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Asbestos class action bill faces hurdles

Politics, veto threat foreshadow breakdown


The outlook for a bill passed by the House of Representatives that would change class action rules in federal court and subject personal injury asbestos settlement funds to new reporting requirements remains extremely murky.

For one thing, the Senate has yet to schedule hearings on the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act — H.R. 1927 — which passed on a 211-191 vote Jan. 8.

Among other things, the measure would require a federal court to certify that plaintiffs in a proposed class action have actually suffered the same type and scope of injury as the named class representatives.

The bill also would require personal injury asbestos settlement trusts to file quarterly reports with the bankruptcy courts. These reports would be available on the public docket and would include already publicly available information about the claims filed with the trust and payments made.

And even if the Senate moves on the bill, President Barack Obama appears very likely to veto it. The Office of Management and Budget issued a statement of administration policy two days before the House vote.

“The administration strongly opposes House passage of H.R. 1927 because it would impair the enforcement of important federal laws, constrain access to the courts and needlessly threaten the privacy of asbestos victims,” the statement says. It adds that “if the president were presented with H.R. 1927, his senior advisers would recommend that he veto the bill.”

Proponents of the measures freely admit they face difficulties.

“Efforts will be made to move H.R. 1927 forward in the Senate, but Democratic crossovers will be difficult to obtain, thus it will be difficult to get the bill to the floor,” said Victor Schwartz, general counsel of the Washington-based American Tort Reform Association and a partner in the Wash- ington office of Shook, Hardy & Bacon L.L.P.

Mr. Schwartz acknowledged the statement of administration policy but said the debate on the House floor “showed arguments against the bill are rather vapid.”

“Why should the legal system open the door to people who are not injured?” Mr. Schwartz said. “One does not have to go to law school to figure that out. In fact, it may be better if the observer about the bill does not go to law school because they will have a good common-sense answer to the question: "No.' The legal system should not waste time and money for claims for people who are not injured.”

“It's clear there's House support to fix this problem,” said Tom Santos, vice president of federal affairs at the American Insurance Association in Washington. “There's concern people are double dipping. We're trying to make sure past victims get fairly compensated and the trust remains to compensate future claimants.”

The extent and cost of claimants receiving compensation from multiple trusts is unknown. In written testimony before a House Judiciary Committee subcommittee considering the asbestos bill last year, Lester Brickman, professor of the Benjamin N. Cardozo School of Law of Yeshiva University in New York, cited a plaintiff who failed to disclose nine trust claims, eight of which had been filed before he testified in the litigation in which he was involved. “Though egregious, this kind of deceit is by no means the exception,” said Mr. Brickman.

He also cited the example of a “plaintiff denied having filed trust claims despite having received payment of approximately $185,000 from five trusts and "deferring' 14 other claims worth at least $313,000” for a total of 19 undisclosed filed claims.

“Improper trust payments no doubt have amounted to billions of dollars,” said Mr. Brickman. “As for tort defendants, it is simply not possible even to begin to estimate how much money they have paid out as a consequence of plaintiffs making false claims as to product exposures.”

In hearings concerning the class action portion of the bill, no witness on either side of the issue offered an estimate of how many federal court actions might be affected if the bill became law.

“Hopefully, we can build momentum to get a hearing in the Judiciary Committee,” Mr. Santos said.

The National Association of Mutual Insurance Companies also “strongly” urged the Senate to move on the measures, according to a statement issued by NAMIC Senior Vice President Jimi Grande in Washington.

“PCI supports the FACT Act and calls on the Senate to pass this legislation,” Nat Wienecke, senior vice president, federal government relations for the Property Casualty Insurers Association of America in Washington, said in an email. “This common-sense legislation is needed to discourage fraudulent, abusive and inconsistent asbestos trust claims. We think all members would want to support this common-sense bill to reduce abuse of asbestos litigation.”

But Linda Lipsen, CEO of the Washington-based American Association for Justice, which represents plaintiffs attorneys, urged the Senate to reject the measure.

“If I said Congress was considering a bill to shield Volkswagen from being held accountable for the fraud on its customers, and then combined it with a bill to protect companies that knowingly poisoned people with asbestos, no one would believe me,” Ms. Lipsen said in a statement. “But that's exactly what the House just passed. This is a bill that only helps corporations that killed and cheated people, plain and simple.”

“It's offensive that with veterans and workers dying from asbestos exposures that Congress would act to delay or deny their compensation at the behest of the companies responsible for their deaths,” she said. “The Senate should recognize this absurd bill for what it is — nothing more than a corporate giveaway — and reject it.”