WASHINGTON (Legal Newsline) - Business defense lawyers say that the fallout from recent government and private actions against asbestos bankruptcy trusts and plaintiffs lawyers specializing in asbestos exposure cases could extend well beyond the actions themselves.

Publicity surrounding these cases could add momentum to state and federal legislation requiring more transparency in the asbestos bankruptcy trusts, and even attract the attention of the U.S. Department of Justice.

The actions could also “drive a wedge” between plaintiffs’ lawyers and their clients over who is responsible for reimbursing Medicare, other government-level heath care agencies, businesses and private carriers when exposure settlements are made.

“If these cases get the attention of the Department of Justice, then it’s a whole new ball game,” said Mark A. Behrens, who co-chairs Shook, Hardy & Bacon’s Washington, DC-based public policy group.

In one case, Utah’s Attorney General recently sued four of the largest asbestos bankruptcy trusts to make them comply with civil investigative demands from 13 states on whether they are failing to reimburse states for Medicare and Medicaid. Federal law requires those who oversee settlements to pay outstanding bills for Medicare coverage.

The trusts, whose operations are overseen by the trial lawyers, have so far ignored the actions from the states.

The federal government and the states may have similar interests with regard to reimbursement of health care costs, business interests believe. It is estimated that some 30 percent of asbestos cases involve veterans. Many of these individuals would receive treatment at VA hospitals at the government's expense. Given the age of many asbestos plaintiffs, many also would receive Medicare benefits, a federal health care coverage program.

“In an era where Washington is looking for revenue especially in the health care arena, this could be incentive enough to look into the actions of the trusts,” Behrens said.

Two other cases are applying pressure as well. In September 2016 - Aetna Inc., Humana Inc. and Unitedhealthcare Services Inc. filed actions in federal court in Texas against six law firms specializing in asbestos cases with a $19 million suit in Texas federal court, claiming the firms avoided reimbursing the insurers for medical coverage insureds received before pocketing settlement payments.

And earlier this month, General Motors sued asbestos trusts in Delaware, New York, and Pennsylvania bankruptcy courts on Monday, seeking recovery of trust money paid to the estate of an employee who also received workers’ compensation payments from the automaker to settle asbestos exposure claims.

The business community has long claimed that secrecy surrounding the trusts has led to rampant abuse. This includes instances of double-dipping where lawyers and their alleged victims receive awards, and the lawyers’ fees, from the bankruptcy trusts, then turn around and sue down-the-line solvent companies who may have had little, or even no connection, to the original, alleged exposure. The lawyers are under no obligation to tell judges or juries about the awards from the trusts.

A 2014 case, Garlock Sealing Technologies exposed the character and scope of the double-dipping.

A North Carolina federal bankruptcy judge found that gasket and packing manufacturer Garlock’s settlements of mesothelioma claims in the tort system were “infected by the manipulation of exposure evidence by plaintiffs and their lawyers.” The judge described an effort by plaintiffs and their lawyers to “withhold evidence of exposure to other asbestos products and to delay filing claims against bankrupt defendants’ asbestos trusts until after obtaining recoveries from Garlock (and other viable defendants).”

In short, the judge said that the alleged victims had different stories for different venues. The lawyers first targeted Garlock in court, coaching their clients to tell one story of exposure. They then told a different story to the trusts, one that linked the manufacturers with the exposure.

Earlier in March, the U.S. House cleared Furthering Asbestos Claim Transparency (FACT) legislation, requiring the lawyers to reveal awards from the trusts when pursuing civil action in court. The language in the bill was folded into class action reform legislation. The bill passed on a narrow 220-201. The legislation’s prospects in the Senate are unclear.

Ten state legislatures have approved FACT-type legislation. Texas is one of them.

Lee Parsley, outside counsel for Texans for Lawsuit Reform, said that the new law completes a series of reforms the group has been working on for the past 10 years.

“We’ve been chipping away at it and finally got the transparency bill approved last session,” Parsley said. “It’s already made a big difference here.”

The group has published a white paper detailing its efforts.

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