[House Report 114-352]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 114-352
======================================================================
FURTHERING ASBESTOS CLAIM TRANSPARENCY (FACT) ACT OF 2015
_______
November 30, 2015.--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. 526]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 526) 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......................................................... 17
Committee Consideration.......................................... 18
Committee Votes.................................................. 18
Committee Oversight Findings..................................... 25
New Budget Authority and Tax Expenditures........................ 25
Congressional Budget Office Cost Estimate........................ 25
Duplication of Federal Programs.................................. 26
Disclosure of Directed Rule Makings.............................. 27
Performance Goals and Objectives................................. 27
Advisory on Earmarks............................................. 27
Section-by-Section Analysis...................................... 27
Changes in Existing Law Made by the Bill, as Reported............ 27
Dissenting Views................................................. 40
Purpose and Summary
H.R. 526, the ``Furthering Asbestos Claim Transparency
(FACT) Act of 2015,'' or the ``FACT Act,'' amends the
Bankruptcy Code to require transparency from bankruptcy trusts
formed to pay asbestos claims. Specifically, 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\ It further
requires each such trust to provide, upon written request,
information related to payment from, and demands for payment
from, such trust to any party in an action involving liability
for asbestos exposure.\2\
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\1\Furthering Asbestos Claim Transparency (FACT) Act of 2013, H.R.
982, 113th Cong. Sec. 2 (2013).
\2\Id.
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Background and Need for Legislation
I. 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 June 18, 2015)); 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 June 18, 2015) (Wylie).
\4\Wylie, supra note 3, at 4.
\5\Asbestos, Heritage Research Center, http://
www.heritageresearch.com/ourlibrary/histories/asbestos.html (last
visited June 18, 2015).
\6\Wylie, supra note 3, at 4.
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Despite the usefulness of asbestos in industrial and
residential products, it was discerned 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 June
18, 2015).
\8\Id.
\9\Asbestos Health Effects, Agency for Toxic Substances & Disease
Registry, http://www.
atsdr.cdc.gov/asbestos/asbestos/health_effects/(last visited June 18,
2015).
\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) (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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II. 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 (Carroll).
\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 (Dixon).
\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.) (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) (Landin).
\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; 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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III. 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 Johns Manville Corporation, the
dominant American producer of asbestos products. The Manville
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\Patrick M. Hanlon & Anne Smetak, Asbestos Changes, 62 N.Y.U.
Ann. Surv. Am. L. 525, 526-7 (2007) (Hanlon & Smetak); 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 Manville 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. There are 60 asbestos trusts with current and
anticipated assets totaling between $30 billion and $37
billion.\40\ 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.\41\
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\40\H.R. 526, the ``Furthering Asbestos Claim Transparency (FACT)
Act of 2015'': Hearing Before the Subcomm. on Regulatory Reform,
Commercial and Antitrust Law of the H. Comm. on the Judiciary, 114th
Cong. (2014) (RRCAL Subcomm. Hearing) (testimony of Lester Brickman),
at 2.
\41\Id.
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IV. 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.''\42\ Fraud in
asbestos litigation largely stems from plaintiffs' lawyers
utilizing mass screening measures to recruit hundreds of
thousands of claimants.
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\42\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.''\43\ 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.\44\ 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.''\45\
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\43\Owens Corning v. Credit Suisse First Boston, 322 B.R. 719, 723
(D. Del. 2005).
\44\Lester Brickman, The Use of Litigation Screenings in Mass
Torts: A Formula for Fraud?, 61 SMU L. Rev. 1221, 1233 (2008).
\45\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!''\46\
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\46\Pamela Sherrid, Looking for Some Million Dollar Lungs, Best of
Asbestos, U.S. News & World Rep., Dec. 17, 2001, at 36.
It is estimated that more than one million workers have
undergone attorney-sponsored screenings.\47\ 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.''\48\
According to legal scholars, ``without these claims, the
`asbestos litigation crisis' would never have arisen.''\49\
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\47\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) (Brickman).
\48\Andrew Schneider, Asbestos Lawsuits Anger Critics, St. Louis
Post-Dispatch, Feb. 11, 2003, at A1.
\49\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.\50\ 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.''\51\ 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%.\52\
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\50\Mark A. Behrens & Phil Goldberg, The Asbestos Litigation
Crisis: The Tide Appears to be Turning, 12 Conn. Ins. L.J. 477, 480
(2006).
\51\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.
\52\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.''\53\
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\53\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.''\54\ 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.''\55\ 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.''\56\
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.''\57\
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\54\David E. Bernstein, Keeping Junk Science Out of Asbestos
Litigation, 31 Pepp. L. Rev. 11, 13 (2003) (quoting Lawrence Martin,
M.D.).
\55\Owens Corning, 322 B.R. at 723.
\56\Lester Brickman & Harvey D. Shapiro, Asbestos Kills--And More
than Just People: Jobs, Ethics, and Elementary Justice, Nat'l. Rev.,
Jan. 31, 2005.
\57\Brickman, supra note 47 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.\58\ 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,''\59\ Congress convened
hearings on fraud and abuse in asbestos litigation.\60\ A
Federal grand jury was empanelled in the Southern District of
New York.\61\
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\58\In re Silica Prods. Liab. Litig., 398 F.Supp.2d 563 (S.D. Tex.
2005).
\59\Id. at 635.
\60\The Silicosis Story: Hearings Before the Subcomm. on Oversight
and Investigations of the Comm. on Energy and Commerce, 109th Cong.
(2006).
\61\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 of mass screenings and enactment
of medical criteria statutes in major asbestos venue states
marked the beginning of a new, fairer asbestos compensation
system.\62\ The Committee, however, has received testimony
suggesting that screening programs may be, or soon will be,
used to generate asbestos trust claims.\63\ 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,\64\ the modern
asbestos plaintiffs' bar spends billions of dollars on mass
media advertisements designed to recruit potential asbestos
tort plaintiffs and trust claimants.\65\ Experts estimate that
asbestos plaintiffs' firms spent over $950 million on
television advertising in 2011.\66\ 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.\67\
``Mesothelioma'' has become the single most expensive keyword
on Google's auction-style AdWords platform.\68\
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\62\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).
\63\Constitution Subcomm. Hearing, supra note 42 (testimony of
Professor Lester Brickman).
\64\See Hanlon & Smetak at 593; 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) (Brickman Ethical
Issues).
\65\Kenneth M. Goldstein, Panel Discussion at U.S. Chamber
Institute for Legal Reform's 12th Annual Legal Reform Summit (Oct. 26,
2011) available at http://videos.uschamber.com/detail/videos/legal-
reform-summits/video/1268850944001/access-to-justice-or-the-bottom-
line-the-growing-commercialization-of-the-practice-of-
law?device=mobile&page=2.
\66\Id.
\67\See New Media Strategies, The Plaintiffs' Bar Goes Digital 3
(January 2012) avail-
able at http://www.instituteforlegalreform.com/uploads/sites/1/
The_Plaintiffs_Bar_Goes_Digital_
2012_0.pdf (last visited June 18, 2015).
\68\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.\69\ 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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\69\The David Law Firm--Lung Cancer, http://www.calldavid.com/lung-
cancer.html (last visited June 18, 2015).
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V. 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.\70\
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\70\11 U.S.C. Sec. 542(g)(2)(B)(ii)(V) (2011).
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.\71\ 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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\71\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.\72\ 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.\73\ This requirement is distinct from the usual
requirements for plan confirmation, which must also be
satisfied.\74\ 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.\75\
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\72\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 (Searcey & Barry).
\73\11 U.S.C. Sec. 524(g)(2)(B)(ii)(IV)(bb) (2011).
\74\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.'').
\75\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.''\76\
Consequently, single firms or small groups of firms may
effectively block confirmation of a chapter 11 plan.\77\ 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.''\78\
---------------------------------------------------------------------------
\76\In re Congoleum Corp., 426 F.3d 675, 679 (3d Cir. 2005).
\77\Brickman Ethical Issues at 868-69 (discussing asbestos bar's de
facto control of bankruptcy process).
\78\Brown, supra note 73, 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.\79\
Plaintiffs' firms exploit section 524(g)'s express preference
for claimant quantity over claim quality by asserting their
large numbers of claims in bankruptcy regardless of their
likely value or merit, which typically will be evaluated
following the voting period on a debtor's chapter 11 plan.\80\
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.\81\
---------------------------------------------------------------------------
\79\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. . . .'').
\80\See Brown, supra note 73, 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.'').
\81\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.''\82\ Courts
generally appoint an individual suggested by the current
claimants and the debtor company.\83\ 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.\84\ Moreover,
FCR work can be extremely lucrative,\85\ and academic
commentators have expressed concern that FCR's are ``punch-
pulling''\86\ in an effort to be seen as ``reliable negotiating
partners who [will] not `rock the boat''\87\ and increase the
likelihood of future FCR appointments. Indeed, many
representatives serve several trusts concurrently.\88\
---------------------------------------------------------------------------
\82\11 U.S.C. Sec. 524(g)(4)(B)(i) (2011).
\83\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.'') (Plevin).
\84\See Brown, supra note 51, at 158-59 (discussing parties'
incentive to propose weak representative).
\85\Brickman Ethical Issues at n. 144 (noting that Halliburton's
pre-petition futures representative was nearly $5 million and retained
by the resulting trust).
\86\See Richard A. Nagareda, Mass Torts in a World of Settlement
177 (2007).
\87\Plevin, supra note 83 at 292-93.
\88\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.\89\ 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.\90\
---------------------------------------------------------------------------
\89\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).
\90\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.\91\ 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.\92\ In many instances,
trusts' procedures require a valid state-court-issued subpoena
in order to provide information to state litigants.\93\ 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.\94\
---------------------------------------------------------------------------
\91\Dixon et al., supra note 17, at 32.
\92\Constitution Subcomm. Hearing, supra note 42, at 94-95, 100-101
(written testimony of James Stengel).
\93\Carroll et al., supra note 16, at 28.
\94\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.\95\ 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.\96\
---------------------------------------------------------------------------
\95\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. . . .'').
\96\Manville Trust Single Use Data License Agreement, http://
www.claimsres.com/documents/MT/DataAgreement.pdf (last visited June 18,
2015).
---------------------------------------------------------------------------
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.\97\ 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.\98\
---------------------------------------------------------------------------
\97\Carroll et al., supra note 16, at 23; Dixon et al., supra note
17, at 45.
\98\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.\99\ 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.\100\
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.\101\
Fraudulent claims against the 9/11 Victim's Compensation Fund
and BP's gulf oil fund, for example, were detected and
prosecuted.\102\ 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.\103\
---------------------------------------------------------------------------
\99\Carroll et al., supra note 16, at 16.
\100\Carroll et al., supra note 16, at 23.
\101\Courts Subcomm. Hearing, supra note 11, at 25 (testimony of S.
Todd Brown).
\102\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 June 18,
2015) (collecting cases involving fraud on the Gulf Coast Claims
Facility).
\103\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.\104\ He simultaneously filed claims against multiple
asbestos trusts alleging exposure to marine products while
working as a ``shipyard laborer.''\105\ Despite the
inconsistency of his tort and trust claims, which the court
described as a ``fiction,'' Kananian received substantial
payments from asbestos trusts.\106\
---------------------------------------------------------------------------
\104\Kananian v. Lorillard Tobacco Co., No. CV 442750 (Ohio Ct.
Com. Pl. Cuyahoga County 2007).
\105\Id. at 5, 9.
\106\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.\107\
Further examples of inconsistent claiming have been identified
in Delaware, Louisiana, New York, Oklahoma, and Virginia.\108\
---------------------------------------------------------------------------
\107\Constitution Subcomm. Hearing, supra note 42, at 94-95, 103-
105 (written testimony of James Stengel).
\108\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.\109\
---------------------------------------------------------------------------
\109\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.''\110\ The court further observed that:
---------------------------------------------------------------------------
\110\Montgomery, supra note 108, 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.\111\
---------------------------------------------------------------------------
\111\Montgomery, supra note 108, 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.\112\ 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.\113\
---------------------------------------------------------------------------
\112\Searcey & Barry, supra note 72.
\113\Searcey & Barry, supra note 72.
---------------------------------------------------------------------------
Recently, a number of discrepancies between bankruptcy and
state court claims were uncovered in a bankruptcy case in North
Carolina.\114\ In the bankruptcy case of In re Garlock Sealing
Techs. LLC, Case No. 10-BK-31607 (Bankr. Ct. W.D.N.C. 2014),
plaintiffs' counsel requested $1.3 billion in asbestos claims
damages.\115\ In a series of rulings, the presiding judge
dramatically reduced the requested damages award from $1.3
billion to $125 million and noted a number of alarming
discrepancies between the claims filed against Garlock in state
court and claims filed by the same plaintiffs against other
bankruptcy asbestos trusts. As reported by the WSJ, in fifteen
cases filed in state court against Garlock, the plaintiffs
disclosed that they were exposed to a total of 32
products.\116\ However, as uncovered in subsequent Garlock
court documents, these same plaintiffs asserted claims in other
forums that asserted exposure to 284 different products.\117\
---------------------------------------------------------------------------
\114\In re Garlock Sealing Techs. LLC, Case No. 10-BK-31607 (Bankr.
Ct. W.D.N.C. 2014).
\115\Editorial, The Double-Dipping Legal Scam, Wall St. J., Dec.
25, 2014.
\116\Id.
\117\Id.
---------------------------------------------------------------------------
Some particularly egregious examples of fraud from the
Garlock case include a California case in which the plaintiff
settled with Garlock for $9 million in state court litigation.
The plaintiff affirmatively denied exposure to any other
asbestos products. Nevertheless, the court later discovered
that this plaintiff had filed fourteen bankruptcy asbestos
trust claims, and included in those claims were statements made
under penalty of perjury that directly contrasted with
statements made to the jury in the state court case.\118\
---------------------------------------------------------------------------
\118\RRCAL Subcomm. Hearing, supra note 40 (testimony of Lester
Brickman), at 29.
---------------------------------------------------------------------------
In another Garlock example, a plaintiff's lawyers responded
to written interrogatories that the plaintiff had ``no personal
knowledge'' of exposure to any other asbestos products. Yet 6
weeks earlier, those exact same lawyers filed a statement in
connection with an asbestos bankruptcy trust claim that the
plaintiff ``frequently, regularly, and proximately'' was
exposed to other asbestos products. In that case, the plaintiff
filed claims against twenty other asbestos products and made
statements that contradicted state court pleadings in fourteen
of the asbestos bankruptcy trust claims.\119\
---------------------------------------------------------------------------
\119\Id., at 30.
---------------------------------------------------------------------------
Other Garlock examples include a plaintiff denying any
exposure to other asbestos products in a state court case and
then filing asbestos bankruptcy trust claims within 24 hours of
settling the case, and a plaintiff denying exposure to a
particular asbestos product in state court only for it to be
uncovered later in discovery that his lawyers had filed an
asbestos bankruptcy trust claim against that very product the
day before his denial statement.\120\ These instances of fraud
have been uncovered in spite of the current lack of
transparency, and are a clear indication of the potential for
significant, currently undetected fraud.
---------------------------------------------------------------------------
\120\Id.
---------------------------------------------------------------------------
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
of the Administative Office of the Courts 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.\121\
That subcommittee, in a memo to the Advisory Committee,
examined the merits and demerits of the proposal, but
ultimately concluded that if:
---------------------------------------------------------------------------
\121\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.\122\
---------------------------------------------------------------------------
\122\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.\123\
---------------------------------------------------------------------------
\123\Memorandum from Subcommittee on Business Issues to Advisory
Committee on Bankruptcy Rules (Sept. 19, 2011) (on file with
Committee).
---------------------------------------------------------------------------
VI. THE FURTHERING ASBESTOS CLAIMS TRANSPARENCY
(FACT) ACT OF 2015
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.''\124\ 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.
---------------------------------------------------------------------------
\124\See generally Constitution Subcomm. Hearing, supra note 42.
---------------------------------------------------------------------------
The Subcommittee on Courts, Commercial and Administrative
Law of the House Judiciary Committee held a hearing on H.R.
4369 on May 10, 2012.\125\ Three of the four witnesses
testified that transparency was sorely needed in the 524(g)
asbestos trust compensation system.\126\ 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.\127\ 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.\128\
---------------------------------------------------------------------------
\125\See generally Courts Subcomm. Hearing, supra note 11.
\126\See id. (testimonies of Leigh Ann Schell, Prof. S. Todd Brown,
and Marc Scarcella).
\127\Id. at 81.
\128\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.
During the 113th Congress, on March 6, 2013, Rep.
Farenthold (R-TX), together with Rep. Matheson, introduced H.R.
982, the Furthering Asbestos Claim Transparency (FACT) Act of
2013, which was 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.\129\ Three of the four witnesses
testified that the current asbestos trust system lacked
transparency and was conducive to fraudulent activity.\130\ 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.\131\ On May 21, 2013, the Committee met in
open session and ordered the bill H.R. 982 to be reported
favorably to the House without amendment. On November 13, 2013,
the House considered H.R. 982 and passed the bill. H.R. 982 was
not considered by the Senate during the 113th Congress.
---------------------------------------------------------------------------
\129\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) (Reg. Subcomm. Hearing).
\130\See id. (testimonies of Hon. Peggy L. Ableman, Prof. S. Todd
Brown, and Marc Scarcella).
\131\Id.; see also H.R. 982.
---------------------------------------------------------------------------
Given the continued necessity for transparency and the
significant legislative record, on January 26, 2015, Rep.
Farenthold, together with Rep. Tom Marino (R-PA), introduced
H.R. 526, the Furthering Asbestos Claim Transparency (FACT) Act
of 2015, which is identical to H.R. 982 as passed by the House
during the 113th Congress. The Subcommittee on Regulatory
Reform, Commercial and Antitrust Law held a hearing on H.R. 526
on February 4, 2015.\132\ Three of the four witnesses testified
that the current asbestos trust system continues to lack
transparency and that additional reports of fraudulent activity
require Congressional action on the FACT Act.\133\ The fourth
witness, Mr. Inselbuch, argued that the FACT Act is unnecessary
and would create administrative burdens on the trusts,
notwithstanding the Committee's record to the contrary on both
accounts.\134\
---------------------------------------------------------------------------
\132\See generally RRCAL Subcomm. Hearing.
\133\See id. (testimonies of Nicholas Vari, Marc Scarcella, and
Prof. Lester Brickman).
\134\See id. (testimonies of Elihu Inselbuch, Nicholas Vari, Marc
Scarcella, and Prof. Lester Brickman).
---------------------------------------------------------------------------
H.R. 526 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, and the
basis for any payments made to claimants.\135\ To be clear, the
quarterly reporting requirements do not require the disclosure
of the amounts of settlement funds paid to claimants. 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.\136\ As the bill amends a
provision of the Bankruptcy Code, the reporting and information
sharing requirements contained therein fall squarely within
Congress' bankruptcy power.\137\
---------------------------------------------------------------------------
\135\H.R. 982 Sec. 2.
\136\Id.
\137\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 123 (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.\138\
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.
. . .''\139\ Further, responses to written discovery requests
are subject to any applicable protective orders.\140\
---------------------------------------------------------------------------
\138\H.R. 982 Sec. 2.
\139\11 U.S.C. Sec. 107(c) (2011); 18 U.S.C. Sec. 1028(d) (2011);
Fed. R. Bankr. P. 9037.
\140\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 enhanced reporting requirements for asbestos bankruptcy
trusts required by the FACT Act may result in improvements and
cost savings in the Medicare program. Specifically, the
information provided under the FACT Act may improve the
reporting of reimbursement payments under Medicare. Section 111
of the Medicare, Medicaid, and SCHIP Extension Act of 2007\141\
added mandatory reporting requirements for Medicare patients
who receive settlements, judgments, awards, or other payment
from liability insurance. The increased reporting requirements
under the FACT Act may result in the availability of
information to the government regarding Medicare beneficiaries
who receive payments from asbestos bankruptcy trusts.
---------------------------------------------------------------------------
\141\P.L. No. 110-173.
---------------------------------------------------------------------------
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 legislative hearing on H.R.
526 on February 3, 2015. Testimony was received from Marc
Scarcella, M.A., Manager, Bates White Economic Consulting;
Nicholas P. Vari, Esq., Partner, K&L Gates LLP; Lester
Brickman, Professor of Law, Benjamin N. Cardozo School of Law;
and, Elihu Inselbuch, Esq., Member, Caplin & Drysdale.
Committee Consideration
On May 14, 2015, the Committee met in open session and
ordered the bill H.R. 526 favorably reported, without
amendment, by a rollcall vote of 19 ayes to 9 nays, 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. 526.
1. Amendment #1, offered by Mr. Conyers, to replace 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. The amendment was
defeated by a rollcall vote of 5 to 14.
ROLLCALL NO. 1
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................
Mr. Chabot (OH)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC).................................
Mr. Labrador (ID)..............................
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY)..............................
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................ X
------------------------
Total...................................... 5 14
------------------------------------------------------------------------
2. Amendment #2, offered by Mr. Nadler, to limit third
party discovery to those parties who disclose information
pertaining to the public safety or health to a law enforcement
agency. The amendment was defeated by a rollcall vote of 6 to
16.
ROLLCALL NO. 2
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)............................... X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC).................................
Mr. Labrador (ID).............................. X
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY)..............................
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................ X
------------------------
Total...................................... 6 16
------------------------------------------------------------------------
3. Amendment #3, offered by Ms. Jackson Lee, to require the
filing of certain information regarding settlement amounts paid
by a third party before such third party can seek discovery
from an asbestos trust. The amendment was defeated by a
rollcall vote of 7 to 17.
ROLLCALL NO. 3
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................
Mr. King (IA)..................................
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. Labrador (ID).............................. X
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL)..............................
Ms. Walters (CA)............................... X
Mr. Buck (CO)..................................
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY).............................. X
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................
------------------------
Total...................................... 7 17
------------------------------------------------------------------------
4. Amendment #4, offered by Mr. Johnson, to exclude
personally identifiable information from the bill's public
reporting and document production requirements. The amendment
was defeated by a rollcall vote of 9 to 20.
ROLLCALL NO. 4
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
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. Labrador (ID).............................. X
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)........................... X
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY).............................. X
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................ X
------------------------
Total...................................... 9 20
------------------------------------------------------------------------
5. Amendment #5, offered by Mr. Jeffries, to replace 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. The amendment was defeated by a rollcall vote
of 8 to 18.
ROLLCALL NO. 5
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Labrador (ID).............................. X
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL)..............................
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ X
Ms. Lofgren (CA)...............................
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN)................................. X
Mr. Johnson (GA)............................... X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................
Mr. Deutch (FL)................................ X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY).............................. X
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................ X
------------------------
Total...................................... 8 18
------------------------------------------------------------------------
6. Amendment #6, offered by Mr. Peters, to exclude members
of the Armed Forces and their families and civilian employees
of the Department of Defense and their families from the
requirements of the FACT Act. The amendment was defeated by a
rollcall vote of 9 to 18.
ROLLCALL NO. 6
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Labrador (ID).............................. X
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL)..............................
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ 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).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY).............................. X
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................ X
------------------------
Total...................................... 9 18
------------------------------------------------------------------------
7. Motion to report H.R. 526 favorably to the House of
Representatives. The motion was agreed to by a rollcall vote of
19 to 9.
ROLLCALL NO. 7
------------------------------------------------------------------------
Ayes Nays Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman................... X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX)................................. X
Mr. Chabot (OH)................................ X
Mr. Issa (CA).................................. X
Mr. Forbes (VA)................................ X
Mr. King (IA)..................................
Mr. Franks (AZ)................................ X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................ X
Mr. Poe (TX)................................... X
Mr. Chaffetz (UT)..............................
Mr. Marino (PA)................................ X
Mr. Gowdy (SC)................................. X
Mr. Labrador (ID).............................. X
Mr. Farenthold (TX)............................ X
Mr. Collins (GA)............................... X
Mr. DeSantis (FL).............................. X
Ms. Walters (CA)............................... X
Mr. Buck (CO).................................. X
Mr. Ratcliffe (TX)............................. X
Mr. Trott (MI)................................. X
Mr. Bishop (MI)................................ X
Mr. Conyers, Jr. (MI), Ranking Member.......... X
Mr. Nadler (NY)................................ 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).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)............................... X
Mr. Jeffries (NY).............................. X
Mr. Cicilline (RI).............................
Mr. Peters (CA)................................ X
------------------------
Total...................................... 19 9
------------------------------------------------------------------------
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. 526, 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, May 27, 2015.
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. 526, the
``Furthering Asbestos Claims Transparency (FACT) Act of 2015.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Marin
Burnett, who can be reached at 226-2860.
Sincerely,
Keith Hall,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 526--Furthering Asbestos Claims Transparency (FACT) Act of 2015.
As ordered reported by the House Committee on the Judiciary
on May 14, 2015.
H.R. 526 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. 526 would
have no significant effect on the Federal budget because the
AOUSC would incur only minor costs to make that information
publicly available. Enacting H.R. 526 would not affect direct
spending or revenues; therefore, pay-as-you-go procedures do
not apply.
H.R. 526 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. 526 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 ($154
million in 2015, adjusted annually for inflation).
The CBO staff contacts for this estimate are Marin Burnett
(for Federal costs) and Paige Piper/Bach (for the private-
sector effects). The estimate was approved by H. Samuel
Papenfuss, Deputy Assistant Director for Budget Analysis.
Duplication of Federal Programs
No provision of H.R. 526 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. 526 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.
526 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. 526 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 2015,'' or the ``FACT Act of 2015.''
Section 2. Amendments. Adds to section 524(g) of the
Bankruptcy Code a requirement that asbestos liability trusts
publish quarterly public reports identifying the claimants, the
demands made by claimants and the basis for such demands, and
the basis for any payments from the trust to claimants. Further
provides that trusts must comply with third-party discovery
demands subject to third-parties' 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) A discharge in a case under this title--
(1) voids any judgment at any time obtained, to the
extent that such judgment is a determination of the
personal liability of the debtor with respect to any
debt discharged under section 727, 944, 1141, 1228, or
1328 of this title, whether or not discharge of such
debt is waived;
(2) operates as an injunction against the
commencement or continuation of an action, the
employment of process, or an act, to collect, recover
or offset any such debt as a personal liability of the
debtor, whether or not discharge of such debt is
waived; and
(3) operates as an injunction against the
commencement or continuation of an action, the
employment of process, or an act, to collect or recover
from, or offset against, property of the debtor of the
kind specified in section 541(a)(2) of this title that
is acquired after the commencement of the case, on
account of any allowable community claim, except a
community claim that is excepted from discharge under
section 523, 1228(a)(1), or 1328(a)(1), or that would
be so excepted, determined in accordance with the
provisions of sections 523(c) and 523(d) of this title,
in a case concerning the debtor's spouse commenced on
the date of the filing of the petition in the case
concerning the debtor, whether or not discharge of the
debt based on such community claim is waived.
(b) Subsection (a)(3) of this section does not apply if--
(1)(A) the debtor's spouse is a debtor in a case
under this title, or a bankrupt or a debtor in a case
under the Bankruptcy Act, commenced within six years of
the date of the filing of the petition in the case
concerning the debtor; and
(B) the court does not grant the debtor's spouse a
discharge in such case concerning the debtor's spouse;
or
(2)(A) the court would not grant the debtor's
spouse a discharge in a case under chapter 7 of this
title concerning such spouse commenced on the date of
the filing of the petition in the case concerning the
debtor; and
(B) a determination that the court would not so
grant such discharge is made by the bankruptcy court
within the time and in the manner provided for a
determination under section 727 of this title of
whether a debtor is granted a discharge.
(c) An agreement between a holder of a claim and the
debtor, the consideration for which, in whole or in part, is
based on a debt that is dischargeable in a case under this
title is enforceable only to any extent enforceable under
applicable nonbankruptcy law, whether or not discharge of such
debt is waived, only if--
(1) such agreement was made before the granting of
the discharge under section 727, 1141, 1228, or 1328 of
this title;
(2) the debtor received the disclosures described
in subsection (k) at or before the time at which the
debtor signed the agreement;
(3) such agreement has been filed with the court
and, if applicable, accompanied by a declaration or an
affidavit of the attorney that represented the debtor
during the course of negotiating an agreement under
this subsection, which states that--
(A) such agreement represents a fully
informed and voluntary agreement by the debtor;
(B) such agreement does not impose an undue
hardship on the debtor or a dependent of the
debtor; and
(C) the attorney fully advised the debtor
of the legal effect and consequences of--
(i) an agreement of the kind
specified in this subsection; and
(ii) any default under such an
agreement;
(4) the debtor has not rescinded such agreement at
any time prior to discharge or within sixty days after
such agreement is filed with the court, whichever
occurs later, by giving notice of rescission to the
holder of such claim;
(5) the provisions of subsection (d) of this
section have been complied with; and
(6)(A) in a case concerning an individual who was
not represented by an attorney during the course of
negotiating an agreement under this subsection, the
court approves such agreement as--
(i) not imposing an undue hardship on the
debtor or a dependent of the debtor; and
(ii) in the best interest of the debtor.
(B) Subparagraph (A) shall not apply to the extent
that such debt is a consumer debt secured by real
property.
(d) In a case concerning an individual, when the court has
determined whether to grant or not to grant a discharge under
section 727, 1141, 1228, or 1328 of this title, the court may
hold a hearing at which the debtor shall appear in person. At
any such hearing, the court shall inform the debtor that a
discharge has been granted or the reason why a discharge has
not been granted. If a discharge has been granted and if the
debtor desires to make an agreement of the kind specified in
subsection (c) of this section and was not represented by an
attorney during the course of negotiating such agreement, then
the court shall hold a hearing at which the debtor shall appear
in person and at such hearing the court shall--
(1) inform the debtor--
(A) that such an agreement is not required
under this title, under nonbankruptcy law, or
under any agreement not made in accordance with
the provisions of subsection (c) of this
section; and
(B) of the legal effect and consequences
of--
(i) an agreement of the kind
specified in subsection (c) of this
section; and
(ii) a default under such an
agreement; and
(2) determine whether the agreement that the debtor
desires to make complies with the requirements of
subsection (c)(6) of this section, if the consideration
for such agreement is based in whole or in part on a
consumer debt that is not secured by real property of
the debtor.
(e) Except as provided in subsection (a)(3) of this
section, discharge of a debt of the debtor does not affect the
liability of any other entity on, or the property of any other
entity for, such debt.
(f) Nothing contained in subsection (c) or (d) of this
section prevents a debtor from voluntarily repaying any debt.
(g)(1)(A) After notice and hearing, a court that enters an
order confirming a plan of reorganization under chapter 11 may
issue, in connection with such order, an injunction in
accordance with this subsection to supplement the injunctive
effect of a discharge under this section.
(B) An injunction may be issued under subparagraph (A) to
enjoin entities from taking legal action for the purpose of
directly or indirectly collecting, recovering, or receiving
payment or recovery with respect to any claim or demand that,
under a plan of reorganization, is to be paid in whole or in
part by a trust described in paragraph (2)(B)(i), except such
legal actions as are expressly allowed by the injunction, the
confirmation order, or the plan of reorganization.
(2)(A) Subject to subsection (h), if the requirements of
subparagraph (B) are met at the time an injunction described in
paragraph (1) is entered, then after entry of such injunction,
any proceeding that involves the validity, application,
construction, or modification of such injunction, or of this
subsection with respect to such injunction, may be commenced
only in the district court in which such injunction was
entered, and such court shall have exclusive jurisdiction over
any such proceeding without regard to the amount in
controversy.
(B) The requirements of this subparagraph are that--
(i) the injunction is to be implemented in
connection with a trust that, pursuant to the plan of
reorganization--
(I) is to assume the liabilities of a
debtor which at the time of entry of the order
for relief has been named as a defendant in
personal injury, wrongful death, or property-
damage actions seeking recovery for damages
allegedly caused by the presence of, or
exposure to, asbestos or asbestos-containing
products;
(II) is to be funded in whole or in part by
the securities of 1 or more debtors involved in
such plan and by the obligation of such debtor
or debtors to make future payments, including
dividends;
(III) is to own, or by the exercise of
rights granted under such plan would be
entitled to own if specified contingencies
occur, a majority of the voting shares of--
(aa) each such debtor;
(bb) the parent corporation of each
such debtor; or
(cc) a subsidiary of each such
debtor that is also a debtor; and
(IV) is to use its assets or income to pay
claims and demands; and
(ii) subject to subsection (h), the court
determines that--
(I) the debtor is likely to be subject to
substantial future demands for payment arising
out of the same or similar conduct or events
that gave rise to the claims that are addressed
by the injunction;
(II) the actual amounts, numbers, and
timing of such future demands cannot be
determined;
(III) pursuit of such demands outside the
procedures prescribed by such plan is likely to
threaten the plan's purpose to deal equitably
with claims and future demands;
(IV) as part of the process of seeking
confirmation of such plan--
(aa) the terms of the injunction
proposed to be issued under paragraph
(1)(A), including any provisions
barring actions against third parties
pursuant to paragraph (4)(A), are set
out in such plan and in any disclosure
statement supporting the plan; and
(bb) a separate class or classes of
the claimants whose claims are to be
addressed by a trust described in
clause (i) is established and votes, by
at least 75 percent of those voting, in
favor of the plan; and
(V) subject to subsection (h), pursuant to
court orders or otherwise, 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 values 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.
(3)(A) If the requirements of paragraph (2)(B) are met and
the order confirming the plan of reorganization was issued or
affirmed by the district court that has jurisdiction over the
reorganization case, then after the time for appeal of the
order that issues or affirms the plan--
(i) the injunction shall be valid and enforceable
and may not be revoked or modified by any court except
through appeal in accordance with paragraph (6);
(ii) no entity that pursuant to such plan or
thereafter becomes a direct or indirect transferee of,
or successor to any assets of, a debtor or trust that
is the subject of the injunction shall be liable with
respect to any claim or demand made against such entity
by reason of its becoming such a transferee or
successor; and
(iii) no entity that pursuant to such plan or
thereafter makes a loan to such a debtor or trust or to
such a successor or transferee shall, by reason of
making the loan, be liable with respect to any claim or
demand made against such entity, nor shall any pledge
of assets made in connection with such a loan be upset
or impaired for that reason;
(B) Subparagraph (A) shall not be construed to--
(i) imply that an entity described in subparagraph
(A)(ii) or (iii) would, if this paragraph were not
applicable, necessarily be liable to any entity by
reason of any of the acts described in subparagraph
(A);
(ii) relieve any such entity of the duty to comply
with, or of liability under, any Federal or State law
regarding the making of a fraudulent conveyance in a
transaction described in subparagraph (A)(ii) or (iii);
or
(iii) relieve a debtor of the debtor's obligation
to comply with the terms of the plan of reorganization,
or affect the power of the court to exercise its
authority under sections 1141 and 1142 to compel the
debtor to do so.
(4)(A)(i) Subject to subparagraph (B), an injunction
described in paragraph (1) shall be valid and enforceable
against all entities that it addresses.
(ii) Notwithstanding the provisions of section 524(e), such
an injunction may bar any action directed against a third party
who is identifiable from the terms of such injunction (by name
or as part of an identifiable group) and is alleged to be
directly or indirectly liable for the conduct of, claims
against, or demands on the debtor to the extent such alleged
liability of such third party arises by reason of--
(I) the third party's ownership of a financial
interest in the debtor, a past or present affiliate of
the debtor, or a predecessor in interest of the debtor;
(II) the third party's involvement in the
management of the debtor or a predecessor in interest
of the debtor, or service as an officer, director or
employee of the debtor or a related party;
(III) the third party's provision of insurance to
the debtor or a related party; or
(IV) the third party's involvement in a transaction
changing the corporate structure, or in a loan or other
financial transaction affecting the financial
condition, of the debtor or a related party, including
but not limited to--
(aa) involvement in providing financing
(debt or equity), or advice to an entity
involved in such a transaction; or
(bb) acquiring or selling a financial
interest in an entity as part of such a
transaction.
(iii) As used in this subparagraph, the term ``related
party'' means--
(I) a past or present affiliate of the debtor;
(II) a predecessor in interest of the debtor; or
(III) any entity that owned a financial interest
in--
(aa) the debtor;
(bb) a past or present affiliate of the
debtor; or
(cc) a predecessor in interest of the
debtor.
(B) Subject to subsection (h), if, under a plan of
reorganization, a kind of demand described in such plan is to
be paid in whole or in part by a trust described in paragraph
(2)(B)(i) in connection with which an injunction described in
paragraph (1) is to be implemented, then such injunction shall
be valid and enforceable with respect to a demand of such kind
made, after such plan is confirmed, against the debtor or
debtors involved, or against a third party described in
subparagraph (A)(ii), if--
(i) as part of the proceedings leading to issuance
of such injunction, the court appoints a legal
representative for the purpose of protecting the rights
of persons that might subsequently assert demands of
such kind, and
(ii) the court determines, before entering the
order confirming such plan, that identifying such
debtor or debtors, or such third party (by name or as
part of an identifiable group), in such injunction with
respect to such demands for purposes of this
subparagraph is fair and equitable with respect to the
persons that might subsequently assert such demands, in
light of the benefits provided, or to be provided, to
such trust on behalf of such debtor or debtors or such
third party.
(5) In this subsection, the term ``demand'' means 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).
(6) Paragraph (3)(A)(i) does not bar an action taken by or
at the direction of an appellate court on appeal of an
injunction issued under paragraph (1) or of the order of
confirmation that relates to the injunction.
(7) This subsection does not affect the operation of
section 1144 or the power of the district court to refer a
proceeding under section 157 of title 28 or any reference of a
proceeding made prior to the date of the enactment of this
subsection.
(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.
(h) Application to Existing Injunctions.--For purposes of
subsection (g)--
(1) subject to paragraph (2), if an injunction of
the kind described in subsection (g)(1)(B) was issued
before the date of the enactment of this Act, as part
of a plan of reorganization confirmed by an order
entered before such date, then the injunction shall be
considered to meet the requirements of subsection
(g)(2)(B) for purposes of subsection (g)(2)(A), and to
satisfy subsection (g)(4)(A)(ii), if--
(A) the court determined at the time the
plan was confirmed that the plan was fair and
equitable in accordance with the requirements
of section 1129(b);
(B) as part of the proceedings leading to
issuance of such injunction and confirmation of
such plan, the court had appointed a legal
representative for the purpose of protecting
the rights of persons that might subsequently
assert demands described in subsection
(g)(4)(B) with respect to such plan; and
(C) such legal representative did not
object to confirmation of such plan or issuance
of such injunction; and
(2) for purposes of paragraph (1), if a trust
described in subsection (g)(2)(B)(i) is subject to a
court order on the date of the enactment of this Act
staying such trust from settling or paying further
claims--
(A) the requirements of subsection
(g)(2)(B)(ii)(V) shall not apply with respect
to such trust until such stay is lifted or
dissolved; and
(B) if such trust meets such requirements
on the date such stay is lifted or dissolved,
such trust shall be considered to have met such
requirements continuously from the date of the
enactment of this Act.
(i) The willful failure of a creditor to credit payments
received under a plan confirmed under this title, unless the
order confirming the plan is revoked, the plan is in default,
or the creditor has not received payments required to be made
under the plan in the manner required by the plan (including
crediting the amounts required under the plan), shall
constitute a violation of an injunction under subsection (a)(2)
if the act of the creditor to collect and failure to credit
payments in the manner required by the plan caused material
injury to the debtor.
(j) Subsection (a)(2) does not operate as an injunction
against an act by a creditor that is the holder of a secured
claim, if--
(1) such creditor retains a security interest in
real property that is the principal residence of the
debtor;
(2) such act is in the ordinary course of business
between the creditor and the debtor; and
(3) such act is limited to seeking or obtaining
periodic payments associated with a valid security
interest in lieu of pursuit of in rem relief to enforce
the lien.
(k)(1) The disclosures required under subsection (c)(2)
shall consist of the disclosure statement described in
paragraph (3), completed as required in that paragraph,
together with the agreement specified in subsection (c),
statement, declaration, motion and order described,
respectively, in paragraphs (4) through (8), and shall be the
only disclosures required in connection with entering into such
agreement.
(2) Disclosures made under paragraph (1) shall be made
clearly and conspicuously and in writing. The terms ``Amount
Reaffirmed'' and ``Annual Percentage Rate'' shall be disclosed
more conspicuously than other terms, data or information
provided in connection with this disclosure, except that the
phrases ``Before agreeing to reaffirm a debt, review these
important disclosures'' and ``Summary of Reaffirmation
Agreement'' may be equally conspicuous. Disclosures may be made
in a different order and may use terminology different from
that set forth in paragraphs (2) through (8), except that the
terms ``Amount Reaffirmed'' and ``Annual Percentage Rate'' must
be used where indicated.
(3) The disclosure statement required under this paragraph
shall consist of the following:
(A) The statement: ``Part A: Before agreeing to
reaffirm a debt, review these important disclosures:'';
(B) Under the heading ``Summary of Reaffirmation
Agreement'', the statement: ``This Summary is made
pursuant to the requirements of the Bankruptcy Code'';
(C) The ``Amount Reaffirmed'', using that term,
which shall be--
(i) the total amount of debt that the
debtor agrees to reaffirm by entering into an
agreement of the kind specified in subsection
(c), and
(ii) the total of any fees and costs
accrued as of the date of the disclosure
statement, related to such total amount.
(D) In conjunction with the disclosure of the
``Amount Reaffirmed'', the statements--
(i) ``The amount of debt you have agreed to
reaffirm''; and
(ii) ``Your credit agreement may obligate
you to pay additional amounts which may come
due after the date of this disclosure. Consult
your credit agreement.''.
(E) The ``Annual Percentage Rate'', using that
term, which shall be disclosed as--
(i) if, at the time the petition is filed,
the debt is an extension of credit under an
open end credit plan, as the terms ``credit''
and ``open end credit plan'' are defined in
section 103 of the Truth in Lending Act, then--
(I) the annual percentage rate
determined under paragraphs (5) and (6)
of section 127(b) of the Truth in
Lending Act, as applicable, as
disclosed to the debtor in the most
recent periodic statement prior to
entering into an agreement of the kind
specified in subsection (c) or, if no
such periodic statement has been given
to the debtor during the prior 6
months, the annual percentage rate as
it would have been so disclosed at the
time the disclosure statement is given
to the debtor, or to the extent this
annual percentage rate is not readily
available or not applicable, then
(II) the simple interest rate
applicable to the amount reaffirmed as
of the date the disclosure statement is
given to the debtor, or if different
simple interest rates apply to
different balances, the simple interest
rate applicable to each such balance,
identifying the amount of each such
balance included in the amount
reaffirmed, or
(III) if the entity making the
disclosure elects, to disclose the
annual percentage rate under subclause
(I) and the simple interest rate under
subclause (II); or
(ii) if, at the time the petition is filed,
the debt is an extension of credit other than
under an open end credit plan, as the terms
``credit'' and ``open end credit plan'' are
defined in section 103 of the Truth in Lending
Act, then--
(I) the annual percentage rate
under section 128(a)(4) of the Truth in
Lending Act, as disclosed to the debtor
in the most recent disclosure statement
given to the debtor prior to the
entering into an agreement of the kind
specified in subsection (c) with
respect to the debt, or, if no such
disclosure statement was given to the
debtor, the annual percentage rate as
it would have been so disclosed at the
time the disclosure statement is given
to the debtor, or to the extent this
annual percentage rate is not readily
available or not applicable, then
(II) the simple interest rate
applicable to the amount reaffirmed as
of the date the disclosure statement is
given to the debtor, or if different
simple interest rates apply to
different balances, the simple interest
rate applicable to each such balance,
identifying the amount of such balance
included in the amount reaffirmed, or
(III) if the entity making the
disclosure elects, to disclose the
annual percentage rate under (I) and
the simple interest rate under (II).
(F) If the underlying debt transaction was
disclosed as a variable rate transaction on the most
recent disclosure given under the Truth in Lending Act,
by stating ``The interest rate on your loan may be a
variable interest rate which changes from time to time,
so that the annual percentage rate disclosed here may
be higher or lower.''.
(G) If the debt is secured by a security interest
which has not been waived in whole or in part or
determined to be void by a final order of the court at
the time of the disclosure, by disclosing that a
security interest or lien in goods or property is
asserted over some or all of the debts the debtor is
reaffirming and listing the items and their original
purchase price that are subject to the asserted
security interest, or if not a purchase-money security
interest then listing by items or types and the
original amount of the loan.
(H) At the election of the creditor, a statement of
the repayment schedule using 1 or a combination of the
following--
(i) by making the statement: ``Your first
payment in the amount of $___ is due on ___ but
the future payment amount may be different.
Consult your reaffirmation agreement or credit
agreement, as applicable.'', and stating the
amount of the first payment and the due date of
that payment in the places provided;
(ii) by making the statement: ``Your
payment schedule will be:'', and describing the
repayment schedule with the number, amount, and
due dates or period of payments scheduled to
repay the debts reaffirmed to the extent then
known by the disclosing party; or
(iii) by describing the debtor's repayment
obligations with reasonable specificity to the
extent then known by the disclosing party.
(I) The following statement: ``Note: When this
disclosure refers to what a creditor`may'do, it does
not use the word`may'to give the creditor specific
permission. The word`may'is used to tell you what might
occur if the law permits the creditor to take the
action. If you have questions about your reaffirming a
debt or what the law requires, consult with the
attorney who helped you negotiate this agreement
reaffirming a debt. If you don't have an attorney
helping you, the judge will explain the effect of your
reaffirming a debt when the hearing on the
reaffirmation agreement is held.''.
(J)(i) The following additional statements:
"Reaffirming a debt is a serious financial
decision. The law requires you to take certain steps to
make sure the decision is in your best interest. If
these steps are not completed, the reaffirmation
agreement is not effective, even though you have signed
it.
"1. Read the disclosures in this Part A carefully.
Consider the decision to reaffirm carefully. Then, if
you want to reaffirm, sign the reaffirmation agreement
in Part B (or you may use a separate agreement you and
your creditor agree on).
"2. Complete and sign Part D and be sure you can
afford to make the payments you are agreeing to make
and have received a copy of the disclosure statement
and a completed and signed reaffirmation agreement.
"3. If you were represented by an attorney during
the negotiation of your reaffirmation agreement, the
attorney must have signed the certification in Part C.
"4. If you were not represented by an attorney
during the negotiation of your reaffirmation agreement,
you must have completed and signed Part E.
"5. The original of this disclosure must be filed
with the court by you or your creditor. If a separate
reaffirmation agreement (other than the one in Part B)
has been signed, it must be attached.
"6. If you were represented by an attorney during
the negotiation of your reaffirmation agreement, your
reaffirmation agreement becomes effective upon filing
with the court unless the reaffirmation is presumed to
be an undue hardship as explained in Part D.
"7. If you were not represented by an attorney
during the negotiation of your reaffirmation agreement,
it will not be effective unless the court approves it.
The court will notify you of the hearing on your
reaffirmation agreement. You must attend this hearing
in bankruptcy court where the judge will review your
reaffirmation agreement. The bankruptcy court must
approve your reaffirmation agreement as consistent with
your best interests, except that no court approval is
required if your reaffirmation agreement is for a
consumer debt secured by a mortgage, deed of trust,
security deed, or other lien on your real property,
like your home.
"Your right to rescind (cancel) your reaffirmation
agreement. You may rescind (cancel) your reaffirmation
agreement at any time before the bankruptcy court
enters a discharge order, or before the expiration of
the 60-day period that begins on the date your
reaffirmation agreement is filed with the court,
whichever occurs later. To rescind (cancel) your
reaffirmation agreement, you must notify the creditor
that your reaffirmation agreement is rescinded (or
canceled).
"What are your obligations if you reaffirm the
debt? A reaffirmed debt remains your personal legal
obligation. It is not discharged in your bankruptcy
case. That means that if you default on your reaffirmed
debt after your bankruptcy case is over, your creditor
may be able to take your property or your wages.
Otherwise, your obligations will be determined by the
reaffirmation agreement which may have changed the
terms of the original agreement. For example, if you
are reaffirming an open end credit agreement, the
creditor may be permitted by that agreement or
applicable law to change the terms of that agreement in
the future under certain conditions.
"Are you required to enter into a reaffirmation
agreement by any law? No, you are not required to
reaffirm a debt by any law. Only agree to reaffirm a
debt if it is in your best interest. Be sure you can
afford the payments you agree to make.
``What if your creditor has a security interest or
lien? Your bankruptcy discharge does not eliminate any
lien on your property. A`lien'is often referred to as a
security interest, deed of trust, mortgage or security
deed. Even if you do not reaffirm and your personal
liability on the debt is discharged, because of the
lien your creditor may still have the right to take the
property securing the lien if you do not pay the debt
or default on it. If the lien is on an item of personal
property that is exempt under your State's law or that
the trustee has abandoned, you may be able to redeem
the item rather than reaffirm the debt. To redeem, you
must make a single payment to the creditor equal to the
amount of the allowed secured claim, as agreed by the
parties or determined by the court.''.
(ii) In the case of a reaffirmation under
subsection (m)(2), numbered paragraph 6 in the
disclosures required by clause (i) of this subparagraph
shall read as follows:
``6. If you were represented by an attorney during
the negotiation of your reaffirmation agreement, your
reaffirmation agreement becomes effective upon filing
with the court.''.
(4) The form of such agreement required under this
paragraph shall consist of the following:
"Part B: Reaffirmation Agreement. I (we) agree to
reaffirm the debts arising under the credit agreement
described below.
"Brief description of credit agreement:
"Description of any changes to the credit agreement
made as part of this reaffirmation agreement:
"Signature: Date:
"Borrower:
"Co-borrower, if also reaffirming these debts:
"Accepted by creditor:
``Date of creditor acceptance:''.
(5) The declaration shall consist of the following:
(A) The following certification:
"Part C: Certification by Debtor's Attorney (If
Any).
"I hereby certify that (1) this agreement
represents a fully informed and voluntary agreement by
the debtor; (2) this agreement does not impose an undue
hardship on the debtor or any dependent of the debtor;
and (3) I have fully advised the debtor of the legal
effect and consequences of this agreement and any
default under this agreement.
``Signature of Debtor's Attorney: Date:''.
(B) If a presumption of undue hardship has been
established with respect to such agreement, such
certification shall state that, in the opinion of the
attorney, the debtor is able to make the payment.
(C) In the case of a reaffirmation agreement under
subsection (m)(2), subparagraph (B) is not applicable.
(6)(A) The statement in support of such agreement, which
the debtor shall sign and date prior to filing with the court,
shall consist of the following:
"Part D: Debtor's Statement in Support of
Reaffirmation Agreement.
"1. I believe this reaffirmation agreement will not
impose an undue hardship on my dependents or me. I can
afford to make the payments on the reaffirmed debt
because my monthly income (take home pay plus any other
income received) is $___, and my actual current monthly
expenses including monthly payments on post-bankruptcy
debt and other reaffirmation agreements total $___,
leaving $___ to make the required payments on this
reaffirmed debt. I understand that if my income less my
monthly expenses does not leave enough to make the
payments, this reaffirmation agreement is presumed to
be an undue hardship on me and must be reviewed by the
court. However, this presumption may be overcome if I
explain to the satisfaction of the court how I can
afford to make the payments here: ___.
``2. I received a copy of the Reaffirmation
Disclosure Statement in Part A and a completed and
signed reaffirmation agreement.''.
(B) Where the debtor is represented by an attorney and is
reaffirming a debt owed to a creditor defined in section
19(b)(1)(A)(iv) of the Federal Reserve Act, the statement of
support of the reaffirmation agreement, which the debtor shall
sign and date prior to filing with the court, shall consist of
the following:
``I believe this reaffirmation agreement is in my
financial interest. I can afford to make the payments
on the reaffirmed debt. I received a copy of the
Reaffirmation Disclosure Statement in Part A and a
completed and signed reaffirmation agreement.''.
(7) The motion that may be used if approval of such
agreement by the court is required in order for it to be
effective, shall be signed and dated by the movant and shall
consist of the following:
"Part E: Motion for Court Approval (To be completed
only if the debtor is not represented by an attorney.).
I (we), the debtor(s), affirm the following to be true
and correct:
"I am not represented by an attorney in connection
with this reaffirmation agreement.
"I believe this reaffirmation agreement is in my
best interest based on the income and expenses I have
disclosed in my Statement in Support of this
reaffirmation agreement, and because (provide any
additional relevant reasons the court should consider):
``Therefore, I ask the court for an order approving
this reaffirmation agreement.''.
(8) The court order, which may be used to approve such
agreement, shall consist of the following:
``Court Order: The court grants the debtor's motion
and approves the reaffirmation agreement described
above.''.
(l) Notwithstanding any other provision of this title the
following shall apply:
(1) A creditor may accept payments from a debtor
before and after the filing of an agreement of the kind
specified in subsection (c) with the court.
(2) A creditor may accept payments from a debtor
under such agreement that the creditor believes in good
faith to be effective.
(3) The requirements of subsections (c)(2) and (k)
shall be satisfied if disclosures required under those
subsections are given in good faith.
(m)(1) Until 60 days after an agreement of the kind
specified in subsection (c) is filed with the court (or such
additional period as the court, after notice and a hearing and
for cause, orders before the expiration of such period), it
shall be presumed that such agreement is an undue hardship on
the debtor if the debtor's monthly income less the debtor's
monthly expenses as shown on the debtor's completed and signed
statement in support of such agreement required under
subsection (k)(6)(A) is less than the scheduled payments on the
reaffirmed debt. This presumption shall be reviewed by the
court. The presumption may be rebutted in writing by the debtor
if the statement includes an explanation that identifies
additional sources of funds to make the payments as agreed upon
under the terms of such agreement. If the presumption is not
rebutted to the satisfaction of the court, the court may
disapprove such agreement. No agreement shall be disapproved
without notice and a hearing to the debtor and creditor, and
such hearing shall be concluded before the entry of the
debtor's discharge.
(2) This subsection does not apply to reaffirmation
agreements where the creditor is a credit union, as defined in
section 19(b)(1)(A)(iv) of the Federal Reserve Act.
* * * * * * *
Dissenting Views
INTRODUCTION
H.R. 526, the ``Furthering Asbestos Claim Transparency
(FACT) Act of 2015,'' would require a trust--established under
bankruptcy law to pay the claims of asbestos victims--to
publicly disclose sensitive, personal information of these
victims, including their names and exposure histories. As a
result, asbestos victims' private information will be
irretrievably released into the public domain and available via
the Internet. We oppose this offensive bill because: (1) its
reporting and disclosure requirements are a blatant assault on
asbestos victims' privacy interests; (2) it is fundamentally
inequitable in that it mandates disclosure by the trusts, but
does not impose comparable disclosure demands on defendant
companies, even though they exposed millions of unsuspecting
Americans to their toxic products; (3) it addresses a non-
existent problem as there is no evidence of systemic fraud; (4)
it is an end-run by defendant companies around the discovery
process available under non-bankruptcy law; and (5) it will
divert critical funds and further decrease compensation to
asbestos victims by forcing bankruptcy trusts to prepare
burdensome reports. Not surprisingly, H.R. 526 is opposed by
asbestos victims and their families,\1\ the Military Order of
the Purple Heart,\2\ the AFL-CIO,\3\ the American Federation of
State, County and Municipal Employees,\4\ Asbestos Disease
Awareness Organization,\5\ the Environmental Working Group,\6\
Public Citizen,\7\ the Alliance for Justice,\8\ various
consumer organizations,\9\ and legal representatives for future
asbestos personal injury claimants with respect to asbestos
bankruptcy trusts.\10\
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\1\See, e.g., Op. Ed., Susan Vento, Asbestos Victims Call on
Congress to Stop Fast-Tracking Legislation That Would Violate Victim's
Privacy, Roll Call, May 14, 2015, at 11 (describing the bill as
``offensive''); Letter from Susan Vento widow of Rep. Bruce Vento
(D_MN), et al. to U.S. House of Representative Members (May 13, 2015)
(on file with H. Comm. on the Judiciary Democratic staff) (warning that
H.R. 526 ``will make it harder for victims to seek justice and easier
for asbestos companies to delay cases and pay less to victims'');
Michael Valach, son of deceased victim of mesothelioma, to
Representative Tom Marino (R-PA), Chair, Subcomm. on Regulatory Reform,
Commercial and Antitrust Law of the H. Comm. on the Judiciary (May 13,
2015) (on file with H. Comm. on the Judiciary Democratic staff)
(expressing concern that the legislation will ``place personal
information about asbestos victims and their families . . . on a public
database accessible to the entire world'').
\2\Letter from J. Patrick Little, National Commander, Military
Order of the Purple Heart, to Representative John Boehner (R-OH),
Speaker of the U.S. House of Representatives, et al. (Feb. 4, 2015) (on
file with H. Comm. on the Judiciary Democratic staff) (stating that
H.R. 526 ``was written to benefit asbestos corporations and their
insurers, not their victims'' and that ``[d]elaying justice for any
veteran suffering from the fatal effects of these diseases is offensive
to our brave men and women in uniform'').
\3\Letter from William Samuel, Director, Government Affairs
Department, American Federation of Labor and Congress of Industrial
Organizations, to U.S. House of Representative Members (Feb. 3, 2015)
(on file with H. Comm. on the Judiciary Democratic staff).
\4\Letter from Scott Frey, Director, Federal Government Affairs,
American Federation of State, County and Municipal Employees, to U.S.
House of Representative Members (Feb. 3, 2015) (on file with H. Comm.
on the Judiciary Democratic staff).
\5\Letter from Linda Reinstein, President & Co-Founder, Asbestos
Disease Awareness Organization, to Representative Bob Goodlatte (R-VA),
Chair, & Representative John Conyers, Jr. (D-MI), Ranking Member, H.
Comm. on the Judiciary (May 13, 2015) (on file with H. Comm. on the
Judiciary Democratic staff).
\6\Press Release, Environmental Working Group, EWG Action Fund:
FACT Act Favors Asbestos Industry Over Justice, Public Health (Jan. 28,
2015) (on file with H. Comm. on the Judiciary Democratic staff).
\7\Press Release, Public Citizen, FACT ACT Adds Insult to Injury
for Asbestos Victims (Jan. 27, 2015) (on file with H. Comm. on the
Judiciary Democratic staff).
\8\Press Release, Alliance for Justice, AFJ: FACT Act Delays
Justice for Asbestos Victims (Jan. 28, 2015), available at http://
www.afj.org/press-room/press-releases/afj-fact-act-delays-justice-for-
asbestos-victims.
\9\These organizations include Consumer Act, Consumer Watchdog, the
National Association of Consumer Advocates, and the National Consumers
League. Letter from Alliance for Justice et al. to Representative Bob
Goodlatte, Chair, H. Comm. on the Judiciary, et al. (May 12, 2015).
\10\See, e.g., Letter from Douglas A. Campbell, counsel for various
asbestos settlement trusts, to Representative Bob Goodlatte, Chair, H.
Comm. on the Judiciary, et al. (Jan. 30, 2015) (on file with H. Comm.
on the Judiciary Democratic staff).
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DESCRIPTION AND BACKGROUND
DESCRIPTION
Section 524(g) of title 11 of the United States Code
authorizes a company struggling with overwhelming asbestos tort
claims to establish and fund, as part of its plan of
reorganization in bankruptcy, a trust to pay such claims, under
certain circumstances.\11\ In exchange for funding this trust,
the company is released from liability for such claims once the
bankruptcy court confirms the plan of reorganization. Upon
confirmation, the trust must make the required payments, but is
not subject to the bankruptcy court's supervision.
---------------------------------------------------------------------------
\11\11 U.S.C. Sec. 524(g) (2015).
---------------------------------------------------------------------------
H.R. 526 amends section 524(g) in two significant respects.
First, it requires the trust to file with the bankruptcy court
a quarterly 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, but not 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 such information would create an
``undue risk of identity theft or other unlawful injury.''\12\
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\12\11 U.S.C. Sec. 107(c) (2015).
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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 heat resistence.\13\ The modern industrial use of
asbestos dates back to around 1860. Between 1934 to 1964, the
world's annual use of raw asbestos increased from about 500,000
tons to 2.5 million tons.\14\ Asbestos was often 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.''\15\ The Department of Labor estimates
that approximately 21 million Americans have been significantly
exposed to asbestos.\16\
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\13\Asbestos Litigation Crisis in Federal and State Courts:
Hearings Before the Subcomm. on Intellectual Property and Judicial
Administration of the House Comm. on the Judiciary, 102d Congress 1
(1975) (Opening Statement of Chairman Hughes) [hereinafter Asbestos
Litigation Hearings].
\14\Id.
\15\U.S. Government Accountability Office, Report on Asbestos
Injury Compensation: The Role and Administration of Asbestos Trusts,
GAO-11-819, at 6 (Sept. 2011) [hereinafter GAO Report].
\16\Asbestos Litigation Hearings at 2.
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Asbestos fibers, when released into the atmosphere and
inhaled by humans, may cause various diseases, including
asbestosis (a clogging and scarring of the lungs that can
produce a reduced breathing capacity) and mesothelioma (a
cancer of the lining of the chest and abdomen that is typically
fatal).\17\ Lung cancer and other diseases have also been
associated with the inhalation of asbestos fibers. \18\
---------------------------------------------------------------------------
\17\GAO Report at 1-2.
\18\Id.
---------------------------------------------------------------------------
Although a link between asbestos and lung cancer was first
reported in 1935, millions of Americans were exposed to
asbestos over the ensuing years and their injuries began to
manifest in the 1960's.\19\ For example, the Occupational
Safety and Health Administration stated in 1986 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.''\20\ The
Environmental Protection Agency (EPA) in 1988 published a study
of asbestos in public schools and found that its presence was
``extremely hazardous.''\21\
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\19\Report of the Judicial Conference of the U.S. Courts Ad Hoc
Committee on Asbestos Litigation, at 2 (Mar. 1991).
\20\Letter of transmittal dated July 21, 1983, Chronic Hazards
Advisory Panel on Asbestos, Report to the U.S. Consumer Product Safety
Commission (July 1983).
\21\U.S. Environmental Protection Agency, EPA Study of Asbestos-
Containing Materials in Public Buildings: A Report to Congress, at 5
(Feb. 1988).
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In 1989, the EPA issued a regulation pursuant to the Toxic
Substances Control Act\22\ (TSCA) banning most asbestos-
containing products. This regulation, however, was remanded by
the Fifth Circuit Court of Appeals\23\ and, ``[a]s a result,
most of the original ban on the manufacture, importation,
processing, or distribution in commerce for the majority of the
asbestos-containing products originally covered in the 1989
final rule was overturned.''\24\ Currently, the use of asbestos
is banned in the manufacture of certain products,\25\ but it
continues to be used in many other products, such as disk brake
pads, vinyl floor tiles, and clothing.\26\
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\22\Pub. L. No. 94-469, 90 Stat. 2003 (1976) (codified in 15 U.S.C.
Sec. Sec. 2601 et seq. (2015)). Section 6 of the Act authorizes the
agency to prohibit the manufacture of certain products ``[i]f the
Administrator finds that there is a reasonable basis to conclude that
the manufacture, processing, distribution in commerce, use, or disposal
of a chemical substance or mixture, or that any combination of such
activities, presents or will present an unreasonable risk of injury to
health or the environment[.]'' 15 U.S.C. Sec. 2605 (2015).
\23\Corrosion Proof Fittings v. Environmental Protection Agency,
947 F.2d 1201 (5th Cir. 1991).
\24\U.S. Environmental Protection Agency, U.S. Federal Bans on
Asbestos--Regulatory History of Asbestos Bans, available at http://
www2.epa.gov/asbestos/us-federal-bans-asbestos (last visited May 7,
2015).
\25\See, e.g., 16 C.F.R. Parts 1304-05 (2015) (banning the use of
asbestos in certain spackling compounds).
\26\Other products that are permitted to be manufactured with
asbestos include: cement corrugated sheets, cement flat sheet, pipeline
wrap, roofing felt, cement shingle, millboard, cement pipe, automatic
transmission components, clutch facings, friction materials, drum brake
linings, brake blocks, and gaskets. U.S. Environmental Protection
Agency, U.S. Federal Bans on Asbestos, available at http://
www2.epa.gov/asbestos/us-federal-bans-asbestos (last visited May 7,
2015).
---------------------------------------------------------------------------
The first appellate opinion upholding a product liability
judgment against a manufacturer of asbestos-containing products
was rendered in 1973 by the Fifth Circuit.\27\ As reported by
the Government Accountability Office (GAO), ``In the course of
the first successful personal injury lawsuits against asbestos
manufacturers, plaintiffs' attorneys introduced evidence that
these manufacturers had known but concealed information about
the dangers of asbestos exposure or that such dangers were
reasonably foreseeable.''\28\ In the more than 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.\29\
``Asbestos litigation,'' according to the GAO, ``has been the
longest-running mass tort litigation in U.S. history.''\30\
---------------------------------------------------------------------------
\27\Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th
Cir. 1973).
\28\GAO Report at 8.
\29\Lloyd Dixon et al., Report: Asbestos Bankruptcy Trusts--An
Overview of Trust Structure and Activity with Detailed Reports on the
Largest Trusts, Rand Institute for Civil Justice, at xi (2010).
\30\GAO Report at 1. Approximately 100 companies have filed for
bankruptcy relief at least in part due to asbestos-related liability.
Id. at 2.
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B. Overview of Bankruptcy Asbestos 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,\31\
section 524(g) authorizes a court in a chapter 11 case, after
making certain findings,\32\ 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\33\ that is to be paid in
full or in part by a trust established under a confirmed plan
of reorganization.\34\ The trust is typically funded with newly
issued securities of the recapitalized debtor and by the
debtor's obligation to make future payments.\35\ 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.\36\ 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.''\37\
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\31\Kane v. Johns-Manville Corp., 843 F.2d 636 (2nd2nd Cir. 1988).
\32\11 U.S.C. Sec. 524(g)(2)(B)(ii) (2015).
\33\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) (2015).
---------------------------------------------------------------------------
\34\11 U.S.C. Sec. 524(g)(1)(B) (2015).
\35\11 U.S.C. Sec. 524(g)(2)(B)(i) (2015).
\36\11 U.S.C. Sec. 524(g)(2)(B) (2015).
\37\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.''\38\ The trusts are privately managed
and typically consist of a trustee, a trust advisory committee,
and a future claims representative.\39\ The GAO explains:
---------------------------------------------------------------------------
\38\Id. at 3.
\39\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.\40\
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\40\Id.
Each trust establishes its own process by which claims are
assessed and paid. Claims that meet the requisite criteria are
paid a percentage of the scheduled value based on the nature of
the asserted injury. The payment ratio varies among the trusts
based on the availability of assets and anticipated present and
future claims.\41\ According to the GAO, payments range from
1.1 percent to 100 percent for certain diseases, such as
mesothelioma or asbestosis and the median payment percentage
among the various trusts was 25 percent.\42\ The GAO reports
that since the establishment of the first trust in 1988,
``asbestos trusts have paid about 3.3 million claims valued at
about $17.5 billion,'' as of 2010.\43\ In addition to seeking
compensation from an asbestos bankruptcy trust, asbestos
claimants may seek compensation from liable companies that are
not in bankruptcy through the tort system.\44\
---------------------------------------------------------------------------
\41\Id. at 17.
\42\Id. at 21.
\43\Id. at 16.
\44\Id. at 15.
---------------------------------------------------------------------------
To establish entitlement to compensation from a bankruptcy
asbestos trust, the claimant completes a claim form supported
by documented evidence of exposure to asbestos products. Such
evidence may consist of the claimant's work history, employer
records, Social Security records, and deposition testimony
taken during any litigation, the GAO reports.\45\ 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.''\46\
---------------------------------------------------------------------------
\45\Id. at 18.
\46\Id.
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In 2004, reports of fraudulent claims made against asbestos
trusts and solvent companies emerged.\47\ The Committee's
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
(RRCAL Subcommittee) examined this issue as well as others
presented with respect to the treatment of mass torts in
bankruptcy cases as part of an oversight hearing conducted that
same year.\48\ More recently, a bankruptcy court found a
pattern by asbestos claims of ``demonstrable
misrepresentation'' of exposure evidence in the chapter 11
bankruptcy case of Garlock Sealing Technologies, an asbestos
manufacturer,.\49\
---------------------------------------------------------------------------
\47\See, e.g., Editorial, St. Francis of Asbestos, Wall St. J.,
June 14, 2004, at A14 (suggesting 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'').
\48\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).
\49\In re Garlock Sealing Technologies, LLC, 504 Bankr. 71, 85-86
(Bankr. W.D.N.C. 2014).
---------------------------------------------------------------------------
Nevertheless, GAO, as part of its 2011 review of bankruptcy
asbestos trusts, found neither any evidence of endemic fraud
with respect to asbestos claims nor any proof of overt fraud
over the course of its examination.\50\ The GAO reported that
98 percent of the 52 trusts that it reviewed required a claims
audit program to be conducted. Based on interviews held with
representatives from 11 trusts, GAO observed that all the
trusts ``incorporate quality assurance measures into their
intake, evaluation, and payment processes.''\51\ GAO also noted
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.''\52\ In addition, it
found that none of the trusts ``indicated that these audits had
identified cases of fraud.''\53\
---------------------------------------------------------------------------
\50\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.
\51\GAO Report at 23.
\52\Id.
\53\Id.
---------------------------------------------------------------------------
With respect to reporting, the GAO states that these trusts
``operate without judicial or Federal Government oversight, but
generally provide annual financial reports to the U.S.
bankruptcy court of jurisdiction in accordance with provisions
set forth in each trust's trust agreements.''\54\ These reports
typically set forth the total number of claims paid and the
aggregate value of these claims.\55\ While some reports are
publicly available, some are filed under seal with the
bankruptcy court ``for reasons deemed appropriate by the
court.''\56\ These include protecting the interests of the
reorganized company and its competitiveness.\57\ Of the 47
annual trust reports reviewed by GAO, only one reported the
amount paid to each individual and listed these individuals'
names.\58\ On the other hand, 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\
---------------------------------------------------------------------------
\54\Id.
\55\Id. at 16, 24.
\56\Id. at 17.
\57\Id. at 4, note 7.
\58\Id. at 24-25.
\59\Id. at 26.
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There is a sharp divide between those who support
additional disclosure, namely the defense bar, and those who
oppose it, namely the plaintiffs' bar and trusts. The principal
arguments against disclosure of individual claimant
information, as summarized by the GAO, are that ``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.''\60\ They further argue that ``all of the
potentially relevant information in the trusts' possession is
available to the defense through pretrial discovery.''\61\
---------------------------------------------------------------------------
\60\Id. at 29.
\61\Id.
---------------------------------------------------------------------------
CONCERNS WITH H.R. 526
I. H.R. 526 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. 526 allege that there is pervasive fraud and
abuse in the asbestos trust compensation system.\62\ In truth,
however, there have been only isolated reports of fraudulent
claims over the years, as previously noted.\63\ Although the
Wall Street Journal published an article in 2013 purporting to
document ``numerous apparent anomalies'' regarding various
asbestos claim,\64\ a close reading of the article shows that
these instances typically resulted from human error or that
protocols for rooting out fraud were working as intended.\65\
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, observed:
---------------------------------------------------------------------------
\62\See, e.g., Unofficial Tr. of Markup of H.R. 526, the
``Furthering Asbestos Claim Transparency (FACT) Act of 2015,'' by the
H. Comm. on the Judiciary, 114th Cong. (2015), at 92-94 [hereinafter
``Tr. at ___''].
\63\See text accompanying notes 47-49.
\64\See, e.g., Dionne Searcey & Rob Barry, As Asbestos Claims Rise,
So Do Worries About Fraud, Wall St. J., Mar. 11, 2013, at A1.
\65\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.\66\
---------------------------------------------------------------------------
\66\Joan Claybrook, Fraud Made the Asbestos Illness Situation Much
Worse, Letter to the Editor, Wall St. J., (May 19, 2013, at A16).
It is also important to note that 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.\67\ 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.\68\ 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.''\69\ 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.''\70\ 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.''\71\ It is noteworthy that even with this
heightened scrutiny, none of the trusts ``indicated that these
audits had identified cases of fraud.''\72\
---------------------------------------------------------------------------
\67\Telephone interview with William Jenkins, Director, Homeland
Security and Justice Issues, et al., U.S. Government Accountability
Office (May 7, 2012); GAO Report, supra note 14, at 23.
\68\GAO Report at 18.
\69\Id.
\70\Id. at 23.
\71\Id.
\72\Id.
---------------------------------------------------------------------------
To draw attention to the fact that the current asbestos
trust claims processing generally has adequate fraud detection
systems in place, RRCAL 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 voice vote.\73\
---------------------------------------------------------------------------
\73\Tr. at 148.
---------------------------------------------------------------------------
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 a hearing
on a substantially identical bill held before the RRCAL
Subcommittee in 2013, ``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.''\74\ Any
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.
---------------------------------------------------------------------------
\74\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. 64 (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 8 to 18.\75\
---------------------------------------------------------------------------
\75\Tr. at 193.
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II. H.R. 526 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. 526's mandatory reporting and disclosure requirements
would violate asbestos victims' privacy when they seek payment
for injuries from an asbestos bankruptcy trust. Specifically,
the bill requires their personal information, such as their
names and exposure histories, to be made part of the bankruptcy
court's public 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 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 Judiciary Committee 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.''\76\
---------------------------------------------------------------------------
\76\Letter from Susan Vento, widow of Rep. Bruce Vento (D-MN), et
al., to Members of the House of Representatives (Feb. 4, 2015), at 2
(on file with Comm. on the Judiciary Democratic staff).
---------------------------------------------------------------------------
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.''\77\ 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.''\78\
---------------------------------------------------------------------------
\77\GAO Report at 30.
\78\Id.
---------------------------------------------------------------------------
These arguments, however, 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.''\79\ Equally important, the GAO
noted that ``all of the potentially relevant information in the
trusts' possession is available to the defense through pretrial
discovery.''\80\ 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.''\81\
---------------------------------------------------------------------------
\79\Id. at 29.
\80\Id.
\81\Memorandum from Legal Representatives for Future Asbestos
Personal Injury Claimants with Respect to Certain Asbestos Settlement
Trusts to Prof. Troy McKenzie, Advisory Comm.ittee on Bankruptcy Rules
of the Judicial Conference of the United States, at 2 (Aug. 10, 2011)
(on file with the H. Comm. on the Judiciary Democratic staff).
---------------------------------------------------------------------------
In an 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 5 to 14.\82\
---------------------------------------------------------------------------
\82\Tr. at 126.
---------------------------------------------------------------------------
In another attempt to mitigate the bill's privacy flaws,
Representative Henry C. ``Hank'' Johnson, Jr. (D-GA) offered an
amendment that 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, information pertaining to
the claimant's health and finances. As Representative Johnson
argued, 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. Last year, for example,
the FTC received nearly 160,000 of these complaints, which was
100,000 more than it received in 2013.\83\ Although, as
previously noted, identity theft is a serious concern of
asbestos victims,\84\ this amendment failed by a vote of 9 to
20.\85\
---------------------------------------------------------------------------
\83\Federal Trade Commission: Identity Theft Once Again the Top
Consumer Complaint, CNN Wire Service (Mar. 1, 2015), available at
http://fox6now.com/2015/03/01/federal-trade-
commission-identity-theft-once-again-the-top-consumer-complaint.
\84\See text accompanying note 76.
\85\Tr. at 180-81.
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B. Asbestos Victims Vigorously Oppose this Legislation
The proponents of this legislation assert that it is
intended to assist asbestos victims. For example, Committee
Chairman Bob Goodlatte stated at the outset of the markup of
H.R. 526 that the bill ``will help asbestos victims.''\86\ Yet,
we are unaware of a single asbestos victim who supports H.R.
526. In fact, we received letters from asbestos victims in
vigorous opposition to this bill.\87\ Tellingly, the Majority
failed to call an asbestos victim to testify at the hearing on
this legislation held in this Congress or in the last two
Congress when similar measures were considered.\88\ And, ``[t]o
add insult to injury,'' the relatives of asbestos victims who
were sitting silently in the audience at the hearing held on
H.R. 526 were asked by Representative Darrell Issa (R-CA) to
stand and then to shake their heads ``yes or no'' in response
to his question, which then sought to use to support his
arguments in support of the legislation.\89\
---------------------------------------------------------------------------
\86\Id. at 92.
\87\See, e.g., Op. Ed., Susan Vento, Asbestos Victims Call on
Congress to Stop Fast-Tracking Legislation That Would Violate Victim's
Privacy, Roll Call, May 14, 2015, at 11 (describing the bill as
``offensive''); Letter from Susan Vento widow of Rep. Bruce Vento (D-
MN), et al. to U.S. House of Representative Members (May 13, 2015) (on
file with H. Comm. on the Judiciary Democratic staff) (warning that
H.R. 526 ``will make it harder for victims to seek justice and easier
for asbestos companies to delay cases and pay less to victims'');
Michael Valach, son of deceased victim of mesothelioma, to
Representative Tom Marino (R-PA), Chair, Subcomm. on Regulatory Reform,
Commercial and Antitrust Law of the H. Comm. on the Judiciary (May 13,
2015) (on file with H. Comm. on the Judiciary Democratic staff)
(expressing concern that the legislation will ``place personal
information about asbestos victims and their families . . . on a public
database accessible to the entire world''). Vento Letter.
\88\See, e.g., Furthering Asbestos Claims Transparency (FACT) Act
of 2015: Hearing on H.R. 526 Before the Subcomm. on Regulatory Reform,
Commercial and Antitrust Law, 114th Cong. (2015); Furthering Asbestos
Claims Transparency (FACT) Act of 2013: Hearing on H.R. 928 Before the
Subcomm. on Regulatory Reform, Commercial and Antitrust Law, 113th
Cong. (2013); Furthering Asbestos Claims Transparency (FACT) Act of
2012: 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).
\89\Letter from Susan Vento widow of Rep. Bruce Vento (D_MN), et
al. to U.S. House of Representative Members (May 13, 2015), at 1 (on
file with H. Comm. on the Judiciary Democratic staff).
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The victims observed, ``Not one of us was given an
opportunity to voice our opinions of the legislation, and yet,
a member of the committee was permitted to use our presence in
the hearing room to further his own position that is in direct
contravention of our views.''\90\
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\90\Id.
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C. LH.R. 526 Will Be Particularly Harmful to Veterans
Although vast swaths 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.\91\
Military.com, the largest military and veteran membership
organization in the United States, explains:
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\91\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 Oct. 27, 2015).
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.\92\
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\92\Id.
In addition, civilian Department of Defense workers, such as
shipbuilders and dockworkers, were 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.''.\93\
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\93\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.
In response to the special concerns presented by
servicemembers and asbestos exposure, Representative Scott
Peters (D-CA) offered an amendment that would have exempted
claimants who have or who are currently serving in the Armed
Forces of the United States, or who are currently or were
previously civilian Department of Defense workers, and their
families from the bill's disclosure requirements. The
amendment, however, failed by a vote of 9 to 18.\94\
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\94\Tr. at 206.
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III. H.R. 526 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. 526 is fundamentally inequitable because it will
impose additional burdens on asbestos bankruptcy trusts while
easing the process by which solvent defendant companies can
obtain discovery. This is particularly galling given the
history of asbestos manufacturers in affirmatively concealing
the dangers of their product 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
enacted.
To highlight the problem of H.R. 526'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. 526'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 6 to 16.\95\
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\95\Id. at 142.
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Similarly, Representative Sheila Jackson Lee (D-TX) offered
an amendment that would have provided balance to the bill's
disclosure requirements. This amendment would have required an
asbestos defendant seeking information from the trust about a
plaintiff to first make available to the plaintiff and trust
information about the median settlement amount paid by that
defendant 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. This amendment, however, failed
by a vote of 7 to 17.\96\
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\96\Id. at 163.
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IV. H.R. 526 WILL DIVERT CRITICAL FUNDS AND FURTHER DECREASE
COMPENSATION TO ASBESTOS VICTIMS BY FORCING BANKRUPTCY TRUSTS TO
PREPARE BURDENSOME REPORTS
H.R. 526 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. 526 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.
For example, trust representatives state that the trusts are
often required to keep such information confidential and they
are concerned about the substantial costs involved in
responding to requests for such information.\97\ In fact, one
trust reported to the GAO that it incurred $1 million in
attorneys' fees to respond to a request to disclose every
document on every claimant.\98\ Several legal representatives
for future asbestos personal injury claimants also 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.''\99\
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\97\GAO Report at 30.
\98\Id. at 27.
\99\Memorandum from Legal Representatives for Future Asbestos
Personal Injury Claimants with Respect to Certain Asbestos Settlement
Trusts to Prof. Troy McKenzie, Advisory Committee on Bankruptcy Rules
of the Judicial Conference of the United States, at 2 (Aug. 10, 2011).
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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. 526'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.\100\ Yet, after the passage of more than 20
years since the first trust was established, the proponents of
H.R. 526 now insist that these trusts issue reports and provide
documentation.
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\100\GAO Report at 16.
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CONCLUSION
The only beneficiaries of H.R. 526 will be the very
entities that knowingly produced a toxic substance that killed
or seriously injured millions of 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. 526's reporting and disclosure requirements
are an assault on 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. 526.
Mr. Conyers, Jr.
Mr. Nadler.
Ms. Lofgren.
Ms. Jackson Lee.
Mr. Cohen.
Mr. Johnson, Jr.
Ms. Chu.
Mr. Deutch.
Mr. Gutierrez.
Ms. Bass.
Mr. Richmond.
Ms. DelBene.
Mr. Jeffries.
Mr. Cicilline.
Mr. Peters.
[all]