Earlier this month, the Senate Judiciary Committee held a hearing on the Fairness in Asbestos Injury Resolution Act (the "FAIR Act"). The stated purpose of the bill is to "create a fair and efficient system to resolve claims of victims for bodily injury caused by asbestos exposure." NAM Executive Vice President Discusses Asbestos Litigation Reform and the FAIR Act

Earlier this month, the Senate Judiciary Committee held a hearing on the Fairness in Asbestos Injury Resolution Act (the "FAIR Act").  The stated purpose of the bill is to "create a fair and efficient system to resolve claims of victims for bodily injury caused by asbestos exposure."  Proponents of the legislation that would create a $140 billion privately financed national trust fund remain hopeful that Congress will pass the asbestos reform legislation before it adjourns for the year.

Recently, National Association of Manufacturers Executive Vice President Michael Baroody joined CFIF Corporate Counsel & Senior Vice President Renee Giachino on "Your Turn – Meeting Nonsense With Common Sense" to discuss the FAIR Act and the economic and legal implications of the bill.  What follows are excerpts from the interview that aired on WEBY 1330 AM, Northwest Florida's Talk Radio.

GIACHINO:  Last month, Senators Arlen Specter and Patrick Leahy introduced a new and improved "Fairness in Asbestos Injury Resolution Act," what is commonly referred to as the FAIR Act.  The Senate Committee on the Judiciary has scheduled a hearing on the FAIR Act for tomorrow.  The FAIR Act has been the subject of discussion previously for us on this program, and I have argued that this legislation is long overdue and that it is a good step toward legal reform in this country.

Joining me today on the program to discuss the FAIR Act specifically, and legal reform more generally, is Michael Baroody, who is the Executive Vice President for the National Association of Manufacturers.  He has a very impressive resume.  What I would most like to point out to the listeners, because you are in Navy country just outside of Pensacola, is that he served for two years in the U.S. Navy.  And, I would also like to note that he is the father of six and the grandfather of thirteen.

Please welcome to "Your Turn" Mr. Michael Baroody.

BAROODY:  Thank you very much.  That was a nice introduction.

GIACHINO:  I bet not a lot of people point out that you are the father of six, but as the third of six, I can appreciate somewhat what it is like to have a lot of children in the home.

Mr. Baroody, could you please begin by telling us a little more about NAM and then give us your web address so that the listeners who are online can go ahead and pull it up?

BAROODY:  The NAM is www.nam.org and the Asbestos Alliance, which is a coalition that we head, has its own website at www.asbestossolution.org.  The NAM as you asked is the nation's oldest and largest industrial broad based trade association with about 13,000 member companies of every size, including some of the largest companies in the world and probably 8,000 small and large companies around the country as well.

The Asbestos Alliance, the coalition that we lead seeking the enactment of the FAIR Act, is a coalition of scores of companies and allied associations that, like us, have long been searching for what you correctly say is long overdue legislative resolution of this scandal of asbestos litigation.

GIACHINO:  In the interest of full disclosure, I do want to note that the organization that I work for, the Center for Individual Freedom, staunchly supports asbestos litigation reform and tort reform.  We are working together with NAM in a group called the American Justice Partnership, which is an organization that brings together leading national and state organizations to coordinate the fight for effective legal reform.

I think we all would be hard pressed not to agree that if a plaintiff has a legitimate injury there should be adequate compensation.  But that is not what we are talking about necessarily when we use the term "legal reform."  How do you define legal reform?

BAROODY:  Well if you look at it just in the context of asbestos litigation, what defines this scandal that has been going on now for three decades – it is actually close to four, and which has bankrupted more than 75 companies, cost tens of thousands of workers their jobs, dried up the retirement savings of tens of thousands of workers as well because of what it does to companies and their equity values, what is behind that scandal and that problem is the fact that hundreds of thousands of cases have been filed.  The Rand Institute is not the only research institute that has found that fully 90% of those cases are filed by people who are not sick.  They can claim some exposure to asbestos, but they cannot claim symptoms of disease.

And yet the dysfunctional legal system that we have in this country has rewarded those people with claims often at the real expense of people who are genuinely sick.  We'd all agree that people who are sick from asbestos exposure deserve compensation.  But the tragedy, and I have met some of these people, is that too often they are unable to sue or can only sue companies that have already been bankrupted by this flood of frivolous claims.  And so, at best, if they get anything they get pennies on the dollar or they die not knowing whether their loved ones will be compensated at all.

GIACHINO:  So what does the FAIR Act propose to do when we talk about asbestos litigation reform?

BAROODY:  The FAIR Act would first of all get asbestos litigation out of the tort system altogether and establish in its place a privately funded, no-fault administrative process with very strong medical criteria to make sure that only people who are sick are compensated.  In addition, it includes very strong anti-fraud provisions to make it basically a felony if anyone files a claim frivolously or fraudulently claiming that they are sick when they are not according to the medical criteria.

The combination of those two would we think make sure that fair compensation goes to people who really deserve it and that no compensation goes to those people who don't deserve it.  It would all, as I said, be privately financed by a combination of insurance companies and defendant companies, a lot of them our members of NAM who have found themselves defendants in asbestos cases.

Again, that same Rand Institute has found that at least 8,000 companies have now been named asbestos defendants; an awful lot of them never had anything to do with asbestos.  That is another way of looking at the scandal of this thing.

GIACHINO:  Alright, I want to offer a point of clarification for the listeners.  Very often we hear the term tort reform used in this debate.  A tort, as many of you know, is the French word for a wrong and its best defined as wrongful conduct by one individual that results in some injury to another.  As we talk today I think we are going to interchange the terms tort reform and legal reform and I just want to throw that out.

You have mentioned a lot of reasons why the average American should care about asbestos reform.  You talked about bankrupt companies, you talked about dried up savings, and it has cost jobs.  Okay, so they care.  What do they do?

BAROODY:  Well in the aftermath of the hearing before the Senate Judiciary Committee -- the Chairman who you mentioned is Senator Specter from Pennsylvania and the ranking Democrat Senator Leahy, and in what is rare these days are joined in a bipartisan effort to get this legislation passed. We hope to get it back to the Senate floor – I will explain in a moment what I mean by back to the Senate floor, this summer.  So in the aftermath of the hearings, if your listeners, and in fact everyone around the country, if they would contact their Senators and urge them to make sure to prevail on the leadership to bring this bill back, it is S.3274, to the Senate floor for due consideration.  There is no substitute for senators hearing from their constituents that there is an expectation that there will be action to finally resolve a problem that has been festering for as I said -- decades in America.

So we really need for senators to hear from their constituents that there is an intense feeling that at long last we need to resolve this problem.

GIACHINO:  I think on our website we have a link so that the listeners can connect with their Senators, Martinez and Nelson here in Florida, and send them a letter.  It is an easy way to reach out and let the senators know how you feel about it.

You mentioned that this is not the first time that Congress has considered asbestos reform legislation and I am aware that several months ago a measure failed by a one vote margin in a Senate procedural vote.  What is different about this version of the FAIR Act?

BAROODY:  First of all, it failed in February, on the 14th of February, it fell by one vote of meeting the sixty vote hurdle that bills now have to surmount routinely in the Senate.  This was on what is called a budget point of order.

What has happened since is numerous changes have been agreed to by Senators Specter and Leahy that we believe serve to strengthen the bill and address some concerns that were raised in equity terms and budget terms that have in fact turned some smaller companies affected by this legislation from opponents of the legislation to proponents, supporters, of the legislation.  One, a company called Foster Wheeler, not a small company – its revenues are more than a billion dollars a year, but it is not a behemoth of a company, it nonetheless will testify in support of the legislation and they will explain that until these changes were made they were opposed to it.  We are hopeful that will communicate to senators who had reservations about the bill, such that we fell one vote short of the required sixty, that this is a stronger, improved bill and that it is now time to move this legislation through the Senate and get it over to the House so that we can get it passed and to the president for signature before this year is over.

Clearly in that legislative process more changes will be made, but that is the way the system works and we would welcome that.

GIACHINO:  Okay, we are talking about the FAIR Act which establishes a privately-funded national trust fund.  Sometimes you hear the word trust fund and it makes some folks' hair stand on end because they look at it as just another big government program.  How do you respond to that?

BAROODY:  That it is not a big government program.  This is entirely privately financed under the terms of the legislation.  As I said, insurance companies and defendant manufacturing companies would all contribute into the trust fund.

There is a concern that some people voice that if it proves not to have sufficient funding to compensate all the people who will deserve it under the law that the next step will be to go to the taxpayer to finance it.  First of all, we are increasingly confident that there will be sufficient funding under the contribution scheme that is contained in the legislation.  And second, the bill is very clear, it expressly provides that if there is insufficient funding, the course is not to go to the U.S. Treasury and expect the taxpayer to bail the fund out, we go back to the tort system.  You can imagine that none of our members of the Asbestos Alliance wish to go back to the tort system but they are willing to assure the Congress that that would be the recourse if the fund runs dry rather than calling on the Treasury and the taxpayer to bail out the fund.

So we are pretty confident that there are redundant guarantees against that problem.

GIACHINO:  Could you please give us a sense of the economic impact that the passage of the FAIR Act would have and the effect it could have on our courts?  I suspect passage of the FAIR Act could have a significant impact on unclogging our courts, am I right on that?

BAROODY:  Oh yes.  The Supreme Court over the last fifteen years has called on the Congress no less than three times to address and resolve this asbestos litigation problem, precisely because it has clogged the courts.  The phrase one of the justices used was the "elephantine mass of cases" that are clogging our courts.  Clearly getting asbestos out of the courts would get rid of a lot of that log jam.

Keeping it in the courts as it is now has cost this economy almost incalculable amounts.  It has bankrupted companies, as I said almost 80 now, it has cost tens of thousands of jobs, dried up retirement savings of lots of people.  If you hold that up to a mirror and imagine a future with the FAIR Act in place, one economic analysis suggested that it would increase economic growth $64 billion per year and over the span of the next 10 years or so, stimulate the creation of an additional 800,000 jobs.

This would promise to be one of the single most positive and immediate economic boons we could get from legislation that is still possible to be enacted in this election year.

GIACHINO:  As I walked out the door today I happened to glance at an e-mail that I just received that stated that the asbestos bill was widened to include 9-11 and hurricane claims.  So what we already have clogging our courts is really just potentially the tip of the iceberg.  Am I right?

BAROODY:  Yes.  And again, the whole thrust of the FAIR Act would be to get this out of the courts.  That go a long way to helping to reduce the pressure on the courts of the clog that we are talking about.

GIACHINO:  So why are the trial lawyers opposed to this legislation?

BAROODY:  Precisely because it gets it out of the courts.  Because it would take it out of the tort system it would dry up a source of what I call venture capital for the trial bar, which they use for a lot of celebrated purposes but not least to develop new business lines.  And they even talk in those terms.  It is not the jurisprudence we learned about in Civic 101.  It is much more, to be kind to them, entrepreneurial.  They talk about a business and an inventory of claims.  They talk about it as if it is a business rather than a judicial proposition.  They are opposed to the establishment of a trust fund because it would dry up that source of a contingency fund.  And in fact the FAIR Act, by establishing an administrative no-fault process, would allow a lot of true victims to issue claims without the use of a lawyer, and where they did need a lawyer or where they picked a lawyer to help them, the lawyer's fees would be capped at 5%.

GIACHINO:  All the more helping us economically, I am sure.

BAROODY:  Indeed.

GIACHINO:  We have a caller on the line, can we take his call?

BAROODY:  Great.

GIACHINO:  Go ahead caller, it's your turn.

CALLER:  Real quick.  You made a statement that there are a lot of people trying to jump on the band wagon that weren't hurt from the asbestos type of injuries.

GIACHINO:  That's right.  There are tens of thousands of bogus lawsuits.

CALLER:  Right and it is clogging our court system. What do you think of loser pays?  That is what I am for – loser pays.  I read about a woman in the paper who was suing for some the hundredth or so time; she had one suit for a billion dollars.  Did you ever read about that?

GIACHINO:  I did read about it.  There's a woman going around the country filing all of these frivolous lawsuits.

CALLER:  That's right, she had been to twelve states.  But if she loses, she walks away.  If she goes to court and loses, well bam she walks away with nothing against her.

GIACHINO:  Meanwhile these companies – and we are up to 80 companies now that have been forced into bankruptcy, and thousands of jobs lost.  Mr. Baroody, what do you think of the loser pays system?

BAROODY:  First of all I would favor it.  That's the so-called English Rule as I understand it.  I would be for it.  It is not engaged in the FAIR Act because as I said if we are able to enact the FAIR Act we would be getting this problem out of the tort system altogether.  But the loser pays and other kinds of legal reforms are devoutly to be wished.  It has been more than the political traffic would thus far bear in this Congress I regret to say, and I think you and your listeners know that, but it would be an innovation that would be a powerful disincentive for any kind of frivolous pleading by anybody, much less a billion dollar claim by one individual.

CALLER:  When I saw that it just took me aback.  I cannot believe that she is jumping from state to state trying to find where she can get the most money.  Plus the fact that she is tying up the courts and then just walks away.

GIACHINO:  And it is happening in the asbestos situation where there are plaintiffs' lawyers who conduct mass screenings trolling for asbestos victims.

BAROODY:  Absolutely.  The scandal is compounded, and one of the reasons why we continue to believe we need a national solution even though it is true and welcomed that there is some progress being made in some individual states, is that unless there is a national solution the trial bar has demonstrated its flexibility.  If Georgia, Mississippi or Ohio puts in place at the state level good asbestos litigation reform laws, medical criteria and the like, then they go to West Virginia.  Or some state senator in Oklahoma stands up and says essentially you all come – we are open for business here.

So we need a national solution.

GIACHINO:  That's all the time we have on this.  Please visit NAM's website at www.nam.org and to learn more about the Asbestos Alliance and how you can support this critical effort to finally get some much-needed legislation and a good step toward legal reform in this country, please visit www.asbestossolution.org

Mr. Baroody thank you very much for your time.  I hope you can come back and join us another time to talk about some of the other popular reforms that are being considered nationally, including the civil liability reforms for junk food and obesity.

BAROODY:  I'd love to do it and would be honored if you had me back.

GIACHINO:  Thank you so much.  That's Michael Baroody, the Executive Vice President with the National Association of Manufacturers.  Learn more about his organization at www.nam.org.  And as I mentioned, my organization supports asbestos litigation reform and you can visit our website at www.cfif.org to learn about this and let your senators know how you feel about it.

June 22, 2006
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