Furthering Asbestos Claim Transparency


In January 2015, the Furthering Asbestos Claim Transparency ("FACT") Act of 2015 was introduced in the U.S. House of Representatives and then sent to the House Judiciary Committee for consideration. The FACT Act of 2015 seeks to amend federal bankruptcy law concerning asbestos trusts and marks the third attempt in recent years to pass reform to reduce fraud in the asbestos bankruptcy trust system.

Similar to prior legislation, the FACT Act of 2015 requires asbestos bankruptcy trusts to file quarterly reports with the bankruptcy court describing each demand the trust has received from a claimant and the basis for any payment made to that claimant, excluding confidential medical records or complete Social Security numbers. Further, the FACT Act of 2015 requires reports related to payment from, and demands for payment from, the trust to any party to any asbestos relates lawsuits.

Although prior legislation (the FACT Acts of 2012 (H.R. 4369) and 2013 (H.R. 982)) seeking to introduce increased transparency failed, the FACT Act of 2015 might see more success in light of the highly publicized ruling of In re Garlock Sealing Technologies, LLC (No. 10-31607, W.D. N.C. Bkcy.) (Garlock).

In Garlock the United States Bankruptcy Court for the Western District of North Carolina assessed the liability of Garlock Sealing Technologies, a gasket manufacturer, for future mesothelioma-related claims. Hon. George Hodges ruled that plaintiffs' attorneys had been withholding evidence of plaintiffs' exposures to asbestos-containing products associated with other bankrupt companies while pursuing claims against Garlock Sealing Technologies. As such, the liability of Garlock Sealing Technology was determined to be $125 million, as opposed to the $1.3 billion plaintiffs claimed.

Garlock clearly exemplifies the systemic abuse of the bankruptcy trust scheme that makes the FACT Act of 2015 necessary. Increased transparency is required to prevent double dipping from plaintiffs who, at present, are able to sue companies by claiming that their asbestos-containing products have caused them harm, while filing claims with asbestos trusts blaming other products for their injuries. Opponents of the FACT Act of 2015 argue that the disclosures required under the Act will invade asbestos plaintiffs' privacy. However, in application, this legislation will eliminate substantial financial fraud and unnecessary and burdensome gamesmanship in asbestos litigation.

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