    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

           FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT) ACT OF 2013

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

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON

                               REGULATORY REFORM,

                          COMMERCIAL AND ANTITRUST LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    H.R. 982

                                   __________

                                 MARCH 13, 2013

                                   __________

                               Serial No. 113-39

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

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                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        JERROLD NADLER, New York
    HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT,
    LAMAR SMITH, Texas                       Virginia
    STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
    SPENCER BACHUS, Alabama              ZOE LOFGREN, California
    DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
    J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
    STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
    TRENT FRANKS, Arizona                  Georgia
    LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
    JIM JORDAN, Ohio                     JUDY CHU, California
    TED POE, Texas                       TED DEUTCH, Florida
    JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
    TOM MARINO, Pennsylvania             KAREN BASS, California
    TREY GOWDY, South Carolina           CEDRIC RICHMOND, Louisiana
    MARK AMODEI, Nevada                  SUZAN DelBENE, Washington
    RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
    BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
    GEORGE HOLDING, North Carolina
    DOUG COLLINS, Georgia
    RON DeSANTIS, FLORIDA
    KEITH ROTHFUS, Pennsylvania

               Shelley Husband, Chief of Staff & General Counsel
            Perry Apelbaum, Minority Staff Director & Chief Counsel
                                     ------

        Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                       SPENCER BACHUS, Alabama, Chairman

                     BLAKE FARENTHOLD, Texas, Vice-Chairman

    DARRELL E. ISSA, California          STEVE COHEN, Tennessee
    TOM MARINO, Pennsylvania             HENRY C. ``HANK'' JOHNSON, Jr.,
    GEORGE HOLDING, North Carolina         Georgia
    DOUG COLLINS, Georgia                SUZAN DelBENE, Washington
    KEITH ROTHFUS, Pennsylvania          JOE GARCIA, Florida
                                         HAKEEM JEFFRIES, New York

                          Daniel Flores, Chief Counsel

                          James Park, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 MARCH 13, 2013

                                                                       Page

                                    THE BILL

    H.R. 982, the ``Furthering Asbestos Claim Transparency (FACT) Act
      of 2013''......................................................     4

                               OPENING STATEMENTS

    The Honorable Spencer Bachus, a Representative in Congress from
      the State of Alabama, and Chairman, Subcommittee on Regulatory
      Reform, Commercial and Antitrust Law...........................     1
    The Honorable Blake Farenthold, a Representative in Congress from
      the State of Texas, and Member, Subcommittee on Regulatory
      Reform, Commercial and Antitrust Law...........................    17
    The Honorable Steve Cohen, a Representative in Congress from the
      State of Tennessee, and Ranking Member, Subcommittee on
      Regulatory Reform, Commercial and Antitrust Law................    99

                                   WITNESSES

    S. Todd Brown, SUNY Buffalo Law School
      Oral Testimony.................................................    18
      Prepared Statement.............................................    21
    The Honorable Peggy L. Ableman, McCarter & English, LLP
      Oral Testimony.................................................    43
      Prepared Statement.............................................    45
    Elihu Inselbuch, Member, Caplin & Drysdale, Chartered
      Oral Testimony.................................................    53
      Prepared Statement.............................................    56
    Marc Scarcella, Bates White, LLC
      Oral Testimony.................................................    72
      Prepared Statement.............................................    75

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Material submitted by the Honorable Suzan DelBene, a
      Representative in Congress from the State of Washington, and
      Member, Subcommittee on Regulatory Reform, Commercial and
      Antitrust Law
        Prepared Statement of the Honorable Steve Cohen, a
          Representative in Congress from the State of Tennessee, and
          Ranking Member, Subcommittee on Regulatory Reform,
          Commercial and Antitrust Law...............................     7
        Opposition Letters...........................................     9
    Material submitted by the Honorable Steve Cohen, a Representative
      in Congress from the State of Tennessee, and Ranking Member,
      Subcommittee on Regulatory Reform, Commercial and Antitrust Law
        Letters from the trust of future claimants' representatives..   108
        Prepared Statement of the Honorable John Conyers, Jr., a
          Representative in Congress from the State of Michigan, and
          Ranking Member, Committee on the Judiciary.................   122
        Opposition Letters...........................................   129
    Material submitted by the Honorable Blake Farenthold, a
      Representative in Congress from the State of Texas, and Member,
      Subcommittee on Regulatory Reform, Commercial and Antitrust Law
        Prepared Statement of the Honorable Bob Goodlatte, a
          Representative in Congress from the State of Virginia, and
          Chairman, Committee on the Judiciary.......................   145

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Prepared Statement of the Honorable Blake Farenthold, a
      Representative in Congress from the State of Texas, and Member,
      Subcommittee on Regulatory Reform, Commercial and Antitrust Law   148
    Prepared Statement of the Honorable Hakeem S. Jeffries, a
      Representative in Congress from the State of New York, and
      Member, Subcommittee on Regulatory Reform, Commercial and
      Antitrust Law..................................................   150
    Response to Questions for the Record from S. Todd Brown, SUNY
      Buffalo Law School.............................................   151
    Response to Questions for the Record from the Honorable Peggy L.
      Ableman, McCarter & English, LLP...............................   156
    Response to Questions for the Record from Elihu Inselbuch,
      Member, Caplin & Drysdale, Chartered...........................   162
    Response to Questions for the Record from Marc Scarcella, Bates
      White, LLC.....................................................   184

           FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT) ACT OF 2013

                                  ----------

                           WEDNESDAY, MARCH 13, 2013

                           House of Representatives,

                      Subcommittee on Regulatory Reform,
                          Commercial and Antitrust Law

                          Committee on the Judiciary,

                                Washington, DC.

        The Subcommittee met, pursuant to call, at 3:37 p.m., in
    room 2141, Rayburn Office Building, the Honorable Spencer
    Bachus, (Chairman of the Subcommittee) presiding.
        Present: Representatives Bachus, Farenthold, Marino,
    Holding, Collins, Rothfus, Cohen, Johnson, DelBene, and Garcia.
        Staff present: (Majority) John Hilton, Counsel; Ashley
    Lewis, Subcommittee Clerk; (Minority) James Park, Minority
    Counsel; Susan Jensen-Lachmann, Counsel.
        Mr. Bachus. The Subcommittee on Regulatory Reform,
    Commercial and Antitrust Law hearing will come to order.
        Without objection, the Chair is authorized to declare
    recesses of the Committee at any time, and that may not be
    necessary now, hopefully.
        I apologize for the delay in the hearing, but the President
    visited the Republican conference, and that is always good when
    the two sides are talking.
        We welcome all our witnesses today.
        Let me begin by thanking Vice Blake Chairman Farenthold of
    Texas and Congressman Jim Matheson of Utah for introducing this
    important bipartisan legislation, the Furthering Asbestos Claim
    Transparency Act of 2013, or the FACT Act for short.
        Let me say this. We are here for one purpose and one
    purpose only, and that is to protect those victims of asbestos
    exposure. That is our only motivation. We are not here to
    protect companies, we are not here to protect the defense bar,
    plaintiffs' bar. We are here for the victims, and we are here
    to protect their rights and to ensure that justice is served.
    We are not here to protect those who are not victims.
        Having said that, the Subcommittee on Courts, Commercial
    and Administrative Law held a hearing on this bill's
    predecessor, H.R. 4369, in the last Congress, and the Committee
    reported that bill favorably to the full House. It is important
    to have a workable system that provides appropriate
    compensation to individuals whose health has been harmed by
    asbestos exposure.
        Congress became directly involved in this matter during the
    early 1990's in the midst of what the Supreme Court described
    as an asbestos litigation crisis. As a result of this crisis,
    many companies facing potentially massive liability claims
    began to file for bankruptcy. This was not a good situation for
    asbestos victims seeking assistance, or for companies and their
    employees. No benefits can be paid by a company that has gone
    broke or shut down. The same thing is true of a trust that has
    been depleted.
        In 1994, Congress amended the bankruptcy code to allow
    companies in Chapter 11 to create and fund asbestos trusts
    which would be responsible for asbestos victims' claims after
    the companies were reorganized. The trust system was meant to
    ensure that current and future asbestos victims would be
    compensated, while allowing companies to continue operations.
        By 2011, 60 trusts have been founded, with over $36 billion
    in assets earmarked for asbestos victims. At this point, half
    of that money has been paid out in claims.
        The enemy of any just compensation system is fraud and
    abuse. Fraud and abuse takes money away from real victims who
    desperately need help. This is an especially important issue
    with regard to the asbestos trust funds, which still face huge
    future claims and where every penny counts.
        The Wall Street Journal reported on Monday that nearly half
    of all trusts have reduced payments to new victims at least
    once since 2011 partially in an effort to preserve assets for
    future victims. That same Wall Street Journal article raised
    serious questions about waste and fraud in the current system.
    It disclosed that after virtually no examination, a $26,500
    claim was awarded to a person who did not exist. The article
    also said that according to a review of claims made to the
    Manville trust, more than 2,000--I think the number is closer
    to 2,700--applicants could not have been older than 12 years of
    age at the time they said they were exposed to asbestos in an
    industrial job.
        One attorney quoted in the report suggested that preventing
    fraud is too expensive and would leave less money to pay
    claims. Let me say that I could not disagree with that more
    strongly. My experience is that if you do not stop fraud, it
    only gets more egregious and more costly.
        The trust system is an efficient way to handle asbestos.
    Companies who have been the biggest defendants in these cases
    have been able to fund these trusts and remain in business. It
    is very disturbing that we are increasingly seeing attorneys
    aggressively pursue claims outside this process, effectively
    establishing a system of double compensation.
        Many lawsuits have been filed against small businesses
    whose connections to asbestos products in question may be
    tenuous at best and who are least able to afford protracted
    litigation. That has serious ramifications for our overall
    economy.
        The trust funds were created with a process designed to
    prevent this kind of costly and unproductive legal free-for-
    all. The best way to combat fraud and abuse is to increase
    transparency and accountability. The FACT Act sets out several
    commonsense steps to ensure that consistent, verifiable claims
    are made in the trust system and civil litigation. Through
    better information sharing, it will improve the evaluation of
    claims and help ensure that funds from the trust are spent on
    the deserving. This can be done while fully respecting privacy,
    which we all know is very important when personal health is
    involved.
        America is a caring country. We help deserving people when
    they are in need. In the case of asbestos exposure, a system
    has been specifically put in place to compensate individuals
    whose health has been harmed. Fraud, abuse, and inconsistent
    claims that drain trusts prevent money from going where it
    properly should go, to those with true and demonstrable health
    needs.
        In conclusion, thank you all for coming today, and thanks
    especially to the witnesses for sharing their time and
    expertise. This promises to be an informative and illuminating
    hearing.
        [The bill, H.R. 982, follows:]

                                   __________
        Mr. Bachus. At this time, I recognize the gentlelady from
    Oregon? From Washington. I keep saying Oregon.
        Ms. DelBene. We are close.
        Mr. Bachus. That is right.
        Ms. DelBene. Thank you, Mr. Chairman. I would like to ask
    unanimous consent for the Ranking Member's opening statement,
    Mr. Cohen's opening statement, to be submitted to the record.
        Mr. Bachus. Absolutely.
        [The prepared statement of Mr. Cohen follows:]
     Prepared Statement of the Honorable Steve Cohen, a Representative in
    Congress from the State of Tennessee, and Ranking Member, Subcommittee
               on Regulatory Reform, Commercial and Antitrust Law
        The debate over the necessity to fully compensate victims of
    asbestos exposure is very personal to me. One of my best friends was
    Warren Zevon, the great singer and songwriter. Warren died of
    mesothelioma--a cancer of the chest and abdominal lining that often
    results from asbestos exposure--almost a decade ago. So, I come at
    today's discussion of H.R. 982, the ``Furthering Asbestos Claim
    Transparency Act of 2013'' or ``FACT Act,'' with a bit of a prejudice--
    one on the side of asbestos victims.
        At first blush, the FACT Act seems reasonable enough. Yet as I
    learned about the FACT Act during a hearing on and markup of a
    substantially identical bill last Congress, the more readily I came to
    conclude that this legislation may be a solution in search of a
    problem.
        More problematically, it could end up hurting asbestos victims by
    denying them full compensation for the harms that they have suffered as
    a result of the product that many asbestos manufacturers peddled for
    decades knowing that they were dangerous.
        H.R. 982 would impose a number of new reporting and other
    information-sharing requirements on trusts that have been established
    under section 524(g) of the Bankruptcy Code. These trusts are designed
    to compensate current and future victims of asbestos exposure by
    ensuring that those asbestos manufacturers and other related defendants
    that have filed for bankruptcy cannot escape their responsibility for
    the harm they have caused.
        The bill would require 524(g) trusts to file quarterly reports with
    the Bankruptcy Court and the United States Trustee describing each
    demand for payment from a claimant, including the claimant's name and
    exposure history, and the basis for any payment made. The Court must
    make this report part of its public docket.
        The bill also would require trusts to provide information regarding
    payments and demands for payments to any party in an asbestos-exposure
    related civil action upon that party's written request.
        Under section 524(g), asbestos defendants can re-organize under
    bankruptcy protection and shift their liability for asbestos exposure
    to these trusts in exchange for agreeing to fund the trusts.
        In turn, these trusts pay claimants who seek compensation for harm
    caused by the bankrupt defendant's actions. Importantly, the trusts owe
    a fiduciary duty to all beneficiaries to ensure that only proper claims
    are paid in light of the universe of current and anticipated future
    claimants.
        While not perfect, the trusts have worked reasonably well.
        Yet H.R. 982's proponents assert that its additional reporting and
    information-sharing requirements for 524(g) trusts are needed to
    prevent fraud by asbestos victims and to eliminate the risk that such
    victims will be over-compensated. Proponents claim that asbestos
    victims engage in fraud by ``double dipping''--that is, presenting
    claims to a 524(g) trust and, simultaneously, seeking relief against
    another asbestos defendant by filing a state-court civil action.
        In weighing this assertion, the most objective source that I could
    find was a study of 524(g) trusts conducted by the Government
    Accountability Office at former Judiciary Committee Chairman Lamar
    Smith's request.
        The GAO was not able to find any instances of overt fraud.
    Moreover, GAO found that trusts take appropriate steps to ensure that
    fraudulent claims are not paid.
        But even accepting that fraud by asbestos victims is a real problem
    with respect to asbestos trusts, I fear that H.R. 982's additional
    requirements on trusts will raise their administrative costs
    significantly.
        Even with its provision that a party requesting information from a
    trust could be required to pay ``any reasonable cost'' of the trust for
    complying with an information request, the cost burden on a trust may
    not be relieved.
        For instance, the bill does not define what a ``reasonable'' cost
    is, nor does it specify who would make such determination, thus opening
    the door to litigation over these issues and less-than-full payment of
    costs.
        Money used to pay these costs ultimately means less money to
    compensate asbestos victims.
        In light of this risk, I would like to know from H.R. 982's
    proponents why defendants who are concerned about potential fraud by
    asbestos victims could not simply seek trust payment information using
    procedures allowed under existing discovery rules.
        Defendants can already obtain the information they want, without
    undermining compensation for legitimate claims.
        Finally, the reporting requirement in H.R. 982 raises privacy
    concerns.
        While I recognize that the bill specifically prohibits trusts from
    making public any medical records or full Social Security numbers, the
    bill still would require trusts to make public a claimant's name and
    exposure history.
        Once out in public, such information can be used for any purpose.
    Potential employers, insurance companies, lenders, and even those who
    may seek to harm an asbestos victim in some way can have access to this
    information without the victim's permission or knowledge.
        For these reasons, I remain opposed to the FACT Act and I urge my
    colleagues to oppose this misguided bill.
                                   __________

        Ms. DelBene. I would also like to acknowledge the presence
    of three asbestos victims in the audience today: Susan Vento,
    widow of the late Congressman Bruce Vento; Judy Vann Ness; and
    Genevieve Bosilevac, and ask that their letters to the
    Committee in opposition to H.R. 982 be entered into the record.
        Mr. Bachus. Thank you. So be it.
        We extend our welcome to you and, Ms. Vento, to Bruce.
        Ms. DelBene. And I would also like to ask that the letters
    of two additional asbestos victims, Bill Cawlfield and Julie
    Gundlach, in opposition to H.R. 982 also be entered into the
    record.
        Mr. Bachus. Absolutely.
        [The information referred to follows:]

                                   __________

                                   __________

                                   __________

                                   __________

                                   __________
        Ms. DelBene. Thank you, Mr. Chair.
        Mr. Bachus. Thank you.
        Is there anyone on the Democratic side who wishes to be
    heard?
        If not, we will go to Mr. Farenthold for an opening
    statement, 5 minutes.
        Mr. Farenthold. Thank you very much, Mr. Chairman. My
    service on this Committee and on the Committee on Government
    Oversight and Reform are dedicated to eliminating waste, fraud
    and abuse in our government, and to that end I have introduced
    H.R. 982, the ``Furthering Asbestos Claims Transparency Act of
    2013.'' The victims of asbestos-related diseases deserve full
    compensation for their injuries, and I am extremely sympathetic
    to these claims.
        However, the trusts set up to provide justice are shrouded
    in secrecy and are frequently abused by claimants and, more
    accurately, their lawyers wasting money intended for
    mesothelioma and other asbestos-related injury sufferers.
    Unfortunately, these trusts are not limitless, bottomless pits
    of money.
        The problem with fraud in the asbestos compensation system
    has been well documented over the past several decades. Often,
    fraud is committed when plaintiffs and their attorneys rely on
    one set of facts in state court and another set of facts in the
    bankruptcy court. This type of abuse can take place when the
    system provides no transparency with payouts.
        Therefore, this legislation would amend section 524(g) of
    the bankruptcy code to require asbestos trusts to file
    quarterly reports with the bankruptcy court detailing the
    claimant's name and the amount paid to each claimant, the basis
    for each payment. We specifically narrowed this bill to protect
    the privacy of plaintiffs to the greatest extent possible.
        This legislation is fair to all parties and has bipartisan
    support. I co-introduced it with Mr. Matheson of Utah.
        It is absolutely imperative that we make sure that those
    who truly have claims are taken care of, but we have also got
    to make sure that we stop the waste, fraud and abuse, and make
    sure that there is money there to pay all the claims. Congress
    must act to cut back abuse of this system.
        Thank you very much, and I will yield back.
        Mr. Bachus. Thank you.
        Are there other Members wishing to make an opening
    statement?
        Thank you. At this time, we will welcome our witnesses.
        Professor Steven Todd Brown teaches at the SUNY Buffalo Law
    School--That is the State University of New York, that is what
    SUNY stands for--where he also serves as director of the
    school's Center for the Study of Business Transactions.
    Professor Brown's research and teaching draws on his experience
    managing a small business and in private practice. His recent
    academic work focuses on the constitutional limits and
    institutional dynamics of aggregate litigation, including
    bankruptcy and procedural devices for consolidating mass tort
    cases.
        Professor Brown received his J.D. from the Columbia School
    of Law and his LLM from the Beasley School of Law at Temple
    University. He earned his undergraduate degree from Loyola
    University in New Orleans.
        Do you know the Pope? Have you been following that?
        Mr. Brown. I have.
        Mr. Bachus. You know we have a new Pope?
        Mr. Brown. I just became aware of that.
        Mr. Bachus. Yes. But we thank you for your testimony,
    professor.
        Judge Ableman is special counsel at McCarter and English
    LLP in Wilmington, Delaware. Before joining McCarter and
    English, Judge Ableman spent over 29 years as a state trial
    judge, first in the Delaware Family Court and then on the
    Delaware Superior Court, where she presided for 2 years over
    the asbestos litigation docket. She has authored thousands of
    judicial opinions that have helped shape Delaware law for the
    past three decades.
        Judge Ableman received her B.A. with distinction from
    Simmons College in Boston and her J.D. from the Emory
    University School of Law, where she was Notes and Comments
    Editor of the Emory Law Journal.
        Thank you, Your Honor, for your testimony today.
        Our third witness is Mr. Elihu Inselbuch. How do you say
    that? Okay. He practices law at Caplin and Drysdale's New York
    City office. His practice focuses on complex litigation,
    including extensive asbestos creditors' rights litigation and
    commercial and securities fraud litigation.
        He is past president of the Princeton University Alumni
    Association, where he received his A.B., holds an LLP from
    Columbia University Law School and an LLM from New York
    University School of Law.
        I thank you for your testimony.
        Our final witness is Mr. Marc Scarcella. Mr. Scarcella is a
    manager at Bates White, an economic consulting firm in
    Washington, D.C. He specializes in quantitative methods and
    their application in dispute resolution, settlement
    negotiations, and litigation management and strategy. Prior to
    joining Bates White, Mr. Scarcella was managing director at an
    analysis and research planning corporation, where he provided
    economic analysis and consultative services in 524(g) Chapter
    11 bankruptcy reorganization in the areas of asbestos liability
    estimation and insurance allocation.
        He has an M.A. in financial economics from American
    University and a B.A. degree in economics and public affairs,
    also from American University.
        Thank you for your testimony today.
        Professor Brown, we will start with your testimony, but let
    me say this. Each of the witness' written statements will be
    entered into the record in their entirety. I ask that each
    witness summarize his or her testimony in approximately 5
    minutes. I am not going to read this about the yellow light and
    the green light and the yellow light. We will turn them on, but
    I don't want you to stop in mid-sentence.

          TESTIMONY OF S. TODD BROWN, SUNY BUFFALO LAW SCHOOL

        Mr. Brown. Thank you, Chairman Bachus and Members of the
    Committee. I appreciate the opportunity to discuss the FACT Act
    with you today. I will begin by discussing trust performance
    data and then turn to a discussion of the fraud question.
        Bankruptcy trusts are established as limited funds for
    paying all current and future asbestos-related claims of the
    debtor. The idea here is that it is equitable to bind absent
    future claimants, notwithstanding the fact that they are not
    present and cannot ensure the loyalty of those who represent
    them in the process, as long as their claims will be valued and
    paid in substantially the same manner as similar current
    claimants who can speak for themselves.
        Since it is a limited fund, if a trust overpays initial
    claims in number, in value, or both, the amount left for future
    victims is necessarily lower. When that happens, trusts reduce
    payment percentages. The percentage of a claim's settled value
    is actually paid for all claims going forward. A low payment
    percentage may reflect that a trust is and always was
    underfunded. But the sheer volume of reductions since 2010,
    approximately half of all active trusts, tells us something
    more.
        First, malignancy and other claims continue to exceed even
    relatively recent projections. Second, past claimants have been
    overcompensated relative to current and future claimants.
        As other defendants leave the tort system and establish
    their own trusts, which appear likely to follow the same
    pattern, should we really expect future victims to fare better
    than plaintiffs who are already grossly underfunded and
    undercompensated?
        Why are there so many more claims than are projected?
        The further criteria get away from testing the intrinsic
    merit of claims, the more volumes are based on client
    recruiting decisions, which are exceptionally difficult to
    predict. This becomes more difficult as practices target claim
    standards.
        This brings me to the question of fraud. If we are talking
    about fraud, we need to understand what exactly we are talking
    about. Are we talking about civil or criminal fraud in the
    legal sense? If so, we are talking about something that is very
    narrow and very difficult to prove, even in the best of
    circumstances. Legal fraud is hard to distinguish from honest
    mistakes. That makes it hard to prosecute.
        I think what we are focusing on when people say fraud in
    this area is not legal fraud. They are talking about the
    popular use of the term, the idea that the claims appear so
    specious that they contradict themselves internally or they
    contradict something that has been said elsewhere that many
    would look at them and wonder how did that claim even get paid.
    It is a normative assessment of the likely merit of the claim
    and goes to the policy question more than whether some lawyer
    or professional has committed a crime.
        Notwithstanding the limited empirical evidence, a survey of
    trust terms indicates that they will accept a broader range of
    claims than in the tort system, and also probably accept claims
    that a lot of us would look at and scratch our heads over.
        So even if we cannot demonstrate legal fraud in a case, we
    still may reasonably infer that those who make such mistakes
    frequently are not merely making mistakes, but they have set up
    their procedures so that these happy accidents occur with some
    regularity. In the alternative, we might infer that some are
    just careless, with the cost of this carelessness being shifted
    to the trust and ultimately to future victims.
        Suspicious patterns are often the first clue that something
    like this is happening. Such patterns led the judge in the
    silica MDL to authorize additional discovery, discovery that
    unveiled the depths of dubious claim development patterns and
    practices in that litigation. Many of these practices were
    borrowed from asbestos litigation. Many of the professionals
    involved were also very active in asbestos litigation.
        Although trusts at the time had far more data at their
    disposal, they either did not discover or were effectively
    prevented from investigating these practices to a sufficient
    level to fully understand and counter them. Prior to the close
    of the silica MDL, witnesses testifying on the FAIR Act and
    discussing the act elsewhere told us that there was nothing to
    see there, claims of fraud were anecdotal, that everything was
    just fine.
        The problem from my perspective really doesn't go to
    protecting defendants. It goes to protecting the integrity of
    the bankruptcy process that established the trust. It goes to
    protecting the integrity of the state courts that manage
    asbestos tort litigation and ask for this information. And it
    goes to whether the compensation frameworks that will be
    available should my loved ones or yours need to resort to them
    5, 10, or 20 years from now, if they do, heaven forbid, that
    they will be adequate.
        I believe that greater transparency can lead to a better
    system. I respect that others may disagree, but I welcome the
    fact that we are having this dialogue, and I thank you for
    inviting me.
        [The prepared statement of Mr. Brown follows:]

                                   __________
        Mr. Bachus. Thank you, Mr. Brown.
        Judge Ableman.

        TESTIMONY OF THE HONORABLE PEGGY L. ABLEMAN, McCARTER &
                             ENGLISH, LLP;

        Judge Ableman. Thank you, Chairman Bachus and Members of
    the Subcommittee, for the opportunity to address you this
    afternoon. Prior to my retirement last December, I served for
    more than 29 years as a trial judge in the Delaware state court
    system. During the last few years of my term on the Delaware
    Superior Court, I was solely responsible for the asbestos
    litigation docket, which comprised approximately 500 to 600
    pending cases filed by plaintiffs from all over the United
    States, and even by foreign nationals.
        My experience in one particular case gave me a unique
    insight into the inherent unfairness associated with a system
    that permits plaintiffs' filings of bankruptcy trust claims to
    remain secret and undisclosed while a plaintiff is also
    actively engaged in tort litigation. What transpired in that
    case is illustrative of the problems that occur when
    transparency is compromised.
        In April 2009, June Montgomery was diagnosed with
    mesothelioma. Her son, Brian Montgomery, retained the law
    offices of Brent Coon. Brian expressly understood that the
    Brent Coon firm would assist his parents in finding counsel in
    Florida, where they lived. Ultimately, they hired Florida
    attorneys. In November of that year, a lawsuit was filed by
    Delaware counsel on behalf of Florida counsel in the Superior
    Court in Delaware on behalf of June and Arthur Montgomery
    against 22 defendants alleging that June's mesothelioma was
    caused by exposure to asbestos from products or conduct of the
    named defendants.
        Asbestos-related suits in Delaware are governed by a
    standing order which sets forth mandatory disclosure
    obligations related to bankruptcy trust claims. Despite this
    order and specific interrogatories directed to plaintiffs
    requesting this information, from the outset of this case and
    up until the week before trial, nowhere did plaintiffs identify
    exposure through any of the 20 entities to whom bankruptcy
    claims were submitted. Instead, plaintiffs claimed that Mrs.
    Montgomery was exposed to asbestos solely through the
    laundering of her husband's work clothing throughout his
    career, as opposed to any work she performed herself with or
    around products outside of the home.
        The impression garnered from the complaint, the answers to
    written discovery, and Mr. Montgomery's sworn testimony in his
    deposition was that the bulk of his exposure occurred when he
    worked as an electrician during a short period at the
    Everglades power plant. Under Florida law, jurors are permitted
    to allocate fault to parties not present at trial, including
    bankrupt entities.
        The defendant in my case filed a motion in advance of trial
    requesting that the court order disclosure of all pretrial
    settlements, including monies received from bankruptcy trusts.
    Counsel for plaintiff emphatically reported to me at the
    pretrial conference that no bankruptcy trust submissions had
    been made and no monies had been received. Two days before a 2-
    week trial in this case was scheduled to begin, plaintiff's
    counsel advised that his client had received two bankruptcy
    settlements of which he was previously unaware.
        This disclosure was directly inconsistent with his
    unequivocal representations to the court and to opposing
    counsel at the pretrial conference.
        By late afternoon the following day, the day before trial
    was to begin, counsel for the defendant learned that a total of
    20 bankruptcy trust claims had been submitted. Although the
    defendant had been led to believe that Mrs. Montgomery's
    exposure was solely the result of take-home fibers on her
    husband's clothing, at this late point in the litigation it
    became obvious that one or more of plaintiff's attorneys had
    been claiming exposure through Mrs. Montgomery's own
    employment. That is, she worked with and around these products
    herself.
        In essence, the representations to the bankruptcy trust
    painted a much broader picture of exposure to asbestos than
    either plaintiff or plaintiff's attorneys had acknowledged
    during the entire course of the litigation in Delaware.
        On the first day of the scheduled trial, with the jury
    already selected and waiting to serve, the court learned of
    plaintiff's failure to disclose the trust submissions. This
    circumstance dramatically affected the entire litigation,
    including a lengthy discovery process and trial preparation
    which had been conducted without knowledge of the true facts,
    not to mention the waste of the court's time and resources.
        In my opinion, transparency of the bankruptcy filings goes
    to the very core of what this litigation is about. The crux of
    the Montgomery case, as in virtually all asbestos litigation,
    was a determination of responsibility for Mrs. Montgomery's
    exposure. Where 20 manufacturers of asbestos and asbestos-
    containing products are removed from the equation, a true
    determination of fault cannot occur.
        In the final analysis, there can be no real justice or
    fairness if the law imposes any obstacles to ascertaining and
    determining the complete truth. From my perspective as a judge,
    it is not simply the sheer waste of resources that occurs when
    one conducts discovery or trials without knowledge of all the
    facts. What is most significant is the fact that the very
    foundation and integrity of the judicial process is compromised
    by the withholding of information that is critical to the
    ultimate goal of all litigation, a search for and discovery of
    the truth.
        [The prepared statement of Judge Ableman follows:]

                                   __________

        Mr. Bachus. Thank you.
        Mr. Inselbuch.

                 TESTIMONY OF ELIHU INSELBUCH, MEMBER,
                      CAPLIN & DRYSDALE, CHARTERED

        Mr. Inselbuch. Thank you, Mr. Chairman. I would like to
    thank the Subcommittee for the opportunity to testify here
    today. My name is Elihu Inselbuch. I'm a member of the firm of
    Caplin and Drysdale. I was first retained by the Asbestos
    Creditors Committee in the Manville reorganization in 1985, and
    since then I have been active in the asbestos bankruptcies and
    in the formation of these trusts and in the operation of these
    trusts. I have some experience with how they do operate.
        Mr. Scarcella says that if this bill is enacted it will
    cost nothing, relatively speaking, and be quite easy for the
    trusts to comply with its provisions. I was in Wilmington
    yesterday and I met with the senior managers of the Delaware
    claims processing facility, which actually does the trust
    processing for five or six of the largest bankruptcy trusts,
    asbestos trusts. And it ain't as simple as Mr. Scarcella would
    suggest.
        This bill would require that each claim be looked at and a
    narrative be prepared describing who the claimant is, his
    exposure history, and the basis for payment. But even if Mr.
    Scarcella is correct and it took no more than 5 minutes for the
    trusts to do this work, and a reviewer could do 80 a day, that
    is about equal to the number of claims that these trusts get
    every day. So you would need one full-time employee working all
    the time just to respond to Part A of this provision.
        Now, the Chairman has told us that every penny counts, and
    I couldn't agree more. If it took 10 minutes, you would need
    two employees to do that. Section B of the proposed bill would
    require that in response to a request, a trust would have to
    provide the same information for all the claims basically it
    has on file.
        Well, take any one of the current trusts. They have 400,000
    claims on file. If someone could do 80 a day, that would
    require 5,000 person days. If there were 250 workdays in a
    year, that would take 20 years for one person to do. If you
    wanted to do it in a year to comply with the statute, you would
    have to hire 20 people. So this is not cost free, even on Mr.
    Scarcella's assumption that it will take only minutes to get it
    done.
        And what will this do with the trust? It will create delay.
    At the very least, it will create delay. What does delay
    matter? Most of us think about delay in terms of interest
    rates, and interest rates are pretty low today. But delay
    really matters to someone who is sick and dying from
    mesothelioma.
        We ran a test some years ago. We made a proposal that we
    would pay a claimant $50 now and $50 3 years from now, or
    rather $70 now. And overwhelmingly, the sick and dying people
    who would like to organize their lives would take the $70. So
    every day of delay is a weapon that the defendants have to
    drive the settlement prices down.
        Why do we have this legislation? What is transparency
    seeking to find? In any court that I know of in the United
    States, all the defendant has to do is serve a subpoena on the
    plaintiff, and the plaintiff is responsible to produce all the
    material that the plaintiff filed with the trusts in response
    to that subpoena.
        Are there lawyers who may misbehave? I'm sure there are.
    I'm sure there are some. In 50 years of practice, I haven't
    seen many, but I am sure there are some that misbehave either
    as plaintiffs or defendants.
        But Judge Ableman will catch them. That is the proof that
    when abuse occurs, the court system, the state court system
    around the country is perfectly able to find the abuse.
        Fraud? Everybody talks about fraud and abuse. This
    Committee, this Committee asked the GAO to investigate whether
    or not there was fraud in the trust system, and the GAO did a
    long study, and they did an investigation, and they filed a
    report, and they said they couldn't find any fraud. The Wall
    Street Journal found discrepancies in something less than four-
    tenths of a percent of the filings at the Manville trust over a
    20- or 30-year period. This is not proof of fraud.
        Transparency. It strikes me as outrageous that this
    industry wants to talk about transparency. This is an industry
    that not only hid the facts of asbestos exposure but positively
    concealed it for 40 years, so that we now have hundreds of
    thousands of people dying from exposure to asbestos, and they
    want to talk about trust transparency. Who is the sheep? Who is
    the wolf?
        Thank you.
        [The prepared statement of Mr. Inselbuch follows:]

                                   __________

        Mr. Bachus. Thank you.
        Mr. Scarcella.

             TESTIMONY OF MARC SCARCELLA, BATES WHITE, LLC

        Mr. Scarcella. Chairman Bachus, Members of the
    Subcommittee, thank you for holding today's hearing on the FACT
    Act and allowing me the opportunity to provide testimony in
    support of this bipartisan, commonsense legislation.
        I also want to thank Mr. Inselbuch for prompting me to
    change my oral testimony at the last moment. But I think it's
    important to address some of the concerns Mr. Inselbuch raised.
        When I spoke in May of 2012 on the FACT Act, I intended
    that the quarterly reporting requirements of the FACT Act to
    provide data disclosing who has filed a claim and under what
    allegations of exposure they are seeking payment, and I made
    comments of how little time and effort it would take to produce
    this information, I believe Mr. Inselbuch has misunderstood me.
    I did not mean to intend that it would take minutes to produce
    per claim. I meant it would take minutes to produce for all
    claims.
        There is a simple fact that people need to understand about
    discovery on trust data. As a former statistician of the
    Manville Asbestos Trust, I can tell you that this data is
    available. Asbestos facilities in trust receive data, process
    data, and pay claims through electronic databases and
    processing systems. These databases allow pertinent information
    to be parsed out about each claim.
        It is very easy for anybody with a general competency on
    database and programming skill that all these trust and claim
    facilities have at their disposal to write a simple code that
    allows them to generate a disclosure of every claimant, when
    they file the claim, and their allegations of exposure
    asserting payment for their claims, without disclosing any
    personal information, private medical information, home
    addresses, or any other privacy concerns that Mr. Inselbuch or
    the plaintiff attorneys have shared in the past. This is a very
    simple procedure.
        So when I say it would take minutes and be a minimal cost
    to produce the quarterly reporting requirements of the FACT
    Act, I mean for all claims, not just one claim per time. And
    this is based on my experience as not only the statistician of
    the Manville trust, but over 7 years of experience working in
    bankruptcy reorganizations for legal representatives of
    asbestos claimants, as well as with the trust once they were
    confirmed.
        I consulted on issues of data management and report
    generation, and I know how these data systems work. That is why
    I am confident in my previous statements, and I am very
    confident that the requirements proposed by the FACT Act will
    not bear a huge cost burden on the trust, if any at all. In
    fact, the recent markup of the FACT Act since I last spoke on
    it in May 2012 allows provisions for the trust and their
    facilities to charge third parties who are requesting
    information reasonable fees in order for the trust to concur
    and comply with those requests.
        This is a cost shift that will help relieve burden on the
    trust and help preserve money in the funds for victims.
        Now, I have gotten a little bit off script because I felt
    it was necessary to address some of those issues, but I just
    want to talk about a few other items that I think are also
    important to know.
        Mr. Inselbuch spoke in his oral testimony, as well as his
    written testimony, about this idea that in order to respond to
    the reporting requirements of the FACT Act, this is going to
    take so much resources away from the trust and their facilities
    that claimants are going to experience a delay in claim
    payments.
        This is a myth. This has been spoken about for quite some
    time, dating back to last year's hearing in May of 2012. When I
    was the statistician for the Manville trust, I was responsible
    for handling data requests both internally and externally. My
    work and the items that I had to produce both internally and
    externally had no bearing on the professionals employed by the
    trust in the facility who were responsible for reviewing,
    processing, and paying claims. So any reporting requirements
    that I would have had to have dealt with in no way would delay
    the processing and payment of claims to the people who deserve
    it most.
        Ultimately, one of the issues I wanted to get across here
    today is that transparency helps trusts. It is difficult to
    detect fraud or inconsistent claiming when you operate in a
    vacuum, as most trusts do. They do not share information with
    each other. Trust transparency will allow trusts to actually
    have auto procedures that can compare claim allegations made
    across multiple trusts. This will cut down on inconsistent
    claiming, and that will preserve money for the victims who
    deserve it the most.
        Thank you very much.
        [The prepared statement of Mr. Scarcella follows:]

                                   ATTACHMENT

                                   __________
        Mr. Bachus. Thank you.
        Mr. Cohen, did you want to give an opening statement? I
    will accord you that opportunity, if you would like.
        Mr. Cohen. Thank you, Mr. Chairman.
        Mr. Bachus. I will tell you that I served with Bruce Vento.
    He died. He and I were on the Financial Services Committee
    around 2000. He was suffering from mesothelioma at the time.
        She is here. She is one of three victims.
        Mr. Cohen. I see. Thank you.
        This is a very personal issue for me because Warren Zevon
    was one of my closest of friends, and he was a great singer-
    songwriter and, unfortunately, a victim of mesothelioma, dying
    in the year 2003. Some decades before he had exposure to
    asbestos, and exactly how it happened, we are not sure. So I
    come certainly with a feeling that the victims of asbestos need
    a voice.
        The FACT Act at first blush has certain characteristics
    that make you think it is reasonable. Yet, I learned about the
    FACT Act during a previous hearing that we had in the previous
    Congress and the markup of a substantially similar bill in this
    Congress, the more readily you come to conclude that this
    legislation may be a solution in search of a problem.
        More problematically, it could end up hurting asbestos
    victims by denying them full compensation for the harms that
    they have suffered as a result of the product that many
    asbestos manufacturers sold for decades, knowing that they were
    dangerous.
        H.R. 982 would impose a number of new reporting and other
    information-sharing requirements on trusts that have been
    established under Section 524 of the bankruptcy code, trusts
    designed to compensate current and future victims of asbestos
    exposure by ensuring that those asbestos manufacturers and
    other related defendants that have filed for bankruptcy cannot
    escape the responsibility for the harm they have caused.
        The bill would require those trusts to file quarterly
    reports describing each demand for payment per claimant,
    including the claimant's name and exposure history as part of
    its public docket. It would also require the trusts to provide
    information regarding payments and demands for payments to any
    party in an asbestos exposure-related civil action upon the
    parties' written request.
        Under this bill, the asbestos defendants can reorganize
    under bankruptcy protection and shift their liability for
    asbestos exposure to these trusts in exchange for agreeing to
    fund the trusts. In turn, these trusts pay claimants who seek
    compensation for harm caused by the bankrupt defendant's
    actions. Importantly, the trusts owe a fiduciary responsibility
    to all beneficiaries to ensure that only proper claims are paid
    in light of the universe of the current and anticipated future
    claimants.
        While not perfect, the trusts have worked reasonably well,
    and H.R. 982's proponents assert that additional reporting and
    information-sharing requirements be put on these trusts in
    order to prevent fraud and eliminate risk to such victims of
    being overcompensated. Proponents claim that there could be
    double dipping.
        In weighing this assertion, the most objective source I
    could find was a study of 524(g) trusts was conducted by the
    Government Accountability Office at the request of the former
    Chairman of this Committee, the Honorable Lamar Smith. The GAO
    was not able to find any instances of fraud. Moreover, the GAO
    found that trusts take appropriate steps to ensure that
    fraudulent claims are not paid.
        But even accepting that fraud by asbestos victims could be
    a real problem with respect to asbestos trusts, I fear that
    H.R. 982's additional requirements of the trusts will raise
    their administrative costs considerably as well. Even with the
    provision that a party requesting information could be required
    to pay a reasonable cost of a trust for complying, the cost
    burden could not be relieved.
        For instance, the bill does not define what reasonable is
    or specify who would make such determinations, opening the door
    to litigation over that issue and others. Any money used to pay
    the cost means less money to compensate victims.
        In light of this risk and others, I would like to know from
    the proponents and hope they did explain why defendants who are
    concerned about potential fraud by asbestos victims cannot
    simply seek trust payment information, easing procedures around
    our existing discovery rules. I believe it has been testified
    by the Judge that she had seen one case of fraud, but she had
    seen hundreds and hundreds and hundreds of cases, and I presume
    that in most of those, there is no fraud. One case does not
    make all 600 bad.
        Defendants can already obtain the information they want
    without undermining compensation for the others, and a
    reporting requirement raises privacy concerns. While I
    recognize the bill specifically prohibits trusts from making
    public any medical records or full Social Security numbers, the
    bill still would require trusts to make public the name and the
    exposure history. Once out, that information can be used for
    other purposes, by potential employers, insurance companies,
    lenders, and even those who may not seek to harm asbestos
    victims who may use the information without the victim's
    permission or knowledge.
        For these reasons, I remain opposed to the FACT Act and
    urge my colleagues to oppose this bill.
        I would like to take a moment to say that at the last
    hearing we had on this bill, Mr. Chairman, I made an
    unfortunate statement concerning an attorney who had tried to
    contact my friend, Warren Zevon. It was a passionate statement
    because of the friendship that I had for him, but it certainly
    should not have been seen as certain activists from the Chamber
    of Commerce crowd and others took it, and they have republished
    that statement in tweets.
        To this day, about every third day, I get some tweet, and I
    sometimes look at where it comes from, and it comes from India,
    or it comes from Indonesia, or it comes from Hushpuckenny. Most
    of them are outside the country.
        I wish they would stop. It is long enough that it makes the
    Chamber look really ridiculous and simplistic, and it looks
    like they take advantage of a simple statement that you made a
    mistake on. It doesn't reflect my feeling for trial lawyers,
    and it doesn't need to be repeated with Warren Zevon's name
    attached to it. So I would ask the Chamber to clean up their
    act, because they are obviously behind it.
        With that, I yield back the balance of my time.
        Mr. Bachus. Thank you.
        At this time, we will proceed under the 5-minute rule with
    questions for the witnesses.
        Mr. Inselbuch, you were saying that GAO found no fraud,
    basically?
        Mr. Inselbuch. That's what they said.
        Mr. Bachus. How do you account for the Wall Street Journal
    that put two reporters on an investigation for four or 5
    months, and they came up with 2,700 people who claimed to be
    injured by asbestos injuries while working in shipbuilding
    mainly, or chemical plants, but their ages, they were 12 years
    of age or under?
        Mr. Inselbuch. Well, first of all, the Wall Street Journal
    itself didn't say that any of these filings were fraudulent.
    They found what they said were discrepancies, and they found
    them, out of 850,000 claim files, they found them in such a
    small number that it is almost not measurable.
        Mr. Bachus. Well, of course, I would say 2,700 claims by
    people that were 12 years or under----
        Mr. Inselbuch. That just could mean that the individual
    working at the Manville trust keyed in the wrong number in the
    computer.
        Mr. Bachus. That is incredibly sloppy, isn't it? You worked
    for that trust.
        Mr. Inselbuch. Well, it happened, Mr. Chairman, in less
    than four-tenths of a percent of the cases.
        Mr. Bachus. Well, okay. I did hear that. That means just 1
    out of every 200.
        Mr. Inselbuch. I understand that.
        Mr. Bachus. Okay. Now, let's take that, 1 out of every 200,
    and that is your testimony, of course. I am sure that Mr.
    Scarcella would say----
        Mr. Inselbuch. Those are the Wall Street Journal's numbers.
        Mr. Bachus. But let's take yours, 1 out of every 200. Let
    me just say I agree with you. That is one every two-and-a-half
    days, because you said 80 a day.
        Mr. Inselbuch. No. That is 80 a day to do the report here.
        Mr. Bachus. But you said that 80 claims come in a day.
        Mr. Inselbuch. That is right.
        Mr. Bachus. Okay. So----
        Mr. Inselbuch. Eighty come in a day. Yes, sir.
        Mr. Bachus. Okay, 80 come in a day. So two-and-a-half days,
    200 come in. One of those is fraudulent.
        Mr. Inselbuch. No, it is not fraudulent. There may be
    something wrong with it, but that doesn't mean it is
    fraudulent.
        Mr. Bachus. Well, okay, there is something wrong with it.
        Mr. Inselbuch. It may well be picked up by the trust.
        Mr. Bachus. It may be that the claimant claims to be under
    12 years of age, and we won't know why. But let's say that is
    what it does say.
        Mr. Inselbuch. Well, we can hypothesize what we want.
        Mr. Bachus. Well, let's just say they file a claim and
    their birthdate says they are 12 or under. To me, that is
    pretty serious. And then your average claim for mesothelioma is
    $17,500, just in one trust. So if every 2 days you pay out a
    claim for $17,500, over a year that is $2 million. Now, this is
    using your figures.
        Mr. Inselbuch. No. You are using your assumption that there
    was something wrong with the filing.
        Mr. Bachus. Well, I am using your testimony that 1 out of
    every 200 claims----
        Mr. Inselbuch. There was a discrepancy.
        Mr. Bachus. Let's just call it a discrepancy.
        Mr. Inselbuch. But a discrepancy----
        Mr. Bachus. They actually found cases where a person never
    existed.
        Mr. Inselbuch. Yes, there was one of those.
        Mr. Bachus. But these are just two reporters.
        Mr. Inselbuch. And how would this act fix that? I don't see
    how it would make any difference.
        Mr. Bachus. They would report. It would have them go over
    and review that and report.
        Mr. Inselbuch. But it wouldn't say what year they were
    born.
        Mr. Bachus. You had 300 people just on one trust that
    claimed they had mesothelioma when actually, publicly, what
    they had was lung cancer. Now, that is a difference of $12,000.
    Would you admit----
        Mr. Inselbuch. Again, Mr. Chairman, even the Wall Street
    Journal didn't assume that these were errors made deliberately
    by the claimant.
        Mr. Bachus. I am not saying that----
        Mr. Inselbuch. All of these could have been errors made by
    the Manville trust.
        Mr. Bachus. Well, yes. But let me say this, let's just call
    them errors; okay?
        Mr. Inselbuch. All right.
        Mr. Bachus. Payments were made based on errors. Now, that
    is money, whether it is based on an error, whether it is based
    on a clerical mistake----
        Mr. Inselbuch. Yes.
        Mr. Bachus [continuing]. Whether it is based on fraud,
    you're talking about $17,500 that----
        Mr. Inselbuch. Then you should have this bill expanded so
    that you will require every bit of data that is filed with the
    trust to be supplied somewhere in a public record.
        Mr. Bachus. Well, you know, let me ask you this. You also
    say, wait, they can get it with a subpoena anyway.
        Mr. Inselbuch. Yes, sir.
        Mr. Bachus. They don't even need this bill.
        Mr. Inselbuch. That is correct.
        Mr. Bachus. Why would you be arguing against a bill that
    they already have every legal right to get the information?
        Mr. Inselbuch. Because the burden is being placed on the
    trust to do something. The second part of this bill----
        Mr. Bachus. Well, the burden----
        Mr. Inselbuch [continuing]. Provides a reference library to
    these defendants in the tort system. They call it transparency.
    They don't provide any transparency. Why don't you require the
    defendants in the tort system to divulge what they have paid to
    settle other cases, or where their products are when they were
    there when they were killing people?
        Mr. Bachus. Well, you know, you argued----
        Mr. Inselbuch. If you want transparency, have transparency.
        Mr. Bachus. Let me say this. You argued, hey, these folks,
    the companies, were guilty of fraud. But that is----
        Mr. Inselbuch. No, they were not guilty of fraud. They were
    guilty of murder.
        Mr. Bachus. Murder. Okay. Genocide, okay? Let's call it
    genocide. Now, does that mean that people that don't have a
    right to recovery have a right to recovery?
        Mr. Inselbuch. No, sir.
        Mr. Bachus. So two wrongs don't make a right, do they?
        Mr. Inselbuch. This was not two wrongs.
        Mr. Bachus. So your argument really doesn't--it is one of
    those two wrongs make a right.
        Mr. Inselbuch. Not to me, sir.
        Mr. Bachus. Oh. You mean you think because a company that
    is no longer in existence, bankrupt--and let me say this, not
    all of them committed fraud, because I can tell you a company
    in Birmingham only built two liberty ships in 1943 and in 1985.
    Because they built two liberty ships for the government and put
    asbestos in it, they went bankrupt and put 120 people out of
    business. So let's not stereotype all these companies.
        Mr. Inselbuch. I am sorry, but how many people in the holds
    of those ships were exposed to asbestos and died?
        Mr. Bachus. Every one of them. And would you blame the
    company when the U.S. Government told them to build a ship, and
    in 1943 no one knew that it was harmful? Would you blame that
    company?
        Mr. Inselbuch. Everybody knew it was harmful in the
    industry.
        Mr. Bachus. In 1943?
        Mr. Inselbuch. Absolutely. They had meetings in the 1930's
    in Saranac Lake where they discussed how to conceal it.
        Mr. Bachus. Why did the U.S. Government allow ships to be
    built? That is a question----
        Mr. Inselbuch. That is a very good question, and it is a
    very good question why the United States Government hasn't
    stepped up to its own responsibility to pay these bills.
        Mr. Bachus. Well, let me say this.
        Mr. Inselbuch. But the United States Government argued
    sovereign immunity.
        Mr. Bachus. Okay. You know, I am interested in that. Let me
    say this. I am a former member of the American Trial Lawyers
    Association. I had the largest jury verdict in the state of
    Georgia in a wrongful death case. So I am not one that
    stereotypes plaintiffs' lawyers, defense lawyers, or companies.
    They are not all alike.
        But I would love to see some of that testimony, and I don't
    doubt it. But this is a first, the first time I have heard it.
        Mr. Inselbuch. I would come and testify for that
    legislation.
        Mr. Bachus. I really would like to explore that with you,
    because just take Bruce Vento. I have never met a nicer
    gentleman in my life, and it is something that we need to know.
    The Wall Street Journal needs to do an article and go back. I
    applaud them. They found something that apparently the GAO
    couldn't find, just two reporters. It is kind of amazing.
        Mr. Cohen.
        Mr. Cohen. Thank you, Mr. Chair.
        I have been pleased with our staff, but I found some
    troubling numbers that I saw today, Mr. Chairman. Their
    statistics suggest this woman graduated law school in 1975. I
    think that is a mistake. How did they come up with that year?
        I mean, were you born in 1975, Judge?
        Judge Ableman. I love you. You could be my friend for life.
    [Laughter.]
        Mr. Bachus. Well, I will actually tell you that as I read
    how long she had been on the bench, it made no sense
    whatsoever.
        Judge Ableman. I have great genes.
        Mr. Bachus. But I have a wife that everybody keeps saying
    she had to be somebody I married in old age, and she and I are
    the same age. So we sometimes----
        Mr. Cohen. Well, I will excuse the staff, but it did seem
    uncharacteristically errant of them.
        Let me ask you, did you know Alan Lubell at Emory law
    School?
        Judge Ableman. Pardon me?
        Mr. Cohen. Alan Lubell?
        Judge Ableman. Yes.
        Mr. Cohen. Well, then you did go to Emory that year. That
    is good.
        Judge Ableman. I swear, I should have brought my diploma.
        Mr. Cohen. Yes. I will ask him. I will check you out.
        Let me ask you about this. You said you had all these
    cases, and I missed your testimony. I apologize for that. But
    there was one particularly bad case. But in most of the cases,
    were most of the cases, in your opinion, legitimate cases?
        Judge Ableman. Well, I don't know, because most of the
    cases don't end up going to trial and to verdict. So I don't
    know what goes on in the settlement process, and I don't know
    what information is or is not available to all of the litigants
    while the discovery process is going on and while the
    settlement negotiations are going on.
        So my concern about the lack of transparency is that I
    think it is anathema to any judge not to have a fair playing
    field and not to have justice depend upon the full truth. The
    problem is that there are missing parts that will never be
    detected if the cases never get to trial.
        This one happened to be ready for trial, and it just so
    happened that we discovered the inequities and the dishonesty
    that occurred. I could have just as easily tried that case
    without ever having discovered it.
        But most of the cases, I don't even get to that point. So I
    don't have any control over what is going on.
        Mr. Cohen. But you don't have any knowledge of fraud in
    those other cases?
        Judge Ableman. No, but I think that there is an incentive,
    when there is nobody there to catch you, there is an incentive
    to do things like delaying claims to the trust, to be able to
    make a case a little bit different from what it really is. I am
    not sure that that does not occur more often than not. I hate
    to say it, but I don't feel real comfortable saying it was a
    one-time situation.
        Mr. Cohen. Are there parts of this bill that you think are
    not necessary and are bad?
        Judge Ableman. No. I think the bill is very fair, and I
    don't think----
        Mr. Cohen. You endorse it 100 percent?
        Judge Ableman. Well, if you changed it, I would be willing
    to let you know what my opinion is too. I mean, I am sure there
    could be modifications to it.
        I think that the confidentiality issue is a little bit of a
    red herring because there is no confidentiality in any of these
    tort cases. I mean, once you file a lawsuit, there is no
    confidentiality. So if these same defendants were not in
    bankruptcy, they would be sued in a court of law and they would
    not be entitled, the plaintiffs would not be entitled to----
        Mr. Cohen. Mr. Inselbuch, let me ask you this. I thought
    your facts were wrong too, because you were practicing law in
    the 1950's, which seems hard to comprehend as well. That was my
    other concern. But where would you----
        Mr. Inselbuch. I am older than I look.
        Mr. Cohen. Obviously, obviously. You have had quite a
    spectacular career.
        Where would you suggest to the Honorable Judge that this
    bill should be changed, or scuttled?
        Mr. Inselbuch. For starters, I would scrap the whole bill
    because it seeks information that, to the extent it is
    legitimately useful to defendants, they can get anyway. It
    creates burdens, notwithstanding what Mr. Scarcella has told
    the Committee. I spoke to the people who would have to do it,
    and they told me how difficult it might be, that there is no
    button to push and no program to do. You are creating burdens.
    You are creating costs. You are creating delay.
        The justification for it is what Judge Ableman and others
    would call transparency. On the other hand, there is no
    transparency that comes from the other side.
        The trust process is the settlement process. If these trust
    forebears had been still in the tort system and they settled a
    case with a plaintiff, the other defendants would not get that
    information. They would not get any information that was
    exchanged in the settlement process. Nowadays, the same
    defendants won't exchange any of their settlement information
    with anybody else, nor will they voluntarily tell anybody where
    their products were.
        To the extent that the court may not have the true picture,
    it may not be getting the true picture from either side because
    in our tort system it is the burden of the plaintiff to get the
    facts from the defendant, and it is the burden of the defendant
    to get the facts from the plaintiff, and that is how we have an
    adversarial system that gets the materials to the court.
        This would like to change that adversary system. This
    would, in effect, change the way discovery would be done by
    defendants in the tort system in 50 states of the United
    States. I don't see any need for it or any purpose to it.
        Mr. Cohen. Thank you. I yield back the balance of my time.
        Mr. Farenthold [presiding]. Thank you, Mr. Cohen. I will
    now yield myself 5 minutes for questioning.
        Mr. Inselbuch, I am an attorney as well, and I am overall
    troubled by your general assertion that getting to the truth
    and doing what is right is too burdensome and too expensive. I
    understand the need for getting the settlement money to the
    victims in as reasonably a prompt fashion as possible, but the
    trusts also have a fiduciary duty, do they not, to as yet
    undiscovered victims to not pay out fraudulent claims?
        Mr. Inselbuch. Absolutely, and they do a pretty good job of
    that. I observe how those trusts operate. Indeed, the trusts
    have paid less than 50 percent of the claims that have been
    filed with them up to now. This is not a revolving door for
    claimants. I have seen how these trusts have done audits, how
    they have uncovered discrepancies, far more interesting
    discrepancies than the Wall Street Journal found, how they
    investigated those, how they audited the law firms that were
    involved in those discrepancies, and I don't see any need for a
    filing place or for this Congress to interfere in what is a
    working system that is working very efficiently and very
    inexpensively, as opposed to the tort system.
        Mr. Farenthold. Having filed this bill, I am going to
    disagree that it is working. One of the things we look at
    consistently is making information available. Again, I am a
    strong believer in the truth will set you free, and I was
    concerned--and I guess Mr. Scarcella addressed the fact of how
    burdensome it would be to create these reports. I can't
    believe, certainly on an ongoing basis--I assume these things
    are filed electronically. You just have the lawyers requesting
    the claim put in a summary of the case, and you review it.
        To me it seems like it could all be done, and Mr. Scarcella
    agrees with me, this is all just a data function that for the
    most part is already in place and wouldn't be that burdensome.
    I just want to make sure the record is clear on that. Is that
    not correct, Mr. Scarcella?
        Mr. Scarcella. Yes. I think the important distinction here
    is to understand that the picture that is being painted by Mr.
    Inselbuch is this idea that attorneys for the trust and
    paralegals and claim reviewers are going to have to sit in
    rooms with stacks of documents redacting information before it
    is turned over, and that is why it would take so long.
        Mr. Farenthold. They are not the Federal Government. They
    actually have computers that work?
        Mr. Scarcella. Yes, it is not that way. The professionals
    he speaks about that he has met with recently at the claims
    processing facilities, I used to work with these people as an
    outside consultant, and I used to have to analyze their data
    for doing future claim projections, which is one of the
    backbones of a bankruptcy trust and how they distribute their
    money, both currently and in the future. And in my experience,
    whenever I needed to request data, far more extensive data than
    what the FACT Act is proposing here, I was able to get it in
    virtually no time at all. It took no time, maybe a day lag for
    them to produce to me a data set far more robust than what the
    FACT Act is seeking here, so I could do my analysis to try to
    help the trust figure out how they should pay claims in the
    future.
        Mr. Farenthold. We could probably spend the rest of the
    afternoon going into the details of this, but I do want to talk
    about the bill in particular. I want to ask Judge Ableman, as
    we produced this bill, do you think it strikes a fair balance
    between addressing the needs of those who suffer from asbestos-
    related diseases now and need to get their claims paid promptly
    and the need for protecting those in the future?
        Judge Ableman. I absolutely do think that it does. I don't
    see how you can argue against openness and transparency,
    because that just makes the judicial process what it is
    supposed to be, which is a fair process where both sides are
    playing on a level playing field. I think the bill protects the
    rights of the victims who have succumbed to this dreadful
    disease, but I also think that it probably provides more
    protection in terms of confidentiality of their records than
    the legal system is able to do.
        Mr. Farenthold. Great. I want to ask Professor Brown, again
    just setting up the record for this, could you expand on your
    testimony on the FACT Act? Is it an appropriate exercise of
    congressional authority given that the Section 524(g) trusts
    are authorized by the bankruptcy code but authorized under
    state law?
        Mr. Brown. Of course. I find it kind of interesting that
    that is even a question. In the course of my research last
    year, one of the lead firms in New York came in and argued that
    the state courts should not be demanding this information in
    discovery and otherwise because it was a violation of the
    sovereignty--excuse me--the supremacy clause.
        But when we look at it from just a matter of the bankruptcy
    power, any conception of the bankruptcy power, even the
    narrowest conception, is a restructuring of the debtor's
    affairs with its creditors, and any act related to that falls
    under the bankruptcy clause. I don't think that is even
    seriously in question here.
        Mr. Farenthold. All right. I just wanted to make sure we
    got that on the record. Thank you, Professor Brown.
        Thank you to the rest of our panel.
        We will now go to the gentleman from Georgia, Mr. Johnson,
    for 5 minutes.
        Mr. Johnson. Thank you.
        Mr. Cohen. If I could interrupt for 1 minute, I would like
    to ask for unanimous consent to introduce letters from the
    trust of future claimants' representatives opposing this for
    the record, and also I think Mr. Conyers' opening statement for
    the record.
        Mr. Farenthold. Without objection, so ordered.
        [The information referred to follows:]

                                   __________
    Prepared Statement of the Honorable John Conyers, Jr., a Representative
     in Congress from the State of Michigan, and Ranking Member, Committee
                                on the Judiciary
        H.R. 982, the Furthering Asbestos Claim Transparency Act, or FACT
    Act, burdens asbestos trusts while giving asbestos defendants new
    rights and advantages to be used against asbestos victims in state
    court.
        This is particularly troubling given that asbestos defendants come
    to this issue with unclean hands. For instance, there is the well-
    documented harm caused by asbestos--including a form of cancer known as
    mesothelioma, as well as a debilitating clogging and scarring of the
    lungs known as asbestosis--and the history of asbestos manufacturers in
    concealing the dangers of their product from the public for many years.
        And yet these very same manufacturers now want Congress to help
    them by passing H.R. 982.
        This legislation is extremely problematic for several reasons.
        To begin with, the bill's reporting and disclosure requirements are
    an assault against asbestos victims' privacy interests.
        While the bill prohibits disclosure of an asbestos claimant's
    confidential medical records and full Social Security number, it also
    mandates that the trusts publically report the claimant's name and
    exposure history, as well as the basis of any payment that the trust
    made to the claimant.
        Given the fact that all of this information would potentially be
    available on the internet, just imagine what insurers, potential
    employers, prospective lenders, and data collectors could do with this
    private information.
        Essentially, this bill would allow asbestos victims to be re-
    victimized by exposing their health information to the public.
        Another problem with the bill is that it is fundamentally
    inequitable.
        This legislation demands that the trusts make these disclosures,
    but makes no comparable demands on the very companies that injured
    millions of Americans and concealed the dangers of their product for
    many years.
        The bill essentially shifts some of the costs of discovery away
    from these defendants to asbestos bankruptcy trusts, which in turn
    diminishes the amount of funding available to compensate asbestos
    victims. In doing so, it provides an end-run by asbestos defendants
    around the discovery process available under non-bankruptcy law.
        While not perfect, the trust system set up under Bankruptcy Code
    section 524(g) has generally proven to be beneficial to both asbestos
    victims and to corporations facing mass tort liability for causing
    asbestos injuries.
        In exchange for agreeing to fund these trusts, companies are able
    to shed their massive asbestos tort liability and re-enter the business
    community on a competitive basis for the benefit of their creditors and
    those who they injured.
        These trusts, in turn, owe a fiduciary duty to all beneficiaries to
    ensure that only proper claims are paid and that such payments are
    ratably equitable given the universe of known and anticipated future
    claimants.
        But, H.R. 982 does nothing to improve the trusts or advance the
    interests of asbestos victims.
        And, finally, there is absolutely no evidence of endemic fraud
    warranting such an invasive measure as H.R. 982.
        That is not just my opinion. The Government Accountability Office
    reported that there is no empirical evidence of such fraud with respect
    to the trusts' claims processing system.
        Sure, the Majority's witnesses will claim today that the system is
    rife with fraud based on isolated instances and anecdotes, and that
    asbestos bankruptcy trusts need to be more transparent to deter
    dishonest claims practices.
        This argument is not persuasive. Existing discovery rules already
    require an extensive amount of disclosure with respect to compensation
    received by asbestos claimants.
        These are just a few of the concerns that I have with this
    legislation. And I am not alone in having serious misgivings about this
    measure. With respect to a nearly identical bill considered in the last
    Congress, the following entities expressed strong opposition to the
    measure:

              the Asbestos Disease Awareness Organization, the
            Environmental Working Group,

              the Center for Justice and Democracy,

              and various legal representatives for future asbestos
            personal injury claimants with respect to asbestos bankruptcy
            trusts.

        I thank our witnesses for being here and hope that they can
    adequately address my concerns.
                                   __________

        Mr. Cohen. Thank you.
        Mr. Farenthold. Thank you, Hank.
        Mr. Johnson. Yes, thank you.
        Ms. Ableman, are you appearing today in your personal
    capacity?
        Judge Ableman. I am appearing in my capacity as a judge for
    29 years and----
        Mr. Johnson. And also a lawyer with a 400-lawyer law firm.
        Judge Ableman. I am, but I don't--I just started there, and
    they----
        Mr. Johnson. They do a lot of----
        Judge Ableman [continuing]. Marching orders.
        Mr. Johnson. They do a lot of asbestos litigation for that
    firm, do they not?
        Judge Ableman. They do.
        Mr. Johnson. McCarter and English is the name?
        Judge Ableman. Yes.
        Mr. Johnson. In fact, product liability is the largest
    practice area for that firm; correct?
        Judge Ableman. I think it--I am not really sure, but I
    think it may be. I thought it was bankruptcy.
        Mr. Johnson. But it is a pretty large part, would you say?
        Judge Ableman. Yes.
        Mr. Johnson. And, of course, asbestos and other toxic tort
    litigation comprises the bulk of the product liability
    litigation that the firm handles; is that correct?
        Judge Ableman. Yes.
        Mr. Johnson. Now, your firm, does it currently represent
    the company Foster and Wheeler?
        Judge Ableman. No.
        Mr. Johnson. Or any of its subsidiaries or associates?
        Judge Ableman. No. I don't believe so, no.
        Mr. Johnson. Are you on the clock right now for your
    testimony?
        Judge Ableman. No.
        Mr. Johnson. You are not making any money right now?
        Judge Ableman. No.
        Mr. Bachus. I think we are all on the clock up here. We are
    getting paid.
        Mr. Johnson. We certainly are, but we are trying to get to
    the truth. I just want to make sure that our witnesses are
    credible in that regard as well, that they don't have a motive
    to testify in a biased way so as to create more business for
    the law firm.
        But let me ask you, Mr. Scarcella, your firm----
        Mr. Bachus. A point of personal privilege.
        Mr. Johnson. If it doesn't apply to my time, if we can stop
    that.
        Mr. Bachus. We will suspend the time.
        Mr. Farenthold. We will suspend the time.
        Mr. Bachus. I think it is the customary rules of the House
    not to impugn the witness' character.
        Judge Ableman. May I respond?
        Mr. Johnson. Well, my response would be that this witness
    is appearing as an expert, and I think it is fair game to ask--
    --
        Mr. Bachus. Well, all our witnesses appear as experts, and
    all of them----
        Mr. Johnson. And all of them are subject to the same
    questioning to determine whether or not they have an interest
    or bias in the case.
        Mr. Bachus. Well, let me say this. I will close this by
    saying that Mr. Inselbuch also is employed, but I would never--
    --
        Mr. Johnson. And I was going to ask you----
        Mr. Bachus. I would never impugn his character or his
    interests.
        Mr. Johnson. He is employed. He works on a----
        Mr. Bachus. I think he testified to the best of his
    ability, and that all of the witnesses testified truthfully.
        Mr. Johnson. He works on a contingent fee basis, but the
    others work on probably an hourly basis. Certainly, one of your
    colleagues on the other side of the aisle is entitled--Mr.
    Inselbuch has been subjected to a thorough and sifting cross-
    examination thus far, and he still has four people that he has
    to go through.
        Mr. Bachus. I didn't impugn his character, his
    truthfulness, or his veracity.
        Mr. Johnson. Well, it was a scathing type of cross-
    examination, I think, and I don't want to do that to the
    Honorable Judge Ableman, but I am just asking some questions to
    get at whether or not I can believe her testimony or not, or
    what weight I should give to it.
        Mr. Farenthold. We did stop the clock. We will go on. I
    would like to remind the Members that we should certainly be
    courteous to our witnesses who are appearing, while still
    looking for the truth.
        We will continue your time. Thank you.
        Mr. Johnson. Thank you.
        Mr. Farenthold. And I believe the judge would also--did you
    ask to respond? We won't start the clock.
        Judge Ableman. I want to just say simply that I was asked
    to do this before I even accepted employment by McCarter and
    English.
        Mr. Johnson. You were asked by the Republicans to do this?
        Judge Ableman. I was--someone got hold of the transcript
    from my hearing after the debacle in that case.
        Mr. Farenthold. Okay, we will go ahead and start the clock
    back up now.
        Mr. Johnson. Okay. All right. Now we are here talking about
    the FACT Act. Would any of your firm's clients benefit from the
    passage of that act?
        Judge Ableman. Well, I think everyone would benefit from it
    because it means that the judicial process is going to be more
    fair.
        Mr. Johnson. Everyone would not benefit from a financial
    aspect of it, though; right?
        Judge Ableman. I think everyone benefits from having a fair
    and impartial judicial decision-making process.
        Mr. Johnson. It should be fair and impartial, there is no
    doubt.
        Judge Ableman. Everyone benefits from the truth.
        Mr. Johnson. This legislation, though, would impose, as we
    have heard from Mr. Inselbuch, it would impose hardship on
    claimants, people who have been injured, due to no fault of
    their own, as a result of unhealthy and unsafe products.
        Mr. Inselbuch, you mentioned the fact that--and, by the
    way, you are plaintiffs' lawyer; correct?
        Mr. Inselbuch. Am I an attorney? Yes, I am an attorney.
        Mr. Johnson. You are plaintiffs' lawyer?
        Mr. Inselbuch. No, I am not.
        Mr. Johnson. You are not? You represent some----
        Mr. Inselbuch. I represent many of the committees in the
    bankruptcies, the committees that act for the plaintiffs that
    are injured. I represent trustee advisory committees that
    advise the trustees in the bankruptcy. But I don't do the tort
    cases, and I am paid by the hour, not on a contingency fee
    basis.
        Mr. Johnson. And paid with monies from the Federal
    Treasury?
        Mr. Inselbuch. No, I don't get any money from the Federal
    Treasury.
        Mr. Johnson. You don't get any money--who do you get money
    from?
        Mr. Inselbuch. My clients in a bankruptcy, the committee
    counsel are paid for--all committee counsel fees are paid by
    the debtor.
        Mr. Johnson. I see. So you have actually been paid by the
    asbestos industry, or your fees are generated through your
    work, which is for plaintiffs and for defendants in the
    asbestos litigation.
        Mr. Inselbuch. I don't look at it quite that way,
    Congressman. I look at the fees of these bankruptcies basically
    are coming out of the asbestos victim's hide.
        Mr. Johnson. Okay. So what I am saying, though, you are
    going to get paid regardless. The other witnesses here,
    including Mr. Scarcella--Mr. Scarcella, you are with a firm
    that serves as an expert witness in these asbestos-related
    cases; is that correct?
        Mr. Scarcella. Yes, that is one of the things we do.
        Mr. Johnson. And you can look forward to receiving more
    business as a result of your testimony today; isn't that
    correct?
        Mr. Scarcella. I don't necessarily know if there is a
    direct correlation there. In this work that I do, testifying on
    issues of trust transparency, doesn't have a direct correlation
    to the work that we do on bankruptcy estimation and financial
    reporting, insurance allocation work.
        Mr. Johnson. Okay. Now, I will tell you, Judge Ableman, you
    said today in your testimony or you have said in your written
    testimony, you have talked about the fact that you had this one
    episode where a plaintiff's counsel was held in contempt?
        Judge Ableman. No, I did not.
        Mr. Johnson. You did not say that? Or something happened
    with the one plaintiff's lawyer that appeared before you in
    your many years of practice as a Federal court judge or, excuse
    me, a state court judge?
        Mr. Farenthold. The gentleman's time has expired. I
    apologize for being so quick with the gavel, but we are trying
    to get this hearing completed before votes go.
        Mr. Johnson. All right.
        Mr. Farenthold. So we will move on to Mr. Marino.
        He left, it looks like. So we will go down to Mr. Collins.
        Mr. Collins. Thank you, Mr. Chairman. I appreciate it.
        Let's get back to the FACT Act instead of who you are here
    with and how you make your money, which is absolutely
    irrelevant to this conversation today.
        One of the questions I have that comes up in this is
    dealing with transparency, and this is sort of an interesting
    act because it is not dealing overall. In a few of the
    jurisdictions, plaintiffs are required to make their trust
    submissions prior to trial--New York City, Montgomery County,
    Pennsylvania. There are several in that. Doesn't this delay the
    ability of the plaintiffs to delay their trust submissions
    until after--it is essentially a double dipping episode? I know
    there's probably disagreement here, but I would like to hear
    both accounts.
        Mr. Inselbuch. Is that addressed to me?
        Mr. Collins. You can go first, and the Judge can go second.
        Mr. Inselbuch. Well, it is one of the principles of the
    tort system that a plaintiff gets to decide who the plaintiff
    sues, who the plaintiff settles with, and on what basis. When
    you move that into the trust system, the same theory should say
    that a plaintiff should be able to decide if and when the
    plaintiff will file a claim with the trust. To the extent that
    under state law settling with a trust would have a detrimental
    effect on the plaintiff's ability at verdict to collect from an
    existing solvent defendant, that choice under state law should
    be left to the plaintiff, because the issue really is who bears
    the shortfall.
        Is the shortfall--in other words, the lack of ability of
    these insolvents to pay--should that shortfall be paid for by
    the other culpable co-defendants, or should it be paid for by
    the innocent plaintiff? That is a question of policy that is
    decided in 50 legislatures around the country.
        Mr. Collins. I want to follow up here. Isn't it also a
    principle of judicial work also that disclosure and discovery
    are also elements of this as well? You made a comment earlier
    that I thought really oversimplified it, that the plaintiff's
    job was to get what they need, and the defendant get that, and
    you have made this sort of the case for the FACT Act at that
    point, just basically saying put into play what is available or
    what should be available in normal discovery.
        Judge, the question I had for you is--and you made the
    comment that it should be handled at the judge level. Explain
    to this Committee how that is difficult from the judge's
    perspective in issues where there is a problem with discovery.
        Judge Ableman. Well, the problem isn't--first of all, we as
    judges, or as former judges, as a former judge I can tell you
    is very, very time-consuming to cite an attorney on a Rule 11
    violation for not being honest with the court. It requires that
    you have hearings, it requires that you write an opinion, it
    requires you to detail with great specific precision what it is
    this attorney has done or not done or should have done.
        So judges are loath to take on that extra responsibility in
    addition to their caseload. It is not just, oh, you are in
    contempt, and that is the end of it. It becomes a big project
    and a very distracting project. So it is not done very often.
        But more importantly, I don't think that the victims in
    these cases should not be fully compensated by every single
    entity that has caused exposure. My problem is that without
    full transparency, the facts that the case is based on are
    sometimes not the full facts.
        Mr. Collins. And I agree completely, the compensation ought
    to be there.
        There are some other issues around this, and I appreciate
    that I need to move to a couple of quick things. One, I want to
    ask this question because we are dealing with asbestos, and
    reporting and not reporting. The Asbestos Information Act of
    1988, you may or may not be familiar with it, which requires
    manufacturers and processors of certain asbestos products to
    disclose the asbestos products they made, as well as the years
    of manufacture.
        From my understanding, from what I have learned so far,
    this law is rarely complied with or enforced. Why is that?
        Mr. Inselbuch. You are asking me?
        Mr. Collins. I will ask anybody who wants to answer the
    question. You have done well answering so far today. I
    appreciate your candor.
        Mr. Inselbuch. I can't say that I have any familiarity with
    that statute. But if what we are interested in is transparency,
    as Judge Ableman would say, then why don't we have reciprocal
    transparency? Why do we just assume that it is the plaintiffs'
    lawyers who don't disclose what should be disclosed in the
    discovery system? Why don't we have a system where the
    defendants are required to provide public information about
    where their products were so that we can check what their
    answers are in the discovery process?
        Mr. Collins. Well, part of that, as an attorney, it's part
    of the legal process here. I mean, the plaintiff brought the
    case, and there is an issue here that they would have to
    describe on both sides to discovery, ask what they are looking
    for as well. Again, they brought the case. The burden is going
    to be on them to make their case. So that is an issue, and
    defendants are putting a different format.
        One last question, Professor Brown. Do you believe that the
    information required under the FACT Act compares to--how does
    it compare to other information that is normally disclosed in
    bankruptcy or tort? Is this really requiring anything all that
    unique?
        Mr. Brown. I will refer to my written statement, where I go
    into that in great detail, but I don't believe that it really
    requires any additional information. In fact, if you were an
    individual tort claimant and trying to seek damages or seek
    recovery in a bankruptcy case, you may be required to file
    this, though the provisions that I also mention under 107,
    Section 107 of the bankruptcy code may be applied there, just
    as they could be to----
        Mr. Collins. Thank you.
        Mr. Chairman, I yield back.
        Mr. Farenthold. Thank you very much.
        Mr. Cohen, you needed a second?
        Mr. Cohen. Thank you. I have an asbestos victim's letter
    and a number of public interest groups opposed to the Act. I
    would ask that their letters and statements be made a part of
    the record.
        Mr. Farenthold. Without objection, so ordered.
        [The information referred to follows:]

                                   __________

                                   __________

                                   __________

                                   __________

                                   __________
        Mr. Cohen. Thank you, sir.
        Mr. Farenthold. Without objection, Chairman Goodlatte's statement
    will also be admitted to the record. So ordered.
        [The prepared statement of Mr. Goodlatte follows:]
    Prepared Statement of the Honorable Bob Goodlatte, a Representative in
      Congress from the State of Virginia, and Chairman, Committee on the
                                   Judiciary
        The history of asbestos litigation is filled with human tragedy,
    culminating in what the Supreme Court described as an ``asbestos
    litigation crisis'' in the pivotal case of Amchem v. Windsor. As
    businesses were forced to declare bankruptcy as a last resort to manage
    their liability, the prospect of full compensation for asbestos
    victims--not to mention current employees' livelihoods--grew dimmer.
        In 1994, Congress attempted to address the crisis through
    legislation. Section 524(g) was added to the Bankruptcy Code, to allow
    companies in Chapter 11 to form a trust that would become responsible
    for receiving, processing and paying all future claims by asbestos
    victims. This trust system was designed to relieve pressure on the
    courts, allow businesses to emerge from Chapter 11 and continue
    operations, and streamline the compensation process for asbestos
    victims.
        Most of the largest and deepest-pocketed defendants have gone
    through bankruptcy and formed trusts under Section 524(g). So now
    plaintiffs' attorneys have moved on to suing secondary targets in
    courts while filing separate claims with the trusts--continuing the
    process that one plaintiff's lawyer described as the ``endless search
    for a solvent bystander.''
        Unfortunately, there is evidence of fraud and abuse in the asbestos
    trust compensation system. The law provides that victims of tortious
    conduct should be made whole, and this is no less true for asbestos
    victims--they should receive 100% of the compensation they are due. But
    no one should be able to recover twice--or more than twice--by pleading
    one set of facts in court and then a different, perhaps contradictory,
    set of facts to an asbestos trust. Bringing greater transparency to the
    asbestos trust system will discourage this sort of conduct in the first
    place, and help to expose it when it happens.
        The Subcommittee on the Constitution examined these matters in a
    September 2011 hearing. In addition, H.R. 4369, the ``Furthering
    Asbestos Claim Transparency Act of 2012,'' or the FACT Act, was the
    subject of a legislative hearing before the Subcommittee on Courts,
    Commercial and Administrative Law in May 2012. That bill was ultimately
    ordered reported by the Full Committee with an amendment last June.
        I am very pleased that Mr. Farenthold has reintroduced this
    important, bi-partisan legislation this Congress. H.R. 982, the FACT
    Act of 2013, will protect trust assets reserved for current and future
    victims by striking the proper balance between much-needed transparency
    and preserving the dignity and medical privacy of asbestos victims. I
    encourage all of my colleagues to support this legislation, and I look
    forward to hearing from the witnesses today.
                                   __________

        Mr. Farenthold. We now have 7 minutes and 44 seconds
    remaining in a vote on the Floor. I don't think we have any
    more Members looking to ask questions at this time.
        But without objection, all Members will have 5 legislative
    days to submit additional written questions for the witnesses,
    or additional material for the record.
        With that, this concludes today's hearing, and we are
    adjourned.
        [Whereupon, at 5:05 p.m., the Subcommittee was adjourned.]
                                A P P E N D I X

                                  ----------

                   Material Submitted for the Hearing Record

    Prepared Statement of the Honorable Blake Farenthold, a Representative
       in Congress from the State of Texas, and Member, Subcommittee on
                Regulatory Reform, Commercial and Antitrust Law

           Prepared Statement of the Honorable Hakeem S. Jeffries, a
      Representative in Congress from the State of New York, and Member,
        Subcommittee on Regulatory Reform, Commercial and Antitrust Law

           Response to Questions for the Record from S. Todd Brown,
                            SUNY Buffalo Law School

                   Response to Questions for the Record from
            the Honorable Peggy L. Ableman, McCarter & English, LLP

          Response to Questions for the Record from Elihu Inselbuch,
                      Member, Caplin & Drysdale, Chartered

           Response to Questions for the Record from Marc Scarcella,
                                Bates White, LLC