[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
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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