to lung 
cancer, it takes a fairly substantial exposure. And most people 
that have developed those diseases as a result of asbestos 
exposure have something in the range of 100 fibers/cc-years or 
more. That is a fairly high level.
    Generally I think a fairly good consensus for a cutoff that 
would not cause those diseases would be about 25 fiber/cc-
years.
    Chairman Hatch. Should anyone with a change in a x-ray be 
entitled to compensation?
    Dr. Parker. If the chest x-rays reflect a pulmonary 
malignancy, I believe--and it is evaluated--that they should 
be, and the bill would do so, yes.
    In the case of non-malignant pulmonary disease, the 
radiograph alone being abnormal as proposed would not 
compensate individuals.
    Chairman Hatch. How can somebody reading an x-ray 
distinguish between asbestos-related diseases and those due to 
other causes? Hasn't it been--or isn't it possible to have 
abnormalities in x-rays from other sources than asbestos? I 
think you have basically said that, but I just want to get that 
out again.
    Dr. Parker. If it is addressed to me, we agree with that. 
What clinicians use----
    Chairman Hatch. If anybody disagrees, feel free to respond.
    Dr. Parker. Frequently, clinicians, when looking at 
asbestos-related parenchymal disease or considering if you see 
pleural disease and have the history of exposure, it is quite 
common to attribute the exposure to asbestos, both disorders 
being caused by----
    Chairman Hatch. And if you add to that the pulmonary tests, 
then you can pretty well definitively conclude that that is 
asbestos-related.
    Dr. Parker. A medical history is also helpful. I suppose if 
a person had extensive collagen vascular disease, you might 
wonder if it was caused by that.
    Dr. Crapo. I think that is very important to put in here, 
because you need to--you really need to rule out other diseases 
that cause that illness. And there are, as I said earlier, a 
large number, almost 100 different diseases that cause 
pulmonary fibrosis. And the diagnosing physician needs to 
consider the other diagnoses and rule them out as part of this 
process.
    Chairman Hatch. Let me ask one last question before I turn 
to Senator Leahy, and that is this: Would all of you or each 
one of you support a heightened exposure requirement for other 
cancers due to the lack of medical evidence establishing a 
causal link between asbestos exposure and other cancers?
    Dr. Welch. Can you tell me what you mean by ``heightened'' 
when you say ``heightened exposure requirement''? Number of 
years, for example?
    Chairman Hatch. Sure, years or exposure in other forms, 
tobacco, et al.
    Dr. Welch. I think that to link lung cancer to asbestos it 
is really based on exposure, and I think that is what--the 
other doctors would agree that as your exposure goes up, at a 
certain level of exposure you can essentially say if you know 
that exposure occurred that asbestos contributed to that lung 
cancer.
    Chairman Hatch. What is the level of exposure that you 
could say with pretty much certitude that that probably 
contributed?
    Dr. Welch. Well, I think if you want to construct something 
like that----
    Chairman Hatch. Would a worker have to work his or her 
whole life around asbestos, or could 1 day of exposure cause 
this?
    Dr. Welch. One-day exposure is not going to cause lung 
cancer. One-day exposure may cause mesothelioma, although we 
hardly ever see cases that are that low. But leave out----
    Chairman Hatch. That is highly unlikely?
    Dr. Welch. Leave out mesothelioma because that does occur 
from short--but for lung cancer, I think you can construct from 
existing guidelines and consensus criteria, you can construct 
an occupational exposure history that would say this amount of 
years in this kind of job significantly increases the risk of 
lung cancer.
    Chairman Hatch. So we could actually, under this bill, the 
way it is drafted, be able to pretty well tell who deserves 
compensation? That is what we have tried to do.
    Dr. Welch. I think what you do is you need to agree on--in 
some ways, state explicitly what your assumptions are. Do you 
think somebody has to have a 20-fold more likely to be lung 
cancer that you know that lung cancer is 99 percent----
    Chairman Hatch. We are leaving it up to the doctors.
    Dr. Welch. I mean, I think that in your written testimony 
you said 25 fiber years crosses a threshold, and there is this 
international group called the Helsinki criteria that came up 
with the same number. A lot of people have used that number. 
And we don't have that monitoring data for all individual 
people, so you have to create an occupational history that 
matches that. But it is possible to do that.
    Chairman Hatch. How do we get rid of the dishonest doctor 
who is willing to come in and say this guy really has 
mesothelioma or cancer caused by--when there is no cancer at 
all or, you know, it is very difficult to prove and there is 
really no real exposure? How do we stop that? We face that all 
the time in personal injury cases.
    Dr. Welch. Well, I think the cancer diagnosis is easier 
because that is----
    Chairman Hatch. It is there.
    Dr. Welch [continuing]. Available pathologically. Generally 
people have that. I think the debate about----
    Chairman Hatch. So we should be able to definitively do 
this for----
    Dr. Welch. For the cancers, yes. I think that the concern 
that comes up is about what you were expressing to some degree, 
an x-ray reading that is consistent with asbestos.
    Chairman Hatch. And with history.
    Dr. Welch. But it hasn't necessarily reached a medical 
diagnosis.
    Chairman Hatch. Okay. What I want all three of you to do 
for us is look over our language. You know, we are not stuck 
with any language. I don't want to make this so broad that 
everybody who gets a cough gets compensation. Naturally, we 
don't want to do that. That takes money away from the honest 
people who do, in fact, have problems. But give us any 
suggestions you have, and we will take a look at them. But we 
think we have written this section pretty well. But especially 
you, Dr. Welch, we would like to see how we can improve it, and 
especially you, Dr. Crapo, and you, Dr. Parker. All three of 
you have extensive experience in this area. So we would like to 
have the best really look this over.
    I have no axes to grind on any part of this bill. I just 
want to get it done, get this problem behind us. I think it 
would help this country and these workers better than anything 
we could do this year, and maybe for the next 30 years. But it 
would certainly lay the groundwork to take care of some of 
these very, very difficult problems. And as you can see, we 
have to split the differences and come with a bill sooner or 
later. Now, this bill is there and we are interested in any 
changes that anybody would care to make that are willing to be 
constructive changes not just ideological changes. So if you 
will do that, we would be very grateful.
    Senator Leahy?
    Senator Leahy. Thank you, Mr. Chairman. I would note--and I 
think everybody would agree with this, certainly from the 
testimony--that exposure can also be the so-called take-home 
exposure, too.
    Dr. Welch. Absolutely.
    Senator Leahy. Is that not correct?
    Dr. Welch. Right.
    Senator Leahy. It is interesting reading the bill, and I 
understand from the Chairman that this, again, is a work in 
progress. But it doesn't compensate anybody who is----
    Chairman Hatch. Can I interrupt you just on that take-home 
exposure situation? Because I have been wanting to say 
something, and I think since you raised it, this bill--you 
know, it is my understanding that those affected by take-home 
exposure--a father who brings home clothes that the kids gets 
asbestosis from--they will be considered under this bill to 
have occupational exposure. So they will be covered, those 
children.
    Now, we are going to look at that language and see if we 
can correct that language or make it better. Now, when they 
start throwing around figures like 32 million people might have 
exposure, I mean, you know, we can't resolve that problem. But 
I have to say if they don't fit in the category of take-home 
exposure, then they have got the regular tort system still 
available to them.
    Now, I think they are going to be pretty tough cases, 
between you and me, but, nevertheless, that is where it is. And 
that doesn't stop dishonest lawyers from bringing cases that 
cost a fortune to defend that aren't valid. That happens. That 
is one of the problems with overutilization of our tort system 
today. And we have got to find some reasonable ways to bring 
Democrats and Republicans together so that our system doesn't 
destroy us.
    So I would like your help on this, and I want to thank my 
colleague for letting me interrupt on this. But we will take 
care of those that have taken exposure because of their father 
or mother who has worked around asbestos. And this bill I think 
does take care of them. But if our language isn't good enough 
there, help us to know how to write it. Okay?
    Go ahead. I am sorry.
    Senator Leahy. Well, of course, all personal injury cases 
related to asbestos are covered by the bill, and take out the 
tort system and occupational or not, as it is written. So that 
is why we are having these hearings, and that is why it is a 
work in progress.
    I notice the bill, I started to say, doesn't compensate 
anybody exposed to asbestos in the workplace after December 31, 
1982. It is a puzzlement to me why we would deny asbestos 
victims their rightful recovery because the exposure occurred 
after an arbitrary cutoff date, New Year's Eve 1982. I mean, a 
great celebration for New Year's Eve, especially when you still 
use asbestos today, as Senator Murray and others have pointed 
out. You have an arbitrary cutoff in a national trust. It seems 
to me that only compounds the problems of this arbitrary 
cutoff.
    Is there any medical reason for the December 31, 1982, 
cutoff? That should be easy to answer yes or no. I realize 
there may be policy reasons. There may be other reasons. But is 
there a medical reason for the December 31, 1982, cutoff?
    Dr. Welch. No.
    Dr. Crapo. There is not a medical reason. It has to do with 
exposures changing.
    Senator Leahy. I understand, but there is no medical 
reason.
    Chairman Hatch. Keep in mind the reason we did that is we 
adopted the Manville approach which sets 1982.
    Senator Leahy. I understand.
    Chairman Hatch. We are not necessarily bound by that 
approach.
    Senator Leahy. We are not going to follow everything of the 
Manville because they are getting 5 cents on the dollar right 
now. Dr. Parker, any medical reason?
    Dr. Parker. Not that I am aware of.
    Senator Leahy. Okay. So there would be--and we will debate 
all the other policy reasons, of course, but no medical reason.
    Now, Dr. Welch and Dr. Parker, if I could direct this to 
you, you are both occupational physicians. As I listened to you 
today and as I have read your testimony, you both have 
discussed the importance of exposure history in the diagnosis 
of asbestos-related disease. I think we would all agree that is 
important.
    Now, S. 1125 as it is drafted requires a diagnosis be 
independently verified with respect to the duration, the 
proximity, regularity, and intensity of the asbestos exposure 
involved. A lot of these exposures took place 30 or 40 years 
ago. I am wondering how you independently verify such exposures 
30 or 40 years ago. Is that something that physicians would 
normally do in diagnosing occupational diseases with long 
latency periods? Is it possible to do that? Dr. Parker, how 
about you?
    Dr. Parker. I am flattered to have been given some honorary 
occupational medicine training. I actually have to say that my 
occupational medicine training is on the job. But I do consider 
myself expert in occupational lung disease. And the 
reconstruction of exposures that occurred many years ago in the 
workforce, primarily we take the history, how intense the 
exposures may have been, how long they worked in jobs that are 
historically associated with potentially high exposures; and 
then if there is a health effect, we try to sort out in our own 
mind whether that health effect is a result of that exposure.
    They are difficult to reconstruct in individuals. They are 
also difficult to construct and reconstruct for research. But 
there are methods to do that. But certainly it would be very 
difficult to individually verify, yes.
    Senator Leahy. Dr. Welch, would you agree with that?
    Dr. Welch. I would agree. You know, as part of the practice 
of medicine, occupational medicine, you take the occupational 
history from the individual. And for a history of exposure to 
asbestos, we know so much. I can fill in so much about what the 
worker is telling me from the existing epidemiology, all the 
research that has been done, that there is no need to try to 
look for other data to verify that an insulator used asbestos. 
I mean, he is telling me that. I know it to be true 
independently, for example. You couldn't do it, but it is not 
standard practice. People don't do that in this kind of 
circumstances where the exposure history from the worker 
clearly represents a certain level of exposure. You can 
understand if you understand the work that was done in the 
literature.
    Senator Leahy. Thank you. Well, I know the Chairman has an 
event at 12:30, and he has also announced we are going to have 
a break at this time. And I realize under our normal practice 
he would extend me more time. But I think that we ought to be--
--
    Chairman Hatch. Sure.
    Senator Leahy. I do have several other questions, as you 
can imagine, but if I might submit them for the record.
    Chairman Hatch. Without objection. We will keep the record 
open for any questions until this evening at 6 o'clock, any 
questions that any member of this Committee would care to make. 
We would hope that you would get your answers right back 
because we intend to put this on a markup next week.
    Now, we also intend to make----
    Senator Leahy. Also, I have a statement by Senator Kennedy.
    Chairman Hatch. And we will put Senator Kennedy's statement 
in.
    Also, we are looking for ways of improving the bill and 
changing it between now and then, and hopefully we could have 
some support from everybody involved, because there is no way 
that we can please everybody. All we can do is try to be as 
fair as we possibly can. And when you are talking $108 billion, 
you are talking a lot of money. Frankly, I understand I have 
got to come up with some--we have got to come up with some sort 
of an end situation here. We will do our best to do that. But I 
also have to bring together disparate political viewpoints. And 
unless we have a very acceptable bill to the majority of 
Members of Congress--and I am saying a significant majority--I 
think we are just climbing the wrong tree and we are basically 
going to fail.
    So it is important that everybody get together. I don't 
have any axes to grind. Some feel that I have leaned too far in 
favor of the unions. Some of the unions feel I haven't leaned 
far enough. The trial lawyers are all mad at me. We have united 
them apparently with this bill.
    [Laughter.]
    Chairman Hatch. That is not hard to do, by the way. 
However, they were split. And, frankly, some trial lawyers like 
some of the aspects of this bill, but as a general rule, they 
are not real happy with it. That ought to please a lot of 
people out there, but it doesn't please the trial lawyers.
    We have 800-some companies who probably are going to go 
into bankruptcy if we don't resolve these problems, and we have 
got a bunch of insurance companies who can't afford to go into 
bankruptcy, but who either will have to go into bankruptcy or 
quit. And I don't want to see that happen when we have at our 
fingertips a chance to resolve this.
    So you three are very important to us, and we would like 
your best advice as to how we might refine this bill further 
with regard to the medical aspects of it, health care aspects 
of it, or anything else you would care to weigh in on. And the 
next panel is going to be a very interesting panel that will 
have some differences, and I look forward to hearing from them. 
But we won't be back until about 1:30.
    Senator Leahy. Mr. Chairman, if I might, I agree with all 
of this, that we have to put together--we are much further 
along than we were a year ago. We have got a lot of parties in 
the room. We still have a way to go. When I was first in the 
Senate, I believe it was Senator Mansfield who said something 
about running the Senate was like trying to move around a 
wheelbarrow full of bull frogs. And maybe this is the same 
thing. But people----
    Chairman Hatch. I like the analogy. I thought it was very 
good.
    [Laughter.]
    Senator Leahy. You have never had that problem with the 
Committee, though, Mr. Chairman.
    Chairman Hatch. Especially the ``bull'' part.
    Senator Leahy. We do whatever you tell us to.
    [Laughter.]
    Senator Leahy. But on this----
    Chairman Hatch. I think it is about time, is all I can say. 
We would all be better off.
    [Laughter.]
    Senator Leahy. I will make a note of that should I forget. 
But----
    Chairman Hatch. Don't worry. You will forget.
    [Laughter.]
    Senator Leahy. What I would suggest is that when we do 
finish this hearing today--and there have been good questions 
and good answers--that once again we get those parties back in 
the room that we had before and continue negotiations, because 
we all know that there is not going to be a bill that is going 
to be perfect for everybody. No one group is going to find it 
perfect, and I understand that because there is no way you can 
do that. But we are getting closer. And a consensus bill with 
broad bipartisan support will pass the Senate, and the House 
may well take it with a sigh of relief. A fractured bill where 
the major parties are in opposition, where we don't have that 
kind of broad, real bipartisan support, that means across the 
political spectrum, doesn't pass and we all know that. We all 
know that, especially as we come into the summer months and the 
appropriations bills season and all the rest.
    So I wouldn't have held that hearing last year if I didn't 
have hope this could be done. Senator Hatch has spent an 
enormous amount of time on this, as have I. Both of us have a 
million other things on our agenda. We want it done. I don't 
have any major parochial interests in Vermont on this. I do 
have an interest, though, as a legislator in wanting to see 
this done and wanting to see a solution that we can all agree 
on.
    I am committed to continue working with the Chairman, but I 
would hope that we can get the parties, once this hearing is 
over and we know where the main differences are, we get the 
parties back together.
    Chairman Hatch. Well, I appreciate that, Senator. Let me 
just say that I have succeeded in irritating everybody, which 
is probably good. It means this must be a bill that is firming 
up.
    Senator Leahy. Except me.
    Chairman Hatch. I am not going to answer that.
    [Laughter.]
    Chairman Hatch. Because I had something in mind. And I 
still have high hopes we will get you on the bill. But the fact 
of the matter is that we are to the point where this is rug-
cutting time. I just don't think we will have the time after 
this month. I am certainly not going to kill myself any 
further. I mean, I have worked on it, a number of us have 
worked on it day and night, and I have met with literally 
hundreds if not thousands of people on this and, frankly, have 
tried to bring everybody together the best way I can. And I 
can't give a great advantage to anybody. We have got to try and 
get this so that we don't destroy the good because we desire 
perfection so much. And there is no way we can get to 
perfection on this and have a bill. In fact, there is no way 
you can get to perfection, like most things in life.
    But this bill, even in its current form, would do an awful 
lot of good for an awful lot of people. For this hearing, the 
remaining purpose will be to get all the help we can to rewrite 
what has to be written and then bring it up next Thursday after 
this one, and hopefully pass it out of the Committee and get 
some time on the floor, which is going to be very difficult, 
because the last 2 weeks of this month are set up for Medicare. 
And that is extremely important to all of us.
    So it is a timing thing as well as a cooperative thing, and 
I have just got to have cooperation from everybody in order to 
get this done. And if not, we are going to fail.
    So let's not fail. Let's get this done, and we will be back 
here--I better make it quarter to 2 because we are 15 minutes 
late, and I have got to go be with Senator Kennedy at this 
time. So I don't have any choice. I have to be with these guys 
whether I want to be or not.
    Senator Leahy. We love you.
    Chairman Hatch. We will recess until further notice.
    [Whereupon, at 12:48 p.m., the Committee was adjourned, to 
reconvene at 1:45 p.m., this same day. Afternoon Session [2:02 
p.m.]
    Chairman Hatch. I apologize to all of you for all the 
delays that we have had here. I haven't been able to do 
anything better. So we appreciate all of you being here today 
and being here to help us to understand what we should do and 
to understand it better, because we certainly need to resolve 
some of these conflicts.
    Now, we have an excellent panel here today. It is a diverse 
panel.
    Jennifer L. Biggs. Ms. Biggs is a consulting actuary with 
Tillinghast-Towers Perrin and is a principal of Towers-Perrin. 
Her practice focuses on quantifying asbestos liabilities 
incurred by the insurance industry and corporate defendants 
named in asbestos lawsuits.
    Dr. Mark A. Peterson. Dr. Peterson has been a special 
adviser to the courts regarding the Manville Trust and has 
studied asbestos litigation and is the founding member of the 
RAND Corporation's Institute for Civil Justice.
    Dr. Fred Dunbar is the senior vice president and senior 
economist for National Economic Research Associates. He is a 
certified expert in the area of mass torts and claims 
valuation.
    Professor Eric Green. Professor Green teaches negotiation, 
mediation, and resolution of mass torts at Boston University 
School of Law. He has served as special master in multi-
district asbestos litigation and is court-appointed legal 
representative for future claimants in asbestos-related 
bankruptcies.
    And Dr. Robert Hartwig. Dr. Hartwig is chief economist and 
senior vice president for the Insurance Information Institute, 
a property, casualty insurance trade association.
    We are very grateful to have all of you here. We welcome 
you and we look forward to hearing your testimony, so we will 
start with you, Ms. Biggs, first.

STATEMENT OF JENNIFER L. BIGGS, TILLINGHAST-TOWERS PERRIN, ST. 
                        LOUIS, MISSOURI

    Ms. Biggs. Mr. Chairman, thank you for allowing me to 
testify today. My name is Jenni Biggs. I am a consulting 
actuary with Tillinghast-Towers Perrin and a principal of 
Towers Perrin. I am a Fellow of the Casualty Actuarial Society 
and a member of the American Academy of Actuaries. My 
consulting practice, as you mentioned, focuses on quantifying 
the asbestos liabilities of insurance and reinsurance companies 
as well as corporate defendants named in asbestos lawsuits.
    In May of 2001, my colleagues and I released our estimate 
of the ultimate loss and expense projected to result from U.S. 
exposure to asbestos. Our estimate of $200 billion has since 
been widely quoted. During this testimony, I will explain to 
you how we anticipate our $200 billion estimate will change if 
Senate Bill 1125, the Fairness in Asbestos Injury Resolution 
Act of 2003, or the ``FAIR Act'', is enacted.
    Tillinghast's $200 billion estimate of ultimate asbestos 
loss and expense includes both past payments and projected 
future payments. The RAND Institute for Civil Justice recently 
estimated that $70 billion in asbestos claims were paid through 
year-end 2002. Thus, our $200 billion ultimate figure 
translates to $130 billion of estimated future payments. This 
$130 billion estimate is based on assumptions consistent with 
the deterioration in the asbestos litigation environment 
observed by 2001.
    An important feature of the proposed legislation is the 
elimination of plaintiff and defense attorney fees. To put this 
into perspective, Tillinghast's $200 billion estimate of 
ultimate asbestos loss and expense is significantly reduced 
when these frictional costs are removed. Of the $130 billion 
remaining to be paid, we estimate that approximately $28 
billion, or 21.5 percent, relates to defense costs. Of the 
remaining $102 billion, we estimate that approximately $41 
billion, or 40 percent, will go to plaintiff attorneys. 
Therefore, out of the original $130 billion estimate of future 
payments, less than half, or only $61 billion, is expected to 
reach the claimants. Our conclusion is consistent with the 
findings of RAND: Transaction costs have consumed more than 
half of total spending.
    In order to project indemnity awards under the proposed 
legislation, estimated claim filings are multiplied by the 
specific awards for each of eight disease levels under the Act. 
We did this separately for estimated future claims and for the 
refiling of existing claims. We then added a component for the 
cost of medical monitoring.
    Tillinghast projected future claim filings using three 
disease categories: mesothelioma, lung cancer, and all other. 
Therefore, we relied on information provided by the Claims 
Resolution Management Corporation, or the CRMC, to split our 
original projections in the three disease categories into the 
eight disease levels under the Manville 2002 Trust Distribution 
Process, which are generally used in this Act. There are some 
differences in the medical criteria. However, with the 
exception of Disease Level VI Lung Cancer One claims, my 
analysis assumes that any differences between the 2002 TDP and 
the bill are unintentional, and that the proposed legislation 
will be modified.
    We also increased the projected number of future 
mesothelioma claims to reflect that the increase in publicity 
relating to asbestos claims and compensation, as well as the 
potential ability to bring claims to a trust in a non-litigious 
environment with pro bono legal assistance will likely increase 
the propensity for victims to seek compensation.
    For pending claim filings, as an upper bound we assumed 
that there are currently 300,000 claims pending in the U.S. 
court systems. Of these pending claims, we assumed that 230,000 
will meet the minimum medical criteria and be refiled under the 
Act.
    The proposed legislation outlines specific claim awards 
that range from zero for Disease Levels I and II to $750,000 
for a mesothelioma victim.
    As currently drafted, the proposed legislation does not 
address increases in the awards to reflect future inflation. 
However, we tested the sensitivity of the prospective payments 
to indexed awards increasing at 2.5 percent a year.
    Under the proposed legislation, the claim awards will be 
reduced by the amount of benefits already received. We are not 
aware of any publicly available data that would allow us to 
estimate the settlement amounts that may have been achieved 
with specific defendants. Recall that a single plaintiff may 
sue as many as 60 different defendants. Therefore, we have 
conservatively assumed no offset to the prospective payments in 
the estimates that I will be discussing today.
    We estimated medical monitoring costs based on current 
Medicare reimbursement schedules, and in total we projected 
relatively small medical monitoring costs of only $400 million.
    Reflecting these provisions of the FAIR Act, we calculated 
the prospective payments from the trust as only $46.7 billion 
using the scheduled claim awards and $60.2 billion if you 
assume a 2.5-percent annual increase in the claim awards. Thus, 
the $108 billion appears to be more than adequate compared to 
Tillinghast's best estimate of future costs, given a more 
stringent definition of Lung Cancer One claims, which is 
consistent with the Manville 2002 TDP.
    We note that our estimates are on a nominal or undiscounted 
basis. Nominal estimates are appropriate for comparison with 
the nominal value of the trust of $108 billion. Discounted 
estimates would be lower; however, discounted estimates should 
be compared to the net present value of the trust, recognizing 
that the entire $108 billion will not be placed into the trust 
at inception.
    Estimates of the prospective payments are very sensitive to 
assumptions regarding the number of future claims, especially 
mesothelioma, the potential indexing of future awards, and the 
definition of Lung Cancer One claims.
    Therefore, for comparison, we also projected the 
prospective payments using future claim projections prepared 
for and provided by the Manville Trust which range from 600,000 
to 2.4 million. In total, these future claim projections are 
higher than the Tillinghast claim projections contained herein, 
but the number of mesothelioma claims are very similar.
    We also added the provision of 230,000 refiled pending 
claims to the Manville scenarios. The resulting Manville 
projections range from $36.8 billion to $72.3 billion, assuming 
no indexing of future awards, and that Lung Cancer One claims 
will be defined consistently with the 2002 TDP.
    If future awards are indexed at 2.5 percent a year, then 
the prospective payments based on the Manville filing 
projections increase to $47.2 to $94.5 billion, still assuming 
a more stringent definition of Lung Cancer One claims: that 
they satisfy the requirement of either an underlying non-
malignant asbestos-related disease or significant occupational 
exposure of 5 years.
    As currently drafted, the FAIR Act does not require 
underlying asbestos-related disease and merely requires 6 
months of occupational asbestos exposure prior to year-end 
1982. Thus, potentially tens of thousands of claimants that 
weren't historically eligible for compensation under the 
Manville Trust will be eligible for compensation under the FAIR 
Act.
    We have projected an additional 172,000 Lung Cancer One 
claims for non-smokers. Each of these additional claimants 
would be awarded $50,000 for a potential additional $8.6 
billion of indicated payments (or $11.8 billion if the future 
awards are indexed at 2.5 percent a year).
    We also increased the Manville projections to include our 
estimate of additional Lung Cancer One claims. If these 
additional cancer costs are added, then the Tillinghast 
estimate increases to $72 billion and the Manville projections 
increase to $56.4 billion under the minimum estimate, $77.6 
billion under the mid-point estimate, and reach $108.4 billion 
under the maximum projection when future awards are indexed at 
2.5 percent a year.
    In conclusion, while the estimates are sensitive to the 
number of future claim filings, the indexing of future claim 
awards, and the definition of Disease Level VI Lung Cancer One 
claims, reasonable projections of prospective payments under 
the Act are at or below $108 billion if future awards are 
trended at 2.5 percent or less.
    Thank you.
    [The prepared statement of Ms. Biggs appears as a 
submission for the record.]
    Chairman Hatch. Thank you. I appreciate your testimony, and 
it was very interesting to me.
    Mr. Peterson, we will turn to you.

STATEMENT OF MARK A. PETERSON, LEGAL ANALYSIS SYSTEMS, THOUSAND 
                        OAKS, CALIFORNIA

    Mr. Peterson. Thank you, Senator. I appreciate the 
opportunity to be here. It is a privilege to address the 
Committee. One of my major areas of research and professional 
activity for the last 20 years has been an attempt to develop a 
fairer and more efficient system for handling asbestos claims. 
And so I appreciate the opportunity to assist the Committee in 
dealing with those issues.
    I want to go through and really take your invitation to 
identify areas of the bill that I think may create problems and 
make suggestions of how the Committee might want to deal with 
them. I want to do this in a constructive fashion to aid the 
Committee.
    The first area I want to comment on is about the timing of 
payment. There have been repeated references today to the 
importance of swift payment of claims, swift provision of 
justice, and I think that is a particularly important area here 
given the age of the victims of asbestos diseases we are 
considering.
    One of the major problems, I think, with the present bill 
is it won't be swift. It won't provide swift justice. And I 
think there are two reasons why both can be addressed. The 
first is that it sets up an extremely complicated process for 
paying claims, and not only does it set up a new bureaucracy to 
pay those claims with a variety of different courts and levels 
for doing so, an untested process, but it also sets up two 
taxing systems to bill and raise the money necessary to pay 
those claims. And it sets up a new court system. So it is a 
complicated proposal like nothing I have ever seen, and my own 
experience with regard to establishing and working with 
asbestos trusts is that the much simpler procedures that they 
have take several years, typically, to set up.
    I am concerned here that this process will take more than 
several years to establish despite the requirements in the bill 
for timing. And I think as you go forward, you should try and 
seek advice from people that have worked and set up trusts that 
do these same kinds of processes. The attempt here is 
essentially to have procedures that are very similar to 
Manville. Manville has been paying claims under this process. 
One can learn and try and adopt a system that is closer to what 
is going on with the existing trust that doesn't have all the 
complications, expense, difficulties, and inertia, essentially, 
in setting this up. That is one area, source of delay.
    The other area that really I think is the bigger problem 
with regard to delay is there is a mismatch in timing between 
the obligation of the fund and the money that will be available 
to pay claimants. The funding provisions of the bill are 
limited to $5 billion a year over the course of 22 or 23 years. 
Unfortunately, the liabilities, the obligations are not steady 
over time. They are front-loaded. It is true of any asbestos 
trusts we have set up. The reason is twofold: one is that there 
are, as Ms. Biggs suggests, around 300,000 claims pending today 
that will be seeking compensation; and in addition to that, if 
there is a two-, three-, four-, 5-year, whatever delay in 
setting up this process and beginning to get the revenue 
necessary, you are going to be accruing claims during that 
entire period of time. So you have to anticipate that when this 
fund opens its doors, it would have 400,000, 500,000, 600,000 
claims there.
    There are two issues with regard to that. Obviously that is 
an enormous number of claims to deal with in an administrative 
process, so it creates administrative burdens. But more 
problematic is you will be dealing with--you need $30, $40, $50 
billion immediately to pay those claims, but the fund will only 
have $5 billion a year for 5, 6 years. It will need to wait 5 
or 6 or more years in order to accumulate the money that is 
necessary to pay claimants who already have claims today. And, 
in the meantime, these people will now be waiting up to a 
decade to get payment. And I don't think anyone--I assume the 
Committee or anyone else--would be satisfied with setting up a 
procedure that is going to require elderly present claimants to 
have to wait 10 years to get paid. So that is one issue.
    The second that I wanted to mention was the amount of money 
that is provided, the level of compensation in this bill. The 
answer, of course, to dealing with the problem of the mismatch 
and timing of liabilities and payments is to make more of the 
cash available immediately. I understand--well, I don't 
understand, but I can sympathize with the difficulties in 
working with the insurance and business community to get them 
to provide money sooner rather than later. But it will be 
necessary in order to avoid the delays I have been talking 
about.
    With regard to the amounts of money, there were references 
earlier about attempting to have perfection and provide the 
highest amounts of money that victims might expect to receive 
in the tort system. I have no such expectations about asbestos 
litigation. Perfection is not something that is much there. But 
the average payment for mesothelioma claims, not the extremely 
highest, the average is $2 to $3 million today, as opposed to 
$750,000 in this plan. So this plan will cut those payments by 
a third. It will cut lung cancer claimants to a tenth because 
the average payment for lung cancer claimants, including most 
of whom are smokers, is about $1 million a claim. So this fund 
will greatly reduce the compensation levels that claimants get. 
Again, of course, there are some compromises necessary, but 
that is a very steep discount.
    The next point I wanted to make is that the $108 billion I 
do not believe is enough money. It is not enough money to pay 
the claims. I have seen Ms. Biggs' forecasts, and I have done 
those of my own. I anticipate that using reasonable alternative 
forecasting assumptions, the liabilities are between $150 and 
$250 billion, well in excess of the $108 billion number. And I 
note that really the only difference between Ms. Biggs' 
forecast and mine is the number of future claimants. She 
anticipated that there will be a million future claimants; I 
forecast that there will be likely 1.9 million future 
claimants. And I would comment that the million--while I agree 
with much of Ms. Biggs' work, I would comment that the 1 
million future claimants is based, even though she notes in her 
report or statement that the Manville Trust got 200,000 
claimants in the last 3 years, so in a world in which 200,000 
claimants come in 3 years, I don't think it is reasonable to 
expect that there will only be a million future claimants.
    The problem with that--and I have outlined it in my 
statement--is that this is a closed-end fund. So if the 
liabilities are greater, if they are at the level that I have 
suggested they might be as opposed to what Ms. Biggs suggests, 
then the claimants will bear the burden. At some point this 
fund will run out of money, and it will not be able to pay 
anyone anymore. It is the back end problem that Senator 
Feinstein referred to.
    Chairman Hatch. Of course, if we don't do something about 
it, we are going to run out of money in the next few years.
    Mr. Peterson. I am assuming the criteria and the levels in 
this funding. I am not assuming any payments of the Level 
Two's. I am saying that based upon the provisions of this bill, 
with the numbers of claims that I am forecasting, there could 
be $150 to $250 billion of liability for the very bill you are 
considering. And there is a risk of that and the risk will be 
borne by the claimants.
    Chairman Hatch. There is certainly going to be that if we 
continue with the tort system the way it is. As I understand 
it, about 60 percent of the people bringing litigation are 
people who aren't sick, but who have the fear of sickness, 
which the Supreme Court seems to have upheld.
    Mr. Peterson. I think that that is not a correct----
    Chairman Hatch. Am I wrong on that?
    Mr. Peterson. Sixty percent is----
    Chairman Hatch. I would be happy to have you give me the 
real figures on that.
    Mr. Peterson. I will try and respond to that. It certainly 
is much lower than that.
    Yes, the tort system is expensive, no doubt about it. In 
the tort system, essentially the tort system is moving toward a 
series of independent trusts that are being run in a couple of 
facilities. The kind of process that you are talking about in 
your bill is occurring now within kind of the legal system. It 
is happening on a case-by-case basis in bankruptcy.
    One of the things that the Committee might consider is 
making that process available to defendants without having to 
file bankruptcy, essentially to be able to have defendants 
negotiate Georgine, Amchem, the kinds of cases that the Supreme 
Court overturned.
    Chairman Hatch. The problem is they can't make those kinds 
of payments and still operate the way they are used to 
operating. They are going to have to cut back on employees and 
everything else. That is why they go into bankruptcy so that 
they can reach some reasonable standard that might possibly 
keep their business alive.
    I have got to say your figures that you have raised and 
some that I have got are completely disparate.
    Mr. Peterson. Well, I think you have raised an important 
issue, and that is that there is such uncertainty about the 
forecasts. I can't tell you that my numbers are definitely 
right. Ms. Biggs can't tell you that her numbers are definitely 
right.
    We don't know with certainty what the future would be. We 
don't know how many future claims there are going to be against 
all defendants, as I described in my statement. We don't know 
how this process would be carried out, but there is a 
substantial risk that the numbers could be greater than $108 
billion, and that risk will be borne by the victims, not by the 
defendants and insurance companies.
    Chairman Hatch. Let me ask you to do me a favor and do the 
Committee a favor. You know, your testimony does not specify 
how you are reaching these figures and these numbers. For 
instance, I have been led to believe that even with attorney's 
fees and everything else, the average award would be about 
$900,000 on a serious case, and that includes a whopping amount 
of money that the attorneys are going to get, which has been 
estimated at between 40 and 50 percent here. It would be 
wonderful if we could give everybody $3 million, but we can't.
    Mr. Peterson. I appreciate the difficulty of trying to get 
a compromise here.
    Chairman Hatch. I mean, there is no way we can have a bill 
and do that, but we are trying to come up with a way that 
everybody who is sick and who has these problems is going to be 
compensated, where right now, we know there is going to be a 
dry-up of funds and a lot of companies in bankruptcy and a lot 
of loss of pension funds and a lot of loss of health care and a 
lot of loss of jobs if we keep going in the current system. So 
what I am trying to do, as you know, is come up with something 
that hopefully everybody can swallow and accept.
    Mr. Peterson. I understand.
    Chairman Hatch. I don't know what else to do, and I can 
tell you that if you are right and it is 1.9 million claims 
that ultimately have to be settled, then we are going to have 
to do it within this fund.
    Now, to me, if I am sitting there in the audience and I am 
one of the businesses that has got to pony up part of $108 
billion, I am not happy about that.
    Mr. Peterson. I can imagine.
    Chairman Hatch. And they are certainly not going to be able 
to do it in the first two or 3 years. I understand some of 
these cases go back 20 years now and they are still sitting 
there, in Philadelphia in particular.
    Mr. Peterson. There are probably some cases that hang 
around that long. They are not being pursued by the plaintiffs.
    Chairman Hatch. That is right. The courts aren't doing the 
job, the attorneys aren't doing the job, and in the process 
justice isn't occurring.
    I didn't mean to get into questions right now, but your 
testimony has been very interesting to me, as has Ms. Biggs'. I 
would like you to supplement that testimony with what you have 
used to arrive at these figures because that would be helpful 
to us.
    Mr. Peterson. I have described them in my statement, but I 
will see if there is some supplemental description that I can 
give you.
    Chairman Hatch. If you can give some definitive economic 
analysis that backs up what you are saying, I would be very 
interested. And even if you could prove those figures, we are 
still faced with a limited ability to get this done, and that 
means that we are going to have to have people swallow hard if 
they want this done and help us to get it done.
    I don't want the union members to be hurt, I don't want the 
companies to be hurt, I don't want the insurance companies to 
do broke. Frankly, I don't particularly want to hurt the trial 
lawyers, but, by necessity, we know the transaction costs do 
amount to almost 50 percent. That means that half the monies 
are going to people who aren't sick, and that is not counting 
the people who aren't sick who are getting some of the money. 
So you can imagine how that concerns, I think, any reasonable 
person who is looking at it.
    But please give us more back-up, and we are open to it, but 
unfortunately we need you to do it soon because I am planning 
on marking this bill the Thursday after this.
    Mr. Peterson. Sure. The part of it that is most difficult, 
of course, is anticipating what is going to be the distribution 
of claims under the procedures and criteria that have been 
established.
    Chairman Hatch. And our efforts may have to be on how do we 
solve this end game; I mean, how do we solve it if the fund 
runs out of funds. Now, admittedly, I want to solve that. I 
know one thing. If I have Government do it, this bill is dead. 
I can just tell you that right now. We don't have enough votes 
to get it through here or the House.
    You are looking at the guy who put through the radiation 
compensation exposure bill, who has had Government do it. The 
Government needed to do it because they were the ones 
responsible for it. So you can see some of the difficulties 
that we have here. It is not an easy matter.
    Mr. Peterson. Senator, I understand very well the problems 
and implications of my testimony. I share with you the desire 
to have some efficient and fair resolution, and I appreciate 
the problems that asbestos generates and I am providing these 
numbers in that spirit.
    I share with you the desire to try and do something, but I 
wanted to make the Committee aware of the implications of the 
very proposals that they are making.
    Chairman Hatch. Well, back up your numbers with more facts 
and we will look at them very seriously.
    [The prepared statement of Mr. Peterson appears as a 
submission for the record.]
    Chairman Hatch. Let's go to Mr. Dunbar.

   STATEMENT OF FREDERICK C. DUNBAR, SENIOR VICE PRESIDENT, 
   NATIONAL ECONOMIC RESEARCH ASSOCIATES, NEW YORK, NEW YORK

    Mr. Dunbar. Thank you, Chairman Hatch and Senator Leahy.
    Chairman Hatch. Of course, if any of you have comments to 
add to either of the first two witnesses, that would be fine, 
too.
    Mr. Dunbar. I am very grateful to have been invited to 
present the work of me and my colleagues. The research that I 
am going to talk to you about was based in part on the research 
of Sebago Associates, with Professor Joseph Stiglitz, a Nobel 
Laureate economist who is teaching at Columbia.
    As you mentioned, I am a Senior Vice President of National 
Economic Research Associates. We are the largest firm employing 
micro economists studying policy and legal issues. We were 
formed about 40 years ago by Professor Alfred Kahn. I and 
others at the firm have been studying asbestos issues for 12 
years.
    The focus of my comments today is really on workers, and it 
is not necessarily those workers which show up in asbestos 
claims statistics. Rather, it is those workers who are employed 
by firms bankrupted by asbestos, as well as those workers who 
supplied the goods and services to the bankrupt firms and their 
employees' families.
    Now, the statistics that I can present will seem mind-
numbingly dry, but they have a special meaning for people; in 
fact, people like me who grew up in a working-class home. In 
such a home, economic security is always a concern, and I and 
the others know firsthand how fine the line is between having 
economic security and adverse fortuity where it is lost.
    Who are the workers? These are people that are your 
constituents. More precisely, they are the constituents of 94 
members of the Senate because the 60-or-so bankrupt firms 
examined by Sebago had facilities with employees in 47 States.
    What happens to these employees when a firm goes bankrupt? 
The lucky ones stay on, but 25 percent are really not so lucky. 
They become unemployed and, on average, they lose $30,000 to 
$60,000 in lost income while being unemployed and taking lower-
pay jobs.
    Sebago Associates estimates that, to date, 50,000 such 
workers have lost their jobs and borne costs that total $1.4 to 
$3 billion. In addition, 200,000 of your constituent workers of 
these bankrupt companies lost retirement benefits of $1,000 
each, for a total adding up to another $200 million to their 
losses.
    These are what economists call the direct costs. Those are 
the losses that people directly bear caused by the 
bankruptcies. There are also multiplier effects in the 
communities where these facilities were located. These are of 
two types.
    The first type comes from the bankrupt firms that are 
buying less of the inputs for their production, things like 
equipment, office supplies and services, from the other firms 
that serve them. The second is that the families of the 
unemployed and displaced workers are buying fewer goods and 
services.
    These effects can be quantified. In the communities 
involved, there are eight lost jobs for every 10 jobs that were 
lost by the bankrupt firms; that is, there has, to date, been a 
total of 90,000 workers that have been displaced, 50,000 direct 
workers, plus 40,000 from the multiplier effects.
    When we add the costs together of the multiplier effects 
and the direct impacts, the total borne by these workers is 
anywhere from $2.2 billion to $5.2 billion. I will end by 
making three observations of why these are underestimates, and 
potentially vast underestimates.
    The RAND study which has been mentioned here before, using 
a different method that focused on both non-bankrupt and 
bankrupt firms, estimated that lost job opportunities were 
nearly three times larger than those given by the Sebago 
estimates.
    Also, these numbers exclude other costs to society--
retraining costs, the fact that when an individual is 
unemployed they have to pay more for their health insurance, 
bankruptcy costs that have been estimated to be in the hundreds 
of millions of dollars, and then the legal costs which were 
mentioned before, which are, in fact, 60 percent of total 
claims which are now in the tens of billions of dollars and act 
like a tax on our goods and services.
    Chairman Hatch. Just for our information, when you mention 
Sebago, you mean Stiglitz, right?
    Mr. Dunbar. That is correct.
    Chairman Hatch. Okay.
    Mr. Dunbar. And then, third, these costs will definitely 
continue in the future unless something is done to correct the 
current system.
    [The prepared statement of Mr. Dunbar appears as a 
submission for the record.]
    Chairman Hatch. Thank you. I have to say that I can see why 
economics is the dismal science.
    [Laughter.]
    Chairman Hatch. But this has been really interesting to us. 
It will be interesting to see what we can do here.
    Professor Green, we will turn to you.

STATEMENT OF ERIC D. GREEN, PROFESSOR, BOSTON UNIVERSITY SCHOOL 
                 OF LAW, BOSTON, MASSACHUSETTS

    Mr. Green. Thank you, Mr. Chairman, Senator Leahy. I 
appreciate the opportunity to testify before the Committee.
    I would like to address the impact of this Act on the 
rights of the as yet unknown victims of exposure to asbestos. 
These victims are commonly referred to as the ``future 
claimants''. They are people who have been exposed, but they 
have not yet brought any personal injury claim or lawsuit, but 
they might or will in the future. They might not even know that 
they have a claim right now.
    These are the overwhelming majority of the people who are 
going to be affected by this Act, any legislation we do. 
Estimates of their numbers vary. You have heard the range of 
estimates from the actuaries and epidemiologists, but the 
future claimants are two to five times the number of current 
claimants, anywhere from 1.5 million to 2.5 million claims.
    I am currently the court-appointed representative for the 
future claimants in the Fuller-Austin, the Federal-Mogul, and 
the Babcock & Wilcox bankruptcies. And I am a professor of law 
at Boston University, where I have specialized in alternative 
dispute resolution, and specifically the resolution of mass 
torts. I have assisted courts in various capacities in the 
asbestos litigation.
    There are 13 other individuals such as myself who are the 
court-appointed future reps around the country in the 18 
pending bankruptcy cases. I will be representing my own views 
here, but I think my views are shared by most, if not all of 
them.
    The future reps support a national legislative resolution 
to the asbestos litigation crisis that can provide an 
efficient, low-cost and effective national fund to fairly 
compensate present and future asbestos victims. But our support 
is reserved only for legislation that produces a result for 
future asbestos victims as good as or better than what those 
victims will obtain absent legislation.
    We are not looking for the perfect solution. We want to do 
good for the future victims, but we want to avoid doing bad, 
and we know that that is what everybody wants to do. And we 
want to work with the Committee in a constructive way to try to 
achieve a good result, better than the ``no agreement'' 
alternative, in negotiation parlance. But we know we can't 
achieve ideal justice or perfect justice.
    It is critical that we do everything we can in this 
legislation, in the short amount of time we have to work on it, 
to make sure that the future victims are protected from risks 
of error and uncertainty associated with a limited national 
fund.
    None of us are perfect, Mr. Chairman. None of us have a 
perfect vision of what the future will be, and in this 
particular area everybody has been wrong more often than they 
have been right. And if we enact this legislation, my role will 
disappear; the future reps will be history.
    Now, we don't mind that. We support this initiative even 
though we will be made redundant, but it must be noted that 
there will no one left with any statutory authority to protect 
the interests of the future claimants. If a single national 
fund is going to be the sole source of compensation for future 
claimants, it must have access to sufficient resources to pay 
all the future claims that we think we are going to get, and it 
must be designed in a way that will operate to ensure that 
future claimants are paid in full what we want to pay them in a 
timely manner.
    In short, we must make sure the fund doesn't run out of 
money before all these future victims of asbestos are 
identified and paid or that will make them wait for payment for 
long years. That would be very sad and disappointing, I am 
sure, to the Chairman and to everybody involved in this effort. 
It would be an embarrassment and a danger to everybody.
    So our concerns fall into three categories. Will the fund 
have the resources to timely pay future claims? Two, will the 
administrative procedures established under the Act be 
efficient, or will they be unduly burdensome and will they 
create a backlog of claims, with long delays in payment?
    Unfortunately, Senator Hatch, the history through this 
litigation has been reform attempts, reform attempts, reform 
attempts. You are talking about Manville II here, not Manville 
I. Many, many attempts that were well-intentioned have resulted 
in long backlogs and delay, and made the problem worse.
    Our third area of concern is whether the compensation 
criteria are fair and consistent with those currently applied.
    We support your work. We would like to work with you 
constructively to make it good, if not perfect. The Act in its 
present form has some problems and concerns. We would like to 
work with your people and make it better. I will submit a full 
statement for the record at the end of the day.
    Our greatest concern, I think, is what you have referred to 
as the back-end problem. It is a tough problem, Senator Hatch.
    Chairman Hatch. Tell me about it.
    [Laughter.]
    Mr. Green. I mediate cases every single day, and people 
want to put it behind them and they want certainty. We are 
dealing with something that is going to be very difficult to 
supply certainty to people without at the same time taking risk 
and squeezing it and putting it on other people.
    There are ways to do it and we offer some suggestions. One 
way would be to authorize the administrator of the fund to 
impose contingent calls on insurer and defendant participants 
after the fund has had some actual experience with the handling 
and paying of claims.
    I am not prepared to put my money down on any of these 
experts' estimates on the future victims. Let's see how these 
new criteria for Manville II play out for a while. The people 
from Manville II will tell you they are so new that they don't 
really have any idea of what the claims filing is going to be 
under them.
    All the future reps want to make sure of is that the 
proponents of whatever numbers are being proposed in funding 
are prepared, as they used to say in Pennsylvania where I grew 
up, to put their money where their mouth is. If it is not 
enough, if there needs to be a contingent call, there has to be 
some provision for it or there would have to be a Federal 
backstop. I understand you when you say that that is not likely 
to happen, so we have to look elsewhere to deal with that risk.
    Chairman Hatch. Well, the reason I say it is not going to 
happen is because I can't get the votes.
    Mr. Green. I understand.
    Chairman Hatch. And if we don't have the votes, this bill 
isn't going to go anywhere anyway. That doesn't mean that some 
future Congress might not remedy that, but this one is not 
going to.
    Mr. Green. If the worst happened and it turned out that 
these predictions were inaccurate, that they were low, and 
there is not some mechanism that we work out now to deal with 
that contingency, then I am sure that the pressures that would 
build would destroy the very stability and finality that the 
companies and the insurers are looking for.
    Chairman Hatch. We will be interested in your suggestions. 
I have some ideas, as well, and so do others on this Committee. 
We realize we have to face that problem somehow or other, and I 
hope Ms. Biggs is right on this. She did a very good job of 
presenting her testimony, but I just hope she is right on it.
    A hundred and eight billion dollars is a lot of money. If I 
can get all the companies to do what they are supposed to do 
there, that is a very, very substantial achievement by the 
companies.
    Mr. Green. A hundred and eight billion dollars is a lot of 
money by any standard, but when one compares it to the reserves 
and expectations that many of these companies deep in this 
litigation have now, it might not be so large as some have 
claimed.
    Chairman Hatch. Well, that is highly debatable, as you 
know, but I appreciate your testimony. We will look forward to 
your suggestions.
    Mr. Green. Thank you.
    [The prepared statement of Mr. Green appears as a 
submission for the record.]
    Chairman Hatch. Mr. Hartwig, we will turn to you.

STATEMENT OF ROBERT P. HARTWIG, SENIOR VICE PRESIDENT AND CHIEF 
 ECONOMIST, INSURANCE INFORMATION INSTITUTE, NEW YORK, NEW YORK

    Mr. Hartwig. Thank you, Mr. Chairman and Mr. Leahy, for the 
opportunity to testify before the Committee today. My name is 
Robert Hartwig and I am Chief Economist for the Insurance 
Information Institute, a property/casualty insurance trade 
association.
    I have been asked to testify before the Committee regarding 
several of the most important economic considerations 
surrounding the asbestos debate. As an economist, I am 
particularly interested in eliminating the extraordinary 
inefficiencies associated with asbestos litigation, as well as 
the severe economic and financial dislocations associated with 
these inefficiencies, within a framework that is fair and 
equitable for all parties involved.
    The macroeconomic implications associated with the current 
out-of-control asbestos litigation system are not in dispute. 
As we have heard several times today, nearly 70 companies have 
been pushed into bankruptcy by asbestos litigation. 
Approximately 8,400 companies in almost every industry have had 
claims filed against them.
    And as we just heard from Mr. Dunbar, between 52,000 and 
60,000 jobs have already been lost as a result of these 
bankruptcies. To echo again Mr. Dunbar, for shattered 
communities and families, these statistics are only the 
beginning of the story, as thousands of jobs are lost in 
industries dependent on these bankrupt firms.
    If nothing is done to resolve what has already been 
described by the U.S. Supreme Court as the elephantine mass of 
asbestos litigation, scores, if not hundreds of additional 
businesses will be forced into bankruptcy and tens of thousands 
of workers will find themselves unemployed. Retirees and 
workers who have spent decades saving for retirement will 
continue to see their life savings and economic security 
vanish.
    The inefficiencies associated with asbestos litigation stem 
largely from abuse, which has led to a rapid upward spiral in 
tort costs. Legislation now before the Committee will address 
these abusive practices.
    Under the present tort system, hundreds of thousands of 
victims, up to 90 percent of whom are unimpaired by any 
asbestos-related illness, are able to move from State to State, 
setting their sights on the most sympathetic jurisdictions and 
judges.
    As State and Federal policymakers have determined 
previously, there are some public policy crises so profound, or 
certainly so vital, as to require quantum legislative actions. 
These include, for example, the September 11 Victims 
Compensation Fund, funds for black lung disease, vaccine 
compensation, or State workers' compensation funds.
    The trust fund proposal would be more efficient and 
rational than the current system for the following reasons. 
Only individuals who are impaired by asbestos exposure would be 
entitled to compensation under the fund. Transaction costs 
would be radically reduced in the new no-fault framework. 
According to the RAND Institute, up to 50 percent of asbestos 
litigation dollars go to cover transaction costs rather than 
toward direct compensation of the victims.
    Wild jury verdicts would be eliminated, such as the recent 
$250 million verdict handed down in Illinois or recent cases in 
Texas and West Virginia which have allowed plaintiffs to obtain 
millions of dollars without any asbestos-related impairment, 
or, in fact, to win cases that have allowed them to sue purely 
on the basis of fear of developing an asbestos-related illness.
    Major insurers and manufacturers have been working with 
some of the best financial, actuarial and legal resources 
available to construct a privately-funded facility that will 
bring certainty, finality and equity to the country's asbestos 
problem.
    Based on these analyses, insurers believe that $45 billion, 
contributed from both the insurance and policyholder sectors, 
will fund a facility that approaches $100 billion, and that 
that is sufficient to compensate present and future claimants 
based upon need, not when or where they file their suits.
    Insurers are willing to perfect such a mechanism so that 
the annual cash flows run unimpeded and that the solvency risk 
is extinguished. The proposed insurer contribution of $45 
billion is large and constitutes by far the largest pay-out in 
the history of the property/casualty insurance industry, and 
will inflict true financial pain on the two dozen or so 
companies who will pay the bulk of this amount. Forty-five 
billion dollars is approximately 50 percent more than insurers 
hold in reserves for asbestos claims today, and it is equal to 
about one-third of all the capital held by commercial insurance 
companies presently.
    In conclusion, it is important to note that the 
consequences of inaction are grave. As previously mentioned, a 
large swath of corporate America is at risk, jeopardizing the 
jobs of thousands of employees, impoverishing retirees, and 
shattering families and communities. America's clear national 
interest lies in making sure asbestos funds are available for 
those who become sick and in lifting an ominous cloud of 
litigation from our troubled economy.
    Thank you for the opportunity to appear at today's hearing 
and I look forward to answering any questions you might have.
    [The prepared statement of Mr. Hartwig appears as a 
submission for the record.]
    Chairman Hatch. Thank you.
    I have been asking some questions throughout, so I am going 
to turn to Senator Leahy first and recognize him.
    Senator Leahy. Thank you, Mr. Chairman.
    Let me direct this first at Dr. Peterson and then Professor 
Green. When you read over Senator Hatch's legislation, it does 
not have--first, I should emphasize everybody up here wants to 
get asbestos legislation. We also all know that we either all 
hold hands on something eventually or nothing goes through.
    I am worried that this legislation doesn't provide for any 
adjustments for inflation in the award values for asbestos 
victims, even though the trust fund provides for the next 50 
years.
    Should the award values for asbestos-related diseases be 
indexed for inflation to maintain the present value of 
compensation to victims?
    Mr. Peterson. I think absolutely, it should. Any kind of 
fund like this that goes over such a long period of time needs 
an inflation adjustment; I mean real inflation, not some 
speculation of what it might be. It just needs to keep track of 
inflation. Otherwise, someone coming 10, 15 years from now is 
only going to get a reduced portion of what someone gets today. 
It introduces the kind of present and future dichotomy that the 
people like Professor Green have been appointed to deal with.
    I should note that both in my analysis and Ms. Biggs' 
analysis, we have assumed that a fund like this would have 
inflation adjustment. It is surprising that it doesn't, 
although I understand that if you add it, I mean it is another 
cost item, Chairman Hatch. It probably is another $15, $20 
billion, or depending on what your assumption is, $10 billion.
    Senator Leahy. Professor Green, do you feel the same way?
    Mr. Green. Yes, Senator Leahy, and it is tied up with two 
related issues. One perhaps little-noticed provision of the 
current Act is that all the existing trusts will be folded into 
this national trust. Now, that may well be a good idea, but all 
the existing trusts have, thanks to 524(g) of the Bankruptcy 
Code which you enacted in 1994 and the work of the future 
reps--all of those trusts have provisions which guarantee the 
future claimants, the far-out future claimants, that there will 
be money for them there when you get in those years.
    Now, you take those trusts and you fold them in. That 
guarantee, that protection could disappear if the estimates are 
wrong. And if there is no adjustment for inflation, you are 
taking that away as well, and then if there is no interest on 
the payments, if there does turn out to be a backlog because of 
the $5 billion-a-year funding, now you have got a triple whammy 
on the futures, who are currently protected to some extent in 
the current trusts against those things.
    Senator Leahy. You also say that you get an additional $14 
billion to be collected from the additional contributing 
participants. I tend to agree. I wonder how the administrator 
of the fund is going to identify future tort defendants. We 
have already eliminated a tort regime for these claims. Doesn't 
it make it pretty well impossible for the administrator to 
credibly assess such future defendants?
    Mr. Green. It might be possible, Senator Leahy, to offer a 
voluntary--an invitation to voluntarily become a contributing 
member and provide some incentives for these peripheral 
defendants to do that, but providing that if they choose not 
to. The free market, so to speak, of the tort system can still 
operate with regard to those companies who do not come into the 
system and provide some mechanism where, if they think better 
of it, they could join up and pay their share and then get the 
protections of being a member of the national trust.
    Senator Leahy. I kind of worry about just who is in and who 
is out. For example, in S. 1125, all tort claims for asbestos-
related injuries are taken out of the tort system. It also 
immunizes all future defendants.
    Now, suppose if a company 5 years from now decides, well, 
we can cut a corner here, make life easier for us, we will use 
asbestos, we have poisonings of our people, now they are 
immunized. Shouldn't at the very least only the contributors to 
the fund be immunized?
    Mr. Green. That is the point I was making, Senator. Of 
course, if Senator Murray's bill passes, that situation might 
not happen. But there may be companies out there who, for one 
reason or another, haven't been identified. One of the things 
the tort system has done is it has been an efficient, perhaps 
aggressive identifier of responsible companies.
    Senator Leahy. Well, you have all looked at these future 
projections over the years. I have never found that any of the 
future projections that come out being on the high side. They 
are usually on the low side. Some have talked about the 
Manville Trust, simply tripling it, but back in the early 
1980's, the Manville Trust represented about 25 percent of the 
liability of asbestos defendants. It is now 15 percent. So if 
we tripled that, we are still only at 45 percent. That is not--
it might sound like a nice, easy formula, but it doesn't work, 
does it?
    Mr. Green. Dr. Peterson is the world's leading expert on 
that.
    Senator Leahy. Over to you, Dr. Peterson.
    Mr. Peterson. It is hard to use Manville as the standard 
for dollar values because it hasn't participated in any kind of 
litigation now for 20 years. And even when it was, what 
percentage it was depended upon what your interests were in 
asserting that it was. But certainly given the ascendancy, if 
you will, of other defendants now since Manville has been 
unavailable, Manville is a much diminished part of the total 
compensation that people get. And even the full values of their 
claims I don't believe represent anywhere near the quarter that 
it did historically. So the 15 percent seems a correct number 
to me.
    Senator Leahy. Thank you.
    Chairman Hatch. But most claimants file with Manville, and 
then they file a separate suit to begin with.
    Mr. Peterson. Well, Senator, we actually did a calculation 
of that. I have databases for the Manville Trust and a number 
of other companies that are in bankruptcy now. And we looked at 
a period of time when there were kind of current filings, so 
they were all the same era of database. And Manville 
constituted only about two-thirds of all the names we could 
identify.
    There are a substantial number of people who haven't sued 
Manville or made claims against Manville. They may eventually. 
Part of that is affected by the joint and several rules and 
contribution rules in States. But Manville isn't--it is 
sometimes regarded as the universe of all claims, but I think 
that is not correct.
    Chairman Hatch. Mr. Dunbar, you have done an excellent job 
of illustrating the consequential impact of these bankruptcies, 
the loss of jobs and pensions, not to mention economic impact 
on the community and the loss of other jobs that naturally 
arise because of the loss of the jobs with regard to asbestos.
    Have you ever given any thought to the future impact? And 
would it be fair to say that the current system operates 
essentially as a tax on workers?
    Mr. Dunbar. Yes. Let me take the last question first. I 
think what is lost in the discussion is the fact that 60 
percent of the dollars that go into the asbestos problem go to 
professionals such as attorneys, both for plaintiffs and 
defendants. That operates--the entire amount, the $70 billion, 
operates like a tax, and the question that economists often ask 
is: Who eventually pays a tax? And taxes are usually backed 
into what are called the factors of production: land, labor, 
and capital.
    Now, capital can move back and forth globally very quickly, 
so that leaves land and labor, and labor is by far then the 
biggest participant in that tax.
    I mentioned some of the ways that labor is taxed, but 
generally how labor does get taxed and has to pay more than the 
40 percent that it gets back in claims is because of the 
reduced demand and the higher prices that they have to pay on 
goods and services. That money comes eventually from--much of 
that money eventually comes from the workers. So it is 
basically the workers transferring their assets to other 
workers, but also in large to the defense bar and the 
plaintiffs' bar.
    Chairman Hatch. If I am interpreting you correctly, what 
you are saying is that this $108 billion trust fund, settling 
the whole matter would be a very advantageous thing over the 
long run if we can solve that end game problem for workers as 
well as the companies.
    Mr. Dunbar. I think if you lower the transactions costs and 
if you lower bankruptcy costs, it is going to be advantageous 
to workers as a whole, yes.
    Chairman Hatch. You are talking about lowering the 
transaction costs and bankruptcy costs, you are talking about 
the expenses of bringing the suits, the attorney's fees 
primarily, and then bankruptcy costs, which are quite 
extensive.
    Mr. Dunbar. That is correct.
    Chairman Hatch. And this is where all this money has gone 
up the flue, to so speak, rather than for the people who are 
really hurt.
    Mr. Dunbar. That is correct.
    Chairman Hatch. Do you believe that this particular bill 
that we have here would solve that problem?
    Mr. Dunbar. I think this bill is definitely a step in the 
right direction, and I hope that something works out to get it 
through this session.
    Chairman Hatch. What you seem to be saying is that, yes, so 
far we have lost upwards of 70 companies.
    Mr. Dunbar. Yes.
    Chairman Hatch. If a whole lot more go, this compounds even 
worse, doesn't it?
    Mr. Dunbar. That is right. These impacts will continue into 
the future under the current system. There are going to be more 
bankruptcies, more jobs lost, more of our----
    Chairman Hatch. Not just direct jobs but spin-off jobs as 
well that rely on the direct jobs.
    Mr. Dunbar. That is right. The effects are going to be you 
are moving plants offshore, out of the United States entirely, 
and what is more, there will be communities--I think the median 
size community in a facility of a bankrupt company is 27,000 
people.
    Chairman Hatch. Well, I am obviously concerned about and 
very troubled about how asbestos litigation has hurt our 
national economy. If we could pass this bill, there is no 
question in my mind it would benefit the national economy 
greatly. But I am equally concerned, as you have just noted in 
your testimony, that smaller communities are perhaps the 
hardest hit.
    Mr. Dunbar. That is right. Whenever a----
    Chairman Hatch. In terms of lost jobs. Can you give me some 
more details on some of these smaller communities?
    Mr. Dunbar. Yes. The median community in one of the 
facilities for a bankrupt company has a population of 27,000. 
That means that the multiplier effect of these bankruptcies is 
much greater because the ability for somebody who is displaced 
to find another position within a smaller community is much 
more limited. So what you are having then, because of the 
nature of the asbestos producers, is a disparate impact on 
smaller communities throughout the country.
    Mr. Green. Mr. Chairman, may I add something?
    Chairman Hatch. Go ahead.
    Mr. Green. The futures reps who don't have a stake on the 
plaintiffs' or defendants' side are concerned about the 
viability and the health of the companies. But I am afraid you 
might be operating under the misperception that these companies 
who come through the Chapter 11 proceeding and set up asbestos 
trusts disappear and go out of business. They don't. The ones 
that I have been associated with reorganized, and they start--
--
    Chairman Hatch. They become like Manville where they pay 5 
cents on the dollar, and the people get nothing out of it.
    Mr. Green. In the trusts, they are paying the victims 5 
cents on the dollar, but Manville continued to operate. It was 
a successful and thriving building products company. Warren 
Buffet bought the company. Federal-Mogul, Babcock and Wilcox, 
the companies that I am involved in----
    Chairman Hatch. That is because they came up with a trust 
that theoretically helps in this situation.
    Mr. Green. Yes.
    Chairman Hatch. But we are talking about 840 companies 
here, not all of whom are as well situated as Manville. And we 
are talking about at least 15 insurance companies that really 
can't go into bankruptcy. In other words, if they do they are 
gone. And so this is not some little itty-bitty problem here, 
and this bill I think goes a long distance in solving that 
problem.
    Yes, Mr. Dunbar?
    Mr. Dunbar. I think Professor Green is a little 
serendipitous on this. It is true that the firms keep 
operations going, but they lose 25 percent of their employees. 
I mean, that is an impaired company, on average, the bankrupt 
companies.
    Chairman Hatch. Well, and by losing----
    Mr. Dunbar. Moreover, I happen to know about some of these 
companies, and when they go into Chapter 11, it is very 
difficult for them to explain to a potential customer, 
especially a customer in Asia, yes, I am in bankruptcy but 
don't worry, everything is fine. They are losing business as a 
result of going into bankruptcy.
    Chairman Hatch. I think it is much more complex than has 
been stated. But let me just--we have got to get over to a 
vote, Senator Leahy and I. But, Professor Green, you have 
concerns about whether future claimants will receive adequate 
compensation under the FAIR Act, the bill we are talking about.
    Now, in your statement you hold up current asbestos 
bankruptcy trust funds as a way to ensure that all victims will 
be compensated. But according to the testimony we have 
received, these trusts are paying just pennies on a dollar, as 
I had mentioned. And assuming these assertions were correct, it 
is difficult for me to understand how they would be better 
off--how the claimants are better off under a system where 
claimants get nothing, others have no one to sue, so others 
have to wait years before the case is even heard; and for those 
who receive awards, a significant portion must be paid to their 
attorneys.
    Now, is it your position that the current tort system is a 
better way to compensate these victims?
    Mr. Green. Senator, we agree with you in your direction to 
set up a national trust. We think it should be better; it will 
be better. But the devil is in the details.
    Chairman Hatch. That is right, but let me go back here to 
some of my original comments, and that is, the companies 
struggled to come up with $90 billion from the manufacturers 
and the insurance companies. And there is a reinsurance problem 
that is a big problem as well that has to be resolved here.
    I was led to believe that if I could get that fund up 
higher, we would probably please organized labor. So I moved it 
to $108 billion, $18 billion more than they felt was reasonable 
for them--they didn't feel $90 billion was reasonable for them 
to pay, but they felt they could pay.
    The unions came in at $120 billion a while back, but they 
are now at $130 billion, and some are even talking $200 
billion. Well, $200 billion is gone, $130 billion is gone, $120 
billion I think is gone as well. A hundred and eight billion 
bucks is where I think we can maybe get a consensus to put this 
through, which certainly is going to take care, according to 
Ms. Biggs, everybody, according to Mr. Hartwig, everybody who 
deserves compensation.
    Now, maybe they are wrong. So there has to be in the eyes 
of you and Mr. Peterson and a few others, there has to be 
perhaps some sort of an end game where we can see if there is 
some way of having monies there if there aren't funds when we 
get to the end of 25 years.
    Now, that is a problem that Senators Leahy and Nelson and 
Zell Miller and others and I have to solve. But I can tell you, 
anybody who thinks we can get this over $108 billion and get a 
huge vote in the United States Senate, which will hopefully get 
it through the House, I think has rocks in their head. And we 
have got to figure out a way of solving these problems, and I 
could use and I know Senator Leahy could use and others on this 
Committee could use some help in how do we solve that end game 
problem without saddling the Federal Government with it, which 
is a non-started.
    Senator Leahy. Mr. Chairman?
    Chairman Hatch. Yes, Senator Leahy?
    Senator Leahy. I know you have worked very, very hard on 
this, as I have and so many others have. We actually want to 
get a consensus bill. Senator Hatch and I have served in the 
Senate long enough to know that there is a certain time, 
especially coming closer to both the congressional elections 
and a Presidential election where things slow up, except for 
those things that have to go through.
    Chairman Hatch. Or it won't get done.
    Senator Leahy. And so this could be--if this is complex, if 
it is something where everybody is sniping at it, it doesn't go 
through because it is just not going to be the time to do it.
    I think we have a chance of doing something. During the 
break, there was kind of an informal discussion about getting 
the parties back into negotiations, have Senator Hatch's staff, 
my staff there with them. I think that is a good idea. We have 
the basic guiding principles. You have got to be fair to the 
victims, and you have got to give certainty to the 
corporations.
    This is something we are united on. Now we just want to 
find a way to make sure we do that. This is not an area--all 
the statistics you want, this is not an area where there is a 
huge parochial interest in my State for this. But I do see the 
court systems being clogged with this. I see a lot--I mean, 
your hearts have to go out for the victims who are here 
testifying. You have a lot of corporations, a lot of corporate 
leaders whom I respect highly who would like to put a certain 
amount of money out here and say, okay, that is our share, now 
let's get on and invest in new plants or business. And I agree 
with all of them.
    So let's hope we can get together. Let's hope we can work 
together. I am committed to do that. But I want to make sure 
that we are going to have, as I said at the beginning of this 
hearing, both fairness for the victims and certitude for the 
corporations. I think it is possible. We are not quite there. 
We will keep working.
    Chairman Hatch. Well, let me just end with these comments. 
This is a very important thing to our Committee, very important 
to me personally. I have met with hundreds if not thousands of 
people on this issue. I almost lost my health on it. I will be 
honest with you. I have worried about it so much. And, to be 
honest with you, nobody is totally happy, but everybody 
realizes that this may be the only way it is going to be 
resolved. And we have got a week to do it in.
    Now, I just don't see going back to try and get all the 
companies together who basically have said, yes, we will go 
along if we have to, we don't like it but we will do it. But 
our offices are open. Our staffs are open. We have asked you 
for suggestions and ideas. But come next Thursday, there is 
going to be a bill put together, hopefully with even an end 
game. I would like to have the representatives of organized 
labor come and visit with me. I am not against them. In fact, 
if anything, we have moved it towards their direction from 
where it began. And I would like to resolve this.
    But you have got about a week, maybe 2 weeks in which to 
get it resolved. If we don't get it done in the month of June--
I mean, I personally believe we have a very uphill job to get 
it done this month. I thought last month had to be the window. 
But I think we could get it done if we just have a lot of 
cooperation.
    And, look, that is what compromise is all about. We can't 
please everybody on this bill, and we can't please anybody on 
this bill. We have got to please everybody by getting a bill 
that hopefully will work a lot better than the current system, 
which is not working. And that is what we intend to do, and if 
we don't have cooperation--and we have had some companies that, 
yes, they are not paying much in so they are willing to make 
the others pay a lot more. I just don't see that negotiation 
going on and being effectively conducted. And there are others 
who are paying a lot more and don't want to give one dime more, 
you see.
    Then there are some who just plain don't think we should be 
paying anybody if there is the slightest proof that they are 
not sick at all.
    These are all complex issues. We could go on and on here. 
But this hearing has been very helpful to me, and I just want 
to thank everybody who has participated in it. But come next 
Thursday, we are going to have a bill that is either going to 
go or it is not going to go. I can live with either, between 
you and me. I don't think the country can. I don't think the 
employees can. I think they are the ones who are going to get 
hurt the worst. And I frankly think the organized labor will be 
hurt the worst, because who is going to pick up the health care 
for all these people? Who is going to make up for the lost 
pensions? Who is going to make up for the lost jobs and the 
hurts of these small communities because we can't come together 
on a bill that is outrageously expensive to some and I think 
very, very importantly expensive to people like myself.
    So we have got to go vote. With that, we will recess until 
further notice. Please send in your ideas.
    [Whereupon, at 3:10 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]
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