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Furthering Asbestos Claims Transparency Act: Discovery of Bankruptcy Claim Information to Avoid Double Compensation

Posted in Asbestos Litigation, Toxic Tort

As previously reported on Defense Litigation Insider, the United States House of Representatives is presently considering the “Furthering Asbestos Claims Transparency (FACT) Act.” (H.R. 982) Since our last report, the bill was approved by the House Judiciary Committee by a 17-14 vote despite efforts to amend its original form.

The bill, introduced by Rep. Blake Farenthold (R-TX) and co-sponsored by Rep. Jim Matheson (D-UT), would require asbestos bankruptcy trusts to file publicly available reports that include demands made against the trusts as well as the names and exposure history of the claimants. Although Congress tracking website, govtrack.us, projects that the bill has only a 14 percent chance of passing, defense attorneys in many jurisdictions can still take steps to pursue the information during litigation.

Bankruptcy claim information is helpful to defense attorneys because, often, plaintiffs in litigation against non-bankrupt asbestos defendants conceal claims made against bankruptcy trusts in an effort to obtain “double compensation.” In many jurisdictions, relief afforded by a bankruptcy trust, if known, would reduce the liability exposure to the non-bankrupt asbestos defendants.

Some jurisdictions have attempted to eliminate the possibility of fraud, abuse, and double compensation legislatively or by judicial order. An Ohio statute, for instance, requires disclosure of bankruptcy claim information. In Delaware, a standing case management order of the Superior Court likewise calls for asbestos plaintiffs to identify bankruptcy trust claims.

If a given jurisdiction does not have a legislative remedy available, many state and federal courts have held that bankruptcy trust claim information is available through discovery. This discovery might include claim forms, which occasionally contain factual allegations that are inconsistent with the plaintiff’s pleadings. The Eastern District of Pennsylvania, home of federal multi-district litigation, has allowed such discovery. So, too, has the State of California.

Conclusion

Defense attorneys must be vigilant in protecting their clients from increased exposure as a result of concealed asbestos claims. Until a national solution is in place, defense attorneys can likely stay on guard of potential double compensation scenarios through focused discovery and subpoena practice.