On November 7, 2018, Illinois State Senator Jason A. Barickman introduced S.B. (Senate Bill) 3643. This legislation is aimed at creating more transparency in asbestos litigation in the state by stipulating that at the outset of litigation, defendants would be given access to claim forms that plaintiffs have submitted to trust funds that bankrupt companies have established in order to compensate victims of asbestos exposure. Similar legislation has been passed in 15 states and comes after documents uncovered during an asbestos defendant’s 2014 bankruptcy proceeding showed a discrepancy between the exposure allegations alleged in forms submitted to these trusts and exposure testimony in separate civil lawsuits against solvent companies.
S.B. 3643 states that “an absence of transparency with respect to bankruptcy trust claims has resulted in the suppression of evidence in asbestos actions” and that “a federal bankruptcy court found that trust claim filings are being manipulated and information withheld in order to inflate recoveries in asbestos actions.” S.B. 3643 seeks to eliminate the possibility of such contradictory exposure evidence and to prevent asbestos plaintiffs from receiving double recoveries.
Asbestos Bankruptcy Trusts
Individuals suffering from an asbestos-related disease can both (1) file a lawsuit seeking damages from solvent companies that they allege exposed them to asbestos, and (2) file claims against trusts that have been established by companies that have sought bankruptcy protection from asbestos claims. An estimated $60 billion has been set aside in these trusts for those diagnosed with an asbestos-related disease.
To obtain money from these trusts, claimants must execute a form stating that they were exposed to asbestos through products or at premises associated with a given bankrupt entity. The trust then uses a formula to determine the amount of money to which that claimant is entitled. On average, an asbestos plaintiff files claims with 18 trusts.
During a bankruptcy proceeding in which Garlock Sealing Technologies, LLC sought to create such a trust, the court uncovered what it called a “startling pattern of misrepresentation.” A striking percentage of the sworn statements that plaintiffs submitted to the trusts directly contradicted the exposure testimony they provided in their civil lawsuits. As a result, plaintiffs were able to obtain a larger recovery from defendants without diminishing the amount that plaintiffs had already received from the trusts.
Some states also allow defendants to offset a jury verdict with the amount the plaintiff recovered from these trusts. If plaintiffs are not obligated to file claims with the trusts before the civil suit, or plaintiffs fail to disclose the amount they recovered from the trusts before the civil judgment is entered, the defendant will not obtain the full setoff to which it is entitled. Proponents of transparency legislation claim that both scenarios result in plaintiffs' receiving a double recovery for their injuries, which is historically against public policy across all types of litigation.
Illinois S.B. 3643
S.B. 3643, if enacted, would require that within 30 days of filing an asbestos action, a plaintiff:
- provide all parties with a sworn statement indicating that an investigation has been conducted and that all asbestos trust claims that can be made by the plaintiff have been filed; and
- provide all parties with all trust claim materials from all law firms connected to the plaintiff in relation to exposure to asbestos.
Plaintiffs are also obligated to supplement these disclosures within 30 days of receiving additional information related to an asbestos trust claim or of filing any additional claims. S.B. 3643 also grants defendants the right to seek discovery from an asbestos trust regarding a plaintiff’s claim, permits the court to stay the proceeding if all required information has not been disclosed, and entitles defendants to a setoff equal to any amount the plaintiff has or will receive from the trusts.
In 2012, Ohio became the first state to pass asbestos transparency legislation. Other states followed suit: Oklahoma (2013), Wisconsin (2014), Arizona (2015), Texas (2015), West Virginia (2015), Tennessee (2016), Utah (2016), Iowa (2017), Mississippi (2017), North Dakota (2017), South Dakota (2017), Kansas (2018), Michigan (2018), and North Carolina (2018).
Similar legislation was introduced in Missouri in 2018 as House Bill 1645, dubbed the “Asbestos Bankruptcy Transparency Act.” That bill was passed by the Missouri House 96-48 and was voted out with a “do pass” recommendation from the Senate committee, but it was never called for a vote on the Senate floor. The bill will likely be re-filed for consideration during Missouri’s 2019 legislative session.