[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
       WORKPLACE GOODS JOB GROWTH AND COMPETITIVENESS ACT OF 2005

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 3509

                               __________

                             MARCH 14, 2006

                               __________

                           Serial No. 109-91

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov







                                 _____

                 U.S. GOVERNMENT PRINTING OFFICE

26-646                 WASHINGTON : 2006
_________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government 
Printing  Office Internet: bookstore.gpo.gov  Phone: toll free 
(866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250 Mail:
Stop SSOP, Washington, DC 20402-0001













                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California        ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee        SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah                   MAXINE WATERS, California
SPENCER BACHUS, Alabama              MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina           WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana          ROBERT WEXLER, Florida
MARK GREEN, Wisconsin                ANTHONY D. WEINER, New York
RIC KELLER, Florida                  ADAM B. SCHIFF, California
DARRELL ISSA, California             LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona                  CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana                  DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas

             Philip G. Kiko, Chief of Staff-General Counsel
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                      CHRIS CANNON, Utah Chairman

HOWARD COBLE, North Carolina         MELVIN L. WATT, North Carolina
TRENT FRANKS, Arizona                WILLIAM D. DELAHUNT, Massachusetts
STEVE CHABOT, Ohio                   CHRIS VAN HOLLEN, Maryland
MARK GREEN, Wisconsin                JERROLD NADLER, New York
RANDY J. FORBES, Virginia            DEBBIE WASSERMAN SCHULTZ, Florida
LOUIE GOHMERT, Texas

                  Raymond V. Smietanka, Chief Counsel
                        Susan A. Jensen, Counsel
                        Brenda Hankins, Counsel
                   Mike Lenn, Full Committee Counsel
                   Stephanie Moore, Minority Counsel




















                            C O N T E N T S

                              ----------                              

                             MARCH 14, 2006

                           OPENING STATEMENT

                                                                   Page
The Honorable Chris Cannon, a Representative in Congress from the 
  State of Utah, and Chairman, Subcommittee on Commercial and 
  Administrative Law.............................................     1
The Honorable Melvin L. Watt, a Representative in Congress from 
  the State of North Carolina, and Ranking Member, Subcommittee 
  on Commercial and Administrative Law...........................     2
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Member, Subcommittee on Commercial 
  and Administrative Law.........................................     3
The Honorable William D. Delahunt, a Representative in Congress 
  from the State of Massachusetts, and Member, Subcommittee on 
  Commerical and Administrative Law..............................     4
The Honorable Steve Chabot, a Representative in Congress from the 
  State of Ohio, and Member, Subcommittee on Commerical and 
  Administrative Law.............................................    26

                               WITNESSES

Ms. Elizabeth Sitterly, Esq., Legal Counsel, Giddings & Lewis, 
  LLC, Cincinnati Machine, Fond du Lac, Wisconsin
  Oral Testimony.................................................     5
  Prepared Statement.............................................     7
Kevin McMahon, Esq., Partner, Nelson Mullins Riley & Scarborugh, 
  LLP, Washington, D.C., on behalf of the National Association of 
  Manufacturers
  Oral Testimony.................................................     9
  Prepared Statement.............................................    11
Mr. Andrew Popper, Professor of Law, Washington College of Law, 
  American University
  Oral Testimony.................................................    13
  Prepared Statement.............................................    15
James H. Mack, Esq., Vice President, Government Relations, The 
  Association for Manufacturing Technology, McLean, VA
  Oral Testimony.................................................    19
  Prepared Statement.............................................    21

                                APPENDIX
               Material Submitted for the Hearing Record

Statement of Mark J. Nuzzaco, Government Affairs Director, NPES, 
  The Association for Suppliers of Printing and Converting 
  Technologies on H.R. 3509......................................    38




















       WORKPLACE GOODS JOB GROWTH AND COMPETITIVENESS ACT OF 2005

                              ----------                              


                        TUESDAY, MARCH 14, 2006

                  House of Representatives,
                         Subcommittee on Commercial
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 1:05 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Chris 
Cannon (Chairman of the Subcommittee) presiding.
    Mr. Cannon. I'd like to call to order this hearing of the 
Commercial and Administrative Law Subcommittee.
    And we'll be considering H.R. 3509, the ``Workplace Goods 
Job Growth and Competitiveness Act of 2005.'' This legislation, 
introduced by Representative Chabot, would establish a 
nationwide, 12-year statute of repose for durable goods in the 
workplace. This bill seeks to address a fundamental problem for 
American manufacturers, the long tail of liability that extends 
for creating long-lasting quality goods.
    Through ingenuity of design and quality of craftsmanship, 
American manufacturers produce a range of workplace goods, 
whose useful life exceeds 12 years. Many of these goods have 
been in service for decades. In one case, a machine that 
stamped a part for the first Smith Corona typewriter--before my 
time, by the way--was used to create a piece of the Apollo 
rocket over a 100 years later. This longevity comes at a cost--
a significant cost. These goods expose their manufacturers to 
suits for products that left their control decades before, even 
when subsequent owners have significantly modified the machine.
    However, these suits beg the question: if the design, 
manufacture, and warnings on a product were good enough to keep 
it running for 10, 20, or 30 years, how are they suddenly 
deficient when an accident occurs in the 40th year?
    As previous hearings before the Judiciary Committee and 
this Subcommittee have shown, the price of such litigation is 
staggering.
    A Tillinghast survey that came out yesterday showed that 
tort costs in the United States reached $260 billion in 2004. 
That amount equals 2.2 percent of the United States gross 
domestic product. The utility of such litigation is often 
questionable. Defendant companies, faced with possible runaway 
jury verdicts, will often settle otherwise meritless claims. 
And, as one of our witnesses will testify to today, nearly half 
of the machine tool industry's litigation costs go to defense 
lawyers. The claimants themselves see less than 30 percent of 
the monies paid out by manufacturers and that amount is reduced 
by a third or more for their attorneys' fees.
    The only clear winners in this cycle of litigation are, of 
course, the lawyers, many of which are very good people, I 
might say as an aside.
    H.R. 3509 addresses this problem by creating a nationwide 
statute of repose for durable goods used in the workplace. 
Black's Law Dictionary defines a statute of repose as a statute 
barring any suit that is brought after a specified time since 
the defendant acted; in this case, 12 years after the product 
was delivered to its first purchaser, even if this period ends 
before the plaintiff has suffered a resulting injury. This 
differs from a statute of limitations, which is a statute 
establishing a time limit for suing in a civil case based on 
the date when the claim accrued.
    Their purpose, however, is very similar: to promote justice 
by preventing surprises through the revival of claims that have 
been allowed to slumber until evidence has been lost; memories 
are faded; and witnesses have disappeared.
    H.R. 3509 is narrowly tailored to address this problem of 
prolonged liability. The statute of repose contained in the 
bill only applies to durable goods used in manufacturing as 
opposed to consumer goods.
    Further, the statute of repose does not apply to personal 
injury or wrongful death actions unless the injured person is 
covered by worker's compensation.
    Therefore, every person would be compensated for his or her 
injuries.
    H.R. 3509 also contains exceptions relating to toxic or 
environmental harms. The provisions of this bill are very 
similar to statutes of repose that have been enacted in 
approximately a dozen States. H.R. 3509 is very similar to a 
bill that passed the House of Representative in the 106th 
Congress as well as the statute of repose that Congress enacted 
in the General Aviation Revitalization Act of 1994. That act 
has been widely credited with saving the small aircraft 
manufacturing industry in this country.
    I'd like to thank Congressman Chabot for introducing this 
legislation, and I look forward to hearing from all of our 
witnesses today.
    And with that, Mr. Watt, would you like to make an opening 
statement?
    Mr. Watt. Thank you, Mr. Chairman. I'll be----
    Mr. Cannon. The gentleman is recognized for 5 minutes.
    Mr. Watt. I'll be brief. I doubt I'll take 5 minutes. What 
I really should do is just record this statement, because I've 
given it so many times. It just seems like every time I turn 
around, we're addressing this whole issue of tort reform in one 
way or another. And we're addressing it at the Federal level. 
And it just seems to me to be the most arrogant pursuit we 
could possibly be engaged in at the Federal level, especially 
given the fact that many of my colleagues who are pushing this 
agenda came into Congress with the avowed purpose of returning 
power to the States and expressing grave concerns about the 
detriment that we are doing to States' rights.
    Well, tort law throughout our history has been a primary 
area in which the States have been paramount. And I just don't 
understand how we can reconcile this assault on States' rights.
    So this is not about substance for me. Actually, I'm told 
that North Carolina has one of the more restrictive statues of 
repose--6 years. Mr. Coble is over there. He's my expert on 
these things, so he'll correct me if I'm wrong, and this 
statute would have a longer statute of repose if we federalized 
it than the North Carolina statute, so this can't be about the 
substance of what we're doing. It's about who has the 
prerogative to make that decision.
    And I hate to be always the chairman of the States' rights 
caucus in this Judiciary Committee. I'm just--I didn't come 
here expecting to have to do that.
    And so it's disappointing to me that we keep going down 
this road over and over and over again, especially when the--
I'm not on the side of this that I was expecting to be on when 
I came to Congress. I thought the Republicans were going to 
fight this States' rights prerogative issue for me. I'm just 
not getting any help from you all anymore.
    So I'm disappointed. I'm here, but not to argue about the 
substance, but to argue about whether the Federal Government 
has the prerogative to impose itself on States over and over 
and over again in every area of our life without justification 
in my opinion.
    With that--I took less than 5 minutes. I took less than 4 
minutes.
    Mr. Cannon. Yes.
    Mr. Watt. So happy to yield back.
    Mr. Cannon. I'm impressed and I'm wiling to be the co-chair 
of the States' rights caucus with the gentleman if he would 
like to create that.
    Mr. Watt. It's created, Mr. Chairman. I just can't get any 
Members on your side to join me because you all keep wandering 
off the reservation to support legislation of this sort, which 
is inconsistent, in my opinion, with the whole concept of 
States' rights.
    Mr. Cannon. Without entering into a debate, this Committee 
is the Committee that exists to oversee the commercial 
processes throughout the United States and to not let State law 
interfere with the commerce of the country. And so while I'm a 
States' rights advocate who was thrust into the middle of these 
kinds of discussions and frankly have done a great deal of it 
this year, probably more than we've done in the history of 
Congress to date. That is last year we did--we passed 
actually--had signed into law four tort reform actions which 
are bills, of which I'm properly proud.
    Would the gentleman from North Carolina like to make an 
opening statement?
    Mr. Coble. Well, I won't make a full opening statement, Mr. 
Chairman.
    Mr. Cannon. The gentleman is recognized for 5 minutes.
    Mr. Coble. I want to thank my States' rights colleague from 
North Carolina for elevating me to the high status of expert. 
Mel, I thank you for you that.
    I think Mr. Watt is embellishing my prowess. I'm not an 
expert by any means. But I do think Mr. Watt is correct. And I 
think our statute is 6 years in North Carolina.
    This is an issue, folks, that many of my constituents and 
perhaps, Chris, you and Mel may have had the same response. I 
just indicate that this is an issue that needs attention and 
resolving. That's why we're here today. And hopefully, you four 
outstanding panelists can shed light upon that.
    I thank you, Mr. Chairman.
    Mr. Cannon. The gentleman yields back.
    Mr. Coble. You got it.
    Mr. Cannon. We're going to have to take a look at this 
statute and make sure that it doesn't pre-empt the more 
restrictive North Carolina statute if that is the case, which I 
think we can probably do.
    Mr. Watt. I'm sure you can.
    Mr. Cannon. And all other States that are more restrictive. 
And without objection, all Members will have 5 legislative days 
to submit additional material for the hearing record.
    I would now like to introduce our witnesses for today's 
hearing. Our first witness is--oh, pardon me. Would the 
gentleman from Massachusetts like to make an opening statement?
    Mr. Watt. The co-chair of the States' rights caucus I'm 
sure would like to----
    Mr. Cannon. We're going to have four co-chairs. This has to 
be bipartisan.
    Mr. Delahunt. I move to strike the last word, and I will 
not use all the 5 minutes, and I just associate myself. I was 
listening to the remarks of the chairman of the States' rights 
caucus, Congressman Watt, and I really do have to--I feel 
compelled--I felt compelled to come down to the hearing, so I 
can hear what I've heard before again and just say that you 
know there's a--it is amazing, it really truly is, that those 
that preach the loudest about devolution, States' rights, 
really have turned their back on States' rights.
    So I'm here to support the States and my chair, Congressman 
Watt.
    I would hope that the panelists could direct--or include in 
their remarks if they simply could point to the need and some 
of the data that exists and I guess I'd have a question, why 12 
years as opposed to 18, and I'd also like to welcome an old and 
dear friend of mine to the panel. That's Jim Mack. I'm sure he 
disagrees with me on just about everything, but he's still my 
pal. And with that, I yield back.
    Mr. Cannon. The gentleman yields back.
    I'm just hoping that if we get this caucus organized, that 
maybe some of the people on this side the dais will get some 
contributions from the trial lawyers and that may--who knows? 
It might affect the judgment between the groups, although we 
may still on this side want to do tort reform.
    Our first witness is Ms. Elizabeth Sitterly, Legal Counsel 
to Giddings and Lewis, a manufacturer of machine tools located 
in Fond du Lac, Wisconsin. Giddings and Lewis is a division of 
the Cincinnati Machine Company. Ms. Sitterly received her 
Bachelor of Arts from Northwestern University and her Juris 
Doctor from Chicago Kent College of Law. In her capacity as 
Legal Counsel to Giddings and Lewis, Ms. Sitterly is 
responsible for overseeing the product liability suits brought 
against her company.
    Our second witness is Mr. Kevin P. McMahon, Partner at 
Nelson Mullins Riley and Scarborough. He is testifying on 
behalf of the National Association of Manufacturers, where he 
served as the Chairman of the Legal Issues Policy Task Force. 
Mr. McMahon received his Bachelor of Arts degree from the 
University of California at Santa Barbara, and his law degree 
from the University of South Carolina School of Law.
    In addition to his involvement with NAM, that is, the 
National Association of Manufacturers, he is the Immediate Past 
President and Chairman of the American Tort Reform Association. 
I think those are the guys on our side of the aisle.
    Our third witness is Professor Andrew Popper, Professor of 
Law at American University's Washington College of Law. 
Professor Popper received his bachelor's at Baldwin Wallace 
College. He attended DePaul University's School of Law for his 
Juris Doctor and subsequently earned his L.L.M. from George 
Washington University National Law Center. Professor Popper 
teaches a number of courses at American University, including 
Torts.
    Our fourth witness--our fourth and final witness is Mr. 
James H. Mack, the Vice President of Tax and Economic Policy at 
AMT, the Association for Manufacturing Technology, where he has 
worked since 1975. Mr. Mack graduated from the University of 
Wisconsin at La Crosse, where he earned a Bachelor of Science, 
as well as from the University of Wisconsin School of Law. He's 
been active in promoting a national statute of repose for a 
very long time, and, in fact, testified before the House 
Committee on the Judiciary on this very issue in the 106th 
Congress.
    Again, I welcome all of our witnesses, and I look forward 
to hearing your testimony.
    Before you get started, let me just draw your attention. 
The light panel before you--there's one on either side. That 
starts out green. After 4 minutes, it turns yellow, and then it 
turns red. And that suggests it's time to wrap up. We're 
actually interested in what you have to say, and if you go a 
little longer, that's fine. If not, if it goes too long, I'll 
tap the gavel and remind you.
    Now, it's the practice of this Committee to swear in all 
witnesses appearing before it, so if you would please stand and 
raise your right hand.
    [Witnesses sworn.]
    Mr. Cannon. The record should reflect that the witnesses 
all said yes, and you may be seated. We'll now proceed with our 
first witness, Ms. Sitterly.

TESTIMONY OF ELIZABETH SITTERLY, ESQ., LEGAL COUNSEL, GIDDINGS 
    & LEWIS, LLC, CINCINNATI MACHINE, FOND DU LAC, WISCONSIN

    Ms. Sitterly. My name is Elizabeth Sitterly. I'm Legal 
Counsel for Giddings & Lewis, a division of Cincinnati Machine.
    I've been an attorney for--okay. I'm sorry. I've been an 
attorney for over 20 years, of which 19 have been dedicated in 
some form to the defense of product liability actions; most 
recently for the last 9 years with Giddings & Lewis, located in 
Fond du Lac, Wisconsin.
    Being part of the machine tool industry has been an 
extraordinary learning experience. I've learned what an 
integral part these companies and the machines these companies 
produce play in our society.
    The companies that I represent have been around for a long 
time--G&L since 1852 and Cincinnati Machines since 1884.
    Robust is the word commonly used to describe the machines 
these companies make. They are the Cadillacs of their kind, 
and, therefore, last for a very long time.
    Anyone familiar with this industry will tell you that it's 
cyclical, and the cycle has been down for the last few years. 
To use my company as an example, in the last 5 years we have 
not turned a profit. This lack of profitability, in part, was 
caused by the exorbitant costs of litigating product liability 
actions across the country.
    These companies are in danger. Litigation costs are 
strangling companies like mine. We're spending money not on 
improving productivity and safety, but on defending claims
    I was asked here today to share with you the experiences of 
the product liability history of two venerable machine tool 
companies.
    If you would walk into my office today, you would find 
that, of the 11 open product liability cases, eight of them 
involve claims on products that were manufactured at least 12 
years prior to the claimant's injury. The claims involve 
products that were manufactured between 1941 and 1982. In the 
last 2 years, I have resolved three cases. All three involve 
machines manufactured 12 years before the date of the 
plaintiff's injury. We've paid $740,000 in defense costs and 
have paid $1.4 million in settlement costs. The largest 
settlement in that time period was on a claim involving a 
machine manufactured in 1966. This case is a good example of 
why we need legislation such as H.R. 3509. An experienced 
machine operator sustained a near amputation of his non-
dominant hand. Though the machine that the plaintiff was 
injured on was manufactured in 1966, its design was born in the 
1930's. There were 9,000 of these machine sold, and this was 
the first claim of injury we've ever received. The plaintiff 
was injured performing an operation in a way that was 
specifically prohibited in our operator's manual. He was trying 
to save time by doing it his way.
    You're probably thinking this a great case for the defense, 
but given the disfiguring nature of the injury and the 
difficulty in finding expert testimony on a product of that 
vintage, giving it to a jury was too great a risk. The matter 
was settled in an amount over $700,000, but not before $410,000 
was spent on preparing the defense.
    In 9 years, I have taken only one case to trial. It was a 
case that I believed could not be lost and involved a machine 
that was built in 1982. It was so substantially modified from 
the time it was shipped, that I thought no jury in the world 
could find against us. Furthermore, the operator was trained 
incorrectly and insufficiently and took a chance on ``beating 
the machine,'' and he lost. But I was wrong to the tune of 
$533,000. But that wasn't before we paid $409,000 to defend the 
claim. The plaintiff was disappointed in the verdict as well. 
His demand was in excess of $2 million, which wouldn't be 
unusual in a case of this nature.
    Honestly, when a plaintiff is injured on a machine that's 
over a decade old, I'm hard pressed to take that case to trial 
because of the difficulty in preparing that defense.
    When machines are that old, none of the engineers involved 
in the product design are still with the company. More often 
than not, they're deceased. So the company has nobody left to 
defend the design or the pains taken by them to make that 
product safe, as that was defined at the time of manufacture.
    It is also an almost insurmountable task to get a jury to 
stay focused on standards that were in effect at the time the 
machine was designed. The impact on the bottom line of the 
Cincinnati Machine group of companies is staggering. Companies 
like ours can't be looking over our shoulders in fear of what 
liability lurks in the past, dedicating our scant resources to 
create reserves for liabilities that never die.
    We need to set our sites on the future, dedicating those 
resources to R&D, to create safer, more productive machines. 
The beauty of this bill is that it does not overreach in my 
mind. It seeks to set a reasonable statute of repose in those 
cases where the party sustained a workplace injury and was 
compensated. This is a good piece of legislation. It supports 
companies that make America more productive and competitive. We 
respectfully urge its adoption. Thank you.
    [The prepared statement of Ms. Sitterly follows:]
                Prepared Statement of Elizabeth Sitterly
                            i. introduction
    My name is Elizabeth Sitterly, Legal Counsel for G&L, a division of 
Cincinnati Machine. I have been an attorney for over 20 years of which 
19 have been dedicated, in some form, to the defense of product 
liability actions--most recently, for the last nine years, with G&L.
    Being part of the machine tool industry has been an extraordinary 
learning experience. I have learned what an integral part these 
companies and the machines these companies produce play in our society. 
I have also learned the historically important roles these companies 
have played, not the least of which has been to help aid in the defense 
of this country. The companies that I represent have been around for a 
long time--G&L since 1852 and Cincinnati Machine since 1884. ``Robust'' 
is the word commonly used to describe the machines these companies 
make. They are the ``Cadillac's'' of their kind and, therefore, last 
for a very long time.
    Anyone familiar with this industry will tell you that it is 
cyclical, and the cycle has been down for the last few years. It is 
returning to an upward climb slowly. But to use my company as an 
example, in the last five years we have not turned a profit. But for 
the generosity of a benevolent corporate parent, G&L would have closed 
its doors and with that lost its history and all its contributions. 
This lack of profit in large part was caused by the exorbitant costs of 
litigating product liability actions across the country.
    These companies are in danger. Litigation costs are strangling 
companies like mine. We are spending money not on improving 
productivity and/or safety, but on defending claims involving machines 
sometimes older than the people on this panel. This problem also 
interferes with our ability to compete with our overseas competitors 
who, unlike us, have no product liability laws to fear.
    I was asked here today to share with you the experiences of the 
product liability history of two venerable machine tool companies.
         ii. the companies' product liability history 2002-2005
    If you would walk into my office today, you would find that, of the 
11 open product liability cases, eight of them involve claims on 
products that were manufactured over 12 years prior to the claimant's 
injury. The claims involve products that were manufactured between 1941 
and 1982. All three of our recently resolved cases involve products 
older than 12 years (1991--$225,000 settlement, $112,000 expenses; 
1966--$700,000 settlement, $410,000 in expenses; 1942--$90,000 in 
settlement, $151,000 in expenses). From 2003 to 2005, we have spent 
over $740,000 in defense costs. We have paid $1.4M in settlements (out 
of that amount less than half was paid with insurance dollars). 
Therefore, in two years we have paid almost $1.3M on product liability 
litigation.
    The largest settlement in that time period was on a claim involving 
a machine manufactured in 1966. This case is a good example of why we 
need legislation such as H.R. 3509. An experienced machine operator 
sustained a near amputation of his non-dominant hand. He sustained this 
injury as he was trying to change an arbor on a horizontal milling 
machine that was manufactured in 1966. These milling machines were 
designed in the mid-1930s. The model that this gentleman was operating 
was only slightly changed from the original design. Approximately, 
9,000 of these machines were sold. The Company stopped producing 
machines altogether in 1994.
    The plaintiff was injured performing an operation in a way that was 
specifically prohibited in the operator's manual. His employer and 
fellow employees advocated the method he used at the time of the injury 
to save time. The plaintiff's attorney proffered arguments regarding 
standards, guarding and the like that were state of the art at the time 
of trial rather than at the time the machine was manufactured. One of 
the many frustrating aspects of this case was that, despite the large 
number of these machines in the field and the amount of time that they 
have been operated, the Company never had a claim on this type of mill.
    You are probably thinking this is a great case for the defense. But 
given the horrendous disfiguring nature of the injury, taking the risk 
of what a jury might do with this was too great. The matter was settled 
for an amount over $700,000 but not before $410,000 was spent on 
preparing the defense. The company had a $500,000 Self Insured 
Retention (SIR).
    We also settled a case on a mill shipped in 1942. Here we settled 
for $90,000 and spent $151,000 in defense costs.
    In nine years, I have taken only one case to trial. It was a case 
that I believed could not be lost and involved a machine manufactured 
in 1982. It was so substantially modified from the time it was shipped, 
that I thought no jury in the world could find against us. Furthermore, 
the operator was trained incorrectly and insufficiently and took a 
chance on ``beating the machine'' and lost. I was wrong to the tune of 
$533,000. The plaintiff felt it was a loss, as his demand was well over 
$2M. We paid $409,000 to defend this matter.
    Honestly, given the nature of injuries sustained on machine tools, 
I am hard pressed to take a case to trial. When machines are over 12 
years old, none of the engineers involved in the product design are 
still with the company. More often than not, they are deceased. So the 
Company has no one left to defend the design or the pains taken by them 
to make the product ``safe'' as was defined at the time of manufacture. 
It is also an almost insurmountable task to get a jury to stay focused 
on standards that were in effect at the time the machine was designed. 
That is assuming there were standards that controlled design at the 
time the machine was manufactured. All of these factors make it 
difficult to take a case to trial, ESPECIALLY on an old product.
                      iii. the need for h.r. 3509
    The impact on the bottom line of the Cincinnati Machine group of 
companies is staggering. It is not only in the dollars paid out, but 
also the increase in insurance premiums due to settlements or verdicts, 
the damage to reputation in publicized outcomes, and the increased 
litigation when ``word gets out'' that companies such as ours are 
paying out for injuries on machines that were manufactured several 
decades ago.
    The dollars that have been paid out on the examples that I shared 
with you today could be put to much better use on things such as 
research and development. Developing newer, safer, more productive 
machines adds to the well being not only of our group of companies but 
to the economy as a whole.
    This bill does not over-reach, it sets a reasonable statute of 
repose in those cases where the claimant sustained a workplace injury 
and is eligible for workers' compensation. No injured worker would go 
uncompensated under H.R. 3509.
    This is a good piece of legislation. It is sorely needed by 
companies that make America more productive and competitive. We 
respectfully urge its adoption.
    Thank you for your attention.

    Mr. Cannon. Right on time. Thank you. Mr. McMahon.

  TESTIMONY OF KEVIN McMAHON, PARTNER, NELSON MULLINS RILEY & 
 SCARBORUGH, LLP, WASHINGTON, D.C., ON BEHALF OF THE NATIONAL 
                  ASSOCIATION OF MANUFACTURERS

    Mr. McMahon. Mr. Chairman, Members of the Subcommittee, my 
name is Kevin McMahon, and I'm a Partner in the law firm of 
Nelson Mullins Riley & Scarborough.
    Today, I'm appearing on behalf of the National Association 
of Manufacturers. Along with several other clients, our firm 
represents Owens Illinois in litigation matters.
    Owens Illinois is an active member of the NAM. 
Additionally, I'm the Immediate Past Chairman of the American 
Tort Reform Association and currently serve on its Board of 
Directors and Executive Committee.
    I've been involved in efforts to enact common sense legal 
reforms at the State and Federal level for several years.
    The NAM supports enactment of H.R. 3509, the ``Workplace 
Goods Job Growth and Competitiveness Act of 2005,'' as 
introduced.
    H.R. 3509 would establish a national statute of repose of 
12 years, a time beyond which a manufacturer would no longer be 
expected to be responsible for claims attributable to workplace 
durable goods. The NAM, with membership of manufacturers that 
extends well beyond durable goods, however, would prefer to see 
a final bill that would extend the coverage and reduce the 
number of years before the bill's protections apply.
    With that said, however, the NAM wants to see H.R. 3509 
become law and will work with the sponsors and supporters to 
ensure that any potential changes to the bill do not diminish 
support for it.
    In past Congresses, statute of repose legislation has 
enjoyed strong bipartisan support in the House. In fact, H.R. 
3509 is based on a compromise negotiated with the Clinton White 
House during consideration of the Comprehensive Product 
Liability Reform Measure.
    The experience of the General Aviation Revitalization Act, 
or GARA, which established an 18-year statute of repose for 
makers of light, privately owned aircraft, demonstrates that a 
Federal statute of repose can be successful. GARA, which was 
passed during a Democratically controlled Congress and signed 
by President Clinton in 1993, is credited with reviving an 
industry that was once thought to be dead, and in the process 
created thousands of jobs.
    Perhaps more importantly, contrary to what plaintiff 
attorneys and some consumer groups predicted, the skies are as 
safe, if not safer, than they were prior to the enactment of 
GARA.
    Our country has a long history of encouraging the 
development and production of useful goods for the benefit of 
our society and the world, and that system is undermined by 
excessive liability exposure.
    The policy of the United States should be to recognize that 
as products age, the responsibility for their integrity and 
operability shifts after a reasonable period to those who 
exercise control over them. Like manufacturers, owners and 
employees have an equal responsibility to ensure that products 
and tools they use are safe and effective for the job.
    The statute of repose also recognizes that many owners take 
the liberty of modifying their equipment. These alterations may 
even go against express warnings issued by the manufacturer. 
The longer a good has been separated from its manufacturer, the 
more likely this is to occur.
    Another difficulty with the passage of time is ironically 
the progress of technology and the state-of-the-art 
innovations. Defendants will themselves unfairly have to 
explain why they did not think of an innovation that came 20 or 
30 years after the time the good was produced.
    Unlike Hollywood, manufacturers cannot go back to the 
future to add innovation to products 60, 70, or 80 years old.
    For example, Harris Corporation, a manufacturer of printing 
equipment has been sued on equipment manufacture in 1922 after 
decades of multiple modifications and alterations, which were 
out of their control. How can this be equitable or just?
    Some States have recognized this inequity in the legal 
system and have enacted their own statutes of repose. In States 
that have a fixed statute, the number of years usually begins 
at the time of initial purchase. Some of these States limit the 
application to workplace goods, but most apply to all goods.
    Most States with a statute of repose have a shorter time 
period than H.R. 3509. North Carolina, for example, has a 6-
year statute of repose that applies to all goods.
    It's very important to highlight that under the current 
language, someone who is injured on the job would be covered by 
worker's compensation; and, therefore, would not be left 
without a remedy. If there is no worker's compensation 
coverage, then a statute of repose does not apply and claimants 
can file a lawsuit.
    Additionally, a statute of repose will simply help level 
the playing field with some of our cheap international 
competitors--Japan and the European Union. Both Japan and the 
EU have 10-year statutes of repose that cover all goods.
    As it is, U.S. legal costs are twice as high as a 
percentage of GDP as our international competitors. According 
to the Tillinghast study cited in yesterday's Wall Street 
Journal, in 2004, total tort costs were $260 billion and nearly 
$900 for every person in the country.
    It's projected that the cost will rise to nearly $315 
billion by 2007. Enactment of 3509 would begin to reduce the 
substantial tort tax, which is a drag on innovation and job 
creation.
    I'll sum up. Even though 11 States have a fixed statute of 
repose applicable to goods, their effect is limited by the fact 
that 70 percent of domestic products travel in interstate 
commerce; thus, only 30 percent of goods are manufactured and 
sold in one State. That is why, like the GARA bill, Congress 
should enact a Federal statute of repose Moreover, Federal law 
establishing a statute of repose for 10 years or less that 
covers all goods would be the best and preferred solution to 
truly help the United States overcome its comparative 
disadvantage in terms of legal costs.
    If sponsors and other supporters concluded after consulting 
with their colleagues that this is not politically feasible at 
this time, the NAM would encourage passage of H.R. 3509 as a 
meaningful step toward helping our domestic manufacturers 
better compete with our international competitors.
    On behalf of the National Association of Manufacturers, I 
thank you for the opportunity to appear before you today, and I 
would be happy to take any questions that Members of the 
Subcommittee may have. Thank you.
    [The prepared statement of Mr. McMahon follows:]
                  Prepared Statement of Kevin McMahon
    Mr. Chairman, members of the subcommittee, my name is Kevin 
McMahon. I am a partner in the law firm of Nelson Mullins Riley & 
Scarborough. Today, I am appearing on behalf of the National 
Association of Manufacturers (NAM). Along with several other clients, 
our firm represents Owens Illinois in litigation matters. Owens 
Illinois is an active member of the NAM. Additionally, I am the 
immediate past chairman of the American Tort Reform Association, and 
currently serve on their Board of Directors and Executive Committee. I 
have been involved in efforts to enact common sense legal reforms at 
the state and federal level for several years.
    The NAM is the nation's largest industrial trade association 
representing small and large manufacturers in every industrial sector 
and in all 50 states. Through our direct membership and our affiliate 
organizations--the Council of Manufacturing Associations, the Employer 
Association Group and the State Associations Group--we represent more 
than one hundred thousand manufacturers.
    The NAM supports enactment of H.R. 3509, the Workplace Goods Job 
Growth and Competitiveness Act of 2005, as introduced. It would 
establish a national statute of repose--a time beyond which a 
manufacturer should no longer reasonably be expected to be held liable 
for a product--of 12 years for workplace, durable capital goods. The 
NAM, however, would prefer to see a final bill that would extend the 
coverage, reduce the number of years before the bill's protections 
apply and allow states greater flexibility. With that said, the NAM 
most wants to see H.R. 3509 become law and will work with the sponsors 
and other supporters to ensure that changes made to the bill do not 
diminish the support for it.
    In past Congresses, statute of repose legislation has enjoyed 
strong, bipartisan support in the House. In fact, H.R. 3509 is based on 
a compromise negotiated with the Clinton White House during the 
consideration of a comprehensive product liability reform measure. 
Unfortunately, despite strong and bipartisan votes in the House, the 
proposal was not taken up by the full Senate except as part of the 
broader comprehensive bill.
    The experience of the General Aviation Revitalization Act (GARA) of 
1993, which established an 18-year statute of repose for makers of 
light, privately owned aircraft, demonstrates that a federal statute of 
repose can be successful. GARA, which was passed during a Democratic-
controlled Congress and signed by President Clinton, is credited with 
reviving an industry that was once thought to be dead, and in the 
process creating thousands of jobs. Perhaps more importantly, contrary 
to what opponents of GARA predicted, the skies are as safe if not safer 
than they were prior to the enactment of GARA.
    It is a sad commentary on today's U.S. legal system that a statute 
of repose even needs to be contemplated. Unfortunately, however, the 
plaintiff's bar has brought lawsuits against products that are decades 
(if not more than a century) old and, even more unfortunately, both the 
federal and state judiciaries have allowed these lawsuits to go 
forward.
    Nothing lasts forever. Every perfectly designed and manufactured 
product will eventually fail. Yet the law imposes a duty on those who 
make things to do so responsibly, so as not to unreasonably put at risk 
those who use them. Our country has a long history of encouraging the 
development and production of useful goods for the benefit of our 
society and the world, and that system is undermined by excessive 
liability exposure. The policy of the United States should be to 
recognize that, as products age, the responsibility for their integrity 
and operability shifts to those who exercise control over them. It is 
unfair and unreasonable to hold a manufacturer liable for long-term, 
ordinary wear and tear, for natural degradation of materials, or the 
effects of the environment or other outside forces. Like manufacturers, 
users have an equal responsibility to ensure that the products and 
tools they use are safe and effective for the job.
    It is true that in the vast majority of cases involving older 
products that the manufacturer/defendant almost always wins. Juries 
tend to understand that owners need to take responsibility for upkeep 
and routine maintenance. Thus, plaintiff's counsel will usually offer 
to settle the case for less than the value of defending the litigation, 
in full knowledge that the defendant's insurer will insist on a 
settlement. While the plaintiff may be somewhat better off, a hefty 
portion of his or her award will be needed to cover legal fees and 
expenses.
    A statute of repose also recognizes that many owners take the 
liberty of modifying their purchases. These alterations may even go 
against express warnings issued by the manufacturer. The longer that a 
good has been separated from its manufacturer, the more likely this is 
to occur.
    Another difficulty with the passage of time is, ironically, the 
progress of technology and other state-of-the-art innovations. 
Defendants will find themselves unfairly having to explain why they did 
not think of an innovation that came 20 or 30 years after the time that 
the good was produced even though the product in question was 
revolutionary in its safety features at the time of manufacture.
    Harris Corporation, for example, has resolved printing industry 
equipment cases during this millennium involving equipment manufactured 
as early as 1922 and throughout each decade thereafter through the 
'70s. Many of those cases involve issues related to industry standards 
that are decades old and disputes over the affect of multiple 
modifications and retro-fitting. Harris Corporation eventually sold its 
printing industry equipment assets in the early '80s.
    Another important consideration regarding the length of time 
following an initial acquisition is the ability of the manufacturer to 
notify purchasers about the need to replace a certain part, or to not 
use the product in a certain manner. Even if the producer has 
information about the customer, such as a purchase order, mail-in 
warranty card, or credit data, the notice will be sent to the initial 
acquirer only. If the product has been sold, bartered or given away, 
there is little that the manufacturer can do to ensure that the notice 
gets to the current owner.
    Some states have recognized this breakdown in the legal system and 
have begun to enact their own statutes of repose. Specifically, twelve 
states have a ``fixed'' statute of repose of a set number of years, 
while seven additional states have a ``soft'' statute of repose that 
relies on terms and concepts such as ``useful life'' that are open to 
litigation. Seven state supreme courts have found statutes of repose to 
violate the state's Constitution and 26 states do not have a statute of 
repose.
    In the states that have a fixed statute, the number of years 
usually begins at the time of the initial purchase, except for Vermont. 
(That state has a special statute of repose of 20 years that applies 
specifically to latent exposure to noxious medical agents.) Some of 
these states limit the application to workplace goods, but most apply 
to all goods. With the exception of Texas and Iowa--each of which has a 
fixed, 15-year statute of repose--the other states with a fixed statute 
of repose all have a shorter time period than does H.R. 3509. North 
Carolina, for example, has a six year statute of repose that applies to 
all goods.
    The NAM appreciates that the number of years in the proposed 
legislation has been lowered from 18 years in the past to the current 
12. Eighteen was initially chosen because of the precedent found in 
GARA. Since H.R. 3509 creates a uniform period of time, the NAM hopes 
that an even lower number of years reflecting the consensus of the 
states that have fixed statutes of repose (such as 10 or less?) could 
be feasible for continued strong and bipartisan House support. Another 
consideration would be to allow states that have chosen to enact 
shorter statutes of repose to keep the length of time of their choosing 
as long as they do not exceed the federal standard.
    In addition, since most states with a statute of repose allow for 
the coverage of all goods, the NAM would hope that the sponsors and 
other supporters could consider extending the coverage. Under the 
current language, of course, someone who is injured on the job would be 
covered by worker's compensation and therefore would not be left 
without any reparation. On the other hand, the basic principle 
underpinning the need for a statute of repose remains the same: 
purchasers need to take responsibility for upkeep and maintenance of 
their products. Even the highest quality products wear down over time.
    Consider as a hypothetical, for example, the case of a couple with 
young children who buy a metal swing set. As the children grow up, the 
swing set is used less and less, but remains standing in the yard. The 
once-young children grow up, get married and have children of their 
own. On a visit to grandma and grandpa's, one of the grandchildren is 
allowed to play in the backyard. He begins to swing as strong as he 
can. The old and, by now, rusted, swing set is not able to handle the 
stress and collapses onto the grandchild. The family sues the swing-set 
manufacturer and the jury awards millions of dollars in punitive 
damages, even though the swing set had long outlived its useful life 
and was allowed to rust.
    In this example, should the swing-set manufacturer even have to 
face the prospect of losing a jury award and, in the case of a small 
manufacturer, possibly the entire business?
    A statute of repose of 10 or fewer years applicable to all goods 
will simply level the playing field with some of our chief 
international competitors, Japan and the European Union (EU). Both 
Japan and the EU have 10-year statutes of repose that cover all goods. 
Moreover, many foreign firms have entered the U.S. market only 
relatively recently, thereby putting established domestically based 
companies at a competitive disadvantage because of the higher legal 
costs they face connected with defending lawsuits against older 
products. By the same token, well-established, long-standing American 
companies are put at a competitive disadvantage with respect to new 
domestic competitors that do not face the same long tail of exposure 
from products sold years ago. This puts added financial pressure on 
companies with substantial legacy costs to cut back or eliminate wage, 
health care and retirement benefits, at a time when those crucial 
elements of our standard of living are already at great risk.
    As it is, U.S. legal costs are twice as high as a percentage of GDP 
as our international competitors. According to Tillinghast-
TowersPerrin, in 2004 total tort costs were $246 billion, or nearly 
$3,400 for every family of four. Enactment of H.R. 3509 would begin to 
whittle down this ``tort tax'' and, if the political will is there to 
improve its provisions, its contribution to reducing the tort tax will 
become even greater.
    Even though 11 states have a fixed statute of repose applicable to 
goods, their effect is limited by the fact that 70 percent of domestic 
products travel in interstate commerce. Thus, only 30 percent of goods 
are manufactured and sold in one state. If a manufacturer were based in 
North Carolina, for example, but 12 years later its merchandise ended 
up in the possession of an owner in New Jersey (which does not have a 
statute of repose) who did not perform the proper care, the 6-year 
North Carolina statute of repose would not apply. Conversely, if the 
manufacturer were based in New Jersey and the good ended up in North 
Carolina, the chances are that the lawsuit would be filed in New 
Jersey.
    Thus, a federal law establishing a statute of repose of 10 years or 
less and that covers all goods would be the best and preferred solution 
to truly help the United States overcome its comparative disadvantage 
in terms of legal costs. If the sponsors and other supporters concluded 
after consulting with their colleagues that this is not politically 
feasible at this time, however, the NAM would encourage passage of H.R. 
3509 as introduced in order to at least begin to help domestic industry 
better compete with our international competitors.
    On behalf of the National Association of Manufacturers, I thank you 
for the opportunity to appear before you today. I would be happy to 
take any questions that the members of the subcommittee may have. Thank 
you.

    Mr. Cannon. Thank you, Mr. McMahon. Professor Popper, 
you're recognized for 5 minutes.

   TESTIMONY OF ANDREW POPPER, PROFESSOR OF LAW, WASHINGTON 
              COLLEGE OF LAW, AMERICAN UNIVERSITY

    Mr. Popper. Good afternoon. Thank you. Two quick Supreme 
Court cases before I get to my testimony. One Silkwood v. Kerr-
McGee, which held that tort law is inherently State law; and 
two, CFTC v. Schor. In CFTC v. Schor, the Supreme Court said, 
dealing with federalism, that there are often blendings in 
functions between houses of Congress or between the Executive 
and the Judicial, and the same is true with federalism and 
State rights. But the Court says in Schor that when there is a 
phalanx of activity that's in the wrong place, action has to 
happen. And that is exactly the case with tort reform.
    So in response to the comments earlier, I certainly align 
myself with the positions that were made before. This is a 
serious federalism problem.
    Let me get to my statement. Think about tort reform for a 
moment. This has never been a fair fight. Think about the 
alignment of forces. On one side, you have the entire GNP. All 
of American industry, all of American retailing and health care 
and pharmaceuticals and the insurance companies. And for that 
matter, you have the press, who would very much like to never 
have to pay punitive damages when they defame into oblivion 
some private citizen. That's on one side of the aisle.
    On the other side, you have underfunded consumer groups who 
are often fragmented. You have a few victims' rights groups who 
have been somehow mocked as shameless seekers of underserved 
damage awards.
    And then you have trial lawyers, the people who protect you 
when you're injured, the people who brought you the consumer's 
rights movement, who have been horribly defamed and vilified 
over the last few years. This is not a fair fight.
    And when it comes to this specific piece of legislation, 
this is a seemingly simple bill. It is unclear, however, 
whether it could apply to regulatory actions. It is unclear 
whether it affects recall litigation. It's unclear about 
dealing with knowing concealment of defects. And, by the way, 
since you raised GARA, now GARA is 18 years, and it has an 
exception for fraudulent concealment. This bill does not. This 
bill is unclear on vested claims. This bill is even unclear on 
how it's supposed to achieve its stated objective of 
competitiveness.
    Those technical shortcomings in the bill, however, pale in 
comparison to what's substantively wrong with this legislation. 
This bill undermines incentives for better design. It 
undermines incentives for innovation. It displaces 
manufacturers from the cycle of liability, when they are the 
ones who are in the best position to cover the claims from the 
products they sold, from which they profited, and in the better 
position to improve the long-term integrity of those products 
themselves.
    It undermines the whole theory of risk distribution, which 
I thought was the predicate for tort reform in the first place. 
It denies innocent injured persons of their right to redress of 
wrongs in court, raising questions of fairness and due process 
and access to the courts. It abolishes lawful claims of 
consumers.
    It seemingly exposes employers to greater liability rather 
than sharing that liability with manufacturers, and, by and 
large, statistically it deals with a tort reform fantasy: that 
we have a large amount of claims involving older products where 
there has not been a showing of a breach of a duty of care.
    This bill punishes workers, not for filing at the wrong 
time or bringing a frivolous claim. This bill punishes workers 
for being hurt at the wrong time. It cuts away at incentives to 
keep long-term records. It cuts away at the incentives to do 
longitudinal studies. It cuts away at recordkeeping obligations 
that manufacturers have now.
    It undermines transparency in the production community, 
because, gee, why should you talk about the deficits you know 
about in your product if liability is cut off after 10 years.
    It creates a de jure interference with private contract, 
creating an incentive in the long run for courts to muddle the 
common law meaning of due care.
    It creates no incentive to recall products. It creates 
tension in labor management relationships, because it's going 
to take out of the cycle the true source of liability if there 
is genuinely a defective piece of machinery.
    In fact, there's not one line in this bill that helps 
consumers. There's nothing to facilitate claims. There's 
nothing to improve product quality. There's nothing to lessen 
the costs that workers are going to sustain.
    The fact of the matter is that the only thing this bill 
does is legally and forever remove fault from at-fault 
manufacturers.
    This is tort reform, as I have come to know it: a series of 
bills that have but one meaning--reducing accountability and 
giving consumers absolutely nothing in exchange. It's not that 
it's incomprehensible. In fact, it's perfectly understandable. 
Who wouldn't want to be excused of responsibility after they 
engaged in misconduct?
    But the fact that it's understandable doesn't mean that 
it's right or proper or fair or just, particularly to an 
injured worker. It is none of these things, and I urge the 
Committee to reject the legislation. Thank you.
    [The prepared statement of Mr. Popper follows:]
                 Prepared Statement of Andrew F. Popper
    My name is Andrew Popper.\1\ I appreciate the opportunity to 
testify on H.R. 3509, a modest side-show in the broader tort reform 
war.
---------------------------------------------------------------------------
    \1\ Biography at conclusion of testimony. (It is not the policy of 
the Committee on the Judiciary to print witness biographies.)
---------------------------------------------------------------------------
                 1. a short perspective on tort reform
    Tort reform has always been an unfair fight. Think about the 
alignment of forces. On the side of those seeking to limit liability is 
the entire GNP. All of U.S. manufacturing, all of retailing, the health 
care industry, the pharmaceuticals, the insurance companies, and even 
much of the press who have abandoned consumers on this issue, with the 
hope of never having to pay punitive damages when they defame into 
reputational oblivion a private citizen.
    On the other side, opposing these limits on accountability, are the 
defenders of the tort system--underfunded and often fragmented consumer 
groups, a few victims rights groups, some of whom have been mocked as 
shameless seekers of undeserved damage awards and, of course, trial 
lawyers. Trial lawyers--the architects of the consumer rights movement, 
the advocates for you and me when we are injured, the lawyers who 
represent the consumer perspective--have been horribly vilified by a 
decades long comprehensive campaign to undermine their credibility.
    This is hardly a fair fight.
    And then there is the term ``tort reform.'' Laws that provide no 
protection for consumers, no incentive for greater safety, and limit 
the rights of those who lack power are hardly the stuff of reform.\2\
---------------------------------------------------------------------------
    \2\ Susan Lorde Martin, The Litigation Financing Industry: The Wild 
West of Finance Should Be Tamed Not Outlawed, 10 Fordham J. Corp. & 
Fin. L. 55, 75 (2004). ``Very cleverly, they have used the term `tort 
reform' to refer to their efforts to make it harder for tort plaintiffs 
to win cases and, when they do win, to receive awards that fully 
compensate them for their injuries and adequately punish defendants for 
egregious acts.'' Richard S. Miller, Tort Law And Power: A Policy-
Oriented Analysis, 28 Suffolk U. L. Rev. 1069, n.61 (1994). ``[T]he 
proponents of `tort reform' have succeeded in grossly misleading the 
public and its decisionmakers about the nature and dimensions of the 
problems produced by tort law. . . .'' Andrew F. Popper, A One-Term 
Tort Reform Tale: Victimizing the Vulnerable, 35 Harv. J. on Legis. 
123, 127 (1998).
---------------------------------------------------------------------------
    And the data--or lack thereof--regarding the current civil justice 
system. From the CRS report forward, no credible juried study documents 
a crisis in the tort or insurance system \3\ that could conceivably 
justify legislation that limits arbitrarily consumer rights, as does 
H.R. 3509.
---------------------------------------------------------------------------
    \3\ Michael L. Rustad, Access To Justice: Can Business Co-Exist 
with the Civil Justice System? The Closing of Punitive Damages' Iron 
Cage, 38 Loy. L.A. L. Rev. 1297, 1417 n.354 (2005). ``Despite the 
controversy over punitive damages, the empirical reality is that there 
is no nationwide crisis requiring radical judicial tort reform.'' Tort 
Questions,  16 Risk & Insurance 9, Vol. 16 (August 1, 2005). ``The 
debate over the tort litigation crisis is driven by hyperbole, faulty 
evidence and `secret' data, according to The Frivolous Case for Tort 
Law Change,  a recent study by the Economic Policy Institute. The 
authors, economist Lawrence Chimerine and attorney Ross Eisenbrey, 
found no evidence to link the tort litigation crisis with economic 
difficulty. Nor did they uncover any evidence to connect benefits to 
proposed tort system reforms.''
---------------------------------------------------------------------------
                              2. the bill
    H. R. 3509, a seemingly simple bill imposing a 12-year statute of 
repose on civil actions involving durable goods, is flawed at a 
technical level.
    It is unclear whether it applies to regulatory post-repose actions 
initiated by state or federal consumer protection agencies.\4\
---------------------------------------------------------------------------
    \4\ Jennifer R. Sentivan, The Statute of Repose Precludes Community 
Affairs Department From Filing Enforcement Action,  12 New Jersey 
Lawyer 17 (May 5, 2003).
---------------------------------------------------------------------------
    It is unclear whether it affects recall litigation in the post-
repose period.
    It is unclear about what happens in the presence of knowing 
concealment of design or structural deficits.\5\
---------------------------------------------------------------------------
    \5\ For a ``fraudulent concealment'' exception, see General 
Aviation Revitalization Act of 1994, Pub. L. No. 103-298, 108 Stat. 
1552, Section 2(b)(1), 49 U.S.C. 49101 et. seq.
---------------------------------------------------------------------------
    It is unclear what happens to vested claims--that is, injuries that 
have already occurred (for which a claim has not been filed) prior to 
the 12-year bar.
    And it is unclear in text and import as to how it would meet its 
stated goals of increasing competitiveness or reducing insurance.
        3. the bill does not advance the interests of consumers
    The technical shortcomings of the bill, however, pale in comparison 
to the harm this bill will cause consumers.
    The bill undermines incentives for better design, for innovation, 
in products designed for long term use.\6\
---------------------------------------------------------------------------
    \6\ ``[T]he basic, if not singular, function of tort law is to 
create incentives for reducing tortious risks. Optimally, tort achieves 
this goal by threatening potential injurers with liability for all 
losses their tortious conduct may cause, compelling them to internalize 
the costs of tortious harm before they take risky action. . . .'' 
[footnotes omitted]. David Rosenberg, Mass Tort Class Actions: What 
Defendants Have and Plaintiffs Don't,  37 Harv. J. on Legis. 393, 404 
(2000). ``One manner in which tort liability may affect well-being is 
through the incentives it creates for potential injurers to take care 
or otherwise to adjust their behavior to reduce harm and thereby 
decrease their chances of having to pay damages. . . .'' Louis Kaplow 
and Steven Shavell, Fairness Versus Welfare,  114 Harv. L. Rev. 961, 
1039 (2001).
---------------------------------------------------------------------------
    The bill displaces manufacturers from the liability cycle when they 
are in the best position (a) to cover claims made from products they 
sold \7\--and from which they profited--and (b) to improve the long 
term integrity of the products they will sell in the future.\8\
---------------------------------------------------------------------------
    \7\ Manufacturers of products used the workplace have a duty to 
warn of defects discovered after a product has been sold. Liriano v. 
Hobart,  170 F.3d 264 (2d Cir. 1999). Quite obviously, they have a duty 
to exercise due care in the design of such products, based on their 
foreseeable use. With durable goods, the notion that those duties would 
be extinguished arbitrarily after 12 years seems irrational, 
particularly if the goods are marketed to an employer on the basis of 
their ability to function effectively over longer periods of time.
    \8\ Despite significant regulatory efforts [e.g.,  29 U.S.C. 654 
(2000), that requires every employer ``(1) shall furnish to each of his 
employees employment and a place of employment which are free from 
recognized hazards that are causing or are likely to cause death or 
serious physical harm to his employees. . . .''], the American 
workplace is not as safe as it should be. Every year, more than 6,000 
workers die of workplace injuries. Tens of thousands are injured. 
``Many worker deaths are the types of deaths that would make headline 
news if the perpetrator was an ordinary citizen. For example, some 
workers have been decapitated on assembly lines, ground up in a cheese 
grinder, buried alive in corn, or seared to a furnace room floor.'' 
[footnotes omitted]. Elizabeth A. Lambrecht Karels, Current Public Law 
and Policy Issues: Make Employers Accountable for Workplace Safety! How 
the Dirty Little Secret of Workers' Compensation Puts Employees at Risk 
and Why Criminal Prosecution and Civil Action Will Save Lives and 
Money, '' 26 Hamline J. Pub. L. & Pol'y 111, 129, 143 (2004). Passing a 
law that eliminates responsibility for those who design and sell 
workplace equipment only exacerbates this situation.
---------------------------------------------------------------------------
    The bill undermines the distribution of risk that underlies much of 
the liability theory that has been argued by those seeking tort 
reform.\9\
---------------------------------------------------------------------------
    \9\ Jan Allan Baughman, Comment, 25 Cap. U. L. Rev. 671, 703 
(1996). ``Statutes of repose are reform measures that provide 
unnecessary, inappropriate protection to manufacturers and insurers at 
the expense of injured consumers. Important policies such as safety 
promotion and risk-spreading are compromised. Injured plaintiffs are 
denied redress for manufacturers' wrongs, regardless of a product's 
defectiveness, notwithstanding a claim's legitimacy. Instead, an 
arbitrary time period determines a manufacturer's liability.''
---------------------------------------------------------------------------
    The bill denies innocent injured persons their right to redress of 
wrongs in a court of law \10\ raising questions of basic due process, 
equal protection, and access to courts.
---------------------------------------------------------------------------
    \10\ States have long recognized that for certain activities and 
products, statutes that restrict litigants' rights based on artificial 
time frames can be greatly unfair. For example, in Terry v. N.M. State 
Highway Comm'n,  98 N.M. 119, 120-23, 645 P.2d 1375, 1376-79 (1982), 
the court held that a 10-year statute of limitations was unfair as 
applied to architects, contractors, and engineers because their work 
was designed to be used and relied upon well beyond that time frame. 
The same can be said about durable goods. They are supposed to last far 
beyond the 12-year limit H.R. 3509 suggests--presumably, that is why 
they are referred to as durable. A number of states faced 
constitutional challenges to such statutes, often finding the statutes 
denied rights protected under a state constitution, e.g., Jackson v. 
Mannesman Demag Corp.,  435 So. 2d 725 (Ala. 1983); Turner Constr. Co. 
v. Scales,  752 P.2d 467 (Alaska 1988); Hazine v. Montgomery Elevator 
Co.,  861 P.2d 625 (Ariz. 1993); Austin v. Litvak, 682 P.2d 41 (Colo. 
1984); McCollum v. Sisters of Charity of Nazareth Health Corp., 799 
S.W.2d 15 (Ky. 1990); Dickie v. Farmers Union Oil Co.,  611 N.W.2d 168 
(N.D. 2000); Hanson v. Williams County,  389 N.W.2d 319 (N.D. 1986); 
State ex rel. Ohio Acad. of Trial Lawyers v. Sheward,  715 N.E.2d 1062 
(Ohio 1999); Lyons v. Lederle Labs.,  440 N.W.2d 769 (S.D. 1989); 
Daugaard v. Baltic Co-op Bldg. Supply Ass'n,  349 N.W.2d 419 (S.D. 
1984), abrogated by Cleveland v. BDL Enters., Inc.,  663 N.W.2d 212, 
224 (S.D. 2003); Nelson v. Krusen,  678 S.W.2d 918 (Tex. 1984); Sax v. 
Votteler,  648 S.W.2d 661 (Tex. 1983); DeYoung v. Providence Med. Ctr., 
960 P.2d 919 (Wash. 1998); Kohnke v. St. Paul Fire & Marine Ins. Co.,  
410 N.W.2d 585 (Wis. Ct. App. 1987), review granted 416 N.W.2d 296 
(Wis. 1987), aff'd and remanded,  424 N.W.2d 191 (Wis. 1988).
---------------------------------------------------------------------------
    The bill abolishes lawful claims of consumers before a consumer 
could know of the risks they face.\11\
---------------------------------------------------------------------------
    \11\ Friedrich K. Juenger, The Complex Litigation Project's Tort 
Choice-of-Law Rules,  54 La. L. Rev. 907, 916 (1994). ``Agitation for 
`tort reform' has produced a motley array of laws lobbied by powerful 
and well organized special interest groups. The manner in which these 
enactments curtail the rights of tort victims differs from one state to 
the next. Among them are arbitrary caps on damages, stunted limitation 
periods, `statutes of repose' that bar actions before they arise, as 
well as provisions abolishing the collateral source rule or joint and 
several liability, to name just a few. . . .'' (footnotes omitted).
---------------------------------------------------------------------------
    The bill seemingly exposes employers to greater liability rather 
than sharing that liability with manufacturers of defective workplace 
equipment.\12\
---------------------------------------------------------------------------
    \12\ If a worker's recourse is limited to workers' compensation, 
after 12 years innocent workers suffering severe injury from workplace 
accidents caused by defective machinery will have no ability to collect 
for the broad ranges of compensable losses not covered by workers 
compensation. ``Often, workers' compensation benefits paid to injured 
workers are lower than the actual damages they have incurred.'' S. 
Elizabeth Wilborn Malloy, The Interaction of the ADA, the FMLA, and 
Workers' Compensation: Why Can't We Be Friends?  41 Brandeis L. J. 821, 
849 (2003) [footnotes omitted].
---------------------------------------------------------------------------
    The bill addresses a tort reform fantasy--litigation regarding 
older durable goods--when in the grand scheme of things there is not 
much evidence of litigation regarding long term goods.\13\
---------------------------------------------------------------------------
    \13\ Robert Van Kirk, Note, The Evolution of Useful Life Statutes 
in the Products Liability Reform Effort,  1989 Duke L.J. 1689, 1712-3 
(1989). ``Some studies indicate that as many as ninety-seven percent of 
all product related injuries occur within the first six years following 
manufacture. Although proponents may use this figure to suggest that 
relatively few plaintiffs will be affected adversely by a typical ten-
year statute of repose, the figure also suggests that many of the 
arguments in favor of statutes of repose may be overstated. If only 
three percent of all claims are eliminated by a six-year repose period, 
then the efficacy of such statutes undoubtedly is called into question. 
. . . [T]he insurance industry has failed to demonstrate that suits 
against older products actually are responsible for a proportionately 
larger share of damage awards. . . .''
---------------------------------------------------------------------------
    The bill ignores the reality of variation in the anticipated life 
of durable goods--the fact is, there are products designed, and priced, 
for very long term use.\14\
---------------------------------------------------------------------------
    \14\ ``Another drawback of a statutorily defined time limit is that 
statutes of repose simply lack the flexibility to deal effectively with 
products of varying anticipated lives. . . .'' Van Kirk, id. at 1714.
---------------------------------------------------------------------------
    The bill punishes consumers and workers, not for filing at the 
wrong time or bringing claims with questionable merit, but rather for 
being injured by a defective product at the wrong moment in time.\15\
---------------------------------------------------------------------------
    \15\ In DeLuna v. Burciaga, 2005 WL 1862395 (1st Dist., Aug. 5), 
the court held that ``[a] statute of repose gives effect to a policy 
different than that advanced by a period of limitations; it is intended 
to terminate the possibility of liability after a defined period of 
time, regardless of a potential plaintiff's lack of knowledge of her 
cause of action.'' Reported in GARMISA,  `Test Case' that Failed 
Results in Legal Malpractice Claim,  Chicago Daily Law Bulletin, Sept. 
8, 2005, p. 1.
---------------------------------------------------------------------------
    The bill cuts away at incentives to undertake long-term 
longitudinal studies of risk or engage in long-term product monitoring 
and record-keeping.\16\
---------------------------------------------------------------------------
    \16\ The problems of document retention and record keeping are 
troubling. Efficiency pressures and litigation anxiety have led 
businesses to purge office environments of all documents arguably not 
required to be maintained. Such purges have led to obstruction of 
justice charges when investigations of misconduct are thwarted by 
overly aggressive document retention policies. Christopher R. Chase, To 
Shred or Not to Shred: Document Retention Policies and Federal 
Obstruction of Justice Statutes,  8 Fordham J. Corp. & Fin. L. 721 
(2003). It is quite easy to imagine a 12-year ``total shred'' policy 
for equipment manufacturers if H.R. 3509 becomes law--and equally easy 
to see how that policy would destroy the ability of injured workers to 
develop proper product function/product failure histories.
---------------------------------------------------------------------------
    The bill creates a de jure interference with private contracts, 
limiting a sellers claim of ``useful life'' and the common law 
obligations that would otherwise flow therefrom.\17\
---------------------------------------------------------------------------
    \17\ ``At purchase, the expectations of both parties will embody a 
generalized conception about the length of time the product will render 
service. Intertwined with these expectations is an implicit 
understanding that if the product contains a defect and is therefore 
unreasonably dangerous, then the purchaser will be able to seek redress 
from the manufacturer. Manufacturers cannot justifiably express 
surprise or claim unfairness when injured parties ultimately bring 
suit. Presumably, a manufacturer of industrial machinery understands 
that her product is designed to last for at least a decade and perhaps 
much longer. She must realize at the point of sale, therefore, that 
suits may be brought against her at any time in the course of that 
product's life.'' Van Kirk, supra,  note 13, pp. 1714-15.
---------------------------------------------------------------------------
    The bill undermines transparency, creating an incentive for a 
manufacturer to be circumspect about data they may have on long term 
use of their goods.\18\
---------------------------------------------------------------------------
    \18\ It is already difficult to compel disclosure of material facts 
outside of a clear duty to do so. Even in cases of arguable fraudulent 
concealment of facts, courts have been cautious in finding a duty to 
disclose information in the absence of a clear statutory or common law 
duty to do so. Moses.com Securities, Inc. v. Comprehensive Software 
Systems, Inc.,  406 F.3d 1052, 1064-1065 (8th Cir. 2005). If H.R. 3509 
passes, it will greatly limit the ability of an injured worker to get 
data from a manufacturer in the post repose period.
---------------------------------------------------------------------------
    The bill creates no incentive to recall products \19\ found to be 
dangerous after extended use.\20\
---------------------------------------------------------------------------
    \19\ Jeffrey A. Lamken, Note, Efficient Accident Prevention as a 
Continuing Obligation: The Duty to Recall Defective Products,  42 Stan. 
L. Rev. 103, 127 (1989). ``Concern over potential liability provides 
efficient incentives to recall a defective product. . . .''
    \20\ Cutting off liability, arbitrarily, may undermine the 
incentives for better products and services. See Gary T. Schwartz, 
Mixed Theories of Tort Law Affirming Both Deterrence and Corrective 
Justice,  75 Tex. L. Rev. 1801 (1997).
---------------------------------------------------------------------------
    The bill creates tension in terms of labor/management relations 
since workers and employers would be denied access to the ``true 
source'' of fault in a factory accident caused by defects in the 
equipment or machinery used.\21\
---------------------------------------------------------------------------
    \21\ Joan T.A. Gabel, Escalating Inefficiency in Workers' 
Compensation Systems: Is Federal Reform the Answer?  34 Wake Forest L. 
Rev. 1083, 1136 n.285 (1999) (``Workplace injuries involving defective 
products are liability concerns for the product manufacturers as well 
as the employers.''), citing Thomas A. Eaton, Revisiting the 
Intersection of Workers' Compensation and Product Liability: An 
Assessment of a Proposed Federal Solution to an Old Problem,  64 Tenn. 
L. Rev. 881, 886 (1997). The workers compensation funds are simply not 
sufficient to cover broad losses from devastating injuries. See Malloy, 
supra,  note 12.
---------------------------------------------------------------------------
    The bill affects disproportionately low to moderate income workers 
who are more likely to work in traditional blue collar employment 
environments where exposure to equipment--as defined in the bill \22\--
is common.\23\
---------------------------------------------------------------------------
    \22\ Suffice it to say that the incidents of equipment related 
injuries in agriculture and industry are frightening. ``While there are 
various reasons why farm injuries occur, many of the most severe 
incidents are directly related to the use of farm equipment. 
Agricultural machinery is becoming more complex and more powerful as 
new technologies develop, creating an intense need for implements to be 
as safe as possible.'' [footnotes omitted]. Nathaniel R. Boulton, Note, 
The Farmer's Retort to Tort Reform: Why Legislation to Limit or 
Eliminate Punitive Damages Hurts the Agricultural Sector,  9 Drake J. 
Agric. L. 415, 427 (2004).
    \23\ E.g. factory machinery (presses, mixers, joining apparatus, 
molding machines, fork lifts, packing machines, steam or hydraulic 
lifts, high power pumps), farm equipment, including balers and 
tractors, and many types of construction tools from compressor to 
drills, are all made to last longer than 12 years.
---------------------------------------------------------------------------
    People injured by products used properly should have no less right 
to compensation if they are injured in the 11th or 13th year of a 
product's useful life.
    There is not one line in this bill that actually helps consumers; 
nothing to facilitate claims, nothing to improve product quality, 
nothing to lessen worker costs for injuries.\24\
---------------------------------------------------------------------------
    \24\ Legislation of this type leads inevitably to the conclusion 
that our political system has made its choice: as between at-risk 
workers and large corporations, the corporations are the favored 
interest. ``[T]he environment created by the current executive 
administration is to give lip service to the American worker while 
giving a wink and a nudge to big business. . . .'' Lambrecht, supra,  
note 8, p. 136.
---------------------------------------------------------------------------
    And what arguments support the bill? H.R. 3509 relieves ``at 
fault'' manufacturers of their responsibility.
                             4. conclusion
    This is tort reform as I have come to understand it--a series of 
bills that have but one meaning: reducing accountability and giving 
consumers and workers nothing in exchange. It is not that it is 
incomprehensible. In fact, the reasoning is all too understandable. Who 
would not like to be excused of responsibility after they engaged in 
misconduct? The fact that the reasoning underlying this bill is 
understandable, however, does not mean that it is right, proper, just 
and fair. It is none of those things. I urge the committee to reject 
H.R. 3509. Thank you.

    Mr. Cannon. You may not have noticed, but you ended exactly 
as the red light came on. This is a remarkable panel. Thank 
you. Mr. Mack, you're recognized for 5 minutes

 TESTIMONY OF JAMES H. MACK, ESQ., VICE PRESIDENT, GOVERNMENT 
   RELATIONS, THE ASSOCIATION FOR MANUFACTURING TECHNOLOGY, 
                           McLEAN, VA

    Mr. Mack. Thank you, Mr. Chairman. This is not the first 
time that AMT has appeared before this Committee in support of 
product liability reform. Over the years, we've testified 
before this and other Congressional Committees in support of 
numerous product liability bills.
    Because these bills were broader in scope than H.R. 3509, 
some of their provisions drew controversy that could not be 
overcome during their consideration by the Senate and or the 
White House.
    H.R. 3509 is different. It deals only with the issue of 
over-age workplace products. It does not contain controversial 
provisions on other product liability issues that have held up 
passage in past years
    Under this proposal, no injured worker would go 
uncompensated. H.R. 3509 would only deal with claims involving 
injuries allegedly caused by workplace durable goods for which 
the plaintiff has received or is eligible to receive worker's 
compensation.
    For those specific kinds of cases, it would create a 
uniform national statute of repose, preempting any State 
statutes of repose that apply to these claims. Otherwise, State 
law would continue to apply. Thus, State statutes of repose 
that may cover consumer goods and other non-durable goods would 
not be affected.
    Why make a special rule for machine tools and other 
manufacturing equipment?
    Well, let me try to deal with that. Everything in this 
hearing room, except for the people, was either made by a 
machine tool or made by a machine that was made by a machine 
tool. A strong machine tool industry is vital to America's 
military and economic security. Our industry is very cyclical. 
Price pressures are very strong. Profitability is very low, 
even in good years. Domestic consumption of machine tools is 14 
percent higher today than it was a year ago, but domestic 
production is only up 7 percent. Imports now represent 65 
percent of domestic consumption.
    AMT estimates that the average age of machine tools 
installed in American factories has climbed from 10 years, the 
last time we testified in 1999, to 13 years in 2004. When a 
factory decides to invest in new capital equipment, the old 
machinery is usually not thrown in the trash heap. Instead, 
companies who lack the resources for new machines purchase 
these over-age machines, often altering them to fit their 
needs.
    This process is repeated, as newer machines are required 
and older ones are resold. Safety features built into the 
original equipment have sometimes been negligently or 
intentionally disabled by employers or workers in an effort to 
increase production or to avoid the nuisance of dealing with 
guards or lockout mechanisms and other safety features.
    The result of all these factors is a big overhang of 
overage machine tools in the U.S. market, which are the subject 
of four-fifths of our industry's lawsuits.
    Under product liability law today in many States potential 
liability for my industry's products is endless, literally 
forever. Many of these machines built before Ronald Reagan 
became President, before the creation of OSHA, before Neil 
Armstrong walked on the Moon, before the Beatles came to 
America, and yes, even before I was born 70 years ago are still 
in use today.
    The survey data contained in my written testimony documents 
that such litigation is a drain on financial resources not only 
from adverse settlements or verdicts, but from the cost of 
successful defense.
    Most cases involving overage machine tools never go to 
trial, and if they do, a jury almost always finds for the 
defendant. If a machine has functioned properly for 12 years, 
it's highly unlikely that it was improperly designed.
    However, even when these lawsuits are won, the litigation 
nevertheless results in unnecessarily high legal and 
transaction costs. The claimant's pleadings must be answered. 
Depositions taken. Design experts consulted. Historical 
records, if any, unearthed and evaluated. And the result is a 
substantial expenditure of funds, additional litigation in our 
courts, and the diversion of resources that could be invested 
in greater competitiveness.
    Our most recent financial performance report shows that the 
median expenditure by our members for product liability costs 
was 0.6 percent of sales, about half of this for insurance 
premiums; the other half on settlement awards and out-of-pocket 
costs.
    This 0.6 percent may not sound like much until you learn 
that in 2004, median after-tax profits for companies in our 
industry was only 1.9 percent of sales.
    Mr. Chairman, H.R. 3509 is a narrow bill that addresses the 
problem of overage workplace equipment in the U.S. market for 
manufacturers of that equipment. It's the end result of years 
of negotiations with the Congress. It provides for two-way 
preemption. It's limited to workplace products. It assures no 
claimant would go uncompensated, and it contains a toxic harm 
exclusion, including but not limited to exposures to asbestos.
    It's essentially the same bill this Committee approved 5 
years ago. And it--and the bill that the House passed.
    It will improve the competitiveness of U.S. workplace 
equipment manufacturers and at the same time it assures no 
injured worker would go uncompensated. It's good legislation, 
and we respectfully urge its adoption. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Mack follows:]
                  Prepared Statement of James H. Mack
                            i. introduction
    My name is James H. Mack, Vice President of Tax and Economic Policy 
at AMT--The Association For Manufacturing Technology--a trade 
association whose membership represents over 350 manufacturing 
technology providers located throughout the United States, almost the 
entire universe of machine tool builders who operate here. Most of them 
would be classified as small businesses, with only about a half dozen 
having more than 500 employees. About 40 percent of our industry's 
output is exported.
    Pursuant to House Rule XI, clause 2(g)(4), I am obliged to report 
to you that AMT received $225,100 from the Commerce Department's Market 
Co-operator Development Program for a technical center in China. One 
hundred sixty-five thousand three hundred dollars was disbursed in 
2005. The $59,800 balance will be disbursed by the end of this month.
    According to the U.S. Census of Manufacturers, 78 percent of the 
companies in our industry have less than 50 employees. They build and 
provide to a wide range of industries the tools of manufacturing 
technology including cutting, grinding, forming and assembly machines, 
as well as inspection and measuring machines, and automated 
manufacturing systems.
    Everything in this hearing room, except for the people, was either 
made by a machine tool or made by a machine made by a machine tool. 
Several years ago, the
    Reagan and first Bush Administrations, responding to strong 
encouragement of over 250 Members of Congress provided temporary import 
relief for our industry, based on the threat posed to our national 
security from Asian machine tool imports. They did so because of their 
recognition that a strong machine tool industry is vital to America's 
military and economic security.
    Our industry is very cyclical. Price pressures are very strong, and 
profitability is relatively low--even in good years. Domestic 
consumption of machine tools is 14 percent higher than a year ago, but 
domestic production is only up seven percent. Imports represent 65 
percent of domestic consumption.
    AMT estimates that the average age of machine tools has climbed 
from 10 years in 1998 to nearly 13 years in 2004. When a factory 
decides to invest in new capital equipment, the old machinery is 
usually not thrown in the trash heap. Instead, companies, who lack the 
resources for new machines, purchase these over-age machines, often 
altering them to fit their needs. This process is repeated, as newer 
machines are acquired and older ones resold. The result of all of these 
factors is a big overhang of over-age machine tools in the U.S. market. 
This exposes the manufacturers of the old equipment to costly 
litigation.
  ii. the need for a federal statute-of-repose for workplace durable 
                                 goods
    Unlike a statute of limitations, a statute-of-repose measures the 
time limitation from the date of the initial sale of the capital 
equipment. Statutes of limitations, by contrast, typically impose a 
time limit measured from the time of the injury or the discovery of its 
cause.
    Under product liability law today, in many states, potential 
liability for my industry's products is endless--literally ``forever.'' 
Many of these machines--built before Ronald Reagan became President, 
before the creation of OSHA, before Neil
    Armstrong walked on the moon, before the Beatles came to America, 
and yes, even before I was born seventy years ago--are still in use 
today.
    Although these machines were built decades ago to safety standards 
of their day and although they are likely to have passed through 
several owners--each of whom are likely to have made their own 
modifications to accommodate their needs--they are still the subject of 
four-fifths of our industry's lawsuits. Safety features built into the 
original equipment have sometimes been negligently or intentionally 
disabled by employers or workers in an effort to increase productions 
or avoid the ``nuisance'' of dealing with guards, lock-out mechanisms, 
and other safety features. But proving such circumstances is extremely 
difficult. This litigation imposes liability in situations where our 
members have not exercised control over the product for such a long 
period that it is unfair to hold them accountable for the products 
performance.
    Such litigation is also disproportionately expensive and socially 
unproductive. It is a drain on financial resources, not only from the 
adverse verdicts, but from the costs of successful defense. Most cases 
involving overage machines never go to trial, and if they do, a jury 
almost always finds for the defendant. If a machine has functioned 
properly for 12 years, it is highly unlikely that the machine was 
improperly designed.
    However, even when these lawsuits are ``won,'' the litigation 
nevertheless results in unnecessarily high legal and transaction costs. 
No matter how frivolous the actual facts, the claimant's pleadings must 
be answered, depositions taken, design experts consulted, and 
historical records, if any, unearthed and evaluated. The result is a 
substantial expenditure of funds, additional litigation in our courts, 
and the diversion of resources that could be invested in greater 
competitiveness. Insurers know this and factor it into insurance 
premiums.
    This also results in legal extortion, in which baseless suits are 
filed by entrepreneurial lawyers, who know that many companies and/or 
their insurers will pay an out-of-court settlement rather than accept 
the risk and high cost of defense. When a case does go to trial and the 
jury finds for the claimant, the judgment can force a company to close 
its doors. The $7.5 million verdict in 1996 involving a machine built 
in 1948 against Mattison Technologies, a 100-year-old Rockford, 
Illinois machine tool builder, led to the company's bankruptcy.
    In contrast, the incursion by foreign machine tool builders into 
the U.S. market is fairly recent (within the past 25 years). Therefore, 
foreign machine tool builders do not bear the significant long-tail 
exposure of U.S. builders. American companies that have been in 
business for many years must factor into their prices the risk of 
litigation involving thousands of overage machines. Our Japanese and 
European competitors don't have those risks and those costs. Their 
liability exposure is relatively small (both Europe and Japan have 10-
year statutes-of-repose, if they are sued in their home markets). 
Enactment of a statute-of-repose for workplace durable goods would 
therefore level the playing field for U.S. manufacturers and achieve 
the uniformity and certainty necessary to produce the state-of-the-art 
products for which we are noted.
                             iii. h.r. 3509
    I appreciate the opportunity to testify in support of ``The 
Workplace Goods Job Growth and Competitiveness Act of 2005'' (H.R. 
3509). This is not the first time AMT has appeared before this 
Committee in support of product liability reform. Over the years, we 
have testified before this and other Congressional committees in 
support of numerous product liability bills. Because those bills were 
broader in scope than H.R. 3509, some of their provisions drew 
controversy that could not be overcome during their consideration by 
the Senate and/or the White House.
    H.R. 3509 is different. H.R. 3509 deals only with the issue of 
overage workplace products. It does not contain controversial 
provisions on other product liability issues that have held up passage 
in past years. Under this proposal, no injured worker would go 
uncompensated. H.R. 3509 would only deal with claims involving injuries 
allegedly caused by
    workplace durable goods for which the plaintiff has received or is 
eligible to receive worker compensation. For that specific category of 
cases, the provision would create a uniform, national statute-of-
repose, preempting any state statutes-of-repose that apply to those 
claims. Otherwise, state law would continue to apply. Thus, state 
statutes-of-repose that may cover consumer goods and other non-durable 
goods would not be affected.
    Some earlier product liability bills had ``one-way preemption,'' 
which would create a federal statue-of-repose in those states with no 
statutes-of-repose while preserving shorter state repose periods. 
Unlike those provisions, H.R. 3509 has ``two-way preemption,'' which 
will actually extend the repose period for capital goods to 12 years in 
nine of the 11 states that have enacted time limits; but our members 
are willing to accept that extension in order to achieve the certainty 
a national period of repose would provide.
    An additional eight states have enacted statutes-of-repose based on 
the ``useful safe life'' of the product. This approach has proven to be 
ineffective; because the ``useful safe life'' of each product must be 
litigated in every case, and substantial transaction costs must still 
be incurred.
             iv. amt's 31st annual product liablity survey
    Preliminary results of AMT's 31st Annual Product Liability Survey 
indicate that our members and/or their insurers could reduce their 
product liability costs by 62 percent, through adoption of a federal 
product liability statute-of-repose.
    Twenty-five percent of the respondents reported claims in 2005. 
Virtually all of the claims were brought in state courts.
    None of the closed claims reported from 2005 reached trial. Fifty 
percent were settled for an average of $146,100 and the remaining 50 
percent were dropped without awards being paid. In addition, companies 
experiencing litigation had an average of three claims pending at 
year's end.
    Whether cases are won, lost, or settled--defense costs for our 
members are substantial. The 1992 Insurance Services Office (ISO) 
closed claims study shows that for every $10 paid out to claimants by 
insurance companies for product liability, another $7 is paid for 
lawyers and other defense costs. These transaction costs will be 
reduced substantially, if Congress enacts H.R. 3509.
    Based upon these survey results, every 100 claims filed against 
machine tool builders ``cost'' $10.4 million--including $5.1 million in 
defense costs and $2.3 million in subrogation paid to employers and/or 
their workers' compensation carriers, regardless of employer fault or 
the lack thereof. In other words, the current system provides $3.0 
million to claimants (less whatever they pay out in contingency fees, 
which average 33 percent) and $7.4 million in transaction costs.
    If a 12-year statute-of-repose were to be enacted, the ``cost'' of 
the same 100 claims filed against machine tool builders would be $4.0 
million--a savings of $6.4 million or 62 percent. Eighty-four percent 
of our members' closed and pending claims
    (and the substantial transaction costs associated with them) would 
have been eliminated by a 12-year statute-of-repose.
                             iv. conclusion
    Mr. Chairman, H.R. 3509 is a narrow bill that addresses the problem 
of overage workplace equipment in the U.S. market for manufacturers of 
that equipment. It does not affect claims involving other products. It 
establishes no precedent on whether states should enact statutes-of-
repose governing other products nor on the appropriate scope or length 
of these statutes.
    H.R. 3509 is the end result of years of negotiations within the 
Congress. It provides for two-way preemption; it is limited to 
workplace products; it assures no plaintiff would go uncompensated; and 
it contains a toxic harm exclusion, including, but not limited to, 
exposures to asbestos.
    H.R. 3509 is essentially the same bill approved by the Judiciary 
Committee in 1999 and passed by the House in 2000. If this bill is 
broadened in an attempt to help manufacturers of non-workplace durable 
goods, or to provide one-way preemption; no company will ultimately be 
better off because the bill will not become the law of the land. The 
concerns of other manufacturers can be addressed in other legislation 
now or in the future.
    By enacting H.R. 3509, as it is written, you would be declaring 
that endless litigation involving overage workplace equipment in the 
U.S. marketplace is a serious problem facing American producers who 
are, after all, the foundation of our industrial economy; and that the 
interstate commerce clause impels a federal solution. It is a problem 
not faced by our Asian and European competitors in their own markets 
nor, because of the longtail of exposure, in ours. The current system 
has cost jobs, money, and time. The principal beneficiaries have been 
lawyers on both sides of the counsel table. Advances in high-tech 
products are slowed as a result. Resources that could have gone toward 
the development of new technology and higher productivity for America 
have been expended on wasteful transaction costs with a relatively 
small percentage of total litigation dollars going to injured workers.
    Enactment of H.R. 3509 will improve the competitiveness of U.S. 
workplace equipment manufacturers by driving down their litigation 
costs and cutting down on meritless lawsuits. At the same time, it 
ensures that no injured worker would go uncompensated. Passage of 
similar legislation relating to private aircraft has revitalized the 
domestic aircraft industry.
    This is good legislation, and we respectfully urge its adoption.
    Thank you for your attention. I would be pleased to respond to your 
questions.

    Mr. Cannon. Thank you, Mr. Mack. The Chair would now 
recognize Mr. Watt for 5 minutes for questioning.
    Mr. Watt. Thank you, Mr. Chairman, and I appreciate your 
allowing me to go first. And I apologize to the witnesses 
because I need to leave to make something that's over at 2 
p.m., and I'm trying to get there just for a few minutes.
    I guess I'm tempted to pick up on the personal 
responsibility tack that Professor Popper picked up on, since 
that was the other mantra that a number of my colleagues came 
into Congress on--personal responsibility. I'm not sure exactly 
how I think this bill supports that or the proposition of 
States' rights, but I'm not going there. He covered that.
    I'm tempted to pick up on the 7,000 plus machines that were 
sold by Ms. Sitterly's employer with only one lawsuit. But I 
don't think I'll go either, because that's really not 
substantively what I'm concerned about.
    What I am concerned about is Mr. McMahon's comment. Not 
concerned, I just want to get more clarity because I'm not sure 
under the standard that you have put forward here, whether 
there would be any State tort law anymore. This notion that any 
time you have some movement in interstate commerce, that gives 
you the basis for Federal preemption, just talk to me a little 
bit about what your theory is on what the standard for States 
should be in this area and then maybe I can get a better idea 
of what you think the standard ought to be.
    Mr. McMahon. Right. Well, Congressman Watt, as you know, 
the Constitution gives Congress the power to legislate in 
matters of interstate commerce, so the issue is what particular 
scenarios arise where it becomes compelling for Federal 
preemption. With regard to the particular issue we have before 
us and workplace durable goods, as I indicated in my testimony, 
70 percent of the products that are manufactured in one 
particular State will be sold and resold and sold and resold 
over period of time and moved in many different States.
    And, therefore----
    Mr. Watt. But this bill applies to 100 percent. It doesn't 
apply to 70 percent. Even if you accept that proposition, then 
what about the machine that was sold 15, 18, 20 years ago. It 
sat in the same State. You're saying that because that machine 
moved in interstate to get to that location, all of a sudden 
the Federal Government has some preemptive right to tell what 
the statute of limitations ought to be?
    Mr. McMahon. Well, again, I think it's a balancing of 
equities and an issue of fundamental fairness. I think you have 
to be cognizant of the fact that because so much machinery 
moves State to State that in order to have a situation where 
you don't have a patchwork quilt, if you will, of differing 
State laws that apply and that manufacturers would have to then 
prescribe to all of these varying standards. There are many 
inequities there. It's inefficient. It's not cost effective.
    Mr. Watt. Is it constitutional? Yeah. That's a good point.
    Mr. McMahon. I--yeah. Okay.
    Mr. Watt. But, you know, I'm just----
    Mr. McMahon. I understand.
    Mr. Watt [continuing]. You know I'm trying to get some 
understanding of under your theory whether there would be any 
State tort law. Well, let me postulate this case. This is the 
one I always enjoy talking to my colleagues about. You got a 
doctor who's operating on a patient inside North Carolina, a 
patient certainly not straddling the State line. Maybe the 
doctor is using a piece of operating equipment that was bought 
in another State. That's enough to get you interstate 
preemption, Federal preemption or you're saying--where's the 
line here. I'm just trying to figure out what is the----
    Mr. McMahon. Right. Well, first of all----
    Mr. Watt. What is the logical line that we are going to 
draw here between what the Federal Government's right is and 
what the States have to do.
    Mr. McMahon. Right. Well, first of all that good would have 
to be 12 years earlier.
    Mr. Watt. No. I'm not talking about under that. I'm talking 
about. That was my shot at others' tort reform that they 
already did, which I couldn't for the life of me understand why 
medical negligence is a matter of Federal law as opposed to 
State law. Nobody operates or sees a patient across State 
lines. Now, maybe once and a while, I do live on the South 
Carolina line, and I concede that some of my constituents may 
go to South Carolina and get inferior medical care. Or some of 
their constituents might come to North Carolina and get 
superior medical care, whichever way you want to look at it. I 
hope nobody from South Carolina is watching this. I get a lot 
of nasty phone calls.
    But I just--I mean I don't even--I don't understand what 
the standard would be here that would give the Federal 
Government the right to just--I mean and it's not substantive. 
I mean North Carolina has got a shorter statute of repose, but 
it seems to me that North Carolina ought to have that right to 
decide what the--whether it's going to have a statute of repose 
and what the statute should be. What is the justification for 
even from a business standpoint taking the North Carolina 6-
year statute of repose and making it a 12-year statute of 
repose?
    Mr. Mack. Congressman, could I perhaps help----
    Mr. Watt. Yes, sir.
    Mr. Mack [continuing]. And----
    Mr. Watt. Help me please.
    Mr. Mack [continuing]. Help add to the confusion here. 
The--I can't address anything other than product liability 
cases here. That's what the subject of this hearing is about. 
And if you're asking what is the justification for a Federal 
preemptive statute addressing product liability cases, let me 
try to give you one.
    The insurance industry rates its product liability claims 
on a national basis, with good reason. North Carolina has a 
very short statute of repose for capital goods or for all 
products. One of our members in North Carolina or perhaps a 
woodworking machinery company in North Carolina pays the same 
insurance rates as a company in New Jersey. Why?
    Mr. Watt. I appreciate it, Mr. Mack. I hear what you're 
saying, but now you're telling me that----
    Mr. Watt. Without objection, the gentleman is recognized 
for an additional minute.
    Mr. Watt [continuing]. Just because the insurance industry 
rates on some national basis that that's some basis 
constitutionally for doing something.
    Mr. Mack. Well----
    Mr. Watt. I just don't accept that. Nor do I accept the 
fact that just because a machine moved in interstate commerce 
15 years ago, that somehow the Federal Government has the right 
to tell that State what their statute of repose ought to be. 
That is--that is a radical departure from where the law has 
been in this country, and my--based on everything I know--you 
know, I just don't understand how we get there from here.
    Mr. Mack. Sure. The courts I think have, as I understand 
it, have interpreted the 14th amendment to give Congress the 
right to enact legislation that affects interstate commerce. 
Then really it seems to me the question that you're asking is 
should it do so. What justification is there to follow this 
constitutional prerogative that Congress has and hopefully in 
our written testimony and what we will say through the 
afternoon's hearing that we will provide some justification for 
doing that would satisfy your concerns, Congressman.
    Mr. Watt. I obviously am not picking on anybody. I'm just 
trying to get a standard here.
    Mr. Mack. No, I know.
    Mr. Watt. I appreciate it. I yield back, Mr. Chairman. And 
I appreciate you for allowing me.
    Mr. Cannon. The gentleman's time has expired. Once again, I 
just might note that I've invited the new--the Chairman of the 
Proposed Democratic States' Rights Caucus to take up as his 
first issue the elimination of the Department of Education. I 
will see if that--if we can gain some bipartisan support on 
that.
    Thank you. Mr. Chabot, would you like to make an opening 
statement?
    Mr. Chabot. Yes.
    Mr. Cannon. Without objection.
    Mr. Chabot. Mr. Chairman, I ask unanimous consent to make a 
statement, and I'll keep it much shorter than the 5 minutes.
    But I'd thought as the principal sponsor of this 
legislation, I wanted to take just a couple of minutes why I 
think we do need this important liability reform.
    American manufacturers of durable goods are frequent 
targets of litigation over products that are decades old and 
have met all safety standards when that particular product was 
put onto the market. The endless tale of liability puts U.S. 
manufacturers at a disadvantage with their foreign 
counterparts. Most often, when these suits are brought to 
trial, defendant companies win, as has been mentioned. However, 
because it costs so much to litigate these claims, companies 
must often settle within their insurance limits and these 
manufacturers are then forced to incorporate the risk of 
litigation in the form of higher prices, which then ends up on 
the backs of the consumers.
    This bill will help save millions of dollars that would 
have otherwise been spent on these types of frivolous lawsuits, 
resources that could be used to compete in the global 
marketplace and create jobs back home; therefore, it would be a 
much better use of these dollars.
    I also wanted to highlight the three core aspects of the 
bill. Number one, H.R. 3509 imposes a nationwide statute of 
repose. This national standard will provide needed stability in 
the marketplace. And secondly, because the bill would only 
apply to plaintiffs who are eligible to receive worker's 
compensation, no one would go uncompensated, as has also been 
mentioned.
    Twelve years is an adequate amount of time to test a 
product's viability without needlessly barring victims from the 
courthouse.
    Since the 106th Congress, I've worked to pass a national 
statute of repose for durable goods in the workplace. In fact, 
in the 106th Congress, the legislation passed the House and 
then passed both bodies of Congress in product liability reform 
legislation that was then unfortunately vetoed--unfortunately, 
in my view, by President Clinton.
    Since that time, I've continued to work with national 
groups like the National Association of Manufacturers and small 
groups located in my district in Cincinnati, Ohio, who continue 
to pay settlements in frivolous cases, because it will cost 
more to defend the case than to settle.
    Jobs in the district that I represent, for example, are 
continually threatened by frivolous suits and, in fact, back in 
2001, a local company, Madison Grinder, was forced to close its 
doors after a products liability suit.
    Just the machine tool industry alone employs over 1,500 
workers in the Cincinnati area. I might note, however, that it 
wasn't too long ago when that 1,500 jobs was 7,000 jobs in the 
Cincinnati area. It was always one of the premier areas for the 
machine tool industry.
    After the passage of several tort reform measures this 
year, I'm pleased to see that we're once again highlighting the 
runaway litigation costs that businesses in our country face at 
the expense of the average consumer.
    And I want to thank you, Chairman Cannon, for holding this 
hearing, and we appreciate the testimony of the witnesses thus 
far. I think whichever side they're on, I think it's really 
been excellent. And I yield back my time.
    Mr. Cannon. I thank the gentleman. Thank you for 
introducing this legislation. We very much appreciate it. And 
without objection, all Members will have 5 days--5 legislative 
days to submit opening statements or additional materials for 
the hearing record. Hearing no objections, so ordered.
    At this point, we're a little bit out of order, because Mr. 
Watt needed to leave. So if it's okay, Mr. Delahunt, we'll call 
on Mr. Coble. Is that? Thanks. Mr. Coble--the gentleman is 
recognized for 5 minutes
    Mr. Coble. Thank you, Mr. Chairman. Bill, are you on a 
short leash? Do you need to go earlier?
    Mr. Delahunt. No. I'm fine.
    Mr. Coble. Okay. Mr. Chairman, thank you for holding this 
hearing. Thank you all for being with us.
    Mr. Mack, what impact would the 12-year statute of repose 
have upon a worker's ability to receive worker's comp and would 
employers still be held liable for injuries that occur on the 
job?
    Mr. Mack. Well, under the provision of 3509, the only time 
it comes into play is when the claimant is eligible for 
worker's compensation, so we say unequivocally that no injured 
worker would go uncompensated.
    Mr. Coble. So no negative impact?
    Mr. Mack. It would not in any way affect the claimant's 
right to get worker's compensation or ability to get worker's 
compensation, and only those persons who are injured in the 
workplace and are eligible for worker's comp would this bill 
be--go into effect.
    Mr. Coble. All right. Now, you mentioned durable goods, Mr. 
Mack. Comment a little bit more in detail, if you will. What 
goods are intended to be included in the bill's definition and 
what goods are not intended to be included?
    Mr. Mack. Well, I think basically it is intended to cover 
equipment like the stuff our folks make, which I indicated, 
makes other things.
    It might be construction equipment--equipment that is used 
in the workplace to either produce a product or to work on a 
project that--and I think under the definition of the bill is 
intended to have a life of at least 3 years; is subject to 
depreciation under the Internal Revenue Code; is used in the 
trade or business for the production of income. It's intended 
to cover workplace products that are used in the workplace that 
cause traumatic injury. The last time we had this hearing, 5 or 
6 years ago, there was a long discussion about toxic harms and 
how do you define toxic harms and the Committee, in its wisdom, 
provided a definition in the markup for toxic harm----
    Mr. Coble. I know, and my time is about to run out, Mr. 
Mack.
    Mr. Mack. But it specifically said asbestos isn't covered.
    Mr. Coble. Mr. McMahon, talk to me about two-way preemption 
versus one-way preemption.
    Mr. McMahon. Sure. I mean two-way preemption means that the 
statute of repose will be extended in States that currently 
have a fixed-time statute, like North Carolina has 6 years, 
that would now be extended to 12 years under that bill.
    One-way preemption creates Federal statute of repose in 
States with no current statute of repose and preserves the 
shorter statute of repose, so in North Carolina, it would be 6 
years.
    So many claim that that is unfair or has been claimed as 
unfair and so, therefore, under this bill, there is two-way 
preemption, not one.
    Mr. Coble. And North Carolina would then be under the 12 
year?
    Mr. McMahon. Correct.
    Mr. Coble. Okay. Mr. Chairman, in closing--I'm about out of 
time here--this matter is clearly subject to interpretation, 
some good, some bad. But I've heard horror stories. Ms. 
Sitterly, you mentioned some that simply demand our imagination 
in resolving it. You want to give one more before the red light 
turns on? Before the red light illuminates in my eye and the 
Chairman hammers me down?
    Mr. Cannon. If you could turn the mike on, please?
    Ms. Sitterly. I just recently settled a case on an mill 
that was shipped in 1942, and we spent $151,000 in defense 
costs and then settled it for $90,000. And I mean 1942. So I 
think that's reason right there.
    Mr. Coble. Well, what caused the injury?
    Ms. Sitterly. A lot of comparative negligence honestly on 
the operator. He stuck his hand in the mill. So the employer 
trained him poorly, provided him with gloves, when the operator 
manual clearly stated no gloves are to be used.
    Mr. Coble. And the defendant was the original manufacturer 
I take it in that case?
    Ms. Sitterly. It was. Yes.
    Mr. Coble. I see the red light, Mr. Chairman. Thank you, 
sir.
    Mr. Cannon. The gentleman yields back. Mr. Delahunt.
    Mr. Delahunt. Yes. Thank you.
    Mr. Cannon. The gentleman is recognized for 5 minutes
    Mr. Delahunt. Yeah. I thank the Chair.
    Counsel Sitterly, have you testified before the Wisconsin 
State Legislature?
    Ms. Sitterly. I have not.
    Mr. Delahunt. You haven't? Has there been a proposal made 
before the Wisconsin State Legislature that would embrace 
basically the legislation that's before us now?
    Ms. Sitterly. I'm afraid I don't know the answer to that.
    Mr. Delahunt. You don't? Do you know if anybody has gone to 
the Wisconsin State Legislature or the Administration in 
Wisconsin and put forth legislation or a proposal that would 
deal with I guess the word is horror stories or frivolous 
lawsuits?
    Ms. Sitterly. I'm afraid I don't know. I think they should, 
though, if they haven't.
    Mr. Delahunt. Well, that's my point. I mean I think they 
should, too. If all these horror stories--and I'll accept your 
version, okay and your conclusions--it's inarguendo, as we say.
    I mean I sit here and I wonder, you know, I think the key 
question was asked by Mr. Watt. You know, where is the line and 
when is the Commerce Clause implicated? Maybe--I just jotted 
some notes down. It's to ensure stability in the marketplace. 
Maybe that's it. But, you know, this Constitution gets to be a 
pesky thing sometimes when it doesn't work to your particular 
advantage.
    You know that's the problem with constitutions. You know 
they can cause you aggravation and cause you to go out and 
spend some money. But, you know, we heard--we hear the term 
frivolous lawsuits thrown around. You know, I'm sure some 
lawsuits are frivolous except can you--somebody give me a 
definition that we could implicate into legislation.
    I mean we're a democracy that prides ourselves in giving 
access to the courts. And you know the Federal justice system 
simply can't accommodate. But when I reflect and think of the 
arguments that my friends and colleagues make who support this 
legislation, I just--you know why not just file a bill and 
abolish, you know, the--you know, State judicial systems. Now, 
let's get a new amendment and update it. Maybe things have 
changed because of the changes in the marketplace. Professor?
    Mr. Popper. Well, that's a terrible idea. Thank you. Just 
to comment on these horror story questions. I mean the real 
horror story is the fact that there's 6,000 workers who die in 
the workplace every year. There are tens of thousands of people 
who are horribly injured. I made reference to it in my 
testimony at Footnote 8.
    Now, you want horror stories. There are horror stories of a 
person ground up in a cheese grinder, buried alive in corn, or 
seared to a furnace from the floor. The workplace is not a safe 
place. We do our best. But when you try and think about 
legislation that's balancing out profitability on one hand and 
excess profitability in many cases, against basic safety from 
those who are least able to protect themselves, I think the 
balance has to tilt the other way. I mean in--and on this 
federalism question, gee, you know the Constitution isn't all 
that clear on a lot of areas, but one thing it is clear on and 
that is it was written to limit the power of the Federal 
Government, not to expand it.
    Mr. Delahunt. Well, I--if I may, Professor, you know, as 
I'm reading this bill for the first time, and I--as I read it, 
I think there's some equal protection issues that are 
implicated here as well in terms of how we treat different 
victims.
    You know and two-way preemption, I don't think that really 
solves the constitutional issue, Mr. McMahon, and I'll 
pronounce your name properly.
    Mr. McMahon. One Irish to another.
    Mr. Delahunt. These non-Irish, they just don't know how to 
do it. I mean I can't believe what I've been hearing.
    Mr. McMahon. We're close to St. Patrick's Day.
    Mr. Delahunt. You know that's right.
    But I mean we've heard these arguments, you know, before, 
and, you know, Ms. Sitterly, I mean, you have had 7,000 cases 
and only one went to trial? Did I catch that right?
    Ms. Sitterly. Nine thousand machines. Yes. Yeah.
    Mr. Delahunt. Okay. And only one went to trial. You know my 
position is if--I think that the insurance carriers don't--I 
think they take an easy approach, okay. And I don't think they 
go to trial often enough. And when I hear arguments such as, 
you know, oh, these are complicated cases. Well, I don't think 
that most jurors are dumb. I really don't. And, you know, 
there's that instinctual, common sense that you know that 
people have, especially when it's done in a collective way.
    I really do believe in the justice system, you know----
    Mr. Cannon. Without objection, the gentleman's time will be 
extended by 1 minute.
    Mr. Delahunt. Thank you, Mr. Chairman. And I'll--I'll try 
not to just ramble on.
    But, you know, you got to tell these insurance companies, 
if you're a company, hey, defend these things. If there are 
frivolous lawsuits out there, go to trial. Go to trial and 
establish the fact that, you know, that that's unacceptable and 
is creating costs. I haven't seen any of the data, but, you 
know, the whole profitability that Jim Mack brings up about .06 
percent and 1.9 percent. I dare say an analysis is that if this 
is a piece of our non-competitiveness, it's such--it's almost 
infinitesimal, and that there are, you know, other factors that 
are going into the equation that are hurting us competitively. 
I mean I can think of you know those jobs going overseas and 
labor costs and a whole variety of other things. But you know 
those who might have a particular agenda when they come to tort 
reform try to make it sound as, you know, these are runaway 
costs for all these frivolous lawsuits and yet whenever I ask 
for any data, I don't get any. I just get free-for-all. With 
that, I'll yield back.
    Mr. Cannon. Thank you. Very close to that additional 
minute. We appreciate that.
    Mr. Chabot.
    Mr. Chabot. Thank you, Mr. Chairman.
    Mr. Cannon. The gentleman is recognized for 5 minutes.
    Mr. Chabot. Thank you. Before, I answer--ask questions, I 
would just comment that the gentleman from Massachusetts I mean 
I would stipulate that most juries aren't dumb and I, however, 
think that many of the cases don't make it to trial. They get 
settled. It's causing insurance rates to go up. It's making 
U.S. companies less competitive. That's one of the reasons that 
we have lost an awful lot of jobs in this country.
    And perhaps--I'll open this up to any of the panelists--my 
understanding is the statutes of repose in some of the other 
countries--Japan, Korea, and others and relative to lawsuits--
does put us at a tremendous disadvantage, and if one of the 
members would like to discuss that, either Mr. Mack or Mr. 
McMahon.
    Mr. Mack. Sure. The--yeah--both the EU and Japan have 10-
year statutes of repose that apply across the board to all 
products, including those that cause toxic harms. I mean it--
and I'm not advocating that. But the point is that our 
principal competitors are basically insulated from lawsuits in 
their home market and in each other's markets by these statutes 
of repose, and, therefore, don't have in their home markets or 
each other's markets long tails of liability.
    Mr. Chabot. Okay.
    Mr. Mack. Now, in the United States, a Japanese company or 
a European company is subject to the U.S. laws whatever they 
are. But in our market, our home market, our members are 
subject to this long tail of liability and the incursion of 
foreign imports to the degree they are now is relatively 
recent.
    So a Japanese company or a European company or a Korean 
company, because it doesn't have this long tail of liability, 
when it goes to insure the products that it does sell in the 
United States, the costs are infinitely lower, and their 
overall liability costs are infinitely lower than a company 
that has been around for a long time in the United States and 
has produced jobs in the Cincinnati area for a gazillion years.
    Mr. Chabot. Thank you. Mr. McMahon, I don't know if you--if 
that was sufficient. It probably was. Let me get at a different 
question, and you've already answered this to some degree, but 
could you once again very briefly explain why the statute of 
repose should be a Federal issue, and why we're moving forward 
that way; why you think this is an appropriate route for the 
Congress to go?
    Mr. McMahon. Sure. I'd be glad to, Congressman.
    As you know, Congress has the authority to act here under 
article I, section VIII. The Constitution gives Congress the 
power to legislate matters of interstate commerce. As was 
raised in my testimony, at at least 70 percent we know of 
manufactured workplace durable goods are moving in interstate 
commerce. So even if you had a perfect set of State laws that 
protected manufacturers and frankly balanced the rights of 
manufacturers with plaintiffs, because that product is moving 
across, especially a product, say, 30 years old that has been 
owned and resold and sold and resold and moved in and out of 
different States and all around that you don't have the ability 
to apply any one State's particular law. Essentially, you can 
allow plaintiff's attorneys to forum shop and because it has 
been so many places and pick a jurisdiction in which they want 
to file a claim, the manufacturers have no certainty; they have 
no predictability because they don't know which particular laws 
they're going to be held accountable to.
    Mr. Chabot. And just to be clear, if a State, say, North 
Carolina has a 6-year statute of repose, it goes up to 12?
    Mr. McMahon. Correct.
    Mr. Chabot. If the State had 15, it comes down to 12?
    Mr. McMahon. Correct. That's two-way preemption.
    Mr. Chabot. Right. And if a State has nothing, it's 12.
    Mr. McMahon. Twelve.
    Mr. Chabot. So 12 is going to be the statute of limitations 
nationwide?
    Mr. McMahon. Correct.
    Mr. Chabot. Ms. Sitterly, let me conclude with you if I can 
real quickly.
    You mentioned in your testimony that you're hesitant to 
bring cases to trial. Could you expand on that and the factors 
that companies like yours must consider when evaluating a case, 
even if it is frivolous.
    Ms. Sitterly. Well, first, when you're dealing with----
    Mr. Chabot. I think the mike's not on there, too.
    Ms. Sitterly. I think it is. There.
    Mr. Chabot. Okay.
    Mr. Shays. The first thing is on a machine that's been 
manufactured a decade or more ago, you have to retrieve the old 
records and that implies that you can find the records, and 
then you need to find an engineer, an expert, who is familiar 
with the standards as they existed at the time. And then you 
have to be able to have a jury focus on those standards and not 
just go to the standards of today.
    And also the fact that the transaction costs of defending a 
case--depositions and outside experts and the cost that the 
company bears on the witnesses that are in-house, for example, 
the engineers. I mean instead of doing their jobs, they're out 
preparing for depositions and the like. And also in machine 
tool industries are usually graphic, and you have great 
sympathy on the part of the plaintiff as well.
    So those are some of the factors that we look at when we 
decide whether or not we're going to take a case to trial or 
settle it.
    Mr. Chabot. Thank you. Thank you, Mr. Chairman.
    Mr. Cannon. The gentleman yields back. Thank you. And 
again, thank you, Mr. Chabot, for introducing this legislation, 
which I think is great. And I'll talk about that. In fact, I'm 
going to get on the soap box in a minute like many other people 
have, but I have a couple of questions. First, Mr. McMahon, 
previous versions of this bill as well as the General Aviation 
Revitalization Act have contained an 18-year statute of repose. 
Why is the 12-year statute of repose better?
    Mr. McMahon. Mr. Chairman, that is a good question. You 
know, why 12 years?
    I think the key notion is a reasonable time period. As you 
stated, GARA is 18 years. Nine of eleven States with statutes 
of repose have--are shorter than 12 years. Japan and EU have 10 
years. But they apply to all consumer goods. I know many 
members of the NAM would support moving to that level, 10 
years. The original or one of the original provisions related 
to the statute of repose was in the Contract with America. That 
was 10 years. Twelve years seems to be a more modest number 
than past efforts at Federal legislation. It's also the mean, 
between 6 and 18.
    Mr. Cannon. Thank you. In addition to the 11 or so States 
that currently have a fixed statute or term statute of repose, 
an additional half dozen States, including my home State of 
Utah have enacted a statute of repose that was ultimately held 
unconstitutional under that State's constitution for violating 
a right to trial or open courts provision.
    First, is there any reason why a statute of repose would be 
unconstitutional under the United States Constitution? And 
second, why should Congress pass a law that effectively forces 
those States to adopt a statute of repose when it would not be 
constitutional for their State legislature to do so?
    Is there any difference than the situation that occurred 
when Congress passed the General Aviation Revitalization Act? 
Mr. McMahon?
    Mr. McMahon. I think GARA sets the precedent. I think it 
explains the rationale. You know ultimately, this is a policy 
decision. You want to balance the equities and adopt reasonable 
limits on long tail liability. Again, products moving in 
interstate commerce, this is a particular area similar to GARA 
where there is an availability to do it, and I believe a desire 
to do it, a justification I should say for it.
    Mr. Cannon. Thank you, Mr. Mack, do you have any comment on 
that constitutionality question?
    Mr. Mack. Well, you're correct that some States have 
provisions in their State constitutions dealing with open 
courts and access to courts and the like, which provisions do 
not appear in the United States Constitution and, therefore, do 
not--would not bar a Federal statute of repose. I would argue 
that the legislature in those States, having seen the need to 
pass a statute of repose. One could argue that the people of 
those States, represented by their legislatures and governors 
do--would like to see some restraint on lawsuits involving 
overage products.
    The trend line, by the way, in States that have adopted 
fix-termed statutes of repose has been to both in Texas, in 
Connecticut, in Colorado, which I think are the most recent to 
restrict the application to workplace injuries, perhaps for the 
reason that this legislation does we should be able to argue 
that no injured person, no injured worker under these--under 
this bill would go uncompensated.
    Mr. Cannon. Thank you. You know, I was struck, Mr. Popper, 
by your comment that the real tragedy is the--first of all that 
the workplace is not a safe place, and that the real tragedy is 
6,000 deaths and you described a couple of ways people have 
died recently in some graphic detail, and that is a matter of 
concern. I personally have worked in that very unsafe 
workplace--in a coal mine and also in a steel mill, and one of 
the things that really strikes me, from my own personal 
experience, and having watched the development of society over 
the last few years is that there has been a dramatic reduction 
in the number of people that are dying in the workplace.
    And you talked earlier about the likely effect that this 
bill would have on innovation and on design, and suggested that 
that would be negative.
    My own experience is that the global workplace has changed. 
The paradigm has changed, and the companies that are going to 
continue to compete have to be focused on design. They have to 
be focused on innovation, but they have to also be able to have 
an endpoint to the liability that their prior products have 
caused.
    Now, on the other hand, the reason injuries have declined 
and deaths have declined is in large part because there's a 
partnering between people that buy equipment and people that 
design and sell equipment. And so people that have equipment or 
resell equipment or move equipment and buy equipment from 
people who've bought it before and they haven't used, there's a 
huge incentive on the part of those people to be safe.
    There are also incentives to make money and then to cut 
corners and sometimes you get employees who cut corners and 
unfortunately you let--there are employers who let employees do 
that. I will never forget the yelling at I got when I didn't 
card out an electronic circuit that I was involved in helping--
or working in the context of, because that was a company that 
was deeply concerned about safety. Not all companies are.
    But the key here-and the reason I think this legislation so 
important--is that to the degree that you have--you bid up the 
number of jobs, in other words, as you remove these obstacles 
to new jobs, and the economy has more jobs, then part of the 
compensation package becomes a safer work environment and 
people move away from the kind of world view that allows people 
to do dangerous things, and they move more toward the harsher 
and safer world. It would be harsher in the sense that you 
correct people that do unsafe things.
    And over time, as we do that, we then refocus on innovation 
and improved design and the effect of that is not just that 
American workers, of whom 6,000 died last year, not only are 
those American workers going to be safer, but around the whole 
world workers are going to be safer.
    So if we're really concerned about workers--in the first 
place, how on earth do you compensate 6,000 deaths? That's a 
very difficult problem.
    On the other hand, how do you avoid the deaths, and it 
seems to me that at some point you have to be looking at how we 
create a world that in which the incentives align to create a 
safer workplace. And it seems to me that this bill does that, 
because it creates a virtuous cycle between the machine 
manufacturer and his future business and the machine operator 
company and his future business.
    Did you want to comment on that, Mr. Popper?
    Mr. Popper. Of course. Thank you. I guess we're going to 
have to agree to disagree. Let's make the positive assumption. 
Let's make the optimistic assumption that you're right; that 
the workplace safety records have improved. And I think there's 
a lot of data to that effect.
    Mr. Cannon. That's not an assumption. I mean there's 
massive data to that over the last--if you take last 20 years, 
I mean the trend line is massive. Now, if it--whether it will 
continue or not that's a different question. I agree. And we 
may----
    Mr. Popper. Right.
    Mr. Cannon [continuing]. May not be so optimistic about 
that, but there are lots of reasons to believe that we would.
    Mr. Popper. Even if--making that assumption, why in the 
world would you want to pull out of the marketplace a primary 
incentive to make the workplace safer? You maintain liability 
standards with the manufacturers, if that's had a positive 
effect, then great.
    This piece of legislation pulls out the rug from under the 
workers, because right now----
    Mr. Cannon. Can we interact on this just a little bit, 
because----
    Mr. Popper. Surely.
    Mr. Cannon [continuing]. It seems to me that what this 
legislation does is it says to the employer I'm the guy who's 
going to be stuck, because the manufacturer is going to get off 
the hook. And so the guy who's in charge of safety now has a 
much higher reason to not be the deep pocket in the lawsuit. Is 
there not some of that?
    Mr. Popper. I don't really think that's the dynamic that 
will occur, because the employer is going to have its liability 
limited by worker's compensation. They're not going to be 
liable in major product liability cases. They're not going to 
be liable when there are foreseeable losses. They're not going 
to be liable when the manufacturer is sitting on a longitudinal 
study about downstream risk. They're not going to be liable for 
any of that. They're going to be only liable to the extent that 
there's worker's comp, which, as you know, is an exclusive 
remedy and bars the kind of civil litigation that you're 
describing.
    Mr. Cannon. Unless there is negligence or gross negligence 
depending upon the State standard on the part of the employer 
and allowing a machine that's been modified to the point that 
it's dangerous probably constitutes that kind of negligence in 
many cases. I mean you got lots of standards in different 
States.
    Mr. Popper. Right. And the fact of the matter is I'd be 
curious in seeing any case law which suggests that where there 
is significant product modification, a manufacturer of a 
product, who produced the product as originally constructed in 
good order and followed regular due care regimes was, in fact, 
liable. As you know, if there is significant modification of a 
product, the manufacturer doesn't bear the same----
    Mr. Cannon. But we're not talking about the manufacturer. 
We're talking about the company that buys the machine and 
operates it.
    Mr. Popper. Precisely. Precisely.
    Mr. Cannon. That company, but I think what we've had 
testimony of is that juries do strange things here, and my 
personal experience in this regard is fairly significant and 
juries, in fact, do--they want to take care of the individual 
who has the problem. If you happen to get in front of one, 
there's probably going to be conversation one way or another.
    So it isn't a question here of the larger societal 
question. Moving away from the--what you're just describing is 
not liability on the part of the manufacturer of the equipment 
and toward responsibility on the guy who really can actually 
control the safety of the workplace environment, which the 
employer who bought the equipment.
    Mr. Popper. Right. And in the event that you have that 
scenario and the employer bears liability--that's what I was 
testifying about before--that creates a tension that's really I 
don't think particularly healthy, and I do think the 
manufacturer ought to stay in there. And if it is a product 
that has a useful life that goes well beyond this 12-year 
period, it's inconceivable to me that you would eliminate that 
regime of responsibility. Who benefits in this? Certainly not 
the worker. Certainly not the employer. The only one who 
benefits in this is the manufacturer, who's going to shore up 
profitability and to me it's like the constitutionality 
question, frankly.
    You know I gave you a whole series of cases that question 
the constitutionality of statutes of repose, but it's a policy 
question. This is a policy question as well. And it seems to me 
that if the policy that you're really concerned about is 
vitality of the American marketplace, then you want to optimize 
the incentives on the producers of durable goods to be 
responsible for those goods, particularly when they 
malfunction. And this legislation frankly is inexcusable in 
that it would allow for a manufacturer who's fraudulently 
concealed a deficit in the machine to be immunized after 12 
years. You don't even do that with GARA.
    Mr. Cannon. Well, but I think the point is that within the 
12 years that defect that may you've suggested be concealed is 
probably going to become apparent or if it's not concealed, 
then there's just a better design possibly out there in the 
mind of God and somehow we infer some part of that better 
design.
    It seems to me the failure of your logic is that somehow 
we're going to stop the innovation or stop the promulgation of 
those kinds of designs that make it more safe. And it seems to 
me that the logic on the other side of this equation, which is 
employer wanting safe employees, bidding up the cost of is 
employment by increasing the safety for his employees, wanting 
better equipment, having the ultimate liability if he messes 
with the equipment and leaving the equipment manufacturer out 
of the cycle, that seems to me to be a virtuous cycle that 
increases the rate at which we're progressing toward fewer 
deaths and fewer injuries in the workplace. And that's why I 
think this is really actually a very good piece of legislation.
    I want to thank the panel for having been here today. We 
appreciate your comments, your input. It's been very valuable. 
Do you have more questions?
    With that, we stand adjourned. Thank you.
    [Whereupon, at 2:38 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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               Material Submitted for the Hearing Record

 Statement of Mark J. Nuzzaco, Government Affairs Director, NPES, The 
 Association for Suppliers of Printing and Converting Technologies on 
                               H.R. 3509







                                 
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