Asbestos Trusts Strike Back, Calling AGs Medicaid Fraud Probe 'Overreach'

04/27/2017 08:24 am ET Updated Apr 27, 2017

Four of the nation’s largest asbestos bankruptcy trusts – the kind that TV ads assure us have “billions of dollars” set aside for asbestos victims – have responded to a Utah lawsuit investigating potential mismanagement, abuse and even potential Medicaid/Medicare fraud from the system organized to compensate people sickened by asbestos.

Defense counsel argues, among other points, that Utah has no jurisdiction over the out-of-state trusts (three in Delaware and one in Pennsylvania) and that the request for millions of documents is also “overbroad” while risking the privacy of claimants who provided medical and other personal information.

Perhaps more interestingly for the nation’s longest-running personal injury litigation, and given ongoing congressional regulatory efforts, is the trusts’ assertion that “…Under the [federal] bankruptcy courts’ orders, the Trusts are responsible for compensating asbestos victims whose claims meet criteria set forth in the Trusts’ governing documents. They remain subject to the bankruptcy courts’ continuing oversight and jurisdiction.” (Emphasis added.)

Viewed from more of a political angle (than, say, a legal angle) that’s a daunting prospect given a Republican congress and White House. (Victims’ attorneys are generally funders of Democrats while the GOP favors tort reforms with the very notable exception of Lindsey Graham as noted by The Wall Street Journal, who likened him to a character from The Godfather.) The trusts’ response also raised eyebrows among some of my attorney friends that the trust response amounts to what one called “an invitation for federal jurisdiction.”

At issue in Utah is a national civil investigative letter backed by more than a dozen other state attorneys general, all from right-leaning states, seeking information on how the trusts do business. In particular, the AGs want to discover if Medicaid and Medicare programs are receiving federally required reimbursements when their patients receive payments.

After the trusts failed to comply with the letter, Utah filed its lawsuit asking the courts to order compliance. The response was filed late last week, according to copies posted online, meeting last Friday’s deadline for response.

In the introduction, the trusts tell the court that the case should be dismissed for several reasons, including “… these demands are intrusive, burdensome, and inappropriate overreaches across state lines and far beyond the Attorney General’s limited authority …”

Forbes’ Daniel Fisher broke the AG-investigation story last month, writing that “… attorneys general from 13 Republican-leaning states including Utah, Michigan, Wisconsin and Kansas sent demand letters to the Armstrong World Industries, Babcock & Wilcox, DII and Owens Corning/Fibreboard bankruptcy trusts on Dec. 12... Utah said they believe ‘abuse of asbestos trusts is occurring’ by plaintiff lawyers who largely oversee the court-approved funds set up to compensate people who claim injury from asbestos.”

Fisher also backgrounded that “… more than 60 manufacturers of asbestos or asbestos-containing products have filed for bankruptcy under the weight of plaintiff lawsuits, paying out $17 billion since 2008, Utah said in its complaint.”

With billions of dollars at stake and that “invitation” for federal involvement in the Trump Era, you have to expect more heat on the asbestos trust issue – an irony, since the whole point of asbestos was once insulation.

See my previous post on this issue for more background.

Sara Corcoran Warner is publisher of the National Courts Monitor website, “Your Daily Ration of Civil Justice Rationing,” an organizer of the Asbestos Double-Victims Workgroup, and a frequent commentator on national legal policy and civil courts issues.

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