[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that the order for the quorum call be rescinded.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.
____________________