[Congressional Record (Bound Edition), Volume 149 (2003), Part 10]
[Senate]
[Pages 12813-12816]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE FAIR ACT

  Mr. HATCH. Mr. President, today I rise to introduce S. 1125, the 
bipartisan Fairness in Asbestos Injury Resolution Act of 2003, the FAIR 
Act. I am joined by my colleagues Senators Ben Nelson, DeWine, Miller, 
Voinovich, Allen, and Chambliss who share my concern on this important 
issue and have worked very hard to help bring about a resolution up to 
this point. They have all felt the impact of this situation in their 
home States and have shown the courage that we need to move forward to 
legislate a solution.
  I also commend the interests of my good friend and Judiciary partner, 
Senator Leahy, as well as Senators Dodd and Carper, whom I would hope 
will continue to work with us to improve this important legislation.
  I also want to recognize and commend my colleague from Oklahoma, 
Senator Nickles, who has also been a leader on this issue and 
recognizes the harm the current system poses to our workers and to our 
economy.
  There can be no doubt that our Nation faces an asbestos litigation 
crisis. We have all heard the statistics, but they bear repeating. The 
RAND Institute for Civil Justice tells us that, to date, over 60 
companies--I have been informed almost 70 companies--have been forced 
into bankruptcy--at least three with operations in my own home State of 
Utah.
  The number of claims continues to rise, as does the number of 
companies pulled into the web of this abusive litigation, often with 
little, if any, culpability. More than 600,000 people have filed 
claims, and more than 8,400 companies have been named as defendants in 
asbestos litigation, some of them for no good reason at all but who are 
now stuck with horrendous defense costs, even though they would win 
every case.
  This has become such a gravy train for some abusive trial lawyers--
just some--that over 2,400 additional companies were named in the last 
year alone. RAND also notes that ``about two-thirds of the claims are 
now filed by the unimpaired, while in the past they were filed only by 
the manifestly ill.'' Two-thirds of the complaints are filed by people 
who are not even sick. Former Attorney General Griffin Bell, amongst 
many others, has denounced this type of ``jackpot justice.''
  There is broad support for a comprehensive solution, and I believe 
that our legislation is a major step in the right direction. I have 
been and will continue working with my colleagues on both sides of the 
aisle to resolve this issue. We need to ensure that the truly sick get 
paid, while providing stability to our economy by stemming the rampant 
litigation that has resulted in a tidal wave of bankruptcies, 
endangering jobs and pensions and health care and almost everything 
else that workers need in these companies. This crisis reaches far and 
wide, and it hurts everyone.
  I am pretty pleased with what we have been able to accomplish to 
date. I have worked with all kinds of companies. I have worked with the 
unions. I have worked with some trial lawyers. And I have worked with 
insurance companies, reinsurers. You name them--they have been to 
Senator Nelson's office and my office. And Senator Nelson has worked 
long and hard and diligently side by side with me to be able to come up 
with what we have right now, which is a pretty darn good package and a 
good bill.
  I am proud of the product we are putting forth today, but we are not 
done. We know that. But we have made significant progress.
  Let me tell you what this bill does. We pay victims faster. The FAIR 
Act creates a fair and efficient system to resolve claims of asbestos 
victims in a reasonable way that enables legitimate claimants to obtain 
recovery much faster and easier than the current system. A new 
specialized court will pay eligible claimants through a no-fault system 
within just a few months. Asbestos victims will no longer have to wait 
several years or more to be paid.
  Our proposal will streamline the process and decrease the need for 
attorneys so that claimants will be able to retain more of their 
awards, without huge attorney's fees or transaction costs. Transaction 
costs--most specifically, attorney's fees--have drained essential 
resources in the current system, to the point where there will not be 
resources for those who are truly ill, unless we do this bill.
  Non-sick claimants will no longer deplete resources that should pay 
the truly sick victims. In order to direct the resources to those most 
in need, the FAIR Act implements measured medical criteria and fair 
dollar values for claimants so that all those who are sick will be able 
to get compensation. The medical criteria are modeled on the 2002 
Manville Trust Distribution Process. These standards were intensely 
negotiated with the plaintiff's bar before they were enacted, and they 
represent a fair guideline for determining the respective diseases, and 
for

[[Page 12814]]

determining who is impaired and who is not. For those who are not sick, 
we provide medical monitoring. If and when they become sick, they are 
ensured access to the fund. This is the FAIR approach.
  Payments in the new court process will be fair and reasonable. 
Claimants will have a reasonable expectation of the amount they will 
receive. There will not be any more runaway jury awards for people who 
have never actually been sick, draining the resources away from the 
victims who truly need our help.
  We provide stability and certainty. In order to get the stability we 
need for victims and the economy, the Fair Act is the exclusive remedy 
for asbestos personal injury claims. There will be no more ``forum 
shopping'' abuses that have made a mockery of our justice system where 
some legitimate victims are currently left with no recourse while 
others with no illness at all receive windfalls.
  We have taken great pains to ensure adequate funding for claim 
awards. Awards to claimants are paid out of a newly created fund 
consisting of contributions over a 25-year period from both the 
bankrupt and solvent defendants with asbestos liabilities and insurance 
and reinsurance companies with policies covering asbestos personal 
injury claims.
  The business community receives the certainty they need to protect 
jobs and pensions. In our legislation, we set out mandatory funding of 
$90 billion from industry and insurers, with an additional $4 to $6 
billion or more available from current asbestos trusts, and the 
authority to assess another $14 billion from companies that may be 
avoiding future liability. I am really pleased that the various 
companies and industry have come together on this. Defendant companies 
have reached an agreement on allocating their $45 billion in 
contributions. I am encouraged that the insurers continue to work 
toward a similar agreement. For now, we have in place a Blue-Ribbon 
commission that can make those determinations should the insurers be 
unable to resolve their shares. Overall, the business community has 
really made tremendous progress to provide funds that are projected to 
compensate victims appropriately and for the next 50 years.
  They haven't been happy to do that but they are going to have to do 
that. They are not happy with this $108 billion trust fund. It is at 
least $18 billion more than what they were willing to pay. But I 
believe that they will, in the end, have to come along with this bill. 
And many of them are saying that right now. They are not happy but they 
realize that we are trying to resolve this in a way that is fair to 
everybody.
  We all want to ensure that there is enough money in the fund to 
compensate claimants. Toward that end, I have included provisions such 
as a payment guarantee surcharge account and an orphan share account 
where additional funds will be set aside to grow and be available in 
the unlikely event of a shortfall. In addition, I provide for 
contribution obligations to be a priority in bankruptcy and for 
Attorney General enforcement of contribution obligations.
  Over the last few days since I circulated the FAIR Act, I have 
received a lot of helpful feedback. As a result, we have made a number 
of changes in response to reasonable concerns. I expect we will make 
more down the road. All we have to do is have reasonable people work 
with us in good faith, and we are going to try to improve this bill 
every step of the way. But we have a limited time in which to get this 
done. Anybody who does not understand that is going to be somebody who 
destroys or at least attempts to destroy the only game in town, the 
only way we can resolve these problems.
  We have received some suggestions from Senators Leahy and Dodd. I 
commend their interest in and leadership on this issue. They have 
provided some valuable suggestions which we will study. We have already 
incorporated some of their suggestions in the bill we introduce today.
  First, we have included language that permits the Administrator of 
the fund to refer to the Attorney General for enforcement any 
information received regarding violations of EPA or OSHA regulations.
  Second, we specify that life insurance will not be counted as a 
collateral source offset to any award granted to victims.
  Third, as a further safeguard against imbalance in the appellate 
procedure, we ensure that the judges of the en banc panel of the new 
U.S. Court of Asbestos Claims are assigned randomly.
  We are considering other proposed suggestions that will further our 
progress on this issue. Again, I want to thank my colleagues on the 
other side of the aisle who have been engaged in this issue over the 
last several months, especially my cosponsors, Senators Nelson and 
Miller, as well as Senators Leahy, Dodd, Carper, Levin, and Feinstein, 
who are contemplating cosponsorship down the line but have not been 
able to do so as of this date. I encourage them to stay involved and 
work with us during this process.
  I also want to thank the leadership of Senators DeWine, Voinovich, 
Brownback, Nickles, and Zell Miller in particular, who all share my 
view that this asbestos crisis must be resolved. I know there are other 
issues that remain. The issue of a potential shortfall in funding at 
the end is certainly an important one. I think we can work together to 
address this issue, although it is premature to come up with a solution 
to that right now. Perhaps exploring private insurance mechanisms or 
some other avenue may be the way to go. I don't know. But we are 
willing to listen.
  We have to start now, or we don't have a chance of getting a bill 
through that will help all of those concerned in this area, from the 
unions to the smallest company and the largest company. As I have said 
before, I oppose making taxpayers responsible for any potential 
mismanagement of the fund. If we employ appropriate medical criteria to 
ensure that those who are actually sick receive the compensation, that 
will go a long way toward increasing the manageability of this fund so 
that we don't have to worry about a shortfall. With our funding levels 
set at the highest level of current projection, I do not expect a 
shortfall to occur, and I don't think others do as well who have done 
the accounting work on this. But we can find a way to give more comfort 
to those who believe that even the highest level may underestimate the 
number of claims. If the medical criteria are reasonable, then it will 
be much easier to resolve the issue of ensuring that there will be 
enough funds to redress future claimants.
  As I have mentioned to my colleagues, if the desire for a legislative 
solution is genuine, then we must take a position and move forward with 
the legislative process. This complex legislation will require our 
collective efforts and our serious cooperation.
  I would like to go to this chart. This chart is on the effects of 
asbestos bankruptcies on workers. A lot of people don't realize, a lot 
of union members don't realize how serious this is. According to a 
study by the notable Nobel-winning economist, Joseph Stiglitz, 
commissioned by the American Insurance Association, entitled ``The 
Impact of Asbestos Liabilities on Workers in Bankrupt Firms'' in 
December of 2002, bankruptcies led to a loss of an estimated 52,000 to 
60,000 jobs. That was in 2002. It is higher now. Each displaced worker 
at the bankrupt firms will lose on average an estimated $25,000 to 
$50,000 in wages over his or her career because of periods of 
unemployment and the likelihood of having to take a new job paying a 
lower salary. The average worker at an asbestos-elated bankrupt firm 
with a 401(k) plan suffered roughly $8,300 in pension losses, which 
represented on average roughly a 25-percent reduction in the value of 
the 401(k) account.
  That is important. If we don't solve this problem within the next 
month, I believe we will have many more companies headed towards 
bankruptcy with a loss of jobs, a loss of high-paying jobs, a loss of 
union members' jobs. I believe in the end, the unions will go broke, 
too. Because if they have any guts at all and any desire to help their 
members, they will have to help pick up the health costs for these 
people

[[Page 12815]]

among other things. But the pensions are going to be gone. The union 
jobs will be gone. That is why we have to do something now, not keep 
trying to get blood out of a stone. Unfortunately, we have some who 
want to do that.
  Let me go to this next chart, which is the New York Times. This shows 
the surge in asbestos suits, many by healthy plaintiffs. The ones who 
are very injured, cancer ones, are represented by the red line on the 
bottom. Look at the black line, which is noncancer victims, many of 
whom have never suffered a sick day in their lives who are now 
approaching 70,000 claims, many of whom show no signs of being sick at 
this point. We provide medical monitoring for them during the lifetime 
of this trust. We pay for it. If they get sick at any time, they can 
come in and on a no-fault basis get their compensation without having 
to pay exorbitant attorney's fees or transactional costs. This is 
something I think every worker should be cheering and hoping for.
  The impact of bankruptcy on employment: After adjusting for the 
changes in industry employment, the firms for which we have data lost 
51,970 jobs in the 5 years prior to bankruptcy. That is a couple years 
ago. It is a lot worse than that now. Assuming that employment losses 
at the firms for which we lack data were proportionate to those for 
which we have data, the implied total employment loss would be roughly 
60,000.
  Now, with regard to the change in employment in 5 years prior to 
bankruptcy, after accounting for changes in industry employment, in 
firms filing for bankruptcy before January 1998, was 24,551, the number 
of jobs lost. Firms filing for bankruptcy after January 1998, 27,419 
jobs. Total for firms with data, 51,970. The estimated total for all 
bankrupt firms is 60,000 as of the day that was done. I believe it is 
now over 70,000.
  This is a serious issue. We have to get serious about it. I have 
tried to work in good faith on behalf of everybody involved. I am 
calling on all parties--from the unions to the reinsurers--to get 
together with us and help us to improve this bill.
  But realize there is only so much blood you can get out of this 
stone. If we don't do that, there are going to be hundreds of thousands 
of union jobs and other jobs lost that literally are going to be 
devastating to this country and to the individuals involved; and we 
would deserve the blame in the Congress because this bill would go a 
long way toward solving it.
  Having said that, I praise my colleague, Senator Nelson of Nebraska, 
and the other cosponsors of this bill. Without Senator Nelson and his 
encouragement over the last number of months, I don't think we would 
have reached this far. He has had the guts to cosponsor this bill at 
this time, and I have nothing but respect for him, and also Senator 
Miller as well on his side, and the others on our side, who are willing 
to stand up. I haven't talked to a lot of Senators about cosponsoring, 
but I will. I pay tribute to my colleague for his stalwart support in 
trying to do something about this tremendous set of problems we have in 
our society today.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. NELSON of Nebraska. Mr. President, thank you for the opportunity 
to appear here with my colleague from Utah to say how much I appreciate 
the opportunity to cosponsor with him and others this very important 
legislation.
  I should also say that when I went to the ranking member, Senator 
Leahy, a year or so ago and talked about how difficult an issue this 
was and how difficult it was becoming, he was gracious and granted a 
hearing, and he has worked very diligently to make certain this issue 
gets the kind of exposure it should. He has also worked toward finding 
solutions to it. Senator Dodd has also worked tirelessly on this issue, 
and they both remain very interested in finding a solution.
  My colleague from Utah has outlined very clearly much of the 
statistical support for this kind of legislation. Historically, in the 
early 1970s, lawsuits against the asbestos manufacturers opened the 
door for victims suffering from asbestos-related diseases to be justly 
compensated for their issues, and they were.
  When Johns-Manville--the largest asbestos manufacturer--filed for 
bankruptcy in 1982, there were fewer than 20,000 asbestos cases, most 
on behalf of individuals with severe asbestosis or mesothelioma--a 
vicious asbestos-related cancer. The system worked. Sick people and 
their families were given the financial security they deserved.
  But then the system stopped working. A flood of cases overwhelmed 
it--some from individuals who were not yet sick but could potentially 
get sick in the future. We don't want to prevent these individuals from 
recovering down the road, but we also need to work toward allowing 
those who are sick now to recover now. With the current docket load, 
that just isn't happening. Over 90,000 new asbestos lawsuits were filed 
in 2001 alone, representing an increase of 30,000 from the previous 
year. However, the American Academy of Actuaries estimates that there 
are only about 2,000 new mesothelioma cases filed each year, another 
2,000 to 3,000 cancer cases that are likely attributable to asbestos, 
and a smaller number of serious asbestosis cases. As a result, we need 
to work toward finding a way to address the lawsuits of seriously ill 
individuals immediately without eliminating the ability for those who 
may become sick in the future to have their case addressed at the 
appropriate time.
  The unfortunate result of these tens of thousands of lawsuits is that 
people who are seriously sick and dying from asbestos must wait longer 
to recover less money than they deserve--if they can recover anything 
at all. After transaction costs and fees for both plaintiff and defense 
lawyers, only about one-third of the money spent on asbestos litigation 
will actually reach the claimants.
  Moreover, as insurance is depleted and an increasing number of these 
defendants declare bankruptcy, it is inevitable that many asbestos 
victims who develop cancer in the future will go uncompensated, unless 
we take the action this bill will provide.
  The economic fallout from this situation, though, extends beyond sick 
victims. Because every company that manufactured asbestos is now 
bankrupt, plaintiffs have been forced to seek alternative defendants to 
take their place. According to the Rand Institute for Civil Justice, 
300 firms were listed as defendants in asbestos cases in 1983. But by 
2002, Rand estimates that more than 6,000 independent entities have 
been named as asbestos liability defendants. More recently, another 
Rand Institute study has estimated that there is about $200 billion in 
pending asbestos claims. Many of these new defendants are small 
businesses located in every community across the country, with little 
or no actual connection to asbestos.
  I have heard from scores of small businesses in my State--local 
hardware stores, plumbing contractors, auto parts dealers, lumber 
yards--and none of these businesses manufactured it. Many did not sell 
it or install it. But these businesses and the jobs they represent are 
at stake. They are now afraid that as primary asbestos defendants 
declare bankruptcy, they will be next in line for the thousands of 
cases being filed and their businesses will not, therefore, survive.
  As the Wall Street Journal reported recently:

       Lawsuits are now piling up against consultants, engineering 
     firms, plant owners, and maintenance and construction 
     contractors, all of whom are being blamed for workers' 
     exposure to asbestos.

  Also, part of this litigation is now being targeted at insurance 
providers. As the same story states:

       Many of the smaller [companies] lack resources to defend 
     thousands of lawsuits or pay huge verdicts. But the companies 
     do have one thing in common: plentiful insurance.

  As the number of asbestos claims filed each year has nearly tripled 
in the last 5 years, the pace of asbestos-related bankruptcies has also 
accelerated dramatically.
  Since 1998, more companies have filed for bankruptcy protection than 
in the

[[Page 12816]]

previous 20 years combined; and in the first 7 months of 2002 alone, 12 
companies facing significant asbestos liability went bankrupt--more 
than in any other 3-year period before 1999. Firms declaring bankruptcy 
since 1998 employed more than 120,000 workers prior to their filing, 
many of whom were significantly invested in their company's stock, 
pension, and 401(k) plans.
  According to Fortune magazine, for example:

       [A]t the time of the Federal-Mogul's bankruptcy filing [in 
     2001], employees held 16 percent of the company's stock, 
     which had lost 99 percent of its value since January 1999.

  It was reported that Federal-Mogul employees lost over $800 million 
in their 401(k). Similarly,

       [A]bout 14 percent of Owens Corning's shares--which lost 97 
     percent of their value in the two years before its filing--
     were owned by employees.
  I think we can all agree that those individuals with legal claims who 
are truly very sick need to be taken care of in the most timely and 
equitable manner possible. That must be our No. 1 priority. We must 
also work to ensure that those who are not sick now, but may become 
sick in the future, are not precluded from recovery and that there are 
still funds available for such a recovery.
  Mr. President, this bill, as it is currently, begins the process of 
doing just that. And as indicated by my colleague, it is a work in 
progress. There are many opportunities yet to modify and to improve it 
as we go through this process. That is what the hearing will be about, 
and that is what the negotiation would be about.
  I am a strong believer that every American has a right to their day 
in court, but I also believe people dying of asbestos-related disease 
deserve just compensation for themselves and their families. 
Fortunately, we are coming closer to being able to restore balance to 
the system. The fund is in the process of being created that will, I 
hope, provide a pool of lasting benefits for those with meritorious 
claims. At the same time, this fund will spread the burden of the cost 
more evenly and ensure the financial impact will not solely be directed 
at some parties due to their ability to pay rather than their true 
liabilities.
  There are a number of task that remain to be done, and we recognize 
that, and we welcome the opportunity to bring all those folks together 
to make sure we come together with the best possible bill that will do 
the best possible job for those who are truly sick and those who will 
become sick.
  We are now at a time, I believe, when this issue can be and should be 
resolved, perhaps not once and for all, as some would hope, but for a 
good long while, giving us a chance to restore stability and certainty 
to a very uncertain issue.
  While this may not be a perfect bill, as they say, we must not let 
our desire for the perfect become the enemy of the good. Much work 
remains to be done, but I hope the parties, the stakeholders, will come 
together and work with us to refine the bill.
  I look forward to working with Members on all sides who truly are 
striving to ensure that those who have been injured the most have an 
opportunity to make their cases heard.
  I thank the Chair and I yield the floor.
  The PRESIDING OFFICER. The Senator from Montana.

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