[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 672 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 672

 To provide a fair and balanced resolution to the problem of multiple 
imposition of punitive damages, and for the reform of the civil justice 
                                system.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

               April 4 (legislative day, March 27), 1995

 Mr. Hatch (for himself, Mr. McConnell, and Mr. Thomas) introduced the 
 following bill; which was read twice and referred to the Committee on 
                             the Judiciary

_______________________________________________________________________

                                 A BILL


 
 To provide a fair and balanced resolution to the problem of multiple 
imposition of punitive damages, and for the reform of the civil justice 
                                system.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Civil Justice Fairness Act of 
1995''.

                    TITLE I--PUNITIVE DAMAGES REFORM

SEC. 101. DEFINITIONS.

    For purposes of this title, the term--
            (1) ``claimant'' means any person who brings a civil action 
        and any person on whose behalf such an action is brought; if 
        such an action is brought through or on behalf of an estate, 
        the term includes the claimant's decedent; if such action is 
        brought through or on behalf of a minor or incompetent, the 
        term includes the claimant's legal guardian;
            (2) ``clear and convincing evidence'' is that measure or 
        degree of proof that will produce in the mind of the trier of 
        fact a firm belief or conviction as to the truth of the 
        allegations sought to be established; the level of proof 
        required to satisfy such standard is more than that required 
        under preponderance of the evidence, but less than that 
        required for proof beyond a reasonable doubt;
            (3) ``harm'' means any legally cognizable wrong or injury 
        for which punitive damages may be imposed;
            (4) ``economic damages'' means objectively verifiable 
        monetary losses including medical expenses, loss of earnings, 
        burial costs, loss of use of property, costs of repair or 
        replacement, costs of obtaining substitute domestic services, 
        loss of employment and loss of business or employment 
        opportunities, to the extent such recovery is allowed under 
        applicable Federal or State law;
            (5) ``nominal damages'' means damages less than or equal to 
        $500;
            (6) ``person'' means any individual, corporation, company, 
        association, firm, partnership, society, joint stock company, 
        or any other entity (including any governmental entity);
            (7) ``punitive damages'' means damages awarded against any 
        person or entity to punish or deter such person or entity, or 
        others, from engaging in similar behavior in the future;
            (8) ``specific findings of fact'' means findings in written 
        form focusing on specific behavior of a defendant; and
            (9) ``State'' means any State of the United States, the 
        District of Columbia, Puerto Rico, the Northern Mariana 
        Islands, the Virgin Islands, Guam, American Samoa, and any 
        other territory or possession of the United States, or any 
        political subdivision thereof.

SEC. 102. MULTIPLE PUNITIVE DAMAGES FAIRNESS.

    (a) Findings.--The Congress finds that--
            (1) multiple or repetitive imposition of punitive damages 
        for harms arising out of a single act or course of conduct may 
        deprive a defendant of all the assets or insurance coverage of 
        the defendant, and may endanger the ability of future claimants 
        to receive compensation for basic out-of-pocket expenses and 
        damages for pain and suffering;
            (2)(A) the detrimental impact of multiple punitive damages 
        exists even in cases that are settled, rather than tried, 
        because the threat of punitive damages being awarded results in 
        a higher settlement than would ordinarily be obtained; and
            (B) to the extent this premium exceeds what would otherwise 
        be a fair and reasonable settlement for compensatory damages, 
        assets that could be available for satisfaction of future 
        compensatory claims are dissipated;
            (3) fundamental unfairness results when anyone is punished 
        repeatedly for what is essentially the same conduct;
            (4) Federal and State appellate and trial judges, and well-
        respected commentators, have expressed concern that multiple 
        imposition of punitive damages may violate constitutionally 
        protected due process rights;
            (5) multiple imposition of punitive damages may be a 
        significant obstacle to comprehensive settlement negotiations 
        in repetitive litigation;
            (6) limiting the imposition of multiple punitive damages 
        awards would facilitate resolution of mass tort claims 
        involving thousands of injured claimants;
            (7) Federal and State trial courts have not provided 
        adequate solutions to problems caused by the multiple 
        imposition of punitive damages because of a concern that such 
        courts lack the power or authority to prohibit subsequent 
        awards in other courts; and
            (8) individual State legislatures can create only a partial 
        remedy to address problems caused by the multiple imposition of 
        punitive damages, because each State lacks the power to control 
        the imposition of punitive damages in other States.
    (b) General Rule.--Except as provided in subsection (c), punitive 
damages shall be prohibited in any civil action in any State or Federal 
court in which such damages are sought against a defendant based on the 
same act or course of conduct for which punitive damages have already 
been sought or awarded against such defendant.
    (c) Circumstances for Award.--If the court determines in a pretrial 
hearing that the claimant will offer new and substantial evidence of 
previously undiscovered, additional wrongful behavior on the part of 
the defendant, other than the injury to the claimant, the court may 
award punitive damages in accordance with subsection (d).
    (d) Limitations on Award.--A court awarding punitive damages 
pursuant to subsection (c) shall--
            (1) make specific findings of fact on the record to support 
        the award;
            (2) reduce the amount of the punitive portion of the damage 
        award by the sum of the amounts of punitive damages previously 
        paid by the defendant in prior actions based on the same act or 
        course of conduct; and
            (3) prohibit disclosure to the jury of the court's 
        determination and action under this subsection.
    (e) Applicability and Preemption.--
            (1) In general.--Except as provided in paragraph (3), this 
        section shall apply to any civil action brought on any theory 
        where punitive damages are sought based on the same act or 
        course of conduct for which punitive damages have already been 
        sought or awarded against the defendant.
            (2) Application to trials.--Except as provided in paragraph 
        (3), this section shall apply to all civil actions in which the 
        trial has not commenced before the effective date of this Act.
            (3) Damages under other federal or state statute.--This 
        section shall not apply to any civil action involving damages 
        awarded under any Federal or State statute that prescribes the 
        precise amount of punitive damages to be awarded.
            (4) Preemption.--This section shall not preempt or 
        supersede any existing Federal or State law limiting or 
        otherwise restricting the recovery for punitive damages to the 
        extent that such law is inconsistent with the provisions of 
        this section.

SEC. 103. UNIFORM STANDARDS FOR AWARD OF PUNITIVE DAMAGES.

    (a) Findings.--The Congress finds that--
            (1) punitive damages are imposed pursuant to vague, 
        subjective, elastic and often retrospective standards of 
        liability, and these standards vary from State to State;
            (2) the magnitude and unpredictability of punitive damage 
        awards in civil actions have increased dramatically over the 
        last 30 years, unreasonably inflating the cost of settling 
        litigation, and discouraging socially useful and productive 
        activity;
            (3) the Supreme Court of the United States has recognized 
        that punitive damages can produce grossly excessive, wholly 
        unreasonably and often arbitrary punishment, and therefore 
        raise serious constitutional due process problems; and
            (4) excessive, arbitrary and unpredictable punitive damage 
        awards disrupt, impair and burden interstate commerce, imposing 
        unreasonable and unjustified costs on consumers, taxpayers, 
        governmental entities, large and small businesses, volunteer 
        organizations, and nonprofit entities.
    (b) General Rule.--
            (1) Limitation on award of punitive damages.--Punitive 
        damages may, to the extent permitted by applicable Federal or 
        State law, be awarded in any civil action in any Federal or 
        State court against a defendant if the claimant establishes by 
        clear and convincing evidence that the harm suffered was the 
        result of conduct that is either--
                    (A) specifically intended to cause harm; or
                    (B) carried out with conscious, flagrant disregard 
                for the rights or safety of other persons.
            (2) Prohibition of punitive damages.--Punitive damages may 
        not be awarded in the absence of an award of compensatory 
        damages exceeding nominal damages.
    (c) Limitation Concerning Certain Drugs and Medical Devices.--
            (1) In general.--Punitive damages shall not be awarded 
        pursuant to this section against a manufacturer or product 
        seller of a drug (as defined in section 201(g)(1) of the 
        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1))) or 
        medical device (as defined in section 201(h) of the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 321(h))) which caused 
        the claimant's harm where--
                    (A) such drug or device was subject to premarket 
                approval by the Food and Drug Administration with 
                respect to the safety of the formulation or performance 
                of the aspect of such drug or device which caused the 
                claimant's harm or the adequacy of the packaging or 
                labeling of such drug or device, and such drug or 
                device was in fact approved by the Food and Drug 
                Administration; or
                    (B) the drug or device is generally recognized as 
                safe and effective pursuant to conditions established 
                by the Food and Drug Administration and applicable 
                regulations, including packaging and labeling 
                regulations.
            (2) Nonapplicability.--The provisions of paragraph (1) 
        shall not apply in any case in which--
                    (A) the defendant, before or after pre-market 
                approval of a drug or device, withheld from or 
                misrepresented to the Food and Drug Administration or 
                any other agency or official of the Federal Government 
                required information that is material and relevant to 
                the performance of such drug or device and is causally 
                related to the harm which the claimant allegedly 
                suffered; or
                    (B) the defendant made an illegal payment to an 
                official of the Food and Drug Administration for the 
                purpose of either securing or maintaining approval of 
                such drug or device.
    (d) Pleading of Punitive Damages.--No complaint or other such 
pleading shall be filed containing a prayer for relief seeking punitive 
damages in any civil action subject to this section. A claimant may, 
however, pursuant to a pretrial motion and after a hearing before the 
court, amend the complaint or other such pleading to include a prayer 
for relief seeking punitive damages. The court shall allow such motion 
to amend if the claimant establishes at the hearing a reasonable 
likelihood of proving facts at trial sufficient to support an award of 
punitive damages. Any such motion to amend shall be made not later than 
30 days after the close of discovery. A prayer for relief added 
pursuant to this subsection shall not be barred by lapse of time under 
any statute prescribing or limiting the time within which an action may 
be brought or right asserted if the time prescribed or limited had not 
expired when the original pleading was filed.
    (e) Bifurcation at Defendant's Request.--
            (1) Separate proceeding.--At the request of the defendant, 
        the trier of fact shall consider in a separate proceeding 
        whether punitive damages are to be awarded and the amount of 
        such award.
            (2) Admissibility of evidence.--If a separate proceeding is 
        requested, evidence relevant only to the claim of punitive 
        damages, as determined by applicable State law, shall be 
        inadmissible in any proceeding to determine whether 
        compensatory damages are to be awarded. Evidence admissible in 
        the separate proceeding for punitive damages may include 
        evidence of the defendant's profits, if any, from its alleged 
        wrongdoing, but shall not include evidence of the defendant's 
        overall wealth.
    (f) Proportional Awards.--The amount of punitive damages that may 
be awarded to a claimant in any civil action subject to this title 
shall not exceed 3 times the amount of damages awarded to the claimant 
for the economic damages, or $250,000, whichever is greater. This 
provision shall be applied by the court and shall not be disclosed to 
the jury.
    (g) Applicability and Preemption.--
            (1) Applicability.--This section shall apply to--
                    (A) any civil action brought in any Federal or 
                State court on any theory where punitive damages are 
                sought; and
                    (B) all civil actions in which the trial has not 
                commenced before the effective date of this Act.
            (2) Preemption.--This section supersedes State law only to 
        the extent that State law applies to an issue covered by this 
        section. Any issue that is not governed by this section shall 
        be governed by applicable State or Federal law.

SEC. 104. EFFECT ON OTHER LAW.

    Nothing in this title shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any law;
            (2) supersede any Federal law;
            (3) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (4) affect the applicability of any provision of chapter 97 
        of title 28, United States Code;
            (5) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation;
            (6) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum; or
            (7) create a cause of action for punitive damages.

              TITLE II--JOINT AND SEVERAL LIABILITY REFORM

SEC. 201. SEVERAL LIABILITY FOR NONECONOMIC LOSS.

    (a) Findings.--The Congress finds that--
            (1) because of the joint and several liability doctrine, 
        municipalities, volunteer groups, nonprofit entities, property 
        owners, and large and small businesses are often brought into 
        litigation despite the fact that their conduct often had little 
        or nothing to do with the accident or transaction giving rise 
        to the lawsuit;
            (2) noneconomic damages are not assessed pursuant to any 
        objective criteria and are therefore impossible to quantify, 
        leading to unpredictable, highly subjective and often excessive 
        awards;
            (3) the imposition of joint and several liability for 
        noneconomic damages frequently results in the assessment of 
        unfair and disproportionate damages against defendants that 
        bear no relationship to their fault or responsibility; and
            (4) the unfair allocation of noneconomic damages under the 
        joint and several liability doctrine disrupts, impairs, and 
        burdens interstate commerce, imposing unreasonable and 
        unjustified costs on consumers, taxpayers, governmental 
        entities, large and small businesses, volunteer organizations, 
        and non-profit entities.
    (b) Definitions.--For purposes of this section, the term--
            (1) ``economic damages'' means objectively verifiable 
        monetary losses including medical expenses, loss of earnings, 
        burial costs, loss of use of property, costs of repair or 
        replacement, costs of obtaining substitute domestic services, 
        loss of employment and loss of business or employment 
        opportunities; and
            (2) ``noneconomic damages'' means subjective, nonmonetary 
        losses including, but not limited to, pain, suffering, 
        inconvenience, mental suffering, emotional distress, loss of 
        society and companionship, loss of consortium, injury to 
        reputation and humiliation.
    (c) In General.--In any civil action for personal injury, wrongful 
death, or based upon principles of comparative fault, the liability of 
each defendant for noneconomic damages shall be several only and shall 
not be joint. Each defendant shall be liable only for the amount of 
noneconomic damages allocated to such defendant in direct proportion to 
such defendant's percentage of responsibility as determined under 
subsection (d). A separate judgment shall be rendered against such 
defendant for that amount.
    (d) Proportion of Responsibility.--For purposes of this section, 
the trier of fact shall determine the proportion of responsibility of 
each person for the claimant's harm whether or not such person is a 
party to the action.
    (e) Applicability and Preemption.--This title shall not preempt or 
supersede any Federal or State law to the extent that such law would 
further limit the application of joint liability to any kind of 
damages.

                   TITLE III--CIVIL PROCEDURAL REFORM

SEC. 301. SANCTIONS FOR ABUSIVE LITIGATION PRACTICES.

    Rule 11 of the Federal Rules of Civil Procedure is amended to read 
as follows:
``Rule 11. Signing of Pleadings, Motions, and Other Papers; 
              Representations to Court; Sanctions
    ``(a) Signature.--Every pleading, written motion, and other paper 
shall be signed by at least one attorney of record in the attorney's 
individual name, or, if the party is not represented by an attorney, 
shall be signed by the party. Each paper shall state the signer's 
address and telephone number, if any. Except when otherwise 
specifically provided by rule or statute, pleadings need not be 
verified or accompanied by affidavit. An unsigned paper shall be 
stricken unless omission of the signature is corrected promptly after 
being called to the attention of the attorney or party.
    ``(b) Representations to Court.--By presenting to the court 
(whether by signing, filing, submitting, or later advocating) a 
pleading, written motion, or other paper, an attorney or unrepresented 
party is certifying that to the best of the person's knowledge, 
information, and belief, formed after an inquiry reasonable under the 
circumstances--
            ``(1) it is not being presented for any improper purpose, 
        such as to harass or to cause unnecessary delay or needless 
        increase in the cost of litigation;
            ``(2) the claims, defenses, and other legal contentions 
        therein are warranted by existing law or by a nonfrivolous 
        argument for the extension, modification, or reversal of 
        existing law or the establishment of new law;
            ``(3) the allegations and other factual contentions have 
        evidentiary support; and
            ``(4) the denials of factual contentions are warranted on 
        the evidence or, if specifically so identified, are reasonably 
        based on a lack of information or belief.
    ``(c) Sanctions.--If, after notice and a reasonable opportunity to 
respond, the court determines that subdivision (b) has been violated, 
the court shall, subject to the conditions stated below, impose an 
appropriate sanction upon the attorneys, law firms, or parties that 
have violated subdivision (b) or are responsible for the violation.
            ``(1) How initiated.--
                    ``(A) By motion.--A motion for sanctions under this 
                rule shall be made separately from other motions or 
                requests and shall describe the specific conduct 
                alleged to violate subdivision (b). It shall be served 
                as provided in rule 5.
                    ``(B) On court's initiative.--On its own 
                initiative, the court may enter an order describing the 
                specific conduct that appears to violate subdivision 
                (b) and directing an attorney, law firm, or party to 
                show cause why it has not violated subdivision (b) with 
                respect thereto.
            ``(2) Nature of sanction; limitations.--A sanction imposed 
        for violation of this rule shall be sufficient to deter 
        repetition of such conduct or comparable conduct by others 
        similarly situated, and to compensate the parties that were 
        injured by such conduct. Subject to the limitations in 
        subparagraphs (A) and (B), the sanction may consist of, or 
        include, directives of a nonmonetary nature, an order to pay a 
        penalty into court, or, if imposed on motion, an order 
        directing payment to the movant of the reasonable attorneys' 
        fees and other expenses incurred as a direct result of the 
        violation.
                    ``(A) Monetary sanctions may not be awarded against 
                a represented party for a violation of subdivision 
                (b)(2).
                    ``(B) Monetary sanctions may not be awarded on the 
                court's initiative unless the court issues its order to 
                show cause before a voluntary dismissal or settlement 
                of the claims made by or against the party which is, or 
                whose attorneys are, to be sanctioned.
            ``(3) Order.--When imposing sanctions, the court shall 
        describe the conduct determined to constitute a violation of 
        this rule and explain the basis for sanctions imposed.
    ``(d) Inapplicability to Discovery.--Subdivisions (a) through (c) 
of this rule do not apply to disclosures and discovery requests, 
responses, objections, and motions that are subject to the provisions 
of rules 26 through 37.
    ``(e) Nonlimitation on Inherent Power of the Court.--Nothing in 
this rule limits the inherent power of the Federal courts to sanction 
misconduct of attorneys or parties appearing before such courts.''.

SEC. 302. TRIAL LAWYER ACCOUNTABILITY.

    (a) Sense of the Congress.--It is the sense of the Congress that 
each State should require, under penalty of law, each attorney admitted 
to practice law in such State to disclose in writing, to any client 
with whom such attorney has entered into a contingency fee agreement--
            (1) the actual services performed for such client in 
        connection with such agreement;
            (2) the precise number of hours actually expended by such 
        attorney in the performance of such services; and
            (3) whether a referral fee was paid to any other person.
    (b) Study and Development of Model Legislation.--The Attorney 
General shall--
            (1) study and evaluate contingent fee awards and their 
        abuses in cases arising in State and Federal court, with 
        particular emphasis on cases in which the resulting fees 
        received by attorneys are grossly disproportionate to the fees 
        such attorneys would command if they offered identical services 
        on an hourly rate competitive with that available in the 
        relevant legal market;
            (2) develop model State legislation--
                    (A) described in subsection (a) of this section; 
                and
                    (B) based on the study conducted under paragraph 
                (1), to curb abuses of contingent fee awards, taking 
                into particular account--
                            (i) the risk that individual clients may 
                        end up in an unduly weak bargaining position 
                        where they, for lack of available funds up 
                        front, are unable to pay an hourly rate and 
                        must enter into a contingent fee agreement if 
                        they are to obtain legal services;
                            (ii) the danger that such clients may 
                        ultimately pay what are effectively flagrantly 
                        excessive hourly rates;
                            (iii) the ways in which requiring attorneys 
                        to disclose to clients the hours expended on a 
                        contingent fee case may improve civil justice, 
                        enhance the recovery received by injured 
                        persons, and eliminate abusive practices by 
                        attorneys who take advantage of vulnerable 
                        clients;
                            (iv) the possibility that similar 
                        beneficial effects may accrue from requiring, 
                        in contingent fee cases, pre-agreement 
                        disclosure of an attorney's best estimate of 
                        the hours that a case will require if it 
                        proceeds to various stages, the likelihood and 
                        amount of an award expected at various stages, 
                        and the attorney's hourly rate for the legal 
                        services required;
                            (v) the further possibility that other 
                        disclosure requirements or restrictions on 
                        contingent fee awards may enhance civil 
                        justice; and
                            (vi) the possibility that any other 
                        inequities in attorney fee payment in 
                        contingent fee cases may appropriately be 
                        addressed through legislation, such as 
                        inequities that might result where an attorney 
                        receives a fee award from a court but still 
                        receives a full contingent fee award such that 
                        the client receives no benefit whatsoever from 
                        court-awarded fees; and
            (3) prepare and disseminate to State authorities the 
        findings made and model legislation developed as a result of 
        the study and evaluation.
    (c) Reporting Requirements.--Not later than the date that is 1 year 
after the effective date of this Act, the Attorney General shall report 
to the Congress--
            (1) the findings of the study and the model legislation 
        required by this section; and
            (2) recommendations based on the findings on the need for 
        and appropriateness of further action by the Federal 
        Government.

SEC. 303. HONESTY IN EVIDENCE.

    (a) Opinion Testimony by Experts.--Rule 702 of the Federal Rules of 
Evidence is amended--
            (1) by inserting ``(a) In General.--'' before ``If'', and
            (2) by adding at the end the following:
    ``(b) Adequate Basis for Opinion.--
            ``(1) Testimony in the form of an opinion by a witness that 
        is based on scientific, technical or medical knowledge shall be 
        inadmissible in evidence unless the court determines that such 
        opinion--
                    ``(A) is based on scientifically valid reasoning;
                    ``(B) is sufficiently reliable so that the 
                probative value of such evidence outweighs the dangers 
                specified in rule 403; and
                    ``(C) the techniques, methods, and theories used to 
                formulate that opinion are generally accepted within 
                the relevant scientific, medical, or technical field.
            ``(2) In determining whether an opinion satisfies 
        conditions in paragraph (1), the court shall consider--
                    ``(A) whether the opinion and any theory on which 
                it is based have been experimentally tested;
                    ``(B) whether the opinion has been published in 
                peer-review literature; and
                    ``(C) whether the theory or techniques supporting 
                the opinion are sufficiently reliable and valid to 
                warrant their use as support for the proffered opinion.
    ``(c) Expertise in the Field.--Testimony in the form of an opinion 
by a witness that is based on scientific, technical, or medical 
knowledge shall be inadmissible in evidence unless the witness's 
knowledge, skill, experience, training, education, or other expertise 
lies in the particular field about which such witness is testifying.
    ``(d) Disqualification.--Testimony by a witness who is qualified as 
described in subsection (a) is inadmissible in evidence if such witness 
is entitled to receive any compensation contingent on the legal 
disposition of any claim with respect to which such testimony is 
offered.''.

SEC. 304. FAIR SHIFTING OF COSTS AND REASONABLE ATTORNEY FEES.

    (a) In General.--Rule 68 of the Federal Rules of Civil Procedure is 
amended to read as follows:
``Rule 68. Offer of judgment or settlement
    ``(a) Offer of Judgment or Settlement.--At any time, any party may 
serve upon an adverse party a written offer to allow judgment to be 
entered against the offering party or to settle a case for the money, 
property, or to such effect as the offer may specify, with costs then 
accrued.
    ``(b) Acceptance or Rejection of Offers.--If within 21 days after 
service of the offer, or such additional time as the court may allow, 
the adverse party serves written notice that the offer is accepted, 
either party may then file the offer and notice of acceptance together 
with proof of service thereof and thereupon the clerk, or the court if 
so required, shall enter judgment. An offer not accepted shall be 
deemed withdrawn and evidence thereof is not admissible except in a 
proceeding to determine costs and reasonable attorney fees.
    ``(c) Determination of Final Judgments.--If the judgment finally 
obtained is not more favorable to the offeree than the offer, then the 
offeree must pay the actual costs and reasonable attorney fees incurred 
after the expiration of the time for accepting the offer, but only to 
the extent necessary to make the offeror whole for actual costs and 
reasonable attorney fees incurred as a consequence of the rejection of 
the offer. When comparing the amount of any offer of settlement to the 
amount of a final judgment actually awarded, any amount of the final 
judgment representing interest subsequent to the date of the offer in 
settlement shall not be considered.
    ``(d) Determination of Costs.--(1) Upon the motion of either party, 
the court shall hold a hearing at which the parties may prove costs and 
reasonable attorney fees, and, upon hearing the evidence, the court 
shall enter an appropriate order or judgment under this section.
    ``(2) Allowable costs under this rule shall include--
            ``(A) filing, motion, and jury fees;
            ``(B) juror food and lodging while the jury is kept 
        together during trial and after the jury retires for 
        deliberation;
            ``(C) taking, videotaping, and transcribing necessary 
        depositions including an original and one copy of those taken 
        by the claimant and one copy of depositions taken by the party 
        against whom costs are allowed, and travel expenses to attend 
        depositions;
            ``(D) service of process by a public officer, registered 
        process server, or other means;
            ``(E) expenses of attachment;
            ``(F) premiums on necessary surety bonds;
            ``(G) ordinary witness fees;
            ``(H) fees of expert witnesses who are not regular 
        employees of any party;
            ``(I) transcripts of court proceedings;
            ``(J) attorney fees, when authorized by contract or law;
            ``(K) court reporters' fees;
            ``(L) models and blowups of exhibits and photocopies of 
        exhibits may be allowed if they were reasonably helpful to aid 
        the trier of fact; and
            ``(M) any other item that is required to be awarded to the 
        prevailing party pursuant to statute as an incident to 
        prevailing in the action at trial or on appeal.
    ``(3) Unless expressly authorized by law, allowable costs under 
this rule shall not include--
            ``(A) investigation expenses in preparing the case for 
        trial;
            ``(B) postage, telephone, facsimile, and photocopying 
        charges, except for exhibits;
            ``(C) costs in investigation of jurors or in preparation 
        for voir dire; and
            ``(D) transcripts of court proceedings not ordered by the 
        court.
    ``(e) Determination of Liability.--When the liability of one party 
to another has been determined by verdict of order or judgment, but the 
amount or extent of the liability remains to be determined by further 
proceedings, any party may make an offer of judgment, which shall have 
the same effect as an offer made before trial, except that a court may 
shorten the period of time an offeree may have to accept an offer, but 
in no case to less than 10 days.
    ``(f) Subsequent Offers.--The fact that an offer is made but not 
accepted does not preclude a subsequent offer. An offeror shall not be 
deprived of the benefits of an offer by a subsequent offer, unless and 
until the offeror fails to accept an offer more favorable than the 
judgment obtained.
    ``(g) Nonmonetary Awards.--If the judgment obtained includes 
nonmonetary relief, a determination that it is more favorable to the 
offeree than was the offer shall be made only when the terms of the 
offer included such nonmonetary relief.
    ``(h) Reduction of Award To Avoid Undue Hardship.--A court may 
reduce an award of costs and reasonable attorney fees by up to 50 
percent of the award if the court finds special circumstances that make 
a full award of attorney fees and costs unjust.
    ``(i) Reasonable Attorney's Fees.--For purposes of this rule, a 
reasonable attorney's fee shall be calculated on the basis of an hourly 
rate which shall not exceed that which is considered acceptable in the 
community in which the attorney practices, considering the attorney's 
qualifications and experience and the complexity of the case.
    ``(j) Applicability.--This rule shall not apply to class and 
derivative actions under rules 23, 23.1, and 23.2.''.
    (b) Application.--The provisions of rule 68 of the Federal Rules of 
Civil Procedure (as amended by subsection (a) of this section) shall 
supersede any statute that--
            (1) provides for the shifting of costs by which a specified 
        party makes payment; and
            (2) does not provide for the shifting of costs by which 
        such party may receive payment.

                 TITLE IV--HEALTH CARE LIABILITY REFORM

SEC. 401. LIMITATION ON NONECONOMIC DAMAGES IN HEALTH CARE LIABILITY 
              ACTIONS.

    (a) Maximum Award of Noneconomic Damages.--
            (1) In general.--In any health care liability action, in 
        addition to actual damages or punitive damages, or both, a 
        claimant may also be awarded noneconomic damages (including 
        damages awarded to compensate injured feelings, such as pain 
        and suffering and emotional distress) in an amount not to 
        exceed the maximum amount described in paragraph (2).
            (2) Maximum amount.--The maximum amount described in this 
        paragraph is $250,000, regardless of--
                    (A) the number of parties against whom the health 
                care liability action is brought; or
                    (B) the number of claims or actions brought with 
                respect to the health care injury.
            (3) No discounting to present value.--An award for future 
        noneconomic damages in a health care liability action shall not 
        be discounted to present value.
            (4) Reduction in jury award.--
                    (A) With respect to a health care liability action 
                heard by a jury, the jury shall not be informed about 
                the limitation on noneconomic damages, but any award 
                for noneconomic damages in excess of $250,000 shall be 
                reduced either before the entry of judgment or by 
                amendment of the judgment after entry.
                    (B)(i) An award of damages for noneconomic losses 
                in excess of $250,000 shall be reduced to $250,000 
                before accounting for any other reduction in damages 
                required by law.
                    (ii) If separate awards of damages for past and 
                future noneconomic damages are rendered and the 
                combined award exceeds $250,000, the award of damages 
                for future noneconomic losses shall be reduced first.
    (b) Applicability.--This section--
            (1) shall apply to any health care liability action brought 
        in any Federal or State court on any theory where noneconomic 
        damages are sought;
            (2) does not create a cause of action for noneconomic 
        damages;
            (3) does not preempt or supersede any Federal or State law 
        to the extent that such law would further limit the award of 
        noneconomic damages; and
            (4) does not preempt any State law enacted before the date 
        of the enactment of this Act that places a cap on the total 
        liability in a health care liability action.

SEC. 402. STATUTE OF LIMITATIONS.

    (a) In General.--Except as provided in subsection (b), no health 
care liability action may be initiated after the expiration of the 2-
year period that begins on the date on which the alleged injury and its 
cause was or should reasonably have been discovered, but in no event 
later than 6 years after the date of the alleged occurrence of the 
injury.
    (b) Exception for Minors.--In the case of an alleged injury 
suffered by a minor who has not attained 6 years of age, no health care 
liability action may be initiated after the expiration of the 2-year 
period that begins on the date on which the alleged injury and its 
cause was or should reasonably have been discovered, but in no event 
later than 6 years after the date of the alleged occurrence of the 
injury and its cause or the date on which the minor attains 12 years of 
age, whichever is later.

SEC. 403. PERIODIC PAYMENT OF FUTURE DAMAGES.

    (a) Negotiated Agreement for Periodic Payment of Future Damages.--
In any health care liability action in which the damages awarded for 
any losses to be incurred after the date on which the decision or 
judgment is entered (hereafter in this section referred to as ``future 
damages'') exceeds $100,000, the court shall provide that the parties 
to the action shall have 60 days to negotiate and consent to an 
agreement to provide for the payment of such damages in a lump sum, 
periodic installment payments, or a combination of both.
    (b) Court Determined Periodic Payment of Future Damages.--If the 
parties to health care liability action described in subsection (a) 
fail to agree on the terms and amount of payments of future damages 
pursuant to such subsection, a defendant may elect to pay the future 
damages on a periodic basis instead of a single lump-sum payment. If 
the defendant elects to make periodic payments, the periods for such 
payments and the amount of such payments shall be determined by the 
court, based upon projections of such future losses and costs. For 
purposes of determining the total amount of future damages, the court 
shall reduce the amounts to be paid to present value for purposes of 
determining the funding obligation of the individual required to make 
such periodic payments.
    (c) Conditions for the Termination of Future Damages Payments.--
            (1) In general.--Except as provided in paragraph (2), 
        periodic payments for future damages shall terminate in the 
        event of the death of the claimant or in the event of the 
        claimant's recovery or return to work.
            (2) Exception for individuals who are owed a duty of 
        support.--The portion of any periodic payment allocable to loss 
        of future earnings shall be paid to any individual to whom the 
        claimant owed a duty of support immediately prior to the 
        claimant's death to the extent such duty of support exists 
        under applicable law at the time of death. Such payments shall 
        terminate at the earlier of the death of the last person to 
        whom a duty of support is owed or the expiration of the payment 
        obligation pursuant to the judgment for periodic payments.

SEC. 404. STATE NO-FAULT DEMONSTRATION PROJECTS.

    (a) Definitions.--For purposes of this section:
            (1) Medical adverse event.--The term ``medical adverse 
        event'' means an injury that is the result of medical 
        management as opposed to a disease process that creates 
        disability lasting at least 1 month after discharge, or that 
        prolongs a hospitalization for more than 1 month, and for which 
        compensation is available under a no-fault medical liability 
        system established under this section.
            (2) No-fault medical liability system.--The terms ``no-
        fault medical liability system'' and ``system'' mean a system 
        established by a State conducting a demonstration project under 
        this section that replaces the common law tort liability system 
        for medical injuries with respect to certain qualified health 
        care organizations and qualified insurers and which meets the 
        requirements of this section.
            (3) Provider.--The term ``provider'' means physician, 
        physician assistant, or other individual furnishing health care 
        services in affiliation with a qualified health care 
        organization.
            (4) Qualified health care organization.--The term 
        ``qualified health care organization'' means a hospital, a 
        hospital system, a managed care network, or other entity 
        determined appropriate by the Secretary that elects in a State 
        conducting a demonstration project under this section to 
        participate in a no-fault medical liability system and meets 
        the requirements of this section.
            (5) Qualified insurer.--The term ``qualified insurer'' 
        means a health care malpractice insurer, including a self-
        insured qualified health care organization, that elects in a 
        State conducting a demonstration project under this section to 
        participate in a no-fault medical liability system and meets 
        the requirements of this section.
    (b) Establishment.--The Secretary of Health and Human Services 
(hereafter in this section referred to as the ``Secretary'') shall 
award grants to 1 or more States to establish demonstration projects 
under which the State establishes a no-fault medical liability system 
in accordance with this section.
    (c) Applications by States.--
            (1) In general.--To be eligible to receive a grant under 
        this section, a State shall prepare and submit to the Secretary 
        an application at such time, in such manner, and containing 
        such information as the Secretary may require, including the 
        following information:
                    (A) Identification of the State agency or agencies 
                that will administer the no-fault medical liability 
                system and be the grant recipient of funds for the 
                State.
                    (B) Identification of each qualified health care 
                organization selected by the State to participate in 
                the system, including--
                            (i) the location of each organization;
                            (ii) the number of patients generally 
                        served by each organization;
                            (iii) the types of patients generally 
                        served by each organization;
                            (iv) an analysis of any characteristics of 
                        each organization that makes the organization 
                        appropriate for participation in the system;
                            (v) whether the organization is self-
                        insured for malpractice liability; and
                            (vi) such other information as the 
                        Secretary determines appropriate.
                    (C) Identification of each qualified insurer 
                selected by the State to participate in the system 
                including--
                            (i) a schedule of the malpractice insurance 
                        premiums generally charged by each insurer 
                        under the common law tort liability system; and
                            (ii) such other information as the 
                        Secretary determines appropriate.
                    (D) A description of the procedure under which 
                qualified health care organizations and insurers elect 
                to participate in the system.
                    (E) A description of the system established by the 
                State to assure compliance with the requirements of 
                this section by each qualified health care organization 
                and insurer.
                    (F) A description of how funds granted to a State 
                will be expended and a description of fiscal control, 
                accounting, and audit procedures to assure the proper 
                disbursement of and accounting for funds received under 
                this section.
                    (G) A description of procedures for the preparation 
                and submission to the State of an annual report by each 
                qualified health care organization and qualified 
                insurer participating in a system that shall include--
                            (i) a description of activities conducted 
                        under the system during the year; and
                            (ii) the extent to which the system 
                        exceeded or failed to meet relevant performance 
                        standards including compensation for and 
                        deterrence of medical adverse events.
            (2) Consideration of applications.--In reviewing all 
        applications received from States desiring to establish 
        demonstration projects under this section, the Secretary shall 
        consider--
                    (A) data regarding medical malpractice litigation 
                patterns in each State;
                    (B) the contributions that any system shall make 
                toward reducing costs associated with health care 
                injuries;
                    (C) diversity among the populations served by the 
                systems;
                    (D) geographic distribution; and
                    (E) such other criteria as the Secretary determines 
                appropriate.
    (d) Waiver.--The Secretary may waive compliance with any 
requirement of this title applicable to health care negligence to 
permit the operation of a demonstration project established under this 
section.
    (e) Duration.--A demonstration project under this section shall be 
conducted for a period of not more than 5 years.
    (f) Evaluation and Reports.--
            (1) By the states.--Each State conducting a demonstration 
        project under this section shall conduct ongoing evaluations of 
        the effectiveness of any no-fault medical liability system 
        established in such State and shall submit an annual report to 
        the Secretary concerning the results of such evaluations at 
        such times and in such manner as the Secretary shall require. 
        The report shall--
                    (A) incorporate information from annual reports 
                submitted to the State by qualified health care 
                organizations and insurers participating in the system;
                    (B) include an analysis of the feasibility and 
                desirability of developing and implementing a no-fault 
                medical liability program; and
                    (C) include a recommendation for legislation on the 
                development and implementation of no-fault medical 
                liability programs.
            (2) By the secretary.--The Secretary shall submit an annual 
        report to the Congress concerning the effectiveness of the 
        demonstration projects conducted under this section. Such 
        report shall analyze the reports received by the Secretary 
        under paragraph (1).
    (g) Limitations on Use of Grants.--
            (1) Administrative expenses.--Not more than 10 percent of 
        the amount of each grant awarded to a State under this section 
        may be used for administrative expenses.
            (2) Waiver of limitation.--The limitation under paragraph 
        (1) may be waived as determined appropriate by the Secretary.
    (h) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.

SEC. 405. DEFINITIONS.

    For purposes of this title:
            (1) Claimant.--The term ``claimant'' means any person who 
        asserts a health care liability claim or who files a health 
        care liability action, including a person who asserts or claims 
        a right to legal or equitable contribution, indemnity or 
        subrogation, arising out of a health care liability claim or 
        action, and any person on whose behalf such a claim is asserted 
        or such an action is brought, whether deceased, incompetent, or 
        a minor.
            (2) Economic damages.--The term ``economic damages'' has 
        the same meaning as defined under section 101(4).
            (3) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought in a Federal or 
        State court, against a health care provider, an entity which is 
        obligated to provide or pay for health benefits under any 
        health plan (including any person or entity acting under a 
        contract or arrangement to provide or administer any health 
        benefit), or the manufacturer, distributor, supplier, marketer, 
        promoter, or seller of a medical product, in which the claimant 
        alleges a claim (including third party claims, cross claims, 
        counter claims, or distribution claims) based upon the 
        provision of (or the failure to provide or pay for) health care 
        services or the use of a medical product, regardless of the 
        theory of liability on which the claim is based, or the number 
        of plaintiffs, or defendants or causes of action.

       TITLE V--CONTROL OF ABUSIVE PRISONER LITIGATION PRACTICES

SEC. 501. REFORM OF IN FORMA PAUPERIS DETERMINATIONS.

    (a) Partial Payment of Fees.--Section 1915(a) of title 28, United 
States Code, is amended in the first sentence--
            (1) by inserting ``or with payment of a partial fee or with 
        payment of the total fees and costs in installment payments,'' 
        after ``security therefor,''; and
            (2) by inserting ``the full amount of'' after ``unable to 
        pay''.
    (b) Prisoner's Statement of Assets.--Section 1915 of title 28, 
United States Code, is amended by adding at the end the following:
    ``(f) If a prisoner in a correctional institution files an 
affidavit in accordance with subsection (a), such prisoner shall 
include in the affidavit a statement of all assets the prisoner 
possesses. The court shall make inquiry of the correctional institution 
in which the prisoner is incarcerated for information available to such 
institution relating to the extent of the prisoner's assets. The court 
shall require full or partial payment of filing fees according to the 
prisoner's ability to pay.''.

SEC. 502. IMPROVING COURTS' ABILITIES TO DISMISS NONMERITORIOUS IN 
              FORMA PAUPERIS CLAIMS.

    Section 1915(d) of title 28, United States Code, is amended--
            (1) by striking ``and may'' and inserting ``at any time and 
        shall''; and
            (2) by inserting ``, or fails to state a claim on which 
        relief can be granted, or the claim is insubstantial in that 
        the plaintiff suffered no injury or an insubstantial injury, 
        even if partial filing fees have been imposed by the court'' 
        before the period.

SEC. 503. EXHAUSTION OF ADMINISTRATIVE REMEDIES IN PRISONER LITIGATION.

    (a) Exhaustion Requirement.--Section 7(a) of the Civil Rights of 
Institutionalized Persons Act (42 U.S.C. 1997e) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``in any action brought'' and 
                inserting ``no action shall be brought'';
                    (B) by striking ``the court shall'' and all that 
                follows through ``require exhaustion of'' and insert 
                ``until''; and
                    (C) by inserting ``are exhausted'' after 
                ``available''; and
            (2) in paragraph (2) by inserting ``or are otherwise fair 
        and effective'' before the period at the end.
    (b) Modification of Required Minimum Standards.--Section 7(b)(2) of 
the Civil Rights of Institutionalized Persons Act (42 U.S.C. 
1997e(b)(2)) is amended--
            (1) by striking subparagraph (A); and
            (2) by redesignating subparagraphs (B) through (E) as 
        subparagraphs (A) through (D), respectively.
    (c) Review and Certification Procedure Changes.--Section 7(c) of 
the Civil Rights of Institutionalized Persons Act (42 U.S.C. 1997e(c)) 
is amended--
            (1) in paragraph (1), by inserting ``or are otherwise fair 
        and effective'' before the period at the end; and
            (2) in paragraph (2), by inserting ``or is no longer fair 
        and effective'' before the period at the end.

                   TITLE VI--MISCELLANEOUS PROVISIONS

SEC. 601. FEDERAL CAUSE OF ACTION PRECLUDED.

    This Act shall not provide a basis for Federal court jurisdiction 
pursuant to section 1331 or 1337 of title 28, United States Code.

SEC. 602. EFFECTIVE DATE.

    Except as otherwise provided in this Act, this Act shall take 
effect 30 days after the date of its enactment and shall apply to all 
civil actions commenced on or after such date, including any action in 
which the harm or the conduct which caused the harm occurred before the 
effective date of this Act.
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