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The chances for asbestos litigation reform in Congress appear brighter than ever this year because of expanding agreement in favor of a federal solution, growing bipartisanship on the issue in the Senate and a split in the plaintiffs’ bar. “I think there’s definitely movement, but whether it will be enough to produce a sufficient consensus to get legislation passed is still a big question,” said Jonathan Hiatt, general counsel to the AFL-CIO. “So many people are working so hard right now. We’re cautiously optimistic.” Business, labor and the bar all now acknowledge that there is an asbestos crisis, one that has clogged the courts, delayed compensation to seriously sick claimants and bankrupted companies, said Jan Amundson, junior vice president and general counsel to the National Association of Manufacturers. “Where the parties may not share the same ground is in how far you can go in getting a political fix — what’s feasible and what’s not,” she explained. Amundson’s organization is the chief force behind the Asbestos Alliance, which includes the U.S. Chamber of Commerce and the American Insurance Association. The Alliance and the AFL-CIO are among four large groups working to find that politically feasible solution. The others are the plaintiffs’ bar and the Asbestos Study Group. The groups also share a new sense of urgency created by Senate Judiciary Committee Chairman Orrin Hatch, R-Utah. During a hearing on March 5 on asbestos reform, Hatch gave them two weeks to show progress. Otherwise he will move on his own, he said. “We’re going to take him at his words and work as hard as we can,” said Joel Johnson of Washington’s Swidler Berlin Shereff Friedman, counsel to the Asbestos Study Group, which includes such companies as Dow Chemical Co., General Electric Co. and Viacom Inc. “I think the political environment is cause for more than cautious optimism,” he said. “It’s not unusual for people to have different views of legislative solutions moving into the process. The real test is whether people of good intentions and goodwill can come together and forge a consensus to take advantage of that political environment.” For tort reform proponents, the Senate traditionally has been less hospitable than the House. The Republican-controlled House generally takes the lead in moving class action, medical malpractice and other tort-related proposals. Even with Republicans now controlling the Senate, the parties are narrowly divided, and tort reformers expect uphill battles on all fronts. But the odds in favor of asbestos legislation in the Senate grew considerably this year when nationally recognized asbestos litigator Fred Baron of Dallas’ Baron & Budd indicated that federal legislation would be appropriate and the American Bar Association (ABA) came out in favor of so-called medical-criteria legislation, said tort expert Victor Schwartz of Kansas City, Mo.’s Shook, Hardy & Bacon. That approach would limit payments to people who are actually ill from specific asbestos-related diseases. Baron does not support the ABA approach, which is backed by a contingent of trial lawyers who primarily represent claimants suffering from asbestos-related cancers. The U.S. Supreme Court last week in an asbestos-related decision again called on Congress to address concerns with the litigation. “The plaintiffs’ bar is divided on some of the approaches,” said Schwartz, noting that bar’s historical opposition to liability reforms. “The fact of the split augurs well for something to happen. “You also have Sen. Dodd calling for an asbestos summit to try to figure out what to do,” he said, referring to Sen. Christopher Dodd, D-Conn. “He’s a Democrat in the Democratic leadership. “Sen. Leahy has at least indicated something ought to be done, whereas on other issues, like medical malpractice, he says no. You have at least a flickering light of bipartisanship, which is essential for anything to pass.” Sen. Patrick Leahy, D-Vt., is the ranking Democrat on the Senate Judiciary Committee. SENATE LOGJAM On the negative side, Schwartz and others said, there is a logjam in the Senate because of the possible war with Iraq and the current battle over the judicial nomination of Miguel Estrada. More important, they add, the business community is divided over the most effective solution to the asbestos morass. The Asbestos Alliance, for example, for two years has been pushing the so-called medical-criteria approach. But the Asbestos Study Group is urging the creation of a trust fund outside of the tort system. “If the business community is divided, two things can happen,” said Schwartz. “One side won’t block the other’s initiative, but if one side thinks the other’s approach is going to make things worse, they could oppose the bill, and then you lose Republican votes and the bill dies. That is the absolute riddle of the sphinx.” The prospects in Congress are probably better for some sort of asbestos reform than for any other type of tort reform this year, said one key Senate staffer. “The split in the trial bar presents an enormous opportunity to get this through,” he said. “The only thing now is to get people up here to stop meandering in circles looking for the perfect bill that everybody would like and find the best one out there and get it passed.” From the Asbestos Alliance’s perspective, the best bill right now is S. 413, the Asbestos Claims Criteria and Compensation Act, sponsored by Sen. Don Nickles, R-Okla. Under the Nickles bill and the ABA’s approach, standard medical criteria would be used to distinguish between claimants who are sick and those who have been exposed to asbestos but do not have any functional impairment. The alliance and the ABA note a recent Rand Corp. report stating that the vast majority of the substantial increase in asbestos filings since the mid-1990s is attributable to claims that don’t involve functional, objectively measurable impairment from asbestos-related disease. “The ABA is concerned that funds are being dissipated by payments to those who are not now sick and may never be sick with asbestos-related diseases, and the costs associated with administering those claims,” ABA President-elect Dennis Archer said at the March 5 judiciary hearing. Archer and others say the not-yet-sick often file claims to meet state statutes of limitations or because they fear that defendant companies may go bankrupt and they will be left uncompensated. The Nickles bill and the approaches pushed by the ABA and the alliance also would toll all applicable statutes of limitations. This approach, said Amundson, “represents the intersection of what you want — which is like a line that goes up — and what you can get — which is a line that comes down. Our proposal does not mean someone loses the right to sue, but the right is deferred until you meet the medical standard.” While not agreeing with every aspect of the Nickles bill, the alliance supports it generally, as do a group of about 20 plaintiffs’ firms that primarily represent claimants impaired by asbestos-related diseases. Labor, other trial lawyers and the Asbestos Study Group don’t support the Nickles bill. “What the so-called medical-criteria approach does is it shuts off the right of people with less than the most serious disease to file claims,” said the AFL-CIO’s Hiatt. “While they call them the non-sick, that’s a simplistic way of looking at it. People who don’t have cancer but who do have diminished lung capacity, to the point they can’t climb stairs, would definitely be cut off. “To make matters worse, even those who can file claims under this approach are basically being left to the existing tort system, with the companies and insurance carriers likely to fight much harder against individual claims because they no longer have the incentives of mass settlements.” Some opposed to the medical-criteria approach believe it would shift the costs in the system. They believe that trial lawyers like Baron, whose asbestos clients are largely unimpaired claimants, would raise the demand level for their cancer cases when they realize they can’t get money for their noncancer cases. Labor and the Asbestos Study Group have been discussing a trust fund proposal that would take asbestos claims out of the tort system, effectively ending asbestos litigation. A payment schedule would be based on medical criteria. A trust fund solution, they argue, would provide certainty to both victims and companies. There would be a limited, last-resort access to the courts. In the 1980s, there were about 40 asbestos defendants. Today, there are an estimated 8,000. A trust fund would operate on a no-fault basis and would be funded by contributions from those 8,000 defendants. Skeptics ask about how contributions are apportioned among the 8,000 defendants when exposure varies and about which insurance carriers are constantly fighting. “It would be terrific if a fund worked,” said Amundson. “It takes everything out of court. As elegant as a fund is, it usually breaks down when you see how it’s going to be funded.” ROLE OF GOVERNMENT Trust fund supporters contend the federal government should contribute because it promoted the use of asbestos, particularly in the defense industries. “I think there’s a political calculus here that is relevant over and above the substantive equation — what kind of solution can get more than 60 votes in the Senate?” said Johnson of the Asbestos Study Group. “The most viable solution is probably one where you’re removing this asbestos crisis from the more politically contentious debates over reform of the tort system and legal reform issues. It’s a different kind of solution that might attract supporters who might not otherwise be attracted to a tort-style scheme,” explained Johnson. The Association of Trial Lawyers of America believes many things can be done to streamline asbestos litigation and deliver benefits better, said Baron, but it is not behind the Nickles approach. Another idea, still sketchy but gathering some support, he said, is a new statute permitting companies to pay some of their liabilities similar to what happens in Chapter 11 bankruptcies. It would require strict court supervision, he said. “I think that’s actually the best idea,” said Baron. “I also think that neither end of the spectrum is going to carry the day — not the medical-criteria people nor the people who say there isn’t a problem. “There is a real belief on the part of all parties that something needs to be done.”

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