Senate Committee Ponders Asbestos Trust Transparency

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By Steven M. Sellers

Feb. 3 — Sharply differing views on the need for asbestos bankruptcy trust reforms dominated a Senate Judiciary Committee hearing Feb. 3, as proponents of an overhaul bill complained of abusive litigation tactics, while opponents said the bill protects asbestos companies at the expense of mesothelioma victims.

The Furthering Asbestos Claims Transparency 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.”

Some witnesses said the FACT Act would bring needed transparency in asbestos litigation trusts—and deter “rampant” abuse by plaintiff lawyers—but others said it would assist asbestos companies in maintaining secrecy about their products as they insist on transparency by plaintiffs.

Mark Behrens, of Shook, Hardy & Bacon in Washington, D.C., testified that some mesothelioma plaintiffs have disavowed exposure to specific asbestos products in litigation and then claimed such exposure in trust claims.

Those circumstances, bill proponents say, reflect a strategy in which plaintiffs' lawyers delay filing asbestos trust claims involving bankrupt companies so that it will appear, in their tort suits, that only solvent companies are responsible for asbestos-related injuries .

“There is a mountain of evidence this is a pervasive practice,” said Behrens, who focuses on product liability defense and litigation reform issues. “Trust claim abuse isn't victimless, it affects companies and future victims.”

‘A Solution Without a Problem.'

But Elihu Inselbuch, of New York City's Caplin & Drysdale, who focuses on asbestos creditors' rights litigation, disputed the pervasiveness of the problem portrayed by Behrens and other witnesses.

“This bill is a solution without a problem, other than the ones it creates,” Inselbuch said.

“These defendants—which are the only beneficiaries of this bill—are the same asbestos companies who for decades have been determined to be liable for recklessly and willfully exposing unknowing workers and their families to the companies’ deadly products,” Inselbuch said.

“I defy anybody to show one fraudulent filing,” Inselbuch said, noting that mesothelioma victims often struggle to remember details about exposures that occurred 30 years ago.

“The plaintiff—the worker—simply didn't know the asbestos he was exposed to,” Inselbuch said. “The irony is that the asbestos defendant does know.”

Peggy Ableman, a former Delaware state court judge now with McCarter & English in Wilmington, Del., told the committee the FACT Act was necessary to curb abusive practices like those in a case she encountered as a judge.

In that case, plaintiff lawyers didn't disclose 20 trusts to whom claims had been submitted despite a standing disclosure order for bankruptcy trust claims, Ableman said. “At least with regard to asbestos litigation, it's not a fair system.”

Robert McKenna, a former Washington state attorney general now with Seattle's Orrick, Herrington & Sutcliffe, said he supported the bill because the “public has a right to know” about litigation trust claims.

McKenna also said identity theft fears raised by the bill's opponents are muted by privacy protections in the bill, as well as protective orders issued by courts. He added that asbestos tort litigation already supplies more information than the bill would require.

More Oversight Needed?

Advocates of the FACT Act have conceded it is unlikely to become law, but say hearings are an opportunity to publicize what they say is suppression of evidence by the plaintiffs' bar.

Senate Judiciary Committee Chairman Charles Grassley (R-Iowa) asked whether there is a need for oversight of asbestos bankruptcy trusts by the Department of Justice or an Inspector General.

“With this amount of money, you'd think there would be oversight, but there isn't,” Grassley said.

Grassley also queried Behrens about whether attorneys' fees should be limited for asbestos trust claims.

Behrens replied that trust claim forms are relatively simple. “You don't even need a lawyer to fill these out—paralegals could do it,” Behrens said.

Another Approach?

Sen. Dick Durbin (D-Ill.), the top Democrat on the committee, said the bill unfairly focuses on mesothelioma victims—30 percent of whom are veterans—rather companies who continued to use asbestos despite long-term knowledge of its dangers.

“Trusts are being depleted because there are so many people who are sick and dying,” Durbin said, noting the continued existence of asbestos in workplaces and schools.

Both Durbin and Sen. Richard Blumenthal (D-Conn.) said legislative efforts are better devoted to passage of the Reducing Exposure to Asbestos Database Act of 2015.

That bill would require the creation of a public database of asbestos-containing products, their origin and where they are “reported to be present.”

To contact the reporter on this story: Steven M. Sellers in Washington at ssellers@bna.com.

To contact the editor responsible for this story: Peter Hayes at phayes@bna.com.