H.R. 982: Furthering Asbestos Claim Transparency (FACT) Act of 2013

H.R. 982

Furthering Asbestos Claim Transparency (FACT) Act of 2013

Date
November 13, 2013 (113th Congress, 1st Session)

Staff Contact
Communications

Floor Situation

On Wednesday, November 13, 2013 the House will begin consideration of H.R. 982, the Furthering Asbestos Claim Transparency (FACT) Act of 2013, under a rule.  H.R. 982 was introduced on March 6, 2013 by Rep. Blake Farenthold (R-TX).  H.R. 982 was marked up on May 21, 2013 by the House Committee on the Judiciary and was ordered to be reported, as amended, by a vote of 17-14.[1]

Bill Summary

H.R. 982 increases transparency within the asbestos trust system in two ways: the bill amends the U.S. Code 1) to require asbestos bankruptcy trusts to file quarterly reports that include the claimant’s name, the basis for the claim against the trust, payments made by the trust, and the basis for those payments; and 2) to require asbestos trusts to respond to requests for similar information from parties involved in asbestos litigation.  Disclosure of this information will increase transparency within the asbestos trust system by enabling the public and bankruptcy trust administrators to review the activities of each bankruptcy trust to ensure that duplicitous and conflicting claims are rightfully detected.

By only requiring the disclosure of basic facts—far less information than is disclosed in typical state tort cases—H.R. 982 protects the privacy of asbestos claimants.  The bill explicitly states that the required quarterly reports shall “not include any confidential medical record or the claimant’s full social security number.”  In addition, H.R. 982 requires that third party requests be “subject to appropriate protective orders.”  The bill does not alter existing privacy protections in the Bankruptcy Code that give judges broad discretion to prevent the disclosure of information that would create “undue risk of identity theft or other unlawful injury.”

Background

“Asbestos is a commercial name given to six minerals . . . widely used in the United States in industrial products throughout much of the 20th Century. . . .  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.  Asbestos consumption in the [U.S] peaked in 1973 and then dropped dramatically over the next three decades.”[1]

Despite its usefulness, it was discovered that inhaling asbestos fibers causes serious diseases, including mesothelioma, lung cancer, asbestosis, and pleural abnormalities.  This led to the advent and evolution of asbestos litigation, “the longest-running mass tort litigation in the United States.”[2]  The first successful asbestos liability lawsuit was upheld in 1973[3], causing asbestos litigation to balloon: “During the 1990’s, the number of asbestos cases pending nationwide doubled from 100,000 to more than 200,000.  By 2002, approximately 730,000 claims had been filed, with more than 100,000 claims filed in 2003 alone—‘the most in a single year.’”[4]

Growth in asbestos litigation stemmed largely from “claimants with nonmalignant injuries, including those with little or no current functional impairment.”[5]  By early 2000, “the overwhelming majority of claims—up to 90 percent—were filed on behalf of plaintiffs who were ‘completely asymptomatic.’”[6]  This trend was due, in part, to plaintiffs’ lawyers using mass screenings to recruit hundreds of thousands of claimants.[7]  Plaintiffs’ lawyers actively advertised and used mobile X-ray vans to identify claimants with even minimal evidence of exposure to asbestos.[8]  This trend decreased following a 2005 court ruling, which noted that “many asbestos and silica cases are ‘driven neither by health nor justice.’”[9]  However, there is concern that equally fraudulent practices have emerged to generate asbestos trust claims.[10]

Asbestos litigation has caused almost 100 companies to go bankrupt—more than half of them since the beginning of 2000—costing the U.S. economy between $1.4 and $3.0 billion and 60,000 jobs.[11]  “One of the most prominent bankruptcies was that of [Johns-Manville Corporation], the dominant American producer of asbestos products.  [It] 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.”[12]

Due to the increase in asbestos defendants seeking chapter 11 bankruptcy, Congress followed the Manville model in 1994, “amend[ing] the Bankruptcy Code to include a provision . . . to allow for the resolution of asbestos liability claims . . . through a trust-based system.”[13]  The provision allows a debtor, in its chapter 11 bankruptcy plan, to create a trust to be used as the sole source of compensation for its asbestos liability.  If its plan is approved, an asbestos claimant is prohibited from suing the reorganized debtor for asbestos liability.[14]  The trust model enables debtors to obtain certainty regarding their asbestos liability, while simultaneously ensuring that asbestos claimants have access to compensation.[15]  Debtors are commonly required “to file periodic disclosures . . . of the financial health of the asbestos liability trust.”[16]  Yet they are not required to identify claimants seeking compensation, the nature of their injuries, and the amount of payments they receive.  In fact, “Documents governing the operation of the asbestos trusts often include restrictions on sharing trust data, facilitating a lack of transparency in the trust system.”[17]

There is evidence of duplicitous and conflicting claims being made in various bankruptcy trusts.  A Wall Street Journal investigation of trust claims and court cases filed by 850,000 people found “numerous apparent anomalies.”[18]  For example, “More than 2,000 applicants to the Manville trust said they were exposed to asbestos working in industrial jobs before they were 12 years old.  Hundreds of others claimed to have the most-severe form of asbestos-related cancer in paperwork filed to Manville but said they had lesser cancers to other trusts or in court cases.”[19]  Despite evidence to the contrary, eleven bankruptcy trusts interviewed by GAO maintained that their audits had not revealed even one instance of fraud.[20]  This data “runs contrary to historical experiences,” as “fraud and abuse have been uncovered in virtually every compensation and relief program undertaken in modern America.”[21]  Reports issued by GAO and the RAND Corporation “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 pattern.”[22]

H.R. 982 addresses these issues by requiring greater transparency for asbestos trusts, preserving funds for valid claimants.  The measure ensures that claimants harmed by asbestos exposure —including veterans, who have been disproportionately affected—will have access to compensation for their injuries.



[1] Id. at 2.

[2] Id. 2-3.

[3] Id. at 3.

[4] Id. at 4.

[5] Id.

[6] Id.

[7] Id. at 6.

[8] Id. “To unearth new clients . . . 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!’ It is estimated that more than one million workers have undergone attorney-sponsored screenings. . . . According to legal scholars, ‘without these claims, the ‘asbestos litigation crisis’ would never have arisen.’” Id.

[9] Id. at 7-8. 

[10] Id. at 8.

[11] Id. at 5.

[12] Id.

[13] Id. “As of June 2012, 54 asbestos trusts had been formed, with an additional nine trusts expected in the near-term and a considerable acceleration of trust formations in the second half of the 2000’s. These trusts manage substantial assets reported in excess of $18.2 billion at the end of 2008. The asbestos trusts review and pay damages on account of millions of claims a year . . . .” Id. at 5.

[14] Id. at 5.

[15] Id.

[16] Id. at 9.

[17] House Committee Report 113-254 at 11.

[18] Dionne Searcey & Rob Barry, As Asbestos Claims Rise, So Do Worries about Fraud,Wall St. Journal (Mar. 11, 2013).

[19] Id.

[20] Id. at 12.

[21] Id.

[22] Id. at 11.

Cost

According to CBO estimates, “implementing H.R. 982 would have no significant impact on the federal budget,” and would not affect direct spending or revenues.  H.R. 982 would impose a private-sector mandate as defined in UMRA; however, because the information required under the bill is already tracked by asbestos trusts, the incremental cost of compliance “would fall below the annual threshold established in UMRA for private sector mandates ($150 million in 2013, adjusted annually for inflation).”

Amendments

1)         Rep. Cohen (D-TN) Amendment #1 – Amendment exempts from the bill asbestos trusts with internal anti-fraud procedures.

2)         Rep. Nadler (D-NY) Amendment #2 – Amendment protects public health and safety by adding a requirement that any party seeking payment information from a trust must also make available information relevant to such action that pertains to public health or safety.

3)         Rep. Jackson Lee (D-TX) Amendment #3 – Applies the transparency rules in the bill equally to asbestos industry defendants by requiring asbestos companies to report information about the location of their asbestos-containing products and provides an exception for trade secrets. 

Additional Information

For questions or further information contact the GOP Conference at 5-5107.