[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:]
    
    


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    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:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


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    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:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    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:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


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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:]
    
    
    
    
    
    
    
    


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    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









                                 
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