Transparency in asbestos bankruptcy trusts claims has become an important and controversial topic of late. We previously reported on the Furthering Asbestos Claim Transparency ("FACT") Act of 2015 which seeks to reduce fraud in the asbestos bankruptcy trust system by requiring bankruptcy trusts to file quarterly reports with the bankruptcy court describing each demand received and the basis for any payment made to a claimant. The FACT Act of 2015 was introduced in January of this year and was ordered to be reported on May 14, 2015.
However, concerns regarding bankruptcy trust disclosures are not just at the federal level. So far this year both Arizona and West Virginia have enacted state legislation aimed at eliminating abuse of the asbestos bankruptcy trust system. The Arizona legislature recently enacted A.R.S. § 12-782, which requires plaintiffs to disclose any asbestos bankruptcy trust claims made prior to trial and compels plaintiffs to disclose all new bankruptcy trust claims they make during the life of a case, including those made after trial has ended. In West Virginia, Governor, Earl Ray Tomblin signed into law a S.B. 411, which creates the Asbestos Bankruptcy Trust Claims Transparency Act and the Asbestos and Silica Claims Priorities Act, and requires the disclosure of existing and potential asbestos bankruptcy trust claims.
Texas is the most recent state to take on the task of correcting abuse of the asbestos bankruptcy system. Texas House Bill 1492 was approved by the Texas Senate on May 22, 2015, and sent to Governor Greg Abbott. If Governor Abbot signs the legislation it would require asbestos claimants to provide notice of claims against all asbestos bankruptcy trusts before proceeding with trial. Moreover, an asbestos defendant would be able to list any trusts which it believes a plaintiff could potentially make successful claims against, even if no such claim has been disclosed by the plaintiff.
There is a clear need for transparency in the bankruptcy trust system in order to prevent foul play and abuse. The legislation enacted in just the last year, as well as the legislation still on the horizon, demonstrates that factions across the United States recognize the importance in reforming the way bankruptcy claims are disclosed prior to, during, and after trial. It is hoped that with the states and federal governments presenting a unified front on the matter, plaintiffs will get the message that the bankruptcy trusts were not created to grant them windfalls and that abuses will no longer be tolerated.