The AFL-CIO is opposed to S. 758, the Fairness in Asbestos Compensation Act of 1999 as is the Building and Construction Trades Department of the AFL-CIO, which has been actively involved over the years in representing workers exposed to asbestos. However, the AFL-CIO does not believe the current state of asbestos litigation is ideal and is committed to working with all interested parties to seek solutions to problems of delay and inequities in the treatment of victims of asbestos.

The AFL-CIO believes any asbestos legislation should meet certain basic fairness tests. Among these are:

- The legislation should preserve asbestos victims’ access to the courts-- alternative dispute mechanisms should be just that-- voluntary alternatives to the courts.

- The legislation should preserve asbestos victims’ access to counsel.

- Any alternative claims procedure should be structured to lessen the delay and uncertainty facing all parties.

- Any alternative claims procedure should be minimally adversarial and minimally legalistic.

- Any provisions that seek to alter the financing of asbestos liabilities should be comprehensive, transparent and should add to victims’ recoveries.

The AFL-CIO believes that there is considerable promise in voluntary, state-based settlement agreements such as that worked out in Louisiana between leading asbestos manufacturers and the plaintiffs’ bar in that state. These arrangements should be looked at carefully as models for any Congressional action.

Good morning, Chairman Grassley. My name is Jonathan Hiatt, I am the General Counsel of the American Federation of Labor and Congress of Industrial Organizations. I would like to thank the Subcommittee for the opportunity to testify on the issue of federal legislation addressing the rights of workers suffering from exposure to asbestos.

The Subcommittee has before it S. 758, the Fairness in Asbestos Compensation Act of 1999. The AFL-CIO is opposed to S. 758, as is the Building and Construction Trades Department of the AFL-CIO, which has been actively involved over the years in representing workers exposed to asbestos. I have attached to my written testimony a copy of a letter from Robert Georgine, the President of the Building and Construction Trades Department of the AFL-CIO, to Congressman Conyers, expressing his opposition to last year’s House version of this bill, and a copy of a letter from William G. Bernard, President of the International Association of Heat & Frost Insulators and Asbestos Workers, to Chairman Hyde of the House Judiciary Committee expressing that union’s opposition to H.R. 1283, the House version of S. 758.

The AFL-CIO’s member unions represent, we believe, over 1 million active and retired workers who have been exposed to asbestos. Hundreds of thousands of America’s working families are living with the deadly consequences of this exposure, acquired often while working in defense industries. Compounding this tragedy, the legal system has offered lengthy delays followed by limited compensation, compensation that often comes too late.

The AFL-CIO, its member unions, and its affiliated state federations of labor have been actively involved in efforts over the last ten years to craft solutions to the tragedy of asbestos. We have sought to work with responsible elements among the asbestos manufacturers, and we continue to be ready to engage in dialogue with the industry. There is, we believe, a broad recognition that the plight of asbestos victims might be eased by developing alternative methods of resolving their claims. Currently efforts are underway among the parties to asbestos litigation to craft innovative voluntary alternative claims procedures at the state level. One such agreement has been entered into in Louisiana. These efforts should be allowed to develop and be tested.

The exposure of millions of working Americans to asbestos is one of the largest torts in the nation’s history. It has led to hundreds of thousands of claims, and will lead to more. The judiciary has asked several times for Congress to consider how this case load might be managed, most recently in last summer’s Fibreboarddecision.1 However, the need for innovative approaches to obtaining justice for asbestos victims must not be the basis for denying those same people effective access to our courts. The AFL-CIO is eager to work with the Subcommittee to craft such an innovative approach, but we must begin by outlining why the bill before the Subcommittee today takes us in the wrong direction.

Any asbestos legislation should meet certain basic fairness tests. Among these are:

- The legislation should preserve asbestos victims’ access to the courts-- alternative dispute mechanisms should be just that-- voluntary alternatives to the courts.

- The legislation should preserve asbestos victims’ access to counsel.

- Any alternative claims procedure should be structured to lessen the delay and uncertainty facing all parties.

- Any alternative claims procedure should be minimally adversarial and minimally legalistic.

- Any provisions that seek to alter the financing of asbestos liabilities should be comprehensive, transparent and should add to victims’ recoveries.

I would like to briefly discuss why S. 758 is at odds with each of these principles.

S. 758 dramatically restricts both asbestos victims’ access to the courts and their substantive rights under state law. It requires asbestos victims to file a claim with a new quasi-governmental agency, the Asbestos Resolution Corporation (“ARC”), and only allows victims to proceed once they have obtained a “certificate of medical eligibility.” Without this certificate, a victim cannot seek justice in the courts. But having obtained a certificate would not be enough. S. 758 would then impose mandatory mediation and would require the asbestos victim obtain a “release from mediation” certificate. Once a victim or, more likely in view of the delays these procedures would create, the victims’ estate reached a court, they would be barred from bringing class actions, joining parties, consolidating actions, or aggregating claims— all standard procedures for lessening the costs and time involved in tort litigation-- unless they obtained the defendants’ consent.

These procedural barriers significantly diminish asbestos victims current rights under state law. But the bill goes further. It would bar any recovery unless victims could prove they had the specific medical criteria listed in the bill. And finally, victims would be barred from seeking punitive damages or relief for emotional distress, medical monitoring or surveillance, increased risk of cancer or other diseases.

Ironically, as the bill shuts the courthouse doors to asbestos victims, it creates a new federal cause of action for asbestos manufacturers to bring to allocate disputed administrative costs.

As to the right to counsel, we are not supportive of excessive attorneys’ fees, but we are all too well aware that unless assured of adequate risk-adjusted compensation, attorneys will not represent clients who are unable to pay hourly rates. S. 758 limits attorneys’ fees to levels below those customarily awarded by courts in contingent litigation and the bars on consolidating cases effectively act as a barrier to economical representation of low-paid workers in asbestos cases. This would be appropriate if the bill envisioned a voluntary, non-adversarial process that allowed asbestos victims to obtain justice with limited assistance from counsel and limited fact finding.

But S. 758 does just the opposite. The certification procedure is substantively rigid and technically demanding, and the mediation and arbitration procedures are highly adversarial and procedurally dense, with financial penalties for taking certain procedural and substantive positions in the process. No one would be well advised to enter into such proceedings without counsel.

To take one example, to get through mandatory mediation, the asbestos victim would have to provide a detailed, company-specific exposure history, which would be subject to challenge by industry counterparties. This procedure, rather than eliminating a major cause of litigation expense, adds to it, by requiring asbestos victims to prove their exposure histories twice— once in mediation, then again in court if mediation fails. Ironically, this procedure appears to make no sense if the Act’s intention is to address the enormous transaction costs of attempting to precisely prove all the sources of each individual victim’s asbestos exposure.

Finally, as to financing, to the extent S. 758 acts to limit the liability of asbestos manufacturers, it may merely succeed in transferring that liability to employers under the workers’ compensation system, and to workers’ health funds. Where the federal government is the employer, as is the case in federal shipyards, this will result in a direct transfer of financial responsibility from the asbestos manufacturers to the federal government. Where the employer is a federal contractor, such as in the private shipbuilding industry, the transfer will be indirect, but just as real. While there may be a role for the federal government in assisting asbestos victims, it should not be to use federal dollars to substitute for asbestos manufacturer dollars. In addition, S. 758 does not meet the comprehensiveness test to the extent that it fails to address issues such as the failure of the insurance industry to honor its contractual commitments to the asbestos manufacturers.

There has been much discussion of the relationship of S. 758 and its predecessors to the Amchem settlement. The crucial difference between the two is that the Amchem settlement was voluntary, this legislation is not. The AFL-CIO affiliates who were involved in the Amchem settlement negotiations oppose S. 758.

The AFL-CIO’s opposition to S. 758 should not be interpreted to mean that we believe the current state of affairs in asbestos litigation is optimal. We are deeply concerned about the collusion of certain attorneys and asbestos manufacturers in “screening programs” that settle cases for workers exposed to asbestos before they know whether they will suffer serious health consequences.

But rather than proceed in the direction laid out in S. 758, the AFL-CIO believes the Committee would be better served by examining the approach now being worked out between the industry and plaintiffs’ representatives in Louisiana. In that state, representatives of some of the major asbestos manufacturers like Owens-Illinois and Owens-Corning and the attorneys representing a majority of Louisiana claimants have worked out a voluntary case resolution system. This system defines three levels of claims, and sets payment levels for each type of claim, together with provisions allowing for higher level claims if the applicants’ condition worsens. It creates certainty for all parties that is absent from the procedures in S. 758. Though entirely voluntary, it allows for victims to receive certain and immediate payments, and for defendant companies to accurately estimate their exposure to claims.

We believe a program like this would be the appropriate context for limiting attorneys fees, since participants in this program would not need extensive adversarial representation or need to engage in time-consuming discovery. Similarly, the Louisiana program should do much to address the screening abuses, as it provides rights to additional compensation to those who have been exposed to asbestos but have not yet become ill.

A copy of the Louisiana agreement is attached to my written testimony.

Any voluntary national program along these lines would have to address certain issues that do not arise in a single state- such as the variation in award levels from state to state. It would also need to be constructed on the understanding that for a voluntary ADR program to succeed, it must offer value to both sides in potential litigation— value in the form of mutually reduced costs and reduced uncertainty. Such a program cannot merely be a vehicle for irresponsible elements in the industry to continue to fight core liability issues that have really long been settled in the hope of winning incremental victories through delay.

Finally, the GAF Corporation and its many representatives have often expressed their frustration at what they describe as “having to pay money to people who are not sick.” The description of the unimpaired as “people who are not sick” can easily leave the mistaken impression that these people have not been injured. When GAF talks about the “non-sick” they mean workers who have been exposed to asbestos and have suffered a medically detectable effect— for example the presence of pleural thickening— but whose bodies do not yet display the outward signs of disease such as impaired breathing. But make no mistake — these people have in fact been damaged by exposure to asbestos and there are testing procedures that can measure that damage.

The AFL-CIO believes that the “unimpaired” have been injured, and should be entitled to some form of compensation. In some states, including Louisiana, the industry and responsible elements within the plaintiff’s bar have worked out settlement procedures that provide the unimpaired with regular testing and modest compensation, while preserving their claims if they become impaired. In contrast, S. 758 appears designed to prevent the “unimpaired” from receiving any compensation of any kind from the asbestos industry.

Before I close, I would like to make two larger systemic points. This Subcommittee in considering whether to create exceptions to state tort law, should be mindful of the incentives it creates for industrial decision makers. I am sure the Subcommittee would not want to suggest to business executives making decisions in the future that if the scale of the risk their product poses is truly awe inspiring, Congress will step in to save them from the consequences of their actions under state tort law.

In addition, the AFL-CIO has always opposed efforts to deny working families access to state courts. One such effort was defeated last year in the Senate.2 S. 758's mandatory provisions are in effect an effort at tort reform one class of plaintiffs at a time. We oppose so-called tort reform both in aggregate and in bite sized pieces.

In conclusion, the AFL-CIO and its affiliates are ready to work with all concerned parties, and especially with this Subcommittee, to seek creative solutions in this area that are respectful of the rights of asbestos victims. We thank you for the opportunity to testify here today.