[House Report 113-254]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 113-254
======================================================================
FURTHERING ASBESTOS CLAIM TRANSPARENCY
(FACT) ACT OF 2013
_______
October 30, 2013.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Goodlatte, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 982]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 982) 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, having considered the same, reports favorably
thereon without amendment and recommends that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 16
Committee Consideration.......................................... 17
Committee Votes.................................................. 17
Committee Oversight Findings..................................... 27
New Budget Authority and Tax Expenditures........................ 27
Congressional Budget Office Cost Estimate........................ 27
Duplication of Federal Programs.................................. 29
Disclosure of Directed Rule Makings.............................. 29
Performance Goals and Objectives................................. 29
Advisory on Earmarks............................................. 29
Section-by-Section Analysis...................................... 29
Changes in Existing Law Made by the Bill, as Reported............ 29
Dissenting Views................................................. 30
Purpose and Summary
H.R. 982, the ``Furthering Asbestos Claim Transparency
(FACT) Act of 2013'' or the ``FACT Act'' adds a paragraph to
subsection (g) of section 524 of title 11 of the United States
Code 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 of those who have
filed a claim with such trust and any payments made to
claimants and the basis for such payments.\1\ The bill
specifically prohibits the disclosure of confidential medical
records and Social Security numbers of claimants. 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\ The purpose of the bill is to prevent
fraud by requiring greater transparency for asbestos trusts so
that future claimants who have been truly harmed by asbestos
exposure will be able to receive compensation for their
injuries.
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\1\Furthering Asbestos Claim Transparency (FACT) Act of 2013, H.R.
982, 113th Cong. Sec. 2 (2013).
\2\Id.
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Background and Need for the Legislation
A. THE HISTORY OF ASBESTOS AND ASBESTOS-RELATED
HEALTH CONDITIONS
Asbestos is a commercial name given to six minerals--
amosite, crocidolite, tremolite, actinolite, anthophyllite, and
chrysotile--that were widely used in the United States in
industrial products throughout much of the 20th Century.\3\
Humans have used asbestos for centuries.\4\ The word
``asbestos'' comes from the Greek word for ``indestructible,''
and the ancient world used asbestos for everything from fabrics
to lamp wicks.\5\ 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.\6\
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\3\S. Rep. No. 110-189, at 1 (citing Asbestos, National Institute
for Occupational Safety and Health, www.cdc.gov/niosh/topics/asbestos
(last visited May 23, 2013)); see also Wylie, A Report on the Asbestos
Litigation Industry, Manhattan Institute's Center for Legal Policy,
2008, at 4, available at http://www.triallawyersinc.com/pdfs/TLI-
ASBESTOS.pdf (last visited May 31, 2013).
\4\Wylie, supra note 3, at 4.
\5\Asbestos, Heritage Research Center, http://
www.heritageresearch.com/ourlibrary/histories/asbestos.html (last
visited May 23, 2013).
\6\Wylie, supra note 3, at 4.
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Despite the usefulness of asbestos in industrial and
residential products, it was uncovered that asbestos fibers
cause serious diseases when inhaled.\7\ Inhalation of asbestos
fibers has been linked to a number of diseases, including
mesothelioma, lung cancer, asbestosis, and pleural
abnormalities.\8\ Mesothelioma is a deadly cancer of the lining
of the chest or abdomen.\9\ Exposure to asbestos is the cause
for most cases of mesothelioma.\10\ 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.\11\ Asbestosis, a chronic lung disease
resulting from inhalation of asbestos fibers, can be
debilitating and even fatal.\12\ Exposure to asbestos has been
claimed to cause pleural abnormalities.\13\ 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.\14\ These
abnormalities can affect breathing and may be an early warning
sign for mesothelioma.\15\
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\7\Asbestos Fibers and Other Elongate Mineral Particles: State of
the Science and Roadmap for Research, National Institute for
Occupational Safety and Health, Apr. 2011, at 1, available at http://
www.cdc.gov/niosh/docs/2011-159/pdfs/2011-159.pdf (last visited May 23,
2013).
\8\Id.
\9\Asbestos Health Effects, Agency for Toxic Substances & Disease
Registry, http://www.atsdr.cdc.gov/asbestos/asbestos/health_effects/
(last visited May 28, 2013).
\10\Id.
\11\See generally H.R. 4369, the ``Furthering Asbestos Claim
Transparency (FACT) Act of 2012'': Hearing Before the Subcomm. on
Courts, Commercial and Administrative Law of the H. Comm. on the
Judiciary, 112th Cong. (2011) [hereinafter Courts Subcomm. Hearing]
(testimony of Charles S. Siegel).
\12\Agency for Toxic Substances & Disease Registry, supra note 9.
\13\Id.
\14\Id.
\15\Id.
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B. ASBESTOS LITIGATION
Asbestos litigation is the longest-running mass tort
litigation in the United States.\16\ 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.''\17\ Throughout
this period asbestos litigation has evolved, presenting
different challenges to the parties and courts involved.\18\
The focus of the litigation shifted from Federal to state
courts, and now, increasingly, to bankruptcy courts and the
resulting bankruptcy asbestos trusts.\19\
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\16\Stephen J. Carroll et al., Asbestos Litigation, Rand Institute
for Civil Justice, 2005, at xvii.
\17\Lloyd Dixon et al., Asbestos Bankruptcy Trusts: An Overview of
Trust Structure and Activity with Detailed Reports on the Largest
Trusts, Rand Institute for Civil Justice, 2010, at xi.
\18\Carroll et al., supra note 16, at xx.
\19\Id.
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Asbestos litigation arose as a result of individuals' long-
term and widespread exposure to asbestos, and as a result of
many asbestos product manufacturers' failure to protect workers
against exposure and failure to warn their workers to take
adequate precautions against exposure. The U.S. Court of
Appeals for the Fifth Circuit upheld the first successful
asbestos liability suit in 1973.\20\ 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.\21\
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.
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\20\Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir.
1973).
\21\Id. at 1109.
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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.''\22\
The volume of claims filed against asbestos defendants has not
abated over time.\23\ On the contrary, annual claims filed
against defendants have risen steadily, with sharp increases in
recent years.\24\ During the 1990's, the number of asbestos
cases pending nationwide doubled from 100,000 to more than
200,000.\25\ By 2002, approximately 730,000 claims had been
filed,\26\ with more than 100,000 claims filed in 2003 alone--
``the most in a single year.''\27\
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\22\Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 597 (1997).
\23\Carroll et al., supra note 16, at xxiv.
\24\Id.
\25\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.) [hereinafter Edley Testimony].
\26\Carroll et al., supra note 16, at xxiv.
\27\Editorial, The Asbestos Blob, Cont., Wall St. J., Apr. 6, 2004,
at A16.
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The recent growth in the number of asbestos claims is
largely attributable to the significant increase of claimants
with nonmalignant injuries, including those with little or no
current functional impairment.\28\ 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.'''\29\ Conversely,
when asbestos litigation first arose in the 1960's, most
claimants were ``workers suffering from grave and crippling
maladies.''\30\
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\28\Carroll et al., supra note 16, at xxiv.
\29\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).
\30\Edley Testimony, supra note 25.
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The number of asbestos litigation defendants has grown in
commensurate fashion with the burgeoning asbestos claims. In
1983, there were approximately 300 asbestos litigation
defendants.\31\ By 2004, the number of asbestos litigation
defendants increased to over 8,400, with over 90 percent of
American industries subject to asbestos lawsuits.\32\ 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.\33\
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\31\Landin, supra note 29, at 597.
\32\Carroll et al., supra note 16, at xxv (noting that the 8,400
figure likely was conservative given the reporting methodology).
\33\Dixon et al., supra note 17, at 2.
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Under the backdrop of amassing asbestos claims and an
expanding defendant constituency, courts and affected parties
have initiated several attempts to achieve a comprehensive
resolution to asbestos litigation. Notwithstanding these
efforts, no resolution has been reached. The Supreme Court
rejected two comprehensive class action settlements and draft
Federal legislative reforms were never enacted.\34\
Accordingly, asbestos claimants and defendants likely will
continue to operate within the existing state and Federal
asbestos framework for the foreseeable future.
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\34\See Amchem Products v. Windsor, 521 U.S. 591 (1997); see Ortiz
v. Fibreboard Corp., 527 U.S. 815 (1999); 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).
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C. ASBESTOS CLAIMS IN BANKRUPTCY
Asbestos litigation has driven nearly 100 companies into
bankruptcy, with more than half of such companies filing since
the beginning of the year 2000.\35\ The cost of these
bankruptcies is largely immeasurable but has been estimated to
cost the American economy approximately 60,000 jobs and between
$1.4 and $3.0 billion.\36\ One of the most prominent
bankruptcies was that of John Mansville Corporation, the
dominant American producer of asbestos products. The Mansville
bankruptcy redefined many aspects of the asbestos litigation
system, including the inception of a trust system to compensate
asbestos claimants in exchange for a broad injunction against
future asbestos liability.\37\
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\35\Hanlon & Smetak, Asbestos Changes, 62 N.Y.U. Ann. Surv. Am. L.
525, 526-7 (2007); see also Dixon et al., supra note 17, at xii.
\36\Id. (citing Carroll et al., supra note 16, at 121 (data through
2002) and Joseph E. Stiglitz et al., The Impact of Asbestos Liabilities
on Workers in Bankrupt Firms, Sebago Associates, 2002, at 27-29, 42).
\37\Hanlon & Smetak, supra note 35, at 541.
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Following the Mansville model and in response to a rising
tide of asbestos defendants seeking relief from liability
through chapter 11 bankruptcies, Congress amended the
Bankruptcy Code in 1994 to include a provision, 11 U.S.C.
Sec. 524(g), to allow for the resolution of asbestos liability
claims against a debtor through a trust-based system.\38\ Under
that section, a debtor is permitted to create, in its chapter
11 plan, a trust that is to be the exclusive source of post-
confirmation compensation for the debtor's 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.\39\ The balance
intended by section 524(g) is simple--the asbestos claimants
receive a trust funded in an amount and administered in a
manner that is satisfactory to the presiding bankruptcy court
and a majority of the debtor's known asbestos claimants in
exchange for the debtor's ability to gain certainty regarding
its asbestos liability exposure and a shield against future
claims in order to allow the debtor to continue its business
operations.
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\38\Bankruptcy Reform Act of 1994, Sec. 111, 103d Cong. (1994)
(enacted) (codified at 11 U.S.C. Sec. 524).
\39\11 U.S.C. Sec. 524(g)(2)(B).
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The institution of an asbestos trust has become a virtual
inevitability in recent chapter 11 cases involving asbestos
defendants. As of June 2012, 54 asbestos trusts had been
formed, with an additional nine trusts expected in the near-
term and a considerable acceleration of trust formations in the
second half of the 2000's.\40\ These trusts manage substantial
assets reported in excess of $18.2 billion at the end of
2008.\41\ The asbestos trusts review and pay damages on account
of millions of claims a year; between 2007 and 2008, selected
asbestos trusts satisfied over four million claims.\42\
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\40\Dixon et al., supra note 17, at xii.
\41\Id. (noting that this figure did not include the assets of at
least four recently formed asbestos trusts).
\42\Id.
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D. FRAUD IN ASBESTOS LITIGATION THROUGH MASS SCREENINGS
A commentator likened the scale of fraud in asbestos
litigation to that of the scandals of ``Credit Mobilier, Teapot
Dome, the Savings and Loan debacles, WorldCom, Enron and the
vast Ponzi schemes that have recently unfolded.''\43\ Fraud in
asbestos litigation largely stems from plaintiffs' lawyers
utilizing mass screening measures to recruit hundreds of
thousands of claimants.
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\43\How Fraud and Abuse in the Asbestos Compensation System Affect
Victims, Jobs, the Economy, and the Legal System: Hearing Before the
Subcomm. on the Constitution of the H. Comm. on the Judiciary, 112th
Cong. 8 (2011) [hereinafter Constitution Subcomm. Hearing] (testimony
of Professor Lester Brickman).
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Asbestos lawyers were found to have 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.''\44\ 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.\45\ 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.''\46\
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\44\Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 723
(D. Del. 2005).
\45\Lester Brickman, The Use of Litigation Screenings in Mass
Torts: A Formula for Fraud?, 61 SMU L. Rev. 1221, 1233 (2008).
\46\Griffin B. Bell, Asbestos & The Sleeping Constitution, 31 Pepp.
L. Rev. 1, 5 (2003).
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These mass screenings 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!''\47\
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\47\Pamela Sherrid, Looking for Some Million Dollar Lungs, Best of
Asbestos, U.S. News & World Rep., Dec. 17, 2001, at 36.
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It is estimated that more than one million workers have
undergone attorney-sponsored screenings.\48\ 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.''\49\
According to legal scholars, ``without these claims, the
`asbestos litigation crisis' would never have arisen.''\50\
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\48\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).
\49\Andrew Schneider, Asbestos Lawsuits Anger Critics, St. Louis
Post-Dispatch, Feb. 11, 2003, at A1.
\50\Lester Brickman, Lawyers' Ethics and Fiduciary Obligation in
the Brave New World of Aggregative Litigation, 26 Wm. & Mary Envtl. L.
& Pol'y Rev. 243, 273 (2001).
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An American Bar Association Commission on Asbestos
Litigation confirmed that claims filed by the non-sick
generally arose from for-profit screening companies whose sole
purpose was to identify large numbers of people with minimal X-
ray changes consistent with asbestos exposure.\51\ 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.''\52\ 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%.\53\
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\51\Mark A. Behrens & Phil Goldberg, The Asbestos Litigation
Crisis: The Tide Appears to be Turning, 12 Conn. Ins. L.J. 477, 480
(2006).
\52\Hon. Nathan R. Jones, ABA Comm'n on Asbestos Litigation, ABA
Report to the House of Delegates 8 (2003) available at http://
www.cdc.gov/niosh/docket/archive/pdfs/NIOSH-015/020103-Exhibit12.pdf.
\53\Id.
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Researchers at Johns Hopkins University compared the X-ray
interpretations of professionals who are certified by the
National Institute for Occupational Safety and Health to
interpret pulmonary X-rays, referred to as ``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.''\54\
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\54\Joseph N. Gitlin et al., Comparison of `B' Readers'
Interpretations of Chest Radiographs for Asbestos Related Changes, 11
Acad. Radiology 843, 852 (2004).
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One physician, Dr. Lawrence Martin, has explained the
reason why plaintiffs' B Readers seem to see asbestos-related
lung abnormalities on chest X-rays in numbers not seen by
neutral experts. Dr. Martin has said, ``the chest X-rays are
not read blindly, but always with knowledge of some asbestos
exposure and that the lawyer wants to file litigation on the
worker's behalf.''\55\ 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.''\56\ 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.''\57\
Professor Lester Brickman, an expert on asbestos litigation,
concluded that ``[a]sbestos 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.''\58\
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\55\David E. Bernstein, Keeping Junk Science Out of Asbestos
Litigation, 31 Pepp. L. Rev. 11, 13 (2003) (quoting Lawrence Martin,
M.D.).
\56\Owens Corning, 322 B.R. at 723.
\57\Lester Brickman & Harvey D. Shapiro, Asbestos Kills--And More
than Just People: Jobs, Ethics, and Elementary Justice, Nat'l. Rev.,
Jan. 31, 2005.
\58\Lester Brickman, On the Theory Class's Theories of Asbestos
Litigation: The Disconnect Between Scholarship and Reality, 31 Pepp. L.
Rev. at 33.
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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.\59\ 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,''\60\ Congress convened
hearings on fraud and abuse in asbestos litigation.\61\ A
Federal grand jury was empanelled in the Southern District of
New York.\62\
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\59\In re Silica Prods. Liab. Litig., 398 F.Supp.2d 563 (S.D. Tex.
2005).
\60\Id. at 635.
\61\The Silicosis Story: Hearings Before the Subcomm. on Oversight
and Investigations of the Comm. on Energy and Commerce, 109th Cong.
(2006).
\62\Adam Liptak, Defendants See a Case of Diagnosing for Dollars,
N.Y. Times, Oct. 1, 2007, available at http://www.nytimes.com/2007/10/
01/us/01bar.html (last accessed May 31, 2013) (``A grand jury was
convened in Manhattan more than 2 years ago to look into potential
fraud in silicosis cases. . . .'').
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Many believed the decline in mass screenings and enactment
of medical criteria statutes in major asbestos venue states
marked the beginning of a new, fairer asbestos compensation
system.\63\ The Committee, however, has received testimony
suggesting that screening programs may be, or soon will be,
used to generate asbestos trust claims.\64\ The asbestos bar is
using new techniques to recruit potential trust claimants.
While screenings were often advertised in break rooms, in local
papers, and on local broadcast stations,\65\ the modern
asbestos plaintiffs' bar spends billions of dollars on mass
media advertisements designed to recruit potential asbestos
tort plaintiffs and trust claimants.\66\ Experts estimate that
asbestos plaintiffs' firms spent over $950 million on
television advertising in 2011.\67\ Trial lawyers' advertising
campaigns extend beyond television, and experts estimate that
the asbestos bar spends tens of millions each year on
sophisticated online advertising campaigns.\68\
``Mesothelioma'' has become the single most expensive keyword
on Google's auction-style AdWords platform.\69\
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\63\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).
\64\Constitution Subcomm. Hearing, supra note 43 (testimony of
Professor Lester Brickman).
\65\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).
\66\Kenneth M. Goldstein, Panel Discussion at U.S. Chamber
Institute for Legal Reform's 12th Annual Legal Reform Summit (Oct. 26,
2011) (associated slides available at http://
www.instituteforlegalreform.com/sites/default/files/
Lawyers_Mass_Tort_Solicitation_Advertising_Oct2011.pdf) (last visited
May 31, 2013).
\67\Id.
\68\See New Media Strategies, The Plaintiffs' Bar Goes Digital 3
(January 2012) available at http://www.instituteforlegalreform.com/doc/
the-plaintiffs-bar-goes-digital-0 (last visited May 23, 2013).
\69\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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There are signs that the suspect practices deployed in
traditional asbestos state court tort litigation have been
utilized against asbestos trusts. 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.\70\ Further, with the advent of enhanced
information technology tools, plaintiffs' firms have the
ability to focus their claimant recruiting efforts on a broader
audience. The indications of fraud coupled with an environment
conducive for fraud, as provided in more detail below, is cause
for alarm.
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\70\The David Law Firm--Lung Cancer, http://www.calldavid.com/lung-
cancer.html (last visited May 31, 2013).
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E. THE OPAQUE ASBESTOS TRUST SYSTEM AND RELATED FRAUD
While the prerequisites for establishing a bankruptcy
asbestos trust typically compel certain disclosures, these
disclosures are significantly lacking. To obtain the principal
benefit of the asbestos trust--the channeling injunction--a
debtor must demonstrate to the court, among other things, that
at the time of confirmation:
the trust will operate through mechanisms such as
structured, periodic, or supplemental payments, pro rata
distributions, matrices, or periodic 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.\71\
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\71\11 U.S.C. Sec. 542(g)(2)(B)(ii)(V) (2011).
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In many cases, this requirement has caused the debtor to
include a provision in its chapter 11 plan requiring it to file
periodic disclosures with the court of the financial health of
the asbestos liability trust.\72\ 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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\72\Carroll et al., supra note 16, at 24.
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The trusts' limited disclosures are a result of the
structure of section 524(g), which grants considerable control
over asbestos bankruptcies and resulting asbestos trusts to
plaintiffs' attorneys.\73\ In particular, section 524(g) allows
a channeling injunction to issue only if three-quarters of
current asbestos claimants support a proposed chapter 11
plan.\74\ This requirement is distinct from the usual
requirements for plan confirmation, which must also be
satisfied.\75\ The requirement to gain the consent of a
specified class is a departure from traditional bankruptcy
procedures, which allow a chapter 11 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.\76\
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\73\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 Dixon et al., supra note 17, 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); see also Searcey &
Barry, As Asbestos Claims Rise, So Do Worries About Fraud, Wall St. J.,
Mar. 11, 2013.
\74\11 U.S.C. Sec. 524(g)(2)(B)(ii)(IV)(bb) (2011).
\75\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.'').
\76\11 U.S.C. Sec. 1129(b)(1) (2011) (allowing confirmation of a
plan over the objection of a class of creditors).
---------------------------------------------------------------------------
In other words, the asbestos claimants class has a
statutory blocking right to a proposed chapter 11 plan, which
results in representatives of that class having considerable
influence over the chapter 11 plan and the formation of any
resulting asbestos trust. Generally speaking, representation of
asbestos claimants is concentrated within a select group of law
firms. 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.''\77\
Consequently, single firms or small groups of firms may
effectively block confirmation of a chapter 11 plan.\78\ 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.''\79\
---------------------------------------------------------------------------
\77\In re Congoleum Corp., 426 F.3d 675, 679 (3d Cir. 2005).
\78\Lester Brickman, Ethical Issues in Asbestos Litigation, 33
Hofstra L. Rev. at 868-69 (discussing asbestos bar's de facto control
of bankruptcy process).
\79\Brown, supra note 74, at 121.
---------------------------------------------------------------------------
Another unique feature of section 524(g) is that it looks
only to the number of current asbestos claimants who support a
proposed chapter 11 plan. In contrast, a traditional bankruptcy
requires a majority in number and two-thirds in amount of a
particular class in order to confirm a chapter 11 plan.\80\
Plaintiffs' firms exploit the express preference for claimant
quantity over claim quality in section 524(g) by asserting
their large numbers of claims in bankruptcy regardless of their
likely value or merit, which typically will be evaluated
following the voting period on a debtor's chapter 11 plan.\81\
Plaintiffs' firms that historically have filed few tort cases
against a debtor company sometimes file claims on behalf of
their entire client list once bankruptcy has been declared.\82\
---------------------------------------------------------------------------
\80\11 U.S.C. Sec. 1126(c) (2011)(``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. . . .'').
\81\See Brown, supra note 74, 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.'').
\82\Id.
---------------------------------------------------------------------------
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, referred to as a
``future claims representative'' or an ``FCR.''\83\ Courts
generally appoint an individual suggested by the current
claimants and the debtor company.\84\ 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.\85\ Moreover,
FCR work can be extremely lucrative,\86\ and academic
commentators have expressed concern that FCR's are ``punch-
pulling''\87\ in an effort to be seen as ``reliable negotiating
partners who [will] not `rock the boat'''\88\ and increase the
likelihood of future FCR appointments. Indeed, many
representatives serve several trusts concurrently.\89\
---------------------------------------------------------------------------
\83\11 U.S.C. Sec. 524(g)(4)(B)(i) (2011).
\84\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.'').
\85\See Brown, supra note 52, at 158-59 (discussing parties'
incentive to propose weak representative).
\86\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).
\87\See Richard A. Nagareda, Mass Torts in a World of Settlement
177 (2007).
\88\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.
\89\See Dixon et al., supra note 17 (FCR's for largest trusts set
forth in Appendix A).
---------------------------------------------------------------------------
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 or
``TAC,'' before amending the trust's distribution plan or audit
procedures.\90\ 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.\91\
---------------------------------------------------------------------------
\90\Carroll et al., supra note 16, at 22 (noting that TAC must
consent to, among other things, modifications to a trust's distribution
plan or audit procedures).
\91\Dixon et al., supra note 17, at 14.
---------------------------------------------------------------------------
The trust documents governing the operation of the asbestos
trusts often include restrictions on sharing trust data,
facilitating a lack of transparency in the trust system. A
majority of the trusts' distribution plans affirmatively
require claims to be treated as confidential settlement
negotiations.\92\ 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.\93\ In many instances,
trusts' procedures require a valid state-court-issued subpoena
in order to provide information to state litigants.\94\ Even in
cases where a valid subpoena is served upon an asbestos trust,
an asbestos trust may attempt to defeat the subpoena or require
an additional subpoena from the presiding bankruptcy court
judge.\95\
---------------------------------------------------------------------------
\92\Dixon et al., supra note 17, at 32.
\93\Constitution Subcomm. Hearing, supra note 43, at 94-95, 100-101
(written testimony of James Stengel).
\94\Carroll et al., supra note 16, at 28.
\95\Courts Subcomm. Hearing, supra note 11, at 14.
---------------------------------------------------------------------------
There was a time when asbestos trusts were willing to share
claims information more 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.\96\ 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.\97\
---------------------------------------------------------------------------
\96\Courts Subcomm. Hearing, supra note 11, at 207 (``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. . . .'').
\97\Manville Trust Single Use Data License Agreement, http://
www.claimsres.com/documents/MT/DataAgreement.pdf (last visited May 31,
2013).
---------------------------------------------------------------------------
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.\98\ The trusts, the plaintiffs' bar, and the post-
confirmation FCRs 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.\99\
---------------------------------------------------------------------------
\98\Carroll et al., supra note 16, at 23; Dixon et al., supra note
17, at 45.
\99\See, e.g., Courts Subcomm. Hearing, supra note 11, 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.\100\ The GAO Report stated that
the internal audits of the asbestos trusts were designed to
ensure compliance with internal trust procedures and not
generally designed to detect duplicate or inconsistent claims
among different asbestos trusts and the state courts.\101\
Further, the complete absence of fraud reported by the eleven
trusts interviewed in the GAO Report runs contrary to
historical experiences with compensation and relief programs.
Fraud and abuse have been uncovered in virtually every
compensation and relief program undertaken in modern America,
whether privately funded or government-sponsored.\102\
Fraudulent claims against the 9/11 Victim's Compensation Fund
and BP's gulf oil fund, for example, were detected and
prosecuted.\103\ 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.\104\
---------------------------------------------------------------------------
\100\Carroll et al., supra note 16, at 16.
\101\Carroll et al., supra note 16, at 23.
\102\Courts Subcomm. Hearing, supra note 11, at 25 (testimony of S.
Todd Brown).
\103\See e.g., Nedra Pickler, Ex-naval officer gets prison time for
9-11 fraud, Associated Press (Dec. 12, 2011), available at http://
www.washingtontimes.com/news/2011/dec/12/ex-naval-officer-gets-prison-
time-911-fraud/; Dept. of Justice, Deepwater Horizon (BP) Oil Spill
Fraud, http://www.justice.gov/criminal/oilspill/(last visited May 31,
2013) (collecting cases involving fraud on the Gulf Coast Claims
Facility).
\104\Courts Subcomm. Hearing, supra note 11, 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 state court 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
state court 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.\105\ He simultaneously filed claims against multiple
asbestos trusts alleging exposure to marine products while
working as a ``shipyard laborer.''\106\ Despite the
inconsistency of his tort and trust claims, which the court
described as a ``fiction,'' Kananian received substantial
payments from asbestos trusts.\107\
---------------------------------------------------------------------------
\105\Kananian v. Lorillard Tobacco Co., No. CV 442750 (Ohio Ct.
Com. Pl. Cuyahoga County 2007).
\106\Id. at 5, 9.
\107\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.\108\
Further examples of inconsistent claiming have been identified
in Delaware, Louisiana, New York, Oklahoma, and Virginia.\109\
---------------------------------------------------------------------------
\108\Constitution Subcomm. Hearing, supra note 43, at 94-95, 103-
105 (written testimony of James Stengel).
\109\Courts Subcomm. Hearing, supra note 11, at 9 (testimony of
Leigh Ann Schell); e.g., Montgomery v. Foster Wheeler, Case No. 09C-11-
215 ASB, Pretrial Hearing 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.\110\
---------------------------------------------------------------------------
\110\Courts Subcomm. Hearing, supra note 11, 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.''\111\ The court further observed that:
---------------------------------------------------------------------------
\111\Montgomery, supra note 110, 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.\112\
---------------------------------------------------------------------------
\112\Montgomery, supra note 110, at 25.
In addition to the fraud uncovered through the state court
system, the Wall Street Journal conducted an investigation that
detailed numerous anomalies between individuals' state court
filings and asbestos trust claim filings.\113\ The Wall Street
Journal found that individuals had claimed exposure to asbestos
through industrial jobs that they held while under the age of
twelve, disparate medical diagnoses asserted among different
asbestos trusts and state court cases, and claims asserted by
individuals that simply did not exist.\114\
---------------------------------------------------------------------------
\113\Searcey & Barry, supra note 74.
\114\Searcey & Barry, supra note 74.
---------------------------------------------------------------------------
The lack of meaningfully transparent trust disclosures,
combined with published research, court decisions and
investigations suggesting and highlighting fraud within the
asbestos trust system provided the framework for bankruptcy bar
and Congressional inquiry into potential mechanics to reduce
and prevent fraudulent activity within the state court and
asbestos trust systems. 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 524(g) trusts to disclose the particulars
of each demand for payment received by a trust during the
preceding quarter.\115\ The Subcommittee, in a memo to the
Advisory Committee, examined the merits and demerits of the
proposal, but ultimately concluded that if:
---------------------------------------------------------------------------
\115\Letter 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 (Nov.
22, 2010) (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
solution--such as an amendment of Sec. 524(g) that
imposes additional requirements on trusts created under
that provision.\116\
---------------------------------------------------------------------------
\116\Memorandum from Subcommittee on Business Issues to Advisory
Committee on Bankruptcy Rules (Mar. 10, 2011) (on file with Committee).
A second memo from the Subcommittee, dated September 19,
2011, collects comments the Subcommittee 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 small number of qualifications. Others who
submitted comments, including the FCRs, opposed the
proposal.\117\
---------------------------------------------------------------------------
\117\Memorandum from Subcommittee on Business Issues to Advisory
Committee on Bankruptcy Rules (Sept. 19, 2011) (on file with
Committee).
---------------------------------------------------------------------------
F. THE FURTHERING ASBESTOS CLAIMS TRANSPARENCY
(FACT) ACT OF 2013
During the 112th Congress, 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.''\118\ 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.
---------------------------------------------------------------------------
\118\See generally Constitution Subcomm. Hearing, supra note 43.
---------------------------------------------------------------------------
The Subcommittee on Courts, Commercial and Administrative
Law of the House Judiciary Committee held a hearing on H.R.
4369 on May 10, 2012.\119\ Three of the four witnesses
testified that transparency was sorely needed in the 524(g)
asbestos trust compensation system.\120\ 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.\121\ Mr. Siegel did argue that the
FACT Act would impose ``onerous'' new administrative burdens on
the trusts--a hypothesis that was contradicted by Mr.
Scarcella's testimony founded in his experience working at a
claims processing department at one of the largest trusts.\122\
---------------------------------------------------------------------------
\119\See generally Courts Subcomm. Hearing, supra note 11.
\120\See id. (testimonies of Leigh Ann Schell, Prof. S. Todd Brown,
and Marc Scarcella).
\121\Id. at 81.
\122\Id. (``As somebody who worked at a trust, the largest asbestos
trust, the Manville Personal Injury Trust, back in 2001 as their
quantitative data analyst and statistician, I can tell you that I
understand Mr. Siegel's concern, and I think it is a legitimate
concern, but I can assure everybody that it is not a problem.'')
---------------------------------------------------------------------------
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 a manager's amendment. The amendment adopted during
the Committee's consideration of H.R. 4369 incorporated
comments received during its legislative consideration and
clarified that section 107 of the Bankruptcy Code applies to
the new requirements of the asbestos trusts and that asbestos
trusts could require payment for costs related to third-party
discovery requests. H.R. 4369 was not considered by the Full
House of Representatives during the 112th Congress.
Given the necessity for transparency and the significant
legislative record, Rep. Farenthold (R-TX), together with Rep.
Matheson (D-UT), introduced H.R. 982, the Furthering Asbestos
Claim Transparency (FACT) Act of 2013, on March 6, 2013, which
is identical to H.R. 4369 as reported out of the Committee
during the 112th Congress. The Subcommittee on Regulatory
Reform, Commercial and Antitrust Law held a hearing on H.R. 982
on March 13, 2013.\123\ Three of the four witnesses testified
that the current asbestos trust system lacked transparency and
was conducive to fraudulent activity.\124\ The fourth witness,
Mr. Inselbuch, argued that the FACT Act would abrogate state
discovery laws and would create administrative burdens on the
trusts notwithstanding a record to the contrary on both
accounts.\125\
---------------------------------------------------------------------------
\123\See generally H.R. 982, the ``Furthering Asbestos Claim
Transparency (FACT) Act of 2013'': Hearing Before the Subcomm. on
Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the
Judiciary, 113th Cong. (2013) [hereinafter the Reg. Subcomm. Hearing].
\124\See id. (testimonies of Hon. Peggy L. Ableman, Prof. S. Todd
Brown, and Marc Scarcella).
\125\Id.; see also H.R. 982.
---------------------------------------------------------------------------
The bill amends section 524(g) of the Bankruptcy Code to
require asbestos trusts to file quarterly reports with the
presiding bankruptcy court that detail claimants' names,
demands made by the claimants to the asbestos trust, any
amounts paid to claimants, and the basis for such
payments.\126\ The FACT Act also requires asbestos trusts to
provide information requested by parties to traditional
asbestos tort litigation, subject to payment from the
requesting party for costs associated with such a request.\127\
As the bill amends a provision of the Bankruptcy Code, the
reporting and information sharing requirements contained
therein fall squarely within Congress' bankruptcy power.\128\
---------------------------------------------------------------------------
\126\H.R. 982 Sec. 2.
\127\Id.
\128\U.S. Const. art. I, Sec. 8, cl. 4; see Court Subcomm. Hearing,
supra note 11, at 85-89 (memorandum regarding Congress' power to enact
legal reform legislation prepared by former Solicitor General Paul D.
Clement); see also Reg. Subcomm. Hearing, supra note 124 (testimony of
Prof. S. Todd Brown).
---------------------------------------------------------------------------
The FACT Act includes several privacy protections. The bill
provides that sensitive identifying information, such as
complete Social Security numbers and confidential medical
records, should not be published in the quarterly reports.\129\
Additionally, the FACT Act subjects both the quarterly
reporting requirements and the written discovery requests to
section 107 of the Bankruptcy Code. Section 107 of the
Bankruptcy Code and related Rule 9037 of the Federal Rules of
Bankruptcy Procedure grant the presiding bankruptcy judge broad
discretion to exclude confidential or sensitive information
from the quarterly reports or in response to a written
discovery request. Specifically, section 107(c) of the
Bankruptcy Code provides a bankruptcy court with discretion to
exclude from disclosure broad categories of information
contained in any document filed in a chapter 11 case that would
``create undue risk of identity theft or other unlawful injury.
. . .''\130\ Further, responses to written discovery requests
are subject to any applicable protective orders.\131\
---------------------------------------------------------------------------
\129\H.R. 982 Sec. 2.
\130\11 U.S.C. Sec. 107(c) (2011); 18 U.S.C. Sec. 1028(d) (2011);
Fed. R. Bankr. P. 9037.
\131\H.R. 982 Sec. 2.
---------------------------------------------------------------------------
The FACT Act does not disturb or supersede any applicable
state discovery laws or rules. On the contrary, any information
received pursuant to a written request would remain subject to
the discovery laws and rules applicable in the relevant state
court proceeding.
The FACT Act is a measured amendment to the Bankruptcy Code
provision governing asbestos trusts that will promote greater
transparency among the asbestos trusts and the state court
system. This information will reduce the potential for fraud
and help to unveil any existing fraudulent activity. A
reduction in fraud will help to ensure that the asbestos trusts
achieve their designed goal--administering and preserving their
funds to provide substantially similar recompense to future
claimants that have been truly aggrieved by exposure to
asbestos.
Hearings
The Committee's Subcommittee on Regulatory Reform,
Commercial and Antitrust Law held a hearing on H.R. 982 on
March 13, 2013. Testimony was received from Hon. Peggy L.
Ableman, former Delaware Superior Court Judge and special
counsel at McCarter & English, LLP; S. Todd Brown, Professor of
Law, SUNY Buffalo Law School; Elihu Inselbuch, Member, Caplin &
Drysdale, Chartered; and Marc Scarcella of Bates White
Consulting, with additional material submitted by Bill
Cawlfield, Asbestos & Mesothelioma Patient, Denver, CO;
Courtney Davis, Daughter of Asbestos & Mesothelioma Victim,
Raleigh, NC; Bob Guinn, Asbestos & Mesothelioma Patient, Ririe,
ID; Julie Gundlach, Asbestos & Mesothelioma Patient, St. Louis,
MO; Shelly Kozicki, Widow of Asbestos & Mesothelioma Victim,
Detroit, MI; Mary Jane Williams, Asbestos & Mesothelioma
Patient, Springfield, OH; Loring Williams, Spouse of Asbestos &
Mesothelioma Patient, Springfield, OH; Forrest Wulf, Asbestos &
Mesothelioma Patient, Alton, IL; Dan Young, Spouse of Asbestos
& Mesothelioma Patient, St. Louis, MO; Susan Vento, Widow of
Bruce Vento, Mesothelioma Victim and Former U.S. House
Representative, St. Paul, MN; Nan Aron, Alliance for Justice;
Joanne Doroshow, Center for Justice & Democracy; Thomas
Cluderay, Environmental Working Group; Robert Kelley, Protect
Missouri Workers; Robert Weissman, Public Citizen; Ed
Mierzwinski, U.S. Public Interest Research Group; Michael J.
Crames, FCR for the Owens Corning/Fibreboard Asbestos Personal
Injury Trust; Lawrence Fitzpatrick, FCR for the ACandS Asbestos
Settlement Trust and the Durabla Manufacturing Company and
Durabla Canada Ltd. Asbestos Trust; Prof. Eric D. Green, FCR
for the Babcock & Wilcox Company Asbestos PI Trust, the DII
Industries, LLC Asbestos PI Trust, the Federal-Mogul Asbestos
Personal Injury Trust, and the Fuller-Austin Asbestos
Settlement Trust; Martin J. Murphy, FCR for the Kaiser Alum. &
Chem. Corp. Asbestos Personal Injury Trust; James L. Patton,
Jr., FCR for the Celotex Asbestos Settlement Trust and the
Leslie Controls, Inc. Asbestos Personal Injury Trust; The
Honorable Dean M. Trafelet (Ret.), FCR for the Armstrong World
Industries Asbestos Trust, the Plibrico Asbestos Trust, the MLC
Asbestos PI Trust, and the United States Gypsum Asbestos
Personal Injury Settlement Trust; Doug Campbell, Campbell &
Levine, LLC; Genevieve Casey Bosilevac, Mesothelioma Victim;
Judy Van Ness, Widow of Dickie Van Ness, Mesothelioma Victim;
and the Asbestos Disease Awareness Organization.
Committee Consideration
On May 21, 2013, the Committee met in open session and
ordered the bill H.R. 982 favorably reported, without
amendment, by a rollcall vote of 17 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. 982.
1. The amendment offered by Mr. Conyers replaces the bill's
substantive provisions with a requirement that asbestos trusts
report only aggregated information on demands received and
payments made from the asbestos trusts. This amendment was
defeated by a rollcall vote of 15-16.
ROLLCALL NO. 1
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI).................... X
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................
Mr. Labrador (ID)..............................
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL)..............................
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)............................... X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 15 16
------------------------------------------------------------------------
2. The amendment offered by Mr. Cohen excepts from
quarterly reporting trusts that already have an internal audit
mechanism in place. This amendment was defeated by a rollcall
vote of 13-19.
ROLLCALL NO. 2
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI).................... X
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 13 19
------------------------------------------------------------------------
3. The amendment offered by Mr. Nadler limits third party
discovery to those parties who disclose information pertaining
to the public safety or health to a law enforcement agency.
This amendment was defeated by a rollcall vote of 14-18.
ROLLCALL NO. 3
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI).................... X
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 14 18
------------------------------------------------------------------------
4. The amendment offered by Mr. Scott treats certain
medical information in the quarterly reports as protected
health information under the Health Insurance Portability and
Accountability Act. This amendment was defeated by a rollcall
vote of 14-18.
ROLLCALL NO. 4
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT).............................. X
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 14 18
------------------------------------------------------------------------
5. The amendment offered by Mr. Scott exempts claimants who
are veterans or servicemembers. This amendment was defeated by
a rollcall vote of 14-15.
ROLLCALL NO. 5
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL)............................. X
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 14 15
------------------------------------------------------------------------
6. The amendments offered en bloc by Mr. Johnson limits the
terms upon which a trust may disclose information and to
exclude personally identifiable information from the bill's
public reporting and document production requirements. These
amendments were defeated by a rollcall vote of 13-18.
ROLLCALL NO. 6
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA).............................. X
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 13 18
------------------------------------------------------------------------
7. The amendments offered en bloc by Ms. Jackson Lee
require the filing of certain certifications concerning claims
against a third party before it may seek discovery from an
asbestos trust and require the filing of certain certifications
concerning asbestos-containing products before a third party
may seek discovery from an asbestos trust. These amendments
were defeated by a rollcall vote of 95-15.
ROLLCALL NO. 7
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID)..............................
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 9 15
------------------------------------------------------------------------
8. The amendment offered by Mr. Garcia prohibits defendants
who were held liable for asbestos exposure from seeking
information through the bill. This amendment was defeated by a
rollcall vote of 11-18.
ROLLCALL NO. 8
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 11 18
------------------------------------------------------------------------
9. The amendment offered by Mr. Jeffries replaces the
quarterly reporting requirements with a requirement that a
trust provide discovery, upon written request, to a party to an
action concerning liability for asbestos exposure if the
requesting party cannot obtain such information under non-
bankruptcy law. This amendment was defeated by a rollcall vote
of 13-18.
ROLLCALL NO. 9
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC)................................. X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Bachus (AL)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA).................................. X
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Amodei (NV)................................ X
Mr. Labrador (ID).............................. X
Ms. Farenthold (TX)............................ X
Mr. Holding (NC)............................... X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
[Vacant].......................................
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Mr. Scott (VA)................................. X
Mr. Watt (NC).................................. X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR)............................. X
Ms. Chu (CA)................................... X
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA).................................. X
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Garcia (FL)................................ X
Mr. Jeffries (NY).............................. X
------------------------
Total...................................... 13 18
------------------------------------------------------------------------
10. The bill was reported favorably without amendment by a
rollcall vote of 17-14.
ROLLCALL NO. 10
------------------------------------------------------------------------
Ayes Nays T2Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................. X
Mr. Sensenbrenner, Jr. (WI)..................
Mr. Coble (NC)............................... X
Mr. Smith (TX)...............................
Mr. Chabot (OH).............................. X
Mr. Bachus (AL).............................. X
Mr. Issa (CA)................................
Mr. Forbes (VA).............................. X
Mr. King (IA)................................ X
Mr. Franks (AZ).............................. X
Mr. Gohmert (TX)............................. X
Mr. Jordan (OH).............................. X
Mr. Poe (TX)................................. X
Mr. Chaffetz (UT)............................
Mr. Marino (PA).............................. X
Mr. Gowdy (SC)............................... X
Mr. Amodei (NV).............................. X
Mr. Labrador (ID)............................ X
Ms. Farenthold (TX).......................... X
Mr. Holding (NC)............................. X
Mr. Collins (GA)............................. X
Mr. DeSantis (FL)............................ X
[Vacant].....................................
Mr. Conyers, Jr. (MI), Ranking Member........ X
Mr. Nadler (NY).............................. X
Mr. Scott (VA)............................... X
Mr. Watt (NC)................................ X
Ms. Lofgren (CA).............................
Ms. Jackson Lee (TX)......................... X
Mr. Cohen (TN)............................... X
Mr. Johnson (GA).............................
Mr. Pierluisi (PR)........................... X
Ms. Chu (CA)................................. X
Mr. Deutch (FL).............................. X
Mr. Gutierrez (IL)...........................
Ms. Bass (CA)................................ X
Mr. Richmond (LA)............................
Ms. DelBene (WA)............................. X
Mr. Garcia (FL).............................. X
Mr. Jeffries (NY)............................ X
--------------------------
Total.................................... 17 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. 982, 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, June 7, 2013.
Hon. Bob Goodlatte, 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. 982, the
``Furthering Asbestos Claim Transparency (FACT) Act of 2013.''
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. 982--Furthering Asbestos Claim Transparency
(FACT) Act of 2013.
As ordered reported by the House Committee on the Judiciary
on May 21, 2013.
H.R. 982 would require trusts set up through a Chapter 11
bankruptcy reorganization caused by asbestos liabilities to
submit quarterly reports to the bankruptcy court concerning the
damage claims and payments made by the trust. Based on
information provided by the Administrative Office of the U.S.
Courts (AOUSC), CBO estimates that implementing H.R. 982 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. 982 would not affect direct
spending or revenues; therefore, pay-as-you-go procedures do
not apply.
H.R. 982 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments.
H.R. 982 would impose a private-sector mandate as defined
in UMRA by requiring asbestos trusts to submit quarterly
reports. According to studies by the Government Accountability
Office (GAO) and the RAND Corporation, only a small number of
asbestos trusts currently exist. Further, the GAO study
indicates that the information to be submitted under the bill
is already tracked by many of the asbestos trusts. Therefore,
CBO expects that the incremental cost to comply with the
reporting requirements in the bill would fall below the annual
threshold established in UMRA for private-sector mandates ($150
million in 2013, 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.
Duplication of Federal Programs
No provision of H.R. 982 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
Disclosure of Directed Rule Makings
The Committee estimates that H.R. 982 specifically directs
to be completed no specific rule makings within the meaning of
5 U.S.C. 551.
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.
982 amends title 11, United States Code, to require the
publication and disclosure of certain data by trusts created in
a chapter 11 plan 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. 982 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
The following discussion describes the bill as reported by
the Committee.
Section 1. Short Title. Provides that the bill may be
referred to as the ``Furthering Asbestos Claim Transparency Act
of 2013,'' or ``FACT Act of 2013.''
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 (new matter is
printed in italics and 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. 982, the ``Furthering Asbestos Claim Transparency
(FACT) Act of 2013,'' is a thoroughly flawed bill that
blatantly strengthens protections for the very entities that
exposed millions of unsuspecting Americans to the toxic effects
of asbestos. The bill accomplishes this end by giving 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 severely
cripple ``their ability to operate and pay claims.''\1\
Although the proponents of this legislation assert that it is
intended to protect asbestos victims, not a single asbestos
victim has expressed support for H.R. 982. For example, we
heard from the widow of our former colleague Representative
Bruce Vento (D-MN) who passed away from mesothelioma. She
emphatically stated that H.R. 982 ``does not do a single
thing'' to help asbestos victims and their families.\2\
---------------------------------------------------------------------------
\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. 61-62 (2012) (testimony of Charles
S. Siegel, Waters & Kraus LLP).
\2\Letter from Susan Vento, widow of Rep. Bruce Vento (D-MN), et
al. to Chairman Bob Goodlatte (R-VA) of the H. Comm. on the Judiciary
(May 20, 2013) (on file with H. Comm. on the Judiciary Democratic
staff) [hereinafter Vento Letter].
---------------------------------------------------------------------------
H.R. 982 disrupts a reasonably well-functioning asbestos
victim compensation process. Entities facing overwhelming mass
tort liability for causing asbestos injuries may shed these
liabilities and financially regain their stability in exchange
for funding trusts established under chapter 11 of the
Bankruptcy Code to pay the claims of their victims, under
certain circumstances.\3\ H.R. 982, however, interferes with
this longstanding process in two ways. The FACT Act would
require these trusts to: (1) file a publicly available
quarterly report with the bankruptcy court that would include
personally identifying information about such claimants,
including their names, exposure history, and basis for any
payment made to them; and (2) provide any information related
to payment from and demands for payment from such trust to any
party to any action in law or equity concerning liability for
asbestos exposure.
---------------------------------------------------------------------------
\3\11 U.S.C. Sec. 524(g)(2)(B)(i)(I) (2013).
---------------------------------------------------------------------------
The bill's sponsors contend that these changes to the
asbestos claims process are necessary to curb fraud in the
system, but there is scant evidence that such a problem even
exists. In fact, the multiple hearings held by this Committee
have failed to identify any academic or other objective study
demonstrating endemic fraud in the asbestos trust claims
process. With the knowledge that there is no empirical evidence
of fraud in the system, we are led to conclude that this
measure is nothing more than an end run by asbestos defendants
around the discovery process available under nonbankruptcy law.
The truth is that this legislation is a solution in search
of a problem that will benefit the asbestos defendants and will
re-victimize asbestos victims and their families by invading
their privacy and slowing the claims payment process. Moreover,
this legislation is fundamentally inequitable as it mandates
disclosure by the trusts, but does not require solvent
defendant companies to disclose information about the injurious
effects of the products they manufactured or hazardous working
conditions they imposed on their employees. Finally, the bill
will divert critical funds and further decrease compensation to
asbestos victims by forcing bankruptcy trusts to prepare
burdensome reports.
Not surprisingly, this measure is opposed by various
asbestos victims,\4\ asbestos trusts,\5\ and legal
representatives for future asbestos personal injury
claimants.\6\ In addition, various organizations representing
workers and consumers have registered their strong opposition,
including the AFL-CIO,\7\ Public Citizen, U.S. Public Interest
Research Group, the Environmental Working Group, the Alliance
for Justice, and Protect Missouri Workers.\8\
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\4\See, e.g., Vento Letter.
\5\See, e.g., Supplemental letter from Douglas A. Campbell, counsel
for various asbestos settlement trusts, to Chairman Bob Goodlatte (R-
VA) of the H. Comm. on the Judiciary et al. (Mar. 20, 2013) (on behalf
of four asbestos settlement trusts) (on file with H. Comm. on the
Judiciary Democratic staff); letter from Douglas A. Campbell, counsel
for various asbestos settlement trusts, to Chairman Bob Goodlatte (R-
VA) of the H. Comm. on the Judiciary et al. (Mar. 11, 2013) (on behalf
of four asbestos settlement trusts) (on file with H. Comm. on the
Judiciary Democratic staff).
\6\See, e.g., Letter from Michael J. Crames, future claimants'
representative for Owens Corning/Fibreboard Asbestos Personal Injury
Trust et al., to Chairman Bob Goodlatte (R-VA) of the H. Comm. on the
Judiciary et al. (Mar. 11, 2013) (signed by six future claims
representatives) (on file with H. Comm. on the Judiciary Democratic
staff).
\7\See, e.g., Letter from William Samuels, Director, Government
Affairs Dep't, AFL-CIO, to Members of the House of Representatives
(June 25, 2013) (expressing the view that ``the bill is simply an
effort by asbestos manufacturers who still are subject to asbestos
lawsuits to avoid liability for diseases caused by their products'')
(on file with H. Comm. on the Judiciary Democratic staff).
\8\See, e.g., Letter from Nan Aron, Alliance for Justice,, et al.,
to Chairman Spencer Bachus (R-AL) and Ranking Member Steve Cohen (D-TN)
of the Subcomm. on Regulatory Reform, Commercial and Antitrust Law of
the H. Comm. on the Judiciary (Mar. 12, 2013) (on file with H. Comm. on
the Judiciary Democratic staff).
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For these reasons and those described below, we
respectfully dissent and urge our colleagues to reject this
seriously flawed bill.
DESCRIPTION AND BACKGROUND
DESCRIPTION
H.R. 982 amends section 524(g) of the Bankruptcy Code in
two significant respects. 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 report may not include any
confidential medical record or the claimant's full Social
Security number. Second, the measure requires the trust, upon
written request and subject to payment for any reasonable costs
incurred in responding to such request at the option of the
trust, to provide in a timely manner any information related to
payments 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. The bill's reporting and information
disclosure requirements are subject to Bankruptcy Code section
107, which authorizes the bankruptcy court, for cause, to
restrict public access to any document filed in a bankruptcy
case if the court finds that the disclosure of the information
contained in such document would create an ``undue risk of
identity theft or other unlawful injury.''\9\
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\9\11 U.S.C. Sec. 107(c)(1) (2013).
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BACKGROUND
A. The Lethal Effects of Asbestos
Asbestos is a fibrous material, extracted from the earth,
that has been used for centuries because of its tensile
strength and its heat resistence.\10\ 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.\11\ Asbestos has been
widely used as an insulator and as a fire retardant by the
construction and ship-building industries. Examples of
asbestos-containing products include attic and wall insulation,
roofing shingles, ceiling and vinyl floor tiles, paper and
cement products, and `friction products such as automobile
clutch, brake and transmission parts.''\12\
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\10\Asbestos Litigation Crisis in Federal and State Courts:
Hearings Before the Subcomm. on Intellectual Property and Judicial
Admin. of the H. Comm. on the Judiciary, 102d Cong. 1 (1975) (opening
statement of Chairman William J. Hughes) [hereinafter Asbestos
Litigation Hearings].
\11\Id.
\12\U.S. Government Accountability Office, Report on Asbestos
Injury Compensation: The Role and Administration of Asbestos Trusts,
GAO-11-819, at at 6 (Sept. 2011) [hereinafter GAO Report].
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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).\13\ Lung cancer and other diseases have also been
associated with the inhalation of asbestos fibers.\14\
---------------------------------------------------------------------------
\13\Id.
\14\Id.
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Although a link between asbestos and lung cancer was first
reported in 1935, an estimated 21 million Americans were
exposed to asbestos over the ensuing years,\15\ some of whom
began to manifest injuries during the 1960's.\16\ During the
1970's, asbestos became the subject of significant regulation
and was banned or declared hazardous by numerous federal
agencies. For example, the Occupational Safety and Health
Administration in 1986 stated that it was ``aware of no
instance in which exposure to a toxic substance more clearly
demonstrated detrimental health effects on humans than has
asbestos exposure. The diseases caused by asbestos exposure are
life-threatening or disabling.''\17\ The Environmental
Protection Agency (EPA) in 1988 published a study of asbestos
in public schools and found that its presence was ``extremely
hazardous.''\18\ In 1989, the EPA promulgated a regulation
banning the manufacture, processing, importation, and
distribution of materials or products containing asbestos.\19\
The rule, however, was later overturned.\20\
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\15\The Department of Labor provided this estimate. Asbestos
Litigation Hearings at 2.
\16\Report of the Judicial Conference of the U.S. Courts Ad Hoc
Committee on Asbestos Litigation, at 2 (Mar. 1991).
\17\Letter of transmittal dated July 21, 1983, Chronic Hazards
Advisory Panel on Asbestos, Report to the U.S. Consumer Product Safety
Commission (July 1983).
\18\U.S. Environmental Protection Agency, EPA Study of Asbestos-
Containing Materials in Public Buildings: A Report to Congress, at 5
(Feb. 1988).
\19\See EPA Asbestos Ban and Phasedown Regulations, 40 C.F.R.
763.160 et seq. (1989).
\20\Corrosion Proof Fittings v. Environmental Protection Agency,
947 F.2d 1201 (5th Cir. 1991).
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In 1973, the Fifth Circuit rendered the first appellate
opinion upholding a product liability judgment against a
manufacturer of asbestos-containing products.\21\ As the
Government Accountability Office (GAO) reported, ``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.''\22\ In the nearly four
decades since, 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.\23\
``Asbestos litigation,'' according to the GAO, ``has been the
longest-running mass tort litigation in U.S. history.''\24\
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\21\Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th
Cir. 1973).
\22\GAO Report at 8.
\23\Lloyd Dixon et al., Rand Institute for Civil Justice, Report:
Asbestos Bankruptcy Trusts--An Overview of Trust Structure and Activity
with Detailed Reports on the Largest Trusts, at xi (2010).
\24\GAO Report at 1.
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B. Overview of Asbestos Bankruptcy Trusts
In 1994, Congress amended the Bankruptcy Code to authorize
the imposition of a channeling injunction in chapter 11 cases
involving asbestos claims. Codified as section 524(g), this
provision allows a debtor, under certain circumstances, to
shift its asbestos liabilities to a trust fund. Modeled on the
injunction issued in the Johns-Manville bankruptcy case,\25\
section 524(g) authorizes a court in a chapter 11 case, after
making certain findings,\26\ to issue an injunction preventing
any entity from ``taking legal action for the purpose of
directly or indirectly collecting, recovering, or receiving
payment'' for any claim or demand\27\ that is to be paid in
full or in part by a trust established under a confirmed plan
of reorganization.\28\ Funding for the trust is derived by the
debtor's securities and by the obligation of the debtor to make
future payments, including dividends.\29\ Upon confirmation,
the trust assumes all of the debtor's liabilities for personal
injury, wrongful death, or property damages allegedly caused by
the presence or exposure to asbestos or asbestos-containing
products.\30\ As the GAO observes, ``neither the courts nor the
U.S. Trustees have any specific statutory or other requirements
to oversee a trust's administration.''\31\
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\25\Kane v. Johns-Manville Corp., 843 F.2d 636 (2nd Cir. 1988).
\26\11 U.S.C. Sec. 524(g)(2)(B)(ii) (2013).
\27\The provision defines ``demand'' as a demand for payment,
present or future, that--
(A) was not a claim during the proceedings leading to the
---------------------------------------------------------------------------
confirmation of a plan of reorganization;
(B) arises out of the same or similar conduct or events
that gave rise to the claims addressed by the injunction
issued under paragraph (1); and
(C) pursuant to the plan, is to be paid by a trust
described in paragraph (2)(B)(I).
11 U.S.C. Sec. 524(g)(5) (2013).
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\28\11 U.S.C. Sec. 524(g)(1)(B) (2013).
\29\11 U.S.C. Sec. 524(g)(2)(B)(i) (2013).
\30\11 U.S.C. Sec. 524(g)(2)(B) (2013).
\31\GAO Report at 13.
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Once operational, the trust implements ``a nonadversarial
administrative process--independent of the court system--to
review claimants' occupational and medical histories before
awarding compensation.''\32\ The trusts are privately managed
and typically consist of a trustee, a trust advisory committee,
and a future claims representative.\33\ The GAO explains:
---------------------------------------------------------------------------
\32\Id. at 3.
\33\Id. at 15.
Trustees manage the daily operations of the trusts,
including managing the trusts' investments, hiring and
supervising support staff and advisors, filing taxes,
and submitting annual reports to the bankruptcy court,
as required by the trusts' [trust agreement]. The
trustees are to manage the trust for the sole benefit
of the present and future claimant beneficiaries.\34\
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\34\Id.
Currently, there are 60 asbestos bankruptcy trusts in operation
with a combined total of $36.8 billion in assets as of
2011.\35\
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\35\Id. at 3.
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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.\36\ According to the GAO, the range of payment
ranges from 1.1 percent to 100 percent for certain diseases,
such as mesothelioma or asbestosis.\37\ The GAO found that the
median payment percentage among the various trusts was 25
percent.\38\ The GAO reports that ``[s]ince the establishment
of the first trust in 1988 through 2010, available data
indicate that asbestos trusts have paid about 3.3 million
claims valued at about $17.5 billion.''\39\ In addition to
seeking compensation from an asbestos bankruptcy trust,
asbestos claimants may also seek compensation from liable
companies that are not in bankruptcy through the tort
system.\40\
---------------------------------------------------------------------------
\36\Id. at 17.
\37\Id. at 21.
\38\Id.
\39\Id. at 16.
\40\Id. at 15.
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CONCERNS WITH H.R. 982
I. H.R. 982 IS NOT NECESSARY GIVEN THE ABSENCE OF ANY
EMPIRICAL EVIDENCE OF SYSTEMIC FRAUD
In order to justify the onerous new requirements the bill
would impose on the asbestos trusts and the victims they serve,
proponents of H.R. 982 allege that ``there is growing evidence
of fraud and abuse in the asbestos trust compensation
system.''\41\ In truth, however, there have been only isolated
reports of fraudulent claims over the years and many of those
instances were attributed to human error. For example, reports
surfaced in 2004 regarding a series of incidences of abusive
claim practices\42\ and the Subcommittee on Regulatory Reform,
Commercial and Antitrust Law (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\ In addition, the Wall Street Journal recently
published an article purporting to document ``numerous apparent
anomalies'' regarding various asbestos claims.\44\ A close
reading of this article, however, reveals that these instances
were isolated or could be explained.\45\ As noted in her
response to this article, Joan Claybrook, president of Public
Citizen from 1982 to 2009 and head of the National Highway
Traffic Safety Administration from 1977 to 1981, noted:
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\41\See, e.g., Unofficial Tr. of Markup of H.R. 982, the
``Furthering Asbestos Claim Transparency (FACT) Act of 2013,'' by the
H. Comm. on the Judiciary, at 5 (May 21, 2013) (remarks of Chairman Bob
Goodlatte, H. Comm. on the Judiciary) [hereinafter Full Committee
Markup Tr.].
\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).
\44\See, e.g., Dionne Searcey & Rob Barry, As Asbestos Claims Rise,
So Do Worries About Fraud, Wall St. J., Mar. 11, 2013, at A1.
\45\Id.
There is no evidence to support assertions of
significant fraud in claims by asbestos victims. Human
error in data entry is not fraud. Out of millions of
claims filed at the company asbestos trusts, the
Journal's extensive investigation identified an error
and anomaly rate of only 0.35%, much of that due to
mistakes by the trusts, not the victims.\46\
---------------------------------------------------------------------------
\46\Joan Claybrook, Fraud Made the Asbestos Illness Situation Much
Worse, Letter to the Editor, Wall St. J., May 19, 2013, at A16.
Likewise, the GAO is not aware of any subsequent reports of
endemic fraud since 2004 with respect to asbestos claims and it
did not uncover any evidence of overt fraud during its
examination of asbestos trusts last year.\47\ Instead, the GAO
has detailed an already robust set of procedures that a
claimant must follow 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.\48\ 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.''\49\ In addition, 98 percent of the 52 trusts
that the GAO 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.''\50\ 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.''\51\ It is noteworthy that even with this
heightened scrutiny, none of the trusts ``indicated that these
audits had identified cases of fraud.''\52\
---------------------------------------------------------------------------
\47\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.
\48\GAO Report at 18.
\49\Id.
\50\Id. at 23.
\51\Id.
\52\Id.
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To draw attention to the fact that the current asbestos
trust claims process generally has adequate fraud detection
systems in place, Subcommittee Ranking Member Steve Cohen (D-
TN) offered an amendment that would have excluded trusts that
have a claims audit program from the bill. This thoughtful
amendment, however, was defeated by a vote of 13 to 19.
With the knowledge that there is no empirical evidence of
fraud in the system, we are led to conclude that this measure
is nothing more than an attempt to improperly allow asbestos
defendants to circumvent state and federal discovery
procedures. As the Minority witness explained during the
hearing on H.R. 982, ``Solvent asbestos defendants remaining in
the tort system are currently able to learn all information
relevant to a claim against them, including information about a
victim's trust claims, under state discovery rules.''\53\ All
information that would be relevant to claims against asbestos
defendants--including information related to a victim's trust
claims--can be obtained using normal discovery tools available
under state law, like interrogatories, document requests, and
depositions. Nonetheless, the bill's proponents offer no
explanation as to why the bill's potentially costly and
burdensome information request provision is necessary or why
federal law should subvert state law discovery processes.
---------------------------------------------------------------------------
\53\Furthering Asbestos Claim Transparency (FACT) Act of 2013:
Hearing on H.R. 982 Before the Subcomm. on Regulatory Reform,
Commercial and Antitrust Law of the H. Comm. on the Judiciary, 113
Cong. (2013) (prepared statement of Elihu Inselbuch).
---------------------------------------------------------------------------
In response to this particular flaw in the bill,
Representative Hakeem Jeffries (D-NY) 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 Jeffries' amendment, however, failed by a
vote of 13 to 18.
Representative Joe Garcia (D-FL) also offered an amendment
that would have prohibited a party that has been found liable
in court for asbestos-related harm to a plaintiff from seeking
information about that plaintiff through the bill's disclosure
process. Essentially, this amendment would have prohibited an
asbestos defendant who has already been found liable in court
for causing harm to a plaintiff from using this bill to seek
information that was already available to it in discovery. This
amendment would have added a little more balance to what is a
very unbalanced bill. Defendants that have already had their
day in court and lost should not be allowed to then use this
bill as a way to simply harass asbestos plaintiffs they have
already harmed. Notwithstanding the clearly equitable bona
fides of this amendment, it failed by a vote of 11 to 18.
II. H.R. 982 WOULD HARM ASBESTOS VICTIMS IN MULTIPLE WAYS
A. LThe Bill's Reporting and Disclosure Requirements Constitute an
Assault on Asbestos Victims' Privacy Interests
H.R. 982's mandatory reporting and disclosure requirements
would threaten asbestos victims' privacy when they seek payment
for injuries from an asbestos bankruptcy trust. Specifically,
the bill requires such information to be made part of the
bankruptcy court's case docket, which is easily accessible
through the Internet with the payment of a nominal fee. As a
result, information concerning claimants' sensitive personal
information--including their names and exposure histories--
would be irretrievably released into the public domain.
It is readily apparent that these reports would provide a
treasure trove of data that could be accessed by insurance
companies, prospective employers, lenders, and data collectors
who could then use such information for purposes having
absolutely nothing to do with compensation for asbestos
exposure and that could be used 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. As the widow
of our former colleague, Representative Bruce Vento (D-MN), who
died of mesothelioma in 2000, warned, ``The information on this
public registry could be used to deny employment, credit, and
health, life, and disability insurance. We are also concerned
that victims would be more vulnerable to identity thieves, con
men, and other types of predators.''\54\
---------------------------------------------------------------------------
\54\Vento Letter.
---------------------------------------------------------------------------
It is notable that 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.\55\ Some reports are publically available,
while others are filed under seal with the bankruptcy court
``for reasons deemed appropriate by the court.''\56\ Such
reasons include protecting the interests of the reorganized
company and its competitiveness.\57\ In fact, of the 47 trust
annual reports that the GAO reviewed, only one reported the
amount paid to each individual and listed these individuals'
names.\58\ 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.''\59\
---------------------------------------------------------------------------
\55\GAO Report at 1, 24.
\56\Id. at 17.
\57\Id. at 4, note 7.
\58\Id. at 24-25.
\59\Id. at 26.
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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.''\60\ 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.''\61\
---------------------------------------------------------------------------
\60\Id. at 30.
\61\Id.
---------------------------------------------------------------------------
These arguments lack any 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.''\62\ Equally important, the GAO noted that ``all
of the potentially relevant information in the trusts'
possession is available to the defense through pretrial
discovery.''\63\ Trust representatives are also very concerned
about the ``privacy rights of hundreds of thousands of
individuals who did nothing except successfully seek
compensation from a trust.''\64\
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\62\Id. at 29.
\63\Id.
\64\Memorandum from Legal Representatives for Future Asbestos
Personal Injury Claimants with Respect to Certain Asbestos Settlement
Trusts to Prof. Troy McKenzie, Advisory Comm. on Bankruptcy Rules of
the Judicial Conference of the United States, 2 (Aug. 10, 2011) (on
file with the H. Comm. on the Judiciary Democratic staff).
---------------------------------------------------------------------------
In attempt to protect asbestos victims from this
unwarranted invasion of privacy, Ranking Member John Conyers,
Jr. (D-MI) offered an amendment specifying that the quarterly
reports required to be filed under the bill contain only
aggregate information. In support of his amendment,
Representative Conyers argued that the bill would, in effect,
subject unsuspecting asbestos victims to possible future abuse.
The amendment also struck the bill's burdensome discovery
requirement. This amendment would have ensured victims' privacy
by not making individualized claimant information public. 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 party-line vote of 15 to 16.
Representative Bobby Scott (D-VA) offered an amendment that
would have required the trust to: (1) not identify the names of
asbestos victims in the quarterly report; and (2) treat any
information contained in the report pursuant to the privacy
protections set forth in the Health Insurance Portability and
Accountability Act (HIPAA).\65\ This amendment would have
simply ensured that trusts comply with the HIPAA Privacy Rule.
This Rule, according to the U.S. Department of Health and Human
Services, was promulgated to establish:
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\65\Pub. L. No. 104-191, 110 Stat. 1936 (1996).
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.\66\
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\66\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 May 23,
2013).
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 13 to 19.
In another attempt to address the bill's privacy flaws,
Representative Hank Johnson (D-GA) offered two further
amendments that were considered en bloc. One amendment would
have required the quarterly reports required by the bill to be
protected from public disclosure. Access to such reports,
pursuant to the amendment, 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. In sum,
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.''
Representative Johnson's other amendment would have ensured
that personally identifiable information about an asbestos
victim claimant is protected from disclosure. It included
within the amendment's definition of ``personally identifiable
information'' any information pertaining to the claimant's
health and finances. The unfettered release of personally
identifiable information facilitates identity theft. According
to the Federal Trade Commission (FTC), identity theft is one of
the top complaints received by the agency. In fact, 18 percent
of complaints that the FTC received in 2012 were related to
identity theft.\67\ As previously noted, identity theft is a
serious concern of asbestos victims.\68\ These amendments,
however, failed by a vote of 13 to 18.
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\67\Press Release, Federal Trade Commission, FTC Releases Top 10
Complaint Categories for 2012--Identity Theft Tops List for 13th
Consecutive Year in Report of National Consumer Complaints (Feb. 26,
2013), available at http://ftc.gov/opa/2013/02/sentineltop.shtm (last
visited May 23, 2013).
\68\See text accompanying note 54.
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B. LAsbestos Victims Vigorously Oppose this Legislation
The proponents of this legislation assert that it is
intended to assist asbestos victims. For example, the
Subcommitte Chairman described the purpose of the bill as
follows:
We are here for one purpose and one purpose only, and
that is to protect those victims of asbestos exposure.
That is our only motivation. We are not here to protect
companies, we are not here to protect the defense bar,
plaintiffs' bar. We are here for the victims, and we
are here to protect their rights and to ensure that
justice is served. We are not here to protect those who
are not victims.\69\
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\69\Unofficial Tr. of Hearing on H.R. 982, the ``Furthering
Asbestos Claim Transparency (FACT) Act of 2013,'' by the Subcomm. on
Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the
Judiciary, 113th Cong. 2 (Mar. 13, 2013) (statement of Chairman Spencer
Bachus, Subcomm. on Regulatory Reform, Commercial and Antitrust Law).
Nevertheless, we are unaware of a single asbestos victim
who supports H.R. 982. In fact, we received letters from
asbestos victims in vigorous opposition to this bill.\70\ It is
notable, for instance, that the Majority failed to call an
asbestos victim to testify at any of the hearings on this
legislation in either this Congress\71\ or in the last Congress
when a similar measure was considered.\72\
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\70\See, e.g., Vento Letter.
\71\See, e.g., Unofficial Tr. of Hearing on H.R. 982, the
``Furthering Asbestos Claim Transparency (FACT) Act of 2013,'' by the
Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H.
Comm. on the Judiciary, 113th Cong. 2 (Mar. 13, 2013).
\72\See, e.g., 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); How Fraud and Abuse
in the Asbestos Compensation System Affect Victims, Jobs, the Economy,
and the Legal System: Hearing Before the Subcomm. on the Constitution
of the H. Comm. on the Judiciary, 112th Cong. (2011).
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To his credit, the Subcommittee Chairman suspended the
markup of the bill by the Subcommittee on March 20, 2013 to
give certain asbestos victims ``the right to have their
testimony recorded'' and to allow ``members to ask them
questions.''\73\ The process ultimately offered to the victims,
consisting of an informal information session that would have
been closed to the public and neither transcribed nor recorded,
was rejected by the victims because they rightly deemed this
process to be woefully deficient.\74\ As these victims
observed:
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\73\Unofficial Tr. of Markup of H.R. 982, the ``Furthering Asbestos
Claim Transparency (FACT) Act of 2013,'' by the Subcomm. on Regulatory
Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary,
113th Cong. 21, 23 (Mar. 20, 2013) [hereinafter Subcommittee Markup
Tr.].
\74\Letter from Susan Vento et al., to Chairman Spencer Bachus (R-
AL) of the Subcomm. on Regulatory Reform, Commercial and Antitrust Law
of the H. Comm. on the Judiciary (Apr. 5, 2013) (on file with H. Comm.
on the Judiciary Democratic staff).
Instead of a public hearing as originally promised,
we were invited to participate in an informal and
private ``information session'' that would be closed
off to the public and everyone else, except
subcommittee members and their staff. We were told that
this would be a closed door ``conversation'' that would
not be recorded or become part of the official record
of the legislation. This was insulting, and
disturbingly ironic for a bill with the word
``transparency'' in its title.
We may not be Washington insiders, but we know the
difference between being official witnesses and being
treated as invisible people who need to be hidden
behind closed doors and then forgotten. We rejected
this offer because we felt it was not a serious effort
to ensure that our views and those of other asbestos
victims--who would be most affected by this one-sided
legislation--were heard and considered before the bill
moves forward.\75\
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\75\Id.
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C. LH.R. 982 Will Be Particularly Harmful to Veterans
Although millions of unsuspecting Americans have been
exposed to asbestos, there are certain populations who had
greater levels of exposure as the result of their work. For
example, members of the Armed Forces of the United States have
been disproportionately affected by asbestos. Even though
veterans make up only eight percent of the population, they
comprise 30 percent of all mesothelioma deaths.\76\
Military.com, the largest military and veteran membership
organization in the United States, explains:
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\76\Military.com, Asbestos and the Military, History, Exposure &
Assistance, available at http://www.military.com/benefits/veteran-
benefits/asbestos-and-the-military-history-exposure-assistance.html
(last visited May 23, 2013).
Virtually every ship commissioned by the United States
Navy between 1930 and about 1970 contained several tons
of asbestos insulation in the engine room, along the
miles of pipe aboard ship and in the walls and doors
that required fireproofing. The sailors that manned
these ships and the men who repaired them in Navy
shipyards were prime candidates for asbestos exposure,
a fact borne out by the disease statistics.\77\
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\77\Id.
In response to the special concerns presented by
servicemembers and asbestos exposure, Representative Scott
offered an amendment that would have exempted claimants who
have or who are currently serving in the Armed Forces of the
United States from the bill's disclosure requirements.\78\ The
amendment, however, failed by a vote of 14 to 15.
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\78\It should be noted that shipbuilders and dockworkers over the
years have been extensively exposed to asbestos. For example, it has
been reported that ``[s]hipbuilding in World War II is a significant
aetiology of the malignancies caused by asbestos.'' John Hedly-Whyte &
Deborah R. Milamed, Asbestos and Ship-Building: Fatal Consequences,
77(3) Ulster Medical J. 191 (Sept. 2008), available at http://
www.ncbi.nlm.nih.gov/pmc/articles/PMC2604477/.
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According to the White Lung Association:
During World War II a new Liberty Ship hit the water in
Baltimore every 37 hours and a few hundred miles South, in
Hampton Roads Virginia, three ships hit the water each day.
Trucks and ships delivered thousands of pounds of asbestos
and asbestos products to the shipyards. . . . Workers in
all trades breathed the asbestos used by insulators, boiler
mechanics, carpenters, machinists, painters and joiners.
James Fite, U.S. Shipyards: A History of Massive Asbestos Exposure and
Disease, World Asbestos Report (2004), available at http://
worldasbestosreport.org/conferences/gac/gac2004/ws_
H_2_e.php.
D. LH.R. 982 Heightens the Risk of More Discrimination Against Victims
H.R. 982 will make asbestos victims more vulnerable to
employment discrimination by making their disease status a
matter of public record. Both Ranking Member Conyers and
Representative Johnson raised serious concerns that current and
potential employers could use the information required to be
disclosed about asbestos victim claimants to engage in
employment discrimination. In response, Representative
Farenthold argued that the ``American [sic] Disabilities Act
would protect folks with the jobs.''\79\ He continued:
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\79\Full Committee Markup Tr. at 137.
They talk about employers using this information. There
is [sic] volumes of existing law. The Americans with
Disabilities Act, for instance, would prohibit
discrimination based on the information disclosed in
here.\80\
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\80\Id. at 31.
While we would hope that Representative Farenthold's
analysis is correct, it is not clear that this would prove to
be the case under the Americans with Disabilities Act
(ADA).\81\ To begin with, these victims would face potential
problems with proof. How, for example, would an applicant or
employee ever be able to prove that an employer had accessed
and relied on the information in the database?
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\81\The Americans with Disabilities Act of 1990, Pub. L. No. 101-
336, 104 Stat. 327 (1990), was subsequently amended by the ADA
Amendments Act of 2008, Pub. L. No. 110-325, 122 Stat. 3553 (2008)
(codified at 42 U.S.C. Sec. Sec. 12101 et seq. (2013)).
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Even if this problem of proof could be overcome, the
applicant or employee would then have to prove that he or she
was an individual with a ``disability,'' as defined in the ADA,
to obtain its protection from discrimination. The information
in the database concerns exposure to asbestos, while the ADA
protects individuals who have, had, or are regarded as having
physical or mental impairments. It is not clear how, or
whether, mere exposure to asbestos would qualify as an
impairment or being regarded as having an impairment, thereby
creating the risk that individuals could face discrimination
based on their prospective or current employer's knowledge of
their exposure to asbestos outside the ADA's protection.
While we believe that a court could, and should, find that
reliance on exposure to asbestos in making an adverse
employment decision is unlawful under the ADA, we have very
real concerns that this would not be the case based on our
experience under this law. For example, following the enactment
of the ADA in 1990, employers and the courts seized on the
Act's definition of disability as a means of denying protection
to individuals with disabilities that Congress unquestionably
intended to protect, such as workers with diabetes, multiple
sclerosis, HIV, and similar limiting impairments. To remedy
this misinterpretation of the law, Congress, in 2008, had to
amend the ADA to ensure sufficient coverage.\82\
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\82\ADA Amendments Act of 2008, Pub. L. No. 110-325, 122 Stat. 3553
(2008).
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In addition, our experience with a closely analogous
problem--discrimination by employers and others based on
genetic information, i.e., a marker for a disease or impairment
that has not yet developed--provides additional cause to
question whether the ADA would be interpreted to prohibit
discrimination based on information about exposure to asbestos.
With regard to genetic information, Congress was sufficiently
concerned that the ADA might not reach discrimination on this
basis and therefore passed the Genetic Information
Nondiscrimination Act of 2008.\83\ Congress understood that,
while it was possible that the courts might interpret the ADA
to prohibit discrimination based on genetic information, there
also was a significant risk that they could fail to do so.
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\83\Pub. L. No. 110-233, 122 Stat. 881 (2008).
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Thus, while we again would hope that the ADA would protect
individuals from discrimination based on information revealing
exposure to asbestos, protection under current law is too
uncertain to risk.
III. H.R. 982 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. 982 is fundamentally inequitable because it imposes
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 affirmatively concealing the dangers
of their products from the public.
Many defendant companies insist on confidentiality
agreements before entering into settlement agreements
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 public
health--whether in the workplace or in the home--are deprived
of the information they need to enforce the laws Congress has
passed.
To highlight the problem of H.R. 982's inequitable
disclosure obligations, 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 a 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. 982'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 14 to 18.
Similarly, Representative Sheila Jackson Lee (D-TX) offered
two amendments en bloc that would have provided balance to the
bill's disclosure requirements. One of these amendments would
have required a trust to provide certain information to a
defendant providing such defendant first disclosed the median
settlement amount that it paid for claims settled or paid
within 5 years of the date of the request, by disease category,
for the state in which the plaintiff's action was filed. Her
other amendment would have similarly allowed the trust to
supply information in response to a request from a defendant
providing the defendant first made available to the plaintiff
and the trust certain information regarding the defendant's
asbestos-containing products and work sites under the
defendant's control, unless such information is a trade secret.
These amendments, however, failed by a vote of 9 to 15.
IV. H.R. 982 WILL DIVERT CRITICAL FUNDS AND FURTHER DECREASE
COMPENSATION TO ASBESTOS VICTIMS BY FORCING BANKRUPTCY TRUSTS TO
PREPARE BURDENSOME REPORTS
H.R. 982 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. By
imposing reporting and information demand requirements on
trusts, H.R. 982 could significantly increase the
administrative costs of trusts in meeting these requirements
and force them to divert their limited resources from paying
the claims of asbestos victims to satisfying the information
requests of those who caused injuries to millions of Americans.
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.\84\ 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.''\85\
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\84\GAO Report at 27.
\85\Legal Representatives Memorandum at 2.
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The bill includes only a modest compensation provision with
respect to its information demand requirements, which allows a
trust to seek payment for ``any reasonable cost'' that it
incurred in responding to such demands. The ``reasonableness''
of reimbursement requests, of course, can be subject to dispute
and litigation. Ultimately, the trusts will incur costs to
implement the bill's requirements, leaving 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.
H.R. 982's retroactive application only adds to this
unnecessary burden. 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.\86\ Yet, after the passage of more than 20 years
since the first trust was established, the proponents of H.R.
982 now insist that these trusts issue reports and provide
documentation.
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\86\GAO Report at 16.
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CONCLUSION
The only beneficiaries of H.R. 982 will be the very
entities that knowingly produced a toxic substance that killed
or seriously injured unsuspecting American consumers and
workers. The legislation does nothing to protect victims or to
improve the claims process and is based on the false assertion
that there is endemic fraud in the asbestos trust system that
must be addressed. In truth, this legislation is simply an end
run by defendants around the discovery process that threatens
to prevent or delay adequate compensation for asbestos victims.
Further, H.R. 982's reporting and disclosure requirements
are an assault against asbestos victims' privacy interests and
are fundamentally inequitable because solvent defendant
companies are not similarly required to disclose their
confidential settlement agreements. Finally, these burdensome
new reporting requirements will divert critical funds and
further decrease compensation to asbestos victims.
Accordingly, we urge our colleagues to stand on the side of
justice for asbestos victims and to oppose H.R. 982.
John Conyers, Jr.
Jerrold Nadler.
Robert C. ``Bobby'' Scott.
Melvin L. Watt.
Zoe Lofgren.
Sheila Jackson Lee.
Steve Cohen.
Henry C. ``Hank'' Johnson, Jr.
Pedro R. Pierluisi.
Judy Chu.
Ted Deutch.
Luis V. Gutierrez.
Karen Bass.
Cedric Richmond.
Suzan DelBene
Joe Garcia.
Hakeem Jeffries.