[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
                    THE RENTAL FAIRNESS ACT OF 1999

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                    FINANCE AND HAZARDOUS MATERIALS

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

                               H.R. 1954

                               __________

                            OCTOBER 20, 1999

                               __________

                           Serial No. 106-78

                               __________

            Printed for the use of the Committee on Commerce


                                


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 60-357CC                   WASHINGTON : 1999
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                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

            Subcommittee on Finance and Hazardous Materials

                    MICHAEL G. OXLEY, Ohio, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     EDOLPHUS TOWNS, New York
  Vice Chairman                      PETER DEUTSCH, Florida
PAUL E. GILLMOR, Ohio                BART STUPAK, Michigan
JAMES C. GREENWOOD, Pennsylvania     ELIOT L. ENGEL, New York
CHRISTOPHER COX, California          DIANA DeGETTE, Colorado
STEVE LARGENT, Oklahoma              THOMAS M. BARRETT, Wisconsin
BRIAN P. BILBRAY, California         BILL LUTHER, Minnesota
GREG GANSKE, Iowa                    LOIS CAPPS, California
RICK LAZIO, New York                 EDWARD J. MARKEY, Massachusetts
JOHN SHIMKUS, Illinois               RALPH M. HALL, Texas
HEATHER WILSON, New Mexico           FRANK PALLONE, Jr., New Jersey
JOHN B. SHADEGG, Arizona             BOBBY L. RUSH, Illinois
VITO FOSSELLA, New York              JOHN D. DINGELL, Michigan,
ROY BLUNT, Missouri                    (Ex Officio)
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                  (ii)


                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Faulkner, Sharon, Area Manager, Premier Car Rental 
      Corporation................................................     6
    Middleton, Richard H., Jr., President, Association of Trial 
      Lawyers of America.........................................    15
    Wagner, Raymond T., Jr., Vice President, Enterprise Rent-A-
      Car Corporation............................................    10

                                 (iii)


                    THE RENTAL FAIRNESS ACT OF 1999

                              ----------                              


                      WEDNESDAY, OCTOBER 20, 1999

                  House of Representatives,
                             Committee on Commerce,
           Subcommittee on Finance and Hazardous Materials,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2322, Rayburn House Office Building, Hon. Michael G. Oxley 
(chairman) presiding.
    Members present: Representatives Oxley, Cox, Largent, 
Shimkus, Wilson, Shadegg, Towns, Deutsch, Stupak, and Luther.
    Also present: Representative Bryant.
    Staff present: Robert Gordon, majority counsel; Robert 
Simison, legislative clerk; and Bruce Gwinn, minority 
professional staff member.
    Mr. Oxley. The subcommittee will come to order. I would 
like to thank our panel of witnesses for joining us today to 
discuss reforming vicarious liability laws. We are fortunate to 
have before us Ms. Sharon Faulkner, who owned and operated an 
independent car rental company in upstate New York for 17 
years. Ms. Faulkner will also tell us firsthand how vicarious 
liability impacted her small business.
    Mr. Raymond Wagner gives us a triple perspective. He is not 
only the vice president of Enterprise, but a municipal circuit 
court judge and adjunct law professor as well.
    Mr. Stewart, the former president of the Association of 
Trial Lawyers of America, got stuck in bad weather in Florida, 
so he is being replaced by ATLA's current president Mr. Richard 
Middleton.
    Thank you all for joining us today.
    The legislation before us today H.R. 1954, introduced by 
Mr. Bryant, would accomplish two simple things. First, it 
creates a legal presumption that car rental employees are not 
required to obtain State insurance licenses when providing 
short-term coverage in connection with a vehicle. Class action 
lawsuits have been threatened in several States which do not 
have express laws governing this issue. The provision of H.R. 
1954 only applies where a State has not acted on the issue and 
only lasts for 3 years as a sort of grace period to encourage 
each side to work toward resolving the issue.
    I would note that this subtitle was adopted by unanimous 
consent in the ongoing conference on financial services reform.
    Second, the bill states that no person engaged in the 
business of renting or leasing a motor vehicle shall be liable 
to a claimant for the tortious act of another solely by reason 
of being an owner of such motor vehicle. In other words, if 
Mrs. Faulkner rents somebody a car, and they go off and crash 
into somebody, this bill says that the person who is at fault 
and caused the car crash should be liable for the damages, not 
Mrs. Faulkner. It seems to make sense to me, and I went to law 
school.
    This sounds like a simple concept. In fact, 44 States have 
rejected vicarious liability as unfair and unjust. 
Unfortunately, if Mr. Wagner rents a car to a Red Sox fan in 
Massachusetts, for example Mr. Markey, which has rejected 
vicarious liability, and the driver gets so upset about the 
Sox's latest playoff loss that he hits a driver from New York, 
inadvertently of course, then the courts may end up applying 
unlimited liability under New York law for all damages against 
Mr. Wagner even though he was in no way at fault for the 
accident, did not rent a car in New York.
    I don't think we want to force car rental companies to ask 
prospective renters whether or not they are Red Sox fans and if 
they plan on attending any baseball games in New York. All this 
subtitle does is to say that the party at fault should be 
responsible for the damages. If you don't do anything wrong, 
you shouldn't be forced to pay for the wrongdoing of others. 
This bill does not in any way preempt State insurance laws or 
the ability of the States to impose minimum responsibility 
requirements on rental companies.
    It also does not in any way limit the liability if the 
agency is in any way or in any respect negligent. For example, 
if Enterprise failed to maintain a car or rented a car to an 
obviously drunk individual, then they would still be liable for 
the resulting harm, but this bill does establish a simple rule 
of fairness. Liability should be based on fault. If we continue 
to let the trial lawyers go after innocent small business 
owners like Mrs. Faulkner, we will end up with less 
competition, higher prices, and only a few megacompanies left 
who can afford the insurance premiums and legal cost of the 
constant lawsuits.
    Last term I was proud when this committee enacted the 
biomaterials bill on a bipartisan basis, protecting medical 
implant suppliers from excessive and frivolous litigation. We 
said that a company shouldn't be dragged into lawsuits merely 
for supplying component parts. Previous term we sent to the 
President a bipartisan product liability bill which contained a 
much broader vicarious liability repeal. This bill is another 
small step forward toward fairness and sanity in our legal 
system.
    I am pleased to cosponsor the reform legislation by our 
good friend from Tennessee Mr. Bryant. I look forward to 
hearing further thoughts on this legislation from our panel of 
witnesses.
    Let me now yield to the gentleman from Minnesota for an 
opening statement should he so desire.
    Mr. Luther. Thank you, Mr. Chairman. I look forward to the 
testimony. Obviously there are reasons why these vicarious 
liability--why vicarious liability laws are in place in this 
country, and I am looking forward to hearing testimony on the 
issue of why we should have a Federal standard here. In other 
words, as I understand it, the State laws, there are a variety 
of State laws on this issue. We generally allow State laws to 
control in this area. So I will look forward to hearing the 
testimony on the issue of why we should be passing Federal 
legislation on this particular issue.
    I know that, for example, in Minnesota, the State that I 
come from, we do have a law that affects this particular 
subject in that State, and generally speaking, I think this 
comes within the jurisdiction of State law, what we generally 
view here as coming within the jurisdiction of State law.
    Also, I will be interested in hearing testimony on why we 
should single out this particular industry compared to all of 
the other areas of law where there is vicarious liability and 
where the burden and responsibility for that is borne by the 
business community and by others. And so I appreciate, very 
much appreciate, the hearing and looking forward to hearing the 
testimony on some of those key issues. Thank you.
    Mr. Oxley. I thank the gentleman. Now I recognize the 
gentleman from Tennessee, the aforementioned gentleman from 
Tennessee, who is a sponsor of the bill and not technically a 
member of the subcommittee, but a member of the full committee. 
We are proud to have him with us this morning, and I now 
recognize him for an opening statement.
    Mr. Bryant. Thank you, Mr. Chairman. I do appreciate your 
holding this hearing today. I want to thank you for allowing me 
to participate. From the beginning of my service in the House 
in 1995, I have been a strong proponent of fair and reasonable 
tort reform. Having participated in this type of debate for 
nearly 6 years, I am well aware of the arguments from those who 
might disagree with me on the need for broad legal reform. The 
bill I have introduced and which we are discussing today, 
however, is a common-sense piece of legislation which I think 
both sides of the legal reform debate should be able to support 
and hope will support.
    Currently companies that rent or lease motor vehicles such 
as car and truck rental firms are subject in five States and 
the District of Columbia to unlimited liability for tortious 
acts of their renters and lessees even if the rental car 
company is not negligent and there is no defect in the motor 
vehicle. In these select States a rental company will be held 
vicariously liable for the injuries and damages caused by the 
negligence of its customers simply because the rental company 
owns the motor vehicle and has given permission of its use by 
the customer.
    With your indulgence, Mr. Chairman, I would like to relate 
to members of the subcommittee some of the more outrageous 
examples of how unfair vicarious liability can be. Budget 
Rental Car rented a vehicle to a woman in New York. The woman 
allowed her son, an unauthorized driver under the rental 
agreement, to drive the vehicle even though he had a suspended 
New York driver's license. The son lost control of the car. His 
mother, who was a passenger at the time of the accident, 
suffered injuries. The mother sued her son for negligence, and 
the jury found Budget vicariously liable for the son's 
negligence under New York State law. The jury returned a 
verdict of $450,000 against Budget.
    In another example four British sailors rented a car from 
Alamo in Florida. The driver fell asleep at the wheel. The car 
ended up in a canal, and only one passenger survived. Alamo was 
found vicariously liable for the deaths and injuries solely to 
the fact that it owned the vehicle. No negligence for the 
accident was attributed to Alamo. Alamo was ordered by a jury 
to pay plaintiffs $7.7 million.
    Mr. Chairman, there are many other examples similar to this 
where the rental company is held liable even though it had not 
been negligent in any way and the vehicle was operated 
perfectly or the vehicle operated perfectly. My legislation 
would preempt the laws of these States which impose unlimited 
vicarious liability on companies that rent or lease motor 
vehicles.
    Again, this bill is a common-sense, targeted solution. This 
bill would not exempt rental companies from liability if the 
company is negligent. It would not exempt the company from 
minimum financial responsibility laws for vehicle owners in 
each State. For example, if a car rental company does not 
maintain a car properly, and the brakes on the car fail, then 
the rental car company would be liable for its negligence. This 
bill would also not foreclose other avenues of tort liability 
for third parties injured by the customers of rental companies.
    Mr. Chairman, the vicarious liability system acts as a 
hidden tax on all rental customers nationwide. Rates go up, 
companies refuse to do business in vicarious jurisdictions, and 
the competition is stifled. It is time for the Congress to take 
action to institute reform in this area of the law. I look 
forward to working with you and other members of this 
subcommittee to move this legislation, and, again, I thank you 
for giving this issue the hearing it deserves and for allowing 
me to participate. Thank you.
    Mr. Oxley. The gentleman's time has expired.
    The gentleman from Florida, Mr. Deutsch.
    Mr. Deutsch. No, thank you.
    Mr. Oxley. How about the gentleman from the Upper 
Peninsula? Does he have an opening statement?
    Mr. Stupak. Yes, Mr. Chairman. This legislation would 
preempt current laws in five States. While I understand the 
reason why the rental car industry wants to change these laws, 
I believe we are in the wrong forum here. Tort law has long 
been the province of State legislatures. The State legislatures 
in Connecticut, District of Columbia, Iowa, Maine, New York, 
and Rhode Island have decided that rental car companies should 
be vicariously liable in the case of an accident. Now, my 
friend from the other side says this is a hidden tax, but we 
don't serve in those State legislatures. I don't know why they 
made those choices, but I do know the State capitals are the 
place where the decision should be made and not here in 
Washington, DC, and if those States and residents feel it is a 
tax, then that is their responsibility and not ours. I believe 
if the rental car companies feel the residents in these States 
pay more for auto rentals because of vicarious liability, then 
they should go there and try to convince those States to elect 
representatives that will change the laws.
    Proponents of the bill argue that rental cars are products 
that exist in interstate commerce and therefore justify uniform 
liability standards, but the simple fact is nearly all items 
involved in lawsuits travel in interstate commerce. In my view, 
rental cars should not be held to a different standard than any 
other product.
    I point out to my fellow Republican colleagues that support 
of Federalizing the tort laws in these States is wholly 
inconsistent with the majority party's stated desire to return 
the power to the States. This bill will remove these decisions 
from the State legislatures and bring them to Capitol Hill. 
Forty-five States, all the territories have addressed this 
issue. I don't think we should come here for five States.
    Mr. Chairman, I understand why the rental car companies are 
lobbying for this bill. I don't fault them in doing so. 
However, I disagree that we should be in the business--we 
should not be in the business of preempting State tort law. 
Thanks, Mr. Chairman.
    Mr. Oxley. I thank the gentleman.
    The gentleman from Oklahoma Mr. Largent.
    Mr. Largent. Thank you, Mr. Chairman.
    We have all heard of oxymorons like jumbo shrimp and hot 
water heater and why we park on a driveway and drive on a 
parkway. Today we are going to learn about a legal oxymoron, 
which is called vicarious liability. I am pleased to offer my 
strong support for H.R. 1954, the Rental Fairness Act of 1999. 
I am an original cosponsor of this important legislation. I 
commend you, Mr. Chairman, for your leadership in calling this 
hearing.
    I am supportive of the underlying theme of H.R. 1954. A 
person should not be held liable for accidents which they were 
not at fault. This theme is a fundamental construct of our 
Nation's liability system. This construct must be upheld if 
dozens are to have faith in the fairness of our judicial 
system. Holding motor vehicle rental companies liable for the 
negligence of their customers when there is nothing they could 
do to prevent this negligence is unfair. So-called vicarious 
liability laws for motor vehicle rental companies, although 
present in a small minority of jurisdictions, impact on car 
rental customers across the Nation, including the citizens of 
my State of Oklahoma. These laws drive up rental rates, reduce 
competition and act as a barrier to interstate commerce.
    Vicarious liability reform legislation was approved by this 
committee and the full House in 1995. These reforms are long 
overdue, and I look forward to working with the chairman of 
this subcommittee and the chairman of the full committee to 
move this legislation this year. Thanks for the opportunity to 
present this opening statement. I look forward to the hearing 
the testimony of our panel of witnesses today. Thank you, Mr. 
Chairman.
    Mr. Oxley. I thank the gentleman.
    The gentlelady from New Mexico.
    Mrs. Wilson. No, Mr. Chairman.
    Mr. Oxley. I guess we completed the opening statements.
    [Additional statement submitted for the record follows:]
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Thank you Mr. Chairman.
    I congratulate my friend from Tennessee, Mr. Bryant, for his work 
in moving this issue forward.
    The Commerce Committee has a long history of working together to 
enact bipartisan product liability reform. Vicarious liability reform 
was included in the product liability bill this Committee sent to the 
President in the 104th Congress, as well as a Gorton-Rockefeller reform 
bill last term that the President supported, but which ultimately 
failed in the Senate on other grounds.
    Vicarious liability is the theory that you can sue the person with 
the most money, even if they have no fault for the harm.
    In my home state of Virginia, a large percentage of rental cars are 
driven into the District. If one of these renters decides to give the 
car keys to a total stranger who gets drunk and crashes the car into 
the Washington Monument, then under the DC vicarious liability laws, 
the trial lawyers can go after the rental company for the bill.
    This is wrong! Why should we subject anyone to unlimited liability 
without any fault or responsibility, where the accident was completely 
caused by the negligence of a third party?
    Responsibility and liability should be placed on the party at 
fault. Forty-four states have recognized this and have repealed their 
vicarious liability laws. But they can't protect their citizens from 
being sued in the other six states without this legislation.
    H.R. 1954 establishes the simple rule that liability should be 
based on fault, not deep pockets to be picked by the trial lawyers.
    The legislation by Mr. Bryant is timely, necessary, and a fine 
addition to this Committee's long-standing efforts on liability reform.
    I thank the gentleman from Ohio for holding this hearing and look 
forward to hearing further testimony from our witnesses.

    Mr. Oxley. Let me now turn to our panel, and, Ms. Faulkner, 
we will begin with you.

    STATEMENTS OF SHARON FAULKNER, AREA MANAGER, PREMIER CAR 
  RENTAL CORPORATION; RAYMOND T. WAGNER, JR., VICE PRESIDENT, 
 ENTERPRISE RENT-A-CAR CORPORATION; AND RICHARD H. MIDDLETON, 
    JR., PRESIDENT, ASSOCIATION OF TRIAL LAWYERS OF AMERICA

    Ms. Faulkner. Good morning, Mr. Chairman and members of the 
committee. My name is Sharon Faulkner, and I am the area 
manager for Premier Car Rental Company in Albany, New York. 
Premier is a subsidiary of Budget Rent A Car Corporation. Thank 
you for inviting me to appear at this hearing today. My 
testimony is in support of H.R. 1954, the Rental Fairness Act 
of 1999. I thank Congressman Bryant for introducing this 
important legislation. In addition, I thank you, Mr. Chairman, 
for your support of this.
    Let me tell you about my own personal experience, which I 
hope will help the members of this committee understand the 
importance of this bill. For 17 years, until 1997, I was a 
small business owner operating an independent car rental 
company in upstate New York. The company, Capitaland Rental 
Car, was head-quartered in Albany, New York. During those 
years, thanks to the hard work of my employees and the loyalty 
of our local customers, my company survived two recessions and 
fierce competition.
    That situation changed 1 day in 1997 when I was notified 
that I and my company were being sued for an accident involving 
one of our rental cars that occurred over a year previously. 
Capitaland rented a car in 1996 to a female customer who 
possessed a valid New York driver's license. As part of 
Capitaland's standard rental agreement, the customer agreed she 
would be the only driver of the car. Our customer then loaned 
the car to her son, an unauthorized driver under the rental 
agreement. The renter's son, without her knowledge, drove the 
car to New York City and was involved in an accident in which a 
pedestrian was struck in the crosswalk. The injured person sued 
our company for the son's negligence in causing the accident.
    This lawsuit caught me completely by surprise, because when 
I checked our records, I found that the rental vehicle had been 
returned to us without any damage. As a result, I had no idea 
that an accident had ever occurred or that a person had ever 
been injured. Nevertheless, Capitaland was named as a 
codefendant in a lawsuit which demanded enormous amounts of 
money to pay medical bills and compensate the injured person 
for his pain and suffering.
    So you might wonder how is it that my company was sued for 
this accident. We rented to a licensed driver. The renter then 
loaned to an unauthorized driver. It was the unauthorized 
driver, a person neither I nor any of my employees ever met, 
that caused the accident that injured this pedestrian. We were 
not negligent in any way and could not have prevented the 
accident from occurring. Therefore, we should not have been 
liable. However, New York is one of a very small minority of 
States that hold the companies that rent motor vehicles liable 
for the negligence of persons driving their vehicles whether 
that person is the customer or not. In these States a car 
rental company can be assessed unlimited damages by a court 
under the legal doctrine of vicarious liability if one of its 
cars is involved in an accident in which the driver of the car 
was negligent. Simply because we own the car, New York law held 
my company liable for the negligence of our renter.
    For me this lawsuit was the final straw. I am a mother with 
three children and Capitaland was our sole means of support. I 
found it incredible that I could lose everything I worked to 
achieve for 17 years because of an accident for which I was not 
at fault. In effect, every time I rented a car to a customer, I 
was putting my family's future on the line and all my 
employees' families' future on the line in the hope that the 
customer did not drive the car negligently and caused an 
accident. I made a decision to sell my company, the assets of 
which were purchased by a company that is now Budget Rent A 
Car. All of my employees were laid off, and another independent 
car rental company disappeared in New York.
    My company is not alone. Capitaland is one of over 300 car 
rental companies that have closed in New York since 1990. 
Unlimited vicarious liability for a car rental company exists 
in five States: Connecticut, Iowa, Maine, New York, and Rhode 
Island, and the District of Columbia.
    Vicarious liability for companies that rent or lease motor 
vehicles is unfair and contrary to one of our Nation's 
fundamental pillars of justice, that a person should be held 
liable only for harm that he or she causes or could have 
prevented. In the car rental industry vicarious liability 
increases rates for all of our customers, not just for 
customers in the small minority of States that adhere to this 
unfair and outmoded doctrine.
    H.R. 1954 will put a stop to this legal lottery. This bill 
will preempt State vicarious liability laws that hold companies 
that rent or lease motor vehicles liable for the negligence of 
the renters or lessors. Specifically it prohibits a State from 
imposing liability on a company solely because the company owns 
the vehicle involved in an accident.
    Let me take a minute to tell you what this bill will not 
do. This section will not shield the car rental company from 
its own negligence or for failing to maintain the car properly. 
This bill will not shield the car rental company from potential 
liability if it rents a car to a person who is intoxicated and 
that person causes an accident. That is negligence. And this 
bill will not prevent any action based upon the negligence of 
the car rental company. In addition, it will not impact on the 
requirement that a car rental company insure their vehicles at 
the level required by State law.
    I urge this committee to pass H.R. 1954 as quickly as 
possible. While it is too late to help my former company, it is 
not too late to put a stop to this legal lottery in the future. 
I will be happy to answer any questions.
    [The prepared statement of Sharon Faulkner follows:]
Prepared Statement of Sharon Faulkner, Area Manager, Premier Car Rental 
                                Company
    Good morning, Mr. Chairman and members of the Committee. My name is 
Sharon Faulkner, and I am the regional manager for Premier Car Rental 
Company in Albany, New York. Premier is a subsidiary of Budget Rent A 
Car Corporation.
    Thank you for inviting me to appear at this hearing today. My 
testimony is in support of H.R. 1954, the ``Rental Fairness Act of 
1999.'' I thank Congressman Bryant for introducing this important 
legislation and you, Mr. Chairman, for being an original co-sponsor of 
the bill. I urge this Committee to approve this bill in the near 
future.
    Let me be very clear about what this bill would and would not do. 
This bill would right a wrong by adopting a uniform federal standard 
that would not hold motor vehicle rental companies liable for damages 
when the companies in no way caused an accident. The bill would not, 
however, eliminate the liability of the companies when they are 
negligent or failed to maintain the vehicle properly.
    Let me relay my personal experience to you, which I hope will help 
the Members of this Committee understand the importance of this bill. 
For 17 years, until 1997, I was a small business owner, operating an 
independent car rental company in upstate New York. The company, 
Capitaland Car Rental, Inc., was headquartered in Albany. During those 
years, thanks to the hard work of my employees and the loyalty of our 
local customers, my company survived two recessions and fierce 
competition from the larger, nationwide car rental companies.
    That situation changed one day in 1997, when I was notified that I 
and my company were being sued for an accident involving one of our 
rental cars that had occurred over a year previously. Capitaland had 
rented a car in 1996 to a female customer who possessed a valid New 
York driver's license. As part of Capitaland's standard rental 
agreement, the customer agreed that she would be the only driver of the 
car. Our customer then loaned the car to her son, an unauthorized 
driver under the rental agreement. Our renter's son, without her 
knowledge, drove the car to New York City and was involved in an 
accident in which a pedestrian was struck in the crosswalk. The injured 
person sued our customer's son for his negligence in causing the 
accident.
    This lawsuit caught me completely by surprise, because, when I 
checked our records, I found that the rental vehicle had been returned 
to Capitaland without any damage. As a result, I had no idea that an 
accident had occurred or that a person had been injured.
    Nevertheless, Capitaland was named as a co-defendant in the 
lawsuit, which demanded enormous amounts of money to pay medical bills 
and compensate the injured person for his pain and suffering.
    You might wonder how it is that my company was sued for this 
accident. We rented to a licensed driver. The renter then loaned the 
car to an unauthorized driver. It was the unauthorized driver--a person 
neither I or any of my employees had ever met--that caused the accident 
that injured this pedestrian. We were not negligent in any way and 
could not have prevented the accident from occurring. Thus, we should 
not have been liable.
    However, New York is one of a very small minority of states that 
hold the companies that rent motor vehicles liable for the negligence 
of persons driving their vehicles--whether that person is a customer or 
not. In these states, a car rental company can be assessed unlimited 
damages by a court under the legal doctrine of ``vicarious liability'' 
if one of its cars is involved in an accident in which the driver of 
the car was negligent. Simply because we owned the car, New York law 
held my company liable for the negligence of our renter.
    For me, this lawsuit was the final straw. I am a mother with three 
children and Capitaland was our sole means of support. I found it 
incredible that I could lose everything I had worked to achieve for 17 
years because of an accident for which I was not at fault. In effect, 
every time I rented a car to a customer, I was putting my family's 
future on the line in the hope that the customer did not drive the car 
negligently and cause an accident.
    I made the decision to sell my company, the assets of which were 
purchased by a company that is now Budget Rent A Car. Budget assumed 
the liability for this lawsuit and, although I am deeply interested in 
knowing the result of this case, the plaintiff's lawyers insisted that 
the settlement of the lawsuit be sealed.
    As a result of the sale of my company, all of my employees were 
laid off, and another independent car rental company disappeared in New 
York. And my company is not alone. Capitaland is one of over 300 car 
rental companies that have closed in New York since 1990.
    Unlimited vicarious liability for car rental companies exists in 
five states (Connecticut, Iowa, Maine, New York, and Rhode Island) and 
the District of Columbia. One other state, Florida, has limited 
vicarious liability to a cap of $900,000 per accident. Forty-four other 
states have either discarded unlimited vicarious liability or never 
adopted it in the first place.
    Vicarious liability for companies that rent or lease motor vehicles 
is unfair and contrary to one of our nation's fundamental pillars of 
justice--that a person should be held liable only for harm that he or 
she causes or could have prevented. In the car rental industry, 
vicarious liability increases rates for all of our customers, not just 
for customers in the small minority of states that adhere to this 
unfair and outmoded doctrine.
    Vicarious liability undermines competition in the car rental 
industry. As I have stated, hundreds of companies have disappeared from 
New York this decade--leaving the major, nationwide systems as the only 
car rental option for consumers in the state. In addition, many 
smaller, growing car rental companies will not do business in vicarious 
liability states and seek to prohibit their customers from driving into 
those states. And vicarious liability operates as a legal lottery, 
enabling trail lawyers to target the so-called ``deep pockets'' of car 
rental companies for huge judgments.
    I can give you numerous other examples of this unjust and unfair 
legal doctrine. Single car accidents where the only person at fault was 
the driver. A car rented in Ohio and driven to New York where an 
accident occurred and New York's law was applied. Customers loaning 
their cars to a friend who loans it to a sibling who runs a stop sign 
and has an accident. All of these situations have resulted in car 
rental companies being sued and paying tens of millions of dollars in 
judgments--despite the fact that the car rental company was not 
negligent or at fault for the accident.
    Together, these cases result in over $100 million in judgments and 
settlements against car rental companies every year--costs that must be 
recovered by the companies through the rates they charge every rental 
customer. In effect, these judgments from this small minority of states 
results in a tax on all car rental customers everywhere, not just on 
the citizens of the vicarious liability states.
    H.R. 1954 will put a stop to this legal lottery. This bill will 
pre-empt state vicarious liability laws that hold companies that rent 
or lease motor vehicles liable for the negligence of their renters or 
lessors. Specifically, it prohibits a state from imposing liability on 
a company solely because the company owns the vehicle involved in an 
accident.
    Let me take a minute to tell you what H.R. 1954 will not do. It 
will not shield a car rental company from its own negligence or for 
failing to maintain the car properly. It will not shield a car rental 
company from potential liability if it rents a car to a person who is 
intoxicated and that person causes an accident. That is negligence, and 
this bill specifically states that it will not prevent any action based 
upon the negligence of the car rental company. In addition, it will not 
impact on the requirement that a car rental company insure their 
vehicles at the level required by state law.
    Instead, this bill will prevent the situation I faced in 1997--
being sued and forced to sell the company that I had worked so hard to 
make successful.
    I urge this Committee to pass H.R. 1954, as quickly as possible. 
While it is too late to help my former company, it is not too late to 
put a stop to this legal lottery in the future.
    I would be pleased to answer any questions that my testimony may 
have raised.

    Mr. Oxley. Thank you, Ms. Faulkner.
    Mr. Wagner.

               STATEMENT OF RAYMOND T. WAGNER, JR.

    Mr. Wagner. Good morning, Mr. Chairman, members of the 
committee. My name is Ray Wagner, and I am a vice president at 
Enterprise Rent-A-Car Company. Enterprise is a family owned 
corporation headquartered in St. Louis, Missouri. I appear 
before you on behalf of Enterprise to express our support for 
Congressman Bryant's Rental Fairness Act of 1999. Thank you, 
Mr. Chairman, for your strong support of this legislation and 
for inviting me to present testimony today.
    My testimony today will center on Title II of H.R. 1954. 
Title I of this bill was attached as a noncontroversial 
amendment to H.R. 10 when that bill was considered by this 
committee earlier this year and, in fact, yesterday as well. It 
is my understanding that this amendment has been agreed to by 
the conference committee currently crafting the final financial 
services modernization bill. Thus, when H.R. 1954 is marked up 
by this committee, it will consist only of Title II of the 
bill.
    I view the current vicarious liability laws from perhaps a 
unique perspective. Not only am I a vice president at 
Enterprise Rent-A-Car, but I am also a circuit judge in the 
municipal division of St. Louis County as well as an adjunct 
professor of Washington University School of Law. I am here 
today to say that the current vicarious liability laws are 
unfair and badly in need of reform.
    The title of this legislation accurately describes its 
impact. H.R. 1954 will return the notion of fairness to 
litigation involving car rental companies and those handful of 
States which still cling to this unfair doctrine. It is simply 
not fair to subject car rental companies to unlimited liability 
for the acts of their renters, and yet that is exactly what the 
vicarious liability laws of Connecticut, Iowa, Maine, New York, 
Rhode Island and the District of Columbia impose. It is not 
fair to impose multimillion dollar judgments on any entity, 
whether an individual or a corporation, when they have done 
nothing wrong. It is not fair to force our customers across the 
Nation to pay higher car rental rates for this misguided and 
outdated vicarious liability laws, which, incidentally, date 
back to the days of horse and buggies, when the horse rental 
operator was presumed to know the personality of his horse.
    The laws of these States force car rental companies to 
charge nonresident renters higher rates to cover their losses. 
In essence, nonresident accident-free renters are forced to 
subsidize accident-prone renters in vicarious liability States. 
I would submit that this is poor public policy. It is not fair 
to deprive consumers of the competition and lower rental rates 
that smaller operators can offer. But that is exactly what has 
happened because these laws have forced hundreds of companies 
out of business, as we just heard from Ms. Faulkner. And it is 
not fair that the only sure way an operator, even one operating 
under--outside of a vicarious liability State, can protect 
itself against such claims is to simply go out of business.
    H.R. 1954 will return uniformity and fairness to the car 
rental industry and to our customers. Quite simply, it will 
preempt the law in the small minority of States which presently 
hold vehicle rental companies liable for the negligence of 
their customers merely because the company owns the vehicle 
involved in the accident.
    Opponents of this legislation will raise three central 
arguments against it. First, they will argue that Congress 
should not preempt State laws as a matter of States rights and 
federalism. I would agree with this argument if the impact of 
these States' vicarious liability laws were confined to their 
borders and their citizens, but this is not the case. Our 
customers across the Nation pay for vicarious liability laws 
through higher rates. A company operating in Virginia cannot 
stop its vehicles from traveling to New York or the District of 
Columbia. And as the selection of cases attached to my 
testimony outlines, creative plaintiff lawyers seek to apply 
these States' vicarious liability laws no matter where the 
accident occurs.
    Second, opponents will argue that the bill will somehow 
lower the standard of care companies will use in the future 
when renting their vehicles. They allege we will feel free to 
rent to drunk customers or to not maintain our vehicles because 
we will have no fear of liability. I believe that they know 
that these arguments are false. This bill expressly states that 
the bill will not impact claims alleging a company's negligence 
whether by negligently entrusting the car to a person or by 
failing to maintain the car. If Enterprise, for example, has 
been negligent in any way, H.R. 1954 does not shield the 
company from potential liability, nor should it. We have an 
obvious interest in protecting our cars, the tool of our trade, 
and we take all steps to do so.
    Third, opponents of H.R. 1954 will argue that innocent 
injured persons will go uncompensated if these laws are not 
preserved. As a subset to this argument, opponents of this bill 
will assert that the car rental companies are in the best 
position to compensate these victims. It is indeed true that 
persons are injured every day in vehicle accidents and that 
financial resources through insurance or personal wealth are in 
many cases insufficient to compensate, but it is also true that 
our Nation's liability system is based upon fault. Compounding 
the wrong, the original accident, by adding another injustice 
holding the car rental company liable does not make the 
original wrong right.
    My company has been subject to numerous vicarious judgments 
and settlements over the past 10 years. These judgments have 
cost Enterprise tens of millions of dollars, costs that we must 
simply pass along to our customers. Collectively vicarious 
liability results in losses well over $200 million per year to 
this industry, exclusive of insurance costs and legal fees.
    In sum, Mr. Chairman, H.R. 1954 will right an ongoing 
wrong. These laws impact interstate commerce through higher 
rental rates for all consumers. These laws lessen competition 
by acting as a barrier to enter into business, and these 
liability laws undermine the fundamental principle of our 
Nation's liability system that a person should pay for the harm 
caused only when he or she is at fault or could have prevented 
the harm in some way. Federal reform legislation is appropriate 
and long overdue.
    I thank you for inviting me to present this testimony this 
morning, and I would be pleased to answer any questions that my 
testimony may have raised. Thank you.
    [The prepared statement of Raymond T. Wagner, Jr. follows:]
Prepared Statement of Ray Wagner, Vice President, Enterprise Rent-A-Car 
                                Company
    Good morning, Mr. Chairman and Members of the Committee. My name is 
Ray Wagner and I am a Vice President at Enterprise Rent-A-Car Company. 
Enterprise is a family-owned corporation headquartered in St. Louis, 
Missouri. I appear before you on behalf of Enterprise to express our 
support for Congressman Bryant's ``Rental Fairness Act of 1999'' (H.R. 
1954). Thank you, Mr. Chairman, for your strong support for this 
legislation and for inviting me to present testimony today.
    My testimony today will center on Title II of H.R. 1954. Title I of 
this bill was attached as a non-controversial amendment to H.R. 10 when 
that bill was considered by this Committee earlier this year. It is my 
understanding that this amendment has been agreed to by the conference 
committee currently crafting the final financial services modernization 
bill. Thus, when H.R. 1954 is marked-up by this Committee, it will 
consist only of Title II of the bill. As a result, I will concentrate 
my remarks today on Title II, which reforms state vicarious liability 
laws for companies that rent or lease motor vehicles.
    I view the current vicarious liability laws from perhaps a unique 
perspective. Not only am I a vice president at Enterprise, I am also a 
municipal circuit court judge in St. Louis County and an adjunct 
professor at the Washington University School of Law in St. Louis. And 
I am here to say that the current vicarious liability laws are unfair 
and badly in need of reform.
    The title of the legislation under consideration today accurately 
describes the impact this bill will have when it is enacted. H.R. 1954 
will return the notion of fairness to litigation involving car rental 
companies in a handful of states that still cling to the unfair 
doctrine of vicarious liability for companies that rent or lease motor 
vehicles.
    It is not fair to subject car rental companies to unlimited 
liability for the acts of their renters. And yet that is exactly what 
the vicarious liability laws in the states of Connecticut, Iowa, Maine, 
New York, Rhode Island, and the District of Columbia impose on 
Enterprise and other companies.1
---------------------------------------------------------------------------
    \1\ Seven additional states (Arizona, California, Idaho, Michigan, 
Minnesota, Nebraska, and Nevada) impose limited vicarious liability 
that is tied to the state's minimum financial responsibility 
requirements. Thus, H.R. 1954 will have no impact on these seven 
states. After enactment, a car rental company will continue to be 
liable in these seven states (and, in fact, all states) up to the 
state's minimum insurance requirements. One state, Florida, has capped 
vicarious liability at $850,000 per incident. H.R. 1954 will pre-empt 
Florida's vicarious liability cap.
---------------------------------------------------------------------------
    It is not fair to impose multi-million dollar judgments on any 
entity, whether an individual or a corporation, when they have done 
nothing wrong. Again, that is exactly what the vicarious liability laws 
of these states do.
    It is not fair to force car rental customers across the nation to 
pay through higher car rental rates for the misguided and outdated 
vicarious liability laws that exist in only a handful of states. But 
that is exactly what happens every day, as the laws of these states 
force car rental companies to charge renters outside of these states 
higher rates to cover their losses in these vicarious liability states.
    It is not fair to deprive consumers the competition and lower 
rental rates that smaller car rental companies can offer. But that is 
what has happened because vicarious liability laws have forced many 
companies out of business.
    And it is not fair that the only sure way a car rental company, 
even one operating outside of vicarious liability states, can protect 
itself against vicarious liability claims is to go out of business. But 
that is the only way that a car rental company can make sure it avoids 
such claims.
    H.R. 1954 will return uniformity and fairness to the car rental 
industry and to the customers who rent our cars. Quite simply, it will 
pre-empt the laws in a small minority of states that hold companies 
that rent or lease motor vehicles liable for the negligence of their 
customers only because the company owns the vehicle involved in the 
accident.
    Opponents of this legislation will raise several arguments as to 
why H.R. 1954 should not become law. I would like to respond to each 
argument in turn.
    First, opponents will argue that Congress should not pre-empt state 
laws as a matter of states' rights and federalism. I would agree with 
this argument if the impact of these states' vicarious liability laws 
was confined to their borders and their citizens. But, this is not the 
case. The car rental industry is a fundamental part of our nation's 
interstate transportation network. Car rental customers across the 
nation pay for the vicarious liability losses incurred by car rental 
companies through higher rates. A car rental company operating in 
Virginia cannot stop its vehicles from traveling to New York or the 
District of Columbia. And, as the selection of cases attached to my 
testimony outlines, creative plaintiffs' lawyers will seek to apply one 
of these states' vicarious liability laws no matter where an accident 
occurs.
    Second, opponents of H.R. 1954 will argue that the bill will 
somehow lower the standard of care car rental companies will use in the 
future in renting their vehicles. They allege that we will feel free to 
rent to drunk customers or to not maintain our vehicles in peak 
condition because we will have no fear of liability. These arguments 
are pure bunk and they know it. H.R. 1954 expressly states that the 
bill will not impact claims alleging a company's negligence, either by 
negligently entrusting the car to a person or by failing to maintain 
the car. If Enterprise, for example, has been negligent in any way, 
H.R. 1954 does not shield the company from potential liability for an 
accident. Nor should it.
    Third, opponents of H.R. 1954 will argue that innocent, injured 
persons will go uncompensated if these states' vicarious liability laws 
are not preserved. As a subset to this argument, opponents of this bill 
assert that car rental companies are in the best position to compensate 
these victims. It is indeed true that persons are injured every day in 
motor vehicle accidents and that financial resources, either through 
insurance or personal wealth, are in many cases insufficient to 
compensate these persons. But it also is true that our nation's 
liability system is based on fault. If a person is not at fault for an 
accident, then he or she should not be held liable. Compounding a 
wrong--the original accident--by adding another injustice--holding the 
car rental company liable--does not make the original wrong right.
    My company has been subject to numerous vicarious liability 
judgments and settlements over the past ten years. These vicarious 
liability judgments have cost Enterprise tens of millions of dollars--
costs that we must pass through to our customers. Together, vicarious 
liability results in losses by car rental companies of over $100 
million every year, exclusive of insurance costs and legal fees.
    In sum, Mr. Chairman, H.R. 1954 will right an ongoing wrong--
holding a car rental company liable for the negligent actions of their 
renters. Vicarious liability impacts on interstate commerce through 
higher rental rates for all consumers, not just those in vicarious 
jurisdictions. Vicarious liability lessens competition in vicarious 
states by acting as a barrier to entry into business in the vicarious 
states. And vicarious liability undermines the fundamental principle of 
our nation's liability system--that a person should pay damages for 
harm caused only when he or she is at fault or could have prevented the 
harm in some way. Federal vicarious liability reform is appropriate and 
long overdue.
    Thank you for inviting me to present this testimony today. I urge 
this Committee to pass this bill so that it can be enacted into law by 
the end of this year.
    I would be pleased to answer any questions my testimony may have 
raised.
   selected examples of vicarious liability cases against car rental 
                               companies
    Settlements and judgments from vicarious liability claims against 
car rental companies cost the industry over $100 million annually. 
Listed below are selected examples of cases involving vicarious 
liability and car rental companies.
Fu v. Fu, 733 A.2d 1133 (1999)
    In 1993, two friends rented a car in New Jersey from Freedom River, 
Inc., a Philadelphia licensee of Budget Rent-A-Car Corporation. The 
rental agreement identified only the two renters as authorized drivers 
of the car. The car, while being driven by Defendant Hong Fu (the wife 
of one of the renters and an unauthorized driver under the rental 
contract), was involved in a single car accident in New York. Plaintiff 
Li Fu, the sister of the Defendant and the wife of the other renter, 
was seriously injured in the accident. An arbitrator applied New York 
law and found the defendant and Freedom River liable for $3.75 million. 
This judgment was affirmed by the New Jersey Supreme Court.
Brown v. National Car Rental System, Inc., 707 So.2d 394 (1998)
    A Georgia resident rented a car from the Georgia office of 
National. The car was registered in Florida. Renter, in violation of 
the rental agreement, loaned the car to a friend, also a Georgia 
resident, who drove the car to Florida. While the unauthorized driver 
was driving in Florida, he hit a car driven by the plaintiff, a Florida 
resident. The lawsuit was brought in Georgia, and yet Florida law was 
applied. On appeal, the court held that National was vicariously liable 
for plaintiff's injuries under Florida law. National settled the case 
for $70,000.
Brown v. Welcome Corporation t/a Thrifty Car Rental, Docket No. 10779/
        96, Supreme Court of New York for the County of Westchester 
        (1997)
    Welcome Corporation, a Thrifty licensee, rented a car to Scott 
Freeman in Norfolk, Virginia. Freeman was the only authorized driver 
under the rental contract. Freeman gave the car to an employee, Harrell 
Davis, to use for business. Frank Dibello, another employee of Freeman, 
took the car without the permission of either Freeman or Davis and 
drove it to New York, where he was involved in an accident with 
Plaintiff. Despite the tortured connection of this accident to Welcome, 
the company was found vicariously liable for the accident under New 
York law and settled the case for $75,000 plus over $100,000 in defense 
costs.
Larocca v. Budget Rent-A-Car Corporation, Docket No. 08632/95, Supreme 
        Court of New York for the County of Suffolk (1995)
    Budget rented a vehicle to Rosalba Larocca in New York. Larocca 
gave permission to her son, an unauthorized driver under the rental 
contract with a suspended New York driver's license, to drive the 
vehicle. The son lost control of the vehicle on the New Jersey turnpike 
in a one-car accident. Larocco was a passenger in the vehicle at the 
time of the accident and suffered injuries. Mother sued son for his 
negligence, and jury found Budget vicariously liable for the son's 
negligence under New York law. A jury returned a verdict of $450,000 
against Budget.
McNamara v. Thrifty Canada, Ltd, Civil Action No. 98-CV-507, U.S. 
        District Court, N.D.N.Y. (1999).
    Thrifty rented the car to renter in Toronto. Renter was involved in 
an accident in New York in which the plaintiff, the driver of another 
car, was injured. The police report on the accident indicated that the 
renter was driving too fast for the prevailing conditions and following 
too close. After a three day jury trial, Thrifty was held vicariously 
liable under New York law and ordered to pay $1.1 million in damages to 
plaintiff.
Zafra v. National Car Rental, Inc., Docket No. 126728/95, Supreme Court 
        of New York for the County of Westchester (1995).
    In 1995, a 19-year-old, who was an unauthorized driver under the 
rental contract for a car rented in New York by her mother, was driving 
in Vermont. She turned around to tell her friends in the back seat to 
be quiet and the car veered off the road and rolled over. One of the 
passengers was injured and sued the driver and National. Despite the 
fact that the accident occurred in Vermont, New York law was applied. 
National settled the claim for $985,000. Of particular interest, 
National was insured for $1 million, but the insurance company denied 
the claim because the driver was underage, in violation of the 
insurance coverage. However, New York prohibits car rental companies 
from refusing to rent to anyone 18 years of age or older.
Clay et al. v. Alamo Rent-A-Car, Inc., 586 So.2d 394 (1991).
    Four British sailors rented a car from Alamo in Fort Lauderdale to 
drive to Naples. While driving to Naples, the driver of the car fell 
asleep at the wheel. The car left the road and ended up in a canal. The 
driver and two passengers were killed; the fourth passenger was 
seriously injured. Alamo was found vicariously liable for the deaths 
and injuries due solely to the fact that it owned the vehicle. No 
negligence for the accident was attributed to Alamo. Alamo was ordered 
by a jury to pay the plaintiffs $7.7 million. The jury award was 
affirmed on appeal.
Nichols v. Value Rent-A-Car, Inc., Case No. 92-20889(21), Circuit Court 
        of the 17th Judicial Circuit in and for Broward County (1992).
    In a single vehicle accident, the driver of a passenger van rented 
from Value lost control of the van after braking on a freeway to avoid 
a slower moving vehicle. The van rolled over and plaintiff Nichols, who 
was not wearing a seat belt, was thrown from the van. She sustained 
injuries to her hands and her head. At trial, Value was not found 
negligent for her injuries in any way, and yet the jury ordered Value 
to pay the plaintiff $2.2 million for her injuries.
Rodriques v. Dollar Rent A Car Systems, Inc., Case No. 94-10085 CA6, 
        Circuit Court for the 11th Judicial Circuit in and for Dade 
        County (1994).
    Plaintiff was speeding in a Dollar rental car when another vehicle 
ran a stop sign, striking the rental car and causing it to overturn. 
The injured parties in the rental vehicle received $800,000 payments 
from the insurance company that covered the other vehicle. Plaintiffs 
sued Dollar based on the negligence of the driver of the rental car 
(she admitted to speeding at the time of the accident). The jury 
awarded total damages of $420,000 against Dollar based upon the 
negligence of the driver and Dollar's ownership of the vehicle.
Watson v. Budget Rent A Car Corporation, Case No. 91/055232, Orange 
        County Circuit Court (1991).
    Budget rented a van to a family in Florida. At the time of the 
accident, the mother of the family was driving the van. The mother lost 
control of the van in a single-vehicle accident. Her infant son (the 
plaintiff), who was not restrained in the van, was thrown from the van 
and suffered severe injuries. Based upon the infant's mother's 
negligence and Florida's vicarious liability doctrine, Budget settled 
the case for $490,000.
Stein v. Thrifty Rent-A-Car, Inc., Case No. 298-6936-TS, Supreme Court 
        of New York for the County of Suffolk (1986).
    The renter of a Thrifty car ran a stop sign and collided with 
Stein's car. Stein was thrown from the vehicle and killed. Stein's 
estate sued Thrifty based upon New York's vicarious liability statute. 
At the original trial, the jury found that Stein's death was caused by 
her failure to wear a seat belt and awarded no damages. In 1992, a New 
York appellate court reversed the original jury verdict and ordered a 
new trial on the issue of damages alone. The second trial resulted in a 
$1.25 million jury verdict against Thrifty.

    Mr. Oxley. Thank you, Mr. Wagner.
    Mr. Middleton.

             STATEMENT OF RICHARD H. MIDDLETON, JR.

    Mr. Middleton. Thank you, Mr. Chairman. I am pleased your 
allowing me to substitute for Mr. Stewart on such short notice. 
I come as president of the Association of Trial Lawyers of 
America, and I come and voice our strong opposition to this 
bill because one thing we don't need is anymore bald assertions 
that such buzzwords as interstate commerce or the impact upon 
consumers via so-called hidden tax is, in fact--is necessary to 
consider.
    The idea of vicarious liability is basically a doctrine of 
law that is based upon the premise that the relationship of one 
party to another, as well as the relationship of those parties 
to the society within that particular State, drives a need to 
have some sort of liability. The policy underlying the 
imposition of vicarious liability is one indeed which the State 
legislators have considered in conjunction with their State 
insurance laws and how they are going to mandate coverage. They 
have decided that in these five States and partially in a few 
other States that legal accountability for actions caused by 
participation in the market is necessary by recognizing who is 
in the best position to identify the risk and then to assume 
any responsibility for what goes wrong.
    All you have to do is look at the impact of the market on 
the market of these rental companies. It is in States where 
there are large tourists numbers where, because they put so 
many cars on the road, they impact the number and the 
likelihood of uninsured motorists who are going to end up in 
collisions, and it exacerbates that uninsured motorist problem 
because of the number of cars they put out there. Vicarious 
liability spreads the responsibility to those making money in 
the marketplace and by increasing the risk to the citizens of 
their particular States. It is peculiarly a matter of the State 
legislatures and not of Congress.
    The risk is obvious. You have people getting in unfamiliar 
vehicles, particularly trucks. You have got no ties to 
ownership, so you have a lesser sense of responsibility, no 
respect for the vehicle involved, and they don't even require 
any other proof of ownership which would help with this 
problem. The benefits of the system, because vicarious 
liability is imposed partially in certain States, is that they 
now rent to people who are under 25 years of age--excuse me, 
they do not rent to those individuals. They require credit 
cards, which studies have shown are synonymous with people who 
hold credit cards are more responsible. They also check driving 
records of individuals. If they added that anybody who didn't 
carry other insurance that would apply--would not be eligible 
to rent cars, we might be getting someplace. But all of these 
good safety-enhancing measures are a result of the fact that 
insurance companies are under requirement to police their 
customer base and are in the best position to do so. This bill 
also encourages the irresponsible lending of vehicles to others 
other than the owners.
    Let me talk to you about something we haven't heard very 
briefly, and that is the economics of this industry. We talk 
about effective interstate commerce, but we don't hear anything 
with regards to the impact on the industry because it is 
transparent. In 1996, Auto Rental News, which is the 
publication for that industry, said that the industry made 
$14.6 billion on their rental cars across this country. Of that 
there were only $100 million in total collision coverage, which 
means that \7/100\ of a cent of every dollar of revenue 
accounts for all the collisions, and if only a portion of that 
includes vicarious liability, it is even less than that. So not 
only is it minimal, it is really microscopic. And that is why 
not one major rental car company has ever reported in their SEC 
filings that liability concerns had impacted their profits in 
any way, shape or form. So the rental car companies are telling 
their investors and they are telling the Federal regulators one 
thing, and they are coming before Congress and telling you all 
something else simply because it is single-industry, special-
interest legislation.
    Auto Rental News also said that States such as Florida that 
have had vicarious liability and have handled their problem 
legislatively on their own without the intrusion of the Federal 
Government have much cheaper rates than other States. In 
addition to that, Auto Rental News has revealed that the auto 
rental industry has decided that they are going to not pursue 
40 percent of the claims which they could, in fact, pursue for 
third-party liability. They have made no effort to do so.
    So let me in conclusion state this, Mr. Chairman. There is 
absolutely no proof of an impact on interstate commerce. There 
is absolutely no need to trample States rights, which I believe 
is a much larger--become a much larger oxymoron than any 
concept of vicarious liability which was carefully crafted in 
the laws of these various States. It is absolutely special 
interest-legislation, and it takes away carefully crafted 
safety incentives that State legislatures have felt necessary 
to implement in their particular States. Thank you, sir.
    [The prepared statement of Richard H. Middleton, Jr. 
follows:]
Prepared Statement of Richard H. Middleton, Jr., President, Association 
                      of Trial Lawyers of America
    Mr. Chairman and members of the Commerce Committee, my name is 
Richard Middleton, Jr., and I am a practicing attorney from Savannah, 
Georgia. I am a senior trial attorney in the firm of Middleton, Mathis, 
Adams & Tate, P.C., with offices in Atlanta and Savannah, Georgia. I 
also have the very high honor of serving presently as the President of 
the Association of Trial Lawyers of America (ATLA). Mr. Chairman, thank 
you for the opportunity to present ATLA's views in opposition to H.R. 
1954, the ``Rental Fairness Act.''
    The Association of Trial Lawyers of America opposes this bill for 
several reasons, including our long standing belief that people who 
have been injured should have a real opportunity to be compensated for 
that harm. Vicarious liability laws are one means to help ensure that 
is the case. This bill would abolish that principle in the several 
states which have applied it to car rental agencies. We are also 
concerned that Congress is once again seeking to limit the rights of 
the states to enact liability laws as they see fit. That this effort 
comes in the midst of other legislative initiatives to federalize all 
state class actions, create a federal statute of repose, federalize no-
fault auto insurance, and alter long standing state laws on punitive 
damages and joint and several liability makes the situation all the 
more alarming in a Congress sworn to return power to the states.
    The principle of vicarious liability--the legal doctrine that one 
entity may be held liable for the actions of another, based on their 
relationship to each other--is deeply rooted in anglo-saxon 
jurisprudence. Where state courts and legislatures have adopted this 
principle, they have done so not only to ensure that injured parties 
are compensated for the harm they have suffered, but also to spread the 
risks and costs of doing business across a broader community. These 
vicarious liability laws also encourage renters and lessors of cars, 
and other merchants, to monitor their products and services more 
carefully, thereby ensuring safer products in the marketplace. This 
bill chooses to protect a thriving car rental industry rather than 
preserve the long standing principle of vicarious liability. As such, 
this legislation not only derogates state prerogatives, but does so on 
behalf of special interests.
    the ``rental fairness act'' is only fair to thriving car rental 
                                agencies
    Let's be clear. The ``Rental Fairness Act'' is only ``fair'' to the 
thriving car rental businesses. Many of these businesses had billions 
of dollars in revenues in the past few years. Surely, they do not need 
this legislation in order to flourish. They are merely trying to limit 
their financial liability so they may reap additional profits. But, for 
the individuals who are injured by drivers of rented or leased cars, 
including the drivers themselves, this bill would curtail possible 
avenues of recovery. When rental car drivers are injured or injure 
others, they may seek recovery from a number of possible defendants, 
including the rental agency and the manufacturer of the automobile. 
This is not unlike the situation that exists in most other industries, 
where the businesses are held vicariously liable for the acts of 
others. There is no rationale or moral basis to single out car rental 
companies for special immunities. That would not only be wrong but the 
wrong is compounded by the fact that there is no demonstrable need for 
such protection from Congress. The current system is working and there 
is no documented evidence to support a federal override of current 
state laws governing this area of tort law. Indeed, this proposed bill 
recognizes that states have the authority to impose financial 
responsibility laws on car rental businesses. Vicarious liability is in 
essence another form of financial responsibility. States that decide it 
is in their best interest or good public policy to impose such 
responsibility should not be prevented from doing so.
vicarious liability laws were established to protect the injured and to 
 ensure the safest possible products are available in the united states
    The courts established the principle of vicarious liability 
primarily to ensure injured parties recover damages for the harm they 
have suffered. But vicarious liability laws serve the additional 
purposes of spreading the risks and costs of doing business throughout 
a broader community, and of encouraging the sellers or renters of 
products to monitor those products closely to ensure the safest 
products possible are available to American families.
    This bill would gut this fundamental principle for one industry by 
prohibiting states from holding any car rental agency liable for the 
harm resulting from a driver's negligent operation of a operation of a 
rented or leased motor vehicle they own. Those states which have 
established vicarious liability laws for car rental agencies clearly 
believe there are strong policy reasons to hold these agencies 
responsible for any harm involving their vehicles. Holding businesses 
accountable via vicarious liability is one way of making sure that 
profit-making businesses shoulder the risks they create. It also 
ensures that innocent victims injured by the business's activities are 
compensated for their injuries, and it creates an incentive for 
businesses to decrease the amount of risk to which the larger community 
is exposed. Ultimately, this legislation would weaken car rental 
companies' responsibility to the community at large, and thereby reduce 
safety on the roads for all of us.
 h.r. 1954 is yet another example of congress seeking to dictate state 
                                policies
    This bill is also another example of the federal government seeking 
to dictate how the states should behave. Currently, only 12 states, 
either through statute or common law, allow for the determination of 
vicarious liability in cases involving rented or leased cars, but 
virtually all states impose some form of financial responsibility on 
car rental businesses, although the precise terms may vary. Congress 
should allow those 12 states to continue with their ongoing policies 
and practices. Those states which have vicarious liability laws for car 
rental agencies recognize that car rental companies enjoy a profit-
making enterprise within their borders that places potentially high-
risk drivers on their roads.
    These companies are putting people behind the wheel of unfamiliar 
cars, often in unfamiliar places. In addition, the people who rent the 
cars do not have pride of ownership in the vehicle; therefore, they may 
engage in behaviors that they would not normally do in their own car. 
States like California, Florida, and New York, which have large 
populations, large tourism industries and the largest rental car 
markets, have either enacted legislation or follow common law 
principles to make car rental companies vicariously liable. If a 
company wants to profit from renting cars in their states, thereby 
creating more potential risks and accidents, then they should help bear 
the cost of the risk they create.
    New York embodies the rationale of why states hold car rental 
companies financially responsible via vicarious liability. The New York 
Court of Appeals noted that New York's vicarious liability legislation 
was designed to ``ensure access by injured persons to a financially 
responsible insured person against whom to recover for injuries.'' The 
New York Law Revision Commission noted that the legislation was 
intended to regulate the conduct of automobile owners by 
``discourag[ing] owners from lending their vehicles to incompetent or 
irresponsible drivers.'' 1 California, Connecticut, Idaho, 
Iowa, Nevada, Maine, Michigan, Minnesota and Rhode Island have all 
codified vicarious liability statutes, in addition to the other 
jurisdictions that follow common law principles. These states have 
decided that vicarious liability is the best way to handle the risks 
created by car rental companies. Their judgment is prudent, sound, and 
should be respected.
---------------------------------------------------------------------------
    \1\ Haggerty v. Cedeno 653 A.2d 1166 (1995) (quoting the New York 
Law Revision Commission at 593 (1958))
---------------------------------------------------------------------------
    For more than 200 years, civil liability under tort and contract 
law have been the sovereign domain of the states. Measures that would 
preempt our state-based liability system, like H.R.1954, are contrary 
to values expressed by lawmakers on both sides of the aisle. 
Particularly since 1995, I was under the impression that a central 
mission of the Congressional leadership was to work assiduously to give 
more authority back to the states. If that is correct, then I find it 
baffling, to say the least, that this Subcommittee is conducting a 
hearing on federal legislation which would clearly extinguish states' 
rights.
    The agenda behind H.R. 1954 is unambiguous: the proponents of this 
legislation seek to unilaterally take power away from the states on an 
issue that historically has been left to the states, that is, the 
regulation of automobile liability. ATLA believes that extinguishing 
state liability laws that work to protect our families is a measure 
that is at best ill conceived, and at worst unconscionable.
   why car rental companies should be held responsible via vicarious 
                               liability
    The policy rationale underlying vicarious liability for car rental 
companies is justified and effective. Car rental companies are the 
experts on their own businesses. Therefore, they are in a best position 
to anticipate the risks of renting cars to a variety of drivers and to 
plan for those risks. In addition, the major car agencies appear to be 
able to bear the consequences for the risks they create. According to 
the Auto Rental News 1997 Fact Book, there were 1.6 million rental cars 
in service at last count. Total revenues for all rental car companies 
reached $14.6 billion in 1996, which was an 18.7 percent increase from 
1985. Hertz's year end revenue was $4.2 billion dollars last year. Avis 
had revenues of $2.3 billion. Budget was at $1.2 billion. Alamo 
generated $201 million in revenue last year. According to the Wall 
Street Journal, profits for the top eight companies was $245 million 
dollars in 1996.2 Do not let these companies tell you they 
are facing egregious accident and litigation costs. The entire industry 
had only $100 million in accident costs in 1996.3 To put 
this in perspective, their accident cost is .7 cents of a dollar, not 
even a penny of their revenue. Clearly, these car rental agencies are 
managing the risks they face in states with vicarious liability laws.
---------------------------------------------------------------------------
    \2\ Lisa Miller, Car Rental Companies are Jacking Up the Prices, 
Wall Street Journal, Feb. 4, 1997 at B6.
    \3\ Auto Rental News, Sept./Oct. 1996.
---------------------------------------------------------------------------
    Yet, car rental companies are motivated to find the most cost 
effective methods in dealing with liability issues. In fact, their 
efficiency in dealing with liability issues has brought us to this 
Hearing Room today. After all, the most cost efficient way for these 
companies to deal with liability issues is to eliminate them 
altogether. But as a matter of fairness, car rental companies should 
not continue to profit from the business without being held responsible 
for accidents being caused by their lessees. Companies like Hertz, 
Avis, Alamo, and Budget, and countless other large and small profitable 
car rental concerns continue to impose risks on ``individually random 
but collectively predictable victims of the activity,'' 4 
namely the people injured by under-insured lessees.
---------------------------------------------------------------------------
    \4\ Harry J. Steiner, Moral Argument and Social Vision in the 
Courts 71 (1987).
---------------------------------------------------------------------------
    Vicarious liability gives car rental companies incentives to 
conduct their businesses with the safety of others in mind. For 
example, they prevent drivers under the age of 25 years from renting 
their vehicles. They don't rent to customers without credit cards. They 
ask for your driver's license. They run a DMV check on your driving 
record. Prohibiting vicarious liability statutes would eliminate one of 
the remaining incentives car rental agencies have to continue to work 
toward decreasing the dangers they are imposing on the public at large. 
Do not let these companies walk away from their responsibilities.
    There are numerous examples of how vicarious liability helps 
compensate innocent victims of accidents that involve rental cars, but 
I would like to leave you with just one. Two married couples rented a 
vehicle from Budget Rent-A-Car for a trip to Cornell University in 
Ithaca, New York. The rental contract named both couples as the parties 
allowed to drive the car. Unfortunately, there was an accident. One of 
the wives was driving when her view became distorted due to rain and 
fog. Due to her unfamiliarity with the vehicle, she could not find the 
windshield wiper. She lost control of the car, veered across two lanes 
of traffic, rolled over, and hit an embankment. The wife who was a 
passenger, a cardiologist, suffered a severe traumatic brain injury and 
will never remember her medical training or be independent 
again.5
---------------------------------------------------------------------------
    \5\ Su v. Hong Fu and Freedom River d/b/a Budget Rent-a Car, 733 
A.2d 1133 (NJ 1999).
---------------------------------------------------------------------------
    Let me pose this question as my concluding remarks. Who is better 
positioned to cope with the risk? The wife who has suffered traumatic 
brain injuries because she happened to have the unfortunate luck of 
traveling in a rented car that was unfamiliar to the driver? Or Budget, 
who has to deal with the risk of accidents every day and who profits 
from putting drivers on the road every day? For those states with 
vicarious liability laws for auto rental agencies, we believe that 
system is more equitable and fair than the system H.R. 1954 would 
create. The Rental Fairness Act protects companies that profit from 
risk-creating activities at the expense of innocent victims. Do not let 
innocent victims go uncompensated to protect the thriving car rental 
industry.
    Last Congress, as time was running out on the Second Session, these 
same rental car companies tried an end run around any real legislative 
scrutiny and attempted to have this same type of legislation buried in 
the massive Omnibus Appropriations bill. They were stopped dead in 
their tracks. Of course, that might not stop them from making a second 
try in the next few weeks.
    Nevertheless, today, at least, the sunlight of public scrutiny is 
being directed on this special interest legislation that would gut 
state rights and potentially expose our communities to more reckless 
behavior on the roads. Mr. Chairman, I very much appreciate having the 
opportunity to discuss the nature of this legislation and why it should 
be strongly opposed. Thank you.

    Mr. Oxley. Thank you, Mr. Middleton.
    Let me begin with some questions. Mr. Middleton, what if a 
State like New York were to entertain repealing the vicarious 
liability statute? Would you go to New York and lobby for that 
repeal?
    Mr. Middleton. As a matter of State policy, I don't think--
I think that is up to the States.
    Mr. Oxley. What would the trial bar do? What position would 
the trial bar take?
    Mr. Middleton. I can't speak for the New York Trial Lawyers 
Association. I would imagine they would have viable arguments 
to not repeal it. New York is one of the largest tourist 
States. They have seen the need to implement this type of 
liability because of the risk involved to their citizenry by 
having so many other rental cars on the road and by spreading 
it to those who can recognize the risk and account for it. I 
believe that is the whole reason that all of these car 
companies have independent insurance policies to cover such 
risk anyway.
    Mr. Oxley. So the basic theory behind vicarious liability 
is essentially the old deep pockets theory that goes back in 
case law; is that correct?
    Mr. Middleton. That is not correct. The theory of vicarious 
liability as it has been crafted State by State throughout this 
country in various ways is that because of the relationship of 
the parties to each other, one should be held vicariously 
responsible because of the nature of that relationship and 
because of the impact on the other citizens of that particular 
State by the market activity that is taking place.
    Mr. Oxley. How far would you take it? Let's say I was going 
to go to a Halloween party, and I was dressed as an umpire, and 
I got attacked by some irate Boston Red Sox fan. Should the 
company that supplied me with the costume be vicariously liable 
for the injuries I received?
    Mr. Middleton. I don't think that is what we are talking 
about here. The transparency of the argument on this bill is 
all about supposedly an impact on interstate commerce in only 
five States----
    Mr. Oxley. How do I protect myself from paying higher rates 
for rental cars, which I do quite often in Ohio because the 
rental car companies, Enterprise and Hertz and Avis and 
everybody else, are paying these vicarious liability claims in 
New York, Maine, and other States, which directly impacts the 
ability of me to rent a car in Ohio, at least the cost of it. 
How do I protect myself from that?
    Mr. Middleton. Well, I don't know how you protect yourself 
from \7/100\ of 1 cent of all the costs incurred of all of the 
profits that these companies have brought in for themselves. 
The problem that we have here is that the States where they 
have large populations in certain States such as New York, 
certain States such as Florida--and Florida said they had a 
problem, so they addressed it, as the State properly should 
have if that was a concern of that State. The truth of the 
matter is certain of these States have much lower rental rates 
than States that do not have vicarious liability. The reason is 
they try--States like New York and Florida try to appeal to the 
leisure time market, the family that walks up and rents a car 
only once as opposed to the business market where they have to 
deal with corporate discount rates. So they utilize these 
lesser rates in some of these big States, and it has no bearing 
whatsoever on the amount of collisions that they are sustaining 
or the amount of vicarious liability.
    The truth is if you look at vicarious liability, and we 
heard from Capitaland, there is a company that had one lawsuit. 
We didn't hear what the result of that lawsuit was, and yet we 
know from a reported case that Ms. Faulkner's company had every 
right to go to court and seek damages which were summarily 
dismissed from one of their renters when it behooved them to. 
So it seems like we have an argument here where they don't want 
to be able to go to court when they may have some 
responsibility for their actions according to that State 
legislature, but they love the court system when they can go 
after somebody for in this case something that was statutorily 
not even allowed.
    Mr. Oxley. I got rear-ended yesterday coming into the 
office, and the guy that hit me--let's say I was driving a 
rental car in the District of Columbia. And I was driving a 
rental car, and I get rear-ended by this guy who lives in 
Virginia. He is clearly at fault, and you are saying that the 
rental car company in that case should be vicariously liable 
for that accident caused by this guy that didn't stop in time?
    Mr. Middleton. You don't necessarily have the situation 
where the District of Columbia has to spread--seen the need to 
spread the risk because you have the claim since you were rear-
ended against the driver of that car, and if you have other 
insurance, which I am sure you do, Mr. Chairman, you would--in 
fact, if that was an uninsured vehicle that rear-ended you, 
your own insurance uninsured motorist coverage or----
    Mr. Oxley. Why should I have to pay extra premiums for my 
insurance to protect me against somebody who is going to end 
up--who is liable, clearly liable and at fault? Why should I 
have to pay that kind of money--do you believe in the fault 
system?
    Mr. Middleton. I do believe in the fault system. I also 
believe in the balancing of if you increase the risk in a 
certain jurisdiction, and the legislature has decided that as a 
result of that, that you should undertake part of the 
responsibility for harm that is caused as a result of 
participating in that market, then if that is what the 
legislature says, that is exactly how it must be adhered to.
    Mr. Oxley. The law is imposed essentially on an out-of-
State driver, not in the driver's own jurisdiction or where he 
lives?
    Mr. Middleton. If you ask about the fact whether any 
individual should pay, there is absolutely no proof that is put 
forth--been put forth in this hearing or anywhere else of any 
increase in premiums whatsoever as a result of the practice in 
only five of the 50 States plus the District of Columbia.
    Mr. Oxley. Why do you think that only five States and the 
District of Columbia have vicarious liability laws and 44--45 
do not?
    Mr. Middleton. I don't know, but I certainly feel the need 
to honor those States that looked at this----
    Mr. Oxley. My time has expired. Let me introduce--recognize 
the gentleman from New York, ranking member.
    Mr. Towns. Thank you very much, Mr. Chairman. Also I would 
like to ask my opening statement be placed in the record.
    Mr. Oxley. Without objection all opening statements will be 
made part of the record.
    Mr. Towns. Let me begin with you, Mr. Wagner. The laws of 
how many States would not be affected by the provision of H.R. 
1954?
    Mr. Wagner. Forty-five States, Mr. Chairman. The laws of 
five different States would be preempted by this bill as well 
as the District of Columbia.
    Mr. Towns. So this law is actually--five States; is that 
correct?
    Mr. Wagner. Yes, sir, for unlimited vicarious liability. 
Let me be clear on that because there are various other States 
that are not going to be impacted by this bill necessarily, but 
do have some capped amount of vicarious liability. If you are 
looking at some notes, I wanted to be clear about that.
    Mr. Towns. Why do you think it is important for the 
Congress to act on legislation that will have such a limited 
and narrow kind of impact?
    Mr. Wagner. Congressman, this issue of vicarious liability 
affects the rental industry throughout the country. As I stated 
in my remarks, renters do not just rent from within the 
vicarious liability States. The damage is not contained to 
those State borders. In fact, when somebody, for example, rents 
in Virginia, they cross interstate lines. They cross into the 
District of Columbia. They cross into New York and Florida and 
so on, places like that.
    So this is an issue that does have national ramifications 
and one which is--amounts to over $200 million per year for 
this industry and has put literally hundreds of small operators 
out of business in States such as New York and other States 
across the country.
    A few moments ago the question was raised by the chairman 
about how the Trial Lawyers Association of New York respond to 
any effort in the State of New York, and the comment was made 
that perhaps we should take these fights back to the State 
capitals and deal with them there. I would submit that this is 
precisely the type of issue which should come before Congress 
for the simple reason that the legislators in the State of New 
York, they are not going to be attentive, responsive to a 
resident of the State of Virginia who petitions New York 
Legislature, and for that reason that points to the fact that 
it is an issue of interstate commerce, an issue of competition, 
an issue of fairness fundamentally and lower rates and price 
competition.
    Mr. Towns. What have you actually done in terms of these 
five States to change their liability laws or practices; what 
have you done in this regard? It would seem to me some effort 
should be made to just get that to happen first.
    Mr. Wagner. Congressman, I would agree with you. In fact, 
the industry has taken stops to address these issues in the 
various State capitols. In fact, last year we aggressively 
mounted an effort in the State of Florida and were successful 
in the context of the overall tort reform bill that was signed 
by Governor Bush and including a provision which would cap to 
some degree the vicarious liability damages. It was a very 
worthy effort on the part of the industry, and it was well 
thought out and well discussed.
    Unfortunately, tort reform laws across the country have 
almost uniformly been set aside and struck down for various 
constitutional reasons, and some of the rationale of those 
decisions striking down those tort reform laws is that this is 
a matter for the Congress. It is a matter of interstate 
commerce, a matter of constitutional law that should be dealt 
with by the Congress. And so while we are maintaining an effort 
at the State level, for example, in Florida, and we have also 
undertaken an effort in the State of New York and the other 
States as well, we frankly do not have the success, and if we 
do have the success at the State capitols, we are not sure that 
that law will withstand the scrutiny of the State court.
    Mr. Middleton also commented a while ago--this is a little 
bit maybe related to your question as well about the various 
steps that we take within the different States, vicarious 
liability States. He commented that we have certain age 
limitations. We don't rent to individuals below the age of 25, 
for example, which, by the way, is not necessarily the case. 
Some State laws address that, where we check drivers' licenses, 
et cetera. The simple fact is if this law passes, if this bill 
passes, those same--the same precautions are going to be in 
place for the simple reason that there are State insurance laws 
that will apply and still hold us accountable up to the State 
financial limits.
    Mr. Towns. Mr. Chairman, would you allow Mr. Middleton to 
just respond? His name was called.
    Mr. Oxley. Of course.
    Mr. Middleton. Well, with regard--I heard the mention of 
constitutional arguments. I am very concerned, obviously, that 
the premise of federalism is being absolutely trampled by these 
single special-interest attempts to impact tort reform, but in 
addition to that, I wonder where the U.S. Supreme Court--it is 
true the State courts have talked about it, but it is because 
in those instances, State legislatures have violated the 
constitutional rights of their citizenry.
    With regards to the U.S. Supreme Court, it is hard to 
imagine where they are going to go with the concept of 
federalism when they have now agreed to accept at least one 
appeal involving the Womens and Violence Act, which they say is 
an intrusion upon the rights of the States to implement certain 
of their own laws where they see fit in this particular area.
    With regards to that and the fact that there was mention 
made there were five States only, if this was an issue that 
impacted a majority of the States, maybe then the argument 
would hold water that interstate commerce was being affected. 
But we have seen absolutely no arguments that with only 10 
percent of the States involved, that there has been any impact 
whatsoever. Where are the figures, and why isn't there a study 
done to investigate not only that, but also the impact this 
would have in those various States on the insurance laws that 
they have implemented, because this does impact in a Federal 
way the insurance laws, and I daresay the proponents of this 
bill don't want to open the door to allow Federal regulation of 
the insurance industry, which has inherently been held within 
the States' purview.
    Mr. Oxley. The gentleman's time has expired.
    Mr. Towns. Thank you, Mr. Chairman. I appreciate your 
generosity. Next year I want you to know when I am Chair, I 
will reciprocate.
    Mr. Oxley. Actually next year we will still be majority.
    The gentleman from Oklahoma.
    I am going to be here, so the members if they want can go 
over and vote and come back. I will just keep on going.
    The gentleman from Oklahoma.
    Mr. Largent. Mr. Middleton, I just had a couple of 
questions for you. I am looking at--first of all, I hear you 
quote this figure \7/100\ of 1 percent. Have you met Mrs. 
Faulkner down at the other end of the table ?
    Mr. Middleton. Actually I met her in a different committee 
on a different topic where I got to hear the same story and 
where a member----
    Mr. Largent. It is a yes or no question.
    Mr. Middleton. Yes.
    Mr. Largent. That is all I need. Yes or no. She is the \7/
100\ of 1 percent that you are talking about, her company, her 
employees, and what this law did to her, take a look. She lost 
her company because of what we are trying to address right 
here. So, you know, you want to know the statistics, you want 
to see the numbers, look at the other end of the table. That is 
where they are. And companies just like hers are going through 
the same thing in States that this exists.
    The question I want to ask you is do you not see the 
patently unfairness of what is taking place here? When I read 
things like this about Budget Rent A Car renting a car to Mrs. 
La Rocca, and then she gives the car to her son who has lost 
his license, and then he drives it across someplace else and 
has an accident, where is--what could the Budget Rent A Car do 
to prevent that from happening? What could they have done to 
prevent that from happening?
    Mr. Middleton. They couldn't probably do anything----
    Mr. Largent. That is all I need.
    Mr. Middleton. Let me explain.
    Mr. Largent. No, I don't want you to explain because what 
you said is right. They couldn't have done anything, and yet 
you want to hold them responsible, and they could not have done 
anything.
    Mr. Middleton. Hold them responsible, Mr. Congressman----
    Mr. Largent. No, no. What I am saying is, when you come in 
here and give us some trial lawyer explanation of what 
vicarious liability is that is just so full of hogwash, I am 
laughing up here listening to your definition, and then come in 
here and try to defend what I believe is patently unfair, just 
on the face of it that anybody would try to defend that, it 
insults me. It insults me.
    And when we see these things happening, I think it is right 
for Congress. And I don't think it is any stretch to talk about 
interstate commerce and what we are doing, not at all. We have 
stretched interstate commerce so thin that this one is not even 
close. This is a good example of what this Congress has done, 
and I just would say that it is fascinating to me to listen to 
the Trial Lawyers of America come in here and talk about States 
rights. That is laughable on its face, too.
    With that, Mr. Chairman, I would just like to yield back my 
time.
    Ms. Faulkner. Mr. Largent and Chairman, I would just like 
to mention, because my name was mentioned by Mr. Middleton, and 
he did not look at me when you asked him to look at me, this 
case that he said that my company, myself, presented was 
presented in small claims court. It cost me less than $45. I 
was asked to do it by the New York Vehicle Rental Association 
because we wanted to try and clear up a gray matter on an issue 
not related to vicarious. I was not in a financial position to 
ever sue for vicarious liability in court, but I could afford 
the $45 for a small claims court decision, which does not 
really get upheld anywhere anyway. I just wanted to bring that 
to your attention.
    Mr. Oxley. The gentleman's time has expired.
    The gentleman from California want to be recognized?
    Mr. Cox. Actually, I intend to vote so--I was just 
answering a page.
    Mr. Oxley. Okay. The Chair would try to--want to keep this 
going because I have got a meeting at 11:30 anyway.
    Mr. Cox. I don't have enough time to ask questions and 
vote.
    Mr. Oxley. You want to come back?
    Mr. Cox. I will be very brief. I wonder if I could ask Mr. 
Wagner if he has had a chance to look at H.R. 1954, which we 
are focused on in this hearing.
    Mr. Wagner. Yes, Congressman, I have.
    Mr. Cox. Enterprise has lawyers.
    Mr. Wagner. Yes, sir.
    Mr. Cox. Are you a lawyer?
    Mr. Wagner. Yes, I am.
    Mr. Cox. I am concerned about the way section 202 is 
drafted because it seems to me that even though we are all 
pretty clear on what we are trying to do, we are trying to 
erase vicarious liability in this particular context. When the 
language says, solely by reason of being an owner of such a 
motor vehicle, and when it says, one shan't be placed in a 
position of being an ultimate insurer, I mean, there are lots 
of ways to, if you are trying to twist the thing or distort it 
or whatever, to possibly draft your complaint around this.
    I have taken a stab at something around the following 
lines. I wonder if you would just react to it. I think it means 
the same thing. No person engaged in the business of renting or 
leasing a motor vehicle shall be liable under the laws of any 
State or the United States for the tortious act of its rental 
customers or the occupants of its rental vehicles or any other 
driver, pedestrian, or person involved in a motor vehicle 
accident by reason of being an owner of a motor vehicle 
involved in such an accident.
    Is that essentially the same thing that you understand this 
bill to be trying----
    Mr. Wagner. Congressman, I think it is essentially the same 
thing. What we were trying to do was to address the issue of 
ownership of the vehicle, the rental car company owning the 
vehicle, and that by definition being the hook by which 
vicarious liability would apply to the rental car company. And 
I do not disagree that it could be rewritten in other ways to 
accomplish the same result.
    At the same time, what we were trying to do is preserve the 
States' abilities to come in and address rental car companies 
in the context of their insurance codes, their financial 
responsibility limitations. So I think that was the balance we 
were seeking, because we are not wanting to preempt State 
insurance codes. We believe that--and that, by the way, is the 
very thing that will protect consumers against, to ensure 
consumers receive the safety precautions that were earlier 
mentioned.
    Mr. Cox. I think I might even suggest appending at the end 
of what I just read the words, whether by reason of the 
doctrine of vicarious liability or otherwise, to make sure, 
again, there is no question what we are trying to do here.
    Do you happen to know, or maybe Mr. Middleton would know, 
what percentage of auto accident cases that are filed in courts 
in the United States actually go to trial?
    Mr. Middleton. I can only estimate based on other things, 
statistics I have seen, Congressman, that actual trials consume 
less than 5 percent of all the civil cases brought in this 
country, but there is another statistic in that only 4 percent 
of all cars that are rented in this country in any given year, 
4 percent, are ever involved in any accidents of any type 
whatsoever. That comes out of the Auto Rental News which is the 
industry publication.
    Mr. Cox. The 95 percent figure, and depending on whether we 
are talking about the States generally, a specific State or the 
Federal system, the numbers tend to range between 93 percent 
and 98 per percent of cases filed compared to those that even 
have a single day of trial. And because the norm is that these 
lawsuits are settled and they are not tried, what we are 
talking about is not so much an ultimate application of the law 
to the facts, which is what a judge and a jury will do, but 
rather we are talking about negotiations between parties that 
are suing each other and settlement decisions that are reached 
on the basis of minimizing the transaction costs. Both parties 
in a settlement believe they are innocent, and therefore the 
moneys that are paid in settlement tend to be the discounted 
present value of what it would take you to finally get your day 
before Judge Wapner and apply the law to the facts.
    If we don't draft this properly, and if it is loosely 
drafted, and a clever lawyer can write a complaint to get 
around summary judgment or get around judgment on the 
pleadings, then we will have done nothing, because in 95 
percent of the cases, you can still make the claim even though 
the statute is meant to prevent it from happening, and get held 
up for ransom, and because vicarious liability relieves, as the 
chairman said, deep pockets liability, it is an opportunity for 
somebody to put a company in a position where they recognize if 
they don't pay, in the end it is not profitable, so they pay 
the ransom on the high seas.
    Mr. Middleton. May I make one comment to that?
    Mr. Cox. Sure.
    Mr. Middleton. With regards to the actual cost, even in 
those negotiated settlements with regards to rental car 
companies, those are paid out of only two different possible 
places: one, a deductible that is paid for by the rental car 
company; and two, out of the insurance proceeds which they 
contract for in the private market. So the limits, it is not 
unlimited liability. The limits are whatever the coverage is 
that they buy. And second, when you look at that cost of that 
insurance spread out over the literally tens of millions of 
cars that are rented every year is so microscopic that the 
impact upon interstate commerce is--if it is not microscopic, 
it is so negligible that the intrusion on States rights simply 
shouldn't be allowed to take place.
    Mr. Wagner. Congressman, if I might react to that and your 
comments as well. First of all, I agree with your comments that 
you are right, it is the issue of settlement and threat of 
lawsuits, so the clarity of the law is as I think tantamount to 
what we are trying to achieve here.
    On the issue of insurance and deductibles, that is 
absolutely not the case. The rental car companies are not 
limited to their deductible. They are not limited to what they 
pay for a policy. In fact, many rental car companies cannot 
find insurance coverage for these types of liabilities, and as 
everybody, I think, understands that ultimately insurance 
premiums reflect the claims that are paid and so--and many of 
the companies are self-insured. I can assure you that Ms. 
Faulkner did not have potentially--depending upon how the case 
was resolved, may not have had the insurance to cover the 
ultimate claim.
    Finally, the issue of only 4 percent or some small percent, 
just a minuscule number we keep hearing about, the issue there 
is the accident-free renters and the innocent car owner 
subsidizing the accident-prone renter or the accident-prone 
driver that runs into the rental car. And there is just 
something fundamentally wrong.
    Mr. Cox. I think most of us in Congress understand this 
innately. If it costs $100 to rent a car, but it costs $100,000 
to pay a settlement if there is a lawsuit about the rental of 
the car, then the ratio is as 100 to 1, and 1 percent would be 
enough to wipe out your entire profit.
    Mr. Wagner. This industry has a very thin profit margin. We 
talk about $14 billion, but if you study those reports that 
were filed with the SEC, you would see that there is a very 
thin profit margin. I can draw some analogies with other 
industries, but in the interest of time I won't, unless asked.
    Ms. Faulkner. Also, I am a contributor to Auto Rental News, 
our only industry magazine, and I have been in the industry for 
30 years in the year 2000. That is how long I have been doing 
rental car. I have read the articles that have been, I feel, 
misquoted here, especially $14.6 billion profit with $100 
million in. If you noticed, he said collision. That article was 
attempting to get car rental companies to collect collision 
damages and encourage them to have good safe controls of the 
counter. It did not include liability cases. There is a 
difference. We collect X amount in collision damages, but it 
did not say how much money we have lost on vicarious liability 
claims or even liability claims themselves.
    Mr. Cox. Collision is just the amount necessarily to repair 
a car.
    Ms. Faulkner. Repair to our car. It was not for damages to 
people. As much as he might state it is minuscule and it is 
only New York, it wasn't minuscule to me, and it wasn't 
minuscule to all of my friends in the industry that I have seen 
go away.
    Mr. Cox. Mr. Chairman, I certainly appreciate your focusing 
this hearing on this subject, and I think it is vital for us to 
try and restore the law to the principle of holding people 
responsible for their own acts, because people who are 
responsible are in a position to remedy these problems and 
prevent them from happening in the first place. Probably the 
most telling discussion we have had here this morning is the 
question of what could the company do, the rental car company 
do, to prevent the kind of accident that was discussed, and the 
answer agreed all around is nothing, and as long as that is the 
case, it is literally immoral to hold people who are not 
responsible liable for damages caused by someone else.
    Mr. Oxley. I thank the gentleman. The gentleman's time has 
expired.
    The gentleman from Michigan is recently back.
    Mr. Stupak. Thank you, Mr. Chairman.
    I wish the legislation was a little more reasonable. If 
this vicarious liability is so horrible, how come other 
industries aren't in here asking for us to repeal it? All we 
have heard from is the car rental industry.
    Mr. Wagner. Congressman, I believe that when the statement 
is made that this single-issue, single-industry legislation--
that that is a statement that has been painted with a broad 
brush----
    Mr. Stupak. Where are the other industries from New York 
that want us to repeal vicarious liability if it is so bad?
    Mr. Wagner. Congressman, you don't see this law applied to 
tuxedo rentals. You don't see this applied----
    Mr. Stupak. Taxis, buses, airplanes, trains, they are all 
transportation much like you guys.
    Mr. Wagner. I don't think you see the issue of vicarious 
liability applied to those industries.
    Mr. Stupak. If the trial lawyers are so wonderful and 
always wanting to go to vicarious States to get these big 
verdicts you guys claim, then I would think they would attach 
it to more than just rental cars. It would be other industries.
    Mr. Wagner. I believe that it is not--it does not apply to 
other industries in the interstate--stream of interstate 
commerce. The issue of vicarious liability typically applies in 
situations where there is an agency relationship, master-
servant relationship. We don't have that here or hazardous 
materials.
    Mr. Stupak. Didn't you say it didn't apply to other 
products in the interstate commerce; you are only saying it 
applies to taxis--excuse me, rental cars?
    Mr. Wagner. I do not believe that it applies to taxis, and 
I would have to check and certainly check with each State's 
laws.
    Ms. Faulkner. New York State, it only applies to motor 
vehicles.
    Mr. Stupak. Do you have to carry vicarious liability on 
your own car?
    Ms. Faulkner. You can't carry vicarious. It is unlimited. 
How can I insure for something that is not limited?
    Mr. Wagner. If Ms. Faulkner would loan her personal vehicle 
to her neighbor, and the neighbor goes out and loans it to 
their kid that was unauthorized, takes his friend out and they 
get intoxicated and damage it, Ms. Faulkner would not be 
accountable for that situation unless there was some sort of 
negligent entrustment.
    Mr. Stupak. Can rental car companies buy insurance coverage 
for vicarious liability?
    Ms. Faulkner. No. How do you insure something that is 
unlimited?
    Mr. Stupak. It is unlimited by the amount of damages 
awarded by a jury, right?
    Ms. Faulkner. But it is unlimited. You are still asking me 
to go to an insurance company and ask for----
    Mr. Stupak. It is limited to the damages, right. I have 
home insurance, and something happens to my home----
    Ms. Faulkner. What if it is $15 million?
    Mr. Stupak. What if it is $15 million? I have as much 
insurance as I can provide, and I am in trouble if I did 
something so egregious that it would cost $15 million.
    Ms. Faulkner. If I was responsible for what happened, I 
agree, but if I am not responsible----
    Mr. Stupak. You mentioned this accident where this person 
took the car, loaned it to their son, went to New York City, 
came back, brought the car back, and there was this enormous 
amount of money awarded against you for this accident, right?
    Ms. Faulkner. I don't know what the amount was. It was 
closed, which happens.
    Mr. Stupak. Pardon? It was closed?
    Ms. Faulkner. The award was not--I was not told.
    Mr. Stupak. It might have been a dollar?
    Ms. Faulkner. I have sold my company.
    Mr. Stupak. It might have been $100 million?
    Ms. Faulkner. It absolutely could have been.
    Mr. Stupak. Was there any damage to the rental car?
    Ms. Faulkner. None whatsoever.
    Mr. Stupak. So I doubt if it is a real serious accident 
with millions of dollars?
    Ms. Faulkner. It could be.
    Mr. Stupak. Then again, it could be $1.
    Ms. Faulkner. I can also tell you that----
    Mr. Stupak. Could be $1, right?
    Ms. Faulkner. You could also let me finish. It could be $1. 
It could be $5 million.
    Mr. Stupak. So you really don't know the extent of 
vicarious liability on that accident?
    Ms. Faulkner. And the reason why I don't know is because if 
you do advertise the amounts that the trial lawyers are 
obtaining, it only gives people the opportunity to do that 
again and again and again.
    Mr. Stupak. You live in Albany, the State capital of New 
York. Did you go and ask them to change their laws?
    Ms. Faulkner. Yes, I did.
    Mr. Stupak. Did you ask them to put caps on damages in 
lawsuits?
    Ms. Faulkner. I have.
    Mr. Stupak. They rejected that?
    Ms. Faulkner. We have not been able to pass any 
legislation.
    Mr. Stupak. So then why should the U.S. Congress--if the 
New York Legislature doesn't want to do it, why should the U.S. 
Congress then bail you out?
    Ms. Faulkner. I know you feel it is repetitive, but I am 
coming here because I now currently work for a nationwide 
company. That nationwide company is in New York, but it is in 
all other States, and it is costing them amounts of money that 
they must spread out those lawsuits----
    Mr. Stupak. If we pass this, how much will my rental car 
premium go down?
    Ms. Faulkner. I can't tell you how much it will go down, 
but it will bring competition back, and competition is always 
good, and it always helps prices for the consumer.
    Mr. Stupak. If we pass this, we won't get a break, but at 
least we get more competition?
    Ms. Faulkner. You will probably get a break because you 
have increased competition. You can't deny that whenever there 
is more competition, prices do tend to go down. That is a 
simple concept.
    Mr. Oxley. The gentleman's time has expired.
    The gentleman from Illinois Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I would like to know--I know opening statements were 
submitted for the record, but I also want to add to that to 
welcome Mr. Wagner, who is from the St. Louis metropolitan 
area. Of course, my district is across the river. We are all 
part of that big family, the St. Louis metropolitan region. 
When you live on the borderline, obviously you understand the 
importance of interstate commerce. I would really like to thank 
the whole panel, because I think we as Americans--I think there 
is some pretty hard lines being drawn here. I think everybody 
accepts that an injured party should have access for redress 
through the court systems, and the problem is who is at fault 
and how do you get compensation for negligence, I think.
    I am not a lawyer. I don't even play one in another life. I 
really have no desire to be one. But I think we respect the 
court system, and the debate here is who is being held liable 
for injuring another citizen. And I do think the interstate 
commerce aspect comes in because in the St. Louis metropolitan 
area, there are people renting vehicles at Lambert, St. Louis 
airport, and driving over to see John Shimkus 30 minutes from 
the airport, and coming across State lines.
    So I appreciate this debate. I really appreciate this 
issue, and hopefully there is some movement to some common 
sense instead of the heated rhetoric that we are hearing.
    Just a couple of questions. First one for Mr. Wagner. Is 
there any way for a company, even one in a State without the 
vicarious liability, to protect itself from the unlimited 
damages that it might be exposed to because this peculiar legal 
theory? It is really kind of--really--my colleague and friend 
Bart Stupak kind of asked that question. I am asking it again. 
Is there a way for rental companies to protect themselves in 
this arena?
    Mr. Wagner. Congressman, I think at the end of the day the 
answer would have to be no, other than simply to go out of 
business. There are steps that could be taken in the interim. 
However, certainly--and Mr. Middleton outlined during his 
testimony some of the steps that we take in terms of checking 
for drivers' licenses, asking for insurance coverage, checking 
drivers' records in certain situations. And we had a discussion 
of insurance, whether we could simply insure for these losses. 
But even with insurance, if you will find a company that will 
ultimately underwrite the full extent of vicarious liability, 
the premiums are going to be oftentimes prohibitive, and 
ultimately the premiums charged are going to catch up and 
reflect the claims that have been covered through settlement or 
through judgment. So at the end of the day, the only sure way 
to protect yourself against vicarious liability claims is to 
simply go out of business.
    We can tell renters that you are not allowed to take this 
car into the other State. We can rent them smaller cars to 
limit our exposure of the passengers, the number of passengers 
that a car might have, but when they violate the rental 
agreement, and they travel across State borders, and they cause 
harm or they are harmed by a third party, the only way to--
there is no other way to ensure against that or to ensure that 
vicarious liability will not reach that rental company.
    Mr. Shimkus. Let me go to Ms. Faulkner, and, Mr. Middleton, 
I will give you a chance to respond.
    If this legislation had been enacted 3 years ago, might you 
have been able to stay in business?
    Ms. Faulkner. I absolutely would still be in business 
today, and so would all my family and friends that worked with 
me.
    Mr. Shimkus. Is a car rental company permitted under New 
York law to require your renters to purchase liability 
insurance if they do not have their own personal car insurance?
    Ms. Faulkner. Are they required to----
    Mr. Shimkus. If they don't have personal liability 
protection based on their own policy, they are renting the car, 
they don't own a car, obviously New York a lot of people 
probably don't have cars in the city, are they required to buy 
insurance as they rent a car?
    Ms. Faulkner. No, it is an option available to them, but it 
is not required. We are required to rent to them with or 
without insurance.
    Mr. Shimkus. Let me then follow up. Mr. Middleton, you 
heard Mr. Wagner's statement there is nothing a rental car 
company can do to prevent itself from liability. Do you agree 
or disagree with that?
    Mr. Middleton. I disagree. One, they can go to the State 
legislatures that have implemented these vicarious liability 
statutes. They could ask for the very type of coverage to be 
implemented in a situation where the renter--excuse me, the 
person renting the car did not, in fact, have insurance. I have 
heard no evidence that that has been attempted. That is where 
it should be in the States.
    And with regards to this idea to the question of whether 
premiums would go down, the only statistics that this committee 
has had today are the statistics that we have provided. The 
statistics from 1996, a year in which Florida allowed vicarious 
liability claims and California, the most populous State, had 
controls on vicarious liability claims, reveals that even with 
vicarious liability claims, the per day rental rate in Florida 
for all companies was more than $4 a day cheaper than it was in 
a State that had controls. It is--to suggest that those limits 
are going to go down----
    Mr. Shimkus. I appreciate your response.
    Mr. Oxley. The gentleman's time has expired, but go ahead, 
one more.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Do you take the position that this has no interstate 
commerce aspect to it?
    Mr. Middleton. I take the position that the impact on 
interstate commerce----
    Mr. Shimkus. The question is--that is not the question. The 
question is is this the purview of interstate commerce; is 
renting cars that go across State lines, is that the purview of 
interstate commerce under the interstate commerce clause?
    Mr. Middleton. Not when there is no provable impact.
    Mr. Shimkus. Your answer is no. Thank you.
    Mr. Oxley. The gentleman's time has expired.
    The gentleman from Minnesota Mr. Luther.
    Mr. Luther. Thank you, Mr. Chairman.
    Mr. Wagner, just a couple of questions to make sure I 
understand this. Now, in those five States that we are 
referring to here, could a customer that is renting a car come 
up and waive all insurance? If there was no vicarious 
liability, or let's say this bill passed, then could the 
customer still waive insurance and therefore not provide any 
coverage in the event that the vehicle would then go out and 
hit someone?
    Mr. Wagner. Congressman, if I understand your question 
correctly, I would have to answer no. There is no way that 
ultimately the customer could waive all insurance if this bill 
would pass. Every State in the country save one, and I am not 
entirely sure if I--it may be Mississippi or Alabama, one of 
those two States--has in place financial responsibility laws; 
requires minimum amounts of coverage that all car owners are 
required to have and maintain a vehicle. And so when a customer 
comes in, if they own their own car, they are likely going to 
be carrying financial responsibility on that vehicle, and the 
rental car company itself will be carrying financial 
responsibility, so that the injured party out there will 
ultimately be able to claim against the driver, the renter's 
insurance or ultimately against the rental car company's 
minimum financial responsibility. So they cannot waive that.
    Mr. Luther. I am curious, though, because it seems to me by 
just initialing places in the form, you can waive all of this 
insurance. And let's say that you applied, and you didn't have 
a car of your own. You might have a driver's license, but you 
don't have a car of your own, so you have no insurance. Or 
let's say that you have a car, but you are one of those people 
who just doesn't insure. That is a big problem in our country 
is uninsured motorists. Now, would it be possible for that 
person----
    Mr. Wagner. What you are speaking to--and you are right, I 
did not address this directly--are the products that are 
offered by a rental car company, oftentimes referred to as 
supplemental liability coverage, supplemental liability 
products, accident insurance, personal injury-type insurance. 
Those are products that are provided often by a rental car 
company, which frankly we haven't mentioned much about today. 
That is a precautionist, a safety measure or an opportunity 
that is offered to each rental customer that they can come in 
and for a fee buy insurance to cover their liability. But if 
they choose to decline that and waive it, and they sign the 
appropriate lines where they knowingly decline that, still the 
State financial responsibility laws that I mentioned apply. If 
the renter has insurance on his own vehicle----
    Mr. Luther. Let's say now there is no----
    Mr. Wagner. They have no vehicle, then the rental car 
company itself is required in all but, as I said, one of 
those--one State to cover the vehicle itself, so that the 
injured party--and that is a public policy that has been 
established in States across the country, that the injured 
party is always going to have some opportunity to recover at 
least the State financial responsibility minimums that are 
imposed by law. And that is the context in which these issues 
are dealt with in State insurance codes. Vicarious liability is 
unrelated to insurance coverage.
    Mr. Luther. Of course, a lot of those coverage limits are 
very low. They are very inadequate. Today I think many of those 
State limits are extremely inadequate compared to what the real 
cost is if a person is injured.
    Did you have a response? Mr. Middleton, you wanted to 
comment.
    Mr. Middleton. Only with regards to these supplemental 
coverages. It is very important for everyone to know that the 
supplemental coverages offered by the car rental industry are 
peddled with great zeal and that, in fact, they represent--
there is a 70 percent margin on all the supplemental coverages. 
In fact, Alamo has 23 percent of their total revenues are 
derived from these supplemental insurance products that they 
try to push upon the customer. So there are a lot of these 
supplemental coverages that are actually, in fact, being 
purchased and which go to help compensate the innocent people 
who are injured.
    Mr. Wagner. Mr. Congressman, may I just--I don't think we 
are here to debate the merits of supplemental liability 
coverage, but I will tell you that typically in the industry 
practice--and you can certainly check with the Auto Rental 
News--is when a liability policy is covered, offered, it 
provides coverage for that injured party, the driver who may be 
the renter or an independent third party, up to $1 million, 
from zero to $1 million, and for a fee of maybe $9, $10, $8. 
That is a product that may have value for which only a small 
percentage of the customers take.
    Mr. Luther. My final question, if I could just ask, is if 
we would pass Federal legislation, would it make sense to at 
least then provide some minimum threshold out there, 
recognizing that there are all these State statutes that are 
probably in most people's views here on the committee very 
inadequate in terms of compensating a truly injured person? 
Should we then also have kind of a minimum standard as to what 
this coverage ought to be?
    Mr. Wagner. If you are asking me, we have heard a couple of 
suggestions for language adjustments, and I think that all of 
those, including your suggestion, are worthy of consideration. 
But I will also add as a footnote that precisely the type of 
matter that is considered in the State capitals are the dollar 
limits, and we see every year legislative efforts and success 
to raise those minimum financial responsibilities.
    Mr. Luther. Mr. Chairman, not to belabor this, but I served 
in the State capital for 20 years, and I can tell you how 
difficult it is to get those raised and the lobbying that goes 
on. I think most of them in this country are very inadequate 
for the real cost today to a family that is injured. And that 
is--our concern here has to be looking out for those consumers.
    Mr. Wagner. I understand. I think we are saying the same 
thing with respect to us going to the State capitals and trying 
to address vicarious liability.
    Mr. Luther. Thank you very much.
    Mr. Shadegg [presiding]. I would recognize myself next. I 
thank the chairman for putting me in the Chair to do this. I 
just want to begin. My time is very short.
    Mr. Middleton, I want to begin by nailing down two 
questions that I think Mr. Shimkus got you to answer, but I 
want to be sure you answered. First, I believe you acknowledge 
in your view there is no effect on interstate commerce?
    Mr. Middleton. None that has been proven.
    Mr. Shadegg. None.
    Mr. Middleton. None that has been proven.
    Mr. Shadegg. Proven. I like the lawyer's word. I am a 
recovering lawyer myself.
    And you say that there are no effects on rates, there is no 
cost to this?
    Mr. Middleton. None that has been shown.
    Mr. Shadegg. This is just a comment. I am puzzled as to why 
ATLA is in here to the wall fighting this if there is no cost 
here. It is a little difficult for me to understand.
    I am out of time. I need to move into my 5 minutes. I will 
let you to respond to that later if you would like.
    Have you read this bill?
    Mr. Middleton. Yes, I have read it.
    Mr. Shadegg. Have you read the operative section of the 
bill on page 7?
    Mr. Middleton. I don't have a copy of the bill with me here 
today.
    Mr. Shadegg. If you turn to page 7 and you look at lines 13 
through 18, that is the operative section of this bill. That is 
where we go at and address the law of vicarious liability. And 
actually I think the key words are on line 17 and 18--actually 
the key words are really on line 17, and it says--basically 
says you cannot be held liable, and there are four words, 
``solely by reason of'' being owner of the car.
    So ATLA's position here today is acknowledging that the 
current law makes someone liable and makes them pay damages 
just because they own the car. That is what we are doing to the 
rental car companies. They simply own the car; therefore, they 
are liable. You believe that to be a reasonable stand?
    Mr. Middleton. I believe it to be reasonable in this 
context, Mr. Congressman: It is reasonable if the State 
legislatures have looked at this--let me finish, please.
    Mr. Shadegg. Your State legislature argument deals solely 
with interstate commerce, and you are simply wrong about that. 
Let's not deal with that. If you have a defense other than 
that, you can give me the defense other than that.
    Mr. Middleton. The defense is that the reason vicarious 
laws are in place is because it has been determined that if a 
company is dealing in a marketplace and is having a potential 
impact upon the risks that are raised for those citizens, 
then--that is the background and the importance of vicarious 
liability--is that those people as a result of the agency 
relationship, then those people should maintain a certain level 
of responsibility. They are making money off of the system----
    Mr. Shadegg. I am afraid I have got to move on. First of 
all, I think you are wrong about the theory underlying 
vicarious liability. The reality is there was a time in America 
when there was no social infrastructure network, when somebody 
who might be injured by somebody that was without any resources 
might not have been compensated at all. That era is gone. What 
I want to talk about is you say in that context ATLA believes 
passionately--because I have been working with ATLA--that HMO 
immunity under ERISA is immoral, that it is wrong, that in no 
circumstances should we allow a health care company in America 
governed by ERISA to injure or kill someone and walk away and 
say, hey, too bad. That flies in the face of the philosophy of 
my party, and I think the philosophy of this Nation, which is 
individual responsibility. ATLA says it is immoral and that 
HMOs are out there killing people today.
    The example I used is Mrs. Corkrum's baby, whom United 
Health Care killed and walked away and said, too bad, Mrs. 
Corkrum, too bad, Mr. Corkrum, you recover nothing. ATLA says 
that is wrong, but you turn the flip side of absolute immunity 
given to the HMOs under ERISA, as interpreted by the United 
States Supreme Court, you turn that around, the other extreme 
is vicarious liability, which is strict liability for doing 
nothing wrong.
    I don't understand how you can come in here on the one hand 
and say ERISA is completely wrong because it allows HMOs to 
kill people and walk away and not be accountable, and then you 
turn around and come back to the same Congress and say, but 
another law that says we can hold innocent parties, in this 
case a rental car company that did nothing, absolutely nothing, 
wrong, we want to be able to hold them liable for something 
they did that--for nothing they did. They are an innocent 
bystander.
    I just can't even imagine that you can take that 
hypocritical stand, and I will tell you I am fighting to the 
wall on the ERISA issue to try to get the business community to 
wake up and say you cannot continue to defend a policy which 
says that HMO health care companies can kill people and maim 
people and walk away and just say, too bad, there is no 
recovery, the Congress granted absolute immunity, and then turn 
around and come in here and say, Avis or Hertz or Budget or 
whoever you are, you did nothing wrong, but you own this car.
    Remember, go back to the language of the bill. Solely by 
reason of being an owner. This isn't a question about their 
negligence in renting the car. If you guys came in here and 
said if they are negligent in renting the car, if they rented 
to a drunk, if they rented to a multiple-convicted reckless 
driver, they ought to held liable, you damn bet. I will be on 
your side of that fight. But I tell you this is a serious 
mistake on your part, which I believe is indefensible.
    Mr. Middleton. May I respond?
    Mr. Shadegg. Sure.
    Mr. Middleton. The difference between HMOs--and I have 
great respect for your stand on the HMO issue, but the 
difference between ERISA preemption with regard to HMOs and 
what we are dealing with here is there is nobody in any State--
we are talking about tens of millions of people, as the 
Congressman is aware, who have been impacted by the ERISA 
preemption. Here we are talking about what essentially five 
State legislatures have seen fit to do based on other policies 
which are intertwined with their own State-regulated insurance 
statutes and which for their peculiar reasons they seem to feel 
is necessary to maintain. The impact, rather than on all 50 
States and the District with the ERISA, is here we only have a 
tenth of the jurisdictions involved at all.
    Mr. Shadegg. So ATLA is okay to defend an immoral policy 
because some State legislature they've been able to 
successfully win that argument in already.
    Mr. Middleton. I think it is a matter of the State 
legislature.
    Mr. Shadegg. It is not immoral to hold me accountable for 
doing nothing wrong, to make me pay millions of dollars in 
damages when I have done nothing wrong? If you don't think that 
is immoral, here's the bill I am going to introduce: A bill 
that says for anyone injured by an accident in which a rental 
car company rented a car to someone, and that someone 
negligently entrusted the car to someone else who killed 
someone, therefore the rental company was not liable for that, 
recovery may be had against a class consisting of all trial 
lawyers in America. It is as logical to hold all trial lawyers 
in America liable to pay the damages to that person innocently 
injured as it is to hold the rental car company liable, isn't 
it?
    Mr. Middleton. No. And I am glad you are a recovering 
lawyer, Congressman.
    Mr. Shadegg. My time has expired.
    The Chair recognizes Mr. Deutsch.
    Mr. Deutsch. Thank you, Mr. Shadegg. I always kind of enjoy 
these hearings for a couple of reasons. One, I get to hear my 
Republican colleagues argue in favor of Federal Government 
involvement sometimes, and then on the other side. The whole 
Patients' Bill of Rights issue that Mr. Shadegg alluded to, you 
know, he as well as many of his colleagues all of a sudden, 
even though there is ERISA in terms of pension issues, which 
they don't want to touch, now it is not a States right issue. 
Whenever we start talking about States rights issues, I am 
consistently reminded that consistency is the hobgoblin of 
small minds. I do think, though, that Mr. Shadegg----
    Mr. Shadegg. Those small minds of the trial lawyers then.
    Mr. Deutsch. It includes yours, though, when you talk about 
what you just talked about in terms of the HMOs. Let me just 
mention this in specific, that I think Mr. Shadegg did get to a 
point which I think needs to be clarified, the whole issue of 
fault. You know, fault is not the only thing that we put 
liability on in the judicial system, and, Mr. Shadegg, there is 
a vast majority of States that have no-fault automobile 
insurance, no-fault automobile insurance. Now, if you want to 
describe no-fault automobile insurance as immoral, that is your 
entitlement to do, but I think--again, I don't know the exact 
number of States that have no-fault insurance, but there is a 
large number of States that have it for some excellent policy 
reasons, some excellent policy reasons in terms of reducing 
unnecessary litigation and reducing consumer costs of insurance 
sufficiency, best ability to pay, all sorts of reasons.
    So I think, you know, we need to go beyond just fault. I 
think something does bother us, though, about saying companies 
should be vicariously liable when there is, in quotes, no 
fault.
    I think Mr. Middleton, at least in some of your testimony, 
is really getting at the heart of this. I had the honor and 
distinction of serving as chairman of my State insurance 
committee when I was in the State legislature, and I at least 
tried to use policy issues. I think what you alluded to in your 
testimony a little bit is what legislatures could be going 
through. Let me emphasize could be going through on the policy 
side of why to implement this; that, I think, if this committee 
is doing our job, we really should be looking at--to some 
extent to really be looking at the policy side, that, in fact, 
do these types of legislation end up really creating a better 
policy outcome, I mean, really testing, creating less risk. 
There are policy reasons for it.
    And Mr. Wagner, I think, responded a little bit trying to 
say that, well, you know, we would be doing these checks of 
drivers' records and things like that anyway.
    Mr. Middleton, I want to give you the opportunity to really 
try to elaborate on that, just in terms of from a policy 
perspective, taking away--and I think that is really what 
bothers me, that we acknowledge that there isn't fault, but if 
you can kind of maybe elaborate why in this setting, even 
though there is not fault from a policy perspective, it would 
make good public policy to do that.
    Mr. Middleton. Well, it stands to reason that if you put 
more and more cars on the road in any particular State 
regardless of what the vicarious liability statute is, is that 
you are going to have a situation where you have more 
likelihood of having collisions or accidents.
    What the underlying policy of vicarious liability is, 
whether anybody wants to admit it or not, is that the 
relationship is twofold. It is a relationship of the rental car 
company in this context to the person renting the car and who 
is in the best position to control that risk, and also how that 
impacts the other citizens of each particular State. You put 
more people on the road; you don't increase the number of 
uninsured motorists, but there is a greater likelihood created 
that the uninsured motorists are going to be involved in a 
collision.
    Who is in a position to compensate the person who is 
absolutely innocent? Who is the person who gets collided with 
or run over as a pedestrian? The company has decided, made a 
marketing decision, to come in and utilize a system in that 
State. They know what the law is of vicarious liability. They 
say, you know what, in spite of this, we can make money off of 
this. They come in, they increase the road usage. They 
decrease, as a result of that, with the millions of cars on the 
roads, the--they increase the likelihood of collisions and harm 
done to people. Then our society, through our State 
legislatures, has decided that in certain States, based on what 
they see as important, they are going to impose that cost upon 
the company that is doing the marketing and doing the business 
in that State.
    Mr. Deutsch. Mr. Wagner, if you could maybe respond in a 
sense, and this is really sort of follow-up to Mr. Shimkus's 
questions or comments, is there any way of dealing with the 
problems that Mr. Middleton just addressed without completely 
repealing vicarious liability through legislation like this? Is 
there any way of dealing with it differently than this? Is it, 
in fact, an either/or, these are the options?
    Mr. Wagner. Congressman, I don't know that it is a black 
and white, either/or situation. Certainly the problems that Mr. 
Middleton addressed, the number of cars on the road, you know, 
there may be more cars on the road than 10 years ago, 15 years 
ago. Certainly cars tend to be safe for now, and they tend to 
wear longer, so I think you see manufacturers addressing issues 
related to more cars on the road.
    The issue of--that he talked about about these people 
exercised a marketing judgment to come into the State and 
conduct business, Ms. Faulkner happened to be in New York when 
she started her business. She may have been born or raised 
there. I work for Enterprise Rent-A-Car. I was born and raised 
there. I think that people have a right to establish a business 
in the State that they are in without having to move out of the 
State. I think Ms. Faulkner has talked from time to time of 
actually leaving the State of New York.
    So you can say, sure, you exercised marketing judgment or 
decision to come into the State and open up a business, but I 
think that that is skirting the fundamental issue here that we 
are talking about about fault notwithstanding, the discussion 
of no-fault insurance, the relationship between the rental car 
company and the customer, that is not the same as an employer-
employee, a master-servant. What you have here is a rental car 
company that receives a potential customer, has about 2 or 3 or 
4 or 5, 10 minutes, whatever time is taken to look at that 
person, check to see if they have got a valid license, check to 
see if they carry insurance, size them up, have them fill out 
the contract, see if they are going to agree to the terms of 
the contract, sign up the other authorized drivers that are 
going to be using the car, and then off they go. It is not--we 
are not the ultimate insurer. We do not hold ourselves out to 
be in the insurance business in the sense of underwriting any 
damages that ultimately result from their giving the car to a 
neighbor, an unauthorized driver and ultimately going on.
    So there are a lot of responses to the things that we have 
heard back and forth here and the comments that Congressman 
Shimkus made and Congressman Luther made in terms of are there 
some areas in the middle. There may be.
    Mr. Deutsch. Thank you.
    Mr. Shadegg. The time of the gentleman has expired. The 
Chair would recognize the gentleman from Tennessee Mr. Bryant.
    Mr. Bryant. Thank you, Mr. Chairman. I am always amazed 
when I hear, and I think unfairly, this debate that the 
Republicans are always for States rights, and we are so 
hypocritical when we want to bring something to the Federal 
level. That is an unfair argument. I see so many times my 
colleagues on the other side who we believe want to Federalize 
everything, but yet when we bring up States rights, they argue 
no, big government has a role in this, and just seeing the 
delight and throwing it up in our face that we are the only 
ones that are hypocritical.
    I think no party has a monopoly on hypocrisy up here. I 
think Mr. Frank has it right when he says the parties agree 
with the level of government that agrees with them. We think 
the level of government that agrees with us ought to be the one 
to control it. Let's put aside that argument of hypocrisy.
    And, Mr. Middleton, I know you represent the trial lawyers. 
I was a civil defense lawyer. And believe me, if you guys 
didn't file lawsuits, I wouldn't have any work to do. So I come 
from that system, and I understand the need for people to be 
able to sue fairly to collect damages, but I sincerely believe 
in sponsoring this bill that this is unfair. I have listened to 
your arguments. I have read other statements about it, and I 
simply disagree. The no-fault system was set up in some States 
to facilitate the adjustment of claims as much as possible, 
bypass trial lawyers, find those people that are truly injured, 
and get the money to them as quickly as possible through a no-
fault system. Whether that has accomplished that or not, 
whether that is beneficial where the plaintiff actually gets 
more money quicker out of it than having to go through a long, 
drawn-out lawsuit, I don't know. We are not here to judge the 
no-fault, but that is why that system is in place.
    I look at all these examples that I brought out about where 
a car company, a truck rental company is held liable simply 
because they rent a perfectly good truck, not defective, to a 
perfectly competent driver, not intoxicated, not in any other 
way impaired, and somehow this person goes out and has a wreck, 
and they are held at fault. The individual who rented the car 
should have had insurance that the injured plaintiff could have 
gone against. If that person was uninsured, the injured party 
most likely had some sort of uninsured coverage in their own 
policy or underinsured coverage. So it is not as if the injured 
plaintiff goes wanting for some source of money. But yet these 
five States and DC have come in and said, well, we are going to 
overlook the fact of liability insurance possibly that the 
driver had, we are going to overlook the fact that the 
plaintiff could have uninsured insurance, and we are going to 
look for the deep pocket. We are going to look for the big 
company out there. Everybody knows they make a lot of money.
    Again, I just don't accept as valid your overall societal 
argument that big companies, when they come into a market, 
ought to be responsible for damages even though there is 
absolutely no fault there.
    Also, the issue of comparison of rates. I am not sure, and 
maybe you believe you are right on this, but when you compare 
Florida rates of rental cars to what cars rent for out in 
California, I am not sure we are talking apples and apples. 
Maybe we are talking apples and oranges, because the tort 
system in Florida, the State tort system in Florida, is 
certainly different than the State tort system in California. 
California, I think, probably has consistently higher verdicts 
out there that are factored in, in normal plaintiff/defendant 
lawsuits, that are factored into the car companies. Certainly 
their cost of doing business, the taxes they pay in the State 
and all these other issues are factored into what they rent a 
car for every day. So simply to say, well, you can rent a car 
cheaper in Florida than you can in California, so therefore 
this whole argument that the car companies make that vicarious 
liability costs them money is a bogus argument, I don't think 
that is true. I think, again, there are a lot of costs that go 
into how much those cars rent for other than the fact that the 
cars can be held--the companies can be held vicariously liable.
    I wonder, too, Ms. Faulkner, you were in business in New 
York. Does New York State--does the New York State Legislature 
require a person renting a car to have insurance?
    Ms. Faulkner. No.
    Mr. Bryant. They don't mandate that you must have insurance 
before you rent a car?
    Ms. Faulkner. No. As a matter of fact, we can't 
discriminate against someone that doesn't have insurance.
    Mr. Bryant. And I say this halfway joking, Mr. Middleton. I 
don't think this is possible, but do you think it would solve 
our problem if after the company went through the checklist and 
made sure they had a perfectly good working car, not defective, 
and a competent driver, that perhaps they would send a Hertz 
employee along with that rental car? Would that solve a 
problem?
    Mr. Middleton. No. I think one way to address this would be 
to require proof of other insurance if you are not going to 
subscribe to the optional coverages. But let me just----
    Mr. Bryant. You are saying the States don't--at least in 
New York didn't require insurance?
    Mr. Middleton. That is why they have this vicarious 
liability. That accentuates the situation that I said that you 
can't simply look at this one statute. You have to look at how 
those particular State legislatures that allow vicarious 
liability have interwoven it with their other insurance 
regulations that they have implemented, because the reason 
they--I assume. I am not from New York. You can't tell from my 
accent, I know. I am your neighbor in Georgia. But with regards 
to what the legislature has decided, since they can't mandate 
that they show proof of insurance, then their legislature has 
decided that vicarious liability, I can only assume by looking 
at it because it dovetails perfectly, should be kept in place.
    But there is one other thing I would like to mention. That 
is, with regards to the Florida rates, those rates were based 
on 1996 figures at a time when Florida had complete vicarious 
liability, and California had caps on vicarious liability and 
applied only to base rates.
    Mr. Bryant. You think that is the only factor that these 
companies take into consideration when they set their costs?
    Mr. Middleton. No, I don't. I think what we ought to do----
    Mr. Bryant. You think Florida--the cost of business is as 
expensive in Florida as it is in California?
    Mr. Middleton. I imagine it is.
    The other problem with the rental car industry in Florida 
is they rent to a greater percentage of foreign nationals, rent 
vehicles to a greater percent of foreign nationals than any 
other State in the Union, and who but the rental car companies 
should be held responsible for the marketing decision to rent 
to those people when those people leave the country and you 
can't attach any insurance that they have or any other assets 
they have for harm that they may cover?
    So you have to look at all of these reasons in a particular 
State. That is why we say it should really be left to the 
States. We think that they have given an analysis to this 
that--I have a great belief that Congress is really charged 
with doing very noble things. I have great respect for this 
body that I sit before today. And I don't see where if you only 
have 10 percent of the States that have implemented a certain 
statutory relief, that you should--that Congress should engage 
in something like that when we don't have the statistics before 
us.
    I would love to see the statistics broken down on actual 
vicarious liability costs, and we don't have those, so the only 
thing that we can rely upon is the extrapolation total 
revenues, total amounts paid in collision costs and the fact 
that no SEC disclosures have revealed any concern whatsoever 
for any of these large car companies, rental companies, of any 
problems with liability coverage.
    Mr. Bryant. I appreciate the extended remarks you have 
given. I think, again, the companies are here in Washington 
asking for relief, for whatever reason, that is not--they can't 
get that in these individual States. I have my own theory on 
why trial lawyers are so successful in the States, as they are, 
I might add, very effective, probably the most effective lobby 
in Washington, DC, from what I can tell.
    But I think it boils down to an issue of fairness in terms 
of fault. I think our system inherently, and should be 
inherently, a fault-based system. I think there are some rare 
exceptions out there. Again, I made my living because you guys 
file lawsuits, but I think there is some balance here, and I 
agree with Mr. Shadegg, I think this one goes a little too far, 
and I am certainly willing to risk my old law firm's cases that 
we had defending what few they might have been in this 
particular instance to take that position. I guess it is just 
one of those issues I think good people can simply disagree on. 
I thank you.
    Mr. Middleton. I appreciate your comments.
    Mr. Shadegg. I thank the gentleman.
    The time of the gentleman has long since expired, but he is 
the sponsor of this legislation. I want to thank all the 
witnesses for your thoughtful testimony. There are probably 
some gray areas here. We appreciate your help. The committee is 
adjourned.
    [Whereupon, at 11:50 p.m., the subcommittee was adjourned.]
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