United States: FACT Act Promises Transparency In Bankruptcy Trust Claims And Payments For Asbestos Exposure

FACT Act Promises Transparency in Bankruptcy Trust Claims and Payments for Asbestos Exposure

FACT would amend the U.S. Bankruptcy Code to require trusts formed under a bankruptcy reorganization plan and charged with paying claims connected to asbestos exposure to disclose all demands made by claimants and the basis of any payments made to claimants.

Asbestos defendants are one step closer to greater transparency regarding the often illusive bankruptcy trust claims and payments. On Wednesday, November 13, 2013, the U.S. House of Representatives passed H.R. 982, the Furthering Asbestos Claim Transparency (FACT) Act by a 221-199 vote. FACT would amend the U.S. Bankruptcy Code to require trusts formed under a bankruptcy reorganization plan and charged with paying claims connected to asbestos exposure to disclose all demands made by claimants and the basis of any payments made to claimants. The entire version of the bill as passed can be viewed here.

Requirements Imposed on Trusts

In 1994, Congress passed legislation allowing asbestos companies to set up trusts to award damages to victims, while still allowing the companies to reorganize and continue operating under the bankruptcy laws.¹ FACT would require asbestos trusts to file quarterly reports with the court and the United States Trustee detailing the claimant's name, the basis for each claim (including the claimant's exposure history) and the amount of any payments made to the claimant.² These reports would be made available on the court's public docket.³ The trusts would also be required to respond to informational requests from asbestos litigants.⁴

How Will This Affect Defendants and Plaintiffs?

Defendants would benefit significantly from the passage of this act. FACT would provide greater transparency in litigation and make publicly available evidence regarding plaintiffs that might not otherwise be discoverable or produced during litigation, including the plaintiffs' exposure and work history. Defendants would be able to obtain this information from the trust disclosures rather than having to go through discovery requests that subject defendants to state court rules. FACT would also require payment details even when they stem from a confidential settlement. Not only would this make the information more readily available, but it would require asbestos trusts, rather than defendants, to bear the cost of production.⁵ All confidential medical records and the claimant's full Social Security Number are explicitly excluded from disclosure to protect the identity of the claimants.

FACT would also curb double payments from asbestos trusts to claimants who have already received compensation from other trusts and non-bankrupt companies, as well as reduce fraudulent claims. Recent studies have indicated that asbestos trusts have made payments based on fraudulent or inflated claims.⁶ This would benefit plaintiffs by ensuring that trust funds actually compensate asbestos victims.

Critics worry the bill would hurt plaintiffs by creating a "cruel and chilling invasion of privacy" by exposing personal details, including the last four digits of a claimant's Social Security Number, which could render them susceptible to identity theft.⁷ Additionally, some fear future employers would discriminate against claimants, believing that they would become ill or make similar asbestos claims against their new employer.

FACT will now go to the Senate for consideration.

If you have any questions about this Alert, please contact Sharon L. Caffrey, Alyson Walker Lotman, any member of the Products Liability and Toxic Torts Practice Group or the attorney in the firm with whom you are regularly in contact.

Footnotes

1. 11 U.S.C.A. § 524(g) (1994).

2. H.R. 982, 113th Cong. § 8 (2013).

3. Id.

4. Id.

5. Litigants would still be required to pay reasonable costs associated with written requests made upon the trusts. Id. at § 8(B).

6. See Press Release, U.S. Chamber of Commerce, GAO Report Confirms Asbestos Bankruptcy Trust System is Broken (October 19, 2011), http://www.uschamber.com/press/releases/2011/october/us-chamber-gao-report-confirms-asbestos-bankruptcy-trust-system-broken.

7. Id.

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