Short title

This Act may be cited as the

Small Business Liability Reform Act of 2007

Findings

Congress finds that— (1)the defects in the United States civil justice system have a direct and undesirable effect on interstate commerce by decreasing the availability of goods and services in commerce; (2)the spiraling costs of litigation and the magnitude and unpredictability of punitive damage awards and noneconomic damage awards have continued unabated for at least the past 30 years; (3)the Supreme Court of the United States has recognized that a punitive damage award can be unconstitutional if the award is grossly excessive in relation to the legitimate interest of the government in the punishment and deterrence of unlawful conduct; (4)just as punitive damage awards can be grossly excessive, so can it be grossly excessive in some circumstances for a party to be held responsible under the doctrine of joint and several liability for damages that party did not cause; (5)as a result of joint and several liability, entities including small businesses are often brought into litigation despite the fact that their conduct may have little or nothing to do with the accident or transaction giving rise to the lawsuit, and may therefore face increased and unjust costs due to the possibility or result of unfair and disproportionate damage awards; (6)due to high liability costs and unwarranted litigation costs, small businesses face higher costs in purchasing insurance through interstate insurance markets to cover their activities; and (7)legislation to address these concerns is an appropriate exercise of the powers of Congress under clauses 3, 9, and 18 of section 8 of article I of the Constitution of the United States, and the 14th amendment to the Constitution of the United States.

Definitions

In this Act: (1)

Crime of violence

The term crime of violence has the same meaning as in section 16 of title 18, United States Code. (2)

Drug

The term drug means any controlled substance (as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802)) that was not legally prescribed for use by the defendant or that was taken by the defendant other than in accordance with the terms of a lawfully issued prescription. (3)

Economic loss

The term economic loss means any pecuniary loss resulting from harm (including the loss of earnings or other benefits related to employment, medical expense loss, replacement services loss, loss due to death, burial costs, and loss of business or employment opportunities) to the extent recovery for such loss is allowed under applicable State law. (4)

Harm

The term harm means any physical injury, illness, disease, or death or damage to property. (5)

International terrorism

The term international terrorism has the same meaning as in section 2331 of title 18, United States Code. (6)

Noneconomic loss

The term noneconomic loss means loss for physical or emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), injury to reputation, or any other nonpecuniary loss of any kind or nature. (7)

Person

The term person means any individual, corporation, company, association, firm, partnership, society, joint stock company, or any other entity (including any governmental entity). (8)

Punitive damages

The term punitive damages means damages awarded against any person or entity to punish or deter such person, entity, or others from engaging in similar behavior in the future. Such term does not include any civil penalties, fines, or treble damages that are assessed or enforced by an agency of State or Federal government pursuant to a State or Federal statute. (9)

Small business

(A)

In general

The term small business means any unincorporated business, or any partnership, corporation, association, unit of local government, or organization that has fewer than 50 full-time employees as determined on the date the civil action involving the small business is filed. (B)

Calculation of number of employees

For purposes of subparagraph (A), the number of employees of a subsidiary of a wholly owned corporation includes the employees of— (i)a parent corporation; and (ii)any other subsidiary corporation of that parent corporation. (10)

State

The term State means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, any other territory or possession of the United States, or any political subdivision of any such State, commonwealth, territory, or possession.

Limitation on punitive damages for small businesses

Except as provided in section 6, in any civil action against a small business, punitive damages may, to the extent permitted by applicable Federal or State law, be awarded against the small business only if the claimant establishes by clear and convincing evidence that conduct carried out by that defendant with a conscious, flagrant indifference to the rights or safety of others was the proximate cause of the harm that is the subject of the action.

Limitation on joint and several liability for noneconomic loss for small businesses

(a)

General Rule

Except as provided in section 6, in any civil action against a small business, the liability of each defendant that is a small business, or the agent of a small business, for noneconomic loss shall be determined in accordance with subsection (b). (b)

Amount of Liability

(1)

In general

In any civil action described in subsection (a)— (A)each defendant described in that subsection shall be liable only for the amount of noneconomic loss allocated to that defendant in direct proportion to the percentage of responsibility of that defendant (determined in accordance with paragraph (2)) for the harm to the claimant with respect to which that defendant is liable; and (B)the court shall render a separate judgment against each defendant described in that subsection in an amount determined under subparagraph (A). (2)

Percentage of responsibility

For purposes of determining the amount of noneconomic loss allocated to a defendant under this section, the trier of fact shall determine the percentage of responsibility of each person responsible for the harm to the claimant, regardless of whether or not the person is a party to the action.

Exceptions to limitations on liability

The limitations on liability under sections 4 and 5 do not apply— (1)to any defendant whose misconduct— (A)constitutes— (i)a crime of violence; or (ii)an act of international terrorism; (B)results in liability for damages relating to the injury to, destruction of, loss of, or loss of use of, natural resources described in— (i)section 1002(b)(2)(A) of the Oil Pollution Act of 1990 (33 U.S.C. 2702(b)(2)(A)); or (ii)section 107(a)(4)(C) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9607(a)(4)(C)); (C)involves— (i)a sexual offense, as defined by applicable State law; or (ii)a violation of a Federal or State civil rights law; (D)occurred at the time the defendant was under the influence (as determined under applicable State law) of intoxicating alcohol or a drug, and the fact that the defendant was under the influence was the cause of any harm alleged by the plaintiff in the subject action; or (2)to any cause of action which is brought under the provisions of title 31, United States Code, relating to false claims (31 U.S.C. 3729–3733) or to any other cause of action brought by the United States relating to fraud or false statements.

Preemption and election of State nonapplicability

(a)

Preemption

Subject to subsection (b), this title preempts the laws of any State to the extent that State laws are inconsistent with this title. (b)

Election of State Regarding Nonapplicability

This title does not apply to any action in a State court against a small business in which all parties are citizens of the State, if the State enacts a statute— (1)citing the authority of this subsection; (2)declaring the election of such State that this title does not apply as of a date certain to such actions in the State; and (3)containing no other provision.

Effective date

This Act shall take effect with respect to any civil action commenced after the date of the enactment of this Act without regard to whether the harm that is the subject of the action occurred before such date.