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With 600,000 claimants, upward of $70 billion spent so far on legal fees and awards, and powerful constituencies on both sides of the debate, a congressional solution to the asbestos litigation crisis has long been dismissed as simply too complicated to achieve. But last week, six years after the Supreme Court called for national legislation to fix the “elephantine mass of asbestos cases,” a legislative draft brokered by Senate Judiciary Chairman Arlen Specter, R-Pa.. unexpectedly surfaced in the Senate. Even the bill’s most ardent opponents concede it has a reasonable chance of success. The draft legislation, which could be introduced as early as this week and voted out of the Senate Judiciary Committee by late April or May, would establish a federally administered $140 billion trust fund — paid for by both insurers and defendant companies — that sets out fixed payments for nine levels of asbestos-related diseases. That, of course, is only the broadest outline of the massively complex 301-page bill, whose delicate balance of support could be upended at numerous points to come. There is fierce opposition to the bill among much of the insurance industry and several large manufacturers. Some 40 amendments to the bill, for example, are expected in the Judiciary Committee alone. “There have been meetings with senators going over line by line, sentences and semicolons, to try to accommodate a lot of interests,” Specter said on April 12, the day the draft was made public. And that’s just the Senate. The House has yet to even draft its legislation, which could mimic a Senate bill — or move in a different direction, making it all but impossible to harmonize the two versions in a conference. Yet despite the remaining hurdles, lobbyists, Senate staffers and industry officials say crafting a bill that can survive the fractious politics of the Judiciary Committee — and garner the support of the panel’s ranking Democrat, Vermont’s Patrick Leahy — is no small accomplishment. “Sen. Specter has managed to accomplish the nearly impossible,” notes William Samuel, the chief lobbyist at the AFL-CIO, “keeping a number of Republicans interested in his approach while also attracting Sen. Leahy.” The group endorsed Specter in his re-election race last fall. COMPETING INTERESTS Those Republicans were led by Judiciary Committee member John Cornyn, an outspoken Texan who led the panel’s “Gang of Five,” its five most-conservative members, whose support was critical to striking a deal. Cornyn, a former Texas attorney general who also spent seven years on the Texas Supreme Court, was under explicit orders from Senate Majority Leader Bill Frist, R-Tenn., to make sure any proposed legislation dealt with conservatives’ major concern: keeping the trust fund viable as long as possible to avoid a return to the court system and its morass of asbestos litigation. For his part, Specter had several things going for him, not the least of which was a dogged determination to strike a deal. He quixotically took up the issue two years ago on a one-senator crusade when he began personally negotiating with the various stakeholders. And he was helped by Frist, who could use an asbestos victory as a sign of his ability to build consensus in his expected bid for the 2008 GOP presidential nomination. Leahy, on the other hand, also had his own reasons for reaching a deal. He is fond of Specter and trusts him far more than he did the committee’s previous chairman, Utah’s Orrin Hatch. And as more manufacturing companies were hit by asbestos jury awards and filed for bankruptcy, opposition to the trust fund plan from Leahy’s union allies had started to soften. There was also pressure from Specter, who was able to play Cornyn and his conservative allies off against the Vermont Democrat. “Since February, it’s been clear that Specter could either cut a deal with them or us,” says one staffer for a GOP Judiciary member. “And Leahy figured that if Specter cuts a deal with those guys, that will be a bill I really hate.” Leahy’s stature should provide crucial political cover to perhaps a dozen Democrats, enough so that, unlike the bill’s last iteration in 2004, there would be enough support to break any possible filibuster. INDUSTRY TAKES SIDES But it wasn’t just the various Senate factions that had to have their key sticking points addressed. The bill pits a significant number of the country’s most powerful insurers against the thousand-odd defendants, most of which are companies that at one time or another had some financial stake in asbestos or had employees who were exposed to the deadly cancer-causing material. Many of these defendants, including such old-line manufacturers as W.R. Grace, U.S. Gypsum, Johns-Manville and Owens-Corning, were pushed into bankruptcy years ago as their asbestos claims mounted and would generally welcome a national trust fund solution. Others, like Exxon-Mobil Corp., Foster Wheeler Ltd. and Federal Mogul Corp., which believe they have sufficient insurance to cover any potential claims, think the bill is unnecessary and that they will pay more under a trust fund regime than by taking their chances in court. Under the proposed legislation, defendant companies that have more than $75 million in previous asbestos costs from lawsuits and payouts, for example, would pay at least $16.5 million to as much as $27.5 million into the fund annually. “This is an issue of survival,” says Thomas O’Brien, the former general counsel at Foster Wheeler who is now the spokesman for the Coalition for Asbestos Reform, an ad hoc group of companies opposed to the trust fund concept. “These are companies which have bought adequate insurance, paid their premiums, and now are being separated from those assets and being required to pay a hefty tax,” O’Brien says. “There’s probably hundreds of companies out there who are asbestos defendants and who are not aware of how this is going to impact them.” Insurers are divided as well, with a host of big names — American International Group Inc., Zurich Financial Services AG, and Liberty Mutual, among them — opposing the draft bill. Others, like ACE Insurance and St. Paul Travelers Cos., are passionate about the trust fund approach. “If you have a big [asbestos] exposure, you’re more inclined to want to be part of this trust fund. If you have minimal exposure and high reserves, you’re less inclined to be supportive,” explained one veteran industry lobbyist whose client supports the bill. “It’s just like everything else,” he adds. “It boils down to money.” Then, there are the trial lawyers, who appear to have been hit with a full-frontal assault. Their fees would be capped at a mere 5 percent of any final award, which themselves are capped at $1.1 million for mesothelioma, the most virulent asbestos-associated cancer. And even that 5 percent fee is not guaranteed if it exceeds twice the reasonable hourly fee for the amount of work needed to research and file a claim. Trial lawyers say the low fees will make it impossible to cover the costs of representing a victim before the trust fund. “A 5 percent fee is unprecedented for a compensation system that is not a no-fault system,” says Association of Trial Lawyers of America chief lobbyist Linda Lipsen. “There will be fights over eligibility and qualifications. It’s very complicated. You can’t just fill out a form,” she says, adding, “All you’re doing is discouraging claims, discouraging very sick and dying people from getting compensation.” The cutting of the hefty legal fees associated with asbestos litigation is bound to make the Republican Party’s more conservative members happy as well, if only as a way to dry up the funding source of some of the trial bar’s most politically active members. REACHING A DEAL Work on a bill to solve the asbestos litigation crisis, which clogs courtrooms with its multiple defendants and many plaintiffs who have not shown signs of illness, was first taken up in the Senate in 2003 under then-Judiciary Committee Chairman Hatch. The Hatch bill, which also used a trust fund model, was voted out of the committee on a straight party-line vote in July 2003. It never had an up or down full Senate vote. Meanwhile, Specter and Edward Becker, a former chief judge of the 3rd U.S. Circuit Court of Appeals who had been involved in major asbestos cases, took up the subject in the summer of 2003, eventually meeting 39 times, according to Specter, with the bill’s warring factions. The changing political dynamics in the new Congress also helped, including the weakened bargaining position of the Democrats, whose numbers, counting Independent Jim Jeffords, dropped from 49 to 45, just four votes more than is needed to sustain a filibuster. “The Dems’ margin of error had been cut in half, basically between the 108th and 109th Congress,” notes the staffer for the GOP Judiciary Committee member. “It’s ‘we can lose eight of our guys’ versus ‘we can lose four of our guys.’ “ Still, it wasn’t clear until the Easter break that a deal was even possible, since both Cornyn’s faction and Leahy had several, separate must-have provisions. A main sticking point was what to do if the trust fund became insolvent one year, 10 years or 30 years into the future. While no one at the table wanted government to step in and cover the shortfall, Cornyn insisted that a reversion to the tort system was also to be avoided at all costs. One proposed solution was to reduce the money the fund paid out by eliminating so-called Level 7 claims, which would have allowed lung cancer victims who had worked in asbestos-laden environments, but who had no evidence of asbestos-related scarring, to be awarded funds from the trust. During a meeting in Specter’s conference room over the Easter recess, recalls another Republican Judiciary staffer, Specter was presented with a memorandum from Cornyn “that walked through a list of issues we needed,” including a lowering of the cap on attorney fees from 10 percent to 5 percent and the removal of Level 7 compensation. “‘I think we can get there on Seven. I think we can get there on attorneys’ fees,’” the staffer recalls Specter saying. At that moment, the staffer says, there was the realization that a deal could be struck. The deal was also aided by factors as subtle as personality differences, Senate Democrats’ long-term strategy in the battle over judicial nominations and the economic drag caused by years of asbestos litigation. Some 60 companies have been forced into bankruptcy in the past 20 years by asbestos liabilities; one-third of them since 2000. And there is a growing realization among all parties that the problem will only get worse. “Everyone has been mugged by reality,” says a lobbyist whose company is actively supporting the bill. “We’ve all taken a step back and said, ‘Is this perfect? Maybe not. But it’s better than the current situation, and bankruptcy is not a good thing. It’s not good for the work force.” Many Republicans believe there is another subtext in the Democrats’ recent string of conciliatory gestures, which include passage of both a bankruptcy bill and class action reform, and Leahy’s decision to sign on to asbestos legislation. By building a pool of good will and a track record of cooperation, Democrats will make it tougher for Republicans to label them obstructionist, even if Democrats inevitably end up filibustering one or more judicial nominations. Leahy had other motivations as well. Both of his grandfathers worked in granite quarries and died from respiratory illnesses caused by airborne particles of granite, a similar situation to airborne asbestos particles which cause asbestosis and mesothelioma. In addition, Leahy and Specter share a degree of trust that, by the end of Hatch’s six years as chairman, Leahy and Hatch did not enjoy. Battered by the acrimony of judicial nominations and difficulties coordinating hearing and markup schedules, relations had soured not just between Leahy and Hatch, but between their staffs as well. Specter and Leahy, on the other hand, have known each other since they were fellow district attorneys from the mid-1960s until the early 1970s — Specter for the city of Philadelphia and Leahy for Chittenden County, Vt. And they both serve on the Senate Appropriations Committee, which by its nature produces senators more likely to negotiate than legislate by fiat. On a more personal level, Specter may also have found his negotiating leverage strengthened in an unintended way by his recent illness: He was diagnosed with Hodgkin’s disease just a month after taking over the chairmanship and is now on weekly chemotherapy. “Democrats have always had a certain amount of respect for Specter,” notes the veteran insurance lobbyist. “Now this guy has cancer, and he’s still busting his ass, so maybe Leahy’s thinking: ‘I’ve got to help him move forward, and not walk away.’” In the end, Leahy received higher compensation awards for victims; the elimination of any subrogation rights by the insurance industry, which must pay all of its claims regardless of whether a victim receives money from the trust fund; and medical screening for high-risk workers. Conservative Republicans were able to remove what they considered the specious asbestos claims of Level 7 lung cancer victims, and chop attorney fees to 5 percent. “Specter was able to give away issues to where the scale remained relatively balanced,” notes the lobbyist whose company is supporting the bill. “There was a little tough love and a little pain spread around to everybody.”

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