House Passes Legislation to Strengthen the Asbestos Trust System

The House of Representatives approved H.R. 982, the Furthering Asbestos Claim Transparency Act (the FACT Act) with bipartisan support by a vote of 221-199. As Vice-Chairman of the House Judiciary Committee Regulatory Reform, Commercial and Antitrust Law Subcommittee, I am the chief sponsor of this bill.

The FACT Act aims to strengthen the Asbestos Trust System by promoting transparency to combat the fraud and abuse that currently plague the system. Reports have shown that opportunistic individuals file conflicting claims with numerous trusts and within the state court tort system, seeking multiple payouts.

The Wall Street Journal did an investigative report on problems with the Asbestos Trust System in March of this year. In an editorial this week, the Wall Street Journal cited examples of fraud like one the paper previously reported involving the Johns Manville trust that paid $26,250 to a claimant invented by a law-firm employee. It found that more than 2,000 applicants to the Manville trust claimed to have been exposed to asbestos working in industrial jobs before they were 12 years old.

This bill is for the victims. It’s preserving the Asbestos trust for those yet undiscovered victims, as opposed to those who try to defraud the system. It’s a simple, short, two page bill. We are going to stop unscrupulous attorneys from filing false claims. Unfortunately, when these trusts were set up there were not enough safeguards in place. We need to shine light on fraudulent claims to protect future victims and that what this bill does.

Background:

The FACT Act amends Section 524(g) of the Bankruptcy Code 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. Second, the bill requires asbestos trusts to respond to requests for similar information from parties involved in asbestos litigation.

The FACT Act protects present and future victims of asbestos. By discouraging waste and fraud, the FACT Act will increase the ability of legitimate victims to obtain maximum recoveries for their injuries and illnesses. Further, congressional testimony from experts on asbestos litigation and trusts reported that preparing the quarterly disclosure requirements would be “very simple” and “take minutes.” The minimal cost associated with FACT Act reporting will be more than outweighed by the benefits made available to legitimate victims when fraudulent claims are deterred.

The FACT Act protects privacy rights. The bill was carefully crafted to build upon the privacy safeguards contained in the Bankruptcy Code, and only requires the disclosure of the same amount of information that would be contained in a public state court tort pleading. The bill specifically prohibits the disclosure of confidential medical records or social security numbers in the quarterly reports. The FACT Act was carefully crafted to strike the proper balance between achieving the transparency necessary to reduce fraud and sufficient privacy protections for victims.

The FACT Act protects states’ rights. The asbestos trusts subject to the FACT Act are authorized under section 524(g) of the Bankruptcy Code, a federal statute, and are overseen and subject to the rules of bankruptcy courts, which are federal courts. The bill amends the federal Bankruptcy Code and does not alter any state laws.