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Despite months of negotiations involving labor, trial lawyers, insurers, businesses and senators, a federal solution to costly asbestos litigation clogging the nation’s courts still seems elusive. There was optimism last year among the various parties to this debate that consensus could be found on how to deal with the massive number of asbestos claims that have led to business bankruptcies, delayed compensation for victims and backlogged courts. But that optimism has been tempered by an election-year political environment in the Senate that, some say, is not conducive to any legislation being approved, and, others say, by feelings that some parties are not negotiating in good faith. Last week, Senate Republican leaders brought to the floor Bill S. 2290, the product of negotiations over the last six months, according to Judiciary Committee Chairman Orrin Hatch, R-Utah, and Majority Leader Bill Frist, R-Tenn. But the leaders failed to gather the 60 votes needed to move to a debate on the bill’s merits. The cloture motion went down, 50-47. “There has been a great deal of movement,” said asbestos litigator Steven Kazan of Kazan, McClain, Abrams, Fernandez, Lyons & Farrise in Oakland, Calif. “It has all been in the wrong direction, which makes clear to me that on the Republican industry/insurance side, there is really no desire for a solution but a desire to posture and preen and attempt to create an issue for the presidential campaign. “The only rational solution is to drive a stake through [S. 2290's] heart and make sure it’s dead forever,” added Kazan. But Jan Amundson, senior vice president and general counsel for the National Association of Manufacturers (NAM), countered, “If you take any measure of sincerity from how many people have been talking, this has generated a lot of talk on the Senate floor. Everybody seems to be saying the same thing — this is important, something must be done. “As the phoenix rises from the ashes or as the cat with nine lives, this will be with us for a while, but I hope not a long while,” she said. LATEST SOLUTION According to the Rand Institute for Civil Justice, more than 730,000 people have filed asbestos claims, with a sharp increase in filings in the last 10 years. More than one million claims are expected to be filed in the future. At least 70 business bankruptcies have been tied to the asbestos crisis. In the quest for a federal solution to delayed victim compensation, clogged court dockets and the economic losses stemming from the bankruptcies, four key groups have been negotiating with senators. Amundson’s organization is the chief force behind the Asbestos Alliance, which includes, among others, the U.S. Chamber of Commerce and the American Insurance Association. There is the plaintiffs’ bar and the AFL-CIO. And a second business group is the Asbestos Study Group, which includes such companies as Dow Chemical Co., General Electric Co. and Viacom Inc. Two approaches to tackling the crisis were on the table last year and had the unique effect of creating divisions within both the business community and the plaintiffs bar. The Asbestos Alliance and the American Bar Association supported an approach in which standard medical criteria would be used to distinguish between claimants who are sick from asbestos-related disease and those who have been exposed to asbestos but do not have any functional impairment from asbestos-related disease. This approach was also backed by a group of about 20 plaintiffs’ firms representing the sickest asbestos victims, including Kazan’s firm. They noted that a Rand report stating that the vast majority of the substantial increase in asbestos filings since the mid-1990s is attributable to nonmalignancy filings — claims that don’t involve functional, objectively measurable impairment from asbestos-related disease. And they voiced concerns that available funds were being dissipated by payments to those who were not yet sick. But labor and the Asbestos Study Group rallied around the concept of a trust fund that would take asbestos claims out of the tort system. The fund would make payments based on medical criteria. The idea promised quicker payments for victims and certainty for business in terms of its liability. The trust fund would operate on a no-fault basis and would be funded by contributions from about 8,000 defendants. The Association of Trial Lawyers of America has taken the position that many things can be done to streamline asbestos litigation within the court system. But Hatch forced the debate forward when he expressed a preference for the trust fund concept. In an attempt to find consensus among what are called the “stakeholders” in this debate, Senator Arlen Specter, R-Pa., brought in Senior Judge Edward Becker of the 3rd U.S. Circuit Court of Appeals to meet with the groups. “Everybody felt they could go in there and talk and somebody would listen,” said NAM’s Amundson. “A lot was hammered out there.” Peg Seminario, director of health and safety for the AFL-CIO, also called the process very useful, but she added, “The discussions we’ve had with industry people lead us to believe the political environment and atmosphere doesn’t seem to be one that is really conducive to a bipartisan agreement on anything.” However, Hatch and Frist brought S. 2290 to the Senate floor, saying it was time to stop talking and to act. “We have studied the asbestos problem at length for decades,” Hatch told his colleagues. “We have held numerous hearings, considered various legislative proposals, and even underwent several marathon markups in the Judiciary Committee last June. “Over the past year, we met extensively with our Democratic counterparts to assuage their concerns about the bill. We have provided a meaningful eight-month mediation forum through which the major stakeholders could bridge their differences on issues critical to the bill. “To the extent we were able to reach consensus on issues, the appropriate language is embodied in the bill now before us,” he said. Under S. 2290, the Asbestos Injury Claims Resolution Fund would be created within the Department of Labor. The fund would be financed by assessments on certain defendant companies and insurers. The fund can pay $114 billion in claims, with an additional $10 billion in contingency funds available from defendant companies. If the fund becomes insolvent, claims would revert to the tort system. The bill contains medical criteria for determining compensation amounts. $15 BILLION DEBT SEEN Last week, the Congressional Budget Office (CBO), responding to an inquiry by the Senate Budget Committee chairman, estimated that by 2014 the proposed fund would have a $15 billion debt. Borrowed funds would be used to pay claims and would be repaid from future revenue collections, according to the CBO. By placing the fund in the Labor Department rather than in the court system as once proposed, S. 2290 accommodates the concerns of labor, said tort expert Victor Schwartz, a partner in the Washington office of Kansas City, Mo.-based Shook, Hardy & Bacon. And the value of claims payments is higher than in earlier proposals, he added. “But you still have matters that over time need to be worked out,” Schwartz said. “Within the business community — consensus on their own contributions. Within labor, are they satisfied with the amount of the fund? The CBO report suggests the fund may run out.” If the fund fails and claims revert to the tort system, he added, many businesses can’t accept that because they lose the certainty provided by the trust fund concept. But if there is a possibility the fund could go dry, he said, labor needs the protection of the tort system for its members as part of its fiduciary duty to them. “The trial lawyers mischaracterize the bill when they say it leaves people with nothing. It gives them something quicker, maybe not as much as in the casino of the court system,” said Schwartz. “I don’t think right now you have something dead forever,” he said of S. 2290. “Theoretically, something like this could work. The theory is labor gets a quicker resolution, particularly for people who are really sick. You eliminate the court casino. And you do have money to play with, and that’s based on what either side spends on attorneys. The business community spends a fortune on attorneys — 40 percent. That’s a lot of money.” MOVING BACKWARD? The bill does nothing but bail out industry, countered Kazan. “It’s inadequately funded. It creates a very elaborate system to protect the rights of insurers and industry people,” he charged. “It does nothing to protect the rights of the victims. It puts them into an elaborate administrative system and effectively deprives them of their right to counsel. This requires a whole elaborate level of proof.” The AFL-CIO’s Seminario called S. 2290 “a very flawed bill.” There has been progress in negotiations, she said, noting agreement on putting the no-fault system in the Department of Labor. “The problem with the bill is, in many respects, it’s a step backward,” she added, explaining that earlier agreed-to provisions, such as allowing victims access to the courts during the fund’s start-up period, were dropped. “We’ve been engaged in an effort to reach agreement in good faith,” she said. “But we can only do that if there is good faith on the other side and not an attempt to roll the unions and roll the Democrats.” To date, trusts have been “woefully underfunded,” said Seminario. “There’s such uncertainty in the number of potential disease cases and claims, and how that may change in the new system. We have to set this up so it can deal with this. People talk about this in terms of a litigation crisis but that’s not really what’s going on here. It’s a massive disease crisis that is unparalleled,” she said. NAM’s Amundson said the Asbestos Alliance supported moving S. 2290 forward, but had reserved a final decision on the bill until it emerged from the Senate debate. “We had started with medical criteria,” she explained. “But we are fully behind the trust fund because that’s what’s there.” The cloture vote last week, she said, was a measure of where senators stood right now, a head count. Shook Hardy’s Schwartz agreed, saying, “I think [the vote] is a little bit of Bush’s ‘Are you with us or against us?’ In all districts, there are businesses hurting over this thing. It’s probably an uncomfortable ‘no’ vote for those opposing it.” Ultimately, Schwartz said, “The parties really have to make a decision, assuming the bill doesn’t become law this session, whether they can come to agreement or not. Then the business community has to decide whether to consider something more modest.”

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