SUMMARY

Mr. Chairman and members of the committee, I am Karen Kerrigan, Chairman of the Small Business Survival Committee (SBSC). On behalf of SBSC and its more than 50,000 small business members across the nation, I appreciate this opportunity to testify before the Senate Judiciary Subcommittee on Administrative Oversight and the Courts regarding the Fairness in Asbestos Compensation Act of 1999 (S. 758). SBSC is a national nonpartisan small business advocacy organization dedicated to advancing policies and legislation that encourages entrepreneurship, economic opportunity, job-creation and innovation.

Twice since 1997 – in Amchem Products v. Windsor and Ortiz v. Fibreboard Corp. -- the Supreme Court has called for national legislation to address the asbestos litigation quagmire. Moreover Amchem Justice Breyer observed that over 50 percent of all asbestos claims involved pleural plaques which do not affect a person’s breathing in any way. Although tens of millions of Americans have been exposed to asbestos, medical experts have testified before Congress that most will not contract an asbestos-related ailment. Despite this fact, tens of thousands will seek to recover damages this year even though they are not sick. Twenty-five companies have already gone bankrupt or are in reorganization as a result of the massive caseload, leaving defendants with an increasingly tenuous relationship to asbestos holding the bag.

For this reason, the Small Business Survival Committee strongly supports S. 758, the Fairness in Asbestos Compensation Act of 1999. Our membership consists of hard-working men and women who generate jobs in their communities. More than 90 percent of our members have less than 50 employees. Why should they wake up each morning fearing thousands of meritless lawsuits filed against them? Should mom-and-pop hardware stores in the heartland be forced into bankruptcy because they sold a small amount of an asbestos-containing product twenty-five years ago? Is bankruptcy really justice? Already in some jurisdictions automobile distributorships and repair shops, construction contractors, and other small businesses are routinely named in asbestos cases. The handwriting is on the wall for small businesses everywhere. The U.S. legal system should not be abused and manipulated in such a way that allows for the perpetuation and potential deepening of this legal quagmire.

BACKGROUND INFORMATION

SBSC believes there is a better way to resolve these cases – a way in which the true victims of asbestos can receive compensation; the claims of people who are not sick can be deferred; courts can be unburdened and defendant companies can remain solvent long enough to pay individuals who become sick in the future. The members of my organization typically do not have an army of lawyers at the ready, nor do they have the insurance coverage necessary to fend off thousands upon thousands of asbestos lawsuits. Yet they know that the asbestos lawyers will not stop until they can no longer find anyone to sue.

The Committee does not need to take my word for it, however, nor the words of the defendant companies. They need only look to the Supreme Court, where on two occasions, strong support was expressed for the creation of a national asbestos claims facility to solve the asbestos litigation crisis. In 1997’s decision on Amchem v. Windsor, Justice Ginsburg has stated that “the argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.” In the recent Ortiz v. Fibreboard ruling, the justices went so far as to refer to asbestos litigation as an “elephantine mass” which “defies customary judicial administration and calls for national legislation.”

The drain on the court system is a problem in its own right, with 200,000 asbestos cases pending and 50,000 additional claims filed each year. Simply screening out the non-sick claimants would alleviate part of the administrative burden, allowing resources to be used for matters more pressing. The current process affords a great deal of power to asbestos trial attorneys, who reap a windfall by overwhelming the court system. They file hundreds or even thousands of cases in individual state courts and use these caseloads to leverage massive settlements from defendant companies. Instead of encouraging defendant companies to focus settlement dollars on sick claimants, the true victims of asbestos exposure, plaintiffs’ attorneys force defendants to settle thousands of non-sick claims or risk going to trial in mass consolidations in which a company’s survival may be at stake. Using sick claimants as a trap to collect billions of dollars for the non-sick does a great disservice to the true victims and to the system.

After more than 30 years of constant litigation, claims against the former asbestos manufacturers can be considered a mature tort. The question before us today is how to put a system in place to differentiate between who is sick and who is not sick and to make sure that those who are impaired by asbestos-related diseases receive just compensation.

Unless a solution is enacted, I have no doubt that more and more small businesses will become targets. Currently, 60 cents of every dollar spent on asbestos litigation goes toward attorneys fees and transaction costs instead of the victims. Moreover, many victims wait years to receive settlements that have little relation to their specific illness. It is a system that the Supreme Court has emphasized is beyond judicial repair and one that only Congress has the authority to fix.

S. 758 is designed to answer the court's calls. Based on the tenets of the Amchem settlement, S. 758 incorporates medical criteria to determine the claimants who have impairments resulting from asbestos exposure. As a result, this legislation would correct today's most pressing problem relating to asbestos litigation – the high volume non-sick clogging the system. To eliminate pressures to file cases prematurely, S. 758 waives the statute of limitations. Moreover, it outlaws general releases that require people with asbestosis to give up their right to further compensation if they contract cancer in the future.

The decades long history of asbestos litigation has proven that litigating 200,000 cases is not an option. Similarly, creating massive class action settlements is also off the table. The only viable alternative is the creation of a system outside of the courts, a system where victims are screened by objective medical criteria and paid promptly for their specific illnesses.

The Fairness in Asbestos Compensation Act is an effective approach to address this crisis. This bill creates a win-win situation: it is good for asbestos victims, the U.S. court system and American businesses both large and small. I have been working with dozens of associations representing thousands of businesses nationwide to increase the visibility of this crisis. The momentum is on our side and I urge this committee to act expeditiously on S. 758.

Again, thank you for the opportunity to appear before you today in strong support of this measure. I look forward to your questions.