The federal Bankruptcy Code allows companies in bankruptcy proceedings to establish asbestos bankruptcy trusts, in which assets are set aside for the benefit of future claimants whose specific identity is unknown at the time of the bankruptcy. So-called “double dipping” can occur when a plaintiff seeks recovery from an asbestos bankruptcy trust without disclosing that recovery in litigation against other defendants.  Recent legislative amendments in Michigan will make it more difficult for individuals to engage in double dipping.

On February 8, 2018, the Michigan State Legislature passed House Bill 5456, which amended the Revised Judicature Act by adding the Asbestos Bankruptcy Trust Claims Transparency Act (the “Transparency Act”).  Currently, a plaintiff seeking compensation for asbestos exposure may seek redress in two ways: by filing a complaint in court, and by filing a claim against an asbestos bankruptcy trust.  To date, there are approximately 60 asbestos bankruptcy trusts in the United States with assets approaching $25 billion, which have been established for the sole purpose of paying asbestos-related personal injury claims.  Although the Transparency Act does not eliminate a plaintiff’s ability to seek compensation from both the trusts rand litigation, it imposes disclosure requirements to prevent a plaintiff from “double-dipping.”  Thus, under the Transparency Act, any compensation received from an asbestos trust will be credited against any judgment in the plaintiff’s favor.

Pursuant to the Transparency Act, a plaintiff in an asbestos action must, within 30 days after filing an action, provide a signed statement, under penalty of perjury, attesting that any and all potential asbestos trust claims that could be filed, have been filed.  In addition, a plaintiff must provide—to all parties—all trust claim materials,[1] including those that relate to conditions other than those that are the basis for the asbestos action.  Finally, if the plaintiff’s asbestos trust claim is based on secondary exposure through another individual, he or she must submit all trust claim materials submitted by the other individual.

The Transparency Act affirmatively requires a plaintiff to provide up-to-date trust claim materials, and it also provides defendants with tools to deter a plaintiff from failing to comply with her disclosure obligations.  A defendant in an asbestos action now has the ability to request a 60-day stay, if the defendant identifies an asbestos trust claim that a plaintiff has failed to disclose to the parties, and the defendant believes the claim should have been identified.  After a motion to stay the matter has been filed, the burden to lift the stay shifts to the plaintiff, who may respond in one of three ways: file the asbestos trust claim; file a response stating that there is insufficient evidence for the plaintiff to file the asbestos trust claim; or request a determination from the court that the costs to file the asbestos trust claim would outweigh the expected recovery.

The Transparency Act also provides safeguards for those scenarios in which a plaintiff first obtains a judgment in an asbestos action and then files an asbestos trust claim that was already in existence at the time of the judgment.  In that scenario, defendants are permitted to file a motion to re-open the case and alter the judgment to reflect any asbestos trust payments obtained by the plaintiff.

Unsurprisingly, attorneys who represent clients with mesothelioma and other asbestos-related cancers are vehemently opposed to this legislation.  One such attorney, Jay Bedortha, stated, “This bill allows the defendants to control whether or not our clients, who are dying of cancer, are going to have a trial date during their lifetime, or whether the trial date has to wait until after they’ve passed away.”[2]  By contrast, proponents of the legislation laud the transparency created between solvent defendants and bankruptcy trusts.

Michigan is not the only state to enact this kind of law.  Since 2011, the following states have enacted similar legislation aimed at preventing plaintiffs from double-dipping when making asbestos claims: Ohio, Oklahoma, Wisconsin, Texas, Arizona, Tennessee, West Virginia, Utah, South Dakota, North Dakota, Iowa, and Mississippi.  In addition, this trend is not limited to state legislation, and a bill has proceeded through one house of Congress.  On March 9, 2017, the United States House of Representatives passed House Resolution 985, which includes the Furthering Asbestos Claim Transparency Act (FACT).  In short, FACT would amend the federal bankruptcy code to require asbestos liability trusts to disclose information about plaintiffs’ demands and payments from the trusts.  As of the date of this writing, House Resolution 985 is still awaiting a hearing in the Senate Judiciary Committee.



[1] Trust claims materials are defined in the Act as “a final executed proof of claim and all other documents and information related to a claim against an asbestos trust, including claims forms and supplementary materials, affidavits, depositions and trial testimony, work history, and medical and health records, all documents that reflect the status of a claim against an asbestos trust, and, if the trust claim has been settled, all documents that related to the settlement of the trust claim.”  H.R. 5456 § 3011(F).

[2] Sarah Cwiek, Critics Say Bill Would “Delay and Deny” Justice for Asbestos Cancer Victims, Mich. Radio (Feb. 12, 2019)