SPEAKERS       CONTENTS       INSERTS    Tables

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62–442

2000
FAIRNESS IN ASBESTOS COMPENSATION
ACT OF 1999

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

ON
H.R. 1283

JULY 1, 1999

Serial No. 75

Printed for the use of the Committee on the Judiciary
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For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
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DAVID VITTER, Louisiana

JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York

THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director

C O N T E N T S

HEARING DATE
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    July 1, 1999

TEXT OF BILL

    H.R. 1283

OPENING STATEMENT

    Hyde, Hon. Henry J., a Representative in Congress from the State of Illinois, and chairman, Committee on the Judiciary

WITNESSES

    Abeln, Maura J., Esq., senior vice president, general counsel and secretary, Owens Corning, Toledo, OH

    Donohue, Thomas J., president, U.S. Chamber of Commerce, Washington, DC

    Edley, Christopher F., Jr., Esq., co-director, The Civil Rights Project, Harvard Law School, Cambridge, MA

    Epler, Gary R., M.D., pulmonary critical care medicine, Brigham and Women's Hospital, Boston, MA

    Heyman, Samuel J., Esq., chairman and CEO, GAF Corporation, Wayne, NJ
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    Hiatt, Jonathan, Esq., general counsel, AFL–CIO, Washington, DC

    Mallett, Conrad, Jr., Miller, Canfield, Paddock and Stone, P.L.C., Detroit, MI

    Middleton, Richard H., Jr., Esq., president-elect, Association of Trial Lawyers of America

    Oliver, Christine, M.D., associate physician, Massachusetts General Hospital, assistant professor, Harvard Medical School, Boston, MA

    Sullivan, Louis W., president, Morehouse School of Medicine, Atlanta, GA

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Abeln, Maura J., Esq., senior vice president, general counsel and secretary, Owens Corning, Toledo, OH: Prepared statement

    Donohue, Thomas J., president, U.S. Chamber of Commerce, Washington, DC: Prepared statement

    Edley, Christopher F., Jr., Esq., co-director, The Civil Rights Project, Harvard Law School, Cambridge, MA: Prepared statement

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    Epler, Gary R., M.D., pulmonary critical care medicine, Brigham and Women's Hospital, Boston, MA: Prepared statement

    Eskridge, William N., Jr., Professor, John A. Garver Professor of Jurisprudence, Yale Law School: Prepared statement

    Heyman, Samuel J., Esq., chairman and CEO, GAF Corporation, Wayne, NJ: Prepared statement

    Hiatt, Jonathan, Esq., general counsel, AFL–CIO, Washington, DC: Prepared statement

    Hyde, Hon. Henry J., a Representative in Congress from the State of Illinois, and chairman, Committee on the Judiciary: Prepared statement

    Johnson, Robert Graham, M.D., FCCP, chief, Division of Cardiothoracic Surgery at the Beth-Israel-Deaconess Medical Center, Boston, MA: Prepared statement

    Little, Alex G., M.D. FCCP, past president, American College of Chest Physicians: Prepared statement

    Mallett, Conrad, Jr., Miller, Canfield, Paddock and Stone, P.L.C., Detroit, MI: Prepared statement

    Middleton, Richard H., Jr., Esq., president-elect, Association of Trial Lawyers of America: Prepared statement
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    Oliver, Christine, M.D., associate physician, Massachusetts General Hospital, assistant professor, Harvard Medical School, Boston, MA: Prepared statement

    O'Malley, Myles, Consumers for Civil Justice: Prepared statement

    Rosenow, Edward C., III, M.D., MACP and Master FCCP, past president, American College of Chest Physicians: Prepared statement

    Sullivan, Louis W., president, Morehouse School of Medicine, Atlanta, GA: Prepared statement

    Verkuil, Paul, dean, Benjamin V. Cardosa School of Law, Yeshiva University: Prepared statement

APPENDIX
    Material submitted for the record

FAIRNESS IN ASBESTOS COMPENSATION ACT OF 1999

THURSDAY, JULY 1, 1999

House of Representatives,
Committee on the Judiciary,
Washington, DC.
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    The committee met, pursuant to call, at 10:25 a.m., in Room 2141, Rayburn House Office Building, Hon. Henry J. Hyde (chairman of the committee) presiding.

    Present: Representatives Henry J. Hyde, George W. Gekas, Howard Coble, Steve Chabot, Bob Barr, William L. Jenkins, Asa Hutchinson, Chris Cannon, Lindsey O. Graham, David Vitter, John Conyers, Jr., Barney Frank, Howard L. Berman, Jerrold Nadler, Robert C. Scott, Melvin L. Watt, Sheila Jackson Lee, and Robert Wexler.

    Staff present: Thomas E. Mooney, Sr., general counsel-chief of staff; Jon Dudas, deputy general counsel-staff director; Diana Schacht, deputy staff director/chief counsel; Daniel M. Freeman, parliamentarian/counsel; Joseph Gibson, chief antitrust counsel; Sharee Freeman, counsel; John Mautz, counsel; Patrick Prisco, assistant to the deputy general counsel-staff director; Ray Smietanka, chief counsel (Subcommittee on Commercial and Administrative Law); Becky Ward, office manager; Michael Connolly, press secretary; James B. Farr, financial clerk; Ann Jemison, receptionist; Robert Jones, staff assistant; Perry Apelbaum, minority general counsel; Julian Epstein, minority chief counsel and staff director; and Samara Ryder, minority counsel.

OPENING STATEMENT OF CHAIRMAN HYDE

    Mr. HYDE. The committee will come to order. Good morning and welcome, everyone. Today we are conducting a hearing on H.R. 1283, the Fairness in Asbestos Compensation Act of 1999. This proposal would create a nationwide administrative claims resolution process to efficiently compensate victims of asbestos exposure. We have two panels of witnesses who will provide a variety of perspectives, and members will have 5 minutes to pose questions to each panel.
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    As I have stated in the past, nothing in my experience as a lawyer has come close to the avalanche of lawsuits now being brought, pending or yet to be brought, inundating our State and Federal courts with claims by workers who say they are or have been injured by excessive exposure to asbestos in the workplaces of the past. There continues to be massive problems associated with asbestos exposure litigation in this country. These problems come at the expense of the court system, taxpayers, and most importantly, the victims. Our courts simply are not equipped to handle this litigation. There are more than 200,000 pending cases, 200,000, and the number is growing.

    Even worse, the limited pool of money that is available to compensate victims is not being used to compensate victims. According to a 1993 article by one of our distinguished panelists, Professor Christopher Edley, 60 cents of every dollar paid to asbestos defendants goes to pay lawyers' fees. According to that article, when you include judicial and insurance overhead costs, only one out of three dollars expended goes to a victim.

    To further complicate the problem, more of the money that could be paid to sick and affected patients is being used to pay plaintiffs who have been exposed to asbestos but have yet to show any symptoms. Finally, the pool available to compensate victims of asbestos-related diseases has grown thinner and may continue to diminish. It wasn't too long ago that Johns-Manville went bankrupt from asbestos lawsuits. The Johns-Manville trust is now paying about 10 cents on the dollar for claims against it. If companies continue to go bankrupt paying litigation costs, it is the victims who will ultimately suffer. This does not account for the problems this will cause for the employees and communities affected by the bankruptcies.

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    The Judicial Conference and the Supreme Court have repeatedly acknowledged the courts' lack of ability to efficiently resolve this litigation. Just this month in Esteban Ortiz v. Fibreboard Corp., the Supreme Court pointed out that the ''elephantine mass of asbestos cases . . . defies customary judicial administration and calls for national legislation.'' This case and Amchem Products v. Windsor, another massive asbestos-related class action, were both struck by the Supreme Court because the represented class was unable to meet the prerequisites of Federal Rules of Civil Procedure, Rule 23. The incredible number of asbestos victims and the complexity of their injuries, including a latency period of up to 40 years, has made it difficult, if not impossible, for the courts to approve massive settlements. The unfortunate consequence is that innocent victims are bearing the brunt of this procedural wall. We in Congress must do everything we can to resolve this issue once and for all.

    [The prepared statement of Mr. Hyde follows:]

PREPARED STATEMENT OF HON. HENRY J. HYDE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS, AND CHAIRMAN, COMMITTEE ON THE JUDICIARY

    Good morning and welcome everyone.

    Today we are conducting a hearing on H.R. 1283, the ''Fairness in Asbestos Compensation Act of 1999.'' This proposal would create a nationwide administrative claims resolution process to efficiently compensate victims of asbestos exposure. We have two panels of witnesses who will provide a variety of perspectives, and members will have five minutes to pose questions to each panel.
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    As I have stated in the past, nothing in my experience as a lawyer has come close to the avalanche of lawsuits now being brought, pending or yet to be brought, inundating our state and federal courts with claims by workers who say they are or have been injured by excessive exposure to asbestos in the workplaces of the past. There continues to be massive problems associated with asbestos exposure litigation in this country. These problems come at the expense of the court system, taxpayers, and most importantly, the victims. Our courts simply are not equipped to handle this litigation. There are more than two hundred thousand pending cases—two hundred thousand—and the number is growing.

    Even worse, the limited pool of money that is available to compensate victims is not being used to compensate victims. According to a 1993 article by one of our distinguished panelists, Professor Christopher Edley, sixty cents of every dollar paid to asbestos defendants goes to pay lawyers' fees. According to that article, when you include judicial and insurance overhead costs, only one out of three dollars expended goes to a victim.

    To further complicate the problem, more of the money that could be paid to sick and affected patients is being used to pay plaintiffs who have been exposed to asbestos but have yet to show any symptoms. Finally, the pool available to compensate victims of asbestos related diseases has grown thinner and may continue to diminish. It was not too long ago that Johns-Manville went bankrupt from asbestos lawsuits. The Johns-Manville Trust is now paying about ten cents on the dollar for claims against it. If companies continue to go bankrupt paying litigation costs, it is the victims who will ultimately suffer. This does not account for the problems this will cause for the employees and communities affected by the bankruptcies.

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    The Judicial Conference and the Supreme Court have repeatedly acknowledged the courts' lack of ability to efficiently resolve this litigation. Just this month in Esteban Ortiz v. Fiberboard Corp., the Supreme Court pointed out, that the ''elephantine mass of asbestos cases . . . defies customary judicial administration and calls for national legislation.'' This case and Amchem Products v. Windsor, another massive asbestos related class action, were both struck by the Supreme Court because the represented class was unable to meet the prerequisites of Federal Rules of Civil Procedure, Rule 23. The incredible number of asbestos victims and the complexity of their injuries, including a latency period of up to 40 years, has made it difficult, if not impossible, for the courts to approve massive settlements. The unfortunate consequence is that innocent victims are bearing the brunt of this procedural wall. We in Congress must do everything we can to resolve this issue once and for all.

    I look forward to a lively discussion on this important legislation. I now recognize the ranking member, Mr. Conyers, for an opening statement.

    [The bill, H.R. 1283, follows:]

106TH CONGRESS
    1ST SESSION
  H. R. 1283
To establish legal standards and procedures for the fair, prompt, inexpensive, and efficient resolution of personal injury claims arising out of asbestos exposure, and for other purposes.
     
IN THE HOUSE OF REPRESENTATIVES
MARCH 25, 1999
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Mr. HYDE (for himself, Mr. MORAN of Virginia, Mr. ARMEY, Mr. DELAY, Mr. SENSENBRENNER, Mr. GEKAS, Mr. BURTON of Indiana, Mr. MANZULLO, Mr. STENHOLM, Mr. HOSTETTLER, Mr. BONILLA, Mr. NORWOOD, Mr. FOLEY, Mr. DEAL of Georgia, Mr. CALVERT, Mr. BRADY of Texas, Mr. WELLER, Mr. CANNON, and Mr. WATTS of Oklahoma) introduced the following bill; which was referred to the Committee on the Judiciary
     
A BILL
To establish legal standards and procedures for the fair, prompt, inexpensive, and efficient resolution of personal injury claims arising out of asbestos exposure, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
    (a) SHORT TITLE.—This Act may be cited as the ''Fairness in Asbestos Compensation Act of 1999''.
    (b) TABLE OF CONTENTS.—The table of contents of this Act is as follows:

    Sec. 1. Short title; table of contents.
    Sec. 2. Findings.
TITLE I—ASBESTOS RESOLUTION CORPORATION
    Sec. 101. Establishment.
    Sec. 102. Powers of the Corporation.
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    Sec. 103. Board of Directors.
    Sec. 104. Officers.
    Sec. 105. Medical Advisory Board.
    Sec. 106. Avoidance of conflict of interest.
    Sec. 107. Annual reports.
TITLE II—MEDICAL ELIGIBILITY DETERMINATIONS
    Sec. 201. Medical criteria—non-malignant conditions.
    Sec. 202. Medical criteria—mesothelioma.
    Sec. 203. Medical criteria—lung cancer.
    Sec. 204. Medical criteria—other cancer.
    Sec. 205. Procedure for certificate of eligibility.
    Sec. 206. Exceptional medical claims.
    Sec. 207. Confidentiality.
    Sec. 208. Judicial review.
TITLE III—ALTERNATIVE DISPUTE RESOLUTION
    Sec. 301. Rules of procedure.
    Sec. 302. Motions officers.
    Sec. 303. Notice to respondents.
    Sec. 304. Grace period.
    Sec. 305. Mediation.
    Sec. 306. Arbitration.
    Sec. 307. Subpoena powers of motions officers and arbitrators.
TITLE IV—CIVIL ACTIONS
    Sec. 401. Prerequisites for civil action.
    Sec. 402. Individual trials.
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    Sec. 403. Certificate of medical eligibility presumed correct.
    Sec. 404. Penalty for inadequate offer in mediation.
TITLE V—RULES APPLICABLE TO ARBITRATION AND CIVIL ACTIONS
    Sec. 501. Elements of proof; relief.
    Sec. 502. Timeliness defenses abolished.
    Sec. 503. Attorneys' fees.
    Sec. 504. Effect on subsequent actions.
TITLE VI—FUNDING
    Sec. 601. Costs of medical review and overhead and administration.
    Sec. 602. Cost of mediation and arbitration.
    Sec. 603. Informal dispute resolution.
    Sec. 604. Judicial review, enforcement.
    Sec. 605. Penalties.
TITLE VII—APPLICABILITY; PENDING CIVIL ACTIONS
    Sec. 701. Applicability.
    Sec. 702. Pending civil actions.
TITLE VIII—MISCELLANEOUS PROVISIONS
    Sec. 801. Definitions.
    Sec. 802. Applicability of other federal laws.
    Sec. 803. Obligations of the corporation not obligations of the United States.
    Sec. 804. Application to existing asbestos trusts.
    Sec. 805. Applicability to certain settlements.
    Sec. 806. Severability.
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SEC. 2. FINDINGS.
    The Congress finds that:
    (1) Asbestos personal injury litigation is unfair and inefficient, and imposes a crushing burden on litigants and taxpayers alike.
    (2) Asbestos litigation has already led to the bankruptcy of more than 15 companies, representing the great majority of the former asbestos industry.
    (3) The extraordinary volume of asbestos litigation is straining state and federal courts at enormous taxpayer expense, with more than 150,000 such lawsuits currently pending in the tort system and tens of thousands of new cases filed every year.

    (4) Asbestos litigation has resulted in arbitrary verdicts, with individuals receiving widely varying recoveries despite similar medical conditions.
    (5) Asbestos litigation is a mature tort. The legal, medical, and scientific issues have been repeatedly tried and retired in the courts for many years.
    (6) Currently, statutes of limitations can force claimants to bring premature lawsuits in order to avoid losing their claim for compensation. Moreover, in order to obtain compensation for non-malignant disease, claimants often must give up their right to obtain compensation later on, if they develop an asbestos-related cancer.
    (7) Litigation has not been able to provide compensation to claimants swiftly. On the contrary, according to the U.S. Judicial Conference's Ad Hoc Committee on Asbestos Litigation, the volume and complexity of asbestos cases have resulted in the violation of a basic tenet of American justice: speedy and inexpensive resolution of cases.
    (8) Litigation has also proved to be an extraordinarily costly means of resolving claims of asbestos-related disease. Less than 50% of the total cost of asbestos litigation actually goes to compensate claimants, while the reminder is eaten up in attorneys' fees and other litigation costs.
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    (9) In many courts, the vast majority of pending asbestos claims are filed by individuals who suffer no present asbestos-related impairment. These claims divert the resources of defendant from compensating individuals who are suffering from serious asbestos-related disease.
    (10) Punitive damages also divert the resources of defendants from compensating impaired claimants. Moreover, punitive damages give a few claimants huge windfalls in addition to compensatory damages.
    (11) In an effort to cope with the overwhelming tide of asbestos cases, a few courts have resorted to mass consolidated trials and other aggregative methods of dealing with asbestos claims. Unfortunately, mass consolidations only serve to magnify the irrationality of a litigation system that awards massive amounts to the unimpaired while threatening the ability of seriously ill people to obtain compensation in the future.
TITLE I—ASBESTOS RESOLUTION CORPORATION
SEC. 101. ESTABLISHMENT.
    There is established a non-profit corporation, to be known as the ''Asbestos Resolution Corporation''.
SEC. 102. POWERS OF THE CORPORATION.
    (a) The Corporation shall have all of the powers granted to non-profit corporations under the District of Columbia Nonprofit Corporation Act, D.C. Code §29–501 et seq.
    (b) In addition to the powers granted under subsection (a) the Corporation shall have the power to—
    (1) hire or appoint employees and to retain the services of other entities to provide such employees;
    (2) contract for services, including the services of physicians and other medical professionals, hearing examiners, mediators, arbitrators, financial experts or consultants, accountants, and attorneys;
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    (3) receive voluntary contributions of funds, goods, and services in order to carry out its purposes;
    (4) appoint one or more exceptional medical claims panels, as described in section 206(a);
    (5) adopt rules, policies, and procedures governing recovery of costs from and allocation of costs to defendants and respondents;
    (6) adopt rules, policies, and procedures for the fair and efficient conduct of medical review and alternative dispute resolution;

    (7) conduct audits of information submitted to it, including inspection of laboratories performing medical tests and verification of quality assurance and quality control procedures; and
    (8) to sue and be sued in its corporate name.
SEC. 103. BOARD OF DIRECTORS.
    (a) MEMBERSHIP.—The Corporation shall be managed by a Board of Directors consisting of 7 members appointed by the President, by and with the advice and consent of the Senate. The President shall designate the chairman of the Board. No more than 4 directors may be members of the same political party. Directors shall be distinguished private citizens of the United States. The President shall submit 7 nominations under this section to the Senate not later than 4 months after the date of the enactment of this Act.
    (b) TERMS.—Each director shall be appointed for a term of 6 years from the expiration of his predecessor's term, except that, of the directors first appointed—
    (1) three shall be appointed for a term of 3 years,
    (2) three shall be appointed for a term of 6 years, and
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    (3) the chairman shall be appointed for a term of 6 years.
The terms of office of the directors first appointed shall begin on the date of enactment. A director may continue to serve until his successor has been appointed and confirmed.
    (c) VACANCY.—A vacancy on the Board shall be filled in the same manner as the original appointment. A director appointed to fill a vacancy occurring before the expiration of the term for which the member's predecessor was appointed shall be appointed for the remainder of that term. A vacancy shall not affect the power of the Board.
    (d) REMOVAL.—Directors may be removed for cause by the President.
    (d) COMPENSATION; EXPENSES.—
    (1) The compensation of directors other than the chairman shall not exceed $50,000 per year, and the compensation of the chairman shall not exceed $75,000 per year.
    (2) Directors may be reimbursed for reasonable travel and other expenses incurred in connection with their services to the Corporation pursuant to policies adopted by the Board.
    (f) PERSONAL LIABILITY OF DIRECTORS.—A director shall not be personally liable for any act or omission within the scope of the director's service as a member of the Board. The liability of a director shall not be limited as provided in this subsection if the director engaged in willful misconduct or a knowing violation of the criminal law.
    (g) AUDIT COMMITTEE.—The Board shall establish an Audit Committee which shall conduct an annual audit of the finances of the Corporation and provide an annual report to the Board regarding the financial condition of the Corporation.
    (h) EXCLUSIVE AUTHORITY.—The Board shall have the exclusive authority to—
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    (1) adopt rules, consistent with this Act, regarding the assessment and recovery of costs, the qualifications of physicians, the organization and operation of the Medical Advisory Board, and the conduct of the alternative dispute resolution process;
    (2) adopt guidelines, upon the recommendation of the Medical Advisory Board, for implementing the provisions of this Act regarding exceptional medical cases;
    (3) recommend the inclusion of new diseases in the ''other cancer'' eligible medical category if it finds, upon the recommendation of the Medical Advisory Board at a meeting expressly called for that purpose, that there is a medical consensus that the disease is caused by exposure to asbestos; and
    (4) adopt and amend by-laws.
    (i) TRANSITION.—The Board may take any action authorized by law as soon as three directors have been confirmed by the Senate. If these initial directors do not include the designated chairman, they shall elect a temporary chairman who shall serve until the designated chairman is confirmed.

SEC. 104. OFFICERS.
    The Corporation shall have a chief executive officer and such other officers as may be named and appointed by the Board at rates of compensation and terms of service fixed by the Board. Officers of the Corporation may not simultaneously serve on the Board.
SEC. 105. MEDICAL ADVISORY BOARD.
    (a) The Board shall appoint a Medical Advisory Board to provide advice on medical matters, including retention, supervision, and removal of physicians; establishment of guidelines regarding exceptional medical claims; the appropriateness of adding new diseases to the ''other cancer'' eligible medical category; and such other medical matters as may be referred to the Medical Advisory Board by the Board.
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    (b) The Medical Advisory Board shall not have fewer than 5 or more than 9 members. Members of the Medical Advisory Board shall be physicians with a demonstrated expertise in asbestos-related conditions. The Medical Advisory Board shall include at least one Board-certified pulmonary specialist, Board-certified radiologist, Board-certified oncologist, and Board-certified pathologist. The Board shall adopt such rules and policies regarding the composition and operation of the Medical Advisory Board as may be necessary for its efficient operation, including rules governing appointment and removal of members, terms of office, filling of vacancies, notice and conduct of meetings (including quorum requirements) and compensation.
    (c) The Medical Advisory Board shall be subject to the Federal Advisory Committee Act (5 U.S.C. App.).
SEC. 106. AVOIDANCE OF CONFLICT OF INTEREST.
    No director, officer, member of the Medical Advisory Board, employee, contract employee, contractor, or consultant to the Corporation may represent any person in any manner in any proceeding before the Corporation. In addition, the Board shall adopt policies and procedures to guard against both actual and apparent conflicts of interest.
SEC. 107. ANNUAL REPORTS.
    The Corporation shall submit an annual report to the President and Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate with respect to its operations, activities, and financial condition on or before December 31 of each year.
TITLE II—MEDICAL ELIGIBILITY DETERMINATIONS
SEC. 201. MEDICAL CRITERIA—NON-MALIGNANT CONDITIONS.
    In order to meet the requirements for the non-malignant conditions eligible medical category, a claimant must submit medical information and/or testimonial information sufficient to demonstrate a latency period of at least 12 years, and (a) clinical evidence of asbestosis, (b) pathological evidence of asbestosis, or (c) evidence of bilateral pleural thickening with impairment.
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SEC. 202. MEDICAL CRITERIA—MESOTHELIOMA.
    In order to meet the requirements for the mesothelioma eligible medical category, a claimant must submit—
    (1) a diagnosis of malignant mesothelioma with a primary site in the pleura or peritoneum, which is derived from appropriate tissue, and verified using standardized and accepted criteria of microscopic morphology and/or a variety of appropriate staining techniques; and which is made by either (1) two Board-certified pathologists, or (2) one Board-certified pathologist who is, at the time that the diagnosis is verified, a member of the U.S.-Canadian Mesothelioma Reference Panel; and
    (2) medical information and/or testimonial information sufficient to demonstrate a latency period of at least ten (10) years.
SEC. 203. MEDICAL CRITERIA—LUNG CANCER.

    In order to meet the requirements for the lung cancer eligible medical category, a claimant must submit (a) a diagnosis by a Board-certified pathologist, Board-certified pulmonary specialist, or Board-certified oncologist of primary lung carcinoma; (b) medical information and/or testimonial information sufficient to demonstrate a latency period of at least twelve (12) years; and (c) either—
    (1) evidence of non-malignant condition sufficient to meet the requirements of section 201; or
    (2) chest x-rays which, in the opinion of a certified B-reader, demonstrate both asbestos-related bilateral pleural plaques or asbestos-related bilateral pleural thickening and evidence of 15 years of exposure to asbestos, to be calculated as specified in subparagraphs (A)–(D)—
    (A) Each year that an exposed person's primary occupation, during a substantial portion of a normal work year for that occupation, involved working in areas immediate to where asbestos-containing products were being installed, repaired, or removed under circumstances that involved regular airborne emissions of visible asbestos dust, shall count as one year;
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    (B) Each year that an exposed persons' primary occupation, during a substantial portion of a normal work year for that occupation, involved the direct installation, repair, or removal of asbestos-containing products, shall count as 2 years;
    (C) Each year that an exposed person's primary occupation, during a substantial portion of a normal work year for that occupation, involved the direct manufacture of asbestos-containing products using raw asbestos fiber, or the direct installation, repair, or removal of asbestos-containing products in a shipyard during World War II, shall count as 4 years.
    (D) For purposes of calculating years of exposure under this paragraph, each year of exposure prior to 1976 shall be counted fully; each year of exposure from 1976 through 1979 shall be counted one-half; and exposures after 1979 shall not be counted, except that—
    (i) For each year from 1972 through 1975, for which it is demonstrated by a preponderance of the evidence that the exposed person's exposure to asbestos in his or her occupation was, during a substantial portion of that work year, in compliance with the OSHA 8-hour time-weighted average airborne concentration for asbestos exposure at that time, then that year shall count one-half for purposes of calculating the years of exposure for purposes of this paragraph:
    (ii) For each year from 1976 through 1979 for which a claimant demonstrates, by a preponderance of the evidence, that the exposed persons' exposure to asbestos in his or her occupation was, during a substantial portion of that work year, in excess of the OSHA 8-hour time-weighted average airborne concentration for asbestos exposure at that time, then that year shall count fully for purposes of calculating the years of exposure for purpose of this paragraph; and
    (iii) For every year after 1979 for which a claimant demonstrates, by a preponderance of the evidence, that the exposed person's exposure to
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asbestos in his or her occupation was, during a substantial portion of that work year, in excess of the OSHA 8-hour time-weighted average airborne concentration for asbestos exposure at that time, then that year shall count one-half for purposes of calculating years of exposure for purposes of this paragraph.
SEC. 204. MEDICAL CRITERIA—OTHER CANCER.
    In order to meet the requirements in the other cancer medical eligible category, a claimant must submit (a) a diagnosis by a Board-certified pathologist, Board-certified pulmonary specialist, or Board-certified oncologist (as appropriate for the type of cancer claimed) of primary cancer of the colon or rectum, larynx, esophagus, or stomach;
(b) medical and/or testimonial information sufficient to demonstrate a latency period of at least 12 months; and
(c) evidence of a non-malignant condition sufficient to meet the requirements of section 201.
SEC. 205. PROCEDURE FOR CERTIFICATE OF ELIGIBILITY.
    (a) APPLICATION.—This claimant may apply for a certificate of medical eligibility by submitting to the Corporation such information as the Corporation may require in a form designated by the Corporation, including:
    (1) PERSONAL INFORMATION.—The name, address, date of birth and death (if applicable), smoking history, occupational history, and social security number of the exposed person, and the relationship between the exposed person and the claimant if the claimant is not the exposed person.
    (2) EXPOSURE INFORMATION.—The years of the exposed person's exposure to asbestos or asbestos-containing products; identification of the types of asbestos or asbestos-containing products to which the exposed person was exposed; description of the circumstances, intensity, and duration of the exposure; and identification of the work sites or other such locations where such exposures occurred.
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    (3) MEDICAL INFORMATION.—The eligible medical category or categories for which the claimant is applying; all medical diagnoses, reports and records that relate to any claimed asbestos-related condition; materials supporting those diagnoses, reports and records that may be required by the Corporation, but in any event including all the back-up data for any pulmonary function tests on which the claimant relies (including all flow volume loops, spirographs, and any other tracings for any test that is performed); identification of all medical professionals and medical care facilities involved in diagnosing, treating, testing, counseling, or consulting with the exposed person concerning any medical condition within the last five years. The claimant shall also provide such medical releases as the Corporation may require allowing the Corporation to obtain any and all medical information relevant to the determination of medical eligibility.
    (4) EXCEPTIONAL MEDICAL CLAIMS.—The claimant may concede that the claim cannot meet the requirements of any eligible medical category and state that the claimant intends to apply to an exceptional medical claims panel for designation as an exceptional medical claim. In that event, the Corporation shall refer the claim to an exceptional medical claim panel and the application will be governed by the provisions of section 206.
    (b) NOTIFICATION OF ACCEPTANCE.—The Corporation shall notify the claimant within 30 days following receipt of the application either that the application is accepted for processing or that the application is materially incomplete and cannot be processed until additional information is provided. Any notice that an application is materially incomplete shall describe the missing information. Issuance of a notice of acceptance shall not preclude the Corporation from requesting additional information regarding a claim if the Corporation subsequently concludes that such information is necessary to make a decision on medical eligibility.
    (c) RECORDS FROM THIRD PERSONS.—The Corporation may at any time obtain medical, employment, or other relevant records concerning an exposed person from persons other than the claimant. If it seeks such additional records, it shall give notice to the claimant, and shall upon request and at the claimant's expense, furnish copies of all records obtained to the claimant.
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    (d) ADDITIONAL MEDICAL TESTING.—If the Corporation reasonably believes that it cannot determine, on the basis of the available medical information, whether an exposed person meets the medical criteria for one of the eligible medical categories, the Corporation may at any time, at its option and expense, require the exposed person to undergo appropriate, reasonable, and non-invasive medical examination or testing (excluding any sort of computed tomography (CT) scan).
    (e) TESTIMONIAL INFORMATION UNDER OATH.—All testimonial information provided to the Corporation in connection with a claim, other than information in any medical report or records, shall be made under oath, or by sworn affidavit, or by written declaration subscribed to as true under penalty of perjury.
    (f) DETERMINATION OF MEDICAL ELIGIBILITY.—As soon as practicable and, in any event, no later than 60 days after issuance of a notice of acceptance, the Corporation shall issue either a certificate of medical eligibility stating each eligible medical category for which the claimant qualifies or a finding of noneligibility. The Corporation may extend the time if necessary to secure additional information that is essential to the determination of medical eligibility. If the claim is rejected wholly or in part, the certificate of eligibility or finding of noneligibility shall be accompanied by a brief written statement of reasons.
    (g) RECONSIDERATION.
    (1) The claimant may seek reconsideration of the Corporation's determination under subsection (f) by submitting to the Corporation a written request for reconsideration within 60 days from the date of the Corporation's determination under subsection (f). The Corporation may extend the time for submitting a request for reconsideration upon the claimant's request. The request for reconsideration shall include a statement of the grounds for reconsideration and shall be accompanied by any additional evidence on which the claimant relies.
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    (2) The Corporation shall refer a request for reconsideration to a panel of two physicians with expertise in the medical issue or issues raised by the claimant. The panel of physicians may request further information from the applicant or from third parties, or may require additional medical examination or testing, in accordance with the provisions of subsections (c) and (d).
    (3) The panel of physicians shall consider the issues raised by the request for reconsideration de novo on the basis of all of the evidence before the Corporation. If the panel of physicians agrees on the disposition of the request for reconsideration, it will render a decision. If the panel is not in agreement, the Corporation will appoint to the panel a third physician with expertise in the issues raised by the claimant, and the panel thus augmented will render a decision.

    (4) If the panel approves the request for reconsideration, wholly or in part, the Corporation shall issue a certificate of medical eligibility for the eligible medical categories for which the panel finds that the claimant qualifies. If the panel denies the request for reconsideration, or if the certificate of eligibility on reconsideration rejects any claim made by the claimant, wholly or in part, the panel shall provide a brief written statement of reasons.
    (5) The Corporation shall act upon a request for reconsideration as soon as practicable but in any event within 30 days: Provided, That the Corporation may extend the time if necessary to secure additional information that is essential to the disposition of the request for reconsideration.
    (h) REAPPLICATION.—A claimant may file a new application under this title at any time. Any such new application filed within one year following the date on which the Corporation issued a final finding of noneligibility shall identify the previous application and any relevant changes in circumstances.
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SEC. 206. EXCEPTIONAL MEDICAL CLAIMS.
    (a) EXCEPTIONAL MEDICAL CLAIMS PANEL.—The Corporation shall establish one or more exceptional medical claims panels. Each exceptional medical claims panel shall be comprised of five physicians, including two Board-certified pulmonary specialists, a Board-certified radiologist (who is either a certified B-reader or a specialist in computed tomography), and two Board-certified pathologists. Each exceptional medical claims panel shall determine whether claims referred to it meet the requirements of this section for designation as exceptional medical claims.
    (b) TIME TO APPLY.—A claimant may apply to the Corporation for designation of his claim as an exceptional medical claim if the claimant—
    (1) concedes (either before or after a determination is made under section 205(f)) that the claim does not meet the medical criteria in sections 201–204; or
    (2) seeks designation of the claim as an exceptional medical claim within 60 days after a determination on reconsideration under section 205(g) that the claim does not meet the medical criteria in sections 201–204, wholly or in part.
However, the Corporation shall not accept any application for designation as an exceptional medical claim if a claimant has filed an action under section 208 for review of the Corporation's determination on reconsideration or has commenced alternative dispute resolution procedures under title III.
    (c) CONTENTS OF APPLICATION.—The application for designation as an exceptional medical claim shall include the information required by the Corporation under section 205(a) and shall, in addition, be supported by the report of a Board-certified internist, Board-certified pulmonary specialist, Board-certified pathologist, or Board-certified oncologist, as appropriate for the eligible medical category claimed. The physician's report shall contain a complete review of the exposed person's medical history and current condition, such additional material by way of analysis and documentation as shall be prescribed by the Corporation, and a detailed explanation why the claim meets the standard for acceptance as an exceptional medical claim set forth in subsection (d).
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    (d) STANDARD FOR ACCEPTANCE.—The exceptional medical claims panel shall designate a claim as an exceptional medical claim only if the claimant cannot satisfy the requirements for a given eligible medical category for reasons beyond his or her control but demonstrates, through clear and convincing evidence, that the exposed person has an asbestos-related condition that is substantially comparable to the condition of an exposed person who would satisfy the requirements of a given eligible medical category.
    (e) FURTHER TESTING.—The exceptional medical claims panel may order additional appropriate, reasonable, and non-invasive testing or examination of the exposed person (including computed tomography (CT) scanning). Tests ordered by an exceptional medical claims panel shall be at the expense of the Corporation.
    (f) DECISION.—The decision of the exceptional medical claims panel shall not be subject to further review within the Corporation. If the exceptional medical claims panel decides that a claim should be designated, wholly or in part, as an exceptional medical claim, the Corporation shall issue a certificate of medical eligibility which shall designate the claim as an exceptional medical claim and state the eligible medical category or categories for which the claim qualifies by virtue of that designation.
SEC. 207. CONFIDENTIALITY.
    The Corporation shall observe the requirements of 5 U.S.C. §552a with respect to information that it receives regarding a claimant or exposed person. The production of this information to respondents in accordance with section 303(c) shall be deemed a routine use of the information within the meaning of 5 U.S.C. §552a(a)(7).
SEC. 208. JUDICIAL REVIEW.
    (a) The district courts of the United States shall have exclusive jurisdiction, without regard to the amount in controversy or the citizenship of the parties, of any action to review a determination by the Corporation that a claimant fails to meet the medical criteria, wholly or in part, or that his claim does not qualify as an exceptional medical claim. An adverse determination regarding medical eligibility shall not be subject to review until the claimant has exhausted administrative remedies before the Corporation by obtaining a final determination under section 205(g) or section 206(f).
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    (b) An action for review under this section shall be commenced within 60 days after the determination on reconsideration as to which review is sought or the decision that the claimant does not qualify as an exceptional medical claim, whichever is later. However, no action for review under this section may be commenced while an application for designation as an exceptional medical claim is pending.
    (c) The court shall uphold the determination of the Corporation if it is supported by substantial evidence on the record as a whole and is not contrary to law. Due account shall be taken of the rule of prejudicial error.
    (d) In applying the standard set forth in subsection (c), the record shall consist of the information submitted to the Corporation or the exceptional medical claims panel by the claimant, records and other information obtained by the Corporation or exceptional medical claims panel relating to the claim, and the results of any medical tests administered at the direction of the Corporation or exceptional medical claims panel.
TITLE III—ALTERNATIVE DISPUTE RESOLUTION
SEC. 301. RULES OF PROCEDURE.
    (a) The Board shall establish rules of procedure for the alternative dispute resolution process. Such rules of procedure shall be designed to ensure that claims will be resolved in a prompt, efficient, fair, and inexpensive way and shall include—

    (1) reasonable time limits and rules regarding the time at which actions of the Corporation become final;
    (2) procedures relating to the notification of respondents, including reasonable and limited discovery;
    (3) procedures for the disclosure of information necessary for settlement, including the timing of disclosure and determination of the information that must be disclosed;
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    (4) rules regarding protection of confidential information;
    (5) procedures for the selection of arbitrators;
    (6) arbitration procedures designed to further the objective of prompt, efficient, fair and inexpensive dispute resolution including simplified pleadings, reasonable limitations on discovery, resolution of pre-hearing motions including motions for summary disposition, appropriate, evidentiary rules, and efficient conduct of hearings; and
    (7) procedures for just and reasonable sanctions to ensure compliance with the Corporation's rules and orders.
    (b) Parties shall have the right to be represented by counsel at all phases of the alternative dispute resolution process.
    (c) By presenting to the Corporation any statement, motion, or other paper, counsel and the party represented by that counsel warrant that to the best of their knowledge, information, and belief, formed after reasonable inquiry—
    (1) it is not being presented for any improper purpose;
    (2) the claims, defenses, or other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
    (3) the allegations and other factual contentions have evidentiary support; and
    (4) the denials of factual contentions are warranted on the evidence.
    (d) The Corporation may contract with providers of alternative dispute resolution services to provide mediation or arbitration under this part. To the extent appropriate and consistent with this Act, the Board may adopt the rules of procedure of such contract service providers.
SEC. 302. MOTIONS OFFICERS.
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    Upon issuance of a certificate of eligibility, the Corporation shall assign a motions officer to the claim. The motions officer shall have the authority to determine all procedural issues in the alternative dispute resolution process except such matters as may be within the authority of a mediator or arbitrator assigned to the claim. Without limitation, the motions officer may—
    (1) determine whether notice shall be provided to any respondent under section 303,
    (2) issue subpoenas to parties and non-parties for testimony and documents, in accordance with the terms of section 307,
    (3) enter scheduling orders and other orders to control the progress of the proceedings,
    (4) resolve discovery disputes, and
    (5) exercise any other authority conferred by procedural rules, policies, or procedures established by the Corporation.
SEC. 303. NOTICE TO RESPONDENTS.
    (a) Within such time after receiving a final certificate of eligibility as the Corporation may provide, a claimant shall provide to the Corporation the name and address of each person that claimant alleges is responsible for his asbestos-related injury and for each such person a verified particularized statement in a form prescribed by the Corporation of the basis for the allegation that that person is or may be responsible for his injury. This particularized statement shall include as applicable the dates of exposure for each relevant time period; the worksite or other place of exposure; the nature and frequency of the exposure; if the exposure was occupational, the name of the exposed person's employer and a description of the exposed person's job and working conditions; the asbestos-containing product(s) or material(s) to which the claimant was exposed at each place of exposure; and any other information that the Corporation may require by rule or otherwise in all or in particular classes of cases.
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    (b) The Corporation will promptly notify each person identified by the claimant pursuant to subsection (a) of this section, and for whom a complete and adequate particularized statement has been submitted, that it has been named as a respondent. The Corporation will at the same time provide to each respondent a copy of all particularized statements submitted to the Corporation under subsection (a).
    (c) The Corporation shall provide to each respondent, on request and at the respondent's expense, a copy of all information submitted to the Corporation by the claimant, records and other information obtained by Corporation relating to the claim and the results of any medical tests administered at the Corporation's direction. However, the Corporation shall not provide the information described in this subsection to the respondent until it has received a protective order, signed by or on behalf of the respondent, in a form prescribed by the Corporation, that will preserve the confidentiality of medical, employment, and other information that the Corporation reasonably designates as confidential.
    (d) For good cause shown and subject to reasonable limitations, a motions officer may allow discovery for the purpose of obtaining information necessary to allow the claimant to provide a particularized statement under subsection (a). The motions officer may grant reasonable extensions of time for naming respondents in order to allow for the completion of discovery under this subsection.
    (e) New respondents may be added in mediation after the time prescribed by the Corporation for adding respondents (including any extensions) only upon motion by a claimant for good cause. Among the factors that the Corporation may consider in determining whether good cause exists are the following: (1) the prejudice to the claimant if the new respondent is not added, (2) the reason why the new respondent was not named in a timely way, (3) whether the claimant sought to name the new respondent as soon as he was aware of the omission, (4) the extent to which late addition of a new respondent would be disruptive, and (5) other relevant factors.
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SEC. 304. GRACE PERIOD.
    The Corporation shall establish a grace period not to exceed 60 days after expiration of the time for naming respondents, during which the parties will be encouraged to reach voluntary settlements without the need for mediation.
SEC. 305. MEDIATION.
    (a) APPOINTMENT OF MEDIATOR.—Upon expiration of the grace period, the Corporation shall appoint a mediator to assist the parties who have not settled in the grace period in settling the claim.
    (b) DISCLOSURE OF INFORMATION NECESSARY FOR SETTLEMENT.—Within such time after appointment of a mediator as the Corporation shall prescribe, each party shall serve upon all other non-settling parties a statement of information required for settlement. The information to be included in such statements shall be determined by the Corporation to be reasonably necessary for the parties to evaluate the claim. Information previously provided by any party may be incorporated by reference and need not be resubmitted. Nothing in this subsection shall be construed to require the disclosure of any information privileged under applicable law.
    (c) TIME LIMITS.—Mediation shall be completed within 60 days following the appointment of the mediator. The time period may be extended by the mediator if the claimant has failed to provide the information required under subsection (b), if such extension is necessary to allow for simultaneous mediation of a group of claims, or for other good cause. The time period may also be extended for a period not to exceed 60 days if in the judgment of the mediator, the claimant's final demand under subsection (e) is not made in good faith, given the legal and factual basis of the claim.
    (d) CONFIDENTIALITY.—All statements made by any party in mediation shall be confidential and shall not be admissible in any trial or arbitration except as allowed under Rule 408 of the Federal Rules of Evidence.
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    (e) GOOD FAITH OFFERS AND DEMANDS.—Fifteen days prior to the close of the mediation period, claimant shall provide to each non-settling respondent or jointly-represented group of respondents a final good faith demand of settlement. Five days later each respondent or jointly-represented group of respondents shall make a final good faith offer in reply. If a respondent or jointly-represented group of respondents fails to make a settlement offer under this section, it shall be deemed to have made a settlement offer of zero dollars. During the remaining 10-day period, or any extension thereof, the mediator shall work with the parties in a further effort to settle the claim.
    (f) RELEASE FROM MEDIATION.—At the close of the mediation period, the mediator shall issue to the claimant a release from mediation with respect to all respondents that participated in mediation. After the issuance of a release from mediation, the claimant may elect arbitration under section 306 or commence a civil action against those respondents.
SEC. 306. ARBITRATION.
    (a) ELECTION TO ARBITRATE.—A claimant may elect arbitration under this section by serving notice of such election within 30 days following release from mediation on all respondents that have not previously settled. All such respondents will be parties to the arbitration. The Corporation shall adopt rules of procedure under section 301 governing the assertion of third-party claims against any person, whether or not that person has previously been named as a respondent. Except as otherwise provided in this section, parties in arbitration against which third-party claims have been asserted shall be deemed respondents.
    (b) FEDERAL ARBITRATION ACT.—All arbitrations hereunder shall be subject to the Federal Arbitration Act, 9 U.S.C. §1–6, 8–16, except that, the provisions of this Act and rules adopted by the Corporation under this Act shall be effective notwithstanding any inconsistent provision of the Federal Arbitration Act.
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    (c) ARBITRATION BY SPECIAL AGREEMENT.—Nothing in this section shall be construed as prohibiting consensual arbitration pursuant to a special agreement entered into by the claimant and one or more of the respondents. The terms of such a special agreement will prevail, as to the parties thereto, over the provisions of this section (other than subsection (h)) and any rules adopted pursuant to section 301.
    (d) STATUTORY ARBITRATION.—In the absence of a special agreement to arbitrate, arbitrations shall be conducted under rules adopted by the Corporation pursuant to section 301. Those rules shall establish a procedure for early dismissal of, or summary judgment in favor of, any party named as a third-party respondent, and no party that obtains such early dismissal summary judgment shall be considered a respondent for purposes of section 601.
    (e) SUBPOENA POWERS OF ARBITRATORS.—Arbitrators may issue subpoenas to parties and non-parties for testimony and documents in accordance with the terms of section 307.
    (f) LAW TO BE APPLIED.—Unless otherwise provided in this Act, the arbitrator shall, with respect to each respondent, apply the law, including the law relating to choice of law, that would be applied by a court designated by the claimant which would have jurisdiction over that respondent. However, if a respondent demonstrates to the satisfaction of the arbitrator that the court designated by the claimant would dismiss or transfer under forum non conveniens or a similar doctrine, then the arbitrator shall apply the law of the state which has the most significant relationship to the occurrence and the parties.
    (g) PRESUMPTION APPLICABLE TO MEDICAL DETERMINATION.—A finding of medical eligibility by the Corporation shall be presumed correct and shall be conclusive unless rebutted by clear and convincing evidence, except that, to the extent that the finding of medical eligibility is abased upon evidence of exposure to asbestos, proof with respect to such exposure shall be determined in accordance with applicable state law.
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    (h) AWARDS.—The arbitrator shall issue awards with respect to each respondent within time periods set by the Corporation. The awards shall be accompanied by findings of fact and conclusions of law. Each respondent shall be jointly and severally liable to the claimant to the extend provided by applicable state law:
    (1) Where joint and several liability exists under applicable state law, the arbitrator shall determine the total joint and several liability of all respondents that have not been released by the claimant or dismissed from the proceeding. The arbitrator shall, in addition, determine the amount allocable to each such respondent based on principles of comparative fault or responsibility. Any respondent who has obtained a release from the claimant prior to the issuance of the arbitrator's award shall be fully protected from claims for contribution or indemnity; but the award against the remaining respondents shall be reduced by the consideration paid or the amount stated in the release, whichever is greater. The total award, reduced by the aggregate of such reductions for all respondents receiving a release, shall then be allocated among the remaining respondents according to the arbitrator's allocation of comparative shares of fault or responsibility.
    (2) Where joint and several liability has been abolished under applicable stat law, the arbitrator shall determine in accordance with that law the several share of liability of each respondent that has not been released or dismissed from the proceeding.
    (3) Where joint and several liability has been abolished under applicable state law with respect to only a portion of damages, the arbitrator shall determine in accordance with state law the several share of liability of each respondent that has not

been released or dismissed from the proceeding, and shall in addition determine in accordance with state law the total joint and several liability of all such respondents. Allocation of the joint and several portion of the ward among the respondents, and reduction of the total award on account of settlements, shall be as set forth in paragraph (h)(1), except that only the joint and several portion of an award may be reduced by amounts paid in settlement by released persons and only the portion of the amount paid by any released person in settlement with respect to the joint and several portion of damages shall be so applied to reduce the award.
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    (i) CONTRIBUTION RIGHTS RETAINED BY RESPONDENTS IN ADR.—The entry of an arbitration award against any respondent shall give rise to a right of contribution on the part of that respondent against any joint tortfeasor whose liability is extinguished by the award without the necessity that the award be enforced as a court judgment. A settlement between a respondent and the claimant that extinguishes in whole or in part the liability of a joint tortfeasor shall not extinguish the settling respondent's right of contribution against that joint tortfeasor.
    (j) PENALTY FOR INADEQUATE OFFER IN MEDIATION.—If the final offer made by any respondent or jointly-represented group of respondents under section 305(e) is more than 25 percent less than the share of the total liability (exclusive of prejudgment interest, if any) awarded in arbitration against that respondent or against all the members of a jointly-represented group of respondents, the arbitrator shall add a 10% penalty to the award against such respondent or each member of such group of respondents. This penalty shall not be taken into consideration in determining the maximum allowable attorneys' fees under section 503.
    (k) CONSOLIDATIONS.—Claims with respect to multiple exposed persons shall not be joined or consolidated for hearing on the merits without the consent of all parties.
SEC. 307. SUBPOENA POWERS OF MOTIONS OFFICERS AND ARBITRATORS.
    A motions officer or an arbitrator may summon in writing any person to attend before him as a witness, or to appear for a deposition, and in a proper case to bring with him any book, record, document, or paper which may be deemed material as evidence in the case. The fees for such attendance shall be the same as the fees of witnesses before masters of the United States courts. A summons under this section shall issue in the name of the motions officer or arbitrator, shall be signed by the motions officer or arbitrator, shall be directed to the person summoned, and shall be served in accordance with Rule 45(b)(1) of the Federal Rules of Civil Procedure. If any person so summoned to testify or produce documents shall refuse or neglect to obey said summons, upon petition the United States District Court for the District of Columbia or for the district in which the testimony is to be taken or the document production is to take place may compel the attendance of such person before the motions officer or arbitrator, or his appearance for a deposition, or the production of documents, or may punish said person for contempt in the same manner provided by law for securing the attendance of witnesses or their punishment for neglect or refusal to attend in the courts of the United States.
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TITLE IV—CIVIL ACTIONS
SEC. 401. PREREQUISITES FOR CIVIL ACTION.
    Subject to section 702, no civil action asserting any asbestos claim may be filed or maintained unless the plaintiff has obtained a certificate of medical eligibility and release from mediation.

SEC. 402. INDIVIDUAL TRIALS.
    No class action suit, joinder of parties, aggregation of claims, consolidation of actions, extrapolation, or other device to determine multiple asbestos claims on a collective basis shall be permitted without the consent of each defendant. Any defendant in a civil action that involves a violation of this subsection may remove such action to an appropriate Federal district court. The district courts of the United States shall have jurisdiction of all civil actions removed pursuant to this section without regard to diversity of citizenship or amount in controversy.
SEC. 403. CERTIFICATE OF MEDICAL ELIGIBILITY PRESUMED CORRECT.
    A finding of medical eligibility by the Corporation shall be presumed correct and shall be conclusive unless rebutted by clear and convincing evidence, except that, to the extent that a finding of medical eligibility is based on evidence of exposure to asbestos, the burden of proof with respect to such exposure shall be determined in accordance with applicable state law.
SEC. 404. PENALTY FOR INADEQUATE OFFER IN MEDIATION.
    If the final offer made by any respondent or jointly-represented group of respondents under section 305(e) is more than 25 percent less than the several share of liability (exclusive of prejudgment interest, if any) assigned by the jury or other fact-finder to that respondent or to all the members of a jointly represented group of respondents, the court shall award a 10% penalty as to each such respondent or member of a jointly-represented group of respondents. This penalty shall not be taken into consideration in determining the maximum allowable attorneys' fees under section 503.
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TITLE V—RULES APPLICABLE TO ARBITRATIONS AND CIVIL ACTIONS
SEC. 501. ELEMENTS OF PROOF; RELIEF.
    Subject to section 702 and notwithstanding any other provision of law, the following shall apply in all civil actions and arbitrations involving an asbestos claim:
    (1) BASIC REQUIREMENT OF ELIGIBLE MEDICAL CONDITION.—No person shall recover in any civil action or arbitration damages or other relief with respect to an asbestos claim unless such person establishes, by evidence meeting the requirements of sections 201, 202, 203, 204, or 206, as appropriate, the existence of an eligible medical condition.
    (2) EMOTIONAL DISTRESS; MEDICAL MONITORING.—No damages or other relief shall be awarded in any civil action or arbitration involving an asbestos claim for emotional distress or any other form of mental or emotional harm, or for medical monitoring or surveillance, based wholly or in part on exposure to asbestos unless the requirements of paragraph (1) are met in addition to any other requirement under applicable law for recovery of damages or other relief for emotional distress or medical monitoring or surveillance.
    (3) ENHANCED RISK.—No damages or other relief shall be awarded in any civil action or arbitration involving an asbestos claim solely for increased risk of cancer or other disease.
    (4) PUNITIVE DAMAGES.—No punitive damages shall be awarded in any civil action or arbitration involving an asbestos claim.
SEC. 502. TIMELINESS DEFENSES ABOLISHED.
    No defense to an asbestos claim based on a statute of limitations or statute of repose, laches, or any other defense based on the timeliness of the claim shall be recognized or allowed in any civil action or arbitration unless such claim was untimely as of the date of enactment of this Act.
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SEC. 503. ATTORNEYS' FEES.
    Notwithstanding any provision of other law or contract, the aggregate fee, including all expenses and other charges of a claimant's attorneys in any civil action or proceeding before the Corporation involving an asbestos claim (whether or not such attorney formally appears in such civil action or proceeding) shall not exceed twenty-five percent of the damages or other payments received by that claimant, in settlement or pursuant to a judgment or award, from or on behalf of all respondents before the Corporation and all defendants in the civil action. This limitation does not apply to any settlement between a claimant and any other person regarding an asbestos claim reached prior to the mediation period and where no civil action has been commenced in any court.
SEC. 504. EFFECTIVE ON SUBSEQUENT ACTIONS.
    (a) Notwithstanding any other provision of law, a judgment or settlement of an asbestos claim for a non-malignant condition satisfying the requirements of section 201 shall not preclude a subsequent claim with respect to the same exposed person for a malignant condition satisfying the requirements of sections 202, 203, 204, or 206, as applicable.
    (b) Subsection (a) shall not be construed to invalidate any provision of a settlement agreement entered into prior to the date of enactment.
TITLE VI—FUNDING
SEC. 601. COSTS OF MEDICAL REVIEW AND OVERHEAD AND ADMINISTRATION.
    (a) PROVISIONAL ALLOCATION.—
    (1) ESTIMATE OF COSTS.—On or before August 1 of each year, the Corporation shall estimate its costs (exclusive of the cost of mediation and arbitration that may be recovered under section 602) for the following fiscal year beginning October 1. In estimating its costs under this section, the Corporation shall make reasonable allowances for contingencies and shall state separately those costs directly related to medical review and those costs directly related to general overhead and overhead and administration of the Corporation.
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    (2) ALLOCATION TO RESPONDENTS.—The Corporation shall proportionally allocate the costs estimated pursuant to paragraph (1) among all persons named as a respondent during the 12-month period ending the preceding June 30 and shall notify each such person of the amount due pursuant to such allocation. In this section, a person shall be considered named as a respondent if notice was provided to such person under section 303. In making this allocation, the Corporation shall calculate the following: (i) for each individual respondent, the total number of proceedings in which the respondent has been named, and (ii) the total combined number of proceedings for all respondents. For purposes of this calculation, all claims, including derivative claims, relating to one exposed person shall be counted as one proceeding for each respondent named in the proceeding. The total number of proceedings for each respondent shall be divided by the total combined number of proceedings for all respondents to determine

the percentage of costs allocable to each individual respondent. The Corporation shall not allocate any of the costs estimated pursuant to paragraph (1) to any respondent whose allocable share of the costs, in the absence of such exclusion, is less than a de minimis percentage established by the Corporation. Any such unallocated percentage(s) shall be reallocated to the remaining respondents based upon their original allocation percentages.
    (3) PAYMENT OF ESTIMATED SHARE OF COSTS.—Each respondent shall pay to the Corporation its allocated share of the estimated costs within 30 days after the date of notification of its allocated share.
    (b) FINAL ALLOCATION.—On or before November 30 of each year, the Corporation shall determine its total costs (exclusive of the cost of mediation and arbitration that may be recovered from respondents under section 602) for the prior fiscal year ending September 30 and will allocate those costs proportionally, in the manner described in subsection (a)(2), among persons who were named as respondents in that fiscal year. In making an allocation under this subsection, the Corporation shall state separately those costs directly attributable to the medical review process and those costs directly attributable to general overhead and administration of the Corporation. If the amount allocated to any person under this subsection is greater than the amount deposited by such person under subsection (a)(2) with respect to the preceding fiscal year, that person shall pay the deficiency to the Corporation within 30 days after receiving a notice of deficiency from the Corporation. If the amount allocated to any person under this subsection is less than the amount deposited by such person under subsection (a)(2) for the preceding fiscal year, the Corporation shall promptly refund the difference to that respondent.
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    (c) TRANSITIONAL PROVISIONS.—
    (1) START-UP FUNDING.—Start-up funding will be provided by voluntary contributions within 30 days after appointment and confirmation of the first director. Unless the Corporation and the donor otherwise agree, the Corporation will refund such contributions following receipt of the funds allocated pursuant to the initial determination of costs and assessments to defendants provided in subsection (c)(2). Start-up costs include all reasonable and necessary expenses of the Corporation incurred prior to the availability of transitional funding under subsection (c)(2).
    (2) TRANSITIONAL FUNDING.—
    (A) NOTICE.—As soon as feasible after a majority of the Board is appointed and confirmed, the Board shall provide notice requesting the information listed in subparagraph (B) to each defendant served in any civil action involving an asbestos claim pending on the date of enactment. Such notice shall be the best practicable under the circumstances, including publication in the Federal Register and individual notice to any defendant that can be identified through reasonable effort.
    (B) INFORMATION TO BE PROVIDED.—Within such time as the Corporation may prescribe, but in any event not less than 60 days after the date of publication in the Federal Register, every person who was, on the date of enactment, served as a defendant in at least 5000 pending civil actions involving asbestos claims shall provide to the Corporation a statement containing the following information: the total number of civil actions in

which that person was named as a defendant and, with respect to each civil action, the name of the lead plaintiff, the name of the lead defendant, the court in which the civil action was pending, and the docket number.
    (C) COUNTING RULES.—For purposes of subparagraph (B):
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    (i) All asbestos claims relating to a single exposed person, including derivative claims, shall be treated as one civil action regardless of the number of plaintiffs or defendants names in the complaint.
    (ii) In civil actions involving multiple plaintiffs and defendants, each asbestos claim shall be deemed to have been asserted against each defendant unless the complaint states otherwise.
    (iii) Third-party defendants shall calculate the number of civil actions involving asbestos claims pending against them as if they had been joined as a defendant by the original plaintiff or plaintiffs.
    (iv) Cross claims, deemed or otherwise, shall not count as a separate civil action.
    (D) SIGNATURE.—The statement of information required under this paragraph shall be signed on behalf of the defendant by a corporate officer or (in the case of a defendant that is not a corporation) a senior official comparable to a corporate officer, authorized to bind such defendant, attesting under penalty of perjury that the information contained therein is true and complete to the best of his knowledge and belief after reasonable investigation.
    (E) ALLOCATION AND PAYMENT.—The Corporation shall proportionally allocate its estimated costs for transitional period to include the first two fiscal years after the date of enactment, in substantially the same manner as the allocation described in subsection (a)(2), to the defendants identified in this paragraph and shall notify each such defendant of its proportionate share of such estimated transitional costs. Within 45 days following the date of such notice, each such defendant shall pay its share of the estimated transitional costs to the Corporation.
    (3) RECONCILIATION.—On or before November 30 following the end of the transitional period, the Corporation shall determine its total costs (exclusive of the cost of mediation an arbitration that may be recovered from respondents under section 602) for the transitional period, including start-up costs, and shall proportionally allocate those costs, in substantially the same manner as the allocation described in subsection (a)(2), among defendants who were named as respondents during that transitional period. In making an allocation under this subsection, the Corporation shall state separately those costs directly attributable to the medical review process and those costs directly attributable to general overhead and administration of the Corporation. If the amount allocated to any respondent under this subsection is greater than the amount deposited by such respondent under paragraph (2), that respondent shall pay the deficiency to the Corporation within
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30 days after receiving a notice of deficiency from the Corporation. If the amount allocated to any respondent under this subsection is less than the amount deposited by such respondent under paragraph (2), the difference shall be promptly refunded.
SEC. 602. COST OF MEDIATION AND ARBITRATION.
    (a) The cost of mediation shall be charged, on a per capita basis, to each respondent who participated in mediation, wholly or in part.
    (b) In the absence of an agreement among the parties to the contrary, the cost of arbitration shall be charged, on a per capita basis, to each respondent who participated in the arbitration, wholly or in part, except that, the Corporation may by rule provide for a reduction in the costs charged to respondents who settle or are dismissed from arbitration prior to the commencement of the hearing.
SEC. 603. INFORMAL DISPUTE RESOLUTION.
    (a) The Corporation shall establish expeditious procedures for the informal resolution of disputes regarding the assessment of costs under this title. The Corporation may, in its sole discretion, postpone the obligation to pay the disputed assessment, wholly or in part, during the pendency of informal dispute resolution procedures.
    (b) The Corporation may agree to participate in voluntary alternative dispute resolution procedures, including mediation and arbitration, to resolve disputes regarding assessments.
SEC. 604. JUDICIAL REVIEW; ENFORCEMENT.
    (a) The district courts of the United States shall have exclusive jurisdiction, without regard to the amount in controversy or citizenship of the parties, to review any assessment of costs made by the Corporation pursuant to this title. The reviewing court shall uphold a challenged assessment unless it determines that that assessment is arbitrary and capricious or otherwise not in accordance with law. No action under this subsection may be commenced or maintained by any person unless that person has first (1) exhausted the informal dispute resolution procedures provided under section 603 and (2) paid to the Corporation the entire amount assessed to that person by the Corporation, including the amount in dispute.
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    (b) The Corporation shall have the authority to bring an action in the district courts of the United States to enforce any obligation imposed on any person by this title, and the district courts of the United States shall have exclusive jurisdiction of such actions without regard to the amount in controversy or citizenship of the parties. The court shall not entertain any defense other than lack of jurisdiction in any action by the Corporation to recover assessments due under this title unless the assessment is fully paid, with interest, in which case the court shall uphold the Corporation's determination if it is not arbitrary and capricious or otherwise contrary to law. In any action under this subsection in which the Corporation prevails, it shall be entitled to costs, including reasonable attorneys' fees, and interest on any unpaid funds. Interest under this subsection shall be equal to the rate applicable to underpaid taxes under 26 U.S.C. §6621.
SEC. 605. PENALTIES.
    If any person required by section 601 to provide information to the Corporation willfully fails to do so within the time fixed by the Corporation, the person shall forfeit to the Corporation the sum of $50,000, which forfeiture shall be payable to the Corporation, and shall be recoverable in a civil suit in the name of the Corporation brought under section 604(b).
TITLE VII—APPLICABILITY; PENDING CIVIL ACTIONS
SEC. 701. APPLICABILITY.
    Subject to section 702, upon the date of enactment the Act shall apply to any civil action asserting an asbestos claim that has not resulted in a final, non-appealable judgment.
SEC. 702. PENDING CIVIL ACTIONS.
    (a) A certificate of medical eligibility shall not be required in any civil action asserting an asbestos claim if (1) that action was pending upon the date of enactment and (2) a trial commences prior to the operational date. No release from mediation shall be required in any civil action asserting an asbestos claim if that action was pending on the date of enactment, whether or not trial commences prior to the operational date.
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    (b) Prior to the operational date, a plaintiff in a civil action asserting an asbestos claim that is pending on the date of enactment may elect to submit that claim to the Corporation for a determination of medical eligibility. Any such election shall be irrevocable.
    (c) Notwithstanding any other provision of law, the plaintiff in any civil action asserting an asbestos claim who has not obtained a certificate of medical eligibility shall have the burden of establishing the existence of an asbestos-related condition that meets the criteria for an eligible medical category pursuant to sections 201–204.
TITLE VIII—MISCELLANEOUS PROVISIONS
SEC. 801. DEFINITIONS.
    In this Act:
    (1) ALTERNATIVE DISPUTE RESOLUTION PROCESS.—The term ''alternative dispute resolution process'' means the mediation and voluntary arbitration process established under Title III of this Act.
    (2) ASBESTOS.—The term ''asbestos'' means any number of naturally occurring silicates with the common properties of great resistance to destruction by physical or chemical means and a fibrous configuration, including asbestiform varieties of chrysotile, crocidolite, amosite, anthophyllite, tremolite, and actinolite.
    (3) ASBESTOS CLAIM.—The term ''asbestos claim'' means any claim for damages or other relief, arising out of, based on, or related to the health effects of exposure to asbestos, including any claim for personal injury, death, mental, or emotional injury, risk of disease or other injury, or the costs of medical monitoring or surveillance, and including any claim made by or on behalf of any exposed person or any representative, spouse, parent, child, or other relative of any exposed person.
    (4) ASBESTOS TRUST.—The term ''asbestos trust'' means a court-supervised trust established to resolve asbestos claims arising directly or indirectly from exposure to asbestos or asbestos-containing products, including a trust created pursuant to the bankruptcy laws of the United States or Rule 23 of the Federal Rules of Civil Procedure.
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    (5) BASILAR CRACKLES.—The term ''basilar crackles'', sometimes called ''rales'', means those sounds described in American Thoracic Society, ''The Diagnosis of Nonmalignant Diseases Related to Asbestos'', 134 American Review of Respiratory Disease 363, 366 (1986).
    (6) BOARD.—The term ''Board'' means the Board of Directors of the Asbestos Resolution Corporation.
    (7) BOARD-CERTIFIED INTERNIST.—The term ''Board-certified internist'' means a physician who is currently certified by the American Board of Internal Medicine in internal medicine.
    (8) BOARD-CERTIFIED ONCOLOGIST.—The term ''Board-certified oncologist'' means a physician who is currently certified by the
American Board of Internal Medicine in the subspecialty of medical oncology.
    (9) BOARD-CERTIFIED PATHOLOGIST.—The term ''Board-certified pathologist'' means a physician who currently holds primary certification in anatomic pathology, or combined anatomic and clinical pathology, from the American Board of Pathology.
    (10) BOARD-CERTIFIED PULMONARY SPECIALIST.—The term ''Board-certified pulmonary specialist'' means a physician who is currently certified by the American Board of Internal Medicine in the subspecialty of pulmonary disease.
    (11) BOARD-CERTIFIED RADIOLOGIST.—The term ''Board-certified radiologist'' means a physician who is currently certified by the American Board of Radiology.
    (12) BYLAWS.—The term ''bylaws'' means the code or codes of rules adopted for the regulation or management of the affairs of the Corporation. Bylaws shall be consistent with the requirements of this Act and, to the extent consistent with this Act, with the requirements of the District of Columbia Nonprofit Corporation Act, (D.C. Code §29–501 et seq.)
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    (13) CANCER.—The term ''cancer'' means any of various malignant neoplasms marked by the proliferation of anaplastic cells that tend to invade surrounding tissue and metastasize to new body sites and the pathological condition characterized by such growths.
    (14) CERTIFICATE OF MEDICAL ELIGIBILITY.—The term ''certificate of medical eligibility'' means a certificate issued by the Corporation to a claimant pursuant to this Act certifying that an exposed person meets the requirements of one or more eligible medical categories (or qualifies as an exceptional medical claim with respect to an eligible medical category).
    (15) CERTIFIED B-READER.—The term ''certified B-reader'' means an individual qualified as a ''final'' or ''B-reader'' under 42 C.F.R. §37.51(b) (1997) (and any subsequent revisions thereof) whose certification is current.
    (16) CHEST X-RAYS.—The term ''chest x-rays'' means chest radiographs taken in four views (Posterior-Anterior, Lateral, and Left and Right Obliques) and graded quality 1 for reading according to the criteria established by the ILO; except that, in situations where the claimant is unable to provide quality 1 chest x-rays because of death or because of an inability to have new chest x-rays taken, chest x-rays graded quality 2 will be acceptable.
    (17) CIVIL ACTION.—The term ''civil action'' means any action, lawsuit, or proceeding in any state, federal, or tribal court, but does not include (a) criminal action, (b) an action relating to state or federal workers' compensation laws, or (c) a proceeding for judicial review of the actions of the Corporation.
    (18) CLAIMANT.—The term ''claimant'' means any exposed person or his legal representative, and any parent, child, or other relative of an exposed person, or their legal representatives, who asserts an asbestos claim.
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    (19) CLINICAL EVIDENCE OF ASBESTOSIS.—The term ''clinical evidence of asbestosis'' means a diagnosis of pulmonary asbestosis by a Board-certified internist or Board-certified pulmonary specialist based on the following minimum objective criteria:
    (A) Chest x-rays which, in the opinion of a certified B-reader, show small irregular opacities of ILO Grade 1/0 and pulmonary function testing and physical examination that show either:

    (i) FVC < 80% of predicted value with FEV1/FVC 75% (actual value); or
    (ii) TLC < 80% of predicted value, with either DLCO 76% of predicted value or bilateral basilar crackles, and also the absence of any probable explanation for this DLCO result or crackles finding other than the presence of lung disease.
    (B) Chest x-rays which, in the opinion of a certified B-reader, show small irregular opacities of ILO Grad 1/1 or greater; and pulmonary function testing that show either:
    (i) FVC < 80% of predicted value with FEV1/FVC 72% (actual value) or, if the individual tested is at least 68 years old at the time of the testing, with FEV1/FVC 65% (actual value); or
    (ii) TLC < 80% of predicted value.
    (20) COMPENSATORY DAMAGES.—The term ''compensatory damages'' means damages awarded for economic and non-economic loss.
    (21) CORPORATION.—The term ''Corporation'' means the Asbestos Resolution Corporation established in section 101.
    (22) DEFENDANT.—The term ''defendant'' means any party in a civil action that is alleged to be legally responsible for the claimant's injury.
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    (23) DLCO.—The term ''DLCO'' means diffusing capacity of the lung (carbon monoxide), which is a measure of the volume of carbon monoxide transferred from the alveoli to blood in the pulmonary capillaries for each unit of driving pressure of the carbon monoxide.
    (24) ECONOMIC LOSS.—The term ''economic loss'' means any pecuniary loss resulting from harm (including the loss of earnings or other benefits related to employment, medical expense loss, replacement service loss, loss due to death, burial costs, and loss of business or employment opportunities) to the extent that recovery for such loss is allowed under applicable law.
    (25) ELIGIBLE MEDICAL CATEGORY.—The term ''eligible medical category'' means mesothelioma, lung cancer, other cancer, and non-malignant conditions.
    (26) EVIDENCE OF BILATERAL PLEURAL THICKENING WITH IMPAIRMENT.—The term ''evidence of bilateral pleural thickening with impairment'' means a diagnosis of bilateral pleural thickening with impairment by a Board-certified internist or Board-certified pulmonary specialist based on the following minimum objective criteria:
    (A) Chest x-rays which, in the opinion of a certified B-reader, show bilateral pleural thickening of ILO Grad B2, and which includes blunting of at least one costophrenic angle and is not explained by any other condition in the subject's history; and pulmonary function testing that shows:
    (i) If TLC is available, TLC < 75% of predicted value; or
    (ii) If TLC is not available, VC or FVC < 75% of predicted value with FEV1/FVC 75% (actual value); and in either case
    (iii) a statement by the Board-certified internist or Board-certified pulmonary specialist that the
asbestos-related changes are a substantial contributing factor in causing the pulmonary function changes.
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    (B) Chest x-rays which, in the opinion of a certified B-reader, show bilateral pleural thickening of ILO Grade C2 or greater, and which includes the blunting of at least one costophrenic angle and is not explained by any other condition in the subject's history; and pulmonary function testing that shows—
    (i) FVC < 180% of predicted value with FEV1/FVC 75% (actual value), or, if the individual tested is at least 68 years old at the time of the testing, with FEV1/FVC 65% (actual value); or
    (ii) TLC < 80% of predicted value; and in either case
     (iii) a statement by the Board-certified internist or Board-certified pulmonary specialist that the asbestos-related changes are a substantial contributing factor in causing the pulmonary function changes.
    (27) EXCEPTIONAL MEDICAL CLAIM.—The term ''exceptional medical claim'' means a claim identified as such pursuant to the procedures in section 206.
    (28) EXPOSED PERSON.—The term ''exposed person'' means any person who has been exposed in any state (or while working aboard a United States vessel outside the United States) to asbestos or to asbestos containing products.
    (29) FEV1.—The term ''FEV1'' means forced expiratory volume (1 second), which is the maximal volume of air expelled in one second during performance of the spirometric test for forced vital capacity (FVC). FEV1 shall be measured using standard spirometric methods.
    (30) FINAL CERTIFICATE OF ELIGIBILITY.—The term ''final certificate of eligibility'' means a certificate of eligibility that is not subject to further review or modification by the Corporation, whether on reconsideration under section 205 or by action of an exceptional medical claims panel under section 206.
    (31) FVC.—The term ''FVC'' means forced vital capacity, which is the maximal volume of air expired with a maximally forced effort from a position of maximal inspiration. FVC shall be measured using standard spirometric methods.
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    (32) GOOD FAITH OFFER OR GOOD FAITH DEMAND.—The terms ''good faith offer'' or ''good faith demand'' means a settlement offer or demand which reflects an evaluation of relevant factors of traditional tort principles of damages.
    (33) GRACE PERIOD.—The term ''grace period'' means the period allowed for voluntary settlements in section 304.
    (34) ILO.—The term ''ILO'' means the International Labour Office.
    (35) ILO GRADE.—The term ''ILO grade'' means the radiological ratings for the presence of lung changes by chest x-ray as established from time to time by the ILO.
    (36) LATENCY PERIOD.—The term ''latency period'' means the period from the date of the exposed person's first significant exposure to asbestos or an asbestos-containing product to the date of manifestation of the condition claimed.

    (37) MANIFESTATION.—The term ''manifestation'' means either the date of the actual diagnosis of the condition claimed, or the date upon which the clinical records and available tests indicate that the condition could reasonably have been diagnosed by a competent physician.
    (38) MEDICAL ADVISORY BOARD.—The term ''medical advisory board'' means the board established under section 105 to provide medical advice to the board of directors of the Corporation.
    (39) MESOTHELIOMA.—The term ''mesothelioma'' means a malignant tumor of the mesothelial tissue.
    (40) MOTIONS OFFICER.—The term ''motions officer'' means an official of the Corporation responsible for resolving procedural and discovery disputes during the alternative dispute resolution process in the absence of an arbitrator. Motions officers shall be members in good standing of the bar of a State.
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    (41) NON-ECONOMIC LOSS.—The term ''non-economic loss'' means subjective, nonmonetary loss resulting from harm, including pain, suffering, inconvenience, mental suffering, emotional distress, loss of society and companionship, loss of consortium, injury to reputation, and humiliation.
    (42) OCCUPATIONAL HISTORY.—The term ''occupational history'' means a listing of all employment positions, providing for each the dates and place of employment, the employer, and a description of job responsibilities and activities.
    (43) OPERATIONAL DATE.—The term ''operational date'' means the earlier of (i) the date on which the Board certifies that the Corporation is operational, or (ii) the first business day following the seventh month after the date on which the Board is authorized under section 103(i) to take any action authorized by law.
    (44) PATHOLOGICAL EVIDENCE OF ASBESTOSIS.—The term ''pathological evidence of asbestosis'' means diagnosis of pulmonary asbestosis by a Board-certified pathologist based on a finding that more than one representative section of lung tissue otherwise uninvolved with any other process (e.g., cancer or emphysema) demonstrates a pattern of peribronchiolar or parenchymal scarring in the presence of characteristic asbestos bodies, and also that there is no other more likely explanation for the presence of the fibrosis.
    (45) PERSON.—The term ''person'' means an individual, trust, firm, corporation, association, partnership, joint venture, the United States, and any state or political subdivisions thereof. The term does not include an asbestos trust in existence as of the date of enactment unless the trust elects to be covered by this Act under section 804.
    (46) PHYSICIAN.—The term ''physician'' means a medical doctor currently licensed to practice medicine in any state who has not, within the five-year period prior to the date of enactment of the Act, spent more than one half of his or her professional time, or derived more than one-half of his or her professional income, either annually or in total, either reviewing or testifying in any forum on medical-legal issues related to asbestos.
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    (47) PREDICTED VALUE.—The term ''predicted value'' for spirometry and lung volumes shall be the relevant value published by Morris, Clinical Pulmonary Function Testing, 2d Edition, Intermountain Thoracic Society (1984). ''Predicted Value'' for diffusing capacity shall be the relevant value published by Miller, et al., ''Single Breath Diffusing Capacity in a Representative Sample of the Population of Michigan, a Large Industrial State,'' 127 American Review of Respiratory Disease, 270–77 (1983). Predicted value in all pulmonary function tests shall be corrected for race, ethnic origin, and other relevant factors.
    (48) PULMONARY FUNCTION TESTING.—The term ''pulmonary function testing'' means spirometry, lung volume, and diffusing capacity (''DLCO'') testing. All spirometry shall use standard spirometric methods.

Pulmonary function testing other than spirometry shall use methods, quality criteria, and standards approved by the Board, upon the recommendation of the Medical Advisory Board. Such methods, quality criteria, and standards shall be generally recognized by authoritative professional bodies as appropriate, giving due consideration to reliability where obstructive lung disease may be present. All back-up data (including flow volume loops, spirographs, and other tracings), necessary to ensure compliance with the methods, quality criteria, and standards approved by the Board shall be submitted to the Corporation along with the results of such tests.
    (49) PUNITIVE DAMAGES.—The term ''punitive damages'' means damages awarded against any person to punish or deter such person, or others, from engaging in similar behavior in the future.
    (50) RESPONDENT.—The term ''respondent'' means any person who is or may be responsible for a claimant's asbestos-related condition and who is so notified by the Corporation under section 303 or who is added to an arbitration proceeding under section 306(a). The terms does not include an asbestos trust in existence as of the date of enactment of this Act unless the trust elects to be covered by this Act under section 804.
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    (51) STANDARD SPIROMETRIC METHODS.—The term ''standard spirometric methods'' means spirometric methods and equipment that substantially conform to American Thoracic Society standards for technical quality and instrumentation, as set forth in 20 C.F.R. §718.103(1997) and Appendix B thereto or in guidelines established by the American Thoracic Society, as set forth in ''Standardization of Spirometry—1994 Update'', 152 American Review of Respiratory Disease 1107–36 (1995) and any revisions thereof. Each subject must be tested with and without inhaled bronchodilaters, with best values taken. All back-up data pertaining to spirometric testing of an exposed person (including all flow volume loops, spirographs, and any other tracings) shall be submitted to the Corporation to ensure that these quality criteria and standards have been satisfied.
    (52) STATE.—The term ''state'' means any state of the United States, the District of Columbia, Commonwealth of Puerto Rico, the Northern Mariana Islands, the Virgin Islands, Guam, American Samoa, and any other territory or possession of the United States or any political subdivision of any of the foregoing.
    (53) TLC.—The term ''TLC'' means total lung capacity, which is the volume of air in the lung after maximal inspiration.
    (54) WORKERS' COMPENSATION LAW.—The term ''workers' compensation law'' means a law respecting a program administered by a state or the United States to provide benefits, funded by a responsible employer or its insurance carrier, for occupational diseases or injuries or for disability or death caused by occupational diseases or injuries. The term includes the Longshore and Harbor Workers' Compensation Act, (33 U.S.C. §901–944, 948–950), but does not include the Federal Employers' Liability Act, (45 U.S.C. §51–60).
SEC. 802. APPLICABILITY OF OTHER FEDERAL LAWS.
    (a) Nothing in this Act shall be construed to make any director, officer or employee of the Corporation, an officer or employee of the U.S. Government for purposes of Title 5, United States Code. Neither the Corporation nor any director, officer, or employee of the Corporation shall be subject to the provisions of 31 U.S.C. §1341(a).
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    (b) To the extent consistent with the provisions of this Act, the Corporation shall be subject to 5 U.S.C. §553, 555, and 706 and 5 U.S.C. § 552a.
    (c) In order to preserve the integrity of the settlement process in the resolution of asbestos claims, the Corporation shall exempt from disclosure under 5 U.S.C. §552(b)(3) information or documents that contain the results of settlements or settlement averages, individual party or attorney names, medical records, and relating data collected for the purpose of resolving individual claims.
    (d) The Corporation shall be exempt from: 5 U.S.C. §552b, 5 U.S.C. §5101–5115, 5331–5338, 5 U.S.C. §504, 5 U.S.C. App. (Ethics in Government Act), 28 U.S.C. §2412, 28 U.S.C. §2672, 41 U.S.C. §251–260 and 44 U.S.C. §3501 et seq.
SEC. 803. OBLIGATIONS OF THE CORPORATION NOT OBLIGATIONS OF THE UNITED STATES.
    Obligations or liabilities of the Corporation shall not be obligations or liabilities of the United States. No action may be maintained against the United States to enforce any obligation or liability of the Corporation.
SEC. 804. APPLICATION TO EXISTING ASBESTOS TRUSTS.
    (a) This Act shall not apply to any asbestos trust in existence as of the date of enactment of this Act, except as provided in subsection (b).
    (b) An asbestos trust may elect to be subject to the Act by providing written notice of such election to the Corporation, in which case the trust will have the same rights and responsibilities under the Act as any person who is not a trust. A valid election under this subsection shall be irrevocable.
SEC. 805. APPLICATION TO CERTAIN SETTLEMENTS.
    This Act shall not apply to any settlement agreement or related agreement concerning asbestos claims entered into by claimants, defendants, or their counsel.
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SEC. 806. SEVERABILITY.
    If any provision of this Act or the application of such provision to any person or circumstance is held invalid, it is the intent of Congress that the remainder of this Act and application of such provision to other persons or circumstances shall not be affected thereby.

    Mr. HYDE. I look forward to a lively discussion on this important legislation, and with pleasure, I now recognize the ranking member, Mr. Conyers, for an opening statement.

    Mr. CONYERS. Thank you, Chairman Hyde, and to my colleagues and probably half the lawyers in the greater Washington area and the lobbyists that are brought here and a few other people that may not fall into any of those categories.

    We have got the following problems in my mind. I want to be clear and start off with the fact that the conduct of the asbestos manufacturers which led to the horrible cancer and asbestosis inflicted on hundreds of thousands of workers was reprehensible. They knew about it. They covered it up. They bailed out and so I want to make it very clear I cannot agree to any legislation that merely serves to bail out this industry. This problem is worse than tobacco. So let's get it straight here. And by the way, I appreciate the Court's decisions as for the Court telling the Congress it is up to us to fix this problem. I would remind them that they created the class alternatives and that they have the power to fix these rules. And so we either have to do one of a couple of things. We have to get a better bill than the one before us or we have to look to some private mechanisms to solve this problem.

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    Mr. HYDE. If the gentleman would yield, I believe that is a vote approving the Journal. I don't intend to make that vote. I intend to stay here and continue. I don't think anybody is missing anything if you don't unless you have a perfect record.

    Mr. CONYERS. I am happy to continue on and I appreciate your trying to keep members here to listen to me, Mr. Chairman.

    Now, I cannot agree to legislation that merely bails out the industry. The Congress should consider in the alternative whether to forego legislating and instead to encourage asbestos manufacturers to enter into private settlements which appear thus far to be successful. Tens of thousands of cases have been settled with the manufacturers pursuant to voluntary settlement agreements which have eliminated the need for trials in many jurisdictions.

    Let me just mention a few of the kind of problems that I am faced with. We need to look at an opt-out provision, applying the legislative settlement voluntarily and only applying it to asbestos manufacturers and plaintiffs who agree to it; defenses requiring the asbestos manufacturers to waive all their traditional and complex defenses, as the Georgine settlement provided, with the exception of product identification and medical criteria; consolidation in which we preserve the right of trial courts to consolidate cases for judicial economy; limiting on attorney fees only in cases that are settled pursuant to the agreement; making punitive damages available, even if this means raising the standard for product harm to clear and convincing evidence from the traditional preponderance of the evidence; and guaranteeing joint and several liability for financial obligations of a settling defendant as the Georgine settlement provided. These are some of the things that we need to look at as we deal with this important, complex, long-standing matter before us.
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    Now, of course it is hard to figure out whether 20 or 30 years from now a person in perfectly good health is going to have a case that would be actionable, but we want a better method than is presented in this bill for dealing with these problems. Maybe this is a noble start but there is a lot of work that has to be done and I am hoping that some of the witnesses can deal with some of the issues that I have raised.

    I thank you for this time and I return any balance that may exist.

    Mr. HYDE. I thank the gentleman. I would say to the rest of the committee if you have an opening statement, without objection it will be admitted into the record at this point, but as we did yesterday, because we have two panels of distinguished witnesses, we do have time constraints. So I am going to forego the opportunity for opening statements, but again they will be admitted to the record.

    First, our first panel consists of six witnesses, and our first witness is Mr. Christopher Edley, professor of law at Harvard Law School, where he teaches administrative civil rights research. Mr. Edley served as the assistant director of the White House Domestic Policy Staff for the Carter administration, as a senior advisor on Economic Policy for the Clinton-Gore Presidential Transition, as an associate director for Economics and Government at the White House Office of Management and Budget and as a special counsel to President Clinton's Race Initiative and as a consultant to the President's Advisory Board on Racial Reconciliation. Mr. Edley was also appointed to serve on the United States Commission on Civil Rights in May 1999. He is a graduate of Swarthmore College and received a joint degree, master's of public policy and jurist doctor, from the Kennedy School of Government and Harvard Law School.
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    Our second witness is the Honorable Louis Sullivan. Dr. Sullivan is the president of the Morehouse School of Medicine and served as the Secretary of the Department of Health and Human Services during the Bush administration, 1989 through 1993. He is a board certified internal medicine doctor and a hematologist. Dr. Sullivan is a graduate of Morehouse College and received his medical degree from Boston University.

    Our third witness is Richard H. Middleton, Jr., of Savannah, Georgia. Mr. Middleton is the president-elect of the Association of Trial Lawyers of America and a senior trial attorney with the law firm of Middleton, Adams, and Tate, with offices in Savannah and Atlanta. He speaks regularly throughout the United States and Canada on civil trial matters, and joins us today to focus on an area in which he has had much experience: Class action asbestos litigation.

    Our fourth witness is Samuel Heyman. Mr. Heyman is the chairman and chief executive officer of the GAF Corporation. He has also served as an assistant United States attorney for the District of Connecticut. Mr. Heyman is a graduate of Yale College and Harvard Law School.

    Our fifth witness is Dr. Christine Oliver. Dr. Oliver is an associate physician at Massachusetts General Hospital, working in the pulmonary and critical care unit. She is an assistant professor of Medicine at Harvard Medical School and is a graduate of the University of North Carolina, where she also received her medical degree. Later she received her master's in public health and master's in science at the Harvard School of Public Health.

    Our last witness for this panel will be Dr. Gary Epler. Dr. Epler is an associate physician at Brigham and Women's Hospital in Boston, Massachusetts, where he practices pulmonary and critical care medicine. Dr. Epler is an associate clinical professor of medicine at Harvard and is a graduate of Tulane University and received his master's in public health at Harvard University.
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    We welcome all of you. Your written statements will be made a part of the record in their entirety, but we request that you limit your oral testimony insofar as humanly possible to 5 minutes or less because we have so many participants and members do think of questions to ask. So we will begin with the panelists as I introduced them.

    Mr. Edley, you may proceed.

STATEMENT OF CHRISTOPHER F. EDLEY, JR., ESQ., CO-DIRECTOR, THE CIVIL RIGHTS PROJECT, HARVARD LAW SCHOOL, CAMBRIDGE, MA

    Mr. EDLEY. Thank you, Mr. Chairman, and members of the committee. I am Christopher Edley, Jr., professor at Harvard Law School, where I have taught administrative law for 18 years. Two years ago the Supreme Court noted the continuing seriousness of the asbestos litigation crisis and called for legislation. They repeated that message to you just last week in Ortiz v. Fibreboard, holding again that class action rules are not flexible enough to handle the flood of cases fairly and efficiently. Yes, you will hear a few voices say that the system is fine, but make no mistake, it is not. The flood is worsening.

    In 1991, there were 100,000 pending cases and since then, despite hundreds of thousands of settlements, often on the eve of trial, the backlog has grown unexpectedly to over 200,000 and the pace of new filings has accelerated. Total asbestos damages are likely to end up at the high end of the 50 to $100 billion range estimated early in the decade. Shockingly, as the justices themselves have noted, lawyer's fees and other transaction costs consume nearly $2 for every $1 paid to claimants, and only half of all claimants are sick. The remaining claimants are not now sick, and most never will become sick.
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    H.R. 1283 would replace this litigation morass with a secure, fair, and efficient means of compensating victims. Its features include: First, a simple non-adversarial administrative procedure for determining medical eligibility key to objective clinical and pathological criteria for impairment; second, an aggressive alternative dispute resolution process to resolve claims fairly, more quickly, and less expensively than in the courts; and third, access either to arbitration or to court at the claimants' option once medical eligibility is established and mediation has failed.

    All said, the bill achieves several critical policy goals. Impaired—that is, sick—claimants are assured tort-like compensatory damages, including pain and suffering. Resources of the defendants and of the courts are focused on sick victims because claims by the non-sick are deferred until they actually become sick—most don't—and because the bill uses expert administrative decision making and the efficiencies of ADR to slash wasteful litigation costs. Claimants, however, have meaningful access to courts as a check on administrative discretion and to ensure that over time the awards are aligned with those available in tort.

    Finally, defendant companies bear all the costs of compensating victims and of administering the system. There are no taxpayer funds in this bill.

    Why can't the courts sort this out? Well, Congressmen, it has been tried, and State and Federal judges themselves are telling you that it can't work. Such expedients as case consolidations help somewhat to clear dockets but only by unacceptably compromising the quality of individual justice. Plaintiffs' attorneys package hundreds, indeed thousands of claims combining sympathetic sick claimants with unimpaired claimants, refusing generous settlement offers for those who are sick unless defendants also make substantial payments to those who aren't. And by threatening to litigate every case, they face defendants with a bet-the-company jury lottery, that can quickly involve hundreds of millions of dollars in awards to people who are not sick and never will be sick.
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    These cocerced payments to non-sick claimants stimulate waves of further filings, diverting resources that should be used to focus on today's sick victims and on those who will need help tomorrow.

    This bill benefits almost everyone. Impaired claimants gain a streamlined and fair system that works, for most, in 3 to 5 months rather than the 3 years more typical today in tort. And if mediation fails, they can still litigate if the claimant chooses without limits on compensatory damages and with a less crowded courthouse.

    The non-sick who will eventually get sick benefit because the bill eliminates statute of limitations defenses. No one need file their claims prematurely or enter into inadequate settlements. Rather, they get full recovery if and when they become impaired. Our courts will benefit, as will everyone who uses them. Defendants benefit: With this litigation nightmare behind them, they can, consistent with their oft-stated wish, compensate the sick and curb the waste. And finally, workers, shareholders, families and communities will benefit from the reduced risk of asbestos driven bankruptcies. The only losers, the only losers, are a few dozen powerful lawyers and those individuals who are not now sick, who will never become sick in the future, and who would have won the jury lottery under our current tort system.

    As a matter of public policy, as a matter of sensible resource allocation for our courts and for society at large, I urge this committee to lead the Congress in moving forward quickly to answer the Supreme Court's repeated call for action. Give victims and companies, shareholders and families a better justice. Fix the mess. Thank you, Mr. Chairman.

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    [The prepared statement of Mr. Edley follows:]

PREPARED STATEMENT OF CHRISTOPHER F. EDLEY, JR., ESQ., CO-DIRECTOR, THE CIVIL RIGHTS PROJECT, HARVARD LAW SCHOOL, CAMBRIDGE, MA

I. INTRODUCTION

    More than six years ago, I wrote a law review article with my colleague Paul Weiler advocating an administrative solution to the morass of asbestos litigation in the courts.(see footnote 1) As we wrote, the litigants were finalizing the Georgine settlement and preparing for its review by the trial court judge. I supported the class action settlement because it achieved most of the goals I thought valuable for legislation, although on a scale limited to only 20 defendant companies. Equally important, the settlement was a ''bird in the hand''—it seemed feasible in the short term, while legislation to fashion an administrative solution seemed certain to face a protracted and uncertain authorization process, followed by the delays of appropriations battles and implementation in the executive bureaucracy.

I have prepared this statement of my views for the Committee at the request of certain proponents of the legislation, and have been compensated for my time and expenses. My statements express my own views on the subject, which may in some respects differ from those of the bill's proponents.

    Alas, although the trial judge ruled that the Georgine settlement was fair, the Supreme Court held on appeal (over a dissent authored by Justice Breyer), that the class action device is not flexible enough to get the job done, and invited Congress to consider a legislative solution.(see footnote 2) And again, just last week, the Supreme Court reluctantly struck down an innovative asbestos class action settlement of hundreds of thousands of claims, again over Justice Breyer's dissent. ''[T]he elephantine mass of asbestos cases,'' the Court concluded, ''defies customary judicial administration and calls for national legislation.''(see footnote 3) Chief Justice Rehnquist noted in dismay,
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  ''Justice Breyer's dissenting opinion highlights in graphic detail the massive impact of asbestos-related claims on the federal courts. Were I devising a system for handling these claims on a clean slate, I would agree entirely with that dissent, which in turn approves the near-heroic efforts of the District Court in this case to make the best of a bad situation. Under the present regime, transactional costs will surely consume more and more of a relatively static amount of money to pay these claims.

  ''But we are not free to devise an ideal system for adjudicating these claims. . . . [T]he 'elephantine mass of asbestos cases' cries out for a legislative solution.''(see footnote 4)

    My earlier hope that the courts possessed the tools they needed to fashion a response to the crisis has proved a mirage. In both cases, Justice Breyer pleaded with his colleagues to approve the settlements. He noted that ''when 'calls for national legislation' go unanswered, judges can and should search aggressively for ways, within the framework of existing law, to avoid delay and expense so great as to bring about a massive denial of justice.''(see footnote 5) I fully subscribe to that view, but the Supreme Court could not have said more clearly that such innovations cannot do the job that the Constitution has entrusted to Congress. Legislation is now the only avenue available to avoid ''a massive denial of justice.''

    In response to the Supreme Court's calls for legislative action, the ''Fairness in Asbestos Compensation Act'' has been introduced in both the House and the Senate. In this paper I review the proposed legislation and conclude that the proposed legislation provides an imaginative and effective framework for replacing the litigation morass with a secure, fair and efficient means of compensating victims of asbestos exposure.
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II. THE ASBESTOS CRISIS REMAINS GRIM

    In 1993, Paul Weiler and I described an ''asbestos tragedy with human, financial, and legal costs that dwarf those created by other examples of medical and product liability.''(see footnote 6) We described several key problems with asbestos litigation as it was then being handled in the traditional tort system.

 Asbestos litigation was clogging the courts, with over 100,000 cases then pending.

 Many claims involved ''individuals who are understandably worried about their exposure to asbestos but who are not now and never will be afflicted by disease,''(see footnote 7) diverting the dwindling resources of the defendants.

 The transaction costs associated with asbestos litigation—attorney's fees, expert fees, and other expenses—were too high, an extravagant waste of limited resources.

 The primary early defendants—those who made the decisions to produce and market asbestos—had gone bankrupt.

 Plaintiffs' attorneys had then ''cast the litigation net further'' in an endless effort ''to find corporate pockets deep enough to satisfy the vast numbers of pending and future tort claims.''

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 Plaintiffs who suffered substantial and even fatal impairments could be forced to wait years to recover.(see footnote 8)

    Since 1993, the already grim situation has deteriorated. Each of the problems identified in our article still plagues asbestos litigation, and many have worsened. Only the Congress can provide a satisfactory response.

    1. Size and Nature of the Caseload. In 1993, courts were already clogged with over 100,000 pending cases, most of them involving claimants who, although exposed, had no impairment whatsoever. That figure has increased sharply in only six years, doubling to 200,000 pending cases. The growth is not due to obstinate defendants, because well over 300,000 cases have been settled.(see footnote 9) New asbestos cases are being filed at a rate we could not have imagined six years ago. For example, from 1994 into 1998, new claims against the largest defendant company alone averaged approximately 40,000 per year; new claims continued to be filed at about that rate through the first three quarters of 1998, the latest available data.(see footnote 10)

    No serious analyst believes that the increased number of filings is due to an increased prevalence of asbestos-related disease. Indeed, medical and epidemiological evidence suggests that the number of asbestos-related diseases is declining,(see footnote 11) yet filings continue to skyrocket. Rather, the new filings represent claims of people who have been exposed to asbestos, and who (usually) have some marker of exposure such as changes in the pleural membrane covering the lungs, but who are not impaired by an asbestos-related disease and likely never will be.(see footnote 12) In 1992, these claims ''account[ed] for sixty to seventy percent of new asbestos claims filed.''(see footnote 13) The trend of an ever-larger proportion of unimpaired claimants appears to have accelerated since then.
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    2. Increasing Resources Are Devoted to the Unimpaired. Overall, the resources that are devoted today to asbestos litigation have sharply increased. In addition to the increase in the number of pending cases to 200,000, the size of verdicts has increased, even in cases of mild or no impairment. For example, in February 1998, a Texas state court jury awarded $15.6 million in compensatory damages, of which the vast majority was for ''future damages,'' and $100 million in punitive damages, to a group of twenty-one plaintiffs whose claimed illness ranged from ''mild'' to so-called ''asymptomatic'' asbestosis. Three of the plaintiffs had no symptoms at all, but nevertheless obtained millions for their admittedly ''unconfirmed'' disease.(see footnote 14) A few months later, in another case, two plaintiffs who allegedly suffered asbestosis but whose disease could not be detected by x-ray examinations were nevertheless awarded between $2 and $3.5 million each by a Mississippi state court jury.(see footnote 15)

    The prospect of such verdicts with lottery-like jury awards distorts the settlement process, particularly for claims involving the unimpaired, and represents an overall trend of higher amounts that defendants are paying to resolve asbestos cases.(see footnote 16) In 1991, Judge Jack Weinstein estimated total indemnity costs at between $26 billion to $30 billion.(see footnote 17) In 1992, one study estimated that the cost of compensating asbestos claimants could be over $100 billion, with $50 billion as a best estimate.(see footnote 18) In light of the unpredicted, rapid caseload growth and the higher verdicts and settlements, one can assume that the higher end of these estimates is more accurate.

    3. The Litigation Process Remains Too Expensive. The burden of a larger caseload and larger verdicts for the unimpaired is exacerbated by the unacceptably high transaction costs associated with asbestos claims. In 1993, Paul Weiler and I summarized the research evidence by observing that,
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  ''[O]f every dollar paid by defendants, over sixty cents goes to the lawyers. Adding the overhead costs of both the judicial and insurance systems, asbestos litigation consumes two dollars of society's resources in order to deliver a single dollar to people who were exposed.''(see footnote 19)

These figures were derived in part from a Rand Corporation study, which remains the most comprehensive study ever done on transaction costs associated with asbestos litigation,(see footnote 20) and that figure been cited as authoritative in numerous court opinions.(see footnote 21) There is no evidence that transaction costs have declined since then to acceptable levels, and it is clear that today most of the money spent to resolve asbestos litigation still does not reach the victims. Plaintiffs' attorneys fees remain as high as 33% to 40% on a contingency basis, despite the fact that the risk of no recovery no longer justifies such high fees. There are examples of some plaintiffs' attorneys charging a fee as high as 50% of any recovery.(see footnote 22) It is possible that defense costs, which are charged on an hourly basis, have moderated in recent years as cases become more routine. However, time-consuming and expensive legal services are inevitable given certain complications of today's court-centered asbestos litigation machinery, such as massive consolidations in state courts, involving disparate claims and enormous financial stakes. Finally, the costs to the court system of resolving hundreds of thousands of asbestos claims—in judicial attention, salaries of court personnel, and lost or delayed opportunities to adjudicate other cases—are enormous, no matter how many innovative techniques are employed.

    4. Compensation for Future Claimants Remains Doubtful. The burden of asbestos litigation—in increased caseload, size of verdicts and settlements, and continued high transaction costs—inevitably raises the most troubling issue surrounding asbestos litigation. If the burden becomes too much for the remaining solvent defendants to bear, future victims may go uncompensated. At least twenty-five companies have been bankrupted, and many other companies have faced potentially crippling awards.(see footnote 23) Johns-Manville, the most important producer of asbestos products, went bankrupt long ago under the weight of claims against it, and claimants who were exposed to Johns-Manville products must now find some other company to which they can assign blame, or accept the delays and substantially reduced compensation of asserting a claim against the Manville Trust, which emerged from that bankruptcy.(see footnote 24) Tragically, the bankruptcy means that Johns-Manville claimants who have now developed serious asbestos-related injuries, such as mesothelioma or lung cancer, may receive substantially less compensation than those with relatively trivial injuries, or even no injury, can obtain against those companies who are now solvent. There will inevitably be Johns-Manvilles in the future, and claimants who will arbitrarily be denied fair compensation as a result.
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    5. The Search of Deep Pockets Continues—and Intensifies. In our paper, Paul Weiler and I described how plaintiffs' lawyers were continually searching for deep pockets among peripheral defendants after the traditional defendants were driven into bankruptcy. This process has accelerated with the new avalanche of claims in the 1990s. Then, the primary concern was the fairness of imposing liability on the shareholders of large companies who had the misfortune of purchasing a small manufacturer of asbestos products in the 1960s and 1970s—long after the company's fateful decision to market asbestos had been made.(see footnote 25) Today, lawyers are searching far beyond manufacturers of asbestos products to cast blame on any company with even the most attenuated connection with asbestos.

    For example, in the Texas case I describe above, Carborundum Corporation, which manufactures grinding wheels, was hit with a $115 million verdict. Plaintiffs claimed that their exposure to a grinding wheel, which contained some asbestos, caused their ''mild'' or even ''asymptomatic'' disease. Until the Carborundum case, no grinding wheel manufacturer had ever been held liable for asbestos-related injuries.(see footnote 26) In a recent federal court case, companies such as AT&T, Chrysler Corp., Ford Motor Co. and IBM were named as defendants.(see footnote 27)

    In my testimony today I have been careful to speak of ''asbestos defendants,'' never of ''asbestos companies'' or the ''asbestos industry.'' There is no ''asbestos industry'' anymore—virtually all asbestos products are off the market, and most of the former major producers are bankrupt—and many, perhaps most, of today's defendants cannot be accurately described as ''asbestos companies.'' These defendants are in every industry and every region, from large companies such as AT&T, to smaller companies such as Carborundum.
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    Finally, although this search for new and creative theories of liability may keep the asbestos plaintiffs' bar in business, it does not ensure compensation for the victims of asbestos disease. Plaintiffs whose primary exposure was to a now-bankrupt defendant (like Johns-Manville) may be able to assert creative claims against solvent peripheral defendants, but they may not. Furthermore, the existence of other potentially liable parties bears no relationship to the seriousness of the victims' diseases or their need for compensation. Whether they will be able to obtain compensation is simply a function of their lawyers' inventiveness and of chance.

    6. Delays Continue to Frustrate Access to Justice. Next, a word about the delays in the courts. In our earlier paper, Paul Weiler and I described how asbestos claims can take many years to resolve, further delaying compensation to those who are sick.(see footnote 28) According to the Judicial Conference Report in 1991, asbestos cases on average take almost twice as long as other lawsuits to resolve.(see footnote 29) Since that time, more than 100,000 cases have been added to court dockets, and cases continue to take many years to come to a resolution.

    Although asbestos cases have presented a severe problem for the federal judiciary, the vast majority of asbestos cases are filed in state court, particularly now. Asbestos lawyers perceive the federal system as an unfavorable forum for the majority of claimants—those who are not sick. The judge in charge of asbestos claims within the federal multidistrict litigation system, Judge Charles Weiner, of the Eastern District of Pennsylvania, gives priority to the sick.(see footnote 30)

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    There is no centralized repository of data on asbestos cases in the state courts, and states vary in how they record data concerning their court systems. The limited evidence available suggests that delays in the tort system remain high in the states with the largest numbers of asbestos claims. Over one-third (36%) of all asbestos claims pending in state courts are pending in Texas. Several county courts in Texas—representing about half of the pending asbestos caseload in that state—responded to a request for data on their asbestos cases. These courts treat cases with a number of plaintiffs as a single case, and so each case may involve many separate claims.(see footnote 31) The courts that provided the data on age of pending cases show serious delays. The average age of pending cases in Jefferson County was 5 years, 3 months. Other counties were almost as bad—3 years, 8 months in Bexar County and 4 years, 9 months in Nueces County. And this is the average age of pending cases—still more time will elapse before they are fully resolved. For example, in Tarrant County the average age of a pending case is only 15 months, while the average time to disposition is 31 months. In Nueces County the average age of a disposed asbestos case was 5 years, 4 months.(see footnote 32) All these figures, whether seriously bleak or only moderately so, should be compared with the 4–6 months that could be achieved by the administrative scheme proposed in H.R. 1283.

    Data from other states is consistent with the pattern of delays in the state court systems. Louisiana represents about 9% of the asbestos cases nationwide. Only one parish responded to a request for data. The Parish of Jefferson has 143 cases pending, with an average number of twelve plaintiffs per case. The average age of the pending cases is 4 years, 5 months—similar to Texas. Finally, although New Jersey is a less important forum for asbestos cases (with 2.4% of the cases nationwide), its court system keeps comprehensive statewide data on asbestos cases. According to those data, more than half of the cases have been pending for more than three years—which is the maximum period the state's system is designed to record.
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    7. Consolidations Exacerbate the Problems Inherent in the Current System. In desperation over the massive caseload and frustrating delays, some state courts have turned to mass consolidations—in which hundreds or thousands of plaintiffs are grouped into a single case, with defendants numbering possibly in the hundreds—in order to process claims more quickly. This procedural device does benefit unimpaired claimants, and of course generates substantial income for lawyers. Consolidations of this sort, however, seriously dilute the quality of justice, not only for defendants, but also for those plaintiffs with the strongest claims. In one case, for example, Cimino v. Raymark Industries, Inc.,(see footnote 33) a federal district court in Texas attempted to adopt a trial plan to adjudicate the claims of 2300 asbestos plaintiffs. The appeals court reversed the plan because the plan would not—and could not—determine the issues in each claim with any reasonable degree of accuracy. So, next, the district court decided on a ''mini-trials'' approach so each plaintiff would receive an individualized assessment of causation and damages. But the district court abandoned that plan because the mini-trials would have required four and a half years to complete under even the most optimistic scenario. Then the court again attempted to devise a generalized approach. The appeals court reversed again, because the generalized approach taken by the district court was inconsistent with Texas substantive law.(see footnote 34)

    In cases where courts have approved mass consolidations, and putting aside for the moment the compromises to the basic legal requirement of individualized determinations of individual issues, the results of consolidation have accentuated the problem of diverting resources from the sick to the non-sick that I have described. When scores or even hundreds of cases are tried at once, it is almost impossible for a judge or a jury to focus attention to the particular issues that are critical to assessing the liability of particular defendants to particular plaintiffs, such as product identification, the adequacy of a particular warning to a plaintiff at a given time, or other critical elements of an asbestos case. And it is similarly all but impossible to assess carefully the compensatory damages due the individual victims. In such a situation, even defendants against whom evidence is very weak must settle, because responsible management cannot ''bet the company'' on the hope that a judge or jury will focus on those issues.
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    Moreover, as Paul Weiler and I stated in our article, the consolidation ''approach inevitably wastes resources on less deserving, unimpaired claimants.''(see footnote 35) For example, in Cimino, the jury awarded $558,900 in every case of pleural plaques, or ''freckles'',(see footnote 36) which usually involve no impairment; that magnitude of award, if applied in all cases, would very quickly exhaust the available resources of all defendants and leave victims who develop serious illness in the future with little or no compensation. In a mass consolidation in Mississippi, unimpaired plaintiffs were awarded between $2 and $3.5 million, undoubtedly because they were tried side by side with severely injured plaintiffs.(see footnote 37) In such cases, the values assigned to those who are not sick are distorted by the jury's sympathy for those deserving claimants who have serious illnesses. Because of this, plaintiffs' lawyers include in consolidations hundreds or thousands of plaintiffs who are not sick, using those who suffer from serious disease to inflate the value of those claims.

    The vast bulk of cases, however, are settled before trial. But the same problems distort the settlement process, too. When a large batch of cases is settled, defendants pay a lump sum to cover both the impaired and unimpaired claims. There is no role for defendants or even a judge in reviewing the manner in which plaintiffs' counsel allocates the settlement among the claimants. It is all but certain, however, that impaired victims receive proportionately less of the settlement sum than they would from a tort award based on individualized adjudication.There is a very troubling dynamic here. Combining impaired victims, some of them seriously ill, with the unimpaired gives the unimpaired a sort of ''sympathy by association'' benefit that would weigh with a jury, if the case ever went to trial. But loading a large number of claims together produces a bet-the-company risk for the defendants, making settlement more likely. In the settlement, then, the higher potential jury-award value of the impaired claims is spread, at least partially, to the unimpaired. The arithmetic is straightforward: the unimpaired and the attorneys who receive contingent fees benefit at the expense of impaired victims.(see footnote 38)
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    The asbestos litigation morass has substantially deteriorated since the collapse of the Amchem settlement in 1997. The need for a legislative response is greater than ever, to provide speedy and inexpensive administration of current claims, security to those who develop injuries in the future, and an end to the litigation lottery that taxes the interests of defendant firms, their employees and their communities.

III. THE PROPOSED LEGISLATION

    In 1998, a bipartisan group of sponsors in both chambers introduced the ''Fairness in Asbestos Compensation Act'' in response to the invitation of the Supreme Court in Amchem. Similar bills have been reintroduced this year by Chairman Hyde (H.R. 1283) and Senator Ashcroft (S. 758). Again, both bills enjoy substantial bipartisan support.

    The proposed legislation would establish an ''Asbestos Resolution Corporation'' or ''ARC''—a government corporation paid for by the defendants but solely responsible (in the familiar manner of independent adjudicatory commissions) to the President and Congress—to administer an asbestos claims resolution program.(see footnote 39) The program includes two basic components:

 an administrative procedure for determining medical eligibility, keyed to objective clinical and pathological criteria for impairment; and

 an aggressive alternative dispute resolution (ADR) process to resolve claims more quickly and less expensively than is possible in the courts.
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Substantively, the bill reflects a number of policy principles, the most critical of which are:

 Impaired claimants, now and into the future, must be assured a recovery of tort-like compensatory damages.

 The resources for compensating victims should go to those who are impaired, while the claims of those who have no impairment should be deferred until any impairment develops; claimants should be able to bring claims whenever they are sick, and not have to rush to file premature claims as a result of any state statute of limitations.

 The resources of defendant companies are better spent on compensation than on litigation costs, so the cost efficiencies of expert administrative decisionmaking and of ADR should be exploited wherever possible.

 Claimants should have meaningful access to courts as a check on administrative discretion and to ensure that, over time, the administrative decisionmaking is ''aligned'' with the compensation available to impaired claimants in tort suits.

    Let me turn to a summary of the bill's features.

    1. Medical eligibility. The heart of the medical eligibility process is a set of medical criteria that are taken practically verbatim from the criteria agreed upon by leaders of the plaintiffs' trial bar, the AFL–CIO, and 20 defendants in the Georgine/Amchem case. After exhaustive hearings, the Amchem district court found that those criteria would not deny compensation to any significant number of people who are impaired by an asbestos-related disease. That finding was never questioned by the appellate courts.
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    The legislation would require medical eligibility decisions to be made by doctors who have no substantial ties to either side in the asbestos litigation. A claimant whose application is not granted as a matter of routine by the ARC's claims examiners would be entitled to reconsideration by a panel of three medical experts, who would consider the claimant's case de novo. In addition, for unusual situations, where a claimant has persuasive evidence of an asbestos-related impairment but does not meet the medical criteria, the legislation provides an Exceptional Medical Claims Panel modeled on a similar panel in Amchem. That panel would have the authority to examine all the circumstances of a claimant's case and to grant a certificate of eligibility if the claimant establishes by evidence comparable to that required by the criteria that he or she is impaired by an asbestos related disease. The Exceptional Medical Claims Panel would consist of five doctors who are each specialists in a key field such as pulmonary medicine, pathology, or radiology.

    A claimant who exhausts the ARC medical review process and is dissatisfied would be entitled to judicial review in a Federal district court. The court would uphold the ARC's decision only if it is supported by ''substantial evidence'' in the record before the ARC, the test traditionally employed for relatively exacting judicial review of formal administrative decisions.(see footnote 40)

    2. ADR Process. After a claimant has received a medical eligibility certificate and has provided a statement of the basis of his or her claim against the named defendants, the ARC employs a two-step mediation process to encourage quick and final settlements. There is a sixty-day grace period following the medical review process to permit the parties to negotiate settlements voluntarily. If settlement is not reached in sixty days, an ARC mediator is appointed to help the parties reach a settlement within another sixty days. Defendants have an incentive to settle before mediation because they bear the cost of the mediation process.
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    The legislation requires all parties to disclose information necessary to make mediation effective. The heart of the process is the legislation's requirement that defendants must make good-faith offers at the end of the mediation period, or face a financial penalty that will be added to an arbitration award or court judgment. The legislation defines a ''good-faith'' offer as one which is within 25% of an eventual award or judgment, and imposes a 10% penalty on defendants for inadequate offers. Claimants, by contrast, would not be subject to a financial penalty for failing to make a good faith demand, although the mediator has the authority to extend the process for up to an additional 60 days if the mediator determines that the claimant's final offer is not in good faith.

    The legislation is designed to resolve as many cases as possible through mediation, but a claimant may choose individual adjudication if he or she is not satisfied with the defendants' final settlement offer. The legislation provides the claimant, not the defendant, with a choice of (1) binding arbitration under rules established by the ARC, or (2) filing a lawsuit in a federal or state court of competent jurisdiction. Unlike the Amchem settlement, there is no limit on the number of claimants who can choose to litigate their claims, either through ARC arbitration or in the tort system.

    Claimants who wish to resolve their cases quickly and with finality can choose arbitration, paid for by the defendants. Simplified rules would be employed, similar to those used in administrative law judge [ALJ] hearings, and the arbitrator would apply applicable state law to determine liability, as modified by the legislation (i.e., medical criteria must be met, no punitive damages, no statute of limitations defense, no bar to additional compensation if plaintiffs have been compensated for a less serious illness, etc.) The ARC would have authority to use its own arbitrators or contract with established private-sector arbitration services. Moreover, nothing in the legislation prevents the ARC from contracting with ALJs (through an interagency agreement) to act as arbitrators. Arbitration awards would be fully enforceable under the Federal Arbitration Act, with extremely limited potential for challenge.
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    3. Claimants still have access to court. After establishing medical eligibility, and if time-limited mediation fails, claimants who prefer to litigate their cases in court can choose that option as well. Individual trials would be required,(see footnote 41) and claimants could choose to file their claims in any state or federal court of competent jurisdiction. Certificates of medical eligibility would be admissible in court to establish medical causation, and would be presumed correct unless rebutted by clear and convincing evidence. Other issues would be resolved in accordance with applicable state law, as modified by the legislation. Jury trials would be available just as they are today, and a jury would assess compensatory damages for a qualified claimant in accordance with state law, including damages for emotional distress and for pain and suffering.

    4. Defendants lose statute of limitations and similar defenses.

    The legislation abolishes the statute of limitations, and similar timeliness defenses such as laches, for all claims that are not barred as of the date of enactment. Plaintiffs will be able to obtain compensation at any time for their illness, and need not fear that their claims for serious disease will be barred if they do not file their claims soon after the first markers of exposure become detectable.

    5. Protection for cancer victims, and proscription of limited releases.

    The legislation protects cancer victims by providing that a claimant is not barred (by the legal rule of res judicata) from collecting compensation for a malignant condition, such as lung cancer or mesothelioma, simply because the claimant has already received compensation for a nonmalignant condition, such as asbestosis or an impairing pleural condition. Likewise, the legislation prohibits defendants from obtaining releases from those with nonmalignant diseases which prohibit further suits if the claimant develops cancer.
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    6. Precludes punitive damages.

    The legislation bars punitive damage awards, but permits full compensatory damages for qualified claimants, including damages for intangibles like pain and suffering or emotional distress, and also allows loss of consortium damages for the spouses of asbestos victims. The legislation ensures that the interests of future victims in obtaining full, prompt and fair compensation is not sacrificed to ''punish'' defendants for decisions made decades earlier that cannot be undone, and for which society has already exacted a price that provides a sober lesson for those who would supply potentially dangerous products in the future.

IV. THE PROPOSED LEGISLATION WOULD PROVIDE A ''SECURE, FAIR AND EFFICIENT MEANS OF COMPENSATING VICTIMS OF ASBESTOS EXPOSURE.''

    There are several criteria we should use to evaluate any proposed administrative system for addressing the asbestos crisis. These include:

 The costs of compensation, as well as the administrative costs of the system, should be borne by defendant companies rather than the taxpayers.

 Resources should be focused on compensating the sick, rather than the unimpaired, but the unimpaired must be assured that compensation will be available to them if they become sick in the future, and transaction costs must be reduced.

 The lottery-like unpredictability of litigation must be replaced by predictability, and like cases should be treated alike.
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 The sick must have their claims determined, and compensation paid, far more quickly than through litigation.

 The administrative scheme must enjoy legitimacy, in theory and perception. For example, there must be access to courts in order to ensure the fairness of administrative actions, and the agency must be structured to avoid ''capture'' or bias.

 The scheme must provide an appropriate balance between the needs of victims of asbestos exposure and present-day workers, families and communities who depend on the companies.

    As detailed below, when judged by these criteria the proposed Fairness in Asbestos Compensation Act is a vast improvement over the current system, and a much needed response to a multibillion dollar problem of enormous importance to hundreds of thousands of families.

    1. Financial responsibility. Because it is a substitute for tort litigation, victim compensation awarded by the proposed Asbestos Resolution Corporation should obviously be funded by respondent-defendants, rather than general tax revenues. The defendants would remain subject to the state law rules of joint and several liability.

    Interestingly, the bill would not collectivize the financial responsibility of defendants and thereby obviate the need for showing that particular defendants are responsible. Unfortunately, although this is what I had in mind when writing in 1993, such a collective mechanism is now impractical because of the enormous diversity within the large set of corporate defendants. There is essentially no asbestos manufacturing industry, as that phrase would have been understood two or three decades ago. Instead, defendants are widely varied in their lines of business, and in their proximate relationship to asbestos production or production use, among other issues. There are unstable patterns in who is named as a defendant in any given type of suit. Some defendants were merely owners of property on which asbestos was present, and at least one is a major insurance company. The rules of civil liability vary depending on the basis for which liability is asserted. All of this is complicated by the fact that different defendant companies have different packages of insurance coverage, with different insurers and reinsurers, and an allocation system would have to avoid shifting the responsibility for compensation costs from insurers back to defendants, and the complex operation of countless different insurance policies and governing state laws. I cannot imagine any legislative formula for allocating financial responsibility under these circumstances. Instead, some form of negotiation and administrative adjudication as among defendants on a case-by-case basis seems necessary, as contemplated in the proposed legislation.(see footnote 42)
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    For administrative costs, the legislation adopts a contribution mechanism that is formally different from a tax, but fully enforceable. There is a reasonable argument that at least some costs should be borne by the taxpayers because the agency's functions are no less governmental than other activities of either the executive or judicial branches. Wisely, however, the bill funds these operating costs through assessments on the defendants. This is consistent with the bipartisan effort in recent years to make appropriate use of fees and other techniques to reduce taxpayer burden for funding activities when an identifiable portion of the public is specially benefitted by the governmental activity. Of course there are political obstacles, as well as settled expectations, standing in the way of instituting such fee-based funding for established programs that already rely on appropriations. With a new entity, the ARC, the Congress has an opportunity to do it the right way from the start.

    As a practical matter, defendant funding also avoids difficulties in the budget process, particularly in light of the continuing importance of the discretionary budget caps. If the effective administration of the ARC were subject to appropriations gridlock or arbitrary budget cuts in either political branch of government, then the fair, expeditious and dependable compensation system we seek would be a legislative chimera, a much less attractive alternative to litigation.

    2. Resources focused on the sick. The proposed bill focuses compensation on the sick in five ways. First, in order to recover, claimants must pass the medical eligibility criteria applied by physicians within the ARC mechanism or make a special showing to the Exceptional Medical Claims Panel—unless they successfully challenge the medical finding of ineligibility through judicial review of the ARC determination. The medical criteria are the culmination of years of clinical and litigation experience. They define a screen to separate out asbestos-related impairments, so that compensation is not available to the unimpaired. The criteria were examined exhaustively by the parties and the court in Georgine, and have provided the general framework in some major settlements since. Second, claimants who are currently unimpaired are free to file for compensation if and when an impairment develops, because the legislation would eliminate the right of companies to defend against a compensation claim by citing the statute of limitations time-bar on lawsuits. Third, a claimant who does receive compensation for a non-cancer impairment but who later develops a malignancy could reenter the system and receive additional compensation. Fourth, the system focuses resources on the impaired by dramatically reducing transactions costs, including court costs and fees paid to lawyers—by defendants and plaintiffs alike. The determination of medical eligibility is not adversarial, and occurs even before the claimant names the respondent companies; mediation and arbitration are far less costly than tort litigation; the entire system is designed to reduce sharply, if not eliminate, the need for sophisticated legal representation. Finally, the legislation eliminates punitive damages, whose purpose (by definition) is to punish rather than to compensate. This, together with eliminating compensation for the unimpaired, reduces the risk of corporate bankruptcies so that resources will be available to those who are sick in the future.
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    The most important qualification to the high marks the bill receives on this criterion relate to the first point, the medical criteria. There appears to be a substantial body of medical opinion that the criteria are perhaps too generous to claimants, and will require defendant companies to pay out more in compensation than is required under the pure theory of focusing exclusively on the impaired. Any such screen or assessment, however, will involve balancing the risks of over- and under-inclusiveness, or ''false positives'' and ''false negatives''. Quite properly, the parties to the Georgine settlement decided to err on the side benefitting victims, and the trial court approved.(see footnote 43) That same judgment is reflected in the proposed legislation.

    Finally, it is noteworthy that the medical eligibility criteria will trigger compensation for individuals who would not fit the familiar definition of ''disability'' used by, for example, Social Security. Such tests usually relate to functional incapacities that make the claimant unable to engage in ''substantial gainful activity.''(see footnote 44)

    3. Predictability and horizontal equity. The proposed legislation would greatly increase predictability for several reasons. First, the use of objective medical criteria, applied by disinterested physicians, is obviously fundamental. This use of expertise is, of course, a traditional justification for the creation of administrative agencies to whom legislative bodies delegate adjudicatory and other powers. Juries and judges without the benefit of repeated exposure to complex technical issues are inevitably less consistent than an expert administrative body.

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    A second reason to expect improved predictability and similarity of treatment for similar claimants is that by eliminating the ''wild card'' punitive damages factor, the legislation's structure will decrease the distortion of recoveries from case to case. While punitive damages are rarely awarded, the prospect of a large windfall award creates uncertainty for the parties, which inhibits settlement. It also permits a lucky few to recover millions while those with more serious diseases will often recover far less. Although the traditional tort damage elements of pain and suffering remain under this legislation, as they should, the bulk of the awards will be keyed to more ''objective'' components of compensatory damages.

    Third, the administrative structure will produce better and timely information to guide settlements. In the current system, settlements may come at various stages in the development of evidence. The proposed legislation would ensure that more information about the claimant's circumstances is available earlier in the process, reducing the guess work and lottery-element in the ADR effort.

    Unlike Amchem, the bill does not provide for predetermined settlement ranges; there is, for example, nothing like a schedule of damages comparable to what we see in some workers' compensation contexts. There are advantages and disadvantages to this approach. With no schedule, the legislation imposes neither maximums (protecting companies) nor minimums (protecting claimants). There is built-in flexibility over time so we can expect that settlements will be yoked to outcomes of cases that are adjudicated. Remember that victims can opt out and go to court after they establish medical eligibility and mediation fails. In this way, the legislation ensures that settlements and arbitration awards will continually track the evolving conscience of the community, as reflected in jury awards, rather than establishing compensation either by statute or by the proverbial bureaucrat wearing green eyeshades.
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    Perhaps most significantly favoring the bill's approach, the maturity of asbestos litigation means that parties generally will have some rough historical guidance on appropriate settlement amounts. On the other hand, the claimants will need help finding, learning and using those facts about comparable settlement amounts. One can envision some reliance on the ARC to provide information in a neutral fashion, but this information would probably be difficult to digest. Overall, therefore, we might expect a more lawyer-driven process than might be the case with a schedule, although claimants often seek legal assistance even in systems that have such grids, such as Social Security. The bill's design does greatly simplify and reduce the necessary role of claimants' lawyers, which is to the good.

    Even if a schedule were desirable, I see no realistic possibility of agreeing to one in legislation. So, what about through administrative rulemaking? The problem is that it would be very reasonable for everyone concerned to worry that this untested agency will go through a protracted notice and comment rulemaking and then somehow get the schedule ''wrong''. A middle ground, neither included nor excluded from the bill, would be for the ARC to use its resources to assemble settlement information and make it available, perhaps after notice and comment to permit interested persons to object to ARC's proposed synthesis.(see footnote 45)

    With or without this refinement, the bill is clearly a major improvement on the unpredictability and horizontal inequity common in asbestos litigation.

    4. Reducing delay. Under the proposed legislation, qualifying cases are likely to be concluded in 4–6 months. This is far faster than tort litigation.
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    To begin with, there is an efficient determination of medical eligibility, by disinterested medical experts, based on objective criteria. The bill facilitates prompt settlement, with explicit incentives for effective use of ADR. Even before official mediation, there is a strong likelihood of settlement immediately after medical eligibility because plaintiffs law firms will have a history of settlements with previous claimants and the early disclosure of information about the claimant. If the claim goes to the formal mediation stage, defendants who have not settled must bear the costs, and there is an aggressive 60 day time limit. Moreover, in that mediation there is a significant financial penalty against defendants for failure to settle or make a reasonable settlement offer. (There is no similar penalty for claimants.) If mediation fails, the claimant has the option of moving the case to speedy arbitration, at defendant's expense.

    With all of these devices at work, it seems likely that the vast majority of cases will be resolved short of formal arbitration, and certainly short of court litigation, producing substantial benefits for all concerned.

    5. Legitimacy. The proposed legislation establishes an entity denominated a ''corporation'' and, finances it through assessments on the defendants. Despite these features, it should be clear that this entity is in every respect governmental. ''Corporation'' could be changed to ''Commission'' or ''Agency'' without altering the substance of its accountability, authority, and legitimacy. The ARC members would be appointed by the President with the advice and consent of the Senate. The ARC would be subordinate to the will of the President and the Congress, like scores of existing independent and quasi-independent administrative agencies, and in accordance with settled principles of constitutional and administrative law. The proposed legislation combines the legitimacy of a good public institution with the flexibility of a good private organization. For example:
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 The ARC would not be subject to some of the management entanglements that would hamper traditional agencies in attracting the expertise needed to provide efficient and expert service, including uneconomic constraints related to salaries or personnel slots. Since it is not financed by taxpayers, it seems appropriate to strike the balance between management regulations and service quality in a more flexible way, determined by the ARC Board.

 Despite the funding mechanism, there are ample safeguards for the neutrality of the ARC. The Board Members are appointed by the President and confirmed by the Senate, and conflict-of-interest rules in the legislation will prohibit any person with a financial stake in asbestos litigation from working for the ARC. The ARC will have ample power to enforce its mandatory funding assessments, so no company could obtain leverage over the corporation by threatening to delay or withhold its contribution.

 There is appropriate use of expertise: The bill takes medical determinations away from the adversary system and puts them in the hands of disinterested doctors.

 Legitimacy is further enhanced by choice: In cases that do not settle, plaintiffs choose between streamlined arbitration proceedings and civil trials. Arbitration is preferable in terms of costs and delay, but to some claimants, courts may have greater legitimacy. (Here again, there may be a middle ground. The bill could explicitly authorize the ARC to use qualified federal Administrative Law Judges as arbitrators, in addition to the traditional private sector pool.) The implicit competition with courts will promote sound arbitration.

    Most fundamentally, the legitimacy of the proposed ARC should be judged in comparison with the current system. The failings of the asbestos tort industry—and I use that phrase advisedly—have been well documented. The delays, expense, randomness, horizontal inequities and more simply cannot be ignored because each of these tends to undermine public confidence in the judiciary, and in the law. Perceptions of unfairness and waste are corrosive to legitimacy, and that is ultimately why the Congress must act on asbestos.
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    6. Appropriately Balancing Social Needs. Finally, the legislation must be judged on the most important criterion of all—whether it provides an appropriate balance among competing social goals and interests. To summarize, the medical criteria err on the side of inclusiveness, and were found by a federal court not to bar claims by any substantial number of plaintiffs who should be compensated. For those exceptional cases who cannot meet the criteria, an Exceptional Medical Claims Panel is established. The legislation adopts mechanisms which will greatly facilitate the prompt delivery of settlements to qualifying claimants, and deprives defendants of some defenses they have today in the tort system. It offers all impaired claimants the choice of streamlined arbitration, or continuing to litigate claims in the tort system, setting up a healthy competition between administrative efficiency and the virtues of the jury system. It requires individual trials, so seriously-ill plaintiffs will have their cases considered on their own, not used to inflate the value of unimpaired plaintiffs' claims. It screens out the backlog of ''exposure-only'' plaintiffs, so that those who suffer substantial injury can obtain prompt justice, while reserving resources that can be used to compensate those who were exposed if they ever become sick.

    Almost everyone currently involved in asbestos litigation today will benefit from this bill. First, claimants who are currently impaired benefit for at least three reasons:

 Their claims will be administered promptly through use of streamlined, alternative dispute resolution techniques which are designed to encourage prompt, fair settlements within months, rather than the years of delay typically encountered in the tort system.

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 Sick claimants retain their rights to have their cases heard in court without caps or artificial limits on their compensatory damages.

 The unconscionable if not crushing transaction costs associated with the tort system today will be substantially reduced, both because attorneys' fees will be capped at 25%, and because other transaction costs and expenses will be sharply curtailed or eliminated.

    Second, individuals exposed to asbestos who are not now impaired but later become so will benefit because they will not be forced to file their claims prematurely or enter into inadequate settlements due to statute of limitations concerns. Rather, they will have the ability to obtain full recovery if and when they become impaired. Moreover, the risk that asbestos claims will force defendant corporations into bankruptcy will be substantially reduced, thereby ensuring that adequate resources will remain available for impaired claimants into the future.

    Third, the former asbestos manufacturers and other defendants will benefit by being able to put this litigation nightmare behind them, thereby relieving them of the enormous distraction and expense associated with the defense of this litigation today as well as obtaining greater certainty as to their exposure and a better ability to plan for the future of their businesses. These costs and risks, amounting in the extreme to the risk of bankruptcy, have consequences not only for current officers and shareholders, but for workers and their families, for economically related businesses, and for communities.

    Fourth, the court system will benefit through the enormous savings in time and resources, with asbestos litigation in the courts sharply reduced, if not virtually eliminated, as a result of the legislation.
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    There are two sets of losers under the new legislation. Lawyers will lose fees, both the plaintiffs' attorneys who charge contingent fees and package huge inventories of claims, and defense attorneys who defend interminable claims, billing by the hour. One can certainly understand the vehement opposition of the trial lawyers to the legislation. But this financial loss to lawyers who have already been paid billions seems entirely unobjectionable from a broad social welfare perspective—just as we would not regret the lost income to hospitals from a breakthrough in disease prevention.

    The other losers are individuals who are not now sick, who will never become sick in the future, and who would have won the ''jury lottery'' under our current tort system. While these individuals will be deprived of their opportunity to win a prize, as a policy matter the interest of such individuals should be subordinated to the weightier concerns of the other stakeholders, especially those who actually are sick today or will become sick in the future.

V. CONCLUSION

    In our earlier article, Paul Weiler and I warned against allowing an ''out-of-date morality play'' to frustrate the needs of both present-day workers and future victims. We noted that ''it is not corporations, but rather real people, who pay the price of tort litigation—specifically, the present stakeholders in defendant firms such as employees, shareholders, pensioners, and surrounding communities.'' Their interests—and the interests of future victims—must not be ignored ''because of tort litigation's preoccupation with retelling, and retaliating for, a tale of corporate 'misconduct' that took place almost sixty years ago.''(see footnote 46)
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    The legislation recognizes that social resources for the asbestos problem are not inexhaustible. The bill reflects a judgment that those resources should be spent on delivering full and prompt compensation to those who are, and will become, impaired by asbestos disease, and not wasted on compensation for those who are not sick and may never become sick, on punitive damages that seek retribution for the tragic decisions of executives decades earlier (most of whom are dead), on transaction costs such as attorney's fees, and on pointless technical and procedural battles that distract courts from their job of providing justice for asbestos victims and for us all.

    The proposed Fairness in Asbestos Compensation Act is a truly innovative response to a crisis that has long evaded a solution. It deserves your careful consideration—and your approval. Calls for legislative action have gone unheeded for too long. The Supreme Court has made clear, first in Amchem and now in Ortiz v. Fibreboard, that only Congress can solve this crisis. For the victims of asbestos-related disease, our overburdened courts, and defendants (and their stockholders, employees, and communities), the legislation represents the last best chance for a long overdue global resolution of the asbestos litigation crisis.

    Mr. HYDE. Thank you very much. And now Secretary Sullivan. Welcome back.

STATEMENT OF LOUIS W. SULLIVAN, PRESIDENT, MOREHOUSE SCHOOL OF MEDICINE, ATLANTA, GA

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    Mr. SULLIVAN. Thank you, Mr. Chairman, Mr. Conyers, members of the committee. It is a pleasure to have this opportunity to appear before you in support of H.R. 1283, the Fairness in Asbestos Compensation Act of 1999. This is bipartisan legislation sponsored by Chairman Hyde and based on the Georgine asbestos litigation settlement. I support the legislation and I applaud your efforts because I believe that the Congress has a responsibility to resolve the judicial crisis caused by years of backlogged litigation. It has the responsibility to ensure quick, fair, and efficient relief to thousands of people suffering from asbestos-related illnesses.

    H.R. 1283 recognizes the fundamental flaws of a system that has previously defied resolution and as a remedy, establishes straightforward, sound policy principles.

    The policy principles incorporated in this legislation are clear. One, impaired claimants, those suffering now and those who develop asbestos-related illnesses in the future, must be assured adequate, timely, and fair compensation. Two, resources for compensating victims should go to those who are impaired, while the claims of those who have no current impairment are deferred until the onset of any impairment.

    Three, claimants should be able to bring claims whenever they are sick and not be limited by any State statute of limitations. Four, defendant companies' resources are better spent on compensation than on litigation costs. And five, claimants should have meaningful access to court as a check on administrative decision making.

    I urge this committee and I urge the Congress as a whole to address this important issue. I believe that the Congress must accept the responsibility to solve the asbestos settlement crisis and ensure that sick individuals are compensated while they are still living. Indeed, I believe that only Congress has the ability to ensure this resolution.
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    Others testifying today, notably Dr. Epler, will discuss the medical criteria set forth in the proposed legislation. I understand that Drs. Rosenow and Little, both of whom are past presidents of the American College of Chest Physicians, have also submitted written testimony to the committee expressing their support for the proposed legislation and specifically discussing the medical criteria which it contains. These medical criteria were originally established in the Georgine settlement agreed to by both the labor organizations and the trial lawyers and approved by a Federal district court as fair and reasonable. Further, the impairment lines drawn by the legislation are generous to claimants and are designed to ensure that no individual suffering from asbestos-related impairment be excluded from compensation.

    Most administrative compensation programs are dependent upon disability, a far more restrictive concept and they use compensation schedules that do not reflect intangibles like pain and suffering. As Secretary of Health and Human Services, I was responsible for many programs that involved determining medical eligibility for certain remedies, and I believe that this bill sets forth a workable concept to ensure fair compensation. This bill also waives State statutes of limitation and similar defenses and preserves individuals' rights to file claims regardless of when they became sick or how long ago the exposure occurred.

    Today, I urge the Congress to act to resolve the national asbestos litigation crisis and to ensure the adequate, timely, and fair compensation of individuals suffering from asbestos-related illnesses.

    The resolution proposed in this bill is based on sound policy goals and will provide adequate remedies for individuals currently seeking compensation and those who will need compensation in the future. The U.S. Supreme Court has twice recommended congressional action. Further, the interested parties, unions, asbestos defendant corporations, and trial lawyers all agreed to the Georgine settlement.
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    Thank you, Mr. Chairman, for this opportunity to appear before you.

    [The prepared statement of Mr. Sullivan follows:]

PREPARED STATEMENT OF LOUIS W. SULLIVAN, PRESIDENT, MOREHOUSE SCHOOL OF MEDICINE, ATLANTA, GA

    Chairman Hyde, Mr. Conyers, members of the Committee, thank you for the opportunity to appear before you today to testify in support of H.R. 1283, the Fairness in Asbestos Compensation Act of 1999, bi-partisan legislation sponsored by Chairman Hyde and based on the Georgine asbestos-litigation settlement. I support the proposed legislation and applaud your efforts because I believe that Congress has a responsibility to resolve the judicial crisis caused by years of back-logged litigation and to ensure quick, fair, and efficient relief to hundreds of people suffering from asbestos-related illnesses. I hereby state that I personally have not received any federal grant, contract or subcontract in the current or preceding two fiscal years.

    H.R. 1283 recognizes the fundamental flaws of a system which has previously defied resolution and, as a remedy, establishes straightforward and sound policy principles. The policy principles incorporated in this legislation are clear: 1) impaired claimants, those suffering now and those who develop asbestos-related illnesses in the future, must be assured adequate, timely, and fair compensation; 2) resources for compensating victims should go to those who are impaired, while the claims of those who have no current impairment are deferred until the on-set of any impairment; 3) claimants should be able to bring claims whenever they are sick and not be limited by any state statute of limitations; 4) defendant companies resources are better spent on compensation than on litigation costs; and 5) claimants should have meaningful access to court as a check on administrative decision making.
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CONGRESS MUST ACT

    I urge this Committee, and Congress as a whole, to address this important issue. I believe that Congress must accept the responsibility to solve the asbestos settlement crisis and ensure that sick individuals are compensated while they are still living. Indeed, I believe that only Congress has the ability to ensure this resolution.

    The legislation we are discussing today is modeled after a Federal District Court order approving an innovative settlement in a class action suit alleging asbestos-related personal injury (Georgine v. Amchem Products, Inc.) The U.S. Supreme Court, when considering the appeal of the settlement terms, reversed on procedural and technical grounds, but called for legislative resolution of the asbestos crisis, stating that legally only Congress could create an out-of-court settlement process to help settle these asbestos lawsuits.

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

    Just last week, the Supreme Court (in Ortiz v. Fibreboard) specifically called for ''national legislation'' to solve what the Court called the ''elephantine mass of asbestos cases . . . which defies customary judiciary administration.''
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    In response, Chairman Hyde and others have crafted a bill which provides a creative and innovative solution to the asbestos litigation crisis. H.R. 1283 creates a unique administrative mechanism to resolve asbestos claims funded entirely by the asbestos defendants. Claims for asbestos-related injuries should be resolved by administrative rather than judicial means. The claims process established by the bill would be administered by a quasi-governmental corporation whose board of directors would be appointed by the President and confirmed by the Senate. This inventive solution would eliminate lengthy trial proceedings and provide quick relief to individuals suffering from asbestos-related illnesses. The current system and its protracted judicial process has allowed sick individuals to die before they ever get their day in court. Congress must act to speed up the process and to ensure that sick individuals receive fair compensation before it is too late for them.

GENEROUS IMPAIRMENT GUIDELINES

    Others testifying today, notably Dr. Epler, will discuss the medical criteria set forth in the proposed legislation. I understand that Drs. Rosenow and Little, both past Presidents of the American College of Chest Physicians, also have submitted written testimony to the Committee expressing their support for the proposed legislation and specifically discussing the medical criteria which it contains. These medical criteria were originally established in the Georgine settlement, agreed to by both the labor organizations and the trial lawyers, and approved by a Federal District Court as fair and reasonable. To ensure a fair system under the proposed settlement process, a distinction must be drawn between people who are impaired and those who are not impaired. Claims should be judged based upon the recognized medical criteria patterned after those agreed to all sides in the Georgine settlement. I believe that these criteria provide an objective, workable, and equitable solution to get compensation to people who are actually sick now.
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    Further, the ''impairment lines'' drawn by the legislation are generous to claimants and are designed to ensure that no individual suffering from asbestos-related impairment be excluded from compensation. Most administrative compensation programs are dependent upon disability—a far more restrictive concept—and use compensation schedules that do not reflect intangibles like pain and suffering. As Secretary of the Department of Health and Human Services, I was responsible for many programs that involved determining medical eligibility for certain remedies, and I believe that this bill sets forth a workable concept to ensure fair compensation.

    Finally, the original Georgine settlement proposal included a rigid compensation schedule which was subject to caps and other limits. The settlement ranges provided were some of the most highly criticized aspects of the settlement and resulted in complaints that the compensation levels were inadequate. H.R. 1283 does not include such limitations on claims and will likely promote faster settlements through mediation without imposing caps on injured individuals' potential compensation.

STATUTES OF LIMITATION WAIVER

    I would like now to address the waiver of state statutes of limitation as contained in H.R. 1283. I believe this is one of the most important policy aspects to ensure that individuals suffering from asbestos-related illnesses receive fair and adequate compensation. Currently, we see mass filings of cases on behalf of large groups of people who are not sick and may never become sick but who are compelled to file for remedial compensation simply because of state statutes of limitation. Previous exposure to asbestos material does not in all cases lead to illness. In fact, only a small percentage of individuals exposed to asbestos ever become impaired and may not become impaired for 20 or even 30 years after exposure. Most claims that have been filed to date are on behalf of people who are not sick from asbestos but are still seeking compensation.
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    H.R. 1283 waives state statutes of limitation and similar defenses and preserves individuals' right to file claims regardless of when they become sick or how long ago the exposure occurred. The proposed legislation sets no time limits for filing a claim. In addition, individuals would be able to re-enter the mediation process at any time to seek compensation for the on-set of new and additional asbestos-related illnesses. Finally, individuals would retain the right to enter the court system if they are unsatisfied with the mediation process or compensation award.

    With an additional 30,000 to 50,000 additional cases expected to be filed this year alone, on top of the 200,000 cases already filed, this provision is necessary to stem the flood of claims currently burdening our court systems. Most importantly, sick individuals would come first under the proposed out-of-court administrative system while still allowing people who become sick later to file appropriate claims.

CONCLUSION

    I appear here today to urge Congressional action to resolve the national asbestos litigation crisis and to ensure the adequate, timely, and fair compensation of individuals suffering from asbestos-related illnesses. The resolution proposed in H.R. 1283 is based on sound policy goals and will provide adequate remedies for individuals currently seeking compensation and those individuals who will need compensation in the future. The U.S. Supreme Court has now twice recommended Congressional action to resolve this crisis. Further, the interested parties: unions, asbestos defendant corporations, and trial lawyers, all agreed to the Georgine settlement upon which H.R. 1283 is based. Accordingly, I would urge Congress to act quickly to pass H.R. 1283 and thus prevent a judicial crisis from becoming a public health crisis.
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    Thank you and I would be pleased to answer your questions.

     

PREPARED STATEMENT OF ALEX G. LITTLE, M.D. FCCP, PAST PRESIDENT, AMERICAN COLLEGE OF CHEST PHYSICIANS

    I practice Thoracic or Chest Surgery and am presently the Chairman of the Department of Surgery at the University of Nevada School of Medicine. As the attached Curriculum Vitae reflects, I am a graduate of Johns Hopkins School of Medicine, Phi Beta Kappa. I completed my internship at Johns Hopkins Hospital and my residency at the University of Chicago, where I then served as a Fellow in Thoracic and Cardiovascular Surgery. I have taught and practiced in the area of thoracic surgery for the past twenty five years, and am the author of more than two hundred book chapters, articles, and abstracts. I have served as the President of the American College of Chest Physicians and on the Board of Governors of the American College of Surgeons. I hereby state that I personally have not received any federal grant, contract or subcontract in the current or preceding two fiscal years.

    I welcome the opportunity to submit to you my written testimony in support of H.R. 1283, the Fairness in Asbestos Compensation Act of 1999 (''Act''). I support the proposed legislation and, in particular, express my endorsement of the medical criteria contained in the Act.

    On a regular basis, I see patients, teach medical students and surgery residents, conduct research and write articles for the scientific literature in the field of chest diseases. Based on this experience, as well as my expertise as reflected in my Curriculum Vitae, I have reviewed the Act, and in particular the medical criteria in the Act. It is my firm conclusion that the medical criteria in the Act fairly and clearly distinguish between those individuals exposed to asbestos who are truly sick and those who are not. The Act's medical criteria reflect the mainstream of medical thinking and ensure that those truly injured as a result of asbestos will be compensated while at the same time it preserves the rights of those who, in the future, develop asbestos-related diseases. Below, I will discuss the medical criteria and the basis for my conclusion that they are fair.
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1. Mesothelioma: Mesothelioma is a relatively rare but essentially universally fatal cancer which is usually associated with a history of asbestos exposure. This cancer arises in the pleura which is the lining of the chest wall or the peritoneum which is the lining of the abdomen. The medical criteria described are designed to—and do—establish the reliability of the diagnosis of mesothelioma. The Act refers that the time between the first documented exposure to asbestos and manifestation of the mesothelioma, or the latency period, must be at least ten years. This latency period is, in fact, reasonably generous for the claimants as epidemiological studies indicate that he minimum latency period for the various asbestos-related conditions is generally 15 to 20 years and that the average latency period for these conditions is even longer. For example, the average latency period for mesothelioma is consistently between thirty-five and forty years. See, C.W.R. Parkes ''Occupational Lung Disorders'' 468 (3rd ed.1994).

2. Lung Cancer: Lung cancer has several known causes, the most common of which is cigarette smoking. The purpose of the lung cancer criteria are to be sure that a potential claimant's lung cancer is in fact related to the asbestos exposure, rather than to smoking or some other factor. It is important for this Committee to understand that the majority of epidemiological studies indicate that ''asbestosis'' is the only risk factor for asbestos-related lung cancer. The majority of these studies indicate that pleural abnormalities by themselves are not associated with an increase in lung cancer. See ''Asbestos-Related Malignancy and the Cairs Hypotheses''. Brit. J. Industr. Med. 48, 73 (1991) ''Asbestos, Asbestos, and Lung Cancer.'' Mod. Path. 6, 509 (1993).

3. ''Other'' Asbestos-Related Cancers: There is no consensus in the medical community on whether any ''other'' cancers may be related to asbestos exposure. Considerable evidence exists to suggest that such ''other'' cancers in fact are not caused by asbestos. Nevertheless, there is a contrary opinion among the minority of the medical community. The criteria included in the category are designed to ensure that the claimant has evidence of sufficient exposure to asbestos to make it reasonable to attribute the ''other'' cancer at least in part to asbestos exposure.
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4. ''Non-malignant conditions'' The non-malignant conditions criteria are established so that a potential claimant will qualify at the first signs of diminished respiratory capacity due to asbestos exposure. I believe that these criteria fairly described claimants who were exposed to asbestos and have been injured as a result of their non-malignant condition.

    As I understand it, the purpose of the Act is to ensure prompt and fair compensation to persons who are suffering from an asbestos-related impairment.

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

    It is for these reasons that I unreservedly support the Fairness in Asbestos Compensation Act of 1999.
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PREPARED STATEMENT OF EDWARD C. ROSENOW, III, M.D., MACP AND MASTER FCCP, PAST PRESIDENT, AMERICAN COLLEGE OF CHEST PHYSICIANS

    Congressman Hyde, Mr. Conyers, members of the Committee, thank you for the opportunity to submit to you my written testimony in support of H.R. 1283, the Fairness in Asbestos Compensation Act of 1999 (''Act''), bi-partisan legislation sponsored by Chairman Hyde and based on the Georgine asbestos-litigation settlement. I support the proposed legislation and, in particular, express my endorsement of the medical criteria contained in the Act.

    I am a physician specializing in thoracic disease. As my attached curriculum vitae reflects, I practiced at the Mayo Clinic in Rochester, Minnesota from 1966–1996, where from 1987–1994 I served as the Chair, Division of Pulmonary and in 1986 I served as the President, Mayo Clinic Staff. I was the recipient in 1998 of the Distinguished Alumnus Award from Mayo Clinic. I am an Emeritus Professor of Medicine at Mayo Graduate School of Medicine and the author of more than 150 publications, the most recent of which was published this year. In 1988–1989, I served as the President of the American College of Chest Physicians and I currently serve as the President, Board of Directors of CHEST Foundation, American College of Chest Physicians. I hereby state that I personally have not received any federal grant, contract or subcontract in the current or preceding two fiscal years.

    As this Committee is aware, there are hundreds of thousands of individuals who have been exposed to asbestos, and there are many sources of exposure. However, it is important for this Committee to understand that many of the patients who have been exposed to asbestos never will develop asbestos related disease. In my many years of practice, I have examined individuals who have been exposed to asbestos and never suffered any impairment and individuals who have been exposed to asbestos and suffer from asbestosis, lung cancer or malignant mesothelioma. The medical criteria in the Act distinguish between those individuals exposed to asbestos who are truly sick and those who are not. The Act's medical criteria reflect the mainstream of medical thinking and ensure that those truly injured as a result of asbestos will be compensated while at the same time it preserves the rights of those who, in the future, develop asbestos-related diseases.
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    Protecting the rights of future claimants is a key part of the Act and one which I believe is laudable, necessary and long overdue. As I noted above, conservative estimates would suggest that there are hundreds of thousands of individuals who have been exposed to asbestos. The latency period between exposure and the manifestation of any asbestos related disease can be long, and it is important to ensure that future claimants are protected. I recall vividly the case of a 78 year old minister who came to me with a finding of malignant mesothelioma. As we discussed the possible source of his exposure to asbestos, he recalled that, as a seminary student some sixty years ago, he had worked in an industrial setting where asbestos was present for only three months. In another case, a patient who presented with malignant mesothelioma recalled that his only exposure to asbestos had been thirty years earlier, when for one summer he emptied bags of asbestos insulation into a blower. The Act would protect these claimants, by waiving the statutes of limitations and thus eliminating the legal incentive which now exists for claimants to pursue legal claims when, in fact, they are not injured or do not yet manifest any of the serious aspects of prior asbestos exposure.

    As I understand it, the purpose of the Act is to ensure prompt and fair compensation to persons who are suffering from an asbestos-related impairment. The medical criteria set forth guidelines which distinguish claimants who may have an asbestos-related impairment and those who do not. By ''impairment,'' I mean something that produces physical symptoms, adversely affects function, or diminishes life span.

    In order to quality for compensation under the Act, the medical criteria require that a potential claimant meet certain standards in one of the following four medical categories: (1) Malignant mesothelioma (a rare form of cancer of the cells of the pleura (lining of the lungs and chest wall) or peritoneum (lining of the abdominal cavity and the mesentery)); (2) Lung Cancer; (3) certain Other Cancers (such as colorectal tumors); or (4) Non-Malignant Conditions (principally asbestosis).
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    I have reviewed in detail the medical criteria in the Act which relate to each of the four medical categories. Based on my experience as a physician who has treated many exposed to asbestos, I am confident that these medical criteria are sufficiently inclusive to permit virtually all claimants with asbestos-related impairment to receive compensation. If anything, in my opinion, these criteria err on the side of being overly protective of claimants and may permit recovery by claimants with no impairment. In addition, as I am sure the Committee is aware, any individuals with asbestos-related conditions who, for some unusual reason, can't satisfy the Act's medical criteria, can nevertheless submit their claim to the Exceptional Medical Panel. As I understand the Act, this Exceptional Medical Panel would review these claims and identify which claimants who, notwithstanding their inability to satisfy the medical criteria, nevertheless could receive compensation for their injures. Thus, even if anyone were to argue that the medical criteria were somehow too exclusive, the Panel provides an additional safety net to ensure that claimants with asbestos-related impairment who fail to satisfy the Act's medical criteria nevertheless will be eligible to receive compensation under the proposed Act.

    It is for these reasons that I unreservedly support the Fairness in Asbestos Compensation Act of 1999.

    Mr. HYDE. Thank you very much, Dr. Sullivan. Mr. Middleton.

STATEMENT OF RICHARD H. MIDDLETON, JR., ESQ., PRESIDENT-ELECT, ASSOCIATION OF TRIAL LAWYERS OF AMERICA

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    Mr. MIDDLETON. Thank you, Mr. Chairman, Mr. Conyers, members of the committee. I am Richard Middleton and I am here on behalf of the Association of Trial Lawyers of American to speak in opposition to H.R. 1283, but I am not here just on behalf of the association. I am also here on behalf of the hundreds and thousands of victims who don't have an independent voice to speak for themselves. Many of them are with us in this room today and have traveled here from all over the United States to be recognized and also voice their opinion that this bill is bad and gets in the way of just compensation.

    I have represented many of these people. I have seen them die. I have seen them being stricken, and I have seen them get compensated because responsible companies such as Owens-Corning and Owens Illinois have recognized their responsibility as manufacturers of these products and have come forward with a solution that has been done voluntarily and been done within the parameters of the court system.

    Members of the committee, this litigation has evolved over 25 years. We are at a point where the vast majority of the cases that are being filed are being settled. They are being handled. There were only 55 cases tried in calendar year 1998, and there were no punitive damage awards made by any juries in the United States. This is a tribute to the efficient claims resolution process that responsible companies and plaintiffs' lawyers representing these victims have been able to craft as a result of their desire to put compensation in the hands of these victims.

    Over the years, the courts have dealt with many defenses. They have been considered. They have been ruled upon. The result now is a balance of interest, interest that if not tampered with by the legislative process, can go forward and continue to compensate these people who were needlessly exposed to this terrible product.
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    On a voluntary basis, there are thousands of cases being settled and there are mechanisms put in place by representatives of these victims every day. We put together the exposure information. The work history has to be developed over years and years of exposure to these products at various plants and facilities throughout this country. The medical evidence has got to be gathered and cultivated in line with the medical criteria that is acknowledged by the medical community, not artificial criteria put together to bail out certain members of this industry. And the payouts are done in an orderly, predictable, and accountable fashion which protect not only the interest of the victims but also the interest of the companies involved and allow them to move forward.

    I want to address for a moment the Ortiz v. Fibreboard decision by the Supreme Court of June 23. Most importantly, that case is an analysis of existing class action law. It is not something novel. It only happened to involve asbestos victims, but most importantly it establishes that you cannot have a class action with a limited fund and no opt-outs unless you prove that the fund is actually limited and that all the resources that are available both from the corporate assets and from available insurance are there and made available to the fund.

    This is not a true limited fund context. The Ortiz case was not a limited fund context and the Court properly ruled that you cannot disallow people to opt out unless it is a true limited fund. Asbestos was mentioned but Justice Souter's call for a fix was not anything like bill H.R. 1283. In fact, he relied—you have got to consider the historical reference. He relied upon the Rehnquist Commission, the Judicial Commission of 1991's report, which relied upon the Rand study of 1995 which relied upon data collected in '81 and '83, a much different time in litigation when insurance coverage disputes were being litigated, when every defense was being litigated, and when the companies had not come to the realization that the proper thing to do was to acknowledge their fault in exposing these people.
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    With regards to the Supreme Court's efforts in this, what they said was that they couldn't tamper with the seventh amendment right to a trial by jury. That is why they said it was important and indeed it would be constitutionally suspect to allow this committee and then furthermore this Congress to venture into that area.

    Finally let me state this, that with regards to this particular bill, it creates a morass that you can see from these charts before you, a new Federal bureaucracy that puts hurdles upon hurdles upon hurdles that prevent the orderly consideration of these people's claims. It is not a compensation scheme as it has been dubbed. It is not fair. It is not fast. It is not efficient, and it is not right.

    Thank you, Mr. Chairman.

    [The prepared statement of Mr. Middleton follows:]

PREPARED STATEMENT OF RICHARD H. MIDDLETON, JR., ESQ., PRESIDENT-ELECT, ASSOCIATION OF TRIAL LAWYERS OF AMERICA

SUMMARY

    Mr. Chairman and members of the Committee,

    My name is Richard Middleton. I am appearing here today on behalf of the Association of Trial Lawyers of America to speak in opposition to H.R. 1283 ''The Fairness in Asbestos Compensation Act of 1999.''
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    ATLA believes that an objective evaluation of the history and present state of asbestos litigation will lead the committee to conclude that:

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

2. H.R. 1283 is a bad bill that would deny compensation to tens of thousands of workers with cancer and disabling lung disease from workplace asbestos exposure and would provide a financial windfall to companies which willfully mislead the public about asbestos problems.

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

4. Both the state and federal courts, and the parties themselves have, over time, devised a variety of mechanisms for processing and settling asbestos cases in a timely fashion. Over 25,000 cases were resolved last year by voluntarily negotiated settlement agreement, providing much needed relief to victims and their families.

5. These private settlement agreements will continue to provide compensation to tens of thousands of victims each year and keep the docket burden of the courts to a minimum well into the future, unless Congress reduces or eliminates the incentive for defendant companies to settle.
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6. H.R. 1283 would negatively impact and, in many cases, overturn the various state laws that have induced settlements. The bill's restrictive medical criteria would eliminate compensation for thousands of cases that are presently compensable under state laws. It would also delay the processing of all pending cases for many months, if not years, and bring all existing settlement activity to a standstill.

7. H.R. 1283 does not, as its proponents suggest, codify the settlement agreement in the Amchem litigation, and the bill is not supported by the parties who participated in that settlement.

8. There are serious 10th Amendment problems with any federal legislation which, like H.R. 1283, rewrite selective portions of state tort law and eliminate a claimant's existing right to seek compensation through the tort system without providing an alternative remedy. Although a constitutionally permissible comprehensive federal asbestos compensation program could be written, compensation levels approximating the value of litigated claims would require tax and spending decisions by Congress which it has been loath to undertake in the past.

STATEMENT

    Mr. Chairman and members of the Committee, my name is Richard Middleton, Jr., and I am a practicing attorney from Savannah, Georgia. I am a senior trial attorney in the firm of Middleton, Adams & Tate, P.C., with offices in Atlanta and Savannah, Georgia. I also have the very high honor of serving presently as the President-Elect of the Association of Trial Lawyers of America (ATLA). Mr. Chairman, thank you very much for this opportunity to present ATLA's views in opposition to H.R. 1283, the proposed asbestos compensation legislation.
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    ATLA believes that an objective evaluation of the history and present state of asbestos litigation will lead the Committee to conclude that:

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

2. H.R. 1283 is a bad bill that would deny compensation to tens of thousands of workers with cancer and disabling lung disease from workplace asbestos exposure and would provide a financial windfall to companies which willfully mislead the public about asbestos problems.

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

4. Both the state and federal courts, and the parties themselves, have, over time, devised a variety of mechanisms for processing and settling asbestos cases in a timely fashion. Over 25,000 cases were resolved last year by voluntarily negotiated settlement agreement, providing much needed relief to victims and their families.

5. These private settlement agreements will continue to provide compensation to tens of thousands of victims each year and keep the docket burden of the courts to a minimum well into the future, unless Congress reduces or eliminates the incentive for defendant companies to settle.
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6. H.R. 1283 would negatively impact and, in many cases, overturn the various state laws that have induced settlements. The bill's restrictive medical criteria would eliminate compensation for thousands of cases that are presently compensable under state laws. It would also delay the processing of all pending cases for many months, if not years, and bring all existing settlement activity to a standstill.

7. There are serious 10th Amendment problems with any federal legislation which, like H.R. 1283, rewrites selective portions of state tort law and eliminates a claimant's existing right to seek compensation through the tort system without providing an alternative remedy. Although a constitutionally permissible comprehensive federal asbestos compensation program could be written, compensation levels approximating the value of litigated claims would require tax and spending decisions by Congress which it has been loath to undertake in the past.

    Twenty years ago, thousands of injured claimants had difficulty obtaining relief in the courts because the asbestos industry was involved in a lengthy and complex legal struggle with plaintiffs over responsibility for the diseases caused by their products. The issues that animated that litigation have long ago been resolved in favor of the claimants. Liability of the defendant companies is no longer seriously disputed. Juries across this country have demonstrated time and again that they will find the defendant companies liable at trial and impose substantial damages for their conduct.

    The last time Congress looked at this issue, in 1991–1992, the concept of a ''litigation crisis'' received support from a number of academic and official sources, notably from the Rand Institute of Civil Justice and later from the U.S. Judicial Conference Ad Hoc Committee on Asbestos Litigation. During the period in the 1980s that these groups studied asbestos litigation, the courts were, in fact, having difficulty handling the caseload or providing adequate and timely compensation for victims. This problem was caused by intense litigation over issues of causation, insurance coverage and apportionment of liability.
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    Today the problems which the courts confronted during the last decade have largely been eliminated and the industry and the claimants have by and large accommodated themselves to the risk of litigation. Most of the major defendants have entered into master settlement agreements, jurisdiction by jurisdiction, that establish criteria for settlement based on the law, the medical standards of proof in each jurisdiction and the historical record of trial success. Tens of thousands of cases are settled every year, providing compensation to victims and their families in a fraction of the time it would take to process claims under the labyrinth proposed in H.R. 1283.

    As a result, it is simply inaccurate to any longer claim that asbestos litigation is placing an undue burden on the courts. As the statistics clearly show, claims filed do not translate into cases tried. The vast majority of cases do not take up the time of the courts. Although many new cases are filed each year, large numbers are placed on inactive dockets and most other claims are settled under private agreements. In fact, according to Mealys Asbestos Litigation Reporter, during 1998 only 55 asbestos cases involving 125 individuals proceeded to verdict in the fifty states and all federal courts, a 45% decline from 1997—and clearly a negligible number.

    The best way to ensure the continued orderly processing of future asbestos cases is to leave matters to the parties and to the state and federal courts under existing law. The way to end progress, produce an administrative nightmare, and create new and lengthy delay for injured victims is to consolidate all asbestos claims in one federally mandated facility.

Unimpaired Claims
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    The lynchpin of the argument for the mandated medical criteria and other devices to limit access to the courts contained in H.R. 1283 is that too many of the new claims filed each year involve conditions that have not yet met the defendants' definition of impairment—a definition of impairment that is less favorable to workers than accepted medical standards and the standards that have been adopted by most of the state and federal courts. By seeking to classify all claims filed by asbestos workers diagnosed with pleural plaques, pleural thickening or pleural calcification, and even many cases of asbestosis as unimpaired, this argument inaccurately suggests that none of these claims are deserving of compensation. Adoption of the medical criteria in H.R.1283 is not medically justified and would do great injustice to a significant number of claimants.

    Virtually all of the states permit recovery only by those asbestos workers who have been diagnosed with physical symptoms of disease. In Metro North Commuter Railroad Company v. Buckley (521 U.S. 424, 1997), the Supreme Court held that mere exposure to asbestos without manifesting injury would not support a recovery under federal law. More recently, the Texas State Supreme Court similarly ruled that compensation is not available without a physical injury. Temple—Inland Products v. Carter (1999 W.L. 254718). These courts identified only two jurisdictions where lower courts permit such claims.

    Elsewhere, the courts, by local rule or otherwise, and the parties have consistently taken steps to prioritize and manage the asbestos cases on their dockets. In the federal courts, the area of primary responsibility of this Committee, all asbestos cases are consolidated before a single federal judge who has administratively resolved tens of thousands of cases and remanded only a nominal number back to transfer courts for trial. Obviously, these cases do not impose a burden on the federal courts. Finally, in many other jurisdictions claims by these workers are placed on inactive dockets or pleural registers which prevent them from becoming a drain on the resources of either the courts or the defendants.
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H.R. 1283 and the Amchem Settlement

    H.R. 1283 does not, as its proponents suggest, codify the settlement agreement in the Amchem litigation, and the bill is not supported by the parties who participated in that settlement. Amchem Products, Inc., et al. v. Windsor, et al., 117 S.Ct. 2231 (1997).

    The basic consideration for the Amchem class action settlement was that if the settlement criteria were met, the claimant would receive prompt payment from the settling defendants. The defendants established a fund in excess of $1 billion to immediately pay claims to qualified claimants.

    In contrast, H.R. 1283 fails to ensure prompt payment of any money to asbestos victims. The bill provides no guarantee of any payment at all to any injured worker. Amchem required that every qualified asbestos claim be paid within nine months. H.R. 1283, however, includes no time period guaranteeing any resolutions or prompt payment of claims. Furthermore, Amchem applied to only a small portion of defendants (less than 25%) who agreed to share liability. Joint and several liability remained available as to defendants not included in Amchem. But, H.R. 1283 eliminates joint and several liability for all asbestos claims.

    H.R. 1283 is also less favorable to asbestos victims than Amchem and will unreasonably restrict access to the courts. In Amchem, plaintiffs waived the right to seek punitive damages in exchange for defendants' waiver of all traditional defenses to asbestos claims. H.R. 1283, on the other hand, eliminates plaintiffs' right to seek punitive damages but provides plaintiffs nothing in exchange for these lost legal rights. Defendants retain the right to raise all of their traditional defenses, including state of the art, comparative negligence, contributory negligence, intervening negligence, superseding negligence, employer fault, notice, and others. Amchem, in addition, applied only to those asbestos manufacturers and plaintiffs who agreed to it. Existing plaintiffs who did not agree to its terms were free to opt out of the settlement and to rely on the tort system for redress. Indeed, over 170,000 workers filed opt out notices from the settlement. H.R. 1283 contains no such opt out provision. Its restrictions apply to all cases, both present and future. In fact, the bill applies retroactively to all cases pending in federal or state courts for which a final judgment has not been entered, including jury verdicts and unpaid settlements.
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    In short, H.R. 1283 stands the Amchem settlement on its head. It eliminates all of the benefit of the bargain that was offered to claimants, but grants none of the benefit that was provided in that settlement.

H.R. 1283—The Fairness in Asbestos Compensation Act of 1999

    The Fairness in Asbestos Compensation Act of 1999 is little more than an attempt by a small minority of the asbestos defendants to limit and, in most cases, eliminate their liability for payment of damages to both present and future victims of asbestos disease. H.R. 1283 requires every claimant to meet the bill's medical criteria before compensation may even be demanded and before he or she has the right to file a lawsuit in any jurisdiction in the United States, even though such claims may meet state law requirements. As such, the bill represents an unprecedented assault on American citizens' common law right of access to state courts.

    By design, this legislation would eliminate most of the pending claims in the United States, create procedural delays for those claims that remain, impose numerous legal obstacles in the path of any claimant who is bold enough to prosecute a claim, and would, at the same time, obliterate existing incentives for defendants to settle cases.

    The bill creates the Asbestos Resolution Corporation, which is not a compensation board but simply a screening device to decide who may file law suits against asbestos defendants. Unless a claimant obtains a certificate of medical eligibility, access to the courts is completely foreclosed. Even when an individual receives a certificate of eligibility, no award or benefit is paid. That certificate merely entitles a claimant to participate in a lengthy and inconclusive mediation and arbitration procedure after which the claimant will likely be left with nothing—no money, no good faith, no timely settlement offer. The Corporation's procedures are open-ended and certain to provide almost endless opportunity for delay.
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    The medical criteria themselves are arbitrary, do not represent mainstream scientific opinion, and would leave thousands of desperately ill individuals with no legal remedies whatsoever. Most draconian is Section 203, which requires 15 years of exposure to asbestos prior to 1979 for eligibility for non-asbestosis lung disease. OSHA standards did not adequately protect workers from significant asbestos cancer risk until 1994, and millions of workers continue to be exposed to this day. Yet the bill conclusively determines that asbestos exposures after 1979 are not harmful.

    Lung cancer victims are denied eligibility unless twelve years have elapsed from their first exposure. In addition, a cancer victim must show either asbestos or bilateral pleural thickening before a certificate of eligibility is awarded. This is contrary to the mainstream medical literature on this issue. The consensus view is that asbestosis is not a precondition required before lung cancer can be attributed to asbestos. Numerous scientific studies indicate that less than five years latency to asbestos can cause asbestos-related lung cancer. A twelve year latency period is required to establish eligibility for non-malignant asbestos-related diseases. This is particularly unfair in light of the heavy exposures that have occurred in recent years as workers have removed asbestos from public buildings, and since the scientific literature has established that de minimis exposure to asbestos can cause the most lethal disease.

    Finally, even victims who successfully run the gauntlet of the bill's procedures and meet its medical criteria get nothing but the right to re-litigate their case in court under highly prejudicial procedural rules. Moreover, because the legislation applies to any case that has not gone to final judgment by the date of enactment, the bill would retroactively nullify awards in cases that have already been resolved by jury verdict or which are on appeal.
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    Taken together, the administrative labyrinth established under the bill and the highly prejudicial changes in tort law will make pursuing asbestos-related damage claims substantially more time consuming and expensive, will greatly reduced the number of claims that defendants face and will significantly reduce the value of those claims.

    It is most important for this committee to realize that procedural changes in H.R.1283 inevitably will condemn the courts to relive the problems that created courthouse gridlock in the 1980s. In the early 1980s, the courts were unable to resolve asbestos cases because the industry used procedural tools available to it at that time to delay trials and avoid settlement. It is axiomatic that delay serves the interests of the industry defendants. It allows firms to pay very few claims and permits them to use their superior economic power to force claimants to accept discounted settlements. Backlogs of thousands of cases are the inevitable result when legislation tips the scale in favor of the defendants' side of the bargaining table. By superimposing a bureaucratic, adversarial administrative mechanism on top of a reconstituted, pro-defendant court regime, H.R. 1283 will recreate a court crisis which the parties themselves have already resolved. To cite but one of many concrete examples, by eliminating the risk of joint and several liability H.R. 1283 will encourage each defendant to litigate its individual market share liability in individual cases, thereby greatly increasing the number and duration of litigated claims.

    In short, H.R. 1283 would eliminate any incentive for defendants to continue their negotiated settlement agreements. These agreements ensure prompt, voluntary payment to tens of thousands of presently-impaired victims. Although this year's bill (in contrast to last year's version) appears to preserve the ability of the parties to enter private settlements, it nevertheless destroys the incentives for defendants to do so.
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Constitutional Problems

    The peculiar structure of H.R. 1283 requires this Committee carefully to consider its potential constitutional defects. The most serious areas of concern include the rewriting of state tort law and those provisions which eliminate the right to seek compensation through the courts without providing an alternative remedy such as a fund for the payment of claims. As the Supreme Court indicated in Duke Power Co. v. Carolina Environment Study Group, 428 U.S. 59, 86–87, 91–93 (1978), and in other decisions, the abolition of common law tort remedies without providing alternative means of redress for injury violates due process. That appears to be precisely what H.R. 1283 does.

    A second serious constitutional defect involves the rights of those asbestos victims who surmount the bill's procedural obstacles, obtain a certificate of medical eligibility and file a civil action. When they finally arrive at state court, they will find that their state's tort law has been rewritten specifically to limit their rights and that these changes were imposed by Congress, rather than their state courts or legislatures. While Congress may create a federal asbestos cause of action, it cannot write state tort law that must be applied by the states. As the Supreme Court Stated in Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938), the cornerstone of federalism in our civil justice system:

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

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    Mr. HYDE. Thank you, Mr. Middleton.

    Mr. Heyman.

STATEMENT OF SAMUEL J. HEYMAN, ESQ., CHAIRMAN AND CEO, GAF CORPORATION, WAYNE, NJ

    Mr. HEYMAN. Thank you, Mr. Chairman. Good morning. GAF's involvement as an asbestos defendant is typical of the story of hundreds of companies who today find themselves enmeshed in this asbestos nightmare. Our only connection to the production of asbestos insulation occurred when it acquired in 1967, Ruberoid, which included at the time a small non-core business which produced an asbestos insulation product Calcilite.

    After publication in the late 1960's of an important medical study concerning the dangers of asbestos, GAF closed its Calcilite operation and has not produced these products for almost 30 years. Although there is no one left with our company today who had responsibility for the production or marketing of the product, we have taken responsibility for what went before at GAF. We regret more than I can say the harm these products have caused, and we are committed to fair, full, and prompt compensation for the sick.

    Since the late 1970's, GAF has paid out as a result of the Ruberoid acquisition whose asbestos insulation business incidentally had profits over a 30-year period of no more we would estimate than an aggregate total of $1 million and sales of only approximately a million dollars per annum during the same period, we have paid out now more than $1.2 billion in asbestos claims and expenses, a substantial portion of which has gone to people who are not sick and will never become sick.
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    We are here today not in search of a bailout or to avoid responsibility for any harm our products have caused and we come here to Congress because our industry's experience over the last 20 years has underscored that asbestos litigation has defied all other solutions. One might logically ask why do we settle the non-sick cases and I would cite for you an example of a current situation which is typical of what we face. We now have some 5,000 cases which have been consolidated in one State courtroom. By way of background you should know that GAF and other co-defendants went to trial on 12 other cases in this same courtroom only a year ago and the 12 plaintiffs, a number of whom were not sick, received a jury award of $48 million and now emboldened by that result, the asbestos lawyers are looking for a billion dollars to settle the remaining cases. And now let's assume that of the 5,000 cases, and I don't think this is far from the truth. We don't have exact numbers—but at least 2,500 involve sick claimants while the other 2,500 are not sick. The asbestos lawyers take the position that if the defendants are not willing to settle the 2,500 non-sick cases, they will insist on taking to trial the 2,500 sick cases. And your lawyer relates, let's suppose that there is a high probability of the jury awarding punishing compensatory awards to the unimpaired as well as the sick and even the possibility of a punitive damage award which could bankrupt any defendant. What would you do? Would you settle the non-sick cases or would you bet the company and the jobs and careers of your more than 3,400 employees around the country on what happens in a courtroom in any one of hundreds of jurisdictions around the country.

    I ask you to draw your own conclusions about a system where the following are common occurrences. Thousands of cases involve questionable lab test results and medical affidavits. Two, because of the opportunity for plaintiffs to forum shop, cases have a habit of migrating to courtrooms which are viewed as particularly favorable to plaintiffs. And three, claimants appear to have an uncanny knack of remembering that the label on the bag of asbestos to which they were exposed corresponds only to those companies who still remain in the particular case.
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    The asbestos insulation litigation nightmare demonstrates not only the fragility of our legal system but how a handful of asbestos trial lawyers who play by a different set of rules managed to control and dominate it. And finally, while our focus is on the critical importance of reform for sick claimants, we make no bones about the fact that this legislation will also be helpful for the many hundreds of defendant companies and we would hope that the interest of defendants, their employees, shareholders, the communities who depend on them and elemental fairness are worthy of Congress' consideration as well.

    Thank you.

    [The prepared statement of Mr. Heyman follows:]

PREPARED STATEMENT OF SAMUEL J. HEYMAN, ESQ., CHAIRMAN AND CEO, GAF CORPORATION, WAYNE, NJ

    Mr. Chairman and Members of the Committee:

    Good morning. My name is Samuel Heyman. I am Chairman and Chief Executive Officer of GAF Corporation.

    GAF's involvement as an asbestos defendant is, I believe, typical of the story of literally hundreds of companies, ranging from some of the largest Fortune 500 corporations to local hardware stores, building supply distributors and many other small, private, and family businesses, who today find themselves enmeshed in this asbestos mess. GAF's only connection to the production of asbestos insulation occurred when it acquired, in 1967, Ruberoid, a company engaged primarily in the manufacture of roofing materials.
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    Ruberoid happened at the time to be operating a small, marginally profitable non-core business, whose sales were no more than 1% of the Company's total sales or approximately $ 1 million per annum, which produced an asbestos insulation product, Calcilite. In point of fact, the United States Navy had asked Ruberoid during World War II to develop this product for use as an insulation material in its ships. After the United States Public Health Service concluded that Calcilite was safe, Ruberoid began to supply the product to our country's Naval shipyards around the Country, pursuant to requisition in accordance with Government specifications, and a not insubstantial portion of GAF's total Calcilite sales over the years were made to the United States Government.

    Shortly after the Ruberoid acquisition, GAF designed an asbestos-free product, but the Navy rejected it. And finally, after an important medical study by Dr. Selikoff was published in the late 60's outlining the dangers of asbestos, GAF promptly closed its asbestos insulation operation and has never produced asbestos insulation products again.

    I do not recount this background to excuse our Company's conduct in any way. For although GAF has not produced these asbestos products for almost 30 years, and there is no one left with our Company today who had responsibility for the acquisition of the business or the manufacturing or marketing of the product, you should know that we take full responsibility for what went before at GAF, we regret, more than I can say, the harm these products have caused thousands of Americans, and we are absolutely committed to making sure that any one who may become genuinely sick a result of our products will be fairly, fully, and promptly compensated.

    Since the late 1970's when asbestos litigation as we know it today began, GAF has paid out, as a result of the Ruberoid acquisition, whose asbestos insulation business had profits over a 30 year period of no more, we would estimate, than an aggregate total of 1 million, more than 1.2 billion dollars in claims and expenses, a substantial portion of which has gone to people who are not sick. Despite both GAF and the industry having settled almost 300,000 cases, more than 200,000 asbestos cases remain pending nationwide, 100,000 of which involve claims against GAF, with new claims being filed now at the rate of 50,000 per annum—with more to come and no end in sight.
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    We come here today not in search of a bailout in any way, shape or form. Nor do we seek legislation which would impose caps on our liability or provide the right to continue to manufacture and market a dangerous product, like another industry sought to do here in the Congress last year. Rather, the asbestos defendants have taken the consistent, simple, straightforward position that they accept their responsibility to fully, fairly, and promptly compensate those who are sick and were exposed to their products, with the proviso that those who are not sick be required to wait until they become sick.

    And we come here to Congress not only because the Supreme Court has suggested that we do so, but so also because our former industry's experience with the asbestos litigation mess over the last 25 years has underscored that it has defied all other solution. In this connection, we have tried, on the one hand, resisting the non-sick claims through litigation and, at other times, aggressively settling these claims in an attempt to substantially reduce the backlog of cases against our Company—each of which strategies I might add have proven disastrous and have only encouraged the further escalation of non-sick claims.

    We have been asked by members of Congress over the last year—why do we settle the non-sick cases?—Why don't we just draw a line in the sand and refuse to settle these cases? And in response, I would cite for you a concrete example of a current situation we face, which by the way is not unlike others we have encountered before, and ask you all to think what you would do if you were a CEO.

    We currently have some 5,000 cases, which have been consolidated in one state courtroom in Mississippi. By way of background, you should know that GAF and other co-defendants went to trial on 12 other cases in this same courtroom only a year ago, and the 12 plaintiffs, a number of whom were not sick, received a jury award of $48 million. And now emboldened by that result, the asbestos lawyers are looking for a billion dollars to settle the remaining cases. And now let's assume—and I do not know this for a fact, but it can't be far from the truth—that of the 5,000 cases, 2500 involve sick claimants, while the other 2,500 are unimpaired.
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    In a recent effort to settle the cases on the courthouse steps before trial, the asbestos trial lawyers took the position, consistent with others they have taken in similar situations around the Country, that if the defendants were not willing to settle the 2,500 unimpaired cases, they would insist on taking to trial the 2,500 sick cases. And your lawyer relates, let's suppose, that there is a high probability of the jury awarding punishing, compensatory awards to the unimpaired, as well as the sick, and even the possibility of a punitive damage award which could bankrupt any defendant. And given that situation, what would you do? Would you settle the non-meritorious cases, which are inherently worth nothing, or would you ''bet the company'', and the jobs and careers of your more than 3,000 employees around the country, on what happens in a courtroom in a small, far-away town where the local lawyer on the other side is well-known to, and highly regarded by, the judge and jury.

    The most disturbing aspect of the story about the asbestos litigation mess in our court system today relates to the manipulation of the system by a small handful of asbestos trial lawyers. And I raise this to provide you with some sense of what happens in the asbestos world today and why neither plaintiffs nor defendants can any longer afford the status quo.

    I ask you to draw your own conclusions about a system, where for example, the following are common occurrences:

  Thousands of cases involve questionable lab test results and medical affidavits and are generated not by doctors but by attorney-sponsored screening companies who have a financial incentive to ''discover'' pleural changes.

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  Because they usually can sue a sufficient number of asbestos defendants, from their potential list of hundreds, in virtually any jurisdiction at the touch of a word processing button, cases have a habit of migrating from all parts of the Country to friendly courtrooms in small towns in a handful of states.

  When a defendant goes into bankruptcy, plaintiffs stop identifying the bankrupt company's product, focusing instead on the products of the remaining solvent companies; and,

  Claimants appear to have an uncanny knack of remembering the label on a bag of asbestos which does not bear the name of any of the companies that have already settled the particular case but rather the name of the one company remaining.

    Another aspect of the absolute dominion and control of the asbestos trial lawyers relates to the fact that there are no bright lines in asbestos litigation as to a particular defendant's share of the total award vis-à-vis his co-defendants in the case. Since the tort took place as much as 30–40 years ago, claimant's identification of a particular defendant's product to which he was exposed is often malleable, and market share statistics are generally unavailable, asbestos trial lawyers have enormous power and control. For by their choice of whom to target or when to make a small, peripheral ''player'' into a large player, and vice versa, the asbestos trial lawyers regularly utilize this power to keep defendants in line.

    While I could recount other examples which I think would make your hair stand on end, suffice it to say that the asbestos litigation mess dramatically demonstrates not only the fragility of our legal system and how a handful of asbestos trial lawyers, who play by a different set of rules, manage to control and dominate the asbestos litigation system as it has evolved over the past 25 years, bending it to their own ends.
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    Finally, while our focus is primarily on the critical importance of reform for sick claimants both now and in the future, and I really do believe that this is first and foremost a victims' rights bill, we make no bones about the fact that this legislation will also be helpful for the many hundreds of companies caught up in this asbestos litigation mess. Companies currently facing asbestos litigation are estimated to employ more than 5 million Americans and have payrolls in the billions of dollars. And while to be sure the rights of sick claimants are paramount here, we would hope that the interests of defendants, their employees, shareholders, the communities who depend on them, and elemental fairness are worthy of Congress'consideration as well.

    Mr. HYDE. Thank you, Mr. Heyman.

    Dr. Oliver.

STATEMENT OF CHRISTINE OLIVER, M.D., ASSOCIATE PHYSICIAN, MASSACHUSETTS GENERAL HOSPITAL, ASSISTANT PROFESSOR, HARVARD MEDICAL SCHOOL, BOSTON, MA

    Ms. OLIVER. I want to thank you, Mr. Chair, and Congressman Conyers as well as the other members of the committee for the opportunity to appear before you to speak on H.R. 1283. My purpose in being here today is to offer testimony that addresses the fairness aspect of the claims. Specifically I will offer testimony on sections 105, 201 through 204, and 801. My comments will summarize my written testimony. These are offered on the basis of my experience over the past 20 years taking care of patients with asbestos-related disease and carrying out epidemiologic studies of populations of workers at risk. I am board certified in internal medicine and in occupational medicine. I have been a NIOSH B-reader since 1980.
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    The sections of H.R. 1283 which I have cited include provisions for a medical advisory board, medical criteria for eligibility determination, and definitions. There are common threads that run throughout these sections that I believe are cause for concern. These are: 1) the designations of medical specialists qualified to render opinions about medical diagnosis and determination of claimant eligibility, 2) latency definition and criteria, 3) selection of radiographic findings and pulmonary function test results needed to establish medical eligibility, and 4) the exposure schema set forth in section 203.

    Section 105 establishes a medical advisory board. Not included as a mandatory specialty on this board are board certified occupational physicians. Generally, occupational physicians are as well, if not better, qualified than the designated specialists with regard to an overall understanding of and experience with asbestos-related disease, both malignant and non-malignant. It is the occupational physician who is trained to take a good occupational history, who understands the concept and reality of latency, who can put pathologic, radiologic and medical findings together with history to make a diagnosis. ''Clinical asbestosis,'' and ''Bilateral pleural thickening with impairment,'' must be diagnosed according to the bill by a board-certified internist or pulmonary specialist. Fortunately, I am board certified in internal medicine as well as occupational medicine. However, if I were not, I would not be allowed under this bill to diagnose either clinical asbestosis or bilateral pleural thickening with impairment, and I have diagnosed hundreds of cases of both. I can tell you without hesitation and with all due respect to internists that most are not able to diagnose asbestosis with a reasonable degree of medical certainty and many pulmonary physicians have not had specific training in asbestos-related disease.

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    With regard to latency, first, latency is poorly defined in the bill. Latency is the period of time between initial exposure and manifestation of disease. The bill defines latency in terms of first significant exposure and fails to define significant. From a medical and epidemiologic perspective, such a determination is not possible.

    Second, established latencies for asbestos-related disease are intended to be applied to populations and used as guidelines for individuals because of individual variability related to host factors and levels of exposure. The basis for the latencies established in the bill is not provided and these latencies, I believe, are arbitrary.

    Specific ILO classifications of radiographic abnormalities needed to establish medical eligibility are set forth in the bill, as are lung function abnormalities. The basis for the ILO classifications chosen and the cutoffs used for lung function are not provided.

    The exposure criteria in section 203 are, I believe, without foundation, complicated, and arbitrary for a number of reasons. Not the least of these is the requirement for a demonstration that airborne concentrations of asbestos were in compliance with the OSHA 8-hour TWA, ''at that time.'' This preponderance of the evidence requirement is unrealistic and unreasonable given that: 1) air sampling was not done routinely in most workplaces; 2) when done, it was not necessarily representative; and 3) it was certainly not available to workers.

    In summary, the cited provisions of the bill are arbitrary, in some cases illogical and inconsistent, and without foundation in either clinical experience or published studies in the medical and scientific literature. The proposed legislation, if passed, will impact the lives of thousands of workers in the United States who have been exposed to asbestos during the course of their work. These workers are at risk for or have already developed asbestos-related disease, in many cases fatal. To legislate medical provisions and criteria that are arbitrary and unnecessarily restrictive, as I believe these are, places an unreasonable burden on these workers and their families and will deny them benefits to which they are entitled. For many this denial of benefits will preclude access to necessary preventive and therapeutic medical care. If accepted as is, H.R. 1283 will not be a ''Fairness in Asbestos Compensation Act.'' Quite the contrary. The act will deny fairness in asbestos compensation to many workers in this country.
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    I thank you.

    [The prepared statement of Dr. Oliver follows:]

PREPARED STATEMENT OF CHRISTINE OLIVER, M.D., ASSOCIATE PHYSICIAN, MASSACHUSETTS GENERAL HOSPITAL, ASSISTANT PROFESSOR, HARVARD MEDICAL SCHOOL, BOSTON, MA

INTRODUCTION

    I want to thank Congressman Hyde, Congressman Conyers, and the members of the Committee for the opportunity to appear before you today to offer testimony on H.R 1283, the so-called ''Fairness in Asbestos Compensation Act''. It is a bill that will impact the lives of tens of thousands of workers in the United States who have had occupational exposure to asbestos and now suffer or will develop asbestos-related disease. My testimony will focus on the Medical Advisory Board (Sec.105), the Medical Criteria (Sec.201–204), and Definitions (Sec.801 (16), (19), (23), (26), (36), (51)). My qualifications for the testimony I am about to offer are described below and in the appended curriculum vitae.

    For almost 20 years, I have evaluated and treated individuals and groups of workers with occupational exposure to asbestos. I have done this work in a variety of different settings. These include direct patient evaluation and care in the Pulmonary and Critical Care Unit of the Massachusetts General Hospital (MGH) in Boston, MA; medical surveys of specfic trades with different types of exposure to asbestos—such as railroad workers, plumbers and pipefitters, and public school custodians; and research investigations of such questions as the immunology of asbestos-related disease and long-term effects of exposure to asbestos during the course of work in buildings with asbestos-containing materials. I have taught medical students at Harvard Medical School, medical residents and fellows in training at the MGH, and other physicians and laypersons about the nature, uses, and health effects of asbestos.
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    I am Board Certified in Internal Medicine and in Preventive (Occupational) Medicine. My particular specialty in Occupational Medicine is occupational lung disease and I have been a staff physician in the Pulmonary and Critical Care Unit of the MGH since 1980. I am an Assistant Clinical Professor of Medicine at Harvard Medical School. At the MGH I was CoDirector and then Director of Occupational Medicine until 1996. In 1980 I was certified by NIOSH as a B-reader, and I have been recertified at four-year intervals since that time.

THE MEDICAL ADVISORY BOARD: SECTION 105

    Section 105 (b) sets forth which medical specialties ''shall'' hold positions on the Medical Advisory Board, a board that is important to implementation of the medical provisions of the Bill. These do not include the specialty of occupational medicine. In my opinion and in my experience, a specialist in occupational medicine is generally better qualified than other specialists listed to advise regarding such issues as occupational history, latency, exposure, and diagnostic findings with regard to radiographic and clinical outcome. Pathologists are important to accurate diagnosis of asbestos-related malignant conditions. A radiologist is important to provide expert advice on quality of films and radiologic interpretation of findings. Pulmonary specialists can advise on procedure and interpretation of pulmonary function tests. An oncologist can advise on treatment once a diagnosis has been established but is less qualified than an occupational medicine specialist to render an opinion on causal associations with asbestos. I believe that the Bill should be amended to require the inclusion of a Board-certified occupational medicine specialist on the Advisory Board.

THE MEDICAL CRITERIA: SECTIONS 201–204
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    Section 201. Medical Criteria—Nonmalignant Conditions. To satisfy eligibility criteria for nonmalignant conditions, a claimant must meet one essential criterion and at least one of three other criteria. The essential criterion is minimum latency of 12 years. I am unable to find basis in published medical and scientific literature for the choice of 12 years. In general the average latency in published studies is 20–25 years, but the range is quite variable—dependent most likely on host factors and levels of asbestos exposure. This criterion therefore appears to be arbitrary and without scientific basis.

    In addition to latency of 12 years, a claimant must either have a) clinical evidence of asbestosis as defined in the Bill, b) pathologic evidence of asbestosis, or c) evidence of bilateral pleural thickening with impairment. I believe both ''clinical evidence of asbestosis'' as defined in the Bill [Definitions, Sec.801 (19)] and ''evidence of bilateral pleural thickening with impairment'' as defined in the Bill [Definitions, Sec.801 (26)] lack medical basis and are arbitrary and unnecessarily restrictive. Specific comments are given below.

    Section 202. Medical Criteria—Mesothelioma. In order to satisfy eligibility criteria for malignant mesothelioma, a claimant must meet two criteria. The first is pathologic diagnosis by two Board-certified pathologists or one Board-certified pathologist who is a member of the US-Canadian Mesothelioma Reference Panel, using standardized techniques and accepted pathologic criteria. The second is evidence of a minimum latency of 10 years. As with a latency of at least 12 years for nonmalignant conditions, the requirement of a latency of at least 10 years for malignant mesothelioma to establish eligibility is arbitrary and without support in the medical and scientific literature. Although the mean latency is 40–45 years, there is wide variability depending on as-yet not clearly defined host factors and the nature of the exposure.
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    Section 203. Medical Criteria—Lung Cancer. Essential to establishing eligibility for the lung cancer medical category is a diagnosis of primary lung cancer by either a) Board-certified pathologist or b) a Board-certified pulmonary specialist or c) a Board-certified oncologist. Where possible, a pathologic diagnosis of primary lung cancer is desirable. This is sometimes not possible and other clinical variables are utilized in making the diagnosis of lung cancer. Pulmonary medicine and oncology are clinical specialties of medicine, as is occupational medicine. In general, an occupational medicine specialist is well qualified to make a diagnosis of primary lung carcinoma and better qualified to assess causal associations. To preclude occupational physicians from making the diagnosis, particularly in this context, is unnecessarily restrictive.

    The second essential criterion is minimum latency of 12 years. Again, the choice of 12 years is one without foundation in the published peer-reviewed literature and is arbitrary. With lung cancer [vs. asbestosis and malignant mesothelioma], the evidence is even stronger that such variables as level of exposure significantly affect latency.

    The third essential criterion is either evidence of a nonmalignant condition as defined in Section 201 or ''chest X-rays which, in the opinion of a certified B-reader, demonstrate both asbestos-related bilateral pleural plaques or asbestos-related bilateral pleural thickening and evidence of 15 years of exposure to asbestos, to be calculated as specified in subparagraphs (A)–(D)''. These criteria make it necessary to show evidence of asbestos-related fibrosis of the lung parenchyma, or asbestos-related scarring of the pleura with ''impairment'', or asbestos-related scarring of the pleura and a required amount of asbestos exposure determined using a complicated paradigm in order to establish eligibility for the lung cancer medical category. My comments with regard to these criteria are as follows:
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    There is abundant evidence in the medical literature that asbestosis is not necessary to the development of an asbestos-related lung cancer. Asbestos is a carcinogen. The process of fibrosis is not the same as the process of carcinogenesis. Lung cancer arises in the bronchi and alveoli of the lung, not the interstitium where fibrosis occurs. The types of cell involved in the two processes are quite different. While epidemiologic studies show an increase in risk for lung cancer in those asbestos-exposed workers with asbestos-related abnormalities on chest X-ray compared to those without such findings, studies also show and the authors conclude that asbestosis is not a necessary prerequisite to an asbestos-related lung cancer.

    The exposure criteria (A)–(C) are arbitrary and without foundation in published literature or clinical experience. Bystander exposures (A) are often as high or exceed exposures of individuals working directly with asbestos. So-called bystanders do not have a ''thin protective shield'' to protect them from nearby exposures. In fact, they are less likely to have been afforded the benefit of respiratory protection than those working directly with asbestos products.

    Criteria (B) and (C) talk about a ''substantial'' portion of a normal work year for that occupation. ''Substantial'' is not defined. And a ''normal'' work year for trades working in the industrial sector are quite different from ''normal'' work years for construction workers, for example. Further, the basis for the specific calculations of exposure years in these sections is lacking.

    With regard to (D), the basis for the defining the three exposure categories in the first paragraph is without foundation and arbitrary.
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    It is not clear to me why exposures after 1979 ''shall not be counted''. The latency between 1979 and 1999 is 20 years, certainly sufficient to satisfy latency criteria for all asbestos-related disease. The physiologic process of inhalation and the pathologic reactions to asbestos fibers are not different.

    What constitutes a ''preponderance of the evidence'' is in sections Di, Dii, and Diii? It is not defined and thus open to arbitrary interpretation. And as important, if not more important, it is unrealistic to expect that records of air-borne concentrations of asbestos fibers will be available to allow determination of their relationship to the existing OSHA 8-hour TWA ''at that time''. Certainly these records will not be available to workers. And there is no guarantee that recorded levels of exposure will be representative of usual exposures. And finally, the OSHA asbestos standard has been revisited and revised on at least two occasions since 1972 and the allowable exposure level reduced from 2 fibers/ml to 0.1 fiber/ml. This reality is not taken into account in the recommended algorithm.

    And finally, with regard to lung cancer, peer reviewed and published studies in the medical and scientific literature support a linear dose-response between asbestos and lung cancer, without a threshold. So for this reason, in addition to those reasons given above, the exposure requirements as set forth in this Section place an unreasonable and unnecessary burden on the claimant.

    Section 204. Medical Criteria—Other Cancer. My comments with regard to Section 204 are similar to those set forth above. The limitation of specialists allowed to make the diagnosis is unnecessarily restrictive. For example, if a Board-certified pulmonary specialist is qualified to make a diagnosis of lung cancer, a Board-certified gastroenterologist should be qualified to make a diagnosis of gastrointestinal cancer; and a Board-certified otolaryngologist, a diagnosis of cancer of the larynx. The 12-year latency requirement is arbitrary and without foundation. And there is no evidence in the medical and scientific literature that asbestosis or asbestos-related pleural abnormalities on chest ray, with impairment, are necessary to the establishment of an asbestos-related gastrointestinal or laryngeal cancer—if the exposure history is consistent with those diagnoses.
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DEFINITIONS: SECTION 801–(16), (19), (23), (26), (36) AND (51)

    Section (16). Chest X-rays. The requirement that chest radiographs be graded quality 1 by the ILO system of classification except for cases in which the claimant is deceased or for some other reason unable to obtain new films is unrealistic and likely to pose a burdensome restriction. In my experience of performing B-reader interpretations of tens of thousands of chest X-rays, quality 1 is unfortunately uncommon. Generally quality 2 films are readily interpretable and should be acceptable in the determination of a claimant's elibilibity.

    Section (19). Clinical Evidence of Asbestosis. My comments regarding Section (19) are several:

    Limitation of specialists qualified to make the diagnosis of pulmonary asbestosis to Board-certified internists and Board-certified pulmonary physicians is unnecessarily restrictive and inconsistent with other sections of the Bill. For example, if a Board-certified internist is qualified to make a diagnosis of asbestosis, why not primary lung cancer? Board-certified occupational medicine physicians are likely significantly more qualified than Board-certified internists to make a diagnosis of pulmonary asbestosis and should be included among the qualified specialties in this section.

    In Section Ai, the selection of FEV/FVC of 75% as the criterion (accompanying FVC < 80% of predicted) is inconsistent with criteria set forth by the American Medical Association (AMA) in their Guides to the Evaluation of Permanent Impairment, Fourth Edition, and with criteria used in epidemiologic research and published in peer-reviewed scientific journals. The AMA defines normal FEV/FVC (%) as 70%. This is the cut-off I have used in investigations of asbestos-related lung disease in exposed populations. And the results of these studies have been published in the peer-reviewed literature. It is less restrictive than 75% and more consistent with accepted medical practice.
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    In Section Bi, the rationale for increasing the requisite profusion of small opacities from 1/0 (Section (A) above) to 1/1 is not clear. The category of profusion used by most scientific investigators and physicians experienced in this area of medicine is 1/0. Likewise, the rationale for the change in requirement for FEV/FVC from 75% or greater in Section A to 72% or greater in Section B, or 65% or greater if the claimant is at least 68 years of age, is not clear. I believe Section Bi is arbitrary and without scientific basis.

    Section (23). DLCO. The definition of DLCO should be clarified to indicate that the test to be performed is the single breath DLCO, as opposed to a steady state DLCO. It is the single breath DLCO that is used in the evaluation and diagnosis of asbestosis.

    Section (26). Evidence of Bilateral Pleural Thickening with Impairment. In (A), the criterion of ILO Grade B2 is arbitrary and without basis in the published medical and scientific literature. In Ai, there is no clear rationale for choosing < 75% of predicted as the cut-off for TLC when Section (19) Aii and Bii used 80% of predicted as the cut-off. The same is true for FVC: < 75% in Section (26) and < 80% in Section (19).

    Clear cut and quantifiable associations between asbestos-related pleural thickening on chest X-ray and findings on lung function testing have not been shown. To state with reasonable certainty that pleural changes are a substantial contributing factor to observed lung function abnormalities in a given individual is often not possible. Therefore to require (Section Aiii) that a Board-certified internist or Board-certified pulmonary physician state that pleural abnormalities are a substantial contributor to observed lung function abnormalities is unreasonable.
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    In Section (B), for reasons stated above, the ILO Grade of C2 or greater and the modification of lung function requirements to fit this ILO grade of pleural thickening is arbitrary, inconsistent, and without foundation. My objections to Biii are the same as my objections to Aiii above.

    Section (36). Latency Period. The term ''first significant exposure'' is not defined. Any exposure to asbestos is considered significant by many Board-certified physicians and many scientific investigators. And the word ''significant'' is not commonly used to define latency. It is defined in terms of ''initial'' exposure.

    Section (51). Standard Spirometric Methods. The term ''substantially'' conforms (to American Thoracic Standards) is unclear and leaves room for arbitrary decisions regarding a claimant's eligibility. The word ''substantially'' in this section either should be omitted or more specifically defined.

SUMMARY AND CONCLUSIONS

    In summary, the Sections of H.R.1283 cited and discussed above include provisions for the Medical Advisory Board, Medical Criteria for Eligibility Determination, and Definitions. There are common threads throughout these Sections that I believe are cause for concern. These are 1) the designations of medical specialists qualified to render opinions about medical diagnosis of asbestos-related disease and medical determination of claimant eligibility, 2) latency criteria, 3) selection of radiographic findings necessary to establish medical eligibility, and 4) selection of pulmonary function test results needed to satisfy medical criteria for eligibility. An additional cause for concern is the exposure schema set forth in Section 203 as necessary to satisfy medical criteria for eligibility for lung cancer.
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    In my opinion, these provisions of the Bill are arbitrary, in some cases illogical, and without foundation in either clinical experience or published studies in the medical and scientific literature. Indeed, the authors of the Bill have provided neither the scientific basis for nor medical rationale behind the Sections of the Bill cited in my testimony.

    The proposed legislation, if passed, will impact the lives of thousands of current and former workers in the United States who have been exposed to asbestos during the course of their work—most of them unknowingly. These workers are at risk for or have already developed asbestos-related disease, in many cases fatal. To legislate medical provisions and criteria that are arbitrary and unnecessarily restrictive, as I believe these are, places an unreasonable burden on these workers and their families and will deny them benefits to which they are entitled. For many, this denial of benefits will preclude access to necessary preventive and therapeutic medical care.

    I ask this Committee and the United States Congress to carefully consider the factual content of the Sections I have cited, and the potential impact of this legislation, before passing judgement. If accepted as is, it will not be a ''Fairness in Asbestos Compensation Act''. Quite the contrary, the Act will deny fairness in asbestos compensation to many workers in this country.

REFERENCES

Pleural Plaques and Related Health Effects

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Fletcher DE. A mortality study of shipyard workers with pleural plaques. Br J Ind Med 1972; 29:142–145.

Finkelstein MM, Vingilis JJ. Radiographic abnormalities among asbestos-cement workers. An exposure-response study. Am Rev Respir Dis 1984; 129:17–22.

Oliver LC, Eisen EA, Greene R, Sprince NL. Asbestos-related pleural plaques and lung function. Am J Ind Med 1988; 14:649–656.

Schwartz DA, Fuortes LJ, Galvin JR, et al. Asbestos-induced pleural fibrosis and impaired lung function. Am Rev Respir Dis 1990; 141:321–326.

Lilis R, Miller A, Godbold J, et al. Pulmonary function and pleural firbosis:quantitative relationships with an integrative index of pleural abnormalities. Am J Ind Med 1991; 20:145–161.

Selikoff IJ, Lilis R, Seidman H. Predictive significance of parenchymal and/or pleural fibrosis for subsequent death of asbestos-associated diseases. Entered into OSHA docket at hearings: OSHA's Proposed Standard for Occupational Exposure to Asbestos, Tremolite, Anthophyllite, and Actinolite, January, 1991. Washington, DC.

Hillerdal G. Pleural plaques and risk for bronchial carcinoma and mesothelioma. Chest 1994; 105:144–150.

Bianchi C, Brollo A, Ramani L, Zuch C. Pleural plaques as risk indicators for malignant pleural mesothelioma: a necropsy-based study. Am J Ind Med 1997; 32:445–449.
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Increased Risk for Asbestos-Related Lung Cancer in the Absence of Asbestosis

Warnock ML, Isenberg W. Asbestos burden and the pathology of lung cancer. Chest 1986;89(1):20–26.

Hiraoka K, Horie A, Masamitsu K. Study of asbestos bodies in Japanese urban patients. Am J Industr Med 1990;18:547–554.

Wilkinson P, Hansell DM, Janssen J, Rubens M, Rudd RM, Taylor AN, McDonald C. Is lung cancer associated with asbestos exposure when there are no small opacities on the chest radiograph? The Lancet 1995;345:1074–1078.

Barroetavena MC, Teschke K, Bates DV. Unrecognized asbestos-induced disease. Am J Industr Med 1996;29:183–185.

Egilman D, Reinert A. Lung cancer and asbestos exposure: asbestosis is not necessary. Am J Industr Med 1996;30:398–406.

DeKlerk NH, Musk AW, Eccles JL, Hansen J, Hobbs MST. Exposure to crocidolite and the incidence of different histological types of lung cnacer. Occ Environ Med 1996;53:157–159.

Finkelstein MM. Radiographic asbestosis is not a prerequisite for asbestos-associated lung cancer in Ontario asbestos-cement workers. Am J Industr Med 1997;32:341–348.

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Pulmonary Function Tests

Doege TC, ed. Guides to the Evaluation of Permanent Impairment. American Medical Association. Fourth Edition. 1995.

    Mr. HYDE. Thank you, Dr. Oliver. Lastly, Dr. Gary Epler.

STATEMENT OF GARY R. EPLER, M.D., PULMONARY CRITICAL CARE MEDICINE, BRIGHAM AND WOMEN'S HOSPITAL, BOSTON, MA

    Mr. EPLER. My name is Dr. Gary Epler. I am a pulmonary specialist at the Brigham and Women's Hospital in Boston. Thank you, Mr. Chairman, and committee, for inviting me here today to testify with respect to H.R. 1283, the proposed Fairness in Asbestos Compensation Act of 1999.

    I shall discuss in particular the medical provisions of the bill. Before turning to the medical provisions, I would like to explain my background. I have a medical degree from Tulane University and public health degree from Harvard University. For over 20 years I have had a faculty appointment, initially at Boston University and since 1995 as a clinical associate professor at Harvard University.

    Before accepting my current position at the Brigham and Women's Hospital, I served for 15 years as chairman of the Department of Medicine at the New England Baptist Hospital.
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    In my present position and practice, I see patients. I teach medical students, residents, pulmonary fellows and I conduct research in the field of pulmonary medicine. Over the years I have published more than 85 articles and two books in this field. I have also served on the panels of the American Thoracic Society and the American Medical Association that wrote guidelines for the evaluation of respiratory impairment for those organizations. I have been a medical expert in asbestos-related issues for several years. I have seen patients for both plaintiffs and defendants, and I have testified as an impartial physician for the Massachusetts Department of Industrial Accidents.

    Turning to the medical criteria in the bill, it is important to understand that hundreds of thousands, perhaps even millions of individuals have been exposed to asbestos. In decades prior to the 1970's and Federal regulation of the workplace, many occupational exposures were high, even among workers with past occupational exposure to asbestos; however, the majority will never become sick from that exposure. Thus, the purpose of the medical criteria in this legislation is to distinguish within this large group of persons those who have asbestos-related impairment from those who do not. By impairment I mean a medical condition that produces physical symptoms or adversely affects function. This legislation includes criteria for medical categories. These are non-malignant conditions. This is principally asbestosis, which is scarring of the lung, mesothelioma, a rare cancer of the lining of the chest wall, lung cancer and certain other cancers. These medical criteria will qualify virtually all claimants for compensation who have asbestos-related impairment.

    If anything, in my opinion the criteria err on the side of being overly protective of claimants. In addition, like the Amchem settlement, the bill provides for an independent five-physician exceptional medical panel. This will give an opportunity for individuals to qualify for compensation who do not satisfy the standard criteria.
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    While some claimants who are not impaired by asbestos-related disease may qualify for compensation under these medical criteria, I believe that it is unlikely that the criteria supplemented by the exceptional medical panel would exclude any claimants with asbestos-related impairment.

    I also believe that most physicians experienced in the diagnosis of asbestos-related disease would agree with this conclusion. In that connection, I would like to draw the committee's attention to the statements of Dr. Edward Rosenow of Mayo Clinic and Dr. Alex Little of University of Nevada, both of whom are former presidents of the American College of Chest Physicians, as well as the statement of my colleague Dr. Robert Johnson of Harvard. All of these doctors have come to the same conclusion that I have.

    Thank you, Mr. Chairman.

    [The prepared statement of Dr. Epler follows:]

PREPARED STATEMENT OF GARY R. EPLER, M.D., PULMONARY CRITICAL CARE MEDICINE, BRIGHAM AND WOMEN'S HOSPITAL, BOSTON, MA

    My name is Dr. Gary Epler. I am a pulmonary specialist in Boston. Thank you for inviting me here today to testify with respect to H.R. 1283, the proposed ''Fairness in Asbestos Compensation Act of 1999''. I shall discuss, in particular, the medical provisions in the bill.

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    My remarks include three parts. First, I will explain my background and why I am here to testify. Second, I will explain in lay persons' terms, the medical provisions in the proposed statute. Third, I will explain my conclusion that the medical criteria are reasonable in the context of the goals of this legislation, and that they are not likely to exclude anyone who is impaired as a result of asbestos exposure.

    I am being compensated for my time at my usual consulting rates by the Coalition for Asbestos Resolution, which supports this bill.

    Pursuant to House Rule XI, clause 2(g)(4), my curriculum vitae is attached to this Statement. I have not received any federal grant, contract or subcontract in the current or preceding two fiscal years.

MY BACKGROUND

    I am presently at the Brigham and Women's Hospital in Boston. I graduated from Tulane University School of Medicine in 1971 and obtained a public health degree from Harvard University in 1978. I trained at Harlem Hospital in New York City and at University Hospital in Boston. I served as an officer in the Public Health Service at the Centers for Disease Control in Atlanta. I was Chairman, Department of Medicine, at the New England Baptist Hospital for 15 years. I am certified in both internal medicine and pulmonary disease by the American Board of Internal Medicine. For over 20 years I have had a faculty appointment, initially at Boston University and currently as an Clinical Associate Professor at Harvard University. I am currently living with my family in the community of Wellesley near Boston.

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    In my present position and practice, I see patients, I teach medical students, residents and pulmonary fellows, and I conduct research and write articles in the field of pulmonary disease. In the 1980's, I was a member of the panel that established the guidelines for pulmonary impairment that were published by the American Thoracic Society in 1986. I was also a member of the panel that developed the fourth edition of the American Medical Association's Guides to the Evaluation of Permanent Impairment.

    In 1985, I described a lung disorder named bronchiolitis obliterans organizing pneumonia (BOOP). It has become the basis of international research and study. I developed an interactive web site ''What's BOOP?'' for patients and their families at www.epler.com. I am currently the Deputy Editor of an Internet-based educational program in Critical Care and Pulmonary Medicine developed by the American College of Chest Physicians. I have edited a book about occupational lung diseases. I have published a book about the bronchiolar diseases. I have written more than 85 scientific articles, several about asbestos-related disease.

    I have been a medical expert in asbestos related issues for several years. I have seen patients for both plaintiffs and defendants, and have testified as an impartial physician for the Massachusetts Department of Industrial Accidents. I served as a member of the Clinical Review Panel under the Georgine/Amchem settlement.

THE MEDICAL PROVISIONS IN H.R. 1283

    Before I explain why I endorse the medical requirements in H.R. 1283, I want to explain the requirements and their purpose.
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    As I understand it, the purposes of the ''Fairness in Asbestos Compensation Act'' are to ensure prompt and fair compensation to persons who are suffering from an asbestos-related impairment.

    It is important to understand that hundreds of thousands, perhaps even millions, of individuals have been exposed to asbestos. In the decades prior to the 1970's and federal regulation of workplace exposures, many occupational exposures were high. Even among workers with past occupational exposure to asbestos, the majority will never become sick from that exposure. Thus, the purpose of the medical criteria in this legislation is to distinguish within this large group of persons with past exposure to asbestos between those who have asbestos-related impairment and those who do not. By ''impairment,'' I mean something that produces physical symptoms or adversely affects function.

    In order to quality for compensation under the proposed statute, the medical criteria require that a potential claimant meet certain standards in one of the following four medical categories: (1) non-malignant conditions, principally asbestosis, which is scarring of the lung tissue; (2) mesothelioma, a rare form of cancer of the lining of the chest or abdomen; (3) lung cancer; and (4) certain other cancers such as colorectal tumors. The proposed statute includes an Exceptional Medical Panel, which is designed to identify claimants who for some reason cannot produce evidence to satisfy the standard requirements in these medical categories, but who nevertheless can present comparable evidence of these asbestos-related conditions. Thus, the Panel provides an additional safety net to ensure that claimants with asbestos-related impairment will be eligible to receive compensation under the proposed statute.

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A. THE STANDARD MEDICAL CRITERIA

    I will now discuss the criteria or standards that claimants must meet in the four medical categories.

    1. Non-Malignant Conditions. The non-malignant criteria are designed so that a potential claimant will qualify for compensation with a mild or slight decrease in respiratory capacity as a result of asbestos exposure. One of three criteria must be met: (a) clinical evidence of asbestosis which includes a chest x-ray showing signs of scarring in the lung and respiratory impairment as demonstrated by certain pulmonary function tests; (b) pathological evidence of asbestosis in lung tissue that shows scarring of the lung; or (c) x-ray evidence of bilateral thickening of the pleura, which is a lining of tissue surrounding the inside the rib cage, and evidence of respiratory impairment. In addition, the claimant must show a latency period of at least 12 years.(see footnote 47)

    (a) Clinical evidence of asbestosis. The criteria for clinical evidence of asbestosis appear complex because they give claimants several opportunities to qualify. To be medically eligible, a claimant must show x-ray evidence of scar tissue formation in the lungs plus evidence of respiratory impairment by pulmonary function tests.

    The chest x-ray finding required to be medically eligible under this category is a ''1/0'' rating under an internationally accepted chest x-ray classification system. This is the minimum that would support a finding of lung changes that may be associated with asbestos-related disease. A ''1/0'' classification means that the x-ray reader believes that the reader sees ''slight'' abnormalities (the ''1''), but the reader seriously considered classifying the chest x-ray as a ''0'', which is a normal film.(see footnote 48)
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    The pulmonary function test results required for medical eligibility in this category are the minimum that would show some respiratory abnormality potentially associated with asbestos-related disease.(see footnote 49) These requirements are more favorable to claimants than the criteria for the diagnosis of asbestosis adopted by the American Thoracic Society (ATS) in 1986. In a list of factors that are important to the diagnosis of asbestosis, the ATS stated that, in addition to pulmonary function tests showing respiratory impairment, an individual should have a chest x-ray that shows greater abnormality than the chest x-ray required for medical eligibility in this category.(see footnote 50)

    (b) Pathological evidence of asbestosis. To quality under this standard, a potential claimant must provide a statement by a qualified pathologist that there is scarring of the lung tissue in the presence of what are called ''asbestos bodies.'' These criteria are designed to demonstrate that there is lung fibrosis and that the fibrosis is probably asbestos-related. They are essentially the criteria that were adopted by a committee of pathologists organized by NIOSH and the College of American Pathologists in 1982.(see footnote 51)

    (c) Bilateral pleural thickening with impairment, The medical criteria in the proposed statute do not provide for the qualification of a potential claimant who has normal pulmonary function tests, no ''scarring'' of the lungs revealed by chest x-ray, and changes in the lining of the lung known as ''circumscribed pleural thickening'' or ''pleural plaques.'' This is appropriate and scientifically justified. ''Pleural plaques'' are markers of asbestos exposure. They are not signs of asbestos-related impairment.(see footnote 52) In unusual situations; however, severe pleural thickening on both sides of the chest may cause respiratory impairment, and the proposed criteria recognize this possibility.
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    To qualify under this standard, a potential claimant must provide three things: (1) chest x-rays, interpreted by a qualified reader, that show significant thickening of the pleura on both sides of the chest; (2) pulmonary function test results showing respiratory impairment; and (3) a statement by a qualified physician that the asbestos-related changes are a substantial contributing factor in causing the pulmonary function abnormalities.

    In sum, the medical criteria in the non-malignant conditions category provide three standards under which a claimant may qualify for compensation under the statute: pathological evidence of asbestosis, clinical evidence of asbestosis, or evidence of bilateral pleural thickening with impairment. These standards are justified by the medical literature, and in my view, would be supported by the majority of physicians experienced in the diagnosis and treatment of asbestos-related disease.

    2. Mesothelioma. Mesothelioma is an almost invariably fatal cancer, usually associated with asbestos exposure, that generally arises in the pleura (the cellular lining of the chest wall) or the peritoneum (the cellular lining of the abdomen). The medical criteria in this category are designed to establish the reliability of the diagnosis of mesothelioma, which is a rare disease. There are three criteria. The diagnosis must be based upon an examination of tissue in accordance with well-accepted techniques of pathology. The diagnosis must be made by either two qualified pathologists or one pathologist who is a member of the Mesothelioma Reference Panel. The latency period, that is, the time between the first exposure to asbestos and manifestation of the mesothelioma, must be at least ten years

    3. Lung Cancer. Lung cancer has a number of known causes, with cigarette smoking the most common cause. The purpose of the lung cancer criteria is to ensure that a potential claimant's lung cancer may be related to asbestos, and not exclusively to smoking or some other factor. The criteria do this by requiring, in addition to a diagnosis of lung cancer, some medical evidence of asbestos exposure that is sufficient to reasonably attribute the claimant's cancer, at least in part, to asbestos exposure. There are several ways that a claimant may demonstrate the required amount of asbestos exposure. A claimant may present pathological or clinical evidence of asbestosis or evidence of bilateral pleural thickening with impairment. He may also present evidence of bilateral pleural plaques or bilateral pleural thickening together with evidence of a minimum period of employment in occupations likely to result in exposure to asbestos. In addition to these requirements, the lung cancer criteria include (a) certain qualifications for the physician making the diagnosis and (b) a minimum 12-year latency period.
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    The lung cancer criteria strike a middle ground on a controversial medical issue, that is, whether lung cancer can be attributed to asbestos exposure in the absence of asbestosis. As Dr. Andrew Churg explained in ''Asbestos, Asbestosis, and Lung Cancer'' in Modern Pathology. 6:509–511 (1993), there are three opinions on this issue.(see footnote 53) The epidemiological evidence strongly supports the conclusion that there is no increased risk of lung cancer in the absence of asbestosis, and that is my view as well.(see footnote 54) Some believe, however, that sufficient exposure to cause asbestosis will increase the risk of lung cancer, even if asbestosis is not present. A few believe that any exposure to asbestos, however small, increases the cancer risk. The medical criteria in H.R. 1283 takes the middle view, allowing claimants to qualify for compensation not only if asbestosis is present, but also if there is an indication of sufficient exposure to cause asbestosis. The claimant can demonstrate this level of exposure by showing a certain number of years of employment in occupations where exposure to asbestos has historically occurred and by showing some evidence of pleural changes.

    4. ''Other'' Asbestos-Related Cancers. There is a disagreement in the medical community on whether any ''other'' cancers may be related to asbestos exposure. I believe that the best evidence is on the side of the majority view that such ''other'' cancers are not caused by asbestos. Nevertheless, there is a contrary opinion among a minority of the medical community. The medical criteria in the proposed statute provide that claimants with one of the four ''other'' cancers including colon or rectal cancer, laryngeal cancer, esophageal cancer, or stomach cancer may receive compensation. The claimant must show, in addition to a diagnosis by a qualified physician, a minimum 12-year latency period and evidence of asbestosis or diffuse pleural changes that would meet the criteria for non-malignant conditions. As in the lung cancer category, these criteria are designed to ensure that the claimant has evidence of sufficient exposure to asbestos to make it reasonable, on the minority view, to attribute the ''other'' cancer, at least in part, to asbestos exposure.
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B. THE EXCEPTIONAL MEDICAL CLAIMS PANEL

    While the medical criteria set forth are fair and reasonable in the context of this legislation, the proposed legislation has an additional protection to enable potential claimants who have asbestos-related impairment to qualify for compensation under the statute. The proposed legislation includes an Exceptional Medical Claims Panel, which is charged with responsibility for qualifying claimants who have a compensable asbestos-related condition, even though they cannot show that they meet the standard qualifying criteria. The proposed legislation would permit claimants who would otherwise be excluded by the criteria, but who can demonstrate asbestos-related impairment by other means to qualify for compensation.

MY VIEWS ON THE MEDICAL REQUIREMENTS

    I believe that these medical criteria will qualify for compensation virtually all claimants with asbestos-related impairment. If anything, in my opinion, these criteria err on the side of being overly protective of claimants. Very few claimants with asbestos-related impairment would fail to meet the standard medical criteria in the proposed statute. In addition, individuals with unusual asbestos-related conditions who do not meet the standard medical criteria could qualify through the Exceptional Medical Panel. While some claimants who are not impaired by asbestos-related disease may qualify for compensation under the medical criteria, I believe it is unlikely that the criteria, supplemented by the Exceptional Medical Panel, would exclude claimants who are impaired by asbestos-related disease.

    I would like to add that I endorse the idea that only persons with impairment should be compensated. As I mentioned previously, by impairment, I mean a condition that produces physical symptoms or adversely affects function. If asbestos exposure has not had one of these effects on an individual, compensation is not justified. However, I have seen severely impaired patients who have not been compensated under the current system. This legislation will provide faster and more certain compensation for my patients and for patients throughout the country who are impaired from asbestos exposure.
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62442a.eps

62442b.eps

62442c.eps

62442d.eps

62442e.eps

62442f.eps

62442g.eps

62442h.eps

62442i.eps

    Mr. HYDE. Thank you very much, Doctor. Mr. Conyers, are you ready to ask questions?

    Mr. CONYERS. Yes, sir. I want to thank all the witnesses.

    Let's get down to this question about whether or not this bill can work in real time. Mr. Middleton. This bill is a screening process and unlike Georgine, doesn't have a payment schedule. Georgine does. Is that an important distinction?
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    Mr. MIDDLETON. It is a critical distinction, sir, because there is no funding mechanism in this proposed bill. In addition, when you ask about the timing, all of these—these charts lay out the procedures which every single claimant must jump through under the bill before they are compensated. In addition to that, a problem that occurs is that employers, not the manufacturers of asbestos, are now having the fault shifted to them. Under the State workers comp rules and laws, employers pay benefits based on medical criteria established in each of those States. Those States' criteria are different from that proposed in this bill so you have this funding problem where the employers pay the workers comp benefits and because the criteria are different and up to 80 percent of those people now being compensated won't be compensated under this bill, that they won't be reimbursed for those medical benefits that they pay out because up to 80 percent it has been estimated of the people that have to jump through all of these hoops will not be paid anything. There is no funding guaranteed or assured in this bill whatsoever.

    Mr. CONYERS. And there is going to be an upset of a lot of other procedure and cases as I see it here. I can see this scheme were it put into place really undoing a lot of progress that is going on in asbestos claim settlements.

    Mr. MIDDLETON. May I respond?

    Mr. CONYERS. Please, briefly.

    Mr. MIDDLETON. This bill skewers State law as it is developed throughout the country with regards to the definition missions of both injury and disease. It is completely contrary to that which has been established and would really throw a monkey wrench into the settlement of these claims, which is going on at a fine rate now between the companies such as Owens-Corning and the bulk of these—the representatives of these people who have been so devastated by this illness.
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    Mr. CONYERS. Thank you.

    Dr. Oliver, I am concerned about the medical part of this bill. I mean, we are kind of turning the medical picture on its head here and I am struck by the fact that there is very little scientific basis or medical rationale for that part of the bill. How serious is that of getting something that might work in your view and from your experience?

    Ms. OLIVER. Well, I think in the bill as presently written, as I stated in my testimony, many of the medical criteria are or at least appear to be arbitrary. For example, the exposure schema that are necessary for an individual to meet in order to satisfy the criteria for eligibility for lung cancer if that individual—according to which category that individual falls into—are very complicated and, as I said earlier, place an unreasonable burden on the injured worker or the exposed worker to come forward with documentation that probably doesn't even exist.

    Mr. CONYERS. What's a better way to approach the medical end of this proposal from your point of view?

    Ms. OLIVER. Well, quite frankly I think the way in which it is being dealt with right now is not a bad way to deal with it. Generally physicians—in my experience—physicians that make a diagnosis of asbestos-related disease are pulmonary physicians and occupational physicians. Pathologists are necessary to guarantee the diagnosis in the case of a malignancy. But an individual comes in, an occupational history is taken, a medical evaluation is done and criteria that are applied in the general population with regard to evaluating impairment, on the basis of lung function test results and radiographic results are applied to individuals with asbestos exposure, with one exception and that is generally you don't do B-readings on chest X-rays of people in the general population. But nowhere can I find that it says C2, for example, is an ILO classification for pleural plaques, that qualifies for impairment or should be used as the lower limit of normal. I think that qualification does not exist and I think the kind of specificity that is in the bill is unfounded and unwarranted and will end up excluding a lot of individuals who deserve compensation who do have injury and do have impairment.
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    Mr. CONYERS. Thank you so much.

    Mr. HYDE. Before I recognize Mr. Gekas, I ask unanimous consent that the following written statements that we have received on this issue be made a part of the hearing record. Congressman James Moran, Paul Verkuil, dean, Benjamin V. Cardosa School of Law, Yeshiva University. William Eskridge, Jr., and John Garver of Yale Law School, Myles O'Malley, Consumers for Civil Justice, Dr. Alex G. Little, past president, American College of Chest Physicians, Dr. Robert Graham Johnson, chief, Division of Cardiothoracic Surgery at the Beth Israel Deaconess Medical Center, Boston, Massachusetts.

    [The prepared statement of Mr. Verkuil follows:]

PREPARED STATEMENT OF PAUL VERKUIL, DEAN OF BENJAMIN V. CARDOSA SCHOOL OF LAW, YESHIVA UNIVERSITY

    Mr. Chairman and Members of the Committee:

    My name is Paul Verkuil. I appear today in my personal capacity. I currently serve as Dean and Professor of Law at Benjamin N. Cardozo Law School in New York, which is part of Yeshiva University. I am also President Emeritus of the College of William & Mary and was dean of the Tulane Law School. The subjects I teach include administrative law and economic regulation, both of which deal with the constitutional and policy issues raised in my testimony. I have written a treatise (with coauthors) entitled Administrative Law and Process (Foundation Press 1999) and a casebook entitled Regulation and Deregulation (West Publishing 1997) which are also relevant to my testimony. I have also published more than 60 law review articles on these and related subjects, all of which are noted in my resume attached to this statement. Over the years, I have testified before House and Senate committees on various regulatory issues, including the creation of an Article I court to review disability decisions of the Veterans' Administration. Much of my professional research has dealt with the need to make mass justice decisions fairly, accurately, and efficiently; recently, I have devoted attention to the creation of administrative solutions that utilize market alternatives as measures of effectiveness.
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    I appreciate the opportunity to discuss the ''Fairness in Asbestos Compensation Act of 1999,'' H.R. 1283 and its Senate counterpart, S. 758. My testimony has two parts. First, I will explain why, as matter of administrative law and process, these bills are a creative and superior solution to the difficult problem of ensuring fair compensation for those injured by exposure to asbestos. Next, I will show that, as a matter of constitutional law, the proposed legislation steers clear of any possible constitutional difficulties. I conclude that H.R. 1283 and S. 758 are sound from the perspectives of both law and policy. In my judgment, the proposed legislation offers a sensible and creative solution to an asbestos litigation crisis that many have believed to be intractable.

I. THE FAIRNESS IN ASBESTOS COMPENSATION ACT: A CREATIVE SOLUTION TO A HARD PROBLEM

A. History of the Problem

    Asbestos is a fibrous material that was used for decades as insulation and as a fire retardant. Airborne asbestos dust can be produced during the manufacture and use of asbestos products, and that asbestos, when breathed, can lead to several potentially serious diseases—asbestosis (a non-malignant scarring of lung tissue), lung cancer, and mesothelioma (a rare and almost invariably fatal cancer of the lining of the chest cavity or abdomen). Asbestos exposure can also lead to markings on the lungs called pleural plaques, although it is my understanding of the scientific literature that these markings rarely lead to any breathing impairment.

    In the mid-1970s, federal and state courts began to see a substantial number of tort cases seeking recovery for asbestos-related occupational diseases. These cases were normally brought against the companies that supplied asbestos-containing products to the plaintiff's workplace. In those early days, the theories of liability were new, the factual issues were often complex, and the outcome was uncertain. The tort system functioned well in opening the door to compensation for workers injured by asbestos and in putting asbestos on the nation's agenda.
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    By the 1980s, however, observers were beginning to speak of an asbestos litigation ''mess.'' It was already apparent that asbestos cases were subject to inordinate delays and excessive transaction costs. It was apparent, too, that similarly situated plaintiffs experienced different outcomes in the courts. The event, however, that concentrated attention on the asbestos litigation problem was the 1982 bankruptcy of the Johns-Manville Corporation, the nation's leading asbestos manufacturer and the leading target of asbestos lawsuits. The troubled Manville reorganization, which continued for the rest of the decade, drove home the realization that asbestos litigation threatened the resources of defendants, jeopardizing the compensation of future claimants.

    As we all now know, the Manville bankruptcy was just the beginning. After an initial check, the asbestos litigation machine pressed forward once again. Manville's former co-defendants absorbed at least some part of Manville's share of the liability, and plaintiffs' lawyers drew more and more new defendants into the ring. The bankruptcies continued. Today, I understand that at least twenty-five companies have been forced into Chapter 11 proceedings as a result of asbestos litigation. Workers with claims against these companies must wait years to get even a fraction of the value of their claims.

    In 1990, Chief Justice Rehnquist appointed a distinguished panel of judges to examine the asbestos litigation ''crisis''—as it was called by then. The Ad Hoc Committee's conclusion was stark:

The committee has struggled with the problems confronting the courts of this nation arising from death and disease attributable to airborne asbestos industrial materials and products. The committee has concluded that the situation has reached critical dimensions and is getting worse. What has been a frustrating problem is becoming a disaster of major proportions to both the victims and the producers of asbestos products, which the courts are ill-equipped to meet effectively.
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    The committee took note of the by-now familiar themes—excessive transaction costs, long delays, and the likelihood that resources to pay future claims will be exhausted. It also noted the increasing proportion of claims being brought, not by seriously ill asbestosis or cancer victims, but by people who were unimpaired. The committee strongly advocated a national legislative solution:

[U]nless Congress acts to formulate a national solution, with the present rate of dissipation of the funds of defendant producers due to transaction costs, large verdicts, and multiple punitive damage awards, all resources for payment of these claims will be exhausted in a few years. That will leave many thousands of severely damaged Americans with no recourse at all.

    Although both houses of Congress held oversight hearings, the Ad Hoc Committee's report did not lead to legislative action. But it did stimulate efforts within the federal judicial system to address the crisis. In 1993, class counsel and counsel for the Center for Claims Resolution (CCR) (which represented 20 asbestos defendants) filed a settlement class action that ultimately became known as the Amchem case. In essence, the Amchem settlement provided for expedited settlement of the claims of people impaired by asbestos-qrelated diseases, deferred the claims of the unimpaired (and waived the statute of limitations with respect to those claims), eliminated punitive damages, and limited plaintiffs' attorneys' fees to 25 percent of recovery.

    The Amchem settlement was found to be ''fair and reasonable'' by the district court. Georgine v. Amchem Prods., Inc., 157 F.R.D. 246 (E.D. Pa. 1994). That conclusion was not questioned by the appellate courts. The Third Circuit, which ruled against the settlement as beyond the scope of Rule 23 of the Federal Rules of Civil Procedure, thought that the Amchem agreement was an ''arguably brilliant'' solution to the crisis. The Supreme Court ultimately set the Amchem settlement aside also on Rule 23 grounds. In the Supreme Court's decision, Justice Ginsburg indicated sympathy with the dilemmas caused by the current system:
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The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. Congress, however, has not adopted such a solution.

    These words echoed the 1991 report by the Ad Hoc Committee, which also recognized that ''congressional action is necessary.'' It is fair to conclude that most neutral observers—and especially many judges who must administer asbestos caseloads—agree that a legislative solution is preferable to the existing tort system. The bill before you has been crafted to satisfy these long acknowledged concerns.

B. The Asbestos Litigation ''Crisis'' Defined

    Before examining the proposed legislation, we need to understand the litigation ''crisis'' as it exists today. Over the last 20 years, hundreds of thousands of lawsuits have been filed in federal and state courts against the manufacturers and distributors of asbestos-containing products (and the owners of premises where asbestos was used) and billions of dollars have been paid in judgments and settlements. Despite this, lawsuits continue to arrive at a rate of over 40,000 per year, and over 200,000 cases are now pending.

    The rate of new filings and the growing number of pending cases vividly demonstrate a basic fact—the asbestos litigation problem is not getting better, it is getting worse. This avalanche of cases has created an extraordinary burden on the court system and has led to a waste of judicial resources because similar legal issues are litigated and relitigated thousands of times. More importantly, this system has come to resemble a lottery: Some plaintiffs—those with good lawyers who appear before favorable juries—hit the jackpot with punitive damages and generous compensatory recoveries, while others settle for meager awards or get nothing at all. On the surface, of course, large judgments may be viewed as lottery-like winnings to those lucky enough to receive them. But these judgments are not benign. Viewed systemically, disproportionate judgments overcompensate present plaintiffs at the cost of future ones who may be more deserving. Recoveries for those who get sick in the future can be jeopardized in two ways: the funds available for compensation are reduced in total; and bankruptcies of potential defendants become more prevalent, thereby delaying or even foreclosing future awards altogether.
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C. The Administrative Alternative

    The proposed legislation responds to the calls for legislative action discussed above. The heart of the proposal is the establishment of a government corporation called the Asbestos Resolution Corporation (ARC) which will have jurisdiction over all individuals seeking compensation for asbestos-related injuries. It operates through a board of directors appointed by the President and confirmed by the Senate. The ARC has two key functions. The first is to implement medical criteria (derived from the consensual process of the Amchem settlement). The second is to administer an ADR process—including mediation and, at the plaintiff's option, binding arbitration—that can provide prompt and fair compensation to medically eligible individuals.

    Upon receiving a certificate of medical eligibility from the ARC, claimants are given time for settlement negotiations and mediation. If no settlement is reached, eligible claimants may either elect streamlined arbitration or commence a traditional tort action in state or federal court. These actions are premised upon the plaintiff having a medical certificate, and proceed without the opportunity for punitive damages. The potential future claims of individuals determined not to be medically eligible at present are preserved because the bill eliminates the statute of limitations defense.

    The costs of operating the ARC are borne entirely by the defendants, through mandatory contributions in proportion to the number of cases in which they are named. This requirement eliminates any financial burden on taxpayers and ensures adequate funding. And it also satisfies bipartisan ''reinventing government'' goals that seek to minimize the growth and cost of federal administrative entities through the encouragement of market-like regulatory alternatives.
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D. The Fairness and Efficiency Advantages of the Administrative Process

    The ARC should be viewed as a variation and an improvement on the long standing practice of administrative resolution of mass justice disability cases. For example, the Social Security and Veterans Administrations resolve millions of claims annually. They do so at a relatively low cost and with a fair degree of accuracy. In terms of costs, SSA administers its disability program at a per case cost of under $1000. The VA System, which utilizes a three person review team, probably costs more than SSA on a per case basis, but it still achieves cost efficiencies over any judicial alternatives. The ARC structure seeks to both capture and improve upon the acknowledged virtues of the administrative process (cost effectiveness and accuracy) with fewer negative side effects.

    Of course not all disputes are meant for administrative, rather than judicial, resolution. In the asbestos context, however, regulatory alternatives are clearly superior to judicial ones. Several years ago the Council on the Role of the Courts in American Society, on which I participated, studied the kinds of cases that are best suited to judicial rather than administrative resolution. The Council recommended that where cases raise repetitive factual questions (such as disability or asbestos claims), indications are they ''might be handled more efficiently . . . by some administrative mechanism.'' The insight of this objective group of government lawyers, judges and academics was that courts should in effect be reserved for more individualized claims. Asbestos cases raise repetitive medical issues in great numbers (remember the over 200,000 current filings), and those issues especially are prime candidates for administrative resolution.

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    The ARC has several advantages in terms of fairness, consistency, and efficiency over both the courts and other administrative approaches.

    Fairness. The ''fairness'' of a proceeding is a function of its ability to provide all parties with an impartial and effective opportunity to be heard. Since the medical eligibility process is ex parte, the fairness of the process must be judged by whether it provides to the claimant an appropriate opportunity for an impartial hearing before a final decision. The ARC does well on this test.

    Certainly, the ARC's procedures give claimants a full and fair opportunity to be heard. Of course, certificates of medical eligibility will be issued to claimants who clearly meet the medical criteria without any need for individualized treatment. However, in non-routine cases, where it is debatable whether the claimant meets the criteria or not, the ARC would provide two kinds of internal review to ensure fairness.

 A claimant may seek reconsideration of an adverse ruling from a panel of two doctors, who will consider the issues raised by the claimant de novo. The claimant is entitled to present to the medical panel any evidence he wishes, whether or not it was previously provided to the ARC. If the two doctors on the panel do not agree, then a third doctor will be appointed to resolve the difference between them. This in effect provides an additional level of appeal without the usual expense and delay.

 A claimant who does not meet the medical criteria, but who believes that he has equivalent evidence of an asbestos-related impairment, can obtain relief from the exceptional medical claims panel. This panel, which consists of five medical experts in a variety of fields, may give relief in cases where strict application of the criteria could lead to unfairness.
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    After exhausting these avenues of internal relief, a disappointed claimant may obtain federal judicial review of ARC's decision. The court would apply the familiar ''substantial evidence'' test, which is used in judicial review of Social Security disability determinations, for example.

    Thus, the legislation would provide to claimants more procedural protection against unfavorable decisions than is usual in administrative regimes. While a right of appeal from adverse initial decisions is fairly common, as is judicial review, it is rare for an agency to provide equitable relief from the possibly unfair application of its own rules, as is done by the exceptional medical claims panel.

    In addition to an opportunity to be heard, fairness requires impartiality. Here too the ARC scores well, for three reasons. First, although the ARC is a corporation in form, it is in substance a government agency, responsible ultimately to the public alone. Second, the legislation is structured to ensure that the fact that defendants pay the ARC's administrative costs will not give them any leverage over the ARC's decisions. Thus, the defendants' obligation to pay the bills is mandatory and legally enforceable; a recalcitrant defendant would have to shoulder the ARC's costs of enforcement; and even a defendant who had a good faith dispute about his bill would have to pay first and litigate later. Third, the structure of the ARC also ensures that the government's fiscal policy will not influence implementation of the medical criteria. In particular, the ARC, which determines medical eligibility, does not bear any financial responsibility for paying eligible claimants. That responsibility continues to rest with the liable defendants and is determined in ADR or (if the plaintiff chooses) in the tort system. Accordingly, the ARC has no budgetary incentive to implement the medical criteria in anything other than a fair and impartial way. This should help it avoid the criticism, which has at times been made of agencies such as SSA, that either eligibility criteria were being misapplied in order to meet the budgetary goals of the Executive Branch or that the deciders were given percentage goals for reversals and affirmances.
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    Consistency. The ARC's medical eligibility decisions are likely to be more consistent than those made either by the courts or by traditional mass justice agencies. The medical criteria in the proposed legislation are designed to be objective, and they will be applied by panels of impartial medical experts. Over time, and with any clarification established by rule, the deciders will become proficient in the making of these determinations. This arrangement is certainly more likely to produce consistent determinations than the alternative; i.e., decisions by judges or juries which are based on a battle of medical experts. Moreover, I believe that it will also provide more consistency than the SSA disability program. One criticism of the SSA system that was confirmed by our earlier research is that the SSA deciders (including ALJs) often did not decide like cases alike. The ARC with its medical panel approach that provides for internal review should render its medical eligibility decisions more consistently that the SSA does with its informal process culminating in ALJ review.

    Efficiency. I believe that the cost of the ARC, through mediation, should be roughly comparable to that of the mass disability programs discussed above. Moreover, total costs will be much less than the cost of litigation. Obviously, the burden of over 40,000 new cases per year on the state and federal courts is enormous. Even though most cases settle, settlement often comes on the courthouse steps, after significant public resources—the costs of judges, magistrates, and other court personnel—have been expended on resolving a wide range of issues, from jurisdiction and venue to discovery. The costs of trial—for those cases that do not settle, or do not settle until trial has commenced—are obviously even higher.

    The administrative system established by the legislation would reduce the number of new cases that burden the courts, since mediation, arbitration, and settlement opportunities will eliminate the need for many judicial filings. It would also reduce the burden of existing cases, since much of the current backlog of over 200,000 cases will be absorbed by the ARC; and on a going-forward basis a much smaller percentage will return to the courts (i.e., only those that achieve a medical certificate but fail to settle and do not choose ARC arbitration).
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    Even setting to one side the burden that asbestos litigation imposes on the taxpayer, the cost of litigation to the parties is tremendous. An often cited study by the Rand Corporation showed that 63 percent, or almost two thirds, of every dollar expended per claim is swallowed up in transaction costs. Under the proposed legislation attorney's fees will be limited to 25 percent of any recovery. Since this is less than the 33–40 percent usually charged (and the 50 percent charged in some cases), there will be an immediate reduction in the amount of a claimant's award absorbed by legal fees. Moreover, this reduced fee reflects efficiency advantages that will also be applicable to defendants. The legal work required of both sides under the legislation should be far less burdensome than under the current system due to prior medical review and arbitration alternatives. This means that the attorneys' fees and expenses of defendants (whose lawyers typically charge by the hour) would be drastically reduced. Indeed, in many cases defendants may not need to use attorneys at all, relying instead on claims administrators.

    In conclusion, the claims resolution system administered by the ARC should be more fair, consistent, and efficient than the system that exists or can exist within our tort structure. And the ARC will achieve these goals with the added bonus of imposing none of its operating costs on the public fisc.

II. THE CONSTITUTIONALITY OF FAIRNESS IN ASBESTOS COMPENSATION ACT

    Let me now turn to the constitutional issues. At the outset it is clear that Congress has ample authority under the Commerce Clause to provide a federal legislative solution to the asbestos litigation crisis. See generally Hodel v. Indiana, 452 U.S. 314 (1981). Only once in the last sixty years has the Supreme Court struck down an Act of Congress as beyond the authority granted by the Commerce Clause. United States v. Lopez, 514 U.S. 549 (1995). In Lopez, moreover, the Supreme Court made clear that Congress may ''regulate the use of the channels of interstate commerce,'' ''persons or things in interstate commerce,'' and ''activities that substantially affect interstate commerce.'' Id. at 558, 559. The proposed legislation easily passes this test. Asbestos litigation is a consequence of the interstate commerce in asbestos-containing products, and, after the bankruptcy of at least twenty-five asbestos producers, there can be no question that this litigation substantially affects commerce.
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    It is also important to understand that asbestos litigation is a national problem that demands a national solution. Asbestos cases burden the dockets of state and federal courts all over the country. Moreover, each case affects parties from numerous states, and the litigation is highly mobile—it tends to flow toward the courts that, at any given time, are considered most favorable to plaintiffs. Most importantly, as the Judicial Conference's Ad Hoc Committee recognized, ''unless Congress acts to formulate a national solution, with the present rate of dissipation of the funds of defendant producers due to transaction costs, large verdicts, and multiple punitive damage awards, all resources for payment of [asbestos] claims will be exhausted in a few years. That will leave many thousands of severely damaged Americans with no recourse at all.'' Only Congress can adopt a solution to a national crisis of these proportions.

    Since Congress's general authority to enact the proposed legislation is clear, my testimony will focus upon the question whether the bill violates any of the limitations to that authority imposed by other provisions of the Constitution. As I explain below, the bill passes every constitutional test with flying colors.

A. Use of a Government Corporation to Administer the Program

    One of the most innovative features of the legislation is its use of a government corporation, rather than a traditional administrative agency, to administer the program. Of course, government corporations are not new—they have been around at least since the Nineteenth Century. Today, government corporations come in many shapes and sizes and include agencies with such disparate missions as the FDIC, Amtrak, the TVA, and Federal Prison Industries. In recent years government corporations have been used in even more creative ways, such as administering federal grants designed to build free enterprise in former communist countries (for example, the Polish American Enterprise Fund). Government corporations, while agencies of government, differ from the usual administrative agency in that they are not part of a formal agency structure, such as a department or an independent commission.
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    The use of a government corporation model for the asbestos claims facility has two important advantages. First, using the ARC to administer the claims facility established by the bill helps make self-financing feasible. As a result, administrative costs will be paid for entirely by the defendants, without placing any burden on the taxpayer. Second, all other things being equal, solutions that emulate the private sector are often more efficient than purely governmental solutions. As a government corporation, the ARC will be more able to tap into the expertise of the private sector than can a traditional government agency; it will be able to operate free of some of the bureaucratic restrictions that lead to inefficiencies in the public sector (such as restrictions on hiring, limits on pay scales, etc.); and it will be as free as possible from political control.

    Nevertheless, the ARC performs a quintessentially governmental function—i.e., it applies statutory medical criteria to determine whether claimants qualify for compensation. As a governmental entity ARC is necessarily subject to overriding constitutional and policy considerations relating to federalism, separation of powers, and due process. The legislation gives due weight to these factors.

    I will discuss each of these factors in turn. At the threshold, however, it is important to note that, while the ARC would enjoy the advantages of the corporate form of organization, it would also observe the constitutional (and other) protocols appropriate for an organization that exercises governmental responsibilities. Thus, for example, the Supreme Court decided in Buckley v. Valeo, 424 U.S. 1, 118–42 (1976) (per curiam), that the ''Appointments Clause'' of the Constitution (U.S. Const. art. II, §2, cl. 2) requires ''Officers of the United States'' to be appointed by the President, with the advice and consent of the Senate. The Appointments Clause applies to the boards of directors of government corporations. Silver v. United States Postal Serv., 951 F.2d 1033 (9th Cir. 1991) (per curiam). The legislation fully complies with this clause.
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    In other key respects, too, the ARC is treated as a governmental entity. Thus, adverse decisions on medical eligibility would be reviewable in the federal district courts. Moreover, the ARC will be required to adopt rules regarding the apportionment of its costs, medical eligibility determinations, and the procedures used in the ADR process, and those rules will be subject to the provisions of the Administrative Procedure Act regarding notice-and-comment rulemaking. In these and other ways, the ARC follows principles applicable to government agencies where it is important to do so, while retaining as much of the flexibility characteristic of private entities as possible. In this sense, ARC is a creative exercise of legislative power that fits its unique role and in many ways improves upon existing regulatory alternatives.

B. The Tenth Amendment and Principles of Federalism

    Let me turn to the question of federalism. The Fairness in Asbestos Compensation Act is carefully structured to address federalism concerns. Sensitive to the role of state courts in our federal system, it displaces state law no more than is necessary to resolve the asbestos litigation crisis. The bill takes aim at four key problems—the tidal wave of lawsuits brought by people who are not sick, punitive damages, coercive mass consolidations, and excessive delays and transaction costs. Rather than displace state law entirely, it modifies state law to a limited extent to address these problems. Medically eligible plaintiffs may still take advantage of most provisions of state law, and they may choose to use state judicial procedures rather than streamlined arbitration. In this way the bill is crafted to work with existing state law so far as possible in achieving its goals.

    There is no doubt that the substantive provisions of the legislation can withstand Tenth Amendment challenge. Under the Supremacy Clause, state courts have an obligation to enforce federal law. Testa v. Katt, 330 U.S. 386 (1947). That obligation plainly includes a duty to apply the purely substantive provisions of the bill—e.g., those establishing objective medical criteria, eliminating the statute of limitations defense, and barring punitive damages.
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    Of course, some provisions—e.g., requirements that asbestos claimants obtain a certificate of medical eligibility and release from mediation before filing or maintaining a tort action—are procedural. While state courts are bound under the Supremacy Clause to enforce federal law, it is sometimes said that ''federal law takes the state courts as it finds them.'' Howlett v. Rose, 496 U.S. 356, 372 (1990) (quoting Henry M. Hart, Jr., The Relations Between State and Federal Law, 54 Colum. L. Rev. 489, 508 (1954)). This raises the question whether the Tenth Amendment allows Congress to require state courts to respect the procedural provisions of H.R. 1283.

    I believe that it does, for two reasons. First, the Supreme Court has unambiguously held that the Supremacy Clause authorizes Congress to establish procedures that affect the operation of state courts, if Congress does so expressly. E.g., Johnson v. Fankell, 520 U.S. 911, 921 n.12 (1997). The bill obviously satisfies this requirement of clear statement.

    Second, given Testa v. Katt, even the most aggressive interpretation of the Tenth Amendment must allow Congress to require the use of specialized federal procedures that are necessary to ensure the efficacy of the substantive provisions of federal legislation. The procedural requirements of the bill easily pass this test. For example, a central goal of the legislation is to ensure that medical criteria are applied in an objective, medically appropriate, and consistent way. Requiring claimants to exhaust the ARC's administrative procedure for determining medical eligibility as a prerequisite for filing suit is vital if that goal is to be achieved. Since the exhaustion requirement is bound up with the achievement of the bill's core substantive goal B preventing diversion of limited resources to the unimpaired at the expense of those claimants who have actually suffered injury—it is plainly valid under Testa v. Katt.
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    My conclusion is reinforced by the fact that state courts have for many years enforced an analogous federal exhaustion requirement under Title VII. Under Title VII, plaintiffs may not file suit in any court for employment discrimination without first exhausting a prescribed administrative claims process in the EEOC or its state equivalent. See 42 U.S.C. §2000E–16(c); Boudreaux v. Hoffman, No. Civ. A. 97–0328, 1997 W. L. 610874, at *2 (E.D. La. Oct. 2, 1997). State courts, which exercise concurrent jurisdiction over Title VII claims, have routinely enforced this federal exhaustion requirement. See, e.g., Duplessis v. Warren Petroleum, Inc., 672 So. 2d 1019 (La. Ct. App. 4th Cir. 1996); Roache v. District of Columbia, 654 A.2d 1283, 1284 n.1 (D.C. 1995); Patrowich v. Chemical Bank, 470 N.Y.S.2d 599 (App. Div. 1984). So far as I am aware, no one has ever seriously maintained that it is beyond Congress's authority to impose such an exhaustion requirement on state courts.

C. Permissibility of Using An Administrative Tribunal Rather than a Court

    Medical eligibility review diverts cases from federal (and state) courts into an administrative screening mechanism. It thus implicates both (1) the limitations that Article III of the Constitution imposes on the exercise of federal adjudicative power by non-Article III tribunals, and (2) the closely related limitations that the Seventh Amendment imposes on the use of federal power to adjudicate damages claims without a jury. In my judgment, the requirement that claimants undergo medical eligibility review before ARC complies with these constitutional provisions.

    Over the years, Article III has been interpreted to permit adjudication of a variety of claims by non-Article III federal tribunals. The leading decisions are Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568 (1985), and Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833 (1986). In both of those cases the Court emphasized pragmatic flexibility—and its own openness to administrative adjudication—in applying Article III. In Thomas the Court upheld federal environmental legislation that required companies to disclose and share proprietary data, and that required arbitration of disputes regarding appropriate compensation for doing so. The Court held that when Congress creates a ''right that is closely integrated into a public regulatory scheme,'' Congress may also select ''a quasi-judicial method of resolving matters''—because that federally created right ''could be conclusively determined by the Executive and Legislative branches,'' which reduces the ''danger of encroaching on the judicial powers.'' Thomas, 473 U.S. at 589, 594 (citations omitted).
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    In Schor the Court upheld the Commodity Exchange Act's grant of authority to the Commodity Futures Trading Commission (ACFTC'') to decide state common law counter-claims to reparations complaints brought under the Act. The Court reasoned that ''limited [] jurisdiction over a narrow class of common law claims as an incident to the [agency's] primary, and unchallenged, adjudicative function'' did not create a ''substantial threat to the separation of powers.'' Schor, 478 U.S. at 854. The Schor Court stressed that it has reviewed Article III challenges ''with an eye to the practical effect that the congressional action will have on the constitutionally assigned role of the federal judiciary.'' Id. at 851 (citation omitted).

    By focusing on the presence or absence of a practical threat to the judiciary's role as a third, co-equal branch of the federal government, Thomas and Schor expanded the ''public rights'' doctrine the Court had applied in reviewing Article III challenges. That doctrine was originally grounded in the understanding that because Congress is free to commit certain matters ''arising 'between the Government and persons subject to its authority' '' to non-judicial executive determination, it may also employ the ''less drastic expedient of committing their determination to a legislative court or an administrative agency.'' Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 68 (1982) (citing Crowell v. Benson, 285 U.S. 22, 50 (1932)). In effect, Thomas and Schor expanded this conceptualization of public rights to include a variety of what Thomas characterized as ''seemingly 'private' '' rights. Thomas, 473 U.S. 568, 594 (1985).

    Although the Supreme Court noted the voluntary nature of the administrative process at issue in Schor , a claimant's consent to adjudication before the ARC is not necessary to make such adjudication constitutional. The Court has never suggested that consent to federal administrative adjudication is necessary when the public rights doctrine applies in the traditional context of wholly federal issues—as is the case here. Moreover, the Court has never held that a federal legislative scheme that involves legitimate regulation limited to a narrow class of cases—and which therefore poses no threat to the judiciary's co-equal role—must be invalidated because it provides a non-consensual administrative process.
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    Furthermore, the ARC's decisions are subject to judicial review. Schor teaches that ''the extent to which the 'essential attributes of the judicial power' are reserved to Article III courts,'' Schor, 478 U.S. at 851 (citation omitted), such as by providing judicial review of the agency's decisionmaking, is a significant factor that weighs in favor of the constitutionality of the legislative scheme. Since, as I discuss below, the procedures used by the ARC comply with due process, including the availability of judicial review, striking down the scheme would celebrate purely formal concerns at the expense of pragmatic federal legislative problem-solving. In my view, that course would be both foreign and contradictory to the jurisprudence of the current Supreme Court.

    To be sure, the Court's willingness to accept administrative adjudication is not unlimited. In the extreme situation presented by Northern Pipeline, for example, the Court invalidated a statute granting broad powers to the bankruptcy court to adjudicate all claims relating to the property of an estate, once a petition for bankruptcy had been filed. The Court focused on the fact that the legislation removed an essentially unlimited category and number of cases from the federal courts to a non-Article III tribunal—action sufficiently open-ended to pose a credible threat to the federal judiciary's role under the Constitution. The Court also held that because the claims at issue arose ''entirely under state law,'' their adjudication by a non-Article III court could not be justified under the doctrine of ''public rights.'' Northern Pipeline, 458 U.S. at 90.

    The Court reached a similar result in Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989)—again, in the bankruptcy context—holding that the Seventh Amendment prohibited the adjudication without a jury (in a non-Article III forum) of a fraudulent conveyance claim that the Court deemed ''[w]holly private'' in nature. Id. at 51, 55 (citations omitted). At the same time, Granfinanciera establishes that, so long as Congress complies with Article III by properly exercising its ''limited power to place adjudicative authority in non-Article III tribunals,'' the Seventh Amendment will not be violated by congressional assignment of claims to administrative adjudication without jury trials. Id. at 52 (citation omitted).
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    In my view, the bankruptcy context presented in Northern Pipeline and Granfinanciera represents the extreme, outlying case (due to the fact that it involved the potential transfer to a non-Article III forum of an essentially unlimited number and type of purely private claims). Both Thomas and Schor make clear that where Congress crafts a limited exception to Article III jurisdiction, its choices will be respected. That is exactly what the Fairness in Asbestos Compensation Act seeks to do.

    In conclusion, I believe that proposed legislation is plainly consistent with Article III and Seventh Amendment requirements for the following reasons:

    First, it narrowly circumscribes the impact that its requirement of medical eligibility review has on the federal judiciary. The legislation affects only cases involving claims of injury or death flowing from asbestos exposure. That category is limited, as were the categories which were upheld in Schor and Thomas, and does not involve anything like the wholesale displacement of Federal jurisdiction involved in Northern Pipeline. It will, moreover, involve fewer cases over time as the class of those exposed or injured shrinks relative to the population as a whole.

    Second, the bill does not commit private litigation of any state law issue to a non-Article III tribunal. Instead, the only issue that the ARC resolves—the claimant's eligibility under the medical criteria—is exclusively federal. Because the ARC adjudicates only federal issues that are part of a broad legislative solution to a nationwide public problem, its adjudicative role falls squarely within the ''public rights'' doctrine. Moreover, because the respondent in a claimant's appeal of an unfavorable medical eligibility determination would be the ARC, a public agency, and not the asbestos defendants, the application of the medical criteria by the ARC would fall within even the narrowest version of the ''public rights'' doctrine—a version far narrower than the one applied by the Court. Thus the legislation fits even more readily within the ''public rights'' doctrine than did the claims at issue in Schor or Thomas.
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    Third, the administrative medical review requirement of the proposed legislation is an essential element of its solution to an urgent problem. Thus, even more plainly than was true in Thomas and Schor, the bona fide and pressing need for the legislation precludes any inference of congressional aggrandizement at the expense of the judiciary's co-equal role.

    Fourth, because assigning the task of determining medical eligibility to the ARC is valid under the ''public rights'' doctrine, it is also—under the Court's express reasoning—necessarily consistent with the Seventh Amendment.

D. Due Process and Equal Protection Issues

1. The Adequacy of ARC Procedures.

    The medical eligibility process administered by the ARC fully complies with the requirements of procedural due process. I have discussed the fairness of the ARC's procedures above (pp. 9–11). In sum: the initial determination of eligibility would be made in a non-adversarial proceeding designed to ensure that medical determinations are made by qualified and unbiased personnel. If a claim is denied, wholly or in part, the claimant may obtain reconsideration from a panel of two impartial Board-certified physicians (and, in the event those two physicians disagree, the panel is expanded to include a third physician who will resolve the conflict). This medical claims handling process is a familiar one in federal disability programs such as the Veterans Administration where rating panels with medically and vocationally trained personnel make and review initial determinations. The proposed legislation goes beyond the norm, however, in providing an exceptional medical claims panel that can rule eligible people who do not technically meet the criteria but have equivalent evidence of an asbestos-related impairment. Under Mathews v. Eldridge, 424 U.S. 319 (1976), and its progeny, flexible administrative procedures—especially those designed to enhance accuracy—entirely satisfy procedural due process concerns.
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    The ARC's hybrid or quasi-governmental character in no way detracts from its independence and impartial public interest focus. The ARC is a government corporation. It will be totally funded by assessments imposed upon asbestos defendants. These assessments are fully enforceable in court, with interest and fee-shifting penalty provisions that make certain no defendant can avoid its funding obligations even for a short period of time. This system guarantees the ARC's independence and impartiality by insuring that no defendant can gain leverage over the ARC by threatening to withhold its share of the ARC funding. In Schweiker v. McClure, 456 U.S. 188 (1982), the Supreme Court upheld the use of private claims handlers by federal agencies to decide public claims. The Court emphasized that private hearing officers could be employed by the government so long as they had no financial interest in the determinations they made. That test is more than met here. The ARC, while innovative, is clearly within the accepted practice of using contract employees as part of the government decision making process. While, unlike in McClure, public funds are not at stake, there is the same lack of personal or institutional financial interest. The crucial factor remains that these employees, even though separately hired and evaluated, either are, or are controlled by, officials who are officers of the United States. See also H.R. 1283, '106, S. 758 '106 (ensuring against actual or perceived conflicts of interest).

2. Medical Eligibility Criteria

    One of the principal features of the legislation is its adoption of the medical eligibility criteria first developed by plaintiffs' attorneys, organized labor, and the corporate defendants in the Amchem settlement. These criteria are designed to ensure that individuals who are suffering from an asbestos-related disease are compensated promptly and efficiently. Individuals who do not meet the eligibility criteria would not have a claim unless and until they developed some impairment. Thus, some people who currently have a claim in the tort system would not have claim under the proposed legislation.
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    This change in the law is clearly constitutional. In substance, the bill incorporates the statutory medical criteria into the basic cause of action for asbestos-related injury. The Constitution permits Congress to create new causes of action, and to eliminate or modify old causes of action, in pursuit of its legitimate objectives. Silver v. Silver, 280 U.S. 117 (1929). Eliminating the right of unimpaired people to sue would not be a ''taking'' prohibited by the Fifth Amendment, because there is no vested interest in a rule of common law unless and until a final judgment has been obtained. Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 88 n. 32 (1978); McCullough v. Virginia, 172 U.S. 102, 123–24 (1898); see also Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 226 (1995). This is true even when legislation changes the application of the law to already-accrued, and even to already filed causes of action. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16 (1976); United States v. Heinszen & Co., 206 U.S. 370, 387 (1907). For these reasons, there is no constitutional impediment barring Congress from establishing consistent and objective medical standards as a prerequisite for receiving compensation for asbestos-related illness, even for those with cases currently pending in state or federal courts.

3. Punitive Damages

    Let me now discuss from a legal perspective the proposal to eliminate punitive damages in asbestos cases. I will not address the policy aspects of this proposal except to observe that the legislation's elimination of punitive damages is important, for several reasons:

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 By providing a windfall award to plaintiffs who hurry to the front of the line, punitive damages encourage lawsuits by people who are not sick.

 Punitive damages in asbestos cases exacerbate the lottery aspect of the tort system, which enables one plaintiff to receive extraordinary recoveries while another plaintiff in similar circumstances recovers little or nothing.

 The unpredictability of punitive damages makes it hard to settle asbestos cases early on and tends to raise the cost of settlements to all defendants.

 Punitive damages consume and reduce the limited resources available for compensating people who become sick in future years, thus potentially depriving future claimants in order to overcompensate present ones.

    There is certainly no constitutional impediment to eliminating punitive damages in asbestos cases. As I noted above, there is no vested interest in a rule of common law until a final judgment has been obtained. This principle applies with special force to punitive damages, which are intended to punish and deter the defendant and others, rather than to compensate the plaintiff. City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 266–67 (1981). Accordingly, legislatures may restrict or abolish punitive damages, even in pending cases, without ''taking'' a claimant's property in violation of the Fifth Amendment. See, e.g., Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1, 39 (1991) (Scalia, J. concurring); Wackenhut Applied Technologies Ctr., Inc. v. Sygnetron Protection Sys., Inc., 979 F.2d 980, 985 (4th Cir. 1992); Bernier v. Burris, 497 N.E.2d 763, 776 (Ill. 1986).
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    Similarly, putting an end to punitive damages in asbestos cases would not violate principles of substantive due process. Limitations on common law liability are ''a classic example of . . . economic regulation,'' and must be upheld if they have a rational relationship to a legitimate governmental purpose. Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 83–84 (1978). Eliminating punitive damages in asbestos cases obviously passes this test. It is surely a legitimate governmental purpose to help preserve the availability of funds to compensate future plaintiffs; to mitigate the unfairness of the current tort lottery, and to promote the early settlement of asbestos cases. Clearly, eliminating punitive damages has a rational relationship to those ends. Indeed, since, as noted above, a legislature can restrict or eliminate a common-law cause of action, it necessarily has the power to take the lesser step of cutting back on the damages available under a cause of action.

E. Limitation on Attorneys' Fees

    The legislation limits plaintiffs' attorneys' fees to 25 percent of plaintiffs' recovery. In my opinion this limitation is plainly constitutional. The constitutionality of fee-limitation statutes must be examined from two perspectives. From the plaintiff's point of view, the question is whether a limitation on attorneys' fees impairs his or her ability to vindicate rights in a way that violates due process. If it does not, of course, the fee limitation merely serves to reduce the plaintiff's transaction costs and increase his or her compensation. For the lawyer, the principal issue is whether invalidation of existing fee agreements involves an impermissible ''taking'' of property or a violation of substantive due process.
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    Imposing a reasonable 25 percent limitation on plaintiffs' attorneys' fees in asbestos cases surely would not violate the plaintiffs' right to due process. The Supreme Court made clear in U.S. Dep't of Labor v. Triplett, 494 U.S. 715 (1990), that caps on plaintiff's attorneys' fees must be upheld in the absence of a convincing showing that the fee limitation makes lawyers generally unavailable. Justice Scalia's opinion for the Court emphasized that the government had ''an obvious and legitimate interest'' in regulating attorneys' fees so as to protect claimants from improvident contracts and to avoid depletion of funds that are needed to pay other claimants. Id. at 722. That interest could only be overcome by a strong factual showing that the attorneys' fee limitation prevented claimants from obtaining attorneys; in the case before it, the anecdotal and self-interested evidence on which the West Virginia court had relied fell far short of the needed showing. Id. at 722–26. Although Justices Stevens, Brennan, and Marshall wrote separate opinions addressing a technical issue regarding standing, every member of the Court agreed that the fee limitation was valid.

    The 25 percent contingency fee allowed by the bill would certainly not deny claimants access to counsel. That limit is more generous than the fee allowed under the Federal Tort Claims Act, 28 U.S.C. §2678 (which allows a 25 percent fee when a case is litigated to judgment but only 20 percent when it is settled), and it is consistent with the 25 percent fee allowed to claimants' attorneys in actions against the Social Security Administration for past-due benefits, 42 U.S.C. §406(b). A contingency fee that is appropriate in often complex tort claims against the Federal government and in contested claims for social security benefits simply could not deprive plaintiffs in asbestos cases of meaningful assistance of counsel.

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    The constitutionality of the 25 percent fee limitation is somewhat more complicated when viewed from the point of view of the attorney. As applied to future cases and future fee agreements, the provision is utterly unproblematic. The trickier question concerns cases in which an arrangement for a higher fee has already been made. This legislative revision to a private agreement might be seen as (1) impermissibly retroactive under the due process clause, or (2) a taking of private property without just compensation.

    As to the due process argument, the Supreme Court almost always upholds retroactive civil legislation, and the test of constitutionality is the relatively toothless one of rationality. This test is easily met here. The legislation is a sensible and fair response to the diversion of compensatory payments from injured parties to their lawyers, while still leaving the latter with more than ample payment for services rendered. Contingency fees of 33–50 percent, which might have been justified in the early days of asbestos litigation, when there was a significant risk of non-recovery, cannot be justified now that asbestos claims have become routine. The reward-for-risk rationale, which is the only possible justification for fees over 25 percent, is simply inapplicable to current asbestos litigation. Moreover, the fee cap is an integral part of a complex regulatory scheme that, among other things, actually makes the lawyer's task easier and more straightforward, which in turn makes a smaller percentage fee even more appropriate. With over 200,000 cases pending, and many more subject to existing fee agreements, it would be impossible to protect asbestos claimants from the unwarranted drain on recoveries caused by excessive fees without some measure of retroactivity. I note, however, that the degree of retroactivity is relatively minor in that the statute applies to relatively recent agreements, between parties with an ongoing relationship, concerning a transaction that is not yet complete.

    The case of Eastern Enterprises v. Apfel, 118 S. Ct. 2131 (1998), in which five Justices offered somewhat firmer rhetoric against retroactivity than has been the norm, does not alter this analysis. First, the substantive constitutional law of retroactivity remains unchanged by that decision. The Court as a whole flatly refused to toughen the due process standard. Only Justice Kennedy would have struck down the statute on such a theory; the four-justice plurality very much shied away from the due process clause, id. at 2153, while the four justices in dissent applied the traditional analysis and found that the much more severely retroactive liabilities were permissible. Second, even under Justice Kennedy's approach, this legislation is a far cry from the rare and ''egregious'' circumstances of that case, id. at 2159, which involved an enormous, unpredicted and unpredictable liability, based on a long-since terminated contractual relationship.
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    Analysis under the Takings Clause reaches the same result. Accepting that a property interest is even at stake, this legislation does not ''take'' that interest within the meaning of the Fifth Amendment. ''[T]he fact that legislation disregards or destroys existing contractual rights does not always transform the regulation into an illegal taking.'' Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 224 (1986). The usual test for whether a taking has occurred looks to three factors: economic impact, interference with ''distinct investment-backed expectations,'' and the character of the governmental action. See, e.g., id. at 225–27.

    First, with regard to economic impact, it is impossible to say whether the economic impact is positive or negative when the legislation is viewed in its entirety. The 25 percent cap will undeniably mean less money, but the other provisions of the bill will mean less labor. Even seen as a flat reduction in lawyers' fees, the economic impact is relatively mild, for the legislation leaves attorneys with a substantial, and indisputably reasonable, fee for services rendered. Thus, the value of the property interest may have been reduced, but certainly not eliminated.

    Second, in most, if not all, cases, it cannot be said that the interest taken reflects distinct, reasonable, investment-backed expectations. Lawyers with existing fee agreements over 25 percent do have expectations, and they are backed by the ''investment'' of the lawyer's time devoted to the particular case. However, these lawyers have no reasonable expectation that their fees will be immune from government interference. Lawyers, and lawyers' fees, are highly regulated. ''Reasonable'' expectations can be formed only against the background of the overarching principle that fees are subject to judicial and legislative supervision and must be reasonable. Private fee agreements have simply never been sacrosanct. Moreover, the excessive fees in asbestos cases have been under attack for years, and the possibility of this legislation has been quite evident.
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    Third, the character of the 25 percent cap also supports its constitutionality. For one thing, the government has not ''taken'' funds; rather, funds have been redirected toward another (more deserving) private party. See Connolly, 475 U.S. at 225 (no taking where ''the Government does not . . . permanently appropriate any . . . assets for its own use''). Furthermore, the legislation reaches back a relatively short way; like other Acts upheld against a takings challenge it is ''confined to short and limited periods required by the practicalities of producing national legislation.'' R.A. Gray & Co., 467 U.S. at 731 (citation omitted). Perhaps most important, it does this for the best possible reason—to ensure adequate compensation of tort victims who have been seriously harmed—without imposing an undue or unforeseeable hardship on their attorneys.

    Finally, let me turn once more to the recent Eastern Enterprises case. Even were the analysis of the plurality to be accepted by the Court as a whole, the bill would be upheld. The plurality concluded ''that legislation might be unconstitutional if it imposes severe retroactive liability on a limited class of parties that could not have anticipated the liability, and if the extent of that liability is substantially disproportionate to the parties' experience.'' Eastern Enterprises, 118 S. Ct. at 2135. That simply is not this situation. The retroactive reach of this legislation is minimal and partial, the limitation was foreseeable, it does not impose a new liability but merely reduces (without even coming close to eliminating) a benefit, and the burden (i.e. the lost revenue) is relatively mild.

CONCLUSION

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    The Fairness in Asbestos Compensation Act is sound as a matter of both law and policy.

 The bill provides prompt redress of the claims of people actually injured by asbestos.

 By requiring proof of asbestos-related physical injury, the bill preserves the assets of asbestos defendants, thus helping to insure that the money will be there to pay people exposed to asbestos who actually become sick.

 The bill uses accepted methods of ADR to resolve claims quickly and efficiently without burdening the state and federal courts, while at the same time allowing plaintiffs to have their day in court if they are dissatisfied with the ADR process.

 And the bill will do all this at the expense of the asbestos defendants, not the taxpayer.

    Almost since the inception of modern asbestos litigation, there have been proposals before the Congress for a legislative resolution to this growing problem. While these proposals were being discussed, numerous defendants went bankrupt, and new waves of asbestos litigation drew more and more companies into the maelstrom. More asbestos cases are pending today than at any other time in history, and the tide of filings continues. Moreover, asbestos cases in the 1990s involve more and more plaintiffs with markers of exposure but without breathing impairment or other symptoms of asbestos-related disease.

    Seven years ago, the Judicial Conference's Ad Hoc Committee on Asbestos Litigation recommended replacing tort litigation with an administrative claims processing facility in order to provide quicker and fairer resolution of asbestos claims and to shield the courts from a tide of asbestos cases. When Congress did not act, the parties to the Amchem class action settlement attempted to create an administrative claims processing system by voluntary agreement within the judicial system. The Supreme Court's decision in Amchem Prods., Inc. v. Windsor put an end to that effort to contain runaway asbestos litigation without Congress's help. Litigation which bankrupts defendants, subjects plaintiffs to long delays, high costs, and inconsistent results, and threatens to leave future asbestos victims without compensation justifies and even demands the carefully crafted administrative solution contained in H.R. 1283.
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    [The prepared statement of Mr. Eskridge follows:]

PREPARED STATEMENT OF WILLIAM N. ESKRIDGE, JR.(see footnote 55), Professor, John A. Garver Professor of Jurisprudence, Yale Law School

This statement reflects my conclusions reached after several years studying and teaching the asbestos and other mass tort litigations, but I am being compensated for this statement by the Coalition for Asbestos Resolution. I am also a signatory of the Letter from 129 Law Professors opposing the proposed changes in Rule 23 that would have allowed greater leeway for settlement class actions, and of a law professor amicus brief urging reversal of the Rule 23(b)(1)(B) class certification in Ortiz v. Fibreboard Corp., No. 97–1704, (U.S. June 23, 1999).

INTRODUCTION

    The asbestos litigation of the 1970s became a crisis in the 1980s, threatening to overwhelm state and federal judiciaries with exponentially growing caseloads. One potential solution to the crisis was the classwide settlement disapproved by the Supreme Court in Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997). The Court held that the federal class action Rule 23(b)(3) could not be construed to resolve the claims of such a heterogeneous group, including people whose injuries lay in the future. The Court concluded its opinion with the observation that ''a nationwide administrative claims processing regime . . . would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.'' Id. at 628–29. The Court followed Amchem in Ortiz v. Fibreboard Corp., No. 97–1704 (U.S. June 23, 1999), disapproving a Rule 23(b)(1)(B) asbestos class action. The Court observed that the ''elephantine mass of asbestos cases . . . defies customary judicial administration and calls for national legislation.'' Id., slip op., at 1.
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    I find the Court's suggestion persuasive but want to explore another option for handling the crisis: mass joinder or consolidations. This is the option that some judges and many lawyers have been pressing, with varying degrees of success, for some time. My statement analyzes the consolidation option from the perspective of the proper operation of the judicial function. Unfortunately, the jumbo consolidations needed to make a dent in the asbestos litigation pose big risks for our system. They too often sacrifice adjudication's capacity for treating individual cases on their merits; compromise the neutrality of both judges and jurors; create too much risk aversion in corporate decisionmaking by overpenalizing asbestos defendants and their insurers; and produce awards and settlements that overcompensate attorneys and least-injured plaintiffs, while shortchanging some of the most-injured plaintiffs.

I. A BRIEF HISTORY OF MASS JOINDERS AND CONSOLIDATIONS IN THE ASBESTOS LITIGATION

    The evolution of asbestos litigation helps us understand the proliferation of jumbo consolidations today.(see footnote 56) One theme that emerges is the inexorable clash between the individuation values of treating every case on its merits, and the efficiency values of treating similar cases and common issues together. Another theme is that the judiciary has failed to find a mechanism to reconcile this clash, in part because of the nature and dynamics of the asbestos litigation. The most disturbing theme is that judicial experimentation has sacrificed both individuation and efficiency, by helping create a juggernaut whereby jumbo settlements generate more lawsuits, with increasing returns for the least-injured and questionable returns for some of those who will become most-injured.

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A. The Increasing Asbestos Caseload, 1973–1985

    By the 1960s it was apparent that asbestos was causing mesothelioma, lung cancer, and asbestosis in some people who had handled the material many years, even decades, earlier. Some of those afflicted sued companies that had supplied the asbestos. After Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973), affirmed a $68,000 jury verdict based on a theory of strict tort liability for failure to warn of a dangerous product, asbestos claims grew into the largest area of product liability litigation in history. The reasons are these: many people were getting seriously sick; those people and their relatives were alerted that their maladies were caused by exposure to asbestos; the legal system was recognizing causes of action favorable to victims and promising potentially large remedial sums; and lawyers were lined up to represent people at no upfront charge—only a 30–40% contingency fee.

    Many of the cases were tried or settled, but for every case that was concluded, a couple or three would replace it. By August 1982, as many as 21,000 claimants had filed lawsuits, and hundreds of new complaints were filed each month.(see footnote 57) Johns-Manville, the leading U.S. supplier, went into bankruptcy that month (as did five other suppliers between 1979 and 1985), but the claims kept coming, and against an expanding array of defendants. Although some judicial districts already considered themselves swamped by asbestos cases, experts predicted that many more were on the way, with estimates of mortality due to asbestos ranging between 154,600 and 450,600.(see footnote 58) With that many lawsuits, liability would be enormous. A 1984 study found average trial verdicts to be $469,000 for mesothelioma plaintiffs, $311,000 for lung cancer plaintiffs, and $205,000 for asbestosis plaintiffs.(see footnote 59)
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    As more plaintiffs emerged and as the asbestos plaintiffs' bar accumulated substantial financial resources from trial victories or settlements, the cases got bigger as well as more numerous. Where the earliest lawsuits typically posed one injured plaintiff against a number of suppliers, counsel increasingly sought to join several plaintiffs into one lawsuit and to consolidate different cases for pretrial or trial purposes. Defendants typically opposed such requests, but in the mid-1980s a coalition of defendants and their insurers created a claims facility to resolve claims more swiftly and cheaply. Before it was dissolved after a couple of years, the facility is reported to have resolved approximately 20,000 claims.(see footnote 60) The idea was revived by a smaller group of defendants and became the Center for Claims Resolution, which was involved in the Amchem settlement.

    Trial judges—especially those in Texas, Massachusetts, Maryland, California, and Pennsylvania, where the bulk of the filings were occurring—faced daunting management challenges. Judges responded by streamlining discovery for the common elements of the many asbestos cases, encouraging the parties to settle and deploying alternative dispute resolution techniques to that end, and handling cases in groups through multiple-party joinders (Federal Rule of Civil Procedure 20[a] or an analogous state rule), class actions (Rule 23[b][3]), and, especially, consolidations (Rule 42[a]). Trial judges found the efficiency advantages of consolidations increasingly compelling. Not only could several liability claims be adjudicated in one trial, but the verdicts could be benchmarks for settling other cases as well. Based on their own experience, most judges limited the consolidations to a small number of cases (usually around five) with very similar liability issues and sought to conduct the proceedings with careful attention to the precise claims raised by each plaintiff against each defendant.(see footnote 61)
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B. Creating the Jumbo Consolidation, 1985–96

    Some of the early consolidations yielded unusually large plaintiffs' verdicts that gave defendants additional incentives to settle cases. In 1984, Judge John Parker consolidated 30 cases as Newman v. Johns-Manville in the Eastern District of Texas.(see footnote 62) Four cases tried together yielded a $7.9 million jury award, one of the largest handed down at that point; after the large award, the remainder of the consolidated cases settled. At least one other Texas judge followed the same procedure.(see footnote 63) Notwithstanding these innovations, however, the cases kept coming in at higher rates than they could be adjudicated or settled. In the Eastern District of Texas, Judge Parker's venue, consolidations and settlements facilitated the resolution of 469 asbestos cases by June 30, 1986, but 2480 had been filed.(see footnote 64)

    The new cases kept coming in for the same reasons as before, but with even greater force—more people were becoming sick, a larger percentage of the ill were aware that they had a legal cause of action, plaintiffs' attorneys had increasing resources and established teams of medical and other experts. And cases came in for new reasons. For example, New York in 1986 changed its statute of limitations to allow for tolling of hard-to-discover injuries, most notably the long-latent consequences of asbestos exposure. Immediately, New York became a leading situs of asbestos filings. More important, the discovery of documents suggesting that some asbestos suppliers knew the dangers of their product long before its public recognition opened the door to punitive damages in these cases; the first such award was in 1981.(see footnote 65) The jury in Newman awarded $4 million in punitive damages against four defendants.
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    Another feature of the new cases was that many of the plaintiffs did not have mesothelioma, cancer, or advanced asbestosis. A lot of them had pleural placques or pleural thickening. Placques are areas of the pleura (the membrane covering the lung and chest wall) in which cell tissue is replaced by tougher tissue. Pleural placques result from asbestos exposure but do not affect lung functions and do not necessarily lead to asbestosis or increase the risk of cancer. The thickening of the pleural membrane is thought to be caused by pleural effusions, which in turn are caused by exposure to asbestos and other kinds of substances. Pleural thickening does not usually result in impairment but can if a large enough area is affected.(see footnote 66)

    Once workers who were exposed to asbestos were alerted that they might be injured, many of them had physical examinations (typically provided by unions or attorneys) which revealed asymptomatic pleural abnormalities. Once aware, these workers were encouraged to sue—frequently with sound legal basis, either because a jurisdiction's statute of limitations might bar a lawsuit for subsequently-developed asbestosis or because the jurisdiction recognized claims for enhanced risk of cancer upon a showing that a person had an arguably significant physical injury.(see footnote 67) By the mid-1980s, it was estimated that 40–60% of the outstanding claims were by people with pleural placques or thickening.(see footnote 68) Thus the flood of cases was generated not just by publicity, but by strong incentives created by statutes of limitations, the law of punitive damages, and evolving tort principles.

    Judges still aspired to control the flood. In 1985, Judge Parker certified a Rule 23(b)(3) class action which, after opting out, consisted of 752 claimants and thirteen defendants.(see footnote 69) For the trial, Judge Parker appointed a special master to gather information about particular plaintiffs and to present that information in an organized form to the jury. After twenty days of trial and before defendants presented their case, the class action was settled for $137 million, a relatively low figure in retrospect. Other class actions were not so successful. The notorious Tireworker Cases yielded a class settlement which was credibly charged with yielding hundreds or thousands of fraudulent claims.(see footnote 70)
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    Judge Parker's next move, as thousands more complaints poured into his district, was to consolidate 3031 cases (37% of which were ''pleural cases'') for a plan, which as modified after a successful appeal entailed three trial phases: (1) a complete trial of ten ''representative'' plaintiffs and determination of class-wide issues of product defectiveness, fair warning, and punitive damages; (2) a stipulation resolving issues of exposure; and (3) trial of damages in 160 sample cases, from which damages for all the other class members could be extrapolated.(see footnote 71) Almost all the defendants settled. For the four remaining defendants in phase one, the juries found gross negligence and ruled that any actual damages would be multiplied by a factor of 3 for one defendant, 2 for another defendant, and 1.5 for two defendants. Following the phase three verdicts in the sample cases, the court extrapolated average damage awards (before multiplication) of $1,224,333 for mesothelioma plaintiffs; $545,200 for lung cancer; $917,785 for other cancer; $543,783 for asbestosis; and $558,900 for pleural disease. These were significantly higher than average verdicts in smaller consolidated cases (see the appendix to this statement).

    The Texas cases serve as a model for the jumbo consolidation that has emerged from the asbestos litigation in the last fifteen years. The features of the model are the following:

 Jumbo Size. Hundreds or thousands of plaintiffs and dozens or hundreds of defendants are joined or consolidated into one proceeding. It may be a class action.

 Party Heterogeneity. Plaintiffs include people exposed to asbestos in different ways, in different time periods, in different places, and with different effects; most of the alleged plaintiff injuries consist of pleural placques or thickening. Defendants include as many nonbankrupt asbestos suppliers, handlers, or employers as possible; named defendants bring in additional ones.
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 Managerial Judge. The judge aggressively manages the litigation and pushes constantly for settlement of as many cases as possible.

 Trial Phasing. The judge develops a plan whereby common issues of defect, warning, and punitive damages are tried separately from issues of injury, causation, and compensatory damages. The latter are tried through a sampling technique, whereby numerous plaintiffs' cases are tried, and then benchmark numbers are extrapolated from the ensuing verdicts. Such a bifurcated trial can be done in reverse, with extrapolated damages determined before liability.

 Settlement. Almost all—sometimes all—defendants settle before or during trial.

 Jumbo Verdicts. The cases that go to trial yield large verdicts. Even the managerial judge finds herself compelled to order remittiturs in a significant percentage of cases.

Although the jumbo consolidation has been most notably developed in federal cases, it has been deployed—and increasingly so—in state cases as well.(see footnote 72)

    The operation of the jumbo consolidation varies with the context of the consolidation and the personality of the managerial judge. In my view, the model worked best in the Brooklyn Navy Yard Cases, where all the claims arose from asbestos use in one place and therefore involved more common factual and legal issues. Federal Judge Jack Weinstein and state Judge Helen Freedman handled the cases with great skill. They not only cooperated with one another, but relied on mediation and other alternative dispute resolution devices that did not involve the judges as intimately as the Texas cases have. Both judges developed trial plans that sought to account for pro-plaintiff biases. Judge Freedman monitored plaintiffs' verdicts and reduced them frequently.
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    Contrast the Mississippi Nationwide Joinder Cases, which seem more likely to be the future face of the jumbo consolidation, especially at the state level, where there are local economic advantages to aggressive consolidation of cases.(see footnote 73) Counsel joined almost 1000 plaintiffs from all over the country in the original 1995 complaint filed in Jefferson County Circuit Court; by the end of 1998, the eighth amended complaint included 1738 plaintiffs. In May 1998, trial of 12 plaintiffs, including several with no demonstrable injury, yielded an improbable verdict of $48.5 million in compensatory damages (with punitive damages to be separately determined). The judge pressured defendants to settle, on what defendants thought were draconian terms. According to sworn affidavits, the judge told defendants that if they didn't settle, the judge would try the remaining 1700+ cases immediately, before the same jury, and with an instruction to find defendants liable. Counsel for defendants allegedly said the plan sounded ''like this side of hell.'' The judge assertedly corrected him, ''No counselor, that is hell.''(see footnote 74) Efforts to secure the judge's recusal were rebuffed with threats of discipline. The cases settled.

    The most obvious beneficiaries of the jumbo consolidation, even when more impartially managed, are (1) counsel, medical and other expert witnesses, and people who work with them, who pocket as much as 60% of the awards as fees and costs in asbestos cases overall; (2) plaintiffs with pleural thickening, many and perhaps most of whom will never develop asbestosis, cancer, or mesothelioma (the least-injured plaintiffs) yet recover verdicts of $1 million or more; and (3) plaintiffs who have either pleural placques or no medically discernible effect of asbestos exposure (the uninjured plaintiffs) yet who are included in cases like the Tireworkers Cases or the Mississippi Nationwide Joinder Cases and receive large awards. The most obvious losers are (1) defendants, as many as 25 of whom have already been driven into bankruptcy; (2) their insurers, who are defending only when compelled to do so and are future candidates for bankruptcy; and (3) citizens and companies who pay higher insurance rates and prices as indirect effects of this expensive litigation.
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    It is not clear that plaintiffs with mesothelioma, cancer, or severe asbestosis (the most-injured plaintiffs) have uniformly benefited from jumbo consolidations, and many of them will be deprived of recovery if the system is overwhelmed by the claims of least-injured and uninjured plaintiffs. Some jurisdictions have established pleural resgistries allowing people with pleural abnormalities to defer their potential lawsuits,(see footnote 75) but that is still the exception, and many pleural plaintiffs would rather sue anyway. Moreover, attorneys have a strong incentive to continue to file complaints for plaintiffs whose harm is speculative, so long as those complaints continue to yield awards.

C. The Judiciary Admits Defeat, 1991–98

    A big loser is the judiciary, which has a larger management problem than ever before. The courts continue to be deluged with asbestos lawsuits. There are now more than 200,000 of them in the system, and tens of thousands of new cases were added last year. (More cases are now filed each year than the total caseload pending against Johns-Manville when it declared bankruptcy in 1982.) The asbestos litigation problem is one that has defeated the judiciary. An increasing number of judges are now admitting it.(see footnote 76)

    Legislative solutions to the asbestos mess, which have been seriously pressed since 1981, received important support from the Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation, which in 1991 urged Congress to create a national asbestos dispute resolution scheme. As a ''back-up position,'' however, the Ad Hoc Committee urged legislation authorizing jumbo consolidations and collective trials. This ''radical solution,'' as the Committee termed it, was vigorously criticized in Judge Thomas Hogan's dissent from the Report as impractical and ''constitutionally suspect.'' Similar criticisms were made in congressional hearings the same year, including criticisms by Judge Freedman, perhaps the ablest manager of asbestos cases in the nation.(see footnote 77)
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    Also in 1991, and after repeated refusals, the Judicial Panel on Multidistrict Litigation initiated the biggest experiment of all, when it transferred more than 26,000 cases to Judge Charles Weiner's court for consolidated pretrial proceedings. In re Asbestos Prods. Liab. Litig. (No. VI), 771 F. Supp. 415 (J.P.M.L. 1991). Acting through steering committees, plaintiffs and defendants tried to reach a global settlement, but without success. In January 1993, certain counsel who had represented thousands of asbestos plaintiffs and certain defendants filed a class action complaint and proposed settlement covering everyone in the country who had been exposed to asbestos attributable to one of the defendants. Over objections, the class was certified under Rule 23(b)(3) and the settlement was approved by Judge Reed of the Eastern District of Pennsylvania. In Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997), the Supreme Court invalidated the class certification and settlement on the grounds that common issues of law or fact did not ''predominate'' as required by Rule 23(b)(3) and the named parties would not ''adequately protect the interests of the class'' (especially people whose exposure had not produced injury) as required by Rule 23(a)(4).

    Justice Ruth Bader Ginsburg's opinion for the Court ruled that plaintiffs exposed to asbestos under divergent circumstances and suffering (if at all) in different ways are not cohesive encough to satisfy the commonality requirement, id. at 2250. Justice Ginsburg conceded that a nationwide process would be the best way to compensate victims of asbestos exposure, but opined that Congress is better situated to perform that function. Id. at 2252. In the wake of the Supreme Court's opinion, the Fifth Circuit in Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th Cir. 1998), found some of the same problems in the jumbo consolidation model followed by Judge Parker and reversed his consolidated trial verdicts. Concurring Judge Reynaldo Garza noted that the Texas experience bore out the criticisms of jumbo consolidations suggested by Judge Hogan in 1991 and Justice Ginsburg's intimation in 1997 that a legislative solution would be useful. Id. at 335–39 (Reynaldo, J., specially concurring). Just a week ago, the Supreme Court even more forcefully reiterated this now-recurring theme. In Ortiz v. Fibreboard Corp., No. 97–1704, (U.S. June 23, 1999), the Court overturned a Rule 23(b)(1)(B) asbestos class action approved by Judge Parker and the Fifth Circuit. Justice Souter's opinion for the Court opened with the lament that the asbestos litigation ''defies customary judicial administration'' and ''calls for national legislation.'' Id., slip op., at 1. A concurring opinion by Chief Justice Rehnquist, joined by Justices Scalia and Kennedy, underscored Justice Souter's plea for Congress to rescue the courts from a mission they cannot handle. Id., slip op., at 1 (Rehnquist, C.J., concurring).
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    The analysis in the next two parts of this testimony suggests that Justices Ginsburg, Souter, Rehnquist, Scalia, and Kennedy are right: for reasons that transcend the particularities of individual cases, judge- and attorney-driven consolidations are no solution to the runaway train of asbestos litigation and are probably now part of the problem.

II. WHY JUMBO CONSOLIDATIONS OVERCOMPENSATE LAWYERS, THE LEAST-INJURED, AND THE UNINJURED IN ASBESTOS LITIGATION

    In an ideal world, every plaintiff has an immediate and fair trial which determines defendant's liability and damages, if any. The damage award at such a trial is the ideal valuation of the claim, a hypothetical figure which serves as a benchmark for the parties to negotiate a settlement in the ''shadow of the jury.'' In theory, when there are a lot of similar claims against the same defendant and the parties do not settle immediately, consolidated proceedings can help deliver ideal valuations more promptly for more people: Potentially, consolidation can save time and duplication during the discovery process. Trials of a few neutrally chosen test cases can yield a benchmark figure for figuring out the ideal valuations for the remaining cases, adjusted for dissimilarities. This logic justifies Rules 20(a), 23(b)(3), and 42(a) in an efficient and fair procedural system.

    This logic of consolidation is undermined when attorneys have access to an expanding pool of heterogeneous plaintiffs. An attorney seeking to increase her income can find or attract a variety of potential plaintiffs and then bring them all into court as part of the same lawsuit, through joinder, consolidation, or class action. Such an expanded lawsuit not only may get a quicker recovery for all the plaintiffs and their counsel, but in some cases will increase the ideal valuation for least-injured plaintiffs, albeit partly at the expense of the ideal valuation of most-injured plaintiffs (see the analysis below). That is why plaintiffs' counsel usually seek consolidations and defendants' counsel oppose them. For reasons of overall efficiency, courts may grant consolidations, but such a move is usually not neutral: it increases the value of the plaintiffs' claims.
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    The foregoing logic of consolidation collapses when other features are added to the expanding pool of heterogeneous plaintiffs: (1) expanding knowledge by potential plaintiffs that they have been or might be injured and legal rules encouraging plaintiffs with speculative injuries to sue sooner rather than later; (2) the realistic possibility of punitive or other damages untethered to actual injury; and (3) the existence of many potential defendants and insurers rather than just one or two. Given these conditions, plaintiffs' counsel will create ever larger consolidations and, if allowed to proceed by the judiciary, will bring in ever larger numbers of least-injured and uninjured claimants. Bigger consolidations will ensure that jury trials will not produce ideal valuations and will, on average, be biased in favor of plaintiffs, including the least-injured and uninjured. Higher verdicts will generate higher settlements, and both will generate more cases until the population of plausible plaintiffs is exhausted or defendants are all bankrupt—or the legislature intervenes to halt the procedural madness.

A. Pro-Plaintiff Bias in the Normal Asbestos Consolidation

    In a normal consolidation, the cases of two to five plaintiffs exposed to asbestos are consolidated against several defendant suppliers to the plant where they all worked. In such cases, joinder or consolidation can make the discovery and trial processes more expeditious. This is of great benefit to plaintiffs seeking recovery and judges managing overcrowded dockets, but creates fairness risks for defendants and (surprisingly but apparently) the most-injured plaintiff, especially but not limited to jury trials. Here's what the survey evidence about jury decisionmaking teaches us.

    Contrary to attorney lore, empirical studies do not support the proposition that juries are generally pro-plaintiff. In cases involving ordinary injuries, corporate defendants are no more likely to be held liable by juries, or judges, than other defendants. But, according to the long-term studies of the Institute for Civil Justice, ''when they were sued by plaintiffs with severe, permanent injuries, corporations were found liable more often than other defendants,'' and such plaintiffs were paid significantly larger awards—findings that were constant over several decades.(see footnote 78) This description fits the early asbestos cases, when people dying of mesothelioma and cancer were suing corporate suppliers of asbestos. The sympathy effect in these kinds of cases means that juries will tend to interpret scientific and other evidence in ways relatively favorable to most-injured plaintiffs. Thus, one would expect juries to undervalue expert evidence showing that the asbestos plaintiff's lung cancer was as likely or not caused by his two-pack-a-day smoking habit, for example.(see footnote 79)
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    Plaintiffs' counsel can further exploit the sympathy effect by associating most-injured plaintiffs with less- or least-injured plaintiffs in a consolidated action. Researchers found this to be an explanation for the large verdicts in Newman (described in part IB of this statement). According to the researchers, there was a piggyback effect: jurors focused on the plaintiff with the most serious injury and assumed, incorrectly, that the other plaintiffs would become as ill as he.(see footnote 80) Contributing to the piggyback effect are several empirically established human decisionmaking biases. One is anchoring: people will latch onto the most emotionally salient factor as an anchor, which will be adjusted to rather than trumped by other factors.(see footnote 81) Another is information overload: people cannot process great gobs of information and will therefore be selective about what they remember.(see footnote 82) The two phenomena work together: in complicated cases, jurors overloaded with information will tend to anchor on dramatic, and sympathetic, plaintiffs and relate the other, less-injured, plaintiffs to the most-injured.

    Skeptical social scientists tested the piggyback effect in a controlled experimental setting, involving several dozen mock juries hearing the same case with variations for number of plaintiffs and severity of injury.(see footnote 83) Consistent with the piggyback effect, the scientists found that aggregation of most-injured plaintiffs with less-injured plaintiffs significantly increased the mean awards to the latter and had the greatest piggyback effect on the least-injured plaintiffs. The juries assumed, with no evidentiary basis, that the less- and least-injured claimants would ultimately suffer the same fate as the most-injured claimants. Beyond the earlier hypothesis, the researchers found that the heterogeneity of the plaintiff group increased the variability of liability findings (i.e., more juries found no liability at all) and that the most-injured plaintiffs received significantly higher verdicts when their cases were tried alone. Therefore, the piggyback effect is complex: it allows plaintiffs' counsel to get much greater recoveries on average for less- and least-injured plaintiffs and thereby to multiply their contingency fees, but with significantly higher risks for the most-injured (lower verdicts and a heightened possibility of nonrecovery).
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    In the normal case, the potential unfairness to defendants and some plaintiffs is either not considered severe enough to outweigh the efficiency advantages of consolidation or the judge believes that the potential unfairness can be managed through juror notetaking, careful instructions, special verdicts, and the like. Judge Freedman diligently monitored jury verdicts and required remittiturs (reductions) in many of them.(see footnote 84) Reviewing much more modest awards in a smaller consolidation, Judge Charles Butler in Cain v. Armstrong World Indus., 785 F. Supp. 1448 (S.D. Ala. 1992), not only overturned compensatory damage awards in 13 cases he had tried together, but concluded, reluctantly, that the jury's apparent confusion showed that he should not have consolidated the cases. After surveying consolidations in his district, he concluded that, ''when fewer cases,'' namely, three or four, are tried together ''the jury is better able to consider the cases separately and return verdicts based on the facts of each case.'' Id. at 1456. Even trial and appellate judges who have upheld consolidation orders have frequently granted remittiturs in the cases.(see footnote 85)

B. Highly Perverse Effects of Jumbo Consolidations on Jury Determinations

    Normal consolidations are problematic in the asbestos context, such as Cain, because of the sympathy effect, exacerbated by the piggyback effect. When the consolidation reaches double digits, as in Newman, juries are even less able of doing their jobs objectively because of cognitive overload, which typically but unpredictably yields verdicts exceeding ideal valuations. In the jumbo consolidation, with a mob of plaintiffs suing a mob of defendants, the fairness problems are not only exacerbated but multiplied.

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    The fairness problems are exacerbated because the phenomena identified above become more pronounced. Many more least-injured or uninjured plaintiffs can piggyback onto the claims of most-injured plaintiffs. Indeed, the ratio of least-injured or uninjured to most-injured can increase significantly. In a normal consolidation of five plaintiffs, at least 20% of the group (at least one person) must be severely injured for the piggyback effect to kick in. In a consolidation of 1000 plaintiffs, the effect can occur with 5% or even 1% of the group being severely injured, especially if the plaintiffs' counsel or a sympathetic judge is able to select the plaintiffs who will ''represent'' the group at certain points in a trial on liability or damages. In many of the jumbo consolidations, plaintiffs' counsel have either chosen or played the major role in choosing the representative plaintiffs.

    For similar reasons as developed above, the problem of information overload will skew jury decisionmaking, making juries less predictable, less likely to differentiate among plaintiffs, and more likely to anchor on the most-injured and to deliver awards in line with plaintiffs' exaggerated relief requests. The overload problem also becomes unmanageable. A typical juror will not be able to follow so many plaintiffs and defendants, and there is little the judge can do to help the jurors; many judges will be unable to follow the evidence themselves. For reasons developed below, judges in jumbo consolidations will also tend to be less impartial. Shortcuts will be inevitable, and given the sympathy and piggyback effects the shortcuts will tend to work against the interests of both defendants and, sometimes, most-injured plaintiffs and in favor of less-injured and uninjured plaintiffs and their attorneys.

    The foregoing are the reasons why the jumbo consolidations exacerbate the perverse effects of normal consolidations. Attribution theory suggests that the perverse effects will be multiplied, sometimes leading to extraordinarily large and unjustified verdicts for less-injured and uninjured plaintiffs and contingency fees for their counsel. Under attribution theory, common characteristics of people who are perceived to be members of a large group are attributed to situational factors outside of any individual's control, while characteristics of isolated people tend to be attributed to dispositional factors such as choice. The implications of this are that clustering asbestos plaintiffs in large groups, the goal of a jumbo consolidation, makes the jury less likely to attribute any personal responsibility for cancer to smoking or other choices of the plaintiffs (to the extent the jury can even distinguish among plaintiffs) and to find the corporate defendants liable for large damages. In their controlled mock jury experiment, the scientists who tested the piggyback effect found this kind of collective harm effect: juries told that the injured plaintiffs were part of a large group (100s) of victims were significantly more likely to attribute responsibility (liabiltiy) for their injuries to corporations and to punish the corporations with larger damage awards, than juries who were told nothing about the larger victim population or who were told that it was modest (20s) in size.(see footnote 86)
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    The collective harm effect and other exacerbating factors of jumbo consolidations can be illustrated by examination of the Texas cases in this decade. Recall that Judge Parker's jumbo consolidation trials, where the jury was aware of the 3000+ members of the class, yielded benchmark compensatory verdicts of $558,900 for plaintiffs with pleural disease and punitive damage multipliers of 1.5 to 3. Apart from the debate over whether people with pleural disease should be able to sue, the recovery amounts are far in excess of those in the 1970s and 1980s—and even significantly larger than Texas trial verdicts in normal consolidations during the 1990s. The appendix to my statement that I have developed with my Yale Law School research associate, Brent McIntosh, compares the benchmark figure derived from the jumbo consolidation in the early 1990s with average compensatory damage awards made to 142 pleural disease plaintiffs in normal consolidations tried in the state of Texas in the 1990s. The $558,900 per plaintiff award for pleural plaintiffs in the jumbo consolidation is more than five times the size of the $101,105 per plaintiff award in 134 Texas jury awards of compensatory damages reported for pleural plaintiffs and rendered by juries in 1991–94 (including the period immediately after the Cimino benchmark awards). Even when later awards are factored in, the Cimino benchmark is more than four times the average award in the normal consolidations. This is a dramatic effect. (Because the published reports do not clearly give us usable punitive damage amounts, Mr. McIntosh has not done a comparison of total awards [compensatory plus punitive damages], but there is no reason to believe the comparison would be any less dramatic.) Although the data do not exist to evaluate the results of the jumbo consolidation in Mississippi, the $48.5 million partial verdict for 12 plaintiffs, several of them with little or no evidence even of pleural disease, suggests that the phenomenon is not limited to Texas and may be more pronounced elsewhere.

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C. Perverse Effects of Jumbo Consolidations on Settlements in the Current Asbestos Litigation Context

    By artificially inflating jury awards way beyond the ideal valuation plaintiffs, especially the least-injured and uninjured, might expect to receive, jumbo consolidations also affect the settlements reached. The most obvious effect would be to inflate settlements as well as verdicts, but I need to draw attention to the variable effects large blocks of cases might have on settlements.

    Negotiations between plaintiffs' and defendants' counsel over a large volume of cases can yield relative bargains for defendants if plaintiffs' attorneys are tempted by easy counsel fees to settle large batches of cases early in the proceedings. This assertedly occurred in the asbestos litigation during the 1970s, when proof of causation was difficult, punitive damages generally unavailable, and plaintiffs' counsel relatively unmonitored by their clients.(see footnote 87) Since the mid-1980s, however, the bargaining balance has shifted decidedly to place defendants at a significant disadvantage. The bargaining balance has probably shifted even more in recent years, as most of the new jumbo consolidations have been filed in state courts, which are particularly disadvantageous fora for asbestos defendants. Former Chief Justice Richard Neely of the West Virginia Supreme Court(see footnote 88) opined in 1991 that in product liability cases where there are at least some in-state plaintiffs suing out-of-state defendants, there is a ''competitive race to the bottom'' driven by local self-interest to tax wealthy out-of-state firms for the benefit of local citizens. According to Neely, ''it takes little imagination to guess that out-of-state defendants as a class won't do very well,''(see footnote 89) a phenomenon borne out in the asbestos cases.
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    Especially in state courts, defendants in the typical jumbo consolidation now face an Armageddon scenario if they do not settle on terms favorable to plaintiffs. As the number of plaintiffs gets bigger and the collective harm effect virtually unavoidable, the stakes become not only enormous, but threaten Armaggedon to the firm. Even risk-neutral people and firms will tend to take too many precautions or pay too high a settlement price when the chance of devastating loss is significant. Stated another way, fright becomes a variable in defendants' calculations when Armgaggedon looms as a significant possibility, and a frightened bargainer will give away too much.

    The large number of defendants can transform the fright effect into a flight effect, or a rush to settle. The rush to settle is the consequence of a classic prisoners' dilemma: Although defendants realize that they should bargain as a group with plaintiffs' counsel, each defendant also understands that it can gain an advantage by settling early, and that it will be disadvantaged if others settle first (the sucker's payoff). Unless defendants can enforce their common self-interest (bargaining collectively), individual defendants will tend to defect, perhaps secretly at first, and at some point there will be a rush to settle—but on terms that will be favorable to plaintiffs.

    Also affecting bargaining is the attitude of the judge. For reasons already developed, defendants are put at a disadvantage by consolidations of any sort, and jumbo ones especially. Thus their interests are systematically at odds with the interests of the judge, who nowadays feels she has no choice but to be concerned with consolidating, managing, and settling cases. For the same reasons, the judge's interests are roughly aligned with those of the plaintiffs. This incentive structure naturally enhances the possibility that the judge—however impartial she usually is—will tend to be pro-plaintiff, and often fervently so because of the sympathy and piggyback effects and/or because of the threat that the asbestos caseload poses to the judiciary's ability to do its job. The pro-plaintiff bias of judges ought to be especially pronounced among state court judges, many of whom are elected and almost all of whom have strong local loyalties. Although the asserted open bias and threats of the judge in the Mississippi Nationwide Joinder Cases are presumably not the norm, the pro-plaintiff attitude is. That affects the terms of settlement, of course in a pro-plaintiff way.
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III. SYSTEMIC SACRIFICES FLOWING FROM JUMBO SETTLEMENTS IN ASBESTOS LITIGATION

    Crisis cases make bad law even more than hard cases do.

    The first two parts of this statement suggest how it makes sense, from their own short-term perspective, for plaintiffs' attorneys and judges to cooperate in creating jumbo consolidations, and how their cooperation has had bad longer-term consequences. The risks posed by jumbo asbestos consolidations are even worse than this suggests, because the risks are systemic. Jumbo consolidations have led to sacrifices of core values of our system of adjudication. These core values implicate constitutional principles of due process, separation of powers, and even the rule of law itself.

    Although I have not reached any firm conclusions about the constitutionality of jumbo consolidations per se, such consolidations dance along the constitutional precipice, and inevitably some of the dancers fall into the abyss. I join the weight of Supreme Court and federal appellate opinion holding that these consolidations should be evaluated in light of the following constitutional and systemic principles: (1) judges should not make new law and should defer to state and national legislatures and should therefore not reallocate substantive entitlements; (2) proper adjudication requires individual treatment of claims and defenses by a neutral process; and (3) like cases should be treated alike. Jumbo consolidations are at odds with all these principles, especially the first.

A. The Principle Against Judicial Lawmaking (Separation of Powers)

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    A key precept of the Constitution is that judges adjudicating cases and controversies should not significantly alter preexisting substantive entitlements. Separation of powers posits a specialization of functions in which the democratically elected legislature is authorized to make broad policy changes, implemented in particular cases or controversies by the judiciary. Although state judges in particular have common-lawmaking powers, those powers are supposed to be exercised to enforce existing rights and duties—and not to create new rights and duties.(see footnote 90)

    The principle against substantive lawmaking by judges is fundamental to American civil procedure. The Rules Enabling Act, 28 U.S.C. §2072, authorizing federal courts to promulgate rules of procedure, admonishes the judiciary that those rules ''shall not abridge, enlarge, or modify any substantive right.'' Id. at §2072(a). Most states similarly limit the authority of their judiciaries to make and apply rules of procedure. The Supreme Court's elaboration of the Erie doctrine, prohibiting the creation of federal common law in diversity cases, sharply distinguishes between substantive law, where federal courts are required to apply state-created entitlements and duties, and procedural law, where federal courts are free to create their own rules, so long as they do not alter people's primary obligations as defined by state substantive law.(see footnote 91)

    To be sure, the substance/procedure divide is an exceedingly ambiguous one, for practical as well as theoretical reasons. For example, Rule 23, authorizing class actions, might be criticized for having substantive as well as procedural effects. I would suggest, however, that the plain meaning and original design of Rule 23 were not to alter rights and obligations (substantive), but merely to facilitate the enforcement of such rights (procedural). The classic case for class action treatment is a case where individual plaintiff claims are too small to justify individual lawsuits but can do so when they can be amalgamated as a class. Contrast Amchem. One reason the Supreme Court was, and should have been, skeptical of the proposed class action was that it seemed likely to alter the substantive rights of future plaintiffs even as it sought to facilitate resolution of current plaintiffs' claims. The Court made this concern explicit in Ortiz. Part III(C) of Justice Souter's opinion for the Court held that Rule 23(b)(1)(B) be construed conservatively, lest it violate the Rules Enabling Act in reallocating substantive entitlements among the affected parties. See Ortiz, slip op., at 23–30.
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    Application of Rules 20 (joinder) and 42 (consolidation) illustrates another ambiguity of the substance/procedure rule and the general principle against substantive judicial lawmaking. Consolidating five asbestos cases into a single trial does more than facilitate plaintiffs' ability to obtain relief; it creates a litigation context that, on average, assures the plaintiffs a higher recovery. Does this violate the various substance/procedure rules? Arguably it does, but the judiciary tolerates the arguable (or potential) violation because judges believe they can monitor any substantive bias through instructions and post-trial remittiturs, and because any (minor) alteration of substantive rights is justified by the efficiency advantages of consolidations and their facilitation of plaintiffs' receiving prompt awards. I have no problem with that.

    The problem becomes significant with the jumbo consolidation or mass joinder. For the reasons developed earlier in my statement, the jumbo consolidation, in the particular context of the asbestos litigation of the 1980s and 1990s, is likely to have such a significant, and potentially tremendous, effect on the plaintiffs' and defendants' relative bargaining positions that it amounts to a (substantive) alteration of entitlements rather than just a (procedural) facilitation of the enforcement of preexisting entitlements. And I am doubtful that judges will usually be able to manage such a consolidation to minimize the alteration. Thus, the least-injured plaintiff, who has pleural thickening now that may never develop into a malignant disease, has at best a modest claim against asbestos defendants in an ideal setting. The uninjured plaintiff, who has no demonstrable lung anomalies or just has pleural placques, has no current claim in an ideal setting. The jumbo consolidation elevates these claims to million-dollar ones. However you draw the substance/procedure line, that looks like a big substantive effect.
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    If this is so, judicial deployment of jumbo consolidations under Rule 42 at some point violates the Rules Enabling Act (or a state law version), the Erie doctrine, and the general constitutional principle against substantive judicial lawmaking. In reversing Judge Parker's jumbo consolidations, the Fifth Circuit relied on these kinds of reasons in In re Fibreboard Corp., 893 F.2d 706 (5th Cir. 1990), and in Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th Cir. 1998). ''The core problem is that [the consolidated trial plan], while offering an innovative answer to an admitted crisis in the judicial system, is unfortunately beyond the scope of federal judicial authority. It infringes upon the dictates of Erie that we remain faithful to the law of Texas, and upon the separation of powers between the judicial and legislative branches.'' Fibreboard, 893 F.2d at 711 (followed in Cimino). In reversing Judge Parker's mandatory asbestos class action, Justice Souter relied on the same kind of reasoning in Part III(C) of Ortiz. His opinion for the Court held that Rule 23(b)(1)(B) should be construed conservatively, lest the class action device amount to an alteration of substantive rights in violation of the Rules Enabling Act. See Ortiz, slip op., at 23–30.

    Under the foregoing analysis, jumbo consolidations are suspect as a constitutional matter. The consolidation plans reversed in Fibreboard and Cimino were similar to those of other consolidations collected in footnote 18 of this statement and were more constrained than some of the consolidations. While an aggressive case manager, Judge Parker was not nearly as aggressive as the trial judge in the Mississippi Nationwide Joinder Cases. Yet state courts in West Virginia and Mississippi have so far been much less sensitive to these concerns with substantive judicial lawmaking, not only because they do not raise Erie issues, but also because individual states can benefit from allowing as many cases as possible cluster within their jurisdictions, as noted above by West Virginia's former Chief Justice Neely. Relatedly, note that the Mississippi cases join as plaintiffs not only Mississippi residents exposed to asbestos, but people from all over the country. If a state wants to enrich its local attorneys and associated personnel, it can follow Mississippi's example: Deploy jumbo consolidations and joinders to impel defendants to settle cases on terms super-favorable to plaintiffs, especially least-injured and uninjured plaintiffs, and then open your courthouse doors to plaintiffs' counsel from other parts of the country. If the asbestos litigation mess is allowed to continue without congressional intervention, my prediction is that more of the caseload will gravitate to state judiciaries that allow aggressive consolidation of diverse, and increasingly nationwide, claims.
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    At both state and federal levels, the jumbo consolidation either traverses or approaches the constitutional line between judicial and legislative authority. At both levels it is a bad precedent. Yet one can sympathize with trial judges who violate the principle. They are not necessarily lawless or usurpative. They are faced with a caseload problem, which cannot be solved, or even just staved off, without some bending of principle. To the extent the asbestos litigation mess is a crisis of democracy as well as of adjudication, Congress is called forth to act, preferably soon.

B. Principles of Individuation (Due Process and Separation of Powers)

    Instinct in constitutional concepts of the nature and role of courts and adjudication is the idea of individuation: every litigant must have her particular claim or defense neutrally evaluated on its own merits. More specifically, individuation is a requirement of the Due Process Clause, which assures people and companies that state adjudication will not deprive them of property without individual notice and a hearing before a neutral decisionmaker.(see footnote 92) It also might be a corollary of the Seventh Amendment: Defendants, like plaintiffs, are guaranteed trial by jury if they request it in common law tort actions against them. See Ortiz, Part III(C), slip op., at 23–30 (relying on Seventh Amendment considerations to construe Rule 23[b][1][B] cautiously). Similarly, where state tort law is the rule for decision, as it usually is in asbestos cases, individuated liability and damage determinations can be understood as part of the underlying substantive law. See Fibreboard, 893 F.2d at 711–12.

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    Individuation is easy, to the point of invisibility, in an ordinary lawsuit, where the plaintiff claims that the defendant did something wrong and caused her injury. It becomes harder to assure when there are several plaintiffs suing a variety of defendants. It becomes well-nigh impossible in cases where masses of plaintiffs sue masses of defendants in tort cases where individual issues of causation, harm, and loss are at issue. That is not to say, however, that the individuation principle does not permit a great deal of procedural leeway for judges to achieve economies of scale in litigation where common issues predominate.

    The Federal Rules of Civil Procedure reflect the modern accommodation of the individuation principle and the efficiency needs of a judiciary handling large numbers of cases that raise common concerns. Thus, Rule 20(a) allows joinder of multiple plaintiffs or defendants if the claims arise out of the ''same transaction, occurrence, or series of transactions or occurrences'' and there is a common question of law or fact. Rule 20(b), however, gives trial judges discretion to ''order separate trials or make other orders to prevent delay or prejudice'' to parties adversely affected by joinder. ''When actions involving a common question of law or fact are pending,'' Rule 42(a) permits the trial judge to conduct joint hearings or trials on common issues or to consolidate the actions and, in either event, to enter orders ''as may tend to avoid unnecessary costs or delays.'' But Rule 42(b) permits the court in a consolidated action to conduct separate trials ''in furtherance of convenience or to avoid prejudice, . . . always preserving inviolate the right of trial by jury as declared by the Seventh Amendment.'' Rule 23(b)(3) allows the formation of class actions in cases where the class is so numerous that joinder is impracticable, questions of law or fact common to the class ''predominate,'' and a class action is ''superior to other available methods for the fair and efficient adjudication of the controversy.'' Rule 23(d), though, authorizes the trial judge to enter orders to reduce complication and otherwise to avoid prejudice in the proceedings.
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    Consistent with the principle of individuation, the Federal Rules and analogous state rules permit amalgamation only when common issues predominate and, even when amalgamation is deemed useful for efficiency reasons, authorize trial judges to protect parties against prejudice. The latter requirement, reflected in Rules 20(b) and 42(b), is in my view a constitutional necessity. Similarly, Rules 20 and 42 must be applied with these ideas in mind.(see footnote 93)

    Individuation is not only sacrificed, but also unconstitutionally lost in jumbo consolidations where plans do not allow for trial of causation and damage issues as to each plaintiff against each defendant. This was a ground for the Fifth Circuit's reversal of Judge Parker's first jumbo consolidation order: Procedures that ''do[ ] not allow proof that a particular defendant's asbestos 'really' caused a particular plaintiff's disease'' violate defendant's due process rights and are inconsistent with the concept of the ''judicial Power'' in Article III. ''We are persuaded on reflection that the procedures here called for comprise something other than a trial within our authority.'' Fibreboard, 893 F.2d at 712. ''Nor is deviation from these settled principles authorized because these are asbestos cases whose vast numbers swamp the courts.'' Cimino, 151 F.3d at 313 (applying Fibreboard).

    Individuation concerns are also raised in consolidations where juries are confronted with too many parties and issues to allow rational consideration. Outside the asbestos context, courts have sometimes ruled that mass consolidations violate the Due Process Clause if they effectively prevent parties from presenting facts to a jury ''in a manner that they could comprehend without being confused with others.''(see footnote 94) While I am not prepared to say that jumbo consolidations are per se unconstitutional for these reasons, my review of the theoretical literature, case studies of asbestos lawsuits, and the reported decisions suggests that the trial of dozens of asbestos plaintiffs against dozens of asbestos defendants is bound to be confusing to the jury. Social scientists have repeatedly found that juries in normal consolidations cannot individuate effectively, and the problem is exacerbated and perhaps multiplied in jumbo consolidations.
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    There is a broader systemic point to the individuation principle. The role of the judiciary in our system is to adjudicate individual cases and controversies, not just for due process reasons, but for reasons of institutional competence. This is what judges are good at doing. They are not good at addressing what are called polycentric problems, ones that are socially complex.(see footnote 95) Judges are neither trained nor skilled at understanding complex social problems and are at a factfinding disadvantage (vis-a-vis agencies and the legislature) in assessing the consequences of various options. More important, judges cannot easily control or even monitor adverse consequences even when they are aware of them.(see footnote 96) Unfortunately, the asbestos cases illustrate these difficulties. Thus it is that judges have fallen into the most elementary trap in their handling of the asbestos cases: By consolidating masses of cases on terms favorable to plaintiffs and by pressuring defendants to settle—all in the name of managing caseloads—judges have created a mechanism that encourages marginal or even frivolous cases to be filed, and in great numbers. It took much too long for judges to become aware of this state of affairs.(see footnote 97) Once they have been made aware, many judges seem at a loss as to what to do about it, because letting the cases pile up seems to them worse than inviting new ones to be filed. That it has taken the judiciary 30 years to figure this out is potent testimony to the caution that judges should bring to adjudication.

C. Neutrality and Nonarbitrariness (Due Process and the Rule of Law)

    The most fundamental requirement of due process, and indeed of the rule of law more generally, is that disputes be adjudicated neutrally by the state. This means that like cases should be treated alike. Although we tend to be most outraged when the principles of neutrality and nonarbitrariness are sacrificed at the expense of the little guy, the rule of law is just as impaired when they are sacrificed at the expense of asbestos and insurance corporations. Jumbo consolidations severely test these principles, and they have often enough failed the test.
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    Part II of my statement sets forth reasons to think that jumbo consolidations yield verdicts and settlements that are excessive and arbitrary. Structuring litigation along lines of the jumbo consolidation model makes it likely that the natural sympathy jurors feel for severely injured plaintiffs will not only be exacerbated by the collective harm effect, but also that least-injured and uninjured plaintiffs (and their contingency-fee attorneys) will piggyback onto the claims of the most-injured plaintiffs. Even without the operation of these natural decisionmaking biases, jurors will not be able to do their jobs, because there is too much evidence for them to assimilate reliably.

    Nor can judges do their jobs properly in this context. In a jumbo consolidation, the judge becomes a super case manager—not only supervising the work of attorneys and structuring their interaction, but playing an often-aggressive role in party negotiations. To the extent that a judge is personally invested in running the case, she is no longer capable of being neutral.(see footnote 98) To the extent that a judge is personally invested in pressuring the parties to settle as many cases as possible, there is a risk of judicial tyranny. The Mississippi Nationwide Joinder Cases appear to be not only an example of judicial tyranny with a huge price tag, but also of unreviewable judicial tyranny that threatens the reputation of the entire judiciary.

    The lesson of the asbestos cases is that the context that has given rise to the jumbo consolidation, and then that is greatly exacerbated by such consolidations, is one where juries and judges cannot easily, or maybe possibly, do their jobs in a neutral and nonarbitrary way. Even the most diligent juror will feel enormous sympathy for the mesothelioma victim suing as part of a 3000-plaintiff consolidation and will not only be inclined to award him large damages, but also award such damages to his co-plaintiffs who are not sick but might become sick. Even the most impartial judge will be pressed toward a pro-plaintiff position by the natural coincidence of judicial and plaintiff interests in jumbo consolidations and will want to punish defendants for objecting to the only mechanism that judges seem to have left to deal with the caseload problem.
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    Jumbo consolidations conduce toward a process where similarly situated plaintiffs are treated very differently. Plaintiffs who sued as part of normal consolidations in the 1980s got a lot less than similar plaintiffs who sued as part of jumbo consolidations in the 1990s. Plaintiffs in the Mississippi cases are getting a lot more than those in New York or Texas. Admittedly, disparities such as these are not unusual in tort cases tried across time and regions. What is more unusual and most alarming is that differently situated people are not just being treated differently, but the difference is too often in the opposite direction the law says the factual difference is supposed to require. That is, most-injured plaintiffs who sued in normal consolidations in the 1980s got a lot less than least-injured or uninjured plaintiffs are getting in the 1990s. And, most critically, people who will discover severe injury in 2010 may not get any recovery at all, because uninjured and least-injured plaintiffs have killed the goose that laid them their golden eggs.

CONCLUSION

    The judiciary has been handling the asbestos litigation for a generation, and its management of the litigation has contributed to what is now called a crisis but may better deserve to be termed a disaster. The victims of this crisis are most-injured plaintiffs, especially future plaintiffs, who don't get as much as they should; defendants who are bankrupted way out of proportion to the harm they caused; jurors and judges whose judgment is skewed by natural human reactions to the cases before them; and society itself, which is paying grotesque sums of money to lawyers and uninjured persons, when that money should be going to the most-injured and to medical research.

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    The Supreme Court all but admitted defeat in Amchem and Ortiz, which insisted that the rule of law and fairness cannot justify the supposed efficiency advantages of jumbo class actions (or, I would argue, consolidations). In both cases, the Court reminded Congress that it is not only the best but perhaps the only forum for dealing with this ''elephantine mass of asbestos cases'' in a way that expeditiously resolves legitimate claims. The West Virginia Supreme Court put it more bluntly, albeit undiplomatically, in a case where it affirmed the creation of a jumbo consolidation to handle asesbtos cases in Kanawha County (not far from where I grew up): ''Congress, by not creating any legislative solution to these problems, has effectively forced the courts to adopt diverse, innovative, and often non-traditional judicial management techniques to reduce the burden of asbestos litigation that seem to be paralyzing their active dockets.'' State v. MacQueen, 479 S.E.2d 300, 304 (W. Va. 1996).

APPENDIX—TEXAS PLEURAL DISEASE VERDICTS, 1991–1998(see footnote 99)

    As an illustration of the vast difference in pleural disease verdicts between jumbo asbestos consolidations and more traditional adjudications of asbestos-induced damages, the following table compares the pleural disease verdicts reviewed in Cimino v. Raymark Industries, 151 F.3d 297 (5th Cir. 1998), which originated in the Eastern District of Texas and utilized Judge Parker's three-phase method of liability determination, to reported pleural disease verdicts in the state of Texas from 1991 to 1998. The latter category of verdicts comprises verdicts reported in Mealey's Litigation Reports (Asbestos).(see footnote 100)

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    The table below only reflects compensatory (i.e., actual) damages. Unlike awards of compensatory damages, which are consistently given on an individual-specific basis, punitive damages are frequently reported only in terms of the amount doled out among joined plaintiffs. This makes calculation of punitive damages for only pleural disease plaintiffs hard to calculate with any degree of accuracy.

Table 1

    [The prepared statement of Mr. O'Malley follows:]

PREPARED STATEMENT OF MYLES O'MALLEY, CONSUMERS FOR CIVIL JUSTICE


Consumers for Civil Justice,
Trenton, NJ, June 29, 1999.
Hon. HENRY J. HYDE, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.

    DEAR CONGRESSMAN HYDE: As Executive Director of the White Lung Association of New Jersey, I represented several thousands asbestos victims throughout the state. I also serve on the Board of Directors of Consumers For Civil Justice, the most broadly based consumer rights group in the state.

    I am writing in opposition to H.R. 1283, the so-called ''Fairness in Asbestos Compensation Act of 1999.'' I have sought to speak against the bill during Judiciary Committee hearings on Thursday. Since my request comes too late, I wish to thank you and your staff for assuring me that what follows will become part of the record and that copies which I overnight to you will be distributed at the hearing.
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    H.R. 1283 is reminiscent of a long line of asbestos bailout schemes devised by the former manufacturers of asbestos products. This bill notwithstanding, the pillar, upon which asbestos victim litigation has been successfully brought, has not changed over the past three and a half decades. The industry that seeks your protection from our judicial system remains the same industry that knew of the health hazards of asbestos exposure and willfully, routinely, and energetically kept that information from the workers who manufactured and installed their products and from the consumers who ultimately used them.

    Unfortunately, the Supreme Court in its recent Fibreboard decision has unwittingly given some momentum to H.R. 1283. It would be tragic, indeed, if the Supreme Court while rejecting the Fibreboard Settlement because of its inadequate protection of the rights and property interests of asbestos victims infused life into a bill which will prove many times more pernicious to those same rights and interests.

    The ostensible purpose of H.R. 1283 is to reduce markedly the number of tort claims filed against the former manufacturers of asbestos products, while providing fair and timely compensation for asbestos victims. In reality, the bill creates a class of citizens, asbestos victims, whose access to our civil justice system would be rendered far different and greatly inferior to that of all other citizens. It would also create a class of manufacturers—the former manufacturers of asbestos products—who would be afforded an unprecedented level of tort protection. The tobacco industry, I am sure, is keenly watching the fate of this bill. What's good for the goose is good for the gander.

    The right to a jury trial and day in court is as good as eliminated in H.R. 1283, which sets up an industry funded Asbestos Resolution Corporation (ARC). The ARC would require that the asbestos victim obtain a Certificate of Eligibility for his/her claim through meeting unprecedented and onerous medical criteria (discussed below). If the Certificate of Eligibility is obtained, the asbestos victim, who is unsatisfied with the settlement offer, must then submit to mediation. Only after mediation has failed is the victim allowed to file a civil action or proceed to Alternative Dispute Resolution. If the victim was unable to obtain a Certificate of Eligibility, he would have no right to file a civil action in any court, state or federal.
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    The transference of such power to validate or liquidate the assets of victims, i.e., their claim under the law for compensation for injury, from our independent judiciary to a Corporation whose independence would always be suspect because of its funding structure, demands close and careful scrutiny as to both its underlying justification and fairness.

I. JUSTIFICATION

    The asbestos manufacturers who have written this bill contend that asbestos personal injury litigation is ''unfair and inefficient and poses a crushing burden on litigants and taxpayers alike.'' There is little doubt that the defendants and their insurers have had to ante up billions of dollars as the result of asbestos litigation. They get no sympathy from this quarter.

    I have helped too many of my members die and have watched too many widows mourn and adjust, some successfully, some not, to the loneliness of life without a spouse. As for the burden of litigation (court costs largely) which the taxpayer must bear, keep in mind that this is an expense of a democratic society. If there are excesses unique to asbestos litigation, they are largely created by the stalling tactics of the asbestos defendants. In light of these tactics, the claim that asbestos litigation has not been able to provide compensation swiftly, truly bewilders. Once the die establishing the culpability of the manufacturers was cast, and it was cast early on, delay and deception became their overarching strategy.

    Keep also in mind that what economists call the externalization of costs has been put at $ 500 billion for the production of asbestos products. These are the costs which accrue to society at large and which are not paid by the manufacturers themselves. These are the costs associated with loss of income, worker compensation, asbestos related burdens on Social Security, SS Disability, Medicare, Medicaid and other social services, and the cost of asbestos abatement and control in the thousands of buildings where the material is in place and continues to deteriorate. In light of these costs the manufactures' concern for the taxpayer in the present instance hints of the disingenuous.
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    The asbestos manufacturers also contend that 150,000 cases are currently pending and that tens of thousands of new cases are being filed each year, with the inference that these cases will finally be resolved through trial. This is not the case. As the defendants point out, asbestos litigation is a mature tort. This means that most cases are settled out of court with both parties having clear understandings as to the historical value of claims. In fact, the homeostasis wrought by years of litigation would be severely upset by the introduction of a mechanism entirely the product of only one of the parties to the most significant mass tort in history.

    The asbestos manufacturers contend that ''in many courts, the vast majority of pending asbestos claims are filed by individuals who suffer no present asbestos-related impairment'' and that ''these claims divert the resources of defendants from compensating individuals who are suffering from serious asbestos-related disease.'' This statement is not accurate.

    Asbestosis is a compensable disease and is usually accompanied by lung function impairment. Likewise in the majority of pleural plaque cases (72% according to one study) lung function impairment is involved.

    The manufactures' argument is a classic blame the victim argument. Asbestosis victims or pleural plaque victims with slight or no lung function impairment have the audacity, so the argument goes, to file their lawful claims and thus deny fair compensation to those who are really injured. Never mind that as much as 30% or more of their lung tissue might be affected by scarring and that their fiber burden is often in the millions per gram of lung tissue, or that their immune systems are compromised. Never mind that their exposures were known to the manufacturers and could have been prevented. Forgive the incredulity, but I do not believe that if the claims of the so-called non-impaired were wiped out in every state and federal court that the historical value of a mesothelioma case would rise by one penny as a result.
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    The manufacturers also contend that ''in order to obtain compensation for non-malignant disease, claimants often must give up their right to obtain compensation later on, if they develop an asbestos-related cancer.'' The manufacturers have used the fact that asbestos victims are often economically stressed to buy protection against the liability of future asbestos-related cancers. They need to stop this inhumane practice.

II. FAIRNESS

    Claims adjudication under H.R. 1283 is fundamentally unfair and manifestly an industry product:

A. Medical Criteria

    The medical criteria, which must be met for the Corporation to issue a Certificate of Eligibility, are more stringent than would be applied in most state jurisdictions. This is true for pleural plaques, asbestosis, mesothelioma and lung cancer.

    Asbestosis and pleural disease victims must not only have x-rays that definitively show disease but also pulmonary function tests that demonstrate significant lung impairment. The majority of asbestos victims who at present have viable court cases would not meet the bill's eligibility criteria. An individual could have 30% of his lung tissue scarred and lose as much as 20% or more of his lung capacity but not be injured sufficiently to warrant compensation.

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    Mesothelioma victims must meet criteria, that no court requires for the diagnoses of Mesothelioma. First, an invasive procedure must be performed to obtain tissue for microscopic analysis and second the tissue must be evaluated by three Board Certified pathologists, one of whom must be a member of the United State-Canada Mesothelioma Reference Panel. For years courts have recognized that it is not always necessary to subject the mesothelioma victim to invasive procedures and when tissue is obtained, usually upon autopsy, the hospital pathologist is fully qualified to make the diagnosis.

    Asbestos Lung Cancer cases face in most instances insurmountable barriers to claim eligibility. First, the lung cancer claim must be accompanied by a diagnosis of asbestosis or pleural disease which meet the criteria for impairment stated above. The assumption here is that asbestos related lung cancer will not appear if non-malignant disease is not also present. This is simply unscientific. Asbestos exposure is the criterion for establishing a lung cancer as asbestos related.

    All lung cancer claims require the establishment of a minimum 12 year latency period and a minimum of 15 years of asbestos exposure. The latency period is unfair because the duration of latency is associated with the individual's background risk. Thus the older the lung cancer victim is at time of exposure the shorter is the latency period.

    The bill's criterion for establishing 15 years of exposure is unreasonable on many grounds. First, 15 years of exposure is not required to produce lung cancer. Greater intensity of exposure in a short time is just as productive of lung cancer as lesser exposure over a shorter time. Second, the way asbestos exposure is calculated for exposures occurring from 1972 onward is particularly cynical. Each year of exposure that occurred between 1972 and 1976 would count as only year toward the 15 year exposure criterion if the manufacturer could show that asbestos operations complied with the then current OSHA Permissible Exposure Limit (PEL) of 5 million fibers per cubic meter of air. By its own admission OSHA has stipulated that it did not intend for that PEL to substantially reduce the risk of asbestos related cancers. Indeed, at that PEL the risk of death is 150 per 1000 exposed workers for 20–40 years of work. Thus even one year of work at the PEL substantially increases the workers risk of asbestos cancer of all types.
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    If the asbestos victim wishes to have his exposure from 1976 through 1979 count as a full year of exposure, then he, the victim, must demonstrate that the employer's asbestos operations were not in compliance with the then current PEL of 2 million fibers per cubic meter of air. This is virtually impossible. In many circumstances the data does not exist; in other circumstances it does not reflect actual exposures. Even when the data legitimately show compliance with the PEL, the increased risk of lung cancer even for one year of exposure is substantial. A 2 million fibers per cubic meter of air the rate of death is 64 per 1000 workers exposed for 20–40 years of exposure. If the victim cannot show non-compliance with the PEL each year of exposure counts only as year.

    In lung cancer suits this is precisely the kind of information juries need to hear when companies offer the standard regulatory compliance defense. H.R. 1283 raises acceptance of the regulatory compliance defense to the level of law. Indeed the bill goes far beyond that. Exposures that occur after 1979 do not count at all, unless the victim can demonstrate that for most of the year the employer's asbestos operations were not in compliance with the PEL. Thus the bill assumes that all employers are entitled to the regulatory compliance defense without demonstrating compliance. It is the victim's task to rebut.

WWI Shipyard Workers Badly Treated

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

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

C. Elimination of Other Causes of Action

    Many jurisdictions allow damages for emotional distress caused by cancer diagnosis and prognoses of death. H.R. 1283 eliminates such damages.

    It also eliminates compensation for medical monitoring, which is particularly important in light of the increased risk of cancer suffered by asbestos victims.

D. Current & Future Cases

    H.R. 1283 has the audacity to eliminate all currently filed asbestos cases, which have not resulted in a final, non-appealable judgment. Asbestos victims in certain jurisdictions have been waiting years for their day in court. This is unspeakable arrogance.

E. A Legislative Solution to Asbestos Litigation.

    The Supreme Court has strongly encouraged the Legislative Branch to attempt a solution to asbestos litigation. It is not likely that HR 1283 is what the Justices had in mind, since their decision was a carefully crafted appreciation of victim rights. HR 1283 would eliminate all currently filed asbestos cases and at least 80% of future cases that would be viable in state and federal court ( so unreasonable are its medical and exposure criteria) . Any legislated elimination of the property interests of hundreds of thousands of asbestos victims, i.e., the elimination of their right to seek compensation for bodily injury, must guarantee fair and equitable compensation. That means the establishment of a Trust Fund to which the Federal Government, the Tobacco Industry, as well as the former manufacturers of asbestos products must contribute. The US Government must contribute because of the knowledge it had and witheld, of asbestos hazards; the Tobacco Industry because of the synergy between cigarette smoking and asbestos exposure especially in the production of asbestosis and lung cancer. The value of the Tobacco Industry's liability has been set $ 20 billion. The federal government's contribution should be no less. HR 1283 guarantees no such Trust fund and in fact guarantees the distribution of not one penny.
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    In conclusion, H.R. 1283 is the product of an asbestos industry, which has acted unilaterally to construct a totally self-serving deus ex machina. It is an industry that does not need the help, since its insurance coverage is ample to satisfy its present and future obligations. And certain of its members do not see it as a help at all, most notably Owens-Corning Fiberglas.

    As stated earlier I should welcome the opportunity to testify against this bill. Please keep me informed of any future hearings. If any member of the Judiciary Committee desires elaboration on any of the statements made in this testimony I shall be happy to pass on my research.

Sincerely,
Myles O'Malley.


    [The prepared statement of Mr. Johnson follows:]

PREPARED STATEMENT OF ROBERT GRAHAM JOHNSON, M.D., FCCP, CHIEF, DIVISION OF CARDIOTHORACIC SURGERY AT THE BETH-ISRAEL-DEACONESS MEDICAL CENTER, BOSTON, MA

    I am a physician specializing in cardiothoracic surgery. As my attached Curriculum Vitae reflects, I am the Chief, Division of Cardiothoracic Surgery of the Beth Israel-Deaconess Medical Center in Boston, Massachusetts. I am a Fellow in the American College of Cardiology, a Fellow in the American College of Chest Physicians and a Fellow in the American College of Surgeons. Since 1997, I have served as Regent-at-Large, American College of Chest Physicians. I am an Associate Professor Surgery at Harvard Medical School. I have taught and practiced in the area of cardiothoracic surgery for twenty years and am the author of more than one hundred articles and abstracts.
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    I welcome the opportunity to submit to you my written testimony in support of H.R. 1283, the Fairness in Asbestos Compensation Act of 1999 (''Act''). I support the proposed legislation and, in particular, express my endorsement of the medical criteria contained in the Act.

    On a regular basis, I see patients, teach medical students and surgery residents, conduct research and write articles for the scientific literature in the field of chest diseases. Based on this experience, as well as my expertise as reflected in my Curriculum Vitae, I have reviewed the Act, and in particular the medical criteria in the Act. It is my firm conclusion that the medical criteria in the Act fairly and clearly distinguish between those individuals exposed to asbestos who are truly sick and those who are not. The Act's medical criteria reflect the mainstream of medical thinking and ensure that those truly injured as a result of asbestos will be compensated while at the same time it preserves the rights of those who, in the future, develop asbestos-related diseases. Below, I will discuss the medical criteria and the basis for my conclusion that they are fair.

1. Mesothelioma: Mesothelioma is a relatively rare but essentially universally fatal cancer which is usually associated with a history of asbestos exposure. This cancer arises in the pleura which is the lining of the chest wall or the peritoneum which is the lining of the abdomen. The medical criteria described are designed to—and do—establish the reliability of the diagnosis of mesothelioma. The Act refers that the time between the first documented exposure to asbestos and manifestation of the mesothelioma, or the latency period, must be at least ten years. This latency period is, in fact, reasonably generous for the claimants as epidemiological studies indicate that the minimum latency period for the various asbestos-related conditions is generally 15 to 20 years and that the average latency period for these conditions is even longer. For example, the average latency period for mesothelioma is consistently between thirty-five and forty years. See, C.W.R. Parkes ''Occupational Lung Disorders'' 468 (3rd ed.1994).
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2. Lung Cancer: Lung cancer has several known causes, the most common of which is cigarette smoking. The purpose of the lung cancer criteria are to be sure that a potential claimant's lung cancer is in fact related to the asbestos exposure, rather than to smoking or some other factor. It is important for this Committee to understand that the majority of epidemiological studies indicate that ''asbestosis'' is the only risk factor for asbestos-related lung cancer. The majority of these studies indicate that pleural abnormalities by themselves are not associated with an increase in lung cancer. Including these pleural-space criteria in the Act serves to broaden the criteria and increase the number of qualified claimants. See ''Asbestos-Related Malignancy and the Cairs Hypotheses''. Brit. J. Industr. Med. 48, 73 (1991) ''Asbestos, Asbestos, and Lung Cancer.'' Mod. Path. 6, 509 (1993).

3. ''Other'' Asbestos-Related Cancers: There is no consensus in the medical community on whether any ''other'' cancers may be related to asbestos exposure. Considerable evidence exists to suggest that such ''other'' cancers in fact are not caused by asbestos. Nevertheless, there is a contrary opinion among the minority of the medical community. The criteria included in the category are designed to ensure that the claimant has evidence of sufficient exposure to asbestos to make it reasonable to attribute the ''other'' cancer at least in part to asbestos exposure.

4. ''Non-malignant conditions'' The non-malignant conditions criteria are established so that a potential claimant will qualify at the first signs of diminished respiratory capacity due to asbestos exposure. I believe that these criteria fairly described claimants who were exposed to asbestos and have been injured as a result of their non-malignant condition.

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

    It is for these reasons that I unreservedly support the Fairness in Asbestos Compensation Act of 1999.

    Mr. HYDE. Without objection, so ordered, and the gentleman from Pennsylvania is recognized for 5 minutes.

    Mr. GEKAS. I thank the Chair.

    I must tell the panel that the statements of the Justices of the Supreme Court in their various ways of expressing their anguish about this whole issue has great impact on me, and in order to work through this, I would have to essentially reject their arguments before doing something other than working on passage of legislation like is before us now.
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    In that regard, Dr. Oliver, if we would give you carte blanche to write the medical provisions which you criticize and, therefore, give you the right to reflect what you have said in other courts and in other venues. Are there criteria to which you accede, and would you then believe that we are on the right track in proceeding with a national solution?

    Ms. OLIVER. If the medical criteria were acceptable to me and the constitutional rights of the claimants were protected, then I would not have a problem. I think to approach this type of solution is not unreasonable, and so with the caveat that I mentioned, yes, I think I could support such a bill.

    Mr. GEKAS. Well, I am willing to urge my colleagues to change some of the criteria which you find unsatisfactory, like bringing in more occupational medicine experts than normal physicians or internists, shall we say, and the other criterions like on chest X-rays and other bases for making diagnoses, et cetera. What we are trying to do is not to say the medical evidence shall be X, Y and Z. We are saying, let us do a kind of a medical system that will serve all the interests, and I am glad to hear you say that if you could write it, I would hire you today, and we agree to that and have you write the criteria. I would feel better toward moving toward this national solution.

    The other question I have relates to—whether the bell has rung or not.

    Mr. FRANK. It has.

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    Mr. GEKAS [continuing]. Is with Mr. Middleton. Do you regard the statements of the Supreme Court Justices as mere dicta or fluff, or do you believe they are seriously worried about the inefficacy of what is happening now in the asbestos cases?

    Mr. MIDDLETON. Mr. Congressman, I believe that they were concerned. However, I believe that what they look to as a solution in no way approaches H.R. 1283. Justice Souter refers to that study that was published in 1991 which relied upon old data. The litigation has changed dramatically since 1981, 1983, which formed the basis of the Rand study conclusions that was considered by the Rehnquist Commission, although that commission never really met. There was just a paper written and one report made by one judge.

    Mr. GEKAS. I pose the same kind of question to you as I did with Dr. Oliver. If we could hire you today, recognizing that the Supreme Court Justices do believe that a national solution is necessary to this, for you to write those things that you feel are necessary to make it workable, to make this bill workable, you ought to provide us with those kinds of suggestions, should you not? Because you are saying, are you not, that they may be right but they are working on the wrong angle, you are saying, that the Justices are—?

    Mr. MIDDLETON. That is correct. One thing that will not work is making sick people try to jump over this wall that is created.

    Mr. GEKAS. You are saying that this bill does not do it but that a national solution is not out of the question in your mind; is that correct?

    Mr. MIDDLETON. Well, I believe that we have arrived at a national solution. There are responsible companies who have settled hundreds of thousands of these claims privately within the system as it has evolved over the years. We are not relitigating the same issues. The companies are paying the people. The transactional costs are decreased because defense counsel, who was raising the same issues every day, in every case, in every State in this Union, are now out of the system, and those transactional costs are reduced and actually paying the money——
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    Mr. HYDE. The gentleman's time has expired. We have a vote on. So we will stand in recess until 10 minutes after the vote, and we will resume, and I beg your indulgence.

    [Recess.]

    Mr. HYDE. The committee will come to order.

    Mr. Jenkins, you are recognized for 5 minutes.

    Mr. JENKINS. Thank you, Mr. Chairman. Mr. Heyman, I would like to go back and discuss your testimony in a little more depth with you. You mentioned a situation, if I remember, where there were 5,000 cases that were consolidated in one State court.

    Mr. HEYMAN. That is correct.

    Mr. JENKINS. And you indicated that there was perhaps pressure put to defendants to settle cases that you at least felt were not meritorious, along with the cases that you felt were meritorious.

    Mr. HEYMAN. That is correct.

    Mr. JENKINS. Well, now, how would you describe that pressure? How severe was that pressure? And really what I am getting to is, is there a prospect that at least in your mind justice was not being done or is not being done there?
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    Mr. HEYMAN. Well, you know, I think what this example shows is endemic to the system. I am not here to complain about a particular case, and obviously, there are cases that go for you in court and against you in court, but what I am here to say is that the system is broken and that this example that I gave is happening all over America in our courts today, and the problem is that the magnitude of the cases is requiring judicial shortcuts, and it prevents the courts from looking at these cases on an individual basis. If you are a judge or a jury, to have 5,000 cases in front of you, it is obviously impossible to judge those cases on the merits. So the cases get lumped together, and because juries and courts see some people who are sick, there is a tendency to give awards to the nonsick as well. If each of these cases were tried separately, you wouldn't have that problem, but on the other hand, the cases are so voluminous that a judicial system could not handle it, and so that is the nature of the problem.

    Mr. JENKINS. Well, Mr. Middleton, your neighbor for the day told us that there were only 50 asbestos cases that were litigated across the Nation last year. So surely 50 is not an unbearable burden. I sat as a circuit judge, and I know the magnitude of 50 cases in the State courts. We had a circuit judge in the early days when I started practicing who could dispose of five or six condemnation cases, and they are quite different from an asbestos case I understand—but in a single day. But there are ways to get at that short of changing the entire system.

    But in spite of the fact that there were only 50 cases tried—and he also pointed out that no punitive damages were awarded in any of those cases last year. Do you just think it is a system that has created so many cases that we just can't deal with them?

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    Mr. HEYMAN. That is correct, Congressman. I know the main argument of the asbestos trial lawyers is that the system is not broken, although there are many authorities including their own quotes over the years which are contrariwise, but I know their big argument is the system isn't broken because all these cases settle, but that begs the question. The question is, on what basis do they settle? And if these cases settle after 3 or 4 years of being in the courts, after all kinds of motion practice, discovery and so forth taking up judicial resources, if they settle after the sick people must pay their lawyers and transaction costs, 60 cents on the dollar, the dollars expended in the asbestos litigation system, what is great about that system?

    The fact that these cases settle is because the asbestos trial lawyers have such unbelievable leverage in this system that a defendant doesn't have any choice but to give in and settle, and that is the example we had here in this court that I told you about where we went to trial with 12 cases. A number of them were from nonsick plaintiffs. In fact, their own physicians of these plaintiffs testified that the people were not sick, and we got an award of $48 million against us, and now they are looking for a billion dollars for the rest of the cases.

    Mr. HYDE. The gentleman's time——

    Mr. JENKINS. Maybe today's hearing is a good example. I have hours of questions and my 5 minutes has expired, but thank you.

    Mr. HYDE. Yes, it has. Thank you. Mr. Frank is next, however Mr. Chabot asks if he might go ahead. He has a bill he needs to manage on the floor. Would you——
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    Mr. FRANK. A rule on the floor——

    Mr. HYDE. Well, whatever it is, he thinks it is urgent. Mr. Chabot is recognized for 5 minutes.

    Mr. CHABOT. I appreciate Mr. Frank's generosity.

    Mr. Middleton, you stated a little while ago that there are essentially no new questions of law to litigate in asbestos cases and that you spend and other attorneys spend much of their time settling cases. Why is it then that attorneys are still getting upwards of 40 percent for attorney's fees in these cases?

    Mr. MIDDLETON. Let me address that issue, because for 25 years, this has been virtually a world war between the asbestos companies and the victims who have suffered. Every issue is litigated, as I stated, every day in every single case. There was no acceptance of rulings by the industry. We had motions, such as I had an ordained minister who was dying of mesothelioma, Reverend Jack Lee of Georgia. Reverend Lee, we were trying to depose him before he passed away. He had to defend against a motion by the insurance company lawyers representing the industry to not be allowed to call him Reverend Lee on the videotape.

    Now, this is what has been going on for years and years, but the lawyers now, because the transactional costs have been decreased, the staffing requirements to meet the criteria that have been agreed to between the companies and the plaintiffs requires even more staff time because you still have to prove very complex work histories of these individuals who worked at many job sites perhaps throughout the country. You have to prove the medical diagnostic requirements. You have to bring in all of their medical records, and so it requires a great deal of staff time that wasn't necessarily required before in order to get it right. These have been agreed to.
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    Mr. CHABOT. I have got limited time, so let me—I appreciate your answer. Let me address this to Mr. Middleton and Mr. Heyman here on my next question. Mr. Middleton, you have mentioned before and I have seen it in an advertisement that was in some of the papers that Congress sees up here. The rest of the country doesn't see it, but we see all the advertisements up here and these things all the time, and it was stated we don't need legislation here because there were only 55 cases that actually went to trial in the U.S. last year. However, it is my understanding that there are over 200,000 cases across the country that are pending relative to asbestos, thousands of new cases are filed every month. And even though a case may not go to trial, isn't it a fact that there is still considerable court time spent even if it doesn't go to trial, on pretrials, depositions, interrogatories, and many other court type hearings? So isn't it a fact that there still is a substantial burden on the judicial system in this Nation with 200,000 pending cases and thousands of new cases being filed every month, even though most cases are generally somebody surrenders and they just can't afford to go to trial?

    So there is still a considerable burden, and I would ask Mr. Middleton and Mr. Heyman to answer that if they would.

    Mr. MIDDLETON. The fact that there have been 55 trials in 1998 and no award of punitive damages show that the system is working, that you have access to the court——

    Mr. CONYERS. Could you pull your microphone closer.

    Mr. MIDDLETON [continuing]. Can in fact be tried. What this also says is that the system works in another way because employers who pay out workers comp benefits get reimbursed or get a credit for the benefits they pay out under the present system. One example very quickly. The Newport News Ship Building and Dry Dock Company in Virginia received credits out of settlements by the third party defendants, the asbestos companies, totalling the last 12 years of $52.7 million that they would not otherwise receive. Those are credits paid ahead of time, so the employers, the small business people in this country who are employing these people who become sick as a result of exposure to the manufacturer's products, are actually receiving their money faster in this system than they ever would by trying to jump through this bureaucratic nightmare.
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    Mr. CHABOT. Let me ask Mr. Heyman if he would answer that, and also if he could address the fact that I have heard it said that for every dollar that goes to a victim, two dollars goes in court costs and transaction costs and lawyers fees as well.

    Mr. HEYMAN. Yes. Well, now I know why Mr. Middleton is a successful trial lawyer because any relationship between what goes on in the tort system today and his recounting of it is purely coincidental, and his own associates in the American Trial Lawyers have stated, and we have all these quotes and we have handed them out, but Joe Rice is one of the Nation's leading asbestos lawyers. ''The American judicial system has been unable to deal with the volume and complexity of asbestos cases.'' Mr. Ron Motley, ''Asbestos victims are at the mercy of a clogged, paralyzed court system.''

    We just heard from a man who was in the audience here earlier about his problems in collecting, giving the system, and about all these cases that get resolved so efficiently. I can tell you in the last year and a half, 21,000 cases were settled within 90 days of trial.

    If these cases are so simple and there are no issues and there are no punitive damages, then what is the problem with settling them at an administrative facility where we can settle them in 3 or 4 months where you can dramatically slash transaction costs and legal fees? We want to get money to the sick, and this is the whole purpose of this bill. We are plenty willing to pay the sick, but we don't, and the industry and the world couldn't afford to pay every person who is exposed to asbestos but did not get sick from it.

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    Mr. HYDE. The gentleman's time has expired. Mr. Middleton has asked unanimous consent to add to the record an additional statement, and it will be received without objection.

    Mr. MIDDLETON. Thank you, Mr. Chairman.

    Mr. HYDE. You bet. Mr. Berman, the gentleman from California.

    Mr. BERMAN. Thank you, Mr. Chairman. It was pointed out to me, and I was reminded, I had signed a letter indicating opposition to this legislation, and I did, but I want to make it clear that I am not opposed to the idea of a Federal fix to the problem. I mean, I almost don't oppose federalizing anything, on principal anyway. In fact, I am surprised that the Supreme Court that could come down with last week's decisions didn't just solve this problem on their own now that judicial activism is doing so well, but it is the details that concern me and what is in a Federal products liability bill or in a bill like this, and I mean, it gets sort of complicated. I see two very well pedigreed, Boston no less, M.D.s, highly credentialed, coming to totally different conclusions about what I think may be one of the important issues, the question of whether people who are sick—there is a distinction between who are not yet sick and who are sick, but now there seems to be a significant controversy about whether this bill adequately covers the people who are in fact impaired. I was wondering why don't the two doctors go out and agree on a third doctor, and then we will just take what that person says as the final word on this subject.

    When I first heard about this bill, it was put in the context of this Georgine settlement that had trial lawyers and unions and defendants and insurance companies all sort of thinking there was a good way, a good settlement of the case covering some number of victims and that the court refused to accept that, but a staff memo says there are some differences between this bill and that court settlement. To the extent I have time left, I would like to just mention what the memo says and then get the response. I will only mention two or three right at the beginning.
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    One, prospective application. I guess Georgine only applied this to people who became sick or who filed claims after the date the settlement was accepted, whereas this current bill applies retroactively. That is one.

    Secondly, the Georgine settlement allowed both—it only applied to the manufacturers and the plaintiffs who agreed to it and allowed people to opt out by a date certain.

    Three, the Georgine settlement required the asbestos manufacturers to waive all of their traditional defenses, except for product identification and medical criteria, whereas the bill only allows defendants to waive—requires the defendants to waive only the statute of—requires, not allows—requires the defendant to waive only the statute of limitations defense.

    And then State court jurisdiction, well, that gets back—forget that one, because if we are talking about federalizing something, then you federalize it. You wouldn't leave room for State court jurisdiction. But I guess particularly from the proponents of the bill, why are these differences with the Georgine settlement justified?

    Mr. EDLEY. Congressman, if I can try to help with that? The Georgine settlement reviewed by the Supreme Court in Amchem affected only 20 defendant companies, only 20, whereas this bill is universal. So the settlement applied to all the claims that were then pending with the twenty defendants and then claims on into the future. This bill——
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    Mr. BERMAN. It applied to?

    Mr. EDLEY. The pending claims and those into the future.

    Mr. BERMAN. That is what it was a settlement about. I guess I am not sure what that distinction means here. I understand in other words.

    Mr. EDLEY. So this bill similarly would apply substantively to pending claims and then on into the future, although pending claims don't have to go to the arc if they are scheduled for an early trial. So that there is a distinction there.

    The opt-out, I am not quite sure what you mean. I think it is critical to keep in mind that in Georgine there was a limit in the settlement to the number of cases that after they went through the ADR process, there was an annual limit on the number of cases that could then be brought to trial in the tort system. There is no such cap in this bill. There is no annual limit in H.R. 1283 on the number of claimants who can take their cases to court. I think that is critical.

    There is also no limit in this bill, as there was in Georgine, on the number of claims that can be presented to the exceptional medical claims panel. Okay. There is no limit in this bill to the amount of compensatory damages, whereas in Georgine there was a schedule with ranges for the settlement of awards for various claims. There are no such ranges in the statute which leaves claimants free to recover whatever they can. There is no particular protection for defendants on the upside or for claimants on the bottom side. There is mediation, and then the claimant gets to choose between arbitration and going to the court system, and as many as they want to can go to the court system.
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    And so in very substantial respects, H.R. 1283 is more favorable to claimants than the Georgine settlement was. Now, there are some differences that cut slightly the other way, for example, the defenses that you mentioned. Actually, the House bill H.R. 1283 differs from the Senate bill in this respect. The Senate bill adopts the treatment of defenses that was in the Georgine settlement, but frankly it won't work, and the best solution is probably somewhere between, in my judgment, between H.R. 1283 and where the Senate bill is.

    Here is why it won't work. In Georgine, with only 20 defendants, everybody could look and see what kinds of liability the defendants were likely to encounter. They are predominantly manufacturers. The legal—the factual issues were settled. Nobody was arguing about causation, et cetera. In a universal bill, we are going after hundreds, hundreds of current defendants and who knows what other defendants Mr. Middleton and his colleagues will come up with in the years in the future. You cannot anticipate all the possible claims somebody would want to make.

    Give you an example, distributors, people who are merely distributors, under many State laws are not subject to strict liability in certain circumstances. So obviously distributors would want to be able to argue about the terms of the liability in the mediation, arbitration or litigation set up by H.R. 1283. That wasn't an issue in Georgine. You could cut off all of those defenses. So that is something that I think the committee will have to work out, where between what is currently drafted and what is in the Senate bill is an appropriate place to start.

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    On balance though, this bill is more favorable, in my judgment, to claimants than the Georgine settlement was.

    Mr. HYDE. The gentleman's time has expired.

    Mr. BERMAN. It would just be interesting at some point to hear Mr. Middleton's reaction to Mr. Edley.

    Mr. HYDE. By unanimous consent the gentleman is granted an additional 2 minutes, and Mr. Middleton, I guess he wants to elicit your response.

    Mr. MIDDLETON. Thank you, Mr. Chairman. With regards to this proposed bill, it does nothing with regards to the defenses that were resolved by State courts years ago. Those defenses are available at every step in this administrative process to be raised, even the final step. The difference in Georgine was the plaintiffs received benefits, money that was on the table. There is no money on the table here, no guarantees, in exchange for giving up certain causes of action. There were defenses given up. That is simply not the case in this particular case.

    In addition, the reason this bill is not advantageous is because in order to get through this entire process you are going to request 200,000 sick and dying victims to queue up, to start trying to figure out how to go through this process before they can get a certificate even to be able to go to court, a right which is guaranteed by the 7th amendment, and it just doesn't work.

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    Mr. HEYMAN. Mr. Chairman, could I just make one comment in response?

    Mr. HYDE. Surely.

    Mr. HEYMAN. And that is this, and I have heard this from Mr. Middleton on several occasions this morning, the fact that there is no funding mechanism in this legislation. There was no funding mechanism in the Georgine settlement either. There was a cap on the limit of total—the total settlement of a billion, $200 million, but there was no funding there. In fact, that was a favorable item for the defendants that there was a cap. Here, we are going into a system of legislation, we waived any caps in this legislation. There are no caps, and in addition, this legislation is better in terms of the financial responsibility of the defendants for plaintiffs because there is joint and several liability in this legislation, whereas in Georgine there was only several liability.

    Mr. HYDE. All right. The Chair's going to arrogate to himself 1 minute to ask Mr. Edley a question.

    Mr. Middleton has made much several times of jumping through hoops. You have some sick plaintiffs who are fighting the grim reaper, and they have to go through all these hoops. This schematic drawing, have you a comment on that?

    Mr. EDLEY. With some trepidation, Mr. Chairman, I am willing to engage in what really feels a little childish, the charts—the chart game. In my judgment—so I think I have a—I have a silly chart here, also. This system is incredibly simple. It is designed to make it easy to say ''yes'' and hard to say ''no'' to a claimant. That is the bottom line. The claimant submits evidence on medical eligibility which is determined by a claims examiner or, if necessary, a panel of independent doctors. That is step one.
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    Step two, mandatory mediation. If the mediation fails, the claimant gets to choose. Do I want binding arbitration or do I want to go to court. It is very straightforward. Now, you can string out lots of intermediary questions to make it look complicated, but if you read the bill in good faith, there are time limits imposed on the length of mediation. There are time limits imposed for the time it takes to determine medical eligibility. The committee could quite easily redraft it to shrink term limits or whatever.

    When compared to the years that it takes a typical tort claim—and remember, the courts themselves in looking at this have said the typical asbestos claims spend twice as much time in the court system as a typical civil case, even if they do settle on the courthouse steps at the eve of trial—this is simpler. This is why I support the bill. I think people will get paid more quickly and with more assurance and with much less in wasted resources under this proposal.

    It is also worth noting, by the way, that the fact this mechanism would be funded by the defendant companies means that the resources needed in order to make sure the quick time lines are feasible, can be paid for; there will be defendant companies assessed the costs of managing it, and it is not subject to what the appropriators might be willing to permit.

    Mr. HYDE. Mr. Middleton.

    Mr. MIDDLETON. Just one brief response, Mr. Chairman. To this chart, it says the claimant is compensated. There is nothing in this system that guarantees that any claimant is compensated, and nothing could be more obvious than the retention of every single substantive defense by the defendants at the end of the administrative process. If there is a trial, they still have all the defenses. If they are in such good faith, then why are those defenses still available to them to extend the process, to extend and prevent up to 80 percent of the sick people in this country being paid just compensation? And again, that goes back and hurts the mom and pop sheet metal fabricators, the small plumbing companies, the employers that have to pay out the workers' compensation benefits. All this is doing is creating a new Federal bureaucracy that is incredibly difficult for any individual, much less a lawyer, to try to figure out how to get through and all of these people are going to be backed up even if they are at the courthouse steps right now and ready to have rights considered by a jury.
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    Mr. HYDE. Mr. Hutchinson.

    Mr. HUTCHINSON. Thank you, Mr. Chairman. I first want to say that whenever the Supreme Court states that there needs to be some global resolution of this and that, Congress needs to take some action. I think that merits strong consideration by this committee, and I congratulate the chairman for showing leadership in this area.

    Secondly, in reference to the charts, Mr. Edley, you have simplified it. But I assume that at each step of the way there would be discovery devices in the ordinary processes of each of those, which I assume, is the reason for a number of these longer charts here that include a number of different steps. But on the other side of the coin, in my brief reading of the bill, it appears that if there is medical evidence of damage, of health problems and there is a presumption that liability should be imposed, the bill shifts the burden of proof to the company to try to disprove that by clear and convincing evidence. Am I correct there? Am I correct, Mr. Middleton?

    Mr. MIDDLETON. Yes.

    Mr. HUTCHINSON. Mr. Chairman, we have been over that clear and convincing standard before, but I think that there is a presumption that makes it somewhat more easy for the claimants. I am troubled by the compensation issue, and it would appear to me that that could be problematic. Go ahead, Mr. Edley, if you want to say something in response.

    Mr. EDLEY. Thank you, Congressman. Let me make just three quick points. First, remember that this bill is not a settlement. This bill is to create a dispute resolution mechanism that is an alternative to, an improvement on the current method relying upon tort litigation. So there is no pot of money on the table, but there was no pot of money on the table in the Georgine settlement either, and that is a common misconception. As Mr. Heyman said, in Georgine, defendants, defendant companies were successful in negotiating in fact a cap of $1.2 billion a year on the amount of money that they would have to pay out to claims. But there was no trust fund created. The $1.2 billion was a ceiling. There is no such ceiling. I actually think that compensation, timely compensation, is more likely under this structure than under the Georgine settlement.
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    Mr. HUTCHINSON. Let me go to another question I have, and that is looking ahead a little bit. There was a statement that we are going to hear in the next panel that the proposed legislation provides no incentive for impaired qualifying plaintiffs whose cases are pending to participate in the legislative plan, that absent set values and payment schedules, continuing their case in the courts is the only logical course of action. Would you respond to that, Mr. Edley?

    Mr. EDLEY. Yes. First, let me say as a matter of principle and a familiar policy problem for all of you as legislators is the transition, how do you handle the transition from one system to the next system. The 200,000 cases, the elephantine mass that the Justices referred to, how that is going to be handled certainly is a problem, but at a minimum it seems to me applying the eligibility criteria, the medical eligibility criteria to make sure that resources are focused on the sick as opposed to the nonsick is critical.

    Mr. HUTCHINSON. Well, the 200,000 pending cases, according to this statement, there is not a whole lot of incentive for them to leave the current pending case circumstance and move to this massive settlement.

    Mr. EDLEY. Well, particularly for the claimants who are sick, the determination of medical eligibility by expert physicians is likely to come earlier and more quickly unless they have got a trial date scheduled for next week, point number one.

    Point number two, there is a mandatory 60-day period for mediation so they know they can get the defendants to the table, get the individualized focus on what their condition is.
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    Point number three, this is key, defendant companies face a penalty if they don't make a good faith offer in the mediation process. If they make an offer, which ultimately in arbitration or in litigation, turns out to be less than 25 percent of what is received in litigation, the defendants pay a surcharge of 10 percent on top of the award amount. Moreover, the defendant companies have to pay the administrative costs through mediation and arbitration, et cetera. So there is a strong incentive that does not exist under the current system for defendants to come to the table, participate, and make a deal sooner rather than later.

    Mr. HYDE. The gentleman's time has expired.

    Mr. Frank.

    Mr. FRANK. Thank you, Mr. Chairman. Mr. Middleton, I apologize because I had to be over in another hearing, but I did read over your testimony. I understood you to be saying there is no problem now and there aren't—there is no problem with the court system handling this, but I did not see in your testimony reference to what the effect of the most recent Supreme Court decision was. Does that have any effect on the ability of the court system to handle the most recent decisions?

    Mr. MIDDLETON. What the Ortiz case addressed was problems with the class-action mechanism, rule 23, and it said if you are going to have a——

    Mr. FRANK. I know, but do you think that is going to have any effect on the ability to move quickly?
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    Mr. MIDDLETON. No, because—I do not because it is being done by the defendants and by responsible counsel for these many victims throughout the United States.

    Mr. FRANK. What is being done?

    Mr. MIDDLETON. Settlements of these claims are being done.

    Mr. FRANK. I am wondering whether the possibility of class-action might not have influenced settlement. I mean, in other words, the court has taken away one of the factors in this equation. Do you think the court decision is going to have no influence on people's willingness or ability to settle?

    Mr. MIDDLETON. I don't believe so because the companies have entered into agreements that reach into the future. The people representing the plaintiffs have done this in a way that guarantees the viability of these asbestos manufacturers——

    Mr. FRANK. So you think the Supreme Court decision was really irrelevant to this issue?

    Mr. MIDDLETON. No, I don't think it was irrelevant.

    Mr. FRANK. Well, what impact does it have?

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    Mr. MIDDLETON. I think they called for some sort of an investigation into this, but it refers to the National Judicial Conference report in that decision, and in that report, which is often called the Rehnquist Commission, although it never officially met, they called for absolute liability, the application of absolute liability which is a far cry from this——

    Mr. FRANK. So you interpret the Supreme Court decision as saying we should impose absolute liability? That is truly an extraordinary interpretation of that.

    Mr. MIDDLETON. That was the finding of the Rehnquist Commission.

    Mr. FRANK. I see. Can I say something, you know you are a great trial lawyer and I am here schlepping away, so I don't mean to misunderstand you, but I have always found overarguing the case to be a very unpersuasive way to go about it. I am really very skeptical that you really believe that the Supreme Court decision had no more impact than to point us in the direction of absolute liability and that it will have no impact on the court system's ability to process these cases.

    Mr. MIDDLETON. The problem with the Supreme Court decision was on the very same date, it also——

    Mr. FRANK. Excuse me, but why is there a problem? You didn't think it had any impact, so how could there be a problem?

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    Mr. MIDDLETON. Well, the problem is that the decision on the same day by the same court in Alden v. Maine said that the Congress could not impose Federal——

    Mr. FRANK. I know that and we will deal with that elsewhere, but why would it be a problem if it doesn't have any effect? I mean, you said the Supreme Court doesn't really bother you, that decision, in the case involving asbestos.

    Mr. MIDDLETON. I think the decision is a correct analysis of existing class-action law because of its impact upon no opt-out, limited fund class actions. It said if they didn't have—if they hadn't proved that, in fact, there were limited funding and resources available, both from the defendants and from the insurance companies, which were providing them coverage, then they couldn't——

    Mr. FRANK. Let me ask you another question. We have 55 trials, there are 200,000 cases pending. Is that claims pending?

    Mr. MIDDLETON. There are a couple hundred thousand cases pending and——

    Mr. FRANK. Excuse me, Mr. Middleton, please don't volunteer. We have a much lower boredom threshold than your average jury, I think, or at least—I take that back, we have more ability to act on it than the poor jurors stuck in the jury box. So the question I have then is, how long if we don't do anything will it take for those 200,000 cases to be processed, in your judgment?
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    Mr. MIDDLETON. I don't know. I don't know what an estimate——

    Mr. FRANK. No, I don't want you to talk about something else. If you don't know—excuse me—''I don't know'' is a perfectly good answer. It is not offered enough. If you don't know, I will go on to another question.

    Mr. MIDDLETON. Owens Corning has resolved 180,000 of these claims.

    Mr. FRANK. I appreciate that. Although I believe that the fact that there could have been class action suits and other things might have had a role in that settlement process, but we don't know how long the 200,000 cases are going to take. How long would the longest of those claims have been pending, does anyone know? And now let me ask——

    Mr. EDLEY. The longest——

    Mr. FRANK. Of the 200,000 cases pending, would anyone have a sense of what is the median time they have been pending?

    Mr. HEYMAN. Our estimate is about 3 or 4 years, but some could be 6 or 7 years and that even when they are settled, they are settled with the structured payments so that the claimants might not get their full compensation.

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    Mr. EDLEY. I refer to some of the State court docket data in my testimony.

    Mr. FRANK. Another question here, and if I can have one more minute, Mr. Chairman, I thank you.

    When we talk about money, the Federal Government was a big user of asbestos with the ships. Have we gotten off the hook because of the Federal Tort Claims Act and the discretionary—I mean, the Federal Government, am I correct, has contributed nothing to any of this?

    Mr. EDLEY. Right.

    Mr. HEYMAN. That is correct.

    Mr. FRANK. It may be correct, but it ain't right, and let me say in summary, just to tell you what I think about this. Clearly our job is to get money to the poor people who got made sick a lot quicker than we are and everybody else's interest, the trial lawyers and the companies and the judges and everybody else really is minimal in its impact, and I would hope everybody would understand that. This is really not a case for anybody else's turf or professional sense of responsibility or any damn thing else to interfere. We need to figure out how to get the most money to those people.

    Now, I am also prepared to err on the side—you know, we are talking about people who worked hard in an unpleasant set of circumstances, didn't make a lot of dough. I am prepared to err on the side of compensating some who might not have gotten sick rather than to run the risk of not compensating some who got sick, and of course, in any situation where you are dealing with masses, you can't have a perfect one by one. You need to know which way your bias is, and my own sense, Mr. Chairman, now we may lose Mr. Edley if he reverts to his former OMB status, one of the things that might help is for the Federal Government to kick in a few hundred million dollars here. After all, we were a major consumer here. I think it is wholly inappropriate for the Federal Government to sit in judgment and arbitrate between the poor people who get sick after working hard in some of the companies and not be part of it. Yeah, the companies ought to pay something, but I think that might help. I think it might help lubricate it.
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    I am convinced we need to set up an administrative system, and I must say, I think any administrative system is subject to being charted. I think if you charted jury selection, frankly, it would look pretty silly to a lot of people. I mean, if you talk about a trial and you did each jury selection, you could make it look ludicrous. So I think we ought to do this administrative process. We would need expertise about what the medical criteria and how quickly you can go, et cetera, but I would hope that we would also think about having the Federal Government come up to the table and not leave this entirely to the private sector since it wasn't entirely a private sector problem, and I thank you for that.

    Mr. HYDE. Well, the Chair wants to commend Mr. Frank for a succinct, lucid, effective statement, and I would associate myself with it. I think it was exactly right.

    Mr. Cannon.

    Mr. CANNON. Thank you, Mr. Chairman. You have actually taken the wind out of my sails. I thought I was going to be the one next to associate myself with Mr. Frank's statements, a relatively unique event.

    I would also like to associate myself with the comments from my colleague from Arkansas about the Supreme Court position and our burden here and about the charts before us. You know, we have had a sick man here literally crying out for help, and it would seem to me that the thrust of this bill really does in fact shift the incentives so that more people who are sick get money earlier, and that is very important to me.
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    I would like to focus just for a minute if I could by asking some questions of Mr. Middleton, and focus very narrowly on the technical issue of what is the appropriate criteria. Now, Mr. Middleton, you are here today representing the Association of Trial Lawyers; is that not correct?

    Mr. MIDDLETON. That is correct.

    Mr. CANNON. But in the past you have actually represented people who have been sick because of their contact with asbestos?

    Mr. MIDDLETON. I have represented victims since 1979 and continue to do so.

    Mr. CANNON. Now, we got you a document a little bit earlier that shows your sign off on behalf of your clients to the Georgine criteria, and yet on the other hand before us today on page five of eleven of your testimony, you have indicated that the adoption of the medical criteria in this bill, is not medically justified and would do great injustice to a significant number of claimants. Can you explain to us why you signed off then for your clients who you were representing and whose best interest you were pursuing and why now that, what is essentially the same criteria, is not appropriate for this bill?

    Mr. MIDDLETON. I am happy and I am glad you brought that up, Mr. Congressman, because in that settlement it was purely voluntary, and in the language of the settlement statement that your staff member gave me it says that the clients can opt out when that is appropriate. In addition to that, the medical criteria are different from that which are in this bill. One example, there is in this agreement no criteria that there must be 15 years of exposure before someone can be compensated for lung cancer. The medical expertise that has been developed for years shows that much less exposure, even de minimis exposure, can result in people contracting lung cancer from no source other than from asbestos, and they can't be compensated. They are part of the 80 percent that doesn't get through this maze of administrative procedure.
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    Mr. CANNON. Thank you. I just don't think that your answer is responsive, but I see that Mr. Edley has something that he would like to say on this point and I would like to ask you, Mr. Edley.

    Mr. EDLEY. Thank you, Congressman. A couple of very critical points about the medical criteria. First of all, substantively they are virtually identical to what was negotiated, what was agreed upon in Georgine, and I want to stress for the members of the committee that there was a fairness hearing in the Georgine settlement. The trial judge heard extensive medical testimony on the proposed eligibility criteria that distinguish who is sick from who is not sick, and the trial judge ruled, held as a matter of fact, that these medical eligibility criteria would not screen out any significant number of people.

    Moreover, and I am quoting from the trial judge, ''Moreover after reviewing and crediting the testimony of the four medical experts presented by the settling parties, this court finds that Dr. Kilburn's and Dr. Oliver's opinions regarding asbestosis, pleural changes and impairment are in substantial disagreement with many of their colleagues and with a large and well respected authoritative body of medical literature.'' And it goes on.

    The point I am trying to make is there will always be fringe opinions on any issue of science, but the effort in H.R. 1283 is to draw a line between the sick and the nonsick that if anything errs, it's on the side of being overinclusive in providing eligibility to anybody who is plausibly sick today.

    Mr. HYDE. Oh, I am sorry, you still have some time, forgive me.
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    Mr. CANNON. Thank you very much. If I might follow up, Professor Edley, you are talking about fringe opinions. Can you tell us a bit about Dr. Oliver's testimony in the case about the Georgine criteria and did the Court draw a conclusion about that?

    Mr. EDLEY. Well, that is exactly right, Congressman. I think that having heard the opinion of Dr. Oliver and some others and hearing testimony about the weight of the literature, the trial judge held as a matter of fact that these eligibility criteria, which are virtually identical to what is in H.R. 1283, did a good job of being, if anything, over inclusive. The judge wrote, these objectors' opinions are not accepted as persuasive in the context of the task before the Court.

    I should also say that with respect to the counting rules, let us be clear. Lung cancer, because it can be caused by a great variety of ailments, is perhaps the thorniest part of the eligibility criteria, and what these criteria say is if you have asbestosis and lung cancer, no question, you are sick. If you have lung cancer but no other evidence of asbestos-related impairment, then a complicated set of counting rules kicks in to see whether or not you were working in places where the kind of exposure that you received seems plausibly that your lung cancer could be attributable to asbestos. I want to emphasize, however, that the critical thing to accomplish in legislation, Mr. Chairman, is to draw a line between the sick and the nonsick. If you want to change the eligibility somewhat, despite the fact that over and over again in Georgine and elsewhere, plaintiffs' counsels, unions have agreed that this is the way to draw the line, if you want to change it a little bit, I think that would make sense provided you do distinguish somehow between the sick and the nonsick and make it a simple system.
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    Mr. CANNON. Mr. Chairman, may I ask a unanimous consent that members of the committee be allowed to submit questions to members of both panels and that the questions and answers be included in the record of this proceeding?

    Mr. HYDE. You certainly may, and hearing no objection, it is so ordered.

    The gentleman from New York, Mr. Nadler.

    Mr. NADLER. Mr. Chairman, could I ask unanimous consent that before my time kicks in, somebody be granted 2 minutes so that the two doctors, who seem eager to comment on what we were just hearing, can comment?

    Mr. HYDE. Surely. Without objection, Dr. Oliver.

    Ms. OLIVER. Thank you. I would just like to comment on Mr. Edley's previous comments about my testimony in the Georgine trial. That was in 1994 or 1995, and since that time and even at that time there was considerable medical evidence, and there has been increasing medical evidence—for example, to show that asbestosis is not a necessary prerequisite in the mind of many well respected scientific investigators and physicians and——

    Mr. NADLER. Prerequisite for what?

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    Ms. OLIVER. I beg your pardon?

    Mr. NADLER. Prerequisite for what, you said.

    Ms. OLIVER. Prerequisite for declaring lung cancer to be asbestos related. There have been a number of articles that have appeared in the literature since 1995. I appended to my testimony a list of relevant references. I would request that the members of the committee pay attention to those references. Thank you.

    Mr. HYDE. Dr. Epler.

    Mr. EPLER. Yes. Lung cancer, the cause is generally not known, but it certainly occurs in smokers, and then the question is, is it due to asbestos. It has been shown that it is due to asbestosis. Asbestosis is a risk factor which is in the bill, and then there is a question, well, what about just amount of exposure to cause asbestosis, will that cause lung cancer, and the evidence is not there. Scientifically in 1990 a review of 38, 35 studies, 35 of them indicate that you have to have asbestosis as a risk factor. So that is in the bill. But the bill has gone farther than that. It has gone father than what science says, and says, okay, let us take a whole group, that if they have been exposed for 15 years, which is enough to cause asbestosis, let us put it in the bill, and it is relatively simple to determine that 15 years. On the left, you put how many—the years I was employed, and then in the middle you say what I did for a job, and in World War II, you get counted as 4 years because exposure was higher, and then if you were a pipe coverer or someone that worked directly with asbestos, you would get 2 years, and then just general exposure of someone maybe working next to someone else would get one, and you can see you can add up relatively fast the 15 years, and I think this bill gives that that opportunity.
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    Mr. HYDE. Mr. Nadler.

    Mr. NADLER. Thank you, Mr. Chairman. Let me say that I am normally very skeptical of any attempt to restrict access to the courts and to bypass the tort system. I do believe here that we may have an exception. I have been struck in talking to proponents of the bill and to opponents by the fact that this seems to be a mature tort in the sense that we don't have to relitigate in every single case most of the issues. We know that exposure to asbestos produces very ill effects. We know what those ill effects are to a great extent. There is no need to relitigate everything, and I am persuaded by the argument that it makes sense to have a—I think I am persuaded, I should say, that it makes sense to have some sort of a simple administrative proceeding to deal with these claims, so that we can figure out who the sick people are and get them paid and who the nonsick people are and make sure they don't get paid, and we don't want to bankrupt the companies by forcing them to pay people who are not sick and are not going to get sick.

    My question, and let me ask—well, I am not sure who to ask. You pick. This bill seems to me at present overly complicated. For example, why do we need the mediation at all? Why not go directly to mandatory arbitration? Why do we need a court review or maybe we should have a court review at the plaintiff's option? In other words, why can't we have a very straightforward system modelled on the workers' compensation model or modelled on—I am not familiar in detail with it—but modelled on say the black lung situation? Because all you have to answer are really three questions. One, is this person sick? Two, how sick is he, how damaged is he, and therefore, how much should he be paid? And three, who should pay it? Why do we need this whole complicated system set up by this bill for?
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    Mr. MIDDLETON. May I address that, sir?

    Mr. NADLER. Okay.

    Mr. MIDDLETON. We don't believe that you do need this complicated system. There is a system in place with only 55 trials in 1998 we believe——

    Mr. NADLER. Excuse me, let me ask one of the proponents of the bill why we need the complicated system, and then I will ask you whether you think if—my question of you, sir, is if we had a workers' comp or black lung simple administrative system that would decide these three questions quickly and fairly and efficiently, whether you would oppose it, and if so, on what grounds.

    Mr. EDLEY. I think, Congressman, the system is really far simpler than what you would characterize. The reason for mandatory mediation is to make sure that the parties go through a good faith effort of trying to reach a settlement.

    Mr. NADLER. Why should they bother? Why not just have some determiner of fact, you come in and make a claim, that determiner of fact, whoever it may be, an arbitrator, whoever, decides you are sick, you are not sick. If you are sick, this is how sick you are, this is how much money you should get. Why do we need mediation at all?

    Mr. EDLEY. Well, I think that many people would argue that—well, arbitration or litigation in a court is much more expensive than mediation is, and it is in the interest of the claimants to avoid the expense, to avoid the lawyers' time and all the rest of it of going through—remember, arbitration is a form of litigation. It is essentially equivalent to having an on-the-record exchange——
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    Mr. NADLER. Fine, but if the issues are limited, the only issues are, one, is the plaintiff sick, and if so, how sick, therefore, how much should he be paid; and two, who should pay it; in other words, whose factory was he exposed to asbestos in. Why is it so complicated and expensive?

    Mr. EDLEY. Well, I don't think it is that complicated which is why an administrative approach is useful. It is just that it seems to me that you are making it sound as though mediation itself is necessarily complicated or drawn out.

    Mr. NADLER. I am just suggesting there is an unnecessary step here.

    Mr. HEYMAN. Congressman Nadler, I hate to add anything to a professor, but I would just say that the mediation mechanism in this legislation, I understand, was placed in the legislation as furthering the interests of the victims because it is an onerous procedure for the companies. We have to pay penalties if we don't give sufficient offers and so forth, but if the Congress in its wisdom decided that it wanted to eliminate the mediation procedure here, I speak for only one company in the coalition, but I would not have a problem with it, but we were trying to fashion a bill in connection with the people we worked with here in the Congress to make this as fair to victims as possible.

    Mr. EDLEY. You see, I think it is good for the victims.

    Mr. NADLER. Mr. Chairman, could I ask unanimous consent for two additional minutes so that Mr. Middleton can answer the question that I put to him; namely, if we had a simpler administrative system modelled on, say, workers' comp or black lung, would you object to that? If so, why and would that run into a 7th amendment problem?
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    Mr. MIDDLETON. It does invade the 7th amendment, but I would object to anything approaching the Black Lung Act. Black lung has been an unmitigated disaster for the victims and because there is so little money going to the victims that toiled in the coal mines there is virtually no way that they get paid, and there is no way under the Black Lung Act that they can even have an advocate which they should have under——

    Mr. NADLER. And the workers' comp model?

    Mr. MIDDLETON. I am sorry, I didn't——

    Mr. NADLER. A workers' comp model.

    Mr. MIDDLETON. A workers' compensation model would require that the defenses be waived. This bill allows all the defenses to be all the way through.

    Mr. NADLER. Fine. Let us assume defenses were waived. In other words, a workers' comp model, what is your comments on a bill that might be developed along that line?

    Mr. MIDDLETON. I believe it is invasive of the 7th amendment and a right to trial by jury in this particular case. It does not involve payment through the government, but by the culpable parties who manufactured these products. In fact, the Federal Government gets repaid in the other Federal shipyards and at other Federal sites from the guilty people who were the companies that exposed these people to their hazardous products.
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    Mr. HYDE. The gentleman's time has expired. Before recognizing Mr. Vitter, I would just like to say you are absolutely right, Mr. Middleton, in workers' comp you waive all those defenses, but the trade-off is you get a fixed amount of money. It is nowhere near pain and suffering and all the wonderful accoutrements that come in a personal injury case. The trade-off is no defense is a limited recovery.

    And that isn't so here.

    And Mr. Vitter.

    Mr. VITTER. I will pass at this time, Mr. Chairman.

    Mr. HYDE. Very well. Mr. Barr.

    Mr. BARR. I have no questions. I have been following the comments and questions and reading the materials. I think they are very, very instructive. I commend you, Mr. Chairman, for bringing this legislation forward. I think it provides a very good balance between the rights of those who truly have been injured by this particular product and the protections that ought to be afforded companies, corporations that are facing tremendous liability and obviously very drawn out litigation. From having been involved in the legal system, I would suspect that the number that we keep hearing of ''55 cases'' really has been a very, very small tip of the iceberg.

    The problem that this bill tries to address is that a relatively small number of cases go through this entire process each year, but—this entire process. I think what you put forward here, Mr. Chairman, is a very fair proceeding—procedure, a very balanced procedure, and I commend you and hope we move forward with it. I appreciate the testimony of all the panelists, both direct and in writing, as well as the answers to the questions that they provided.
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    Mr. HYDE. The gentleman from Virginia, Mr. Scott.

    Mr. SCOTT. Thank you, Mr. Chairman.

    Dr. Oliver, the mesothelioma, can you get that any way other than through asbestos exposure?

    Ms. OLIVER. In my opinion, the only way you develop malignant mesothelioma is either from exposure to asbestos or from another asbestiform mineral fiber found in the earth. In this country, for all practical purposes, asbestos is the only cause of malignant mesothelioma.

    Mr. SCOTT. So you indicated the arbitrariness of some of these latency periods, the only purpose to be served by the 10-year latency period would be to exclude people that had, in fact, been exposed to asbestos and had incurred the disease.

    Ms. OLIVER. I believe so. Yes.

    Mr. SCOTT. Thank you.

    Mr. Edley, you indicated all these pending cases. How many pending hundreds of thousands of cases are, in fact, inactive?

    Mr. EDLEY. There is no way of knowing, Congressman. And also inactive——
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    Mr. SCOTT. Inactive, when you have to file to save the statute of limitations, and you, in fact, are not sick, and you are waiting to be sick to determine whether you are sick, that that's not clogging up anything, that is just sitting there and not disturbing anybody?

    Mr. EDLEY. I have looked at the State court docket data, and there is no way of telling, Congressman. There is, as you know, an agreement in Virginia that is helpful.

    Mr. SCOTT. Mr. Middleton, in terms of getting to court, how much backlog is there on asbestos cases getting to court compared to a routine automobile accident, personal injury case?

    Mr. MIDDLETON. If you look at other types of personal injury cases that are filed in the same courts, there is absolutely no backlog. Where trials are requested, trials are had. Very few are requested solely for the reason that private means are now resolving these disputes. It is not necessary to try all of these cases.

    I am in a case up in Georgia. We have 6 months mandatory discovery. We can get a case within 12 to 14 months, which is the same as any other civil dispute of any type.

    Mr. SCOTT. We have talked about the Georgine case. In that case plaintiffs could opt out if they wanted to. In this bill do I understand it they cannot opt out under the bill?
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    Mr. MIDDLETON. That is correct. And it is not——

    Mr. SCOTT. If you meet the medical criteria under the Georgine case, did you not, in fact, get money because the liability was determined by market share? You didn't have to prove which company did what? You got your money?

    Mr. MIDDLETON. You got your money because the 20 participating defendants had signed a contractual agreement to make certain that they paid up to a certain amount for each of several years in the future.

    Mr. SCOTT. And under the bill, if you meet the medical criteria, all you get is the right to go find a defendant to try to sue; is that right?

    Mr. MIDDLETON. That is correct, and in addition you have another defense that is placed in the system under this bill, and that is the jury has got to hear the defendants litigate amongst themselves and against the plaintiffs what their market share actually is. That is a defense that is not in the present litigation system, a new and very complicated defense which will convolute the system and——

    Mr. SCOTT. You can't have joint trials, so do I understand it to mean that you have to relitigate each case on the question of liability?

    Mr. MIDDLETON. Every single case that has not gone to final judgment in the United States, even those on appeal from judgments where there is no final judgment, must now back up and start through this system under this present bill.
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    Mr. SCOTT. If you had gotten a jury verdict, if this bill were to pass and be signed under law, would you have to start from scratch?

    Mr. MIDDLETON. It would do away with jury verdicts that victims have received and need to have resolved as quickly as possible by the appellate process.

    Mr. SCOTT. We talked about getting—in your right to a trial that is not hampered, if you are not satisfied with the corporation decision on your medical diagnosis, what effect does the language on page 26 have that says the court shall uphold the determination of the corporation if it is supported by substantial evidence on the record as a whole and not contrary to law? What does that do to your right to have a jury determine the facts in the case?

    Mr. MIDDLETON. It completely exacerbates the right, because your only appeal is from the decision of the medical board itself.

    Mr. SCOTT. What incentive does the manufacturer have to settle the case during the administrative procedure?

    Mr. MIDDLETON. Absolutely none. In fact, they retain every single substantive defense that they had.

    Mr. SCOTT. When do they get to offer those defenses?

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    Mr. MIDDLETON. At each stage when the criteria are being considered, either the medical panel or the mediation or arbitration proceeding, which is mandatory then, which allows for no opt-outs.

    Mr. HYDE. The gentleman from North Carolina, Mr. Watt.

    Mr. WATT. Mr. Middleton, under Georgine, what happens when somebody opts out?

    Mr. MIDDLETON. Under Georgine, if someone opted out, they would retain every right that is guaranteed by the Constitution to go have a jury trial against the consortium of those 20 defendants.

    Mr. WATT. And defendants would retain every legal defense and all parties would just go through the regular process?

    Mr. MIDDLETON. That is correct.

    Mr. WATT. Mr. Edley and Mr. Heyman, what would be the problem with giving plaintiffs the right or employees the right to opt out? What is the problem with that? I think of all the things I have concerns about, requiring somebody to go into a system when they don't want to do it, I mean, I can think of all kinds of reasons that if I were still practicing law, I might discourage a plaintiff or employee from opting out, but that is different from me writing and passing a law that says you are required to stay in. What is the problem with putting some provision in here that allows people to opt out?
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    Mr. EDLEY. Well, Congressman, it depends on what you mean by an opt-out. If the issue is——

    Mr. WATT. I am talking about the same thing that I have been talking about under Georgine. People opt out, and they get the same rights that they have in tort law, and the defendants get the same defenses that they have in tort law.

    Mr. EDLEY. The point of the opt-out in Georgine in a class action was to allow——

    Mr. WATT. I didn't ask that question, Mr. Edley, with all due respect. I am trying to figure out what is the problem with opting out. Why would there be a problem with just striking the provision in this bill that prohibits people from opting out?

    Mr. EDLEY. If by opting out you mean that they don't have to go to ARC at all, ever, that they don't have to go to the agency at all, ever——

    Mr. WATT. That is what I meant.

    Mr. EDLEY. The critical question in this bill, please, it is important to focus, the critical question of this bill is, are you willing to draw a line between the sick and the nonsick?

    Mr. WATT. I am trying to draw a line between people being required to do something and not required to do it, and giving individual employees or people the right to do what they perceive to be in their best interest. I am not trying to draw a line whether they are sick or whether they are well. What I am trying to figure out is what is the problem, if there is a problem, with allowing people to opt out under the regular tort system?
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    Mr. EDLEY. There is a very serious problem if, in fact, you do not adopt a universal solution. If you adopt a universal solution, it means that you are requiring that all claimants after some transition period—that all claimants at least go through this screen of who is sick and who is not sick. The critical point, though, is that in——

    Mr. WATT. Mr. Edley, I understand the consequences. I am trying to figure out what the problem is.

    Mr. Heyman, maybe you can help me.

    Mr. HEYMAN. Maybe I can respond to that. What you are essentially alluding to, Congressman, would be a voluntary system where if someone——

    Mr. WATT. That is right. For people who chose to opt out, they would simply go into the regular tort system. What is the problem with that?

    Mr. HEYMAN. May I please finish my answer? Under that—under what you are suggesting, the sick people would go into ARC and get quick compensation, and the nonsick people would continue to clog the courts with these lawsuits. That is the central problem in this whole asbestos litigation mess. And the point of this legislation is to deal with the nonsick cases and to defer them until they become sick, and then we toll the statute of limitations, and then they can come back. But if you are saying that I am only going to set up this facility to help the sick people get quick compensation, and we are going to continue to sue the pants off you in the tort system with regard to the nonsick cases——
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    Mr. WATT. Mr. Heyman, I am not saying anything.

    Mr. HEYMAN. If I could just finish.

    Mr. WATT. I am just asking a question, and for the life of me, you are trying to make it sound like I am on one side or the other. I am trying to find out why you would deprive a person of the right to make a decision about what is in his or her own interest whether they are sick or well. That is all I am trying to find out.

    Mr. HEYMAN. That is key to the legislation, Congressman, the distinction between sick and nonsick people, and I think the courts and the authorities have spoken out on this issue on numerous occasions, but the system cannot accommodate all the nonsick cases in the system.

    In addition, I just want to point out that under this legislation if you are sick, you have a complete opt-out into the tort system. If you meet the medical criteria, you can go to the tort system. Under Georgine, the only opt-out was the opt-out pursuant to the class action provision, which you have to have, and it only applied up front. Once Georgine was approved and the opt-out period expired, everybody was required to go into Georgine, and there was no opt-out.

    Mr. HYDE. The gentleman's time has expired.

    Does the gentlelady wish to ask questions having——
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    Ms. JACKSON LEE. I would, Mr. Chairman.

    Mr. HYDE. Very well. The gentlelady is recognized for 5 minutes.

    Ms. JACKSON LEE. I thank the chairman very much. As the chairman was getting ready to say, I'm a ranking member on another committee, and we were holding hearings. In fact, I left the committee just a few minutes ago to ensure I would have the opportunity to ask questions this morning, and I think now this afternoon because of the enormous importance of this issue—I would ask Professor Edley, Dr. Edley, if he would put that chart up again and add his chart—I think you have been blocked here for a moment—if you could share that with me. I would like to pursue some line of questioning on the issues that we have been discussing.

    Interestingly enough, as I came in, I heard comments about health, and it seems quite unique that we are here in the Judiciary Committee talking about health issues, but those who may find that unique, we have talked about a variety of issues to improve the quality of health of Americans, and I believe the issue that we are talking about today is to provide and improve the quality of health of Americans and to provide them with what they should come to expect in the most powerful Nation in the world.

    I am noting, I believe, a statement made out of the ad hoc committee dealing with this question some years ago. May I read it for the record: ''the committee firmly believes that the ultimate solution should be legislation recognizing the national proportions of the problem both in Federal and State courts and creating a national asbestos dispute resolution scheme that permits consolidation of all asbestos claims in a single form, whether judicial or administrative, with jurisdiction over all defendants and appropriate assets.''
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    Now, it is interesting that the committee seem to have given two options. One, Dr. Edley, they mentioned your alternative dispute resolution, but they also said then ultimately judicial administrative. We have a document here that is called legislation, and I respect the authors of it. It seems to be focused on getting your local trial lawyer today, because it does not give the option, I understand, to the judicial aspect.

    This seems to be an administrative aspect of which your diagram—and help me understand—gives the opportunity for two approaches depending on what the plaintiff may choose. They can go to a panel of doctors, if I understand you correctly. They can then seek mediation. If they don't like mediation or the results thereof, they can have binding arbitration or offer to go to the courts, is that my understanding of what you are saying, and that would move us along, but it gives them the option. It does not foreclose the option of having a judicial rendering of their particular situation. Could you help me understand that, please?

    Mr. EDLEY. Again, you said it exactly, Congresswoman, which is why I was having trouble answering Mr. Watt's question. Everyone who is sick can go to court if they choose to go to court, but the system is designed to try to encourage, produce incentives for people to avoid that by doing the mediation.

    Ms. JACKSON LEE. Is that in contrast to the bill here, which I understand is strictly administrative?

    Mr. EDLEY. No, this system describes what the bill does.

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    Ms. JACKSON LEE. This system describes what the bill does, so they have an option to go into judiciary at that time?

    Mr. EDLEY. They do.

    Ms. JACKSON LEE. Let me ask Mr. Middleton how he finds that disturbing in the cases that he has.

    Mr. MIDDLETON. I find it extremely disturbing because these diseases are escalating. These people need their day in court. What they don't need are these artificial barriers that are placed in their way before they get there where every defense can be raised, where every impediment that was previously litigated throughout the 50 States and have been resolved amongst most of the parties to the litigation gets in the way. You know who suffers the most? It is the people who are sick, who want to know that they and their families will receive just compensation. Most of them under this scheme, if you back up all these people and start them through this administrative nightmare, they will never have the satisfaction of knowing, Congresswoman, that, in fact, they will receive something, because the defenses are still in——

    Ms. JACKSON LEE. Let's go to the Georgine settlement that I think will help make your point very clear. There was an opt-out provision that at least indicated that both of the parties had to agree. Is that my understanding?

    Mr. MIDDLETON. That is correct.

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    Ms. JACKSON LEE. And this present legislation we don't have the privileges of having both parties agree. There seems to be an absolute. Am I reading that correctly?

    Mr. MIDDLETON. You are, Congresswoman.

    Ms. JACKSON LEE. You don't have to have agreement. It is forced upon you. And how will that impact the sick people that we are talking about? You said it earlier, but how will it impact the sick people we are trying to get at?

    Mr. MIDDLETON. The sick people and their families, who so desperately need the security of knowing that their medical expenses and their lives will be taken care of, that which they always worked for, they need the security of knowing that the system is available, and it is. The 55 trials indicate that there weren't even any trials in any other States. You can get these cases to trial. I have done it many, many times. But someone like Reverend Jack Lee, who I referred to who was dying of mesothelioma and was deposed 3 days before he passed away, if he were in this system, Mrs. Lee, who is a resident of Atlanta, Georgia, to this day would never have known what would happen and he would never have had a clue that he would be taken care of, as would his family.

    Ms. JACKSON LEE. Mr. Chairman, I ask for an additional minute.

    Mr. HYDE. I am afraid not.

    Mr. Edley, do you have a response, and then we are going to adjourn for lunch. It has been a long morning.
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    Ms. JACKSON LEE. I can imagine it has. I just want to clarify that Mr. Lee is not a relative. I thank you.

    Professor Edley, why don't you respond.

    Mr. EDLEY. I just want to make sure that everyone understands that the central focus in this bill, the central focus—the central thing that Congress has to do if it is going to address this mess is to draw a line between the sick and the nonsick. Now, after that line is drawn, whether the claimants solve their problem in an administrative system, in arbitration, in litigation is a wholly separate matter. And if in your judgment you think it makes more sense for claimants who are sick to have to go to the tort system and stand in a queue, then that is fine. I can see you doing that. It still would have been a step forward to at least draw the line between the sick and nonsick. But I submit to you if you are willing to draw that line and then say, if you are sick, you decide; do you want administrative resolution, do you want mediation, do you want to get it done within 3 to 5 months, or instead, do you want to go to the courthouse and wait for years? You know, that would be fine. I think that claimants would by and large choose the administrative system, but the critical line is sick versus nonsick.

    Mr. HYDE. I am with great regret going to reconvene in 45 minutes. I am giving everyone a chance to freshen up, as they say, get a bite. And we have some work to do. There will be a couple of votes on the floor, but we will be back at quarter to 2:00, and I appreciate your indulgence. This panel is finished, and you have done a wonderful job, every one of you, and thank you so much.

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    [Recess.]

    Mr. HYDE. The committee will come to order. I regret the sparse attendance, but we have an important bill on the floor that has captured the interest of many members of this committee, but we will proceed. You have been imposed upon enough.

    Today's second panel consists of four witnesses. Our first witness will be Maura Abeln. Ms. Abeln was appointed senior vice president and general counsel of Owens Corning in 1998 and prior to her position at Owens, Ms. Abeln was vice president and general counsel of General Electric and a partner with the international law firm of Baker and McKenzie. Ms. Abeln is a graduate of Vassar College, received her master's degree from Oxford University in England and received a juris doctor from the University of Miami. As well as bringing her impressive academic and professional credentials, I understand she will provide a unique perspective including her success story of resolving Owens Corning's asbestos liability through private settlements.

    Our second witness will be Mr. Thomas Donohue. He is the president and chief executive officer of the U.S. Chamber of Commerce, which represents three million companies and organizations. Mr. Donohue has also served as the president and chief executive officer of the American Trucking Association, vice president of the U.S. Chamber of Commerce, assistant postmaster general in San Francisco and New York, and vice president of Fairfield University in Fairfield, Connecticut. He is a graduate of St. John's University and received a master's degree in business from Adelphi University.

    Our third witness is Jonathan P. Hiatt. Mr. Hiatt is general counsel of the AFL–CIO. He serves as the executive director of the AFL–CIO Lawyers Coordinating Committee. He sits on the board of directors of the National Employment Law Project and the New York University Center for Labor and Employment Law. Mr. Hiatt is a graduate of Harvard College and Bolt Hall School of Law at the University of California at Berkeley. He has served as general counsel of the Service Employees International Union, was a partner of Angoff, Goldman, Manning, Pyle, Wanger and Hiatt in Boston, Massachusetts.
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    Our last witness for the second panel will be the Honorable Conrad Mallett. Mr. Mallett is the 60th Chief Justice of the Michigan Supreme Court. He was appointed to the bench by Governor James Blanchard in 1990, unanimously elected by his colleagues to chief justice in 1997, and retired in 1999. Justice Mallett is a graduate of the University of California at Los Angeles and received a juris doctor and master's in public administration from the University of Southern California.

    We welcome members of this panel. Your written statements will be made a part of the record in their entirety, and we request that you limit, insofar as you can, your oral testimony to 5 minutes so that we may hear from you all and that the members as they arrive may ask questions.

    We will begin with the panelists as I have introduced them. So Ms. Abeln, will you proceed.

STATEMENT OF MAURA J. ABELN, ESQ., SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, OWENS CORNING, TOLEDO, OH

    Ms. ABELN. Chairman Hyde, members of the committee, on behalf of the 20,000 Owens Corning employees, I want to thank you for the opportunity to participate in today's hearing and discuss with you possible solutions to this challenging problem. I also want to thank you, Mr. Chairman, for your leadership and long-standing interest in attempting to resolve this very important matter.
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    While there are diverse views on the legislation, I share your view that nothing comes close to this complex and difficult mass tort. The Supreme Court in its most recent Fibreboard decision overturned a flawed limited-fund class action. The court does appear to be calling out for legislation. However, the court has not suggested a specific alternative or solution.

    I come here today to suggest that there is a viable alternative to this legislation, a settlement process which protects the rights of individual claimants and permits companies to manage their own financial destiny. I am not here as an advocate for any particular coalition; rather I'm here to explain the National Settlement Program.

    What is the National Settlement Program? It is privately negotiated. It is a voluntary settlement that resolved more than 215,000 pending claims against Owens Corning; and due to the Supreme Court's recent decision in Fibreboard, we have also resolved under the National Settlement Program the Fibreboard claims pending in the system. Owens Corning owns Fibreboard.

    We have also settled with more than 90 law firms around the country. We settled through private negotiations that took a lot of work with each law firm and we negotiated at arm's-length settlement amounts based on type of disease and length of exposure to Owens Corning and Fibreboard's former products.

    We also negotiated fair payment schedules that make it possible for us to pay in installments over the next 2 to 5 years, a very important point from a financial management perspective. We are meeting our obligations to people whose cases are pending today; and in doing so, we will have a more predictable and manageable financial future.
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    In addition, the National Settlement Program establishes a private administrative process efficiently managed by us to process and resolve future claims without litigation. Like Georgine and good aspects of the workman's comp scheme, we have agreed medical criteria values that are determined by us in negotiations with the plaintiffs' lawyers, and we have flexibility to deal with the individual circumstances of future claimants.

    We know that settling the pending cases is going to cost a lot of money. For Owens Corning and Fibreboard together, we will be spending more than $2.5 billion, but we will have eliminated the high cost of litigation, and I assure you they continue. We will also avoid adverse verdicts and appeals, as well as the risk of punitive damages. The NSP has taken us out of trials throughout the country. We are not in trials anywhere and with a few minor exceptions we are no longer preparing for trial. We have settled all of the claims in Mississippi and virtually all in the six or seven other States where there is lots of existing litigation.

    We are doing the right thing for everyone. We are free to proceed without this burden of litigation.

    Other companies are also free to enter into similarly negotiated private settlements, and they are free to fund them. We are not unique. We are looking to a future where, if Federal legislation were enacted, the only benefit that we can see of that legislation is if there were new funding from the government who should share in the responsibility for having specified this insulating material since World War II. The government knew very well of these health problems.

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    In fact, if you look at the legislation, the legislation, while well intended, falls short of the objectives of providing fair and prompt compensation to individuals. Under NSP through good-faith negotiations, we have, in fact, entitled sick people to prompt payment, and we are going to ensure that prompt payment is available for future claimants.

    Individuals are not forced to accept the settlement now or in the future. They are free to opt out, and they may arbitrate with us before resorting to the tort system. We have flexibility to make adjustments for the particular circumstances of each claimant.

    Most of the major substantive provisions in the proposal before us are also included in the National Settlement Program. We have medical criteria which are quite similar and negotiated freely and voluntarily with the plaintiffs' lawyers. We pay no punitive damages. Statutes of limitations are tolled and people are entitled to more money if they get sick and develop more serious diseases later.

    What is different is we are actually settling these cases today for agreed values and payments have begun. The legislation does not provide for those agreed values, and this is what would cause tremendous delay in the system.

    Despite the claim that the Asbestos Resolution Corporation is simple, I disagree. How many hours and mediations will it take to work through the more than 200,000 claims in this process? The tort system also takes time; but it only took us 1 year, 1 year to negotiate the settlement of over 200,000 claims. I suggest that other companies could do the same.

    In a sense, the National Settlement Program deserves serious consideration by all. It is impossible to cover in detail all of its provisions, but I would ask you to permit the private sector to continue to negotiate and resolve this litigation as we are doing.
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    There are a few comments that I would like to make on this specific bill if I may. I notice my red light is on, Mr. Chairman.

    Mr. HYDE. We will be flexible with you, Ms. Abeln.

    Ms. ABELN. Thank you, Chairman Hyde. Owens Corning does applaud the chairman and any other supporters of the proposed legislation for their leadership on this issue. However, many specific aspects of the proposed legislation, while reflecting laudable goals, can either be better achieved by private negotiation among the parties or can be accomplished under existing laws and without the need for further legislation.

    NSP is proof that plaintiffs' counsel and their clients are prepared to enter into voluntary settlements, nontraditional arrangements to resolve large numbers of cases without involving the courts. NSP also demonstrates that there is a mutually negotiated agreement in place and that there is no need for a Federal corporation to impose upon us an additional layer of bureaucracy. This will, in fact, cause real delays; and we are concerned about the people that we have promised to make payments to already.

    The reservations we have about the establishment of the corporation are twofold. A one-size-fits-all approach is not consistent with the sense of a settlement that takes into account individual claimants' particular circumstances. Some individuals are elderly. Some individuals are younger and have many dependents. Some are very sick. Some are sick and could be getting sicker in the future. Our program enables us to sit down with each individual law firm and handle those different circumstances.
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    The medical eligibility criteria we have no difficulty with. However, we do believe that it should be up to the individual involved to accept or reject those criteria as applied to him or her.

    The application to pending claims is most difficult because it does change State substantive law in a dramatically retroactive fashion imposing new rules on State causes of action that not only have accrued but have actually been filed. In many instances, plaintiffs have been waiting for trial for many years.

    The limitations on private litigation that are in the bill seem reasonable, Chairman Hyde, and members of the committee. However, we would suggest that these limitations can be negotiated, as we have done.

    Clearly the biggest drawback for us is the funding, the absence of funding from the Federal Government, and the funding requirements from the existing defendants. The legislation doesn't clearly explain what would happen to the existing defendants in this arbitration process. We have already negotiated the values and the payment terms, and we are afraid that this process would undermine the very negotiations that have taken us a year to accomplish.

    I urge this committee and Chairman Hyde to consider NSP and permit us to continue. Thank you.

    Mr. HYDE. Thank you very much.
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    [The prepared statement of Ms. Abeln follows:]

PREPARED STATEMENT OF MAURA J. ABELN, ESQ., SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, OWENS CORNING, TOLEDO, OH

    Chairman Hyde, Congressman Conyers, members of the Committee—On behalf of the 20,000 employees of Owens Corning I want to thank you for the opportunity to participate in today's hearing and discuss with you possible solutions to this complex and challenging problem.

    I also want to thank you, Mr. Chairman, for your leadership and long-standing interest in attempting to resolve this matter. In 1986, you wrote, ''Nothing in my experience as a lawyer has come close to the avalanche of lawsuits now being brought, pending or yet to be brought, inundating our state and federal courts with claims by workers who say they are or have been injured by excessive exposure to asbestos in the workplaces of the past.'' While there are diverse views on the proposed legislation, I share your view that nothing comes too close to this complex and difficult mass tort.

    The Supreme Court, in its most recent Fibreboard decision, striking down a flawed limited fund class action, appears to be calling out for legislation. However, the Court has not suggested a specific solution. I come here today to suggest that there is a viable alternative to legislation—a settlement process which protects the rights of individual claimants and permits companies to manage their own financial destiny. I am not here as an advocate for any particular coalition. Rather, I come here to explain our National Settlement Program (NSP).
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    What is it? It is a privately negotiated voluntary settlement to resolve more than 215,000 claims pending against Owens Corning and, due to the Supreme Court's decision, resolves virtually all of the claims now pending against our subsidiary, Fibreboard. We have settlement agreements with more than 80 law firms around the country. It took a lot of work to sit down with each law firm, and negotiate—at arm's length—settlement amounts, based on the type of disease and length of exposure to Owens Corning and Fibreboard former products. We also negotiated fair payment schedules that make it possible for us to pay in installments over the next two to five years. We are meeting our obligations to people whose cases are pending today, and in doing so, we have a more predictable and manageable financial future.

    We know what settling the pending cases will cost—for Owens Corning and Fibreboard together, we will pay more than $2.5 billion, but we will have eliminated the high costs of litigation, adverse verdicts and appeals, as well as the risk of punitive damages. We have much more certainty surrounding the future of this litigation.

    We are doing the right thing for everyone—claimants and our company—and we are not unique. Other companies have and are in the process of negotiating similar private settlements of their cases, with similar provisions for the future. If federal legislation brought new funding to help pay the government's share of responsibility, perhaps there would be consensus. Mr. Chairman, and members of the Committee, as you may know, our government specified the asbestos containing insulation product that later caused the health hazards suffered by thousands of Navy and private shipyard workers exposed since World War II. If the proposed legislation streamlined court procedures, or created new rules for resolving cases expeditiously, there may also be consensus. However, this legislation, while well intended—falls short of those objectives. The real problem faced by asbestos victims and companies alike is that there is not enough money available today to pay all of the pending and future claims unless there are case flow and cash management tools negotiated by the parties. Each company has its own unique financial condition, and each company's asbestos history differs. The proposed legislation does not take into account these factors.
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    All that the Supreme Court has said in its recent pronouncements on asbestos litigation is that Rule 23, the class action rule, was not designed to resolve mass torts. Perhaps revision of Rule 23 is an avenue to be explored. The limited fund class action requires a company to be near bankruptcy to avail itself of that vehicle. Even under those dire circumstances, the hurdles for a successful limited fund class action are high, given the difficulty of protecting individual claimants with differing exposures and diseases.

    Under the National Settlement Program, everyone recognizes the value of early payments, much earlier, in fact, than payments following a trial. Everyone also recognizes the importance of preserving Owens Corning's ability to pay qualifying future claims. Thus, the National Settlement Program provides a vehicle for settling future claims without litigation. Individuals are encouraged to settle, but are not forced to do so. They may arbitrate with us before resorting to the court system. We have flexibility to make adjustments for the particular circumstances of each claimant, and we have taken into account the rights of individuals under various state laws.

    Most of the major substantive law provisions contained in the proposed legislation are included in our National Settlement Program. We have medical criteria which are quite similar; we pay no punitive damages; statutes of limitations and statutes of repose are tolled; we provide no recovery for risk of cancer; there is no medical monitoring for exposure only cases; and people are entitled to more money if they later develop more serious diseases.

    What is different is that we are actually settling these cases today for agreed values and payments have begun. While we do not interfere in the attorney client fee relationship—that it to say, we do not cap attorneys' fees, we otherwise have achieved what the legislation attempts to achieve, but without a federal bureaucracy and its attendant costs. There is nothing stopping other defendants in this litigation from entering into similar voluntary settlement agreements.
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    The National Settlement Program allows us to manage our destiny. Historically, prior to the NSP, Owens Corning paid approximately $2.7 billion to asbestos claimants for a product we manufactured from 1958–1972, a product that comprised less than 2% of our revenue for that period. The NSP operates with the understanding that there are limits to how much any one company can afford to pay. The proposed legislation fails to address this issue because it does not establish settlement values. Moreover, the proposed formula for determining how much each defendant company pays is fatally flawed.

    The problems with asbestos litigation are well known. Legitimate recovery of payments to victims has been slow, companies have filed for bankruptcy, courts have been overwhelmed with cases and legislative remedies—never adopted—have differed in philosophy and scope.

    We are proud to report to this Committee significant indicators of early success. To date, under the National Settlement Program, we have settled over 215,000 claims with over 80 plaintiffs' firms throughout the United States. The program creates a private administrative process by which all present and future claims are settled without litigation but with payment terms that make it possible for Owens Corning to continue to grow, and meet commitments to its shareholders and employees.

    Proposed legislation, while well intended, provides no incentive for impaired qualifying plaintiffs, whose cases are pending, to participate in the legislative plan. Absent set values and payment schedules, continuing their cases in the courts is the only logical course of action. Those who go into the Asbestos Resolution Corporation risk being placed at the end of another long line should they deem their settlement offer insufficient.
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    The National Settlement Program deserves serious consideration. It is impossible to cover, in detail, all aspects of our plan in such a short time. I ask that you permit the private sector to continue its efforts to resolve the litigation privately. We welcome any federal government initiative which would provide federal funds to supplement our payments to deserving claimants, or which would otherwise streamline the costly litigation process.

    Again, I thank you Mr. Chairman, and the Committee for the opportunity to participate in today's hearing. I ask that I may submit my written statement for the record and will be glad to respond to any questions from members of the Committee.

ADDENDUM

Introduction

    Owens Corning, headquartered in Toledo, Ohio, is a publicly-held U.S. company, founded in 1938. The Company manufactures composites and building materials, with production and research facilities located predominantly in the United States. We have more than 20,000 employees, the majority of whom reside in Ohio, South Carolina, Texas, Pennsylvania, Florida, Georgia, California and New York.

    The Company's building materials—such as fiberglas insulation, vinyl siding, windows, roofing shingles, and cast stone products—are used in residential remodeling and repair, commercial improvement, new residential and commercial construction, and other related markets; its composites products are used in diverse products in building construction, automotive, telecommunications, marine, aerospace, energy, appliance, packaging and electronics. Our products are widely recognized by our registered trademarks, including the name FIBERGLASS and the color PINK. We are the company people think of when they see the PINK PANTHERTM, a mascot we have licensed for use in our advertising and promotions
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Asbestos Litigation History

    Owens Corning is a co-defendant with other former manufacturers, distributors and installers of products containing asbestos and with miners and suppliers of asbestos fibers in personal injury litigation. Since 1987, the Company has been named as a defendant in almost 400,000 cases. Virtually all of the asbestos-related lawsuits against Owens Corning arise out of its manufacture, distribution, sale or installation of an asbestos-containing calcium silicate, high temperature insulation product, the manufacture of which was discontinued in 1972. The personal injury claimants generally allege injuries to their health caused inhalation of asbestos fibers from Owens Corning's products. Most of the claimants seek punitive damages as well as compensatory damages. But for the operation of Owens Corning's National Settlement Program, described below, Owens Corning would be a defendant more than 200,000 cases that were pending at time of the program's announcement.

The National Settlement Program

    In December 1998, Owens Corning announced its National Settlement Program (the ''NSP''). At that time, we had agreed with more than 50 plaintiffs' law firms to resolve approximately 176,000 asbestos claims against the Company. We had also agreed to resolve more than 100,000 claims against its wholly-owned subsidiary, Fibreboard Corporation, in the event that Fibreboard's global class action settlement, under review by the U.S. Supreme Court, was overturned.

    The NSP also established procedures for resolving future claims brought by plaintiffs' law firms participating in the NSP without litigation. As of June 30, 1999, settlement payments aggregating approximately $1.9 billion will be made over the next two to five years, with most payments occurring in 1999 and 2000. These payments will be made from the Company's available cash and credit resources.
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    The NSP is designed to better manage Owens Corning's asbestos liability, and that of Fibreboard, and to enable the Company to better predict the timing and amount of indemnity payments for both pending and future claims. Under the NSP, each participating law firm has entered into a long-term settlement agreement (''NSP Agreement'') providing for the resolution of claims pending against both Owens Corning and Fibreboard for settlement amounts negotiated with each participating firm. Settlement amounts to each claimant vary based on a number of factors, including the type and severity of disease.

    As is true of the legislative scheme provided under H.R. Bill 1283, the NSP Agreements impose a number of standards and procedures for the review and processing of the cases being settled. All payments to settling claimants are subject to satisfactory evidence of a qualifying medical condition, evidence of exposure to an Owens Corning and/or Fibreboard asbestos-containing product during a defined time period, and delivery of customary releases by each claimant. The NSP Agreements allow claimants to receive prompt payment without incurring the significant delays and uncertainties of litigation. Claimants settling non-malignancy claims may also be entitled to seek additional compensation if they develop a more severe asbestos-related medical condition in the future.

    Like H.R. Bill 1283, NSP Agreements require participating firms to agree to attempt to resolve all future claims outside the courts. Under each NSP Agreement, the participating firms have agreed (consistent with applicable legal requirements) to resolve any future asbestos personal injury claims against Owens Corning or Fibreboard through an administrative processing arrangement, rather than through litigation. Under such arrangement, no settlement payment will be made for future claims unless specified medical criteria and other requirements are met, and the amount of any such payment is based on the disease of the claimant and other factors. In the case of future claims not involving malignancy, such criteria require medical evidence of functional impairment.
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    The medical criteria employed in the NSP are very similar to the criteria proposed in H.R. Bill 1283, and will have the effect of limiting future payments by Owens Corning and Fibreboard only to those claimants who present evidence of an asbestos-related lung disease and, as to non-malignancies, functional impairment. Claims will be processed for payment for both pending and future claims Integrex, a wholly-owned Owens Corning subsidiary that specializes in claims processing and other litigation support services.

    It is anticipated that payments for a limited number of future ''exigent'' claims (principally malignancy claims) under the administrative processing arrangement will generally begin in 2001, while payments for other future claims will begin in 2003. Participating plaintiffs' counsel have agreed that payments for future claims beginning in 2003 and later years will be constrained by the availability of cash flow, rather than the number of claims per year. The restrictions established by the covenants in the Owens Corning's Credit Agreement are designed to ensure the predictability of annual cash outflows for asbestos payments. Owens Corning will not be required to make any payments that would place in jeopardy those financial covenants. The NSP Agreements have a term of at least 10 years and may be extended by mutual agreement of the parties.

    Each NSP Agreement will also resolve claims against Fibreboard. The Supreme Court's recent decision in Ortiz v. Fibreboard Corporation (June 23, 1999) makes it appear virtually certain that the Global Settlement will be finally disapproved by the Courts. If, as expected, the Global Settlement does not receive such approval, a back up Insurance Settlement will become effective. Under the Insurance Settlement (which has received final court approval), Fibreboard will have access to assets of approximately $1.9 billion, to be used to resolve pending and future Fibreboard claims. Approximately $1.0 billion will be devoted to pending claims, and the remainder, plus interest, will be used to satisfy future claims. Each of Owens Corning and Fibreboard retain the right to terminate any individual NSP Agreement, if in any year more than a specified number of plaintiffs represented by the plaintiffs' firm in question opt out of such agreement.
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    Owens Corning believes the NSP is working, and will work in the future, by (i) providing prompt, predictable settlement payments to qualifying claimants who would otherwise wait many years in the tort system to resolve their cases, (ii) providing Owens Corning a much higher degree of financial certainty by allowing it to better predict and control future annual settlement payments and defense costs, and (iii) decreasing the resources used to defend asbestos cases, thus freeing more money with which to pay claimants.

Comments on H.R. Bill 1283

    Owens Corning applauds the Chairman and other supporters of the proposed legislation for their leadership on this important issue. However, in light of the success of the NSP, the Company does not believe that it is either necessary or desirable for the federal government to impose on plaintiffs and defendants a federal administrative scheme of the kind contemplated by H.R. 1283. Many specific aspects of the proposed legislation, while reflecting laudable goals, can either be better achieved by private negotiation among parties to the litigation or can be accomplished under existing laws and without the need of further legislation. The NSP is proof that plaintiffs' counsel and their clients are prepared to enter into private, non-traditional arrangements to resolve large numbers of pending and future cases without involving the courts. The NSP also demonstrates that mutually negotiated agreements among the parties, rather than the creation of a federal corporation and imposition of an additional level of bureaucracy, are achievable. In our view, the NSP represents for all companies a model that could be adopted to end most of the asbestos litigation.

    A voluntary, non-legislative resolution of asbestos cases such as the NSP avoids the many drawbacks inherent in the federal administrative scheme envisioned by H.R. Bill 1283. In particular, a voluntary program involves no government compulsion, no new federal bureaucracy, and no interference with the legal rights of those who do not wish to participate. The NSP raises none of the serious federalism concerns that are presented by the proposed legislation.
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    Owens Corning has the following brief comments on several of the major aspects of the proposed legislation:

    1. Establishment of a Federal ''Asbestos Resolution Corporation''. Owens Corning has reservations concerning the wisdom and workability of creating a federal administrative agency to evaluate and process asbestos personal injury claims. On the basis of its long experience in the asbestos litigation, Owens Corning believes that, as a practical matter, the creation of a federal bureaucracy will prove extremely cumbersome, while failing to achieve anything that cannot be accomplished through private negotiations between plaintiffs and defendants. Claims are currently evaluated and processed by the defendants, each of whom uses a unique system and unique standards—including medical and exposure standards—for determining whether to pay on a particular claim, and, if so, how much to pay. Often, group settlements of cases between defendants and plaintiffs' counsel are achieved on the basis of long-standing relationships, unique historical relationships and unique settlement criteria, and involve trading concessions in order to tailor mutually acceptable arrangements.

    The one-size-fits-all approach of H.R. Bill 1283 is not consistent with this practice, and may deprive parties of the flexibility needed to achieve settlements. Moreover, placing a large federal corporation at the helm of evaluating and processing hundreds of thousands of pending claims—many of which have been in the tort system for many years—will lead to even further delays in resolving the pending cases.

    For all of these reasons, Owens Corning believes that Congress should act with special caution in creating a new administrative regime to deal with asbestos claims. As many Members have recognized, an administrative agency, once created, often takes on a life of its own. Such a new administrative entity may well prove difficult to reform or rein in should it take a different course than its creators intended or anticipated.
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    2. Medical Eligibility Criteria. Owens Corning has long recognized, as do the sponsors of the proposed legislation, that the limited resources available to provide compensation to individuals who are injured as a result of exposure to asbestos-containing products should not be diverted to pay claims of individuals who do not have demonstrable illnesses or actual physical impairment. As illustrated by the NSP, plaintiffs and defendants are capable of negotiating appropriate, mutually agreeable medical criteria that defer claims of those who are not impaired. Their rights are preserved in the event that they become ill in later years. Such a voluntary deferral system does not preclude those claimants who nonetheless want to pursue their claim, even though they do not meet medical criteria. In our view, the NSP is preferable to a compulsory ''one-size-fits-all'' set of requirements imposed by the federal government.

    To the extent that some claimants still pursue litigation, Owens Corning believes that the tools necessary to appropriately prioritize the claims of truly sick plaintiffs already are available to the courts. These include inactive dockets—such as those employed in Cook County, Illinois and Baltimore, Maryland—for the claims of unimpaired plaintiffs, and the prioritizing of more serious claims as in the federal multi-district proceedings. Also, some jurisdictions, such as New York City, have what are called ''in extremis'' dockets for exigent cases of the most seriously ill who are likely to die within six months of an asbestos related disease. These cases are processed quickly to give these claimants their day in court. Most of these cases are settled. These techniques, together with others which have been successfully employed by many courts, provide far greater flexibility than can a federally mandated set of uniform medical criteria.

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    3. Application to Pending Claims. One of the most troubling features of the proposed legislation is its applicability to pending lawsuits. By making the bill's provisions applicable to lawsuits pending at the time of enactment, Congress would in effect be changing, or completely preempting, state substantive law in a dramatically retroactive fashion, imposing new rules on state causes of action that not only have already accrued but have actually been filed. In many instances, plaintiffs have been waiting for trial for many years.

    There are serious federalism concerns any time Congress supercedes state law in areas in which the states have traditionally been free to adopt their own policies. As the Supreme Court made clear just last week in its opinion in Alden v. Maine, the federal government has been granted by the Constitution only ''limited and enumerated powers,'' while a ''vital role'' is ''reserved to the States by the constitutional design.'' These federalism concerns are heightened immeasurably when state law is rewritten with respect to claims that are already in the courts. Moreover, this retroactive feature of the proposed legislation would have the effect of imposing a massive stay on all pending asbestos claims (except those actually on trial). This delays the resolution of these claims for what may be a number of additional years until the new agency is in a position to address the backlog of hundreds of thousands of pending claims.

    4. Alternative Dispute Resolution (''ADR''). Owens Corning is not opposed to the use of ADR to process asbestos claims; on the contrary, the NSP Agreements include a privately-negotiated provision that requests claimants to mediate claims as a precondition to opting out of the program. Moreover, many courts already make effective use of ADR to resolve asbestos cases. However, Owens Corning does not perceive the need or justification for a new and compulsory ADR system under the aegis of a federal administrative bureaucracy.
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    5. Limitations on Private Litigation. Once again, Owens Corning applauds many of the concepts reflected in the current legislation, particularly with regard to those provisions rejecting as inappropriate and unfair the consolidation of large numbers of individual asbestos claims and the continued imposition of repetitive punitive damages awards. Even without new legislation, however, courts have increasingly come to view these aspects of the asbestos litigation as counter-productive and improper. While Owens Corning welcomes further reform in this area, we believe that the creation of a new federal administrative bureaucracy is unnecessary to accomplish these goals.

    6. Funding from Existing Defendants. Owens Corning is particularly concerned with those provisions in the legislation that provide for all funding to be collected from existing defendants in proportion to the number of claims asserted against those defendants. There are two serious problems with this approach.

    First, the legislation ignores the well-documented central role of the federal government in exposing tens of thousands of individuals to asbestos-containing materials. As many Members are aware, although the use of such products was actually required by the federal government through such mandates as the Walsh-Healy Act, the government has invoked its defense of sovereign immunity to escape paying its fair share toward compensating injured plaintiffs. It is particularly ironic that the Congress should now contemplate the establishment of a federal bureaucracy for the resolution of these same asbestos claims entirely funded by private industry. We can not support federal legislation without federal funding.

    Second, the particular funding formula embodied in the pending legislation will have the effect of freezing into place the disproportionate level of payments by a relatively small percentage of the many hundreds of former producers and distributors of asbestos-containing products. Such an allocation is particularly unfair to Owens Corning, which has resolved the vast majority of claims against it and therefore has no need for such a program. Moreover, it is important for the Committee to understand that, although the asbestos litigation originally arose insulators and shipyard workers whose primary exposure involved high temperature pipe-and-block insulation, the litigation has expanded dramatically to encompass a wide range of occupations involving very different product exposures. Unfortunately, the traditional ''pipe-and-block'' defendants have continued to pay far in excess of their fair share in the litigation. No administrative procedure should be adopted that demands continued disproportionate contributions from these traditional defendants while permitting newer defendants, many of whom have substantial resources, to escape paying their fair share.
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Conclusion

    Owens Corning suggests that this Committee give serious consideration to the NSP as a viable alternative to legislation. However, we would welcome the opportunity to discuss our concerns further, and appreciate the opportunity to be heard on this important subject. Thank you for your consideration.

    Mr. HYDE. Mr. Donohue.

STATEMENT OF THOMAS J. DONOHUE, PRESIDENT, U.S. CHAMBER OF COMMERCE, WASHINGTON, DC

    Mr. DONOHUE. Thank you very much, Mr. Chairman. Much of what I was prepared to comment on has been discussed vigorously here this morning, so allow me to highlight a couple of points.

    Asbestos litigation reform is of critical importance to business, to consumers, and to the courts. The whole question of asbestos litigation reform and the urgent need for action by Congress is obvious to everyone that was here. What the argument is now is how do we do this.

    The Chamber has supported previous efforts to reform the asbestos claims process, including the so-called Georgine Administrative Claims Resolution approach. This legislation is a matter of national significance far beyond the simple question of how asbestos exposure claims ought to be administered.
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    It goes to the critical question of who should be able to use and not abuse our legal system to make legitimate claims and collect damages. And we believe very clearly that the U.S. legal system must not be manipulated to allow noninjured claimants to tie up our courts and be rewarded and enriched at the expense of those who are injured.

    This legislation takes away the statute of limitations and says that anyone who meets the medical criteria will be compensated.

    I would also like to associate myself with the comments that have been made about the role of the Federal Government in the asbestos crisis.

    We all know that much of the asbestos that was produced during the Second World War and produced for national defense purposes and produced for our schools, was mandated by the government. And yet, the government has snuck out the back door with very little accountability.

    So the Chamber strongly supports H.R. 1283, the Fairness in Asbestos Compensation Act. The legislation makes a lot of sense. It offers a process to compensate victims more fully, fairly and quickly than the current process. It provides relief for the crowded court dockets. It frees up judicial resources. It focuses on the truly injured rather than allowing noninjured claimants and their attorneys to take a lion's share of the recovery. And, importantly, it offers a national approach for dealing with large numbers of repetitive legal claims.

    We have discussed the process at some length today. There are nearly 200,000 claims in the court. How long does it take to resolve 200,000 issues? At 55 a year, that could take a long time.
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    You heard from Chris Edley and others this morning that more than half of these claims are filed by persons who are not sick. These are staggering numbers, particularly the number of nonsick claimants. The fact that the legislation takes away the statute of limitations proves that this legislation is geared toward those who are truly sick.

    Moreover, defending companies must either knuckle under—this is a point I really want to make—or pay out huge settlements to groups that include nonsick claimants or endure countless individual trials. Using this tactic, nonsick plaintiffs have been able to collect billions of dollars in settlements at the expense of others.

    Mr. Chairman, this is a point, representing American business, that I would like you to personally focus on. The meetings that have been held with some of the lawyers representing the asbestos claimants with American companies and the tactics that have been used to get them to back off this bill or to concede to their demands or face basic elimination of their enterprise deserve to be looked at by your committee and by the people that you employ. It is very troubling to me in a system, a legal system, that gives everyone an opportunity to be heard, and a legislative system, a Constitution that gives everyone an opportunity to petition this Congress that such tactics are allowed.

    I don't think that I should use a good deal of my time here going through what has already been said, but the issue is simple. If somebody is sick because they were exposed to asbestos, they should be paid on a timely basis. They should be paid a full and reasonable amount of money, and they should not be exposed to unnecessary process. If people are not sick, they should not be paid until they are sick.
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    Mr. Chairman, we sent up the Wall Street Journal article outlining some of the concerns I have expressed about the tactics of some of the trial lawyers. And to you and the other members of the committee, I am very impressed with the things you have done on this important issue. I hope you will not only consider the bill, but consider the very thoughtful comments that have been made by others as a way of improving that bill. Thank you very much for your attention.

    Mr. HYDE. I thank you, Mr. Donohue.

    [The prepared statement of Mr. Donohue follows:]

PREPARED STATEMENT OF THOMAS J. DONOHUE, PRESIDENT, U.S. CHAMBER OF COMMERCE, WASHINGTON, DC

    Mr. Chairman and members of the committee, I am Thomas J. Donohue, President and Chief Executive Officer of the United States Chamber of Commerce. The U.S. Chamber is the world's largest federation of business organizations, representing more than three million businesses and professional organizations of every size, in every business sector, and in every region of the country. The Chamber serves as the principal voice of the American business community.

I. INTRODUCTION

    Mr. Chairman, the Chamber is pleased to testify on an issue of critical importance to business, consumers, and the courts—that of asbestos litigation reform and the urgent need for action by Congress. The Chamber has been actively involved in this issue for many years, and has supported reasonable efforts to reform the asbestos claims process.(see footnote 101) This is a matter of national significance that has consequences far beyond the simple question of how asbestos exposure claims ought to be administered. Instead, it goes to the critical question of who should be able to use (and not abuse) our legal system to make legitimate claims and collect damages. We believe that the U.S. legal system must not be manipulated and burdened by a handful of individuals in order to allow non-injured claimants to be rewarded and enriched at the expense of the truly injured.
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    Accordingly, the U.S. Chamber strongly supports H.R. 1283, the Fairness in Asbestos Compensation Act. This legislation makes a lot of sense. It offers a process to compensate impaired claimants more fully, fairly, and quickly than the current process. It provides relief for crowded court dockets and frees up precious judicial resources. It focuses on the truly injured, rather than allowing non-injured claimants and attorneys to help themselves to recovery funds that should go to victims. And it offers a national approach for dealing with large numbers of repetitive legal claims fairly and efficiently.

II. THE ASBESTOS CLAIMS PROBLEM

    The asbestos claims problem is serious: nearly 200,000 asbestos claims are now pending in our courts, and several hundred thousand additional claims will be filed in coming years. Harvard Law School Professors Christopher Edley and Paul Weiler have conservatively estimated that at least half of these claims are filed by persons who are not sick from asbestos;(see footnote 102) most of these will likely never become sick from asbestos. These staggering numbers of non-sick claimants clog the courts and divert the attention of judges, court administrators, and other resources away from other important issues. Moreover, asbestos defendants are forced to either pay out huge settlements to groups that include non-sick claimants or endure countless individual trials. The defendant companies have not been allowed to focus their settlements on sick claimants; they have been compelled to settle with sick and non-sick claimants. With this tactic, non-sick plaintiffs have been able to collect billions of dollars of settlement money at the expense of the victims.

    The problem is compounded by the fact that attorneys take a large share of the available funds. A comprehensive study of the asbestos litigation crisis estimated that some 60 cents out of every dollar paid by defendants goes to pay for lawyers and transaction costs.(see footnote 103) The U.S. Judicial Conference Ad Hoc Committee on Asbestos Litigation appointed by Chief Justice Rehnquist noted that ''transaction costs exceed the victim's recovery by nearly two to one.''(see footnote 104) Because of payments to non-sick claimants, to lawyers, and transaction costs, asbestos victims are deprived of much of the compensation paid by defendant companies. So the question is who really benefits from the current process? Clearly it is not the injured.
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    The asbestos claims process has become a tremendously profitable machine for asbestos plaintiff lawyers, and some have shown that they will go to great lengths to keep their claims machine chugging along. Since most of the original asbestos manufacturers are in bankruptcy, asbestos plaintiff lawyers have had to seek out new defendant companies with, at best, a tangential involvement in asbestos. These have included oil companies, automobile makers, aluminum manufacturers, and a myriad of other large and small companies. Defendants with even more peripheral connections to asbestos will no doubt follow.

    The outrageous tactics some asbestos lawyers routinely use to coerce asbestos defendants into group settlements with non-sick plaintiffs show no signs of moderating. We are strongly concerned that these tactics, honed in asbestos cases, will be used by some abusive trial attorneys against a range of new target industries. Finally, as reflected in the Wall Street Journal and other publications, some trial lawyers are accused of using highly questionable coercive tactics to compel asbestos defendants and elected officials to drop their support for asbestos litigation reform legislation.(see footnote 105) Such conduct is unconscionable.

III. THE FAIRNESS IN ASBESTOS COMPENSATION ACT

    Congress has an opportunity to address this problem directly. H.R. 1283 would establish a national claims facility, administered by a Board composed of individuals appointed by the President and confirmed by Congress, wholly funded by asbestos defendants, to handle asbestos claims. Taxpayers and the courts would be spared the burden of administering hundreds of thousands of asbestos claims. Claimants would be asked to demonstrate exposure-related impairment based on proven medical criteria before bringing a claim. This will eliminate the current problem of non-injured claimants filing lawsuits. Although the claims process will be able to focus its attention on truly sick individuals and avoid rewarding non-sick individuals, any exposed individual would be able to file a claim at any time that he or she can demonstrate impairment under the medical criteria. Attorneys' fees could be collected, up to a very reasonable level of 25% of the recovery amount. By passing this legislation, Congress will ensure that injured claimants will receive compensation faster, that medical issues will be resolved by medical professionals in a non-adversarial process, and that the injured will retain much more of the monies awarded.
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    The courts have indicated strong and continuing support for the concept of a national asbestos claims facility. U.S. Supreme Court Justice Ginsburg has stated that ''a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.''(see footnote 106) Just last week, Justice Souter, writing for the Supreme Court, reiterated that the ''elephantine mass of asbestos cases . . . defies customary judicial administration and calls for national legislation.''(see footnote 107)

    The need for action by Congress is critical. Even the AFL–CIO and the asbestos plaintiffs lawyers recognize the problems with the current system. They gave their support to the administrative claims approach embodied in the ''Georgine'' settlement, which would have worked very much like the process in H.R. 1283.(see footnote 108) Now, it is clear that only Congress has the power to resolve the asbestos crisis.

    While some have argued that the new claims process reflected in H.R. 1283 would create delays for victims and allow defendant companies to escape their compensation obligations, the checks and balances built into the claims facility process will prevent such abuses. It is hard to imagine a claims process that will not do a far better job of fully compensating true asbestos victims than the current system, under which a large share of the compensation funds never reach the actual victims.

IV. CONCLUSION

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    The Fairness in Asbestos Compensation Act is a strong, direct approach to effectively resolving the asbestos claims situation. It is good for asbestos victims, the U.S. court system, taxpayers, and American businesses. It will send a powerful message to those who would abuse our legal system and try to terrorize company after company. The legislation makes a great deal of sense. The U.S. Chamber urges Congress to enact the Fairness in Asbestos Compensation Act without delay.

    Thank you.

    Mr. HYDE. We are going to find out when the cacophony simmers down, what we are doing here.

    We have an important vote on the floor, the Y2K conference report. So if you will bear with us, we will run over and run back.

    Mr. DONOHUE. Mr. Chairman, on that piece of legislation, you have all of our patience.

    Mr. HYDE. Very well. We will be back as soon as we can. We will stand in recess until after the vote.

    [Recess.]

    Mr. HYDE. The committee will come to order and Mr. Hiatt is recognized for an opening statement.
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STATEMENT OF JONATHAN HIATT, ESQ., GENERAL COUNSEL, AFL-CIO, WASHINGTON, DC

    Mr. HIATT. Thank you, Mr. Chairman, members of the committee. I too would like to thank the committee for the opportunity to testify on the issue of Federal legislation addressing the rights of workers suffering from exposure to asbestos.

    Let me start by saying that we agree with the committee—with the views that have been expressed by many members of the committee today and many members of the panel that there certainly is a problem out there, all is not well, and that many victims of asbestos, both those showing signs today and those who will likely be showing signs in the future, are having great difficulty in getting redress.

    However, the AFL–CIO is strongly opposed to H.R. 1283 because we do not believe that that is a solution to the problem and so also is the Building and Construction Trades Department of the AFL–CIO, which has been actively involved over the years in representing workers who have been exposed to asbestos.

    I have attached to my written testimony a copy of a letter from Robert Georgine, the same Georgine that has been referred to many times today, the president of the Building and Construction Trades Department, expressing his opposition to last year's version of this bill, and a copy of a letter from William Bernard, the president of the International Asbestos Workers Unions to yourself, Chairman Hyde, expressing that union's opposition to this bill.
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    The AFL–CIO's member unions represent, we believe, over a million active and retired workers who have been exposed to asbestos. Hundreds of thousands of American working families are living with the deadly consequences of this exposure acquired often while working in defense industries. Compounding this tragedy, the legal system has offered lengthy delays followed by limited compensation, compensation which often comes too late.

    The AFL–CIO and its affiliated unions have been actively involved in efforts over the last 10 years to craft solutions to the tragedy of asbestos. We have sought to work with responsible elements among the asbestos manufacturers, and we continue to be ready to engage in dialogue with the industry.

    There is, we believe, a broad recognition that the plight of asbestos victims might be eased by developing alternative methods of resolving their claims. Currently, efforts are under way among the parties to asbestos litigation to craft innovative voluntary claims procedures at the State level.

    One such agreement has been entered into in Louisiana. These efforts should be allowed to develop and be tested; and to that extent, we join very much in the comments made in Congressman Watt's questioning earlier this morning and in the comments by Owens Corning expressed on this panel earlier that a solution can have the voluntary opt-out component, we believe, and that that is where the starting place of this search for a solution should be.

    The exposure of millions of working Americans to asbestos is one of the largest torts in this Nation's history. There is a real need for innovative approaches, but this must not be the basis for denying those people, the victims, effective access to our courts, much less risking even more difficulty for claimants to have their valid claims satisfied.
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    We are most willing to help craft such an innovative approach, but we have to begin by outlining why the bill before the committee today, we think, takes us in the wrong direction.

    Any asbestos legislation should meet certain basic fairness tests. In that regard, I think we agree with many of those that President Donohue just outlined. The legislation should be structured to lessen the delay and uncertainty facing all parties. Any alternative claims procedure should be minimally adversarial and minimally legalistic.

    Any provisions that seek to alter the financing of asbestos liability should be comprehensive and transparent, should add to victims' recoveries. The legislation should preserve asbestos victims' access to counsel. And finally, as I said at the beginning, the legislation should preserve asbestos victims' access to the courts. Alternative dispute mechanisms should be just that, voluntary alternatives to the courts.

    I would like to briefly discuss why the bill is at odds with some of these principles and the others have been addressed in my written testimony. The bill dramatically restricts both asbestos victims' access to the courts and their substantive rights under State law. It requires victims to file a claim with this new quasi-governmental agency and only allows victims to proceed once they have obtained a certificate of medical eligible.

    But having obtained that certificate isn't enough. The bill then imposes mandatory mediation and requires the asbestos victim obtain a release for mediation certificate. Once the victims have reached a court, they are barred from bringing class actions, joining parties, consolidating actions or aggregating claims, all standard procedures for lessening the costs and time involved in tort litigation unless they obtain the defendant's consent. These procedural barriers significantly diminish asbestos victims' current rights under State law.
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    Ironically, as the bill shuts the courthouse doors to asbestos victims, it creates a new Federal cause of action for the asbestos manufacturers to open up all over again some of the liability issues that have pretty much been completely resolved by now, the efforts to allocate disputed administrative costs among other companies and the like.

    Finally, as to financing, to the extent that the bill acts to limit the liability of asbestos manufacturers, it may merely succeed in transferring the liability to employers under the worker's compensation system and to workers' health fund. Where the Federal Government is the employer, as is the case in Federal shipyards, this will result in direct transfer of financial responsibility to the Federal Government; and where the employer is a Federal contractor, such as in the private ship building industry, the transfer will be indirect but just as real.

    While there may be a role for the Federal Government in assisting victims—and there, too, we think some of the comments with the first panel deserve serious consideration—it shouldn't be a substitute for the liability issues that have been resolved.

    In addition, the bill does not meet the comprehensiveness test to the extent that it fails to address issues such as the failure of the insurance industry to honor its contractual commitments to the asbestos manufacturers. The biggest difference—there has been much discussion of the relationship of this bill and its predecessors to the so-called Georgine settlement—but the crucial difference between the two is that the Georgine settlement was voluntary. This legislation is not.

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    The AFL–CIO affiliates who were involved in the Georgine settlement negotiations opposed this bill. Our opposition shouldn't be interpreted to mean that we believe the current state of affairs is optimal, as I said before. We are deeply concerned about problems with many of the screening programs that settle—result in settlements for workers exposed to asbestos before they know whether they will suffer serious health consequences.

    But rather than proceed in the direction laid out by this bill, we believe the committee would be better served by examining the approach now being worked on between the industry and plaintiffs' representatives and some of the individual company protocols, like the Owens Corning one or the one in Louisiana where manufacturers and attorneys representing a majority of the claimants have worked out a voluntary case resolution system that defines three levels of claims, sets payment levels for each type of claim, assures that the workers—that the victims will continue to have medical testing so that in case they develop serious illness down the road they will not have waived their rights for adequate compensation.

    Lastly, to conclude, Chairman Hyde, and members of the committee, we believe that any voluntary national program along these lines would have to address certain issues that don't arise in a single State, such as the variation in award levels from State to State. It would need to be constructed in the understanding for a voluntary ADR program to succeed, it has to offer value to both sides in potential litigation, value in the form of mutually reduced costs and reduced uncertainty. And if it does that, we believe that that—people would not opt out. Victims would not come back to the tort system in the courts. They would use this voluntary alternative.

    The committee in considering whether to create exceptions to State tort law should be mindful of the incentive that it creates for industrial decision makers. I am sure the committee would not want to suggest to business executives making decisions in the future that if the scale of the risk their product poses is truly awe inspiring, Congress will step in to save them from the consequences of their actions under tort law. And for that reason, we strongly urge the committee to continue on this path to seek creative solutions.
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    We stand ready to join with them in doing so, but we do believe for all of these reasons and those outlined in my written testimony that this is not the appropriate approach.

    Mr. HYDE. Thank you, Mr. Hiatt.

    [The prepared statement of Mr. Hiatt follows:]

PREPARED STATEMENT OF JONATHAN HIATT, ESQ., GENERAL COUNSEL, AFL–CIO, WASHINGTON, DC

    Good morning, Chairman Hyde. My name is Jonathan Hiatt, I am the General Counsel of the American Federation of Labor and Congress of Industrial Organizations. I would like to thank the Committee for the opportunity to testify on the issue of federal legislation addressing the rights of workers suffering from exposure to asbestos.

    The Committee has before it H.R. 1283, the Fairness in Asbestos Compensation Act of 1999. The AFL–CIO is opposed to H.R. 1283, as is the Building and Construction Trades Department of the AFL–CIO, which has been actively involved over the years in representing workers exposed to asbestos. I have attached to my written testimony a copy of a letter from Robert Georgine, the President of the Building and Construction Trades Department of the AFL–CIO, to Congressman Conyers of this Committee, expressing his opposition to last year's version of this bill, and a copy of a letter from William G. Bernard, President of the International Association of Heat & Frost Insulators and Asbestos Workers, to Chairman Hyde expressing that union's opposition to H.R. 1283.
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    The AFL–CIO's member unions represent, we believe, over 1 million active and retired workers who have been exposed to asbestos. Hundreds of thousands of America's working families are living with the deadly consequences of this exposure, acquired often while working in defense industries. Compounding this tragedy, the legal system has offered lengthy delays followed by limited compensation, compensation that often comes too late.

    The AFL–CIO, its member unions, and its affiliated state federations of labor have been actively involved in efforts over the last ten years to craft solutions to the tragedy of asbestos. We have sought to work with responsible elements among the asbestos manufacturers, and we continue to be ready to engage in dialogue with the industry. There is, we believe, a broad recognition that the plight of asbestos victims might be eased by developing alternative methods of resolving their claims. Currently efforts are underway among the parties to asbestos litigation to craft innovative voluntary alternative claims procedures at the state level. One such agreement has been entered into in Louisiana. These efforts should be allowed to develop and be tested.

    The exposure of millions of working Americans to asbestos is one of the largest torts in the nation's history. It has led to hundreds of thousands of claims, and will lead to more. The judiciary has asked several times for Congress to consider how this case load might be managed, most recently in last week's Fibreboard decision.(see footnote 109) However, the need for innovative approaches to obtaining justice for asbestos victims must not be the basis for denying those same people effective access to our courts. The AFL–CIO is eager to work with the Committee to craft such an innovative approach, but we must begin by outlining why the bill before the Committee today takes us in the wrong direction.
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    Any asbestos legislation should meet certain basic fairness tests. Among these are:

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

 The legislation should preserve asbestos victims' access to counsel.

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

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

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

    I would like to briefly discuss why H.R. 1283 is at odds with each of these principles.

    H.R. 1283 dramatically restricts both asbestos victims' access to the courts and their substantive rights under state law. It requires asbestos victims to file a claim with a new quasi-governmental agency, the Asbestos Resolution Corporation (''ARC''), and only allows victims to proceed once they have obtained a ''certificate of medical eligibility.'' Without this certificate, a victim cannot seek justice in the courts. But having obtained a certificate would not be enough. H.R. 1283 would then impose mandatory mediation and would require the asbestos victim obtain a ''release from mediation'' certificate. Once a victim or, more likely in view of the delays these procedures would create, the victims' estate reached a court, they would be barred from bringing class actions, joining parties, consolidating actions, or aggregating claims—all standard procedures for lessening the costs and time involved in tort litigation—unless they obtained the defendants' consent.
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    These procedural barriers significantly diminish asbestos victims current rights under state law. But the bill goes further. It would bar recovery unless victims could prove they had the specific medical criteria listed in the bill. And finally, victims would be barred from seeking punitive damages or relief for emotional distress, medical monitoring or surveillance, increased risk of cancer or other diseases.

    Ironically, as the bill shuts the courthouse doors to asbestos victims, it creates a new federal cause of action for asbestos manufacturers to bring to allocate disputed administrative costs.

    As to the right to counsel, we are not supportive of excessive attorneys fees, but we are all too well aware that unless assured of adequate risk-adjusted compensation, attorneys will not represent clients who are unable to pay hourly rates. H.R. 1283 limits attorneys' fees to levels below those customarily awarded by courts in contingent litigation and the bars on consolidating cases effectively act as a barrier to economical representation of low-paid workers in asbestos cases. This would be appropriate if the bill envisioned a voluntary, non-adversarial process that allowed asbestos victims to obtain justice with limited assistance from counsel and limited fact finding.

    But H.R. 1283 does just the opposite. The certification procedure is substantively rigid and technically demanding, and the mediation and arbitration procedures are highly adversarial and procedurally dense, with financial penalties for taking certain procedural and substantive positions in the process. No one would be well advised to enter into such proceedings without counsel.
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    To take one example, to get through mandatory mediation, the asbestos victim would have to provide a detailed, company-specific exposure history, which would be subject to challenge by industry counterparties. This procedure, rather than eliminating a major cause of litigation expense, adds to it, by requiring asbestos victims to prove their exposure histories twice—once in mediation, then again in court if mediation fails. Ironically, this procedure appears to make no sense if the Act's intention is to address the enormous transaction costs of attempting to precisely prove all the sources of each individual victim's asbestos exposure.

    Finally, as to financing, to the extent H.R. 1283 acts to limit the liability of asbestos manufacturers, it may merely succeed in transferring that liability to employers under the workers' compensation system, and to workers' health funds. Where the federal government is the employer, as is the case in federal shipyards, this will result in a direct transfer of financial responsibility from the asbestos manufacturers to the federal government. Where the employer is a federal contractor, such as in the private shipbuilding industry, the transfer will be indirect, but just as real. While there may be a role for the federal government in assisting asbestos victims, it should not be to use federal dollars to substitute for asbestos manufacturer dollars. In addition, H.R. 1283 does not meet the comprehensiveness test to the extent that it fails to address issues such as the failure of the insurance industry to honor its contractual commitments to the asbestos manufacturers.

    There has been much discussion of the relationship of H.R. 1283 and its predecessors to the Amchem settlement. The crucial difference between the two is that the Amchem settlement was voluntary, this legislation is not. The AFL–CIO affiliates who were involved in the Amchem settlement negotiations oppose H.R. 1283.
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    The AFL–CIO's opposition to H.R. 1283 should not be interpreted to mean that we believe the current state of affairs in asbestos litigation is optimal. We are deeply concerned about the collusion of certain attorneys and asbestos manufacturers in ''screening programs'' that settle cases for workers exposed to asbestos before they know whether they will suffer serious health consequences.

    But rather than proceed in the direction laid out in H.R. 1283, the AFL–CIO believes the Committee would be better served by examining the approach now being worked out between the industry and plaintiffs' representatives in Louisiana. In that state, representatives of some of the major asbestos manufacturers like Owens-Illinois and Owens-Corning and the attorneys representing a majority of Louisiana claimants have worked out a voluntary case resolution system. This system defines three levels of claims, and sets payment levels for each type of claim, together with provisions allowing for higher level claims if the applicants' condition worsens. It creates certainty for all parties that is absent from the procedures in H.R. 1283. Though entirely voluntary, it allows for victims to receive certain and immediate payments, and for defendant companies to accurately estimate their exposure to claims.

    We believe a program like this would be the appropriate context for limiting attorneys fees, since participants in this program would not need extensive adversarial representation or need to engage in time-consuming discovery. Similarly, the Louisiana program should do much to address the screening abuses, as it provides rights to additional compensation to those who have been exposed to asbestos but have not yet become ill.

    A copy of the Louisiana agreement is attached to my written testimony.
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    Any voluntary national program along these lines would have to address certain issues that do not arise in a single state—such as the variation in award levels from state to state. It would also need to be constructed on the understanding that for a voluntary ADR program to succeed, it must offer value to both sides in potential litigation—value in the form of mutually reduced costs and reduced uncertainty. Such a program cannot merely be a vehicle for irresponsible elements in the industry to continue to fight core liability issues that have really long been settled in the hope of winning incremental victories through delay.

    Before I close, I would like to make two larger systemic points. This Committee in considering whether to create exceptions to state tort law, should be mindful of the incentives it creates for industrial decision makers. I am sure the Committee would not want to suggest to business executives making decisions in the future that if the scale of the risk their product poses is truly awe inspiring, Congress will step in to save them from the consequences of their actions under state tort law.

    In addition, the AFL–CIO has always opposed efforts to deny working families access to state courts. The most recent such effort was defeated last year in the Senate.(see footnote 110) H.R. 1283's mandatory provisions are in effect an effort at tort reform one class of plaintiffs at a time. We oppose so-called tort reform both in aggregate and in bite sized pieces.

    In conclusion, the AFL–CIO and its affiliates are ready to work with all concerned parties, and especially with this Committee, to seek creative solutions in this area that are respectful of the rights of asbestos victims. We thank you for the opportunity to testify here today.
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    Mr. HYDE. The Chair recognizes Mr. Conyers.

    Mr. CONYERS. Mr. Chairman, I am happy to add a round of warm welcome to the next witness. The reason that ''honorable'' is before Conrad Mallett, Jr.'s name is that he is the immediate past chief justice of the Supreme Court of Michigan; and I have had the pleasure of working with him in a number of capacities across the years, and we are delighted to have him in this hearing room and anticipate that he will be in and out of it a good number of times.

    Welcome, Conrad.

STATEMENT OF CONRAD MALLETT, JR., MILLER, CANFIELD, PADDOCK AND STONE, P.L.C., DETROIT, MI

    Mr. MALLETT. Thank you, Congressman, very much.

    Members of the committee, I will forego reading to you that which I prepared to say and get right to the issue at hand. Let me, Mr. Chairman, quote Justice David Souter who just last week said: ''This class action is prompted by the elephantine mass of asbestos cases which litigation defies customary judicial administration and calls for national legislation.''.

    Every person, I think it is fair to say, Mr. Chairman, at this table sitting right now agrees that there should be medical criteria in place to evaluate the cases that come before any system, be it voluntary or mandatory; but what each of these persons have said—Mr. Hiatt indicated that he would endorse the efforts of Owens Corning, that he would endorse the efforts of the persons associated with the Louisiana Solomon agreement.
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    Mr. Chairman, Mr. Conyers, I would point out that those agreements contain medical criteria identical to that which is contained in H.R. 1283.

    Now, Mr. Chairman, that is not accidental. As I understand it, those persons who crafted this bill looked to all of the various settlement agreements that existed, examined extensively that which was written in the Georgine settlement and said what we need to do today is to make that settlement agreement better. We do need the predictability that comes from medical criteria. We do need to be able to draw a bright line that will allow those persons administrating the system to separate persons who are sick from those persons who are not.

    The persons at this table, it seems to me, if I heard them correctly, agree that medical criteria is critical. If we focus then only on the question of voluntariness, Mr. Chairman, half of the work of the committee is done. It seems to me that important members of the community, both producers, business and labor, have agreed that medical criteria is important and that the sick should be paid and that those persons who are not sick should wait their turn. If that is true, Mr. Chairman, I would suggest to you that the committee is halfway home.

    As we get to the question of voluntariness, what do we mean by that? Voluntariness as to what? Now, I thought I heard my colleague on the end say that she thought that the medical criteria itself should be voluntary. Now, Mr. Chairman, that is a difficult concept.

    As I understand it, all of the various companies who are members of the coalition would establish relationships with and contact with all of the various persons who represent injured workers. They then would agree between themselves that they would apply the medical criteria, duplicate it in the NSP program and in the Louisiana program and contained in H.R. 1283.
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    Now, Mr. Chairman, what happens if they can't agree? What happens, Mr. Chairman, if the general counsel of Owens Corning—and I know that this is never going to happen—but what if the general counsel of Owens Corning changes? What if the general counsel does not bring to the process of analysis the same goodwill currently contained by my colleague at the end? What if that general counsel says I want to go to court? What if that general counsel says the medical criteria contained in the bill in H.R. 1283 is too generous, that the NSP program is inappropriate, that the Louisiana program is nonfunctional? What if someone does not bring to the process, Mr. Chairman, the goodwill appropriate to resolving these cases?

    This situation cries out for an institutional response so that persons who are responsible for dealing with shareholders, members of the board, injured workers, all can say at the end of the day this is what is going to happen; not that it depends on the goodwill of persons who you know or do not know; not that it depends on the current status that Mr. Hiatt will be in his position and that Ms. Abeln will be in her position, but what it means is that there is a reference point for all of the parties associated with this process and can refer back to and say this is the measure against which all of the claims will, in fact, be evaluated. Mr. Chairman, that is critical.

    Everyone agrees there should be medical criteria. How can it be that if we agree medical criteria should exist, that it is going to agree in case A but not in case B? This is about establishing a regimen. According to the United States Supreme Court, Ruth Bader Ginsburg, the argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, most fair, and most efficient means of compensating victims of asbestos exposure.
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    Thank you very much.

    Mr. HYDE. Thank you very much, Judge.

    [The prepared statement of Mr. Mallett follows:]

PREPARED STATEMENT OF CONRAD MALLETT, JR., MILLER, CANFIELD, PADDOCK AND STONE, P.L.C., DETROIT, MI

    January 4,1999 marked officially the day I retired from the Michigan Supreme Court. I served the people of the State of Michigan for eight years, the last two years as the Chief Justice. Twice nominated by the Michigan Democratic Party, and twice elected by the people of the State of Michigan, I have, throughout my career, approached justice system modification, cautiously and carefully. During my tenure on my state's highest court I was, however, keenly aware of my responsibility to be sure the court system functioned efficiently. I was intrigued therefore, when I was contacted by the former general counsel of a major Fortune 500 corporation, based in Michigan, who described to me the tremendous problems companies like his were still experiencing because of asbestos litigation. He indicated that a group of companies, had formed a government action coalition, whose mission was and is, to present to Congress, a workable administrative solution, to the asbestos litigation crisis. I am the Chairman of the Coalition for Asbestos Reform (''CAR''), whose members now include the GAF Corporation, the United States Chamber of Commerce, the National Roofing Contractors Association, the Automobile Parts and Accessories Association, the Associated Builders and Contractors, Citizens Against Government Waste and many other groups spread out across the country. I do not work for the federal government nor have I received any federal grant, contract or subcontract, in the current or preceding two fiscal years.
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    Prior to my association with CAR, I was a justice system professional, clear that exposure to asbestos claims, had been a nationwide, court system, management problem, for twenty five years. In Michigan, we like every other state court, had during the late 1970s and 1980s, redesigned many of our court service delivery systems, to handle the huge number of asbestos cases, filed. In our case, the major battle ground for this kind of case, was the County of Wayne. In order to be sure that our service system functioned properly the Michigan Supreme Court, through the State Court Administrators office, assigned to hear these cases some of our best, most experienced trial court judges. The system implemented performed admirably. The problem of course, was that some of our best judges were managing case flow as opposed to making reasoned decisions, regarding difficult facts and complex areas of the law. The problem of course was that tax payers both individual and corporate, were deprived of the services of some of our best and brightest judges. The problem of course had everything to do with the fact, the trial courts of this land are not designed to handle thousands of cases, filed at the same time, against the same defendants. It is not accidental that administrative systems like workers compensation, unemployment compensation and the social security administration function in place of the courts when the case load strips the trier of fact of her ability to do her job appropriately. The judge's central function is to assist society, through the court system, to discover as best it can, the truth of the matter, before the court. We in the Michigan court system, did not then and do not now have the person power to run a workers compensation system. No one could seriously argue that worker compensation cases present the same level of difficulty as asbestos cases. If the courts are not equipped to handle thousands of workers compensation cases, how could anyone expect the court system to handle fairly and efficiently thousands of asbestos cases.

    Two federal district courts attempted to resolve the asbestos litigation crisis. The first attempt, occurred in Amchem Products, Inc. v. Windsor, 157 FRD 246 (ED PA 1994) and the second attempt, occurred in Ortiz v. Fibreboard Corporation, 162 FRD 505 (ED Texas 1995). Both cases were appealed twice and ultimately both cases, were overturned by the United States Supreme Court. Writing for the majority in Amchem, Justice Ruth Bader Ginsburg also said:
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''The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair , and efficient means of compensating victims of asbestos exposure''.

Writing for the majority in Fibreboard, Justice David H. Souter said:

This case is a class action prompted by the elephantine mass of asbestos cases . . . which litigation defies customary judicial administration and calls for national legislation . . . To date Congress has not responded.

    Please do not be misled: Asbestos litigation is different from all other mass tort litigation. Plaintiffs sometimes suffer from similar but not identical injuries resulting from different periods of exposure to different products and reports vary from fatal cancers to mild impairment of lung capacity to no impairment at all. Let me quote United States Supreme Court Justice Stephen Breyer, who wrote in the Amchem case:

''Between 13 and 21 million workers have been exposed to asbestos in the workplace—over the 40 or 50 years. The most severe instances of such exposure probably occurred three or four decades ago. . . . About half of the suits have involved claims for pleural thickening and plaques—the harmfulness of which is apparently controversial. One expert testified below that they do not transform into cancer and are not predictors of future disease. Up to one half of asbestos claims are now filed by people who have little or no physical impairment. Many of these claims produce substantial payments and substantial costs even though the individual litigants will never become impaired.''
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    I believe it is fair to say that the Unites States Supreme Court agreed with the United States Court of Appeals for the Third Circuit, when that court said:

Asbestos litigation has burdened the dockets of many state and federal courts and has particularly challenged the capacity of the federal judicial system. The resolution posed in this settlement is arguably a brilliant partial solution to the scourge of asbestos that has heretofore defied global management in any venue.—

    The Third Circuit acknowledged that the asbestos litigation crisis required ''innovation in the management of mass tort litigation . . . But reform must come from the policy makers, not the courts.'' What the United States Supreme Court; the United States Courts of Appeal for the Third and Fifth Circuit ; The Supreme Court of the State of Texas; The Supreme Court of the State of New Jersey and numerous federal district courts suggest be established, is a claim and recovery system that is fair to both parties.

    The Coalition for Asbestos Reform agrees with Herbert E. Millstein and Gary E. Mason, specialists in class actions when they wrote in the New Jersey Law Journal, in August 1997 that ''. . . resolution of the [asbestos litigation] dilemma lies not with the judiciary, but with Congress.''

    I think it important to point that the vast majority of these cases settle. In fact, I would venture to say that 99% of these cases settle. Persons will certainly argue that the settlement rate is proof positive that the system need not be changed. Think about a system that is supposedly adversarial, where 99% of the case settle. That settlement rate is duplicated nowhere else in the justice system ,if excluded from the analysis are family law and prisoner related cases. According to the National Center for State Courts, in a survey conducted in 1992, of the total civil cases filed, only 61% of the cases settled. According to survey of federal cases disposed of in FY–1996 and FY–1997 only 35% of the cases filed, settled. I am certain, that interested persons could, if called upon, produce different numbers taken form different surveys. No one, I am certain, can produce survey results, from any where, that will show settlement rates in excess of 75%. There is indeed, in the asbestos litigation justice subsystem, a lack of balance in the bargaining power of the parties and the lack of balance, is caused sometimes, by the courts.
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    Be assured, not every case brought by attorneys representing claimants is a sure fire winner. Ask yourself, if it is true persons who suffer no injury, are being compensated, why are not the defendants demanding these case be tried. My response is based on personal supposition and documented evidence. Think about a county circuit judge who has dropped on her 5,000 cases all at the same time. Just so you don't think the judge is lazy, if she scheduled all 5,000 cases for one week trials, she would not complete her task until the year 2095. The judge's first thought then is ''How do I handle these cases quickly and efficiently?'' The judge does not purposely ignore, fairness and truth, but the demands of the system require speed and dictate case consolidation even where the rules may not allow joinder. I am a defender of trial court judges. As the former Chief Justice of the State of Michigan Supreme Court I am proud of the fact I was able to secure for the trial court judges in my state a pay raise of almost 10%—the first pay raise after a pay freeze, for most that lasted five years. But the fact remains institutional pressure is exerted so that the court house, is not consumed by one set of litigation matters that threaten the entire operation. The key is docket management and process. One of the tools trial court judges are expected to use is the power of their office. Parties are required to cooperate with the judge in the management of the docket and are expected to settle cases whenever possible. Confronted with 5,000 cases no judge is going to long let the parties pick and choose which cases are going to be tried and which are going to settled. Even when the judge is operating in good faith case consolidation is a key management tool that must utilized ruthlessly or not at all.

    Recent litigation in Mississippi provides the most vivid example of the pressure that trial courts can place on defendants to settle cases by rule manipulation so as to permit mass adjudication of asbestos claims. Cosey v. E.D. Bullard Co., Civ. No. 95–0069 (Miss. Cir. Ct. Jefferson Cty) was filed in July 1995. The original complaint joined 995 plaintiffs, who alleged exposure to silica and asbestos at one or more of more than 300 work sites both in and out of Mississippi over a 56-year period.
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    Joinder of all these factually unrelated claims was clearly inappropriate under Rule 20 of the Mississippi Rules of Civil Procedure, which is identical to federal Rule 20. The plaintiffs' claims did not arise from any common transaction or occurrence, or series of transactions or occurrences. Nor did the plaintiffs identify any issue of fact or law common to all the plaintiffs or all the defendants. Given the wide disparity in the plaintiffs' claims, individual issues substantially predominated over common issues. Nonetheless, the trial court steadfastly refused all efforts to sever the case into separate claims.

    Because of the peculiarities of Mississippi's venue law, this misjoinder had important procedural consequences. Mississippi's venue rules permit a plaintiff to sue an out-of-state corporation in the plaintiff's home county. In Cosey, only 22 of the original plaintiffs resided in Jefferson County, where the action was filed. Indeed, only about half the plaintiffs even resided in Mississippi. But the Mississippi Rules provide that ''where several claims or parties have been joined, the suit may be brought in any county in which any one of the claims could properly have been brought.'' Miss. R. Civ. P. 82(c). By joining all of their claims together under Rule 20, plaintiffs were thus able to file in any Mississippi county where any plaintiff resided. Had the court enforced the joinder requirements, most of these claims could not have been brought in Jefferson County, and would have been transferred elsewhere.

    The trial court in Cosey allowed plaintiffs to amend their complaint several times to join additional plaintiffs or defendants. Ultimately, the case involved more than 1,700 plaintiffs and 178 defendants. Trial of such an unwieldy group of claims raised obvious management problems. Rather than trying to conduct a ''common issues'' trial, the court's solution was to schedule a series of trials disposing of all issues as to particular groups of plaintiffs. The court allowed plaintiffs to select an initial group of twelve plaintiffs. None of the twelve resided in Jefferson County.(see footnote 111) Trial was conducted from May 6, 1998 until June 12, 1998. On that day, the jury returned a verdict of $48.5 million in compensatory damages alone—an extraordinarily high figure, given the weakness of the plaintiffs' claims. Only four of the twelve plaintiffs had even alleged asbestos related malignancies. The remaining eight claimed only asbestosis, a non-malignant scarring of the lung, and in two of those cases, no symptoms and no chest x-ray abnormalities were detected. Faced with such an astronomical and irrational verdict, all of the defendants settled these twelve claims before the jury could return a verdict on punitive damages.
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    The trial court judge exerted considerable pressure on the defendants to settle not just the twelve cases, but all of the remaining 1,700-plus cases. This is a vivid example of the harmful affects of case consolidation. Confronted with system demands for settlement verses the huge risks associated with imposition of punitive damages, rational company decision makers opt to settle all of their cases, as opposed to none at all. The only corrective response that will create balance and efficiency is the creation of the administrative entity called for in the legislation.

    The courts of this land are not equipped to handle the more than 200,000 cases currently in the system and the 8,000 new filings, thrust upon the courts, in the last month alone. The companies and the truly impaired, associated with these claims, deserve the creation of a mutually fair, claim and recovery system. The period when asbestos use was rising and suppression of knowledge was also operating, is long past. The time has come to recognize that it is up to the legislature to help the parties involved in this litigation do a better job of allocating cost and ensuring, speedy injured claimant recovery. The key point of difference between the parties is of course the medical criteria. This is the crux of the bill and will, I expect, be the focus of much of the committee's work.

    The medical criteria contained in House Bill 1283 are essentially the same as the criteria agreed to by most of the participants in the Amchem case. Indeed the AFL–CIO was a key voice of support in the Amchem case to point that most persons refer to this case as the Georgine case after AFL–CIO vice president and president of the building trades, Mr. Robert Georgine. The Federal district court judge who heard the Amchem case determined, after much study, that the criteria was fair and inclusive. Those who argue to the contrary, loudly suggest that the criteria would exclude 80% of the persons now eligible to recover something from the current operating system. It is doubtful that 80% of the those currently eligible would be denied recovery. This extravagant claim, however, underscores a key point. Many and perhaps most of the claimants who currently receive payments in the tort system are not impaired by an asbestos related disease. Our position is clear. We believe the only persons who ought to receive compensation are those persons who have suffered an injury that can be described as a physical impairment. We believe that paying persons, who suffer some degree of emotional distress merely because they have been exposed to asbestos, is a misallocation of valuable resources.
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    The science in this area is clear. Pleural plaques and a thickening of the surface area of the lung not resulting in a breathing impairment are not early symptoms of cancer. There are no warning signs, that science has identified that can act as early indicators, of a recovery eligible impairment. That said, how can anyone be opposed to system modifications, that compensate the impaired, within six months of the date the claim is filed and suspends the statute of limitations. This body should be aware that the suspension of the statute of limitations is critical to this effort. Persons need no longer, rush to the court house when they discover that there is a physical manifestation of asbestos exposure, that has not resulted in any physical impairment. Compensation when it is paid, will indeed be connected to actual impairment, not just exposure. It should not be enough to say that all those who can collect from the system today , have some right in perpetuity to collect always. Let those who defend the current system explain why it is appropriate that persons who are not in any way impaired, be compensated.

    Honorable members of the House of representatives we seek fairness and ask for leadership. We think that if our descriptions of the current state of affairs, is accepted as true, the current circumstance requires a meaningful response by this great body. We think that it is the task of this body and not the courts, to determine the extent to which damages will be paid, for how long and to whom. We have made our case that the courts cannot and ought not run a claim and recovery system that has at least 208,000 component parts. Here is a better way and we ask for fair and complete consideration.

    Thank you.

    Mr. HYDE. Mr. Conyers.
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    Mr. CONYERS. Thank you very much. I thank all the witnesses. What about that, Ms. Abeln, as Justice Mallett has said? What if Owens Corning changes its mind? How is your medical criteria different from that which is recommended in this proposal?

    Ms. ABELN. Congressman Conyers, the Owens Corning National Settlement Program is a series of contractual commitments that we have already entered into with over 90 plaintiffs' law firms around the country. A contract is entered into by the corporation, Owens Corning, not by me personally; and even if I am not around, the corporation will certainly honor its commitments contractually as we would fully expect the plaintiffs' law firms to do as well.

    With our promise to pay the money we have promised, we have agreed to pay based on medical criteria, and this medical criteria determines how much money each individual will receive in the settlement.

    The people who are not yet sick have received a very modest sum and have also obtained the right to come back for an agreed-upon amount later if they become sicker. So we do have an enforceable agreement with an individual who gives our company a limited release. That is the plan, and that is why it differs. It is voluntary and an individual can reject the settlement and opt out. Thus far, Congressman Conyers, we have no opt-outs.

    Mr. CONYERS. As we come to a close on a very important day of significant testimony, let me restate my position that I made right at the beginning. I am for legislation but only if it is fair; and I am going to ask Mr. Hiatt, the test of fairness must be that the victims would be compensated the same in this system by administrative procedure as they would in the State tort system; and they must be compensated for at least the same amount as they would in a State tort procedure.
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    In other words, this bill can't be a ruse to exclude some victims or to decrease their compensation. The administrative system should merely be a mechanism to get maximum and rapid settlement to the victims without the time and expense of litigation. Where do you come down on that kind of an assertion?

    Mr. HIATT. I think we very much agree with that assertion, Congressman. I think that even within that framework and those principles, it is certainly possible to improve on the system that we do have today because there are many people who are receiving meager compensation at what some of the panelists today have called the nonsick stage.

    I think that is really a misnomer. The nonsick aren't getting anything. The less-sick are. But there is no question that in some instances, even the less-sick are waiving certain rights. In order to get a quick fix to their problem, they are accepting compensation and waiving rights to get full compensation in those cases where they really end up developing serious illness.

    We certainly could come up with a better system as the Owens Corning system does this. The Louisiana experiment does this. I think it would protect—it would address the principles of fairness you describe and still—and allocate the redress more fairly.

    Mr. CONYERS. Mr. Mallett, do you subscribe to the fairness test that I have described?

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    Mr. MALLETT. Mr. Conyers, with only one very small modification, and that is the medical criteria. Mr. Conyers, this particular tort, as you well know, has been around for 25 years. The settlement history, that I am sure Ms. Abeln can speak to more fully than I can, is very, very well known.

    So when you suggest that it is indeed fundamental that persons in the ARC system receive from that system what they would have gotten from the tort system, Mr. Conyers, we are prepared to agree with that with slight modification that indeed there be in place medical criteria to evaluate their claim.

    But there is history enough in the mediation process that this particular bill describes that will—that is taken from the current experience of the companies represented in this room and the victims' lawyers.

    Mr. CONYERS. Might that decrease from the pool of eligible persons by the slight change in medical criteria? I think it might be a big difference. Am I overstating that, Ms. Abeln?

    Ms. ABELN. I am not sure I understand the question. Could you help me a little bit?

    Mr. CONYERS. Are you suggesting that your criteria may end up with fewer people being eligible for compensation?

    Mr. MALLETT. Mr. Conyers, there is no question that we do want to separate the sick from the nonsick. There is no question.
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    Mr. CONYERS. We need a yes or no on this one because my time is at an end.

    Mr. MALLETT. Mr. Conyers, there will be fewer people in the line to receive just, fair, and tort-like compensation should this bill pass.

    Mr. CONYERS. We have got some work to do here.

    Mr. DONOHUE. May I just respond very quickly. I think your target words of speed and amount are addressed very thoughtfully in this legislation. First, no one would argue that speed could always be improved in any administrative or judicial process, but the speed here would certainly be faster than the courts.

    And second, I am not sure what the amount would finally be, but the net amount to the claimant will be higher than with 60 percent currently going to transaction and legal costs on both sides of the operation.

    Mr. CONYERS. Mr. Hiatt shakes his head.

    Mr. HIATT. I am shaking my head because the system that is proposed in this bill is so complicated that just even looking at the attorneys' cost, it is inconceivable that an average nonlawyer victim could wade through this system that has been proposed here without as much or more attorney time as is happening right now under our existing system.
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    I don't see any way that this system will reduce the transaction cost. You have to prove things over and over again in this system; first to get a certificate of eligibility, then in mediation, then get released from mediation, and then have to go through it all over again in the courts.

    This isn't going to cut down on the transaction costs; and in fact, the extent that there will be added transaction costs as the companies now litigate against each other over which companies owe what, it is going to significantly increase the transaction costs.

    Mr. CONYERS. Well, we don't want to reduce the field of eligible victims or the amount of compensation they recover, and that is what I am looking for. That is the test.

    Mr. DONOHUE. Mr. Conyers, if the field is reduced because one person is declared as not sick and therefore not eligible at this time, then yes. However, this bill takes away the statute of limitation and says that anytime you become sick you will get paid.

    Mr. CONYERS. We are not talking about the sick and the nonsick. We are talking about the compensation in the end and the field of eligibles not being reduced; and in all fairness, Mr. Chairman, it is not clear to me that I can get a positive answer on that.

    Mr. HYDE. Well, when you use the word eligible, that to me means sick; and as long as they are sick, they are eligible.

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    Mr. MALLETT. Absolutely. As long as they are sick, Mr. Chairman, they are eligible. There will be no decrease in the number of sick persons entitled to compensation under this system. There is no question about that.

    Mr. HYDE. The gentleman's time has expired, Mr. Conyers.

    The gentleman from South Carolina, Mr. Graham.

    Mr. GRAHAM. Now, I am very confused so I will try to follow up on Mr. Conyers' questions. Let us see if I can make this simple. We will start with Owens Corning. How many cases have you settled in a year?

    Ms. ABELN. Congressman Graham, we have settled over 215,000 cases thus far.

    Mr. GRAHAM. Can anybody beat that in this building? That is pretty good; and one reason I am here is because you got a lot of employees in my district, and I want you to stay in business, but I want people who are hurt to get compensated. Tell me why or how this bill would affect your ability to go forward and maintain the settlement progress you have achieved, if it would affect it at all.

    Ms. ABELN. Well, Congressman Graham, this bill has a lot of elements in it, and the debate about medical criteria is really something that we would not necessarily want to tangle with insofar as our National Settlement Program has medical criteria for future claimants.
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    What the medial criteria will do in the future is essentially insure that people who are sick get paid first. It is a priority more than it is a denial, more than anything else; and in fact, the current proposal seems, to us, to delay compensation to a number of people who would otherwise be entitled under the tort system today to compensation.

    What we have been able to do is negotiate payment terms to all individuals who currently are in the tort system. That means that even though these individuals may not be very sick, they must have an asbestos-related disease in order to get compensated under Owens Corning's National Settlement Program.

    To say that they are not sick is not fair because, in fact, you can be diagnosed by a doctor with an asbestos-related disease and you may not show any functional impairment. We are compensating those individuals today. That is the very big difference between what we are doing and what the proposed legislation would do, which is essentially to wipe out the rights of those individuals with an asbestos-related disease who are not yet impaired.

    Mr. DONOHUE. Excuse me, just for a clarification. Are you suggesting that this legislation would not allow people who could be diagnosed by a doctor as having a functional and symptomatic asbestos disease from being considered for settlement?

    Ms. ABELN. You used the words ''functional'' and ''symptomatic.'' I would say there is a distinction between symptomatic, pleural plaque, pleural thickening, and other asbestos-related indicators of the disease process underway versus functional impairment which then may come later as a person ages and the disease progresses.
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    Mr. DONOHUE. Okay. Then I will change my question from functional to symptomatic.

    Ms. ABELN. I would say that this bill precludes people who are not functionally impaired from receiving compensation. They must wait.

    Mr. GRAHAM. I am getting right to you, judge. I promise. And all of y'all jump in here when y'all feel good about it. I want to get to the bottom line. Under the settlement program, it is contractual, it is not person specific. You get an amount of money now; and if you get sicker later, there is a system for you to be compensated where you have a set amount to pay. They know what they are going to receive, and everybody gets something when the person needs it the most. Okay, judge.

    Mr. MALLETT. Congressman, two things. This act shall not apply to any settlement agreement or related agreement concerning asbestos claims entered into by claimants, defendants or their counsel. This bill, H.R. 1283, has no impact on OCF at all this day or any day, number one.

    Number two, it is very critical that if the medical criteria contained in the OCF settlement agreement is different than the Louisiana bill, then it is different than that contained in H.R. 1283. The distinction between those persons who are sick and those persons who are not is critical.

    There is nothing appropriate about a system—now, if OCF is going to pay persons who are not sick, this bill will allow them to do that. H.R. 1283 reserves the rights of other persons associated with this problem to, in fact, say wait a minute, if you ever become sick, recognizing there is no statute of limitations, you need not worry about being compensated. You will, in fact, be compensated when there is a physical impairment. In the absence of a physical impairment, we would simply ask that you wait your turn.
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    Now, Congressman, it is very difficult to understand what is unreasonable about that particular position to reserve the funds available today for people who are sick currently and to say to those persons, regardless of the level of your exposure, if you are not physically impaired, all you need do is to continue a regimen of, you know, whatever physical checkups that you are involved in, and at a particular point, should you suffer any physical impairment that the companies or their derivative companies will be available to support the compensation levels that there are traditionally, just like the compensation levels, the tort-like compensation levels that have been made available in the past.

    Mr. HYDE. The gentleman's time has expired.

    Mr. Nadler.

    Mr. NADLER. Thank you. Let me ask a question of Mr. Hiatt. You said that essentially you don't think the current situation is a good one, you could support legislation, you have set forth some criteria for that legislation. It should preserve access to courts. Access to counsel should be structured to lessen delay and uncertainty, minimally adversarial and legalistic and should be transparent, comprehensive and add to victims' recoveries.

    Mr. HIATT. And be voluntary.

    Mr. NADLER. I thought I said that. Okay. Let me ask you, I don't know if you heard the question—did you hear the question of the previous panel?
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    Mr. HIATT. Which question was that?

    Mr. NADLER. Well, I asked the previous panel what the—you know, it seems to me that what we have here is a situation where most of the issues have been litigated repeatedly, where the issues that you have left are basically, did person A, was he, you know, has he suffered damage, what is the extent of that damage and who should pay. Those are really the only questions.

    Mr. HIATT. I am sorry, I did hear your question.

    Mr. NADLER. Okay. And I asked, would a model, not exactly, but something modelled on a workers' comp or black lung model—and I am not really familiar with the details of black lung. I assume it is something like workers' comp. Would something modelled on that be a good idea, in your opinion?

    Mr. HIATT. I think that is certainly a model, with one major caveat that I will come to. That is certainly a model that should be considered as part of the discussion about what kind of alternatives can cut through relitigating over and over again and having an alternative administrative procedure that can make these kinds of shortcuts. A major caveat is, is it adequately financed. One of the answers, I believe, to your question, Congressman, on the first panel was the problem with the black lung solution has been——

    Mr. NADLER. But you have to be adequately financed. Let me ask you a second question then. Let us assume you did that and you set up some sort of administrative panel or whatever to make those adjudications, has Mr. Jones been damaged, how much et cetera. What kind of a system would you set up for determining who should pay, in other words, for allocating so, you know, allocating potential liability, so that you know that the money is there? In other words, would you look at every firm in the country and determine somehow that this one is responsible for 2 percent or how do you think that could be handled?
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    Mr. HIATT. Well, you know, I recognize that that is—actually, to perhaps defer to Congressman Frank's advice, I should just say I don't know, but I think that is certainly one of the issues that would need to get discussed. When we had the Georgine settlement, you had a pot that was a fairly substantial pot.

    Mr. NADLER. From a discrete number of companies that were involved in that case.

    Mr. HIATT. There may be other—certainly the other companies that were not part of that settlement, the other asbestos manufacturers, should be part of that. The Federal Government may indeed need to be a part of that, but I think that is one of—the financing is certainly something that has to be addressed anytime you are talking about a workers' compensation time of administering.

    Mr. NADLER. Let me just say on what you just raised, I certainly think the Federal Government ought to be involved. I was struck by one sentence in Mr. Heyman's prepared remarks where he says on page 6, Ruberoid acquisition, GAF designed an asbestos-free product, but the Navy rejected it. In other words, they wanted to get out of asbestos so the Navy, which is to say the U.S. Government, said no, no, we want asbestos and apparently that happened a lot, which means the Federal Government has a certain liability, too, which ought to be recognized as part of whatever fund is set up.

    Mr. Donohue, let me ask you the following. We have here a bill that seems to me unnecessarily complex and subject to a lot of the criticisms that have been leveled at it. Why do you think or do you think that you couldn't set up a much simpler administrative system without six different steps to just say, all right, since we all recognize that people were exposed to asbestos, that there is liability and that it does cause all this health damage, and the only questions left are was Mr. Jones exposed, was he damaged, to what extent and who should pay, couldn't you set up a much simpler system than in this bill to make those determinations on a quid basis?
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    Mr. HYDE. Would the gentleman yield?

    Mr. NADLER. Sure.

    Mr. HYDE. You know, it just seems to me, the more you have to go through, the better for the claimant. You go into mediation, you might work out a settlement. If you are unsatisfied, you go into arbitration. You might work out a settlement. If you are unsatisfied, you go to court. The more tables you get to put your case on, the better for the claimant. It seems to me that to just have one place to go it is simple, but it could be arbitrary and you could be cut off.

    Mr. NADLER. Let me just reclaim my nonexistent time for a moment and ask for 2 additional minutes.

    Mr. HYDE. Certainly. It is existent now, 2 additional minutes.

    Mr. NADLER. Thank you. Let me first just observe, Mr. Chairman, that in theory you may be right, but of course, that assumes infinite lifetime, which is what these patients don't have. There should certainly be at least one bill somewhere.

    Mr. HYDE. Workers' comp is the same way. You go to an arbitrator, you do the commission, or you go to court.

    Mr. NADLER. Let me ask, Mr. Donohue, if you would answer the question I asked.
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    Mr. DONOHUE. Thank you.

    Mr. NADLER. I don't mean to imply that you didn't want to.

    Mr. DONOHUE. No, I wanted to. First of all, everyone that has anything to do with government courts or procedures within any institution looks for simplicity, as long as simplicity doesn't significantly narrow their options to advance their case. I listened to your discussion before, and I was very taken by some of your points. I believe that if we had had this discussion in the beginning, if the government had shared responsibility and we had not gone through the process of absolutely destroying the economic vitality—and in fact the existence—of a large number of companies, if we were not down now to a smaller pool of companies and looking for the next level of companies who may have transported the stuff or banked it or somehow had some involvement with asbestos, we would now be much better off.

    What we are saying here now are three simple things. Number one, to do this in a sensible way we have to have a program immediately for the people that are sick, that need immediate financial compensation; second, we need to take away the restrictions on those who may become sick later so that they can be assured that they will have access to compensation; and, third, we have to take out of this process the threats and the intimidation that are being put on small and medium-sized companies in this country that if they don't oppose or at least go away from legislation and discussions like this that they are next. I think that this committee should be particularly concerned about the last point because of the charter of the committee. But I want to encourage you to continue the discussion. I like simplicity, but I want it to work.

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    Mr. MALLETT. Congressman, I would also point out one thing, and that is this, that I am going to urge two things: one, that we work with the committee——

    Mr. NADLER. Can you talk into your mic, please.

    Mr. MALLETT [continuing]. To work out a solution to some of the problems you have raised; and in that light, I would urge the primary defendants in these causes of actions to let go of some of the defenses that the bill currently maintains, and Congressman, part of the reason that those defenses exist is exactly what Mr. Donohue talked about. Some of the persons in the process now are hardware stores, distributors, nonproducers of this asbestos.

    Now, it seems to me that all of us would want them to be able to say, wait a minute, my association with this process was indirect. I did not have all of the various responsibilities that other persons responsible for these injuries ought to bear. Having said that——

    Mr. NADLER. Wait a minute, I am sorry. I just want to make sure I understand you. Are you saying that the reason for the retention of the common law defenses in the court suits in this bill, even after the mediation and the arbitration and so forth, that the reason for that is to enable these tertiary players, the hardware stores and the like, to be able to say, hey, wait a minute. We really weren't responsible. Is that the reason in this bill?

    Mr. MALLETT. Congressman, we did not want to overwrite the bill to a point where persons who are distantly associated with this problem had nothing left to say except where do I write the check. Primary defendants in this bill, however, persons responsible directly for a large part of the problem that has been identified which has bollixed up the system that we currently have, I am going to urge to them that they work with you and the chairman to find out a way to let go of some of the primary defenses that are there, plus that will indeed make less cumbersome this mediation process.
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    Plus, I would remind the committee, that the bill, as I read it, contains very, very, very tight time schedules, 60 days for mediation, 60 days to get through the mandatory arbitration process.

    Mr. NADLER. How do you enforce those time schedules?

    Mr. MALLETT. The law does. The law says you shall. The law says you shall.

    Mr. NADLER. That is nice, but you know, I don't mean to make light of it, but the experience—excuse me a second—experience hath shown, I think as some people may have put it, that the fact that you say you shall finish in 60 days doesn't mean that people do or even can finish in 60 days.

    Mr. MALLETT. Congressman, that is a very valid point and is precisely—and your observations are the ones that I would apply to the voluntariness argument that some persons are making here. This book contains a host of voluntary agreements. None of them said—and they say you shall. It says you shall, and these particular voluntary agreements along the lines as outlined by OCF are not being enforced. There is a problem with voluntariness.

    Now, to the degree, Congressman, that you say that we can't even write a law that will require people to do that which the law says, it seems to me extraordinary that we would say that we are now going to impose on this system only a voluntary compliance scheme and say that is indeed what is going to work, when history has shown us in the past that it has not.
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    Mr. NADLER. Mr. Hiatt, could I ask time for Mr. Hiatt——

    Mr. HYDE. Oh, Mr. Nadler, don't press the envelope too hard, really. We will get you again.

    Mr. Hutchinson.

    Mr. HUTCHINSON. Thank you, Mr. Chairman, and I want to thank you again for your leadership on this issue. I think the Supreme Court has said very clearly they would like to see us address it. I want to express my appreciation to Ms. Abeln, also, and Owens Corning for what they have done in settling some of these cases. I hope that they will be successful in getting compensation to victims who are hurting. Obviously, we don't want to do anything in legislation that might negatively impact what you have done so successfully, your company.

    Judge Mallett made the point that there is nothing in H.R. 1283 that would impact on your national settlement, and I would like to have you respond to that and explain your concerns, if any, as to what impact this legislation would have on your settlement.

    Ms. ABELN. Thank you, Congressman Hutchinson. The two impacts are actually related. The first impact on the National Settlement Program is because we have negotiated these agreements against a set of current rules in the tort system. Our payment schedules and everything we have done is based on the fact that the tort system is, in fact, much slower at getting compensation to individuals.
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    People are accepting our offers of settlement today, even though we are paying them over 2 to 5 years, because they believe that they would get prompter payments from us than if they were to wait in the tort system, and we were afraid since we do not have signed releases from all the 200,000 plus individuals whose offers have been extended through the plaintiffs' firms, that they will, in fact, reject our settlement if they believe that somehow the system is going to fall apart, that the rules are going to change and there is a lot of uncertainty.

    Financial markets are affected adversely by uncertainty, and what we have brought to bear for our company is financial predictability and more certainty for our shareholders and for our company.

    Mr. HUTCHINSON. So under current arrangement you have confidence that, because it is a voluntary settlement, these people will pursue the voluntary settlement program in contrast to going to court. But if this legislation is enacted, they would have a disincentive to following through on the settlement?

    Ms. ABELN. They may believe that they could get more money through the process as set forth in the bill. We have fixed settlement values, and it is unclear to me whether the values that we have negotiated, which we feel are fair, which involve a discount for early payment, would be upheld in any kind of arbitration system where the historical role that Owens Corning has played is that we have been paying much more than our fair share in the tort system.

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    While Georgine was in place, many of the companies here at the table today or who were in the Georgine settlement, did not pay a lot of money into the tort system, whereas Owens Corning was continuing to pay and take verdicts; and so with our negotiated settlement, we are going to pay less than we otherwise would have in the tort system.

    In the new process, it is unclear how the arbitrator would divide up and allocate responsibility.

    The second point—and I think is the other one that I think is most important—is that we believe the voluntary relationships that we have developed in good faith are going to encourage this program in the future to work its way through all the future claimants.

    People who are receiving the right to come back today in our program are the ones who may become sick in the future, and we do have an enforceable agreement with them with this program.

    Mr. HUTCHINSON. Thank you, and I want to thank Mr. Donohue for your testimony as well. Mr. Donohue, I am sure that many of the companies have looked at the national settlement that Owens Corning implemented. Have they considered it? What is their greatest reservation in pursuing the same path? If you settle a couple hundred thousand cases, that is helpful.

    Mr. DONOHUE. I think Owens Corning should be congratulated for moving in an aggressive way to come to settlement with those that are sick and those that are showing symptoms of being sick. That, in many places, doesn't seem to work; and over some period of time, it certainly hasn't because of rulings of courts on class-action settlements that have just been egregious.
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    Mr. HUTCHINSON. I assume there is not any problem with theirs because it is voluntary.

    Mr. DONOHUE. I have no problem with what they have done. Quite frankly, I have admiration for the way they have gone about their business. If I were running the company, I hope I would have been smart enough to do this in a way that takes care of their employees, limits their liability and gives them some financial assurance. One of the things that we are trying to do in this legislation is very much the same thing. We want to ensure that those persons that are prepared to pay their share of this matter remain economically viable.

    Mr. HUTCHINSON. May I have one additional minute, Mr. Chairman?

    Mr. HYDE. Yes, sir, that is fair.

    Mr. HUTCHINSON. I understand that this legislation would address the same problem. My question is, why do you prefer this legislation rather than trying to implement the same type of voluntary settlement?

    Mr. DONOHUE. I think, Congressman, there are a lot of people that have tried to find a voluntary and a rational way to do this over a long period of time. A short, thoughtful review of the history of asbestos litigation, asbestos class action and asbestos damage to companies, as well as individuals, provides a great deal of frustration.

    This bill is in response to three things. Twice the Supreme Court has said that the current system doesn't work and has asked Congress to do something. Second, there are a lot of sick people that are not getting taken care of in the current system, and a voluntary system doesn't seem to be working for some of them. Third, and very, very important, we have a system that is so cluttered up because we have both sick and nonsick people in the system. This has got to be changed.
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    Would it be better if we had a voluntary system that worked? It might well be, but I am telling you we have many years of frustration, and we have to do something.

    Mr. HUTCHINSON. Mr. Donohue, I have abused the chairman's time, and I thank the chairman.

    Mr. HYDE. Thank you, sir.

    The gentlelady from Texas.

    Ms. JACKSON LEE. Let me thank the panelists again, the second panel, for their presentation, and I would like to refer you again to the excerpt that I took from the ad hoc committee that subsequently reported to the Judicial Conference, and the reason why I would like to refer you to it, because I see—I don't know whose poster boards—it seems like we do have a lot of cross-signals poster boards here.

    One reads the Supreme Court has spoken, national legislation is necessary to solve the asbestos litigation crisis. In particular, the provision that I am reading from indicates that they believe that an ultimate solution should be legislation, recognizing the national proportions of the problem both in Federal and State courts in creating a national asbestos dispute resolution scheme that permits consolidation, but they also indicate that solutions could be administrative and judicial.

    And so, Ms. Abeln, I would like to first of all compliment Owens Corning for what they have managed to achieve and cite you to your testimony that specifically indicates that you have a viable alternative to legislation, and I assume that your settlement had some court authorization to allow you to go forward or to indicate that. If not, you can share that with me, how you got there, how you tackled the problem and how you believe what is presently before us would, in fact, delay assistance to sick people.
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    And I have a series of other questions that, if you would, because of the time, try to abbreviate your response; but again, I appreciate your presence here today.

    Ms. ABELN. Thank you, Congresswoman. The court authorization for the private settlement has not been required because it is like any other private settlement between two parties, an individual and another individual. What we have court approval is for the ethical obligation of both the plaintiffs' lawyers and our company in entering into this settlement, and we have asked that the plaintiffs' lawyers and Owens Corning together go to court just to ratify what we have done as in any other private settlement.

    Ms. JACKSON LEE. Let me just stop you for a moment and that was what I was implying, and so I sort of broadly have defined what the Supreme Court has suggested by saying that however we get it resolved, administrative or judicial, they were not precluding the structure that you are using.

    Ms. ABELN. That is right.

    Ms. JACKSON LEE. And here you are using it without a legislative initiative. You have confirmation by the courts that you are proceeding correctly, but you are engaged in private settlement. I just want to make that clear.

    Ms. ABELN. That is correct. Thank you.

    As to how we tackled the problem, really there were individual negotiations with over 90 plaintiffs' firms, and with them we sat down and evaluated the number of cases that that firm had; and the individual plaintiffs' lawyers were able to assess what each case in their mind and what their claimants would accept for each case, and they came up with a dollar figure for their total number of cases. They were then able to work with us to determine how much each individual would receive based on the medical criteria that we have used.
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    There have been very many historical, private settlements like this in the past, Congresswoman; and this is the kind of settlement process that many companies, including those here today who are proposing legislation, have used to settle cases in the past. This is not unique, and we are not alone, and this has been done repeatedly over the years.

    Ms. JACKSON LEE. Is that process ongoing?

    Ms. ABELN. Yes, it is, and as far as I know, today the companies in the Center for Claims Resolution are actively negotiating private settlement agreements around the country; and I would say that there may be pockets of resistance by some plaintiffs' lawyers, but I don't see that resistance continuing. I have seen tremendous cooperation by the plaintiffs' bar in bringing private resolution to these problems.

    Ms. JACKSON LEE. If you might forgive me by being graphic, would legislation like this drive a spear through the heart of what you perceive to be a spirit of cooperation forthcoming?

    Ms. ABELN. I can't speak for the plaintiffs' bar on that question, but I certainly feel that it undermines the goodwill that we, Owens Corning, feel we have developed.

    Ms. JACKSON LEE. How would you respond to the point being made about small businesses, and as hardware stores and others that might need some assistance, how would our present situation, what relief could we provide them outside of this presently drafted legislation?
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    Ms. ABELN. We do believe that the Federal Government should step in and pay its fair share for all companies who are providing funding into the current situation. So for Owens Corning and all of the other defendants, including peripheral defendants who are paying any money, we believe that there should be some assistance by the Federal Government in the fact that they have specified this material over the many years and that the companies are doing all they can to pay for these claims out of current resources.

    Most companies have exhausted their insurance resources, like Owens Corning, and our current employees have had to work very hard to begin to pay back the kind of money we have to borrow to make this program work. So it isn't just small companies, Congresswoman. It is all companies.

    Ms. JACKSON LEE. Mr. Hiatt, I noted in your comments about where this legislation might be taking us. I am sorry that that billboard that I had noted before by Professor Edley is not here because I brought out its simplicity, but I hope I brought out some of the concerns and I will go to the medically certified.

    Do you perceive us being able to or the legislation drawing any consensus in as much as we can certainly draw our attention to medical panels that have disagreed and, therefore, could not certify a sick person and, therefore, stall that sick person's ability to proceed to find relief? What is your assessment on that issue?

    Mr. HIATT. I do think that is a real risk under the system as proposed. If you are asking if that is inevitable in any system, I don't. I think that we have seen where, in these examples of protocols that Owens Corning and the Louisiana experiment and some of the other companies have developed, a much more simple set using medical criteria that are not all that different from the ones in this bill, but with procedures that are far more simple and where the parties all know that if this isn't a win-win for both the companies and the claimants, they can fall back on the tort system, and given that these systems are better and been developed mutually to ensure quicker relief, we are finding, as Ms. Abeln mentions, that the overwhelming majority of the claimants are opting on a voluntary basis to take advantage of a much simpler system.
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    Ms. JACKSON LEE. Mr. Chairman, I ask for an additional 2 minutes.

    Mr. HYDE. Without objection.

    Ms. JACKSON LEE. I thank the chairman very much.

    Mr. Hiatt, let me try to understand what you are saying. I am making the point that in the structure that is under the legislation and as I perceive the diagram where it had the medical panel and it worked its way through, I have known medical panels to disagree. In the present structure, as I understand this legislative initiative, there are no options. You go through it, you get to binding arbitration, you opt for that, and then you may ultimately get to a courthouse.

    You may be estopped or stopped at that point when doctors disagree, and so I am asking, does that pose a concern because you can get stopped there because panelists can disagree on the certification?

    Mr. HIATT. I am sorry, Congresswoman, to have jumped over your point. I think that is one of the real problems with the system as it is proposed in this bill.

    Ms. JACKSON LEE. I notice that Judge Mallett has referred to the, if I am not mistaken, the NSP standard, but we know that scientific evidence is free flowing and changes. Why would we want to freeze the science of determining whether somebody is sick to NSP which has gotten their solutions in this era, but we may find that there are other scientific methods of determining whether someone is sick. So you limit it by supporting this legislation or you either use NSP as an example. Scientific research and determination of sickness by physicians in the medical research arena is fluid; and, therefore, I perceive the possibility of large numbers of sick people being precluded by this format.
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    Mr. MALLETT. Congressperson, clearly, with those science changes in this particular area, the fail-safe here is the exceptional medical panel. Should persons, indeed, have science that the primary doctors selected by the corporation have indeed not been able to consider, the science has changed, they adjust that rapidly. The exceptional medical panel is there to provide them just the kind of relief that you were talking about.

    Congressperson, it seems to me very clear that, if we can get medical criteria of the kind that Mr. Hiatt talked about, it is possible indeed to have scientific agreement on whether or not you are indeed sick or not. The key question here is to institutionalize that agreement from no matter where it comes.

    To the degree that we are going to rely on a voluntary system, Congressperson, we are simply not going to have the kind of success duplicated from company to company to company that OCF demonstrates by their boards that they have had.

    Ms. JACKSON LEE. Thank you, Judge Mallett. I see the chairman moving toward his time frame. I would think, Mr. Hiatt, that you would disagree with that and would raise the concern about insurance companies right now not protecting manufacturing companies like Corning and like others.

    Mr. HIATT. Well, there is no question. Where a system is working only where you have these protocols with some companies but not with others, you have the kind of large number of victims that are still falling through the cracks.

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    Mr. HYDE. Mr. Scott of Virginia.

    Ms. JACKSON LEE. I thank you very much.

    Mr. SCOTT. Thank you, Mr. Chairman. Ms. Abeln, as I understand the present settlement process, if someone presents the medical documentation that they are appropriately sick, they get money; is that right?

    Ms. ABELN. That is right, Congressman Scott.

    Mr. SCOTT. And if there's a disagreement over that, they can go to court?

    Ms. ABELN. Yes, that is correct.

    Mr. SCOTT. And first of all, if this bill were to pass, do your settlement agreements have a provision in it that if there is any substantial change in the law, you get to renegotiate?

    Ms. ABELN. No, no, Congressman. We actually went the other way to protect all claimants. Once we have agreed to pay, we will pay regardless of the change in the law. For most of our settlement agreements they actually specifically say that.

    Mr. SCOTT. That is for specific named plaintiffs. The people who come after the fact, if there is a change in the law, you are not bound by that. If this bill were to pass and someone were to present the appropriate medical criteria, what they would get after they have gone through this process and been certified? Do they get anymore than just a right to continue under the present system?
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    Ms. ABELN. Under our program, if I understand your question——

    Mr. SCOTT. No, if this bill were to pass.

    Ms. ABELN. If the bill were to pass, what would happen to these individuals who in the future come forward and meet the criteria? They would get paid an unspecified amount of money.

    Mr. SCOTT. By who?

    Ms. ABELN. By whomever's process——

    Mr. SCOTT. They would start the process, and they would have to find a defendant, they would have to find somebody, then they would have to prove everything.

    Ms. ABELN. That is right.

    Mr. SCOTT. With you, all they do is present the medical criteria and they get money?

    Ms. ABELN. They prove that they have been exposed to an Owens Corning product. Many of the work sites around the country are known. This litigation is so mature that the plaintiffs' lawyers—and we have agreed almost to stipulate to which work sites are covered.
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    Mr. SCOTT. And if this bill were to pass, they would have to litigate that in each and every case?

    Ms. ABELN. We are not going to litigate. I will tell you, Congressman Scott, that litigation is unproductive for all of us; and our company is prepared to honor our commitments under the National Settlement Program.

    Mr. SCOTT. That is you—and you are not supporting this bill.

    Ms. ABELN. That is right.

    Mr. SCOTT. There is a limitation on attorneys' fees. How much of the plaintiff's attorney's fees does the defendant pay?

    Ms. ABELN. We have not gotten at all into the relationship between attorney and client.

    Mr. SCOTT. So, if you were to reduce the attorney fees, how much would that save your company? If you were to reduce the plaintiff's attorney's fees, how much would that save your company?

    Ms. ABELN. If you reduce them to whatever is negotiated, which I am not privy to, between plaintiff's lawyer and their client to 25 percent, is that the question?
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    Mr. SCOTT. How much would that save your company?

    Ms. ABELN. Several hundred million dollars.

    Mr. SCOTT. I thought you said you weren't paying their fees.

    Ms. ABELN. We are paying the total amount, and the fee relationship between attorney and client is between those two individuals, and they entered into fee arrangements which we are not privy to.

    Mr. SCOTT. And, therefore, if they were to reduce the attorney's fees, your company would not be affected one way or the other in what you had to pay.

    Ms. ABELN. No. We would still pay the total amount, Congressman Scott.

    Mr. SCOTT. That is right, and it would not be reduced—a reduction in attorney's fees would not reduce what you would have to pay.

    Ms. ABELN. I am sorry. I am getting turned around with your questioning.

    Mr. SCOTT. You are obligated to pay the judgment or the settlement. If the attorney's fees went down for the plaintiff that would not affect what you paid at all. The claimant would benefit, but that would not affect what you would have to pay.
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    Ms. ABELN. That is correct.

    Mr. SCOTT. Okay.

    Ms. ABELN. Okay.

    Mr. SCOTT. So the limitation on attorney's fees does not affect what you have to pay.

    Ms. ABELN. I don't understand your question, because are you asking hypothetically if the legislation were passed?

    Mr. SCOTT. Right.

    Ms. ABELN. That is a really difficult question.

    Mr. SCOTT. Well, you are not paying the attorney's fees, that is just arithmetic. Your amount that you would have to pay would not go down as a result of that.

    Ms. ABELN. We are settling all of the current cases filed; and so, as I understand it, the legislation would not in any way affect our program.

    Mr. SCOTT. Okay. But if you were to reduce attorney's fees, that would be between the lawyer and the client, it would not affect the amount of the judgment or the amount of the settlement; and so your company would not be affected one way or the other by the limitation of attorney's fees unless the attorney's fees went down so far that the client couldn't get a lawyer and couldn't bring the case, then you'd benefit.
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    Mr. Hiatt, I have a question. On normal arbitration, each side gets to pick, say, a doctor, and if they don't agree, the two doctors would pick someone in between. What do you think of a process where the corporation appoints—politically appointed corporation picks the doctor and they get to say whether the person is sick or not and there is essentially no appeal from that decision? How do you like that?

    Mr. HIATT. I don't like it too much, Congressman.

    Mr. SCOTT. I didn't think so. Mr. Chairman, may I have 2 additional minutes? While he is deciding, Justice Mallett——

    Mr. HYDE. You want 2 additional minutes?

    Mr. SCOTT. Yes, Mr. Chairman.

    Mr. HYDE. Why not? Everyone else has, 2 minutes.

    Mr. SCOTT. Justice Mallett, in your testimony, your written testimony, you complain about the stress on the judicial system that these cases bring. There was a chart up that showed that 55 of these cases actually went to court now. I assume your testimony was how it used to be and not how it is.

    Mr. MALLETT. No, Congressman. Exactly how it is, the process as it exists currently is this: I think if the 55 cases, if that is indeed the number, is proof positive that the system is broken, and here is why. Is it possible, Congressman, that there are only 55 instances where defendants in this country believe that they have a case that is a winner? And so it seems to me that the system itself is demanding under its current regime that all of these cases settle. Congressman, it cannot be true that every single case brought is indeed one not worth defending.
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    Mr. SCOTT. Ms. Abeln, did you tell me that you are not trying any cases, that all of them are settling? In fact, you are not even preparing for trial anymore?

    Ms. ABELN. With very few exceptions, Congressman Scott, that is correct.

    Mr. SCOTT. So the present system is working well.

    Ms. ABELN. Yes, sir.

    Mr. SCOTT. The plaintiffs are satisfied, the defendants are satisfied, and there are no trials?

    Ms. ABELN. Yes, sir.

    Mr. SCOTT. Under the present system.

    Mr. MALLETT. Some of the defendants, Congressman, not all of them.

    Mr. SCOTT. Only 55 went to court. Are you aware of anywhere where there are more people trying to get to court, can't get to court?

    Mr. MALLETT. Congressman, there were 21,000 cases that were indeed settled on the courthouse steps on the eve of trial.
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    Mr. SCOTT. That is how it used to be in Virginia. You never settle a case until you got a court date. The backlog was so long that you would wait till you got to court, and any plaintiff that could actually get a scheduled court date, then on the courthouse steps they would get their money. And what has happened with litigation and consolidated cases, they have been able to eliminate the backlog, and people have been able to get their money through companies or through settlements and they get their money, and that is the present system, and this would set up the same incentive for defendants to go through and retry every case and get back to the good old days where you wouldn't have to pay until somebody could actually get a court date.

    Mr. MALLETT. No, sir. That is exactly not what we are trying to do. We are trying to achieve just the exact opposite.

    Mr. SCOTT. Are you aware of any victims' organizations that want this legislation?

    Mr. MALLETT. I am sorry, sir?

    Mr. SCOTT. Are you aware of any victims' organizations that want this legislation?

    Mr. MALLETT. Congressman, I am aware the victims that were sitting out here today who said that we need more speed in this process as it currently exists, now that is what I am aware of, Congressman, what in fact occurred here this morning.
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    Mr. DONOHUE. And Congressman, in the last 12 months, 30,000 new legal actions have been filed. We have more than 200,000 cases in the courts; and I think hearing from the Justices of the Supreme Court again in the last few weeks for the second time that something has to be done to clean this up is what we are trying to do here.

    Mr. HYDE. Mr. Cannon.

    Mr. SCOTT. Mr. Chairman.

    Mr. HYDE. I have been here all day, Mr. Scott. You come in and out and that is good, but can't we wind this up?

    Mr. SCOTT. Mr. Chairman, I have been here the whole time.

    Mr. HYDE. Have you?

    Mr. SCOTT. I have. I have a unanimous consent request. I would like to introduce the letter from the Virginia Peninsula Chamber of Commerce opposing the legislation.

    Mr. HYDE. Absolutely, without objection.

    Mr. SCOTT. Virginia Peninsula Chamber of Commerce.

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    Mr. HYDE. Mr. Cannon.

    Mr. CANNON. I appreciate the chairman's patience. I have not had the luxury of being here all day today, and I recognize the difficulty. I also appreciate the panel for being here, and I apologize for not having been able to be here the whole time.

    Ms. Abeln, if I could just—I don't think I quite understood what went on between the questions of Mr. Scott. In the case with Owens Corning and this legislation, which would limit attorney's fees, is it your understanding that this limitation in the statute would affect the attorney's fees that are already involved between your claimants and their attorneys?

    Ms. ABELN. I apologize for being so dense to Congressman Scott and to you, but as I understand your question, the answer is, no, that the legislation would not in any way affect the already existing settlements we have already entered into. I apologize.

    Mr. CANNON. You are fine. It was a difficult set of questions, and you actually answered very well, and that was just one end that I wanted to wrap up. Is it correct that Owens Corning gets to pay less on certain claims—I think you referred to it as discount—that would be the sort of full cost to Owens Corning would be less than the tort value that H.R. 1283 would provide?

    Ms. ABELN. Yes. We are not sure what the legislation would provide since there are no set values in the legislation. It is an open-ended process but with no agreed values. Our program is specific. It provides financial certainty to us, and we can plan for the amount of money we have to pay over the next 2 to 5 years for current cases.
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    We start paying future claims in 2003, other than exigent claims of people who are currently sick but have not yet filed their cases we pay when those cases arise. So we have a plan that actually is more financially grounded and is based on our ability to pay, which the plaintiffs' lawyers have agreed to. The legislation doesn't provide any of those financial management or cash management tools.

    Mr. CANNON. Would it be your expectation that claimants under your regime would get more or less than under this statutory regime that we are talking about here?

    Ms. ABELN. I don't know the answer to that, Congressman Cannon. The answer to that question is really that since the legislation has no specified values, it would really be up to an arbitrator to determine how much each individual company pays and what that amount would be. We have already negotiated those values.

    Mr. CANNON. I think, Mr. Chairman, we haven't reset the clock, but I shall not take the full 5 minutes.

    Mr. HYDE. I know we haven't, and you take as much time as you would like.

    Mr. CANNON. I shall certainly not tread upon the chairman's patience. I do have a couple of other questions.

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    Ms. Abeln, the Washington Journal reported earlier this week that Owens Corning has set up a company called Integrex to process its own asbestos claims and also to market asbestos litigation management and claims processing services to other asbestos defendants. How much do you expect in annual revenue from that business?

    Ms. ABELN. That is a very good question. I am the chairman of Integrex, and I will tell you that we are working on a business plan; but first, we are trying to put our own house in order and that would involve us processing our own claims and that processing program is just under way. So I don't have a very specific answer related to the litigation management services yet, but I will by the end of the year. A modest sum.

    Mr. CANNON. Modest, millions, dozens, hundreds of millions of dollars.

    Ms. ABELN. Not hundreds of millions. A few million dollars would be a laudable goal to help offset the cost of our own operation.

    Mr. CANNON. This is really a lost-control device.

    Ms. ABELN. It is making lemonade from lemons.

    Mr. CANNON. As asbestos-specific litigation gets worse, is there going to be a greater demand for your services?

    Ms. ABELN. We would be looking to do other litigation services, not just related to asbestos. We have a very good claims processing group who has been processing claims over the years. In 1998 we settled 10,300 claims in our system and paid $312 million. That is a lot of checks to cut. So they are experienced in sending money out the door.
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    Mr. CANNON. Thank you.

    Mr. Mallet, if I could just ask one more question of you.

    Mr. MALLETT. Certainly.

    Mr. CANNON. It is my understanding that following the Amchem and Fibreboard decisions, it is impossible to bind future plaintiffs not bringing lawsuits if they are not sick. Do you agree with that assertion? And if so, what is your view as to why Owens Corning would be taking a position in opposition to this legislation?

    Mr. MALLETT. Congressman, I think that Ms. Abeln just said it very clearly. This legislation, if it is passed, is going to set up a federally mandated administrative processing regime that indeed will make Integrex simply not necessary.

    The key here seems to me, Congressman, is this. All of these persons, and Ms. Abeln included, the company that she represents, what we are trying to achieve, everything we are designing and asking the committee and the committee is asking us to consider, is predictability. A voluntary program based on voluntary medical criteria will give no one the predictability that they need. We do need, as people here can see, that we need medical criteria. That, as I think as I indicated to the chairman earlier on, half that battle has been won.

    Let me read to you from a voluntary settlement agreement: ''plaintiff's counsel believe that the criteria set forth in paragraph 5 of this agreement is fair and reasonable and the acceptance of CC's offer will be in the interest of future clients who do not have a medical condition described in five,'' blah, blah, blah.
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    The bottom line is this: This settlement agreement, Congressman, was not lived up to. This is a voluntary agreement. We have tried to do this again and again and again. It seems to me that what we are confronted with is trying to put old wine in a new bottle. It is time to recognize that 25 years of litigation experience, settlement experience, process design experience, CCR experience, NPR experience, whatever kind of experience you want to apply to this particular problem, none of them have worked.

    What we have got to have is objective, medical criteria that will be in place to evaluate these claims speedily, efficiently, and to give those persons who are sick their money that they need immediately.

    Mr. CANNON. Thank you, Mr. Chairman. I yield back the balance of my time.

    Mr. HYDE. I want to thank all of you for your marvelous persistence and your illumination of a very difficult question. This is only the beginning. Thank you very much. The committee stands adjourned.

    [Whereupon, at 4 p.m., the committee was adjourned.]

A P P E N D I X

Material Submitted for the Hearing Record

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PREPARED STATEMENT OF BRIAN WOLFMAN, PUBLIC CITIZEN LITIGATION GROUP

    Chairman Hyde and Members of the Committee: Thank you for the opportunity to submit this testimony. Before explaining our concerns about H.R. 1283, I want to describe the basis for our interest in the proposed legislation. I am a staff attorney with Public Citizen Litigation Group, a non-profit, national public interest law firm founded in 1972 as the litigating arm of Public Citizen, a consumer advocacy organization with approximately 150,000 members.

    The Litigation Group represented a group of objectors to the Amchem v. Windsor class action asbestos settlement, before the lower federal courts and in the Supreme Court. Our clients included individuals exposed to asbestos, advocacy groups, and labor unions. We objected to the settlement not only on legal grounds, including those adopted by the Supreme Court in rejecting the settlement, but also on fairness grounds—that the settlement terms would cause delay and would deny deserving asbestos plaintiffs proper compensation and, in many instances, any compensation at all. Because the substantive terms of the now-rejected Amchem settlement have been adopted in large measure into H.R. 1283, we have particular expertise in responding to that legislation.

    Attached to this testimony is Public Citizen's analysis of H.R. 1283, and the companion Senate bill, S. 758. That analysis, prepared in April of this year, sets forth our views on the legislation in considerable detail, and explains how many provisions of the bill will undermine the rights of individuals harmed by asbestos and unjustly benefit the asbestos industry. We urge Committee Members to consult that analysis.

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    In addition, in this testimony, we wish to comment on several recurring justifications—or myths—used to bolster H.R. 1283, and explain why none of them are correct. Those myths are (1) that the current volume of asbestos cases presents a unique litigation ''crisis'' requiring national legislation; (2) that H.R. 1283 will ameliorate the alleged crisis by streamlining litigation and reducing delay; and (3) that H.R. 1283 will pay fair compensation to people injured by asbestos. We take up each of these myths in turn.

(1) The Alleged Asbestos Litigation ''Crisis'' Is Not a Justification for H.R. 1283.

    Without question, there are a large number of asbestos personal-injury cases in the federal and state courts. The fact that there are a large number of asbestos cases in the courts, in itself, is no reason to single those cases out for special treatment. The large number of cases is directly related to the magnitude of the harm inflicted; in other words, there are many cases because many people have been (and will be) injured.

    Thus, the real question is whether, on a per-case basis, asbestos cases are so costly and so difficult to resolve that special treatment in the form of sweeping federal legislation is necessary.

    To be sure, in the early years of asbestos litigation, the complexity of the underlying liability issues, unresolved issues relating to insurance coverage, asbestos bankruptcies, and other matters made asbestos litigation costly. These factors gave rise to the oft-cited 1985 RAND study, which indicated that more than 60% of asbestos litigation costs went to lawyers and other transaction costs, not to asbestos plaintiffs. RAND, Asbestos in the Courts, The Challenge of Mass Torts iii. (Significantly, RAND found that defendants' attorney fees and costs 37% of each asbestos litigation dollar, 50% more than plaintiffs' fees and costs (less than 24%)).
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    But nowhere in any of the information submitted to the committee is there hard data showing that the current cost of asbestos personal-injury litigation is different from the cost of other product liability litigation or of litigation generally.

    Not only is there no evidence that asbestos cases are more expensive than other litigation, but there is reason to think that, at this juncture, they are less expensive to resolve. In the first place, unlike many product liability cases, because the asbestos litigation is very ''mature,'' no discovery about the defendants' liability is necessary, because that discovery has already been taken. Furthermore, the defendants' and the plaintiffs' bar have amassed large amounts of information about asbestos exposure—which products were used at which work sites in which years—and so discovery on those questions is limited or non-existent. An individual plaintiff's injuries and damages can usually be proved through a single deposition and/or medical records. In sum, asbestos litigation is unusually amenable to settlement (or rare instances, trial) without large amounts of pre-trial litigation and discovery.

    Although asbestos trials, including consolidated trials, continue to take place, the vast majority of cases are resolved by settlement. The Center for Claims Resolution asbestos defendants—the 20 companies that were defendants in the Amchem case, and which represent about 25% of the industry's liability share—settle approximately 99.8% of the personal-injury cases filed against them. See Georgine v. Amchem, No. 93–0215 (E.D. Pa.), Doc. No. 173, Response of CCR Defendants to the Order to Show Cause, p. 27 n.18 (filed Mar. 17, 1993). This is because the CCR companies, and the plaintiffs that sue them, recognize that the issues in asbestos litigation have been greatly refined, and thus the case values have been fairly well established over time.
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    In addition, this Committee has been provided with other information suggesting that asbestos defendants and court systems have become adept at managing their asbestos dockets. For instance, the testimony from Owens Corning about that company's voluntary settlement program demonstrates both that a federal program is not needed and that settlement, not costly litigation, is the norm. Indeed, Owens Corning made clear that H.R. 1283's federal bureaucracy would be more costly, and less beneficial to injured plaintiffs, than that company's voluntary settlement program. And, although some of the components of Owens Corning's program could be harmful to some plaintiffs (e.g., its restrictive medical criteria), in the context of a truly voluntary program, plaintiffs are free to reject the program and go to court, without the restrictive medical criteria and other substantive and procedural impediments imposed by H.R. 1283. See also Letter From Theodore Goldberg to Hon. Henry Hyde (June 24, 1999) (outlining the large number of extra-judicial voluntary settlement agreements employed by plaintiffs and describing how court systems in various states are managing their asbestos dockets).

    Moreover, the few available statistics do not suggest that asbestos cases are unduly delayed in the litigation process—as compared to other cases. To be sure, asbestos cases are the largest single category of product liability cases commenced in the federal courts, again because of the magnitude of harm inflicted. Asbestos cases comprised 7,143 of the 33,649 product liability cases commenced in the year ending September 30, 1997, according to statistics compiled by the Administrative Office of the U.S. Courts. However, on that same date only a relatively small number of the asbestos cases—439—were pending for three years or more. A year later, an even smaller number—406—were pending for three years or more.

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    Comparisons with other types of cases suggest that asbestos cases are resolved more, not less, expeditiously than comparable cases. For instance, 161 personal-injury cases involving airlines were filed in the year ending on September 30, 1997. On that same date, 45 such cases had been pending for three years or more. A year later, 37 such cases had been pending for three years or more. We recognize that these data are not definitive, because cases commenced in a particular year do not contribute to the three-year backlog for that same year. However, the data strongly suggest that asbestos cases are not peculiarly subject to delay.

    In sum, although there are large numbers of asbestos cases in the courts, there is no evidence that, at the present time, on a per-case basis, those cases are either more costly or more likely to delay the administration of justice than other comparable cases.

(2) H.R. 1283 Will Not Streamline Case Administration or Provide Quicker Justice For Injured Plaintiffs.

    As explained in our attached section-by-section analysis, asbestos claims will not be dealt with more quickly if H.R. 1283 is enacted. The bill requires asbestos claimants to file enormously detailed claims setting out their personal information (including smoking history and work history), their asbestos exposure, and medical information about claimed asbestos-related conditions. As a practical matter, because of the great complexity of the submission and the procedures involved, the claimant will be required to hire a lawyer, even though this process alone is simply a first step and cannot itself lead to recovery of damages.

    After the filing of the claim, the Asbestos Resolution Corporation (''ARC'')—the new federal bureaucracy established by the legislation—then determines whether the claimant meets the bill's stringent medical criteria. If the ARC allows the claim it issues a ''certificate of medical eligibility.'' If the ARC denies the claim, the claimant must seek reconsideration to keep his or her claim alive. If the claim is again denied, the claimant enters ''round one'' of court proceedings by filing a suit in federal court seeking reversal of the ARC's denial of the certificate of medical eligibility. The bill contains no time limit on when the federal courts must decide these cases; indeed, it is likely, given the volume of asbestos cases, that thousands of new cases will be filed in federal district courts. These cases will not decide whether an asbestos victim will be compensated for his or her injuries, but only the threshold issue whether he or she is medically eligible to file suit. All of these cases must be filed in federal district court, thus effectively transferring a large number of cases previously filed in state court to the federal system.
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    The delays will likely be long for two additional reasons. First, the cases will be entirely new to the federal courts. The courts will have had no experience interpreting the law's new medical criteria and the accompanying rules and regulations to be issued by the ARC. An entire new jurisprudence will have to be created by the district courts and, ultimately, the federal courts of appeals, much as currently exists in social security cases. Second, as others have already explained to the committee, H.R. 1283 applies in large measure to asbestos cases pending in both state and federal courts. This factor alone will add enormously to the district courts' burden to the detriment of injured claimants.

    Only if a claimant wins in federal court, or previously obtains a certificate of medical eligibility, can he or she file an ordinary civil action in state or federal court to collect damages. Thus, many claimants will have to go court twice.

    In many respects, these second suits will mimic the suits that already exist in federal and state courts around the Nation. But there is reason to think that they will engender somewhat more delay than current asbestos cases. First, no individual asbestos case may be made a part of a class action, or be subject to joinder or any other type of aggregation, without the consent of all defendants. Without any opportunity for courts to aggregate cases for any purposes, cases will take longer to resolve. Moreover, although a finding of medical eligibility is presumed correct, the defendant has the right to challenge that determination and, therefore, lawsuits may well involve substantial re-litigation over whether the claimant meets the bill's medical criteria, even though the plaintiff has already obtained a certificate of medical eligibility.

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    The bill's proponents do not—because they cannot—dispute the existence of H.R. 1283's byzantine, multi-layered procedures. They argue instead that most cases will be resolved through the bill's mediation process, and therefore delay will not, as a practical matter, be a serious problem. That argument fails to support this legislation for two reasons. First, successful mediation is simply a form of settlement, and parties to litigation may always settle on terms agreeable to them. Many federal and state courts already have mandatory mediation programs. Those programs, like the one imposed by H.R. 1283, require that the parties exchange information and discuss settlement, but they do not require settlement. And as noted above, certain asbestos defendants already have aggressive settlement programs. In short, we do not see how this legislation does anything that asbestos plaintiffs and defendants cannot already do, either at the behest of courts, or on their own.

    Second, mediation only makes sense against a backdrop of viable litigation that sets appropriate settlement values for individual cases. Until claimants go through H.R. 1283's litigation process, there will be no basis for knowing the terms upon which to settle. Therefore, at least in the beginning, the mediation process established by H.R. 1283 will likely be less successful, not more successful, than the settlement processes established in current litigation.

(3) Compensation Levels Will Not Be Fair.

    In the attached memorandum, we show that the bill's medical criteria and its elimination of certain types of claims compensable under state law are grossly unfair, and will severely harm asbestos victims. Others who have appeared before the committee or submitted testimony have made the same point and we need not repeat it here.
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    We wish to address a related issue. The bill's proponents have also made the claim that compensation levels for those who do qualify for compensation will be fair, perhaps greater than that which they presently obtain in the tort system. We strenuously disagree. The bill does not set forth minimum compensation requirements for particular diseases. Nor does the bill even require that awards take into account historical tort awards in asbestos cases or in comparable personal-injury and wrongful death cases. Rather, H.R. 1283 simply assumes that awards will adequately compensate victims. However, there is every reason to believe that asbestos defendants will make ''low ball'' offers in the alternative dispute resolution system established by the legislation.

    Once the claimant enters H.R. 1283's mediation program, he or she may have already gone through years of delay in obtaining a certificate of medical eligibility, including a full federal court review, thus making acceptance of a low offer much more likely. The only additional leverage available to the claimant is to file a lawsuit in state or federal court, in which (1) there is no opportunity to aggregate the claim for any purpose; (2) any defendant can still contest the existence of a medical condition that the claimant has already proved to the ARC or to a federal court; and (3) punitive damages may not be sought under any circumstances. Thus, with additional court delay ahead (recall that the ordinary suit to recover damages has yet to be filed), and the plaintiffs subject to H.R. 1283's substantive and procedural disadvantages, it would be pure folly to think that defendants will offer claimants anything approaching the damages that they have historically obtained in the tort system. Put differently, H.R. 1283 will greatly depress settlement values.

    A consensus was reached at the July 1 hearing that asbestos is a very dangerous product and that our goal should be to ensure that those injured by it receive swift and fair compensation. Depressing settlement values and delaying resolution of claims will not achieve that goal.
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    Again, we urge the Committee to consider our attached analysis of H.R. 1283. For the reasons stated in that analysis and in the testimony above, we urged the Committee to reject H.R. 1283. Thank you for the opportunity to submit this testimony.

62442j.eps

62442k.eps

62442l.eps

62442m.eps

62442n.eps

62442o.eps

62442p.eps

62442q.eps

62442r.eps

62442s.eps

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Building and Construction
Trades Department,
Washington, DC, August 10, 1998.
Hon. JOHN CONYERS, JR.,
Committee on the Judiciary,
House of Representatives, Washington, DC.

    DEAR CONGRESSMAN CONYERS: Your statement in the Congressional Record of June 25, 1998 agreeing to cosponsor H.R. 3905, the ''Fairness in Asbestos Compensation Act of 1998'', has been brought to my attention. For the reasons set forth in the enclosed list of ''Objections to H.R. 3905'', the Building and Construction Trades Department, AFL–CIO, strongly opposes this bill.

    It is apparent to me that erroneous information was provided to you concerning our position on the issues addressed by H.R. 3905 and its relationship to the settlement agreement reviewed by the Supreme Court in Amchem Products. Inc. v. Windsor. The settlement agreement in the Windsor case was voluntarily negotiated by several members of the plaintiffs' trial bar who over the years have represented thousands of building trades union members. The agreement applied only to those members who wished to be covered by its terms. Many members made the decision to be included in the covered class, and by lending my support to the settlement agreement I felt I was supporting their decisions while, at the same time, not interfering with the decisions of members who decided not to be included and, thereby, to retain all their rights in the tort system. Many members also decided not to be included. I did not directly participate in the negotiation of that settlement agreement, and to the best of my recollection, organized labor became involved only after the main agreement was negotiated between plaintiffs' attorneys and attorneys for the CCR companies. This involvement resulted in certain amendments to the agreement which provided organized labor with a role in the implementation and monitoring of the agreement.
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    H.R. 3905 is a completely different matter. In the first place, it is, obviously, a piece of federal legislation rather than the settlement of a law suit, and it addresses certain issues, such as particularized medical criteria, which, in my view, should not be addressed by federal legislation. Second, H.R. 3905 is not voluntary. it would apply to every occupational asbestos victim in the future. It would even apply to those victims who already have filed lawsuits which are pending in the federal and state courts. Third, H.R. 3905 substantially curtails victims' tort rights and remedies. Fourth, it requires victims who wish to use the tort system to pursue first an administrative process which is lengthy, costly, adversarial, cumbersome and technical. Our objections in these regards are set forth in the enclosure.

    I do not disagree that asbestos victims deserve, at their option, an alternative to the tort system because the tort system can often be lengthy, costly, adversarial, cumbersome and technical. However, I also know that many thousands of asbestos victims have received justice by reason of this tort system, and that many more victims will do so in the future.

    The Building and Construction Trades Department is prepared, as always, to discuss with any well-meaning person, organization, or group viable voluntary alternatives to the tort system for asbestos victims which will promote their interests in securing timely and adequate compensation for their injuries.

    With best wishes, I am

Sincerely,
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Robert A. Georgine, President.
OBJECTIONS TO H.R.3905 (''FAIRNESS IN ASBESTOS COMPENSATION ACT OF 1998'').

    1. The bill eliminates a claimant's right to sue in the tort system unless the claimant first files a claim with the Asbestos Resolution Corporation (ARC), submits information to ARC, and awaits a determination by ARC on medical eligibility.

    2. The bill eliminates a claimant's right to sue in the tort system unless the claimant is successful in having ARC issue a ''certificate of medical eligibility''. This is true even with regard to pending civil actions which have not gone to trial prior to the ''operational date'' of the Act (the date on which ARC certifies that it is operational or the first business day following the seventh month after the date of enactment whichever comes first).

    3. The bill legislates specific and detailed medical criteria to govern ARC's determination.

    4. Even if a claimant is issued a certificate of medical eligibility, the claimant cannot sue in the tort system unless he first goes through a lengthy mediation procedure, and is successful in having ARC issue a ''release from mediation''.

    5. In the mediation procedure, the claimant is required to provide a detailed and company-specific exposure history. This defeats the purpose of having an alternative, expeditious compensation system which compensates claimants with asbestos-related diseases, regardless of their ability to identify the manufacturer of the asbestos to which they were exposed, or to recall the particulars about each and every job at which they were exposed.
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    6. The mediation and voluntary arbitration procedures established by the bill are adversarial, cumbersome and extremely technical. This will make the process costly and time consuming and will require every claimant to be represented by an attorney. It would be preferable to make such an optional alternative process non-adversarial and streamlined by having companies pay monies into the facility on the basis of some formula (perhaps size and ability to pay and/or the formula set forth in the bill governing the assessment of administrative costs) for distribution to the claimants. This way, the companies would not participate in the proceedings, the proceedings would not be adversarial, cumbersome, or technical, and proof of particularized exposure histories would be unnecessary. Also, perhaps the claims facility can have on staff an independent group of attorneys who are available at the option of claimants to assist claimants at no cost or a minimal cost.

    7. The bill details each and every procedure in the administrative claims process. It would be better to leave the function of establishing rules of procedure to the administrators of the process.

    8. The bill allows companies to join forces in the claims process but bars consolidation of the claims of a group of claimants.

    9. Under the medical criteria established in the bill, exposures below OSHA PELs which were in effect in prior times but were later discredited by new scientific knowledge are disregarded in whole or in part.

    10. Under the medical criteria for lung cancer established in the bill, the installation, repair or removal of asbestos products in a shipyard during World War II is given more credit than the installation, repair or removal of asbestos products on a construction project.
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    11. The bill establishes a new civil action in the courts of the United States to handle disputes between companies, or between companies and ARC, regarding the assessment of administrative costs. These new civil actions are likely to consume resources which should be applied to the purpose of the claims process (i.e. compensation to claimants).

    12. To succeed in their civil actions, claimants are required to prove (a second time) the existence of the medical criteria set forth in the bill.

    13. Even in pending civil actions that have gone to trial, but have not resulted in final non-appealable judgments, claimants are required to prove the existence of the legislated medical criteria.

    14. Courts entertaining civil actions by claimants are precluded from utilizing well-established procedures to expedite the handling of multiple-claimant cases, including class actions, joinder of parties, consolidation of actions, aggregation of claims, and extrapolations.

    15. Courts are restricted in providing damages or other relief to claimants for emotional distress, or any other form of mental or emotional harm, or for medical monitoring or surveillance.

    16. Courts are precluded from providing damages or other relief to claimants based on valid state law claims for increased risk of cancer or other diseases.

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    17. Courts are precluded from providing punitive damages to claimants in appropriate cases.

    18. The doctrine of joint and several liability may be adversely affected by the Bill.

     


Heat & Frost Insulators &
Asbestos Workers,
Washington, DC, May 20, 1999.
Hon. HENRY J. HYDE, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.

    DEAR CHAIRMAN HYDE: The International Association of Heat and Frost Insulators and Asbestos Workers strongly opposes H.R. 1293, the ''Fairness in Asbestos Compensation Act of 1999'' for the following reasons:

    1. The bill eliminates a claimant's right to sue in the tort system unless the claimant first files a claim with the Asbestos Resolution Corporation (ARC), submits information to ARC, and awaits a determination by ARC on medical eligibility.

    2. The bill eliminates a claimant's right to sue in the tort system unless the claimant is successful in having ARC issue a certificate of medical eligibility''. This is true even with regard to pending civil actions which have not gone to trial prior to the ''operational date'' of the Act.
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    3. The bill legislates specific and detailed medical criteria to govern ARC's determination.

    4. Even if a claimant is issued a certificate of medical eligibility, the claimant cannot sue in the tort system unless he first goes through a lengthy mediation procedure, and is successful in having ARC issue a ''release from mediation''.

    5. In the mediation procedure, the claimant is required to provide a detailed and company-specific exposure history. This defeats the purpose of having an alternative, expeditious compensation system which compensates claimants with asbestos-related diseases, regardless of their ability to identify the manufacturer of the asbestos to which they were exposed, or to recall the particulars about each and every job at which they were exposed.

    6. The mediation and voluntary arbitration procedures established by the bill are adversarial, cumbersome and extremely technical. This will make the process costly and time consuming and will require every claimant to be represented by an attorney. It would be preferable to make the process non-adversarial and streamlined by having companies pay monies into the facility on the basis of some formula (perhaps size and ability to pay and/or the formula set forth in the bill governing the assessment of administrative costs) for distribution to the claimants. This way, the companies would not participate in the proceedings, the proceedings would not be adversarial, cumbersome, or technical, and proof of particularized exposure histories would be unnecessary. Also, perhaps the claims facility can have on staff an independent group of attorneys who are available at the option of claimants to assist claimants at no cost or a minimal cost.
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    7. The bill details each and every procedure in the administrative claims process. It would be better to leave the function of establishing rules of procedure to the administrators of the process.

    8. The bill allows companies to join forces in the claims process but bars consolidation of the claims of a group of claimants.

    9. Under the medical criteria established in the bill, exposures below OSHA PELs which were in effect in prior times but were later discredited by new scientific knowledge are disregarded in whole or in part.

    10. Under the medical criteria for lung cancer established in the bill, the installation, repair or removal of asbestos products in a shipyard during World War II is given more credit than the installation, repair or removal of asbestos on a construction project.

    11. The bill establishes a new civil action in the courts of the United States to handle disputes between companies, or between companies and ARC, regarding the assessment of administrative costs. These new civil actions are likely to consume resources which should be applied to the compensation of claimants.

    12. To succeed in their civil actions, claimants are required to prove (a second time) the existence of the medical criteria set forth in the bill.

    13. Even in pending civil actions that have gone to trial, but have not resulted in final non-appealable judgments, claimants are required to prove the existence of the legislated criteria.
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    14. Courts entertaining civil actions by claimants are precluded from utilizing well-established procedures to expedite the handling of multiple-claimant cases, including class actions, joinder of parties, consolidation of actions, aggregation of claims, and extrapolations.

    15. Courts are restricted in providing damages or other relief to claimants for emotional distress, or any other form of mental or emotional harm, or for medical monitoring or surveillance.

    16. Courts are precluded from providing damages or other relief to claimants based on valid state law claims for increased risk of cancer or other diseases.

    17. Courts are precluded from providing punitive damages to claimants in appropriate cases.

    Asbestos victims deserve, at their option, an alternative to the tort system because the tort system can often be lengthy, costly, adversarial, cumbersome and technical. However, it is also true that many thousands of asbestos victims have received justice by reason of this tort system, and that many more victims will do so in the future.

    Our Union is prepared, as always, to discuss with any well-meaning person, organization, or group viable voluntary alternatives to the tort system for asbestos victims which will promote their interests in securing timely and adequate compensation for their injuries.

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    With kind regards, I am

Sincerely yours,

William G. Bernard, General President.

Letter to go to all member of the Senate and House Judiciary Committees and sponsors of the bills as follows:

Senate Sponsors:
Ashcroft—Judiciary
Hatch—Judiciary
Dodd
Sessions—Judiciary
Lieberman
Grassley—Judiciary
Torricelli—Judiciary
Robert Smith, NH—Judiciary
Schumer—Judiciary

House Sponsors:
Hyde—Judiciary
James Moran, VA
Richard Armey
Tom DeLay
James Sensenbrenner—Judiciary
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Gekas—Judiciary
Dan Burton, IN
Manzuloo
Stenholm
Hostettler
Bonilla
Norwood
Folley
Deal
Dea;
Brady, TX (no Bradley of TX)
Weller
Cannon
J.C. Watts, OK

     


Virginia Peninsula Chamber
of Commerce,
Hampton, VA, June 22, 1999.
Mr. KEITH HOLMAN,
U.S. Chamber of Commerce,
Washington, DC.

RE: The Hyde Bill—H. R. 1283

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    DEAR KEITH: The Virginia Peninsula Chamber of Commerce is familiar with asbestos product liability litigation and its effects on our Peninsula communities. During the past (20) twenty years, several thousand local shipyard workers have developed asbestosis, lung cancer and mesothelioma from asbestos exposure that occurred in the 1940s to the 1970s. Hundreds of these workers have died (approximately 400 from mesothelioma alone), and asbestos deaths and disabilities are continuing due to the long latency period associated with these illnesses.

    Plaintiffs in these lawsuits are routinely and regularly receiving prompt settlements from the asbestos manufacturers pursuant to a broad-based settlement agreement that has been negotiated with substantially all of the asbestos manufacturers who are defendants in these lawsuits. The efficiency of the settlements that have been reached between the asbestos manufacturers and plaintiffs' counsel for these claims is demonstrated by the fact that there has not been a jury trial in an asbestos lawsuit in this area for (7) seven years; during this period of time, hundreds of asbestos victims have been promptly and voluntarily compensated with settlements; transaction costs of the defendants have been virtually eliminated; and there is no burden on the courts because most of the lawsuits are settled before they are even served on the defendants.

    Virginia employers have been a major beneficiary of the broad-based settlement agreements which exist in this jurisdiction because every dollar that is received by the asbestos worker reduces the liability of his employer to pay workers' compensation benefits for that asbestos-induced illness or death. For example, during the past three years, the Newport News Shipyard has received credits from hundreds of these settlements each year. The lawyers who represent the asbestos victims in this area are well known and respected for the work they have done in proving the liability of the asbestos industry and providing compensation for deserving victims.
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    The Virginia Peninsula Chamber of Commerce opposes the Hyde Bill as it is deemed unnecessary legislation. In Virginia the parties have voluntarily resolved this litigation on terms that are acceptable to both the clients and the manufacturers. The qualified claimants are receiving prompt and certain payments, the settlement agreements have minimum medical and exposure criteria which assure that only legitimate claims are compensated, and there is no burden on the courts.

    In the event the Hyde Bill is made law, it will provide a windfall to asbestos manufacturers by first permitting them to void their settlement agreements and then by creating eligibility requirements that are so strict that more than one-half of the claimants who are now being voluntarily compensated will be ineligible to file a lawsuit, much less receive any settlement. Additionally, it will create a new and burdensome federal bureauracy which is clearly designed for one purpose and one purpose only—to delay and/or prevent asbestos victims from being compensated. These procedures will also drastically increase the transaction costs for all parties and eliminate the efficiencies that have been designed by the courts and the parties to resolve this litigation.

    We urge you to find a middle ground of commense sense and avoid any action that will impact the current agreements in the Commonwealth of Virginia.

Cordially,

Clyde R. Hoey II, President & CEO.
     

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ADDITIONAL STATEMENT OF THE ASSOCIATION OF TRIAL LAWYERS OF AMERICA

THE SUPREME COURT IN FIBREBOARD DID NOT ASK CONGRESS TO PASS H.R. 1283. IN FACT, H.R. 1283 IS INCONSISTENT WITH THE COURT'S DECISION.

    When the Supreme Court of the United States last week called upon Congress to consider ''creating a national asbestos dispute-resolution scheme,'' what the Court had in mind is a far cry from H.R. 1283. In fact, a full reading of the Court's decision in Ortiz v. Fibreboard Corp., No. 97–1704 (June 23, 1999), together with a reading of the report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation (cited by the Court), makes clear that H.R. 1283 would be inconsistent with the goals enunciated by the Court.

    H.R. 1283 does not ensure the payment of any compensation; under the bill, no claimant is assured of any relief. Moreover, a fair reading of the bill—indeed the purpose of the bill—is to add layers of procedural hurdles in the path of claimants and to shrink the rights that victims presently enjoy. The Court, on the other hand, asked for Congress to provide fair compensation to asbestos victims without what it saw as delays and costs in the current system. Moreover, the Court in Fibreboard made clear that it would not countenance any scheme that compromises Americans' Seventh Amendment right to trial by jury or the sovereignty of the states under our federal system. H.R. 1283 does both.

    The Court in Fibreboard struck down a massive class action settlement of future asbestos claims, concluding that it was simply beyond the power of the judicial branch to resolve the large numbers of claims while at the same time protecting the jury rights and due process rights of the individual claimants. The ''elephantine mass of asbestos cases,'' Justice David Souter bluntly stated, ''defies customary judicial administration and calls for national legislation.'' Justice Souter noted that the Court had issued a similar call for action two years ago in Amchem Products Inc. v. Windsor, 521 U.S. 591 (1997).
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HR 1283 DOES NOT ANSWER THE CALL FOR CONGRESSIONAL ACTION

    It would be a mistake to interpret the Court's call for legislation as support for anything like HR 1283. There is no need to speculate about this. The Court spelled out what it had in mind by referring to pages 27–35 of the report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation, a panel of federal judges appointed by Chief Justice Rehnquist to study the problem. The panel did not suggest that Congress address asbestos litigation by shrinking the rights of asbestos victims or by tilting the playing field in the industry's favor.

    While ATLA does not believe that a national legislative solution is necessary or that such a solution would better serve victims of asbestos-related disease, it is clear that the recommendation of the judicial panel cited by the Court bears little resemblance to H.R. 1283. The panel recommended that Congress place the assets of asbestos companies and all the insurance coverage available for the satisfaction of claims under the control of a single judicial or administrative forum, perhaps in the form of a trust fund. All asbestos claims would be consolidated for payment from the fund in an equitable manner. (H.R. 1283 keeps the various asbestos companies and insurers in control of the resources that may be allocated to compensation, continuing the practice of filling courtrooms with scores of defense attorneys, which the panel found wasteful). The panel called for eliminating burdensome proof requirements and ''allowing principles of absolute liability to apply.'' (H.R. 1283 adds requirements that claimants must satisfy before they can proceed with a civil action). The panel urged steps to encourage consistency in compensation and preservation of the trust for future claimants. (H.R. 1283 offers no guarantees of consistency and focuses on preserving the assets of the asbestos industry).
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    Congress might well reject the type of major federal program envisioned by the judicial panel and referenced by the Court in Fibreboard. But it must recognize that proposals such as HR 1283 in no way respond to the Court's call for a national dispute-resolution and compensation scheme. Congress need look no further than the Court's decision in Fibreboard itself. The Court struck down a $1.5 billion settlement plan as beyond the scope of Federal Rule of Procedure 23(b)(1) precisely because it ''obviously implicates the Seventh Amendment jury trial rights of absent class members.'' To avoid ''serious constitutional concerns,'' the Court rejected any more ''adventurous'' application of the Rule. Congress, no less than the Supreme Court, is bound by the Bill of Rights.

H.R. 1283 VIOLATES PRINCIPLES OF STATE SOVEREIGNTY

    H.R. 1283 would impose a complex array of rules for asbestos cases not only in federal courts but also in state court actions under state law. Although Congress has the power to create a federal cause of action for asbestos claimants, it is beyond Congress' authority to rewrite state law and commandeer state courts as tools of congressional policy.

    On the same day the Justices decided Fibreboard, the Court also handed down its decision in Alden v. Maine, No. 98–436 (June 23, 1999), reinforcing the constitutional limits on Congress' authority to dictate state law. The Court held that immunity from suit was an element of state sovereignty and that it was beyond the authority of Congress to require state courts to disregard state immunity, unless waived by state law. Neither the Interstate Commerce Clause nor the Supremacy Clause of the U.S. Constitution permits Congress to treat the states as ''mere provinces.''
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    The power to develop and apply state tort law is even more essential to state sovereignty than immunity (which can be waived). The Court rejected the notion of congressional ''authority to pursue federal objectives through state judiciaries.'' The Court repeated its admonition in Erie Railroad v. Tompkins: ''Supervision over either the legislative or the judicial action of the States is in no case permissible except as to matters by the Constitution specifically authorized or delegated to the United States.''

    Rewriting state tort law—even with the intention of improving it—is not within Congress' powers.

     

ONE PAGE SUMMARY OF THE WRITTEN TESTIMONY SUBMITTED BY ALEX G. LITTLE, M.D. FCCP PAST PRESIDENT, AMERICAN COLLEGE OF CHEST PHYSICIANS

    Dr. Little is the Chairman of the Department of Surgery at the University of Nevada School of Medicine and the past President of the American College of Chest Physicians. He has taught and practiced in the area of thoracic surgery for the past twenty five years, and is the author of more than two hundred book chapters, articles, and abstracts. In his written testimony submitted to the House Judiciary Committee, Dr. Little expresses his support of H.R. 1283, the Fairness in Asbestos Compensation Act of 1999 (''Act'') and his endorsement of the medical criteria contained in the Act. In his written testimony, Dr. Little states that, on a regular basis, he sees patients, teaches medical students and surgery residents, conducts research and writes articles for the scientific literature in the field of chest diseases. Based on this experience, as well as the expertise as reflected on his Curriculum Vitae, Dr. Little states his firm conclusion that the medical criteria in the Act fairly and clearly distinguish between those individuals exposed to asbestos who are truly sick and those who are not. He testifies that the Act's medical criteria reflect the mainstream of medical thinking and ensures that those truly injured as a result of asbestos will be compensated while at the same time it preserves the rights of those who, in the future, develop asbestos-related diseases.
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PREPARED STATEMENT OF HON. CHRIS CANNON,A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

    Mr. Chairman, I commend you for introducing H.R. 1283, the Fairness in Asbestos Compensation Act of 1999. This legislation of which I am an original cosponsor is a common-sense solution to the asbestos litigation crisis in our courts. I believe that today's hearing is an important opportunity for members on both sides of the aisle to focus on this problem.

    The most important point for the hearing today is that our current asbestos litigation system does not work. Our federal and state courts are clogged with 200,000 pending cases and tens of thousands of new cases are being filed every year.

    The courts simply cannot handle this number of asbestos cases and have responded by encouraging the consolidation of thousands of cases. In many instances, these mass settlements do not take into account the strengths or weaknesses of an individual's claim, but rather lump the sick and non-sick together. This sets up a situation where the truly sick victims of asbestos receive less compensation and people who are not impaired get a windfall and lawyers get rich. This is no small problem. There is wide acceptance among legal scholars that a majority of the current claimants are not sick.

    The Fairness in Asbestos Compensation Act would provide for an administrative claims system for those individuals who meet objective medical criteria that determine whether or not an individuals has an asbestos related impairment. The criteria in the legislation are identical to those in Georgine settlement which was agreed to by defendant companies and key components of the plaintiff's bar and organized labor.
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    In recent years the Supreme Court has been asked to rule on two asbestos settlement agreements and on both occasions concluded that an administrative claims system would best serve the true victims of asbestos. Just last week in the ruling on Ortiz v. Fibreboard, Chief Justice Rehnquist forcefully stated in his concurring opinion that the current asbestos litigation system ''cries out for a legislative solution.'' Justice Ginsburg similarly stated in Amchem v. Windsor in 1997 that an administrative claims process ''would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.''

    Mr. Chairman, H.R. 1283 would bring some sanity to an inequitable system. It would ensure that those who are really sick from asbestos get paid in a timely manner. It would preserve their right to go to court. It would allow victims back into the system if they get sick in the future. In addition, the bill would help companies to be able to compensate those who actually become impaired with an asbestos-related ailment for decades to come.

    I support H.R. 1283, compliment Chairman Hyde for introducing it, and urge my colleagues to support its passage.

     

PREPARED STATEMENT OF HON. JAMES P. MORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA

    Mr. Chairman and members of the Committee, I want to thank you for this opportunity to make a statement regarding H. R. 1283, the Fairness in Asbestos Compensation Act of 1999.
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    As an original cosponsor of H.R. 1283, I believe strongly that the current system of compensating those who suffer from asbestos-related illnesses is unwieldy and unfair. With nearly 200,000 cases pending in state and federal courts and 30,000 to 50,000 new cases filed each year, there is no end in sight. I have appeared before this Committee in the past on other tort reform matters, yet the present asbestos litigation system poses a truly unique problem in that it contradicts every notion of how justice should be served.

    Imagine a courtroom where judges no longer preside over actual cases, or sit in judgement over right and wrong, guilt or innocence and where claims are referred to in the aggregate as ''inventories'' and are forced to be paid without regard to whether the plaintiff has any impairment at all. Consider a system where a seemingly unlimited supply of healthy claimants bring suit who may never get sick. Consider further a system of justice where two-thirds of every dollar spent goes to transaction costs rather than to the victims and where the truly sick have to wait years to receive compensation.

    This is the face of the current asbestos litigation crisis, a system where the truly sick, the defendants and the courts themselves all suffer unnecessarily because of the overwhelming number of cases brought by the non-sick. With the promise of tens of thousands of additional cases to be filed just this year, we can only expect this problem to get worse.

    As my colleagues are aware, the Supreme Court ruled on a class action settlement in 1997 that would have largely solved the problem of compensating individuals with asbestos-related illnesses. Based on objective and fair medical criteria which would allow the true victims of asbestos to recover whenever they are sick, the settlement was agreed to by industry, by members of the plaintiffs' bar and by key components of organized labor. Bob Georgine, President of the Building and Construction Trades Union, even lent his name to the agreement.
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    At the end of the day, however, the Supreme Court affirmed a lower court decision that held while the Georgine Settlement was a long-overdue and rational solution to the asbestos crisis, the class was too large and complex to certify. Courts and commentators have concluded that the present system is indeed broken and that a congressionally mandated administrative mechanism is needed.

    Justice Ginsburg points directly at Congress as the only body with the authority to create an administrative claims processing mechanism to solve the asbestos litigation crisis. In his concern over the failures of the current system—a system where the victims of asbestos will be shortchanged unless something is done, Justice Breyer echoed comments of the Judicial Conference Ad Hoc Committee on Asbestos Litigation, appointed by Chief Justice Rehnquist in 1991:

''Decisions concerning thousands of deaths, millions of injuries, and billions of dollars are entangled in a litigation system whose strengths have increasingly been overshadowed by its weaknesses. The ensuing five years have seen the picture worsen: increased filings, larger backlogs, higher costs, more bankruptcies and poorer prospects that judgements—if ever obtained—can be collected.''

(Justice Stephen Breyer, Amchem v. Windsor, 1997)

    The Supreme Court, just last week, again implored Congress to devise a solution to ''the elephantine mass of asbestos cases'' that the justices said are clogging federal and state dockets in protracted court proceedings. The notion that victims now and in the future may be unable to recover damages unless the system is fixed should give pause to every one of my colleagues here today.
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    We should all support a system to screen out the unimpaired, allowing those who are truly sick to be brought to the front of the line for compensation. We should support a system where companies are not driven into bankruptcy—a system where the defendants will remain solvent long enough to continue paying the claims of the sick well into the 21st century. And where they would do so quickly and fairly, whenever the claimant is sick, regardless of the statute of limitations. This is exactly what H.R. 1283 would accomplish if enacted into law.

    Congress has been called upon by the courts to act on this matter and we should do so expeditiously. If we fail in our responsibility, the tragedy of victims waiting years for compensation and receiving only a fraction of the settlement dollars will perpetuate.

    Opponents of this legislation are resorting to tactics of confusion and intimidation because they simply can not make sound policy arguments against this legislation. Their argument that the system set forth in the legislation should be ''voluntary,'' whereby claimants can elect to either ''opt in'' or ''opt out'' at their discretion, may appear superficially attractive, but would only generate new problems for the system. Since experts estimate that 50% to 80% of the current claims filed are by individuals with no physical impairment, it is easy to see how a ''voluntary'' system would work: victims with a legitimate claim would elect to use the new system; they would go through the medical screen and would receive an award quickly. Individuals with no impairment, however, would elect to file a claim in court, doing little to alleviate the tens of thousands of cases filed by the unimpaired each year. The new system must be mandatory—both for victims and for the defendants—and it must contain incentives to encourage quick and fair settlements for victims.
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    All too often, we are forced to choose between corporate America and the little guy—situations where someone has been harmed and no one wants to take responsibility. But today, we have an issue that goes beyond the question of who is liable. The parties in support of this bill have admitted responsibility and want to pay those who are sick whenever they are sick. H.R. 1283 would not screen out deserving claimants, it would simply ask those who are not yet sick to wait their turn. I would ask the Committee: How many bills are pending before Congress where one of the main objectives is to bring the truly impaired to the front of the line?

    H.R. 1283 addresses the fundamental flaws of the present system and offers common-sense solutions that preserve a sick claimants' right to sue, require defendant companies to make good-faith settlement offers, relieve trial court judges of their role as claims examiners, and ensures that the victims—and not their lawyers—receive as much of the award as possible.

    Rarely do we get the chance to enact such a targeted, yet comprehensive, solution to a complex problem. Asbestos litigation affects the bottom line of hundreds of companies nationwide and H.R. 1283 would allow them to manage this liability with the certainty that the true victims of asbestos will be compensated. More importantly, however, it streamlines the recovery process and keeps the courthouse door open to deserving claimants.

    I applaud Chairman Hyde for his efforts and leadership in introducing this legislation designed to solve an overwhelming problem faced by the courts, the defendants and, most disturbingly, the victims of asbestos. The time is now for us to exercise our responsibility, answer the judiciary's calls for a legislative solution and restore order and fairness to the presently out-of-control system. H.R. 1283 provides us with this unique opportunity .
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    I thank the Chairman and the members of the Committee for the opportunity to make a statement on this important issue.











(Footnote 1 return)
Christopher F. Edley, Jr. and Paul C. Weiler, Asbestos: A Multi-Billion-Dollar Crisis, 30 Harv. J. on Legis. 383 (1993).


(Footnote 2 return)
Amchem Products, Inc. v. Windsor, 521 U.S. 591, 628–29 (1997).


(Footnote 3 return)
Ortiz v. Fibreboard Corp., No. 97–1704, slip op., at 1 (June 23, 1999).


(Footnote 4 return)
Id., slip op., at 1 (Rehnquist, C.J., concurring). Other courts have also invited—or even demanded—legislative action. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 628–29 (1997), Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996) (''The most direct and encompassing solution would be legislative action.''); Cimino v. Raymark Indus., Inc., 151 F.3d 297, 313 (5th Cir. 1998) (''There is no doubt that a desperate need exists for federal legislation in the field of asbestos litigation.''); Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 50 (Tex. 1998); Appalachian Power Co. v. MacQueen, 479 S.E.2d 300, 304 (W. Va. 1996); W.R. Grace & Co. v. Waters, 638 So.2d 502, 505 (Fla. 1994) (''Any realistic solution'' must be uniform and ''such a uniform solution can only be effected by federal legislation.'').


(Footnote 5 return)
Ortiz v. Fibreboard, No. 97–104, slip op., at 3 (Breyer, J., dissenting).


(Footnote 6 return)
Edley & Weiler, supra note 1, at 386 (1993).


(Footnote 7 return)
Id. at 384.


(Footnote 8 return)
Id. at 384.


(Footnote 9 return)
Just those twenty defendants involved in the Georgine case have settled approximately this number.


(Footnote 10 return)
There is no central judicial administrative body that collects data on asbestos cases in both federal and state courts. The Mealey's Report obtains its data from public SEC filings by asbestos defendants. According to those filings, in Sept. 30, 1998, there were 196,300 cases pending against Owens-Corning, a defendant in the great majority of asbestos cases. See Owens-Corning, SEC Form 10–K, Annual Reports for Fiscal Years 1994 through 1997. Following the announcement of Owens-Corning's ''National Settlement Program'' in late 1998, Owens-Corning's filings ceased reporting the number of new cases filed. See Owens Corning, SEC Form 10–K, Annual Report for Fiscal Year 1998. See also Asbestos Companies Report Numbers of Pending Claims, New Filings in 1998, 14 Mealey's Litig. Rep.: Asbestos 23–27 (May 7, 1999) (hereinafter ''Asbestos Companies Report'').


(Footnote 11 return)
See Edley & Weiler, supra note 1, at 389 n.10 (citing medical studies).


(Footnote 12 return)
See, e.g., Richard Doll & Julian Peto, Asbestos: Effects on Health of Exposure to Asbestos 2 (1985) (''The benign conditions of the pleura that are produced by asbestos are seldom of any lasting importance.'')


(Footnote 13 return)
See Lester Brickman, The Asbestos Litigation Crisis: Is There a Need for an Administrative Alternative?,'' 13 Cardozo L. Rev. 1819, 1853 (1992).


(Footnote 14 return)
Aaron v. Abex Corp., No. 94–C–2110–2 (Dist. Ct. Brazoria Cnty. Feb. 19, 1998). See Carborundum Co. Hit With $115.6 Million Verdict In 21 Texas Cases, 13 Mealy's Litig. Rep.: Asbestos 5–6 (March 6, 1998).


(Footnote 15 return)
Cosey v. E.D. Bullard Co., No. 95–0069 (Miss. Cir. Ct., Jefferson Cnty., June 12, 1998). See Mississippi Jury Awards $48.5 Million in 12 Cases, Andrews Asbestos Litig. Rep., July 17, 1998, at 1.


(Footnote 16 return)
See, e.g., Asbestos Companies Report, supra note 10.


(Footnote 17 return)
See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 129 B.R. 710, 907 (Bankr. E. & S. D. N.Y. 1991), vacated on other grounds, 982 F.2d 721 (2d Cir. 1992); An Administrative Alternative to Tort Litigation to Resolve Asbestos Claims, Transcript of the Administrative Conference of the United States, at 4 (Oct. 31, 1991).


(Footnote 18 return)
See Paul W. MacAvoy, The Financing of Liability Payments for Asbestos-Related Disease 4–5 (Yale Univ. School of Management Working Paper Series C, No. 35, 1992).


(Footnote 19 return)
See Edley & Weiler, supra note 1, at 393; see also Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 13 (March 1991) (hereinafter Ad Hoc Committee Report) at 2–3; Peter Schuck, The Worst Should Go First: Deferral Registries in Asbestos Litigation, 15 Harv. J. L. & Pub. Pol'y 541, 558 (1992). Judge Jack Weinstein estimated that, by 1991, the percentage of all funds expended in asbestos litigation (including the costs of overhead, the insurance system, and the courts) that were used to compensate victims was only 30%, with 70% expended on transaction costs. See In re Joint E. &S. Dist. Asbestos Litig., 129 B.R. at 749.


(Footnote 20 return)
See James S. Kakalik, et al., Variation in Asbestos Litigation Compensation and Expenses (Rand 1984).


(Footnote 21 return)
See, e.g., Fibreboard, slip op., at 2 n.1 ('' '[T]ransaction costs exceed the victims' recovery by nearly two to one. . . .' ''); id. at 2–3 (Breyer, J., dissenting) ('' '[O]f each dollar that asbestos defendants pay, those costs consume an estimated 61 cents, with only 39 cents going to victims' ''); Amchem, 521 U.S. at 632 (Breyer, J., dissenting) (same); see also In re Joint E. &S. Dist. Asbestos Litig., 129 B.R. at 749 (regarding that figure as conservative).


(Footnote 22 return)
See Brickman, supra note 13, at 1834 n.60.


(Footnote 23 return)
See Ad Hoc Committee Report at 14 (listing eleven major corporate defendants that had filed for bankruptcy by 1991); Edley & Weiler, supra note 1, at 390 (identifying five additional bankruptcies and one dissolution). Further research has brought the total to approximately twenty-five.


(Footnote 24 return)
The Manville Trust was originally created in 1988 as a result of the reorganization of Johns Manville. It immediately experienced a run on its assets that threatened to deplete everything within a matter of months. Judge Jack Weinstein quickly acted to stem the hemorrhage by entering a stay, and the Manville Trust was reorganized in a class action proceeding. The Trust began to make payments to new claimants in 1995, thirteen years after the initial bankruptcy. The Trust currently pays 10 cents on the dollar on claims made against it. See In re Joint E. & S. Dist. Asbestos Litig., 878 F. Supp. 473, 479, 574 (E. & S.D.N.Y. 1995) (Weinstein, J.).


(Footnote 25 return)
See Edley & Weiler, supra note 1, at 384.


(Footnote 26 return)
See sources cited supra note 15.


(Footnote 27 return)
See Asbestos MDL 875 Update, Andrews Asbestos Litig. Rep., May 25, 1999, at 6–7.


(Footnote 28 return)
See Edley & Weiler, supra note 1, at 394.


(Footnote 29 return)
Ad Hoc Committee Report at 10–11.


(Footnote 30 return)
The Administrative Office of the United States Courts (AOUSC) for years has kept comprehensive data on federal asbestsos claims. However, because the AOUSC counts a transfer pursuant to an MDL order as a termination of a case, following the MDL order in 1991 the federal data on delays in asbestos cases are no longer meaningful.


(Footnote 31 return)
Unfortunately, the counties were unable to respond to a request to segregate actual plaintiffs from court cases, to give a more precise figure for delay. Bexar County stated that the cases contained an average of six plaintiffs per case.


(Footnote 32 return)
Even this figure may understate delay, because, according to the Texas Civil Justice League, the Texas courts list a case as ''resolved'' even if claims are still pending against some defendants.


(Footnote 33 return)
151 F.3d 297 (5th Cir. 1998).


(Footnote 34 return)
See also Fibreboard, slip op., at 2–3 (Breyer, J., dissenting) (describing Cimino case).


(Footnote 35 return)
Edley & Weiler, supra note 1, at 397.


(Footnote 36 return)
See Cimino, 151 F.3d at 305.


(Footnote 37 return)
See sources cited supra note 10.


(Footnote 38 return)
See William N. Eskridge, Jumbo Consolidations in Asbestos Litigation 18–25 (Prepared Statement at a Hearing Concerning H.R. 1283, the Fairness in Asbestos Compensation Act, Before the House Committee on the Judiciary, July 1, 1999).


(Footnote 39 return)
The ARC's administrative costs will be funded by assessments on the defendants who are named as respondents, with the costs of mediation and arbitration imposed directly on those defendants named in proceedings before the ARC. The Corporation would have authority to enforce its assessments in court and to obtain reasonable attorney's fees and prejudgment interest if it prevailed. Defendants could challenge their assessments, but they would be required to pay first and litigate afterwards. Costs of settlements, awards, and judgments would be borne by the individual defendants, just as they are today, and joint and several liability would remain as under current law.


(Footnote 40 return)
5 U.S.C. 706(2)(E) (substantial evidence review under the APA).


(Footnote 41 return)
Consolidations would be permitted only if all parties agree. If this federal rule requiring individual trials without such agreement is violated by a state court, defendants would have a right to remove the case to federal court.


(Footnote 42 return)
With new theories of liability every day bringing in new defendants, such as AT&T and IBM, see above, it would be well nigh impossible to calculate the collective proportional liability of all asbestos defendants for all asbestos claims. In legislation that seeks a global resolution for asbestos cases (unlike the Georgine settlement, which involved only twenty companies representing less than a quarter of the liability, and which covered only occupational exposure, not all claims), such issues must be resolved on a case-by-case basis. The legislation provides that state rules of joint and several liability remain in place, permitting the claimant to obtain full compensation from any of several defendants, and provides that issues of relative fault among different defendants can be resolved in mediation or arbitration, without in any way tying up the claimant's recovery. See H.R. 1283, §305, 306(h); S. 758, §306, 307(h).


(Footnote 43 return)
Georgine v. Amchem Prods., 157 F.R.D. 246, 270–71 (E.D. Pa. 1994).


(Footnote 44 return)
See, e.g. 42 U.S.C. §423(f). See generally Jerry L. Mashaw, Charles J. Goetz, Frank I. Goodman, Warren Schwartz, Paul R. Verkhuil & Milton Carrow, Social Security Hearings and Appeals (Lexington 1978).


(Footnote 45 return)
No legislative authorization would be needed for ARC to issue such informational bulletins or, in the language of the Administrative Procedure Act, ''interpretative rules.''


(Footnote 46 return)
Edley & Weiler, supra note 1, at 389–91.


(Footnote 47 return)
All of the medical categories include a minimum latency requirement of 10 or 12 years. These minimum latency periods are generous to the claimants. Epidemiological studies indicate that minimum latency period for the various asbestos-related conditions is generally 15 to 20 years, and that the average latency period for these conditions is much longer. For example, the average latent period for ''mesothelioma . . . is consistently between 35 and 40 years.'' W.R. Parkes, Occupational Lung Disorders 468 (3rd ed. 1994). See also, e.g., I.J. Selikoff et al., ''Latency of Asbestos Disease Among Insulation Workers in the United States and Canada,'' Cancer 46:2736–2740 (1980).


(Footnote 48 return)
The proposed medical criteria would also require x-rays to be read by ''B-readers'' which are doctors who have passed a test given by NIOSH establishing their competency to read and grade chest x-rays under the ILO (International Labor Organization) system.


(Footnote 49 return)
The statute uses 80% of predicted as the value between ''normal'' and ''abnormal'' pulmonary function tests, which is a ''rule of thumb'' used by many pulmonary physicians. See A. Miller, ed., Pulmonary Function Tests in Clinical and Occupational Lung Disease 203 (1986).


(Footnote 50 return)
See American Thoracic Society, ''The Diagnosis of Non Malignant Diseases Related to Asbestos,'' American Review of Respiratory Disease 134:363–68 (1986). The ATS statement calls for an individual to have a chest x-ray that is rated under the ILO standard as definitely abnormal (ILO designation: 1/1). A copy of the ATS statement is attached as Appendix A.


(Footnote 51 return)
See ''The Pathology of Asbestos-Associated Diseases of the Lungs and Pleural Cavities: Diagnostic Criteria and Proposed Grading Schema,'' Arch. Path. Lab. Med. 106:544–559 (1982).


(Footnote 52 return)
See R. Doll & J. Peto, Asbestos: Effects on Health of Exposure to Asbestos 2 (1985) (''The benign conditions of the pleura that are produced by asbestos are seldom of any lasting importance.''); A. Churg and F. Green, Pathology of Occupational Lung Disease 2nd Ed. 295 (1998) (it is clear that the ''asbestos-associated benign pleural changes are mostly radiographic and pathologic'' findings that only infrequently have significant symptoms or functional consequences . . .''); W.R. Parkes, Occupational Lung Disorders. 3rd ed, 455 (1994) (''Whether calcified or not, pleural plaques alone are symptomless: dyspnoea, chest pain, abnormal physical signs and impairment of lung function are absent.''); V. Roggli, S.D. Greenberg, P. Pratt, Pathology of Asbestos-Associated Diseases 176 (1992) (the ''great majority of individuals with pleural plaques alone have no symptoms or physiologic changes'').


(Footnote 53 return)
A copy of A. Churg, ''Asbestos, Asbestosis, and Lung Cancer'' is attached as Appendix B.


(Footnote 54 return)
A recent comprehensive treatment of this issue is W. Weiss, ''Asbestosis: A Marker for the Increased Risk of Lung Cancer Among Workers Exposed to Asbestos,'' Chest 115: 536–549 (1999).


(Footnote 55 return)
John A. Garver Professor of Jurisprudence, Yale Law School. I have taught Civil Procedure for the last 17 years to several thousand students at the Georgetown University Law Center, the Yale Law School, and the University of Virginia School of Law. My courses regularly included an extensive segment on mass tort litigation, usually focusing on the asbestos litigation.


(Footnote 56 return)
For scholarly accounts, see Deborah Hensler et al., Asbestos in the Courts: The Challenge of Mass Toxic Torts (1985); Thomas Willging, Trends in Asbestos Litigation (1987) and Asbestos Case Management (1985); Lester Brickman, The Asbestos Litigation Crisis: Is There a Need for an Administrative Alternative?, 13 Cardozo L. Rev. 1819 (1992); Linda Mullinex, Beyond Consolidation: Postaggregative Procedure in Asbestos Mass Tort Litigation, 32 Wm. & Mary L. Rev. 475 (1991).


(Footnote 57 return)
The leading studies have been those of the Institute for Civil Justice of the Rand Corporation. See Hensler et al., supra note 2; James Kakalik et al., Variation in Asbestos Litigation Compensation and Expenses (1984) and Costs of Asbestos Litigation (1983).


(Footnote 58 return)
See Kakalik et al., Costs, supra note 3, at 10 (estimate of Dr. Paul McAvoy, Yale Sch. Org. & Managment).


(Footnote 59 return)
Kakalik et al., Variation, supra note 3, at 30.


(Footnote 60 return)
See Tracy Carter, Big Names, Deep Pockets Opt Out; Asbestos Coalition Falling Apart, Nat'l L.J., Apr. 25, 1988, at 1, 3.


(Footnote 61 return)
See Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d 1492 (11th Cir. 1985); In re All Asbestos Cases Pending in the United States District Court for the District of Maryland, 1983 U.S. Dist. LEXIS 10719 (D. Md. en banc, Dec. 16, 1983) (guidelines for consolidations). Cf. Neal v. Carey Canadian Mines, Ltd., 548 F. Supp. 357 (E.D. Pa. 1982) (15 cases).


(Footnote 62 return)
See Molly Selvin & Larry Picus, The Debate over Jury Performance: Observations from a Recent Asbestos Case (ICJ, Rand, 1987).


(Footnote 63 return)
See Wilson v. Johns-Manville Sales Corp., 107 F.R.D. 250 (S.D. Tex. 1985), aff'd, 810 F.2d 1358 (5th Cir. 1987).


(Footnote 64 return)
See Willging, Asbestos Litigation, supra note 2, at 118.


(Footnote 65 return)
See Hensler et al., Asbestos in the Courts, supra note 2, at 20.


(Footnote 66 return)
In the cases, medical opinion about pleural placques and thickening has been contentious. The work published in professionally refereed medical journals supports the statements in text. See, e.g., Robert Jones et al., The Radiographic Pleural Abnormalities in Asbestos Exposure: Relationship to Physiologic Abnormalities, 3 J. Thoracic Imaging 57–66 (1988); Theresa McCloud et al., Diffuse Pleural Thickening in an Asbestos-Exposed Population: Prevalence and Causes, 144 Am. J. Roentgenology 8–18 (Jan. 1985). For like analysis in authoritative treatises, see Richard Doll & Julian Peto, Asbestos: Effects on Health of Exposure to Asbestos 2 (1985); W. Raymond Parkes, Occupational Lung Disorders 455 (3d ed. 1994).


(Footnote 67 return)
In two-disease jurisdictions, discovery of pleural abnormalities would not trigger the running of the statutory timetable. In one-disease jurisdictions, this discovery would start the timetable running for asbestos-related diseases. For a breakdown of the jurisdictions as of 1992, see Marinari v. Asbestos Corp., 612 A.2d 1021 (Pa. Super. Ct. 1992) (en banc). Especially in the 1980s, when the limitation issue was unclear in many states, plaintiffs would rationally believe that they had to act upon discovery of pleural placques, and some jurisdictions helped them out by recognizing claims for enhanced risk of cancer. See Brickman, Asbestos Litigation Crisis, supra note 2, at 1852–60.


(Footnote 68 return)
See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 129 B.R. 710, 946 (Bankr. E.D. & S.D.N.Y. 1991); Willging, Asbestos Litigation, supra note 2, at 51–52.


(Footnote 69 return)
See Jenkins v. Raymark Indus., 109 F.R.D. 269 (E.D. Tex. 1985), aff'd, 782 F.2d 468 (5th Cir. 1986), discussed in Francis McGovern [the special master], Resolving Mature Mass Tort Litigation, 69 B.U.L. Rev. 659 (1989).


(Footnote 70 return)
See Raymark Indus., Inc. v. Stemple, No. 88–1014–K, 1990 U.S. Dist. LEXIS 6710 (D. Kan. May 30, 1990) (judge handling subsequent fraud case denies summary judgment to alleged perpetrators and found claims of fraud credible).


(Footnote 71 return)
See Cimino v. Raymark Indus., Inc., 151 F.3d 297 (5th Cir. 1998) (describing revised three-phase trial plan).


(Footnote 72 return)
For other examples of jumbo consolidations, see the Brooklyn Navy Yard Cases, In re New York City Asbestos Litig., 142 F.R.D. 60 (E.D. & S.D.N.Y. 1992) (federal) and 572 N.Y.S.2d 1006 (Sup. Ct. 1991) (state); the Baltimore City Cases, ACandS, Inc. v. Godwin, 667 A.2d 116 (Md. 1995); ACandS, Inc. v. Abate, 710 A.2d 944 (Md. Ct. Spec. App. 1998); the putative Ohio class action, In re Allied-Signal, Inc., 915 F.2d 190 (6th Cir. 1990).; the New York Powerhouse Cases, In re New York City Asbestos Litig., 142 F.R.D. 60, 64–67 (E.D. & S.D.N.Y. 1992); the Massachusetts Mass Joinder Cases, Abdullah v. ACandS, Inc., 30 F.3d 264 (1st Cir. 1994); the Mississippi Nationwide Joinder Cases, In re Amchem Prods., Inc., No. 1998–M–01373 (Miss. Sept. 29, 1998); the Monongalia County Mon-Mass II Consolidated Cases, W. Va. Cir.Ct., Mon.Cnty. (Jan. 1996); the Kanawha County Premises Liability Cases, State ex rel. Appalachian Power Co. v. McQueen, 479 S.E.2d 300 (W. Va. 1996).


(Footnote 73 return)
The discussion that follows draws from defendants' motion for recusal of the trial judge, accompanying affidavits, and the attempted appeal to the Mississippi Supreme Court. Copies of these documents can be made available to the committee but are not attached to this testimony.


(Footnote 74 return)
Affidavit of Daniel P. Myer, 7–11 (attached to defendants' recusal motion).


(Footnote 75 return)
See Peter Schuck, The Worst Should Go First: Deferral Registries in Asbestos Litigation, 15 Harv. J.L. & Pub. Pol'y 541 (1992).


(Footnote 76 return)
The most notable and intelligent exception is Jack Weinstein, Individual Justice in Mass Tort Litigation: The Effect of Class Actions, Consolidations, and Other Multiparty Devices 139–43 (1995), although even Judge Weinstein cites the asbestos cases as a ''good example of consolidation's inadequacies.'' Id. at 139.


(Footnote 77 return)
Asbestos Litigation Crisis in Federal and State Courts: Hearings Before the Subcomm. on Intellectual Property and Judicial Admin. of the House Comm. on the Judiciary, 102d Cong. (1991–92); see id. at 35 (testimony of Judge Freedman).


(Footnote 78 return)
Audrey Chin & Mark Peterson, Deep Pockets, Empty Pockets: Who Wins in Cook County Jury Trials 42–43 (ICJ, Rand, 1985). On juries' tendency to be more generous on damages issues, see, e.g., Harry Kalven, Jr., The Dignity of the Civil Jury, 50 Va. L. Rev. 1055, 1065 (1964) (comparing jury verdicts to judges' statements of what they would have awarded); David Rottman, Tort Litigation in the State Courts: Evidence from the Trial Court Information Network, 14 St. Ct. J. 4–18 (Fall 1990).


(Footnote 79 return)
Interviews with Texas jurors in the Newman litigation (described in part IB of this statement) found this to be the case, and the sympathy effect led the jury to disregard the judge's instructions. See Selvin & Picus, Jury Performance 24–35. For a dramatic example of the sympathy effect, yielding a jury verdict of $26,300,000 for a plaintiff who was perceived to be seriously ill and claimed to have asbestosis, see Dunn v. Owens-Corning Fiberglass, 774 F. Supp. 929 (D.V.I. 1991) (Constance Baker Motley, J.).


(Footnote 80 return)
See Selvin & Picus, Jury Performance 24–25.


(Footnote 81 return)
See generally Nisbett & Ross, Human Inferences: Strategies and Shortcomings of Social Judgment 41–42 (1980); Amos Tversky & Daniel Kahneman, Judgment Under Uncertainty: Heuristics and Biases, in Judgment Under Uncertainty: Heuristics and Biases 3, 14–18 (Tversky et al. eds. 1982). For example, surveys have shown that variation in the plaintiffs' requested damage award strongly affects jury awards because of anchoring. See Robert McCoun, Inside the Black Box: What Empirical Research Tells Us about Decisionmaking by Civil Juries, in Verdict: Assessing the Civil Jury System 137, 157 (Robert Litan ed. 1993).


(Footnote 82 return)
See Jane Goodman et al., What Confuses Jurors in Complex Cases, 21 Trial 66 (Nov. 1985) (juries most easily confused when evaluating conflicting medical and economic damages testimony in complex cases, including asbestos cases). For a vigorous defense of jury abilities to process complex information, see Richard Lempert, Civil Juries and Complex Cases: Taking Stock After Twelve Years, in Verdict: Assessing the Civil Jury System, supra note 27, at 181–247.


(Footnote 83 return)
Irwin Horwitz & Kenneth Bordens, The Effects of Outlier Presence, Plaintiff Population Size, and Aggregation of Plaintiffs on Simulated Civil Jury Decisions, 12 Law & Hum. Behav. 209 (1988).


(Footnote 84 return)
E.g., In re New York City Asbestos Litig., 572 N.Y.S.2d 1006, 1007 (Sup. Ct. 1991). See Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003, 1014–15 (2d Cir. 1995) (detailed discussion of frequent and substantial remittiturs granted by Judge Freedman in asbestos cases).


(Footnote 85 return)
See, e.g., Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003 (2d Cir. 1995); Hendrix v. Raybestos-Manhattan, Inc., 776 F.2d 1492 (11th Cir. 1985); ACandS, Inc. v. Godwin, 667 A.2d 116 (Md. 1995); ACandS, Inc. v. Abate, 710 A.2d 944, 954–55 (Md. Ct. Spec. App. 1998). Because the standard for granting a remittitur is that the jury's damages ''shock the conscience,'' remittiturs are rare in civil cases outside the asbestos context.


(Footnote 86 return)
Horowitz & Bordens, Effects of Outlier Presence, supra note 28, at 212, 225–26.


(Footnote 87 return)
See Hensler, Asbestos in the Courts, supra note 2, at 95.


(Footnote 88 return)
West Virginia, my home state, has been the situs for several jumbo consolidations in the 1990s. See State ex rel. Appalachian Power Co. v. McQueen, 479 S.E.2d 300 (W. Va. 1996); the Monongalia County Mon-Mass II Consolidated Cases, W. Va. Cir. Ct., Mon. Cnty. (Jan. 1996).


(Footnote 89 return)
Testimony of Hon. Richard Neely of the West Virginia Court of Appeals before the Senate Commerce Comm., Sept. 12, 1991, quoted in Brickman, Asbestos Litigation Crisis, supra note 2, at 1847 n.122.


(Footnote 90 return)
The classic modern account of the role of common law courts to elaborate rather than create law is Henry Hart, Jr. & Albert Sacks, The Legal Process: Basic Problems in the Making and Application of Law 362–629 (William Eskridge, Jr. & Philip Frickey eds. 1994 [1958 tent. ed.]).


(Footnote 91 return)
See Hanna v. Plumer, 380 U.S. 460 (1965); Erie R.R. v. Tompkins, 304 U.S. 64 (1938), applied to asbestos litigation in Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314 (5th Cir. 1985).


(Footnote 92 return)
See Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (actual individual notice required when addresses ascertainable; vicarious notice unacceptable); Tumey v. Ohio, 273 U.S. 510, 532–34 (1927) (officer with incentive to find liability cannot perform adjudicative functions); Goldberg v. Kelly, 397 U.S. 254 (1970) (individualized hearing ordinarily required before termination of property interest).


(Footnote 93 return)
As must Rule 23, a precept explicitly invoked in Ortiz, Part III(C), and Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), and implicitly invoked in Amchem.


(Footnote 94 return)
Gwathmey v. United States, 215 F.2d 148 (5th Cir. 1954).


(Footnote 95 return)
This point originates in Lon L. Fuller, The Forms and Limits of Adjudication, 92 Harv. L. Rev. 353 (1978).


(Footnote 96 return)
In some contexts, such as the enforcement of constitutional desegregation orders, judges have sought to overcome these obstacles through the appointment of special masters, retention of jurisdiction to monitor compliance, and so forth. See Owen Fiss, The Civil Rights Injunction (1978); Abram Chayes, The Role of the Judge in Public Law Litigation, 89 Harv. L. Rev. 1281 (1976). Even in those contexts, however, polycentric problems have proven beyond the capacity of most courts. Compare Gerald Rosenberg, The Hollow Hope: Can Courts Bring About Social Change? (1991); Peter Schuck, Suing Government: Citizen Remedies for Official Wrongs (1983); William A. Fletcher, The Discretionary Constitution: Institutional Remedies and Judicial Legitimacy, 91 Yale L.J. 635 (1982).


(Footnote 97 return)
An early and perceptive warning flag was raised by Judge Carl Rubin, who rejected the battle of the retained experts by appointing his own experts in 65 pending asbestos cases. Although all plaintiffs claimed physical injury, the court-appointed experts found that only 10 (15%) had asbestosis, 13 (20%) had pleural placques (which probably are not properly recognized as an injury, see sources in note 12 above), and 42 (65%) had no asbestos-related condition. See Carl Rubin & Laura Ringenbach, The Use of Court Experts in Asbestos Litigation, 137 F.R.D. 35 (1991).


(Footnote 98 return)
See Judith Resnik, Managerial Judges, 96 Harv. L. Rev. 376 (1982).


(Footnote 99 return)
The following table was prepared at the request of Professor William N. Eskridge, Jr., by Brent J. McIntosh, Professor Eskridge's research assistant and a recent graduate of the Yale Law School. Mr. McIntosh was in no way privy to any privileged or confidential information in the preparation of this table; his role was simply tabulation of publicly available data.


(Footnote 100 return)
Because of concerns about the representativeness and comprehensiveness of the sample of verdicts reported in Mealey's Litigation Reports (Asbestos), no calculations regarding the statistical significance of the difference was performed, and none is implied.


(Footnote 101 return)
The U.S. Chamber of Commerce filed an amicus brief supporting an administrative claims resolution approach (''the Georgine settlement'') in Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997).


(Footnote 102 return)
Christopher F. Edley, Jr. and Paul C. Weiler, Asbestos: A Multi-Billion Dollar Crisis, 30 Harvard Journal on Legislation 383 (1993).


(Footnote 103 return)
James S. Kakalik, et al., Variation in Asbestos Litigation Expenses (Rand 1984).


(Footnote 104 return)
Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation (March 1991)


(Footnote 105 return)
See, e.g., Holman W. Jenkins, Jr., Now on Video: America's Scariest Special Interest, The Wall Street Journal, April 21, 1999 at A-23.


(Footnote 106 return)
Amchem Products, Inc. v. Windsor, 117 S. Ct. 2231, 2252 (1997).


(Footnote 107 return)
Ortiz v. Fibreboard Corp., XXU.S.XX (June 23, 1999), slip opinion at 1.


(Footnote 108 return)
The so-called ''Georgine'' settlement, named after plaintiff Robert Georgine, was the subject of Amchem Products, Inc. v. Windsor, 117 S.Ct. 2231 (1997).


(Footnote 109 return)
Esteban Ortiz et. al v. Fibreboard Corporation et. al., No. 97–1704 (1999). See The Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation (March 1991); Amchem Products, Inc. v. Windsor, 138 L. Ed. 2d 689, at 716 (1997).


(Footnote 110 return)
The Products Liability Reform Act of 1997, S. 648.


(Footnote 111 return)
One member of the trial group claimed in his deposition that he lived in Jefferson County, but subsequent investigation revealed that his address was actually located in neighboring Claiborne County.