[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
PROTECTING THE PLAYROOM: HOLDING FOREIGN MANUFACTURERS ACCOUNTABLE FOR 
                           DEFECTIVE PRODUCTS

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



                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 15, 2007

                               __________

                           Serial No. 110-166

                               __________

         Printed for the use of the Committee on the Judiciary


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



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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
                 Joseph Gibson, Minority Chief Counsel
                                 ------                                

           Subcommittee on Commercial and Administrative Law

                LINDA T. SANCHEZ, California, Chairwoman

JOHN CONYERS, Jr., Michigan          CHRIS CANNON, Utah
HANK JOHNSON, Georgia                JIM JORDAN, Ohio
ZOE LOFGREN, California              RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts   TOM FEENEY, Florida
MELVIN L. WATT, North Carolina       TRENT FRANKS, Arizona
STEVE COHEN, Tennessee

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel


                            C O N T E N T S

                              ----------                              

                           NOVEMBER 15, 2007

                                                                   Page

                           OPENING STATEMENT

The Honorable Linda T. Sanchez, a Representative in Congress from 
  the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................     1
The Honorable Chris Cannon, a Representative in Congress from the 
  State of Utah, and Ranking Member, Subcommittee on Commercial 
  and Administrative Law.........................................     2

                               WITNESSES

Mr. Thomas L. Gowen, The Locks Law Firm, Philadelphia, PA
  Oral Testimony.................................................     5
  Prepared Statement.............................................     8
Mr. Victor E. Schwartz, Shook, Hardy and Bacon, LLP, Washington, 
  DC, on behalf of the Institute for Legal Reform, U.S. Chamber 
  of Commerce
  Oral Testimony.................................................    17
  Prepared Statement.............................................    19
Ms. Pamela Gilbert, Cuneo, Gilbert and Laduca, LLP, Washington, 
  DC
  Oral Testimony.................................................    23
  Prepared Statement.............................................    24
Mr. Andrew F. Popper, American University, Washington College of 
  Law, Washington, DC
  Oral Testimony.................................................    27
  Prepared Statement.............................................    30

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable Steve Cohen, a Representative 
  in Congress from the State of Tennessee, and Member, 
  Subcommittee on Commercial and Administrative Law..............     4
Article entitled ``AGs Gone Wild,'' from The Wall Street Journal 
  dated Tuesday, November 13, 2007, submitted by the Honorable 
  Chris Cannon, a Representative in Congress from the State of 
  Utah, and Ranking Member, Subcommittee on Commercial and 
  Administrative Law.............................................    66

                                APPENDIX
               Material Submitted for the Hearing Record

Responses from Thomas L. Gowen, The Locks Law Firm, Philadelphia, 
  PA, to Post-Hearing Questions from the Honorable Linda T. 
  Sanchez, a Representative in Congress from the State of 
  California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law.............................................    72
Responses from Victor E. Schwartz, Shook, Hardy and Bacon, LLP, 
  Washington, DC, to Post-Hearing Questions from the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law.............................................    74
Responses from Pamela Gilbert, Cuneo, Gilbert and Laduca, LLP, 
  Washington, DC, to Post-Hearing Questions from the Honorable 
  Linda T. Sanchez, a Representative in Congress from the State 
  of California, and Chairwoman, Subcommittee on Commercial and 
  Administrative Law.............................................    77
Responses from Andrew F. Popper, American University, Washington 
  College of Law, Washington, DC, to Post-Hearing Questions from 
  the Honorable Linda T. Sanchez, a Representative in Congress 
  from the State of California, and Chairwoman, Subcommittee on 
  Commercial and Administrative Law..............................    80


PROTECTING THE PLAYROOM: HOLDING FOREIGN MANUFACTURERS ACCOUNTABLE FOR 
                           DEFECTIVE PRODUCTS

                              ----------                              


                      THURSDAY, NOVEMBER 15, 2007

              House of Representatives,    
                     Subcommittee on Commercial    
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 9:43 a.m., in 
Room 2141, Rayburn House Office Building, the Honorable Linda 
Sanchez (Chairwoman of the Subcommittee) presiding.
    Present: Representatives Sanchez, Johnson, Lofgren, Cannon, 
and Franks.
    Staff present: Eric Tamarkin, Majority Counsel; Paul 
Taylor, Minority Counsel; and Adam Russell, Professional Staff 
Member.
    Ms. Sanchez. This hearing of the Committee on the Judiciary 
Subcommittee on Commercial and Administrative Law will now come 
to order.
    I will now recognize myself for a short statement.
    From the millions of toys recalled because of lead paint, 
to last week's recall of Aqua Dots, a popular Chinese-made toy 
which converts into a dangerous date-rape drug when eaten, it 
has become increasingly clear that playrooms across the country 
are in danger. There is a growing business trend of sacrificing 
safety standards and quality for slightly cheaper imported 
products.
    While defective foreign-manufactured products entering into 
the U.S. is not a new phenomenon, I have been alarmed by the 
recent flow that is flooding our marketplace. Unfortunately, 
the Consumer Product Safety Commission, which is tasked with 
protecting consumers from harmful and dangerous products, 
appears to have done little to curb the flow of these 
problematic imports. In fact, the CPSC has actually cut its 
total staff by 55 percent and its budget by 49.4 percent since 
it was created in 1974. It now has fewer than 100 inspectors 
and investigators nationwide.
    Even more troubling was the recent release of records 
showing that CPSC employees have accepted a large number of 
trips financed by industries the commission is mandated to 
regulate, calling into question its independence. I look 
forward to hearing from Pam Gilbert, former executive director 
of the CPSC, on how the commission can more effectively do its 
job.
    Given the increase of imported products that do not meet 
U.S. standards for health, safety and quality and the fact that 
the CPSC has been largely ineffective in preventing the 
importation of defective products, consumers are left with 
little protection. When consumers are harmed by foreign-made 
products, current law leaves them little recourse in receiving 
compensation from a foreign manufacturer.
    Consumers seeking to hold foreign manufacturers accountable 
face a number of daunting barriers. First, a consumer must 
establish personal jurisdiction, an increasingly difficult task 
given the uncertainty of the law. A consumer must then navigate 
the complex service of process requirements when serving a 
manufacturer in a foreign country. This may include translating 
materials into the language of that country. Finally, even if 
the consumer succeeds in having the matter heard and winning a 
favorable judgment, collecting compensation may be difficult as 
most countries resist enforcing U.S. judgments.
    I look forward to hearing from our witnesses on how we can 
ensure that foreign manufacturers are held accountable for 
injuries consumers suffer as a result of defective products. As 
the holiday season comes upon us, we must do what we can to 
make certain it is both joyful and safe.
    Accordingly, I very much look forward to today's hearing 
and to receiving the testimony from all our witnesses.
    I will at this time now recognize my colleague, Mr. Cannon, 
the distinguished Ranking Member of the Subcommittee, for his 
opening remarks.
    Mr. Cannon. Thank you, Madam Chair.
    The American tort system is nothing to be proud of. As 
Lawrence McQuillan, director of business and economic studies 
at the Pacific Research Institute, recently concluded, 
``America's tort system imposes a total cost on the U.S. 
economy of $865 billion per year. This constitutes an annual 
tort tax of $9,827 on a family of four. It is equivalent to the 
total annual output of all six New England states or the yearly 
sales of the entire U.S. restaurant industry.'' These costs 
hurt domestic American jobs and businesses, and much of these 
costs are imposed on American wholesalers and distributors.
    In the United States, any seller of a product--not just the 
original manufacturer--is liable for damages caused by a 
defective product under the legal doctrine of strict tort 
liability. The fact that a wholesaler-distributor did not 
create the defect or did not participate in the design or 
production of the product or did not author the product 
instructions or warnings is no defense under current law. This 
often results in great unfairness, and efforts to aggravate 
that unfairness would simply increase the unjustified costs 
already imposed on American companies.
    Normally, a wholesaler-distributor in a U.S. product 
liability suit will bring the manufacturer of the defective 
product into the case as a defendant, if the plaintiff has not 
already done so, and claim indemnity from the manufacturer as 
the faulty party. However, this may not always be successful, 
especially when the product is made by a foreign supplier
    If the foreign supplier does not have a legal presence in 
the United States, such as a U.S. subsidiary, a U.S. plant or 
other offices, or has not agreed by contract to be subject to 
the jurisdiction of the U.S. courts, the wholesaler-distributor 
often cannot obtain jurisdiction over the foreign supplier in 
America. The wholesaler-distributor may still claim indemnity 
from the foreign supplier, but it will have to do so in a 
distant, overseas court system that may not yield reliable 
compensation.
    One prime impediment American courts face when seeking to 
assert jurisdiction over foreign corporations is the 
Constitution itself, which cannot be amended through simple 
legislation. Under the due process clause, as interpreted by 
the Supreme Court, a foreign corporation that has its principal 
place of business overseas, engages in little or no economic 
activity inside the United States and does not otherwise 
subject itself to the jurisdiction of the United States cannot 
be subject to the jurisdiction of the various state courts.
    These problems for domestic distributors have been brought 
to the fore by a recent spate of problems with defective 
products whose defects may be traced to Chinese or other 
foreign sources.
    Tort reform advocates, such as Victor Schwartz, who is a 
witness before us today, have proposed that Congress consider 
requiring that substantial suppliers be required to post a bond 
or appoint an agent for service of process before they can 
enter into transactions in which their component parts are 
distributed in the U.S. Such proposals could help ensure that 
money from foreign manufacturers is available to compensate 
those injured by foreign component parts in the U.S. and also 
allow such foreign companies to be subject to the service of 
process in the United States so Americans courts can assert 
jurisdiction over them.
    Unfortunately, however, legislative proposals that have 
been introduced to address this issue have tended to focus on 
misguided attempts to amend the rules governing the Consumer 
Product Safety Commission in a way that threatens more 
litigation, but less actual enforcement of product safety 
issues. As The Wall Street Journal editorialized just last 
week, ``Just in time for toy season, Congress is promoting new 
legislation to crack down on companies selling products said to 
be defective or dangerous. A Senate bill would empower all 50 
State attorneys general to effectively run their own consumer 
product safety adjuncts, deciding what constitutes a safety 
defect and making their own judgments about appropriate 
remedies.
    ``The result could be a jigsaw system of conflicting 
standards across the country. You can see where this is going: 
banned-in-Michigan toys being smuggled across the border into 
Indiana and so on. And without a consistent national standard, 
small businesses would be particularly hard hit, lacking 
resources to monitor the evolving rules nationwide, all of this 
happening at a time when the appetite for business self-
policing is strong. Businesses have every incentive to clean up 
their acts, given the costly damage to their brand equity from 
news stories about tainted toys.''
    I look forward to hearing from all of our witnesses today, 
but I hope we can all agree on at least one thing at the outset 
of this debate, and that is that no attempt to amend the tort 
liability system in America should increase the burdens the 
current out-of-control lawsuit industry already imposes on 
American jobs and businesses, especially small businesses.
    I thank you, Madam Chair, and I yield back.
    Ms. Sanchez. I thank the gentleman for his statement.
    Without objection, all Members will be allowed to enter 
their opening statements in the record.
    [The prepared statement of Mr. Cohen follows:]
 Prepared Statement of the Honorable Steve Cohen, a Representative in 
   Congress from the State of Tennessee, and Member, Subcommittee on 
                   Commercial and Administrative Law
    Last year, half of all the products that the Consumer Product 
Safety Commission recalled were made in China, and 80% of all products 
recalled this year were made in China. Among the Chinese-made products 
recalled were toys containing high levels of lead and tainted pet food 
that has lead to the serious illness or death of beloved animal 
companions. The recent discovery of tainted foreign-made products 
raises several concerns. One concern is whether the Consumer Product 
Safety Commission, the federal agency charged with protecting the 
American consumer from such tainted products, has been adequately doing 
its job. Another concern is whether Congress can provide for a private 
cause of action for any consumer that has been injured by a tainted 
product made by a foreign manufacturer. I look forward to considering 
the suggestions of our witnesses as to how we can protect consumers and 
hold foreign manufacturers accountable for introducing defective 
products into the American marketplace.

    Ms. Sanchez. And without objection, the Chair will be 
authorized to declare a recess of the hearing at any point.
    I am now pleased to introduce the witnesses for today's 
hearing.
    Our first witness is Thomas Gowen. Mr. Gowen is special 
counsel to the Locks Law Firm. His practice is concentrated 
primarily in the areas of complex personal injury and civil 
litigation, and he has represented numerous clients in products 
liability, head injury, construction litigation, medical 
malpractice and automobile litigation.
    Mr. Gowen is a member of the faculty of the National 
College of Advocacy and a past chairman of the Montgomery Bar 
Association continuing legal education committee. He has 
published legal articles in Am Jur Trials, a Guide for Legal 
Assistance by the Practicing Law Institute, the Barrister, the 
Pennsylvania Law Journal Reporter and other journals.
    We welcome you, Mr. Gowen.
    Our second witness is Victor Schwartz. Mr. Schwartz chairs 
the Public Policy Group at Shook, Hardy & Bacon. He co-authors 
the nation's leading torts casebook, ``Prosser, Wade & 
Schwartz's Torts,'' and authors ``Comparative Negligence,'' the 
principal text on the subject. Mr. Schwartz also serves as 
general counsel to the American Tort Reform Association and co-
chairs the American Legislative Exchange Council's civil 
justice task force.
    Mr. Schwartz is former dean of the University of Cincinnati 
College of Law and currently serves on its board of visitors. 
During his academic career, he litigated cases on behalf of 
plaintiffs and secured the first punitive damages award of the 
Midwest against the manufacturer of a defective product.
    Welcome, Mr. Schwartz.
    Our third witness is Pamela Gilbert. Ms. Gilbert is a 
partner in Cuneo, Gilbert and LaDuca and focuses her practice 
on government relations matters. She represents a wide variety 
of clients before Congress, the executive branch and regulatory 
agencies.
    Ms. Gilbert serviced as the executive director of the U.S. 
Consumer Product Safety Commission from 1995 until 2001. In 
that capacity, she was responsible for the full range of 
government management issues and helped persuade Congress and 
the Administration to increase funding to the agency by nearly 
40 percent.
    Ms. Gilbert also served as consumer program director at the 
U.S. Public Interest Research Group from 1984 to 1989 where she 
specialized in civil justice and consumer protection issues. 
She worked for Public Citizen's Congress Watch, one of 
Washington's largest consumer advocacy organizations, first as 
legislative director and then as executive director.
    Welcome, Ms. Gilbert.
    Our final witness, which we are glad to see has arrived, 
despite the delays caused by the rain, is Andrew Popper who 
serves as a professor at American University Washington College 
of Law, in Washington, D.C. He teaches administrative law, 
government litigation, advanced administrative law and torts 
and directs the law school's integrated curriculum project. He 
has served as chair of the administrative law section of the 
Federal Bar Association and vice chair of the ABA committee on 
government relations' section on legal education and admission 
to the bar.
    Professor Popper is the author of more than 100 published 
articles, papers and a number of amicus curiae briefs before 
the United States Supreme Court. He has served as consumer 
rights advocate and pro bono counsel for the Consumers Union of 
America. Prior to his career in legal education, he was a 
Federal administrative antitrust prosecutor.
    I want to thank you all for your willingness to participate 
in today's hearing. Without objection, your written statements 
will be placed into the record, and we are going to ask that 
you please limit your oral remarks to 5 minutes.
    You will note that we have a lighting system that starts 
with a green light when you begin your testimony. At 4 minutes, 
it will turn yellow to give you a warning that you have a 
minute remaining. And then when your time has expired, the 
light will turn red. If the light turns red and you are mid-
sentence, we will allow you to finish your final thoughts 
before moving on to our next witness.
    After each witness has presented his or her testimony, 
Subcommittee Members will be permitted to ask questions subject 
to the 5-minute limit.
    With that, I would now invite Mr. Gowen to proceed with his 
testimony.

TESTIMONY OF THOMAS L. GOWEN, THE LOCKS LAW FIRM, PHILADELPHIA, 
                               PA

    Mr. Gowen. Thank you, Madam Chairman Sanchez and Mr. 
Cannon. Good morning.
    As the Chairwoman stated, the problem that we are here 
today to discuss is finding remedies to deal with the large 
number of imported products that are defective and causing 
injury to people in the United States. Our Federal agencies 
seem not to have been able to keep up with this large increase 
in volume. The tort system, however, can provide an important 
private vehicle for the policing of dangerous products that are 
injuring people in this country when it is not hampered by 
procedure rules as it presently is today.
    Presently, foreign manufacturers are able to take advantage 
of onerous service of process rules, either under the Hague 
Convention, if their country is a signatory, or even worse if 
it is not. Once service is achieved--and it takes months and 
months oftentimes to get service under the Hague Convention--
the party comes in and raises the minimum contacts defenses 
that were set forth in Justice O'Connor's opinion in the Asahi 
case. Discovery can be cumbersome, and collection of judgments 
can also be very difficult.
    One of the problems is that our commercial markets are 
designed to be national. The foreign manufacturers sell their 
products for sale in the United States and not to any 
particular State. The minimum contacts rules are designed for a 
State-based court system, such that tests, including whether or 
not a product is specifically designed for Pennsylvania or 
Maryland or Utah or California, is a factor to be considered, 
whether there is an office there, whether there is advertising 
specifically there, when, in fact, the products are very rarely 
made specifically for any given State and are made for sale in 
the United States market.
    We should not handicap our consumers by tying them to the 
minimum contacts rules of the State courts when, in fact, our 
commercial reality reflects that we have a national market.
    The Supreme Court in Asahi, although the plurality opinion 
did establish many of the factors that are raised in case after 
case when a foreign manufacturer is brought in, did 
specifically note that Congress could legislate to create a 
standard of national contacts for the standard of minimum 
contacts, and I would encourage that Congress should consider 
doing so because it would bring our justice system into line 
with the commercial reality of our markets.
    I have dealt over the years with multiple cases involving 
foreign manufacturers and have seen that they arise in several 
different contexts.
    The first context is when there is a brand name, such as on 
a tire. I had a case with Fate S.A.I.C.I., the largest tire 
manufacturer from Argentina. They were able to be identified 
and served through the Hague Convention, but, again, came in 
after many months to get service and raised all of the Asahi 
defenses claiming that they had only imported 8,000 tires 
through the Port of Baltimore which were then sold in Maryland 
where our client was injured.
    Secondly, you have products that are made for the 
proprietary names of many retailers, such as Sears, Wal-Mart, 
Target, and it is often difficult to find out even who this 
manufacturer is until the lawsuit is well underway and the 
information can be provided by the defendant retailer. It is 
important to have the retailer in the case for that reason so 
that that information can be provided hopefully on a timely 
basis so the statute does not run.
    The third context that I have seen--and this leaves aside 
the component part one which is an entirely different issue--is 
where a product is sold to a large marketer or retailer, such 
as the Easy Pull Stomach Trimmer that I attached to my 
testimony, where two million units were imported to the United 
States through seven different importers who could not identify 
the manufacturer, but they knew that it was made in China. I 
think there is a solution to this problem.
    The first solution is for Congress to legislate that the 
standards should be consistent with the due process clause, 
should be a national standard of contacts rather than the 
artificial State standards that are presently considered by the 
courts.
    Secondly, I think that Congress should legislate that there 
be an import license required for all foreign manufacturers who 
seek to sell their products in our important market. The 
license should require the disclosure of the name and address 
of the manufacturer, the product lines and brand names that 
they make, appointments of an agent of service of process in 
all the States where the product is sold. It should require 
consent to jurisdiction of the U.S. courts by accepting the 
license and selling products in the United States market, much 
like we have required consent to drive on our highways. It 
should require insurance in the United States and should 
contain a provision that the license will be revoked if a 
judgment of the U.S. court is not satisfied.
    Finally, the information----
    Ms. Sanchez. Mr. Gowen?
    Mr. Gowen [continuing]. Should be placed on a searchable 
Web site.
    [The prepared statement of Mr. Gowen follows:]
                 Prepared Statement of Thomas L. Gowen


















    Ms. Sanchez. Thank you very much. I was just about to say 
that your time had expired, but you summarized nicely. Thank 
you for your testimony.
    At this time, I will invite Mr. Schwartz to begin his 
testimony.

 TESTIMONY OF VICTOR E. SCHWARTZ, SHOOK, HARDY AND BACON, LLP, 
 WASHINGTON, DC, ON BEHALF OF THE INSTITUTE FOR LEGAL REFORM, 
                    U.S. CHAMBER OF COMMERCE

    Mr. Schwartz. Thank you, Madam Chairwoman and Ranking 
Member Cannon.
    This morning, I am testifying on behalf of the Institute 
for Legal Reform of the Chamber of Commerce of the United 
States, but the views are my own, and I think that is why I was 
invited here. And I am just going to discuss three topics 
briefly.
    The first, which Mr. Gowen referred to, is the problem of 
products coming into the United States that may be defective 
and a consumer who has a claim cannot reach that party. This is 
unfair in more than one way. We have a tort tax on every 
product sold in the United States. In some instances, it is 
very substantial, maybe as much as 10 percent.
    So, if a company is able to come into the United States and 
not be subject to liability, it has an advantage of setting 
price that is simply unfair competition. It is coming into a 
marketplace without the same cost burdens, and that is not 
right.
    More severe is the fact that somebody may be seriously 
injured by one of these products and, as Mr. Gowen has 
suggested, there is no remedy to reach the manufacturers.
    I have read the Asahi case. I think there is room in that 
case for this body and this Committee to look at alternatives 
as to ways to impose a fair tort system on people who sell 
substantial amounts of products here. We are talking about toys 
where somebody puts the lead in the paint or puts a poison 
wrapping around a bead. These are very serious things, and to 
allow such parties to totally escape our system is wrong.
    Asahi was a plurality opinion. Footnote 5 in the opinion 
which Mr. Gowen referred to provides a good menu for Congress 
to look at it. This is not fair.
    I am going to very briefly talk about the tort system a 
little bit and what Congress has done because some have 
suggested that some way to cure this is to expand liability for 
defendants. That, I think, is a very poor idea. When Congress 
has stepped into address liability reform, it has limited 
liability and had remarkable success.
    In 1994, Congress enacted the General Aviation Recovery 
Act. That saved an industry. Mr. Glickman was very instrumental 
in that--Democratic member--and it was signed by the President; 
it was an 18-year statute of repose. I sat in a similar room 
and was told if it was enacted, planes would be falling out of 
the sky. I was told that safety equipment would not be put on 
aircraft. Now we know--it is a little bit later--that the 
products that are sold by the General Aviation products--are 
safe. Twenty-three thousand new jobs were created. Safety 
equipment is on those planes that was never there before.
    This Congress also worked on the Biomaterials Access 
Assurance Act--that was Mr. Lieberman and Republicans, too--
bipartisan legislation limiting liability of people who 
supplied raw materials to medical devices. People who made the 
medical devices could not get the raw materials, so a limit was 
placed. We were told that this would create mayhem, that people 
who made the raw materials would just take largesse and not be 
concerned with safety. That has not happened. What has happened 
is the medical device manufacturers can get the raw materials.
    Very recently, this body enacted the Class Action Fairness 
Act. That was needed because some personal injury lawyers were 
manipulating the system and bringing interstate commerce cases 
into local State courts that were friendly to plaintiffs. That 
also has worked. It has not brought about the serious harm to 
consumers that was predicted. At the State level, reforms have 
also helped reduce the cost of medical liability insurance and 
gained access to medicine.
    So the idea that somehow civil justice reform does not work 
is belied by the facts.
    And, finally, I would like to address the Consumer Product 
Safety Commission. Pam and I know each other a long time, and 
she knows--and it is true--I have always been supportive of the 
commission, even before it existed. I wrote a paper when I was 
a law professor that said tort law comes in too late, that we 
need a strong agency to protect people before they are injured, 
and I think it is right that the agency be reauthorized and 
there should be a focus on the powers of the agency to catch 
defective products at the border, and they should have adequate 
personnel and adequate funding to reach that goal.
    Unfortunately--and, Madam Chairwoman, you have seen it and 
Mr. Cannon has seen it--a good legislation gets waylaid by 
things that people put in there that have nothing to do with 
the goal, and in the sense----
    Ms. Sanchez. That never happens in Congress. Never.
    Mr. Schwartz. Well, no, maybe not under your watch, but I 
have seen it happen here or there. And that has happened with 
this bill in some quarters.
    For example, authorizing 51 State attorney generals on 
their own to decide how to enforce the CPSC. I was told, 
``Well, do not worry about this, Victor, because the CPSC can 
intervene and help bring about uniform policy.'' Well, if they 
do not have enough people to do their job, I think setting them 
up as sort of monitors for State attorney generals is not a 
good idea. The CPSC should focus on its purpose.
    And I thank you for the time to speak this morning.
    [The prepared statement of Mr. Schwartz follows:]
                Prepared Statement of Victor E. Schwartz








    Ms. Sanchez. Thank very much for your testimony.
    Ms. Gilbert?

              TESTIMONY OF PAMELA GILBERT, CUNEO, 
            GILBERT AND LADUCA, LLP, WASHINGTON, DC

    Ms. Gilbert. Thank you very much, Chairwoman Sanchez, 
Ranking Member Cannon.
    I am Pamela Gilbert. I am a law partner in the law firm of 
Cuneo, Gilbert & LaDuca. I have been asked to testify today, 
however, to share with you some of the insights that I learned 
when I was executive director of the Consumer Product Safety 
Commission from the very end of 1995 through mid-May 2001. I am 
testifying on my own behalf, and all of my opinions are solely 
my own.
    As the Chairwoman mentioned in the beginning of the 
hearing, the summer of 2007 might well be remembered as the 
summer of toy recalls. At one point, it seemed that every day 
brought new reports of dangers posed by another well-loved toy 
that could be lurking in our children's playrooms. The list 
included Thomas and Friends trains with unsafe levels of lead, 
Easy-Bake Ovens that could entrap and burn children, Polly 
Pocket dolls with magnets that could also seriously injure 
children if swallowed, and Barbie doll accessories--Barbies, of 
all things--with high levels of lead. And this left parents 
across the country wondering if any toy they buy will be safe 
for their children.
    Adding to the public's concern is the fact that just about 
all of the recalled toys were manufactured in China, and, in 
fact, according to the Toy Industry Association, toys made in 
China make up 70 to 80 percent of all the toys sold in the U.S. 
Some industry analysts say that only about 10 percent of the 
toys sold in the USA are actually made in the USA.
    So the question of whether we can hold these foreign 
manufacturers accountable for harms caused by the toys is not 
merely an interesting academic exercise. It actually is the 
heart of the issue.
    Accountability is the key to making sure that we provide in 
this country the right incentives for manufacturers and other 
companies in the stream of commerce to make and sell safer 
products. Accountability is also the key to ensuring that 
people who are injured by dangerous products can be compensated 
and that dangerous products can be removed from the market 
quickly.
    With such a large percentage of the toys we buy for our 
children being manufactured abroad, it is incumbent upon us to 
ensure that our system of accountability includes foreign 
manufacturers, but where that is not possible, that it also 
includes others in the stream of commerce to make sure they can 
be held responsible.
    Under section 15 of the Consumer Product Safety Act, 
companies are required to make reports of hazardous products to 
the commission. Section 15 gives the CPSC authority over 
manufacturers who are defined to be also importers, 
distributors and retailers who discover that one of the 
products they sell does not comply with Consumer Product Safety 
rules or are otherwise dangerous. Section 15 also authorizes 
the commission to order a manufacturer, importer, distributor 
or retailer to inform the public of the dangers in their 
products and to remove those products from the marketplace and 
from people's homes.
    And so, for purposes of our discussion today, what is 
critical about the scheme that is adopted by this section 15 is 
that manufacturers, importers, distributors and retailers are 
all equally responsible for notifying the public and the 
commission of hazards and conducting a recall, if they are 
selling a dangerous product.
    The Aqua Dots recall that has already been mentioned today 
is a really good example of this, because what happened is 
these beads were supposed to be covered with a safe chemical. 
Now what happens is you put the beads in water and then they 
make an art product, an art and craft. The beads were, in fact, 
covered with a toxic chemical that, when ingested, acted like 
the date-rape drug GHB, of all things, and a couple of infants 
actually went to the hospital, were in a coma, hospitalized for 
a number of days after ingesting many of these beads, and it 
turns out that the Chinese company or Chinese manufacturer 
substituted the unsafe chemical for the safe glue.
    What is interesting about Aqua Dots is that the chain of 
ownership of Aqua Dots, until it reached U.S. stores, was all 
foreign. The manufacturer was an Australian company. The 
distributor is a company in Canada. And, of course, the 
products were actually physically manufactured in China. Now 
the Canadian distributor is the one that voluntarily did the 
recall with CPSC.
    However, many times, companies are not as cooperative with 
the Consumer Product Safety Commission, and, in that case, when 
you are dealing with a foreign distributor, it makes it very 
difficult, if not impossible in some cases, for the CPSC to 
order a recall of that foreign company, and so what you have is 
the CPSC, as a last resort, can go after the retailer to make 
sure the retailer conducts the recall.
    And I would argue that in this world of the global economy 
that we have, that that is a very, very critical piece of the 
puzzle, and when the Consumer Product Safety Commission cannot 
reach the others in the stream of commerce that are foreign 
companies, whether it is the manufacturer or the importer or 
the distributor, that the buck stops where the retailer is and 
that the retailers need to take equal responsibility for 
getting these products out of people's homes and for informing 
the public of the dangers.
    So I will stop there and take your questions.
    Thank you.
    [The prepared statement of Ms. Gilbert follows:]
                  Prepared Statement of Pamela Gilbert
    Good morning Chairwoman Sanchez, Ranking Member Cannon and members 
of the Subcommittee. I am Pamela Gilbert and I am a partner in the law 
firm of Cuneo Gilbert & LaDuca. I have been asked to testify today to 
share with you insights I gained as executive director of the U.S. 
Consumer Product Safety Commission from 1996 through May, 2001. I am 
testifying on my own behalf and all the opinions expressed are my own.
    Thank you for giving me the opportunity to testify on the 
critically important issue of accountability for dangerous products 
that are sold in the U.S. but produced by foreign manufacturers.
    The summer of 2007 might well be remembered as the summer of the 
toy recalls. At one point, it seemed every day brought new reports of 
dangers posed by another well-loved toy that could be lurking in our 
children's playrooms--Thomas and Friends trains with unsafe levels of 
lead; Easy-Bake Ovens that could entrap and burn children; Polly Pocket 
dolls with magnets that were dangerous if swallowed or aspirated; and 
Barbie doll accessories with high levels of lead. This left parents 
wondering if any toy they buy will be safe for their children.
    Adding to the public's concern is the fact that just about all of 
the recalled toys were manufactured in China. In fact, according to the 
Toy Industry Association, toys made in China make up 70 to 80 percent 
of the toys sold in the U.S. Some industry analysts estimate that only 
about 10 percent of toys sold here are actually made in the U.S.A.
    The question of whether we can hold these foreign manufacturers 
accountable for harms caused by their toys is not merely an interesting 
academic exercise. It is really the heart of the issue. Accountability 
is the key to making sure that we are providing the right incentives 
for manufacturers and others in the stream of commerce to make and sell 
safer products. Accountability is also the key to ensuring that people 
who are injured by dangerous products can be compensated and that 
dangerous products can be removed from the market quickly. With such a 
large percentage of the toys we buy for our children being manufactured 
abroad, it is incumbent upon us to ensure that our system of 
accountability includes foreign manufacturers, and where that is not 
possible, to ensure that others in the stream of commerce can be held 
responsible.
    It is not my role here today to discuss the difficulties, under 
current product liability law, of holding foreign manufacturers 
accountable to injured people in the U.S. There are other, more 
qualified witnesses to discuss those issues. I am here to explain some 
of the obstacles faced by the Consumer Product Safety Commission when 
the agency tries to conduct a recall of a product that was manufactured 
in China or in another foreign country. I would note, however, that 
most of the obstacles that injured individuals face in the product 
liability system--obtaining jurisdiction, conducting discovery, and 
enforcing judgments--also make it very difficult for the CPSC to carry 
out a product recall with a foreign firm.
    The Consumer Product Safety Commission is charged with protecting 
the public from hazards associated with at least 15,000 different 
consumer products, ranging from toys to home appliances to all-terrain 
vehicles. CPSC's mission, as set forth in the Consumer Product Safety 
Act, is to ``protect the public against unreasonable risks of injury 
associated with consumer products.'' CPSC's statutes give the 
Commission the authority to set safety standards and work with industry 
on voluntary standards, collect death and injury data, educate the 
public about product hazards, and ban and recall dangerous products.
    My testimony will focus on the authority of the CPSC over firms 
that sell defective or dangerous products. As I am sure the 
subcommittee is aware, over the years, CPSC's budget has shrunk, 
impairing its ability to effectively carry out its mission. 
Furthermore, the Commission recently has come under fire for poor 
leadership and management. I do not intend, however, to address CPSC's 
current difficulties in my testimony, unless I am asked by a member of 
the subcommittee.
    Section 15 of the Consumer Product Safety Act \1\ requires 
companies to make reports of hazardous products to the Commission and 
sets forth the procedures for conducting a recall of such products. 
Under section 15, manufacturers (defined as a manufacturer or 
importer), distributors and retailers who discover that one of the 
products they sell does not comply with a consumer product safety rule, 
contains a defect which creates a substantial risk of injury to the 
public, or creates an unreasonable risk of serious injury or death, 
must immediately inform the Commission.
---------------------------------------------------------------------------
    \1\ Consumer Product Safety Act, 15 U.S.C. 2064, section 15.
---------------------------------------------------------------------------
    In addition, section 15 authorizes the Commission to order the 
manufacturer, distributor or retailer to notify the public of the 
product hazard and to conduct an appropriate corrective action to 
remove the hazard from the marketplace and from people's homes. The 
statute allows the manufacturer, distributor or retailer to elect to 
repair or replace the product, or offer refunds to the public less an 
allowance for use for products more than one year old. These corrective 
action plans are commonly referred to as product recalls.
    For purposes of our discussion today, what is critical about the 
scheme adopted by section 15 is that manufacturers--including 
importers--distributors and retailers are equally responsible for 
notifying the Commission and the public and conducting a recall when 
they sell a dangerous product. To illustrate why this is so important, 
and how it may play out in practice, I am going to use a recent recall 
as a case study.
    Last week, more than four million sets of a children's art product 
containing beads called Aqua Dots were recalled in cooperation with the 
CPSC. According to the Commission's press release, the sets were 
recalled because the coating on the beads that causes the beads to 
stick together when water is added contains a chemical that turns toxic 
when many are ingested. Children who swallow the beads can become 
comatose, develop respiratory depression or have seizures.
    Before the recall, the Commission had two reports of serious 
injuries from children swallowing the Aqua Dot beads. A 20-month-old 
became dizzy and vomited several times before slipping into a comatose 
state and being hospitalized after swallowing several dozen beads. A 
second child who swallowed the beads also vomited and slipped into a 
coma and was hospitalized for five days before recovering.
    According to news reports, the beads contained an adhesive solvent 
called ``1,4 butylene glycol,'' which can simulate the so-called date-
rape drug gamma hydroxyl butyrate or GHB when ingested, causing 
seizures, coma or death. According to the toy's manufacturer, the 
problem had been traced to a Chinese factory under contract that 
substituted a toxic chemical for a safe glue during manufacturing.
    This is not the first time we have heard of a Chinese factory 
substituting a harmful chemical for a safe one. In many of the toy 
recalls involving unsafe levels of lead, a Chinese factory reportedly 
bought and used leaded paint, against the specifications of the U.S. 
manufacturer contracting with the Chinese. The question on most 
peoples' minds is who is responsible when this happens, and how can we 
ensure that these harmful practices stop?
    In the Aqua Dot case, the chain of ownership was as follows: The 
manufacturer, Moose Enterprise, is a Melbourne, Australia company. 
Moose Enterprise produced the product in Chinese factories. The North 
American distributor of Aqua Dots is Spin Master, a company based in 
Toronto, Canada. All of this means that, until the toys reached stores 
in the U.S., they were owned and controlled by foreign firms. This type 
of scenario is becoming increasingly common with toys and other 
products that are sold here.
    In the Aqua Dots case, Spin Master worked cooperatively with the 
CPSC to conduct the recall. The company set up a website and an 800 
number for consumers to use to get a replacement toy for their 
children. As far as I know, the recall is running smoothly.
    If Spin Master did not willingly cooperate with the CPSC, however, 
this recall could not have happened as quickly or as comprehensively. 
When companies refuse to cooperate with CPSC on a product recall, the 
agency can order the company to conduct a recall if it proves after a 
hearing in accordance with the Administrative Procedures Act that the 
product is defective and creates a substantial product hazard or that 
it violates the law. The Commission can also go to federal court and 
seek an injunction to stop the product from being sold while the 
hearing is pending. To take these steps, however, CPSC must have 
personal jurisdiction over the company. In practice, CPSC will rarely 
pursue an order for a recall against a recalcitrant foreign firm 
because of the difficulties of succeeding. CPSC has a very limited 
budget. It will only proceed against a firm if there is a good 
likelihood of success. When a company is not cooperating, and has 
limited assets or presence in the U.S., the Commission will try to find 
another way to accomplish the recall.
    Even back in 1973, when the Consumer Product Safety Act was 
enacted, Congress recognized that there would be situations in which 
the only U.S. company involved in selling a product in the U.S. would 
be the retailer. Therefore, as I mentioned in the beginning of my 
testimony, under section 15 of the CPSA, retailers are equally 
responsible for notifying the CPSC when a dangerous product may pose a 
risk to the public, and for implementing measures to remove the product 
from the marketplace and from people's homes.
    As our economy is increasingly global, and goods and services 
seemingly have no national boundaries, it is a lynchpin of our product 
safety system that retailers remain responsible for ensuring a safe 
marketplace.
    In general, CPSC calls on retailers to implement a recall only as a 
last resort. Usually, a product has only one manufacturer and one 
distributor, but many retailers. To carry out an effective and 
comprehensive recall through retailers requires agreements with a 
number of companies. In addition, depending on how broadly the product 
was distributed, it may be impossible to include in the recall every 
retailer that sold the product. This is, therefore, not usually the 
most efficient or effective method of carrying out a recall. But it is 
critical, for the reasons already discussed, that this option be 
available to the commission.
    In the years since the Consumer Product Safety Act was enacted, the 
consumer product industry in the U.S. has changed significantly. It 
used to be that retailers were considered to be ``mom and pop'' stores, 
selling products produced by much larger companies. Think of Barbie 
dolls, manufactured by Mattel, being sold at local ``five and dimes'' 
in every community in the country. With the advent of the ``big box 
stores,'' that scenario has changed substantially.
    Now we have Wal-Mart, the largest retailer in the world, which 
sells over 20 percent of the toys in the U.S. According to experts, the 
top five retailers control almost 60 percent of the U.S. toy market. In 
this environment, you can conduct a product recall of a substantial 
percent of the market with just a handful of companies.
    In addition, these large retailers have greater abilities to 
influence the quality and safety of products than ever before. 
Therefore, it makes sense to put greater responsibility on these mega-
retailers for ensuring the safety of the products we buy. For example, 
many, if not most, of these large retailers have contracts with testing 
facilities to test the products they sell. In some instances, they have 
their own testing facilities. They should bear responsibility for 
ensuring that the products they sell meet consumer product safety 
standards, both voluntary and mandatory.
    Large retail chains also have increasing market power, which they 
can use to make sure the products they sell are safe and high-quality. 
If Wal-Mart, for example, stops selling a certain manufacturer's 
products because the manufacturer does not have sufficient quality 
controls in place, the chances are excellent that the manufacturer will 
improve its practices rather than lose Wal-Mart as a customer.
    Furthermore, some retailers are increasingly ``cutting out the 
middle man.'' That is, they contract with factories in China to 
manufacture products and ship them directly to the retailer's 
distribution center for delivery to the store. In those cases, the 
retailer is the importer. For purposes of the Consumer Product Safety 
Act, that means the retailer is also the manufacturer. In those cases, 
there is no reason the retailer should not bear all the responsibility 
to ensure the safety of the product.
    Times have changed. Our economy is global. It is getting 
increasingly difficult to ensure the safety of the products on store 
shelves and in consumers' homes. The responsibility for safety must be 
shared, or there will be gaps in protection. Manufacturers, importers, 
distributors, and retailers all must work together to restore the faith 
of the public in the safety of the marketplace.
    Certainly, there is room for strengthening our laws so that foreign 
manufacturers can be held accountable through the U.S. legal and 
regulatory systems. But I would argue that the barriers to effectively 
holding foreign firms accountable in the U.S. are always going to be 
steep, because of distance, language and sovereignty problems. The only 
way that we can have effective accountability in our global marketplace 
is for all firms in the stream of commerce to be responsible for the 
safety of the products they sell and profit from. Regulation must work 
that way. Liability must also.
    Thank you for the opportunity to testify today. I look forward to 
answering your questions.

    Ms. Sanchez. All right. We appreciate your testimony. Thank 
you so much.
    And last, but not least, Professor Popper?
    We are not super strict with the time limits. So we have 
given everybody a little bit of leeway.

TESTIMONY OF ANDREW F. POPPER, AMERICAN UNIVERSITY, WASHINGTON 
                 COLLEGE OF LAW, WASHINGTON, DC

    Mr. Popper. Chairwoman Sanchez, Ranking Member Cannon, 
thank you very much for inviting me. I apologize for my delay 
in getting here. There were tort reformers in the hall, and 
they blocked me.
    It strikes me as nearly miraculous that the four of us are 
in agreement on the basic measure that needs to be taken. I 
think we should pause and enjoy the moment because that does 
not happen very often in the product liability area.
    Ms. Sanchez. Should we order a moment of silence to absorb 
that? [Laughter.]
    Mr. Popper. I would be happy with a croissant, but silence 
is fine.
    And out of respect to Professor Schwartz, I want to note 
that I have used his fantastic book for as long as I have been 
teaching, and there is just nothing like it, and I thought I 
would put that on the record.
    Ms. Sanchez. So noted.
    Mr. Popper. Onto my testimony. Of course foreign 
manufacturers and their domestic counterparts should be liable 
for the harms they cause when sellers place millions of toys in 
the stream of commerce with toxic levels of lead and deadly 
drugs and cribs that can strangle children. Of course they have 
to be accountable. It is not really much of a question.
    I want to first talk a little bit about something on which 
Victor and I disagree. Why has this happened? Year after year, 
tort reformers have come to this capital and to state houses 
demanding relief from the accountability the law required.
    They asked for abolition of strict liability. They asked 
you to relieve retailers and distributors and component parts 
manufacturers of liability. They sought to cap noneconomic 
losses. They sought to ratchet up standards for evidence. They 
sought to abolish joint and several liability, abolish the 
punitive damages and, ultimately, by indirection, neuter the 
Consumer Product Safety Commission.
    With singular determination, they sought to dismantle a 
system that had generated a tough market-based force that 
compelled the production of safe products. State legislatures 
and occasionally congressional Committees gave in to these 
requests, congratulating themselves on how they were leveling 
the playing field. In the feeding frenzy that resulted, known 
as tort reform, vital market pressures, corrective justice 
forces, were diluted.
    Stripped of the strong civil justice incentives, free from 
coherent regulation, foreign manufacturers and their domestic 
distributors put our children at risk. They went with dangerous 
products, shiny and cute, but deadly. With the ability to 
calculate with precision downstream liability, with many States 
abolishing joint and several liability, strict liability and on 
and on, what else would you expect?
    Against this bleak backdrop, what next?
    Well, I am done with the negative part. I think there is a 
lot that you can do. The good news is that the backbone of the 
tort system, negligence law, has survived the onslaught. The 
State court doors are open, and they are open for domestic 
distributors and foreign manufacturers who produce the goods 
that bring us to the hearing today. Foreign manufacturers are 
subject to the jurisdiction of domestic courts if there are 
constitutionally sufficient minimum contacts in the forum State 
and if the proceeding comports with our notion of fairness, 
justice and fair play.
    While Asahi requires us to take into account the unique 
burdens placed on one who must defend oneself in court, if you 
reap the distributional benefits of a product in the network, 
Asahi also says you should not be able to escape the 
jurisdiction of the courts. Too often, that is exactly what 
happens.
    The minimum contacts puzzle is not complicated. The more a 
foreign manufacturer has domestic facilities, bank accounts, 
property, pays taxes, has employees, agents, advertisers, 
communicates with consumers, the less minimum the contacts 
become.
    The problem is that the courts have interpreted both the 
plurality and Brennan's opinion in different ways. As the 
Eighth Circuit has said repeatedly, there is no one single 
interpretation, and that is possibly where you can step in and 
where this gets interesting. I am not sure, constitutionally, 
that you can change a Supreme Court decision that declares a 
Due Process minimum requirement by legislation declaring that 
Justice Brennan was correct. I do think that the Supreme Court 
opinion left it wide open for you to adopt a national effects 
test to secure personal jurisdiction, discussed by all members 
of this panel today.
    I also think that you can adopt a bond requirement. I can 
see no overt impediment to prevent you from creating, as a 
condition of importation to that foreign importers post a bond 
when they bring products into the United States. By the same 
token, I think that you can require foreign importers to 
consent to jurisdiction.
    Party autonomy has been the heart of our conflict of laws 
system and in other systems as well. What is wrong with signing 
a statement that says: ``We consent to the jurisdiction of any 
State in which our products are sold.'' Once a party actively 
consents, I think the matter gets far easier.
    It does not mean, however, that once you have jurisdiction 
over foreign manufacturers that these cases are going to be 
easy. Discovery is difficult when you are dealing with foreign 
manufacturers. Blocking statutes, as I mentioned in my 
testimony, are a problem. The Hague Convention is an expensive 
and unreliable solution in terms of service of process, and the 
United States, to be perfectly frank, has not exactly done 
things that would allow it to lay claim to comity and support 
of foreign courts when it tries to enforce its own judgments.
    Let's face it. When you are looking at dangerous product 
recalls on the order of 30 million and upward, it is time to 
think boldly about how things can be turned around. No more so-
called reforms that cut down consumers at the knees. It is time 
at last to facilitate justice, not to impede it.
    Thank you very much for the opportunity to testify today.
    [The prepared statement of Mr. Popper follows:]
                 Prepared Statement of Andrew F. Popper






















































    Mr. Johnson. [Presiding.] We will now begin the 
questioning, and I will begin by recognizing myself.
    Professor Popper, in your written testimony, you suggest 
that Congress require foreign manufacturers of consumer goods 
to consent to the jurisdiction of any domestic State court in 
which their products are sold as a condition of importation. 
Please explain further how this could be accomplished.
    Mr. Popper. When you are presented with a problem of this 
magnitude, you have an opportunity initially to be creative and 
thereafter to think in detail. I have to tell you, I am still 
in the creative stage, and I think that we all are. There are 
problems with NAFTA any time you impose any kind of obstacle to 
importation and there are issues that come under our customs 
laws, and there are enforcement problems since this is 
primarily in the domain of the executive.
    All that said, let me give you a simple analogy. When you 
buy insurance, in your insurance policy, you consent to the 
laws of a particular State and you consent to be part of 
compulsory arbitration. We argue about that, whether that is a 
good idea for consumers or not, but we have done it for years. 
I do not see anything different about doing this with a foreign 
importer. When you come in, it is part of the customs statement 
you sign, ``I consent to the jurisdiction of any State in which 
my products are sold.''
    I recognize, sir, that there are complexities to this, but 
I think as a starting point, if the States find, as they do, 
and the Federal courts affirm, that minimum contacts is a 
significant problem, a statement that says by the foreign 
manufacturer, ``We consent to the jurisdiction in which our 
products are sold,'' would go a long way to solving that.
    Mr. Johnson. Thank you, sir.
    In your written testimony, you also recommend that Congress 
require foreign manufacturers to post a bond in the event goods 
they produce prove to be defective, and dangerous. How would 
that be accomplished?
    Mr. Popper. The same set of considerations would apply 
here. I think there is a NAFTA problem. I think you have 
executive enforcement problems. This is Customs, Treasury. And 
just to be clear, it would not be that they post a bond in the 
event their goods are defective, it would be that they post a 
bond as a condition of importation. If it turns out that their 
goods are defective, then at least an injured consumer has some 
recourse through the bond, assuming that they have difficulty 
securing minimum contacts or assuming they cannot secure relief 
from the foreign manufacturer's distributor.
    Let me be clear about something. A domestic distributor or 
retailer of a foreign entity is responsible under any 
construction of the law that I know if that foreign product 
fails and if that foreign entity is unavailable for suit. So 
there is that recourse that is out there. We have not talked 
about that. It is not really part of the charge of this 
hearing, but I would not want that lost today.
    Mr. Johnson. All right. Thank you.
    Ms. Gilbert, do you think that foreign manufacturers would 
comply with safe product standards if they were held 
accountable in U.S. courts?
    Ms. Gilbert. Yes. I think that that would go a long way 
toward helping the accountability problem that we have now. Now 
we have these foreign manufacturers or these foreign factories 
that really get away scot-free when these problems arise in the 
U.S. The U.S. companies are the ones that are conducting the 
recalls.
    For the most part, the U.S. companies are the ones that are 
on the hook if they are sued in a liability lawsuit so that, if 
you were to have a longer arm reach out to the foreign 
manufacturers and the foreign factories that are causing some 
of these problems, then I think that the incentives would be 
the right incentives, and then you would ultimately get safer 
products and better accountability
    Mr. Johnson. Thank you, ma'am.
    Mr. Schwartz, H.R. 989, the Innocent Sellers Fairness Act, 
would completely immunize sellers from liability except under 
limited circumstances. In light of the facts that consumers 
currently have a difficult time holding foreign manufacturers 
accountable, do you support this legislative approach?
    Mr. Schwartz. I support a legislative approach that would 
say that a seller or distributor should not be subject to what 
is called strict liability, unless the manufacturer is 
unavailable for suit. You know, I have been supportive of that 
approach. It is the law in 16 States. It has worked very well. 
There has been no problem. So it just gets the innocent seller 
out of court in situations when the manufacturer is available 
for suit and there is jurisdiction over the manufacturer.
    So my answer to the question is if that bill reflects that 
approach--I do not have that bill in front of me--I have always 
been supportive of it.
    Mr. Johnson. Thank you, Mr. Schwartz.
    My time has expired. I now recognize the Ranking Member of 
the Subcommittee, Mr. Cannon, for 5 minutes.
    Mr. Cannon. Thank you.
    Ms. Gilbert, on October 30, a political newspaper noted 
that 75 percent of contributions that come from lawyers and 
their lobbyists go to Democrats, and in October of 2004, in an 
article in The Nation magazine, you noted that ``tort reform 
would help de-fund the Democratic Party.'' Can you please 
describe the connection between a system that allows more 
lawsuits and more money going to candidates for the Democratic 
Party?
    Ms. Gilbert. I got everything up until your question. I am 
sorry. What was the question?
    Mr. Cannon. Can you describe the connection between a 
system that allows more lawsuits and increased funding for the 
Democratic Party?
    Ms. Gilbert. Not very well. It is not my area of expertise. 
I do not recall that Nation article.
    Mr. Cannon. Let's go back to the----
    Ms. Gilbert. It was a long time ago. Did you say it was 
1994?
    Mr. Cannon. No, 2004.
    Ms. Gilbert. Oh, 2004. I do not recall the article or what 
the context was, so I cannot really speak to that, and, again, 
I am not here to be an expert on the funding of either the 
Democratic Party or the Republican Party.
    Mr. Cannon. Do you think there is----
    Ms. Gilbert. I am personally a very, very strong believer 
in a strong civil justice system that places responsibility 
where it belongs when there are injuries from unsafe products 
or other unsafe activities.
    Mr. Cannon. Regardless, 2004 is a long time ago, and who 
knows when the discussion happened, if it was an accurate 
quote, but do you think that there is a relationship between 
tort reforms or the availability of tort actions for lawyers 
and contributions for Democrats?
    Ms. Gilbert. I do not know. I do not know. Again, it is----
    Mr. Cannon. I know.
    Ms. Gilbert. It is not my area of----
    Mr. Cannon. I know. I think everybody knows.
    Ms. Gilbert [continuing]. Expertise, and it is not why I am 
here.
    Mr. Cannon. The fact is this is a Republic-Democrat issue 
in part because the Republicans want a system that works and 
makes sense, and the Democrats want to empower lawyers to make 
money and suck that out of the system.
    I see Mr. Popper is furiously making a note, and I suspect 
you would like to respond to that, Mr. Popper.
    Mr. Popper. I----
    Mr. Cannon. You do not need to. I thought you were 
anxiously engaged there.
    Mr. Popper. I was just noting what I needed to do after the 
hearing.
    Mr. Cannon. You leave academia----
    Mr. Popper. Pick up the laundry. Go to the cleaner's.
    Mr. Cannon. No, we do not mean to be mean. Let me just 
say----
    Mr. Popper. I am happy to respond just----
    Mr. Cannon. I will just use some time, but let me just say 
I am not anti-tort. I mean, I have lots of friends that are 
lawyers that bring about justice for people in small cases, in 
certain cases. It is just that there has to be a balance, and I 
think that there is clearly an imbalance both in the 
contributions and in the incentives that the different parties 
have, and I would love to hear what you have to say about that.
    Mr. Popper. Too often tort reform is characterized as an 
issue between the Democratic Party and the Republican Party. I 
think while sometimes it seems that way on different votes, it 
really is not.
    The States' rights issue that is at the heart of tort 
reform is very much an issue of the Republican Party. I think 
there are many, many people in the Republican Party who have 
trouble with Congress trying to impose standards on the States.
    I think there are many people in the Democratic Party--
Senators Dodd and Lieberman, proposed legislation that would 
have declared the tort system compensatory some years ago. As a 
consumer advocate, I thought was horrendous.
    So I do not think it is quite that clear as a Democrat-
Republican matter. I would just as a final comment regarding 
contributions of lawyers to campaigns. I think Ms. Gilbert is 
right. That is almost impossible to isolate. People give to 
campaigns for all kinds of different reasons. If I ran the zoo, 
campaigns would be publicly financed, and we would not be 
talking about this.
    Mr. Cannon. Thank you. That was a very thoughtful comment. 
I appreciate it.
    If I had my way, people could contribute anything they 
wanted, and we would have disclosure of everything, and I think 
that would clean up the cesspool much better than any other 
system would, but we are not likely to have that, and that 
makes it sort of a zoo, I agree, and it is sometimes hard to 
have direct connections in these things because you make good 
points about States' rights and that sort of thing, and I am 
personally deeply troubled about some of the aspects of tort 
reform that go to the prerogatives of States.
    Mr. Schwartz, I suspect you could further enlighten us on 
the issue----
    Mr. Schwartz. Well, not on----
    Mr. Cannon [continuing]. Or on anything else that you would 
like to respond to that other people have said on the panel 
thus far.
    Mr. Schwartz. Well, thank you. Since Professor Popper has 
graciously said he is a customer of my casebook, I have to 
tread lightly on criticizing anything he said. [Laughter.]
    But I do not believe and it is really speculation that the 
people in China who put lead in paint that would hurt children 
were thinking about tort reform in the American system. They 
may have thought that they are immune from the reach of our 
system of tort law, and that is not good. As I said, there is a 
tort tax on products. There is no reason for someone who is 
supplying a substantial number of products to this country to 
be immunized from our system, and I think it is good that this 
body is considering ways to address that.
    Professor Popper talked about bonding. I think any remedy 
should be isolated to the problem, not everybody who sends 
imports, but those who are not really available for suit under 
the current system, and there is flexibility in these decisions 
to try to address that particular problem.
    You have large importers that can be sued here and have 
been sued here. That is not the problem. It is those who send a 
substantial amount of products into the United States and are 
immune from our tort system, and that is, I think, what this 
body should look at.
    Mr. Cannon. Thank you.
    Mr. Johnson. The gentleman's time has expired.
    We will now proceed with questions from the gentlewoman 
from California, Ms. Lofgren.
    Ms. Lofgren. Thank you very much.
    And I am glad that this hearing is being held today. This 
is, I think, an enormously important issue.
    Recently, I was in a department store, and I walked past 
the toy aisle, and I saw all of these toys, and I thought I am 
so glad that my youngest is 22, and that I do not have to worry 
about buying one of these things and whether there is lead on 
it and whether it is going to poison my kid. And when you take 
a look at parents all over the country thinking about, with 
Christmas coming up, whether they are going to injure their 
children by their Christmas gifts, it is just a horrendous 
situation.
    And, you know, I have always supported internationalism, 
and I have been supportive of trade issues. It just has to be 
noted that most of these defective products seem to be coming 
from China, and, you know, how are we going to hold them 
accountable? That is what really this is about.
    The Ranking Member and I worked together on many things. I 
like him. He knows that. And there are things that we agree on. 
But I think when it comes to so-called tort reform, for 12 
years, the Republican majority pursued efforts so that people 
would not be held accountable for hurting people who were 
innocent, and now there is a new approach here, which is how do 
we hold people accountable?
    And part of that is using the court system, the system of 
civil justice, where people have to be held accountable for 
what they do, and when it comes to foreign entities who are 
wrongdoers, no one should want to defend misconduct on the part 
of toy manufacturers who are either reckless or--who knows what 
the motivation is--that would harm American children. And 
noting we had a hearing a couple of weeks ago on a different 
subject on the IP Subcommittee where the Customs Department 
admitted that when it comes to penalties for careless dumping 
and other misconduct, they collect less than 1 percent of 
assessed penalties. So that whole system is not functioning 
well.
    The Consumer Product Safety Commission is not up to task. 
We have called for, you know, a complete re-haul of that whole 
system, but here is my question, I guess maybe to the professor 
or whoever else could answer it, given the fact that most of 
what is being imported into the United States is not even 
inspected, the Customs Bureau is not actually efficiently even 
collecting the fines, it is not clear----
    How would we actually administratively get these importers 
to consent to jurisdiction? And is there a role in terms of 
treaties? Do you think it would be constitutionally permissible 
for, for example, the government of China to consent to 
jurisdiction on its manufacturers and citizens because it is 
really in their long-term interest not for this to happen? I 
mean, nobody is going to buy a toy made in China if this 
continues. Do you have an opinion on those questions? Any of 
you?
    Mr. Popper. On the question of consent to jurisdiction, 
there is the individual party choice that a foreign 
manufacturer can make, and then there are choices that a 
country can make to declare that foreign manufacturers are 
subject to the jurisdiction of the courts of the United States. 
Constitutionally, I do not think that there is any prohibition 
on a foreign government doing that.
    I mentioned in my statement, however, that this requires 
real cooperation and agreement from the executive because when 
you are talking about how the customs system functions in the 
United States, I do not know that that is something that you 
can legislate into efficiency. If----
    Ms. Lofgren. Well, certainly, we cannot, and I have a lot 
of respect for the line officers trying to do a very tough job, 
but it is administratively a complete mess, and I do not have 
any hope that under the current Administration that is going to 
improve despite the very, you know, diligent efforts of the 
officers on the line.
    Mr. Popper. This is the one thing that you can have an 
effect on: is resources, which really gets, I think, all of us 
back to thinking about the CPSC. My alma mater law school and 
the law school in which I currently work, in both institutions, 
our budget is larger than the budget of the CPSC, which is just 
appalling.
    Ms. Lofgren. Right. Well, I think, you know, it is 
appalling, but if the manufacturers or the government of China 
know that they are going to face civilian courts in the United 
States--and it is not about lawyers. It is about parents and 
their children who have a right to be heard, to have their day 
in court and to hold somebody accountable, you know, even the 
fact that the government is dysfunctional at this point--that 
element could help save the day for American families.
    Mr. Popper. I would agree with that.
    Ms. Lofgren. My time is expired.
    Mr. Chairman, I thank you.
    Mr. Johnson. Thank you, Madam.
    We will now turn to Congressman Franks from Arizona for 5 
minutes.
    Mr. Franks. Well, thank you, Mr. Chairman. You are doing a 
good job.
    Mr. Johnson. Thank you, sir. Your check is in the mail, 
sir. [Laughter.]
    And you can have an extra 5 minutes.
    Mr. Franks. Mr. Chairman, I guess, you know, some of these 
esoteric areas of law escape a lot of us, but the one thing 
that is paramount in our minds is doing everything we can to 
protect the children of this country and, for that matter, in 
every country, and you folks have insight into the mechanics 
and the process of how these toys are not only manufactured, 
but how they get here and under what auspices, what the 
protections are, whether it be the Port Authority or legal 
remedy might be available.
    So I want to ask each of you kind of a straightforward 
question. Let me first say that Ms. Lofgren said, you know, no 
one will want to buy toys from China if this continues. Now I 
am not sure that that is such a bad idea. Maybe the market 
itself, if properly informed, would have an economic impact 
that would mitigate this quite a lot.
    But without trying to color your perspective, I would like 
to have each person, starting over here with you, Mr. Gowen, if 
it is all right, to just go down the panel and tell me what you 
think would be the one thing if you were running the zoo that 
you would do to solve this problem. What is the one most 
important single thing? You know, in Congress, we actually try, 
but sometimes it is hard to stay focused on something that 
would really make a difference, and we shoot in a lot of 
directions and we do not hit anything of consequence.
    So tell me, if you were emperor of the world, what is the 
one thing you would do to protect children in this country from 
dangerous or faulty toys from other countries or, for that 
matter, this one?
    Mr. Gowen?
    Mr. Gowen. Thank you, Mr. Franks.
    I would require all who are importing products into the 
United States or exporting to the United States to have an 
import license into the United States that would require them 
to consent to the jurisdiction of the courts, to have insurance 
in this country and to have that license subject to revocation 
if the judgment of an American court is not paid, as well as 
having an agent for service of process here in this country, to 
put them on an equal footing with American companies and to 
give American consumers a reasonable remedy in the event that 
they are injured.
    Mr. Popper. Madam Chairman, that almost sounds reasonable 
to me.
    Ms. Sanchez. [Presiding.] I am glad we agree on something.
    Mr. Franks. Mr. Schwartz?
    Mr. Schwartz. I would pinpoint responsibility on suppliers 
of products from foreign countries who are currently on an 
unequal playing field in our tort system. All of our companies 
here are subject to it, including those who send goods here and 
have substantial business, but there are ways to address and 
pinpoint that responsibility on those companies.
    The tort system, when it is fair, can have a deterrent 
value, and, right now, they escape that deterrent value, and 
that would be a good policeman since we cannot have the borders 
staffed with policemen to catch these goods.
    Mr. Franks. Thank you, Mr. Schwartz.
    Ms. Gilbert?
    Ms. Gilbert. I am going to try to cheat and give you two 
things.
    My second choice would be the import license and the scheme 
that Mr. Gowen just laid out.
    I would have to say as my first choice, being a devotee of 
the Consumer Product Safety Commission, I would triple the 
budget of the agency and the size of the agency to address this 
problem.
    Mr. Franks. Thank you.
    Mr. Popper? I am sorry.
    Mr. Popper. I think those are all good suggestions. If you 
could put together a simple piece of legislation that 
incorporated all three, I would certainly be excited about it. 
In addition to an import license and focus on the CPSC, I think 
that the Supreme Court has invited you to declare that minimum 
contacts can be satisfied with a nationwide-effect tes. I think 
that is actually fairly easy to do and, arguably would resolve 
some of the problems that Asahi created.
    Mr. Franks. Well, thank you, Mr. Popper. That is all of the 
above.
    Mr. Popper. That is all of the above.
    Mr. Franks. And I appreciate that.
    Mr. Gowen, thank you for starting out with a crisp--I am 
going to vote for Mr. Gowen if that is okay with the rest of 
you, but I think all of you had good suggestions here.
    And I yield back, Mr. Chairman. Thank you. Or Madam Chair. 
I am sorry. We had a little switch here.
    Ms. Sanchez. Thank you. We pulled the switcheroo on you, so 
it is understandable.
    And I want to apologize to our witnesses. I dashed out 
because I had a concurrent markup in the Ed and Labor Committee 
and I was required to vote there.
    I understand Mr. Johnson did a very good job chairing the 
Committee, although when the Chairwoman leaves, the Committee 
goes to hell and he wants to give away an additional 5 minutes 
for questioning to each panel member.
    I am going to take my round of questions.
    Mr. Cannon. The minority would not object if the Chair took 
her 5 minutes and we did not go to a second round, by the way.
    Ms. Sanchez. Thank you. We will see if there is substantial 
interest in the second round of questions, but I am going to do 
my first 5 minutes.
    Mr. Gowen, in your written testimony, you note that Justice 
Sandra Day O'Connor's opinion in Asahi suggested that Congress 
could authorize Federal court personal jurisdiction over alien 
defendants based on the aggregate of national contacts rather 
than on the contacts between defendant and the State where the 
Federal court sits. If that were enacted, how would this 
proposal impact the ability of injured consumers to hold 
manufacturers accountable?
    Mr. Gowen. Well, presently, when foreign manufacturers 
filed their motions to dismiss, which usually comes shortly 
after service is achieved, they raise the factors that Justice 
O'Connor suggested as possibilities for looking at the 
additional factors beyond placement into the stream of 
commerce.
    One of those is: Was the product made specifically for 
California or Pennsylvania or New Jersey? And I think we know 
that very few products are really made specifically for any 
State. They are made for our national market.
    Secondly, they look at things like: Do they have an office 
there? Do they advertise specifically in that State? 
Frequently, they work through an intermediary, such as an ad 
agency or an importer. So, if we were able to look at a 
national standard of minimum contacts instead of saying there 
were 8,000 tires sold in Maryland and suppose 500 of those had 
been taken to Delaware where the injury occurred, would that 
have been enough?
    This company that we had the case with there had millions 
of tires that were sold into the United States as a whole, and 
I think that it would make the process of establishing minimum 
contacts much easier?
    Ms. Sanchez. Okay. Mr. Schwartz, sort of along the same 
line, Justice O'Connor in her opinion suggested that we could 
potentially use the aggregate of national contacts, and I 
thought I heard you use the term ``substantial business,'' and 
I think I heard Professor Popper use the word ``nationwide 
effect,'' and I am sort of wondering if they all are fairly 
similar or if there are distinctions between any of those 
standards that we could potentially use.
    Mr. Schwartz. Well, I think that you have two measures 
there. Having a national measure is a sound idea that is put in 
Footnote 5 of the opinion. But if it was just a mere sprinkling 
of sales and not substantial as a whole, that might not satisfy 
the Constitution. So I think both elements would be required.
    Ms. Sanchez. Okay. And do you have--since you are an author 
of a torts book--an idea of what criteria might be used to 
establish substantial?
    Mr. Schwartz. Well, I have learned from my work not to 
draft when one is sitting here----
    Ms. Sanchez. We will allow you some----
    Mr. Schwartz [continuing]. But I certainly would be pleased 
to follow up with this, Chairwoman, on that issue.
    Ms. Sanchez. Sure. I appreciate that.
    Ms. Gilbert, as you referenced in your written testimony, 
the Consumer Product Safety Commission has come under fire for 
poor leadership and management, and it is recently reported 
that CPSC employees have accepted a large number of trips 
financed by industries that the CPSC are mandated to regulate, 
which sort of sounds a little icky, to use sort of a 
nongovernmental term. What steps do you think that the CPSC 
should take in order to overcome those recent problems and to 
restore the independence of the commission?
    Ms. Gilbert. Well, as I mentioned before, the Consumer 
Product Safety Commission needs an infusion of cash, frankly. I 
mean, it has been underfunded for decades now, and when I was 
there, I used to say that the Pentagon spent CPSC's annual 
budget every hour and a half, and I think that that must be a 
much shorter period of time now since the Pentagon has gotten 
bigger and CPSC has gotten smaller. So I am not arguing that 
CPSC should be as big as the Pentagon, but maybe it should be a 
little bit larger than 45 minutes worth of the Pentagon to keep 
American families and children safe. So, to me, that is the 
most important.
    And then, secondly, the current leadership of CPSC is, 
frankly, quite sad, and it has saddened those of us who worked 
there, and many of the staff who were quite expert and 
committed and devoted to that agency who have left out of 
frustration, and there are many of them, and so we really do 
need new leadership at the commission.
    It appears from what has come out in the press--as you 
mentioned, the trips--that the current chair and her 
predecessor really abuse the privilege. I will admit that when 
I was at CPSC, I did approve some industry-funded travel, 
mostly for staff, for the technical or legal compliance staff 
of the agency for product safety work, for specific product 
safety work that we did not have the budget for, but we did not 
have chairs and commissioners flying around to this resort and 
that golfing, you know, excursion on the dime of the industry, 
and that really does need to stop.
    Ms. Sanchez. Thank you.
    My time has expired, but I will beg the indulgence of my 
Ranking Member. I think we can finish up without going to a 
second round of questions if I could have 2 additional minutes.
    Mr. Cannon. I would be happy.
    May I just ask unanimous consent to submit for the record 
an article in The Wall Street Journal that was printed on 
Tuesday, November 13 called AGs Gone Wild?
    Ms. Sanchez. Without objection.
    [The information referred to follows:]
    
    
    Ms. Sanchez. I have one last question, and I understand 
this question has been asked of another witness, but I am 
interested in getting Professor Popper's perspective on this.
    Somebody asked about the H.R. 989, the Innocent Sellers 
Fairness Act, which would completely immunize sellers from 
liability, except under very limited circumstances, and in 
light of the fact that consumers already have a difficult time 
holding foreign manufacturers accountable, do you think that 
this is a smart legislative approach to the problem?
    Mr. Popper. I think the initial smart answer would be 
Victor's, which is without the legislation in front of me, I am 
hesitant to comment. But on the general proposition of 
relieving retailer sellers of responsibility, I think it is a 
terrible idea.
    It has been an argument for a long time, and you can 
understand why. Most sellers--retailers in particular--do not 
design goods, they do not place the warnings, the labels on the 
goods, and so therefore to tie them into broad-based stream-of-
commerce liability might seem, at a certain level unfair.
    Anticipating that argument, I would say sellers have an 
enormous influence on design. If a seller communicates with a 
manufacturer that the product is not satisfactory, the product 
will not be sold and the design will change. Further sellers 
have an affirmative duty to warn, and they are vital to the 
stream of commerce, they make a profit from the products they 
sell, and they have the capacity to spread loss. They need to 
take responsibility for the products they sell. If there is 
some kind of global wash that eliminated the liability of 
retail sellers, I think that would be a very bad idea.
    And, again, it is like a lot of tort reform. It is not that 
I am right or Victor is wrong. They are two different points of 
view. If I am a small seller, and I am getting products from 
abroad, and I hear that they are great products, and I put them 
on the shelf, and I sell them, and I had nothing to do with the 
design or labeling of them, and then, suddenly, I am tied up in 
a lawsuit, of course, I am going to feel it is unjust. But in 
the grand scheme of things, we make tradeoffs, and by 
legislation, to give that wash to the whole of the selling 
community strikes me as bad legislation.
    But, again, I do not have the language of that bill in 
front of me. I would assume that you have characterized it 
correctly, and on that assumption, I would say it is a bad 
idea.
    Ms. Sanchez. Great. Thank you so much.
    Mr. Schwartz. Madam Chairman?
    Ms. Sanchez. Yes?
    Mr. Schwartz. You were at another Committee when I was 
asked that question, so I will just very briefly mention my 
answer.
    Ms. Sanchez. Certainly.
    Mr. Schwartz. Most of the bills that have taken the product 
seller issue on work like this. It relieves the product seller 
of strict liability. So, if they are selling a steam-and-dry 
iron and something is wrong with it and it is in a box and they 
do not know about it, they are not subject to liability. In the 
laws that have been enacted in the 16 States, it has worked 
well--not one of them has been repealed. No one has tried to 
repeal them. They have been law for 20, 25 years--they are 
subject to liability if the manufacturer cannot be reached by 
judicial process.
    So, in the problem that we are talking about today, if the 
foreign manufacturer could not be reached, the retailer or 
wholesaler would be subject to liability. But it does cut legal 
costs. You are not bringing them in in every single case.
    And what sometimes happens is that a plaintiff's lawyer, a 
good one, who wants to sue a manufacturer but wants to be in a 
State court, will name the retailer, not for the purposes of 
suing them at all, but just to get jurisdiction into a State 
court because then--I may be getting too legal here--the 
plaintiff and defendant are from the same State, and the 
Federal court cannot take jurisdiction. So that is the reason 
for that particular reform.
    I would want to review the bill and then have an 
opportunity to give you my views in writing about it.
    Ms. Sanchez. Sure. I do not want to mischaracterize your 
testimony, but you agree that if somebody is in that chain of 
commerce and we do not have the ability to reach the 
manufacturer, that they do bear some responsibility and should 
be subject to----
    Mr. Schwartz. If you do not strand the complainant.
    Ms. Sanchez. The consumer. The complainant.
    Mr. Schwartz. But product seller reform legislation has 
worked, and also----
    Ms. Sanchez. Would you----
    Mr. Schwartz [continuing]. A lot of other civil justice 
reforms that have been supported by Mr. Cannon have worked. 
So----
    Ms. Sanchez. But you would also agree, though, that in this 
instance--and I think I have heard it in different ways from 
everybody here--there is a general sense that, A, it is unfair, 
B, it is unsafe for us not to be able to reach the 
manufacturers who are the starting point in this process----
    Mr. Schwartz. Absolutely. I think that to have people who 
are making a substantial profit from dollars spent in this 
country to be immune from our tort system is unsound public 
policy.
    Ms. Sanchez. Thank you very much.
    And would everybody agree, if I could just get a verbal on-
the-record answer?
    Mr. Gowen?
    Mr. Gowen. Yes, I would certainly agree.
    Ms. Sanchez. Ms. Gilbert?
    Ms. Gilbert. Yes, I agree.
    Ms. Sanchez. Professor Popper?
    Mr. Popper. I agree as well.
    Ms. Sanchez. We are all in agreement.
    Mr. Cannon. May I add my voice to this?
    Ms. Sanchez. Mr. Cannon? Sure. Feel free.
    Well, that wraps up pretty much the hearing for today. 
Again, I want to thank all of the witnesses for their 
testimony.
    Without objection, Members will have 5 legislative days to 
submit any additional written questions which we will forward 
to the witnesses and ask that you answer as timely as possible 
so that we can also include those in the record.
    Without objection, the record will remain open for 5 
legislative days for the submission of any additional 
materials.
    Again, I want to thank everybody for their time and their 
patience, and this hearing on the Subcommittee on Commercial 
and Administrative Law is adjourned.
    [Whereupon, at 10:4 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

 Responses from Thomas L. Gowen, The Locks Law Firm, Philadelphia, PA, 
   to Post-Hearing Questions from the Honorable Linda T. Sanchez, a 
     Representative in Congress from the State of California, and 
     Chairwoman, Subcommittee on Commercial and Administrative Law




                                

    Responses from Victor E. Schwartz, Shook, Hardy and Bacon, LLP, 
 Washington, DC, to Post-Hearing Questions from the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
     Chairwoman, Subcommittee on Commercial and Administrative Law






                                

    Responses from Pamela Gilbert, Cuneo, Gilbert and Laduca, LLP, 
 Washington, DC, to Post-Hearing Questions from the Honorable Linda T. 
Sanchez, a Representative in Congress from the State of California, and 
     Chairwoman, Subcommittee on Commercial and Administrative Law






                                

   Responses from Andrew F. Popper, American University, Washington 
  College of Law, Washington, DC, to Post-Hearing Questions from the 
Honorable Linda T. Sanchez, a Representative in Congress from the State 
     of California, and Chairwoman, Subcommittee on Commercial and 
                           Administrative Law














                                 
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