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74–122 PDF 2012

FURTHERING ASBESTOS CLAIM TRANSPARENCY 

(FACT) ACT OF 2012 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COURTS, COMMERCIAL 

AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

ON

H.R. 4369 

MAY 10, 2012 

Serial No. 112–120 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MARK AMODEI, Nevada 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JARED POLIS, Colorado 

RICHARD HERTLING, Staff Director and Chief Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON COURTS, COMMERCIAL AND ADMINISTRATIVE LAW

HOWARD COBLE, North Carolina, Chairman 

TREY GOWDY, South Carolina, Vice-Chairman 

ELTON GALLEGLY, California 

TRENT FRANKS, Arizona 

DENNIS ROSS, Florida 

BEN QUAYLE, Arizona 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

MELVIN L. WATT, North Carolina 

JARED POLIS, Colorado 

DANIEL FLORES, Chief Counsel 

JAMES PARK, Minority Counsel 

(III) 

C O N T E N T S 

MAY 10, 2012 

Page 

THE BILL 

H.R. 4369, the ‘‘Furthering Asbestos Claim Transparency (FACT) Act of 

2012’’ ..................................................................................................................... 3 

OPENING STATEMENTS 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Chairman, Subcommittee on Courts, Commercial 

and Administrative Law ...................................................................................... 1 

The Honorable Ben Quayle, a Representative in Congress from the State 

of Arizona, and Member, Subcommittee on Courts, Commercial and Administrative Law ........................................................................................................ 6 

WITNESSES 

Leigh Ann Schell, Esq., Kuchler Polk Schell Weiner & Richeson, LLC, New 

Orleans, LA 

Oral Testimony ..................................................................................................... 8 

Prepared Statement ............................................................................................. 10 

Response to Questions for the Record ................................................................ 97 

S. Todd Brown, Professor, SUNY Buffalo Law School, Buffalo, NY 

Oral Testimony ..................................................................................................... 24 

Prepared Statement ............................................................................................. 26 

Response to Questions for the Record ................................................................ 175 

Charles S. Siegel, Partner, Waters & Kraus LLP, Dallas, TX 

Oral Testimony ..................................................................................................... 51 

Prepared Statement ............................................................................................. 53 

Response to Questions for the Record ................................................................ 183 

Marc Scarcella, Bates White, LLC, Washington, DC 

Oral Testimony ..................................................................................................... 65 

Prepared Statement ............................................................................................. 67 

Response to Questions for the Record ................................................................ 206 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Steve Cohen, a Representative in Congress from the State of Tennessee, and Ranking Member, Subcommittee 

on Courts, Commercial and Administrative Law .............................................. 79 

Material submitted by the Honorable Ben Quayle, a Representative in Congress from the State of Arizona, and Member, Subcommittee on Courts, 

Commercial and Administrative Law ................................................................. 85 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 95 

Letters from Kevin E. Irwin, Keating Muething & Klekamp PLL, Attorneys 

at Law ................................................................................................................... 210 

Page

IV 

Letter from Douglas A. Campbell, Campbell & Levine, LLC, Attorneys at 

Law ........................................................................................................................ 220

Letter of Opposition to H.R. 4369, from the Future Claimants’ Representatives (FCRs) .......................................................................................................... 224 

Letter from Heather B. White, Esq., Chief of Staff & General Counsel, Environmental Working Group (EWG) ...................................................................... 237 

Letter from R. Bruce Josten, Executive Vice President, Government Affairs, 

Chamber of Commerce, United States of America ............................................ 239 

OFFICIAL HEARING RECORD 

MATERIAL SUBMITTED FOR THE HEARING RECORD BUT NOT REPRINTED

GAO Report, GAO–11–189, entitled Report to the Chairman, Committee on the Judiciary, House of Representatives, September 2011, Asbestos Injury Compensation, The Role and Administration of Asbestos Trusts, submitted by the Honorable 

Ben Quayle, a Representative in Congress from the State of Arizona, and Member, Subcommittee on Courts, Commercial and Administrative Law. This report 

is available at the Subcommittee and can also be accessed at: 

http://www.gao.gov/new.items/d11819.pdf 

(1) 

FURTHERING ASBESTOS CLAIM 

TRANSPARENCY (FACT) ACT OF 2012 

THURSDAY, MAY 10, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COURTS, COMMERCIAL AND ADMINISTRATIVE LAW, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to call, at 9:34 a.m., in room 

2141, Rayburn House Office Building, the Honorable Howard Coble 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Coble, Quayle, Cohen and Watt. 

Staff Present: (Majority) Daniel Flores, Subcommittee Chief 

Counsel; Travis Norton, Counsel; Johnny Mautz, Counsel; Beth 

Webb, Counsel; Rachel Dresen, Professional Staff Member; Ashley 

Lewis, Clerk; (Minority) James Park, Subcommittee Chief Counsel; 

and Susan Jensen-Lachmann, Counsel. 

Mr. COBLE. Good morning, ladies and gentlemen. The Subcommittee on Courts, Commercial and Administrative Law will 

come to order. 

Today’s hearing is a legislative hearing on H.R. 4369, the ‘‘Furthering Asbestos Claim Transparency Act,’’ popularly known as the 

‘‘FACT Act of 2012,’’ introduced by Representatives Quayle, Ross— 

Quayle from Arizona, Ross from Florida—and Matheson from 

Utah. 

Nearly 15 years ago in Amchem v. Windsor, the Supreme Court 

struck down a massive class action settlement which many considered to be the turning point in asbestos litigation. In its opinion, 

the Court described asbestos litigation as an elephantine mass that 

may be best resolved by the Legislature. 

While I think no one in the House or Senate disputed the Court’s 

elephantine description, years were spent in this Committee and in 

the Senate trying to craft some replication of the Amchem settlement to help resolve claims and prevent a wave of bankruptcies 

due to asbestos litigation. 

As everyone or as most everyone is well aware, efforts in the 

House and Senate were unsuccessful, and for many defendants the 

only recourse had been to seek bankruptcy protection. Fortunately, 

section 524(g) of the Bankruptcy Code had already been enacted 

and has served a vital tool for asbestos victims, defendants, and 

plaintiffs. Needless to say, 524(g) has not been without its problems, which resulted in the creation of H.R. 4369 and today’s hearing. 

2 

Virtually every aspect of the asbestos litigation has been tragic. 

At its inception asbestos was a miracle product used in construction and by our military throughout the country, only to become a 

national pariah after thousands of Americans became deadly ill or 

sick due to exposure. The symptoms of asbestos exposure are uncanny. There are long latency periods and a myriad of symptoms. 

While liability for asbestos exposure was fiercely contested initially, 

it has become so prevalent that many defendants simply settle 

claims rather than assume the risk. 

Most of the original big-name defendants have filed for bankruptcy protection, and I am told that the number of new claims is 

holding steady, which means that the growing pool of plaintiffs will 

have to seek compensation from a shrinking pool of money unless 

there are new defendants to pay claims. 

The tragic twist is that asbestos litigation has not concluded. It 

has simply moved from notorious big-name defendants to lesserknown entities and asbestos trusts. I look forward to today’s hearing and learn how H.R. 4369 will help protect the pool of funds for 

asbestos victims and prevent fraud against asbestos trusts. Anyone 

who is missing or wrongfully taking money from these trusts is 

simply compensating from victims that should be held accountable. 

Also I am interested in how the bankruptcy trustee and the 

trusts help protect the money for victims. Finally, I am concerned 

and interested to learn more about the ethical responsibilities and 

duties of attorneys who bring or initiate cases against asbestos 

trusts. 

Now that I have concluded my opening statement, I will recognize the distinguished gentleman from Utah, Mr.—I stand corrected, Arizona. All those Western States look alike. I say that with 

tongue in cheek, of course. The distinguished gentleman from 

Utah, Mr. Quayle, for his opening statement. 

[The bill, H.R. 4369, follows.] 

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Mr. QUAYLE. Thank you, Mr. Chairman. And it is part of the 

Four Corners, so we are good to go. 

I want to thank you, Mr. Chairman, and thank you for calling 

this hearing to consider H.R. 4369, the ‘‘Furthering Asbestos Claim 

Transparency Act,‘‘ or ‘‘FACT Act,‘‘ which I recently introduced 

with my Democratic colleague, Jim Matheson from Utah, and my 

colleague on the Subcommittee, Dennis Ross from Florida. This bill 

is about transparency so that funds will remain available for those 

who are truly injured and not exhausted by those filing fraudulent 

claims. 

The problem with fraud in the asbestos compensation system has 

been well documented. In September of last year, my Judiciary colleagues on the Constitution Subcommittee held a hearing to examine the occurrence of fraud within the asbestos compensation system and its effects on businesses and the economy. That hearing 

addressed the problem. This hearing explores a much-needed solution. 

In 1994, Congress amended the Bankruptcy Code to allow a 

Chapter 11 debtor to create in its plan of reorganization a trust 

that would handle all future liability claims based on the debtor’s 

manufacture, sale, or other involvement with asbestos-containing 

products. These trusts, created under section 524(g), came into existence when the debtor exits bankruptcy. In exchange for providing recourse to future asbestos claimants through the trust, the 

debtor receives a channeling injunction, preventing future claimants from suing the reorganized debtor. 

Under current law there is no statutory requirement that asbestos bankruptcy trusts provide any disclosure to anyone about who 

is filing claims, who is getting paid, and why. Essentially they operate in secret. There is evidence that this secrecy allows fraud to 

occur. Plaintiffs will present one set of facts in public complaints 

filed in the State tort system, then give a contradictory set of facts 

when they make a demand from the trust, and there is no communication or transparency between the two systems. 

The FACT Act shines light on the asbestos compensation system. 

It requires the trust to publish quarterly reports detailing the identity of claimants, the amount they are paid, and the basis for the 

payment. It is important to note that this disclosure will provide 

no more information than is currently available in the claimants’ 

pleadings in the State tort system from the local courthouse. 

Make no mistake, I believe that victims of asbestos exposure are 

entitled to just compensation. This bill does nothing to hinder their 

receipt of damages. Instead the bill attempts to root out fraud 

through public disclosure of important information. The savings to 

the trusts that result from the reduction of fraud, waste, and abuse 

will ensure that the trusts will have adequate capital for future 

claimants. 

The FACT Act is a light touch. It does not tell claimants how and 

where they must file their claims or foreclose them from recovery. 

Instead, it brings much-needed transparency to a compensation 

system replete with abuse. 

I appreciate the support of Congressman Matheson and Congressman Ross on this measure, and I look forward to the testimony of the witnesses. 

7 

Thank you, and I yield back. 

Mr. COBLE. I thank the distinguished gentleman from Arizona. 

Ladies and gentlemen, I am told that a vote is imminent, there 

will probably be a vote on or about 10:25, so we will move along, 

and I hope we—without keeping you all in an undue tone, we will 

try to wrap this up, but if not, we will come back after the vote. 

We have a very distinguished panel before us this morning. Our 

first witness today is Leigh Ann Schell, a founding partner of the 

law firm of Kuchler—is that correct? Did I pronounce that correctly? 

Ms. SCHELL. It is actually Kuchler, Mr. Chairman. 

Mr. COBLE. I wasn’t even close. Kuchler Polk Schell Weiner & 

Richeson in New Orleans. She practices in the areas of toxic tort 

litigation, environmental litigation, product liability, and other 

legal fields relevant to asbestos. Ms. Schell also serves as chairwoman of the International Association of Defense Counsel’s Legislative, Judicial, and Government Affairs Committee. 

Ms. Schell received her law degree from Loyola University Law 

School and her undergraduate degree from the University of New 

Orleans. She is also a marathon runner. According to her firm’s 

Web site, the legislative process is frequently a marathon and not 

a sprint. 

Good to have you with us, Ms. Schell. 

Ms. SCHELL. Thank you, Mr. Chairman. 

Mr. COBLE. Professor Steven Todd Brown is an associate professor of the SUNY Buffalo Law School, where he also serves as director of the school’s Center for the Study of Business Transactions. Professor Brown’s research and teaching draws on his experience managing a small business and his practice at a major 

D.C. law firm. His recent academic work focuses on the constitutional limits and institutional dynamics of aggregate litigation, including bankruptcy and procedural devices for consolidating mass 

tort cases. 

Professor Brown received his J.D. From the Columbia School of 

Law and LL.M. From the Beasley School of Law at Temple University, and his undergraduate degree also from Loyola University in 

New Orleans. 

Mr. Charles Siegel is a professor and the head of the appellate 

practicing the law firm of Waters & Kraus in Dallas. His practice 

focuses on asbestos and toxic tort litigation, among other fields. He 

is an experienced litigator and appellate advocate, having argued 

cases in most of the courts of appeal and before the Supreme Court 

of Texas. Mr. Siegel is furthermore a member of the Texas Lawyers 

Association and the American Bar Association. 

Mr. Siegel received his law and undergraduate degrees from the 

University of Texas at Austin, where he is a sometimes guest lecturer. 

Finally, Mr. Marc Scarcella—am I close? 

Mr. SCARCELLA. Very close. Scarcella. 

Mr. COBLE. Thank you, sir. 

Mr. Scarcella is a manager of Bates White economic consulting 

firm here in Washington, D.C. He has more than 10 years experience as an economic consultant for litigation. He specializes in 

8 

quantitative methods and their applications in dispute resolution, 

settlement negotiations, and litigation management and strategy. 

Prior to joining Bates White, Mr. Scarcella was managing director at an analysis and research planning corporation where he provided economic analysis and consultive services in 524(g) Chapter 

11 bankruptcy for Fortune 500 companies. Specifically he has advised clients on matters of liability estimation and cash flow management, as well as on asbestos trust claims, processing procedures, policies, reporting, and valuation. 

Mr. Scarcella holds a master’s degree in financial economics and 

two bachelor’s degrees from the American University. 

It is good to have all of you with us this morning. Folks, we try 

to comply with the 5-minute rule. There will be a panel on your 

desk that will show a green light, and when the amber light appears, that means that you have 1 minute. And you won’t be 

keelhauled if you violate the 5-minute rule, but if you can wrap it 

up on or about 5 minutes, particularly in view of an imminent vote, 

we would be appreciative to you. We try to apply the 5-minute rule 

to ourselves when it comes our time to question you as well. 

Ms. Schell, why don’t you kick us off. 

Good to have all of you with us. 

TESTIMONY OF LEIGH ANN SCHELL, ESQ., KUCHLER POLK 

SCHELL WEINER & RICHESON, LLC, NEW ORLEANS, LA 

Ms. SCHELL. Thank you. 

Good morning, Chairman Coble and Members of the Subcommittee. Thank you for holding a hearing today on the FACT 

Act, which is good, commonsense, bipartisan legislation that is 

looking for a solution to an asbestos compensation system that is 

broken. And the solution proposed by the FACT Act is for transparency and accountability. 

Now, during the course of my practice, I have been involved in 

asbestos litigation for approximately 15 years. This is not a solution in search of a problem. Instead, based on my own experience 

and from that that is seen around the country, this is a national 

problem that needs a national solution. 

For example, my firm recently handled the Robeson case, which 

was filed in New Orleans. In Robeson, the plaintiffs had filed on 

behalf of Mr. Robeson 16 trust claims. Now, Mr. Robeson’s deposition was taken in Texas solely for the purpose of exploring the 16 

trust claims filings, and throughout the course of the deposition, 

which was submitted as an exhibit for my testimony, Mr. Robeson 

repeatedly affirmed that misstatements and misrepresentations 

had been made in each of the 16 claims filings. In fact, it was noted 

that the claims filings were inconsistent even among themselves as 

to the exposure histories that were listed. 

Another example is a case that I am currently involved in in 

which—it is the Oddo case also pending in New Orleans. And we 

filed written discovery to the plaintiff seeking information on 

whether or not any trust claims had been made. The interrogatories were answered, stating that, no, no trust claims had been 

made. We filed a subpoena and issued it to the Johns Manville 

trust, but were met with a motion to quash. During the course of 

arguing on the motion to quash, we received information, in fact 

9 

it was received by letter on April 5th of this year, from the Johns 

Manville trust affirming that the plaintiff not only had made a 

trust claim with Johns Manville, but he, in fact, had actually been 

paid. 

Now, these are just two examples from my law firm and my practice, and I am from a small firm in New Orleans with only about 

24 lawyers in it. 

In the written information that I have submitted to the Subcommittee, I have cited a number of other examples from States 

around the country, including Ohio, Oklahoma, New York, Virginia, and Maryland, and in all of those instances, courts have 

noted areas of inconsistent statements made in trust claim forms 

and inconsistent information given to the trust claims system and 

in the tort system. In fact, as the Subcommittee is likely aware, in 

the Kananian case, Judge Hanna stated that it was the worst case 

of fraud that he had ever seen, and that, in fact, what was before 

him was lies upon lies upon lies. 

In the Virginia case that is cited in the paper, Judge Horne said 

that in his 22 years on the bench, he had never seen such abuses 

in the discovery process. He went on in that case to dismiss the 

plaintiff’s claim with prejudice, and commented that it was a fraud 

upon the court. 

Through the examples cited from the States around the country, 

it is apparent that this is a large problem. In fact, looking to the 

compensation systems that the government has set up, those being 

for BP, 9/11, Katrina, with both BP and Katrina being in my own 

backyard, misstatements and specious claims have been discovered 

time and time again. I think that we would be naive not to recognize that in a trust compensation system funded with over $36 billion, that there would not be instances of misstatements and specious claims that are filed in that system. 

So what we are asking for today is the transparency and accountability that is established in all those other kinds of compensation systems, and we can do that through the FACT Act, 

which calls for transparency in the asbestos trust compensation 

system. 

I see that my time is up, and I thank you for the time today and 

the opportunity to speak before the Subcommittee about this problem. 

[The prepared statement of Ms. Schell follows:] 

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————— 

The exhibits submitted with this statement are not printed in this hearing record 

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Mr. COBLE. Thank you, Ms. Schell. You even beat the—you concluded before the red light illuminated, so you get a gold star for 

that. 

We have an obvious New Orleans climate on the panel today. 

Professor Brown, you are now recognized for 5 minutes. 

TESTIMONY OF S. TODD BROWN, PROFESSOR, 

SUNY BUFFALO LAW SCHOOL, BUFFALO, NY 

Mr. BROWN. Thank you, Chairman Coble and Members of the 

Committee. I really appreciate the opportunity to come and speak 

in support of the FACT Act today. 

I testify as an academic who studies mass torts and bankruptcy. 

I also speak from my own experience as a practicing bankruptcy 

lawyer. And in this experience the idea, the very idea that ensuring 

bankruptcy transparency would be in any way controversial is surprising. That is the default in bankruptcy, particularly with respect 

to the debtors’ dealings with their creditors and the way that they 

settle claims. This makes sense. Most bankruptcies involve a limited fund where the value of claims asserted exceeds the assets 

available. Claimants are in competition for these limited assets, 

and experience shows that without transparency, repeat players 

and those they favor will enjoy undue recoveries at the expense of 

the claim pool. 

There is nothing special here about asbestos trusts. They manage 

a limited fund created at the discretion of Congress to fulfill a policy established by Congress, the equitable compensation for comparable claims over time. Moreover, nothing, nothing in the FACT 

Act requires more information than thousands and thousands of 

creditors file in bankruptcy cases across the country every day. 

Second, our experience shows that we cannot just defer to fiduciary duty standing alone to advance public policy. Some may take 

their roles more seriously than others, but those who sit idly by 

and collect paychecks face little risk for doing so. Moreover, in this 

context future claims representatives and trustees are never wholly 

independent. They owe their existing and future appointments to 

the goodwill of their nominal adversaries, leading attorneys advancing current claims. This dependency has a clear punch-pulling 

effect. This is why we do not allow potential adversaries to appoint 

a guardian ad litem. It is why creditors’ committee and trustee appointments are today left to the United States Trustee. Yet here 

the one group that is not by definition able to monitor the representative in the case has that representative chosen by its adversaries and rubber-stamped by bankruptcy courts. 

Even those fiduciaries who are vigilant have the deck stacked 

against them. The TDP design is dominated during the course of 

the bankruptcy by the asbestos claimants committee. Any significant modification of TDP terms requires approval of some of these 

same lawyers who now serve on the trust advisory committee. In 

most trusts any audit plan can only be put into effect with the consent of this same trust advisory committee. 

The effects of this approach are readily apparent. First, the trust 

representations to the GAO about the results of their internal audits tell us far more than meets the eye. Every global compensation 

scheme that has been created by Congress, every global asbestos 

25 

compensation scheme of the last three decades has been plagued by 

what most of us would characterize as fraudulent claims, yet the 

trusts self-reported, among other things, that they have discovered 

no fraud, none. We can conclude one of two things from this. Either 

asbestos trusts are somehow magically different from every other 

grid and matrix compensation scheme in history, or the audits are 

not what they appear to be. 

There is reason to believe that it is the latter. First, there are 

clear examples of claim filings that most of us would characterize 

as fraudulent, even if they might not qualify as fraudulent legally, 

as a legal term. Take the Kananian case. The lawyer responsible 

for that case acknowledged, and I quote, we overstate Mr. 

Kananian’s exposure by indicating he was exposed as some type of 

shipyard worker, and then in parentheses in that same email to his 

partner, he was there one day to pick up his ship. Is this the kind 

of claim we want to have paid by trusts with limited funds at the 

expense of true victims who come later in time? 

Or take the Garner case I referred to in my written statement. 

Four trusts accepted this claim and paid over $100,000 in spite of 

the fact that the sole medical evidence was a photo of an X-ray 

taken more than three decades earlier, and a doctor who said, well, 

maybe, possibly it was mesothelioma. Is this the kind of claim we 

want paid out of limited funds? 

The faults of this system were laid bare in Silica MDL. Many of 

the claims that Judge Jack called manufactured in that case used 

the asbestos-screening approach and many of the same screening 

companies and lawyers. The Manville Trust tried to do something 

in the late 1990’s about these type of claims and lost that battle, 

and yet suddenly trusts one by one adopted narrow policies to exclude these doctors and screening companies only after Judge 

Jack’s opinion in Silica MDL. 

Why then? If they did not know that such rampant claim manufacturing was taking place before that, why did they not know? If 

they did, how did Judge Jack’s opinion change the rationale for ignoring it? It is because, I submit, the truth was laid bare publicly, 

and that is the great fear with the FACT Act. It tells us what those 

with a vested interest in secrecy have to lose with transparency. 

Thank you for your time. 

Mr. COBLE. Thank you, Mr. Brown, Professor Brown. 

[The prepared statement of Mr. Brown follows:] 

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Mr. COBLE. Mr. Siegel. 

Mr. SIEGEL. Thank you, Chairman—— 

Mr. COBLE. Strike that, Mr. Siegel. We have been joined by the 

distinguished gentleman from North Carolina Mr. Watt. 

Good to have you with us, Mel. 

Mr. WATT. Thank you. 

Mr. COBLE. Mr. Siegel, you are recognized for 5 minutes. 

TESTIMONY OF CHARLES S. SIEGEL, PARTNER, 

WATERS & KRAUS LLP, DALLAS, TX 

Mr. SIEGEL. Thank you, Chairman Coble, and I want to thank 

the Subcommittee for the opportunity to testify today. 

I am a partner in Waters & Kraus. For 25 years I have represented families who have been tragically affected by asbestos disease, and I am proud to do that. 

The way I see this is as simply a continuation of what I have 

seen for 25 years. The asbestos industry for decades waged a war 

first to keep the hazards of asbestos secret, and then to immunize 

themselves from liability in any way possible, and this is just the 

latest effort in that campaign. 

The real problem we have here is that 10,000 people continue to 

die every year in the United States from asbestos disease, and I 

suggest respectfully that if we are going to hold congressional hearings, that perhaps that is what we ought to be looking at. 

We have to remember that when we talk about asbestos plaintiffs in the abstract, we are actually talking about real people, and 

I just want to use one example of clients my firm represents from 

just outside your district, Chairman, they live in Lincolnton, the 

Mattox family. Evelyn Mattox is the widow of William Mattox, who 

was exposed to asbestos while serving his country in the Navy and 

later as an electrician at Duke Power. He died at age 59 of mesothelioma, and I guess Ms. Mattox had the temerity to file a claim 

for that for compensation. 

Why do we have asbestos claims? We have them because there 

was fault. State judges and juries have consistently heard evidence 

of how corporations hid the dangers of asbestos and knowingly exposed their workers and their families to a substance that could 

kill them. A corporate official for Bendix, for example, said, if you 

have enjoyed a good career working with asbestos, why not die 

from it? There has got to be some cause for death, why not die from 

it? 

Now, you know, I think that Ms. Mattox, a widow at 59, would 

find the talk of transparency ironic. She could have used, he could 

have used, Mr. Mattox could have used some transparency about 

the hazards of asbestos while he was being exposed to it. There 

wasn’t any of that. But, you know, this corporate conduct and the 

vast legacy of death that ensued has resulted in decades of litigation. It should be emphasized that most of that litigation occurs 

and has always occurred in State court, and it is dwindling. 

In 1994, Congress amended the Bankruptcy Code, as we know, 

to create section 524(g) to address asbestos-related bankruptcies. 

This resolution, 4369, would place new burdens on the trusts that 

have been created pursuant to that statute, but would only serve 

52 

solvent defendants’ interest in denying and delaying fair compensation to victims. 

First of all, there has been a suggestion that asbestos victims are 

double-dipping. I think Ms. Mattox would find that offensive. She 

is not double-dipping. She is seeking compensation from every company who manufactured an asbestos product to which her husband 

was exposed. 

The double-dipping charge, I think, reflects a basic fundamental 

misunderstanding of the way the bankruptcy system operates, the 

way State court lawsuits operate. Claimants do not recover the full 

value of their claims from bankruptcy trusts. Most of these trusts 

pay pennies on the dollar for their scheduled claim. They may list 

the value of a mesothelioma claim at $100,000, but the typical actual payment may be $15- or $20,000. Many trusts pay less than 

1 cent on the dollar for the scheduled claim. Every claimant, in 

order to receive even the most small claim from the smallest trust, 

must establish entitlement to payment from that trust according to 

that trust’s procedures. 

This bill is designed simply to slow down the payment of claims 

and deny compensation entirely in some instances. Mesothelioma 

victims, as I am sure the Members of the Subcommittee know, only 

have a few months to live. Time is the one thing they don’t have. 

Defendants argue that, you know, they are being unfairly disadvantaged because they can’t get individual information from the 

trusts, but State court discovery rules always allow the discovery 

of relevant information. We are in the process of looking at the 

facts of each of the claims that Ms. Schell has talked about in her 

written statement, and we will be pleased to submit the details of 

those to the Subcommittee. I think the Members of the Subcommittee will see that the story is a little bit different. 

The last thing I would like to talk about is this contention about 

transparency and how no one could be opposed to that. It is important to realize that every single defendant in asbestos litigation, including Ms. Schell’s clients, absolutely insist on complete confidentiality when they address and settle claims in the tort system. Ms. 

Schell would be horrified if her clients—and she would never let 

her clients pay us a dime without an absolute ironclad confidentiality guarantee. That is an absolute condition of the way they 

participate in the tort system, but they are asking the opposite of 

the trusts. 

Thank you. 

Mr. COBLE. Thank you, Mr. Siegel. 

[The prepared statement of Mr. Siegel follows:] 

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Mr. COBLE. Mr. Scarcella. 

TESTIMONY OF MARC SCARCELLA, BATES WHITE, LLC, 

WASHINGTON, DC 

Mr. SCARCELLA. Thank you, Chairman Coble and Members of the 

Subcommittee. My name is Marc Scarcella, and I appreciate the opportunity to provide testimony in support of this commonsense bipartisan legislation. 

As an economist who has been studying trends in asbestos claims 

filings and compensation for over 10 years, I believe that transparency between the asbestos civil tort and bankruptcy trust systems is critical for the proper allocation of indemnification to asbestos claimants and necessary for ensuring the accountability in 

claiming behavior as a deterrent to potential specious or fraudulent 

claiming practices. 

During the past decade I have had the opportunity to work with 

both defendants who are actively litigating cases in the asbestos 

civil tort, as well as legal representatives for asbestos claimants 

and trustee boards to some of the largest asbestos bankruptcy 

trusts. It is from that balanced experience of seeing the world from 

both the tort and trust systems, working for both defendants and 

claimants, that I have gained a great deal of knowledge about how 

these two compensation systems interact or, in many instances, fail 

to interact. 

After reviewing provisions outlined in the bill, I believe that it 

will serve as an effective and necessary step toward bridging the 

transparency gap that currently exists between asbestos bankruptcy trusts and the civil tort system, and will do so in an efficient 

and cost-effective manner. Moreover, the reporting requirements of 

the bill will serve as a deterrent to potential fraudulent claiming 

practices across bankruptcy trusts. 

The key takeaway points from my testimony are quite simple. 

First, the FACT Act will advance transparency within the asbestos 

bankruptcy trust system. The FACT Act will mandate that each 

trust provide quarterly disclosures, showing who has filed a claim 

against the trust seeking payment and what the exposures are that 

they are alleging in seeking that payment. 

This information is akin to what is already publicly available in 

the civil tort system. When an asbestos lawsuit is filed in the tort 

system, a public complaint discloses the identity of the plaintiffs 

and all the defendants named in the lawsuit from which the plaintiffs are seeking compensation. In addition, these complaints typically provide general allegations of exposure, and in some cases 

they will include a very detailed account of the victim’s work and 

exposure history. In addition, publicly available case dockets will 

typically provide status information on each defendant named in 

the lawsuit. 

In sum, the FACT Act is simply looking to disclose the same 

level of information on trust filings as is already available on public 

tort claims. 

The second takeaway point, the FACT Act will act as a deterrent 

to potential fraudulent claiming across trusts. Currently billions of 

dollars in claim payments are distributed by asbestos bankruptcy 

trusts each year with virtually no external oversight or public acVerDate Aug 31 2005 15:10 Sep 05, 2012 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\051012\74122.000 HJUD1 PsN: DOUGA
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countability. Individual trusts operate in vacuums. This is how the 

procedures are written. So not only are the claimant demands 

made across trusts not publicly available to solvent defendants in 

the civil tort system, but they are also not available within the 

trust system. In most cases the only individuals who know the full 

breadth of claims made in corresponding alleged exposures are the 

plaintiff’s counsel. 

To the extent that this lack of transparency and accountability 

may incentivize specious and inconsistent claiming across the tort 

and trust systems, it may result in trust funds being depleted by 

erroneous payments, which in turn takes funds away from those 

asbestos victims who are most deserving in the future. 

In sum, the FACT Act will add a level of accountability that will 

act as a deterrent to inconsistent, specious, and potentially fraudulent claiming activity in the future. 

The third takeaway. Quarterly reporting requirements of the 

FACT Act will not result in overly burdensome efforts or costs to 

the trusts. Asbestos bankruptcy trusts receive and collect claimlevel data electronically. They store and process this data electronically, and track the claim status and payments electronically at the 

claim level. As a result, extracting quarterly summary tables at the 

claim level is an efficient process and an exercise requiring basic 

database programming skill. 

In sum, as someone who has worked for and with processing facilities on issues of data management and reporting, I can say with 

confidence that the trust and facilities are well equipped to produce 

these quarterly reports at minimal cost. 

My final takeaway point has to deal with the burden on thirdparty disclosures that the FACT Act points to. Third-party disclosure requirements of the FACT Act will not result in overly burdensome efforts or cost to the trust. The bill requires that trusts 

provide filing and payment information upon request of a third 

party under appropriate protective orders. This is already being 

done today by a lot of trusts. Some trusts respond to third-party 

requests by searching their claims database for particular individuals and providing information as to whether or not that individual 

has filed a claim with the trust. They will do this for costs ranging 

from zero dollars to maybe $100. Once that search has been completed, it is minimal additional effort to produce additional information about that claim. 

In closing, the FACT Act is seeking a reasonable level of bankruptcy trust claim transparency akin to what is already being provided in the tort system, and it is doing so in a cost-effective and 

efficient manner, and that is why I support the bill. 

Thank you. 

[The prepared statement of Mr. Scarcella follows:] 

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Mr. COBLE. Thank you, Mr. Scarcella, and thank each of you for 

your very timely presentation of your evidence. I appreciate that. 

We have been joined as well by the distinguished gentleman 

from Tennessee, the Ranking Member of the Subcommittee, Mr. 

Cohen, whom I will now recognize for his opening statement. 


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Mr. COHEN. Thank you, Mr. Chairman. I won’t take the time to 

give my opening statement. I would like to ask that it be entered 

in the record. 

I would like to say this: I have done a little study on this, not 

enough, and I really regret having missed your statements. I had 

some other issues I had to deal with this morning. 

This issue is personal to me in that one of my absolute best 

friends in the world was a great, great, great singer/songwriter by 

the name of Warren Zevon. Warren Zevon succumbed to mesothelioma in September of 2003. He didn’t know the genesis of the disease, but he was diagnosed with such, and because of that, I am 

real concerned about these illnesses. 

He did not seek a lawyer, didn’t want damages. I had a few 

parasites; I am an attorney, but I had a few people call me and 

talk to me, quote/unquote friends of mine, friends because they 

wanted to get to Warren to take his case, and Warren was good 

and didn’t do it. 

But I am concerned about victims, and I am prejudged to look 

at it from that perspective. From what I look at on first blush, this 

is a solution looking for a problem, and the expense to the trust 

of having to go through all of this material is going to be to the 

detriment of the beneficiaries of the trust, and it is the beneficiaries of the trust to whom I think I owe a—my perspective and 

my judgment. 

With that, I ask that my statement be entered in the record and 

I yield back the balance of my time. 

Mr. COBLE. I thank the gentleman from Tennessee, and, without 

objection, the Ranking Member’s complete statement will be inserted and made a part of the record. 

[The prepared statement of Mr. Cohen follows:] 

Prepared Statement of the Honorable Steve Cohen, a Representative in 

Congress from the State of Tennessee, and Ranking Member, Subcommittee on Courts, Commercial and Administrative Law 

On its face, H.R. 4369, the ‘‘Furthering Asbestos Claim Transparency Act of 

2012,’’ or ‘‘FACT Act,’’ seems like a reasonable measure. After all, who could possibly be against greater ‘‘transparency?’’ 

Yet the more that I learn about this bill and about the broader issue of what the 

appropriate level of compensation for victims of asbestos exposure should be, the 

more I am beginning to think that this bill may be a solution in search of a problem. 

H.R. 4369 would impose a number of new reporting and other information-sharing 

requirements on trusts that have been established under section 524(g) of the Bankruptcy Code. These trusts are designed to compensate current and future plaintiffs 

in civil actions against those asbestos manufacturers and other related defendants 

that have filed for bankruptcy. 

The bill would require 524(g) trusts to file quarterly reports with the Bankruptcy 

Court and the United States Trustee describing each demand for payment from a 

claimant, including the claimant’s name and exposure history, and the basis for any 

payment made. The Court must make this report part of its public docket. 

The bill also would require trusts to provide information regarding payments and 

demands for payments to any party in an asbestos-exposure related civil action 

upon that party’s written request. 

Under section 524(g), asbestos defendants can re-organize under bankruptcy protection and shift their liability for asbestos exposure to these trusts in exchange for 

agreeing to fund the trusts. 

In turn, these trusts pay claimants who seek compensation for harm caused by 

the bankrupt defendant’s actions. Importantly, the trusts owe a fiduciary duty to 

all beneficiaries to ensure that only proper claims are paid in light of the universe 

of current and anticipated future claimants. 

While not perfect, the trusts have worked reasonably well. 

80 

Yet H.R. 4369’s proponents assert that its additional reporting and informationsharing requirements for 524(g) trusts are needed to prevent fraud by asbestos victims and to eliminate the risk that such victims will be over-compensated. 

In assessing this assertion, the most objective source that I could find was a study 

of 524(g) trusts conducted by the Government Accountability Office at Chairman 

Lamar Smith’s request. 

The GAO was not able to find any instances of overt fraud. Moreover, GAO found 

that trusts take appropriate steps to ensure that fraudulent claims are not paid. 

But even accepting that fraud by asbestos victims is a real problem with respect 

to asbestos trusts, I fear that H.R. 4369’s additional requirements on trusts will 

raise their administrative costs significantly. Money used to pay these costs ultimately means less money to compensate asbestos victims. 

In light of this risk, I would like to know from H.R. 4369’s proponents why defendants who are concerned about potential fraud by asbestos victims could not simply seek trust payment information using procedures allowed under existing discovery rules. 

Defendants can already obtain the information they want, without undermining 

compensation for legitimate claims. 

Finally, the reporting requirement in H.R. 4369 raises privacy concerns. 

While I recognize that the bill specifically prohibits trusts from making public any 

medical records or full Social Security numbers, the bill still would require trusts 

to make public a claimant’s name and exposure history. 

Once out in public, such information can be used for any purpose. Potential employers, insurance companies, lenders, and even those who may seek to harm an asbestos victim in some way can have access to this information without the victim’s 

permission or knowledge. 

I hope the witnesses can shed more light on the merits of H.R. 4369, and I look 

forward to a fruitful discussion. 

Mr. COBLE. Folks, we try to comply with the 5-minute rule here 

as well, so if you all can keep your answers in a terse manner, I 

would appreciate that. 

Professor Brown, some opponents of this legislation claim that 

Congress lacks the authority to enact this legislation because these 

trusts are governed by State law. What say you to that? 

Mr. BROWN. Thank you for the question, Chairman Coble. These 

trusts a. 

Re created solely because of an act of Congress. They carry out 

a function that has been dictated by this same act of Congress. 

They are no more a creature of State law just because they incorporate there, because they are formed there, than any other organization that is performing a function that has been dictated by an 

act of Congress. 

And, in fact, the Bankruptcy Code already acknowledges that entities that are created through the bankruptcy process are still subject to Bankruptcy Court orders; they are still subject to what is 

expected of them under the Bankruptcy Code. This is not surprising. Moreover, as I mentioned in my written statement, this is 

firmly within the bankruptcy power, which even under the narrowest definition relates to regulation of the relations between the 

debtor and its creditors. 

This act, the amendments in 1994, section 524(g) regulate those 

relations going forward, and all that we can really expect here, all 

that we ask, all that I would ask for here is that we make sure 

that parties, whether they are private or public, if they are performing a function under the Bankruptcy Code, that they do it in 

a transparent way. 

Mr. COBLE. Thank you, Professor. 

81 

Mr. Siegel, what provision of the FACT Act will impede claimants from filing a claim with or receiving compensation from a 

trust? 

Mr. SIEGEL. Well, the act will not prevent a claimant from filing 

a claim with the trust, but what the act will do inevitably is impose 

onerous administrative burdens on the trust, which will slow down 

the payment of claims and will deplete the funds of those claims. 

As I said, the claims are already paying pennies on the dollar, 

and to impose upon them the costs that are already being—the 

costs of an enterprise or an exercise that is already being handled 

in the State court discovery system is sort of just asking Congress 

to shift the defendants and the State court’s work on to the trust, 

and again, as I said, they are already strained to the maximum. 

They don’t have any spare personnel or dollars to devote to these 

tasks of essentially relieving defendants in the tort system from 

their discovery burdens. 

Mr. COBLE. Thank you, Mr. Siegel. 

Mr. Scarcella, very briefly. I want to get to Ms. Schell. If you 

will, go ahead very briefly. 

Mr. SCARCELLA. I just wanted to add something to that question 

if I may. As somebody who worked at a trust, the largest asbestos 

trust, the Manville Personal Injury Trust, back in 2001 as their 

quantitative data analyst and statistician, I can tell you that I understand Mr. Siegel’s concern, and I think it is a legitimate concern, but I can assure everybody that it is not a problem. 

When I worked at Manville, my sole function was to manage 

data for internal analysis and respond to third-party requests for 

external information. My role and job functions relating to reporting requirements similar to what is in the FACT Act had no bearing on the work that was being done by claim reviewers and claim 

managers whose job is to review, qualify, and get claimants paid. 

It is a split, you know, level of authority and split level of responsibility that will not impede how fast an individual can get paid 

when they call a trust fund. 

Mr. COBLE. Thank you. 

Let me get one more question in for Ms. Schell. Ms. Schell, the 

September 2011 GAO report notes, and you highlight this in your 

testimony, that 65 percent of trusts have included procedures in 

their trust distribution plans that are intended to prevent the disclosure of claims information. Why do you think this is the case? 

Put your mic on, if you will. 

Ms. SCHELL. Thank you for your question, Mr. Chairman. 

I included that information because I think it is significant that 

now postconfirmation the committees that make up the rules for 

the Administration of the trust funds are building in confidentiality 

provisions into those trusts to keep information from the public, 

and it is problematic for a number of reasons. 

First, it doesn’t make much sense to keep the information confidential. It should be information that should be reported. And the 

fact that it is being done postconfirmation raises questions in and 

of itself, and that it is being done by committees that are in large 

part made up by or at least in part made up by plaintiffs’ firms 

from around the country. 

82 

The confidentiality provision sometimes—and I gave the example 

of Babcock and Wilcox in my paper—also set out the method by 

which the information can be obtained, and in that particular instance it requires a subpoena from a Bankruptcy Court. So that 

trust is moving the question out of the State court arena and putting it in front of the Bankruptcy Court in which none of the tort 

players are actually involved. And so it sets up an unworkable 

step. 

And really to go down the path of whether or not defendants can 

get discovery through State court proceedings strays from the point 

of the FACT Act. The point of the FACT Act is to require widespread reporting of claims made in all the trusts; not just to provide information to one single defendant in one single case, but instead to provide information that then can be reviewed by those 

seeking clarity and those—— 

Mr. COBLE. Ms. Schell, my time has expired, but if you could 

wrap up very quickly. 

Ms. SCHELL. And by those seeking clarity and those that are just 

simply looking to make this compensation procedure and process 

like all the others with oversight. 

Mr. COBLE. Thank you, Ms. Schell. I appreciate that. 

The distinguished Ranking Member from Tennessee is recognized for 5 minutes. 

Mr. COHEN. Thank you, Mr. Chairman. 

Mr. Siegel, how do you look upon this law as it affects people 

who have been affected by asbestos claimants? Is this adverse to 

their interests? 

Mr. SIEGEL. It is entirely adverse to their interests. Even though, 

oddly enough, it is an act that is directed at bankruptcy trusts and 

the claimants of those bankruptcy trusts, it serves only the interest 

of third parties, and that is the defendants in the tort system. 

The defendants already get and are able to get all of this information through State court discovery. We know that from the results of trials, and that is all in my written statement, because in 

trial after trial after trial, juries assign liability to bankrupt defendants, so the defendants in the tort system get all the information they need. 

This is simply an effort to take that discovery burden away from 

them which they are already satisfying and put it on the claimants, 

and it has to be recalled. As I said, some trusts are paying less 

than 1 cent on the dollar for scheduled values of claims, and to add 

all of a sudden a quarterly reporting requirement that requires 

them to produce and report on every—but also redact information 

from every single claim that they have received in the last quarter 

is really undue and onerous. 

The few examples that we have of fraud in the system today I 

think show that the system works. The Kananian case is a terrible 

example. That lawyer was disbarred, and that claim was dismissed. And so once in a while we have a situation like that, the 

system deals with it, and the parties go on down the road. 

So there is no need for this, number one; and, number two, it is 

terribly against claimants’ interest because it will just deplete the 

time and money left that the trusts are already straining with. 

83 

Mr. COHEN. I probably in my opening gave too strong a term in 

describing the attorney who sought my intervention to get my 

friend to enlist his counsel, because if it weren’t for trial lawyers, 

probably the defendants in these cases, the agents of this illness, 

would not be as careful as they are now for they wouldn’t have liability. 

People maybe don’t understand the effect of tort law and how it 

does police agents that are harmful to human beings. Who are 

some of these folks that are dispensers of the asbestos problem? 

Mr. SIEGEL. Well, they are companies large and small, but I 

think it is well to recognize that, you know, there is a sense from 

the written statements that we are now dealing only with so-called 

peripheral defendants or defendants that don’t really have to do 

much with the real problem caused by asbestos, and that the people who really caused the problem are all in bankruptcy. Nothing 

could be further from the truth, and I think the best example of 

that is Ms. Schell’s client, Union Carbide Corporation, which is 

hardly a mom-and-pop operation. Union Carbide mined raw asbestos. They are about as close to the original problem as you can get. 

They mined raw asbestos and sold it by telling people that it—well, 

the stuff that comes from our mine is somehow safer; we are the 

safe asbestos, not the dangerous asbestos. 

So to suggest that we are in the era of—we are only suing defendants that had nothing to do with the problem is wrong, simply 

flat wrong. 

Mr. COHEN. When was it discovered that there was a connection 

with asbestos and lung disease? Was that something in the last 20, 

30 years? 

Mr. SIEGEL. No, no. There are indications in the—I mean, it goes 

back a long time. The Romans noticed that their slaves who were 

delegated to work with asbestos were dying at a much earlier age 

than their other slaves. 

Mr. COHEN. And did the Romans—the Romans didn’t hire trial 

lawyers to—— 

Mr. SIEGEL. No, they didn’t. 

Mr. COHEN. They wore the toga, so they didn’t have to do anything. 

Mr. SIEGEL. That is true. That is true. 

But as far as the medical literature goes, there are indications 

in the late 1890’s and certainly in the early 1900’s of lung problems, lung diseases and death caused or occurring in people who 

worked occupationally with asbestos. I mean, we have in the 

1930’s—— 

Mr. COHEN. And when were the first lawsuits brought, do you 

know, that were successful? 

Mr. SIEGEL. The first lawsuits in the modern era were brought 

in the late 1960’s, and the first one that really became prominently 

known is a case called Burrell from Texas in the early 1970’s. 

And the nature of the claimants has changed. It is true that back 

in the 1970’s and 1980’s, what you were dealing with in terms of 

claimants was insulators and pipefitters, people whose day-to-day 

work exposed them over and over to massive quantities of asbestos. 

What you have now, you tend to have people who weren’t exposed 

to overwhelming quantities on a day-by-day basis, but still susVerDate Aug 31 2005 15:10 Sep 05, 2012 Jkt 000000 PO 00000 Frm 00087 Fmt 6633 Sfmt 6601 H:\WORK\COURTS\051012\74122.000 HJUD1 PsN: DOUGA
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*The study, a GAO Report, GAO–11–189, entitled Report to the Chairman, Committee on the 

Judiciary, House of Representatives, September 2011, Asbestos Injury Compensation, The Role 

and Administration of Asbestos Trusts, is not reprinted in this record but can be accessed at 

http://www.gao.gov/new.items/d11819.pdf 

tained very severe, serious occupational exposure in a myriad of 

ways, and that is causing them mesothelioma and lung cancer. As 

I said, they are seeking compensation not from every company in 

the phone book, but simply from companies who made products 

that they worked with. 

Mr. COHEN. Thank you, sir, and I thank the Chairman. 

Mr. COBLE. Mr. Cohen, thank you. 

The distinguished gentleman from Arizona Mr. Quayle is recognized for 5 minutes. 

Mr. QUAYLE. Thank you, Mr. Chairman. 

Before I get into my questions, I would like to ask unanimous 

consent to enter into the record a memo by Paul Clement regarding 

the authority to enact this legislation, and also a GAO study* 

about the role and administration of asbestos trusts. 

Mr. COBLE. Without objection. 

[The information referred to follows:] 

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Mr. QUAYLE. Thank you, Mr. Chairman. 

Mr. Scarcella, I kind of want to get back to something that you 

were talking about earlier. And Mr. Siegel was talking about the 

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this information, and I was just trying to—you testified that you 

already have an electronic claim processing that exists, the trusts 

do, or at least some trusts do, and I was just wondering if you 

would agree that fraudulent claims actually impose a greater cost 

to the trust than the cost of the disclosure requirements that are 

in this bill. 

Mr. SCARCELLA. Thank you, and that is a very good question, 

and I think that all depends on the level of potential fraudulent 

claiming as to whether or not that financial strain outweighs any 

other related cost in identifying that fraud. 

I really can’t speak to the level of potential fraud. I think that 

is what we are here today to try and figure out is if there is a costeffective way to provide that type of accountability and public disclosure to help keep in check potential fraud and at least identify 

it. 

What I can tell you with confidence is that the cost associated 

with trusts meeting the requirements of the FACT Act are not that 

great. They are de minimis. In fact, in general, asbestos trusts 

since 2008 probably spend less than 2 percent of total dollars on 

their processing operations relative to their claim payments obviously, and that is by design. 

They are designed to be administrative by nature. It is supposed 

to be a process in which people get paid very quickly, and they do, 

the point I really hope everybody understands. Because this idea 

that Mr. Siegel brings up, like I said, it is a legitimate concern, and 

I am here to tell you that it is not a problem. Because of the way 

these trusts function, because most of them, if not all of them, 

maintain this data electronically, the ability to extract reports is 

something that could take a matter of minutes to a few hours. We 

are talking about a computer program that is a few lines of code 

that anybody with basic programming skills could write that could 

generate these quarterly reports. And the beauty of it is that once 

you write that code one time, you don’t have to rewrite it 3 months 

later when you have to produce the report again. 

It is very, very efficient, and because trusts operate with distinct 

responsibilities where they have people reviewing claims and processing claims and getting people paid, and they have people—like 

what I used to do and some of the people I used to work with when 

I was a consultant—and other claims facilities who can handle the 

day-to-day operations of managing the data and responding to 

third-party requests. 

So I guess in answer to your question, it is hard for me to know 

what the potential financial strain of fraudulent claiming could be. 

This bill could help tell us that. What I can tell you with confidence 

is that the cost associated with that level of transparency and accountability is not great at all. 

Mr. QUAYLE. Okay. Thank you very much. 

Ms. Schell, I want to ask, why should the trusts have to produce 

this information on written request instead of going through the 

courts? And kind of why isn’t the State court discovery adequate 

in this regard? 

Ms. SCHELL. Well, for a number of reasons. The State court’s discovery obligation is challenged time and time again by the plaintiffs. And oddly enough, one of the points that Mr. Siegel makes is 

91 

that State court discovery is where this should lie, but State court 

discovery and that effort to produce actually does fall upon the 

plaintiffs’ attorney and the plaintiffs taking some time, but instead 

what the FACT Act is looking for is reporting from the trust. It 

doesn’t impose an obligation on the plaintiffs at all. 

And so this isn’t an issue that would cause any kind of delay. In 

fact, the only delay I am aware of is the delay caused by the plaintiffs in making their trust claims, because they are now allowed, 

in essence, just to defer the claims until some future date to collect 

on them. 

And the discovery system in State courts is a problem. For one, 

the State in which the tort case is pending is usually not the State 

in which the trust is formed, and so issuing a subpoena cannot be 

done by the State court sitting over the tort suit. Instead it has to 

be done through a court in the jurisdiction where the trust is, and 

also, as I mentioned, that is often just met with opposition. 

Mr. QUAYLE. Okay. Thank you. 

And, Mr. Siegel, I have like about 15 seconds, but you said that 

the FACT Act is adverse to the interests of claimants, but opening 

this up to transparency and actually protecting the trusts and the 

trust assets from fraudulent claims, isn’t that in the best interest 

for future claimants who may not have yet actually experienced the 

symptoms of some of the things that are coming from the asbestosrelated injuries? 

Mr. SIEGEL. Well, I don’t think that the point of this bill is to 

protect trusts from fraudulent claims. That is already the trustees’ 

job. Their job is to conserve, is to pay—— 

Mr. QUAYLE. Lack of transparency makes it much easier for 

fraudulent claims to go through, which is why this is actually the 

main focus of the bill so the trust assets are actually protected. 

Mr. SIEGEL. These defendants have no interest in saving the 

trust money to pay claimants. They are using this data solely for 

their own purposes in the tort system. Ms. Schell’s clients are not 

going to authorize her to spend money to make sure that some unrelated trust pays out only to certain claimants and not others. 

That is not in their interest. Their interest is only to get this data 

to use it in their own private State court litigation, and we know 

that because that is—the asserted problem is that the plaintiffs are 

somehow hiding the ball from the tort system. 

Mr. QUAYLE. Well, I am sure that they would disagree with your 

statement on that. 

Mr. Chairman, I yield back. 

Mr. COBLE. I thank the gentleman. 

Let me say, Mel, we can either adjourn and come back. 

Mr. WATT. I am not coming back, Mr. Chairman. I would like to 

do my questioning now. You all are welcome to come back. 

Mr. COBLE. Well, let me see if they will hold this vote. We are 

well into this vote. 

Mr. WATT. You are not but 5 minutes into the vote. 

Mr. COBLE. Why don’t you go ahead then, Mel. 

Mr. WATT. Thank you. 

Mr. Chairman, I am here because I got requests from both sides 

of this issue to be here. I have come in with no bias on one side 

or the other. And I have to say I am disappointed by the hearing, 

92 

because instead of witnesses who came to inform us about the pros 

and cons of legislation, we seem to have four advocates here. And 

so I have not gotten much enlightenment as to which side of this 

issue I should be on because the hearing is not serving its useful 

purpose, which is why I have no interest in coming back. 

I just came in in the middle of Professors Brown’s testimony. He 

is the one I was hoping would be the most enlightening since he 

was coming from an academic perspective, but seemed to be the 

most strident on one side or the other. 

I picked up testimony of Ms. Schell, who says this testimony is 

in support of H.R. 4369 rather than to inform the Committee about 

the pros and cons of the legislation. 

So, you know, it has not been very helpful. To the extent I have 

a bias, I come out of a litigation background and have always 

thought that information related to litigation is information that is 

the parties’ litigation. But somebody told me that this was distinguishable from that set of facts because there were some other considerations. 

I haven’t heard them. Maybe Ms. Schell can enlighten me about 

how this is different from any other litigation. I take it that parties 

to other litigation can have resolutions of that litigation as private 

settlements, and they are able to do that. I suspect, as Mr. Siegel 

said in his testimony, that if you were representing a defendant in 

litigation, you would want a privacy agreement and not to disclose 

either that you were at fault or that—or the terms of settlement. 

How is this different from that? 

Ms. SCHELL. Thank you, Congressman Watt. First of all, I am 

not here today on behalf of any client. 

Mr. WATT. Well, I didn’t see say you were here on behalf of a client, but when I pick up your testimony and it starts ‘‘testimony in 

support’’ of as opposed to testimony to inform this Committee about 

the pros and cons of legislation, I—I mean, we are here to—I didn’t 

come in as an advocate on one side or the other, and I don’t expect 

the witnesses to be here as advocates on one side or the other of 

a piece of legislation. 

Tell me what the facts are, and, you know, I will make my own 

conclusions about the policy judgment. Don’t tell me about the cost 

of something. Tell me about the policy considerations, Mr. 

Scarcella. I mean, you know, this is a policy discussion. I suppose 

you could pay for anything costwise. 

Go ahead. I don’t mean to go off on this panel. I just don’t find 

it all that informative to have a bunch of advocates testifying rather than a bunch of people who are here to try to inform us about 

what the policy considerations are. 

Ms. SCHELL. Yes, sir. The situation with 524(g) trust is unique 

to other types of litigation. 

Mr. WATT. Why? 

Ms. SCHELL. In most other types of litigation in which I am involved, it is part of my practice every day, there aren’t any trusts 

set up that can pay bankrupt shares. 

Mr. WATT. Okay. But they are parties to the litigation, and there 

are public policy considerations why in a number of cases we would 

disclose to the public dangers, right? And yet privacy agreements 

93 

are entered into in settlement agreements every single day in our 

litigation setting. So how is this different? 

Ms. SCHELL. Well, the trust submissions are not—— 

Mr. WATT. Just because some trust is sitting out there, we 

should have a different set of rules? 

Ms. SCHELL. Yes, sir, and the reason is because the trust submissions are not in the nature of routine settlement agreements, but 

instead contain oftentimes sworn or certified statements supporting 

an exposure history that is sometimes inconsistent with that is 

given—— 

Mr. WATT. I don’t understand that. My time is over. So if all four 

of you can write me something about how this is distinct in some 

way. 

Mr. COBLE. If the gentleman will suspend, we are going to keep 

the record open for 5 days. 

Mr. WATT. Okay. I have asked the question. Maybe I can get a 

response from everybody, but I don’t want to come back and pursue 

it. 

Mr. COBLE. As I said, the record will remain open for 5 days. 

And I will get into that ultimately. 

I am not offended by having advocates as witnesses. As long as 

both sides are represented, that doesn’t bother me. I think that 

may even illuminate the procedure. 

But I want to thank all of you for your testimony today. Without 

objection, all Members will have 5 legislative days to submit to the 

Chair additional written questions for the witnesses, which we will 

forward and ask the witnesses to respond as promptly as they can 

so that their answers will be made a part of the record. 

Without objection, all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

With that, again, I thank the witnesses and for those in the audience. And this hearing is adjourned. 

[Whereupon, at 10:38 a.m., the Subcommittee was adjourned.] 

(95) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Ranking Member, Committee on the Judiciary 

Asbestos is among the most lethal substances that has been widely used in the 

American workplace. 

Most victims of asbestos exposure either receive compensation for their injuries 

by filing claims with asbestos bankruptcy trusts or by filing lawsuits in state and 

federal court against solvent defendants. 

Today’s hearing will consider H.R. 4369, the ‘‘Furthering Asbestos Claims Transparency Act,’’ or the ‘‘FACT Act.’’ 

This bill essentially seeks to shift a portion of the costs of discovery away from 

solvent defendants in asbestos litigation cases to asbestos bankruptcy trusts that 

were created to compensate victims harmed by bankrupt entities. 

It does this by imposing several potentially burdensome reporting and other information-sharing requirements. Specifically, the bill requires a trust: 

• to file a report at the end of every quarter with the bankruptcy court and the 

United States Trustee describing each demand that the trust received from a 

claimant and the basis for any payment from the trust to the claimant, including the name and exposure history of such claimant; and 

• provide any information related to payment from or demands for payment from 

such trust to any party in a lawsuit based on asbestos exposure upon written 

request, in a timely manner. 

Moreover, this bill applies retroactively, meaning that it will apply to all existing 

asbestos trusts. 

This legislation is problematic for several reasons. 

First, the bill, while perhaps well-intentioned, may have an adverse impact on 

the most vulnerable individuals in this system, namely, the thousands of Americans 

who were exposed to asbestos and now suffer from serious diseases and must wait 

for years to have their legitimate claims paid. 

The bankruptcy system is one based on equity and, unfortunately, asbestos manufacturers do not have the cleanest of hands in this matter. 

Since the early 20th Century, asbestos manufacturers have known that asbestos 

could cause serious injury and possible death to their employees and their families, 

as well as unsuspecting consumers. 

Yet, these manufacturers continued to allow these unsuspecting men and women 

to be exposed to asbestos. 

As a direct result of such exposure, victims experience mesothelioma, a fatal cancer caused by asbestos. 

They also contract non-malignant asbestosis, a disease that impairs the victim’s 

lung function. 

In addition, victims exposed to asbestos experience lung cancer as well as stomach 

cancer. 

Notwithstanding these serious illnesses, asbestos manufacturers used every trick 

in the book to avoid responsibility, including —— 

• suppressing the evidence of its mortal dangers, and then, 

• fighting the government’s efforts to ban its use when the deadly effects of asbestos were indisputable. 

96 

In some cases, innocent victims risk not receiving any compensation at all because 

the responsible manufacturers have gone out of business or incessantly deny their 

liability to these victims. 

H.R. 4369 must also be viewed in the context of asbestos-related bills from past 

Congresses in which the asbestos industry tried a strategy of avoiding responsibility 

for the harm it caused by seeking legislation that would have denied or limited recoveries to the asbestos victims and their families. 

Another concern that I have with H.R. 4369 is that it would effectively shift 

the cost of discovery away from solvent asbestos defendants to the bankruptcy 

trusts, ultimately diminishing the available pool of money to compensate the victims 

of bankrupt asbestos defendants. 

As it is, claimants often receive only a small portion of the full amount of their 

claims, even as little as 1 percent. 

A critical goal of our discussion today should be to ensure that H.R. 4369 does 

not lessen the amount of compensation for asbestos claimants, who have already 

been victimized. 

While not perfect, the trust system set up under Bankruptcy Code section 524(g) 

has generally proven to be beneficial to both asbestos victims and to corporations 

facing mass tort liability for causing asbestos injuries. 

In exchange for agreeing to fund these trusts, companies are able to re-enter the 

business community on a competitive basis for the benefit of their creditors and 

those who they injured. 

In turn, these trusts owe a fiduciary duty to all beneficiaries to ensure that only 

proper claims are paid and that such payments are ratably equitable given the universe of known and anticipated future claimants. 

But, H.R. 4369 does nothing to advance the interests of the trust beneficiaries. 

If anything this measure could lessen the amount of compensation available to 

pay the claims of these trust beneficiaries because it shifts the cost of discovery from 

solvent defendant companies to the very trusts that are charged with maximizing 

payments to their beneficiaries. 

Again, as a matter of equity, the victims of asbestos exposure should not now bear 

the discovery costs of those who caused their injuries and death. 

Nevertheless, some of the witnesses today will likely say the asbestos claim process is rife with fraud and that asbestos bankruptcy trusts need to be more transparent to deter dishonest claims practices. 

This argument is not persuasive. Existing discovery rules already require an extensive amount of disclosure with respect to compensation received by asbestos 

claimants. 

And, as the Government Accountability Office reported last fall, there is no empirical evidence of endemic fraud in the claims processing system. 

Finally, I am concerned about H.R. 4369’s potential to expose private and confidential information about asbestos victims. 

While the bill requires the exclusion of confidential medical records or full Social 

Security numbers of claimants, it also requires trusts to report and make public the 

names and exposure histories of trust claimants. 

Such information, once irretrievably released into the public domain, could be 

used by data collectors and other entities for purposes that have nothing to do with 

compensation for asbestos exposure. 

Just think what insurance companies and prospective lenders could do with that 

information. 

These are just a few of the concerns that I have with this legislation. 

I thank our witnesses for being here and hope that they can adequately address 

my concerns. 

f 

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Response to Questions for the Record from Leigh Ann Schell, Esq., 

Kuchler Polk Schell Weiner & Richeson, LLC, New Orleans, LA 


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Response to Questions for the Record from S. Todd Brown, 

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Response to Questions for the Record from Charles S. Siegel, 

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Response to Questions for the Record from Marc Scarcella, 

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Æ 


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