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Washington-In the words of one participant, the dynamics of asbestos reform negotiations in the Senate during the last two years have been: You push in one direction, you get a negative reaction in the other. With a $140 billion bill now headed to the Senate floor, the pushing and reacting, some predict, will leap off the charts. The Senate is unlikely to take up S. 852, the “Fairness in Asbestos Injury Resolution Act,” before its July 4 recess, according to some Senate staffers, and may not even get to it before September. But a divided business community, trial lawyers, asbestos victims groups and other so-called stakeholders in the legislation are already meeting with senators and staffers about their problems with the bill and, in some cases, threatening court challenges if those problems are not resolved and the bill becomes law. The court challenges are not empty threats: Former Solicitor General Theodore B. Olson of Gibson, Dunn & Crutcher recently reiterated in a letter to senators that his clients-the trustees of several bankruptcy trusts for asbestos claimants-are ready to mount a constitutional challenge to a national asbestos trust fund if, as planned in S. 852, the more than $7 billion in assets of the bankruptcy trusts are transferred to the national fund. The Coalition for Asbestos Reform-a group of about 40 major insurance companies and construction, energy and other businesses-retained another constitutional law expert, David Strauss of the University of Chicago Law School, to inform the senators of another “serious constitutional defect” in S. 852 that would lead to a successful court challenge. Also, the senators have been told that special provisions in S. 852 compensating victims of community asbestos poisoning in Libby, Mont., by W.R. Grace & Co., could be the basis for a discrimination challenge by workers and residents in 28 other locations around the country that processed asbestos from the Libby mine. “Who is for this bill?” asked Carlton Carl, vice president and director of media relations for the Association of Trial Lawyers of America. “When you look at it, the only interests who are for it are General Electric, Honeywell, W.R. Grace, the handful of companies that are going to make out like bandits in terms of windfalls versus their current liabilities. “You have most of the insurance companies opposed to it. You have all the victims’ groups opposed to it. Organized labor opposes it. Every consumer group is opposed. Where is the constituency for this bill that is unfair, underfunded, unworkable and unconstitutional?” But Jan Amundson, senior vice president and general counsel of the National Association of Manufacturers (NAM), which supports the legislation, countered, “Show me a piece of major legislation that doesn’t have significant opposition.” The bill, as it came out of the Senate Judiciary Committee on May 26, is “improved but not perfect,” said Amundson, adding that NAM’s offshoot, the Asbestos Alliance, a coalition of asbestos manufacturers, has yet to support it fully. “I think we’ve got some challenges, but then again I think we have opportunities. Nothing is easy. Remember how long it took to get legislation on how to manage 9/11.” To the floor The Senate bill would create an Office of Asbestos Disease Compensation within the U.S. Department of Labor. The office would be headed by an administrator responsible for managing the $140 billion Asbestos Injury Claims Resolution Fund. Although few groups voiced unqualified support for the bill as it came out of committee, many felt that the bill’s chief sponsor, Judiciary Committee Chairman Arlen Specter, R-Pa., and its co-sponsor, Patrick Leahy, D-Vt., did an able job of holding off “extreme” amendments coming from senators on the left and the right in order to maintain what Specter called “core principles” in the bill. But all voiced concern about what will happen when the bill reaches the Senate floor. Specter will face “enormous pressure” from within his own party to make the bill worse for asbestos claimants, predicted Bill Samuel, legislative director for the AFL-CIO labor federation, which currently opposes the bill. Specter, explained Samuel, will have to deal with 25 to 30 “really conservative” Republican senators, some of whom, for example, may want to reopen the medical-criteria provisions on who can file claims in order to restrict more claims and limit business liability. “Those are non-starters for us,” he said. Labor is already unhappy with the bill’s failure to compensate lung cancer victims with 15 years of occupational exposure to asbestos but no signs of underlying nonmalignant asbestos disease. The bill does allow some of these victims to use CT scans to show they have asbestosis, but labor contends victims with pleural disease are excluded-an estimated 20,000 to 30,000 asbestos lung cancer victims. Samuel said the AFL-CIO also does not support language imposing a stay of up to 24 months on asbestos-related court claims upon enactment of law, which leaves those claimants with nowhere to go if the start-up of the fund is delayed. (There is an exception for terminally ill claimants.) It also opposes the hard 5% cap on attorney fees in the bill. Business is worried that Specter and Leahy will come under pressure from the left-liberal Democrats who also want to reopen the medical criteria. But they want to include lung cancer claimants with a history of smoking, or eliminate a bar on individuals with silica disease from seeking compensation in court if they had previously filed an asbestos suit or would be eligible for a monetary award from the fund. “We’ve got to protect what we have on medical criteria,” said NAM’s Amundson. While NAM has voiced qualified support for the bill, most of the insurance industry opposes it in its current form. For insurers-the heavy front-loader funders of the trust fund-the fund has to provide finality and certainty to the participants, said Leigh Ann Pusey, senior vice president, government affairs, of the American Insurance Association. “The legislation still leaves us significantly exposed to the litigation system,” said Pusey. “Insurers will put $46 billion into the fund. To take all that money, put it into the fund and allow litigation to take place simultaneously defeats the purpose.” The insurance association wanted a bright-line rule that upon the date of enactment of the trust fund law, all pending litigation would stop and the fund would become the exclusive remedy. Insurers are upset about “carve-out” categories of claims-such as those of the terminally ill-that let claimants return to the courts under certain circumstances, and also allow all claims to re-emerge in litigation if the Labor Department does not grant “operational certification” to the fund because of funding or other problems. And if cases do return to the courts, insurers want them in federal-not state-courts. “I don’t know if this bill can get worse, but I do believe it can be improved,” said Pusey. “We have two distinct camps in our group, both of which are very suspicious, all want reform, and all currently are opposed. If we don’t see commitments to significant improvements, insurers will be given no choice but to aggressively oppose.” Tom O’Brien, spokesman for the Coalition for Asbestos Reform, another group of insurance companies and other businesses, is even less optimistic about changing the bill. “We have major problems with the allocation system [of payments into the fund by insurers and other participants],” he said. “It severely impacts many of the mid- and smaller-size companies. Our position right now is to defeat the bill, and we think we can do that with help of other groups.” If the various interests in this battle have a common concern, it is with the funding of the asbestos trust fund. While insurers are heavy funding front-loaders, the proposed trust fund also anticipates using more than $7 billion in assets held by bankruptcy trusts for asbestos claimants. The bill requires money in the trusts to be turned over to the fund 90 days after enactment. Some of the trustees for the bankruptcy trusts have been telling lawmakers for almost two years that taking trust assets presents a constitutional problem, said Professor Walter Taggart of Villanova University School of Law, one of those trustees. “One concludes the best answer to our concerns is: ‘We need your money to fund the trust,’ ” said Taggart. “As the legislative process became more intense in the recent six months, and it became apparent the practicalities of funding the trust were going to drive the initial legislation, then we thought we’d be well advised to go forward to select counsel to represent us to carry out our constitutional challenge.” Los Angeles-based Gibson Dunn represents a litigation group that now includes: Celotex Asbestos Settlement Trust, DII Industries, LLC Asbestos PI Trust (Halliburton), Fuller Austin Settlement Trust, NGC Bodily Injury Settlement Trust and Western Asbestos Settlement Trust. In an April letter to Senator John Cornyn, R-Texas, a judiciary committee member, Gibson Dunn’s Olson said that S. 852, if enacted as written, would violate the takings clause of the U.S. Constitution by expropriating the private property of the trusts and their beneficiaries “for public use, without just compensation.” Olson also said the law would violate the separation of powers by effectively nullifying the final judgments of the federal district courts establishing the asbestos trusts, due process by stripping the trusts of financial resources necessary to assert a legal challenge, and equal protection by specifically excluding bankruptcy-related recoveries from the act’s general protection of recoveries arising out of settlements and final judgments. That same month, Chicago’s Strauss, on behalf of the Coalition for Asbestos Reform, informed the judiciary committee that the legislation violated the takings and due process clauses of the U.S. Constitution because it requires companies that have insurance contracts for asbestos liability to turn over those assets to the fund in addition to paying their assessments to the fund. “This [law] will span more litigation than it will eliminate,” predicted the Association of Trial Lawyers of America’s Carl. But NAM’s Amundson suggested the potential challenges were a fact of legislative life. “We knew and everyone knew there’d be no way to avoid it.”

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