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By Peter Hayes, Perry Cooper and Stephanie Cumings
Jan. 6 — A bill to limit class actions and restrict illegitimate asbestos bankruptcy trust claims is predicted to sail through the House this week but is unlikely to muster sufficient votes in the Senate, sources tell Bloomberg BNA.
The Fairness in Class Action Litigation Act (H.R. 1927), which includes the Furthering Asbestos Claims Transparency Act (formerly H.R. 526), is scheduled for a floor vote Jan. 7 or 8.
Then it's on to the Senate, where the bill is expected to stall.
But even if the legislation never passes, it could prove to be an interesting test case for the impact of a Republican-controlled Senate on the balance of power between tort reform advocates and those who trumpet increased access to the courts.
“It does not seem likely that the FACT Act will pass the Senate,” Rachel Reynolds with Sedgwick Law LLP told Bloomberg BNA in a Jan. 4 e-mail. Reynolds defends companies against product liability, environmental and toxic torts claims.
“There is a strong lobby against the legislation that asserts that the bill is designed to unfairly deny injured individuals compensation to which they are due,” she said.
“Legal reform bills usually draw strong opposition from trial lawyer allies in the Senate so the FACT Act would most likely face challenges, including a filibuster, if it reaches the Senate floor,” Mark Behrens with Shook Hardy & Bacon LLP told Bloomberg BNA in a Dec. 22 e-mail.
Behrens co-chairs the firm's public policy group and is a tort reform advocate.
“Asbestos plaintiff lawyers are especially politically active, well-funded, and influential within the American Association for Justice, the trial bar's lobbying organization,” he said.
But even if the bill fails to pass the Senate or get presidential approval, it may serve other ends.
“Committee hearings and floor debate provide important opportunities to shine public light on plaintiff lawyer suppression of evidence in asbestos cases,” Behrens said.
But those opposed to the bills weren't so quick to see a silver lining.
Joanne Doroshow, executive director of the Center for Justice & Democracy, told Bloomberg BNA in a Jan. 6 e-mailed statement that the bills “have nothing in common except for their overall purpose to block victims access to the courts and eliminate legal accountability for corporations engaged in wrongdoing.”
“One bill would wipe out federal class actions. The second would block asbestos victims from accessing the courts while violating their privacy,” she said. CJ&D is a public interest group promoting access to the courts.
Under the class action bill, courts would be required to conduct “a rigorous analysis of the evidence” to determine that “each proposed class member suffered the same type and scope of injury” as the named class representative before certifying a class under Fed. R. Civ. P. 23(c)(1).
The House Judiciary Committee approved the bill in June (16 CLASS 718, 6/26/15).
The measure targets class actions in which, defendants say, not all class members are injured. One such example is the moldy washing machine product liability litigation, where not everyone's defective washers grew mold (14 CLASS 1055, 9/13/13). Other examples involve cases for statutory damages where, defendants say, no “concrete” injury has been suffered.
“FICALA will restore consistency among the federal courts’ treatment of overbroad class actions and in the process promote fairness in the litigation of class actions and the U.S. economy,” the U.S. Chamber Institute for Legal Reform said in a statement e-mailed Jan. 4.
But the bill “could be very detrimental for workers and consumers” if the “same type and scope” language is interpreted narrowly, Alexandra D. Lahav, a professor specializing in class actions and aggregate litigation at the University of Connecticut School of Law, told Bloomberg BNA in a Dec. 29 e-mail. Lahav testified against the bill at an April House subcommittee hearing.
“In the end the effect will depend on how judges choose to interpret it,” she said. If the courts interpret it as a “reminder” that the claims of the class representative must be typical of the class claims, “it will not have much of an effect, except perhaps to slightly narrow the typicality requirement.”
The class bill could impact pending consumer class actions against Volkswagen over the use of emissions cheating software in the company's diesel engine vehicle fleet (16 CLASS 1358, 12/11/15), plaintiffs' attorney Jonathan D. Selbin, of Lieff Cabraser Heimann & Bernstein LLP in New York, told Bloomberg BNA in a Jan. 6 e-mail.
The bill's supporters “want to protect companies like VW from being held accountable for its emissions fraud. As VW shows, sometimes big companies lie and cheat, and all the class action bill would do is make it harder for consumers to hold them accountable,” he said.
The FACT Act would amend Section 524(g) of the Bankruptcy Code to require each asbestos bankruptcy trust to file a report with the bankruptcy court every quarter that “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.”
The trust would also be required to provide upon request information regarding payments or requests for payments to any party in an action for asbestos liability.
The House passed the FACT Act in 2013 and 2014, but both times it stalled in the Senate, which was then controlled by the Democrats .
While the Republicans have since taken control of the upper chamber, passage there remains an uphill battle. Still, one advocate expressed hope for success.
“Predicting the future is always a challenge, but we're hopeful,” Harold Kim, executive vice president of the U.S. Chamber Institute for Legal Reform, told Bloomberg BNA Jan. 4.
“We're happy the FACT Act is getting a vote. We're certainly optimistic. There's no reason not to be. They're introducing it early in the year, and the Senate is different than a few years ago,” Kim said.
Advocates of the FACT Act, including the Chamber's Institute for Legal Reform, cite In re Garlock Sealing Techs. LLC, 504 B.R. 71 (Bankr. W.D.N.C. 2014), as an example of fraud and abuse in the asbestos bankruptcy trust system.
The Garlock court rejected the claimants' $1.3 billion liability estimate in favor of Garlock's $125 million figure.
The Garlock court found the plaintiffs withheld exposure evidence, which “had the effect of unfairly inflating the recoveries against Garlock from 2000 through 2010.”
In a statement e-mailed Jan. 4, the Institute for Legal Reform said the FACT Act's disclosure requirement will “discourage fraudulent, abusive and inconsistent claims.”
But Julia Duncan, director of federal programs at the American Association for Justice, criticized the bill as a “corporate giveaway.”
“This bill would harm not just asbestos victims, but also people who have been cheated, ripped off or discriminated against by widespread illegal corporate practices. Our hope is that the Senate views this absurd proposal for what it is—nothing more than a corporate giveaway,” she told Bloomberg BNA in a Jan. 6 e-mail.
To contact the editor responsible for this story: Julie A. Steinberg at email@example.com
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