Furthering Asbestos Claim Transparency (FACT) Act of 2013

Posted on December 21st, 2013 by sutter-admin

In March 2013, Representative Blake Farenthold (R-TX) introduced H.R. 982, also known as the Furthering Asbestos Claim Transparency (FACT) Act of 2013. Most recently, on November 13, 2013, the House of Representatives passed H.R. 982. In general, H.R. 982 would require asbestos trusts, established under section 524(g) of title 11, to file quarterly reports with the bankruptcy courts that contain detailed information regarding the receipt and disposition of claims for injuries based on exposure to asbestos or asbestos containing materials. More specifically, pursuant to proposed section 8(A)(i), each quarterly report must “describe each demand the trust received from, including the name and exposure history of, a claimant and the basis for any payment from the trust made to such claimant.” H.R. 982 explicitly prohibits the disclosure of a claimant’s medical records and social security number in the quarterly reports. Furthermore, H.R. 982 requires trusts to respond to similar written requests for information from third-parties during asbestos litigation.

Since asbestos litigation began nearly four decades ago, almost one hundred companies have filed for bankruptcy. This has cost the economy between $1.4 and $3 billion in addition to 60,000 jobs. As a result, in 1994, Congress amended the Bankruptcy Code to include a provision that would allow asbestos liability claims to be resolved through a trust based system. This Bankruptcy Code provision allows a Chapter 11 debtor to create a trust to be used as the only source of compensation for potential asbestos liability claims. Should the debtor’s plan be approved, all asbestos claimants are prohibited from bringing suit against the debtor for asbestos liability. Presently, debtors are not required to file documents outlining the claimants seeking compensation, the nature of the injuries or the amount of payments received; rather, debtors are required to file periodic disclosures of the trust’s financial status.

One of the main purposes of H.R. 982 is to address and prevent fraudulent filings by claimants. This purpose would be achieved by preserving bankruptcy trust funds for non-fraudulent claims by requiring trusts to become more transparent. More specifically, the public would have the ability to view each trust’s activities and ensure that fraudulent claims are discovered.

Generally, Republicans advocate for the passage of H.R. 982 as it would promote transparency in asbestos claims and ensure that funds are not paid to fraudulent claimants. H.R. 982 would also assist asbestos defendants to properly assess a claimant’s complete exposure history, as well as defend themselves against “misleading or erroneous evidence of the potential cause of the claimant’s injuries.” Furthermore, H.R. 982 would protect asbestos defendants from becoming involved in potentially fraudulent asbestos litigation claims or being “unfairly victimized” by claimants’ attorneys. Other significant proponents of H.R. 982 include the U.S. Chamber of Commerce, the American Association for Justice, the American Bar Association, and the American Insurance Association. Rep. Farenthold, stated that “[w]hen attorneys and their clients bring false or exaggerated claims to trusts, they take assets from deserving victims. The FACT Act will discourage this kind of abuse by shining light on the trust system, as sunlight is often the best disinfectant.”

Those in opposition to H.R. 982 strongly disagree with the proponent’s view that the passage of H.R. 982 would eliminate fraudulent filings due to a severe lack of evidence of fraudulent asbestos filings. Some believe that H.R. 982 is a solution to a problem that does not exist: fraudulent filings. Trusts are currently required to provide annual financial reports to the bankruptcy courts, but the trusts only provide numbers in the aggregate, not each individual claimant’s information. Additionally, if H.R. 982 becomes law, this would require trusts to waste time and resources on both preparing the required quarterly reports, as well as responding to discovery requests from other asbestos defendants. This may potentially delay compensation to claimants.

Furthermore, H.R. 982 would violate a claimant’s privacy when bankruptcy trusts are required to disclose private and sensitive information. The disclosure of a claimant’s confidential information may discourage future claimants from filing claims. Because each claimant’s information will be accessible on the bankruptcy court’s docket, it will be accessible to the general public, as well as insurance companies, future employers, and identify thieves. Opponents to H.R. 982 include the White House, the National Chamber of Commerce and American Legislative Exchange Council, and Asbestos Cancer Victim’ Rights Campaign.

Now that H.R. 982 has been passed by the House of Representative, it will next be up for vote in the Senate. Should the Senate pass the bill, it will then be in the hands of the President, and this may be where the bill comes to a stop.