[Congressional Record Volume 141, Number 47 (Tuesday, March 14, 1995)]
[Extensions of Remarks]
[Page E595]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


            COMMON SENSE LEGAL STANDARDS REFORM ACT OF 1995

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                               speech of

                         HON. STEPHEN E. BUYER

                               of indiana

                    in the house of representatives

                        Wednesday, March 8, 1995

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill H.R. 956, to 
     establish legal standards and procedures for product 
     liability litigation, and for other purposes:

  Mr. BUYER. Mr. Chairman, in the past 50 years, the cost of torts--
personal injury, product liability, and medical malpractice cases--have 
grown at 4 times the rate of the overall economy. Currently, the cost 
of this system is in the neighborhood of $132 billion.
  Other than diversity jurisdiction in Federal court, predominately, 
tort actions have been tried in State courts. Historically, consumers 
bought goods and services locally--intrastate--where many companies 
primarily conducted commercial trade locally. State rules for tort 
actions were probably quite appropriate. In the last half century, 
however, interstate commerce has dominated the market. Consumers buy 
products that are manufactured in other States, with company 
headquarters in still another State. Companies no longer serve local 
markets, but sell products nationally, even internationally. The 
mechanism by which civil disputes are settled has not kept pace with a 
changing world and its economy.
  From 1973 to 1988, product liability suits in Federal courts 
increased 100 percent; in State courts the increase was between 300 and 
500 percent.
  This increase in litigation has not come without a price. Because 70 
percent of products manufactured in any one State cross State
 borders before the point of final sale, American manufacturers must 
contend with the uncertainty of 50 different civil justice systems. The 
awards for damages in one State affect the prices to consumers, 
insurance rates, and job market in other States. According to surveys 
reported by Pace University Professor of Law M. Stuart Madden, because 
of liability costs, 36 percent of American manufacturers have withdrawn 
products from the world market, 47 percent have withdrawn products from 
the domestic market, 30 percent have decided not to introduce new 
products, and 25 percent have discontinued new product research.

  It can be argued that our tort system is already federalized, except 
that no consistent standards apply. Even criminals in our criminal 
justice system face a clear definition of what constitutes crime and 
there is a limit on what punishment is deemed to be just.
  For the average American, the current tort system denies the right of 
free choice in the marketplace and inflates the prices for available 
products. It also discourages innovation, retards capital formation and 
creates a distinct competitive disadvantage in the world market, 
affecting ability of the economy to create and maintain jobs.
  The chief flaws of the existing system is that it is unpredictable 
and there is little individual responsibility where all are considered 
victims.
  Article I, section 8 of the Constitution gives Congress the power to 
regulate interstate and foreign commerce. The intent of H.R. 956, the 
Common Sense Product Liability and Legal Reform Act, is to return a 
sense of reasonableness and predictability to this system.
  H.R. 956 would: First, limit the liability of product sellers; 
second, limit the liability of manufacturers for injuries due to drug 
or alcohol abuse, or to the misuse or alteration of their product; 
third, institute a 15-year statute of repose on product liability; 
fourth, impose sanctions for bringing frivolous product liability 
suits; fifth, eliminate joint liability for noneconomic damages in 
product liability suits; sixth, require a higher standard of proof for 
punitive damages in all civil suits; seventh, cap punitive damage 
awards in all civil suits at $250,000 or 3 times economic damages, 
whichever is greater, and eighth, require strict standards of proof for 
claims against biomaterial suppliers.
  In no way does H.R. 956 limit the ability of a plaintiff to recover 
actual economic loss--medical bills, lost wages, and the like.
  This legislation will help benefit many of the small businesses in 
the 5th District of Indiana. Let me site just two examples.
  Whallon Machinery of Royal Center, IN, manufacturers industrial 
material handling machines. The machines incorporate hydraulic and 
pneumatic components as well as sophisticated electronics. This 
equipment can be found in nearly every State and many foreign 
countries. In nearly 30 years of business, over 83 percent of all 
machines built are still in use. In 1993, Whallon received notice of an 
incident involving their equipment. Previous to this, Whallon had no 
product liability claims. A
 customer modified a Whallon machine to the extent that an operator 
could place himself into the working mechanism of the equipment while 
the machine was still in automatic operation. An operator, without 
first hitting the emergency stop button, as instructed by the owner of 
the machine, entered the machine while it was running and sustained 
injuries. Whallon ultimately settled out of court.

  Whallon was quickly affected by this. First, its insurance carrier 
decided to not renew Whallon's policy. New insurance was found but at 
nearly 4 times its 1993 premium. The company had to alter plans for 
plant improvements and expansion, which meant neither additional hiring 
nor improvement in employee benefits.
  In another example, medical device manufacturers, such as BIOMET, 
Zimmer, DePuy, and Danek in Warsaw, IN, provide critically needed 
products to patients across the country and in the world. Medical 
device manufacturers have improved the quality of life for countless 
individuals, through pacemakers, heart valves, artificial blood 
vessels, hip and knee joints.
  Three major suppliers--DuPont, Dow Chemical, and Dow Corning--
recently announced that they would limit, or cease altogether, their 
shipments to medical implant manufacturers. Under current law, 
suppliers of the raw materials used in implantable devices may be 
brought into the litigation process. Huge damage awards are often 
sought from these biomaterial suppliers, even though suppliers have no 
role in the design, manufacturer, or sale of the implantable device. 
The courts are not finding the suppliers liable--one supplier has a 
record of 258 to 1. Nevertheless, it can cost millions to defend and 
win these lawsuits. The risks and costs of responding to product 
liability suits far exceeds the limited revenues generated from the 
sale of these materials and it is driving suppliers away from the 
medical device industry.
  Alternate suppliers have been identified for certain of the 
materials, but they have expressed similar liability fears. In many 
cases, no other supplier exists. Alternate suppliers will likely sell 
materials only to those medical implant companies with the financial 
ability to back stringent indemnification agreements. According to Dane 
Miller, president of BIOMET, he is having to look at offshore 
biomaterial suppliers and the substitute materials made available may 
be substantially different and require quality assurance and new 
testing. Small implant manufacturers and start-up companies, however, 
are not in a financial position to guarantee adequate indemnification 
to suppliers. Small medical technology manufacturers are a primary 
source of innovation in the medical technology industry.
  By limiting liability to instances of genuine fault, H.R. 956 will 
enable life-saving and life-improving medical devices to remain on the 
market.
  We must return a sense of reasonableness to ensure that injured 
parties are compensated in a manner that protects all consumers and 
America's competitiveness. H.R. 956 is a good start in that direction.


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