```

[Senate Hearing 106-931]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 106-931

 FINDING SOLUTIONS TO THE ASBESTOS LITIGATION PROBLEM: THE FAIRNESS IN 
                   ASBESTOS COMPENSATION ACT OF 1999

=======================================================================

                                HEARING

                               before the

        SUBCOMMITTEE ON ADMINISTRATIVE OVERSIGHT AND THE COURTS

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

                                 S. 758

   TO ESTABLISH LEGAL STANDARDS AND PROCEDURES FOR THE FAIR, PROMPT, 
INEXPENSIVE, AND EFFICIENT RESOLUTION OF PERSONAL INJURY CLAIMS ARISING 
            OUT OF ASBESTOS EXPOSURE, AND FOR OTHER PURPOSES

                               __________

                            OCTOBER 5, 1999

                               __________

                          Serial No. J-106-49

                               __________

         Printed for the use of the Committee on the Judiciary

                    U.S. GOVERNMENT PRINTING OFFICE
70-244 CC                   WASHINGTON : 2001

                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman

STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona                     HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire

             Manus Cooney, Chief Counsel and Staff Director

                  Bruce Cohen, Minority Chief Counsel

                                 ______

        Subcommittee on Administrative Oversight and the Courts

                  CHARLES E. GRASSLEY, Iowa, Chairman

JEFF SESSIONS, Alabama               ROBERT G. TORRICELLI, New Jersey
STROM THURMOND, South Carolina       RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            CHARLES E. SCHUMER, New York

                       Kolan Davis, Chief Counsel

                 Matt Tanielian, Minority Chief Counsel

                                  (ii)

                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Grassley, Hon. Charles E., U.S. Senator from the State of Iowa...     1
Hatch, Hon. Orrin G., U.S. Senator from the State of Utah........    10
Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont...    12
Torricelli, Hon. Robert G., U.S. Senator from the State of New 
  Jersey.........................................................    13
Ashcroft, Hon. John, U.S. Senator from the State of Missouri.....    84

                    CHRONOLOGICAL LIST OF WITNESSES

Statement of Hon. George W. Gekas, U.S. Representative in 
  Congress from the State of Pennsylvania........................     3
Statement of Hon. James Moran, U.S. Representative in Congress 
  from the State of Virginia.....................................     5
Statement of Hon. Robert Scott, U.S. Representative in Congress 
  from the State of Virginia.....................................     7
Panel consisting of Christopher Edley, Jr., professor, Harvard 
  Law School, Cambridge, MA; Jonathan P. Hiatt, general counsel, 
  American Federation of Labor and Congress of Industrial 
  Organizations, Washington, DC; Samuel J. Heyman, chairman and 
  chief executive officer, GAF Corporation, Wayne, NJ; Karen 
  Kerrigan, chairman, Small Business Survival Committee, 
  Washington, DC; Richard Middleton, Jr., president, Association 
  of Trial Lawyers of America, Washington, DC; and Conrad 
  Mallett, chairman, Coalition for Asbestos Resolution, 
  Washington, DC.................................................    15
Statement of Hon. Chris Cannon, U.S. Representative in Congress 
  from the State of Utah.........................................   102
Panel consisting of Michael D. Green, professor of law, 
  University of Iowa College of Law, Iowa City, IA; Richard A. 
  Nagareda, associate professor of law, University of Georgia 
  School of Law, Athens, GA; and Paul Verkuil, dean, Benjamin 
  Cardozo School of Law, New York, NY............................   103

                ALPHABETICAL LIST AND MATERIAL SUBMITTED

Cannon, Representative Chris: Testimony..........................   102
Edley, Christopher, Jr.:
    Testimony....................................................    15
    Prepared statement...........................................    17
Gekas, Representative George W.:
    Testimony....................................................     3
    Prepared statement...........................................     4
Green, Michael D.:
    Testimony....................................................   103
    Prepared statement...........................................   105
        Appendix: Asbestos Reform: State and Federal Courts' 
          Commentary About the Asbestos Litigation Crisis........   110
Heyman, Samuel J.:
    Testimony....................................................    64
    Prepared statement...........................................    65
Hiatt, Jonathan P.:
    Testimony....................................................    24
    Prepared statement...........................................    26
        Letter from Robert A. Georgine, president, Building and 
          Construction Trades Department, American Federation of 
          Labor, to Representative John Conyers, Jr., dated Aug. 
          10, 1998...............................................    29
        Objectives to H.R. 3905 (``Fairness in Asbestos 
          Compensation Act of 1998'')............................    30
        Letter from William G. Bernard, general president, 
          International Association of Heat & Frost Insulators & 
          Asbestos Workers, to Representative Henry Hyde, dated 
          May 20, 1999...........................................    31
        Agreement Providing Administrative Alternatives for 
          Claimants with Asbestos Related Conditions, dated Jan. 
          9, 1998................................................    33
Kerrigan, Karen:
    Testimony....................................................    68
    Prepared statement...........................................    69
Mallett, Conrad:
    Testimony....................................................    77
    Prepared statement...........................................    79
Middleton, Richard, Jr.:
    Testimony....................................................    71
    Prepared statement...........................................    73
Moran, James: Testimony..........................................     5
Nagareda, Richard A.:
    Testimony....................................................   115
    Prepared statement...........................................   116
Scott, Representative Robert:
    Testimony....................................................     7
    Letter from Cylde R. Hoey, II, president and CEO, the 
      Virginia Peninsula Chamber of Commerce to Keith Holman, 
      U.S. Chamber of Commerce, dated June 22, 1999..............     9
Verkuil, Paul R.:
    Testimony....................................................   124
    Prepared statement...........................................   125

                                APPENDIX
                         Questions and Answers

Responses of Prof. Christopher Edley, Jr., to questions from 
  Senators:
    Grassley.....................................................   135
    Thurmond.....................................................   139
    Feingold.....................................................   141
Responses of Jonathan P. Hiatt to questions from Senators:
    Grassley.....................................................   147
    Thurmond.....................................................   147
Responses of Samuel J. Heyman to questions from Senators:
    Grassley.....................................................   148
    Feingold.....................................................   149
Responses of Karen Kerrigan to questions from Senators:
    Grassley.....................................................   151
    Thurmond.....................................................   152
    Feingold.....................................................   153
Responses of Conrad Mallett to questions from Senators:
    Grassley.....................................................   153
    Feingold.....................................................   155
    Thurmond.....................................................   157
Responses of Michael D. Green to questions from Senators:
    Grassley.....................................................   160
    Feingold.....................................................   161
Responses of Richard Middleton to questions from Senators:
    Thurmond.....................................................   162
    Feingold.....................................................   163
Responses of Dean Paul R. Verkuil to questions from Senator 
  Grassley.......................................................   164

                 Additional Submissions for the Record

Prepared statements of:
    Susan K. Pingleton, M.D., president-elect, American College 
      of Chest Physicians........................................   167
    Louis W. Sullivan............................................   168
    Brian Wolfman of the Public Citizens Litigation Group........   170
        Analysis of Proposed Federal Asbestos Legislation--The 
          So-Called ``Fairness in Asbestos Compensation Act'' 
          dated April 1999.......................................   173
        Letter from Erika L. Baum, director, workplace policy, 
          Associated Builders and Contractors to Senator 
          Grassley, dated Oct. 5, 1999...........................   179
        Letter from Maura J. Abeln, senior vice president, 
          general counsel and secretary, Owens Corning to Senator 
          Grassley, dated Oct. 5, 1999...........................   180
        Addendum to the prepared statement of Owens Corning, 
          House Judiciary Committee, July 1, 1999................   180
Letter from Roger L. Sullivan, McGarvey, Herberling, Sullivan & 
  McGarvey, P.C. to Senator Max Baucus, dated Oct. 4, 1999.......   184
    Letter from Louise McNair to Senator Max Baucus, dated Mar. 
      3, 1999....................................................   191
    Letter from Robbin Redman, Troy, MT to Senator Max Baucus....   192
Letter from White Lung Asbestos Information Center to Senator 
  Grassley, dated Oct. 5, 1999...................................   193

 
 FINDING SOLUTIONS TO THE ASBESTOS LITIGATION PROBLEM: THE FAIRNESS IN 
                   ASBESTOS COMPENSATION ACT OF 1999

                              ----------                              

                        TUESDAY, OCTOBER 5, 1999

                           U.S. Senate,    
       Subcommittee on Administrative Oversight    
                                        and the Courts,    
                                Committee on the Judiciary,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Charles E. 
Grassley (chairman of the subcommittee) presiding.
    Also present: Senators Sessions, Ashcroft, Torricelli, and 
Schumer.

 OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR 
                     FROM THE STATE OF IOWA

    Senator Grassley. Good morning, everybody, I welcome you 
all to the hearing on the Fairness in Asbestos Compensation 
Act.
    My interest in this legislation stems from a desire to make 
sure that justice is being done and that people stuck in the 
current system who are truly sick can get compensated as 
quickly as possible. Asbestos litigation has bedeviled the 
Federal and State court system for almost 30 years. In the last 
decade, however, a crisis has developed and there appears to be 
no end in sight to the filings.
    The Administrative Office of the U.S. Courts says the 
number of asbestos suits filed between 1997 and 1998 has 
increased 27 percent. The current judicial rules and procedures 
do not appear to have resolved these claims in an effective 
manner. There are, of course, staggeringly high costs to 
asbestos litigation. Moreover, huge payments paid out to 
nonsick claimants and plaintiffs' lawyers have bankrupt many of 
the defendant companies, and that has essentially prevented 
many of the genuinely sick from ever receiving appropriate 
compensation.
    The problem is not new. The courts and the Congress have 
been struggling with this for some time. In the early 1990's, 
the Judicial Conference convened an Ad Hoc Committee on 
Asbestos Litigation and this is what they had to say about it, 
``Dockets in both Federal and State courts continue to grow; 
long delays are routine; trials are too long; the same issues 
are litigated over and over again; transaction costs exceed the 
victims' recovery by nearly two to one; exhaustion of assets 
threatens and distorts the process; and future claimants may 
lose altogether.''
    At House and Senate Judiciary Committee hearings, witnesses 
reiterated their concerns with the ability of the judicial 
system to deal with the morass of asbestos cases, and urged 
Congress to find a national remedy.
    Even the U.S. Supreme Court itself has directly called upon 
Congress to formulate a legislative solution. In the 1997 
Amchem decision, Justice Ginsburg suggested that, ``a 
nationwide administrative claims processing regime would 
provide the most secure, fair and efficient means of 
compensating victims of asbestos exposure.''
    In that case, the Supreme Court rejected the settlement 
because the class failed to satisfy rule 23(b)(3) requirements. 
The group of plaintiffs was too dissimilar. Some members of the 
class had manifested symptoms of asbestos exposure, while 
others had not. So the Court concluded that the disparities 
among plaintiffs precluded class certification.
    Just this past June, in the Ortiz case, the Supreme Court 
again called for a national solution. Justice Souter said that, 
``the elephantine mass of asbestos cases * * * defies customary 
judicial administration and calls for national legislation * * 
* to date Congress has not responded.'' Rehnquist then echoed, 
``The elephantine mass of asbestos cases cries out for a 
legislative solution.''
    Today, we will hear about the problems and whether S. 758 
provides us with an efficient, equitable remedy. Clearly, the 
current system is not working. This bill before us today would 
create a nationwide administrative claims resolution process to 
compensate victims.
    Although I believe that most everyone would agree something 
needs to be done to fix the problems, people disagree about how 
to do it. Today we will hear from our colleagues from the other 
body about the bill currently being considered are going on 
before the House Judiciary Committee, but even they are 
suggesting changes in their original bill as originally 
introduced which was essentially identical to the Senate 
version introduced in the Senate.
    For the sake of the victims and their families, we need to 
carefully analyze the unique problems presented to devise the 
most fair process possible so compensation gets to those that 
have been truly injured by asbestos. Because of the different 
interests involved and the complexity of issues, crafting a 
balanced solution to the problem will take a lot of work and 
compromise, and we need to ensure that no one is unfairly 
disadvantaged by what we come up with. So I look forward, of 
course, to this hearing process to work through some of these 
issues and to seek a fair resolution of the problem.
    I now go to panel one. We have Congressman George Gekas, 
chairman of the House Judiciary Subcommittee on Commercial and 
Administrative Law. He is from the State of Pennsylvania. 
Congressman Jim Moran from the State of Virginia. Congressman 
Christopher Cannon, who isn't here yet, a member of the House 
Judiciary Committee from the State of Utah, will also testify. 
And we do have with us Representative Robert Scott from the 
State of Virginia. I would ask that we go in that order.

  STATEMENT OF HON. GEORGE W. GEKAS, A U.S. REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Mr. Gekas. Senator Grassley, we all wish to thank you for 
convening this special hearing so that we can discuss the 
mounting problem of the asbestos suits. Actually, I discerned a 
special reason that you and I are involved in this. We want to 
prevent bankruptcies among the companies that are dealing in 
asbestos, and we want to do so even before we pass the 
bankruptcy reform bill, on which we are acting as expeditiously 
as we can, because that is an important feature of the opening 
statement that the Senator has made.
    Looming bankruptcies among the very companies that deal 
with asbestos--if they are to proceed with abandon, these 
bankruptcies, jobs are lost. The economy suffers collaterally 
because of it. And at the same time, and most importantly for 
what we are trying to achieve here, less money is available. 
Because there will be fewer sources, less money would be 
available for an eventual pot from which the victims of 
asbestos and potential victims can garner some compensation.
    So the opening statement of Senator Grassley is the 
definitive foundation for this entire process, and I think it 
is worthy of wide publication. It covers all the salient 
problems and features of the massive problem that we have.
    I want to note that the hearing to which the Senator 
alluded that occurred in the House Judiciary Committee resulted 
largely, I felt from some of the witnesses, a critique, some of 
it nit-picking, I felt, on what the then bill contained as the 
medical standards which should be generally followed in the 
proceedings that were contemplated by the bill.
    In engaging in a colloquy with one of the witnesses, I 
ascertained at least to my satisfaction that the medical 
standards should not be cause for delaying or for obstructing 
completely the enactment of this type of legislation. And so I 
am happy to report that the members of the House Judiciary 
Committee, not all of them, but some, are daily working out the 
problems of the language that might be employed to further 
define the medical standards and make them more universally 
acceptable to those who opposed the original version or who 
oppose any kind of solution by the Congress to this massive 
problem.
    With that, the other portion of the opening statement 
centered on something that was very meaningful to me, and that 
was the dicta and actual statements issued by the Supreme Court 
relative to these cases, that indeed the sheer number of them 
cry out, as the Justices themselves have said, for a national 
solution. That is what we are about.
    Too often, we are criticized for offering a national 
solution, and we hear the cries also too often that in doing so 
we are running squarely into the face of the Supreme Court and 
previous decisions and what they might do with it. Well, here 
they are inviting us, practically. The Supreme Court is saying 
that national policy is required on that peg. I am willing to 
do those extra efforts that are required to pass the 
legislation that you have introduced and which we gratefully 
acknowledge has been introduced by the chairman of the 
Judiciary Committee, Henry Hyde. I think we are on our way to 
at least a full debate on this mammoth issue.
    Thank you very much, Senator.
    Senator Grassley. Thank you, Congressman Gekas.
    [The prepared statement of Mr. Gekas follows:]

          Prepared Statement of Representative George W. Gekas

    Senator Grassley, Thank you very much for the opportunity to appear 
before you here today. I am looking forward to again working with you 
on the Bankruptcy Reform bill once the Senate completes its action on 
that legislation.
    This morning, however, I am testifying in support of Senate Bill, 
758, the companion to H.R. 1283.
    The House Judiciary Committee held a hearing on the problems posed 
by asbestos on July 1, and on the companion legislation to S. 758, H.R. 
1283. That hearing made it clear to me that this is indeed an urgent 
problem, and that there is an opportunity for compromise that we cannot 
afford to squander. Indeed, the simple dictates of justice, as well as 
the command of the Supreme Court, propel us to act, and to do so 
quickly.
    There are over 200,000 asbestos cases pending in our federal 
courts, and an additional 20,000 cases are filed every year. This 
problem not only clogs our federal courts, increasing the time that it 
takes other litigants to get through the system, but results in efforts 
to simply move these cases, treating asbestos plaintiffs as mere 
statistics, often with little regard for the reality that every single 
one of these ``cases'' is really just a person or a family who has been 
exposed to asbestos.
    Further, over 15 asbestos companies have declared bankruptcy, not 
only resulting in lost jobs for their employees, but also in less money 
being available for sick plaintiffs. Additionally, a reduction in the 
number of defendant companies increases the liability faced by those 
companies that remain, increasing their chances of going bankrupt, 
resulting in a possible vicious cycle, leaving plaintiffs with 
decreased settlements. For example, the Manville Trust, which has over 
400,000 cases pending against it, went bankrupt as a result of the 
liability that it faced from asbestos claims, and only pays plaintiffs 
pennies on the dollar for their injuries. These unfortunate workers 
deserve better treatment than that.
    This is a system that is crying out for reform. And this 
responsibility rests squarely at our feet. In fact, the Ad Hoc 
Committee on Asbestos Litigation, appointed by Chief Justice Rehnquist 
in 1990, stated: ``The committee recognizes that virtually all of the 
issues relating to a so-called `national solution' are primarily 
matters of policy for the Congress.'' (Emphasis added.) This sentiment 
was reiterated last year, when the Supreme Court's Fiberboard decision 
called the asbestos system an ``an elephantine mass'' which ``defies 
customary judicial administration and calls for national legislation.'' 
(Emphasis added.) We in the Congress who recognize a responsibility to 
act must take heed of this admonition.
    Any proposed solution must, at the very least, ensure that victims 
are compensated quickly, fairly and efficiently. That is one of the 
reasons that I agreed to cosponsor H.R. 1283/S. 758. The system that is 
set up under this legislation ensures that impaired claimants will 
receive compensation much faster than in any jury trial or any private 
settlement.
    However, let me be clear--I am not tied to any particular proposal. 
There are on-going, bipartisan discussions over different approaches, 
and I would like to commend Chairman Hyde and his staff for their 
diligent work in trying to forge a solution to this problem. I am 
optimistic that a compromise solution can be crafted, and that it can 
be enacted into law this session--even during an election year. This 
issue is too important to our federal courts, to the companies that 
have to deal with this morass, and, most importantly, to the victims, 
who face tremendous delays in receiving just compensation for their 
injuries, and then often witness a third or more of their settlement 
getting eaten up by lawyers fees and transactions costs.
    Thank you for your time today, and I hope that one day, I will have 
the opportunity to work on the Fairness in Asbestos Compensation Act of 
1999 with you, just as I look forward to completing our efforts on the 
bankruptcy bill.

    Senator Grassley. Now, to Congressman Moran.

    STATEMENT OF HON. JAMES MORAN, A U.S. REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF VIRGINIA

    Mr. Moran. Thank you very much, Mr. Chairman, for having 
this hearing. It is necessary, as Chairman Gekas has said, for 
the Congress to act on this issue. As I will say in my 
testimony, the judicial system is not capable or prepared to 
resolve the complexity and the number of cases that are 
pending. It cries out for a legislative solution, and the 
people whose cries should be heard the loudest are the actual 
victims of asbestos-related illnesses who are now receiving 
only pennies on the dollar.
    As Chairman Gekas said, over 15 asbestos companies have now 
declared bankruptcy, primarily as a result of the asbestos 
claims. So our legislation is designed to compensate true 
victims fairly while there is still an opportunity to do so. 
This legislation, S. 758 and H.R. 1283, is the way to do this. 
That is why I am an original cosponsor of the legislation in 
the House.
    I am glad to see Mr. Schumer here, who shows the bipartisan 
nature of the bill, as I am hoping to do with Mr. Gekas. This 
is not a partisan issue. This is an issue that screams out for 
a reasonable, responsible settlement.
    You have got nearly 200,000 cases pending in State and 
Federal courts, and tens of thousands of new cases are filed 
each year. There is no end in sight. The present asbestos 
litigation system contradicts every notion of how justice 
should be properly served.
    Imagine a courtroom where judges no longer preside over 
actual cases or sit in judgment over right and wrong, guilt or 
innocence, where claims are referred to, in the aggregate, as 
inventories and are forced to be paid without regard to whether 
the plaintiff has any impairment at all. Consider a system 
where a seemingly unlimited supply of claimants brings suit 
long before they are actually sick, often because of the 
running of the statute of limitations or because of the concern 
that available funds for compensation will be exhausted long 
before any disease manifests itself. Consider further a system 
of justice where two-thirds of every dollar spent goes to 
transaction costs rather than to the victims, and where the 
truly sick have to wait years to receive compensation.
    Mr. Chairman, this is the face of the current asbestos 
litigation crisis, a system where the truly sick, the 
defendants, and the courts themselves all suffer unnecessarily 
because of the overwhelming number of cases brought by the 
nonsick. With the promise of tens of thousands of additional 
cases to be filed just this year, we can only expect this 
problem to get worse.
    As my colleagues are aware, the Supreme Court ruled on a 
class action settlement in 1997 that would have largely solved 
the problem of compensating individuals with asbestos-related 
illnesses based on objective and fair medical criteria which 
would allow the true victims of asbestos to recover 
compensation whenever they are sick.
    The settlement was agreed to by industry, by members of the 
plaintiffs bar, and by key components of organized labor. Bob 
Georgine, president of the Building and Construction Trades 
Union, even lent his name to the agreement. But the Supreme 
Court said that while the Georgine settlement was a long-
overdue and rational solution to the asbestos crisis, the class 
was too large and complex to certify.
    But it is the consensus of the judicial system today that 
the present system is indeed broken and that a congressionally-
mandated solution is needed. Justice Breyer has concluded that 
Congress is the only body with the authority to create an 
administrative claims process to solve this crisis. Justice 
Breyer went further in his concern over the current system, a 
system where the victims of asbestos will be short-changed 
unless something is done. Justice Breyer echoed comments of the 
Judicial Conference Ad Hoc Committee on Asbestos Litigation, 
appointed by Chief Rehnquist in 1991. That has been quoted, but 
it is the key quote.
    Decisions concerning thousands of deaths, millions of 
injuries, and billions of dollars are entangled in a litigation 
system whose strengths have increasingly been overshadowed by 
its weaknesses. The ensuing 5 years have seen the picture 
worsen--increased filings, larger backlogs, higher costs, more 
bankruptcies, and poorer prospects that judgments, if ever 
obtained, can be collected.
    I will try to wrap this up now because I know we are going 
to start getting repetitive. But, in addition, on the last day 
of its session this past June, the Supreme Court once again, as 
you referred to, Chairman Grassley, called on the Congress to 
legislate a solution to the asbestos litigation crisis. The 
Court's ruling in Ortiz v. Fibreboard emphasizes the tremendous 
and immediate need for Congress to act on S. 758 and H.R. 1283. 
Justice Souter wrote the majority opinion and referred to 
asbestos litigation as an ``elephantine mass.'' He said the 
problem of asbestos cases defies customary judicial 
administration and calls for national legislation.
    This, as I said when I began my testimony, requires a 
legislative solution. The opponents are resorting to tactics, I 
think, of confusion and intimidation because they simply cannot 
make sound policy arguments against this legislation. Their 
argument that the legislation should be voluntary, where 
claimants can elect to either opt in or opt out, is 
superficially attractive, but it would only generate new 
problems for the system.
    Experts predict anywhere from 50 to 80 percent of the 
current claims filed are by individuals with no physical 
impairment. So you can see how a voluntary system would work. 
The people with legitimate claims would elect to go to the new 
system. They would go through the medical screen and would 
receive an award quickly. But individuals with no impairment 
would elect to file a claim in court, doing little to alleviate 
the tens of thousands of cases filed by the unimpaired every 
year.
    This legislation addresses the fundamental flaws of the 
present system and offers commonsense solutions that preserve a 
sick claimant's right to sue, requires defendant companies to 
make good-faith settlement offers, relieves trial court judges 
of their role as claims examiners which they shouldn't be 
having to do, and ensures that the victims and not their 
lawyers receive as much of the award as possible. That is what 
this is all about.
    If we can get this legislation through, the true victims of 
asbestos will get a much greater share of what they truly 
deserve and our judicial system will be better served. It is 
good legislation. We need it immediately, and I thank you for 
having a hearing on it, Mr. Chairman.
    Senator Grassley. Congressman Scott.

   STATEMENT OF HON. ROBERT SCOTT, A U.S. REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF VIRGINIA

    Mr. Scott. Thank you, Mr. Chairman. I am pleased to join 
you and my former colleague on the Judiciary Committee, Mr. 
Schumer. I am the Representative from the 3d Congressional 
District of Virginia and appear here as a Member who has been 
involved in legislative issues surrounding asbestos litigation 
for more than 15 years, and as a Representative of a district 
whose citizens have experienced firsthand the devastation which 
decades of corporate deceit has imposed on victims and 
families.
    I am here to speak in opposition to S. 758, and to urge in 
the strongest possible terms that this subcommittee reject a 
bill that is nothing more than a bailout for an industry 
responsibility for the disability and death of millions of 
Americans.
    First, we have to square the rhetorical claims of the 
problem with the realities of asbestos litigation today and the 
language of the bill. Supporters of 758 have said that the bill 
is necessary to relieve the burden of asbestos litigation in 
State and Federal courts. The plain fact of the matter is the 
crisis that did exist in the 1980's is clearly behind us. 
Today, only a handful of cases go to trial each year and 
thousands are settled under the present system.
    In the State of Virginia, I am only aware of one case that 
has gone to trial in the last 7 years. Yet, we have settled 
thousands of cases. In the early 1980's, Virginia, like many 
other States, did have a large asbestos case backlog. The legal 
struggle over the industry's attempt to avoid liability and the 
delaying tactics of the defense in court, which were encouraged 
by Virginia law, led to lengthy trials, multiple complex 
appeals, and little, if any, justice for the victims.
    We enacted two pieces of legislation, one involving the 
statute of limitations and another a consolidation bill, which 
resolved those. The consolidation bill allowed consolidation on 
issues such as when a particular company learned of the risk 
asbestos posed to workers, when they first warned workers of 
the risk, and whether the warning was adequate under the law. 
Those questions were well-known and did not require endless and 
repeated litigation.
    Following the enactment of those two bills, the State court 
judges ordered consolidation on these issues, and almost 
immediately and well before those cases could begin, virtually 
every manufacturer settled virtually every asbestos case with 
virtually every plaintiff in Virginia. And the framework for 
all future settlement agreements which apply in our State to 
this day were established.
    Unfortunately, S. 758 would undo all of that work. It would 
undo it, first, because the bill would eliminate all of the 
powers of consolidation which have been authorized by the 
courts, and would remove the incentives to settlement which 
have proved so beneficial to victims in Virginia and across the 
country.
    Second, it would create a new Federal bureaucracy with 
complex procedures that no one can navigate in order to achieve 
a prompt settlement, regardless of how sick they are or how 
compelling their case is. Today's plaintiffs can go into a 
lawyer's office and know almost immediately what they are going 
to get and when they are going to get it, many times as quickly 
as 6 months, without any complexity. With this bill, there is 
no telling when you would get any money or if you would get any 
money.
    Now, we have heard suggestions that the litigation expenses 
are expensive now. Right now, there are virtually no litigation 
expenses. The corporations are doing this with in-house 
counsel. There is no discovery or anything like that. It is a 
very streamlined situation.
    Also, Mr. Chairman, the bill's strict medical criteria will 
eliminate 50 to 80 percent of the claims now being compensated, 
and will make those victims ineligible to file a lawsuit, much 
less receive a settlement. It would permit asbestos companies 
to avoid their existing settlement agreements, denying victims 
money they may be currently receiving and companies have 
already agreed to pay, or in cases like they have agreed to 
pay, may not be able to get that.
    If you have a plaintiff who is unable to satisfy the bill's 
strict medical criteria, the bill shifts the cost of paying to 
those bills from the manufacturer to the employers who are 
strictly liable under workers compensation laws. For example, 
our Newport News Shipyard receives payments in subrogation 
averaging about $6 million a year because of subrogation 
agreements under the asbestos litigation. That is why many 
corporations like the Newport News Shipyard and business 
organizations like the Virginia Peninsula Chamber of Commerce 
do not support the bill. I strongly suspect that employers who 
have no-fault liability under workers comp laws will have the 
same reaction once they find out what is going on in this bill.
    The asbestos issue has a long and complex history. It is 
entirely appropriate that the committee look for new and 
perhaps innovative approaches. But great care must be taken to 
avoid recreating problems that have essentially been resolved 
to the benefit of asbestos victims, and there is no excuse for 
providing a windfall to this industry or for passing 
legislation like S. 758.
    Senator Grassley. Thank you, Congressman Scott.
    I have no questions of this panel. Does Senator Torricelli 
or Senator Schumer?
    Senator Torricelli. I do not, Mr. Chairman.
    Senator Grassley. Well, we thank you very much for 
participating.
    Mr. Scott. Mr. Chairman.
    Senator Grassley. Yes, Congressman Scott?
    Mr. Scott. I would like to submit for the record a letter 
from the Virginia Peninsula Chamber of Commerce, if I could.
    Senator Grassley. It will be received.
    [The letter referred to follows:]
                    Virginia Peninsula Chamber of Commerce,
                                        Hampton, VA, June 22, 1999.
RE: The Hyde Bill--H.R. 1283

Mr. Keith Holman,
U.S. Chamber of Commerce,
Washington, DC.
    Dear Keith: The Virginia Peninsula Chamber of Commerce is familiar 
with asbestos product liability litigation and its effects on our 
Peninsula communities. Dining the past (20) twenty years, several 
thousand local shipyard workers have developed asbestosis, lung cancer 
and mesothelioma from asbestos exposure that occurred in the 1940s to 
the 1970s. Hundreds of these workers have died (approximately 400 from 
mesothelioma alone), and asbestos deaths and disabilities are 
continuing due to the long latency period associated with these 
illnesses.
    Plaintiffs in these lawsuits are routinely and regularly receiving 
prompt settlements from the asbestos manufacturers pursuant to a broad-
based settlement agreement that has been negotiated with substantially 
all of the asbestos manufacturers who are defendants in these lawsuits. 
The efficiency of the settlements that have been reached between the 
asbestos manufacturers and plaintiffs' counsel for these claims is 
demonstrated by the fact that there has not been a jury trial in an 
asbestos lawsuit in this area for (7) seven years; during this period 
of time, hundreds of asbestos victims have been promptly and 
voluntarily compensated with settlements; transaction costs of the 
defendants have been virtually eliminated; and there is no burden on 
the courts because most of the lawsuits are settled before they are 
even served on the defendants.
    Virginia employers have been a major beneficiary of the broad-based 
settlement agreements which exist in this jurisdiction because every 
dollar that is received by the asbestos worker reduces the liability of 
his employer to pay workers' compensation benefits for that asbestos-
induced illness or death. For example, during the past three years, the 
Newport News Shipyard has received credits from hundreds of these 
settlements each year. The lawyers who represent the asbestos victims 
in this area are well known and respected for the work they have done 
in proving the liability of the asbestos industry and providing 
compensation for deserving victims.
    The Virginia Peninsula Chamber of Commerce opposes the Hyde Bill as 
it is deemed unnecessary legislation. In Virginia the parties have 
voluntarily resolved this litigation on terms that are acceptable to 
both the clients and the manufacturers. The qualified claimants are 
receiving prompt and certain payments, the settlement agreements have 
minimum medical and exposure criteria which assure that only legitimate 
claims are compensated, and there is no burden on the courts.
    In the event the Hyde Bill is made law, it will provide a windfall 
to asbestos manufacturers by first permitting them to void their 
settlement agreements and then by creating eligibility requirements 
that are so strict that more than one-half of the claimants who are now 
being voluntarily compensated will be ineligible to file a lawsuit much 
less receive any settlement. Additionally, it will create a new and 
burdensome federal bureaucracy which is clearly designed for one 
purpose and one purpose only--to delay and/or prevent asbestos victims 
from being compensated. These procedures will also drastically increase 
the transaction costs for all parties and eliminate the efficiencies 
that have been designed by the courts and the parties to resolve this 
litigation.
    We urge you to find a middle ground of common sense and avoid any 
action that will impact the current agreements in the Commonwealth of 
Virginia.
            Cordially,
                                          Clyde R. Hoey II,
                                                 President and CEO.

    Senator Grassley. We look forward to working with you. 
Obviously, if we move this bill in the Senate, we will see you 
somewhere in conference.
    I am going to put in the record the statements from 
Senators Orrin G. Hatch, Chairman of the full Judiciary 
Committee and Patrick Leahy, ranking minority member of the 
full Judiciary Committee, on this issue. I will put them in the 
record now.
    [The prepared statement of Senator Hatch follows:]

  Prepared Statement of Hon. Orrin G. Hatch, a U.S. Senator From the 
                             State of Utah

    Good morning, and welcome to today's hearing on finding solutions 
to the asbestos litigation problem. I first would like to thank Senator 
Grassley, Chairman of the Judiciary Committee's Subcommittee on 
Administrative Oversight and the Courts for his leadership and hard 
work in holding this hearing so that we may begin to examine the issues 
presented by the asbestos litigation crisis.
    I also would like to thank all of our witnesses today for their 
time and cooperation. Let me extend a particular welcome to my 
colleagues from the House of Representatives who are here today. 
Representatives Gekas, Moran, Cannon, and Scott: thank you for being 
with us to share your views.
    I am hopeful that this hearing will help us better understand the 
asbestos issue, and will give us an opportunity to examine S. 758, the 
Fairness in Asbestos Compensation Act of 1999.'' As an original sponsor 
of S. 758, I have been very concerned about the asbestos crisis, which 
has had a profound impact on individuals who were injured by asbestos 
exposure, as well as on the court system and on industry.
    I am very pleased that today's hearing will enable us to begin to 
address the problems presented by the current system. As S. 758 makes 
its way through the legislative process, I look forward to working with 
my colleagues to achieve the maximum public benefit from this 
legislation.

                            I. Introduction

    Mr. Chairman and members of the Subcommittee, I am Sheila F. 
Anthony, a Commissioner of the Federal Trade Commission (``FTC'' or 
``Commission''). I am pleased to have this opportunity to describe the 
Commission's consumer protection activities in the area of scholarship 
services.\1\ The Commission applauds Senator Abraham and Senator 
Feingold for focusing on the serious law enforcement issues raised by 
fraudulent purveyors of scholarship services.
---------------------------------------------------------------------------
    \1\ This written statement presents the views of the Federal Trade 
Commission. Responses to questions reflect my views and do not 
necessarily reflect the views of the Commission or the other 
Commissioner.
---------------------------------------------------------------------------

            II. The Commission's Consumer Protection Mission

    The FTC is a law enforcement agency whose mission is to promote the 
efficient functioning of the marketplace by protecting consumers from 
unfair or deceptive acts or practices and increasing consumer choice by 
promoting vigorous competition. The Commission's primary legislative 
mandate is to enforce the Federal Trade Commission Act (``FTCA''), 
which prohibits unfair methods of competition and unfair or deceptive 
acts or practices in or affecting commerce.\2\ The FTCA generally 
provides the Commission with broad law enforcement authority over 
entities engaged in, or whose business affects, commerce and with the 
authority to gather information about such entities.\3\ The Commission 
also has responsibility under approximately forty additional statutes 
governing specific industries and practices.\4\
---------------------------------------------------------------------------
    \2\ 15 U.S.C. Sec. 45(a).
    \3\ 15 U.S.C. Sec. Sec. 45(a), 46(a).
    \4\ These include, for example, the Truth in Lending Act, 15 U.S.C. 
Sec. Sec. 1601 et seq., which mandates disclosures of credit terms, and 
the Fair Credit Billing Act, 15 U.S.C. Sec. Sec. 1666 et. seq., which 
provides for the correction of billing errors on credit accounts. The 
Commission also enforces over 30 rules governing specific industries 
and practices.
---------------------------------------------------------------------------

                        III. Project Scholarscam

    In the fall of 1996, the Commission launched ``Project 
Scholarscam,'' a joint law enforcement and consumer education effort 
aimed at fraudulent purveyors of so-called ``scholarship services.'' At 
that time, the Commission announced six law enforcement cases against 
companies we alleged falsely promised scholarships to students and 
their parents nationwide. In November 1997, the Commission followed up 
with two additional cases known as ScholarScam II. The Commission 
obtained the most recent settlements in the fall of 1998.
    These companies employed similar tactics: the sales pitch usually 
started with a postcard proclaiming ``FREE MONEY FOR COLLEGE'' and 
providing a toll free number for students or their parents to call. A 
telemarketing sales pitch ensued whereby the company told students and 
parents that, for an up-front fee $100 to $400, the defendant would 
guarantee that the student would get a scholarship or the company would 
refund the up-front fee. To further entice the students, telemarketers 
claimed the student had prequalified for scholarships and that the 
company would ``do all the work'' necessary to obtain the scholarship. 
Getting the scholarships was easy, the telemarketers explained, because 
the company would match the student's qualifications with a database of 
scholarships and would send the student a list of sources tailored to 
that student. The telemarketers proclaimed that the company had 
``information you can't get anywhere else.''
    Naturally, the telemarketer would impress upon the student the need 
to act quickly and typically would press the student or parent to 
provide over the telephone a credit card number or checking account 
number. Once students and their parents paid the up-front fee, they 
would complete a questionnaire detailing their interests, school 
activities and other personal information. Subsequently, they would 
receive a list of available scholarships and sources of money--but the 
list was hardly ``tailored'' to the student's qualifications. In fact, 
as the Commission alleged, it was a useless list--containing outdated 
information, scholarships whose deadlines had passed, entries that were 
not even scholarships but were student loan programs, and scholarships 
that the student clearly could not qualify for (for example, a 
scholarship for children of veterans or residents of a particular state 
when the student was neither).
    When consumers sought refunds for these useless lists, the 
defendants foiled their attempts by putting hurdles up at every turn 
instead of honoring their much-heralded and unconditional ``money-back 
guarantee.'' Students were required, the defendants said, to apply to 
each and every source on the list and to obtain and send to the company 
all rejection letters received. In reality, this was an impossible 
condition to fulfill because scholarship organizations typically notify 
only those who are selected as recipients. In addition, because the 
list contained scholarships for which the students could not qualify, 
students had no reason to apply to those sources. In one FTC case, the 
defendant stopped providing any lists at all--leaving consumers to 
write futile complaint letters to a nonexistent ``scholarship 
foundation.''
    These cases were filed in federal district courts in Florida, 
Georgia, Maryland, and New York. A summary of these cases is provided 
to the Committee as an Appendix to my written statement. The Commission 
sought and obtained temporary restraining orders with asset freezes 
and, in some cases, the appointment of a receiver over the corporate 
defendants. All Commission litigation has been concluded with permanent 
injunctions obtained either through settlements or ordered by the 
court. The orders obtained either ban defendants from engaging in 
telemarketing or providing scholarship services or require defendants 
to post performance bonds in significant amounts to protect consumers 
from future fraudulent practices should defendants resume telemarketing 
of scholarship services.
    In several instances, the Commission obtained partial or complete 
redress for consumers. In two cases, the defendants posted $100,000 
telemarketing bonds pursuant to Florida law, which requires all 
telemarketers to make such commitments. We worked with the Florida 
Department of Agriculture and Consumer Services to revoke the bonds 
and, for the first time, Florida consumers received refunds derived 
from a Florida telemarketing bond. In another case, as part of the 
settlement, the defendant relinquished mail containing checks from 
almost 500 consumers which enabled the Commissioner to provide full 
refunds to those consumers. In many FTC cases, however, the defendants 
have depleted the monies received, leaving little, if any, for consumer 
redress. In addition, FTC defendants frequently attempt to use 
bankruptcy laws to avoid paying consumer redress required by our 
orders.
    We estimate that the companies involved in these cases scammed, in 
total, approximately 175,000 consumers to the tune of $22 million. In 
addition, one of the Scholarscam defendants, Christopher Nwaigwe, was 
criminally prosecuted by the U.S. Attorney's Office in Baltimore, 
Maryland. Commission staff provided substantial assistance to the U.S. 
Attorney's Office, including having a staff attorney testify at trial. 
Nwaigwe was convicted of seven counts of mail fraud in March of this 
year and in June was sentenced to 36 months in prison. Tough penalties 
are needed for these scam artists. The civil remedies afforded by an 
FTC action can deprive defendants of their ill-gotten gain through 
restitution, but only if the victims' money can be found. The penalties 
resulting from criminal prosecutions by the U.S. Department of Justice 
and state authorities send the strongest possible message, which is 
particularly needed because there is a never-ending pool of potential 
victims: college-bound students and their parents.
    The Commission has undertaken extraordinary efforts to educate 
consumers about scholarship scams. As part of this effort, we teamed up 
with a variety of private and public partners, including:

   Sallie Mae

   College Parents of America

   Who's Who Among American High School Students

   The College Board

   Educational Testing Service

   National Association of Student Financial Aid Administrators

   National Association of Secondary School Principals

   National Association of College Stores

    Our consumer education materials include bookmarks, posters, and 
consumer alerts warning students and their parents of the red flags to 
look for when evaluating scholarship service sales materials and sales 
pitches. We have distributed over 2 \1/2\ million pieces of our 
consumer education materials, including a mass mailing of bookmarks to 
2,000 college bookstores across the country and have the materials 
posted on our Web site. In addition, we posted a Web page of a 
fictitious scholarship service company that had the typical claims we 
saw in our cases and, when consumers clicked to sign up for the 
service, they were warned that they could have been scammed. We call 
this a ``teaser Web site'' and have used it to help disseminate our 
message on the Internet.
    The Commission continues to monitor the industry and to provide 
both consumer and business education. In May, we issued a new Consumer 
Alert to inform consumers about a recent trend: the seminar for 
financial aid or scholarships. We warn consumers to take their time 
when attending these seminars and to avoid high-pressure sales pitches 
that require them to buy now or risk losing out on the opportunity. 
Consumers should investigate the organization by 5 talking with a high 
school or college guidance counselor or financial aid advisor before 
spending money--many colleges and universities are offering Web-based 
scholarship searches for free to potential students. Consumers 
shouldn't rely solely on ``success stories'' or testimonials of 
extraordinary success offered by the seminar company. Instead, they 
should ask for a list of three local families who have used the service 
in the last year and then contact them to find out if they were 
satisfied with the products and services received. As always, consumers 
should keep in mind that they may never recoup the money they give to 
an unscrupulous operator, despite stated refund policies.

                        IV. Proposed Legislation

    S. 1455, the ``College Scholarship Fraud Prevention Act of 1999,'' 
provides some useful tools to help combat scholarship fraud. It would 
enhance criminal penalties for fraud in connection with the obtaining 
or providing of scholarships. Also, it would prevent purveyors of 
college scholarship fraud from using the bankruptcy laws to shield 
their ill-gotten gains while their victims go without recompense. The 
Bankruptcy Code allows debtors to retain certain property even when 
their creditors receive little or no recompense. In particular, debtors 
can use state-law exemptions, including homestead exemptions that in 
some states can have no dollar limit, to shield their assets. S. 1455 
would deny these exemptions to the extent that debts resulted from 
college scholarship fraud.

                             V. Conclusion

    The story of Project ScholarScam has garnered tremendous coverage 
in the media. Through this coverage and by enlisting those who are on 
the front lines--financial aid advisors and guidance counselors--we 
have spread the word about these pernicious scams. The Commission's 
strong record of enforcement and education has served as an effective 
deterrent in this industry. But, as education costs continue to rise 
and, given the unlimited supply of potential victims, fraudulent 
operators will always have an interested audience and an enticing sales 
pitch. Thus, we will continue our efforts and will also continue to 
provide cooperation to any criminal investigation or prosecution of 
``ScholarScam'' defendants.

    [The prepared statement of Senator Leahy follows:]

 Prepared Statement of Hon. Patrick J. Leahy, a U.S. Senator From the 
                            State of Vermont

    I am concerned that the Fairness in Asbestos Compensation Act S. 
758, unfairly sacrifices the legal rights of hundreds of thousands of 
workers and their families.
    This complex legislation transfers the legal rights of asbestos 
victims and their families to a new byzantine bureaucracy in a quasi-
governmental entity called the Asbestos Resolution Corporation (ARC). 
An asbestos victim, under the bill, would be forced to file his or her 
asbestos-related claim with the ARC instead of a court of law of the 
victim's choice. Then, the legislation: prohibits any form of asbestos-
related class action lawsuit unless all defendants agree; bans any 
award of punitive damages; caps the victim's attorney's fees; and fails 
to provide any funding for the asbestos victim or the ARC.
    In short the bill is an asbestos defendant's dream. It is not 
balanced or fair to plaintiffs. Instead of enacting one-sided 
legislation, I believe Congress can play a more constructive role in 
helping to find more equitable solutions for all the parties involved 
in asbestos litigation.
    I agree with Supreme Court Justice Ruth Bader Ginsburg in the 
Amchem Products decision that Congress can provide a secure, fair and 
efficient means of compensating victims of asbestos exposure. I believe 
the appropriate role for Congress is to provide incentives for private 
parties to reach settlements, not to take away the legal rights of 
asbestos victims and their families. For example, Congress should 
consider enacting tax incentives for private parties involved in 
asbestos-related litigation to reach global settlements and to 
guarantee that asbestos victims and their families receive the full 
benefit of the incentives. This is an approach that encourages fair 
settlements while still preserving the legal rights of all parties.
    I commend Chairman Henry Hyde of the House Judiciary Committee for 
working with all the parties involved in asbestos litigation to try to 
reach consensus. I look forward to working with Mr. Hyde, Chairman 
Hatch, Senator Grassley, Senator Torricelli and others to fashion an 
appropriate Congressional response to encourage fair settlements for 
asbestos victims and the asbestos industry.

    Senator Grassley. Now, I will turn to Senator Torricelli to 
make an opening comment.

STATEMENT OF HON. ROBERT G. TORRICELLI, A U.S. SENATOR FROM THE 
                      STATE OF NEW JERSEY

    Senator Torricelli. Thank you very much, Mr. Chairman. 
First, I want to thank you for holding this hearing. This 
Congress has a responsibility to look at the asbestos issue in 
some depth, to do expeditiously, and we are all very grateful 
for your leadership in bringing us together today.
    I would also note that soon we are going to hear from a 
variety of witnesses. In particular, I would like to welcome 
Sam Heyman, of the GAF Corporation that is located in the State 
of New Jersey, and Rich Middleton, the president of ATLA. They 
will be joined by other distinguished witnesses, but to these 
individuals in particular I would like to welcome them before 
the committee today.
    I think, Mr. Chairman, we have all watched with some dismay 
the torrent of asbestos cases that are now before the Federal 
courts. We have a system which it appears to me is not working 
for anyone. There are 200,000 cases now clogging State and 
Federal courts, with 50,000 new cases being added every year. 
Victims have been waiting years to receive compensation, and it 
appears to me that there is very little relationship between 
the degree of injury or illness and the compensation that is 
actually being received. The truly sick are waiting up to 3 
years to receive compensation for their illnesses compared with 
other product liability cases where the average is 18 months.
    It is very difficult to mount a defense of the current 
system. Twenty-five of the largest manufacturers representing 
the majority of the defendents have already filed for 
bankruptcy. We are therefore facing a system in which the very 
sick are waiting a long period of time to mount cases against 
an industry which is dwindling, where those who have liability 
may no longer be in business and truly may not survive to ever 
recognize compensation, with a compensation that doesn't seem 
to have any relationship between the amount of the award and 
the amount of the injury. It would be difficult to design a 
system that is worse, less fair, or less likely to produce a 
result.
    As we know, in 1994 a class action settlement in the 
Georgine case did lead to a system which provided for a 
national facility to resolve the claims of future plaintiffs. 
We also know that it did not survive. I think, though, we have 
been led by the courts to recognize the potential and the need 
to succeed the Georgine settlement.
    It was instructive, I think, by Justice Ginsburg writing in 
that case when she wrote, ``The argument is sensibly made that 
a nationwide administrative claims processing regime would 
provide the most secure, fair and efficient means of 
compensating victims of asbestos exposure. Congress, however, 
has not adopted such a solution.'' That, Mr. Chairman, was, in 
my judgment, an invitation for this Congress to provide some 
leadership.
    If there was any doubt, this summer, in the Ortiz case, 
once again the Court signaled its beliefs. Justice Souter 
wrote, in describing the asbestos cases as ``an elephantine 
mess which defies customary judicial administration and calls 
for national legislation.'' It would be difficult to describe 
how the Court in any clearer manner could have described the 
need for the Congress to take some action.
    The bill we are looking at today is a first attempt to 
provide exactly such an answer. It establishes a national claim 
facility to provide fair and prompt compensation for persons 
suffering from asbestos-related illness. Eligibility for 
compensation would be determined by objective, predetermined 
criteria. I do not, Mr. Chairman, as one of the cosponsors of 
the legislation, believe it is a final answer. We are not 
closed to other suggestions on how to deal with an 
extraordinarily complex situation.
    I think we should simply recognize that the current system 
is not working for anybody. I do not believe it is fair for the 
attorneys involved. Clearly, it is not fair for those potential 
victims involved. It is not providing a timely or rational 
means of distributing benefits to people. It is damaging to the 
industry.
    I genuinely believe through these hearings, after hearing 
from the representatives of ATLA and the industry, this 
committee is in a position to fashion a fair and reasonable 
solution. I don't think any of us come to this hearing with a 
closed mind, but recognizing something must be done. 
Legislation is going to evolve from the House. This Senate 
should take leadership as well, and I am very grateful that you 
have, probably against all common sense and personal wisdom, 
put yourself in this position to provide leadership on this 
issue. Thank you for doing so.
    Senator Grassley. Let me associate myself with part of your 
remarks, and that is that I think you have given a very careful 
analysis of the parliamentary situation, and probably one in 
which, if we do move in any way, would have to be bipartisan. 
Obviously, you and I have been able to do that before and we 
would obviously explore doing that in this instance as well.
    Senator Torricelli. And, Mr. Chairman, if we do not, our 
extensive collaboration in legislation on bankruptcy will prove 
to be relevant.
    Senator Grassley. Very relevant.
    Senator Torricelli. The two issues will merge in the 
future.
    Senator Grassley. Yes; Congressman Gekas had already 
touched on that issue.
    Now, we will move on to our first panel, and you will see 
as I introduce them that we have a very impressive list of 
witnesses, very impressive backgrounds, and all well-qualified 
to testify in this area.
    We have Harvard Law School professor of administrative law 
and civil rights, Mr. Christopher Edley. We have the general 
counsel of the AFL-CIO, Jonathan Hiatt. Already introduced is 
Samuel Heyman, chairman and CEO of GAF Corporation. Ms. Karen 
Kerrigan, chairman of the Small Business Survival Committee, 
and Mr. Richard Middleton, Jr., president of the Association of 
Trial Lawyers of America. He is also a senior trial attorney 
with the firm Middleton, Adams and Tate in Savannah, GA. And 
then we are honored to have the Hon. Conrad Mallett, former 
chief justice of the Michigan Supreme Court, and currently 
chairman of the Coalition for Asbestos Resolution.
    We will proceed as I introduced the witnesses, so we go to 
Professor Edley.

PANEL CONSISTING OF CHRISTOPHER EDLEY, JR., PROFESSOR, HARVARD 
LAW SCHOOL, CAMBRIDGE, MA; JONATHAN P. HIATT, GENERAL COUNSEL, 
    AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL 
 ORGANIZATIONS, WASHINGTON, DC; SAMUEL J. HEYMAN, CHAIRMAN AND 
  CHIEF EXECUTIVE OFFICER, GAF CORPORATION, WAYNE, NJ; KAREN 
    KERRIGAN, CHAIRMAN, SMALL BUSINESS SURVIVAL COMMITTEE, 
WASHINGTON, DC; RICHARD MIDDLETON, JR., PRESIDENT, ASSOCIATION 
    OF TRIAL LAWYERS OF AMERICA, WASHINGTON, DC; AND CONRAD 
     MALLETT, CHAIRMAN, COALITION FOR ASBESTOS RESOLUTION, 
                         WASHINGTON, DC

              STATEMENT OF CHRISTOPHER EDLEY, JR.

    Mr. Edley. Thank you, Mr. Chairman. I am Christopher Edley, 
Jr., a professor at Harvard Law School.
    Senator Grassley. Before you start, something that will 
avoid all of us some embarrassment later on, particularly me, 
who finds it very difficult to wield a gavel, I am sorry to 
say. It is a weakness; I like to hear people.
    But today the caucuses of our respective parties are 
scheduled, so we have to get done by a certain time. As such, 
we have asked for you all to have your entire written 
statements submitted for the record and for you to summarize 
your oral testimony in 5 minutes, please. If anybody didn't 
hear that, is that going to cause problems for anybody?
    [No response.]
    Senator Grassley. OK; would you please proceed, Professor 
Edley?
    Mr. Edley. Thank you, Mr. Chairman. I am Christopher Edley, 
Jr., a professor at Harvard Law School, where I have taught 
administrative law for 18 years.
    Two years ago, the Supreme Court noted the continuing 
seriousness of the asbestos litigation crisis and called for 
legislation. They repeated that message to you just this past 
June in Ortiz v. Fibreboard, holding again that class action 
rules are not flexible enough to fix the mess.
    S. 758 provides a fair, efficient means of compensating 
victims. Is it complicated? Absolutely not. The critics confuse 
complexity with careful design. There are just three steps: 
step one, a simple, nonadversarial administrative procedure for 
determining medical eligibility, keyed to objective clinical 
and pathological criteria for impairment and with safeguards 
making it easy to say yes to the claimant and hard to say no; 
step two, an aggressive alternative dispute resolution process, 
faster and less expensive than courts; and step three, access 
either to arbitration or to court at the claimant's option. 
That is it--3 to 5 months instead of 3 or more years in today's 
tort system.
    Here are just a few of the several policy goals that I 
think are achieved by the bill. No. 1, claimants who are 
impaired--that is, sick--get tortlike compensatory damages from 
the defendants, including pain and suffering, and they get it 
quickly.
    Point No. 2: claims by the nonsick are deferred until they 
actually become sick, and most don't. Point No. 3: the bill 
reduces transaction costs by using ADR and expert 
administrative decisionmaking. If mediation fails, however, 
claimants can opt out to the court, and this helps police 
administrative discretion and ensures that over time the awards 
are aligned with tort damages. Finally, defendant companies 
bear all the costs of compensating victims and of administering 
the system. No taxpayer funds are necessary.
    Now, why can't the courts sort all this out? Senators, it 
has been tried, but State and Federal judges themselves are 
telling you it can't work. Such expedients as case 
consolidations help somewhat to clear dockets, but only at the 
expense of the quality of individual justice. Plaintiffs' 
lawyers package hundreds and often thousands of claims, 
combining sympathetic sick claimants with unimpaired claimants, 
and refusing generous settlement offers for those who are sick 
unless defendants also make substantial payments to those who 
aren't.
    Alternatively, plaintiffs' counsel threaten to litigate 
every case, facing the defendants with a ``bet the company'' 
jury lottery that can quickly involve hundreds of millions in 
awards to people who are not sick and never will be sick. And 
these coerced payments to nonsick claimants stimulate further 
waves of filings, diverting resources that should be focused on 
today's sick victims and on those who will need help tomorrow.
    Now, some have complained that this bill is not voluntary, 
like the hundreds of private deals that plaintiffs' attorneys 
have signed with companies over the years. But please look 
carefully. The private deals don't last and they make no sense 
as a national solution. Those deals haven't prevented a 
doubling in this decade of the backlog, a growing flood of 
claims, still long delays for victims, and more and more 
bankruptcies to boot.
    Moreover, you can't make voluntary the statutory medical 
criteria which draw the line between the sick and the nonsick 
because the nonsick, egged on by contingent fee counsel, would 
ignore the line, file their suits, clog the system, continue to 
drain the defendants, and leave themselves with no recourse in 
the future, if and when they become sick. The voluntariness 
that does make sense is in the bill--the claimant's choice of 
administrative arbitration versus court litigation once the 
medical line is drawn.
    This bill benefits almost everyone. Impaired claimants get 
fair compensation in months, not years. The nonsick who will 
eventually get sick benefit because the bill eliminates statute 
of limitations defenses. No one need file their claims 
prematurely or enter into inadequate settlements.
    Our courts will benefit, as will everyone who uses them. 
Defendant companies will benefit. With this litigation 
nightmare behind them, they can, consistent with their oft-
stated wish, focus their resources on compensating the sick. 
And, finally, workers, shareholders, families and communities 
will benefit from the reduced risk of asbestos-driven 
bankruptcies. The only losers are a few lawyers and those 
individuals who are not now sick who never will become sick in 
the future and who would have won the jury lottery under our 
current tort system.
    As a matter of public policy, as a matter of sensible 
resource allocation for our courts and society at large, I urge 
you to move forward quickly to answer the Supreme Court's 
repeated call for action. Give victims and companies, 
shareholders and families a better justice. Fix the mess.
    Thank you, Mr. Chairman.
    Senator Grassley. Thank you, Professor Edley.
    [The prepared statement of Mr. Edley follows:]

         Prepared Statement of Professor Christopher Edley, Jr.

                                SUMMARY
    The Supreme Court has, twice in two years, noted the continuing 
seriousness of the asbestos litigation crisis and called for Congress 
to adopt a legislative solution. The courts have said they cannot 
handle the flood of cases fairly and efficiently. And the flood is 
worsening, exacerbating each of the problems associated with asbestos 
litigation, including the growing number of claims by the unimpaired. 
Only half of all claimants are sick; the remaining half of claimants 
are not sick, and most will never become sick.
    S. 758 provides an imaginative and effective means of compensating 
victims of asbestos exposure. It features: (1) objective medical 
review, administered by doctors, (2) an aggressive alternative dispute 
resolution process to promote settlement, and (3) an optional 
streamlined arbitration process. The right to go to court is preserved 
for all impaired claimants. Compensation goes to impaired victims, 
while claims by the unimpaired are deferred until they become sick. The 
efficiencies of expert decisionmaking and of alternative dispute 
resolution are fully exploited to reduce litigation costs. Finally, 
defendant companies bear all the costs. No taxpayer funds are used.
    Other issues concerning S. 758 that are addressed in the statement 
include--

   A lack of trials does not mean all is well. Cases generally 
        settle, but only after years of depositions, discovery, and 
        pretrial motions--which is nothing new. Trials were never the 
        major burden imposed by asbestos litigation.

   Private plans are no substitute for legislation. They are 
        unenforceable, and do not bind future claimants.

   A collective fund for all asbestos liability is unworkable. 
        The enormous diversity of asbestos defendants, and uncertainty 
        regarding insurance coverage, make one seemingly attractive 
        approach--a collective fund--unworkable in practice.
                                 ______
                                 
    I appreciate the opportunity to testify concerning S. 758, the 
Fairness in Asbestos Compensation Act.\1\ Asbestos litigation has long 
been a scandal, which poorly serves the interests of victims, as well 
as defendants and the employees and communities that depend upon them. 
Several years ago I published an article with Paul Weiler, my colleague 
at the Harvard Law School, advocating an administrative system for 
compensating people who are impaired by asbestos-related diseases.\2\ 
Since then, my conviction that an administrative compensation system 
would do a better job of compensating the sick has grown even stronger. 
It is for that reason that I welcome S. 758.
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    \1\ The Coalition for Asbestos Resolution has compensated me for my 
time and expenses in preparing this statement. My statements express my 
own views on the subject, which may in some respects differ from those 
of the bill's proponents. Please note that I am not the recipient of 
any federal grant or contract.
    \2\ See Christopher F. Edley, Jr. and Paul C. Weiler, Asbestos: A 
Multi-Billion-Dollar Crisis, 30 Harv. J. on Legis. 383 (1993).
---------------------------------------------------------------------------
    My testimony today will make three points. First, the asbestos 
litigation crisis not only remains with us, but has in important 
respects grown worse in the late 1990s. Second, S. 758 provides an 
innovative and practical administrative alternative to tort litigation 
which would be far more fair, prompt, and inexpensive than the present 
system. Third, after reviewing a number of concerns that have been 
expressed about the bill, I conclude that S. 758 is a necessary and 
effective response to the challenge of asbestos compensation.

                    THE ASBESTOS LITIGATION PROBLEM
    By the early 1970s, the widespread use of asbestos in shipbuilding, 
insulation and other industries without adequate precautions or 
warnings had led to what can only be termed a public health disaster. 
The tort system responded well to the tragedy. After years of struggle, 
imaginative trial lawyers established industry liability for the 
asbestosis and cancer that ruined the health and shortened the lives of 
workers. They were assisted in this by legal rulings from far-sighted 
judges that established many of the basic principles of modern product 
liability. The Fifth Circuit's decision in Borel v. Fibreboard Corp., 
493 F.2d 1076 (1974), which elaborated the theory of strict liability 
for failure to warn users of the hazards of an inherently dangerous 
product, is just one example.
    In the 1980s, however, the defects of the tort system began to 
outweigh its advantages. The courts were flooded with asbestos claims, 
in which the same issues were litigated again and again. In 1982, the 
leading manufacturer of asbestos products, Johns-Manville, went 
bankrupt, and the Manville bankruptcy was followed by two dozen others, 
essentially wiping out much of the former asbestos industry. As the 
pool of available assets grew smaller, the asbestos trial bar sought to 
involve more companies, and more products, in the litigation. At the 
same time, the momentum of the tort system led to an ever increasing 
number of claimants who had pleural plaques and other non-impairing 
conditions. By the end of the decade, the focus had shifted from 
proving the asbestos defendant's responsibility for the harm their 
products had caused to ensuring that funds would be available to 
compensate workers when they became sick.
    In 1991, the Judicial Conference of the United States noted the 
seriousness of the problem:

          The most objectionable aspects of asbestos litigation can be 
        briefly summarized: dockets in both federal and state courts 
        continue to grow; long delays are routine; trials are too long; 
        the same issues are litigated over and over; transaction costs 
        exceed the victims' recovery by nearly two to one; exhaustion 
        of assets threatens and distorts the process, and future 
        claimants may lose altogether.\3\
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    \3\ Report of the Judicial Conference Ad Hoc Committee on Asbestos 
Litigation 3 (Mar. 1991).

The Judicial Conference strongly recommended that Congress create ``a 
legislative dispute resolution system to resolve asbestos personal 
injury disputes.\4\ That was my view as well.
---------------------------------------------------------------------------
    \4\ Id. at 27.
---------------------------------------------------------------------------
    Congress did not act in response to the Judicial Conference's 
recommendation. However, leaders of the plaintiffs' bar and a group of 
20 defendants attempted to achieve a similar result through a creative 
use of the class action device under the Federal Rules of Civil 
Procedure. The parties negotiated a settlement class action, the heart 
of which was medical criteria that provided compensation for people who 
were impaired by asbestos-related conditions and deferred the claims of 
the unimpaired. The settlement was approved as fair and reasonable by a 
federal district judge in Georgine v. Amchem Products, Inc., 157 F.R.D. 
246 (E.D. Pa. 1994). But, though the Third Circuit described the 
settlement class action as ``arguably brilliant,'' it held that the 
device was not authorized by the Federal Rules of Civil Procedure. 
Georgine v. Amchem Products, Inc., 83 F.3d 610 (1996). The Supreme 
Court, too, recognized that the ``settlement-class certification [it 
confronted] evolved in response to an asbestos-litigation crisis.'' 
Amchem Products v. Windsor, 521 U.S. 591 (1997). But, it too 
invalidated the settlement on procedural grounds, while calling for 
Federal legislation. Justice Ginsberg, speaking for the Court, said: 
``The argument is sensibly made that a nationwide administrative claims 
processing regime would provide the most secure fair, and efficient 
means of compensating victims of asbestos exposure.'' Id. at 628-29. 
This summer, in Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999), the 
Court returned to the same theme. Justice Souter wrote for the Court 
that ``the elephantine mass of asbestos cases * * * defies customary 
judicial administration and calls for national legislation. * * * To 
date Congress has not responded.'' Id. at 2302 & n.\5\
---------------------------------------------------------------------------
    \5\ Chief Justice Rehnquist's concurring opinion noted that the 
``massive impact of asbestos-related claims on the federal courts'' had 
frustrated judicial efforts to resolve the asbestos crisis, despite 
``the near-heroic efforts of the District Court in this case to make 
the best of a bad situation.'' ``Under the present regime,'' he 
observed, ``transactional costs will surely consume more and more of a 
relatively static amount of money to pay these claims.'' Noting the 
need to ``devis[e] a system for handling these claims on a clean 
slate,'' Chief Justice Rehnquist too concluded, ``the `elephantine mass 
of asbestos cases' cries out for a legislative solution.'' Id. at 2323-
24.
---------------------------------------------------------------------------
    The flood of asbestos cases is worsening, In 1991 there were 
100,000 pending cases. Despite hundreds of thousands of settlements, 
the backlog has grown unexpectedly to well over 200,000 and the pace of 
new filings is even greater than before. Indeed, over 40,000 asbestos 
cases are filed each year in both state and federal courts; the 
nineteen defendants who are members of the Center for Claims Resolution 
report over 40,000 claims against them for the first eight months of 
1999 alone. Thus, today more cases are filed each year than were 
pending in the federal courts in 1991, when the Judicial Conference Ad 
Hoc Committee sounded the alarm.
    This stream of cases has exacerbated other defects of the tort 
system. First, bankruptcies have increasingly cast doubt on the ability 
of asbestos defendants to compensate people who contract cancer or 
disabling asbestosis in the future. For example, the Manville Trust, 
after protracted litigation in which all claims were barred, now pays 
only 10 cents on the dollar for claims against Johns-Manville. The 
record of many other trusts is worse.
    Second, the pace of justice remains agonizingly slow--with typical 
cases taking several years to reach settlement and many cases 
languishing for much longer.
    Third, lawyers' fees and other transactions costs continue to 
consume nearly two dollars for every one dollar paid to claimants. 
These transactions costs, in the words of Chief Justice Rehnquist, 
``consume more and more of a relatively static amount of money to pay 
[asbestos] claims.'' See footnote 5.
    Fourth, as Justice Breyer noted in his separate opinion in Amchem, 
521 U.S. at 631-32, half of all claimants are not sick, and most will 
never become sick. Instead, they sue (often because they must, to avoid 
the statute of limitations) seeking compensation for pleural conditions 
which are a mere marker of asbestos exposure. Although these conditions 
can be detected by medical tests, they generally do not cause any 
impairment to lung function and they are not early warning signs of 
more serious conditions such as cancer. The substantial compensation 
some are receiving in the tort system threatens to exhaust all 
resources for future, seriously ill claimants.
    All of these problems impact our courts and create uncertainty for 
defendant companies and the employees and communities that depend upon 
them. Perhaps more importantly, however, these problems also have 
seriously impaired the ability of those injured by asbestos disease to 
recover compensation, creating what the Judicial Conference termed ``a 
massive denial of justice.''
   the fairness in asbestos compensation act: an innovative solution
    S. 758 provides an imaginative framework for compensating people 
who are impaired by asbestos-related diseases faster and at a lower 
cost than litigation. The bill establishes an independent public 
agency, the Asbestos Resolution Corporation (ARC), to resolve asbestos 
claims. The ARC would administer a process for determining medical 
eligibility, keyed to, objective medical criteria for asbestos-related 
impairment, and an aggressive alternative dispute resolution process to 
ensure timely resolution of claims.
    The administrative process has three simple steps. First, the 
claimant presents medical information sufficient to show that he has an 
asbestos-related disease. In most cases, compliance with the objective 
medical criteria in the bill will be obvious, and the claimant's 
application can be approved by a claims examiner without further 
review. Second, the ARC will gather together the defendants that are 
allegedly responsible for claimant's impairment and will require the 
defendants to engage in mediation to settle the claim. Mediation is 
subject to a strict 60-day time limit, and defendants are penalized if 
they do not make an adequate offer at its close. Finally, if the 
claimant is not satisfied with the defendants' settlement offers in 
mediation, the claimant can choose either to invoke arbitration under 
the auspices of the ARC or to go to court. In either case, S. 758 
eliminates traditional defenses--such as ``state of the art''--allowing 
the adjudicator to focus on a few narrow questions--medical 
eligibility, causation, and damages.\6\ The normal claim should be 
resolved in a few months rather than the years required in the tort 
system today.
---------------------------------------------------------------------------
    \6\ In this respect, S. 758 differs from its House counterpart, 
H.R. 1283. In my view, the broad elimination of defenses contained in 
S. 758 is appropriate only for ``core claims,'' and not, for example, 
for claims against distributors or premises owners. The Coalition for 
Asbestos Resolution has acknowledged the need to find a middle ground 
between the narrow limitation of defenses in the House bill and the 
much broader Senate provision. Although the issue is difficult, I am 
confidant that an appropriate solution can be found.
---------------------------------------------------------------------------
    In addition, the bill contains a number of provisions, especially 
in the medical review process, that protect claimants' rights and 
ensure that no claimant who suffers impairment from an asbestos-related 
disease will be deemed ineligible. Claimants may appeal adverse 
decisions by claims examiners to a panel of two doctors, with a third 
added to the panel if there is a disagreement. Claimants would also 
have the chance to qualify for compensation before an exceptional 
medical claims panel, composed of a number of qualified specialists, 
even if they failed to meet the standard medical criteria. Denials 
would be subject to judicial review in the federal courts. It is 
important to note that these procedures, which are essential to 
guarantee fairness to claimants, could not be abused by defendants in 
order to delay the proceedings, because the medical review process 
would involve only the claimant and the government's physicians. The 
defendants would not even be named until later.
    The bill achieves critical policy goals. Impaired claimants are 
assured full compensatory damages, now and into the future. Unlike 
workers' compensation and many other administrative programs, claimants 
need not be disabled from employment and are not limited to economic 
damages, but can recover for their pain and suffering as well. 
Compensation goes to impaired victims, while claims by the unimpaired 
are deferred. The efficiencies of expert administrative decision-making 
and of alternative dispute resolution are fully exploited, reducing 
litigation costs. Claimants, however, have meaningful access to courts 
as a check on administrative discretion and to ensure that, over time, 
the awards are ``aligned'' with tort damages as determined by a jury. 
The resources of the defendants are focused where they should be: on 
compensating those who are impaired from exposure to their asbestos-
containing products, not on awards for the unimpaired, wasteful 
punitive awards, or on litigation costs. Transaction costs are 
controlled by limiting contingent fees to 25 percent. Finally, 
defendant companies bear all the costs of compensating victims and of 
administering the system. No taxpayer funds are used.
    This bill strikes an appropriate balance that benefits almost 
everyone. The most important benefits go to claimants. The impaired 
gain a streamlined and fair system which provides them full 
compensatory damages in months, not years. Moreover, the elimination of 
many defenses and the presumption of correctness accorded to the ARC's 
medical determination would make it much easier for impaired claimants 
to recover. On the other hand, most of the unimpaired also benefit from 
the increased assurance that the funds will be there to compensate them 
if they become impaired by an asbestos-related disease.
    Of course, the bill will benefit defendants too. By focusing 
resources on the sick, reducing transactions costs, and eliminating 
bet-the-company consolidations, the bill reduce the likelihood of 
bankruptcies. This is good news not only to the defendants, but also to 
shareholders, including pension funds, employees and their families, 
and to the communities that depend on these business for their 
prosperity.
    Finally, the public benefits. The burden of asbestos litigation 
will be lifted from the courts, freeing them to dispose of their other 
business more effectively. And asbestos defendants, rather than 
taxpayers, will pay the administrative costs of the new system.
    As in any legislation, there will be some who are better off under 
the status quo. Yet the only losers under this legislation are lawyers 
and those individuals who are not now sick, who will never become sick 
in the future, and who are able to navigate the ``jury lottery'' and 
obtain substantial compensation under the current system.

             QUESTIONS THAT HAVE BEEN ASKED ABOUT THE BILL
    During the legislative process, several thought-provoking questions 
have been asked about the bill. In my judgment, further reflection 
merely confirms the need for S. 758.
    Doesn't the relative scarcity of trials mean there is no asbestos 
litigation problem? Some maintain that, despite the repeated calls for 
reform by the United States Supreme Court, all is well in the tort 
system. They point to the fact that the vast majority of cases settle--
according to Mealey's Asbestos Litigation Reporter, only 55 asbestos 
trials went to verdict in 1998. Leaving aside for a moment that one of 
those trials was part of a complex, multi-phase mass consolidation 
involving thousands of plaintiffs, it is misleading to suggest that the 
rarity of trials indicates that the tort system is efficiently handling 
asbestos claims. While asbestos cases settle, they often do so on the 
court house steps, after years of pretrial proceedings, involving 
document requests, depositions, procedural motions, substantive 
motions, and sometimes appeals. In my testimony before the House 
Judiciary Committee, I described how a recent review of asbestos 
litigation dockets in several states continued to show a disturbing 
pattern of long delays, and I explained how the need for expensive 
legal services in our highly technical, highly adversarial legal system 
continued to swallow the lion's share of resources devoted to asbestos 
litigation. Indeed, when the Rand Corporation conducted a series of 
important studies on asbestos litigation in the 1980s--still the most 
comprehensive data on asbestos litigation available--they concluded 
that about two thirds of every dollar spent on asbestos litigation went 
to lawyers and other litigation expenses. At the time of the Rand 
Corporation studies, there were only about 50 asbestos trials a year, 
just as there are today, yet the expense of lawyers' fees and other 
costs was scandalously high. The number of trials has never been an 
accurate indicator of the resources consumed by asbestos tort 
litigation.
    Could the goals of legislation be achieved through private 
settlement plans, like Owens-Corning's National Settlement Plan? Some 
have suggested that settlement arrangements, created by contracts or 
other understandings between defendants and the relatively small number 
of key plaintiffs' asbestos firms, might resolve the asbestos 
litigation crisis without the need for federal legislation.\7\ To be 
sure, these arrangements have been around for some time and been of 
some use in managing a bad system. They do not, however, establish 
anything like an alternative to legislation.
---------------------------------------------------------------------------
    \7\ 1t is important to keep clearly in mind that Owens Corning's 
National Settlement Plan has two parts--a series of massive batch, or 
``inventory'' settlements resolving pending claims and standing offers 
to future claimants, subject to significant restrictions. While the 
settlement of Owens Corning's 235,000 case backlog is dramatic because 
of its size (which, in turn is due to Owens Corning traditionally 
aggressive litigation strategy), it does not provide a means for 
resolving cases in the future. That depends on its ``futures 
agreements'' with the plaintiffs' trial bar.
---------------------------------------------------------------------------
    I note at the outset that agreements such as Owens Coming's are not 
new. Other defendants have entered into such agreements throughout the 
1990s. These deals have not prevented the backlog of cases from 
doubling in 8 years; nor have they restrained the rate of new filings.
    The reason for the ineffectiveness of these agreements is not hard 
to find. In the absence of a settlement class action like Amchem, it is 
impossible to bind future claimants. The best defendants can do is to 
enter agreements with plaintiffs' counsel requiring them to recommend 
the settlement to their future clients. Agreements like these raise 
serious ethical questions, which is why Owens Corning has conditioned 
its agreement on receiving a favorable opinion from an ethics expert 
and a judge chosen by the parties. But, even if the ethical problems 
can be overcome, such agreements are highly unstable. They can work in 
a region with a small number of lawyers who are willing to join 
together to limit asbestos plaintiffs' access to legal services (and 
who can prevent other lawyers from poaching on their territory). These 
conditions are rarely met, however. If the economics of asbestos 
litigation makes it profitable for lawyers to bring cases on behalf of 
the unimpaired, counsel who have signed futures agreements will find a 
way to withdraw from them, or the business will be captured by new 
entrants, who have not signed the previous agreement.
    This idea is proven by experience. In connection with the Georgine/
Amchem settlement, lawyers for plaintiffs signed side letters promising 
to recommend to their future clients a settlement framework which 
required impairment for compensation, promised tolling of the statute 
of limitations for unimpaired claimants and offered alternative dispute 
resolution to sick claimants. The plaintiffs' lawyers promised to 
recommend this framework even if the Georgine/Amchem class action were 
rejected by the courts. Nevertheless, most of the lawyers who signed 
those agreements have either repudiated or ignored them.
    Shouldn't legislation establish a fund, from which claimants are 
compensated, and to which defendants would contribute in accordance 
with an estimate of their liability?\8\ A global fund for asbestos 
claimants is an idea that has been included in previous legislative 
proposals and that I have favored in the past. In theory, a fund could 
reduce transactions costs by eliminating the issue of individual 
liability from each case, and would provide greater security by 
guaranteeing compensation in the event that all defendants responsible 
for a victim's injuries went bankrupt. I have come to believe, however, 
that a fund of this type is completely impractical.
---------------------------------------------------------------------------
    \8\ Some have maintained that this is a difference between S. 758 
and Georgine/Amchem. This is not the case. Georgine/Amchem did not 
establish a fund. Instead it established a cap on total liability, and 
further caps on the amounts that could be paid each year--a very 
different thing.
---------------------------------------------------------------------------
    First, as a result of OSHA regulation and the drastic reduction of 
asbestos use in the 1980s, practically all asbestos liability arises 
out of conduct that occurred long ago. For this reason, a simple 
assessment or taxation scheme, in which producers pay a tax into a fund 
or (as in workers compensation programs) provide insurance to cover 
their future liabilities, would not work. Rather, the ARC would be 
required to estimate the appropriate share of liability of hundreds of 
potentially responsible parties, participating in many different 
product and geographical markets as manufacturers, wholesalers, or 
distributors. Moreover, many companies will be defendants as a result 
of their ownership of premises, which does not involve product 
liability at all. This would be an endlessly complicated task.
    Second, the ARC would have to address the responsibility of 
liability insurance companies (with their complex patters of 
reinsurance). Insurance contracts cover ``damages for personal injury'' 
for which a particular insured company is found liable, and there is no 
guarantee an assessment for a government-created fund would be held to 
fit this definition. It is, of course, unthinkable to shift the burden 
of compensation from insurance companies to policy holders. That would 
not only be unfair to the policy holder but would drastically shrink 
the assets available for compensation of asbestos victims. On the other 
hand, a legislative fiat requiring insurance companies to make payments 
not founded by contract would ensure drawn out--and highly uncertain--
constitutional litigation.
    Finally, because of the dynamic nature of asbestos litigation, even 
if these obstacles could be overcome, the agency would be required to 
update and adjust the shares formula constantly. This task could prove 
as costly as, or more costly than, case-by-case adjudication.
    It is not an accident that previous administration systems that 
have established a compensation fund which assesses a tax on companies, 
such as the Black Lung Disability Trust Fund, assigned liability to the 
fund only prospectively.\9\ Although I continue to believe that in a 
perfect world a legislative compensation scheme would include a fund to 
avoid case-by-case adjudications of liability and to guarantee 
payments, such a fund is impractical in the real world. I note, in this 
regard, that the legislation preserves joint and several liability, 
which effective ensures full payment by a solvent defendant of an 
insolvent defendant's share even without a fund.
---------------------------------------------------------------------------
    \9\ Liability for cases of black lung for past workers was assigned 
to the taxpayers under Part B of the program. No one suggests that 
solution for asbestos liability.
---------------------------------------------------------------------------
    Is the system in S. 758 too complicated? The short answer is no. 
Most claimants will file their application, obtain determination of 
eligibility, and quickly settle their claim with the help of a 
mediator. The few claims that are not resolved in this way could be 
tried in a court, of the plaintiffs choice, or in a streamlined 
arbitration process. Nothing could be simpler.
    Obviously, the process would be more complex in a hard case. 
Fairness requires claimants to have a right of appeal to medical 
experts; and claimants who do not meet the standard criteria may have 
to demonstrate to an exceptional claims panel that they have a 
qualifying condition. These rights of appeal are perfectly 
straightforward and are required for fairness.
    Why not make the system wholly voluntary for claimants? S. 758 
places a strong emphasis on voluntariness. Thus, every claimant who 
demonstrates to the ARC that he has an eligible medical condition can 
freely choose whether to obtain an adjudication from an ARC arbitrator 
or to exit to the tort system. Indeed, the fact that ARC would always 
have to compete with the courts for the claimant's ``business'' would 
help ensure the quality of justice dispensed by the ARC. In this 
respect, administrative claims process established by the bill is far 
more voluntary than the private agreements that have been touted as an 
alternative by some of the bill's opponents.
    The one thing that cannot be voluntary, however, is the medical 
criteria. No solution to the asbestos litigation mess is possible 
unless the claims of the unimpaired are deferred. If the medical 
criteria were voluntary, claimants who met the criteria would use the 
cheaper and faster administrative system, while the unimpaired would 
proceed to court. The stream of asbestos cases would be unstaunched, 
and dissipation of resources to pay claimants with no physical 
impairment would continue unabated.

                               CONCLUSION
    S. 758 recognizes that social resources for the asbestos problem 
are not inexhaustible. The bill reflects a judgment that those 
resources should be spent on delivering full and prompt compensation to 
those who are, and will become, impaired by asbestos disease, and not 
dissipated on payments to those who are not sick and may never become 
sick, on punitive damages that seek retribution for the decisions of 
long-dead executives for conduct that took place decades ago, and on 
extraordinary transactions costs. I am convinced that that is the right 
judgment. The proposed Fairness in Asbestos Compensation Act is a truly 
innovative response to a crisis that has long evaded a solution. It 
deserves your careful consideration.
                                 ______
                                 

                    Professor Christopher Edley, Jr.

    Professor Christopher Edley, Jr. has taught at Harvard Law School 
since 1981. His book, Not All Black & White: Affirmative Action, Race 
and American Values (Hill & Wang), grew out of his work as special 
counsel to President Clinton, and director of the White House review of 
affirmative action. He is also the author of a treatise, Administrative 
Law: Rethinking Judicial Control of Bureaucracy (Yale University 
Press). He is founding co-director of The Civil Rights Project, a think 
tank based at Harvard University. Edley's academic work is primarily in 
administrative law, and in the role of law in the policymaking process, 
but has also included civil rights, federalism, budget policy, defense 
department procurement law, public interest litigation, and national 
security law. In June 1997 he was named, in a consulting capacity, 
Senior Advisor to President Clinton for the Race Initiative, and 
consultant to the President's Advisory Board on Racial Reconciliation. 
In May 1999, he was appointed to the United States Commission on Civil 
Rights by Representative Richard Gephardt, House of Representatives 
Democratic Leader.
    Following graduate school, Edley served in the Carter 
Administration as Assistant Director of the White House Domestic Policy 
Staff, with responsibility for welfare reform, social security and 
other antipoverty measures. He joined the Harvard Law School faculty in 
1981, and later served in the Dukakis presidential campaign as National 
Issues Director.
    Prof. Edley served in 1992 as a Senior Advisor on Economic Policy 
for the Clinton-Gore Presidential Transition, and then for two-and-one-
half years in the Clinton Administration. First, as Associate Director 
for Economics and Government at the White House Office of Management 
and Budget, he oversaw development of the budget and participated in 
most major legislative and policy initiatives for a broad portfolio of 
agencies, including the departments of HUD, Justice, Treasury, 
Transportation, Commerce, and over 40 autonomous agencies, among them 
the Securities & Exchange Commission, the Small Business 
Administration, the Federal Emergency Management Agency, the District 
of Columbia, the EEOC, the U.S. Commission on Civil Rights and the bank 
regulatory agencies.
    Then, in February of 1995, he was asked to delay his return to 
Harvard in order to serve as Special Counsel to the President of the 
United States. In that capacity he led the White House review of 
affirmative action programs and participated in developing the 
President's July 1995 ``Mend it, don't end it'' speech on affirmative 
action. Shortly thereafter, he resumed his professorship at Harvard Law 
School. Among his past activities, Professor Edley served for a time as 
a member of the editorial board of the Washington Post, and as vice 
chairman of the board of the Congressional Black Caucus Foundation. 
Among his current activities: member, Council on Foreign Relations; 
executive committee of the board of People for the American Way; 
Adjunct Scholar at the Urban Institute; member, National Academy of 
Public Administration; member, Board of Testing and Assessment of the 
National Research Council.
    Professor Edley is a 1973 graduate of Swarthmore College, where he 
received high honors in mathematics and economics; and a 1978 honors 
joint-degree graduate-of-the Kennedy School of Government (M.P.P.) and 
of Harvard Law School, where he was an editor of the Harvard Law 
Review. In May 1999, he received an Honorary Degree from Swarthmore 
College.

    Senator Grassley. Mr. Hiatt.

                 STATEMENT OF JONATHAN P. HIATT

    Mr. Hiatt. Thank you, Mr. Chairman and members of the 
subcommittee. The AFL-CIO's member unions represent, we 
believe, over 1 million active and retired workers who have 
been exposed to asbestos. Hundreds and thousands of America's 
working families are living with the deadly consequences of 
this exposure, acquired often by working in defense industries. 
Compounding this tragedy, the legal system has offered lengthy 
delays, followed by limited compensation, compensation that 
often comes too late.
    Nonetheless, the AFL-CIO, as well as the Building and 
Construction Trades Department of the AFL-CIO, are opposed to 
S. 758 because we strongly believe that the approach of this 
bill would not constitute an improvement, but would instead 
make matters even worse. Building and Construction Trades 
Department President Georgine has written a letter to that 
effect which is attached to my written testimony.
    The AFL-CIO, its member unions, and its affiliated State 
federations of labor have been actively involved in efforts 
over the last 10 years to craft solutions to the tragedy of 
asbestos. We have sought to work with responsible elements 
among the asbestos manufacturers, and we continue to be ready 
to engage with the industry.
    There is, we believe, a broad recognition that the plight 
of asbestos victims might be eased by developing alternative 
methods of resolving their claims. Certainly, there is a real 
need for innovative approaches to obtaining justice for 
asbestos victims.
    Let me begin by outlining why the bill before the 
subcommittee today takes us in the wrong direction, and then 
briefly describe what we believe to be a more promising 
approach.
    Any asbestos legislation should meet certain basic fairness 
tests. Among those are, first, that the legislation should 
preserve asbestos victims' access to the courts. Alternative 
dispute mechanisms should be just that, voluntary alternatives 
to the courts, a right to opt out, as you had in the Amchem and 
Fibreboard settlements.
    Second, any alternative claim procedure should be 
structured to lessen the delay and uncertainty facing all 
parties, not increase those matters. Third, any alternative 
claims procedures should be minimally adversarial and minimally 
legalistic. Any provisions that seek to alter the financing of 
asbestos liability should be comprehensive, transparent, and 
should add to victims' recoveries. And a bill should not 
substitute a new set of major transaction costs for the 
existing set.
    S. 758 is at odds with these principles. First, it 
restricts both asbestos victims' access to the courts and their 
substantive rights under State law. It requires asbestos 
victims to file a claim with a new quasi-governmental agency 
and only allows victims to proceed once they have obtained a 
certificate of medical eligibility.
    But having obtained the certificate wouldn't be enough. The 
bill would then impose mandatory mediation and would require 
that the asbestos victim obtain a release from mediation 
certificate. Once a victim reached a court, he or she would be 
barred from bringing class actions, joining parties, 
consolidating actions, or aggregating claims--all standard 
procedures for lessening the costs and time involved in tort 
litigation--unless they obtained the defendant's consent.
    Finally, victims would be barred from seeking punitive 
damages or relief for emotional distress, medical monitoring or 
surveillance, increased risk of cancer or other diseases. 
Ironically, as the bill shuts the courthouse door to asbestos 
victims, it creates a new Federal cause of action for asbestos 
manufacturers to allocate dispute administrative costs. It also 
threatens to transfer a new set of transaction costs, allowing, 
for example, companies to start litigating issues that for 
years have been considered resolved--liability issues, product 
identification issues, and others. Further, the procedures 
provided for are highly adversarial, allowing the companies to 
challenge claimants at virtually every stage.
    There has been much discussion of the relationship of S. 
758 and its predecessors to the Amchem settlement, the so-
called Georgine settlement. The crucial difference between the 
two is that the Amchem settlement was voluntary. This 
legislation is not. The AFL-CIO affiliates who were involved in 
Amchem settlement negotiations oppose this bill. Rather than 
proceed in the direction laid out here, we believe the 
committee would be better served by examining the approach now 
being worked out between the industry and plaintiffs' 
representatives in Louisiana.
    In that State, representatives of some of the major 
asbestos manufacturers like Owens Illinois, Owens Corning, and 
the attorneys representing a majority of Louisiana claimants 
have worked out a voluntary case resolution system. It defines 
levels of claims. It does include the medical criteria. It sets 
payments for levels of each type of claim. It creates certainty 
for all parties that is absent from these procedures. And 
though it is entirely voluntary, it allows for victims to 
receive certain and immediate payments, and for defendant 
companies to accurately estimate their exposures to claims.
    Finally, the GAF Corporation and its many representatives 
have been expressing their frustration at what they describe to 
be having to pay money to people who are not sick. The 
description of the unimpaired as people who are not sick can 
easily leave the mistaken impression that these people have not 
been injured.
    When GAF talks about the nonsick, they mean workers who 
have been exposed to asbestos and have suffered a medically-
detectable effect--for example, the presence of pleural 
thickening--but whose bodies don't yet display the outward sign 
of disease such as impaired breathing. But make no mistake, 
these people have, in fact, been damaged by exposure to 
asbestos and there are testing procedures that can and should 
measure that damage.
    We believe that the not yet impaired have been injured and 
should be entitled to some form of compensation under any 
alternative system. In some States such as Louisiana, the 
industry and responsible elements within the plaintiff's bar 
have worked out settlement procedures that provide the 
unimpaired with regular testing and modest compensation, while 
preserving their claims if they have been impaired. In 
contrast, this bill is designed to prevent the unimpaired from 
receiving any compensation of any kind from the asbestos 
industry.
    The subcommittee, in considering whether to create 
exceptions to State tort law, should be mindful of the 
incentives it creates for industrial decisionmakers. I am sure 
the subcommittee would not want to suggest to business 
executives making decisions in the future that if the scale of 
the risk their product poses is truly awe-inspiring, Congress 
will step in in the form of single-industry tort reform to save 
them from the consequences of their actions under State tort 
law.
    Thank you.
    [The prepared statement of Mr. Hiatt follows:]

                Prepared Statement of Jonathan P. Hiatt

                                SUMMARY
    The AFL-CIO is opposed to S. 758, the Fairness in Asbestos 
Compensation Act of 1999 as is the Building and Construction Trades 
Department of the AFL-CIO, which has been actively involved over the 
years in representing workers exposed to asbestos. However, the AFL-CIO 
does not believe the current state of asbestos litigation is ideal and 
is committed to working with all interested parties to seek solutions 
to problems of delay and inequities in the treatment of victims of 
asbestos.
    The AFL-CIO believes any asbestos legislation should meet certain 
basic fairness tests. Among these are:

   The legislation should preserve asbestos victims' access to 
        the courts--alternative dispute mechanisms should be just 
        that--voluntary alternatives to the courts.

   The legislation should preserve asbestos victims' access to 
        counsel.

   Any alternative claims procedure should be structured to 
        lessen the delay and uncertainty facing all parties.

   Any alternative claims procedure should be minimally 
        adversarial and minimally legalistic.

   Any provisions that seek to alter the financing of asbestos 
        liabilities should be comprehensive, transparent and should add 
        to victims' recoveries.

    The AFL-CIO believes that there is considerable promise in 
voluntary, state-based settlement agreements such as that worked out in 
Louisiana between leading asbestos manufacturers and the plaintiffs' 
bar in that state. These arrangements should be looked at carefully as 
models for any Congressional action.
                                 ______
                                 
    Good morning, Chairman Grassley. My name is Jonathan Hiatt, I am 
the General Counsel of the American Federation of Labor and Congress of 
Industrial Organizations. I would like to thank the Subcommittee for 
the opportunity to testify on the issue of federal legislation 
addressing the rights of workers suffering from exposure to asbestos.
    The Subcommittee has before it S. 758, the Fairness in Asbestos 
Compensation Act of 1999. The AFL-CIO is opposed to S. 758, as is the 
Building and Construction Trades Department of the AFL-CIO, which has 
been actively involved over the years in representing workers exposed 
to asbestos. I have attached to my written testimony a copy of a letter 
from Robert Georgine, the President of the Building and Construction 
Trades Department of the AFL-CIO, to Congressman Conyers, expressing 
his opposition to last year's House version of this bill, and a copy of 
a letter from William G. Bernard, President of the International 
Association of Heat & Frost Insulators and Asbestos Workers, to 
Chairman Hyde of the House Judiciary Committee expressing that union's 
opposition to H.R. 1283, the House version of S. 758.
    The AFL-CIO's member unions represent, we believe, over 1 million 
active and retired workers who have been exposed to asbestos. Hundreds 
of thousands of America's working families are living with the deadly 
consequences of this exposure, acquired often while working in defense 
industries. Compounding this tragedy, the legal system has offered 
lengthy delays followed by limited compensation, compensation that 
often comes too late.
    The AFL-CIO, its member unions, and its affiliated state 
federations of labor have been actively involved in efforts over the 
last ten years to craft solutions to the tragedy of asbestos. We have 
sought to work with responsible elements among the asbestos 
manufacturers, and we continue to be ready to engage in dialogue with 
the industry. There is, we believe, a broad recognition that the plight 
of asbestos victims might be eased by developing alternative methods of 
resolving their claims. Currently efforts are underway among the 
parties to asbestos litigation to craft innovative voluntary 
alternative claims procedures at the state level. One such agreement 
has been entered into in Louisiana. These efforts should be allowed to 
develop and be tested.
    The exposure of millions of working Americans to asbestos is one of 
the largest torts in the nation's history. It has led to hundreds of 
thousands of claims, and will lead to more. The judiciary has asked 
several times for Congress to consider how this case load might be 
managed, most recently in last summer's Fibreboard decision.\1\ 
However, the need for innovative approaches to obtaining justice for 
asbestos victims must not be the basis for denying those same people 
effective access to our courts. The AFL-CIO is eager to work with the 
Subcommittee to craft such an innovative approach, but we must begin by 
outlining why the bill before the Subcommittee today takes us in the 
wrong direction.
---------------------------------------------------------------------------
    \1\ Esteban Ortiz et. al v. Fibreboard Corporation et. al. No. 97-
1704 (1999). See The Report of the Judicial Conference Ad Hoc Committee 
on Asbestos Litigation (March 1991); Amchem Products, Inc. v. Windsor, 
138 L. Ed. 2d 689, at 716 (1997).
---------------------------------------------------------------------------
    Any asbestos legislation should meet certain basic fairness tests. 
Among these are:

   The legislation should preserve asbestos victims' access to 
        the courts--alternative dispute mechanisms should be just 
        that--voluntary alternatives to the courts. The legislation 
        should preserve asbestos victims' access to counsel.

   Any alternative claims procedure should be structured to 
        lessen the delay and uncertainty facing all parties.

   Any alternative claims procedure should be minimally 
        adversarial and minimally legalistic.

   Any provisions that seek to alter the financing of asbestos 
        liabilities should be comprehensive, transparent and should add 
        to victims' recoveries.

    I would like to briefly discuss why S. 758 is at odds with each of 
these principles.
    S. 758 dramatically restricts both asbestos victims' access to the 
courts and their substantive rights under state law. It requires 
asbestos victims to file a claim with a new quasi-governmental agency, 
the Asbestos Resolution Corporation (``ARC''), and only allows victims 
to proceed once they have obtained a ``certificate of medical 
eligibility.'' Without this certificate, a victim cannot seek justice 
in the courts. But having obtained a certificate would not be enough. 
S. 758 would then impose mandatory mediation and would require the 
asbestos victim obtain a ``release from mediation'' certificate. Once a 
victim or, more likely in view of the delays these procedures would 
create, the victims' estate reached a court, they would be barred from 
bringing class actions, joining parties, consolidating actions, or 
aggregating claims--all standard procedures for lessening the costs and 
time involved in tort litigation--unless they obtained the defendants' 
consent.
    These procedural barriers significantly diminish asbestos victims 
current rights under state law. But the bill goes further. It would bar 
any recovery unless victims could prove they had the specific medical 
criteria listed in the bill. And finally, victims would be barred from 
seeking punitive damages or relief for emotional distress, medical 
monitoring or surveillance, increased risk of cancer or other diseases.
    Ironically, as the bill shuts the courthouse doors to asbestos 
victims, it creates a new federal cause of action for asbestos 
manufacturers to bring to allocate disputed administrative costs.
    As to the right to counsel, we are not supportive of excessive 
attorneys' fees, but we are all too well aware that unless assured of 
adequate risk-adjusted compensation, attorneys will not represent 
clients who are unable to pay hourly rates. S. 758 limits attorneys' 
fees to levels below those customarily awarded by courts in contingent 
litigation and the bars on consolidating cases effectively act as a 
barrier to economical representation of low-paid workers in asbestos 
cases. This would be appropriate if the bill envisioned a voluntary, 
non-adversarial process that allowed asbestos victims to obtain justice 
with limited assistance from counsel and limited fact finding.
    But S. 758 does just the opposite. The certification procedure is 
substantively rigid and technically demanding, and the mediation and 
arbitration procedures are highly adversarial and procedurally dense, 
with financial penalties for taking certain procedural and substantive 
positions in the process. No one would be well advised to enter into 
such proceedings without counsel.
    To take one example, to get through mandatory mediation, the 
asbestos victim would have to provide a detailed, company-specific 
exposure history, which would be subject to challenge by industry 
counterparties. This procedure, rather than eliminating a major cause 
of litigation expense, adds to it, by requiring asbestos victims to 
prove their exposure histories twice--once in mediation, then again in 
court if mediation fails. Ironically, this procedure appears to make no 
sense if the Act's intention is to address the enormous transaction 
costs of attempting to precisely prove all the sources of each 
individual victim's asbestos exposure.
    Finally, as to financing, to the extent S. 758 acts to limit the 
liability of asbestos manufacturers, it may merely succeed in 
transferring that liability to employers under the workers' 
compensation system, and to workers' health funds. Where the federal 
government is the employer, as is the case in federal shipyards, this 
will result in a direct transfer of financial responsibility from the 
asbestos manufacturers to the federal government. Where the employer is 
a federal contractor, such as in the private shipbuilding industry, the 
transfer will be indirect, but just as real. While there may be a role 
for the federal government in assisting asbestos victims, it should not 
be to use federal dollars to substitute for asbestos manufacturer 
dollars. In addition, S. 758 does not meet the comprehensiveness test 
to the extent that it fails to address issues such as the failure of 
the insurance industry to honor its contractual commitments to the 
asbestos manufacturers.
    There has been much discussion of the relationship of S. 758 and 
its predecessors to the Amchem settlement. The crucial difference 
between the two is that the Amchem settlement was voluntary, this 
legislation is not. The AFL-CIO affiliates who were involved in the 
Amchem settlement negotiations oppose S. 758.
    The AFL-CIO's opposition to S. 758 should not be interpreted to 
mean that we believe the current state of affairs in asbestos 
litigation is optimal. We are deeply concerned about the collusion of 
certain attorneys and asbestos manufacturers in ``screening programs'' 
that settle cases for workers exposed to asbestos before they know 
whether they will suffer serious health consequences.
    But rather than proceed in the direction laid out in S. 758, the 
AFL-CIO believes the Committee would be better served by examining the 
approach now being worked out between the industry and plaintiffs' 
representatives in Louisiana. In that state, representatives of some of 
the major asbestos manufacturers like Owens-Illinois and Owens-Corning 
and the attorneys representing a majority of Louisiana claimants have 
worked out a voluntary case resolution system. This system defines 
three levels of claims, and sets payment levels for each type of claim, 
together with provisions allowing for higher level claims if the 
applicants' condition worsens. It creates certainty for all parties 
that is absent from the procedures in S. 758. Though entirely 
voluntary, it allows for victims to receive certain and immediate 
payments, and for defendant companies to accurately estimate their 
exposure to claims.
    We believe a program like this would be the appropriate context for 
limiting attorneys fees, since participants in this program would not 
need extensive adversarial representation or need to engage in time-
consuming discovery. Similarly, the Louisiana program should do much to 
address the screening abuses, as it provides rights to additional 
compensation to those who have been exposed to asbestos but have not 
yet become ill.
    A copy of the Louisiana agreement is attached to my written 
testimony.
    Any voluntary national program along these lines would have to 
address certain issues that do not arise in a single state-such as the 
variation in award levels from state to state. It would also need to be 
constructed on the understanding that for a voluntary ADR program to 
succeed, it must offer value to both sides in potential litigation--
value in the form of mutually reduced costs and reduced uncertainty. 
Such a program cannot merely be a vehicle for irresponsible elements in 
the industry to continue to fight core liability issues that have 
really long been settled in the hope of winning incremental victories 
through delay.
    Finally, the GAF Corporation and its many representatives have 
often expressed their frustration at what they describe as ``having to 
pay money to people who are not sick.'' The description of the 
unimpaired as ``people who are not sick'' can easily leave the mistaken 
impression that these people have not been injured. When GAF talks 
about the ``non-sick'' they mean workers who have been exposed to 
asbestos and have suffered a medically detectable effect--for example 
the presence of pleural thickening--but whose bodies do not yet display 
the outward signs of disease such as impaired breathing. But make no 
mistake--these people have in fact been damaged by exposure to asbestos 
and there are testing procedures that can measure that damage.
    The AFL-CIO believes that the ``unimpaired'' have been injured, and 
should be entitled to some form of compensation. In some states, 
including Louisiana, the industry and responsible elements within the 
plaintiff's bar have worked out settlement procedures that provide the 
unimpaired with regular testing and modest compensation, while 
preserving their claims if they become impaired. In contrast, S. 758 
appears designed to prevent the ``unimpaired'' from receiving any 
compensation of any kind from the asbestos industry.
    Before I close, I would like to make two larger systemic points. 
This Subcommittee in considering whether to create exceptions to state 
tort law, should be mindful of the incentives it creates for industrial 
decision makers. I am sure the Subcommittee would not want to suggest 
to business executives making decisions in the future that if the scale 
of the risk their product poses is truly awe inspiring, Congress will 
step in to save them from the consequences of their actions under state 
tort law.
    In addition, the AFL-CIO has always opposed efforts to deny working 
families access to state courts. One such effort was defeated last year 
in the Senate.\2\ S. 758's mandatory
---------------------------------------------------------------------------
    \2\ The Products Liability Reform Act of 1997, S. 648. provisions 
are in effect an effort at tort reform one class of plaintiffs at a 
time. We oppose so-called tort reform both in aggregate and in bite 
sized pieces.
---------------------------------------------------------------------------
    In conclusion, the AFL-CIO and its affiliates are ready to work 
with all concerned parties, and especially with this Subcommittee, to 
seek creative solutions in this area that are respectful of the rights 
of asbestos victims. We thank you for the opportunity to testify here 
today.
                                 ______
                                 
       Building and Construction Trades Department,
                              American Federation of Labor,
                                   Washington, DC, August 10, 1998.
Hon. John Conyers, Jr.,
House of Representatives,
Washington, DC.
    Dear Congressman Conyers: Your statement in the Congressional 
Record of June 25, 1998 agreeing to cosponsor H.R. 3905, the ``Fairness 
in Asbestos Compensation Act of 1998'', has been brought to my 
attention. For the reasons set forth in the enclosed list of 
``Objections to H.R. 3905'', the Building and Construction Trades 
Department, AFL-CIO, strongly opposes this bill.
    It is apparent to me that erroneous information was provided to you 
concerning our position on the issues addressed by H.R. 3905 and its 
relationship to the settlement agreement reviewed by the Supreme Court 
in Amchem Products. Inc. v. Windsor. The settlement agreement in the 
Windsor case was voluntarily negotiated by several members of the 
plaintiffs' trial bar who over the years have represented thousands of 
building trades union members. The agreement applied only to those 
members who wished to be covered by its terms. Many members made the 
decision to be included in the covered class, and by lending my support 
to the settlement agreement I felt I was supporting their decisions 
while, at the same time, not interfering with the decisions of members 
who decided not to be included and, thereby, to retain all their rights 
in the tort system. Many members also decided not to be included. I did 
not directly participate in the negotiation of that settlement 
agreement, and to the best of my recollection, organized labor became 
involved only after the main agreement was negotiated between 
plaintiffs' attorneys and attorneys for the CCR companies. This 
involvement resulted in certain amendments to the agreement which 
provided organized labor with a role in the implementation and 
monitoring of the agreement.
    H.R. 3905 is a completely different matter. In the first place, it 
is, obviously, a piece of federal legislation rather than the 
settlement of a law suit, and it addresses certain issues, such as 
particularized medical criteria, which, in my view, should not be 
addressed by federal legislation. Second, H.R. 3905 is not voluntary. 
It would apply to every occupational asbestos victim in the future. It 
would even apply to those victims who already have filed lawsuits which 
are pending in the federal and state courts. Third, H.R. 3905 
substantially curtails victim' tort rights and remedies. Fourth, it 
requires victims who wish to use the tort system to pursue first an 
administrative process which is lengthy, costly, adversarial, 
cumbersome and technical. Our objections in these regards are set forth 
in the enclosure.
    I do not disagree that asbestos victims deserve, at their option, 
an alternative to the tort system because the tort system can often be 
lengthy, costly, adversarial, cumbersome and technical. However, I also 
know that many thousands of asbestos victims have received justice by 
reason of this tort system, and that many more victims will do so in 
the future.
    The Building and Construction Trades Department is prepared, as 
always, to discuss with any well-meaning person, organization, or group 
viable voluntary alternatives to the tort system for asbestos victims 
which will promote their interests in securing timely and adequate 
compensation for their injuries.
    With best wishes, I am.
            Sincerely,
                                        Robert A. Georgine,
                                                         President.
                                 ______
                                 

  Objections to H.R. 3905 (``Fairness in Asbestos Compensation Act of 
                                1998'')

    1. The bill eliminates a claimant's right to sue in the tort system 
unless the claimant first files a claim with the Asbestos Resolution 
Corporation (ARC), submits information to ARC, and awaits a 
determination by ARC on medical eligibility.
    2. The bill eliminates a claimant's right to sue in the tort system 
unless the claimant is successful in having ARC issue a ``certificate 
of medical eligibility''. This is true even with regard to pending 
civil actions which have not gone to trial prior to the ``operational 
date'' of the Act (the date on which ARC certifies that it is 
operational or the first business day following the seventh month after 
the date of enactment whichever comes first).
    3. The bill legislates specific and detailed medical criteria to 
govern ARC's determination.
    4. Even if a claimant is issued a certificate of medical 
eligibility, the claimant cannot sue in the tort system unless he first 
goes through a lengthy mediation procedure, and is successful in having 
ARC issue a ``release from mediation''.
    5. In the mediation procedure, the claimant is required to provide 
a detailed and company-specific exposure history. This defeats the 
purpose of having an alternative, expeditious compensation system which 
compensates claimants with asbestos-related diseases, regardless of 
their ability to identify the manufacturer of the asbestos to which 
they were exposed, or to recall the particulars about each and every 
job at which they were exposed.
    6. The mediation and voluntary arbitration procedures established 
by the bill are adversarial, cumbersome and extremely technical. This 
will make the process costly and time consuming and will require every 
claimant to be represented by an attorney. It would be preferable to 
make such an optional alternative process non-adversarial and 
streamlined by having companies pay monies into the facility on the 
basis of some formula (perhaps size and ability to pay and/or the 
formula set forth in the bill governing the assessment of 
administrative costs) for distribution to the claimants. This way, the 
companies would not participate in the proceedings, the proceedings 
would not be adversarial, cumbersome, or technical, and proof of 
particularized exposure histories would be unnecessary. Also, perhaps 
the claims facility can have on staff an independent group of attorneys 
who are available at the option of claimants to assist claimants at no 
cost or a minimal cost.
    7. The bill details each and every procedure in the administrative 
claims process. It would be better to leave the function of 
establishing rules of procedure to the administrators of the process.
    8. The bill allows companies to join forces in the claims process 
but bars consolidation of the claims of a group of claimants.
    9. Under the medical criteria established in the bill, exposures 
below OSHA PELs which were in effect in prior times but were later 
discredited by new scientific knowledge are disregarded in whole or in 
part.
    10. Under the medical criteria for lung cancer established in the 
bill, the installation, repair or removal of asbestos products in a 
shipyard during World War II is given more credit than the 
installation, repair or removal of asbestos products on a construction 
project.
    11. The bill establishes a new civil action in the courts of the 
United States to handle disputes between companies, or between 
companies and ARC, regarding the assessment of administrative costs. 
These new civil actions are likely to consume resources which should be 
applied to the purpose of the claims process (i.e. compensation to 
claimants).
    12. To succeed in their civil actions, claimants are required to 
prove (a second time) the existence of the medical criteria set forth 
in the bill.
    13. Even in pending civil actions that have gone to trial, but have 
not resulted in final non-appealable judgments, claimants are required 
to prove the existence of the legislated medical criteria.
    14. Courts entertaining civil actions by claimants are precluded 
from utilizing well-established procedures to expedite the handling of 
multiple-claimant cases, including class actions, joinder of parties, 
consolidation of actions, aggregation of claims, and extrapolations.
    15. Courts are restricted in providing damages or other relief to 
claimants for emotional distress, or any other form of mental or 
emotional harm, or for medical monitoring or surveillance.
    16. Courts are precluded from providing damages or other relief to 
claimants based on valid state law claims for increased risk of cancer 
or other diseases.
    17. Courts are precluded from providing punitive damages to 
claimants in appropriate cases.
    18. The doctrine of joint and several liability may be adversely 
affected by the Bill.
                                 ______
                                 
               International Association of Heat & 
               Frost Insulators & Asbestos Workers,
                           Office of the General President,
                                      Washington, DC, May 20, 1999.
The Hon. Henry Hyde, Chairman,
House Judiciary Committee,
Rayburn House Office Building, Washington, DC.
    Dear Chairman Hyde: The International Association of Heat and Frost 
Insulators and Asbestos Workers strongly opposes H.R. 1283, the 
``Fairness in Asbestos Compensation Act of 1999 for the following 
reasons:

    1. The bill eliminates a claimant's right to sue in the tort system 
unless the claimant first files a claim with the AsbestosResolution 
Corporation (ARC), submits information to ARC, and awaits a 
determination by ARC on medical eligibility.
    2. The bill eliminates a claimant's right to sue in the tort system 
unless the claimant is successful in having ARC issue a``certificate of 
medical eligibility''. This is true even with regard to pending civil 
actions which have not gone to trial prior to the ``operational, date'' 
of the Act.
    3. The bill legislates specific and detailed medical criteria to 
govern ARCs determination.
    4. Even if a claimant is issued a certificate of medical 
eligibility, the claimant cannot sue in the tort system unless he first 
goes through a lengthy mediation procedure, and is successful in having 
ARC issue a ``release from mediation''.
    5. In the mediation procedure, the claimant is required to provide 
a detailed and company-specific exposure history. This defeats the 
purpose of having an alternative, expeditious compensation system which 
compensates claimants with asbestos-related diseases, regardless of 
their ability to identify the manufacturer of the asbestos to which 
they were exposed, or to recall the particulars about each and every 
job at which they were exposed.
    6. The mediation and voluntary arbitration procedures established 
by the bill are adversarial, cumbersome and extremely technical. This 
will make the process costly and time consuming and will require every 
claimant to be represented by an attorney. It would be preferable to 
make the process non-adversarial and streamlined by having companies 
pay monies into the facility on the basis of some formula (perhaps size 
and ability to pay and/or the formula set forth in the bill governing 
the assessment of administrative costs) for distribution to the 
claimants. This way, the companies would not participate in the 
proceedings, the proceedings would not be adversarial cumbersome, or 
technical, and proof of particularized exposure histories would be 
unnecessary. Also, perhaps the claims facility can have on staff an 
independent group of attorneys who are available at the option of 
claimants to assist claimants at no cost or a minimal cost.
    7. The bill details each and every procedure in the administrative 
claim process. It would be better to leave the function of establishing 
rules of procedure to the administrators of the process.
    8. S. The bill allows companies to join forces in the claims 
process but bars consolidation of the claims of a group of claimants.
    9. Under the medical criteria established in the bill, exposures 
below OSHA PELs which were in effect in prior times but were later 
discredited by new scientific knowledge are disregarded in whole or in 
part.
    10. Under the medical criteria for lung cancer established in the 
bill, the installation, repair or removal of asbestos products in a 
shipyard during World War II is given more credit than the 
installation, repair or removal of asbestos on a construction project.
    11. The bill establishes a new civil action in the courts of the 
United States to handle disputes between companies, or between 
companies and ARC, regarding the assessment of administrative costs. 
These new civil actions are likely to consume resources which should be 
applied to the compensation of claimants.
    12. To succeed in their civil actions, claimants are required to 
prove (a second time) the existence of the medical criteria set forth 
in the bill.
    13. Even in pending civil actions that have gone to trial, but have 
not resulted in final non-appealable judgments, claimants are required 
to prove the existence of the legislated criteria.
    14. Courts entertaining civil actions by claimants are precluded 
from utilizing well-established procedures to expedite the handling of 
multiple-claimant cases, including class actions, joinder of parties, 
consolidation of actions, aggregation of claims, and extrapolations.
    15. Courts are restricted in providing damages or other relief to 
claimants for emotional distress, or any other form of mental or 
emotional harm, or for medical monitoring or surveillance.
    16. Courts are precluded from providing damages or other relief to 
claimants based on valid state law claims for increased risk of cancer 
or other diseases.
    17. Courts are precluded from providing punitive damages to 
claimants in appropriate cases.
    Asbestos victims deserve, at their option, an alternative to the 
tort system because the tort system can often be lengthy, costly, 
adversarial, cumbersome and technical. However, it is also true that 
many thousands of asbestos victims have received justice by reason of 
this tort system, and that many more victims will do so in the future.
    Our Union is prepared, as always, to discuss with any well-meaning 
person, organization, or group viable voluntary alternatives to the 
tort system for asbestos victims which will promote their interests in 
securing timely and adequate compensation for their injuries.
    With kind regards, I am
            Sincerely yours,
                                        William G. Bernard,
                                                 General President.
    Letter to go to all members of the Senate and House Judiciary 
Committees and sponsors of the bills as follows:

Senate Sponsors:

Ashcroft  Judiciary                 Grassley  Judiciary
Hatch  Judiciary                    Torricelli  Judiciary
Dodd                                Robert Smith, NH  Judiciary
Sessions  Judiciary                 Schumer  Judiciary

Lieberman
House Sponsors:

Hyde  Judiciary                     Bonilla
James Moran, VA                     Norwood
Richard Armey                       Folley
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    Senator Grassley. Mr. Heyman.

                 STATEMENT OF SAMUEL J. HEYMAN

    Mr. Heyman. Good morning. GAF's involvement as an asbestos 
defendant is typical of the story of hundreds of companies who 
find themselves enmeshed today in this asbestos nightmare. 
GAF's only connection to the production of asbestos insulation 
occurred when it acquired in 1967 Ruberoid, which included at 
the time a small noncore business which produced an asbestos 
insulation product, Calcilite.
    In point of fact, the U.S. Navy had asked Ruberoid during 
World War II to develop this product for use as an insulation 
material in its ships. After the U.S. Public Health Service 
concluded that Calcilite was safe, Ruberoid began to supply the 
product to our country's Naval shipyards pursuant to 
requisition in accordance with Government specifications, and a 
not insubstantial portion of GAF's Calcilite sales were made to 
the U.S. Government.
    After publication in the late 1960's of medical studies 
concerning the dangers of asbestos, GAF designed an asbestos-
free product, but the Navy rejected it. Whereupon, GAF closed 
its Calcilite operation and has not produced these products for 
some 30 years now.
    Although there is no one with our company today who had 
responsibility for the production of this product, we have 
taken responsibility for what went before. We regret more than 
I can say the harm caused, and we are committed to fair, full 
and prompt compensation for the sick.
    Since the 1970's, GAF has paid out as a result of the 
Ruberoid acquisition whose asbestos insulation business has 
profits over a 30-year period, 3 years under the GAF ownership 
and 27 years under the Ruberoid ownership, no more than $1 
million and sales of only $30 million--we have paid out now 
more than $1.3 billion in asbestos claims and expenses, a 
substantial portion of which has gone to legal fees and people 
who are not sick.
    We come here to Congress today not in search of a bailout 
or to avoid responsibility, but because our experience has 
underscored that asbestos litigation has defied all other 
solutions. One might logically ask, why do we settle the 
nonsick cases. And I would cite for you an example which is 
typical of what we face.
    We currently have some 5,000 cases which have been 
consolidated in one local courtroom. By way of background, you 
should know that GAF and other co-defendants, after having 
attempted to settle, went to trial on 12 other cases in this 
same courtroom over a year ago. And the 12 plaintiffs, most of 
whom were not sick, received a jury award of $48 million. Now, 
emboldened by that result, asbestos lawyers are looking for $1 
billion to settle the remaining cases.
    Let's assume, which I think is not far from the fact, that 
of the 5,000 cases, 1,000 involve sick claimants, while the 
balance are not sick. Asbestos lawyers take the position that 
if the defendants are not willing to settle the nonsick cases, 
they will take the sick cases to trial. And your lawyer reports 
that there is a high probability of the jury awarding punishing 
compensatory awards to the nonsick, and even the possibility of 
a punitive damage award, which could bankrupt any defendant. 
What would you do? Would you pay legalized blackmail and settle 
the nonsick cases, or would you bet the company and the jobs 
and careers of your more than 3,400 employees around the 
country on what happens in a courtroom in any one of dozens of 
hostile jurisdictions around our country? Let me just share 
with you that whatever the choice may be, given the real world 
of asbestos litigation today, it will be a wrong one.
    The coalition has in recent months published in the media a 
series of reports which have outlined in some detail a pattern 
of the most serious asbestos lawyer misconduct, which 
incidentally have gone unrebutted to date, often at the expense 
of their own clients. We have done this in order to provide a 
sense of what happens in the asbestos world today and why 
asbestos victims and defendants can no longer afford the status 
quo.
    I should like to thank Chairman Grassley and ranking member 
Torricelli for inviting me to testify here this morning. 
Finally, there is a reason why this legislation has been 
gaining extraordinary momentum in the Congress and bipartisan 
support. We have an asbestos litigation system today where no 
one is being accorded due process. This is not a Republican, 
Democratic, liberal, or conservative issue. Rather, it is a 
question of elemental fairness.
    And there is a clear policy decision to be made. At the end 
of the day, do we want our duly-elected Congress to resolve 
this critical national problem or should we leave it to a 
handful of asbestos lawyers to continue to bend the system to 
their own ends?
    Thank you.
    Senator Grassley. Thank you, Mr. Heyman.
    [The prepared statement of Mr. Heyman follows:]

                 Prepared Statement of Samuel J. Heyman

                                SUMMARY
    GAF Corporation's involvement as an asbestos defendant is typical 
of the story of the hundreds of companies, ranging from the largest 
Fortune 500 corporations to small, local businesses, who today find 
themselves enmeshed in the asbestos litigation crisis. GAF's only 
connection to the production of asbestos insulation occurred when it 
acquired, in 1967, a company engaged primarily in the manufacture of 
roofing materials but which also operated a small non-core business 
which produced an asbestos insulation product, Calcilite, a product GAF 
ceased manufacturing entirely several years after this acquisition.
    Although this asbestos insulation business had profits, we would 
estimate, of no more than $1 million aggregate over the 30 year history 
of the business, GAF has now paid out over $1.3 billion in claims and 
expenses, a substantial portion of which has gone to people who are not 
sick. Although there is no one left with our Company today who had 
responsibility for the acquisition of the business or the manufacturing 
or marketing of the product, you should know that we take full 
responsibility for what went before at GAF. We regret, more than I can 
say, the harm these products have caused thousands of Americans, and we 
are absolutely committed to making sure that anyone who may become 
genuinely sick as a result of our products will be fairly, fully, and 
promptly compensated.
    We come here today not in search of a bailout or to avoid 
responsibility for any harm our products have caused. Nor do we seek 
legislation which would impose caps on our liability or provide the 
right to continue to manufacture and market a dangerous product. 
Rather, our former industry has taken the position that it accepts its 
responsibility to fully, fairly, and promptly compensate those who are 
sick and were exposed to its products.
    Our extensive experience in litigating, and dealing with, these 
hundreds of thousands of claims over the past quarter century has now 
clearly revealed that the only solution to this crisis lies in 
congressional legislation.
    Finally, while our focus is primarily on the critical importance of 
reform, for sick claimants both now and in the future, we make no bones 
about the fact that this legislation will also be helpful for the many 
hundreds of companies caught up in this asbestos litigation mess. 
Companies currently facing asbestos litigation are estimated to employ 
more than 5 million Americans, have payrolls in the billions of 
dollars, and we would hope that the interests of defendants, their 
employees, shareholders, the communities who depend on them, and 
elemental fairness are worthy of Congress' consideration as well.
                                 ______
                                 
    Good morning. My name is Samuel Heyman. I'm Chairman and Chief 
Executive Officer of GAF.
    GAF's involvement as an asbestos defendant is typical of the story 
of hundreds of companies, who today find themselves enmeshed in this 
asbestos nightmare. GAF's only connection to the production of asbestos 
insulation occurred when it acquired, in 1967, Ruberoid, which included 
at the time a small, marginally profitable, non-core business, whose 
sales were no more than 1 percent of the Company's total sales or 
approximately $1 million per annum, which produced an asbestos 
insulation product, Calcilite.
    In point of fact, the United States Navy had asked Ruberoid during 
World War II to develop this product for use as an insulation material 
in its ships. After the United States Public Health Service concluded 
that Calcilite was safe, Ruberoid began to supply the product to our 
naval shipyards around the country, pursuant to requisition in 
accordance with government specifications, and a not insubstantial 
portion of GAF's total Calcilite sales over the years were made to the 
United States Government.
    Shortly after the Ruberoid acquisition, GAF designed an asbestos-
free product, but the Navy rejected it. And finally, after an important 
medical study by Dr. Selikoff was published in the late 60's outlining 
the dangers of asbestos, GAF promptly closed its asbestos insulation 
operation and has never produced asbestos insulation products again.
    I do not recount this background to justify in any way our 
Company's manufacture of asbestos products. For although GAF has not 
produced these asbestos products for almost 30 years, and there is no 
one left with our Company today who had responsibility for the 
acquisition of the business, or the production or marketing of the 
product, you should know that we have taken full responsibility for 
what went before at GAF. We regret, more than I can say, the harm these 
products have caused thousands of Americans, and we are absolutely 
committed to making sure than anyone who may become genuinely sick as a 
result of our products will be fairly, fully, and promptly compensated.
    Since the late 1970's, when asbestos litigation as we know it today 
began, GAF has paid out, as a result of the Ruberoid acquisition, whose 
asbestos insulation business had profits over a 30 year period of no 
more, we would estimate, than an aggregate total of $1 million, and 
sales of only approximately $30 million during the same period, more 
than $1.3 billion in asbestos claims and expenses, a substantial 
portion of which has gone to people who are not sick and will never 
become sick. Despite both GAF and the industry having settled almost 
300,000 cases, more than 200,000 asbestos cases remain pending 
nationwide, 100,000 of which involve claims against GAF, with new 
claims being filed now at the rate of 50,000 per annum--with more to 
come and no end in sight.
    We are here today not in search of a bailout in any way, shape or 
form. Nor do we seek legislation that would impose caps on our 
liability or provide the right to continue to manufacture and market a 
dangerous product, like another industry sought to do here in the 
Senate last year. Rather, asbestos co-defendants have taken the 
consistent, simple, straightforward position that they accept their 
responsibility to fully, fairly, and promptly compensate those who are 
sick and were exposed to their products, with the proviso that those 
who are not sick be required to wait until they become sick. And we 
come here to the Senate because our experience over the last 20 years 
has underscored that asbestos litigation has defied all other solution.
    In this connection, we have tried, on the one hand, resisting the 
non-sick claims through litigation and, at other times, aggressively 
settling these claims in an attempt to substantially reduce the backlog 
of cases against our Company--each of which strategies I might add have 
proven disastrous and have only encouraged the further escalation of 
non-sick claims.
    We have been asked by members of the Senate over the last year--why 
do we settle the non-sick cases? Why don't we just draw aline in the 
sand and refuse to settle these cases? And in response, I would cite 
for you a concrete example of a current situation we face, which by the 
way is not unlike others we have encountered before, and ask you all to 
think what you would do if you were a CEO.
    We currently have some 5,000 cases, which have been consolidated in 
one state courtroom in Mississippi. By way of background, you should 
know that, after attempting unsuccessfully to settle with the sick 
plaintiffs, GAF and other co-defendants went to trial on 12 other cases 
in this same courtroom only a year ago, and the 12 plaintiffs, a number 
of whom were not sick, received a jury award of $48 million. And now, 
emboldened by that result, the asbestos lawyers are looking for a 
billion dollars to settle the remaining cases. And now let's assume--
and I do not know this for a fact, but it can't be far from the truth--
that of the 5,000 cases, no more than 2,500 involve sick claimants, 
while at least 2,500, and probably more, are unimpaired.
    In a recent effort to settle the cases on the courthouse steps 
before trial, the asbestos lawyers take the position, consistent with 
others they have taken in similar situations around the country, that 
if the defendants are not willing to settle the 2,500 non-sick cases, 
they will insist on taking to trial the 2,500 sick cases. And your 
lawyer relates, let's suppose, that there is a high probability of the 
jury awarding punishing, compensatory awards to the non-impaired, as 
well as the sick, and even the possibility of a punitive damage award 
which could bankrupt any defendant. And given that situation, what 
would you do? Would you settle the non-meritorious cases, which are 
inherently worth nothing, or would you ``bet the company'', and the 
jobs and careers of your more than 3,400 employees around the country, 
on what happens in one of thousands of potentially hostile 
jurisdictions across the country.
    Let me just tell you that whatever the answer of a CEO in this 
situation is, it will be wrong--because of the simple fact that both 
choices are simply intolerable. All of which underscores that short of 
legislation, asbestos litigation defies all conventional solution.
    As you may know, the Coalition for Asbestos Resolution has 
published, in Roll Call and other publications, 10 well researched and 
documented pieces. We have disclosed in these articles a pattern of the 
most serious misconduct on the part of asbestos lawyers (which 
incidentally has gone unrebutted to date), often at the expense of even 
their own clients, in order to provide some sense of what happens in 
the asbestos world today and why neither plaintiffs nor defendants can 
any longer afford the status quo.
    First, and undoubtedly most important to this Committee, because 
this legislation is primarily a victims' rights bill, is that these 
asbestos lawyers regularly exploit their own clients in violation of 
their professional and ethical obligations, including:

  (1) Charging their own clients exorbitant contingent legal fees 
    (usually 40 percent of the recovery) in cases where there is little 
    or no contingency or risk of non-recovery. This has resulted in 
    effective hourly rates of sometimes more than $10,000 per hour, 
    thereby contributing to a system today where more than 60 cents of 
    every dollar spent on asbestos litigation is consumed by legal fees 
    and transaction costs.

  (2) Holding their own genuinely sick clients ``hostage'' without 
    their knowledge or consent, often for years, by refusing to settle 
    their cases (resulting in many sick claimants dying before 
    receiving compensation) while assembling huge inventories of non-
    sick claimants, as in the Mississippi situation to which I have 
    previously referred.

  (3) Arbitrary allocation by asbestos lawyers of aggregate settlement 
    amounts among their clients. These allocations, carried out without 
    oversight or review, are made often with little regard to 
    individual conditions or damages, creating a situation rife with 
    cronyism, favoritism, and exploitation.

  (4) Since the pool of resources available to claimants is limited, 
    asbestos lawyer schemes to extort huge settlements for non-sick 
    claimants constitute an enormous diversion of resources from those 
    claimants who are sick, or may become sick in the future, thereby 
    jeopardizing compensation for the truly deserving.

    Finally, while our focus is primarily on the critical importance of 
reform for sick claimants, we would hope that the interests of these 
businesses, their employees, shareholders, the communities who depend 
on them, and elemental fairness are worthy of the Senate's 
consideration as well.

    Senator Grassley. Now, Ms. Kerrigan.

                  STATEMENT OF KAREN KERRIGAN

    Ms. Kerrigan. Good morning, Chairman Grassley and other 
members of the subcommittee. On behalf of the Small Business 
Survival Committee and its more than 50,000 members nationwide, 
let me express my appreciation for giving our organization, and 
more significantly small business, a voice and an opportunity 
to testify before this subcommittee today on the Fairness in 
Asbestos Compensation Act of 1999.
    SBSC is a national nonprofit, nonpartisan small business 
advocacy organization dedicated to advancing policies and 
legislation that encourage entrepreneurship, economic 
opportunity, job creation and innovation. Again, my name is 
Karen Kerrigan and I chair SBSC.
    Twice since 1997, in Amchem Products v. Windsor and Ortiz 
v. Fibreboard Corp., the Supreme Court has called for national 
legislation to address the asbestos litigation quagmire. 
Twenty-five companies have gone bankrupt or are in 
reorganization as a result of the massive caseload, leaving 
defendants with an increasingly tenuous relationship to 
asbestos holding the bag.
    Pressure to maintain a full and steady stream of money for 
what appears to be an unending flow of asbestos claims and 
lawsuits will inevitably force plaintiffs' attorneys to cast a 
wider net in an effort to identify additional companies to 
support the exorbitant financial requirements of current and 
future tort claims.
    It is only a matter of time that the asbestos litigation 
crisis is directly extended to America's small business sector. 
Already in some jurisdictions, automobile distributorships and 
repair shops, construction contractors, and other types of 
small businesses are routinely named in asbestos cases. Let me 
also add that many small businesses and their economic health 
are directly tied to the health of larger defendants whose 
bankruptcy would seriously disrupt small business operations, 
as well as their workforce.
    The perpetuation of this serious legal problem will lead to 
the snaring of many more small businesses into a system that 
has been deftly manipulated and abused, which has led to an 
overburdening of the court system, unacceptably high 
transaction costs, and most unfortunately nonsick claimants 
benefiting at the expense of the truly sick.
    Our membership consists of very hard-working men and women, 
family-owned businesses and the like who generate jobs in their 
communities and provide a solid financial and tax base in those 
communities. I fail to understand how potentially bankrupting 
these businesses equates to justice. Should the small hardware 
shop owner be forced into bankruptcy because they unknowingly 
sold a small amount of an asbestos-containing product 25 or 30 
years ago? Again, is bankrupting these small firms and the loss 
of jobs for their employees really an act of justice?
    The members of my organization, as is the case with most 
small businesses throughout the country, do not have the luxury 
of counsel at the ready, nor can many of them afford the 
insurance coverage that would be necessary to fend off an 
asbestos lawsuit. Similar to tactics used by the asbestos trial 
lawyers where the court system is overwhelmed to force case 
consolidation and then settlement, small businesses too are 
forced into a corner. They simply do not have the resources to 
fight costly and protracted legal battles.
    For this reason, we strongly support S. 758. This 
legislative remedy, whose concept has been strongly supported 
and suggested by the U.S. Supreme Court, represents a fair and 
efficient claim and recovery program, a system in which the 
true victims of asbestos can receive speedy compensation, the 
claims of people who are not sick can be deferred, courts can 
be unburdened, and defendant companies can remain solvent long 
enough to pay individuals who may become sick in the future.
    Again, no less than the Supreme Court of the United States 
has expressed strong support for the creation of a national 
asbestos claims facility to solve the asbestos litigation 
crisis. The ``elephantine mass''--I guess our two favorite 
words at the committee hearing today--as described by the 
Supreme Court, needs to get out of the courts. People who are 
victims need to be addressed on an individual basis for justice 
to be properly administered and served.
    Unless this solution is enacted, I have no doubt that more 
and more small businesses will become targets and unwilling 
players in the currently dysfunctional system. Currently, 60 
cents of every dollar spent on asbestos litigation goes toward 
attorneys' fees and transaction costs instead of victims. 
Moreover, many victims wait years to receive settlements that 
have little or no relation to their specific illness.
    The Fairness in Asbestos Compensation Act is an effective 
approach to address the current crisis. The bill creates a win/
win situation. It is provictim, procommon sense, good for the 
U.S. Court System, and a sound approach for American business, 
both small and large.
    I have been working with dozens of associations 
representing hundreds of thousands of businesses nationwide to 
increase the visibility of this issue. The momentum is on our 
side, and I urge the committee to act quickly on this issue.
    Thank you very much.
    Senator Grassley. Thank you, Ms. Kerrigan.
    [The prepared statement of Ms. Kerrigan follows:]

                  Prepared Statement of Karen Kerrigan

                                SUMMARY
    Mr. Chairman and members of the committee, I am Karen Kerrigan, 
Chairman of the Small Business Survival Committee (SBSC). On behalf of 
SBSC and its more than 50,000 small business members across the nation, 
I appreciate this opportunity to testify before the Senate Judiciary 
Subcommittee on Administrative Oversight and the Courts regarding the 
Fairness in Asbestos Compensation Act of 1999 (S. 758). SBSC is a 
national nonpartisan small business advocacy organization dedicated to 
advancing policies and legislation that encourages entrepreneurship, 
economic opportunity, job-creation and innovation.
    Twice since 1997--in Amchem Products v. Windsor and Ortiz v. 
Fibreboard Corp.--the Supreme Court has called for national legislation 
to address the asbestos litigation quagmire. Moreover Amchem Justice 
Breyer observed that over 50 percent of all asbestos claims involved 
pleural plaques which do not affect a person's breathing in any way. 
Although tens of millions of Americans have been exposed to asbestos, 
medical experts have testified before Congress that most will not 
contract an asbestos-related ailment. Despite this fact, tens of 
thousands will seek to recover damages this year even though they are 
not sick. Twenty-five companies have already gone bankrupt or are in 
reorganization as a result of the massive caseload, leaving defendants 
with an increasingly tenuous relationship to asbestos holding the bag.
    For this reason, the Small Business Survival Committee strongly 
supports S. 758, the Fairness in Asbestos Compensation Act of 1999. Our 
membership consists of hard-working men and women who generate jobs in 
their communities. More than 90 percent of our members have less than 
50 employees. Why should they wake up each morning fearing thousands of 
meritless lawsuits filed against them? Should mom-and-pop hardware 
stores in the heartland be forced into bankruptcy because they sold a 
small amount of an asbestos-containing product twenty-five years ago? 
Is bankruptcy really justice? Already in some jurisdictions automobile 
distributorships and repair shops, construction contractors, and other 
small businesses are routinely named in asbestos cases. The handwriting 
is on the wall for small businesses everywhere. The U.S. legal system 
should not be abused and manipulated in such a way that allows for the 
perpetuation and potential deepening of this legal quagmire.

                         BACKGROUND INFORMATION
    SBSC believes there is a better way to resolve these cases--a way 
in which the true victims of asbestos can receive compensation; the 
claims of people who are not sick can be deferred; courts can be 
unburdened and defendant companies can remain solvent long enough to 
pay individuals who become sick in the future. The members of my 
organization typically do not have an army of lawyers at the ready, nor 
do they have the insurance coverage necessary to fend off thousands 
upon thousands of asbestos lawsuits. Yet they know that the asbestos 
lawyers will not stop until they can no longer find anyone to sue.
    The Committee does not need to take my word for it, however, nor 
the words of the defendant companies. They need only look to the 
Supreme Court, where on two occasions, strong support was expressed for 
the creation of a national asbestos claims facility to solve the 
asbestos litigation crisis. In 1997's decision on Amchem v. Windsor, 
Justice Ginsburg has stated that ``the argument is sensibly made that a 
nationwide administrative claims processing regime would provide the 
most secure, fair, and efficient means of compensating victims of 
asbestos exposure.'' In the recent Ortiz v. Fibreboard ruling, the 
justices went so far as to refer to asbestos litigation as an 
``elephantine mass'' which ``defies customary judicial administration 
and calls for national legislation.''
    The drain on the court system is a problem in its own right, with 
200,000 asbestos cases pending and 50,000 additional claims filed each 
year. Simply screening out the non-sick claimants would alleviate part 
of the administrative burden, allowing resources to be used for matters 
more pressing. The current process affords a great deal of power to 
asbestos trial attorneys, who reap a windfall by overwhelming the court 
system. They file hundreds or even thousands of cases in individual 
state courts and use these caseloads to leverage massive settlements 
from defendant companies. Instead of encouraging defendant companies to 
focus settlement dollars on sick claimants, the true victims of 
asbestos exposure, plaintiffs' attorneys force defendants to settle 
thousands of non-sick claims or risk going to trial in mass 
consolidations in which a company's survival may be at stake. Using 
sick claimants as a trap to collect billions of dollars for the non-
sick does a great disservice to the true victims and to the system.
    After more than 30 years of constant litigation, claims against the 
former asbestos manufacturers can be considered a mature tort. The 
question before us today is how to put a system in place to 
differentiate between who is sick and who is not sick and to make sure 
that those who are impaired by asbestos-related diseases receive just 
compensation.
    Unless a solution is enacted, I have no doubt that more and more 
small businesses will become targets. Currently, 60 cents of every 
dollar spent on asbestos litigation goes toward attorneys fees and 
transaction costs instead of the victims. Moreover, many victims wait 
years to receive settlements that have little relation to their 
specific illness. It is a system that the Supreme Court has emphasized 
is beyond judicial repair and one that only Congress has the authority 
to fix.
    S. 758 is designed to answer the court's calls. Based on the tenets 
of the Amchem settlement, S. 758 incorporates medical criteria to 
determine the claimants who have impairments resulting from asbestos 
exposure. As a result, this legislation would correct today's most 
pressing problem relating to asbestos litigation--the high volume non-
sick clogging the system. To eliminate pressures to file cases 
prematurely, S. 758 waives the statute of limitations. Moreover, it 
outlaws general releases that require people with asbestosis to give up 
their right to further compensation if they contract cancer in the 
future.
    The decades long history of asbestos litigation has proven that 
litigating 200,000 cases is not an option. Similarly, creating massive 
class action settlements is also off the table. The only viable 
alternative is the creation of a system outside of the courts, a system 
where victims are screened by objective medical criteria and paid 
promptly for their specific illnesses.
    The Fairness in Asbestos Compensation Act is an effective approach 
to address this crisis. This bill creates a win-win situation: it is 
good for asbestos victims, the U.S. court system and American 
businesses both large and small. I have been working with dozens of 
associations representing thousands of businesses nationwide to 
increase the visibility of this crisis. The momentum is on our side and 
I urge this committee to act expeditiously on S. 758.
    Again, thank you for the opportunity to appear before you today in 
strong support of this measure. I look forward to your questions.

    Senator Grassley. Now, Mr. Middleton.

              STATEMENT OF RICHARD MIDDLETON, JR.

    Mr. Middleton. Thank you, Mr. Chairman. Members of the 
committee, central to the civil justice system is the idea that 
corporations always want to be considered the same before 
juries as individual persons. The incongruity that we are faced 
with is that we have here in this age of personal 
responsibility a few corporations, led by GAF, who want to 
avoid their personal responsibility for what they did.
    With regard to betting jobs that we heard from the other 
member of the panel, Mr. Heyman, in fact, GAF and its 
predecessor bet the jobs of their employees when they hid 
medical reports on how sick they were and didn't tell them so 
that they would continue to work and continued to be exposed to 
those products for years. Juries all over this country have 
listened to the evidence against GAF and other corporations and 
have decided that, in fact, the companies were wrong, that they 
were guilty of gross misconduct, gross negligence, and, in 
fact, deceit and hiding of the truth.
    With regard to this legislation, one thing that I haven't 
heard any discussion of today is the dormant docket situation. 
State and Federal courts all across this country have set up 
dormant dockets so that the people who met medical criteria in 
the specific States who are being diagnosed with asbestos-
related diseases have their cases filed to preserve the 
statute. They are then placed in a dormant situation which is 
no expense to the court. No administrative delays are 
encountered, and they get to come back when they become sick, 
this allowing the truly very serious cases to be heard by the 
courts, except for the fact that there is no logjam because in 
1998 we know, and it has gone undisputed, that only 55 cases 
were, in fact, tried to a jury nationwide. So there is no 
problem in getting cases before a jury and, in fact, the cases 
are being settled.
    Throughout this country, jurors and courts, both State and 
Federal, have established product exposure levels, what would 
be allowed in as evidence concerning liability, what shares of 
liability the various companies have in different locales based 
upon their product sales, and the amount of damages that are 
appropriate.
    Many manufacturers such as Owens Corning and Owens Illinois 
and Babcock and Wilcox, who were the largest boiler 
manufacturer in World War II, have recognized their 
responsibility to compensate victims. In fact, Owens Corning 
settled 217,000 cases by private means, not through resort to 
Government interference or any bureaucratic development that 
has to take place. They did it because they recognized where 
they were in the litigation and they decided to settle those 
claims. It was good for employers and it is good for the 
manufacturers because these settlements that are private and 
that are ongoing allow the companies to continue in existence.
    The other problem is that employers who have to, under 
State workers compensation systems, pay out workers comp 
benefits, the criteria is different than what is under this 
bill. If you take the State of Virginia, the largest employer, 
Newport News Shipbuilding and Dry Dock Company, they have to 
pay out on cases that would not be considered to be legitimate 
claims under this bill. Those are medical expenses that are 
paid.
    Under the private agreements that have been achieved in 
this case, and not as a result of any clogging of the court 
system, those employers not only receive reimbursement for 
medical expenses already paid, they also receive credits for 
medical expenses that will be possibly incurred in the future.
    With regard to the Ortiz case, the Supreme Court, if you 
look at the entire case, made the quote and it came out of 
Chief Justice Rehnquist's panel from 1992. That panel found, 
based on a RAND study of 1985 that included statistics from 
1981 through 1983, that the courts were clogged. Those 
statistics are 16 years stale.
    This system works. The dormant dockets that have been set 
up by the courts allow the serious cases to go forward. The 
truth is that the green-carding system, the dormant docket 
system, works at the State and the Federal levels. The serious 
cases go first.
    GAF is virtually alone in refusing to accept its 
responsibility. What they are trying to do is to change the 
focus; engage in personal attacks on individuals; deny the 
medical truth that is established according to State law, State 
by State; eviscerate the laws of those States; and turn the 
concept of federalism completely on its head. I have to wonder, 
in light of cases that the Supreme Court has already stated 
they are going to review this term, if Congress has any ability 
to act in this particular area. And the women and violence 
legislation which they are going to review is but one example.
    The difference in the Amchem settlement is it was 
voluntary. There was money actually put on the table and there 
was prompt payment to be considered. Under this system, Mr. 
Chairman and members of the panel, in fact, there is no money 
on the table. This creates restricted medical criteria that 
violates the State laws. It creates longer delays before the 
people can then go into the court system they should have 
access to. It puts no money on the table. It blames others 
through the art of deflection for the harm that they caused, 
and it keeps these cases away from the jurors and the citizens 
of this country.
    In conclusion, what it does is create artificial, and 
indeed superficial barriers to the administration of true 
justice. I would state this, that ATLA, the Association of 
Trial Lawyers of America, has published three very flexible 
criteria which says if there is a system that should be 
considered, that system should be voluntary. It should put 
money on the table. It should result in the consideration of 
absolute liability by the manufacturers, not the reservation of 
all of their defenses while this bureaucratic administrative 
procedure is gone through. In fact, it should be something 
other than a full employment bill for the lobbyists here in the 
Beltway.
    Thank you, Mr. Chairman.
    Senator Grassley. Thank you, Mr. Middleton.
    [The prepared statement of Mr. Middleton follows:]

     Prepared Statement of Richard Middleton, Jr. on Behalf of the 
                Association of Trail Lawyers of America

    Mr. Chairman and members of the Committee, my name is Richard 
Middleton, Jr., and I am a practicing attorney from Savannah, Georgia. 
I am a senior trial attorney in the firm of Middleton, Mathis, Adams & 
Tate, P.C., with offices in Atlanta and Savannah, Georgia. I also have 
the very high honor of serving presently as the President of the 
Association of Trial Lawyers of America (ATLA). Mr. Chairman, thank you 
very much for this opportunity to present ATLA's views in opposition to 
S. 758, the proposed asbestos compensation legislation.
    ATLA believes that an objective evaluation of the history and 
present state of asbestos litigation will lead the Committee to 
conclude that:

  1. Workers who have been injured by exposure to asbestos in the 
    workplace are entitled to receive compensation in the court system. 
    There is no basis for providing legal relief to the companies who 
    are responsible for their injuries.

  2. S.758 does not, as its proponents suggest, codify the settlement 
    agreement in the Amchem litigation, and the bill is not supported 
    by the parties who participated in that settlement.

  3. S. 758 is a bad bill that would deny compensation to tens of 
    thousands of workers with cancer and disabling lung disease from 
    workplace asbestos exposure and would provide a financial windfall 
    to companies which willfully mislead the public about asbestos 
    problems.

  4. The courts are well equipped to handle the pending and future 
    asbestos cases that will require trial. A litigation crisis, as 
    that term is usually understood, does not exist. In 1998, only 55 
    asbestos trials, involving 125 individuals, were completed in all 
    the states and federal courts, a 45 percent decline from 1997. 5.

  5. Both the state and federal courts, and the parties themselves, 
    have, over time, devised a variety of mechanisms for processing and 
    settling asbestos cases in a timely fashion. Over 25,000 cases were 
    resolved last year by voluntarily negotiated settlement agreement, 
    providing much needed relief to victims and their families. These 
    private settlement agreements will continue to provide compensation 
    to tens of thousands of victims each year and keep the docket 
    burden of the courts to a minimum well into the future, unless 
    Congress reduces or eliminates the incentive for defendant 
    companies to settle.

  6. S. 758 would negatively impact and, in many cases, overturn the 
    various state laws that have induced settlements. The bill's 
    restrictive medical criteria would eliminate compensation for 
    thousands of cases that are presently compensable under state laws. 
    It would also delay the processing of all pending cases for many 
    months, if not years, and bring all existing settlement activity to 
    a standstill.

  7. It would be a mistake to interpret the Supreme Court's call last 
    term in Ortiz v. Fibreboard for a ``national asbestos dispute 
    resolution scheme'' as support for anything like S. 758. What the 
    Court made reference to in Ortiz was a system modeled on the 
    recommendations of the Judicial Conference's Ad Hoc Committee on 
    Asbestos Litigation. That panel suggested creation of an 
    administrative compensation mechanism that would control all of the 
    defendants' available assets and apply principles of absolute 
    liability in order to compensate claimants. Such a model bears no 
    resemblance to the system proposed in S. 758, which provides no 
    compensation to any asbestos victim.

  8. There are serious 10th Amendment problems with any federal 
    legislation which, like S. 758, rewrite selective portions of state 
    tort law and eliminate a claimant's existing right to seek 
    compensation through the tort system without providing an 
    alternative remedy. Although a constitutionally permissible 
    comprehensive federal asbestos compensation program could be 
    written, compensation levels approximating the value of litigated 
    claims would require tax and spending decisions by Congress which 
    it has been loath to undertake in the past.

    Twenty years ago, thousands of injured claimants had difficulty 
obtaining relief in the courts because the asbestos industry was 
involved in a lengthy and complex legal struggle with plaintiffs over 
responsibility for the diseases caused by their products. The issues 
that animated that litigation have long ago been resolved in favor of 
the claimants. Liability of the defendant companies is no longer 
seriously disputed. Juries across this country have demonstrated time 
and again that they will find the defendant companies liable at trial 
and impose substantial damages for their conduct.
    The last time Congress looked at this issue, in 1991-1992, the 
concept of a ``litigation crisis'' received support from a number of 
academic and official sources, notably from the Rand Institute of Civil 
Justice and later from the U.S. Judicial Conference Ad Hoc Committee on 
Asbestos Litigation. During the period in the 1980s that these groups 
studied asbestos litigation, the courts were, in fact, having 
difficulty handling the caseload or providing adequate and timely 
compensation for victims. This problem was caused by intense litigation 
over issues of causation, insurance coverage and apportionment of 
liability.
    Today the problems which the courts confronted during the last 
decade have largely been eliminated and the industry and the claimants 
have by and large accommodated themselves to the risk of litigation. 
Most of the major defendants have entered into master settlement 
agreements, jurisdiction by jurisdiction, that establish criteria for 
settlement based on the law, the medical standards of proof in each 
jurisdiction and the historical record of trial success. Tens of 
thousands of cases are settled every year, providing compensation to 
victims and their families in a fraction of the time it would take to 
process claims under the labyrinth proposed in S. 758.
    As a result, it is simply inaccurate to any longer claim that 
asbestos litigation is placing an undue burden on the courts. As the 
statistics clearly show, claims filed do not translate into cases 
tried. The vast majority of cases do not take up the time of the 
courts. Although many new cases are filed each year, large numbers are 
placed on inactive dockets and most other claims are settled under 
private agreements. In fact, according to Mealys Asbestos Litigation 
Reporter, during 1998 only 55 asbestos cases involving 125 individuals 
proceeded to verdict in the fifty states and all federal courts, a 45 
percent decline from 1997--and clearly a negligible number.
    The best way to ensure the continued orderly processing of future 
asbestos cases is to leave matters to the parties and to the state and 
federal courts under existing law. The way to end progress, produce an 
administrative nightmare, and create new and lengthy delay for injured 
victims is to consolidate all asbestos claims in one federally mandated 
facility.

                           UNIMPAIRED CLAIMS
    The lynchpin of the argument for the mandated medical criteria and 
other devices to limit access to the courts contained in S. 758 is that 
too many of the new claims filed each year involve conditions that have 
not yet met the defendants' definition of impairment--a definition of 
impairment that is less favorable to workers than accepted medical 
standards and the standards that have been adopted by most of the state 
and federal courts. By seeking to classify all claims filed by asbestos 
workers diagnosed with pleural plaques, pleural thickening or pleural 
calcification, and even many cases of asbestosis as unimpaired, this 
argument inaccurately suggests that none of these claims are deserving 
of compensation. Adoption of the medical criteria in S. 758 is not 
medically justified and would do great injustice to a significant 
number of claimants.
    Virtually all of the states permit recovery only by those asbestos 
workers who have been diagnosed with physical symptoms of disease. In 
Metro North Commuter Railroad Company v. Buckley (521 U.S. 424, 1997), 
the Supreme Court held that mere exposure to asbestos without 
manifesting injury would not support a recovery under federal law. More 
recently, the Texas State Supreme Court similarly ruled that 
compensation is not available without a physical injury. Temple--Inland 
Products v. Carter (1999 W.L. 254718). These courts identified only two 
jurisdictions where lower courts permit such claims.
    Elsewhere, the courts, by local rule or otherwise, and the parties 
have consistently taken steps to prioritize and manage the asbestos 
cases on their dockets. In the federal courts, the area of primary 
responsibility of this Committee, all asbestos cases are consolidated 
before a single federal judge who has administratively resolved tens of 
thousands of cases and remanded only a nominal number back to transfer 
courts for trial. Obviously, these cases do not impose a burden on the 
federal courts. Finally, in many other jurisdictions claims by these 
workers are placed on inactive dockets or pleural registers which 
prevent them from becoming a drain on the resources of either the 
courts or the defendants.

                    S. 758 AND THE AMCHEM SETTLEMENT
    S. 758 does not, as its proponents suggest, codify the settlement 
agreement in the Amchem litigation, and the bill is not supported by 
the parties who participated in that settlement. Amchem Products, Inc., 
et al. v. Windsor, et al., 117 S.Ct. 2231 (1997).
    The basic consideration for the Amchem class action settlement was 
that if the settlement criteria were met, the claimant would receive 
prompt payment from the settling defendants. The defendants established 
a fund in excess of $1 billion to immediately pay claims to qualified 
claimants.
    In contrast, S. 758 fails to ensure prompt payment of any money to 
asbestos victims. The bill provides no guarantee of any payment at all 
to any injured worker. Amchem required that every qualified asbestos 
claim be paid within nine months. S. 758, however, includes no time 
period guaranteeing any resolutions or prompt payment of claims. 
Furthermore, Amchem applied to only a small portion of defendants (less 
than 25 percent) who agreed to share liability. Joint and several 
liability remained available as to defendants not included in Amchem. 
But, S. 758 eliminates joint and several liability for all asbestos 
claims.
    S. 758 is also less favorable to asbestos victims than Amchem and 
will unreasonably restrict access to the courts. In Amchem, plaintiffs 
waived the right to seek punitive damages in exchange for defendants' 
waiver of all traditional defenses to asbestos claims. S. 758, on the 
other hand, eliminates plaintiffs' right to seek punitive damages but 
provides plaintiffs nothing in exchange for these lost legal rights. 
Defendants retain the right to raise virtually all of their traditional 
defenses, including state of the art, comparative negligence, 
contributory negligence, intervening negligence, superseding 
negligence, employer fault, notice, and others. Amchem, in addition, 
applied only to those asbestos manufacturers and plaintiffs who agreed 
to it. Existing plaintiffs who did not agree to its terms were free to 
opt out of the settlement and to rely on the tort system for redress. 
Indeed, over 170,000 workers filed opt out notices from the settlement. 
S. 758 contains no such opt out provision. Its restrictions apply to 
all cases, both present and future. In fact, the bill applies 
retroactively to all cases pending in federal or state courts for which 
a final judgment has not been entered, including jury verdicts and 
unpaid settlements.
    In short, S. 758 stands the Amchem settlement on its head. It 
eliminates all of the benefit of the bargain that was offered to 
claimants, but grants none of the benefit that was provided in that 
settlement.
       s. 758--the fairness in asbestos compensation act of 1999
    The Fairness in Asbestos Compensation Act of 1999 is little more 
than an attempt by a small minority of the asbestos defendants to limit 
and, in most cases, eliminate their liability for payment of damages to 
both present and future victims of asbestos disease. S. 758 requires 
every claimant to meet the bill's medical criteria before compensation 
may even be demanded and before he or she has the right to file a 
lawsuit in any jurisdiction in the United States, even though such 
claims may meet state law requirements. As such, the bill represents an 
unprecedented assault on American citizens' common law right of access 
to state courts.
    By design, this legislation would eliminate most of the pending 
claims in the United States, create procedural delays for those claims 
that remain, impose numerous legal obstacles in the path of any 
claimant who is bold enough to prosecute a claim, and would, at the 
same time, obliterate existing incentives for defendants to settle 
cases.
    The bill creates the Asbestos Resolution Corporation, which is not 
a compensation board but simply a screening device to decide who may 
file law suits against asbestos defendants. Unless a claimant obtains a 
certificate of medical eligibility, access to the courts is completely 
foreclosed. Even when an individual receives a certificate of 
eligibility, no award or benefit is paid. That certificate merely 
entitles a claimant to participate in a lengthy and inconclusive 
mediation and arbitration procedure after which the claimant will 
likely be left with nothing--no money, no good faith, no timely 
settlement offer. The Corporation's procedures are open-ended and 
certain to provide almost endless opportunity for delay.
    The medical criteria themselves are arbitrary, do not represent. 
mainstream scientific opinion, and would leave thousands of desperately 
ill individuals with no legal remedies whatsoever. Most draconian is 
Section 203, which requires 15 years of exposure to asbestos prior to 
1979 for eligibility for non-asbestosis lung disease. OSHA standards 
did not adequately protect workers from significant asbestos cancer 
risk until 1994, and millions of workers continue to be exposed to this 
day. Yet the bill conclusively determines that asbestos exposures after 
1979 are not harmful.
    Lung cancer victims are denied eligibility unless twelve years have 
elapsed from their first exposure. In addition, a cancer victim must 
show either asbestos or bilateral pleural thickening before a 
certificate of eligibility is awarded. This is contrary to the 
mainstream medical literature on this issue. The consensus view is that 
asbestosis is not a precondition required before lung cancer can be 
attributed to asbestos. Numerous scientific studies indicate that less 
than five years latency to asbestos can cause asbestos-related lung 
cancer. A twelve year latency period is required to establish 
eligibility for non-malignant asbestos-related diseases. This is 
particularly unfair in light of the heavy exposures that have occurred 
in recent years as workers have removed asbestos from public buildings, 
and since the scientific literature has established that de minimis 
exposure to asbestos can cause the most lethal disease.
    Finally, even victims who successfully run the gauntlet of the 
bill's procedures and meet its medical criteria get nothing but the 
right to re-litigate their case in court under highly prejudicial 
procedural rules. Moreover, because the legislation applies to any case 
that has not gone to final judgment by the date of enactment, the bill 
would retroactively nullify awards in cases that have already been 
resolved by jury verdict or which are on appeal.
    Taken together, the administrative labyrinth established under the 
bill and the highly prejudicial changes in tort law will make pursuing 
asbestos-related damage claims substantially more time consuming and 
expensive, will greatly reduced the number of claims that defendants 
face and will significantly reduce the value of those claims.
    It is most important for this committee to realize that procedural 
changes in S. 758 inevitably will condemn the courts to relive the 
problems that created courthouse gridlock in the 1980s. In the early 
1980s, the courts were unable to resolve asbestos cases because the 
industry used procedural tools available to it at that time to delay 
trials and avoid settlement. It is axiomatic that delay serves the 
interests of the industry defendants. It allows firms to pay very few 
claims and permits them to use their superior economic power to force 
claimants to accept discounted settlements. Backlogs of thousands of 
cases are the inevitable result when legislation tips the scale in 
favor of the defendants' side of the bargaining table. By superimposing 
a bureaucratic, adversarial administrative mechanism on top of a 
reconstituted, pro-defendant court regime, S. 758 will recreate a court 
crisis which the parties themselves have already resolved. To cite but 
one of many concrete examples, by eliminating the risk of joint and 
several liability S. 758 will encourage each defendant to litigate its 
individual market share liability in individual cases, thereby greatly 
increasing the number and duration of litigated claims.
    In short, S. 758 would eliminate any incentive for defendants to 
continue their negotiated settlement agreements. These agreements 
ensure prompt, voluntary payment to tens of thousands of presently-
impaired victims. Although this year's bill (in contrast to last year's 
version) appears to preserve the ability of the parties to enter 
private settlements, it nevertheless destroys the incentives for 
defendants to do so.

ORTIZ V. FIBREBOARD--THE SUPREME COURT DID NOT ASK CONGRESS TO PASS S. 
                                  758
    Proponents of S. 758 suggest that the Supreme Court decision in 
Ortiz v. Fibreboard (No. 97-1704, June 23, 1999) constitutes an 
endorsement of their proposal.
    What the court had in mind in asking Congress to consider ``* * * 
creating a national asbestos dispute resolution scheme * * *'' is a far 
cry from the legislation we are considering here today. In fact, a full 
reading of the opinion makes it clear that S. 758 is wholly 
inconsistent with the goals enumerated by the court.
    In Ortiz, the court spelled out its views by reference to the 
report of the Judicial Conference Ad Hoc Committee on Asbestos 
Litigation, a panel of federal judges appointed by Chief Justice 
Rehnquist to study the problem. Among other things, that panel 
recommended consolidation of all asbestos claims and defendants assets 
before a single judicial forum, called for elimination of burdensome 
proof requirements and for imposition of absolute liability on the 
defendants--all in order to increase and accelerate plaintiff 
compensation. In contrast, S. 758 purposely creates new time-consuming 
procedural and bureaucratic hurdles, and erases existing legal rights--
all in order to avoid paying compensation. Clearly, the administrative 
scheme proposed in S. 758 bears no resemblance to the Judicial panel's 
recommendations or the goals of the Ortiz court.

                        CONSTITUTIONAL PROBLEMS
    In Ortiz, the Supreme Court also made clear that it would not 
countenance any scheme that compromises America's Seventh Amendment 
right to trial by jury or the sovereignty of the states under our 
federal system.
    The peculiar structure of S. 758 requires this Committee carefully 
to consider its potential constitutional defects. The most serious 
areas of concern include the rewriting of state tort law and those 
provisions which eliminate the right to seek compensation through the 
courts without providing an alternative remedy such as a fund for the 
payment of claims. As the Supreme Court indicated in Duke Power Co. v. 
Carolina Environment Study Group, 428 U.S. 59, 86-87, 91-93 (1978), and 
in other decisions, the abolition of common law tort remedies without 
providing alternative means of redress for injury violates due process. 
That appears to be precisely what S. 758 does.
    A second serious constitutional defect involves the rights of those 
asbestos victims who surmount the bill's procedural obstacles, obtain a 
certificate of medical eligibility and file a civil action. When they 
finally arrive at state court, they will find that their state's tort 
law has been rewritten specifically to limit their rights and that 
these changes were imposed by Congress, rather than their state courts 
or legislatures. While Congress may create a federal asbestos cause of 
action, it cannot write state tort law that must be applied by the 
states. As the Supreme Court Stated in Erie Railroad Co. v. Tompkins, 
304 U.S. 64, 78 (1938), the cornerstone of federalism in our civil 
justice system:

          There is no federal general common law. Congress has no power 
        to declare substantive rules of common law applicable in a 
        State, whether they be local in their nature or ``general,'' be 
        they commercial law or part of the law of torts.''
          * * * * *

    Senator Grassley. Now, Mr. Mallett.

                  STATEMENT OF CONRAD MALLETT

    Mr. Mallett. Mr. Chairman, thank you very much. My name is 
Conrad Mallett. I appreciate the subcommittee's invitation to 
testify on Senate bill 758. This bill answers the U.S. Supreme 
Court's call for national legislation to address the 
elephantine mass of asbestos cases and provide a fairer, less 
expensive, more certain and faster way of providing 
compensation to people who are impaired by asbestos-related 
disease.
    I am appearing today in my capacity as the chairman of the 
Coalition for Asbestos Resolution. The Coalition encompasses 
over 200 companies and organizations nationwide interested in 
asbestos reform, including the U.S. Chamber of Commerce, the 
Small Business Survival Committee, the National Roofing and 
Contractors Association, Citizens Against Government Waste, the 
Business Council of Alabama, and the Petroleum Makers of Iowa, 
among hundreds of others.
    The breadth of the Coalition bears witness to the fact that 
asbestos litigation is no longer the problem of 10 or 20 core 
defendants. Any business, from a local automobile distributor 
to a giant oil or chemical company, can find itself a defendant 
in an asbestos case. Indeed, some who never thought of 
themselves as asbestos defendants, like a small hardware store 
owner in Saginaw, MI, can face virtually overnight the threat 
of compensatory and punitive damages amounting to tens of 
millions of dollars.
    Last February, I agreed to serve as the Coalition's 
chairman in part because of my abiding commitment to improve 
this Nation's justice system. I served the people of the State 
of Michigan for 8 years as a justice of the Michigan Supreme 
Court, the last 2 as the chief justice. During my tenure on my 
State's highest court, I was keenly aware of my responsibility 
to be sure the court system functioned efficiently and fairly.
    The Coalition's mission is to support congressional 
legislation to enact a workable administrative solution to the 
asbestos litigation crisis. And make no mistake, the enormous 
volume of asbestos cases is now more than ever impacting the 
quality of justice in our Federal and State court systems.
    In 1991, the year before I was first elected to the 
Michigan Supreme Court, the Judicial Conference of the United 
States estimated a backlog of 90,000 cases. The problem has 
grown worse. The current backlog of asbestos cases is well over 
200,000, and as many as 50,000 new cases are already filed this 
year. The problem is not getting better, but is indeed getting 
worse.
    Since the Judicial Conference's report, there have been 
innovative efforts to resolve this case crisis. Perhaps the 
most creative of these efforts was the 1994 class action 
settlement in what was then called Georgine v. Amchem Products. 
This settlement, which was negotiated by leading trial lawyers 
and endorsed by the AFL-CIO, would have provided for a national 
administrative claims resolution facility to resolve the claims 
of future plaintiffs against the participating defendants 
quickly and fairly.
    Eventually, however, the U.S. Supreme Court overturned the 
agreement on procedural grounds. Writing for the U.S. Supreme 
Court, Justice Ginsburg wrote, ``The argument is sensibly made 
that a nationwide administrative claims processing regime would 
provide the most secure, fair, and efficient means of 
compensating victims of asbestos exposure. Congress, however, 
has not adopted such a solution.''
    The Supreme Court returned to this theme only last June. 
Writing for the majority in Ortiz v. Fibreboard, Justice Souter 
said, ``[T]he elephantine mass of asbestos cases * * * defies 
customary judicial administration and calls for national 
legislation * * * to date Congress has not responded.''
    Justice Souter's call for national legislation has been 
echoed in other Federal and State courts. For example, the 
fifth circuit said, ``There is no doubt that a desperate need 
exists for federal legislation in the field of asbestos 
litigation.''
    The Florida Supreme Court sounded the same note: ``Any 
realistic solution to the problems caused by the asbestos 
litigation in the United States must be applicable to all fifty 
states. It is our belief that such a uniform solution can only 
be effected by federal legislation.''
    One key problem that has resulted from asbestos litigation 
has been the inability to cope with the disturbing quantity of 
claims that have been filed by individuals who are not now, and 
quite likely never will be impaired by any asbestos-related 
disease. This is a problem noted by numerous impartial 
observers, including U.S. Supreme Court Justice Stephen Breyer.
    Because the caseload prevents the trier of fact from 
delving into the medical condition of each of the thousands of 
plaintiffs, it becomes impossible to separate those who suffer 
from serious injury from those who are exposed but do not 
suffer any impairment.
    Sophisticated national asbestos law plaintiff firms have 
exploited the asbestos litigation crisis by filing waves of 
unimpaired claims together with claims by those who are 
seriously ill. Trial court judges are often forced to batch 
settlements, hoping to clear their dockets. In doing so, the 
system simply encourages another wave of unimpaired claims in 
an unending spiral, threatening the availability of funds for 
those who become seriously ill in the future.
    Champions of the status quo sometimes maintain that lawyers 
for plaintiffs and defendants can resolve the asbestos morass 
through private agreement. I strongly disagree. In Amchem, 
defendant and plaintiffs entered into many such agreements in 
1993 and 1994. Those agreements committed plaintiffs' lawyers 
to recommend individual settlements to their clients based on 
criteria for impairment by nonmalignant disease that were 
essentially the same as the Amchem criteria. Five years later, 
very few, if any, of those agreements are still being observed 
by the plaintiffs' lawyers who signed them.
    How can anyone be opposed to a system that fully 
compensates the impaired within 6 months of the date the claim 
is filed? To be sure, compensation will be, under Senate bill 
758, connected to present impairment, not just exposure. It 
should not be enough to say that all those who can collect from 
the system today have some right in perpetuity to collect from 
the system always.
    Let those who defend the current system explain why it is 
appropriate that persons who are not in any way impaired be 
compensated, thereby threatening more companies with bankruptcy 
that will not only cause great disruption to the companies, 
their employees and communities, but will seriously impair the 
ability of those companies to compensate those who become sick 
in the future.
    The time has come for Congress to recognize its duty to 
help overburdened courts and the parties to do a better a job 
of allocating costs and ensuring speedy and generous recovery 
for those who suffer illness from asbestos-related disease.
    Thank you, Mr. Chairman.
    Senator Grassley. Thank you, Mr. Mallett.
    [The prepared statement of Mr. Mallett follows:]

               Prepared Statement of Hon. Conrad Mallett

                                SUMMARY
    Former Chief Justice Conrad Mallett, of the Michigan Supreme Court, 
testifies today in his role as Chairman of the Coalition for Asbestos 
Resolution. The ``elephantine mass of asbestos litigation'' is 
seriously impacting the quality of justice in our state and federal 
courts, leading the Supreme Court of the United States, consistent with 
similar statements by numerous state supreme courts and other courts 
across the country, to call on Congress to enact a national 
legislation.
    A disturbing pattern of filings by unimpaired claimants has 
overwhelmed the system and threatens the ability of those with serious 
illness to recover. Although only a few cases go to trial, enormous 
resources are spent in pretrial litigation and victims must wait years 
to obtain a resolution of their claims. In fact, the lack of trials is 
itself a disturbing symptom of the problem. To manage their caseload, 
courts must aggregate thousands of cases in a way designed to avoid 
individual adjudication of any of them. Understandably, trial judges 
put great pressure on defendants to enter into mass settlements, but 
these settlements typically lack safeguards to ensure that compensation 
is focused on those who actually suffer from serious illness.
    Finally, Chief Justice Mallet expresses skepticism regarding 
private settlement plans that some have touted as an alternative to 
legislation. These plans have, in the past, proved ineffective as there 
is a powerful incentive for lawyers to continue to file unimpaired 
claims if the rules of the asbestos litigation system are not changed 
through legislation.
                                 ______
                                 
    I appreciate the Subcommittee's invitation to testify on S. 758, 
the ``Fairness in Asbestos Compensation Act of 1999.'' This bill 
answers the Supreme Court's increasingly insistent calls for national 
legislation to address the ``elephantine mass'' of asbestos cases and 
provides a fairer, less expensive, more certain and faster way of 
providing compensation to people who are impaired by asbestos-related-
diseases.
    I am appearing today in my capacity as the Chairman of the 
Coalition for Asbestos Resolution. The Coalition encompasses over 150 
companies and organizations interested in asbestos reform, including 
United States Chamber of Commerce, the Small Business Survival 
Committee, the National Roofing Contractors Association, the Automobile 
Parts and Accessories Association, the Associated Builders and 
Contractors, Citizens Against Government Waste, GAF Corporation, and 
many other groups across the country. The breadth of the Coalition's 
membership bears witness to the fact that asbestos litigation is no 
longer the problem of ten or twenty core defendants. Any business, from 
a local automobile distributor to an giant oil and chemical company, 
can find itself a defendant in an asbestos case. Indeed, some who never 
thought of themselves as asbestos defendants can face, virtually 
overnight, the threat of compensatory and punitive damages awards 
amounting to tens of millions of dollars.
    Last February, I agreed to serve as the Coalition's Chairman 
because of my abiding commitment to improving the quality of this 
nation's justice system. I served the people of the State of Michigan 
for eight years as a justice of the Michigan Supreme Court, the last 
two years as the Chief Justice. During my tenure on my state's highest 
court I was keenly aware of my responsibility to be sure the court 
system functioned efficiently, and I have always approached justice 
system modification cautiously. The Coalition's mission is to support 
Congressional legislation to enact a workable administrative solution 
to the asbestos litigation crisis, and is in keeping with my 
philosophy.

                    THE ASBESTOS LITIGATION PROBLEM
    Make no mistake--the enormous volume of asbestos cases is now, more 
than ever, impacting the quality of justice in our federal and state 
court systems. In 1991, the year I was first elected to the Michigan 
Supreme Court, the Judicial Conference of the United States estimated a 
backlog of approximately 90,000 cases in federal and state courts. The 
result was not pretty:

          [D]ockets in both federal and state courts continue to grow; 
        long delays are routine; trials are too long; the same issues 
        are litigated over and over; transaction costs exceed the 
        victims' recovery by nearly two to one; exhaustion of assets 
        threatens and distorts the process; and future claimants may 
        lose altogether.\12\
---------------------------------------------------------------------------
    \1\ Report of the Judicial Conference AdHoc Committee on Asbestos 
Litigation 3 (Mar. 1991).

These problems have grown worse. The current backlog of asbestos cases 
is well over 200,000, and as many as 50,000 new cases are filed every 
---------------------------------------------------------------------------
year.

    Since the Judicial Conference's report there have been innovative 
efforts to resolve this torrent of cases. Perhaps the most creative of 
these efforts was the 1994 class action settlement in what was then 
called Georgine v. Amchem Products. This settlement, which was 
negotiated by leading trial lawyers and endorsed by the AFL-CIO, would 
have provided for a national administrative claims resolution facility 
to resolve the claims of future plaintiffs against the participating 
defendants quickly and fairly. After an exhaustive hearing, the federal 
district court approved the class settlement as fair and reasonable. 
Georgine v. Amchem Products, Inc., 157 F.R.D. 246 (E.D. Pa. 1994). 
Eventually, however, the Supreme Court overturned the agreement on 
procedural grounds. While the Court recognized that the settlement 
addressed a critical problem with an innovative solution, it ruled that 
only Congress had the power to enact that solution. Writing for the 
Court Justice Ginsburg wrote:

          The argument is sensibly made that a nationwide 
        administrative claims processing regime would provide the most 
        secure, fair, and efficient means of compensating victims of 
        asbestos exposure. Congress, however, has not adopted such a 
        solution.

Amchem Products, Inc. v. Windsor, 521 U.S. 591, 628-29 (1997).

    The Supreme Court returned to this theme only last June. Writing 
for the majority in Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999), 
Justice Souter said:

          [T]he elephantine mass of asbestos cases * * * defies 
        customary judicial administration and calls for national 
        legislation. * * * To date Congress has not responded.'' Id. at 
        2302 & n. 1.

    Justice Souter's call for national legislation has been echoed in 
other federal and state courts. For example, according to the United 
States Court of Appeals for the Fifth Circuit:

          There is no doubt that a desperate need exists for federal 
        legislation in the field of asbestos legislation.'' Cimino v. 
        Raymark Industries, Inc., 151 F.3d 297, 313 (1998).

    The Supreme Court of West Virginia agrees:

          Congress, by not creating any legislative solution to these 
        problems, has effectively forced the courts to adopt diverse, 
        innovative, and often non-traditional judicial management 
        techniques to reduce the burden of asbestos litigation that 
        seem to be paralyzing their active dockets. * * * ``[T]hese 
        efforts have failed to expedite a substantial fraction of the 
        caseload. Nor do they appear to have brought about significant 
        reduction in transaction costs.'' State ex rel. Appalachian 
        Power Co. v. MacQueen, 479 S.E.2d 300, 304 & n.8 (1996).

    The Florida Supreme Court sounds the same note:

          Any realistic solution to the problems caused by the asbestos 
        litigation in the United States must be applicable to all fifty 
        states. It is our belief that such a uniform solution can only 
        be effected by federal legislation.'' W.R. Grace & Co.--Conn. 
        v. Waters, 638 So. 2d 502, 505 (1994).\2\
---------------------------------------------------------------------------
    \2\ See also Appendix B of my statement, listing courts that have 
called for legislative action.

    All of this, of course, was hardly news to me. As a justice of my 
state's highest court, and as head of our state judicial system during 
my tenure as Chief Justice, I was well aware that asbestos claims have 
presented an unparalleled nationwide court management problem for at 
least twenty five years. In Michigan, we were forced during the late 
1970s and 1980s to redesign many of our court service delivery systems 
to handle the huge number of asbestos cases filed. The Michigan Supreme 
Court, through the State Court Administrators office, tried to cope 
with the caseload by assigning these cases to some of our best, most 
experienced trial court judges. The system moved cases, but some of our 
best judges were managing case flow as opposed to making reasoned 
decisions regarding difficult facts and complex areas of the law. 
Taxpayers, both individual and corporate, therefore, were deprived of 
the services of some of our best and brightest judges. The problem, of 
course was (and is) that the trial courts of this land are not designed 
to handle thousands of cases filed at the same time against the same 
defendants. It is no accident that administrative systems like workers 
compensation, unemployment compensation and the Social Security 
Administration function in place of the courts when the caseload strips 
the trier of fact of her ability to do her job appropriately. The 
judge's central function is to assist society to discover, as best it 
can, the truth of the matter before the court. In the Michigan court 
system, like other state court systems facing the onslaught of asbestos 
claims, we did not then and do not now have the person power to run, in 
effect, a workers' compensation system.

                 THE VICIOUS CYCLE OF UNIMPAIRED CLAIMS
    One key problem that has resulted from these caseload pressures in 
Michigan and around the country has been an inability to cope with the 
disturbing quantity of claims that have been filed by individuals who 
are not now, and quite likely never will be, impaired by any asbestos 
related disease. This is a problem noted by numerous impartial 
observers, including Justice Stephen Breyer. Such cases include well 
over half the total.\3\ Because the caseload prevents the trier of fact 
from delving into the medical condition of each of thousands of 
plaintiffs, it becomes impossible to separate those who suffer from 
serious injuries--many of whom receive inadequate or no compensation--
from those who were exposed but do not suffer any impairment. Moreover, 
the rush of non-impaired cases diverts the limited resources of 
defendants away from compensating the victims of asbestos related 
disease--including, tragically, cancer cases that will be with us well 
into the next century.
---------------------------------------------------------------------------
    \3\ See Amchem, 521 U.S. at 631 (Breyer, J., concurring in part and 
dissenting in part) (``About half of the suits have involved claims for 
pleural thickening and plaques--the harmfulness of which is apparently 
controversial. (One expert below testified that they `don't transform 
into cancer' and are not `predictor[s] of future disease.')'').
---------------------------------------------------------------------------
    Sophisticated, national asbestos plaintiffs' law firms have 
exploited the asbestos litigation crisis by filing waves of unimpaired 
claims together with claims by those who are seriously ill from 
asbestos disease. Knowing that trial judges simply do not have the 
resources to screen the claims on a case-by-case basis, the law firms 
refuse to settle the sick cases without substantial compensation for 
their unimpaired cases. Trial judges are often forced to encourage such 
``batch settlements,'' hoping to clear their dockets. In doing so, the 
system simply encourages another wave of unimpaired claims in an 
unending spiral--threatening the availability of funds for those who 
will become seriously ill in the future.

              THE LACK OF TRIALS: A SYMPTOM, NOT A REMEDY
    Despite the crushing caseload, long delays, high transaction costs, 
and deep-seated inequities in the current asbestos litigation system, 
some will tell you that all is well. Some--primarily those with a 
financial interest in the present system--will say that there is no 
crisis in the courts because almost all asbestos cases eventually 
settle. According to Mealey's Asbestos Litigation Reporter, only 55 
asbestos trials went to verdict in 1998.\4\
---------------------------------------------------------------------------
    \4\ Of course, as often occurs, one of those trials represented one 
phase of an exceedingly complex consolidated case involving thousands 
of claims. And many other trials involved multiple claims and multiple 
defendants.
---------------------------------------------------------------------------
    The obvious answer to this observation is that trials are only the 
tip of the iceberg. Many cases settle on the courthouse steps, after 
substantial resources have been spent in pretrial document requests, 
depositions, procedural motions, substantive motions (including 
appeals), and the like. This is nothing new. The burden that asbestos 
litigation imposes on federal and state courts has never been the court 
time devoted to trials but rather the enormous judicial energy required 
to manage these cases through the pretrial stage. The 55 trials in 1998 
are comparable to the number of trials each year in the early 1980s, 
when Johns-Manville and the other big targets in the first wave of 
asbestos litigation began to crumble before the onslaught.
    The extraordinarily high settlement rate in asbestos cases is 
really a symptom of the underlying problem. Just think about a system 
that is supposedly adversarial, where 99 percent of the case settle. 
That settlement rate is duplicated nowhere else in the justice system 
(if we exclude family law and prisoner related cases). According to a 
survey conducted in 1992 by the National Center for State Courts, of 
the total civil cases filed, the settlement rate was only 61 percent. 
According to a survey of federal cases disposed of in fiscal year 1996 
and fiscal year 1997, the rate was only 35 percent.
    To some extent the extraordinary settlement rate in asbestos cases 
is the result of judicial pressure. Think about a trial judge who has 
dropped on her 5,000 asbestos cases all at the same time in 1999. At 
one case per week, she would need until the year 2095 to try all 5000 
cases. The judge's first thought then is ``How do I handle these cases 
quickly and efficiently?'' The answer, of course, is to manage the 
cases to ensure that they do not go to trial. The judge does not 
purposely ignore fairness and truth, but the demands of the system 
require that certain values be sacrificed. I am a defender of trial 
court judges. I know the pressures under which they work. But no judge 
could stand for her courthouse to be consumed by one set of cases that 
threatens its entire operation.
    Recent litigation in Mississippi provides a vivid example of the 
pressure that trial courts can place on defendants to settle cases 
through improper mass adjudication of asbestos claims. Cosey v. E.D. 
Bullard Co., Civ. No. 95-0069 (Miss. Cir. Ct. Jefferson Cty.) was filed 
in July 1995. The case eventually included thousands of plaintiffs and 
178 defendants. Trial of such an unwieldy group of claims raised 
obvious management problems. The court's solution was to schedule a 
series of mini-trials. The first trial involved 12 plaintiffs selected 
by plaintiffs counsel. The jury returned an extraordinary verdict of 
$48.5 million in compensatory damages--including multimillion dollar 
verdicts for some plaintiffs who were admittedly ``asymptomatic,'' 
i.e., not sick.
    Faced with this verdict on compensatory damages, the defendants 
rushed to settle before the jury could return a verdict on punitive 
damages. The trial judge then twisted the arm of the defendants to 
settle the remaining several thousand cases--in most cases sight 
unseen. Since the plaintiffs' attorneys would not allow the defendants 
to settle each case on its merits, the defendants were forced either to 
settle wholesale or risk potentially crippling verdicts. And there was 
no way to know how the mass settlement would be divided between the 
plaintiffs--no way to ensure that the most seriously injured received 
appropriate compensation.
    This is one vivid example of the harmful affects of case 
consolidation. Confronted with a system that demands settlement, 
regardless of the merits, and taking into account the huge risks 
associated with imposition of punitive damages, rational company 
decision makers usually opt to settle all of their cases, as opposed to 
betting the company by settling none at all. This, of course, simply 
fuels the filing of new cases on behalf of the unimpaired. The only 
corrective response that will create balance and efficiency is the 
creation of the administrative entity called for in the legislation.

               THE ROLE OF PRIVATE SETTLEMENT AGREEMENTS

    Champions of the status quo sometimes maintain that lawyers for 
plaintiffs and defendants can resolve the asbestos morass through 
private agreements. That claim is wrong, however, for at least three 
reasons.
    First, private settlements, including settlements that have 
established more or less formal, criteria-based claims processing 
systems for future cases, have been with us throughout the 1990s. The 
recently announced settlement agreements between Owens Coming and a 
hundred plaintiffs' lawyers are merely a recent instance of a long-
standing practice. These agreements have not, however, prevented the 
asbestos caseload from doubling in the last seven years. They have not 
even slowed the pace of new filings. Most importantly, they have not 
focused resources on the sick--lawsuits by unimpaired claimants are at 
an all time high.
    Second, the root cause of the ineffectiveness of these agreements 
is that they cannot bind future plaintiffs or non-signatory asbestos 
plaintiffs lawyers. This was precisely the problem that the parties 
attempted to address in Amchem. If that class action settlement had 
been upheld by the Supreme Court, the medical criteria in the agreement 
would have applied to all future claimants, and the claims facility 
would have been able to produce quick and even-handed settlements for 
everyone. In the absence of a class action, defendants had to depend 
upon the promises of signatory asbestos plaintiffs' lawyers to 
recommend settlements based on the medical criteria to their future 
clients--not only when those clients qualify under the criteria, but 
also when they do not.
    In fact, the Amchem defendants and plaintiffs' lawyers entered into 
many such agreements in 1993 and 1994 while the Amchem class action 
settlement was being litigated in federal district court. Those 
agreements committed plaintiffs lawyers to recommend individual 
settlements to their clients based on criteria for impairment by non-
malignant disease that were essentially the same as the Amchem 
criteria. Five years later, very few, if any, of those agreements are 
still observed by the plaintiffs' lawyers who signed them. And there is 
no practical way for the defendants to enforce such agreements, because 
the asbestos claimants were never parties to them.
    Third, as a judge, I find agreements such as the recent Owens 
Corning settlements disquieting. Serious questions are raised under the 
rules of professional responsibility when 9 lawyers agree with 
defendants to recommend a settlement to their future clients--that is 
why the Owens Corning agreements are conditioned upon the approval of 
ethics experts and judges selected by the parties. The agreements have 
to strike a delicate balance between protecting the future plaintiff's 
right to make his own decision on whether to settle, based on his 
lawyer's unfettered professional judgment, and the interest of the 
defendant in channeling future plaintiffs into the administrative 
framework established by the agreement. Moreover, these Owens Corning 
agreements can only work if practically all experienced plaintiffs' 
lawyers observe what is essentially an agreement not to represent 
clients who do not wish to participate in their National Settlement 
Plan--and if no one else enters the field to take their place. In any 
event, as long as the asbestos litigation system provides economic 
incentives for lawyers to file claims on behalf of a mass of unimpaired 
claimants, it is unlikely that any agreement that prevents some from 
doing so will long survive.

                               CONCLUSION
    How can anyone be opposed to a system that fully compensates the 
impaired within six months of the date the claim is filed and preserves 
the right of all claimants to seek compensation whenever they are sick? 
To be sure, compensation will be connected to present impairment, not 
just exposure. It should not be enough to say that all those who can 
collect from the system today thereby have some right in perpetuity to 
collect always. Let those who defend the current system explain why it 
is appropriate that persons who are not in any way impaired be 
compensated--thereby threatening more bankruptcies that will not only 
cause great disruption to the companies (and their employees and 
communities), but will seriously impair the ability of companies to 
compensate those who actually become sick in the future.
    The Coalition for Asbestos Resolution agrees with the Supreme 
Court, numerous other federal courts and state supreme courts, the 
Judicial Conference of the United States, and countless independent 
observers that the resolution of this asbestos litigation crisis lies 
not with the judiciary and certainly not with the attorneys alone, but 
with Congress. Both those who are sick from asbestos exposure and the 
companies deserve the creation of a mutually fair system. The time has 
come for Congress to recognize its duty to help overburdened courts and 
the parties do a better job of allocating costs and ensuring speedy and 
generous recovery for those who suffer illness from asbestos-related 
disease.

STATEMENT OF HON. JOHN ASHCROFT, A U.S. SENATOR FROM THE STATE 
                          OF MISSOURI

    Senator Grassley. We will each have 5 minutes of questions, 
and I would like to do it in this way if it is no problem--me, 
Senator Torricelli, Senator Schumer, Senator Sessions, and 
Senator Ashcroft. Is that OK?
    Senator Ashcroft. Mr. Chairman, I want to thank you for 
doing this today. I have had a terribly conflicted schedule 
today. I may not be able to stay. I want to thank all these 
individuals. I want to indicate that I am very eager to go over 
their testimony. I want to thank you, and if I don't get a 
chance to stay for my questions, you can make that as my 
remarks.
    Senator Grassley. We will also have the usual process of 
accepting questions for answer in writing. So you can submit 
those in writing if you aren't able to do it orally.
    Before I start to ask questions, I have statements here 
from Louis Sullivan, President, Morehouse School of Medicine, 
and former Secretary of HHS; Susan Pingleton, President-elect 
of the American College of Chest Physicians. And Senator Baucus 
has asked us to submit a statement from Roger Sullivan, of the 
law firm of McGarvey, Heberling, Sullivan and McGarvey.
    [The statements referred to are located in the appendix.]
    Senator Grassley. We also are going to have coming, it is 
my understanding, other interested parties that might want to 
be filing some statements, like Owens Corning; Myles O'Malley, 
with the New Jersey White Lung Association; Paul Safchuk, of 
the White Lung Association. Their comments are very important 
to us as we address this legislation.
    My first question will be to Professor Edley. Some have 
expressed concern that S. 758 does not require the 
establishment of a trust fund from which victims are 
compensated. Thus, there is no guarantee that claimants will 
ever receive any money. I would like to have your response to 
that.
    Mr. Edley. Thank you, Mr. Chairman. There are a couple of 
things I should point out. First, let me note that Mr. 
Middleton, with respect, misspoke when he suggested that the 
class action settlement in Georgine included the creation of a 
fund. It did not. In fact, that settlement created a cap of $1 
billion per year that the 19 defendants who settled in Georgine 
would be obligated to pay. So there were flow controls on the 
amount of money that would be flowing to claimants from the 
defendant companies.
    There is no such cap in this bill, and to that extent, and 
others, this bill is more favorable to claimants than was the 
settlement in Georgine.
    More generally, here is the problem. First of all, in 
asbestos, unlike other products liability situations such as 
tobacco, we are not talking about defendant behavior that is 
going to continue into the future. You can't simply impose a 
tax on an industry to cover the costs of compensation that will 
arise going forward. Instead, we are focused on conduct that 
occurred in the past and there is no easy way--in fact, it is 
difficult to even contemplate a complicated way to assign 
liability to particular companies and then tax them in some way 
to have the money flow into a Government fund.
    The black lung program, for example, was created, in which 
there was a tax on coal companies to cover the prospective 
costs of the work and the injury that would result in the 
future. But liability arising out of previous conduct was not 
imposed on the industry through an industry tax, but was 
instead imposed on the taxpayers.
    Similarly, in this situation it simply isn't feasible to 
figure out what the shares would be. Remember, we are talking 
about hundreds of different kinds of defendants in scores of 
different lines of business whose liability arises from a 
myriad of different contexts. They may have been manufacturers, 
they may have been distributors, they may have simply owned the 
premises on which some asbestos exposure occurred. Calculating 
year by year, facility by facility, industry by sub-industry, 
what the appropriate share would be just boggles the mind--
impossible.
    The second--and I will stop with this--the second, and to 
me absolutely conclusive reason why a fund of the sort that is 
often mentioned wouldn't work here is that it is critical that 
insurance companies continue to be at the table. Many 
defendants continue to have some insurance company coverage for 
their liabilities to asbestos exposure, and the question is how 
to make sure that insurance companies continue to pay on 
contracts which make them obligated to help defendants with the 
costs arising from tortlike compensation.
    Insurance companies for the most part probably would not be 
liable to contribute to a fund, and if you try to make them 
liable through some kind of legislative fiat, not only will 
there be a jihad in terms of the insurance company coming up 
here to try to tell you why that is wrong as a matter of the 
theology of the insurance industry, but I think there would be 
serious constitutional issues as well with tampering with their 
insurance contracts.
    Senator Grassley. Thank you very much. Now, I would ask Mr. 
Hiatt, but I would ask Mr. Mallett to listen to the questions I 
am going to ask Mr. Hiatt because I would like a response from 
you after his answer.
    Could you expand on what you consider to be the specific 
merits of the Louisiana plan and why you believe it might be a 
better approach than the Asbestos Resolution Corporation; 
specifically, what is your judgment of the success of the 
Louisiana plan, how many cases have been settled under this 
model, and then have all parties agreed to participate in that 
agreement?
    And then you might respond to that, Mr. Mallett, based on 
the effectiveness and its merits as compared to the process 
that we propose in S. 758.
    Mr. Hiatt. Thank you, Senator Grassley. Let me start with 
the second half of your question. My understanding at this 
point is that the virtues of the Louisiana plan are mainly on 
paper, that the program itself has not really had an 
opportunity to get off the ground in large part because very 
soon after the parties to that agreement, which included a 
large number of companies, trial lawyers, claimants' groups, 
including unions down there, had reached an agreement, word got 
around that some of the companies were going to seek a national 
legislative solution. And that sort of has put the 
implementation of that program pretty much on hold.
    The reason I think that the plan, at least as it is 
intended to work, makes a lot of sense is that it does contain 
several of the elements that are missing here. It is a very 
nonadversarial approach. The issues which have been litigated 
for years and years and now have been acknowledged by all 
parties to be resolved--the liability issues, the product 
identification issues, and others--are not raised anew. There 
are no attempts to bring in the hardware stores and other small 
businesses that Ms. Kerrigan cites. It is a very nonadversarial 
process.
    There are medical criteria that are there. Somebody either 
is found to be impaired and entitled to a certain dollar amount 
or they are found to be exposed, but not yet impaired, in which 
case they are entitled to subsidized testing and monitoring and 
a smaller amount of damages. And they have not waived their 
rights to come back with a claim if they are ultimately 
impaired.
    So I think, on balance, it is a much better approach and 
does give individuals the right to opt out if they choose. The 
unions down there believe that because it is such a superior 
approach, very few individuals would be inclined to exercise 
opt-out rights, just as would have been the case presumably 
under the Fibreboard and Amchem settlements.
    Senator Grassley. Mr. Mallett.
    Mr. Mallett. Mr. Chairman, there are a couple of things 
that I want to point out and make sure that the committee is 
well aware of. Mr. Hiatt and I agree that medical criteria are 
indeed a necessity. To the degree that you have a system whose 
foundation is indeed a line of demarcation between those 
persons who are sick and those persons who are not, the 
Coalition would leap to support that and be very enthusiastic 
in its endorsement.
    On the concept of voluntariness, again, as far as we look 
at 758, it is voluntary to the degree that a person who goes 
through a 1, 2, 3-step system, indeed should they be 
disappointed by the offers that have been placed on the table 
by the defendant companies, can opt to go to court.
    Now, in terms of dropping out of the system, which is I 
think how some persons would define voluntariness, the 
important point, Mr. Chairman, is this. Either the medical 
criteria is going to apply to every single person involved in 
the system or it is not. You can't gather people effectively in 
a system designed to organize a solution to this kind of 
problem and allow people to say, I will choose from aisle A but 
not from aisle B.
    The important point is that if there is agreement, and I 
think that I heard agreement that medical criteria should be 
assigned as the foundation upon which any program that you 
design rests, if we build from there, the imposition upon every 
person who comes to solve a particular personal health crisis--
are you sick or are you not--should be the same for everybody, 
a critical point.
    On the voluntariness of the private agreements, all I can 
say is it has been the experience of the companies who are part 
of the Coalition that because they are voluntary, because the 
plaintiffs themselves do not sign the agreement, it is a wisp 
of paper upon which the defendants prayerfully hope that the 
agreements will be met. We are dealing with a nonregulated 
circumstance, and what we are asking for and what I think the 
bill is designed to provide is predictability.
    Senator Grassley. Mr. Heyman, and then I will go to Senator 
Torricelli.
    Mr. Heyman. Yes; Chairman Grassley, if I could make just 
one comment, the Louisiana settlement experience is a dramatic 
illustration that this notion of voluntary actions doesn't work 
at all because Louisiana has been set up 2 years ago and there 
hasn't been a single case, I understand, that has been settled 
pursuant to the arrangement. Only a handful of lawyers have 
agreed to enter into the arrangement.
    Major asbestos lawyers have refused to join it. It hasn't 
been replicated in a single other jurisdiction. And if this is 
labor's solution to the matter, it is pretty sad because it is 
not a constructive alternative. And the whole gist of Mr. 
Hiatt's testimony, as I understand it--and we ought to make 
this clear at the outset--is that he is in favor of what you 
would call a voluntary system. In other words, we should set up 
this administrative facility to compensate sick people and pay 
them promptly. But then with regard to nonsick people, they 
ought to be free to sue in the tort system.
    Well, unless you solve by means of this legislation the 
problem of the nonsick cases and the nonsick people filing 
claims and finite resources being squandered on nonsick people, 
thereby jeopardizing the ability of sick people to collect, you 
haven't accomplished, in my view, anything. And it is very 
interesting that this Louisiana settlement would be raised by 
Mr. Middleton and Mr. Hiatt as a classic example of what they 
would like to see. Let's talk about the success or failure of 
that settlement.
    Senator Grassley. Mr. Middleton, go ahead.
    Mr. Middleton. Thank you. I would like to respond to the 
problem with setting up artificial medical criteria, if I 
might, Mr. Chairman. The problem is that State workers 
compensation laws control who is going to be paid by the 
employers and by the employers' insurance companies when a 
person is diagnosed with disease.
    Those criteria, as established under State law, require 
that companies pay out medical benefits under the comp laws 
before they would qualify under this system. As it is currently 
in place, the employers and their insurers are properly 
reimbursed. This is the point that Congressman Scott was trying 
to make.
    You have this huge open area where employers are paying out 
the medical benefits, but under these artificial criteria there 
is no reimbursement, there are no credits available. And so the 
system that now allows for the proper payment to end up in the 
hands of the victims of this disease and for the payers of the 
medical benefits is prevented under this system because there 
is no way to dovetail the medical criteria which are completely 
artificial and out of whack with what the medical community 
sees with the State compensation laws and what it requires 
those companies to pay out.
    So it is really harmful to employers, and the Newport News 
Shipbuilding Company, the largest employer in Virginia, is a 
prime example. That is why they are so adamantly opposed to 
this bill because it takes away millions of dollars that they 
have actually paid out in benefits that they get reimbursed, 
and on Federal work the U.S. Government properly gets 
reimbursed for.
    Thank you.
    Mr. Mallett. Mr. Chairman, just for the record, I strongly 
disagree categorically with 99.9 percent of what Mr. Middleton 
just said. You can, in fact----
    Senator Schumer. Would you tell us the .1 percent? 
[Laughter.]
    Mr. Mallett. That is that somehow, under workers 
compensation, the system can be rationalized. Very quickly, Mr. 
Chairman, the medical criteria under State law can easily be 
matched with the medical criteria of Federal law. We see that 
every single day, and that which is going on now should not 
prevent a rational solution to the problem in the future.
    Senator Grassley. Senator Torricelli.
    Senator Torricelli. Thank you, Mr. Chairman.
    Mr. Hiatt, I am somewhat unaccustomed to having positions 
that are at significant variance with the AFL-CIO, and a good 
deal of that reason is I think we identify our constituencies 
similarly. And I would like to explore whether indeed our 
differences are as wide as they might appear.
    In Mr. Georgine's correspondence that you have submitted 
for the record, he says, ``I do not disagree that asbestos 
victims deserve at their option an alternative to the tort 
system, because the tort system can often be lengthy, costly, 
adversarial, cumbersome, and technical.''
    That is a broad statement. Does it necessarily mean that 
this alternative must be privately agreed upon, or that there 
is, if somewhat differently designed, a congressionally-
designed system that could be fair to the workers?
    Mr. Hiatt. If this is all it takes to put our position back 
into a consistent line with your own, Senator, I don't think 
there is much of a problem. We have made it clear that we 
aren't opposed to the notion of a legislative solution, per se. 
In fact, I think that is where Mr. Heyman misunderstands the 
comparison we keep making with the Louisiana approach.
    We are not saying that a Louisiana-type approach would have 
to be done on a completely voluntary basis, and have indicated 
an openness to a legislative solution. But I think the key in 
that portion of Mr. Georgine's letter that you read was that it 
be at the individual's option, just as----
    Senator Torricelli. I have to guard my time here jealously. 
So, indeed, Mr. Georgine is open to an alternative system, and 
even open to it being a congressionally-designed system. It is 
a question that it be optional.
    You recognize that as we have written this legislation, if 
at the end of the day the worker is displeased and can meet 
certain criteria in the system, there still is a court option.
    Mr. Hiatt. Well, I mean there are two fundamental problems 
with saying that this bill is a voluntary approach. First of 
all, the number of hoops and the complexity of the hoops that 
workers have to go through, that claimants have to go through, 
to get back into the tort system, and then second there are all 
kinds of modifications to the existing tort system.
    Senator Torricelli. I understand that, but if indeed we do 
not philosophically disagree on there being a congressionally-
designed system and if we both recognize that if the system is 
not working properly, there should be an option to return to 
the courts, then it would appear to me that what were our 
considerable differences have not narrowed to simply the 
criteria by which you reenter the tort system at the end of the 
process. So what began here as a significant gulf, to me, has 
just considerably narrowed to a writing of criteria and 
definitions.
    Mr. Hiatt. Well, I almost agree with that. I think that a 
lot has to do with----
    Senator Torricelli. Well, is it better than 99.9? 
[Laughter.]
    Mr. Hiatt. It is not just the criteria, but also what is 
that process that people are forced to go through before the 
criteria let them back into the tort system, and then what has 
been modified in the tort system itself.
    Senator Torricelli. But for all of us to recognize--I see a 
situation with 200,000 cases and 50,000 new filings, where a 
significant number of these workers' lives may expire before 
they ever reach settlement. You and I have a similar objective 
here to get this done.
    Mr. Hiatt. Absolutely, Senator.
    Senator Torricelli. Do you actually have the numbers of 
these workers whose lives are expiring before their cases are 
heard?
    Mr. Hiatt. I don't offhand. We can try to get that 
information for you.
    Senator Torricelli. Do you know the average award that the 
workers are receiving and the percentage of that that is not 
going to them or their families, but to costs?
    Mr. Hiatt. Not in dollars, but we certainly agree with the 
point that many of the companies make that it is an 
unfortunately high amount.
    Senator Torricelli. As you look at why this bill is 
bipartisan and crosses philosophical lines, just so we 
understand each other, that is what is going on here. I mean, I 
understand the Supreme Court's concern with the courts being 
overworked. Frankly, I think a lot of Federal judges could work 
a little bit harder. That doesn't bother me. What bothers me is 
that people who deserve this help may not get it, and when they 
finally reach an award they are not keeping their own money.
    Mr. Hiatt. We do agree and we are most willing to explore 
alternatives. We just don't want to substitute a system that is 
going to be even worse than the one that we have right now.
    Senator Torricelli. Mr. Heyman, a rather significant 
statement was made about you that I think you should respond 
to. If I get this right, ``GAF hid medical information so 
employees would keep working.''
    Mr. Heyman. There is no evidence of that that I know of, 
Senator, and I am sure the asbestos lawyers would have produced 
it in the 300,000 cases they have brought against us.
    We held the company business for 3 years. I think we acted 
pretty darn responsibly in shutting the business down as soon 
as the medical studies were published. And for us to be assumed 
to have more information on a business that had $1 million of 
sales a year than the U.S. Public Health Service which was 
requisitioning this product is really not credible.
    Senator Torricelli. So in addition to there being no 
evidence of this, you categorically state that this is simply 
not true. You were unaware of it?
    Mr. Heyman. Absolutely.
    Senator Torricelli. Why, Mr. Heyman, as a business 
judgment, given the potential liability, did GAF simply not 
adopt the Owens Corning model of a national settlement program?
    Mr. Heyman. Well, I would say that, in my view, Owens 
Corning has made a serious mistake in connection with that 
settlement. So that we all understand it, what the company has 
done essentially is to settle almost all its pending cases, 
about 250,000 cases in all, most of which involved nonsick 
claimants, for about $2.5 billion in upfront cash. About $1 
billion will go to the asbestos lawyers, which incidentally 
will make this one of the biggest pay days for lawyers in the 
history of tort litigation.
    Now, what Owens Corning is banking on in return is that 
they are receiving promises from 100 major asbestos firms 
around the country that these firms will use their best efforts 
to persuade nonsick claimants in the future not to file 
lawsuits against OC, and sick claimants to enter into 
prearranged settlement agreements. Obviously, the settlement 
does not bind the thousands of other lawyers who are not 
entering into these agreements, nor does it bind future 
claimants.
    And let me make three simple points about this settlement. 
First, and most important, the OC settlement is about as 
antithetical to the philosophy embodied in the proposed 
legislation as you can get, for it perpetuates rather than 
corrects all the flaws of the current litigation system by 
squandering finite resources on huge upfront cash payments to 
lawyers and current nonsick claimants at the expense of future 
sick claimants whose payments under the arrangement will be 
discounted from normal values and deferred over time, if, of 
course, there are sufficient financial resources left to 
satisfy them.
    Under the proposed Senate legislation, claimants, on the 
other hand, will receive full value--sick claimants, that is, 
will receive full value paid in a timely fashion. Second, GAF 
and 19 other co-defendants have been there, done that, and it 
doesn't work. In 1993, we entered into agreements with 50 of 
the Nation's leading asbestos firms, and this was aside from 
the Georgine settlement which was obviously subject to approval 
by the court. But this was supposed to be independent of the 
Georgine settlement.
    We entered into agreements with 50 of the Nation's leading 
asbestos firms to settle 50,000 cases for $750 million, and we 
received promises similar to those given to OCF under their 
settlement today. And as soon as the check cleared for the $750 
million, the lawyers, including Mr. Middleton, I might add, 
repudiated the agreements and began filing nonsick claims at an 
even faster and more furious pace than ever.
    Finally, there is just not enough money in the world to buy 
off all the asbestos lawyers. And what is to stop a lawyer with 
an asbestos firm who signed the agreement from going off on his 
own, opening a law office across the street, and making a 
specialty of bringing asbestos cases against Owens Corning?
    Senator Torricelli. Thank you. Mr. Chairman, I didn't get 
to ask Mr. Middleton anything. I had hoped that we might have a 
brief second round, if that is possible.
    Senator Grassley. We will take care of your concerns.
    Senator Torricelli. Thank you.
    Senator Grassley. Senator Schumer.
    Senator Schumer. Thank you, Mr. Chairman. I want to thank 
the witnesses for their testimony. Before I ask my questions, I 
guess I would like to just lay out a little scenario here.
    There are two levels that this legislation is debated at. 
One is the specific level which I would like to get to. The 
other is the larger level of what is the balance between 
litigation and--well, the litigation side and the corporate 
side. I have been sort of moderate on those issues because it 
seems to me that while the trial lawyer system we use is messy 
and inefficient and leads to frivolous suits, there are many, 
many instances where without it nothing would happen and real 
injustices would not come to light, that the legislature is not 
able to do it, that individuals alone are not able to do it, et 
cetera.
    So there is a real balance here and you have to weigh them, 
and it is one of the issues I think that this Congress has been 
struggling with. But it seems to me in this situation we have 
been through that, and the corporations who may have done wrong 
here, or at least injured people, have been basically brought 
to the realization they have to do something to compensate 
people. We are not at the first stage where people say, no, no, 
no, we did nothing wrong, we shouldn't have to pay a nickel.
    And once we get to that stage, it seems to me that 
settlement is the right way to go. To continue the litigation 
and continue everything, this is not the time that that is 
needed, and that is why on this issue I think there ought to be 
a strong lean in favor of settlement because the 75 or 60 
percent that will not go to the victims is necessary at the 
beginning to prove damage and to prove illness and to prove all 
these other things. But we have done that, and most of the 
industry in one way or another is willing to settle and pay out 
large amounts of money to truly injured people.
    So in these sort of mature claims, I think it is different 
than in the early stages. It is sort of like, I guess, in a 
certain way the tobacco settlement. The tobacco companies 
resisted and resisted and resisted, but then there was a time 
for settlement. And because probably there was a fewer number, 
or whatever reason, settlement at least in part came about, 
although these settlements are difficult.
    So my strong lean in this is to come to a settlement 
because the endless litigation which, Mr. Middleton, I have 
to--you say that it won't clog the courts, but all the Supreme 
Court Justices say it, and the number of potential cases is 
enormous. But that is not my issue. If it were to clog the 
courts and there were no alternative to producing justice for 
people who suffered, so be it.
    So then the nub of the issues boils down to once you 
believe that there ought to be some kind of settlement, the 
question is--Is it a fair settlement? And this relates to Mr. 
Hiatt's discussion with Mr. Torricelli. It seems to me the nub 
of it here is this, not how much of the settlement should go to 
lawyers versus victims--that is always out there and we are not 
going to settle all of that--but how much should go to victims 
who truly have been hurt by this system, as opposed to victims 
who might be hurt by the system.
    As I look at this settlement, it seems to me to do a darn 
good job of getting money to the people who are truly hurt, and 
getting it to them quickly and without delay, or without too 
much delay. It will never be without delay. And for those who 
might have something called pleural hardening, which has no 
effects on the person and has no cure, if, God forbid, that 
pleural hardening develops into something that makes someone 
sick, they can opt into that system even if it is 10 or 15 
years from now.
    So I think the settlement seems to me to be a good 
settlement. And, yes, if you want to say that every person who 
might get sick should retain their right to sue on a voluntary 
basis, I think you have to say that at the expense, because you 
are not going to get the corporations who settle to say, OK, we 
will pay all the people who are sick and we will let everybody 
who might become sick sue us--that is not a settlement at all, 
so what you are saying basically is we will make sure that 
everyone who truly is sick gets compensated in a fairly 
generous way, as I read the legislation, and keep everyone who 
might get sick in line, but now allow people who will not get 
sick, even though they have been exposed to asbestos, to just 
collect claims right now. That seems to me to be a pretty fair 
tradeoff.
    So my first question comes to Mr. Hiatt. I understand that 
there are people whom you represent, and ably represent, who 
might say, look, I would like to get some money now. But what 
is wrong with a basic compensation system that says we are 
going to put our first dollars, and they are limited, to those 
who are sick, and since this happened during World War II, much 
of it, may not be around in future years? That is where I have 
problems with this. That is why I thought Georgine was a good 
settlement because it did bring most everyone in, although it 
didn't have all the restrictions.
    But if you could answer for me why you--do you disagree 
with that premise, No. 1? And, No. 2, if you don't, then why 
aren't you supporting this type of settlement?
    Mr. Hiatt. Not only do I not disagree with the premise, but 
we do support that premise. At the risk of raising Mr. Heyman's 
hackles in mentioning Louisiana again, let me just say that I 
recognize the difficulty of a Louisiana settlement that applies 
only in Louisiana. But the notion behind the Louisiana 
settlement is exactly what you have just described. It does 
provide for a reallocation of the benefits to the people who 
are already impaired, who are truly impaired, but it does not--
--
    Senator Schumer. Doesn't this settlement do the same?
    Mr. Hiatt. Maybe and maybe not. It purports to want to do 
that. We would argue, first of all, that the difficulty that 
claimants with real impairments have in processing those claims 
makes it questionable about whether they will have an even 
harder time in having claims satisfied--I am talking about the 
truly impaired--here than they do under the present system.
    But the other disadvantage is that we are not saying that 
the exposed but not yet impaired are entitled to the same kind 
of claims that the truly impaired are, but they should have 
their testing and monitoring provided for as they did in 
Georgine or in the Amchem settlement, as they do in Louisiana. 
They should have some kind of nominal damages because in many 
States this is recognized as a tort. What the companies don't 
like is the bundling of these claims of the nonsick or the not 
yet impaired and the impaired, where the not yet impaired are 
getting excessive settlements.
    Senator Schumer. Mr. Hiatt, wouldn't it be reasonable not 
to bundle those claims?
    Mr. Hiatt. Yes, yes. We agree with you.
    Senator Schumer. Forgetting that each side has its own 
economic interests which they are pursuing, it seems to me when 
you are trying to make policy, it would be a good idea not to 
bundle the two claims together. And as I understand it, one of 
the major problems in all the suits that are brought is that 
they do bundle the two claims together.
    Mr. Hiatt. Absolutely; we are in total agreement with you 
on that, and that is why we agree that one should look for a 
new approach. And the approach of distinguishing between the 
not yet impaired and the impaired in terms of damage 
entitlement is completely reasonable, but this bill is the 
wrong approach. This bill is not going to do that.
    Senator Schumer. Let me ask you, if we didn't have this 
bill, wouldn't all the things you say are wrong continue--the 
bundling together of the impaired and unimpaired; like Mr. 
Torricelli brought out, the continued attrition, if you will, 
or people dying who are ill?
    It seems to me at this stage of the game, as I mentioned 
earlier, this does the most good compared to not an ideal 
solution, but to the practical solutions out there for the 
people who are truly ill.
    Mr. Hiatt. Well, I guess we disagree at the point that we 
do not believe that this bill would represent an improvement. 
We believe this bill would make things even worse, but we do 
believe that one could fashion an approach, even a legislative 
approach, that would be better certainly than this bill, and 
certainly than the existing system.
    Senator Schumer. Could I just ask one of the people on the 
other side to respond?
    Senator Grassley. Yes.
    Senator Schumer. Mr. Heyman.
    Mr. Heyman. If I could say one thing, I just want to 
underscore something that you alluded to, Senator Schumer. This 
legislation is much better for nonsick people who will become 
sick in the future than under our current situation. There is 
no question about it. Under our current tort system, because of 
statute of limitations defenses, and so forth, nonsick people 
must bring premature lawsuits, which is one of the major 
problems here, before they get sick. And they are supposed to 
be compensated, of course, according to their physical 
condition at the time of the trial, and if they get sicker 
later on, they can't come back. Under our system, you can.
    The only people who lose here, as Professor Edley said, are 
the people who are not sick now and who will never become sick. 
And the question I think we are getting down to with Mr. Hiatt 
is if someone has a freckle on their lung because of asbestos 
exposure and there is no ailment, there is no physical symptom, 
there is no disability, and so forth--and believe me, three-
quarters of America was exposed to asbestos. There is not 
enough money in the world to compensate everybody because they 
were exposed to asbestos, whether or not they are injured or 
not.
    Now, Mr. Hiatt would say, well, if he has a freckle on the 
lung, I want him to be able to continue to file a lawsuit in 
the tort system. And that is what is ruining this system, the 
inundation of these cases of people who are not sick. There is 
just not an unlimited amount of money to give to everybody.
    Mr. Hiatt. That is not what we have said. We have said that 
the not yet impaired, even if we could come up with an 
alternative dispute system, should be entitled to testing and 
monitoring. These people have been exposed and many of them 
will come down with impairments. It is fine for them to say 
that the statute of limitations is tolled and they will be able 
to come back in with claims. But most of these people won't 
know if and when their claims have matured and they do start 
having serious asbestos-related diseases if they do not have 
some kind of testing and monitoring system, which most of those 
people do today under the existing system. They know right now 
that many of their tort lawyers have provided free testing and 
monitoring. That is not going to be available anymore.
    Senator Schumer. Let me ask you a question. If they were to 
add to their proposal free testing and monitoring, which I 
understand is about $200 a test, which is far less than the 
sums we are talking about, would you support it?
    Mr. Hiatt. That is one of a number of things in our 
testimony, Senator, that we have said needs to be changed in 
this bill. On that one issue, that is an important aspect. It 
is not the only one.
    Senator Grassley. Here is what I want to do. I want to go 
to Senator Sessions, then I want to give Senator Torricelli an 
opportunity to ask a second round of questions, and then I hope 
that I can dismiss this panel and get on to the third panel.
    Senator Sessions.
    Senator Sessions. Mr. Chairman, I thank you for having this 
hearing. As a person who has spent a large portion of my 
professional life actively in a courtroom, and as a believer in 
the rule of law, a believer in justice and fairness, I think we 
have got to fundamentally look at what is happening in asbestos 
from that basis. We have got to ask ourselves is what is 
happening today just and fair for people who are dying from 
asbestos-related diseases.
    Now, we know the basic history of it; it is not 
complicated. Asbestos is a very effective substance for a lot 
of different reasons. Plaintiffs' lawyers determined and were 
able to prove in court that manufacturers of asbestos had 
learned that it had adverse health consequences, and they were 
able to then allege and prove that it was sold to distributors 
without any warning on it and that people's health had been 
damaged by it.
    We have now had over 200,000 lawsuits of this kind filed; 
over 200,000 apparently are pending, and maybe another 200,000 
expected. What we know from the numbers Ms. Kerrigan was using 
is only 40 percent of the money paid out by the asbestos 
defendants actually got down to sick people, or sick or not, 
actually got to the recipients of the payments.
    Now, as a person who believes in the rule of law and 
justice in America, that is not it, that is not acceptable. I 
do not condemn the lawyers who file the lawsuits because, in 
fact, they uncovered a big, bad problem in America and have 
gotten some people compensated for it.
    But as Senator Schumer indicated, we are not at the 
beginning of these cases anymore. We are past that point. We 
now have a situation in which who knows how many other people 
may have been damaged by asbestos, and how will they be 
compensated?
    Now, we have methods of compensation; we do it with workers 
compensation. We say precisely by legislation how monies should 
be distributed. I think we now have all the facts we need to 
know. Asbestos is bad for you; it causes sickness. The asbestos 
company manufacturers, many of them, deliberately hid the 
dangers when they were shipping it out and people are having 
serious problems with it.
    So I really feel strongly that this is a rational way to go 
about getting money to the people who need it. I don't see why 
we can't, in short order, get 90 percent of the money paid out 
by defendant companies directly to a sick person. And it was 
pointed out to me recently--when I said only 40 percent was 
getting to the victims, it was pointed out to me that a lot of 
the money is going to people who have not yet become sick. So, 
really, even less is going to people who have become sick as a 
result of this disease.
    So I am delighted that we have a bipartisan effort to 
analyze the problems that we are dealing with and see if we 
can't come up with a method to distribute justly and rationally 
proceeds to sick people.
    Mr. Edley, I think you have observed this fairly 
objectively as a person who cares about the system, you 
teaching at Harvard and all. Would you comment? Am I off base 
about this?
    Mr. Edley. Not at all, Senator. I think that you hit the 
nail on the head. I will say that much of the opposition to 
this legislation, I have to say regretfully, is kicking dust in 
the air. For example, the workers compensation issue that was 
raised by Congressman Bobby Scott--frankly, I think that the 
logic is somewhat tortured.
    The medical eligibility criteria in this bill are more 
generous to the victim than State workers comp laws. State 
workers comp laws hinge on disability, whereas the impairment 
line drawn by this test--people will receive compensation under 
this legislation who would not be eligible for compensation 
under workers comp. So I think that the argument that somehow 
this legislation is going to chase claims into workers comp is 
specious.
    I should also point out that the alleged complexity of the 
administrative process suggested in this statute strikes me as 
missing the ball completely. Three steps: medical eligibility, 
ADR, and your choice of arbitration versus litigation. Now, if 
the AFL-CIO or others want to eliminate a 60-day mandatory 
period of ADR, fine. I doubt that the defendants would have 
much objection to that.
    But I have got to tell you it sounds to me like that is a 
bad idea for victims because it is the period of mediation that 
forces the companies to come to the table, put a good-faith 
offer in front of the victim, and then face a penalty if it 
turns out that that offer was too low. That is good for 
victims. But if, for some reason, in a rush to get to the 
courthouse people want to dispense with that and make that 
completely optional, it doesn't seem to me it is the end of the 
world. But I just question whether that is a provictim change.
    With respect to the first step, determining medical 
eligibility, we are talking about simply submitting your tests 
to a set of independent people, claims examiners who would 
review it, independent doctors who would have to approve a 
denial, so it is easy to say yes to the victim and hard to say 
no. And that, it seems to me, is also beneficial to the 
claimant and not at all the kind of burdensome process that Mr. 
Hiatt described.
    And at the end of that medical eligibility system 
determination, what the victim gets is a certificate that is 
presumptively binding, unless clearly erroneous, in any 
subsequent litigation. It is not spinning wheels, it is not 
burning up time. It is producing something that is of value 
that will drive defendants to the bargaining table and that 
will be useful in any subsequent litigation. It is a simple 1, 
2, 3-step system, Senators.
    And I think that there are things that can be worked out 
that may be of more liking to the AFL-CIO. There are several 
things that are being discussed in, I think you call it the 
other body, but the elements of a consensus are certainly 
before you.
    Mr. Middleton. Might I respond briefly, Mr. Senator?
    Senator Sessions. All right, yes, sir.
    Mr. Middleton. If the rule of law is to be observed, then 
you have got to look at the complete language in the Ortiz 
case. What the court in Ortiz said--that is, the Fibreboard 
decision--was that any ADR resolution at all must ensure the 
seventh amendment right to trial by jury. By openly stating 
that this bill will knock out 50 to 80 percent of the claims 
that would otherwise be deemed eligible under State law, State 
case law, State statutory law, you are denying them that 
seventh amendment right if you administratively knock out that 
claim.
    I happen to agree with Senator Schumer that we have been 
there and done that. That is why for years the transaction 
costs were high because there were insurance coverage disputes. 
In every case, regardless of what the court ruled with regard 
to what was evidence and what was not, the defense lawyers came 
in, and time and time again, at the direction of their 
employers, the insurance industry, came in and disputed the 
same documents over and over and over.
    That is why the Owens Corning settlement is indeed so good 
because it knocks that out. The transaction costs now are 
nowhere near what they were in the early 1980's, where the 
figures that were quoted--and if you extrapolate backwards the 
1981 to 1983 figures that became the basis finally of the 
Supreme Court dicta in Ortiz, that is where those figures came 
from, when everybody was fighting every issue, the carriers 
were fighting coverage.
    Finally, Mr. Senator, I would like to say this to all the 
members of the committee. Many of the manufacturers actually 
want to pay the pleural disease claims. What is called a 
freckle by Mr. Heyman is indeed considered under State laws to 
be asbestos disease and recognizes the progressive nature of 
the problem. Therein lies the reason they want to settle now 
and pay those claims because they may have insurance problems 
which will preclude them from being able to handle those 
liabilities later on if their coverage ceases to exist.
    Senator Sessions. Mr. Chairman, I think we as a Congress 
can craft constitutionally a system to disburse benefits to 
people who need it. I don't think we can go along with a system 
that continues to have almost half of the money go to lawyers, 
plus additional costs, and only $1,700 out of $5,000 actually 
getting to the victim. That is just not acceptable.
    I know you will work with that. If we can work with Mr. 
Middleton and others to make sure that we are consistent with 
the request, Judge Mallett, of multiple courts that we do pass 
legislation--courts are begging us to do--I believe we can do 
it and I think it will be a good thing for those who have been 
injured.
    Senator Grassley. Senator Torricelli.
    Senator Torricelli. Did you want to ask something about 
that, Chuck?
    Senator Schumer. I was just going to ask Mr. Middleton a 
question. Do you disagree that the proposed settlement, if that 
freckle, so to speak, develops into full-fledged asbestosis, 
would compensate the person at that point for their illness, 
and compensate them rather well?
    Mr. Middleton. I don't agree, Mr. Senator, that this is a 
settlement of anything because if we have been there and done 
that, and if all those issues should have been resolved, then 
why, in crafting this bill, don't we waive the defenses that 
have already been resolved that you, Senator Schumer, 
acknowledge? Why don't we include putting the money that is 
available on the table?
    The Supreme Court stated that the resolution has got to be 
voluntary; they have to put money on the table and there has to 
be prompt payment. There is no money in this bill and all 
defenses are preserved. Every defense is preserved, so if you 
go through this 5-month--and that is very optimistic--
procedure, then they still get to raise them if the person gets 
to go to court if he is one of the 30 to 50 percent that is not 
knocked out and his constitutional rights are not prevented in 
this case.
    Senator Grassley. Senator Torricelli.
    Senator Torricelli. Thank you very much.
    Mr. Middleton, if it is unusual for me to have a difference 
of view with the AFL-CIO, it is only somewhat less unusual for 
me to be at variance with the trial lawyers, and I wanted to 
see whether we couldn't also in some way narrow our differences 
here.
    As Senator Schumer had pointed out, this is a peculiar area 
for such a conflict. We have a situation where there is no 
dispute as to the cause of the problem. There is no dispute of 
a willingness to pay. There is no dispute over the people who 
are responsible. We are only talking about process. That is 
very unusual when the stakes are so high and the situation is 
so complex. The Supreme Court having made clear in very unusual 
terms that the Congress bears a responsibility to establish an 
orderly process, it would not be responsible for Congress not 
to deal with this issue, in my judgment.
    Now, I am a believer in the tort system. I am a believer in 
the system of contingencies as the only means of keeping the 
courthouse door open for indigent, or even middle-income 
people. I believe in the process, but you cannot expect this 
Congress to be idle, with 200,000 cases and an additional 
50,000 filed a year, and the Supreme Court on two occasions 
challenging us to act.
    Now, I want to narrow here is in my conversation with Mr. 
Hiatt, if we have an administrative procedure that nevertheless 
provides for claimants a chance to return to the court system 
if justice is not done and a threshold is not met, is our only 
dispute about the criteria by which you get a second bite at 
the apple to return to the system, or do you simply dismiss 
that there is any administrative procedure defined on any basis 
that we could have, no matter how we defined a return to the 
traditional tort system?
    Mr. Middleton. Senator, we have arrived at three 
principles--and when I say ``we'' I speak for the Association 
of Trial Lawyers of America--in conjunction and which have to 
dovetail with the Supreme Court's decision, not their dicta but 
the decision in Ortiz, and those recognize that any ADR 
mechanism must not trample the Seventh Amendment right to trial 
by jury. That gets into the inadequacy of the artificial 
medical criteria that are developed here.
    But here are the three principles. We believe that any ADR 
system has got to be voluntary and it has got to be non-
exclusive. That was the Amchem settlement; it was voluntary. It 
should not interfere with a victim's access to the court 
system. It should not foreclose the available of any common law 
remedies or limit the victim's access to counsel.
    Number two, any alternative claims procedure must actually 
reduce delay and uncertainty for the victims. The only way that 
can be done is if you get rid of the defenses which this bill 
allows them to preserve. It has got to be minimally adversarial 
and legalistic. And so the substantive as well as the 
procedural defenses that Senator Schumer recognized that have 
been litigated and litigated and litigated and that have been 
established have got to be waived.
    The time period for eligibility determinations should 
absolutely be specific, and compensation amounts obviously 
should be fair. But in order to do that, the payment schedules 
should also be specified and fully disclosed to all the 
claimants so that they know what they are getting into before 
they enter into this voluntary process so they can judge 
whether they have to waste five months, which I believe is 
extremely optimistic under any program, or they can resort to 
the tort system which is compensating the most serious people 
now because of the docket.
    And finally I have a third point.
    Senator Torricelli. Excuse me. The chairman is being very 
generous with my time. However, his mood may change.
    Mr. Middleton. I understand. Finally, the third principle 
that we believe is critical is that financing provisions have 
got to be comprehensive. In other words, the funding has got to 
be sufficient to handle the projected flow of the cases and the 
allocation of that financial responsibility has got to be 
determined for the defendants and all the insurers, and that 
should be legislatively determined.
    Senator Torricelli. Mr. Middleton, under no circumstances 
would this committee design legislation that violated the 
seventh amendment right for people to access to these courts. 
That will not happen. We have provided for a return to the 
system. That is why I am suggesting that there may be less 
difference here than it appears.
    We are only debating the criteria by which a person gets 
back and what needs to be established. We recognize that 
ultimately we can put people into an administrative system, but 
we cannot take away, and do not seek to take away, their right 
to ultimately get to the courts if that is required.
    I would prefer that all parties to this work with us and 
try to design a system that meets everybody's obligations and 
is ultimately fair. It is not as if everyone now is getting 
their day in court and getting this settled. Waiting three 
years for a result on an application to the courts, 55 cases 
going to jury trials out of 200,000 that are pending--people 
are seeking settlement remedies, I suspect, in large measure 
because they do not think the courts in a timely fashion can 
deal with this or they can be dealt with fairly.
    Mr. Chairman, if I could just very quickly, Mr. Hiatt and 
then Mr. Edley, I know, wanted to respond. Mr. Hiatt, I simply 
also want to leave you with this. We have another area of 
common interest and it is the goose that laid the golden egg. 
Fifty corporations have gone bankrupt. If indeed we do not 
reach some settlement, we are not only going to lose the 
employment of the remaining corporations, but more importantly 
there is going to be no one left to make these claims.
    I have a responsibility to the GAF Corporation as a company 
in New Jersey with 3,000 employees. It is one of the larger 
employers in my State. I would regret to lose those 3,000 
employees in my State. I would regret even more if the 1,000 
claimants who have nothing else in life to pay their medical 
bills or future medical bills lose the source of that.
    I only urge then, finally, to work with us in trying to 
fashion something that is fair because the people we care about 
the most are going to be victimized again if these corporations 
are lost and seek bankruptcy protection and there is no one 
left to pay. I think that is an obligation on all of us.
    Mr. Edley, did you want to respond to a comment that was 
made?
    Mr. Edley. I did, Senator. Thanks very much. Just quickly, 
I think Mr. Middleton's discussion about the waiver of defenses 
is just flat wrong. He is describing some other piece of 
legislation on some other planet. This bill contains a broad 
waiver of defenses. The only thing that companies under this 
bill would be left to litigate are is the claimant really sick, 
and as to that there is a presumption from the medical 
eligibility determination that is all but binding; the product 
I.D., like was my product even in Seattle; and the amount of 
damages. I mean, that is called providing a little bit of due 
process to the defendants in this. There is a very broad waiver 
of defenses, as there was in the Georgine v. Amchem settlement.
    The basic problem here, I think, is that Mr. Middleton 
doesn't want to draw a line at all between the sick and the 
nonsick. The fundamental policy choice to which Mr. Hiatt 
agreed is not something that ATLA is willing to agree to. So 
make no mistake about it, if you want to compromise this out in 
a way that would be agreeable to ATLA, I think you have got a 
fundamental policy issue there about are you willing to draw a 
line.
    The argument with Mr. Hiatt, as best I can understand it, 
is less with where the line is drawn, because I think that 
drawing the line where it is drawn in Louisiana is only 
infinitesimally different from drawing the line where it is in 
this legislation and that is important.
    The question is, for the people who don't quite make the 
impairment line, will there be some extra provision, for 
example, to subsidize their costs of medical testing. That 
seems to me to be a somewhat separable issue from the basic one 
of will you draw a line.
    Finally, I just want to point out that the issue of 
voluntary ADR that Mr. Middleton spoke about--as it happens 
now, with the huge bundling of thousands of cases that can 
occur at the behest of plaintiffs' counsel, what goes on is 
that there is ADR between the plaintiffs' lawyers and the 
defendants. No one polices the way in which the plaintiffs' 
counsel then turn around and distribute the money to their 
hundreds and thousands of clients. No one polices it.
    So if you were to ask the question, what is the average 
amount that is paid to people with mesothelioma or people with 
pleural plaque under these voluntary arrangements that Mr. 
Middleton talks about, the answer is who knows? We don't know 
because the plaintiff's counsel basically has to make a deal 
and is trading off the interests of the sick and the nonsick in 
order to keep their client base, to keep their, quote, 
``inventory'' going. There is no volunteerism to that because 
claimant victims don't really have all the information about 
what is going on. This is system in that respect is a major 
improvement in the ability of claimants to determine their fate 
in the adjudication of the damages that they deserve.
    Senator Torricelli. Thank you.
    Senator Grassley. Mr. Heyman.
    Mr. Heyman. If I could just make one comment, first, I 
wanted to endorse Senator Torricelli's notion that we ought to 
try to reach some constructive resolution if we can, and we 
have been endeavoring to do that. With regard to Mr. Hiatt's 
suggestion with regard to medical monitoring, we certainly 
would--I am only one member of the Coalition, but we certainly 
would be willing to consider that. The only problem is every 
time Jon has a suggested change and we meet it, there is 
another problem. But we live in hope and we would like very 
much to----
    Mr. Hiatt. I really resent that. That is not----
    Mr. Heyman. We would like very much to resolve this with 
you. We have discussions underway at the House Judiciary 
Committee and we are hopeful of doing that, but I would just 
way one thing. We have been working on this since, I think, 
1992, when we first began to negotiate the Georgine settlement. 
And this legislation, if you look at it on all fours with 
Georgine, is really much more favorable than Georgine. In fact, 
some of the features like the cap on annual payments, and so 
forth, were deleted in this legislation.
    So we have been at this process for 7 or 8 years. We are 
delighted to entertain any constructive solutions to see if we 
can reach legislation, but I think that time is of the essence 
here. Thank you.
    Senator Grassley. Mr. Hiatt, can you say something in 30 
seconds?
    Mr. Hiatt. Yes. I just want to say for the record that I 
did not understand that the purpose of this hearing was to get 
into discussions that have been going on in the House or 
anywhere else about concerns we have and possible changes that 
the parties would be willing to make in the bill. But we 
certainly have expressed to the companies a large number of 
areas that we find greatly deficient in this legislation and, 
with very few exceptions, GAF indicated a willingness to 
address that.
    Now, I can't say the companies because GAF is one company. 
There are many other asbestos companies out there that are much 
closer to our point of view on the deficiencies of this 
legislation than GAF, and I don't think that point should be 
lost, Mr. Chairman.
    Thank you.
    Senator Ashcroft. I want to again thank Senator Grassley 
for holding this hearing today on this important issue. 
Unfortunately, pressing matters require that I be elsewhere so 
I must excuse myself. I would just like to thank all of the 
witnesses for coming here to help us understand this problem 
better, and to express my hope that during the discussion today 
that some attention will be paid to the importance of 
explicitly protecting the stability of settlements in any cases 
that have settled prior to the enactment of any administrative 
regime. I look forward to reviewing the transcript of today's 
proceedings.
    Senator Grassley. I thank the panel very much for their 
participation, and I will call the next panel. Thank you all 
very much.
    Mr. Edley. Thank you, Mr. Chairman.
    Mr. Heyman. Thank you.
    Senator Grassley. Congressman Cannon is going to come to 
the table because he was not here when we first started. And I 
am going to let Congressman Cannon go first, but I want the 
other panelists to come as I introduce them.
    We have Prof. Michael Green, a professor at the University 
of Iowa School of Law, where he teaches torts, product 
liability, complex litigation, and mass torts. Then Mr. 
Nagareda is an associate professor of law at the University of 
Georgia Law School. He teaches administrative law, evidence, 
and torts. And then lastly we have Mr. Paul Verkuil, currently 
serving as dean and professor of law at Benjamin Cardozo Law 
School, where he teaches also administrative law and economic 
regulation.
    So, Mr. Cannon, we will probably have you give your 
testimony and if you want to stay and listen to all the rest of 
it, you can do that, but we want to go through the entire panel 
before we ask any questions.

   STATEMENT OF HON. CHRIS CANNON, A U.S. REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF UTAH

    Mr. Cannon. Thank you, Mr. Grassley. I have other things I 
need to do, so I will leave after my testimony.
    Mr. Chairman, I appreciate the opportunity to appear before 
you in support of the Fairness in Asbestos Compensation Act. 
This is important legislation designed to solve a substantial 
problem for people who are sick from asbestos.
    Part of the problem is that litigation is causing a 
disproportionate burden on our court system. I am one of the 
original cosponsors of the House companion bill, H.R. 1283. 
This legislation solves the asbestos litigation crisis in our 
courts.
    The first point I would like to make today is that our 
current asbestos litigation system is just not working. The 
system is not equitable to either the victims of asbestos or 
the defendant companies. Our State and Federal courts are 
clogged with over 200,000 pending cases and over 50,000 new 
cases being filed each year. The volume of cases is creating a 
tremendous backlog in our courts and it can take years for a 
victim to have his day in court. The Fairness in Asbestos 
Compensation Act will provide a speedy resolution that allows 
those whose health is affected by asbestos quicker 
remuneration.
    Over the last three decades, the courts have established 
the factual threshold for asbestos compensation, but we have a 
dire situation before us. The former asbestos manufacturers are 
willing to compensate the sick, but due to the sheer volume of 
cases before them, the courts have simply become inefficient 
claims processors.
    The courts are not designed for this overwhelming task, and 
as a result two-thirds of every settlement dollar is being 
diverted from deserving victims to lawyers and court costs. The 
courts have responded by encouraging the consolidation of 
cases. As a result, settlements do not take into account the 
strengths or weaknesses of an individual's claims, but rather 
lump the sick and nonsick together.
    This sets up a lose/lose situation in which the true 
victims of asbestos unnecessary wait years and receive less 
compensation than if their claims are addressed individually. 
The Fairness in Asbestos Compensation Act provides for an 
administrative claim system for those individuals who meet 
objective medical criteria. These criteria determine whether or 
not they have an asbestos-related impairment. They are 
administered in a nonadversarial manner by medical experts.
    It is important to note that the medical criteria in the 
legislation are virtually identical to the criteria in the 
Georgine settlement which was agreed to by defendant companies 
and key components of the plaintiffs' bar and organized labor. 
These criteria were also approved by the Federal courts as 
being fair and reasonable.
    In recent years, the Supreme Court has been asked to rule 
on two proposed asbestos class actions and on both occasions 
concluded that an administrative system would best serve the 
victims of asbestos. On the last day of its session this past 
June, the Supreme Court ruled in Ortiz v. Fibreboard. Justice 
Souter, speaking for the majority, held that asbestos 
litigation is an elephantine mass which defies customary 
judicial administration and calls for national legislation.
    Chief Justice Rehnquist stated in his concurring opinion 
that the current asbestos litigation system cries out for a 
legislative solution. Justice Ginsburg similarly stated in the 
Amchem decision which dealt with the Georgine settlement in 
1997 that an administrative claims process would provide the 
most secure, fair, and efficient means of compensating victims 
of asbestos exposure.
    Mr. Chairman, S. 758 is a good piece of legislation that 
would speed up and pay more to the sick as opposed to the 
current inequitable system. It would ensure that those who are 
truly sick from asbestos get paid in a timely manner, while 
preserving their right to go to court. And it would allow 
healthy victims back into the system if they get sick in the 
future. In addition, the bill would help keep the defendant 
companies financially able to continue compensating those who 
become impaired with asbestos-related ailments for decades to 
come.
    Twenty-five of the largest asbestos manufacturers have 
already filed for bankruptcy, leaving the peripheral asbestos 
players to continue paying the sick. This has cost thousands of 
jobs across the country. A bankrupt company cannot compensate 
victims. This legislation will allow a fair solution for 
companies and provide speedy compensation to those who are 
sick, while bypassing those who really aren't affected by 
asbestos-related infirmities. I support S. 758 and compliment 
this committee for its consideration of this legislation.
    Thank you.
    Senator Grassley. Thank you, Congressman Cannon.
    Now, Professor Green.

    PANEL CONSISTING OF MICHAEL D. GREEN, PROFESSOR OF LAW, 
 UNIVERSITY OF IOWA COLLEGE OF LAW, IOWA CITY, IA; RICHARD A. 
  NAGAREDA, ASSOCIATE PROFESSOR OF LAW, UNIVERSITY OF GEORGIA 
  SCHOOL OF LAW, ATHENS, GA; AND PAUL VERKUIL, DEAN, BENJAMIN 
              CARDOZO SCHOOL OF LAW, NEW YORK, NY

                 STATEMENT OF MICHAEL D. GREEN

    Mr. Green. Thank you, Senator Grassley. The asbestos 
litigation system is broken. There is no reasonable observer of 
what is going on today that could conclude otherwise. I have 
heard a lot of mention of the Supreme Court's decisions in 
Ortiz and Amchem and their call for national legislation. In 
addition to the Supreme Court, dozens of Federal courts and 
State court judges, including trial judges who are down in the 
trenches and dealing with these repetitive cases, have 
criticized the current system and called for a legislative 
scheme.
    The goals of any legislative solution, I think, have been 
well articulated. We need to minimize administrative costs. 
They are far too high today. We need to preserve assets for 
future claimants. We need to ensure so far as possible payment 
for all asbestos victims, including those that develop 
asbestotic disease in the next century, and there will be some. 
We also need to speed the compensation process. We need to get 
dollars to people who are suffering impairment as a result of 
asbestos exposure.
    Well, how might we obtain those goals? I think one way is 
to simplify and minimize the criteria for recovery. Ideally, 
recovery would only require a showing of asbestos-induced 
disease and impairment. And upon showing of that, a claimant 
would be able to recover. Keep the parties out of court so far 
as possible. Litigation is far too expensive for the limited 
remaining resources available to compensate asbestos victims. 
Expert witnesses are being paid $7,500 and $10,000 a day to 
testify in asbestos cases about the same state-of-the-art 
defense over and over and over again.
    Cease compensating those who are asymptomatic. Resources 
need to be preserved for those who are truly sick. And the 
repeated and duplicative awards of punitive damages--even 
though cases are being settled, the prospect of punitive 
damages is reflected in those settlements. We need to stop 
paying punitive damages in order to preserve the assets that 
exist for future claimants.
    So how well does S. 758 accomplish these goals? In some 
respects, I think quite well. It seeks to screen out the 
unimpaired and it ends punitive damages. It does away with a 
number of tort law issues that drain resources. It does away 
with the statute of limitations, which has a perverse effect on 
encouraging premature claims. It does away with state-of-the-
art claims. It does away with the questions of the defendant's 
culpability in order to recover.
    In some respects, though, S. 758 could be improved because 
it retains too much tortlike rules. The bill will not provide a 
lean administrative compensation system. It continues to 
require proof of exposure to each defendant's asbestos 
products. It encourages controversy over noneconomic damages. 
It requires resolution of the comparative fault of each 
defendant named in a claimant's case. Resolution of the 
comparative fault of each defendant in some States, given joint 
and several liability rules--and I am getting into details 
here, but I think there is a devil in some of the details--
could require resolution of the comparative fault of all 
members of the asbestos industry; that is, nonparties. We 
really don't want to do that.
    All of those concerns could be resolved by getting the 
asbestos defendants together and creating a fund, resolving 
once and for all globally their liability. Will it be 
difficult, as Professor Edley suggested? Absolutely. Is it 
impossible? I think not. There are a number of ideas that might 
be explored in a way to get the fund in and to have a true 
compensation system. In short, the goal here should be to 
replace the elephantine masslike current system with a feline, 
lean, and quick compensation system.
    Thank you.
    Senator Grassley. Thank you, Professor Green.
    [The prepared statement of Mr. Green follows:]

                  Prepared Statement of Michael Green

    Mr. Chairman and Members of the Subcommittee: My name is Michael 
Green, and I am a Professor of Law at the University of Iowa. I have 
taught and written about toxic substances and their treatment in the 
tort system for almost 20 years. I represent no one in providing this 
statement and my testimony. I have never represented nor consulted for 
an asbestos victim or an asbestos defendant, and no one has compensated 
me for preparing this statement or testifying. I'm sure that, like all 
of us, I have my personal biases, but I am not an advocate for any of 
the parties interested in this legislation.
    There are three things I'd like to address in this Statement

   The State of Asbestos Tort Litigation

   The Goals Critical to an Asbestos Compensation Statute

   How S. 758 Measures up Against Those Goals

    Asbestos compensation through the tort system is broken-seriously, 
irreparably, and incontrovertibly.

   Everyone knows that the systems is broken, judges know it, 
        commentators know it, asbestos victims know it, their families 
        know it, the experts who testify over and over and over again 
        know it, and, the lawyers who are litigating these cases know 
        it.

   The Federal Judiciary for over a decade has hinted, 
        requested, and implored Congress to take up the matter of 
        asbestos compensation and enact a comprehensive system. State 
        judges have also joined in the chorus seeking legislative 
        resolution of the court-clogging, compensation-delaying, over 
        bloated and underfunded system in place now. I have appended to 
        my Statement an annotated bibliography of courts that have, in 
        reported opinions, criticized various aspects of asbestos 
        litigation and called for a solution from the only institution 
        with the authority to provide it, the United States Congress.

   Perhaps the most persuasive evidence that a compensation 
        statute is required is to appreciate that that is precisely 
        what the plaintiffs' and defendants' lawyers have been 
        attempting to craft within the tort system for the past decade 
        in the form of class action settlements.

   Those class actions settlements are nothing more than 
        asbestos compensation systems dressed up in litigation clothes. 
        But the courts institutionally cannot craft compensation 
        systems, as the Supreme Court has made plain in both Amchem 
        Products Inc. v. Windsor \1\ and Ortiz v. Fibreboard Corp.\2\
---------------------------------------------------------------------------
    \1\ 521 U.S. 591 (1997).
    \2\ 119 S. Ct. 2295 (1999).
---------------------------------------------------------------------------
   This is an important point to appreciate. The failure of 
        Congress to enact a legislative compensation scheme has placed 
        enormous pressure on the courts to develop not only creative 
        and unusual procedures and rules to deal with the mass of 
        asbestos cases that were presented, but, in many respects, the 
        judiciary has been involved in activism in inventing partial 
        and imperfect compensation schemes that, from a separation of 
        powers perspective, are appropriate for Congress not the 
        courts.

   The solution, if it is to occur, is in the hands of 
        Congress. Congress, and Congress alone, has the institutional 
        authority and capacity to develop a rational, fair asbestos 
        compensation system. I urge this Subcommittee, and each member, 
        to work toward that goal.

   For more specific explanation of why the current system is 
        broken, the proposed findings in section 2 of S. 758 capture 
        the situation well.
             principles or goals for a compensation system
    Minimize Administrative Costs: The tort system is an enormously 
expensive one for getting dollars from the asbestos industry to injured 
victims, with somewhere between 50 and 63 cents of every dollar paid by 
asbestos defendants being eaten up in administrative Costs,\3\ not to 
mention the burden on taxpayers who pay for the court resources 
required to resolve asbestos lawsuits.\4\
---------------------------------------------------------------------------
    \3\ See Peter Schuck, The Worst Should Go First: Deferral 
Registries in Asbestos Litigation, 15 HARV. J.L. & PUB. POL'Y 541, 558 
(1992); JAMES S. KAKALIK, ET AL., VARIATION IN ASBESTOS LITIGATION 
COMPENSATION AND EXPENSES (Rand 1984). The Rand Study, which was the 
most comprehensive, is based on early litigation in asbestos. That 
litigation likely was significantly more administratively inefficient 
than the situation today.
    \4\ See In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710, 
749 (E.D. & S.D.N.Y. 1991) (estimating that 70 percent of all funds 
expended for asbestos claims are for administrative costs, including 
the costs of court resources).
---------------------------------------------------------------------------
    In a day when the resources available to the remaining tens of 
thousands of legitimate asbestos victims are dwindling, that 
administrative expense is simply unacceptable and unconscionable.
    Keep Parties out of Court. There is no system like litigation to 
consume administrative expense. It requires expensive lawyers and 
experts and, because contested issues of fault, causation, exposure, 
and others must be resolved using these costly personnel, the tort 
system is the most expensive scheme for compensation in existence. Any 
legislative compensation system should consciously be constructed to 
minimize the instances when claimants have to go to court. Social 
security is an example of such a system. Age and payment into the 
system are the only conditions for qualification. And Social Security 
is an enormously efficient scheme for transferring dollars from those 
who pay in to those who are eligible.
    Some limited opportunity for court review must be provided, but 
incentives should be structured in a way to keep claimants from 
employing this option except in the most serious cases of error.\5\ 
There are many creative ways to do this--but the key is a fair and 
simple compensation system based on a minimum of objective and easily 
verifiable criteria.
---------------------------------------------------------------------------
    \5\ A very good model for resolving the vast majority of claims 
through an administrative scheme, while providing a limited right to 
seek court review is the Dalkon Shield Trust, which was established in 
A.H. Robins bankruptcy proceedings. See Georgene Vairo, The Dalkon 
Shield Claimants Trust: Paradise Lost (or Found)?, 61 FORDHAM L. REV. 
617 (1992) Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53 
L. & CONTEMP. PROBS. 79 (1990).
---------------------------------------------------------------------------
    Reduce the Number of Contestable Issues to a Minimum. There are a 
number of specific aspects to this subgoal:

   Simple qualification criteria: suffering from asbestos-
        induced disease.
   Do away with requiring claimant to prove which company's 
        asbestos products he or she was exposed to. This means a global 
        resolution of the asbestos industry's contribution to the 
        compensation scheme.\6\
---------------------------------------------------------------------------
    \6\ While estimations of total liability based on future claims are 
not easy, this task was successfully accomplished in the Dalkon Shield 
Trust. See Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53 
L. & CONTEMP. PROBS. 79, 89 (1990).
---------------------------------------------------------------------------
   Damage awards scheduled based on simple, objectively 
        verifiable criteria: type of disease, lost income, age, etc. In 
        fact, this already occurs in asbestos mass settlements and it 
        was part of the plan in the settlement class actions to which 
        plaintiffs' attorneys agreed.\7\ It is no secret that the ideal 
        of individualized adjudication, with respect for the parties 
        and attention to the details of the claim, the attorneys 
        reflecting the interests and desires of their clients, and the 
        arbiters listening carefully to the claims and stories of the 
        parties is a myth.\8\ An asbestos compensation statute could 
        have a range of awards within each category and leave 
        discretion in the administering agency to adjust the award 
        upward or downward within the authorized range based on the 
        specific and unusual circumstances of a given case.
---------------------------------------------------------------------------
    \7\ Amchem Products Inc. v. Windsor, 521 U.S. 591 (1997); see also 
Hearings Before the House Judiciary Committee on H.R. 1283 (July 1, 
1999) (Opening Statement of Maura J. Abeln, Senior Vice-President, 
General Counsel and Secretary of Owens Corning).
    \8\ Mark A. Peterson & Molly Selvin, Mass Justice: The Limited and 
Unlimited Power of Courts, 54 L. & CONT. PROBS. 227 (Summer 199 1); 
Deborah R. Hensler, Resolving Mass Toxic Torts: Myths and Realities, 
1989 U. ILL. L. REV. 89, 96.
---------------------------------------------------------------------------
    Speed the Compensation Process: Compensating the heirs of an 
asbestos insulation worker who contracted asbestosis at 48, was 
incapacitated and unable to work at 55, and died at 60 because of 
mesothelioma, ten years after the death is a cruel hoax. There is 
evidence that asbestos cases take considerably longer to resolve than 
other civil cases, which is not surprising given the large number of 
cases backlogged in a number of jurisdictions.\9\
---------------------------------------------------------------------------
    \9\ Judicial Conference Report at 10-11.
---------------------------------------------------------------------------
    End Punitive Damages. The repetitive award of punitive damages for 
essentially the same industry conduct has been criticized by just about 
everyone familiar with the current situation. Deterrence and expressing 
society's disdain for the industry's conduct have more than been 
accomplished. No court or jury is situated to make a judgment that, 
however heinous the conduct of industry members, we are well past any 
further need to express society's disapproval of this conduct. 
Especially with compensation resources running dry, there is no 
justification for providing windfalls to current victims at the risk of 
leaving future victims without compensation. Because of our system of 
federalism, the state and lower federal courts cannot solve this 
problem. Either Congress acts or we will continue to squander the 
opportunity to assure compensation for all.
    Cease Compensating Those who Have Suffered No Loss. For perfectly 
understandable reasons-fear of running afoul of the statute of 
limitations and fear that the asbestos well will run dry in the future, 
we have created a situation in which claimants with no present disease, 
no present impairment, and no present monetary loss bring suit because 
physicians can detect abnormalities in their chest x-rays. These non-
impairment cases are a significant majority of currently filed cases, 
and they constitute an increasing proportion of the asbestos 
caseload.\10\ While one can understand why those suits have been 
brought, it is difficult to fathom why some jurisdictions have 
permitted them to go forward, especially when there are victims with 
lung cancer, mesothelioma, and other serious diseases who wait behind 
them in line to pursue their claims.\11\
---------------------------------------------------------------------------
    \10\ See Lester Brickman, The Asbestos Litigation Crisis: Is There 
a Need for an Administrative Alternative?, 13 CARDOZO L. REV. 1819, 
1853 (1992).
    \11\ Schuck, supra note?
---------------------------------------------------------------------------
    Ensure, So Far as Possible, Payment for all Asbestos Victims, 
Including Those in the Future. This may be the most difficult goal to 
meet, but a good start would be to end the squandering of industry 
resources on punitive damages, conserve what funds are available by 
reducing administrative costs--by taking the lawyers and litigation out 
of the process--and by ceasing to provide compensation to those who, 
while they can be diagnosed as having abnormal chest x-rays, are not 
suffering any impairment in their activities or abilities.
    Fairness. Of course, any compensation system should be fair. But 
fairness, like beauty, is often in the eye of the beholder and, like 
raising children, to do the right thing, sometimes one must say ``No.''

   What's important in any statutory scheme enacted is balance. 
        None of the parties can have everything, but some modest 
        compromises by each can produce substantial social good for 
        all, especially the unfortunate victims of asbestotic disease, 
        who, even with compensation, cannot be made whole for their 
        losses.
   A compensation system would enhance fairness for victims by 
        getting compensation more quickly to injured victims and 
        spreading the available resources to more victims, especially 
        those who develop disease in future decades. The pot is not 
        unlimited and a day will arrive when it is empty. I can think 
        of nothing more unfair than leaving future victims 
        uncompensated.
  Will some claimants have to give up punitive damages or their 
        theoretical--the asbestos settlement rate reveals that the 
        right to trial for asbestos claimants is largely a mirage--day 
        in court? Yes. Will those who might recover some compensation 
        today for abnormal x-rays (pleural plaque) have to wait until 
        they suffer real losses? Yes. Will overall fairness be 
        furthered despite these sacrifices? Absolutely and 
        unquestionably.

    The Asbestos Industry and other defendants resist a compensation 
scheme because members do not want or think that they cannot agree on 
an overall resolution of their respective liability for asbestos 
claims, which is how any compensation scheme should be funded. But a 
compensation scheme would end the distraction of asbestos litigation, 
the disruption to company financial planning and operations, and 
provide a global resolution that would enable them to get on with their 
businesses instead of the business of litigation.\12\
---------------------------------------------------------------------------
    \12\ See Kenneth R. Feinberg, The Dalkon Shield Claimants Trust, 53 
L. & CONTEMP. PROBS. 79, 81 (1990) (discussing loss of productivity of 
company involved in protracted, mass tort litigation).
---------------------------------------------------------------------------
    Will it be difficult to determine shares of liability among 
industry members for all future claims? Of course. Is there a risk of 
inaccuracy in that determination? Absolutely. Would the industry pay 
less and be better off with a compensation scheme that wraps up their 
involvement in asbestos litigation? No Question.
    Plaintiffs' Lawyers have made an important contribution. They took 
on Significant risk, undertook to represent asbestos victims in the 
early days when it was quite uncertain whether the courts would make 
the necessary adjustments to tort law to accommodate those claims, and 
uncovered a tale of reckless indifference to the health of generations 
of asbestos workers and active suppression of danger.\13\ They deserve 
to be well compensated for the risks that they took and the social good 
that they accomplished. Business schools will teach the asbestos matter 
as a case study, and corporate executives will think hard before 
engaging in such a massive exposure of workers to risk of this 
magnitude.
---------------------------------------------------------------------------
    \13\ PAUL BRODEUR, OUTRAGEOUS MISCONDUCT: THE ASBESTOS INDUSTRY ON 
TRIAL (1985).
---------------------------------------------------------------------------
    Will a compensation system reduce what plaintiffs' attorneys 
receive? Yes--necessarily and by design. But has the compensation 
obtained by the plaintiffs' bar for this work been less than handsome? 
No. Are we at risk of lawyers turning down the next victim of a toxic 
substance and refusing to pursue an industry? Emphatically Not. Indeed, 
what we have today in large part because of the recoveries in asbestos 
is a very will-financed plaintiffs' bar that is sophisticated, 
organized, and ready and anxious to attend to the next toxic disaster 
that may occur.
    There are a number of successful models for a compensation scheme 
that could serve as a template for an asbestos compensation scheme. 
Since the turn of the century, we have employed a no-fault compensation 
system for workplace injuries. The National Childhood Vaccine Injury 
Act\14\ was enacted by Congress when there was a temporary crisis in 
the availability of childhood vaccines and has worked quite well. The 
Dalkon Shield Trust set up in the A.H. Robins bankruptcy proceedings 
provides a number of lessons about how to develop and administer a 
toxic compensation fund in a successful and fiscally responsible 
manner.\15\
---------------------------------------------------------------------------
    \14\ 42 U.S.C. Sec. Sec. 300aa-33 et seq. (1997).
    \15\ See supra note?
---------------------------------------------------------------------------
    Enacting an Asbestos Compensation System would not set a precedent 
for Congress regularly and precipitously enacting compensation schemes 
for every new mass tort that comes down the road. Asbestos is unique in 
its quantity of victims, demands on the judicial system, and 
complexities.\16\ The common legal and factual issues have been 
litigated and relitigated, throughout the country in court after court 
in eye-glazing and mind-numbing fashion. No other mass tort has had the 
same impact on driving numerous, substantial, including Fortune 500, 
companies into bankruptcy. This is a true crisis, far more severe than 
what existed when the Childhood Vaccine Act was enacted or when the 
Black Lung Benefits Act was enacted in 1969.\17\ A number of mass toxic 
litigations have been resolved by the courts, if not perfectly, at 
least acceptably in the past several decades.
---------------------------------------------------------------------------
    \16\ See, e.g., Christopher F. Edley, Jr. and Paul C. Weiler, 
Asbestos: A Multi-Billion-Dollar Crisis, 30 HARV. J. ON LEGIS. 383, 386 
(1993).
    \17\ 30 U.S.C. Sec. Sec. 901 et seq. (1997).
---------------------------------------------------------------------------
    Asbestos stands in stark relief to DES, Bendectin, the Dalkon 
Shield, and similar mass torts.
    There is a certain ``closing the barn door after the horses have 
escaped'' quality to S. 758. Hundreds of thousands of claims have been 
resolved, billions of dollars have been paid (and billions more wasted 
in administrative expense), untold millions, nay billions, have been 
paid in punitive damages, and the number of asbestos victims who had to 
wait years and years before obtaining compensation or who died before 
their cases were resolved is unconscionable. But the number of pending 
claims is in excess of a hundred thousand, at least that many are 
likely to be filed in the next several years, and there will be 
seriously injured asbestos victims in the future, although the number 
is tapering off. But Congress must act now--in another decade there 
will be nothing left with which to try to fashion a compensation 
scheme.
       how well does s. 758 meet the goals that i have outlined?
    It does an excellent job in certain respects:

   Punitive Damages would cease, thereby preserving assets for 
        future claimants.
   Claimants with only pleural plaque and no clinical symptoms 
        would be required to wait until they developed real injury-
        clinical symptoms--before being permitted to pursue claims.
   It ends unnecessary and costly wrangling over ``discovery'' 
        of disease for statute of limitations purposes by abolishing 
        this defense and, it thereby ends the unfairness of barring 
        asbestos victims from recovery because they waited too long to 
        file suit, even though the delay has little or no impact on the 
        availability of evidence.\18\
---------------------------------------------------------------------------
    \18\ Sec. 502; see Michael D. Green, The Paradox of Statutes of 
Limitations in Insidious Disease Litigation, 76 CALIF. L. REV. 965 
(1989).
---------------------------------------------------------------------------
   It ends the need to try to predict the future under the 
        single judgment rule, which requires that all damages-whether 
        yet incurred or not--be awarded in a single proceeding.\19\
---------------------------------------------------------------------------
    \19\ Sec. 504.
---------------------------------------------------------------------------
    It does a mediocre to poor job in certain other respects:

   Administrative efficiency: This Bill retains too much of the 
        adversarial-tort law framework, but privatizes initial phases 
        within the corporation and attempts to use a liberal dose of 
        ADR to lubricate the process of reaching a settlement.
  Certain requirements of tort law are retained-including proof of 
        historical exposure to each defendant's asbestos products,\20\ 
        the causal role of those products, and individual 
        determinations of damages. Defendants' fault or product defect 
        is eliminated from the determination of whether the plaintiff 
        can recover, and any affirmative defenses based on the 
        claimant's conduct are eliminated--and that is positive.
---------------------------------------------------------------------------
    \20\ In response to an inquiry in the House hearings on the 
companion Bill to S. 758, HR 1283, Richard H. Middleton, President of 
the American Trial Lawyers Association, explained why lawyers are still 
charging contingency fees of 33-40 percent: ``Because you still have to 
prove the very complex work histories of these individuals who worked 
at many job sites, perhaps throughout the country. You have to prove 
the medical diagnostic requirements. You have to bring in all of their 
medical records. And so, it requires a great deal of staff time * * *'' 
Hearings on HR 1283 Before the House Judiciary Committee (July 1, 
1999).
---------------------------------------------------------------------------
  However, in order to apportion liability among asbestos defendants, 
        the Bill requires determination of the comparative fault of 
        each defendant. So, even though the fault of a defendant is not 
        relevant for purposes of liability to the claimant, we have 
        injected into every case a potential dispute, requiring 
        litigation, among the defendants as to their comparative share 
        of fault for purposes of apportionment. And, as I understand 
        it, that would occur in the mediation process, arbitration, if 
        it occurs, and in any lawsuit that might occur.
  Another consequence of case-by-case defendant apportionment along 
        with the adoption of the joint and several liability or several 
        liability rule employed by the governing jurisdiction's law is 
        the potential for requiring apportionment of comparative fault 
        to nonparty asbestos defendants to whose products the plaintiff 
        was exposed. Most jurisdictions that have adopted some form of 
        several liability--a majority of jurisdictions in the United 
        States--permit the submission of nonparties to the fact finder 
        for purposes of apportioning comparative fault and determining 
        the several liability share of each defendant.\21\ This is, 
        quite frankly, a terrible idea: asbestos defendants or 
        potential tortfeasors seeking to minimize their liability by 
        pointing to asbestos manufacturers or distributors, who are not 
        parties because they are outside the jurisdiction, or dissolved 
        and liquidated. We might also see efforts to assign comparative 
        responsibility to nonparties who are immune from suit, such as 
        the federal government and plaintiffs' employers.
---------------------------------------------------------------------------
    \21\ See RESTATEMENT (THIRD) OF TORTS: APPORTIONMENT OF LIABILITY 
Sec. Sec. 28A-28E, cmt. a, reporters note (Proposed Final Draft 
(Revised) March 22, 1999).
---------------------------------------------------------------------------
  The adversarial nature of the mediation and arbitration procedures 
        along with the tort framework for qualifying for compensation 
        and the procedural requirements of the Act virtually mandate 
        that claimants be represented by counsel and the cap on 
        attorneys fees of 25 percent will be a floor as well. Twenty-
        five percent is better than 33 or 40 percent but even more of 
        these costs could be squeezed out with a simpler, less 
        adversarial, compensation system. This Bill should eliminate as 
        much of the waste that bloats the current system as possible.
  The success of the ADR provisions will depend to a large extent on 
        the response of asbestos defendants, at least some of whom in 
        the past have taken a position of not settling until the right 
        before trial.\22\ At best, this procedure might provide a 
        modest reduction in transaction costs. At worst, it could 
        increase certain inefficiencies in the current system by adding 
        additional layers.
---------------------------------------------------------------------------
    \22\ See Francis E. McGovern, Resolving Mature Mass Tort 
Litigation, 69 B.U.L. REV. 659, 663-64(1989).
---------------------------------------------------------------------------
   Creating incentives to keep the parties out of court. A 10 
        percent penalty for making a settlement offer that is less than 
        75 percent of the actual award \23\ is a very modest stick, 
        indeed. Much more powerful incentives need to be imposed on 
        both sides to avoid resort to the courts and to encourage early 
        resolution of claims. Pennsylvania, for example, imposes a 10 
        percent per year penalty for delay against defendants who fail 
        to settle a case.\24\
---------------------------------------------------------------------------
    \23\ Sec. 307(j).
    \24\ PA. R. CIV. PRO. 238.
---------------------------------------------------------------------------
   Balance. The Bill tilts the current playing field a bit too 
        much toward defendants' interests at the expense of current 
        claimants. It ends punitive damages and asymptomatic claims, 
        imposes medical screening criteria for all diseases, and bans 
        joinder, consolidations, and class actions that might be 
        permitted under current law and which have some potential to 
        reduce administrative costs. It does bar statute of limitations 
        defenses, a very sensible proposition and it provides current 
        claimants a unilateral right to binding arbitration and the 
        potential of mediation, which may, depending on defendants' 
        response, or may not be a benefit to claimants. Defendants gain 
        substantially from this Bill--pushing them to remove the tort-
        like framework for compensation and requiring global resolution 
        of defendants' liability is not too much to ask in exchange for 
        eliminating punitive damages--which affect the settlement value 
        of every case. Global resolution would save substantial 
        attorneys fees and other administrative costs and provide a 
        wrap on asbestos litigation once and for all.

                                Appendix

Asbestos Litigation Reform: State and Federal Courts' Commentary About 
                     the Asbestos Litigation Crisis

                           I. FEDERAL COURTS
A. United States Supreme Court
    A United States Judicial Conference Ad Hoc Committee on Asbestos 
Litigation, appointed by THE CHIEF JUSTICE in September 1990, described 
facets of the problem in a 1991 report: ``[D]ockets in both federal and 
state courts continue to grow; long delays are routine; trials are too 
long; the same issues are litigated over and over; transaction costs 
exceed the victims' recovery by nearly two to one; exhaustion of assets 
threatens and distorts the process; and future claimants may lose 
altogether.'' Report of The Judicial Conference Ad Hoc Committee on 
Asbestos Litigation 2-3 (Mar. 1991). Real reform, the report concluded, 
required federal legislation creating a national asbestos dispute-
resolution scheme. See id., at 3, 27-35; see also id., at 42 
(dissenting statement of Hogan, J.) (agreeing that ``a national 
solution is the only answer'' and suggesting ``passage by Congress of 
an administrative claims procedure similar to the Black Lung 
legislation''). As recommended by the Ad Hoc Committee, the Judicial 
Conference of the United States urged Congress to act. See Report of 
the Proceedings of the Judicial Conference of the United States 33 
(Mar. 12, 1991). To this date, no congressional response has emerged.
    In the face of legislative inaction, the federal courts--lacking 
authority to replace state tort systems with a national toxic tort 
compensation regime--endeavored to work with the procedural tools 
available to improve management of federal asbestos litigation. * * *

Amchem Products, Inc. v. Windsor, 521 U.S. 591, 599 (1997).

    * * * We noted in Amchem that the Judicial Conference Ad Hoc 
Committee on Asbestos Litigation in 1991 had called for ``federal 
legislation creating a national asbestos dispute-resolution scheme.'' 
Ibid. (citing Report 3, 27-35 (Mar. 1991). To date Congress has not 
responded. * * * Thus, when ``calls for national legislation'' go 
unanswered * * * judges can and should search aggressively for ways, 
within the framework of existing law, to avoid delay and expense so 
great as to bring about a massive denial of justice.

Ortiz v. Fibreboard Corporation, 119 S.Ct. 2295, 2303, 2325 (1999).
B. United States Courts of Appeals
    [R]eform must come from the policy-makers, not the courts. Such 
reform efforts are not, needless to say, without problems, and it is 
unclear through what mechanism such reform might best be effected. The 
most direct and encompassing solution would be legislative action. * * 
* In a different vein, Congress might enact compensation-like statutes 
dealing with particular mass torts * * * Congress might enact a statute 
that would deal with choice of law in mass tort cases, and provide that 
one set of laws would apply to all cases within a class, at least on 
issues of liability. Such legislation could do more to simplify (and 
facilitate) mass tort litigation than anything else we can imagine.

Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996).

    It is clear that the enigma of asbestos litigation is not readily 
susceptible to resolution under the standards and practices 
representative of traditional tort litigation (citations omitted). * * 
*
    What has been a frustrating problem is becoming a disaster of major 
proportions to both the victims and the producers of asbestos products, 
which the courts are ill-equipped to meet effectively. * * * This case 
also illustrates the need for a legislative response to the asbestos 
litigation crisis. As the majority opinion in this case notes, there is 
a dire need for legislative intervention in the arena of the asbestos 
litigation crisis.

Cimino v. Raymark Industries, Inc., 1512 F.3d 297, 336 (5th Cir. 1998).

    The Supreme Court, as the only institution other than Congress 
capable of imposing the uniformity necessary to resolve this problem in 
a just manner, should be afforded the chance to deal with the singular 
problem presented by these cases. That Court has the power to formulate 
federal common law which will ensure equitable compensation for all 
claimants. Its ability to address the controlling issues with a single 
voice is not only necessary for just resolution of pending litigation; 
it is even more important to expeditious and equitable settlement of 
claims. A uniform set of rules would not only protect the rights of 
individual claimants and the effective functioning of the judicial 
system, but would also aid the efforts of the asbestos companies and 
their insurers to develop an effective procedure for resolving these 
disputes on a rational basis without resorting to the courts. The 
potential for disparate outcomes in the different states could 
encourage many plaintiffs to remain in the courts rather than resorting 
to a unified nationwide facility for resolving these disputes. * * *

Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314, 1333 (5th Cir. 
1985).

    [T]he court is frustrated by lack of congressional action. A number 
of legislative solutions has been proposed for the problems we must 
confront today and tomorrow throughout America because of yesterday's 
production and use of asbestos. None has been enacted. Clearly the 
powers of Congress to tax and regulate give that forum the interstate 
reach and flexibility needed to allocate the relatively scarce 
resources that must be available to present and future claimants to 
achieve the greatest good for society. * * * Congress can refuse to act 
while the court cannot abstain from resolving a case presented.

Jackson v. John Manville Sales Corp., 781 F.2d 394, 415 (5th Cir. 
1986).

    The national dimensions of the problem have led to calls for 
congressional action. Although the subject has attracted the attention 
of individual representatives and senators, no legislative response has 
garnered enough support to be enacted.

In re School Asbestos Litigation, 789 F.2d 996, 1001 (3d Cir. 1986).

    There has been a lot of talk in Congress and even a little action--
about unclogging the courts by setting up some sort of out-of-court 
claims-handling facility to resolve product liability problems 
involving substances that have injured hundreds, or thousands, of 
people. Much of the Congressional concern was prompted by the more than 
20,000 asbestos-related lawsuits now swamping the courts. In both the 
House and the Senate, legislation has been introduced to take those 
cases out of the courts and instead handle them through a fund offering 
fixed payments for different levels of injury. Those proposals are 
stalled, but there is some movement on separate legislation that would 
create an out-of-court mechanism to compensate people injured by toxic 
substances.

In re A.H Robins Co., Inc., 880 F.2d 709, 744 (4th Cir. 1989).

    This kind of single-state action, however, is an ineffectual 
response to the problem, because one state cannot control what happens 
in other jurisdictions.

Dunn v. HOVIC, 1 F.3d 1371, 1387 (3rd Cir. 1993).

    In both cases we expressed our view that relief from multiple 
punitive damage awards should not be sought from a federal court 
sitting in a diversity action but, rather, from the legislature under 
whose law the action is decided.

Cantrell v. GAF Corp., 999 F.2d 1007, 1017 (6th Cir. 1993).

    [T]he problem is one better suited for solution by state 
legislatures, state courts, and Congress rather than through the 
creation of some federal ``presumption'' by federal courts sitting in 
diversity cases only.

Backston v. Shook and Fletcher Insulation Co., 764 F.2d 1480, 1486 
(11th Cir. 1985).

    [F]ederal common law may at times be a ``necessary expedient,'' 
under our federal system Congress is generally the body responsible for 
balancing competing interests and setting national policy. There is no 
doubt that a desperate need exists for federal legislation in the field 
of asbestos litigation. * * * Congress' silence on the matter, however, 
hardly authorizes the federal judiciary to assume for itself the 
responsibility for formulating what essentially are legislative 
solutions. Displacement of state law is primarily a decision for 
Congress, and Congress has yet to act.

Woessner v. Johns-Manville Sales Corp., 757 F.2d 634, 648 (5th Cir. 
1985).

    A fully satisfactory solution would require properly crafted 
federal legislation.

Jackson v. Johns-Manville Sales Corp., 727 F.2d 506, 529 (5th Cir. 
1986).
C. Federal District Courts
    At this point it would be highly desirable to remove these types of 
mass tort cases from the courts entirely. One proposal that has been 
advanced is to consolidate the various trusts established to handle 
asbestos liability, and to turn over their claims processing functions 
to private companies. The most significant benefit of moving in this 
direction would be the potential to reduce transaction costs and 
possibly the courts' oversight functions. * * *

In re Joint Eastern and Southern Dist, Asbestos Litigation, 878 F. 
Supp. 473, 573 (E.D. & S.D.N.Y. 1995).

    Given the dimensions of the perceived problem in federal asbestos 
litigation, it is not surprising that no ready solution has emerged. 
The Judicial Conference Asbestos Committee concluded that the only true 
solution lies in Congressional legislation.

In re Asbestos Products Liability Litigation (No. VI), 771 F. Supp. 
415, 420 (J.P.M.L. 1991).

    Asbestos litigation in the federal and state courts has reached 
crisis proportions. Over 100,000 pending asbestos * * * cases have 
backlogged the courts--preventing many injured persons from obtaining 
much needed compensation in a timely and efficient manner. * * * A 
fundamental tenet of our legal system--equal treatment--no longer 
exists for asbestos victims.
    The national war over asbestos has produced unnecessary casualties. 
Many of the persons harmed by asbestos-containing products have been 
injured once again by our legal system's method of litigating tort 
cases. Case-by-case adjudications for each injured person has both 
delayed payment and consumed the bulk of the monies available for those 
injured. * * * Much of the billions of dollars in transaction costs 
going to attorneys could be used to compensate the suffering and 
injured. Judicial resources now unnecessarily tied up in these cases 
could be used for other pressing needs.

In re Eastern and Southern Dist. Asbestos Litigation, 134 F.R.D. 32, 34 
(E.D. & S.D.N.Y. 1990).

    The courts and legal profession are under unacceptable pressures 
preventing attention to other matters. More than a hundred thousand 
present claimants will wait indefinitely for relief and an equitable 
share of the assets available to aid them under the present system of 
case-by-case adjudication. Two-thirds or more of the amounts paid for 
the injured are used for transaction costs, most in legal fees and 
expenses (some of it borne by the taxpayer supported court system). 
Business as usual in the law offices and courts is not possible in the 
case of the asbestos disaster. * * * A clearer fix on the extent of the 
problem and the assets available is necessary if a rational and 
workable compensation scheme is to be developed.
    Development of a broad-based consensus concerning the nature and 
extent of the problem is a fundamental step in planning.

In re Joint Eastern and Southern Dist. Asbestos Litigation, 1990 WL 
115785, at * 1-2 (E.D. & S.D.N.Y. July 20, 1990).

    [T]he complexity of asbestos cases makes them expensive to 
litigate; costs are exacerbated when each individual has to prove his 
or her claim de novo; high transaction costs reduce the recovery 
available to successful plaintiffs; and the sheer number of asbestos 
cases pending nationwide threatens to deny justice and compensation to 
many deserving claimants if each claim is handled individually. * * *

In re Joint Eastern and Southern Dist. Asbestos Litigation, 129 B.R. 
710, 750-751 (E.D. & S.D.N.Y. 1991).

    The [asbestos litigation] situation continues to deteriorate. * * * 
Despite an overall decrease in civil filings, there was a dramatic 
increase in the number of asbestos personal injury product liability 
filings in 1990. Despite the large number of cases terminated in the 
last two years and extensive efforts to increase efficiency and devote 
substantial resources to asbestos cases, the number of unresolved cases 
continues to escalate.
    The national dimensions of the asbestos problem has generated 
multiple calls for congressional action. * * * Although the subject has 
attracted the attention of individual representatives and senators, no 
legislation has garnered requisite support for enactment.

In re Joint Eastern and Southern Dist. Asbestos Litigation, 129 B.R. 
710, 812-813 (E.D. & S.D.N.Y. 1991).

    The courts, attempting to provide fair, systematic relief to the 
parties litigant while other powers of government and sectors of 
society turn away from the problem, have become so overburdened as to 
risk denying justice in asbestos cases as well as other types of cases. 
On December 31, 1984, there were approximately 893 personal injury 
asbestos cases involving over one thousand plaintiffs pending in this 
District. This backlog persists despite such creative judicial efforts 
as master filings, detailed standing orders, and large-scale 
consolidations. * * *

Jenkins v. Raymark Industries, Inc., 109 F.R.D. 269, 271 (E.D. Tex. 
1985).

    There is no projection as to when Congress will resolve the 
asbestos problems facing the federal judicial court system * * * It is 
not at all clear to me that congressional action or the Wellington 
Facility are functionally inconsistent with the class action mechanism 
proposed here. We can no longer allow asbestos litigation to creep in 
its petty pace from day to day.

    Jenkins v. Raymark Industries, Inc., 109 F.R.D. 269, 287 (E.D. Tex. 
1985).

    [T]he serious social problem presented by these many claims cry out 
for legislative resolution, not court imposed socio-economic solutions.

Owens-Illinois, Inc. v. Aetna Cas. and Sur. Co., 597 F. Supp. 1515, 
1521 (D.D.C. 1984).

    Experience indicates that these features of mass torts conspire to 
hinder efficient judicial disposition. While in some instances 
legislative solutions have been proposed and adopted * * * our 
political system has left primary responsibility with courts and state 
legislatures to establish practicable and just rules for compensating 
mass tort victims.
    The litigation complexities raised by mass torts are legion. The 
place and manner of exposure to the alleged harm-producing agents are 
often impossible to determine for purposes of establishing a ``locus'' 
state. Very complex-questions as to jurisdiction, choice of law, 
liability, causation and damage apportionment typically result.

In re DES Cases, 789 F. Supp. 552, 562 (E.D.N.Y. 1992).

    Because of the vast numbers of asbestos personal injury and 
property damage suits which have been and are expected to be filed in 
state and federal courts throughout the country * * * [t]he problems 
associated with awarding exemplary damages in successive asbestos 
litigations are thus nationwide problems and call for a uniform 
solution. Resolution of this problem is better dealt with either by the 
federal legislature or through legislation on a state-by-state basis, 
with the proviso that all states adopt a uniform system for handling 
these claims, than on the judicial level.

Leonen v. Johns-Manville Corp., 717 F. Supp. 272,285 (D.N.J. 1989).

                            II. STATE COURTS
    The civil court calendar in Philadelphia cannot cope with the 
volume of over 3,000 asbestos cases that have been filed. * * * Sick 
people and people who have died a terrible death from asbestos are 
being turned away from the courts, while people with minimal injuries 
who may never suffer severe asbestos disease are being awarded hundreds 
of thousands of dollars, and even in excess of a million dollars.
    The asbestos litigation often resembles the casinos sixty miles 
east of Philadelphia more than a courtroom procedure. And just as the 
casinos are the winners in Atlantic City, the lawyers are the winners 
in asbestos litigation since the costs of litigation far exceed 
benefits paid to claimants.
    The Philadelphia court system has focused a great portion of its 
civil resources on the asbestos litigation, devised methods of 
disposition of cases that have won national acclaim, and has processed 
record numbers of major civil cases. But the new cases are filed faster 
than any court system of Philadelphia's size can dispose of them.
    Ideally, the federal or state legislatures should address the 
problem. But even if legislation is enacted some time in the future, it 
may not solve the problems of the thousands of cases which have already 
been filed.
    Since legislative remedies seem remote, the courts should recognize 
that application of traditional tort law to the ``creeping disease'' 
situation is often like trying to fit a square peg into a round hole.

Doe v. Johns-Manville Corp., 471 A.2d 1252, 1256 (Pa. Super. Ct. 1984).

    [S]ingle-state action * * * is an ineffectual response to the 
problem, because one state cannot control what happens in other 
jurisdictions. In fact, the state that acts alone may simply provide 
some relief to out-of-state manufacturers at the expense of its own 
citizen-victims, a situation that hardly provides much law reform 
incentive for state legislators. [T]hese formulas, which give the 
lion's share of the punitive award to the first victim able to win a 
judgment against a particular defendant, are unfair to subsequent 
plaintiffs and concomitantly risk providing too little deterrence to 
behavior of this type. American Law Institute, Enterprise 
Responsibility for Personal Injury 261 (1991). As an alternative to 
state action, the Study supported a federal legislative solution ``to 
authorize mandatory class actions for multiple punitive damages arising 
out of large-scale mass torts.'' Id. at 263.

Owens-Corning Fiberglass Corp. v. Malone, 972 S.W.2d 35, 50 (Tex. 
1998).

    [T]he last decade of the 20th Century, our judicial system faces an 
apocalypse in the guise of asbestos cases. As did the ``Apocalyptic 
beast,'' * * * asbestos rose up ``as from the depths of the sea,'' 
after having lain dormant for decades, to plague our industries 
initially and our judicial system consequentially, spreading cancer and 
asbestosis to thousands of workers along the way. * * * [I]t seems 
quite possible that our dockets shall be visited with asbestos 
litigation well into the next century, each case presenting its unique 
yet similar tragic scenario.

Eagle-Pitcher Industries, Inc. v. Balbos, 578 A.2d 228, 231 (Md. Ct. 
Spec. App. 1990).

    We believe neither our action nor legislative action in Iowa will 
curb the problem of multiple punitive damage awards in mass tort 
litigation. Other courts have reached this same conclusion. * * * 
[B]oth state and federal courts have recognized that no single court 
can fashion an effective response to the national problem flowing from 
mass exposure to asbestos products.

Spaur v. Owens Corning Fiberglass Corp., 510 N.W.2d 854, 866 (Iowa 
1994).

    Congress, by not creating any legislative solution to these 
problems, has effectively forced the courts to adopt diverse, 
innovative, and often non-traditional judicial management techniques to 
reduce the burden of asbestos litigation that seem to be paralyzing 
their active dockets.

Appalachian Power Co. v. MacQueen, 479 S.E.2d 300,303 (W. Va. 1996).

    Any realistic solution to the problems caused by the asbestos 
litigation in the United States must be applicable to all fifty states. 
It is our belief that such a uniform solution can only be effected by 
federal legislation.

W.R. Grace & Co. v. Waters, 638 So.2d 502, 505 (Fla. 1994).

    We can perceive of no problem more in need of a legislative 
solution [i.e., the insurmountable problem of proof for victims of 
asbestos exposure].

Sutowski v. Eli Lilly & Co., 696 N.E.2d 187, 196 (Ohio 1998).

    While we recognize that there are numerous cases that have been 
decided and numerous cases are pending concerning damages claims based 
upon exposure to asbestos, this Court cannot dictate policy in a mass 
tort context, but can only decide the cases involved in the present 
suit. Such broad policy considerations are left to the Supreme Court of 
this state and the United States and to the appropriate legislative 
bodies. * * * We * * * conclude that the higher courts and the 
appropriate legislative bodies should resolve such policy 
considerations.

Keene Corp. v. Kirk, 870 S.W.2d 573, 582 (Tex. App. 1993).

    At the state court level we are powerless to implement solutions to 
the nationwide problems created by asbestos exposure and litigation 
arising from that exposure.

Fischer v. Johns-Manville Corp., 512 A.2d 466, 480 (N.J. 1986).

    We commend the problem to the Legislature for imposition of a more 
rational solution than dissipating the defendant's corporate assets for 
the private enrichment of random fully-compensated victims.

Ripa v. Owens-Corning Fiberglass Corp., 660 A.2d 521, 534 (N.J. Super. 
Ct. App. Div. 1995).

    The solution to the complex of issues generated by asbestos 
litigation is more within the province of the legislature.

Goldman v. Johns-Manville Corp., 1986 WL 7374, at *11 (Ohio App., June 
30, 1986).

    Despite the fact that the current system sometimes provides what 
seems to be, and at times doubtless is, a less-than-adequate remedy to 
those who have been disabled on the job, all policy arguments regarding 
any ineffectiveness in the current compensation system as a way to 
address the problems of industrial diseases and accidents are within 
the exclusive province of the legislature.

Millison v. E.I. du Pont de Nemours & Co., 501 A.2d 505, 515 (N.J. 
1985).

    Senator Grassley. Now, Professor Nagareda.

                STATEMENT OF RICHARD A. NAGAREDA

    Mr. Nagareda. Thank you, Mr. Chairman. Since joining the 
legal academy in 1994, I have dedicated my career to studying 
the mass tort litigation problem, including the asbestos 
litigation. I think that a useful way to frame the discussion 
of this particular bill is to think about what would happen in 
a world in the absence of national legislation.
    It seems to me that a comprehensive nationwide solution of 
the sort that is set forward in this bill would be vastly 
superior to the patchwork quilt of private compensation plans 
that I would expect to arise in the absence of Federal 
legislation. Absent Federal legislation, I think the incentives 
of plaintiffs' law firms and the defendants will remain the 
same.
    Plaintiffs' law firms will have every reason to continue to 
bring forth claims on behalf of unimpaired persons, and 
defendants will have every reason to resist the expeditious 
resolution of those claims, at least without some assurance 
about the future. So without Federal legislation, my 
expectation is that the major plaintiffs' law firms in the area 
and at least the remaining asbestos defendants would each be on 
their own to seek to cut as advantageous a deal with their 
counterparts on the other side as they could manage.
    What is likely to emerge, in other words, is, I think, a 
patchwork quilt of agreements between particular firms and 
particular defendants, some of which might be more favorable or 
less favorable in some respects than the legislation currently 
before this committee.
    The significant practical advantage to S. 758 is that it 
would create a forum for one-stop shopping on the part of 
plaintiffs who are seeking redress from asbestos defendants. 
The compensation that they would receive would not depend upon 
sheer chance. It wouldn't depend upon the particular firm they 
go to. It wouldn't depend on whether or not that firm had an 
agreement in place with a particular defendant. It would depend 
instead upon an assessment by neutral medical and legal experts 
in the field, drawing upon standards that would be agreed upon 
in the legislative process.
    Now, to provide a chance for preserving the limited assets 
of defendants, there have to be some difficult value choices 
made. I do believe that this legislation makes the right value 
choice. The major point for present purposes that I wanted to 
underscore is that those sorts of value choices to prefer the 
impaired over the unimpaired, should be made openly through a 
process amenable to democratic discussion and oversight.
    It seems to me that a patchwork system of private 
agreements would neither be practicable nor desirable, not 
practicable because there are simply too many defendants in too 
many exposure situations that we are dealing with in this area. 
It is not one where you can have two or three defendants pursue 
these sorts of private arrangements and solve the problem that 
way.
    In addition, I am convinced that a patchwork quilt of 
agreements involving particular plaintiffs' firms and 
defendants would only to the confusion and the frustration of 
asbestos victims. I would describe it as a full employment bill 
for lawyers on both sides because only the lawyers would know 
the terms of the various deals which would not be matters of 
public record, and only they would have the legal expertise to 
manage their way through the multiple agreements that would be 
implicated in most asbestos cases which characteristically 
involve multiple defendants.
    It seems to me that the legislation before this committee 
makes a lot of sense. It does not impose a bureaucratic 
solution to the asbestos problem, but instead seeks to 
replicate private agreements that have already been fleshed out 
by experienced attorneys in the private sector. That, it seems 
to me, makes this bill a desirable piece of legislation that is 
long overdue.
    Senator Grassley. Thank you, professor.
    [The prepared statement of Mr. Nagareda follows:]

               Prepared Statement of Richard A. Nagareda

                                SUMMARY
    S. 758 represents a fair, practicable, and innovative solution to 
the asbestos litigation--one that merits enactment by this Congress.
    In the absence of federal legislation, the essential features of 
the asbestos litigation will not somehow go away: Plaintiffs' lawyers 
will continue to have a powerful economic incentive to bring forth 
large number of claims on behalf of unimpaired persons, having already 
expended the fixed costs to develop legal and factual expertise 
concerning asbestos in earlier phases of the litigation. At the same 
time, defendants have no reason to resolve expeditiously asbestos 
claims, absent some set of ground rules to govern the quality of claims 
to be presented for compensation in the future. The upshot is a kind of 
litigation gridlock, accompanied by what, to date, has been a fruitless 
search for some legal vehicle by which to resolve future asbestos 
claims.
    The framework established by this Act would be vastly superior to 
the legal environment likely to emerge in the absence of federal 
legislation. Specifically, a comprehensive solution to the asbestos 
litigation effected by way of federal legislation would be superior--
from the standpoint of both asbestos victims and democratic 
accountability--to the patchwork quilt of private compensation plans 
likely to emerge otherwise. In addition, federal legislation to address 
specifically the asbestos litigation would reduce the pressure for 
dramatic, and potentially unwise, changes to general principles of 
civil procedure and bankruptcy law.
    The Act represents an appropriate--indeed, necessary--exercise of 
federal power. It places the federal government in the position of a 
facilitator and coordinator of private dispute resolution. It does not 
impose a bureaucratic solution to the asbestos problem but, rather, 
seeks to replicate arrangements already fleshed out by experienced 
attorneys in the private sector. Any workable national solution to the 
asbestos litigation will necessarily entail some degree of intrusion 
upon matters that otherwise would remain subject to state authority. 
This Act does so only as much as necessary to implement its underlying 
priorities for compensation and, even then, only as a last resort.
    Finally, the priorities set by the Act are right on the merits. The 
Act appropriately seeks to maximize the resources available for 
compensation of impaired persons by barring claims on behalf of persons 
who do not meet specified criteria for medical impairment as well as 
claims for punitive damages. The Act prefers private dispute resolution 
to the dead weight loss of continued litigation in the tort system; and 
it prefers to put money in the hands of asbestos victims rather than 
the pockets of their lawyers.
          * * * * *
    Mr. Chairman and Members of the Committee: My name is Richard A. 
Nagareda, and I am an Associate Professor of Law at the University of 
Georgia. Since joining the legal academy in 1994, I have dedicated my 
teaching and research to the subject of mass tort litigation. As 
indicated in the attached c.v., I have published three articles in 
major law reviews on the subject, addressing class action settlements 
in the asbestos area \1\ as well as ongoing litigation over silicone 
gel breast implants and tobacco products.\2\ My objective in these 
writings has been to examine comparatively the many vehicles--class 
actions, bankruptcy, federal regulation, and national legislation, 
among others--advanced in recent years to effect comprehensive 
solutions for particular areas of mass tort litigation. In addition to 
my academic writings, I regularly teach a seminar in which my students 
discuss a set of reading materials assembled by me on the subject of 
mass tort litigation and then proceed to prepare research papers under 
my supervision on unresolved legal issues in the area.
---------------------------------------------------------------------------
    \1\ See Richard A. Nagareda, Turning from Tort to Administration, 
94 Mich. L. Rev. 899 (1996).
    \2\ See Richard A. Nagareda, In the Aftermath of the Mass Tort 
Class Action, 85 Geo. L.J. 295 (1996); Richard A. Nagareda, Outrageous 
Fortune and the Criminalization of Mass Torts, Mich. L. Rev. 1121 
(1998).
---------------------------------------------------------------------------
    At the outset, let me emphasize that I seek to assist the Committee 
from the standpoint of an academic commentator interested in finding 
fair and practicable solutions to mass tort problems. At no point since 
joining the academy have I done any consulting work for any party, law 
firm, court, or other organization with respect to asbestos cases or 
any other area of mass tort litigation. Nor have I otherwise accepted, 
either directly or through my law school, any financial support from 
any such persons in connection with my academic research and writing. 
My views are, quite simply, my own.
    I have reviewed S. 758, the Fairness in Asbestos Compensation Act 
of 1999, and urge you strongly to enact it into law. In this era of 
divided government, I applaud the bipartisan effort to move forward 
this legislation. Indeed, I believe that S. 758 represents the last, 
best hope for a fair and comprehensive solution to the problems posed 
by asbestos litigation, not only for asbestos victims and defendants 
but also for the judicial system as a whole.
    The history and essential facts behind the asbestos litigation are 
both well known and ably documented in the testimony presented in favor 
of the legislation during the July 1, 1999 hearing before the House 
Judiciary Committee. The experience gleaned from the asbestos 
litigation over the span of recent decades establishes several starting 
points for the discussion of S. 758. After noting these points, I set 
forth the reasons for my conclusion that S. 758 stands as a fair and 
practicable solution--in particular, one superior to the legal 
environment likely to emerge in the absence of federal legislation.

                            STARTING POINTS
    There are three significant starting points for any debate over 
federal legislation in the asbestos area:

   Currently-pending asbestos cases involve large numbers of 
        persons with little or no physical impairment. This feature of 
        the asbestos litigation not only is likely to continue in the 
        future, it also forms the basis for a kind of litigation 
        gridlock capable of being broken only on a comprehensive basis.

    Leading commentators have observed that ``up to one-half of 
asbestos claims are now being filed by people who have little or no 
physical impairment. Many of these claims produce substantial payments 
(and substantial costs) even though the individual litigants will never 
become impaired.'' \3\ These claims, moreover, have considerable 
settlement value when bundled together in large numbers with claims 
brought on behalf of persons who are genuinely impaired.\4\ This 
feature of the ongoing litigation over asbestos is the predictable 
consequence of two underlying phenomena: the nature of latent disease 
and the economic incentives for both plaintiffs' law firms and 
defendants.
---------------------------------------------------------------------------
    \3\ Christopher F. Edley, Jr. & Paul C. Weiler, Asbestos: A Multi-
Billion-Dollar Crisis, 30 Harv. J. Legis. 383, 393 (1993).
    \4\ See Prepared Statement of Professor William N. Eskridge, Jr., 
Hearing on H.R. 1283 Before the House Comm. on the Judiciary (July 1, 
1999).
---------------------------------------------------------------------------
    Asbestos-related impairments can result from both cancerous and 
non-cancerous diseases--mesothelioma being a classic example of the 
former and asbestosis a common illustration of the latter. The crucial 
feature of these diseases consists of a latency period--typically, 
extending over decades--between asbestos exposure and the onset of 
physical impairment.\5\ The result is that, at a given time, there will 
be a group of persons with asbestos-related impairments and a 
comparatively larger group of persons who merely have been exposed to 
asbestos, only some of whom will ever become impaired.
---------------------------------------------------------------------------
    \5\ For a concise overview of the medical aspects of asbestos, see, 
e.g., In re Joint E. & S. Dist. Asbestos Litig., 129 B.R. 710, 737-42 
(Bankr. E. & S.D.N.Y. 1991) (Weinstein, J.).
---------------------------------------------------------------------------
    From the standpoint of a plaintiffs' law firm, the economics of 
asbestos litigation are such that there is every reason to push forward 
not merely the claims of those who are physically impaired but also 
those of persons who merely have been exposed to asbestos and may never 
become impaired.\6\ This economic incentive flows from the repetitive 
character of the factual and legal issues in mass tort cases generally. 
To put the point briefly: The fixed costs associated with winning a few 
path breaking early victories in mass tort litigation are considerable, 
but the marginal costs of pursuing additional claims--that is, claims 
that raise similar legal and medical issues and that flow from similar 
factual situations--are comparatively low. Having expended the time and 
resources to win an initial set of victories, in other words, 
plaintiffs' law firms have every reason, from an economic standpoint, 
to attempt to spread their fixed costs over an ever-increasing number 
of claims.
---------------------------------------------------------------------------
    \6\ This discussion summarizes the analysis presented in Nagareda, 
supra note 1, at 904-14.
---------------------------------------------------------------------------
    It bears acknowledgment that early asbestos lawsuits--undertaken at 
considerable risk and personal expense by the plaintiffs' attorneys 
involved served to bring to light the misconduct of the asbestos 
industry more quickly and in greater depth than those misdeeds would 
have emerged in the absence of such innovative litigation. But 
acknowledgment of the considerable social good achieved by early 
asbestos lawsuits--now, decades in the past--should not blind one from 
the recognition that current asbestos litigation is increasingly 
focused upon unimpaired persons.
    All of this creates the makings for what can best be described as a 
form of litigation gridlock. In the absence of a long-term, 
comprehensive approach to the disposition of asbestos cases as a whole, 
defendants have little reason to seek the expeditious resolution of 
claims short of the approach of actual trial dates. From defendants' 
standpoint, settlements in pending cases--particularly, settlements in 
cases brought on behalf of as-yet-unimpaired persons--serve no purpose 
but to enhance the economic attractiveness of still more lawsuits with 
ever-decreasing merit. Defendants, in other words, have little reason 
to seek the resolution of current cases absent the development of 
ground rules for the types of claims that can be brought forward for 
payment in the future. Thus, the gridlock: Plaintiffs' law firms have 
economic incentives to bring more cases, which defendants have no 
incentive to resolve expeditiously absent some form of assurance about 
the quality of future claims.

   Reliance upon litigation in the ordinary tort system has 
        resulted in an unconscionable dead weight loss of resources 
        that could be better devoted to the compensation of asbestos 
        victims.

    The litigation gridlock described above has genuine costs. The 
Judicial Conference Ad Hoc Committee on Asbestos Litigation reported in 
1991 that, for each dollar expended in asbestos litigation, only 39 
cents were paid to asbestos victims. The remainder was consumed by 
transaction costs--principally, attorneys' fees.\7\ In addition, the 
Committee reported that asbestos cases were subject to delays twice the 
length of those experienced by other civil litigants.\8\
---------------------------------------------------------------------------
    \7\ See Report of the Judicial Conference Ad Hoc Committee on 
Asbestos Litigation 13 (Mar. 1991) (crediting the findings of the Rand 
Corporation Institute for Civil Justice).
    \8\ See id. at 10-11.
---------------------------------------------------------------------------
    I am aware of no empirical research on transaction costs in 
asbestos litigation during more recent years an era in which the 
medical and legal issues involved in such cases have become familiar to 
the point of rote repetition. There is reason to doubt, however, that 
transaction costs have dropped precipitously from those observed 
earlier by the Ad Hoc Committee. Neither the influx of claims on behalf 
of unimpaired persons nor the economic incentives of plaintiffs' 
lawyers or defendants have changed in the interim.
    At the very least, there is considerable reason to doubt that 
transaction costs are anywhere, near as low as they could be. 
Notwithstanding that plaintiffs' law firms increasingly have assigned 
much of the day-to-day handling of asbestos claims to lower-cost 
paralegals \9\ and have developed a working knowledge of which sorts of 
claims have genuine settlement value based upon prior dealings with 
their defense counterparts, there is no indication that plaintiffs' law 
firms have correspondingly reduced the contingency fees that they 
retain from any compensation payments ultimately made by defendants. 
The result is a contingency fee system predicated upon the presence of 
substantial litigation risk but applied in a context in which such risk 
is no longer present.\10\
---------------------------------------------------------------------------
    \9\ See Nagareda, supra note 1, at 935.
    \10\ This problem is not unique to asbestos litigation. See 
generally Lester Brickman, Contingent Fees Without Contingencies: 
Hamlet Without the Prince of Denmark?, 37 UCLA L. Rev. 29 (1989).
---------------------------------------------------------------------------
    Apart from the costs borne by those actually involved in the 
litigation, the influx of asbestos cases in state and federal courts 
imposes a burden upon the judicial docket--one that affects not merely 
the handling of asbestos lawsuits but also the expeditious resolution 
of all other pending litigation in the court system.

   There is today a compelling need for a comprehensive 
        solution through federal legislation, as previous efforts by 
        the private sector alone have met with failure on legal grounds 
        or with only modest practical success after lengthy delay.

    It comes as no surprise that the private sector would have tried to 
use existing legal mechanisms to put into place the kind of ground 
rules capable of breaking the litigation gridlock: namely, ground rules 
that limit the sorts of cases that can legitimately be presented for 
compensation in exchange for commitments from defendants to pay 
expeditiously legitimate claims. The principal vehicles for these kinds 
of ground rules have consisted of settlements in either mandatory class 
actions under Rule 23)(b)(1) of the Federal Rules of Civil Procedure or 
in opt-out class actions under Rule 23(b)(3). Recent Supreme Court 
decisions, however, have invalidated those efforts as inconsistent with 
the terms of Rule 23 in its current form.\11\ But, in so doing, the, 
Court has called upon Congress to consider the enactment of measures 
similar in substance through the more legitimate vehicle of federal 
legislation.\12\
---------------------------------------------------------------------------
    \11\ See Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997); 
Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999).
    \12\ See, e.g., Ortiz, 119 S. Ct. at 2302 (``[T]he elephantine mass 
of asbestos cases * * * defines customary judicial administration and 
calls for national legislation.'') (footnote omitted); id. at 2324 
(Rehnquist, C.J., concurring) (emphasizing that the asbestos litigation 
``cries out for a legislative solution'').
---------------------------------------------------------------------------
    Apart from the class action arena, several firms within the 
asbestos industry--most prominently, Johns Manville--have sought to 
resolve their outstanding liabilities through reorganization 
proceedings in bankruptcy. The academic literature on these bankruptcy 
proceedings has long documented both substantial delays in the actual 
payment of compensation to asbestos victims and, more generally, 
formidable structural reasons to believe that such proceedings will 
systematically undercompensate future claimants.\13\ In addition to 
these significant practical problems, there remains uncertainty over 
the extent to which current law empowers the bankruptcy courts to 
resolve future mass tort claims at all.\14\
---------------------------------------------------------------------------
    \13\ For background on the Johns Manville proceedings in 
particular, see Frank J. Macchiarola, The Manville Personal Injury 
Settlement Trust: Lessons for the Future, 17 Cardozo L. Rev. 583 
(1996). On the structural biases of the bankruptcy process with regard 
to future claims, see Mark J. Roe, Bankruptcy and Mass Tort, 84 Colum. 
L. Rev. 846 (1984).
    \14\ The ongoing debate is reflected in the recent report of the 
National Bankruptcy Review Commission, Bankruptcy: The Next Twenty 
Years 323-26 (1997).
---------------------------------------------------------------------------
    In sum, wholly private vehicles short of federal legislation have 
sought to achieve comprehensive solutions for the asbestos litigation 
with only minimal success.

                 A FEDERAL SOLUTION, COMPARED TO WHAT?
    Consideration of S. 758 must begin with an informed assessment of 
what the world would look like in the absence of such legislation. Not 
even the most expert observer can predict the future with complete 
accuracy but, based upon the incentives of plaintiffs' law firms and 
defendants, one can advance two central points:

   A comprehensive solution to the asbestos litigation effected 
        by way of federal legislation would be vastly superior--from 
        the standpoint of both asbestos victims and democratic 
        accountability--to the patchwork quilt of compensation plans 
        likely to emerge otherwise.

    Absent federal legislation, the underlying economic incentives 
described earlier will not somehow go away. Rather, plaintiffs' law 
firms will have every reason to continue to bring forth claims on 
behalf of unimpaired persons, and defendants will have every reason to 
stonewall, absent some system of ground rules for future claims. 
Without federal legislation, the major plaintiffs' law firms in the 
asbestos area and the remaining asbestos defendants each would be on 
their own: Each would seek to cut as advantageous a series of deals 
with its counterparts as it could, simply as a way to break the 
litigation gridlock. What is likely to emerge, in short, is a patchwork 
quilt of agreements between particular plaintiffs' firms and particular 
defendants--some deals, perhaps, more favorable to asbestos victims in 
certain respects and some less favorable in others than S. 758.
    The significant advantage to S. 758 is that it would create a forum 
for one-stop shopping on the part of persons seeking redress from 
asbestos defendants. The compensation that any given victim ultimately 
receives would not depend upon sheer chance--namely, the particular 
plaintiffs' law firm that happened to represent the person and the 
particular deal that the firm might have in place with those defendants 
to whose products the person happened to be exposed. Instead, 
compensation would turn upon an assessment made by neutral medical and 
legal experts, drawing upon standards that would be debated in the 
ordinary legislative process, or--if the plaintiff ultimately chose to 
sue--upon an individualized determination by a jury.
    To provide the best chance for the preservation of resources to 
compensate those persons who happen to become impaired later rather 
than sooner, many difficult value choices are needed. As I detail 
later, I am confident that S. 758 makes the right value choices--most 
importantly, in its preference for the compensation of impaired persons 
over the unimpaired. The major point for present purposes is that these 
value choices should be made openly through a process amenable to 
democratic discussion and oversight, not through an intricate matrix of 
agreements insulated from the public eye.
    The notion that a patchwork quilt of compensation plans would 
emerge in the absence of federal legislation is not simply a matter of 
guesswork or speculation. In the aftermath of the Supreme Court's 
invalidation of the opt-out class settlement in Amchem Products v. 
Windsor, one prominent asbestos defendant--Owens Corning--announced the 
creation of a ``national settlement program'' precisely of the sort 
described: namely, a series of agreements between that company and 
particular plaintiffs' law firms, setting forth various means for the 
submission and payment of asbestos claims in the future.\15\ Were the 
asbestos litigation confined to a small number of defendant companies, 
agreements of the sort pursued by Owens Corning might make for a 
workable solution--one that would forestall the need for federal 
legislation. The simple fact, however, is that the asbestos litigation 
is not nearly so confined; rather, recent years have witnessed ever-
expanding attempts to implicate still-solvent companies with only 
tangential involvement, if that, in the manufacture or sale of 
asbestos-containing products.\16\
---------------------------------------------------------------------------
    \15\ For a general description of the Owens Coming national 
settlement program, see Janet Morrissey, Owens Corning Fends Off 
Asbestos-Issue Worries, Wall St. J., Sept. 20, 1999, at B9A--See also 
http://www.owenscorning.com/owens/settlement.html.
    Although the enactment of federal legislation would--desirably--
eliminate the need for a patchwork quilt of compensation plans, such 
legislation would not require the dismantling of those plans already in 
place. Rather, Sec. 804 specifically provides that ``[n]othing in this 
Act shall prohibit any claimant, plaintiff, respondent, or defendant 
from entering into a settlement agreement or any other agreement 
concerning a claim covered, in whole or in part, under this Act.''
    \16\ See Prepared Statement of Professor Christopher Edley, Jr., 
Hearing on H.R. 1283 Before the House Comm. on the Judiciary (July 1, 
1999).
---------------------------------------------------------------------------
    Rather than effect a viable solution, a patchwork quilt of 
agreements involving a myriad of plaintiffs' firms and defendants would 
only add to the confusion and frustration of asbestos victims. Indeed, 
such a patchwork system would amount to a full-employment bill for 
lawyers on both sides: Only they would know the terms of the various 
deals, which would not be matters of public record. And only they would 
have the legal expertise needed to wind their way through the multiple 
agreements that would be implicated in most asbestos cases, which 
characteristically involve multiple defendants.

   Federal legislation to address specifically the asbestos 
        litigation would reduce the pressure for dramatic, and 
        potentially unwise, changes to general principles of civil 
        procedure and bankruptcy law.

    In addition to a multitude of private compensation plans, the legal 
world without S. 758 likely would include a second, and potentially 
more troubling, feature: namely, intensified efforts to revamp in 
fundamental ways the legal principles that govern class action 
settlements and the treatment of future claims under the Bankruptcy 
Code. I mentioned earlier the legal obstacles encountered in recent 
years by those who have attempted to use class actions and bankruptcy 
proceedings as ways to impose a set of ground rules for asbestos 
claims. Confronted with the Supreme Court's unfavorable decisions in 
Amchem Products and Ortiz, those who would seek so to use class action 
settlements would have every reason to redouble their efforts to modify 
Rule 23 to permit such vehicles. In fact, that effort would not have to 
start from scratch, as the Advisory Committee on Civil Rules already 
has put forward a proposal that would loosen the strictures upon class 
certification under Rule 23 for purposes of settlement.\17\ Likewise, 
the National Bankruptcy Review Commission has advanced a proposal to 
amend the Bankruptcy Code to provide explicitly that reorganization 
proceedings may resolve future claims\18\--a move that prompted 
substantial criticism from one Commission member currently serving on 
the federal bench.\19\
---------------------------------------------------------------------------
    \17\ See Advisory Committee on Civil Rules, Proposed Amendments to 
the Federal Rules of Civil Procedure, Rule 23 (May 17, 1996), reprinted 
in 117 S. Ct. 352 (1996).
    \18\ See National Bankruptcy Review Commission, supra note 14, at 
316-17.
    \19\ See Edith H. Jones, Rough Justice in Mass Future Claims: 
Should Bankruptcy Courts Direct Tort Reform?, 76 Tex. L. Rev. 1695 
(1998).
---------------------------------------------------------------------------
    It is beyond the scope of the present hearing to address the legal 
intricacies of these reform proposals. The central point, for present 
purposes, is that the pressure upon plaintiffs and defendants to find 
some viable vehicle by which to establish ground rules for asbestos 
claims will not disappear in the absence of S. 758. To the contrary, 
that pressure will continue to build and could manifest itself in 
demands for far more sweeping changes in the law.
    From the standpoint of one who has studied mass tort litigation in 
its various recent forms, I remain open to the prospect that, over 
time, general lessons might be drawn from experience in multiple areas 
of mass tort litigation--lessons that might lead to worthwhile 
proposals for change in generally applicable bodies of law like Rule 23 
and the Bankruptcy Code. Whatever direction that process of legal 
reform might take, however, it should be based upon experience over a 
broad range of contexts--indeed, experience not confined simply to mass 
tort litigation but encompassing other problematic areas of the civil 
docket.
    There is a familiar adage in the legal world that ``great cases 
make bad law.'' Here, it would be exceedingly unwise and short sighted 
to set in motion a process of reform in generally applicable federal 
law based simply, or primarily, upon the unique experience of the 
asbestos litigation. The beauty of S. 758 is that it would enable this 
Congress to address the problem of asbestos litigation but to leave for 
another day the larger question of whether to reform in fundamental 
ways the law of class actions or bankruptcy.

             THE APPROPRIATE ROLE OF THE FEDERAL GOVERNMENT
    In an era of widespread skepticism over the use of federal power, 
Congress rightly should take care before enacting national legislation 
in an area as hotly disputed as the asbestos litigation. Here, however, 
there are substantial reasons to consider federal legislation an 
appropriate--indeed, necessary--exercise of federal power.

   The Act places the federal government in the position of a 
        facilitator and coordinator of private dispute resolution. It 
        does not impose a bureaucratic solution to the abestos problem 
        but, rather, seeks to replicate arrangements already fleshed 
        out by experienced attorneys in the private sector.

    The fundamental policy choices and structure of S. 758 stem not 
from the mind of a federal bureaucrat--much less some law professor--
but, instead, from arrangements hammered out through intensive 
negotiations between leading asbestos plaintiffs' and defendants' 
lawyers. Specifically, the determination to focus the limited remaining 
resources of defendants upon the compensation of impaired persons as 
well as the detailed medical criteria spelled out in the Act stem from 
the nationwide class action settlement entered into by some twenty 
defendants in Amchem Products.
    After an extensive hearing at which prominent opponents presented 
their strongest case against the settlement terms, the United States 
District Court for the Eastern District of Pennsylvania nonetheless 
approved those terms as fair.\20\ Subsequent decisions from the Third 
Circuit and ultimately the Supreme Court have made clear that a class 
action under Rule 23 is simply an impermissible means for such a 
settlement.\21\ But in so holding, both courts remarked upon the bold, 
innovative character of the compensation system crafted by class 
counsel and defendants.\22\ If anything, the need for fundamental value 
choices to be made about the allocation of compensation amongst 
asbestos victims underscored for these appellate courts the need for 
legislative action.
---------------------------------------------------------------------------
    \20\ See Georgine v. Amchem, Products, Inc., 157 F.R.D. 246 (E.D. 
Pa. 1994).
    \21\ See Georgine v. Amchem Products, Inc., 83 F.3d 610 (3rd Cir. 
1996); Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997).
    \22\ See, e.g., Amchem Products, 521 U.S. at 628-29 (``The argument 
is sensibly made that a nationwide administrative claims processing 
regime would provide the most secure, fair, and efficient means of 
compensating victims of asbestos exposure. Congress, however, has not 
adopted such a solution.'') (footnote omitted); Georgine, 83 F.3d at 
617-18 (noting that ``[t]he resolution posed in this settlement is 
arguably a brilliant partial solution to the scourge of asbestos'' but 
ultimately opting to ``leave legislative solutions to legislative 
channels'').

   The Act displaces state authority only as much as necessary 
        to implement its underlying priorities for compensation and, 
---------------------------------------------------------------------------
        even then, only as a last resort.

    In order to focus the resources of defendants upon the compensation 
of impaired persons, S. 758 necessarily bars those who have not met its 
impairment criteria from suing in state or federal court (Sec. 402)--As 
an additional safeguard against the bundling of stronger claims with 
weaker ones, S. 758 also prohibits--in the absence of defendants' 
consent--the use of procedural devices that would ``determine asbestos 
claims on a collective basis'' (Sec. 402). These measures undoubtedly 
tread upon matters of tort law and litigation procedure that, absent S. 
758, would remain within the province of state law. Any viable 
comprehensive solution for the asbestos litigation, however, must 
operate at both the state and the federal level. Limitations applicable 
only in the federal courts would simply have the effect of channeling 
the claims of unimpaired persons to the state court system.
    S. 758 displaces state authority only to the extent needed to 
implement the value choices that underlie the medical criteria therein. 
If anything, S. 758 reflects an abiding respect for state tort law, 
directing arbitrators in proceedings under Sec. 307(f) to ``apply the 
law * * * that would be applied by a court designated by the claimant 
which would have jurisdiction'' over the particular asbestos defendant 
whose liability is at issue.
    Whatever might be said about S. 758, one cannot claim that the 
federal government has rushed in to take charge of the asbestos 
litigation in preference to the states. Rather, the experience of 
recent decades has made it abundantly clear that reliance upon the 
traditional dual system of courts is prescription for continued chaos 
in this area.

                     MAKING THE RIGHT VALUE CHOICES
    Even if federal legislation would be preferable to the legal world 
that likely would emerge absent such action, it remains crucial for any 
federal legislation to make the right value choices in its compensation 
framework. I am confident that S. 758 does so.

   The Act appropriately seeks to maximize the resources 
        available for compensation of impaired persons by barring 
        claims on behalf of persons who do not meet the criteria for 
        medical impairment as well as claims for punitive damages.

    The many bankruptcies that have already befallen member of the 
asbestos industry underscore dramatically that the goal of compensating 
asbestos victims must be pursued with sensitivity to the limited 
resources available for that purpose. Rather than risk a shortfall of 
resources for those persons who happen to manifest impairment later 
rather than sooner, S. 758 makes the safe and prudent choice to focus 
the available resources of defendants upon those persons who are 
actually impaired. Likewise, S. 758 focuses available resources upon 
compensation rather than punitive damages that--from the standpoint of 
asbestos victims--serve simply as a lottery-like windfall for a small 
number of individuals in the near term.

   The Act appropriately prefers to put money into the hands of 
        asbestos victims rather than to enrich unduly their lawyers.

    A key feature of S. 758 consists of its Sec. 503(a), which limits 
to 25 percent the contingency fee that a plaintiffs' lawyer may obtain 
from compensation payments to asbestos victims. This limitation is 
entirely appropriate in the context of a mature mass tort, like 
asbestos. Here, there simply is not the level of legal or factual 
uncertainty that supports the use of higher contingency fee percentages 
in other areas of mass tort litigation. Upon enactment of S. 758, the 
ground rules for the bringing of asbestos claims in the future will be 
well known, such that the plaintiffs' bar--indeed, non-lawyers as 
well--can easily determine whether a given asbestos claim has merit. 
Under such circumstances, a failure to place a cap on contingency fees 
would amount to a substantial and unmerited transfer of wealth from 
future claimants to lawyers.\23\
---------------------------------------------------------------------------
    \23\ On the intensive, behind-the-scenes effort of the asbestos 
plaintiffs' bar to deter defendants from supporting national 
legislation, see Holman W. Jenkins, Jr., Now on Video: America's 
Scariest Special Interest, Wall. St. J., Apr. 21, 1999, at A23.

   The Act expresses an appropriate preference for private 
        dispute resolution over litigation in the tort system. At the 
        same time, the Act preserves asbestos victims' ultimate right 
---------------------------------------------------------------------------
        to sue in court.

    S. 758 seeks to preserve the civil litigation system for those 
cases that raise novel factual or legal issues and, in so doing, to 
avoid the consumption of scarce judicial resources in the handling of 
repetitive claims in large numbers. Hence, the emphasis upon mediation 
as a necessary predicate to the filing of a lawsuit. In this respect, 
the mediation framework set forth in S. 758 does not differ markedly 
from common practice in other areas of civil dispute, where efforts at 
private dispute resolution routinely precede a trip to court.
    The essential deal embodied in S. 758 is that asbestos victims must 
meet the medical criteria for impairment and, in exchange, defendants 
must stop stonewalling. Specifically, once appropriately identified 
under Sec. 303, defendants--no less than asbestos victims--must 
participate in mediation, during which both sides are obligated to make 
``good faith offers'' to resolve the claim in question (Sec. 306(e)). 
And the entire mediation process takes place under specified time 
limits, unlike the settlement process in the ordinary tort system. For 
defendants, in particular, the mediation process is not merely another 
avenue for delay rather, in the event that the plaintiff thereafter 
elects to submit his claim to arbitration, the arbitrator is empowered 
to penalize defendants for inadequate offers in mediation 
(Sec. 307(j)). Arbitration, however, is completely voluntary on the 
plaintiff's part (Sec. 306(f)(2)); one instead may proceed directly to 
litigation if unsatisfied with the results of mediation.
    The preservation of the plaintiff's ultimate right to sue serves to 
induce genuine compromise by defendants at the mediation stage. 
Likewise, the limitation of recovery to compensatory damages--and, of 
course, the prospect of further delay while a lawsuit works its way 
through the judicial docket--serve as appropriate inducements for 
plaintiffs to consider seriously the offers made to them in mediation.

   The absence of specific dollar amounts for compensation 
        stands as a realistic response to the complexity of the 
        compensation determination and will leave asbestos victims no 
        worse off in terms of the resources available for redress.

    Some observers have criticized S. 758 for its failure to set forth 
particular compensation amounts for each asbestos-related disease or 
otherwise to specify an overall dollar amount to be set aside by 
defendants to compensate victims. Under this line, of reasoning, the 
Act forces victims to relinquish the opportunity to Seek compensation 
in the absence of impairment but does not give victims a ``sure thing'' 
in return.
    There are two major flaws in this reasoning. First, the recitation 
of specific dollar amounts is meaningless in practical terms in the 
absence of resources on defendants' part to compensate those who meet 
the medical criteria of the Act. As to the resources that any given 
defendant has available for this purpose, the Act certainly will have 
no negative effect. If anything, the opposite is likely to be true: 
Because the Act will enhance the predictability of the asbestos 
litigation in the years to come and otherwise will reduce the need for 
continued expenditures in defense costs, the Act will enable defendants 
to draw more effectively upon the capital markets to support their 
ongoing business enterprises \24\--a development that can only enhance 
their ability to pay compensation in the future.
---------------------------------------------------------------------------
    \24\ The district court in the Amchem Products settlement so found. 
See Georgine, 157 F.R.D. at 291 (crediting testimony from expert 
witness presented by settling parties).
---------------------------------------------------------------------------
    Second, the complaint that the Act sets forth no ``sure thing'' in 
dollar terms dramatically underestimates the complexity of the 
compensation determination. The class action settlement in Amchem 
Products was able to include a detailed set of dollar amounts only 
because that settlement was limited to a relatively modest number of 
defendants (willing to share their historical settlement data) and 
concerned only occupational exposures to those particular defendants' 
products. S. 758 quite rightly describes a comprehensive framework for 
the asbestos litigation--one applicable to all defendants and all 
exposure settings. It simply is not possible--or, for that matter, 
desirable--to specify in advance a compensation grid when the potential 
combinations of defendants and factual circumstances are effectively 
infinite. That said, however, any determination of compensation for a 
particular victim--whether achieved through mediation, arbitration, 
settlement agreement, or judgment at trial--would remain just as 
enforceable in the courts as before the Act.

                               CONCLUSION
    S. 758 represents a fair, practicable, and innovative solution to 
the asbestos litigation--one that merits enactment by this Congress. 
Indeed, in this instance, federal legislation is long overdue.

    [Editor's note: The Curriculum Vitae of Richard A. Nagareda is 
retained in Committee files.]

    Senator Grassley. Now, Mr. Verkuil.

                  STATEMENT OF PAUL R. VERKUIL

    Mr. Verkuil. Thank you, Senator. I have been working in the 
field of administrative law and constitutional law and 
separation of powers for many years beyond my colleagues here 
or Professor Edley, I must say, who has 18 years in. But let me 
focus for you on what I think are the crucial issues of 
constitutional concern, since they were raised by Mr. 
Middleton. And the two issues, I believe, that come most to the 
fore are the matter of federalism and the seventh amendment.
    First of all, you must appreciate that the Asbestos 
Resolution Corporation is a government corporation. As such, it 
is like any other administrative agency created by this 
Congress, if it were to do so, under its article I power. It is 
no different constitutionally from the Federal Trade Commission 
or the Federal Communications Commission or from Amtrak which, 
of course, is bound by the same constitutional constraints as a 
government corporation.
    Federalism concerns might be seen to arise because Congress 
would be acting under the Commerce Clause to grant powers to 
the ARC, the Asbestos Resolution Corporation, that partially 
preempts State authority. But there is no question that the 
asbestos industry affects interstate commerce. Indeed, all we 
have heard today is about the number of cases being brought in 
a number of States, and the number of businesses that are 
involved and the number of individuals that are involved. So 
there is no issue, it seems to me, that interstate commerce is 
implicated.
    That distinguishes us from the Lopez case and perhaps also 
from the case that was mentioned by Mr. Middleton concerning 
the women's rights case which will be an issue of interstate 
commerce, realizing that Lopez was the first case of its kind 
in the last 60 years. We are surely beyond and clearly beyond 
any issue there.
    Now, there is another issue with regard to the exercise of 
Federal power, and that is under cases such as Printz, the 
Brady bill case, and New York v. United States, which question 
the use of Federal power validly exercised under the Commerce 
Clause otherwise because it commandeers State officials. And 
the commandeering of State executive officials also has been 
rejected by the Court in the Brady case, for example.
    Well, these are not executive officials that are being 
commandeered here at all. The only thing that is going on is 
that the State judiciary will be required to hear these cases, 
and the judges in the States have to hear Federal claims. And, 
of course, to the extent this bill became law, it would be a 
Federal claim.
    Cases since Testa v. Katt more than 50 years ago have made 
it plain that State courts must hear Federal claims. Indeed, no 
other outcome would be acceptable to the constitutional plan 
drawn up over 200 years ago which contains the Supremacy 
Clause.
    As to the seventh amendment which was also mentioned by Mr. 
Middleton, the issue becomes whether the right to a jury trial 
which is available under State tort law can somehow derail the 
administrative solution proposed by S. 758 through the ARC. The 
key inquiry is whether Congress can validly establish this 
regime consistent with article III. If it does, as a practical 
matter the seventh amendment issue goes away.
    Ever since Crowell v. Benson, decided over 60 years ago, it 
has been plain that, ``public rights cases'' are valid 
exceptions to the seventh amendment. This is such a case. In 
fact, the application of the medical criteria is a classic 
exercise of a public rights doctrine at work. And I think later 
cases like Thomas v. Union Carbide and CFTC v. Schor would also 
support the notion that the intrusion upon the article III 
power is reasonable and not vast and broad, such as it was in 
the bankruptcy context earlier discussed by the Court. So these 
cases, it seems to me, are very clearly valid.
    I realize that ATLA mentions the seventh amendment a lot. 
Of course, they live by the seventh amendment. You can 
appreciate that, but these are not seventh amendment problems 
with this legislation, in my firm judgment. I think the 
legislation works.
    I think the Supreme Court, by the way--and I take comfort 
from Ortiz. I do not see in Ortiz a seventh amendment concern 
which Mr. Middleton mentioned. He cited that case in connection 
with that. I don't even see it there. I am very confident that 
Justice Souter in that opinion said, much like Senator Schumer 
said earlier, that we have been through that; we, the Court, 
want to see a solution. And an administrative solution which 
has been on the table since 1991 when the Judicial Conference 
Ad Hoc Committee first proposed it as a first choice is what 
the Court is now looking for, I really believe.
    My time is up. Thank you very much. I will be pleased to 
answer any questions.
    [The prepared statement of Mr. Verkuil follows:]

                 Prepared Statement of Paul R. Verkuil

                                SUMMARY
    S. 758, the ``Fairness in Asbestos Compensation Act of 1999,'' is 
consistent with principles of federalism enshrined in the Tenth 
Amendment and with the Seventh Amendment of the Constitution.
    Federalism. Under the Commerce Clause, Congress may enact a 
national solution to the asbestos litigation crisis, which is both a 
consequence of and affects interstate commerce. Because of their 
special role in our federal system, state courts have the obligation to 
apply such federal law. S. 758 is thus fully consistent with recent 
Supreme Court decisions protecting state legislatures and 
administrative personnel from commandeering by the Congress.
    Seventh Amendment. The administrative scheme established by S. 758 
is consistent with the Seventh Amendment. Since the right to a jury 
trial applies only in judicial proceedings, the key question is whether 
Congress can establish an administrative claims resolution process 
without violating Article III of the Constitution. The answer to that 
question is clearly yes. Under the public rights doctrine, Congress can 
confer upon administrative tribunals the power to decide cases 
involving ``public rights'' under a Federal regulatory program. Medical 
eligibility determinations under S. 758 clearly fall within this 
doctrine, since they involve a Federal regulatory program and since the 
government is a participant in the proceeding. In this respect, such 
determinations are comparable to similar determinations made by the 
Social Security Administration and the VA in disability cases. 
Moreover, arbitrations under the statutory scheme (which are optional 
to the claimant in any event) are also acceptable as long as there is 
no threat to separation of powers. There is no such threat here.
                                 ______
                                 
    Mr. Chairman and Members of the Committee: My name is Paul Verkuil. 
I appear today in my personal capacity.\1\ I currently serve as Dean 
and Professor of Law at Benjamin N. Cardozo Law School in New York, 
which is part of Yeshiva University. I am also President Emeritus of 
the College of William & Mary, was dean of the Tulane Law School, and 
taught at the law schools of the University of North Carolina, 
University of Pennsylvania and Duke University. The subjects I teach 
include administrative law and economic regulation, both of which deal 
with the constitutional issues raised in my testimony. I have written 
(with colleagues) a treatise and casebooks on administrative law and 
regulatory issues, and I have also published more than 60 law review 
articles on these and related subjects, as my resume, attached hereto, 
describes in detail. Over the years, I have testified before House and 
Senate committees on several occasions, including the bill to provide 
Article I court review of Veterans Administration disability decisions 
which raised substantive issues similar to those involved in S. 758.
---------------------------------------------------------------------------
    \1\ I note for the record that I have been compensated by the 
Coalition for Asbestos Resolution for advice on issues of 
administrative and constitutional law. My testimony, of course, is 
based on my own experience, knowledge, and views, resulting from and 
reflected in work done over almost thirty years of academic activity. 
Please also note that I am not the recipient of any federal grant or 
contract.
---------------------------------------------------------------------------
    I appreciate the opportunity to discuss the constitutionality of S. 
758, the proposed ``Fairness in Asbestos Compensation Act of 1999.'' I 
shall focus on two issues. The first is whether the bill's 
modifications of state law are consistent with principles of federalism 
enshrined in the Tenth Amendment and with the substantive due process 
rights of claimants. The second issue is whether the bill violates a 
claimant's right to a jury trial under the Seventh Amendment. As we 
shall see, the answer to that question is intertwined with the question 
whether the use of an expert, non-adversarial administrative process to 
determine medical eligibility impermissibly vests the ``judicial Power 
of the United States'' in something other than an Article III court. I 
conclude that S. 758 is plainly constitutional.\2\
---------------------------------------------------------------------------
    \2\ I treated these and other issues at greater length in my 
Prepared Statement to the House Committee on the Judiciary, submitted 
for that Committee's hearing on the Fairness in Asbestos Compensation 
Act of 1999, H.R. 1283, held July 1, 1999.
---------------------------------------------------------------------------

  I. THE FAIRNESS IN ASBESTOS COMPENSATION ACT DOES NOT VIOLATE TENTH 
                   AMENDMENT PRINCIPLES OF FEDERALISM
    This past June, the Supreme Court repeated its call for a 
congressional solution to the asbestos litigation crisis: ``[T]he 
elephantine mass of asbestos cases * * * defies customary judicial 
administration and calls for national legislation.'' Ortiz v. 
Fibreboard Corp., 119 S. Ct. 2295, 2302 (1999) (emphasis added). The 
Court's call for national legislation on its face presupposes at least 
some preemption of state law. S. 758 strikes a balance between state 
and federal interests that is in my view entirely consistent with 
constitutional principles of federalism.
    The threshold question is whether Congress has the power under the 
Constitution to adopt comprehensive legislation addressing the asbestos 
litigation crisis.\3\ Under our federal system,
---------------------------------------------------------------------------
    \3\ The legislation makes several changes to the substantive law of 
torts, long sought by proponents of asbestos litigation reform. First, 
the bill adopts medical criteria to separate those who are impaired by 
asbestos-related disease from those who are not. Second, the Senate 
bill, S. 758, adopts the waiver of defenses contained in the Georgine/
Amchem stipulation, limiting the issues in asbestos tort cases to 
medical eligibility, product identification, and damages. Third, the 
legislation abolishes the statute of limitations and punitive damages 
and bars consolidation of cases without the consent of all 
parties.Congress' powers are limited to those enumerated under Article 
I, Section 8 of the Constitution. Article I, Section 8 does not give 
Congress any specific authority over the common law of torts, which is 
entrusted in the first instance to the States, nor does Article III 
give Congress or the federal courts any power to make common law in 
cases under the jurisdiction of the federal courts because of the 
diversity of the parties. See Erie R.R. v. Tompkins, 304 U.S. 64, 78 
(1938).
---------------------------------------------------------------------------
    Nevertheless, the power of Congress to override state rules of law 
to address a national litigation crisis, with serious and severe 
effects on interstate commerce, is beyond controversy. Article I, 
Section 8 of the Constitution gives Congress the power to regulate 
interstate commerce. Ever since Chief Justice Marshall's decision in 
Gibbons v. Ogden, 22 U.S. (9 Wheat.) I (1824), the Supreme Court has 
emphasized the necessity for Congress to protect national markets. Even 
in United States v. Lopez, 514 U.S. 549 (1995), a recent decision 
recognizing the limits of the Commerce Power, the Supreme Court 
explained that Congress may ``regulat[e] the use of the channels of 
interstate commerce,'' ``persons or things in interstate commerce,'' 
and ``activity that substantially affects interstate commerce.'' Id. at 
558, 559. Asbestos litigation is a consequence of the interstate 
commerce in asbestos-containing products. Each case affects parties 
from numerous states, and the litigation is highly mobile as a 
relatively small number of sophisticated and highly profitable national 
law firms seek state courts that, at any given time, are considered 
favorable to plaintiffs. The bankruptcy of over twenty former asbestos 
producers, with serious consequences for workers, communities and 
future victims nationwide, makes it clear beyond doubt that this 
litigation substantially affects interstate commerce.
    Of course, even if Congress has the power to legislate in an area, 
it must use means that are consistent with the Tenth Amendment, i.e., 
``it must respect the sovereignty of the States.'' Alden v. Maine, 119 
S. Ct. 2240, 2268 (1999). The provisions of S. 758 that affect state 
court procedures are entirely consistent with this principle. Under the 
Supremacy Clause, state courts have an obligation to enforce federal 
law. Testa v. Katt, 330 U.S. 386 (1947). That obligation includes a 
duty to apply the purely substantive provisions of the bill. To be 
sure, the Tenth Amendment does not allow Congress to ``commandeer'' 
state officials, institutions or resources as agents or instruments of 
federal law or policy. See Printz v. United States, 521 U.S. 898 
(1997); New York v. United States, 505 U.S. 144 (1992). But Congress 
does not ``commandeer'' state courts when it requires them to enforce 
rules of federal law. As the Printz Court noted, ``[T]he Constitution 
was originally understood to permit imposition of an obligation on 
state judges to enforce federal prescriptions. * * *'' Printz, 521 U.S. 
at 907.
    Of course, some provisions of the bill--e.g., requirements that 
asbestos claimants obtain a certificate of medical eligibility and 
release from mediation before filing or maintaining a tort action--are 
arguably procedural. While state courts are bound under the Supremacy 
Clause to enforce federal law, it is sometimes said that ```federal law 
takes the state courts as it finds them.''' Howlett v. Rose, 496 U.S. 
356, 372 (1990) (quoting Henry M. Hart, Jr., The Relations Between 
State and Federal Law, 54 Colum. L. Rev. 489, 508 (1954)). I do not 
believe, however, that this principle forbids Congress from requiring 
state courts to respect these provisions of the bill.
    The Supreme Court has held that the Constitution's Supremacy Clause 
authorizes Congress to establish procedures that affect the operation 
of state courts, if Congress does so expressly. See Johnson v. Fankell, 
520 U.S. 911, 921 n.12 (1997). Given the obligation of state courts to 
enforce federal substantive law, Congress may require the use of 
specialized federal procedures that are intertwined with the 
substantive provisions of federal legislation. A central goal of the 
legislation is to ensure that medical criteria are applied in an 
objective, medically appropriate, and consistent way. Requiring 
claimants to exhaust a federally-established, expert, non-adversarial 
medical review process as a prerequisite for filing suit is vital if 
that goal is to be achieved. In this sense, application of the medical 
criteria is really a substantive rather than a purely procedural 
requirement.\4\ Similarly, the requirement that claimants must exhaust 
the medical review process before filing suit is bound up with the 
achievement of the bill's core substantive goal. The exhaustion 
requirement in S. 758 is analogous to the exhaustion requirement in 
Title VII of the Civil Rights Act. Under Title VII, plaintiffs may not 
file suit in a state court for employment discrimination without first 
exhausting a prescribed administrative claims process. See 42 U.S.C. 
Sec. 20OOe-16(c). State courts have for many years enforced this 
federal exhaustion requirement under Title VII.\5\ So far as I am 
aware, no one has ever seriously maintained that it is beyond 
Congress's authority to impose such an exhaustion requirement on state 
courts.
---------------------------------------------------------------------------
    \4\ By way of analogy, under Erie, states are not permitted to make 
purely procedural rules for federal courts, but state statutes that 
require medical malpractice claims to be submitted to state screening 
panels are sufficiently ``substantive'' that the federal courts must 
respect them. See Wray v. Gregory, 61 F.3d 1414, 1417-18 (9th Cir. 
1995); DaigLe v. Maine Med. Ctr., Inc., 14 F.3d 684, 689 (1st Cir. 
1994); DiAntonio v. Northampton-Accomack Mem'l Hosp., 628 F.2d 287, 291 
(4th Cir. 1980). State courts would likewise be obliged to respect the 
federal rule requiring claimants to submit to the ARC medical review 
process.
    \5\ See, e.g., Duplessis v. Warren Petroleum, Inc., 672 So. 2d 1019 
(La. Ct. App. 1996); Roache v. District of Columbia, 654 A.2d 1283, 
1284 n.1 (D.C. 1995); Patrowich v. Chemical Bank, 470 N.Y.S.2d 599 
(App. Div.), aff'd, 483 N.Y.S.2d 659 (N.Y. 1984).
---------------------------------------------------------------------------
    Finally, the legislation's bar on consolidations without the 
consent of all parties does not violate the Tenth Amendment as 
interpreted in Printz and New York. The legislation does not force the 
states to create any new court nor does it require them to expand the 
jurisdiction of existing courts--the principal boundaries on 
congressional power over state courts that the Supreme Court has 
identified. See Howlett, 496 U.S. at 372. Indeed, the legislation does 
not regulate state court procedures at all. Rather, it gives an 
objecting party the right to remove a state court-ordered consolidation 
to federal court. As Professor Laurence Tribe observed in testimony 
before the Senate Judiciary Committee regarding a similar provision in 
last year's bill implementing the global tobacco settlement, Congress 
has broad power to regulate the jurisdiction of the federal courts, and 
may make cases removable so long as the case is within the federal 
judicial power under Article III.\6\ I agree with Professor Tribe on 
this point. There is, of course, no question that Congress may, under 
Article III, confer jurisdiction over these removed cases on the 
federal courts. Under S. 758, a central element of the plaintiff's 
case--medical eligibility--would be governed by federal law.
---------------------------------------------------------------------------
    \6\ A Review of the Global Tobacco Settlement: Hearing Before the 
Senate Comm. on the Judiciary, 105th Cong. 160 (1997) (Prepared 
Statement of Prof. Laurence H. Tribe, Harvard Law School).
---------------------------------------------------------------------------
    A final objection to the creation of a national asbestos dispute 
resolution system is the argument that Congress may not displace state 
tort systems without providing claimants with an adequate alternative 
remedy.\7\ This is not strictly a federalism issue, but instead raises 
the question whether the legislation's effect on common law rules 
invades the substantive due process rights of claimants. In Duke Power 
Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59 (1978), the 
Supreme Court explained that ```[a] person has no property, no vested 
interest, in any rule of the common law.' The `Constitution does not 
forbid the creation of new rights, or the abolition of old ones 
recognized by the common law, to attain a permissible legislative 
object[]' * * *'' Id. at 88, n.32 (citations omitted).\8\ In light of 
this principle, the Court strongly suggested (although it was not 
required to decide) that Congress is not required to provide any 
substitute for common law rights of action, as long as it has a 
rational basis for its changes to common law rules.\9\ Certainly, no 
court has ever suggested that Congress must provide a substitute remedy 
``approximating the value of litigated claims'' for all affected 
parties (as the trial lawyers argue) \10\ so long as the remedy it 
provides is reasonable in general.
---------------------------------------------------------------------------
    \7\ Statement of Richard Middleton, Jr., President-Elect of the 
Association of Trial Lawyers of America, before the House Committee on 
the Judiciary, July 1, 1999, at 3, 11.
    \8\ This is true even when legislation changes the application of 
the law to already-accrued, and even to already filed causes of action, 
as long as no final judgment has obtained. Usery v. Turner Elkhorn 
Mining Co., 428 U.S. 1, 16 (1976); United States v. Heinszen & Co., 206 
U.S. 370, 387 (1907).
    \9\ Id. at 88 & n. 32 (``[I]t is not at all clear that the Due 
Process Clause in fact requires that a legislatively enacted 
compensation scheme either duplicate the recovery at common law or 
provide a reasonable substitute remedy. * * * Indeed, statutes limiting 
liability are relatively commonplace and have consistently been 
enforced by the courts.'' (citing cases)).
    \10\ Statement of Richard Middleton, Jr., at 3. Indeed, even during 
the now-discredited Lochner era, when the Supreme Court routinely 
invalidated congressional enactments that modified common law rules, 
the Court would uphold statutes that substantially affected common law 
liability if the government provided a ``reasonably just substitute'' 
for common law rights. See New York Cent. R.R. v. White, 243 U.S. 188, 
201 (1917).
---------------------------------------------------------------------------
    In any event, the Fairness in Asbestos Compensation Act does 
provide a reasonable, and in many ways, superior remedy for victims 
than the current tort system. A federal court has already determined, 
after exhaustive hearings, that a settlement containing many of the 
basic provisions of S. 758 were fair and reasonable and offered 
substantial advantages over the tort system. Georgine v. Amchem Prods., 
157 F.R.D. 246 (E.D. Pa. 1994). The appeals court praised the 
alternative system proposed by the settlement as ``arguably [] 
brilliant,'' Georgine v. Amchem Prods., 83 F.3d 610, 617 (3d Cir. 
1996), and the Supreme Court noted that ``a nationwide administrative 
claims processing regime'' could well ``provide the most secure, fair 
and efficient means of compensating victims of asbestos exposure.'' 
Amchem Prods. v. Windsor, 521 U.S. 591, 628-29 (1997).

  II. THE FAIRNESS IN ASBESTOS COMPENSATION ACT DOES NOT VIOLATE THE 
                SEVENTH AMENDMENT RIGHT TO A JURY TRIAL
    Finally, the medical eligibility process established in S. 758, and 
the provisions concerning alternative dispute resolution, do not 
violate the Seventh Amendment. The Seventh Amendment issue turns on the 
question whether Article III allows Congress to create a nationwide 
dispute resolution process for asbestos cases that would permit 
adjudication of those cases, in whole or in part, by a non-Article III 
tribunal. If it does, there can be no Seventh Amendment objection to 
administrative resolution of asbestos cases without a jury trial. The 
Supreme Court has determined that, where Congress properly places 
adjudicative authority in a non-Article III tribunal, there is no 
Seventh Amendment jury trial right. As the Supreme Court has observed, 
```the Seventh Amendment is generally inapplicable in administrative 
proceedings, where jury trials would be incompatible with the whole 
concept of administrative adjudication.''' \11\
---------------------------------------------------------------------------
    \11\ Atlas Roofing Co. v. Occupational Safety and Health Review 
Comm'n, 430 U.S. 442, 454 (1977) (quoting Pernell v. Southall Really, 
416 U.S. 363, 383 (1974)); see Granfinanciera, S.A. v. Nordberg, 492 
U.S. 33, 52 (1989).
---------------------------------------------------------------------------
    Over the years, Article III has been interpreted to permit 
adjudication of a variety of claims by non-Article III federal 
tribunals. In particular, Article III has always been interpreted to 
permit adjudication of disputes between an individual and the 
government under the ``public rights'' doctrine. That doctrine is 
grounded in the understanding that, because Congress is free to commit 
certain matters ``arising `between the Government and persons subject 
to its authority''' to non-judicial executive determination, it may 
also employ the ``less drastic expedient of committing their 
determination to a legislative court or an administrative agency.'' 
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 
68 (1982) (citing Crowell v. Benson, 285 U.S. 22, 50 (1932)). Because 
the question whether to issue a medical eligibility certificate is a 
matter ``arising between the Government and persons subject to its 
authority,'' rather than a dispute involving private parties, there is 
no question that it can be committed to administrative resolution. The 
medical review process is entirely non-adversarial, involving only the 
claimant and the ARC, a government body; defendants do not participate 
at all in this stage. Although the review process will, at a later 
stage, affect the resolution of a private dispute, the process itself 
has the form and structure of a traditional ``public right'' involving 
only the claimant and the Government. In this sense the medical review 
process is like such programs as Social Security disability 
determinations, veterans' benefits, and workers' compensation programs.
    The alternative dispute resolution process brings in the defendants 
as additional parties, but is still permissible under Article III. I 
note at the outset that, under S. 758, eligible claimants are not 
required to submit to any non-Article III adjudication and that they 
fully retain a right to a jury trial in the courts of their choice. 
But, even if this were not the case, there would be no constitutional 
problem. The Supreme Court has expanded the traditional 
conceptualization of public rights to include a variety of what it has 
characterized as ``seemingly 'private''' rights that are related to a 
public administrative scheme. Thomas v. Union Carbide Agric. Prods. Co. 
473 U.S. 568, 594 (1985). The leading decisions are Thomas and 
Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833 (1986). In both 
of those cases the Court emphasized pragmatic flexibility--and its own 
openness to administrative adjudication--in applying Article III.
    In Thomas the Court upheld federal environmental legislation that 
required companies to disclose and share proprietary data, and that 
required arbitration of disputes regarding appropriate compensation for 
doing so. The Court held that when Congress creates a ``right that is * 
* * closely integrated into a public regulatory scheme,'' Congress may 
also select ``a quasi-judicial method of resolving matters'' arising 
under that scheme. Thomas, 473 U.S. at 589, 594. In Schor the Court 
upheld the Commodity Exchange Act's grant of authority to the Commodity 
Futures Trading Commission (``CFTC'') to decide state common law 
counter-claims to reparations complaints brought under the Act. The 
Court reasoned that ``limited * * * jurisdiction over a narrow class of 
common law claims as an incident to the [agency's] primary, and 
unchallenged, adjudicative function'' did not create a ``substantial 
threat to the separation of powers.'' Schor, 478 U.S. at 854. The Schor 
Court stressed that it has reviewed Article III challenges ``with an 
eye to the practical effect that the congressional action will have on 
the constitutionally assigned role of the federal judiciary.'' Id. at 
851.
    The provision of mediation and arbitration, entirely at the 
claimant's option, is linked to the medical eligibility process, and 
serves the legislation's public purpose of providing alternative 
resolution of asbestos disputes. In this respect, it resembles the 
arbitration provisions upheld in Thomas. Although the Supreme Court 
noted the voluntary nature of the process at issue in Schor, a 
claimant's consent to federal administrative adjudication is not 
necessary to make such adjudication constitutional. The Court has never 
held that a federal legislative scheme that involves legitimate 
regulation limited to a narrow class of cases--and which therefore 
poses no threat to the judiciary's co-equal role--must be invalidated 
because it provides a non-consensual administrative process.
    To be sure, the Court's willingness to accept administrative 
adjudication is not unlimited. In the extreme situation presented by 
Northern Pipeline, for example, the Court invalidated a statute 
granting broad powers to a bankruptcy court. The Court found that the 
legislation removed an essentially unlimited category and number of 
cases from the federal courts to a non-Article III tribunal, posing a 
credible threat to the federal judiciary's role under the Constitution. 
The Court also held that because the claims at issue arose ``entirely 
under state law,'' their adjudication by a non-Article III court could 
not be justified under the doctrine of ``public rights.'' Northern 
Pipeline, 458 U.S. at 90. The Court reached a similar result in 
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989)--again, in the 
bankruptcy context--holding that the Seventh Amendment prohibited the 
adjudication without a jury (in a non-Article III forum) of a 
fraudulent conveyance claim that the Court deemed ```[w]holly 
private''' in nature. Id. at 51, 55 (citations omitted). In my view, 
these cases involving the bankruptcy courts involved a far broader 
category of cases, potentially touching on all areas of law, rather 
than the narrow class of cases in which claimants seek compensation for 
injury from asbestos products.
    Under Schor, the ultimate issue is whether the non-Article III 
adjudication poses a threat to the separation of powers. Where the 
```essential attributes of judicial power' are reserved to Article III 
courts,'' Schor, 478 U.S. at 851 (citation omitted), the legislative 
scheme will generally be constitutional. Here, as in other 
administrative programs, those attributes are reserved to the judiciary 
through judicial review of the ARC's decisions.\12\ Striking down the 
scheme would celebrate purely formal concerns at the expense of 
pragmatic federal legislative problem-solving, a course that would be 
both foreign and contradictory to the Supreme Court's current 
jurisprudence. Indeed, the Supreme Court has, twice in the last two 
years, described asbestos claims as particularly unsuited to judicial 
resolution and appropriate for administrative resolution.\13\ In light 
of this history, I do not believe that the Supreme Court would now 
decide that confining review of asbestos claims for compensation to a 
nationwide dispute resolution process would pose a serious attack on 
the judicial power.
---------------------------------------------------------------------------
    \12\ See generally Paul Verkuil, Congressional Limitations on 
Judicial Review of Rules, 57 Tulane L. Rev. 733, 739-43 (1983) 
(discussing the relationship between judicial review and due process).
    \13\ See Ortiz v. Fibreboard Corp., 119 S. Ct. 2295, 2302 (1999); 
Anchem Prods. v. Windsor, 117 S. Ct. 2231, 2252 (1997); see also Report 
of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 27 
(Mar. 1991).
---------------------------------------------------------------------------
    In conclusion, I believe that proposed legislation is plainly 
consistent with the Seventh Amendment and Article III requirements for 
the following reasons:

   First, the medical review process involves only the claimant 
        and the government--thus fitting squarely within the 
        traditional category of ``public rights'' cases where 
        administrative resolution is unquestionably constitutional.
   Second, the alternative dispute resolution process, 
        including mediation and arbitration at the claimant's option, 
        is closely linked with the medical eligibility process and 
        serves the government's public goal of providing compensation 
        to eligible claimants.
   Third, the legislation narrowly circumscribes the impact 
        that its requirement of medical eligibility review has on the 
        federal judiciary. The legislation affects only cases involving 
        claims of injury or death flowing from asbestos exposure. That 
        category does not involve anything like the wholesale 
        displacement of federal jurisdiction involved in the bankruptcy 
        cases and will, moreover, involve fewer cases over time as the 
        class of those exposed or injured shrinks relative to the 
        population as a whole.
   Fourth, the nationwide dispute resolution process provided 
        in the bill is a solution to an urgent problem which the 
        Supreme Court has said is particularly suited to administrative 
        resolution. The Court's own pronouncements strongly suggest 
        that the administrative process established by S. 758 would not 
        be considered congressional aggrandizement at the expense of 
        the judiciary's co-equal role in our constitutional system.
   Finally, because assigning the task of determining medical 
        eligibility to the ARC, and the related alternative dispute 
        resolution process, is valid under the ``public rights'' 
        doctrine, it is also necessarily consistent with the Seventh 
        Amendment.

                               CONCLUSION
    The Fairness in Asbestos Compensation Act is sound as a matter of 
constitutional law. Eight years ago, the Judicial Conference's Ad Hoc 
Committee on Asbestos Litigation recommended replacing tort litigation 
with a nationwide dispute resolution process in order to provide 
quicker and fairer resolution of asbestos claims and to shield the 
courts from a tide of asbestos cases. When Congress did not act, the 
parties to the Amchem class action settlement attempted to create an 
administrative claims processing system by voluntary agreement within 
the judicial system. In Amchem and, more recently, in Ortiz, the 
Supreme Court made it clear that the responsibility for creating an 
alternative system rested with Congress, not the courts. Congress has 
ample constitutional authority to do so.

    Senator Grassley. Thank you all very much. We will take 5-
minute rounds and see how far we go, but we will have to be out 
of here very shortly.
    Professor Green, you indicate that S. 758, and these are 
your words, ``tilts the current playing field a bit too much 
toward the defendant's interest at the expense of current 
claimants.'' So I would like some suggestions on how you might 
rewrite the bill to improve that imbalance, or at least some 
suggestions.
    Mr. Green. Well, I think the difficult issue for the 
asbestos defendants right now, Senator Grassley, is to try and 
resolve to apportion liability among them, and that is 
something this bill does not resolve. This bill leaves that 
open. It will have to be resolved in the mediation, the 
arbitration, or litigation in each individual case.
    Now, what we are trying to do here, what this bill does go 
a ways toward is to create a system that will not eat up I have 
heard estimates of anywhere from 50 to 75 cents of every 
dollar. But what the failure of the asbestos defendants to come 
forward and try to work out a system by which we can globally 
resolve apportionment among them--that, I think, is the 
critical deficiency in this bill. That is something that, if I 
were rewriting it, I would try and come up with a mechanism to 
do that.
    Senator Grassley. Professor Nagareda, S. 758 establishes 
threshold medical criteria that need to be met before a 
plaintiff can enter the Resolution Corporation and then get 
compensation. Some have argued that this mechanism 
substantially curtails the victim's tort rights and remedies 
available in our system. Do you agree? Also, do you believe 
that the mandatory rather than voluntary nature of the program 
is problematic?
    Mr. Nagareda. No, I don't believe those are problematic, 
Senator. I think that there is a fundamental value choice that 
needs to be made in this legislation, and the choice that this 
legislation makes, I believe, is the right one to preserve 
resources for the payment of those who are genuinely impaired 
and not to devote resources to those who either aren't impaired 
or to fund punitive damages in a sort of lottery-like fashion. 
So I am comfortable with the underlying value choice that is 
made in the legislation.
    In terms of the notion of abridging or limiting some sort 
of rights that exist in the present system, it is true that 
people who are unimpaired can in some jurisdictions file 
certain sorts of tort claims. And that is why I am saying that 
a value choice does need to be made by this body under the 
commerce power to say that those claims are not preferred to 
the claims of those who are legitimately impaired and who meet 
the criteria set forward in the legislation. I think it is a 
question of prioritization, and I think that the legislation 
sets forward the right priorities.
    Senator Grassley. Mr. Verkuil, I would like to have a 
response from you in regard to his answer.
    Mr. Verkuil. To Mr. Green and to Mr.----
    Senator Grassley. No, no, just to Mr. Nagareda.
    Mr. Verkuil. Well, I think he is on the right track.
    Senator Grassley. OK; Professor Green, you criticized S. 
758 for retaining the adversarial nature of the tort system by 
requiring a determination of comparative fault for each 
defendant, essentially creating a potential issue which could 
be disputed at all phases of the Corporation's process.
    How would you change the process to address those concerns?
    Mr. Green. Well, one idea is for Congress to enact a 
compensation fund that would be voluntary for asbestos 
defendants. They could opt into it or not. If they didn't, they 
would be subject to suit in the tort system. If such a scheme 
were set up, I would venture to say every asbestos defendant 
would opt in. Once they opted in, we could then attempt to 
devise a mechanism, either arbitration or administrative 
process, that would resolve among all of them their respective 
liability for the claims that are made.
    Would it be difficult? Of course. But would it save an 
enormous amount of money over litigating comparative fault or 
resolving comparative fault in every case that comes down under 
this statute? I think unquestionably.
    Senator Grassley. What I was hoping to do was in regard to 
this same issue, to ask both Professor Nagareda and Professor 
Verkuil, if you share Professor Green's concerns, and whether 
there are any improvements that you believe can be made in this 
proposed process to alleviate concerns expressed by witnesses 
on the first panel?
    Mr. Verkuil. Well, let me say this, that the comparative 
fault problem could be fixed on one way that Congress could 
declare a Federal standard of liability that would apply in the 
States. But that would be more intrusion upon the States and 
the State courts than I think might be desirable.
    But we have to go back to the purpose of this bill. Most of 
these cases that come through, assuming you have your medical 
certificate and you had been declared to be sick and qualified 
to be entitled to reimbursement, will be settled. I mean, the 
great hope here is that return to State courts will be the 
occasional case rather than the massive cases. So, that is one 
answer.
    And if the medication is mandatory, or even if it is 
voluntary and if there is arbitration that follows, there will 
be a lot of incentive to settle these cases. And I think the 
Asbestos Resolution Corporation can begin to get a sense of 
values of settlements. They will have rulemaking power; it 
could determine rules over time. So a lot of the mystery will 
be taken out of these settlements, and I think maybe resort to 
the State court and the problem of definitions of fault will 
not be as great a problem over time.
    The other difficulty, though, with having a fund is, as I 
think Professor Edley said, it is just so hard to identify. It 
is either going to be overinclusive or underinclusive because 
there are so many potential defendants who have marginal 
connections to the asbestos world that if you draw them too 
broad, they have claims, I think, maybe undertaking due process 
issues. I mean, the defendants would have some interests, too, 
not to be brought in. And if you draw them too narrowly, you 
are letting people out.
    But bigger than that is the potential problem of insurance, 
and that would have to be fixed as well because otherwise it 
may be that the insurance carriers would no longer be liable, 
and certainly that would be an outcome none of us would want.
    Senator Grassley. Professor Nagareda, do you have anything 
to add?
    Mr. Nagareda. Yes, Mr. Chairman. It seems to me that the 
sort of regime that Professor Green is talking about is, I 
think, desirable in theory, but I think very, very difficult, 
possibly impossible, for this Congress to work out in a piece 
of legislation.
    We are dealing here in the asbestos area with multiple 
defendants, multiple exposure settings. This is unlike 
situations like, for example, in the breast implant litigation. 
We are dealing with a smaller number of defendants in which the 
exposure settings are very similar. So I think it would be very 
complicated as a practical matter to set forward the sort of 
fund that Professor Green would advocate.
    The other point that I would raise is simply as a matter of 
experience, when even individual asbestos manufacturers have 
tried to take this sort of approach of setting aside particular 
money and trying to decide in advance what their liabilities 
will be, projected over many decades, that has not proven very 
successful. That is the enterprise that courts pursue in the 
bankruptcy context, and I think that the results there have 
been quite mixed as a practical matter.
    Senator Grassley. After they have commented now, Professor 
Green, do you have any rebuttal to the point of view that they 
just expressed?
    Mr. Green. Well, I agree with Professor Nagareda that 
Congress probably cannot write this into a bill, that 
apportionment of global liability among defendants would 
require some sort of process outside of the statute, an 
administrative resolution or arbitration among the defendants. 
You often see defendants who avoid in cases deciding their 
respective liability and then they agree to arbitrate it 
afterwards. Binding arbitration might be a mechanism.
    I am becoming more and more enamored of the notion of 
leaving this optional with asbestos defendants. If they are 
really peripheral and they want to stay out, let them stay out. 
They would be subject to tort suit, and if they wanted to 
defend those, my guess is that this compensation scheme, leaned 
down, would be so attractive both to asbestos defendants and to 
their insures that all of the viable, realistic defendants that 
are paying money today would opt into it on a voluntary basis, 
including their liability insurers.
    Senator Grassley. Well, I thank you all very much. That is 
the end of my questioning. Let me ask this panel to be 
cognizant of a point I made to the first panel, that for 
members who were here or members who weren't here, there might 
be questions submitted to you for answer in writing. Hopefully, 
they will do that right away. We would like to keep the record 
open for about 15 days for that purpose.
    Thank you all very much.
    [Whereupon, at 12:41 p.m., the subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              

                         Questions and Answers

                              ----------                              

  Responses of Prof. Christopher Edley, Jr. to Questions From Senator 
                                Grassley

    Question 1. Does S. 758 provide the necessary incentives or dis-
incentives for plaintiffs and defendants to resolve their claims 
promptly with the Asbestos Resolution Corporation? For example, Owens 
Corning argues that there are no set settlement values or payment 
schedules which would encourage plaintiffs to forgo court action and 
enter into settlements with asbestos defendants. Owens Corning proposes 
that tax incentives might be incorporated to encourage defendants to 
settle, while Professor Green suggests that penalties might encourage 
the early resolution of claims. What is your opinion?
    Answer 1. I believe that S. 758 is carefully drafted to encourage 
both plaintiffs and defendants to settle early in the process, and that 
adjudication, whether in the ARC or in the tort system, will be rare.
    The ARC system is designed to encourage settlement shortly after a 
claim is filed, and to facilitate the private negotiation of settlement 
schedules or ranges between defendants and plaintiffs' attorneys that 
will allow for routine payment of claims after a claimant has been 
found medically eligible and produces some evidence of exposure to the 
defendant's product. There is no need for the legislation to mandate a 
particular set of values. I believe that would work to claimants' 
disadvantage by capping their recovery at a particular value, rather 
than allowing those values to be continually ``aligned'' with the 
recovery available in the tort system. Instead, there is every reason 
to expect that major defendants would, in essence, establish ``standing 
offers'' for medically eligible claimants, thereby disposing of a great 
many cases--assuming the figures are reasonable.
    Defendants have important incentives to settle, and to settle 
early. As soon as a claimant completes the medical review process, the 
claimant has an opportunity to identify defendants who are responsible 
for the claimant's injury. Defendants have an incentive to settle with 
claimants at that point, because they bear the costs of mediation if 
that becomes necessary. At the close of mediation, defendants are 
required to make good faith settlement offers, and face a financial 
penalty if their offers are 25 percent less than the damages ultimately 
assessed by an arbitrator or a jury. If there is no settlement, 
defendants know that claimants will come into court or arbitration with 
a presumption that they are impaired by an asbestos-related disease. 
Thus, it will be greatly in defendants' interest to pursue a strategy 
of settling cases as soon as possible after medical review.
    I have not had the opportunity to review Owens Coming's tax 
incentive proposal and cannot comment intelligently about it. However, 
I do believe that defendants will have ample incentives to settle cases 
fairly, and early, without any additional tax incentives. Moreover, 
attaching tax provisions to this legislation will fuel delay in the 
Congress, invite criticism that the bill has become a ``corporate 
bailout'', draw objections from fiscal conservatives, and create points 
of order against the legislation under the Budget Enforcement Act.

    Question 2. Mr. Middleton and others have criticized the Asbestos 
Resolution Corporation to be a time-consuming process by which sick 
plaintiffs will be ``Jumping through hoops'' with no guarantee of 
timely compensation. Is this an accurate assessment of the process set 
up in S. 758? Does S. 758 create an open-ended procedure which provides 
endless opportunities for defendants to delay any compensation to the 
victims, as suggested by Mr. Middleton?
    Answer 2. No fair examination of the ARC process can lead to that 
conclusion. The process is really very simple for the vast majority of 
claimants. First, a claimant presents medical information to the ARC to 
show that he satisfies the medical criteria. In most cases, compliance 
with the objective criteria will be obvious, and the claim can be 
approved as a matter of routine by a claims examiner. Second, the ARC 
gathers together the defendants alleged to be responsible, and, if 
necessary, appoints a mediator to encourage all parties to settle. But 
this is key: Mediation cannot be used as a delaying tactic because it 
is subject to a 60-day time limit. Finally, a claimant can choose 
either (1) streamlined arbitration under the auspices of the ARC, or 
(2) traditional litigation in state or federal court, but now armed 
with a valuable certificate of medical eligibility.
    Of course, some cases will be harder than the typical case, such as 
cases where the claimant seeks designation as an exceptional claim 
because he cannot meet the statutory criteria. There are also appeals 
from a denial of medical eligibility. Fairness to the claimant requires 
this. But this does not allow any opportunity for delay. The entire 
medical review process is non-adversarial. Defendants are not involved 
in the medical review process at all. It is impossible for defendants 
to use the medical review process for delay. Most important, the 
various special procedures and appeals are all for unusual cases, all 
designed to benefit the victim, and all created to make it easy to say 
``yes'' to eligibility and hard to say no.
    It is misleading to paint this process as ``jumping through hoops'' 
or just burning time. Qualified claimants will emerge from the medical 
review process with a strong presumption that they are impaired by an 
asbestos-related disease. Defendants may only overcome that presumption 
only with ``clear and convincing evidence,'' which, in the real world, 
will probably require something like clear evidence of fraud.
    In addition, despite Mr. Middleton's confusion or misstatement at 
the October 5 hearing, S. 758 takes away all traditional defenses for 
asbestos defendants. Given this, virtually all defendants will settle 
quickly. If defendants insist on litigating, they are limited to 
contesting (1) medically eligibility (in the face of a strong 
presumption of correctness from the medical review certificate), (2) 
individual causation (usually, product identification), and (3) 
damages. This will virtually ensure compensation for any eligible 
plaintiff who was exposed to a solvent defendant's product. While I 
have reservations about applying this broad waiver language to non-core 
defendants (that is, premises defendants and others who are not among 
the major players), I do support the waiver in the Senate bill with 
respect to the principal defendants in this litigation.
    Finally, this system, which will provide compensation after only a 
few months, must be compared with the length and complexity of the 
process that occurs today in the tort system. Cases often languish for 
years before settlement, usually on the eve of trial, and are subject 
to the whims of court scheduling decisions. The ARC process, by 
contrast, is designed to promote settlement right away, as soon as the 
medical review process is concluded.

    Question 3. At the House Judiciary Committee hearing, a 
representative from Owens Corning expressed concern about the 
applicability of the bill's provisions to lawsuits pending at the time 
of enactment, specifically that Congress would be preempting state 
substantive law causes of action which have already been filed. In 
addition, Owens Corning objected to the provisions requiring that all 
funding be collected from existing asbestos defendants in proportion to 
the number of claims against them. Are these concerns valid and, if so, 
how can the bill be remedied?
    Answer 3. I do not believe that these concerns are valid. As far as 
the first question is concerned, it is important to keep in mind that 
well over 200,000 asbestos cases have been filed and that more are 
being filed at a rate approximating 50,000 per year. Any solution to 
the asbestos litigation problem must apply to these cases--the 
``elephantine mass,'' as the Supreme Court calls them--as well as to 
future cases. Otherwise, the defendants' resources will continue to be 
misdirected until after the mass of pending claims is finally 
resolved--which will not occur until well into the next century.
    An effective solution requires that some changes be made to 
existing tort law for all pending claims. These include the abrogation 
of traditional defenses in favor of absolute liability (at least for 
core defendants), statutory medical criteria that focus resources on 
the impaired, the elimination of punitive damages, the guarantee of 
additional compensation for cancer if a claimant has been compensated 
for non-malignant disease (``come-back rights''), and the abolition of 
the statute of limitations. These changes will affect both plaintiffs 
and defendants, are appropriate, and are entirely within congressional 
authority under the Commerce and Due Process clauses of the 
Constitution.\1\ Of course, handling the transition to the new system 
requires care, in order to deal fairly with those who have already been 
waiting too long under the old system. Plaintiffs with early trial 
dates are permitted to forgo going into the administrative system and 
can remain in court if they choose.
---------------------------------------------------------------------------
    \1\ In Duke Power Co. v. Carolina Envtl. Study Group, Inc. 438 U.S. 
59 (1978), the Supreme Court explained that ```[a] person has no 
property, no vested interest, in any rule of the common law.''' Id. at 
88, n.32 (citations omitted); see also Usery v. Turner Elkhorn Mining 
Co., 428 U.S. 1, 16 (1976) (principle applies so long as no final 
judgment has obtained); United States v. Heinszen & Co., 206 U.S. 370, 
387 (1907) (same).
---------------------------------------------------------------------------
    As far as the second question is concerned, I believe that 
defendants who use the new system should be required to pay reasonable 
user fees and assessments to defray its costs. I regard this aspect of 
the legislation as one of its strengths. Taxpayers should not have to 
bear the costs of the asbestos tragedy. (The legislation does not 
affect sovereign immunity for the governments role in promoting--indeed 
commanding--the use of asbestos in ships and other requisitioned 
products.) The legislation's cost-assessment formula is fairly 
straightforward. It charges administrative and medical review costs to 
defendants based on the number of cases in which they are named, 
subject to a de minimis exclusion for defendants named in only a few 
cases. It would charge the costs of mediation and arbitration to 
defendants who participate, while excluding defendants who are 
dismissed early in the process. These assessments are entirely fair. If 
a defendant, such as Owens-Corning, is able to resolve cases early, it 
will pay correspondingly smaller user fees. If a defendant can resolve 
cases without the need for the administrative system at all, it will 
not be named, and will not have to pay administrative assessments for 
medical review for those cases.\2\
---------------------------------------------------------------------------
    \2\ The Supreme Court has upheld analogous user fees that defray 
the cost of the Iran Claims Tribunal. See United States v. Sperry 
Corp., 493 U.S. 52 (1989) (rejecting Takings Clause and due process 
challenges to a 1-2 percent ``user fee'' on prevailing plaintiffs 
before the Iran-United States Claims Tribunal).

    Question 4. Some have criticized S. 758 because they say that it 
forces claimants into a program in which they may not want to 
participate. Is this a problem? What are your thoughts on including an 
``opt out'' provision or allowing participation on a voluntary basis?
    Answer 4. An ``opt out'' provision that permitted claimants to 
excuse themselves from the substantive medical standards in the program 
would render the legislation entirely ineffective. A critical aspect of 
the legislation's reform of asbestos litigation is to draw a line, 
based on objective medical criteria, between those who are impaired by 
asbestos-related diseases and those who are not. Under an ``opt out'' 
system, those who satisfy the bill's medical criteria would file claims 
in the new system, leaving the unimpaired to continue to flood federal 
and state courts with a mass of filings. The bill provides expedited 
compensation for the sick and defers the claims of the unimpaired until 
they become sick. It is impossible to relieve the burden of asbestos 
litigation on the courts or to focus defendants' resources on 
compensating the sick without deferring the claims of the unimpaired. 
This is critical to resolving the crisis. If the system is made 
voluntary, the crisis in our courts will continue unabated, and future 
claimants may, as the Judicial Conference predicted, ``lose 
altogether.''
    There is another sense of voluntariness which relates to the use of 
the administrative system of the ARC. That is, claimants might be 
permitted to file tort actions in an appropriate court and have that 
court, or jury, apply the substantive medical criteria in the statute 
as a ``rule of decision'' preempting state tort law to that extent. 
There are serious problems with the procedural opt-out, however. The 
objective medical criteria are exceedingly complex for lay jurors to 
apply, making the advantages of expert administrative decisionmaking, 
in my view, quite compelling. It would not be possible to create a 
mechanism analogous to the exceptional medical claims panel in courts 
throughout the nation, and vesting such ``exceptional'' authority in 
those courts for lay decisionmaking would remove the decision from 
medical science and invite jury nullification that would undermine the 
statutory purpose. Victims would inevitably rely quite strongly on 
advice of counsel concerning the relative attractiveness of court-
centered litigation versus the administrative system, and the 
likelihood of balanced and objective advice on this point is far from 
clear.
    I view this approach, which has been called a ``front-end 
administrative opt out,'' as a boon to lawyers. From the perspective of 
typical victims, however, it is mischief.

    Question 5. One of the concerns that has been raised by Owens 
Corning is that the administrative solution offered by S. 758 would 
adversely impact the settlement that they have negotiated with the 
plaintiffs, and that in effect, they would have to ``pay twice.'' What 
is your opinion? How can we make sure that we do not hamper successful 
private settlements, such as the one crafted by Owens Corning?
    Answer 5. It is perhaps helpful to explain what the National 
Settlement Plan is. It is not a single settlement agreement, but rather 
a single label for a variety of agreements with different plaintiffs' 
lawyers in different states. Since the terms of the individual 
agreements vary, it is difficult to make any generalizations. All of 
the agreements, however, involve settlement of a plaintiffs' lawyer's 
inventory of pending cases, usually with relaxed medical criteria, and 
a standing offer by Owens Corning to settle future cases on set terms. 
There are much stricter medical criteria for the future cases. The 
agreements impose a moratorium on the payment of future claims until 
after 2001, when payment on the pending cases is supposed to be 
concluded. The agreements also have various ``flow'' provisions that 
protect Owens Corning from being inundated with claims in future years 
that may threaten its financial stability.
    The NSP agreements are all between Owens Corning and plaintiffs' 
lawyers. The lawyers agree to recommend the settlement to their 
clients, but no case is finally settled until the claimant shows to 
Owens Corning's satisfaction that he meets the requirements of the 
applicable agreement and until a release is provided. Both future 
claimants and claimants with pending claims accordingly have a right to 
opt out of the agreement if they believe (contrary to the advice of 
their lawyers) that the agreement is not good for them individually.
    S. 758 will certainly not undo Owens Corning's National Settlement 
Plan. Section 804 of the bill is drafted specifically to ensure that 
the legislation would not override or invalidate any settlement 
agreement entered into by Owens Corning or anyone else. Therefore, 
claims that have been paid, or that have been accepted for payment, 
prior to the date of enactment cannot be reopened. I can see no basis 
for Owens Corning's assertion that it might have to pay twice.
    With respect to futures cases, and pending cases where the 
plaintiff has not yet agreed to the settlement worked out with his 
lawyer, the National Settlement Plan itself contemplates the 
possibility of opt-outs. Owens Corning has expressed concern that 
plaintiffs will be unwilling to accept the amount that Owens Corning 
has offered if they do not have to fear inordinate delays in the 
courts. As a matter of public policy, however, it would be undesirable 
to maintain the current level of delays to allow Owens Corning to 
benefit from discounted settlement values. Moreover, it is not clear 
that reduction of delay, by itself, would induce many plaintiffs (on 
the advice of counsel) to abandon the Owens Corning agreements. For 
example, structured pay-outs to ensure that asbestos claims do not 
undermine Owens Corning's ability to pay future claims would still be 
desirable.
    Basically, the National Settlement Plan will continue to be viable 
if plaintiffs who have not settled continue to believe that the plan is 
in their own best interests. It would make no sense deliberately to 
preserve the flaws of the present system in order to encourage 
plaintiffs to accept Owens Corning's offers. But, assuming that the NSP 
is in the interest of future claimants, there is nothing in S. 758 that 
would undermine its viability.

    Question 6. Mr. Middleton testified that the Supreme Court's ruling 
in Ortiz v. Fibreboard for a ``national asbestos dispute resolution 
scheme'' is nothing like what is provided in S. 758. Mr. Middleton 
testified that the Ortiz decision made reference to a system modeled on 
the recommendations of the Judicial Conference's Ad Hoc Committee on 
Asbestos Litigation, which he says suggested the creation of an 
administrative compensation mechanism that would control all of the 
defendants' available assets and apply principles of absolute liability 
in order to compensate claimants. How do you respond?
    Answer 6. The Supreme Court in Ortiz v. Fibreboard rejected the 
view of the Association of Trial Lawyers of America (ATLA) that 
consolidations and other judicial management techniques could establish 
a national dispute resolution scheme that would solve the asbestos 
litigation problem. The Court said that the mass of asbestos cases 
``defies customary judicial administration'' and ``calls for national 
legislation.'' 119 S. Ct. at 2302. Likewise, the Judicial Conference Ad 
Hoc Committee on Asbestos Litigation stated ``no adequate procedures 
exist to enable the justice system to deal with the unique nature of 
asbestos cases.'' Report, at p. 26. Its primary recommendation for 
meeting the challenge was

          a national legislative scheme to come to grips with the 
        impending disaster * * * with the objectives of achieving 
        timely appropriate compensation of present and future victims 
        and of maximizing the prospects for the economic survival and 
        viability of the defendants.

Report, at p. 27. S. 758 establishes absolute liability, contains a 
broad waiver of defenses, expedited claims procedure, and focuses 
defendants' limited resources on the sick. The legislation is 
specifically designed to achieve the Committee's objectives.

    Finally, as to whether a fund could be created to control 
defendants' assets, many observers, unfamiliar with the practical 
complexities of such an approach, have advocated that solution. I also 
considered such a fund to be attractive, so it is not surprising that 
the Judicial Conference recommended that Congress consider this 
solution. I discuss in my written statement and in my answer to Senator 
Feingold's questions why such a fund is simply not feasible, could 
jeopardize the availability of assets for recovery rather than protect 
them (by jeopardizing insurance coverage), and is not necessary.
                                 ______
                                 

  Responses of Prof. Christopher Edley, Jr. to Questions From Senator 
                                Thurmond

    Question 1. In your prepared testimony, you discuss S. 758's 
elimination of traditional defenses, such as ``state of the art--
allowing the adjudicator to focus on a few narrow questions. ``Why do 
you believe that the elimination of traditional defenses is a necessary 
component of the solution to the asbestos litigation problem, and how 
would it affect defendants?
    Answer 1. I have always regarded the elimination of traditional 
defenses to asbestos litigation to be an important part of a fair 
resolution to the asbestos litigation crisis. The waiver of defenses in 
S. 758 focuses an asbestos case on only three questions. First, is the 
claimant impaired from an asbestos-related disease? Second, who is 
responsible for that impairment? Third, what damages should be awarded? 
In the House hearing, Congressman Nadler said,

          [A]ll you have to answer [in most asbestos litigation] are 
        really three questions. One, is this person sick? Two, how sick 
        is he, how damaged is he, and therefore how much should he be 
        paid? And three, who should pay it?

I agree with Representative Jerry Nadler that a system that focused on 
only these questions could reduce transaction costs and delay, thus 
ensuring more compensation for victims. This is what the waiver in S. 
758 seeks to accomplish.

    I also believe, however, that a waiver of defenses must be 
carefully targeted to cover only ``core'' asbestos defendants--mainly, 
large-scale manufacturers of insulation and other asbestos products. 
For this group of companies, the issue of their liability has been 
largely settled by decades of tort litigation. However, since the 
collapse of Johns Manville, the largest manufacturer of asbestos 
products, in the 1980's, asbestos lawyers have sought to expand the 
liability net as far as possible, in a search for ``deep pockets'' to 
supplement the dwindling assets of the principal wrongdoers. These new, 
peripheral defendants include large and small businesses--from IBM and 
General Motors to local hardware stores--which may have valid defenses 
to asbestos lawsuits. It would be unfair to strip defenses from these 
defendants. This is the reason that the House version of the 
legislation, H.R. 1283, did not contain the waiver of defenses 
contained in the Georgine/Amchem settlement.
    For this reason, I favor a compromise between the House version of 
the bill--which contains no waiver at all--and the Senate version, 
which goes too far by waiving defenses for all companies. The 
compromise should preserve the Senate waiver, but limit its application 
to ``core claims,'' i.e., claims against the principal asbestos 
defendants.

    Question 2. In your prepared testimony, you state that ``the only 
losers under this legislation are * * * those individuals who * * * are 
able to navigate the jury lottery and obtain substantial compensation 
under the current system.'' Could you elaborate on this point and 
explain whether and how people have been able to obtain compensation 
who did not truly deserve it?
    Answer 2. The inhaling of asbestos dust can cause a variety of 
conditions, some of which cause impairment and some of which do not. 
The impairing conditions include cancer and various non-malignant 
conditions which impair lung function, including asbestosis and some 
forms of pleural thickening. The benign conditions include most pleural 
plaques and mild pleural thickening. S. 758 contains objective medical 
criteria designed to separate those asbestos-related conditions which 
cause impairment to lung function from those that do not.
    Our current tort system is not designed to make this distinction. 
Instead, juries and judges are asked to determine whether a given 
asbestos-related condition has produced an ``injury''--generally 
defined not by impairment but merely by whether the condition has 
produced a physical change in the body, regardless of impairment--and 
whether to award damages. Compounding this, cases involving pleural 
conditions are often bundled together with cases involving very serious 
injury, such as cancer or advanced asbestosis. Juries are instructed to 
award damages not only for the benign condition, but also for the risk 
of future injury, as the law may not allow a plaintiff with a pleural 
condition to file a second lawsuit for additional compensation if the 
plaintiffs condition worsens. Both judges and juries, who feel sympathy 
for the seriously ill plaintiffs, award large amounts to the unimpaired 
as well, both out of confusion and out of a mistaken belief that the 
unimpaired will inevitably become sick--when most, in fact, do not.
    Whether the unimpaired ``deserve'' immediate compensation depends 
on the alternative. In the current system, many unimpaired plaintiffs, 
worried about the statute of limitations and the prospect that there 
may be no one left to compensate them in the future, feel compelled to 
file lawsuits now, even if they will lose their chance to receive a 
more generous recovery later if they become ill, when they and their 
families will need the money. This is perfectly understandable. Under 
the system established by S. 758, however, plaintiffs will have the 
statute of limitations abolished, will have the right to additional 
compensation for cancer even if they have already been compensated for 
non-malignant disease, and will have greater assurance that defendants 
will not go bankrupt in the interim. In that system, asking the 
unimpaired to defer their claims until they become sick seems fair and 
reasonable, particularly in light of the many deficiencies and even 
dangers (such as delays for the sick, and additional bankruptcies) in 
the present system.

    Question 3. Please explain in more detail why as your prepared 
testimony suggests, ``the economics of asbestos litigation makes it 
profitable for lawyers to bring cases on behalf of the unimpaired?''
    Answer 3. Plaintiffs' attorneys routinely sponsor ``mass 
screenings'' among healthy industrial workers to uncover usually benign 
pleural conditions. Although these screenings have no medical purpose, 
many workers, worried about asbestos exposure, take part. When the 
screenings uncover evidence of unimpairing pleural conditions, lawyers 
sign up the workers and add them to their ``inventories'' of 
plaintiffs. Asbestos lawyers then file mass complaints with hundreds or 
thousands of plaintiffs, mixing the cases of the seriously ill together 
with those of the unimpaired. When defendants are faced with settlement 
demands, asbestos lawyers generally give them no choice but to make 
substantial payments to all plaintiffs, both the impaired and the 
unimpaired. Advertisements of plaintiffs' attorneys and direct mail 
solicitations are straightforward about the economic purpose of the 
screenings. They ask, ``Do you have million-dollar lungs?'' \3\
---------------------------------------------------------------------------
    \3\ See attached advertising materials for mass screenings, and a 
labor notice warning against them.
---------------------------------------------------------------------------
    Although cases involving unimpairing conditions generally settle 
for far less per case than cases involving genuine illness, they can 
produce millions of dollars in mass settlements for a law firm when 
aggregated into large inventories. The Judicial Conference Ad Hoc 
Committee on Asbestos Litigation estimated that up to 21 million 
Americans were exposed to asbestos. Report, at page 7. There are far 
more potential claimants who are not impaired than those who will 
develop serious illness. As long as a system continues in which large 
groups of unimpaired claims can generate millions in contingency fees, 
simply with a modest investment in a screening program and paralegal 
time, plaintiffs' lawyers will continue to bring such cases.

    Question 4. Please evaluate the relative strengths and weakness of 
S. 758's compensation and dispute resolution system compared with the 
so-called voluntary alternative dispute mechanisms that Mr. Hiatt and 
Mr. Middleton discuss in their testimony.
    Answer 4. Because of the economic incentives I discussed in my last 
answer, I am skeptical about the ability of private settlement plans to 
solve the asbestos litigation crisis. In these plans, plaintiffs 
lawyers often agree to a settlement in exchange for a promise not to 
bring unimpaired cases in the future. In the Georgine/Amchem 
litigation, leading asbestos law firms signed such agreements, which 
were to remain effective even if the Georgine class action was rejected 
by the courts. Many law firms have refused to honor these agreements. 
Even if they did, nothing prevents an enterprising lawyer or law firm 
which did not sign the agreement from arranging mass screenings and 
amassing a formidable inventory of mostly unimpaired claims in order to 
force a large settlement.
    Secondly, these private settlement plans are not really voluntary. 
The Owens Corning plan, for example, relies on an agreement by a 
critical mass of asbestos plaintiffs' firms to recommend a settlement 
framework to their future clients and not to represent claimants if 
they reject the settlement framework. There are serious ethical issues 
involved when a lawyer agrees not to represent a future client, which 
is why the Owens Corning agreement is hinged on obtaining an ethics 
opinion from a court or ethics expert. Assuming the agreement is 
approved, however, the intent of the agreement is plainly to exert some 
pressure on claimants to use the system by depriving claimants of the 
services of their preferred lawyers if they choose not to use it.
    In his statement, Professor Nagareda observed that

          A comprehensive solution to the asbestos litigation effected 
        by way of federal legislation would be vastly superior--from 
        the standpoint of both asbestos victims and democratic 
        accountability--to the patchwork quilt of compensation plans 
        likely to emerge otherwise.

I agree.

    Question 5. How do you respond to critics of S. 758, who argue that 
the bill's certification procedure is ``substantively rigid and 
technically demanding, ``that its mediation and arbitration procedures 
are ``highly adversarial and procedurally dense, with financial 
penalties for taking certain procedural and substantive positions in 
the process?''
    Answer 5. I think they must be reading a different bill. First, the 
medical review process is entirely non-adversarial--defendants are not 
even allowed to participate in this stage. The process is designed to 
make it easy to say yes to the claimant, but hard to say no. A claimant 
simply presents the results of medical tests showing that he satisfies 
the objective medical criteria in the legislation. Compliance with 
these standards should generally be obvious, and most eligible claims 
will be approved as a matter of routine, with no additional steps 
needed.
    If a claim is rejected, or if the claim is exceptional in some way, 
there are additional opportunities for review in fairness to the 
claimant. (Because defendants do not participate, these steps cannot be 
used by defendants to delay eligible applications, but are at the 
plaintiffs' option only). A claimant can appeal a denial to a panel of 
two doctors, with a third added to break the tie if there is a 
disagreement. A claimant can apply for relief to an exceptional medical 
claims panel, if the claimant has an asbestos-related illness that is 
not covered by the standard criteria. All of these decisions are 
subject to judicial review under the Administrative Procedures Act.
    Once a claim is approved, there is an immediate alternative dispute 
resolution process, which is neither technical nor complex. Following a 
grace period for voluntary settlement, the ARC will require all parties 
to engage in good faith negotiations under the auspices of a mediator, 
and defendants will have to make good faith offers. If defendants' 
offers later turn out to be less than 25 percent of the ultimate 
liability, the defendants face a penalty. Plaintiffs face no penalty 
for a failure to make a good faith offer other than an additional 60-
day period of mediation. If mediation fails, plaintiffs have the choice 
of arbitration or court action. All of these provisions are designed to 
maximize the plaintiff's opportunity for receiving a fair settlement.
    The attacks by ATLA and others on this dispute resolution mechanism 
are very troubling to me because they fly in the face of more than 25 
years of experience in courts and agencies in which ADR methods have 
been developed, tested, and expanded to the point of widespread 
acceptance as a critical alternative and adjunct to judicial process. 
Many courts now require some process of conciliation as a precondition 
for using scarce trial resources. These criticisms of S. 758 would turn 
back the clock on decades of progress in creating more efficient 
dispute resolution tools.
                                 ______
                                 

  Responses of Prof. Christopher Edley, Jr. to Questions From Senator 
                                Feingold

    Question 1. In your prepared statement, you write: ``Impaired 
claimants are assured full compensatory damages, now and into the 
future.'' How does the bill ``assure full compensatory damages'' when 
the bill does not guarantee that a qualified claimant will receive any 
compensation at all?
    Answer 1. The legislation creates very powerful incentives for 
defendants to settle cases immediately after the medical review stage. 
Qualified claimants will receive a ``certificate of medical 
eligibility'' from the ARC, a certificate that they suffer an asbestos-
related condition, which is presumed correct absent clear and 
convincing evidence to the contrary. Claimants then have the 
opportunity to name particular defendants who are responsible for their 
condition, and defendants are required to make good faith offers or 
face a financial penalty if they are later found liable. Finally, 
issues are limited so that defendants may only contest medical 
eligibility, individual causation (generally, exposure to the 
defendant's product), and damages. Facing these pressures, defendants 
will seek to settle virtually all cases in which they are identified 
soon after the medical review stage, usually even before mediation.
    If defendants refuse to settle in a timely fashion, plaintiffs can 
obtain a binding arbitration award in far less time than the tort 
system requires, or, at their option, take defendants to court. In 
pursuing a settlement strategy, defendants will seek to build upon 
settlement schedules and ranges they have negotiated with plaintiffs' 
attorneys, ranges which will be continually adjusted in light of tort 
awards, and which are not artificially limited by a schedule mandated 
by legislation.
    Although I am confident that the legislation will assure full 
compensatory damages for the vast majority of claimants, I believe the 
legislation could be amended to provide additional assurance of 
payment. A ``global fund'' in which all liability is apportioned up 
front is not feasible (see below). However, a more modest fund which 
permits a claimant to receive a settlement from the fund immediately 
after the medical eligibility phase, where the fund is then reimbursed 
by responsible defendants, is a viable idea. Because defendants remain 
jointly and severally liable to the fund for the full value of 
plaintiff's claim, the bankruptcy of one or another defendant will not 
deprive a plaintiff of compensation. If Congress appropriates funds to 
pay the claims of those few plaintiffs who only have claims against 
bankrupt defendants, as part of an ``orphan share program'' within the 
fund, no medically eligible plaintiff will ever go without appropriate 
compensation.

    Question 2. During your testimony, you stated that asbestos 
litigation can take several years to conclude. Could the long delays be 
due in part to the inactive docket system alluded to in Mr. Middleton's 
testimony?
    Answer 2. Delay in asbestos cases are a scandal. The Judicial 
Conference Ad Hoc Committee on Asbestos Litigation concluded that 
``[t]he volume and complexity of asbestos cases have resulted in the 
violation of a basic tenet of American justice * * *: speedy and 
inexpensive resolution of cases.'' Report, page 10. The Judicial 
Conference concluded that asbestos cases, unlike other civil cases 
``does not come close to meeting the 18-month standard'' for resolution 
of cases set by the Civil Justice Reform Act of 1990. Instead, the 
Judicial Conference concluded, asbestos cases took almost twice as 
long, on average, to resolve as other civil cases in federal court. 
This was not the result of an ``inactive docket system,'' but of the 
``complexity of asbestos litigation'' as it is conducted in the tort 
system. Report, at page 11. A recent review of state court dockets in 
several key asbestos states, which was conducted in 1998 and described 
in my testimony to the House Judiciary Committee, shows a pattern of 
delays which is even more disturbing than the figures cited in 1991.
    In Cimino v. Raymark Industries, a consolidated trial in the 
Eastern District of Texas, over four hundred eighty-eight plaintiffs 
died during the pendency of the litigation. ``Under these 
circumstances, the principle of `justice delayed is justice denied' has 
added meaning.'' Report, at page 12.

    Question 3. In your prepared statement, you write: ``lawyers' fees 
and other transaction costs continue to consume nearly two dollars for 
every one dollar paid to claimants.'' What evidence do you have, aside 
from the RAND study of 1991, that transaction costs continue to consume 
more than 60 cents of every dollar paid to claimants?
    Answer 3. For evidence that transaction costs in asbestos 
litigation remain outrageously high, one need look no farther than the 
recent invoice exhibited at the Senate hearing on October 5. A 
plaintiff who received a settlement of $5,000 from one asbestos 
defendant was left with only $1,700 dollars after fees and expenses 
were subtracted. This includes, of course, only the plaintiff's side of 
the ledger; additional money was obviously paid for defense fees.
    After decades of litigation, asbestos cases have gone from 
difficult, risky tort cases to no more than case processing for most 
lawyers. Nevertheless, plaintiffs' lawyers do not charge 
correspondingly lower attorney's fees--fees of 40 percent or more (plus 
expenses) remain the norm. These contingency fees remain excessive for 
cases with little or no real contingency, or risk of non-recovery. When 
Mr. Middleton was asked to justify these fees in the House Judiciary 
Committee hearing, his only answer was that the cases required 
paralegal time. Cases that can be processed with paralegals cannot 
justify contingency fees that are typical of litigation requiring 
substantial attorney involvement and risk. While I believe that 
defendants' litigation costs have declined since 1982 (as I discussed 
in my statement to the House Judiciary Committee), there is no question 
that transaction costs remain much too high, and much higher than they 
would be under the bill. The cap on attorneys' fees is a consumer 
protection measure, and the evidence suggests that it is plaintiffs who 
are most in need of protection. Ultimately, it is the claimant who 
suffers from the excessive transaction costs of the current system.

    Question 4. In your testimony, you stated that you no longer 
support the idea of a ``global fund ``for asbestos claimants. One of 
the reasons you give is that estimating the appropriate share of 
liability for defendants would be ``an endlessly complicated task.'' 
However, under the proposed system, liability must be apportioned on a 
case by case basis. Why do you think it is more efficient to do this 
complicated assessment thousands of times per year rather than once?
    Answer 4. There are several reasons why I have come to believe that 
a ``global fund'' which apportions liability among defendants in the 
aggregate, rather than case-by-case, would not be feasible. First, it 
would not be possible to apportion liability ``once.'' Because asbestos 
products do not constitute a single market with a few big players (such 
as some drugs, or tobacco products), but rather involve many different 
products made by hundreds, even thousands of companies which are 
alleged to cause harm in a myriad of ways, one could not use ``market 
share'' as an easy proxy for liability. Moreover, many defendants are 
not even product manufacturers, but are allegedly liable because they 
distributed asbestos, or asbestos products were used on their premises. 
A sharing formula that attempted to capture these nuances would not be 
very different in cost or complexity from case-by-case adjudication.
    Second, it is critical than any reform of asbestos litigation does 
not jeopardize the availability of insurance proceeds--a critical 
source of compensation for victims. Insurance contracts cover ``damages 
for personal injury,'' and insurance companies will say that this does 
not cover assessments for a government fund. Any attempt to require 
insurance companies to contribute money for a tax by legislative fiat 
would be subject to constitutional challenge.
    Finally, and perhaps most importantly from the claimants' 
perspective, a fund simply is not necessary to ensure compensation. 
Another approach, which I advocate, is to leave joint and several 
liability in place. Legislation would create a fund from which victims 
can be compensated immediately, and which can seek reimbursement from 
defendants, in accordance with principles of joint and several 
liability and comparative fault. From the plaintiffs' perspective, this 
is identical to a ``global fund,'' but it eliminates the problems that 
make a global fund impractical. Most importantly, it preserves the 
availability of insurance coverage as a source of assets for 
compensating victims.
[GRAPHIC] [TIFF OMITTED] T0244.032

[GRAPHIC] [TIFF OMITTED] T0244.033

[GRAPHIC] [TIFF OMITTED] T0244.034

   Response of Jonathan P. Hiatt to a Question From Senator Grassley

    Question 1. Does S. 758 provide the necessary incentives or 
disincentives for plaintiffs and defendants to resolve their claims 
promptly with the Asbestos Resolution Corporation? For example, Owens-
Corning argues that there are no set settlement values or payment 
schedules which would encourage plaintiffs to forgo court action and 
enter into settlements with defendants. Owens-Corning proposes that tax 
incentives might be incorporated to encourage defendants to settle, 
while Professor Green suggests that penalties might encourage the early 
resolution of claims. What is your opinion?
    Answer 1. We are very concerned that the structure of S. 758 would 
destabilize existing settlement incentives. We are also concerned about 
the allocation of any gains that could be realized from reducing 
transaction costs in asbestos litigation. From the victims' 
perspective, statutory changes that reduced transaction costs by 
radically weakening victims' rights would lead to decreased recoveries 
for victims even if victims were able to capture significant portions 
of the transaction cost savings.
    Specifically, the provisions of S. 758 that would bar punitive 
damages, consolidations, and class actions would considerably diminish 
the uncertainty defendants face when considering whether to litigate 
claims. Additionally, the opportunities the medical certification and 
mandatory arbitration processes provide for further delay and expense 
and would add to the uncertainties faced by victims seeking 
compensation, particularly those victims who are running out of time. 
These provisions might not only decrease settlement rates but might 
lead to the reassertion of defenses in litigation that have practically 
ceased to be raised by manufacturers.
    Thus while the settlement schedules suggested by Owens-Corning 
could be a helpful component of an alternative dispute resolution 
system for asbestos claims, their addition to S. 758, would not address 
what we believe are the primary disincentives to settlement within the 
bill. Similarly, tax incentives for settlement, while a positive step 
in several ways, would also not fundamentally alter the disincentives 
embedded in the remainder of the bill.
    Professor Green's suggestion is more disturbing. When combined with 
the bill's more general tilting of the playing field toward asbestos 
manufacturers, imposing penalties on asbestos victims for failing to 
settle would lead to even lower settlement amounts. While settlements 
can reduce transaction costs and lead to more funds being available to 
victims, if asbestos manufacturers have the ability under the bill to 
leverage low-ball settlements, the net result will be that victims will 
have been disadvantaged to the benefit of the companies that poisoned 
them.
                                 ______
                                 

   Responses of Jonathan P. Hiatt to Questions From Senator Thurmond

    Question 1. Your prepared testimony states that S. 758 dramatically 
restricts * * * asbestos victims access to the courts. How do you 
respond to Professor Edley's contention that claimants who are ``not 
satisfied with the defendants' settlement offers in mediation * * * can 
choose either to invoke arbitration * * * or go to court?''
    Answer 1. S. 758 requires that all asbestos victims go through 
lengthy, adversarial administrative proceedings replete with deadlines 
and penalties for failing to comply with those deadlines before they 
can even enter the courthouse doors. Large numbers of victims--people 
with evidence of damage to their lungs caused by asbestos--will be 
absolutely barred from the courts until their conditions worsen. These 
people--often and inaccurately referred to as the unimpaired--may never 
be compensated for real, measurable injuries under S. 758. Finally, 
under S. 758, ``impaired'' victims would be barred from exercising a 
number of rights typically available to victims in tort cases--punitive 
damages, the right to consolidate cases and to bring class actions--
that make access to the courts a reality for individual tort victims. 
The combination of these features in S. 758 amounts to a dramatic 
restriction of asbestos victims' legal rights as compared to current 
law in most states.
    Of course, Professor Edley is correct in noting that S. 758 
contemplates that the victim (or that victim's estate) who manages to 
obtain a certificate of medical eligibility will eventually be able to 
file a tort case under its truncated tort regime. However, the 
substantive, procedural and economic barriers that S. 758 places in the 
way of that victim vindicating her rights in court in a timely manner 
are so numerous and material in their impact that the phrase 
``dramatically restricts * * * access to the courts'' is an accurate 
description of the efforts of the bill as proposed.

    Question 2. Your prepared testimony states that ``[c]ompounding 
this [tragedy], the legal system has offered lengthy delays followed by 
limited compensation, compensation that often comes too late.'' Do you 
agree that, in view of your own assessment of the state of the asbestos 
litigation problem, some procedural modification of victims' access to 
the courts is necessary to ensure that truly asbestos-impaired people 
get timely compensation?
    Answer 2. The AFL-CIO believes that in the decade since the data 
the Supreme Court cited in its Fibreboard decision much progress has 
been made in both routinizing settlements between asbestos victims and 
asbestos manufacturers and in speeding payments to victims. However, we 
are concerned primarily about two features of the current asbestos 
litigation environment--first, and most importantly, we are concerned 
that asbestos victims with real but less serious symptoms, the so-
called unimpaired, are entering into settlements that prevent them from 
seeking additional compensation if they later develop serious or life-
threatening asbestos related conditions. Second, we are concerned about 
the length of time that asbestos victims wait before receiving payment 
in settlement--delays that may to some extent be the result of 
settlement structures. But we cannot see how the solution to delay in 
compensation to victims should be the creation of it multi-layered 
adversarial structure that appears to have the potential for further 
delays at every step.
    As we noted in our response to Chairman Grassley's question, we 
believe the incentives for settlement at fair values, whether through 
unstructured negotiations between the parties or through a structured 
alternative dispute resolution process, are heavily bound up with the 
availability of tort litigation as a viable though risky alternative. 
Consequently, we favor legislative models that have a voluntary 
structure.
    Furthermore, it is of great importance to the AFL-CIO that all 
asbestos victims be compensated for their injuries. We believe terms 
like the ``non-sick'' and ``truly asbestos impaired'' suggest that 
persons who have suffered real lung damage as a result of exposure to 
asbestos, damage that may very well increase with the passage of time, 
somehow have not been injured and are not deserving of compensation. 
Obviously, however, levels of compensation should be commensurate with 
levels of injury.
    Finally, the question as posed suggests an assumption that the 
resources of the defendants and their insurers in asbestos litigation 
today are so clearly limited in relation to the value of claims brought 
by asbestos victims that a sort of triage approach to compensation must 
be adopted by the federal government. It is our view that neither the 
testimony at the Subcommittee's hearing nor at the House's recent 
hearings on the same subject demonstrated that the current value, of 
these claims dramatically exceeds the value of the defendant companies' 
assets or future cash flows.
    In the course of discussions that we have been engaged in with a 
broad range of interested parties under the auspices of the House 
Judiciary Committee, we have become convinced that currently both we 
and the Congress have inadequate information about this and other 
critical questions to craft constructive, broadly supportive 
legislation. We, believe we need more information about the existing 
court dockets and settlement structures, about the variety of medical 
conditions that result from asbestos exposure, their impact on the 
lives of victims and the causal connections among these conditions, 
about the assets of the manufacturers and other defendants, including 
their insurance coverage, and the trends in all these areas. To take 
just one example, it would seem a precondition to any action in this 
area to have current data on the size of asbestos dockets by state and 
some information on how many of those cases are active and how many 
have simply been filed to preserve litigation rights.
    Let me conclude by emphasizing that while we are eager to work with 
the Subcommittee and any interested parties to craft solutions to the 
problems in asbestos litigation, the AFL-CIO completely rejects the 
notion that the appropriate response to the barriers asbestos victims' 
face in obtaining justice in the courts is to deny large numbers any 
ability to obtain compensation at all, and then to place substantial 
obstacles in the way of all asbestos victims'--including the 
desperately ill and the dying--obtaining compensation through the 
courts.
                               __________

    Response of Samuel J. Heyman to a Question From Senator Grassley

    Question 1. Does S. 758 provide the necessary incentives or dis-
incentives for plaintiffs and defendants to resolve their claims 
promptly with the Asbestos Resolution Corporation? For example, Owens 
Corning argues that there are no set settlement values or payment 
schedules which would encourage plaintiffs to forgo court action and 
enter into settlements with asbestos defendants. Owens Corning proposes 
that tax incentives might be incorporated to encourage defendants to 
settle, while Professor Green suggests that penalties might encourage 
the early resolution of claims. What is your opinion.
    Answer 1. S. 758 does provide necessary incentives for both 
plaintiffs and defendants to resolve asbestos claims promptly and 
fairly within the Asbestos Resolution Corporation (ARC), Under the 
bill, once a claimant receives his certificate of medical eligibility, 
a process that ordinarily should take only a few weeks, he enters a 
settlement stage that culminates, if necessary, in mediation that is 
subject to a 60 day time limit. At the end of the mediation stage, each 
identified defendant is obligated to make a good faith offer of 
settlement to the claimant. Any defendant who does not make such a good 
faith offer, defined as being an offer which, after being rejected by a 
particular claimant, falls more than 25 percent short of what that 
claimant ultimately recovers either by way of arbitration or in the 
courts, is subject to a penalty paid directly to the claimant.
    In addition, a defendant who does not reach a fair settlement with 
a claimant in this mediation stage would have to face the claimant 
either in arbitration or in the court system, at the claimant's 
election, with the claimant having a certificate entitling him to a 
strong presumption of asbestos-related disease and the defendant having 
most defenses waived. Furthermore, the costs of the mediation and 
arbitration components of the system are assessed to those defendants 
who use them, providing a further incentive to resolve cases early, 
once the ARC has determined that the claimant indeed is sick. These are 
strong incentives for defendants to resolve the cases quickly and 
fairly either during the mediation stage or even earlier. In addition, 
because the ARC provides this administrative system for claimants to 
recover fair settlements at full ``tort system'' compensatory values in 
a matter of months, rather than the years that cases can grind on in 
the tort system, plaintiffs as well would be incentivized to settle 
cases promptly within this administrative framework.
                                 ______
                                 

    Responses of Samuel J. Heyman to Questions From Senator Feingold

    Question 1. In your testimony, you refer to the ``bundling'' of 
sick and non-sick claimants. Have you encountered any suits by non-sick 
claimants alone? If so, how often and what was the outcome?
    Answer 1. It is extremely rare to encounter claims which proceed to 
trial on behalf of non-sick claimants alone, and we at least are 
unaware of any non-sick claimants who have proceeded to trial on their 
own against us. As reflected in my testimony before the subcommittee, 
asbestos lawyers almost always seek to bundle non-sick claims with sick 
claims--either in order to use the sick claims as leverage to obtain 
settlement of the non-sick claims or, in the case of trial, to confuse 
the jury and elicit sympathy for the non-sick claimants.

    Question 2. In your testimony, you argue that claimants who have 
developed medically detectable injuries from asbestos exposure and face 
increased chances of other more serious diseases such as mesothelioma, 
other cancers, and asbestosis, should not receive any compensation. Why 
isn't it fair to give these claimants modest compensation and to pay 
for medical monitoring for those conditions they are more likely to 
contract? Would you support a system that provided claimants with 
modest compensation and/or medical monitoring?
    Answer 2. I disagree with the premise of the question--that persons 
who have pleural plaques or diffuse pleural thickening but no 
impairment of lung function, have an increased chance of contracting 
serious diseases such as mesothelioma, other cancers or asbestosis 
compared to persons with comparable levels of asbestos exposure. 
Pleural changes, which can be caused by very low exposure, me just a 
marker of such exposure and by themselves do not increase the risk of 
cancer or other serious disease at all. In fact, given the same amount 
of exposure, there is no greater risk of cancer or other serious 
disease with regard to those who have pleural changes compared with 
those who do not. In any event, there is no dispute that the vast 
majority of people with pleural changes will never become sick.
    The purpose of S. 758 is to insure that people who are actually 
impaired by asbestos disease receive fair compensation. Providing 
compensation for the unimpaired would defeat this purpose, since if the 
defendants continue to spend billions of dollars paying claims of 
people who are exposed but not impaired, the true asbestos victims may 
be left without any recourse.
    With regard to medical monitoring, a substitute bill is being 
considered by the House Judiciary Committee providing for partial 
reimbursement of medical testing expenses for claimants who demonstrate 
certain asbestos related fibrosis or pleural changes but no impairment. 
I understand the criteria for reimbursement of such testing expenses 
under the substitute bill are based upon the so-called ``Louisiana 
agreement'' which the AFL-CIO endorsed at the hearing on S. 758. We may 
consider supporting such a provision.

    Question 3. In your testimony, you strongly condemn exorbitant 
plaintiffs' fees. In the RAND study on asbestos litigation costs, 
defendants' legal fees were 50 percent higher than plaintiffs' fees. Do 
you have any evidence that this situation has changed? If not why is it 
fair to limit plaintiffs' fees and not defendants' fees?
    Answer 3. As a preliminary matter, I would note that comparisons of 
aggregate plaintiffs, fees with aggregate defense fees really are 
comparing apples to oranges since for every plaintiff, there generally 
are dozens of defendants named, most of whom ordinarily have their own 
counsel. In any event, the real issue is not who spends more for 
lawyers, but how to reduce the transaction costs that exceed recoveries 
by a factor of two to one.
    First, the issue of plaintiffs' fees is not a financial issue for 
asbestos defendants in that they are not paying these fees but rather 
the claimants. Nevertheless, we have been supportive of the cap 
because:

  (1) The legislation seeks to track the Georgine settlement, where the 
    23 percent cap was a pan of the settlement;
  (2) This is essentially a victims' rights bill, and it is our hope 
    that sick claimants as a result of the legislation will be able to 
    maximize their after cost recoveries;
  (3) Since it is expected that most cases brought after an enactment 
    of this legislation will be settled in the administrative claim 
    facility, where far less legal work will be required, a 25 percent 
    cap does not appear very onerous; and
  (4) In the proposed administrative claims facility, where it will be 
    immediately clear as to whether a claimant is sick or not, and if 
    so the lawyers will not have any downside as they now have in the 
    tort system, a 25 percent fee ought to be regarded as very 
    attractive.

    Second, with respect to defense fees and costs, it should be borne 
in mind that asbestos defendants are highly sophisticated consumers of 
legal services, whereas asbestos claimants are often financially 
unsophisticated and are regularly taken advantage of by asbestos 
lawyers. Moreover, asbestos legal fees are invariably contingent on the 
outcome of the case, with asbestos lawyers receiving 40 
percent of the recovery. As most cases today are consolidated in a 
single action sometimes involving groups of literally thousands of 
claimants, asbestos lawyers are able to leverage their efforts time, 
and overhead over more and more cases. Defendants' lawyers, on the 
other hand, are paid at hourly rates, and therefore have not enjoyed 
the huge financial rewards that plaintiffs' asbestos lawyers have.
    Finally, courts and commentators have made it clear that there are 
currently no effective controls on the legal fees paid by asbestos 
claimants, as evidenced by the fact that asbestos lawyers continue to 
extract 40 percent contingent fees on cases where there is 
little or no risk of non-recovery. As a very concrete example of the 
scandalous attorney fees which continue to be extricated from asbestos 
claimants, I would refer you to the recent example referenced at the 
hearing where a claimant filing a routine administrative claim against 
the Manville Trust was forced to pay over 60 percent of his claim in 
attorneys fees and expenses.

    Question 4. S. 758 is often characterized as a victims' rights bill 
by its supporters. Are you aware of any significant support among 
asbestos victims for the bill? If not, how do you explain the lack of 
support?
    Answer 4. We believe that S. 758 is properly characterized as a 
victims' rights bill. Claimants who have asbestos related disease will 
receive full compensatory damages, with no caps or other limits, 
promptly. Those who have been exposed to asbestos, but are not sick 
today, may bring their claims whenever they may become sick without 
regard to the statute of limitations, and may then recover compensation 
fairly and promptly.
    While we would love to talk directly with asbestos victims, 
asbestos lawyers have gone to great lengths to prevent us from doing 
so. Given the refusal of asbestos lawyers to consent to such contacts, 
there are ethical constraints concerning communicating directly with 
asbestos clients represented by counsel. Notwithstanding these 
impediments, it is fairly clear that asbestos victims support this 
bill. First, physicians across the country, who care and speak for 
asbestos victims, wholeheartedly support the legislation. You have 
before you the written testimony of Dr. Susan Pingleton, the president-
elect of the American College of Chest Physicians (``ACCP''), the 
largest association in the world of chest physicians, expressing her 
unequivocal opinion that this legislation is good for asbestos victims 
and that it will protect the best interests of these victims. In 
addition to Dr. Pingleton, seven past presidents of The ACCP have 
expressed in writing their unequivocal support of the bill as well.
    The doctors agree with the fundamental concept underlying the 
legislation--namely that the system is broken and these cases can no 
longer be handled by the traditional judicial system. Many of the 
doctors have expressed the patent frustration of their patients over 
the fact that their cases and compensation seem mired in continual 
difficulty and delay. One doctor told of a patient who suffered from 
mesothelioma for years and recently died--without receiving any 
compensation despite having had a lawyer and a case filed for years. 
His widow expressed to the physician extreme frustration with the 
entire process. Other doctors have told us of patients who have had 
exposure, but are not presently ill, and are fearful that if they 
become ill the statute of limitation will have run, or there will be no 
money left for them, and they will not be able to receive compensation 
for themselves or their families.
    It is important to emphasize that many physicians view this bill as 
a public health bill and a victims' rights bill--and not a fundamental 
alteration of the tort system. Dr. Louis Sullivan referred in his 
testimony to the need to prevent a legal crisis from becoming a public 
health crisis. The doctors clearly recognize the ramifications of this 
legislation, and they are clearly focused on the serious ways in which 
their patients are disadvantaged by the present system.
    Finally, the Coalition has received numerous unsolicited messages 
from asbestos victims who have called, or contacted our website, 
indicating that they are upset with the current asbestos litigation 
system and/or endorsing of the legislation.

    Question 5. Would you be willing to support a bill that apportioned 
liability ``up-front and created a global trust fund from which 
claimants would be compensated upon receiving a certificate of medical 
eligibility?
    Answer 5. It simply is not possible to apportion liability ``up 
front'' among defendants to create a single fund from which plaintiffs 
would be compensated. There are today more than 2,600 different 
asbestos defendants who are named in lawsuits. The number and identity 
of defendants is subject to tremendous variability depending on where 
the case is brought, the nature, place and time of the exposure, and 
the basis of liability. It must be recognized that asbestos liability 
can arise out of exposure to hundreds of products for which there was 
no single market, so it would not be possible to use market share as a 
proxy for estimated liability. The creation of a fund also could 
jeopardize the availability of insurance proceeds as a source for 
compensation of asbestos victims. Insurance companies would maintain 
that their contracts do not require them to cover an assessment or tax 
to a government fund that is not related to individual company 
liability. It simply is not possible, therefore, to come up with an up 
front sharing formula.
    I understand that a compromise bill being considered by the House 
Judiciary Committee, which we could perhaps support, provides for the 
creation of a fund from which a special master will provide sick 
claimants with the option of receiving a total award as soon as they 
receive their certificate of medical eligibility without themselves 
having to pursue individual defendants. The fund would then seek 
reimbursement from defendants, either by way of settlement or 
litigation in the administrative forum. In this way, a claimant would 
be able to seek a total settlement from a single fund, or pursue 
individual defendants in either the administrative system or in court, 
without their having to be an up-front apportionment of liability.
                               __________

     Response of Karen Kerrigan to a Question From Senator Grassley

    Question 1. Does S. 758 provide the necessary incentives or dis-
incentives for plaintiffs and defendants to resolve their claims 
promptly with the Asbestos Resolution Corporation? For example, Owens 
Corning argues that there are not set settlement values or payment 
schedules which would encourage plaintiffs to forgo court action and 
enter into settlements with Asbestos defendants. Owens Corning proposes 
that tax incentives might be incorporated to encourage defendants to 
settle, while Professor Green suggests that penalties might encourage 
the early resolution of claims. What is your opinion?
    Answer 1. We believe that S. 758 does provide adequate incentives 
for settlement of cases brought by individuals with impairing diseases. 
First, the bill would require plaintiffs' lawyers to make serious 
efforts to settle cases as soon as medical review is completed. Today, 
although the plaintiffs themselves have an interest in early 
settlement, their lawyers may be distracted by the challenge of 
managing hundreds, or even thousands of cases, and frequently do not 
focus on settlement until the lost minute.
    Second, the bill would facilitate (as well as require) early 
officers by defendants. For example, as a result of the non-adversarial 
medical review process, the medical condition of the plaintiff will be 
essentially established at the outset of the case, and information on 
product identification would be available much earlier than is the case 
today. This will enable defendants to formulate a reasonable settlement 
offer at the outset of the proceeding.
    Third, mediation under the auspices of the ARC should help bridge 
differences between parties who tire unable to reach agreement on their 
own. The provision of the bill requiring mediation takes advantage of 
the emergence of ADR in recent years as a means of promoting efficient 
and inexpensive resolution of disputes.
    Finally, in accordance with Professor Green's suggestion, the bill 
provides it penalty for defendants whose offers in mediation prove to 
be too low.
    Of course, S. 758 would eliminate the use of mass consolidations 
and the threat of punitive damages to coerce the settlement of cases 
regardless of their merits. From the prospective of the nation's small 
businesses, that can only be construed as a plus.
    Relative to the proposal that tax incentives be incorporated to 
encourage defendants to settle, I would tend to take a rather dim view 
of this approach for several reasons. As you know Senator Grassley, 
SBSC is a vocal proponent of tax relief and providing American business 
with tax incentives to maintain a high level of investment, job 
creation, and innovation. But it strikes me that the use of tax 
incentives to mask or correct abuses in our legal system is not sound 
public policy--nor will it solve the underlying problem in this current 
crisis. In addition to further complicating the tax code (and charges 
that such tax incentives amount to ``corporate welfare'') I would 
assert that using tax incentives to encourage defendants to settle 
might, in fact, skew the settlement process. I would encourage the 
Congress to leave the tax code out of the asbestos litigation quagmire.
    SBSC prefers Professor Green's approach.
                                 ______
                                 

     Response of Karen Kerrigan to a Question From Senator Thurmond

    Question 1. Do you believe that the current trend of asbestos 
litigation is to target, as you put it, ``defendants with an 
increasingly tenuous relationship to asbestos?'' If so, why in your 
opinion is this happening, and how many of such defendants have 
actually been held liable for harm to victims of asbestos exposure?
    Answer 1. I do believe that today's trend is to target those 
companies with an increasingly tenuous relationship to asbestos. Twenty 
years ago, asbestos cases were brought against such companies as Johns-
Manville, Raybestas Manhattan, Celotex, Eagle-Picher and the like. 
These are the companies that come to mind when one thinks of asbestos 
defendants. Asbestos litigation has destroyed those companies, reducing 
the assets available to compensate plaintiffs. At the same time the 
flood of cases brought on behalf of unimpaired claimants has put more 
pressure on the assets that, are left.
    Plaintiffs' lawyers have therefore sought to expand the resource 
base by naming more and more peripheral companies. The list of 
peripheral companies that could someday find themselves trapped in such 
lawsuits is extensive. A reading of standard complaints shows many 
small businesses among the over 6,000 defendants that have been named. 
Small businesses such as automobile dealerships, hardware stores and 
car repair shops have found their way onto the standardized complaints 
filed by plaintiffs counsel.
    Few of these peripheral defendants have gone to trial. Rather, 
faced with huge defense costs, distraction of management attention and 
time, and the possibility of crushing awards, most small businesses 
settle.
    However, just last week a small family-owned business in Vermont 
was, pushed into bankruptcy by asbestos claims. This company was owned 
by the same family for five generations. It manufactured furnace and 
woodstove repair cements and ceased using asbestos in its products in 
the early 1970s. Nevertheless, the company was subjected to over 50,000 
claims 37,000 of which are currently pending. With combined assets of 
less than $3 million, the company's president estimated that current 
and future claims against the small company total more than $67 
million. It is a small wonder that this onslaught of litigation pushed 
the company over the edge.
    While most individual settlements are ``small'' by beltway 
standards, collectively they amount to a significant drag on small 
businesses as a whole. Individually these smaller settlements still 
place great economic hardship on small firms where cash flow and cash 
availability is less flexible than it is for larger firms.
                                 ______
                                 

     Response of Karen Kerrigan to a Question From Senator Feingold

    Question 1. Specifically, how many of the more than 50,000 small 
business in the Small Business Survival Committee have asbestos claims 
filed against them? How many have had asbestos-related judgments 
assessed against them? How many have paid to settle asbestos claims?
    Answer 1. Presently, we currently do not know how many of our 
members have been named as defendants in asbestos lawsuits. But we do 
know that the types of small businesses that have been named as 
defendants in asbestos lawsuits are well represented in the ranks of 
those members who belong to the Small Business Survival Committee 
(SBSC).
    A reading of standard complaints shows many small businesses among 
the over 6,000 defendants that have been named, Among those--car 
dealerships, car repair shops, hardware stores and others--have found 
their way into standardized complaints filed by plaintiffs' counsel. As 
you may or may not recall, I have personally visited your office with 
small business leaders who belong to the Independent Business 
Association of Wisconsin (IBAW), an affiliate of SBSC whose broad-based 
small business membership includes the type of businesses that are 
appearing with more frequency in asbestos lawsuits.
    As you know from your interaction with IBAW, and other small 
businesses in Wisconsin, most small businesses cannot afford to defend 
these claims. Even apart from litigation costs and possible judgments, 
small businesses do not have the personnel to devote attention to mass 
tort litigation. They need to focus their attention on doing business.
    Just last week, a small family-owned business in Vermont was pushed 
into bankruptcy by asbestos claims. This company was owned by the same 
family for five generations, It manufactured furnace and woodstove 
repair cements, and ceased using asbestos in its products in the early 
1970s. Nevertheless, the company was subjected to over 50,000 claims 
37,000 of which are currently pending. With combined assets of less 
than $3 million, the company's president estimated that current and 
future claims against the Small company total more than $67 million, it 
is a small wonder that this onslaught of litigation pushed the company 
over the edge.
    Even one such bankruptcy is too many for the small businesses that 
belong to SBSC. Legislation such as S. 758 is vitally needed to ensure 
that the real victims of asbestos exposure are compensated while 
leaving America's small businesses free to contribute to economic 
growth and jobs.
                               __________

     Responses of Conrad Mallett to Questions From Senator Grassley

    Question 1. Does S. 758 provide the necessary incentives or dis-
incentives for plaintiffs and defendants to resolve their claims 
promptly with the Asbestos Resolution Corporation? For example, Owens 
Corning argues that there are no set settlement values or payment 
schedules which would encourage plaintiffs to forgo court action and 
enter into settlements with asbestos defendants. Owens Corning proposes 
that tax incentives might be incorporated to encourage defendants to 
settle, while Professor Green suggests that penalties might encourage 
the early resolution of claims. What is your opinion?
    Answer 1. S. 758 encourages all parties to settle the cases as soon 
as possible after the medical review process has been completed. 
Defendants have important incentives to settle the cases and to settle 
them early. In the first place, defendants are given a short grace 
period for settling without the need for mediation. They have every 
incentive to do so, because they pay the mediator. As a practical 
matter, I would expect most of the major defendants would settle at 
this stage pursuant to futures agreements they have negotiated with 
plaintiffs' counsel in advance. Second, a mediator will assist the 
parties to settle cases that could not be resolved in the grace period. 
Mediators will be especially helpful in unusual cases, or cases in 
which the parties disagree on the strength of the evidence. Third, 
defendants face a significant penalty if their offers in mediation turn 
out, in hindsight, to be too low. Finally, defendants have an added 
incentive to settle without arbitration, because they bear the costs of 
arbitration.
    If they do not settle, defendants will face plaintiffs with a 
certificate of medical eligibility that is presumed correct and will be 
limited to contesting just three issues. These issues are (1) medical 
eligibility (again, with defendants having to overcome the presumption 
of correctness that attaches to the certificate), (2) individual 
causation (which for most defendants means product identification), and 
(3) damages.\1\ In many cases, defendants will want to settle because, 
under the new rules established by the bill, there is no point in doing 
anything else.
---------------------------------------------------------------------------
    \1\ The Coalition for Asbestos Resolution believes that the waiver 
of defenses contained in S. 758 is not appropriate for all defendants, 
but only for ``core claims'' involving the principal players. CAR 
stands ready to work with the Senate to craft an appropriate compromise 
waiver.
---------------------------------------------------------------------------
    The plaintiff's incentive to settle early is obvious. He gets his 
money quicker. Moreover, by tightening liability rules and eliminating 
punitive damages, the results of a trial or arbitration become more 
predictable and the temptation to gamble on a trial is thus reduced. I 
do not understand the suggestion that plaintiffs would not settle 
without a legislatively established schedule. In my long experience as 
a judge, I have seen plaintiffs settle every day without such 
schedules.
    I do not believe that tax incentives are necessary for the 
legislation to work. The Coalition has consistently maintained that the 
costs of S. 758 should be borne by the defendants, and not the 
taxpayer. Beyond that, I have not seen Owen Corning's tax proposal and 
have no comment on it.

    Question 2. As former Chief Justice for the Michigan Supreme Court, 
you have unique insight into what is going on in the state courts with 
respect to these asbestos claims. Could you explain the effect of the 
asbestos litigation crisis on the state court systems? Do you believe 
that this bill presents a Tenth Amendment problem? Also, what would be 
the effect if this legislation only operated at the federal level?
    Answer 2. In my written testimony, I described the experience that 
the Michigan Supreme Court had in handling the tremendous impact that 
asbestos claims had on the Michigan Court system. We designed a system 
whose main goal was to process the cases through our docket as quickly 
as possible. It became impossible in this environment for the cases to 
be treated on their individual merits.
    Our experience is hardly unique. Other courts, throughout the 
country, have been inundated with claims that they have been ill-
equipped to handle. The reason for this is quite simple. Our state and 
federal court systems are not designed to handle thousands of claims 
filed at the same time against the same defendants. When caseload 
pressure strips the trier of fact of the ability to handle each case on 
a case-by-case basis, we generally assign cases to an administrative 
system. This is why workers compensation, Social Security disability 
decisions, black lung, and other repetitive injury cases are assigned 
to administrative programs. A similar administrative approach is 
necessary to handle asbestos litigation.
    I do not believe that this legislation presents any significant 
Tenth Amendment problems. Judges in state courts apply federal law 
every day. That is part of their job in our federal system. Moreover, 
if there were ever an area in which national legislation is desirable, 
it is asbestos legislation. Indeed, ``national legislation'' is exactly 
what the United States Supreme Court called for in Ortiz v. 119 S. Ct. 
2295 (1999), thus adding its voice to those of state judges themselves. 
For example, the Florida Supreme Court has said, ``Any realistic 
solution to the problems caused by the asbestos litigation in the 
United States must be applicable to all fifty states. It is our belief 
that such a uniform solution can only be effected by federal 
legislation.'' W.R. Grace & Co. v. Waters, 638 So.2d 502, 505 (Fla. 
1994).\2\ In my mind, there is no question that the rules of law 
established in S. 758 are well within Congress' power under the 
Commerce Clause and are necessary reforms that must be uniform across 
the states, as the state courts have said.
---------------------------------------------------------------------------
    \2\ See also State ex rel. Appalachian Power Co. v. MacQueen, 479 
S.E.2d 300, 304 & n.8 (W. Va. 1996).
---------------------------------------------------------------------------
    Finally, as to the third question, I believe that this legislation 
could not work if applied on the federal level alone. In 1991, the 
Panel on Multidistrict Litigation consolidated federal asbestos cases 
for pretrial purposes in the Eastern District of Philadelphia. The 
district court gave priority to claimants and severed punitive damages 
claims for future trials. As a result, plaintiffs' lawyers fled the 
federal system and filed record numbers of asbestos cases in state 
courts. The lesson is simply that asbestos litigation is not 
susceptible to partial solutions. Legislation must be national--
applicable in all states and all courts--or it will be ineffective.

    Question 3. Mr. Middleton and others have criticized the Asbestos 
Resolution Corporation to be a time-consuming process by which sick 
plaintiffs will be ``jumping through hoops'' with no guarantee of 
timely compensation. Is this an accurate assessment of the process set 
up in S. 758? Does S. 758 create an open-ended procedure which provides 
endless opportunities for defendants to delay any compensation to the 
victims, as suggested by Mr. Middleton?
    Answer 3. Mr. Middleton has distorted the process by which a 
plaintiff goes through the system and obtains timely compensation. The 
process is really quite simple.
    First, the claimant will obtain medical certification from the ARC. 
This is a simple, non-adversarial process. The defendants will not even 
be parties at this stage. Usually there will be no question about the 
plaintiff's compliance with the medical criteria, and medical approval 
will occur in a matter of days.
    Second, the ARC will gather the defendants together and encourage 
settlement, as I have described in my answer to Senator Grassley's 
first question. Most cases will end here. Plaintiffs will receive 
prompt compensation reflecting values established by the tort system.
    Finally, for the few cases that cannot be settled, the plaintiff 
has his choice of taking the defendant to court, or choosing 
streamlined arbitration under the auspices of the ARC.
    This is a simple and straight-forward process. There is no point at 
which defendants can manipulate the ARC's procedures for the purpose of 
delay. Defendants are not involved at all in the medical review 
process, and alternative dispute resolution is subject to strict time 
limits. Moreover, there are, as I have explained in my answer to 
Senator Grassley's first,question, substantial penalties for defendants 
who fail to make objectively reasonable settlement offers at the 
mediation stage.

    Question 4. At the House Judiciary Committee hearing, a 
representative from Owens Corning expressed concern about the 
applicability of the bill's provisions to lawsuits pending at the time 
of enactment, specifically that Congress would be preempting state 
substantive law causes of action which have already been filed. In 
addition, Owens Corning objected to the provisions requiring that all 
funding be collected from existing asbestos defendants in proportion to 
the number of claims against them. Are these concerns valid and, if so, 
how can the bill be remedied?
    Answer 4. Well over 200,000 claims are pending in court today 
alleging injuries due to asbestos-related disease. The asbestos 
litigation crisis is not something which will happen in the future; it 
is something that has already happened. Any legislation which did not 
cover those pending case applied only to cases which are filed in the 
future, would be a missed opportunity for reform.
    Of course, the transition to a new system has to be handled with 
care. It is important to apply the medical criteria to as many cases as 
possible, in order to stop the diversion of resources from the sick to 
the non-sick. The bill therefore makes the criteria applicable to all 
pending cases. However, it would be unfair to apply the requirement 
that a plaintiff obtain a certificate of medical eligibility from the 
ARC who have waited for a long time, and are getting near a trail date. 
For these transitional cases, the legislation excuses claimants whose 
cases are ready for trial before the ARC is operational from this 
requirement.
    In answer to the second question, one of the objectives of S. 758 
is to solve the asbestos litigation problem without burdening 
taxpayers. The Coalition believes that the provisions of S. 758 
regarding allocation of costs are sensible and sufficiently flexible to 
take into account usage of the system. For example, if Owens Corning is 
named in few cases (because its National Settlement Plan functions as 
intended), its share of the costs will be low. And, of course, if Owens 
Corning settles without the need for mediation or arbitration, it will 
not have any responsibility for those costs.

    Question 5. Some have criticized S. 758 because they say it forces 
claimants into a program in which they may not want to participate. Is 
this a problem? What are your thoughts on including an ``opt out'' 
provision or allowing participation on a voluntary basis?
    Answer 5. Observers of the asbestos litigation problem have 
uniformily come to the conclusion that it is critical to make a 
distinction between those plaintiffs who are sick from asbestos 
disease, and those who are not sick. Otherwise, the resources of 
defendants will not be focused on compensating the ``elephantine mass'' 
of asbestos cases will continue to clog court dockets. A voluntary 
system could not effectively address the problem of lawsuits brought by 
the unimpaired. Under such a system, plaintiffs who lack any current 
impairment, and therefore could not satisfy the medical criteria, would 
continue to file cases in court, thus frustrating the purpose of the 
legislation.
                                 ______
                                 

     Responses of Conrad Mallett to Questions From Senator Feingold

    Question 1. In your testimony, you refer to S. 758 as ``a system 
that fully compensates the impaired within six months of the date the 
claim is filed.'' The bill, however, does not guarantee that an 
impaired person will receive any compensation nor that the claim will 
be settled within six months. How then do you support your contention?
    Answer 1. S. 758 contains important incentives for defendants to 
settle cases with all plaintiffs who have an asbestos-related disease. 
Once claimants have been granted a certificate of medical eligibility, 
a presumption of correctness attaches to that finding which defendants 
can overcome only with clear and convincing evidence. All traditional 
defenses are waived; the only questions that need to be answered in an 
asbestos case will be medical eligibility, individual causation, and 
damages. Defendants will be required to make good-faith offers during 
mediation sponsored by the Asbestos Resolution Corporation or face 
significant financial penalties. And it is to be expected that most 
major defendants will have futures agreements providing for routine 
settlement of medically eligible claims even before a mediator is 
appointed. It is therefore likely that the vast majority of claimants 
will be ensured full recovery very shortly after the medical review 
process is over.
    Indeed, there are important reasons to believe that plaintiffs will 
be more likely to receive full and prompt compensation under the 
legislation than under the Georgine class action on which it was based 
(which is sometimes said to have offered greater guarantees of 
compensation than S. 758). In Georgine, plaintiffs agreed to a $1 
billion cap on defendants' liability, and they also agreed to yearly 
caps on the amount of money that would be paid in any given year. There 
are no such caps in this bill, and for that reason, plaintiffs are 
ensured full and prompt compensation. In addition, while Georgine set 
settlement ranges (which were criticized as too low), the legislation 
would allow for full tort recoveries and would constantly adjust 
settlement values to maintain an equilibrium with the results of 
arbitrations and trials and with actual settlement experience.

    Question 2. In your testimony, you argue that defendants are forced 
to settle claims as a result of judicial pressure and the trial court 
system. You cite the Cosey case as support but admit that ``the 
defendants rushed to settle before the jury could return a verdict on 
punitive damages.'' Isn't the real pressure then emanating from the 
threat of large verdicts rather than from judges?
    Answer 2. The pressure in the Cosey litigation was a function of 
case consolidation, not of the ordinary jury system. In desperation 
over the caseload pressure, and the inaction of Congress, many state 
courts have turned to consolidation in order to attempt to clear the 
docket. Unfortunately, consolidations do, not work. What generally 
happens is that thousands of claims will be consolidated in one 
courtroom. Consolidation is designed to make sure that none of the 
cases are even actually tried or that only a handful are tried. 
Attorneys generally have control over which cases will be tried first, 
and will pick their strongest claims in order to put maximum pressure 
on the defendants to settle.
    Although the defendants may wish to settle these particularly 
strong claims, the plaintiff's attorneys will not allow the defendants 
to settle only those claims, but insist on settlement for all of the 
thousands of cases that have been consolidated, many of which involve 
claims without any impairment whatsoever. I described this in my 
written testimony. When the tactic works, unimpaired claimants receive 
substantial settlements, and this encourages a further waive of filings 
which prompts judges to ask for further consolidations in order to 
clear the docket.
    I strongly support our jury system. When thousands of cases are 
improperly joined before one jury, however, and plaintiffs' attorneys 
are given a free hand in determining which cases are going to be tried 
as allegedly representative of the whole, it is not surprising that the 
attorneys will select the most dramatic cases for trial, to put severe 
pressure on defendants to settle the remaining cases. If defendants 
choose to go to verdict, the stakes are raised to intolerable levels, 
because the risk of a punishing award is magnified thousands of times. 
This is simply inconsistent with basic fairness.

    Question 3. S. 758 would take away any current remedy for persons 
with asbestos-related physical changes, but without current functional 
impairment. The rationale for excluding all currently available state 
remedies, including funding for medical monitoring, is that funding 
must be conserved to pay those with greater impairments. This implies 
that there are limited funds available and that future bankruptcies 
among asbestos defendants are likely under the current system. What 
evidence do you have that future bankruptcies are likely to occur (as 
opposed to the bankruptcies of the 1980s)? In particular, are you aware 
of any asbestos company's 10(K) filings with the Securities and 
Exchange Commission that indicate their asbestos liabilities are out of 
control and threaten the companies' existence or future business plans? 
if defendants are not making this disclosure, upon what do you base 
your bankruptcy and its attendant limited funds argument?
    Answer 3. After the bankruptcy of well over 20 major defendants, 
the threat that the limited assets available to compensate asbestos 
victims will run out before all victims of serious injury can be 
compensated cannot be doubted. Just two weeks ago, a small manufacturer 
in Rutland, Vermont was the latest victim of the asbestos litigation 
problem. This company had been in the same family for five generations. 
It made an asbestos-containing product for wood stoves, which brought 
in about $1,000,000 per year. The weight of 33,000 asbestos claims, 
however, dragged it under. This is unconscionable. Nor is the 
experience of the Vermont unique. Over 25 percent of asbestos-related 
bankruptcies have occurred in the 1990s, including such defendants as 
Keene, Celotex, and National Gypsum.
    These bankruptcies have had a serious impact on the ability of 
asbestos victims to receive full and prompt compensation. When Johns 
Manville went bankrupt in 1982--without, I might add, giving warning of 
its impending bankruptcy in its Form 10K--many asbestos claimants were 
left without recourse. Historically, Johns Manville was the largest 
manufacturer of asbestos products and, by some estimates, was 
responsible for about 40-50 percent of the liability. Today, the Johns 
Manville Trust, which is responsible for claims against Manville, pays 
claims at 10 cents on the dollar.
    Apart from bankruptcies, there can be no doubt that resources for 
compensating asbestos victims are not unlimited. Workers, families and 
the communities that depend on today's asbestos defendants, cannot make 
needed investments in their businesses, create jobs, or invest in 
research and development if they remain burdened by a crushing caseload 
of asbestos claims. The legislation takes the public policy position 
that the resources of asbestos defendants should be focused on 
compensating those who have become sick because of exposure to their 
asbestos products. This reflects in appropriate balance of social 
priorities.
                                 ______
                                 

     Responses of Conrad Mallett to Questions From Senator Thurmond

    Question 1. How do you respond to Mr. Middleton's contention that 
``S. 758 would negatively impact and, in many cases, overturn the 
various state laws that have induced settlements * * * [and that] [t]he 
bill's restrictive medical criteria would eliminate compensation for 
thousands of cases that are presently compensable under, state laws?''
    Answer 1. I am not sure what Mr. Middleton meant by the ``various 
state laws that have induced settlements.'' I assume, however, that he 
was referring to mass consolidations and the threat of punitive 
damages, which together raise the stakes of trial to the point where 
defendants have no choice but to settle, whether a case is meritorious 
or not. This sort of coercion is effective at inducing settlements, 
without a doubt. But the cost is a sacrifice of impartial justice in 
each case, and to high diversion of scarce resources to payments for 
the unimpaired and transaction costs, including high contingency fees. 
As a former judge, I consider this distortion of the judicial system to 
be one of the more significant problems of asbestos litigation.
    The proposed legislation has its own incentives for defendants to 
settle, and I have described these incentives at length in my answer to 
Senator Grassley's first question. Suffice it to say that I am 
convinced that a reasonable level of settlements will be achieved under 
the program established by S. 758, without the need for coercive 
measures that have already undermined the administration of justice in 
the interest of clearing overwhelmed court dockets, and that these 
settlements will be focused on providing compensation to the sick.
    Let me turn now to the second part of the question--whether the 
bill would eliminate claims that are compensable under state law. In 
most states today (Pennsylvania being a notable exception), a plaintiff 
can get to a jury by showing a legal ``injury,'' which is not the same 
as what most laymen understand to be an injury. Pleural plaques, which 
are an indicator of asbestos exposure and which themselves do not cause 
breathing impairment or increase the risk of future disease, normally 
count as a technical injury for this purpose. Since plaques are common 
in individuals exposed to asbestos, this means that hundreds of 
thousands of people can bring suit even though they do not have cancer 
or any other functional impairment. Plaintiffs' lawyers actively 
solicit such people through mass screening programs and flood the 
courts with claims on their behalf.
    That's the problem.
    The solution proposed by S. 758 is to establish medical criteria 
that require impairment by an asbestos-related disease as a 
precondition for recovery. The medical criteria contained in S. 758 
were carefully negotiated between lawyers for plaintiffs and 
defendants, were endorsed by leading members of the plaintiff's bar, 
and by organized labor. A federal district court held exhaustive 
hearings on the fairness of the medical criteria and rejected all of 
the arguments that were proffered by those who objected to the 
settlement. The federal district judge found that the medical criteria 
were fair and reasonable, and that, supplemented by the exceptional 
medical claim's panel, would not exclude any plaintiff who is deserving 
of compensation. That finding was never questioned on appeal.

    Question 2. Mr. Middleton contends that ``[t]he courts are well 
equipped to handle the pending and future asbestos cases that will 
require trial [and that] [a] litigation crisis, as that term is usually 
understood, does not exist.'' Based on your experience as a judge, do 
you agree?
    Answer 2. The numerous federal and state courts who have had 
occasion to comment on the asbestos litigation situation emphatically 
disagree with Mr. Middleton's opinion of the problem. Just this summer, 
the Supreme Court again described the seriousness of the asbestos 
litigation problem, and stated that only Congress could solve it.
    In my experience in Michigan, the asbestos litigation problem 
resulted not from trials, but from the tremendous judicial resources 
that had to be spent on managing hundreds of thousands of cases through 
the pre-trial stage. These resources require judges to manage a process 
involving depositions, expert reports, and other aspects of our costly 
litigation system. After these substantial judicial resources have been 
spent on the cases, the cases do generally settle, but only on the eve 
of trial.
    Indeed, I would venture to say that probably 99 percent of the 
cases settle. In my written statement, I described how this settlement 
rate is a symptom of the problem. It is not an indication that there is 
no problem. The extremely high settlement rate is a result of a system 
which has given up on handling cases on an individual basis, and 
instead prefers to encourage batch settlements which exacerbate the 
problem of diverting the resources of the defendants away from 
providing compensation for the sick and towards providing compensation 
for for the unimpaired.
    This is nothing new. Mr. Middleton agrees that during the 1980s, 
asbestos litigation was creating serious problems for federal and state 
courts, but says that the problem is no longer as serious--as evidenced 
by the fact that there were only 55 trials in the United States in 1998 
that proceeded to verdict. An examination of the RAND Corporation 
studies shows that this rate of 55 trials in a year is very similar to 
the rate of trials that occurred in the 1980s when Mr. Middleton says 
there was a problem. Most asbestos cases have always settled, but the 
existence of well over 200,000 cases pending on federal and state court 
dockets has nevertheless resulted in enormous problems in the state and 
federal judiciaries, problems that are only getting worse.

    Question 3. How widespread in your opinion is the phenomenon of 
juries awarding extraordinary verdicts for asymptomatic plaintiffs? Why 
do you think this is happening?
    Answer 3. I am a strong believer in the jury system, and I believe 
that the award of extraordinary verdicts for plaintiffs with little or 
no impairment is not a result of any failing of the jury system per se, 
but instead occurs because of the dynamics of case consolidation. 
Plaintiff's lawyers understand that sensible juries will not award 
extraordinary damages to plaintiffs who have very little visible signs 
of disease. Instead, they seek to package these plaintiffs with other, 
more sympathetic plaintiffs who have serious illness.
    Professor Eskridge of Yale Law School has provided a thoughtful 
analysis of why this may be happening in a statement that was submitted 
to the House Judiciary Committee.\3\ He describes how this dynamic 
creates a situation in which the unimpaired receive sizeable awards, 
awards that are much larger than the awards they would receive if their 
cases were tried alone. He notes two reasons, among others. First, both 
judges and juries have a difficult time in separating out the cases of 
more than just a very few plaintiffs and treating them each 
individually. Because the plaintiffs with serious injury have very 
dramatic stories to tell, it becomes difficult to separate their cases 
from the cases of those plaintiffs who do not suffer serious injury. 
Secondly, juries inevitably begin to assume--wrongly--that those 
plaintiffs who do not suffer serious injury will inevitably get sick. 
In fact, the vast majority of asymptomatic plaintiffs will never become 
sick.
---------------------------------------------------------------------------
    \3\ See Jumbo Consolidations in Asbestos Litigation: Prepared 
Statement by Prof. William N. Eskridge, Jr., Yale Law School, at a 
Hearing before the House Committee on the Judiciary, July 1, 1999, 
available at http://www.house.gov/judiciary/eskr0701htm.
---------------------------------------------------------------------------
    That said, the number of cases in which extraordinary damages were 
awarded to unimpaired claimants is comparatively small, because most 
cases settle. In the Cosey litigation, at least two plaintiffs were 
awarded between $2.5 and despite the lack of any impairment. In the 
Carborundum case, a Texas jury awarded $15.6 million in compensatory 
damages, and $100 million in punitive damages, to a group of twenty-one 
plaintiffs whose disease ranged from mild asbestosis to admittedly 
asymptomatic conditions. The risk of a hung verdict in the asbestos 
litigation lottery, multiplied by a mass consolidation, drives 
defendants to make substantial payments to the unimpaired in mass 
settlements.

    Question 4. Do you believe that the drive to enact legislation such 
as S. 758 reflects a consensus among jurists, scholars, and 
practitioners that the judicial system is no longer capable of making a 
meaningful distinction between sick and non-sick asbestos claimants?
    Answer 4. I do believe that the momentum which S. 758 has gained in 
this Congress is in part because of the consensus judges, and lawyers 
that one of the most serious problems in asbestos litigation today is 
the inability of the system to make a meaningful distinction between 
those who are sick from asbestos-related disease, and those who are 
not. All three law professors who testified in the third panel, 
Professor Green, Professor Nagaretta, and Dean Verkuil, agreed that of 
the most serious problems of asbestos litigation today. John Hiatt, who 
testified on behalf of the AFL-CIO and legislation, nevertheless agreed 
that the inability to make distinctions between the impaired and the 
unimpaired was a significant problem. Supreme Court Justice Stephen 
Breyer has commented that perhaps half of all asbestos claims physical 
impairment. There is no real debate among impartial scholars, judges, 
and lawyers that this is one of the principle problems with asbestos 
litigation today.

    Question 5. Please compare the actual benefits to both the impaired 
and unimpaired claimants that are offered by the settlements that the 
Association of Trial Lawyers of America advocates and the system that 
S. 758 would establish.
    Answer 5. I believe that both the impaired and the unimpaired 
claimants that are offered by the private settlement deals that the 
Association of Trail Lawyers of America (ATLA) has advocated as an 
alternative to the legislation.
    For the impaired, there can be no doubt that the system established 
by the legislation is far superior. The system allows an impaired 
claimant to proceed swiftly through a medical review process. Following 
that, the claimant is able to force the defendants to mediation and 
require that they make good-faith offers. If those offers turn out to 
be significantly lower than the amount the plaintiff can obtain either 
in arbitration under the auspices of the Asbestos Resolution 
Corporation suit and obtaining a jury trial, the defendant face 
penalties. Because of this, defendants will be required to offer 
realistic settlement figures to the plaintiff at an early stage in the 
process.
    The private deals advocated by ATLA are not an improvement on this 
system. Under such private deals, the current clients of a plaintiffs' 
lawyer nearly always receives a better settlement than future claimants 
(who generally have not yet walked into the lawyer's office). There is 
a fundamental problem of fairness here. Moreover, with regard to future 
claimants, the agreements are premised upon keeping experienced 
plaintiffs' attorneys from representing claimants who do not like the 
settlement agreements, a lawyer who has entered into a private deal 
would tell future claimants that they have two choices: they can accept 
the offer of the defendant under the private settlement deal or find 
another lawyer. If it is easy to find another lawyer, the private 
settlement will not work. If it is hard, the plaintiff's ``choice'' is 
illusory.
    It is also important to realize that a plaintiff who settles with a 
defendant such as Owens Corning has not finally settled his case--there 
are dozens more defendants with which to settle. Where (as has been the 
case with Owens Corning) there have been concerns about the ability of 
the defendant to continue paying the flood of asbestos claims while 
maintaining its financial health, it may make sense to settle for a 
relatively low value and attempt to make up the difference through 
recoveries from, or setlements with, other defendants. Thus, a global 
settlement with one company may make it that much harder to enter into 
similar settlements with other defendants.
    The Coalition believes that S. 758 is not inconsistent with 
appropriate private settlements. It establishes a framework--an 
authoritative medical eligibility process, elimination of the statute 
of limitations, extensive waiver of defenses, and provision of an 
administrative process that can cut down on delays--within which 
private agreements would be encouraged. The issue in short, is not 
whether we should have a government program or private settlements, but 
rather what kind of government program will best encourage private 
settlements that are fair and appropriate.
    The unimpaired will also benefit from the legislation as compared 
with the alternative private arrangements espoused by ATLA. As soon as 
the legislation is enacted, the statute of limitations will be 
abolished for all asbestos claims that are not barred by the date of 
enactment. On the other hand, in the Owens-Corning agreement, for 
example, plaintiffs who proceed in the Owens-Corning system will have 
the statute of limitations tolled only after they sign up with the 
system.
    To be sure, some of the private settlement arrangements that have 
been proposed involve some nominal compensation to the unimpaired. When 
the unimpaired receives such compensation, however, they are binding 
themselves to the settlement values that are contained in the 
agreements, and cannot obtain full compensation for their injuries. In 
the legislation, claimants who are unimpaired will receive full 
compensatory value for their claims when and if they ever become sick.

    Question 6. Do you believe that S. 758 will present any federalism 
or Tenth Amendment problems?
    Answer 6. The state supreme courts have recognized that Congress 
must act to solve the asbestos litigation crisis. Congress must act 
because any solution must be uniform, and such a solution can only be 
accomplished by Congress. National legislation does, of course, imply 
some preemption of state law. Congress has ample authority under the 
Commerce Clause to make the modifications to state law that are 
contained in S. 758 in order to solve the asbestos litigation crisis.
    In his written statement, Dean Paul Verkuil of the Cardozo School 
of Law provides a careful analysis of recent decisions which upheld the 
sovereignty of the state federal intrusion. I agree with Dean Verkuil's 
analysis of the legislation, and I believe that by preserving access to 
state courts for all impaired claimants, the legislation balanced to 
make only those changes to state tort law that are strictly necessary 
to solve the asbestos litigation. Instead of preempting state tort law 
altogether, and establishing a completely federalized system, S. 758 
works carefully with our existing state court systems to address those 
problems which the state courts have faced, and yet still preserve 
access to those courts for all impaired claimants who choose to file 
their claims in the state court. This is consistent with my philosophy 
as a defender of our state court systems.
                               __________

    Responses of Michael D. Green to Questions From Senator Grassley

    Question 1. Professor Green, you indicate that because of its 
adversarial nature, S. 758 creates a procedurally complicated system 
where representation by counsel is almost essential. You state that 
these costs could be minimized by a ``simpler, less adversarial, 
compensation system.'' Do you have any specific suggestions that could 
improve the current process in the bill?
    Answer 1. Specific suggestions for simplifying the process so as to 
reduce administrative costs include:

  (1) Preparing a schedule for damages based on simple, objectively
  (2) Jettisoning the requirement that claimant prove which asbestos 
    products he or she was exposed to. This means a global resolution 
    of the asbestos industry's contribution to the compensation scheme.

    In general, the fewer, simpler, and more objective the criteria for 
recovery, the more efficient, inexpensive, and speedy the process will 
be.

    Question 2. Thousands of plaintiffs have already entered the legal 
system with stages in the process. What should happen to those claims 
in the event an administrative program is adopted? Do you think that S. 
758 should apply only prospectively and allow existing claims to 
proceed through the courts, should there be an option for claimants to 
either continue with their present claims or chose to enter the 
program, or should they all have to participate in this program?
    Answer 2. One of the major problems that S. 758 addresses is the 
proliferation of nonimpairment cases. The bill requires those with 
abnormal impairment to wait until they suffer from clinical symptoms. 
To exempt all of the cases that are currently filed from this provision 
of S. 758 would be unfortunate. On the other hand, if there are 
plaintiffs with serious disease who are close to trial, requiring them 
to start anew with the process set forth in S. 758would be most unfair. 
At the same time, barring those plaintiffs from recovering punitive 
damages (as the Bill does) would further the goal of making sure that 
the available resources are used to compensate all who suffer 
asbestotic disease. Overall, my preference would be to presume that all 
current cases would be subject to the Bill, but with appropriate 
exceptions for cases that are well advanced and involve serious 
diseases.

    Question 3. Some have criticized S. 758 because they say that it 
forces claimants into a program in which they may not want to 
participate. Do you believe that this is a problem? What are your 
thoughts on including an ``opt out'' provision or allowing 
participation on a voluntary basis?
    Answer 3. This statute must be mandatory for claimants. Overall, 
this statute will benefit all real asbestos victims by maximizing 
industry resources and ensuring that those resources are used to 
compensate the most seriously impaired victims. If the Bill provides a 
voluntary scheme, all those with abnormal chest x-rays but no 
impairment will opt out of the statutory scheme and file suit. 
Similarly, those with good prospects for a punitive damages claim would 
choose to go to court. In short, claimants will play their options 
strategically, which would result in the best cases being filed in 
court and the worst cases opting into the Bill's process. This would 
virtually gut the effectiveness of the Bill.
                                 ______
                                 

    Responses of Michael D. Green to Questions From Senator Feingold

    Question 1. One of the principal obstacles to the establishment of 
a fund is the argument that a corporation's insurance may not cover the 
cost of contribution. Is there a way to structure a fund so that 
insurance companies would continue to be liable?
    Answer 1. I believe there is. The standard CGL insurance policy 
provides coverage for ``all sums which the insured shall become legally 
obligated to pay as damages because of bodily injury or property 
damage.'' This language does not require tort liability. Courts have 
held that this language encompasses liability imposed by the 
Comprehensive Environmental Response, Compensation and Liability Act 
CERCLA''),\1\ I a federal statute imposing liability on those who 
generated, transported, or disposed of hazardous waste. In addition, 
liability insurers contributed to obligations of asbestos defendants 
who participated in the Wellington Agreement, in which global 
apportionment of each participating defendant was employed. And courts 
ruled that a decision to participate in the Wellington process was a 
reasonable mechanism for resolving liability for which insurers were 
obligated to provide coverage.\2\
---------------------------------------------------------------------------
    \1\ 42 U.S.C. Sec. Sec.  9601-75 (1997), amended by Superfund 
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 
Stat. 1613.
    \2\ See Stonewall Insurance Co. v. National Gypsum Co., No. 86 Civ. 
9671 [JSM] (S.D.N.Y. Dec. 22,1993)
---------------------------------------------------------------------------
    Perhaps more importantly, establishing a compensation fund and 
resolving each defendants' liability on a global basis will save a 
substantial amount of money that would otherwise be paid as costs of 
defending these suits. In addition, some states permit insurance 
coverage of punitive damages, which the Bill would end. These savings 
would redound to the benefit of insurers, which, after all, are 
concerned with costs and profits. This Bill should be very attractive 
to liability insurers. Indeed, I would venture the forecast that if 
participation in the administrative scheme were made voluntary for 
asbestos defendants and their insurers, with the option to participate 
or remain governed by current law, we would see a massive movement 
toward participation in the direction of the scheme set up in the Bill.
    Question 2. In your testimony, you state that ``asbestos cases take 
considerably longer to resolve than other civil cases.'' Could the long 
delays be due in part to the inactive docket system alluded to in Mr. 
Middleton's testimony? If not, please explain the cause for delays.
    Answer 2. First, I should disclaim having any empirical evidence on 
the length of time required to resolve asbestos cases. My impression is 
that they tend to take longer to resolve, and I believe that the 
Hearings held before this Subcommittee and the House Judiciary 
Committee bear that out. Surely one reason for the delay could be the 
inactive docket devices that some jurisdictions have adopted, although 
that would depend on whether the study measuring time-to-resolution 
included those inactive docket cases. Another reason is that most 
asbestos defendants are not anxious to settle cases and pay claimants 
until they are absolutely required to do so, which often is on the 
courthouse steps on the way to trial. Because, historically, asbestos 
cases tended to congregate in a few jurisdictions, they overwhelmed 
those courts and created long waiting lines for trial dates. Many 
asbestos plaintiffs in the Eastern District of Texas agreed to a 
variety of unusual procedures that were employed by Judge Robert 
Parker, because without such extraordinary efforts their cases would 
take many years or decades before called for trial.

    Question 3. You testified that one of the primary goals of any 
legislative solution to the asbestos problem is to expedite the 
compensation process. Do you believe that the proposed system will 
expedite compensation to victims? If not, what suggestions would you 
give for streamlining the process?
    Answer 3. It is very difficult to tell if the Bill's provisions for 
alternative dispute resolution (mediation and arbitration) will 
expedite resolution of claims. To a large extent, the answer to this 
inquiry depends on whether asbestos defendants participate in a good 
faith effort to resolve claims promptly. To they extent that they do, 
claims resolution could be accelerated. On the other hand, if one or 
more defendants decide that it is in their interest to delay payment 
for as long as possible, the Bill could actually build in further delay 
by requiring claimants to go through mediation before being able to 
assert their claims in court. I am also concerned about the provisions 
in the Bill that require apportionment of liability among multiple 
defendants on the basis of comparative fault. This requirement, which 
could delay resolution of the claim, will apparently exist whether a 
claim is resolved in mediation, arbitration, or in a lawsuit.
    For my suggestions for streamlining the process, please see my 
answers to Senator Grassley's first supplemental question.

    Question 4. In your testimony, you attack the proposed system as 
overly adversarial and as retaining too many ``tort-like'' elements. 
How could the system be altered to remove these elements while still 
protecting a defendant's legitimate interest in compensating only those 
it has harmed?
    Answer 4. I would resist the premise of this question that a 
defendant has a legitimate interest in compensating only those it has 
harmed significant interest is that they not be required to pay more 
than they would be required to pay under the current system. The more 
administratively efficient the process in this Bill, the more that 
defendants will ultimately save over what they would be required to pay 
if left to the common law tort system. Numerous major asbestos 
defendants voluntarily joined the Wellington Agreement which, decoupled 
defendants' payments from those injured by each defendant's asbestos 
products. They joined the Wellington Agreement because they anticipated 
they would save money from the joint defense to be employed under 
different premises from tort law. Thus, the National Childhood Vaccine 
Injury Act \3\ was enacted by Congress, and is funded by an excise tax 
on each dose of vaccine sold. There is no causal connection between 
payments by vaccine manufacturers and compensation to child victims. We 
should not impose tort principles--which often are modified by 
exigencies of particular cases \4\--on compensation schemes.
---------------------------------------------------------------------------
    \3\ 42 U.S.C. Sec. Sec.  300aa-33 et seq. (1997).
    \4\ See, e.g, Hymowitz v. Eli Lilly & Co., 539 N.E.2d 1069 (N.Y. 
1989) (adopting a ``market share'' theory of liability for DES victims 
that ensured that defendants would pay to compensate those that they 
did not harm).
---------------------------------------------------------------------------
                               __________

   Responses of Richard Middleton to Questions From Senator Thurmond

    Question 1. Your prepared testimony states that S. 758's 
``restrictive medical criteria would eliminate compensation for 
thousands of cases that are presently compensable under state laws.'' 
Is this because there are statutes or reported judicial decisions that 
hold that non-sick plaintiffs are entitled to compensation? If so, 
please provide appropriate citations.
    Answer 1. Virtually every state court decision dealing with the 
issue of the appropriateness of permitting an award of damages to 
victims of asbestos-related diseases follows established principles of 
common law tort doctrine requiring that there must first be evidence of 
``bodily harm'' or ``physical injury'' before a damage award is 
permitted. The American Law Institute's Restatement of the Law of 
Torts, 3rd, states that ``bodily harm'' is an essential element of a 
cause of action under Section 402A, which governs product liability 
actions. Section 15 of the Restatement defines bodily harm as ``* * * 
any physical impairment of the condition of another's body, or physical 
pain or illness.'' See, e.g., Verbryke v. Owens-Corning, Fiberglas 
Corp., 616 N.E.2d 1162 (Ohio App. 1992).
    To be sure, individuals whose lungs have been scarred by asbestos 
high risk of developing cancer (at least 3 times increased risk) have 
suffered bodily harm. Hillerdal, a Swedish researcher, recently stated 
that ``persons with pleural plaques have increased risk of 
mesothelioma, cancer of the bronchi and the gastrointestinal tract 
pulmonary fibrosis.'' Hillerdal, Pleural Plaques and Risk for Bronchial 
Carcinoma Mesothelioma, 105 Chest 144 (1994). And numerous researchers 
have concluded that individuals ``with pleural thickening appear to 
have more shortness of breath * * * and more dyspnea with major 
activities such as walking up a steep hill or climbing two flights of 
stairs.'' Bourbeau, The Relationship Between Respiratory Impairment and 
Asbestos-Related Pleural Abnormality in an Active Work Force, 142 Am. 
Rev. Respir. Dis. 837 (1990).
    Yet the medical criteria of S. 758 requires significant pulmonary 
function deficits to be present before victims of asbestos disease may 
be compensated. Most, if not all claimants with pleural disease and 
even a majority of those with full blown asbestosis will be excluded 
from compensation under the Bill because of the application of 
standards that were meant to measure, for medical treatment purposes, 
such things as oxygen exchange propensities and lung volumes rather 
subjective signs of illness and injury. Indeed, many researchers have 
concluded that even an attempted use of pulmonary function tests to 
measure impairment in victims of asbestos-related disease is 
inappropriate. See, Barnhart, Total Lung Capacity, an Insensitive 
Measure of Impairment in Patients with Asbestosis and Chronic 
Obstructive Pulmonary Disease, 93 Chest 299 (1988).

    Question 2. If, as your prepared testimony states, ``[l]iability of 
the defendant companies is no longer seriously disputed,'' why is it 
still necessary to limit asbestos claimants to seeking compensation 
from a system under which 60 cents of every dollar spent is consumed by 
transaction costs and attorney's fee?
    Answer 2. The basic premise of this question, that ``60 cents on 
every dollar spent [on asbestos cases] is consumed by transactions 
costs and attorneys' fees,'' is a fiction. The genesis of this oft-used 
quote is a report published in 1985 by the Rand Institute, which 
studied asbestos litigation during the years 1981 through 1983. 
Eighteen years ago, when the liability of the asbestos industry was 
being seriously disputed, the cost of prosecuting an individual 
asbestos-related claim was high. And it's true that in 1983, a 
relatively large percentage of the cases were tried to verdict, and 
were expensive. Things have changed considerably in the past 18 years. 
In 1998, only 55 cases were tried to verdict in all state and federal 
courts and over 25,000 were settled. Although no accurate statistics 
are kept, information available from anecdotal evidence would support 
the proposition that the cost of asbestos litigation, when spread among 
the population of resolved cases, is typically far less per case than 
in other types of civil litigation and certainly it is significantly 
less than the number reported by Rand in 1985.
    It is particularly disturbing to us that the proponents of this 
legislation are even raising this issue, since transaction costs and 
attorney's fees in asbestos litigation have been generated primarily by 
defendants not claimants. Even when the costs were as high as those 
cited in the Rand report, it was because defendants insisted upon 
raising false defenses, delaying discovery, seeking to withhold 
documents, and forcing claimants to relitigate settled issues. 
Moreover, at the same time, asbestos defendants were extensively 
litigating coverage disputes with their insurers, further elevating 
transaction costs and generating additional legal fees--for defense and 
insurance attorneys, not for plaintiffs' lawyers. It seems to us 
unconscionable for the proponents of S. 758 to now come before Congress 
and hide behind the transaction cost issue as justification for taking 
away the rights of claimants.
                                 ______
                                 

   Response of Richard Middleton to a Question From Senator Feingold

    Question 1. Mr. Edley testified that there are 200,000 pending 
claims and a heightened pace of new filings. During your testimony, you 
stated that in most jurisdictions cases of persons with no functional 
impairment are put on an inactive docket and therefore require no court 
resources. How many of the 200,000 pending claims are on these inactive 
dockets? To what do you attribute the heightened pace of new filings? 
How are the claims of those with no functional impairment handled in 
those jurisdictions that have not adopted an inactive docket system?
    Answer 1. To begin with, a serious question can be raised about the 
accuracy of Mr. Edley's assertion that there are 200,000 pending 
asbestos-injury claims. Although no empirical data is available from 
any source on the total number of cases that are currently pending in 
both the state and federal courts, annual reports of many companies who 
are traditionally named as defendants in asbestos cases would indicate 
that the number of open, pending cases may be far less than half of Mr. 
Edley's number. Owens-Illinois, for instance, a company that is often 
sued for asbestos-related injuries, reports that less than 25,000 cases 
are currently pending. Other often sued companies report less than 
50,000 pending cases. At a minimum, some inquiry should be made by 
Congress to determine this fundamental information before an attempt is 
made to fashion any remedy of perceived problems.
    Similarly, no exact statistics are available as to how many 
jurisdictions have adopted ``inactive'' dockets and how many cases are 
pending on such dockets. Anecdotal reports to ATLA would indicate that 
in both jurisdictions where ``inactive'' dockets are available and in 
others where they are not, statute of limitations tolling agreements 
have been entered into by litigants, on a private, consensual basis, 
which encompass a reasonably large number of cases. Again, however, it 
would be pure speculation to attempt to quantify this data.
    As to the alleged ``heightened pace'' of new filings, this would 
appear to be inaccurate information. The Manville Trust, which handles 
asbestos-injury claims filed against the Johns-Manville Company, the 
largest of the asbestos products manufacturers, recently reported that 
between July 1, 1998 and June 30, 1999 a total of 25,574 claims for 
compensation were filed against the Trust. This number represents a 
significant reduction from the previous period and throws into question 
the accuracy of the assertion that claims are being filed at an 
increased rate.
    Finally, as mentioned above, many claims are placed into an 
``inactive'' status by voluntary tolling agreements that are routinely 
entered into by the parties to asbestos litigation. Although all 
jurisdictions require that an ``injury'' be sustained before a 
compensable claim may be pursued for individual damages, most states 
permit tort damages for asbestos-injuries even if they do not produce 
incapacity. As the medical literature uniformly states, even pleural 
thickening without accompanying loss of earning capacity is an 
``injury'' and subjects a victim to maladies such as chest pain, 
shortness of breath, cough and, most assuredly, a significantly 
increased risk of developing cancer. See, e.g., Rosenstock, 
Roentgenographic Manifestations and Pulmonary Effects of Asbestos-
Induced Pleural Thickening, 7 Toxicology and Industrial Health 81 
(1991).
                               __________

  Responses of Dean Paul R. Verkuil to Questions From Senator Grassley

    Question 1. Thousands of plaintiffs have already entered the legal 
system with claims at varying stages in the process. What should happen 
to those claims in the event any administrative system is adopted? Do 
you think that S. 758 should apply only prospectively and allow 
existing claims to proceed through the courts, should there be an 
option for claimants to either continue with their present claims or 
choose to enter the program, or should they all have to participate in 
this program?
    Answer 1. S. 758 addresses the tremendous problems that have 
already been caused by over 200,000 pending asbestos claims, most of 
which have been filed on behalf of claimants who have only so-called 
pleural plaques, which do not lead to any breathing impairment or 
increased risk of cancer. These are the cases that the Supreme Court 
called an ``elephantine mass which defies customary judicial 
administration.'' Asbestos litigation is not a wreck that is waiting to 
happen, but one that has already occurred. S. 758 would be ineffective 
if it ignored the more than 200,000 cases that have already been filed.
    S. 758 would change the legal landscape immediately for all pending 
cases. Thus, new rules of law established by the statute would be 
applicable right away:

   the statutory medical criteria,
   the elimination of the statute of limitations and the 
        imposition of absolute liability,
   the guarantee of ``come-back'' rights if asbestosis victims 
        later contract cancer,
   the elimination of punitive damages, and
   limits on consolidations.

    The plaintiffs in pending cases would not, however, be required to 
obtain a certificate of medical eligibility from the ARC until the ARC 
is in operation. Cases could go to trial before that time under the new 
rules without the certificate, in which case the medical criteria would 
be applied by the court.
    It seems to me that this is an appropriate balance. The new rules 
established by the bill should generally be applied to pending cases. 
The legislation would be ineffective if the medical criteria were 
applied prospectively. Moreover, on balance the package of legal 
reforms in the bill are favorable to claimants with cancer or impairing 
non-malignant disease, and those individuals should obtain the benefit 
of the new rules as soon as possible. I recognize, of course, that 
there will be a few cases which are already in trial or possibly on 
appeal when the bill is enacted. There is a reasonable argument against 
changing the legal rules applicable to such cases. Grandfathering these 
cases would not seriously undermine the effectiveness of the bill, 
since, as other witnesses point out, very few asbestos cases are 
actually tried each year.

    Question 2. Some have criticized S. 758 because they say that it 
forces claimants into a program in which they may not want to 
participate. Is this a problem? What are your thoughts on including an 
``opt out ``provision or allowing participation on a voluntary basis?
    Answer 2. A provision that allows claimants to opt out of the 
medical critiera would completely undermine the basic purpose of the 
legislation. If the medical criteria were made voluntary, the sick 
would participate in the program, while the unimpaired would still 
flock to the courts, as they do now. Judicial overload and the 
diversion of the resources of defendants would continue unabated, at 
the expense of the people who are impaired by their exposure to 
asbestos.
    Right now both the courts and the limited resources of defendants 
are being overwhelmed by a flood of claims by the unimpaired. This is a 
major source of the problems with asbestos litigation today which have 
so far eluded customary judicial administration, according to most who 
have studied the problem, including Professor Edley, Professor Green 
and Professor Nagareda who testified at the hearing. I agree with my 
colleagues on this point.
    According to studies and judicial decisions, at least 50 percent 
(and possibly many more) of the current claimants are not impaired by 
any asbestos-related disease. These cases involving unimpaired 
claimants are creating what the Supreme Court termed an ``elephantine 
mass'' of asbestos claims flooding state and federal court dockets. 
More troubling, as the Judicial Conference observed several years ago, 
diverting the resources of defendants to paying hundreds of thousands 
of claims by the unimpaired threatens defendants ability to pay 
seriously ill people in the future.
    The main contribution this bill makes to resolving the asbestos 
litigation crisis is focusing the resources of the defendant companies 
on those who are impaired by asbestos-related disease, instead of on 
those who have been exposed but are not now sick. This fundamental 
purpose cannot be achieved without requiring the unimpaired to defer 
their claims.

    Question 3. Some have criticized the bill on Tenth Amendment 
grounds. What would be the effect if this legislation only operated at 
the federal level?
    Answer 3. Applying the legislation only to cases filed in federal 
court would eviscerate its effectiveness. The vast majority of the over 
200,000 asbestos cases pending today are in state courts. Because the 
litigation is mobile, and litigation in each state affects the 
viability of defendants in all states, only a uniform, national 
solution to the problem could effectively ensure a policy of focusing 
defendants' resources on the sick, reducing transaction costs, and 
solving the other problems that the legislation addresses. A solution 
that applies only at the federal level would leave the great bulk of 
the litigation in the same state it is today.
    In W.R. Grace & Co. v. Waters, 638 So.2d 502 (1994), the Florida 
Supreme Court noted:

          Any realistic solution to the problems caused by the asbestos 
        litigation in the United States must be applicable to all fifty 
        states. It is our belief that such a uniform solution can only 
        be effected by federal legislation. Id. at 505.

Other state supreme courts have made the same observation. The Supreme 
Court of West Virginia notes that Congress's inaction has forced the 
state systems to cope with the crisis on their own.

          Congress, by not creating any legislative solution to these 
        problems, has effectively forced the courts to adopt diverse, 
        innovative, and often non-traditional judicial management 
        techniques to reduce the burden of asbestos litigation that 
        seem to be paralyzing their active dockets.* * * [T]hese 
        efforts have failed to expedite a substantial fraction of the 
        caseload. Nor do they appear to have brought about significant 
        reduction in transaction costs.''' State ex rel. Appalachian 
        Power Co. v. MacQueen, 479 S.E.2d 300, 304 & n.8 (1996).

Likewise, the Supreme Court has said that the asbestos litigation 
problem requires ``national legislation.'' National legislation 
presupposes at least some preemption of state law.

    In my written testimony, I addressed in depth the Tenth Amendment 
issues that relate to this legislation. I concluded that the 
legislation did not present any serious Tenth Amendment concerns. 
Rather, I believe that the legislation was drafted with attention to 
the sovereignty of the states and their systems by moving incrementally 
to make only those reforms that are necessary to alleviate the asbestos 
litigation crisis.

    Question 4. Does S. 758 provide the necessary incentives or dis-
incentives for plaintiffs and defendants to resolve their claims 
promptly in the first stages of the Asbestos Resolution Corporation and 
without proceeding to litigation? For example, Owens Corning argues 
that there are no set settlement values or payment schedules which 
would encourage plaintiffs to forgo court action and enter into 
settlements with asbestos defendants. Owens Corning proposes that tax 
incentives might be incorporated to encourage defendants to settle, 
while Professor Green suggests that penalties might encourage the early 
resolution of claims. What incentives or dis-incentives do you think 
might be appropriate to incorporate into this legislation to encourage 
prompt settlement of claims?
    Answer 4. I believe that S. 758 does provide appropriate incentives 
for early settlement. For plaintiffs, of course, early settlement 
should mean early compensation. A settlement schedule mandated by the 
legislation should not be necessary to encourage plaintiffs to settle. 
In practice, many defendants will have voluntary futures agreements 
with plaintiffs' lawyers, just as they do now, in order to administer 
claims efficiently and with a minimum of cost. Those agreements are 
likely to have either settlement schedules or ranges to promote early 
settlement and over time these arguments will establish settlement 
parameters.
    From the defendants' perspective, the bill removes a number of 
current obstacles to settlement. The bill requires disclosure of 
information necessary to formulate a sensible settlement offer, which 
now takes place only after discovery, typically on the courthouse 
steps. In particular, reliable information about the claimant's medical 
condition will be available early in the process. Second, the bill 
requires all of the parties to focus on settlement at or before the 
mediation stage, and by imposing the costs of mediation on defendants, 
it encourages settlement even before mediation begins. Third, the bill 
simplifies the issues for litigation, essentially eliminating defenses 
relating to product defect and the statute of limitations. Defendants 
will have an increased incentive to settle because the case against 
them will be stronger. Fourth, the bill eliminates the threat of 
punitive damages, a wild card that can undermine settlement 
discussions. And, finally, the bill requires defendants to make good 
faith offers following mediation and imposes a surcharge on the 
judgment if their final offer proves to be more than 25 percent short 
of the mark.
    Essentially, S. 758 is designed to create a framework in which all 
sides have an incentive to settle, and I believe that it does that. I 
am not familiar with and thus cannot comment upon Owens Corning's 
proposal for tax incentives to encourage early settlement. I believe 
that the current set of incentives are sufficient to make S. 758 work.

                 Additional Submissions for the Record

                              ----------                              

   Prepared Statement of Susan K. Pingleton, M.D., President-Elect, 
                  American College of Chest Physicians

    I am a physician specializing in pulmonary medicine. As my attached 
Curriculum Vitae reflects, I am Professor of Medicine and Director of 
the Pulmonary and Critical Care Division at the University of Kansas 
Medical Center. I am the President-Elect of the American College of 
Chest Physicians. I am also a Fellow in the American College of Chest 
Physicians and a Fellow in the American College of Physicians. I have 
taught and practiced in the area of pulmonary medicine for over twenty-
five years and am the author of over one hundred publications. During 
my many years oil practice, I have treated many patients suffering from 
asbestos related diseases.
    I welcome the opportunity to submit to you my written testimony in 
support of S. 758, the Fairness in Asbestos Compensation Act of 1999 
(``Act''). I support the proposed legislation and, in particular, 
express my endorsement of the medical criteria contained in the Act.
    On a regular basis, I see patients, teach medical students and 
surgery residents, conduct research and write articles for the 
scientific literature in the field of chest diseases. Based on this 
experience, as well as my expertise as reflected in my Curriculum 
vitae, I have reviewed the act, and in particular the medical criteria 
in the act. It is my firm conclusion that the medical criteria in the 
act fairly and clearly distinguish between those individuals exposed to 
asbestos who are truly sick and those who are not. The Act's medical 
criteria reflect the mainstream of medical thinking and ensure that 
those truly injured as a result of asbestos will be compensated while 
at the same time it preserves the rights of those who, in the future, 
develop asbestos-related diseases. Below, I will discuss the medical 
criteria and the basis for my conclusion that they are fair.

    1. Mesothelioma: Mesothelioma is a relatively rare but essentially 
universally fatal cancer which is usually associated with a history of 
asbestos exposure. This cancer arises in the pleura which is the lining 
of the chest wall or the peritoneum which is the lining of the abdomen. 
The medical criteria described are designed to--and do--establish the 
reliability of the diagnosis of mesothelioma.
    2. Lung Cancer: Lung cancer has several known causes, the most 
common of which is cigarette smoking. The purpose of the lung cancer 
criteria are to be sure that a potential claimant's lung cancer is in 
fact related to the asbestos exposure, rather than to smoking or some 
other factor. It is important for this Committee to understand that the 
majority of epidemiological studies indicate that ``asbestosis'' is the 
only risk factor for asbestos-related lung cancer. The majority of 
these studies indicate that pleural abnormalities by themselves are not 
associated with an increase in lung cancer. Including these pleural-
space criteria in the Act serves to broaden the criteria and increase 
the number of qualified claimants.
    3. ``Other'' Asbestos-Related Cancers: There is no consensus in the 
medical community on whether any ``other'' cancers may be related to 
asbestos exposure. Considerable evidence exists to suggest that such 
``other'' cancers in fact are not caused by asbestos. Nevertheless, 
there is a contrary opinion among the minority of the medical 
community. The criteria included in the category are designed to ensure 
that the claimant has evidence of sufficient exposure to asbestos to 
make it reasonable to attribute the ``other'' cancer at least in part 
to asbestos exposure.
    4. ``Non-malignant conditions'' The non-malignant conditions 
criteria are established so that a potential claimant will qualify at 
the first signs of diminished respiratory capacity due to asbestos 
exposure. I believe that these criteria fairly described claimants who 
were exposed to asbestos and have been injured as a result of their 
non-malignant condition.

    As I understand it, the purpose of the Act is to ensure prompt and 
fair compensation to persons who are suffering from an asbestos-related 
impairment.
    I have reviewed in detail the medical criteria in the Act which 
relate to each of the four medical categories. Based on my experience 
as a physician who has treated hundreds of individuals exposed to 
asbestos, I am confident that these medical criteria are sufficiently 
inclusive to permit virtually all claimants with asbestos-related 
impairment to receive compensation. If anything, these criteria are 
conservative and protective of claimants. The Exceptional Medical Panel 
created by the Act further provides protection for those claimants who, 
for some reason, are unable to satisfy the Act's medical criteria can 
submit their claim to the Exceptional Medical Panel. As I understand 
the Act, this Exceptional Medical Panel would review these claims and 
identify which claimants who, notwithstanding their inability to 
satisfy the medical criteria, nevertheless could receive compensation 
for their injures. Thus, even if anyone were to argue that the medical 
criteria were somehow too exclusive, the Panel provides an additional 
safety net to ensure that claimants with asbestos-related impairment 
who fail to satisfy the Act's medical criteria nevertheless will be 
eligible to receive compensation under the proposed Act.
    It is for these reasons that I unreservedly support the Fairness in 
Asbestos Compensation Act of 1999.

    [Editor's note: Susan K. Pingleton's Curriculum Vitae is retained 
in Committee files.]
                               __________

                Prepared Statement of Louis W. Sullivan

    Chairman Grassley, Senator Torricelli, members of the Committee, 
thank you for the opportunity to submit to you my written testimony in 
support of S. 758, the Fairness in Asbestos Compensation Act of 1999, 
bi-partisan legislation sponsored by Senator Ashcroft and based on the 
Georgine asbestos-litigation settlement. I support the proposed 
legislation and applaud your efforts because I believe that Congress 
has a responsibility to resolve the judicial crisis caused by years of 
back-logged litigation and to ensure quick, fair, and efficient relief 
to hundreds of people suffering from asbestos-related illnesses. I 
hereby state that I personally have not received any federal grant, 
contract or subcontract in the current or preceding two fiscal years.
    S. 758 recognizes the fundamental flaws of a system which has 
previously defied resolution and, as a remedy, establishes 
straightforward and sound policy principles. The policy principles 
incorporated in this legislation are clear:

  (1) impaired claimants, those suffering now and those who develop 
    asbestos-related illnesses in the future, must be assured adequate, 
    timely, and fair compensation;
  (2) resources for compensating victims should go to those who are 
    impaired, while the claims of those who have no current impairment 
    are deferred until the on-set of any impairment;
  (3) claimants should be able to bring claims whenever they are sick 
    and not be limited by any state statute of limitations;
  (4) defendant companies resources are better spent on compensation 
    than on litigation costs; and (5) claimants should have meaningful 
    access to court as a check on administrative decision making.

                           CONGRESS MUST ACT
    I urge this Committee, and Congress as a whole, to address this 
important issue. I believe that Congress must accept the responsibility 
to solve the asbestos settlement crisis and ensure that sick 
individuals are compensated while they are still living. Indeed, I 
believe that only Congress has the ability to ensure this resolution.
    The legislation under discussion is modeled after a Federal 
District Court order approving an innovative settlement in a class 
action suit alleging asbestos-related personal injury (Georgine v. 
Amchem Products, Inc.) The U.S. Supreme Court, when considering the 
appeal of the settlement terms, reversed on procedural and technical 
grounds, but called for legislative resolution of the asbestos crisis, 
stating that legally only Congress could create an out-of-court 
settlement process to help settle these asbestos lawsuits.

          The argument is sensibly made that a nationwide 
        administrative claims processing regime would provide the most 
        secure, fair and efficient means of compensating victims of 
        asbestos exposure. Congress, however, has not adopted such a 
        solution.'' (Georgine v. Amchem Products, Inc.)

    This past June, 1999, the Supreme Court (in Ortiz v. Fibreboard) 
specifically called for ``national legislation'' to solve what the 
Court called the ``elephantine mass of asbestos cases * * * which 
defies customary judiciary administration.''
    In response, Senator Ashcroft and others have crafted a bill which 
provides a creative and innovative solution to the asbestos litigation 
crisis. S. 758 creates a unique administrative mechanism to resolve 
asbestos claims funded entirely by the asbestos defendants. Claims for 
asbestos-related injuries should be resolved by administrative rather 
than judicial means. The claims process established by the bill would 
be administered by a quasi-governmental corporation whose board of 
directors would be appointed by the President and confirmed by the 
Senate. This inventive solution would eliminate lengthy trial 
proceedings and provide quick relief to individuals suffering from 
asbestos-related illnesses. The current system and its protracted 
judicial process has allowed sick individuals to die before they ever 
get their day in court. Congress must act to speed up the process and 
to ensure that sick individuals receive fair compensation before it is 
too late for them.

                     GENEROUS IMPAIRMENT GUIDELINES
    Others testifying or submitting written testimony today, will 
discuss the medical criteria set forth in the proposed legislation. I 
understand that Drs. Rosenow, Little, and Shure all of whom are past 
Presidents of the American College of Chest Physicians, and Dr. Susan 
Pingleton, President-Elect of the American College of Chest Physicians 
also have submitted written testimony to the Committee expressing their 
support for the proposed legislation and specifically discussing the 
medical criteria which it contains. These medical criteria were 
originally established in the Georgine settlement, agreed to by both 
the labor organizations and the trial lawyers, and approved by a 
Federal District Court as fair and reasonable. To ensure a fair system 
under the proposed settlement process, a distinction must be drawn 
between people who are impaired and those who are not impaired. Claims 
should be judged based upon the recognized medical criteria patterned 
after those agreed to by all sides in the Georgine settlement. I 
believe that these criteria provide an objective, workable, and 
equitable solution to get compensation to people who are actually sick 
now.
    Further, the ``impairment lines'' drawn by the legislation are 
generous to claimants and are designed to ensure that no individual 
suffering from asbestos-related impairment be excluded from 
compensation. Most administrative compensation programs are dependent 
upon disability--a far more restrictive concept--and use compensation 
schedules that do not reflect intangibles like pain and suffering. As 
Secretary of the Department of Health and Human Services, I was 
responsible for many programs that involved determining medical 
eligibility for certain remedies, and I believe that this bill sets 
forth a workable concept to ensure fair compensation.
    Finally, the original Georgine settlement proposal included a rigid 
compensation schedule which was subject to caps and other limits. The 
settlement ranges provided were some of the most highly criticized 
aspects of the settlement and resulted in complaints that the 
compensation levels were inadequate. S. 758 does not include such 
limitations on claims and will likely promote faster settlements 
through mediation without imposing caps on injured individuals' 
potential compensation.

                     STATUTES OF LIMITATION WAIVER
    I would like now to address the waiver of state statutes of 
limitation as contained in S. 758. I believe this is one of the most 
important policy aspects to ensure that individuals suffering from 
asbestos-related illnesses receive fair and adequate compensation. 
Currently, we see mass filings of cases on behalf of large groups of 
people who are not sick and may never become sick but who are compelled 
to file for remedial compensation simply because of state statutes of 
limitation. Previous exposure to asbestos material does not in all 
cases lead to illness. In fact, only a small percentage of individuals 
exposed to asbestos ever become impaired and may not become impaired 
for 20 or even 30 years after exposure. Most claims that have been 
filed to date are on behalf of people who are not sick from asbestos 
but are still seeking compensation.
    S. 758 waives state statutes of limitation and similar defenses and 
preserves individuals' right to file claims regardless of when they 
become sick or how long ago the exposure occurred. The proposed 
legislation sets no time limits for filing a claim. In addition, 
individuals would be able to re-enter the mediation process at any time 
to seek compensation for the on-set of new and additional asbestos-
related illnesses. Finally, individuals would retain the right to enter 
the court system if they are unsatisfied with the mediation process or 
compensation award.
    With an additional 30,000 to 50,000 additional cases expected to be 
filed this year alone, on top of the 200,000 cases already filed, this 
provision is necessary to stem the flood of claims currently burdening 
our court systems. Most importantly, sick individuals would come first 
under the proposed out-of-court administrative system while still 
allowing people who become sick later to file appropriate claims.

                               CONCLUSION
    I urge Congressional action to resolve the national asbestos 
litigation crisis and to ensure the adequate, timely, and fair 
compensation of individuals suffering from asbestos-related illnesses. 
The resolution proposed in S. 758 is based on sound policy goals and 
will provide adequate remedies for individuals currently seeking 
compensation and those individuals who will need compensation in the 
future. The U.S. Supreme Court has now twice recommended Congressional 
action to resolve this crisis. Further, the interested parties: unions, 
asbestos defendant corporations, and trial lawyers, all agreed to the 
Georgine settlement upon which S. 758 is based. Accordingly, I would 
urge Congress to act quickly to pass S. 758 and thus prevent a judicial 
crisis from becoming a public health crisis.
    Thank you.

    [Editor's note: Louis W. Sullivan's Curriculum Vitae is retained in 
Committee files.]
                               __________

      Prepared Statement of Brian Wolfman of the Public Citizens 
                            Litigation Group

    Chairman Grassley and Members of the Committee: Thank you for the 
opportunity to submit this testimony. Before explaining our concerns 
about S. 759, I want to describe the basis for our interest in the 
proposed legislation. I am a staff attorney with Public Citizen 
Litigation Group, a non-profit, national public interest law firm 
founded in 1972 as the litigating arm of Public Citizen, a consumer 
advocacy organization with approximately 150,000 members.
    The Litigation Group represented a group of objectors to the Amchem 
v. Windsor class action asbestos settlement, before the lower federal 
courts and in the Supreme Court. Our clients included individuals 
exposed to asbestos, advocacy groups, and labor unions. We objected to 
the settlement not only on legal grounds, including those adopted by 
the Supreme Court in rejecting the settlement, but also on fairness 
grounds--that the settlement terms would cause delay and would deny 
deserving asbestos plaintiffs proper compensation and, in many 
instances, any compensation at all. Because the substantive terms of 
the now-rejected, Amchem settlement have been adopted in large measure 
into S. 758, we have particular expertise in responding to that 
legislation.
    Attached to this testimony is Public Citizen's analysis of S. 758, 
and the companion House bill, H.R. 1283. That analysis, prepared in 
April of this year, sets forth our views on the legislation in 
considerable detail, and explains how many provisions of the bill will 
undermine the rights of individuals harmed by asbestos and unjustly 
benefit the asbestos industry. We urge Committee Members to consult 
that analysis.
    In addition, in this testimony, we wish to comment on several 
recurring justifications--or myths--used to bolster S. 758, and explain 
why none of them are correct. Those myths are (1) that the current 
volume of asbestos cases presents a unique litigation ``crisis'' 
requiring national legislation; (2) that S. 758 will ameliorate the 
alleged crisis by streamlining litigation and reducing delay; and (3) 
that S. 758 will pay fair compensation to people injured by asbestos. 
We take up each of these myths in turn.
 (1) the alleged asbestos litigation ``crisis'' is not a justification 
                               for s. 758
    Without question, there are a large number of asbestos personal-
injury cases in the federal and state courts, with the vast majority in 
state court. The fact that there are a large number of asbestos cases 
in the courts, in itself, is no reason to single those cases out for 
special treatment. The large number of cases is directly related to the 
magnitude of the harm inflicted; in other words, there are many cases 
because many people have been (and will be) injured.
    Thus, the real question is whether, on a per-case basis, asbestos 
cases are so costly and so difficult to resolve that special treatment 
in the form of sweeping federal legislation affecting primarily state 
cases is necessary.
    To be sure, in the early years of asbestos litigation, the 
complexity of the underlying liability issues, unresolved issues 
relating to insurance coverage, asbestos bankruptcies, and other 
matters made asbestos litigation costly. These factors gave rise to the 
oft-cited 1985 RAND study, which indicated that more than 60 percent of 
asbestos litigation costs went to lawyers and other transaction costs, 
not to asbestos plaintiffs. RAND, Asbestos in the Courts, The Challenge 
of Mass Torts iii. Significantly, RAND found that defendants' attorney 
fees and costs were 37 percent of each asbestos litigation dollar, 50 
percent more than plaintiffs' fees and costs (less than 24 percent).
    But no one has brought forth hard data showing that the current 
cost of asbestos personal-injury litigation is different from the cost 
of other product liability litigation or of litigation generally. Not 
only is there no evidence that asbestos cases are currently more 
expensive than other litigation, but there is reason to think that, at 
this juncture, they are less expensive to resolve. In the first place, 
unlike many product liability cases, because the asbestos litigation is 
very ``mature,'' generally no discovery about the defendants' liability 
is necessary, because that discovery has already been taken. 
Furthermore, the defendants' and the plaintiffs' bar have amassed large 
amounts of information about asbestos exposure--which products were 
used at which work sites in which years--and so discovery on those 
questions is limited or non-existent. An individual plaintiff's 
injuries and damages can usually be proved through a single deposition 
and/or medical records. In sum, asbestos litigation is unusually 
amenable to settlement (or in rare instances, trial) without large 
amounts of pre-trial litigation and discovery.
    Although asbestos trials, including consolidated trials, continue 
to take place, the vast majority of cases are resolved by settlement. 
The Center for Claims Resolution asbestos defendants--the 20 companies 
that were defendants in the Amchem case, and which represent about 25 
percent of the industry's liability share settle approximately 99.8 
percent, of the personal-injury cases filed against them. See Georgine 
v. Amchem, No. 93-0215 (E.D. Pa.), Doc. No. 173, Response of CCR 
Defendants to the Order to Show Cause, p. 27 n. 18 (filed Mar. 17, 
1993). This is because the CCR companies, and the plaintiffs that sue 
them, recognize that the issues in asbestos litigation have been 
greatly refined, and thus the case values have been fairly well 
established over time.
    In addition, asbestos defendants and court systems have become 
adept at managing their asbestos dockets. For instance, Owens Corning's 
voluntary settlement program demonstrates both that a federal program 
is not needed and that settlement, not costly litigation, is the norm. 
Indeed, Owens Corning in its testimony on the House bill made it clear 
that S. 758's federal bureaucracy would be more costly, and less 
beneficial to injured plaintiffs, than that company's voluntary 
settlement program. And, although some of the components of Owens 
Corning's program could be harmful to some plaintiffs (e,g., its 
restrictive medical criteria), in the context of a truly voluntary 
program plaintiffs are free to reject the program and go to court, 
without the restrictive medical criteria and other substantive and 
procedural impediments imposed by S. 7S8.
    In sum, although there are large numbers of asbestos cases in the 
courts, there is no evidence that, at the present time, on a per-case 
basis, those cases are either more costly or more likely to delay the 
administration of justice than other comparable cases.
 (2) s. 758 will not streamline case administration or provide quicker 
                     justice for injured plaintiffs
    As explained in our attached section-by-section analysis, asbestos 
claims will not be dealt with more quickly if S. 758 is enacted. The 
bill requires asbestos claimants to file enormously detailed claims 
setting out their personal information (including smoking history and 
work history), their asbestos exposure, and medical information about 
claimed asbestos-related conditions. As a practical matter, because of 
the great complexity of the submission and the procedures involved, the 
claimant will be required to hire a lawyer, even though this process 
alone is simply a first step and cannot itself lead to recovery of 
damages.
    After the filing of the claim, the Asbestos Resolution Corporation 
(``ARC'')--the new federal bureaucracy established by the legislation--
then determines whether the claimant meets the bill's stringent medical 
criteria. If the ARC allows the claim, it issues a ``certificate of 
medical eligibility.'' If the ARC denies the claim, the claimant must 
seek reconsideration to keep his or her claim alive. If the claim is 
again denied, the claimant enters ``round one'' of court proceedings by 
filing a suit in federal court seeking reversal of the ARCs denial of 
the certificate of medical eligibility. The bill contains no time limit 
on when the federal courts must decide these cases; indeed, it is 
likely, given the volume of asbestos cases, that thousands of new cases 
will be filed in federal district courts. These cases will not decide 
whether an asbestos victim will be compensated for his or her injuries, 
but only the threshold issue whether he or she is medically eligible to 
file suit. All of these cases must be filed in federal district court, 
thus effectively transferring a large number of cases previously filed 
in state court to the federal system.
    In addition to the delays caused by moving many state cases to 
federal court, further delays will be caused by the fact that these 
medical qualification cases will be entirely new to the federal courts. 
The courts will have had no experience interpreting the law's new 
medical criteria and the accompanying rules and regulations to be 
issued by the ARC. An entire new jurisprudence will have to be created 
by the district courts and, ultimately, the federal courts of appeals, 
much as currently exists in social security cases.
    Only if a claimant wins in federal court, or previously obtains a 
certificate of medical eligibility, can he or she file an ordinary 
civil action in state or federal court to collect damages. Thus, many 
claimants will have to go court twice.
    In many respects, these second suits will mimic the suits that 
already exist in federal and state courts around the Nation. But there 
is reason to think that they will engender somewhat more delay than 
current asbestos cases. First, under the bill no individual asbestos 
case may be made a part of a class action, or be subject to joinder or 
any other type of aggregation, without the consent of all defendants. 
Public Citizen interviews with officials of several courts, such as the 
Philadelphia state courts, have found that aggregating small numbers of 
cases where plaintiffs have suffered similar injuries and were exposed 
at the same workplaces has allowed the courts to eliminate the large 
backlog of asbestos cases that plagued them in the 1980s. Without any 
opportunity for courts to aggregate cases for any purposes, cases will 
take longer to resolve.
    Moreover, although a finding of medical eligibility is presumed 
correct, the defendant has the right to challenge that determination 
and, therefore, lawsuits may well involve substantial re-litigation 
over whether the claimant meets the bill's medical criteria, even 
though the plaintiff has already obtained a certificate of medical 
eligibility.
    The bill's proponents do not--because they cannot--dispute the 
existence of S. 758's Byzantine, multi-layered procedures. They argue 
instead that most cases will be resolved through the bill's mediation 
process, and therefore delay will not, as a practical matter, be a 
serious problem. That argument fails to support this legislation for 
two reasons. First, successful mediation is simply a form of 
settlement, and parties to litigation may always settle on terms 
agreeable to them. Many federal and state courts already have mandatory 
mediation programs. Those programs, like the one imposed by S. 759, 
require that the parties exchange information and discuss settlement, 
but they do not require settlement. And as noted above, certain 
asbestos defendants already have aggressive settlement programs. In 
short, we do not see how this legislation does anything that asbestos 
plaintiffs and defendants cannot already do, either at the behest of 
courts, or on their own.
    Second, mediation only makes sense for the injured worker against a 
backdrop of viable litigation that sets appropriate settlement values 
for individual cases. Until claimants go through S. 758's litigation 
process, there will be no basis for knowing the terms upon which to 
settle. Therefore, at least in the beginning, the mediation process 
established by S. 758 Will likely be less successful, not more 
successful, than the settlement processes established in current 
litigation.
                (3) compensation levels will not be fair
    In the attached memorandum, we show that the bill's medical 
criteria and its elimination of certain types of claims compensable 
under state law are grossly unfair, and will severely harm asbestos 
victims.
    We wish to address a related issue. The bill's proponents have also 
made the claim that compensation levels for those who do qualify for 
compensation will be fair, perhaps greater than that which they 
presently obtain in the tort system. We strenuously disagree. The bill 
does not set forth minimum compensation requirements for particular 
diseases. Nor does the bill even require that awards take into account 
historical tort awards ill asbestos cases or in comparable personal-
injury and wrongful death cases. Rather, S. 758 simply assumes that 
awards will adequately compensate victims. However, there is every 
reason to believe that asbestos defendants will make ``low ball'' 
offers in the alternative dispute resolution system established by the 
legislation.
    Once the claimant enters S. 758's mediation program, he or she may 
have already gone through years of delay in obtaining a certificate of 
medical eligibility, including a full federal court review, thus making 
acceptance of a low offer much more likely. The only additional 
leverage available to the claimant is to file a lawsuit in state or 
federal court, in which (1) there is no opportunity to aggregate the 
claim for any purpose; (2) any defendant can still contest the 
existence of a medical condition that the claimant has already proved 
to the ARC or to a federal court; and (3) punitive damages may not be 
sought under any circumstances. Thus, with additional court delay ahead 
(recall that the ordinary suit to recover damages has yet to be filed), 
and the plaintiffs subject to S. 758's substantive and procedural 
disadvantages, it would be pure folly to think that defendants will 
offer anything approaching the damages that plaintiffs have 
historically obtained in the tort system. Put differently, S. 758 will 
greatly depress settlement values.
    Asbestos is a very dangerous product and our goal should be to 
ensure that those injured by it receive swift and fair compensation. 
Depressing settlement values and delaying resolution of claims will not 
achieve that goal.
          * * * * *
    Again, we ask the Subcommittee to consider our attached analysis of 
S. 758. For the reasons stated in that analysis and in the testimony 
above, we urge the Subcommittee to reject S. 758. Thank you for the 
opportunity to submit this testimony.
                                 ______
                                 

   Analysis of Proposed Federal Asbestos Legislation--The So-Called 
               ``Fairness In Asbestos Compensation Act''

                               APRIL 1999
    This paper analyzes key provisions of two bills reintroduced in the 
106th Congress: H.R. 1283, sponsored by House Judiciary Committee 
Chairman Henry Hyde, and S. 758, sponsored by Senator John Ashcroft and 
others.
    Because the core provisions of both bills are similar in major 
respects, the bills are analyzed together, with significant variations 
noted.
    Before turning to a detailed analysis of the bills, there are a few 
general observations that should be underscored. As Public Citizen's 
analysis of the bills make clear, they are seriously flawed and 
represent a substantial step backward for the tens of thousands of 
American workers exposed to asbestos on the job who, through no fault 
of their own, may suffer serious illness or death as a result. Among 
the most serious problems with the bills are the following:

    1. Faulty Premise: We do not accept the premise on which both bills 
rest, namely that the volume of asbestos litigation has overwhelmed the 
ability of state and federal courts to dispense justice to asbestos 
victims in a fair and efficient manner. There are steps that could be 
taken to bolster the judicial resources available to resolve asbestos 
cases, and perhaps Congress and state legislatures should consider how 
best to strengthen our judicial system generally. But nothing in these 
bills is aimed at improving the administration of justice for asbestos 
victims.
    Nor is there any justification for the wholesale repudiation of 
state law called for in the bills. Our federalist system of government 
is predicated on the idea that no one-size-fits-all rule is necessarily 
best, and that the states should be free to establish their own 
substantive liability rules, as well as their own procedures for 
adjudicating cases. The bills cast that basic constitutional tenet 
aside, and substitute a congressionally-mandated liability scheme--both 
substantive and procedural--that governs all cases. Congress ought not 
displace state law on a wholesale basis so cavalierly.
    2. Denial of Existing Asbestos Claims: The bills' approach to 
reducing the burden of asbestos litigation is to adopt the most 
Procrustean solution imaginable--the bills simply deprive entire 
classes of asbestos victims of compensation. It is like ``solving'' a 
food shortage simply by saying that half the population gets no food. 
For one thing, the bills reverse state law by adopting very restrictive 
medical criteria for lung cancer. As many as half the lung cancer 
victims who currently recover damages under state law would be deprived 
of any remedies under the bills. Similarly, the bills set aside state 
law and deny recovery for victims with pleural plaques and pleural 
thickening (abnormalities of the outside lining of the lung), even 
though most states provide for recovery for people with these 
conditions. It appears that the bills may also be interpreted to 
eliminate loss of consortium claims by spouses, parents, and children 
of injured asbestos workers suggesting that Congress is unconcerned 
about the devastation that asbestos-induced disease and death inflicts 
on family members. Accordingly, the bills are mistitled; they are not 
``compensation'' Acts, but Acts to deprive injured parties 
compensation.
    3. New Layers of Procedure and Delay: Despite the bills' promise to 
enhance efficiency, the bills actually handicap the litigation of 
asbestos claims, and will only add to the delays. To be sure, the bills 
place relatively short time frames on the administrative process they 
create for asbestos victims to establish eligibility. But then 
claimants are forced to undergo a lengthy ``alternative dispute 
resolution'' proceeding that forces the claimants, not the companies, 
to lay their case out in full. And if no settlement is reached, then 
the claimants are back to square one--they then may go to court and 
litigate their claims in precisely the same way asbestos cases are now 
litigated. Compounding the problem for claimants, although their 
medical eligibility will have been determined by a quasi-governmental 
entity after an exhaustive medical review in which the claimant bears 
the burden of proof, that determination is fair game for litigation by 
the companies--giving them a second bite at the apple on this pivotal 
point. In reality, all the bills do is add to the start of an asbestos 
victim's quest for compensation a cumbersome administrative process 
that will add delay and engender additional expense.
    To make matters worse, the bills do not resolve perhaps the most 
critical issue in asbestos litigation--how liability should be, 
allocated among the various defendants. Because most asbestos victims 
have been exposed to multiple products and because it is often 
difficult for the victim to identify which products he has been exposed 
to, asbestos litigation often involves 10, 15, or 20 defendants, and 
much of the effort in asbestos cases is litigation among the companies 
to apportion damages. Astonishingly, the bills ignore this problem.
    4. Tilting Civil Actions Against Injured Plaintiffs: Last, but not 
least, the bills sacrifice the needs of asbestos victims to save the 
asbestos companies money in ways apart from the bills' wholesale 
intrusion into state law to deprive meritorious asbestos claimants 
compensation. The bills reduce the financial burden on the industry in 
three ways. First, they establish increased procedural hurdles that 
will make asbestos litigation more costly for plaintiffs, while 
lowering defense costs. Second, they derogate state law by providing 
that plaintiffs are absolutely barred from recovering punitive damages, 
no matter how reprehensible, deliberate or malicious the company's 
conduct. And finally, although the bills' professed goal is efficiency, 
they guarantee inefficiency in asbestos litigation by forbidding 
plaintiffs from aggregating or consolidating their actions with other 
asbestos victims, unless the industry consents.

                  THE BILLS--A TITLE BY TITLE ANALYSIS
Introductory materials
    Like most bills, these begin with lengthy congressional findings. 
Here, the ``findings'' are especially one-sided and unfairly portray 
the current state of affairs regarding asbestos litigation. In a 
nutshell, we agree with the findings insofar as they suggest that there 
are substantial numbers of asbestos cases pending in the courts, and 
that there have been significant delays in some forums. But we do not 
agree that the courts are incapable of dispensing justice to asbestos 
claimants in an orderly and swift manner. Indeed, in some jurisdictions 
that have seen a substantial number of asbestos filings, there is 
little or no backlog of asbestos cases.
    Both bills contain a detailed list of definitions; they are at the 
beginning of the Senate bill and in the last title of the House bill. 
Many have substantive import. For instance, the term ``asbestos 
claim,'' section 3(3), is defined in a way that loss of consortium 
claims, which are ordinarily treated as entire separate legal claims 
asserted by spouses, parents and children of asbestos victims, are 
defined as asbestos claims as well. As discussed in more detail below, 
the effect of this definition and provisions, particularly in the 
Senate bill, may eliminate or make it impossible to prove these 
consortium claims. The bills also contain detailed definitions of 
medical terms such as ``clinical evidence of asbestosis,'' ``evidence 
of bilateral pleural thickening with impairment,'' and ``FEV.'' These 
definitions mirror those adopted in Georgine v. Amchem, and many of 
them were criticized as unfair to claimants.
Title I
    Both bills begin by creating a new federal entity called the 
``Asbestos Resolution Corporation,'' a quasi-governmental entity to 
manage the administrative system that lies at the heart of the 
legislation. The Corporation is empowered to hire employees, contract 
for services, receive contributions of funds (presumably from the 
asbestos industry and its insurers), appoint medical claims policies, 
adopt rules for recovery of funds from responsible parties, sue and be 
sued, and manage its own affairs. In a nutshell, the Corporation's 
major functions are to screen asbestos claimants to determine whether 
they satisfy the Act's definitions of medical eligibility, and, if so, 
to subject their claims to a mandatory mediation process with the hope 
of reaching a settlement.
    The Corporation will be managed by a 7-member Board, appointed by 
the President with the advice and consent of the Senate, with the Board 
Chairperson designated by the President. The Board must be politically 
balanced: only four members may be of the same political party. Board 
members are appointed to staggered 6-year terms, and may be removed 
only ``for cause'' by the President. Board members are entitled to 
compensation not exceeding $50,000 per year, with the Chair's 
compensation set at an annual maximum of $15,000. These levels of 
compensation suggest that service on the Board will be significantly 
less than full time. Board members are given qualified immunity.
    Apart from managing the Corporation, the most significant 
responsibility entrusted to the Board is to appoint a ``Medical 
Advisory Board,'' which advises the Board on medical matters, including 
the retention, supervision, and removal of physicians, and the 
appropriateness of adding new diseases to the ``other cancer'' 
category. The Advisory Board may have no fewer than five and no more 
than nine members, at least one Board member must be board-certified in 
each of four specialities--radiology, pulmonary, pathology, and 
oncology. The Board of Directors is instructed to set rules governing 
the operations of the Medical Advisory Board, and the Act provides 
expressly that the Advisory Board is not subject to the Federal 
Advisory Committee Act. There is, it bears noting, a conflict of 
interest provision that forbids members of the Advisory Committee from 
any role in proceedings before the Corporation. This provision may 
assume more importance than one might expect because the bills exempt 
the Corporation from the Ethics in Government Act.
Title II--Medical eligibility determinations
    In order for a claimant to have a right to proceed through the 
alternative dispute resolution mechanism established in Title III of 
the Act, and ultimately have a right to go to Court (Title IV), the 
claimant must receive a certificate of medical eligibility from the 
Corporation. Title II deals with questions of eligibility, and sets 
detailed eligibility criteria that the Corporation must apply in making 
certification determinations. The, eligibility criteria set forth in 
Title II are the same criteria adopted in the Amchem settlement, many 
of which were criticized for being overly restrictive.
    For non-cancer cases, section 201 sets forth eligibility criteria, 
one of which excludes about half the current asbestos claimants. Under 
section 201(2)(C), in order to be eligible, a person exposed to 
asbestos who does not have either cancer or clinical or pathological 
evidence of asbestosis, must show ``evidence of bilateral pleural 
thickening with impairment.'' State law generally does not require 
impairment, and hence this provision will deny recovery to many 
claimants who currently have valid claims under state law.
    Mesothelioma cases are addressed in section 202. For non-
mesothelioma lung cancer claimants, section 203 sets up Byzantine 
eligibility criteria that depend in large part on the dates of 
exposures, the nature of the exposures, the extent to which the exposed 
person's employer complied with then-existing OSHA exposure standards 
(without regard to whether the standards were later discredited), and 
many other factors. These criteria are weighted-in favor of defendants 
by heavily discounting certain types of exposures, and will result in 
the exclusion of as many as half the lung cancer claims that are 
currently compensated via settlement or court judgment.
    In order for a claimant to obtain a certificate of eligibility, he 
has to submit a detailed form to the Corporation. (Section 205). 
Although the statute says that the claimant ``is not required to retain 
an attorney in order to file and proceed with a claim,'' the sheer 
volume and detail of information required to be submitted may, as a 
practical matter, make it necessary for claimants to have lawyers. The 
application is to be submitted under oath. Once a claimant files a 
complete application, the Corporation, at its discretion, can require 
the submission of supplemental data, seek records from third parties--
including records pertaining to the person exposed to asbestos--and 
order the exposed person to undergo further medical review.\1\
---------------------------------------------------------------------------
    \1\ There is a process for claimants who concede that the exposed 
persons' condition does not fit into any of the eligibility criteria 
laid out in the statute to nonetheless seek certification of their 
claims as ``exceptional.'' The procedures that the Corporation is to 
follow in considering these claims are, set forth in section 206.
---------------------------------------------------------------------------
    Within 60 days of accepting the application as complete, the 
Corporation shall issue either a certificate of eligibility or a 
finding of non-eligibility, accompanied by a brief statement of 
reasons. The claimant may seek reconsideration of the Corporation's 
decision, and may, at that time, submit additional evidence. Requests 
for reconsideration are referred to two-physician panels, who are 
instructed to reconsider, de novo, the application. In the case of a 
deadlock, a third physician is appointed to break the tie. If the panel 
accepts the request, then the Corporation issues a certificate of 
eligibility; if the panel denies the request, the panel is required to 
provide a brief statement of reasons. Reconsideration requests are 
supposed to be acted upon within 30 days.
    The bill recognizes that claimants unhappy with the eligibility 
determinations are entitled to judicial review, and the bills permit 
claimants to go to federal district court to challenge adverse 
Corporation eligibility decisions--except those that were not subject 
to reconsideration. The courts are instructed to uphold the 
Corporation's decisions where ``supported by substantial evidence on 
the record as a whole'' and ``not contrary to law. Due account shall be 
taken of the rule of prejudicial error.'' This standard, although 
somewhat oddly formulated, is typical for judicial review of actions of 
government administrative agencies.
    There is one point that merits emphasis. Although these appeals 
involve review of an administrative record, and therefore involve no 
new fact-gathering that is ordinarily the province of district courts, 
they are sent to district courts, not courts of appeals. This 
designation will substantially delay the resolution of these cases for 
two reasons. First, it squanders scarce judicial resources, because the 
party that loses in federal district court has every incentive to 
pursue an appeal, meaning that two levels of federal court review will 
ordinarily be required to conclusively adjudicate these claims. Most 
cases involving court review ``on the record'' are assigned to courts 
of appeals in the first instance, to avoid precisely this needless 
drain on resources. Second, district courts are already overburdened: 
these cases are not likely to be adjudicated quickly. Thus, the 
judicial review process laid out for these cases will be time- and 
resource-consuming.
Title III--Alternative dispute resolution
    The Corporation is directed to establish detailed rules for a 
comprehensive alternative dispute resolution (ADR) process. (Section 
301). This process begins after the Corporation issues an eligibility 
certificate. At that point, the Corporation is to assign a ``motions 
officer'' to the claim; the motions officer is to determine procedural 
issues, to issue subpoenas, to resolve discovery disputes, and 
generally to ensure that the claim is expeditiously processed.
    After a motions officer is designated, all potential responsible 
parties--generally meaning asbestos companies--are given notice, 
including a ``verified particularized statement'' prepared by the 
claimant setting forth the basis for the allegations against that 
party. (Section 303(a)(2)).\2\ The Act describes the required contents 
in elaborate detail. (Section 303(a)(2)). In some cases, the motions 
officer is empowered to allow the claimant discovery to assist in the 
preparation of the verified statement. Once the statement is filed, the 
Senate bill specifically allows a respondent to identify additional 
likely responsible parties, and add them by filing a verified 
statement.
---------------------------------------------------------------------------
    \2\ Among other things, the statement must include the dates of 
exposure, each worksite, the nature of the exposure, an identification 
of each asbestos-containing product the person was exposed to, and 
other information that the Corporation may require by rule or 
otherwise.
---------------------------------------------------------------------------
    Remarkably, although the bills require the claimant to lay bare his 
entire case in the verified statement (the detail of which far exceeds 
the detail normally found in complaints), there is no requirement that 
the respondents formally respond. Although the Senate bill says that 
respondents ``may accept as true any assertion made by the claimant in 
a particularized statement'' neither bill requires the respondent to 
say anything.
    After the statements are submitted, the bills contemplate a ``grace 
period'' of 60 days to encourage the parties to reach a voluntary 
settlement. At the expiration of this period, the Corporation appoints 
a mediator to assist the parties. At this point, the parties are 
required to serve on one another a ``statement of the information 
required for the settlement.'' The Corporation is to prescribe by rule 
the information required for the parties to evaluate the claim (except 
for the disclosure of privileged information). The mediation is to be 
concluded within 60 days of the appointment of the mediator, with 
extensions allowed in limited circumstances. Statements made in the 
course of mediation are inadmissible in any subsequent trial or 
mediation.
    The mediation process is highly structured. At least 15 days prior 
to the, close of mediation, the bills put the onus on the claimant to 
make a ``good faith'' final demand of settlement. No later than 10 days 
prior to the close of mediation, each respondent is required to make a 
good faith settlement offer, except if a respondent fails to do so the 
statute deems the offer to be $0. In the event that the mediation 
fails, the mediator issues a ``release from mediation,'' which entitles 
the claimant to either go to court or to binding arbitration.
    Before turning to arbitration, it bears emphasis that the mediation 
process spelled out in the bills is nearly as onerous as litigation, 
and, compounding the problem for claimants, requires them to lay their 
cards on the table in a way that gives their adversaries a clear 
understanding of their case--warts and all--while permitting the 
defendants to hold back considerable information. Thus, the mandatory 
mediation process disadvantages claimants in two ways: (1) it saps 
their resources because it is protracted and resource-intensive 
mediation; and (2) it gives their opponents a detailed preview of their 
case in court.
    Should the mediation fail to bring about an acceptable resolution 
with regard to all of respondents, then, at the close of the process, 
the claimant is back to square one--the place he would be in absent the 
statute. At this point, the claimant finally is entitled to bring suit 
(civil litigation is addressed in Title IV).
    The bills also provide that, should he elect to do so, a claimant 
can invoke as an alternative to litigation a binding arbitration 
process that would involve all of the remaining respondents. The 
arbitration, which would be governed by the Federal Arbitration Act, 
would apply the law that would be applied by a court designated by the 
claimant and having jurisdiction over the respondents. Arbitrators, 
like motions officers, would have subpoena authority. Findings of 
medical eligibility would be conclusive and binding, unless rebutted by 
``clear and convincing evidence'' by respondents.\3\ Arbitrators are 
empowered to render awards, but, in contrast to ordinary arbitrations, 
awards must be accompanied by `findings and fact and conclusions of 
law.''' \4\ With certain exceptions, respondents are jointly and 
severally liable to the extent provided by state law.\5\ Contribution 
rights by respondents are expressly retained. And arbitrators are given 
the power to add a ``penalty'' of 10 percent of the award where the 
respondents' final ``good faith'' offer was significantly less than the 
amount ultimately awarded.
---------------------------------------------------------------------------
    \3\ As discussed in more depth below, see n.6, infra, eligibility 
determinations are always subject to challenge by the companies, 
allowing them another bite of the apple.
    \4\ Arbitrators often do not issue findings and conclusions, in 
large measure because of the presumption that arbitration awards are 
conclusive and not subject to judicial review. If the bills' 
requirement of findings of fact and conclusions of law suggests that 
judicial review might be more widely available here, that would call 
into question the value of arbitration.
    \5\ As with awards in litigation, although the bills nominally 
retain joint and several liability, to the extent it is available under 
state law, there are certain modifications to the joint and several 
rule that might allow respondents to escape full liability and leave a 
claimant with less than full compensation.
---------------------------------------------------------------------------
Title IV--Civil actions
    Section 401 sets forth the general prohibition against asbestos 
actions until a claimant has both obtained a medical certificate and 
completed the mediation process; it says ``no civil action may be filed 
or maintained unless the plaintiff has obtained a certificate of 
medical eligibility and release from mediation.'' Not only is 
litigation precluded outside this process, but a number of unique rules 
are created to constrain and govern these actions.
    First, the bills preclude plaintiffs from using collective 
actions--no class actions, joinder of parties, aggregation of claims, 
or any other device to enhance the efficiency of asbestos litigation is 
allowed for the plaintiffs, ``without the consent of each defendant.'' 
No similar prohibition attaches to the defendants.
    Second, any asbestos case filed in violation of the rules--such as 
a case filed prior to the claimant obtaining an eligibility 
certificate, or one filed as a class action--is subject to removal to 
federal court. Insofar as we are aware, there is no precedent for this 
provision, and, to the extent that Congress is asserting power to 
dictate procedural rules to the states--such as the ``no class action'' 
rule--we believe that such an arrogation of power presents serious 
constitutional problems.
    In addition to these special rules, this Title also establishes the 
presumption that medical eligibility determinations are conclusive and 
may be set aside only on the basis of ``clear and compelling 
evidence,'' except for cases involving questions of exposure, which are 
to be determined on the basis of state law.\6\
---------------------------------------------------------------------------
    \6\ This provision is especially troubling, because it suggests 
that the question of a claimant's medical eligibility may be, always 
open to relitigation when the question has been resolved in the 
claimant's favor. To use an illustration, assume that the claimant is 
initially found by the Corporation to be medically ineligible, and that 
determination is upheld on reconsideration by a medical panel. Assume 
further that the claimant then seeks review in a federal district court 
and the question of medical eligibility is fully litigated and that the 
claimant prevails. Normally, under the doctrine of res judicata, one 
might think that the court's judgment on eligibility would be 
conclusive and binding. Yet this provision drives home the point that 
medical eligibility determinations could nonetheless be open to 
relitigation by the companies--either in court, or in binding 
arbitration--in the event that the mediation process fails to achieve a 
settlement. Not only is this provision troubling in its own right but 
there is an asymmetry here that works to the claimant's disadvantage. 
If the claimant is found to be medically ineligible, loses on 
reconsideration, and then loses in court, that determination would bar 
the claimant from litigating his eligibility in court, unless new 
evidence came to light or his medical condition changed. Even then the 
claimant would have to start over in Title II and not Title IV of the 
bills. But the companies are not similarly bound by the court's ruling 
and have at least two bites at the eligibility apple.
---------------------------------------------------------------------------
    Finally, like the arbitration provision, judges are empowered to 
penalize respondents who failed to make an adequate offer in mediation 
(measured by the differential between the offer and the final award) by 
enhancing the award 10 percent.
Title V--Rules applicable to arbitrations and civil actions
    This Title builds on Title IV, and lays down some general 
principles intended to guide the substantive decisions in arbitrations 
and civil litigation.
    First, section 501(1) sets up the basic rule that no one shall 
recover in any proceeding relating to an asbestos claim unless that 
person establishes the existence of an eligible medical condition. This 
provision, read in combination with other sections of the bill, is 
ambiguous. It could be interpreted to eliminate the asbestos companies' 
liability under state law to spouses, parents and children of injured 
workers, since they would not be able to establish ``eligibility'' 
under the statute.
    In the Senate bill, section 501(2) provides that in proceedings to 
resolve asbestos claims, there are three main issues to be decided: (a) 
whether the exposed person with respect to whom a claim is made has an 
asbestos-related disease or condition; (b) whether exposure to asbestos 
or an asbestos-containing product was a ``substantial contributing 
factor'' in causing that disease or condition; and (c) the amount of 
compensatory damages, if any, that should be awarded. Although the 
claimant would be entitled to the presumption of eligibility, those 
issues would nonetheless be fair game in litigation. As discussed 
above, the consequences are that the asbestos companies have at least 
two bites at the liability apple, since the claimant is required to 
prove initially to the Corporation that he is medically eligible under 
the Act to receive compensation and then to defend the Corporation's 
ruling on medical eligibility in court or arbitration.
    Third, both bills forbid the award of damages or any other relief 
for emotional distress, mental harm, or medical monitoring, without 
proof of the exposed person's medical eligibility. The Senate bill adds 
the additional requirement of proving that the exposure to the 
respondent's product was a substantial contributing factor causing the 
injury.
    Fourth, both bills forbid the award of any damages or any other 
relief for the enhanced risk of contracting cancer or any other 
disease.
    Fifth, both bills categorically forbid the award of punitive 
damages on any asbestos claim, no matter how deliberate, malicious, or 
unconscionable the acts of the respondents.
    Sixth, section 502 abolishes a statute of limitation, laches, or 
statute of repose defense for any claim that was not untimely on the 
date of the Act's enactment.
    Seventh, section 503 abrogates existing attorneys' fees contracts 
and governs all future contracts by setting a fee ceiling of 25 percent 
of the compensation the claimant receives in any of the proceedings 
covered by the Act. This limitation applies even if the attorney 
represents the claimant in both the mediation proceeding and then in 
litigation. Attorneys will be required to submit to the Corporation an 
itemized statement of their fees and costs before recovering any fee, 
attorneys who violate this provision are made subject to serious civil 
and criminal penalties. There is no requirement that respondents' 
counsel disclose their fee arrangements, their costs and fees, and 
defense counsel are not subject to any cap or limit on the fees they 
can charge. This is particularly troublesome since the Rand Corporation 
study of asbestos litigation expenses found defendants' attorney and 
litigation fees consumed 37 percent of each asbestos litigation dollar, 
50 percent more than plaintiffs' fees (less than 24 percent). In the 
House bill, the attorneys' fee cap is not imposed on attorneys' fees 
for cases that settle before the mediation process has begun, creating 
a perverse incentive for attorneys to settle early, even if that is not 
in the best interest of the client.
    Eighth, and finally, section 504 provides that a judgment or 
settlement on a nonmalignant claim does not foreclose the right of a 
plaintiff to bring a claim based on a malignant condition, should one 
arise.
Title VI--Funding
    The bills create a highly complex funding structure that allows the 
Corporation to assess, on a pro-rata basis, potential respondents for 
the cost of administering the, Corporation's medical screening, ADR, 
and other activities. There are provisions for ``transitional funding'' 
that require potential respondents to use historical measures to 
determine their likely pro rata share to get the Corporation up and 
running. Thereafter, the assessments will be made based on the numbers 
of cases the respondents have pending. The Secretary of the Treasury is 
directed to establish a special Trust Fund for the Corporation's 
accounts. Mediation costs will be charged on a per capita basis to each 
participating respondent; the same appears to be true of arbitrations. 
The Corporation is empowered to bring suit to enforce these 
obligations, and is entitled to attorneys' fees, costs, and interest 
when it prevails. Moreover, the bills anticipate that there will be 
serious disagreements among the asbestos companies over their shares of 
mediation, arbitration, and general administrative costs. Accordingly, 
the Act sets up elaborate arbitration and litigation provisions to 
resolve these disputes.
Title VII--Applicability; pending civil actions
    Section 701 sets forth the general rule that the Act applies to any 
case pending on the date of enactment that has not resulted in a final, 
nonappealable judgment. For pending cases, a certificate of eligibility 
is not required where a trial has already commenced, and no release 
from mediation is required if the action was pending, regardless of 
whether trial had begun. (Section 702).
    The upshot of this provision is that, except for the handful of 
claimants whose trials are actually ongoing on the date of the Act's 
enactment, every one of the more than 100,000 current asbestos 
plaintiffs will have to go to the Corporation to get a certificate of 
eligibility in order to proceed with their cases.
    Finally, and critically, the Act changes the rules of decision for 
pending cases by providing (in section 702(c)) that plaintiffs in cases 
being tried (who have not obtained certificates of eligibility) ``have 
the burden of establishing the existence of an asbestos-related 
condition that meets the criteria for an eligible medical category 
pursuant to sections 201 through 204.'' There is a serious 
constitutional question whether Congress can change a rule of decision 
in pending cases, and there is no doubt that is precisely what section 
702 seeks to accomplish.
Title VIII--Miscellaneous provisions
    This Title is a grab-bag of unrelated administrative and 
housekeeping matters, some with real consequence. To begin with, it 
makes clear that directors and employees of the Corporation are not 
officers of the United States or government employees.
    The Corporation is required to comply with the rulemaking 
provisions of the Administrative Procedure Act; however the Corporation 
is made exempt from the Freedom of Information Act, the Ethics in 
Government Act, the Equal Access to Justice Act, and a host of other 
Statutes that govern the conduct of federal agencies and government 
controlled corporations.
    Title VIII permits, but does not require, any of the asbestos 
trusts in existence at the time of the enactment of the statute to be 
subject to the Act.
    Finally, the, Act contains a standard severability clause.
                               __________
                       Associated Builders and Contractors,
                                      Rosslyn, VA, October 5, 1999.
The Hon. Charles Grassley,
Chairman, Subcommittee on Oversight and the Courts,
Judiciary Committee, U.S. Senate Washington, DC.
    Dear Chairman Grassley: Associated Builders and Contractors (ABC), 
representing over 21,000 contractors, subcontractors, material 
suppliers and related firms across the country and from all specialties 
in the construction industry with a network of 83 chapters, strongly 
supports S. 758, the Fairness in Asbestos Compensation Act of 1999. We 
strongly support today's hearing and respectfully request that our 
statement of support for S. 758 be included in the hearing record of 
October 5, ``Finding Solutions to the Asbestos Litigation Problem.''
    ABC has a long-standing position in support of legal reforms that 
will ensure that businesses across the country can operate and compete 
based on fair, flexible and equal opportunities in the marketplace. Our 
litigious society has run amok and has subjected entrepreneurs as well 
as bureaucracies to costly and unproductive consequences. Congress must 
address excessive litigation, which is eating away at the United 
States' entrepreneurial society, and relieve businesses from having to 
defend against special interest groups who seek to invoke economic 
damages through the courts.
    ABC is very concerned about the rise in personal injury suits 
without an injury in asbestos cases filed in state and federal courts, 
and the impact these cases have on individuals who have contracted 
asbestos related illness and asbestos companies. Lawsuits by 
individuals whose health is unaffected by exposure to asbestos are 
clogging the courts and are delaying or preventing legitimate cases 
brought sick individuals from receiving adequate attention in the 
courts. Furthermore, the impact of such cases against companies are 
increased liabilities and high legal expenses. The need for this 
legislation is clear--to ensure sick individuals can be compensated in 
a timely manner and companies can be freed from lengthy and unnecessary 
litigation procedures.
    ABC supports the Fairness in Asbestos Compensation Act of 1999 
which seeks to establish a non-judicial Alternative Dispute Resolution 
System to resolve asbestos injury claims, based on a settlement in 
Amchem Products, Inc. v. Windsor, which established the medical 
criteria that individuals would have to meet in order to be eligible 
for compensation. ABC also supports the administrative process proposed 
in the legislation which is funded by the defendant companies to 
compensate persons who have asbestos-related illnesses and alleviate 
the delays and transactional costs of asbestos litigation while 
relieving the caseload burden on state and federal courts.
    The Fairness in Asbestos Compensation Act would provide a secure, 
fair and efficient means of compensating victims of asbestos, ABC looks 
forward to working with you on this important legislation.
    Thank you for considering our views on this issue.
            Sincerely,
                                             Erika L. Baum,
                                        Director, Workplace Policy.
                               __________
                                             Owens Corning,
                                                   October 5, 1999.
The Hon. Charles E. Grassley,
U.S. Senate Washington, DC.
    Dear Senator Grassley: Thank you for your leadership and serious 
consideration in your efforts to resolve the complex matters resulting 
from asbestos litigation, Owens Corning, as you may know from my 
testimony before the House Judiciary Committee on July 1, 1999, has 
recently entered into a private national settlement plan. I have 
included with this letter an addendum that explains our plan.
    An integral and attractive element of our settlement plan lies in 
the fact that the vast majority of the dollars paid and to be paid go 
to plaintiffs with asbestos-related malignancies or asbestos-related 
non-malignant impairments that would satisfy the medical criteria in 
the proposed legislation. Claimants with pending cases who do not meet 
the medical criteria typically receive a modest cash payment in return 
for signing a binding settlement agreement. However, if they develop an 
asbestos-related malignancy or impairment meeting the medical criteria, 
they have the night (but only under the terms of their agreements) to 
receive additional payments. Importantly, these additional payments are 
for amounts negotiated at the time of the original settlements, thus 
helping Owens Corning achieve financial predictability.
    Future claimants only receive compensation if they have an 
asbestos-related malignancy or if they meet the medical impairment 
criteria.
    Contrary to proponents' intentions, the proposed legislation does 
not create a level of certainty superior to existing private solutions. 
For example, no manufacturer or other responsible party can know what 
its percentage share of liability on a particular claim will be under 
the proposed legislation, nor can any manufacturer or other responsible 
party know the annual level of dollar commitments it may be called upon 
to fund. These are serious problems better addressed in Owens Corning's 
private plan.
    We hope, as you explore solutions to this complex problem, that you 
will concur with Chairman Hyde that private settlement plans, like 
Owens Corning's, should not be adversely affected by well-intended 
legislation. We further hope that the legislative approach will 
continue to be thoughtful and measured, and that the views and 
interests of all parties will be considered as legislation is crafted.
    Thank you for the opportunity to provide this for the hearing 
record. If I can be of further assistance, I can be reached, or you may 
contact John Libonati, Director of Government Affairs. We assure you of 
our participation in the process and will make ourselves available upon 
your request.
            Sincerely,
                                    Maura J. Abeln,
                 Senior Vice President, General Counsel and
                                          Secretary, Owens Corning.
                                 ______
                                 

 Addendum to the Prepared Statement of Owens Corning, House Judiciary 
                         Committee July 1, 1999

Prepared by Maura J. Abeln, Senior Vice President, General Counsel and 
                               Secretary
Introduction
    Owens Corning, headquartered in Toledo, Ohio, is a publicly-held 
U.S. company, founded in 1938. The Company manufactures composites and 
building materials, with production and research facilities located 
predominantly in the United States. We have more than 20,000 employees, 
the majority of whom reside in Ohio, South Carolina, Texas, 
Pennsylvania, Florida, Georgia, California and New York.
    The Company's building materials-such as fiberglas insulation, 
vinyl siding, windows, roofing shingles, and cast stone products--are 
used in residential remodeling and repair, commercial improvement, new 
residential and commercial construction, and other related markets; its 
composites products are used in diverse products in building 
construction, automotive, telecommunications, marine, aerospace, 
energy, appliance, packaging and electronics. Our products are widely 
recognized by our registered trademarks, including the name FIBERGLASS 
and the color PINK. We are the company people think of when they see 
the PINK PANTHER}TM a mascot we have licensed for use in our 
advertising and promotions.
Asbestos litigation history
    Owens Corning is a co-defendant with other former manufacturers, 
distributors and installers of products containing asbestos and with 
miners and suppliers of asbestos fibers in personal injury litigation. 
Since 1987, the Company has been named as a defendant in almost 400,000 
cases. Virtually all of the asbestos-related lawsuits against Owens 
Corning arise out of its manufacture, distribution, sale or 
installation of an asbestos-containing calcium silicate, high 
temperature insulation product, the manufacture of which was 
discontinued in 1972. The personal injury claimants generally allege 
injuries to their health caused inhalation of asbestos fibers from 
Owens Corning's products. Most of the claimants seek punitive damages 
as well as compensatory damages. But for the operation of Owens 
Corning's National Settlement Program, described below, Owens Corning 
would be a defendant more than 200,000 cases that were pending at time 
of the programs announcement.
The national settlement program
    In December 1998, Owens Corning announced its National Settlement 
Program (the ``NSP''). At that time, we had agreed with more than 50 
plaintiffs' law firms to resolve approximately 176,000 asbestos claims 
against the Company. We had also agreed to resolve more than 100,000 
claims against its wholly-owned subsidiary, Fibreboard Corporation, in 
the event that Fibreboard's global class action settlement, under 
review by the U.S. Supreme Court, was overturned.
    The NSP also established procedures for resolving future claims 
brought by plaintiffs' law firms participating in the NSP without 
litigation. As of June 30, 1999, settlement payments aggregating 
approximately $1.9 billion will be made over the next two to five 
years, with most payments occurring in 1999 and 2000. These payments 
will be made from the Company's available cash and credit resources.
    The NSP is designed to better manage Owens Corning's asbestos 
liability, and that of Fibreboard, and to enable the Company to better 
predict the timing and amount of indemnity payments for both pending 
and future claims. Under the NSP, each participating law firm has 
entered into a long-term settlement agreement (``NSP Agreement'') 
providing for the resolution of claims pending against both Owens 
Corning and Fibreboard for settlement amounts negotiated with each 
participating firm. Settlement amounts to each claimant vary based on a 
number of factors, including the type and severity of disease.
    As is true of the legislative scheme provided under H.R. Bill 1283, 
the NSP Agreements impose a number of Standards and procedures for the 
review and processing of the cases being settled. All payments to 
settling claimants are subject to satisfactory evidence of a qualifying 
medical condition, evidence of exposure to an Owens Corning and/or 
Fibreboard asbestos-containing product during a defined time period, 
and delivery of customary releases by each claimant. The NSP Agreements 
allow claimants to receive prompt payment without incurring the 
significant delays and uncertainties of litigation. Claimants settling 
non-malignancy claims may also be entitled to seek additional 
compensation if they develop a more severe asbestos-related medical 
condition in the future.
    Like H.R. Bill 1283, NSP Agreements require participating firms to 
agree to attempt to resolve all future claims outside the courts. Under 
each NSP Agreement, the participating firms have agreed (consistent 
with applicable legal requirements) to resolve any future asbestos 
personal injury claims against Owens Corning or Fibreboard through an 
administrative processing arrangement, rather than through litigation. 
Under such arrangement, no settlement payment will be made for future 
claims unless specified medical criteria and other requirements are 
met, and the amount of any such payment is based an the disease of the 
claimant and other factors. In the case of future claims not involving 
malignancy, such criteria require medical evidence of functional 
impairment.
    The medical criteria employed in the NSP are very similar to the 
criteria proposed in H.R. Bill 1283, and will have the effect of 
limiting future payments by Owens Corning and Fibreboard only to those 
claimants who present evidence of an asbestos-related lung disease and, 
as to non-malignancies, functional impairment. Claims will be processed 
for payment for both pending and future claims Integrex, a wholly-owned 
Owens Corning subsidiary that specializes in claims processing and 
other litigation support services.
    It is anticipated that payments for a limited number of future 
``exigent'' claims (principally malignancy claims) under the 
administrative processing arrangement will generally begin in 2001. 
while payments for other future claims will begin in 2003. 
Participating plaintiffs' counsel have agreed that payments for future 
claims beginning in 2003 and Later years will be constrained by the 
availability of cash flow rather than the number of claims per year. 
The restrictions established by the covenants in the Owens Corning's 
Credit Agreement are designed to ensure the predictability of annual 
cash outflows for asbestos payments. Owens Corning will not be required 
to make any payments that would place in jeopardy those financial 
covenants. The NSP Agreements have a term of at least 10 years and may 
be extended by mutual agreement of the parties.
    Each NSP Agreement will also resolve claims against Fibreboard. The 
Supreme Court's recent decision in Ortiz v. Fibreboard Corporation 
(June 23, 1999) makes it appear virtually certain that the Global 
Settlement will be finally disapproved by the Courts. If as expected, 
the Global Settlement does not receive such approval, a back up 
Insurance Settlement will become effective. Under the Insurance 
Settlement (which has received final court approval), Fibreboard will 
have access to assets of approximately $1.9 billion, to be used to 
resolve pending and future Fibreboard claims. Approximately $1.0 
billion will be devoted to pending claims, and the remainder, plus 
interest, will be used to satisfy future claims. Each of Owens Corning 
and Fibreboard retain the right to terminate any individual NSP 
Agreement, if in any year more than a specified number of plaintiffs 
represented by the plaintiffs' firm in question opt out of such 
agreement.
    Owens Corning believes the NSP is working, and will work in the 
future, by (i) providing prompt, predictable settlement payments to 
qualifying claimants who would otherwise wait many years in the tort 
system to resolve their cases, (ii) providing Owens Corning a much 
higher degree of financial certainty by allowing it to better predict 
and control future annual settlement payments and defense costs, and 
(iii) decreasing the resources used to defend asbestos cases, thus 
freeing more money with which to pay claimants.
Comments on H.R. bill 1283
    Owens Corning applauds the Chairman and other supporters of the 
proposed legislation for their leadership on this important issue. 
However, in fight of the success of the NSP, the Company does not 
believe that it is either necessary or desirable for the federal 
government to impose on plaintiffs and defendants a federal 
administrative scheme of the kind contemplated by H.R. 1283. Many 
specific aspects of the proposed legislation, while reflecting laudable 
goals, can either be better achieved by private negotiation among 
parties in the litigation or can be accomplished under existing laws 
and without the need of further legislation. The NSP is proof that 
plaintiffs' counsel and their clients are prepared to enter into 
private, non-traditional arrangements to resolve large numbers of 
pending and future cases without involving the courts. The NSP also 
demonstrates that mutually negotiated agreements among the parties, 
rather than the creation of a federal corporation and imposition of an 
additional level of bureaucracy, are achievable. In our view, the NSP 
represents for all companies a model that could be adopted to end most 
of the asbestos litigation.
    A voluntary, non-legislative resolution of asbestos cases such as 
the NSP avoids the many drawbacks inherent in the federal 
administrative scheme envisioned by H.R. Bill 1283. In particular, a 
voluntary program involves no government compulsion, no new federal 
bureaucracy and no interference with the legal rights of those who do 
not wish to participate. The NSP raises none of the serious federalism 
concerns that are presented by the proposed legislation.
    Owens Corning has the following brief comments on several of the 
major aspects of the proposed legislation:

    1. Establishment of a Federal ``Asbestos Resolution Corporation''. 
Owens Corning has reservations concerning the wisdom and workability of 
creating a federal administrative agency to evaluate and process 
asbestos personal injury claims. On the basis of its long experience in 
the asbestos litigation. Owens Corning believes that, as a practical 
matter, the creation of a federal bureaucracy will prove extremely 
cumbersome, while failing to achieve anything that cannot be 
accomplished through private negotiations between plaintiffs and 
defendants. Claims are currently evaluated and processed by the 
defendants, each of whom uses a unique system and unique standards--
including medical and exposure standards--for determining whether to 
pay on a particular claim, and, if so, how much to pay. Often, group 
settlements of cases between defendants and plaintiffs' counsel are 
achieved on the basis of long-standing relationships, unique historical 
relationships and unique settlement criteria, and involve trading 
concessions in order to tailor mutually acceptable arrangements.
    The one-size-fits-all approach of H.R. Bill 1283 is not consistent 
with this practice, and may deprive parties of the flexibility needed 
to achieve settlements. Moreover, placing a large federal corporation 
at the helm of evaluating and processing hundreds of thousands of 
pending claims--many of which have been in the tort system for many 
years--will lead to even further delays in resolving the pending cases.
    For all of these reasons, Owens Corning believes that Congress 
should act with special caution in creating a new administrative regime 
to deal with asbestos claims. As many Members have recognized, an 
administrative agency, once created, often takes on a life of its own. 
Such a new administrative entity may well prove difficult to reform or 
rein in should it take a different course than its creators intended or 
anticipated.
    2. Medical Eligibility Criteria. Owens Corning has long recognized, 
as do the sponsors of the proposed legislation, that the limited 
resources available to provide compensation to individuals who are 
injured as a result of exposure to asbestos-containing products should 
not be diverted to pay claims of individuals who do not have 
demonstrable illnesses or actual physical impairment. As illustrated by 
the NSP, plaintiffs and defendants are capable of negotiating 
appropriate, mutually agreeable medical criteria that defer claims of 
those who are not impaired. Their rights are preserved in the event 
that they become ill in later years. Such a voluntary deferral system 
does not preclude those claimants who nonetheless want to pursue their 
claim even though they do not meet medical criteria. In our view, the 
NSP is preferable to a compulsory ``one-size-fits-all'' set of 
requirements imposed by the federal government.
    To the extent that some claimants still pursue litigation. Owens 
Corning believes that the tools necessary to appropriately prioritize 
the claims of truly sick plaintiffs already are available to the 
courts. These include inactive dockets--such as those employed in Cook 
County, Illinois and Baltimore, Maryland--for the claims of unimpaired 
plaintiffs, and the prioritizing of more serious claims as in the 
federal multi-district proceedings. Also, some jurisdictions, such as 
New York City, have what are called ``in extremis'' dockets for exigent 
cases of the most seriously ill who are likely to die within six months 
of an asbestos related disease. These cases are processed quickly to 
give these claimants their day in court. Most of these cases are 
settled. These techniques, together with others which have been 
successfully employed by many courts, provide far greater flexibility 
than can a federally mandated set of uniform medical criteria.
    3. Application to Pending Claims. One of the most troubling 
features of the proposed legislation is its applicability to pending 
lawsuits. By making the bill's provisions applicable to lawsuits 
pending at the time of enactment, Congress would in effect be changing, 
or completely preempting, state substantive law in a dramatically 
retroactive fashion, imposing new rules on state causes of action that 
not only have already accrued but have actually been filed. In many 
instances, plaintiffs have been waiting for trial for many years.
    There are serious federalism concerns any time Congress supercedes 
state law in areas in which the states have traditionally been free to 
adopt their own policies. As the Supreme Court made clear just last 
week in its opinion in Alden v. Maine, the federal government has been 
granted by The Constitution only ``limited and enumerated powers,'' 
while a ``vital role'' is ``reserved to the States by the 
constitutional design.'' These federalism concerns are heightened 
immeasurably when state law is rewritten with respect to claims that 
are already in the courts. Moreover, this retroactive feature of the 
proposed legislation would have the effect of imposing a massive stay 
on all pending asbestos claims (except those actually on trial). This 
delays the resolution of these claims for what may be a number of 
additional years until the new agency is in a position to address the 
backlog of hundreds of thousands of pending claims.
    4. Alternative--Dispute Resolution (``ADR''). Owens Corning is not 
opposed to the use of ADR to process asbestos claims, on the contrary, 
the NSP Agreements 'include a privately-negotiated provision that 
requests claimants to mediate claims as a precondition to opting out of 
the program. Moreover, many courts already make effective use of ADR to 
resolve asbestos cases. However, Owens Corning does not perceive the 
need or justification for a new and compulsory ADR system under the 
aegis of a federal administrative bureaucracy.
    5. Limitations on Private Litigation. Once again, Owens Corning 
applauds many of the concepts reflected in the current legislation, 
particularly with regard to those provisions rejecting as inappropriate 
and unfair the consolidation of large numbers of individual asbestos 
claims and the continued imposition of repetitive punitive damages 
awards. Even without new legislation, however, courts have increasingly 
come to view these aspects of the asbestos litigation as counter-
productive and improper. While Owens Corning welcomes further reform in 
this area, we believe that the creation of a new federal administrative 
bureaucracy is unnecessary to accomplish these goals.
    6. Funding from Existing Defendants. Owens Corning is particularly 
concerned with those provisions in the legislation that provide for all 
funding to be collected from existing defendants in proportion to the 
number of claims asserted against those defendants. There are two 
serious problems with this approach.
    First, the legislation ignores the well-documented central role of 
the federal government in exposing tens of thousands of individuals to 
asbestos-containing materials. As many Members are aware, although the 
use of such products was actually required by the federal government 
through such mandates as the Walsh-Healy Act, the government has 
invoked its defense of sovereign immunity to escape paying its fair 
share toward compensating injured plaintiffs. It is particularly ironic 
that the Congress should now contemplate the establishment of a federal 
bureaucracy for the resolution of these same asbestos claims entirely 
funded by private industry. We can not support federal legislation 
without federal funding.
    Second, the particular funding formula embodied in the pending 
legislation will have the effect of freezing into place the 
disproportionate level of payments by a relatively small percentage of 
the many hundreds of former producers and distributors of asbestos-
containing products. Such an allocation is particularly unfair to Owens 
Corning, which has resolved the vast majority of claims against it and 
therefore has no need for such a program. Moreover, it is important for 
the Committee to understand that, although the asbestos litigation 
originally arose insulators and shipyard workers whose primary exposure 
involved high temperature pipe-and-block insulation, the litigation has 
expanded dramatically to encompass a wide range of occupations 
involving very different product exposures. Unfortunately, the 
traditional ``pipe-and-block'' defendants have continued to pay far in 
excess of their fair share in the litigation. No administrative 
procedure should be adopted that demands continued disproportionate 
contributions from these traditional defendants while permitting newer 
defendants, many of whom have substantial resources to escape paying 
their fair share.
Conclusion
    Owens Corning suggests that this Committee give serious 
consideration to the NSP as a viable alternative to legislation, 
However, we would welcome the opportunity to discuss our concerns 
further, and appreciate the opportunity to be heard on this important 
subject. Thank you for your consideration.
                               __________
                Law Offices of McGarvey, Heberling,
                                Sullivan, & McGarvey, P.C.,
                                    Kalispoll, MT, October 4, 1999.
Re: 10/5/99 hearing on ``Fairness Asbestos Compensation Act of 1999''

Hon. Max Baucus,
U.S. Senate, Washington, DC.
    Dear Senator Baucus: We represent Montana mine workers and, family 
members who have been injured or killed by exposure to asbestos from 
vermiculite ore coming from W.R. Grace's Libby mine. The proposed 
legislation would take away substantial rights presently available to 
these people. The bill purports to address the problem created by 
thousands of asbestos claims pending around the country. The vast 
majority of this litigation consists of product liability claims 
arising out of exposure to asbestos insulation and other products. The 
legislation is being opposed, in toto by such organizations as Public 
Citizen and The Association of Trial Lawyers of America (ATLA). We 
support these efforts to defeat this legislation. However, we also seek 
your assistance in making sure that the Senate is fully apprised of the 
compelling reasons why this legislation should, in any event, be 
amended so that it does not displace the expeditious and efficient 
recourse presently available to hundreds of your injured constituents. 
I attach hereto (as exhibit 1) the amendatory language. Set forth below 
is additional information concerning the impacts of the proposed 
legislation on your Montana constituents, which I hope will be shared 
with your colleagues.

         1. THE MONTANA CLAIMS ARE NOT PRODUCT LIABILITY CLAIMS
    The proponents of this legislation point to the concern expressed 
by several Supreme Court justices in Amchem Products, Inc. v. Windsor, 
521 U.S. 591, 628-29 (1997) and Ortiz v. Fibreboard Corp. No. 97-1704, 
slip op. at 1 (June 23, 1999). Likewise, proponents point to the 
numerous cases pending in the federal court multi-district litigation 
entitled In Re Asbestos Products Liability Litigation. Amchem and Ortiz 
were large product liability class action lawsuits. Similarly, the 
multi-district litigation involves product liability claims. In 
contrast, the claims of your constituents are based on the intentional 
and negligent conduct of W.R. Grace & Co. in exposing Libby miners and 
their families to raw asbestos from the mining and milling process and 
the dust brought home on the miners' clothes. We are not asserting 
product liability claims on behalf of these victims.
    Unfortunately, through the unnecessarily broad scope of its 
definitional and applicability sections the bill would indiscriminately 
displace the claims not only of consumers and workers exposed to 
asbestos products, but would also preempt the very different exposures 
of the Montana miners and their families.
    We are requesting that you push for an amendment to the bill which 
would exclude from the definition of ``asbestos claim'' the claims of 
miners and their families arising from exposure to raw asbestos from 
the mining and milling process. (See exhibit 1, attached.)

2. MONTANA'S STATE COURTS ARE RESOLVING THESE CLAIMS SWIFTLY AND FAIRLY
    Both Justice Dryer and Chief Justice Renquist expressed concern 
with ``the massive impact of asbestos-related claims on the federal 
courts.'' Ortiz, supra at 1 (emphasis added). Ironically, the proposed 
legislation would remove the Libby cases from Montana's state court 
system and place them first in a federal administrative process and 
ultimately in the federal courts.
    The claims of the grievously injured people from Libby receive 
prompt attention in our state court system. The state district court in 
Libby has special asbestos injury jury trial terms each February, May, 
August and November. The most seriously injured are allowed first 
access to the court. This system has worked remarkably well. 
Ironically, the proponents of the legislation purport to be concerned 
for plaintiffs being forced to wait years to recover for their 
injuries. However, the processing of your constituents' claims through 
the proposed new federal administrative bureaucracy, with appeals taken 
to the federal court, would be nowhere near as expeditious.
    Members of both political parties have justifiably expressed 
concern over federal encroachment into matters that have traditionally 
been governed by state law. Federal encroachment is particularly ill-
advised here, where Montana's judicial system is dispensing justice 
swiftly.
  
       3. THE MONTANA CLAIMS ALL INVOLVE GRIEVOUS INJURY OR DEATH
    Another assertion of the bill's proponents', which does not apply 
to the Libby claims, is that many of the pending product liability 
claims involve individuals who are worried about their exposure to 
asbestos but who never will be affected by disease. This is in grim 
contrast to the situation here in Montana. Attached hereto (as exhibit 
2) is a list of 88 Montanans who have already died of asbestos-related 
diseases due to their exposure at the Libby facility. This list does 
not include family or community members, who have died from asbestos 
exposure arising from the Libby facility. The claims now pending here 
in state court all involve either lung cancer, mesothelioma, 
asbestosis--or death from one of these asbestos-related diseases. A 
brief sampling of the human misery caused to the involved families is 
described in several letters from victims' families (attached as 
exhibit 3).

 4. W.R. GRACE IS SOLVENT AND MUST BE HELD ACCOUNTABLE FOR ITS CONDUCT
    Proponents of the legislation contend that the major primary 
defendants have gone bankrupt, causing plaintiffs' attorneys to target 
tangentially involved ``deep pocket'' corporations as defendants. Not 
so here. W.R. Grace & Co. owned, operated and profited from the 
operation of its vermiculite mine and mill in Libby, Montana. While 
Grace has tried in recent years to spin off new corporate forms in an 
attempt to disguise and shelter the corporate entity that owned the 
Libby mine, W.R. Grace remains a large and solvent corporation.
    Moreover, compelling policy reasons argue against allowing a rogue 
corporation to benefit from federal legislation at the expense of those 
whom it negligently and/or maliciously injured. The vermiculite mine 
and mill in Libby was in operation since the 1930s. The mining and 
milling process produced a considerable amount of dust. In 1956 the 
Montana Board of Health issued a report based on its industrial hygiene 
study of the Libby facility. That report informed the company of 
numerous air quality violations, numerous violations of standard 
industrial hygiene practices, and informed the company in unequivocal 
terms that: ``The asbestos dust in the air is of considerable toxicity, 
and is a factor in the consideration of reducing dustiness in this 
plant.'' The report cited to the extant industrial hygiene literature 
and described the disease process set in motion by asbestos exposure. 
For decades after the issuance of this report, the Zonolite Company and 
W.R. Grace withheld this critically important information from its 
workers, their families, and, indeed, the community of Libby.
    It must be emphasized that the nature and degree of exposure to raw 
asbestos from the mining and milling operations in Libby, Montana is 
profoundly different from the exposures to asbestos from end-products 
such as insulation. For example, the asbestos dust levels measured in 
the Libby mine and milling operations were as much as 400 times greater 
than the applicable threshold limit values (TLV) and thousands of times 
greater than the current accepted TLV. Grace's own internal memos 
observed that 92 percent of workers with more than 20 years exposure 
had lung disease. It is hardly appropriate to place this type of direct 
exposure to extreme levels of raw asbestos in the same category as the 
insulation and other product-related exposures which comprise 90+ 
percent of the litigation addressed by this legislation.

                             5. CONCLUSION
    In. summary, we support efforts to defeat this legislation in its 
entirety. At a minimum the legislation must be amended to protect the 
rights of grievously injured Montanans, who presently have efficient 
and expeditious recourse through this state's judicial system. On 
behalf of the numerous miners and their families, I am requesting your 
assistance in carrying this message to each and every Senator. We trust 
that in this way justice will prevail.
    Please let me know if I can provide further information or 
assistance on this matter.
            Yours sincerely,
                                         Roger M. Sullivan,
                         McGarvey, Heberling, Sullivan, & McGarvey.
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                    White Lung Asbestos Information Center,
                                     New York, NY, October 5, 1999.
Senator Charles Grassley,
Chairman, Subcommittee for Administrative Oversight and the Courts,
Hart Senate Office Building, Washington, DC.
    Dear Senator Grassley: The major portion of this testimony was 
prepared as a letter to Senator Torricelli and presented to him at a 
meeting in his office in Newark. I present for inclusion in the record 
that letter with some slight modification. In addition to the White 
Lung Asbestos Information Center, the current testimony represents the 
view of Consumers For Civil Justice, the largest consumer advocacy 
group in New Jersey. Since our meeting with Senator Torricelli in May a 
lot has transpired that directly pertains to S. 758 and its House 
companion H.R. 1283. Opposition to the House bill from unions and 
asbestos victim groups has made clear that the bill in its current form 
lacks consensus. Thus the American Trial Lawyers Association has 
developed a set of principles for the Review of Asbestos Personal 
Injury and Wrongful Death Cases and in apparent response Christopher 
Edley has structured a proposal that is markedly different from the 
bill that is before us today. It is time for asbestos victims to state 
some principles:

                             False Premises

    The underlying premises upon which S. 758 or any of its future 
revisions are based are false. The first premise is that the defendant 
manufacturers are at risk of bankruptcy and that many jobs will be lost 
if these companies are not assisted. I know of no former asbestos 
manufacturers who are in danger of filing for bankruptcy. Most of those 
manufacturers who might benefit from the bill are members of the Center 
For Claims Resolution (CCR). The insurance coverage of these 
manufacturers is minimally 1.5 billion dollars. This we know from the 
Amchem settlement. The second premise is that asbestos litigation is 
cluttering the courts. As has been repeatedly pointed out, asbestos 
compensation is a mature tort. All the major legal issues have been 
resolved many times over and the value of claims has historically 
evolved. Few cases go to trial, less than 100 in 1998. The tort system 
has brought homeostasis between victims and the defendant 
manufacturers. It's not hard to determine why the latter are not happy 
with this equilibrium. They've lost and find the tort system no longer 
serviceable.

                         Maximized Compensation

    I have agreed to review and comment on the efforts of Mr. Edley and 
in general to keep an open mind concerning the possibility of a 
legislative surrogate for asbestos tort. There is only one valid reason 
for an asbestos victim advocate to do this and that is to maximize 
asbestos victim compensation. As you know, the bankruptcy filing of 
Manville Corporation has worked out wonderfully for the newly re-named 
Johns-Manville Corporation but not so well for its victims who receive 
no more than 10 percent of the historical value of their claims from 
the settlement trust. Asbestos victims are not adequately compensated 
for their injuries. To date Mr. Edley's very fertile mind has 
effectively scuttled H.R. 1283 but it has not made any headway in 
putting on the table a guaranteed amount of money. Indeed, there has 
been no estimate of the dollar value of present and future liability, 
no research into defendant insurance assets and no discussion of 
maximizing victim compensation.
    There are two tortfeasors who as yet have not been held responsible 
for their participation in the generation of asbestos disease. The U.S. 
Government and the Tobacco Industry. I suggest linkage between the 
Justice Department's suit against tobacco and the complicit role of the 
U.S. Government in suppressing information and its failure to 
adequately protect workers through regulation. A portion of jury awards 
to the U.S. Government might be set aside for asbestos victim 
compensation. Any legislative replacement of tort should stipulate its 
primary goal as the maximization of asbestos victim compensation.

       Prevention and Early Detection of Asbestos Related Disease

    Advances in CAT scan technology, especially in the area of early 
lung cancer detection, holds the promise of dramatically improving the 
five year survival rate of asbestos related lung cancer. Any federally 
sponsored asbestos disease compensation program should involve early 
detection lung cancer monitoring. (See the NY Times, July 9, 1999). 
Targeted smoking cessation programs should also be made available to 
asbestos victims.

                Letter to Senator Torricelli (May, 1999)

    1 am writing in opposition to S. 758, the so-called ``Fairness in 
Asbestos Compensation Act of 1999.'' This bill is reminiscent of a long 
line of asbestos bailout schemes devised by the former manufacturers of 
asbestos products. The pillar, upon which asbestos victim litigation 
has been successfully brought, has not changed over the past three and 
a half decades. The industry that seeks your protection from our 
judicial system remains the same industry that knew of the health 
hazards of asbestos exposure and willfully, routinely, and 
energetically kept that information from the workers who manufactured 
and installed their products and from the consumers who ultimately used 
them.
    The ostensible purpose of S. 758 is to reduce markedly the number 
of tort claims filed against the former manufacturers of asbestos 
products, while providing fair and timely compensation for asbestos 
victims. In reality, the bill creates a class of citizens, asbestos 
victims, whose access to our civil justice system would be rendered far 
different and greatly inferior to that of all other citizens. It would 
also create a class of manufacturers--the former manufacturers of 
asbestos products--who would be afforded an unprecedented level of tort 
protection. The tobacco industry is keenly watching for the fate of 
this bill. What's good for the goose is good for the gander.
    The right to a jury trial and day in court is as good as eliminated 
in S. 758 which sets up an industry funded Asbestos Resolution 
Corporation (ARC). The ARC would require that the asbestos victim 
obtain a Certificate of Eligibility for his/her claim through meeting 
unprecedented and onerous medical criteria (discussed below). If the 
Certificate of Eligibility is obtained, the asbestos victim, who is 
unsatisfied with the settlement offer, must then submit to mediation. 
Only after mediation has failed is the victim allowed to file a civil 
action or proceed to Alternative Dispute Resolution. If the victim was 
unable to obtain a Certificate of Eligibility, he would have no right 
to file a civil action in any court, state or federal.
    The transference of such power to validate or liquidate the assets 
of victims, i.e., their claim under the law for compensation for 
injury, from our independent Judiciary to a Corporation whose 
independence would always be suspect because of its funding structure, 
demands close and careful scrutiny as to both its underlying 
justification and fairness.

                            I. JUSTIFICATION

    The asbestos manufacturers who have written this bill contend that 
asbestos personal injury litigation is ``unfair and inefficient and 
poses a crushing burden on litigants and taxpayers alike.'' There is 
little doubt that the defendants and their insurers have had to ante up 
billions of dollars as the result of asbestos litigation. They get no 
sympathy from this quarter.
    I have helped too many of my members die and have watched too many 
widows mourn and adjust, some successfully, some not, to the loneliness 
of life without a spouse. As for the burden of litigation (court costs 
largely) which the taxpayer must bear, keep in mind that this is an 
expense of a democratic society. If there are excesses unique to 
asbestos litigation, they are largely created by the stalling tactics 
of the asbestos defendants. In light of these tactics, the claim that 
asbestos litigation has not been able to provide compensation swiftly, 
truly bewilders. Once the die establishing the culpability of the 
manufacturers was cast, and it was cast early on, delay and deception 
became their overarching strategy.
    Keep also in mind that what economists call the externalization of 
costs has been put at $500 billion for the production of asbestos 
products. These are the costs which accrue to society at large and 
which are not paid by the manufacturers themselves. These are the costs 
associated with loss of income, worker compensation, asbestos related 
burdens on Social Security, SS Disability, Medicare, Medicaid and other 
social services, and the cost of asbestos abatement and control in the 
thousands of buildings where the material is in place and continues to 
deteriorate. In light of these costs the manufactures' concern for the 
taxpayer in the present instance hints of the disingenuous.
    The asbestos manufacturers also contend that 150,000 cases are 
currently pending and that tens of thousands of new cases are being 
filed each year, with the inference that these cases will finally be 
resolved through trial. This is not the case. As the defendants point 
out, asbestos litigation is a mature tort. This means that most cases 
are settled out of court with both parties having clear understandings 
as to the historical value of claims. In fact, the homeostasis wrought 
by years of litigation would be severely upset by the introduction of a 
mechanism entirely the product of only one of the parties to the most 
significant mass tort in history.
    The asbestos manufacturers contend that ``in many courts, the vast 
majority of pending asbestos claims are filed by individuals who suffer 
no present asbestos-related impairment'' and that ``these claims divert 
the resources of defendants from compensating individuals who are 
suffering from serious asbestos-related disease.'' This statement is 
not accurate.
    Asbestosis is a compensable disease and is usually accompanied by 
lung function impairment. Likewise in the majority of pleural plaque 
cases (72 percent according to one study) lung function impairment is 
involved.
    The manufactures' argument is a classic blame the victim argument. 
Asbestosis victims or pleural plaque victims with slight or no lung 
function impairment have the audacity, so the argument goes, to file 
their lawful claims and thus deny fair compensation to those who are 
really injured. Never mind that as much as 30 percent or more of their 
lung tissue might be affected by scarring and that their fiber burden 
is often in the millions per gram of lung tissue, or that their immune 
systems are compromised. Never mind that their exposures were known to 
the manufacturers and could have been prevented. Forgive the 
incredulity, but I do not believe that if the claims of the so-called 
non-impaired were wiped out in every state and federal court that the 
historical value of a mesothelioma case would rise by one penny as a 
result.
    The manufacturers also contend that ``in order to obtain 
compensation for non-malignant disease, claimants often must give up 
their right to obtain compensation later on, if they develop an 
asbestos-related cancer.'' The manufacturers have used the fact that 
asbestos victims are often economically stressed to buy protection 
against the liability of future asbestos-related cancers. They need to 
stop this inhumane practice.

                              II. FAIRNESS

    Claims adjudication under S. 758 is fundamental unfair and 
manifestly an industry product:

A. Medical criteria

    The medical criteria, which must be met for the Corporation to 
issue a Certificate of Eligibility, are more stringent than would be 
applied in most state jurisdictions. This is true for pleural plaques, 
asbestosis, mesothelioma and lung cancer.
    Asbestosis and pleural disease victims must not only have x-rays 
that definitively show disease but also pulmonary function tests that 
demonstrate significant lung impairment. The majority of asbestos 
victims who at present have viable court cases would not meet the 
bill's eligibility criteria. An individual could have 30 percent of his 
lung tissue scarred and lose as much as 20 percent or more of his lung 
capacity but not be injured sufficiently to warrant compensation.
    Mesothelioma victims must meet criteria, that no court requires for 
the diagnoses of Mesothelioma. First, an invasive procedure must be 
performed to obtain tissue for microscopic analysis and second the 
tissue must be evaluated by three Board Certified pathologists, one of 
whom must be a member of the United States-Canada Mesothelioma 
Reference Panel. For years courts have recognized that it is not always 
necessary to subject the mesothelioma victim to invasive procedures and 
when tissue is obtained, usually upon autopsy, the hospital pathologist 
is fully qualified to make the diagnosis.
    Asbestos Lung Cancer cases face in most instances insurmountable 
barriers to claim eligibility. First, the lung cancer claim must be 
accompanied by a diagnosis of asbestosis or pleural disease which meet 
the criteria for impairment stated above. The assumption here is that 
asbestos related lung cancer will not appear if non-malignant disease 
is not also present. This is simply unscientific. Asbestos exposure is 
the criterion for establishing a lung cancer as asbestos related.
    All lung cancer claims require the establishment (if a minimum 12 
year latency period and a minimum of 15 years of asbestos exposure. The 
latency period is unfair because the duration of latency is associated 
with the individual's background risk. Thus the older the lung cancer 
victim is at time of exposure the shorter is the latency period.
    The bill's criterion for establishing 15 years of exposure is 
unreasonable on many grounds. First, 15 years of exposure is not 
required to produce lung cancer. Greater intensity of exposure in a 
short time is just as productive of lung cancer as lesser exposure over 
a shorter time. Second, the way asbestos exposure is calculated for 
exposures occurring from 1972 onward is particularly cynical. Each year 
of exposure that occurred between 1972 and 1976 would count as only \1/
2\ year toward the 15 year exposure criterion if the manufacturer could 
show that asbestos operations complied with the then current OSHA 
Permissible Exposure Limit (PEL) of 5 million fibers per cubic meter of 
air. By its own admission OSHA has stipulated that it did not intend 
for that PEL to substantially reduce the risk of asbestos related 
cancers. Indeed, at that PEL the risk of death is 150 per 1000 exposed 
workers for 20-40 years of work. Thus even one year of work at the PEL 
substantially increases the workers risk of asbestos cancer of all 
types.
    If the asbestos victim wishes to have his exposure from 1976 
through 1979 count as a full year of exposure, then he, the victim, 
must demonstrate that the employer's asbestos operations were not in 
compliance with the then current PEL of 2 million fibers per cubic 
meter of air. This is virtually impossible. In many circumstances the 
data does not exist, in other circumstances it does not reflect actual 
exposures. Even when the data legitimately show compliance with the 
PEL, the increased risk of lung cancer even for one year of exposure is 
substantial. A 2 million fibers per cubic meter of air the rate of 
death is 64 per 1000 workers exposed for 20-40 years of exposure. If 
the victim cannot show non-compliance with the PEL each year of 
exposure counts only as \1/2\ year.
    In lung cancer suits this is precisely the kind of information 
juries need to hear when companies offer the standard regulatory 
compliance defense. S. 758 raises acceptance of the regulatory 
compliance defense to the level of law. Indeed the bill goes far beyond 
that. Exposures that occur after 1979 do not count at all, unless the 
victim can demonstrate that for most of the year the employer's 
asbestos operations were not in compliance with the PEL. Thus the bill 
assumes that all employers are entitled to the regulatory compliance 
defense without demonstrating compliance. It is the victim's task to 
rebut.

                  WW II Shipyard Workers Badly Treated

    Of the bill's criteria for lung cancer, the most hurtful and 
irreconcilable with our American values of fair play is the treatment 
of our WW II shipyard workers. Over 15 million workers went into our 
shipyards nationwide after Dec 7, 1941; 4 million sustained significant 
exposure to asbestos. Many were there for several months only, while 
they awaited the draft or mobilization into the armed services. Some 
worked for a year, some for two years and others for three years. None 
were afforded information concerning asbestos hazards: none were 
provided with protective equipment and many thousands of them have died 
of asbestos related disease. Under the bill, the WW II shipyard workers 
would have to have worked for almost 4 full years to establish the 
fifteen year exposure requirement. The overwhelming majority of WW II 
shipyard workers would not meet the bill's lung cancer eligibility 
requirement.

B. Consolidation of cases

    While complaining about the unwieldiness of asbestos litigation, 
the asbestos manufacturers would prohibit the consolidation of cases, a 
device, which many jurisdictions, have found effective in providing a 
speedy resolution of cases.

C. Elimination of other causes of action

    Many jurisdictions allow damages for emotional distress caused by 
cancer diagnosis and prognoses of death. S. 758 eliminates such 
damages.
    It also eliminates compensation for medical monitoring, which is 
particularly important in light of the increased risk of cancer 
suffered by asbestos victims.

D. Current and future cases

    S. 758 has the audacity to eliminate all currently filed asbestos 
cases, which have not resulted in a final, non-appealable judgment. 
Asbestos victims in certain jurisdictions have been waiting years for 
their day in court. This is unspeakable arrogance.
    In conclusion, S. 758 is the product of an asbestos industry, which 
has acted unilaterally to construct a totally self-serving deus ex 
machina. It is an industry that does not need the help, since its 
insurance coverage is ample to satisfy its present and future 
obligations. And certain of its members do not see it as a help at all, 
most notably Owens-Corning Fiberglass. Please abandon your support of 
this bill.
            Sincerely,
                                   Myles O'Malley,
                                           Director of Research.

                                   William Rausnitz,
                                           President.

                                   Berenice Rosenberg,
                                           Vice-President and 
                                               Treasurer.

                                   Barbara Zeluck,
                                           Secretary and Editor.
  

                                
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