[Congressional Record Volume 141, Number 44 (Thursday, March 9, 1995)]
[Senate]
[Pages S3691-S3693]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                              LEGAL REFORM

  Mr. McCONNELL. Mr. President, the House of Representatives is in the 
[[Page S3692]] midst of Legal Reform Week and on its way to passing 
three bills which, if enacted, would dramatically overhaul and improve 
our civil justice system. So, Mr. President, the first thing I would 
like to do is commend the House for its determination and its 
commitment to change the legal system.
  With the exception of the general aviation bill last year, no court 
reform legislation of any sort has ever gotten anywhere in the 
Congress.
  So the House this week is about to do something truly historic. Over 
in the House and over here I hope we now realize the civil justice 
system is broken.
  Injured parties wait too many years to have their cases heard. While 
a few win big damage awards, many people suffering personal injuries do 
not get adequately compensated for those injuries. We know that for 
every dollar spent in America in these tort cases only 43 cents makes 
it to the injured party and 57 cents is taken up by the courts and the 
lawyers; 57 cents out of every dollar for transaction costs. That is 
not civil justice. More than half the money goes to transaction costs--
lawyers, and expert witness fees, as well as administration of the 
court system.
  Not only do victims fare poorly in the current legal system, but 
scarce economic resources are drained from more productive uses. 
Municipalities and nonprofit organizations must absorb spiralling 
insurance costs, threatening the important public services they 
provide. No small businessman can afford to be without a lawyer because 
of the liability maze. And, ultimately, the burden falls on the 
American people--as taxpayers and consumers, paying more for Government 
services and higher costs at the checkout counter.
  In fact, enactment of legal reform would give the American people a 
much deserved tax break--a break from the litigation tax that is 
strangling our economy. This tax break, unlike all others, will not 
even require a budgetary offset. And, even more significantly, it will 
not impact the Social Security trust fund.
  Perhaps if we add some specific language protecting Social Security 
to these bills, we will pick up a few Democrat votes. And, maybe then 
the President could support legal reform. Because as we learned from 
Attorney General Reno this week, the administration is strongly opposed 
to the legal reform effort. Interestingly, the administration's 
unhappiness with these initiatives focuses on federalism--State's 
rights. I am quite amazed by this approach; after all this 
administration has not met a problem that could not be solved without a 
new or expanded Federal program. We only need to remind ourselves of 
the health care debacle. It is only on this issue--legal reform--that 
they have suddenly found the 10th amendment.
  The fact is, the problem is a national one, and Congress has ample 
power to act, consistent with the commerce clause of the Constitution. 
Former Judge Robert Bork has eloquently disposed of the federalism 
issue in a letter he recently wrote to the Speaker. I ask that Judge 
Bork's letter be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                               Washington, DC,

                                                February 27, 1995.
     Hon. Newt Gingrich,
     Office of the Speaker, U.S. House of Representatives, 
         Washington, DC.
       Dear Mr. Speaker: I understand that several provisions 
     either already in H.R. 956, the Contract With America's legal 
     reform provision, or proposed to be included in it, have been 
     criticized as unwarranted intrusions on the authority of the 
     States.
       The provisions include virtually all the reform measures 
     that have been discussed over the previous several 
     Congresses, including limits on punitive or non-economic 
     damages and joint and several liability (whether applied to 
     product liability suits or broader categories of cases); 
     defenses relating to compliance with applicable federal 
     regulations; regulation of contingency fees and other aspects 
     of attorney conduct; and various statute of limitations 
     reforms.
       There can be little question that these reforms are well 
     within the scope of Congress' authority under the Commerce 
     Clause of the Constitution as it has been interpreted for 
     many years. Beginning in the 1930s, the courts have read this 
     Clause as a comprehensive grant of authority to Congress to 
     regulate virtually any type of activity affecting the 
     national economy. The measures under discussion indisputably 
     fall within this broad category of regulation.
       As you know, I have long believed, like many scholars and 
     jurists (and many Members of Congress), that these broad 
     interpretations of the Commerce Clause are questionable, and 
     arguably out of keeping with the scheme of coordinate 
     sovereignty intended by the Framers of the Constitution. 
     Rather than simply resting on the federalism case law, 
     therefore, I believe those measures are justifiable and 
     necessary to protect the balance between State and Federal 
     authority contemplated by the Framers. They could not have 
     foreseen the spectacular growth, complexity, and unity of 
     today's economy. It cannot be said with any certainty that 
     they would not have passed a measure like H.R. 956 in today's 
     circumstances.
       The problems addressed by H.R. 956 are national problems. 
     That is true not only because interstate commerce is 
     affected, and not only because products and services are made 
     more expensive as insurance costs rise, but also because the 
     plaintiffs' tort bar chooses to sue in jurisdictions where 
     awards of compensatory and punitive damages are highest. As a 
     consequence, a state like California or Texas can impose its 
     views of appropriate product design and the penalties for 
     falling short on manufacturers and distributors across the 
     nation. This is a perversion of federalism. Instead of 
     national standards being set by the national legislature, 
     national standards are set by the courts and juries of 
     particular states.
       No problem more preoccupied the Constitutional Convention 
     than the necessity of protecting interstate commerce from 
     self-interested exploitation by the States. Madison observed 
     in Federalist No. 42 that no defect in the Articles of 
     Confederation was clearer than their inability to protect 
     interstate commerce. And in Federalist No. 11, Hamilton made 
     clear that one of the key purposes of the new Constitution 
     was to prevent interstate commerce from being ``fettered, 
     interrupted and narrowed'' by parochial state regulation.
       The civil justice reforms under discussion are all designed 
     to vindicate this central constitutional purpose. It can no 
     longer be disputed that abusive litigation is having a 
     profoundly adverse impact on interstate commerce. Indeed, a 
     growing body of evidence suggests that the very purpose of 
     much of this litigation is to discriminate against interstate 
     commerce on behalf of local interests. Although 
     discrimination of this type was anticipated by the Framers, 
     the misuse of litigation to achieve this effect is a 
     relatively recent development. It is not surprising, 
     therefore, that Congress has not previously found it 
     necessary to regulate in this area.
       It is thus neither inconsistent nor hypocritical for 
     Congress simultaneously to protect interstate commerce from 
     parochial discrimination and to protect States and localities 
     from unwarranted federal interference. Both steps are 
     essential to maintain the constitutional balance established 
     by the Framers. Clearly, over the last fifty years the 
     overwhelming trend has been towards the unwarranted expansion 
     of Federal authority at the expense both of the States and of 
     individual liberties, and Congress can and should reverse 
     that trend. But this fact should not blind us to the 
     continuing necessity of protecting interstate commerce from 
     parochial, discriminatory regulation by states and 
     localities. Federal intervention for this purpose is not 
     merely constitutionally permissible, it is important to 
     vindicate the Framers' constitutional design.
           Sincerely,
                                                   Robert H. Bork.

  Mr. McCONNELL. Mr. President, there is only one objection to 
reforming the legal system. And it is the objection of the trial bar. 
They may be getting beat in the House, but they have not really begun 
to fight. We will see them use their muscle in the Senate. They will 
throw everything they have at us. They will wrap themselves in the 
tragic stories of real people who have suffered injuries. And they will 
let Ralph Nader and his network of organizations which they--the trial 
lawyers--fund argue on their behalf.
  Contrary to their assertions, our reforms will not hurt victims. We 
want to help victims get fairly compensated without long, drawn-out 
litigation. We want to encourage those responsible for injuries to 
settle with injured parties early. And, the House bill moves in the 
right direction.
  But as the debate shifts to the Senate, I want to encourage my 
colleagues to look seriously at the McConnell-Abraham bill, S. 300. Our 
bill reverses the incentive structure of the legal system. We set up 
rewards for early settlement. We want to put more money in the hands of 
victims. Our limitation on attorney contingent fees, as the Washington 
Post editorial page noted this week, will do just that.
  Mr. President, I ask unanimous consent that the Washington Post 
editorial be printed in the Record.
  There being no objection, the editorial was ordered to be printed in 
the Record, as follows:
        [[Page S3693]] [From the Washington Post, Mar. 8, 1995]

                         Civil Justice Reforms

       House Republicans are moving quickly to pass a series of 
     bills designed to reform the civil justice system. At least 
     three separate measures are expected to go to the Senate 
     before the weekend: a bill concerning the payment of 
     attorneys' fees, another making changes in securities fraud 
     law and a third setting new rules for the payment of punitive 
     damages and changes in product liability law.
       Not every bill deserves support in its present form. But 
     there is no denying that the majority party has taken on a 
     problem that has been festering for some time. In their 
     favor, it should also be noted that some of the more 
     defective provisions of the ``Contract With America'' on this 
     subject have already been improved by compromise and will 
     probably be further fixed by the Senate.
       The ``loser pays'' provisions of the first bill, which was 
     passed yesterday, would have required unsuccessful litigants 
     to pay winners' lawyers fees. It was always a bad idea. 
     Taking any case to court would have been extremely risky, 
     especially for those of modest means. As originally drafted, 
     the bill deserved to be defeated. But it has been modified so 
     that a loser must pay only if he has rejected a settlement 
     offer and after trial is awarded less than that offer. 
     Better, but still not perfect. The Senate should consider an 
     alternative offered by Sens. Mitch McConnell and Spencer 
     Abraham that would provide an incentive to litigants to 
     settle (immediate payment and hourly attorneys' fees) and a 
     penalty (reduced contingency fees in some cases) to attorneys 
     who don't. Both measures are designed to encourage early 
     settlement of disputes, but the McConnell-Abraham bill is 
     less Draconian.
       Securities fraud provisions have also been softened to take 
     into account some of the suggestions offered by the chairman 
     of the Securities and Exchange Commission, Arthur Levitt. The 
     problem here--frivolous class-action lawsuits against a 
     company as soon as its stock drops--is a real one. As 
     reported by the House Commerce Committee, this bill drew 
     support from almost half the Democrats. But additional 
     changes may be warranted to protect stockholders in 
     meritorious cases.
       The most hotly contested bill will be considered last. It 
     would limit punitive damages in all civil cases to three 
     times compensatory damages including pain and suffering, or 
     $250,000, whichever is more. It would also narrow the risk of 
     manufacturers' and sellers' liability in certain cases 
     involving defective products. Many of the latter provisions 
     make sense. Why not limit damages if the user has altered or 
     misused the product, or if the accident was caused by drug or 
     alcohol abuse? As for punitive damages, reform is overdue. 
     Guidelines and limits must be set, whether caps are $250,000 
     or $1 million or something higher. Juries are at sea and 
     sometimes come in with awards that are neither reasonable nor 
     justified.
       Yes, the fear of high punitive damages may keep 
     manufacturers on their toes. But so would the fear of large 
     fines payable to the public treasury in case of egregious 
     misconduct. The system of providing unpredictable 
     multimillion-dollar awards to single plaintiffs in order to 
     deter corporate misconduct is unfair and inefficient. A shift 
     to fines would make sense. Barring that change, clear 
     guidelines on punitive damages are needed.

  Mr. McCONNELL. Mr. President, our early offer provision, which builds 
upon a bill introduced by House Minority Leader Gephardt 10 years ago, 
will pay victims all of their losses, while taking many cases out of 
the court system altogether.
  Our Nation is suffering from, as one editorial cartoonist called it, 
lawsuitenitus. It is a contagious disease and it is raging at epidemic 
proportions. The cure is a strong dose of legal reform. The only ones 
who will not like the medicine are those who thrive on the disease and 
profit from the spread of lawsuitenitus by earning huge fees.
  Mr. President, we will have a number of bills here in the Senate to 
consider--the McConnell-Abraham Lawsuit Reform Act; the McConnell-
Lieberman-Kassebaum Health Care Liability Reform and Quality Assurance 
Act; the Product Liability Fairness Act will be introduced next week, 
and there will be other initiatives. I look forward to comprehensive 
hearings on these bills, in the Judiciary, Commerce, and Labor 
Committees.
  I am genuinely excited about the possibility of something happening 
on this issue. I remember being here 10 years ago as chairman of the 
Courts Subcommittee of Judiciary in 1985 and 1986, and we had numerous 
hearings on the subject of tort reform. But I knew we had no chance. We 
have had no chance for years. One of the positive results of last 
year's election, Mr. President, is that civil justice reform is now on 
the front burner and that genuinely excites this Senator who has had a 
great interest in this issue for many, many years.
  And, most importantly I am hopeful we will enact reforms which give 
the American people a legal system that is fair, equitable, and 
accessible for the resolution of their disputes.
  Mr. President, I thank you for your time.
  I yield the floor.
  Mr. BREAUX addressed the Chair.
  The PRESIDING OFFICER. The Senator from Louisiana is recognized.
  

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