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


 
                   PROTECTING AMERICANS FROM UNSAFE 
                          FOREIGN PRODUCTS ACT

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                   COMMERCIAL AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 5913

                               __________

                              MAY 1, 2008

                               __________

                           Serial No. 110-176

                               __________

         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
      Sean McLaughlin, Minority Chief of Staff and General 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

                              ----------                              

                              MAY 1, 2008

                                                                   Page

                                THE BILL

H.R. 5913, the ``Protecting Americans from Unsafe Foreign 
  Products Act''.................................................     2

                           OPENING STATEMENTS

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.........................................     6

                               WITNESSES

Mr. Ed Mierzwinksi, U.S. PIRG, Washington, DC
  Oral Testimony.................................................     9
  Prepared Statement.............................................    12
Mr. Richard R. Schlueter, Childers Buck and Schlueter, LLP, 
  Atlanta, GA
  Oral Testimony.................................................    17
  Prepared Statement.............................................    19
Mr. Victor E. Schwartz, Shook, Hardy and Bacon, LLP, Washington, 
  DC, on behalf of the Institute for Legal Reform of the United 
  States Chamber of Commerce
  Oral Testimony.................................................    31
  Prepared Statement.............................................    33
Mr. Ralph G. Steinhardt, The George Washington University Law 
  School, Washington, DC
  Oral Testimony.................................................    40
  Prepared Statement.............................................    42

                                APPENDIX
               Material Submitted for the Hearing Record

Responses to Post-Hearing Questions from Richard R. Schlueter, 
  Childers Buck and Schlueter, LLP, Atlanta, GA..................    66
Responses to Post-Hearing Questions from Victor Schwartz, Shook, 
  Hardy and Bacon, LLP, Washington, DC, on behalf of the 
  Institute for Legal Reform of the United States Chamber of 
  Commerce.......................................................    71
Reponses to Post-Hearing Questions from Ralph G. Steinhardt, The 
  George Washington University Law School, Washington, DC........    74


         PROTECTING AMERICANS FROM UNSAFE FOREIGN PRODUCTS ACT

                              ----------                              


                         THURSDAY, MAY 1, 2008

              House of Representatives,    
                     Subcommittee on Commercial    
                            and Administrative Law,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:42 a.m., in 
Room 2141, Rayburn House Office Building, the Honorable Linda 
Sanchez (Chairwoman of the Subcommittee) presiding.
    Present: Representatives Sanchez, Lofgren, Watt, and 
Cannon.
    Staff present: Eric Tamarkin, Majority Counsel; Paul 
Taylor, Minority Counsel; and Adam Russell, Majority 
Professional Staff Member.
    Ms. Sanchez. This hearing of the Committee on the 
Judiciary's Subcommittee on Commercial and Administrative Law 
will come to order.
    Without objection, the Chair will be authorized to declare 
a recess of the hearing.
    And I will now recognize myself for a short statement.
    I have been alarmed by the steady stream of defective 
foreign-manufactured products flooding our marketplace. From 
the millions of toys recalled because of lead paint to heparin, 
the tainted blood thinner that caused at least 81 deaths and 
scores of injuries, it has become increasingly clear that our 
health and welfare have been compromised by foreign-made 
products.
    I am also concerned that foreign manufacturers have gained 
an unfair advantage over U.S. manufacturers because foreign 
manufacturers have avoided liability for defective products in 
our marketplace.
    Because of the difficulties associated with serving process 
on and establishing over jurisdiction over foreign 
manufacturers, many Americans harmed by defective foreign-made 
products never get their day in court. That is why I introduced 
H.R. 5913, the ``Protecting Americans from Unsafe Foreign 
Products Act.''
    [The bill, H.R. 5913, follows:]

    
    
    
    
    
    
    
    
    Ms. Sanchez. Specifically, this legislation would allow 
American consumers harmed by foreign defective products to 
obtain personal jurisdiction over foreign manufacturers by 
serving foreign manufacturers with process where they reside, 
are found, have an agent or transact business.
    H.R. 5913 would also help eliminate the unfair competitive 
advantage enjoyed by foreign manufacturers and ensure that they 
can be held accountable in U.S. courts for injuries that 
consumers suffer as a result of defective products.
    Finally, H.R. 5913 would pressure foreign manufacturers to 
improve the quality and integrity of their products. When 
foreign manufacturers are held accountable under the tort 
system, they will be deterred from making dangerous products in 
the future.
    At one time, products exported to the United States market 
were known to meet the highest health, safety and quality 
standards in the world. Many manufacturers had two production 
lines: one for products to be sent to the U.S. and one for all 
others.
    As our trade has expanded and our inspections have become 
more lax, this is no longer the case. The deluge of defective 
products entering our markets has demonstrated that neither the 
Consumer Product Safety Commission nor the Food and Drug 
Administration have effectively done their job.
    I look forward to the day when, once again, we can be proud 
that only the highest-quality, safest products line the shelves 
of American stores. I support the recent congressional efforts 
to strengthen the CPSC and the FDA so they have the tools and 
resources they need to adequately protect American consumers.
    However, the approaches currently considered by the House 
and Senate do not address the barriers individual consumers 
face once they have been injured by a foreign-manufactured 
product. Legislation such as H.R. 5913 fills an important void 
of facilitating accountability of foreign manufacturers that 
injure consumers with defective products.
    I want to thank Chairman Conyers, Representatives Zoe 
Lofgren, Melvin Watt, Steve Cohen, Hank Johnson, Betty Sutton 
and Raul Grijalva for cosponsoring H.R. 5913. The legislation 
is also supported by U.S. PIRG, Consumers Union, Consumer 
Federation of America, Public Citizen, and the Center for 
Justice and Democracy.
    H.R. 5913 will aid in ensuring the safety and health of 
American consumers. I very much look forward to hearing from 
our witnesses.
    And, at this time, I would now like to recognize my 
colleague, the distinguished Ranking Member of the 
Subcommittee, Mr. Cannon, 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''--pretty exact figure, by the way, here--
``on a family of four''--I think we could round that to about 
$10,000--``the 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 business, 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's 
instructions or warnings is no defense under current law.
    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 claimed indemnity from the manufacturer as 
the faulty party.
    However, this is not always successful, especially when the 
product is made by a foreign supplier. If a foreign supplier 
does not have a legal presence in the U.S., 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, as the Chairman just pointed out.
    Chairman Sanchez's bill, which is the subject of the 
hearing today, attempts to solve the servicer process and 
personal jurisdiction problems faced by those who want redress 
for injuries caused by the products of foreign manufacturers.
    While I support the intent of the legislation, there are 
some troubling ambiguities in the bill. It seems that the 
legislation affects jurisdiction in cases far beyond product 
liability cases, including contract and business cases, such 
that the bill may even interfere with international treaties.
    It also seems the bill could unnecessarily expand 
jurisdiction over domestic distributors and, in potentially 
doing so, add even more burdens to America's competitiveness.
    I would also note that Justice O'Connor, in a footnote in 
the Asahi case, suggested that, ``Congress could, consistent 
with the due process clause of the fifth amendment, authorize 
Federal court personnel jurisdiction over alien defendants 
based on the aggregate of national contacts, rather than the 
contacts between the defendant and the State in which the 
Federal court sits.''
    However, the legislation before us today does not track 
this statement in the Asahi case; indeed, it contradicts that 
statement by granting jurisdiction not just to Federal courts 
but even when the State has no contacts whatsoever with the 
alien defendant.
    I look forward to hearing from all our witnesses today.
    And I hope we can agree on at least one thing at the outset 
of the debate, and that is that the tort liability system 
should not be changed to increase the burdens the lawsuit 
industry already imposes on American jobs and enterprise, 
especially small businesses.
    Thank you, Madam Chair, and I yield back the balance of my 
time.
    Ms. Sanchez. I thank the gentleman for his opening 
statement.
    I am now pleased to introduce the witnesses on our panel 
for today's hearing.
    Our first witness is Ed Mierzwinski. Mr. Mierzwinski has 
been a consumer advocate in the Washington, D.C.-based Federal 
lobbying office of the National Association of State Public 
Interest Research Groups, U.S. PIRG, since 1989. State PIRGs 
are nonprofit, nonpartisan, consumer, environmental and good 
government watchdog groups, with over 500,000 members around 
the United States.
    Mr. Mierzwinski is a founding member of the Trans-Atlantic 
Consumer Dialogue and represents U.S. PIRG in the TACD's 
steering committee and, from 1981 through 1988, served as 
executive director of Connecticut PIRG, where he helped pass 
the nation's first new-car lemon law.
    Mr. Mierzwinski has testified before both Congress and 
State legislatures numerous times and has authored or co-
authored numerous major reports on a wide range of consumer 
issues, including cable television rates, telecommunications 
reform, banking, financial services, and identity theft and 
product safety issues, including toy and playground safety.
    Welcome to you.
    Our second witness is Mr. Richard Schlueter. Mr. Schlueter 
is founding member of Childers, Buck and Schlueter, LLP, a law 
firm in Atlanta, Georgia. He has extensive trial and motion 
practice experience as a lawyer practicing in the Federal and 
State courts of Georgia.
    Mr. Schlueter currently represents victims in product 
liability and personal injury cases, as well as representing 
victims of investor fraud in the solicitation and sale of 
securities.
    Mr. Schlueter is a recipient of the Jaycees' annual 
Brownfield Award for Leadership and has been an award-winning 
participant in pro bono projects for his representation of 
financially disadvantaged plaintiffs.
    I want to welcome you to our panel today.
    Our third witness is Victor Schwartz. Mr. Schwartz chairs 
the Public Policy Group at Chook, Hardy and Bacon, LLP. He is 
co-author of the nation's leading torts casebook, ``Prosser, 
Wade and Schwartz's Tort,'' and also wrote ``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 in the 
Midwest against the manufacturer of a defective product.
    Welcome to our panel.
    Our final witness is Ralph Steinhardt. Professor Steinhardt 
specializes in international law, conflict of laws, 
international business transactions, international civil 
litigation, and property law. He is co-director of the Oxford-
G.W. Program in International Human Rights Law at St. 
Catherine's College, Oxford.
    His current research and advocacy concerns the human rights 
obligations of multinational corporations. He now serves as the 
only U.S. citizen on the expert legal panel on that subject 
under the auspices of the International Commission of Jurists.
    Professor Steinhardt has served as legal counsel to several 
foreign governments in both commercial and intergovernmental 
matters, including border disputes and economic relations, and 
pioneered the application of international human rights law in 
U.S. courts.
    I want to thank you all for your willingness to participate 
in today's hearing. We are very interested in hearing what you 
have to say.
    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. At 4 minutes, the light will turn yellow, 
warning you that you have a minute to finish your testimony. 
And when your time has expired, you will receive a red light. 
If you are caught mid-sentence or mid-thought, we will of 
course allow you to finish your final thought before moving on 
to our next witness.
    After each witness has presented his testimony, 
Subcommittee Members will be permitted to ask questions, 
subject to the 5-minute limit.
    With all the ground rules having been stated, I am going to 
invite Mr. Mierzwinski to please proceed with his testimony.

     TESTIMONY OF ED MIERZWINKSI, U.S. PIRG, WASHINGTON, DC

    Mr. Mierzwinski. Thank you, Madam Chair and Representative 
Cannon, Members of the Committee. My name is Ed Mierzwinski, 
and on behalf of the U.S. Public Interest Research Group, the 
Consumer Federation of America, Consumers Union, and Public 
Citizen, we are pleased to support your legislation, the 
``Protecting Americans from Unsafe Foreign Products Act.''
    We are organizations that have long supported a strong 
legal system that allows citizens access to justice. We have 
supported strong product safety laws. And we have supported a 
strong CPSC and a strong Food and Drug Administration.
    As you indicated in your opening remarks, Madam Chair, this 
has been the year of the recall. There have been recalls of 
over 40 million children's products and toys. There have been 
recalls of tainted blood thinner, heparin; the unsafe tires; 
the tainted toothpaste; and the pet food that killed or 
sickened hundreds, if not thousands, of cats and dogs. So it 
has been a very bad year for the American people, in terms of 
foreign products that have harmed them.
    Over the last 22 years, our organization has released a 
report on dangerous toys that has resulted in over 130 recalls 
by the CPSC. Just to point to an example of the kinds of 
dangerous products that are being placed into children's arms, 
I brought a few with me that have been recalled, just to show 
you.
    The most common kinds of recalls historically had been 
small parts that are banned for sale to children under 3 that 
fit in this choke test tube. But lately we have been finding 
painted toys with excessive levels of lead.
    We are also finding jewelry--millions of units of small 
pieces of jewelry have been recalled. One little boy died, that 
is known of, from swallowing a piece of jewelry that was 99 
percent lead. These little zipper pulls are 65 percent lead.
    A lot of the recent recalls, particularly of the Mattel 
toys, have not actually been lead paint. They have been of a 
new hazard: tiny, powerful, rare-earth magnets. When we found 
these little panda bears, the little magnets had fallen out and 
were actually in the package. And just an example of how 
powerful they are, I have one on either side of my finger.
    One little boy, Kenny Sweet, swallowed several of these. 
They caused an intestinal blockage, and he died. At least 25 
other children have been sent to emergency surgery due to 
swallowing these tiny magnets.
    What do all these toys have in common? They come from 
China.
    The Congress, as you noted, is very close to appointing 
conferees to finish action on legislation to improve the power 
and authority and resources of the Consumer Product Safety 
Commission to protect us. It protects us from imported toys in 
a number of ways. It increases its budget dramatically. And it 
gives it a lot more authority to go after wrongdoers.
    But strong Federal resources and a strong Federal agency is 
only one of three pillars of a strong civil justice system. The 
second pillar is you should also have the right of State 
attorneys general to enforce both State and Federal laws, to 
use their traditional police powers to protect the public. The 
legislation before Congress, at least on the CPSC, will go 
somewhat toward improving attorney general power to protect the 
public.
    But the third pillar of consumer protection is access to 
justice. Consumers need a system where they can bring private 
actions to help recover damages and compensation when they are 
harmed or injured by a product. That activity in the pursuit of 
justice also of course deters other companies from designing 
and making unsafe products.
    Your legislation, which makes it easier for private 
plaintiffs to go after foreign manufacturers, as the learned 
practitioners will discuss in greater detail, is an important 
part of that solution. I would also note that, importantly, 
while it balances the justice system by making it easier to 
give liability to foreign manufacturers, it doesn't take away 
liability from U.S. companies.
    Big, powerful U.S. companies may not simply be sitting at 
the end of the supply chain. The biggest ones, like Wal-Mart 
and Mattel, actually do own the entire supply chain, all the 
way from China to America, in many cases.
    In addition, even if they don't, they have tremendous 
market power. So they should be held liable. And, importantly, 
your legislation would allow that. If a company with tremendous 
market power were to want to buy dangerous toys, that would be 
bad for American children.
    But as long as we are simply strengthening the ability to 
go after the foreign manufacturers, consumer groups think your 
bill is a great idea.
    Thank you very much.
    [The prepared statement of Mr. Mierzwinski follows:]

                Prepared Statement of Edmund Mierzwinski











    Ms. Sanchez. Thank you very much for your testimony.
    At this time, I would like Mr. Schlueter to begin his 
testimony.

TESTIMONY OF RICHARD R. SCHLUETER, CHILDERS BUCK AND SCHLUETER, 
                        LLP, ATLANTA, GA

    Mr. Schlueter. Thank you, Chairwoman Sanchez and Members of 
the Subcommittee. Thank you for the opportunity to discuss the 
many difficulties associated with holding foreign manufacturers 
accountable in cases involving defective and dangerous imported 
products.
    My name is Richard Schlueter. I am a partner with the law 
firm of Childers, Buck and Schlueter in Atlanta, Georgia. I 
have come here today to share with you my client's experience 
when she sought justice for the death of her 13-year-old 
daughter and only child.
    A defective foreign-manufactured product was responsible 
for Lauren's death that occurred when she was seeking to meet 
her friends at the bus stop. The product was a Chinese-made 
electric scooter that was imported through the Port of Long 
Beach, California, distributed and branded by a California 
corporation, and sold by a retailer in Gainesville, Georgia, at 
a flea market.
    The defectively designed scooter, though marketed for 
children, was not a toy and was incapable of stopping a rider 
after a short time of operation. The product should have been 
required to meet Federal motor vehicle safety standards and 
declared as such at customs. Proper inspection should have 
resulted in the detention of this illegal product at the port.
    Foreign corporations have learned to send nonconforming 
products that do not meet either certain safety standards or 
meet compliance regulations through specific ports.
    We knew a case against the Chinese manufacturer would be 
difficult. Under Georgia law, as in many other States in the 
United States, a distributor or end retailer does not have 
liability for design defects or defects in the manufacturing 
process.
    Our first hurdle was trying to locate the name of the 
Chinese manufacturer, since the scooter revealed no identifying 
information, either by serial number or name.
    Once we uncovered the manufacturer's name, we realized that 
the company had no registered agent or office in the United 
States, even though the Chinese company claimed on its Web site 
that, every year, it exported $120 million in goods, including 
a wide array of toys and vehicles, to U.S. retailers, including 
Wal-Mart.
    After an unsuccessful attempt to get the Chinese company to 
acknowledge service, we performed service pursuant to the Hague 
Convention. This is a costly and complicated process for a 
variety of reasons. China is a community nation, ruled by a 
totalitarian government. An American litigant has no option but 
to turn service papers over to the Ministry of Justice, hope 
for the best, and wait.
    We translated the complaint, forwarded them to the Ministry 
of Justice, and waited 3 months for the central authority to 
serve a registered agent. Service was performed on the wrong 
individual, and this was later raised as a defense by the 
defendant Chinese company.
    After initial service of process, contact was made. The 
Chinese company sent a letter stating that they were reserving 
the right to ``ignore the charges'' against them.
    We obtained a default judgment against the Chinese company 
when the company did not retain a lawyer and file and answer. 
We knew the judgment would likely never be collected, because 
China does not recognize the validity of U.S. judgments.
    We did not hear from the Chinese company again until we 
received notice that the company was appealing the judgment. 
The company appealed the judgment, premised largely on lack of 
proper service and personal jurisdiction, claiming lack of 
contacts due to title of the goods that it sold and imported in 
the country passing at the port in Shanghai.
    In an effort to prove the Chinese company had minimum 
contacts to Georgia, we retained the services of a well-
respected civil procedure professor from the University of 
Georgia School of Law, as well as two additional Georgia 
lawyers.
    We further hired law firms in Florida, Texas, California 
and New York to assist in out attempts to locate assets, 
establish contacts, and assist in comity issues of 
domestication, and retained experts in the fields of service of 
process under the Hague, as well as experts in U.S. customs.
    To remove any further argument of service, we attempted 
service yet again under the Hague, which took 8 months. This 
was required, despite knowing in advance that the company 
representatives would be at a Las Vegas trade show and that the 
company designated a shell Florida corporation for service of 
process requirements related to EPA and California Air Resource 
Board requirements.
    Meanwhile, we were also concerned that the Chinese company 
would try to avoid the judgment by fraudulently concealing and 
transferring any assets that it had out of the country. We 
later learned that such a transfer did occur in a multi-
million-dollar wire transaction to Hong Kong within days of 
taking a deposition of a customer of the Chinese company.
    As a new Chinese company was now involved, adding it to the 
litigation would have required service under the Hague 
Convention, with the additional costs and associated delay.
    I have relayed the aforementioned mainly to summarize my 
recent experience on how foreign manufacturers who 
enthusiastically seek to enter the U.S. market do not have the 
same accountability as domestic manufacturers. In China, United 
States consumer protection laws can be ignored.
    Lately, we have seen this in the news with an array of 
products being imported, most prominently highlighted from 
China being medicine, food and toys. It is respectfully 
submitted that this Committee should look long and hard to the 
growing trend in problems associated with foreign-manufactured 
goods and items reaching our ports with a little oversight, 
protection or inspection of the containers they arrive in.
    House Bill 5913 would allow a plaintiff to have additional 
avenues to expedite or ensure service of process for foreign 
manufacturers. This will at least give the consumer a chance to 
seek accountability when they have been harmed by a defective 
product.
    For these reasons, I strongly support House Bill 5913, the 
``Protecting Americans from Unsafe Foreign Products Act.''
    Thank you.
    [The prepared statement of Mr. Schlueter follows:]

               Prepared Statement of Richard R. Schlueter

























    Ms. Sanchez. Thank you very much for your testimony.
    Mr. Schwartz?

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

    Mr. Schwartz. Thank you, Madam Chair and Ranking Member 
Cannon, for inviting me here today.
    I guess we have all had this happen where there is a 
personal matter and a business matter conflict. But I was so 
impressed with the fact that you followed up on the hearing 
from last November, developed legislation. Often, what I see is 
there is a hearing and then nothing happens, and everybody has 
wasted his or her time. But a friend of mine is undergoing 
medical care at Sloan-Kettering, and I am going to have to 
leave a little bit early to be able to be with her.
    Ms. Sanchez. Absolutely. Not a problem whatsoever. And, Mr. 
Schwartz, we would do our utmost on this Subcommittee never to 
waste your time.
    Mr. Schwartz. All right. Thank you. And I hope that doesn't 
count against my time. Shows I still know what I am doing here.
    I have the privilege to testify on behalf of the Institute 
for Legal Reform of the U.S. Chamber. But, as is always true 
when I am up here, the views I state are my own and based on 
the experience that you were so gracious to outline.
    You are right on a very, very key problem, and that is that 
some foreign manufacturers are able to escape our tort system. 
And if you just to give you an example, about 18 percent of the 
price of a ladder is liability. Now, if you had a foreign 
manufacturer that didn't have to pay that tort tax and an 
American manufacturer who did, it is really unfair competition. 
And to even the playing field, we need legislation so that that 
foreign manufacturer, in appropriate circumstances, can be 
subject to liability.
    And H.R. 5913 is directed at that very basic problem. But 
designing legislation in this area, as you know and your staff 
knows, is not easy. The Supreme Court decision stands in the 
way, Asahi. It is not easy, it is a plurality opinion. You have 
to make a chart to figure out what the court held.
    And the case is often misstated. And this is important in 
drafting this legislation. It is often stated as if it were a 
product liability case. It was not. It was a dispute between 
two foreign companies who wanted to use a California court to 
resolve their dispute. The plaintiff was not a person injured 
in California.
    And for that reason, I think there may be more latitude to 
designing legislation to reach a foreign company when a person 
lives here, has been injured here, and is suing a foreign 
manufacturer.
    And in that opinion, Justice O'Connor, it was almost like, 
``I am going to give you a little hint,'' it gives you a little 
hint as to where you might have a green light to develop 
legislation.
    And, in effect, what she said was that a Federal court 
could obtain jurisdiction over a foreign manufacturer where a 
State court might not. Because a State court is confined to 
contacts that occur within that State, not the whole United 
States. And a Federal court can look at the contacts that the 
company might have with the whole United States, which gives 
you more authority, more power to develop legislation.
    The purpose is good. There is a guideline there. I have 
some concerns, and I will mention them very, very briefly.
    The scope of the legislation, it does seem to me, goes 
beyond what the principal concern is, which is a product 
injuring somebody. My written testimony speaks for itself. 
Rather than parrot it here, but I spell out words that are used 
here that make the bill broader than it really should be to 
meet constitutional and practical concerns that people have. It 
should focus on product liability.
    There are some constitutional problems with the bill, at 
least as I read Asahi. Asahi seems to confine the situations 
for jurisdiction to when manufacturers have purposely directed 
the sale of their products toward the United States, not merely 
whether they knew or reasonably should have known that the 
product is used here.
    If the language is too broad, virtually any contact, even a 
phone call, could create jurisdiction. But I think this is a 
correctable thing. It is not as if major changes need to be 
made.
    Second, the bill places jurisdiction in both State and 
Federal courts, and Justice O'Connor was very clear, and I 
think when we are dealing with an issue of this magnitude it is 
clear, that jurisdiction should be solely in Federal courts, 
not State courts.
    And then finally, and this is just my own thing, I 
remembered this case from law school called Erie v. Tompkins. 
It was really a tort case, but it said that Federal courts 
sitting in States where cases arise under State law have to 
follow State law. And that was followed up by a case called 
Klaxon, which said that this includes choice-of-law law.
    So I would just commend members and staff to take a look at 
that issue so you don't inadvertently create 
unconstitutionality. And there is a section dealing with choice 
of law, but it may be unconstitutional. It is just something to 
look at very carefully, because the Klaxon bell went off when I 
read that.
    The State court openness can create litigation tourism--
that is just my words--where people go around--and when I did 
plaintiff's lawyer work, I did the same thing. I would look for 
a court that would be helpful to my client. But we don't want 
that to permeate this bill. By having cases in Federal court, 
one is better off.
    There may be an effect here on domestic defendants. And 
there may be expansion of either jurisdiction or even substance 
that affects them. And I think the basic way to ensure, Mr. 
Cannon, that that doesn't happen is to put language in the bill 
that clarifies that nothing in the act should be construed to 
affect personal jurisdiction, choice of law, or liability of 
any entity that is not a citizen of subject of a foreign state.
    So, to sum up, we don't want to further overheat the tort 
system, but language that would strengthen the extent of 
contacts necessary to establish personal jurisdiction would be 
helpful. Applying jurisdiction based on national contacts only 
in Federal court. Take a look at the Erie v. Tompkins problem. 
And include a rule of construction that clarifies that this 
bill only affects foreign manufacturers.
    And I thank you for your patience and for giving me a 
little extra time here.
    [The prepared statement of Mr. Schwartz follows:]

                Prepared Statement of Victor E. Schwartz















    Ms. Sanchez. Not at all. Always a pleasure to have you. And 
at any point, if you need to leave, you are excused. And we 
want to thank you again.
    Mr. Schwartz. Thank you.
    Ms. Sanchez. At this time, I would invite Professor 
Steinhardt to give his testimony.

    TESTIMONY OF RALPH G. STEINHARDT, THE GEORGE WASHINGTON 
             UNIVERSITY LAW SCHOOL, WASHINGTON, DC

    Mr. Steinhardt. Chairwoman Sanchez, Ranking Member Cannon, 
Members of the Subcommittee, I am very grateful for the 
opportunity to testify this morning.
    In my view, H.R. 5913 is a crucial first step in clarifying 
the power of U.S. courts to reach foreign manufacturers that 
introduce dangerous or defective goods into the international 
stream of commerce which then cause injury in the United 
States.
    For the reasons laid out in my written statement, I believe 
that the legislation removes some of the antiquated legal 
obstacles to foreign manufacturers' liability in U.S. courts by 
assuring that these foreign manufacturers are within the 
personal jurisdiction of the U.S. courts.
    But the second step, and it is also crucial, has to be 
taken by the courts as they interpret and apply this 
legislation. If the courts resolve certain constitutional and 
international issues the way I think they should and will, then 
I believe the legislation will both protect consumers in the 
United States and benefit U.S. businesses by leveling the 
competitive playing field along the lines that Ranking Member 
Cannon mentioned in his opening statement.
    In reviewing the testimony before this Subcommittee's 
oversight hearing in November, I was struck that so diverse a 
group of expert witnesses could reach so fundamental a 
consensus, namely----
    Ms. Sanchez. Professor Steinhardt, we were struck by that 
as well. That rarely happens.
    Mr. Steinhardt. There may have been disagreement, I 
suppose, about exactly how they will be held accountable, but 
the idea that they should is a post-partisan conclusion.
    I, frankly, am concerned that a discussion of the 
jurisdictional and logistical obstacles to accountability in 
U.S. courts will be very technical. It will remind many lawyers 
of what they hated about the first year of law school. But 
press on we must.
    The essence is this is a national problem; it deserves a 
national solution. Congress has all the constitutional 
authority it needs under article I to adopt this legislation.
    But I do try to identify the issues most likely to arise in 
lawsuits under the legislation, emphasizing certain 
constitutional and international issues.
    The easy case is that you have this authority to adopt the 
legislation. The harder case is that, under the Supreme Court's 
decision in International Shoe and its progeny, it is the 
courts that will determine in any given case whether due 
process is satisfied. Congress cannot, I think, legislate a 
one-size-fits-all answer to the individualized due process 
inquiry that is at the heart of personal jurisdiction cases.
    The power of H.R. 5913, as far as I am concerned, is that 
it helps the courts tailor the due process inquiry to the 
commercial realities of contemporary business. And it does that 
by focusing on basic fairness in a globalized economy rather 
than on the historic and now commercially irrelevant concerns 
with State boundaries.
    I also think the legislation helps because it puts the 
thumb on the scale of when courts are trying to balance the 
public and private interests that, under Woodson and Asahi, go 
into determining whether the exercise of jurisdiction in any 
particular case is reasonable or not.
    With great respect, I think I have a different take on the 
Asahi case than the one Mr. Schwartz just suggested. I actually 
think it poses no obstacle in principle to litigation under 
5913, because in that case the injured U.S. consumer was no 
longer a party to the case by the time it reached the Supreme 
Court, nor was there any legislation in that case that 
established the public interest in having these kinds of cases 
go forward.
    Both of those distinctions, it seems to me, affect the due 
process balancing of public and private factors that is at the 
heart of due process, and both are affected by this 
legislation.
    I also think that the nationwide service of process 
provision is constitutional on its face, there being similar 
provisions in other legislation. I think you could anticipate 
an as-applied challenge on any particular facts.
    If I may turn very briefly to the international issues, it 
is certainly true, as Ranking Member Cannon suggested in his 
opening statement, that treaties of the United States are 
relevant to this concern. In my written testimony, I suggest 
not only the Hague Service Convention but also the Hague 
Evidence Convention will be crucial at the discovery process in 
any litigation that goes forward.
    Focusing on the Hague Service Convention, I, too, have come 
up against those difficulties. But this may be an area where 
Congress can't simply legislate its way out of the box. 
Implicit repeals of treaties are not allowed, under U.S. law. 
U.S. courts will try to interpret the legislation and the 
treaty consistently with one another, unless there is an 
explicit override, which is not present in the current 
legislation.
    Let's also remember the law of unintended consequences and 
the law of reciprocity. I respectfully urge Congress to 
calibrate the service measures of H.R. 5913 in light of the 
reality that whatever we require will be required of us, under 
the Convention.
    I see my time has expired. Thank you, Chairman.
    [The prepared statement of Mr. Steinhardt follows:]

               Prepared Statement of Ralph G. Steinhardt





























    Ms. Sanchez. Thank you very much. We appreciate all of your 
testimony.
    We are now going to begin the questioning. And I will begin 
by recognizing myself first for 5 minutes of questions.
    Mr. Mierzwinski, a goal of H.R. 5913 is to pressure foreign 
manufacturers to improve the quality and integrity of their 
products. When foreign manufacturers are held accountable under 
the tort system, it is argued that they will be deterred from 
making dangerous products in the future.
    Do you believe that holding a foreign manufacturer 
accountable would give the manufacturer the financial incentive 
to produce safer products?
    Mr. Mierzwinski. Absolutely, Madam Chair. And that is one 
of the reasons our organization, all the consumer groups, 
support your legislation.
    It is partly necessary that we improve the tort system so 
that consumers can recover damages for the harms caused to 
them, but it is also just as important to deter other companies 
from becoming wrongdoers. And they will look at your 
legislation, and it will force them to do a better job.
    Ms. Sanchez. With respect to the case of the heparin, which 
is a blood thinner, and there were several people, sort of, in 
the manufacturing process, but ultimately it was traced back to 
a Chinese company.
    Do you believe--and I think you mentioned this, but I would 
like you to flesh it out a little more--that everyone in the 
chain of commerce should be held liable for the deaths and 
injuries sustained as a result of that tainted drug?
    Mr. Mierzwinski. Well, in our testimony--which is primarily 
based on the Consumer Product Safety Act, not the Food and Drug 
Act, but the provision and the concept I believe is the same. 
Everyone in the supply chain should be held accountable when 
they break the law. That is the best way to preserve access to 
justice.
    The big problem that you have in not holding the companies, 
if you will, at this end of the supply chain accountable is 
that then they won't have an incentive to demand that their 
foreign suppliers have safe products. You want this big company 
that is buying the product in America to tell the foreign 
company that the foreign company better adhere to U.S. law. And 
if the big company doesn't have accountability and liability, 
it won't do it.
    So we agree that the entire supply chain should be held 
liable. And the important new step in your bill is it makes it 
easier to hold that foreign supplier liable.
    Ms. Sanchez. Mr. Schlueter, in your written testimony, you 
recount the complexity of serving process on the Chinese 
company that was responsible for manufacturing the defective 
scooter that caused the death of the 13-year-old girl.
    If legislation such as H.R. 5913 were enacted prior to the 
incident, how do you think that that would have affected your 
case and the way that it was litigated?
    Mr. Schlueter. Well, it certainly would have changed and 
made the ability to get service of process on the Chinese 
defendant a lot easier.
    But, you know, there is one step that goes beyond the issue 
of service of process. This bill effectively assists and helps 
with getting jurisdiction within the United States of the 
defendant. It doesn't help with, you know, the results that you 
get by getting a judgment against the Chinese manufacturer.
    But it would have additionally assisted, and that is what I 
tried to put in my written statement, to try to explain what 
was taking place and going on. After the defendant received 
notice that it had the judgment against it, it initially 
ignored the judgment until discovery was sent to its customers 
that were receiving the goods that were coming into the United 
States.
    What typically happens--and I have learned this in speaking 
to other government folks and in speaking to experts in the 
area of imports--that the defendant can change the way that it 
operates and does business.
    And by morphing itself into another entity or being 
involved in a fraudulent conveyance, which was one issue that 
happened here, having a bill where you could effectively have 
some control over activities more easily in the United States 
by serving those other entities than going back through The 
Hague again and again every time they change it.
    Because the stream of commerce, the way that they operate, 
in speaking particularly with this one manufacturer and taking 
depositions, from the point of order from a particular company 
they can have a container to you within 3 to 5 weeks. It may 
take, as it did in the last service in The Hague, 8 months to 
simply get notice.
    So it would be very helpful and very instrumental to assist 
in that regard.
    Ms. Sanchez. Thank you.
    Mr. Schwartz, in your written testimony, you talk about the 
disparity between those foreign manufacturers who escape 
accountability and the domestic manufacturers who do not.
    If this Subcommittee were to implement the changes to H.R. 
5913 that you suggest, would that begin to remove that 
disparity between foreign manufacturers and domestic 
manufacturers?
    Mr. Schwartz. I think the bill as a whole would, because, 
to the extent we can put at least the threat of our tort system 
on anyone who is sending a defective or dangerous product to 
the United States, they are going to have to have some type of 
insurance.
    Right now, some of them can operate with a blank check. 
They can go uninsured, because they have realized they will 
never, never be subject to liability here.
    So I think at least one step in that direction is good, for 
the point of view, at least, of deterrence and also that they 
would have to go out and buy insurance and have the same tort 
tax as we do.
    Ms. Sanchez. Thank you.
    My time has expired. At this time, I will recognize Mr. 
Cannon for 5 minutes of questions.
    Mr. Cannon. Thank you, Madam Chairman.
    You know, sometimes it is offensive when a group of people 
are standing around laughing, and I want to apologize. But Mr. 
Steinhardt made the point that this is not exactly the most 
interesting stuff on earth. We have some brilliant staff on 
both sides of the aisle here who are standing around talking 
about how cool it is, after having been first-year law students 
a long time ago, to actually be dealing with this area of the 
law, which actually was intriguing to me then and intriguing 
apparently to all of us. And one wonders about people who find 
intrigue in the procedure of the Hague Convention.
    But we appreciate your being here and your expertise and 
your insights into this. This is not a partisan issue, from my 
point of view. It is really an issue of how we proceed and make 
it work in a way that actually is effective.
    And, by the way, your testimony has been very enlightening. 
I think that we now have some work to do here on the Committee 
to help make adjustments that work.
    Let me just clarify, Mr. Schwartz and others of you who 
might have an opinion on this. You talked, Mr. Schwartz, about 
Asahi and the national contacts versus the State contacts and 
the difference between the national contacts justifying Federal 
jurisdiction as opposed to State jurisdiction.
    Would you mind talking a little bit more about that? And 
then, if others have views on that, I would appreciate that as 
well.
    Mr. Schwartz. Well, a State court can consider contacts 
within its borders but not beyond, at least the way the texts 
and cases say they can. So you could have a product that is in 
Oregon. Maybe there was virtually no contact with Oregon. 
Somebody is injured there. They go into an Oregon court, the 
case is going to be dismissed against that foreign 
manufacturer.
    A Federal court can assemble contacts throughout the United 
States and is a better forum, from all points of view, to 
resolve an issue of this type. If you open it up to State 
courts, I think it creates a problem of potential 
unconstitutionality of the statute, and also it impedes its 
practical work in our judicial system.
    Mr. Cannon. Mr. Steinhardt, Professor Steinhardt, do you 
agree with that?
    Mr. Steinhardt. I do. I guess I would add two quick 
constitutional points.
    One is the difference between Federal and State courts is 
crucial, as your question suggests. I don't know of any 
previous effort by the Congress to determine the means or the 
sufficiency of process in State courts. It is arguable, I 
suppose, that the foreign commerce powers and the supremacy 
clause would give Congress the ability to determine the means 
and sufficiency of service for State courts, but I doubt it.
    And so I have no doubt that it is constitutional with 
respect to the Federal courts and the ability to aggregate, for 
the reasons Mr. Schwartz suggested, all national contacts. But 
I am dubious that Congress can do that with respect to the 
State courts.
    The second point I would make is that the legitimacy of 
aggregation can depend in part on what the basis for subject 
matter jurisdiction is. That is, the courts are much more 
likely to aggregate national contacts when the basis for 
subject matter jurisdiction is a Federal question.
    So there is some controlling Federal question, and it would 
make sense, where the relevant jurisdiction there is the nation 
as a whole, to aggregate all the national contacts. The courts 
are much less likely to aggregate when it is based on diversity 
jurisdiction, where, for the reasons Mr. Schwartz suggested, 
they look to the States.
    The key point of 5913, it seems to me, is that it begins 
the process of breaking away from these historic concerns with 
State boundaries that don't matter at all to the foreign 
manufacturers.
    Mr. Cannon. Mr. Mierzwinski and then Mr. Schlueter?
    Mr. Mierzwinski. I don't have any comments, sir.
    Mr. Cannon. Do you guys actually care--do you want us to do 
something so that State courts have jurisdiction? Or are you 
indifferent as to whether it is State or Federal courts?
    Mr. Mierzwinski. I think the consumer groups would prefer 
the broadest possible opportunities for private plaintiffs to 
protect themselves. We would be happy to get back to you with 
greater details on it.
    Mr. Cannon. Thank you. But you don't really particularly 
disagree, I think, with what the professors have said?
    Mr. Mierzwinski. Not right now, no.
    Mr. Cannon. Great. Well, we would appreciate some feedback 
on that, then.
    And, Mr. Schlueter, do you have anything you would like to 
say?
    Mr. Schlueter. Yes, Congressman Cannon. I leave the 
subject, regarding the constitutionality, to smarter minds than 
mine.
    But in regards to what the bill would effectively do, would 
be something that would be helpful, because, as in this 
particular case that I have in my written testimony, you had 
the defendant that, after being notified in regards to its 
judgment and efforts going in that direction, making the claim 
that it did not have any contacts in the United States by 
simply adopting the philosophy and seeking to get a ruling from 
the courts by saying that essentially, because the transfer of 
the goods took place in the port of Shanghai, that they did not 
have contacts with the United States, in the sense that their 
goods were not their goods, they belonged to someone else.
    Mr. Cannon. I see that my time is expired, but could I ask 
one clarifying question here?
    Ms. Sanchez. Certainly.
    Mr. Cannon. What I am really wondering is, do you, as a 
practicing lawyer, care about whether you have the ability to 
go into State courts, or do you mind if this bill is limited to 
Federal courts based upon some sort of national set of 
contacts?
    Mr. Schlueter. Well, obviously, the issue of choice between 
State courts and Federal courts is an issue that I think is 
generally relegated to, I guess, the separation of powers 
between Federal and States. But, generally speaking, we pursue 
claims both in Federal and State courts and look at it on a 
case-by-case basis of where a jurisdiction would be.
    Mr. Cannon. Madam Chair, I see my time is expired.
    Let me just say that, if you have further comments on 
that--it seems to me that we are, sort of, falling into saying 
that national contacts in Federal courts, which would preclude 
State court jurisdiction in these matters. And to the degree 
that you and your associates have comments on that, I think we 
would appreciate that, both from you and Mr. Mierzwinski.
    And, with that, I yield back, Madam Chair.
    Ms. Sanchez. I thank the gentleman.
    At this time, I would recognize Ms. Lofgren for 5 minutes 
of questions.
    Ms. Lofgren. Thank you, Madam Chair.
    And thanks to the witnesses.
    I think, you know, this is a very important issue. I am 
happy to be a cosponsor of the bill. But the introduction of 
the bill is just the beginning of the legislative process. And 
this hearing and the expertise shared with us is an important 
element to refining the bill to make sure that it actually is 
constitutional.
    And, for the professors, I think your comments relative to 
the State court jurisdiction issue are extremely pertinent and 
important. Much as I would like to have the ability to go to 
State court, if we pass a law that doesn't meet constitutional 
requirements, we haven't accomplished much. So I appreciate 
that.
    Listening, Mr. Schlueter, to your testimony--it was a very 
tragic situation that you described there. And it just sounds 
to me that China was really not complying with the Hague 
Convention.
    Do you believe that the Chinese government really was 
attempting to avoid their obligations under the Hague Treaty?
    Mr. Schlueter. Well, my understanding of the Hague 
Convention is that that is a process, and not every foreign 
state subscribes to every term within the Hague Convention.
    My issue with regards to the process of the Hague is not 
commenting upon whether or not the central authority complied 
with the Hague, because there was service that was done, albeit 
perhaps improper--or, at least, you would have a State court 
judge in Georgia that would be making an interpretation as to 
whether or not that was proper service. But under the Hague, it 
defers to the foreign state to make a decision whether or not 
this service that took place on a security guard was effective 
service in China.
    That issue had not yet been decided. We have to go through 
the process again, which took a substantial amount of time. It 
would seem that it wouldn't take 8 months to get service----
    Ms. Lofgren. Yes, it would.
    Mr. Schlueter [continuing]. Under the Hague. But I have 
come to learn that it does take a substantial amount of time to 
get compliance. Whether or not there are any shenanigans that 
go on in regards to the country in trying to hinder efforts in 
getting service I don't know. But, still, there is not 
reciprocity. The Hague, since the subscription of China with 
the Hague would not allow the enforcement of the judgment, even 
though we get a judgment in the United States, with China.
    Ms. Lofgren. You know, I very much want to accomplish some 
progress in this area. I think it is important for consumers. I 
am concerned, however, that what we have may not meet our 
requirements under the Hague Convention.
    And I am wondering, Professors, if you have any thoughts on 
is there anything we could do, if you share that concern, that 
would provide any remedies for that.
    Mr. Schwartz. Professor Steinhardt is really the expert on 
that, so I will defer to him.
    Mr. Steinhardt. Always a dangerous introduction. 
[Laughter.]
    I have run up against the difficulties in the Hague Service 
Convention; I have criticized it in print. It is an improvement 
over the law of the jungle that we had before.
    It is complicated because every major trading partner of 
the United States is a party, including Canada, China, Japan, 
Korea, Mexico, the United Kingdom and most members of the E.U. 
And they will not go away quietly if any piece of legislation 
is construed as an effort to render it irrelevant.
    In the Shlunk case--I am not making that name up, S-H-L-U-
N-K, the Shlunk case--the Supreme Court, again per Justice 
O'Connor, said this: ``Where service on a domestic agent is 
valid and complete under both State law and the due process 
clause our inquiry ends and the Convention has no further 
implication.''
    In that case, there was an attempt to sue a foreign 
manufacturer on the basis of a U.S. subsidiary. Under State 
law, the U.S. subsidiary was a mandatory agent for the receipt 
of process. So serving the subsidiary was dandy under State 
law, forgetting the foreign manufacturer.
    If we just put the word ``Federal'' instead of the word 
``State'' law there, then it looks as though Shlunk would allow 
you to comply with Federal law. And a Federal law says you are 
complete with your service as soon as you have accomplished it 
domestically, and after that the Convention drops away. You 
could take that hint and try to drive a truck through it, but 
the real-world consequences, I think, are profound.
    I ask my students often, did the Hague Service Convention 
survive being Shlunked? And there is a sense in which if you 
use the expedient of local law to circumvent the treaty, every 
other treaty partner will be lined up around the block with the 
State Department either holding the United States in violation 
of the Convention or saying, ``Me, too.''
    And that is where the rule of reciprocity comes in, because 
if we are fed up with the idea that we have to translate our 
process into a foreign language because of the Hague Service 
Convention, we give up the right to insist that their legal 
papers be translated into English too.
    Ms. Lofgren. I see the problem you have outlined. I see my 
time is up. But we have a situation that we have faced here, 
for example, in China, where, you know, you can't get justice 
for somebody who has been wrongfully harmed.
    Mr. Steinhardt. If I may, one possibility is to view this 
as a form of unfair competition and as a violation of World 
Trade Organization rules----
    Ms. Lofgren. That is interesting.
    Mr. Steinhardt [continuing]. Which is not something I 
pursued in my written statement, but I think it is not 
unreasonable, for the reasons Dean Schwartz suggested a second 
ago, it is not unreasonable to view their impunity as an unfair 
form of trade. So that the answer lies not in the Hague Service 
Convention, which, as I say----
    Ms. Lofgren. That is very interesting.
    Mr. Steinhardt [continuing]. Is just a matter of process; 
it lies in the WTO.
    Ms. Lofgren. My time is expired.
    Thank you, Madam Chair.
    Ms. Sanchez. Thank you, Ms. Lofgren.
    At this time, I would recognize Mr. Watt for 5 minutes of 
questions.
    Mr. Watt. Thank you, Madam Chair.
    And let me do two things preliminarily: apologize to the 
first two witnesses for missing your testimony because of 
another commitment; and applaud the selection of the witnesses 
by our Chair and the staff. This is a fascinating issue. But, 
as the second witness can attest, it is about people and the 
impact on people, ultimately, so we shouldn't lose sight of 
that.
    Mr. Cannon said that he was intrigued in law school by Erie 
v. Tompkins. I was just confused by it. And I thought I would 
never see a day when I would come back to it voluntarily, but 
here we are. [Laughter.]
    There are two issues that I want to deal with. One is the 
substantive law issue. Erie v. Tompkins deals with: Cases 
arising under the State substantive law must apply the law of 
the State in which the Federal court sits.
    Let's deal with the substantive law issue first. Is there a 
body of Federal law in a sufficient number of these areas where 
we wouldn't have to deal directly with the question of 
application of State law?
    I mean, what is the body of Federal law, and should we be 
looking at the possibility of extending that Federal law, not 
as a preemptive set of standards, but as something that people 
could get into on the substantive law issue to get around this 
and then, if there were sufficient State contact, apply the law 
of that State and Federal law?
    What is the status of the Federal law in this area?
    Mr. Schwartz. Well, I want to hear the views of others, 
but--it has been said many times there is no Federal common law 
when a case arises under State law. And my first job was as a 
law clerk, and when we had a case arising under State law, 
Judge Metzner looked to the law of New York, which is where his 
court was located, to determine what the rules were. And that 
included conflicts of laws, and that is why I think it is 
important to look at that particular issue.
    What has confused scholars, sir, is whether or not Erie--I 
hate to bring it up--and Klaxon, its daughter, were 
constitutionally based. Sometimes the Supreme Court operates 
under the Constitution of the United States, and other times it 
is operating as a Federal supervisory role. And people who are 
a lot brighter than I am have studied this for years, and they 
come away like three rabbis reading part of the Torah: They 
have all different opinions.
    So to be safer than sorry, I would say, unless there is 
really an absolute need, that everybody says we must have a 
choice-of-law provision in here, I would probably not do that, 
because it is more likely to lead to problems than it is to 
solve problems. So there is no body of Federal law that I know 
that can cross over Erie.
    Mr. Steinhardt. If I could just be one of the three 
rabbis----
    Mr. Watt. Let me just flesh that out a little bit, because 
you are saying we don't have--obviously won't have any Federal 
common law, but we have Federal statutory law. And that 
wouldn't be sufficient in this context? Or is there no Federal 
statutory law that--I mean, we are trying to federalize tort 
liability standards. Why couldn't we federalize--is there no 
Federal tort law, statutory law?
    Mr. Schwartz. Okay. Now I have got your question, Mr. Watt.
    Mr. Watt. Okay. All right.
    Mr. Schwartz. You can, under the commerce clause--and 
actually this body has done this in the General Aviation 
Recovery Act of 1994--have a rule of law that applies in both 
Federal and State courts when there is a basis in interstate 
commerce for that law.
    And I want to think further about that particular aspect 
that you have brought up and report back to the Committee on 
that.
    Mr. Watt. Professor, my time is up and I didn't get to my 
second question, but this one is fascinating enough. I guess if 
we had the substantive issue taken care of, we can deal with 
the service issues, the process issues. That would be--I mean, 
it might take 3 years to get service of process, but at least 
we are dealing with the substantive law now.
    Could I just hear your response to the first question?
    Mr. Steinhardt. Sure. Thank you, Mr. Watt.
    I think as Mr. Mierzwinski indicated in his testimony, 
there are certain Federal standards that I think distinguish 
this case from the Erie case. Sadly, it is part of my job 
description to teach Erie and the Klaxon decision. And I guess, 
in my view, the choice-of-law provision in the bill is not an 
unconstitutional modification of the rule in Erie and Klaxon. 
And my written statement, pages 9 and 10, tries to lay that 
out.
    Now, maybe I am just one of the three rabbis trying to 
interpret this. But I think Erie, at its heart, reflects the 
fact that Congress had no power over the issue substantively in 
Erie. And so of course the Federal courts were supposed to 
apply the State law.
    At the heart of the Erie litigation were these 
constitutional limitations on the Federal Government's 
legislative power. But you have the legislative power, with 
respect to 5913, because it is in foreign commerce and, as 
modified, deals with the jurisdiction of the Federal court.
    It seems to me that that fundamentally distinguishes cases 
under 5913 from Klaxon. So long as you have the constitutional 
authority and, as Mr. Mierzwinski suggests, there is Federal 
law dealing with product safety, then I think Erie and Klaxon 
is actually quite distinguishable.
    Ms. Sanchez. The time of the gentleman has expired.
    Mr. Watt. Thank you, Madam Chair.
    Ms. Sanchez. We will allow Members to submit written 
questions as well. We have many more questions, but we want to 
make sure we speed you on your way to whatever other 
commitments you have.
    I want to thank all of the witnesses for their testimony 
today.
    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 promptly as you can 
so that they can be made a part of 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 all of our witnesses for their time 
and their testimony.
    And this hearing of the Subcommittee on Commercial and 
Administrative Law is adjourned.
    [Whereupon, at 10:44 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

Responses to Post-Hearing Questions from Richard R. Schlueter, Childers 
                  Buck and Schlueter, LLP, Atlanta, GA











                                

Responses to Post-Hearing Questions from Victor Schwartz, Shook, Hardy 
 and Bacon, LLP, Washington, DC, on behalf of the Institute for Legal 
            Reform of the United States Chamber of Commerce







                                

Reponses to Post-Hearing Questions from Ralph G. Steinhardt, The George 
            Washington University Law School, Washington, DC






                                 
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