According to a public statement that is on line here, the U.S. Chamber of Commerce is pleased that RAND has issued its Phase 1 report on the asbestos bankruptcy trusts. The Chambers’ statement focuses on one of the issues related to the trusts.
The issue in focus is the reality that claims submitted to trusts are NOT treated as public information. This situation illustrates a perversity created in the bankruptcy trust system by the self-interested parties that cut deals that are almost always approved, even if they include lousy or illegal plan terms and even if the plan is destined to fail, as many do, as proven by Prof. Lynn LoPucki and others in a great book that highlights huge picture problems in the administration of bankruptcy law. The book, Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts is described in this prior post.
Tort lawsuits, in contrast, are matters of public record. Accordingly, tort claims are subject to public scrutiny that allows parties, legislators and courts to know which persons are filing claims against which entities. And, if parties want to know what is paid in verdicts or settlements, they usually (not always) have a state law right to acquire the information.
The lack of transparency in bankruptcy courts is a stunningly broad problem that goes well beyond asbestos trusts, as described in this and other prior posts. The specific problem of bankruptcy trust secrecy highlights just one of the many reasons why current bankruptcy practice is at best a lousy way to handle mass tort problems. The GAO was previously asked to study and report on bankruptcy trust secrecy, one hopes that a fair and scholarly report is issued. There also is a detailed, prior defense-side article on the subject; go to this prior post for links and commentary on the article.
Set out below is the full text of the Chamber’s statement that focuses on the issue of secrecy. The double-dipping term is unfortunate, however, because under state law, there is nothing wrong with tort victims claiming money from more than one tort-feasor. The problem is the secrecy regarding which persons are claiming money from which entities.
There also is irony in the bankruptcy trust secrecy. How? Many members of the Chamber explicitly have been part of bankruptcy court deals that call for secrecy for asbestos bankruptcy trusts. Likewise, lots of insurers are today complaining about secrecy, but in the past (and even today) have consented to secrecy in order to get settlements done in the asbestos bankruptcy cases. Perverse? You bet, but that’s how things go in bankruptcy – parties cut deals and the judges bless them, regardless of wisdom and sound public policy.
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Chamber Calls for Increased Transparency and Oversight to Prevent Abuse
WASHINGTON, D.C.—The U.S. Chamber of Commerce’s Institute for Legal Reform (ILR) today applauded a new study released by the RAND Institute for Civil Justice that provides the foundation for debate over how to reform the broken asbestos bankruptcy trust system. The RAND study is the first phase of a major research project investigating the bankruptcy compensation system for asbestos claimants.
“While the bankruptcy trusts were created to compensate those with proven asbestos-related illnesses, they have become a playground for enterprising plaintiffs’ lawyers who have learned how to game the system,” said ILR President Lisa Rickard. “The RAND report underscores the level of trial lawyer control over the trusts and the inability to link payments across trusts to the same individual – encouraging some to dip into multiple trusts with impunity.”
In Asbestos Bankruptcy Trusts: An Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts, RAND compiled publicly available data on the history of the asbestos bankruptcy trusts as well as how they are organized, governed and payments are processed. Through its research, RAND identifies a trend where a small group of asbestos plaintiffs’ attorneys have become “repeat players” representing a large number of claimants.
The report also finds that there is typically no coordination between trusts to determine whether a claimant’s exposure evidence is consistent. As the report explains, “a claimant needs credible evidence that he or she worked with or around asbestos during the period of time when asbestos was in use.” However, while claimants have been found to submit conflicting exposure evidence to multiple trusts, the lack of coordination between trusts allows fraudulent claims to slip through the system.
“This study sheds further light on the growing problems surrounding these trusts, including their lack of transparency, coordination and oversight,” Rickard concluded. “Given the massive assets of these trusts, Congress, the Government and Accountability Office and state legislatures must begin to seriously investigate the trust system to prevent future abuses and better provide just compensation for those truly injured.”
ILR seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the national, state, and local levels.
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.
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