[Senate Hearing 107-993]
[From the U.S. Government Publishing Office]
S. Hrg. 107-993
ASBESTOS LITIGATION
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 25, 2002
__________
Serial No. J-107-105
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin JON KYL, Arizona
CHARLES E. SCHUMER, New York MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina MITCH McCONNELL, Kentucky
Bruce A. Cohen, Majority Chief Counsel and Staff Director
Sharon Prost, Minority Chief Counsel
Makan Delrahim, Minority Staff Director
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Brownback, Sam, a U.S. Senator from the State of Kansas, prepared
statement...................................................... 123
Cantwell, Hon. Maria, a U.S. Senator from the State of Washington 35
DeWine, Hon. Mike, A U.S. Senator from the State of Ohio,
prepared statement............................................. 167
Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa,
prepared statement............................................. 174
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 11
Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin,
prepared statement............................................. 222
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
prepared statement........................................... 223
WITNESSES
Austern, David T., General Counsel, Manville Personal Injury
Settlement Trust, Fairfax, Virginia............................ 15
Baron, Frederick M., Baron ad Budd, P.C., on behalf of the
Association of Trial Lawyers of American, Dallas, Texas........ 17
Baucus, Hon. Max, a U.S. Senator from the State of Montana....... 5
Dellinger, Walter E., O'Melveny and Myers, LLP, Washington, D.C.. 19
Hiatt, Jonathan P., General Counsel, American Federation of Labor
and Congress of Industrial Organizations, Washington, D.C...... 21
Kazan, Steve, Kazan, McClain, Edises, Abrams, Fernandex, Lyons
and Farrise, a Professioal Law Corporation, Oakland, California 24
Nelson, Hon. E. Benjamin, a U.S. Senator from the State of
Nebraska....................................................... 8
Voinovich, Hon. George V., a U.S. Senator from the State of Ohio. 13
QUESTION AND ANSWER
Response of Mr. Austern to a question submitted by Senator
Cantwell....................................................... 43
SUBMISSIONS FOR THE RECORD
American Academy of Actuaries, Jennifer L. Biggs, Chairperson,
Mass Torts Subcommittee, Washington, D.C., statement........... 47
American Chemistry Council, Arlington, Virginia, statement....... 70
American Conservative Union, W. Stephen Thayor, Director of
Legislative and Legal Policy, Alexandria, Virginia, letter..... 80
American Shareholders Association, Grover Norquist, President,
Washington, D.C., statement.................................... 82
Asbestos Alliance, Washington, D.C., statement................... 84
Austern, David T., General Counsel, Manville Personal Injury
Settlement Trust, Fairfax, Virginia, prepared statement........ 87
Baron, Frederick M., Baron and Budd, P.C., Dallas, Texas,
prepared statement............................................. 97
Baucus, Hon. Max, a U.S. Senator from the State of Montana,
prepared statement............................................. 107
Bergman, Matthew P., Partner, Senn Pageler & Frockt, Vashon,
Washington, statement.......................................... 110
Coalition for Asbestos Justice, Inc., Washington, D.C., statement 129
Dellinger, Walter E., O'Melveny and Myers, LLP, Washington, D.C.,
prepared statement............................................. 150
Heberling, Jon L., McGarvey, Heberling, Sullivan & McGarvey,
P.C., Kalispell, Montana, letter............................... 178
Hiatt, Jonathan P., General Counsel, American Federation of Labor
and Congress of Industrial Organizations, Washington, D.C.,
prepared statement and attachment.............................. 181
Kazan, Steven, Kazan, McClain, Edises, Abrams, Fernandez, Lyons
and Farrise, Oakland, California............................... 188
Manhatten Institute for Policy Research, Lester Brickman, Civil
Justice Forum, New York, New York, article..................... 226
National Association of Manufacturers, Washington, D.C.,
statement...................................................... 238
Nelson, Hon. E. Benjamin, a U.S. Senator from the State of
Nebraska, prepared statement................................... 245
Rutland Daily Herald, Ronald J. Gascon, commentary, September 25,
2002........................................................... 248
Small Business Survival Committee, Karen Kerrigan, Chairman,
Washington, D.C., letter and attachment........................ 249
Washington Post, Albert B. Crenshaw, article, September 25, 2002. 262
ASBESTOS LITIGATION
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WEDNESDAY, SEPTEMBER 25, 2002
U.S. Senate,
Committee on the Judiciary,
Washington, D.C.
The Committee met, Pursuant to notice, at 10:09 a.m., in
room SD-106, Dirksen Senate Office Building, Hon. Patrick J.
Leahy, Chairman of the Committee, presiding.
Present: Senators Leahy, Durbin, Cantwell, Edwards, Hatch,
Grassley, Specter, DeWine, Brownback, Carper [ex officio], and
Voinovich [ex officio].
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
STATE OF VERMONT
Chairman Leahy. Good morning. Today, we are going to hear
from experts representing all sides in asbestos litigation. We
want to get a better understanding of how asbestos victims,
defendants, and others fare in the courts. I hope today this
can be the beginning of a bipartisan dialog that will result in
a comprehensive review of the complex and competing issues
involved in providing fair and efficient compensation to
asbestos victims.
I believe for a sense of history we should acknowledge the
root cause of this litigation. For many years, many in
America's labor force were secretly poisoned. Unbeknownst to
the men and women who worked in our Nation's factories,
shipyards, mines, and constructionsites, the worksite air was
laced with a substance so harmful that they could become
critically ill by simply breathing, and they risked
contaminating their loved ones from their clothes after a hard
day's work.
In 1906, England adopted the first labor regulation warning
about the health effects of inhaling asbestos. In 1924, a
national insurance company studied the health effects of
asbestos exposure of Johns-Manville workers and then hid the
results.
In 1949, the American Medical Association Journal
editorialized on the harm from asbestos exposure. In 1989, the
Environmental Protection Agency banned asbestos in 3,500
products, only to see that overturned in an industry suit later
on. Asbestos, a known carcinogen, is still used today in many
products.
Corporate America had been on notice that asbestos carried
significant health risks for its workers and customers. Some
corporate executives ignored these warnings and manufactured,
mined, or used asbestos because it was inexpensive and
profitable. As a result, the marketplace has punished more than
50 companies that knew or should have known about the health
dangers of asbestos, forcing them into bankruptcy because of
asbestos-related liabilities.
Three thousand Americans die every single year from
mesothelioma, a horrible cancer caused only by asbestos. In
addition, hundreds of thousands of Americans suffer from other
injuries caused by asbestos exposure, including lung cancer,
throat cancer, and other diseases.
Perhaps the worst part of the asbestos nightmare is that
many victims do not know yet that they will get sick. That is
because of the long latency period for asbestos-related
diseases. Some cancers take 30 to 40 years to develop and it is
a ticking time bomb during that time. It is a time bomb ticking
in the bodies of thousands of innocent victims.
Approximately 120 million Americans have been or continue
to be exposed to asbestos. With the long latency period for
most asbestos-related diseases, simple math tells us that some
will be suffering for years to come.
Asbestos victims who filed claims with the Manville Trust
this year were, on average, first exposed to asbestos in 1961.
Since production in the U.S. did not slow until well into the
1980's and asbestos is still being used today, that means we
have decades to go before we know who is going to be sick. Many
more Americans will be seeking compensation for their asbestos-
related injuries for decades.
All this caused Supreme Court Justice Ruth Bader Ginsburg
in the Amchem v. Windsor case to call for legislative
intervention. I agree with Justice Ginsburg that Congress can
provide a secure, fair, and efficient means of compensating
victims. I believe that it is in the national interest to
encourage fair and expeditious settlement between companies and
asbestos victims, and that is why I have convened this hearing.
Actually, it is the first full Judiciary Committee hearing
since Justice Ginsburg urged congressional action.
But it is not going to be easy. It is going to require a
commitment by lawmakers and interested parties to conduct a
full and open debate, an honest debate, to identify issues and
craft possible solutions.
Industry-related injuries have existed for a long time.
Usually, industry eventually wakes up and takes steps to stop
it from happening. Both of my grandfathers were stone cutters
in Vermont, one emigrating to this country take up that work.
Both died of silicosis of the lungs. It was at a time when
many, many people knew the dangers, but did not want to spend
the slight extra amount more to protect the workers from the
dangers. Today, they are protected.
We have to conduct a debate, something Congress has not
done. The past failed efforts at legislative solutions were
thinly veiled attempts by some to avoid accountability for
their asbestos responsibilities through what they
euphemistically called ``tort reform.''
We could have a debate on tort reform, and probably should,
but let's not lose sight of what we are talking about here. We
are talking about these asbestos cases. If we keep it narrowed
to that, we can come up with a legislative solution.
Our first witness, Senator Nelson, talked to me over a year
ago about that, or a couple of years ago, I think it was, and
urged that why can't we come together for a legislative
solution.
We should learn from the past that any compensation plan
has to be fair to asbestos victims and their families. I
applaud the business leaders who met with me recently for their
recognition that victims have to come first in an alternative
compensation system.
I know we are going to have an honest and constructive
debate. Senator DeWine and I have attempted to prove in our
bipartisan asbestos tax legislation that if you encourage fair
settlements, it is a win-win situation for businesses and
victims. Chairman Baucus and Senator Grassley have included our
legislation in their small business tax package to be
considered soon by the Finance Committee.
Senator Hatch has written to me that he wishes to work in
this same bipartisan spirit on the asbestos litigation issue,
on that narrow issue, and not to include a lot of other
controversial areas in the debate.
It is going to take full-faith efforts of all the people--
the industry, workers, victims--to come to it. We are going to
need full participation from the insurance industry. The press
reported this month that many insurers have refused to pay
claims that were related to the September 11 terrorist attacks,
and even threatened to pull business coverage if such claims
were filed. But we are going to need their participation and we
are going to need cooperation to reach a better solution for
asbestos litigation.
I know the insurance industry enjoys a one-of-a-kind
statutory exemption from our antitrust laws, but that special
privilege has a special responsibility. I hope and expect that
they will be up to the task. I hope this hearing will start us
forward.
I might add that a solution is not one that adds more
corporate bankruptcies or creates artificial immunities or
legal fees, but one that actually compensates victims. So I put
all on notice on all sides of this issue that this chairman is
primarily interested in the victims and that is what we will
speak to.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Chairman Leahy. Senator Grassley, I understand you are just
going to put a statement in.
Senator Grassley. Yes.
[The prepared statement of Senator Grassley appears as a
submissions for the record.]
Chairman Leahy. Senator DeWine, I know you are going to put
a statement in, but you had something you wanted to say.
Senator DeWine. Yes, Mr. Chairman. Thank you very much. I
do have a full statement which I would like to have included as
part of the record.
Chairman Leahy. Without objection.
Senator DeWine. Let me Mr. Chairman, thank you for holding
this hearing. Your comments were very well taken. I look
forward to working with you and the other members of this
committee in trying to deal with a problem that candidly we as
a country have ignored too long, and I think this Congress has
ignored too long. We are the only ones at this point in our
history that can help provide a solution, and the courts, as
you have pointed out, have made that very, very clear.
Just before I came here today, I was talking to a
businessman from Ohio and I told him where I was going and what
we were talking about, and he made the point to me--he actually
grabbed me and he said, look, you need to understand this. One
of the things that we always will have the great ability to
make in this country is building material, he said, but that is
an industry that is in peril and it is an industry, in all the
jobs that it creates, that is in peril because of the asbestos
problem, and you need to understand that. The current system,
he said, is not fair to the victims and it is not fair to the
people who are trying to create jobs.
I must say, Mr. Chairman, that I totally agree. The status
quo is just not fair. It is grossly unfair to the victims. What
you find is an inconsistency in how victims are treated, a
horrible inconsistency that I don't think you will find
anyplace else in our country or in our judicial system.
You have a situation or a system today in which the victims
are treated differently. Their compensation is certainly not
fast and it is not complete. Very rarely is it ever complete.
You also have, at the same time, a dwindling number of
companies, as you have pointed out, and obviously that means
fewer jobs that can be created. Companies go out of business
and you lose those jobs.
But it also means, when you have fewer companies, that they
have more liability, and when they have more liability, it puts
them in danger, as well. It also means that they are in a less
good position. When you have fewer companies or fewer people
that you can call upon to pay the compensation, then the
victims suffer.
So we are in this downward spiral, and candidly only the
U.S. Congress can begin to stop that spiral. So I just
appreciate very much the fact that you are holding this
hearing. I know that the witnesses today will be very, very
helpful.
As all of us do, I have other hearings and other
obligations. I will be in and out, but I just wanted to thank
you for your attention to this matter and holding this very
timely hearing.
[The prepared statement of Senator DeWine appears as a
submission for the record.]
Chairman Leahy. The Senator from Ohio has been one also who
has encouraged me to do that.
I will go to the first two witnesses by seniority, Senator
Baucus and then Senator Nelson.
Senator Baucus. Well, I appreciate that, Mr. Chairman, but
actually Senator Nelson was here ahead of me and I would be
fine to defer to Senator Nelson.
Senator Nelson. Well, since I have some things I would like
to get from Senator Baucus before he finishes his work with the
Finance Committee, I would be very happy to defer to his
seniority.
[Laughter.]
Chairman Leahy. I will tell you what, guys. You go ahead
and start. I am just going to stay out of this one.
[Laughter.]
STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM THE STATE OF
MONTANA
Senator Baucus. Well, I would be very honored to proceed
first, then.
Thank you, Mr. Chairman and distinguished members of the
committee. I deeply appreciate, Mr. Chairman, your holding this
hearing. I think we can all agree that asbestos litigation in
this country is an enormous issue that will impact this Nation
for many years to come, and I applaud your leadership in
stepping up to address it head-on.
I want the record to reflect my deep concern that we not
lose sight of what is really at stake here, and that is making
sure that people who are sick or people who are likely to
become sick from exposure to asbestos are not denied the
ability to fight for their rights against the companies or
persons that injured them. That is absolutely the bottom line.
I know you have all heard me talk about Libby, Montana, but
Libby represents one of the grossest cases of corporate
irresponsibility and down-right criminal negligence that I have
ever seen. The extent of asbestos contamination in Libby, the
number of people who are sick or who have died from asbestos
exposure, is just staggering. The people of Libby suffer from
the deadly asbestos-caused cancer, mesothelioma, at a rate 100
times greater than the rest of the Nation. One in 1,000
residents of Libby suffer from the disease. The national
average is one out of a million.
Mr. Chairman and Senator Grassley, I wish you were with me
when I was in the living room of Les Scramstad. Les Scramstad
and others in Libby were talking about coming down from the
mine covered with dust from the mine, had no idea that they
were affected with a cancer-causing disease. Les would go home,
he would meet his wife, he would embrace his wife. His kids
would jump into his lap. All of them are now dying from
asbestos-related disease.
I mean, just think of it. He is dying. The guilt he has in
transferring the disease off to his wife and to his children--
it is one of the most heart-wrenching experiences I have ever
encountered. And I vowed to myself that day that I was going to
do all I can to make sure that justice is given to them.
The company knew what was going on. The company knew that
the asbestos dust from tremolite was causing this problem, and
yet they did not warn their employees. It is an outrage, and
the people of Libby, Montana, desperately need the help of this
committee and the Congress.
I might add, Mr. Chairman, that the Agency for Toxic
Substances and Disease Registry has found that Libby residents
suffer from all asbestos-related diseases at a rate of 40 to 60
times the national average.
Well, how could this happen? Well, a company named W.R.
Grace owned and operated a vermiculite mining and milling
operation in Libby. It just so happened that vermiculite was
contaminated by a deadly form of asbestos called tremolite.
W.R. Grace milling operations belched thousands of pounds
of asbestos-contaminated dust into the air each day, dust that
settled on the town of Libby, on cars, on homes, gardens, dust
that settled on children. Workers brought the dust home on
their clothes and exposed their families, as I mentioned.
Hundreds have died and hundreds more are sick.
The very worst part about this story is that W.R. Grace
knew exactly what it was doing. It knew that vermiculite dust
was contaminated with deadly asbestos. Yet, it told workers and
the town that it was harmless.
Now, W.R. Grace has filed for bankruptcy, wringing its
hands over escalating asbestos claims involving the vermiculite
products its produced, and shielding billions in assets from
the bankruptcy proceedings. It is an outrage. Through all this,
W.R. Grace has yet to step up and do the right thing in Libby.
It has ungraciously fought any attempts to beg, plead, or
cajole the company into living up to its responsibilities to
the people of Libby, Montana. It is attempting to drastically
scale back a paltry health care fund set up for former workers.
All the while, Grace lawyers have filed for over $30
million in fees accumulated in the past year alone defending
Grace in the bankruptcy proceeding. That $30 million would sure
go a long way in Libby, Montana, where health care costs are
increasingly rapidly, threatening the ability of that town to
get back on its economic feet after the blow it took from W.R.
Grace.
More worrisome still, many folks who have been diagnosed
with asbestos-related disease, some of whom are in their 30's
because they were exposed to asbestos as children, are now
essentially ininsurable going forward, because the costs of
securing private insurance are non-economical.
The costs to the community and State government related to
providing health coverage for uninsured sick people are
creating significant pressures on the State Medicaid fund, and
even causing workers' compensation problems for some private
business owners in Libby, like Stimson Lumber and Lincoln
County private enterprises already at marginal operations.
In addition, the Federal Government, through the U.S.
Environmental Protection Agency, will spend over $100 million
to clean up the contamination caused by W.R. Grace's
vermiculite mining operation. So everyone--taxpayers, local
businesses, the State of Montana, and especially the victims
themselves--everyone but W.R. Grace is bearing the burden and
suffering the pain caused by W.R. Grace's actions. Granted, we
can all agree that the State and Federal Governments should
have done more to protect the folks in Libby, but ultimately
the buck stops with Grace.
So I apologize if I am skeptical and find it hard to be
sympathetic to companies like W.R. Grace who claim they are
overburdened by asbestos lawsuits. I would agree, however, that
it is also not fair for companies like W.R. Grace to shift the
burden of their actions onto other companies that have not
filed for bankruptcy and that do not share Grace's liability or
responsibility.
But, again, this is where I would ask this committee to be
very, very careful in how you address asbestos litigation. It
would be so very easy to insulate bad actors like Grace from
their fair share of liability and responsibility, and to cutoff
rightful claimants like the Libby victims from ever receiving
their fair share of compensation for the wrong done to them
because, Mr. Chairman, it is a little too easy to say let's
cutoff those folks who aren't sick yet.
But we are talking about a disease that a 20- to 40-year
latency period. Given the exposure of the folks in Libby and
the type of exposure to deadly tremolite asbestos, it is very
likely that many more people in Libby will become very sick in
the future. We cannot cut them off.
I am sure you remember my opposition, Mr. Chairman, to the
Fairness in Asbestos Compensation Act of 2000. I believed very
strongly at the time that the administrative procedures set up
by that bill, particularly the medical eligibility criteria,
would effectively eliminate the legal rights of many residents
in Libby.
I wrote you at that time letting you know that I would
speak at length to any attempt to attach that legislation to
bankruptcy legislation that would be on the floor. I would ask
your permission to insert in the record a letter from some
Libby representatives that raises similar concerns about what
could be contained in revised asbestos litigation legislation
that this committee my consider.
Ultimately, Mr. Chairman, because W.R. Grace has filed for
bankruptcy, the rightful claims of Libby victims may never be
satisfied against W.R. Grace, no matter what this committee
chooses to do about asbestos litigation reform.
Perhaps part of this committee's review should include a
review of the injustices inherent in corporate bankruptcies,
like W.R. Grace's, that are related to asbestos litigation,
particularly those injustices associated with the ease with
which Grace hid a vast chunk of its assets from the reach of
the bankruptcy court and, by extension, from Libby victims.
Maybe some of those billions will be returned to the bankruptcy
estate. Maybe not, but it is certainly an appropriate piece of
the asbestos puzzle for this committee to take a very hard look
at.
Mr. Chairman, I have fought for every resource at the
disposal of the Federal Government to help the people of Libby,
Montana, get a clean bill of health. And despite W.R. Grace's
resistance, we have actually been making real progress on the
ground in cleaning up the town of Libby, cleaning up
contaminated homes and screening more than 8,000 current and
former Libby residents for asbestos-related disease or
exposure.
I am pursuing all other avenues to address long-term health
care costs for those who have been devastated by asbestos-
related disease, and screening costs for those who are worried
that they may become ill. This includes the possibility of
setting up some type of white lung trust fund.
These other avenues have to be pursued because W.R. Grace
has side-stepped its responsibilities to the community of
Libby. In your search for solutions to the real problems
associated with asbestos litigation, Mr. Chairman, I would ask
that you not make it easier for companies like W.R. Grace to
shift their liability to others. In fact, I believe you should
make it more difficult.
The focus here should not be on cutting off the rights of
victims, but on holding accountable those who are truly
responsible for the pain and suffering of real people like the
people of Libby, Montana.
Thank you again, Mr. Chairman, for allowing me to testify.
[The prepared statement of Senator Baucus appears as a
submission for the record.]
Chairman Leahy. Thank you. I appreciate it very much, and I
know that the Senator from Montana has been outspoken in his
feelings on this for years, and very articulate and very
knowledgeable. So I appreciate you coming here. I also know you
have another committee meeting you are supposed to be at, so we
appreciate that.
Senator Baucus. Thank you, Mr. Chairman.
Chairman Leahy. Senator Nelson first approached me some
time ago, actually almost from the time he came here, and said
we have got to start looking at this asbestos issue, we have
got to try to craft a legislative solution. He has been
tireless in working with Senators on both sides of the aisle
and I applaud him for that. It is in the best tradition of the
Senate.
Ben, we are delighted to have you here.
STATEMENT OF HON. E. BENJAMIN NELSON, A U.S. SENATOR FROM THE
STATE OF NEBRASKA
Senator Nelson. Well, thank you very much, Mr. Chairman and
members of the committee. I certainly appreciate, Senator
Leahy, the way in which you have characterized the effort in
compensating victims and making sure not only that the program
that we will be talking about ultimately compensates victims,
but making sure that at the end of the day they are, in fact,
compensated.
I want to thank you for this opportunity to appear here
today. I was a little nervous when I saw Senator Grassley
because I figured he would try to get some sort of a bet on the
Nebraska-Iowa State game. I am relieved to see that he has now
left and I will be able to escape that.
I was also a little bit concerned about your reference to
experts, and I was looking at the table and realized that you
must be referring to somebody other than Senator Baucus and
myself.
I want to thank you, and Senator Hatch as well for his
leadership as he walks in the door, for bringing together a
group of individuals, I think, today who can share information
that may lead to a legislative solution regarding the many
issues surrounding asbestos litigation.
These issues are of growing concern to people in my State
and I suspect, as we have heard from Senator Baucus and from
others, that the members of the committee have seen the same
increase in letters and calls from constituents that I have
about this issue.
Historically, in the early 1970's, lawsuits against
asbestos manufacturers opened the door for victims suffering
from asbestos-related diseases to be justly compensated for
their injuries. When Johns-Manville, the largest asbestos
manufacturer, filed for bankruptcy in 1982, there were less
than 20,000 asbestos cases, most on behalf of individuals with
severe asbestosis or mesothelioma, a vicious asbestos-related
cancer. The system worked. Sick people and their families were
given the financial security that they deserved.
But the system doesn't seem to be working anymore. It has
been overwhelmed by a flood of cases, some from individuals who
are not yet sick but could potentially get sick in the future.
We don't want to prevent those individuals from recovering down
the road, but we also need to work toward allowing those who
are sick now to recover now.
With the current docket load, that doesn't seem to be
happening. Over 90,000 new asbestos lawsuits were filed in
2001, representing an increase of 30,000 from the previous
year. However, the American Academy of Actuaries estimates that
there are only about 2,000 truly new mesothelioma cases filed
each year, another 2,000 to 3,000 cancer cases that are likely
attributed to asbestos, and a smaller number of serious
asbestosis cases.
As a result, we must work toward finding a way to address
the lawsuits of seriously ill individuals immediately, without
eliminating the ability for those who may become sick in the
future from having their case addressed at the appropriate
time.
The unfortunate result of these tens of thousands of
lawsuits is that people who are seriously sick and dying from
asbestos must wait longer to recover less money than they
deserve, if they recover anything at all. After transactions
costs and fees for both plaintiff and defense lawyers, only
about one-third of the money spent on asbestos litigation
actually reaches the claimants. Moreover, as insurance is
depleted and an increasing number of asbestos defendants
declare bankruptcy, it is inevitable that many asbestos victims
who develop cancer in the future will go uncompensated.
One such victim from my State was Val Johns. Mr. Johns was
born and lived his whole life in Bloomfield, Nebraska. It is
the egg capital of the world. It is in the northwest corner of
the State. He and his wife, Sharon, raised their three children
there. Two still live in the area and have their own families.
For 19 years before his death, Mr. Johns maintained the
town cemetery. He served in the U.S. Navy from 1957 to 1960 as
an electrician and he was exposed to asbestos pipe insulation
aboard the destroyer USS Charles Ware. Mr. Johns was diagnosed
with malignant mesothelioma in January 2000, and unfortunately
passed away on November 5, 2001.
He filed a lawsuit to pay his substantial medical bills and
to do something for his wife to support her after his death.
But all but one of the companies that made the asbestos he was
exposed to were already bankrupt. As a result, the settlement
for his family was a fraction of what it should have been.
The economic fall-out from this situation, though, extends
beyond sick victims. Because every company that manufactured
asbestos is now bankrupt, plaintiffs have been forced to seek
alternative defendants to take their place. According to the
RAND Institute for Civil Justice, 300 firms were listed as
defendants in asbestos cases in 1983. By 2002, RAND estimates
that more than 6,000 independent entities have been named as
asbestos liability defendants.
Many of these new defendants are small businesses located
in every community with little or no direct connection to
asbestos. I have heard from scores of small businesses in my
State--local hardware stores, plumbing contractors, auto parts
dealers, lumber yards. None of these businesses manufactured
asbestos. None sold or installed asbestos products, but these
businesses and the jobs they create are all at stake. They are
now afraid that as primary asbestos defendants declare
bankruptcy, they will be next in line for the thousands of
cases being filed and their businesses will not survive.
As the number of asbestos claims filed each year has nearly
tripled in the last 5 years, the pace of asbestos-related
bankruptcies has also accelerated dramatically. Since 1998,
more companies have filed for bankruptcy protection than in the
previous 20 years combined. And in the first 7 months of 2002,
12 companies facing significant asbestos liability filed for
bankruptcy, more than in any other 3-year period before 1999.
Firms declaring bankruptcy since 1998 employed more than
120,000 workers prior to their filing, many of whom were
significantly invested in their company's stock, pension, and
401(k) plans. According to Fortune magazine, for example, at
the time of Federal-Mogul's bankruptcy filing last year,
employees held 16 percent of the company's stock, which had
lost 99 percent of its value since January 1999. It was
reported that Federal-Mogul employees lost over $800 million in
their 401(k)'s. Similarly, about 14 percent of Owens Corning
shares, which lost 97 percent of their value in the 2-years
before its filing, were owned by employees.
I think we can all agree that those individuals with legal
claims who are very sick need to be taken care of in the most
timely and equitable manner possible. That should be our No. 1
priority. We must also work to ensure that those who are not
sick now but may become sick in the future are not precluded
from recovering, and that there are still funds available for
such a recovery.
Finally, we must consider the unpredictable economic impact
the immense amount of pending litigation could have on
secondary businesses and companies. The costs associated with
increased bankruptcy filings to business owners, employees, and
retirees could be devastating.
In order to prevent future Enron disasters for our older
workers nearing retirements, we must address the very real
potential threat and adverse impact this type litigation can
have on our economy if we don't address these inequities now.
We cannot afford to see more 401(k) and pension plans become
worthless if there is action that we can take to prevent that.
I am a strong believer that every American has a right to
his or her day in court. I believe also that people dying of
asbestos-related diseases deserve just compensation for
themselves and their families. Achieving the latter does not
require a change in our tort system. It requires the
restoration of the system's true purpose of providing relief to
those who need it most.
So, Mr. Chairman, I plan to work with you and the committee
in any way that we possibly can for the remainder of the year
and in the next Congress to help resolve these issues in a fair
and comprehensive manner. I thank you for the opportunity and
your attention to these very important issues today.
Thank you very much.
[The prepared statement of Senator Nelson appears as a
submission for the record.]
Senator Hatch. [presiding.] Thank you, Senator Nelson. We
appreciate your testimony here today.
We have a vote on, so the chairman has gone over to make
the vote and I am supposed to make my statement. I think I only
have about 6 minutes left, but let me see what I can do.
If you would go vote and tell them to hold it for me until
I get there----
Senator Nelson. I will. Thank you, Mr. Chairman.
STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE
OF UTAH
Senator Hatch. Thanks, Ben. I appreciate it.
I appreciate the chairman holding this hearing today to
examine the extremely important issue of asbestos litigation. I
don't think there are any serious doubts that our Nation faces
an asbestos litigation crisis. Nor do I believe that it can be
seriously disputed that some type of comprehensive solution is
necessary.
Over the past decade, a variety of developments have
greatly intensified the need and the urgency for a Federal
solution. An exponential increase in asbestos claims has
resulted in a wave of asbestos-related bankruptcies, and
consequently threatens to leave hundreds of thousands of
claimants without fair compensation and hundreds of thousands
of workers without jobs. Moreover, this crisis is impacting not
only the claims of those who are truly sick, but also the jobs
and pensions of employees of the defendant companies. The
Supreme Court has twice called upon the Congress to act and it
is time that we do so.
The current crisis is not going to get any better and it
will continue to worsen unless we act. In fact, as all of you
are aware, the RAND Institute for Civil Justice today released
their study of the asbestos litigation crisis. RAND identifies
that the number of claims continues to rise and that, to date,
over 600,000 people have filed claims typically against dozens
of defendants.
In addition, more than 6,000 companies have been named as
defendants in asbestos litigation. RAND also notes that about
two-thirds of the claims are now filed by the unimpaired, while
in the past they were filed only by the manifestly ill. Former
Attorney General Griffin Bell recently denounced this type of
``jackpot justice.''
Because of this surge in litigation, companies, many of
whom never manufactured asbestos nor marketed it, are going
bankrupt paying people who are not sick, may never be sick, and
who therefore may not need immediate compensation. Let me be
clear. I do not advocate denying the deserving claimants timely
and appropriate compensation, but I do think that we have to
make some choices here about prioritizing who is paid now and
who is paid later. If we don't, there won't be a ``later'' and
true victims of asbestos exposure, as well as the companies,
employees and pensioners, will pay the price.
An editorial in the Wall Street Journal suggested, quote,
``Seeing legislators pull their hair over Enron is a pleasant
diversion, but if Washington is really interested in the jobs
and livelihood of American citizens it might be better off
paying attention to the runaway blob known as asbestos
litigation,'' unquote, in its characteristically interesting
language.
Why do the number of claims continue to increase when
actual asbestos exposure has decreased over the years? Because
the current litigation system has in some instances required
that those who are not yet ill file their claims now or risk
being barred by the statute of limitations later. This is
coupled with a, quote, ``enterprising,'' unquote, trial bar
that has orchestrated mass asbestos screenings to identify
potential clients.
Don't get me wrong. Legitimate medical screenings can help
to identify valid health concerns worthy of compensation.
However, frequently these screenings are nothing more than an
effort to generate large numbers of potential claimants in an
effort to force a defendant to settle a case, regardless of
culpability or causal relation to the claimants, rather than
incur the costs of litigation.
In a letter to the editor of the American Journal of
Industrial Medicine in May of this year, Dr. David Egilman,
M.D. relates that for the past several years, he has served as
an expert witness in liability cases primarily at the request
of plaintiffs' attorneys. Over the past 2 years, he has, quote,
``noted that many of these individuals could not (due to
inadequate latency or exposure) and did not manifest any
evidence of asbestos-related disease,'' unquote.
And he notes that, quote, ``most of these cases are
generated by 'screenings' which plaintiff lawyers have
sponsored over the past several years to attract new asbestos
clients for lawsuits,'' unquote. He was, quote, ``amazed to
discover that in some of these screenings, the worker's x-ray
had been 'shopped around' to as many as six radiologists until
a slightly positive reading was reported by at least one of
them,'' unquote. And he points out that a payment plan for the
reader is often based on the reading result--a higher price for
a higher reading of exposure. Now, I doubt seriously that that
encourages objectivity.
In addition, the American Academy of Actuaries reports in
its December 2001 Overview of Asbestos Issues and Trends that
two recent estimates, quote, ``indicate that the ultimate costs
arising from U.S. exposure to asbestos could range from $200 to
$275 billion,'' unquote. By some estimates, this amount exceeds
the current estimates for all Superfund clean-up sites
combined, Hurricane Andrew, or the September 11 terrorist
attacks. Now, that is incredible.
As I am sure our chairman is aware, asbestos litigation has
already bankrupted over 60 companies, and one-third of those
bankruptcies have happened in the last two-and-half years. No
one can credibly deny that this is a serious problem.
As Mr. Austern will testify, the number of claims is
outstripping the resources of bankruptcy trusts to pay the true
value of a sick person's claim. Trusts such as Manville are
today only able to pay approximately 5 percent of a claim's
liquidated value because of the increased number of claims
filed each year that defy all estimated projections.
It is possible that some of these companies may be able to
emerge from bankruptcy someday. However, what is the cost of
the delay caused by a reorganization and approval of a
bankruptcy trust? What about the vastly diminished resources
available for deserving claimants? Those that are sick may die
before they receive compensation.
Incredibly, there are some who will attempt to claim that
there is no crisis at all, even some who are here today. Some
will contend that the current system will sort itself out and
that therefore there is no need for reform. But the general
consensus out there is that there is a real problem, and I
refuse to bury my head in the sand.
I am encouraged that there are those among the trial bar
that recognize the problem and see the need for reform. I know
that Mr. Kazan recognizes this problem, especially because it
affects his clients most directly. I look forward to hearing
him elaborate on how the current system results in those that
are truly ill having their awards reduced.
I am interesting in hearing about how the vast numbers of
those who are not ill are draining the limited resources of the
defendant companies, often driving them into bankruptcy, where
the risk is that there will be little, if any, compensation
left for the truly deserving.
I submit for the record a copy of a full-page ad that was
placed in Roll Call recently and signed by 20 of Mr. Kazan's
colleagues in the asbestos trial bar. The ad urges simple
legislative reform to ensure that the truly sick are
compensated, while also guaranteeing those who are healthy
their day in court, if and when they become ill.
Senator Hatch. I would like the written statements from the
American Academy of Actuaries, the Coalition for Asbestos
Justice, the National Association of Manufacturers, as well as
several letters that I have received, to be submitted for the
record.
Without objection, they will be. I think the information
they provide is helpful to our analysis and essential to the
debate of this issue.
In conclusion, I would like to say that I sincerely hope my
colleagues will agree to work together so that we can attempt
to resolve this issue in a reasonable and straightforward
manner before its crippling effects further endanger our
economy and cheat true victims out of compensation and innocent
employees out of their jobs and pensions.
I appreciate those who will testify here today and I hope
we can shed some light on this issue and I hope that this
statement has helped to do that.
With that, we will recess until the chairman gets back.
[The Committee stood in recess from 10:50 a.m. to 11:14
a.m.]
Chairman Leahy. Many of you, as I look around this room,
are very familiar with the Senate and understand why the bells
have been buzzing and the votes have been underway, a series of
them. The one thing that will get us out of the room, of
course, is the votes.
I did say I would recognize Senator Voinovich, who, while
not a member of this committee, is a very valued member of the
Senate, a former Governor, and one whose views I respect.
Senator you wanted to make a statement.
STATEMENT OF HON. GEORGE V. VOINOVICH, A U.S. SENATOR FROM THE
STATE OF OHIO
Senator Voinovich. Thank you, Mr. Chairman. I want to thank
you and Senator Hatch for holding this hearing and allowing me
to sit in on it. I have had a longstanding interest in this
issue since I was Governor of Ohio. I have had great concern
about the victims of asbestos.
I think the chairman will recall that I was in the
forefront a couple of years ago of getting a worker's
compensation bill passed for the victims of the cold war, those
people who worked in our uranium enrichment plants and others
that had been treated shabbily by our Government. I have also
been concerned about this issue. I lost my uncle at the age of
59 from leukemia, which I believe at the time would not have
happened if he hadn't been exposed to things where he was doing
his maintenance work.
The point is that we have got to strike a balance between
the rights of aggrieved parties to bring lawsuits and the right
of society to be protected against frivolous lawsuits and
judgments that are disproportionate to compensating the injured
and made at the expense of society as a whole.
I think, Mr. Chairman, that most would agree that the issue
of asbestos litigation is presenting a crisis in our country.
More than 50 companies have gone into bankruptcy, and I am
really concerned about the companies in Ohio. I think it is
hurting the victims and I think it is hurting society.
Owens Corning, headquartered in Toledo, went bankrupt in
2000 and lost 97 percent of the value of its stock; 14 percent
of it was owned by the employees. Federal-Mogul was already
mentioned by Senator Nelson, and they lost 99 percent of their
stock value and 16 percent was held by the employees. Of
course, Babcock and Wilcox is also headquartered in Ohio, and
another Ohio company, Owen Illinois, of Toledo, is faced with
asbestos liability as well. These bankruptcies have had
negative impacts on the victims who are really sick and who do
not receive compensation. Employees in my State lose their
pensions and jobs, and solvent companies face even more
financial strain.
The chairman knows that the Government required the use of
asbestos in building materials from before World War II until
1986, long after the health risks were known. Consequently, the
Government, I believe, has a role to play in making sure that
the sick receive compensation without bankrupting all of
corporate America.
Again, Mr. Chairman, I thank you very much for allowing me
to sit in on this hearing.
Chairman Leahy. Well, I thank you, and I thank you for your
interest in this.
The panel today includes David Austern, who is the
President of Claims Resolution Management Corporation. He is
General Counsel of the Manville Personal Injury Settlement
Trust. The Johns-Manville Trust is the bellwether for national
asbestos claims. Mr. Austern has run the Trust since it first
began paying asbestos claims in 1988. That was the result of
the Johns-Manville bankruptcy. He is highly respected by all
parties in the asbestos litigation debate as an independent
voice with years of experience.
He is joined by Fred Baron, who is a partner in the law
firm of Baron and Budd, in Dallas, Texas. He represented his
first claim with an asbestos-related illness in 1973. The
National Law Journal named Mr. Baron as one of the most
influential lawyers in the United States for his work in
protecting the rights of victims of asbestos. He has twice
represented asbestos victims before the Supreme Court in the
Amchem v. Windsor and Ortiz v. Fibreboard Corporation cases.
Mr. Walter Dellinger is joining us today. He served as
Solicitor General for the 1996-1997 term of the Supreme Court.
He is now a partner with O'Melveny and Myers. He is well-known
to this committee. He argued nine cases before the Supreme
Court as Solicitor General, including physician-assisted
suicide, the Brady Act, the Religious Freedom Restoration Act,
and the line item veto. This past July, he testified at our
hearing on class action litigation on behalf of the Chamber of
Commerce, and we welcome him back.
Jonathan Hiatt is the General Counsel of the American
Federation of Labor and Congress of Industrial Organizations.
The AFL-CIO represents 13 million working men and women, many
of them exposed to asbestos at shipyards, constructionsites,
and other workplaces. Mr. Hiatt has served as General Counsel
at the AFL-CIO since 1995, and committee members have relied on
his expertise many, many times.
Finally, Mr. Steven Kazan is a partner at the law firm of
Kazan McClain, in Oakland. He represented for the first time an
asbestos victim in 1974, if I am correct. He has represented
thousands of the most seriously ill asbestos victims, and from
1998 to the year 2000 he served as Co-Chair of the Mealey's
National Asbestos Litigation Conference.
I thank you all. Mr. Austern, why don't we begin with you,
sir? And, again, I appreciate all of you coming here and I
appreciate you taking the time on this hearing.
STATEMENT OF DAVID T. AUSTERN, GENERAL COUNSEL, MANVILLE
PERSONAL INJURY SETTLEMENT TRUST, FAIRFAX, VIRGINIA
Mr. Austern. Thank you, Mr. Chairman. As noted, I am
president of the corporation which processes claims not only
for the Manville Trust, for which I serve as general counsel,
but we also handle asbestos claims for three other asbestos
trusts.
As reflected in my written submission to the committee, and
as noted in the written in the written submissions of some
other witnesses today, the Manville Trust has received more
asbestos claims than any defendant in the tort system and more
asbestos claims than any other asbestos trust. Thus far, we
have received almost 600,000 claims.
Our extensive asbestos claims data base has between 25
percent and 30 percent more claims than any other entity. I
would like to share with the committee some of what that
asbestos claims data base shows.
First, in addition to receiving almost 600,000 claims, we
have paid almost 500,000 of these claimants approximately $2.9
billion. From the beginning of the Trust to date, 11 percent of
the people we have paid have had cancer claims and 89 percent
have had non-cancer claims.
Recently, the cancer versus non-cancer division has
changed, so that in the year 2000, 9 percent of the claims we
received were cancer claims and 91 percent were non-cancer
claims. And in 2001, cancer claims were 6 percent of the claims
filed and non-cancer claims were 94 percent of the claims
filed.
We pay claims as directed by our negotiated and court-
approved trust distribution process, and we pay non-cancer and
cancer claims as directed by that. To date, approximately $2
billion of our $2.9 billion in paid claims has gone to non-
cancer claims, and we, of course, have no flexibility in this
matter.
With respect to disease progression and how many of the
non-cancers will eventually get cancer, of the over 400,000
non-cancer claimants who have been paid by the Trust, 2,947 of
them, after they received the non-cancer payment, then
developed an asbestos-related cancer, for which they filed a
claim. This is substantially less than 1 percent of all the
non-cancer claims we have paid.
Recently, there have been amendments to our claims
processing system, and while these amendments, in my opinion,
at least, are a substantial improvement over the existing
system, they certainly don't please everyone. Although in the
administration of our claims processing system and indeed in
the recent amendments to it we try to be sensitive to the
concerns that I know Mr. Baron will speak to, as well as the
concerns I know Mr. Kazan will speak to, trying to meet the
concerns of all these parties means that inexorably we are not
going to please everyone all the time.
But so much for history. Where are we in the life cycle of
asbestos claims filings? It is abundantly clear that predicting
how many future claims there are going to be is very difficult.
It has always in the past been inaccurate and it has always in
the past invariably underestimated the number of future claims.
My written submission, which by the way I recently
discovered overstates the Tillinghast-Towers Perrin predicted
total asbestos liabilities and claims--my written submission
presents the dismal history of trying to predict future claims.
However, based on the predictions, first, of the expert
asbestos claims forecaster employed by the plaintiffs' bar, we
have received only about 45 percent of all the asbestos claims
we will receive. Other forecasts of future asbestos claims
suggest that we have received only 30 percent or so of the
claims we will receive. And some future claims forecasts are
even worse; that is, they predict we will receive over 3
million asbestos claims, such that we have received only 20
percent of the claims we will receive. Almost everyone agrees,
however, with respect to asbestos claims we are not halfway
there and we are looking at 20 years or so of substantial
future claims filings, and thereafter even more years with some
claim filings.
Therefore, in exploring whether there is an appropriate
legislative solution to this problem, I would encourage that
the driving public policy consideration, first, not be
constrained by the view that the asbestos claims filings are on
their way down--they are not--and, second, that it not be
constrained by how we or any other system processes asbestos
claims. Rather, I would hope that the driving public policy
consideration for any legislation and any legislative solution
be based on an absolutely clean slate so that new ideas and new
solutions can be considered.
Thank you very much.
[The prepared statement of Mr. Austern appears as a
submission for the record.]
Chairman Leahy. Thank you very much.
Mr. Baron?
STATEMENT OF FREDERICK M. BARON, BARON AND BUDD, P.C., DALLAS,
TEXAS, ON BEHALF OF THE ASSOCIATION OF TRIAL LAWYERS OF AMERICA
Mr. Baron. Mr. Chairman, good morning. My name is Fred
Baron. I am here today to present the views of the Association
of Trial Lawyers of America on asbestos litigation, and,
because of my own experience as a lawyer for asbestos victims
for almost 30 years, offer my own personal observations. We
have submitted a comprehensive written statement of our
position which summarizes the positions of ATLA on asbestos
litigation.
In a nutshell, Senator Leahy, as you have pointed out, the
principal problem is the fact that for over 50 years, tens of
millions of American workers were unknowingly exposed to
asbestos fibers occupationally and hundreds of thousands, if
not millions, have suffered injuries that are compensable under
the State common laws of all 50 States. ATLA's first and
principal interest is to assure that there is a system in place
that these victims can use to obtain adequate and expeditious
compensation for their injuries.
This morning, I would like to address three issues: first,
the issue of the so-called court congestion; second, the issue
of unimpaired claims; and, third, offer some suggestions as to
what might be done to help asbestos victims.
Let's talk about court congestion first. I filed my first
claim for an asbestos victim in 1973. It was a long, hard,
expensive litigation. Indeed, the first 10 or 15 years of
asbestos litigation involved enormously expensive, costly
litigation between the victims and the defendants. But that
only matched the long, lengthy, costly litigation between the
asbestos defendants and their insurance carriers over whether
or not there would be coverage for these claims.
Studies that were undertaken in the 1980's showed correctly
that the amount of money that was being spent on asbestos
litigation was enormous and the amount of compensation that was
being paid to victims was relatively paltry in relation to that
number. Over the last decade, after hundreds and hundreds of
claims were tried to juries in the 1980's, that has changed.
Senator Leahy, I'd like to refer to a chart regarding
asbestos trials. There are about 50,000 asbestos claims filed
in the State and Federal courts each year. Of that 50,000, 90
percent of them are filed in the State courts rather than in
the Federal courts, and 85 percent of the claims are filed in
only 10 States.
As you can see from this chart, the total number of trials
involving asbestos claims in the United States during the
period January 2000 to December 2000, was only 55 claims, and
for last year, 2001, it was only 61 claims. So in terms of
court time, only 61 trials were held in all of the State and
Federal courts in the United States last year, and I believe
that number will be less this year. That is matched against
50,000 asbestos claims being filed in the State and Federal
courts and 50,000 asbestos claimants settling their claims.
Second, most of the courts in these impacted jurisdictions,
the ten or so States, have developed special litigation
processes for asbestos cases. If an individual presents with a
significant disease such as mesothelioma, that individual goes
to the head of the line.
When a client comes into my office today with mesothelioma,
I can assure that client that they will receive their first
compensation within 90 days, and the likelihood is strong that
their trial will occur in 12 months. As to an asbestosis
victim, again because of the enormous number of administrative
settlements that we have reached, victims get compensated
usually within 6 months and their case is often completed
within 24 months.
Next, I would like to visit the issue of the so-called
flood of unimpaired claims. First, and most important, is a
definitional issue. No State in the United States permits a
person who is exposed to asbestos but who has not been
diagnosed with an asbestos-related disease to successfully
prosecute a claim. There is no such thing as a claim for
concern about ``I am worried that I'm going to get sick
later.'' None of the 50 States permit such claims to be
successfully prosecuted.
Recently, I took the deposition of a claims manager of the
largest group of asbestos defendants, and he told me with a
straight face under oath that he did not believe he had ever
paid a dime to anyone who did not have a diagnosed asbestos-
related disease.
There are essentially three forms of asbestos-related
disease. First is pleural disease. Pleural disease is a
scarring of the lining of the lung. Admittedly, that does not
cause disability, but it clearly is a diagnosed injury that is
made by a physician.
Second is asbestosis, which represents the largest number
of claims. Asbestosis is a scarring of the lining of the lung
and the interior of the lung. This is a disease that the
medical textbooks say represent a significant problem.
Asbestosis, by all accounts, is progressive, it is
irreversible, and if it goes on long enough, it can be
terminal. Certainly, victims of asbestosis deserve
compensation.
Third is cancer. Asbestos does indeed cause cancer. It
causes mesothelioma and lung cancer. But in terms of the
enormity of the problem, the National Cancer Institute believes
there are only about 2,800 mesothelioma deaths a year in the
United States. About 1,600 of those individuals file claims. I
can tell you today that most victims of mesothelima receive
compensation--not all of them--but most of them receive
compensation in mid to high seven figures.
As to the pleural claims, I have the numbers from the
Manville Trust here on a chart and in terms of the percentage
of all claims filed, it has gone from 24 percent, which was
pre-1995, down to 14 percent in 2001. And in terms of the
dollars paid by the Manville Trust, pre-1995 it was 7 percent,
and since then only 4 percent. So all the dollars paid by the
Manville Trust, only 4 percent have gone to pleural claims. All
other moneys have been paid to individuals who have presented a
physician's diagnosis of asbestosis or cancer.
What can be done by Congress to help? It's my opinion the
most important thing that needed to be done has been
accomplished with the passage of Section 524(g) of the
Bankruptcy Code. That provision assures funding for future
claimants and permits bankrupt defendants to leave bankruptcy
as solvent, reorganized companies.
Remember, virtually every one of the asbestos bankruptcies
has been a Chapter 11 bankruptcy, not a Chapter 7 bankruptcy.
No jobs are lost. The best example is the Johns-Manville
Company. When it emerged from bankruptcy in 1987, its assets,
$2 billion, were placed into a trust for victims. To date, over
$2.9 billion has been paid to victims, and over $2 billion
still remains in the trust because of successful asset
management. Berkshire Hathaway now owns Johns-Manville and it
is a larger, healthier company than it was before it entered
bankruptcy.
Certainly, there are some things that can be done to help.
Number one is tax relief for 524g trusts. There is no reason
why the trusts who are paying money to victims should be taxed
at the normal rates.
I understand, Senator Leahy, you have sponsored a bill that
would give a tax exemption to the asbestos-related trusts. That
would be an excellent idea and a good start to provide more
money for victims.
Finally, there have been some suggestions involving the
creation of a National compensation fund for asbestos victims.
ATLA believes that such proposals are interesting and should be
explored. But if this Committee is going to pursue such
proposals the first and foremost thing that has to happen is a
thorough investigation of the total resources that might be
available from all sources.
Again, ATLA believes the principal concern of this
Committee should be to assure that victims of this
unprecedented industrial tragedy are properly compensated.
Thank you, Senator.
[The prepared statement of Mr. Baron appears as a
submission for the record.]
Chairman Leahy. Mr. Dellinger, you are here representing--
--
STATEMENT OF WALTER E. DELLINGER, O'MELVENY AND MYERS, LLP,
WASHINGTON, D.C.
Mr. Dellinger. Mr. Chairman, I was invited to appear by
Senator Hatch, which I was pleased to accept. But I should also
note that the law firm with which I am a partner, O'Melveny and
Myers, has among its clients a number of companies who are
defendants in asbestos cases.
I further note that I personally filed a petition with the
U.S. Supreme Court asking the Court to review the trial plan in
West Virginia and a so far unsuccessful application to stay
that trial of----
Chairman Leahy. I mention that because as we let Mr. Baron
go over a couple minutes, we will let you go over a couple
minutes for balance.
Mr. Dellinger. Thank you, Mr. Chairman.
I think it is a great benefit to the Congress and to the
country that you and Senator Hatch and the other members of the
committee have set out to try to define the scope of this
problem and to see if there is some bipartisan effort that we
could make in order to ameliorate what I think everybody, with
the possible exception of Fred Baron, thinks is a quite serious
problem; indeed, what the U.S. Supreme Court has called a
crisis.
There are really several elements that have produced this
as a crisis. Before I went into the Government in 1993, I
looked at the asbestos situation and thought by the year 2002
that it would be beyond us. Since heavy use of occupational
asbestos ceased in the 1970's, we would be at that time seeing
the end of the process. But, in fact, we have a full-blown
crisis that has caused 60 bankruptcies and is threatening the
viability of claims by people who are seriously impaired.
Here is what has happened. I do think, in spite of Mr.
Baron's statistics, that the system is being flooded by people
who are not sick, and the RAND study which has been submitted
to this committee shows that, as well as other claims.
We know from the Manville Trust figures that we just heard
this morning that 94 percent of the 2001 claims were non-cancer
claims. Of that, there are no doubt some that are suffering
from severe forms of asbestosis which indeed can impair a
person. But every estimate--and I look in West Virginia--is
that far and away there are claims of people who are not sick.
Let me say precisely what I mean by that. I am using that
term, ``people who are not sick,'' as the American Medical
Association and the RAND study that term; that is, an
individual who experiences no decrease in the ability to
perform the activities of daily lives; in other words, as RAND
says, an individual who would be assigned a zero impairment
rating, according to the American Medical Association's
definition.
What has happened and the reason these claims are
compensable is that, increasingly, one is able to forum-shop
and go to a jurisdiction which will allow cases to be brought,
first of all, by people who are not demonstrating that they are
sick. The forum-shopping means that the problem is localized in
a few States and a few counties which are themselves adopting a
national legislative solution, when they are not a legislature
and they haven't been chosen by the people of the other 49
States and when the solution is itself flawed.
What happens is that you have a mass-trial proceeding like
the one in West Virginia where you set up a trial plan for
8,000 claims to be tried against over 250 defendants in a
single proceeding. It is going to be impossible to get a fair
trial. That means that settlements are forced, as they have
been this week, when no one knows whether those 8,000 claims
would indeed show up as being valid claims or impaired claims,
or whatever, because so many companies cannot afford to go
through that kind of process. When payments are made to people
who are not impaired, that then in turn brings another set of
cases that will never be examined closely and will go through a
mass-trial process.
What are the effects of this? There are adverse effects on
the defendant companies, on their employees, on their
shareholders and on pension programs. There are adverse effects
on plaintiffs who are seriously impaired, and Mr. Kazan will
speak to that this morning.
While there are some very strong companies who have now
been brought in as defendants in this case, that doesn't help a
victim suffering from severe mesothelioma or his or her
survivors. Companies that they could sue have gone bankrupt.
If you look at this morning's Washington Post, Mr.
Chairman, it notes the case of the widow of electrician Dale
Dahlke on the front page of the Business Section. He died of
mesothelioma. She has brought suit against 11 companies and all
11 have gone bankrupt. The fact that there are other companies
out there in the economy whom she can't sue and against whom
she has no claim that could be sued by other people does her no
good whatsoever.
I think Mr. Kazan will demonstrate that point quite
effectively that people now have claims they cannot get
reimbursed against companies that are in bankruptcy, when many
of those companies, nearly all of those companies, have made
payments to people who are not sick.
The trial process, finally, I think, not only causes a
problem for the economy, but it also calls into question that
fairness of the civil justice system. As the Committee on the
Judiciary, I think that is something about which you ought to
be concerned.
As someone who has taught civil procedure for many of the
years I was at Duke, I don't see any semblance in a civil
procedure book to the kind of trial plan that is going to go on
where you have got hundreds of defendants trying to make
defenses against thousands of plaintiffs at a single time. This
trial plan doesn't exist in the same universe as the Due
Process Clause of the United States Constitution. It is a trial
plan that was never designed to produce a fair result. It is a
trial plan that produces settlements. And I do not take the
comfort that Fred Baron takes in the relatively few number of
trials. I think the relatively few number of trials we see
reflects the fact that the trial process that is anticipated is
fundamentally unfair.
Let me conclude, Mr. Chairman, by saying that I am pleased
that you and the other members of the committee want to help
achieve a solution to this. We know what we have to have--full
and timely compensation for those remaining victims and future
victims who suffer from serious illnesses. We need to stop the
hemorrhaging of hundreds of millions of dollars going to those
who are not sick, to protect American jobs, pensions, and
shareholders. Finally, we need to ensure that there is no
asbestos exception to the United States Constitution, and that
we can be confident that our system of justice operates in a
manner that is fairly designed to achieve justice.
Thank you.
[The prepared statement of Mr. Dellinger appears as a
submission for the record.]
Chairman Leahy. Thank you, Professor.
Mr. Hiatt, as I noted earlier, the AFL-CIO has thousands of
members. It also has a very large number of those members who
have asbestos-related illnesses, and so we are glad to have you
here and thank you very much.
STATEMENT OF JONATHAN P. HIATT, GENERAL COUNSEL, AMERICAN
FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS,
WASHINGTON, D.C.
Mr. Hiatt. Thank you very much, Chairman Leahy and members
of the committee. I would like to thank the committee for
providing this opportunity to present the Federation's views on
the deficiencies of our current litigation-based system of
resolving asbestos claims and on the need for Federal
legislation that would adequately address the rights of workers
suffering from exposure to asbestos.
As you mentioned, Mr. Chairman, the AFL-CIO's member unions
represent millions of active and retired workers who have been
occupationally exposed to asbestos, hundreds of thousands of
whom are living with the deadly consequences. For many, this
exposure occurred while working in defense-related industries,
in shipyards, for example, or in other public service, also in
building and construction, in transportation, other
manufacturing industries.
More recently, we have seen an increase in asbestos-related
diseases among those working in telecommunications and the
service and maintenance trades. For far too many of these
workers, the legal system has offered lengthy delays, followed
by limited compensation, compensation which often comes much
too late.
The exposure of millions of working Americans to asbestos
is one of the largest torts in this Nation's history. In the
recent very comprehensive study that Senator Hatch alluded to
earlier this morning, the RAND Institute estimated that as of
the end of the year 2000, over 600,000 claims, as I think he
said, have been filed, at a cost of $54 billion, less than half
of which had actually been paid to the victims themselves. RAND
now projects that up to 2.5 million more claims will be filed,
at a potential cost of over $200 billion.
I don't agree with Mr. Baron that there is any evidence
that these transaction costs are going down. In fact, on pages
60 and 61 of this RAND Institute study, they address this and
say that, of the total cost of every dollar up until the
1990's, about 37 cents was going into the pockets of the
victims. And in the 1990's, that had only risen to about 43
cents on the dollar. So I think it is still a major problem.
The labor movement has been actively involved in efforts
over the past several years to craft solutions to the tragedy
of asbestos. We have sought to work with all the interested
parties, with manufacturers, insurers and other defendants,
counsel for both plaintiffs and defendants, the Johns-Manville
Trust, and congressional leaders of both parties.
In the last major attempt here on the Hill to address this
issue, we worked closely with then-Chairman Hyde of the House
Judiciary Committee and Ranking Minority Member Conyers, who
both sought to forge a consensus among the various parties. And
for reasons I have outlined in my written testimony, those
efforts didn't succeed, but a lot was learned and we remain
willing to participate in these efforts.
We believe that there is a broad and growing recognition by
all interested parties that there are serious problems with the
way the civil litigation system has ultimately addressed the
plight of asbestos victims. In addition to the high transaction
costs and excessive delays that I have already alluded to,
these problems include inequitable allocation of compensation
among victims, caused in part by the so-called bundling of
claims in consolidated mass settlements which Mr. Dellinger
just talked about and a general climate of uncertainty that is
damaging business far more than it is compensating victims.
Also, uncertainty for workers and their families is growing as
they lose health insurance and see their companies file for
bankruptcy protection.
Meanwhile, we think there is also a growing recognition
that some of these problems could be eased by developing
alternative methods of resolving the claims of asbestos
victims. But we are convinced that any legislative solution to
the asbestos crisis has to meet certain basic fairness tests. I
have appended to my testimony the AFL-CIO's Executive Council
statement on asbestos which lays these out, and I would just
like to conclude by saying a few words about some of them.
First, anyone who has been measurably affected by asbestos
exposure has suffered a wrong and should receive some amount of
monetary compensation for that wrong. We completely agree that
those with serious disease--cancer, mesothelioma, advanced-
stage asbestosis--are in a completely different category and
should be entitled to significantly more compensation than
victims with less serious disease.
Where one draws the line--that is, what medical criteria
are employed--will be a critical determination. But for those
elements of the business community who believe that asbestos
reform simply means knocking out of the system victims with
less serious forms of impairment, this is a non-starter as far
as we are concerned.
Here, I do agree with Mr. Baron and I don't agree with Mr.
Dellinger. I don't think there are just two categories, people
who are very, very sick and people who are not sick at all. It
is not that simple, and I think there is a very large middle
category of people who are impaired, who are sick, and who need
to have some monetary compensation, even if they should be
looked at differently from the most seriously impaired.
Second, while an administrative system may have benefits
for some classes of asbestos victims, those with serious
asbestos-related medical conditions must have unimpeded access
to the courts. Moreover, victims with early stages of asbestos-
related disease should not be required or pressured to waive
their right to additional compensation if their conditions
worsen.
Third, any substitute reform system should be cheaper,
speedier, and less adversarial than the present system for
plaintiffs as well as defendants, and it can't be a device for
re-litigating the broad issues that have effectively been
settled in these past many years of litigation.
Fourth, any new system has to provide for affordable
testing and monitoring to all those who have been
occupationally exposed. This is particularly important since,
at present, the trial lawyer bar, as Senator Hatch mentioned,
is offering this service at no cost to the workers in numerous
locations throughout the country. So any substitute initiative
which significantly reduces the need for legal services will
remove this critical feature of the current system, leaving
potential victims unable to adequately track the status of
their medical condition.
Finally, there has to be sufficient funding for any newly
legislated system. As the RAND study that I cited earlier
acknowledges, we are potentially talking about a very, very
large amount of money that will be necessary to finance a
substitute system. If the defendant community is unwilling,
first, to provide the relevant financial information necessary
to determine costs, which has been a continuing problem, and,
second, to subsidize those costs, then it will be impossible to
reach any sort of consensus solution.
Of course, we strongly support a contribution from the
Federal Government, which after all does bear its own
significant share of responsibility for this catastrophe. But
even with Government money, that will not remove the need for a
major financial investment from the defendant community to fund
any comprehensive solution, and that investment cannot be
arbitrarily capped in such a way as to place the ultimate risk
back on the victims, as we have seen with the Manville Trust
experience.
Even so, the goal would be for the costs to be more defined
and more predictable than is true at present, and presumably
the amounts involved would also be reflective of substantially
reduced transaction costs in the asbestos compensation system,
leaving more money for victims and for companies.
Thank you, Mr. Chairman, and we are prepared, as I said at
the outset, to work closely with you and the committee in
trying to fashion a solution to this problem.
[The prepared statement of Mr. Hiatt appears as a
submission for the record.]
Chairman Leahy. Well, we thank you, and we thank you for
all the hours you have spent up here with us and other
committees in representing your membership.
Mr. Kazan, I am sure I am mispronouncing your name. Please
give me the pronunciation.
STATEMENT OF STEVEN KAZAN, KAZAN, MCCLAIN, EDISES, ABRAMS,
FERNANDEZ, LYONS AND FARRISE, OAKLAND, CALIFORNIA
Mr. Kazan. Well, it is Kazan, Mr. Chairman, but I have been
called lots worse than Kazan.
Chairman Leahy. I try very hard to get names right. So, Mr.
Kazan, I am delighted you are here and thank you for coming all
the way across the country to join us.
Senator Hatch. We all understand that situation of being
called worse.
[Laughter.]
Chairman Leahy. Except for Senator Hatch, whom we all speak
reverentially to.
Senator Hatch. I would like to hear a little bit more of
that.
[Laughter.]
Mr. Kazan. Thank you, Mr. Chairman and members of the
committee. I am a plaintiffs' lawyer. I represent people who
are dying from cancer caused by asbestos exposure. I speak for
myself and other members of the asbestos bar who stand up for
the interests of asbestos cancer victims. Some of these
victims, including Ms. Dahlke, are here with us today.
Asbestos litigation has become a national nightmare, as
well as a national disgrace, and cries out for your attention.
The legacy of asbestos disease is a tragedy for my clients and
their families, made only worse by a legal system that is
compounding their plight. Everyday, we see people who are
seriously ill. Many have just a few months to live.
In the past, I could promise a man dying of mesothelioma, a
progressively debilitating and incurable cancer that kills
within a year or two, that his lawsuit would guarantee his
family's financial security after he was gone. Today, in many
cases, I can no longer make that promise.
How did we get here? It is a tragic tale that begins with
outrageous corporate disregard for the health and safety of
American workers and continues today with a betrayal by the
justice system that is supposed to protect them.
Industry knew by the 1920's that asbestos could harm the
lungs and cause death, but did not begin to warn workers until
the mid-1960's. Public concern, the establishment of OSHA, and
fears of liability finally led to a drastic reduction in
asbestos use after 1973. However, the earlier exposures have
left a wake of incubating devastation that will be with us for
decades.
The health effects of asbestos exposure vary. It causes
some cancers and non-cancer conditions as well. The two
principal cancers are lung cancer and mesothelioma. There are
2,000 or more mesothelioma cases expected each year for at
least the next 15 years, with significant additional cases well
into the 40's of this century. Asbestos also contributes to
another 4 to 5,000 lung cancers each year. In my view, any
serious look at the asbestos crisis must first focus on the
needs of these victims.
Asbestos exposure also causes two non-cancer conditions--
asbestosis and pleural changes. Asbestosis is a scarring of the
lungs which can lead to disability and even death. Fortunately,
such extreme cases are quite rare today. Pleural changes
usually take the form of plaques, small thickened areas on the
membrane between the lungs and the ribs. Plaques do not,
however, cause any symptoms and have no effect on lung
function. Neither asbestosis nor pleural plaques turn into lung
cancer or mesothelioma.
Asbestos victims began filing suit against manufacturers in
the early 1970's, and by the late 1970's seriously ill victims
were winning their cases. By the mid-1980's, a disturbing new
trend began to emerge. Some of my colleagues began filing
thousands of claims for people who just were not sick. Three
years ago, this trend accelerated rapidly.
Today, these claimants are often treated like commodities,
recruited and bundled by hired-gun operators of mobile x-ray
equipment or through websites that proclaim to people ``you may
have million-dollar lungs.''
We have gone from a medical model in which a doctor
diagnoses an illness and the patient then hires a lawyer to an
entrepreneurial model in which clients are recruited by
lawyers, who then file suit even when there is no real illness.
These are not patients; they are plaintiffs recruited for
profit.
Last year, some 90,000 asbestos claims were filed. Less
than 7 percent were for cancer and 75 percent or more were
filed by lawyers for people without any asbestos breathing
problem whatsoever. The burden of paying people who are not
sick has sucked billions of dollars out of the defendant
companies, pushing more than 60 in bankruptcy; more than 20
since January of 2000 alone.
I have no sympathy at all for the asbestos defendant
companies. The wrongs they did are the cause of this public
health catastrophe, but these companies provide the only
resources to compensate my clients and other asbestos victims.
Bankruptcies delay compensation for years and severely reduce
the amounts awarded to the sick.
In 1991, the U.S. Judicial Conference called asbestos
litigation a ``crisis,'' saying ``the worst is yet to come.''
If Congress did not act, they said, ``all resources for payment
will be exhausted in a few years,'' leaving ``many thousands of
damaged Americans with no recourse at all.''
They were right, and it just keeps getting worse. The U.S.
Supreme Court has called on Congress several times to act. As
you consider this problem and its potential solutions, I ask
you to think about those hurt most by asbestos, people who are
seriously and often terminally ill. Think of their husbands or
wives and of their children. I urge you to act quickly to fix
this broken and abused part of our justice system before the
real victims of asbestos lose everything. Only Congress has the
power to end this national nightmare.
Thank you.
[The prepared statement of Mr. Kazan appears as a
submission for the record.]
Chairman Leahy. Thank you.
Senator Carper, did you want to add something here before
we go to the questions?
Senator Carper. I simply want to say, Mr. Chairman, my
heartfelt thanks to you for scheduling this hearing and for our
witnesses that are here. This is a very important issue. There
is a reasonable compromise that can be found on this issue that
is fair to those who have been harmed and to the businesses.
There is a fair compromise and it is just incumbent on us to
find that.
I thank you for this hearing.
Chairman Leahy. I thank you, Senator, and I appreciate the
time you have spent with us and the amount of time you have
spent at these matters before this committee.
Senator Voinovich, I thank you, too.
Mr. Austern, let me ask you a question because I sort of
think of you as the repository of a great deal of information,
probably more than you would like to have, on these issues.
We see all the things written about the types of victims
filing claims, including these so-called unimpaired victims. As
I read this, it almost depends upon who is writing it, what
unimpaired means, so if I can ask you some specific questions
about the unimpaired, especially as it refers to claims filed
with the Manville Trust which is sort of the bellwether here.
Some have claimed that anyone who does not have cancer has
not been truly injured by asbestos. On the other hand, we heard
what Senator Baucus said earlier about the family in Montana
and some of the Libby, Montana, victims.
Does the Trust have victims of asbestos exposure that don't
have cancer, but do have serious physical ailments?
Mr. Austern. In aggregate total, from inception to today,
11 percent of all claims were cancer and 89 percent were not.
Accepting Mr. Baron's pleural figures as I do, because they are
accurate, of the actual claims filed in total thus far, 18
percent have been pleural.
With respect to the issue of whether the remaining 59
percent suffer from impairment, I am not a medical doctor or a
doctor of any sort. Clearly some do not, clearly some do. In
our changed trust distribution process that I alluded to, the
definition of a serious asbestotic has changed. It now requires
that someone have a particular severity of the disease.
We have attempted to model how many people that would be
each year based on this new definition of severe asbestos
disease. It would be 40 or 50. It is an irrelevant number in
terms of how much we will be able to pay and all the others
will not have a severe asbestos disease.
Chairman Leahy. Well, help me a little bit further on this.
There is an increase in filings for people with disabling
asbestosis. It was about 25 percent in 1999 and it went to 39
percent in 2000, and so on.
What is disabling asbestosis and are these people impaired?
Mr. Austern. The definition of disabling asbestosis in the
system that we now have, not the changed system, not the one
that goes into effect, requires that a person have an x-ray
result that shows that they have an asbestos disease. Candidly,
it is a low severity, but nonetheless an asbestos disease. As
Mr. Baron said, it is scarring of the lungs.
And, second, for severe asbestosis, they must have had a
breathing test and that breathing test must show that at least
one of the scores was below 80 percent of what would be
expected for their age, their height, their weight, and certain
other factors.
Chairman Leahy. Let me start now at this end of the table
and ask you about getting information. Mr. Hiatt had said that
manufacturers and their insurers failed to provide full
financial information on the funding needed to support an
acceptable claims resolution system.
Now, Mr. Kazan, I am going to ask you and Mr. Hiatt and Mr.
Baron, could you comment on this and whether you agree that
getting complete financial information from the manufacturers
and insurers is critical to give any kind of intelligent
evaluation of a reform proposal?
Mr. Kazan?
Mr. Kazan. Well, Mr. Chairman, these are mostly publicly
traded companies and my understanding is that they are, in
fact, required to publish financial data. We have never had a
problem that I know of finding out what their assets, and so
on, are.
I can tell you that in many bankruptcies the plaintiffs'
committees on which I and Mr. Baron usually serve vigorously
investigate and go after hidden assets of the kind that Senator
Baucus mentioned in his earlier remarks.
Chairman Leahy. Are you including insurance companies in
this, too?
Mr. Kazan. Well, the insurance assets or the claims of
insurance coverage are also discoverable and we know about
them. I did come today, however, Senator, prepared to talk
about the problem rather than the solutions because I thought
that was what you had instructed us to do.
Chairman Leahy. That is fine, but we have got to find
solutions. But would you say that in finding those solutions,
it is also necessary to know what the financial backgrounds
are?
Mr. Kazan. I think we have that information and I don't
think that is a problem.
Chairman Leahy. Mr. Hiatt?
Mr. Hiatt. Well, my concern, Senator, was not so much on a
company-by-company basis, and I did not make my statement from
the perspective of difficulty we have had in a particular piece
of litigation where there are legal obligations that the
attorneys can take advantage of to provide the information, but
rather in terms of the wholesale scope of this problem and what
the business community as a whole and the insurer community as
a whole would need in order to subsidize this problem.
Admittedly, that is a very difficult task because nobody
does know, as the RAND people acknowledge, what the long-term
scope of this is going to be. But we don't want is another
Manville situation where we start off thinking that we have a
total sum that is a realistic figure, only to have within a few
years that fund being able to pay only five cents on the
dollar. That is what we are most concerned about.
Chairman Leahy. That is also my concern. As Justice
Ginsburg suggested in her case, if we are going to find a
legislative solution, and I would think if we are going to set
up a system for victims, we also have to know that the
financial wherewithal is there. That is a question I have. I
will stop with that, but I will leave it to anybody else to
speak--Mr. Baron, you can, or Mr. Dellinger or Mr. Austern--to
that question.
I should also note in this that we are using a lot of
statistics, a lot of figures, and shorthand on some things. I
only want the results of this hearing to educate all of us.
Look at your testimony afterwards. I will make sure, and I am
sure Senator Hatch will have no objection to this, that the
record will stay open so that each one of you can amplify in
any way that you wish to on your answers.
Mr. Baron?
Mr. Baron. Well, I think you hit the nail on the head, Mr.
Chairman. I think complete financial disclosure is the first
and most essential piece to this effort because if a fund is to
be created, we need to know what the financial parameters of
the fund are.
Indeed, we are here because so many of these companies and
their insurance companies claim that they don't have adequate
resources to cover the load. You need to look into that issue
and identify what resources are available because it is
essential that claimants have the ability to access a fund that
is going to be adequate to pay fair compensation.
Unfortunately, there have been numerous cases of fraudulent
conveyances and years of litigation trying to bring back assets
to companies that have been spun off or involved in a shell
game essentially to eliminate liability exposure to asbestos
claimants. I think that this investigation is going to be a
long, tedious process, but I think it is the first thing that
needs to happen before a fund is created.
Chairman Leahy. Thank you.
Mr. Dellinger?
Mr. Dellinger. Mr. Chairman, just a personal word, speaking
entirely for myself in this instance about the role of the
Federal Government which I have reflected on for some years.
In World War II, we faced a critical situation where we
were going to lose control, I think, of both the Atlantic and
the Pacific Oceans and we had to have ships. We asked shipyards
to get ships out into the water to do battle in World War II,
and we threw our workers into that situation, shipyard workers,
and they got those ships out. There was huge exposure to
asbestos. It is the source of some big portion of this claim.
And we all benefited from that. Everybody in this room
today benefits from the fact that we got those ships out there.
So in terms of the appropriateness of a claim and that those of
us in this generation have benefited from those World War II,
there is actually a very good argument to be made that we as
beneficiaries should contribute at least to that aspect of the
problem that was caused by what we absolutely had to do in
World War II.
Chairman Leahy. Thank you.
Mr. Austern. Mr. Chairman, if I could echo Mr. Dellinger's
comment, not for a solution today, but I would like to make
available to the committee at a future time the very
substantial record that the Manville Corporation had in suing
the Federal Government for the exact liability that Mr.
Dellinger just mentioned. I think it would be of interest to
the committee to see just how much the Government, in fact,
knew about the very dangers of asbestos that Mr. Baron and Mr.
Kazan have just spoken about.
Chairman Leahy. Thank you.
Senator Hatch?
Senator Hatch. Well, thank you, Mr. Chairman. This is a
very interesting hearing to me and I respect all of you
greatly. But, Mr. Dellinger, I am having a hard time
understanding how the court in West Virginia could consolidate
or cojoinder the claims of 8,000 plaintiffs against 250
defendants.
Can you explain to me how this provides due process to any
of the parties involved?
Mr. Dellinger. Senator, that is a good question.
Senator Hatch. Does this compromise the rights of asbestos
victims?
Mr. Dellinger. Here we have thousands of plaintiffs who
worked at hundreds of locations all around the country. They
worked in different kinds of jobs, they worked in different
time periods over six decades. They had different individual
health backgrounds. They were exposed to hundreds of different
products with different applications, different instructions,
different warning labels. They have, among the 8,000, different
theories of recovery.
But under the mass tort rule, the liability of hundreds of
defendants to those thousands of plaintiffs was going to be
resolved in a single mass proceeding where defendants would not
have any opportunity to show that the claims against them had
no relationship to the claims made against them, or to
demonstrate the tremendous difference among defendants. In that
setting, it is hard not to assume that the worst is going to
happen and that you have to settle.
Now, that has real consequences. If the tort system doesn't
operate fairly, it doesn't achieve its goal of providing proper
incentives to good conduct. If it is just a random shot as to
whether you are found liable or not, so that companies that
have little or no relationship to the exposure to asbestos are
the ones that actually wind up paying a part of the costs, then
the system simply won't work as an incentive to avoid risky
behavior because it simply is going to be irrelevant whether
you are at risk or not.
Senator Hatch. I understand that the majority of defendants
in the West Virginia cases, or mass action should I say, have
settled their claims. Do those settlements affect your appeal
to the U.S. Supreme Court?
Mr. Dellinger. We still have our petition pending with the
Supreme Court and the two claims we put before the Court are
still there. One is that before you have a proceeding like
this, you have to make a determination that the claims are
sufficiently common, that they can be tried against this group
of defendants in a way that allows the defendants to advance
their rights without prejudice. West Virginia makes no such
determination. They just throw the cases in.
We are asking the Supreme Court to say, look, it could be
that you can try cases of more than one plaintiff against more
than one defendant, but it has always been the case that you
have had to make a determination that could be done fairly.
They have just dispensed with that in West Virginia.
And the fact that there are a relatively few defendants
left does not change the fact that no such determination was
ever made, or the fact, Senator Hatch, that a Justice on the
West Virginia Supreme Court estimates that at least 5,000 of
the 8,000 cases have no connection to the State of West
Virginia, the ones being tried there. So this is a West
Virginia solution for the country.
Senator Hatch. Mr. Kazan, where are all these new asbestos
cases coming from? I thought that exposures had been reduced
down to very low levels 25 years ago or more. How is it
possible that we are seeing 90,000 new cases last year?
Mr. Kazan. It is a function, Senator, of the vigor and
strength of the free market system. There is an economic
opportunity for my colleagues in the plaintiffs' bar and they
are maximizing that opportunity.
Senator Hatch. It sounds like a fairly strong indictment of
the claimants' bar.
Mr. Kazan. Well, it is not an indictment. If it was
indictable, we would have a solution to the problem.
[Laughter.]
Senator Hatch. Are you suggesting that this legislation
should provide some indictable----
Mr. Kazan. Even I would not go that far.
Senator Hatch. OK.
Mr. Kazan. The reality is, Senator, that well over 50
percent of the American adult population, if you took x-rays,
would demonstrate changes that meet the requirements today to
justify an asbestos lawsuit. That doesn't mean they have
changes in their lungs that have anything whatsoever to do with
asbestos.
The bulk of these cases that are being filed today come out
of these screenings where a doctor who gets paid piecework
doing volume business reads these films as simply consistent
with asbestos disease. That is not a diagnosis. It would never
get to a jury as more probable than not.
There are over 150 medical causes that produce these
changes in the lungs, and that is why they can only say
``consistent with.'' Nonetheless, those are the very claims
that are being filed. They are being recruited. The Manville
Trust and others are paying them. These are people who are not,
by any rational definition of the word, sick. Their breathing
is not affected, their lives are not affected. They simply have
an x-ray that some for-hire doctor is prepared to say, in a
medical-legal evaluation, not a physician-patient one, that
there is a change that could possibly have come from asbestos.
So, Senator, although the Manville Trust talks about 1 or 2
or 3 million future cases, in fact, the number of potential
future cases is virtually infinite--50 million, 70 million, 100
million cases.
Senator Hatch. Of these cases, how many are brought by
people who are basically unimpaired from asbestos? How much
money has gone to these claimants and how does that impact your
clients?
Mr. Kazan. Well, approximately, from what I understand from
the Manville Trust, last year 75 percent of the claims filed
were for people with no lung function impact of asbestos. There
is a whole range of cases of people who have asbestosis that
does affect their breathing, and I certainly believe those are
legitimate cases. They have real value and they ought to be
compensated.
My guess is, based on the Manville data, there are 10 or 12
or 15,000 of those cases a year nationwide, added to the maybe
10,000 cancer nationwide each year, the 20 or 25,000 cases,
which is the kind of volume we were getting up until 1997,
1998.
The system worked fine. We were doing well. The courts
could handle that without difficulty. We wouldn't need your
help if that were the case. The difference is mobile x-ray vans
and entrepreneurial lawyers.
Senator Hatch. Yes, Mr. Hiatt?
Mr. Hiatt. Senator Hatch, I just wanted to say whatever
merit there is to the factors that Mr. Kazan has just
described, I think that also leaves out a very important factor
that contributes to the increase in claims that are being
filed, and that is that there are new sectors where workers who
had never before had to worry or thought they had to worry that
they had been exposed or that their exposure had been
significant enough to possibly result in asbestos-related
disease has now become clear.
The Communications Workers of America union had never seen
this as a major problem affecting their members, and recently
they have done sampling and found extremely high exposure rates
among installers, cable splicers, outside plant technicians,
and auto mechanics who had been exposed to asbestos. This would
be a whole category of workers that would not have known to
even get themselves tested in the past. So I think that that is
an important factor.
We have just finished reading about the exposure by workers
who helped with the clean-up of the World Trade Center
disaster, and I am afraid that as long as asbestos is still
around there are going to be new sectors and new places that
these claims are going to come from.
Senator Hatch. Well, maybe I should get down to real
business here. I may be one of the few Members of Congress who
really has worked around asbestos, because I worked in the
building and construction trade unions for 10 years. Asbestos
was used for pipe covering and I was a metal lather putting in
suspended ceilings and partitions and corners and all kinds of
other things.
Mr. Dellinger. I would recommend Mr. Baron, Senator.
[Laughter.]
Senator Hatch. That is what I am getting to. I am going to
forget about you three.
Mr. Kazan. You don't want me, Senator. I would just
reassure you that you are fine.
Senator Hatch. Mr. Baron, I think maybe I need to retain
you because some people have said that I look sick from time to
time.
Mr. Baron. Senator, you are obviously in very good health.
The issue, though, is a really important one in terms of the
number of claims.
There is another factor that hasn't been mentioned. In
addition to finding more workers who have been exposed to
asbestos over their career that really didn't know they were
exposed and therefore adding another group to the litigation
mix, there is another factor that we lawyers and some of the
statisticians call ``propensity to sue.''
Harvard has studied propensity to sue in medical
malpractice cases and found that maybe 10 or 12 percent of
people who have sustained malpractice actually file suit. In
automobile accidents, the generally accepted figure is about 15
percent of individuals who have potential claims actually
pursue them.
In asbestos litigation, because of the enormous amount of
publicity and discussion of the issue in the public, we are
seeing that the propensity of individuals who have contracted
asbestos-related diseases to sue is high. Indeed, the most
telling statistic is the number of mesothelioma cases filed.
Every year in the United States for the past 25 years,
between 2,500 to 3,000 people have developed mesothelioma. That
disease is caused only by asbestos and it is invariably fatal.
Each individual arguably has a cause of action.
Back in the 1980's and into the early 1990's, we would only
see maybe 800 claims, 1,000 claims a year. Now, we are seeing
1,600 to 1,800 claims. The propensity to sue among mesothelioma
victims is very, very high. It is also getting higher among the
victims of asbestosis and that accounts for the large number of
filings.
Senator Hatch. Well, my time is up, but let me just turn to
Mr. Kazan. Do you have any response to that? I can see why Mr.
Baron makes so much money every year. I mean, he is very
persuasive. Now, what do you have to say about that?
Mr. Kazan. Well, aside from the fact that he is wrong,
certainly more and more of the cancer victims are coming
forward with litigation. Doctors are more aware of this. There
is more publicity. The Internet has made a significant impact,
as well, in disseminating knowledge to the public.
At the end of the day, however, it is not people deciding
that they want to bring claims. What is fueling the increase in
the last 3 years is lawyers going out and advertising for free
screenings, sending out mobile vans, recruiting plaintiffs who
feel fine, who don't know they have any claim, who never would
have thought about it until the lawyer gets the x-ray and has
somebody read it as showing that it might possibly have
something to do with asbestos.
These are not diagnosed cases of asbestos disease in any
sense that any of you would think of when you think about
illness, where you go to a doctor and you tell him what is
wrong and he orders tests and he evaluates your condition and
thinks through the process and reaches a conclusion. These are
simply people who have an x-ray that somebody says might be
from asbestos. They don't see a doctor in most cases, and when
they do it is a for-hire screening doctor.
Our materials include some depositions where there is an
osteopath who has confirmed 14,000 consecutive diagnoses of
asbestosis in people he has seen and he doesn't even know what
the word means. So it is a fiction. That is simply what it is.
These are not real illnesses. They are not real cases in large
degree. That is not to say there aren't thousands of
legitimate, non-cancer cases every year. There are. They
deserve to be paid. That is not the problem.
Senator Hatch. Mr. Baron, just one last comment. I have
quite a bit of respect for you, but I agree with him; I think
you are wrong in this area. I know that you must have been
talking tongue-in-cheek when you said in June of this last year
at the Mealey's asbestos bankruptcy conference, quote, ``I
picked up my Wall Street Journal last night and what did I
learn? The plaintiffs' bar is all but running the Senate. Now,
I really strongly disagree with that, particularly the words
'all but.'''
Mr. Baron. Senator Hatch, that, as you correctly stated,
was a comment I made very jokingly when somebody brought to my
attention a copy of a Wall Street Journal editorial criticizing
me for filing claims for asbestos victims.
Senator Hatch. Look, don't get so defensive. I took it as
humor. I thought it was pretty good humor----
Mr. Baron. It was intended to be humorous.
Senator Hatch [continuing]. Except that some of us do feel
that the plaintiffs' lawyers and the plaintiffs' bar have an
inordinate control in the Congress of the United States. Now,
rightly or wrongly, we feel that way and I think we are pretty
much right.
I think that the plaintiffs' bar is a very important bar in
this country, and I think it is important that the plaintiffs'
bar realizes that there are all kinds of viewpoints up here and
that we try to find some way of making sure that justice really
occurs in this country.
It is one thing to fight for the rights of people, to fight
to correct injuries and wrongs. It is something that I applaud
all of you for. It is another thing to make this a money-
grubbing, political, power-seeking approach which some are
criticizing our plaintiffs' bar for.
Mr. Baron. I agree with you, Senator Hatch.
Senator Hatch. I belong to your organization. I was a
plaintiffs' lawyer. I started out as a defense lawyer and I
found out that was too tough, so I became a plaintiffs' lawyer.
I found out that was just like rolling off a log compared to
being a defense lawyer.
But to make a long story short, I respect you and I respect
the plaintiffs' bar. But I suggest that this is a serious set
of problems. We have got to solve these problems, and you and I
both know that sometimes problems like these have to be solved
by good people getting together and resolving them.
I would like as many good ideas as you can give us as to
how we might do this, because I am sure that you recognize that
if not all of what Mr. Kazan is saying is true, part of it is.
I would like your help in this committee and I would like to
have a good relationship in arriving at that, but I want a
solution here.
This clearly is not right. It is clearly not working. There
are clearly people getting compensation who don't deserve it,
while others are not getting compensation or won't get
compensation who do deserve it. We have got to find some way
out of this and I would like some help from all of you. I think
this hearing is very, very important to try and lay this all
out.
Thanks to all of you. I wish I had more time.
Mr. Baron. Senator, may I say that ATLA as an institution
is absolutely committed to working with this committee to find
a solution to these very significant problems. I have to say
that sometimes we say things tongue-in-cheek and we are sorry
we say them, and I apologize to anyone that was offended by
that statement. It was meant jokingly and it was taken out of
context.
Senator Hatch. I was having some fun myself.
Mr. Baron. I apologize. But one only needs to look around
this room to see that the manufacturers and the insurance
carriers are very well represented in this city. And as far as
ATLA is concerned, we are a voice for victims and we need to go
the extra distance to be sure that voice is heard, and we
appreciate the opportunity to provide information to this
committee and you have our solemn promise that we will
cooperate with the committee in all respects on this matter.
Senator Hatch. I look forward to that. Thank you.
Mr. Dellinger. Can I make a 10-second comment?
Senator Hatch. Sure.
Mr. Dellinger. I think it has been apparent what a well-
balanced panel you have had today that you have collectively
put together.
The first essential question is, is there a serious
asbestos litigation problem. Though the panel is well-balanced,
I would note that four of the five people here today agree that
there is a serious problem that makes a congressional response
imperative.
Senator Hatch. I apologize to Senator Cantwell for taking
so long, but I felt that this is really a good panel.
Chairman Leahy. I think it is, and this is, since I have
been here, the only time we have ever had a full Judiciary
Committee hearing on this matter and I have tried to give extra
time to each Senator and each witness.
Mr. Dellinger mentioned the World War II ships and the use
of asbestos. The State Adjutant for the Vermont Department of
Veterans of Foreign Wars, by coincidence, had an op ed piece in
the Rutland Daily Herald, our Pulitzer Prize-winning, highly
respected newspaper back home.
He spoke of the insulation which continued even through the
1960's while the Navy knew of the dangers and they still kept
on doing it.
His op ed ends by saying, ``Many victims of asbestos need
his help, particularly veterans who already served their
country--veterans who continue to fight battles every day
against deadly illness and a system that doesn't seem to
care.''
I will put Adjutant Gascon's whole op ed piece in the
record.
Senator Cantwell, I appreciate you being here and I yield
to you for whatever amount of time you would like.
STATEMENT OF HON. MARIA CANTWELL, A U.S. SENATOR FROM THE STATE
OF WASHINGTON
Senator Cantwell. Thank you, Mr. Chairman, and I also thank
the Ranking Member for his questions and comments. I think it
was very important that he get his questions out. And we found
out some vital pieces of information that, in fact, Senator
Hatch is not sick, and I think that was very important for us
to establish.
Mr. Chairman, this hearing is very important to my
constituents. I think my State suffers from a disproportionate
amount of sufferers from mesothelioma and a large number of
cases because of our mill industry and because of our shipyard
industry.
Some of my constituents who suffer from this truly awful
disease are here today and I want to thank them for making the
trip. Brian Harvey, who, if not a medical miracle, I am sure he
will be soon, is in his 36th month from diagnosis and serves as
an inspiration to others who are undergoing experimental
mesothelioma treatment. I would also like to thank Charisse
Dahlke, who lost her husband in May, for being here as well and
being part of giving input in this process.
I would also like to enter into the record, Mr. Chairman,
if I could, testimony from Matthew Bergman, an attorney from my
State who has developed an expertise in this area, and I urge
my colleagues to read his testimony.
In my opinion, the most astounding part of this situation
is that we have yet to ban asbestos. I have a colleague,
Senator Murray, from Washington, who has a bill in the HELP
Committee. I hope that this hearing today will encourage people
to pass that bill out of the committee.
In regard to compensation of those exposed to asbestos, I
have reviewed the testimony of the various witnesses and I am
convinced it is, in fact, a very complex issue. But I would
remind my colleagues, and even those on the panel, there are
the victims, and oftentimes those victims lose their lives, and
then there are the victim survivors, oftentimes women,
oftentimes young children, whose future lives will be
determined by what this compensation outcome is. So I think it
is very important that we not let the complexity of this issue
deter us from getting to some of the specific solutions to the
problem.
Mr. Austern, you, I think, probably gave the best
statistics that I just want to make sure I am reviewing
correctly. Since the exposure to asbestos didn't peak until
1973 and didn't significantly decline until the mid-1980's, am
I correct that we are going to continue to see an increasing
number of these cases? I think you number you have is until
2013, and that cases aren't likely to decrease in number until
2025.
Is that correct?
Mr. Austern. Based on our years of first exposure--and you
can cut this almost any way you want, by industry, by injury--
really, all the statistics show that the year of first exposure
is rising very, very slowly and we are going to see significant
claims filing based on the consumption of asbestos in this
country in those previous years for at least 12 or 13 more
years and then for a period of time thereafter. It is a very
discouraging picture when you look at the amount of asbestos
that was used and how we are looking at claims that were only
exposed in the 1950's and the 1960's.
Senator Cantwell. Well, given that, I would like to ask Mr.
Baron and Mr. Kazan a question about the fairness of this
situation, given the two constituents that I have here today:
one, Mr. Harvey, who was successful because the timing of his
illness in actually receiving a settlement, and Ms. Dahlke. In
both of these cases, some of the same companies now have
declared bankruptcy and Ms. Dahlke's ability to get resolution
on this issue is mitigated significantly.
So what is the fairness in that? The timing of the illness
becomes the determining factor?
Mr. Baron. Senator, I think you make a very, very good
point. And might I say before I answer the question that I
agree with you completely that it is outrageous that we have
not banned the use of asbestos in this country and I think that
has to be a priority for this Congress.
But back to your question, it is unfortunate that there are
so many victims, and the mismatch here is obviously the number
of victims and the amount of money available to be paid. I
respectfully submit that the first thing that this committee
should do is carefully investigate what resources are available
to pay claimants; in other words, how much money is really out
there in insurance coverage and how much money the companies
who created this problem have available to pay for the damage
that they have caused. There is indeed a mismatch and it is
unfortunate.
By passing 524(g) of the Bankruptcy Code, Congress has
required that when a company goes into bankruptcy it must be
required that they set aside assets to pay future victims, not
just the present victims. That is a very, very important
consideration.
Senator Cantwell. But won't there be an inherent
disadvantage to Ms. Dahlke in the sense of, again, because Mr.
Harvey entered into--basically because we found out at a time
in this process, he was able to get a settlement. Ms. Dahlke
may be 5 percent, so Mr. Dahlke's surviving children will now
be disadvantaged in this situation.
I am very glad that my constituent, Mr. Harvey, has done so
well, but I also think that we need to realize that there are
other victims in this situation of those survivors and that
they are going to receive a very, very small amount of what
would be available compensation.
Mr. Baron. It is not unlike the drunk driver who causes
five or six different accidents and has no insurance. Maybe the
first one or two victims will receive his assets, but the
others may be left with nothing. Fortunately, it is my
experience--and I represent almost 700 victims of
mesothelioma--that only a very small number of mesothelima
victims are left only with bankruptcy-related claims.
Most mesothelioma victims were exposed to many different
types of asbestos products and there are still solvent
defendants who can pay these claims. Are they always going to
get a hundred cents on the dollar? No, but that is also true of
all of the other asbestos victims. They have the same problem
to deal with.
Senator Cantwell. Mr. Kazan, do you agree with that
assessment?
Mr. Kazan. Do I agree with Mr. Baron? No. Again, the
problem is--you have put your finger on it--there is a very
serious issue here. And the root cause of the fact that Ms.
Dahlke is not getting paid now and is likely only to recover
pennies in the future is that very bankruptcy provision that
Mr. Baron speaks of, 524(g), which requires that when you set
up a trust, you treat all claimants, present and future, alike,
which means you have to estimate all the future claims so you
can assign values to them and allocate their share.
It is the problem that Mr. Austern has and it is the
increasing trend in filings that causes revisions in
projections which led Mr. Austern's trust last year to cut its
payment percentage in half. As long as we leave the system the
way it is, there will be more and more claims filed. That, in
turn, leads to higher and higher estimates in the bankruptcies,
which means a smaller and smaller percentage of payment not
only to the currently sick people and all current claimants but
to all the future claimants.
We know the numbers of the cancer cases. We are going to
have, as Mr. Austern says, 2 to 3,000 a year. We can calculate
that. We have been predicting cancer correctly in asbestos for
20 years, and the reason we have done that is it is science. It
is based on medicine and epidemiology.
We cannot predict the number of non-malignant, unimpaired,
no-functional-change cases because those are not based on
medicine. They are based on entrepreneurial zeal. As a result--
I hate to say it, especially in front of Ms. Dahlke, who is a
lovely person that I have spent some time with--the chance of
her getting significant recovery out of any of these
bankruptcies is somewhere between slim and none.
The tragedy here gets compounded every day in case after
case. Mr. Harvey is an exception to the rule. I see clients all
the time and I tell them I have good news and bad news. The
good news is that you weren't diagnosed until just now, so you
have been healthy for the last 5 years. The bad news is you
have been diagnosed now and although you have had those 5 years
of good health, you don't get any real compensation. If you had
gotten sick 5 years ago, your case would have been worth a
great deal of money. Unfortunately, you probably wouldn't be
here today.
The real tragedy in this, Senator, is that while most of us
sitting up here view this as a serious public health problem
and a public policy issue, I am afraid that some members of the
trial bar, including those who have great influence over ATLA's
policy--and I am an ATLA member for 30 years and it pains me to
say this, but they view this simply as a business opportunity
rather than a chance to deal with public policy issues. And I
certainly hope this committee focuses on the public health
issues.
Senator Cantwell. Well, I definitely think you have stirred
some followup interest and response from some of our panelists
and I do want to get to that, but I would like to pose a
question to the panel, as well, in making your response to
those statements.
I just want a yes or no answer on should people with
exposure but no symptoms be compensated at the same level as
those that are sick?
Mr. Baron. Of course not, and they aren't in the present
system.
Senator Cantwell. I think that is the fundamental question
that we have here. I know that we are talking about a process,
but I want to give Mr. Austern a chance and the other panelists
because I think what we really need to do is boil it down to
what we do agree on and take this process from there.
I think we all think we have a very complex problem, but I
would beg to say that what we are failing to recognize is--Mr.
Harvey's life is incredibly important, but the future
opportunities for Mr. Dahlke's son--maybe it is the difference
between whether he will ever get to go to college or not, or
whether Ms. Dahlke will be able to support the rest of the
family.
I don't think you can treat them unfairly just because of
an arbitrary date and time by which they found out that they
were ill, when we know that there has got to be a better way to
solve this.
Mr. Austern?
Mr. Austern. Senator, if I could make two responses to
that, first, as Mr. Baron and Mr. Kazan know, we and virtually
every other asbestos trust recognize economic differences in
terms of recovery based on disease severity. Mr. Baron is
right. We pay those whose symptoms are less severe less than
those, to take the highest example, mesothelioma victims. I
fear, however, that the devil is in the details and it is the
extent of the difference that is probably going to be in
dispute.
With respect to the dilemma with the people you recognized
in the room, as noted, we have paid 10 percent of Manville's
liability, ordinarily recognized as 30 percent of the total
liability because of Manville's very large share of the market.
We paid 10 percent of that liability up until last year. As Mr.
Kazan pointed out, we had to halve it last year, cut in half,
based on the number of claim filings.
So let me turn to your constituents. We have paid through
the end of last year $336 million to mesothelioma victims, but
we have to look at the other side of that. What haven't we
paid? Well, the total Manville liability for that is
$3,150,000,000. We will never pay that $3,150,000,000 to the
people that you represent and to others because we have an
asset/liability mismatch, and it is one that, as Mr. Kazan
points out, is growing.
Senator Cantwell. And so your recommendation is keep going
in the direction that we are going?
Mr. Austern. Well, I agree that looking at alternative
sources of funding--and I was thinking when I said that, and
continue to think, to look to the Government of the United
States for the liability that might be appropriate for the
reasons Mr. Dellinger mentioned. I fear, Senator, that when you
look at the total potential victim population by disease and
the total potential assets, there is going to continue,
however, to be some asset/liability mismatch.
Mr. Dellinger. Just a brief comment to emphasize what David
has just said. When you ask the question, are those who are not
sick, not impaired--should they receive as much as those
suffering from serious illness like mesothelioma, of course
everybody agrees the answer is no and they should not.
That is one notch removed from where the real problem is,
which is people who are not impaired are nonetheless getting
far too great resources that are depleting resources that ought
to go. And on that, you have differences among members of the
panel in terms of how you define impairment or ``not sick,''
Senator, but there is a disinterested source.
The RAND study, at page 19, summarizes this point by saying
simply it appears that a large and growing proportion of the
claims entering the system in recent years were submitted by
individuals who have not incurred an injury that affects their
ability to perform activities of daily living. That is the RAND
conclusion.
Senator Cantwell. Mr. Hiatt?
Mr. Hiatt. Senator, I think a helpful way of looking at the
universe of victims who have been occupationally exposed to
asbestos at one time or another is to divide them into three
broad categories.
On one extreme, you have victims who suffer from cancers,
mesotheliomas, very advanced stages of asbestosis. I think
leaving aside the problem of what medical criteria you use to
place people there, everyone would agree those are people who
are seriously ill and should be adequately compensated.
At the other extreme, you have people who can show that
they were occupationally exposed. And as earlier testimony
showed, those are people who do need to fear that they are
sitting on what somebody referred to as a ticking time bomb.
And at the very least, those people should be given adequate
access to continuing testing and monitoring.
In the middle, you have a category of people who some would
blithely say are not sick, but are indeed sick. They simply
aren't as impaired as those with cancers and the truly serious
forms of disease.
Now, admittedly, within that middle category there are
gradations, and I think that is where, if this effort by
Senator Leahy and your committee continues, there will have to
be some real scrutiny paid. Where do you draw the lines in that
middle category?
I don't think that the answer is that they should not be
compensated at all. I think that a consensus has to be found
for how much should that middle category be compensated. Maybe
there are different levels for people within that category, but
they are impaired to some extent. It may not be as much as the
folks at the top end, but it is certainly more than people in
the bottom category.
Too many in the business community, I think, would just
like to write that whole category off and say the solution to
this problem is just to worry about the people with cancer.
That is not an adequate response to this crisis.
Mr. Kazan. Senator, if I remember the question and your
request for a one-word answer, the answer is no, but I can't
resist saying a couple of other things, if I might. Mr. Hiatt
is right in one sense. You can usefully divide the asbestos
claimant population into three groups. I would group them
somewhat differently.
One group would be cancers, about which everybody agrees.
The second group, in my view, would be people without cancer,
the non-cancer claimants who have breathing problems, however
you want to describe it, who from a physiologic or medical
standpoint have some degree, however slight, of interference in
their lives, in their breathing, as a result of asbestos
exposure. I think those people also are entitled to
compensation that is fair and adequate and reasonable in the
light of the circumstances.
My third group would be those who may or may not have some
possible evidence of change in their lungs, but have no
functional or physiological impairment whatsoever. They are
not, by any ordinary definition of the word sick, what we would
call sick.
Mr. Austern is exactly right. The problem here is an asset/
liability mismatch, if you will. It started out as one in
Manville and that is the microcosm. The problem that brings us
here is that this is now an industry-wide, America-wide
mismatch which has led to all these bankruptcies.
Most of the companies going in say that they have been
spending more than half their money on precisely these
unimpaired, no-functional-limit cases. And an interesting
question that I would like you to consider asking Mr. Austern--
you know, he is paying 10 percent, then 5 percent, and he has
this $3 billion liability that he acknowledges to mesothelioma
victims alone. He has paid them $336 million. An interesting
question would be how many dollars has he paid to people who
have absolutely no pulmonary function limitation because if the
sickest should go first, maybe that is an illustration of where
the problem is.
Senator Cantwell. Well, I am sure that he heard your
question and may respond.
Chairman Leahy. In a similar one-word answer.
Go ahead.
Mr. Kazan. We are plaintiffs' lawyers, Mr. Chairman.
Senator Cantwell. I am sure that the committee staff
thought about that when they had all of you agree to being up
here.
There was a time in which we did have a fundamental
agreement about medical impairment being demonstrated before
compensation, right?
Mr. Baron. May I speak to that, Senator?
Senator Cantwell. Yes.
Mr. Baron. The issue of the word ``impairment'' is the
stumbling block. We learned in law school that if someone
negligently causes an injury, the injured party is entitled to
recover damages. Now, if you jumped across the desk and stabbed
me in the arm, I would have probably a very large scar on my
arm, but I would not be impaired in any real way. Would that
prevent me from filing a claim for my damages? No, of course it
wouldn't, as it would not if you caused scarring of my lungs. I
may not have impairment because our lungs fortunately have
extra capacity, but I would be just as damaged.
And its true but that individuals who have minor injuries,
like someone who breaks their arm in a car wreck, receive
significantly less compensation than does someone who is
rendered paraplegic in a car wreck or a mesothelioma victim.
Today, a victim of pleural disease will generally recover,
in the tort system, somewhere between $20,000 and $40,000. A
victim of asbestosis usually recovers somewhere in the $50,000
to $100,000 range. A victim of mesothelioma--and you can go
directly to Mr. Kazan's website to verity this--will recover
between $5 and $15 million, and occasionally more than $15
million.
Senator Cantwell. Are you guaranteeing that to Ms. Dahlke?
Mr. Baron. In a case where there is an identifiable
defendant that remains solvent, yes, I would almost guarantee
to a mesothelioma victim a significant seven-figure recovery.
That has been my experience with the hundreds and hundreds of
mesothelioma victims or firm has represented.
But, again, someone with pleural disease who comes into the
office would be told to expect a $25,000 to $50,000 recovery.
Whether those numbers are adequately balanced, I am not the one
to say, but suffice it to say that there is an enormous
difference.
Anyone who says that the pleural cases are getting as much
in the tort system as mesothelioma cases is just not telling
the truth. If an identical victim with pleural disease sues the
same defendants that the mesothelioma victim sues, the
mesothelioma victim will get significanty more money, but it
will remain at the same proportion in relation to the value of
the claims.
In other words, if the mesothelioma case has a value of $5
million and only has 50 percent of the defendants available to
seek recovery from, the case will settle for $2.5 million. If
the pleural case has a valve of $25,000 and has the same 50
percent of the defendants involved that case will receive,
$12,500. And that is, in my judgment, an appropriate way to
deal with it.
Senator Cantwell. I guess I disagree in this regard. I
don't think Ms. Dahlke now is the survivor of a victim that has
been struck by mesothelioma. She is a victim of the calendar.
She is a victim of an arbitrary date on the calendar by which a
bankruptcy was filed.
The difference between Mr. Kazan saying she is going to get
pennies and you saying that somebody might get $15 million--I
am sure she is more concerned about how to support her family
today.
Mr. Baron. I agree with you, Senator, and I think there
should be a fund of some sort where people who have only claims
against bankrupt defendants can go to receive benefits. My
experience is that less than about 10 percent of the
mesothelioma victims do not recover significant sums. As more
companies go into bankruptcy, though, there may be more people
in that position.
Senator Cantwell. Mr. Chairman, I do think this is a
critically important issue for our committee. I think with the
talent that is at the table today testifying, obviously if
there was an easy solution we would have come up with it by
now.
Constituents' lives are playing out before us, and I again
just urge people not to forget the victim survivors and the
consequences to their lives. Please help us in working on this
issue.
Thank you, Mr. Chairman.
Chairman Leahy. I would hope you may think about some of
the other questions which I won't raise here because the time
has expired. What has always bothered me is the companies
continued using products containing asbestos well into the
1980's. Some even use such products today. They knew the grave
dangers caused by this.
The companies' insurers continued to cover them, knowing
the liability that was being assessed to the companies who used
these products. That is troublesome. The Adjutant General from
our VFW and the questions he raised about the Navy are
bothersome. He asked the question whether vessels should be
banned.
I will put into the record a statement by Senator
Brownback, and I will leave it open for anybody else.
[The prepared statement of Senator Brownback appears as a
submission for the record.]
Chairman Leahy. There has been reference to the RAND report
that was raised today. I have a lot of respect for RAND. I have
read their reports on many matters. I think it is only fair to
note, because everybody keeps raising who is representing whom,
that according to RAND's annual report last year the following
organizations were benefactors of RAND--that means they
contributed $50,000 or more; they don't say how much more--
Allstate Insurance; State Farm Insurance; Chubb Insurance;
Coalition for Asbestos Justice, made up of a group of insurance
companies; Farmers Insurance Group; Hartford Financial
Services; Liberty Mutual Insurance; Massachusetts Mutual Life
Insurance; USAA Insurance; and Alcoa.
I do appreciate, gentlemen, your taking all this time. I
appreciate all the lobbyists and their representatives in the
audience. Not wanting to cutoff anybody's billable hours, I
would point out that it is a very nice day outside and I hope
you get a chance to also breathe the air and see the sights of
Washington. It may be a little more hectic on the streets of
Washington in the next day or so, so enjoy it today.
All of you take my offer to add anything to your testimony
or in reference to anybody else's. This hearing is not intended
as a ``gotcha'' hearing. This is trying to find a way through a
problem that, if I were given the power the write the solution
today and had the whole Congress follow it, I am not sure what
I would write. But I hope you understand that I and a number of
other members on both sides of the aisle are trying to find an
answer.
We stand adjourned.
[Whereupon, at 12:50 p.m., the committee was adjourned.]
[Question and answers and submissions for the record
follow.]
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