The controversy over disclosure of asbestos bankruptcy trust claims continues. In recent weeks, efforts to adopt legislation requiring trust disclosure have gained momentum in state and federal legislatures.
As we previously reported, a handful of states have taken up legislation similar to the Furthering Asbestos Claim Transparency (FACT) Act, which was introduced in the U.S. House of Representatives in 2012. That bill would require quarterly reports about claims from asbestos trusts.
The federal measure was eventually reported out of the House Judiciary Committee but never reached a vote on the House floor before the end of the legislative session. A companion bill (S. 3076) was introduced in the Senate, but never made it out of the Senate Judiciary Committee.
Despite limited action during the 112th Congress, efforts to disclose more trust claim information are definitely alive. In March, lawmakers reintroduced the federal bill in the 113th Congress as the FACT Act of 2013 (H.R. 982). At the state level, the Wisconsin State Assembly introduced and passed its own measure requiring disclosures about trust claims.
FACT Act Developments
H.R. 982 essentially revives the 2012 bill. It would amend the U.S. Bankruptcy Code to require asbestos bankruptcy trusts to file quarterly reports detailing trust claims with the bankruptcy court. The reports would include the name and exposure history of the claimant, along with the basis for any payment made by the trust to the claimant. The bill states that confidential medical records and full Social Security numbers should not be included in the reports.
In addition to filing quarterly reports, the trusts would also be required to respond to written requests by asbestos litigation defendants for “any information” related to payments and demands for payment from the trusts. The bill would give trusts the option of demanding reimbursement for any reasonable costs they incur while complying with this disclosure requirement.
To date, lawmakers have not introduced a companion bill in the Senate.
The House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing on H.R. 982 shortly after its introduction. Testimony was similar to that given during last year’s hearings on asbestos trust transparency. Witness testimony in support of the bill continued to suggest that trust procedures are lax and could unfairly compensate fraudulent or weak claims. Testimony criticizing the bill argued that there is little support for allegations of trust abuse and there is already an appropriate amount of trust disclosure.
Unfortunately, asbestos victims were once again absent from the initial witness panel. That’s why Subcommittee Chair Spencer Baucus delayed a vote on the bill during his subcommittee’s markup. But asbestos victims and victims’ rights advocates were understandably disappointed when they were only invited to provide written testimony and additional input off the record, behind closed doors. The Asbestos Cancer Victims Rights Campaign documented their disapproval in an April letter to the chairman that also urged him to give victims the opportunity to testify publicly.
Nationwide Momentum for Trust Disclosures
Asbestos tort reform advocates, however, have not had the same difficulty getting lawmakers’ attention at the state or federal levels. So-called asbestos trust transparency legislation has emerged across the country. This legislation appears to have originated from the same source: tort reform advocates.
Notably, some sponsors of the proposed FACT Act of 2013 and its predecessor come from states that have been hotbeds for tort reform efforts, including Texas and Florida. At one time, they led the nation in pending asbestos cases. They later became leaders in asbestos litigation reform. Some of the reforms benefited asbestos victims by prioritizing processing for the most severe claims. But others (e.g., successor liability laws) were primarily aimed at offering legal protections for companies facing asbestos liabilities.
These types of tort reform laws are often replicated in multiple states and based on model legislation from tort reform advocates such as the American Legislative Exchange Council (ALEC) and the U.S. Chamber of Commerce Institute for Legal Reform. The groups exist to advance various business interests. They’ve also been linked to the proposed FACT Act and asbestos trust transparency legislation that’s popped in several states, including Ohio. That state enacted transparency legislation in December 2012.
More recently, Wisconsin legislators have considered trust transparency legislation. On Wednesday, the State Assembly passed Assembly Bill 19 with a vote of 58-39. The measure would require asbestos litigation plaintiffs to identify all trust claims they have made or plan to make in the future. It would also require plaintiffs to provide documents related to their trust claims. The court would stay a plaintiff’s case until it received “final executed proof” of any trust claims.
If a defendant believes that a plaintiff also has a claim against an unnamed trust, the court would have authority to order the plaintiff to file a claim with that trust. If a defendant is eventually found liable, the amount of any award would be reduced by the amount of trust compensation the plaintiff receives for a substantially similar injury.
A version of the bill has also been introduced in the Wisconsin Senate. A public hearing was held in April, but no further action has been taken to date. Similar measures have also been introduced in Illinois, Louisiana, Mississippi, Pennsylvania, Oklahoma, Texas and West Virginia.