Beware the Ides of March: The Hatch Bill Rears Its Ugly head...again

On July 10, 2003, the Senate Judiciary Committee by a 10 to 8 vote, sent SB 1125, the " Fairness in Asbestos Injury Resolution (FAIR) Act", sponsored by Sen. Orrin Hatch (R-Utah), to the full Senate for consideration.

The Hatch bill would halt all asbestos litigation for a 27-year period, and pay those with asbestos-related illnesses on a "no fault" basis out of a trust funded by asbestos defendants and their insurers. Established asbestos bankruptcy trusts would funnel their monies into the Hatch fund as well. Unpaid settlements would be voided. The bill sets substantially lower compensation levels for mesothelioma and lung cancer claimants than generally available in the tort system, in exchange for a claims system which bill proponents say would provide more certainty in compensation to asbestos victims, at a price which would not bankrupt liable businesses and their insurers.

Within days of the Judiciary Committee vote, asbestos defendants and the insurance industry lobbied aggressively to decrease the trust fund from $152 billion to $114 billion. Organized labor and attorneys representing asbestos plaintiffs rejected this and other changes.

Despite efforts by Sen. William Frist, the Republican Majority Leader, the Senate took no action on the Hatch bill before the end of 2003. Sen. Frist recently affirmed his determination to bring the Hatch Act to the Senate floor for a vote, sometime in late March 2004.

In order to help prepare you for what to expect this March, below we update action on the Hatch bill since July and examine the arguments - pro and con.

Judiciary Republicans Publish Additional Views on the Bill; Counterpoints

Shortly after the July vote, Republican Judiciary Members Senators Chuck Grassley, Jon Kyl, Jeff Sessions, Larry E. Craig and John Cornyn ("the Judiciary Republicans"), issued a joint statement detailing their "additional views" on the version of the Hatch bill reported out of Committee.

Point: The Judiciary Republicans criticized the allowance of "large awards" to claimants with lung cancer who were current or former smokers, contending that "medical science conclusively links lung cancer to smoking, not asbestos."

Counterpoint: The Judiciary Republicans' statement ignores the medically established synergismbetween asbestos exposure and cigarette smoking. Non-smoking asbestos workers develop lung cancer seven times more often than workers not exposed to asbestos. Cigarette-smoking workers not exposed to asbestos develop lung cancer seven to ten times as often as non-smoking workers. Cigarette-smoking workers who are exposed to asbestos contract lung cancer at a rate 50 to 70 times higher than workers who were not exposed to asbestos and who did not smoke.

Point: The Judiciary Republicans claimed that "it is imperative that the only settlement agreements to be paid outside of the trust be final settlement agreements that are based on a current injury."

Counterpoint: Estimates for the time it will take to make trust funds available range widely, from as little as two to as much as eight years. The Feinstein amendment adopted by the Judiciary Committee permits resort to the court system during that interim period. However, if only "final settlements" will be honored after the interim and at the time funds become available, defendants will have little incentive to settle.

Rather, the incentive will be to delay trial, fight cases to verdict, and then appeal any adverse judgments -- because no judgment is final until it is fully appealed, conceivably all the way to the U.S. Supreme Court. Asbestos defendants and their insurers may calculate that clogging the tort system until trust fund implementation is cost-effective, but this tactic would undermine the purpose of the Feinstein amendment -- to provide relief to asbestos plaintiffs during the considerable time it will take to activate the trust fund. Any case begun before the trust fund is operational should be permitted to run the full course of the legal system without interruption.

Point: The Biden amendment adopted by the Judiciary Committee provides escape to the tort system if the 27-year trust fund runs out of money. The Judiciary Republicans complained that "the Biden sunset amendment could seriously jeopardize the relief that the fund is intended to provide victims of asbestos."

Counterpoint: What the Judiciary Republicans are really saying is that the asbestos defendants and their insurers will not support a bill which could cost more than the monies they are willing to commit to the 27-year fund. They want "certainty" in what they will pay out, but they don't want to guarantee certainty that all who are ill will be paid, and they offer no remedy for victims left holding the bag if the trust runs out of money early. (Indeed, the sufficiency of the fund is a topic of hot debate).

The Hatch bill constitutes a trade between asbestos defendants and plaintiffs: victims sacrifice their Seventh Amendment constitutional right to trial by jury in exchange for certainty in payment, albeit reduced. The asbestos defendants cannot have their cake and eat it too -- if the fund runs out of money, the asbestos sick should have resort to the courts.

Sen. Frist Heeds Insurance Industry Concerns

On September 29, 2003, Insurance Chronicle reported that Ace, Travelers and The Hartford had proposed upping the insurance industry's contribution to the trust fund from $45 billion to $62 billion. The Ace/Travelers/Hartford proposal was an attempt to accommodate the increased size of the fund voted out of Judiciary.

In separate but virtually identical letters to Senate Majority Leader Frist, dated September 23 and 24 respectively, other insurance and reinsurance players called both the $62 billion proposal and the S. 1125 trust fund "unworkable" and unacceptable to the rest of the insurance industry, and asked Sen. Frist to work with them to enact "alternative reform legislation."

In mid-October, Sen. Frist announced an agreement between insurers and manufacturers about how much they were willing to pay into the fund and how they would divvy up the costs among themselves. The " compromise" proposed by Sen. Frist was a fund totaling $114 billion, some $40 billion smaller than the Judiciary Committee version.

After organized labor blasted Sen. Frist's proposal, he urged labor on October 21 to make a counter-offer, saying he had not given up on passing asbestos legislation in 2003. Sen. Hatch was more blunt, telling Reuters, "They (the unions) have to get off their duffs and tell us what they want."

Peg Seminario, the AFL-CIO's occupational health official, when told of Frist's and Hatch's comments, responded, "That's not what they told us last week. They told us that (the $114 billion proposal) was their final offer."

Nevertheless, the AFL-CIO on October 31 countered with a request for a $153.8 billion fund. Senators Christopher Dodd (D-CT), Minority Leader Tom Daschle (D-SD) and Patrick Leahy (D-VT) sent a letter to Sen. Frist urging passage of the reform.

Sen. Frist Addresses Asbestos Legislation from the Senate Floor; Counterpoints

On November 22, 2003, Sen. Frist commented on asbestos legislation from the Senate floor. Some of Sen. Frist's points with counterpoints follow.

Point: Sen. Frist said in the current asbestos tort system, "There is only one real consistent winner, and that is the plaintiffs' trial lawyers." He said that the plaintiffs' lawyers were "taking as much as half of every dollar that is awarded to the victims."

Counterpoint : Sen. Frist stacks the statistical deck by ignoring asbestos defense costs. When one considers the total dollars spent on asbestos litigation and compensation, defense litigation and indemnification costs consume the largest share, and plaintiffs' attorneys take the smallest share. According to Connecticut Valley Claims Service, an insurance adjuster company which has represented asbestos defendants for several decades, the dollars consumed by asbestos litigation break down as follows:

• $.37 spent on defense litigation and indemnification costs (lawyers, experts, staff).
• $.36 spent on compensation to plaintiffs.
• $.27 spent on plaintiffs' attorneys fees.

Point: Sen. Frist called the current asbestos tort system "a litigation lottery" in which "a few victims receive adequate compensation but far more suffer long delays" for "unpredictable rewards" and "inequitable awards." He continued, "Some deserving victims do not receive anything at all."

Counterpoint: Sen. Frist falsely assumes that a fairer justice system will result from an administrative claims process run by a new and vast federal bureaucracy which does not permit individual evaluation of a claimant's particular damages, but rather a one-size-fits-all compensation schedule that pays cancer claimants equally, despite unequal damages.

For example, a 40 year-old mesothelioma patient with three children, a mortgage, $750,000 in medical bills and yearly income of $50,000 would receive the same payment as an 84 year-old retiree who is not eligible for radical treatment. Core constitutional principles of due process and limited government should not be so cheaply exchanged for administrative ease, political expedience and a new, vast federal bureaucracy.

Extraordinary verdicts ("the litigation lottery") are the exception, and Sen. Frist ignores the fact that the appeals process inevitably results in resolution of such cases at much reduced figures. The Hatch bill will in fact result in greater inequity to asbestos victims than the current system. Under the bill, classes of deserving asbestos victims who have routinely prevailed in court would be subject to exclusion from the trust fund. For example, women who were exposed to asbestos from washing a husband's contaminated clothing would have their cases reviewed by a Medical Advisory Committee, made up of "objective, experienced physicians" to determine whether they are eligible for compensation. Plaintiffs' advocates worry that the federal panel will be weighted with doctors who will reject all but the most egregious instances of take-home exposure.

Point: Sen. Frist warned that in order to protect the solvency of the Hatch trust fund, distinctions had to be made between lung cancers caused by asbestos and those caused by smoking.

Counterpoint: Sen. Frist, a physician, ignores the medically established synergism between cigarette smoking and asbestos exposure discussed above. This comment reinforces fears that Republican proponents of the Hatch bill intend to exclude classes of asbestos victims who have routinely prevailed in court.

Point: Sen. Frist: "The torrent of asbestos litigation has wreaked havoc on asbestos victims, on American jobs, and this havoc has extended into our economy." He continued, "Asbestos-related bankruptcies spell doom for these workers' jobs; thus, their families, and, of course, incomes and retirement savings. Already, these lawsuits have cost more than 60,000 Americans their jobs. For those who lose their jobs, the average personal loss in wages over a career is as much as $50,000, and that doesn't include the loss of retirement wages or the loss of health benefits."

Counterpoint: Sen. Frist sheds crocodile tears for asbestos victims while overstating the impact of asbestos company bankruptcies on the American economy. As Andrew Schneider of The St. Louis Post-Dispatch writes:

"The claims of disruption to jobs and sales have been exaggerated in many cases . . . a different picture emerges in Securities and Exchange Commission filings and press releases from the five largest asbestos targets who have filed for bankruptcy. The most recent reports from Armstrong, W.R. Grace, Federal Mogul, Owens-Corning and U.S. Gypsum show that with a single exception, all have increased sales and have the same or greater number of employees than before they filed Chapter 11."

One need only stroll through the insulation and drywall aisles of a local Home Depot to confirm that the bankrupts have maintained their market share, even thrived. It is truly inappropriate for Sen. Frist to use such charged words as "havoc" and "doom" when speaking of the litigation's impact on corporations and their employees. Such words should be reserved for the victims of asbestos poisoning.

Asbestos has caused at least 225,000 premature deaths in the U.S. -- a figure that is probably conservative, since most doctors perfunctorily attribute lung cancer to smoking without assessing the contribution of asbestos. Although they were certainly the architects of the conspiracy of silence and thus guilty of causing the painful deaths of thousands, Johns-Manville and Raybestos were not put to death -- they simply reorganized. You can see their names proudly displayed on NASCAR race cars. But you will never again see Congressman Bruce Vento , Admiral Elmo Zumwalt , Elizabeth Clancy , Steve McQueen or Warren Zevon , or the hundreds of thousands of other Americans whose lives were ended by asbestos.

Point: Sen. Frist warned that the situation was only going to get "even worse", as the bankruptcies mounted. He recited the past losses of "companies such as Johns Mansville, bankrupt; Owens Corning, bankrupt; U.S. Gypsum, bankrupt; and, W.R.Grace, bankrupt: these are large reputable companies that have gone bankrupt because of this crisis with the associated job losses." (Emphasis added).

Counterpoint: Current large asbestos defendants include Honeywell, General Electric, Westinghouse, Georgia Pacific, General Motors, Daimler-Chrysler and Ford, all with ample resources to compensate projected asbestos claims without ever filing bankruptcy.

Historically, Johns-Manville, Owens-Corning and W.R. Grace were anything but "reputable" in their treatment of asbestos-exposed workers. Manville knew since the 1920s that asbestos was killing its workers and actively conspired to keep the public in the dark about the hazards. This conspiracy included lying to workers about the results of X-rays showing that they had developed a fatal lung disease. Owens-Corning also knew about asbestos disease hazards in the 1930s, and failed to inform its workers of the hazard or to take preventive measures to protect their health. W. R. Grace owns an asbestos-contaminated vermiculite mine in Libby, Montana which has caused an epidemic of asbestos-related diseases in the town's residents. Grace paid the highest possible fine allowed by the law for lying to the EPA about asbestos. Grace has also been found guilty of outrageous misconduct in a South Carolina lawsuit when it was proved that the company had sold asbestos insulation to the City of Greenville, after it had removed the same insulation from its corporate headquarters in Maryland for reasons of health and safety.

Point: In hailing "the generosity" of awards to claimants under the Hatch bill, Sen. Frist writes that in the bill as reported, "mesothelioma claimants would have received not 43 times, but 57 times the amount at which the Manville Trust actually compensates similarly situated victims." (The standard Manville payout for mesothelioma [$17,500] times 57 equals $997,500).

Counterpoint: Sen. Frist cites one slice of a bankrupt orange without mentioning the whole apple of compensation available to mesothelioma patients in the tort system, where mesothelioma claims generally settle for an amount ranging from $2 million to $4 million (average trial verdicts range from $322,000 for nonmalignant claims to $3.8 million for mesothelioma claims). Over 3,000 asbestos-containing products (acps) were manufactured in this country during the past century, and patients with mesothelioma commonly point to exposures ranging from a handful to dozens of acps. It is therefore doubly absurd to point to just one piece of a total compensation package, and a bankrupt piece at that, as proof of the "generosity" of awards under the bill. Moreover, the Manville Trust's compensation schedule (established in 1988) is hardly a fair benchmark, as Manville had the largest market share for thermal insulation products.

Before seeking refuge in bankruptcy, another leading thermal insulation manufacturer settled mesothelioma claims in my office for an average of $400,000, about 23 times more than what the Manville Trust settles for.

Point: Sen. Frist accepted the Biden amendment, but only with resort to the federal court system: "The legislation should make clear that if the fund cannot guarantee that victims will receive all of their claims, a program review is triggered, and if not corrected the fund should end and claims should revert to the tort system. To work, however, such a reversion would have to be to Federal court and should contain certain additional protections to ensure the current litigation morass is not recreated."

Counterpoint: As Mississippi plaintiff's lawyer and self-described conservative Republican Don Barrett notes, it is deeply troubling that the Republican party, traditionally the party of limited government, individual liberty and states' rights, would gut America's federalist legal system. Federalization of asbestos litigation and other radical tort reforms proposed by Republican leadership would turn the decentralized U.S. system of state tort claims into something that resembles the autocratic, statist models found in post-communist Eastern Europe

State court systems have done a relatively good job in processing asbestos claims, with expedited trial settings for terminally ill plaintiffs. Sen. Frist would send asbestos victims to the ultimate "litigation morass", the federal court system, long the bane of asbestos victims and blessing for asbestos purveyors. All federal asbestos cases are consolidated in the federal court of Judge Ira Weiner in Philadelphia. For years Judge Weiner refused to prioritize the cases of the seriously ill, to set cases for trial, and to force parties to attempt to negotiate good-faith settlements. Asbestos defense attorneys inevitably try to have plaintiffs' cases moved to federal court to "kill" those cases.

Point: The proponents of SB 1125 contend that their bill will actually help cancer claimants by providing swift and fair compensation.

Counterpoint: The first priority of mesothelioma patients is treatment, not compensation - they want more life. Any reform legislation without funding provisions for medical research into treatment and a cure in my firm's view simply continues a failed paradigm which focuses on reparation for past evils without trying to prevent future harm to the victims. I hope that Sen. Frist's background as a physician will prompt him to seriously examine this issue, as well as the proposed ban on asbestos by Sen. Patty Murray (D-WA).

Before SB 1125 was voted out of committee, the Mesothelioma Applied Research Foundation ( MARF) proposed language that would create a Mesothelioma Research and Treatment Program for the modest sum of $135 million over five years, a fraction of the proposed $114 to $153 billion trust fund. MARF proposed that the program would be administered jointly by the NIH, Department of Veterans Affairs and Department of Defense, noting that roughly 32% of all mesothelioma patients diagnosed in the U.S. today were exposed to asbestos while wearing a Navy uniform or working on Navy ships, truly qualifying mesothelioma as a " service-connected disability." The program would fund basic and applied research, an "Admiral Elmo Zumwalt" tissue bank and a "Congressman Bruce Vento" registry of mesothelioma patients. Both Admiral Zumwalt and Rep. Vento passed away from mesothelioma. MARF also noted that when compared to federal funding for other diseases and cancers, the amount allocated to mesothelioma -- roughly $1.2 million a year -- is disproportionately low compared to other cancers.

Sen. Hatch rejected the proposal for mesothelioma research and treatment. So we are left with a very noble sounding title - "The Fairness in Asbestos Injury Resolution Act" - which does nothing to resolve the source of the misery. At least 225,000 Americans have suffered and died prematurely because of asbestos. Over 27 million were occupationally exposed before 1979. Anywhere between 2,000 and 3,000 U.S. citizens are diagnosed with mesothelioma every year, although experts believe the actual numbers may be higher, because of difficulties in correctly diagnosing the disease and the fact that the Center for Disease Control does not track mesothelioma as a reportable disease. The incidence of mesothelioma cases in the United States is not expected to drop to "background" levels until 2050. The failure to provide funding for medical research is a glaring omission.

Current Prospects for Passage of the Hatch Bill in 2004

The lobbyists for asbestos defendants and the insurance industry are gearing up for another smear campaign against trial lawyers and asbestos plaintiffs. They will argue that asbestos litigation has hurt our economy, thrown workers out on the street, and bankrupted "reputable" companies. They will trot out the familiar rants against labor unions and trial lawyers, which, historically, have tended to exploit the frustrations of ordinary people; prepare yourself for another round of hackneyed cliches, such as Shakespeare's well-worn, "The first thing we do is kill all the lawyers."

At a time of high unemployment, war, crumbling infrastructure, cutbacks in education, 43 million Americans without health care insurance, a gathering threat to the solvency of Medicare and Social Security, and a federal deficit spiraling out of control, Sen. Frist has called asbestos tort reform a "priority."

I expect he will have an uphill fight. Recent statistics and national settlements by Halliburton, ABB, Hercules, Congoleum and The Travelers cast doubt on the prospects for passage of the Hatch bill in 2004.

Bill Rochelle, a bankruptcy lawyer at Fulbright & Jaworski in New York City, notes that the rate of private settlements of asbestos claims slowed noticeably in 2002 when corporate executives felt a national settlement was likely to pass Congress. But now Rochelle sees the rate of private settlements of asbestos claims accelerating as the chances for passage ebb and the November 2004 elections approach. Rochelle says, "Companies need certainty and the negotiations have gone on for too long.

The continued importation of asbestos, the plight of the residents of Libby, Montana, and the Republican leadership's declaration of war on Seventh Amendment trial rights of tort plaintiffs lessen chances of passage of the Hatch bill. According to the Commerce Department, U.S. importation of asbestos has increased 300 percent in the last decade, much of the fiber being used in automotive brakes. Federal testing shows that thousands of people in Libby have clinical signs of exposure to asbestos from W.R. Grace's asbestos-contaminated vermiculite mine. For the past three years, Sen. Murray has tried to introduce the "Ban Asbestos in America Act", but has so far failed to find a Republican co-sponsor. Sen. Hatch accepted some of Murray's bill as a peace offering to Democratic opponents of SB 1125, but gutted Murray's provisions that would protect people like the miners in Libby.

"Send lawyers, guns and money -- the @$&! has hit the fan!" -- Warren Zevon, singer-songwriter, died on September 7, 2003 of malignant mesothelioma.

So, what now? The stakes are too high for the families of patients with mesothelioma and other cancers to do nothing and simply trust that a bill so rotten will die of its own stench. We cannot simply assume that the Hatch bill will crash and burn because of its failure to appease business, the insurance industry or organized labor. We must not make the mistake of believing that the bill will be exposed as a reprehensible radical corporate give-away that cannot possibly have traction in an election year.

Asbestos plaintiffs' lawyers all over the country are being solicited to make large contributions of cash to support the anti-Hatch effort. To paraphrase Mr. Zevon, the cry has gone out to send lawyers, hired-gun lobbyists, and money -- lots of money -- to Capitol Hill to defeat the Hatch bill.

It may take all of these things to defeat the bill, but much more will be needed to prevail. We must put a human face on the failings of the Hatch bill. I am proud that my firm's clients have contributed on this front.

Forty-one year-old Chris Stoeckler, dying of mesothelioma of the pleurae, the peritoneum and pericardium, with metastasis to the testicles, boarded a jet to Washington, D.C. last July to speak out against the Hatch bill. On his return home from Washington, he collapsed and required emergency hospitalization.

We feel his sacrifice in face-to-face meetings with his home state's Senators secured their opposition to the bill in the Judiciary Committee. Collette Poore, widow of mesothelioma victim Randy Poore, met with Sen. Richard Durbin (D-Ill), another Judiciary member who passionately pressed for amendments to the bill which would protect those with mesothelioma. We feel Collette helped fuel Sen. Durbin's passion.

Chris and Collette proved that individuals without big money can still have an impact on their elected representatives.

Your voice, your face, your struggle --more than a bursting media war chest -- matters. Please step up. As written, the Hatch Bill must be defeated, pure and simple.

However, we can no longer afford to ignore "the elephant in the living room": some form of asbestos tort reform legislation is inevitable. While the Republicans have overstated the harmful economic impact of the current system on asbestos companies and their employees, few doubt projections by the RAND Institute for Civil Justice that the system if unchanged will cost over $200 billion over the next 50 years.

It is a matter of record that both Republican and Democratic representatives agree some change is required. The current lobbying effort against Hatch offers no answer to the legitimate concerns regarding the relative inequities in the total amount of compensation going to the gravely ill versus so-called "unimpaired claims", namely those who show signs of asbestos exposure on X-ray but are otherwise asymptomatic. Although the RAND Institute, the Manville Personal Injury Trust and others have shown beyond cavil that burgeoning numbers of non-malignant claims (e.g., someone with asbestosis) have driven the recent wave of bankruptcies, I have been unable to find compelling proof of a reliable percentage of current asbestos compensation which has gone to the unimpaired. I feel this failure of proof primarily relates to the controversy on how impairment should be defined.

The Nickles bill, introduced a year ago by Sen. Don Nickles (R-Okla.), attempted to permit only those with significant asbestos injuries to bring suit. The devil is in finding a dividing line between the impaired and unimpaired, but we are struggling with that same devil in the Hatch bill, and, as noted above, Hatch is beset with many more demons.

The Nickles bill very quietly and mysteriously vanished soon after its introduction. We should look again at legislation which adopts a fair interpretation of impairment per American Medical Association and American Thoracic Society criteria and establish that impairment as a threshold for suit, as with "no fault" automobile negligence statutes. We should offer such legislation as a first and hopefully last step in addressing legitimate concerns regarding compensation inequities between sick plaintiffs and those who are not, by any reasonable interpretation.

Some may argue that this would sacrifice the Seventh Amendment right of the unimpaired to bring claims for such damages as fear of cancer, but this is a practical and far less reaching solution than that offered by SB 1125. Such a measure may dramatically reduce the current costs of asbestos claims; many attorneys believe this would be the case, but we won't really know until we try.

-- Trey Smith
Roger G. Worthington, P.C.
February 9, 2004

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