[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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \7\Carroll, supra note 5, at xvii.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \15\Dixon et al, supra note 6, at 2.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                      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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \30\Joseph N. Gitlin et al., Comparison of `B' Readers' 
Interpretations of Chest Radiographs for Asbestos Related Changes, 11 
Acad. Radiology 843, 852 (2004).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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. . . .'').
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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\
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    \27\June 6 Markup Transcript at 228.
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    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\
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    \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.
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    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\
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    \31\Id.
    \32\Id.
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    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.