Senate Report 108-118 - THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2003

[Senate Report 108-118]
[From the U.S. Government Publishing Office]

Calendar No. 239
108th Congress Report
SENATE
1st Session 108-118

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

THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2003

_______

July 30 (legislative day, July 21), 2003.--Ordered to be printed

_______

Mr. Hatch, from the Committee on the Judiciary, submitted the
following

R E P O R T

together with

ADDITIONAL AND MINORITY VIEWS

[To accompany S. 1125]

The Committee on the Judiciary, to which was referred the
bill (S. 1125) to create a fair and efficient system to resolve
claims of victims for bodily injury caused by asbestos
exposure, and for other purposes, reports favorably thereon,
with amendments, and recommends that the bill, as amended, do
pass.

CONTENTS

Page
I. Purposes.........................................................2
II. Legislative History..............................................4
III. Votes of the Committee...........................................5
IV. Background and Need for Legislation.............................16
V. How S. 1125 Works...............................................27
VI. Section-by-Section Analysis and Discussion......................35
VII. Critics' Contentions and Rebuttals..............................58
VIII.Cost Estimate...................................................73

IX. Regulatory Impact Statement.....................................73
X. Additional Views................................................74
Additional View of Senator Grassley...................... 74
Additional Views of Senators Grassley, Kyl, Sessions,
Craig, and Cornyn.................................... 75
Additional Views of Senators Kyl, Grassley, and Sessions. 78
Additional View of Senator Kyl........................... 81
Additional Views of Senators Feinstein and Kohl.......... 184
XI. Minority Views.................................................188
Minority Views of Senator Leahy, Kennedy, Biden, Kohl,
Feinstein, Schumer, Durbin, and Edwards.............. 188
Minority View of Senator Biden........................... 216
XII. Changes in Existing Law........................................218

I. Purposes

The Fairness in Asbestos Injury Resolution Act of 2003
``FAIR Act'' S. 1125, is essential legislation that is needed
to fix a broken system. It will create an alternative, but fair
and efficient system to resolve the claims of victims for
bodily injury caused by asbestos exposure. It is intended to
bring uniformity and rationality to the system so that
resources are directed toward those who are truly sick. It is
also intended to provide economic stability by stemming the
tide of runaway asbestos litigation that has clogged our
courts, bankrupted companies, compensated those who are not
sick at the expense of those who are, and endangered the jobs
and pensions of employees.
The FAIR Act, S. 1125, has five key components:
First--S. 1125 compensates legitimate asbestos victims
faster and on a ``no-fault'' basis. Under the FAIR Act,
asbestos victims' claims are resolved under specific time
limits that enable claims to be processed in under a year, not
including appeals--which are also required to be timely
resolved. In the tort system today, victims face delay and
unpredictable results. Currently, victims must bear the burden
of identifying a specific product, proving that it caused their
illness and showing culpability of a particular defendant,
usually years after the exposure occurred. Moreover, suits by
unimpaired claimants have bankrupted companies and diminished
the funds available for the truly ill. Often times there is no
identifiable party for a claimant to sue, either because the
culpable party has been driven into bankruptcy or it is
impossible to identify the cause of the claimant's exposure.
And when a suit is filed, it is usually several years before
claimants see resolution, and far from certain that they will
obtain compensation. Under S. 1125, victims will receive timely
and certain compensation on a ``no fault'' basis. They will not
need to prove causation or culpability or find a solvent party
in order to be compensated. Instead, with this legislation they
need only satisfy the eligibility requirements under the Act in
order to receive compensation or medical monitoring
reimbursement. S. 1125 establishes fair and balanced
eligibility criteria to ensure that the $108 billion privately
financed Asbestos Injury Claims Resolution Fund (the ``Fund'')
directs compensation to those who are truly sick as a result of
their exposure to asbestos. The mass screenings and other
abuses in the current litigation system will be replaced with a
sound medical diagnosis of an asbestos-related disease by the
claimant's physician. The FAIR Act also takes into
consideration that the most seriously ill should receive
priority and provides for expedited payments. There are special
exceptions for claimants in unique circumstances whose injuries
are also asbestos-related, but who cannot, through no fault of
their own, meet the requirements of the Act. The medical
monitoring that will be available under the FAIR Act for those
who have been exposed but are not sick preserves resources for
those same claimants for the time, if and when, they become
sick. The streamlined administrative process also diminishes
the need for large attorney fees that currently can deplete
claimant awards by as much as 40%.
Second--S. 1125 provides certainty to asbestos victims. In
the current system, claimants who are legitimately sick have no
certainty they will ever be compensated due to the increasing
number of bankrupt companies and the long delays of current
litigation. While some may receive high awards, others receive
nothing at all. S. 1125 sets up a $108 billion fund that is
based on sound statistical data and is projected to be more
than adequate to compensate all present and future eligible
claims. To compound that certainty, S. 1125 includes several
contingent additional funding mechanisms to address any
unanticipated needs of the Fund.
Third--S. 1125 provides economic stability and preserves
jobs and pensions by offering certainty to defendants and
insurers. The FAIR Act ensures that the allocation of payments
into the fund will be fair, rational, and predictable.
Companies are unable to plan for asbestos litigation spending
because of the irrationality and unpredictability of the
current tort system. Even companies with the most tangential
relationship to asbestos have been crushed under the weight of
overwhelming litigation, driving many into bankruptcy and
hurting employees and investors. The legal burden of
compensating victims and paying unimpaired claims is
distributed irrationally. With most of the original asbestos
manufacturers bankrupt, companies with little relationship to
asbestos are targeted with massive suits. Insurers and
reinsurers are affected as well, increasingly threatened with
insolvency due to the current crush of asbestos claims. Under
S. 1125, in return for contributing significant amounts of
money to the Fund, businesses will be able to move forward, a
step that will preserve jobs and pensions and result in broad
economic benefits. An administrative system will provide for
fair, balanced, reasonable, and predictable allocation of
payments by defendant companies and their insurers.
Fourth--S. 1125 ensures that the fund will be administered
simply, fairly, and efficiently. The tort system today is
backlogged and manifestly unfair. The flood of lawsuits in the
tort system, moreover, has led to unacceptable delays; some
seriously ill plaintiffs even die before their suits are
resolved.¹ One such victim was Texas resident Ronald
Bailey who died of mesothelioma in June of 2000, about two
months before his scheduled trial date.² Under S.
1125, claims will be processed efficiently and fairly by the
U.S. Court of Federal Claims through a newly established Office
of Special Asbestos Masters, pursuant to clear standards. Under
this streamlined system, a Special Asbestos Master will
determine eligibility and payments based on fair and balanced
eligibility criteria, including a sound medical basis for all
claims, and payments will be issued by the Fund which will be
run by an Administrator solely for the benefit of asbestos
victims.
---------------------------------------------------------------------------
\1\ See Stephen J. Carroll, et al., Rand Institute for Civil
Justice, ``Asbestos Litigation Costs and Compensation: An Interim
Report,'' 35 (2002). [Hereinafter RAND 2002].
\2\ Thomas Korosec, Enough to Make You Sick: In the struggle for a
shrinking pot of money from asbestos litigation, the sickest victims
are getting nickels and dimes while lawyers get their millions, Dallas
Observer, Sept. 26, 2002.
---------------------------------------------------------------------------
Finally--S. 1125 bans harmful asbestos to help prevent
future illnesses. Although the use of asbestos has largely been
reduced by federal regulations it has not been eliminated. The
FAIR Act seeks to eliminate the risks of future injuries from
asbestos use by prohibiting any further manufacture,
processing, and distribution in commerce of harmful asbestos-
containing products, subject to certain exceptions. S. 1125
would also require that prohibited asbestos-containing products
be disposed of pursuant to federal, state and local
requirements within three years of the date of enactment to
ensure that such products are no longer in the stream of
commerce.
Above all, the purposes of this legislation are to ensure
that people who become sick as a result of exposure to asbestos
are compensated surely, fairly, and quickly, while protecting
the economic viability of defendants, and the employees,
investors, and the communities that depend on them.

II. Legislative History

The asbestos litigation crisis has been under consideration
by Congress for many years with several hearings and multiple
legislative proposals. The most recent events that led to the
introduction of S. 1125, The Fairness in Asbestos Injury
Resolution Act of 2003 (FAIR Act), began in the 107th Congress
when then Chairman Leahy held a hearing on September 25, 2002,
``Asbestos Litigation.'' At that time the Committee heard
testimony from Senator Max Baucus (D-MT) and Senator Ben Nelson
(D-NE) as well as witnesses Fred Barron, Steven Kazan, General
Counsel of the AFL-CIO Jonathan Hiatt, General Counsel of the
Manville Personal Injury Settlement Trust David Austern, and
former Solicitor General Walter Dellinger III. Chairman Hatch
followed up with another hearing on March 5, 2003 ``The
Asbestos Litigation Crisis: It Is Time for Congress to Act''
and testimony was given by Senator Max Baucus (D-MT) and
Senator George Voinovich (R-OH) and witnesses Melvin
McCandless, Brian Harvey, David Austern, President-elect of the
American Bar Association Dennis Archer, Steven Kazan, and
Jonathan Hiatt.
S. 1125 the ``Fairness in Asbestos Injury Resolution Act of
2003 (FAIR Act)'' was introduced in the Senate on May 22, 2003
by Chairman Orrin Hatch (R-UT), Senator Ben Nelson (D-NE),
Senator Mike DeWine (R-OH), Senator Zell Miller (D-GA), Senator
George Voinovich (R-OH), Senator George Allen (R-VA), Senator
Saxby Chambliss (R-GA) and Senator Chuck Hagel (R-NE) and
reported to the Judiciary Committee. Chairman Hatch held a
hearing on S. 1125 on June 4, 2003 ``Solving the Asbestos
Litigation Crisis: S. 1125 the Fairness in Asbestos Injury
Claims Resolution Act of 2003 (FAIR Act)'' and the committee
heard testimony from Senator Patty Murray (D-WA), Senator Chuck
Hagel (R-NE) and from witnesses Professor Laurence H. Tribe,
Dr. James Crapo, Dr. Laura Stewart Welch, Dr. John E. Parker,
Jennifer L. Biggs, FCAS, MAAA, Dr. Mark A. Peterson, Prof.
Frederick C. Dunbar, Prof. Eric D. Green and Dr. Robert
Hartwig.
S. 1125 was considered by the committee during Executive
Business meetings held on June 19, 24, 26, 2003 and July 10,
2003. The Committee approved S. 1125 on July 10, 2003 by a
rollcall vote of 10 yeas, 8 nays and 1 pass. The Committee then
ordered S. 1125 favorably reported with amendments.

III. Votes of the Committee

Pursuant to paragraph 7 of rule XXVI of the Standing Rules
of the Senate, each Committee is to announce the results of
rollcall votes taken in any meeting of the Committee on any
measure or amendment. The Senate Judiciary Committee, with a
quorum present, met on June 19, 24, 26, 2003 and July 10, 2003
at 9:30 am to markup S. 1125. The following votes occurred on
S. 1125.
Vote on: Agreed Upon Amendments: Indexing all awards for
future inflation; removing collateral source offsets; doubling
the statute of limitations; coverage for claimant exposures on
U.S. flag ships or while working for U.S. companies overseas;
strengthening enforcement of contributions; recoupment
authority for the administrator; criminal penalties for fraud
or false information; bankruptcy certification; congressional
oversight--administrator annual reports; and, Hatch technical
amendments to S. 1125.
Date of markup: June 24, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... ............
Mr. DeWine................................................ X
Mr. Sessions.............................................. ............
Mr. Graham................................................ ............
Mr. Craig................................................. X
Mr. Chambliss............................................. ............
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... X
Mr. Biden................................................. ............
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. X
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Agreed Upon Amendments: Hatch Asbestos Ban;
Feinstein Second Degree to Hatch Asbestos Ban; Leahy FOIA
amendment for the Commission; and, Leahy FOIA amendment for the
Office of Asbestos Injury Claims Resolution.
Date of markup: June 24, 2003.

Vote on: Leahy/Hatch Medical Criteria Amendment.
Date of markup: June 24, 2003.

Vote on: Agreed Upon Amendments: Grassley/Leahy/Feinstein/
Durbin Asbestos Court Amendment; Grassley Federal Liability
Amendment; Leahy Environmental Crimes Amendment; and Leahy
Successor in Interest Amendment.
Date of markup: June 24, 2003.

Vote on: Durbin/Kyl Hardship Amendment that would double
the caps for the financial hardship and inequity adjustments;
permits the inequities panel to consider a participant's
litigation successes when assessing prior asbestos
expenditures; and requires a reduction in contribution
allocation if a participant's exposure was remotely attenuated
under certain circumstances.
Date of markup: June 24, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... ............
Mr. DeWine................................................ X
Mr. Sessions.............................................. X
Mr. Graham................................................ ............
Mr. Craig................................................. X
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... X
Mr. Biden................................................. ............
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. X
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Sessions Pro Bono Amendment that would require the
Asbestos Court to provide information to claimants of the
availability of pro bono representation. Attorneys would have
to provide notice of pro bono representation.
Date of markup: June 24, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... ............
Mr. DeWine................................................ X
Mr. Sessions.............................................. X
Mr. Graham................................................ ............
Mr. Craig................................................. X
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. ............
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. X
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Kohl/Feinstein Contingent Call Amendment, which
would require reductions of participants' contributions if the
Administrator can certify the fund has and will continue to
fully pay compensation awards. The amendment also allows the
Administrator, if necessary, to request $1 billion in the
aggregate from defendant participants and $1 billion from
insurer participants beginning in the 28th year. This is a
voluntary contribution, whereby non-payment subjects the
participant to the tort system. If this occurs, the statute of
limitations is tolled. This amendment was amended with a Hatch
2nd degree amendment, allowing defendant companies to continue
paying into the fund after year 27 or else re-enter the tort
system in Federal Court only.
Date of markup: June 26, 2003.

[Approved--members indicated were present when the motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... X
Mr. DeWine................................................ X
Mr. Sessions.............................................. X
Mr. Graham................................................ ............
Mr. Craig *............................................... X
Mr. Chambliss............................................. X
Mr. Cornyn *.............................................. X
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. ............
Mr. Kohl.................................................. X
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin *.............................................. X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------
* Members indicated opposed the Amendment.

Vote on: Kyl Lock Box Amendment, that would insert a new
Sec. 223(e) into S. 1125, as amended with new Hatch criteria,
that requires a ``lock box account'' to ensure compensation
will be available for claimants who fall into specified medical
criteria categories with more significant impairment.
Date: June 26, 2003.

[Approved by a vote of 10 yeas, 9 nays]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ P ............
Mr. Specter................................. X ............
Mr. Kyl..................................... X ............
Mr. DeWine.................................. X ............
Mr. Sessions................................ X ............
Mr. Graham.................................. X ............
Mr. Craig................................... X ............
Mr. Chambliss............................... X ............
Mr. Cornyn.................................. X ............
Mr. Leahy................................... ............ X
Mr. Kennedy................................. ............ P
Mr. Biden................................... ............ P
Mr. Kohl.................................... ............ P
Mrs. Feinstein.............................. ............ P
Mr. Feingold................................ ............ P
Mr. Schumer................................. ............ P
Mr. Durbin.................................. ............ P
Mr. Edwards................................. ............ P
Mr. Hatch, Chairman......................... X ............
------------------------------------------------------------------------

Vote on: Hatch Insurance Commission Amendment that would
amend the Asbestos Insurance Commission by broadening criteria
considered in allocations, clarifying insurer and re-insurer
obligations.
Date of markup: June 26, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... X
Mr. DeWine................................................ X
Mr. Sessions.............................................. X
Mr. Graham................................................ X
Mr. Craig................................................. X
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. ............
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ ............
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Agreed Upon Amendments: Hatch/Leahy Takehome
Exposure Amendment; Revised Hatch Congressional Findings
Amendment; Hatch Insurer Commission and Asbestos Ban Technical/
Non-technical Amendments and the Hatch Technical Amendment for
Tier I Allocation.
Date of markup: July 10, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. X
Mr. Specter............................................... X
Mr. Kyl................................................... X
Mr. DeWine................................................ ............
Mr. Sessions.............................................. X
Mr. Graham................................................ ............
Mr. Craig................................................. ............
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... X
Mr. Biden................................................. ............
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Leahy/Kennedy Claims Value Amendment would
increase awarded values for the 10 disease categories under the
bill.
Date: July 10, 2003.

[Defeated by a vote of 10 nays, 9 yeas]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ X
Mr. Specter................................. ............ X
Mr. Kyl..................................... ............ X
Mr. DeWine.................................. ............ X
Mr. Sessions................................ ............ X
Mr. Graham.................................. ............ P
Mr. Craig................................... ............ P
Mr. Chambliss............................... ............ X
Mr. Cornyn.................................. ............ X
Mr. Leahy................................... X ............
Mr. Kennedy................................. X ............
Mr. Biden................................... P ............
Mr. Kohl.................................... X ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ P ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. X ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Feinstein $108 Billion Claims Values Amendment
would raise the amount of money many victims can recover under
the fund with an aggregate cost of $108 billion.
Date: July 10, 2003.

[Defeated by a vote of 10 nays, 9 yeas]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ X
Mr. Specter................................. ............ X
Mr. Kyl..................................... ............ X
Mr. DeWine.................................. ............ P
Mr. Sessions................................ ............ X
Mr. Graham.................................. ............ X
Mr. Craig................................... ............ X
Mr. Chambliss............................... ............ X
Mr. Cornyn.................................. ............ X
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden................................... P ............
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ P ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. X ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Graham/Feinstein/DeWine Claims Values Amendment
with new values.
Date: July 10, 2003.

[Approved by a vote of 14 yeas, 3 nays, 2 voting pass]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ P
Mr. Specter................................. X ............
Mr. Kyl..................................... ............ X
Mr. DeWine.................................. X ............
Mr. Sessions................................ ............ P
Mr. Graham.................................. X ............
Mr. Craig................................... X ............
Mr. Chambliss............................... P ............
Mr. Cornyn.................................. X ............
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden *................................. ............ ............
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ P ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards *............................... ............ ............
Mr. Chairman................................ X ............
------------------------------------------------------------------------
* Voting pass.

Vote on: Kohl/Leahy Financing Amendment that would increase
the amount of contributions to the Fund by defendant and
insurer allocations from $45 billion to $52 billion each and
strikes the ``additional contributing participants'' section
(Sec. 225).
Date of markup: July 10, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... X
Mr. DeWine................................................ X
Mr. Sessions.............................................. ............
Mr. Graham................................................ X
Mr. Craig................................................. X
Mr. Chambliss............................................. ............
Mr. Cornyn................................................ ............
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. X
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Feinstein Start-up Amendment would provide that
none of the preemption, removal or dismissal provisions of the
bill would become effective until the Trust Administrator
determines that the fund is fully operational and processing
claims. This amendment was approved subject to Kyl provisions
prohibiting claimant double dipping and the offsetting of
payments made by defendants and insurers post enactment but
prior to the fund being up and running.
Date of markup: July 10, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... X
Mr. DeWine................................................ X
Mr. Sessions.............................................. ............
Mr. Graham................................................ X
Mr. Craig................................................. X
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. X
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Durbin Mesothelioma Amendment would exempt from
trust fund and leave in the tort system pending claims dealing
with levels IV through VIII which were filed on or before the
FAIR Act was introduced.
Date: July 10, 2003.

[Defeated by a vote of 10 nays, 9 yeas]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ P
Mr. Specter................................. ............ X
Mr. Kyl..................................... ............ P
Mr. DeWine.................................. ............ X
Mr. Sessions................................ ............ P
Mr. Graham.................................. ............ X
Mr. Craig................................... ............ X
Mr. Chambliss............................... ............ X
Mr. Cornyn.................................. ............ X
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden................................... X ............
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ P ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. P ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Durbin Federal Employers' Liability Act (FELA)
Amendment removes the FAIR Act's preemption of FELA claims for
asbestos injuries, and would leave those claims in the tort
system.
Date: July 10, 2003.

[Defeated by a vote of 10 nays, 9 yeas]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ P
Mr. Specter................................. ............ X
Mr. Kyl..................................... ............ P
Mr. DeWine.................................. ............ X
Mr. Sessions................................ ............ P
Mr. Graham.................................. ............ X
Mr. Craig................................... ............ X
Mr. Chambliss............................... ............ X
Mr. Cornyn.................................. ............ X
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden................................... X ............
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ P ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. P ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Biden Sunset Amendment would insert into the bill
a provision that requires the FAIR Act to immediately sunset
after 90 days if, in the Administrators' annual report, he
cannot certify that at least 95% of all of the previous years'
claims have been paid. Any applicable statute of limitations
for filing asbestos claims will be deemed tolled.
Date: July 10, 2003

[Approved by a vote of 15 yeas, 4 nays]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ P
Mr. Specter................................. X ............
Mr. Kyl..................................... ............ P
Mr. DeWine.................................. X ............
Mr. Sessions................................ ............ P
Mr. Graham.................................. X ............
Mr. Craig................................... X ............
Mr. Chambliss............................... X ............
Mr. Cornyn.................................. X ............
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden................................... X
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ X ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. P ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Biden Inequity Amendment would permit an inequity
adjustment for a company whose contribution rate, as a
percentage of gross revenues, is exceptionally high compared to
the median contribution rate for other companies in the same
tier.
Date of markup: July 10, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... ............
Mr. DeWine................................................ X
Mr. Sessions.............................................. ............
Mr. Graham................................................ X
Mr. Craig................................................. X
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. X
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. X
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Feingold Payments Amendment as modified to ensure
all payments should be paid within 3 years, no more than 4
years.
Date of markup: July 10, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. ............
Mr. Specter............................................... X
Mr. Kyl................................................... X
Mr. DeWine................................................ X
Mr. Sessions.............................................. ............
Mr. Graham................................................ X
Mr. Craig................................................. X
Mr. Chambliss............................................. ............
Mr. Cornyn................................................ ............
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. X
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Leahy Subrogation Amendment that would remove
subrogation rights currently permitted under state laws of
entities that may have provided benefits to a claimant.
Date: July 10, 2003.

[Defeated by a vote of 10 nays, 9 yeas]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ X
Mr. Specter................................. ............ X
Mr. Kyl..................................... ............ P
Mr. DeWine.................................. ............ X
Mr. Sessions................................ ............ P
Mr. Graham.................................. ............ X
Mr. Craig................................... ............ X
Mr. Chambliss............................... ............ X
Mr. Cornyn.................................. ............ X
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden................................... X ............
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ X ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. P ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Leahy Reimbursable Medical Costs Amendment would
expand the monitoring provision so that the award also covers
the claimant's initial diagnosis as well as monitoring
regardless of insurance coverage. It would also expand
monitoring provision so that award covers other tests that the
doctor may deem appropriate for the initial diagnosis under
121, and every three years thereafter.
Date: July 10, 2003.

[Defeated by a vote of 10 nays, 9 yeas]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ ............ X
Mr. Specter................................. ............ X
Mr. Kyl..................................... ............ P
Mr. DeWine.................................. ............ X
Mr. Sessions................................ ............ X
Mr. Graham.................................. ............ X
Mr. Craig................................... ............ X
Mr. Chambliss............................... ............ X
Mr. Cornyn.................................. ............ X
Mr. Leahy................................... X ............
Mr. Kennedy................................. P ............
Mr. Biden................................... X ............
Mr. Kohl.................................... P ............
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ X ............
Mr. Schumer................................. P ............
Mr. Durbin.................................. X ............
Mr. Edwards................................. P ............
Mr. Chairman................................ ............ X
------------------------------------------------------------------------

Vote on: Hatch Technical Amendment 2c that would revise the
Durbin/Kyl amendment adopted previously in order to narrow the
scope of the Kyl hardship language and ensure it does not place
a substantial drain on the fund.
Date of markup: July 10, 2003.

[Approved by unanimous consent--members indicated were present when the
motion occurred]
------------------------------------------------------------------------
Members Present
------------------------------------------------------------------------
Mr. Grassley.............................................. X
Mr. Specter............................................... X
Mr. Kyl................................................... ............
Mr. DeWine................................................ X
Mr. Sessions.............................................. X
Mr. Graham................................................ X
Mr. Craig................................................. X
Mr. Chambliss............................................. X
Mr. Cornyn................................................ X
Mr. Leahy................................................. X
Mr. Kennedy............................................... ............
Mr. Biden................................................. ............
Mr. Kohl.................................................. ............
Mrs. Feinstein............................................ X
Mr. Feingold.............................................. ............
Mr. Schumer............................................... ............
Mr. Durbin................................................ X
Mr. Edwards............................................... ............
Mr. Hatch, Chairman....................................... X
------------------------------------------------------------------------

Vote on: Motion to report S. 1125 as amended.
Date: July 10, 2003.

[Reported out by a vote of 10 nays, 8 yeas, 1 voting pass]
------------------------------------------------------------------------
Members Yeas Nays
------------------------------------------------------------------------
Mr. Grassley................................ X ............
Mr. Specter................................. X ............
Mr. Kyl*.................................... ............ ............
Mr. DeWine.................................. X ............
Mr. Sessions................................ X ............
Mr. Graham.................................. X ............
Mr. Craig................................... X ............
Mr. Chambliss............................... X ............
Mr. Cornyn.................................. X ............
Mr. Leahy................................... ............ X
Mr. Kennedy................................. ............ P
Mr. Biden................................... ............ P
Mr. Kohl.................................... ............ P
Mrs. Feinstein.............................. X ............
Mr. Feingold................................ ............ X
Mr. Schumer................................. ............ P
Mr. Durbin.................................. ............ X
Mr. Edwards................................. ............ P
Mr. Chairman................................ X ............
------------------------------------------------------------------------
* Voting pass.

IV. Background and Need for Legislation

``I don't think there can be any doubt that the crisis in
asbestos litigation is a serious problem, and it continues to
get worse as the abuse continues and Congress fails to act.''--
Chairman Orrin Hatch, at a March 5, 2003 Senate Judiciary
Committee Hearing.

The testimony presented at multiple hearings on this issue,
and the recent studies written by independent research
organizations confirm the fact that the asbestos litigation
crisis in the United States is real. It has failed deserving
claimants, who are ill, often fatally ill, because of their
occupational exposure to asbestos. First, these claimants must
often wait years for compensation, and they may ultimately be
denied any compensation at all because the defendant
responsible for their injury has been bankrupted by lawsuits
brought by others who are not sick. Second, the compensation
that claimants do receive is arbitrary and inequitable. People
who bring their claims in certain jurisdictions can receive
huge awards, even when they are not sick--while people fatally
injured by asbestos exposure may receive far less and often
nothing. Third, only a small percentage of the amount of money
defendants and insurers spend on asbestos litigation reaches
the claimants who have been injured. The majority of these
funds find their way into the pockets of lawyers on both sides.
The current asbestos litigation system does not serve the
public interest. Since 1982, when the Johns-Manville
Corporation entered Chapter 11, nearly 70 companies, large and
small, have been driven into bankruptcy by asbestos litigation.
These bankruptcies have had tragic consequences for employees,
who have lost their jobs and often their savings, and for the
communities that depended on the bankrupt firms. Moreover, this
litigation is no longer confined to a few asbestos
manufacturers. Asbestos litigation today touches thousands of
companies in almost every sector of the American economy. Many
of these companies never made asbestos products and have been
drawn into the litigation only because the companies truly
responsible for asbestos injuries, the asbestos manufacturers,
are no longer available to sue.
Our nation's state and federal courts simply cannot
adequately manage the problems in the current asbestos
litigation system. As the United States Supreme Court stated in
Ortiz v. Fibreboard Corporation, 527 U.S. 815, 821 (1999),
``the elephantine mass of asbestos cases * * * defies customary
judicial administration and calls for national legislation.''
The Court has called upon the Congress three times since 1997
to address this issue: in Amchem Products Inc. v. Windsor, 521
U.S. 591 (1977), in Ortiz, and most recently a few months ago
in Norfolk & Western Railway. Co. v. Ayers, 123 S. Ct. 1210
(2003). The Committee believes that it is time to answer that
call.
Today, asbestos is seldom used in comparison to its
widespread use in the early 1970s. Nonetheless, the Committee
believes that continued asbestos use, however limited it may
be, should be banned except in those instances where it
presents no reasonable risk to health and it has no reasonably
safe substitute, or where it is necessary to national security.

A. HISTORY OF ASBESTOS LITIGATION

Asbestos is a fibrous mineral used in many products due to
its resistance to fire, corrosion, and acid. In the early part
of the 20th Century, asbestos was regarded as a miracle fiber
because it was versatile enough to weave into textiles,
integrate into insulation, line the brakes of automobiles, and
construct flame-retardant hulls for naval and merchant ships.
Annual asbestos production climaxed some 30 years ago, and had
been incorporated into thousands of products by this time.
This Committee received testimony from a number of
witnesses regarding the scope and effects of asbestos
exposure.\3\ Asbestos is ubiquitous in the environment, and
practically all Americans are exposed to some degree. Such
everyday exposures do not usually result in health problems.
But, substantial occupational exposure to asbestos can lead to
a variety of medical conditions. Some of these conditions--for
example, pleural plaques and most cases of pleural thickening--
do not measurably interfere with the individual's breathing.
Similarly, most cases of asbestosis--scarring of the tissue
inside the lung--do not result in impairment. Severe
asbestosis, however, can cause very serious breathing
impairment and even death. Asbestos-related illnesses also
include some kinds of cancer, including mesothelioma and lung
cancer (although smoking remains by far the most common cause
of lung cancer). At this time, mesothelioma is almost
invariably fatal within a short period of time after diagnosis.
The diseases caused by asbestos can have long latency periods,
sometimes up to 30 or 40 years.
---------------------------------------------------------------------------
\3\ See, e.g., Hearing on Solving the Asbestos Litigation Crisis:
S. 1125, the Fairness in Asbestos Injury Resolution Act of 2003, Before
the Senate Committee on the Judiciary, 108th Cong. (June 4, 2003)
(prepared testimony of Dr. James D. Crapo and prepared testimony of Dr.
John E. Parker).
---------------------------------------------------------------------------
The first wave of lawsuits began in the late 1960s, when
victims brought actions against asbestos manufacturers and
suppliers. These lawsuits increased significantly in 1973 when
the 5th Circuit Court of Appeals decided the Borel case, which
applied strict liability in asbestos lawsuits. Borel v.
Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973).
By the early 1980s, the principal asbestos defendant, Johns-
Manville, was unable to sustain the onslaught any longer, and
in 1982 it filed for protection under chapter 11 of the
bankruptcy laws. Six years later, the Manville bankruptcy
resulted in the formation of a trust to pay asbestos claims,
but after a brief (and disastrous) rush of claims on the trust
in 1988-89, the trust was forced to reorganize and reduce
benefits to claimants to 10 cents on the dollar in 1995.\4\
Today, asbestos claims have so overwhelmed the Manville Trust
that it pays only 5 cents on the dollar.\5\
---------------------------------------------------------------------------
\4\ http://www.mantrust.org/history.htm
\5\ Id.
---------------------------------------------------------------------------
Experts estimate that nearly 70 more companies have
followed Manville into bankruptcy in the last 20 years--with
more than a third of them filing in the last three years alone.
Some of these bankruptcies have resulted in trusts for the
payment of victims, and some have not. None of the existing
trusts pay claims at their full value. By now, practically all
of the former asbestos industry is bankrupt. As a result,
asbestos litigation today affects companies that never made
asbestos and often have only the most attenuated connection
with it.
The heaviest asbestos exposures occurred decades ago. After
the federal government began regulating the use asbestos in the
early 1970s, and with the sharp decline in asbestos use towards
the end of that decade, occupational exposures to asbestos have
been drastically reduced in recent years. This has greatly
reduced the incidence of significant non-malignant disease,
especially asbestosis. A leading pathologist of asbestos
diseases stated that the ``progressive lowering of standards
for permitted occupational exposure to asbestos has markedly
decreased the incidence and severity of asbestosis.'' \6\ Dr.
James Crapo, a nationally renowned expert in asbestos diseases
and former president of the American Thoracic Society,
testified before the Committee on June 19, 2003, that in his
practice, serious asbestosis cases, which still occurred in the
early 1990s, have now become exceedingly rare. At the same
time, because of long latency periods, there will be
significant numbers of mesothelioma and lung cancer claims for
many years to come.
---------------------------------------------------------------------------
\6\ Neoplastic Asbestos-Induced Disease, in Pathology of
Occupational Lung Disease (Churg & Green, ed., 2nd 1998) at 339, cited
in ``Babcock & Wilcox Company Report to the Court Regarding Asbestos
Developments Generally and The Proofs of Claims Filed Here,'' In re:
The Babcock & Wilcox Company, et al, Civil Action No. 00-0558, 2000
U.S. Dist. Lexis 5626, Eastern Dist. Louisiana, decided April 17, 2000.
---------------------------------------------------------------------------
Asbestos claims steadily increased during the 1990s, and
then exploded during the end of the decade. The vast majority
of those claims, however, were filed by people who claimed non-
malignant diseases such as asbestosis--the very diseases that
had become less and less common during the 1990s. The RAND
Institute for Civil Justice reports that ``[a]lmost all the
growth in the asbestos caseload can be attributed to the growth
in the number of these claims [for nonmalignant conditions],
which include claims from people with little or no current
functional impairment.'' \7\ Furthermore, more than 90% of all
filings with the Johns-Manville bankruptcy trust in 2001 were
brought by individuals with non-cancer claims.\8\ The great
majority of these non-cancer claims were brought by people with
no impairment. This threatens funding available to compensate
those who may become sick in the future.
---------------------------------------------------------------------------
\7\ RAND Institute for Civil Justice, ``Asbestos Litigation Costs
and Compensation: An Interim Report,'' September 2002, at 45 (RAND
2002).
\8\ Hearing on Asbestos Litigation, Before the Senate Comm. on the
Judiciary 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript of
oral statement of David Austern).
---------------------------------------------------------------------------

B. COURTS UNABLE TO HANDLE VOLUME OF ASBESTOS LITIGATION

The tens of thousands of asbestos claims filed every year
have overwhelmed the ability of the courts to provide fair,
individualized justice in a timely way. Judges, facing a tidal
wave of asbestos cases, have adopted a variety of procedural
short cuts to deal with the flood of claims. By reducing the
traditional scrutiny given to tort claims, these expedients
have encouraged the filing of even more claims. The result has
been disastrous for deserving claimants and defendants alike.
For claimants, the flood of cases has meant delay, inequitable
compensation, and increasing uncertainty that the defendants
responsible for their injury will remain solvent and able to
compensate their claims. For defendants, the out-of-control
tort system has caused companies who never manufactured
asbestos and who have little or no connection with it to face
the possibility of devastating liabilities against which they
have little practical defense. Asbestos litigation has touched
almost every sector of American industry, and no company can be
sure it is not at risk.
Among distortions in the judicial system that work to deny
justice to victims and defendants alike are venue shopping,
consolidations, aberrations in individual courts, lax
standards, and failures by the courts to provide the resources
necessary to consider cases fully:
Forum Shopping: The evidence before the Committee
showed a disturbing nationwide commerce in asbestos cases.
These claims are not filed in the courts where claimants live
or worked. Instead, they flow to the jurisdictions with the
greatest potential for huge settlements and verdicts, even
though those jurisdictions may have no connection whatsoever to
the parties or to the factual basis of the case.\9\ Venue
shopping warps the judicial system and results in delays for
victims. Many plaintiffs' lawyers only file asbestos cases in
jurisdictions they identify as having the most sympathetic
judges and juries. Former U.S. Solicitor General Walter
Dellinger testified before this Committee that ``increasingly
one is able to forum shop and go to a jurisdiction, which will
allow cases to be brought first of all by people who are not
demonstrating that they're sick.'' \10\ Five states--
Mississippi, New York, West Virginia, Ohio and Texas--handled
66% of filings between 1998 and 2000.\11\ In Jefferson County,
Mississippi--population 9,700--21,000 plaintiffs filed asbestos
cases between 1995 and 2000.\12\ The concentration of a huge
number of filings in a small number of jurisdictions only
exacerbates the delays and inequities inherent in the current
system--forcing victims to wait too long to receive benefits.
---------------------------------------------------------------------------
\9\ Hearing on Asbestos Litigation, Before the Senate Comm. on the
Judiciary, 107th Cong., (Sept. 25, 2002) (prepared testimony of Steven
Kazan at 25-26) (Kazan, Sept. 25, 2003).
\10\ Hearing on Asbestos Litigation, Before the Senate Comm. on the
Judiciary 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript of
oral statement of Walter E. Dellinger); see also Kazan Sept. 25, 2002,
at 26.
\11\ RAND 2002, at 32.
\12\ Albert B. Crenshaw, For Asbestos Victims, Compensation Remains
Elusive, The Washington Post, Sept. 25, 2002, at E01.
---------------------------------------------------------------------------
Mass Consolidations: Consolidated cases often
compromise justice for individual claimants. The claims of
seriously ill asbestos victims are often combined with claims
made by people who are not sick into large consolidated cases.
As a result, the most seriously injured victims receive less
because they are forced to share awards with claimants who are
not ill.\13\ In a recent West Virginia case, Mobil Corp. v.
Adkins, 8,000 claimants with varying degrees of exposure and
illness were grouped together for trial against 250
defendants.\14\
---------------------------------------------------------------------------
\13\ See Kazan, Sept. 25, 2002, at 27.
\14\ See Application to Stay Mandate of the Supreme Court of
Appeals of West Virginia and to Stay the Commencement of Trial Pending
This Court's Decision on Petition for Writ of Certiorari Or, in the
Alternative, Suggestion to Expedite Decision on the Petition, Mobil
Corporation v. Adkins, (No. 01-C-1847, Cir. Ct. Kanawha Cty, W. Va.),
cert. denied, 123 S. Ct. 346 (Oct. 7, 2002) (No. 02-132) (Application
to Stay).
---------------------------------------------------------------------------
Inequitable Compensation: The vagaries of the
courts where victims' cases are filed can have a greater impact
on the outcome than the merits of a case. Current asbestos
litigation payouts vary significantly by what state victims
live in, which court their cases are tried in, and who the
judge and jury are that day. For example, in late 1999,
attorneys for 18 defendants reached a $160 million settlement
with lawyers for almost 4,000 plaintiffs in cases filed in
Jefferson County, Mississippi. Allocation of the settlement
money was based on how far plaintiffs lived from the
courthouse. The Mississippi residents each received $263,000,
while plaintiffs from Ohio, Pennsylvania, and Indiana, despite
having similar conditions, received only $14,000 each. The
Texas plaintiffs recovered $43,500 each.\15\ David Austern, the
General Counsel of the Manville Personal Injury Settlement
Trust told the Committee that ``the amount of victim awards
diverge wildly--some victims receive grand slam awards, while
others receive little or nothing.'' \16\ The Committee concurs
with that conclusion.
---------------------------------------------------------------------------
\15\ David Cosey, et al. v. E.D. Bullard, et al., No. 99-60373, 5th
Cir. and Leroy Rankin Jr., et al. v. A-Bex Corporation, et al., No. 99-
0086, Miss. Super., Jefferson Co., at 3 (Jan. 28, 2000); See
Jurisdiction and Injury Basis for CCR Settlement Agreement in
Mississippi, Mealey's Litigation Report: Asbestos, Feb. 17, 2000.
\16\ Hearing on The Asbestos Litigation Crisis Continues: It Is
Time for Congress to Act, Before the Senate Comm. on the Judiciary,
108th Cong. (March 5, 2003) (prepared testimony of David Austern, at 2)
(Austern March 5, 2003).
---------------------------------------------------------------------------
Abrogation of Tort Principles: The rights of
defendants are also compromised by failures of the judicial
system. First, many courts have made it easier for plaintiffs
to pursue claims against companies without demonstrating that
the companies' actions or products directly caused a claimant's
illness. Causation is traditionally an element of tort law; in
other words, a defendant's product must have caused a
plaintiff's injury. In asbestos cases, however, ``the system
rarely accommodates a determination of whether plaintiffs made
valid product identification, one of the most basic elements of
establishing an asbestos tort.'' \17\ This abrogation of tort
principles has led to arbitrary results. Companies that may, in
reality, have played minimal or no part in causing a
plaintiff's disease are held liable, and in jurisdictions that
adhere to joint and several liability rules, may end up
responsible for the entirety of the plaintiff's damages.
---------------------------------------------------------------------------
\17\ Griffin B. Bell, Asbestos Litigation and Judicial Leadership:
The Courts' Duty to Help Solve the Asbestos Litigation Crisis, National
Legal Center for the Public Interest, June 2002, at 15 (Bell).
---------------------------------------------------------------------------
Relaxed standards of proof enable plaintiffs to sue an ever
broader range of peripheral defendants who, under traditional
tort standards, would not ever be haled into court. In addition
to causing arbitrariness in verdicts, the effective relaxation
of standards of proof gives plaintiffs' attorneys who represent
large numbers of plaintiffs undue settlement leverage. Because
they can choose which companies to bring to trial for
plaintiffs with the most serious injuries, counsel have
leverage to negotiate large settlements with particular
defendants for their entire ``inventory'' of claims, including
those of unimpaired plaintiffs. This makes the filing of claims
on behalf of the unimpaired persons profitable, which has been
a factor in the acceleration of such filings in recent years.
Oakland, California, lawyer Steven Kazan testified before this
Committee that ``we've gone from a medical model in which a
doctor diagnoses an illness and the patient then hires a
lawyer, to an entrepreneurial model in which clients are
recruited by lawyers who then file suit even when there's no
real illness. These are not patients, they are plaintiffs
recruited for profit.'' \18\
---------------------------------------------------------------------------
\18\ Hearing on Asbestos Litigation, Before the Senate Committee on
the Judiciary, 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript
of oral statement of Steven Kazan).
---------------------------------------------------------------------------
Second, defendants' rights are further compromised when
courts lack the resources to monitor medical evidence submitted
by plaintiffs. A study by neutral academics showed that in 41%
of audited claims of alleged asbestosis or pleural disease, the
Trust's physicians found that the claimant either had no
disease or a less severe disease than alleged (for example,
pleural disease rather than asbestosis).\19\ Such evidence
contradicted the plaintiffs' experts. This systematic
overreading of x-rays by plaintiffs' experts doubtless figured
into the court cases filed by the same claimants.
---------------------------------------------------------------------------
\19\ Bell, at 18.
---------------------------------------------------------------------------
Third, large consolidated cases compromise the rights of
defendants as well as victims. In Mobil v. Adkins, the 8,000
cases were consolidated against 250 diverse defendants for
trial. Such circumstances offer little chance to present
individual defenses. Compounding and exacerbating the
unfairness, the court structured the trial essentially backward
so that findings of fault and punitive damages would come
before the finding of causation.\20\ Huge consolidations such
as the West Virginia proceeding in Adkins put defendants in a
``bet-the-company'' situation that forces settlements of
undeserving cases. But, even much smaller consolidations can
make it impossible for juries to sort out the evidence in
individual cases, significantly increasing the size of
verdicts.\21\
---------------------------------------------------------------------------
\20\ Application to Stay, Mobil Corporation v. Adkins, at 5.
\21\ See Hearing on H.R. 1283, The Fairness in Asbestos
Compensation Act, Before the House Comm. on the Judiciary, 106th Cong.
(1999) (prepared testimony of William N. Eskridge); Michelle White, The
Role of Procedural Innovations in Mass Tort (NBER 2002).
---------------------------------------------------------------------------
One can only conclude that the current asbestos litigation
system is a failure. It is slow, expensive, and inequitable for
both plaintiffs and defendants alike. The courts have used a
variety of judicial management techniques to cope with the
influx of asbestos cases. Attempts to solve the problem within
the present tort system have been rejected by the Supreme
Court. In one case, the parties agreed to a class action
settlement that would have provided an alternative dispute
resolution mechanism for asbestos claims against all defendants
(who had stopped manufacturing asbestos products some 18 years
before the settlement). The Supreme Court rejected the
settlement. Amchem Products, Inc. v. Windsor, 521 U.S. 591
(1997). The Supreme Court also rejected a class action
settlement that would have required all claimants against the
defendant company to seek compensation from a fund established
by the defendant's insurer. Ortiz v. Fibreboard, 527 U.S. 815
(1999). And recently, the Supreme Court rejected an attempt to
limit damages in asbestos cases under federal law, holding that
a defendant that played only a small part in the victim's total
exposure could be held liable for the entire damage where the
firms primarily responsible were bankrupt or otherwise
unreachable, and that a person with only mild impairment due to
asbestosis could receive a very large award based only on fear
of developing cancer at some future date. Norfolk & Western
Railway Co. v. Ayers, 123 S.Ct. 1210 (2003).
In these cases, the Supreme Court recognized that the
asbestos problem ``defies customary judicial administration and
calls for national legislation.'' Norfolk & Western, 123 S.Ct.
at 1228, quoting Ortiz, 527 U.S. at 821. As far back as 1997,
Justice Ruth Bader Ginsburg wrote for the Court that ``[t]he
argument is sensibly made that a nationwide administrative
claims processing regime would provide the most secure, fair,
and efficient means of compensating victims of asbestos
exposure.'' Amchem, 521 U.S. at 628. Specifically, the Court
has endorsed the Judicial Conference's recommendation that
``[r]eal reform * * * require[s] federal legislation creating a
national asbestos dispute-resolution scheme.'' Id. at 598. The
FAIR Act is the ``real reform'' called for by the Supreme
Court.

C. VICTIMS FACE LONG DELAYS, UNCERTAIN OUTCOMES

Jonathan Hiatt, General Counsel of the AFL-CIO, testified
before this Committee in September of 2002 that, compounding
the tragedy of asbestos illness, ``the legal system has offered
lengthy delays, followed by limited compensation, compensation
that often comes too late.'' \22\ A flood of asbestos cases is
overwhelming the courts, causing delays for victims. An
estimated 300,000 cases are currently pending.\23\ More than
600,000 individuals have brought claims.\24\ Some experts
estimate that as many as 2.7 million additional claims will be
filed by people who were exposed to asbestos.\25\ While the
majority of these claims are expected to be filed by unimpaired
claimants, this onslaught will inevitably cause extensive
delays.
---------------------------------------------------------------------------
\22\ Hearing on Asbestos Litigation, Before the Senate Comm. on the
Judiciary, 107th Cong. (Sept. 25, 2002) (prepared statement of Jonathan
Hiatt, General Counsel, American Federation of Labor and Congress of
Industrial Organizations, at 1) (Hiatt Sept. 25, 2002).
\23\ Hearing on Solving the Asbestos Litigation Crisis: S. 1125,
the Fairness in Asbestos Injury Resolution Act of 2003, Before the
Senate Comm. on the Judiciary, 108th Cong. (June 4, 2003) (prepared
testimony of Jennifer Biggs, at 5) (Biggs June 4, 2003).
\24\ RAND, at 40.
\25\ Austern Sept. 25, 2002, at 4.
---------------------------------------------------------------------------
Some fatally ill victims die before their claims are
resolved. As discussed above, one worker whose claim against
Avondale shipyard was buried in a consolidated case involving
more than 1,000 plaintiffs, died of mesothelioma before the
Louisiana trial involving his claim even got underway.\26\
While some courts give priority to plaintiffs with
mesothelioma, elsewhere plaintiffs with mesothelioma may die
before they get to trial.\27\ Senator Kohl noted at our
September 25, 2002, hearing that, ``[s]imply put, some of the
most seriously injured are just not getting their day in court
quickly enough.''
---------------------------------------------------------------------------
\26\ 16-7 Mealey's Litig. Rep. Asb. 2 (May 4, 2001) at 1.
\27\ RAND 2002, at 35.
---------------------------------------------------------------------------
The flood of asbestos litigation has resulted in nearly 70
bankruptcies, which further diminish the prospect that truly
ill victims will be timely and adequately compensated. The
average amount of time between filing a bankruptcy petition
andapproval of a reorganization plan is about six years, during which
time victims are not paid.\28\
---------------------------------------------------------------------------
\28\ Austern March 5, 2003, at 2.
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Not only do victims have to wait too long for compensation,
awards are frequently inequitable, with large awards often
going to claimants who are not sick. For example, in a recent
Mississippi case, six plaintiffs who were not sick were awarded
a total of $150 million. The plaintiffs did not claim to have
ever missed a day of work because of asbestos injury, they did
not claim any medical expenses related to asbestos, and they
did not have asbestos-related physical impairment. One
plaintiff told the court he suffers no shortness of breath and
walks up to four miles per day for exercise.\29\
---------------------------------------------------------------------------
\29\ Bell, at 14.
---------------------------------------------------------------------------
Too many seriously ill victims do not fare so well, and
many find that the defendants have filed for bankruptcy and
will only pay pennies on the dollar, if anything. Senator
DeWine noted at our September 25, 2002 hearing that ``[t]he
status quo is just not fair. It is grossly unfair to the
victims. What you find is an inconsistency in how victims are
treated--a horrible inconsistency that I don't think you'll
find anyplace else in our country or our judicial system.''
Asbestos-related bankruptcies severely diminish the
prospects that sick victims will be adequately compensated.
Overwhelmed by the enormous number of claims by the unimpaired
in recent years, the Johns-Manville bankruptcy trust is now
paying victims just five cents on the dollar.\30\ Moreover, 63%
of the funds paid out by the Manville trust have gone toward
claims by those with non-malignant conditions.\31\ The General
Counsel of the Manville Personal Injury Trust, David Austern,
testified before this Committee that none of the existing
asbestos trusts, nor any of the 20 trusts pending in bankruptcy
court, will pay any more than a fraction of the value of claims
submitted to them.\32\
---------------------------------------------------------------------------
\30\ Austern Sept. 25, 2002, at 2.
\31\ Claims Resolution Management Corporation, Hearing Exhibit No.
8 at 5, In Re: Asbestos Litigation, (E.D.N.Y. Hearing on Dec. 13, 2001)
(Nos. CV-91-875, CV-90-3973).
\32\ Austern March 5, 2003, at 2.
---------------------------------------------------------------------------
According to New York Senior District Judge Jack B.
Weinstein, the flood of new claims, the reduction in amounts
paid pro rata by the Johns-Manville bankruptcy trust on claims,
and the increasing number of bankruptcy filings ``suggests that
there may be a misallocation of available funds, inequitably
favoring those who are less needy over those with more pressing
asbestos-related injuries.'' \33\
---------------------------------------------------------------------------
\33\ Order of Judge Jack B. Weinstein, Senior District Judge,
E.D.N.Y., In re: Johns-Manville Corporation et. al., Nov. 7, 2001,
Brooklyn, New York.
---------------------------------------------------------------------------
Even for those sick victims who are able to recover monies,
those awards are diminished by high transaction costs.
Plaintiffs' lawyers fees alone are typically 40% of any
settlement, and with expenses can take more than half of the
claimants' recovery.
Today's system is very costly, and victims could be well
compensated under a more efficient system. Tillinghast-Towers
Perrin actuary Jennifer Biggs testified before this Committee
that the future loss and expense for asbestos liability will
amount to $130 billion (to which might be added the $70 billion
that has already been paid).\34\ Of that $130 billion, roughly
$28 billion (21.5%) goes to defense costs and $41 billion (40%)
to plaintiffs' attorneys. So, while today's system has a cost
impact of $130 billion (future), less than half--$61 billion--
will actually reach claimants. A compensation system that
removes these transaction costs could compensate victims while
at the same time have the benefit of shepherding more funds to
sick victims rather than to legal and other fees. S. 1125
provides for $108 billion, nearly all of which would go
directly to claimants. Contrasting these numbers with the $61
billion that would actually go to claimants under our current
tort system, it becomes evident that S. 1125 is a far superior
option.
---------------------------------------------------------------------------
\34\ Biggs, June 4, 2003, at 1-3.
---------------------------------------------------------------------------

D. ECONOMY, JOBS SUFFER UNDER CURRENT SYSTEM

Almost all of the original asbestos manufacturers were
driven into bankruptcy by asbestos litigation. Plaintiffs'
attorneys now seek to recoup funds ``lost'' to bankruptcy by
targeting a widening list of solvent companies, thus triggering
a new wave of bankruptcies. The growth in litigation against
this expanding list of defendants threatens jobs, workers'
401(k) and retirement accounts, and the American economy. As
Senator Leahy noted at our March 5, 2003, hearing, ``[n]ot only
do the victims of asbestos exposure continue to suffer, and
their numbers to grow, but the businesses involved in the
litigation, along with their employees and retirees, are
suffering from the economic uncertainty surrounding the
litigation. * * * These bankruptcies created a lose-lose
situation. Asbestos victims deserving fair compensation do not
receive it and bankrupt companies cannot create new jobs nor
invest in our economy.''
Given that nearly 70 defendant corporations have filed for
bankruptcy related to asbestos litigation, and as many as 2.7
million asbestos claims still may be filed, bankruptcies are
likely to continue. More than 20 of the almost 70 bankruptcies
have been filed since 2000; as many asbestos-related
bankruptcies have been declared in the last two years as in
either of the past two decades.\35\ Recent bankruptcies include
Armstrong World Industries, Owens Corning, Pittsburgh Corning,
G-I Holdings Inc. (the successor to GAF Corp.), W.R. Grace &
Co., U.S. Gypsum Co., Federal Mogul, Babcock & Wilcox, and
Kaiser Aluminum.\36\ Asbestos liabilities accounted for 84% of
total contingent liabilities for Owens Corning, 67% for W.R.
Grace, and 93% for USG.\37\
---------------------------------------------------------------------------
\35\ RAND 2002, at 71.
\36\ Keith M. Buckley, Asbestos: Impact on the U.S. Insurance
Industry, Fitch Ratings, July 25, 2002, at 13.
\37\ Joseph E. Stiglitz, The Impact of Asbestos Liabilities on
Workers in Bankrupt Firms, Sebago Associates, Dec. 2002, at 10
(Stiglitz).
---------------------------------------------------------------------------
As the first wave of asbestos defendants filed for
bankruptcy and their resources dried up, the number of
companies named as defendants in asbestos suits began to rise.
Increasingly, companies with a limited link to asbestos
liability are being targeted. Senator Hatch noted at our
September 25, 2002, hearing that ``[b]ecause of this surge in
litigation, companies--many of whom never manufactured asbestos
nor marketed it--are going bankrupt paying people who are not
sick and may never be sick, and who, therefore, may not need
immediate compensation.'' Approximately 8,400 firms have been
named defendants in asbestos suits,\38\ up from 300 listed in
1983.\39\
---------------------------------------------------------------------------
\38\ Hearing on Solving the Asbestos Litigation Crisis: S. 1125,
the Fairness in Asbestos Injury Resolution Act of 2003, Before the
Senate Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared
testimony of Robert P. Hartwig, Insurance Information Institute, at 2).
\39\ RAND 2002, at 49.
---------------------------------------------------------------------------
Asbestos litigation has reached nearly all parts of the
U.S. economy. Companies representing 75 of 83 American
industries (using the Commerce Department's classifications)
have been hit. ``Nontraditional'' defendants account for 60% of
asbestos-related expenditures. Companies ranging from America's
largest corporations to small businesses with less than two
dozen employees are now the target of asbestos litigation.\40\
According to Senior U.S. District Judge Jack Weinstein, ``[i]f
the acceleration and expansion of asbestos lawsuits continues
unaddressed, it is not impossible that every company with even
a remote connection to asbestos may be driven into
bankruptcy.'' \41\
---------------------------------------------------------------------------
\40\ Id., at 49-50.
\41\ Remarks of Judge Jack Weinstein, at a symposium held by the
Bar Association of the City of New York titled: ``Asbestos: What Went
Wrong?'' Oct. 21, 2002, at 12.
---------------------------------------------------------------------------
The negative impact of asbestos liability is so serious;
the mere specter of it has the effect of chilling or even
halting transactions. Goldman Sachs Managing Director Scott
Kapnick told this Committee that ``the large uncertainty
surrounding asbestos liabilities has impeded transactions that,
if completed, would have benefited companies, their
stockholders and employees, and the economy as a whole.'' \42\
The asbestos problem also has serious consequences for
insurers, who now pay about 57% of the cost of asbestos
liability.
---------------------------------------------------------------------------
\42\ Hearing on Solving the Asbestos Litigation Crisis: S. 1125,
the Fairness in Asbestos Injury Resolution Act of 2003, Before the
Senate Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared
testimony of Scott Kapnick, at 2).
---------------------------------------------------------------------------
A national economic research specialist testified before
this Committee on the economic effects caused by asbestos
litigation: ``Asbestos-related bankruptcies and the associated
layoffs will have ripple effects that harm many groups beyond
company stockholders. Workers will suffer in many ways,
including temporary or long-term unemployment, lower long-term
earnings, and inadequate and/or more expensive interim health
coverage.'' \43\
---------------------------------------------------------------------------
\43\ Hearing on Solving the Asbestos Crisis: S. 1125, the Fairness
in Asbestos Injury Resolution Act of 2003, Before the Senate Committee
on the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of
Frederick C. Dunbar, of the National Economic Research Associates, at
1).
---------------------------------------------------------------------------
Asbestos-related bankruptcies have a devastating impact on
workers' jobs and their economic security. Companies that have
declared bankruptcy related to asbestos litigation employed
more than 200,000 workers before their bankruptcies. Asbestos-
related bankruptcies led to the direct loss of as many as
60,000 jobs, while each displaced worker will lose an average
of $25,000 to $50,000 in wages over his or her career.\44\ The
need for congressional intervention is clear, testified former
U.S. Solicitor General Walter Dellinger: ``We need to stop the
hemorrhaging of hundreds of millions of dollars going to those
who are not sick, to protect American jobs, pensions and
shareholders.'' \45\
---------------------------------------------------------------------------
\44\ Stiglitz, at 3.
\45\ Dellinger Sept. 25, 2002.
---------------------------------------------------------------------------
When asbestos defendant Federal-Mogul declared bankruptcy
in 2001, employees reportedly lost more than $800 million in
their 401(k)s.\46\ For example, one 82-year-old Federal-Mogul
employee saw his $1 million retirement nest egg shrivel to
$20,000.\47\ Bankrupt Owens Corning saw its shares lose 97% of
their value in the two years before its filing. Approximately
14% of those shares were held by employees.\48\
---------------------------------------------------------------------------
\46\ Hearing on Asbestos Litigation, Before the Senate Committee on
the Judiciary, 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript
of oral testimony of The Honorable Senator Benjamin Nelson, United
States Senator, Nebraska) (Nelson Testimony).
\47\ Mark Truby, Asbestos Ruined Federal-Mogul, The Detroit News,
Mar. 31, 2002.
\48\ Hearing on Asbestos Litigation, Before the Senate Committee on
the Judiciary, 107th Congress, September 25, 2002. The Honorable
Benjamin Nelson, United States Senator, Nebraska.
---------------------------------------------------------------------------
The AFL-CIO has told Congress that ``[u]ncertainty for
workers and their families is growing as they lose health
insurance and see their companies file for bankruptcy
protection.'' \49\ Many companies had high unionization rates
when they filed for bankruptcy: Johns-Manville, 42%; Eagle-
Picher, 33%; Federal-Mogul, 33%; Armstrong, 57%; and Todd
Shipyards, 75%.\50\
---------------------------------------------------------------------------
\49\ Hearing on Asbestos Litigation Crisis: S. 1125, the Fairness
in Asbestos Injury Resolution Act of 2003, Before the Senate Committee
on the Judiciary, September 25, 2002, Jonathan Hiatt at 2.
\50\ Stiglitz, at 22.
---------------------------------------------------------------------------
There is no question that the escalating numbers of claims
and costs is a threat to workers' jobs and retirement savings.
The AFL-CIO testified that ``[The tort system] is damaging
business far more then it is compensating victims.'' \51\
Businesses with only a remote connection to asbestos are being
targeted in the same way that original manufacturers were,
despite the differences in culpability.
---------------------------------------------------------------------------
\51\ Hiatt at 2, Sept. 25, 2002.
---------------------------------------------------------------------------
Six years ago, the Supreme Court endorsed a ``national
dispute resolution scheme'' to remedy this crisis, and the FAIR
Act is the vehicle to implement this mechanism. Without it, the
current system will continue exacerbating the devastating
consequences it has wrought for over 20 years.

E. ASBESTOS BAN

Dangers associated with exposure to asbestos fibers are
well known, and have prompted efforts to reduce and in some
cases ban asbestos use. EPA and OSHA have severely restricted
the use of asbestos since 1986. In 1989, EPA attempted to
finalize a ban on asbestos use in the United States; however,
that ban was subsequently overturned on non-substantive
grounds, by the United States Court of Appeals for the Fifth
Circuit in 1991. A number of products and processes still use
asbestos. Today, asbestos may be present in such products as
brake pads and linings, roofing materials, ceiling tiles,
garden materials containing vermiculite, and cement products.
According to the United States Geologic Survey, approximately
13,000 to 15,000 metric tons of asbestos are consumed in the
United States every year. Numerous countries have banned, or
are working to ban, the manufacture and importation of
asbestos. Despite its continued (albeit limited) use in the
United States, some types of asbestos remain a dangerous
substance. Therefore, a ban on the import and manufacture of
harmful forms of asbestos and asbestos containing products is
needed to prevent the well known risks associated with these
products, and to reduce the number of future victims of
asbestos-related diseases. The only exceptions are for uses
that present no unreasonable risks to health (e.g., diaphragms
in chlorine solvent) and for national security (e.g., use in
missile liners).

F. CONCLUSION

It is evident that the asbestos litigation system is
fundamentally flawed. Victims and defendants alike face
inequity and uncertainty, which will only get worse. The
Supreme Court has concluded that only federal legislation can
create a fair and efficient asbestos resolution system. The
FAIR Act offers just such a resolution.

V. How S. 1125 Works

The FAIR Act takes asbestos claims out of the existing
broken tort system and processes them through a federally
administered trust fund that compensates current and future
asbestos claimants on a no-fault basis according to
standardized medical criteria and corresponding claims awards.
Reduced to its essence, and as discussed further below, the
trust fund operates on two fronts: (i) through the collection
and management of contributions received from defendant and
insurer participants and existing asbestos compensation trusts;
and (ii) through the payment of such funds to compensate
claimants who can show eligibility based on standardized
medical criteria.
The Committee believes that a national trust fund is the
best answer to the current asbestos litigation crisis. By
funneling existing asbestos tort claims into an administrative
funding system, claimants should see quicker compensation while
defendants and insurers benefit from increased economic
certainty and stability--an outcome that the current tort
system is ill-suited to provide.
Claimants would benefit because the FAIR Act eliminates
expensive and time consuming litigation. A claimant can recover
from the trust fund if that person can meet the Act's
standardized medical criteria, which is categorized in various
funding levels based on the severity of the asbestos-related
disease. Unlike the current tort system, claimants would not be
required to prove causation with respect to a pool of
defendants or show that their claim was somehow not caused by
their own negligence.
Defendants and insurers would also benefit from a trust
fund because their future asbestos liabilities become more
predictable. The trust fund will be financed through a
structured payment scheme involving defendants and insurers
with asbestos liabilities. As long as these payments are made
into the Fund, these contributing participants are immune from
the tort system with regard to asbestos personal injury claims
and its inherent pitfalls.

A. THE FAIR ACT'S FUNDING MECHANISMS

To first ensure that claimants can be properly compensated,
the FAIR Act requires defendant and insurers to capitalize the
trust fund. This injection of funds is achieved through four
layers of funding that break down as follows: (i) $108 billion
in mandatory contributions from defendants and insurers spread
over 27 years; (ii) the Administrator's access to supplemental
accounts and borrowing authority; (iii) the contingent call
funding vehicle; and (iv) the back-end funding vehicle.
Although the Committee believes that the first layer of
mandatory funding contributions from defendants and insurers
will be more than adequate to pay all pending and future
asbestos claims, the FAIR Act contains these three additional
layers of funding to ensure that the Fund adequately
compensates eligible asbestos victims in the event of
unanticipated contingencies.

1. The $108 billion in mandatory funding

The primary source of funding comes from mandatory annual
contributions by defendant participants and insurers during the
first 27 years of the Fund's life. The aggregate level of
mandatory contributions is established at $108 billion: $104
billion shared equally between defendants and their insurers
and at least $4 billion from existing confirmed asbestos
trusts.
a. The $104 billion contribution from defendants and
insurers
The Fund will be financed through allocated contributions
of $52 billion each by defendants and insurers that have been
exposed to asbestos claims in the tort system. Although
insurers and defendants share this funding obligation equally,
the mechanics of how these amounts will be assessed towards
each contributing group necessarily differs.
For defendants
With respect to the defendants, the Administrator must
first assign companies into tiers that are defined by prior
company expenditures incurred defending asbestos claims in the
tort system. These expenditures include defense, indemnity,
judgment and settlement costs. In addition, the FAIR Act
establishes separate tiers for debtor companies currently in
bankruptcy and companies subject to claims under the Federal
Employer's Liability Act.
Once companies have been assigned to tiers, the
Administrator's next step is to assign companies into subtiers
based on revenue levels--amounts calculated by each company's
reported earnings for the most recent fiscal year ending before
December 31, 2002. After a company is assigned to a subtier,
the Administrator can then identify with ease a corresponding
annual contribution amount that the assigned company is
obligated to pay into the Fund. In other words, each subtier
identifies the annual contribution amount into the Fund.
The Committee believes that a dual tiering system that
accounts for past asbestos expenditures and company revenues is
a fair measure of a company's ability to fund the assessments
under the FAIR Act. But in the event a tiering assignment
unduly burdens a contributing company, the FAIR Act provides
for limited payment adjustments based on severe financial
hardship or exceptional cases of demonstrated inequity.
For insurers
Unlike the assessment formula for defendants, the FAIR Act
takes a different approach with respect to the asbestos
insurers. Rather than establish an allocationformula, the FAIR
Act creates a separate Asbestos Insurers Commission, which holds
responsibility to determine the amount that each insurer is obligated
to pay into the Fund. The Committee believes that delegating such a
task to a separately commissioned entity makes abundant sense given the
necessary technical expertise that is required in developing a fair and
appropriate allocation formula. The FAIR Act requires the Commission to
determine contributions based on several factors, including premiums
from asbestos policies, losses paid, reserve levels, and future
liability. However, if the insurers agree on a fair division of
contributions among themselves, such an agreement may be used to
determine the insurer allocation. This agreement is subject to approval
by the Commission after a finding that the agreed upon allocation
formula meets all of the requirements of the Act.
Moreover, to ensure that the Fund receives early funding
while the Commission develops an allocation formula, the FAIR
Act authorizes the Administrator to collect payments from the
asbestos insurers in an amount that does not exceed the
ultimate financial obligation of an insurer participant. Such
payments are to be assessed on an equitable basis and credited
against future payments that may be required after the
Commission develops an allocation formula.
b. The $4 billion contribution from existing bankruptcy
trusts
The remaining $4 billion is provided by existing asbestos
compensation trusts that have been established to compensate
asbestos claims, including but not limited to those established
under section 524(g) of the Bankruptcy Code. The Committee
understands that the total amount of all existing bankruptcy
and other asbestos compensation trusts is valued to be at least
$4 billion. Because the FAIR Act requires that all trust assets
be transferred to the Fund within 6 months of the date of
enactment pursuant to the provisions of the Act, these trusts
represent an immediate source of funding for the Administrator
to begin processing claims.

2. The administrator's access to supplemental accounts and borrowing
authority

To ensure sufficient funds are available to compensate
eligible claimants if funding is necessary beyond the mandatory
$108 billion contribution, the FAIR Act provides a second layer
of funding that contains three components. First, the
Administrator holds access to additional funds through a
guaranteed payment account. This account collects a mandatory
surcharge (in addition to the assessed amount) on every
defendant and insurer contribution made into the Fund. The
proceeds from this surcharge are used to cover shortages
attributable to the non-payment by any participant. Second, the
Administrator holds access to an orphan share account that
collects amounts paid in excess of the maximum aggregate
contribution by insurers and defendants. These amounts are used
to cover losses caused by participants that proceed with
Chapter 11 bankruptcies and for losses caused by financial
hardship and inequity determinations made in favor of certain
participants. Third, the Administrator holds authority to
borrow from commercial lending institutions amounts to offset
short term losses in an amount that does not exceed anticipated
contributions for the following year.

3. The contingent call funding vehicle

This funding vehicle is the next line of defense to offset
potential, though unlikely, shortages during the first 27 years
of the Fund. The contingent call provision gives the
Administrator the discretion to withhold step-downs after year
5 of the Fund. As currently structured, the Fund envisions a
payment schedule that begins with at least $5 billion annually
during years 1 through 5 with a gradual reduction in the amount
of such payment beginning year 6. But if the Administrator
certifies that the Fund is encountering financial difficulties
in paying claims, the Administrator is authorized to assess
participants at the initial year 1-5 minimum contribution
levels.

4. The back-end funding vehicle

As the term suggests, this funding vehicle addresses
potential shortages to pay claims that may exist after year 27
of the Fund. The back end provision gives participants the
option to either continue contributing into the Fund in an
aggregate amount not to exceed $2 billion annually or have the
remaining claims resolved in the tort system in Federal Court.

B. FAIR ACT CLAIMS PROCESS

The FAIR Act creates a no-fault system to compensate those
who meet sound, fair and balanced eligibility criteria to
establish the existence of a legitimate asbestos-related
disease. The eligibility criteria include diagnostic, latency,
medical and exposure requirements. Flexibility is built into
the system, providing for exceptional claims and special cases.
The FAIR Act then provides fair and equitable claim values to
eligible claimants. To ensure the integrity of the system,
however, auditing procedures and independent reviews by
objective, experienced physicians are also provided.
The FAIR Act's nationalized, streamlined claims processing
system provides compensation to eligible claimants promptly
without creating a new or large bureaucracy. It works as
follows:

1. Court procedure

The compensation system will be administered by the Court
of Federal Claims, which will establish and supervise an Office
of Special Asbestos Masters (OSAM) to process and make initial
decisions on claims for compensation. OSAM will facilitate the
claims handling process, so that the Court's docket does not
become backlogged as occurs in the current tort system.
Claimants begin the process by filing a claim form listing
their asbestos exposure, work history, medical records
(including diagnoses and test results), tobacco use and prior
claims and recovery. Claims are referred to claims examiners
for an initial review. If the claim form is complete, a special
asbestos master has 60 days to determine the amount of any
award to which the claimant is eligible. Thespecial asbestos
masters, with recommendations by a Medical Advisory Committee made up
of objective and experienced physicians when requested or where
required, need only determine whether the claimant meets the
diagnostic, latency, medical, and exposure criteria established in the
Act. A claimant may appeal a decision to a panel of three Special
Asbestos Masters within 30 days of receiving notice of a decision. The
panel must make a determination within 60 days after receipt of an
appeal. Claimants have 30 days to appeal this panel's decision to a 3-
judge panel of the Court of Federal Claims. When such panel is
constituted, it is known as the Court of Asbestos Claims (``Asbestos
Court''). Claimants then have 30 days to file an appeal to the U.S.
Court of Appeals for the Federal Circuit.
Claims must be filed with the Court within 4 years from the
date the claimant knew or should have known of the claim, and
claimants have the right to seek appeal eligibility
determinations. The FAIR Act establishes a claimant assistance
program to provide assistance to claimants in preparing and
submitting claims, including a legal assistance program to
assist them with legal representation issues. Notification is
provided of available pro bono legal services.
The purpose of the FAIR Act is to establish an
administrative compensation system to replace the tort system
for asbestos victims, in much the same manner that workers'
compensation systems have replaced tort liability as a means of
compensating workplace injuries. In accordance with this
purpose, the FAIR Act preempts asbestos personal injury claims
made under state or other federal law, including pending claims
that have not proceeded to final judgment before the date of
enactment. Pursuant to an amendment in committee, the
preemption of pending claims will not become effective until
the Fund is fully operational and processing claims. However, a
participant's contributions to the Fund shall be reduced by the
amount of any claims made payable by the operation of this
amendment after the enactment of this Act. Workers'
compensation and veterans' benefits claims are excepted from
preemption, because workers' compensation and veterans'
benefits programs generally do not suffer from the
uncertainties, unfairness, delay and expense of the tort
system.

2. Prompt payment of claims

Unlike the current system, in which results are slow,
inequitable and unpredictable, the Fair Act ensures rapid,
fair, and predictable payments, while still maintaining the
stability of the Fund. In contrast to the long delays
associated with current asbestos litigation, payments are
expected to be paid over a period of 3 years, and no longer
than 4 years. Living mesothelioma claimants are entitled to
accelerated payments. Expedited payments also may be provided
in cases of exigent circumstances or extreme hardship caused by
the asbestos related injury. The reduced transaction costs of
the administrative system and the more than adequate funding
provided under the FAIR Act ensure that eligible claimants
receive the compensation to which they are entitled, unlike
current bankruptcy trusts where claimants receive pennies on
the dollar or current settlements and awards where claimants
often lose more than half of the recovery in attorneys' fees
and expenses. Pursuant to an amendment in Committee, if in any
year the Administrator is unable to certify that 95% of claim
obligations owed in that year are being paid (and after a 90
day period to cure), the fund shall immediately sunset and
return claimants to the tort system.
In the event the claimant has a timely filed pending claim,
the claimant has 4 years from the date of enactment of this Act
to file the claim with the Court. Claimants who meet the
statute of limitations under the FAIR Act, and have already
received a prior settlement or judgment for their injury, will
have any recovery from the Fund reduced by the amount of those
prior recoveries.

3. Diagnostic and latency criteria

Claimants must meet diagnostic and latency criteria to be
compensated by the Fund. The Committee intends the diagnostic
criteria to reflect the typical components of a true medical
diagnosis by a claimant's doctor, including an in-person
physical examination (or pathology in the case where the
injured person is deceased) and a review of the claimant's
medical, smoking and exposure history by the doctor diagnosing
an asbestos-related disease. These requirements ensure that the
claimant will be given a true diagnosis related to the
claimant's condition. The diagnosis must also include
consideration of other more likely causes of the condition to
ensure that asbestos exposure was the cause of any claimed
nonmalignant disease (as opposed to other industrial dust
exposure) or a substantial contributing factor in causing a
malignant disease.
Because asbestos-related diseases have a long latency
period before symptoms begin to manifest, the FAIR Act also
requires that the claimant demonstrate that his or her first
exposure to asbestos occurred at least ten years prior to the
initial diagnosis.

4. Medical criteria

Claimants must meet medical criteria to ensure that
resources are protected for those who are currently suffering
from asbestos-related disease. The medical criteria establishes
requirements for 10 disease levels, 5 of which relate to
nonmalignant asbestos-related diseases, such as asbestosis, and
5 of which relate to malignant diseases, such as lung cancer
and mesothelioma. The medical criteria for three of the
nonmalignant categories are based on increasing severity of the
claimant's impairment. Because these impairments may have other
causes, such as other airborne contaminants including cotton
dust, medical evidence is required to establish that asbestos
exposure is the cause of the claimant's impairment. The medical
criteria for the malignant categories similarly reflect the
need to have medical evidence to support a finding that the
claimant's exposure to asbestos is a substantial contributing
factor in causing the claimant's asbestos-related disease.

5. Exposure criteria

Claimants must meet exposure criteria to be compensated.
Because the risk of developing an asbestos-related disease
increases with the amount and intensity of exposure to
asbestos, the Committee has set exposure requirements for each
disease level to ensure that the FAIR Act compensates only
asbestos-related diseases. The number of years of occupational
exposure are weighted based on industry and occupations and by
the dates of exposure, so as to serve as a proxy for
approximating the dose of exposure associated with various
types of occupational exposures typically associated with
asbestos-related diseases. The intensity and regularity of
asbestos exposures associated with certain industries and
occupations were significantly greater prior to the 1970's, at
which time federal regulations limiting its use and for the
protection of workers were first put in place. Such exposures
often occurred in the manufacture of asbestos. Because
mesothelioma can develop, in some instances, from more limited
exposure, the exposure requirements for mesothelioma are the
least stringent, requiring minimal exposure to asbestos.
Nonetheless, the criteria are meant to ensure that only
diseases caused by asbestos exposures versus other causes are
compensated by the Fund.

6. Exceptional and special cases

The FAIR Act provides some limited exceptions to the above
standards for compensation. Exceptional cases where the medical
criteria under the Act cannot be met but the claimant has
comparable and reliable medical evidence are eligible for
review by a Medical Advisory Committee, made up of objective,
experienced physicians, to determine whether the claimant is
eligible.
Special provisions are established for review by the
Medical Advisory Committee in other unique circumstances,
including those related to ``take home'' exposures where
asbestos was brought into the home by an occupationally exposed
person and those related to the high levels of environmental
exposures of residents and workers in Libby, Montana. Because
the medical conditions of the residents of Libby are currently
being studied by various agencies, claims filed by Libby
claimants are to be automatically designated as exceptional
medical claims and referred to the Medical Advisory Committee
for review of the claimant's eligibility.

7. Claim values

The FAIR Act provides for carefully constructed, rational,
and fair claims values. Many of the illnesses that are
compensated under the Act could be caused or contributed to by
factors other than asbestos exposure, such as smoking and other
airborne contaminants. Therefore, claims values have been
carefully constructed to provide increased compensation in
those cases where there is greater confidence that the asbestos
exposure was the cause of the claimant's injury. To those ends,
mesothelioma and lung cancer claims where the claimant has been
diagnosed with underlying asbestosis and is a nonsmoker have
been given the highest values. Claims values for claimants with
severe asbestosis and other lung cancer claims where the causal
connection between the asbestos exposure and the injury is more
substantiated similarly reflect the purpose of the Act to
direct monies to the most serious injuries caused by exposure
to asbestos.
In the case of other cancers and lung cancers where smoking
is considered a predominant or likely cause of the cancer,
claims values are reduced for smokers. Lifetime nonsmokers and
former smokers who had not smoked at least 12 years prior to
diagnosis are eligible for increased compensation based on a
review of their smoking history by the Medical Advisory
Committee. Such claimants, however, bear the burden of
providing sufficient evidence of the limits of their smoking
behavior. This Fund is not intended to be a compensation system
for tobacco-related diseases, which would overwhelm the Fund
leaving no money for asbestos victims.
The FAIR Act recognizes that claimants with significant
occupational exposure to asbestos may be at risk of developing
a serious asbestos-related illness. As such, claimants meeting
the minimum exposure criteria will be reimbursed reasonable
costs for medical monitoring. In the event these claimants
develop into a compensable illness, they may then seek
compensation from the Fund.

8. Quality control

Because of the subjectivity of many of these medical tests
and because these illnesses have other causes, including
smoking, industrial dusts, aging, etc., provisions are made to
ensure the quality of the medical and exposure evidence
submitted to support claims. The FAIR Act is designed to
eliminate the abuses found in the current system, where mass
screenings conducted by facilities associated with plaintiffs'
law firms often result in claims with questionable medical
support. The FAIR Act requires the implementation of audit
procedures as quality control on the evidence being submitted,
which includes independent review by certified B-readers of x-
rays submitted in support of claims. Similarly, in light of the
history of abuse and the potential for misrepresentations by
claimants or their representatives, the FAIR Act authorizes the
Court to request additional information, including medical
records and blood tests, to review and confirm a claimant's
declared smoking history and behavior. Finally, the FAIR Act
also provides for criminal penalties in the event a claimant or
other person (including contributors) submits false information
related to compensation of an asbestos claim under the Fund.

C. THE TIMING OF THE FAIR ACT UPON ENACTMENT

1. The funding

The Fund will start receiving assets at least six months
after the date of enactment. Confirmed bankruptcy and other
trusts created to pay asbestos claims must transfer the bulk of
their assets to the Fund within 6 months of the date of
enactment, which is expected to infuse at least $4 billion
dollars into the Fund at the outset. As a result, in less than
a year the Fund will have substantial funding to begin the
payment of claims
The Administrator begins the defendant assessment process
by sending notice within 60 days of appointment. This notice
requires all recipients to provide the Administrator within 30
days information necessary to calculate the amount of required
contributions into the Fund. Upon the Administrator's receipt
of such information, the FAIR Act gives the Administrator 60
days to make a determination assessing defendant contributions.
Although a defendant participant has the right to obtain
rehearing of the determination and has the right of review, the
payment obligation is not stayed during this review.
The Asbestos Insurers Commission, which is established to
expedite the assessments of contributions to the Fund from
insurers, reinsurers, and run-off entities established to pay
costs associated with asbestos claims, is under strict
deadlines to assess contributions to insurer participants.
Within 30 days of being appointed, the Commission is required
to meet to begin the process of developing an allocation
formula. Once the Commission develops the allocation formula
and assesses contributions to the insurer participants, the
insurer participants are given only 30 days to provide a
consensus agreement on allocation, which may replace the
Commission's determination as long as the Commission certifies
that it meets the requirements of the Act.

2. The payment of claims

The FAIR Act is designed to ensure that claimants are
compensated quickly, and under the FAIR Act resolution of a
claim can occur in less than a year. Upon filing a claim with
the Court of Federal Claims, a claimant should receive an
eligibility determination from a special asbestos master in
less than three months. As discussed above, the FAIR Act
requires the Court of Federal Claims to refer a claim to the
Office of Special Asbestos Masters within 20 days of filing.
The Special Asbestos Master must then make an eligibility
determination within 60 days after receiving the claim and
requisite medical information.
In the event a claimant challenges an eligibility decision
by a special asbestos master, the claimant is given a
structured appeals process with established deadlines. A
claimant may seek further review by a panel of three Special
Asbestos Masters within 30 days of receiving notice of a
Special Asbestos Master decision. The FAIR Act requires that
this panel deliver its decision within 60 days of receipt of an
appeal.
The claimant may seek further review of a panel decision by
appealing to a three judge panel of the Federal Court of
Claims. This panel is referred to as the United States Court of
Asbestos Claims and is required under the FAIR Act to make a
decision within 60 days of its receipt of an appeal. If the
U.S. Court of Asbestos Claims remands the claim for further
action, the special asbestos masters is given an additional 30
days to make a determination.
Claimants are also given the option to pursue further
judicial review before the United States Court of Appeals for
the Federal Circuit upon filing an appeal within 30 days after
issuance of a final decision by the U.S. Court of Asbestos
Claims. Decisions by the Federal Circuit are subject to review
by the United States Supreme Court.

VI. Section-by-Section Analysis and Discussion

Sec. 1. Short title

Sec. 2. Findings and purpose

Sec. 3. Definitions

TITLE I. ASBESTOS CLAIMS RESOLUTION

Subtitle A. United States Court of Federal Claims

Sec. 101. United States Court of Federal Claims

Office of Special Asbestos Masters: The United States Court
of Federal Claims (``Court of Claims''), through the newly
created Office of Special Asbestos Masters, shall have the
authority to examine asbestos claims and make awards. The chief
judge of the Court of Federal Claims appoints Special Asbestos
Masters, including one Chief Special Asbestos Master, as
necessary to facilitate claims processing. A concurrence of a
majority of the court is required on all appointments and
reappointments. No more than 20 Special Asbestos Masters may be
appointed without Congressional approval.
The Chief Special Asbestos Master serves for a term of 4
years, and may be reappointed for 2-year terms. The Chief
Special Asbestos Master, in consultation with the Chief Judge,
prescribes rules and procedures for claims processing, and
appoints or contracts for services personnel to carry out the
duties of the Office of Special Asbestos Masters. All special
masters are subject to removal by the concurrence of a majority
of the active judges of the court for good cause. The
compensation of special masters is set by the chief judge and
cannot exceed Level V of the Executive Schedule.

Subtitle B. Asbestos Injury Claims Resolution Procedures

Sec. 111. Filing of claims

Claimants file claims with the United States Court of
Federal Claims (the Court), through the Office of Special
Asbestos Masters. The Chief Special Asbestos Masters, in
consultation with the Chief Judge of the Court, issues rules as
to who may file as a representative of another individual.
Claims must be notarized and give detailed information about
the claimant, including their asbestos exposure, medical
records, tobacco use, collateral sources of compensation and
any other information that the Court elects to add. Claims must
be brought within 4 years from the time the claimants knew or
should have known of their injury. Persons with pending claims
in the tort system must file within 4 years of the date of
enactment. Claimants who develop an additional condition or
disease may file for additional benefits.

Sec. 112. General rule concerning no-fault compensation

It is the intent of the FAIR Act to provide a process to
compensate claimants faster and with more certainty than the
current system The FAIR Act therefore removes the burden a
claimant would ordinarily have to overcome of establishing that
the injury was the fault of a particular party. Under the FAIR
Act claimants need not establish that his/her injury resulted
from the negligence or other fault of another person.

Sec. 113. Essential elements of eligible asbestos claim

Claimants must prove by a preponderance of the evidence
that they have an eligible disease or condition, and that they
meet the latency and exposure criteria requirements.

Sec. 114. Eligibility determinations

Within 20 days of filing, claims are referred to a Special
Asbestos Master. Claims examiners then make the initial review
for each claim under the Special Asbestos Masters' direction.
Claims examiners will notify claimants if additional
information is needed to determine eligibility, including
requiring a medical examination and/or tests. Once a claims
examiner has all the necessary information, the claim and a
recommendation are sent to a Special Asbestos Master who has 60
days after receipt of a completed claim to provide a written
recommendation, including findings of facts.
The Court will establish expedited procedures for exigent
cases. Claimants must either waive their right to judicial
review or have exhausted their judicial review to receive their
award. The Court will establish audit procedures for reviewing
the accuracy of the Special Asbestos Master's recommendation.
Appeal to 3 Special Asbestos Master panel: Within 30 days
after receiving a notice of a decision by the Special Asbestos
Master, a claimant may appeal to a panel of 3 Special Asbestos
Masters. Such panel may reverse the decision of the individual
Special Asbestos Master within 60 days if the decision was
based on clear error or if new, material evidence is available.
Accepting a payment extinguishes all claims related to such
payment.\52\
---------------------------------------------------------------------------
\52\ See section 141 for claimant's appeal of a decision by panel
of 3 Special Asbestos Masters to panel of 3 Judges of the Federal Court
of Claims.
---------------------------------------------------------------------------

Sec. 115. Medical evidence auditing procedures

The Court will establish audit procedures for medical
evidence submitted as part of claims to ensure accuracy of x-
ray readings and pulmonary function tests. If the Court finds
certain providers are not complying with prevailing medical
practices, records from such providers will be deemed
inadmissible for a claim. A provider who is deemed non-
compliant may appeal such determination under procedures
established by the Court.

Sec. 116. Claimant assistance program

This section authorizes the Court to establish a legal
assistance program to aid claimants in legal representation
issues. As part of this program, the Court will maintain a list
of attorneys who are willing to provide their services on a pro
bono basis and provide to claimants notice of and information
relating to pro bono legal services available to those
claimants and any limitations on attorney fees. Before a person
becomes a client of an attorney with respect to an asbestos
claim that attorney shall provide notice to that person of pro
bono legal services available for that claim.

Subtitle C. Medical Criteria

Sec. 121. Medical criteria requirements

This section establishes the latency, diagnostic, exposure
and medical criteria required to establish an asbestos claim
for each of 10 disease levels. Levels I through V include
nonmalignant asbestos-related disease or conditions and levels
VI through X include malignant diseases.
Latency: Although the latency period for asbestos-related
disease can be as long as 30-40 years, part of the consensus
agreement by the Committee was to require only a 10-year
latency period in order to ensure that all potential asbestos
victims were being compensated. Claimants must provide a
statement from a doctor or a history of exposure that shows at
least 10 years elapsed from the date of the initial exposure to
the date of the initial diagnosis of any asbestos-related
injury.
Diagnostic Criteria: This section recognizes that a medical
diagnosis is a key component of the eligibility requirements in
order to maintain the integrity of the Fund and to fulfill the
purpose of the Act to compensate asbestos victims. This section
sets forth diagnostic criteria that track the typical elements
of a medical diagnosis, such as an in-person physical
examination by the claimant's doctor, a thorough review of the
claimant's medical, smoking and exposure history by the
claimant's doctor, and a review of other potential causes of
the claimant's illness.\53\ Injuries due to other causes, such
as smoking, can present themselves in similar ways as asbestos-
related injuries. This Fund, however, is intended to compensate
injuries caused by asbestos exposure, and, therefore, a
diagnosis of an asbestos-related injury is required under the
Act.
---------------------------------------------------------------------------
\53\ See, e.g., The Diagnosis of Nonmalignant Disease Related to
Asbestos, Offical Statement of the American Thoracic Society, March
1986 (noting that ``[a]ll alternative diagnoses must be considered
before accepting the presumptive diagnosis of asbestosis'').
---------------------------------------------------------------------------
For levels I through V, a diagnosis must be based on an in-
person physical examination by the claimant's doctor providing
the diagnosis, an evaluation of smoking history and exposure
history before making a diagnosis, an x-ray reading by a
certified B-reader, and a pulmonary function test for levels
III through V. Deceased claimants may provide a diagnosis
supported by physician report based on pathological evidence or
an x-ray reading by a certified B-reader. For disease levels VI
through X, the diagnosis must be based on a physical
examination or on findings by a board-certified pathologist.
Exposure Criteria: A claimant must demonstrate meaningful
and credible evidence of exposure to asbestos in the United
States, or while a U.S. citizen employed by a U.S. company or
employed on a U.S. flagged ship. There must be a causal link
between the asbestos exposure related to the employment
overseas for a U.S. company or on the U.S. flagged ship and the
asbestos-related injury. Since asbestos fibers are present in
the ambient air and water in very small amounts it is the
intent of the committee that any exposure must be in excess of
the amount of asbestos in the ambient air.
``Take-Home'' Exposure: Claimants may alternatively satisfy
the requirements under the Act based on exposures to asbestos
brought into the home by an occupationally exposed person,
i.e., take home exposures, if the occupationally exposed person
can satisfy the exposure requirements of the disease or
condition claimed and the claimant lived with the
occupationally exposed person during the required exposure
period. This requirement of ``living with'' a person requires
that the claimant have used the residence of the
occupationally-exposed person as his/her regular residence for
the time period necessary to satisfy the exposure requirement
for the disease level that the claimant is asserting. It is
understood that household members may travel to a certain
extent for work or vacationand still be considered as ``living
with'' another member of the household. Because take home exposures
generally do not rise to the same level and intensity of exposure as
the occupationally exposed worker, such claims will be referred to the
Medical Advisory Committee for a determination as to whether the take
home exposures are sufficient to establish a causal relationship to the
claimed disease comparable to that of the occupational exposed person.
Libby, Montana: In addition, the unique nature of the
exposures to asbestos associated with the vermiculite mining
and milling operations in Libby, Montana have resulted in a
number of asbestos-related injuries among the residents of
Libby. Under the FAIR Act, the occupational exposure
requirements are waived for workers in the mining and milling
operations in Libby, Montana, and persons who lived or worked
within a 20-mile radius of Libby, Montana for at least 12
consecutive months prior to December 31, 2003. The mining and
milling operations in Libby ended in 1990, and the United
States Environmental Protection Agency, among others, has been
working to address and eliminate the environmental and health
risks in Libby since 1999.
Non-malignant Conditions: For nonmalignant conditions
(Levels I to V), the medical criteria generally require a
diagnosis of bilateral pleural plaques or thickening, bilateral
pleural calcification, diffuse pleural thickening, bilateral
pleural disease of grade B2, or asbestosis based on x-ray
readings or pathology. Level II includes claimants with mixed
obstructive and restrictive disease based on pulmonary function
testing and supporting medical documentation that asbestos
exposure was a contributing factor to the disease. Mild,
moderate and severe impairment is required for Levels III, IV,
and V, respectively, based on pulmonary function test results
and supporting medical documentation that there are no other
more likely causes of the claimant's impairment than the
claimant's asbestos exposure. The Committee intends that such
medical documentation would be provided by a physician with
knowledge and expertise in diagnosing occupational lung
disease. With respect to Nonmalignant Levels III, IV, and V the
Committee intends to the extent feasible that the documentation
would be provided by an appropriately board certified physician
in occupational medicine or pulmonary medicine. The Committee
recognizes, however, that access to appropriately board-
certified physicians may not be feasible for all claimants due
to geographical constraints. The exclusion of other more likely
causes of the impairment is a typical component of a medical
diagnosis due to the fact that there are a number of other
potential causes for such conditions which may have similar
characteristics of an asbestos-related condition. For example,
individuals exposed to other dusts or airborne contaminants may
be at risk for silicosis or other diseases which also may show
up as an abnormality in the lung.
In addition, Level I requires 5 years cumulative
occupational exposure, while levels II through V require 5
years substantial occupational exposure weighted based on time
and industry (``weighted years''). Because it is well
recognized in the medical community that, except for
mesothelioma, asbestos-related diseases are dose dependent,
i.e., the risk increases as the amount of exposure increases,
the industry and time weighting of years of exposure are
necessary to act as a measure of dose. Certain industries and
occupations involve higher levels of exposures to asbestos
fibers due to the direct handling of the asbestos itself, and
is reflected in the industry weighing component. On the other
hand, persons who work with asbestos-containing products, such
as auto mechanics who work on brakes and related occupations,
are generally not exposed to asbestos fibers in harmful amounts
in the course of their occupation. Such occupations do not
involve the same type of exposure as a person who manufactured
products using raw asbestos.
The intent of the weighted exposure requirement is to
recognize that federal regulations implemented in the 1970's
and 1980's have dramatically reduced asbestos exposures and
resulted in significantly less exposures to asbestos that
simply do not compare to the levels of asbestos exposures that
occurred prior to 1970. As found by the District Courts,
``Mesothelioma and asbestos-related lung cancers are expected
to result primarily from the sort of direct occupational
exposure that was phased out as a result of increasingly
stringent federal regulation.'' \54\ Also, as noted by the
American Thoracic Society in its March 1986 guidance, ``[w]ith
exposures below the current recommended permissible exposure
limit value [under OSHA standards], asbestosis is not likely to
be found during the course of a working career. With proper
engineering controls, work practice, and where necessary,
personal respiratory protective devices, asbestosis should not
occur.'' \55\ These differences in the exposure intensity and
amount of exposure to asbestos fibers are reflected in the
industry and time-weighting formula.
---------------------------------------------------------------------------
\54\ In re Joint E & S Dists. Asbestos Litig., 237 F Supp.2d 297,
311 (E. & S.D.N.Y. 2002) (citations omitted).
\55\ The Diagnosis of Nonmalignant Disease Related to Asbestos,
Official Statement of the American Thoracic Society, March 1986.
---------------------------------------------------------------------------
Malignant Conditions: For malignant conditions (Levels VI
to X), the medical criteria require a diagnosis of
mesothelioma, primary lung cancer, or other cancer. For other
cancers, level VI, requirements of a claim include (i) evidence
of a bilateral asbestos-related nonmalignant disease; (ii) 15
weighted years of exposure to asbestos; and (iii) supporting
medical documentation that the claimant's exposure to asbestos
was a contributing factor in causing the claimant's other
cancer. These claims are referred to the Medical Advisory
Committee for a determination that the claimant's asbestos
exposure was a substantial contributing factor in causing the
claimant's other cancer. The intent behind this provision is to
reflect the testimony before this Committee, which indicated
that a majority of the medical community has found little
association between asbestos exposure and other cancers,
particularly colorectal cancer. Because there is some evidence
that may support an association, the Committee has provided
compensation for such cancers. Because of the evidence finding
no association, however, the Committee believes it is
reasonable to require that a claimant establish a causal
connection between his/her asbestos exposure and his/her other
cancer. The Committee may review any studies, including the
Institute of Medicine study to be commissioned, in making this
determination.
Lung Cancer: The testimony before this Committee indicated
that the majority of the medical community has found that lung
cancer is generally not related to asbestos exposure unless the
claimant has underlying asbestosis or, at least, sufficient
exposure to asbestos to have caused asbestosis.\56\ The United
States Supreme Court recognized that ``studies provide strong
support for the notion that asbestosis is crucial to the
development of asbestos-associated lung cancers.'' \57\ Workers
with only pleural plaques, on the other hand, have not been
shown to be at a higher risk for lung cancer, although pleural
plaques are considered a marker of prior exposure to
asbestos.\58\ The consensus medical criteria established under
this section thus provides three levels of lung cancers, with
increasing evidence of causation.
---------------------------------------------------------------------------
\56\ Testimony of Dr. James D. Crapo, Professor of Medicine,
National Jewish Center and University of Colorado Health Sciences
Center, Before the Senate Committee on the Judiciary Concerning S.
1125, the Fairness in Asbestos Injury Resolution Act of 2003, June 4,
2003, at 6.
\57\ Norfolk & W. Railway Co. v. Ayers, 123 S. Ct. 1210, 1222
(2003) (citing A. Churg & F. Green, Pathology of Occupational Lung
Disease 343 (2d ed. 1998)).
\58\ Testimony of Laura Welch, MD, Medical Director, Center to
Protect Workers Rights, On Asbestos Related Diseases--Medical Criteria,
Populations at Risk and Disease Projections, Before the Senate
Judiciary Committee, June 4, 2003, at 7.
---------------------------------------------------------------------------
For lung cancer I, level VII, evidence of 15 weighted years
of exposure to asbestos is required. For lung cancer II, level
VIII, the requirements include (i) evidence of bilateral
pleural plaques, bilateral pleural thickening or bilateral
pleural calcification, and (ii) 12 weighted years of exposure
to asbestos. For lung cancer III, level IX, the claimant must
provide either (i) a diagnosis of asbestosis and evidence of 8
or 10 weighted years, depending on the x-ray reading, or (ii)
diagnosis of asbestosis by pathology and evidence of 10
weighted years. Supporting medical documentation as used
throughout this section refers to a medical diagnosis or
opinion related to the claimant's condition and does not
include general medical literature related to the claimed
disease or condition.
All lung cancer claims are paid pursuant to a matrix of
classes for each level which the Administrator develops. This
matrix is based on the claimant's smoking history, their age,
and the intensity and duration of the exposure. A former smoker
is defined as a person who quit smoking at least 12 years prior
to date of diagnosis. A nonsmoker is a person who has never
smoked at any time during his or her life. Because of the
potential for misrepresentations related to one's smoking
behavior, the claimant bears the burden of producing meaningful
and credible evidence of their smoking history as part of their
claim submission.
The intent behind paying less money to smokers is to
reflect the fact that smoking also plays an important factor in
causing lung cancers. According to the American Lung
Association, about 87% of lung cancer cases are caused by
smoking.\59\ Early studies showing a synergistic effect between
smoking and asbestos exposure have not been substantiated by
later studies. Studies have also shown that the risk of lung
cancer, while diminished for those who quit smoking, never
reaches the same levels as those for lifetime nonsmokers.\60\
This is particularly true where the claimant smoked 40-50 packs
of cigarettes a year for many years prior to quitting. The Fund
is not intended to be a compensation system for smokers, which
would otherwise overwhelm the Fund leaving no money for
asbestos victims.
---------------------------------------------------------------------------
\59\ ALA, Facts About Lung Cancer, available at www.lungusa.org/
diseases/lungcanc.html. Radon is considered to be the second leading
cause of lung cancer in the United States today. Id.
\60\ See, e.g., Donald R. Shopland, et al., Smoking-Attributable
Cancer Mortality in 1991: Is Lung Cancer Now the Leading Cause of Death
Among Smokers in the United States?, 83 J. of the Cancer Inst. 1142,
1145 (1991); National Cancer Institute, SEER Statistics, Effect of
Quitting Smoking on Lung Cancer Risk Among Male and Female Former
Smokers, by Length of Time Off Cigarettes and Number of Cigarettes
Smoked Daily, (Table 3, based on data in Shopland et al., 1991),
available at http://seer.cancer.gov/publications/raterisk/risks71.html.
---------------------------------------------------------------------------
For mesothelioma, level X, the claimant must provide
credible evidence of identifiable exposure to asbestos based on
occupational exposures, take home exposures, or exposures from
living in the proximate vicinity of a plant or other industrial
operation that has emitted asbestos fibers into the air
resulting in asbestos being present in the environment well
above normal background levels. Claimants may allege any other
specific, identifiable exposure to asbestos as the cause of the
mesothelioma, but such cases shall be referred to the Medical
Advisory Committee for a determination as to eligibility. This
identifiable exposure is not intended to include mere exposure
to asbestos insulation in homes, except in the unusual
circumstance that the claimant was exposed to friable asbestos
in large amounts or on a repeated basis, in which case the
claim shall be subject to review by the Medical Advisory Panel.
Study of ``other cancers'' and causation: No later than 2
years after the date of enactment, the Institute of Medicine of
the National Academy of Sciences must complete a study of the
causal link between asbestos exposure and the other cancers:
colorectal, laryngeal, esophageal, pharyngeal and stomach
cancers. The study must be transmitted to Congress, the Court
of Federal Claims and the Medical Advisory Committee. The Court
and Medical Advisory Committee may consider the results of the
report for purposes of determining whether asbestos exposure is
a substantial contributing factor to causing claimant's other
cancer. The Court also may request additional study regarding
other cancers if warranted by advancements of science.
Exceptional Medical Claims: The FAIR Act recognizes that in
some cases, through no fault of the claimant, claimants may not
have certain medical tests that are required under the medical
criteria, but may have results from comparable tests and that
there may be advances in science that result in new testing
methods not anticipated by the Committee at this time. As such,
this provision allows a claimant to seek designation of his or
her claim as an exceptional medical claim if the claimant
states that claim does not meet medical criteria requirements
or has been found ineligible for compensation based on the
failure to meet the medical criteria only. The claimant must
provide a report from a physician meeting the requirements of
section 121, such as a diagnosis based on an in person physical
examination that finds asbestos exposure as a contributing
factor to causing the relevant disease, and which includes (i)
a complete review of the claimant's medical history and current
condition, (ii) additional material as required by the Court,
and (iii) a detailed explanation as to why the claim meets the
standard for designating exceptional medical claims.
All applications for designation as an exceptional medical
claim are referred to the Medical Advisory Committee, which
must find that the claimant, for reasons beyond his or her
control, cannot meet the requirements but can through
comparably reliable evidence establish a condition similar to
one that would satisfy the requirements. TheMedical Advisory
Committee may request additional reasonable testing, and CT Scans may
be submitted in addition to an x-ray. CT Scans are generally used only
after an x-ray has already been taken and the physician believes a CT
Scan may shed additional light on the claimant's condition. In such
cases, a CT Scan may be used to supplement the submission of an x-ray
reading. Because of the lack of any clear, objective standards similar
to those for x-ray readings, however, the Committee does not intend
that CT Scans become normal practice for the filing of claims, and as
such, they are limited to optional use by the Medical Advisory
Committee in assessing exceptional medical claims.
If the Medical Advisory Committee certifies a claim as an
exceptional medical claim, it must designate the disease
category for which compensation may be sought and refer the
claim to a special asbestos master for a determination on
eligibility on the remaining diagnostic, latency and exposure
requirements. A claimant may resubmit application based on new
evidence, stating the new evidence that is the basis of the
resubmission. The Chief Judge will promulgate rules governing
the procedures for seeking designation of a claim as an
exceptional medical claim. Because the medical conditions of
the residents of Libby, Montana are currently being studied by
various agencies, claims filed by Libby, Montana claimants are
to be automatically designated as exceptional medical claims
and referred to Medical Advisory Committee for review of the
claimant's eligibility.

Subtitle D. Awards

Sec. 131. Amounts

Because there are other causes for many of the illnesses
that are compensated under the Act, claims values have been
carefully constructed providing increased compensation not only
for more severe degrees of illness, but also in those cases
where there is increased confidence that the asbestos exposure
was the cause of the claimant's injury. Mesothelioma, where
asbestos is currently considered the only known cause, and lung
cancer claims where the claimant has been diagnosed with
underlying asbestosis and is a nonsmoker, have been given the
highest values. Claims value for claimants with severe
asbestosis and other lung cancer claims where the causal
connection between the asbestos exposure and the injury is more
substantiated similarly reflect the purpose of the Act to
direct monies to the most seriously injured claimants whose
injuries were caused by exposure to asbestos.
With this purpose in mind, eligible claims will be paid as
follows:

------------------------------------------------------------------------
Disease/condition Amount of award \1\
------------------------------------------------------------------------
Level I............ Asbestosis/Pleural Medical Monitoring \2\
Disease A.
Level II........... ``Mixed'' Disease.... $20,000
Level III.......... Asbestosis/Pleural $75,000
Disease B.
Level IV........... Severe Asbestosis.... $300,000
Level V............ Disabling Asbestosis. $750,000
Level VI........... Other Cancers........ $150,000
Level VII.......... Lung Cancer I........ $25,000--$75,000 \3\
Former Smokers... $75,000--$225,000 \3\
Nonsmokers....... $225,000--$600,000 \3\
Level VIII......... Lung Cancer II....... $125,000--$225,000 \3\
Former Smokers... $400,000--$600,000 \3\
Nonsmokers....... $600,000--1,000,000 \3\
Level IX........... Lung Cancer III...... $300,000--$400,000 \3\
Former Smokers... $550,000--$850,000 \3\
Nonsmokers....... $800,000--$1,000,000 \3\
Level X............ Mesothelioma......... $1,000,000
------------------------------------------------------------------------
\1\ Scheduled awards will be indexed for future inflation based on a
cost of living adjustment.
\2\ Claimants meeting Level I requirements are eligible for medical
monitoring reimbursement only.
\3\ All Lung Cancer values are to be determined based on a matrix which
the Administrator must develop. This matrix will reflect different
values based on a claimant's smoking history, age and level and
duration of exposure. An ``ex-smoker'' is someone who has not smoked
in the 12-year period before diagnosis of lung cancer. A ``non-
smoker'' is a claimant who has never smoked. There are some
occupations, such as automotive repair, in which a claimant would meet
the definition of ``substantial occupational exposure,'' ``moderate
exposure,'' and ``heavy exposure'' because he or she was working with
a product containing asbestos for a sufficient period of time--yet,
because of the low level of asbestos fibers to which the claimant
would be exposed during this period, the exposure would not in reality
be substantial and would not be capable of causing an asbestos-related
disease. The bill therefore requires the Administrator to make a
determination, based on studies of industrial hygiene and
epidemiology, of the industries and occupations in which the airborne
fiber levels of asbestos would indeed be at a level where exposure is
considered substantial. Claimants whose primary occupation falls
outside those industries or occupations where exposure has been
determined to be substantial should not be presumed to have met the
exposure requirements but such claims may be evaluated by the Medical
Advisory Committee as exceptional medical claims.

Sec. 132. Medical monitoring

Although the intention of the FAIR Act is to direct monies
away from the unimpaired and to those truly sick from asbestos
exposure, the Committee recognizes that claimants with
significant occupational exposure to asbestos may be at risk of
developing a serious asbestos-related illness in the future. As
such, claimants meeting the criteria for Level I will be
reimbursed for all reasonable costs (which are not covered by
insurance) for x-rays, physical examinations, and pulmonary
function tests every three years, which will provide the
claimant with information as to whether he or she has a
compensable illness. Although the claimant may choose which
physician conducts such tests, the Administrator will provide
eligible claimants with a list of providers in the claimant's
area that can provide such services. Filing a claim for
reimbursement of medicalmonitoring costs shall not commence the
4 year statute of limitations for filing a claim for compensation for
an eligible condition or disease.

Sec. 133. Payments

Payments should be disbursed over a period of 3 years and
in no event more than 4 years from the date of final
adjudication of the claim, and can be accelerated for
mesothelioma claimants who are alive on the date of
determination. Claimants may also elect to receive their
benefits in the form of an annuity. All benefits are non-
taxable and not deemed to be a Medicare benefit.

Sec. 134. Reduction in benefit payments for collateral sources

All awards will be reduced by the amount of collateral
source a claimant has received, or is entitled to receive.
Collateral source is defined in section 3 as compensation that
the claimant received or is entitled to receive from a
defendant or its insurer, or compensation trust as a result of
judgment or settlement for an asbestos related injury that is
the subject of a claim filed under section 111. Worker's
compensation and veteran's benefits are not included as
collateral sources.

Subtitle E. Panel Review

Sec. 141. Panel review

United States Court of Asbestos Claims: Claimants may
appeal determinations of a panel of 3 Special Asbestos Masters
to a panel of 3 randomly-assigned judges from the United States
Court of Federal Claims. Such panel shall be known as the
United States Court of Asbestos Claims (``Asbestos Court'') and
may sustain decisions, set aside arbitrary and capricious
decisions, or remand for further action. Remands are limited to
30 days. The Administrator may appoint counsel to represent the
Fund in oral arguments and to submit briefs. The Court will
make its rulings based on the record, and not later than 30
days after oral argument, and in no event later than 60 days
after receipt of the notice of appeal. Accepting payment of an
award under this Act extinguishes all further right to appeal
related to such payment.

TITLE II. ASBESTOS INJURY CLAIMS RESOLUTION FUND

Sec. 201. Definitions

Sec. 202. Authority and tiers

The Administrator shall identify all defendants with $1
million or more in prior asbestos expenditures and assign them
to tiers as appropriate pursuant to this Act. Defendants will
generally be placed in tiers based on historical expenditures
on asbestos claims, including costs related to defense and
indemnity, and further subdivided based on revenues.\61\
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\61\ It is the intent of the Committee that the amounts contributed
by defendants and insurers be tax deductible and that claim awards and
the growth of the Asbestos Claims Resolution Fund be tax-free,
consistent with good public policy. The Judiciary Committee and Finance
Committee will work together to insert the appropriate language for
Senate floor consideration of this bill.
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Assessment of Defendant Participant Contributions: The
Administrator shall determine the amount that each defendant
participant will be required to pay into the fund to compensate
claimants for asbestos injuries based on the following formula:
(1) Tier I--Persons with Prior Asbestos Expenditures that
have a case pending under a chapter of title 11 of the United
States Code, before January 1, 2002, shall be assigned to Tier
I if such Chapter 11 filing was caused by asbestos liability.
Bankruptcies not caused by asbestos liability--However, it
is the intent of the FAIR Act and the Committee that a
bankruptcy not caused by asbestos liabilities be permitted to
proceed with filing and approval of the bankruptcy
reorganization plan. And any asbestos compensation trust
established pursuant to such plan, will pursuant to other
provisions in this Act, be incorporated in the Asbestos Injury
Claims Resolution Fund. Therefore, for any company that filed
for chapter 11 protection prior to the date of enactment of
this Act and has not confirmed a plan of reorganization as of
the date of enactment of this Act, it may petition to proceed
with its bankruptcy filing if its bankruptcy was not caused by
asbestos liabilities. The presiding bankruptcy court shall make
the determination of whether or not the filing was caused by
asbestos liabilities after notice and a hearing upon motion
filed by the entity within 30 days of the effective date of
this Act, which motion shall be supported by an affidavit or
declaration of the Chief Legal Officer of the business entity,
and copies of the entity's public statements and filing for
chapter 11 protection that asbestos liability was not the sole
or precipitating cause of the entity's chapter 11 filing. The
bankruptcy court shall hold a hearing and make its
determination within 60 days of when the motion is filed. Any
judicial review of this determination must be an expedited
appeal and limited to whether the decision was against the
weight of the evidence presented.
If the bankruptcy court's determination is in favor of the
entity's motion, that entity may proceed with the filing,
solicitation and confirmation of a plan or reorganization,
including a trust and channeling injunction pursuant to section
524(g) of the bankruptcy code, notwithstanding any other
provisions of this Act, provided that:
(1) the bankruptcy court determines that confirmation
is necessary to permit the reorganization of the
company and assure that all creditors and the company
are treated fairly and equitably;
(2) an order confirming the plan of reorganization is
entered by the bankruptcy court within nine months
after the effective date of the Act, or such longer
period approved by the bankruptcy court for good cause
shown. To the extent such company successfully confirms
a plan of reorganization including a 524(g) trust and
channeling injunction that involves payments by
insurers who are otherwise subject to this Act, such
insurers shall obtain a corresponding reduction in the
amount otherwise payable by that insurer under this
Act.
(2) Other Tiers--Except as otherwise provided, Persons or
Affiliated Groups shall be assigned to Tiers II, III, IV, V, VI
or VII according to their Prior Asbestos Expenditures as
follows:
Tier II: $75 million or greater.
Tier III: $50 million or greater but less than $75
million.
Tier IV: $10 million or greater but less than $50
million.
Tier V: $5 million or greater but less than $10
million.
Tier VI: $1 million or greater but less than $5
million.
Tier VII: $5 million or More in FELA Liability.
(Note: Tier VII is discussed in Sec. 203).
Total Contributions: Defendants' contributions shall total
$52 billion collectively over a 27-year period, unless
otherwise provided.

Sec. 203. Subtier assignment

Except as otherwise provided, the Administrator shall
assess contributions to Persons or Affiliated Groups within
Tiers I through VII as follows--
Tier I--The Administrator shall assess an annual
contribution to each debtor in Tier I based on a percentage of
its revenues, according to the following tiers:
Subtier 1: 1.5184% of its Revenues in years 1-5,
declining gradually to .1518% of Revenues in year 27.
Subtier 2: For non-operational companies--all of
assets earmarked for asbestos contributed to fund.
Subtier 3: Non-operational and no assets earmarked
for asbestos--50% of all unencumbered assets
contributed to fund.
For Tiers II through VII--The Administrator shall assess
annual contributions to each participant, according to the
following allocation:
Tier II--Based on Revenues the Person or Affiliated Group
shall be assigned to subtiers and shall pay, on an annual
basis, the following:
Subtier 1: $25 million (those with highest revenues).
Subtier 2: $22.5 million (those with next highest
revenues).
Subtier 3: $20 million (those remaining).
Subtier 4: $17.5 million (those with the next to the
lowest revenues).
Subtier 5: $15 million (those with the lowest
revenues).
Tier III--Based on Revenues the Person or Affiliated Group
shall be assigned to subtiers and shall pay, on an annual
basis, the following:
Subtier 1: $15 million (those with the highest
revenues).
Subtier 2: $12.5 million (those with the next highest
revenues).
Subtier 3: $10 million (those remaining).
Subtier 4: $7.5 million (those with the next lowest
revenues).
Subtier 5: $5 million (those with the lowest
revenues).
Tier IV--Based on Revenues, the Person or Affiliated Group
shall be assigned to subtiers and shall pay, on an annual
basis, the following:
Subtier 1: $3.5 million (those with the highest
revenues).
Subtier 2: $2.25 million (those with the next highest
revenues).
Subtier 3: $1.5 million (those remaining).
Subtier 4: $0.5 million (those with the lowest
revenues).
Tier V--Based on Revenues, the Person or Affiliated Group
shall be assigned to subtiers and shall pay, on an annual
basis, the following:
Subtier 1: $1 million (those with the highest
revenues).
Subtier 2: $0.5 million (those remaining).
Subtier 3: $0.2 million (those with the lowest
revenues).
Tier VI--Based on Revenues, the Person or Affiliated Group
shall be assigned to subtiers and shall pay, on an annual
basis, the following:
Subtier 1: $0.5 million (those with the highest
revenues).
Subtier 2: $0.25 million (those remaining).
Subtier 3: $0.1 million ((those with the lowest
revenues).
Tier VII--In addition to an assignment in Tiers II through
VI, persons who are assigned to Tier VII if they are subject to
claims under FELA liability and shall pay, on an annual basis,
the following:
Subtier 1: Railroad common carriers with revenues of
at least $5 billion shall pay $10 million.
Subtier 2: Railroad common carriers with revenues of
at least $3 billion but less than $5 billion shall pay
$5 million.
Subtier 3: Railroad common carriers with revenues of
at least $0.5 billion but less than $3 billion shall
pay $500,000.
Revenues: ``Revenues'' shall be determined by reported
earnings for the year ending December 31, 2002, or, if
applicable, the earlier fiscal year that ends during 2002.

Sec. 204. Assessment administration

Decreased contributions: Except as otherwise provided, the
Administrator will assess contributions based on the values set
forth for each Person or Affiliated Group covered by this
subsection for the first five years of the Fund's operation.
After year five, the Administrator shall reduce the
contribution amount for each Defendant Participant in Tiers II,
III, IV, V, VI and VII.
Small business exemption: Persons or Affiliated Groups
meeting the definition of ``small business'' as defined by the
Small Business Administration pursuant to the SmallBusiness
Act, 15 U.S.C. Sec. 632, on December 31, 2002 are exempt from any
contribution requirement under this subtitle.
Exceptions: Under expedited procedures established by the
Administrator, a Defendant Participant may seek adjustment of
the amount of its contribution based on severe financial
hardship or demonstrated exceptional inequity. The
administrator shall appoint two advisory panels--one on
financial hardship and one on inequity adjustment--to make
recommendations.
Hardship adjustments--may not exceed in the aggregate 6% of
the total annual contributions otherwise required of all
Defendant Participants
Inequity adjustments--may not exceed 4% of the total annual
contributions otherwise required of all Defendant Participants.
A defendant may qualify for an inequity adjustment by
demonstrating that the amount of its contribution under the
statutory allocation is exceptionally inequitable when measured
against:
(i) that percentage of the prior asbestos
expenditures of the defendant that were incurred with
respect to claims that neither resulted in an adverse
judgment against the defendant nor were the subject of
a settlement that required a payment to a plaintiff by
or on behalf of that defendant; or
(ii) the amount of the likely cost to the defendant
of its future liability in the tort system in the
absence of the Fund; or
(iii) the contribution rate of the defendant is
exceptionally inequitable when compared to the median
contribution rate for all defendants in the same tier
(contribution rate for purposes of this section is the
contribution amount of the defendant as a percentage of
such defendant's gross revenues for the year ending
December 31, 2002); or
A defendant shall qualify for a two-tier main tier and a
two-tier sub-tier adjustment reducing the defendant's
contribution based on inequity by demonstrating that not less
than 95% of such person's prior asbestos expenditures arose
from claims related to the manufacture and sale of railroad
locomotives and related products, so long as such person's
manufacture and sale of railroad locomotives and related
products is temporally and causally remote. For purposes of
this paragraph, a person's manufacture and sale of railroad
locomotives and related products shall be deemed to be
temporally and causally remote if the asbestos claims
historically and generally filed against such person relate to
the manufacture and sale of railroad locomotives and related
products by an entity dissolved more than 25 years prior to the
date of enactment of this Act.
Term and Renewal--The adjustments granted under this
section shall apply for a period of 3 years and may be renewed.
Recoupment Authority--Following expiration of the hardship
or inequity adjustment period granted under this section, the
Adminstrator shall annually determine whether there has been a
material change in conditions which would support a finding
that the allocation was not inequitable or that the defendant
that was the recipient of a hardship is now capable of paying
its full allocation amount plus past reduction amounts and if
so reinstate the original contribution that was not paid during
the inequity or hardship adjustment term. The intent of this
section is to protect the integrity of the fund by permitting
recoupment of prior adjustments. However, it is intended that
this recoupment is not mandatory but that the Administrator
shall have discretion to ensure that any such recoupment will
not result in a hardship on the participant.
Determination of Prior Asbestos Expenditures: Payments by
indemnitors prior to December 31, 2002 shall be counted as part
of the indemnitor's prior asbestos expenditure.
Statutory Minimum Contributions: Statutory minimums for the
aggregate contributions of Defendant Participants to the Fund
in any single year shall be as follows:
(1) For each of the first five years of the Fund, the
aggregate contributions of Defendant Participants to the Fund
shall be at least $2.5 Billion.
(2) After year five, the statutory minimum shall be reduced
as follows:
(A) For years 6 through 8, $2.25 billion;
(B) For years 9 through 11, $2 billion;
(C) For years 12 through 14, $1.75 billion;
(D) For years 15 through 17, $1.5 billion;
(E) For years 18 through 20, $1.25 billion;
(F) For years 21 through 26, $1 billion;
(G) For year 27, $250 million.
Identification of Defendant Participants: The Administrator
shall identify defendants that have paid or been assessed
through legal judgment or settlement, greater than $1 million
in defense and indemnity costs relating to asbestos personal
injury claims and these defendants shall be mandatory
participants in the fund. The Administrator shall directly
notify all reasonably identifiable Defendant Participants of
the requirement to submit information necessary to calculate
the amount of any required contribution to the Fund; and
publish in the Federal Register a notice requiring any person
who may be a Defendant Participant to submit such information.
Several Liabilities: Each Defendant Participant's
obligation to contribute to the Fund is several. There is no
joint liability and the future insolvency of any Defendant
Participant shall not affect the assessment assigned to any
other Defendant Participant.
Application of FOIA and confidentiality of information:The
Freedom of Information Act shall apply to the Office of Asbestos Injury
Claims Resolution. Any person may designate any record submitted under
this section as a confidential commercial or financial record.

Subtitle B. Asbestos Insurers Commission

Sec. 211. Establishment of Asbestos Insurers Commission

No later than 60 days after enactment, the President, in
consultation with Congress, shall appoint five commissioners
with sufficient expertise. The commissioners shall be appointed
for the life of the Commission. No member of the Commission may
be an employee or immediate family member of an employee of an
insurer participant. No member of the commission may be a
former employee or shareholder of any insurer participant
unless that fact is fully disclosed. However, the meaning of
shareholder is defined to exclude a broadly based mutual fund
that may from time to time include the stocks of insurer
participants. A commissioner shall not be an officer or
employee of the Federal Government, except in relation to this
commission. The Commission shall select a chairman from among
its members. No later than thirty days after all the members
have been appointed, the Commission shall hold its first
meeting. Subsequently, the Commission shall meet at the call of
the Chairman as necessary to carry out the duties. No business
may be conducted or hearings held without the participation of
all members of the Commission.

Sec. 212. Duties of the Asbestos Insurers Commission

Subsection (a)(1)--Determination of Insurer Liability for
Asbestos Injuries: The Commission shall determine the amount
that each Insurer Participant will be required to pay into the
Fund to compensate claimants for asbestos injuries. The terms
``Insurer Participant'' and ``Mandatory Insurer Participant''
includes direct insurers, reinsurers and any run-off entity
established to review and pay asbestos claims.
Subsection (a)(2)--Allocation Agreement: Not later than 30
days after the Commission issues its initial determination, the
direct insurers and reinsurers have the option of submitting an
allocation agreement that establishes the respective insurer
payments into the Fund. The agreement must be approved by all
of the participants from both groups and submitted to the
Congress. The Commission's authority terminates on the day
after the Commission certifies that an allocation agreement
meets the requirements of Subtitle B.
Subsection (a)(3)--General Provisions: The total aggregate
contributions required of all Insurer Participants equals $52
billion. Unless provided otherwise, the annual contributions
from Insurer Participants are expected to decline over time and
the proportionate share of each Insurer Participant's
contributions will remain the same throughout the life of the
Fund. Unless provided otherwise, each Insurer Participant's
obligation to contribute to the Fund is several. There is no
joint liability and the future insolvency of any Insurer
Participant shall not affect the assessment assigned to any
other Insurer Participant.
Subsection (a)(4)--Assessment Criteria: Insurers that have
paid or been assessed through legal judgment or settlement,
greater than $1 million in defense and indemnity costs relating
to asbestos personal injury claims shall be considered
Mandatory Insurer Participants to the Fund. Direct insurers
licensed and domiciled in the United States shall be
responsible for a portion of the total insurer fund
contribution of $52 billion. All other Insurer Participants,
shall also be responsible for a portion of the $52 billion in
total contributions. In determining the respective allocations
among these Insurer Participants, the Commission is required to
apply the following factors: historic premium lines for
asbestos liability coverage; recent loss experiences for
asbestos liabilities; the likely costs to each Insurer
Participant of its future liabilities under applicable
insurance policies; and other factors the Commission deems
relevant and appropriate. This subsection gives Insurer
Participants the ability to seek hardship adjustments of the
amount of its contribution based on severe financial hardship.
This subsection also provides that captive insurers of
Defendant Participants should not be assessed a funding
obligation as Insurer Participants to the extent that their
asbestos exposure remains within the corporate family. Payments
are to be made annually into the Fund, however, direct insurers
are required to pay 100% of their allocated amount within three
years of the effective date of this Act. Unless provided
otherwise, Insurer Participants who have fully paid their
allocation obligations to the Fund shall have no further
responsibilities under the Act. An interested party may obtain
judicial review of any final regulation of the Commission with
regard to an allocation formula under this subsection.
Notification to and request for information from Insurer
Participants: Subsection (b)(1)--Within 30 days after its
initial meeting, the Commission is required to directly notify
all reasonably identifiable Insurer Participants of the
requirement to submit information necessary to calculate the
amount of any required contribution to the Fund; and publish in
the Federal Register a notice requiring any person who may be
an Insurer Participant to submit such information.
Response to the Commission: Subsection (b)(2)--Any person
meeting the criteria established in the notice shall respond
and submit the required information within thirty days after
receipt of the direct notice or thirty days after the
publication of the notice in the Federal Register. The response
shall be signed by a responsible corporate officer, general
partner, proprietor, or individual of similar authority, who
shall certify under penalty of law the completeness and
accuracy of the information submitted.
Notice of Initial Determination: Subsection (b)(3)--Not
later than 120 days after the initial meeting of the
Commission, the Commission shall send each participant a notice
of the initial determination assessing a contribution to the
Fund. If no response is received from the participant, or if
the response is incomplete, the initial determination assessing
a contribution from the participant shall be based on the best
information available to the Commission.
Review Period: Subsection (b)(4)(A)--Not later than 30 days
after receiving notice of the initial determination from the
Commission, an Insurer Participant may provide the Commission
with additional information to support limited adjustments to
the assessment received to reflect exceptional circumstances.
Additional Participants: Subsection (b)(4)(B)--If before
the final determination of the Commission, the Commission
receives information that an additional person may qualify as
an Insurer Participant, the Commission shall require such
person to submitinformation necessary to determine whether a
contribution from that person should be assessed.
Revision Procedures: Subsection (b)(4)(C)--The Commission
is authorized to adopt procedures for revising initial
assessments based on information received under subparagraphs
(A) and (B).
Subpoena Power: Subsection (b)(5)--The Commission may
request the Attorney General to subpoena persons to compel
testimony, records, and other information relevant to its
responsibilities under this section. This subpoena power shall
be enforced in the U.S. district court for the district in
which the person to whom the subpoena was addressed resides,
was served, or transacts business.
Escrow Payments: Subsection (b)(6)--Notwithstanding an
Insurer Participant's allocation obligation, any escrow or
similar account established before the enactment of this Act by
an Insurer Participant in connection with an asbestos trust
fund that has not been judicially confirmed by the date of
enactment of this Act shall be returned to that insurer
participant.
Notice of Final Determination: Subsection (b)(7)--Not later
than 60 days after the notice of initial determination is sent
to the Insurer Participants, the Commission shall send each
Insurer Participant a notice of final determination of the
assessment amount and payment schedule. A participant has a
right to obtain judicial review of the Commissions final
determination under Title III.
Determination of Relative Liability for Asbestos Injuries:
Subsection (c)--The Commission shall determine the percentage
of total liability of each participant identified under
subsection (a).
Report: Subsection (d)--Not later than one year after the
date of enactment of this Act, the Commission shall submit a
report regarding the amount of the assessments and payment
schedule of contributions to the Senate Judiciary Committee,
the House Judiciary Committee and the U.S. Court of Federal
Claims.

Sec. 213. Powers of the Asbestos Insurer Commission

This section authorizes the Commission to conduct
rulemakings for the purpose of implementing its authority under
the Act. The Commission may hold hearings, sit and act at such
times, take testimony and receive evidence as it considers
advisable. The Commission may secure directly from any Federal
agency such information as the Commission considers necessary
to carry out this act, and may use the United States mails in
the same manner and under the same conditions as other
departments and agencies of the Federal government. The
Commission may not accept, use, or dispose of gifts or
donations of services or property. The Commission may also
enter into contracts as it deems necessary to obtain expert
advice and analysis.
In addition to establishing the powers of the Commission,
this section establishes related powers of the Administrator.
The Administrator may require Insurer Participants to make
payments to the Fund prior to the Commission's establishment of
an allocation formula. Such payments shall be assessed on an
equitable basis and equal, in total, the funding obtained from
Defendant Participants for the same period of time.
Enforcement--The Administrator also holds authority to
pursue a civil action in federal court against any reinsurer
that fails to comply with its obligations under the Act. The
Administrator is authorized to seek treble damages and is
authorized to seek relief against the direct insurer, an
obligated party, if unable to collect from the reinsurer.

Sec. 214. Personnel matters of the Asbestos Insurers Commission

Each member of the Commission shall be paid a daily
equivalent of the annual rate for level IV of the Executive
Schedule. Members of the Commission shall be allowed travel
expenses including per diem in lieu of subsistence consistent
with that permitted for federal agency employees. The Chairman
of the Commission may appoint and terminate an executive
director and such other additional personnel as may be
necessary to enable the Commission to perform its duties. The
employment of the executive director shall be subject to
confirmation by the Commission. The Chairman of the Commission
may set the rate of compensation of staff but it must not
exceed Level V of the Executive Schedule. Any federal
government employee may be detailed to the Commission without
reimbursement, and such detail shall be without interruption or
loss of civil service status or privilege. The Chairman of the
Commission may procure temporary and intermittent services at
rates that do not exceed Level V of the Executive Schedule.

Sec. 215. Application of FOIA and confidentiality of information

The Freedom of Information Act shall apply to the
Commission. Any person may designate any record submitted under
this section as a confidential commercial or financial record.

Sec. 216. Termination of the Asbestos Insurers Commission

The Commission shall terminate 60 days after the date on
which the Commission submits its report.

Sec. 217. Expenses and costs of Commission

All expenses and costs of the Commission shall be paid by
the Asbestos Injury Claims Resolution Fund.

Subtitle C. Office of Asbestos Injury Claims Resolution

Sec. 221. Establishment of the Office of Asbestos Injury Claims
Resolution

The office shall be responsible for administering the Fund,
providing compensation from the Fund to asbestos claimants who
are deemed eligible for such compensation; and any other
activities deemed appropriate. The President shall appoint an
Administrator, with the advice and consent of the Senate. The
Administrator shall serve for a term of five years and may be
removable for good cause.

Sec. 222. Powers and duties of the Administrator and management of the
fund

The Administrator shall promulgate such regulations as the
Administrator deems necessary to implement provisions of this
title; appoint employees or contract for the services of other
personnel; make expenditures as may be necessary and
appropriate in the administration of this subtitle; and take
all actions necessary to prudently manage the Fund.
This section also requires the Administrator to refer any
information relating to violation of the Toxic Substances
Control Act, the Clean Air Act, or the Occupational Safety and
Health Act to the Secretary of Labor, the Administrator of the
EPA or the United States Attorney for possible civil or
criminal prosecution and penalties.
This section also directs the United States Sentencing
Commission to review and amend, as appropriate, the United
States Sentencing Guidelines regarding environmental crimes
relating to asbestos to ensure that the penalties are
sufficient to deter and punish future activity and for other
reasons.

Sec. 223. Asbestos Injury Claims Resolution Fund

There is established in the Office of Asbestos Injury
Claims Resolution, the Asbestos Injury Claims Resolution Fund
which shall be available to pay claims deemed eligible for
compensation for an eligible disease or condition,
reimbursement for medical monitoring, principal and interest on
amounts borrowing, and administrative expenses under the
authority of this subsection. Except as otherwise provided, the
aggregate contributions of all mandatory participants to the
Fund may not exceed $5 billion in any calendar year. The
Administrator is authorized to borrow, in any calendar year, an
amount not to exceed anticipated contributions to the Fund in
the following year, for purposes of carrying out this Act.
Orphan Share Reserve Account: To the extent the total
amount of contributions of the Defendant Participants in any
given year exceed the statutory minimum under section 204(h),
the excess monies will be placed in an Orphan Share reserve
account established by the Administrator. These excess
contributions are not intended to include contributions from
contingent call funding. Monies from the Orphan Share reserve
account shall be preserved and administered like the remainder
of the Fund, but shall be reserved and may be used only (A) in
the event that a petition for relief is filed and not withdrawn
for the Defendant Participant under title 11 of the United
States Code after date of enactment and the Defendant
Participant cannot meet its obligations under paragraphs (4)
and (5) of sections 202 and 212, and (B) to the extent the
Administrator grants a Defendant Participant relief for severe
financial hardship or exigent circumstances under paragraph (9)
demonstrated inequity under section 204(d).
Guaranteed Payment Surcharge Account: The Administrator
shall impose on each Mandatory Participant an amount in
addition to contributions a reasonable surcharge to insure
against the risk of nonpayment of required contributions. These
amounts are to be put in a reserve account to be used in the
event contribution obligations are not met.
Lockbox for Severe Asbestos-Related Injury Claimants: This
section authorizes the Administrator to establish four separate
lockbox accounts to protect the funds needed to compensate the
victims with the most severe asbestos-related injuries:
mesothelioma, lung cancer with asbestosis, lung cancer with
pleural disease, other cancer and disabling asbestosis. The
Administrator shall allocate to each of these accounts a
portion of contributions to the Fund to compensate anticipated
claimants for each account. Funds will be allocated to these
accounts based on the best epidemiological and statistical
studies.
Contingent Call for Additional Mandatory Funding: This
section provides a contingent source of funding during the 27
year mandatory funding period. This contingent call authority
is intended to be truly contingent and only used in the event
that claims cannot be paid in a timely manner after other
reserve funds are utilized, including borrowing authority. The
section requires the Administrator to certify, before making
any reduction adjustments to annual contributions under section
204(a) or section 212(a)(3)(B), that the Fund will have
adequate funds available to compensate past, pending and
projected future claimants at the scheduled award values
provided in section 131(b) of the Act. If the Administrator
fails to make such certification for any given 1 year, 3 year,
or 6 year reduction adjustment period, the Administrator has
the authority to delay or reduce any scheduled step-down. For
example, if in year 9 and defendant companies' aggregate
contributions are scheduled to go down to $2 billion from $2.25
billion. The Administrator has the discretion to allow the step
down to go forward as projected to $2 billion, or the
Administrator can reduce the contribution partially to $2.1
billion or keep the contributions at the year 8 level of $2.25
billion. To meet the contingent call, defendant companies have
a prorated assessment based on their original section 203
subtier funding levels. Insurer funding levels to meet
contingent calls will be established by the Insurers
Commission.
Credit for surplus funds--The section also grants the
Administrator the authority to provide contributing
participants a credit for surplus funds that may be generated
through a contingent call. These credits are applied by
authorizing the Administrator to provide an additional
reduction adjustment to participants in addition to any
reduction adjustment already made. The total reduction
adjustment, however, cannot exceed the amount of additional
contributions required under this section.
Back-End Payments: This section addresses funding shortages
should they occur after expiration of the 27 year mandatory
funding period. The section authorizes the Administrator to
request annually $1 billion in the aggregate from Defendant
Participants and $1 billion in the aggregate from Insurer
Participants starting in year 28. The Administrator is required
to determine, after consulting with appropriate experts,
whether additional contributions are necessary to assure
adequate funding for claimants eligible to receive compensation
under the Act at the scheduled awards and the scheduled rates.
Payments are voluntary. But if the participant decides not to
make such voluntary payments, that participant would be subject
to a civil action in federal court. For civil actions against
participants that fail to make voluntary payments under this
section, the statute of limitations is tolled until a qualified
claimant knows or should have known that the participant failed
to make a voluntary contribution.

Sec. 224. Enforcement of contributions

If any participant fails to make any payment in the amount
and according to the schedule specified in the assessment,
after demand and 30 days opportunity to cure the default, there
shall be a lien in favor of the United States for the amount of
the delinquent payment (including interest). In the case of a
bankruptcy or insolvency proceeding, the lien shall be treated
in the same manner as a lien for taxes due and owing to the
United States. In any case where there has been a refusal or
neglect to pay an assessment, the Administrator may bring a
civil action in the Federal district court for the District of
Columbia to enforce such liability.
Availability of punitive damages and fines--In any action
involving a willful refusal to pay, the Administrator is
authorized to recover punitive damages, includingcosts and
attorneys fees, and may collect a fine equal to the total amount of the
liability not collected. In any enforcement proceeding, the participant
shall be barred from bringing any challenge to the assessment if such
challenge could have been made during the review period specified under
section 102(b)(4)204(i)(8) or 112(b)(4), or a judicial review
proceeding under Title III.

TITLE III. JUDICIAL REVIEW

Sec. 301. Judicial review of decisions of the Asbestos Court (which is
within the U.S. Court of Federal Claims)

The United States Court of Appeals for the Federal Circuit
has exclusive jurisdiction over any action to review a final
decision of the Asbestos Court. Appeals must be filed within 30
days of the final decision of the Asbestos Court. All decisions
will be upheld unless deemed to be arbitrary and capricious, in
which case they will be remanded to the United States Court of
Federal Claims.

Sec. 302. Judicial review of final determinations of the Administrator
and the Asbestos Insurers Commission

The U.S. District Court for the District of Columbia has
exclusive jurisdiction over any action to review the final
determinations of the Insurer Commission regarding contribution
allocations, and contribution allocation decisions by the
Administrator. Final determinations will be upheld unless
arbitrary and capricious, in which case it will be remanded to
the Administrator or the Commission with instructions to
modify. No stays of payments pending appeal are allowed.

Sec. 303. Exclusive review

No judicial review other than as set forth in sections 301
and 302 is allowed. Any decision of the federal court finding
any part of the FAIR Act to be unconstitutional shall be
reviewable as a matter of right by direct appeal to the Supreme
Court within 30 days of such ruling.

Sec. 304. Private right of action against reinsurers

An insurer participant may bring an action in the U.S.
District Court for the District of Columbia against any
reinsurer that is contractually obligated to reimburse such
insurer for some or all of its costs incurred in an asbestos
related claim. Such claims must be decided within 30 days after
filing, and will be reviewed under an arbitrary and capricious
standard. Appeals may be filed in the Court of Appeals for the
District of Columbia and will be reviewed under an arbitrary
and capricious standard.

TITLE IV. MISCELLANEOUS PROVISIONS

Sec. 401. False information

This section amends Title 18, Chapter 63 of the U.S. Code
by adding a new section 1348 to impose criminal penalties for
fraud against the Asbestos Insurers Commission and the Office
of Asbestos Injury Claims Resolution, and false statements made
against the Asbestos Injury Claims Resolution Fund by any
party.

Sec. 402. Effect on bankruptcy laws

Contribution obligations are not dischargeable and may not
be stayed when a participant files for bankruptcy. Claims by
the Court or U.S. against a participant are allowed even in
bankruptcy. Participants' payment pending bankruptcy or in
bankruptcy are not avoidable as preferences or executory
contract.
Transfer of Existing Asbestos Trusts: Existing trusts,
including 524(g) trusts, will be incorporated into the Asbestos
Injury Resolution Fund. The Administrator shall have discretion
when transferring assets of these trusts. This incorporation is
estimated to provide an additional $4-6 billion in
contributions to the fund.

Sec. 403. Effect on other laws and existing claims

This section provides that there will be no other forum for
recovery of an asbestos injury claim other than under S. 1125.
Claims pending as of the date of enactment will be preempted by
S. 1125, except those ``actions for which an order or judgment
has been duly entered by a court that is no longer subject to
any appeal or judicial review. * * *'' Nonfinal settlements and
judgments that are still subject to appeal are included in the
preemption. If a state court does not dismiss a claim, it may
be removed to federal court, which will rule on the motion to
dismiss.
As amended in Committee, the preemption, removal and
dismissal provisions of this section are not effective until
the Administrator determines that the fund is fully operational
and processing claims. However, any claims made payable by
operation of this amendment will reduce a participant's
contribution obligations under this Act.

Sec. 404. Administrator's annual reports

This section requires the Administrator to submit an annual
report to the Senate Committee on the Judiciary and House
Committee on the Judiciary concerning the operation of the
Asbestos Injury Claims Resolution Fund. The section specifies
the contents of the report which includes summaries, estimates
and recommendations.
Fund Sunset provision--In the Annual Report, the
Administrator is required to certify that 95% or more of
eligible asbestos claimants who filed claims during the prior
calendar year, have been paid and received compensation
according to the terms of section 133. If the Administrator
fails to make such certification, the Administrator is given 90
days to remedy the situation. But if the Administrator fails to
make the required certification after expiration of the 90
days, the Fund will terminate, and claimants will have the
opportunity to pursue their claims in the appropriate court.
The Committee is concerned that this Amendment was adopted
without a full understanding of the actual language and the
harsh consequences, ramifications and implications thereof. The
sponsor of the Amendment, Senator Biden, has agreed to work
with Members to develop appropriate language to mitigate any
unintended consequences of this provision before floor
consideration of S.1125.

Sec. 405. Rule of construction relating to liability of the United
States government

Except as otherwise specifically provided in this Act,
nothing in this Act may be construed as creating a cause of
action against the United States government, any entity
established under this Act, or any officer or employee of the
United States government or such entity. In addition it should
not be construed in any way to create an obligation of funding
from the United States government, other than funds for
personnel or support as specifically provided in this
legislation.

Section 406. Effect of insurance and reinsurance contracts

Because most insurance policies cover multiple liabilities,
it was necessary to account for ``erosion'' of a policy that
covers not only asbestos liabilities, but potentially other
liabilities such as property or other environmental liabilities
when assessing contribution obligations to the fund in order to
avoid depriving insureds of coverage for other non-asbestos
related claims. This section establishes how contributions to
the Fund by insurers and reinsurers reduce the limits of
existing insurance policies held by the Defendant Participants.
The quantum of erosion is based on the collective payment
obligations to the Fund by the insurer and reinsurer
participants, and are deemed as of the date of enactment to
erode remaining aggregate product limits available to a
Defendant Participant in an amount of 74.51% of each Defendant
Participant's scheduled assessment amount. The erosion
principles apply to the mandatory payment obligations to the
Fund, the contingent call payments and back-end payments.

TITLE V. PROHIBITION OF ASBESTOS CONTANING PRODUCTS

This section amends chapter 39 of Title 18 to prohibit the
manufacture, distribution and importation of consumer products
to which harmful asbestos is deliberately or knowingly added.
This section also contains specific exemptions and authorizes
the Administrator to hear and grant exemptions on a case by
case basis. The Committee found precedence and structured this
section in large part on an asbestos ban implemented by the
Environmental Protection Agency in 1989. Although this
regulatory ban was invalidated by the Fifth Circuit on mainly
procedural grounds, this section implements it legislatively
and it is the Committee's intent that the Administrator use the
1989 Environmental Protection Agency regulations as a guide
towards implementing the ban and relevant exceptions under this
section. The Committee recommends that the EPA consider,
consistent with its prior regulations, among other issues: (1)
whether to create a two-stage ban with a manufacturing ban
first and a distribution in commerce ban phased in after a
proper time delay; (2) whether to provide a labeling mechanism
to identify an asbestos containing product as soon as
practicable after date of enactment; and (3) whether to provide
an enforcement standard that requires a violation under the ban
to be knowing and willful.

VII. CRITICS' CONTENTIONS AND REBUTTALS

Critics' Contention No. 1: Critics contend that the funding
provided for in S. 1125 is inadequate to pay all asbestos
victims.
Response: The FAIR Act as amended obligates defendant and
insurer participants to contribute $52 billion equally to the
Asbestos Injury Claims Resolution Fund (hereinafter ``Fund'').
In addition, at least another $4 billion would be contributed
to the Fund from confirmed bankruptcy and other asbestos
compensation trusts, bringing the total level of mandatory
contributions to the Fund to $108 billion. The size of the Fund
is based on sound statistical data and economic models, and is
more than adequate to compensate all victims of asbestos-
related disease. Indeed, a leading actuary with Tillinghast-
Towers Perrin, testified convincingly before the Committee on
June 4, 2003 that ``$108 billion appears to be more than
adequate * * *'' ⁶²
---------------------------------------------------------------------------
\62\ Statement of Jennifer L. Biggs, FCAS, MAAA, Tillinghast-Towers
Perrin, Hearing Before the Senate Committee on the Judiciary, ``Solving
the Asbestos Litigation Crisis: S. 1125, the Fairness in Asbestos
Injury Resolution Act of 2003,'' 108th Cong., June 4, 2003, at 7.
---------------------------------------------------------------------------
The total estimated cost of ultimate asbestos loss and
expense, which includes both past payments and projected future
payments, is $200 billion.⁶³ The RAND Institute for
Civil Justice recently estimated that $70 billion has already
been paid through year-end 2002.⁶⁴ By reducing the
total estimated cost of asbestos-related loss and expense by
the $70 billion already paid out through 2002, the remaining
future cost of asbestos-related loss and expense is an
estimated $130 billion.
---------------------------------------------------------------------------
\63\ Id. at 1.
\64\ Steve Carroll, RAND Institute for Civil Justice, ``The
Dimensions of Asbestos Litigation'' presentation at the Spring Meeting
of the Casualty Actuarial Society, May 19, 2003.
---------------------------------------------------------------------------
One of the most beneficial features of the FAIR Act is that
it will significantly reduce the substantial transaction costs
of the current tort system--amounts which most experts agree
currently consume more than half of the total
costs.⁶⁵ By substituting the tort system for an
administrative no-fault system for compensation, the FAIR Act
will wring out these transaction costs and further reduce the
future projected costs. Of the $130 billion of asbestos-related
spending remaining outstanding, Tillinghast-Towers Perrin
estimates that approximately $28 billion (or 21.5%) is
attributable to defense costs. Of the remaining $102 billion,
Tillinghast estimates that approximately $41 billion (or 40%)
will go to plaintiffs' attorneys. In the current system, as a
result of these transaction costs, only $61 billion of the $130
billion estimate of future asbestos-related loss and expense,
or less than half, is expected to be paid to asbestos
victims.⁶⁶ Moreover, the FAIR Act will correct the
current misallocation of payments being made to unimpaired
claimants who are flooding the court system today. Therefore,
the $108 billion to be contributed to the Fund by defendant and
insurer participants will be more than double the $61 billion,
thus giving victims the certainty that they will receive
compensation under the new system.
---------------------------------------------------------------------------
\65\ See id; see also Biggs, supra Note 1 at 2-3.
\66\ See Biggs, supra Note 1 at 2.
---------------------------------------------------------------------------
As an added protection against the unlikely risk of
insufficient funding, the FAIR Act provides several funding
safeguards to ensure Fund solvency. First, the Administrator
holds access to additional funds through a guaranteed payment
account. This account collects a mandatory surcharge (in
addition to the assessed amount) on every defendant and insurer
contribution made into the Fund. The proceeds from this
surcharge are used to cover shortages attributable to non-
payment by any participant. Second, the Administrator holds
access to an orphan share account that collects amounts paid in
excess of the maximum aggregate contribution by insures and
defendants. These amounts are used to cover losses caused by
participants that proceed with Chapter 11 bankruptcies and for
losses caused by financial hardship and inequity determinations
made in favor of certain participants. Third, the Administrator
holds authority to borrowfrom commercial lending institutions
amounts to offset short term losses in an amount that does not exceed
anticipated contributions for the following year.
In the unlikely event that these funding mechanisms are
exhausted, the Administrator next holds access to a significant
source of contingency funding. In addition to the obligation of
defendant and insurer participants to contribute $108 billion
to the Fund, the Administrator can assess additional
contributions from the defendant and insurer participants,
unless the Administrator of the Fund certifies that there are
adequate funds available to compensate claimants in years six
through twenty-seven of the Fund. This ``contingency call''
authority would provide for up to an additional $45 billion of
funding that would be available to compensate victims, if
needed. Moreover, after year twenty-seven of the Fund, the
Administrator will also have the authority to request
additional contributions of up to $1 billion a year from both
defendant and insurer participants, thereby providing for
additional ``back-end'' contingency funding. But based on all
reasonable cost estimates, it is not anticipated that any of
the contingency funding will be necessary because the $108
billion will be more than adequate to meet all future claims.
However, in combination with the $108 billion, these
contingency provisions will provide more than enough funding to
compensate asbestos claimants.
Critics' Contention No. 2: Critics contend that given the
significant amount of time that will be involved in
establishing the Fund and getting it funded and fully
operational, asbestos victims may have to wait years before
they receive any compensation.
Response: This argument lacks merit because it completely
ignores the FAIR Act's explicit timing provisions that ensure
Fund liquidity and operation. Upon enactment, the Fund will
receive within the first 6 months at least $4 billion in assets
from existing bankruptcy and other trusts that have been
established to pay asbestos claims. The FAIR Act is also
structured so that the Fund can start receiving the mandatory
annual contributions from defendant and insurer participants
within an estimated five months after the Administrator's
appointment by the President. If so, this source of funding
will boost the Fund's assets to at least $9 billion within the
first year of the Fund's existence.
As for the insurers, the FAIR Act requires the Insurer
Commission to begin developing an allocation formula within 30
days after appointment. In the interim, however, the
legislation authorizes the Administrator to assess up-front
contributions from insurer participants with the proviso that
any amounts paid will be adjusted later to reflect the
appropriate allocations formula that is later developed.
To the extent the critics argue that potential delays will
be caused by judicial challenges to the assessment decisions by
the Administrator or Insurance Commission or constitutional
challenges to the FAIR Act itself, these arguments are belied
by the legislation's expedited judicial review provisions.
First, any judicial challenges to the assessment decisions of
the Administrator or Insurance Commission must be filed within
thirty days of a final decision with the United States District
Court for the District of Columbia. To avoid further delays,
the FAIR Act explicitly prohibits the district court from
issuing any stay of payment into the fund. Second, any
constitutional challenge to the Act is subject to a direct
appeal process to the Supreme Court. The likelihood of a
successful constitutional challenge is remote given the hearing
testimony from several renowned constitutional experts who have
opined on the constitutional validity of the Fair Act.
Finally, these contentions are further undermined when
compared with the significant delays that asbestos victims face
in our tort system today. Indeed, the Supreme Court has
practically begged the Congress to fix the widespread problems
in the court system caused by the massive number of filed
asbestos tort claims. It is typical for claimants to have to
wait years before they are awarded compensation, if any. In
some cases, victims die before receiving any compensation. One
of the chief attributes of the FAIR Act is that it creates a
streamlined, administratively simple claims processing system
that compensates victims in an expedited manner. The specific
time deadlines for claims processing included in the FAIR Act
enable claims to be resolved in under a year, unlike the
current tort system. The FAIR Act drafted specifically to
expedite the process of getting the Fund up and running as
quickly as possible after the enactment of the legislation.
Critics' Contention No. 3: Critics contend that if the Fund
runs out of money, asbestos victims will have no place to turn
for compensation.
Response: As explained in detail in response to Critics'
Contention No. 1, based on all reasonable estimates, the Fund
will not run out of funds or be unable to meet all of its
obligations to all claimants. First, the Fund will have funding
of $108 million in order to process and pay out what has been
estimated to be a substantially smaller remaining outstanding
liability for all future asbestos claims of $61 billion, after
reducing the substantial transaction costs of the current tort
system. Second, the Administrator holds access to supplemental
accounts and borrowing authority. Third, although it is fully
expected that the $108 billion will be more than necessary to
meet all anticipated claims over the life of the Fund, the
Administrator of the Fund will, in years five through twenty-
seven, have ``contingency call'' authority to collect
additional funds from defendant and insurer participants if
needed, as well as the authority, after year twenty-seven of
the Fund, to seek additional, ``back-end,'' contingency funding
from the program participants. Therefore, the $108 billion
funding, when combined with the additional contingency funding
will ensure that the Fund has more than adequate monies to pay
all deserving asbestos claimants.
But in the extremely unlikely event the FAIR Act does not
ultimately provide adequate funding to compensate all asbestos
victims deemed entitled to compensation, S. 1125 provides
victims the right to pursue their claims in the tort system. As
amended, the FAIR Act provides that if the Administrator is
unable to certify in any year that 95% of the claimants who
were determined to be eligible to receive compensation have
received the compensation for which they are entitled, and the
Administrator is unable to remedy the situation within 90 days,
the legislation would sunset and all claimants would be able to
pursue their claims in the tort system.\67\ Additionally, after
year twenty-seven of the Fund, if any participant fails to pay
its back-end, contingency contribution determined by the
Administrator to be necessary in order to be able to compensate
victims, any claimant may pursue an action against that
participant in federal court.
---------------------------------------------------------------------------
\67\ The Committee is concerned that this Amendment was adopted
without a full understanding of the actual language and the harsh
consequences, ramifications and implications thereof. The sponsor of
the Amendment, Senator Biden, has agreed to work with Members to
develop appropriate language to mitigate any unintended consequences of
this provision before floor consideration of S.1125.
---------------------------------------------------------------------------
Critics' Contention No. 4: Critics contend that victims
will be paid less under the FAIR Act than they could get in the
tort system.
Response: The Committee has adopted S. 1125 in recognition
that the tort system is broken and the status quo cannot be
sustained for either victims or defendants. Under S. 1125,
claimants will receive fair, consistent and equitable
compensation without the delays inherent in litigation.
Moreover, most appropriately, those that are most seriously ill
and whose diseases have the most direct causal link to asbestos
will receive the most compensation under the legislation,
including up to $1 million for Level X, Mesothelioma. Those
individuals who have been exposed to asbestos but are not
impaired will be eligible for medical monitoring, and their
claims will be preserved should they later develop impairment.
In sharp contrast to S. 1125, the current tort system is
unfair to asbestos victims and plagued with uncertainty.
Whether asbestos victims receive compensation at all, and, if
so, how much they might receive, depends on where and when they
file claims, who the defendants happen to be, whether those
defendants are solvent, and the leverage and skill of their
trial lawyers. The amount of compensation victims receive
diverges widely, with some victims receiving very large
amounts, and others receiving little or nothing. And sadly,
some victims die before their cases can be heard in court.
These distortions in the current tort system are further
exacerbated by jurisdictional idiosyncrasies. Only five states
had two-thirds of all asbestos case filings between 1998 and
2000. The concentration of an overwhelming number of filings in
a small number of jurisdictions only increases the delays and
inequities inherent in the current system.
While the tort system bestows large awards for some
victims, it all too often leaves the unfortunate without fair
compensation, and the system is only getting worse with time.
In order for victims to be compensated, they need to be able to
look to solvent companies for resources. However, to date, at
least 67 companies have declared bankruptcy because of asbestos
claims, with more than 20 of these bankruptcies having occurred
in the past two years. While bankruptcy trust funds can be an
efficient way of compensating victims, a study of a number of
major asbestos defendant bankruptcies showed that the average
time from petition to confirmation of a reorganization plan was
six years. During these proceedings, claimants are not paid.
Even worse, after a company declares bankruptcy, it has very
limited resources with which to compensate victims. The
Manville Trust, for example, can only pay victims 5% of the
value of their claims. Moreover, not one single existing
asbestos trust or any of the 20 or more trusts currently
pending in bankruptcy court can or will be able pay any more
than a fraction of the value of the claims that will be
presented.\68\
---------------------------------------------------------------------------
\68\ See Statement of David Austern, General Counsel for the
Manville Personal Injury Settlement Trust, Hearing before the Senate
Committee on the Judiciary, The Asbestos Litigation Crisis Continues--
It is Time for Congress to Act, 108th Cong., March 5, 2003.
---------------------------------------------------------------------------
Also, importantly, another benefit of S. 1125 is that most
claimants will receive compensation much faster than they would
under the current system, where individual need and
consideration is too often lost in the trial lawyers' inventory
of thousands and thousands of claims that are resolved on a
wholesale bargaining basis that often plays out over a period
of years.
As noted in the response to Critic's Contention No. 1, by
reducing the substantial transaction costs of the current
system and directing resources to those who are injured from
asbestos related diseases, S. 1125 will deliver more
compensation to victims in a timely and certain manner.
The scheduled values of S. 1125 are some of the highest of
any federal or state compensation program in existence. The
values in S. 1125 compare very favorably to the statutory,
maximum disability and death benefits of all other federal
compensation programs. The values in S. 1125 are also higher
than the benefits offered under state workers' compensation
programs. In January of 2002, of the 23 states reporting a
calculated, maximum death benefit, the lowest reported amount
was $46,900 in Maryland; the highest reported amount was
$390,000 in Minnesota. By contrast, under S. 1125, the benefit
for Level X, Mesothelioma, is $1 million.
The values in S. 1125 also compare favorably to the other
bankruptcy trusts. By example, the Manville Trust provides for
a scheduled value of $350,000 for mesothelioma claimants, and
is only able to pay 5 cents on the dollar on all claims. A
mesothelioma claimant would, therefore, only receive a payment
of $17,500 from the Manville Trust, but under S. 1125 would
receive $1 million. While claimants typically sue a number of
trusts, the results are likely to be similar.
Critics' Contention No. 5: Critics contend that S. 1125 is
supposed to embody a ``no fault'' system, but the medical
criteria are overly stringent.
Response: S. 1125 establishes a truly non-adversarial, no-
fault system in which claimants, in sharp contrast to the tort
system, will not have to prove fault on the part of defendants
or have to provide specific product identification in order to
receive compensation. In addition, those individuals that have
been exposed to asbestos but are not ill will be eligible for
medical monitoring and will remain eligible to receive
compensation at a later time should they become ill in the
future.
S. 1125's medical criteria, the product of a bipartisan
consensus of the Committee, are fair and reasonable and are
appropriately designed to provide certainty to claimants.
Indeed, the starting point for the medical criteria provided
for under S. 1125 were those from the Manville Trust, which
were adopted with the overwhelming support of the claimants and
their counsel and which have been substantially followed by
other bankruptcy trusts because of their credibility.
In exchange for establishing a no-fault, non-adversarial
system, however, the criteria in the Act require a medical
diagnosis by the claimant's doctor and sufficient evidence to
establish that the claimed illness is asbestos related. In such
a system, the defendant does not have the opportunity to
present contrary evidence or the testimony of its own,
competent experts to refute the contentions of experts hired by
the plaintiff's attorneys. Such criteria are also necessary to
keep the problems associated with mass screenings and the
current abuses found in the tort system from being transferred
to the Fund. To ensure the integrity of the Fund and to promote
the purpose of the bill to direct funds to those claimants who
are truly ill from their exposure to asbestos, therefore, the
criteria in the bill reflects compromises, yet is based on
sound, diagnostic, medical, latency and exposure criteria.
Critics' Contention No. 6: Critics contend that smokers are
receiving unfair discounts in compensation for lung cancer
under S. 1125.
Response: The Committee's intention is to compensate
victims who are sick as a result of their exposure to asbestos.
While exposure to asbestos has been identified as increasing
the risk of lung cancer, there are many other causes. Smoking
is, by far, the predominant contributing factor to lung cancer,
even where an individual has quit smoking for many years.
Compensation for lung cancers in this context is particularly
difficult to value due to the high incidence of smoking in the
population that is estimated to have asbestos exposure. The
absence of an underlying asbestos-related nonmalignant disease
makes the causal connection between the asbestos exposure and
the lung cancer tenuous, and the weight of the medical evidence
does not show that risks are increased in the absence of
exposures sufficient to have caused underlying asbestosis.\69\
Despite this evidence, S. 1125 does provide for a specific
disease level, lung cancer one, that does not require an
underlying disease for compensation, and lung cancer two, that
only requires pleural plaques or thickening or calcification,
all asbestos exposure markers. S. 1125, however, is meant to
compensate victims of asbestos exposure and is not a
compensation fund for tobacco use. It, therefore, appropriately
adjusts the claims values for lung cancers based on the
claimant's smoking history, especially in the absence of
asbestosis.
---------------------------------------------------------------------------
\69\ Testimony of Dr. James D. Crapo, Professor of Medicine,
National Jewish Center and University of Colorado Health Sciences
Center, Before the Senate Committee on the Judiciary Concerning S.
1125, the Fairness in Asbestos Injury Resolution Act of 2003, June 19,
2003, at 6.
---------------------------------------------------------------------------
It is not disputed that there was a high rate of smoking in
the blue-collar industries where asbestos exposure was
particularly high.\70\ There is a vigorous dispute, however, as
to whether asbestos exposure alone, without underlying
asbestosis, increases lung cancer risks. Critics often cite to
early epidemiological studies conducted by Dr. Irving Selikoff
or to reports that rely on these early studies for the
proposition that there is a strong synergistic relationship
between asbestos exposure and smoking, such that smokers with
asbestos exposure alone face a multiplicative risk of lung
cancer. These early Selikoff studies of lung cancer among
smoking asbestos-exposed workers were based on much higher
asbestos exposure levels than occur today and in the recent
past. The Selikoff studies also did not adequately account or
control for other disease risk factors, including smoking.\71\
Subsequent studies, particularly of chrysotile, ``have shown
fewer or no interactions.'' \72\
---------------------------------------------------------------------------
\70\ RAND, Asbestos Litigation Costs and Compensation: An Interim
Report, 2002, at 17.
\71\ Testimony of Dr. James D. Crapo, Professor of Medicine,
National Jewish Center and University of Colorado Health Sciences
Center, Before the Senate Committee on the Judiciary Concerning S.
1125, the Fairness in Asbestos Injury Resolution Act of 2003, June 19,
2003, at 44.
\72\ Tee L. Guidotti, Case Study 3: Apportionment of Asbestos-
Related Disease, in Science on the Witness Stand 397, 398 (Tee L.
Guidotti, MD, MPH and Susan G. Rose, MPH, JD, eds., 2002).
---------------------------------------------------------------------------
More importantly, Dr. Selikoff's study did not look at the
presence or absence of asbestosis in the study population. The
United States Supreme Court has recognized, and the testimony
of Dr. James D. Crapo before this Committee confirmed, that
``studies provide strong support for the notion that asbestosis
is crucial to the development of asbestos-associated lung
cancers.'' \73\ In a letter to Senator Kyl responding to
questions on his view of the current values in the Committee
bill, Dr. Crapo expanded on his testimony before the Committee,
stating:
---------------------------------------------------------------------------
\73\ Norfolk & W. Ry. Co. v. Ayers, 123 S. Ct. 1210, 1222 (2003)
(citing A. Churg & F. Green, Pathology of Occupational Lung Disease 343
(2d ed. 1998)).

From a medical perspective, the trust should not
provide compensation to claimants who have lung cancer
and exposure, but who do not have asbestosis (i.e.,
Malignant Levels VII and VIII). The medical literature
shows that, while lung-cancer risk increases when
significant asbestosis is present, there is no such
increase in risk in workers who are exposed to
asbestos, with or without pleural plaques, but who do
not have asbestosis. [Weiss, W., Asbestos-related
pleural plaques and lung cancer. Chest 103:1954-1959,
1993; Weiss, W., Asbestosis: a marker for the increased
risk of lung cancer among workers exposed to asbestos.
Chest 115:536-549, 1999.]
The medical literature also shows that asbestos
exposed individuals who are at greatest risk of
developing lung cancer are those with clinically
diagnosable asbestosis. Prospective studies that have
focused upon the question whether exposure alone,
without accompanying asbestosis, is associated with
increased lung cancer risk have found that lung cancer
risk is associated with asbestosis and not with
asbestos exposure alone. For example, Hughes and Weill
separated asbestos cement workers into groups with and
without chest x-ray evidence of asbestosis. * * *
[W]orkers without asbestosis had no increased frequency
of lung cancer while those with asbestosis had a
significantly elevated lung cancer frequency.\74\
---------------------------------------------------------------------------
\74\ Letter from Dr. James D. Crapo, National Jewish Medical and
Research Center, to Senator Jon Kyl, July 22, 2003, at 8 (see
Additional Views of Senator Jon Kyl).

The results of these studies led Dr. Crapo to conclude that
the categories without a requirement of underlying asbestosis
will result in a large number of false positives.\75\
---------------------------------------------------------------------------
\75\ Id.
---------------------------------------------------------------------------
For example, one study of power plant workers exposed to
asbestos found that ``[o]nly when asbestosis was also detected
in association with plaques did the risk ofcancer increase,
thus signifying heavier asbestos exposure as the cause of increased
risk, rather than the mere presence of pleural plaques.'' \76\
Epidemiological studies show that the risk of lung cancer among smokers
with asbestosis is much greater than that of non-smokers with
asbestosis. The risk of mortality from lung cancer for smokers with
asbestosis is 39%, while it is just 2.5% for nonsmokers.\77\ As noted,
studies also suggest that, while quitting smoking reduces the risk, it
will not reduce it to the same risk level as that for an exposed worker
who has never smoked.\78\
---------------------------------------------------------------------------
\76\ Lester Brickman, Asbestos Litigation: Malignancy in the
Courts?, 40 Civil Justice Forum 1, 10n.14 (Aug. 2000). (citing Dr.
Joseph M. Miller, Benign Exposure to Asbestos Among Power Plant Workers
(1990) (unpublished)).
\77\ Norfolk & W. Ry. Co., 123 S. Ct. at 1215 n.3.
\78\ 29 C.F.R. Sec. Sec. 1910, 1915.1001, and 1926.1101 (2003).
---------------------------------------------------------------------------
While these claimants with lung cancer but no asbestosis
are regrettably seriously ill, the cause of the injury cannot
be shown to be related to asbestos exposure. Paying all lung
cancer victims the same amount risks the financial viability of
the Fund to pay true victims of asbestos exposure. The Manville
Trust and subsequent trusts reduce awards for claimants that
cannot show an underlying asbestos-related nonmalignant
disease, especially in the case where the claimant is a smoker.
Under the Manville Trust, claims under lung cancer one (Level
VI), which show no evidence of an underlying asbestos-related
nonmalignant disease or significant occupational exposure, are
not expected to have any significant value, especially if the
claimants are smokers. There is no presumption of validity for
these claims. They have no scheduled value, and have a maximum
value of $50,000.\79\ Lung cancer two in the Manville Trust
(Level VII) requires a showing of both an underlying asbestos-
related nonmalignant disease and significant occupational
exposure. Claims in this level are not individually evaluated
to take smoking into account, but the scheduled value is
$95,000.
---------------------------------------------------------------------------
\79\ Manville 2002 TDP, at 10-11.
---------------------------------------------------------------------------
In addition, the fund contemplates a no-fault system to
reduce the burden on the claimant and to reduce transaction
costs. This no-fault system gives claimants a large incentive
to file claims. In the litigation context, defendants are able
to present evidence regarding causation. Defendants often
dispute causation in the case of smokers.\80\ Defendants do not
have the same opportunity here. Defendants also do not have the
opportunity to review or dispute the claimant's evidence that
he or she is a nonsmoker or former smoker. Treatment of
causation varies by court, and smoking has often been used to
reduce awards and/or the percent liability of defendant in a
jury trial despite the presence of large verdicts in other
jurisdictions. In one case, for example, the jury reduced the
claimant's award by 95%, finding that smoking was the cause of
the claimant's lung cancer.\81\ Similarly, compensation is
reduced and even denied in workers' compensation schemes on the
basis that smoking was the cause of the lung cancer.\82\ The
legislation attempts to reach a compromise and adjust this
disparity, while ensuring that the Fund remains viable to
provide fair and equitable compensation to all victims.
---------------------------------------------------------------------------
\80\ RAND, Asbestos Litigation Costs and Compensation: An Interim
Report, 2002, at 17.
\81\ See, e.g., Zarow-Smith v. N.J. Transit Rail Operations, 953 F.
Supp. 581 (D. N.J. 1997). The jury in Zarow-Smith calculated
plaintiff's total damages to be $898,665.00, but then found that 95
percent of the cause of the claimant's illness and death was
attributable to his cigarette smoking, reducing the total damages award
to $44,934.00.
\82\ See, e.g., Bath Iron Works Corp. v. Office of Workers'
Compensation Programs, 137 F.3d 673 (1st Cir. 1998) (reinstating denial
of claim based on non-causation).
---------------------------------------------------------------------------
The Fund cannot become a compensation system for smoking
related diseases, directing funds away from those who are most
clearly sick due to asbestos exposure. Because of the high
incidence rates of lung cancers caused by smoking, the absence
of an underlying bilateral asbestos-related nonmalignant
disease and a claimant's smoking history are appropriate to
consider in reducing the compensation, especially for smokers.
Otherwise, the Fund could be overwhelmed financially by lung
cancer cases that are not attributable to asbestos exposures,
but, instead, have other causes, such as smoking.
Critics' Contention No. 7: Critics contend that small
businesses that rely on their insurance will be harmed under S.
1125 because they will be forced to contribute to the Fund and
will not be able to use their insurance in order to do so.
Response: Under the FAIR Act, small businesses, as defined
under Section 3 of the Small Business Act, are explicitly
exempt from having to contribute to the Fund, but will receive
the very protections provided to all of the other defendant
participants under the legislation. Also, small companies that
have not incurred asbestos liability-related payments of $1
million or more before December 31, 2002 are exempt from having
to contribute to the Fund. For those companies that are not
exempt from having to contribute to the Fund, S. 1125 tiers
companies by size and liability, such that no company would
have to contribute to the Fund an amount out of line with their
resources. In stark contrast, the current tort system provides
no protections for small businesses and allows any company of
any size, no matter how small, to be sued into bankruptcy.
Furthermore, S. 1125 provides the Administrator of the Fund the
authority to adjust defendant participants' contributions based
on severe financial hardship and demonstrated inequity, further
protecting the interests of all businesses of all sizes.
Critics Contention No. 8: Critics contend that S. 1125 will
primarily benefit businesses and insurance companies.
Response: This contention is unwarranted. S. 1125 benefits
victims who have been inadequately served by the current tort
system while providing economic stability to businesses that
have been overwhelmed by abusive litigation in the current tort
system, driving many into bankruptcy and impacting the jobs and
pensions of their employees.
S. 1125 will benefit victims significantly because they
will receive fair, certain and equitable compensation without
the delays and uncertainties inherent in the current tort
system. Moreover, claimants will not have to worry whether
their defendant is or will become bankrupt, and they will not
bear the burden to prove liability, causation or to establish
product identification as in litigation.
Further, under the funding provisions in S. 1125, more
resources will be available to compensate victims than under
the current system. As estimated by leading actuaries, because
of the substantial transaction costs of the current tort
system, only a total of about $61 billion will go to asbestos
victims in the future, while an estimated $69 billion will go
to plaintiff and defense lawyers.\83\ In contrast, under S.
1125, $108 billion, with additional contingency funding, if
necessary, will go directly to compensate victims.
---------------------------------------------------------------------------
\83\ See Jennifer L. Biggs, supra at 2.
---------------------------------------------------------------------------
Victims will be much better protected once S. 1125 is
enacted because the current awards some receive from the tort
system are not sustainable into the future. With most of the
original asbestos manufacturers bankrupt, companies with little
or no connection to asbestos are increasingly targeted with a
massive number of cases and often driven into bankruptcy. To
date, over sixty companies have been driven into bankruptcy as
a result of asbestos liability, and without reform, more
companies will be at risk in the future. The Committee's
hearing record is replete with the devastating impact the
current asbestos crisis is having on businesses, workers,
retirees, shareholders and the U. S. economy.\84\ S. 1125 will
ensure that asbestos victims no longer face the risk that their
only recourse will be trusts created out of bankruptcies paying
pennies on the dollar.
---------------------------------------------------------------------------
\84\ See Statement of Frederick C. Dunbar, Hearing before the
Senate Committee on the Judiciary, ``Solving the Asbestos Litigation
Crisis: S. 1125, the Fairness in Asbestos Injury Resolution Act of
2003,'' 108th Cong., June 4, 2003; See also Statement of Robert P.
Hartwig, Insurance Information Institute, supra.
---------------------------------------------------------------------------
In short, S. 1125 provides fair compensation to those who
are injured by asbestos exposure and ensures that scarce
resources will not be spent on the unimpaired at the expense of
those with asbestos-related injuries now and into the future.
Too often those most deserving do not get their fair share out
of the current system. Victims will benefit substantially from
the new system.
While defendants and their insurance companies will be
provided a certain degree of economic certainty from the
stability provided through implementation of the Fund. They
will each be required to contribute $52 billion under S. 1125
and, if deemed necessary by the Administrator, could be
required to contribute substantial contingency funding to
ensure that victims will receive compensation for future
asbestos-related illnesses. This is a substantial obligation by
any assessment. For many of these defendants, particularly
those with significant amounts of insurance coverage remaining,
this represents a substantial increase in their out-of-pocket
spending for asbestos liability because they cannot seek
insurance coverage for their payments under S. 1125.
Finally, there is an unfortunate misperception by some who
believe defendant companies that have announced proposed
settlements will be able to walk away from these settlements
and pay substantially less under S. 1125. First, the intent of
this bill is to fix a system that is broken and badly in need
of repair. The vast majority of claimants with pending cases
are the unimpaired who may be eligible for monitoring under S.
1125 but will not and should not be compensated at the expense
of those who are sick. Second, pending settlements are exactly
that, pending, and are as a matter of course contingent on a
number of factors, and in some cases, any of the parties to the
pending settlements are free to walk away from the settlements
at anytime for any reason. Third, in comparing how defendants
will fare under S. 1125 versus the current system, for many of
the pending or announced settlements, insurance coverage
constitutes a significant portion of the funding of the
settlement and a portion of these settlements may also cover
liabilities other than asbestos claims. Finally, in making
comparisons to how asbestos victims would fare under S. 1125 as
opposed to pending settlements, opponents of the legislation do
not account for the substantial amounts of funding that will be
siphoned away towards the costs of the bankruptcy and to
plaintiffs' attorneys' fees. In many cases, claimants will be
paid more under S. 1125 than they would under their pending
settlements.
In conclusion, S. 1125 is fair and balanced and will
produce substantial benefits for victims, workers, retirees,
shareholders and the U.S. economy.
Critics' Contention No. 9: Critics contend that S. 1125
unfairly eliminates settlement agreements, jury verdicts and
pending cases.
Response: Before addressing the merits of fairness, the
Committee believes that it is important to set the record
straight concerning the misinformation in the Minority Views.
S. 1125 is intended only to preempt those claims, verdicts and
settlement agreements that are not final, i.e., no longer
subject to appeal. The Minority Views assert that the FAIR Act
would ``completely negate all legally binding settlement
agreements between asbestos manufacturers and victims, even
settlements that have been made by asbestos defendants with
claimants that have already been partially paid would be voided
under this legislation.'' To the contrary, section 403(d)(2) of
S. 1125 specifically excludes from preemption ``actions for
which an order or judgment has been duly entered by a court
that is no longer subject to any appeal or judicial review * *
* ''. Court-approved settlements with an individual who has
begun receiving payments would certainly fall within that
exclusion. But to ensure that all such finalized settlement
agreements receive the same protection as final judgments, the
Chairman agreed during Committee markup that he would work with
Members to clarify the language of that particular provision of
the bill to eliminate any confusion.
The purported unfairness of preempting non-final settlement
agreements, jury verdicts and pending cases rests on the faulty
premise that the existing system is somehow fair. Nothing could
be further from the truth--especially from the perspective of
the asbestos victims. Potential claimants who would potentially
be awarded a higher dollar amount in a non-final settlement,
judgment or existing claim will see their recoveries, if any,
reduced significantly by plaintiffs' attorney's fees.
S. 1125's limited preemption of non-final settlements and
judgments is important for yet another reason: to bring more
stability and reason to the system. Included in the preemption
are settlements of ``inventory agreements'' which are non-final
settlement agreements that do not become effective for an
individual claimant until they are ``perfected.'' Perfection
occurs when a claimant comes forward and submits the
information necessary to substantiate their claim under the
criteria set forth in the settlement. The majority of these
inventory agreement settlements are entered into with
attorneys, not claimants. These agreements are typically not
even binding on claimants, who in many instances have not yet
been identified.
These types of agreements make the filing of claims on
behalf of the unimpaired persons profitable, which has been a
factor in the acceleration of such filings in recent years.
Steven Kazan, a California lawyer with a long history of
representing true victimsof asbestos exposure, testified before
this Committee that ``we've gone from a medical model in which a doctor
diagnoses an illness and the patient then hires a lawyer, to an
entrepreneurial model in which clients are recruited by lawyers who
then file suit even when there's no real illness. These are not
patients, they are plaintiffs recruited for profit.'' \85\ As such, S.
1125's preemption provision is designed to address these types of non-
final settlement agreements.
---------------------------------------------------------------------------
\85\ Hearing on Asbestos Litigation, Before the Senate Comm. on the
Judiciary 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript of
oral statement of Steven Kazan).
---------------------------------------------------------------------------
Moreover, many of these non-final settlement agreements,
judgments and pending lawsuits include claims by those who are
not even sick. The RAND Institute for Civil Justice reports
that: ``Almost all the growth in the asbestos caseload can be
attributed to the growth in the number of these claims [for
non-malignant conditions], which include claims from people
with little or no current functional impairment.'' \86\ More
than 90% of all filings with the Johns-Manville bankruptcy
trust in 2001, for example, were brought by individuals with
non-cancer claims.\87\ Using the values cited by the minority
for unimpaired claimants (from $40,000 to $125,000), allowing
pending claims to continue could direct anywhere from $10.8
billion to $33.8 billion or more to unimpaired claimants. It
simply defies fundamental fairness for the Minority to support
a Trust Fund that deprives the truly sick of critical
resources.
---------------------------------------------------------------------------
\86\ RAND, ``Asbestos Litigation Costs and Compensation: An Interim
Report,'' Sept. 2002, at 45.
\87\ Senate Judiciary Comm. Hr'g on Asbestos Litig. (2002), FNS
Unofficial Transcript of oral statement of David Austern.
---------------------------------------------------------------------------
When compared to what the current tort system provides via
proposed settlements, non-final jury verdicts and even existing
bankruptcy trusts, legitimately sick claimants will fare much
better under the fund created by S. 1125. First, the claim
award amounts provided in S. 1125 exceed the amounts provided
in bankruptcy trusts and in these proposed settlements. The
Manville Trust has a scheduled value of $350,000 for
mesothelioma victims, but is only able to pay 5% of that or
$17,500, both values far below the $1 million award provided
under S. 1125. And what opponents conveniently ignore is that
the claim values set forth in the proposed settlements are far
below the amounts a legitimately sick claimant would receive
under S. 1125.
Second, claimants will have certainty that money will be
available to pay their awards. No longer will claimants be left
without a remedy because a defendant has gone bankrupt. Because
S. 1125 provides a streamlined no-fault process for resolving
claims, the awards need not be reduced by large attorney fees,
allowing more money to actually go to the claimant. Currently,
claim awards may be reduced as much as 40% by attorney fees. It
is clear that enforcing proposed, non-final, settlement
agreements would not benefit the claimants, but instead benefit
their attorneys, whose fees under S. 1125 would likely be
drastically reduced.
In addition to providing fairness from a policy
perspective, S. 1125's preemption provision falls squarely
within Constitutional mandates. Substantial judicial precedent,
dating back to the early part of the 20th century, supports the
constitutionality of Congress' authority to preempt tort claims
and to preempt settlement agreements entered under a pre-
existing system that Congress has improved. Among others
supporting the constitutionality of the Act, Harvard
constitutional law scholar Professor Laurence H. Tribe,
testifying before the Committee on June 4, 2003, concluded
``that the FAIR Act is well within Congress' authority to enact
and does not offend the constitutional guarantees of due
process, equal protection, or right to jury trial. Nor does it
represent an uncompensated taking of private property, an
unconstitutional impairment of contracts, or a violation of the
separation of powers.'' \88\ Congress, therefore, should
exercise the full reach of its ability, consistent with the
goals of S. 1125 to target available resources toward true
victims of asbestos exposure.
---------------------------------------------------------------------------
\88\ See Statement of Lawrence H. Tribe, Hearing Before the Senate
Committee on the Judiciary, ``The Asbestos Litigation Crisis
Continues--It is Time for Congress to Act,'' 108th Cong., March 5,
2003, p. 2.
---------------------------------------------------------------------------
In a very real sense, the minority would ``have their cake
and eat it too.'' By preserving pending claims and non-final
settlements and judgments under the pretext of fairness, the
Minority would allow the trial lawyers and the vast majority of
unimpaired claimants to continue draining resources out of the
system while forcing defendants and insurance companies to pay
twice--once to perpetuate the current system through paying
pending claims and proposed settlements and then again (through
the trust) to compensate those truly ill from asbestos
exposure.
The minority would preserve the current inequities of
asbestos litigation, where payouts vary significantly by what
state victims live in, which court their cases are tried in,
and who the judge and jury are that day. For example, in a
recent Mississippi case, six plaintiffs who were not sick were
awarded a total of $150 million. The plaintiffs did not claim
to have ever missed a day of work because of asbestos injury,
they did not claim any medical expenses related to asbestos,
and they did not have asbestos-related physical impairment. One
plaintiff told the court he suffers no shortness of breath and
walks up to four miles per day for exercise.\89\ The minority
would also preserve the windfalls to plaintiffs' attorneys that
result from these large jury verdicts where 40 to 50% of these
recoveries go to attorney's fees and expenses. As Senator
DeWine noted at our September 25, 2002 hearing, ``[t]he status
quo is just not fair. It is grossly unfair to the victims. What
you find is an inconsistency in how victims are treated--a
horrible inconsistency that I don't think you'll find anyplace
else in our country or our judicial system.'' It is these
inequities that the FAIR Act is meant to address.
---------------------------------------------------------------------------
\89\ Griffin B. Bell, Asbestos Litigation and Judicial Leadership:
The Courts' Duty to Help Solve the Asbestos Litigation Crisis, National
Legal Center for the Public Interest, June 2002, at 14.
---------------------------------------------------------------------------
As a final note, the Committee would like to respond to the
Minority Views' reference to high profile settlement agreements
that have been reported in the media. The Minority's attempt to
equate the total amount of a proposed settlement to a company's
estimated obligations under the Fund is, at best, comparing
``apples to oranges,'' and at worst, misleading. Contrary to
the Minority views'' assertion that these settlement agreements
are ``legally binding,'' they are in fact only proposed, and
still contingent upon several factors, including court approval
of a bankruptcy plan, a review of claims to determine if they
meet the criteria set forth in the proposed agreement,
confirmation of necessary financing and receipt of insurance
proceeds among other things. In addition, when comparing the
size of the proposed settlement to a particular company's
estimated contribution under S. 1125, it is important to
recognize that a significant portion of the proposed settlement
will be funded by insurers. From these proposed settlements, it
is all but certain that the plaintiffs' lawyers will recover
handsome attorneys' fees and other costs--amounts that victims
will never see. As for the victims, it is the Committee's
understanding that most of these claimants who stand to gain
from these proposed settlements are unimpaired or suffer from
injuries unrelated to asbestos.
Critics' Contention No. 10: Critics contend that S. 1125 is
unconstitutional and will lead to years of litigation over its
constitutionality.
Response: S. 1125 has been very carefully written to avoid
running afoul of the U.S. Constitution. Indeed, it is important
to note that more than ten years ago a committee of the United
States Judicial Conference, appointed by the Chief Justice of
the U.S. Supreme Court, studied the special features of
asbestos litigation and concluded that the ``ultimate solution
should be [federal] legislation recognizing the national
proportions of the problem...and creating a national asbestos
dispute resolution scheme * * * '' \90\ Since that time, the
U.S. Supreme Court has called repeatedly for an administrative
solution as provided for in S. 1125. In 1997, in Amchen Prods.,
Inc. v. Windsor, 521 U.S. 628-629 (1997), Justice Ginsburg
wrote: ``The argument is sensibly made that a nationwide
administrative claims processing regime would provide the most
secure, fair, and efficient means of compensating victims of
asbestos exposure.'' \91\ Most recently, in March of this year,
in writing for the Court in Norfolk & Western Ry. v. Ayers, 123
S. Ct. 1210, 1228 (2003), Justice Ginsburg again stated: ``The
`elephantine mass of asbestos cases' lodged in the state and
federal courts, we again recognize, `defies customary judicial
administration and calls for national legislation.' '' The
Committee has heeded the explicit call of both the U.S.
Judicial Conference and the U.S. Supreme Court in establishing
the no-fault, publicly-administered, privately-funded
administrative claims process provided for in S. 1125.
---------------------------------------------------------------------------
\90\ Report of the Judicial Conference Ad Hoc Committee on Asbestos
Litigation 3 (March 1991); see also id. at 42 (dissenting statement of
Hogan, J.) (agreeing that ``a national solution is the only answer''
and suggesting ``passage by Congress of an administrative claims
procedure * * *'')
\91\ See also Ortiz v. Fibreboard Corp., 527 U.S. 815, 821 (1999).
---------------------------------------------------------------------------
In reviewing the constitutionality of S. 1125, at the
specific request of the Committee, preeminent Harvard
constitutional law scholar Professor Laurence H. Tribe,
testifying before the Committee on June 4, 2003, confirmed the
constitutionality of the legislation:

My conclusion, in brief, is that the FAIR Act is well
within Congress' authority to enact and does not offend
the constitutional guarantees of due process, equal
protection, or right to jury trial. Nor does it
represent an uncompensated taking of private property,
an unconstitutional impairment of contracts, or a
violation of the separation of powers.\91a\
---------------------------------------------------------------------------
\91a\ See Statement of Lawrence H. Tribe, Hearing Before the Senate
Committee on the Judiciary, Solving the Asbestos Litigation Crisis: S.
1125, The Fairness in Asbestos Injury Resolution Act of 2003, 108th
Cong., June 4, 2003, at 2.

With regard to the concerns of some that the preemption of
common law tort claims may violate due process or create a
claim under the Takings Clause of the Constitution, Professor
Tribe testified further on the ability of Congress to preempt
---------------------------------------------------------------------------
common law tort claims:

The legislative precedents illustrate the breath of
Congress' power to adjust, restrict, or even abolish
common-law and statutory causes of action. Thus,
Congress has ample authority to rationalize asbestos
claims, by creating an Article I procedure in the
asbestos court for the orderly payment of such claims
and thereby avoiding a race-to-the-bottom situation in
which relatively unimpaired plaintiffs are overpaid,
transaction costs are high, and grievously injured
plaintiffs risk getting little or no compensation at
all * * *. It has long been settled, ever since the
states began adopting workers' compensation statutes,
that a legislature is free to modify or abolish common-
law causes of action without violating due process or
creating a claim for compensation under the Takings
Clause.\92\
---------------------------------------------------------------------------
\92\ Tribe testimony at 6.

In written testimony submitted to the Committee by former
Solicitor General Seth Waxman supports this analysis, he
explains that ``[t]here is further no doubt that in pursuing
proper national goals, Congress may, to the extent it deems
necessary or desirable, preempt and supersede the operation of
state law.''\93\
---------------------------------------------------------------------------
\93\ Hearing on Solving the Asbestos Litigation Crisis: S. 1125,
the Fairness in Asbestos Injury Resolution Act of 2003, Before the
Senate Comm. on the Judiciary, 108th Cong. 4 (2003) (testimony
submitted for the record by Seth P. Waxman, Wilmer, Cutler &
Pickering).
---------------------------------------------------------------------------
Nevertheless, should the constitutionality of S. 1125 be
challenged, the legislation explicitly provides for an
expedited appeal directly to the Supreme Court as a matter of
right within thirty days of any decision of a federal court
finding any part of S. 1125 to be unconstitutional. This
ensures that any such litigation will be resolved quickly.

VIII. Congressional Budget Office Cost Estimate

The cost estimate from the Congressional Budget Office
requested on S. 1125 has not yet been received. Due to time
constraints, the CBO letter will be printed in the
Congressional Record.

IX. Regulatory Impact Statement

Pursuant to Rule XXVI, of the Standing Rules of the Senate,
the Committee, after due consideration anticipates that S. 1125
will have the following regulatory impact:
A. (i) Businesses regulated.--Under S. 1125 companies and
insurers with asbestos liability will be required to submit
necessary financial documentation to the Asbestos Injury Claims
Resolution Fund and the Insurers Commission respectively for
proper assessment of contributions. With respect to the ban on
certain asbestos containing products in S. 1125, it is
anticipated the regulatory burden will be minimal especially in
light of regulation promulgated in the late 1970's and early
1980's that limited occupational exposure to asbestos.
(ii) Individuals regulated.--Individuals seeking
compensation from the Asbestos Injury Claims Resolution Fund
will be required to submit necessary documentation to support
their claim.
B. Economic Impact.--S. 1125 will have a positive economic
impact on businesses by providing greater certainty with regard
to asbestos liability exposure, which in turn will enable
businesses to preserve jobs and pension of employees.
C. Personal Privacy Impact.--Claimants must provide written
consent for claims examiners to obtain information necessary to
evaluate their claim, including their medical and smoking
history in order to make a determination of eligibility. It is
anticipated that the impact will be comparable to requirements
under the current tort system.

X. Additional Views

----------

ADDITIONAL VIEW OF SENATOR GRASSLEY

Although I support finding a solution to the asbestos
litigation crisis, there are a number of problems with this
bill as currently drafted regarding the tax treatment of the
asbestos fund. These problems affect the tax treatment of the
amounts paid into and received from the asbestos fund. If not
remedied, there could be serious adverse tax consequences to
the companies, the asbestos fund, and, most importantly, the
beneficiaries. These tax issues are within the jurisdiction of
the Finance Committee. Prior to and during the markup I
requested that S. 1125 be referred to the Finance Committee so
that we could fix these problems. If the bill is not referred
to the Finance Committee, the Finance Committee may report a
separate tax title for floor consideration. I will work with
the Chairman of the Judiciary Committee, Senator Hatch, on how
to proceed with this bill and hopefully address the tax issues
raised in it.
Chuck Grassley.

ADDITIONAL VIEWS OF SENATORS GRASSLEY, KYL, SESSIONS, CRAIG AND CORNYN

Although the goal of this legislation to compensate those
harmed from asbestos exposure is both noble and necessary, the
means chosen are susceptible to abuses that could bankrupt the
fund and, ultimately, impose financial obligations upon the
taxpayer. It is also troubling that the bill does not contain
any limitations on attorneys' fees or mandatory sanctions for
abusive filings. The bill could also be underfunded if certain
settlements are not accounted for by the fund, and it creates
disturbing inequities among defendants and insurers. Finally,
the bill includes a provision requiring certification of
payment of claims that could prematurely dismantle the fund and
return all claims to the tort system. These flaws must be
corrected prior to final passage.
The most significant failing of the bill is its medical
criteria and claims values. Two categories in particular are
ripe for abuse. First, claim level two allows payment of up to
$20,000 for ``mixed-dust'' cases. Exposure to multiple
industrial elements is commonplace. A mixed-dust claimant's
respiratory injuries may well have been caused by something
other than asbestos, yet under the bill's medical criteria,
that claimant can obtain an award simply by showing qualifying
exposure. Second, claim levels seven and eight allow current
and former smokers to obtain large awards for lung cancer that
(according to expert testimony presented to the Committee)
medical science conclusively links to smoking, not asbestos.
Abuse of these two categories could rapidly bankrupt the fund
and deny relief to truly injured claimants. The fact that
bystander claimants can also recover from the fund only adds to
the risk.
In addition, the fund sets up a non-adversarial process,
but does not place any limitation on attorneys' fees. Attorneys
will remain over-incentivized, and likely will file frivolous
claims and appeals that could unnecessarily stress the fund.
While any cap on attorneys' fees must be generous enough to
ensure that those who believe they need to hire legal
representation are able to entice qualified counsel, it should
also maximize award dollars for worthy claimants--and not act
as an incentive to file frivolous suits. The majority of claims
filed in this no-fault system should be routine and non-
controversial, and not require significant legal work.
Moreover, claimants may take advantage of pro bono services and
the fund's legal assistance office. Reasonable caps should be
placed on attorneys' fees to allow maximum recovery of awards
for claimants. We are pleased that Senator Sessions offered and
won acceptance of an amendment that requires attorneys to
notify claimants of the availability of free legal services.
This amendment will prevent claimants from being victimized
twice--once by asbestos, and a second time by the trial bar.
Limits on attorneys fees alone, however, will not prevent
abuse. Appropriate sanctions should be available, and their use
encouraged, to thwart abusive practices by attorneys. This is
so because even a cap on attorneys fees of, for example, 10%,
could provide $100,000 for an attorney claiming to represent an
asbestos victim with lung cancer. The promise of a $100,000
payday may be too much incentive for an unscrupulous attorney
to file a frivolous claim and, accordingly, sanctions will
control abusive filings. The bill needs to clarify that
sanctions will be mandatory for lawyers who abuse the asbestos
fund claims process.
Also, to preserve the integrity of the Fund, it is
imperative that the only settlement agreements to be paid
outside of the trust be final settlement agreements that are
based on a current injury, where there is no contingency other
than payment. Questions continue to be raised about what
settlement agreements are covered by S. 1125. For example, some
argue that inventory or matrix settlements--which bind
defendant companies to pay future claims meeting specific
criteria--or bankruptcy settlements subject to bankruptcy court
approval are not included in the language of the bill. In
either of these cases, failure to include the settlement in the
trust will expose companies to dual liability and entitle
claimants to dual recovery, by forcing defendant companies to
both contribute to the Fund and pay settlement costs. As a
result, billions of dollars, thousands of claimants, and the
fundamental premise of the FAIR Act will be removed from the
asbestos trust fund.
The bill also has the potential to create hardships for
companies who adequately insured themselves against asbestos
litigation exposure. Certain companies could have expected
minimal out-of-pocket exposure but, by virtue of previous
litigation expenses that insurance covered, will qualify for a
more expensive tier. One company, which expected only ten
million dollars in out-of-pocket expenses, calculates that its
obligation under the bill would be $500,000,000 over the 27
year life of the fund. During the markup, the Chairman
committed to working to resolve this problem prior to floor
action because of this type of gross unfairness. Resolution of
this issue is critical.
In addition, the bill poses potential inequities
particularly in the allocation of contingent call funding
between defendant companies and their insurers. The contingent
call funding provision of the bill charges additional billions
to participants should the Fund run out of money during the
mandatory funding period. We must make sure that the ultimate
allocation is fair and reasonable between both sides.
The potential of collusive default judgments against
insurers under the bill also is troubling. These judgments are
entered as a result of a defendant company's agreement not to
contest certain asbestos claims, in exchange for plaintiffs'
agreement to enforce the judgment only against insurers, not
against the defendant company. One company, a distributor of
asbestos products, allowed billions of dollars of default
judgments to be entered against it in exchange for agreements
from plaintiff's counsel that enforcement would be sought only
against insurers. The Insurer/Defendant Coverage Claims
Amendment proposed by Chairman Hatch would remedy this problem
by preempting collection of these judgments against insurers.
In addition to this amendment, language prohibiting all direct
actions against insurers should be considered to ensure that
insurers enjoy the same kind of certainty that defendant
companies and claimants receive under the bill.
Finally, the Biden sunset amendment could seriously
jeopardize the relief that the fund is intended to provide
victims of asbestos. Senator Biden correctly noted that
claimants could be left without recourse in the event that the
Fund runs out of money prior to year 27's additional payments.
Even those of us who voted for the Biden amendment, however,
believe there are better ways to address this problem. The
effect of the Biden amendment is to dismantle the Fund and
return all claims to the tort system if income in a given year
does not meet 95% of all claims--regardless of whether
sufficient funds will be available in the next year of the
Fund. The Biden amendment thwarts the purpose of the bill,
which is to find a viable solution outside of the tort system.
This issue should be revisited and corrected in order to allow
the Fund to function and claimants to receive payments with
some flexibility to address temporary funding shortfalls.
Chuck Grassley.
Jon Kyl.
Jeff Sessions.
Larry E. Craig.
John Cornyn.

ADDITIONAL VIEWS OF SENATORS KYL, GRASSLEY, AND SESSIONS

This bill must meet three criteria in order to be worthy of
support: it must provide adequate compensation to persons with
asbestos injures; its cost must be reasonable; and it must
provide a permanent solution to the asbestos-litigation crisis.
The bill meets the first criterion. It compensates those
who have been made sick by asbestos exposure, though it errs
towards compensating many people with no asbestos-related
injury. With the inclusion of a lockbox amendment to protect
victims with serious asbestos-related injuries, we can be
confident that the bill will provide adequate compensation to
those who are actually sick from asbestos. A letter from Dr.
James Crapo, describing the need for this amendment, is
attached to this statement.
It is no longer clear if the committee-reported bill meets
the second criterion. With the addition of the contingent-call
amendment, the bill now may cost as much as $139 billion. As
noted elsewhere, see infra ______, total asbestos tort
judgments and settlements to date have amounted to
approximately $70 billion, with much of that amount going to
plaintiffs with no injury or impairment. Also, medical
professionals agree that actual asbestos injuries have been
declining for the last decade, see infra ______. It is not
apparent to us that it is reasonable to pay twice as much in
the future as has already been spent in the past to provide
compensation for a health problem that peaked more than a
decade ago.
This is not to say that we do not think that the Trust Fund
will exhaust the entire $139 billion available to it. Medical
professionals already have warned us that much of the disease
criteria employed by the bill is medically unsound and will
compensate persons who are not sick from asbestos, see infra
______. Although this bill, unlike past bankruptcy trust funds,
requires some evidence of impairment for all compensation
levels, it is uncertain how many persons with common, non-
asbestos-related diseases and injuries will qualify for awards
under this bill's criteria.
Finally, with the addition of the sunset amendment, the
bill clearly fails the last test: it does not offer a permanent
or even stable solution to the litigation system. That
amendment provides that if, in any year, the fund is unable to
pay 95% of ``eligible'' claimants, the entire fund terminates
and all claims are returned to the tort system. Particularly
given the inflated claim values approved by the committee, and
the bill's compensation of people who are not sick from
asbestos, it is very likely that ``eligible'' claims will in
some year exceed the resources of the trust fund.
Under the sunset amendment, defendants and insurers could
pay into the fund for five years, for a total of $25 billion
dollars, and then, in year six, if claims exceed funds, the
whole system would be scrapped and everyone would be back where
they started--but minus $25 billion. This amendment was adopted
during the last hour of four days of Judiciary Committee
executive consideration of the bill. It was one of a large
number of amendments that had been filed but was never
discussed before it was called up. We believe that our
colleagues did not consider all of the details and
ramifications of this amendment. We are confident that, in the
full Senate, a majority will agree that a hair-trigger self-
destruct mechanism should not be included in this bill, and
will vote to remove the sunset amendment.
Jon Kyl.
Chuck Grassley.
Jeff Sessions.

ATTACHMENT

National Jewish Medical and Research Center,
Denver, CO, June 23, 2003.
Hon. Jon Kyl,
Senate Hart Building,
Washington, DC.
Dear Senator Kyl: You have asked that I elaborate on my
reasons for recommending that the proposed asbestos trust fund
include a lock box to protect payments to victims with serious
asbestos-related conditions
As I stated in my answers to written questions from the
Judiciary Committee, I believe that a lock box for the most
seriously ill claimants ``could prevent depletion of the trust
by individuals with asymptomatic asbestos related diseases or
processes which are not clearly associated with asbestos
exposure.'' Ideally, the lock box would protect funds needed to
compensate claimants with mesothelioma, moderate and severe
asbestosis, and lung cancer accompanied by clinically
significant asbestosis. As I indicated during last Thursday's
hearing, these are the claimants who have a significant
impairment that is most likely caused by asbestos. These
conditions also have had a fairly steady incidence over the
past decade and their frequency should decrease as more time
passes since the federal controls on occupational asbestos
exposure were implemented in the 1970's and 1980's.
The other categories compensated by the bill, by contrast,
either have fluctuated wildly when employed in past trust
funds, or are too novel to be reasonably predictable. All of
these other categories pay compensation for illnesses that,
according to the clear weight of medical evidence, either are
not caused by asbestos or do not result in a significant
impairment--i.e., are not generally regarded by the medical
profession as an illness. Projection of these claims is
inherently uncertain. Simply put, when medical research
concludes that a condition is not caused by asbestos, or is not
an illness at all, medical research will not be able to predict
the number of such claims.
While political compromise may require you to compensate
these other categories, you should not allow the uncertainty
inherent in these claims to prejudice those with serious
asbestos-related injuries. In my view, if the other
compensation categories are included in the trust fund, a lock
box-type mechanism is critical to protecting the rights of the
most seriously ill claimants. The proposed trust fund should
include such a guarantee to these claimants.
Sincerely,
Dr. James Crapo, M.D.

ADDITIONAL VIEW OF SENATOR KYL

Throughout this Committee's consideration of this
legislation, lobbyists for interests that favor the bill
frequently have invoked the U.S. Supreme Court's admonitions to
Congress to address the asbestos-litigation crisis. Many have
noted that in 1999, the Justices characterized asbestos
lawsuits as an ``elephantine mass'' that ``defies customary
judicial administration and calls for national legislation.''
(Ortiz v. Fibreboard Corp., 527 U.S. 815, 821 (1999).)
Supporters also have reminded us that the Court had hinted, two
years earlier, that a ``sensibl[e]'' argument could be made
``that a nationwide administrative claims processing regime
would provide the most secure, fair, and efficient means of
compensating victims of asbestos exposure.'' (Amchem Products,
Inc. v. Windsor, 521 U.S. 591, 628-29 (1997).) And industry
lobbyists surely must have found it propitious when, just four
months ago, the Supreme Court elevated its call for federal
legislation to a plea that ``a national solution is the only
answer.'' (Norfolk & Western Ry. Co. v. Ayers, 123 S.Ct. 1210,
1218 (2003).)
I share the sense of urgency over the asbestos-litigation
crisis felt by many supporters of this bill. Asbestos lawsuits
have descended on the American economy like a plague of
locusts. They have grown to include claims by more than 600,000
plaintiffs filed against at least 8,400 businesses, resulted in
the payment of more than $70 billion in legal judgments or
settlements, and have devoured at least 78 companies through
bankruptcy.\1\ Almost every industrial sector has been hit by
this phenomenon. And, increasingly over the years and almost
exclusively today, the companies being sued are ones that had
no direct role in causing any asbestos injuries, and the
plaintiffs filing suit do not have any asbestos-related
injuries, diseases, or impairments. Yet, despite the size and
seemingly unlimited scope of this litigation, many victims who
do have serious asbestos-related injuries remain unable to
secure adequate compensation. For these reasons, I would
support a national legislative solution along the lines
proposed by Chairman Hatch. As I explain in another statement
issued with Senators Grassley and Sessions, it is only the
presence of a few remediable but serious flaws that precludes
me from supporting the committee-reported bill.
---------------------------------------------------------------------------
\1\ Written Statement of Jennifer L. Biggs, FCAS, MAAA, Before the
Senate Committee on the Judiciary Concerning S. 1125, The Fairness in
Asbestos Injury Resolution Act of 2003 (June 4, 2003); Michelle J.
White, Why the Asbestos Genie Won't Stay in the Bankruptcy Bottle, 70
U. Cin. L. Rev. 1319, 1320 (2002) (bankruptcy data); Stephen J. Carroll
et al., Asbestos Litigation Costs and Compensation: An Interim Report
40, RAND/DB-397-ICJ (2002) (noting that ``our total [estimate] of
600,000 claimants to date [i.e., end of 2000] is probably an
understatement'').
---------------------------------------------------------------------------
I write separately here to discuss the asbestos-litigation
crisis generally--and to offer a reply to the Supreme Court's
several entreaties to Congress. I believe that the Court fails
to appreciate the true nature of the asbestos-lawsuit problem.
The Court has stated, for example, that ``the most
objectionable aspects of asbestos litigation'' are the fact
that ``dockets in both federal and state courts continue to
grow'' and that ``trials are too long.'' (Amchem, 521 U.S. at
598.) I think that a better description of the most
objectionable aspects of asbestos litigation is that provided
by law professor Lester Brickman, who states that ``asbestos
litigation today is, for the most part, a massively fraudulent
enterprise that can rightfully take its place among the
pantheon of * * * great American swindles.'' \2\
---------------------------------------------------------------------------
\2\ Lester Brickman, Asbestos Litigation: Malignancy in the Courts,
Civil Justice Forum of the Manhattan Institute no. 40 (Aug. 2002), at 7
(hereinafter ``Brickman, Malignancy in the Courts'').
---------------------------------------------------------------------------
This statement of additional views explains why I believe
that Professor Brickman appears to be correct in his
conclusion. The statement surveys the publicly available
evidence that fraud is the predominant feature of asbestos
litigation as it is conducted today. This evidence indicates
that the large asbestos-litigation plaintiffs firms routinely
coach their clients to lie under oath about their exposure to
asbestos products; that these law firms routinely rely on
fraudulent readings of chest x-rays and pulmonary-function
tests, in order to manufacture false evidence of asbestos
injury; and that invalid medical testimony routinely is
employed in litigation to support the existence of asbestos
injuries that do not or could not exist.
In pursuit of the last point, the statement also summarizes
the best medical evidence about asbestos injury--including
several letters that I have received from the nation's most
respected pulmonary-medicine specialists, explaining what types
of injuries asbestos does and does not cause. This evidence
also suggests that much of the criteria employed by the present
bill for identifying asbestos injuries is medically
unsupportable. Indeed, it appears that a majority of the
compensation categories created by the committee-reported bill
would only be used to pay people who we know are not sick from
asbestos.
This statement concludes by returning to the subject of the
judiciary's role in this crisis. Because the Supreme Court has
shown such a sustained interest in asbestos litigation, and has
even made recommendations for reform to this branch of
government, I think it only fair to return the favor and offer
some suggestions to the courts. The judiciary's failure to
police its processes has played no small part in this
phenomenon. In particular, there are several gross violations
of due process that make fraudulent asbestos litigation
possible, and that deserve the attention of the highest court
in the land. These include the practices of allowing unreliable
and invalid medical testimony to be introduced before a jury,
and allowing unrestricted intangible damages to distort a civil
justice system that was designed only for allocating the costs
of actual harms.
The Disconnect Between Rates of Asbestos Injury and Asbestos Legal
Claiming
As an initial matter, in defense of the legislative and
executive branches, it bears mention that Congress and the
President have acted to address actual asbestos health hazards.
Federal legislation and regulations virtually have eliminated
the asbestos exposures that cause disease or injury. According
to Dr. James Crapo, one of the nation's leading specialists in
pulmonary medicine, ``[d]ue to federal regulation of asbestos
that began in the early 1970s, current occupational exposure
levels are a tiny fraction of those that existed in the 1940s
and 1950s. All of the asbestos-related diseases are considered
dose-dependent, and the pre-1973 exposures to asbestos that
resulted in severe asbestosis and lung cancer are not present
today.'' \3\
---------------------------------------------------------------------------
\3\ Written Statement of Dr. James Crapo, Professor of Medicine,
Nation Jewish Center and University of Colorado Health Sciences Center,
Before the Senate Committee on the Judiciary Concerning S. 1125, The
Fairness in Asbestos Injury Resolution Act of 2003 (June 4, 2003). See
also Carroll et al., supra note 1, at 13. Dr. Crapo served for more
than 20 years on the medical faculty of Duke University; during 17 of
those years, he served as Chief of the Division of Pulmonary and
Critical Care Medicine. He is a past president of the American Thoracic
Society and is the co-author of several leading textbooks on pulmonary
medicine.
---------------------------------------------------------------------------
Today, ``[i]t has been more than 30 years since the
government began imposing strict limits on workplace exposure
to asbestos dust,'' and ``[i]t has been 20 to 30 years since
most asbestos-containing products were phased out of production
completely.'' \4\ Therefore, ``[b]ased upon the latency periods
associated with asbestos-related disease, rates of disease
manifestation and claims based on such manifestation should
have begun to decline significantly by no later than the mid-
1990s.'' \5\
---------------------------------------------------------------------------
\4\ Roger Parloff, The $200 Billion Miscarriage of Justice:
Asbestos Lawyers Are Pitting Plaintiffs Who Aren't Sick Against
Companies that Never Made the Stuff--And Extracting Billions for
Themselves, FORTUNE, February 17, 2002.
\5\ Lester Brickman, article forthcoming in a Pepperdine Law Review
Symposium on Asbestos Litigation (hereinafter ``Brickman, Pepperdine
Symposium'') (draft on file with the Judiciary Committee).
---------------------------------------------------------------------------
With regard to disease manifestation, this is exactly what
has occurred. According to the doctors, ``the number of new
cases of asbestos-related disease has been falling * * *. Very
few new plaintiffs have serious injuries, even their lawyers
acknowledge.'' \6\ ``John Dement, an associate professor for
environmental and occupational medicine at Duke University and
the former deputy director for lung disease research at the
National Institute for Occupational Safety and Health, [has]
said there were far fewer cases of serious asbestosis today
than 5 to 10 years ago.'' According to Dr. Dement, ``What we're
seeing right now is the downswing.'' \7\ Epidemiological data
confirm these observations. ``[C]ancer deaths in the United
States attributable to asbestos exposure are already falling,
and are estimated to have peaked in 1992 at 9700 per year.''
\8\ Indeed, almost a decade ago--in 1994--``the medical text
Occupational Lung Disorders describe[d] asbestosis as a
`disappearing disease.' '' \9\
---------------------------------------------------------------------------
\6\ Alex Berenson, A Surge in Asbestos Suits, Many by Healthy
Plaintiffs, The New York Times, A1, April 10, 2002.
\7\ Id.
\8\ White, supra note 1 (citing Barry I. Castleman, Asbestos:
Medical and Legal Aspects 784 (4th ed. 1996)).
\9\ Parloff, $200 Billion Miscarriage of Justice, supra note 4.
---------------------------------------------------------------------------
Asbestos-injury legal claims, on the other hand, have
``prov[en] impervious to the predictions of medical science.''
\10\ ``Contrary to expectations, the numbers of claims filed
increased rapidly during the 1990s.'' \11\ Only
``[a]pproximately 20,000 claims were filed annually against
major asbestos defendants in the early 1990s.'' \12\ But in
2001, at least 90,000 new asbestos claims were filed--a three-
fold increase over the number filed in 1999.\13\ Also, ``[t]he
number of defendants named in asbestos claims has risen
dramatically from around 300 in the early 1980s to
approximately 2,000 identified in 2001 to 8,400 cited in the
most recent RAND findings.'' \14\ Bankruptcies also have
increased sharply. Of the 78 firms driven to bankruptcy by
asbestos lawsuits since 1982, 30 have filed between 2000 and
2002.\15\
---------------------------------------------------------------------------
\10\ Brickman, Pepperdine Symposium, supra note 5.
\11\ White, supra note 1, at 1319 (citing S.J. Carroll et al.,
Asbestos Litigation in the U.S.: a New Look at an Old Issue, RAND DB-
362.0-ICJ, August 2001).
\12\ Biggs, supra note 1, at n. 3.
\13\ Brickman, Malignancy, supra note 2, at 1.
\14\ Biggs, supra note 1, at n. 5.
\15\ White, supra note 1, at 1320.
---------------------------------------------------------------------------

Persuasive Evidence of Fraud

How is it possible that asbestos-injury legal claims have
skyrocketed during a period when rates of actual asbestos
injury have declined sharply? An answer might begin with a
letter to the American Journal of Industrial Medicine from Dr.
David Egilman, a Clinical Associate Professor at Brown
University. Dr. Egilman notes that ``[f]or the past several
years,'' he has ``served as an expert witness in areas related
to state-of-the-art and liability primarily at the request of
plaintiff lawyers,'' and has ``reviewed the medical records and
X-rays of workers in the cases in which [he has] testified.''
\16\ He concludes that ``[o]ver the past 2 years, I have noted
that many of these individuals could not (due to inadequate
latency or exposure) and did not manifest any evidence of
asbestos-related disease.''
---------------------------------------------------------------------------
\16\ Dr. David Egilman, Asbestos Screenings, American Journal of
Industrial Medicine 42:163 (2002) (Letter to the Editor).
---------------------------------------------------------------------------
This phenomenon--of asbestos claims brought by people who
are not sick--is quantified in several sources. It has been
noted in the experience of the Manville Trust.\17\ According to
a recent report, ``90% of the Trust's last 200,000 claims have
come from attorney-sponsored x-ray screening programs, * * *
91% of all claims allege only non-malignant asbestos `disease,'
and these cases currently receive 76% of all Trust funds.''
\18\ A recent RAND study has identified the same pattern in the
tort system as a whole: ``Claims for nonmalignant injuries grew
sharply through the last half of the [1990s].'' \19\ The study
notes that ``[a]lmost all the growth in the asbestos caseload
can be attributed to the growth in the number of these claims,
which include claims from people with little or no current
functional impairment.'' These claims grew as a fraction of all
claims ``through the late 1980s and early 1990s, finally
stabilizing at about 90 percent of annual claims in the late
1990s.'' \20\
---------------------------------------------------------------------------
\17\ The Manville bankruptcy trust pays claims on behalf of the
former Johns-Manville Corporation, ``which mined virtually all of the
asbestos used in the United States and was, by far, the leading
manufacturer of asbestos-containing materials.'' Brickman, Malignancy
in the Courts, supra note 2. Johns-Manville declared bankruptcy in
1982. It is generally believed that most--and probably two-thirds--of
all asbestos plaintiffs file claims with the Manville bankruptcy trust.
\18\ Letter from Steven Kazan to the Honorable Jack B. Weinstein,
July 23, 2002 (included as Attachment ``A'' to this statement). Mr.
Kazan is a plaintiffs attorney who specializes in representing asbestos
claimants with cancer.
\19\ Carroll et al., supra note 1, at 45.
\20\ Id. at 46. See also id. at 64-65 (discussing Tillinghast-
Powers Perrin estimate that ``[n]onmalignant claims accounted for about
89 percent of claims and 65 percent of the dollars'' awarded to
asbestos claimants from 1991 to 2000); id. at 20 (citing studies
concluding that unimpaired claimants account for two-thirds to 90
percent of all current claimants). See also Thomas Korosec, Enough to
Make You Sick, Dallas Observer, September 26, 2002 (``You could see as
early as a decade ago this unnatural proliferation of nonmalignant
cases being filed around the country * * * * [W]e have 10 times more
nonmalignant cases being filed today than in 1990. A nonmalignant
asbestos disease is whatever a willing physician says it is, so a
lawyer and physician can go out and create however many cases they
want'') (quoting plaintiffs attorney Mark Iola).
---------------------------------------------------------------------------
These data invite the question, how are plaintiffs able to
recover money for asbestos claims if they have not been
injured? The Supreme Court recently has noted that, ``[i]n the
1970's and 1980's, plaintiffs' lawyers throughout the country,
particularly in East Texas, honed the litigation of asbestos
claims'' by ``improving the forensic investigation of diseases
caused by asbestos'' and ``refining theories of liability.''
(Ortiz, 527 U.S. at 822.) The role of several other plaintiffs-
lawyers practices and ``refinements'' also bears mention:
1. Coaching Asbestos Plaintiffs to Lie
Questions about how asbestos litigation is conducted today
can be answered by examining the practices of just a limited
number of law firms. A few plaintiffs firms dominate the field.
According to a recent RAND study, ``[b]y 1995, ten firms * * *
represented three-quarters of the annual filings against the[]
defendants'' from whom RAND was able to obtain data.\21\ And
one academic expert has estimated that just two law firms--
Baron & Budd of Dallas, and Ness Mottley of South Carolina--
``probably account for half the asbestos docket in the
country.'' \22\
---------------------------------------------------------------------------
\21\ Carroll et al., supra note 1, at 30 (emphasis in original).
\22\ Samuel Issacharoff, ``Shocked'': Mass Torts and Aggregate
Asbestos Litigation After Amchem and Ortiz, 80 Tex. L. Rev. 1925, 1930
(2002). See also Korosec, Enough to Make You Sick, supra note 20
(estimating that Baron & Budd and its subsidiaries ``control a double-
digit percentage of the roughly 250,000 asbestos claims pending
nationwide'').
---------------------------------------------------------------------------
Several years ago, a first-year associate at Baron & Budd
accidentally produced to defense counsel a memo that provides a
startling insight into how asbestos claims are created. The
memo, titled ``Preparing for Your Deposition,'' gives clients
detailed instructions how to credibly testify that they worked
with particular asbestos products. The memo also instructs
clients to assert particular things that will increase the
value of their claim, without regard to whether those things
are true. The memo even informs clients that a defense attorney
will have no way of knowing whether they are lying about their
exposure to particular asbestos products.
Baron & Budd has admitted that the memo was produced by its
employees, but denies that the memo instructs clients to lie,
and has argued that statements from the memo have been taken
out of context by the press. In order to allow the reader to
draw his own conclusions, I have included the entire memo as
Attachment ``B'' to this statement.
The memo effectively resolves one mystery that has
bedeviled asbestos defendants for several years. As the major
asbestos producers have gone bankrupt, lawsuits have shifted to
defendants with an increasingly minor role in the asbestos
industry. These companies often produced only a small volume of
asbestos-containing products, yet plaintiffs have been able to
identify these products in very large numbers. ``Many of the
remaining asbestos manufacturers complain that they couldn't
possibly have sold enough product to expose even a fraction of
the men who claim to remember seeing their goods.'' \23\
According to one defense lawyer,

\23\ Christine Biedermman, Thomas Korosec, Julie Lyons, and Patrick
Williams, Toxic Justice, Dallas Observer, August 13, 1998.
---------------------------------------------------------------------------
I'd be surprised if [my client] actually sold enough
product to expose half the people who claimed to have
been exposed. We know, for example, of locations where
not only was our product not there, but [it] would have
no function there. Yet in case after case, Baron & Budd
sues us and gets product ID and comes up with at least
three or four co-workers [who identify the products].
A. The Baron & Budd Script Memo
``Preparing for Your Deposition'' shows how Baron & Budd
gets that product ID. The first half of this 20-page memo
consists of separate sections providing detailed descriptions
of the uses of 14 different asbestos products: insulating
cement, refractory cement, gun mix, pre-cut gaskets, sheet
gaskets, rope packing, pipe covering, block insulation, plastic
cement, fireproofing, asbestos boards and panels, joint
compound, cloth and felt, and firebrick.
For each of these 14 products, the memo gives a detailed
account of which types of workers used the product, for what
purposes, in what places, how it was mixed and applied, and
what types of containers held the product. Each description
goes well beyond what one would think necessary simply to
refresh the memory of someone who had actually worked with the
product. Instead, the memo appears to anticipate that clients
will not have any previous familiarity with the product. For
example, the memo reminds clients: ``Insulating cement is NOT
like sidewalk concrete! * * * It was typically used to insulate
steampipes.'' The memo provides sufficient information about
all aspects of the product to allow any person to credibly
testify that he worked with the product.
The memo also repeatedly reminds readers of the importance
of memorizing the information about the products. It informs
readers from the outset, ``How well you know the name of each
product and how you were exposed to it will determine whether
that defendant will want to offer you a settlement.'' Later,
the memo continues:

Your responses to questions about asbestos products
and how you were exposed to them is the most important
part of your deposition. You must PROVE you worked with
or around the products listed on your Work History
Sheets. You must be CONFIDENT about the NAMES of each
product, what TYPE of product it was, how it was
PACKAGED, who used it and HOW it was used. You must be
able to show that you were close to it often enough
while it was being applied to have inhaled the fibers
given off while it was being mixed, sanded, sawed,
compressed, drilled or cut, etc.
You will be required to do all this from MEMORY,
which is why you MUST start studying your Work History
Sheets NOW! * * * [I]t is best to MEMORIZE all your
products and where you saw them BEFORE your deposition.

* * * * *

You must be able to pronounce the product names
correctly and know WHICH products are pipecovering,
WHICH are insulating cements and WHICH are plastic
cements, for instance. Many of the product names should
sound very similar to each other (Kaylo and Kaytherm,
or Raybestos and Unibestos, for instance), but they
might be different products entirely! Have a family
member quiz you until you know ALL the product names
listed on your Work History Sheets by heart.

``Preparing for Your Deposition'' also gives instructions
on what to do if defense attorneys suspect that you were
coached, on blaming discrepancies on ``the Baron & Budd girl,''
and on letting the Baron & Budd lawyer fix your mistakes:

You may be asked how you are able to recall so many
product names. The best answer is to say that you
recall seeing the names on the containers or on the
product itself. The more you thought about it, the more
you remembered! If thedefense attorney asks you if you
were shown pictures of products, wait for your attorney to advise you
to answer, then say that a girl from Baron & Budd showed you pictures
of MANY products, and you picked out the ones you remembered.
If there is a MISTAKE on your Work History Sheets,
explain that the ``girl from Baron & Budd'' must have
misunderstood what you told her when she wrote it down.

* * * * *

If you are answering a question and your Baron & Budd
attorney interrupts you, STOP TALKING IMMEDIATELY! Your
attorney is trying to fix something you said wrong, or
stop you from saying something that contradicts your
earlier testimony.

Perhaps the most disturbing parts of ``Preparing for Your
Deposition'' are those that advise clients to say particular
things that have clear import for various legal defenses and
the value of the plaintiff's claim. The memo instructs all
clients to say these things, without regard to whether they are
true. For example:

You will be asked if you ever saw any WARNING labels
on containers of asbestos. It is important to maintain
that you NEVER saw any labels on asbestos products that
said WARNING or DANGER. * * *
You will be asked if you ever used respiratory
equipment to protect you from asbestos. Listen
carefully to the question! If you did wear a mask for
welding or other fumes, that does NOT mean you wore it
for protection from asbestos! The answer is still
``NO''!

* * * * *

Make sure you concentrate on your exposure to
asbestos products in the 1950s, 1960s and early 1970s.
Do NOT talk about what went on at work in the 1980s and
1990s. The reason for this is that by the mid 1970s
most insulating products being installed no longer
contained asbestos.

* * * * *

Do NOT mention product names that are not listed on
your Work History Sheets. The defense attorneys will
jump at a chance to blame your asbestos exposure on
companies that were not sued in your case.
Do NOT say you saw more of one brand than another, or
that one brand was more commonly used than another. At
some jobs there may have been more of one brand. At
other jobs there may have been more of another brand,
so throughout your career you were probably exposed
equally to ALL the brands. You NEVER want to give
specific quantities or percentages of any product
names. The reason for this is that the other
manufacturers can say you were exposed more to another
brand than to theirs, and so they are NOT as
responsible for your illness! Be CONFIDENT that you saw
just as much of one brand as all the others. All the
manufacturers sued in your case should share the blame
equally!

* * * * *

Unless your Baron & Budd attorney tells you
otherwise, testify ONLY about INSTALLATION of NEW
asbestos material, NOT tear-out of the OLD stuff. This
is because it is almost impossible to prove what brand
of material was being torn out, since heat probably
destroyed any name printed on the product itself. You
can only prove what the product name was when it was
being installed in the first place, when the name was
clearly marked on the material or on the container it
came out of.

But undoubtedly the most damning parts of the script memo
are its assurances to the client that defense attorneys will
not be able to know if he is lying--and its warnings that no
one must know about the memo itself:

Keep in mind that these [defense] attorneys are very
young and WERE NOT PRESENT at the jobsites you worked
at. They have NO RECORDS to tell them what products
were used on a particular job, even if they act like
they do.

* * * * *

The only documents you should ever refer to in your
deposition are your Social Security Print Out, your
Work History Sheets and photographs of products you
were shown, but ONLY IF YOU ARE ASKED ABOUT THEM AND
ONLY IF YOUR BARON & BUDD ATTORNEY INSTRUCTS YOU TO
ANSWER! Any other notes, such as what you are reading
right now, are ``privileged'' and should never be
mentioned.

Professor Brickman makes the following assessment of
``Preparing for Your Deposition:'' ``In my opinion, * * * this
is subornation of perjury.'' He also concludes that ``[i]t is
also a principal, if not the principal, method of processing
unimpaired asbestos claims today.'' \24\
---------------------------------------------------------------------------
\24\ Brickman, Malignancy in the Courts, supra note 2, at 6.
---------------------------------------------------------------------------
B. ``What I was doing was fraudulent. There was never any
doubt in my mind.''
After ``Preparing for Your Deposition'' was discovered, the
Dallas Observer, a weekly newspaper in Baron & Budd's hometown,
conducted an investigation of the firm's practices. The
Observer found that ``a number of former Baron & Budd employees
say that the information and techniques contained in the memo
are widely used, even taught to employees. They say the * * *
memo was not truly an aberration, but a written example of how
the product-identification staff works at Baron & Budd.'' \25\
The Observer's investigative stories provide additional insight
into how asbestos litigation is conducted. Highlights include:
---------------------------------------------------------------------------
\25\ Biederman et al., supra note 23.
---------------------------------------------------------------------------
``[Two former paralegals who traveled] to upstate
New York in the winter of 1991 to do `product ID' interviews *
* * both say that a client-coaching system was in place at the
firm. Workers were routinely encouraged to remember seeing
asbestos products on their jobs that they didn't truly recall,
the women say.''
``Paralegals say * * * that workers are
selectively shown pictures of asbestos products they should
identify. [One paralegal] says that in meetings with clients,
she would bring a `3- or 4- or 5-inch binder with pictures of
asbestos products, divided up according to manufacturer. I'd go
through page by page and encourage the client to recall the
products they used. It would be pretty strong encouragement.
Most of the time when I left, I had ID for every manufacturer
that we needed to get ID for.' She already had the answers, she
says. [The paralegal] just needed the worker to agree she had
the correct ones. Most would wise up pretty quickly, she says.
`Clients understood that products needed to be ID'd for the
manufacturers we sued,' she says.''
``[The paralegal] says that in many cases, the
client had no specific recollection of some products before she
interviewed them. `My original caseload was a thousand, but I
didn't interview that many people. It was in the hundreds. I'd
say that probably in 75 percent of those cases I had people
identify at least one product they couldn't recall originally.'
''
``[According to the paralegals], their job didn't
stop with implanting memories; there were also the asbestos
products they had to encourage clients not to recall. In New
York, [the paralegal] says, `everybody could remember something
from Johns-Manville,' which was the largest U.S. distributor of
asbestos products. But [the paralegal] claims that her
supervisors, two lawyers, told her to discourage identification
of Johns-Manville products because the Manville Trust was not
paying claims rendered against it at the time. * * * Thus, when
a client would say he saw, for instance, a Johns-Manville pipe
covering, [the paralegal] says, she would hand them a line.
`You'd say, `You know, we've talked to some other people, other
witnesses, and they recall working with Owens Corning's Kaylo.
Don't you think you saw that?' And they'd say, `Yeah, maybe
you're right.' Later, she says, Johns-Manville began paying
settlements, and she was ordered to go out and `meet these guys
again' and get them once again to name Johns-Manville
products.''
``[The paralegal] says she learned some of these
methods and techniques from `other paralegals I worked with.'
But she has no doubt that her supervisors and at least one of
the firm's partners knew what was going on. `I remember
specifically there was a case in the Mobile, Alabama, area that
was set for trial, and I was specifically sent down there to
get product ID. I was basically told, `Don't come back without
the IDs.' [One of two Baron & Budd attorneys] told me that.' ''
``[According to the paralegal,] `There was at
least one time, maybe more, that I went to [a particular Baron
& Budd attorney] and said I didn't think a particular
settlement was right. That I can't believe we're doing this. I
was basically told to be quiet or leave.' * * * `There were
clients we were getting money for, and some people just didn't
deserve a dime.' ''
``[Another former paralegal] recalls being asked
to falsify product-ID information the very first week she was
on the job. `They were having me fill out the product IDs
[forms that the paralegals had gathered from clients] . . .
There was a man, he was some sort of contractor. He had
absolutely no exposure to asbestos--none. There was nothing in
his work history.' As she scanned the paperwork, [a Baron &
Budd partner] walked by the office she was working in. `I got
up and walked out and said, `I don't know what to do. This man
has not had exposure at all.' He looked at me and said, `Oh
you're a smart lady. Be creative,' and he turned and he walked
away.' She says she then went to her immediate supervisor, who
she recalls also told her to `fill it in, make up stuff.' `I
was shocked,' she says. When she refused to fill in product
names, the supervisor simply took over the file, she says. `I
don't know what happened to the case after that.' ''
``[A former Baron & Budd attorney] describes * * *
an atmosphere where attorneys and paralegals were not only
taught that manufacturing testimony was their duty, but
disciplined if the `proper' testimony was not obtained. She
says she lasted a few years. `Slowly, you begin to question
whether the means you are using to achieve the ends are
legitimate. And if not, what is your involvement in that?' she
says. `And you either leave or you accept it.' She still
recalls one of the first depositions she ever defended at Baron
& Budd by herself. `I knew my guy wasn't prepared to tell the
lie,' she says. `This gentleman did not know Kaylo [a product
manufactured by an important defendant], had never seen pipe
covering and never worked with it. It was on his work-history
sheet. And for me not to get the testimony that some paralegal
got * * * I'd have caught shit for that if that group went to
trial. I pulled him out [of the deposition],' she says. `And I
said, `Could you just read off your work-history sheet?' * * *
He goes, `I don't know why it's on there. It shouldn't be on
there. I don't remember it.' ` * * * And I was in fear and
feeling totally inadequate and knowing that in getting what I
needed to get, I was crossingthe line.' She got the
identification. `And this was a good man,' she recalls--though he
wasn't particularly sick.'' \26\
---------------------------------------------------------------------------
\26\ Biederman et al., supra note 23.
---------------------------------------------------------------------------
``[Yet another former Baron & Budd paralegal] says
he would at times be given rush jobs that took him out of his
daily, witness-finding duties. As the firm reached mass
settlements with manufacturers, it needed to produce sworn
affidavits from every client who had sued, he recalls. The
mostly retired workers had to swear they had been exposed, 30,
40 or 50 years ago, to specific products the company made.
Industry officials say they require the statements to validate
claims and present them to insurers. [The paralegal] says some
clients had already identified the products in prior talks with
the firm, and sometimes they had not. Frequently, he says, he
was the first person to mention the products, and clients who
didn't remember them were hesitant and worried about signing.
`They'd ask, ``Do I have to go court? Do I have to come to
Dallas?'' ' [The paralegal] says he would assure them all they
had to do was sign the document, have it notarized, send it in,
and money would be coming their way. `It was like telephone
marketing * * * a marketing approach,' [the paralegal] says.
But it didn't take much savvy to close the sale. Everyone would
sign, he says. `When you are offering someone the ability to
get money in their pocket when they're not expecting money for
any particular reason, it's not all that difficult.' ''
``[The former paralegal also] says he was assigned
to find witnesses who could support claims by Baron & Budd
plaintiffs that they were exposed to asbestos products at
various workplaces from the early 1940s until the late 1960s.
The problem was, almost nobody could remember these facts
without being told what to say, [the paralegal] recalled in an
interview earlier this month. It was his job to get them to
name 20 or 30 different products from the multiple companies
Baron & Budd would typically sue. * * * [The paralegal] says he
was pretty good at his job, and he'd usually end up getting
many men to say many things they had no idea about before he
called. `I'd get 'em to identify every one,' he says of his
list of 20 or more products. Clerical staff managers and a
`product ID' paralegal he worked under taught him his
techniques. * * * Truth got lost in the process, he says, and
[the paralegal] recalls being uncomfortable from the start with
telling witnesses how to testify. `What I was doing was
fraudulent. There was never any doubt in my mind about it.' ''
\27\
---------------------------------------------------------------------------
\27\ Thomas Korosec, Homefryin' with Fred Baron, Dallas Observer,
March 29, 2001.
---------------------------------------------------------------------------
Other documents obtained by the Dallas Observer ``appear to
track what these former paralegals say about how the firm's
product-identification process works''--and provide
instructions similar to those in ``Preparing for Your
Deposition.'' For example, a document titled ``P.I.D. Study
Sheet,'' written by a former paralegal, also contains detailed,
deposition-relevant product-use information. In a handwritten
1993 memo to several attorneys, the Baron & Budd paralegal who
produced the document ``writes that she gives the attached
`study sheet' to `all my clients who can read [and] ask them to
be familiar [with] the information for their deposition.' ''
\28\ Another document obtained by the Observer consisted of
``handwritten notes apparently taken by [a Baron & Budd
attorney] during an internal training session.'' The notes
state: ``Warn [plaintiffs] not to say you were around it--even
if you were--after you knew it was dangerous.'' Elsewhere,
under a section titled ``name that product,'' the notes state:
``Show client filled out sheet showing what [client] picked
out. Get him to agree he picked out * * * Products: explain in
the context of who will be in depo[sition]--emphasize those
products.'' \29\ Another set of notes obtained by the Observer,
which were prepared by a Baron & Budd attorney, simply state:
``If client is asked if any other doctors told him about his
condition before the diagnosing doctor named in the
[interrogatory], client should answer NO.'' \30\
---------------------------------------------------------------------------
\28\ Biederman et al., supra note 23.
\29\ Id.
\30\ Id.
---------------------------------------------------------------------------
Interestingly, statements made by former Baron & Budd
employees even confirm what epidemiological studies have
projected for asbestos disease generally--that as exposures
were eliminated in the 1970s and latency periods lapsed, the
number of sick workers diminished. This change was reflected in
the composition of the firm's caseload. One former paralegal
noted that ``she witnessed how, as the pool of very sick
clients shrunk, the firm lowered the bar on which cases it
would take.'' The paralegal states: ``Initially [in the late
`80s], if somebody just had pleural plaques [benign spots on
the pleura, or lining of the lung] or something like that, they
wouldn't take the case. Later on that's all they had * * *
Later on they made these into cases. I could see the shift
during my period [with the firm].'' Similarly, a former Baron &
Budd attorney states: ``As the '90s went on, you got more and
more people with marginal exposure to the stuff. You went from
insulators and pipe fitters to having the maintenance guys in
the paper mill. Yes, there was asbestos in that mill equipment,
but they didn't work with it, and the medical evidence you get
reflects that.'' \31\ A former paralegal also effectively
explains why means like the script memo were used: ``Overall,
she says, workers in asbestos plants and insulators `really did
know the products * * * But when you got to the electricians
and carpenters and the brick masons * * * they didn't work with
the products that much.' '' \32\
---------------------------------------------------------------------------
\31\ Korosec, Enough to Make You Sick, supra note 20.
\32\ Biederman et al., supra note 23.
---------------------------------------------------------------------------
C. A Pattern of Intimidation and Retaliation
Perhaps as disturbing as the script memo itself, and the
statements of Baron & Budd's former employees, is the firm's
partly successful efforts to suppress any investigation of its
activities. After ``Preparing for Your Deposition'' was
discovered, a state district judge referred the matter to the
local district attorney's office for criminal prosecution.
According to the assistant district attorney in charge of the
matter, local authorities did not act because ``our
investigation has been taken over federally.'' \33\ The local
U.S. attorneys office, however, gave a different account of why
the local DA did not pursue the case: ``Because of the politics
of it, [the DA's office] wanted to drop it, and so it ended up
here.'' \34\
---------------------------------------------------------------------------
\33\ Id.
\34\ Id.
---------------------------------------------------------------------------
That was in 1998. No federal investigation has ever taken
place. In 2001, the Observer provided the following
explanation:

Former U.S. Attorney Paul Coggins told the Observer
recently he recused himself from participating in his
office's investigation of the memo because of a
conflict of interest posed by the firm's political
contributions to his wife, Regina Montoya Coggins, in
her run last year for Congress. He said contributions
to his wife from the national trial lawyers group,
where Baron earlier served as vice president, also
drove his decision to remove himself from making
decisions in the case.
Baron's critics question how vigorously Coggins'
troops pursued Baron & Budd without support from the
top, and whether Baron's massive fund raising for the
Democrats, which stepped up in early 1998, might have
influenced Coggins' superiors in Washington as well.
``In my humble opinion,'' says one lawyer who provided
information to the FBI, ``that investigation was a
joke.'' \35\
---------------------------------------------------------------------------
\35\ Korosec, Homefryin' with Fred Baron, supra note 27.

The Observer also provided the following account of what
happened to the Texas state district judge who originally had
referred the matter of the script memo to the District
---------------------------------------------------------------------------
Attorney's office:

[Judge John] Marshall, a lifelong Republican who drew
no opponents when he ran in 1992 and 1996, found
himself the next year in the fight of his life, with
Baron leading the charge. Before the 2000 primary,
Baron urged a Dallas trial lawyers group to target the
judge with campaign money, enlisting the firm's lawyers
in his cause. Campaign records show Baron & Budd was an
early donor to Marshall's opponent, Mary Murphy, who
said Baron was one of the first to urge her to run.

* * * * *

Several lawyers interviewed for this story said
Marshall's defeat sent a signal that it's hazardous to
threaten Baron & Budd. ``If I liked my comfortable seat
on the bench, I'd think twice about ruling against them
on these things,'' says one attorney, who declined to
be named. Says another who was close to the memo case,
``No judge in Dallas will cross Baron & Budd after what
happened in that election. They are scared to death.''
\36\
---------------------------------------------------------------------------
\36\ Id.

It bears mention, however, that Baron & Budd is not all
stick and no carrot. The Observer also reports that Baron &
Budd attorneys initiated an effort to hire a lobbyist to
represent state judges in their requests for additional funding
from the state legislature. Attorneys at the firm also led a
drive to buy every civil judge in Dallas County a new personal
computer.\37\ The firm also has managed to retain a University
of Texas legal-ethics professor, who has written law-review
articles about the script memo favorable to Baron & Budd--
without disclosing that he has been hired by the firm. \38\
---------------------------------------------------------------------------
\37\ Id.
\38\ Id.
---------------------------------------------------------------------------
Some lawyers representing companies sued by Baron & Budd
have attempted to pursue the matter of the script memo. Three
lawyers who did so quickly found that ``Baron & Budd stepped up
asbestos litigation against [their] clients.'' Two of these
lawyers' clients soon negotiated settlements with Baron & Budd.
According to one of the lawyers, Elizabeth Pfifer, ``I've never
seen anything like them in my 17 years of practice. * * *
Everyone understood that if we took them on, they would go
after our clients.'' The third lawyer, Bill Skepnek, eventually
lost his client, Raymark Corp., when it went bankrupt.
``[W]ithin months, Baron & Budd turned the tables on Skepnek.
It filed contempt motions against him in 165 courts * * * [and]
tied up Skepnek's legal fees from Raymark in a contentious
bankruptcy fight that itself spawned a crop of lawsuits.'' \39\
---------------------------------------------------------------------------
\39\ Id.
---------------------------------------------------------------------------
Another company that has been driven into bankruptcy by
asbestos litigation, G-1 Holdings, Inc., of Wayne, New Jersey,
also has attempted to investigate Baron & Budd's use of the
script memo. G-1 Holdings has sued Baron & Budd, as well as
South Carolina-based Ness Motley and New York asbestos
litigators Weitz & Luxenberg, under the federal racketeering
statutes in New York federal district court. Judicial opinions
summarizing the pleadings in that case provide an excellent
overview of the evolution of asbestos litigation, and describe
significant additional misconduct by these law firms. Excerpts
from two of those opinions are include as Attachment ``C'' to
this statement.
G-1 Holdings also has encountered substantial difficulty in
investigating Baron & Budd's practices. According to the Dallas
Observer:

To pursue its allegations that Baron & Budd has
suborned perjury and fabricated evidence to produce
dubious cases, G-1 dispatched investigators to Dallas
in 1999. Baron & Budd met them head-on. The firm
obtained a temporary injunction from state District
Judge Merrill Hartman, forbidding them from
``communicating in any manner'' with former Baron &
Budd employees. Such information was likely
``privileged and confidential,'' Hartman ruled.

* * * * *

This January [of 2001], after filing its racketeering
lawsuit, G-1 employed a new set of investigators, Kroll
& Associates, and by the end of the month, they were
busy tracking down former employees. On January 30,
they telephoned former Baron & Budd lawyer Amy
Blumenthal, who in turn telephoned her former firm,
which appears to have gone immediately on alert.

* * * * *

The next day, state District Judge Ann Ashby granted
Baron & Budd's quickly drafted motion for a temporary
restraining order. It barred Kroll from contacting the
firm's employees and ordered Kroll's investigators to
submit themselves to questioning by Baron & Budd about
what they had learned.\40\
---------------------------------------------------------------------------
\40\ Korosec, Homefryin' with Fred Baron, supra note 27. The
Observer's investigative news stories also have drawn Baron & Budd's
attention to that newspaper. The Observer has characterized the firm's
actions toward the paper as ``a pattern of intimidation and paranoia
such as the Observer has never seen before.'' Julie Lyons, The Control
Freak, Dallas Observer, August 13, 1998.

G-1 Holdings's RICO suit against Baron & Budd still is
pending in a New York federal district court--and still is in
the discovery phase.\41\
---------------------------------------------------------------------------
\41\ See, e.g., G-1 Holdings, Inc. v. Baron & Budd, 213 F.R.D. 146
(S.D.N.Y. 2003).
---------------------------------------------------------------------------
According to a 1994 estimate, Baron & Budd had, by that
year, grossed more than $800 million from asbestos
litigation.\42\
---------------------------------------------------------------------------
\42\ See Biederman et al., supra note 23.
---------------------------------------------------------------------------
2. Fraudulent Pulmonary-Function Tests and Fraudulent X-Ray
Interpretations
Asbestos legal claims cannot be manufactured with witness
testimony alone. Such claims also require evidence of reduced
lung capacity and x-ray evidence of lung damage.
A thorough description of how such evidence is produced is
available in a recent law-review article by Professor
Brickman.\43\ That article, for example, quotes from a
complaint brought by Owens-Corning Fiberglass, Inc., against
businesses that administer pulmonary-function tests for
asbestos plaintiffs lawyers. (A pulmonary-function test gauges
lung impairment by measuring the subject's ability to blow on a
tube for different intervals.) The complaint describes how
these testing companies systematically disregard well-
established requirements for conducting a valid pulmonary-
function test; charge plaintiffs attorneys ``$700 if the tests
were positive for diminished lung function but only $400 if the
tests were negative;'' and, on one occasion, have agreed to
perform such tests for a 15% contingency fee from the attorney
who would be using the results.\44\
---------------------------------------------------------------------------
\43\ Lester Brickman, Lawyers' Ethics and Fiduciary Obligation in
the Brave New World of Aggregative Litigation, William and Mary
Environmental Law and Policy Review 243, Winter 2001 (hereinafter
``Brickman, Aggregative Litigation'').
\44\ Id. at 282 n. 110.

Similar practices have infected the reading of chest
x-rays:
One doctor who has evaluated 14,000 individuals for
two different screening companies admitted under oath
that he has no experience in diagnosing asbestosis, and
that he is not even practicing medicine. That doctor
has concluded that every single person that he has
evaluated--all 14,000--had asbestosis.\45\
---------------------------------------------------------------------------
\45\ Brickman, Pepperdine Symposium, supra note 5 (quoting Written
Statement of Steven Kazan (Kazan, McClain, Edises, Abrams, Fernandez,
Lyons & Farrise), Hearing on Asbestos Litigation before the Committee
on the Judiciary, U.S. Senate, Sept. 25, 2002). See also Egilman,
Asbestos Screenings, supra note 16.
---------------------------------------------------------------------------
Another example:
A United States District Court judge, using impartial
medical experts and excluding the parties' use of their
own experts, determined that of 65 plaintiffs claiming
to have contracted asbestosis--who, but for the court's
order, would have offered their own medical experts'
testimony in support of their claims and on that basis
would very likely have been awarded significant
compensation by the jury--only 10 (15%) had in fact
contracted asbestosis.\46\
---------------------------------------------------------------------------
\46\ Brickman, Aggregative Litigation, supra note 43, at 284-85

An even more extreme example of consistent misdiagnosis of
asbestosis was provided directly to this committee by Mr. Otha
Linton, who served for 25 years on the principal staff of the
American College of Radiology Task Force on Pneumoconiosis, and
Dr. Joseph Gitlin, a faculty member of the department of
radiology at the Johns Hopkins Medical Institutions. Mr. Linton
and Dr. Gitlin were asked to review over 500 chest x-rays that
originally had been provided by an asbestos plaintiffs firm.
That firm's medical experts had given 91.7% of these x-rays an
ILO score of 1/0 or higher. (Which itself is only marginal
evidence of asbestosis, see infra Attachment ``E'' (Letter of
Dr. Crapo.).) Mr. Linton and Dr. Gitlin arranged for a blind
reading of those same x-rays by six consultants in chest
radiology who were also B readers. These independent experts
gave the same x-rays an ILO score of at least 1/0 in only 4.5%
of their reports.\47\
---------------------------------------------------------------------------
\47\ Mr. Linton's Letter to Senator Grassley, and an abstract of an
article submitted for publication that describes his findings, is
included as Attachment ``D'' to this statement.
---------------------------------------------------------------------------
And the Manville Trust's experience, again, has matched
that of the wider asbestos-litigation world:

In 1995, the Trust instituted a medical audit program
providing for a random audit of 5% of each law firms'
claims submitted per payment cycle. The core of the
audit program was a process of review of claimants' x-
rays by independent medical experts.\48\
---------------------------------------------------------------------------
\48\ Brickman, Pepperdine Symposium, supra note 5.

The initial results of the Trust's review led it to
conclude that it should audit all claims submitted by some law
firms. Plaintiffs firms resisted this approach, and instead
---------------------------------------------------------------------------
offered a proposal to audit the doctors directly.

Reasonable though that proposal might sound, [then-
Trust Executive Director Patricia] Houser resisted it
for * * * eyebrow-raising reasons * * * [that] stemmed
from the trust's early analyses of the audit data. In
mid-1996, the trust had commissioned biostatisticians
at Penn State University and the University of
Pennsylvania to help them with that task. Houser
quickly discovered that the failure rate of any given
doctor often correlated with which law firm that doctor
was working for at the time! A physician's failure rate
might be markedly elevated when working for one firm,
but quite average when retained by another. In fact,
the biostatisticians concluded, in a written report
submitted to the trust in February 1998, that the
particular law firm that submitted any given claim was
``a strikingly significant predictor'' of whether that
claim would fail the audit, and that those findings
exhibited ``huge levels of statistical significance.''
\49\
---------------------------------------------------------------------------
\49\ Roger Parloff, Mass Tort Medicine Men, The American Lawyer,
January 15, 2003. See also Parloff, $200 Billion Miscarriage of
Justice, supra note 4 (noting that ``[j]ust eight screening doctors
accounted for more than 70% of all claims filed with the Manville Trust
between January 1995 and April 1998'').

Ultimately, the Manville Trust was made to disband its
audit program by U.S. District Court Judge Jack Weinstein.\50\
But during the time that the program was in place, the Trust
was able to collect data on how often different doctors'
diagnoses ``failed'' a review by independent examiners. The
failure rate was high. ``According to an April 1998 Manville
Trust memorandum, the 10 physicians most frequently used by
plaintiffs' firms at the time of the audits had an average
failure rate of 63 percent. Nine had failure rates ranging from
50 percent to 70 percent, while the 10th failed 36 percent of
the time.'' \51\
---------------------------------------------------------------------------
\50\ For an account of the consequences of Judge Weinstein's
actions, see Brickman, Aggregative Litigation, supra note 43, pp. 290-
93.
\51\ Parloff, Mass Tort Medicine Men, supra note 49.
---------------------------------------------------------------------------
In a forthcoming law-review article, Professor Brickman
also provides a detailed description of the operations of the
testing enterprises that conduct mass screenings on behalf of
asbestos plaintiffs firms. These businesses often are full-
service providers: they recruit workers for screenings, conduct
pulmonary-function tests, and make, develop, and read chest x-
rays. These businesses find workers for screenings through
labor unions, or sometimes by direct mail and mass
advertisements. The article describes several enterprises that
were started by individuals with no medical background--or any
substantial education of any sort. These screening companies
include: a company that produced test results in exchange for a
25% contingency fee from the lawyer using the result; a company
that screened eight persons per hour; another company that
charged lawyers $775 for a positive result, but only $175 for a
negative result; a screening company that allowed plaintiffs
attorneys to determine what predicted values should be employed
in pulmonary function tests; and a screening-company owner who
testified that test subjects openly discussed during pulmonary-
function tests how failing to fully exhale would ``earn'' them
a settlement check.\52\
---------------------------------------------------------------------------
\52\ Brickman, Pepperdine Symposium, supra note 5 (citing
Deposition of Charles Lewis in In Re: Asbestos Cases (ACR XXIII
Asbestos Cases), No. 89-2-18455-9-SEA, Superior Court, King County,
Washington at 14, 29, 159 (Sept. 12, 2002); Deposition of Lloyd Criss
in DeForest et al. v. American Optical, et al., Dist. Ct., Brazoria
County, Tx. (Dec. 10, 2002); Deposition of Charles Foster, in Morehouse
v. North American Refractories Co., et. al., Circuit Court, Mobile Cty,
Ala. (Aug 6, 2002); Deposition of Dr. Jose E. Roman-Candelaria, in
Koontz and Koontz v. AC&S, Inc., et. al., Superior Ct., Marion Cty.,
Ind., Cause No. 49D02-9601-MI-0001-668 (Oct. 11, 2002); Deposition of
Guy Wayne Foster, American Medical Testing, Inc., in Bentley v. Crane
Co., Civ. Action No. 11-2064, Circuit Ct., Jasper Cty, Miss. (Dec. 12,
2001).) See also id. (quoting Andrew Schneider, Asbestos Lawsuits Anger
Critics, St. Louis Post-Dispatch, February 9, 2003, at A1).
---------------------------------------------------------------------------
Professor Brickman estimates that the number of workers who
have undergone attorney-sponsored asbestos screenings since the
mid-1980s exceeds 1,000,000 and may approach 2,000,000. He also
concludes, based on the evidence that he has collected, that
these screeningcompanies identify positive evidence of
asbestos-related disease in at least 40% and sometimes as many as 85%
of the workers that they screen.\53\
---------------------------------------------------------------------------
\53\ Id. Professor Brickman also notes that it is exceedingly
difficult to gather evidence about the positive rates generated by
these screening companies. Although such information must be readily
available to these enterprises, company representatives and the doctors
who make the diagnoses almost uniformly have refused to provide it.
---------------------------------------------------------------------------
To sum up all that has been discussed so far, I quote
another commentator who, having reviewed evidence similar to
that described here, has come to the following concise
conclusion about the nature of asbestos litigation as it is
conducted today: ``Among ordinary people, there is a word for
this: fraud. This is a legalized fraud.'' \54\
---------------------------------------------------------------------------
\54\ Robert J. Samuelson, Asbestos Fraud, Washington Post, November
20, 2002, A25.
---------------------------------------------------------------------------

Medical Facts About Asbestos Injury

At this point, it is appropriate to examine what modern
medicine tells us about what types of injuries asbestos does
and does not cause. There has been considerable uncertainty
about this question both in this committee and in the legal
community generally. For example, one Supreme Court Justice
recently noted that ``[a]bout half of the [asbestos] suits have
involved claims for pleural thickening and plaques--the
harmfulness of which is apparently controversial.'' Amchem, 521
U.S. at 631 (Breyer, J., dissenting).
Justice Breyer, of course, is limited to considering only
those facts presented to him in the record by the parties. The
Senate is not. Thus I have asked Dr. James Crapo, who has
provided very helpful and credible testimony to this Committee,
to analyze the final committee-reported bill, and to address
several issues that have been controversial in this committee.
His letter is include as Attachment ``E'' to this statement. I
also have posed three questions to Dr. William Weiss (Emeritus
Professor of Medicine, Drexel University), Dr. Michael Goodman
(Senior Managing Scientist, Exponent Health Group), and Dr. J.
Bernard L. Gee (Emeritus Professor of Medicine, Yale University
School of Medicine). Their responses are included as
Attachments ``F,'' ``G,'' and ``H'' to this statement,
respectively.
I have selected these three doctors because they are
eminent scientists who have done extensive reviews of the
literature on asbestos and have written critical reviews that
are highly regarded in the field. It is fair to say that no one
knows more about the issues raised here than do these doctors.
The three questions posed to all of these doctors are as
follows: 1. Do pleural plaques or pleural thickening constitute
an injury or impairment? Are they a useful predictor of future
injury? 2. If an asbestos exposure was not sufficient to cause
clinically significant asbestosis, could it nevertheless have
caused lung cancer? 3. Can asbestos exposure cause colorectal
cancer, or cancer of the larynx, pharynx, esophagus, or
stomach?
Not every doctor addressed every question. The doctors'
answers are as follows:
1. Do pleural plaques or pleural thickening constitute an
injury or impairment? Are they a useful predictor of future
injury?
Dr. Gee: ``[Plaques] generally do not cause impairment of
either the lung or breathing apparatus nor cause any disease to
the worker.''
``In summary, plaques (common) as opposed to diffuse
pleural fibrosis (now rare) do not cause disease or impairment.
Neither plaques alone nor diffuse pleural fibrosis imply an
increased risk of malignancy.''
Dr. Weiss: ``Pleural plaques are an injury which generally
does not cause any impairment unless they are very extensive.
They do not predict an increased risk of lung cancer. Pleural
thickening is an injury which varies in degree and impairment
from negligible to moderate and even severe.''
Dr. Crapo: ``Changes of the pleura, such as pleural plaques
or pleural thickening, due to asbestos exposure should not be
characterized as asbestosis. These pleural changes do not
affect lung function unless they are extensive, and they do not
increase the risk of an asbestos-related lung cancer.'' (Citing
studies.)
``When compared to other individuals with similar asbestos
exposure but no pleural manifestations, patients with pleural
plaques have not been shown to be at increased risk of more
serious asbestos-related diseases.''
2. If an asbestos exposure was not sufficient to cause
clinically significant asbestosis, could it nevertheless have
caused lung cancer?
Dr. Gee: ``[A]sbestosis is clearly quantitatively the major
associate of lung cancer risk.''
``Where an asbestos exposure was not sufficient to cause
clinical asbestosis, the chances of its being the cause of or a
substantial contributing factor to lung cancer in smokers is
between small and absent. In the absence of plaques, there is
no reason to implicate asbestos in lung cancer.''
Dr. Crapo: ``From a medical perspective, the [proposed
federal] trust should not provide compensation to claimants who
have lung cancer and exposure, but who do not have asbestosis
(i.e., Malignant Levels VII and VIII). The medical literature
shows that, while lung-cancer risk increases when significant
asbestosis is present, there is no such increase in risk in
workers who are exposed to asbestos, with or without pleural
plaques, but who do not have asbestosis.''
``Prospective studies that have focused upon the question
whether exposure alone, without accompanying asbestosis, is
associated with increased lung cancer risk have found that lung
cancer risk is associated with asbestosis and not with asbestos
exposure alone.''
``In my view, medical science would support requiring
asbestosis before a significant contribution of asbestos
exposure to lung cancer risk is accepted.''
Dr. Weiss: ``No.''
Dr. Weiss cites to his own review of the literature
regarding this question, which was published in 1999.\55\ In
that review, Dr. Weiss analyzed cohort studies that provided
evidence bearing on ``the hypothesis that excess lung cancer
risk occurs only among those workers who develop asbestosis.''
---------------------------------------------------------------------------
\55\ Weiss, W: Asbestosis: A Marker for the Increased Risk of Lung
Cancer Among Workers Exposed to Asbestos. Chest 115:536-549, 1999.
---------------------------------------------------------------------------
Dr. Weiss' review concluded that:

Only a few cohort studies have addressed directly the
issue of asbestosis as a marker for increased lung
cancer among workers exposed to asbestos. What evidence
exists supports the hypothesis that asbestosis is such
a marker as reviewed in the first section above.
Additional circumstantial evidence has been described
in subsequent sections: (1) there is no excess risk of
lung cancer in cohorts with no deaths from asbestosis;
(2) workers with pleural plaques but no asbestosis have
no increased risk of lung cancer in well-designed
studies; and (3) the association between asbestosis and
excess lung cancer rates is much stronger than the
association between cumulative asbestos exposure and
the relative risk of lung cancer.
The literature also contributes support for the
hypothesis in two other lines of investigation: animal
research and epidemiological studies of lung cancer
risk in other diseases characterized by diffuse
pulmonary fibrosis.\56\
---------------------------------------------------------------------------
\56\ Id. at 546.

3. Can asbestos exposure cause colorectal cancer, or cancer
of the larynx, pharynx, esophagus, or stomach?
Dr. Crapo: ``Compensation by the FAIR Act for forms of
cancer other than lung cancer and mesothelioma is not justified
by current medical science. While the evidence suggests an
association between asbestos and laryngeal carcinoma, no other
form of cancer is clearly associated with asbestos exposure.
Moreover, the suggested association between asbestos exposure
and laryngeal cancer is suspect because of the absence of a
dose-response relationship.''
``While it is accepted that exposure to asbestos is
associated with mesothelioma and lung cancer, there is no
persuasive scientific evidence of meaningful association with
cancer at other sites.''
Discussing Dr. Goodman's study, Dr. Crapo notes that
``[b]esides lung cancer and mesothelioma, the only other cancer
for which a possible association exists is laryngeal cancer,
where the meta-analysis showed an SMR with latency of 1.57. (An
SMR of 1.0 would indicate an absence of any increased risk,
while an SMR of 2.0 would indicate a doubling of the risk.)
However, variance in the studies relating to laryngeal cancer
was so large that the possibility of no increased risk could
not be excluded, and there was no evidence of a dose-response
effect, raising serious question as to whether cancer of the
larynx has a true correlation with asbestos exposure.''
Dr. Weiss: ``For colorectal cancer the evidence indicates
no causality between asbestos and colorectal cancer. I have not
reviewed the studies on cancers of the larynx, pharynx,
esophagus, or stomach so I will not comment on these.''
Dr. Gee: With regard to cancer of the larynx and pharynx:
``The confounding factors previously mentioned, namely smoking
and alcohol, remain major often-unadjusted factors in these
diseases. * * * We reviewed 24 prospective and 17 retrospective
studies out of which only three or four showed any excess risk.
We concluded that asbestos exposure does not cause these
cancers, as did Liddell reporting for the U.K. health
authorities.''
With regard to esophageal cancer: ``[T]here is no evidence
relating them to asbestos.''
With regard to kidney cancer, Dr. Gee quotes an analysis
summarizing both published data and data from additional
inquiries: ``this analysis pointed toward a lack of an
association between asbestos exposure and renal cancer.''
Discussing Dr. Goodman's study, Dr. Gee concludes that it
``noted an overall excess laryngeal cancer risk rate that was
about 1.6 but there was no dose response, no correlation with
increasing mesothelioma rates and importantly, no adjustment in
the original cohort data for the confounding effects of
smoking, alcohol or their combination. Thus, this value of 1.6
is suspect and the absence of a dose response with asbestos
exposure suggests alternative factors cause these cancers.
Other data show a correlation between the lung and laryngeal
cancer rates that is most likely due to a common smoking
origin.''
Dr. Goodman: He notes that his 1999 study, Cancer in
Asbestos-Exposed Occupational Cohorts: A Meta-Analysis,\57\
``confirmed a causal link between asbestos exposure and lung
cancer.''
---------------------------------------------------------------------------
\57\ Cancer Causes and Control 10:453-465, 1999.
---------------------------------------------------------------------------
``Data for urinary cancers (bladder, kidney, prostate),
gastrointestinal cancers (esophagus, stomach, colon, rectum)
and lymphohematopoietic cancers (lymphoma, myeloma, leukemia)
failed to demonstrate a consistent statistically significant
increase in risk. Analysis for laryngeal cancer was suggestive
of a causal association, but not as conclusive as the analysis
for lung cancer.''
``With respect to most cancers, the latency period is
typically 20 years or more. For this reason, studies that
examine latency are considered more reliable and a true causal
relationship is expected to become more evident after latency
is taken into account. We re-analyzed the data by including
only studies that took into consideration latency of at least
10 years. The results for lung cancer showed further elevation
in risk, the risk of laryngeal cancer was somewhat higher, but
was no longer statistically significant, while the risks of
other cancers either decreased or remained essentially
unchanged.''
``Another set of analyses in our study examined the
exposure-response relationship between asbestos and cancer. If
the risk of disease increases with increasing level of
exposure, the relationship is more likely to be causal. * * *
Our analyses demonstrated that lung cancer risk was strongly
associated with and statistically significantly related to the
proportionate mesothelioma mortality. However, this observation
did not hold true for other cancers including laryngeal cancer
and thus, did not support the causal association between
asbestos exposure and other cancer sites.''
``It is important to point out that our meta-analysis is
not the only publication reviewing the scientific evidence on
the association between asbestos exposure and malignancies
other than mesothelioma and lung cancer. For example, a 2000
article by Browne and Gee entitled, `Asbestos Exposure and
Laryngeal Cancer' concluded that the available evidence does
not support the contention that asbestos causes laryngeal
carcinoma. According to the authors of this article, their
review is in agreement with five or six other reviews of this
topic published since 1985. Similarly, a 1994 article entitled
`Asbestos and Colon Cancer: A Weight-of-the-Evidence Review' by
J. Gamble concluded that asbestos exposure, `does not appear to
increase the risk of colon cancer.' ''
``In summary, the epidemiological literature on balance
does not support a causal association between asbestos exposure
and the development of cancers other than mesothelioma and lung
cancer.''
4. The Medical Criteria Employed by the Committee-Reported
Bill.
The information provided by these doctors casts doubt on
this bill's standards for identifying asbestos injury. To all
three of the questions discussed above, the doctors
overwhelmingly answer ``no.'' But the committee-reported bill
appears to assume that the answer to each questions is ``yes,''
or at least ``maybe.''
First, the bill assumes that pleural plaques are meaningful
indicia of injury. As Dr. Crapo notes:

The x-ray findings required for compensation in Non-
Malignant Levels III, IV, and V are generous. In the
first place, it is possible to recover in each of these
categories with an x-ray indicating pleural plaques or
diffuse pleural thickening that register B2 on the ILO
scale. It is rare, however, that people with only
pleural conditions of this kind will have a genuine
impairment.\58\
---------------------------------------------------------------------------
\58\ Infra at Attachment ``E.''

Second, the bill assumes that lung cancer can be attributed
to asbestos even in the absence of clinically significant
asbestosis. Again, Dr. Crapo notes: ``From a medical
perspective, the [proposed federal] trust should not provide
compensation to claimants who have lung cancer and exposure,
but who do not have asbestosis (i.e., Malignant Levels VII and
VIII).''
Dr. Crapo goes on to warn that the bill's ``Malignant
Levels VII and VIII will allow a significant number of people
to qualify for compensation who do not in fact have a lung
cancer caused by asbestos exposure. In other words, there will
be a substantial number of `false positives.' ''
Finally, the committee-reported bill assumes that other
cancers--including colorectal cancer--are caused by asbestos.
Dr. Crapo bluntly notes that ``[c]ompensation by the FAIR Act
for forms of cancer other than lung cancer and mesothelioma is
not justified by current medical science.'' He goes on to state
that ``[i]n my view there is a danger that the limited
resources of the Fund will be diverted to paying the claims of
people with `other cancers,' many of which are quite common and
could give rise to numerous claims in a no-fault system.''
The committee-reported bill's inclusion of colorectal
cancer is particularly disappointing. The original bill did not
include this cancer. Indeed, during the introductory hearing on
the bill, Dr. Crapo praised this omission, and specifically
warned against awarding compensation for colorectal cancer. He
noted that ``[a]ccording to the National Cancer Institute,
there are 147,500 colo-rectal cancers each year. To allow
recovery based on nothing more than plaques and the requisite
exposure could expose the Trust to considerable, unpredictable
liabilities in future years.''
Dr. Crapo also noted that including colorectal cancer
``would be ironic, since asbestos litigation as it is today
involves few `other cancer' cases, presumably because of the
difficulties of proof. There is a danger that the medical
criteria in the bill would open the door to many more claims of
this kind than are currently seen.''
In other words, attributing ``other cancers'' to asbestos
exposure is an argument that even the tort system does not
accept. But it is an argument accepted by this bill.
It was to be expected that this committee would give
claimants the benefit of the medical doubt when developing a
national trust fund that will bar access to the tort system. It
was not to be expected that the committee would also cast aside
the overwhelming conclusions of the last thirty years of
medical research.\59\
---------------------------------------------------------------------------
\59\ As for why this committee even began with a bill that
compensates any ``other cancers''-- despite the clear weight of the
medical evidence that none of these cancers is caused by asbestos
exposure--the explanation is simple: the existing bankruptcy trusts,
particularly Manville, are a natural political default for designing a
national trust fund, and most of those trusts--including Manville--
compensate claimants for ``other cancer.'' See White, supra note 1, at
1324-26 & n. 25. The explanation for why these trusts make awards for
``other cancers'' and other medically unsupportable claims is even
simpler: ``[b]ecause an asbestos firm's bankruptcy reorganization plan
must be approved by at least 75% of claimants, the [firm] managers'
[bankruptcy] decision * * * depends on whether more than or less than
75% of claims are fraudulent, i.e., whether the critical voter on the
reorganization plan is a fraudulent or a valid claimant.'' Id. at 1339.
Those who contend that asbestos exposure causes stomach or colon
cancer usually rely on studies published in the mid-1960s by Irving
Selikoff. Though all subsequent studies were unable to confirm his
results, Selikoff dominated the field of occupational medicine during
his lifetime, and frequently participated in litigation as an expert
witness on behalf of plaintiffs. Any marginal deference due from this
committee to Selikoff's findings certainly is further diminished by the
fact that, as one scholar recently has noted, ``in terms of medical
education and qualification, Selikoff was a fraud.'' P.W.J. Bartrip,
Irving John Selikoff and the Strange Case of the Missing Medical
Degrees, Journal of The History of Medicine and Allied Science 28, Vol.
58 (2003). The author discovered that Selikoff lacked the medical
degree that he had always represented himself as having--though he did
have a PhD, earned in one year, from ``an unaccredited school of
appalling quality on the verge of collapse.'' Id. at 22. The author
concludes that ``[i]f Selikoff's evasions had been uncovered [during
his lifetime], his credibility would almost certainly have been
destroyed.'' Id. at 31-32.
---------------------------------------------------------------------------
One potential consequence of this committee's inclusion in
the trust fund of ``other cancers'' and other unjustified
compensation categories is described in a letter received by
Senator Sessions from Dr. E.B. Ilgren.\60\ Dr. Ilgren agrees
with all of the conclusions reached by the doctors whose
opinions are described above. He concurs that: ``[t]he medical
literature provides very strong evidence that asbestos does not
cause or enhance an individual's risk for cancer aside from
mesothelioma and lung cancer,'' and that ``[t]here is no reason
to include pleural plaques amongst the medical criteria of
attributable changes that deserve compensation. Pleural plaques
do not portend future malignancy.'' He additionally notes that
an ILO score of 1/0--one of the criteria that the bill relies
on as evidence of asbestosis--is also consistent with long-
term, heavy smoking.
---------------------------------------------------------------------------
\60\ This letter is included as Attachment ``I'' to this statement.
---------------------------------------------------------------------------
Dr. Ilgren also notes, however, that ``[i]nclusion of
pleuro-pulmonary malignancies in the medical criteria
potentially undermines present day evidentiary standards.''
Stated otherwise, this committee is setting a very bad
precedent. Dr. Ilgren also points out--in the spirit of
Jonathan Swift--that inclusion of these criteria argues for
inclusion of numerous other premalignant conditions for
numerous other cancers as well.\61\
---------------------------------------------------------------------------
\61\ See infra at Attachment ``I.''
---------------------------------------------------------------------------

Some Suggestions to a Coordinate Branch of Government

Over the course of this committee's consideration of this
bill, Senators have heard from a large number of manufacturers,
doctors, insurance carriers, union officials, and even trial
lawyers about their stake in this matter. Each of these groups
is divided into subgroups, which often have conflicting
interests. Plaintiffs lawyers are divided between those who
primarily represent cancer victims--and want strict medical
limits placed on asbestos claims, in order to preserve funds
for their clients--and those who pursue large numbers of
manufactured claims, and who oppose any limits on the tort
system. Business is divided between those facing massive
asbestos liability (and possibly bankruptcy), who want a bill
at any cost, and those who only will support legislation within
certain limits. Each of these groups has its own story to tell.
Members of this committee have been presented with a vast
amount of information about asbestos litigation. We have heard
numerous accounts, many of them first hand, about how these
lawsuits are conducted. From all these accounts, certain
patterns emerge, and certain aspects of the asbestos-litigation
crisis come into relief. Two matters call out for the
judiciary's attention.
First, it is apparent that the truth-seeking function of a
trial is completely undermined when courts allow illegitimate
expert testimony to be presented to a jury. As a matter of
federal due process, all unreliable expert testimony should be
excluded from the courtroom.
Asbestos lawsuits repeatedly have confirmed the finds of
Milgram's experiment: that most people will believe what an
expert tells them. When an expert testifies about scientific or
technological facts, we believe what he says, not because of
his credentials, or because we think ourselves obligated to do
so, but because we believe that he has access to the truth. We
believe that the expert is revealing to us a part of that
truth. We are aware that we do not know as much as the expert
does, and so we defer to him.
Before an expert is allowed to exercise this power over a
jury, the courts must be certain that he is, in fact,
presenting the truth. The expert's power over the jury is not
diminished when he presents inaccurate information. Rather, it
is the trial itself that is compromised.\62\
---------------------------------------------------------------------------
\62\ The Judiciary Committee encountered this very phenomenon
during the first day of its executive consideration of this bill. In
response to a question from a member of the committee, Dr. Laura Welch,
a medical doctor affiliated with The Center to Protect Workers' Rights,
stated that in her ``opinion, there are epidemiologic studies that show
that substantial exposure to asbestos raises the risk of colon
cancer.'' This opinion easily could have been persuasive to committee
members had Dr. Crapo not been present to respond. He explained:
``There is really only one cohort or study that has really
significantly shown an association [of asbestos exposure] with
colorectal cancer. It was an early one done. The problem with that
cohort was that--and it was Selikoff's cohort of insulators--they had
an 80 percent smoking incidence in that cohort, and the controls [the
study] used to predict the rate of colorectal cancer in the group came
from normal American males that had about a 40 to 50 percent smoking
rate, and smoking is a major cause of colorectal cancer. So you can
raise some concerns of, did they have the right control number when
they estimated the increased rate? That epidemiological study has been
redone in a total of 14 cohorts, and when you do a meta-analysis, which
means [you] take all the cohorts, all the work that has been done on
[the subject] * * * and say, is there an increased risk?, the answer is
absolutely no. The SMR for that is 1.03, where no risk is 1.00. An
elevated risk would be 2 or something. So you are talking about a
profound amount of studies that say there is no increased risk if you
properly control for smoking. And I would further add that if you go to
most major medical textbooks under asbestosis and cancers and look it
up, they will say colorectal [cancer] is not associated [with asbestos
exposure].'' See also infra, Attachments ``E,'' ``F,'' ``G,'' ``H,''
and ``I.''
---------------------------------------------------------------------------
Had all courts been required to exclude expert testimony
that has not been tested for validity and relevance, the
asbestos-litigation crisis probably never would have become a
crisis.\63\ The pleural plaques-phase of the litigation, which
dominated the mid-1990s, never would have occurred. The clear
weight of the medical evidence indicates that pleural plaques
are not substantial evidence of either present harm or the
threat of future harm. No expert evidence to the contrary
should be admissible in an American court. Nor, were invalid
expert testimony excluded from the courtroom, would law firms
be able to employ slipshod medical diagnoses to identify
asbestosis.
---------------------------------------------------------------------------
\63\ See Patrick M. Hanlon, Asbestos Legislation, SH043, ALI-ABA
Course of Study Materials (Sept. 2002) (``Only a few thousand cancer
cases are filed each year. If the judicial system merely had to resolve
those cases, there would be no asbestos litigation crisis''). See also
id. (``Most defendants, including many of those who have filed for
bankruptcy, could manage the problem of compensating cancer victims and
people with serious asbestosis. Compensating hundreds of thousands of
people who have no breathing impairment whatever is a task not many
companies can handle''). See also infra Attachment ``I'' (describing
unsound medical theories employed in asbestos litigation) (Letter of
Dr. Ilgren).
---------------------------------------------------------------------------
Second, it is apparent that for many defendants, going to
trial ceases to be an option when unrestricted intangible
damages are threatened. By ``intangible damages,'' I refer to
punitive damages, pain and suffering, and all other damages
that are not based on a measurable harm and that are
potentially unlimited in amount.\64\
---------------------------------------------------------------------------
\64\ Common sense and practical experience suggest that these types
of damages are interchangeable--where a jury can award one kind, it
generally can find ways to award other kinds as well. See, e.g. Adam
Liptak, Pain-and-Suffering Awards Let Juries Avoid New Limits, The New
York Times, October 28, 2002, at A14 (noting that ``[a]s all sorts of
limitations have recently been placed on punitive damages, creative
lawyers have shifted their attention to pain and suffering, a little-
scrutinized form of compensation for psychic harm''). See also Parloff,
The $200 Million Miscarriage of Justice, supra note 4 (describing
Mississippi jury award of $150 million in ``compensatory''--not
punitive--damages to six asbestos plaintiffs with no injury or
impairment).
---------------------------------------------------------------------------
These types of damages (particularly punitive damages) are
at war with the principles and structure of the civil
trial.\65\ The civil-justice system tolerates low standards of
proof because it does not create or impose harm. Rather, it
evaluates existing harms and determines which party most
appropriately bears their costs. The civil-justice standard of
proof is thus proportionate to the potential of compensatory
liability. Because the harm at issue exists regardless of
whether the court acts, it is appropriate to ask simply who,
more likely than not, should bear the cost of that harm.
---------------------------------------------------------------------------
\65\ See also Thomas H. Dupree, Jr. & Theodore J. Boutrous, Jr.,
Successfully Challenging Punitive Damage Awards: Winning Strategies
After State Farm v. Campbell, National Legal Center for the Public
Interest (forthcoming 2003) (noting that punitive damages ``do not
serve a compensatory function, nor are they awarded with the
protections of the criminal justice system'').
---------------------------------------------------------------------------
But when unlimited intangible damages are permitted, the
civil-justice system's low standard of proof becomes an
invitation to abuse. Now the court creates new harms--and
imposes them despite reasonable doubt about the facts. And,
unlike even in the criminal justice system, the potential
liability is unknowable. In the classes of cases where punitive
damages often are awarded, the defendant, in every case, risks
putting his entire business at stake.\66\ Given the
uncertainties of a jury trial, the typical defendant will not
take this risk, even if he believes that he can show that he is
not liable.
---------------------------------------------------------------------------
\66\ Just four months ago, for example, a Madison County, Illinois
jury awarded an individual asbestos plaintiff $250 million--an amount
that certainly would threaten the viability of most businesses. See
Alex Berenson, 2 Large Verdicts in New Asbestos Cases, The New York
Times, April 1, 2002, at C4. For a discussion of punitive damages'
predominance in particular classes of cases, see Erik K. Moller et al.,
Punitive Damages in Financial Injury Verdicts, 28 J. Legal Stud. 283,
304 (finding, based on review of financial-injury cases in five large
jurisdictions, that ``[u]niformly, punitive damages represent a large
portion of the total damages awarded * * * : from 43 percent of all
damages in other contract verdicts to over 70 percent of all damages in
insurance verdicts''). For data regarding the frequency with which
punitive damages are awarded in particular classes of cases, see Erik
K. Moller, Trends in Civil Jury Verdicts Since 1985 54 Table A.9 (RAND
1996) (indicating that in some types of litigation, punitive damages
are awarded in over a quarter of cases).
---------------------------------------------------------------------------
This clearly is what occurs in much asbestos litigation.
The threat of massive intangible damages has vastly magnified
the bargaining power of the plaintiffs firms. As a direct
consequence, these firms are now able to impose coercive
settlements. In exchange for settling its few legitimate
claims, a large-inventory firm can demand that defendants also
settle thousands of manufactured claims involving no credible
evidence of impairment.\67\ Even large defendants are afraid
(with reason) to go before a jury even on a small number of
claims.
---------------------------------------------------------------------------
\67\ For examples of this phenomenon, see Parloff, $200 Billion
Miscarriage of Justice, supra note 4 (discussing bouquet trials and
David Cosey litigation).
---------------------------------------------------------------------------
The Supreme Court recently again has held that the federal
guarantee of due process places limits on the amount of a
punitive-damage award.\68\ Once again, however, the court's
analysis is restricted to formal punitive damages--it ignores
other types of punitive-in-all-but-name intangible damages that
have grown to massive size in recent years. Moreover, once
again, the Court has ``eschew[ed] a bright-line limit'' even
for punitive awards.\69\ As commentators have noted, this
ambiguity already has been exploited by some courts.\70\
---------------------------------------------------------------------------
\68\ See State Farm v. Campbell, 123 S.Ct. 1513 (2003).
\69\ Dupree & Boutrous, supra note 65.
\70\ See id. (discussing Trinity Evangelical Lutheran Church v.
Tower Ins. Co., No. 01-1201, 2003 WL 21205367 (Wis. May 23, 2003), and
TVT Records v. The Island Def Jam Music Group, 257 F. Supp. 2d 737
(S.D.N.Y. 2003)).
---------------------------------------------------------------------------
The federal high court should restrict intangible-damage
awards to the value of transactions costs--i.e., to the amount
of a reasonable attorneys fee. And, where additional damages
are authorized by statute, they should be limited to a small
multiple of concrete, calculable damages.
Some jurists have taken the view that because exemplary
damages were allowed at the time that the Fifth and Fourteenth
Amendments were adopted, the due-process guarantee places no
limits on such awards today. It thus bears emphasis that truly
massive intangible-damage awards are a creature only of the
last thirty years. As one commentator has noted, for example,
the largest reported punitive-damage award upheld on appeal in
California before 1960 was $10,000.\71\ The size of awards
allowed at common law was relatively small--in fact, comparable
to the limits suggested here. The due-process clauses guarantee
no ``right'' to these types of awards, unless one takes the
view that our Constitution acquired its current meaning in the
1970s.
---------------------------------------------------------------------------
\71\ Written Statement of Theodore B. Olson Concerning Civil
Justice Reform, Before the U.S. Senate Subcommittee on Consumer
Affairs, Foreign Commerce, and Tourism of the Committee on Commerce,
Science, and Transportation, 1995 WL 152026 (April 4, 1995). See also
id. (describing recent decade's exponential growth in size of Alabama
and Texas punitive-damages awards); Dupree & Boutrous, supra note 65
(describing Kentucky Supreme Court's recent approval of a punitive-
damages award ``more than twice as large as the aggregate of all
punitive verdicts approved on appeal in Kentucky history'') (emphasis
in original).
---------------------------------------------------------------------------
For intangible damages--as for asbestos--it is the dose
that makes the poison. The massive awards permitted today
overwhelm the civil-justice system and frustrate its truth-
seeking function. Unless these awards are cabined within their
historical limits, all other process guaranteed to those who
are sued becomes illusory.
To conclude, I think that it is fair to say that asbestos
litigation has warped the American civil-justice system. The
courts have been used to commit abuses that one would not have
thought possible in America. Congress may yet enact this bill,
and put an end to asbestos lawsuits. Even if Congress does so,
however, the asbestos model of litigation is now too well-
practiced to permit hope that it will not reappear in some
other form. The problems described here are ones that we will
confront again in the coming years.

Jon Kyl.

ATTACHMENT A

Kazan, McClain, Edises, Abrams,
Fernandez, Lyons, & Farrise,
July 23, 2002.
Hon. Jack B. Weinstein,
U.S. District Court--EDNY,
Brooklyn, NY.
Hon. Burton Lifland,
U.S. Bankruptcy Court--Southern District,
New York, NY.
Re In Re Johns-Manville Corp., et al., Case Nos. 82 B11656 (BRL)
through 82 B11676 (BRL), Inclusive, NYAL Index No. 4000.
Bernadine K. Findley, et al. v. Leslie Gordon Fagen, et al.,
E.D.N.Y. 90 CV 9373 (JBW), NYAL Index No. 4000.
Dear Judge Weinstein and Judge Lifland: I had the privilege
of attending the hearing held in your court on December 13,
2001, and the even greater pleasure of being asked to comment
following the presentations by the Manville Trust, the Futures
Representative, and counsel for the SCB. At the conclusion of
those proceedings, you asked the Trust to meet and confer with
Mr. Fagen and the SCB and report back in 30 days. I understand
that you gave them at least one additional extension. Although
we have heard various rumors about progress in those
discussions from time to time, nothing very specific has
surfaced.
Seven and a half months have gone by. Nothing has changed.
The Trust has received some 40,000 additional cases. Last week,
I co-chaired Mealey's ``Wall Street Forum: Asbestos'' seminar
at which Mr. Austern presented some information. He reported
that 90% of the Trust's last 200,000 claims have come from
attorney-sponsored x-ray screening programs, that 91% of all
claims allege only non-malignant asbestos ``disease,'' and that
these cases currently receive 76% of all Trust funds.
In my submission for the December hearing, titled
``Memorandum by Interested Attorney,'' I made my own
suggestions as to an appropriate revision of the disease matrix
value system and also proposed as an alternative that the court
consider taking steps to implement a useful and legitimate
medical screening program.
I do not write to point fingers at anyone, for I have no
idea why nothing seems to have been accomplished to date, but
simply to suggest with all respect that the time has come for
your Honors to exercise the powers of the Chancellor and take
whatever steps you think appropriate to fix this problem.
Nothing you can do can make things worse; any changes you make
can only be an improvement of the current intolerable
situation.
Respectfully,
Steven Kazan.

ADDITIONAL VIEWS OF SENATORS FEINSTEIN AND KOHL

We write separate views on S. 1125, the FAIR Act, to
clarify certain amendments passed in Committee and to highlight
our priorities as the legislation proceeds to the Senate Floor.
The legislation passed out of Committee reflects a substantial
improvement over the FAIR Act as introduced. But we strongly
believe that additional changes are necessary before the bill
is ready for final passage.
Without question, our State and Federal courts face an
asbestos litigation crisis. An estimated 18.8 million U.S.
workers were exposed to high levels of asbestos from 1940
through 1979. Claims resulting from related cancers and other
ailments are expected to cost up to $210 billion. More than
500,000 cases have been brought in the past 20 years, targeting
8,400 companies. The court dockets are simply clogged with
claims. As a result, the sickest victims must wait years before
their claims are resolved and dozens of companies are filing
for bankruptcy due to the overwhelming cost of lawsuits. The
enormity of this crisis calls for a national solution.
We support the concept of a comprehensive, no-fault
national trust. However, any Trust Fund created by Congress
must be fiscally responsible, establish fair compensation for
asbestos victims, and provide certainty for all. We supported
amendments in Committee to accomplish these goals, and many of
those amendments passed. But there is more to be done.
Financial Risk Amendment
The Feinstein-Kohl contingent call amendment passed by the
Committee provides an important financial reserve in case of
unexpected contingencies. As introduced, the FAIR Act provided
no mechanism to raise additional funds from defendant companies
or insurers if claims outstripped the resources of the Trust
Fund. Our amendment addresses this deficiency and is explained
below.
S. 1125 separates contributions from defendant companies
into eight time periods stretched over 27 years. Each time
period has an annual aggregate amount that applies to defendant
company contributions. For example, years one through five
total $2.5 billion a year to be paid by defendant companies. In
subsequent time periods, the annual aggregate number is reduced
according to scheduled step-downs.
Our amendment would require that these reductions only be
allowed if the Administrator can certify that the Trust Fund
has paid and will continue to fully pay the compensation awards
afforded to asbestos claimants.
Specifically, the Administrator must consult with experts
in determining whether or not to certify a reduction. A
contributor to the Trust Fund (defendant company or insurer) is
allowed an opportunity to comment and offer additional
information to support a determination that additional
contributions are not necessary and hence, a reduction is in
order.
Denying a reduction in one time period does not restrict
the Administrator from allowing a reduction in the future to
the value allotted that future time period. Furthermore, the
Administrator is allowed flexibility to partially limit a
reduction so long as the contributions will be sufficient to
meet current and future claims.
Our amendment is not a one-way street. It would permit the
Administrator to reduce the aggregate contribution levels and
give defendants a credit if the defendants were denied
deductions in earlier time periods. These credits would not
exceed the amount of extra payments received earlier.
Under the FAIR Act as reported out by the Committee,
insurance company contributions will be determined by the
Asbestos Insurers Commission, but shall equal the total amount
($52 billion) paid by the defendant companies. For the purposes
of our amendment, the insurance companies will be liable for
the same amount for any contingent funding assessed upon
defendant companies.
Our amendment also offers a solution to the back-end
problem. Namely, we need to address the possibility that the
Trust Fund will require additional dollars beyond the initial
27 year period. Our amendment permits continued contributions
past year 27 if the Administrator finds that more funds are
needed to cover claims. We do not require companies and
insurers to pay this further obligation. If they choose, they
can return to the tort system. Working with Senator Hatch, we
agreed that this return to the tort system be the federal court
system. Alternatively, companies and insurers can maintain
their immunity by making payments into the Trust Fund. The
choice is theirs to make based on each company's or insurer's
self-interests.
There must be a check to ensure that we aren't giving
defendant companies and insurers a break on their contributions
if we aren't able to guarantee a full compensation award
allowed for by the Trust Fund. The amendment is a common-sense
approach that provides accountability that asbestos victims are
fairly and fully compensated per the law. Furthermore, this
amendment still provides a measure of certainty for the
companies of what their total contribution could be, even if it
is higher than what the bill allows for now. We are pleased
that Chairman Hatch worked with us to include this amendment
which we feel greatly improves the FAIR Act.
Ban on Asbestos Products
The legislation reported out of Committee includes an
amendment we drafted with Senator Hatch banning the production,
manufacture and distribution of asbestos-containing products.
We believe this amendment is a crucial component of any
comprehensive bill. Any resolution to the asbestos litigation
crisis should also end the tragic legacy of disease and death
that exposure to asbestos has wrought. We must minimize the
creation of new asbestos victims by banning the use of this
dangerous mineral in this country. The Judiciary Committee has
become very familiar with the tremendous long-term human
health, environmental and economic costs of reliance on
asbestos. It makes no sense to develop a complex plan for
mitigating these costs while still allowing this harmful
substance to be used in workplaces across America.
The asbestos ban amendment included in S. 1125 builds off
of the asbestos phase-out and ban regulations that the
Environmental Protection Agency (EPA) finalized in 1989 and
that would have taken full effect by 1997. Unfortunately, the
5th Circuit Courtof Appeals overturned these rules in 1991 and
this decision was not appealed to the U.S. Supreme Court. The asbestos
ban amendment also draws from Senator Murray's Ban Asbestos in America
Act, S. 1115. The language requires the EPA within two years to
finalize rules banning the manufacture, processing and distribution in
commerce of asbestos containing products. The ban also applies to the
importation of asbestos containing products from other countries. Prior
to finalizing these rules, the EPA shall be required to conduct a study
to determine whether certain roofing products should remain exempt from
the ban. It is worth noting that in 1989, the EPA chose not to exempt
this product category from its ban; however, in the spirit of
compromise we agreed to defer this decision to EPA's expertise.
However, we must stress the importance of EPA conducting this study
prior to finalization of the asbestos ban.

Fair Claims Values

As the bill goes forward, the legislation must ensure fair
claims values. Senators Feinstein and Graham passed an
amendment in Committee that substantially increases the award
values for claims under the Trust Fund. Through these increased
award values, the amendment would direct an estimated $11
billion additional dollars to victims (from $96.2 to $107.8
billion).
The new claims values increase compensation for the more
serious diseases. For example, under the Feinstein-Graham
amendment, compensation for pleural disease rose from $60,000
to $75,000, Compensation for disabling asbestos went up from
$600,000 to $750,000; and the maximum compensation for non-
smoking lung cancer victims went up sharply. Lung cancer
victims with 15 years of exposure can now get maximum awards of
$600,000 (instead of $100,000). Those with pleural disease or
disabling asbestosis can get maximum awards of $1,000,000.
After adoption of the claims awards amendment, Senators
Leahy and Kohl proposed another amendment to truly fund the
FAIR Act at its purported $108 billion level. The Leahy-Kohl
amendment provides an additional $14 billion of mandatory
contributions--$7 billion each from defendant companies and
insurers--and eliminates an ill-defined section that sought to
raise $14 billion from companies that had less than $1 million
in asbestos-related litigation expenses. We concur with the
minority views of Senator Leahy that it is both the intention
and the effect of this amendment that the contingent funding
mechanism established by the Kohl-Feinstein amendment--and the
amount of additional dollars available under that mechanism--
remain unchanged.

Transition to Trust Fund

We remain very concerned about the adequacy of the bill's
provisions regarding the transition of the 294,000 pending
asbestos lawsuits into the Trust Fund. The Committee took one
step forward by adopting the Feinstein amendment that delays
implementation of the tort preemption provisions of the bill
until the Trust Fund is fully operational and processing
claims. As the bill was originally drafted, pending claims were
barred from the court system upon the date of enactment. This
preemption would have deprived mesothelioma patients and other
victims any legal remedy while the Trust Fund was being set up.
Since individuals with mesothelioma typically live for only a
matter of months after diagnosis, the bill as introduced would
have essentially denied them any remedy while they were alive.
Under the bill as amended, individuals with asbestos-related
diseases will maintain their legal rights during the transition
period.
The bill still has not fully addressed issues raised by
final settlements. During Committee mark-up, Senator Feinstein
offered language that would exempt from the Trust Fund
settlements that were valid under state law as well as claims
upon which a court rendered a judgment to pay money. Senator
Feinstein withdrew her amendment after Chairman Hatch agreed
with Senators of both parties to put language excluding
settlements from the Trust Fund into the manager's package on
the Floor.
Many asbestos victims have reached settlements with
corporate defendants that are only partly paid. The
participants in these settlement agreements are counting on
these payments to support their families and pay medical bills.
Are we really going to replace a claimant's current stream of
income with a future promise to pay? In some cases, individuals
getting compensated under current settlement agreements will
get less money or even no money under the Trust Fund. Exclusion
of these settlements is necessary to preserve basic fairness
and to protect the bill against constitutional challenges.
In sum, we applaud the Chairman and Ranking Member for
their efforts in shepherding this enormously complex
legislation through Committee. However, we have more work to do
before this legislation can become law.
Dianne Feinstein.
Herb Kohl.

XI. Minority Views

----------

MINORITY VIEWS OF SENATORS LEAHY, KENNEDY, BIDEN, KOHL, FEINGOLD,
SCHUMER, DURBIN, AND EDWARDS

I. INTRODUCTION

After weeks of Committee consideration of legislation to
enact a national trust fund for victims of asbestos-related
disease, we are disappointed that the Committee failed to reach
consensus on S. 1125, the Fairness in Asbestos Injury
Resolution Act of 2003 (``FAIR Act''). We had hoped a
bipartisan dialogue over the past several months would result
in the best means for providing fair and efficient compensation
to the current victims and those yet to come, and we thank
Senators on both sides of the aisle who have been working with
us in good faith to try to achieve common ground.\93\
---------------------------------------------------------------------------
\93\ We are particularly disappointed that the majority that passed
the FAIR Act out of Committee has demanded that these minority views
must be filed less than 24 hours after the text of the amended bill was
available from legislative counsel. This has been a tremendously
difficult piece of legislation to develop, and the long and involved
mark-up in Committee included dozens of amendments and numerous
agreements to work further on a variety of provisions. While it is not
clear why the majority is forcing us to issue our views before we are
permitted to carefully read the revised bill, it is clear that it makes
no sense to do so. Nonetheless, we have drawn on the reserves of good
will and energy that have characterized our efforts throughout the work
on this legislation, and have drafted our views to the best of our
ability given the extremely limited time the revised bill has been
before us.
---------------------------------------------------------------------------
We have all learned a great deal about the harms wreaked by
asbestos exposure since Senator Leahy convened the first
hearing on the asbestos litigation crisis last September. What
we face first and foremost, as Senator Kennedy reminded the
Committee during our final markup, is an asbestos-induced
disease crisis--and the much publicized ``litigation crisis''
has arisen only because thousands of workers and their families
have suffered debilitating disease, and death, due to asbestos
exposure.
Asbestos is the most lethal substance ever widely used in
the workplace. Between 1940 and 1980, more than 27.5 million
workers in this country were exposed to asbestos on the job,
and nearly 19 million of them had high levels of exposure over
long periods of time. That exposure has irrevocably changed
many of their lives. Each year, 10,000 of these victims die
from lung cancer and other diseases caused by asbestos. Each
year, hundreds of thousands of them suffer from lung conditions
which make breathing so difficult that they cannot engage in
the routine activities of daily life. Even more have become
unemployable due to their medical condition. And, because of
the long latency period of these diseases, not only will the
damage done by asbestos continue for decades but many of the
exposed live in fear of a premature death due to asbestos-
induced disease. These are the real victims of the asbestos
nightmare and must be the first and foremost focus of our
concern.
Not only do the victims of asbestos exposure continue to
suffer, and their numbers to grow, but the businesses involved
in the litigation, along with their employees and retirees, are
suffering from the economic uncertainty created by this
litigation. More than 60 companies have filed for bankruptcy
because of their asbestos-related liabilities. As Senator Leahy
observed at the Committee's March 5, 2003, hearing on asbestos
litigation: ``These bankruptcies created a lose-lose situation.
Asbestos victims deserving fair compensation do not receive it
and bankrupt companies do not create new jobs nor invest in our
economy.''
Working with Chairman Hatch and others, we encouraged
representatives from organized labor and industry to help us
reach consensus on a national trust fund to fairly compensate
asbestos victims and to provide financial certainty for
asbestos defendants and their insurers. After much hard work,
however, we have yet to craft a complete bill to create an
effective and fair national trust fund.
A successful trust fund--which would provide fair and
adequate compensation to all victims and would bring reasonable
financial certainty to defendant companies and insurers--
includes four essential components: appropriate medical
criteria, fair award values, adequate funding, and an
efficient, expedited system for processing claims that enables
eligible claimants to obtain prompt payments without the
complications, time and expense of a traditional lawsuit. Of
course, there are many other important aspects of such a fund,
including a functional administrative system, but these four
components are the core requirements necessary to the
foundation of a fair fund.
During the first full mark-up session of the Committee on
the FAIR Act, we unanimously adopted the Leahy-Hatch amendment
on medical criteria, as well as a number of other bipartisan
amendments. We then tackled the issue of solvency and, again,
were able to make a bipartisan improvement by adopting a
proposal by Senator Feinstein, Senator Kohl and Senator Hatch.
More remains to be done on this issue, but an auspicious
beginning left us hopeful of future agreements.
That hope turned to disappointment when we next turned to
the critical issue of determining award values for victims of
asbestos-related diseases. Although the changes made to award
values in the FAIR Act as introduced constitute movement in the
right direction, the Committee did not move far enough toward
providing fair compensation to all impaired victims of asbestos
exposure. Indeed, seriously ill victims of asbestos exposure
would receive less compensation, on average, under the current
version of the FAIR Act than they would in the tort system. The
FAIR Act is not yet fair. We are extremely disappointed that
Senators from both parties have yet to reach consensus on this
fundamental aspect of a fair and effective national trust fund.
At times over the last month, we had genuine reason to
believe that the Committee might agree upon a real solution to
the asbestos crisis. We invested ourselves completely in a good
faith effort to reach consensus. But that movement toward
consensus stalled just as we addressed this fundamental issue
of whether we were truly willing to compensate asbestos victims
fairly.
Since the first hearing on this issue, we have emphasized
one bedrock principle: We cannot support a bill that gives
inadequate compensation to victims. We will not adjust fair
award values into some discounted amount just to make the final
tally come within a pre-determined, artificial limit. Senator
Leahy summed up this basic tenet during our markup of the FAIR
Act: ``We will have failed if we leave those poisoned by
asbestos without fair compensation.''
Of course, other aspects of the bill need correction and
modification. We must be certain that the administrative system
we establish is a fair, no-fault process. In our zeal to remove
cases from the tort system, we do not want to create a process
that leaves victims facing years of delay before the new system
is operational. It would be cruel to lock the doors to our
courthouses before the administrative process is ready to award
compensation to victims. And, we must determine a way to avoid
the administrative process being swamped by 300,000 claims on
the day it theoretically opens its doors, and thus delay
victims' compensation for years.
Given these serious problems, we believe that forcing the
Act through the Senate, in its present form, would prove
counterproductive, even fatal, to this legislative effort. The
near party-line vote within the Committee on this legislation
was more of a setback than a step forward. Proceeding without
consensus would open this matter to weeks of debate on the
floor, just as it has required weeks of consideration before
the Judiciary Committee. Proceeding without consensus would
likely result in numerous amendments and extended debate with
no agreement emerging at the end of the process.
We need to continue our work to achieve the common ground
needed to enact a good law. Acting together through consensus
remains, in our view, the best way to move a bill through the
legislative process and into law.

II. BIPARTISAN IMPROVEMENTS TO S. 1125

The Committee adopted more than 35 bipartisan amendments to
improve S. 1125. We thank Chairman Hatch and other members of
the Committee for working with us to achieve consensus on these
improvements to the FAIR Act.
A. Collateral Sources, Indexing Awards For Inflation, Banning Asbestos
and Other Bipartisan Agreements
During our first full mark-up of S. 1125, the Committee
adopted numerous amendments to correct some of the
unnecessarily harsh provisions in the original bill. For
example, we unanimously adopted a Hatch-Leahy amendment to
strike offsets to compensation for asbestos victims from
previous payments from disability insurance, health insurance,
Medicare, Medicaid, and death benefit programs. Left unchanged,
these offsets would have marked a dramatic change from current
law, and would have resulted in a cost shift of millions, or
perhaps billions, of dollars from defendants and their insurers
to other insurance companies, health care plans, and the
federal government.
Just as important, the use of these ``collateral sources''
in the original bill would have reduced or eliminated
compensation pledged to asbestos victims. For instance, a
mesothelioma victim, who had disability and medical insurance
and who lived more than the usual 18-month survival time, might
not receive any of the scheduled award under the original bill
because of these collateral source offsets. Senator Durbin,
Senator Feinstein, Senator Leahy and others pointed out this
flawed approach at our June 4th hearing on the FAIR Act. We
could not support reducing compensation to asbestos victims
simply because they survived, or because they had the good
fortune and foresight to purchase insurance. We are pleased
that this section of the original bill has been revised to only
offset past judgment or settlement payments for the same
asbestos-related injuries from any awards made under the
national trust fund.
That first day of consideration of S. 1125, the Committee
also adopted another bipartisan amendment authored by Senator
Leahy, Senator Kohl and Senator Hatch to index the award values
to asbestos victims for future inflation as a matter of basic
fairness in a 50-year fund.
We also announced an agreement by Senator Feinstein,
Senator Kohl, Senator Hatch and Senator Murray that would ban
the commercial manufacture, use and distribution of asbestos,
which we were all pleased to support. Though many people
believe asbestos is banned, it is in fact still commercially
used today. As the Committee and the full Senate consider
creating an alternative compensation system to address past
exposures to asbestos, it is only sensible that we also prevent
future asbestos-related illnesses from occurring by banning
asbestos use.
This bipartisan amendment directs the Environmental
Protection Agency, within two years of enactment of the FAIR
Act, to promulgate final regulations prohibiting the
manufacture, processing, or distribution in commerce of
asbestos-containing products. The provision allows affected
companies to petition for an exemption from the ban for
individual products if the product does not pose an
unreasonable health risk and if there is no safer
alternative.\94\ This ban will bring the United States into
line with the 25 other countries that have already banned
asbestos and with the European Union, which is slated to
implement a similar ban in 2005.
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\94\ In addition, roofing cements that are totally encapsulated
with asphalt are exempt, subject to an EPA review. The amended bill
would direct the EPA to review the exemption for roofing sealants
within 18 months of passage of the Act in order to determine the risks
posed by these products and whether there are reasonable alternatives.
The amendment would also give the EPA the authority to revoke the
exemption for these products based on the findings of its review. In
2001, 62% of the asbestos consumed in this country was in roofing
products. That is why it is so important to direct EPA to revisit this
question through a study within 18 months of passage of the Act and to
give EPA the authority to revoke this exemption if EPA deems it
appropriate to do so.
---------------------------------------------------------------------------
The Committee also adopted an amendment by Senator Leahy to
ensure future accountability of corporate participants in the
Fund that are sold, or otherwise change hands. The Leahy
amendment defines participants in the trust fund to include so-
called ``successors in interest'' based on the ``substantial
continuity test'' to determine whether it is fair and
appropriate to require a company to take on the obligations of
its predecessor. This amendment adopts the precedent of number
courts that have generally looked to a number of factors in
determining ``substantial continuity'': whether the new company
retains the same assets and facilities, the same employees and
supervisors, the same jobs and working conditions, the same
products and services, and the same customers and
investors.\95\
---------------------------------------------------------------------------
\95\ This ``substantial continuity'' rule has been routinely
applied in cases involving tort plaintiffs and the beneficiaries of
federal statutes, such as the NLRA (labor relations), the Family Leave
Medical Act (FMLA), CERCLA (environmental crimes), Title VII (EEOC) and
the Veterans' Readjustment Assistance Act.
---------------------------------------------------------------------------
The Committee also adopted an amendment by Senators Durbin
and Kyl, and later, a similar amendment offered by Senator
Biden, to expand and clarify the scope of the financial
hardship and inequity adjustments allowed for defendant
participants' contribution to the Fund. The Durbin-Kyl
amendment doubled the annual cap for the financial hardship
adjustment from 3% to 6% of the total annual contributions
required of all defendant participants, and likewise from 2% to
4% for inequity adjustments.
In determining who qualifies for an inequity adjustment,
the Durbin-Kyl amendment distinguishes costs incurred defending
claims that were lost or settled out of court from costs
incurred defending claims that neither resulted in an adverse
judgment against the defendant company nor settled requiring a
payment to a plaintiff by that defendant company. The amendment
mitigates the inequitable effect upon a defendant company with
an exceptionally strong record of successfully defending
asbestos claims that would be placed in a relatively high
payment tier under the legislation only because significant
defense costs were incurred in order to dispose of claims which
ultimately turned out to be without merit. The amendment also
recognizes that some corporate connections to the use of
asbestos in manufacturing may be so remote, yet the impact of
the FAIR Act may be so disproportionate that, as applied, it
might have Due Process or Takings Clause implications. The
amendment thus addresses this potential constitutional problem.
The Biden amendment permits an inequity adjustment for a
company whose contribution rate, as a percentage of gross
revenues, is exceptionally high compared to the median
contribution rate for other companies in the same tier, thereby
bringing companies that are statistical outliers in terms of
their contributions within the range of their peers. The
amendment thus addresses the unfairness of the FAIR Act that
allows large wealthy companies to receive a windfall, while
smaller companies are asked to pay more than they would have
spent in the tort system.
In addition, the Committee adopted a number of other
bipartisan amendments that address other matters in the bill,
such as providing for annual Congressional oversight of the
asbestos fund, imposing criminal penalties for false or
fraudulent statements against the fund, establishing penalties
for corporations that fail to make their contributions to the
fund, establishing procedures for the families of deceased
asbestos victims to apply for compensation, and applying the
Freedom of Information Act to the new entities that will act
like executive branch agencies--the Asbestos Insurance
Commission and Office of Asbestos Injury Claims Resolution.

B. Consensus Medical Criteria

While pursuing a legislative solution to the asbestos
crisis, all Senators have been sounding a consistent theme:
fair compensation to the truly sick. At the beginning of our
third week of consideration of the FAIR Act, we were pleased
that the Committee unanimously adopted an amendment by Senators
Leahy and Hatch establishing medical criteria requirements with
the national trust fund to identify legitimate victims of
asbestos exposure. This amendment properly defined the truly
sick, dividing them intoappropriate categories on the basis of
sound medical diagnoses. Senator Graham declared that coming to this
bipartisan agreement on medical criteria was a ``breakthrough'' for the
Committee. We agree.
We are grateful for the generosity of Dr. Laura Welch and
Dr. James Crapo, who presented to the Committee an invaluable
tutorial on the medical aspects of the asbestos problem during
the Committee's initial mark-up session on the FAIR Act. Our
bipartisan medical criteria amendment reflects the Committee's
good use of their expertise. It defines ten categories of
asbestos-related disease, five levels of non-malignant disease
and five levels of cancer, which are described in the table
below.

TABLE OF MEDICAL CATEGORIES
------------------------------------------------------------------------
Description of disease
Level Scheduled disease and symptoms
------------------------------------------------------------------------
I Asbestosis/Pleural Disease A........ These individuals
clearly have asbestos-
related disease with a
history of exposure to
asbestos, but their
pulmonary function
tests are within the
normal range. They
experience non-
malignant conditions
in which asbestos
fibers are breathed
into the lungs and (i)
are transported to
outside of lungs,
causing scars to form
on the pleural lining
(the thin lining that
surrounds the heart),
or (ii) which remain
inside the lungs,
causing scarring,
while retaining at
least 80% of lung
capacity.
1II Mixed Disease With Impairment....... Every individual in
this group has a
medically significant
impairment, as defined
by the American
Medical Association.
They are impaired due
to a combination of
asbestosis and other
causes, such as
smoking or silicosis.
The requirement for a
1/1 ILO reading on a
chest x-ray ensures
that asbestos exposure
is an important
contributing factor to
the lung diseases and
impairment. Victims
experience increased
scarring on lungs,
with varying levels of
impairment, ranging
from shortness of
breath to being
homebound and
requiring oxygen
treatments.
III Asbestosis/Pleural Disease B........ These individuals have
impairment that is
primarily due to
asbestosis. They
develop asbestos-
related respiratory
disease with
increasing losses of
pulmonary function,
with lung function
decreasing to as low
as 60% of normal.
Victims with this
level of impairment
will not be able to
continue working if
they have a physically
demanding job.
Approximately half of
these sick patients
were in construction
trades, e.g., plumbers
and pipe fitters, and
are prevented from
continuing these jobs.
IV Severe Asbestosis................... These individuals have
impairment that is
primarily due to
asbestosis. They
experience significant
loss of pulmonary
function, with lung
function between 50%
and 60% of normal.
Victims with this
level of impairment
will not be able to
continue working, and
will not be able to
perform some
activities of daily
living.
V Disabling Asbestosis................ These individuals have
impairment that is
primarily due to
asbestosis. They
experience severe loss
of pulmonary function,
experiencing loss of
more than 50% of
normal lung capacity.
Victims with this
level of impairment
will not be able to
perform most
activities of daily
living. These
claimants will be
unable to perform
activities of daily
life, such as getting
dressed, taking a
shower, cooking
dinner, or doing even
minimal work around
the house. This
category often becomes
fatal.
VI Other Cancer........................ The level of disability
for this group is
determined by the
extent of the cancer.
Victims suffer from
colon, laryngeal,
pharyngeal, stomach
(i.e., non-lung)
cancers, the risk of
which is increased by
asbestos exposure.
While some cancers may
be cured, many of the
individuals in this
group will undergo
surgery, radiation,
chemotherapy, and
still eventually die
of their cancer.
VII Lung Cancer One..................... These individuals
suffer from asbestos-
related lung cancer.
For those not
diagnosed early, the
life expectancy is 12
to 18 months. These
individuals develop
progressive shortness
of breath, loss of
appetite, coughing up
blood, chest pain, and
severe fatigue, as
well as other side
effects of radiation
or chemotherapy.
VIII Lung Cancer With Pleural Disease.... These individuals
suffer from asbestos-
related lung cancer
with pleural scarring
outside the lung. For
those not diagnosed
early, the life
expectancy is 12 to 18
months. These
individuals develop
progressive shortness
of breath, loss of
appetite, coughing up
blood, chest pain, and
severe fatigue, as
well as other side
effects of radiation
or chemotherapy.
IX Lung Cancer With Asbestosis......... These individuals
suffer from asbestos-
related lung cancer
with pleural scarring
inside the lung. For
those not diagnosed
early, the life
expectancy is 12 to 18
months. These
individuals develop
progressive shortness
of breath, loss of
appetite, couching up
blood, chest pain, and
severe fatigue, as
well as other side
effects of radiation
or chemotherapy.
X Mesothelioma........................ These individuals
suffer from a rare and
fatal cancer of the
chest lining (the
pleura) and abdomen
lining. Virtually all
instances of
mesothelioma in the
U.S. are a result of
past exposure to
asbestos. This cancer
is impossible to treat
and usually fatal
within 18 months of
diagnosis. The
symptoms of this
disease are similar to
those of lung cancer--
progressive shortness
of breath, loss of
appetite, coughing up
blood, chest pain, and
severe fatigue, as
well as other side
effects of radiation
or chemotherapy.
------------------------------------------------------------------------

The Leahy-Hatch medical criteria amendment explicitly
recognized that victims suffering from colorectal cancer
related to asbestos exposure should be fairly compensated under
a national trust fund in the Level VI, Other Cancer, category.
The FAIR Act, as introduced, excluded colorectal cancer victims
from any compensation, no matter how much exposure to asbestos
those victims suffered. This surprised many members of the
Committee given the fact that colorectal cancer is among one of
the cancers that merit compensation in all of the asbestos
trusts, including the Manville Trust. Indeed, the American
Thoracic Society wrote to the Committee urging us to correct
this injustice, which we are pleased was done as part of the
consensus medical criteria with a strong presumption of
eligibility for the scheduled value of compensation in this
category.\96\
---------------------------------------------------------------------------
\96\ Letter from Homer A. Boushey, Jr. MD, President, American
Thoracic Society, to Senator Hatch and Senator Leahy, June 19, 2003:
``The ATS notes that stomach cancer is listed as a qualifying disease,
but that colon cancer is not. Evidence supporting the link between
asbestos exposure and colon cancer is at least as strong or stronger
than evidence linking asbestos exposure and stomach cancer. We strongly
urge the Committee to consider the data linking asbestos exposure and
colon cancer in drafting the list of qualifying diseases.''
---------------------------------------------------------------------------
The Leahy-Hatch medical criteria provision also provides a
mechanism for comparing various years of exposure, in various
industries, on a correctly weighted basis. The amendment
distinguishes between three time periods of asbestos exposure
(pre-1976, 1976-1986, and post-1986). This recognizes that
asbestos use in the workplace was much more prevalent in the
mid-20th Century than in more recent years. The amendment also
delineates three levels of exposure defined by occupation,
which acknowledges that some workers (e.g., insulators)
experience much more exposure to asbestos than others (e.g.,
mechanics). Thus, the amendment officially creates a nine-
segment grid, assigning greater weight to years spent in high
exposure trades and earlier time periods, and lesser weight to
more recent years of exposure and those spent in trades with
less asbestos exposure generally. Thus, the years a shipyard
worker worked during World War II--which were among the
heaviest of asbestos exposures--will be counted as four times a
normal year of exposure. Our ``weighted occupational exposure''
provision fairly accommodates the many scenarios that the
victims of asbestos exposure will present to the fund to
determine appropriate compensation. This weighting calculation
will result in a significant assurance that victims receiving
compensation from the Fund have experienced an indisputably
harmful level of exposure, ensuring a medically sound basis for
the classification of the victims into various disease
categories.
The Leahy-Hatch medical criteria amendment also requires
in-person physician examinations to support the diagnoses of
each victim, which will eliminate the mass screenings that have
garnered so much attention in the asbestos litigation debate.
The Leahy-Hatch medical criteria amendment also requires the
use of the diagnostic tests and standards that the medical
community agrees upon for diagnosing these lung diseases, to
ensure the accuracy of the evidence presented to the Fund.
Furthermore, it also permits the Fund Administrator to audit
the doctors whose diagnoses are used by claimants, and to
refuse to accept submissions from doctors whose diagnoses are
not trustworthy.
Finally, the amendment includes a ``take home exposure''
provision to allow recovery for spouses and family members who
were exposed to asbestos from the work clothes of their loved
ones and provides eligibility for compensation for victims of
the community poisoning cases in Libby, Montana. During our
June 4th hearing on the FAIR Act, we heard from Senator Murray
about the importance of addressing ``take home'' exposure, and
from Senator Baucus about the basic fairness of covering
victims of tremolite asbestos exposure in Libby. We agree
wholeheartedly with Senator Murray and Senator Baucus and we
were pleased to include these provisions in the consensus
medical criteria.

C. Safeguarding The Solvency of the Trust Fund

In our fourth week of Committee consideration, we began to
address the critical questions of maintaining the solvency of
the fund, and related issues of ensuring that claimants are
paid in full in a timely manner. As passed out of Committee,
this bill still shifts the financial risk of the trust fund
approach from defendants and insurers to asbestos victims.
Before a final bill is passed we must determine what will be
done if the trust fund runs out--or runs short--of money at any
time during the next 50 years. The one constant in our
experience with projections of asbestos liabilities is that
they have invariably been too low. The risk of insolvency in a
national trust fund--and the risk of inadequate funding short
of insolvency--must be addressed in order to provide certainty
to asbestos victims as well as to defendants and insurers.
Indeed, there is no more fundamental concern underlying
this bill. Twenty years ago, all the experts predicted that the
Manville Trust Fund would be paying asbestos victims full
compensation for many years. Now, asbestos victims get 5 cents
on the dollar because the Manville Trust Fund is nearly
insolvent. What has doomed earlier efforts is the fact that
they were all unfunded or drastically under-funded.
We must be wary of the Committee Report's repeated and
erroneous assertions that the trust fund will reach $108
billion in mandatory contributions from defendants and
insurers. That $108 billion figure gained a life of its own in
the mark-up of this bill, but we should remember that it is
simply an analyst's projection of the likely payments into the
fund, not a guaranteed minimum funding. What the bill does
provide is a schedule of contributions, broken out into tiers
for the defendant companies, with determinations about those
companies' obligations to the fund depending on their revenues
and their history of asbestos-related expenditures. But we do
not even know which specific companies fall into these tiers
since the amount of asbestos-related expenditures of most
defendant companies is not publicly disclosed and efforts by
members of the committee to obtain this information from
representatives of the defendant companies has been futile to
date. If analysts' projections are correct, the resulting
contributions may reach $108 billion, but if the analysis is in
error--or if the dire predictions of more bankruptcies among
defendant companies come true--then that number may well be
lower.
Successful legislation cannot be predicated on a false
promise. There must be money to compensate the victims. As
Senator Feinstein pointed out during the markup: ``If you just
take the experience of the Manville Trust, which is paying 5
cents on the dollar, you know that this is not just pie in the
sky, that this is real, and that the worry about inadequate
funding is a real worry.''
Addressing a key part of this critical issue, Senators
Feinstein and Kohl joined together to craft an amendment that
would create a contingent funding mechanism to bring in up to
$45 billion in the first 27 years of the fund in case there is
an unanticipated surge of claims. Defendant and insurance
companies would split the responsibility ($22.5 billion each)
for providing this contingent funding. These funds would only
be called for in the event that the basic funding proved to be
inadequate.
In addition, the Feinstein-Kohl amendment permits the
Administrator of the fund to request up to $2 billion annually
to cover any funding shortfalls, beginning in year 28 of the
fund. Up to $1 billion would come from insurer contributions
and up to $1 billion would come from defendant company
contributions. Companies and insurers could make the voluntary
payments requested by the Administrator or instead could choose
to opt-out of the fund and be subject to claims in Federal
court under a compromise reached with Chairman Hatch.
We supported the ultimate Feinstein-Kohl-Hatch amendment to
help address the risk of trust insolvency, giving the trust
Administrator limited authority to request additional funds
from contributing insurers and defendant companies throughout
the life of the fund. As a whole, this amendment gives victims
of asbestos exposure greater certainty that they will receive
compensation for their injuries.
However, as discussed in Section III of these views, we are
still concerned that the trust fund may become insolvent before
providing all victims of asbestos exposure with fair
compensation for their injuries. If Congress is to prevent an
entire group of claimants from seeking justice in our courts,
we must guarantee that a no-fault system established by this
bill will not deplete its funds before the promise of this
legislation can be fulfilled.

D. Fairer Compensation for Asbestos Victims

The third cornerstone of federal asbestos compensation
legislation must be fair, timely, and certain compensation for
victims of asbestos-related diseases. During the mark-up, the
Committee reached unanimous agreement on the Leahy-Hatch
medical criteria, which established ten categories of disease.
The Committee also reached an agreement on the principle that
the legislation should provide monetary compensation to
claimants who had suffered impairment, and should provide
medical monitoring to those individuals with less serious
asbestos-related conditions. Having reached agreement on
disease criteria and on the principle that only those who are
ill should receive a monetary award--and bearing constantly in
mind that the exposed but less impaired claimants are often
receiving substantial sums in settlements of tort suits--it is
imperative that the legislation provide fair levels of
compensation to impaired individuals who develop the covered
diseases.
All of the individuals who qualify for monetary awards
under S. 1125 will have significant impairment from their
asbestos-related disease. For many individuals these diseases
will be fatal. Measured against the health impact and economic
impact on victims and their family members, the compensation
provided in the bill for many victims clearly is unfair.
During the course of the markup, Senators Feinstein and
Graham proposed, and the Committee approved, an amendment that
increased claims values for most diseases over those originally
proposed in S. 1125. We commend Senators Feinstein and Graham
for working in a bipartisan manner to improve compensation
values to asbestos victims. As discussed in Section III of
these views, we believe the award values proposed by Senators
Leahy and Kennedy, discussed in Section III of these views,
would provide more appropriate levels of compensation for
victims who meet the criteria established under this bill, and
that for a number of diseases, and for most victims, the
Feinstein-Graham amendment still does not provide fair
compensation. We supported the Feinstein-Graham amendment,
however, as a move towards the goal of providing fair and
adequate compensation to victims.
Following adoption of the Feinstein-Graham amendment,
Senators Leahy and Kohl immediately proposed another amendment,
to ensure that the increased promises of the new award values
were not empty promises. The Feinstein-Graham schedule of award
values would require another $14 billion in funding, so the
Leahy-Kohl amendment provided a corresponding $14 billion of
mandatory contributions--$7 billion each from defendant
companies and insurers--and struck an illusionary section in
the original bill that anticipated obtaining $14 billion in
voluntary contributions from additional, unidentified
participants that were ``likely to avoid future civil liability
as a result of this Act.'' It is both the intention and the
effect of this amendment that the contingent funding mechanism
adopted in the Feinstein-Kohl amendment remain unchanged. As
Senator Leahy said of the amendment, which was adopted by the
Committee, ``This just puts the money in the bank to cash the
check that we just signed on the amendment of Senator Feinstein
and Senator Graham.''

E. Certainty for Asbestos Victims

At our final markup, Senator Biden offered an amendment to
complement the Feinstein-Kohl amendment adopted on June 26th.
The Feinstein-Kohl amendment was a positive development to
ensure solvency of the trust fund, with periodic checks of the
funding levels, starting in 2010. As amended by Feinstein-Kohl,
however, the FAIR Act requires a determination of the
sufficiency of the trust's funding prospectively only eight
times, beginning in 2010.
Senator Biden's amendment would require a check on the
funding of the system retrospectively every year by providing a
sunset to the Act--and reverting asbestos claims to the tort
system in the appropriate state or federal court--if the
Administrator of the fund fails to certify for any given year
that:
95% or more of the asbestos claimants who
filed claims in that year, and who were determined to
be eligible to receive compensation, have received the
compensation, and
95% or more of the total obligations of the
Fund owed to eligible claimants in that year have been
paid.
We supported the Biden sunset amendment, which the
Committee adopted by an overwhelming vote of 15-4, because we
believe this bill must ensure compensation for victims every
bit as much as it provides certainty for corporations and
insurers facing asbestos liability. If this legislation fails
to achieve that goal, it is only fair to allow victims back
into the tort system, seeking justice in state or federal court
as appropriate under the applicable law before enactment of
this Act.
In essence, we agree with Senator Specter, who during
consideration of the Biden amendment summed up the need for
certainty for asbestos victims:

We are taking away a right to jury trial, which is
very substantial, it is a fundamental right, and I
think in the interest of the workers who are injured
and not being compensated that it is a tough balancing
act * * * But I want to be sure, Mr. Chairman, that if
the companies do not put up the money, or whatever
point the trust is out of money and there is no more
money to be collected by injured people, at least at
that stage, they have access to the courts.

This principle received validation by the Committee, with
only four Senators refusing to concede that if the trust proves
an ineffective solution in paying deserving victims, the
legislation must sunset so workers can attain just judgments in
our state and federal courts.

III. MORE IMPROVEMENTS NEEDED TO S. 1125

Senator Specter captured precisely the challenges we face,
when he spoke so eloquently of the need for fair and effective
alternative evaluative processes if we are to approve
legislation that restricts the rights of those harmed by
asbestos. Unfortunately, the FAIR Act as reported by the
Committee falls short of achieving fairness for all asbestos
victims.
Perhaps Senator Biden made the point most aptly at the
Committee's first markup session on S. 1125: ``Whenever we deny
an American citizen a right they now possess under the law, the
burden should be on us to make the case overwhelmingly why we
are denying that right. Therefore, the benefit of the doubt
should be given to the party whom you are about to
disenfranchise in some way.''
While we agree with the evaluation that, in the case of
asbestos, meaningful change in the system is needed, we believe
that the benefit of the doubt has not been given to asbestos
victims under this legislation.

A. Inadequate Compensation For Asbestos Victims

Although the Committee improved the award values for
asbestos victims on a bipartisan basis, and with our support,
we believe the bill still fails to provide fair compensation to
all victims of asbestos-related diseases.
The key test of any legislative proposal on asbestos claims
is whether, by reducing transaction costs, it would put more
money into the pockets of seriously injured workers and their
families than under the current system.\97\ As a Washington
Post editorial noted just prior to the final day of the mark-
up, ``The more fully Congress can ensure that the average
asbestos victim will do better under the trust than in court,
the more credibility this important reform will have.'' \98\
---------------------------------------------------------------------------
\97\ Dr. Mark Peterson, one of the foremost analysts of asbestos
litigation, testified at the Committee's June 4, 2003 hearing on the
FAIR Act, on the following average recoveries for asbestos-related
diseases in the tort system:
\98\ The Washington Post, ``An Asbestos Accord,'' p. A22, July 10,
2003.
---------------------------------------------------------------------------
We believe that a properly designed and implemented trust
fund can move us toward that goal. Such a trust must not only
use medical criteria that cover all workers who have sustained
real injuries, but must provide fair levels of compensation for
all those injured workers. Moreover, the alternative system
must guarantee that all injured workers who qualify for awards
will receive that full compensation on a timely basis.
As it stands today, this legislation satisfies only one of
these three criteria. Even with the Feinstein-Graham amendment,
the bill sets levels of compensation that are substantially
below what victims, especially those who are seriously ill,
currently receive for their injuries. Furthermore, the current
funding plan may well be inadequate to fully compensate all
eligible victims in a timely manner.
Proponents of this bill argue that in the tort system, too
much money finds its way to victims who are not really impaired
and not enough money is awarded to those who are truly sick.
But their concern for the truly sick certainly finds no real
expression in this bill. Lung cancer victims are ``truly sick''
by anyone's definition and many of them will have their lives
cut short by these diseases. Yet, even in these, the most
compelling cases, S. 1125 provides grossly inadequate
compensation. We are deeply troubled by the way this
legislation treats those with the most severe illnesses.
As we have already noted, victims of asbestos with lung
cancer who smoked receive particularly inappropriate treatment.
As reported by the Committee, this legislation unfairly holds
victims accountable for the synergistic effects of smoking and
asbestos. When smoking and asbestos are combined, the
likelihood, as well as the severity of the resulting disease,
is greater than the sum of its parts. Numerous medical
experts--in person and in writing--informed the Committee of
this harmful combination, and the mutually aggravating effects
of smoking and asbestos exposure have been demonstrated at the
highest levels of medical science.

AVERAGE VALUE OF ASBESTOS CLAIMS BY DISEASE CATEGORIES
[Estimated total compensation across all asbestos defendants]
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
$40,000 to $70,000.............................. Pleural plaques and thickening.
$50,000 to $125,000............................. Asbestosis, without loss of lung function.
$200,000 to $400,000............................ Asbestosis, with loss of lung function.
$800,000 to $1,500,000.......................... Severe Asbestosis.
$450,000 to $600,000............................ Other cancers.
$1,000,000 to $1,500,000........................ Lung Cancer.
$2,000,000 to $3,000,000........................ Mesothelioma.
----------------------------------------------------------------------------------------------------------------

As Dr. Laura Welch discussed in her testimony, the
epidemiological studies conducted by Dr. Irving Selikoff have
shown that for the more heavily exposed individuals (such as
insulation workers), the risk of lung cancer from asbestos
exposure is increased five times. Because there is a
synergistic relationship between asbestos exposure and smoking,
smokers who meet the bill's exposure requirements face a risk
of lung cancer that is up to 50 times greater than that of
individuals without a history of asbestos exposure or smoking.
Moreover, because of this synergistic relationship, the risk of
lung cancer for asbestos-exposed workers who smoked is far
greater than the risk of lung cancer among those with a similar
smoking history who were not exposed to asbestos.\99\ In
addition, the American Thoracic Society noted in a letter to
Chairman Hatch and Senator Leahy, ``Asbestos-related lung
disease may aggravate or complicate a second disorder, making
it more severe than it might be otherwise or tipping a claimant
with poor lung function into serious impairment.'' \100\
---------------------------------------------------------------------------
\99\ Testimony of Dr. Laura Welch, MD, Medical Director, Center to
Protect Workers Rights, On Asbestos Related Diseases--Medical Criteria,
Populations at Risk and Disease projections, Before the Senate
Judiciary Committee, June 4, 2003.
\100\ Letter from Homer A. Boushey, Jr. MD, President, American
Thoracic Society, to Senator Hatch and Senator Leahy, June 19, 2003, 2.
---------------------------------------------------------------------------
Had defendant corporations disclosed to workers the harmful
effects of their occupations, victims would have been able to
make more informed decisions about their lifestyles. As Doctors
L. Christine Oliver and Edwin C. Holstein noted, ``If workers
had been informed that dust, specifically in the case of
asbestos, in their place of work could cause pulmonary
impairment * * * we would not be writing this letter.'' \101\
But in S. 1125 as passed by the Committee, a smoker diagnosed
with Disease Level VII--an illness that requires 15 weighted
years of occupational exposure to asbestos--might receive just
four percent of the award granted to a non-smoker. While we
support award values that provide greater values where the
causation is clearest, we cannot endorse the notion that
smokers should find their awards unfairly reduced.
---------------------------------------------------------------------------
\101\ Letter from Dr. L. Christine Oliver and Dr. Edwin C.
Holstein, February 7, 2003, 2-3.
---------------------------------------------------------------------------
The manner in which this bill treats smokers is
particularly onerous in light of the association between
asbestos exposure and the most dangerous jobs. As RAND's
analysis of asbestos litigation points out, ``There were high
rates of smoking in the blue-collar industries where asbestos
exposure was particularly high.'' \102\ Yet this legislation
automatically reduces awards for smokers, and thus fails to
meet its stated goal of providing the most compensation to the
sickest victims.
---------------------------------------------------------------------------
\102\ RAND Institute for Civil Justice, ``Asbestos Litigation Costs
and Compensation: An Interim Report,'' 17.
---------------------------------------------------------------------------
We disagree with the claims made in the majority views on
the scientific evidence establishing the relationship between
asbestos exposure and lung cancer. Specifically, citing the
testimony of Dr. James Crapo, the majority views state that
``the majority of the medical community has found that lung
cancer is generally not related to asbestos exposure unless the
claimant has underlying asbestosis or, at least, sufficient
exposure to asbestos to have caused asbestosis.'' The majority
views go on to claim ``[e]arly studies showing a synergistic
effect between smoking and asbestos exposure have not been
substantiated by later studies.'' As noted above, numerous
medical experts who testified and wrote to the Committee do not
share this view. Similarly, the current body of scientific
evidence and scientific consensus on asbestos does not support
these statements and claims.
The Tenth Report on Carcinogens issued in December 2002 by
the Department of Health and Human Services National Toxicology
Program clearly and unequivocally found that exposure to
asbestos causes lung cancer and that there is a synergistic
relationship between asbestos exposure and lung cancer:

Asbestos and all commercial forms of asbestos are
known to be human carcinogens based on sufficient
evidence of carcinogenicity in humans (IARC 1982,
1987). Occupational exposure to chrysotile, amosite,
anthophyllite, and mixtures containing crocidolite has
resulted in a high incidence of lung carcinomas * * *
Both cigarette smoking and occupational exposure to
asbestos fibers increase lung cancer incidence
independently. When present together, they act
multiplicatively (IARC 1973, 1977, 1979, 1982).

This is also the view of the National Cancer Institute,
which in its Cancer Facts--Asbestos Questions and Answers,
states that asbestos exposure increases the risk of lung
cancer, pointing out that ``although it is known that the risk
to workers increases with heavier exposure and longer exposure
time, investigators have found asbestos-related disease in
individuals with only brief exposures.'' The NCI document also
states: ``many studies have shown that the combination of
smoking and asbestos exposure is particularly hazardous.
Smokers who are also exposed to asbestos have a greatly
increased risk of lung cancer.'' \103\
---------------------------------------------------------------------------
\103\ National Cancer Institute, Cancer Facts--Asbestos Questions
and Answers (updated July 10, 2003) http://cis.nci.nih.gov/fact/----
21.htm) (emphasis in original).
---------------------------------------------------------------------------
This is also the consensus scientific view internationally.
The International Agency for Research on Cancer (IARC) in its
1987 supplement to the monograph on asbestos found:

The studies of the carcinogenic effect of asbestos
exposure, including evidence reviewed earlier [ref: 1],
show that occupational exposure to chrysotile, amosite
and anthophyllite asbestos and to mixtures containing
crocidolite results in an increased risk of lung
cancer, as does exposure to minerals containing
tremolite and actinolite and to tremolitic material
mixed with anthophyllite and small amounts of
chrysotile * * * The relationship between asbestos
exposure and smoking indicates a synergistic effect of
smoking with regard to lung cancer [ref: 1]. Further
evaluations indicate that this synergistic effect is
close to a multiplicative model [ref: 52,109].'' \104\
---------------------------------------------------------------------------
\104\ IARC Monographs on the Evaluation of the Carcinogenic Risk of
Chemicals to Humans. Overall evaluations of Carcinogenicity. Supplement
7., IARC 1987.

The Leahy-Kennedy award values amendment offers a more
reasoned and fair approach for compensating victims--smokers
and non-smokers alike--throughout all ten disease levels
established under the bill. The vast majority of claimants,
those with Level I sickness, would receive only medical
monitoring. While these individuals have clearly suffered the
impact of asbestos exposure, the only compensation most will
receive is the peace of mind in knowing that if their disease
should become more serious, they will be able to seek both
treatment and compensation quickly.
The Leahy-Kennedy award values for the other nine levels
provide more appropriate measures of compensation than those
numbers calculated in the Feinstein-Graham amendment in the
midst of the Committee's markup. For example, those claimants
suffering from Class II (Mixed Disease) would receive only
$20,000 under the reported bill. These victims have real
impairment, suffering from both restrictive disease and
obstructive disease caused by a combination of asbestosis and
other causes, such as smoking. Some of the people in this class
will be totally disabled, unable to conduct activities of daily
living. Providing only $20,000 for these victims and their
families is just not right. Though this value is considerably
higher than nothing at all, which is what an earlier Hatch
amendment would have granted these impaired victims, the award
is far lower than what might be attained in the tort system,
with payments on average of $35,000 to $50,000. The Leahy-
Kennedy amendment proposes compensation at the low end of this
range, offering $35,000 for these victims.
It is estimated that more than 100,000 victims will file
claims that will qualify for Level III compensation, which
covers asbestosis or pleural disease that has resulted in a 20%
to 40% loss of lung function. For these claimants, the Leahy-
Kennedy amendment would pay $110,000. As introduced, S. 1125
set an award of $40,000, which the Feinstein-Graham amendment
increased to $75,000--a step in the right direction, to be
sure, but which will still leave victims to bear much of the
cost of their asbestos exposure and its consequences. This is a
group of workers with impairment so severe they might not be
able to perform their labor-intensive jobs. Available claims
data from the Manville Trust and the results of the Sheetmetal
Workers asbestos disease screening program provided to the
Committee by the AFL-CIO show that more than 40% of the
individuals in this group are less than 57 years old, meaning
that that many will lose years of employment and have
significant economic loss.\105\
---------------------------------------------------------------------------
\105\ Supporting Documentation for AFL-CIO Disease Distributions,
Average Age Assumptions and Incidence projections, April 24, 2003.
---------------------------------------------------------------------------
Level IV claimants suffer from severe asbestosis, and we
think it only fitting to increase the $300,000 currently
offered by S. 1125 to the more reasonable $400,000 award under
the Leahy-Kennedy values. For some reason, the Feinstein-Graham
amendment actually lowered the award values for this disease as
compared to the original bill. For many with severe asbestosis,
their disease will prevent even the most basic daily
activities, and these victims will in many cases require
regular oxygen in order to alleviate the physical discomfort.
For the sickest non-malignant victims, those in Level V
disease, with very severe asbestosis, the Leahy-Kennedy
Amendment proposes an $850,000 award. This category consists of
individuals who are totally disabled. Many will die from their
disease. They are quite literally suffocated by the asbestos
fibers in their lungs and, without question, they deserve more
than the $750,000 approved by the Committee.
Level VI disease--Other Cancers--should have resulted in
easy compromise in Committee. The Feinstein-Graham Amendment
sets the compensation for these cancer victims at $150,000.
Remarkably, this is less than the $200,000 award set in the
bill as introduced. Many of the other asbestos-related cancers,
including stomach cancer, will often be fatal or cause
significant disability. In cases where there is a determination
that asbestos caused or significantly contributed to the
cancer, victims should be appropriately compensated.
The gravest injustice done by the bill is to lung cancer
victims. All of the medical categories established by the bill
are for asbestos-related diseases, including the lung cancer
categories. For each of these lung cancer categories, a
significant history of asbestos exposure is required, and for
two of the lung cancer categories, underlying non-malignant
asbestos disease must also be present, confirming that
significant asbestos exposure has occurred. These individuals
suffer due to their exposure to this toxin. For the lung cancer
and mesothelioma disease levels (VII, VIII, IX, and X), the
award values in the Leahy-Kennedy amendment are more in keeping
with the severity of the illness and with what claimants would
receive in the tort system. If the worker smoked--and
unfortunately most of these workers did--the combination of
tobacco and asbestos exposure dramatically increases the
likelihood of contracting lung cancer.
All of the individuals who would qualify for lung cancer
compensation under S. 1125 are at greatly increased risk of
lung cancer as a result of their asbestos exposure, and it is
more likely than not that asbestos exposure significantly
contributed to, or primarily caused, their lung cancer. Because
there is a synergistic relationship between asbestos exposure
and smoking, smokers who meet the bill's exposure requirements
face a risk of lung cancer that is 20 to 90 times greater than
that of individuals without a history of asbestos exposure or
smoking. Moreover, because of this synergistic relationship,
the risk of lung cancer for asbestos-exposed workers who smoked
is far greater than the risk of lung cancer among those with a
similar smoking history who were not exposed to asbestos.
The compensation values for lung cancer claimants, in the
bill as reported out of Committee, are woefully inadequate,
particularly for individuals who smoked. S. 1125 as reported
established three different categories of lung cancer--lung
cancer with exposure (Level VII), lung cancer with pleural
disease (Level VII), and lung cancer with asbestosis (Level
VIII). For the victims with lung cancer who smoked, which is
the vast majority of asbestos lung cancer claimants, awards are
set at $25,000-$75,000 for Level VII, $125,000-$225,000 for
Level VIII, and $300,000-$400,000 for Level IX. These award
levels are unfair. For the majority of lung cancer victims, the
disease will be fatal, usually within two years. Many of these
victims will have significant medical costs associated with
hospitalization, surgery, or chemotherapy. For some victims, S.
1125 compensation awards will not even cover these medical
costs, let alone provide compensation for a life-ending disease
and financial assurance to those left behind.
While it is reasonable to pay smokers less than non-
smokers, they should receive substantial awards which reflect
the devastating effect that the disease has had on their lives.
The lung cancer compensation levels in the Fair Act as reported
are shamefully low. The Leahy-Kennedy Amendment would increase
them to more reasonable levels. These values are fair for the
victims, and with the financial security offered by a trust,
defendants and their insurers will be more than capable of
paying these sums.
Our medical criteria have already eliminated what
businesses contended were the most troublesome claims. We all
say that we need to compensate the truly sick. But fair
compensation is not free. We now need to ensure fair
compensation for all 10 categories of asbestos-related disease,
the five levels of non-malignant disease of increasing severity
and the five levels of cancer, including colorectal cancer,
lung cancer and Mesothelioma.
The Committee's bipartisan agreement on medical criteria
will be meaningless if we, in effect, rewrite the categories by
failing fairly to compensate many who fall within them. Even
with consensus on medical criteria, if the award values are
unfair, the bill will be unfair and unworthy of our support.
The Leahy-Kennedy proposal on awards values addresses the
shortcomings of the bill as approved by the Committee. No
payment, from a tort suit or a trust fund, can ever really make
someone who has lost their health, or their life, ``whole''
again, but we should be both compassionate and reasonable as we
set these values. We believe the Leahy-Kennedy award values,
discussed in Section III of these views, better accomplish this
goal. If we fail to achieve fair award values for victims, the
Committee's bipartisan agreement on medical criteria will lose
all meaning--determining who is truly sick is only useful
inasmuch as it provides guidelines for adequately compensating
those who suffer from asbestos-induced disease. We now know who
is truly sick. We must next make certain that their
compensation is fair.

B. Disease, Claims, and Cost Projections

Developing sound and effective public policy and
legislation on asbestos compensation requires an assessment and
understanding of the extent of future asbestos related disease,
numbers of expected claims for compensation and the resulting
costs. During our consideration of the FAIR Act, various
projections were made about possible future disease incidence,
claims and costs. While attempts were made to harmonize these
different estimates and reach agreement on a common set of
expected and possible high-end projections, unfortunately, this
did not happen. This lack of an agreement on a common set of
projections has resulted in constantly changing estimates,
which has caused great confusion and impeded reaching a
consensus on asbestos compensation legislation.
Projected estimates of future asbestos disease claims
provided to the Committee have generally ranged between 1
million and 2.5 million future claims, with the large majority
of these claims involving non-malignant asbestos-related
disease with no impairment. Many of these estimates are based
upon a model developed by Nicholson and Perkel in 1982 to
estimate asbestos related cancer mortality. The estimates use
this model to develop projected incidence of asbestos-related
cancer mortality from mesothelioma, lung cancer and other
cancers and based upon claims filing experience, develop
estimates of numbers of expected claims. Estimates for non-
malignant disease have come from ratios of the number of claims
for non-malignant disease to claims for malignant disease.
The major factor that drives all of the estimates is the
assumption about filing rates, which has been based upon
historical filing experience. As the number of claims for
asbestos-related disease has increased over the years, so has
the projected number of future claims. There is general
agreement that the asbestos disease epidemic is now peaking,
and that the number of future disease cases will decrease in
coming years. What is less certain, however, is how many of
these future cases will result in future claims.
In developing cost estimates for national asbestos
compensation legislation, the majority relied upon cost
estimates developed by Goldman Sachs based upon projections and
assumptions provided by the Asbestos Study Group (ASG) and the
insurance carriers. Early in the process, there appeared to be
agreement between the ASG, carriers and labor unions on a
common set of projections and assumptions that allowed for
comparison of alternative proposals and claim values.
Unfortunately as the mark-up proceeded, the projections and
assumptions provided by the ASG and insurance carriers changed,
in some cases dramatically and with no apparent justification,
with great impact on projected costs and claim values for
asbestos victims.
For example, on July 8 Goldman Sachs provided cost
estimates for the Leahy-Kennedy and Graham proposed amendments
on claims values that estimated 48,023 total future lung cancer
claims for the most likely scenario, and 90,092 for the
``stress'' case based upon modified projections from the ARPC.
Two days later, on July 10, Goldman Sachs provided cost
estimates for the Feinstein-Graham claims values amendment that
projected future 115,385 lung cancer claims for the most likely
case and 139,672 for the ``stress'' case. No explanation was
provided for this change, other than a footnote in the July 10
cost estimate that for the Lung Cancer VII category the cost
estimate was utilizing projections provided by Navigant
Consulting, not ARPC. This change more than doubled the number
of estimated lung cancers. Since the Graham-Feinstein amendment
was constructed based upon a fixed fund of $108 billion, the
effect of this change was to significantly lower the award
values that could be paid to claimants.
Before final action is taken on any asbestos compensation
legislation, it is imperative that a consensus be reached on a
common set of disease, claims and cost projections for both the
likely case and the high-end case. It is not possible or
appropriate to make sound policy decisions or to craft
responsible legislation without agreement on the fundamental
issue of the extent of future asbestos-related disease
andexpected claims. With such an agreement, we can move to develop
legislation that provides adequate funding to ensure payment of fair
compensation for the expected number of claims and contingent funding
in the event that the number of expected claims is exceeded.

C. Retroactive Preemption of Settlement Agreements, Jury Verdicts and
Pending Cases

As presently written, the FAIR Act would completely negate
all legally binding settlement agreements between asbestos
manufacturers and victims, even settlements that have been made
by asbestos defendants with claimants that have already been
partially paid would be voided under this legislation. In other
words, if a victim agreed to take payment of a settlement over
a period of time from a defendant in return for dismissing the
case, even though the settlement agreement is an enforceable
contract, the defendant gets the right to walk away from their
obligation under this bill. Needless to say, this result is of
questionable constitutionality and will undoubtedly result in
expensive, lengthy litigation over its validity. Victims are
punished under this statute for agreeing to settlement terms
proposed by asbestos defendants.
Thousands of asbestos claimants entered into such
settlement agreements with asbestos manufacturers and have
released their claims against asbestos defendants in pending
lawsuits. In executing these releases, asbestos victims waived
their right to have their claim heard before a judge and jury
in exchange for monetary payment. These settlement agreements
constitute binding and enforceable contracts, but the FAIR Act
negates them all.
Most settlement agreements in asbestos litigation provide
for payment terms. Defendants are routinely given a year or
more after the cases are settled to pay the claims and
installment payments are often made. The FAIR Act would totally
absolve defendants from their obligation to honor their
contractual commitments and reward double-dealing and delay.
That is hardly fair. During markup, several members of the
majority joined us in voicing their strong concerns on the
inclusion of these unfair provisions in the bill, and Chairman
Hatch committed to addressing the bipartisan objections.
Absolving defendants of their contractual obligation to pay
settled claims would confer a windfall upon some corporate
defendants by absolving them of responsibility to pay for a
benefit they already received. An example of this unfairness is
the financial windfall conferred on the Halliburton Corporation
under the bill as currently written.
On December 18, 2002, Halliburton announced a global
settlement of its entire asbestos liability, which would
resolve over 150,000 asbestos cases and involved agreements
with more than 75 law firms. Under the terms of the settlement
Halliburton would pay $2.8 billion in cash to present victims
of asbestos disease and turn over 59.5 million shares of stock
to a trust established to care for asbestos victims in the
future. In exchange, the plaintiffs have agreed to provide
Halliburton and its affiliates with complete release from each
of the 150,000 plaintiffs with pending cases and an injunction
under section 524(g) of the bankruptcy code barring any future
cases against Halliburton and its affiliates.
But now it appears that Halliburton is refusing to
implement the settlement in an attempt to bide time to
determine whether Congress will enact legislation which gives
it a better deal. A June 6, 2003 press release from the company
stated that:

Halliburton continues to track legislative proposals
for asbestos reform pending in Congress. In determining
whether to proceed with the global settlement,
Halliburton's board of directors will take into account
the current status of these legislative
initiatives.\106\
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\106\ See also The Wall Street Journal, ``Halliburton to Request
Extension on Stay for Asbestos obligations,'' p. A3, July 21, 2003.

The enactment of the FAIR Act would confer a windfall on
Halliburton's bottom line. Jim Wicklund, an analyst at Banc of
America Securities was quoted in Reuters as opining that
Halliburton's total liability under S. 1125 was $450 million.
When one considers that Halliburton's $450 million commitment
is amortized over a 27-year period, the present value of
Halliburton's liability under S. 1125 is around $360 million.
Because Halliburton is committed to pay $4.2 billion under the
December 18, 2002 agreement, enactment of S. 1125 would result
in a 92% reduction of Halliburton's asbestos liability.
One does not have to be a securities analyst to predict
what will occur to Halliburton's stock if S. 1125 is enacted.
If S. 1125 as currently drafted becomes law, Halliburton will
be suddenly relieved of 92% of its contractual liability and
its stock price will skyrocket. In all likelihood, the increase
in Halliburton's market capitalization accompanying the
enactment of S. 1125 will greatly exceed Halliburton's $360
million liability under the bill.
Thus, S. 1125 not only represents a 92% bailout of
Halliburton's acknowledged and agreed to liability, but it will
also enable Halliburton and its executives to enjoy a windfall
as the company's stock price shoots upward. Not only will S.
1125 enable Halliburton to pay 92% less than it agreed to;
passage of the FAIR Act, as reported by the Committee, will
result in a windfall for its executives and shareholders.
Again, that is hardly fair.
The FAIR Act would also retroactively extinguish all
pending asbestos cases regardless of the stage in the
litigation. Asbestos cases currently in trial, or on the verge
of trial, would immediately be brought to a halt, case with
jury verdicts would end, and all appeals suspended. Again, this
is hardly fair.

D. Front-End Funding and Payment Problems

We are concerned that the FAIR Act, as presently written,
fails to provide financial certainty for asbestos victims
because of the structure of trust fund contributions and the
wide fluctuations in projected estimates of future asbestos
victims. As we have repeated again and again, financial
certainty for asbestos victims is a fundamental foundation for
an effective trust fund.
In addition, the start-up of the national asbestos trust
fund presents significant problems both from an administrative
and a financial perspective. Unless the bill is amended to
significantly contract the universe of claims pending in the
tort system and in the bankruptcy trusts that will be
extinguished under the bill as written, an estimated 300,000
pending claims will be transferred to the trust. Each will have
to be processed regardless of their current status in the tort
system. This may result in long delays in payments to victims
and perhaps the administrative and financial collapse of the
system within a short period.
It will take at least several years for the trust fund to
process the 290,000-300,000 asbestos cases that are currently
pending. According to expert testimony before the Committee,
under the current funding scheme, it might take at least 8
years to fully pay pending claims, even with the inadequate
values provided in the reported bill.\107\ During this period
an additional backlog of 200,000-300,000 cases may develop as
new claims come into the system. Many of these victims may
never be paid.
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\107\ See testimony of Dr. Mark Peterson, June 4, 2003 hearing on
S. 1125.
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Professor Eric Green, who testified at the Committee's June
4th hearing on the FAIR Act on behalf of all representatives of
future asbestos victims in bankruptcy trusts, recently wrote to
Senator Leahy about this potential front end problem in the
trust fund. Professor Green wrote:

Another extremely important issue to us is the timing
of the contributions to the Fund under the Act. We
believe that the Act will be seriously underfunded from
the outset and will never catch up. Our experience
shows us that approximately 40% of the total funding
under a 524(g) trust is needed within the first five
years after the trust is established. The Act, on the
other hand, calls for only 18% of the total funding to
be available in the first 5 years. This will result in
a payment backlog beginning on day one and increasing
for years to come. Payments to future asbestos victims
will be seriously delayed, if not put at risk
entirely.\108\
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\108\ July 7, 2003 letter Dr. Green to Senator Leahy.

If this solution is to work, it cannot be predicated on a
false promise. There must be money to compensate the victims.
We cannot allow the money to simply dry up, with the victims
left holding the bag.

E. Truly No-Fault Administrative System

Any alternative compensation system must be truly no-fault
to be fair to asbestos victims who will no longer have recourse
to the courts. An effective, no-fault, non-adversarial system
for processing compensation claims is as vital to the success
of this legislation as ensuring adequate funding and fair
compensation values, since if the claimants are unable to
obtain the awards to which they are entitled in a timely and
efficient manner, the system will fail.
In its original version, S.1125 would have created an
entirely new court, the U.S. Court of Asbestos Claims, to
adjudicate claims for compensation from the Asbestos Injury
Claims Resolution Fund. Under the bill as introduced, the
President would have nominated a new slate of judges and the
Senate would have needed the requisite time to review their
backgrounds and consider them for confirmation. The time
involved in appointing, confirming and funding a new court
would have contributed to delays in processing victims' claims.
We appreciate the efforts of Senators Feinstein, Grassley and
Sessions who joined us in striking these provisions from S.
1125. On a bipartisan basis, we agreed that a different
approach was more desirable than merely clogging a new court
with adversarial litigation proceedings.
As amended, the FAIR Act would establish an Office of
Special Asbestos Masters under the supervision of the existing
U.S. Court of Federal Claims. These special masters are charged
with making eligibility determinations within 60 days of
receiving a completed file. An individual special master
determination is initially reviewable by a panel of three
Special Masters and subsequently reviewable by a panel of three
judges from the Court of Federal Claims. These special asbestos
masters would be under the supervision of the Court of Federal
Claims. This structure mirrors the processing of claims under
the Vaccine Injury Compensation Program. Only appeals from
determinations of special masters' rulings would be heard in
the court system.
The FAIR Act as reported out of Committee, although an
improvement over the bill as originally proposed, still falls
short of providing an adequate administrative system for the
following reasons. First, the proposed court-based system does
not allow for centralized, uniform policy development. There is
neither a representative board nor an administrator authorized
to oversee the system, engage in substantive rulemaking, or
guide policy development. Instead, there is only a chief
special asbestos master, whose administrative authority is
limited to prescribing procedural rules, contracting for
necessary personnel and making expenditures necessary for the
office to fulfill its functions. While the system is ostensibly
intended to provide fair compensation in a non-adversarial
manner, nothing in the structure appears to encourage or even
permit the special masters or other personnel to engage in a
consultative process that would assist individuals in filing
claims and securing any compensation to which they are
entitled.
Second, delegating important rule-making authority to
officers of the Court of Federal Claims is not the best method
to ensure the unique goals of the FAIR Act. The court-based
system in the existing bill does not involve a representative
board or an administrator authorized to oversee the claims
processing system. The same judicial officers who would be
considering the victims' claims would also be promulgating
rules that might dramatically affect victims' access to
recovery. While the system is explicitlyintended to provide
fair compensation in a nonadversarial manner, nothing in the structure
appears to encourage or even permit the special masters or claims
examiners to engage in a consultative process that would assist
individuals in filing claims and securing any compensation to which
they are entitled.
The Court of Federal Claims is not well-suited to develop
methods for auditing medical evidence, to prescribe rules for
implementing diagnostic criteria requirements, or to develop
rules for identifying presumptive industries for significant
occupational exposure determinations as is expressly required
by the bill's language. Nor is it an appropriate body for
performing other administrative functions integral to the
overall compensation system, including, for example, outreach
activities, management of the trust fund, and rulemaking when,
as a result of recommendations from the Medical Advisory
Committee, it is necessary to update the medical or diagnostic
criteria.
To ensure a truly ``no-fault,'' non-adversarial system,
with minimized transaction costs, this legislation should
establish an independent agency or trust fund to administer the
compensation program. The hallmarks of such a system would
include:
(a) Policy leadership by a board comprised of
representatives of the parties to this process--i.e.,
claimants, defendant corporations and insurance
companies, labor representatives, and public health
professionals;
(b) Centralized oversight of claims handling, to
provide quality assurance, to ensure that claims are
processed in a manner consistent with the fund's
objectives and are processed expeditiously;
(c) A non-adversarial, ``user-friendly'' process, in
which personnel are charged with assisting the
claimants in presenting their claims and securing
necessary documentation, and decision makers are
authorized to engage in a consultative process with
claimants;
(d) An independent process within the administrative
system to resolve disputes arising from claims
determinations; and
(e) A final opportunity for judicial review on the
record at the court of appeals level.
If the goal of the FAIR Act is to resolve the vast majority
of claims without clogging the courts, an administrative review
process is a better solution. Amending the current legislation
to include an administrative process would resolve more claims
in less time. In addition, an administrative agency would be in
a better position to adopt standards consistent with the
express purpose of an alternative to the tort system and to
manage the initial consideration of the large volume of claims.
Inserting an administrative review process would uphold the
consensus goals of claims resolution in a no fault, non-
adversarial system. Judicial review would remain available but
the need for such court-based resources would be reduced with
the addition of an administrative process.

F. Other Unfair Provisions in S. 1125

The Committee-reported bill, while establishing a
presumption that awards will be paid within three years, does
not require that any portion of a claimant's award be paid
before the three years are up. Consequently, nothing in the
bill would prevent the Fund from forcing claimants who have
been determined to be eligible for an award to wait a full
three years--and in some cases four years--before they are paid
a penny of what they are due. If payments are to be spread out
over a period of three years, there must be protections to
ensure that they are spread at least evenly over that period,
and that claimants begin receiving their compensation
immediately upon receipt of a determination of eligibility. To
enact this legislation without such protections would make a
mockery of the bill's promise of prompt compensation.
If the FAIR Act were enacted in its current form, railroad
workers would lose their only recourse against an employer for
compensation for injuries resulting from exposure to asbestos
while all other workers would see their injury compensation
program remain intact. Under S. 1125, railroad workers would be
unfairly singled out because the bill preempts The Federal
Employers' Liability Act (FELA).
The FELA is both an injury compensation statute as well as
a safety statute. Congress established the FELA for two primary
reasons: (1) to provide compensation for injured railroad
workers; and, (2) to provide an incentive to American railroads
to operate safely by holding them accountable for the safety of
their workers.
The legislative effort to find a solution to the current
asbestos crisis is laudable; however, any legislation aimed at
providing a remedy should not come at the expense of one group
of workers. S. 1125, as introduced, unfortunately does that by
singling out railroad workers and treating their injury
compensation rights differently than all other workers. S. 1125
should be amended to remove this obvious inequity for railroad
workers.\109\
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\109\ During Committee consideration of S. 1125, Senator Durbin
offered an amendment to strike the preemption of FELA from the bill.
Unfortunately, this amendment was defeated on a party-line vote, with
all members of the majority voting against it and all members of the
minority voting for it.
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In addition, we believe that the provisions for medical
monitoring in the FAIR Act need to be improved to be both
effective and fair. We agree that medical monitoring is
appropriate compensation for Level 1 disease victims, and if
these victims become sicker, they will be compensated according
to their illness as it progresses and their health declines.
But to be effective and fair to these victims of asbestos
exposure, medical monitoring should not be offset by a victim's
health insurance as is currently required by S. 1125. These
costs are properly borne by the defendant and their insurers,
and a worker should not be penalized because he or she had the
foresight and means to purchase health insurance. Medical
monitoring compensation by the Fund should alsoinclude the cost
of the initial diagnosis of asbestos-related disease as a matter of
basic fairness.\110\
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\110\ During Committee consideration of S. 1125, Senator Leahy
offered an amendment to strike the requirement that the victim first
resort to his or her health insurance to pay monitoring costs and to
include the cost of the initial diagnosis of asbestos-related disease
as part of medical monitoring compensation. Unfortunately, this
amendment was defeated on a party-line vote, with all members of the
majority voting against it and all members of the minority voting for
it.
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Another clear unfairness in S. 1125 is that victims
suffering from asbestos-related diseases may have their awards
reduced to repay any insurance carrier, or any provider of
workers' compensation. The failure to protect compensation
awards from this subrogation is contrary to many existing
victim compensation programs. For example, the Radiation
Exposure Compensation Act of 1990, the Energy Employees
Occupational Illness Compensation Program Act, and the Ricky
Ray Hemophiliac Relief Fund Act of 1998 all contain strong
anti-subrogation language to protect awards to victims under
these compensation programs.\111\
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\111\ During Committee consideration of S. 1125, Senator Leahy
offered an amendment to add the same anti-subrogation provisions from
these three existing federal compensation programs to this bill.
Unfortunately, this amendment was defeated on a party-line vote, with
all members of the majority voting against it and all members of the
minority voting for it.
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In addition, this bill fails to provide medical screening
for high-risk workers. More than 27 million workers have been
exposed to asbestos on the job. For an asbestos compensation
program to be successful and truly serve workers, the program
must provide a way to identify those workers at high risk and
provide them information and medical screening and easy access
to the system. The FAIR Act provides medical monitoring for
individuals who have been diagnosed with pleural disease or
asbestosis, but who are not yet ill, to evaluate if their
conditions have worsened and if further medical treatment is
needed. The bill, however, fails to provide medical screening
of high risk workers to determine if they have developed
disease.
Medical screening of high-risk workers who have been
exposed to toxic substances is an established practice.
Virtually every health standard issued by the Occupational
Safety and Health Administration requires medical surveillance
of workers who are currently exposed above specified levels of
toxic substances. The Mine Safety and Health Administration
requires routine medical screening of coal miners to determine
if they have developed coal workers pneumoconiosis. In 1993,
the Department of Energy (DOE) established an outreach and
screening program for former workers who had been employed at
the DOE atomic weapons facilities who are at high risk of
disease due to exposure to beryllium, radiation and other
workplace hazards. Such initiatives are intended to identify
possible health changes or disease as early as possible, so
that steps can be taken to reduce exposures and risk and to
facilitate appropriate medical treatment. While OSHA requires
medical surveillance of workers currently exposed to asbestos,
there is no requirement for medical screening for workers who
were formerly exposed to asbestos and now at an increased risk
of asbestos-related disease.
Final asbestos compensation legislation should include
provision for the establishment of an outreach and medical
screening program for workers at high risk of disease. This
program should be funded by the asbestos trust fund, but to
ensure quality and independence should be overseen by the
National Institute for Occupational Safety and Health (NIOSH),
the government agency responsible for worker safety and health
research. NIOSH should establish the medical protocols and
standards for the screening program and identify those groups
that should be included in a screening program due to their
high levels of past exposures. In addition, NIOSH should
identify and enter into contracts with qualified providers to
carry out this screening. These providers should be
organizations or institutions with experience and expertise
that have the ability to reach individuals at high risk.
Medical screening of workers who have had significant
occupational exposure to asbestos and medical monitoring of
claimants who meet the exposure and medical requirements for
Category 1 will help to ensure that these individuals receive
timely diagnosis and treatment and are educated about actions
they can take to reduce their future health risk. The public
health benefits of these measures will, however, be undermined
if workers who take advantage of these opportunities are
discriminated against by health plan or health insurers because
their participation in these programs identifies them as being
at high risk for serious asbestos disease.
In 1996, Congress enacted the Health Insurance Portability
and Accountability Act (HIPAA), to prohibit health plans and
health insurers from discriminating against individuals on the
basis of health status and various enumerated health status-
related factors. Although we believe that participation in
medical screening or medical monitoring is a ``health-related
factor'' that falls within the protection of that Act, there is
some ambiguity in the statute. Therefore, we strongly support
adding provisions to the FAIR Act to clarify that workers
participating in any monitoring or screening program
established in this bill cannot be denied or lose their health
coverage for that reason.
Moreover, we believe this legislation should exempt
investment income in the fund from federal income tax in order
to increase the funds available to compensate victims, much as
the investment income in a 401(k) savings plan is currently
treated under the Internal Revenue Code. This tax incentive is
particularly appropriate given the federal government's role in
exposing so many veterans to asbestos-related products. Under
current law, trusts established for the sole purpose of
compensating asbestos victims are taxed at the high rate of
38%, thus limiting the funds available to asbestos
victims.\112\ We also believe that defendant and insurer
contributions and awards to claimants should be exempt from
taxation. We look forward to working with Chairman Grassley and
Ranking Member Baucus of the Finance Committee to increase
asbestos victim compensation through appropriate tax treatment
of the trust fund, contributions and awards.
---------------------------------------------------------------------------
\112\ Indeed, in response to questions at Committee's hearing on
asbestos litigation last September, David Austern, President of the
Manville Trust, estimated that exempting investment income from federal
taxation would increase the funds available to pay asbestos victims by
$100 million for the Manville Trust alone.
---------------------------------------------------------------------------

IV. CONCLUSION

Although we have authored and supported many bipartisan
improvements to this legislation--from medical criteria to
solvency safeguards to higher award values--this bill still has
many problems that need to be worked out before we can support
it.
Our undertaking is complex and unprecedented. It has not
been easy to work out the details necessary for consensus. But
the stakes are too high for us to leave the field before trying
our utmost to complete this task. We want to make every effort
to solve this crisis, and we commend and encourage all who are
working in good faith to help do that.
Certainty for defendants and insurers is a fine objective
but it must be coupled with fairness to the asbestos victims
whose rights this bill takes away. We have emphasized again and
again one basic, bedrock principle throughout this process: We
will not support a bill that contains inadequate compensation
for victims.
As it currently stands, this is not a bill that reduces the
high transaction costs in the current system, and puts more
money in the pockets of injured workers while reducing the
costs to businesses and their insurers. That would be a real
solution. This is a bill which merely shifts more of the
financial burden of asbestos-induced disease to the injured
workers by unfairly and arbitrarily limiting the liability of
defendants. Sick workers would receive lower levels of
compensation than they receive on average in the current
system, and payment of even those lower levels of compensation
would not be guaranteed. That is no solution at all. For these
reasons, we must vote ``no.'' We can do better than this.
Because consensus remains the best hope for us to pass a
bill this year, and because this matter is so important, as
disappointed as we are in the final product of the Committee's
deliberations, we intend to continue working for a fair
solution to this problem. We seek a bill that we can support
and that we can in good conscience urge our colleagues to
support. We are discouraged, but not resigned.
We need to continue our bipartisan work to achieve the
common ground needed to enact a good law. Acting together
through consensus remains, in our view, the only way to move a
bill through the legislative process and into law.

Patrick J. Leahy.
Edward M. Kennedy.
Joseph R. Biden, Jr.
Herbert Kohl.
Russell D. Feingold.
Charles E. Schumer.
Richard J. Durbin.
John Edwards.

MINORITY VIEW OF SENATOR BIDEN

Senator Biden joins in the minority views of Senators
Leahy, Kennedy, Biden, Kohl, Feingold, Schumer, Durbin and
Edwards, but finds it necessary to express separate views with
regard to the majority's discussion of the sunset provision in
Section 404 of S. 1125 (the ``Biden Sunset''), as well as
footnote 67's discussion of the same provision. As accurately
described in Senator Leahy's minority views, the Biden Sunset
complements the Feinstein-Kohl provision to ensure solvency of
the trust fund, which provides periodic checks of the funding
levels, starting in 2010. The Biden Sunset will check solvency
every year and permit reversion to the traditional tort system,
including state and federal courts, the year after the fund
fails to make its payments. It is only fair to return the
victims to where they were beforehand--the tort system.
Specifically, the Biden Sunset amendment would sunset the
fund and revert asbestos claims to the traditional tort system
if the Administrator of the Office of Special Asbestos Masters
fails to certify for any given year that: (1) 95 percent or
more of the asbestos claimants who filed claims in that year,
and who were determined to be eligible to receive compensation,
have received the compensation, and (2) 95 percent or more of
the total obligations of the Fund owed to eligible claimants in
that year have been paid.
S. 1125 would abridge victims' rights as they currently
exist under the tort system. If Congress abridges those rights,
it must be certain that the solution it creates will work 100%
as planned. The Biden Sunset makes certain that this
legislation ensures compensation for victims to the same extent
that it aids corporations facing asbestos liability. Just as
corporations are to be granted certainty, victims must be
granted the certainty that they will receive the compensation
to which they are entitled. Under the Biden Sunset, if the
legislation fails to achieve that goal, even after the various
backstops and safety nets created by the fund have come into
effect, it is only fair to put the victims back in the position
they would have been in absent the legislation.
Thus, the Biden Sunset serves as the ultimate backstop to
insure fairness in the system, whether in year 1, or in year 29
when the fund continues to operate only on a voluntary basis.
Senator Biden strongly disagrees with the following
statement in the majority report's discussion of Section 404:

The Committee is concerned that this Amendment was
adopted without a full understanding of the actual
language and the harsh consequences, ramifications and
implications thereof. The sponsor of the Amendment,
Senator Biden, has agreed to work with Members to
develop appropriate language to mitigate any unintended
consequences of this provision before floor
consideration of S. 1125.

First, this provision was more carefully debated and
analyzed than virtually all other provisions of the bill.
Indeed, in a very rare move, the roll call vote on the
amendment was suspended so that all Senators could fully
understand the provision. When the vote resumed, it passed by
an overwhelming, bipartisan margin of 15-4. Second, the
consequences of the provision are fairness, justice, and
certainty, attributes that Senator Biden finds neither
``harsh'' nor ``unintended.'' Third, as the majority well
knows, Senator Biden has not ``agreed to work with Members to
develop appropriate language to mitigate'' the effects of the
Biden Sunset. He has consented to no changes in the provision,
but, in a private conversation with Chairman Hatch and Senator
Graham of South Carolina, agreed to consider possible proposals
to modify the way the Biden Sunset is applied at the outset of
the Fund.
Joseph R. Biden.

XII. Changes in Existing Law

In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 1125, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in brackets, new matter is
printed in italic, and existing law in which no change is
proposed is shown in roman):

UNITED STATES CODE

* * * * * * *

TITLE 11--BANKRUPTCY

Chapter Section
1. General Provisions..................................... 101
301. Case Administration....................................

* * * * * * *

CHAPTER 3--CASE ADMINISTRATION

Subchapter Commencement of a Case

* * * * * * *

Subchapter IV--Administrative Powers

361. Adequate protection.
363. Automatic stay.
* * * * * * *

Sec. 362. Automatic stay

(a) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this title, or
an application filed under section 5(a)(3) of the Securities
Investor Protection Act of 1970, operates as a stay, applicable
to all entities, of--

* * * * * * *

(b) The filing of a petition under section 301, 302, or 303
of this title, or of an application under section 5(a)(3) of
the Securities Investor Protection Act of 1970, does not
operate as a stay--
(1) under subsection (a) of this section, of the
commencement or continuation of a criminal action or
proceeding against the debtor;

* * * * * * *

(17) under subsection (a) of this section, of the
setoff by a swap participant, of any mutual debt and
claim under or in connection with any swap agreement
that constitutes the setoff of a claim against the
debtor for any payment due from the debtor under or in
connection with any swap agreement against any payment
due to the debtor from the swap participant under or in
connection with any sway agreement or against cash,
securities, or the property of the debtor held by or
due from such swap participant to guarantee, secure or
settle any swap agreement; [or]
(18) under subsection (a) of the creation or
perfection of a statutory lien for an ad valorem
property tax imposed by the District of Columbia, or a
political subdivision of a State, if such tax comes due
after the filing of the petition[.]; or
(19) under subsection (a) of this section of the
enforcement of any payment obligations under section
204 of the Fairness in Asbestos Injury Resolution Act
of 2003, against a debtor, or the property of the
estate of a debtor, that is a participant (as that term
is defined in section 3 of that Act).
The provisions of paragraphs (12) and (13) of this subsection
shall apply with respect to any such petition filed on or
before December 31, 1989.

* * * * * * *

Sec. 365. Executory contracts and unexpired leases

(a) Except as provided in sections 765 and 766 of this
title and in subsections (b), (c), and (d) of this section, the
trustee, subject to the court's approval, may assume or reject
any executory contract or unexpired lease of the debtor.

* * * * * * *

(o) In a case under chapter 11 of this title, the trustee
shall be deemed to have assumed (consistent with the debtor's
other obligations under section 507), and shall immediately
cure any deficit under, any commitment by the debtor to a
Federal depository institutions regulatory agency (or
predecessor to such agency) to maintain the capital of an
insured depository institution, and any claim for a subsequent
breach of the obligations thereunder shall be entitled to
priority under section 507. This subsection shall not extend
any commitment that would otherwise be terminated by any act of
such an agency.
(p) If a debtor is a participant (as that term is defined
in section 3 of the Fairness in Asbestos Injury Resolution Act
of 2003), the trustee shall be deemed to have assumed all
executory contracts entered into by the participant under
section 204 of that Act. The trustee may not reject any such
executory contract.

* * * * * * *

CHAPTER 5--CREDITORS, THE DEBTOR, AND THE ESTATE

Subchapter I--Creditors and Claims

Sec.
501. Filing of proofs of claims or interests
* * * * * * *
503. Allowance of administrative expenses.
* * * * * * *

Sec. 503. Allowance of administrative expenses

(a) An entity may timely file a request for payment of an
administrative expense, or may tardily file such request if
permitted by the court for cause.
(b) After notice and a hearing, there shall be allowed
administrative expenses, other than claims allowed under
section 502(f) of this title, including--

* * * * * * *

(c)(1) Claims or expenses of the United States, the
Attorney General, or the Administrator (as that term is defined
in section 3 of the Fairness in Asbestos Injury Resolution Act
of 2003) based upon the asbestos payment obligations of a
debtor that is a Participant (as that term is defined in
section 3 of that Act), shall be paid as an allowed
administrative expense. The debtor shall not be entitled to
either notice or a hearing with respect to such claims.
(2) For purposes of paragraph (1), the term ``asbestos
payment obligation'' means any payment obligation under
subtitle B of title II of the Fairness in Asbestos Injury
Resolution Act of 2003.

* * * * * * *

Subchapter II--Debtor's Duties and Benefits

521. Debtor's duties.
* * * * * * *
523. Exceptions to discharge.
* * * * * * *

Sec. 523. Exceptions to discharge

(a) A discharge under section 724, 1141, 1228(a), 1228(b),
or 1328(b) of this title does not discharge an individual
debtor from any debt--
(1) for a tax or a customs duty--

* * * * * * *

(e) Any institution-affiliated party of a \1\ insured
depository institution shall be considered to be acting in a
fiduciary capacity with respect to the purposes of subsection
(a)(4) or (11).
---------------------------------------------------------------------------
\1\ So in original. Probably should be ``an''.
---------------------------------------------------------------------------
(f) A discharge under section 727, 1141, 1228, or 1328 of
this title does not discharge any debtor that is a participant
(as that term is defined in section 3 of the Fairness in
Asbestos Injury Resolution Act of 2003) of the payment
obligations that is a debtor under subtitle B of title II of
that Act.

Sec. 524. Effect of discharge

(a) A discharge in a case under this title--

* * * * * * *

(h) Application to existing injunctions.--For purposes of
subsection (g)--

* * * * * * *

(i) Participant Debtors.--
(1) In general.--Paragraphs (2) and (3) shall apply
to a debtor who--
(A) is a participant that has made prior
asbestos expenditures (as such terms are
defined in the Fairness in Asbestos Injury
Resolution Act of 2003); and
(B) is subject to a case under this title
that is pending--
(i) on the date of enactment of the
Fairness in Asbestos Injury Resolution
Act of 2003; or
(ii) at any time during the 1-year
period preceding the date of enactment
of that Act.
(2) Tier i debtors.--A debtor that has been assigned
to tier I under section 202 of the Fairness in Asbestos
Injury Resolution Act of 2003 shall make payments in
accordance with sections 202 and 203 of that Act.
(3) Treatment of payment obligations.--All payment
obligations of a debtor under sections 202 and 203 of
the Fairness in Asbestos Injury Resolution Act of 2003
shall--
(A) constitute costs and expenses of
administration of a case under section 503 of
this title;
(B) notwithstanding any case pending under
this title, be payable in accordance with
section 202 of that Act;
(C) not be stayed;
(D) not be affected as to enforcement or
collection by any stay or injunction of any
court; and
(E) not be impaired or discharged in any
current or future case under this title.
(j) Asbestos Trusts.--
(1) In general.--A trust shall assign a portion of
the corpus of the trust to the Asbestos Injury Claims
Resolution Fund (referred to in this subsection as the
``Fund'') as established under the Fairness in Asbestos
Injury Resolution Act of 2003 if the trust qualifies as
a ``trust'' under section 201 of that Act.
(2) Transfer of trust assets.--
(A) In general.--Except as provided under
subparagraphs (B) and (C), the assets in any
trust established to provide compensation for
asbestos claims (as defined in section 3 of the
Fairness in Asbestos Injury Resolution Act of
2003) shall be transferred to the Fund not
later than 6 months after the date of enactment
of the Fairness in Asbestos Injury Resolution
Act of 2003. Except as provided under
subparagraph (B), the Administrator of the Fund
shall accept such assets and utilize them for
any purposes of the Fund under section 223 of
such Act, including the payment of claims for
awards under such Act to beneficiaries of the
trust from which the assets were transferred.
After such transfer, each trustee of such trust
shall have no liability to any beneficiary of
such trust.
(B) Authority to refuse assets.--The
Administrator of the Fund may refuse to accept
any asset that the Administrator determines may
create liability for the Fund in excess of the
value of the asset.
(C) Allocation of trust assets.--If a trust
under subparagraph (A) has beneficiaries with
claims that are not asbestos claims, the assets
transferred to the Fund under subparagraph (A)
shall not include assets allocable to such
beneficiaries. The trustees of any such trust
shall determine the amount of such trust assets
to be reserved for the continuing operation of
the trust in processing and paying claims that
are not asbestos claims. Such reserved amount
shall not be greater than 3 percent of the
total assets in the trust and shall not be
transferred to the Fund.
(D) Sale of fund assets.--The investment
requirements under section 222 of the Fairness
in Asbestos Injury Resolution Act of 2003 shall
not be construed to require the Administrator
of the Fund to sell assets transferred to the
Fund under subparagraph (A).
(E) Liquidated claims.--A trust shall not
make any payment relating to asbestos claims
unless such claims were liquidated in the
ordinary course and the normal and usual
administration of the trust consistent with
past practices before the date of enactment of
the Fairness in Asbestos Injury Resolution Act
of 2003.
(3) Injunction.--Any injunction issued as part of the
formation of a trust described in paragraph (1) shall
remain in full force and effect.
* * * * * * *

Subchapter III--The Estate

541. Property of the estate.
* * * * * * *
546. Limitations on avoiding powers.
* * * * * * *

Sec. 546. Limitation on avoiding powers.

(a) An action or proceeding under section 544, 545, 547,
548, or 553 of this title may not be commenced after the
earlier of--
* * * * * * *
(h) Notwithstanding the rights and powers of a trustee
under sections 544, 545, 547, 548, 549, and 550 of this title,
if a debtor is a participant (as that term is defined in
section 3 of the Fairness in Asbestos Injury Resolution Act of
2003), the trustee may not avoid a transfer made by the debtor
pursuant to its payment obligations under section 202 or 203 of
that Act.

CHAPTER 11--REORGANIZATION

Subchapter I--Officers and Administration

* * * * * * *

Subchapter II--The Plan

1121. Who may file a plan.
* * * * * * *
1129. Confirmation of plan.
* * * * * * *

Sec. 1129. Confirmation of plan

(a) The court shall confirm a plan only if all of the
following requirements are met:
(1) The plan complies with the applicable provisions
of this title.
* * * * * * *
(14) If the debtor is a participant (as that term is
defined in section 3 of the Fairness in Asbestos Injury
Resolution Act of 2003), the plan provides for the
continuation after its effective date of payment of all
payment obligations under title II of that Act.

TITLE 18--CRIMES AND CRIMINAL PROCEDURE

Part Section
I. CRIMES................................................. 1
* * * * * * *

PART I--CRIMES

Chapter Section
1. General provisions..................................... 1
* * * * * * *
39. Explosives and combustibles........................... 831
39A. Ban of asbestos containing products.................. 838
* * * * * * *

CHAPTER 39--EXPLOSIVES AND OTHER DANGEROUS ARTICLES

Sec.
831. Prohibited transactions involving nuclear materials.
[832 to 835. Repealed.]
836. Transportation of fireworks into State prohibiting sale or use.
[837. Repealed.]
838. Ban of asbestos containing products.
* * * * * * *

CHAPTER 39A--BAN OF ASBESTOS CONTAINING PRODUCTS

Sec. 838. Ban of asbestos containing products

(a) Definitions.--In this chapter:
(1) Administrator.--The term ``Administrator'' means
the Administrator of the Environmental Protection
Agency.
(2) Asbestos.--The term ``asbestos'' includes--
(A) chrysotile;
(B) amosite;
(C) crocidolite;
(D) tremolite asbestos;
(E) winchite asbestos;
(F) richterite asbestos;
(G) anthophyllite asbestos;
(H) actinolite asbestos;
(I) any of the minerals listed under
subparagraphs (A) through (H) that has been
chemically treated or altered, and any
asbestiform variety, type or component thereof.
(3) Asbestos containing product.--The term ``asbestos
containing product'' means any product (including any
part) to which asbestos is deliberately or knowingly
added or used because the specific properties of
asbestos are necessary for product use or function.
Under no circumstances shall the term ``asbestos
containing product'' be construed to include products
that contain de minimus levels of naturally occurring
asbestos as defined by the Administrator not later than
1 year after the date of enactment of this chapter.
(4) Distribute in commerce.--The term ``distribute in
commerce''--
(A) has the meaning given the term in section
3 of the Toxic Substances Control Act (15
U.S.C. 2602); and
(B) shall not include--
(i) an action taken with respect to
an asbestos containing product in
connection with the end use of the
asbestos containing product by a person
that is an end user, or an action taken
by a person who purchases or receives a
product, directly or indirectly from an
end user; or
(ii) distribution of an asbestos
containing product by a person solely
for the purpose of disposal of the
asbestos containing product in
compliance with applicable Federal,
State, and local requirements.
(b) In General.--Subject to subsection (c), the
Administrator shall, after consultation with the Assistant
Attorney General for the Environmental and Natural Resources
Division of the United States Department of Justice,
promulgate--
(1) not later than 1 year after the date of enactment
of this chapter, proposed regulations that--
(A) prohibit persons from manufacturing,
processing, or distributing in commerce
asbestos containing products; and
(B) provide for implementation of subsections
(c) and (d); and
(2) not later than 2 years after the date of
enactment of this chapter, final regulations that,
effective 60 days after the date of promulgation,
prohibitpersons from manufacturing, processing, or
distributing in commerce asbestos containing products.
(c) Exemptions.--
(1) In general.--Any person may petition the
Administrator for, and the Administrator may grant an
exemption from the requirements of subsection (b), if
the Administrator determines that--
(A) the exemption would not result in an
unreasonable risk of injury to public health or
the environment; and
(B) the person has made good faith efforts to
develop, but has been unable to develop, a
substance, or identify a mineral that does not
present an unreasonable risk of injury to
public health or the environment and may be
substituted for an asbestos containing product.
(2) Terms and conditions.--An exemption granted under
this subsection shall be in effect for such period (not
to exceed 5 years) and subject to such terms and
conditions as the Administrator may prescribe.
(3) Governmental use.--
(A) In general.--The Administrator of the
Environmental Protection Agency shall provide
an exemption from the requirements of
subsection (a), without review or limit on
duration, if such exemption for an asbestos
containing product is--
(i) sought by the Secretary of
Defense and the Secretary certifies,
and provides a copy of that
certification to Congress, that--
(I) use of the asbestos
containing product is necessary
to the critical functions of
the Department;
(II) no reasonable
alternatives to the asbestos
containing product exist for
the intended purpose; and
(III) use of the asbestos
containing product will not
result in an unreasonable risk
to health or the environment;
or
(ii) sought by the Administrator of
the National Aeronautics and Space
Administration and the Administrator of
the National Aeronautics and Space
Administration certifies, and provides
a copy of that certification to
Congress, that--
(I) the asbestos containing
product is necessary to the
critical functions of the
National Aeronautics and Space
Administration;
(II) no reasonable
alternatives to the asbestos
containing product exist for
the intended purpose; and
(III) the use of the asbestos
containing product will not
result in an unreasonable risk
to health or the environment.
(B) Administrative procedure act.--Any
certification required under subparagraph (A)
shall not be subject to chapter 5 of title 5,
United States Code (commonly referred to as the
``Administrative Procedure Act'').
(4) Specific exemptions.--The following are exempted:
(A) Asbestos diaphragms for use in the
manufacture or chlor-alkali and the products
and derivative therefrom.
(B) Roofing cements, coatings and mastics
utilizing asbestos that is totally encapsulated
with asphalt, subject to a determination by the
Administrator of the Environmental Protection
Agency under paragraph (5).
(5) Environmental protection agency review.--
(A) Review in 18 months.--Not later than 18
months after the date of enactment of this
chapter, the Administrator of the Environmental
Protection Agency shall complete a review of
the exemption for roofing cements, coatings,
and mastics utilizing asbestos that are totally
encapsulated with asphalt to determine
whether--
(i) the exemption would result in an
unreasonable risk of injury to public
health or the environment; and
(ii) there are reasonable, commercial
alternatives to the roofing cements,
coatings, and mastics utilizing
asbestos that is totally encapsulated
with asphalt.
(B) Revocation of exemption.--Upon completion
of the review, the Administrator of the
Environmental Protection Agency shall have the
authority to revoke the exemption for the
products exempted under paragraph (4)(B) if
warranted.
(d) Disposal.--
(1) In general.--Except as provided in paragraph (2),
not later than 3 years after the date of enactment of
this chapter, each person that possesses an asbestos
containing product that is subject to the prohibition
established under this section shall dispose of the
asbestos containing product, by a means that is in
compliance with applicable Federal, State, and local
requirements.
(2) Exemption.--Nothing in paragraph (1)--
(A) applies to an asbestos containing product
that--
(i) is no longer in the stream of
commerce; or
(ii) is in the possession of an end
user or a person who purchases or
receives an asbestos containing product
directly or indirectly from an end
user; or
(B) requires that an asbestos containing
product described in subparagraph (A) be
removed or replaced.
* * * * * * *

CHAPTER 63--MAIL FRAUD

Sec.
1341. Frauds and swindles.
* * * * * * *
1347. Health care fraud.
1348. Fraud and false statements in connection with participation in
Asbestos Injury Claims Resolution Fund.
* * * * * * *

Sec. 1348. Fraud and false statement in connection with participation
in Asbestos Injury Claims Resolution Fund

(a) Fraud Relating to Asbestos Injury Claims Resolution
Fund.--Whoever knowingly and willfully executes, or attempts to
execute, a scheme or artifice to defraud the Asbestos Insurers
Commission or the Office of Asbestos Injury Claims Resolution
under title II of the Fairness in Asbestos Injury Resolution
Act of 2003 shall be fined under this title or imprisoned not
more than 20 years, or both.
(b) False Statements Relating to Asbestos Injury Claims
Resolution Fund.--Whoever, in any matter involving the Asbestos
Insurers Commission or the Office of Asbestos Injury Claim
Resolution, knowingly and willfully--
(1) falsifies, conceals, or covers up by any trick,
scheme, or device a material fact;
(2) makes any materially false, fictitious, or
fraudulent statements or representations; or
(3) makes or uses any false writing or document
knowing the same to contain any materially false,
fictitious, or fraudulent statement or entry,
in connection with the award of a claim or the
assessment of contributions under title I or II of the
Fairness in Asbestos Injury Resolution Act of 2003
shall be fined under this title or imprisoned not more
than 10 years, or both.
* * * * * * *