Ex U.S. solicitor general Olson hired to test asbestos trust fund constitutionality

By Ted A. Knutson

Washington, April 26 - Trust funds of several bankrupt asbestos manufacturers including Dresser Industries (Halliburton), Celotex, Fuller-Austin Insulation Inc. and Western MacArthur have retained former U.S. Solicitor General Ted Olson to file suit challenging the constitutionality of a proposed federally run, privately financed asbestos injury trust fund, Steve Kazan, an attorney for several fund advisory committees told Prospect News.

Every existing bankruptcy trust would sue if the legislation were enacted, Kazan predicted.

The Manville Trust would be one of them, the trust's general counsel David Austern said.

Under the proposed Fairness in Asbestos Injury Resolution Act (S. 852), trust accounts set up under the court proceedings of former asbestos manufacturers would be mandated to go into the fund.

But Olson, Austern, Kazan and others are claiming the act would result in an illegal seizure of property under the due process clause of the 14th amendment to the U.S. Constitution.

Olson's and University of Chicago Law Professor David Strauss's charge that the bill has "profound constitutional deficiencies" was a centerpiece of a full-page ad in The Washington Times as the Senate Judiciary Committee was preparing to hold its first public hearings on the bill.

In response to the charges, the bill's author Judiciary Committee chairman Arlen Specter, R.-Pa., said the due process clause is violated only when somebody has been savaged and nobody has been savaged here.

Specter reiterated assurances that the fund's $140 billion would be enough to pay for asbestos injury claims during its 30-year life.

However, Mark A. Peterson, a consultant and expert for Manville and nine other trusts, said between $57 billion and $76 billion of the total would be consumed in interest payments.

"More money will be paid to lenders than asbestos victims (under most financial models)," Peterson said.

Sen. Edward Kennedy, D.-Mass., said in prepared remarks that a real possibility exists the fund could become insolvent and many asbestos manufacturers are likely to challenge their obligation to contribute to the fund.

The American Insurance Association estimates the fund could cost insurers $46 billion, AIA senior vice president and general counsel Craig A. Barrington testified.

Supporting the bill, National Association of Manufacturers president and chief executive officer John M. Engler said a study commissioned by his organization shows the bill could save $85 billion in asbestos injury payments legal and administrative costs and bankruptcy charges.

The report by NERA Consulting also estimates the legislation could increase the market cap of affected companies by $60 billion to $137 billion.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.