[Congressional Record (Bound Edition), Volume 150 (2004), Part 4]
[Senate]
[Pages 4845-4847]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          ASBESTOS LEGISLATION

  Mr. SPECTER. Mr. President, I have sought recognition to comment 
briefly on the bill, S. 1125, which provides for relief on the serious 
problem facing America involving asbestos.
  I have had a number of inquiries on the status of the bill. I 
recently received a comprehensive memorandum by former Chief Judge 
Edward R. Becker for the Court of Appeals for the Third Circuit. I 
thought it would be useful to comment as to the status of this bill at 
the present time.
  Asbestos litigation has caused some 67 bankruptcies in America, and 
the injuries from asbestos have left workers without compensation and 
suffering from mesothelioma, asbestosis, and other very serious 
ailments. In July, the Judiciary Committee passed out S. 1125. I voted 
for it. It was a vote pretty much along party lines. We passed it out 
of committee so we could take the next step looking toward floor 
action.
  But the bill required a great deal of evaluation, analysis, and 
significant changes. I contacted senior Circuit Judge Edward R. Becker, 
who had been chief judge of the Court of Appeals for the Third Circuit 
until May 5 of last year. Since he had been involved in major asbestos 
litigation, I thought he would have special insights into this issue 
and this problem. He is one of America's leading Federal jurists, if 
not the leading Federal jurist. He received the Devitt award last year 
as the author of many scholarly opinions. He was a district judge from 
1970 to 1982. He has been on the Court of Appeals for the Third Circuit 
from 1982 until the present time.
  I think bringing in a Federal jurist to help on a legislative matter 
is unprecedented. During the month of August, when the Senate was in 
recess, 2 full days were spent in Judge Becker's chambers in 
Philadelphia, where I attended, and we had representatives from the 
manufacturers of asbestos; insurance companies, which insured asbestos 
manufacturers; reinsurers, who reinsured the insurers; representatives 
of the AFL-CIO, representing the injured parties; and trial lawyers, 
also representing the injured parties.
  Since those two meetings in August, there have been a series of 
additional meetings in Washington in my office, where Judge Becker has 
attended. One meeting involved Majority Leader Bill Frist. Another 
meeting involved representatives of the Department of Labor. In total, 
there have been some 15 meetings. We are scheduled to have our 16th one 
on Thursday of this week.
  The bill--the product of very inventive thinking by the chairman of 
the committee, Senator Hatch--has created a fund, funded initially at 
$104 billion. It has subsequently been increased. The thrust was to 
create a schedule of payments very much like workers' compensation, 
where there would not have to be proof of causality, proof of 
liability; but once the damages were established coming from asbestos, 
the payments would follow this schedule.
  The situation has been compounded, as I say, by the bankruptcy 
proceedings and the reorganization of some 67 companies. The law has 
been that workers, or others exposed to asbestos, could be compensated 
for the full range of their potential injuries even if they had not yet 
sustained those injuries--a result which I submit does not make good 
sense in a context where many people who have serious injuries, 
mesothelioma, asbestosis, and others who are not being compensated at 
all. This seeks to correct those inequities.
  We have wrestled with a great many of the problems, and we have 
solved a great many issues. Enormous progress has been made on others. 
We have had the cooperation of many Senators. Senator Hatch has had 
representatives at the meeting. Senator Leahy, the ranking Democrat, 
has had representatives there. The majority leader, Senator Frist, and 
the Democratic leader, Senator Daschle, have had representatives there. 
Senators Dodd, Carper, Feinstein and Nelson have also participated with 
representatives present. Judge Becker prepared a very comprehensive 
memorandum, dated March 16, outlining the evaluation of the current 
status of ongoing efforts to achieve a consensus among the 
manufacturers and insurers, the trial lawyers, and the AFL-CIO.
  It is my view that this is the kind of bill that cannot be enacted 
unless there is a consensus. Unless there is agreement among all of the 
stakeholders or parties, I think we will not be able to enact this 
important legislation. If this legislation were to be enacted, it would 
be an enormous stimulus to the economy and would take these many 
companies that are in bankruptcy proceedings out of those proceedings 
so that they become again productive.
  Many of those companies are in my home State of Pennsylvania and many 
across the country.
  That is a very brief summary as to where we stand. We will be back at 
work on Thursday. We are determined to solve these problems. I am 
optimistic they can be solved. The majority leader has stated his 
intention to bring this matter to the floor for a vote some time next 
month. I think we are very close to knowing whether we can resolve 
these issues, and we will continue to try to do that.
  I repeat, I am optimistic we can resolve the issues. The stakes are 
very high. We have many injured workers who are relying upon some 
answer to their just compensation. The companies are looking for an 
answer, and the economy needs to be stimulated and also looks for an 
answer.
  I ask unanimous consent that the memorandum from Senior Chief Judge 
Edward R. Becker, dated March 16, 2004, be printed in the Record.

[[Page 4846]]

  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                               Memorandum

     Date: March 16, 2004.
     To: Senator Arlen Specter.
     From: Judge Edward R. Becker.
     Re: Pending Asbestos Legislation S. 1125 (Fairness in 
         Asbestos Injury Resolution Act) (Status Report on 
         Progress of our Mediation).
       You have asked that I memorialize my evaluation of the 
     current status of our ongoing efforts to achieve a consensus 
     among the manufacturers and other defendant companies, the 
     insurers, the reinsurers, organized labor, and the trial 
     lawyers, i.e., the stakeholders concerned with S. 1125, so as 
     to facilitate consideration of the legislation by the Senate 
     and make possible its ultimate passage in a form satisfactory 
     to the stakeholders and the Senate. This is an interim 
     evaluation. I will be in better position to evaluate the 
     situation after the weekly meeting this Thursday, March 18, 
     2004. That is because at our meeting of March 11, it was 
     represented to us that draft legislative language with 
     respect to a number of key issues, including ``start-up'' of 
     the National Trust Fund, on which the stakeholders are 
     apparently close to consensus, will be presented on March 18. 
     The start-up consensus, as I understand it, is to have the 
     insurers and manufacturers put up substantial sums on ``day 
     one'' so that the Fund can be jump-started and exigent claims 
     can come right into the Fund and not have to linger in the 
     tort system. I have urged that language be drafted to 
     authorize Bankruptcy Courts to approve immediate payments by 
     the Tier 1 (Chapter XI) companies into the Trust Fund. I will 
     give you a follow-up evaluation after the March 18 meeting.
       As you know we have made enormous progress over the last 
     few months on quite a number of issues, and already have a 
     clean consensus draft of a comprehensive administrative 
     structure for processing claims which, subject to review by 
     Senate Legislative Counsel, can go right into the bill. Based 
     on representations at recent meetings, I believe that we can 
     expect (consensus) bill language in the next week or two, 
     tying up the few loose ends on the administrative structure, 
     particularly the statute of limitations issue and the 
     definition of exigent claims. The issue of limits on 
     attorney's fees will also have to be resolved, but I think 
     that is do-able. I also expect very shortly consensus bill 
     language covering non-discrimination by health insurers with 
     respect to coverage against workers receiving benefits under 
     S. 1125; and engrafting into S. 1125 Health Insurance 
     Portability & Accountability Act (HIPAA) presumptions 
     regarding exposure criteria; i.e., rebuttable presumptions 
     concerning the extent to which employment (a) in specific 
     industries, (b) in specific occupations within those 
     industries, and/or (c) during specific time periods 
     constitutes ``significant occupational exposure.''
       There are quite a number of other issues on which the 
     stakeholders represent that they are close to agreement 
     including:
       1. Values as a range
       2. Timing of payments
       3. Exclusivity for all asbestos related claims (silica, 
     etc.)
       4. The anatomy of medical monitoring
       5. Collusive default judgment
       6. The smoking matrix.
       These matters can, I believe, be put into consensus bill 
     form quickly, and I will seek to establish a timetable at 
     Thursday's meeting.
       Another key area on which the parties seem close to 
     agreement is the status of settlements and pending cases. The 
     views that you expressed--that a case that has been settled 
     should be out of the National Trust--seemed to be accepted by 
     all. There were two caveats. One related to partial 
     settlements--with some but not all potential defendants, but 
     I believe that a formula can be worked out to deal with that 
     situation. The second related to generalized agreements 
     between plaintiffs' counsel with large inventory of cases and 
     insurance carriers as to the terms of settlement when the 
     cases become ripe. I do not believe that such ``settlements'' 
     should qualify. I believe that other pending cases should go 
     into the S. 1125 National Trust. I note, however, that there 
     are 300,000 pending cases, and unless start-up can be quite 
     effective Labor would prefer that they be processed in the 
     tort system. I still believe that the pending claim issue is 
     resolvable.
       Another critical area where much progress has been made is 
     ``sunset.'' Based on representations at last week's meeting, 
     I believe that we are in striking distance of an agreement on 
     sunset, including the timing of sunset; program review (so as 
     to anticipate the need for sunset); and return to the tort 
     system. There is some disagreement as to whether the return 
     to the tort system should be in state or federal court. I 
     understand that your position is that the return should be to 
     federal court, so as to avoid the excesses of certain state 
     jurisdictions. I agree, and believe that the stakeholders, 
     with the exception of the trial lawyers, will be satisfied 
     with that result. Another sunset-related issue that is under 
     discussion and needs resolution is whether, in the event of 
     sunset, the Tier 1 companies (those presently in Chapter XI) 
     go back to the Bankruptcy Court, so as to assure that funds 
     dedicated to Bankruptcy not be dispersed (disbursed) at 
     large. I believe that issue too to be capable of early 
     resolution.
       In our recent meeting with high officials of the railroad 
     industry and the rail unions, we discussed in depth the 
     treatment of rail workers with asbestos disease under S. 
     1125. It was the position of the rail unions that the 
     preemption by S. 1125 of the right of rail workers to file 
     claims under the Federal Employers Liability Act (FELA) is 
     unfair because non-rail workers maintain their full rights to 
     seek workers' compensation from their employers for asbestos 
     related diseases. However, our discussion revealed that the 
     supposed discrimination was largely illusory because 95% of 
     the rail workers with asbestos disease are retired and would 
     have no traditional workers' compensation claims. It was 
     acknowledged by all that the scheme of S. 1125 does leave 
     non-retired rail workers modestly worse off than their non-
     rail counterparts, and we charged the stakeholders with 
     coming up with a formula that would create parity. We are 
     awaiting the results of their deliberations. If they do not 
     reach agreement, the Senate could settle it.
       The insurers and reinsurers are struggling to come up with 
     an allocation formula that would obviate the need for an 
     Asbestos Insurer's Commission (appointed by the President). 
     If they cannot, the Commission can remain in the bill (as a 
     kind of ``club''--for S. 1125 already provides that if an 
     allocation formula is agreed to by all participants in each 
     insurer group and approved by the Commission and the House-
     Senate Judiciary Committees, the Commission will terminate. 
     Section 212(2). I have entreated the stakeholders to work on 
     a redraft on the Asbestos Insurer's Commission language, 
     Sec. 219 et seq., which is presently cumbersome, and they 
     have agreed to do so. At the very least, the requirement of 
     100% agreement seems too high. I note that the creation of a 
     Commission is not a matter of great urgency because it is 
     anticipated that the start-up payment of both the insurers 
     and reinsurers will be very substantial, postponing the need 
     for a Commission decision on allocation. We also discussed 
     last week mechanisms for assuring the contributions (and 
     collecting of contributions) from offshore reinsurers. A 
     number of potential statutory provisions were discussed, and 
     I think that this aspect of the matter can be resolved.
       We had a good deal of discussion last week about what to do 
     with pending bankruptcies. I expressed the view, based upon a 
     conversation that morning with the bankruptcy judge who is 
     handing most of the asbestos bankruptcy cases, that it will 
     be quite some time, at least a year and probably a good deal 
     longer, before the major bankruptcies can be resolved; even 
     if plans are agreed upon and are confirmed, the insurers will 
     appeal. Consequently, I urged that the pending bankruptcies 
     be folded into the National Trust. The Tier 1 (Chapter XI) 
     companies are liable under S. 1125 for roughly 20% of the 
     Trust funding, so that their participation in the National 
     Trust is essential. Additionally, it appears that, with fast 
     start up, the claimants will receive compensation from the 
     Trust Fund much more quickly then they would from the 
     bankruptcy trusts. I believe that the stakeholders are 
     comfortable with this view. Drafting is simple.
       It appears that Labor feels that the Tier 1 companies 
     should pay more than S. 1125 provides, i.e. what they would 
     pay on bankruptcy. The Tier 1 companies, however, point out 
     that they will already pay a significantly greater percentage 
     then the non-bankrupt companies, and further argue that any 
     effort to make them pay into the Trust Fund the amount they 
     might have to pay in bankruptcy is not sound, because: (1) in 
     most cases these amounts are at present speculative (usually 
     agreed to by only one class of creditors), and, at all 
     events, subject to approval of the Bankruptcy Court (in one 
     case the Court disapproved); (2) the deal under S. 1125 is 
     different because in bankruptcy they are forever discharged 
     whereas under S. 1125 they may be back in the tort system; 
     and (3) companies such as Armstrong would be dealt a body 
     blow by such a provision. Since the increment is at most $1 
     billion, I do not think that this is a ``deal breaker.''
       I turn now to the few remaining issues. Medical screening 
     and education for high risk workers must be resolved. I do 
     not think that one is too tough. Some technical bankruptcy 
     issues such as the problematic floating Chapter XI lien and 
     some points raised by the Bankruptcy Administration Division 
     of the Administrative Office of the United States Courts must 
     be resolved. These are just drafting problems. There are, 
     however, three critical issues remaining, the second and 
     third of which will make or break the bill, and they are 
     related.
       The first is subrogation of workers' compensation payments 
     (health insurer subrogation is apparently not a problem). 
     Labor firmly believes there should be no subrogation; it 
     represents that no similar federal program provides for it. 
     The insurers and business think there should be subrogation 
     to avoid ``double dipping.'' One major manufacturer 
     represented at the talks did not see failure to provide for 
     workers comp subrogation as a problem, but others thought 
     that

[[Page 4847]]

     the failure to mention subrogation in the bill would alter 
     future behavior by encouraging more comp claims. We charged 
     the stakeholders with ascertaining the dollar amounts 
     involved. I suspect that they are not as great as imagined, 
     especially in view of the number of workers with asbestos 
     disease who are retired. These appears to be a will to work 
     this out.
       The second issue is ``transparency''--the need to assure 
     Labor and the claimants that the funding formula (for 
     insurers and especially manufacturers and other defendants) 
     will yield the sums projected by the bill's sponsors. Labor 
     maintains that on the present record there is no way to know 
     this. Business concedes that there is no extant list of the 
     companies who will be in the various tiers, and that there 
     will not be one. The companies acknowledge that they must 
     come up with a solution to the transparency problem, whether 
     it is joint or several liability, or guarantees, or 
     surcharges, or something else, or there can be no consensus. 
     They have promised to come up with something.
       The final--and most difficult issue--is the funding level. 
     Labor claims that the projected $114 billion is grossly 
     inadequate to pay the needed compensation to the injured 
     workers. This matter is well beyond my portfolio. I believe 
     that Labor must come down considerably from the Leahy-Kennedy 
     values, and that business must ``sweeten'' considerably the 
     Frist values. If all the other issues can be worked out, 
     perhaps the Senate leadership can prevail on the stakeholders 
     to reach agreement on the projected dollars.
       One final comment. I cannot praise too highly the 
     representatives of the stakeholders who have participated in 
     our dialogue. They are working assiduously, constantly (two 
     or three meetings per week), and, in my view, earnestly, and 
     in a spirit of cooperation and in good faith to try to reach 
     consensus. Senate staff has also been of very great help. I 
     believe that if we can keep up the current pace for another 
     four weeks, five at the most, we can get the job done. I may 
     be wrong. The dollars may be the final stumbling bloc, 
     However, I am prepared to give it my ``best shot,'' and to 
     come to your office every week to work with you to keep the 
     ball rolling.

                          ____________________