[House Report 112-687]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 112-687
======================================================================
FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT) ACT OF 2012
_______
September 21, 2012.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Smith of Texas, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 4369]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 4369) to amend title 11 of the United States Code to
require the public disclosure by trusts established under
section 524(g) of such title, of quarterly reports that contain
detailed information regarding the receipt and disposition of
claims for injuries based on exposure to asbestos, and the
filing of such reports with the Executive Office for United
States Trustees, having considered the same, reports favorably
thereon with amendments and recommends that the bill as amended
do pass.
CONTENTS
Page
The Amendments................................................... 2
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 3
Hearings......................................................... 15
Committee Consideration.......................................... 15
Committee Votes.................................................. 15
Committee Oversight Findings..................................... 25
New Budget Authority and Tax Expenditures........................ 25
Congressional Budget Office Cost Estimate........................ 25
Performance Goals and Objectives................................. 26
Advisory on Earmarks............................................. 26
Section-by-Section Analysis...................................... 27
Changes in Existing Law Made by the Bill, as Reported............ 27
Dissenting Views................................................. 29
The Amendments
The amendments are as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Furthering Asbestos Claim
Transparency (FACT) Act of 2012''.
SEC. 2. AMENDMENTS.
Section 524(g) of title 11, United States Code, is amended by
adding at the end the following:
``(8) A trust described in paragraph (2) shall, subject to section
107--
``(A) file with the bankruptcy court, not later than 60
days after the end of every quarter, a report that shall be
made available on the court's public docket and with respect to
such quarter--
``(i) describes each demand the trust received
from, including the name and exposure history of, a
claimant and the basis for any payment from the trust
made to such claimant; and
``(ii) does not include any confidential medical
record or the claimant's full social security number;
and
``(B) upon written request, and subject to payment
(demanded at the option of the trust) for any reasonable cost
incurred by the trust to comply with such request, provide in a
timely manner any information related to payment from, and
demands for payment from, such trust, subject to appropriate
protective orders, to any party to any action in law or equity
if the subject of such action concerns liability for asbestos
exposure.''.
SEC. 3. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as provided in subsection (b), this Act
and the amendments made by this Act shall take effect on the date of
the enactment of this Act.
(b) Application of Amendments.--The amendments made by this Act
shall apply with respect to cases commenced under title 11 of the
United States Code before, on, or after the date of the enactment of
this Act.
Amend the title so as to read:
A bill to amend title 11 of the United States Code to
require the public disclosure by trusts established under
section 524(g) of such title, of quarterly reports that contain
detailed information regarding the receipt and disposition of
claims for injuries based on exposure to asbestos; and for
other purposes.
Purpose and Summary
H.R. 4369, the Furthering Asbestos Claim Transparency
(FACT) Act of 2012, adds a paragraph to subsection (g) of
section 524 of the Bankruptcy Code, 11 U.S.C. Sec. Sec. 101 et
seq., to require a trust established pursuant to that
subsection to file, each quarter, a public report with the
bankruptcy court listing the name and exposure history (viz.
exposure to asbestos) of those who have filed a claim with such
trust.\1\ It further requires each such trust to provide, upon
written request, information related to payment from, and
demands for payment from, such trust to any party in an action
involving liability for asbestos exposure.\2\
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\1\Furthering Asbestos Claim Transparency (FACT) Act of 2012, H.R.
4369, 112th Cong. Sec. 2 (2012).
\2\Id.
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Background and Need for Legislation
A. ASBESTOS AND ASBESTOS-RELATED HEALTH CONDITIONS
Asbestos is the name given to a number of naturally
occurring fibrous minerals that were widely used in the United
States in industrial products throughout much of the 20th
Century. Humans have used asbestos for centuries. The word
``asbestos'' comes from the Greek word for ``indestructible,''
and the ancient world used asbestos for everything from fabrics
to lamp wicks.\3\ In the 1860's, it was first commercially used
in the United States as insulation. Because asbestos is strong,
durable, and has excellent fire-retardant capability, it was
widely used in industrial and other work and residential
settings through the early 1970's. It was regarded as a miracle
fiber, versatile enough to weave into textiles, integrate into
insulation, line the brakes of automobiles, and construct
flame-retardant hulls for naval and merchant ships. Asbestos
consumption in the United States peaked in 1973 and then
dropped dramatically over the next three decades.\4\
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\3\Manhattan Institute, A Report on the Asbestos Litigation
Industry, 4 (2008), available at http://www.triallawyersinc.com/pdfs/
TLI-ASBESTOS.pdf (last visited Aug. 1, 2012).
\4\Id. (``The asbestos industry in the United States grew
astronomically in the twentieth century: asbestos consumption went from
only 956 metric tons in 1890 to a peak of 803,000 tons in 1973.'').
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Despite the usefulness of asbestos in industrial products,
asbestos fibers are toxic when inhaled. Inhalation of asbestos
fibers has been linked to a number of injuries, including
mesothelioma, lung cancer, asbestosis, and pleural
abnormalities. Mesothelioma is a deadly cancer of the lining of
the chest or abdomen for which asbestos is the only known
cause. Lung cancer is the other frequently claimed malignant
disease that can be caused by asbestos, although some other
forms of cancer may be related to asbestos exposure.
Asbestosis, a chronic lung disease resulting from inhalation of
asbestos fibers, can be debilitating and even fatal. Pleural
plaques, pleural thickening, and pleural effusion are
abnormalities of the pleura, the membrane that lines the inside
of the chest wall and covers the outside of the lung.
B. ASBESTOS LITIGATION
Asbestos litigation is the longest-running mass tort
litigation in the United States.\5\ Personal injury litigation
related to asbestos exposure ``has continued for over 40 years
in the United States with hundreds of thousands of claims filed
and billions of dollars in compensation paid.''\6\ Asbestos
litigation's distinguishing feature has been its tendency to
reshape itself over time. The focus of the litigation has
shifted from Federal to state courts, and now, increasingly, to
asbestos bankruptcy trusts.
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\5\Stephen J. Carroll et al., Asbestos Litigation, xvii (2005).
\6\Lloyd Dixon et al., Asbestos Bankruptcy Trusts: An Overview of
Trust Structure and Activity with Detailed Reports on the Largest
Trusts, xi (2010).
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Asbestos litigation arose as a result of individuals' long-
term and widespread exposure to asbestos, and as a result of
many asbestos product manufacturers' failure to protect workers
against exposure and failure to warn their workers to take
adequate precautions against exposure. Over time, asbestos
litigation ``has been shaped by changes in substantive and
procedural law, the rise of a sophisticated and well-
capitalized plaintiff bar, heightened media attention to
litigation in general and toxic tort litigation in particular,
and the information science revolution.''\7\
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\7\Carroll, supra note 5, at xvii.
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The U.S. Court of Appeals for the Fifth Circuit upheld the
first successful asbestos liability suit in 1973.\8\ A worker
sued the manufacturers of asbestos-containing products on a
theory of product liability (a strict liability tort); the
defendants' affirmative defense that their products contained
ample warning about the dangers of using the product proved
insufficient.\9\ Prior to the Fifth Circuit's decision,
employees exposed to asbestos had recourse only to workers'
compensation claims to recover for their asbestos-related
injuries. After the Fifth Circuit's decision, the volume of
asbestos litigation exploded--so much so that in 1990, the
Chief Justice of the United States Supreme Court appointed the
Ad Hoc Committee on Asbestos Litigation to address what the
Court later referred to as the ``asbestos-litigation
crisis.''\10\
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\8\Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir.
1973).
\9\Id. at 1109.
\10\Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 597 (1997).
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The crisis has not abated. By the early 2000's, ``the
overwhelming majority of claims--up to 90 percent--were filed
on behalf of plaintiffs who were `completely asymptomatic.'
These claimants may have had some marker of exposure, such as
changes in the pleural membrane of their lungs, but `are not
now and never will be afflicted by disease.'''\11\ Conversely,
when asbestos litigation first arose in the 1960's, most
claimants were ``workers suffering from grave and crippling
maladies.''\12\
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\11\David C. Landin et al., Lessons Learned from the Front Lines: A
Trial Court Checklist for Promoting Order and Sound Policy in Asbestos
Litigation, 16 J.L. & Pol'y 589, 595-96 (2008) (internal citations
omitted).
\12\The Fairness in Asbestos Compensation Act of 1999: Hearing on
H.R. 1283, Before the H. Comm. on the Judiciary, 106th Cong. 67 (1999)
(statement of Christopher Edley, Jr., Professor, Harvard Law School).
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Thus, the hallmark of the litigation has been the mass
filing of lawsuits by plaintiffs with little or no physical
impairment and claims made by plaintiffs without reliable proof
of causation, both of which have helped force scores of
defendant companies into bankruptcy and have threatened
payments to the truly sick. A 2005 RAND report estimated that,
through 2002, approximately 730,000 people had filed asbestos
claims against at least 8,400 corporate defendants.\13\ These
defendants included miners and manufacturers of asbestos or
asbestos-containing products, purchasers of asbestos products,
insurers, and businesses that used asbestos or asbestos-
containing products in the course of their industry. Awards,
legal fees, and other claim-related costs have risen into the
tens of billions of dollars. To date, asbestos-related
liabilities and litigation have driven approximately 100
companies into bankruptcy.\14\
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\13\Carroll et al., supra note 5, at 71.
\14\U.S. Government Accountability Office, Asbestos Injury
Compensation: The Role and Administration of Asbestos Trusts, GAO-11-
819 (2011), at 2.
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Inundated with cases involving thousands of plaintiffs and
dozens of defendants, courts had great difficulty in resolving
asbestos cases. Several factors contributed to the courts'
difficulty in resolving the litigation: ``the widespread use of
asbestos, which exposed as many as 27.5 million Americans to
asbestos in the course of their employment; a long latency
period for asbestos diseases; a segment of the plaintiffs' bar
that sought to capitalize on the asbestos litigation boom by
seeking settlements for plaintiffs with no known diseases; and
the failure of global settlements through class-action
lawsuits.''\15\
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\15\Dixon et al, supra note 6, at 2.
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Various Federal reform efforts have been offered in order
to better manage the resolution of the massive number of
asbestos claims and to provide compensation for asbestos
claimants.\16\ But ``[d]espite the judicial remedies,
legislative wrangling, and more than 40 years of lawsuits,
asbestos claims continue to this day.''\17\
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\16\See e.g. Asbestos Compensation Fairness Act, H.R. 1957, 109th
Cong. (2005); Fairness in Asbestos Injury Resolution (FAIR) Act, S.
852, 109th Cong. (2005).
\17\Id.
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C. ASBESTOS LITIGATION FRAUD
Courts, overwhelmed by asbestos claims developed special
asbestos rules to facilitate the management of the asbestos
claims on their dockets. These special rules, however, ``tipped
the scale of justice in favor of plaintiffs by compelling
defendant companies to settle mass quantities of claims at one
time.''\18\ With the scale tipped in their favor ``plaintiffs'
firms responded opportunistically to their success by
developing screening measures to recruit hundreds of thousands
of claimants, asbestos litigation reached crisis status.''\19\
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\18\Elise Gelinas, Asbestos Fraud Should Lead to Fairness: Why
Congress Should Enact the Fairness in Asbestos Injury Resolutions Act,
69 Md. L. Rev. 162 (2009).
\19\Id.
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Asbestos lawyers hired screening companies to recruit
potential claimants who, although not currently suffering from
asbestos-related injuries, exhibited symptoms of exposure.
``Labor unions, attorneys, and other persons with suspect
motives caused large numbers of people to undergo X-ray
examinations (at no cost), thus triggering thousands of claims
by persons who had never experienced adverse symptoms.''\20\
These screening companies used mobile X-ray vans to seek out
potential clients in the parking lots of hotels and
restaurants. The sole object of these screenings was to
generate evidence--X-rays, pulmonary function tests, and
medical reports--to support claims of asbestos-related
injuries.\21\ As former United States Attorney General Griffin
Bell has observed, ``[t]here often is no medical purpose for
these screenings and claimants receive no medical follow-
up.''\22\
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\20\Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 723
(D. Del. 2005).
\21\Lester Brickman, The Use of Litigation Screenings in Mass
Torts: A Formula for Fraud?, 61 SMU L. Rev. 1221, 1233 (2008).
\22\Griffin B. Bell, Asbestos & The Sleeping Constitution, 31 Pepp.
L. Rev. 1, 5 (2003).
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These mass screening were wildly successful and generated
massive numbers of claims for plaintiffs' attorneys. The
claimant recruiting process was described by U.S. News & World
Report: ``To unearth new clients for lawyers, screening firms
advertise in towns with many aging industrial workers or park
X-ray vans near union halls. To get a free X-ray, workers must
often sign forms giving law firms 40 percent of any recovery.
One solicitation reads: `Find out if YOU have MILLION DOLLAR
LUNGS!'''\23\ It is estimated that more than one million
workers have undergone attorney-sponsored screenings.\24\ As
one worker explained, ``it's better than the lottery. If they
find anything, I get a few thousand dollars I didn't have. If
they don't find anything, I've just lost an afternoon.''\25\
According to legal scholars, ``without these claims, the
`asbestos litigation crisis' would never have arisen.''\26\
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\23\Pamela Sherrid, ``Looking for Some Million Dollar Lungs,'' U.S.
News & World Rep., Dec. 17, 2001, at 36.
\24\See Lester Brickman, On the Theory Class's Theories of Asbestos
Litigation: The Disconnect Between Scholarship and Reality, 31 Pepp. L.
Rev. 33, 69 (2003).
\25\Andrew Schneider, ``Asbestos Lawsuits Anger Critics,'' St.
Louis Post-Dispatch, Feb. 11, 2003, at A1.
\26\Lester Brickman, Lawyers' Ethics and Fiduciary Obligation in
the Brave New World of Aggregative Litigation, 26 Wm. & Mary Envtl. L.
& Pol'y Rev. 243, 273 (2001).
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An American Bar Association Commission on Asbestos
Litigation confirmed that claims filed by the non-sick
generally arose from for-profit screening companies whose sole
purpose was to identify large numbers of people with minimal X-
ray changes consistent with asbestos exposure.\27\ The
Commission, with the help of the American Medical Association,
consulted prominent occupational-medicine and pulmonary-disease
physicians to craft legal standards for asbestos-related
impairment. The Commission found: ``[s]ome X-ray readers spend
only minutes to make these findings, but are paid hundreds of
thousands of dollars--in some cases, millions--in the aggregate
by the litigation screening companies due to the volume of
films read.''\28\ The Commission also reported that litigation
screening companies were finding X-ray evidence that was
consistent with asbestos exposure at a ``startlingly high''
rate, often exceeding 50% and sometimes reaching 90%.\29\
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\27\Mark A. Behrens and Phil Goldberg, The Asbestos Litigation
Crisis: The Tide Appears to be Turning, 12 Conn. Ins. L.J. 477, 480
(2006).
\28\ABA Comm'n on Asbestos Litigation, ABA Report to the House of
Delegates 8 (2003).
\29\Id.
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Researchers at Johns Hopkins University compared the X-ray
interpretations of B Readers employed by plaintiffs' counsel
with the subsequent interpretations of six independent B
Readers who had no knowledge of the X-rays' origins. The study
found that, while B Readers hired by plaintiffs claimed
asbestos-related lung abnormalities in almost 96% of the X-
rays, the independent B Readers found abnormalities in less
than 5% of the same X-rays--a difference the researchers said
was ``too great to be attributed to inter-observer
variability.''\30\
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\30\Joseph N. Gitlin et al., Comparison of `B' Readers'
Interpretations of Chest Radiographs for Asbestos Related Changes, 11
Acad. Radiology 843, 852 (2004).
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One physician, Dr. Lawrence Martin, has explained the
reason why plaintiffs' B Readers seem to see asbestos-related
lung abnormalities on chest X-rays in numbers not seen by
neutral experts. Dr. Martin has said, ``the chest X-rays are
not read blindly, but always with knowledge of some asbestos
exposure and that the lawyer wants to file litigation on the
worker's behalf.''\31\ In 2005, Senior U.S. District Court
Judge John Fullam said that many B Readers hired by plaintiffs'
lawyers were ``so biased that their readings were simply
unreliable.''\32\ As Dr. James Crapo, a leading medical expert
on asbestos-related diseases, has observed, claimants are being
compensated ``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.''\33\
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\31\David E. Bernstein, Keeping Junk Science Out of Asbestos
Litigation, 31 Pepp. L. Rev. 11, 13 (2003) (quoting Lawrence Martin,
M.D.).
\32\Owens Corning, 322 B.R. at 723.
\33\Lester Brickman & Harvey D. Shapiro, ``Asbestos Kills--And More
than Just People: Jobs, Ethics, and Elementary Justice,'' Nat'l. Rev.,
Jan. 31, 2005.
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Professor Lester Brickman, an expert on asbestos
litigation, concluded that
Asbestos litigation has become a malignant enterprise
which mostly consists of a massive client-recruitment
effort that accounts for as much as 90 percent of all
claims currently being generated, supported by baseless
medical evidence which is not generated by good-faith
medical practice, but rather is primarily a function of
the compensation paid, and by claimant testimony
scripted by lawyers to identify exposure to certain
defendants' products.\34\
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\34\Lester Brickman, On the Theory Class's Theories of Asbestos
Litigation: The Disconnect Between Scholarship and Reality, 31 Pepp. L.
Rev. at 33.
Screening programs declined in prominence following a
landmark ruling by U.S. District Court Judge Janis Jack, who
issued a 300-plus page order detailing methods used to generate
fraudulent asbestos and silica claims in 2005.\35\ In the wake
of Judge Jack's opinion, which noted that many asbestos and
silica cases are ``driven neither by health nor justice'' and
are instead ``manufactured for money,''\36\ Congress convened
hearings on fraud and abuse in asbestos litigation.\37\ A
Federal grand jury was empanelled in the Southern District of
New York.\38\
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\35\In re Silica Products Liability Litigation, 398 F.Supp.2d 563
(S.D. Tex. 2005).
\36\Id. at 635.
\37\The Silicosis Story: Hearings Before the Subcomm. on Oversight
and Investigations of the Committee on Energy and Comm., 109th Cong.
(2006).
\38\Adam Liptak, Defendants See a Case of Diagnosing for Dollars,
N.Y. Times, October 1, 2007, available at http://www.nytimes.com/2007/
10/01/us/01bar.html (last accessed Sep. 18, 2012) (``A grand jury was
convened in Manhattan more than 2 years ago to look into potential
fraud in silicosis cases. . . .'').
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Many believed the decline of mass screenings and enactment
of medical criteria statutes in major asbestos venue states
marked the beginning of a new, fairer asbestos compensation
system;\39\ however, the Committee has recently received
testimony suggesting that screening programs are being used to
generate asbestos trust claims.\40\
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\39\See e.g., Ohio Rev. Code Ann. Sec. 2307.91 et. seq. (enacted
2004), Tex. Civ. Prac. & Rem. Sec. 90.001 et. seq. (last amended 2007).
\40\How Fraud and Abuse in the Asbestos Compensation System Affect
Victims, Jobs, the Economy, and the Legal System: Hr'g Before the
Subcomm. on the Constitution of the H. Comm. on the Judiciary, 112th
Cong. 5-6 (2011) [hereinafter Constitution Subcommittee Hr'g]
(testimony of Professor Lester Brickman).
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The asbestos bar is also using new techniques to recruit
potential trust claimants. While screenings were often
advertised in break rooms, in local papers, and on local
broadcast stations,\41\ the modern asbestos plaintiffs' bar
spends billions of dollars on mass media advertisements
designed to recruit potential asbestos tort plaintiffs and
trust claimants.\42\ Experts estimate that asbestos plaintiffs'
firms spent over $950 million on television advertising in
2011.\43\ Trial lawyers' ad campaigns extend beyond television,
and experts estimate that the asbestos bar spends tens of
millions each year on sophisticated online advertising
campaigns.\44\ ``Mesothelioma'' has become the single most
expensive keyword on Google's auction-style AdWords
platform.\45\
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\41\See Patrick M. Hanlon & Anne Smetak, Asbestos Changes, 62
N.Y.U. Ann. Surv. Am. Law 525, 593 (2007); Lester Brickman, On the
Applicability of the Silica MDL Proceeding to Asbestos Litigation, 12
Conn. Ins. L.J. 10 (2006); Lester Brickman, Ethical Issues in Asbestos
Litigation, 33 Hofstra L. Rev. 833, 833-34 (2005).
\42\Kenneth M.Goldstein, Panel discussion at U.S. Chamber Institute
for Legal Reform's 12th Annual Legal Reform Summit (October 26, 2011)
(associated slides available at http://www.instituteforlegalreform.com/
sites/default/files/
Lawyers_Mass_Tort_Solicitation_Advertising_Oct2011.pdf).
\43\Id.
\44\See New Media Strategies, The Plaintiffs' Bar Goes Digital
(January 2012), available at; http://www.instituteforlegalreform.com/
doc/the-plaintiffs-bar-goes-digital-0 (last accessed Sep. 18, 2012).
\45\Id. at 7 (``Trial attorneys spend as much as $80 per click on
mesothelioma-related search terms, far exceeding industry averages for
search terms . . . ranked as most expensive by Google AdWords'').
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Many asbestos firms' advertisements are designed to attract
the attention of unimpaired individuals, smokers stricken by
lung cancer, and others whose claims would be difficult to
pursue in the modern tort system.\46\ At least one firm advises
lung cancer victims that billions of dollars have been set
aside in ``U.S. Compensation Trust Funds . . . to financially
assist individuals with lung cancer'' while making no mention
of asbestos.\47\
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\46\See e.g. Weitz & Luxenberg P.C. Television Ad, http://
www.youtube.com/watch?v=
6yrieyZtfr4 (last visited September 18, 2012) (``You are entitled to
compensation even if you've been a smoker!'').
\47\The David Law Firm--Lung Cancer, http://www.calldavid.com/lung-
cancer.html (last visited Sept. 18, 2012).
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D. ASBESTOS CLAIMS IN BANKRUPTCY
The accumulation of liability on the part of asbestos
defendants throughout the 1980's and early 1990's, and the
widespread use by those companies of chapter 11 bankruptcy to
manage their liability, led Congress in 1994 to amend the
Bankruptcy Code to include a section, 11 U.S.C. Sec. 524(g), to
provide for the resolution of asbestos liability claims against
the debtor.\48\ Under that section, a debtor is permitted to
create, in its plan of reorganization, a trust that is to be
the exclusive source of post-confirmation compensation for the
debtor's future asbestos liability. If the trust meets certain
prescribed requirements, the debtor, after its successful
reorganization, is granted a channeling injunction that
prohibits any asbestos plaintiff from suing the reorganized
debtor for asbestos liability.\49\
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\48\Bankruptcy Reform Act of 1994, Sec. 111, 103d Cong. (1994)
(codified at 11 U.S.C. Sec. 524).
\49\11 U.S.C. 524(g)(2)(B).
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The current requirements for obtaining a channeling
injunction include, but are not limited to, the trust's
ability, at the time of confirmation, to prove to the court
that
the trust will operate through mechanisms such as
structured, periodic, or supplemental payments, pro
rata distributions, matrices, or period review of
estimates of the numbers and value of present claims
and future demands, or other comparable mechanisms,
that provide reasonable assurance that the trust will
value, and be in a financial position to pay, present
claims and future demands that involve similar claims
in substantially the same manner.\50\
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\50\Id. Sec. 542(g)(2)(B)(ii)(V).
In many cases, this requirement has caused the debtor to
include a provision in its reorganization plan requiring it to
file periodic disclosures with the court of the financial
health of the asbestos liability trust.\51\ Missing from these
disclosures, however, is any statutory requirement that the
trust identify claimants who seek compensation from the trust,
the nature of their alleged injury, and the amount the trust
paid them.
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\51\See, e.g., History of Johns Manville Trust, http://
www.mantrust.org/history.htm (last visited September 18, 2012).
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The trusts' limited disclosures are a result of the
structure of section 524(g), which grants considerable control
over asbestos bankruptcies and resulting asbestos trusts to
plaintiffs' attorneys.\52\ In particular, section 524(g) allows
a channeling injunction to issue only if three-quarters of
current asbestos claimants support a proposed plan of
reorganization.\53\ This requirement is distinct from the usual
requirements for plan confirmation, which must also be
satisfied.\54\ This is a departure from traditional bankruptcy
procedures, which allow a plan to be confirmed over the
objection of an impaired class so long as the plan is fair,
non-discriminatory, and supported by another impaired
class.\55\
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\52\See generally S. Todd Brown, Section 524(g) Without Compromise:
Voting Rights and the Asbestos Bankruptcy Paradox, 2008 Colum. Bus. L.
Rev. 841 (2008); see also RAND Corporation, Asbestos Bankruptcy Trusts:
An Overview of Trust Structure and Activity with Detailed Reports on
the Largest Trusts, TR-872-ICJ (2010) at 43 (listing asbestos firms
most frequently represented on TAC's; Weitz and Luxenberg P.C. sits on
TAC's of 11 trusts that control, combined, approximately 74% of all
asbestos trust assets).
\53\11 U.S.C. Sec. 524(g)(2)(B)(ii)(IV)(bb).
\54\In re Combustion Engineering, Inc., 391 F.3d 190, 234 (3d Cir.
2004) (``[A] debtor must satisfy the prerequisites set forth in
Sec. 524(g) in addition to the standard plan confirmation
requirements.'').
\55\11 U.S.C. Sec. 1129(b)(1) (allowing confirmation of a plan over
the objection of a class of creditors).
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As courts have noted, ``[a] unique feature of asbestos . .
. litigation is the fact that a small group of law firms
represents hundreds of thousands of plaintiffs.''\56\
Consequently, single firms or small groups of firms may
effectively block confirmation of a plan of reorganization.\57\
And as Professor S. Todd Brown has observed, ``[asbestos firms]
hold an unassailable veto power [that] leaves debtors and other
parties in interest with a classic Hobson's choice--
reorganization on the [f]irms' terms or no reorganization at
all.''\58\
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\56\In re Congoleum Corp., 426 F.3d 675, 679 (3d Cir. 2005).
\57\Lester Brickman, Ethical Issues in Asbestos Litigation, 33
Hofstra L. Rev. at 868-69 (discussing asbestos bar's de facto control
of bankruptcy process).
\58\Brown, supra note 52, at 121.
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Another unique feature of 524(g) is that it looks only to
the number of current asbestos claimants who support a proposed
plan of reorganization. In contrast, a majority of class
members and members who represent a majority of the debtor's
liabilities to the class must both support plan confirmation in
order to satisfy section 1129(a)(8) in a traditional
bankruptcy.\59\ Plaintiffs' firms exploit section 524(g)'s
express preference for claimant quantity over claim quality by
asserting their large numbers of claims in bankruptcy
regardless of their likely value or merit.\60\ Plaintiffs'
firms that have historically filed few tort cases against a
debtor company sometimes file claims on behalf of their entire
client list once bankruptcy has been declared.\61\
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\59\11 U.S.C. Sec. 1126(c) (``A class of claims has accepted a plan
if such plan has been accepted by creditors . . . that hold at least
two-thirds in amount and more than one-half in number of the allowed
claims of such class held by creditors. . . .'').
\60\See Brown, supra note 52, at 150. (``[A]n attorney can obtain a
considerable negotiating position and sizeable fees by simply dumping
their asbestos claim ``inventory'' on a debtor [with] little to no
prospect of sanctions for filing even grossly fraudulent or, at best,
wholly unsubstantiated claims.'').
\61\Id.
---------------------------------------------------------------------------
Despite Congress' clear intent that asbestos trusts ``pay[]
present claims and future demands . . . in substantially the
same manner,''\62\ current claimants' counsel used their
leverage to secure ``two tiered'' trusts solutions in a number
of pre-2008 bankruptcies, \63\ with their clients' claims
directed to a limited-duration ``pre-petition'' trust that paid
nearly full value and future claims channeled to a ``post-
petition'' trust that paid only a fraction of full value and,
often, subjected claims to more rigorous criteria.\64\ Although
it appears that courts now frown on such staggered trusts,\65\
inequality between current and future claimants persists. For
example, the T H Agriculture & Nutrition (``THAN'') trust was
created in November 2009 and promptly began distributing
payments to ``Qualified Asbestos [Personal Injury] Voting
Claims'' at full value.\66\ Consideration of claims filed by
individuals who had not participated in the THAN bankruptcy was
deferred.\67\ By the time the trust opened its doors to future
claimants, in April 2011, over $325 million had been paid to
the plan's supporters and the trust lacked the funds needed to
settle further claims at full value. \68\ In less than eighteen
months, the THAN trust was forced to decrease its payment
percentage to a mere 30%.\69\
---------------------------------------------------------------------------
\62\11 U.S.C. Sec. 524(g)(2)(B)(ii)(V).
\63\Mark D. Plevin, Pre-Packaged Asbestos Bankruptcies, 44 S. Tex.
L. Rev. 883, 911-13 (2003).
\64\Id.
\65\See In re Congoleum Corp., 426 F.3d at 693 (criticizing pre-
petition conduct of asbestos plaintiffs' attorneys and debtor and
noting that ``leaving the procedures for allocation of resources
predominantly in the hands of private, conflicting interests has led to
problems of fair and equal resolution.'').
\66\See Kirk T. Hartley, Pre-packaged plan of inequity: the
financial abuse of future claimants in the T H Agriculture & Nutrition
524(g) asbestos bankruptcy, 11:4 Mealey's Asbestos Bankr. Rep. 34 (Nov.
2011).
\67\Id.
\68\Id.
\69\Id. at 39-40.
---------------------------------------------------------------------------
Section 524(g) also requires the appointment of a legal
representative on behalf of individuals who may file claims
with a proposed asbestos trust in the future.\70\ Courts
generally appoint an individual suggested by the current
claimants and the debtor company.\71\ Congress envisioned the
appointment of an FCR as a due process protection for future
claimants; however, the debtor company and the attorneys
representing current claimants stand to benefit from the
appointment of a weak or pliant representative.\72\ Moreover,
FCR work can be extremely lucrative,\73\ and academic
commentators have expressed concern that FCR's are ``punch-
pulling''\74\ in an effort to be seen as ``reliable negotiating
partners who [will] not `rock the boat'''\75\ and increase the
likelihood of future FCR appointments. Indeed, many
representatives serve several trusts concurrently,\76\ and an
FCR well versed in asbestos compensation matters supported the
plan that resulted in the inequitable distribution of the THAN
trust's funds.\77\
---------------------------------------------------------------------------
\70\11 U.S.C. Sec. 524(g)(4)(B)(i).
\71\Mark D. Plevin, The Future Claims Representative in Prepackaged
Asbestos Bankruptcies: Conflicts of Interest, Strange Alliances, and
Unfamiliar Duties for Burdened Bankruptcy Courts, 62 N.Y.U. Ann. Surv.
Am. L. 271, 301 (2006) (``In almost every . . . case to date . . . the
debtor [has been granted] a presumptive right to select . . . an FCR
acceptable to the current claimants.'').
\72\See Brown, supra note 52, at 158-59 (discussing parties'
incentive to propose weak representative).
\73\Lester Brickman, Ethical Issues in Asbestos Litigation, 33
Hofstra L. Rev. at n. 144 (noting that Halliburton's pre-petition
futures representative was nearly $5 million and retained by the
resulting trust).
\74\See Richard A. Nagareda, Mass Torts in a World of Settlement
177 (2007).
\75\Mark D. Plevin, The Future Claims Representative in Prepackaged
Asbestos Bankruptcies: Conflicts of Interest, Strange Alliances, and
Unfamiliar Duties for Burdened Bankruptcy Courts, 62 N.Y.U. Ann. Surv.
Am. L. at 292-93.
\76\See RAND Corporation, Asbestos Bankruptcy Trusts: An Overview
of Trust Structure and Activity with Detailed Reports on the Largest
Trusts, TR-872-ICJ (2010) (FCR's for largest trusts set forth in
Appendix A).
\77\Hartley, supra note 66, at 35 (discussing asbestos experience
of THAN FCR and valuation experts).
---------------------------------------------------------------------------
Although asbestos trusts are nominally managed by court-
approved trustees, virtually all trusts' founding agreements
require the trustee to seek approval of a post-confirmation FCR
and a committee composed of current claimants' representatives,
most often characterized as a trust advisory committee
(``TAC''), before amending the trust's distribution plan or
audit procedures.\78\ The asbestos bars' pre-confirmation
influence extends to operating trusts, as many TAC seats are
held by plaintiffs' attorneys who represented large numbers of
claimants in bankruptcy proceedings.\79\
---------------------------------------------------------------------------
\78\U.S. Government Accountability Office, supra note 14, at 22
(noting that TAC must consent to, among other things, modifications to
a trust's distribution plan or audit procedures).
\79\RAND Corporation, supra note 76, at 14.
---------------------------------------------------------------------------
Members of the asbestos bar who represent current claimants
in bankruptcies and on TAC's have frequently benefitted from
trusts' lack of transparency. A majority of the trusts'
distribution plans affirmatively require claims to be treated
as confidential settlement negotiations.\80\ As a result, tort
litigants must engage in lengthy and expensive discovery
disputes in order to gain access to basic information--
including exposure information--routinely disclosed by
defendant companies before they created trusts and exited the
tort system.\81\ In many instances, trusts' distribution
procedures were amended to include confidentiality provisions
after tort litigants demanded and received access to documents
filed in support of individual trust claims.\82\
---------------------------------------------------------------------------
\80\Id. at 32.
\81\Constitution Subcommittee Hr'g, supra note 40, at 94-95, 100-
101 (written testimony of James Stengel).
\82\Legal redlines of TDP's amended after confirmation are on file
with the Judiciary Committee.
---------------------------------------------------------------------------
There was a time when asbestos trusts were willing to share
claims information relatively freely. Prior to Judge Jack's
exposure of fraud in mass screened silica and asbestos cases,
the Manville Trust sold its data to actuarial firms, law firms,
and defendant companies.\83\ The trust also licensed its data
to occupational health researchers and provided custom datasets
to academics upon request. But in the wake of Judge Jack's
opinion, the Manville Trust limited access to its data. Its
current data license prohibits use of the trust's data to
process or contest trust and tort claims, prevents data
recipients from revealing information regarding an individual
claimant, and is otherwise structured to ensure that any
analysis of the data is strictly empirical, unusable in
litigation, and may not serve as a basis for other trusts to
reject inconsistent or improper claims.\84\
---------------------------------------------------------------------------
\83\Furthering Asbestos Claim Transparency(FACT) Act of 2012:
Hearing Before the Subcommittee on Courts, Commercial and
Administrative Law of the Committee on the Judiciary, 112th Cong. 207
(2012) [hereinafter CCAL Subcommittee Hr'g] (``The Manville Personal
Injury trust offer[ed] a data extract of claim level information . . .
to anyone willing to pay a $10,000 licensing fee. Prior to 2002 the
data could be purchased outright. . . .'').
\84\Manville Trust Single Use Data License Agreement, http://
www.claimsres.com/documents/MT/DataAgreement.pdf (last updated
February, 2010) (last accessed Sep. 18, 2012).
---------------------------------------------------------------------------
Because the trusts' current confidentiality provisions and
practices make data sharing difficult, individual trusts and
the trust system as a whole are susceptible to fraud and abuse.
The GAO and the non-partisan RAND Corporation, in their
respective reports on the trusts, both concluded that asbestos
bankruptcy trusts are unlikely to identify and decline payment
of improper claims, including claims that are supported by
``altered work histories'' or allege inconsistent exposure
patterns.\85\ The trusts, the plaintiffs' bar, and the post-
confirmation future claims representatives nonetheless contend
that the trust system is free from fraud and that more robust
anti-fraud measures would be costly and reduce the funds
available to fulfill the trusts' core mission--claimant
compensation.\86\
---------------------------------------------------------------------------
\85\U.S. Government Accountability Office, supra note 14, at 23;
RAND Corporation, supra note 76, at 45.
\86\See e.g. CCAL Subcommittee Hr'g, supra note 83, at 224-36
(letter signed by six FCRs).
---------------------------------------------------------------------------
Although the eleven trusts interviewed by GAO in the course
of its investigation reported that their audits have never
identified an instance of fraud, the trusts paid over $4
billion in 2010 alone and, combined, have paid 3.3 million
alleged asbestos victims nearly $17.5 billion since the
Manville Trust was established.\87\ Fraud and abuse have been
uncovered in virtually every compensation and relief program
undertaken in modern America, whether privately funded or
government sponsored.\88\ Fraudulent claims against the 9/11
Victim's Compensation Fund and BP's gulf oil fund, for example,
were detected and prosecuted.\89\ As Professor Brown has
observed, asbestos trusts are not ``magically different'' from
other compensation trusts; that asbestos trusts' audits have
uncovered no fraud whatsoever suggests that their internal
controls are lacking.\90\
---------------------------------------------------------------------------
\87\U.S. Government Accountability Office, supra note 14, at 16.
\88\CCAL Subcommittee Hr'g, supra note 83, at 25 (testimony of S.
Todd Brown).
\89\See e.g., Nedra Pickler, ``Ex-naval officer gets prison time
for 9-11 fraud,'' Associated Press (Dec. 12, 2011); Deepwater Horizon
(BP) Oil Spill Fraud, http://www.justice.gov/criminal/oilspill/(last
accessed Sep. 18, 2012) (collecting cases involving fraud on the Gulf
Coast Claims Facility).
\90\CCAL Subcommittee Hr'g, supra note 83, at 25 (testimony of S.
Todd Brown).
---------------------------------------------------------------------------
While the trust system operates with near-complete secrecy,
the quality of medical evidence and the consistency of the
allegations made by alleged asbestos victims are sometimes
tested in the tort system. Although the trusts' confidentiality
provisions and the generally combative nature of asbestos
litigation have combined to limit the disclosure of trust
information, defendants have successfully identified a number
of cases of inconsistent and potentially fraudulent claiming.
In the best known example of fraud uncovered through the
tort system, Kananian v. Lorillard Tobacco, a tort plaintiff
claimed that he developed mesothelioma solely from smoking
asbestos-filtered cigarettes and that he only passed through a
naval ship yard while being deployed elsewhere by the navy.\91\
He simultaneously filed claims against multiple asbestos trusts
alleging exposure to marine products while working as a
``shipyard laborer.''\92\ Despite the inconsistency of his tort
and trust claims, which the court described as a ``fiction,''
Kananian received substantial payments from asbestos
trusts.\93\
---------------------------------------------------------------------------
\91\Kananian v. Lorillard Tobacco Co., No. CV 442750 (Ohio Ct. Com.
Pl. Cuyahoga County 2007).
\92\Id. at 5, 9.
\93\Id, at 6.
---------------------------------------------------------------------------
Kananian is not an isolated incident; the Committee
received testimony detailing several additional examples of
fraud, abuse, and inconsistent claiming in other jurisdictions,
including Maryland cases in which inconsistent exposure
information was presented in the tort system and trust systems
in an attempt to circumvent state-law caps on damages.\94\
Further examples of inconstant claiming have been identified in
Delaware, Louisiana, New York, Oklahoma, and Virginia.\95\
---------------------------------------------------------------------------
\94\Constitution Subcommittee Hr'g, supra note 42, at 94-95, 103-
105 (written testimony of James Stengel).
\95\CCAL Subcommittee Hr'g, supra note 83, at 9 (testimony of Leigh
Ann Schell); e.g., Montgomery v. Foster Wheeler, Case No. 09C-11-215
ASB, Pretrial Hr'g Trans. (Del. Super. Ct. Nov. 7, 2011).
---------------------------------------------------------------------------
Counsel in a Louisiana case, Mary A. Robeson et al v.
Amatek, Inc. et al, filed sixteen trust claims that denied the
plaintiff's father smoked and included detailed asbestos
exposure information. When the plaintiff was deposed, however,
he claimed his father was a smoker and that he had no knowledge
of the exposures alleged in the claims. He also testified that
counsel had never spoken to his father about his exposures to
asbestos.\96\
---------------------------------------------------------------------------
\96\CCAL Subcommittee Hr'g, supra note 83, at 16 (written statement
of Leigh Ann Schell).
---------------------------------------------------------------------------
In Montgomery v. Foster Wheeler, a Delaware case, the
plaintiff's attorney disclosed a number of trust claims shortly
before trial even though he had repeatedly represented to the
defendant and the court that his client had no such claims. The
court described the plaintiff's disclosure failure as ``really
seriously egregiously bad behavior'' and lamented that ``it
happens a lot.''\97\ The court further observed that:
---------------------------------------------------------------------------
\97\Montgomery, supra note 95, at 7-8.
The core of this case had been fraudulent. . . . [T]his
whole litigation is based on who was responsible.
Nobody can say which fibers did what. But the most
important thing is that a plaintiff disclose what they
think caused their disease. And if they don't disclose
honestly when they're asking [for] money from another
company and they don't even let the defendant know
about that, that's so dishonest. It is just so
dishonest.\98\
---------------------------------------------------------------------------
\98\Id. at 25.
The lack of meaningfully transparent trust disclosures,
combined with published research, court decisions suggesting
fraud on behalf of claimants/plaintiffs who sometimes use two
completely different fact patterns to support claims against
asbestos trusts and other related solvent defendants in the
state tort system, and the prevalence of attorney advertising
designed to cultivate trust claims raises the question of
whether Congress should require 524(g) asbestos trusts to
disclose information that, when analyzed with other data, would
facilitate analysis to determine the extent and cost of any
fraud between the two systems. Similarly, some lawmakers
question whether asbestos trusts ought to be required to
produce third-party discovery under the Federal Rules of Civil
Procedure when a defendant in the state tort system seeks
information that is probative of its civil liability.
In March 2011, the Subcommittee on Business Issues of the
Advisory Committee on Bankruptcy Rules considered a proposal to
add a new Federal Rule of Bankruptcy Procedure to require
542(g) trusts to disclose the particulars of each demand for
payment received by a trust during the preceding quarter.\99\
That subcommittee, in a memo to the Advisory Committee,
examined the merits and demerits of the proposal, but
ultimately concluded that if
---------------------------------------------------------------------------
\99\Letter dated November 22, 2010, from Lisa A. Rickard,
President, U.S. Chamber Institute for Legal Reform, to Peter G. McCabe,
Secretary, Committee on Rules of Practice and Procedure, Judicial
Conference of the United States (on file with Committee).
it is determined that the trusts should be providing
more information than they currently are, the
Subcommittee's preliminary thought was that this may be
a matter more appropriately addressed by a legislative
solutions--such as an amendment of Sec. 524(g) that
imposes additional requirements on trusts created under
that provision.\100\
---------------------------------------------------------------------------
\100\Memorandum dated March 10, 2011, from Subcommittee on Business
Issues to Advisory Committee on Bankruptcy Rules (on file with
Committee).
A second memo from the Subcommittee, dated September 19, 2011,
collects comments it solicited from various bankruptcy and
nonbankruptcy legal groups. The chair of the ABA Business
Bankruptcy Committee established a task force to review the
proposal, which ultimately supported the proposal, subject to a
few qualifications. Others who submitted comments, including
the future claims representatives, opposed the proposal.\101\
---------------------------------------------------------------------------
\101\Memorandum dated September 19, 2011, from Subcommittee on
Business Issues to Advisory Committee on Bankruptcy Rules (on file with
Committee).
---------------------------------------------------------------------------
E. THE FURTHERING ASBESTOS CLAIMS TRANSPARENCY (FACT) ACT
OF 2012
The Subcommittee on the Constitution of the House Judiciary
Committee held a hearing entitled ``How Fraud and Abuse in the
Asbestos Compensation System Affects Victims, Jobs, the
Economy, and the Legal System.''\102\ In light of the testimony
received at that hearing, the study of the Advisory Committee
on Bankruptcy Rules, and the experience of debtors who have
used the Bankruptcy Code to manage their future asbestos
liability and their attorneys, Rep. Quayle (R-AZ), together
with Reps. Matheson (D-UT) and Ross (R-FL), introduced H.R.
4369, the Furthering Asbestos Claim Transparency (FACT) Act of
2012, on April 17, 2012.
---------------------------------------------------------------------------
\102\See generally Constitution Subcommittee Hr'g, supra note 40.
---------------------------------------------------------------------------
The bill amends section 524(g) of the Bankruptcy Code to
require asbestos trusts to file quarterly reports with the
court and the United States Trustee for the respective region
that detail claimants' names, the amount paid to each claimant,
and the basis for such payment. The bill specifically provides
that sensitive identifying information, such as Social Security
numbers and confidential medical records, should not be
published. The FACT Act also requires trusts to provide
information requested by parties to traditional asbestos tort
litigation. The reporting and information sharing requirements
are fall squarely within Congress' bankruptcy power.\103\
---------------------------------------------------------------------------
\103\See CCAL Subcommittee Hr'g, supra note 83, at 85-89
(memorandum regarding Congress' power to enact legal reform legislation
prepared by former Solicitor General Paul D. Clement).
---------------------------------------------------------------------------
The Subcommittee on Courts, Commercial and Administrative
Law of the House Judiciary Committee held a hearing on the FACT
Act on May 10, 2012.\104\ Three of the four witnesses testified
that transparency was sorely needed in the 524(g) asbestos
trust compensation system.\105\ The fourth witness, Mr. Siegel,
conceded that no provision of the FACT Act would impede a
claimant's filing of a claim with or receipt of compensation
from a trust.\106\ He did argue that the FACT Act would impose
``onerous'' new administrative burdens on the trusts--a
hypothesis controverted by Mr. Scarcella's experience working
on claims processing department at one of the largest
trusts.\107\
---------------------------------------------------------------------------
\104\See generally CCAL Subcommittee Hr'g, supra note 83.
\105\See id. (testimonies of Leigh Ann Schell, Prof. S. Todd Brown,
and Marc Scarcella).
\106\Id. at 81.
\107\Id.
---------------------------------------------------------------------------
Hearings
On May 10, 2012, the Subcommittee on Courts, Commercial and
Administrative Law held a legislative hearing on H.R. 4369 and
heard testimony from: Leigh Ann Schell, Esq., a partner at
Kuchler Polk Schell Weiner & Richeson, LLC; S. Todd Brown,
Professor of Law, SUNY Buffalo Law School; Charles S. Siegel,
Partner, Waters & Kraus LLP; and Marc Scarcella of Bates White
Consulting.
Committee Consideration
On June 8, 2012, the Committee met in open session and
ordered the bill H.R. 4369 to be reported favorably to the
House with an amendment by a rollcall vote of 15 ayes to 14
noes, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
following recorded votes were taken during the Committee's
consideration of H.R. 4369.
1. Amendment offered by Mr. Johnson to limit the terms upon
which a trust may disclose information. Not agreed to by vote
of 10 ayes to 12 noes.
ROLLCALL NO. 1
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert..................................
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz................................. X
Mr. Griffin..................................
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler...................................
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr.............................. X
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch...................................
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 10 12
------------------------------------------------------------------------
2. Amendment offered by Mr. Conyers to limit the quarterly
publication of information to statistics on demands received
and claims paid by the trust. Not agreed to by vote of 10 ayes
to 11 noes.
ROLLCALL NO. 2
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert..................................
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz................................. X
Mr. Griffin..................................
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams....................................
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler...................................
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 10 11
------------------------------------------------------------------------
3. Amendment offered by Mr. Scott to treat certain medical
information in the quarterly reports as protected health
information under the Health Insurance Portability and
Accountability Act. Not agreed to by vote of 10 ayes to 11
noes.
ROLLCALL NO. 3
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert..................................
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz................................. X
Mr. Griffin..................................
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams....................................
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler...................................
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 10 11
------------------------------------------------------------------------
4. Amendment offered by Mr. Watt to require a GAO study on
fraudulent claims made against asbestos trusts. Not agreed to
by vote of 10 ayes to 13 noes.
ROLLCALL NO. 4
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe...................................... X
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams....................................
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler...................................
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 10 13
------------------------------------------------------------------------
5. Amendment offered by Ms. Jackson Lee to require the
filing of certain certifications concerning claims against a
third party before it may seek discovery from asbestos trust.
Not agreed to by vote of 10 ayes to 11 noes.
ROLLCALL NO. 5
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks...................................
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe...................................... X
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams....................................
Mr. Quayle................................... X
Mr. Amodei...................................
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler...................................
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 10 11
------------------------------------------------------------------------
6. Amendment offered by Ms. Jackson Lee to require the
filing of certain certifications concerning asbestos-containing
products before a third party may seek discovery from asbestos
trust. Not agreed to by vote of 8 ayes to 14 noes.
ROLLCALL NO. 6
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe...................................... X
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams....................................
Mr. Quayle................................... X
Mr. Amodei...................................
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler...................................
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 8 14
------------------------------------------------------------------------
7. Amendment offered by Mr. Cohen to except from quarterly
reporting trusts that already have an internal audit mechanism
in place. Not agreed to by vote of 11 ayes to 11 noes.
ROLLCALL NO. 7
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren.................................. X
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King..................................... X
Mr. Franks................................... X
Mr. Gohmert.................................. X
Mr. Jordan...................................
Mr. Poe......................................
Mr. Chaffetz.................................
Mr. Griffin.................................. X
Mr. Marino................................... X
Mr. Gowdy.................................... X
Mr. Ross.....................................
Ms. Adams....................................
Mr. Quayle................................... X
Mr. Amodei...................................
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis....................................
--------------------------
Total.................................... 11 11
------------------------------------------------------------------------
8. Amendment offered by Mr. Nadler to limit third party
discovery to those parties who disclose information pertaining
to the public safety or health to a law enforcement agency. Not
agreed to by vote of 7 ayes to 10 noes.
ROLLCALL NO. 8
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren..................................
Mr. Chabot...................................
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King.....................................
Mr. Franks................................... X
Mr. Gohmert..................................
Mr. Jordan................................... X
Mr. Poe...................................... X
Mr. Chaffetz................................. X
Mr. Griffin..................................
Mr. Marino...................................
Mr. Gowdy....................................
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei...................................
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt.....................................
Ms. Lofgren..................................
Ms. Jackson Lee..............................
Ms. Waters...................................
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez..................................
Mr. Polis.................................... X
--------------------------
Total.................................... 7 10
------------------------------------------------------------------------
9. Amendment offered by Mr. Polis to limit third party
discovery only to to contexts in which applicable nonbankruptcy
discovery law is insufficient to produce disclosure. Not agreed
to by vote of 11 ayes to 12 noes.
ROLLCALL NO. 9
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................
Mr. Lungren..................................
Mr. Chabot................................... X
Mr. Issa.....................................
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King.....................................
Mr. Franks................................... X
Mr. Gohmert..................................
Mr. Jordan................................... X
Mr. Poe......................................
Mr. Chaffetz................................. X
Mr. Griffin..................................
Mr. Marino...................................
Mr. Gowdy.................................... X
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman...................................
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu......................................
Mr. Deutch................................... X
Ms. Sanchez..................................
Mr. Polis.................................... X
--------------------------
Total.................................... 11 12
------------------------------------------------------------------------
10. Motion to report H.R. 4369, as amended, favorable to
the House of Representatives. Agreed to by vote of 15 ayes to
14 noes.
ROLLCALL NO. 10
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Smith, Chairman.......................... X
Mr. Sensenbrenner, Jr........................
Mr. Coble....................................
Mr. Gallegly................................. X
Mr. Goodlatte................................ X
Mr. Lungren..................................
Mr. Chabot................................... X
Mr. Issa..................................... X
Mr. Pence....................................
Mr. Forbes................................... X
Mr. King.....................................
Mr. Franks................................... X
Mr. Gohmert..................................
Mr. Jordan................................... X
Mr. Poe......................................
Mr. Chaffetz................................. X
Mr. Griffin.................................. X
Mr. Marino...................................
Mr. Gowdy.................................... X
Mr. Ross..................................... X
Ms. Adams.................................... X
Mr. Quayle................................... X
Mr. Amodei................................... X
Mr. Conyers, Jr., Ranking Member............. X
Mr. Berman................................... X
Mr. Nadler................................... X
Mr. Scott.................................... X
Mr. Watt..................................... X
Ms. Lofgren..................................
Ms. Jackson Lee.............................. X
Ms. Waters................................... X
Mr. Cohen.................................... X
Mr. Johnson, Jr..............................
Mr. Pierluisi................................ X
Mr. Quigley.................................. X
Ms. Chu...................................... X
Mr. Deutch................................... X
Ms. Sanchez.................................. X
Mr. Polis.................................... X
--------------------------
Total.................................... 15 14
------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 4369, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 2, 2012.
Hon. Lamar Smith, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4369, the
``Furthering Asbestos Claim Transparency (FACT) Act of 2012.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Martin von
Gnechten, who can be reached at 226-2860.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 4369--Furthering Asbestos Claim Transparency (FACT) Act of 2012.
As ordered reported by the House Committee on the Judiciary
on August 2, 2012.
H.R. 4369 would require trusts set up through a Chapter 11
bankruptcy reorganization caused by asbestos liabilities to
submit quarterly reports to the bankruptcy court on damage
claims and payments. Based on information provided by the
Administrative Office of the U.S. Courts (AOUSC), CBO estimates
that implementing H.R. 4369 would have no significant impact on
the Federal budget because the AOUSC would incur only minor
costs to make that information publicly available. Enacting
H.R. 4369 would not affect direct spending or revenues;
therefore, pay-as-you-go procedures do not apply.
H.R. 4369 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
H.R. 4369 would impose private-sector mandates as defined
in UMRA by requiring asbestos trusts to submit quarterly
reports. Information from the Government Accountability Office
and the RAND Corporation indicates that about 60 asbestos
trusts existed in 2011. Based on that information, CBO expects
that the cost to comply with the reporting requirements in the
bill would fall well below the annual threshold established in
UMRA for private-sector mandates ($146 million in 2012,
adjusted annually for inflation).
The CBO staff contacts for this estimate are Martin von
Gnechten (for Federal costs) and Paige Piper/Bach (for the
impact on the private sector). The estimate was approved by
Theresa Gullo, Deputy Assistant Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
4369 amends title 11, United States Code, to require the
publication of certain data by trusts created in a chapter 11
plan of reorganization pursuant to section 524 of that title.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 4369 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
Section-by-Section Analysis
Section 1. Short Title. Provides that the bill may be
referred to as the ``Furthering Asbestos Claim Transparency Act
of 2012,'' or ``FACT Act of 2012.''
Section 2. Amendments. Adds to section 524(g) of the
Bankruptcy Code a requirement that asbestos liability trusts
publish quarterly public reports identifying claimants, amounts
paid, and basis for paying claims on the court's public docket.
Further provides that trusts must comply with third-party
discovery demands subject to third-party's payment of
reasonable discovery costs.
Section 3. Effective Date; Application of Amendments. Sets
the effective date of the Act as date of enactment. Provides
that the amendments made by the act apply retroactively and
prospectively.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
TITLE 11, UNITED STATES CODE
* * * * * * *
CHAPTER 5--CREDITORS, THE DEBTOR, AND THE ESTATE
* * * * * * *
SUBCHAPTER II--DEBTOR'S DUTIES AND BENEFITS
* * * * * * *
Sec. 524. Effect of discharge
(a) * * *
* * * * * * *
(g)(1) * * *
* * * * * * *
(8) A trust described in paragraph (2) shall, subject to
section 107--
(A) file with the bankruptcy court, not later than
60 days after the end of every quarter, a report that
shall be made available on the court's public docket
and with respect to such quarter--
(i) describes each demand the trust
received from, including the name and exposure
history of, a claimant and the basis for any
payment from the trust made to such claimant;
and
(ii) does not include any confidential
medical record or the claimant's full social
security number; and
(B) upon written request, and subject to payment
(demanded at the option of the trust) for any
reasonable cost incurred by the trust to comply with
such request, provide in a timely manner any
information related to payment from, and demands for
payment from, such trust, subject to appropriate
protective orders, to any party to any action in law or
equity if the subject of such action concerns liability
for asbestos exposure.
* * * * * * *
Dissenting Views
INTRODUCTION
H.R. 4369, the ``Furthering Asbestos Claim Transparency
(FACT) Act of 2012,'' as amended, is problematic because it
would give asbestos defendants ``new rights and advantages to
be used against asbestos victims in state court'' and it would
``add new burdens'' to asbestos bankruptcy trusts that would
cripple ``their ability to operate and pay claims.''\1\
Congress established asbestos trusts under the Bankruptcy Code
to pay the claims of asbestos claimants through a court-
authorized process that permits these trusts to assume the
liabilities of an entity that is ``a defendant in personal
injury, wrongful death, or property-damage actions seeking
recovery for damages allegedly caused by the presence of, or
exposure to, asbestos or other asbestos-containing
products.''\2\ H.R. 4369 inteferes with this longstanding
process in two ways. First, the trust would have to file with
the bankruptcy court publicly available quarterly reports
disclosing personal information about asbestos victims who seek
payment from these trusts, including their names and exposure
histories. Second, the trust would have to provide any
information related to payment from and demands for payment
from such trust to any party to any action in law or equity if
such action concerns liability for asbestos exposure.
---------------------------------------------------------------------------
\1\Furthering Asbestos Claims Transparency Act: Hearing on H.R.
4369 Before the Subcomm. on Courts, Commercial and Admin. L. of the H.
Comm. on the Judiciary, 112th Cong. (2012) (testimony of Charles S.
Siegel, Waters & Kraus LLP)
\2\11 U.S.C. Sec. 524(g)(2)(B)(i)(I) (2012).
---------------------------------------------------------------------------
H.R. 4369 is troubling because: (1) its reporting and
disclosure requirements are an assault against asbestos
victims' privacy interests; (2) it is fundamentally inequitable
in that it requires disclosure by the trusts, but does not
require solvent defendant companies to disclose their
confidential settlement agreements; (3) it is not necessary
given the absence of any evidence of systemic fraud with
asbestos trusts; (4) it is nothing more than an end run by
asbestos defendants around the discovery process available
under non-bankruptcy law; and (5) it will divert critical funds
and further decrease compensation to asbestos victims by
forcing bankruptcy trusts to prepare burdensome reports. In
light of these concerns, the Asbestos Disease Awareness
Organization,\3\ the Environmental Working Group,\4\ the Center
for Justice and Democracy,\5\ and various legal representatives
for future asbestos personal injury claimants with respect to
asbestos bankruptcy trusts\6\ all oppose H.R. 4369.
---------------------------------------------------------------------------
\3\Letter from Linda Reinstein, President & Co-Founder, Asbestos
Disease Awareness Organization, to Representative Lamar Smith, Chair, &
Representative John Conyers, Jr., Ranking Member, H. Comm. on the
Judiciary (June 5, 2012) (on file with H. Comm. on the Judiciary
Democratic staff).
\4\Letter from Heather B. White, Chief of Staff & General Counsel,
Environmental Working Group, to Representative Lamar Smith, Chair, &
Representative John Conyers, Jr., Ranking Member, H. Comm. on the
Judiciary (June 4, 2012) (on file with H. Comm. on the Judiciary
Democratic staff).
\5\Letter from Joanne Doroshow, Executive Director, Center for
Justice & Democracy, to Representative Lamar Smith, Chair, &
Representative John Conyers, Jr., Ranking Member, H. Comm. on the
Judiciary (June 5, 2012) (on file with H. Comm. on the Judiciary
Democratic staff).
\6\See, e.g., Letter from Douglas A. Campbell, counsel for various
asbestos settlement trusts, to Representative Lamar Smith, Chair, H.
Comm. on the Judiciary, et al. (June 5, 2012) (signed by six future
claims representatives) (on file with H. Comm. on the Judiciary
Democratic staff); Letter from Michael J. Crames, Future Claims
Representative for Owens Corning/Fibreboard Asbestos Personal Injury
Trust, et al. to Representative Lamar Smith, Chair, H. Comm. on the
Judiciary, et al. (May 9, 2012) (signed by six future claims
representatives) (on file with H. Comm. on the Judiciary Democratic
staff).
---------------------------------------------------------------------------
For these reasons and those described below, we
respectfully dissent and urge our colleagues to reject this
seriously flawed bill.
DESCRIPTION AND BACKGROUND
Under the guise of promoting transparency with respect to
claims made against trusts established under the Bankruptcy
Code to compensate asbestos victims, H.R. 4369 imposes
burdensome reporting and disclosure requirements on these
trusts. Specifically, the bill would require a trust to submit
quarterly reports to the bankruptcy court, which would be
posted on the court's public case docket, and to respond to
virtually unlimited discovery demands by any party to
litigation concerning asbestos exposure. The only beneficiaries
of this measure will be the very entities that produced or
utilized asbestos, a toxic substance that killed or seriously
injured unsuspecting American consumers and workers. In
particular, H.R. 4369's reporting requirements will impose
additional costs and burdens on the trusts, notwithstanding
changes made in the substitute amendment, diminishing the
available pools of money and other resources to compensate the
victims of bankrupt asbestos defendants. Additionally, this
bill would allow unsuspecting asbestos victims to be further
victimized by requiring information about their illness to be
made available publicly to anyone who has access to the
Internet.
Representative Ben Quayle (R-AZ) introduced H.R. 4369 on
April 17, 2012 together with Representatives Jim Matheson (D-
UT) and Dennis Ross (R-FL) as original cosponsors. Thereafter,
the Subcommittee on Courts, Commercial and Administrative Law
(CCAL) held a hearing on the bill on May 10, 2012 at which
Professor S. Todd Brown, SUNY Buffalo Law School; Marc
Scarcella, Bates White Economic Consulting; and Leigh Ann
Schell, Kuhler Polk Schell Weiner & Richeson, testified on
behalf of the Majority. The Minority witness was Charles S.
Siegel, Esq., a partner with the law firm of Waters & Kraus.
The Committee marked up the bill over two days, during which
the Majority voted down every amendment offered by the
Minority. Thereafter, the Committee ordered the bill to be
reported favorably as a single amendment in the nature of a
substitute by a vote of 15 to 14, along party lines, on June 8,
2012.\7\
---------------------------------------------------------------------------
\7\Unofficial Tr. of Markup of H.R. 4369, the ``Furthering Asbestos
Claim Transparency (FACT) Act of 2012,'' by the H. Comm. on the
Judiciary, 112th Cong. 40-41 (June 9, 2012) [hereinafter June 8 Markup
Transcript].
---------------------------------------------------------------------------
A summary of the bill's substantive provisions as amended
by the substitute amendment follows. Section 2 of the bill
amends Bankruptcy Code section 524(g)\8\ to add a provision
comprised of two components. First, it requires a trust to file
with the bankruptcy court not later than 60 days after the end
of every quarter a report that must be made available on the
court's public docket. The report must describe each demand the
trust received from a claimant, including the claimant's name
and exposure history as well as the basis for any payment from
the trust made to such claimant. The claimant's confidential
medical records or full Social Security number cannot be
included in this report.
---------------------------------------------------------------------------
\8\11 U.S.C. Sec. 524(g) (2012).
---------------------------------------------------------------------------
Second, Section 2 requires the trust, upon written request,
to provide in a timely manner any information related to
payment from and demands for payment from the trust, subject to
appropriate protective orders, to any party to any action in
law or equity if the subject of such action concerns liability
for asbestos exposure. Section 2, as amended, authorizes the
trust to require the entity seeking such information to pay the
trust for the cost of providing it. The bill's reporting and
information disclosure requirements are subject to Bankruptcy
Code section 107, which authorizes the bankruptcy court to
restrict public access to any document filed in a bankruptcy
case if the information contained in such document would create
an ``undue risk of identity theft or other unlawful
injury.''\9\
---------------------------------------------------------------------------
\9\11 U.S.C. Sec. 107 (2012).
---------------------------------------------------------------------------
CONCERNS WITH H.R. 4369
I. H.R. 4369'S REPORTING AND DISCLOSURE REQUIREMENTS ARE AN ASSAULT
AGAINST ASBESTOS VICTIMS' PRIVACY INTERESTS
One of H.R. 4369's most fundamental flaws is that it would
require the disclosure of personal information about victims
who seek payment for injuries from an asbestos bankruptcy trust
and that such information would have to be made available in a
public forum, namely, the bankruptcy court's case docket. As a
result, this bill could further victimize unsuspecting asbestos
victims by requiring information about their illness to be made
publically available to anyone who has access to the Internet.
Trusts already generally provide annual financial reports
to the bankruptcy court, but the information disclosed
typically consists of the total number of claims paid and the
aggregate value of these claims, thus protecting claimants'
privacy.\10\ Some reports are publically available, while
others are filed under seal with the bankruptcy court ``for
reasons deemed appropriate by the court.''\11\ Such reasons
include protecting the interests of the reorganized company and
its competitiveness.\12\ In fact, of the 47 trust annual
reports that the Government Accountability Office (GAO)
reviewed, only one reported the amount paid to each individual
and listed these individuals' names.\13\ Nevertheless, 65
percent of the trusts reviewed by GAO (33 out of 52 trusts)
specifically provide that ``claimant information submitted to
the trust for purposes of obtaining compensation is
confidential and should be treated as a settlement
negotiation.''\14\
---------------------------------------------------------------------------
\10\U.S. Government Accountability Office, Report on Asbestos
Injury Compensation: The Role and Administration of Asbestos Trusts,
GAO-11-819, at 1, 24 (Sept. 2011) [hereinafter GAO Report].
\11\Id. at 17.
\12\Id. at 4, note 7.
\13\Id. at 24-25.
\14\Id. at 26.
---------------------------------------------------------------------------
Proponents of more disclosure argue that it may reduce the
``asbestos-related litigation burden on the remaining solvent
defendants by demonstrating that the trusts have increased
claimants' overall compensation beyond the amount justified in
relation to the harm caused.''\15\ They also assert that the
current system's lack of transparency ``could enable plaintiffs
to file contradictory claims to different trusts while also
pursuing recovery through the tort system.''\16\ Trust
representatives, however, are very concerned about the
``privacy rights of hundreds of thousands of individuals who
did nothing except successfully seek compensation from a
trust.''\17\
---------------------------------------------------------------------------
\15\Id. at 30.
\16\Id. at 30.
\17\Memorandum from Legal Representatives for Future Asbestos
Personal Injury Claimants with Respect to Certain Asbestos Settlement
Trusts to Prof. Troy McKenzie, Advisory Committee on Bankruptcy Rules
of the Judicial Conference of the United States, at 2 (Aug. 10, 2011)
[hereinafter Legal Representatives Memorandum].
---------------------------------------------------------------------------
The proponents' arguments are without merit. As the GAO
observed, ``parties in the tort system are not required to
disclose settlement negotiation or agreement information
outside of the subpoena process'' and that ``trusts are
analogous to any other settling party and related negotiations
and payments are privileged.''\18\ Equally important, the GAO
noted that ``all of the potentially relevant information in the
trusts' possession is available to the defense through pretrial
discovery.''\19\
---------------------------------------------------------------------------
\18\GAO Report at 29.
\19\Id.
---------------------------------------------------------------------------
In addition, trust representatives state that the trusts
are often required to keep such information confidential and
they are concerned about the substantial costs involved in
responding to requests for such information.\20\ For example,
one trust reported that it incurred $1 million in attorneys'
fees to respond to a request to disclose every document on
every claimant, according to the GAO.\21\ Several legal
representatives for future asbestos personal injury claimants
fear that ``unnecessary and unreasonable reporting and
discovery obligations would divert resources from the trusts'
limited funds, which were specifically created to pay the
claims of individuals stricken with asbestos-related diseases,
for the benefit of third party defendants in non-bankruptcy,
asbestos-tort litigation.''\22\
---------------------------------------------------------------------------
\20\Id. at 30.
\21\Id.
\22\Legal Representatives Memorandum at 2.
---------------------------------------------------------------------------
H.R. 4369's reporting requirements would irretrievably
release into the public domain asbestos claimants' sensitive
personal information, such as their names and exposure
histories. Under the bill, this information would have to be
posted on the court's public docket, which is easily accessibly
through the Internet with the payment of a nominal fee. This
information could then be used by data collectors and other
entities for purposes that have absolutely nothing to do with
compensation for asbestos exposure.
It is readily apparent that these reports would provide a
treasure trove of data that could be accessed by insurance
companies, prospective employers, and lenders who could then
use that information to the detriment of asbestos victims. In
effect, this bill would allow unsuspecting asbestos victims to
be further victimized, all in the name of helping those who
harmed these victims in the first place.
To rectify this flaw in the bill, Representative Hank
Johnson (D-GA) offered an amendment replacing the bill's
reporting and document production provisions with a requirement
that the trust file a report describing demands it received,
including the names and exposure histories of the claimants, as
well as the basis for any payments, on a confidential basis.
Access would have been restricted to a party that is a
defendant in an action concerning asbestos exposure, with the
access limited to the information in the report that was
relevant to the plaintiff in such action, and only when such
information is relevant to such action. This amendment would
have ensured that the privacy interests of asbestos victims are
respected by restricting access to the information contained in
the reports to only those parties that have a ``need to know.''
This amendment, however, failed by a vote of 10 to 12.\23\
---------------------------------------------------------------------------
\23\Unofficial Tr. of Markup of H.R. 4369, the ``Furthering
Asbestos Claim Transparency (FACT) Act of 2012,'' by the H. Comm. on
the Judiciary, 112th Cong. 206 (June 6, 2012) [hereinafter June 6
Markup Transcript].
---------------------------------------------------------------------------
Similarly, Judiciary Committee Ranking Member John Conyers,
Jr., (D-MI) offered an amendment that would have amended the
bill to require the quarterly reports to contain only aggregate
information and deleted the bill's burdensome discovery
requirement. This would have ensured victims' privacy by not
making public individualized claimant information. It also
would have ensured that trusts could focus their resources on
their primary mission of assuring fair compensation for
asbestos victims, rather than participating in the discovery
process for outside lawsuits. Notwithstanding these benefits,
this amendment failed by a vote of 10 to 11.\24\
---------------------------------------------------------------------------
\24\Id. at 215.
---------------------------------------------------------------------------
In yet another attempt to address the bill's privacy flaws,
Representative Bobby Scott (D-VA) offered an amendment that
would have deleted the bill's requirement that the names of
asbestos victims be identified in the quarterly report. The
amendment would have also stricken the bill's discovery
provisions and replaced them with a requirement that the trust
treat any information contained in the report pursuant to the
privacy protections set forth in the Health Insurance
Portability and Accountability Act (HIPAA).\25\ This amendment
would have simply ensured that trusts comply with the HIPAA
Privacy Rule that, according to the U.S. Department of Health
and Human Services:
---------------------------------------------------------------------------
\25\Pub. L. No. 104-191, 110 Stat. 1936 (1996).
[E]stablishes national standards to protect
individuals' medical records and other personal health
information and applies to health plans, health care
clearinghouses, and those health care providers that
conduct certain health care transactions
electronically. The Rule requires appropriate
safeguards to protect the privacy of personal health
information, and sets limits and conditions on the uses
and disclosures that may be made of such information
without patient authorization. The Rule also gives
patients rights over their health information,
including rights to examine and obtain a copy of their
health records, and to request corrections.\26\
---------------------------------------------------------------------------
\26\U.S. Dep't of Health & Human Services, Health Information
Privacy--The Privacy Rule, available at http://www.hhs.gov/ocr/privacy/
hipaa/administrative/privacyrule/index.html (last visited June 21,
2012).
Although asbestos victims who seek compensation for their
injuries should be accorded at least the same privacy
protections that are given to every other patient, this
amendment failed by a vote of 10 to 11.\27\
---------------------------------------------------------------------------
\27\June 6 Markup Transcript at 228.
---------------------------------------------------------------------------
II. H.R. 4369 IS FUNDAMENTALLY INEQUITABLE BECAUSE IT REQUIRES
DISCLOSURE BY THE TRUSTS, BUT DOES NOT REQUIRE SOLVENT DEFENDANT
COMPANIES TO DISCLOSE THEIR CONFIDENTIAL SETTLEMENT AGREEMENTS
H.R. 4369 is fundamentally inequitable because it will
impose additional burdens on asbestos bankruptcy trusts while
easing the process by which solvent defendant companies can
obtain discovery. This is particularly galling given the
history of asbestos manufacturers in concealing the dangers of
their product from the public for many years.
Asbestos is a fibrous material, extracted from the earth,
that has been used for centuries because of its tensile
strength and its heat resistence.\28\ The modern industrial use
of asbestos began around 1860, and the world's annual use of
raw asbestos increased from some 500,000 tons to 2.5 million
tons between the years 1934 and 1964.\29\ The Department of
Labor estimates that approximately 21 million Americans have
been significantly exposed to asbestos.\30\
---------------------------------------------------------------------------
\28\Asbestos Litigation Crisis in Federal and State Courts:
Hearings Before the Subcomm. on Intellectual Property and Judicial
Administration of the House Comm. on the Judiciary, 102nd Congress 1
(1975) [hereinafter Asbestos Litigation Hearings].
\29\Id.
\30\Id. at 2.
---------------------------------------------------------------------------
Asbestos fibers, when released into the atmosphere and
inhaled by humans, may cause various diseases, including
asbestosis (a clogging and scarring of the lungs that can
produce a reduced breathing capacity) and mesothelioma (a
cancer of the lining of the chest and abdomen that is typically
fatal).\31\ Lung cancer and other diseases have also been
associated with the inhalation of asbestos fibers.\32\
---------------------------------------------------------------------------
\31\Id.
\32\Id.
---------------------------------------------------------------------------
Although a link between asbestos and lung cancer was first
reported in 1935, millions of Americans were exposed to
asbestos over the ensuing years and injuries began to manifest
in the 1960's.\33\ The first appellate opinion upholding a
product liability judgment against a manufacturer of asbestos-
containing products was rendered in 1973 by the Fifth
Circuit.\34\ As reported by the GAO, ``In the course of the
first successful personal injury lawsuits against asbestos
manufacturers, plaintiffs' attorneys introduced evidence that
these manufacturers had known but concealed information about
the dangers of asbestos exposure or that such dangers were
reasonably foreseeable.''\35\
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\33\Report of the Judicial Conference of the U.S. Courts Ad Hoc
Committee on Asbestos Litigation, at 2 (Mar. 1991).
\34\Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th
Cir. 1973).
\35\GAO Report at 8 (emphasis added).
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As of 2002, approximately 730,000 individuals filed
asbestos-related lawsuits and $49 billion had been paid in
compensation.\36\ In the nearly four decades since 1973,
litigation over personal injuries resulting from exposure to
asbestos has resulted in ``hundreds of thousands of claims
filed and billions of dollars in compensation paid,'' according
to the Rand Institute for Civil Justice.\37\ ``Asbestos
litigation,'' according to the GAO, ``has been the longest-
running mass tort litigation in U.S. history.''\38\
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\36\Lloyd Dixon & Geoffrey McGovern, Report: Asbestos Bankruptcy
Trusts and Tort Compensation, Rand Institute for Civil Justice, at xi
(2011).
\37\Lloyd Dixon et al., Report: Asbestos Bankruptcy Trusts--An
Overview of Trust Structure and Activity with Detailed Reports on the
Largest Trusts, Rand Institute for Civil Justice, at xi (2010).
\38\GAO Report at 1.
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As this history illustrates, the asbestos industry, like
some other industries, tried to hide the dangers of its product
from the public. In the context of settlement agreements, cases
are too often settled by defendant companies specifically in
order to prevent evidence of their wrongdoing from becoming
public. More importantly, because of the secrecy of these
settlements, other people who have been injured have no way of
gaining important information about their exposure, their
illnesses, or the settled liability of the companies that made
them sick. Information about the concealment of wrongdoing
never becomes public, and the people who have suffered have no
way of knowing about that wrongdoing or its extent.
Governmental agencies that are charged with protecting the
public health--whether in the workplace or in the home--are
deprived of the information they need to enforce the laws
Congress has enacted. There has been too long a record, over
too many decades, of concealment, dissembling, and lawlessness,
and too many lives destroyed because of that illegal conduct.
To highlight the problem of inequitable disclosure
obligations under H.R. 4369, Representative Jerrold Nadler (D-
NY) offered an amendment requiring a party that requests
information from a bankruptcy asbestos trust to meet certain
criteria. Under the amendment, such party would have been
required to agree to disclose information relevant to such
action that pertains to the protection of public health or
safety to any other person or to any federal or state agency
with authority to enforce laws regulating an activity relating
to such information upon request of such party or agency. The
goal of this amendment was to ensure that the transparency that
H.R. 4369's proponents demand from the victims of the asbestos
industry would also apply to the corporations that inflicted so
much damage and so much suffering over the years. The amendment
would have addressed the longstanding efforts by these
corporations to conceal the facts from the public, from their
victims, and from government agencies charged with enforcing
our health and safety laws. Notwithstanding the equitable value
of this amendment, it failed by a vote of 7 to 10.\39\
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\39\June 8 Markup Transcript at 13.
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Similarly, Representative Sheila Jackson Lee (D-TX) offered
an amendment that would have provided balance to the bill's
reporting requirements and ensured privacy. Her amendment would
have required the report to be filed under seal and mandated
that the party requesting such report certify the following:
(1) Lthat it is a party in an action seeking
compensation for asbestos exposure;
(2) Lthe number of claims made against such party for
injuries resulting from asbestos;
(3) Lthe name of the state in which such claim arose;
(4) Lthe condition for which the claim for injury is
alleged;
(5) Lthe amount of the payment sought in such action;
and
(6) Lthe history of exposure and occupation of the
claimants in such action.
In addition, the amendment specified that the certification
could not include any personally identifiable information.
Finally, the amendment struck the bill's document production
provisions. This amendment, however, failed by a vote of 10 to
11.\40\
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\40\June 6 Markup Transcript at 254.
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Representative Jackson Lee offered a second amendment in
another effort to add some parity to H.R. 4369. This amendment
would have required the report to be filed under seal and
mandated that the party requesting such report certify:
(1) Lthat it is a party in an action seeking
compensation for asbestos exposure;
(2) Lthe names of asbestos containing products that the
party manufactured;
(3) Lthe locations where those products were sold or in
use;
(4) Lan estimate of the number of individuals in the
U.S. who were exposed to each asbestos product; and
(5) Lproduct identification affidavits for every case
ever settled by such party.
The amendment specified that the certification must not include
any personally identifiable information. In addition, the
amendment also struck the bill's document production
provisions. Representative Jackson Lee's amendment, however,
failed by a vote of 8 to 14.\41\
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\41\Id. at 265.
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III. H.R. 4369 IS NOT NECESSARY GIVEN THE ABSENCE OF ANY EVIDENCE OF
SYSTEMIC FRAUD
H.R. 4369's proponents have failed to provide any evidence
of systemic fraud in the asbestos bankruptcy trust system.
Therefore, this bill is a solution in search of a problem.
In 2004, reports of allegedly fraudulent claims being made
against asbestos bankruptcy trusts and solvent companies
surfaced.\42\ The CCAL Subcommittee conducted an oversight
hearing into that issue as well as others presented with
respect to the treatment of mass torts in bankruptcy cases.\43\
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\42\See, e.g., Editorial, St. Francis of Asbestos, Wall St. J.,
June 14, 2004, at A14 (recommending that the House and Senate
``bankruptcy subcommittees . . . [conduct] a full and public
investigation of the rigged asbestos mess''); The Latest Asbestos
Scam--The Lawyers Are Now Rigging the Bankruptcy Process, Wall St. J.,
June 1, 2004, at A16 (observing that the ``latest asbestos scandal is
threatening the integrity of the judicial system itself'').
\43\The Administration of Large Business Bankruptcy
Reorganizations: Has Competition for Big Cases Corrupted the Bankruptcy
System?: Hearing Before the Subcomm. on Commercial and Admin. Law of
the H. Comm. on the Judiciary, 108th Cong. (2004).
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GAO, however, informed Minority Committee staff that it was
unaware of any subsequent reports of endemic fraud with respect
to asbestos claims and that it did not uncover any evidence of
overt fraud during its examination of asbestos trusts last
year.\44\ In fact, the GAO reports that 98 percent of the 52
trusts that it reviewed required a claims audit program to be
conducted. Based on interviews held with representatives from
11 trusts, GAO found that all the trusts ``incorporate quality
assurance measures into their intake, evaluation, and payment
processes.''\45\ GAO also found that ``each trust is committed
to ensuring that no fraudulent claims are paid by the trust,
which aligns with their goals of preserving assets for future
claimants.''\46\ In addition, it found that none of the trusts
``indicated that these audits had identified cases of
fraud.''\47\
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\44\Telephone interview with William Jenkins, Director, Homeland
Security and Justice Issues, et al., U.S. Government Accountability
Office (May 7, 2012); GAO Report at 23.
\45\GAO Report at 23.
\46\Id.
\47\Id.
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Indeed, trusts maintain an elaborate process for
determining whether a claim is legitimate. Once operational,
the trust implements ``a nonadversarial administrative
process--independent of the court system--to review claimants'
occupational and medical histories before awarding
compensation.''\48\ The GAO explains that the ``trustees are to
manage the trust for the sole benefit of the present and future
claimant beneficiaries.''\49\
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\48\Id. at 3.
\49\Id. Each trust establishes its own process by which claims are
assessed and paid. Claims that meet the requisite criteria are paid a
percentage of the scheduled value based on the nature of the asserted
injury. The payment ratio varies among the trusts based on the
availability of assets and anticipated present and future claims.
According to the GAO, the range of payment ranges from 1.1 percent to
100 percent for certain diseases, such as mesothelioma or asbestosis.
The GAO found that the median payment percentage among the various
trusts was 25 percent. Id. at 17, 21.
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To establish entitlement to compensation, the claimant
completes a claim form supported with documented evidence of
exposure to asbestos products. Such evidence may consist of the
claimant's work history, employer records, Social Security
records, and deposition testimony taken during any litigation,
the GAO reports.\50\ The claimant must also submit medical
records ``sufficient to support a diagnosis for the specific
disease being claimed or, if applicable, a copy of a death
certificate.''\51\
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\50\Id. at 18.
\51\Id.
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Notwithstanding the obvious lack of any empirical evidence
of endemic fraud, and notwithstanding the existence of trust
processes designed to ensure the validity of claims, H.R.
4369's proponents argue that its reporting and other
information-sharing requirements are necessary in order to
ensure that asbestos victims are not committing fraud by
recovering money from trusts and through the tort system,
thereby ``double dipping.'' At most, however, they were only
able to identify isolated instances of fraud, which were
promptly addressed through the court system. As Charles Siegel,
the Minority witness, testified at the hearing on this
legislation:
The few examples that we have of fraud in the system
today I think show that the system works. The Kananian
case is a terrible example. That lawyer was disbarred,
and that claim was dismissed. And so once in a while we
have a situation like that, the system deals with it,
and the parties go on down the road.\52\
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\52\Furthering Asbestos Claims Transparency Act: Hearing on H.R.
4369 Before the Subcomm. on Courts, Commercial and Admin. L. of the H.
Comm. on the Judiciary, 112th Cong. (2012) (testimony of Charles S.
Siegel, Waters & Kraus LLP)
To underscore the obvious lack of evidence of any endemic
fraud and why it is premature to consider H.R. 4369,
Representative Mel Watt (D-NC) offered an amendment that would
have replaced the bill with a directive to the GAO to quantify
the extent to which fraudulent claims are, in fact, made
against asbestos bankruptcy trusts and the extent to which they
are paid. This amendment, however, was defeated by a vote of 10
to 13.\53\
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\53\June 6 Markup Transcript at 243.
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IV. H.R. 4369 IS NOTHING MORE THAN AN END RUN BY ASBESTOS DEFENDANTS
AROUND THE DISCOVERY PROCESS AVAILABLE UNDER NON-BANKRUPTCY LAW
H.R. 4369 improperly allows asbestos defendants to
circumvent state and federal discovery procedures. Its
reporting and document production requirements for asbestos
bankruptcy trusts are designed to allow defendants to obtain
information that they can already obtain under existing law.
From this, it is evident that the bill's true intent is simply
to hamper trusts from fulfilling their obligation to compensate
asbestos victims appropriately.
In response to this particular flaw in the bill,
Representative Jared Polis (D-CO) offered an amendment that
would have required the trust to provide information relating
to payments made by the trust and demands for such payment to
any party to an action concerning asbestos liability exposure
only if such party cannot otherwise obtain such information
under applicable non-bankruptcy law. The amendment further
provided that the information must relate to a trust claimant
who is also a party to such action against the requesting
party. Representative Polis's amendment, however, failed by a
vote of 11 to 12.\54\
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\54\June 8 Markup Transcript at 243
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V. H.R. 4369 WILL DIVERT CRITICAL FUNDS AND FURTHER DECREASE
COMPENSATION TO ASBESTOS VICTIMS BY FORCING BANKRUPTCY TRUSTS TO
PREPARE BURDENSOME REPORTS
H.R. 4369's reporting and document production requirements
on trusts will raise their administrative costs significantly,
notwithstanding changes that the substitute amendment made to
the bill's base text. Money used to pay these costs ultimately
means less money to compensate asbestos victims. This is
particularly problematic in light of the fact that defendants
can already obtain the information they want using existing
discovery tools without undermining compensation for legitimate
claims. The GAO, for example, noted that one trust reported
that it incurred $1 million in attorneys' fees to respond to a
request to disclose every document on every claimant, according
to the GAO.\55\
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\55\GAO Report at 27.
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H.R. 4369's retroactive application only adds to this
unnecessary burden. It is important to note that the vast bulk
of asbestos trusts that would be affected by this legislation
have long been in existence, one of which dates back to 1988.
According to the GAO, these trusts have already paid 3.3
million claims valued at about $17.5 billion.\56\ Yet, after
the passage of more than 20 years since the first trust was
established, the proponents of H.R. 4369 now insist that these
trusts issue reports and provide documentation.
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\56\Id. at 16.
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The only beneficiaries of H.R. 4369 will be the very
entities that knowingly produced a toxic substance that killed
or seriously injured unsuspecting American consumers and
workers. This bill would effectively shift the cost of
discovery away from solvent asbestos defendants to the
bankruptcy trusts, ultimately diminishing the available pool of
money to compensate the victims of bankrupt asbestos
defendants.
To reduce the cost of compliance imposed by H.R. 4369,
Representative Steve Cohen (D-TN), CCAL Subcommittee Ranking
Member, offered an amendment that would have exempted from the
bill any trust that has an internal fraud detection program.
Had this commonsense amendment been adopted, H.R. 4369 would
not have applied to a trust that has an internal claims audit
program, which ensures that claims are valid and supported.
Meanwhile, trusts that had such anti-fraud measures in place
would not have to bear the costs, burdens, and privacy risks
presented by HR. 4369's requirements. Indeed, this amendment
would have provided a meaningful incentive for trusts to ensure
that they have a viable claims audit program. This amendment
balanced the need to be vigilant against potential fraud with
the underlying purpose of asbestos trusts, which is to ensure
adequate compensation for asbestos victims. Notwithstanding
this balanced approach, Representative Cohen's amendment
narrowly failed by a vote of 11 to 11.\57\
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\57\June 6 Markup Transcript at 276.
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CONCLUSION
H.R. 4369 is troubling because: (1) its reporting and
disclosure requirements are an assault against asbestos
victims' privacy interests; (2) it is fundamentally inequitable
in that it requires disclosure by the trusts, but does not
require solvent defendant companies to disclose their
confidential settlement agreements; (3) it is not necessary
given the absence of any evidence of systemic fraud with
asbestos trusts; (4) it is nothing more than an end run by
asbestos defendants around the discovery process available
under non-bankruptcy law; and (5) it will divert critical funds
and further decrease compensation to asbestos victims by
forcing bankruptcy trusts to prepare burdensome reports. More
broadly, H.R. 4369 is just the latest in a string of bills
advocated by the asbestos industry to prevent or delay adequate
compensation for victims of the industry's dangerous product
and its efforts to hide information about such dangers from the
public.
We urge our colleagues to stand on the side of justice for
asbestos victims and to oppose H.R. 4369.
John Conyers, Jr.
Howard L. Berman.
Jerrold Nadler.
Robert C. ``Bobby'' Scott.
Melvin L. Watt.
Zoe Lofgren.
Sheila Jackson Lee.
Steve Cohen.
Henry C. ``Hank'' Johnson, Jr.
Mike Quigley.
Judy Chu.
Ted Deutch.
Linda T. Sanchez.
Jared Polis.