Bill targeting asbestos litigation abuse passes House Judiciary Committee

By John O'Brien | May 15, 2015

WASHINGTON (Legal Newsline) – Legislation designed to promote transparency in asbestos litigation passed the U.S. House Judiciary Committee on Thursday.

The committee voted 19-9 in favor of the Furthering Asbestos Claims Transparency Act, or FACT Act. The bill’s sponsor is Rep. Blake Farenthold, R-Texas.

The bill targets asbestos plaintiffs lawyers’ practice of double-dipping – telling one story about a client’s exposure history in the civil courts system while telling another to companies that have set up bankruptcy trusts to pay out asbestos claims.

“The Committee’s passage of the FACT Act is a major step towards helping those asbestos victims who must look to the bankruptcy process to seek redress for their, or their loved ones’, injuries,” said committee chair Bob Goodlatte, R-Va.

“The FACT Act increases transparency in the Bankruptcy Code in order to protect the finite funds available to compensate asbestos victims while still protecting their privacy.

“The FACT Act is a measured reform that strikes the proper balance between introducing much-needed transparency in the asbestos bankruptcy trusts system and protecting the privacy of individual claimants.”

Farenthold added that the bill would help protect the dwindling resources in the bankruptcy trust system.

“Every dollar taken through double-dipping or unscrupulous legal practices is a dollar less for those victims who face mesothelioma and other asbestos related illnesses,” he said. “The FACT Act will shine sunlight into the opaque asbestos trust system to fight this fraud and abuse.”

It is the third time the bill has been introduced, but it may have a better shot of getting through Congress this year.

In 2013, the bill passed the House of Representatives on a 221-199 vote that went mostly along party lines, with Republicans favoring the bill.

However, the bill never gained much traction in the Democrat-led Senate. This year, though, Republicans hold a majority in both houses.

Approximately 100 companies have been forced into bankruptcy due to asbestos-related liabilities, creating an asbestos bankruptcy trust system with between $30 billion and $37 billion reserved for current and future asbestos claimants.

At a hearing before a subcommittee earlier this year, much was made of a 2014 ruling in North Carolina bankruptcy court.

That January, U.S. Bankruptcy Judge George Hodges ruled in a landmark decision that asbestos plaintiffs attorneys had been withholding evidence that could have been submitted to bankruptcy trusts while pursuing tort claims against Garlock Sealing Technologies, a gasket manufacturer.

They did so in order to maximize recovery in both systems, he ruled.

Hodges ordered that the amount sufficient to satisfy the company’s asbestos liability was $125 million, more than $1 billion less than what plaintiffs’ representatives felt was proper, because the reliability of its settlement and verdict history in the tort system had been tainted by the actions plaintiffs attorneys.

Garlock later agreed to put more than $350 million in a trust for future claimants. Legal Newsline fought to have the evidence Garlock submitted unsealed, which happened in March.

The company also filed four racketeering lawsuits that were unsealed this year against plaintiffs firms.

The American Association for Justice – a national trial lawyers group – strongly opposes the bill.

“Asbestos is still legal in the United States, and with 12,000 to 15,000 Americans suffocating to death every year from asbestos diseases, Congress should act to protect the public by demanding transparency from asbestos corporations,” AAJ CEO Linda Lipsen said.

“Instead, the FACT Act will grant a handout to the very corporations that poisoned and killed hundreds of thousands of Americans, while doing nothing to prevent further exposure to this deadly toxin.”

Details of the FACT Act, taken from a Judiciary Committee press release, are:

-Requires the asbestos trusts to file quarterly reports on their public bankruptcy dockets. These reports will contain very basic information about demands to the trust and the bases for payments made by the trusts to claimants;

-With roughly 60 asbestos trust funds and nearly $40 billion in assets, opportunistic individuals are able to file conflicting claims with numerous trusts and within the state court tort system, seeking multiple payouts;

-Asbestos trusts would be required to respond to information requests about claims asserted against, and bases for payments made by, the asbestos trusts at the expense of the requesting party;

-Structured to minimize the administrative impact on asbestos trusts; and

-The FACT Act amends Section 524(g) of the Bankruptcy Code to require asbestos trusts to file quarterly reports with the bankruptcy court that detail claimants’ names, the bases for their claims, and the bases for any amounts paid to claimants. This would allow parties, including state courts and asbestos bankruptcy trusts, to compare claims and prevent fraudulent or duplicate filings.

From Legal Newsline: Reach editor John O’Brien at jobrienwv@gmail.com.

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