[Senate Hearing 106-979]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 106-979

   BIG GOVERNMENT LAWSUITS: ARE POLICY-DRIVEN LAWSUITS IN THE PUBLIC 
                               INTEREST?

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

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   on

   EXAMINING THE SPATE OF CERTAIN GOVERNMENT LAWSUITS FILED AGAINST 
                          DIFFERENT INDUSTRIES

                               __________

                            NOVEMBER 2, 1999

                               __________

                          Serial No. J-106-58

                               __________

         Printed for the use of the Committee on the Judiciary


                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
71-867                     WASHINGTON : 2001


                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman

STROM THURMOND, South Carolina       PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania          JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona                     HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri              RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan            ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama               CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire

             Manus Cooney, Chief Counsel and Staff Director

                 Bruce A. Cohen, Minority Chief Counsel

                                  (ii)


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Hatch, Hon. Orrin G., U.S. Senator from the State of Utah........     1
Kennedy, Hon. Edward M., U.S. Senator from the State of 
  Massachusetts..................................................  3, 5
Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont...     4
Schumer, Hon. Charles E., U.S. Senator from the State of New York    18

                    CHRONOLOGICAL LIST OF WITNESSES

Statement of Hon. Mitch McConnell, U.S. Senator from the State of 
  Kentucky.......................................................     7
Statement of Hon. Jack Reed, U.S. Senator from the State of Rhode 
  Island.........................................................    11
Statement of Hon. Richard J. Durbin, U.S. Senator from the State 
  of Illinois....................................................    15
Panel consisting of Jonathan Turley, Shapiro Professor of Public 
  Law, George Washington University, Washington, DC; Don Ryan, 
  executive director, Alliance To End Childhood Lead Poisoning, 
  Washington, DC; Matthew L. Myers, executive vice president and 
  general counsel, National Center for Tobacco-Free Kids, 
  Washington, DC; Victor E. Schwartz, Crowell and Moring LLP, 
  Washington, DC; William M. Keys, chief executive officer, New 
  Colt's Holding Company, Hartford, CT; and R. Bruce Josten, 
  executive vice president, U.S. Chamber of Commerce, Washington, 
  DC.............................................................    21

               ALPHABETICAL LIST AND MATERIALS SUBMITTED

Durbin, Hon. Richard J.: Testimony...............................    15
Josten, R. Bruce:
    Testimony....................................................    55
    Prepared statement...........................................    57
Kennedy, Hon. Edward M.: Conversation with Attorney General Janet 
  Reno, dated April 30, 1997.....................................    14
Keys William M.:
    Testimony....................................................    51
    Prepared statement...........................................    53
McConnell, Hon. Mitch:
    Testimony....................................................     7
    Prepared statement...........................................     9
Myers, Matthew L.:
    Testimony....................................................    39
    Prepared statement...........................................    41
Reed, Hon. Jack:
    Testimony....................................................    11
    Prepared statement...........................................    13
Ryan, Don:
    Testimony....................................................    34
    Prepared statement...........................................    36
Schwartz, Victor E.:
    Testimony....................................................    43
    Prepared statement...........................................    45
Turley, Jonathan:
    Testimony....................................................    21
    Prepared statement...........................................    23

 
   BIG GOVERNMENT LAWSUITS: ARE POLICY-DRIVEN LAWSUITS IN THE PUBLIC 
                               INTEREST?

                              ----------                              


                       TUESDAY, NOVEMBER 2, 1999

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:25 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Orrin G. 
Hatch (chairman of the committee) presiding.
    Also present: Senators Sessions, Kennedy, and Schumer.

 OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 
                       THE STATE OF UTAH

    The Chairman. I apologize to everybody for having to start 
this hearing so late. Let's allow as many people into the 
hearing room as we possibly can from those standing in the 
hallway. Allow people to stand if they have to.
    Today's hearing is entitled ``Big Government Lawsuits: Are 
Policy-Driven Lawsuits in the Public Interest?'' The purpose of 
the hearing is to examine the spate of government lawsuits 
filed against different industries. The aim of these lawsuits 
is clearly to establish and enforce social policy preferences.
    Many of the social goals of the lawsuits appear to be 
worthwhile, but to me, these lawsuits raise the issue of 
whether the courts and the trial attorneys, or the 
democratically-elected legislatures of this country, should set 
policy for the American people. I believe that our Constitution 
has already provided an answer to this question. In a 
democratic republic, the people, through their elected 
representatives, must set fundamental policy.
    The scope of these lawsuits happens to be immense, and the 
American public is taking notice. A Federal suit was filed 
against the tobacco industry on September 22 of this year, 
ostensibly to recoup Medicaid and Medicare costs for treating 
tobacco-related illnesses. In a recent Kaiser/Harvard report, 
the Federal Government's civil lawsuit against the tobacco 
industry was rated America's top health news story in September 
of this year, followed by 62 percent of the public.
    Besides the Federal tobacco suit, the Housing and Urban 
Development Agency, HUD, has recommended to the Department of 
Justice that a Federal suit be filed against the firearms 
industry to recoup the costs to public housing of illegal 
firearm use.
    Twenty-nine cities and counties have filed suits against 
gun manufacturers, claiming that the manufacturers have 
negligently marketed and distributed firearms, resulting in 
increased criminal use of guns. State actions have also been 
filed against the lead paint manufacturers. It has been 
reported that other suits may be brought against the alcohol 
and beverage industry, the automobile industry, the fast-food 
industry, and the pharmaceutical industry. The latter is not at 
all far-fetched, given the recent announcement by President 
Clinton that the Government will investigate the pharmaceutical 
industry, although no violation of law was stated to justify 
such an investigation.
    Certainly, the social goals of reducing cigarette smoking 
and decreasing firearm injuries and crimes are worthwhile. Let 
me say up front that I am no friend of tobacco use, nor an 
apologist for the tobacco industry. Indeed, I have never used 
tobacco products in my life and I am opposed to tobacco use. I 
have never inhaled or chewed tobacco, although I have wondered 
from time to time.
    Along with my cosponsor, Senator Feinstein, I worked hard 
last Congress to pass legislation that would have gone a long 
way in helping Americans kick the habit in reducing teen 
smoking. The legislation required the tobacco companies to pay 
$429 billion to settle existing lawsuits. In return for the 
settlement of those lawsuits, the companies would have stopped 
targeting children, and they would also have funded anti-
smoking cessation efforts.
    While this measure has yet to pass, I strongly believe that 
the fairest and most efficient solution to the use of tobacco 
is omnibus legislation such as the Hatch-Feinstein bill, rather 
than relying on dubious legal lawsuits. Litigation cannot 
effectively deal with important public policy problems such as 
what measures the industry must take to reduce youth smoking or 
to what effect will rising prices have on the black market for 
cigarettes.
    The courts indeed have never been considered the proper 
institution to determine such policy. The judiciary, according 
to Alexander Hamilton in Federalist No. 78, is the, ``least 
dangerous,'' branch because courts exercise neither, ``force 
nor will,'' but ``judgment.'' By that, Hamilton meant that the 
judiciary should not exercise executive powers nor promulgate 
legislative activity and policy.
    The only proper role for the courts, therefore, to Hamilton 
and other Framers is to render, ``judgment,'' by interpreting 
the laws in particular cases or controversies. Using the courts 
to create or enforce policy objectives, no matter how 
worthwhile an end, may very well distort the constitutional 
system of separation of powers, and may weaken republican 
democracy.
    But the Clinton administration appears to be doing just 
that. In fact, they openly admit it. In an article in USA 
Today, dated February 11, 1999, former Clinton guru and 
Secretary of Commerce Robert Reich applauded the then 
prospective Federal lawsuit against the tobacco industry, as 
well as other policy-driven lawsuits, such as those against the 
firearms manufacturers. Reich conceded that, ``In the old days, 
state legislatures or Congress would enact laws which would be 
administered by regulatory agencies.''
    Now, this constitutional procedure born of separation of 
powers is no longer effective, according to Reich, because, 
``the era of big government,'' is over and laws and regulations 
are just too hard to promulgate. Consequently, Reich advocates 
litigation as a replacement for regulation. He is also really 
saying that, because the administration can't get its policy 
agenda through Congress, the trial lawyers and the attorneys 
should do the job of setting and enforcing legislative policy.
    Now, that this anti-constitutional thinking is rather a 
blatant attempt to bypass Congress is apparent to some, and it 
appears to be a manipulation of the judiciary as well and it is 
shown by the fact that Reich brazenly acknowledges that it does 
not even matter whether a bona fide suit exists. He recognizes 
that for tobacco, ``many legal experts doubt that the federal 
government has the authority to launch a lawsuit.'' But 
according to Reich, ``that's irrelevant,'' because, ``the 
lawsuit would be a bargaining chip to settle the case.'' So 
much for legal ethics, so much for the Constitution.
    Robert Reich's conclusion is, ``The era of big government 
may be over, but the era of regulation through litigation has 
just begun.'' What a blessing for our country, I am sure. I 
surely hope that this statement is an exaggeration, but it does 
appear to be accurate.
    The hearing today hopefully will shed light on the issues 
arising from government public policy-driven lawsuits, and I 
want to welcome all of our guests and witnesses here today. I 
am very concerned about these issues and they are not easy 
ones, and I have to say they are among the most interesting 
issues I have ever seen come before the Judiciary Committee. I 
will look forward to hearing both sides on these issues and I 
will try and keep an open mind with regard to both sides 
because I am one who believes that litigation can in many 
respects cure many public policy problems in the sense that 
sometimes honest litigation brought pursuant to real rules of 
law can basically correct some wrongs in our society. But I do 
have some questions about some of the litigation that is being 
advocated by authorities such as Mr. Reich.
    I will turn to Senator Kennedy at this point.

 STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE 
                     STATE OF MASSACHUSETTS

    Senator Kennedy. Thank you, Mr. Chairman, and thank you for 
having this hearing. In recent years, the judicial branch of 
the Government has been deeply involved in the impact of the 
tobacco industry, gun manufacturers, and lead paint 
manufacturers on the Nation's health and well-being. To a large 
extent, the courts have been asked to deal with these problems 
because the legislative and executive branches have failed to 
deal with them adequately.
    Several of today's witnesses will argue that government 
lawsuits against the manufacturers of hazardous products usurp 
the taxing authority of the legislative branch. I strongly 
disagree with that view. In fact, litigation is an effective 
way of assessing responsibility and providing remedies for 
obvious harm in accordance with longstanding traditions of law.
    Those who oppose the lawsuits which have been brought by 
Federal and State governments against the producers of 
unreasonably dangerous products are arguing, in essence, that 
there is no difference between a tax and a judicial penalty. In 
fact, they are very different. The considerations which 
influence a legislative decision to levy a tax are totally 
different from those that govern a judicial decision to award 
financial damages to an injured party.
    Legislation to levy a tax is not based on any finding of 
wrongdoing by the entity being taxed. The key consideration is 
the government's need for revenue to finance public programs to 
enhance the health, safety and welfare of its citizens. If 
certain products threaten public health and safety, Congress or 
a State legislature may reasonably decide to subject them to 
higher taxes, but that is only one of many factors influencing 
tax policies.
    In contrast, the entire focus of current government is the 
wrongdoing of the defendant corporation. The authority of the 
court to award damages against the defendant requires a 
judicial finding that the company engaged in misconduct in the 
manufacture and marketing of its product. In the absence of 
such a finding, there is no liability. A tax requires no 
finding of wrongdoing. A judicially-imposed penalty cannot be 
imposed without it.
    Mr. Chairman, that is true with regard to the findings in 
the tobacco industry. I believe it is also true with regard to 
the gun industry, and it is increasingly true with regard to 
the lead paint industry as well, as we find more and more 
documents that go back to the 1930's where industry was warned 
about the dangers of lead in paint and the efforts to hide and 
conceal that, a very similar pattern to what happened with 
regard to the tobacco industry.
    So I think there is a very broad and definable distinction 
between these two situations, but we will look forward to 
hearing from the witnesses on that point.
    I would like to ask if I could have Senator Leahy's 
statement included in the record.
    The Chairman. Without objection, we will put Senator 
Leahy's statement in the record.
    Senator Kennedy. I have a lengthier statement, if that 
could be put in the record as well.
    The Chairman. We will put that statement in the record as 
well.
    Senator Kennedy. Thank you.
    [The prepared statements of Senators Leahy and Kennedy 
follow:]

 PREPARED STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                            STATE OF VERMONT

    Mr. Chairman, I am pleased that the Committee is considering the 
value of governmental lawsuits in the public's interest. I believe that 
the Department of Justice's lawsuit against the tobacco industry, like 
the multi-state attorneys general litigation against the tobacco 
industry, was brought in the public's interest.
    Attorney General Reno and the professional prosecutors at the 
Department of Justice have made a sound legal decision to try to recoup 
the Federal government's spending of more than $20 billion a year to 
treat ill smokers. The Department of Justice has presented serious and 
credible evidence on the tobacco industry's 45-year campaign of 
deception about the dangers of cigarettes.
    The Department of Justice's case should be judged on its merits in 
the proper court, just as the state attorneys general litigation was 
judged by the appropriate state courts.
    The settlements of the state attorneys general litigation has 
brought about profound changes in the corporate culture of the tobacco 
industry. Indeed, the tobacco industry is now admitting on its web 
sites that smoking causes cancer and is addictive. Before the state 
attorneys general litigation, the executives of these same companies 
denied under oath to Congress that smoking is addictive.
    Mr. Chairman, I applaud the Republican and Democratic state 
attorneys general for their leadership and courage in taking on tobacco 
interests in pursuit of a healthier America and in attempting to free 
our youth from captivity to this deadly addiction.
    The very existence of the multi-state tobacco settlements is a 
credit to our civil justice system. In fact, without the use of class 
action and the likelihood of punitive damage recoveries, does anyone 
believe that the tobacco companies would have ever come to a 
negotiating table? Without the willingness of private attorneys acting 
on behalf of their clients, taking significant financial and 
professional risks, and pursuing these matters so diligently, the 50 
states would not have settlement payments for the next 25 years, which 
may be devoted to promote the public health of its citizens.
    At a time when some are trying to limit legal rights and remedies 
through national legislation, the multi-state tobacco settlements 
remind us that our state-based tort system remains one of the greatest 
and most powerful vehicles for justice anywhere in the world.
    These private citizens and their attorneys deserve appreciation for 
what they have made possible. They laid the groundwork for the work of 
our state attorneys general. Then, the attorneys general cases turned 
the corner. I commend them all for their diligence on behalf of the 
public.
    When tobacco companies were fighting any and all lawsuits against 
them, a combination of legal challenges by private citizens and public 
officials were pursued against great odds.
    Men and women whose lives were cut short by cancer and other 
adverse health consequences from tobacco deserved better treatment than 
the years of obstruction and denial by the tobacco industry. Only when 
the internal documents were being discovered and the legal tide began 
to turn did the tobacco companies decide to change their strategy and 
pursue a settlement. The tobacco industry did not agree to the multi-
state settlement out of some new-found sense of public duty.
    The truth is that giant tobacco corporations came to the bargaining 
table only after they realized that they were beginning to lose in 
court and after President Clinton initiated tough new regulatory 
efforts.
    I am grateful that Matt Myers from the Campaign For Tobacco-Free 
Kids is here to testify about the public health benefits of 
governmental litigation against the tobacco industry. I want to thank 
him for appearing before the Committee on short notice.
    I know that some Members of Congress want to pass Federal 
legislation to place limits on the use of class actions and punitive 
damage awards on governmental litigation. I want to remind some of my 
colleagues that the possibility of punitive damages and class action 
lawsuits are two important factors that brought us the historic multi-
state tobacco settlement. Class actions make it possible for state 
attorneys general to band together to take on the powerful tobacco 
conglomerates in ways that an individual could not afford to take on 
alone.
    Punitive damages are awarded to punish egregious behavior--like the 
deceit or concealment of research that some have accused tobacco 
company officials of practicing. It would be criminal to leave some 
people with valid claims against tobacco interests with no effective 
way to seek relief, in order to obtain partial reimbursement of public 
expenses. I will be extremely hesitant to restrict these legal rights 
and remedies without substantial evidence that such restrictions are 
justified.
    Mr. Chairman, I look forward to working with you and the other 
members of the Committee to learn more about the value of governmental 
litigation in the public's interest. I also look forward to hearing 
from Senator Durbin, Senator McConnell and Senator Reed today and from 
our other witnesses. Finally, I want to thank Don Ryan from the 
Alliance To End Childhood Lead Poisoning for appearing today. I am 
particularly interested in learning more about the dangers of lead 
poisoning to our nation's children.
    I hope this hearing is only the beginning of a balanced and fair 
inquiry by the Committee into the value of governmental litigation in 
the public's interest.
                               __________

            PREPARED STATEMENT OF SENATOR EDWARD M. KENNEDY

    Mr. Chairman, I welcome today's hearing on this important issue.
    In recent years, the judicial branch of the government has been 
deeply involved in the impact of the tobacco industry, gun 
manufacturers, and lead paint manufacturers on the nation's health and 
well-being. To a large extent, the courts have been asked to deal with 
these problems because the legislative and executive branches have 
failed to deal with them adequately.
    Several of today's witnesses will argue that government lawsuits 
against the manufacturers of hazardous products usurp the taxing 
authority of the legislative branch. I strongly disagree with that 
view. In fact, the litigation is an effective way of assessing 
responsibility and providing remedies for obvious harm, in accord with 
the long-standing traditions of the law.
    Those who oppose the lawsuits which have been brought by federal 
and state governments against the producers of unreasonably dangerous 
products are arguing, in essence, that there is no difference between a 
tax and a judicial penalty. In fact, they are very different. The 
considerations which influence a legislative decision to levy a tax are 
totally different from those which govern a judicial decision to award 
financial damages to an injured party. Legislation to levy a tax is not 
based on any finding of wrongdoing by the entity being taxed. The key 
consideration is the government's need for revenue to finance public 
programs to enhance the health, safety, and welfare of its citizens. If 
certain products threaten the public health and safety, Congress or a 
state legislature may reasonably decide to subject them to higher 
taxes, but, that is only one of many factors influencing tax policy.
    In contrast, the entire focus of the current government lawsuits is 
the wrongdoing of the defendant corporation. The authority of the court 
to award damages against the defendant requires a judicial finding that 
the company engaged in misconduct in the manufacturing or marketing of 
its product. In the absence of such a finding, there is no liability. A 
tax requires no finding of wrongdoing. A judicially imposed penalty 
cannot be imposed without it.
    In the case of tobacco, the federal government spends more than $20 
billion a year to provide medical care for persons suffering from 
tobacco-induced diseases. The federal lawsuit seeks to recover a 
portion of that enormous expenditure for American taxpayers. The 
litigation also seeks to prevent the tobacco industry from continuing 
the massive campaign of deception perpetrated for the last forty years 
on the public. If this suit succeeds, the ultimate winners will be 
future generations of children who are shielded from the tobacco 
industry's relentless effort to addict them to this lethal product.
    Not surprisingly, the tobacco companies and their allies have been 
quick to criticize the Justice Department for bringing this litigation. 
Their statements about the federal suit parrot similar objections by 
the industry when the state tobacco cases were first filed. As those 
cases went forward, industry claims that the state suits lacked merit 
were proven false. The viability of those lawsuits was ultimately 
conceded by the tobacco companies, and they agreed to pay a total of 
$246 billion to settle them. In light of that history, current industry 
claims that the federal suit lacks merit have no credibility.
    The most implausible of all the industry's assertions is their 
claim that the federal lawsuit is an assault not only on cigarette 
manufacturers, but on every legitimate business enterprise in the 
country. Contrary to this claim, the facts against the tobacco 
companies are truly unique.

   No other industry in America produces a product which, when 
        used exactly as intended and marketed, kills four hundred 
        thousand people each year.
   No other industry has so vociferously denied the 
        addictiveness of its product in the face of overwhelming 
        evidence. Medical experts say nicotine is more addictive than 
        heroin or cocaine.
   No other industry has chemically altered its product to make 
        it even more addictive, while publicly denying that it was 
        addictive at all.
   No other industry has conspired over decades to market its 
        addictive product to children, in violation of the laws of 
        nearly every state. More than 90 percent of smokers become 
        addicted as children, before they are mature enough to 
        understand and act on the health dangers.

    The tobacco industry's claim that it is no different from ``other 
legal industries'' is only the latest in its long history of 
deceptions. No other industry presents such a shameful forty year track 
record of unlawful behavior. Cigarettes are uniquely lethal and the 
conduct of the tobacco industry has been singularly unscrupulous.
    The tobacco companies and their allies in Congress have harshly 
attacked the federal lawsuit--but the attack is just another industry 
smokescreen. The federal claims are strong. The American people are 
finally getting their day in court, and the tobacco companies fear that 
justice will be done.
    Gun manufacturers face a similar situation.
    Everyday, 13 more children across the country die from gunshot 
wounds. Yet, the national response to this death toll continues to be 
grossly inadequate. The gun industry has fought against reasonable gun 
control legislation. It has failed to use technology to make guns 
safer. It has attempted to insulate itself from its distributors and 
dealers, once the guns leave the factory door.
    Studies estimating the total public cost of firearm-related 
injuries put the cost at over one million dollars for a single shooting 
victim. According to the Centers for Disease Control, cities, counties 
and states have incurred billions of dollars in costs each year as a 
direct result of gun violence--including the costs of medical care, law 
enforcement, and other public services.
    Our communities have attempted to deal with the epidemic of gun 
violence that claims the lives of so many young people. Law enforcement 
officials, community leaders, parents and youth are struggling to 
counter this epidemic. But, the gun industry and Congress, and most 
state legislatures have persistently ignored these concerns.
    It appears that litigation may well be the only means to hold gun 
manufacturers accountable for the harm caused by their products and 
force them to acknowledge the facts. As we have seen with litigation 
against the tobacco industry, manufacturing secrets and marketing 
secrets often come to light in a courtroom. Public interest lawsuits 
can change and have changed the dynamic between the public and mammoth 
industries long thought to be invincible.
    The legal system is just starting to review the important questions 
that must be answered regarding the impact of lead paint on children. 
But, we know some of the sad facts. Sixty-six million American homes 
are contaminated with lead paint, and 890,000 children have high levels 
of lead in their blood. Many of these children will never fulfill their 
true potential--physical, psychological, and developmental disabilities 
caused by lead will forever plague their lives. We also know that paint 
manufacturers were aware of the dangers posed by lead many, many years 
ago--long before serious efforts were made to eliminate lead from paint 
used in homes.
    Janessa Lascko is one child affected by lead paint. In 1990, she 
and her mother moved from a California homeless shelter to a home in 
Cleveland, Ohio. By the time Janessa was two-years old, her blood had 
more than five times the amount of lead that federal health authorities 
consider to be normal. Janessa and others have taken their cases to the 
courts, where testimony will be heard, facts examined, and a 
determination made whether lead paint manufacturers should be held 
liable for this harm.
    The litigation brought by Janessa Lascko and others in Cleveland, 
as well as the lawsuits pending in New York City, Buffalo, Baltimore, 
and Rhode Island, are necessary to ensure fairness and justice. We 
believe in the jury system, the wisdom of the judiciary and the basic 
principles of equal justice under law. Congress should not undermine 
the role of courts and lawyers in vindicating these basic rights.
    The right to trial by jury is one of the great historical 
achievements of Anglo-American law. In the criminal justice system, we 
are willing to entrust our liberty and even our very lives to a jury of 
our peers. How can we say that the many other basic rights guaranteed 
by the civil justice system deserve less protection?
    Our laws are the wise restraints that make us free. It would be a 
travesty of these basic principles of the law for Congress to put its 
thumb on the scales of justice and try to tilt the balance in favor of 
these powerful industries and against the citizens harmed.

    The Chairman. To help all better understand the far-
reaching effects of government-sponsored lawsuits, we are 
fortunate to have distinguished witnesses who I know will 
illuminate the issues.
    Our first panel today consists of three of our 
distinguished colleagues from the Senate. First, we will hear 
from the Honorable Mitch McConnell, the Senator from Kentucky. 
Following his remarks will be the Honorable Jack Reed, Senator 
from Rhode Island. And lastly, we will hear from the Honorable 
Richard J. Durbin, Senator from Illinois.
    Senator McConnell.

  STATEMENT OF HON. MITCH McCONNELL, A U.S. SENATOR FROM THE 
                       STATE OF KENTUCKY

    Senator McConnell. Thank you, Chairman Hatch, for 
conducting a full committee hearing on this new and frightening 
trend of big government lawsuits. These suits are becoming the 
great American hoax, pulled off by conspiring governments and 
trial lawyers.
    The hoax is really quite simple. The governments and trial 
lawyers talk about sympathetic victims, innocent children and 
injured people. Then they twist the law to file a suit on 
behalf of the government, not the victims. The result: the 
government gets bigger, the trial lawyers get richer, and the 
injured people get nothing.
    The key to the hoax is that a government lawsuit is not 
about injured people. It is about more money for big 
government. Put simply, in these cases governments file multi-
billion-dollar civil lawsuits allegedly to recover the medical 
or other expenses the government incurred taking care of the 
individual who is allegedly harmed by the defendant's product.
    Yes, under the theories used in these big government 
lawsuits, the governments and the trial lawyers conveniently 
have managed to eliminate the injured client completely. Why? 
Because that way, there will be more money for the government 
plaintiff and the trial lawyers. You don't have to take my word 
for it. Even our colleague Senator John Edwards, who is a 
talented and noted trial lawyer, has summarized the Federal 
tobacco lawsuit as nothing but a, ``Federal money grab.''
    I have been concerned about this trend for some time. As a 
Senator from a State that has 45,000 tobacco farmers--I might 
say we had 60,000 before President Clinton came to office--I 
was deeply concerned when the State attorneys general started 
partnering with the trial lawyers to sue the tobacco industry.
    In addition to my deep concerns about my State's number one 
cash crop and our tobacco farmers, I feared that the tobacco 
lawsuit would be the start of a very dangerous trend, one not 
limited to tobacco. When I and others expressed this fear, 
government officials and trial lawyers said these kinds of 
lawsuits would never be filed against any other industry. It 
was also said that the U.S. Department of Justice would never 
pursue such absurd cases. Janet Reno even testified before this 
committee that the Federal Government did not have the legal 
authority to file this kind of lawsuit.
    Unfortunately, a few short months have shown that my 
greatest fears were right. The State tobacco case was just the 
beginning, the model act, if you will, for hungry and 
enterprising trial lawyers and their big-government friends. 
The past year has demonstrated that, left unchecked, there will 
be no limits on these government-sponsored lawsuits. The proof 
is before us.
    First, the Clinton-Gore administration suddenly determined 
they could pursue a Federal lawsuit against tobacco. Next, 
governments filed lawsuits against gun manufacturers. Then 
rumors surfaced that the next targets would be automobile 
manufacturers, Internet providers, paint manufacturers, and, 
yes, even the fast-food industry.
    While this sounds absurd, we are now living in the world of 
the absurd. We have a Yale professor espousing the theory that, 
``There is no difference between Ronald McDonald and Joe 
Camel.'' They both market products that are, ``luring our 
children into killer habits.'' Some are now advocating that 
caffeine-pushing coffee and soft drink companies are good 
targets as well.
    Now that the Rhode Island Attorney General has filed a suit 
against the lead paint industry, who is next? What Senator's 
State products will be the next target? Well, we may not have 
to wait very long. The Rhode Island Attorney General has his 
sights set on a new lawsuit against the makers of latex gloves.
    Now that I have put to rest the question of whether these 
government-sponsored lawsuits are really a widespread 
phenomenon, I would like to discuss two of the fundamental 
problems with these offensive lawsuits.
    First, government plaintiffs should not have rights 
superior to the rights of private plaintiffs. In these cases, 
the government is using the court to tilt the system in their 
favor, which is fundamentally unfair for the individual 
citizens who may have their own right to sue. Government 
entities are not ashamed to change the law so they can win 
these meritless cases.
    Just look at Maryland. According to the Maryland State 
Senate president, ``We agreed to change the tort law, which was 
no small feat. We changed centuries of tort law to ensure a win 
in the tobacco case.'' Now, governments are supposed to uphold 
the law, not bring lawsuits whose sole intent is to distort the 
law.
    Second, Mr. Chairman, these suits are simply efforts of 
governments to tax and regulate through litigation. The power 
to tax is a legislative function. Our Founding Fathers wisely 
believed that it would be important for those who raise taxes 
to be directly accountable to the voters. Fortunately, it is 
getting more and more difficult to raise taxes in the Congress 
and in the State legislatures, something I am really glad 
about.
    Regretfully, this brings about a situation where trial 
lawyers and big-government public officials are bypassing 
legislatures to engage in taxation and regulation through 
litigation. We cannot allow this blatant violation of the 
separation of powers to go unchecked.
    The unconscionable distortion of the law that goes on in 
these government-sponsored lawsuits prompted me to introduce 
the Litigation Fairness Act of 1999. I am pleased that Chairman 
Hatch is also a cosponsor of that common-sense legislation 
which says that whenever the government sues private sector 
companies to recover costs, the government plaintiff gets no 
more rights than the ordinary citizen. If the law is good 
enough for an average citizen, then it is good enough for the 
government.
    The Litigation Fairness Act does not prohibit government 
lawsuits. It does not close the courthouse door to injured 
parties. This legislation will simply ensure that the 
government plays by the very same rules as its citizens. I look 
forward in the future to have an opportunity to discuss this 
legislation in this forum. However, Mr. Chairman, I know today 
is not about any particular piece of legislation. It is rather 
about discussing these lawsuits and exposing the tremendous 
problems created by governments bringing such suits.
    So I just want to thank you again, Chairman Hatch, for your 
interest in this extraordinarily important subject, and I think 
this hearing is quite timely. Thank you for the opportunity to 
be here.
    The Chairman. Thank you, Senator McConnell. We will 
certainly allow you to go. I know your time is very valuable, 
as are all our Senators.
    [The prepared statement of Senator McConnell follows:]

             PREPARED STATEMENT OF SENATOR MITCH MCCONNELL

    I first want to thank Senator Hatch for conducting a full committee 
hearing on this new and frightening trend of ``big government 
lawsuits.''
    These suits are becoming the ``Great American Hoax''--pulled off by 
conspiring governments and trial lawyers. The Hoax is really quite 
simple: The governments and trial lawyers talk about sympathetic 
victims, innocent children, and injured people, then they twist the law 
to file a suit on behalf of the government--not the victims. The 
result? The government gets bigger, the trial lawyers get richer--and 
the injured people get nothing.
    The key to the Hoax is that a government lawsuit is not about 
injured people--it is about more money for big government. Put simply, 
in these cases governments file multi-billion dollar civil lawsuits 
allegedly to recover the medical or other expenses the government 
incurred taking care of the individual who was allegedly harmed by the 
defendant's product.
    Under the theories used in these big government lawsuits, the 
government and the trial lawyers conveniently have managed to eliminate 
the injured client completely. Why? So there is more money for the 
government plaintiff and the trial lawyers, of course.
    You don't have to take my word for it. Even our colleague Senator 
John Edwards--who is a talented and noted trial lawyer--has summarized 
the federal tobacco lawsuit as nothing but a ``federal money-grab.''
    I have been concerned about this trend for some time. As a Senator 
from a state that has 45,000 tobacco farmers, I was deeply concerned 
when the state Attorneys General started partnering with the trial 
lawyers to sue the tobacco industry. In addition to my deep concerns 
about my state's tobacco farmers, I feared that the tobacco lawsuit 
would be the start of a very dangerous trend--one not limited to 
tobacco.
    When I and others expressed this fear, government officials and 
trial lawyers said these kinds of lawsuits would never be filed against 
any other industry. It was also said that the United States Department 
of Justice would never pursue such absurd cases. Janet Reno even 
testified before this Committee that the federal government did not 
have legal authority to file this kind of lawsuit.
    Unfortunately, a few short months have shown that my greatest fears 
were right. The state tobacco case was just the beginning--the ``Model 
Act'' for hungry and enterprising trial lawyers and their big-
government friends.
    The past year has demonstrated that, left unchecked, there will be 
no limits on these government-sponsored lawsuits. The proof is before 
us. First, the Clinton/Gore administration suddenly determined they 
could pursue a federal lawsuit against tobacco. Next, governments filed 
lawsuits against gun manufacturers. Then rumors surfaced that the next 
targets would be automobile manufacturers, Internet providers, paint 
manufacturers, and even the fast food industry. We are now living in 
the world of the absurd. We have a Yale professor espousing the theory 
that ``There is no difference between Ronald McDonald and Joe Camel.'' 
They both market products that are ``luring our children into killer 
habits'' ultimately increasing healthcare costs for the public. Some 
are now advocating that ``caffeine-pushing'' coffee and soft drink 
companies are good targets, too.
    Now that the Rhode Island Attorney General has filed a suit against 
the lead paint industry, who is next? What Senator's home state 
products will be the next target? We may not have to wait long. The 
Rhode Island Attorney General has his sights on a new suit against the 
makers of latex gloves.
    Now that I've put to rest the question of whether these government-
sponsored lawsuits are really a widespread phenomenon, I'd like to 
discuss two of the fundamental problems with these offensive lawsuits.
    First, government plaintiffs should not have rights superior to the 
rights of private plaintiffs. In these cases, the government is using 
the courts to tilt the system in their favor--which is fundamentally 
unfair for the individual citizens who may have their own rights to 
sue. Governments are supposed to uphold the law--not bring lawsuits 
whose sole intent is to distort the law.
    Second, these suits are simply efforts of governments to tax and 
regulate through litigation. The power to tax is a legislative 
function. Our founding fathers wisely believed it important that those 
who raise taxes should be directly accountable to the voters. 
Fortunately, it is getting more and more difficult to raise taxes in 
the Congress and the state legislatures--so trial lawyers and big-
government public officials are bypassing legislatures to engage in 
taxation and regulation through litigation. We cannot allow this 
blatant violation of the separation of powers to go unchecked.
    The unconscionable distortion of the law that goes on in these 
government-sponsored lawsuits prompted me to introduce the Litigation 
Fairness Act of 1999. Senator Hatch joined me in offering this common 
sense legislation, which says that whenever the government sues 
private-sector companies to recover costs, the government plaintiff 
gets no more rights than the ordinary citizen. If the law is good 
enough for the average citizen, then it is good enough for the 
government. The Litigation Fairness Act does not prohibit government 
lawsuits. It does not close the courthouse door to injured parties. My 
legislation will simply ensure that the government plays by the same 
rules as its citizens.
    I look forward to future opportunities to discuss my legislation in 
this forum. However, today is not about my legislation. It is about 
discussing these lawsuits and exposing the tremendous problems created 
by governments bringing such suits. After we explore the issue, we can 
talk about solutions.

    The Chairman. Senator Reed, we will turn to you, and then 
we will go to Senator Durbin.

 STATEMENT OF HON. JACK REED, A U.S. SENATOR FROM THE STATE OF 
                          RHODE ISLAND

    Senator Reed. Thank you, Mr. Chairman. Before discussing my 
legislation to permit the Federal Government to recover damages 
from child lead poisoning, I believe it is important to note 
the crucial role that government litigation is playing in 
shaping public health policy.
    Consider the $100 million that Philip Morris announced it 
would spend on its anti-youth-smoking advertising campaign. On 
TV screens, in convenience stores, and in magazines, the 
largest tobacco company in America is urging young people to 
avoid smoking, and retailers to stop selling tobacco to 
children.
    In addition, Philip Morris has now added the following 
information to its Web site, ``There is an overwhelming medical 
and scientific consensus that cigarette smoking causes lung 
cancer, heart disease, emphysema and other serious diseases in 
smokers. Smokers are far more likely to develop serious 
diseases, like lung cancer, than non-smokers. There is no 
`safe' cigarette.''
    There is also this quote from the same Web site: 
``Cigarette smoking is addictive, as that term is most commonly 
used today. It can be very difficult to quit smoking, but this 
should not deter smokers who want to quit from trying to do 
so.''
    Compare these claims to the sworn testimony of the major 
tobacco CEO's before the House Commerce Committee in the early 
1990's and you will see a remarkable change of heart on the 
question of whether cigarettes are addictive and dangerous. 
These items represent no less than a sea change in the behavior 
of the tobacco industry, for one simple reason: the $500 
billion lawsuit brought against Big Tobacco to recover damages 
and to provide remedial relief. Indeed, were it not for this 
lawsuit and other legal actions, there is no compelling reason 
to believe that any of these steps would have been undertaken 
at all.
    Now, with regard to the issue of childhood lead poisoning, 
as you may know, Senator Torricelli and I have introduced the 
Lead Poisoning Expense Recovery Act, which provides clear 
authority for the Federal Government to recover from the 
manufacturers of lead paint the significant public resources 
already expended to mitigate childhood lead poisoning. This 
includes dollars spent on medical care and treatment, special 
education, and funds spent to make homes lead-safe for 
children.
    Today, nearly one million preschoolers nationwide have 
excessive levels of lead in their blood, making lead poisoning 
the leading environmental health disease among children. Even 
low levels of lead exposure can cause serious injury to the 
developing brain and nervous system of children. And at high 
levels of exposure, lead can cause mental retardation and even 
death.
    Lead-based paint in housing is the major remaining source 
of exposure and is responsible for most cases of childhood lead 
poisoning. An estimated 3 million tons of lead still coat the 
walls of American homes. Approximately half of America's 
housing stock, or roughly 64 million units, contain some lead-
based paint. My home State of Rhode Island has the fifth oldest 
housing stock in the country and, as a result, has a lead 
poisoning rate that is 3 times the national average.
    Taxpayers have already paid over $1 billion to deal with 
the tragic consequences of childhood lead exposure, including 
significant expenditures for medical care, special education, 
and lead abatement in housing. However, what has been spent so 
far is barely a drop in the bucket. Protecting our children's 
health doesn't come cheap. Medical costs typically run in the 
thousands of dollars for each child with elevated lead levels, 
and they are far more if hospitalization is required.
    And lead abatement is expensive. In Rhode Island, we are 
looking at a bill of $300 million to clean up just the most 
dangerous housing units. Despite our efforts to address 
childhood lead poisoning legislatively, the fight has been slow 
and inadequate. At the current rate, it could be decades 
longer, and millions of poisoned children more, until we can 
finally say that we have got the lead out.
    In contrast to the public funds which have been expended to 
date, an industry that has over $30 billion in assets has yet 
to make a significant contribution to efforts to address the 
problems associated with its product. Take the State of 
Maryland, for example. Since 1992, the Federal Government has 
spent $28.5 million to make Maryland homes lead-safe. The 
industry's contribution, on the other hand, was $481,900.
    Mr. Chairman, the magnitude of this problem and the 
unwillingness of the industry to respond has already sparked 
legal action at the State level. In Rhode Island, Attorney 
General Sheldon Whitehouse recently filed a 10-count lawsuit 
against the manufacturers of lead paint and the industry's 
trade association. The lawsuit documents nearly a century-long 
record of industry culpability.
    The complaint lays out compelling evidence about the 
activities of the lead industry, showing that it aggressively 
marketed its product as safe while knowing fully of its harmful 
effects. Although the lead industry knew since the early 1900's 
that lead was hazardous to human health, the evidence suggests 
that they continued producing and marketing the product well 
into the 1960's for consumption in the home.
    Glidden actually marketed a, ``lead-free'' and, ``non-
poisonous'' paint for use by farmers that, in their words, 
``eliminates all possibility of lead poisoning in livestock.'' 
At the same time, it sold lead-based paints for use in 
children's bedrooms and play rooms.
    Because of the severity of the problem and the behavior of 
the industries, Senator Torricelli and I have introduced 
legislation that will ensure that justice is served. As cities 
and States stand up and say enough is enough, it is only 
appropriate for the Federal Government to join them in the 
effort to hold the industry responsible. The seriousness of 
childhood lead poisoning and the considerable expenses borne by 
taxpayers to clean up the industry's mess demands action now. I 
urge my Senate colleagues to join me in supporting this 
legislation so that we can move aggressively toward our goal of 
ending childhood lead poisoning.
    Thank you very much, Mr. Chairman.
    The Chairman. Thank you, Senator Reed. Of course, we are 
happy to let you go as well.
    [The prepared statement of Senator Reed follows:]

                PREPARED STATEMENT OF SENATOR JACK REED

    Mr. Chairman, before discussing my legislation to permit the 
federal government to recover damages from child lead poisoning, I 
believe its important to note the crucial role that government 
litigation is playing in shaping public health policy.
    Consider the $100 million that Phillip Morris announced it would 
spend on its anti-youth smoking advertising campaign. On TV screens, in 
convenience stores, and in magazines, the largest tobacco company in 
America is urging young people to avoid smoking and retailers to stop 
selling tobacco to youngsters.
    In addition, Phillip Morris has now added the following information 
to its website:

        ``There is an overwhelming medical and scientific consensus 
        that cigarette smoking causes lung cancer, heart disease, 
        emphysema and other serious diseases in smokers. Smokers are 
        far more likely to develop serious diseases, like lung cancer, 
        than non-smokers. There is no `safe' cigarette.''

    As well as this quote from the same website:

        ``Cigarette smoking is addictive, as that term is most commonly 
        used today. It can be very difficult to quit smoking, but this 
        should not deter smokers who want to quit from trying to do 
        so.''

    Compare these claims to the sworn testimony of the major tobacco 
CEO's before the House Commerce Committee in the early 1990's, and you 
will see a remarkable change of heart on the question of whether 
cigarettes are addictive and dangerous.
    These three items represent no less than a sea change in the 
behavior of the tobacco industry for one simple reason--the $500 
billion lawsuit brought against Big Tobacco to recover damages and to 
provide remedial relief. Indeed, were it not for this lawsuit and other 
legal actions, there is no compelling reason to believe that any of 
these steps would have been undertaken at all.
    Now, with regard to childhood lead poisoning, as you may know, 
Senator Torricelli and I have introduced the Lead Poisoning Expense 
Recovery Act (S. 1821) which provides clear authority for the Federal 
government to recover from the manufacturers of lead paint, the 
significant public resources already expended to mitigate childhood 
lead poisoning. This includes dollars spent on medical care and 
treatment, special education, and funds spent to make homes lead-safe 
for children.
    Today:

   nearly one million preschoolers nationwide have excessive 
        levels of lead in their blood; making lead poisoning the 
        leading environmental health disease among children.

    Even low levels of lead exposure can cause:

   serious injury to the developing brain and nervous system of 
        children.

    At high levels of exposure lead can cause:

   mental retardation; and even
   death.

    Lead-based paint in housing is the major remaining source of 
exposure and is responsible for most cases of childhood lead poisoning. 
An estimated 3 million tons of lead still coat the walls of American 
homes. Approximately half of America's housing stock, or roughly 64 
million units contain some lead-based paint. My home state of Rhode 
Island has the 5th oldest housing stock in the country, and, as a 
result, has a lead poisoning rate that is 3 times the national average.
    Taxpayers have already paid over a billion dollars to deal with the 
tragic consequences of childhood lead exposure, including significant 
expenditures for medical care, special education, and lead abatement in 
housing. However, what has been spent so far is barely a drop in the 
bucket. Protecting our children's health doesn't come cheap. Medical 
costs typically run in the thousands of dollars for each child with 
elevated lead levels; they are far more if hospitalization is required.
    And, lead abatement is expensive. In Rhode Island alone, we are 
looking at a bill of $300 million to clean up just the most dangerous 
housing units. Despite our efforts to address childhood lead poisoning 
legislatively, the fight has been slow and inadequate. At the current 
rate, it could be decades longer, and millions of poisoned children 
later, until we can finally ``get the lead out.''
    In contrast to the public funds which have been expended; to date, 
an industry that has over $30 billion in assets, has yet to make a 
significant contribution to efforts to address the problems associated 
with its product. Take the State of Maryland for example. Since 1992, 
the federal government has spent $28.5 million to make Maryland homes 
lead-safe. The industry's contribution, on the other hand, was 
$481,900.
    Mr. Chairman, the magnitude of this problem and the unwillingness 
of industry to respond has already sparked legal action at the State 
level. In Rhode Island, Attorney General Sheldon Whitehouse recently 
filed a 10-count lawsuit against the manufacturers of lead paint and 
the industry's trade association. The lawsuit documents nearly a 
century-long record of industry culpability.
    The complaint lays out compelling evidence about the activities of 
the lead industry showing that it aggressively marketed its product as 
safe, while knowing fully of its harmful effects. Although the lead 
industry knew since the early 1900's that lead was hazardous to human 
health, the evidence suggests that they continued producing and 
marketing the product well into the 1960's.
    Because of the severity of the problem and the behavior of the 
industries, Senator Torricelli and I have introduced legislation that 
will ensure that justice is served. As cities and states stand up and 
say enough is enough, it is only appropriate for the federal government 
to join them in the effort to hold the industry responsible. The 
seriousness of childhood lead poisoning and the considerable expense 
borne by taxpayers to clean up the industry's mess demands action now. 
I urge my Senate colleagues to join me in supporting this legislation 
so that we can move aggressively towards our goal of ending childhood 
lead poisoning.

    Senator Kennedy. Mr. Chairman, just before Senator Durbin--
I am going to have to leave--just before he goes, could I just 
ask that we include in the record--I was the person that asked 
Janet Reno the question about the case, and that has been 
referred to frequently actually by members of the cigarette 
industry that she responded to those questions, saying that the 
Federal Government didn't have a case.
    I would like to put into the record the exchange with 
Attorney General Reno that is quite clear that what she was 
talking about was Medicaid, because that was the issue, which 
the States bring, but not the Medicare, which was the principal 
issue where Janet Reno was bringing the case. I think it is 
important just for the record. I am sure that Senator McConnell 
wasn't trying to mislead us, but I think in fairness of this 
record that that be put in at an appropriate place.
    The Chairman. Without objection, we will put it in the 
record.
    Senator Kennedy. I thank the chairman.
    [The information referred to follows:]

                INFORMATION SUBMITTED BY SENATOR KENNEDY

    Senator Kennedy: Spokesmen for the tobacco industry routinely 
assert that Attorney General Reno stated in testimony before the Senate 
Judiciary Committee on April 30, 1997 that the federal government had 
no cause of action against the tobacco companies to recover the cost of 
treating smoking-induced disease. Senator McConnell repeated that claim 
in his testimony today. Such a characterization of her testimony is 
completely inaccurate. I was the Senator who raised the subject of 
tobacco litigation with her at that hearing, and her response was 
clearly addressed to Medicaid claims only.
    After explaining that representatives of the Department of Justice 
had met with the state attorneys general, Attorney General Reno said:

        ``What we have determined was that it was the state's cause of 
        action and that we needed to work with the states, that the 
        federal government does not have an independent cause of 
        action. But I will continue to review it and see if there are 
        new issues.''

    Her answer only makes sense in the context of the Medicaid claims, 
because the states have no role in Medicare, Veterans Administration or 
other exclusively federal health care programs. Only Medicaid is a 
state administered, program. At that point in time, the Justice 
Department had not even conducted a thorough examination of federal 
claims against the industry arising under these exclusively federal 
programs. The only issue which she was prepared to address in April of 
1997 was whether to intervene in the states' Medicaid suits. I 
concluded the dialogue by asking her to have the Department look into a 
suit to recover for the federal Medicare costs.
    I would like to make the full text of the exchange from the April 
30, 1997 hearing part of today's record.

    Senator Kennedy: General I want to ask you, an issue with regards 
to the position of the administration on tobacco, and this is the 
important issue of whether the administration will sue the tobacco 
companies to reimburse the government for Medicare and Medicaid costs 
associated with the tobacco use.
    I know that some in the Senate, led by our friend and colleague 
Senator Lautenberg, wrote you recently, urging you to pursue this. I 
support this effort as tobacco costs Americans millions and millions of 
dollars in the health care costs. Can you tell us whether you plan 
legal action against the tobacco companies?
    Reno: Senator, at the time, we met--representatives of the 
Department of Justice met with the state attorneys general and with the 
Department of Health and Human Services to determine what was our role.
    It was determined at the time that we should make sure that there 
was an appropriate exchange of information. And if I may, let me go 
back and see exactly where we stand and advise you subsequently.
    Senator Kennedy: All right.
    I just raised this--our estimates is that it's about $10 billion in 
Medicare, $5 billion a year in the Medicaid. Other federal programs are 
about $5 billion, approximately $20 billions of dollars, so this is a 
matter of very important, per year. We could do a lot with that $20 
billion and * * *
    Reno: But Senator, again, let me point out to you that it is the 
state--what we have determined was that it was the state's cause of 
action and that we needed to work with the states, that the federal 
government does not have an independent cause of action. But I will 
continue to review it and see if there are new issues.
    Senator Kennedy: All right. Would you? Because I imagine in some 
states, they're not pursuing this, and they would still have the 
Medicare costs. But I would be interested in how--what the position is 
of the Justice Department in this area in terms of recovering those 
kinds of costs.

    The Chairman. Senator Durbin.

 STATEMENT OF HON. RICHARD J. DURBIN, A U.S. SENATOR FROM THE 
                       STATE OF ILLINOIS

    Senator Durbin. Thank you, Mr. Chairman. It is good to be 
back with the Judiciary Committee. I miss you, and I know you 
miss my comments from time to time.
    The Chairman. We do miss them, but we get plenty of them on 
the floor.
    Senator Durbin. I am sure you do. [Laughter.]
    Our colleague, Senator McConnell, said that this trend 
toward government lawsuits was new and frightening. I couldn't 
disagree more. Consider the history of this country and where 
we would be today as a Nation were it not for government-
related lawsuits in two or three specific areas.
    If the government had not moved forward to file lawsuits in 
the area of civil rights, where would we be today? When the 
government decided that it was the right of every American, 
regardless of color to vote, and African Americans were being 
discriminated against by businesses and landowners because they 
registered to vote, it was a government lawsuit brought against 
these business and individual interests that really gave 
African Americans their opportunity to become full participants 
in this democracy. That was a government lawsuit. It set a 
policy. Thank God it did.
    Think where we would be today if the government had not 
initiated lawsuits to protect the environment, as it has over 
the course of this century. Time and time again, we can credit 
clean water and clean air to the fact that the government stood 
up against the biggest polluters. Did the government lawsuit 
set policy? Yes, it did, and thank God it did.
    Throughout this century, starting with President Teddy 
Roosevelt, and beyond, government agencies have stepped in to 
break up monopolies that were discriminating against the 
consumers of America so that families would have a fighting 
chance in the marketplace. Did these government-inspired 
lawsuits set policy? Yes, they did, policies of competition, 
and thank God they did.
    Mr. Chairman, the first point I would like to make concerns 
the title of today's hearings, ``Big Government Lawsuits: Are 
Policy-Driven Lawsuits in the Public Interest.'' Let me comment 
on the first part.
    To me, lawsuits such as those filed against tobacco and gun 
industries are not about big government; they are about 
individuals and families across America who count on the people 
they elect to be willing to fight to protect them. These 
lawsuits are about the 13-year-old in my hometown who starts 
smoking cigarettes, becomes addicted, and faces a lifetime of 
disease and possibly death because of the addiction. These 
lawsuits are about the nearly one in five Americans who will 
die a tobacco-related death.
    These lawsuits are about the 90 people who die and 200 
people who are wounded everyday in our country by guns. These 
lawsuits represent the 13 kids killed each day by firearms, the 
equivalent of a Columbine shooting every day of the week in the 
United States of America.
    In addition to the crushing human costs of tobacco and 
guns, these so-called big government lawsuits are about 
taxpayers, taxpayers who are forced to pick up the tab for the 
devastation caused by these well-heeled defendants. Both the 
tobacco industry and the gun industry impose staggering health-
related costs on government programs that are ultimately paid 
for by taxpayers.
    Tobacco disease is the number one preventable cause of 
death in America today. The Federal Government spends 
approximately $25 billion every year for health care costs 
related to tobacco-caused diseases, and America's taxpayers 
pick up the tab. And the health care costs associated with gun 
violence continue to grow. According to the National Center for 
Injury Prevention and Control, 80 percent of the economic costs 
of treating firearm injuries are paid for by taxpayers. Federal 
taxpayers pick up the tab for disability payments through SSI, 
Veterans Administration, unemployment, Medicare, and a host of 
other programs for gunshot victims.
    I would also like to comment on the second part of the 
title of this hearing, ``Are Policy-Driven Lawsuits in the 
Public Interest?'' To me, the simple answer is yes, 
particularly when Congress time and again puts special 
interests ahead of the public interest. The issue if whether 
the refusal of Congress to address compelling social issues of 
our time should insulate specific businesses from being held 
accountable.
    For decades, tobacco was advertised by its manufacturers as 
a benign luxury. The truth is it was manipulated to addict 
Americans. The truth is cigarette markers targeted our kids to 
replace the thousands of smokers who die every year from 
tobacco-related disease. The truth is the tobacco industry 
engaged in misconduct knowing that their product would kill a 
large percentage of those who became addicted.
    The gun industry has been equally irresponsible in the 
design, manufacture, distribution, and marketing of its 
products. The gun maker Navigar advertised its Tech-9 assault 
pistol, used by two teenagers in the Columbine shooting, as 
being, ``tough as your toughest customer,'' and bragged about 
the gun's, ``resistance to fingerprints.''
    As we sit here today, we have to acknowledge that last year 
special interests, Big Tobacco, killed comprehensive 
legislation in Congress to protect our children. And as we sit 
here today, we must acknowledge that Congress will likely 
recess next week without taking final action on the juvenile 
justice bill, a bill which contains a modest but important 
provision to help keep guns out of the hands of kids and 
criminals. It is my understanding that Chairman Hyde in the 
House announced today the conference is over. There will be no 
juvenile justice bill.
    So in answer to the second part of the hearing title, these 
lawsuits are in the public interest--the interests of the 
families who lose loved ones to tobacco-related disease and gun 
violence, the interests of the taxpayers and the communities 
where they live. There are a lot of courageous mayors out 
there, in towns like Chicago, New York, New Orleans, Atlanta. 
They filed lawsuits to protect their citizens when it comes to 
guns, and I am glad they had the courage to do that. And I hope 
we don't send them a message in this hearing that they have 
done the wrong thing. I don't believe they have. So, basically, 
the public interest must be pursued in courts when the special 
interests create gridlock in Congress.
    Why are we here today? We are here because the special 
interests, like tobacco and the gun industry, are afraid to be 
held accountable for their conduct. We are here because special 
interests who cause some politicians to cower before them are 
scared to death to face a jury of ordinary Americans.
    When Congress abdicates its responsibility to fight for and 
protect American families, fortunately the doors of courthouses 
across America are still open, allowing a jury of our peers to 
face the tough problems Congress will not. The bottom line is 
this: do you trust the men and women who elect us to sit as 
juries, to reject frivolous claims, to find justice, to stand 
up for the voiceless, or do you believe the special interests 
in America should constitute some privileged class beyond the 
reach of Congress and beyond the jurisdiction of our courts? 
History tells us in America it is best to stand with the 
people.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Durbin. I might add that 
the instances that you gave, the civil rights, the 
environmental lawsuits and the antitrust lawsuits, were all 
pursuant to statutes enacted by Congress or pursuant to the 
Constitution, but basically statutes by Congress. One of the 
issues we are deciding here is can the government bring actions 
where there is no legal authority to do so just by creating 
actions out of thin air, if that is the case, or should they 
have to have, before they can bring actions to accumulate huge, 
massive amounts of money for government expenditure, comply 
with some sort of a statute or some sort of an authorization by 
Congress.
    These are important questions, and you have raised a lot of 
important questions here today. Thank you for being here.
    We are going to turn to Senator Schumer, who would like to 
make a statement.

 STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE 
                       STATE OF NEW YORK

    Senator Schumer. Thank you, Mr. Chairman. I thank you for 
holding this hearing. I think it is an important subject. I 
would certainly agree that the ideal way to make law is by 
statute. It is fairer, it is more uniform, it is not based on a 
particular case. But as has been said here, I mean I think the 
point that has to be made is that the Founding Fathers 
envisioned many ways for citizens to redress grievances. And 
when there is a deadlocked Congress, when there is no other 
way, the courts have always been and should be open.
    Perhaps the most important Supreme Court case ever issued, 
Brown v. Board of Education, was not based on a statute, and it 
was certainly based on the inability of Congress to act, for a 
whole variety of reasons. If there had been no lawsuit on Brown 
v. Board of Education, which admittedly was a private lawsuit, 
we wouldn't have had the kinds of changes we have now, or they 
would have occurred in a different kind of way.
    Yet, when Brown v. Board of Education occurred, we heard 
all the same cry--wait for statutes, States' rights. But we all 
knew what everyone was saying; they were against the thrust of 
the lawsuit. If you want a stark reason for what has happened 
today, for why we have these lawsuits, just look across the 
Hill at what Congressmen Hyde just said. We are not going to 
legislate on the gun show loophole. We are not even going to do 
a juvenile justice bill because people don't want to talk about 
it.
    Well, my view is very simple. Eighty, ninety percent of the 
American people are for closing that loophole. The Congress 
doesn't act, and we can argue why, but I would argue because of 
responding to a special and narrow interest that happens to 
have a lot of political power, given the peculiar makeup of how 
we elect people. And so mayors and governors and attorneys 
general seek redress. I think that is the American way. You 
know, I think that is called for.
    If there hadn't been a mounting frustration with the 
Congress, say, on the issue of guns and its inability to act--
we didn't see a whole lot of lawsuits up until 1994, and then 
it became clear that any bill that was not blessed by the NRA 
on guns would never be able to see the light of day on the 
House side, where they have a rules committee. Fortunately, in 
this Senate we were allowed to bring up amendments, and a scant 
few passed, but at least we had the opportunity to debate them.
    I don't want to say to the mayor of my city or the Governor 
of my State or the attorney general of my State don't bring up 
a lawsuit, wait until the Congress acts, on something that we 
know the public is strongly for and we know, except for sort of 
narrow power, narrow special interest power, would happen. I 
think you can repeat that argument in many different places.
    Should the courts be careful when these lawsuits are 
brought? Yes, and they generally are careful. But should we 
preclude them from being brought? No. The real antidote, in my 
judgment, is for Congress to get with it, to understand that in 
certain areas, not in every area, but in certain areas there 
are huge frustrations, and that particularly our local 
governments and our State governments, fed up with the 
inability of Congress to act, have moved on their own. So I 
don't like the lawsuit way of going, but sometimes it is the 
only way to go.
    Thank you, Mr. Chairman.
    The Chairman. Well, I appreciate your point of view. All I 
can say is Brown v. Board of Education, in my opinion, was a 
constitutionally-based decision, although there are those who 
argue that it was not, but I happen to be a strong supporter of 
it. And I appreciate your remarks.
    Our second panel consists of six witnesses from various 
backgrounds. We will first hear from Professor Jonathan Turley, 
the Shapiro Professor of Public Interest Law at George 
Washington University. He has also taught tort law and products 
liability for over a decade. Professor Turley is best known for 
his scholarly commentary on the impeachment trial of President 
Clinton. It is not true that Professor Turley was chosen as a 
witness because of his kind words about me in the media during 
the trial, although that had just merely slipped my mind.
    Our second witness today is Mr. Don Ryan, Executive 
Director of the Alliance to End Childhood Lead Poisoning, which 
he helped found in 1990. Mr. Ryan was also instrumental in 
founding the National Center for Lead-Safe Housing, which was 
launched in 1992 with the Fannie Mae Foundation's largest grant 
ever. Along with his very active interest in ending childhood 
lead poisoning, Mr. Ryan has also spent over 25 years working 
with the executive branch and on Capitol Hill. So we welcome 
you, Mr. Ryan, as well.
    Next, we will hear from Mr. Matthew Myers, Executive Vice 
President and General Counsel for the National Center for 
Tobacco-Free Kids. Mr. Myers was the primary public health 
representative in the negotiations between the tobacco industry 
and the State attorneys general in the spring of 1997 that led 
to an agreement between these two parties. Mr. Myers has 
appeared before Congress and before executive branch agencies 
representing organizations such as the American Lung 
Association, the American Cancer Society, and the American 
Heart Association. I have worked with Matt over the years and 
have found him to be truly a gentleman and a scholar. We look 
forward to your testimony very much.
    Then we will hear from Mr. Victor E. Schwartz. Mr. Schwartz 
is a senior partner at the law firm of Crowell and Moring LLP, 
in Washington, DC, and Chairs the firm's Torts and Insurance 
Practice Group. Mr. Schwartz is recognized for his coauthoring 
of one of the most widely used law case books in the United 
States, Prosser, Wade and Schwartz' Cases and Materials on 
Torts. Mr. Schwartz was a professor and former dean of the 
University of Cincinnati School of Law, and currently is an 
adjunct professor at the Georgetown Law Center. For those of 
you who may not know, Victor Schwartz is an accomplished 
impersonator.
    Victor, I hope you appear as yourself today and not as the 
President or any former President of the United States.
    Mr. Schwartz. I would never do that, sir, under any 
circumstances.
    The Chairman. Also testifying today will be retired U.S. 
Marine Corps Lt. Gen. William Keys. General Keys is currently 
the chief executive officer and president of New Colt's Holding 
Corporation. General Keys has a long and distinguished list of 
accomplishments in the armed forces, including his last active 
duty assignment as the commander of the U.S. Marine Corps 
Forces Atlantic. I understand that General Keys is a true 
American hero, having led the U.S. Marines 2nd Division during 
the Persian Gulf War. I am certainly looking forward to hearing 
your testimony, General Keys, both as a high-ranking military 
officer and CEO and President of New Colt's Holding 
Corporation.
    Our final witness today will be Mr. R. Bruce Josten. Mr. 
Josten, Executive Vice President for Government Affairs, is the 
second ranking officer at the U.S. Chamber of Commerce and the 
organization's senior government and political affairs 
executive. Mr. Josten is also considered one of America's most 
effective strategists in the ongoing battle with the trial 
lawyer lobby, from product liability issues to class action and 
tort reform. So we are happy to have you here as well.
    I would like to thank each of our witnesses for taking time 
out of their busy schedules and appearing before the committee. 
These experts will, no doubt, shed light on the issues which 
accompany government-sponsored mass tort liability lawsuits. I 
am sure each of our witnesses today agree with me that the 
ramifications of such lawsuits are worth discussing. I look 
forward to today's hearing as a careful and considered first 
step toward a better understanding of government lawsuits as a 
substitute for regulation itself.
    So we will start with you, Professor Turley, and we will go 
right across the board.

   PANEL CONSISTING OF JONATHAN TURLEY, SHAPIRO PROFESSOR OF 
PUBLIC INTEREST LAW, GEORGE WASHINGTON UNIVERSITY, WASHINGTON, 
  DC; DON RYAN, EXECUTIVE DIRECTOR, ALLIANCE TO END CHILDHOOD 
  LEAD POISONING, WASHINGTON, DC; MATTHEW L. MYERS, EXECUTIVE 
    VICE PRESIDENT AND GENERAL COUNSEL, NATIONAL CENTER FOR 
TOBACCO-FREE KIDS, WASHINGTON, DC; VICTOR E. SCHWARTZ, CROWELL 
    AND MORING LLP, WASHINGTON, DC; WILLIAM M. KEYS, CHIEF 
 EXECUTIVE OFFICER, NEW COLT'S HOLDING COMPANY, HARTFORD, CT; 
AND R. BRUCE JOSTEN, EXECUTIVE VICE PRESIDENT, U.S. CHAMBER OF 
                    COMMERCE, WASHINGTON, DC

                  STATEMENT OF JONATHAN TURLEY

    Mr. Turley. Thank you, Mr. Chairman. Mr. Chairman and 
members of the Judiciary Committee, my name is Jonathan Turley 
and I am a law professor at George Washington University, where 
I hold the J.B. and Maurice Shapiro Chair for Public Interest 
Law. I sincerely appreciate the opportunity to speak with you 
today and to lead such a distinguished panel on an issue of 
great importance.
    Of course, only Dante could come up with a more devilish 
bargain for an academic. You can speak at length on your most 
cherished subject so long as you can do it in 5 minutes. 
Mercifully, the committee has accepted a written statement, and 
I will only summarize those comments.
    The Chairman. We will put all written statements in the 
record as though fully delivered.
    Mr. Turley. Thank you, Mr. Chairman.
    At the outset, I want to make clear that I come to this 
hearing with no prior involvement in this litigation or its 
parties. What draws me to the controversy is the process, not 
the products involved in these lawsuits. I believe that core 
principles underlying our government are being eroded through 
the pressures of political impulse and convenience.
    As beneficiaries of a great constitutional legacy, left to 
us by men like James Madison, we have a duty to consider not 
only the political ends but the constitutional means to achieve 
contemporary goals. It falls to this body to protect that 
legacy when political passions threaten to overwhelm legal 
judgment.
    We all inevitably bring some baggage to a hearing of this 
kind. Products like tobacco resonate with every citizen and 
legislator in a different way. For my part, I come to this 
hearing with something of an idiosyncratic academic 
perspective. I am an unabashed Madisonian. When Senator Schumer 
referred to the American way, I prefer the Madisonian way. In 
that sense, I tend to see political conflicts through the lens 
of Madisonian principles, divorced from their merits or 
ultimate outcome.
    In the midst of this controversy, this view may seem an 
academic caprice for modern legislators. Certainly, while he 
grew tobacco for a living, Madison would have had little to say 
on the merits of this litigation, but he would have a lot to 
say on the way that we should resolve it. You see, in a 
Madisonian democracy it is more important how we resolve a 
question than what we resolve.
    Our system is not immune from bad ideas or bad decisions, 
but Madison gave us a system that is truly idiot-proof so long 
as we stay within its simple rules. The only threat to a 
Madisonian system is when one branch attempts to act extra-
constitutionally or to circumvent the tripartite process of 
government.
    If there is a quintessential Madisonian moment, it is 
tobacco. Tobacco is a factional dispute. You have already seen 
the factions here today. There are fundamental questions about 
personal responsibility, corporate conduct, the government's 
role, taxation issues. It is precisely the moment that Madison 
had in mind. You see, he spent all of his life studying systems 
of government. He studied them not to see what they stood for 
but how they failed. He found that what forces governments to 
fail are factions, and that most governments often have poetic 
demonstrations of the things that bring us together, but he 
wanted to focus on the things that pushed us apart. He built a 
system not to inspire but to last. It is politics without 
romance. It is beautiful in its simplicity.
    What happens in the Madisonian system is that we take our 
factional disputes and in the crucible of debate we reach a 
majority decision. Politics is like a prism; it creates 
factional views, and the Madisonian system brings those views 
together, a point of reference. Now, the greatest threat there 
is when you have one branch that wants to circumvent, not to 
submit things to a legislative process which is very, very 
costly and often irritating. That is what is happening with the 
tobacco litigation.
    Rather than a Madisonian moment, we have a Madisonian 
nightmare. We have one of the most fundamentally fractioned 
issues that our country faces removed from the legislative 
branch and given to the judiciary. It is litigation with the 
best motives and the worst method. It is dangerous because it 
takes our system off its center of gravity. It invites the 
things that Madison wanted to prevent.
    Regardless of how you feel about the motives of this 
litigation--and I may agree with people on the other side--I 
ask you to think of the covenant that we made when we formed 
this Nation. We come from different places. We have different 
backgrounds, but the one thing that we have together is that 
common covenant to submit our disputes to the democratic 
process. That is what makes us unique as a people. We are not 
unique because of the problems we face; we are unique in how we 
solve them.
    And so I ask you to pause and look seriously at what the 
cost of a system will be when we shift matters that divide us 
to the one branch which we are supposed to prevent from making 
decisions for the majority. I appreciate the opportunity to 
speak today because the tobacco litigation threatens, 
unfortunately, to remove us from our most central roots. It is 
an impulsive act. It is one that I understand, but it falls to 
this body on some occasions to resist temptation and to level a 
system that had the greatest possible foundations and 
beginnings.
    Thank you, Senator.
    The Chairman. Thank you, Professor Turley.
    [The prepared statement of Mr. Turley follows:]

                 PREPARED STATEMENT OF JONATHAN TURLEY

    Thank you, Mr. Chairman: Mr. Chairman, members of the Judiciary 
Committee, my name is Jonathan Turley. I am a professor at George 
Washington University Law School where I hold the J.B. and Maurice C. 
Shapiro Chair for Public Interest Law. I sincerely appreciate the 
opportunity to speak with you today about the recent government lawsuit 
and the mass tort actions against the tobacco industry and other 
domestic industries.\1\ Of course, only Dante could construct a more 
devilish bargain for an academic: you can speak at length on your most 
cherished subject * * * so long as you can do it in five minutes. 
Mercifully, the Committee has accepted a longer statement for the 
record and my oral testimony today will only summarize those written 
remarks.
---------------------------------------------------------------------------
    \1\ Most of my comments today will be directed at the federal 
tobacco lawsuit but the same concerns extend to other governmental 
suits such as those against the gun manufacturers. Moreover, I will 
address the significance of the recent mass tort litigation toward the 
end of these remarks.
---------------------------------------------------------------------------

                            I. INTRODUCTION

    At the outset, I want to make clear that I come to this hearing 
with no prior involvement with this litigation. Specifically, I have 
never accepted money from any of these industries or served in a 
consultative capacity to any of these companies. What draws me to the 
controversy is the process, not the products, involved in the lawsuits. 
I believe that core principles underlying our government are being 
eroded under the pressures of political impulse and convenience. As the 
beneficiaries of a great constitutional legacy left by men like James 
Madison, we have a duty to consider not only the political ends but the 
constitutional means used to pursue contemporary goals. It falls to 
this body to protect that legacy when the political passions overwhelm 
legal judgment.
    We all inevitably bring some baggage to a hearing of this kind. 
Products like tobacco and guns resonate with every citizen and 
legislator in a different way. These are products that have attained 
powerful symbolic value that unleash passions on every side of the 
debate. All of the witnesses today, like the public at large, will see 
the issues surrounding these lawsuits through a lens of personal 
experience or perspective. For my part, I come to this hearing with 
something of an idiosyncratic academic perspective. I am an unabashed 
Madisonian.\2\ In that sense, I tend to see political conflicts through 
a lens of Madisonian principles divorced from their merits or ultimate 
outcome. I have spent most of my academic career studying, writing, and 
teaching in the area of Madisonian theory and the legislative process. 
I have written roughly two dozen academic works and over 70 articles on 
constitutional and legal issues.\3\ Much of this work incorporates or 
relies on the principles of James Madison who was the central architect 
of our governmental structure.\4\ In addition to my academic work and 
litigation in the constitutional area, I have also taught torts and 
product liability for over a decade.
---------------------------------------------------------------------------
    \2\ Madisonian scholars are a diverse group with many different 
views of Madison's theories and positions. While there are common 
denominators among the historians, law professor and political 
scientists, it would be arrogant to claim any particular view as the 
``genuine Madisonian'' perspective. It is impossible to list all of the 
academics who have written on this subject. Some of these works, 
however, are included in citations to this testimony.
    \3\ In legal commentary pieces, I have been critical of the federal 
lawsuit and the current system for handling mass torts actions, 
particularly mass tort tobacco cases. See, e.g., Jonathan Turley, The 
New Profiteers of the Tobacco War, The Wall Street Journal, September 
20, 1999; Jonathan Turley, Reforming the Great American Litigation 
Lottery, The Chicago Tribune, November 1, 1999, at A11.
    \4\ These academic works touch on various aspects of the Madisonian 
democracy or the legislative process. See, e.g., Senate Trials and 
Factional Disputes: Impeachment as a Madisonian Device, 49 Duke Law 
Journal 1 (1999); Through a Looking Glass Darkly: National Security and 
Statutory Interpretation, 53 Southern Methodist University Law Review 
(1999) a (Symposium); The ``Executive Function'' Theory, the Hamilton 
Affair and Other Constitutional Mythologies, 77 North Carolina Law 
Review 1791 (1999); Congress as Grand Jury: The Role of the House of 
Representatives in the Impeachment of an American President, 67 George 
Washington University Law Review 735 (1999) (Symposium); Dualistic 
Values in the Age of International Legisprudence, 44 Hastings Law 
Journal 145-275 (1992); ``When in Rome'': Multinational Misconduct and 
the Presumption Against Extraterritoriality, 84 Northwestern University 
Law Review, 598-664 (1990); Transnational Discrimination and the 
Economics of Extraterritorial Regulation, 70 Boston University Law 
Review 339-364 (1990); see also Reflections on Murder, Misdemeanors, 
and Madison, 28 Hofstra Law Review (2000) (Symposium); Dynamic 
Originalism and the Posnerian Paradigm, 93 Northwestern University Law 
Review (1999); ``From Pillar to Post'': The Impeachment and Indictment 
of Sitting Presidents, (forthcoming).
---------------------------------------------------------------------------
    In the midst of the current controversy, I realize that the views 
of a Framer, even James Madison, may appear to be something of an 
academic caprice for modern legislators. Certainly, while he grew 
tobacco for a living at Montpelier, Madison's writings offer little 
indication on how he would have felt about the merits of the claims 
against the tobacco companies. The Framers had no true comparison to 
contemporary litigation. Certainly, the concept of a mass tort or an 
action like the federal lawsuit would have been quite foreign to 
Madison and his cohorts. Madison, however, has much to say about how 
we, as a people, should resolve this and any political controversy. In 
a Madisonian democracy, it is more important how we resolve questions 
than what we resolve. In our system, we are not immune from bad 
decisions but our process protects the integrity of the system and 
gives it a direction. As Alexis de Tocqueville noted in his masterful 
work Democracy in America, Americans are constantly in motion. De 
Tocqueville was astonished that we appeared to be always veering in 
different directions. Yet, he noted that we somehow still managed to 
get from point A to point B before any other government. It is the 
integrity of our political system that allows this hyperkinetic energy 
to be released without seriously damaging our country. To be blunt, 
Madison gave us a system that is truly idiot-proof so long as we stay 
within its simple rules. The only threat to a Madisonian system is when 
one branch attempts to act extra-constitutionally or to circumvent the 
tripartite process of governance. It is this problem, what I refer to 
as the problem of ``circumvention,'' that will occupy the majority of 
my remarks today. While I will suggest an alternative process for 
dealing with mass tort litigation, I would like to focus on the process 
by which this controversy should be resolved regardless of its merits.

     II. THE MADISON MOMENT AND ROLE OF THE LEGISLATIVE PROCESS IN 
                      RESOLVING FACTIONAL DISPUTES

    If there is a quintessential Madisonian moment,\5\ it is the 
contemporary debate over tobacco. Tobacco is a factional dispute 
involving fundamental questions of personal responsibility versus 
corporate conduct. It involves complex questions of the actual costs of 
this product on the federal and state governments. It raises questions 
of the government's own culpability in the subsidization and taxation 
of an industry that is now targeted for damages. It involves questions 
concerning the future of this industry and the priority of any federal 
payment vis-a-vis the state settlements and private mass tort verdicts. 
It is a debate that has been joined by a vast array of different 
interest groups and organizations representing medical, legal, 
financial, and political interests. It is precisely the moment that 
Madison had in mind when he crafted our system.
---------------------------------------------------------------------------
    \5\ This is not a reference to Jack Rakove's fine work which uses 
this term. Jack N. Rakove, The Madisonian Moment, 55 University of 
Chicago Law Review 473 (1988). While I respect Rakove's work immensely, 
we have different views of aspects of Madison's theories.
---------------------------------------------------------------------------
A. Factional Politics and the Tripartite System
    Before addressing the specific questions raised by the federal 
tobacco litigation, a brief review of the foundations and principles of 
the Madisonian democracy may be useful.\6\ It is important to be clear 
as to what is meant by the Madisonian principles before reaching 
conclusions as to how the federal lawsuit could pose a threat to those 
principles.
---------------------------------------------------------------------------
    \6\ This brief overview is a reduction of longer treatments that 
can be found in Senate Trials and Factional Disputes: Impeachment as a 
Madisonian Device, 49 Duke Law Journal 1 (1999); Through a Looking 
Glass Darkly: National Security and Statutory Interpretation, 53 
Southern Methodist University Law Review (1999) (Symposium); Congress 
as Grand Jury: The Role of the House of Representatives in the 
Impeachment of an American President, 67 George Washington University 
Law Review 735 (1999) (Symposium).
---------------------------------------------------------------------------
    While it has evolved since its conception by James Madison and 
other Framers, the tripartite system continues to reflect the genius 
and character of Madison.\7\ Madison spent much of his life studying 
systems of government.\8\ When the time came for a design of a new 
governmental structure after the failure of the Articles of 
Confederation, Madison had achieved an almost unrivaled knowledge and 
appreciation of the various governmental antecedents. Madison was 
particularly interested in the ancient systems such as the Achean 
confederacy of Greece and the Helvitic confederacy of Switzerland.\9\ 
Madison was most interested in the causes for failure in democratic 
systems.\10\ In the course of his studies, he came to conclude that one 
of the chief causes of system failure was the corrosive influence of 
factions. This problem was exacerbated by the failure of prior systems 
to recognize the inevitability of factions and to effectively channel 
the pressures produced by such divisions.\11\ Madison noted that these 
earlier models tended to be based on documents espousing the common 
values and collective goals of a nation. They often bordered on the 
poetic in their articulation of the aspirational values of government. 
They also tended to fail as factional pressures grew beneath the 
surface and exploded into the streets of Paris or Athens. The Athenian 
model of direct democracy was rejected by Madison precisely because it 
``admits of no cure for the mischiefs of faction.'' \12\
---------------------------------------------------------------------------
    \7\ Madison himself steadfastly declined the common label as the 
author of the Constitution or father of the American constitutional 
system. Madison was personally quite modest and actively sought to 
share credit with his colleagues in the enterprise. See LANCE BANNING, 
THE SACRED FIRE OF LIBERTY: JAMES MADISON AND THAT FOUNDING OF THE 
FEDERAL REPUBLIC 1 (1996). Certainly, other Framers played significant 
roles in crafting aspects of the government. However, while Madison may 
have viewed such distinction as vainglorious, his vision of the 
tripartite system was the most cogent and dominant of his time. For a 
collection of Madison's writings, see JACK N. ROKOVE, MADISON: WRITINGS 
(1999). For background on Madison, see IRVING BRANT, THE LIFE OF JAMES 
MADISON (1970).
    \8\ Madison was voracious in his appetite for books on government 
and particularly confederacies. This appetite was so great than, when 
Jefferson went to Paris in July 1784, Madison dogged Jefferson to send 
books on government. Jefferson would comb stores in Europe for his 
friend and ultimately sent back dozens of such works, including the 
thirty-seven volumes collection Encyclopedie methodique. See generally 
WILLIAM LEE MILLER, THE BUSINESS OF MAY NEXT: JAMES MADISON AND THE 
FOUNDING 15 (1992); JACK N. RAKOVE, JAMES MADISON AND THE CREATION OF 
THE AMERICAN REPUBLIC (1990); ROBERT MORGAN, JAMES MADISON ON THE 
CONSTITUTION AND THE BILL OF RIGHTS (1988); ADRIENNE KOCH, JEFFERSON 
AND MADISON: THE GREAT COLLABORATION (1950).
    \9\ See WILLIAM LEE MILLER, THE BUSINESS OF MAY NEXT: JAMES MADISON 
AND THE FOUNDING 15 (1992).
    \10\ Madison would so often speak on such antecedents in defending 
his model that Framers, like James Wilson, grew to loathe his 
historical presentations. See Miller, supra, at 18. As will be shown, 
however, there was method to this intellectual fascination.
    \11\ Madison defined factions broadly: ``By a faction I understand 
a number of citizens, whether amounting to a majority or minority of 
the whole, who are united and actuated by some common impulse of 
passion, or of interest, adverse to the rights of other citizens, or to 
the permanent and aggregate interests of the community.'' THE 
FEDERALIST NO. 10, at 78. The Framers were well-aware of the presence 
of factions in the United States from their colonial experience. The 
colonies were riddled with often violent factional interests fueled by 
political and religious divisions. Nevertheless, as Madison strove to 
deal with factions, the delegates divided sharply between Federalists 
favoring representative procedures and Anti-Federalists favoring more 
direct democratic procedures. The Federalists believed that pure 
democratic systems were inherently unstable and that the solution to 
factional threats could be found in a representative system containing 
a separation of powers doctrine and a system of checks and balances.
    \12\ THE FEDERALIST NO. 10 at 81 (James Madison).
---------------------------------------------------------------------------
    The Madisonian system can be aptly called government without 
romance. Like Madison himself, the system is remarkably understated and 
unpretentious. Where other systems built structures around a view of 
the common values of a people, Madison designed a system to deal with 
the things that divided us. Madison left the vanities of other systems 
behind in favor of a starkly pragmatic system of government. It was a 
system primarily designed not to inspire, but to last. Since its 
creation, the Madisonian system has withstood pressures that would have 
easily crushed many other systems. It has lasted because it was based 
on an ultimate expression of realism in the matching of a government 
structure to the demands of a pluralistic society. Madison was faced 
with the most pluralistic nation on Earth with the promise of 
religious, economic, political, and racial factions.\13\ Madison 
concluded that ``the causes of faction cannot be removed and that 
relief is only to be sought in the means of controlling its adverse.'' 
\14\
---------------------------------------------------------------------------
    \13\ While the United States presented greater chances for 
factionalism, Madison also noted that the unique characteristics and 
the size of the new nation could help reduce these dangers since 
``society itself will be broken into so many parts, interests and 
classes of citizens, that the rights of individuals, or of the 
minority, will be in little danger from interested combinations of the 
majority * * * The degree of security * * * will depend on the number 
of interests and sects.'' THE FEDERALIST NO. 51, at 324 (J. Madison).
    \14\ THE FEDERALIST NO. 10, at 80.
---------------------------------------------------------------------------
    The bicameral legislative model was central to Madison's vision in 
dealing with factional pressures. Madison recognized that factions and 
divisions within a nation can, if left unresolved, fester into open 
conflict or ``convulse the society.'' \15\ Madison saw the natural 
inclination of citizens to divide on issues of importance in a 
democratic system since ``[t]he latent causes of faction are * * * sown 
in the nature of man.'' \16\ Madison wanted to create a system that 
would force such divisions into the open where they could be 
transformed into majoritarian compromises.\17\ The bicameral system was 
a result of this deliberative democratic concept. The key was to deal 
with the inevitable formation of factions in a free government while 
not suppressing liberty itself.\18\ Under this system, factional 
interests and preferences were coaxed to the surface of a legislative 
process in which such interests could be realized in whole or in part 
only by majoritarian agreement. In order to secure such agreement, 
compromise would be required in both houses of Congress with an appeal 
to values or interests outside any particular narrow interest 
group.\19\ Through the bicameral process, factional interests can 
evolve in the crucible of debate and deliberation into majoritarian 
resolutions. Certainly, this is the ``deliberative ideal,'' \20\ albeit 
sometimes unrealized.\21\
---------------------------------------------------------------------------
    \15\ THE FEDERALIST NO. 10 at 80 (James Madison) (Clinton Rossiter 
ed. 1961).
    \16\ Id. at 79.
    \17\ Id. at 80 (``The inference to which we are brought is that the 
causes of faction cannot be removed and that relief is only to be 
sought in the means of controlling its effects.'')
    \18\ THE FEDERALIST NO. 10, at 78 (``Liberty is to faction what air 
is to fire, an ailment without which it instantly expires. But it could 
not be a less folly to abolish liberty, which is essential to political 
life, because it nourishes faction than it would be to wish the 
annihilation of air, which is essential to animal life, because it 
imparts to fire its destructive agency.''). Madison sought to balance 
these two interests, noting that ``[t]o secure the public good and 
private rights against the danger of such a faction, and at the same 
time to preserve the spirit and the form of popular government is, then 
the great object to which our inquiries are directed.'' THE FEDERALIST 
NO. 10, at 80 (J. Madison).
    \19\ Letter from Thomas Jefferson to Edward Rutledge (June 24, 
1798), reprinted in 2 THE LIFE OF THOMAS JEFFERSON 24 (G. Tucker ed. 
1873) (quoted in Stewart Jay, Origins of Federal Common Law: Part One, 
133 University of Pennsylvania Law Review 1003, 1024 (1985)).
    \20\ Id. at 20.
    \21\ The public choice school has written extensively on the 
failures that can occur within the legislative process. For work 
discussing these theories, see generally Jonathan Turley, Through a 
Looking Glass Darkly: National Security and Statutory Interpretation, 
53 Southern Methodist University Law Review (1999) (Symposium); 
Dualistic Values in the Age of International Legisprudence, 44 Hastings 
Law Journal 145-275 (1992); Jonathan Turley, ``When in Rome'': 
Multinational Misconduct and the Presumption Against 
Extraterritoriality, 84 Northwestern University Law Review, 598-664 
(1990); Jonathan Turley, Transnational Discrimination and the Economics 
of Extraterritorial Regulation, 70 Boston University Law Review 339-364 
(1990).
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B. The Separation of Powers and the Circumvention of the Legislative 
        Process
    Just as Madison was strikingly pragmatic about the tendencies of 
citizens to divide, he also had no delusions about the motivations of 
individuals in politics or the institutional tendencies of the three 
branches that they would lead. ``If men were angels,'' he stressed, 
``no government would be necessary. If angels were to govern men, 
neither external nor internal controuls on government would be 
necessary.'' \22\ Throughout our history, there has never been a 
Congress that did not want to act like the president; a president who 
did not want to act like Congress; or judges who did not want to act 
like both. Madison preserved the balance of power by denying any branch 
the ability to govern alone.\23\ In some ways, our system is held 
together by the simultaneous pressures of each of the branches, a type 
of inverse pressure that holds the three parts as one. Madison relied 
on the self-interest of each branch to maintain this level of 
institutional pressure, including acts of self-defense in the face of 
circumvention.\24\ Madison believed that the solution for opportunistic 
elements in the political system was for ``[a]mbition * * * to 
counteract ambition.'' \25\
---------------------------------------------------------------------------
    \22\ THE FEDERALIST NO. 51, at 322.
    \23\ The concept of separation of powers predates American 
jurisprudence and had grown in sufficient popularity to be a familiar 
political theory to the Framers. For an excellent treatment of the 
history behind the separation of powers doctrine, see Robert J. Pushaw, 
Jr., Justiciability and Separation of Powers: A Neo-Federalist 
Approach, 81 Cornell L. Rev. 393 (1996).
    \24\ THE FEDERALIST NO. 51, at 349 (Madison) (``Unless these 
departments be so far connected and blended, as to give each a 
constitutional controul over the others, the degree of separation which 
the maxim requires as essential to a free government, can never in 
practice, be duly maintained.'')
    \25\ THE FEDERALIST NO. 10, at 344 (Madison).
---------------------------------------------------------------------------
    The separation of powers was understood to be vital to this new 
model.\26\ The problem of circumvention or usurpation would have to be 
checked to prevent a consolidation of power, for even a brief period, 
in any one branch. This belief in the separation of powers was heavily 
influenced by John Locke. While Locke referred to a separation of 
powers in two rather than three parts, he viewed the separation as 
essential to defeat the ``great temptation to human frailty'' when 
those with ``the Power of making laws'' are the same as those with 
``the power to execute them.'' \27\ Montesquieu emphasized the need to 
separate the power of government among various branches.\28\
---------------------------------------------------------------------------
    \26\ James Madison stressed that the essence of good government 
required that ``the legislative, executive and judiciary departments 
ought to be separate and distinct.'' THE FEDERALIST NO. 47, at 331 
(Madison).
    \27\ JOHN LOCKE, TWO TREATISES ON GOVERNMENT (Peter Laslett 1988) 
at 364.
    \28\ BARON DE MONTESQUIEU, THE SPIRIT OF THE LAWS bk. XI, ch. 6, at 
152 (Franz Neumann ed. & Thomas Nugent trans., 1949) (1748) (``There 
would be an end of everything, were the same man or the same body, 
whether of the nobles or of the people, to exercise those three powers, 
that of enacting laws, that of executing the public resolutions, and of 
trying the causes of individuals.''). Montesquieu noted that checks 
must exist within a governmental system on the abuses of office since 
``constant experience shows us, that every man invested with power is 
apt to abuse it; he pushes on till he comes to the utmost limit.'' 
Montesquieu, U, at 200. Thus, a tripartite system allows ``that by the 
very disposition of things power should be a check to power.'' Id.
---------------------------------------------------------------------------
    Through the separation of powers and the system of checks and 
balances, Madison sought to achieve the difficult goal described in his 
Federalist No. 51: ``In framing a government which is to be 
administered by men over men, the great difficulty lies in this: You 
must first enable the government to controul the governed; and in the 
next place, oblige it to controul itself.'' \29\ This goal required not 
only the separation of governmental powers among ``departments'' but 
also a system of checks and balances:
---------------------------------------------------------------------------
    \29\ THE FEDERALIST NO. at 349 (Madison).

        [T]he great security against a gradual concentration of the 
        several powers in the same department, consists in giving to 
        those who administer each department the necessary 
        constitutional means and personal motives to resist 
        encroachments of the others * * * This policy of supplying, by 
        opposite and rival interests, the defect of better motives 
        might be traced through the whole system of human affairs, 
        private as well as public.\30\
---------------------------------------------------------------------------
    \30\ Id.

Our system is designed to compel the two political branches,\31\ 
sometimes against the inclinations of their leaders, to deal with each 
other in an open and deliberative way. It is only by passing divisive 
issues through the legislative system that factional interests can be 
brought to the forefront and reconciled. Once either political branch 
circumvents the other branch in the process, the center of gravity for 
the Madisonian system is displaced with potentially dangerous 
consequences. It is the Judicial Branch that often preserves this 
balance.
---------------------------------------------------------------------------
    \31\ This term is used to refer to the Legislative and Executive 
Branches. Admittedly, it is a crude device that ignores obvious 
political aspects of judicial rulings. The reference, however, reflects 
the Madisonian view that any political role of the courts should be 
minimal in comparison to the central political functions of the other 
two branches.
---------------------------------------------------------------------------
    Threats to the Madisonian system can come in a variety of different 
forms. The greatest temptation in the system is to avoid the 
inconveniences or costs of the political process in favor of an attempt 
at judicial intervention. The threat of circumvention is most profound 
when one of the two political branches attempts such an end-run around 
the legislative process, though individual suits can also challenge the 
integrity of the system by raising political questions with the courts.
    The courts have been particularly vigilant in preventing unilateral 
action of one of the political branches to circumvent the other 
political branch. United States v. Standard Oil Company of California 
\32\ reflects the adherence to this principle. In that case, the 
Executive Branch sought to recover tortious damages from Standard Oil 
after one of its trucks injured a serviceman. Advancing a common law 
claim for recovery for medical expenses and wages, the Executive Branch 
sought damages that were available to litigants in state court. The 
Supreme Court, however, ruled that such a theory raised separation of 
powers problems. The claim of the Executive Branch constituted a 
circumvention of the right of Congress to determine the circumstances 
under which the government could claim a cause of action.\33\
---------------------------------------------------------------------------
    \32\ 332 U.S. 301 (1947).
    \33\ The Court accepted that some historically recognized 
governmental claims do not require congressional action. The Court 
noted that ``it has not been necessary for Congress to pass statutes 
imposing civil liability in those situations where it has been 
understood since the days of the common law that the sovereign is 
protected from tortious interference.'' Id. at 315 n.22. This includes 
such claims as trespass. Id.
---------------------------------------------------------------------------
    The tobacco litigation is the prototypical example of factional 
pressures and the need for ``institutional settlement'' \34\ within the 
political system. The tobacco litigation by the federal government is 
ultimately based on a core of largely unresolved questions of policy. 
First, there is the question of the continued sale of tobacco as a 
product. While various leaders, like President Clinton, have denounced 
tobacco as a leading killer of Americans, there has been no general 
call from the White House or most congressional opponents to ban the 
product. There appears to be a consensus that citizens will be allowed 
to continue to use this product despite its addictive and harmful 
characteristics. Yet, if this litigation is successful, there is a 
question of whether the industry would withstand the exposure to 
liability by the government as well as private actions like Engle v. 
R.J. Reynolds \35\ and the massive payments as part of the state 
settlements. Likewise, there is the question of the future of the 
industry and the continued role of the government in promoting or 
discouraging the sale or use of the product. Some of the most direct 
impact of this litigation will tend to fall on consumers in the form of 
increased prices for tobacco, a distribution question for which 
Congress is uniquely qualified to answer. Second, there is the question 
of the responsibility of individual smokers for their injuries and the 
equity of pursing the industry after years of federal governmental 
support and acquiescence. The public has strong views on issues of 
personal autonomy and responsibility that could significantly affect 
this debate. Third, there is the question of the right of the federal 
government to claim damages against any citizen or company. Citizens 
have a right to determine the conditions under which the federal 
government can seek additional funds or damages, including the moral or 
ethical basis for such recovery. Fourth, there is a factual question of 
whether the government has actually lost money on tobacco and, if so, 
to what extent. Finally, there is the cost-benefit determination of how 
a federal claim for tobacco money would affect other federal programs 
or the state settlements.
---------------------------------------------------------------------------
    \34\ HENRY HART & ALBERT SACKS, THE LEGAL PROCESS: BASIC PROBLEMS 
IN THE MAKING AND APPLICATION OF LAW 4 (tent. ed. 1958) (``The 
principle of institutional settlement expresses the judgment that 
decisions which are the duly arrived at result of duly established 
procedures for making decisions of this kind ought to be accepted as 
binding on the whole society unless and until they are duly changed. 
The bicameral system forced communications in the interests of the 
parties and took conflicts from the streets into a legislative process 
* * *'')
    \35\ Recently, a state court of appeals reversed its own panel 
decision in this case to allow for a single punitive award against the 
tobacco companies without individual trials. See R.J. Reynolds Tobacco 
Co., et al. v. Engle, et al., 1999 Fla. App. Lexis 13055, 24 Fla. Law 
W. D. 2192 (September 17, 1999).
---------------------------------------------------------------------------
    None of these questions belong in a federal court. They belong in a 
congressional committee room. Whether tobacco continues to be sold and 
the role of the federal government in such sales is ultimately a 
political, not a legal, question. No court is truly prepared or 
competent to explore the myriad of issues and calculations needed to 
determine the true cost or benefits of tobacco sales to the federal 
government. While courts do make difficult determinations on damages, 
such complex matters are generally left to congressional committees and 
agencies which have the resources and expertise to competently render a 
determination. There are few issues as volatile as tobacco or subject 
to more disagreement as to the underlying facts. Like gun and HMO 
liability, it is an area that produces only factionalized views without 
a single majoritarian resolution.
    Politics works as a prism that spreads different views across a 
spectrum as it has in the tobacco controversy. The legislative process 
works to take this spectrum and produce a common focal point that is 
acceptable to the majority. Until tobacco is considered in the 
legislative process, the views contained in any federal filing are 
merely the single view of the Executive Branch and not the entire 
public for which it should speak. Moreover, these theories create 
uncertainty as to the relevant legal obligations in this area.\36\ This 
produces gross inefficiencies within the market that should be able to 
rely on Congress as the forum for new policy and liability decisions. 
When the focus of governmental policy debates shifts from the 
Legislative Branch to the judicial branch, the stability and equity of 
the system is lost with a myriad of negative political and market 
consequences.
---------------------------------------------------------------------------
    \36\ As will be shown below, these theories are generally quite 
weak. However, the possibility of such massive liability is enough to 
produce uncertainty and force inefficient measures to hedge or protect 
against negative rulings against the industry. The federal filings 
could be easily viewed as a ``settlement strategy'' due to this fright 
factor. By even raising the possibility of a huge damage award, the 
federal government may hope to secure a settlement like those with the 
states. While this would be a highly improper use of litigation, it 
would only magnify the constitutional concerns discussed in this 
testimony.
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      III. THE MADISONIAN NIGHTMARE AND THE CIRCUMVENTION OF THE 
                          LEGISLATIVE PROCESS

    The decision of the Clinton Administration to pursue a judicial 
remedy converted the quintessential Madisonian moment into a Madisonian 
nightmare. The passions evident in the debates over tobacco are 
precisely the reason this issue belongs in the Legislative, not the 
Judicial, Branch. It is in Congress that factional interests can be 
reconciled and, ideally, transformed into majoritarian views. The 
Madisonian nightmare is the removal of a highly factionalized dispute 
from the Legislative Branch to the Judicial Branch. As unelected 
governmental officers, judges can bring highly unrepresentative and 
unaccountable views into a matter of national importance. These filings 
invite federal courts to determine questions that divide the nation. It 
is an invitation for judicial activism. By seeking a judicial 
legislative act, a branch avoids the costs of some insular political 
fight at a prohibitive cost to the system.\37\
---------------------------------------------------------------------------
    \37\ To his credit, Senator Jack Reed (D.R.I.) sought to make lead 
paint manufacturers liable to the federal government, Senator Reed 
submitted the matter to his colleagues for a decision of Congress. 
Regardless of the merits of such a bill, the recognition that an 
independent cause of action can only be given by Congress is central to 
the integrity of the tripartite system.
---------------------------------------------------------------------------
    As noted earlier, Madison could not have anticipated the degree to 
which social or policy issues could be litigated in the court system. 
While he anticipated the danger of judicial activism, Madison assumed 
that Congress would be the dominant branch in such questions. The 
influence of litigation as an alternative to political action is, 
therefore, a largely unanticipated and exogenous factor in the 
Madisonian system.\38\
---------------------------------------------------------------------------
    \38\ This is not to say that it is always inappropriate to seek 
major social or legal changes through the courts. Some citizen groups 
like the Civil Rights groups of the 1960's found the federal courts to 
be the only forum open to the realization of principles of equality and 
desegregation. Through cases such as Brown v. Board of Education, 347 
U.S. 483 (1954), the federal courts succeeded not only in changing 
legal standards but creating a dialogue over racial issues between the 
three branches. There is a great deal of difference, however, between 
marginalized groups seeking social justice in the courts and a branch 
of government seeking such judicial relief. When the Executive Branch 
seeks a judicial avenue for major policy changes, it is substituting a 
government by legislation with a government by litigation.
---------------------------------------------------------------------------
    The federal law suit may fall into the category of an Executive 
Branch policy advanced with the best motives and the worst methods. 
Administration officials clearly feel strongly about the costs and 
dangers of this product. Yet, while many members of the Administration 
have had distinguished careers in public interest causes, their prior 
method of seeking judicial intervention is wholly inappropriate to 
their current status. Rather than fighting a resistant government, they 
are now the government. As part of the governmental structure, their 
effort to circumvent the political branch invites the very dangers that 
Madison sought to avoid. In using the courts as an alternative method 
for policy implementation, the Administration undermines the 
protections against tyranny of the minority and judicial activism. The 
smallest reliance on such means adds a corrosive element to the system 
that will only undermine its foundations in time.
    The federal filing appears in part motivated by a judgment of the 
White House that Congress would not support an independent cause of 
action. The White House had already failed in its effort to secure 
funding for the lawsuit and, previously, Congress barred the federal 
government from claiming money that is part of the state settlements. 
It is certainly understandable why a political judgment would favor the 
circumvention of Congress in the hopes of reaching the same objectives 
through a federal court. However, the decision to advance creative 
statutory claims does little to change the effort to secure a judicial 
legislative act. Returning to Standard Oil, the Court rejected the use 
of creative analogies in that case to obscure the fact that what the 
government sought was an important change in policy--without 
congressional involvement.

        For grounded though the argument is in analogies drawn from 
        that field, the issue comes down in final consequence to a 
        question of federal fiscal policy, coupled with considerations 
        concerning the need for and the appropriateness of means to be 
        used in executing the policy sought to be established. * * * 
        [These analogies to tort law are] advanced as the instrument 
        for determining and establishing the federal fiscal and 
        regulatory policies which the Government's executive arm thinks 
        should prevail in a situation not covered by traditionally 
        established liabilities.\39\
---------------------------------------------------------------------------
    \39\ Id. at 314.

The Court returned to first principles in sending the Executive Branch 
to Congress, and through the Madisonian process, to achieve such 
---------------------------------------------------------------------------
objectives.

        Whatever the merits of the policy, its conversion into law is a 
        proper subject for congressional action, not for any creative 
        power of ours. Congress, not this Court or the other federal 
        courts, is the custodian of the national purse. By the same 
        token it is the primary and most often the exclusive arbiter of 
        federal fiscal affairs. And these comprehend * * * securing the 
        treasury or the government against financial losses however 
        inflicted, including requiring reimbursement for injuries 
        creating them as well as filling the treasury itself.\40\
---------------------------------------------------------------------------
    \40\ Id. at 314-15.

The only difference between the current filing and the failed effort in 
Standard Oil is the pretense of a statutory basis. Yet, any statutory 
source could be commandeered to serve as the basis for a new liability 
system. The government was simply more straightforward in Standard Oil, 
in acknowledging that it sought to construct a new cause of action 
through analogies to common law doctrines. The courts must still 
determine if there is any congressional intent to create such a cause 
of action. Under the statutory sources in the federal filing, there is 
plainly no such intent.
    Without debating the merits of each of the claims, it is important 
to note the extraordinary statutory interpretation theories that the 
Administration was required to maintain in order to avoid seeking an 
independent cause of action. One of the claims made by the government 
is that it can seek reimbursement under the Medical Care Recovery Act 
(MCRA).\41\ MCRA was the belated response to the Standard Oil decision 
through which the Congress, fifteen years after the decision, gave the 
federal government a right to recoup the costs for medical care and 
treatment paid by the government. While the 1996 amendment specifically 
allowed the government to proceed independently against individual 
tortfeasors, it has never been used for Medicare reimbursement.\42\ 
This limited statute was designed for a clear and limited purpose. The 
federal lawsuit would convert this limited statute into a massive 
Medicare recovery program without any debate as to the merits or 
efficiency of such a conversion.\43\ Moreover, MCRA extends a right of 
recovery to the government only when an individual is harmed ``under 
circumstances creating a tort liability upon some third person.'' \44\ 
Such ``circumstances'' are found in state tort laws, which differ 
dramatically in terms of the elements and defenses of tortious 
liability. The court would have to allow the government to litigate an 
unprecedented number of individual cases without reference to their 
underlying state issues. The question for any federal court concerned 
about the separation of powers is whether it should (1) manipulate the 
language of a statute clearly designed for a different purpose (2) in 
order to achieve a massive public policy objective that (3) was never 
submitted to Congress.
---------------------------------------------------------------------------
    \41\ 42 U.S.C. Sec. 2651.
    \42\ Moreover, while an independent right is expressly mandated, 
the same sentence creating the cause of action also refers to the 
action as subrogated. This creates ambiguity on the question of whether 
a true independent right exists or whether the government must still 
stand in the shoes of the injured party. 42 U.S.C. Sec. 2651(a) states:

      the United States shall have a right to recover 
      (independent of the rights of the injured or diseased 
      person) from said third person * * * the reasonable value 
      of the care and treatment so furnished, to be furnished, 
      paid for, or to be paid for and shall, as to this right be 
      subrogated to any right or claim that the injured or 
      diseased person * * * has against such third person to the 
      extent of the reasonable value of the case and treatment so 
      furnished, to be furnished, paid for, or to be paid for.
---------------------------------------------------------------------------
    \43\ But see United States v. Gera, 279 F. Supp. 731 (W.D. Pa. 
1968), rev'd on other grounds, 409 F.2d 117 (3d Cir. 1969) (finding 
independent right of action under MCRA); see also United States v. 
Housing Authority of the City of Bremerton, 415 F.2d 239, 243 (9th Cir. 
1969).
    \44\ 42 U.S.C. Sec. 2651(a).
---------------------------------------------------------------------------
    The government also seeks to use the Medicare Secondary Payer (MSP) 
\45\ provisions to secure compensation. This theory frankly borders on 
the frivolous. MSP was created to allow the government to seek 
reimbursement for Medicare funds. This act was also amended to expand 
the government's cause of action in 1984. However, the entire Act is 
designed to pursue insurers of tortfeasors, not the tortfeasors 
themselves. The court would have to find, among other things, that the 
tobacco companies constitute covered parties. In this sense, the self-
insurance of the companies would have to be construed as a ``primary 
plan,'' a highly unlikely event. Moreover, that statute allows for 
recovery under the auspices of the Health Care Financing Authority 
(HCFA) only through satisfaction of certain claim filings requirements 
that are highly difficult to apply to tobacco companies. Finally, the 
MSP refers to the recovery of payments that should be paid 
``promptly.'' Yet, there is no plausible argument why the tobacco 
companies should have expected to pay promptly costs that HCFA has 
never suggested should be paid. There is nothing in the statute or past 
practice to suggest to a tobacco company that it should pay anything at 
all, let alone on a prompt basis.
---------------------------------------------------------------------------
    \45\ 42 U.S.C. Sec. 1935(b)(2).
---------------------------------------------------------------------------
    Under both MCRA and MSP, courts would not only have to ignore the 
original intent behind these statutes but resolve a host of problems in 
advancing the government's case. These include statute of limitations 
problems. MCRA has a three-year limitation, which begins to run as soon 
as the government knew or should have known that it had a cause of 
action. MSP has a three-year limitation, though the operations of the 
regulations could practically reduce this to one-year due to a notice 
requirement.\46\ Moreover, the court would have to aggregate the claims 
on questions of proximate causation; employ statistical methods of 
proof; bar individual defenses; and resolve different choice of law 
problems relating to the tort laws from each of the states involved in 
the pool of injured parties.\47\ Aggregation has never been used in a 
MCRA action against any defendant and there is no authorization under 
the Act for such an action. This is a great deal of water for a court 
to carry to maintain a cause of action on a question that the Executive 
Branch has refused to submit to Congress.
---------------------------------------------------------------------------
    \46\ 42 C.F.R. Sec. 411.24(f)(2).
    \47\ The issue of the displacement of state law is itself a 
question that Congress should address with the Executive Branch.
---------------------------------------------------------------------------
    The strongest basis for recovery in the federal lawsuit is under 
the claim brought under the Racketeer Influenced Corrupt Organizations 
Act (RICO).\48\ Congress has long known that such claims are routinely 
applied to areas far removed from the Act's origins in fighting 
organized crime. In fact, RICO contains an express invitation for 
liberal interpretation of its application.\49\ The Supreme Court has 
accepted the language of the law as requiring federal court to ``read 
broadly'' the law due not only to ``Congress' self-consciously 
expansive language and overall approach but also its express admonition 
* * *'' \50\ This may allow the government to get beyond the threshold 
question of congressional purpose and intent. However, this still 
leaves the court with a host of subsidiary issues, including questions 
of how to prove the injuries. In Homes v. Securities Investor 
Protection Corp.,\51\ the Supreme Court held that any RICO claims must 
show ``some direct relation between the injury asserted and the 
injurious conduct alleged'' to satisfy proximate causation. This 
requirement has led to dismissals in lower courts.\52\ While 
distinguishable on some points, these cases share this fundamental and 
questionable element as well as difficult interpretative hurdles. While 
RICO has been shown to be susceptible to the wildest interpretations, 
the court must still face a series of insular statutory and proof 
issues.\53\
---------------------------------------------------------------------------
    \48\ 18 U.S.C. Sec. 1961.
    \49\ Pub. L. No. 91-452, Sec. 904(a), 84 Stat. 992, 947 (1970) 
(mandating that the law ``shall be liberally construed to effectuate 
its remedial purposes.'').
    \50\ Sedmina, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497-98 (1985).
    \51\ 503 U.S. 258, 268 (1992).
    \52\ See, e.g., Laborers Local 17 Health & Benefit Fund v. Philip 
Morris, Inc., 172 F.3d 223 (2d Cir. 1999), withdrawn and superseded by 
1999 U.S. App. Lexis 19576, 1999 WL 639865 (2d Cir. Aug. 18, 1999) 
(noting that [w]here a plaintiff complains of injuries that are wholly 
derivative of harm to a third party, plaintiff's injuries are generally 
deemed indirect and as a consequence too remote, as a mater of law, to 
support recovery.''); Steamfitters Local Union No. 420 v. Philip Morris 
et al., 171 F.3d 912 (3d Cir. 1999) (noting that `the tortured path 
that money must follow from the tobacco companies' alleged wrongdoing 
to the Fund's increased expenditures demonstrates that plaintiff's 
claims are precisely the type of indirect claims that the proximate 
cause requirement is intended to weed out.''). However, recently Judge 
Jack Weinstein in the Eastern District of New York has approved a RICO 
action on behalf of self-insured ERISA trust funds and Blue Cross/Blue 
Shield. See, e.g., Blue Cross & Blue Shield of N.J., Inc. v. Philip 
Morris, Inc., 36 F. Supp. 2d 560, 579 (E.D.N.Y. 1999).
    \53\ In the interest of full disclosure, the author has also found 
civil RICO an irresistible vehicle for application in areas far removed 
from its origins. See, e.g., Jonathan Turley, Laying Hands on Religious 
Racketeers: Applying Civil RICO to Fraudulent Religious Solicitation, 
29 William and Mary Law Review 441-500 (1988); Jonathan Turley, The 
RICO Lottery and the Gains Multiplication Approach: An Alternative 
Measurement of Damages Under Civil RICO, 33 Villanova Law Review, 239-
79 (1988).
---------------------------------------------------------------------------
    Inevitably, a federal court will have to deal with the question of 
circumvention and the question of judicial competence in this lawsuit. 
The circumvention of legislative process in this area has occurred in 
other litigation, which should only heighten judicial concerns.\54\ 
Putting aside the response of the federal courts, however, there is a 
separate question as to the proper response of Congress to such 
circumvention. It is to that final question that I would now like to 
turn.
---------------------------------------------------------------------------
    \54\ Congress has also seen the Administration pursue tobacco 
through the Federal Drug Administration (FDA) in a case now pending 
before the Supreme Court. Food and Drug Administration, et al. v. Brown 
& Williamson, et al., 119 S. Ct. 1495 (1999) (accepting petition for 
certiorari). In that case, the Fourth Circuit rejected the FDA effort 
to regulate tobacco as a circumvention of Congress. Food and Drug 
Administration, et al. v. Brown & Williamson, et al., 153 F.3d 155 
(1998).
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  IV. THE INSTITUTIONAL ROLE OF CONGRESS IN THE FACE OF CIRCUMVENTION

    As noted above, the maintenance of the balance between the branches 
is left to the self-interest of each branch to jealously guard its own 
constitutional domain. Madison's vision of government anticipated the 
branches being in a continual parry and thrust over institutional 
prerogatives. Ironically, the greatest threat is not an attempt at 
circumvention by one branch. Such attempts happen with fair regularity. 
Rather, the greatest danger is when one branch attempts such 
circumvention and the other branch does nothing in response. In this 
system, the failure of one branch to defend its constitutional 
territory produces a vacuum of authority that is itself destabilizing. 
The defense of the separation of powers is not left to the courts alone 
but to each branch in the use of its constitutional powers in defense 
of its institutional interests.
    Madison gave Congress a powerful institutional interest in 
deterring the circumvention of the legislative process through judicial 
filings by the Executive Branch. That interest can be defended in a 
variety of ways. The power of the purse given to Congress is not simply 
a check on specific programs requiring appropriations. Rather, Congress 
can use its appropriations authority to respond to circumvention in the 
general budget authorizations for the affected agencies. Appropriations 
are a signal of agreement between the two branches on the conduct and 
goals of the government. If a majority of Congress views the Executive 
Branch as pursuing extra-legislative means for policy, it is entirely 
legitimate to withhold public support for such unilateral behavior.\55\ 
Likewise, Congress may use its oversight authority to demand answers to 
questions over the constitutionality or propriety of executive actions. 
Finally, Congress can directly legislate to bar legal theories by the 
Executive Branch or to create protections of targets pursued by the 
Executive Branch. Such measures are not only permitted but encouraged 
in such conflicts. Obviously, Congress can also overstep its bounds in 
the use of such authority. However, in the case of the federal tobacco 
lawsuit, a major policy question has been removed to the courts to 
avoid a vote of Congress. It is essential for this body to respond to 
such circumvention to reestablish the need for legislative debate and 
resolution.
---------------------------------------------------------------------------
    \55\ Some academics would likely balk at such use of appropriations 
as excessive and impinging on areas of Executive Branch authority. In 
my view, however, the power of the purse was given to Congress to force 
the Executive Branch into a continual dialogue with the two houses. 
Where the Executive Branch is avoiding such a dialogue in pursuit of 
judicial legislative acts, the purse can be drawn tighter to 
concentrate the collective mind of the Executive Branch.
---------------------------------------------------------------------------
    The need for congressional action is magnified by two other 
developments in this area. First, the Administration has attempted to 
regulate tobacco under the Food and Drug Administration. In a case 
before the Supreme Court, an enormously important policy question will 
be answered without a decision of Congress. While the statutory 
arguments are closer in the Brown and Williamson case than the federal 
tobacco lawsuit, this case still represents a creative effort to avoid 
a question that belongs in the political not the judicial process. 
Second, and more importantly, the recent spate of mass tort actions in 
the tobacco area has recently created a new and compelling basis for 
federal intervention. While this is not the focus of this hearing, I 
would like to make a few brief comments about the latter phenomenon of 
mass tort litigation. As with the federal tobacco lawsuit, these class 
actions involve questions with truly national significance that are 
being decided outside the legislative process. While this is not a 
matter of circumvention, it is a matter of an interstate importance 
that is being left to the operations of individual state courts.
    Mass tort represents a small subset of tort litigation. By mass 
tort, I am referring to legal actions that can encompass thousands or 
even millions of injured parties. My concern is primarily with a subset 
of this subset of product liability litigation. Recently, we have seen 
the emergence of mass tort actions seeking, in some cases, hundreds of 
billions of dollars in compensatory and punitive damages. Where past 
lawsuits focused on individual products, these suits over such things 
as tobacco, guns, and paint appear to target entire industries. Some of 
these lawsuits may be well-founded in their underlying claims but the 
national impact of these lawsuits demands a national process of 
adjudication.
    Under the current system, a single state court can cripple or kill 
an industry. Moreover, litigants in mass tort actions today are 
participants in a contest that has far more in common with a lottery 
system than a legal system. There is no better example of the workings 
of this lottery system than proceedings that began yesterday in Engle. 
In the second phase of that tobacco case, a jury of six people will be 
asked to come up with a figure on punitive damages against the tobacco 
industry. Some projections suggest that the figure could go as high as 
$300 billion.\56\ What is extraordinary is that this single state court 
could demand most of the liquid capital of an industry. Such a verdict 
could ultimately prevent payments on the tobacco settlements to some 
states and, more importantly, leave other litigants with valid but 
valueless claims. All of this would be done without any political 
debate or public consensus. Whole industries may fall, not by a vote of 
Congress, but by massive blows delivered in mass torts law suits.
---------------------------------------------------------------------------
    \56\ Jonathan Turley, Reforming the Great American Litigation 
Lottery, The Chicago Tribune, November 1, 1999, at A11.
---------------------------------------------------------------------------
    Mass torts cases present unique national issues in terms of the 
scope of the injuries and the pool of victims. However, in a type of 
tragedy of the commons problem, a single state can move to acquire the 
assets of a company or industry through generous class action rules and 
hostile appellate procedures. Each state has a perverse incentive to 
attempt to fully recover the maximum amount of damages for its 
citizens. Consider again the Engle, case. The tobacco industry is eager 
to appeal a series of decisions by the trial judge, Judge Robert Kaye, 
who has made some highly controversial rulings in this case. However, 
under Florida law, in order to appeal a final decision from Kaye, the 
companies would have to post a bond for the entire monetary judgment 
plus twenty percent interest. Such a bond could bankrupt the 
defendants. While the industry has promised billions to the states, 
these payments are spread across a number of years and tied to future 
sales. Even if the industry could post such a bond, the tobacco stocks 
would likely go into a free fall. Yet, if tobacco does not post a bond, 
they may be prevented from appealing and then get hit with the total 
bill for the punitive damages. This Catch-22 may face other industries, 
which find themselves subject to fifty different state laws and an 
incentive of each state to secure as much of the damages as possible.
    This is what fuels the Litigation Lottery. If you are the first in 
line to demand punitive damages, you may receive awards in the 
billions. Later injured parties generally receive less as courts tend 
to reduce damages after an initial punitive award. They may receive 
nothing if the first award killed the company or the industry. None of 
this makes much sense, of course. There is no reason why one group of 
litigants in one state should receive the lion's share of damages to 
the deprivation of hundreds of thousands of other injured parties. 
Moreover, there is no reason why one state should be able to impose 
this result over other states when the problem and the victims are 
shared by the nation as a whole.
    There is an alternative to the current mass tort system. While I 
have long opposed many tort reform proposals, I believe that it is time 
for federal intervention to deal with some mass tort actions. Congress 
can establish a national system for mass torts that would remove these 
cases from the state courts to the federal courts. This will prevent 
the ability of a state to gut an industry and would allow for 
consolidation of cases for a national resolution. Narrow criteria can 
be used to remove only those cases with truly national impact and the 
greatest interstate dimensions. These cases would be taken from a 
larger pool of litigation involving class actions in which punitive 
damages are sought. The removed cases would be class actions that are 
part of a product liability theory with injuries and anticipated cases 
distributed across the country. This would avoid the current danger in 
which each state has the ability to hit an industry with a massive or 
even fatal award to the deprivation of other states with similarly 
situated victims. It would reduce the race to the courthouse and the 
potential for windfall damages to the swiftest litigants or the most 
aggressive state process.\57\ It would avoid the injustice of one state 
court forcing domestication of an award when other states have citizens 
with equal claims. Finally, it would add a degree of predictability and 
uniformity for the markets. The markets have experienced highly 
inefficient responses to the uncertainties of mass tort liability. 
Since any state law could potentially seize the assets of an industry 
in mass tort, the mere exposure of an industry results in expenditure 
of capital and resources in efforts to hedge or insure against such 
losses. Regardless of the ultimate liability of an industry like 
tobacco, the nation should create a system that affords greater 
structure and continuity to avoid such economic deadweight losses.
---------------------------------------------------------------------------
    \57\ Currently, one could anticipate a type of ``race-to-the-
bottom'' in which states attempt to gain advantages for its citizens in 
mass tort claims. Mass tort litigation can pit states against each 
other in seeking to offer their own citizens the same access and 
potential recovery as the citizens of other states. If one state has a 
draconian bonding requirement for appeal or a liberal proximate cause 
standard, for example, another state could adopt similar rules to level 
the playing field.
---------------------------------------------------------------------------
    This federal process would also bring a greater degree of equity to 
the distribution of damages in mass tort actions. Since compensatory 
damages would be paid upon final judgment and appeal, the payout from 
punitive awards can be delayed by a brief period to allow for the 
consolidation of cases and to avoid premature exhaustion of the fund. 
Congress could then mandate that punitive damage awards be placed in a 
single pool to be divided more evenly among injured parties. Finally, 
Congress should create caps for legal fees. This is not an effort to 
radically slash attorney fees common to contingency litigation, which 
often serve as a necessary incentive to bring many worthy suits. 
Rather, the caps would only reduce the percentage that an attorney 
could take on punitive damages to prevent a repeat of the state tobacco 
scandals where attorneys are entitled to billions of dollars (a rate in 
some cases of $200,000 per hour). It would also avoid the spectacle of 
single firms or attorneys claiming literally billions of dollars in 
attorney fees.\58\
---------------------------------------------------------------------------
    \58\ See, e.g., Marianne Lavelle & Angie Cannon, The Reign of the 
Tort Kings, U.S. News & World Report, November 1, 1999, at 36 
(reporting that ``[l]awyers representing the first three states that 
settled--Florida, Mississippi, and Texas--were awarded $8.2 billion in 
legal fees); Daniel LeDuc, Angelos, Md. Feud Over Tobacco Fee; $4 
Billion Payout to State Will Be on Hold as Lawyer Argues for 25 
Percent, The Washington Post, October 15, 1999, at B01 (reporting that 
lawyer Peter G. Angelos ``has a three-year-old contract with Maryland 
to pay him 25 percent of the proceeds from the litigation, or about $1 
billion.'').
---------------------------------------------------------------------------
    This is a general outline of only one approach to deal with mass 
torts. The merits of this proposal are less important than the need for 
a legislative response to the problem. While interstate issues are 
easiest to understand in the form of pollution or market barriers, it 
is now necessary to view some liability questions in interstate terms. 
The issues raised in cases like Engle produced highly factionalized 
debate that touches on the role of lawyers, the role of tort liability, 
the conditions for business enterprise, and the right of states to 
control tort judgments. It is a debate that does not belong in a state 
trial court. It is a debate that belongs here with the representatives 
of the entire populace and the involvement of both of the political 
branches.

                             V. CONCLUSION

    In the law of product liability, there is a legal term called 
``foreseeable misuse.'' This term refers to the doctrine that a 
manufacturer may still be liable for the misuse of a product if the 
misuse was foreseeable. Legislative circumvention is the constitutional 
counterpart to foreseeable misuse. Like any responsible product 
designer, James Madison anticipated such misuse and created a system to 
function in light of such conduct. The safety mechanism in the 
Madisonian design was a system of checks and balances in which 
circumvented branches could force correction and adherence to the 
original design. Such corrections or responses occur continually in the 
inevitable tension of a tripartite system. The mere presence of 
conflict, therefore, is not alarming. It is the possibility of 
acquiescence that is the danger to this system. Once one branch allows 
circumvention of its constitutional authority, the system becomes 
dangerously unstable.
    This is not to say that the Republic will fall due to the filing of 
a federal tobacco lawsuit. To the contrary, the Madisonian democracy is 
a system that can take enormous abuse and still retain its integrity. 
However, the taste for legislative circumvention only increases with 
time. We have seen disturbing examples of recent circumvention and the 
negative effects of this trend should not be underestimated for the 
future. Our nation is one of the most pluralistic nations on Earth. We 
all come from different cultural, racial, and religious traditions. We 
share, however, one constitutional tradition. It is highly 
proceduralistic and pragmatic. It is magnificent in its simplicity. It 
requires little of us. The Madisonian democracy asks for only one 
thing, a type of covenant with its people. We must be willing to submit 
to the supremacy of a democratic process and the judgment of the 
majority. This judgment is found in the dialogue between the two houses 
of Congress and between the two political branches. The pressure of 
rivaling constituencies and institutional perspectives can transform 
factional politics into a national consensus. This is the Madisonian 
moment. What makes us unique as a people are not our problems but how 
we chose to solve them.
    I would be happy to answer any questions that the Committee may 
have on my testimony.

    The Chairman. Mr. Ryan, we will take your testimony.

                     STATEMENT OF DON RYAN

    Mr. Ryan. Thank you, Senator Hatch. My name is Don Ryan. I 
am Executive Director of the Alliance to End Childhood Lead 
Poisoning. The Alliance is a national non-profit public 
interest organization. We work to protect children from lead 
poisoning through education, advocacy, and policy change. Our 
mission is prevention, avoiding children's exposure to lead 
hazards in the first place.
    I should note that the Alliance does not accept 
contributions from those with an economic stake in the issue, 
nor are we involved in any of the suits being brought against 
the lead paint industry by poisoned children, by owners of 
lead-burdened properties, or by the States.
    I do need to make clear that I am not a legal scholar, nor 
am I prepared to comment generically about State lawsuits. My 
remarks this morning focus on the challenge of protecting 
children from lead poisoning and the potential that State 
lawsuits offer to advance prevention.
    I believe the public interest is well served by State 
lawsuits against the manufacturers of lead-based paint. This 
morning, I want to make four points. Childhood lead poisoning 
remains a serious unsolved national problem. Current resources 
are inadequate to control lead hazards in children's homes. 
Fairness requires holding the manufacturers of lead-based paint 
accountable. Protecting children still at risk must be the 
central purpose of these lawsuits.
    By its nature, childhood lead poisoning is an environmental 
disease. There is no medical cure. The only solution is to 
protect children from exposure to lead through source control. 
The scientific evidence about lead's adverse human health 
effect is overwhelming. Almost one million U.S. preschoolers 
have enough lead in their blood to harm their intelligence, 
learning, and behavior.
    Most children are poisoned by lead hazards in their own 
homes. The major source of exposure is lead-based paint, 
present in nearly two-thirds of the entire U.S. housing stock. 
The foremost pathway of exposure is lead-contaminated dust 
which gets on children's hands and toys and into their mouths.
    Lead paint poses an enormous challenge to this Nation. 
Preschool children, of course, suffer from lead poisoning, but 
many others suffer as well--landlords, insurance companies, 
lenders, homeowners, real estate agents, painters, remodelers, 
health care providers, and teachers in our schools.
    Over the past several decades, all conceivable strategies 
have been explored--public education campaigns, universal blood 
lead screening, real estate disclosure, targeted subsidies, 
command and control regulations, and incentives for voluntary 
compliance. Despite all these efforts, the inescapable reality 
remains. Protecting children from lead poisoning requires 
substantial additional resources to control the hazards in 
their housing.
    How did we come to have lead paint in 64 million homes and 
apartments? Why were we 50 years behind in regulating lead 
paint? I believe the answers are clear, because of the 
relentless promotion of lead-based paint by the manufacturers 
and their agent, the Lead Industries Association, despite their 
clear knowledge of the dangers.
    The most chilling testimony comes from statements by 
industry leaders themselves and from LIA's own reports. This 
committee hearing is not the proper forum for judging the lead 
industry's actions. One important purpose of the Rhode Island 
lawsuit will be to reveal the factual evidence. I should note, 
however, that enough incriminating evidence has already been 
uncovered in prior suits that demonstrates that these charges 
are far from frivolous.
    I believe the recent tobacco litigation and the settlements 
the States have made offer several lessons for States now 
contemplating suits against lead paint manufacturers. Simply 
punishing the companies for their misdeeds is not sufficient. 
The public interest requires that relief and resources be 
devoted to remedying the problem at hand.
    The Rhode Island suit meets this test by requiring the 
defendants to detect and abate lead hazards in housing. Lead 
screening and educational programs also support prevention. I 
would urge other States now planning such suits to devote the 
preponderance of relief to controlling lead hazards in the 
homes of children at highest risk.
    In summary, I believe that fairness requires holding the 
Lead Industries Association and the lead paint manufacturers 
liable for their unscrupulous behavior in keeping lead in paint 
and for the cost of controlling the resulting hazards in our 
children's housing. I believe that Rhode Island's lead paint 
lawsuit directly serves the public interest. Indeed, such suits 
may be the only way to fill the gap in resources required to 
control lead hazards in the homes of children at highest risk.
    Thank you.
    The Chairman. Thank you very much, Mr. Ryan.
    [The prepared statement of Mr. Ryan follows:]

                     PREPARED STATEMENT OF DON RYAN

    Good morning, Mr. Chairman and Members of the Committee. My name is 
Don Ryan. I am executive director of the Alliance To End Childhood Lead 
Poisoning. I appreciate the invitation to testify before the Senate 
Judiciary Committee this morning.
    The Alliance is a national, 501(c)(3), non-profit, public interest 
organization located in Washington, D.C. The Alliance has been working 
since 1990 to protect children from lead poisoning through education, 
advocacy, and policy change. The Alliance anchors a loose-knit 
coalition of more than 250 state and local grassroots groups committed 
to lead poisoning prevention.
    The Alliance's goal is primary prevention, which means taking 
effective action to protect children before they are exposed to lead. 
We have been instrumental in shifting the national approach from 
waiting to react until after a child has been poisoned to ensuring that 
homes and apartments are safe from lead hazards in the first place. The 
Alliance was instrumental in Congress' enactment of the Residential 
Lead-Based Paint Hazard Reduction Act of 1992. This landmark law 
focused attention and resources on promptly and effectively controlling 
lead hazards in housing, especially lead-based paint and lead-
contaminated dust hazards, which are by far the foremost cause of lead 
poisoning among U.S. children. With the goal of ensuring that all 
children's homes are lead-safe, the Alliance has worked over the past 
ten years to find cost-effective strategies for controlling lead 
hazards and has sought to develop and build consensus on maintenance 
and lead safety standards that are both workable and protective.
    I will submit background information about the Alliance and our 
board of directors for the record. I should note that the Alliance does 
not accept donations from corporate and other interests with an 
economic stake in the issue, including: the lead and paint industries; 
the real estate and apartment industries; insurance companies; trial 
lawyers; lead hazard control contractors; or lead-safety product 
manufacturers. The Alliance has never initiated a lawsuit nor have we 
been involved in the suits now being filed against the lead-based paint 
manufacturers by state governments, by owners of lead-burdened 
properties, or on behalf of lead-poisoned children.
    I should clarify at the outset that I am not a legal scholar and I 
am not prepared to comment generically about state suits to recover 
public health costs from those who have manufactured and marketed 
hazardous products. I would like to provide background information 
about childhood lead poisoning and its prevention, the challenges 
presented by lead-based paint in housing, the need for additional 
resources for source control, insights into how two-thirds of our 
housing came to contain lead-based paint, and reactions to the State of 
Rhode Island's suit against the manufacturers of lead-based paint.
    I believe the public interest can be well served by state and local 
government lawsuits against the manufacturers of lead-based paint. 
First, lawsuits by state and local governments offer a means to right a 
longstanding wrong by holding the lead-based paint manufacturers and 
the Lead Industries Association (LIA) accountable for their ill-gotten 
gains through unscrupulous and relentless promotion of a product whose 
dangers were clearly known. Second, these suits hold the potential to 
fill a critical gap in the resources required to control lead-based 
paint and dust hazards which threaten the intelligence, learning, and 
behavior of nearly one million preschool children. I want to make four 
points this morning:

   That childhood lead poisoning remains a serious and unsolved 
        environmental, health, housing, and educational problem that 
        demands concerted action;
   That substantial additional resources are required for 
        source control strategies to protect children still at 
        immediate risk for lead poisoning from lead hazards in their 
        homes;
   That fairness requires holding the manufacturers of lead-
        based paint accountable, particularly in light of their efforts 
        to obscure scientific evidence, mislead the public, and promote 
        the sale of lead-based paint despite their clear knowledge of 
        its dangers; and
   That the ultimate goal of protecting children at greatest 
        risk for lead poisoning must guide the judgment of state 
        attorneys general, judges and juries, and the defendants in 
        these cases as well as legislative bodies that might themselves 
        consider constructive solutions.
      childhood lead poisoning remains a pressing national problem
    By its nature, childhood lead poisoning is an environmental 
disease. There is no medical prescription to cure lead poisoning. The 
only solution is protecting children from continued exposure to lead 
hazards through source control.
    Young children are most sensitive to lead's toxic effects because 
their brains and nervous systems are still developing. Even at very low 
levels, lead exposure in childhood causes reduced intelligence and 
attention span, learning difficulties, and behavioral problems. The 
scientific evidence about lead's adverse human health effects is beyond 
dispute, as summarized by the National Academy of Science's objective 
and authoritative 1993 report, Measuring Lead in Infants, Children and 
Other Sensitive Populations.
    Ironically, lead poisoning among U.S. children is at once a 
stunning environmental and public health success story and a pressing 
and persistent problem that eclipses virtually all other environmental 
health threats. The past three decades have seen dramatic decreases 
both in average blood lead levels in the U.S. population and in the 
number of children with elevated blood lead levels. These public health 
gains are positive proof that regulating environmental exposures to 
toxic substances directly benefits human health.
    Nevertheless, lead poisoning still affects almost one million 
preschoolers in the U.S. despite controls on point source emissions and 
bans on lead in new paint, gasoline, food cans and plumbing supplies. 
The latest national health data available (NHANES III) estimate that 
890,000 children aged 1-5 have blood lead levels 10 ug/dL or above, the 
current ``level of concern.'' (A number of recent studies have observed 
adverse neurological effects at even lower levels.) The risk of lead 
poisoning is disproportionate across population subgroups: children 
from low-income families are eight times more likely to have elevated 
blood lead levels than children from upper income families; African-
American children are at five times higher risk than White children.

     THE CHALLENGE POSED BY LEAD PAINT IN HOUSING AND THE NEED FOR 
                        EXPANDED SOURCE CONTROL

    Most children with elevated blood lead levels are poisoned by 
exposure to lead hazards in their own homes. The major source of their 
exposure is lead-based paint, estimated by the Department of Housing 
and Urban Development's 1990 Report to Congress to be present in 64 
million homes and apartments, nearly two-thirds of the entire U.S. 
housing stock. Intact lead-based paint rarely poses an immediate 
hazard, although children can be highly poisoned by chewing protruding 
surfaces coated with intact lead-based paint. The foremost pathway of 
exposure in children is ingesting lead-contaminated dust, which 
typically is produced by lead-based paint that is deteriorating or 
disturbed by repainting or remodeling. Toxic lead dust settles on 
floors and other surfaces and gets on children's hands and toys and 
then into their mouths.
    Lead-based paint in two-thirds of all U.S. housing presents an 
enormous challenge to the nation. Preschool children, of course, are 
directly affected. But lead-based paint in housing poses a complex 
public policy dilemma and imposes multiple burdens on many industries 
and interests. To name a few: rental property owners fear lead 
poisoning tort suits by tenants; insurance companies seek to refuse 
liability coverage wherever possible; lenders are nervous about 
properties with lead-based paint; affordable housing providers face the 
increased costs imposed by lead-based paint; real estate agents take 
pains to get disclosure forms signed; homeowners fear that lead-based 
paint will reduce equity in their homes; painters and remodelers need 
special training in lead safety; health care providers dread parents' 
questions about lead poisoning (there is no medical ``silver bullet''); 
the Medicaid system struggles mightily to screen children at highest 
risk; public health agencies scramble to give poisoned children follow-
up care; and our public schools must teach children unable to 
concentrate and unready to learn.
    Over the past few decades, various federal, state and local 
agencies and private sector interests have searched for solutions to 
childhood lead poisoning through a multitude of strategies: from 
screening and treating lead-poisoned children to educating parents and 
caregivers; from certifying specialized lead contractors to empowering 
community-based organizations; from training apartment maintenance 
supervisors in lead safety to educating painters and remodelers in how 
to avoid creating lead dust hazards; from categorical grants targeted 
to highest risk housing to lead safety regulations that govern all 
federal housing assistance programs; from incentives for voluntary 
compliance to targeted code enforcement; from reliance on market forces 
to command and control state laws. Despite the contributions of these 
various strategies, lead poisoning remains an unfortunate reality for 
almost one million preschool children. While the Alliance will continue 
to pursue all promising strategies, including public education and 
market-based solutions, the inescapable reality is that committing 
substantial additional resources to source control is the only way to 
prevent childhood lead poisoning. Without additional resources for 
controlling lead-based paint and lead-contaminated dust hazards in 
housing, future generations of children are destined to continue to be 
poisoned by lead hazards in their homes.

   THE MANUFACTURERS OF LEAD-BASED PAINT SHOULD BE HELD ACCOUNTABLE 
                           FOR THEIR MISDEEDS

    One group has been conspicuously absent from efforts to protect 
children from lead poisoning: those who are directly responsible for 
putting the lead in paint that is now present in nearly two-thirds of 
all U.S. housing. Suits by states such as Rhode Island serve the public 
interest by forcing the lead-based paint manufacturers and their agent, 
the Lead Industries Association, to be held accountable for improperly 
manufacturing and marketing lead-based paint and by rightfully forcing 
these companies to help defray the costs of source control to protect 
children from lead hazards in their homes. The unscrupulousness of 
these companies' and LIA's activities to cover up the dangers of lead-
based paint and promote its sale for decades after the dangers were 
clearly understood underscore the fairness of such suits by state 
governments.
    People's first reactions to the Rhode Island case seem to vary 
based on their presumptions about the lead-based paint industry's 
culpability or innocence. Those who view the manufacturers of lead-
based paint as benign argue that it is unfair to hold past acts to the 
standards of current knowledge. I am convinced that an objective 
evaluation of the historical record will reveal that the dangers of 
lead-based paint have been well known since at least the turn of the 
century and that the lead-based paint manufacturers and the LIA, with 
clear knowledge of these dangers, undertook a callous, calculated, 
decades-long campaign to manufacture and market lead-based paint. 
Statements by industry leaders and LIA's own reports offer the most 
chilling testimony about the industry's success in obscuring the 
scientific evidence, misdirecting scientific inquiry, suppressing 
publication of damning studies, and delaying government legislation and 
regulation of dispersive uses of lead.
    This Committee hearing is not the proper forum for judging the 
actions of the lead industry. One benefit of the Rhode Island suit is 
to ensure that this historical record is carefully examined and that 
LIA's and the lead-based paint manufacturers' actions are fairly 
judged. I should note, however, that litigation against the lead-based 
paint manufacturers over the past decade has already uncovered 
sufficiently incriminating evidence of wrongdoing to preclude 
dismissing out-of-hand the charge that these suits are frivolous.

STATE SUITS AGAINST LEAD-BASED PAINT MANUFACTURERS MUST INSTRUMENTALLY 
                           ADVANCE PREVENTION

    As an advocate for children's health, I want to emphasize that the 
ultimate effectiveness of suits against the lead-based paint 
manufacturers is the extent to which resources are actually devoted to 
controlling lead hazards in the homes of children at highest risk. The 
recent tobacco litigation and settlements offer many lessons for state 
suits against the manufacturers of lead-based paint. Most importantly, 
the public interest requires more than simply punishing companies for 
their culpability; the relief sought and the proceeds of such cases 
should remedy the problem at hand rather than balancing state budgets 
or funding unrelated activities.
    In this regard, the Rhode Island suit deserves note because the 
relief it seeks from the lead-based paint manufacturers will 
instrumentally advance prevention. The lion's share of the relief 
sought will ensure source control by requiring the defendants to detect 
and abate lead hazards in Rhode Island's housing and neighborhoods. In 
addition, the case seeks funding for ongoing blood lead screening and 
educational programs. The Alliance believes that, in addition to giving 
parents practical information about what they can do to help protect 
their children, educational strategies must encompass training of 
property owners, community groups, painters, and remodelers in lead-
safe work practices and certification of expert lead safety consultants 
and abatement contractors in order to advance prevention effectively.
    I would urge any and all states now developing suits against the 
manufacturers of lead-based paint to focus relief on source control to 
protect children at immediate risk. It is not sufficient simply to 
transfer funds from the companies responsible to state governments, 
even though that does serve to punish their misdeeds. The vast 
preponderance of the relief sought and the proceeds derived from such 
suits must be devoted to cleaning up lead hazards in the homes of 
children at highest risk for lead poisoning. These same principles of 
prevention and public health protection should guide any legislative 
action.
    I have outlined the dimensions of the still unsolved problem of 
childhood lead poisoning, the challenges presented by lead-based paint 
in housing, the necessity for additional resources to control lead 
hazards in the homes of children at highest risk, and the 
appropriateness of holding liable the manufacturers of lead-based paint 
and the Lead Industries Association. I believe that Rhode Island's 
lawsuit against the manufacturers of lead-based paint directly serves 
the public interest by holding the responsible companies accountable 
and by filling the critical gap in resources needed for prevention 
through source control. Indeed, I believe that such suits may be the 
only way to secure the resources that are required to control lead-
based paint and lead-contaminated dust hazards in housing to protect 
the almost one million children now affected by lead poisoning as well 
as future generations of children who will occupy these homes and 
apartments.

    The Chairman. Mr. Myers, we will turn to you.

                 STATEMENT OF MATTHEW L. MYERS

    Mr. Myers. Good morning, Mr. Chairman. It is a pleasure to 
be back before this committee and I want to thank you for the 
opportunity to testify today.
    It is our opinion that these lawsuits, particularly the 
tobacco lawsuits, have been an effective and powerful mechanism 
for holding the tobacco companies accountable, for changing the 
behavior of the tobacco companies in ways that are likely to 
promote the public health, and for at least partially 
transferring the cost of treating tobacco-caused disease from 
the American taxpayer to the tobacco companies themselves.
    The issue is not, as some have said, whether the Surgeon 
General was fooled or whether the Surgeon General knew that 
tobacco caused disease. It is whether the tobacco companies 
succeeded in using their 40-year campaign of deceit and 
deception to confuse young people deciding whether to start and 
adults deciding whether to stop, and, as between the tobacco 
companies and the American taxpayer, who should pay.
    We only have to go back to 1994 when the State of 
Mississippi became the first State to file suit against the 
major tobacco manufacturers and look at that complaint. 
Mississippi sought to hold the tobacco industry accountable for 
decades of wrongdoing. They sought to seek reimbursement for 
the taxpayers' cost in treating tobacco-caused disease, and 
using traditional consumer protection concepts to force the 
tobacco industry to make changes in order to drive down the 
incidence of tobacco-caused disease in the future. Mississippi 
did not seek to enact new laws. It relied on existing laws, and 
when its complaint was challenged in the courts, it held solid 
ground.
    Now, eventually, almost all of the States followed suit, 
and the judicial decisions that were rendered in those cases 
were a mixed bag. But it is fair to say that a substantial 
number of them, at least in preliminary rulings, had courts 
make findings to demonstrate that they were solidly based on 
the law.
    It is important to try to put these cases in context, and 
you know the context as well as I; as a matter of fact, you 
know it better than I. At the time the State of Mississippi 
first sued, tobacco companies continued to deny that their 
products caused lung cancer or other serious diseases, 
including before this very committee. They continued to deny 
that the nicotine in their products was addictive. They 
continued to deny that they researched children or marketed in 
ways that were attractive to children, and they continued to 
deny that they had any ability to actually reduce the harms 
caused by these products.
    These lawsuits, in the finest tradition of what litigation 
can accomplish, have opened the flood gates, and that is why it 
is our opinion that these cases reflect a proper use of the 
judicial process and a real sensitivity to the different roles 
of the three branches of government. Both the State and the 
Federal lawsuits are based on straightforward legal principles 
that a person or corporation should be held legally responsible 
when he, she, or it engages in conduct that causes harm to 
others.
    State legislatures and Congress have enacted laws that 
embody this principle. What the State attorneys general have 
done and what I believe the Department of Justice has done is 
seek to use those laws, to enforce those laws, in ways to seek 
proper redress. In bringing these suits, neither the State nor 
the Federal Government as a general rule enacted new laws.
    Now, I want to make a specific comment. We don't support 
cases that are not solidly based in the law. I don't know 
anybody who does. What we do support is a strict application of 
the current laws to accomplish the mutual goal, and I believe 
that that is what has been done in these cases.
    As we go back and look quickly, we can recite the positive 
gains that have come from the tobacco cases--the disclosure of 
tobacco industry documents that has forever changed the debate, 
for the first time creating a sense of accountability for the 
tobacco industry that never before existed; forcing the tobacco 
industry to make changes that you and I in our discussions have 
said are actually better done in litigation, elimination of 
billboards, elimination of brand name advertising in clothing, 
curtailment of sponsorship. Things that would have been 
difficult for this body to do have been accomplished through 
these ways.
    They have done some other traditional consumer protection 
things, and that is forcing the tobacco companies to fund a 
foundation to do public education. When I was at the FTC, we 
called it corrective advertising. It is exactly what the court 
should be doing, what the Attorney General should have been 
doing.
    In conclusion, I think there are three points I would like 
to make, and I know my time is up. One is I think these cases 
represent a thoughtful, careful enforcement of the laws. To the 
extent they are frivolous, I trust the courts to make that 
distinction. Two, they have done a great deal of good. And, 
three, as you know, we support the enactment of comprehensive 
legislation. I don't see them as either/or. I think we need to 
do both. We would like to work with you to enact meaningful, 
comprehensive legislation so that the courts can do their job, 
Congress can do its job. We need to do both.
    I want to thank you for the opportunity to be here today.
    The Chairman. Thank you, Mr. Myers.
    [The prepared statement of Mr. Myers follows:]

                 PREPARED STATEMENT OF MATTHEW L. MYERS

    Good morning Mr. Chairman and members of the Committee. My name is 
Matthew Myers. I am the Executive Vice President and General Counsel of 
the National Center for Tobacco-Free Kids, a national organization 
created to protect kids from tobacco by raising awareness that tobacco 
use is a pediatric disease, by changing public policies concerning 
tobacco, by altering the environment in which tobacco use and tobacco 
policy decisions are made, and by actively countering the tobacco 
industry and its special interests. The National Center is a membership 
organization with over 125 members, including many of this nation's 
major public health organizations and other groups concerned about the 
health and welfare of our nation's children.
    Mr. Chairman, I appreciate the opportunity to testify today 
regarding whether government lawsuits against industries like the 
tobacco industry are in the public interest and whether they run 
counter to the proper separation of powers among the legislative, 
executive and judicial branches of government. I want to emphasize that 
my organization's expertise is limited to tobacco and to the role 
lawsuits play in helping to prevent the death toll from tobacco.
    In 1994 the state of Mississippi became the first state to file 
suit against the major tobacco manufacturers. Mississippi sought to 
hold the tobacco industry accountable for decades of wrongdoing, to 
obtain reimbursement for the taxpayers of the state of Mississippi for 
the state's expenditures to treat tobacco-caused disease, and to force 
the tobacco industry to make changes in order to drive down the 
incidence of tobacco-caused disease in the future. Eventually, almost 
all states followed Mississippi's lead. Most recently, the United 
States Department of Justice has decided to enforce federal statutes 
against fraud and other wrongdoing by the tobacco companies. It is 
seeking reimbursement for a variety of health care expenses incurred by 
federal taxpayers to treat tobacco-caused disease as a result of 
decades of wrongdoing by the tobacco industry.
    It is our opinion that these lawsuits have been an effective and 
powerful mechanism for holding the tobacco companies accountable, for 
changing the behavior of the tobacco companies in ways that are likely 
to promote the public health and for partially transferring the cost of 
treating tobacco-caused disease from the American taxpayer to the 
tobacco companies. The issue is not whether the states or the federal 
government knew that smoking caused disease. The issue is whether the 
tobacco companies succeeded in using its campaign of deceit and 
deception to confuse children to start, and adults not to quit, and who 
should pay for the impact of the industry's wrongdoing--the tobacco 
companies or the American taxpayer.
    It is important to put these tobacco-related cases in context. At 
the time the state of Mississippi first sued, tobacco executives 
continued to deny that their products caused lung cancer or other 
serious disease, that the nicotine in their products was addictive, and 
that they marketed their products to children. In fact, the behavior of 
the tobacco companies on these critical issues had changed little over 
the previous decades and neither government, nor the private sector had 
yet succeeded in piercing the tobacco industry's wall of silence.
    The United States Centers for Disease Control and Prevention has 
estimated more than 10 million Americans have died from tobacco use 
since the issuance of the landmark Surgeon General's report in 1964. 
How many of those lives could have been saved had the tobacco industry 
told the truth or lived up to its promises not to market its products 
in a manner to make them more attractive to children? It has also been 
estimated that annual health care expenditures in the Unites States 
directly related to smoking exceed 85 billion dollars, that tobacco-
related Medicaid expenditures exceed 16 billion dollars annually and 
the Federal Government pays more than 20 billion dollars a year as a 
result of non-Medicaid, tobacco-related, health care costs. How much of 
these costs could have been averted had the tobacco industry behaved 
responsibly?
    Millions of lives could have been saved and billions of dollars 
could have been more productively spent if the tobacco industry had not 
engaged in a concerted cover up of the truth and a campaign designed to 
mislead the American public. While it is true that the tobacco industry 
did not succeed in deceiving the Surgeon General, it is equally true 
that its conscious effort to ``sow seeds of doubt'' in the minds of the 
American public, along with its aggressive marketing efforts, had an 
impact on young people deciding whether to smoke and on smokers 
deciding whether to quit. Unfortunately, all taxpayers ended up paying.
    It is also our opinion that these cases reflect a proper use of the 
judicial process and a sensitivity to the different roles of the three 
branches of government. Both the state and federal lawsuits are based 
upon the straightforward legal principle that a person or corporation 
should be held legally responsible when he, she or it engages in 
conduct that harms others. State legislatures and Congress have enacted 
laws that embody this principle. It is the role of State Attorneys 
General to enforce those state laws, and it is the role of the 
Department of Justice to enforce the laws passed by this Congress in 
order to hold wrongdoers accountable. In bringing these suits, neither 
the state nor federal Attorneys General enacted a new law; rather they 
applied existing laws to the conduct of the tobacco industry and 
reached a legal conclusion that the industry's conduct gave rise to 
civil liability. Ultimately the courts will determine the validity of 
this legal conclusion, but we are persuaded that the lawsuits correctly 
apply current law and represent an appropriate exercise of executive 
authority.
    What has been the effect of these tobacco cases? They have played a 
vitally important role. The following is not intended to be an all-
inclusive list.
    First, these lawsuits forced the tobacco industry to disclose 
millions of pages of documents it had long kept secret. It put on 
public record for the first time what the tobacco industry knew and 
when they knew it. By doing so, it destroyed the tobacco industry's 
ability to continue to confuse the American public about whether there 
was any scientific controversy about the health effects of its products 
or the addictive impact of nicotine. It also blew apart the tobacco 
industry's claim that it never studied the smoking behavior of children 
and that it was uninterested in trying to attract children. These 
disclosures have forever changed the public debate about tobacco and 
the tobacco industry.
    Second, these cases for the first time held the tobacco industry 
accountable for its wrongdoing. The payments the tobacco industry is 
now being forced to make to the states represent only a fraction of the 
value of the harm the tobacco industry has caused, but for the first 
time they bring some sense of justice to this issue. The federal 
government's claims are no less meritorious and may even be more so in 
light of the decision by Congress to recognize an independent right of 
recovery for the government under the Federal Medical Care Recovery Act 
(MCRA).
    But should the federal government be allowed to file a suit 
separate from the suits filed by the states? The answer is yes. The 
state suits sought recovery in part for Medicaid costs; the federal 
government's claims are for Medicare and other non-Medicaid federal 
programs. In addition, we have argued that a portion of the state 
settlement should have been returned to the federal government because 
current law requires states to reimburse the federal government when 
they recover from third parties. Many members of Congress countered 
that the federal government should file its own suit if it wanted to 
recover. Those who made that argument should not now criticize the 
Department of Justice for taking action that Congress essentially 
invited.
    Third, some states are using these funds to attack the tobacco 
problem. It is too early to know whether the states will maximize this 
opportunity to reduce the long-term death toll from tobacco. Of the 29 
states which have made at least a preliminary decision about how to use 
the first payments which they will receive, 8 have made commitments to 
use enough of the funds to mount a truly comprehensive tobacco 
prevention program, 10 have made more modest commitments, and five put 
funds into a trust fund for which expenditures for tobacco prevention 
and cessation can, but need not be made. In addition, the state of 
Mississippi has launched an aggressive two-year pilot project with 
funds from the tobacco settlement and Florida used its initial payment 
for the most successful one-year tobacco prevention program to date.
    Fourth, in the finest tradition of the enforcement of consumer 
protection laws, the States Attorneys General demanded and received 
meaningful concessions in how the tobacco industry does business that 
were directly related to the tobacco industry's wrongdoing. As the 
result of the state settlement, there are no more tobacco billboards. 
Clothes and other non-tobacco items no longer will be distributed with 
tobacco product brand names. Brand name sponsorships will be somewhat 
curtailed, among other actions. These measures are a step in the right 
direction and are appropriate actions to take in the settlement of a 
public lawsuit.
    Fifth, the state settlement agreement also requires the tobacco 
industry to fund the American Legacy Foundation. This foundation will 
conduct a major public education campaign to counter and undo some of 
the harm that has been caused by years of massive tobacco industry 
advertising. This, too, is a classic consumer protection remedy. If the 
American Legacy Foundation carries out its task effectively, it will 
become a powerful force for helping to reduce tobacco use.
    Sixth, no one should underestimate the overall impact that these 
cases have had on the tobacco industry. They now know that if they 
engage in future wrongdoing, they may be held accountable for their 
actions. Thus, for the first time the tobacco industry will not be 
allowed to behave as if it is immune from the laws that apply to other 
industries and other citizens.
    Every year tobacco kills over 420,000 Americans. It is a product 
that is unique in many respects. It is the only product, which kills 
when used exactly as intended. It is addictive. Virtually all-new users 
are children. The tobacco industry's behavior also distinguishes it 
from responsible industries. We now know that for decades the tobacco 
industry had known that its products were a cause of disease, but hid 
from the American public what it knew. We also now know that for 
decades the tobacco industry realized that the nicotine in its products 
was addictive, but also hid that truth from the American public. We 
know that the tobacco industry studied children and the behavior of 
children very carefully and understood full well that virtually all-new 
users of its deadly products were kids. Finally, we now realize that 
the tobacco industry has long known how to reduce the harm from its 
products, but because it was not being held accountable for its 
behavior, it chose to continue business as usual.
    Our support for these law enforcement actions is consistent with 
our call for strong, comprehensive, national legislation. Both seek to 
hold the tobacco industry accountable when it engages in serious 
wrongdoing. Both are needed. The lawsuits are not a substitute for 
legislation. The state and federal Attorneys General have correctly 
relied on existing laws to hold the tobacco industry accountable for 
its wrongdoing and, in the process, have triggered important 
improvements in public health.

    The Chairman. Mr. Schwartz.

                STATEMENT OF VICTOR E. SCHWARTZ

    Mr. Schwartz. Thank you, Mr. Chairman, for inviting me here 
today. I am testifying today on behalf of the American Tort 
Reform Association, which is a broad-based coalition of non-
profits, businesses, who are interested in our justice system. 
But my remarks are my own, and they are called by points that 
you have made, Mr. Chairman, and zeroed in on.
    There is a new trend, and the trend of these lawsuits--and 
I will discuss some of them in a moment--intrudes on separation 
of powers, reflects unsound public policy, and raises questions 
about equal justice under law. As you enlightened us earlier, 
the examples that were put forth by Senator Durbin of antitrust 
suits, civil rights suits, or under the Constitution all had 
some basis in law. But the lawsuits that we are talking about 
today are unchartered ventures where judges make the law with 
no principles, other than their own feelings about unpopular 
defendants.
    I put it this way: is it tort law or is it outlaw? If you 
don't like somebody, do you change the law because you don't 
like them? Now, a few years ago, that occurred in asbestos 
litigation. A few of our courts said basic principles of law go 
out the window; we are going to say there should be absolute 
liability because asbestos companies did very bad things.
    But then cases came up involving other things like 
escalators, and then they said, well, maybe what we said there 
about products isn't really what we meant because escalators in 
Louisiana, when those principles that were established in 
asbestos were applied to escalators, shut down.
    When the principles of law that were brought up against 
unpopular defendants were listed against popular defendants, 
the courts moved back. Now, will that occur with the current 
situation? Take tobacco. For 240 years, a basic principle is 
that if I am hurt, the primary right to sue is mine. Nobody 
should, and nobody does, have a greater right to sue than I do. 
That is true of every American who is hurt.
    But by some magic, a few lower courts, no court of highest 
jurisdiction, came up with something that my godchild could 
come up, although he is 6 years old and creative. They called 
it the quasi-sovereign doctrine. Just like he finds things in 
rooms, they found it in a room. It had no basis in law 
whatsoever, but it gave States greater power to sue than 
somebody who was hurt. So the State wasn't bothered about 
choice of smokers. The State wasn't bothered about proving 
harm. The State wasn't bothered about whether the State could 
tell who did what.
    Now, if you apply those principles to other industries--and 
I give an example in my testimony--sure, people who make lead 
paint should worry. Sure, the attorney general of Rhode Island 
is going to be head-on with the latex industry. The automobile 
industry makes cars that go fast. If you ignore the driver who 
is driving that car and you forget about his conduct, it is a 
big cost to our society. But people would be uncomfortable if 
those types of lawsuits had begun with automobiles. They are 
more comfortable when things are brought against unpopular 
defendants.
    With gun laws, and I won't go into detail, the same new 
creation is there. One theory is negligent distribution. Well, 
if you adopt that, people who make beer in Milwaukee have to 
worry about people who may be drinking beer in New York. The 
principles of law have changed because we don't like the 
defendant.
    One of the theories is that guns should be liable because 
they operate as guns. Well, that means we are holding companies 
liable even though their product doesn't have a defect in it. 
There are kitchen knives that are very large and very 
frightening. One was used in a famous case out in California.
    To us, what should the concern be? Is it tort law or 
outlaw? The principles of Senator McConnell's bill help address 
this. The principles of basic law address this that we have a 
system of laws that is based on principles, not who the 
defendant is.
    In closing, I will mention one other concern, and that is 
that where you have very wealthy, very fine plaintiffs lawyers 
bonding with the State, you have two people who have completely 
different interests. The State has certain interests. The sworn 
allegiance of attorneys general, Mr. Sessions, is to the 
Constitution. But those who practice personal injury law in 
your State who are very good people have other motives 
underlying them. This body produced the laws for unpopular 
defendants. It says ``Equal Justice Under Law'' on the top of 
the Supreme Court. I think it should, and that is why your 
hearing today puts a light on a subject that needs more 
attention.
    Thank you.
    The Chairman. Thank you, Professor Schwartz. We appreciate 
it.
    [The prepared statement of Mr. Schwartz follows:]

                PREPARED STATEMENT OF VICTOR E. SCHWARTZ

  THE NEW TREND OF REGULATION AND TAXATION THROUGH LITIGATION: WHY IT 
                    REPRESENTS UNSOUND PUBLIC POLICY

    Mr. Chairman, thank you for your kind invitation to allow me to 
share some thoughts before the Committee about the new judicial trend 
of regulation and taxation through litigation. This trend intrudes on 
the separation of powers, reflects unsound public policy, and raises 
concerns that the bedrock principle of ``equal justice under the law'' 
might be set aside when the defendant is unpopular.
    I am testifying today on behalf of the American Tort Reform 
Association (``ATRA''). ATRA is a broad-based coalition of more than 
300 businesses, corporations, municipalities, associations, and 
professional firms who have pooled their resources to promote reform of 
the civil justice system with the goal of ensuring fairness, balance, 
and predictability in civil litigation. ATRA was founded in 1986; it is 
based in Washington, D.C.

Regulation and Taxation Through Litigation
    Former Secretary of Labor Robert Reich concisely characterized the 
new trend of governments bringing their powerful resources to bear 
against lawful, private industries when he observed, ``The era of big 
government may be over, but the era of regulation through litigation 
has just begun.'' \1\ The new judge-made path toward regulation and 
taxation through litigation has been blazed by unpopular defendants--
the people who make tobacco, guns, or lead paint. On the horizon, 
reports have suggested that the next round of targets could include 
HMO's, manufacturers of latex products, automobiles, chemicals, 
alcoholic beverages, and pharmaceuticals, the gaming industry, 
``Hollywood'' and the entertainment industry, internet providers, and 
even the dairy and fast food industries.
---------------------------------------------------------------------------
    \1\ Robert B. Reich, Regulation is out, Litigation is in, USA 
Today, Feb. 11, 1999, at A15.
---------------------------------------------------------------------------
    Public officials and personal injury lawyers who have brought these 
lawsuits, and judges who support them, argue that since the Congress 
and state legislatures have not acted, judges must do so. Some 
regulation through litigation advocates suggest that executive branch 
regulators are captured by industry and will not act in the public 
interest, and that the only way to achieve certain public policy goals 
is through litigation.
    Litigation may provide the opportunity for some to achieve their 
personal agenda of reform, because some judges who see themselves as 
public policymakers are willing to bend the law. Although the judiciary 
should be, in the words of the late Alexander Bickel, the ``least 
dangerous branch,'' a few judges see it as the most activist branch. 
There are problems with this perspective.
    One of the problems is that many judges are unelected; this is 
certainly true with respect to the entire federal judiciary. And, even 
in those states where judges are elected, judges face little public 
light or scrutiny. Therefore, judges who embrace ``regulation through 
litigation'' are not subject to the checks and balances of the more 
open arenas of public policy that you face as Members of Congress.
    I will briefly share with you how Robert Reich's observation has 
played out so far and where it may go in the future. I suggest that 
this new, uncharted path poses serious dangers for our society. When 
the cheers fade for the state attorneys general tobacco victories, the 
public may realize that a new form of government has been unleashed and 
has the real potential to regulate them and tax them in ways that they 
neither require nor want.
Tort Law Or Outlaw?
    Tort law principles should apply in the same way to all defendants. 
This does not always occur in practice. Sometimes courts have bent tort 
law rules to ensure findings of liability against unpopular defendants.
    For example, in a 1982 case called Beshada v. Johns-Manville 
Products Corp.,\2\ the Supreme Court of New Jersey overturned more than 
two centuries of tort law and imposed absolute liability on a 
manufacturer of an asbestos-containing product. The court broadly 
stated that manufacturers of products that caused serious harm should 
not be able to defend themselves on the ground that they neither knew 
nor could have known about the risks that might be caused by their 
products.
---------------------------------------------------------------------------
    \2\ 447 A.2d 539 (N.J. 1982).
---------------------------------------------------------------------------
    The Supreme Court of Louisiana reached the same conclusion in a 
case called Halphen v. Johns-Manville Sales Corp.\3\ The court 
determined that asbestos products were unreasonably dangerous per se, 
in effect, of no social benefit. The court chose to ignore the fact 
that regardless of the risks asbestos may have created, it was the only 
insulation material available during World War II to ensure that Allied 
ships could stay warm inside. And, it was fireproof--an important fact 
when you are a thousand miles out at sea.
---------------------------------------------------------------------------
    \3\ 484 So. 2d 110 (La. 1986).
---------------------------------------------------------------------------
    While principles in those cases were broadly stated, the New Jersey 
and Louisiana supreme court decisions were based on the judges' views 
that manufacturers of asbestos-containing products had engaged in 
heinous conduct. The companies had produced a product that had caused 
serious injuries and, in some cases, death. According to the 
plaintiffs' allegations, the manufacturers knew about the risks, but 
did not warn the public.
    While the plaintiffs had made the central allegation that the 
defendants had known about the health risks associated with asbestos, 
the New Jersey and Louisiana courts eliminated the requirement that the 
plaintiffs prove that fact. By eliminating the need to prove that the 
defendants knew or should have known about the health risks of their 
products, the Supreme Courts of New Jersey and Louisiana anticipated 
that asbestos manufacturers would settle their cases and not litigate.
    When the Beshada principle of law arose again, however, in a case 
against the manufacturer of a pharmaceutical product, the Supreme Court 
of New Jersey stated that absolute liability would not apply because 
the product at issue was a medical product.\4\ The court opined that 
the nature of the product justified a different result.
---------------------------------------------------------------------------
    \4\ See Feldman v. Lederle Labs, 479 A.2d 374 (N.J. 1984).
---------------------------------------------------------------------------
    The distinction drawn by the New Jersey Supreme Court between 
asbestos and a medical product was not based on neutral principles of 
law, but on how the justices on that court felt about the particular 
defendants--people who made products that contained asbestos were tort 
law ``outlaws''; people who manufactured pharmaceuticals were not.
    A similar process occurred in Louisiana. Once the principle of 
absolute liability set forth in Halphen was unleashed in Louisiana, 
lower courts applied it to non-outlaw defendants. One example: 
escalator manufacturers. As a consequence, escalators in the state were 
shut down. When the case involving escalators reached the Supreme Court 
of Louisiana, the court confined the Halphen principle to manufacturers 
of asbestos-containing products.\5\ The court believed that society 
could proceed without asbestos, but not without escalators.
---------------------------------------------------------------------------
    \5\ See Brown v. Sears, Roebuck and Co., 514 So. 2d 439 (La. 1987).
---------------------------------------------------------------------------
    In effect, these courts said that manufacturers of asbestos-
containing products were outlaws and were not entitled to the same 
legal principles that applied to others.\6\ A key public policy 
question that Congress should consider is whether our Nation should 
have neutral tort law or outlaw tort law.
---------------------------------------------------------------------------
    \6\ Halphen and Beshada were overruled by legislation so as to 
require proof of defect. See N.J. Rev. Stat. Sec. 2A:58C-3(3) (1987); 
La. Rev. Stat. Ann. Sec. 9:2800.56(1) (1991). Another case, Kelley v. 
R.G. Indus., Inc., 497 A.2d 1143 (Md. 1985) (holding handgun 
manufacturer strictly liable for injury resulting from properly 
functioning ``Saturday Night Special''), was subsequently overruled by 
legislation. See Md. Ann. Code art. 27, Sec. 36-I(h) (West Supp. 1990).
---------------------------------------------------------------------------

Tobacco Law--Good-bye Subrogation, Hello ``Quasi-Sovereign'' Doctrine
    The ``tort law or outlaw'' issue arose with respect to the state 
attorneys general tobacco cases. Will the principles established by a 
few courts against those who make tobacco products be confined to 
tobacco or spread to other manufacturers? Some background concerning 
long-standing tort principles sheds light on the answer to that 
question.
    A fundamental principle of tort law is that an injured person's 
claim is greater than or at least equal to any claims by others for 
indirect economic harms that may flow from that injury. For example, if 
a worker is injured in the workplace as a result of a defective tool, 
his claim is the primary claim. No one else has a greater right to sue 
for the worker's injuries than the worker himself. If the worker's 
employer suffers economic losses as a result of the employee's injury 
(e.g., the employer has to pay workers compensation and medical 
expenses on the employee's behalf, suffers loss of profits while the 
employee is out of work, or has to hire a substitute worker), the 
employer's claim is secondary to that of the injured party. Through a 
legal process called subrogation, the employer can join in the 
employee's tort claim against the manufacturer of the tool or put a 
lien on the employee's recovery, but the employer does not have a 
separate, independent claim or a greater claim than that of the injured 
worker.
    Apart from the process of subrogation, the same result is reached 
through a traditional tort principle called the ``remoteness 
doctrine.'' The remoteness doctrine prohibits people who may incur an 
indirect economic loss from bringing a claim against a person who may 
have caused a physical injury. For example, if a negligent driver 
injures a person and the accident ties up a highway, the injured person 
may have a claim, but those who suffer lost economic opportunities 
because of traffic delays do not. The remoteness doctrine is based on 
twin public policies of avoiding duplicate recoveries and preventing an 
avalanche of claims.\7\
---------------------------------------------------------------------------
    \7\ See Victor E. Schwartz, The Remoteness Doctrine: A Rational 
Limit on Tort Law,--Cornell J. Law & Public Pol'y--(forthcoming Fall 
1999) (providing history and public policy behind the remoteness 
doctrine).
---------------------------------------------------------------------------
    Despite these fundamental aspects of tort law that have been 
respected for more than 200 years, a few lower state courts in the 
state attorneys general tobacco cases held that a state government 
could have greater legal rights than those of the individual smokers. 
In effect, the state could recover the cost and injuries allegedly 
sustained by a smoker, even though the smoker's case would fail. A 
smoker's case could fail, for example, because the person was clearly 
aware of the risk of smoking and made a conscious choice to smoke. Or a 
smoker's case might fail because the person did not establish that his 
or her particular illness was caused by smoking. Under established tort 
principles, the smoker could not prove this causal connection by 
statistics alone.
    In one state's lawsuit against the tobacco companies, however, a 
trial court created a new principle, the ``quasi-sovereign'' doctrine, 
which granted the state ``super plaintiff'' status.\8\ First, the 
``quasi-sovereign'' doctrine, in effect, eliminated applicable neutral 
defenses such as assumption of risk and contributory negligence. 
Second, it allowed states to subvert traditional principles of 
causation by allowing causation to be established through a general 
statistical correlation between the activity of smoking and public 
health care expenditures. Third, it bypassed established rules for 
allocating liability by allowing the super-plaintiff State to provide 
liability by generalized market share statistics. It did not have to 
show that a particular citizen was injured because he or she smoked a 
particular defendant's product.
---------------------------------------------------------------------------
    \8\ Texas v. American Tobacco Co., 14 F. Supp. 2d 965 (E.D. Tex. 
1997).
---------------------------------------------------------------------------
    It remains to be seen whether the ``quasi-sovereign super 
plaintiff'' decision represents neutral tort law or outlaw tort law. 
The implications of either result will have profound effects on our 
society. If ``super plaintiff'' decisions become neutral tort law and 
are applied to other defendants, many industries could be at risk of 
new and unprecedented liability exposures.
    For example, a very prominent plaintiffs' lawyer friend has shared 
with me his view that automobiles that go 90 miles per hour or more 
create a known risk that has no social justification. He fully 
appreciates that a person who drove a car above 90 miles per hour and 
was hurt would have his claim barred because of his own negligence or 
because he assumed the risk of injury. On the other hand, this sage 
plaintiffs' attorney observed that a claim by the state to recover 
Medicaid costs incurred in treating the driver's injuries might not be 
barred if the ``quasi-sovereign'' doctrine applied. For example, the 
driver's fault could be ignored. This plaintiffs' lawyer believes that 
state funds have incurred substantial Medicaid costs because of people 
who drive at excessive speeds. He believes that statistics can show 
that ``speed kills.'' He also claims to have evidence that automobiles 
sold in certain foreign countries have computer chips which prevent the 
automobiles from going faster than the speed limit. He claims that 
U.S.-made automobiles should have these computer chips.
    If the ``quasi-sovereign'' doctrine is limited in its application 
to unpopular defendants such as the tobacco industry, however, this 
plaintiffs' lawyer's theory would probably fall. The law would be 
different only because judges believe that we need automobiles, not 
tobacco.
    Mr. Chairman, the legislation you have sponsored with Senator 
McConnell, S. 1269, the Litigation Fairness Act, would address this 
issue and preserve the rights of individuals who may be injured. As the 
Litigation Fairness Act makes clear, an injured person's right to sue 
should be primary. Government should not have a greater right to sue 
than a citizen who has been hurt when that injury is at the heart of 
the government's claim.

Gun Law--Changing Law, Once Again, Against An Unpopular Defendant
    The new cases filed by some cities against firearms manufacturers 
present the same issue of neutral tort law or outlaw tort law. The 
cities have proceeded on at least two rather novel theories. First, 
some of the city suits are predicated on a theory called ``negligent 
distribution.'' These suits allege that the gun manufacturers knew or 
should have known that their products, lawfully sold in one state, 
would find their way into other states, where they could be used in 
criminal activity.
    Recently, a Federal District Judge in the Eastern District of New 
York ignored basic principles of tort law and allowed a jury to 
consider this novel new theory of liability of negligent 
distribution.\9\ The theory allows a jury to impose liability on 
various gun manufacturers. While the state or city was not the 
plaintiff in that case, its core principle would be helpful to 
governments that base their suits on negligent distribution claims.
---------------------------------------------------------------------------
    \9\ Hamilton v. Accu-Tek, 1999 WL 557261 (E.D.N.Y. June 3, 1999).
---------------------------------------------------------------------------

Hello ``Negligent'' Distribution, Good-bye Cars and Beer
    Fundamental tort law principles create a duty on the part of a 
person not to entrust another with a dangerous object. If I give my car 
to a drunk driver, and he causes an accident, I am subject to 
liability. That is the law of negligent entrustment. The same would be 
true if a gun seller knowingly sells a firearm to a ``strawman'' 
fronting for a felon or a bartender sold a bottle of vodka to a 
customer who was clearly inebriated.
    For over 200 years, negligent entrustment has been based on face-
to-face contact. There has been no tort of ``negligent distribution,'' 
where liability is asserted against a manufacturer that neither saw nor 
knew the party that intentionally and wrongfully misused its product.
    If negligent distribution principles, such as the one embraced by 
the New York Federal District Judge, were adopted and neutrally 
applied, a number of industries could be substantially at risk. For 
example, manufacturers of alcoholic beverages could face crushing and 
unfair liability exposure. To date, they have had no duty to stand 
guard over where their products are going or decide whether their 
products should be used in areas where they might be over-consumed by 
the local populace. The precedent that may be established in the gun 
cases, however, could create such a duty. Similarly, automobile 
manufacturers could have a duty to determine whether any dealer or car 
rental agency sold or leased vehicles to any person who might drive 
while intoxicated. Gasoline companies and matchmakers do not currently 
have a duty to determine whether the purchasers of their products might 
be arsonists.
    In short, once a new duty regarding manufacturer's negligent 
distribution is created, and one is held responsible for the criminal 
acts of a person that one never knew nor saw in person, liability 
implications are limitless, unless judges decide forever that ``we only 
meant guns, because we do not like guns; no one else need be 
concerned.''

Defectless Products--Let's Invent A Perfect Kitchen Knife
    A second theory used in gun cases is that firearms are 
``defective'' because they do not feature adequate safety devices to 
protect third parties against criminal misuse of the product. Product 
liability principles since their inception have focused on protecting 
the product user. These principles also may protect bystanders if the 
product fails to perform in a safe manner--for example, if a wheel 
falls off a car and injures the driver and a pedestrian.
    The concept of ``defect'' does not support the idea, pushed in the 
cities' firearms cases, that a protective device must be included to 
protect third parties from the intentional wrongful acts of the person 
who uses the product. If the legal definition of ``defect'' were to be 
extended to that point, there could be far-reaching implications for 
manufacturers of products that are intended to serve a legitimate 
purpose, but could cause significant harm if intentionally misused--for 
example, matches, kerosene, or even knives.
    The manufacturers of kitchen knives--especially long, sharp and 
potentially dangerous ones like those that have been used in well-
publicized criminal cases--could have a potential duty to ensure that 
those knives are kept locked up and used only for their lawfully 
intended purpose (i.e., cutting food, not people). Again, we will have 
to see whether courts will adopt this radical new definition of 
``defect.'' Will we have neutral tort law or outlaw justice?
    We are fortunate that, to date, at least some courts have respected 
existing principles of law and have not twisted them in order to 
regulate the firearms industry.\10\
---------------------------------------------------------------------------
    \10\ See City of Cincinnati v. Beretta U.S.A. Corp., No. A9902369 
(Ct. Cm. Pl. Oct. 27, 1999).
---------------------------------------------------------------------------

Government Should Not Be ``Pushing The Envelope'' On Tort Law
    Governments should not be part of the push to extend tort law far 
beyond its 200-year-old moorings. Governments also should stand for 
principles of equal justice under law and not try to create or extend 
existing legal principles for the purpose of attacking unpopular 
defendants. Government officials should appreciate that the legal 
theories created to fight unpopular industries could soon be applied to 
more popular industries. That is occurring now.
    The latest extension is in Rhode Island with respect to the 
manufacturers of lead paint. At least one attorney general has 
suggested considering suits against manufacturers of latex. Publicly, 
however, most state officials have followed the example of the Attorney 
General of the United States. When Senator McConnell asked Attorney 
General Reno about the Federal Government's lawsuit against the tobacco 
companies to recover Medicare costs and whether she would consider 
suing producers of high fat foods, alcohol, firearms or automobiles in 
the future, she stated that she was ``not aware of any other industry'' 
with the characteristics of tobacco. It has been stated by many 
attorneys general that tobacco is the only product that causes disease 
when it is used as intended.
    But, as people who suffer from heart disease can attest, high fat 
foods used as intended can contribute to serious illness, including 
arteriosclerosis. This is particularly true with young males. Medical 
data show that at least 25 percent already have incipient 
arteriosclerosis, a disease that seriously reduces the probability of a 
long and healthy life. If a court were to stretch existing legal 
principles in order to allow the Federal Government to sue tobacco 
companies for alleged Medicare costs, there is nothing to prevent 
future attorneys general from deciding to extend this new principle to 
manufacturers of products other than tobacco.

Separation Of Personal Injury Lawyers And State
    Apart from and, to some extent, linked with the creation of 
``outlaw tort law'' against unpopular defendants is the new and 
unprecedented partnership between governments and private contingency 
fee personal injury lawyers. Personal injury lawyers are enterprising 
professionals and have helped many seriously injured people. 
Nevertheless, this attorney general-personal injury lawyer linkage 
creates at least four fundamental public policy problems.
    First, government and private contingency fee personal injury 
lawyers are guided by different goals and principles. Attorneys general 
take oaths to the Constitution of the United States; that document is 
their guiding light and their interest is the public interest. The 
guiding light of private contingency fee personal injury lawyers, by 
contrast, is profit. To quote the old Seinfeld show, ``not that there's 
anything wrong with that,'' but it is clear that the goals of 
contingency fee personal injury lawyers and the goals of government are 
not the same. If personal injury lawyers run the show, the result may 
not be in the public interest.
    Second, as has been amply demonstrated in the Texas tobacco 
lawsuit, there is a strong potential for fraud and abuse when public 
officials make private fee arrangements with contingency fee personal 
injury lawyers. In almost every other context, government contracts are 
made in the public light and are priced through a competitive bidding 
process.
    That is a proper way to resolve public contracting opportunities. 
Public contracting should achieve the very best values for taxpayers. 
That goal is achieved by conducting the bidding process in the open. 
When public officials make agreements in private about contingency 
fees, however, potential abuses can include a wink and a nod about 
political contributions, or a wink and a nod about future employment at 
a private contingency fee law firm.
    Third, assuming such agreements are negotiated on the ``up and 
up,'' private multi-million or billion dollar agreements between 
contingency fee personal injury lawyers and attorneys general may not 
result in the selection of the best person at the best cost. 
Contingency fees do not have to be automatically 33 percent or 25 
percent of the total recovery. It is in the public interest to have the 
amount of the fee based on neutral criteria. For example, the 
probability of a successful outcome, whether work already has been 
performed by others to achieve the goals of the litigation, and the 
amount of time actually spent on the case. Marketplace open bargaining 
should be the norm--not backroom deals in the dark.
    Fourth, governments and contingency fee personal injury lawyers 
have shown the strong potential for fee disputes that can result from 
``backroom deals.'' Such disputes have occurred in a number of states. 
The potential for such fee disputes would be reduced if the agreements 
were made in public.
    The American Legislative Exchange Council (ALEC), a group of over 
3,000 state legislators, has developed a proposal to address these 
problems. ALEC's, model bill, ``The Private Attorney Retention Sunshine 
Act,'' was recently enacted in Texas and North Dakota. The Act would 
clarify how and under what terms state governments may enter into 
contingency fee contracts with private lawyers. Here is what the ALEC 
model bill would do.
    First, the filing of a contingency fee contract would have to be 
approved by a Legislative Budget Board if the state's anticipated 
recovery was likely to be more than $100,000 and adequate funds had not 
been budgeted to prosecute the case. Second, the contracting attorney 
or law firm would have to keep complete time and expense records. 
Expenses would have to be reasonable, proper, necessary, and actually 
incurred. In most cases, the time and expense records would be subject 
to public disclosure. Third, hourly rates would be capped at $1,000 an 
hour. Attorney fees could not exceed 35 percent of the total recovery, 
and the ``risk'' and ``difficulty'' multipliers could not exceed four 
times the base rate without prior approval by the legislature. All 
litigation and settlement funds recovered by the state would become the 
property of the state. Fourth, the payment of fees and expenses would 
have to be specifically approved by a governing body. Finally, no state 
or local officer could waive the requirements imposed by the 
legislature.
    For over ten years, I had the privilege to represent plaintiffs and 
it was a very satisfying portion of my professional life. But, I know 
from that experience and the experience of others that a plaintiff's 
counsel has a goal and, in part, an instinct to both push tort law 
principles as far as they will go, and to create new principles when 
the old ones do not reach far enough to permit a recovery. That is a 
legitimate private goal, not a public goal.
    A few years ago, legal experts stated almost universally that 
plaintiffs' lawyers would never sue the firearms industry because gun 
manufacturers do not have ``deep pockets'' like those of the tobacco 
industry. Experience has shown otherwise. This is true, in part because 
the balance between the plaintiffs' lawyer and the defense changes when 
the government is the contingency lawyer's sponsor and partner. For 
that reason, the pursuit and extension of new changes in law have no 
end. The contingency fee lawyer would not wish to confine the 
principles to one or two industries; he or she wants liberal tort law 
rules applied to everyone from whom a monetary recovery is possible. 
The future will demonstrate the truth of this statement. For example, 
the lead paint industry already is now exposed to new style lawsuits. 
As has been suggested, at least one attorney general has strongly 
suggested that the latex industry be next on the list for the state 
official contingency fee personal injury partnership.

Intrusion On The Separation Of Powers Principle
    When Robert Reich wrote that ``the era of big government may be 
over, but the era of regulation through litigation has just begun,'' 
his examples of this new trend were state suits against unpopular 
defendants--tobacco and guns. Robert Reich said that the public policy 
goals of these and future lawsuits could not be achieved through the 
normal political process of enactment of legislation or through well-
considered regulatory proposals. He analogized the new effort to the 
United States Supreme Court's civil rights decisions under the 
Constitution of the United States.
    Mr. Reich's perception of a new and major trend in tort law is 
perceptive and valid, but his analogy to the civil rights movement is 
misplaced. Equal protection under the law were words that were 
guideposts for the Supreme Court in civil rights cases. Tobacco, gun, 
and other new-style lawsuits, by contrast, operate in an almost 
completely open-ended, uncharted world. The words of the Constitution 
of the United States do not frame the picture as they did for civil 
rights. There is virtually no limit to what courts can do in creating 
new tort law and now they are demonstrating that fact.
    When courts create totally new causes of action and nullify long-
established precedent they go beyond their appropriate governmental 
role and act as legislators. Apart from the fact that such lawmaking 
initiative trespasses on the vital separation of powers between the 
judicial and legislative branches of government, bad public policy can 
result. This is why.
    First, judge-made law is retroactive. If the Congress made law in 
the same way, it would be an unconstitutional ex post facto law, 
Second, judges do not have the information that legislatures gather 
through the hearing process. That process helps legislative lawmakers 
appreciate the full public policy implications of their decisions. 
While two lawyers before an appellate court presenting their points of 
view are a source of good information, they are not a substitute for 
the legislative or regulatory fact-gathering process. Third, lawyers in 
court argue and focus on narrow rules of law, not major changes in 
public policy. If lawyers were allowed to focus on public issues far 
beyond the instant case they are arguing, courts would abandon the 
fundamental principle that judges must only resolve actual cases and 
controversies. Consideration of issues that go beyond a particular case 
or controversy is properly the job of legislatures.
    Those that have advocated that courts should make law where 
legislatures have refused to do so ought to think about the full 
implications of their new approach. If the courts become the forum in 
which to remedy failures in the legislative arena, what would happen if 
tort reformers who are unable to persuade legislatures take their case 
before judges who are empathetic to reform efforts? Would it be 
appropriate to have judges place caps on punitive damages? Would it be 
appropriate to have judges create statutes of repose and limit the 
liability of a manufacturer to a fixed number of years? I do not think 
so. Those are decisions for legislatures, not courts.

Conclusion
    The greatest argument of Robert Reich is that legislatures simply 
will not act on things that he and those who share his values believe 
are appropriate for legislative action. But it touches upon a bedrock 
principle of our Government to give up on the legislature because you 
cannot get your way. It has been shown that legislatures are 
politically responsive to the wishes of the general public. As Senator 
Everett Dirksen of Illinois once said, ``When they feel the heat, they 
will see the light.'' Legislators do act when the public consistently 
wants them to do so. Moreover, if legislators are not responsive to the 
public, voters have a direct remedy at the polls. The judiciary, on the 
other hand, is the least politically accountable branch of government.
    As state or the federal government tries to regulate or tax 
unpopular defendants through litigation, Members of this Committee 
should ask themselves whether we will have neutral tort law or outlaw 
tort law justice. If new and unprecedented judicial lawmaking is 
applied only against unpopular defendants, the principle of ``equal 
justice under law'' that is set forth on the top of an august building 
near here, the Supreme Court of the United States, will be nullified. 
We will have an outlaw tort law system. On the other hand, if courts 
adopt and broadly apply these new principles of tort law, judges could 
begin to regulate the marketplace and tax the public, deciding what 
products and services are to be available, how they are to be marketed, 
and at what price. No doubt, the implications of these lawsuits for our 
society are frightening; they undercut the very basic principles of our 
democratic form of government.

    The Chairman. General Keys, we will turn to you.

                  STATEMENT OF WILLIAM M. KEYS

    Mr. Keys. Mr. Chairman, I would like to thank you and 
members of the committee for inviting me to speak here today, 
and I am grateful for the opportunity to discuss with you the 
effect that the multitude of trial attorney-sponsored and 
politically-backed anti-firearm group lawsuits have had and 
could continue to have on Colt.
    Colt is a company with a time-honored place in American 
history, and today is engaged in an important and legitimate 
business. Colt today remains one of the few U.S.-owned 
suppliers of vital military equipment and firearms. We have 
supplied weapons to our armed forces in every conflict for the 
past 100 years. In fact, our present product line consists of 
over 70 percent government and law enforcement weapons, and our 
handgun manufacturing has now been reduced to two models.
    I would like to state up front that we consider ourselves 
to be a very responsible gun manufacturer who is clearly 
concerned with gun safety in all areas and against any illegal 
use of firearms. Nevertheless, Colt and other legitimate gun 
makers currently face unfounded lawsuits from approximately 30 
cities and counties and other entities in predominantly local 
and State courts across the country.
    We have been burdened with an unusual number of discovery 
requests seeking every document in our possession. In our 
defense, waves of lawyers have descended on Colt and other 
manufacturers, scouring every aspect of our business in order 
to respond to these requests.
    The fact of the matter is that the sale of firearms by 
companies like Colt is lawful. Congress has properly recognized 
that firearms serve an important, legitimate, and necessary 
purpose, including military, law enforcement, sporting, 
collector and self-defense uses. Does this mean that firearms 
like any other manufactured product doesn't get misused? Of 
course not. But Congress and other political entities have 
responded to the misuse of firearms by criminals and others by 
passing an extraordinary array of laws and regulations.
    Additionally, manufacturers like Colt are continually 
seeking to educate firearm users regarding the risks, proper 
use, and safe storage of firearms. In fact, death from 
accidental or criminal misuse of firearms is now and has been 
at historical lows, raising serious questions about the motives 
of the trial lawyers and others behind these lawsuits.
    Evidence suggests that the best method of achieving even 
further reductions in firearms misuse is to increase the 
enforcement of existing laws, which number approximately 40,000 
in this country, and to provide additional staffing of law 
enforcement bodies like the Bureau of Alcohol, Tobacco, and 
Firearms.
    Instead, local governments, who already have the power and 
authority to regulate the very issues against which they now 
complain, have brought these lawsuits. Each of these cities can 
seek through legislation to require guns sold within those 
cities to have any design feature they would like, as well as 
control of distribution requirements. They can even ban sales 
on firearms if they so choose.
    Mr. Chairman, we feel litigation should not be used to 
replace the will of the people and those laws enacted by the 
legislature. In fact, the first judge to consider these issues 
fully, Judge Ruehlman, in Cincinnati, agreed only a legislature 
has the power to engage in this type of regulation which is 
being sought.
    It appears the hidden agenda of the backers of this 
litigation is to put us out of business. And despite the lack 
of merit in these lawsuits, they may succeed even before we 
have the opportunity to obtain complete vindication in these 
many lawsuits in courtrooms around the country. The legal fees 
that the industry has and will incur to defend against these 
lawsuits have and will be astronomical. Sources of investment 
in our legitimate businesses are being discouraged and driven 
away. This is a very serious concern to us. Insurance providers 
threaten not to renew policies, and the manpower and time 
requirements of our executives and employees required to defend 
Colt in this litigation seriously disrupt our daily business 
operations.
    In short, municipal firearms litigation threatens the very 
existence of legitimate businesses like Colt, and in the case 
of Colt a business clearly important to the national defense. 
We are only one of two suppliers of the M16 rifle and the sole 
supplier of the M4 carbine to the U.S. military, as well as our 
allies. We are continually working with the military to develop 
new products to protect our armed forces. We believe, in fact, 
that we remain a major U.S. military supplier because of our 
ability to provide the highest quality products at a reasonable 
cost. It is less expensive for the U.S. Government to buy from 
a commercial business supplier than it is to maintain a 
supplier who supplies only to the military.
    Another aspect of our business that is jeopardized by the 
plaintiffs trial attorney is the development of the 
personalized handgun. Colt has long been a company known for 
its ingenuity and skill. Since Colt's rebirth in the mid-
1990's, we have placed great emphasis on the development of 
high-tech safety options, including the so-called ``smart 
gun.'' As many of you know from previous press accounts, we 
began working on this project several years ago.
    In summary, Mr. Chairman, I would state that we consider 
ourselves to be a responsible gun manufacturer. For the future 
of Colt, we would like to assure our position as the premier 
manufacturer of small arms to our military and our allies. We 
are uneasy and troubled by the fact that we and other companies 
in the future may be driven out of business by a wave of 
lawsuits even if the courts find out that the plaintiff's case 
has no merit.
    Mr. Chairman, myself and every other member of the Colt 
family is horrified when children take the lives of other 
children, and other law-abiding citizens suffer death as a 
result of gunshot wounds. But passing new laws and putting our 
company out of business is not the solution to solving this 
social problem. Rather, the best method of achieving even 
further reductions is to increase the enforcement of existing 
laws and provide additional funding for law enforcement bodies 
like the Bureau of Alcohol, Tobacco, and Firearms, and to 
continue development of safety programs like the ``smart gun.''
    Thank you.
    The Chairman. Thank you, General. We appreciate it.
    [The prepared statement of Mr. Keys follows:]

      PREPARED STATEMENT OF LT. GEN. WILLIAM M. KEYS, USMC (RET.)

    Thank you Mr. Chairman and Members of the Committee for inviting me 
here to speak. I am grateful for the opportunity to discuss with you 
the affect the multitude of trial attorney sponsored and politically 
backed anti-firearm groups lawsuits have had and could continue to have 
on Colt. Colt is a company with a time honored place in American 
history and today is engaged in an important legitimate business. Colt 
today, remains as one of the few U.S. military suppliers of vital 
military equipment and firearms. We have supplied military weapons to 
our armed forces in every conflict for over 100 plus years. In fact, 
our present product line consists of over 70 percent government and law 
enforcement weapons and our hand gun manufacturing has now been reduced 
to only two models. I would also like to state up front that we 
consider ourselves a responsible weapons manufacturer who is clearly 
concerned with gun safety in all respects and against any illegal use 
of firearms.
    Nevertheless, Colt and other legitimate gunmakers currently today, 
face unfounded lawsuits from approximately 30 cities and counties and 
other entities in predominantly local state courts around the country. 
In connection with these lawsuits, Colt has been served with 
extraordinarily expansive and burdensome discovery requests seeking 
virtually every document in Colt's possession related to the design, 
manufacture and marketing of firearms--military and otherwise. In our 
defense, waves of lawyers have descended on Colt and other legitimate 
gun manufacturers, scouring every corner and aspect of our business in 
an effort to respond to these unreasonable requests. Indeed, the trial 
lawyers and anti-gun groups, who crafted and are behind these ill-
conceived lawsuits, seek only to cripple, maim and, if possible, 
destroy legitimate businesses like Colt. And one would believe increase 
their personal gain in the process. In a U.S. News report dated 
November 1, 1999, about the litigation, Lester Brickman, a legal 
ethicist at the Benzamin N. Cordozo School of Law in New York properly 
pointed out that: ``They [the plaintiffs' trial lawyers] * * * have 
invented a formula where they get megabucks * * * for being a 
superlegislature and creating policy to their liking without regard to 
the right of the electorate to make the ultimate decisions about public 
policy.''
    The fact of the matter is that the sale of firearms by companies 
like Colt is lawful. Aside from its Constitutional foundation, it has 
long been the will and considered judgment of the United States 
Congress that the manufacture and sale of firearms should be permitted. 
Congress properly has recognized that firearms serve important, 
legitimate and necessary purposes, including military, law enforcement, 
sporting, collector and self-defense uses.
    Does this mean that firearms, like any other manufactured products, 
don't get misused? Of course not. But, Congress and other political 
entities have responded to the issue of firearm misuse by criminals and 
others by passing an extraordinary array of laws and regulations. 
Additionally manufacturers, like Colt, also have continually sought to 
decrease the likelihood of misuse by seeking to educate firearm users 
regarding the risks, proper use and safe storage of firearms. In fact, 
death from accidental or criminal misuse of firearms is now and has 
been at historic lows, raising serious questions about the motives of 
the trial lawyers and others behind these lawsuits. Moreover, the 
evidence suggests that the best method of achieving even further 
reductions in firearms' misuse is to increase the enforcement of 
existing laws which number approximately 40,000 in this country and 
provide additional funding and staffing of law enforcement bodies, like 
the Bureau of Alcohol Tobacco and Firearms.
    In sharp contrast to the considered judgment and actions of 
Congress, however, the backers of the Municipal Firearms Litigation are 
now attempting to circumvent the Legislature and turn to the courts to 
have them declare unlawful that which Congress has determined should be 
lawful and to prevent law abiding citizens--and, perhaps, even the 
military--from obtaining U.S. manufacturers products. Instead local 
governments who already have the power and authority to regulate the 
very issues against which now they complain have brought these 
lawsuits. Each of these cities can seek, through legislation; to 
require guns sold within those cities to have any design feature they 
would like as well as control the distribution requirements. They can 
even ban sales on firearms if they would like. Mr. Chairman, litigation 
should not be used to replace the will of the people and the 
Legislature with respect to these issues of public policy. In fact, the 
first judge to consider these issues fully, Judge Ruehlman in 
Cincinnati, Ohio agreed by only the legislature has the power to engage 
in the type of regulation which is being sought by the City here.
    It appears that the hidden agenda of the backers of this litigation 
is to put us out of business and, despite the lack of merit in these 
lawsuits, they may succeed even before we have the opportunity to 
obtain complete vindication in all these many lawsuits in courtrooms 
around the country. The legal fees that the industry has and will incur 
to defend against these lawsuits have been and will be astronomical. 
Sources of investment in our legitimate business are being discouraged 
and driven away. Insurance providers threaten not to renew policies. 
The manpower and time commitments of our executives and employees 
required to defend Colt in the litigation seriously disrupt our 
business operations.
    In short, the Municipal Firearms Litigation threatens the very 
existence of legitimate businesses like Colt and, in the case of Colt, 
a business clearly important to the national defense. While Colt's 
Manufacturing is one of the oldest manufacturers in the world, it also 
is one of the few remaining U.S. suppliers of military weapons. Our 
company's historical relationship with the U.S. Armed Forces remains 
today one of the focal points of our business. We are one of the two 
suppliers of the M16 rifle and the sole supplier of the M4 carbine to 
the United States military, as well as, many of our allies. In fact, we 
are continually working with the military to develop new products to 
protect our armed forces and bring them the highest technology 
available. We believe, in fact, that we remain a major U.S. military 
supplier because of our ability to provide the highest quality products 
at a reasonable cost.
    One of the reasons we are able to do this is because of the 
efficiencies we achieve as a result of our commercial business which 
consists of our Match Target rifle, our classic handguns and our law 
enforcement sales. In fact, the Army conducted a study in 1994 and has 
produced several documents thereafter, which recommend maintaining Colt 
as the sole supplier to the military because of our successful 
commercial business. It is less expensive for the U.S. government to 
buy from a commercial business supplier than it is to maintain a 
supplier who supplies only the military.
    The Municipal Firearms Litigation will not only have a negative 
affect on our ability to supply the military at a more reasonable cost, 
but if it forces us out of business, it also will leave the military 
without an experienced base to turn to during a time of crisis. In the 
opinion, of the Department of Defense, it would take two to five years 
and significant government investment to return any of today's weapon 
systems to their current level of operational reliability should we 
loose this present capability.
    Another aspect of our business that is jeopardized by the 
plaintiffs' trial attorneys is the development of the personalized 
handgun. Colt has been a company long known for its ingenuity and 
skill. Since Colt's re-birth in the mid 1990's, Colt has placed great 
emphasis on the development of high tech safety options, including the 
so-called ``Smart Gun.'' As many of you know from the numerous press 
accounts of our project, we began working on this program several years 
ago. In 1998, we received a grant for $500,000 from the National 
Institute of Justice to further this process. Colt has also invested a 
significant amount of its own funds into this program.
    In comparison, the army currently which is developing a new firearm 
with electronics on board and, despite their cost overruns, the project 
received over $15 million for research and development this year, a 
significant amount more than the funding we received from the 
Department of Justice. Viewed from that perspective, the $500,000 the 
government has awarded us clearly is only a small part of an investment 
to move this program to a commercially viable product. Nevertheless, 
because of our concern for safety, our company is committed to its 
development. Unfortunately, the very municipalities, which are suing us 
who, believe we are not interested enough in safety are the ones who 
may prevent us from completing this project. The heavy financial 
burdens of the Municipal Firearms Litigation clearly will continue to 
impede our progress and possibly jeopardize its very existence.
    In summary, Mr. Chairman, I again state we consider ourselves to be 
a responsible gun manufacturer. And for the future Colt, now New Colt 
Holding Company, is intent on ensuring its position as the premier 
manufacturer of small arms to our military and allies throughout the 
world and most particularly, we seek to be the supplier of choice to 
our military. In the furthering interests of gun safety we will 
continue to develop the Smart Gun to the extent possible in the current 
costly legal environment and to work with any organizations both public 
and private who have a legitimate interest in gun safety. We have a new 
management team who together, will with our labor force share the 
vision for a successful future. Our union, which is approximately 70 
percent of our workforce, has remained loyal because of their 
workmanship and pride in our product through our recent complicated 
period of readjustment.
    We are uneasy and troubled by the fact that we and other companies 
in the future may be driven out of business by a wave of lawsuits, even 
if the courts eventually find out that the plaintiff's cases have no 
merit. We feel Tort law should not be used to achieve a narrow 
political goal that can not be achieved through legislative means.
    Mr. Chairman, myself and every member of the Colt family is 
horrified when children take the lives of other children or other law-
abiding citizens suffer death as the result of gun shot wounds but 
passing new laws and putting our company out of business is not the 
solution to solving this social problem. Rather, the best method of 
achieving even further reductions in firearms' misuse is to increase 
the enforcement of existing laws and provide additional funding and 
staffing of law enforcement bodies, like BATF and continue development 
of programs like the ``Smart Gun''.
    Thank you very much for allowing me this opportunity.

    The Chairman. Mr. Josten, we will turn to you now.

                  STATEMENT OF R. BRUCE JOSTEN

    Mr. Josten. Mr. Chairman, members of this committee, I am 
Bruce Josten, Executive Vice President of the U.S. Chamber of 
Commerce. I appreciate the opportunity to testify today before 
the committee and request that my full statement be entered 
into the record.
    Government-sponsored litigation is a topic that has 
recently been thrust again into the public spotlight. Following 
President Clinton's directive in this year's State of the Union 
Address, Attorney General Janet Reno filed the Department of 
Justice's lawsuit against tobacco manufacturers.
    Government-sponsored litigation is also appearing in a 
growing list of industries. Numerous lawsuits have been filed 
by local jurisdictions against the firearms industry, as we 
just heard. Rhode Island has filed a lawsuit against the 
manufacturers of lead paint, and other jurisdictions are 
expected to file shortly. Some in the plaintiffs bar have been 
vocal in announcing additional targets for litigation--
alcoholic beverages, pharmaceutical products, and even auto 
manufacturers, to name but a few.
    The effects of these lawsuits are far-reaching and they 
pose serious threats to American business, their employees, 
their shareholders, as well as the communities they operate in 
and the economy at large. We need prompt action by Congress to 
stop governments from abusing their power to tax legitimate 
businesses through litigation or, where the rule of law is 
against them, to strip certain fundamental legal rights from 
the companies they are suing.
    Why are governments abusing their power to litigate against 
legal industries and legitimate activities? We believe the 
answer is three-fold. First is the potential for massive 
settlement awards, such as the success of the States in 
recovering over $240 billion from tobacco manufacturers.
    The second is the relative ease with which governments have 
been able to partner with some trial lawyers willing to finance 
and initiate these suits. The services of these trial lawyers 
are frequently secured under contingency contracts and they are 
willing to take these cases because of the possibility of a 
massive jackpot at the end of the litigation. For example, the 
5 firms that represented Texas are attempting to share a $3.3 
billion award from an arbitration panel, though Texas is 
challenging that fee.
    The third reason is the ability to make policy decisions 
through litigation. Exploiting their alliance with a mere 
handful of like-minded government officials, some of the 
members of the plaintiffs bar are today in a unique position to 
bypass legislatures, if not usurp their authority, and 
determine public policy through the courts. As former Labor 
Secretary Robert Reich asserted, ``The era of big government 
may be over, but the era of regulation through litigation is 
in.'' The Chamber believes that these policy decisions should 
be left right where they belong, in legislatures.
    The incentives for unfair government-sponsored litigation 
are clear, but how is this process actually carried out? First, 
a particularly legal, albeit unpopular industry is targeted. 
Next, a campaign to vilify that industry occurs. Third, 
lawsuits are filed in multiple jurisdictions. Finally, in some 
instances we are also beginning to see a particularly troubling 
trend. Some governments, at the request of their trial lawyer 
allies, have taken the extraordinary step of enacting 
legislation targeted at these legal industries to, in effect, 
guarantee victory in the courts.
    In the Florida tobacco litigation, for example, this 
political phenomenon resulted in the enactment of the Medicaid 
Third-Party Liability Act which played an enormous role in 
forcing settlements by tobacco manufacturers. This 
unprecedented legislation stripped the defendant companies of 
their legal defenses. In Maryland, a similar outcome was 
achieved when the State's general assembly enacted legislation 
almost identical to Florida's. Maryland has become embroiled in 
a dispute with its outside attorney, Peter Angelos, who is 
claiming that the State agreed to pay him 25 percent of the 
settlement.
    Maryland's State Senate President Thomas V. ``Mike'' 
Miller, Jr.'s response to Mr. Angelos' claim was, ``Mr. Angelos 
agreed to accept 12.5 percent if, and only if we, the State of 
Maryland, agreed to change tort law, which was no small feat. 
We changed centuries of precedent to ensure a win in this 
case.'' This example highlights how governments have, in fact, 
become super-plaintiffs by removing legal defenses and other 
fundamental rights from legal industries that they are suing.
    We need prompt action. The list of businesses targeted for 
this type of litigation grows longer each day. One way to 
combat the unfair government-sponsored litigation is, in fact, 
for Congress to pass S. 1269, the Litigation Fairness Act. This 
simple yet effective legislation sponsored by you, Mr. 
Chairman, and Mitch McConnell and other members of this 
committee would do much to stop some of the more abusive parts 
of this new trend.
    I believe it is important to say first what this 
legislation does not do. It does not bar any lawsuits by 
governments against private defendants. It does not place any 
caps on recoveries that may be obtained, nor does it limit any 
attorney fees. What it does do is ensure a level playing field 
where the government cannot make itself a super-plaintiff at 
the expense of defendant companies.
    Unfair government-sponsored litigation has the potential to 
bankrupt entire segments of the American economy. Congress and 
State governments must take action to stop this abusive 
practice. Passage of the Litigation Fairness Act would preserve 
the authority of Congress to set national policy and maintain 
the principles of accountability. The Chamber and the Nation's 
business community endorse this legislation and will work to 
help secure its enactment.
    Thank you, Mr. Chairman, for the opportunity to testify.
    The Chairman. Thank you so much, Mr. Josten.
    [The prepared statement of Mr. Josten follows:]

                 PREPARED STATEMENT OF R. BRUCE JOSTEN

                              INTRODUCTION

    Good morning, I am Bruce Josten, Executive Vice President of the 
United States Chamber of Commerce with responsibility for the U.S. 
Chamber's Institute for Legal Reform and the National Chamber 
Litigation Center. The U.S. Chamber is the world's largest business 
federation, representing more than 3 million businesses and 
professional organizations of every size, in every business sector, and 
in every region of the country. The central mission of the Chamber is 
to represent the interests of its members before Congress, the 
Administration, the independent agencies of the federal government, and 
the courts. The mission of the Institute for Legal Reform is to reform 
the nation's justice system to make it more predictable, fairer and 
more efficient while maintaining access to our courts for legitimate 
lawsuits.
    On behalf of the U.S. Chamber of Commerce, I appreciate the 
opportunity to testify before the Committee. Government-sponsored 
litigation is a topic that has been thrust into the public spotlight. 
Following President Clinton's directive in this year's State of the 
Union Address, Attorney General Janet Reno filed the Department of 
Justice's lawsuit against tobacco manufacturers. But unfair government-
sponsored litigation is also appearing in a growing list of industries. 
For example, numerous lawsuits have been filed by local jurisdictions 
against the firearms industry and Rhode Island has announced its intent 
to bring a lawsuit against the manufacturers of lead paint. Other 
jurisdictions are expected to file their own lawsuits as well.
    Some in the plaintiffs' bar have been vocal in announcing 
additional targets for litigation: alcoholic beverages, pharmaceutical 
products and auto manufacturers to name a few. The effects of these 
lawsuits are far-reaching and pose serious threats to American 
businesses and their employees, as well as the economy at large. We 
need prompt action by Congress to stop governments from abusing their 
power to tax legitimate businesses through litigation, or to strip 
certain fundamental legal rights from the companies they are suing.

               PROBLEM OF GOVERNMENT-SPONSORED LITIGATION

    So why are governments abusing their power to litigate against 
legal industries and legitimate activities? The answer is threefold. 
Some believe it is the potential for massive damage and settlement 
awards, an alliance between some government officials and outside trial 
lawyers seeking huge contingency fee awards, and the ability to obtain 
policy objectives that may otherwise be impossible to achieve.
    Clearly, the first factor is the success of the States in 
recovering over $240 billion from tobacco manufacturers. The state 
tobacco settlement will result in States receiving pay-outs in the 
billions of dollars over the next 25 years; monies which will likely be 
spent on projects not connected to alleviating tobacco-related health 
costs. Further, the Justice Department's suit seeking equally as large 
amounts can be construed as tacit approval by the federal government of 
legal actions, which serve as primary sources of additional revenue.
    The second factor leading to unfair government-sponsored litigation 
is the relative ease with which governments have been able to partner 
with some trial lawyers willing to finance and initiate these suits. 
The services of these trial lawyers are frequently secured under 
contingency contracts that do not require any immediate outlay of cash, 
and allow the government to avoid the financial risks associated with 
initiating speculative litigation of this type. The outside trial 
lawyers are willing to take these cases because of the possibility of a 
massive payout at the end of the litigation.
    For example, in Mississippi, one law firm has been awarded $304 
million for its involvement in that State's tobacco lawsuit (the total 
fee awarded to all lawyers who represented Mississippi was $1.4 
billion). The five firms that represented Texas are attempting to share 
a $3.3 billion award from an arbitration panel, though Texas is 
challenging their fee. The single law firm that represented Minnesota 
was awarded $440 million over two years. In addition to the sheer 
amount of legal fees involved, these contracts have been the source of 
other controversies. For instance, allegations arising out of Texas' 
contract to the five law firms are currently under investigation by 
Texas' attorney general and the FBI. This partnership of trial lawyers 
and government officials has led to unprecedented political clout by 
the plaintiffs' bar.
    The third factor leading to these lawsuits is the ability to make 
policy decisions through litigation. Exploiting their alliance with a 
mere handful of like-minded government officials, some members of the 
plaintiffs' bar are in a unique position to bypass legislatures and 
determine public policy through the courts. For instance, the firearms 
industry is relatively small when compared to other targets of these 
lawsuits and cannot possibly pay the huge damages that are sought in 
these types of cases. Many believe that these particular suits seem to 
be more about achieving policy goals that could not be obtained through 
other means (such as the legislature). As former Labor Secretary Robert 
Reich described in an editorial earlier this year, ``the era of big 
government may be over, but the era of regulation through litigation is 
in.'' The Chamber, however, believes that these decisions should be 
left where they rightfully belong--in the legislative bodies.

                       HOW THIS PHENOMENON WORKS

    The process through which unfair government-sponsored litigation 
develops into cash bonanzas is a predictable one. First, a particular 
legal, albeit unpopular, industry is targeted. The firearms 
manufacturing industry is a good example. Despite their own failure to 
reduce handgun violence in the nation's urban centers, mayors in cities 
such as New Orleans and Boston have expressed interest in lawsuits 
targeted at manufacturers. In New Orleans, the city itself released 
more than 7,000 guns confiscated from lawbreakers back onto the streets 
without many of the safeguards they demand from gun manufacturers. In 
Boston, 3,000 handguns were resold, with no conditions attached, even 
though that city has endorsed a theory which would hold vendors liable 
for displaying so-called ``willful blindness'' to what happens to guns 
after they have been sold.
    Nevertheless, after targeting the industry, some trial lawyers and 
public officials become emboldened to pursue litigation. As was the 
case when New Orleans Mayor Marc Morial announced his city's lawsuit, 
numerous states and localities, sensing a potential for some financial 
gain and the ability to achieve a policy objective they could not 
otherwise achieve, jumped on the bandwagon.
    Finally, in some instances we are also beginning to see a 
particularly troubling trend. Having become ideologically invested in 
the notion of holding the industry accountable for alleged wrongdoing 
some governments, at the request of their outside trial lawyer allies, 
have taken the extraordinary step of enacting legislation targeted at 
these legal industries to, in effect, guarantee victory in the courts.
    For example, in the Florida tobacco litigation, this political 
phenomenon resulted in the enactment of the Medicaid Third-Party 
Liability Act. Not only did this measure strip defendant companies of 
the traditional common law tort defenses that have been essential to 
ensuring fairness in the American civil justice system for over two 
hundred years, it also relieved the State of its obligation to identify 
injured parties on whose behalf it claimed to be suing. Although this 
statute later had significant portions repealed by the legislature, and 
others invalidated by the Florida Supreme Court, it played an enormous 
role in forcing settlements by tobacco manufacturers on terms which 
were disproportionately in the government's favor.
    In Maryland, a similar outcome was achieved when the State's 
General Assembly enacted legislation that contained provisions almost 
identical to Florida's. Like the Florida statute, it permitted the 
state to seek compensation for sums paid for smoking-related illnesses 
without identifying victims, or producing them in court. Also like the 
Florida statute, the Maryland law abrogated centuries old common law 
tort defenses such as assumption of risk, thus prohibiting tobacco 
makers from making the claim that smokers may have caused their own 
illnesses by choosing to smoke. This new statute was not to be tested 
in court, however, since Maryland joined in the national settlement.
    Subsequently, Maryland has become embroiled in a dispute with its 
outside attorney, Peter Angelos, who is claiming that the state agreed 
to pay him 25 percent of the settlement amount under his contingency 
contract. If the contract is upheld, he stands to gain $1 billion. To 
bolster his argument that Mr. Angelos is only entitled to a mere 12.5 
percent, Maryland State Senate President Thomas V. Miller, Jr. made an 
astonishing assertion. ``Mr. Angelos, in my opinion agreed to accept 
12.5 percent if and only if we [i.e., the State of Maryland] agreed to 
change tort law, which was no small feat. We changed centuries of 
precedent to ensure a win in this case.''
    This example highlights how governments have become ``super-
plaintiffs'' by removing legal defenses and other fundamental rights 
from the legal industries they are suing.

                     FAR REACHING NEGATIVE EFFECTS

    Defenders of government-sponsored lawsuits and the liberal use of 
contingency fees to initiate them claim that our system of justice 
dictates that plaintiffs with fewer resources be given an opportunity 
to have their lawsuits against wealthy corporate defendants heard. They 
would also say that in these lawsuits the government stands in the 
place of those individuals injured by allegedly defective products, 
assuming the risks of litigation that the victims are not themselves 
equipped to assume. But does that accurately characterize what these 
government-sponsored actions are about?
    In the Florida, Maryland, Vermont and Mississippi tobacco lawsuits, 
the state governments did not merely ``stand in the place'' of the 
parties who were alleged to have been injured by defective products. 
Rather, through the manipulation of their legislative and judicial 
processes, these jurisdictions altered procedural rules and substantive 
laws to ensure legal victory, exercising rights that even the alleged 
victims would not have had. The end result was not surprising.
    The chilling effects of potential lawsuits on the economy have been 
widely documented. According to the Public Policy Institute, tort costs 
in 1996 were estimated at over $163 billion. This amounts to a ``tort 
tax'' of $2,400 annually for a family of four. Government-sponsored 
lawsuits, bolstered by laws that tilt the playing field in the favor of 
the government will only serve to heighten this effect. Congress should 
act now to ensure that the civil justice system is not further 
corrupted. Inaction at this crucial stage will result in additional 
harm to American business and our nation's ability to compete on a 
global level.

                        WHY NO BUSINESS IS SAFE

    We need prompt action. The list of businesses targeted for 
litigation grows longer each day. For example, last month, Rhode 
Island's Attorney General expressed his interest in pursuing the 
manufacturers of latex products for compensation for allergies caused 
by their rubber products. Even fast food establishments are beginning 
to experience the initial negative campaign that often precedes and 
accompanies these types of lawsuits.
    A 1997 RAND study on punitive damages reports that ``most business 
decision makers focus on the worst-case scenario and will go to great 
lengths to avoid exposing their companies to large financial losses and 
potential bankruptcy.'' This means that even in cases in which 
defendants have little or no genuine liability, companies are forced--
by the threat of large punitive awards--to reach a settlement. 
Proponents of government-sponsored lawsuits capitalize on this 
willingness to settle and are in effect, taxing businesses through 
litigation. The American business community is in dire need of a 
comprehensive measure which will ensure basic fairness of process when 
they are under attack from government officials seeking to raise 
revenue and trial lawyers hoping to increase their personal fortunes.

                                SOLUTION

    A direct means of solving this problem of unfair government-
sponsored litigation is for Congress to pass S. 1269, ``The Litigation 
Fairness Act.'' This simple, yet effective legislation sponsored by 
you, Mr. Chairman, and Senator Mitch McConnell and other members of the 
Committee, would do much to stop some of the more abusive aspects of 
this new trend.
    I believe it is important to state clearly what this legislation 
does not do. It does not bar suits by governments against private 
defendants; it does not place ``caps'' on recoveries that may be 
obtained; nor does it limit attorneys' fees.
    What this legislation would do is ensure a level playing field 
where the government cannot make itself a super-plaintiff at the 
expense of defendant companies. This would mean that in many of these 
lawsuits, governments could not unfairly stack the deck against 
defendant companies by depriving them of their legal defenses.
    If enacted, this legislation would ensure that if a covered 
government entity files suit to recover funds expended by that entity 
on behalf of a third-party, such as a Medicare or Medicaid patient, it 
would only be entitled to the same rights as an individual suing that 
defendant. In essence, this would mean that in many of these lawsuits, 
governments could not unfairly stack the deck against a defendant 
industry. A defendant in such a suit would have the same defenses as 
those available if an individual had sued that defendant. These include 
access to affirmative defenses such as assumption of risk and 
comparative negligence. In addition, it would prevent the government 
from being able to aggregate dissimilar claims, use broad statistical 
evidence to prove causation, and determine damages based on market 
share.
    The Litigation Fairness Act would apply to any industry sued by a 
covered governmental entity (including the U.S. Department of Justice) 
under the legal theories just discussed. It is not about protecting any 
single unpopular industry. Instead, this balanced and equitable 
legislation would ensure that the customers, employees and shareholders 
of all defendants sued by a government entity in these types of 
lawsuits will be treated fairly by the judicial system and not have the 
rules changed to their detriment in the middle of litigation.

                               CONCLUSION

    Unfair government-sponsored litigation has the potential to 
bankrupt entire segments of the American economy. Congress and state 
governments must take action to stop this abusive practice. Passage of 
the Litigation Fairness Act would preserve the authority of Congress to 
set national policy and maintains the principle of accountability. The 
U.S. Chamber and the nation's business community endorse this 
critically needed legislation and we will work to help secure its 
enactment into law.
    Mr. Chairman, thank you for the opportunity to testify today. I 
would be happy to respond to any questions the members of the Committee 
may have.

    The Chairman. Let me just ask you, Professor Turley, can 
you expand on your testimony as to what Congress can do to 
resolve the policy and constitutional problems arising out of 
these policy-driven governmental lawsuits? How can Congress 
protect its prerogatives under the Constitution?
    Mr. Turley. Thank you, Mr. Chairman. The funny thing is 
that Madison actually envisioned the problem that we are having 
today; he envisioned it all too well. Throughout our history, 
there has not been a Congress that didn't want to act as 
President, there has not been a President that didn't want to 
act like Congress, and there haven't been judges that didn't 
want to act like both.
    Madison saw that as a very likely thing, so he gave to the 
branches the ability of self-defense. It is a unique aspect of 
the tripartite system because it is held together by sort of 
inverse pressure. He expected the branches to defend their 
constitutional territory. He anticipated it. The greatest 
danger is not when one branch tries to usurp the powers of 
another branch. It is when there is not an act of self-defense, 
and that is what we have with the tobacco litigation.
    Madison gave a great number of possible responses to 
Congress. They included most importantly the power of the 
purse. Nothing concentrates the executive mind as much as 
pulling the strings on the purse. On top of that, it gave 
Congress oversight responsibility and the ability to legislate 
directly. But the most important thing is that there is a 
misconception that it is the courts that protect the separation 
of powers. Madison expected that Congress would be at the 
forefront of protecting its own power, as the President is at 
the forefront of protecting the executive's power.
    But there is an enormous vacuum which forms when Congress 
acts by acquiescence and allows this type of circumvention to 
occur. And once again, it doesn't matter what the subject is 
and it doesn't matter where you come out on this. It is 
dangerous to a system which depends upon all the branches being 
vigorous and jealous of their own authority.
    The Chairman. Thank you.
    Mr. Myers, let me just ask you one. I understand that there 
was a September 24, 1999, press release by the Physicians 
Committee for Responsible Medicine urging the Justice 
Department to go after the so-called, ``big meat.'' In the 
press release, the president of this organization states, ``An 
estimated 1.3 million Americans die of cancer, heart disease, 
and other diet-related causes each year. It's time we looked at 
holding the meat producers and fast-food outlets legally 
accountable.''
    Now, you have said on a number of occasions that tobacco 
raises unique issues that justify a Federal lawsuit, but 
apparently others don't see how tobacco is so unique in terms 
of health care issues. Doesn't this press release justify our 
serious concern about the dangerous precedent the Department of 
Justice is setting with this tobacco lawsuit?
    Mr. Myers. Obviously, I can't comment on a press release.
    The Chairman. Sure, you can.
    Mr. Myers. But let me give you an answer because you and I 
agree it is vitally important that the Department of Justice's 
suit be solidly founded in the law. Now, in this case the 
Federal Government has cited a number of different claims. They 
have at least as much merit as the claims that the States did, 
and in critical respects.
    You have emphasized the importance of reliance on statute. 
Well, in 1996 Congress amended the Medical Care Recovery Act to 
make clear that the U.S. Government had an independent cause of 
action when a third party causes an injury for which the 
Federal Government pays the bill. What the key difference is 
that the Department of Justice in the tobacco case is relying 
on solid statutory grounds, rights and authorities that 
Congress gave it, in moving forward. That is exactly the type 
of division of responsibility that I would think you would 
want.
    Now, if the Department of Justice wanders off and we begin 
to look at different types of things where it is not solidly 
based, well, two things. One is the courts will slap them down. 
I have no doubt about that. I have witnessed that enough, and 
it will happen quickly in cases that are truly frivolous. I 
have faith in the courts, as I know you do.
    Second, if they really move off the area where there is a 
solid statutory basis, well, then Congress should intervene, 
but I don't believe that has happened with the tobacco case 
here. Now, anybody can issue a press release and advocate that 
the Department sue anybody. You and I have engaged in debates, 
not between us, but listened to debates for years where the 
tobacco companies said, if you impose regulation on us, then it 
is not only going to be meat, but it is going to be--and then 
we have a laundry list down.
    The good fortune is that we have public officials who have 
sound judgment, and I trust them to be able to divide the line 
between a product which, when used as exactly as intended, 
kills; to divide the line with an industry who, based on the 
documents that you have helped to bring out, now make clear 
that they engaged in a concerted conspiracy to lie to the 
American public. There is a distinction there that we can 
rationally draw, and I trust the Department of Justice and the 
courts to do it, and for you to understand when that line has 
been crossed.
    Mr. Schwartz. Senator Hatch, may I speak to that?
    The Chairman. Sure.
    Mr. Schwartz. At the end, Matt used the same rhetoric and I 
was glad he did, the mantra that was used to distinguish the 
tobacco suits over and over and over again. The distinction was 
that tobacco was the only product used as intended that can 
harm you. But you talked about food products. I have 
arteriosclerosis. If I eat hamburger, if I eat cheese with 
pizza, it can kill. At the age of 21, 25 percent of men already 
have arteriosclerosis.
    The marketing of food products with fat is used as 
intended. People don't throw french fries; they eat them. So 
the distinction is one without a difference. It just happens to 
be that it is unpopular probably right now to go after fast 
food, and it is popular right now to go after tobacco.
    Mr. Myers. Senator Hatch, could I just have one quick 
response because I think it is very important? The tobacco 
industry's behavior itself ought to distinguish it from 
responsible industries in this country. From documents that are 
in the congressional record, we know that 40 years ago they sat 
down together and conspired to engage in a campaign to deceive 
the American public about what they knew about their product, 
about how addictive their product was, about their interest in 
children. Now, I would hope that we don't have other industries 
that have engaged in that type of behavior, and I would 
certainly hope that we don't design our laws to protect 
industries that do.
    The Chairman. Mr. Turley, do you have any comment?
    Mr. Turley. Well, you know, what is interesting about this 
exchange is I expect that James Madison is smiling. The 
question is where does this belong? At the beginning, Senator 
Durbin made a passionate and I think compelling argument for 
his side, but he also said what are they afraid of? Why are 
they afraid of presenting this to a jury of American citizens?
    Well, the question can also be asked, what are some afraid 
of submitting this to the representatives of those citizens? 
That is what the Constitution presupposes. What you are hearing 
is a wonderful debate by two wonderful advocates, and they 
belong here and this body should make a resolution as to what 
has the most power. But if we are going to return to a system 
of government by litigation as opposed to government by 
legislation, then our Constitution becomes something of a noble 
lie.
    You know, that is the violation of the covenant that we 
made not just with the Framers but with each other. And so I 
think it is a great debate. It is in the right place. The 
question is, is this body going to assume responsibility to 
decide that debate.
    The Chairman. Let me go back to you, Mr. Schwartz, for a 
minute, and then if I can just ask two more questions, I am 
going to turn the rest of the time over to the distinguished 
Senator from Alabama.
    Let me turn your attention, Mr. Schwartz, to the government 
lawsuit against the tobacco companies, particularly the RICO 
count. My understanding is that, in general, the law will not 
allow third parties such as the government and health care and 
pension plan suits to sue for damages that grow out of harm to 
individual smokers who are covered by the plans or whose 
medical care is paid for by the government.
    Such lawsuits are termed, as I understand it, derivative 
lawsuits and are considered too remote because the third 
parties cannot establish that the alleged harms were proximally 
caused by the defendants. Is that right or wrong?
    Mr. Schwartz. It is right. I will submit to the record--I 
have just completed an article on the remoteness doctrine in 
the Cornell Journal of Law.
    The Chairman. We would like to have that, but to many----
    Mr. Schwartz. It is remote. Indirect economic harm under 
RICO and under the common law is deemed too remote. That is a 
core doctrine of law, it is hornbook law. It isn't some type of 
thing to debate. The theories used under the RICO count are 
brand new. Asking to disgorge profits because there has not 
been full disclosure in advertising could apply to any industry 
just about in the United States.
    The Chairman. Well, to many this tort concept is very 
confusing. Let me just ask the following related question. Why 
shouldn't the United States be able to sue the tobacco 
companies for recoupment of medical costs which it has shelled 
out? Aren't the Federal Government and the States and 
localities who bring such lawsuits being harmed?
    Mr. Schwartz. I think that their right to sue is not 
questioned. Some of the earlier remarks by the Senators were 
really addressing a different issue as to whether the 
government can sue. The question is what is the government's 
right when they do sue, and is their right greater than the 
individual who is hurt. Law for 240 years did not somehow make 
the government a super-plaintiff. If you do that, you change 
the whole fabric of American law.
    An example that anyone here would know is in the workplace, 
a worker is injured. That causes an employer harm; he has got 
to pay workers compensation. And you know businesses. That can 
be plenty of money. It can be $100,000 with one case. But the 
employer's right to sue is not better or greater than the 
worker. He stands in the shoes of the worker with all the 
defenses that would be applicable to him.
    What is new about these cases is it is making the State a 
super-plaintiff, getting the money before the injured person 
can. And things have changed in tobacco litigation. Individuals 
are winning some cases. With the government getting greater 
rights to sue, with any industry, assets can be exhausted by 
government lawsuits with greater power than individuals before 
people who are hurt. So the answer to your question is, sure, 
they can sue, but by what right does greater power devolve on 
the government?
    If you want to do that, that is fine. Senator Reed earlier 
brought up a bill. You should debate that bill, and debate it 
right. I found Mr. Schumer's point that we have a peculiar way 
of electing people, that somehow that makes this forum 
inappropriate--well, he got elected and so did other people. 
This is the forum with the bright lights and this is the forum 
where the cameras are on. When one is in a court and you have a 
court do this, a court is dark. There is one other person at 
the podium. They do not hear the full implications of what is 
going on.
    So if a court decides that a State should have greater 
power than an individual, it is doing so without the 
informational base to make that decision. If you want to do 
that with the Reed bill, do it. If you want to do it against 
tobacco, but do it, but it should be done with the lights on, 
not with the lights out.
    Mr. Turley. Mr. Chairman, could I add one thing to 
something Victor said?
    The Chairman. Yes.
    Mr. Turley. We have disagreements between us on some tort 
issues, but we agreed on this one. The Supreme Court laid out 
the test for the Federal Government in claiming a right to sue 
in a case called Standard Oil, which I know you are familiar 
with. In Standard Oil, the Court rejected creative arguments, 
in this case arguments by analogy to tort common law. The Court 
said that mere creativity in trying to come up with a reason to 
sue is not enough, that the executive branch must go to 
Congress and get the right to sue.
    And the only difference between the tobacco litigation and 
Standard Oil is the pretense of a statutory basis. But any 
statute can be commandeered to create a pretense. The statutes 
used in the tobacco litigation, I don't think anyone argues, 
have no evidence of congressional intent that they are to be 
essentially a parallel system to Medicare. So we see a 
collision here with a doctrine established by the judicial 
branch to try to keep the executive branch as part of that 
dialogic process, that Madisonian process. And so it is a 
little curious to look at these theories.
    Mr. Myers. Senator Hatch, I can't cite quite the same way 
that my two learned colleagues can, but I think it is very 
important. One is that the Federal Medical Care Recovery Act 
was designed in such a way to overcome the problems in the 
Standard Oil case, and effectively does so.
    Second, I believe the Department of Justice suit here, the 
use of RICO, takes into full account the Supreme Court's 
decisions that relate to the extent to which there must be a 
proximate cause between the injury of the government, not a 
derivative injury, the injury of the government, and the 
purpose for which it sues.
    And, third, it is important to understand in this case that 
the RICO claim is an equitable claim in this particular case, 
so it took into account many of these problems. Now, we are not 
going to resolve the legal issues here today. I understand 
that, but I think it is important to understand that the 
Department of Justice's suit was carefully done based upon a 
existing law, not breaking new ground, not even being creative 
in its use of the law. We all may disagree with it, and I think 
the appropriate place to resolve that is in the courts and I 
think that is where they will.
    The Chairman. Well, let me just ask one other question of 
you, Mr. Schwartz, and that is cannot the government plaintiffs 
in these suits sue under a theory of subrogation? Is there any 
statute that grants the United States subrogation rights in its 
suits against the tobacco companies?
    Mr. Schwartz. I think under the MCRA statute, they can make 
an argument clearly that they have the rights that an injured 
person has. I have never seen in MCRA anything there--and I 
don't want to have a debate on the issue--that gives the 
government greater substantive rights than a smoker or a 
drinker or somebody exposed to lead paint. It is just not 
there.
    So they could bring a subrogation claim, if they wished, on 
behalf of those smokers just the way every employer in America, 
when it has to recoup for injuries to workers, are permitted 
subrogation claims. And no employer in the history of the 
United States has gone into court to assert some type of super 
power that would be greater than the individual who was injured 
in the workplace. We differ, Matt. This is new, and subrogation 
is the remedy that is appropriate.
    The Chairman. Well, let me just ask you, General, one 
question. I recognize you as a true hero. You are one of the 
few recipients of the Navy Cross. You have led people into 
battle. You have done a lot of things. You commanded the 2nd 
Marine Division in Operation Desert Storm during the Gulf War 
and you are a true American hero. You are now an executive 
officer of a major gun manufacturer.
    I believe you testified that there are over 44,000 firearm 
control regulations on the books and that Colt abides by all of 
these pertinent to its operations. Now, you say that Colt is a 
good citizen and has been developing the so-called computerized 
``smart gun,'' which may reduce firearm accidents and crimes 
using firearms because only the owner of the firearm is able to 
use it. Yet, Colt is being sued for negligence.
    When I went to law school, negligence was in part defined 
as a breach of a duty of care or an unreasonable behavior by 
the defendant. Now, unless somebody has changed that, that is 
still the law. Would you answer the charge that Colt has been 
negligent? Has it sold or distributed its products in such an 
unreasonably risky manner that lives have been lost and crimes 
have been committed?
    Mr. Keys. We don't agree with that, Senator. We agreed 
that, in fact, we are not negligent. We have obeyed every law. 
We don't distribute to anybody who does not have a Federal 
firearm license. Clearly, the laws on the books, if 
administered correctly, have shown that it reduces crime in 
every area.
    The Chairman. Well, let me put this another way. Has Colt 
directly harmed the city plaintiffs in such a way as to warrant 
a lawsuit?
    Mr. Keys. In our opinion, no. We are willing to work with 
the cities in any way we can to make a safer product. We will 
work in any way, but we don't feel that we are negligent.
    The Chairman. What does Colt do when it finds out that one 
of its products has been used in the commission of a crime?
    Mr. Keys. Well, we are not a law enforcement agency, but we 
would go out and work with the Federal agency that is seeking 
to investigate the crime. We would provide any serial numbers 
that they asked us to. We would work with them in any way 
possible to ensure----
    The Chairman. You would fully cooperate, in other words?
    Mr. Keys. Yes, absolutely.
    The Chairman. Now, one of the points that you made was that 
you have not only been a good corporate citizen, but you have 
supplied arms for our military in almost every war.
    Mr. Keys. Yes, sir, we have, and we are very proud of that.
    The Chairman. And you have done it in a low-cost, modern, 
efficient, and technically astute way.
    Mr. Keys. Yes, sir.
    The Chairman. What would be the economic impact on Colt and 
other firearms companies if these--well, let's just limit it to 
Colt--if these lawsuits by the municipalities prevail?
    Mr. Keys. If these lawsuits were to put Colt out of 
business, then, in fact, it would take 2 to 5 years to 
reestablish the manufacturing base for the small arms of this 
country and to our armed forces, and it would cost considerably 
more.
    The Chairman. Well, as the leader of a company that is 
manufacturing firearms for the military and other purposes, 
what should we in the government do to stem this tide of 
unwarranted crime?
    Mr. Keys. Well, we would hope, sir, that you would pass 
legislation that would preclude companies like us who are not 
negligent and are trying to just make a product that satisfies 
the law from being sued in this instance. We feel that we have 
adhered to every regulation that is now on the books.
    The Chairman. I understand that settlement talks have been 
held between the gun manufacturers and the municipalities. Can 
you comment on that?
    Mr. Keys. Well, we have worked with them. We have not 
agreed on anything. There are some things I think we could do, 
but we have not reached a consensus on any of them yet.
    The Chairman. One last question to you, Mr. Josten. You 
said in your testimony that no business is safe from these 
types of governmental-inspired lawsuits. Could you amplify on 
that? What businesses do you think may be next?
    Mr. Josten. Well, 2 years ago, sir, I began asking that 
very question myself. Who is next? And subsequent to that time, 
the firearms industry clearly is one. The lead paint industry 
has become another. The trial lawyers in a March article in the 
New York Times suggested many others, including the health care 
industry. There are other reports from other trial lawyers 
mentioning the entertainment industry. Victor Schwartz has 
pointed out the automobile industry has been mentioned. The 
fast food industry has been mentioned by others.
    The Chairman. You seem to be saying no industry is immune 
if this kind of legal theory prevails.
    Mr. Josten. What we are concerned about, Mr. Chairman, is 
the distortion of law, the changing of law in midstream, as I 
tried to highlight in my testimony, which clearly stacks the 
deck in behalf of government-sponsored litigation to go after 
legal industries. And clearly, with some of the creative 
theories that we are seeing employed and that have been 
discussed here on this panel today, in our opinion, no CEO, no 
company should feel secure today as this begins to take root in 
our society.
    The Chairman. Well, thank you.
    Senator Sessions, I wonder if you would come up here and 
take over the hearing. I am going to have to leave, but you can 
finish off the questions.
    Mr. Myers. Senator Hatch, could I just make one comment 
before you leave?
    The Chairman. Sure.
    Mr. Myers. I think one of the most important points that 
should come out of today's hearing is that we not do this as a 
juxtaposition that there is either an opportunity for 
government lawsuits to hold industries accountable or for 
Congress to act.
    As I said in our testimony and what I would hope that we 
could do is find a way to work with Congress to solve 
legitimate public health problems, particularly in tobacco, and 
to recognize the proper role of the courts, and carefully 
define both. I don't see that they have to be in opposition as 
we move forward in this process, and I don't think we should 
see that there are government lawsuits just because Congress 
didn't act and that Congress should act to curtail lawsuits and 
not solve these other problems.
    The Chairman. As we can see, there are legitimate issues 
here, very serious issues here. There are issues involving not 
only the future of law and application of law in this society, 
but whether or not our separation of powers is going to be 
maintained in a reasonably decent way.
    I think you have all been very interesting. This has been a 
very interesting panel. It is a very interesting set of issues. 
I am a great believer that sometimes, through litigation, you 
can solve problems, but on the other hand there have to be 
limits to everything and we have to have the laws be reasonable 
in ways that work, not just ways that benefit one side or the 
other. So this has been a very interesting hearing, and we will 
continue to consider these issues as much as we can.
    I am sorry that I have kept you so long, Senator Sessions, 
but I will turn the rest over to Senator Sessions. Thank you 
all for being here. You have been wonderful witnesses.
    Senator Sessions [presiding]. Thank you, Mr. Chairman, for 
your leadership and concern and scholarship concerning the rule 
of law.
    I do really think it is important for us to recognize, as 
some of you have suggested, that we have got to preserve, fight 
for, and defend the rule of law. This changing of procedural 
rules, and so forth, blithely this way and that way have 
tremendous consequences. When we start changing 200-plus years 
of established precedent that jeopardizes entire industries, 
when the Congress of the United States or State legislatures 
haven't chosen to act--and not choosing to act is an act--then 
I think we have got some serious problems.
    We have lawsuits in America today deciding about air bags 
in some county in some State somewhere that will probably bind 
the entire automobile industry. That would be better done, in 
my opinion, in full hearings, in the light of day, in the 
Congress of the United States by people who can be voted out of 
office if they don't do their duty.
    With the matter of gun manufacturing, to me that is 
breathtaking in its concept. Historically, if I have a gun and 
I aim it at somebody and it blows up and knocks out my eye, I 
can sue the gun manufacturer because it didn't perform. But if 
I aim it at somebody and it shoots as it is supposed to, you 
don't sue the gun manufacturer. You sue the person who aimed it 
if he aimed it in the wrong direction. I mean, that is 
fundamental law. That is what America is all about. This idea 
that mayors can gather together and sue a gun manufacturer 
because the guns do what they are created to do, and they are 
legal, protected by the Constitution, in my view, is stunning.
    Let me just ask you, General Keys, when you distribute a 
Colt handgun, you indicated they go to licensed gun dealers.
    Mr. Keys. Yes, sir.
    Senator Sessions. Who licensed those dealers?
    Mr. Keys. The Bureau of Alcohol, Tobacco, and Firearms. It 
is a Federal bureau.
    Senator Sessions. The Federal Government licensed these 
people who distribute the firearms?
    Mr. Keys. Yes, sir.
    Senator Sessions. And they tell them who and what and how 
to distribute them, is that right?
    Mr. Keys. Absolutely.
    Senator Sessions. Then how in the world can somebody think 
that Colt is responsible for maldistribution, when the Federal 
Government passes the laws and creates the agencies to 
supervise the laws to do it? To me, that is stunning.
    Mr. Josten, you mentioned changing the law. In Florida, as 
you are aware, one of the better lawyers in Florida was 
interviewed by John Stosel on ``20/20'' and he asked about the 
tobacco lawsuit there that made the attorneys $3 billion in 
legal fees, over $3 billion. And they asked him about the 
change in the Medicare law and Mr. Stosel said, well, we did it 
by changing the law.
    And Stosel said to Mr. Levin, well, did the legislature 
understand what they were doing? Oh, no, they never would have 
done it; it was a technical thing. Then he asked Mr. Levin, did 
it make a difference in the lawsuits, and he answered, oh, God, 
yes, it was a slam dunk.
    So I guess what I am saying is I guess you could blame that 
on the legislature, couldn't you, Mr. Myers? They passed the 
law without knowing what was in it, but isn't there potential 
abuse here?
    Mr. Myers. You can't have it both ways, sir. You can't both 
want to say the court shouldn't do it and the legislature 
shouldn't do it. There are some important questions, though, 
that are raised as well, and I can only speak to tobacco, and 
that is whether the law is used to address corporations that 
engage in wholesale wrongdoing. I would hope that we wouldn't 
disagree that that is an appropriate use of the law.
    And in the tobacco case, we have concrete evidence that 
they have engaged in precisely that type of activity, to the 
injury of your kids and my kids. That is something that I would 
hope that our law enforcement officers would be aggressive in 
attacking.
    Senator Sessions. Well, what do you think about the gun 
manufacturers, Mr. Josten? I want to ask Mr. Keys; I know how 
he feels about it. Do you think that approach jeopardizes--you 
have indicated it does--can you give me any concrete examples 
of how it may jeopardize other industries, and do you agree 
with my analysis on that?
    Mr. Josten. I completely agree with your analysis. With 
respect to the firearms industry, as I believe has been well 
reported, they are nowhere near the size and financial stature 
of the tobacco industry. And the bets are, as we see 
jurisdictional lawsuits filed across the country in multiple 
locations, that that will essentially bring them to financial 
settlement as a way to avoid bankruptcy.
    What we are watching take place is a prostitution, it seems 
to me, of everything that this country stands for. You can't 
have governments, as you just cited, in Florida be duped into 
changing a law in midstream on the bet of financial rewards at 
the end of the stream. And what we are seeing in Florida now, I 
think, is a very challenge to what that legislature did. But 
what it did do, as you pointed out, is forced settlements. It 
forced huge sums of money to be put on the table as a way to 
get out from under what was beginning to occur.
    The President earlier this year waved his finger at the 
entertainment industry which I cited earlier. I think the trial 
lawyers are being--and I almost hate to say it this way--
entrepreneurially creative, sir, in how they are approaching 
this. It is not a far stretch for me--and I am not a lawyer, I 
am not a legal scholar--to imagine a creative lawsuit against 
that industry in the name of our children's health.
    I mean, you can keep going on and on and on as you destroy 
over 200 years of principles of the rule of law which have 
evolved on solid standing on this country, with defenses and 
legal rights for both plaintiffs and defendants. To see 
governments jump in, change that in midstream, and literally 
seize the assets of legal industries--Senator McConnell himself 
testified earlier he was pleased that it had become difficult 
to raise taxes. This seems to be a free way to get your hands 
on bags of tax dollars without having to go through a difficult 
process under the light of day.
    Senator Schumer earlier spoke of his favoring long-held 
principles of law. So do I. The American business community is 
probably the single biggest user of lawyers and the courts of 
law in this country. We rely on the rules of the game. To have 
them changed in midstream is certainly repugnant. To watch your 
authority usurped as an elected official to determine the next 
law and regulation bothers me immensely. Not unlike Mr. 
Schumer, I too everyday am not necessarily pleased with the 
actions of this chamber or the one on the other side. There are 
days I am frequently discouraged, but I wouldn't change it.
    Mr. Turley. Senator, could I note one thing?
    Senator Sessions. Yes.
    Mr. Turley. I come to the same conclusion, obviously, as 
some of the witnesses. I don't think we can blame trial 
lawyers, frankly. An ``eat what you kill'' lawyer is operating 
according to his training, and sometimes they do a lot of good. 
The people that are blamed are the people in this body for not 
acting when they see an interstate national issue.
    I think that the difference is that we have always had tort 
law, but in the past products liability cases have focused on a 
product, not on an industry. The thing that has changed is that 
whole industries are being sued. In places like Florida, in the 
Engel case, you could actually have an industry hit with as 
much as $300 billion worth of punitive damages and unable to 
put up a performance bond in order to appeal that decision.
    So what you have for the first time, I think, is you have a 
true interstate issue of each of these States adopting mass 
tort actions that threaten industries. And now, because of 
these actions, this body has, in my view, the right and the 
interest to act. And you can legislate on mass tort to remove 
from class actions on the State level those things that have a 
national footprint, where there are victims across the country.
    Recently, I did an article called ``The Litigation 
Lottery,'' and that is how this system works. It is a perverse 
system. It means that if you are first to nail an industry with 
punitive damages, you could get $300 billion worth of damages, 
and then all the other victims in all the other States simply 
lose because they were not as swift or their State was not as 
aggressive. Now, that is not good for anyone. It is enormously 
inefficient.
    And so what we have is we have to start thinking of 
interstate problems as including liability issues. There comes 
a time when this Congress, in fairness, has to create a Federal 
process to remove certain cases, not all tort cases, into the 
system where they could be dealt with by fairness, not by fate 
as to who wins and who collects.
    Senator Sessions. I appreciate your saying that. As a 
federalist, I know you believe in the rights of States to have 
certain different standards than other States would have. But 
when things are essentially interstate in nature, such as 
airbags that are in every county in America, would you agree 
that that would be an appropriate kind of litigation, a class 
action case that would be appropriately brought in Federal 
court?
    Mr. Turley. Absolutely. Otherwise, you have enormous 
inefficiencies not just in terms of law, but also the markets. 
Right now, you have a market which must take preventive action. 
Dead-weight losses occur. When the market has to respond to 50 
different systems, like speed traps, if they get nailed in one 
of the States, they could gut the industry. What the market 
then has to do is engage in inefficient preventative efforts. 
In some cases, that means stocks go right through the floor. 
But that is not how the system is supposed to work.
    This body has to step in, not in the interest of any 
industry, but in the interest of creating an efficient and fair 
process. If it is a national problem, it needs a national 
solution.
    Senator Sessions. Well, it is certainly consistent with the 
Commerce Clause. I mean, this is not a lawsuit over a fight in 
a local community. You are talking about a lawsuit that affects 
every automobile or every smoker in America, or every breather 
of asbestos in virtually every State and community in America. 
And those things would be appropriate, I think, even those of 
us who believe in States' rights, to be handled in Federal 
court, where you have the Supreme Court making the final ruling 
because it affects the entire United States.
    Mr. Turley. That is right. In fact, in my testimony I make 
a proposal in terms of mass tort legislation. It is a modest 
one in the sense of comparison to other programs, but it is not 
hard. I mean, we can define those types of cases with this type 
of national footprint. It is not hard to do that.
    I don't understand why there is a question in terms of 
fairness. Right now, there is nothing fair, nothing logical 
about the system. I have opposed a lot of tort reform. I 
believe in tort litigation, but you can't defend the system 
anymore. I don't know of any merits to a system where you hit a 
jackpot in Florida and then victims in 49 States are left. And 
not only that, but once you hit the jackpot in Florida, you can 
domesticate the judgment and force other States to collect that 
$300 billion while your own citizens are left whistling in the 
wind.
    Mr. Myers. Senator Sessions, we have moved off government-
sponsored lawsuits, which I think is important to understand. 
And before we do just what many of the people on this panel 
have accused the courts of doing, which is willy-nilly blowing 
out 200 years of State tort law, we should be very cautious in 
doing so.
    I think one of the concerns I have heard is in one voice I 
am hearing the applicability of the rule of law. You know, over 
45 States sued tobacco companies; only 3 changed the law. The 
others all relied on the existing State laws. I think we need 
to be very careful that what we do is not simply say we don't 
like the outcome, it is tilted one way or the other, because a 
mechanism has been created to deal with corporations and 
industries that engage in the type of behavior that most 
American businesses, I hope, don't engage in. So I think we 
need to go very, very carefully here so that we don't tilt the 
law against those people who are recovering so that the balance 
is proper and careful.
    And as it relates to government lawsuits, I think we need 
to recognize that they have done a great deal of good. We need 
to ferret out those that have not, but fortunately those that 
have been brought so far have done an enormous amount of public 
health good for this Nation.
    Senator Sessions. Well, I appreciate your position on that. 
I would just simply say, as Mr. Turley suggests, that it has 
been and is and remains the burden of the legislative branch to 
observe the legal system because judges are enforcing the laws 
we pass for the most part. And if things are out of control, 
such as in asbestos where you have almost every company in 
bankruptcy, or a large number of them in reorganization, and 
only 40 percent of the money they paid out getting to the 
victims, then we need to be prepared to ask ourselves can't we 
legislate something to make it better.
    Professor Schwartz, there has been a phrase used, ``public 
policy lawsuit.'' It strikes me that is a misnomer in itself. 
It strikes me that a lawsuit, according to all traditions of 
American law, is an action against two parties or multiple 
parties over whether or not there is a case of action and 
damages. It is not a matter of public policy. Public policy is 
set by the legislative branches. Is that right?
    Mr. Schwartz. Well, you went right to the heart of what 
this hearing, as I understood it from Senator Hatch, is all 
about. Tort law deals with people who may be injured, 
individuals, and they go into court and they are compensated 
for harms, whether it is a smoker or somebody who has driven an 
automobile or is hurt by a lawn mower. That has been around for 
a long time.
    Robert Reich says we need a new paradigm where courts make 
public policy, frankly, because you won't, and that is the 
issue. Is there enough public light on what Congress does and 
State legislatures do for you to maintain your current role as 
an equal branch of government, the branch that makes the law? 
Or have you so abdicated your powers that now courts have to 
take over?
    Now, if the answer is the courts should take over, here is 
a question to ask people who have that view. Think of laws that 
you have proposed, sir, or other of your colleagues on your 
side of the aisle. Should courts enact those laws because 
Congress doesn't? I worked for a number of years for certain 
tort reforms that didn't pass here; a statute of repose, for 
example, for a number of years. It failed, but should courts 
then decide, if the judges are of the right temperament, that a 
manufacturer should only be liable for so many years?
    If you turn this principle around to ideas and concepts 
that people who espouse it don't have, you really have the 
litmus test about where they are. Is it only to be courts as 
regulators when they are enforcing ideas that are in their 
political spectrum? That is the problem with courts making 
public policy, and those are the questions that need to be 
addressed to Mr. Reich and his colleagues who say courts now 
should be making public policy because you won't.
    Senator Sessions. I think you really went to the core of 
that problem and I agree with you there. Mr. Myers indicated 
that if the product is used as intended, it kills. I think 
there are a lot, as you indicated, of other products that do 
have the capacity to kill if used as intended, and people make 
choices everyday.
    Mr. Myers. But what prompted these lawsuits was the fact 
that evidence came public that this industry lied about what it 
knew, hid the truth about what it knew about addiction, 
marketed in ways that violated the law, and had the capability 
of producing a product that killed many fewer people and chose 
not to do so and hid all of those things. And that is the 
proper role for a court. It is not a public policy decision. It 
is an enforcement of the laws, just as if somebody else broke 
the consumer protection laws, we would ask them to move in. And 
if corrective advertising was a way to overcome that problem, 
we would ask them to do that. In a very critical respect, at 
least the tobacco cases are not designed to make public policy; 
they are designed to enforce the public policy.
    Mr. Schwartz. I mean, why wouldn't the smoker cases be 
enough, Matt? I mean, you have followed them and you felt a few 
years ago----
    Mr. Myers. Actually, Victor, as you know, I have never 
filed a tobacco lawsuit.
    Mr. Schwartz. No; followed them. You have followed this as 
much as anybody in America.
    Mr. Myers. You know, the government has----
    Senator Sessions. I think the question Mr. Schwartz is 
asking is why does the government have to do it? If the person 
is wronged, why can't the individual be successful?
    Mr. Myers. In this case, we have government programs where 
we pay for health care costs. We have as taxpayers direct 
financial interest, and it is those interests that we were 
protecting. We also as governments--States have different laws 
on it, but most States have strong consumer protection laws 
where we give the government a responsibility to come in and 
enforce wholesale violations of the law. We don't leave it 
necessarily to an individual to combat a whole industry.
    You know, the battle was more lopsided when it was this 
poor person sitting and having to face five tobacco companies 
with hordes of lawyers. And the tobacco industry documents say 
that one of their strategies was simply to out-spend them so 
that they could never get into the courthouse. But the 
government has a distinct interest here and I think it is an 
important one to protect, and I think we should have a very 
serious discussion about how we draw the line.
    Senator Sessions. Well, it seems to me the individual has 
the right; he has traditional tort law. The government has the 
power to pass legislation, fundamentally.
    With regard to tobacco, Mr. Turley, the attorneys general 
of the United States, utilizing their contracted employees, the 
plaintiff lawyers who made billions, not millions, hundreds and 
millions and billions of dollars--they enter into agreements 
that involve health matters, advertising, free speech 
questions, and have the people sign on to these things. And one 
of them, including the judge, were elected to set health 
policy. Is that correct?
    Mr. Turley. Well, that is correct.
    Senator Sessions. Is that the problem we are dealing with?
    Mr. Turley. Well, that is correct. I mean, you sort of look 
at today's debate and you say what is wrong with this picture? 
You have all these people debating this issue, where in a small 
courtroom in Florida the issue is being resolved by six people 
selected at random. And so you are left with this question of 
if this is so divisive, why isn't it here?
    And I have got to disagree with Mr. Myers because I feel he 
is rearguing Standard Oil. This is not a question of the 
government's interest. There is a question of the government's 
right to sue. The government had an interest in Standard Oil 
and they ultimately were told to create MCRA. I strongly 
disagree with Mr. Myers about MCRA. MCRA was enacted to take 
care of a sergeant hit by truck late one night. It was not 
created as a parallel system to Medicare.
    Mr. Myers and I may agree in terms of where we should go on 
Medicare, but it doesn't matter what we agree on. It is what 
the representatives of the people agree. Listen, I have been 
out of step with Congress before. I don't always like--
sometimes I won't even read the paper about what Congress does.
    Senator Sessions. I don't either. [Laughter.]
    Mr. Turley. So we are of like mind, but no one said the 
Madisonian process was pretty. Sometimes you avert your eyes, 
but it is the process. And so the problem with Standard Oil 
that it addressed is it is never a question of the government's 
interest. It is a question of the government's right, and that 
comes down to what Congress thought of with MCRA. MCRA has 
never been used to recover a dime in terms of Medicare. It has 
never been used to aggregate interests the way that the Federal 
claim will require aggregation of interest.
    It is essentially a court which will have to carry a great 
deal of water for the executive branch to avoid it doing what 
James Madison asked that it does, to engage in a dialogue with 
the legislature and come up with a majoritarian decision, a 
decision of the people, not a decision of President Clinton, 
not a decision of the people in the executive branch.
    What is sort of interesting is a lot of my friends in the 
administration come from public interest backgrounds and they 
often go to court against a resistant government, and that is 
fine. But they are now part of the government, they are a 
branch of the government. It is OK for those of us who go and 
we try to litigate civil rights or we try to litigate 
environmental issues as private citizens, trying to interpret 
statutes.
    But when you are part of the government, your 
responsibility changes, and it is not an easier road at all. 
And I am afraid that the Federal tobacco litigation has a lot 
about it that seems intestinal. It is an impulse, but it is the 
wrong impulse.
    Senator Sessions. Mr. Josten, I just want to ask you a 
question here. I want to ask you two questions. One is isn't 
there a qualitative difference when a private American company 
is sued by the attorney general of a State than when he is sued 
by a private attorney, and what kind of pressure is put on 
those companies when 15, 20, 25, 30 attorneys general sue them 
in 30 different States? What kind of stress and what kind of 
analysis does a company like that have to go through?
    Mr. Josten. I would say two things. The RAND Corporation 
study tells us that companies are risk avoiders. So when they 
begin to look at that activity, they immediately begin to 
rethink whether they are even going to make that product or put 
it out in the marketplace.
    I find it interesting in General Keys' case that some of 
the lawsuits against him by city governments and some of the 
requests they are trying to suggest be made in terms of 
adjustments to his products none of them made when they 
wholesaled those products back to Federal firearms-licensed 
dealers. Nor did they take any responsibility for the ultimate 
end purchaser, who may--I don't know--have potentially used 
them in a felony.
    Senator Sessions. I just want to add there is a traditional 
rule of law, and I have used it, that you can never foresee an 
illegal act, a criminal act. A person is never responsible for 
entrusting somebody with something on the theory that they may 
commit a crime. You should never expect them to commit a crime, 
so we have violated that little traditional rule.
    Excuse me. I interrupted you.
    Mr. Josten. I think part of the analogy here that we see 
from the business side of the ledger is the trial bar, in 
concert with some attorneys general, not all, but with some, is 
very similar, ironically, to us to a union corporate campaign. 
Go after the company, vilify them publicly, demonize them and 
their purposes and their products. We are looking at the health 
care industry, in part, if you will, being tried in the court 
of public opinion on Wall Street, of all places, where we have 
trial lawyers actually openly talking about the need to drive 
down their price and the value of their shares to put pressure 
on the company to capitulate.
    We are seeing some very strange and scary things take place 
in this country. We already, it seems to me, are the litigation 
capital of the entire world. We fortunately still seem to be 
the global leader in the world, and what we are doing in the 
rule of law is adding brick after brick after brick to a 
saddlebag on this horse called the American economy. And we are 
going to slow it down to the point that it is going to affect 
shareholders' pockets, it is going to start to affect his 
employees, it is going to affect the community that he is 
headquartered in.
    And I am afraid that up until pain is felt by everybody and 
they begin to realize the old axiom that there is no free lunch 
here, only then will the public start to express its outrage 
openly in terms of what is taking place. Companies are being 
ripped off.
    Senator Sessions. You are faced with 10 or 15 attorneys 
general suing you in States. You have got your stock prices 
dropping. Maybe others may join. You are getting bad press 
around, as the media tends to favor the good citizen lawsuit. 
It does put extraordinary pressure that could cause a company, 
would you agree, to pay more than they ought to pay? They could 
say, well, we are going to litigate this for 3 or 4 years. Our 
stock is going to be depressed. We are going to get bad press. 
Let's just pay more than we think we ought to pay.
    Mr. Josten. I think the temptation is there to pay to get 
out from under. It is also interesting that some of the newer 
versions of legislation offered even sweep up in them the trade 
associations that represent some of these sectoral companies in 
lead paint, for example. That is an interesting twist to this 
game as well. It would seem to me if I were representing that 
industry trade association, I might be reluctant to come here 
today.
    Mr. Schwartz. Senator, I want to speak to your question.
    Senator Sessions. Please speak up, if anybody does.
    Mr. Schwartz. There is a big difference when you walk in a 
courtroom and your buddy, a woman lawyer or a male lawyer, is 
over there representing somebody. And you walk in and the 
plaintiff's lawyer is walking arm in arm with an attorney 
general. Maybe you have got to be there to really see the 
difference. This is assuming that the rules of law were the 
same, not that the State had some special advantage.
    Mr. Myers and I differ about----
    Senator Sessions. I would just offer when I was a U.S. 
attorney for 12 years, I didn't say I am Jeff Sessions. I would 
say I am Jeff Sessions, for the United States of America. That 
is your client, and it does have a resonance, and for the State 
of Alabama, as attorney general. So I think there is a 
qualitative difference.
    Mr. Schwartz. Then you don't have just one attorney general 
that you are dealing with, or 2 or 20, because there can be 40 
or 45.
    Now, Mr. Myers and I often agree on legal principles, but 
we disagree on one here today that is very important. No State 
supreme court, including the Supreme Court of Florida when it 
looked at that law, said that the government has greater power 
than the individual. There were some lower courts that did. In 
my judgment, and in my testimony, I believe they weren't 
following the law.
    A study was done at Cumberland Law School, in your State, 
sir, which was the most extensive study of legal principles in 
this area that has ever been done. And the professors who 
worked on it had nothing to do with the companies; they just 
looked at the law, and they said that, too. But the combination 
of lower courts changing the law, 45 or 40 attorneys general 
coming at you, the bonding between the plaintiffs lawyers and 
the attorneys general, caused a settlement.
    Now, people may say that was a good settlement and it 
benefitted the public, but I think we ought to look at how we 
got there, how the public got there, and I think there are 
concerns with that.
    Senator Sessions. I think we had better finish. Mr. Myers, 
I think you have made some good points about what do you do 
with a company who acts fraudulently and deliberately 
misrepresents. I certainly bear no brief for the tobacco 
industry, but I am troubled by what happened in Florida or 
Maryland where they overturned 200 years of law. It seems to me 
that if things are as the evidence appears that the tobacco 
companies would have been liable in more traditional ways than 
some of the ways we are looking at.
    I see you want to say something quickly and I will allow 
you to do that.
    Mr. Myers. Well, let me say something quickly as we end the 
hearing. It is sort of ironic that I am sitting here with the 
business leaders of America and I the only one who seems to 
have any faith in the State attorneys general of this Nation 
and the State courts of this Nation and the legislatures of 
this Nation. But that does seem to be the case because they are 
all unhappy with the result either in the application of 
current tort principles, or in some cases in legislatures 
deciding that tort principles aren't functioning properly and 
therefore need to be changed, or in the case that the State 
attorneys general have decided that they can perform their law 
enforcement function more effectively if they join together and 
look at big issues.
    I still come back to a core principle, and we won't resolve 
it today. I think the Federal Government has solid legal 
grounds to move forward with its case and it ought to be tested 
in the courts. I think that there is a line between enforcement 
of the law and making policy that is consistent with the 
Madisonian view, is consistent with our historical view. There 
may be places where it would cross it one way or the other, and 
you and I could probably debate that back and forth. I don't 
think the system is way out of whack.
    I do think that as this Nation has become more integrated 
and problems have become more complex, as corporations have 
been more removed from their consumers and it has become harder 
to hold them accountable, that solving these problems has also 
become more complex.
    We do need, in tobacco, comprehensive legislation to truly 
bring about fundamental change, and I regret that we missed the 
opportunity.
    Senator Sessions. You believe that?
    Mr. Myers. Absolutely.
    Senator Sessions. Apparently, not a majority of the 
Congress has agreed at this point on that.
    Mr. Myers. That is right.
    Senator Sessions. They were elected, not you, to decide 
that.
    Mr. Myers. That is exactly right, and I am not suggesting 
that.
    Senator Sessions. And may get unelected, but so far that is 
it.
    Mr. Myers. Well, that is the case, but I don't believe the 
need for comprehensive legislation means the courts ought to 
close their eyes to enforce the laws that currently exist. And 
I fear that at least the result of what is being proposed by 
many of the people on this panel today would be just that, and 
that would be a tragedy for the consumers of this Nation who 
depend on the State attorneys general and the courts to protect 
them.
    Senator Sessions. Well, I would just share this thought 
with you. Alabama has been at the center of a lot of the debate 
over this issue, for a lot of different reasons. I have a 
daughter at Cumberland. I am glad you mentioned that fine law 
school.
    I remember before I was elected attorney general--I will 
just share this story with you--a lawsuit was filed attacking 
the at-large election of the Alabama Supreme Court on the 
theory that it discriminated against minority candidates. The 
fact was that three African Americans had run for the supreme 
court, or two at that time, and all had won. We never had one 
lose a race. But at any rate, the lawsuit was filed and it 
challenged the way the supreme court was made up and it asked 
for various remedies.
    The attorney general of the State of Alabama got with the 
plaintiff's lawyer in that case and agreed to a settlement, and 
the settlement consisted of adding two new judges to the 
supreme court and having them elected by a committee, even 
though the constitution of the State of Alabama said there 
would be nine justices and they were to be elected by the 
people.
    A Federal judge approved that settlement, and so I am 
thinking you have got several plaintiffs' lawyers and the 
attorney general of Alabama agreeing to violate the 
constitution of the State of Alabama. And so when I became 
elected attorney general, the case was on appeal and I switched 
sides, and the Eleventh Circuit reversed that.
    But I say that to say think about it. As you said, a little 
group of people--and that settlement is in many ways stronger 
than a law passed by the State legislature. It is more 
difficult to change, especially if it is in Federal court. How 
big should a jail cell be? How much money should be spent on a 
mental health patient? So when these settlements occur, there 
is great power there, and there is a potential that we would be 
abdicating some of the great powers of a democracy if we 
allowed that to occur. So we need to think about what is 
happening.
    I believe it is a major public policy issue for us. It is a 
recent trend that has taken on great momentum, and I think 
Senator Hatch and Senator McConnell and others are to be 
commended for confronting it, to having a panel like this, one 
of the best panels I have seen since I have been here, to 
discuss it. And perhaps we can figure a way to allow the great 
principles of litigation to proceed in America, but at the same 
time protect the separation of powers and the rule of the 
people.
    The record will be open for one week for those who may want 
to submit additional questions.
    Without further ado, we will be adjourned.
    [Whereupon, at 1:41 p.m., the committee was adjourned.]

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