[Congressional Record Volume 141, Number 67 (Tuesday, April 25, 1995)]
[Senate]
[Pages S5638-S5659]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          COMMONSENSE PRODUCT LIABIL- ITY AND LEGAL REFORM ACT

  The PRESIDING OFFICER. The clerk will report pending business.
  The legislative clerk read as follows:

       A bill (H.R. 956) to establish legal standards and 
     procedures for product liability litigation, and for other 
     purposes.

  The Senate resumed the consideration of the bill.

       Pending:
       Gorton amendment No. 596, in the nature of a substitute.

  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. PELL. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  [[Page S5639]] Mr. HOLLINGS. Mr. President, I ask unanimous consent 
that the order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HOLLINGS. Mr. President, awaiting others who wish to address this 
particular problem, I would like to emphasize, of course, the good that 
has been done over the many, many years when we have debated product 
liability. The sponsors of the bill here are looking for a problem to 
solve and disregarding the fact that the United States of America is 
the safest society with respect to manufactured products in the history 
of the world. That has been done in large measure due to that group of 
trial lawyers, damage suits, punitive damages, and other verdicts. With 
respect to punitive damages, they can only come about as a result of 
gross negligence and willful misconduct. And in my State, and in many 
of the States, some States do not even allow them. But in my State, if 
the trial judge himself does not find proof of willful misconduct to 
his own satisfaction, he just throws out that particular finding.
  So punitive damages have been used very judiciously, and in reality, 
are seldom used. For example, we asked the particular witness who 
appeared before us at the hearings who had presented the issue of 
punitive damages before the U.S. Supreme Court, we asked him to please 
study and come back and report to us over the past 30 years the total 
amount of punitive damages found. I know from my own experience and 
otherwise that it was a small amount, relatively speaking. I cited at 
that particular time the $3 billion punitive damage verdict in the 
Exxon Valdez case.
  And the gentlemen studied the particular findings of punitive damages 
over the 50 States in the past 30 years and it was $1.3 billion. Of all 
punitive damage findings, in all product liability cases, there was an 
amount less than one-half in one manufacturer's case.
  That has been the problem, Mr. President, in the sense that the great 
number of punitive damages are industries suing industries. An example 
again was down in the Pennzoil case, in Pennzoil against the Texaco Co. 
in the State of Texas some years ago. Again there was another $3 
billion finding. So I can just cite two manufacturer's cases where all 
the punitive damage findings in product liability cases amounts to one-
sixth of the amounts of those two cases.
  But look at the magnificent good that the tort system has done over 
many, many years. I think, for example, Mr. President, of the 4 million 
minivan recalls by Chrysler Corp. here in the last several weeks. Quite 
to the point. You do not find Chrysler Corp. recalling minivans to 
correct that faulty latch on the back door because they think it is 
just good business. They know good and well that they are going to get 
socked for actual and punitive damages if they willfully allow that 
particular defect to continue, to knowingly, willfully, heedlessly--
recklessly is the language used in punitive damage awards--allow that 
to continue.
  And as a result we will give the body before long over at the 
Department of Transportation information about the millions and 
millions of car recalls by the various automobile companies over the 
past several years, which means what? Which means exactly what we are 
trying to say. If you want to talk about Medicare, limit the damages, 
limit the recovery of the injured parties as a result of the neglect of 
these manufacturers as this bill does, and what will happen is that you 
and I will pick them up in Medicare and Medicaid costs.
  In all my years of trial work, I have never really seen an injured 
party make money. And I can tell you less and less of those in the 
trial bar are joining that particular trial bar because the other is 
much more luxurious. If you can represent the industry, the business, 
the manufacturer, if you can represent, as some 60,000 lawyers here in 
the District of Columbia represent, lobbyist consultant causes, hardly 
ever entering the courtroom, you are into the game of billable hours. 
In my 20 years of active practice and over 40 years at the bar--almost 
50 years now at the bar--I have never had a billable hour case. We are 
always practicing law from the standpoint of the success of the trial 
and the representation of that particular client.
  But be that as it may, let me emphasize going right to the different 
studies made by the Rand Corp. and others, large manufacturers have 
responded to product liability suits by establishing corporate level 
product safety officers. In the 1987 Conference Board report, 232 risk 
managers reported that over two-thirds of the companies in this survey 
had responded to product liability by making their products safer.
  I can go down the list of the various trials and findings that led to 
a change of practice, whether it is in the Dalkon shield case, or the 
Drano case. The evidence showed in the Drano case that, subsequent to 
the plaintiff's injury, the screw top on the can was changed because it 
caused it to explode. That particular design was changed on account of 
the plaintiff being awarded $900,000 in compensatory damages and 
$10,000 in punitive damages. With regard to firefighter respirators, 
three firefighters in Lubbock, TX, were killed as a result of a defect 
in their respirators, a hole in the diaphragm. A lawsuit revealed that 
the company knew that the respirator was unsafe. The manufacturer later 
corrected the mask as a result of the lawsuit.
  I have a whole documentary of product after product after product 
being made more safe than ever before on account of product liability. 
We are all talking like product liability is a burden on society. It is 
an advantage to the American body politic because it brings out this 
safe conduct.
  Specifically, Mr. President, just a few years ago, originally some 15 
to 20 years ago, I went into Bosch, a manufacturer of fuel injectors in 
my backyard, which now has graduated up to making antilock brakes. I 
would think that any investor on the New York Stock Exchange would say 
wait a minute, before I invest in the antilock brake manufacturer, I 
can see that after a year one might go awry, after 10 years a car with 
an antilock brake might go and cause the one wheel to lock and the rest 
spill them over and cause, without even running into somebody else, a 
serious accident. I better not invest in an antilock brake 
manufacturer.
  The truth of the matter is that I was introduced into the 
manufacturing plant itself, and I put coverings over my shoes, a smock 
around my clothing, a head cover over my hair and my head and 
everything else as if we were producing pharmaceuticals or film. We 
have the film making plants of Fuji that is doubling their size right 
now in Greenwood, SC. I have Hoffmann-La Roche actually building the 
most modern pharmaceutical plant in the world in Florence, SC, right 
this minute. And we have brought in Parke-Davis and Baxter and Norwich 
and the other medical pharmaceutical manufacturers. So we know about 
them.
  I thought I was already into one of those film making plants where 
you could not stand the slightest speck of dust. I asked the manager at 
the Bosch plant, I said, ``Let me ask you about this plant. How many 
product liability claims have you had?'' He said, ``What's that?'' I 
said, ``Product liability claims. Defective antilock brakes, some of 
them going bad.'' He said, ``Oh, Senator, we have never had a product 
liability claim. If we had''--and he quickly ran over on the line there 
and picked up one--he said, ``See that little number. Every antilock 
brake that goes out of this particular plant has a serial number and we 
could immediately identify where and at what stage any kind of defect 
occurred, but we have never had it.''
  Now, that particular corporation makes the antilock brakes for the 
Toyota, for the Mercedes-Benz, and was recently awarded a 10-year 
contract for all General Motors cars. This is what we have going on as 
a result of product liability. It is not the stultification or denial 
of the development of manufactured products or pharmaceuticals or 
whatever else. What has developed is far more safe to the consuming 
public.
  We know that, and we appreciate it. The Consumer Federation of 
America, Consumers Union, every consumer organization of any 
credibility whatsoever in the United States of America, is absolutely 
opposed to this so-called reasonable bill. They know it, and I know it. 
It is not reasonable.
  [[Page S5640]] The bill in the last three Congresses never had caps. 
They have caps on punitive damages now in this bill. We never had in 
the last three Congresses the matter of misuse. Now they have a misuse 
provision. It allows them to get out from under the particular claims 
exemption. They have the exclusion for rental car exemptions, the 
matter of component parts. We can go right on down the different things 
that have been sneaked into this particular bill.
  To talk in terms that I have heard recently about how you cannot pass 
product liability reform at the State level absolutely begs the 
question. The distinguished Presiding Officer knows that. He has it in 
his own State.
  In 1988, in South Carolina, under a Republican administration, a 
Republican Governor, we had a get-together of the chamber of commerce, 
the textile manufacturers, the pharmaceutical groups, the trial 
lawyers, the medical bar and all insurance companies, and we got a 
product liability reform bill passed and signed by the Governor. Forty-
six States have done that.
  I heard just recently that, to do that at the State level would take 
4 or 5 years because those trial lawyers would come in and delay it, 
because they like delay. Totally false. The sponsors of this bill do 
not understand that.
  I am a trial lawyer. That is the last thing I want is delay. I know 
the game. The insurance company is going to ultimately pay, if at all, 
if there is going to be any recovery. The insurance company and the 
manufacturers' attorneys win every time if they can delay the case. 
Witnesses get lost, they ``malaccuse,'' and everything else of that 
particular kind, and all along that trial lawyer is having to pay for 
what? For the investigative costs, the medical experts, the 
depositions, interrogatories, the court costs, his own time and 
everything else on a contingent-fee basis.
  You get 5 to 10 fairly substantial cases in your practice and you are 
carrying those for 2 to 3 years now. Do not tell me it will take 4 to 5 
years, I will go broke. So I as a trial lawyer am trying my best to 
bring those cases to a conclusion. Yes, the trial lawyer does have a 
self-interest in bringing that case to a conclusion and as quickly as 
he can. The delay is on the other side. I know, because I represented 
the electric and gas company and the bus operator in my own hometown in 
defending injury claims against that bus company. Any time I got the 
investigators--and we can sit up there with the mahogany desk and nice 
Karastan rug, answer the phone and act dignified and do not have to 
worry about looking for any witnesses or talking to any doctors or 
anything else, just tell the investigatory team of the large 
corporation--and it was the largest corporation we had in the State of 
South Carolina at the time I represented them--``Go ahead and get all 
of those statements. Don't worry about it.'' ``Miss so and so, fill out 
interrogatories No. 52 and send that to the lawyers and I'll send them 
another bill.''
  Oh, man, that is luxury practice. That is what you have downtown 
here. That is what you have with this crowd that is sponsoring this 
particular bill. They wrote it. The game plan now is quite obvious. The 
game plan is ooze and cruise. How reasonable and how fair and they call 
it the fairness act and all that nonsense, like somebody is fast 
asleep, and then go over there and get with the Gingrich contract.
  Republicans are rolling over on this side with the Gingrich contract. 
He writes it over there. He tells them, ``You do this or you're out of 
it. You're not going to have your funds raised by us, you're not going 
to have our support in the next year's election and if you want to be 
on the team, you have to come out for practice and vote as we say 
vote.''
  Right now they have in the morning news how they are trying to get 
them to sign a pledge about a budget. Can you imagine that? Like 
joining some organization or fraternity. I never was in a fraternity. 
They were against the rules at the campus of the college I attended. 
But you take an oath. So they have an oath of loyalty to whatever 
else--not to the people they represent or their conscience but what Mr. 
Gingrich and the contract finds.
  So we are in a dangerous strait here in this particular body. We will 
be asking for time to debate every one of these particular measures. 
You have not only the matter of the punitive damages provision in here, 
you have the exemption for the manufacturer. You would think that the 
conscience would get them, if you please, and they say, ``Well, it 
makes no difference.'' If it does not make any difference, I want them 
to go along with the amendment when we put it up that the manufacturer 
will also be under the provisions of this particular measure.
  They have it for everybody but who? The manufacturer. The 
manufacturer is not subject to the provisions of this bill. It is a 
manufacturer's scapegoat if there ever was one. In good conscience, I 
just could not put up a bill like that and try to defend it amongst my 
colleagues. I would lose all my credibility. But that is what they 
have. They say it is not restrictive. Yet, certain evidence is not 
admissible. They say it is simplicity, eliminating duplication, the 
multiplicity of suits. They asked for a bifurcated system on the one 
hand for action and on the other hand for punitive damages and say you 
cannot on the willfulness part submit that kind of evidence in the 
actual damage claim over here for compensatory damages.
  The Conference of State Supreme Court Justices came up, the National 
Conference of State Legislatures came up and said this is really going 
to bog us down taking the guidelines from Washington and trying to 
administer with new words of art and provisions at the State level. If 
there is ever one unfunded mandate, this is it. This is an unfunded 
mandate back at the States to cost more money, more legal costs and 
everything else of that kind, and they have the audacity to come forth 
with a straight face and say they are interested in the consumers 
getting the money because the lawyers are getting too much. That is out 
of the whole cloth.
  Of all tort claims in the United States of America, rather of all 
civil claims filed in the United States of America, tort represents 9 
percent of all civil claims filed. Of the 9 percent of tort claims 
filed, product liability represents 4 percent of the 9 percent, or 
thirty-six one-hundredths. We are not talking about medical 
malpractice. We are not talking about businesses suing businesses. We 
are not talking about Securities and Exchange Commission suits and 
class actions. We are not talking about automobile wreck cases. We are 
not talking about any of those kinds of injury cases. We are talking 
solely about product liability. It is not a national problem.
  President Ford took this up starting back in 1976 with a special 
study commission, and after 4 years of findings, they found that the 
States were doing it. Sure enough, over the past 15 years, as I pointed 
out, 46 of the 50 States have just done that, they have upgraded, in a 
sense, their product liability laws.
  Now cometh the theme, so to speak, of the revolution of the Contract 
With America. I never heard so many Republican friends of mine quote 
Jefferson, but all of a sudden Thomas Jefferson has gotten very popular 
around here in Washington these days. ``That Government closest to the 
people is the best Government.'' So when it comes to welfare reform, 
block grant it back, give it to the States. When it comes to housing, 
give them the money. When it comes to the crime bill, eliminate the 
cops on the beat, give them block grants back there. The people back 
home know how to better spend the money.
 They have the better judgment at the local level. You would think that 
12 jurors having sworn under oath to listen to the particular evidence 
would better be able to make a judgment in a case. But, no, no, not 
with this manufacturers' bill. Corporate America has come to the scam 
here and they come and say: ``No, wait a minute, we have to reverse 
fields and we have to bring this to Washington, and do not worry about 
it, Washington, we are really not going to get uniformity because we 
are not going to give you a Federal cause of action,'' which I have 
been debating for 15 years. If you believe it is a Federal problem, 
give us a Federal cause of action. They said: ``No, what we are going 
to do is give you Federal regulatory guidelines.'' That is what this 
whole body is up against--regulatory measures at the State level. Here 
with this bill we are going to heap it upon them.
  [[Page S5641]] The body is up against the Washington bureaucracy to 
give it back to the local level. This whole body is all wound up about 
unfunded mandates here now. Come the end of April, we are going against 
the contract, and we are going to give them an unfunded mandate, and 
they know it. The whole body is saying that in welfare we have to make 
the recipient more responsible. Here we say that the manufacturer is 
not going to be responsible. We have all kinds of bars in here to 
protect the manufacturer. If you have any doubt about it, we will show 
you the section where the manufacturer itself is exempt from the bill. 
That is what we have going here with respect to product liability.
  We have serious problems in this country of ours. But torts, 
historically, under the English system for 200 some years, has been a 
matter of the jurisdiction of the States. They are trying to give 
meaning to the 10th amendment. When I go home and turn on C-SPAN, I see 
the speakers about the contract say we are going to give meaning to the 
10th amendment. Those responsibilities, not delegated specifically 
under the Constitution to the Federal Government, shall be reserved to 
the States. Oh, no, they say, on this one, if we can put over this 
one--how do you put it over? When you get in a campaign, Mr. President, 
you know how they have been putting it over because I get it from the 
other side. They come to me, the National Association of Manufacturers, 
in my campaign over the last 15 years, elected three times. They say, 
``Why do you not go along with this thing? We have product liability 
problems''.
  The chamber of commerce comes to you and the Business Roundtable 
members come to you, responsible civic leaders and all think there is a 
real problem. Why? Because Victor Schwartz, and the hired hands up 
here, a bunch of 60,000 lawyers, have been paid off. They say, ``Get 
ahold of that Senator and get a commitment from him because he has not 
committed.'' We tried to tell the business leaders, ``Look, wherein do 
you ever think that the National Congress in Washington, DC, is more 
conservative than your own legislature back in the State capital?'' I 
know from 40 years in government that temporarily, yes, you might have 
a more conservative government and group over in the House of 
Representatives. But give it a few more years and I can tell you from 
my experience up here, I would much rather have the State legislature 
find on this particular score. You might think you get temporary relief 
but in a few years, you will trip up on this rug and go up to the 
window and get your money. Business does not have a problem. The 232 
risk managers under the Conference Board study showed that it was less 
than 1 percent of the cost of doing business.
  When they get to talking about competitiveness, competitiveness, 
competitiveness, I have to smile, because I have been in the game for 
years and I wish they would point out--and they cannot--that we have 
over 100 German industries--recently BMW, recently Hoffmann-La Roche, 
and over 50 Japanese industries, and I got the blue chip corporations 
of America that came to my home State. Not once have they said: ``What 
about this product liability? We need some kind of solution to it.''
  The fine businesses that like and respect safety are willing to put 
it into the cost of the product and into the practices, with safety 
offices and everything else in these particular entities all over the 
United States.
  If you want safe manufacturing, you come to the United States of 
America. We take it for granted and we are about to strip it today and 
tomorrow and the next day, whenever we vote, trying our best to put in 
a fixed situation which is, frankly, an embarrassment to me having been 
on both sides of this particular problem in the courtroom representing 
businesses as well as representing injured parties. It is difficult, 
difficult, difficult in this day and age. You do not get runaway 
juries. They all know about insurance. They are very sophisticated. 
They have all good businesses. They know there is no free lunch. You 
have to prove by the greater weight of the evidence to all 12 jurors--
all 12. If you miss one, your case is over with; you get a mistrial and 
you have a hard time getting back into the courtroom and all that time 
your costs and all are going up.
  So in these civil claims of tort, if we want to get to the problem, 
let us go to the businesses suing businesses that have billions and 
billions of dollars, where these fellows sit around in the boardroom 
and say, ``I do not care, let us go to trial and let us show what we 
can do.'' I put in the Record here yesterday the most spurious of 
claims by different businesses for millions and billions of dollars, 
really, which says to me perhaps there is a problem. The most objective 
group--and if you had to characterize it, it could be characterized 
``corporate''--is the American Bar Association. They have various 
divisions. The American Bar started really with the utilities and the 
railroad and other lawyers. They are the ones who had the money to go 
all the way to Chicago, all the way to New York or Los Angeles to a 
meeting. Working lawyers for individual clients never had that kind of 
money. They found out they were not represented. As a result, that is 
why you have ATLA, the American Trial Lawyers Association. I was in on 
the early days when it was organized. Now we have almost as many 
defense lawyers attend our ATLA conferences as plaintiff's lawyers. The 
defense lawyers come and learn and understand the various issues, the 
various demonstrative evidence that was started out years ago on the 
west coast by Lou Ashe and Mel Belli, and others, to keep a record, 
rather than an operation by ambush. Give everybody everything you have 
and say here is what I am going to prove. As a result, we have the 
Restatement of Torts and otherwise, and wonderful progress has been 
made in the field of law in the trial of cases over many, many years.
  That has been done at the State level. What happened as a result is 
that the American Bar Association, once again, for the sixth time, has 
opposed this bill. They have prepared testimony and testified against 
the bill. You have the American Bar Association; you have the 
Association of Law School Deans and Professors--over 121--opposing this 
as bad law. You have the National Conference of State Legislatures and 
the Conference of State Supreme Court Justices. We have the credibility 
and the concern of the responsible consumer groups and other wise 
individuals--the AFL-CIO and everyone else who really understands the 
plight of injured parties. They all oppose this as a bad, bad, bad, 
prejudicial kind of measure that should not be in the National 
Congress. If there is a problem, the States are handling it well. This 
is part of the contract. I hope that in this context these folks will 
keep their contract with the American people.
  Mr. BREAUX. If the Senator will yield, I would like to ask the 
Senator a question. One of the arguments I have heard on the side of 
the proponents of the legislation is that we have to do this in 
Congress, in Washington, because we have to have what they call 
uniformity among all of the States, and all of the States have to have 
the same laws when it deals with personal injuries that are derived 
from defective products that hurt people, that we have to have the same 
laws in all of the States.
  It is my understanding that this legislation says you have to have 
uniformity, unless the State wants to make it even more difficult for 
an injured person to recover, and then we can have 50 States having 50 
sets of different rules, if the rules make it more difficult for an 
injured person to recover.
 That is not uniformity.

  Mr. HOLLINGS. Mr. President, that is not uniformity; the Senator is 
quite correct. More restricted measures are permitted.
  The fact of the matter is that it is not uniform with respect to one 
of the big issues of concern, the matter of punitive damages.
  In the distinguished State of Washington, home of the manager of this 
bill and the principal author, they do not have punitive damages. Where 
they have punitive damages, they are limited to $250,000, but they are 
not required by this bill in those States that do not have punitive 
damages.
  There is no uniformity here. If they really wanted uniformity, we 
would have had ipso facto a Federal cause of action. Then we would have 
the rules, the simplicity, and the uniformity.
  There is no attempt to produce true uniformity, even though we have 
had 
[[Page S5642]] this measure up time and time again, everyone has 
wondered about this particular measure and requirement of the States in 
their jurisdiction. There is a constitutional question involved, but 
they have said: ``Wait a minute; if we really want uniformity, please 
give a Federal cause of action and we will go from there.''
  If we want a finding under the interstate clause, Congress has that 
authority and responsibility to make the finding and get a Federal 
cause of action. Then we have uniformity. But they use every gimmick to 
make sure it is not.
  Mr. BREAUX. It is my understanding, does the Senator agree, that this 
uniformity argument really does not apply; if each State wants to make 
it more difficult for an injured person to recover, they have the right 
to do that?
  Under this proposal, we could have 50 different States with 50 
different sets of rules with regard to an injured person's ability to 
recover damages, if it is more restrictive than this bill.
  Mr. HOLLINGS. That is right. Take every page of the bill--every page 
of the bill has certain legislative, congressional language. That is to 
be interpreted, the intent of that particular language is to be 
interpreted by the 50 several supreme courts of the 50 several, 
separate States. Then, in certain instances, it could go all the way to 
the U.S. Supreme Court. So they know that.
  We would not have that if we had a Federal cause of action. We would 
have one jurisdiction and we would move with that and the lawyers and 
the parties would know where they are. They do not want them to know 
where they are.
  There are certain roadblocks, restrictions, as indicated in your 
question. This bill says that, if we want to get more restrictive or 
want to put a greater burden to the injured party, fine. We do not mind 
at the national level.
  If we approve this bill, we are saying as a Government up here, if 
people want to do that, the Government in Washington, the great white 
father, we approve that. If a State wants to be more considerate of the 
injured party; no, no. We, the Federal Government, the end-all, be-all 
of wisdom up here, the Washington bureaucrats, we say no.
  Mr. BREAUX. If the Senator will yield, I think he has very clearly 
made the point we are talking about--fairness. This legislation does 
not represent fairness at all. I think the Senator from South Carolina 
has made that point very well. I thank him.
  Mr. HOLLINGS. I thank the distinguished Senator from Louisiana. He 
has been a leader on this measure.
  I can say manufacturers are not all that steamed up. They would have 
long since gotten rid of me. They have tried, and they have come pretty 
close the last time, so I am not bragging.
  I can say right now, the manufacturers understand it. I met time and 
again with manufacturers, business leaders, bankers, and everyone else 
of that kind, and they begin to realize that.
  I have asked, I challenged them, get a judge in the State of South 
Carolina that has just been put up to the circuit court of appeals, as 
has Billy Wilkins. Remember Judge Wilkins, who headed up a sentencing 
commission for President Reagan and was considered for the head of the 
FBI? Go back to Billy and say, ``Is product liability a problem here, 
really?'' He would say, ``Not in South Carolina, not in the State. They 
handle it well.''
  This has not come from the judiciary or the American bar. This has 
not come from the consumers, whose interest it is supposed to--with 
that title, Fairness Act--supposed to represent. On the contrary, it is 
a manufacturers scam.
  I yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Abraham). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GORTON. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GORTON. Mr. President, in the nature of attempting to correct a 
few, I think, inadvertent misstatements during the course of the last 
24 hours, and also in the interest of speaking philosophically on at 
least one of the points made by my friend and colleague from South 
Carolina, I would like to speak briefly on three or four subjects.
  Yesterday in his opening statement, the distinguished junior Senator 
from Louisiana [Mr. Breaux] commented that although Louisiana State law 
does not allow punitive damages, S. 565 would preempt this refusal to 
allow such damages. It is quite important for me to correct that 
misapprehension, as my own State of Washington, like Louisiana, is one 
of roughly five in this country that does not permit punitive damages 
in most civil litigation at all.
  As I said in my opening statement, if I had my way, I would abolish 
punitive damages in civil litigation. It amounts to an unlimited form 
of punishment, the risk of unlimited punishment in civil litigation at 
the absolute discretion or whim of the jury. My view of civil 
litigation is that it should be designed to redress grievances, to 
compensate fully individuals for actual damages that they have 
suffered, but should not be used for punishment.
  So I would be extremely disturbed if we were dealing with a bill that 
included the preemption to which the Senator from Louisiana referred.
  S. 565, which, in essence, is what we are dealing with in my 
substitute amendment, does not preempt the ability of a State to 
restrict punitive damages to a greater extent than are restricted in S. 
565 itself.
  Section 107, subsection (A) reads:

       General ruling. Punitive damages may, to the extent 
     permitted by applicable State law, be awarded against the 
     defendant in a product liability action that is subject to 
     this title.

  And then it goes on to limit punitive damages in such actions. That 
is to say, that it does put certain limitations on punitive damages, 
but it does not mandate that a State must permit even up to that 
limitation in product liability litigation in those States.
  While we are on the subject of preemption, there are two other 
similar areas in which there is no preemption in the sense, at least, 
that there is no preemption of a State prohibition against punitive 
damages. We have in this bill a statute of repose for certain 
manufactured items of 20 years. But if a State has a statute of repose 
as broad or broader than the one in this bill with a limit of fewer 
than 20 years, that statute of repose is not preempted.
  Section 108, subsection (B)(2) reads:

       Notwithstanding paragraph 1--

  Which establishes a 20-year statute of repose--

       If pursuant to applicable State law an action described in 
     such paragraph is required to be filed during a period that 
     is shorter than the 20-year period specified in such 
     paragraph, the State law shall apply with respect to such a 
     period.

  And, finally, if a State law does not allow joint liability at all, 
S. 565, which bans joint liability for noneconomic damages, does not 
require a State to ban joint liability for economic damages.
  All of this is relevant because in a conversation an hour or so ago 
on this floor between the distinguished Senators from Louisiana and 
South Carolina, the criticism was raised that if we are going to go for 
uniformity, we should require absolute uniformity; that there is 
something perverse or something wrong about a preemption in one 
direction without a preemption which is all encompassing in nature.
  In fact, I believe the Senator from South Carolina went beyond that 
point to say that if we desired uniformity in product liability 
litigation, we should transform what is now a State cause of action to 
exclusively a Federal cause of action and have identical rules 
applicable in every State in the country.
  I find it curious that we should so frequently in this body be faced 
with an argument that because we seek to reach a certain goal, we have 
to do it absolutely and without exception.
  I believe that it is the essence of our system that we are constantly 
adjusting our rules to meet the present needs of the society. I do not 
believe that we must act mechanistically and, of course, we do not act 
mechanistically. Usually, this kind of argument is brought up simply 
because the entire concept is opposed by whoever presents it.
  I began my remarks on this bill yesterday by saying that obviously 
there 
[[Page S5643]] are two purposes of society on which sometimes the 
margins come into conflict. Clearly, in connection with this 
litigation, one is the regressive grievances, is the proposition that 
courts should be open to citizens of the United States and of the 
respective States to sue when they feel that they have been wronged. 
The other is economic efficiency, is the encouragement of the creation 
of jobs, of research, of development resulting from that research, the 
marketing of new and improved goods and pharmaceutical drugs, and the 
prevention of the irrational and unreasonable withdrawal from the 
market of goods and services which are of great use to most of society 
but which occasionally are accompanied by adverse reactions on the part 
of a few consumers.
  So what we are trying to do here is to deal with the proposition that 
the proponents of this bill--and I think the clear majority of the 
Members of this body--feel that the pendulum has swung too far in favor 
of litigation. This should not be a surprise. We read about this 
constantly, we hear about it constantly, and we know that we are the 
most litigious society, literally, in the history of the world. It 
seems quite evident to most citizens that the operations of our society 
and of our economy are often inhibited by the amount and the nature of 
much of the litigation with which the people of America are faced.
  And so here we seek, in a modest way, in one field of litigation, to 
put some limits on that litigation. We do not do so by depriving 
anybody of a cause of action. Every cause of action that exists at the 
present time will exist if this bill becomes law. But we do put some 
inhibitions in the way of the pursuit of punitive damages, damages 
which do not, by their very nature, compensate for an injury. We put 
limitations on the ability of plaintiffs to recover from defendants 
beyond the responsibility of those defendants with a particular harm. 
And, yes--I must correct myself--we do under some circumstances deprive 
people of causes of action with respect to equipment and manufactured 
items which are more than 20 years in age.
  That does not mean that we feel we have done everything that might 
appropriately be done. We feel that these limitations are reasonable 
and should be universal in nature. But that does not automatically 
carry with it the philosophy that no one else, no other State, can feel 
that other limitations, greater limitations, are also appropriate. We 
need the experimentation of a federal system in that connection. Nor do 
we feel that because we desire somewhat greater uniformity in the law, 
we have to have absolute uniformity. Now, with 50 States and the 
District of Columbia, each with a different legal code, there is a 
total lack of imposed uniformity in the law relating to product 
liability, in spite of the fact that the production and marketing of 
products is national in nature. Of course, I suppose we can say we 
should go from no mandatory uniformity at all to 100 percent mandated 
uniformity. Personally, I think that would be absurd. I think most 
Members of this body think it would be absurd. There is not the 
slightest chance that this body, in its wisdom, would federalize the 
entire product liability system. But that does not mean that a greater 
degree of uniformity that we have at the present time is not socially 
desirable. We--and even more important than we--the market thinks that 
a greater degree of uniformity is essential. So we go toward the 
center. We attempt to get that pendulum back into a centerpiece. We are 
seeking balance. So we do not intend to go to the extremes with respect 
to product liability, and we do not in this bill.
  We do not intend to go to the extremes with respect to joint 
liability, and we do not in the course of this bill. We do not adopt 
the shortest possible statute of repose in this bill, and we do not 
demand absolute uniformity in this bill.
  In the four most important elements of this bill, we seek not some 
kind of pure ideology, but an appropriate balance, a greater degree of 
encouragement for the economy to create jobs, competitiveness, new and 
improved products, certain limitations on the kind of litigation 
problems which plague our society, and we feel it is this middle ground 
that is the appropriate ground. That is the rationale that, I think, is 
overwhelmingly appropriate for the way in which we treat preemption in 
each of these areas.
  Mr. President, I yield the floor.
  Mr. HEFLIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Alabama is recognized.
  Mr. HEFLIN. Mr. President, I rise in opposition to this bill. It is 
entitled the Product Liability Fairness Act. In my judgment, that is 
the biggest misnaming of any bill that I have seen come 
before this body. It is a misnomer because, in my judgment, it is very 
unfair and one-sided. It is sort of like you have seen in the fine 
print--you know, everybody's choice--they say it is a contract you 
entered into. It is one of those take-it-or-leave-it sort of things, in 
that here we have a very unfair bill. I will be going into that as we 
discuss this over the next several days.
  I want to discuss several things. First, my friend from the State of 
Washington says that he would like to do away with all punitive 
damages, and I wonder if he has thought that when a company hires 
employees--chemists, engineers, and so forth--who have had a record of 
alcoholism or drug abuse and nevertheless the manufacturer exposes the 
public to those types of people and a person is injured, should not 
that company be punished?
  Let us consider a case--this is not in product liability situation--
where a person is driving where an automobile accident occurs, and the 
driver of one car has 10 beers, crosses the center line, causes an 
accident, and man loses his leg, as compared to an accident in which a 
bare distraction causes damage to someone.
  I think both the people who lose legs regardless should be entitled 
to recover compensation, but the man who was under the influence of 10 
beers, and who got behind the wheel and injured someone, ought to be 
punished.
  The concept of tort liability is that there is a wrongdoer and 
someone is injured as a result thereof. The whole basis of our law that 
has developed over the common law over the years is being that the 
wrongdoer must pay.
  So are we talking about a situation in which we want to put all 
wrongdoers on the same level? Human beings differ. In regard to 
injuries, the loss of one, two, three fingers--if I were to be injured 
by a machine that did not have a proper guard on it--those three 
fingers that I lose may be different from the three fingers that a 
violinist loses.
  So we make distinctions in regard to individuals. There are a lot of 
aspects of noneconomic damage that we fail to give appropriate 
attention to. A young woman who loses the capacity to have a child, a 
young woman whose face is scarred in a fire--all of those are 
noneconomic pain and suffering.
  In Russia, when Chernobyl, the nuclear plant, experienced a meltdown, 
the people who suffered radiation and who suffered in many ways, many 
of those suffered noneconomic damages, but they ought not to be limited 
in their compensation.
  Now, I realize that in some aspects there have been changes in the 
bill before the Senate. Changes that have been made, designed to be 
able to get it passed in the Senate. I do not think anybody here fails 
to realize that the House of Representatives passed a bill that was 
written with one purpose in mind--to see that awards are substantially 
reduced and that the injured party does not receive what they really 
are entitled to.
  Whatever the Senate were to pass, if cloture is obtained, will go to 
conference. What will come out of conference will be the bill that will 
go to the President.
  Looking at who the players are, the cast of characters, who will be 
in conference, I do not think there is much question as to who will 
prevail. I think the Speaker of the House will prevail, relative to the 
bill that comes out of conference.
  There is no question that he has shown superb leadership in getting 
legislation passed in the House and in being able to bring about party 
discipline and to attract others. I do not sell him short on what the 
conference version of this bill will be like.
  Now, I want to go over a few things in this bill and in the House-
passed bill, and list what in my judgment I think the final version 
will be.
  [[Page S5644]] Both bills exclude commercial loss. Commercial loss by 
business--which includes loss of profits, destruction to facilities, 
everything else--does not come under this bill or the House bill.
  Why, then, if the provisions of this bill are so great and so needed 
that corporate America is excluded from it? There are a lot of 
examples. We have a machine that blows up in a factory because of 
defective manufacturing. That machine blows up and people on the 
sidewalk and other places are injured. They come under the provisions 
of this bill. However, the company itself can sue the manufacturer of 
the machine for lost profits, for the destruction done to the physical 
property, for numerous elements of damage. They do it outside the 
purview of this particular bill.
  If something is good for the goose, it ought to be good for the 
gander. But businesses do not want to come under this bill.
  Where have the large damage verdicts occurred? The biggest one that 
we know about was Pennzoil versus Texaco, for $11 billion. It was not a 
product liability case, but a commercial case.
  Go down the list and we will see most of the largest verdicts that 
have occurred relative to civil litigation are where businesses suing 
businesses. They do not attempt to take care of that in this bill. They 
do not want to be put under this bill.
  The fact that they do not want to be put under this bill indicates 
that there are provisions that they do not want that could affect their 
lawsuits, when they suffer a loss, and when they sue a wrongdoer, to 
have to live with and to have to comply with.
  When we stop and think, there are other aspects we should consider. 
The bill does exclude airlines for hire, but there are other aircraft 
that we ought to look at. Two planes crash in the air. Persons that are 
injured in those planes come under this proposed bill as to their 
damages. The airplane does not. One of the planes drops parts of its 
body down on Yankee Stadium and Yankee Stadium suffers a financial 
loss. The spectators are injured. They come under this bill;
 the owner of the Yankees for the loss of business profits, destruction 
to grandstands or to bleachers or what else might be, they do not come 
under it. What is good for the goose is good for the gander.

  The bill talks about an ongoing business. I even got to thinking 
about it, and this may apply or may not apply, but if part of that 
airplane falls on a house of ill repute, if it is legitimate in a 
town--and there are States and towns where they are--then the ongoing 
business can recover for the loss of profits. That may be an extreme 
example, but it shows you how they have crafted this bill to take care 
of situations pertaining to commercial use, to business losses, yet the 
human elements of loss of limbs and of pain and suffering are 
restricted under this bill.
  In the product liability bill during the 103d Congress, there was a 
provision for a defense against punitive damages where the FDA had 
given premarket approval to a drug or medical device. Last time there 
were several Senators who were very concerned about this provision, so 
this time the proponents left it out with the idea of picking up some 
votes. The House, on the other hand, left it in. They left in the FDA 
provision whereas statistics have shown, over a 10-year period 51.6 
percent of all products that have been approved for the market by FDA 
have been recalled. But when this gets to conference, you can rest 
pretty well assured that the House provisions on that will control and 
be maintained.
  This bill has a 20-year statute of repose. A statute of repose says 
that regardless of what happens, after 20 years of it being built--and 
where it says ``construct''--that thereafter, regardless of what was 
the reason, you cannot bring a lawsuit. You have a complete defense. 
This language of the bill is broad enough, in my judgment, with the use 
of the word ``construct'' to include a bridge, which if it collapses, 
will be subject to a statute of repose of 20 years. Yet the House bill 
has a statute of repose of only 15 years, and I think it will end up 
being 15 years.
  You had the general aviation awhile back, where a bill was passed, 
agreement was worked out by most of the people involved here. They put 
in an 18-year statute of repose, which I think was a serious mistake 
since the figures show that 60 percent of the small planes in use were 
20 years old or older. But, anyway, the House would even reduce that 
down further--20 years or 15 years. I mentioned a nuclear power plant, 
Chernobyl, and the pain and suffering that had incurred. Practically 
every nuclear powerplant in the United States today is at least 15 
years of age. Most of them are older than 20 years.
  Maybe it might not cover it. It uses the word ``construct'' and as I 
read the various language, I think it does. But regardless whether it 
does as a unit object as a whole, component parts in a nuclear 
powerplant which have been there for 20 years or longer, or 15 if the 
House prevails and I think they will. I am not sure, but it seems to me 
I read awhile back the last nuclear power plant that was started in 
construction was more than 20 years ago.
  I think we do not realize the breadth of this bill and its effort to 
try to encompass all situations and what it will do.
  I think there was testimony before the Commerce Committee on machine 
tools. The indications were that over 50 percent were at least 30 years 
old or older. Design conflicts, metal stress on airplanes and metal 
stress on airplanes that cause damages frequently, in the decision of 
the national safety investigation board--I do not remember the exact 
name--would indicate that metal stress on airplanes does not occur 
until after 15 or 20 years.
  On the House side there are caps on noneconomic damages on drug 
companies, on pharmaceuticals. That cap is $250,000 on noneconomic 
damages, and there are provisions throughout on pharmaceuticals and 
drugs. This new section that was added, this biomaterials section, you 
first read it and it looks like raw materials. I was told that is like 
a fluid such as silicone that is in a breast implant, or the tissue 
that is sewed together in regards to making it, that gives them some 
immunity and protection against these suits.
  But then you read further in that and it says ``component parts.'' I 
have a pacemaker. I do not know all the component parts. But, as I 
understand it, it has batteries and some computers and other component 
parts. There are wires that go down from that pacemaker, and its 
battery, into my ventricle--into the chambers of my heart. There are 
several component parts.
  If it is defective, it would mean that for implants--and this 
biomaterial provision deals with implants--that an individual would 
practically have no way of recovering for defective products.
  In pharmaceuticals, manufacturers are just almost given complete 
immunity in any suits. Drugs, and those implants I was mentioning a 
while ago, the silicone breast implant, the Copper IUD, and the Dalkon 
shield, as I understand it, are implants. So some people were worried 
about those as it would affect women for punitive damages. We ought to 
be concerned about this new section that they put in the bill on 
biomaterials.
  The House bill abolishes joint and several liability for noneconomic 
damages as to all civil lawsuits. The House-passed bill, which again I 
think will prevail in conference, does not limit it to products but it 
says to all civil suits. I do not know who is responsible for the 
Oklahoma City bombing, but someone could bring a civil suit. I know in 
my home State that civil action was brought against the Ku Klux Klan 
and really did a great deal to stop the Ku Klux Klan through that civil 
lawsuit because the Klan had some land and other assets that were 
collectible. In the Oklahoma City situation, in the Alfred Murrah 
Building, if there were four people that were involved in it and a 
court would have to determine the part that each played relative to a 
conspiracy. But what if one of the conspirators happens to inherit 
5,000 acres of land or has other assets, and it is determined that he 
is the one with the most knowledge, it may be that a plaintiff could 
not collect damages.
  The present law is let the parties themselves determine among 
themselves the apportionment of the damage rather than having the 
plaintiff responsible relative to the apportionment of damages and the 
determination on each and every individual case. I think they have 
worked it out over the years.
  [[Page S5645]] There are some States that have contributions from 
joint tort feasors. There are others that do not. But as a general 
rule, it has been worked out in a manner where it is not a difficult 
situation that has caused any tremendous injustice among the defendants 
to apportion that responsibility.
  We mention caps on punitive damages, and the House has caps on 
noneconomic damages on drug companies, pharmaceuticals. The language is 
that it is a cap of $250,000, or three times the economic loss. How 
does that apply? Let us take an example. We have a 55-year-old CEO of a 
company. He has 10 years of work expectancy say, and at 65 he would 
retire. He makes $5 million a year. So you take $5 million, multiply it 
by the annuity tables, which would we will say 10 years is what he 
would have. You have $50 million that would be then a part of his cap. 
You then multiply it by three. He would have a $150 million cap on 
punitive damage, or on the matter of the cap on noneconomic damages 
that the House has on drugs.
  Then we compare the $150 million, which takes care of the wealthy, to 
the housewife. She has no economic loss because she does not work 
outside the home. So the housewife has a cap of $250,000, as opposed to 
$150 million for the CEO. The 65- or 70-year-old retired person has no 
economic loss, and he is not working. Mr. President, $250,000 is the 
cap. The CEO 55 years of age is capped at $150 million. And you can go 
on down the list of the inequities. The provisions as it would apply on 
factual situations shock your conscience.
  There is a provision that allows you to collect workers compensation. 
Perhaps you collect under the workman's compensation, $40,000 or 
$30,000. You get your medical bills paid and other expenses. They are 
subrogated. That means, if a claimant recovers against a third-party 
wrongdoer, the insurer is entitled to get its workman's compensation 
insurance back. But this bill has the language that a claimant cannot 
settle his lawsuit without that workman's compensation insurer's 
permission. You have to have the permission of the insurer to settle, 
unless that workman's compensation insurer is paid in full. You come to 
the point that, well, I do not want to gamble. The case is probably 
worth $500,000. Maybe if somebody does not want to go through a lawsuit 
so they say, ``Well, I will settle my damages for basically about two-
thirds on the dollar. But the workman's compensation company says, 
``No. I want 100 percent on the dollar,'' and this is shocking to one's 
conscience.
  I also remind you that we have an exemption under antitrust laws for 
insurance companies, and they can get together and in effect reach some 
sort of an agreement. There is also the situation that it could well be 
that they are the same insurance company for the employer as well as 
the manufacturer. Therefore, they are bargaining for a cheaper figure, 
putting a claimant in a disadvantageous situation.
  There are all sorts of factual situations that can arise which show 
this question is which really shocks your mind to consider from a 
viewpoint of what is right and wrong and gives them a hammer over a 
claimant's head.
  Shocking your conscience further, there is a provision in this bill 
that says that if you sue for punitive damages, then either party, the 
plaintiff or defendant or any of the defendants, has a right to have a 
separate trial on the issue of punitive damages as opposed to the trial 
in chief in which compensatory damages are sought. This bill provides 
for bifurcated, separate trial.
  Then the language of this bill provides that you cannot prove the 
elements of culpability, the fault, the evidence of punitive damages in 
the compensatory damage lawsuit.
  So you have evidence of a drunk chemist that was involved with a 
company making a drug. That evidence would go to punitive damages, but 
it could not be introduced in the compensatory damage lawsuit. I think 
that shocks your conscience.
  Consider the example of where a person is intoxicated. The bill has a 
provision which gives a complete bar to recover if the intoxication of 
the plaintiff amounted to 50 percent of the causation and the damages. 
On the other hand, if a punitive damage case was brought under this 
bill, the drunkenness or the alcoholic activity of the chemist or 
whoever the actor might be that was involved in the production of the 
product could not be shown in the compensatory damage lawsuit. You 
would have to show it only in the punitive damage part of the lawsuit.
  Now, this bill does not have the loser pay in regard to the 
attorney's fee. But when it comes out of conference, I think you better 
be extremely watchful as to whether the conference report will contain 
such a provision.
  I think it is important that we look at this bill carefully. I 
pointed out some of the provisions, and every time I read the bill I 
see more and more fine print, methods by which there is an advantage 
that is sought for manufacturers. I have not had the time to review 
this yet, but in the punitive damage aspect of it, they have changed 
the language where it was generally accepted throughout as either 
willful or wanton or gross negligence depending on the State standards. 
It uses the words ``conscious, flagrant indifference to the safety of 
others,'' and so on. I am interested in seeing where that language came 
from and the reason.
  I do not in my recollection remember the use of conscious, but I 
remember that under certain circumstances--and I am hazy on this, and I 
have asked staff to do some research, to contact a tort professor at a 
university pertaining to this--there seems to me to be a body of law 
that for a corporation to be conscious, it requires activity on the 
part of the board of directors. I am vague on that, and I do not want 
to make a statement because I am not sure as to that. But that is 
something that is troubling and something that I wish to look at 
further and perhaps say something else at a later time. But these words 
are new words. And, of course, they would be interpreted by the courts 
as they come along, and there may be basic case law in regards to it at 
the present time that has given some type of interpretation which means 
that there is an existing precedent. It may not have to be followed 
from one State to another.
  But that brings up the interpretation which to me is just entirely 
inconsistent by the original motivation that brought forth the idea of 
some federalized tort law. That was the concept that we live in a world 
in which interstate commerce goes from one State to the other and 
products are sold and everything else. Therefore, we need a uniform 
Federal products liability.
  Well, this is far from being uniform. First, it only preempts the 
State laws in the specific matters that are listed within the bill. The 
interpretation that is given is placed upon the State court system and 
in diversity cases on the circuit court of appeals. Under the original 
bill that they proposed, they had the State courts reviewing this as 
well as the territories. You could have had 55 different 
interpretations of law and of with little uniformity in that regard.
  The proponents made a change somewhat in that whereby it says that 
the 11 Federal circuit courts will be involved in interpretations. So 
you have got all of at least 11 circuits that could have different 
interpretations, and you could have conflicts of law. They made a 
change which says basically does away with the concept of the old line 
of cases of Erie which say that the Federal courts shall follow the 
State law and they say now the State laws pertaining to interpretation 
of this shall follow each circuit, but instead of uniformity you can 
still have at least--well, it would take, in my judgment, 20 to 25 
years before you would finally get the matter to the Supreme Court, and 
you would have uniform interpretation of a particular language or 
particular provision. It is devoid of uniformity. There is no 
uniformity except for the few instances in which they preempt in this, 
and the ones they preempt are in effect the guts of a civil lawsuit. 
But you have a situation where you do not have uniformity relative to 
the motivation that many businesses argued for relative to that. So 
there is no uniformity that is involved here.
  There has been this lawsuit about McDonald's and the woman with the 
cup of coffee, and there is an article by Roger Simon in the Baltimore 
Sun on February 22, 1995. He says:

       Forget about the millions won by sue-happy lawyers.
       Just about everybody knows about the woman who spilled a 
     cup of coffee on herself and sued McDonald's because it was 
     too hot.
       [[Page S5646]] Just about everybody knows the jury awarded 
     her millions of dollars and this is what is wrong with 
     America.
       It is so wrong, in fact, that the Republican ``Contract 
     With America'' has promised to fix it and hearings are now 
     under way before Congress to make it much harder for 
     consumers to sue for large amounts of money.
       But the real story of what happened to that much-maligned 
     woman tells us something else about America.
       Stella Liebeck was 79 years old in 1992 and sitting in her 
     grandson's car when she bought a 49-cent cup of coffee at a 
     McDonald's drive-through window in Albuquerque, N.M.
       The car was stationary when she lifted the lid to put in 
     cream and sugar, but she spilled the coffee on her lap.
       She received third-degree burns on her groin, thighs, and 
     buttocks. She was hospitalized for 8 days and underwent skin 
     grafts. According to her lawyer, she was disabled for more 
     than 2 years. Her hospital bills were in excess of $10,000.

  McDonald's offered the woman $800 to settle, and she had a $10,000 
hospital bill.

       She sued.
       At trial, Liebeck's attorney, S. Reed Morgan of Houston, 
     told the jury that McDonald's serves its coffee between 180 
     and 190 degrees, which, he argued, is 40 degrees hotter than 
     most food establishments. McDonald's says coffee tastes 
     better at the higher temperature.
       Morgan presented an array of expert witnesses who testified 
     that serving coffee at such a high temperature presents an 
     unacceptable risk to consumers.
       The jurors also learned that between 1982 and 1992, more 
     than 700 claims had been filed against McDonald's for coffee 
     burns and that McDonald's had settled claims for more than 
     $500,000.
       After a 6-day trial, the jury awarded Mrs. Liebeck $200,000 
     in compensatory damages for her injuries, but reduced that by 
     20 percent because the jury felt the spill was 20 percent her 
     fault.
       Then the jury awarded her $2.7 million in punitive damages, 
     a figure it did not pick out of a hat.
       Having been told during the trial that McDonald's sold 
     $1.35 million worth of coffee per day, the jurors assessed 
     McDonald's a fine equal to 2 days of gross coffee sales.
       The trial judge, however, reduced the amount of punitive 
     damages to $480,000 or triple Mrs. Liebeck's actual damages.
       Both sides could have appealed, but it was now 1994. Mrs. 
     Liebeck was 81, and her lawyer felt McDonald's was hoping she 
     would die before the case was concluded.
       So he negotiated a settlement with McDonald's. He is not 
     allowed to say for how much, but let's say it was roughly 
     $500,000.
       Mrs. Liebeck's attorney would get one-third of that amount 
     and the expert witnesses, who can cost tens of thousands of 
     dollars, would be paid out of Mrs. Liebeck's share.
       So Mrs. Liebeck did not become a millionaire or anything 
     close to it. Which is typical of such cases.
       ``I have been an attorney for 20 years and I have received 
     two awards for punitive damages in all that time''--

  The lawyer Morgan told Roger Simon.

     in a telephone interview * * *. ``And you know how many times 
     I have gotten full punitive damages as the jury intended? 
     Never.''
       An American Bar Association study of over 25,000 jury 
     awards between 1981 and 1985 found that the median punitive 
     damage award was only $30,000. According to a U.S. News & 
     World Report, the current average award in personal injury 
     cases is $48,000.
       And, contrary to claims that there has been an explosion of 
     personal injury lawsuits, the number of such suits have been 
     dropping since 1990.
       It is important to keep in mind, however, that punitive 
     damages are supposed to serve a purpose.
       ``It's all economics,'' Mr. Morgan said. ``If some 
     companies can make more money injuring you with a bad product 
     than keeping you safe with a good one, they will injure you. 
     I am not saying all companies; I am saying some companies.''
       In other words, the fear of being socked with large 
     punitive damages is all that keeps some companies from doing 
     us harm.
       So why should we ``reform'' away our ability to hit them 
     where it hurts?

  I ask unanimous consent that this article be printed in the Record at 
the conclusion of my remarks.
  The PRESIDING OFFICER (Mr. Thompson). Without objection, it is so 
ordered.
  (See exhibit 1.)
  Mr. HEFLIN. Mr. President, there are many other aspects, and I will 
speak further in regard to it but, at this time, I yield the floor.
                               Exhibit 1

           Forget About the Millions Won By Sue-Happy Lawyers

                            (By Roger Simon)

       Just about everybody knows about the woman who spilled a 
     cup of coffee on herself and sued McDonald's because it was 
     too hot.
       Just about everybody knows a jury awarded her millions of 
     dollars and this is what is wrong with America.
       It is so wrong, in fact, that the Republican ``Contract 
     with America'' has promised to fix it and hearings are now 
     under way before Congress to make it much harder for 
     consumers to sue for large amounts of money.
       But the real story of what happened to that much-maligned 
     woman tells us something else about America:
       Stella Liebeck was 79 years old in 1992 and sitting in her 
     grandson's car when she bought a 49-cent cup of coffee at as 
     McDonald's drive-through window in Albuquerque, N.M.
       The car was stationary when she lifted the lid to put in 
     cream and sugar, but she spilled the coffee on her lap.
       She received third-degree burns on her groin, thighs and 
     buttocks. She was hospitalized for eight days and underwent 
     skin grafts. According to her lawyer, she was disabled for 
     more than two years. Her hospital bills were in excess of 
     $10,000.
       McDonald's offered Mrs. Liebeck $800. She sued.
       At trial, Liebeck's attorney, S. Reed Morgan of Houston, 
     told the jury that McDonald's serves its coffee at between 
     180 and 190 degrees, which, he argued, is more than 40 
     degrees hotter than most food establishments. McDonald's says 
     coffee tastes better at the higher temperature. (McDonald's 
     declined to be interviewed for this column.)
       Morgan presented an array of expert witness who testified 
     that serving coffee at such a high temperature presents an 
     unacceptable risk to consumers.
       The jurors also learned that between 1982 and 1992 more 
     than 700 claims had been filed against McDonald's for coffee 
     burns and that McDonald's had settled claims for more than 
     $500,000.
       After a six-day trial, the jury awarded Mrs. Liebeck 
     $200,000 in compensatory damages for her injuries, but 
     reduced that by 20 percent because the jury felt the spill 
     was 20 percent her fault.
       Then the jury awarded her $2.7 million in punitive damages, 
     a figure it did not pick out of a hat.
       Having been told during the trial that McDonald's sold 
     $1.35 million worth of coffee per day, the jurors assessed 
     McDonald's fine equal to two days of gross coffee sales.
       The trial judge, however, reduced the amount of punitive 
     damages to $480,000 or triple Mrs. Liebeck's actual damages.
       Both sides could have appealed. But it was now 1994, Mrs. 
     Liebeck was 81, and her lawyer felt McDonald's was hoping she 
     would die before the case was concluded.
       So he negotiated a settlement with McDonald's. He is not 
     allowed to say for how much, but let's say it was roughly 
     $500,000.
       Mrs. Liebeck's attorney would get one-third of that amount 
     and the expert witnesses, who can cost tens of thousands of 
     dollars, would be paid out of Mrs. Liebeck's share.
       So Mrs. Liebeck did not become a millionaire or anything 
     close to it. Which is typical of such cases.
       ``I have been an attorney for 20 years and I have received 
     two awards for punitive damages in all that time.'' Morgan 
     told me in a telephone interview yesterday. ``And you know 
     how many times I have gotten full punitive damages as the 
     jury intended? Never.''
       An American Bar Association study of over 25,000 jury 
     awards between 1981 and 1985 found that the median punitive 
     damage award was only $30,000. According to a U.S. News & 
     World report, the current average award in personal injury 
     cases if $48,000.
       And, contrary to claims that there has been an explosion of 
     personal injury lawsuits, the number of such suits has been 
     dropping since 1990.
       It is important to keep in mind, however, that punitive 
     damages are supposed to serve a purpose.
       ``It's all economics,'' Morgan said. ``If some companies 
     can make more money injuring you with a bad product than 
     keeping you safe with a good one, they will injure you. I am 
     not saying all companies; I am saying some companies.''
       In other words, the fear of being socked with large 
     punitive damages is all that keeps some companies from doing 
     us harm.
       So why should we ``reform'' away our ability to hit them 
     where it hurts?

  Mr. HEFLIN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HOLLINGS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HOLLINGS. Mr. President, I have been waiting my turn to comment 
on the observations of my distinguished colleague from Washington. I 
have been waiting with anticipation.
  The distinguished author and manager of the bill, the Senator from 
Washington, said, as best I can remember that here in the Senate, if we 
seek to accomplish a certain goal, we should do it absolutely. It is 
very, very curious to me, if we seek to accomplish a certain goal, we 
should do it absolutely.
  [[Page S5647]] Now if what is attempted is uniformity, then why not 
require uniformity? It is not about whether it is an absolute or a 
balanced measured, or any forensic approach. It is a matter of law and 
what is provided. We go right to the idea of uniformity and its 
inconsistency with respect to the States.
  Very interestingly, Mr. President, this bill--which I have a copy 
of--starts off, if we look at the front page of S. 565, as ``A bill to 
regulate interstate commerce by providing for a uniform product 
liability law.''
  Well, they got into that pollster nonsense that I was talking about 
earlier. They do not want to call it a uniform law, rather they now 
want to focus on fairness. The buzzword now is everything has to be 
``fair.'' I do not know who it is going to be fair to. They say here 
that ``This act may be cited as the Product Liability Fairness Act.'' 
However, what they ought to call it is the ``Product Liability 
Generosity Act to Manufacturers of 1995.'' Very, very generous to the 
manufacturers.
  Now let us go to the matter of punitive damages. Let us look at S. 
687, the 1993 bill, at page 22. S. 687, page 22, says in the proof of 
punitive damages:

       In determining the amount of punitive damages, the trier of 
     fact shall consider all relevant evidence, one, the financial 
     condition of the manufacturer of product seller; two, the 
     severity of the harm caused by the manufacture of product 
     seller;
      three, the duration of the conduct or any concealment of it 
     by the manufacturer or product seller; four, the 
     profitability of the conduct to the manufacturer or 
     product seller; five, the number of products sold by the 
     manufacturer or product seller of the kind causing the 
     harm complained of by the claimant.

  These are the elements that you have, generally, at the State court 
level on the proof of punitive damages, so it is not just a runaway 
jury. Many times I have heard--and the distinguished Presiding Officer 
has tried these cases--a judge turn and say there is going to be a fine 
to make sure they do not engage in this reckless course of conduct 
again. And in determining whether there is going to be punitive 
damages, it's important to look at the worth of the organization and 
whether or not it is a customary violation, the duration of the conduct 
or concealment of it and all of these elements.
  Now look at the matter with respect to this particular bill, S. 565, 
on punitive damages. They do not list those things at all. It says here 
at the bottom of page 47: ``Proceeding with respect to punitive 
damages.'' Line 24: ``Evidence that is admissible in the separate 
proceeding under paragraph 1--(i) may include evidence of the profits 
of the defendant, if any, from the alleged wrongdoing; and (ii) shall 
not include evidence of the overall assets of the defendant.''
  That is all. They don't spell out what you can look at in this bill, 
Mr. President. You can consider evidence of the profits from the 
wrongdoing, but not any evidence whatsoever of the overall assets, or 
the nature or the duration of the conduct, or concealment of the 
manufacturer, or the number of products sold, or the financial 
condition of the manufacturer. In fact, they say: ``Shall not include 
evidence of the overall assets of the defendant.''
  In the Exxon Valdez case, how do you think Exxon Corp. profited from 
running into the ground? There would not be any profit there. I could 
go through the list of different manufacturers' cases. I refer to the 
matter of the illusory part position on the Ford automobile, whereby 
the users of Ford cars between 1970 and 1979 thought that when they had 
a car in the park position, it was giving the operator the impression 
that the car was secured. Of course, it was the slamming of the car 
door or vibration caused the car to move in reverse. We have one case 
here, and several others, about a car that backed up into a particular 
individual that was walking by the rear of the automobile and was run 
down, and they gave $4 million in punitive damages.
  Under this particular test against Ford, if you put this into law, I 
do not see where Ford gained an advantage or made profits--if they 
could call it profits--from the misconduct that caused the injury to 
the pedestrian that the car all of a sudden backed into. Of course, 
Ford Motor Co. could change the thing. When they got the punitive 
damages, they understood and changed the park position in the gear of 
the Ford automobile.
  But to come now, and rather than list commonsense provisions that 
they had in the 1993 and 1991 bills and everything else, they put these 
kinds of restrictive provisions in, and then claim it is a fairer bill. 
I go right to the punitive caps there on page 47. They have in the bill 
what purports to be uniform standards for punitive damages. But when 
get beneath the cover, Mr. President, you discover the real deal. That 
is, if you have punitive damages in your State, it's preempted. But if 
in a State that does not provide for punitive damages, you are not 
given the benefit of uniformity. The Senator from Washington does not 
want uniformity for the State of Washington since they do not have 
punitive damages, but, yet, he is talking about uniformity. Of course, 
it is all uniformity so long as it is advantages, so to speak, for the 
manufacturer, but not the injured party. So this does not provide for 
punitive damages in all States and for all citizens, even though the 
so-called goal of the bill is uniformity. In this particular bill, he 
said, even though we want uniformity, if you do not have punitive 
damages, no way, you still do not get them. On the other hand, even if 
you were injured, you cannot exceed $250,000 or three times the 
economic loss which, in many instances, is a lot less than the $250,000 
cap. So you do not teach the lesson there.
  With respect to a more reasonable bill, again, you have the matter of 
misuse on page 44. Regarding the previous bills, they are talking about 
how reasonable they have gotten now. ``Reduction for misuse for 
alteration of the product.'' This provision was not in the three 
previous bills. The statute of repose, as has already been pointed out, 
for no good reason, has been reduced now to 20 years. So pass this, 
with the House at 15 years, it is going to be reconciled downward.
  The liability shield for component parts manufacturers was not in the 
three previous bills. As the distinguished Senator from Alabama, having 
a heart beeper in his own body, which is obviously comprised of 
component parts, said wait a minute, if this thing is defective, do not 
give me this particular bill or I am a definite loser. There will be no 
recovery there.
  On the morning of the markup, they added this rental car provision to 
exempt rental car companies from liability. If you get a rental car and 
you run into somebody, the rental car owner is not responsible. But if 
you borrow my car, and run into somebody, I am still responsible. They 
have many more severe provisions, if you read down, as we have in 
covering this particular measure. The fact of the matter is that this 
bill is not intended to be more reasonable but rather more restrictive 
on those seeking recovery for their particular injury.
  And I want to go here to the uniformity part where it does not apply 
to the manufacturer, and they talk now about the Uniform Commercial 
Code.
  Mr. President, I ask unanimous consent at this particular point--it 
is not that long--to have printed in the Record an overview of the 
Uniform Commercial Code.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

              The Uniform Commercial Code--An Introduction


                         1. nature and origins

       As of 1988, one of three different Official Texts of the 
     Uniform Commercial Code was in force in each of the American 
     states except Louisiana, as well as the District of Columbia 
     and the Virgin Islands. The 1962 Official Text (or a 
     predecessor with minor variations) was in force in 3 states. 
     The 1972 Official Text was in force in 14 states. The 1978 
     Official Text was in force in 32 states. Unless otherwise 
     indicated, all references in this book are to the 1978 
     Official Text of the Code. The Code is law in these 
     jurisdictions by virtue of ``local,'' state by state, 
     enactment. The United States Congress did not enact the Code 
     as general federal statutory law, although it did enact the 
     Code for the District of Columbia. The 1978 Code is divided 
     into eleven articles as follows:
       Article 1. General Provisions.
       Article 2. Sales.
       Article 3. Commercial Paper.
       Article 4. Bank Deposits and Collections.
       Article 5. Letters of Credit.
       Article 6. Bulk Transfers.
       Article 7. Warehouse Receipts, Bills of Lading and Other 
     Documents of Title.
       Article 8. Investment Securities.
       Article 9. Secured Transactions; Sales of Accounts and 
     Chattel Paper.
       Article 10. Effective Date and Repealer.
       [[Page S5648]] Article 11. Effective Date and Transition 
     Provisions.

     In all but Articles Ten and Eleven, the Articles are 
     subdivided into ``Parts.'' Thus, in Article One there are two 
     ``Parts'' while in Article Two there are seven. Each Part is 
     in turn subdivided into ``sections.'' Sections are numbered 
     in a manner that indicates both Article and Part. Thus, 
     section 2-206 on ``Offer and Acceptance in Formation of 
     Contract'' is in Article Two, Part Two. The first number of a 
     section always indicates the Article and the second number 
     the Part within that Article in which the section appears. 
     The Official Text of The Code includes ``Official Comments'' 
     on each section. The enacting jurisdictions did not enact 
     these comments, although they did enact both the section 
     headings and the sections (except insofar as they amended the 
     Official Text, a topic which will be considered below.) The 
     various jurisdictions, on enacting the Code, generally 
     followed the arrangement and sequence of the Official Text. 
     In almost all instances, they also preserved the Code's 
     numbering system. For example, in the great State of Oregon, 
     a seven appears before the first digit in the Code's 
     numbering system and a zero after the last digit. Otherwise, 
     the Code's numbering system is left intact. Thus, in Oregon, 
     1-101 is 71-1010.
       The National Conference of Commissioners on Uniform State 
     Laws was the originating sponsor of the Code. This was hardly 
     the first venture of the Conference into the field of 
     commercial law reform. The Conference had earlier sponsored a 
     number of ``uniform acts'' in
      this field. Those acts that were adopted in one or more 
     jurisdictions are listed below, with dates of 
     promulgation.
       Uniform Negotiable Instruments Law, 1896.
       Uniform Warehouse Receipts Act, 1906.
       Uniform Sales Act, 1906.
       Uniform Bills of Lading Act, 1909.
       Uniform Stock Transfer Act, 1909.
       Uniform Conditional Sales Act, 1918.
       Uniform Trust Receipts Act, 1933.
       All states adopted the Uniform Negotiable Instruments Law 
     and the Uniform Warehouse Receipts Act. Roughly two-thirds of 
     the states adopted the Uniform Sales Act and the Uniform 
     Trust Receipts Act. The other acts were less well received.
       By the late 1930's, the foregoing uniform acts had become 
     outdated. Changes had occurred in the patterns of commercial 
     activity prevalent when the acts were promulgated. Also, 
     wholly new patterns had emerged which gave rise to new kinds 
     of legal needs. Moreover, a major objective of the uniform 
     acts had been to promote uniformity. But not all states 
     enacted the acts, and the courts of the states rendered 
     countless nonuniform ``judicial amendments.'' By 1940, there 
     was growing interest in large scale commercial law reform. 
     The Conference was already at work revising the old Uniform 
     Sales Act and was giving consideration to a revision of the 
     Uniform Negotiable Instruments Law.
       In 1940, Mr. William A. Schnader conceived the idea of a 
     comprehensive commercial code that would modernize and 
     displace the old uniform acts. That same year, with the 
     support and advice of Professor Karl N. Llewellyn, Mr. 
     Schnader, as President of the National Conference of 
     Commissioners on Uniform State Laws, persuaded the Conference 
     to adopt a proposal to prepare a comprehensive code. Shortly 
     thereafter, Schnader and others sought the co-sponsorship of 
     the American Law Institute. Initially, the Institute agreed 
     only to co-sponsor a revision of the old Uniform Sales Act, 
     but on December 1, 1944 the two organizations formally agreed 
     to co-sponsor a Uniform Commercial Code project, with 
     Professor Karl N. Llewellyn of the Columbia Law School as its 
     ``Chief Reporter'' and Soia Mentschikoff as Associate Chief 
     Reporter. The co-sponsors also set up a supervisory Editorial 
     Board of five members which was later enlarged. Professor 
     Llewellyn then chose various individuals to serve as 
     principal drafters of the main Code Articles:
       Article 1. Karl N. Llewellyn.
       Article 2. Karl N. Llewellyn.
       Article 3. William L. Prosser.
       Article 4. Fairfax Leary, Jr.
       Article 5. Friedrich Kessler.
       Article 6. Charles Bunn.
       Article 7. Louis B. Schwartz.
       Article 8. Soia Mentschikoff.
       Article 9. Allison Dunham and Grant Gilmore.
       Between 1944 and 1950, the foregoing team formulated (not 
     without extensive consultation) the first complete draft of 
     the Code. The co-sponsors then circulated this draft widely 
     for comment. After revision, the co-sponsors promulgated the 
     first Official Text of the Code in September 1951 and 
     published it as the ``1952 Official Text.'' In 1953, 
     Pennsylvania became the first state to enact the Code, 
     effective July 1, 1954. In February of 1953, the New York 
     State Legislature and Governor Thomas E. Dewey referred the 
     Code to the New York State Law Revision Commission (located 
     at the Cornell Law School) for study and recommendations. 
     Between 1953 and 1955, the Commission dropped all other work 
     to study the Code. In the end, the Commission concluded that 
     the Code idea was a good one but that New York should not 
     enact the Code without extensive revision. Meanwhile, the 
     Code's Editorial Board had been studying the Commission's 
     work (as well as proposals for revision from other sources) 
     and in 1956 the Board recommended many changes in the 1952 
     Official Text. In 1957, the co-sponsors promulgated a 1957 
     Official Text that embodied numerous changes, many of which 
     were based on the Commission's study. Another Official Text 
     was promulgated in 1958, and still another in 1962. The 
     latter two made relatively minor changes in the 1957 Official 
     Text.
       Meanwhile, Massachusetts became the second state to enact 
     some version of the Code in September 1957. By 1960, 
     Kentucky, Connecticut, New Hampshire, and Rhode Island had 
     followed suit. In 1961, eight more states joined the fold. In 
     1962, there were four more, including New York. In 1963, 
     there were eleven more enacting states,
      in 1964 one, in 1965 thirteen, and in 1966 five more. By 
     1968, the Code was effective in forty-nine states, the 
     District of Columbia, and the Virgin Islands. Louisiana is 
     the only state not to have adopted the entire Code. In 
     1974, however, that state did enact Articles 1, 3, 4, 5, 7 
     and 8 of the 1972 Official Text, with amendments.
       In 1961, the Code sponsors set up a Permanent Editorial 
     Board for the Code which continues in operation to this day. 
     After its first written report on October 31, 1962, the Board 
     made three further reports. During the 1960's and early 
     1970's, the Board was concerned mainly with two tasks: (1) 
     promoting uniformity in state by state enactment and 
     interpretation of the Code and (2) evaluating and preparing 
     proposals for revision of the 1962 Official Text. For 
     example, the Board devoted great energy to revision of 
     Article Nine on personal property security. Eventually, the 
     American Law Institute and the National Conference of 
     Commissioners on Uniform State Laws approved a revised 
     Article Nine which West Publishing Co. published in 1972 as 
     part of a new 1972 Official Text of the entire Code 
     (incorporating all officially approved amendments thereto).
       In the mid and late 1970's the Code sponsors and others 
     studied possible revisions of Article Eight on investment 
     securities. A committee called the 348 Committee of the 
     Permanent Editorial Board reviewed proposals and made 
     recommendations to the Board. Eventually, the Code sponsors 
     adopted a revised Article Eight and in 1978 promulgated a new 
     Official Text embodying these revisions. As of January 1, 
     1988, thirty-two states had adopted most of this Official 
     Text.\22\
       No one has published an authentic ``inside'' story of the 
     evolution of the Code. Judged by its reception in the 
     enacting legislatures, the code is the most spectacular 
     success story in the history of American law. We know that 
     the design and text of the Code bears the inimitable imprint 
     of its chief draftsman, Karl N. Llewellyn, and that his 
     spouse, Soia Mentschikoff, had a major hand in the entire 
     project. We know, too, that many individuals whose names have 
     not appeared so prominently as draftsmen or as reporters had 
     great influence on aspects of the final product. One example 
     is Professor Rudolf B. Schlesinger of the Cornell Law School 
     who was not only responsible for the idea of a Permanent 
     Editorial Board,\24\ but also provided most of the ideas for 
     the radical revision of Article Five on letters of credit 
     that appeared in the 1957 Official Text. Another example is 
     the extensive work of the late Professor Robert Braucher of 
     the Harvard Law School (subsequently Mr. Justice Braucher of 
     the Massachusetts Judicial Court). His efforts began in the 
     1940's and continued until his death in 1981. We know, too, 
     that politically and in other ways, William A. Schnader of 
     the Philadelphia Bar was the Code's prime mover. It seems 
     safe to say that without his efforts, the Code would not have 
     come into being. Llewellyn and Schnader are now dead 
     (deceased 1962 and 1969 respectively), a fact that imposes a 
     real handicap on anyone who seeks to prepare an authentic 
     history of the Code project. A British scholar, Professor 
     William Twining, has catalogued Llewellyn's papers at the 
     University of Chicago Law School, and any future history of 
     the Code project must take account of these papers.


           2. commercial law not covered; freedom of contract

       The Uniform Commercial Code does not apply to the sale of 
     realty nor to security interests in realty (except fixtures), 
     yet these are undeniably commercial matters. The Code does 
     not apply to the formation, performance, and enforcement of 
     insurance contracts. It does not apply to suretyship 
     transactions (except where the surety is a party to a 
     negotiable instrument). It does not govern bankruptcy. It 
     does not define legal tender. It is not a comprehensive 
     codification of commercial law.
       The Code does not even cover all aspects of transactions to 
     which its provision do apply. For example, it includes 
     several innovative provisions on the formation of sales 
     contracts, but it still leaves most issues of contract 
     formation to general contract law. To cite one more example, 
     the code includes provisions on the purchaser's title to 
     goods, but one of these provisions turns on the distinction 
     between void and voidable title, a distinction that requires 
     courts to invoke non-Code law. Section 1-103 is probably the 
     most important single provision in the Code, and will be 
     discussed in section five of this Introduction. The provision 
     reads:
       ``Unless displaced by the particular provisions of this 
     Act, the principles of law and equity, including the law 
     merchant and the law relative to capacity to contract, 
     principal and agent, estoppel, fraud, misrepresentation, 
     duress, coercion, mistake, bankruptcy, or other validating or 
     invalidating cause shall supplement its provisions.''
       As Professor Grant Gilmore once put it, the Code ``derives 
     from the common law 
     [[Page S5649]] [and] assumes the continuing existence of a 
     large body of
      pre-Code and non-Code law on which it rests for support, 
     [without which the Code] could not survive.'' Much of the 
     pre-Code and non-Code law to which Professor Gilmore 
     refers is case law from such fields as contracts, agency, 
     and property, which comes into play via 1-103.
       Of course, federal commercial law overrides the Code. The 
     Federal Bills of Lading Act is illustrative. So, too, is the 
     Carmack Amendment to the Interstate Commerce Act. Federal 
     regulatory law overrides the Code, too. Today there are 
     federal statutes such as the National Consumer Credit 
     Protection Act, and the Magnuson-Moss-Warranty-Federal Trade 
     Commission Improvement Act regulating aspects of consumer 
     warranty practices. Similarly, state regulatory statutes also 
     override the Code. Thus, there are state retail installment 
     sales acts, state usury laws, state laws on consumer credit, 
     and so on. The Code itself includes a few regulatory 
     provisions.
       Finally, most of the Code's provisions are not mandatory. 
     The parties may vary their effect or displace them 
     altogether: freedom of contract is the rule rather than the 
     exception. Most commercial law is therefore not in the Code 
     at all but in private agreements, including course of 
     dealing, usage of trade, and course of performance.


  3. variations in enactment and in interpretation; conflict of laws 
                                 rules

       The Uniform Commercial Code is not uniform. As early as 
     1967, the various jurisdictions enacting the Code had made 
     approximately 775 separate amendments to it. Article Nine on 
     security interests in personal property was the chief victim 
     of the nonuniform amendments. As of December 15, 1966, 47 of 
     the 54 sections in the Article had been amended; California, 
     in particular, liberally rewrote or deleted segments of it. 
     The new Article Nine, embodied in the 1972 and 1978 Official 
     Texts, had become law in forty-six states (including 
     California) by January 1, 1987. Article Six on bulk transfers 
     was also the subject of many nonuniform amendments. New York 
     amended Article Five in a way that renders it inapplicable to 
     many letter of credit transactions, and yet New York does 
     more letter of credit business than any other state.
       Another source of nonuniformity lies in the various 
     ``optional'' provisions in the Official Texts of the Code. 
     Thus, for example, Section 9-401 offers enacting states three 
     alternatives with respect to the place of filing of financial 
     statements. Section 7-403(1)(b) offers two versions of the 
     burden of proving the bailee's negligence. Section 6-106 
     imposes a duty on the bulk transferee to see that the 
     transferor's creditors are paid off, but it is wholly 
     optional. Section 2-318 includes three options on third party 
     beneficiaries of warranties. And the Code includes still 
     other optional provisions. In almost every instance, some 
     states have adopted one version while other states have 
     adopted another.
       So-called ``open-ended' drafting is another source of 
     nonuniformity. In Articles Two and Nine, the draftsmen used 
     such phrases as ``commercial reasonableness'' and ``good 
     faith.'' That different courts will give such phrases 
     different meanings should surprise no one. And, after any 
     uniform law has been on the books for very long, disparate 
     judicial interpretation and construction of even quite 
     detailed provisions become another source of nonuniformity. 
     Today, many Code sections have been the subject of judicial 
     interpretation and construction in more than one jurisdiction 
     and the courts disagree over the meaning of many sections.
       The foregoing sources of nonuniformity signify that the 
     Code's conflict of laws rules are becoming especially 
     important. Section 1-105 sets forth the basic Code 
     provisions.
       (1) Except as provided hereafter in this section, when a 
     transaction bears a reasonable relation to this state and 
     also to another state or nation the parties may agree that 
     the law either of this state or of such other state shall 
     govern their rights and duties. Failing such agreement this 
     Act applies to transactions bearing an appropriate relation 
     to this state.
       (2) Where one of the following provisions of this Act 
     specifies the applicable law, that provision governs and a 
     contrary agreement is effective only to the extent permitted 
     by the law (including conflict of laws rules) so specified:
       Rights of creditors against sold goods. Section 2-402.
       Applicability of the Article on Bank Deposits and 
     Collections. Section 4-102.
       Bulk transfers subject to the Article on Bulk Transfers. 
     Section 6-102.
       Applicability of the Article on Investment Securities. 
     Section 8-106.
       Perfection Provisions of the Article on Secured 
     Transactions. Section 9-103.
       Various scholars of conflict of laws have offered their 
     thoughts on 1-105, and we have collected some of their 
     writings in the footnote. Later in this book we also address 
     ourselves to specify conflicts problems in the context in 
     which they arise.


               4. aids to interpretation and construction

       The principal aids to interpretation and construction of 
     the Code are these:
       Case law.
       Prior drafts and prior official texts.
       Other legislative history--New York Law Revision Commission 
     Reports--State legislative hearings and committee reports.
       Official Comments to each section.
       Periodic Reports of the Permanent Editorial Board.
       Treatises and other secondary sources.
       Rules of interpretation and construction.
       Standard interpretation technique.

  Mr. HOLLINGS. Mr. President, I will read the very first line:

       As of 1988, one of the three different Official Texts of 
     the Uniform Commercial Code was in force in each of the 
     American States except Louisiana. . . . The United States 
     Congress did not enact the code as general Federal statutory 
     law.

  It is talking of the nature and origins. Then it goes on to point out 
that what we have under the code is a selective process. It says here 
in the section two, titled ``Commercial Law Not Covered; Freedom of 
Contract'':

       Finally, most of the Code's provisions are not mandatory. . 
     . . Most commercial law is therefore not in the Code at all 
     but in private agreements, including course of dealing, usage 
     of trade, and course of performance.

  The Uniform Commercial Code is not uniform. Now that is the 
manufacturers.
  I ask unanimous consent to have printed in the Record a particular 
law review article on the conflict of laws under the Uniform Commercial 
Code at this point.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                     [From the Arkansas Law Review]

                   Conflict of Laws Under the U.C.C.

                         (By Robert A. Leflar)

       When do conflict of laws problems arise under the Uniform 
     Commercial Code, now that it is law in all the states and 
     other subdivisions of the United States except Louisiana?
       Conflicts do still occur. Obviously they can occur when 
     part of a commercial transaction takes place in Louisiana or 
     in a foreign nation whose law differs from the Code. But they 
     occur more frequently between the laws of states that have 
     adopted the Code. Why? Because (1) several states have 
     enacted variant amendments to some sections of the Code, and 
     (2) the courts of a number of states, careless of the 
     function of uniformity in a uniform act, have given 
     nonuniform interpretations to some sections of the Code. 
     Conflicts are not now as inevitable as in the 1950's and 
     early 1960's, when only a few states had enacted the Code, 
     but they can be even more frustrating than they were then. 
     The answers to the conflicts problems, however, are 
     reasonably definite.
       The history of choice-of-law provisions in the Code is, in 
     a very real sense, a pre-outline of the more recent history 
     of American conflicts law generally. It is a history of 
     increased emphasis upon substance over form and of deliberate 
     preference for an approach that would result in application 
     of better, sounder rules of commercial law as distinguished 
     from mechanical choice-of-law rules applied for their own 
     sake. The approach is primarily designed by commercial law 
     specialists whose concern was with what they conceived to be 
     good commercial law, rather than by conflicts scholars. Most 
     conflicts scholars, however, ultimately agreed with the 
     approach.
       Joe C. Barrett of Arkansas was one of the practical lawyer-
     Commissioners whose interests lay in the substantive law 
     areas, not in choice-of-law theory. His voice was an 
     influential one almost from the beginning of work on the 
     Code, and he agreed with the pragmatic approach to conflicts 
     issues. Though he left it to others, for the most part, to 
     frame the conflicts language, he supported their ideas, 
     particularly as the sections were reviewed by the Permanent 
     Editorial Board of which he was a longtime member. He had 
     much to do with the thinking and rethinking that is reflected 
     in the successive drafts as they are presented in the next 
     few pages. Above all, he was satisfied by section I-105 as it 
     finally emerged, first in the 1958 Official Text, then with 
     one further change in 1972. The section as it now stands is 
     as follows:
 Section 1-105. Territorial Application of the Act; Parties' Power to 
                         Choose Applicable Law

       (1) Except as provided hereafter in this section, when a 
     transaction bears a reasonable relation to this state and 
     also to another state or nation the parties may agree that 
     the law either of this state or of such other state or nation 
     shall govern their rights and duties. Failing such agreement 
     this Act applies to transactions bearing an appropriate 
     relation to this state.
       (2) Where one of the following provisions of the Act 
     specifies the applicable law, that provision governs and a 
     contrary agreement is effective only to the extent permitted 
     by the law (including the conflict of laws rules) so 
     specified:
       Rights of creditors against sold goods. Section 2-402.
       Applicability of the Article on Bank Deposits and 
     Collections. Section 4-102.
       Bulk transfers subject to the Article on Bulk Transfers. 
     Section 6-102.
       [[Page S5650]] Applicability of the Article Investment 
     Securities. Section       * * *.
       Perfection provisions of the Article on Secured 
     Transactions. Section 9-103.

                           The first 25 years

       From the beginning the effort was to make the new Code 
     applicable to as many transactions as could constitutionally 
     be brought under it. The due process clause of the federal 
     Constitution, and possibly the full faith and credit clause, 
     set the outer limits. The leading case was (and is) Home 
     Insurance Co. v. Dick, which held that due process was 
     violated by a state's holding a transaction to be governed by 
     the substantive law of a state which had no substantial 
     connection with the transaction.
       The October, 1949 draft of section 1-105 attempted to 
     achieve the desired maximum application of the new Code by 
     providing that this Act shall apply to any contract or 
     transaction within its terms if:
       (a) the contract is completed, or the offer made or 
     accepted, or the transaction occurs within this state; or
       (b) the contract is to be performed or the transaction is 
     to be completed within this state; or
       (c) the contract or transaction relates to or involves 
     goods which are to be or are in fact located, delivered, 
     shipped or received within this state; or
       (d) the contract or transaction involves a bill of lading, 
     warehouse receipt or other document of title which is to be 
     or is in fact issued, delivered, sent or received within this 
     state; or
       (e) the contract or transaction involves commercial paper 
     which is made, drawn, transferred or payable within this 
     state; or
       (f) the contract or transaction involves a commercial 
     credit made, sent or received within this state; or involves 
     a commercial credit issued in this state or confirmation or 
     advice of which is sent or received within this state, or 
     involves any negotiation within this state of a draft drawn 
     under a credit; or
       (g) the contract or transaction involves a foreign 
     remittance drawn, transferred or payable within this state; 
     or
       (h) the contract or transaction involves an investment 
     security issued or transferred within this state; or
       (i) the contract or transaction involves a security 
     interest created within this state or relating to tangible 
     personal property which is or is to be actually within this 
     state or to intangible personal property which has or is to 
     have its situs within this state; or involves a bulk transfer 
     of property to the extent that such property is within this 
     state; or if the borrower's principal place of business is 
     within this state; or
       (j) whenever the contract, instrument or document states in 
     terms or in substance that it is subject to the Uniform 
     Commercial Code.
       (2) Notwithstanding the provisions of the foregoing 
     subsection, the parties to a contract or transaction 
     involving foreign trade may agree in writing that the law of 
     a specified jurisdiction shall apply.
       The objective had been to list all the factual connections 
     that were substantial enough to permit forum law (the Code) 
     to be constitutionally applicable.
       At the same time an alternative section 1-105 was drafted, 
     for inclusion in a proposed enactment of the Code by the 
     federal Congress, on the supposed authority of the commerce 
     clause. This draft generally tracked the language of the 
     state section.
       The reaction to this section came near to being violent. A 
     part of the reaction was automatic resistance to change: ``If 
     it's different from what I learned in law school it must be 
     wrong.'' A number of conflicts scholars joined in unanimous 
     adoption of a resolution introduced by the respected 
     Professor Elliott E. Cheatham of Columbia University Law 
     School:
       ``Resolved, that the undersigned, participants in the 1949 
     Institute of International and Comparative Law, Ann Arbor, 
     Michigan, are of the opinion that Section 1-105 (in both 
     forms) of the May, 1949, draft of the Uniform Commercial 
     Code, dealing with conflict of laws, is unwise and should be 
     omitted from the Code; and the Executive Secretary of the 
     Institute of International and Comparative Law is requested 
     to transmit a copy of this resolution to the President of the 
     American Law Institute and the Chairman of the Commissioners 
     on Uniform Laws.''
       This reaction induced the Institute and the Commissioners 
     to revise the section by lengthening it considerably, 
     deleting the alternative proposed for federal enactment, but 
     retaining the same objective that the Act, as a state 
     statute, apply to as many transactions as the Constitution 
     would permit. The 1952 draft of the section, instead of 
     providing that ``this Act'' shall apply to all the enumerated 
     situations, called for application of particular parts 
     (articles) of the Act to the fact situations:


   section 1-105. applicability of the act; parties' right to choose 
                            applicable law.

       (1) Article 1 applies to any contract or transaction to 
     which any other Article of this Act applies.
       (2) The Articles on Sales (Article 2), Documentary Letters 
     of Credit (Article 5) and Documents of Title (Article 7) 
     apply whenever any contract or transaction within the terms 
     of any one of the Articles is made or occurs after the 
     effective date of this Act and the contract
       (a) is made, offered or accepted or the transaction occurs 
     within this state; or
       (b) is to be performed or completed wholly or in part 
     within this state; or
       (c) relates to or involves goods which are to be or are in 
     fact delivered, shipped or received within this state; or
       (d) involves a bill of lading, warehouse receipt or other 
     document of title which is to be or in fact issued, 
     delivered, sent or received within this state; or
       (e) is an application or agreement for a credit made, sent 
     or received within this state, or involves a credit issued in 
     this state or under which drafts are to be presented in this 
     state or confirmation or advice of which is sent or received 
     within this state, or involves any negotiation within this 
     state of a draft drawn under a credit.
       (3) The Articles on Commercial Paper (Article 3) and Bank 
     Deposits and Collections (Article 4) apply whenever any 
     contract or transaction within the terms of either of the 
     Articles is made or occurs after the effective date of this 
     Act and the contract
       (a) is made, offered or accepted or the transaction occurs 
     within this state; or
       (b) is to be performed or completed wholly or in part 
     within this state; or
       (c) involves commercial paper which is made, drawn or 
     transferred within the state.
       (4) The Article on Investment Securities (Article 8) 
     applies whenever any contract or transaction within its terms 
     is made or occurs after the effective date of this Act and 
     the contract
       (a) is made, offered or accepted or occurs within this 
     state; or
       (b) is to be performed or completed wholly or in part 
     within this state; or
       (c) involves an investment security issued or transferred 
     within this state.
       But the validity of a corporate security shall be governed 
     by the law of the jurisdiction of incorporation.
       (5) The Articles on Bulk Transfers (Article 6) and Secured 
     Transactions (Article 9) apply whenever any contract or 
     transaction within their terms is made or occurs after the 
     effective date of this Act and falls within the provisions of 
     section 6-102 or sections 9-102 and 9-103.
       (6) Whenever a contract, instrument, document, security or 
     transaction bears a reasonable relationship to one or more 
     states or nations in addition to this state the parties may 
     agree that the law of any such other state or nation shall 
     govern their rights and duties. In the absence of an 
     agreement which meets the requirements of this subsection, 
     this Act governs.
       This, too, produced negative reactions. These were largely 
     based on the assumption, actually not justified, that section 
     1-105 followed the mechanical choice-of-laws theories of 
     Professor Joseph H. Beale of Harvard, as those theories were 
     embodied in the American Law Institute's Restatement I of 
     Conflicts of Laws, for which Professor Beale was the 
     Reporter. Two facts tended to support the assumption. One was 
     the designation of specific fact situations as being 
     determinative of the stated choices of law. That was the way 
     Beale had set forth his hard and fast jurisdiction-selecting 
     rules, and the critics tended to overlook the fact that the 
     Code's choices would be different from Beale's. The other was 
     that Judge Herbert F. Goodrich, Director of the American Law 
     Institute and Chairman of the Code's Editorial Board, was a 
     former student and long-time disciple of Beale and was at 
     least to some extent responsible for the successive drafts of 
     section 1-105. On this point, the tendency was to overlook 
     the fact that Judge Goodrich, in his
      support of these early drafts of section 1-105, had moved 
     far away from Beale's still earlier rules. These reactions 
     were, nevertheless, part of the reason for the slow 
     acceptance of the Code by state legislatures in the next 
     few years. Reconsideration of the language was called for, 
     but there was no serious thought of abandoning the 
     objective of having the Code apply to all the fact 
     situations to which the due process clause would permit 
     its application. It was sincerely believed to be a better 
     body of commercial law than any other anywhere, and the 
     best basis for choice of law was deliberate application of 
     this ``better law.''
       Simplification was the principal result of the 
     reconsideration. The 1958 official draft of the Code, 
     substantially completed in 1957, put section 1-105 in very 
     nearly its present form. It became apparent that, apart from 
     permitting parties to agree on what law should govern their 
     transactions, the effect of the detailed listing in the 1952 
     Code of the fact situations to which the various portions of 
     the Code were to apply was nearly the same as a simple 
     statement that all the transactions listed were to be 
     governed by the relevant parts of the Code. The listed fact 
     situations, it was believed, all bore a constitutionally 
     ``appropriate relation'' to the forum state in which the Code 
     was the law. But if any of them did not, the new phrasing, 
     ``this Act applies to transactions bearing an appropriate 
     relation to this state,'' evaded possible 
     unconstitutionality. At the same time it avoided hard-and-
     fast rules of the Bealian kind and left the choice-of-law 
     limits open-ended so that they would fit in with whatever new 
     developments the future might bring to that small branch of 
     constitutional law.
       The next conflicts change came in 1972. It was not a 
     modification of section 1-105 as such, but rather a deletion 
     of all choice-of-law provisions from section 9-102 and a 
     revision of the choice-of-law provisions in section 9-103, 
     both dealing with secured transactions. This increased 
     somewhat the scope 
     [[Page S5651]] of the first paragraph of section 1-105, but 
     left as before the separate applicability of choice-of-law 
     rules laid down for the five separate areas identified in the 
     second paragraph of section 1-105, including the revised 
     section 9-103. Section 8-106, on the law governing certain 
     investment securities transactions, was revised in 1977, and 
     another minor change was at the same time made in section 9-
     103, correlating it with the revised section 8-106. That is 
     where the Code's conflicts sections stand today. There are 
     still a number of doubts and unresolved questions not only 
     under section 1-105 but under the other listed sections as 
     well.

                  Party autonomy--reasonable relation

       With specified exceptions, ``when a transaction bears a 
     reasonable relation to this state and also to another state 
     or nation the parties may agree that the law either of this 
     state or of such other state or nation shall govern their 
     rights and duties.'' What constitutes a ``reasonable 
     relation''? How far afield may the parties go in deciding for 
     themselves what law is to govern their transactions?
       The theory of party autonomy in choice of law has not 
     always been accepted by American jurists, though it has for a 
     century been a factor affecting choice of governing law in 
     contracts cases. Acceptance of the parties' stated intention, 
     or even their implied intention, as to what law should govern 
     their contract is a part of the common law of conflict of 
     laws today. To that extent the Code merely follows the common 
     law. The unanswered question is only as to where the outer 
     limit lies. The term ``reasonable relation'' sets an outer 
     limit, and suggests that common sense defines it, but still 
     does not locate it, geographically or otherwise.
       The Official Comment on section 1-105 is not very 
     conclusive. The Comment's principal reliance is on Seeman v. 
     Philadelphia Warehouse Co., a case in which, actually, no 
     choice-of-law clause was involved. The holding was that a 
     contract calling for a rate of interest usurious by New York 
     law but valid by Pennsylvania law should be governed by 
     Pennsylvania's law, and the contract sustained. There were 
     substantial elements of both making and performance in each 
     state. The court did rely upon an inference that parties 
     contracting in good faith would have intended their contract 
     to be governed by the law of the one of the only two related 
     states that would validate it. This was not so much party 
     autonomy in choice of law as it was a preference for the law 
     that would validate a contract made in good faith--a ``basic 
     rule of validation'' approach.
       The Restatement (Second) of Conflict of Laws is somewhat 
     more in point. It specifies an outer geographic limit on the 
     contracting parties' freedom to name the governing law by 
     providing that their choice will not control if ``the chosen 
     state has no substantial relationship to the parties or the 
     transaction and there is no other reasonable basis for the 
     parties' choice.'' This of course is only a negative, not an 
     affirmative, statement as to how far afield the choice may 
     go. Yet the implication that the parties are free to choose 
     the law of a state unrelated to the transaction or to 
     themselves is significant. The significance is increased by 
     the implication that a ``reasonable basis'' for such an 
     extraneous choice may exist. And the Official Comment on 
     section 1-105 does say:
       ``an agreement as to choice of law may sometimes take 
     effect as a shorthand expression of the intent of the parties 
     as to matters governed by their agreement, even though the 
     transaction has no significant contact with the jurisdiction 
     chosen.''
       The argument that follows is that agreements by contracting 
     parties as to what law shall govern their transaction are not 
     essentially different from other parts of their contract upon 
     which they are completely free to agree. The only limitation 
     should be that they cannot lawfully do something that would 
     be violative of the strong public policy of a concerned 
     state. Reasonableness should have to do with good reasons for 
     wishing a particular system of law to govern their 
     transaction, not necessarily limited to states having 
     physical contacts with them or it. That is the view taken by 
     most academic interpreters of the Section.
       A set of facts suggested by the most recent commentator 
     illustrates the argument. Suppose a contract completed in 
     Florida for sale of goods to be delivered to a Canadian buyer 
     in Montreal by a seller incorporated in Delaware but 
     operating factories in Arkansas, Louisiana and Wisconsin. The 
     contract stipulates that New York law shall govern its 
     validity, construction and enforcement. ``The stipulation 
     could be upheld based upon the parties' familiarity with New 
     York law, its fuller development in dealing with issues of 
     the type presented by the particular contract or perhaps the 
     parties' preference for a particular substantive doctrine 
     established under New York law. Unless the selection offends 
     a fundamental public policy of the forum state or constitutes 
     a wilful evasion that smacks of bad faith or overreaching, 
     the court would have no cause to interfere with the choice of 
     the parties.'' The same author, however, cites two cases both 
     holding that similar contract stipulations were ineffectual 
     because New York had no physical connection with the 
     transaction sued on. Despite such cases, it is not unlikely 
     that the ``reasonable relation'' required by section 1-105 
     will some day, in some courts, be held to be satisfied simply 
     by the parties' deliberate designation of a relevant law that 
     in their opinion best serves the purposes of their voluntary 
     transaction.
       It must not be thought that every choice-of-law clause in 
     every commercial contract that any parties execute is 
     deserving of enforcement. Such clauses can be hidden in the 
     fine print of take-it-or-leave-it form contracts which casual 
     customers have little or no opportunity to study. Adhesion 
     contracts are always suspect. Something turns upon the 
     meaning of the Code word ``agree.'' The take-it-or-leave-it 
     party may not have ``agreed'' to a strange and unread choice-
     of-law clause in the fine print that was never called to his 
     attention. At least there can be as much justification for 
     avoiding these clauses as there is for avoiding any other 
     harsh and unanticipated provision in any kind of adhesion 
     contract. Other Code provisions also afford means for 
     avoidance of unfair choice-of-law clauses. Section 1-103 
     preserves defenses based on ``estoppel, fraud, 
     misrepresentation, duress, coercion, mistake, * * *''; 
     section 1-203 ``imposes an obligation of good faith'' in all 
     contracts; and section 2-302 permits refusal of enforcement 
     as to any unconscionable clause in a sales contract. The 
     enforceability of choice-of-law clauses is no more required 
     than for any other sort of contract clause.
       It must be admitted, also, that choice-of-law contract 
     clauses have been avoided by simply neglecting to notice 
     section 1-105 as a controlling statute.
       One of the worries that was discussed when the party-
     autonomy part of section 105 was first drafted was whether 
     third persons, not parties to the contract but affected by it 
     might be prejudiced by the parties' selection of a state law 
     unfavorable to the third persons' interests. Such third 
     persons may include creditors of a seller who retained 
     possession of the sold goods, other creditors of either party 
     or nonbuyers in whose favor a warranty might or might not 
     run.
       The drafters' quick answer to this worry is in the wording 
     of section 1-105 itself. It says that the parties may agree 
     on what law is to ``govern their rights and duties.'' This 
     does not refer to the rights and duties of third persons. 
     That may not be conclusive in all situations. More in point 
     is subparagraph (2) of the section, which in its five 
     specific exceptions identifies the situations in which the 
     interests of third persons are most likely to be involved, 
     and takes them out of the party-autonomy category. There may 
     be other situations, but at least the problem is minimized.

            ``This act applies . . . appropriate relation''

       ``Except as provided hereafter in this section . . . [and] 
     failing such agreement this Act applies to transactions 
     bearing an appropriate relation to this state.'' One purpose 
     behind section 1-105 from its beginning was that the Code 
     (``this Act''), believed to be the most nearly perfect system 
     of commercial law yet devised by man, should be as widely 
     applicable as possible. Within the United States, the only 
     limitations upon territorial applicability of an otherwise 
     valid state statute (which was what was contemplated for the 
     Code), are to be found in the Federal Constitution. What are 
     they?
       The due process clause in the fourteenth amendment is the 
     traditional one, and probably still the principal one. Home 
     Insurance Co. v. Dick is the leading case. In it, the United 
     States Supreme Court held that for Texas to apply Texas law 
     to invalidate a time-for-suit clause in a Mexican insurance 
     contract, valid by Mexican law, was a violation of due 
     process. The constitutional requirement, broadly stated, is 
     that no state's substantive law may be applied to govern a 
     transaction unless the transaction had some fairly 
     substantial connection with that state. In Dick, the only 
     Texas connection was that the plaintiff, assignee of claims 
     under the Mexican contract, was a Texas domiciliary. That was 
     not enough. There are many contacts that will suffice, but 
     they must be significant ones.
       The 1949 and 1952 drafts of section 1-105 listed a 
     considerable number of specific contacts which the drafters 
     believed, or at least hoped, would be accepted by the Supreme 
     Court as sufficiently substantial to permit application of 
     ``this Act'' or the designated one of the Act's articles. One 
     of the frequently-voiced objections to these early drafts was 
     that several of the listed contacts were so casual, so 
     insignificant as elements in the total transaction, that they 
     would not satisfy the constitutional standard. Some of them 
     probably would not have. That was one reason why the 
     specificity of the early drafts was abandoned in the present 
     (1958) revision. Yet the basic thought that the Code was a 
     superior body of commercial law that ought to be widely 
     applied was not abandoned. Making it applicable whenever the 
     facts bore an ``appropriate relation'' to the forum state 
     having the Act preserved the potential for maximum 
     applicability, without risking specific unconstitutional 
     possibilities.
       Another concern also was involved. This one arose partly 
     from the fact that probable wide adoption of the Code, plus 
     variant interpretations of it and local amendments to it, 
     made it less urgent that ``this Act'' as it was operative in 
     any given state be there applied to essentially extrastate 
     transactions. Assurance that the Code as amended and 
     interpreted in any given state was clearly the ``better law'' 
     could not be maintained. Forum shopping by plaintiffs not 
     interested in ``better law'' but only in law most favorable 
     to their private interests would be encouraged by a choice-
     of-law rule always requiring application of the forum's 
     version of the Code. The original purpose of the earlier 
     [[Page S5652]] section 1-105, to compel application of ``this 
     Act,'' in every state that adopted the Code, to every 
     commercial lawsuit filed in the state, was no longer the 
     worthy purpose that it had at first appeared to be.
       Also important was the modernization of American choice-of-
     law law was occurring at about the same time, breaking away 
     from the old hard-and-fast mechanical rules that had been 
     accepted during most of the century. The infusion of Brainerd 
     Currie's concepts of ``governmental interest,'' of 
     Ehrenzweig's idea of a ``basic rule of validation, of Cavers' 
     ``principles of preference,'' and of the fundamental 
     ``choice-influencing considerations'' into the mainstream of 
     conflicts law has made that body of law far more reasonable 
     than it used to be, and far more acceptable as an intelligent 
     basis for choosing between competing laws.
       Choice-of-law problems in commercial litigation do not 
     arise as often today as they did before the Code or in the 
     Code's early days. Many of them are resolved beforehand by 
     agreement of the parties. Others are covered by the specific 
     rules set out in the second paragraph of section 1-105. For 
     the rest, the governing words ``appropriate relation'' can 
     well be taken to refer to what appears to be appropriate 
     under sensible modern choice-of-law principles. There is good 
     reason to believe that this is the approach which the 
     majority of courts are taking to the problem.
       There may be infrequent cases not covered by either of the 
     two sentences in the first paragraph in section 1-105, nor by 
     any of the five possibilities specified in the second 
     paragraph. These will involve transactions in which the 
     parties have not agreed to as to what state's law shall 
     govern and in which the transaction does not bear ``an 
     appropriate relation to this [the forum] state.'' The 
     situation will arise when the plaintiff has for reasons of 
     his own filed his lawsuit in what has been called a 
     ``disinterested third state.'' It might be resolved by a 
     forum non conveniens dismissal. But if jurisdiction is 
     retained, since the Code simply prescribes no choice-of-law 
     rule for the case, the court must of necessity fall back on 
     its preexistent statutory or common law of conflicts law, 
     whatever that may be.
                      Paragraph (2) of the section

       The second paragraph of the 1958 draft of section I-105 
     named five areas, identified by numbered Code sections, that 
     were not to be governed by the rather loose provisions of the 
     first paragraph. These areas, for the sake of maximum 
     predictability of results in the transactions covered by 
     them, were to be subject to hard-and-fast choice-of-law 
     rules, explicitly laid down. The governing law was to be that 
     of a designated place, so that the parties could know 
     beforehand, by knowing that law, what the legal consequences 
     of their transaction would be.
       Maximum assurance of this predictability was provided by 
     requiring, for each of the five areas, that the whole 
     relevant law ``including the conflict of laws rules'' of the 
     designated place be applied. Reliance upon this renvoi 
     technique was designed to make certain that the forum court 
     trying the case would handle the issue in exactly the same 
     way that a court at the designated place would handle it, by 
     applying the same choice-of-law rules that court would apply 
     and thus reaching exactly the same decision that would be 
     reached by a court at that place. Accidents might interfere 
     with this absolute predictability, but that came as close to 
     it as could be planned.
       The section as thus drafted in 1958 remains unchanged 
     except for the scope of the last (fifth) area. That was 
     modified in 1972, and the modification has now been accepted 
     in a majority of the states. Each of the five excepted areas 
     will now be noted.
       Section 2-402. This section in part of the Article on sales 
     of goods. It deals with the rights that a creditor of the 
     seller may have against the sold goods by reason of the 
     seller's misleading retention of possession or other 
     allegedly fraudulent conduct with reference to the goods. The 
     Code itself provides that certain types of conduct are either 
     fraudulent or not fraudulent. Apart from those provisions, 
     section 2-402 prescribes a specific choice-of-law rule, that 
     the law governing the creditor's rights, if any, in the sold 
     goods (as against both buyer and seller) is that of the state 
     where the goods are situated. This is the sort of case in 
     which one related state's law is likely to be as good as 
     another's, and about as relevant. The goods' situs is an 
     ascertainable extrinsic fact on the basis of which a firm 
     determination of governing law and resultant rights can most 
     readily be made not only by a court but by the parties 
     themselves.
       Section 4-102. Article 4 of the Code deals with bank 
     deposits and collections. Section 4-102 provides:
       ``The liability of a bank for action or non-action with 
     respect to any item handled by it for purposes of 
     presentment, payment or collection is governed by the law of 
     the place where the bank is located. In the case of action or 
     non-action by or at a branch or separate office of a bank, 
     its liability is governed by the law of the place where the 
     branch or separate office is located.''
       Here again the purpose was to lay down a clear and simple 
     choice-of-law rule that would prescribe the law of an obvious 
     and readily ascertainable place to govern the literally 
     millions of elementary transactions that occur on every 
     banking day in the United States. The Official Comment makes 
     it clear that the rule is to ``apply from the inception of 
     the collection process of an item through all phases of 
     deposit, forwarding, presentment, payment and remittance, or 
     credit of proceeds.'' Unity of governing law is part of the 
     objective. At the same time, however, section 4-103 permits 
     the parties, ``by agreement,'' to vary the choice-of-law rule 
     laid down by section 4-102. Thus the party autonomy which is 
     a central feature of section I-105 is available for this area 
     also.
       Section 6-102. The law governing bulk transfers of tangible 
     goods is covered by Article 6 of the Code. The paragraph 
     numbered (4) of section 6-102 provides:
       ``Except as limited by the following section all bulk 
     transfers of goods located within this State are subject to 
     this article.''
       The following section (6-103) does not deal with choice of 
     law, but rather lists eight kinds of transfers that are not 
     governed by Article 6 at all, therefore not by section 6-102.
       Again, situs of the affected goods is made the controlling 
     choice-of-law fact. There has been criticism of sections 6-
     102 and 6-103 of the Code, but the criticism has apparently 
     not been directed at the choice of law provision in paragraph 
     (4) of section 6-102.
       Section 8-106. Investment securities (stocks, bonds, and 
     the like) constitute the subject matter of Article 8. Section 
     8-106 does not lay down conflicts rules for all matters 
     covered by the article, but only for a specified part of it. 
     The first paragraph of section 1-105 governs as to the rest. 
     The 1972 version of section 8-106 was as follows:
       ``The validity of a security and the rights and duties of 
     the issuer with respect to registration of transfer are 
     governed by the law (including the conflict of laws rules) of 
     the jurisdiction of organization of the issuer.''
       That version is still the law in most states. In 1977, 
     however, the section was changed to read:
       ``The law (including the conflict of laws rules) of the 
     jurisdiction of organization of the issuer governs the 
     validity of a security, the effectiveness of registration by 
     the issuer, and the rights and duties of the issuer with 
     respect to:
       ``(a) registration of transfer of a certificated security;
       ``(b) registration of transfer, pledge, or release of an 
     uncertificated security; and
       ``(c) sending of statements of uncertificated securities.''
       It is interesting that both versions of the section repeal, 
     presumably for the sake of emphasis, the renvoi provision 
     which is in any event applicable to it, as well as to all the 
     others of the five specified exceptions listed in the second 
     paragraph of section 1-105.
       The modification of the section does not change the rule as 
     to what law governs the validity of a security as issued, nor 
     as to the transfer of certificated securities. What it does 
     is clarify the aspects and effects of registration, 
     particularly of uncertificated securities, that are to be 
     governed by the designated law. As under the earlier version, 
     the first paragraph of section 1-105 relates the rest. 
     Application of the law of the issuer's ``jurisdiction of 
     organization'' to registrations and closely related matters 
     present no real difficulties and is in keeping with normal 
     expectancies.
       Section 9-103. Secured transactions, the subject covered by 
     Article 9 of the Code, includes some of the most difficult 
     areas of commercial law, and the choice-of-law sections of 
     the article have been among its most controversial. In the 
     1958-1962 version of the Code, section 9-102 applied most of 
     the article's provisions to ``any personal property and 
     fixtures within the jurisdiction of this state.'' The 1972 
     revision deleted this choice-of-law clause completely. The 
     1958-1962 version, in section 9-103, dealt with choice-of-law 
     issues as to validity, perfection and the effects of default 
     in security transactions. The 1972 revision eliminated the 
     conflicts parts dealing with validity and defaults, leaving 
     only as hard-and-fast choice-of-law rules those parts dealing 
     with perfection and the consequences of non-perfection of 
     security interests. These obviously are substantial legal 
     areas. But the deleted areas, from both sections, were also 
     substantial. The choice-of-law rules applicable to them are 
     now
      those set out in the first paragraph of section 1-105.
       There are many ways in which movable goods can be pledged 
     as security for discharge of obligations owed to creditors or 
     other obligees, and many ways in which third persons may 
     acquire conflicting claims. Removal of the goods from one 
     state to another may be contemplated or not contemplated by 
     the secured party (obligee), and removal may occur even 
     though it was not contemplated. Removal increases the risk 
     that third persons may, possibly in good faith, acquire 
     conflicting claims to the goods. Official recordation of the 
     security transaction (``perfection'' of the security 
     interest) is the accepted method for validating the security 
     holder's interest as against most of such conflicting third-
     person claims. But recordation where?
       That is the principal question which section 9-103 
     undertakes to answer, along with companion questions as to 
     the effects of non-perfection. Potential fact situations and 
     the variant rules prescribed for them by section 9-103 are 
     too elaborate for detailed explanation in this short article. 
     They are much clearer, however, under the 1972 revision than 
     they were before, also more fair and more efficient. They are 
     sufficiently specific that not a great deal of litigation on 
     choice-of-law questions has developed in states, now 
     [[Page S5653]] a substantial majority, that have enacted the 
     1972 revision, and commentators on the section have envinced 
     general agreement as to its scope and applicability. By 9-
     103(1)(b) perfection of security interests is governed by the 
     law of the state where the chattel was located at the time of 
     the transaction, except that under 9-103(1)(c) if at the time 
     a purchase money security interest is created the parties 
     contemplate removal of the chattel to another state then the 
     law of the other state governs, subject to a 30-day 
     recordation requirement. A certificate of title thus issued 
     will in most situations protect the holder of security 
     interests noted on it for four months after the chattel is 
     removed to a different state, after which time an innocent 
     purchaser, under 9-103(2)(b), will take free of a locally 
     unrecorded security interest.
       There are still problems, especially with reference to 
     inherently movable chattels such as motor vehicles. Most of 
     the states have motor vehicle title certificate laws, under 
     which motor vehicle titles are integrated in properly issued 
     certificates, but not in improperly issued ones. In the ten 
     states which have enacted the Uniform Motor Vehicle 
     Certificate of Title and Anti-Theft Act, there is 
     coordination with the corresponding provisions of the Code, 
     but in some other states there may not be. Perfection of 
     security interests in chattels the title to which is supposed 
     to be integrated in a title certificate is referred by the 
     Code to the relevant title certificate law. Under the Code, 
     however, if a title certificate though improperly issued in a 
     second state (fraudulently procured, as after a theft or by 
     an absconding buyer after a conditional sale) is fair on its 
     face, a buyer of the chattel who purchases it in good faith 
     and for value in reliance on the bad certificate, and ``who 
     is not in the business of selling goods of that kind,'' gets 
     good title even against the owner of a prior properly 
     ``protected'' security interest. A used car dealer who relies 
     on such a bad certificate, on the other hand, would not 
     prevail over the prior security interest.

                           *   *   *   *   *

  Mr. HOLLINGS. Mr. President, I will read this little example to show 
exactly what we are getting at:
  Suppose a contract is completed in Florida for the sale of goods to 
be delivered to a Canadian buyer in Montreal by a seller incorporated 
in Delaware, but operating factories in Arkansas, Louisiana, and 
Wisconsin; the contract stipulates that New York law shall govern its 
validity, construction, and enforcement.
  Now, there we are. Talking about foreign shopping, New York lawyers 
sitting up there on the top floor of the World Trade Center Building, 
having their martinis at lunch, they say, ``We do not care what State 
this is in, we have the Universal Commercial Code and for us we will 
select where we are, where it is convenient for us to try cases, or any 
other forum that is available to us.'' But not the injured party.
  They claim all they want is uniformity, but have the unmitigated gall 
to include an exclusion for manufacturers--for manufacturers. They 
boldface put it in there as an exemption for manufacturers for this 
particular law that they say is such a national necessity.
  I have seen a lot of activity in my service here as the junior 
Senator over the years, but I have never seen a provision where they 
come in, absolutely representing the manufacturers and saying they are 
trying to get money to the injured parties. They really say that. I 
will go back to the Congressional Record and show it.
  Where all the representative organizations of injured parties, 
whether it is the lawyers themselves or otherwise the consumer groups 
of Americans say ``No, no, no, do not give us this,'' yet they put in 
all the favorable provisions for the manufacturers. With respect to the 
joint and several, we know there are some 10 States that do not include 
joint and several but rather, several only for the proof of 
compensatory damages.
  Do we think they make that uniform? Just as they do not extend 
punitive damages to those States that do not have it, they do not 
extend the joint and several provision to those States that only have 
several.
  If it was the intent to get uniformity, we would have it there, but 
they do not provide it there.
  So, we can go right on down the list in all regards to this 
particular bill with respect to uniformity on the one hand, or how far 
they have come over the past several years and made it more reasonable, 
when the truth of the matter is they have included a lot of things here 
in this particular measure that were included in the House bill, so 
that when it passes the Senate, of course, it will not be 
conferenceable at all. It will not be subject to the conference because 
it will be a provision not in dispute but contained in both measures.
  I yield the floor.


                 Amendment No. 597 to Amendment No. 596

 (Purpose: To provide for equity in legal fees, and for other purposes)

  Mr. ABRAHAM. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER (Mr. DeWine). The clerk will report.
  The bill clerk read as follows:

       The Senator from Michigan [Mr. Abraham] proposes an 
     amendment numbered 597 to amendment No. 596.

  Mr. ABRAHAM. Mr. President, I ask unanimous consent that the reading 
be dispensed.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the pending amendment add the following new 
     title:
                    TITLE III--EQUITY IN LEGAL FEES

     SEC. 301. EQUITY IN LEGAL FEES.

       (a) Disclosure of Attorney's Fees Information.--
       (1) Definitions.--For purposes of this subsection--
       (A) the term ``attorney'' means any natural person, 
     professional law association, corporation, or partnership 
     authorized under applicable State law to practice law;
       (B) the term ``attorney's services'' means the professional 
     advice or counseling of or representation by an attorney, but 
     such term shall not include other assistance incurred, 
     directly or indirectly, in connection with an attorney's 
     services, such as administrative or secretarial assistance, 
     overhead, travel expenses, witness fees, or preparation by a 
     person other than the attorney of any study, analysis, 
     report, or test;
       (C) the term ``claimant'' means any natural person who 
     files a civil action arising under any Federal law or in any 
     diversity action in Federal court and--
       (i) if such a claim is filed on behalf of the claimant's 
     estate, the term shall include the claimant's personal 
     representative; or
       (ii) if such a claim is brought on behalf of a minor or 
     incompetent, the term shall include the claimant's parent, 
     guardian, or personal representative;
       (D) the term ``contingent fee'' means the cost or price of 
     an attorney's services determined by applying a specified 
     percentage, which may be a firm fixed percentage, a graduated 
     or sliding percentage, or any combination thereof, to the 
     amount of the settlement or judgment obtained;
       (E) the term ``hourly fee'' means the cost or price per 
     hour of an attorney's services;
       (F) the term ``initial meeting'' means the first conference 
     or discussion between the claimant and the attorney, whether 
     by telephone or in person, concerning the details, facts, or 
     basis of the claim;
       (G) the term ``natural person'' means any individual, and 
     does not include an artificial organization or legal entity, 
     such as a firm, corporation, association, company, 
     partnership, society, joint venture, or governmental body; 
     and
       (H) the term ``retain'' means the act of a claimant in 
     engaging an attorney's services, whether by express or 
     implied agreement, by seeking and obtaining the attorney's 
     services.
       (2) Disclosure at initial meeting.--
       (A) In general.--An attorney retained by a claimant shall, 
     at the initial meeting, disclose to the claimant the 
     claimant's right to receive a written statement of the 
     information described under paragraph (3).
       (B) Waiver and extension.--The claimant, in writing, may--
       (i) waive the right to receive the statement required under 
     subparagraph (A); or
       (ii) extend the 30-day period referred to under paragraph 
     (3).
       (3) Information after initial meeting.--Subject to 
     paragraph (2)(B), within 30 days after the initial meeting, 
     an attorney retained by a claimant shall provide a written 
     statement to the claimant containing--
       (A) the estimated number of hours of the attorney's 
     services that will be spent--
       (i) settling or attempting to settle the claim or action; 
     and
       (ii) handling the claim through trial;
       (B) the basis of the attorney's fee for services (such as a 
     contingent, hourly, or flat fee basis) and any conditions, 
     limitations, restrictions, or other qualifications on the fee 
     the attorney determines are appropriate; and
       (C) the contingent fee, hourly fee, or flat fee the 
     attorney will charge the client.
       (4) Information after settlement.--
       (A) In general.--An attorney retained by a claimant shall, 
     within a reasonable time not later than 30 days after the 
     date on which the claim or action is finally settled or 
     adjudicated, provide a written statement to the claimant 
     containing--
       (i) the actual number of hours of the attorney's services 
     in connection with the claim;
       (ii) the total amount of the fee for the attorney's 
     services in connection with the claim; and
       (iii) the actual fee per hour of the attorney's services in 
     connection with the claim, determined by dividing the total 
     amount of the fee by the actual number of hours of attorney's 
     services.
       (B) Waiver and extension.--A client, in writing, may--
     [[Page S5654]]   (i) waive the right to receive the statement 
     required under subparagraph (A); or
       (ii) extend the 30-day period referred to under 
     subparagraph (A).
       (5) Failure to disclose.--Except with regard to a claimant 
     who provides a waiver under paragraph (2)(B) or (4)(B), a 
     claimant to whom an attorney fails to disclose information 
     required by this section may withhold 10 percent of the fee 
     and file a civil action for damages resulting from the 
     failure to disclose in the court in which the claim or action 
     was filed or could have been filed.
       (6) Other remedies.--This subsection shall supplement and 
     not supplant any other available remedies or penalties.
       (b) Effective Date.--This title shall take effect and apply 
     to claims or actions filed on and after the date occurring 30 
     days after the date of enactment of this Act.

  Mr. ABRAHAM. Mr. President, my esteemed colleague from Kentucky and I 
are proposing here an amendment which would establish a consumer of 
legal services' right to know how much he or she is paying and for what 
services. This is a right we recognize in most other markets for goods 
and services, and one which is no doubt recognized and respected by 
most reputable attorneys.
  Nonetheless, Mr. President, there are too many cases in this country 
in which tort victims and other consumers of legal services have real 
difficulty determining whether they are getting a fair shake from their 
attorney.
  As a result, victims receive less of their rewards than they should, 
the legal system costs everyone too much, and ever-higher fees are 
encouraged by a lack of competition.
  Mr. President, this amendment will give consumers of legal services 
the means with which to make informed decisions concerning their legal 
representation. By establishing a consumer's right to know in the legal 
services market it will encourage competition and fair dealing. It will 
help make our system more fair to litigants and reduce the total cost 
of our legal system.
  The unfairness of our current system is shown by the fact that tort 
victims receive only 43 cents of every $1 awarded from damages--the 
other 57 cents going to pay lawyers and court fees and to cover the 
litigants' lost time.
  A significant portion of the 57 cents taken by the legal system goes 
directly to attorneys. Plaintiff's attorneys, in particular, collected 
from 33 to 40 percent of the average award in a contingency fee case--
that, plus fees for all costs related to the litigation.
  Now, I am not begrudging the hard-working attorney for his or her 
hard-won fee. Nor am I proposing that we establish any set fee. But it 
seems clear to me that something is wrong with a system in which, as 
was noted by Professor Lester Brickman of the Cardozo School of Law, 25 
to 30 percent of all contingency fee cases have no real contingency.
  In particular, in cases such as those involving airline crashes, 
fault often is not in doubt as a practical matter. This means that 
plaintiff's lawyers, who still collect their full 33-to-40 percent fee, 
may receive the equivalent of $10,000 or even $30,000 per hour.
  I was struck in particular by a 1989 case Professor Brickman noted 
out of Alton, TX, in which a school bus was hit by a delivery truck. In 
this tragic incident 21 children were killed and 60 were injured. 
Obviously and rightfully there was a large judgment in favor of the 
plaintiff/children.
  While there was no doubt about who was at fault, the lawyers still 
charged their full fees. As a result, according to Professor Brickman, 
the attorneys received as much as $30,000 an hour for their services--
money for which they did little and which could have done much more to 
help the victims and their families.
  Mr. President, victims are losing out, and so are the rest of us, 
because legal costs are too high. Professor Brickman estimates that 
contingency fees now run $13 to $15 billion annually. This represents a 
substantial portion, more than 10 percent, of the $132 billion which 
Tillinghast research estimates we spend as a nation on our legal system 
each year. This $132 billion acts as a huge, business-stifling 
liability tax on consumer goods and services.
  Now, again, most attorneys recognize their duty to inform clients of 
how much they will be paying and for what services. Indeed, this is a 
standard for professions in general.
  Doctors provide fee schedules to insurers. Architects and even 
furniture movers provide written, binding estimates upon request. 
Consumers of legal services, I believe, deserve the same treatment.
  This is what our reforms would provide: At the initial meeting with 
the prospective client the attorney would be obligated to inform the 
client of his or her right to obtain a written fee statement within 30 
days. This statement would contain, first, the estimated hours of the 
attorney's services that will be spent settling or attempting to settle 
the claim and handling the claim through trial; second, the basis on 
which the attorney proposes to charge the client--hourly, contingent, 
or flat fee; and third, the hourly rate, contingent fee, or flat fee 
the attorney proposes to charge.
  The attorney would be obligated to give this statement to the client 
within 30 days unless the client in writing waives the right to receive 
it or extend the attorney's time within which to provide.
  Similarly, within 30 days after completion of the litigation either 
by settlement or trial, the attorney would be obliged to furnish the 
client a written statement describing, first, the number of hours the 
attorney expended in connection with the claim; second, the total 
amount of the fee; and third, the actual fee per hour charged, 
regardless of how the fee was structured. Again, the client could waive 
the right to the statement or extend the 30-day deadline.
  A claimant who does not receive the requisite disclosures has the 
right to withhold up to 10 percent of the fee charged and to file a 
civil action for any damages the client incurred as a result of the 
failure to disclose.
  Mr. President, we need these reforms to help potential clients make 
informed decisions concerning legal representation.
  The legal services market is in particular need of open information 
because clients may never have dealt with the legal system before. This 
lack of client experience establishes a significant information and 
expertise imbalance, one that can lead to a client's receiving less 
favorable treatment than he or she might obtain with better 
information.
  Moreover, this problem is made worse when an attorney is hired to 
provide services for a single piece of litigation. That lawyer does not 
have the same incentives to keep the clients happy at the conclusion of 
the lawsuit as an attorney providing services to a longstanding firm or 
client on an ongoing basis.
  The right to know established by this amendment will facilitate an 
exchange of information concerning the quality of legal services 
provided, and even single-issue relationships.
  Thus we can empower clients in their dealings with attorneys while 
actually increasing the ability of market forces to work in the legal 
services markets. The result will be increased competition, better 
service, lower fees, and savings for everyone.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Washington.
  Mr. GORTON. Mr. President, the amendment proposed by my friend, the 
distinguished Senator from Michigan, is the first amendment that has 
been proposed to this bill in something over 24 hours of debate. It is 
a most interesting amendment. I hope that any Member who feels that he 
or she can contribute to the debate on the amendment will appear on the 
floor and share with Members of the Senate that Senator's views.
  The amendment is relatively modest in one respect, and in another 
sense is expansive. It is not directly connected with the other 
provisions of this bill in that it is not limited to product liability 
litigation. It is, on the other hand, limited, as I understand it, to 
actions in Federal court--basically in the U.S. district courts--and 
applies to all such litigation in those courts.
  The concept that there should be disclosure, both in the initial 
stages of an attorney-client relationship and at the end of that 
relationship, over a particular case is, of course, an appropriate one. 
On its surface, the amendment seems to be constructive. I hope we will 
very promptly get the views of other Senators on the subject.
  I would like to conclude the debate on this relatively narrow 
amendment before we adjourn this evening.
  [[Page S5655]] Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. HOLLINGS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HOLLINGS. While I am trying to obtain a copy of the amendment, I 
have in hand from the distinguished Senator from Michigan a copy of a 
letter dated April 24, I take it, outlining the amendment itself. It 
says here:

       Under our proposal, at the initial meeting the attorney 
     would be obligated to inform the client of his or her right 
     to obtain, within thirty days, a written statement containing 
     (1) the estimated hours of the attorney's services that will 
     be spent (a) settling or attempting to settle the claim and 
     (b) handling the claim through trial; (2) the basis on which 
     the attorney proposes to charge the client (hourly, 
     contingent or flat fee); and (3) the hourly rate, contingent 
     fee, or flat fee the attorney proposes to charge. The 
     attorney would then be obligated to provide that statement to 
     the client within thirty days unless the client in writing 
     waives the right to receive it, or extends the time.

  Mr. President, on the matter of fees, I was in the practice actively 
for 20 years and I never had outlined this. I have always had an 
understanding, and a written one. I wish I had one of the forms here, 
because it was the minimum fee schedule, approved by the Charleston 
bar, my hometown, where we had a minimum fee schedule--at a formal 
meeting that was agreed upon--and that was a contingency contract. And 
wherein I was retained, I had that contingency contract signed not only 
by, of course, the client, but by myself.
  In 20 years I have never found this problem. You can get this 
professor. I doubt he has tried a case, because I find that is the case 
with most professors and that is why they are professors.
  But right to the point, this so-called estimated hours. Let me go to 
one of the cases that was taken all the way to the Fourth Circuit Court 
of Appeals and then finally abandoned before the Supreme Court. It was 
a case of the C&S Bank as the trustee for Harold Tummestone versus the 
Morgan Construction Co. The reason I got the bank as a trustee is 
because the particular individual had been severely damaged, brain 
damaged, which I will be glad to go into because, unless others want to 
speak to this particular amendment, until I can get a copy of it I want 
to say a few words.
  But we wanted to get comity or the trustee to bring that particular 
case. I knew the bank had credibility. I wanted to bring credibility to 
this so-called damage suit. Of course I got the bank to go over there 
and handle it and have them review all of my activities.
  With respect to that, I can tell you the bank would not have 
required, and the bank would not have had any idea, nor would I have 
had any idea about the estimated hours of the attorney's services that 
will be spent (a) settling or attempting to settle the claim.
  Excuse me, let me rescind that particular statement by saying, yes, I 
could have put on there an estimation of (a) the hours spent settling 
or attempting to settle the claim. But, I can tell you here and now, 
they never offered any settlement. We tried that case. It was not until 
the jury came in that they wanted to try to even talk about settlement. 
I will never forget it. The trial judge in court recommended that we 
settle the case. The truth of the matter is I had proven a very, very 
strong case. I felt very confident. In spite of the admonition of the 
trial judge, I told him to go ahead and write his order, whatever it 
was, but I was not going to yield 1 red cent on that particular verdict 
because I knew what we had done. And I was not offered any settlement.
  I never had billable hours. That is annoying to this particular 
Senator and lawyer. I have no idea how you can really make it. You 
might sit in an office and talk about so many hours you are going to 
try to settle. But it depends on how you reach the case on the docket 
and what the pressure is that you can bring on the defendant, if they 
can get a continuance and everything else of that kind, and there is 
such a tremendous variable it does not help the client and it does not 
help the lawyer. It is a sort of spurious thing.
  We believe in the client being informed. The information that I have 
always had with respect to the contract and agreement with my clients 
is just exactly as I have pointed out. It is a contingent basis of one-
third, whereby we assume, as the attorney for that particular case, all 
costs and all court costs, all medical fees to get examined by doctors 
and specialists' fees.
  I remember in this particular case I had to get a neurosurgeon to 
come down and spend several days and later on testify. So not only were 
his fees billed to me--you have to pay the doctor's fee if you do not 
want a witness who feels like he has not been paid. You want him to be 
a happy witness, so you pay his medical fees. You pay the investigative 
fees. You pay all the interrogatory fees, discovery fees, all the time. 
You pay for the appeals and the brief and the court, the transcript of 
record and everything else, the printing of that on appeal.
  And of course all your hours and time--I did not sit down and start 
computing hours and time. But for the poor, indigent client, ``Look. 
Don't worry. We will do our level best to get you any recoveries made, 
and any offers made we are obviously going to tell you what the offer 
is and make sure you know about it. And you have the approval or 
disapproval of any kind of settlement offer.'' Because, of course, we 
have malpractice in law as well as malpractice in medicine. So you have 
to protect yourself and deal open and on top of the table with the 
particular client.
  But I can tell you now. Being at the bar, this particular thing here 
is the first I ever heard of it. I started in 1947; 1997 would be 50 
years. So in almost 47 years of practice, I never heard this as a 
problem. Let me go further. I can tell you what I find as a problem. 
But the basis on which the attorney proposes to charge the client an 
hourly contingent or flat fee, I think I can answer that and just say 
what I have said here.
  Three, the hourly rate contingent fee or flat fee the attorney 
proposes to charge.
  So mine again would be just the contingent fee. I could comply with 
two and three. But I have no idea about the estimated hours of settling 
or attempting to settle the claim and estimated hours of handling the 
claim through trial. Of course, it says nothing here about the appeal.
  It says similarly, within 30 days after completion of the litigation, 
either by settlement or trial, the attorney would be obliged to furnish 
the client a written statement describing, first, the number of hours 
the attorney expended in connection with the claim; second, the total 
amount of the fee; and, third, the actual fee per hour charged 
regardless of how the fee was structured. That brings us back.
  I really object to bringing it back to billable hours because we have 
to work and represent clients. I am not in Michigan in one of these 
large law firms. We are in a relatively small town. I guess speaking 
with respect to large law firms in any event, and I have to spend, not 
bureaucracy and regulatory. Here we have regulatory reform. Now they 
have regulations here about actual fee per hour charged. We will have 
to hire someone to keep track of this thing because I have work to do, 
study the law, interview the witnesses, and talk about not only the 
pleadings and everything else of that kind but the chances of 
prevailing. All of that is tied up as we have been hearing about 2 to 3 
years. I would rather just put it on a contingent basis trying my best 
to get it to trial and get it to a conclusion, and not be into the 
proposition of the actual fee per hour charged and trying to compute 
it.
  There is nothing wrong with disclosure. Like I say, I disclose. I 
want a clear understanding. I cannot represent a client fully and 
fairly unless there is absolute trust. You build that up. You do not 
write that into law up here in Washington. I practice law. You get a 
reputation. You get a reputation for trust and for accomplishment, and 
by that reputation of being able to be successful at the bar and 
totally trustworthy, the word spreads. You get a client and you get a 
successful law practice. Incidentally, I had it. I had at least three 
times what I made when I got here in 1966.
  But one of the things I really did not like was charging clients. I 
never did charge enough. A client told me that 
[[Page S5656]] later on, as did several lawyers. I would rather come up 
here where I do not have to worry about charging the clients. I can 
talk to the jury and then go in with the jury and vote. I like this 
much better. I get a variety of cases, too. I do not get a reputation 
just by bringing one set of cases on the claimant side. You get any and 
every case whether it is a terrorism case, whether it is a product 
liability case, or whether it is going to be telecommunications or 
whatever it is. So it is the enrichment of the learning experience up 
here that attracted me and not the fees.
  But having said that, what really disturbs me is this trying to 
bureaucratize the law practice which I have resisted. But if we are 
going to go ahead and bureaucratize the law practice, what really is 
outrageous in my opinion is this billable hours whereby this crowd 
downtown here is charging $300, $400, $500 an hour.
  I will never forget when I was first up here and I put in on the case 
statute the textile amendment. I got help from the distinguished 
Senator from New Hampshire on the other side of the aisle, Norris 
Cotton.
  After we succeeded in passing that textile bill over 25 years ago, 
Senator Cotton said, ``You know what so and so downtown was paid to 
pass that bill?''
  I said, ``I did not know he had anything to do with the bill.''
  He said, ``No. But he was retained by the industry and given $1 
million to get that bill through.''
  I said, ``Did you ever talk to him?''
  He said, ``No. I never did talk to him. But I just found that out.'' 
I never talked to him.
  But these lawyers in this town get these enormous fees. I found since 
that time regarding drugs--that is a terrible menace to our society--
that these lawyers that are successful in the drug cases immediately 
demand and receive a $50,000 retainer, $100,000 retainer, large, 
exorbitant fees of that kind. I think that is really the thing that 
discourages society against the lawyers. I think what we ought to do 
really is limit the attorneys' fees. I think what we ought to do is 
limit the billable hours, the attorneys' fees in all cases, the 
billable hours to $50 an hour.
  Mr. President, at $50 an hour, at a 40-hour workweek, and a 52-week 
year, you would exceed over $100,000. That is just $50. Of course, if 
you work on weekends and overtime like any trial lawyer would work 
overtime. Everybody was off to the football game and Sunday afternoon 
driving with the family, and I was working in the office and Sunday 
night getting ready to go to court on Monday morning. You could easily 
at $50 an hour, if you work as a lawyer, make $150,000 to $175,000 a 
year. I think that is a good salary for a working lawyer. Senators get 
less, of course, and work harder. We start out early in the morning 
around here, and then when you supposedly get time off like Easter 
break, that is constituent service.
  What I want to do is send an amendment to the desk to limit 
attorneys' fees in all civil actions to $50 per hour. And at the end of 
the matter proposed to be inserted, I want to add section 302, 
limitation on fees. If an attorney at law brings a civil action, or is 
engaged to defend against any civil action, the word ``action'' should 
be inserted there because I was not familiar with this particular 
amendment and never had heard of it until the distinguished Senator 
from Michigan submitted it. But if any attorney at law brings a civil 
action or is engaged to defend against any civil action, the attorneys 
may not be compensated for legal services provided in connection with 
that action at a rate in excess of $50 an hour.
  I expect to get reelected on this amendment. I can tell you here and 
now, if we can bring that down to $50 an hour. I remember my poor 
colleagues on ethics charges having to go back on this particular 
record.
  You have my colleagues here right now who would elect me President of 
the Senate if they could get a fair vote because they were charged $400 
an hour, and they all owe their lawyers downtown. You come to this 
place and in the legal game of bringing ethics charges and everything 
else of that kind and then having to go through all the records and 
what have you and pay the lawyer downtown, you have got $400, $500 an 
hour. I have heard of all kinds of charges of that nature. And I think 
that what we ought to do is get to the real problem in these civil 
actions, not just in product liability, if we are going to have an 
amendment that goes into all of this disclosure like there is some kind 
of secret hocus pocus.
  Now, let me agree with the distinguished Senator from Michigan. I 
noted in that letter as I was reading, and I quote, ``This concern is 
not merely hypothetical.'' So says the Senator from Michigan.
  To give just one example: According to the Washington Post, last 
month, attorneys collected $16 million in a settlement of antitrust 
claims against several airlines. Their clients received coupons worth 
$10 to $25 redeemable toward the purchase of airline tickets, under 
limited and restricted conditions. According to Prof. Lester Brickman 
of the Cardozo School of Law, in many tort cases lawyers are charging 
standard contingent fees even though the contingency is in name only. 
Similarly, professionals who audit law firm fees find significant 
overcharging in many of the cases they examine.
  If you got the contract that this lawyer has had, you cannot find any 
overcharging. If you get the one-third, you have to pay all the costs 
and you have been paying for doctors; you have been paying for printing 
costs; you are paying for interview costs; you are paying all kind of 
costs over the 2- to 3-year period, and that comes out of your fee. 
That does not come out of the claimant's award or verdict, I can tell 
you here and now.
  I do not know the background of this particular case, but it is 
obvious to me this antitrust claim--and that is what these lawyers get 
in so much billable hours. I noticed in one they had on another 
bankruptcy, and so forth, if someday we can retire and get to be a 
referee in bankruptcy and sit around on golf courses, learning how to 
finally settle the bankrupt nature of the entity, we can pay really 
thousands and thousands of dollars in fees, which to me is a disgrace. 
I have seen that happen in my own backyard, and I have complained about 
it in our hearings on bankruptcy cases.
  But this $16 million in the antitrust claim no doubt was approved by 
the Court itself. Now, they had a claim and they had all of these 
billable hours. I know how to get that $16 million down to about $2 or 
$3 million by coming down to my amendment with $50 an hour maximum at 
that particular time. I think that is one way to rectify what the 
distinguished Senator from Michigan finds is an abuse.
  It is not really lack of disclosure because when you get an antitrust 
case of this kind, you bring a class action, which apparently this was, 
you really produce a case that was not in existence. You go around and 
fetch people who do not have any idea that they are being recharged and 
you tell them I wish to get and bring a class action; I happen from 
research to believe that you have a case here; you are not obligated to 
pay anything to me unless we succeed.
  So the clients, while the distinguished Senator from Michigan may 
complain and I may complain at an inordinately high $16 million fee, 
you can bet your boots that the people themselves had nothing to 
complain about because they did not have anything in the first place. 
They did not even know they had a claim. They did not even know they 
could get involved and help bring this abusive practice of overcharging 
by the airlines to a halt.
  So they have performed a public service. Whether the lawyers in that 
particular case deserved $16 million, at least the Court thought so. 
And the clients could well have appealed, and it could have been 
adjusted, and it could be subject now to adjustment and that kind of 
thing. I just really do not know. I agree that I am, as the Senator 
from Michigan, disturbed not about disclosure because clients can find 
out. And I can tell you now, if you have a client and you come around 
and all of a sudden win a case and you do not have an understanding, 
that client can go to another lawyer and you have malpractice on your 
hands. You can be hit with a malpractice suit, whether they win or 
lose. What happens is that hurts your reputation. So irrespective of 
the merit of the particular case, you 
[[Page S5657]] are supercautious in this day and age to not engage in 
any kind of misunderstanding with clients. So, yes, write it down, 
write down the contingent fee.
  But I would have to oppose the amendment with respect to the billable 
hours. But if there is to be billable hours in product liability 
claimants attorneys' restrictions, then I think maybe, if that is the 
will of the body, they want to consider limiting attorneys' fees in all 
civil actions to $50 per hour.


                 Amendment No. 598 to Amendment No. 597

  (Purpose: To limit attorneys' fees in all civil actions to $50 per 
                                 hour)

  Mr. HOLLINGS. Mr. President, I send an amendment to the desk to the 
amendment of the Senator from Michigan and ask that the clerk report.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows.

       The Senator from South Carolina [Mr. Hollings] proposes an 
     amendment numbered 598 to amendment numbered 597.

  Mr. HOLLINGS. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of the matter proposed to be inserted, add the 
     following:

     SEC. 302. LIMITATION ON FEES.

       If an attorney of law brings a civil action or is engaged 
     to defend against any civil action, the attorney may not be 
     compensated for the legal services provided in connection 
     with that action at a rate in excess of $50 an hour.

  Mr. HOLLINGS. I have explained the amendment and about read it to my 
colleagues.
  I thank the Chair. I yield the floor.
  Mr. McCONNELL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Kentucky.
  Mr. McCONNELL. Mr. President, I am pleased to be a cosponsor of the 
amendment by the distinguished Senator from Michigan [Mr. Abraham] 
requiring lawyers to disclose to their clients information about fee 
arrangements.
  The amendment of the Senator from Michigan is a very simple consumer 
protection amendment. Too often, those in need of legal services are 
inexperienced in evaluating whether they are getting good value for the 
money they pay. After all, choosing a lawyer is not exactly like 
choosing a lawn mower. No objective specifications, to my knowledge, 
exist. It is virtually impossible to compare prices. The only thing a 
prospective client may know in selecting the lawyer is what law school 
he or she attended, and that he or she passed the State bar 
examination. The client may not even know if it took the lawyer more 
than one try to pass the bar exam. And unfortunately, some lawyers take 
advantage of unsuspecting clients. In contingent fee cases, lawyers 
charge standard rates, regardless of how much effort or how much risk 
is involved in the particular case, typically, to take one-third of any 
settlement, 40 percent of any award resulting from trial, and 
frequently 50 percent if the case gets appealed. Many jury verdicts are 
eventually reduced on appeal, so often an injured person will recover 
less money the further the case is litigated.
  A few weeks ago, the Washington Post reported on the settlement of an 
antitrust case against several airlines. The clients got $10 to $25 
coupons redeemable under restricted and limited conditions. The lawyers 
shared $16 million in fees.
  Lawyers who bill their clients on an hourly basis create problems of 
a different sort. Consider the case of the Denver law firm that claimed 
it did not bill its clients for the first class airfare. A legal 
auditor hired by a client discovered that the firm bought business 
class tickets but individual lawyers were upgrading to first class at 
the airports and then billing the clients. In another firm, a lawyer 
was discovered to have billed for 62 hours in a single day--quite an 
accomplishment, I might say.
  Still, another lawyer drafted a motion for a client that could be 
used in thousands of asbestos cases that the lawyer was defending. The 
lawyer billed his clients 3,000 separate times for the same motion--
3,000 separate times, I repeat, Mr. President, for the same motion.
  These anecdotes are related in a recent U.S. News & World Report 
story entitled ``Lawyers Who Abuse the Law.'' Add on to a few lawyers 
who take advantage of their clients the reality that the legal system 
does not fairly compensate those who seek redress. Someone injured 
because of another's negligence has as much chance of winning in a 
lawsuit as he or she does by taking a turn at the gaming tables of Las 
Vegas. Sometimes, as at the casinos, it is possible to win big. But we 
know that in gambling, the house is usually the big winner. The same is 
true in the legal system, only the house is the system itself--lawyers 
and court costs.
  After all, more than half of every dollar spent in the liability 
system, 57 cents goes to the lawyers and to the courts. The injured get 
only 43 cents of that dollar.
  These experiences are causing the American people to lose confidence 
in our legal system. The same U.S. News & World Report article found 
that 69 percent of the American people believe lawyers are only 
sometimes or not usually honest.
  Restoring integrity to our legal system is a fundamental goal of this 
reform effort. This amendment is designed to give clients some 
reasonable information about the financial aspects of the relationship 
with a lawyer.
  Under the amendment of the Senator from Michigan, the lawyer would be 
required to provide the client with two statements, one at the outset 
of the representation and another when the case is concluded.
  The attorney must provide the client with the following information 
at the beginning: How many hours will be spent trying to settle the 
case; how many hours it will take to bring the case to trial; how the 
attorney will charge the client--hourly, contingent, or flat fee; and, 
the precise rate.
  A final statement at the end of the case must include the following: 
The number of hours the lawyer spent on the case, the total amount of 
the fee and the effective hourly rate, regardless of the rate actually 
charged.
  This basic information will go a long way toward restoring America's 
faith in our legal system, and it will enable those who need legal 
counsel to be better informed in selecting counsel. The scope of the 
amendment is limited. It applies only to those cases filed in Federal 
courts. So the Senator from Michigan has narrowed the scope of this 
considerably.
  While there is no reason for these disclosure requirements not to 
apply to State courts, we are trying to be mindful of imposing too many 
requirements upon the States in this particular instance. So we have 
left the scope of this effort quite narrow, and the States are free to 
adopt these disclosure requirements on their own, obviously.
  Let me close by stating what the amendment does not do. First of all, 
it does not prohibit or restrict contingent or hourly fees. It does not 
mandate the use of contingent or hourly fees.
  We recognize the importance of contingent fees. In some situations, a 
contingent fee may be the only way a person can afford to hire a lawyer 
to pursue a case. But the Abraham amendment affords consumers important 
information. It will help those choosing lawyers to be good consumers, 
and it will put consumers on a more level playing field with the 
lawyers whose services they need.
  So I want to commend the distinguished Senator from Michigan for his 
amendment. I think it is an excellent amendment. I hope it will be 
adopted by the Senate at the appropriate time.
  Mr. President, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. HOLLINGS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HOLLINGS. Mr. President, I ask for the yeas and nays on my 
amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. HOLLINGS. I thank the distinguished Chair.
  [[Page S5658]] Mr. President, of course, you can see now what is 
entering into this particular issue, and that is what I would call 
candor. The reason this issue has survived over 15 years but never 
passed the Senate, the reason it hasn't gotten anywhere is the 
antipathy to lawyers. And here in the middle of the treatment of 
product liability, a very restricted part of civil actions--you take 
all the civil actions in the United States filed, 9 percent of all 
civil actions filed comprise tort claims. And if you take all the tort 
claims filed, only 4 percent of the 9 percent comprise product 
liability.
  What you have is thirty-six one-hundredths of the civil actions being 
treated in product liability. But superimposed on top of that comes the 
first amendment, and the first amendment is: ``Kill all the lawyers,'' 
they said in King Henry VI, Shakespeare. We will kill all the lawyers 
here. We have the disclosure of attorneys fees and information.
  They take an anecdotal measure that they refer to in the newspaper 
relative to antitrust, having nothing to do with product liability, and 
they put in an antitrust charge which is no doubt a class action--not 
class action on product liability--and a class action that has been 
conducted over the many years. I have to go back and find out what it 
was.
  Quite to the point, the $16 million, with the inference here, they do 
not tell you how many millions went to the claimants. Obviously, 
millions went to the claimants, but when you had thousands and 
thousands of claimants, maybe millions of claimants, then it did reduce 
it to a $10 to $25 redeemable toward the purchase of an airline ticket.
  Those things come out when you get the full facts. But this anecdotal 
approach, and taken with all civil cases in Federal court and putting 
down lawyers' disclosure amounts gets to the candor that really is 
behind the movement here at hand.
  Product liability has been handled at the State level and in a very 
judicious and forceful fashion. We know it is not a national problem. 
All the little things that they tried to bring up over the years--
incidentally, Mr. President, by way of amusement to this Senator, I 
remember when they brought up the Little League, and the Little League 
had the right and said, no, no, we are not a part of this case. Then 
they had an anecdotal amount of Girl Scout cookies and they had the 
right and said, no, we are not into this at all. Then our former 
colleague who, incidentally, sat right here in the Senate, the Senator 
from South Dakota, George McGovern, was on a little TV expose, how he 
went out of business on account of product liability, and then he 
reversed field and said, no, no, they had cut that particular little 
30-second bite that they had him and former Congressman and then 
Secretary Jack Kemp on, which they were trying to build up.
  They tried every amusing thing in the world to give some force and 
credence to our product liability problem. There is none. There is no 
national problem in product liability. Now if we cannot get the votes 
for that, then what we ought to do is get lawyers fees here and call it 
disclosure, like the lawyers are running around cheating their clients. 
Come on. If the lawyers do that, they are not going to last long. I do 
not know what town they practice in, but reputation means everything in 
the profession. Oh, yes, we object to doctors and doctors' fees and 
everything else, until we get sick, and then we want the best and we 
love our doctors. In a similar fashion, yes, they all complain about 
the lawyers, until they get in trouble and then they get a lawyer of 
their choice and have complete trust.
  Like I say, at the bar we require a minimum fee kind of schedule and 
contract, and the lawyers of the local bar associations police their 
groups. And, yes, there are many cases being brought up now before our 
State supreme court for malpractice, disbarment, and everything else of 
that kind, where they have taken the client's money. But that was not 
because they did not disclose. You are going to find those kinds of 
lawyers and those kind of individuals in every practice, profession, 
trade, or business.
  It is unfortunate, but you certainly do not need here at the Federal 
level to try and burden product liability with a lawyer fee act. But if 
we are going to do it, let us get to the real heart of the matter, 
because there is a cleavage of division. When, Mr. President, I work 
for you as my client, I do not get paid until I succeed and you 
understand the percentage or the contingent basis. If I go to you under 
billable hours, in addition to trying to win your case, I am trying to 
win myself more fees, and on a billable hour basis, the more I can say 
that I worked on Saturday and I spent some hours reading here and I 
looked there and everything else--in other words, I am trying my case 
and not the client's case.
  I think that is unethical. I think it is basically unethical. There 
are a lot of things that I think are unethical. Perhaps our conference 
that we have around here every Tuesday trying to ambush each other is. 
We never had that before. We had policy committees. As the 
distinguished Parliamentarian who has been here for years knows, the 
policy committee set the seriatim of the treatment of measures. But we 
never had parties meeting, the Republican conference and the Democratic 
conference, to meet in ambush of the other side and come around here 
and talk about ethics.
  When you get these billable hours, you begin to work for your 
billable hours, you begin to work for your case rather than the 
client's case. I never did like it. I never charged billable hours. I 
resent it and reject it. But if we are going to have it, let us limit 
it because it is unforgivable what they are trying to charge. If that 
is what the market forces are, I never heard of all the hours charged. 
Look at the O.J. Simpson case, what they say those high-powered lawyers 
are charging. Maybe we can have a hearing before the Judiciary 
Committee and find out. I know we have not had any hearings on this.
  The product liability measure was referred to the Commerce Committee 
and there was not one word of testimony on this matter. That made me 
withhold the matter of lawyers fees. I was waiting for somebody to 
raise the subject of let us get the lawyers. Now that it has been 
raised in the Abraham-McConnell amendment, I have to amend that 
amendment with my particular one of a limitation of $50, at the most, 
on any billable hours.
  As I pointed out, I am confident that the anecdotal antitrust case--
not a product liability case--would reduce the $16 million. Oh, that 
would reduce it down to $2 or $3 million.
  So we are moving in the right direction in the Hollings amendment. 
But more than that, I would challenge those who sponsored this 
amendment to bring me the product liability case wherein the claimant 
represented by an attorney was misled, misinformed, or not disclosed 
fully what the fee basis was. I do not know of any. I never have heard 
of any. I cannot understand it. Maybe it happened here in this 
antitrust case. But if that is what they are disturbed about, do not 
just reach around in a magazine article having nothing to do with 
product liability or reach around in a newspaper article in the 
Washington Post having to do with antitrust and a class action brought 
over a series of years and court approved that we do not have the facts 
for, having nothing to do with product liability. I want to ask them to 
please bring--if that is their intent now on disclosure--evidence of 
where it is a national problem.
  Heavens above, we have enough work to do around here. But if we are 
going to start debating lawyer's fees at the national level, and 
disclosures, and how many hours, and what do you expect, and how many 
hours on settlement, and how many hours on trial, and then the actual 
fee per hour charge, regardless of how the fee was structured, and all 
of these things of that kind, this is a solution looking for a problem. 
What the real problem is, is lawyers. So they say we can enhance this 
product liability initiative by going at lawyers. And we will find out 
who is for lawyers and against lawyers.
  Well, I happen to be for lawyers. We will have to get that saying of 
``kill all the lawyers.'' But that was really a laudatory comment, 
whereby lawyers stand between tyranny and freedom. In Shakespeare, you 
will find that reference with respect to lawyers not being against all 
the lawyers, but the 
[[Page S5659]] tyrant was saying the only way we can prevail and 
continue this tyranny is to get the lawyers because they are the only 
ones that understand and know and stand in our way of freedom, and we 
can continue this tyranny. So it was not a pejorative saying of ``kill 
all the lawyers.''
  We can go through to the Founding Fathers who were all lawyers and 
drew the Constitution and worked at it overnight. We can come right on 
down the line with respect to the lawyers in the history of this land, 
whether it be President Lincoln in the days during the Civil War, or 
most recently here, in civil rights cases, Thurgood Marshall and 
others. If they had not had those lawyers, I can tell you now, having 
been at the local level over the many years, had Thurgood Marshall not 
succeeded in Brown versus Board of Education, you would not have found 
the advancements made.
  Advancements were not made as a result of the Civil Rights Act of 
1964 so much as the advancement made in the 1954 Brown versus Board of 
Education decision by the U.S. Supreme Court, brought by the trial 
lawyer for the NAACP, Thurgood Marshall.
  I will bring the cases, when we have time, to the attention of my 
colleagues. The hour is late and I want to yield to others to be heard 
on this.
  Since it has just come up, I have represented to the distinguished 
manager of the bill, it is not our intent to delay. We will survey 
colleagues on this side of the aisle and see what amendments they want 
to present. I want to see if there are those who want to talk on this 
particular measure before we vote. And pending that, Mr. President, I 
yield the floor. I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Santorum). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HOLLINGS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HOLLINGS. Mr. President, my staff brought to my attention--I wish 
we had billable hours for Senators. We could make a living up here. 
Maybe that is the next amendment we will have if they insist on this 
amendment, Mr. President.
  Pending that, we have the Model Rules of Professional Conduct and the 
Code of Judicial Conduct by the American Bar Association.
  I look at rule 1.4, ``Communication'' and I read:

       A lawyer shall keep a client reasonably informed about the 
     status of a matter and promptly comply with reasonable 
     requests for information.
       A lawyer shall explain a matter to the extent reasonably 
     necessary to permit the client to make informed decisions 
     regarding the representation.

  That is the American Bar Association Model Rule that we all are 
governed by.
  With respect to the fees themselves, rule 1.5:

       (A) A lawyer's fee shall be reasonable. The factors to be 
     considered in determining the reasonableness of a file 
     include the following:
       (1) the time and labor required, the novelty and difficulty 
     of the questions involved, the skill requisite to perform the 
     legal service properly;
       (2) the likelihood, if apparent to a client, that the 
     acceptance of the particular employment will preclude other 
     employment by the lawyer;

  I take that, Mr. President, to be no conflict of interest.

       (3) the fee customarily charged in the locality with 
     similar legal services;
       (4) the amount involved and the results obtained;
       (5) the time limitations imposed by the client or by the 
     circumstances;
       (6) the nature and length of the professional relationship 
     with the client;
       (7) the experience, repetition, and the ability of the 
     lawyer or lawyers performing the services;
       (8) where the fee is fixed, whether the fee is fixed or 
     contingent.

  It goes on in detail on the basis of the rate of fee, the terms of 
payment, and all the necessary things--the divisions of fee, how to 
settle if there is a dispute about the fee, all are matters of 
disclosure.
  What they are really coming with on product liability is an assault 
against the bar. I know the former distinguished Vice President of the 
United States thought it was good politics, and he brought up about 
lawyers at the American Bar Association.
  If a person practices law, they are under the rule and guidelines. It 
is still a profession. Just like I have resisted actually the TV 
coverage of the proceedings here of the U.S. Senate because we could 
get a lot more work done and we did a lot more work and we got things 
done.
  I also have resisted the so-called advertisement by attorneys with 
the neon sign ``Divorces, divorces,'' or ``If you think you are hurt,'' 
or, ``We get more money in our claims than anybody else.'' I think that 
is unethical. I hate to see that coming about with the particular 
profession.
  If we take the television out of the O.J. Simpson courtroom, that 
case could be handled in the next 3 weeks. But it will take the next 3 
months at least with TV there. The idea is to get justice and not to 
amuse the public generally.
  I hope we get the television out of this body, the television out of 
the courtroom, and get back to some economic sense, go to work for the 
people of America, and certainly not take what never has been 
recognized as a national problem, except with respect to the American 
Bar Association and its code of conduct which it has over the many, 
many years. It has never made a national problem to be legislated upon.
  I know what they have in mind, and I think that my amendment will 
help them get at the 60,000 billable hour lawyers, and not the trial 
lawyers. They really go after the trial lawyers and product liability.
  I want to talk about the corporate lawyers and that billable hour 
crowd that extends out. I have heard my colleague from West Virginia. 
He does not have any understanding of the law practice. He says, why, 
at the State level it is very difficult to get product liability 
reform. False. We have it in 46 of the 50 States in the last 15 years.
  He says one of the reasons we cannot get it are these trial lawyers 
holding things up because they like to extend their cases and get more 
money. Extend more cases, I get more expenses.
  I am paid on a contingency basis. I am not paid by a billable hour. 
The fellow who gets more money is the insurance company lawyer, the 
corporate lawyer. They love it. They try to stretch it out, get 
continuances, make more motions and everything else. I got 10 or 15 
good cases in the office that I have taken for seriously injured 
clients. I have hundreds of thousands of dollars in time and costs 
wrapped up. I am really having to carry and finance, which we do. I 
have done it in my private practice.
  We know how it is in corporate law. They have the mahogany desks and 
the Persian rugs, and they sit down there with the paneled walls and 
just answer the phone and everything. Answer the phone and say, by the 
way, charge him that I talked to him on the phone. I never heard of a 
contingency fee lawyer say I talked to somebody and charged so much. 
They charge so much per telephone call, so much per letter, so much per 
hour, so much per this. There is more per fees in the practice than we 
could ever contemplate.
  Heavens, let us not write this bureaucracy into the law.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DASCHLE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DASCHLE. Mr. President, I ask unanimous consent I be permitted to 
speak as in morning business for 10 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  

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