E-Alert Case Updates

Furthering Asbestos Claim Transparency Act of 2015 Passes House, Faces Uphill Battle in Senate

Furthering Asbestos Claim Transparency (FACT) Act of 2015
H.R. 1927 (formerly H.R. 526)
by Caroline E. Willsey, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: https://www.congress.gov/bill/114th-congress/house-bill/526/text

On Friday, January 8, 2016, the U.S. House of Representatives passed the Fairness in Class Action Litigation Act (H.R. 1927), which includes the Furthering Asbestos Claims Transparency (FACT) Act (formerly H.R. 526) (the “FACT Act” or “Act”). The FACT Act is aimed at cutting down fraud in asbestos claims. Specifically, the Act would amend federal bankruptcy law to require asbestos bankruptcy trusts to publish quarterly reports including the names, partial social security numbers, exposure history, and basis for any payment made from the trust to asbestos claimants. The Act would also allow defendant corporations to submit written requests for information to asbestos bankruptcy trusts.

The bill containing the FACT Act was initially introduced into the House on January 26, 2015 by Rep. Blake Farenthold (R – TX). It read as follows:

Section 524(g) of title 11, United States Code, is amended by adding at the end the following:

“(8) A trust described in paragraph (2) shall, subject to section 107—

“(A) file with the bankruptcy court, not later than 60 days after the end of every quarter, a report that shall be made available on the court’s public docket and with respect to such quarter—

“(i) describes each demand the trust received from, including the name and exposure history of, a claimant and the basis for any payment from the trust made to such claimant; and

“(ii) does not include any confidential medical record or the claimant’s full social security number; and

“(B) upon written request, and subject to payment (demanded at the option of the trust) for any reasonable cost incurred by the trust to comply with such request, provide in a timely manner any information related to payment from, and demands for payment from, such trust, subject to appropriate protective orders, to any party to any action in law or equity if the subject of such action concerns liability for asbestos exposure.”

The U.S. Chamber of Commerce expressed its concerns over fraud and abuse in the asbestos bankruptcy trust system in a letter to the Judiciary Committee stating, “[a]lthough asbestos trusts currently control over $30 billion in assets for the benefit of present and future claimants, many have received more claims that expected and have, as a result, been forced to reduce their payments to asbestos victims.” The House Judiciary Committee agreed, noting in its report that the current system of asbestos bankruptcy trusts has led to hundreds of millions of dollars spent by asbestos plaintiffs’ firms on advertising to attract potential claimants.

Advocates of the FACT Act often cite to the case In re Garlock Sealing Techs., LLC, 504 B.R. 71 (Bankr. W.D.N.C.), as evidence of widespread fraud and abuse in the asbestos bankruptcy trust system. In Garlock, the court found that the plaintiffs withheld evidence of exposure from other companies which “had the effect of unfairly inflating recoveries against Garlock from 2000 through 2010” and which ultimately lead to Garlock’s bankruptcy – a fate that about one hundred (100) companies have faced due, in part, to their asbestos-related liabilities. See Government Accountability Office Report No. GAO-11-819, available at http://www.gao.gov/assets/590/585381.html.

Despite much strong support for the FACT Act, it has received substantial criticism from asbestos claimants, labor organizations and the plaintiffs’ bar, who argued in a letter to members of the U.S. House of Representatives that the FACT “Act would create conditions that are ripe for scam artists and identity thieves.”

The FACT Act faces an uphill battle in the Senate according to Mark Behrens of Shook Hardy & Bacon, LLP, who gave a statement to Bloomberg BNA saying “legal reform bills usually draw strong opposition from trial lawyer allies in the Senate so the FACT Act would most likely face challenges, including a filibuster, if it reaches the Senate floor.” Similar versions of the bill passed the House in 2013 and 2014, only to stall in the Democrat-controlled Senate. One significant different from 2013 and 2014 is that the Republicans now control the Senate, which may signal a different fate for the bill this time around.