[Congressional Record Volume 141, Number 70 (Monday, May 1, 1995)]
[Senate]
[Pages S5874-S5909]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          COMMONSENSE PRODUCT LIABIL- ITY AND LEGAL REFORM ACT

  The Senate continued with the consideration of the bill.
  Mr. KYL. I thank my colleague.
  Mr. President, at this time, I ask unanimous consent to lay aside the 
pending amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                 Amendment No. 611 to Amendment No. 603

      (Purpose: To establish a limitation on noneconomic damages)

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

       The Senator from Arizona [Mr. Kyl] proposes an amendment 
     numbered 611 to amendment No. 603.

  Mr. KYL. 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 appropriate place, insert the following new section:

     SEC.   . LIMITATION ON NONECONOMIC DAMAGES.

       (a) In General.--With respect to any health care liability 
     action, in addition to any award of economic or punitive 
     damages, a claimant may be awarded noneconomic damages, 
     including damages awarded to compensate the claimant for 
     injured feelings such as pain and suffering, emotional 
     distress, and loss of consortium.
       (b) Limitation.--The amount of noneconomic damages that may 
     be awarded to a claimant under subsection (a) may not exceed 
     $500,000. Such limitation shall apply regardless of the 
     number of defendants in the action and the number of claims 
     or actions brought with respect to the injury involved.
       (c) No Disclosure to Trier of Fact.--The trier of the fact 
     in an action described in subsection (a) may not be informed 
     of the limitation contained in this section.
       (d) Awards in Excess of Limitation.--An award for 
     noneconomic damages in an action described in subsection (a), 
     in excess of the limitation contained in subsection (b) 
     shall--
       (1) be reduced to $500,000 either prior to entry of 
     judgment or by amendment of the judgment after entry;
       (2) be reduced to $500,000 prior to accounting for any 
     other reduction in damages required under applicable law; and
       (3) in the case of separate awards of damages for past and 
     future noneconomic damages, be reduced to $500,000 with the 
     initial reductions being made in the award of damages for 
     future noneconomic losses.
       (e) Present Value.--An award for future noneconomic damages 
     shall not be discounted to present value.

  Mr. KYL. Mr. President, this is the noneconomic damages limitation 
amendment that many of us have been talking about for some time. I 
indicated earlier this morning that I would be introducing it. It works 
in tandem with the limitation on lawyer's fees to ensure that the 
victims of negligence are properly compensated and that neither the 
public needs to end up continuing to pay this tort tax that we talked 
about earlier nor that lawyers or others in the system become enriched 
at the expense of the victims of negligence.
  This particular amendment would place a limitation of $500,000 on 
noneconomic damages that are awarded to compensate a claimant for pain, 
suffering, emotional distress, and other related injuries.
  Mr. President, every day in America, physicians take care of over 9 
million patients. These are professionals who are dedicated to the 
service of their fellow citizens. They do a tremendous job. They serve 
in times of crisis and natural disasters often at great personal risk. 
A good example is the heroic service of the doctors in the aftermath of 
the bombing in Oklahoma City.
  The medical profession is dedicated to doing everything possible to 
ensure that the practice of medicine conforms at all times with both 
Government rules and regulations and, of course, with the high 
standards that are inherent in the profession itself.
  But physicians are not God. They are human like all the rest of us, 
and occasionally mistakes are made and sometimes patients suffer 
injuries as a result. When this occurs, injured patients must be 
awarded full and fair compensation for their injuries should they 
choose to pursue a legal remedy. But in today's litigious climate, 
roughly one-third of all physicians, 50 percent of all 
[[Page S5875]] surgeons, and 75 percent of all obstetricians will be 
sued in their careers.
  Let me go through those figures again: 50 percent of all surgeons and 
75 percent of all obstetricians will be sued in their careers.
  Courts determine that roughly three-fourths of these cases have no 
merit, and they are ultimately dismissed with no payment being made to 
the claimant, but the psychological and financial costs of defending 
these cases, oftentimes frivolous, but these unpredictable situations 
are staggering. Defending against meritless lawsuits has in effect 
become an occupational hazard of practicing medicine and, of course, 
these costs are passed on to all the rest of us in the form of higher 
medical costs, diminished quality, and access to health care.
  Mr. President, as we in the Congress address legal reform, we should 
not miss the opportunity to rationally address the overly litigious 
nature of medical liability actions. The Kyl amendment would limit 
noneconomic damages to $500,000. The amendment would apply only to 
noneconomic damages, known sometimes as pain and suffering.
  No other country compensates victims of health care injuries as 
generously as $500,000 for noneconomic damages. For example, in Canada, 
there is a cap on noneconomic damages of $180,000. In a 1994 report to 
Congress, the Physician Payment Review Commission, which is the Federal 
Commission established to review Medicare payments, said:

       Much of the unpredictability and inconsistency that 
     characterizes today's malpractice awards is because of 
     noneconomic damages, which account for 50 percent of total 
     payments. Reducing the unpredictability and eliminating the 
     potential for unreasonably high awards would improve 
     decisionmaking during the course of a lawsuit and would 
     promote settlement.

  In other words, Mr. President, in order to encourage settlement 
rather than litigation, we should address this ``lottery mentality'' of 
awarding arbitrary and unpredictable noneconomic damages.
  According to a September 1993 report by the Office of Technology 
Assessment, and I am quoting now:

       Limits on noneconomic damages is the single most effective 
     reform in containing medical liability premiums.

  Let me repeat that, because all of us are concerned now about what 
kind of health care reform we will be adopting later this year, and in 
the context of both legal reform and health care reform, this is a 
startling statement. It is the OTA, 1993.

       Limits on noneconomic damages is the single most effective 
     reform in containing medical liability premiums.

  Without a reasonable limitation on these nonquantifiable losses, 
medical liability insurance premiums and medical product liability 
costs will continue to skyrocket. Physicians are forced to drop 
insurance coverage or, in order to minimize the risk, to stop 
performing high-risk procedures such as delivering babies.
  According to a book published by the respected Institute of Medicine 
called ``Medical Professional Liability and the Delivery of Obstetrical 
Care,'' the most comprehensive, authoritative study of rural health 
care access, the delivery of obstetrical care in all rural areas of 
America is seriously threatened by professional liability concerns: 
12.3 percent of the ob/gyn's nationally have given up obstetrics 
totally due to liability pressures--12.3 percent; 22.8 percent of ob/
gyn's nationally have drastically decreased the amount and level of 
obstetric care they provide. In some States, the problem is much worse 
than nationally.
  In rural Arizona, the most recent study shows that 21 percent of the 
ob- gyn's have totally stopped providing obstetric care. The reason? 
The cost of malpractice insurance and threats of suits in Arizona.
  Mr. President, how is this system enhancing medical care in our 
country? Somehow, this system is protecting people in need of medical 
care? It is precluding physicians from serving the patients, and in the 
rural areas in particular the kind of care that women delivering babies 
are getting is less than it could be, less than it should be, because 
you do not have that obstetrician there helping with the delivery.
  There is an impact on the minority community. The National Council of 
Negro Women believes that ``a cap on noneconomic damages is an 
essential part of comprehensive legal reform legislation.'' This is in 
a letter dated just February 14 of this year, from Eleanor Hinton 
Hoytt, director of national programs of the National Council of Negro 
Women.
  The council realizes that low-income minority communities are facing 
increasing shortages of physicians who can afford to pay liability 
insurance premiums.
  We know, Mr. President, of many examples of physicians who, on the 
very first day of the year, January 1, either have to have a liability 
insurance policy costing them anywhere from $30,000, $40,000, $50,000, 
$60,000, and even upward of $70,000 before they can see their very 
first patient, much more than most people in this country make in a 
year.
  The argument may be made that limiting noneconomic damages would 
restrict the right of an injured patient to sue and collect for 
economic damages and that, of course, is not true. My amendment does 
not prevent filing suit and recovering all economic damages for past 
and future medical expenses, loss of past and future earnings, loss of 
consortium, loss of employment or any other business opportunity, nor 
does my amendment limit suits that seek damages for malicious acts for 
which punitive damages are warranted. A cap on noneconomic damages such 
as the Kyl amendment does not discourage the filing of lawsuits. In 
California, which has a cap just half the cap that I am proposing here, 
a cap of $250,000 as opposed to $500,000, there were 16\1/2\ percent 
more cases filed in 1993 than in 1992, the year before the limit in 
California went into effect. So it did not preclude the filing of 
actions.
  Moreover, in California, the cost of liability premiums has been 
reduced in part because of this cap. Prior to imposition of the 
$250,000 cap in California, the State had the highest liability 
premiums in the Nation. Premiums are now one-third to one-half the rate 
in States like New York, Florida, and other States that have not 
established a limit.
  Mr. President, as part of the Contract With America, the House has 
passed a more restrictive cap of $250,000 on noneconomic damages, the 
same limit as in some other States, including California. Some in the 
Senate said, in response to that, that the $250,000 cap may be fine in 
most cases, but there are always those few exceptional egregious cases 
that should have a greater limit. So we doubled it. We increased it 100 
percent to $500,000. And bear in mind, this would be on top of all of 
the economic damages awarded, in other words, all of the sums of money 
required to make the victim whole, to pay for all of the economic 
losses, losses of future employment opportunities, whatever it might 
be, including all of the bills, of course. And, as I said, in the case 
of punitive damage awards, those are not limited by this particular 
amendment. So we are only talking about the noneconomic damages, those 
unquantifiable damages. No one can put a dollar amount on how much pain 
and suffering it is when someone is injured. What we are saying is 
there should be a predictable sum that at least represents the absolute 
top.
  There is a lot of public support for some kind of cap here. For 
example, a very recent poll conducted by the Health Care Liability 
Alliance indicated that 17 percent of the public supports a cap on 
common noneconomic damages.
  So we think, Mr. President, this is an amendment which will 
strengthen the bill. It will strengthen the Kassebaum-McConnell-
Lieberman amendment, which has to do with medical malpractice, and 
therefore at the appropriate time, I guess sometime after 11 o'clock 
tomorrow, we are going to call for a vote on this amendment, and I hope 
it will pass.
  I wish to conclude with two arguments that have been made in 
opposition to this amendment. The first is that the people who are 
injured by some kind of negligence need to keep the lion's share of the 
money they win, and the point with respect to these caps is do they not 
ordinarily keep what they win? And the answer to that, of course, is 
that that is not true.
  According to the Rand Corp., plaintiffs keep only 43 cents of every 
dollar 
[[Page S5876]] spent on medical liability. Over 50 cents goes to the 
lawyers.
  So, Mr. President, what we are trying to do here is to put two 
amendments in tandem. There is already an amendment which I have 
offered which would limit the attorney's fees in these kinds of cases. 
By limiting the attorney's fees, we enable the claimant to keep more of 
the award. So, at the same time that a cap would be placed on the 
noneconomic damages, a cap of a half million dollars, the claimants 
would be able to keep more of that half million dollars because of the 
limits on attorney's fees.
  So the net result is that the claimant will not be hurt, will not 
have recovery reduced by this cap on noneconomic damages. The claimant 
will do as well, if not better, by virtue of the fact that we would 
also limit the attorney's fees. The loser will be the attorney who is 
trying to get the great jackpot here, the big bonanza, of earning 
something like $300,000 for 1 hour of work. That will be the loser, not 
the claimant, with this particular cap.
  The bottom line is that the claimants will do as well or better if we 
combine this with the limitation on attorney's fees.
  Second, there is a question that I have heard: Is it not true that a 
$500,000 cap on noneconomic damages will keep deserving patients from 
getting million-dollar settlements when they really need them? And the 
answer is, of course, no.
  One of the reasons for increasing the cap to $500,000 rather than 
$250,000 is to ensure that in that very exceptional cases, in addition 
to all of the economic damages awarded, there will be an opportunity to 
get up to a half million dollars.
  But the point is that patients with valid claims are today collecting 
millions of dollars in States with caps, such as California, despite 
the cap on noneconomic damages there of $250,000. In California, the 
number of million-dollar verdicts and settlements has hovered around 30 
per year throughout the 1990's, with the average indemnity in these 
cases over $2 million. These million-dollar-plus cases included awards 
for wrongful death, birth injuries diagnosed in related areas, failure 
or delay in treatment, and substandard post-surgical care.
  So, Mr. President, despite the fact there has been a limit on 
noneconomic damages in California of only half the amount we are 
suggesting here, there have still been settlements and awards that far 
exceed $1 million. So we are not limiting those cases, and everyone 
acknowledges they are the very small exceptions to the rule here. But 
we are not limiting those particular recoveries.
  In conclusion, Mr. President, there are two amendments that I have 
offered to the underlying medical malpractice amendment offered by 
Senators Kassebaum, Lieberman, and McConnell. The first is a limitation 
on attorney's fees, essentially, at 25 percent, although there are some 
nuances to it, of any recovery. And second is the limitation on 
noneconomic damages. The two of these amendments, working in tandem, 
ensure that people will be able to bring claims, that they will be able 
to recover more of the award either in settlement or by jury verdict 
themselves, that the attorney will receive less but attorneys will 
still receive a perfectly adequate compensation, and there will be no 
disincentive for them to actually bring the lawsuits because the 
attorney's fees cap is actually high enough so that there is not a 
disincentive.
   The combination of that with the cap on noneconomic damages will 
enable the plaintiffs to be fully compensated, but also reduce the cost 
to society as a whole in the form of increased medical malpractice 
premiums and, therefore, in the form of higher costs charged for 
medical care generally because those costs have to be passed on by the 
physicians and the hospitals that have to acquire the insurance.
  We believe these are two important and necessary amendments to the 
underlying legislation. I ask my colleagues to support these 
amendments.
  I yield back my time.
  Mr. WELLSTONE addressed the Chair.
  The PRESIDING OFFICER (Mr. Grams). The Senator from Minnesota.
  Mr. WELLSTONE. I wonder whether I would have time to ask a few 
questions that I would like to ask my colleague from Arizona.
  I am not a lawyer, but as I understand it, the whole concept of 
compensation is to make the individual whole, and there is the economic 
and then the noneconomic. With this cap of $500,000, how many of the 
plaintiffs, as we project to the future, how many plaintiffs would lose 
how much by way of dollars in compensation to make them whole again? 
What are the projections on what impact this is going to have on those 
individuals that have been injured in a malpractice?
  Mr. KYL. Mr. President, I say to my colleague that the information 
that we have, according to a study that was recently done, is that less 
than 2 percent of the cases would be affected by the $500,000 cap. But, 
of course, because of the large amount of money involved, it would have 
a very large impact on constraining costs.
  Mr. WELLSTONE. Mr. President, my next question would be: If it is 
less than 2 percent--and I gather that that, as you say, may focus on a 
few cases where there are large dollars involved--then I would ask my 
colleague from Arizona, do you have any projections on what impact this 
will actually have on more doctors? How many more doctors would be 
practicing medicine in underserved areas, be they rural or inner city, 
as a result of this cap? Do you have any projections?
  Mr. KYL. I would be happy to continue to respond to my colleague, 
because they are very good questions. They go right to the heart of the 
issue.
  Obviously, by proposing the reform, we are hoping to have an impact 
pact on the problem. Part of the problem, as I indicated, is the fact 
that, particularly in rural areas but not limited to rural areas, and 
in particular ob-gyn's have either stopped practicing or have cut back 
their practice just to the gynecological services rather than 
obstetrical services. If you go by the numbers I cited, you have an 
indication at least of what these physicians were able to do before 
this litigation system got to the point that it is today.
  It is impossible, of course, to predict precisely, but I will go back 
to the numbers that I stated just a moment ago, because the study was 
very recent. I think it was either 1993 or 1994. Nationally, 12.3 
percent of the ob-gyn's have given up obstetrics totally, due to 
liability pressures. That is in a book, as I said, that was written by 
the Institute of Medicine called Medical Professional Liability and the 
Delivery of Obstetrical Care. Nationally, 22.8 percent of the ob-gyn's 
have drastically decreased the amount of care they have provided 
because of this.
  So one could conclude that, if we were able to put a cap on these 
damages, at least some of this problem would go away. But, obviously, 
because you would still be able to recover up to $500,000 in 
noneconomic damages, I am not contending that all of these physicians 
would go back to practicing. Of course, this does not relate either to 
the increases in costs of the medical malpractice premiums for those 
physicians who do choose to stay in practice or for those who are 
involved in other areas of specialty.
  So, it is impossible to say with precision, but I think it is safe to 
say that at least it would reduce medical costs and get some of these 
rural areas better covered by physician services.
  Mr. WELLSTONE. By the way, in the 2 percent of the cases that the 
Senator mentioned, how much does that translate to in terms of dollars?
  Mr. KYL. Let me see if I can get that for you. I do not have that in 
my prepared remarks.
  Mr. WELLSTONE. I guess what I am struggling with here, Mr. President, 
as I try to figure out the logic of this, if my colleague had said, 
``Look, there are lots of cases that this would affect all across the 
country,'' then I would have said, ``Well, then I understand what you 
are doing in terms of the negative impact on plaintiffs.'' Many times 
we are talking about people who have been injured.
  But my colleague's response was, it is a relatively small percentage, 
in which case then the flip side of the coin is, I am wondering--and I 
wrote it down--if it is 12.3 percent, the figure on ob-gyn's who talked 
about the problems of excessive payments, I am not at all sure that 
there would be--I mean, by definition, if there are very few cases, 
then why would any of us 
[[Page S5877]] have any reason to believe that, by putting this cap on, 
this would have any significant impact on the number of ob-gyn, if you 
follow me, practitioners in these underserved communities?
  Mr. KYL. I think my colleague raises a good point. The mere fact that 
half of the physicians will, half of the surgeons in the country will 
be sued for medical malpractice has a great deal to do with the 
malpractice premium problem as well.
  So it is very difficult to tell how much of the problem is due to the 
large number of cases that will be filed and have to be defended, 
regardless of whether they have merit or not--three-fourths of them 
actually being thrown out--and how many problems, on the other hand, 
are due to very large awards. Because it is impossible to divide those 
numbers out, it is impossible to say precisely how much good we will do 
with this amendment.
  But this amendment is just one narrow piece of a much larger 
underlying amendment, as my colleague knows, that is being offered by 
Senators Lieberman, Kassebaum, and McConnell, that hopefully will also 
deal with the number of claims that are filed.
  So we are trying to get at it in three different ways: We are trying 
to limit the circumstances under which these cases are filed and trying 
to get them into alternative dispute rather than going all the way 
through trial, No. 1; second, we are trying to limit the nonessential 
costs, and in this case, we are saying some of the attorney's costs are 
just not necessary, we want to give more of that money to the 
claimants; and third--and I think this goes directly to the point of 
the Senator from Minnesota--there may not be very many cases where you 
have these astronomical awards but those few cases do represent a lot 
of money and they represent a lot of psychological horror to the 
insurance companies and to the physicians. They are the ones everybody 
knows about. That is the McDonald's coffee that burned the claimant and 
all of the other cases that we are very familiar with.
  Of course, that is not a medical malpractice case, but it is those 
kinds of awards that get put into people's minds and it is that which 
probably, in the case of the insurance companies, ends up causing them 
to, in effect, dictate to their insured, the physician, that a case be 
settled, even though I heard a lot of physicians saying, ``I wanted to 
fight that case because I knew I was not negligent, I knew we didn't 
cause this damage, or at least it was not negligence,'' but the 
insurance company said it was cheaper to settle because of the 
potential for one of these astronomical awards.
  Because that is the sense of it, it is probably impossible to tell 
precisely what effect it will have. But I think a combination of all 
three of those approaches together will have a significant impact on 
bringing the costs down.
  Mr. WELLSTONE. Mr. President, there are two issues I will address, 
and I would be very interested in the response of my colleague. One is, 
and, again, I do not know what the exact amount of money is, my 
colleague says a small number of cases but there is a significant 
amount of money involved. If I do not know exactly how many plaintiffs 
are going to be hurt or denied what I think should be fair 
compensation, and I do not know exactly what impact this is really 
going to have on the problem that my colleague identifies--ob-gyn's 
practicing in some of our underserved communities--then I find it 
difficult to support this, especially since I struggle with two 
questions:
  One--and I will present both to my colleague so he can respond at 
once--I can remember, for example, when I was in North Carolina and we 
had our first son, David, there was a guy I was very close to, a 
graduate student, who had a son and went in for what was supposed to be 
regular surgery. Because of malpractice, his son was paralyzed in a 
wheelchair for the rest of his life. He was a student, he did not have 
a lot of money, but would anything above and beyond $500,000 for 
noneconomic damages be too much? That is my first question, and I am 
not willing to give up on that principle, especially when I do not 
really have any precise way of knowing what the benefits are of the 
amendment. And second, I say to my colleague from Minnesota, in 1986, 
the Minnesota Legislature enacted a $400,000 cap on intangible loss 
which was defined to mean embarrassment, emotional distress, so on and 
so forth, and we repealed it the following year because we felt it did 
not work at all.
  This may be good in Arizona, but why should this be applied to the 
State of Minnesota? We have tried something different. We have some of 
our own alternative dispute mechanisms, et cetera, et cetera. If it is 
good for Arizona, fine, but why the Federal preemption on this?
  Two questions, if you follow me: A, in all due respect--and, by the 
way, there is a lot of respect--I still feel like my colleague has not 
been able to spell out what exactly will be the pluses and the minuses 
of this, the losses and the benefits, who would benefit, who would not; 
and, B, therefore, I am a little reluctant to--more than a little 
reluctant--to give up on two principles, which are, I do not know why, 
in some cases, we say $501,000 is too much, and why preempt what 
Minnesota is doing?
  Mr. KYL. I will be happy to try to respond to my colleague. First of 
all, by its very nature, these noneconomic damages are not 
quantifiable, so no one can say a particular amount is or is not 
warranted, which is to say of course, except we have put this decision 
in the hands of the jury. They are no more capable of divining a figure 
than the rest of us. We ask them to do it. We charge them with that 
responsibility, and they discharge their responsibility and, in many 
cases, do so very, very well. But these are very emotional cases, by 
their very nature. Ordinarily, the jury is well within the bounds of 
reason when it fixes the damage amount. We are only talking about those 
very, very exceptional cases, the less than 2 percent which exceed the 
half of a million dollars.
  So no one can say in one case it should have been $501,000 and in 
another case $499,000. But I think we should be guided by two or three 
different principles.
  First of all, we should understand that all of the economic damages 
are unaffected by this, so that with regard to the young man who has 
been confined to a wheelchair there would have to be a question about 
the loss of his earning power throughout the rest of his life, and he 
would receive damages for that entire sum of money. If he was building 
houses or something of that sort, his economic damages would be 
tremendous at that point, they would probably be in the millions and 
millions of dollars. In other cases, because of the nature of the 
economic loss, it would not be. If you are talking about a 65-year-old 
person who is about at the end of the earning part of their career, the 
economic damages would not be quite as large. We are already 
compensating for the economic loss.
  Second, since we cannot know precisely how much pain and suffering 
should be compensated, I think we ought to fix it at a level that is 
adequate to compensate an egregious case but not such as to permit all 
of the rest of society to pay a very large price as we are paying.
  What kind of a price do we put on the poor woman in rural Minnesota 
or rural Arizona who loses a child because there is not an obstetrician 
there to help deliver her baby because the high cost of medical 
malpractice premiums prevented that person from practicing? I know 
several communities in Arizona where every one of the OB's have left 
town because they cannot make it with the high premiums that they have 
to pay. I have cited these statistics here.
  So when we talk about how many millions of dollars should one person 
receive for being injured, I turn that around and say, how many 
millions of dollars worth of damage are being caused by the fact that 
physicians are not able to practice the way we all would like to have 
them practice and the way they used to practice.
  Finally, I note that our amendment does not provide for reduction in 
present value, therefore, in the case of the young man, the example the 
Senator cited, that $500,000, since he already received the economic 
damages--he has been made whole in that sense--this $500,000 can 
generate maybe several millions of dollars, many millions of dollars of 
income during that person's lifetime. We are enabling the person to 
collect the entire sum rather than having it to be reduced to present 
value.
  [[Page S5878]] As to the question why preemption, it is a very good 
question, because ordinarily we would like to have the experimentation 
at the State level, and that certainly has been a part of my philosophy 
over the years. But we found in many areas from standards we have 
established on health care delivery, from the FDA, in welfare, in so 
many different areas we have found we want to have some kind of at 
least minimal national standards.
  In the case of people trying to do business and provide insurance so 
that hospitals and physicians can provide care to people so that they 
will receive the kind of health care that they need, in order for them 
to do that, they are going to need to have some kind of standard by 
which they can operate.
  If there is a different standard in every State, it is going to be 
very difficult--in fact, they have said it--it is very difficult for 
these insurers to insure against the different standards in different 
States. So some predictability and a maximum level of exposure, we 
think, would go a long way toward enabling companies around the country 
to reduce the overall cost of health care which, of course, would tie 
into our efforts to try to establish some kind of health care reform 
later in the session in Congress.
  Mr. WELLSTONE. I see other colleagues on the floor. I wanted to speak 
briefly about an amendment that I have offered.
  Mr. KYL. May I say, before my colleague leaves the floor, I 
appreciate his questions. They are all very good. I wish we had more of 
an opportunity to engage in colloquy. I think we would get to the 
bottom of some of these things.
  Mr. WELLSTONE. I thank my colleague, too. I think ultimately where I 
come down on this question is--while some of my objections I have tried 
to be clear about--I guess I still do not find the argument about the 
jury being swayed on a motion to appeal that persuasive--and you know 
what I am going to say. These are the people who vote for us in 
elections. I will tell you that my State has struggled with this 
question, and we have passed some significant reform. You may want to 
do this in Arizona. I think the Senator from Massachusetts ultimately 
will have the State-opt-out amendment. It seems that States--the 
Federal preemption bothers me to no end and not trusting juries, which 
are citizens, to make these decisions when we trust them to elect us to 
office, I think is a curious irony. I think that is one of the flaws in 
the proposal.
  I know the Senator presents this in very good faith. I agree with the 
Senator--not on his amendment, but I agree and we share a very strong 
common commitment and interest--and I look forward to working with you 
on this--about how we can make sure that some of our underserved areas, 
where we have men and women that can deliver dignified and affordable 
health care. In rural Minnesota, the issue is not any longer whether 
you can afford a doctor but whether you can find one. I do not think 
the cause of that is what you think is the cause. But I think we can 
work together. I thank my colleague.
  I want to briefly speak about a ``Dear Colleague'' letter I have sent 
out on an amendment I introduced on Friday. This amendment deals with 
what is called the national practitioner data bank, which was created 
in 1986.
  Mr. President, this data bank provides information in two decisive 
areas that are extremely important to provide this. One is the area of 
what is called adverse actions. When an adverse action has been taken 
against a doctor by a hospital or by a medical board, essentially 
saying to that doctor, ``You cannot practice medicine at this hospital 
any longer because of a pattern of negligence,'' or ``you cannot 
practice medicine in the State any longer,'' then that information--
very important information--goes into this data bank.
  Mr. President, the second kind of information that is critically 
important that goes into that data bank is information that deals with 
malpractice payments. When in fact a doctor has made a malpractice 
payment, then going into this national practitioner data bank is very 
important information on how many times this has happened and what 
amount has been paid.
  Mr. President, this is, I think, the bitter irony to it. This 
information in the national practitioner data bank is available to 
hospitals; it is available to doctors; it is available to managed care 
plans; it is available to just about everybody but the consumers. It is 
not available to the consumers.
  Now, Mr. President, what we do in this amendment is a couple of 
different things. First of all, we really strengthen the disclosure of 
this information in a couple of different ways. What this amendment 
calls upon is for the Secretary of Health and Human Services, over a 6-
month period--every 3 months he comes to Congress, and 3 months later 
promulgates rules as to the best way to make sure that this information 
gets to consumers. Understand, Mr. President, there are 80,000 deaths a 
year for medical malpractice, from negligence, and 300,000 people 
injured.
  Now, I want to be clear for colleagues that tomorrow when I speak on 
the floor when all of our colleagues are back, in summarizing this 
amendment, I am going to make this point again. We are very clear that 
what goes into this data bank is not when someone complains about the 
doctor--that is not part of the data bank. It is only when there has 
been an adverse action taken or a malpractice payment has been made. 
That is all there is. I mean, for example, if you go to a dentist and 
you do not like the dental work, you are pretty angry about it and you 
feel like you were put in a lot of pain and you say, ``Look, I want to 
get my money back,'' and he says, ``I do not want to deal with you, 
here is your money back,'' that is not in this data bank. It is only 
when an actual adverse action has been taken or there has been a 
malpractice payment. That is very important. That is the only 
information.
  Moreover, Mr. President, in response to what I think were some fairly 
legitimate questions from the providers, we have done a couple of other 
things in this amendment which I think are important. First, we list 
the norms, we were just talking about obstetricians, and we were 
talking about that in terms of rural areas. We list the norm for each 
subsection of the health care profession so that, for example, if you 
were to see there had been a malpractice payment, one or two with an 
obstetrician, you might think that is bad. But if you saw the norm for 
obstetricians and it looked pretty good, you would not be nearly as 
worried. We make sure the norms are listed for each part of the medical 
profession that a consumer would have access to.
  Second, since insurance companies sometimes say to a doctor, ``Look, 
just settle,'' and the doctor really does not want to, does not feel he 
or she did anything wrong but that is the best thing to do, we make 
sure that is part of that data bank, that provider's perspective 
analysis of what happened and why it is a part of the data bank. This 
is available as part of the data base.
  Fourth of all, Mr. President, we deal with what is a very serious 
problem. Maybe tomorrow, because I see my colleague from Ohio and I 
promise I am going to try and finish within 5 minutes--maybe tomorrow I 
will give examples which are very heartrending. But all too often what 
happens is--and we are not talking about, thank God, many doctors--but 
all too often what happens is that you have a doctor who has had an 
adverse action taken against him--and I know my colleague from Ohio is 
interested in this question--and he actually leaves the State, changes 
his name, and commits the butchery again. What we make sure of--and we 
have examples of this in a number of different States, and this has 
been a proposal that Health and Human Services has made for some time--
as a matter of fact, the Social Security number is entered into this 
data bank, so it is much easier to track those individuals--so that, 
Mr. President, if you had to have back surgery in Minnesota and you 
wanted to check--and God forbid there had been somebody who came from 
Ohio who literally had an adverse action taken against him, and he no 
longer was able to practice in the State, changed his name in 
Minnesota--you could track that person. You could have access to that 
kind of information.
  Mr. President, I really believe that this amendment is extremely 
important. Here we are talking about malpractice reform--med-mal 
amendments. I am saying that one of the 
[[Page S5879]] ways we can prevent this malpractice or this negligence 
from happening in the first place is to make sure consumers have this 
information. I really find it a very weak argument, and weak arguments 
were made as to why we cannot do it. Some say, ``Let us study it,'' or 
``We need to improve the data.'' We have, as a matter of fact; we have 
plugged some of the loopholes.
  In any case, it is far better that we make sure the consumers have 
access to this information. I am a little startled at some of the 
opposition to this. If in fact this information is available--and you 
could go to a court in any State and get it. But it is not readily 
available to consumers. It is readily available for hospitals, for 
doctors, medical boards, medical societies, and managed care plans. The 
only people that do not have access to this information are the 
consumers.
  So it seems to me that this amendment strengthens what we are trying 
to do here,
 especially if what we are trying to do here does, I hope, in part, 
prevent this kind of negligence from happening in the first place.

  I do not think there is any reason why a Senator should vote against 
what is a strong consumer protection amendment. Tomorrow morning, I 
will, if there are any Senators who want to debate this, be pleased to 
debate it. Or later on today, we will do so, as well.
  I yield the floor.


                 Amendment No. 612 to Amendment No. 603

(Purpose: To clarify that the provisions of this title do not apply to 
                    actions involving sexual abuse)

  Mr. DeWINE. Mr. President, I ask unanimous consent that the pending 
amendment be set aside so that I may offer an amendment.
  Mr. WELLSTONE. Mr. President, reserving the right to object, is this 
a medical malpractice amendment?
  Mr. DeWINE. It is, indeed.
  Mr. WELLSTONE. Mr. President, I no longer object.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DeWINE. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Ohio [Mr. DeWine] proposes an amendment 
     numbered 612 to amendment No. 603.

  The amendment is as follows:

       In section    12(5) of the amendment, add at the end 
     thereof the following new sentence: ``Such term does not 
     include an action where the alleged injury on which the 
     action is based resulted from an act of sexual abuse (as 
     defined under applicable State law) committed by a provider, 
     professional, plan or other defendant.''.
  Mr. DeWINE. Mr. President, the underlying amendment that we are 
considering, the McConnell medical malpractice amendment, would place a 
cap on the punitive damages that may be awarded by a jury against a 
doctor or against other medical providers.
  My amendment would except out from this cap sexual assault and sexual 
abuse.
  The underlying amendment, Mr. President, does set this cap. By 
setting the cap, it also sets a cap on all medical malpractice cases, 
including cases where the doctor has committed a sexual assault, some 
form of sexual abuse, against the patient.
  Mr. President, I find no logical reason for this Congress, as we 
debate the issue of medical malpractice, to impose our will on the 
States and say to each State no longer can a person have unlimited 
punitive damages against those who a jury has found or an individual 
who a jury has found has sexually abused his patient.
  I find no logic behind that, and I think it would be, quite frankly, 
morally wrong for this Congress to impose such a limit.
  Mr. President, the amendment I have just sent to the desk would add, 
at the end of the relevant section, the following new sentence:

       Such term does not include an action where the alleged 
     injury on which the action is based resulted from an act of 
     sexual abuse (as defined under applicable State law) 
     committed by a provider professional, plan, or other 
     defendant.

  Mr. President, it is not my intention at this time to talk about the 
underlying merits of the amendment. What I will try to do, instead, is 
make absolutely certain by my amendment, that this legislation does not 
have a truly disastrous, if unintended, consequence, one that may well 
occur if we do not make the legislation absolutely crystal clear.
  Mr. President, sexual abuse is a horrible problem in this country. 
Two and a half percent of all medical malpractice cases involve sexual 
abuse.
  In the last reporting period, Mr. President, it was reported that 
this totaled 173 cases of not only medical malpractice, but of sexual 
abuse.
  Clearly, Mr. President, there are a few doctors out there who are 
engaging in very reprehensible conduct. These cases involve a brutal 
violation of one of the most sacred relationships that exist; that is, 
the relationship between a doctor and his or her patient.
  When a person goes to a doctor, that person establishes that sacred 
relationship. That person goes to a place where she or he can be healed 
and certainly not hurt. The patient goes to a doctor in a spirit of 
trust, someone who is bound by a sacred oath not to violate that trust.
  Mr. President, tragically, at least 173 women have recently 
discovered that they had misplaced that trust. They trusted someone who 
posed as a healer but who it turns out was, in fact, a predator. When 
they entered the doctor's office, they certainly did not expect that it 
would turn into an outrageous, humiliating, criminal nightmare.
  Let me talk about a few cases that have been in the news recently. 
Let me talk about a woman in Virginia who went to a doctor because she 
and her husband wanted to have children. They asked the doctor, because 
they had that problem, to help them start this pregnancy. The doctor 
led them to believe that the husband's semen would be implanted in the 
wife by artificial means.
  The woman became pregnant, all right. But tragically, it turned out 
that the semen was not her husband's but was, rather, the doctor's. It 
was later revealed that the doctor had literally made a practice of 
impregnating his own patients.
  Mr. President, what words can we summon to express the rage that we 
all feel when we hear about this kind of outrageous conduct?
  Mr. President, it has been said that one of the problems we have in 
this country today in our society is that we accept too much, we 
tolerate too much; we see so much on TV that is sad and brutal that we 
just pass it off and say that that is just the way it is.
  I think, Mr. President, we need to really recapture a spirit of 
outrage, a sense of deep shame, a sense that we are not going to 
tolerate this anymore, that we are really going to succeed in deterring 
this kind of intolerable behavior. It is that sense of outrage that we 
must have.
  Would it be right, would it be just, for this Congress to impose a 
cap and tell the State of Virginia to tell that jury in Virginia, ``You 
cannot impose punitive damages above a certain amount in this 
particular case''? I think the answer is, clearly, no.
  We cannot tolerate what happened to a woman in Connecticut. She had 
been going to a dentist for about 10 years. She was going to get a 
molar filled. The dentist sedated her with nitrous oxide. She woke up, 
Mr. President, three times in the next hour and 15 minutes.
  The first time, she found the dentist kissing her and she felt pain 
in her breasts. She attempted to resist and saw the doctor turn up the 
concentration of nitrous oxide so that she would pass out again, which 
she did. The second time she woke up, she found the dentist on top of 
her, and the third time she woke up the dentist was still on top of 
her.
  She felt very scared and very sick. The dentist realized she was 
awake. He helped her out of the chair. He grabbed her and kissed her. 
The woman did not remember any dental work ever having been done in 
that visit.
  During her excessive exposure to the nitrous oxide, some obviously 
went into her lungs. And stomach acid had actually gone into her lungs, 
leaving her with a permanent asthma condition and permanent loss of 30 
to 40 percent of her lung capacity.
  Would it be right to tell the jury in Connecticut, ``No, in this 
case, there will be a cap on the punitive damages 
[[Page S5880]] that can be awarded''? I do not think so.
  In another case, a Florida woman thought she was receiving 
periodontal treatment. She awoke from the anesthesia the doctor had 
given her and found the doctor touching her private parts. Would it be 
right, in that particular case, Mr. President, to impose a cap? Again, 
I think not.
  Mr. President, according to a recent study, in one-third of the sex 
abuse cases--in one-third--the doctor was permitted to go on practicing 
medicine.
 Patients today are being treated by those doctors, totally unaware of 
the doctors' history of obscene conduct.

  Sometimes, tragically, it takes time for justice to be done. An 
investigation by ABC News revealed that a gynecologist in southern 
California sexually abused as many as 200 women over a 30-year period. 
It took almost 20 years after the first complaint for California 
authorities to start proceedings against him. But in that case, the 
very first complaint really told the whole story. The victim wrote that 
while the doctor was examining her pelvic region he began sexually 
abusing her and using foul language. My amendment would exclude this 
kind of behavior from the changes contemplated in the bill we are 
considering. This medical malpractice amendment should not have caps 
which would affect sexual abuse.
  The Senate may decide to cap damages in case of medical malpractice. 
But there certainly is no logical reason to extend that protection to 
individuals who sexually abuse their patients. It would, I believe, be 
morally wrong. Indeed, I believe it would be outrageous for this 
Congress to protect, by the use of a cap on punitive damages, 
individuals who sexually molest or abuse their patients. Under my 
amendment, all of the remedies currently available for victims of this 
kind of sexual abuse will continue to remain available to them under 
the applicable State law.
  Punitive damages are historically used to punish and to deter. Let us 
not limit the punishment of these sex offenders. Let us not limit the 
deterrent effect on these sex offenders. Let us allow juries the full 
latitude they need to punish and the full latitude they need to deter 
these offenders. That is what this amendment would do.
  The vast majority of doctors in this country do a fantastic job. We 
rely on them for literally the most precious thing in our lives, which 
is the health and welfare of our family members. Each one of us has 
had, we hope, great experiences with these doctors. This amendment 
should not in any way reflect on these doctors. All we are saying by 
this amendment is let us not have the U.S. Congress interfere with a 
jury, interfere with a State, interfere with the people's right to 
punish and deter the small minority of doctors who violate the sacred 
trust that the patient has given them.
  The same amendment I am offering today was offered by Senator Kennedy 
in the Labor and Human Resources Committee. The committee passed that 
amendment and it is my hope the full Senate will, tomorrow, do the 
same.
  The American jury speaks with the voice of America's deepest 
conscience. That is why I want to make sure the jury keeps the power, 
the power to punish fully these horrible violations of trust by some 
truly warped and dangerous individuals.
  Mr. President, I yield the floor.
  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. HATCH. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Thomas). Without objection, it is so 
ordered.
                    Bashing Business/helping lawyers

  Mr. HATCH. Mr. President, during debate on the products liability 
bill last week, some of our colleagues who defend the status quo made 
comments on the punitive damages issue to which I would like to say a 
few words.
  I heard one comment to the effect that, ``if a multibillion-dollar 
corporation makes a mistake in building a bus and the bus explodes, to 
punish a multibillon-dollar corporation $250,000 or three times 
economic damages is not going to cut it.''
  First, let us understand that punitive damages were not conceived for 
application in cases of mere mistake, mere negligence. They are 
intended for application in cases of much, much more serious conduct. 
The underlying bill, which speaks to conduct carried out with a 
conscious, flagrant indifference to the safety of others is the kind of 
standard usually employed before punitive damages are found 
appropriate.
  Second, given today's regime of compensatory damages, the cost of 
litigation, and adverse publicity, punitive damages infrequently are 
needed to punish and deter such misconduct. In the case of the 
exploding bus, if it had resulted from the kind of conduct triggering a 
right to punitive damages under the law today, all of these factors 
would combine as a powerful incentive for the company to reform its 
practices. But, the underlying bill hardly does away with punitive 
damages, it simply places rational limits on their award.
  Third, the current, largely uncontrolled nature of punitive damages 
is anticonsumer. The threat of these awards must be built into the cost 
of services and products today, even before we get to the impact on 
prices when runaway awards are handed down. Punitive damage reform is 
proconsumer.
  I will have more to say about this subject when Senator Dole offers 
his amendment on punitive damages to broaden the scope of the provision 
now in the bill. I believe my colleagues might be interested in the 
testimony of George L. Priest before the Judiciary Committee on April 
4, 1995. Mr. Priest is professor of law and economics at Yale Law 
School and has taught in the areas of tort law, products liability, and 
damages for 21 years. He has served as director of the Yale Law School 
Program in Civil Liability since 1982.
  He appeared before the committee as a private citizen, and not as a 
representative of any interest or lobbying group. His scholarship has 
led him to the conclusion that the kind of reform on punitive damages 
that Senators Gorton and Rockefeller are talking about, and which 
Senators Dole and I and others would like to extend beyond products 
liability, would be beneficial to consumers. He also concluded that 
punitive damages do not serve a deterrent purpose. He testified:

       I have never once seen a careful study in a specific case 
     showing that a punitive damages judgment of some particular 
     amount was necessary to deter some particular wrongful 
     behavior.

  Professor Priest unhesitatingly stated that the view--

       That ever-increasing civil liability verdicts, including 
     punitive damage verdicts, would serve to reduce the number of 
     accidents * * * has been totally discredited today, and I 
     know of no serious tort scholar publishing in a major legal 
     journal who could maintain it.

  He added:

       It is widely accepted--and it is a routine proposition of a 
     first year modern torts course--that compensatory damages * * 
     * serve as a complete deterrent in addition to their role in 
     compensating injured parties.

  I ask unanimous consent that Professor Priest's testimony be printed 
in the Record at the conclusion of my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. HATCH. Thank you, Mr. President.
  Now, Mr. President, let me address another point made on the floor 
last week. It was asked, how can Congress know how to limit judges and 
juries in making punitive damage awards, how can we lay down a rigid 
law?
  Mr. President, I find the criticism odd in the extreme. These same 
Senators would not dream of imposing punishment, be it jailtime or 
criminal fines or both, on some violent thug, without according that 
criminal a full panoply of procedural protections, clarity in the law 
as to what constitutes criminal conduct, and certainly, a defined set 
of punishments. That is what we do before we seek to punish anyone in 
our society for criminal misconduct.
  But, because some of the opponents of change in our civil justice 
system like to mischaracterize the issue before us as a matter 
involving only businesses, they apparently could not care less if 
defendants are punished in a civil case in an almost totally 
uncontrolled fashion. It is OK I guess in their 
[[Page S5881]] eyes to bash business. It is OK to unload on large, 
medium, and small businesses. What the heck, some of our Nation's 
lawyers make out just fine. Forget about the fact businesses, especaily 
small businesses, provide the jobs in this country. Forget about the 
fact they bring new products and services to the American people. Who 
cares if runaway punitive damage awards stifle innovation, curtail 
products and services, hurt employment, and deplete company assets for 
use in compensating other victims of the company's wrongdoing? Let us 
just bash American business and watch some of the Nation's lawyers 
laugh all the way to the bank. I am not being critical of all lawyers 
by a long shot and I understand the crucial role lawyers play in 
vindicating individual rights. But, today, the biggest beneficiaries of 
the stubborn defense of the status quo are some of our Nation's 
lawyers--not consumers.
  And the opponents of change can wave around lists of consumer 
organizations that also oppose change. But the American people for whom 
they claim to speak, favor change. They know the civil justice system 
is broken.
                               Exhibit 1

Testimony of Prof. George L. Priest Before the Senate Committee on the 
                               Judiciary

       Mr. Chairman, I am grateful for the opportunity to testify 
     on the subject of punitive damages reforms being considered 
     by your Committee. I am the John M. Olin Professor of Law and 
     Economics at Yale Law School, and have taught in the areas of 
     tort law, products liability and damages for 21 years--the 
     last 15 years at Yale. I have served as the Director of the 
     Yale Law School Program in Civil Liability since 1982.
       Over the course of my career, I have written broadly on the 
     fields of tort law and damages. A major area of my interest 
     has been jury verdicts in civil litigation. I have published 
     many empirical studies of jury verdicts, including verdicts 
     involving punitive damages. I was one of the original 
     organizers of the now-famous Rand Corporation studies of jury 
     verdicts that began in the early 1980s.
       The concern of my scholarship universally has been how the 
     civil justice system can be reformed to benefit consumers in 
     our society and low-income consumers most of all. I have no 
     particular concern to define what is beneficial to 
     manufacturers or to other corporate entities, except as their 
     activities provide benefit to consumers. I wish to emphasize 
     that I am testifying today at your invitation, solely in my 
     capacity as a private citizen interested in the effects of 
     tort law and punitive damages on American consumers. The 
     views presented here are mine alone and do not represent 
     those of any interest or lobbying group.
       As an academic, my job is to study and define the ideal 
     world and the system of laws that would most benefit American 
     citizens. The reform of punitive damages alone--even reforms 
     that would cap punitive damages or introduce a 
     proportionality cap--will help consumers, but will not 
     achieve the ideal. I believe consumers in this country would 
     be benefitted all the more if Congress (or our courts) were 
     to modify substantive standards of civil liability, reducing 
     the scope of liability and cutting off at the source a great 
     deal of what today is needless and counterproductive 
     litigation. Indeed, if such reforms were introduced, changes 
     in punitive damages might not be necessary because punitive 
     damages awards would nearly disappear. That world, however, 
     is the ideal, and we should not allow hope for the ideal to 
     discourage support for true reform. As I hope to convince 
     you, sharp yet reasonable Congressional limits on punitive 
     damages will constitute true reform to the benefit of all 
     American citizens.


             the increasing commonality of punitive damages

       Forty years ago, punitive damages verdicts were 
     exceptionally rare and were available against only the most 
     extreme and egregious of defendant actions. The world of 
     civil litigation is surely different today. But the number 
     and, especially, magnitude of punitive damages judgments have 
     increased dramatically. Indeed, the frequency of claims for 
     punitive damages has increased to approach the routine. These 
     claims affect the settlement process, both increasing the 
     litigation rate\1\ and, necessarily, increasing the ultimate 
     magnitude of settlements even in cases that are settled out 
     of court.
     Footnotes at end of article.
       I recently participated in an empirical study of punitive 
     damages verdicts that illustrates the point. The study 
     reviewed claims and verdicts for punitive damages in several 
     counties in Alabama--a state in which it has been alleged 
     that punitive damages verdicts have skyrocketed over the past 
     decade.
       The study first addressed the extent to which tort actions 
     filed included claims for punitive damages. Many commentators 
     have dismissed concerns about punitive damages on the grounds 
     that there are very few ultimate punitive damages verdicts 
     reported. In the American system of civil justice, of course, 
     very few verdicts of any kind are reported, relative to the 
     number of claims filed, since only 2 to 5 percent of civil 
     cases filed ever proceed to a verdict.\2\ The better test of 
     the frequency and impact of punitive damages, thus, derives 
     from a study of claims.
       Here are the results: Bullock, Lowndes, and Barbour 
     Counties in Alabama are relatively rural locales, with small 
     populations and without substantial industry. We studied all 
     tort actions filed in these counties for several fiscal years 
     to determine the numbers in which punitive damages were 
     claimed. To summarize the most recent statistics, we found 
     that, in the fiscal year 1992-93, of all tort cases filed in 
     Bullock County, 76.5 percent included a punitive damages 
     claim; 65.1 percent in Lowndes County; and 78.3 percent in 
     Barbour County.\3\
       The exceptionally high proportion of punitive damages 
     claims and the universality of such high proportions over 
     each of the counties are striking and nearly incredible.
      Again, the study was not limited to only claims involving 
     high dollar amounts or product liability claims or, even, 
     claims against corporate defendants; the study addressed 
     all tort claims. Anyone familiar in the slightest with our 
     civil justice system knows that most tort actions involve 
     relatively routine forms of accidents, including traffic 
     accidents. That 65 to 78 percent of all tort actions over 
     a fiscal year include punitive damages claims starkly 
     challenges the notion that punitive damages are an 
     infrequent and seldom invoked remedy in American civil 
     law.
       Yet, incredible as these numbers may seem, in the 
     succeeding fiscal year, the proportion or number of tort 
     cases including a punitive damages claim actually increased 
     in each of the counties. During the 1993-94 fiscal year, an 
     extraordinary 95.6 percent of tort cases filed in Bullock 
     County included a punitive damages claim; 78.8 percent in 
     Lowndes County. In Barbour County, the proportion of tort 
     cases including a punitive damages claim decreased from 78.3 
     to 72.1 percent, but the absolute number of punitive damages 
     claims increased during 1993-94 by over 40 percent.
       Much of the debate over punitive damages proceeds in the 
     form of battle by competing anecdote in which a defender of 
     our modern regime will present a case of exceptionally 
     egregious defendant behavior deserving of punitive damages, 
     and a supporter of reform will present an opposite example. 
     (Indeed, I present an anecdotal case--though a telling one--
     below.) The Alabama numbers belie anecdotes. No one can 
     plausibly claim that 72.1 to 95.6 percent of all accident 
     cases over an entire year in any county of the U.S. involve 
     the form of exceptionally egregious defendant behavior that 
     might merit substantial punitive damages. In contrast, these 
     numbers show that the role of punitive damages has changed 
     dramatically in our civil justice system, from an occasional 
     remedy invoked against outrageous action to a commonplace of 
     tort law practice.
       These numbers also belie the commonly-heard defense that 
     actual punitive damages verdicts are rare and that many of 
     those awarded by juries are later reduced on appeal so that 
     there is no substantial effect. Debate can be had on what is 
     meant by the term ``rare'' and what constitutes in terms of 
     magnitude of verdicts a ``substantial'' effect. The 
     impression is often suggested, however, that even for the 
     Nation in its entirety, punitive damages claims amount to 
     nothing more than a handful.
       Our Alabama study demonstrates that this is a great 
     misimpression. Again, we did not select the largest cities in 
     Alabama or industrial or manufacturing centers; in fact, just 
     the opposite: The counties that we studied in Alabama are 
     rural, with modest populations, and a relatively non-
     urbanized citizenry. For example, Bullock County has a total 
     population of only 11,042, 4,040 of whom are employed, and a 
     per capita income of $9,212; Lowndes, a total population of 
     12,658, 5,300 employed, and a per capita income of $10,628. 
     Barbour County is somewhat larger, with a total population of 
     25,417, 12,400 employed, and a per capita income of $12,100. 
     None of these counties, however, resembles in the slightest 
     metropolitan areas such as Miami, Los Angeles, or Dallas.
       What did we find? In 1993-94, despite these small 
     populations, punitive damages claims constituted far more 
     themselves in these rural counties than the claimed 
     nationwide ``handful''. In Bullock County, 43 of 45 tort 
     actions included a punitive damages claim; in Lowndes County, 
     52 of 66; and in Barbour County, 93 of 129. Are punitive 
     damages in Alabama insignificant? The claims reported above, 
     of course, are quite recent and remain still in the 
     litigation pipeline. Looking to much earlier claims, however, 
     our study in Alabama showed that the magnitude of punitive 
     damages judgments affirmed by the
      Alabama Supreme Court from 1987 through the first half of 
     1994 equalled $53.2 million,\4\ equal to roughly $13 per 
     Alabama citizen.
       This study demonstrates that the number and magnitude of 
     affirmed punitive damages verdicts is only the very small tip 
     of an extraordinary iceberg. Again, it is universally 
     conceded that only 2 to 5 percent of cases filed ever proceed 
     to verdict. Thus, it is not surprising that the systematic 
     observation of any single type of verdict is relatively rare. 
     What the Alabama numbers show is that the availability of 
     unlimited punitive damages affects the 95 to 98 percent of 
     cases 
     [[Page S5882]] that settle out of court prior to trial. It is 
     obvious and indisputable that a punitive damages claim 
     increases the magnitude of the ultimate settlement and, 
     indeed, affects the entire settlement process, increasing the 
     likelihood of litigation. Thus, as shown in the Bullock, 
     Lowndes, and Barbour County figures, our modern rules with 
     respect to punitive damages impose these effects on 95.6 and 
     72.1 percent of even settled cases. Punitive damages reform--
     especially if it extends to all state and federal litigation, 
     not simply products liability--is desperately needed.


        do punitive damages serve a necessary deterrent purpose?

       Virtually every supporter defends punitive damages on 
     grounds of deterrence, accompanied by an anecdote or 
     anecdotes involving persons who suffered serious losses in 
     contexts in which most observers would agree that the 
     respective defendant should have prevented the accident. 
     Generally, the anecdotes are allowed to speak for themselves: 
     I have never once seen a careful study in a specific case 
     showing that a punitive damages judgment of some particular 
     amount was necessary to deter some particular wrongful
      behavior. Instead, the argument proceeds by implication. The 
     basic defense of punitive damages--and I believe that it 
     is the only serious defense--is the implication that 
     large, unlimited punitive damages verdicts are necessary 
     to control injurious activities in the society. Put 
     slightly differently, it is implied that, without the 
     availability of unlimited punitive damages awards, 
     potential defendants, especially corporate defendants, 
     would face no deterrent threat to prevent them from 
     causing injuries.
       Forty years ago, in a tort law regime that provided little 
     in the way of consumer remedies, it might have been believed 
     that ever-increasing civil liability verdicts, including 
     punitive damages verdicts, would serve to reduce the number 
     of accidents.\5\ That view, however, has been totally 
     discredited today, and I know of no serious tort scholar 
     publishing in a major legal journal who could maintain it. 
     Instead, it is widely accepted--and it is a routine 
     proposition of a first-year modern torts course--that 
     compensatory damages--economic losses and pain and 
     suffering--serve a complete deterrent purpose in addition to 
     their role in compensating injured parties. Compensatory 
     damages impose costs on defendants who wrongfully fail to 
     prevent accidents, costs equal in amount to the injuries 
     suffered. Compensatory damages internalize injury costs to 
     defendants where some action has wrongfully injured an 
     innocent party.
       Indeed, the strongest theory in the modern tort academy is 
     that full compensatory damages generate exactly the optimal 
     level of deterrence of accidents--not too little and not too 
     much.\6\ For purposes of deterrence or accident prevention, 
     given full compensatory damages, there is no need for 
     punitive damages of any dimension, not to mention unlimited
      punitive damages. Of course, this is a theoretical 
     conclusion, and there remains dispute in the academy as to 
     whether as an empirical matter court or juries calculate 
     compensatory damages exactly perfectly in every case or in 
     every context. Thus, substantial academic attention has 
     been given to the refinement of liability so that the 
     deterrant effects of compensatory damages may be 
     sharpened.
       Given the role of compensatory damages as a deterrent, 
     however, the analysis of punitive or other exemplary damages 
     becomes substantially different. The only justification on 
     grounds of deterrence for any exemplary award beyond the 
     compensatory is that compensatory damages are inadequate for 
     some reason, say, that juries award damages too low in some 
     dimension or that some set of injuries go undetected or are 
     perhaps too insignificat individually to justify 
     litigation.\7\ The only plausible defense of punitive damages 
     on deterrence grounds, thus, is to restore aggregate damages 
     to a level equal to that that is fully compensatory.
       Opponents of punitive damages reform in current 
     Congressional debates avoid this issue, but this failure to 
     confront it suggests the ultimate weakness of their 
     opposition. Again, anecdotes involving individuals suffering 
     serious serious loss are not generally helpful to the 
     analysis. I am extremely sympathetic--as all of us are--to 
     individuals suffering serious injuries. We all wish that the 
     wrongfully injurious action might have been avoided. Given a 
     wrongful injury, we all want the victim to receive full 
     compensation for economic losses and pain and suffering.
       The question for punitive damages tort reform, however, is: 
     Given full compensation to the victim, is there some 
     affirmative deterrent purpose served by awarding further 
     damages? Is there some reason to believe that the payment of 
     full compensatory damages
      will fail to deter the defendant, such that some further 
     multiple of punitive damages is absolutely necessary? For 
     corporate defendants, the answer surely is no. Corporate 
     defendants who must maximize profits net of costs must 
     necessarily take the prospect of compensatory damages into 
     account in determining how to invest in accident 
     prevention. Again, this analysis presumes full 
     compensation. If there were some reason to believe that 
     juries were systematically undervaluing economic losses or 
     pain and suffering, punitive damages might be necessary to 
     make up the shortfall. (Of course, the opposite is true; 
     many, including myself, believe that juries overvalue 
     compensatory damages, especially pain and suffering, 
     justifying Congressional limits on pain and suffering 
     awards.) Barring such a shortfall, however, there is no 
     justification for punitive damages on deterrence grounds.
       The analysis is, perhaps, somewhat different in the context 
     of individual noncorporate defendants who are less subject to 
     cost constraints and, perhaps, more inclined to behave 
     unconscionably. This is the reason that exemplary or punitive 
     damages are often awarded in cases involving intentional 
     harms such as assault.
       As administered by juries, however, our current civil 
     liability regime approaches the issue exactly backwards. In 
     our current regime, large punitive damages verdicts are 
     seldom awarded against non-corporate defendants. And I know 
     of no one objecting to a punitive damages cap on the grounds 
     that it will impair the deterrence of private individuals. 
     Instead, large punitive damages verdicts are most typically 
     awarded against corporate defendants who, as profit 
     maximizers (a motivation often irrationally held against 
     them), will be carefully responsive to compensatory damages. 
     Corporate defendants need no punitive damages verdict to 
     encourage them to take all cost-effective precautions to 
     prevent injuries; compensatory damages alone achieve that 
     result. Thus, the increasingly commonplace plaintiff lawyer's 
     charge to a jury to ``send the defendant a signal'' ignore 
     entirely the
      universally accepted academic view that, to a corporate 
     defendant, full compensatory damages are not only an 
     effective signal, but also the only and entire signal 
     needed.


              do punitive damages help or hurt consumers?

       If the effect of punitive damages were to benefit consumers 
     or if their effect were even neutral to the consumer 
     interest, we might be unconcerned that punitive damages are 
     unnecessary to deter corporate defendants from injurious 
     behavior. The central problem of punitive damages, however, 
     is that, except in the rare cases of jury undervaluation of 
     damages or underlitigation, punitive damages settlements and 
     verdicts affirmatively harm consumers, and low-income 
     consumers most of all.
       Where punitive damages become a commonplace of civil 
     litigation as in Alabama, or even where they become a 
     significant risk of business operations, consumers are harmed 
     because expected punitive damages verdicts or settlements 
     must be built into the price of products and services. The 
     effect of the greater frequency and magnitude of punitive 
     damages recoveries of modern times has been to increase the 
     price level for all products and services provided in the 
     U.S. economy. To observe this phenomenon is not to say that 
     injured consumers should go uncompensated. If a consumer 
     suffers an injury that can be attributed to some wrongful 
     activity of a defendant, whether manufacturer or service 
     provider, that consumer should receive compensation for 
     economic losses and for reasonable non-economic losses, such 
     as pain and suffering.\8\ In contrast, punitive damages, by 
     definition, go beyond the compensatory. The problem with the 
     increasing commonality of
      large punitive damages verdicts and settlements, such as 
     those we see in Alabama, is that the awards to some 
     consumers of greater than compensatory damages must be 
     built into the prices paid by all other consumers.
       It is an obvious implication of this proposition that low-
     income consumers are most seriously harmed by our current 
     damages regime. First, low-income consumers have less money 
     generally and, regardless of the product or service, are more 
     seriously affected in terms of the purchasing power of their 
     limited resources where the price level increases. Secondly, 
     and most importantly, low-income consumers are not the 
     typical beneficiaries of large punitive damages verdicts or 
     settlements, surely not on a systematic basis. Again, 
     research of my own currently in progress shows that low-
     income consumers, if injured, are less likely to seek an 
     attorney; even with an attorney, are less likely to sue; less 
     likely to recover; and, again by definition, less likely to 
     recover large damage judgments since their lost income is 
     typically low and pain and suffering awards, which are highly 
     correlated with lost income, equally low.
       Put more simply, where punitive damages verdicts and 
     settlements are frequent and large, low-income consumers are 
     forced to subsidize the high-incomes as expected punitive 
     damages awards are built into the prices of products and 
     services. Occasionally, a low-income individual will receive 
     a punitive damages windfall, but the far more systematic 
     effect is to harm the low-income as the prices of products 
     and services generally are increased as producers must adjust 
     for the expectation of future punitive damages payouts.
       Although these Hearings are chiefly directed to punitive 
     damages reforms, it is important to recognize that the 
     current effect of the doctrine of joint and several liability 
     is similar. Joint and several liability has its most general 
     effect on organizations or entities which engage in a large 
     scope of activities, such as state and municipal governmental
      entities, public utilities, and the like. It has become a 
     commonplace of modern civil litigation for plaintiffs' 
     attorneys to join as defendants any governmental entity or 
     utility remotely associated with an injury. Thus, state 
     governments and municipalities are joined as defendants on 
     claims 
     [[Page S5883]] that roads were misdesigned or poorly 
     maintained or that a guard rail or telephone pole could have 
     been placed in a better position. Forty years ago, attorneys 
     would not have thought to include entities whose causal 
     relationship to the harm was so low or, if they had attempted 
     to join such entities, the claim would have been dismissed. 
     Today, such litigation is routine and imposes substantial 
     litigation expenses upon our state and municipal governments 
     and liability expenses, only infrequently, but chiefly under 
     operation of the doctrine of joint and several liability 
     where the truly responsible defendants have gone bankrupt, 
     leaving our governments and utilities to suffer the remaining 
     judgment.
       It is clear that, for very similar reasons, operation of 
     the doctrine of joint and several liability harms citizens in 
     general, but low-income citizens most of all. Damages 
     judgments must be paid from state and municipal financial 
     sources. It is well-established that state and, especially, 
     municipal finance is seriously regressive in effect, charging 
     more to middle- and low-income citizens, proportionate to 
     income, than to the relatively high-income. This effect, most 
     obviously, is not limited to the product manufacture context 
     and provides an important independent reason why the reforms 
     the Senate is considering should be expanded beyond 
     application to products manufacture to all civil litigation.
       These propositions about the effect of punitive damages and 
     joint and several liability on the poor and low-income may 
     appear abstract, though I believe that they are generally 
     accepted within the academic community. To illustrate their 
     import with greater salience, however, I would like to 
     present one recent example of a punitive damages verdict in 
     Alabama, indeed, a case that inspired the research presented 
     above. The case will both show
      the pressing need for punitive damages reform, again, not 
     limited to products liability, but expanded to all state 
     and federal litigation.
       In the case Gallant v. Prudential, decided this past April 
     1994, Iran and Leslie Gallant sued Prudential Life Insurance 
     Company based on the actions of a Prudential agent. The 
     Gallant's had purchased a combination life insurance-annuity 
     policy with a $25,000 face value at a monthly premium of 
     roughly $39.00. At the time of sale, the agent had told them 
     that the value of the annuity was roughly twice what in fact 
     it was; the agent had added together the table indicating 
     ``Projected Return'' with the table indicating the lower 
     ``Guaranteed Return.'' A jury found this action fraudulent 
     and held the agent liable and Prudential separately liable 
     for failing to better supervise the agent.
       Fortunately, the problem was discovered before either the 
     policyholder had died or had retired to receive the annuity. 
     Thus, to the time of trial, there was no true economic loss 
     beyond the failed expectation of the larger future return. I 
     have carefully read the transcript of the testimony, and the 
     Gallants testified that, between the time that they 
     discovered the misinformation and Prudential called them to 
     offer a remedy (Prudential offered to return their premiums 
     or to discuss adjusting the policy), they had suffered 
     roughly two weeks of sleepless nights and substantial anger 
     at having been misled. That was the extent of their ``mental 
     anguish''.
       Twenty years ago, I taught cases of this nature in a course 
     entitled Restitution, in which the appropriate remedy was 
     restitution of all paid premiums or out-of-pocket costs. On 
     very rare occasions such as especially egregious actions by a 
     defendant, some courts considered awarding plaintiffs the 
     benefit of the bargain, say, by increasing their annuity 
     benefits.
       Our modern world has changed: After a one and one-half day 
     trial, an Alabama jury awarded the Gallants damages equal to 
     $30,000 in economic loss; $400,000 in mental anguish; and $25 
     million in punitive damages. Again, the face value of the 
     insurance policy was only $25,000.
       I do not wish to minimize the harm to the Gallants, 
     especially the indignity of the misrepresentation, nor to 
     condone the fraudulent actions of the agent, apparently 
     perpetrated on several other Alabama citizens who recovered 
     separately. Nevertheless, there is not a single person to 
     whom I have described this case--not an attorney, whether 
     plaintiff or defendant; not a liberal or a conservative; not 
     even a radical or idealistic Yale Law student (or faculty 
     member)--who has not been shocked by the outcome or who could 
     defend it as a rational or sensible verdict in the context of 
     the harm. Again, many defenders of punitive damages argue 
     that exceptionally large verdicts are usually overturned on 
     appeal. Alabama provides a review procedure for punitive 
     damages verdicts that the U.S. Supreme Court has approved.\9\ 
     In the Gallant case, however, the judge conducting the review 
     affirmed the $25 million award in its entirey, though 
     directing part of the amount to be paid to the State.
       What will be the effect of a punitive damages verdict of 
     this nature? The Gallants appear to be persons of modest 
     means (before the verdict). Does a verdict of this nature 
     help middle- or low-income consumers? Totally, the opposite. 
     The insurance policy in question--face value, $25,000--was 
     the cheapest form of life insurance/annuity available on the 
     market; again, its monthly premium was only $39.00. 
     Obviously, at such a premium, the insurance carrier could not 
     be expecting to make a substantial profit on the policy. 
     Indeed, an expert in the case estimated that over the entire 
     life of the policy, the premiums net of
      payouts paid by the Gallants would increase Prudential's 
     assets by only $46.00.\10\ Prudential, like most other 
     life insurance companies, profit more substantially from 
     large dollar, rather than small dollar policies. The 
     expert estimated that the verdict reduced dividends to 
     every Alabama policyholder (Prudential is a mutual 
     carrier) by $323.
       How do we analyze a case like this in terms of whether 
     punitive damages serve a necessary deterrent effect? In his 
     closing arguments, the (highly effective) attorney for the 
     Gallants asked the jury to determine a level of damages that 
     would send a ``message'' to the giant Prudential Life 
     Insurance Company that fraudulent behavior on the part of an 
     agent will not be tolerated.\11\ What kind of damages message 
     is necessary to achieve that effect? Obviously, if the 
     insurer stood to gain no more than $46 over the life of the 
     policy, any damages judgment greater than $46 sends the 
     insurer a message by making the policy unprofitable. (Of 
     course, I ignore entirely Prudential's defense costs plus the 
     reputational harm from the lawsuit.) The jury in the Gallant 
     case went substantially beyond that amount, however, in 
     awarding compensatory damages of $30,000 for economic loss 
     and $400,000 for the mental anguish of the two weeks' lost 
     sleep and anger. It certainly cannot be argued that the jury 
     has undervalued the Gallant's compensatory loss--indeed, the 
     $400,000 mental anguish award is extreme. Furthermore, there 
     is no reason to think that the agent's behavior in other 
     contexts would go undetected. (Prudential later settled other 
     cases brought by the agent's clients.) As a consequence, 
     there is no justification for a punitive damages award 
     whatsoever.
       What will be the effect of punitive damages verdicts such 
     as that in the Gallant case? In the face of such a verdict, 
     what is the rational response of an insurer like Prudential 
     or
      other insurers selling similar policies? Regrettably, but 
     necessarily in a competitive industry, the rational 
     response is to quit selling such low value policies 
     altogether. It makes very little sense to expose the 
     company and its policyholders to the risk of such a 
     damages verdict given the very small gain from the sale of 
     such a policy.
       Is this the type of product that our civil liability system 
     should drive from the market? Obviously, not, and low-income 
     consumers in Alabama are directly harmed as a result. Here, 
     the dramatically differential effects of such verdicts on 
     high-income versus low-income consumers are made clear. In my 
     own view, it is far more important to our society to have our 
     insurance industry provide life insurance coverage to low-
     income than to high-income citizens, since the relatively 
     affluent of our society have other means of providing 
     financial security for their families. The availability of 
     financial protection and security at relatively low cost will 
     be substantially diminished if such low premium policies, as 
     here, are no longer available.
       More generally, where expected punitive damages verdicts 
     are added to the price of products and services, the first to 
     feel the effect will be low-income consumers. And where the 
     magnitude of punitive damages verdicts rise, imperiling the 
     continued provision of the product or service, the first to 
     be affected will be those products and services with the 
     lowest profit margins, most attractive to the low-income. The 
     Gallant case provides a dramatic example of the effect. 
     Following Gallant and other large punitive damages verdicts, 
     several insurers have quit offering coverage in Alabama 
     altogether.
       Punitive damages reform would cure that ill to the benefit 
     of all Americans and especially low-income Americans. As the 
     Gallant case shows, however, to fully cure the problem, 
     punitive damages reform must extend beyond the products 
     liability context to all civil litigation. The Gallant case 
     involved insurance, not product manufacture, Punitive
      damages verdicts such as the $25 million verdict in the 
     Gallant case encourage wasteful litigation. (Indeed, 
     litigation seeking punitive damages judgments against 
     financial service companies has become an industry in 
     Alabama.) By increasing the prices of all products and 
     services, punitive damages verdicts and settlements reduce 
     the purchasing power of all Americans, again, especially 
     the poor.


            must congress implement punitive damages reform?

       Many defenders of our current regime question why the 
     Congress should become involved in civil liability reform, 
     rather than leaving reform initiatives to the courts or to 
     the state legislatures. The question is particularly 
     appropriate with respect to punitive damages reform, given 
     that the Supreme Court has addressed the issue of the 
     excessiveness of punitive damages in several recent 
     cases.\12\
       I have been involved in the tort reform effort for many 
     years and have testified in favor of tort reform before 
     various state legislatures (California, Louisiana, New 
     Jersey) and in various judicial proceedings evaluating state 
     tort reform statutes (Alabama, Florida, New Mexico). I have 
     organized several conferences addressing tort reform for 
     state legislators and judges, and have directed much of my 
     writing on tort reform to the judiciary.
       [[Page S5884]] This varied experience has convinced me that 
     only Congress is in a position to implement effective civil 
     liability reform and, especially, punitive damages reform. 
     First, it is evident, after many opportunities, that the 
     Supreme Court has great difficulty proceeding beyond what 
     might be called a ``procedural'' approach to the punitive 
     damages problem. The Court's various options suggest clearly 
     that a majority of Justices are concerned about
      the excessiveness of modern punitive damages verdicts. To 
     date, however, the only form of punitive damages control 
     that the Court has adopted has been procedural: approving 
     a set of procedures at the state level for judicial review 
     of punitive damages verdicts (Haslip, supra) or 
     disapproving a state judicial procedure as not providing 
     sufficient review (Oberg, supra).
       In my view, a merely procedural approach to the punitive 
     damages problem will never be successful. Indeed, we have 
     stark evidence of its failure. In 1991 in the Haslip case, 
     the Supreme Court specifically approved the procedure for 
     reviewing punitive damages verdicts for excessiveness adopted 
     by the Alabama Supreme Court.\13\ Viewing the Alabama 
     procedure on its face, few can contest that the review 
     procedure appears reasonable. In practice, however, as the 
     Gallant case proves and as the statistics from the rural 
     Alabama counties strongly suggest, the punitive damages 
     problem in Alabama, under the procedures approved by the U.S. 
     Supreme Court, has grown to epidemic proportions.
       Upon reflection, it is not surprising that the Supreme 
     Court has found it difficult to deal with excessive punitive 
     damages. The Supreme Court's job, in general, is to define 
     rights. Few would contest--I do not contest--that punitive 
     damages may be appropriate in some contexts. I would not 
     support a Constitutional right of immunity from punitive 
     damages (though that may well be an important improvement 
     over the current state of the law).
       What is needed for punitive damages reform is a prudential 
     judgment of the appropriate cap or limit to punitive damages 
     that will allow some room for punishing egregious behavior, 
     but constrain the deleterious effects of unlimited punitive 
     damages judgments on consumers and on the low-income. A 
     proportional limit of three times
      economic losses or $250,000 is a prudential judgment of that 
     nature. (Personally, I would support a lower figure absent 
     a definitive finding of malice.) But that prudential 
     judgment is a uniquely legislative, not judicial, 
     exercise.
       With respect to reform by the states, the question is 
     somewhat different. Punitive damages verdicts implicate both 
     interstate and foreign commerce in a manner that only the 
     federal Congress can address. Some have argued that a state 
     without a significant manufacturing or interstate service 
     sector could actually benefit its citizens by adopting an 
     expansive civil liability regime at the expense of citizens 
     of other states. Only the federal Congress can address this 
     issue.
       Secondly, there is one further effect of our modern damages 
     regime that should not go unnoticed in Congress: an effect on 
     the competitiveness of American manufacturers and producers. 
     Some have argued that large punitive damages verdicts in the 
     U.S. are neutral with respect to competitiveness since 
     foreign courts do not award such verdicts against U.S. 
     producers with respect to sales abroad and because foreign 
     producers are equally subject to such verdicts for sales in 
     the U.S. Thus, for U.S. sales, foreign producers, just like 
     U.S. producers, must add expected punitive damages and joint 
     and several liability verdicts into the prices of products 
     and services. (It is often lost on these observers that an 
     increase in prices on account of punitive damages--even if 
     operating neutrally--is not an affirmative argument on behalf 
     of consumers.)
       This analysis, however, is only partially correct. 
     Increasingly, foreign courts are refusing to enforce 
     extraordinary judgments from U.S. courts against foreign 
     defendants. For example, very recently the German Federal 
     Court of Justice (Germany's highest court for civil and 
     commercial matters) refused to enforce a $400,000 punitive 
     damages verdict obtained in an American court by an American 
     plaintiff against a German defendant on the
      grounds that the punitive damages verdict was inconsistent 
     with German public policy.\14\ In the same case, an 
     intermediate court had reduced the pain and suffering 
     damages component from $200,000 to $70,000 on the same 
     grounds.
       Foreign judgments of this nature should be alarming both to 
     Congress and to U.S. courts. First, they are strong evidence 
     that the current course of American law does not command wide 
     assent--itself another reason for Congress to enact general 
     punitive damages reform. Secondly, however, such judgments 
     suggest an increasing competitiveness problem facing U.S. 
     producers here in the U.S. To the extent that U.S. verdicts 
     must be enforced abroad, foreign producers need not add the 
     costs of the U.S. civil justice system, including punitive 
     damages and excessive pain and suffering awards, into the 
     prices of products and services sold in the U.S. Thus, 
     foreign producers can underprice U.S. producers in sales to 
     American consumers here in the U.S.
       Ironically, although U.S. producers and their employees are 
     harmed by this effect, U.S. consumers benefit because they 
     can obtain products and services at lower prices, without the 
     effects of our punitive damages verdicts built in. Put 
     slightly differently, the refusal of foreign courts to 
     enforce large punitive damages or pain and suffering awards 
     from U.S. courts represents a type of tort reform, 
     regrettably however, only available--prior to federal 
     punitive damages reform--to foreign, rather than to U.S., 
     producers.
       For these various reasons, I endorse punitive damages 
     reform. May I emphasize again the necessity of extending 
     reform to all civil litigation, state and federal, rather 
     than
      limiting it to products liability or some other subset, in 
     order to spread the benefits of reform most broadly.
       There are a wide range of punitive damages reforms that the 
     Senate might consider. Most important would be a 
     proportionality limit on available punitive damages. The 
     proposed limit of three times economic losses or $250,000 is 
     a reasonable first start, though strong arguments can be made 
     for lower limits or more rigorous standards requiring a 
     finding of actual malice before any exemplary damage award 
     can be made. It would also be helpful to provide for the 
     bifurcation of trial as between the compensatory and punitive 
     damages phase, in order that the often highly-inflammatory 
     evidence concerning defendant (most often, corporate) wealth 
     does not taint a jury's evaluation of the basic evidence with 
     respect to liability. It is also important to place limits on 
     or give credit to defendants facing multiple punitive damages 
     awards. The tragic modern experience in the asbestos 
     litigation demonstrates the problem. Here, because of 
     multiple punitive awards to sets of plaintiffs reaching court 
     first, many subsequent claimants have been unable to collect 
     basic compensatory damages of any amount.
       These comments address only current proposals. Again, I 
     have studied the reform of modern tort law for many years and 
     would be happy to respond to any questions concerning the 
     full range of modern tort law reform.
                               footnotes

     \1\See, e.g., Richard A. Posner, An Economic Approach to 
     Legal Procedure and Judicial Administration, 2 J. Legal Stud. 
     399 (1973); G.L. Priest, Selective Characteristics of 
     Litigation, 9 J. Legal Stud. 399 (1980).
     \2\G.L. Priest, Private Litigants and the Court Congestion 
     Problem, 69 B.U.L. Rev. 527, Table 1 at 540 (1989).
     \3\These data were collected under a research project 
     organized and directed by myself and Professor James R. 
     Barth, Auburn University for the case Gallant v. Prudential. 
     Publication is in process; the data are available from the 
     author.
     \4\This figure excludes wrongful death awards which are 
     denominated ``punitive'' in Alabama. If such awards were 
     included, the amount equals $109 million, equal to $26 per 
     capita.
     \5\For a discussion of the development of modern tort law, 
     G.L. Priest, The Invention of Enterprise Liability: A 
     Critical History of the Intellectual Foundations of Modern 
     Tort Law, 14 J. Legal Stud, 461 (1985).
     \6\Richard A. Posner, Economic Analysis of Law (4th ed., 
     1992).
     \7\Of course, this is also a justification for the class 
     action.
     \8\I have written widely on the subject of appropriate pain 
     and suffering awards, and would strongly endorse limits on 
     pain and suffering, though this issue is somewhat beyond the 
     focus on punitive damages here. See, e.g., G.L. Priest, The 
     Current Insurance Crisis and Modern Tort Law, 96 Yale L.J. 
     1521 (1987).
     \9\Pacific Mutual Life Insurance Co. v. Haslip, 111 S.Ct. 
     1032 (1991).
     \10\Testimony of Professor James R. Barth, Auburn University.
     \11\Gallant v. Prudential, Barbour County, Alabama, Trial 
     Transcript at 647, April 6, 1994.
     \12\See, e.g., Pacific Mutual Life Insurance Co. v. Haslip, 
     111 S.Ct. 1932 (1991); TXO Production Corp. v. Alliance 
     Resources Corp., 113 S.Ct. 2711 (1993), Honda Motor Co. v. 
     Oberg, 114 S.Ct. 2331 (1994).
     \13\Pacific Mutual Life Insurance Co v. Haslip,. 111 S.Ct. 
     1032 (1991).
     \14\Judgment of June 4, 1992, BGH Gr. Sen. Z., discussed in 
     G.L. Priest, Lawyers, Liability and Law Reform: Effects on 
     American Economic Growth and Trade Competitiveness, 71 U. 
     Denver L. Rev. 115 at 146-47 (1993).
    McConnell Amendment to H.R. 956, Product Liability Fairness Act

  Mr. HATCH. Mr. President, there is a subtle implication in this whole 
debate on the McConnell amendment--an amendment which I strongly 
support--that somehow health care providers are a bunch of greedy so 
and so's, motivated solely by dreams of maximizing profit.
  If they ask for relief from liability, it must be because they want 
to escape responsibility, to make a quick buck, not because it would 
make our health care delivery system better.
  What is ironic is that this body has spent countless hours over the 
past 2 years debating proposals on health care reform, all of which 
were based on a system which places the utmost trust in the health care 
professional, whether it be a doctor, a nurse, a chiropractor, or a lab 
technician.
  In fact, we spent countless hours here in this very Chamber, debating 
how to improve our health care delivery system. We spent 54 days in the 
Labor and Human Resources Committee--46 days in hearings and 8 days in 
markup--and 40 days in the Finance Committee--36 days in hearings, and 
4 days in markup. And that does not even count the countless hours of 
work outside the committee and on the floor.
  There was no disagreement over the need for medical liability reform. 
Indeed, the Clinton proposal, the Labor 
[[Page S5885]] Committee bill, the Finance Committee bill, the ensuing 
Mitchell bill--all contained medical liability provisions, as I will 
discuss later. The only question was over what those proposals should 
be.
  When we get sick, who do we see? A doctor, a nurse practitioner, or 
another health care professional. Not an attorney.
  When our children get sick, who do they see? A pediatrician, a 
physician assistant, or another health care provider. Not an attorney.
  Our entire medical system--which everyone knows is heralded as the 
best in the world--is based on a total reliance on the abilities of the 
health care professionals who treat us, professionals who have 
scarified immeasurably to get the requisite training and credentialing. 
These are professionals who spend long and hard hours in school and at 
work to make our system the best in the world.
  Will there be mistakes?
  Of course there will. After all, we are only human. And while we must 
drive for perfection, that by definition cannot be.
  My heart goes out to each and every person who has suffered an 
adverse medical event, whether it were caused by the delivery system or 
not.
  I wish we could have a perfect health care delivery system, where 
everyone was healthy and no one ever was ill or suffering.
  I wish this could be a perfect world in which children never suffered 
adverse reactions from the very vaccines designed to protect them.
  I wish this could be a perfect world in which a surgeon never removed 
the wrong eye, or the wrong kidney. But it is not a perfect world, nor 
can it ever be.
  I was a trial attorney before I came to the Congress.
  I saw heart-wrenching cases in which mistakes were made. I saw heart-
wrenching cases in which mistakes were not made, and doctors were 
forced to expend valuable time and resources defending themselves 
against frivolous lawsuits.
  I have litigated these cases, both as an attorney for the plaintiff 
and as an attorney for the defendant.
  No one in this body knows better than I--perhaps with the exception 
of our colleague from Tennessee, Senator Frist--what the defects are in 
this system.
  Mr. President, there are over 260 million people in these United 
States. I wish we could design a system which would protect each and 
every one of them from harm, but that is not possible. Our job is to 
design the best system we can.
  Several of our colleagues came to the floor last week and gave very 
heart-felt statements, citing specific cases in which patients had not 
had the outcome we all would have liked.
  I pray that these cases could have turned out for the better. I 
fervently wish that such problems never occur again.
  But in a country as large and as diverse as this one, problems are 
inevitable. The task before us is to make sure the system
 minimizes those problems.

  I ask my colleagues: ``Do we have the best system possible?''
  I do not believe any one in this Chamber would argue that is so.
  Thus, the question before is how to design a system which protects 
both the patient and the provider. I do not believe that a protracted 
war between trial attorneys and health care professionals is the way to 
accomplish that goal.
  My experience indicates that the best way for us to pass solid 
legislation which really solves a problem is for both sides to come 
together and negotiate a solution. Unfortunately, that has not been the 
case to date. And I think our debate, and indeed our country, has 
suffered because of this.
  Nevertheless, the intransigence of one or more parties is no reason 
that we should cast aside consideration of one of the most important 
issues that has faced this body since I came to the Senate.
  Indeed, I first introduced a medical liability bill in this body in 
1978. Many of the approaches embodied in my legislation are also 
contained in the McConnell-Kassebaum amendment before us today.


               the need for health care liability reform

  What are the problems which give rise to the need for the McConnell 
amendment? Let me list them for my colleagues:
  First, medical liability costs are out of control. A significant 
portion of our gross domestic product is devoted to tort costs, of 
which medical torts are a large part. This number is growing.
  As our distinguished House colleague, Representative Dave McIntosh, 
noted in an April 1994 ``Hudson Briefing Paper,'' the United States has 
the most expensive tort system in the world, with direct tort liability 
costs of 2.3 percent of the gross domestic product. Our colleague went 
on to note that whereas U.S. economic output grew 100 percent between 
1933 and 1991, tort costs grew almost 400 percent. In other words, over 
the past 58 years, tort costs have grown almost four times faster than 
the U.S. economy.
  In that briefing paper, which I commend to my colleagues, Mr. 
McIntosh found that 7 percent of America's tort costs--$9.1 billion--
are associated with medical malpractice claims. As Senator McConnell, 
the author of this amendment, said last Thursday, according to the AMA 
physician masterfile and other AMA liability data, the average rate of 
claims has increased every year since 1987. In fact, as Senator 
McConnell noted, the AMA data show that in 1992, 33,424 medical 
professional liability claims were filed. The next year, 1993, 38,430 
claims were filed, a 28-percent jump from one year to the next.
  Second, liability insurance costs are having a direct impact on 
health care spending. Professional liability insurance rates are rising 
in response to our runaway tort system. The estimated annual cost of 
liability insurance for physicians and health care facilities, for 
example, was calculated at more than $9 billion in 1992, and it 
continues to grow.
  We have all heard the statistics cited in our debate on the amendment 
by our distinguished colleague from Wyoming, Senator Thomas.
  The costs of ob-gyn malpractice claims in particular are having a 
very serious impact on both professional liability costs and the 
patient's bill. Statistics from the American College of Obstetricians 
and Gynecologists show that one out of eight ob-gyn's has dropped 
obstetrical practice due to liability concerns. A 1990 OTA report 
indicated that more than half a million rural residents are without any 
ob services at all, a number which has undoubtedly grown since the 
report was issued.
  Third, health care liability costs raise the costs of health care. 
The explosion in medical liability claims diverts resources which could 
be used for patient care, and it raises the per patient cost of health 
care.
  As Federation of American Health Systems President Tom Scully noted 
at a March 28 Labor Committee hearing, the total yearly cost of medical 
liability insurance is $9.2 billion. He went on to relate that that, 
added to Lewin-VHI estimates of defensive medicine, as I will discuss 
in a minute, plus the liability costs borne by manufacturers of drugs 
and devices--$10.8 billion a year--could total up to $45 billion a 
year. And that does not even include settlements. Clearly, even if 
these estimates are off a bit, we are talking about a substantial sum 
involved in the cases.
  Fourth, defensive medicine contributes to increased health care 
spending. Health care professionals, fearing lawsuits, perform more 
services and order more tests than they would otherwise would.
  I know about that. As a former medical malpractice lawyer, one of the 
bits of advice I would give to doctors was you cannot afford to not 
list every possibility in your health history. You cannot afford to not 
try everything you possibly can to make sure that that simple cold is 
not a respiratory disease, blood disorder or any number of other 
things. You have to make sure of your history because no longer can you 
get by just meeting the standard of practice in the community. You 
better be way above and beyond that. And in the process, the cost of 
health care has gone up exponentially because doctors must now protect 
themselves, against medical liability cases, and I cannot blame them. 
The only way to stop it is to get some reason into the system.
  [[Page S5886]] This issue has been one of the more hotly contested in 
the medical liability debate.
  In fact, a few years ago, Ways and means Chairman Bill Archer and I 
asked the Office of Technology Assessment to conduct a study on 
defensive medicine. The results embodied in a July 1994 report were not 
as conclusive as we would have liked. As OTA admitted, ``Accurate 
measurement of the extent of this phenomenon (defensive medicine) is 
virtually impossible.''
  However, Lewin-VHI, one of the leading analysts in the whole field, 
has estimated that the combined cost of hospitals' and physicians' 
defensive practices was $25 billion in 1991, and that study was based 
on what was considered to be a very conservative definition of 
``defensive.''
  In fact, the Hudson Institute Competitiveness Center study I cited 
earlier found that liability premiums and defensive medical practices 
contributed $450 per patient admitted to a large urban hospital in 
Indiana, an average of 5.3 percent of the patient's hospital bill. Of 
that amount, $327 went for defensive medicine practices, and $123 went 
for insurance and administrative costs.
  But, Mr. President, I do not believe you need the results of a study 
to realize that there is defensive medicine and that it costs a lot of 
money.
  I have a very simple gauge. Ask your doctor or other health care 
professional the next time you have an office visit. They will confirm: 
defensive medicine is real.
  In fact, you do not have to even wait for your next visit. Ask our 
colleague from Tennessee, Senator Frist. In a very compelling statement 
before this body last week, he said:

       As a physician, I have seen first-hand on a daily basis the 
     threat of litigation and what it has done to American 
     medicine.
       I have watched my medical colleagues order diagnostic tests 
     that were costly and unnecessary to the diagnosis or to the 
     care of the patient, and they are ordered for one purpose: To 
     create a trail--in many cases a paper trail--to protect them 
     in the event a lawsuit were ever to be filed.
       It is called defensive medicine and it happens every day in 
     every hospital in America. It alters the way medicine is 
     practiced, and it is wasteful.

  He could not have said it better. In fact, some scholars and leaders 
say that if the American Medical Association admits to $25 to $30 
billion a year in defensive medicine, can you imagine how really high 
it must be? We have to get a handle on this.
  Fifth, a significant portion of these tort awards never make it to 
the plaintiff. Despite all these tremendous litigation costs, the 
beneficiaries seem to be lawyers, not patients.
  Lawyers should be compensated and they should be fairly and 
reasonably compensated. But studies have shown anywhere from 28 to 43 
percent of every dollar spent on liability litigation ever reaches 
patients. That is a strong indication that our liability system has 
been turned squarely on its head.
  There are lawyers in some States who set up separate corporations to 
provide for documentary evidence or exhibits or designs and pictures 
and other matters. Sometimes total costs taken out of these suits can 
go as high as 60 percent of the money before any of it ever reaches the 
patient. Now, I think that is outrageous in some of these States. But I 
am aware of some of these things that go on. These lawyers are just 
making a killing off some of these cases. I will never deny or begrudge 
any lawyer the right to make a fair compensation for what happens to be 
a very difficult and skillful trial or even a case. But there are 
limits to everything, and that is why this bill is providing some 
additional limits that would help all of us to save and conserve on 
medical costs.
  Sixth, the liability crisis has limited the public's access to, and 
confidence in, health care. An Insurance Information Institute report 
in May of last year cited that a 1992 survey of obstetricians and 
gynecologists showed that 80 percent has been sued. Is it likely that 
80 percent of obstetricians and gynecologists are committing 
malpractice? I do not think so.
  The results of this are obvious. A survey conducted by the American 
College of Obstetricians and Gynecologists showed that one out of eight 
physicians specializing in pregnancy-related services stopped 
delivering babies because of liability concerns, and, I might add, the 
cost of malpractice insurance.
  A New York Times article from July of 1993 said that as many as 17 
percent of obstetricians and 70 percent of family practitioners who 
once delivered babies in New York no longer do so.
  I ask my colleagues, is the goal of access to care helped by a system 
that drives providers out of certain areas or types of practice?
  I ask my colleagues, does a system which creates these disincentives 
to patient care instill public confidence in providers?
  In each case, I think the answer is a resounding ``no.'' Senators 
McConnell and Kassebaum have provided us with a solution.
  The vulnerability of both health care payers and health care 
providers to claims arising from the liability morass is not an 
abstract proposition.
  According to Lewin-VHI, comprehensive medical liability reform would 
save $4.5 billion in year one, and an estimated $35.8 billion over 5 
years, by curbing both the costs of premiums and of defensive medical 
practices.
  The McConnell amendment, modeled after the Health Care Liability 
Reform and Quality Assurance Act of 1995 (S. 454), which I strongly 
support, would instill a much needed measure of stability into our 
legal lottery and benefit both patient and provider. How?
  Statute of limitations: First, the proposal includes a 2-year statute 
of limitations for health care liability actions. A claim must be filed 
within 2 years of the date on which the claimant discovered or, in the 
exercise of reasonable care, should have discovered the injury and its 
cause. This is similar to a provision contained in S. 672, 
my Civil Justice Fairness Act.
  It is also similar to the law in Utah, which provides for a 2-year 
statute of limitations, with a 4-year maximum.
  Punitive damages reform: Second, the McConnell amendment sets 
standards for punitive damages awards. In order for a claimant to 
receive such damages, he or she must prove by clear and convincing 
evidence that:
  The defendant intended to injure the claimant for a reason unrelated 
to health care;
  The defendant understood the claimant was substantially certain to 
suffer unnecessary injury and yet still deliberately failed to avoid 
such injury; or
  The defendant acted with a conscious, flagrant disregard of a 
substantial and unjustifiable risk of unnecessary injury, which the 
defendant failed to avoid in a manner which constitutes a gross 
deviation from the normal standard of conduct.
  Further, the amendment precludes punitive damages awards only if 
compensatory damages are more than nominal.
  One of the strong points of the amendment is that it sets up 
standards for punitive damages. Any defendant may request separate 
proceedings on either punitive damages liability or the amount of the 
award. There is a proportionality requirement, so that no award will 
exceed three times the amount awarded for economic damages or $250,000, 
whichever is greater.
  Finally, there is an important safeguard contained in the McConnell 
amendment, so that it is made clear the language does not imply a right 
to seek punitive damages if none currently exists under Federal or 
State law.
  Again, this language is very similar to the language in my bill S. 
672.
  Periodic payments: Under the McConnell amendment, periodic payment of 
future damages can be made at the request of either party if the award 
exceeds $100,000. This is an important provision which ensures that the 
injured party will receive more of the award, and the attorney less. It 
also makes it easier for insurers to judge their appropriate reserves.
  This provision was also contained in my Civil Justice Fairness Act. I 
would note that in Utah law, periodic payments for awards of over 
$100,000 are mandatory.
  Limits on attorney fees: The amendment before us limits attorney fees 
to 33\1/3\ percent of the first $150,000, based on after tax-recovery, 
and 25 percent of any amount in excess of $150,000. Although my bill 
this year addresses attorney fees from a different perspective, I would 
note that last year the 
[[Page S5887]] Labor and Human Resources Committee adopted an amendment 
I offered to cap attorney's fees at 25 percent across the board.
  I have to say, I am concerned about any limitation on attorney's 
fees, but there have been some colossal rip-offs in this area and this 
appears to be a reasonable approach in the McConnell-Kassebaum 
amendment.
  Finally, I want to mention two other important provisions in the 
McConnell-Kassebaum amendment.
  Alternative dispute resolution [ADR] mechanisms: I have long felt 
that our fault-based liability system may not be the most equitable or 
the most efficient. It is expensive, time consuming, and unpredictable.
  The McConnell-Kassebaum bill encourages States to establish or 
maintain alternative dispute resolution systems. It also requires the 
Attorney General, in consultation with the Administrative Conference of 
the United States, to develop guidelines for State ADR procedures, 
including:
  Arbitration; mediation; early neutral evaluation; early offer and 
recovery mechanisms; certificate of merit; and no-fault.
  Further, the provision authorizes the Attorney General to provide 
States with technical assistance in establishing and maintaining such 
ADR systems. The AG is required to monitor and evaluate the 
effectiveness of these systems.
  I believe that these provisions will be very helpful in encouraging 
alternatives to our current system. However, I am concerned that the 
language does not go far enough in encouraging the development of such 
systems.
  For example, at least two States, Colorado and Utah, are developing 
no-fault liability systems. No-fault may hold great promise in 
rectifying many of the problems with a fault-based system, such as its 
unpredictability and cost, but we are far from designing a system which 
will work perfectly.
  Later in this debate, I plan to offer an amendment authorizing the 
Attorney General to assist States to help develop the ADR programs 
which are authorized in the McConnell amendment.
  On measures to improve quality; when I began this statement, I talked 
about efforts to improve our health care delivery system, and, in 
particular, the quality of care that patients receive.
  There are myriad safeguards in our system to ensure that we strive 
for quality care.
  Physicians are credentialed by the hospitals at which they practice 
to ensure that the medical staff both has the appropriate training, 
experience, insurance coverage, and is utilizing their skills 
appropriately. Peer review protects against problems with patient care 
as do the many activities of local and State medical societies.
  All U.S. medical schools are accredited by one of three organizations 
sponsored and supported by the American Medical Association. In 
addition, all medical school graduates must pass the U.S. Medical 
Licensing Examination and almost all voluntarily choose to become board 
certified.
  The Joint Commission on the Accreditation of Healthcare Organizations 
[JCAHO] accredits most of the hospitals in the United States. Hospital 
insurors monitor the care at the facilities they cover as well.
  Finally, I would also note that according to statistics provided to 
me by the Federation of State Medical Boards, State medical board 
authorities disciplined 3,685 physicians in 1994, representing an 11.8-
percent increase over the previous year. Almost 86 percent of those 
actions involved loss of license or some restriction of license.
  By the way, I want to recognize that the States are also moving to 
improve health care quality.
  In my own State of Utah, the legislature in January of this year 
enacted the second phase of Governor Leavitt's HealthPrint health 
reform program.
  The act established a 2-year demonstration program to promote and 
monitor quality health care. Specifically, the law requires that the 
project include a collaborative public-private effort to promote 
clinical quality and cost effectiveness through community-wide 
continuous quality improvement methods. It also requires a process for 
evaluating the effectiveness of health care continuous quality 
improvement in the State of Utah.
  Some have alleged that this system is not tight enough to guard 
against problem practitioners.
  That may be the case. For example, there is an impediment to 
physicians self-regulating themselves which is posed by our antitrust 
laws; that obstacle is something Chairman Archer and I attempted to 
address in our antitrust legislation last year. It is an issue I intend 
to pursue again this year.
  But, obviously, out antitrust laws are not the entire answer.
  The McConnell-Kassebaum amendment provides additional resources for 
State health care quality assurance and access activities. One-half of 
all punitive damage awards will be used for licensing, investigating, 
disciplining, and certifying health care professionals in a State or 
for reducing the malpractice-related costs for health care volunteers 
in medically underserved areas.
  This is a common sense provision, and one which I believe should be 
adopted.


                         biomaterials liability

  A very important provision contained in Senator McConnell's original 
medical liability bill, S. 454, is not contained in this amendment as 
it is contained in the underlying Gorton substitute product liability 
bill. I am referring to the biomaterials liability legislation 
sponsored by my colleagues from Arizona, Senator McCain and from 
Connecticut, Senator Lieberman.
  I am very supportive of this legislation. There is a real need for 
the Congress to take action to relieve raw materials suppliers from 
liability in finished medical products.
  Last month, I received a letter from Dr. Don B. Olsen, director of 
the University of Utah Artificial Heart Laboratory. He cited a 
situation which points out precisely why the McCain-Lieberman language 
is needed.
  In his letter to me, Dr. Olsen said:

       Perhaps you were informed about the recent patient at LDS 
     Hospital who is on one of our devices awaiting cardiac 
     transplantation. The patient is doing very well, after having 
     been bed-ridden for about 11 days awaiting a heart 
     transplant. ``As his health continued to deteriorate, he 
     received an intraaortic balloon pump (manufactured from one 
     of the polymers now pulled off the market) and this device 
     was inadequate to support his failing heart. Dr. Long, Dr. 
     Doty and myself then elected to replace his heart with the 
     CardioWest pneumatic artificial heart developed at the 
     University of Utah.

  CardioWest is a not-for-profit corporation that has 42 of their 
pneumatically powered artificial hearts implanted in patients as a 
bridge to cardiac transplantation.
  The problem is that large polymer manufacturers, who make the raw 
materials needed to produce the artificial heart, have stopped 
marketing the polymers due to liability concerns.
  A large device manufacturer, facing similar liability concerns, has 
set up its own polymer plant to produce the materials needed for its 
own devices. They are working with the university in an attempt to 
reach an agreement to provide the polymers for the artificial heart. 
However, they are understandably reluctant to provide the materials 
without some liability protection. There again the liability problem 
has reared its head.
  Here we have a renowned university designing literally lifesaving 
products which cannot be used because of liability concerns. This is a 
travesty.
  The McCain-Lieberman language is needed to obviate such problems. 
Enactment of it cannot come to quickly.


                       health care reform redux?

  In closing, Mr. President, I want to outline for my colleagues the 
road we have traveled in the past 2 years.
  When the President and Mrs. Clinton transmitted their Health Security 
Act to Congress, they acknowledged that we do have a health care 
liability problem in this country.
  The Clinton bill, while it did not contain caps on damages,
   contains provisions on collateral source reform, periodic payment of 
future damages, limits on attorneys' fees, and alternative dispute 
resolution mechanisms.

  In the Labor Committee, we adopted provisions on collateral source 
reform, periodic payment of future damages, limits on attorneys' fees, 
and grants for alternative dispute resolution mechanisms, including no-
fault.
  Subsequently, in the Finance Committee, we adopted a measure which 
[[Page S5888]] contained a $250,000 cap on noneconomic damages indexed 
to inflation, joint and several liability reform, use of punitive 
damage awards for quality improvement, limits on attorneys' fees, 
mandatory ADR, and grants for no-fault demonstration programs.
  Obviously, none of these measures included all of the provisions of 
the Mcconnell proposal; at the same time, it is obvious that much of 
the ground we have covered in the past 2 weeks we have covered before, 
in that many of these provisions been advocated, indeed endorsed, by 
significant parties in our past health care reform debate.


                               conclusion

  Mr. President, what we are talking about here is improving our health 
care delivery system, by ending the legal lottery which threaten both 
patients and providers.
  Some in this body have expressed opposition to the very fundamental 
changes espoused by my colleague from Kentucky and Kansas.
  What I find ironic is that when the shoe is on the other foot, that 
is, the Government is the deep pocket not a practitioner, this body can 
move quickly to enact tort reforms far more radical than those we are 
discussing today.
  I am referring to the 1992 amendments to the Federal Tort Claims 
Act--FTCA--amendments I supported, indeed helped pass--which relieved 
Community health centers from burdensome malpractice premiums.
  In placing community health centers under the FTCA, Congress endorsed 
prohibiting punitive damages, allowing liability to be determined by a 
judge, not a jury, and capping contingency fees at 25 percent of a 
litigated claim or 20 percent of a settlement.
  And, while we are on the subject of community health centers--a 
program I support fervently and which I hope can be expanded to help 
address the uninsured problem--I might mention another irony.
  Many have stood in this Chamber and cited the statistic that 
malpractice claims only amount to 1 percent of our total health care 
bill.
  With a national health care bill approaching almost $1 trillion, 1 
percent amounts to almost $10 billion.
  Think how we could expand access to health care by using those 
billions of dollars for a program so much more productive than 
litigation.
  With current funding of $757 million, community, migrant and homeless 
centers provide care to almost 9 million people in 2,200 communities. 
They estimate that, incrementally, each additional $10 million they are 
provided would extend services to 100,000 people in 30-40 new 
communities.
  Reforming our medical liability system and using those savings in 
community health centers would truly be health care reform in the first 
order of magnitude.
  In closing, I wish to commend Senator McConnell, Senator Kassebaum, 
and Senator Lieberman for their efforts on this important topic.
  I intend to continue working with them closely on this issue, as it 
is extremely important to health care in America.
                 Amendment No. 613 to Amendment No. 603

     (Purpose: To permit the Attorney General to award grants for 
 establishing or maintaining alternative dispute resolution mechanisms)

  Mr. HATCH. Mr. President, I ask unanimous consent that the pending 
amendment be temporarily set aside, and I send an amendment to the desk 
and ask for its immediate consideration.
  The PRESIDING OFFICER. Without objection, the pending amendment is 
set aside.
  The clerk will report.
  The legislative clerk read as follows:

       The Senator from Utah [Mr. Hatch] proposes an amendment 
     numbered 613 to amendment No. 603.

  Mr. HATCH. 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:

       In section    20(d)(1), strike ``with technical 
     assistance'' and insert ``with grants or other technical 
     assistance''.

  Mr. HATCH. Mr. President, one thing is clear from our debate over the 
past week.
  While there are both proponents and opponents of the medical 
liability amendment before us, we all agree that the system is not 
perfect.
  Specifically, many commentators have criticized our current liability 
system as compensating very few of those entitled to recovery and 
punishing the wrong providers.
  And most of the money spent on liability goes to lawyers.
  By a RAND estimate, 57 cents of every liability dollar goes to 
lawyers, leaving only 43 cents for injured patients.
  Injured patients can wait years for a final judgment and eventual 
payment of the small percentage of their awards left to them by the 
lawyers and the system.
  And doctors can have their reputations destroyed or lose their 
livelihood by a single lawsuit or even mere insurance costs. The 
results of tort litigation, particularly in jury cases, is so 
unpredictable that it has been called the liability lottery.
  There must be a better way of compensating injured patients and 
punishing bad doctors without wasting so much time, money, and effort 
while getting such unpredictable and inconsistent results. There must 
be a more rational and efficient liability system.
  As with so many things, innovative ideas are coming from the States. 
And, I believe, many more interesting new ideas can be developed in the 
States if we will allow them to experiment.
  One idea, which some in Utah, and in other States like Colorado, have 
been investigating is the development of innovative no-fault medical 
liability systems. A no-fault system could compensate more injured 
patients more quickly than the litigation system.
  It could be more effective at punishing those providers who do act 
culpably. It may be that a no-fault system could be not only more 
equitable, but more inexpensive.
  Researchers at Harvard University, who have been working in this for 
years and who are working with those in Utah and Colorado suggest that 
these systems hold substantial promise on all these fronts.
  But we need more experience with different alternative dispute 
resolution systems, such as no-fault, before we can be sure.
  There are many other approaches being tried in various parts of the 
country that might help make the system more rational. In the last few 
years we have heard about innovative dispute resolution systems that 
encourage quick and fair settlements like early intervention and early 
offer models.
  Practice guidelines and enterprise liability are also options that 
should be watched and studied to see if they will yield helpful results 
elsewhere.
  Enhancing the evidentiary status of clinical practice guidelines 
could help the tort system move to judgment more quickly and 
efficiently, with more uniform results. And practice guidelines could 
also be an interesting method of developing more uniform standards of 
medical practice.
  There are many forms of each of these approaches, and I think we can 
learn much from experimenting with various approaches in the States. I 
believe we should encourage the States and entities in the States to 
experiment so that we can see what approaches are most likely to lead 
to a more fair and efficient liability system.
  The amendment I am offering to the McConnell-Kassebaum provision on 
medical liability is very simple.
  In section 20, State-Based Alternative Dispute Resolution Mechanisms, 
the current language in subsection (d) authorizes the Attorney General 
to provide States with technical assistance in establishing or 
maintaining alternative dispute resolution mechanisms.
  My amendment would expand that slightly, so that the Attorney General 
may provide grants or technical assistance to States in establishing or 
maintaining alternative dispute resolution systems.
  The only change is the addition of the words ``grants or'', and I 
note that this would be entirely permissive.
  While minor, it is an important change, because it will allow States, 
or their designees, to work on ADR alternatives, without time-consuming 
work which is potentially duplicative at the Federal level.
  [[Page S5889]] I hope this amendment can be adopted.
  Mr. WELLSTONE addressed the Chair.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. WELLSTONE. Mr. President, I know my colleague from Illinois is 
shortly going to introduce an amendment that I will support, which 
gives States the right to opt out. I am in profound disagreement with 
this Federal preemption. I think I will respond to my colleague from 
Utah just with a somewhat different perspective for the record, if you 
will, Mr. President.
  Mr. President, I remember last year during the health care debate 
when we had talked about the cost of medical malpractice premiums that 
both the Congressional Budget Office--I did not say Democrat or 
Republican--and the Office of Technology Assessment, which gets high 
remarks for its very rigorous work--indicated that the medical 
malpractice premiums account for less than 1 percent of the overall 
health care costs. A trillion-dollar industry, less than 1 percent.
  As I remember, there were some other reports that said even if you 
were to take into account defensive medicine, altogether it was 2 
percent of the total cost. By the same token, Mr. President, when the 
Congressional Budget Office, for example, and the General Accounting 
Office scored a single payer bill, where there was one single payer at 
each State level, as I remember, the estimates were that we could save 
up to $100 billion a year. But that challenged the power of the 
insurance industry. My understanding, Mr. President, is that medical 
malpractice insurance is the single most important profitable line of 
property casualty insurance and generated $1.4 billion in profit in 
1992.
  So we do not talk about insurance reform, record profits being made; 
we do not talk about how to really contain costs. The Congressional 
Budget Office also said, Mr. President, that the best single way of 
containing health care costs would be to put some limit on what 
insurance companies can charge. We do not do that at all. We go the 
path of least political resistance. Those folks have entirely too much 
economic and political power. We dare not confront them.
  But, Mr. President, instead, we are going to go after those people 
who have been hurt, those people who have been injured, that have lost 
loved ones and take away some of their protection and take away some of 
their rights to seek redress of grievance.
  Mr. President, I am going to go back to an example--I am sorry my 
colleague is not on the floor right now. I have a practice of not 
debating colleagues directly if they are not here. I do not think there 
is a standard of fairness to that. So I will be more general.
  Let me raise the question about these caps on punitive damages. For 
example, I think my colleague wants caps across the board, as I 
understand it. Let me put a face on this question. Think of Lee Ann 
Gryc from my State of Minnesota who was 4 years old when the pajamas 
she was wearing ignited, leaving her with second- and third-degree 
burns over 20 percent of her body. An official with the company that 
made the pajamas had written a memo 14 years earlier stating that 
because the material they used was so flammable, the company was 
``sitting on a powder keg.'' When Lee Ann sued for damages, the jury 
awarded $8,500 in economic damages and $1 million in punitive damages. 
By the way, children--earlier we were talking about this in debate, and 
one of my colleagues was making projections for economic damages for 
children--children do not get much by way of economic damages.
  Let me ask you, Mr. President, as I cannot ask my colleague, was the 
jury wrong? Should the company have gotten away with a cap of $250,000 
in punitive damages, as this bill would require? Unless you are 
comfortable answering the question yes, unless you are willing to say 
that Lee Ann Gryc was entitled to no more than $250,000 in punitive 
damages, when the company knew that the pajamas were flammable, then 
you should not be supporting this bill.
  This legislation is going to have a very negative effect on 
consumers. I think it is unconscionable.
  Now, Mr. President, I do not get a chance to ask the question, but I 
get a chance to present another perspective on the floor of the Senate 
right now in response to my colleague. The question I would raise is--I 
do not think my colleagues have an answer to this question--No. 1, if 
we have this cap on punitive damages, what is the projection on how 
many citizens are going to be denied, how much by way of compensation, 
over the years to come? And No. 2, what implications does this have 
toward weakening the deterrent effect?
  Like it or not, Mr. President, the company that made those pajamas 
had a memo written 14 years earlier stating that it was sitting on a 
powder keg. But for this company the bottom line was the only line. 
Unfortunately, there are some companies like that--thank God, not too 
many. For those companies that produced these pajamas that are 
flammable that burn children, or products that injure or kill people, 
one of the ways we know they will not do it again is when they are 
slapped with such a stringent punitive damages suit that they know they 
cannot do it again. What is the effect of taking away that deterrent? 
What is the projection on how many innocent people are going to be 
injured, maimed, or killed by defective products in the foreseeable 
future? Give me near-term figures. Give me middle-term figures. Give me 
long-term figures.
  Mr. President, what we have before us is an agenda that is an 
extreme. First of all, there is this agenda to, on the one hand, weaken 
some of the agencies which have as their mandate to protect the health 
and safety of consumers in this country. Then, on top of that, we try 
and take away from citizens their right to receive fair compensation.
  I might add, when it comes to the cap on punitive damages, I think we 
essentially severely undercut the deterrent effect of this. That is why 
they are there. I mean, you have the economic and noneconomic damages 
to make the victim whole. In addition, you have punitive damages to say 
to a company: By God, you need to understand this is so egregious in 
what has been done that you really are slapped with a major damage 
which will prevent you from ever, ever doing this again and will 
prevent other companies from doing this again.
  That is what we are attempting to overturn. That is what is so 
dangerous, no pun intended, for consumers in this country.
  Mr. President, again, No. 1, for Lee Ann Gryc from the State of 
Minnesota, 4 years old when the pajamas she was wearing were ignited, 
leaving her with second- and third-degree burns over 20 percent of her 
body. Is $250,000 too much? Is any Senator willing to say it was too 
much? I do not think so.
  Then my colleagues say, we cannot leave it up to a jury to decide. 
They are too swayed by emotion. The juries are the citizens that elect 
Senators.
  Then, in addition, when my State of Minnesota decides that a cap on 
noneconomic damages did not work, we may not have any choice in the 
matter because we have legislation that preempts States. Whatever 
happened to decentralization? Whatever happened to the idea of States 
making some of these decisions?
  Finally, Mr. President, again, on the medical malpractice part, I can 
simply say that I am not aware of any independent study done by CBO or 
Office of Technology Assessment since last year that went through the 
whole question of a $1 trillion industry, that went through medical 
costs, went through an analysis of health care costs.
  What CBO and OTA said is 1 percent--medical malpractice premiums 
account for less than 1 percent of overall health care costs. Medical 
malpractice premiums account for less than 1 percent; adding defensive 
medicine, maybe 2 percent. Those are my figures as I remember.
  When, in the name of controlling health care costs, are we going to 
pass a piece of legislation which is profoundly anticonsumer, which 
tips the scales of justice away from people who were seeking redress of 
grievance in behalf of negligent companies or negligent doctors? It is 
just outrageous. We take away from people some of the basic legal 
rights they have, some of the basic consumer protection they count on.
  On the other hand, I would say to my colleagues, if we want to 
control health 
[[Page S5890]] care costs, great, I will give my colleagues an 
opportunity. Sometime I hope to bring an amendment on the floor that 
talks about putting a limit on insurance company premiums. Then we will 
see whether or not we are interested in controlling health care costs. 
According to the Congressional Budget Office, that is the way to 
control health care costs.
  And I will say to my colleagues, if my colleagues are interested in 
having more health care in rural or urban communities, I am extremely 
interested in how we encourage more family doctors, nurse 
practitioners, and how we deliver health care in a humane, affordable 
way in underserved communities. But do not use these medical 
malpractice amendments as a reason to do that. We do not have to take 
away from citizens in this country protection when it comes to their 
health and safety. We do not have to take away from them their rights 
in the court system in order to make sure that we provide dignified, 
affordable health care. That is not a choice.
  Mr. President, I hope on both the underlying product liability, and 
much less, some of these medical malpractice amendments--ones with 
caps--that colleagues will vote no. I yield the floor.
  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. SIMON. 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. SIMON. Mr. President, I ask unanimous consent that amendment No. 
613 be laid aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                 Amendment No. 614 to Amendment No. 603

           (Purpose: To clarify the preemption of State laws)

  Mr. SIMON. Mr. President, I send an amendment to the desk and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Illinois [Mr. Simon], for himself and Mr. 
     Wellstone, proposes an amendment numbered 614 to amendment 
     No. 603.

  Mr. SIMON. 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 appropriate place insert the following:

     SECTION   . STATE OPTION.

       (a) A provision of this subtitle shall not apply to 
     disputes between citizens of the same State if such State 
     enacts a statute--
       (1) citing the authority of this section; and
       (2) declaring the election of such State that such 
     provision shall not apply to such disputes.
       (b) If a dispute arises between citizens of two States that 
     have elected not to apply a particular provision, ordinary 
     choice of law principles shall apply.
       (c) For purposes of this section, a corporation shall be 
     deemed a citizen of its State of incorporation and of its 
     principal place of business.

  Mr. SIMON. Mr. President, this is word-for-word the amendment that 
the Presiding Officer offered in our Labor and Human Resources 
Committee, a very thoughtful amendment, which says we will permit the 
Federal Government to establish these standards, and if there is a 
litigation between a citizen of one State and a physician or hospital 
from another State, or whatever the circumstances may be, then these 
Federal standards apply. But if a State wishes to differ from this, a 
State can do that. That is all this amendment does. It was carried, as 
the Presiding Officer will recall, in a bipartisan vote in the Labor 
and Human Resources Committee. I hope it can pass in a bipartisan vote 
here.
  I have some concerns about the basic product liability bill, but 
there can be a very cogent argument made for it, because if a 
manufacturer in Illinois or Michigan, or in some other State, 
manufactures a product, that goes interstate. So having some national 
standards makes some sense.
  But in the case of medical malpractice, in all but a few cases we are 
talking about litigation within a State. And the argument made by 
Senator Abraham in the committee seems to me to be a very logical 
argument, and that is, let us establish the Federal standards, but if a 
State wishes to vary from those standards, a State can do that. That is 
all the amendment does. It is not complicated. I will, at an 
appropriate time tomorrow, ask for a rollcall vote on the amendment.
  I see my colleague from Washington is off the floor right now.
  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. 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, I would like to speak for a few moments on 
the underlying bill on product liability--the debate on which began a 
week ago today--on some aspects of the amendments which are before us 
at the present time on medical malpractice, and respond to two 
questions raised by the Senator from Minnesota during one of his sets 
of remarks on product liability earlier during the course of the day.
  But I can begin in no better fashion than to share with you, Mr. 
President, and with my colleagues, a remarkably eloquent essay which 
appeared in last Friday's Washington Post. Its author, Bernadine Healy, 
was Director of the National Institutes of Health during most of the 
Bush administration and is a senior policy advisor at the Cleveland 
Clinic Foundation.
  Mr. President, rather than simply to put that essay into the Record, 
in order that our Members, in making their judgments on the important 
votes they are going to cast tomorrow and the rest of the week, I 
intend to read that essay, because I was so moved by it, with simply 
the caveat in the beginning. The essay, entitled ``Tort Tax on Women's 
Health,'' is primarily about the impact of this bill and these 
amendments on women. And I trust, Mr. President, that you will 
remember, as I read it, that it speaks from Dr. Healy's female 
perspective. I am quoting and I will be until I bring this to an end:

       As the move to fix the broken tort system gains steam in 
     the Senate, we're hearing a tired refrain: Legal reform will 
     hurt women. This political gimmick to paint women as victims 
     is precisely the opposite of the truth: Perpetuation of the 
     litigation lottery, not its reform, hurts most women in the 
     long run.
       In dire need of reform is the current system's imposition 
     of massive and arbitrary fines under the guise of ``punitive 
     damages.'' In product liability cases, punitive damages are 
     intended to punish a company that manufactures a dangerous 
     product. In medical malpractice cases, these fines are 
     cloaked as non-economic damages, such as those for ``pain and 
     suffering.''
       Juries are asked to impose these damages on a purely 
     subjective, emotional basis. They are in excess of the 
     amounts needed to pay for the harm actually done. One juror 
     told the Legal Times her reasons for awarding $10 million 
     against a Washington, D.C. doctor and hospital: ``[Q]uite 
     honestly, I think it had something to do with sounding like a 
     round figure.''
       It is this open-ended freedom to punish that creates a 
     legal lottery, one in which many trial lawyers scoff at 
     smaller claims in favor of the winning ticket of a million-
     dollar contingency fee.
       How could reforming this system hurt women? Protectors of 
     the current system claim that, because society places women 
     at a lower economic value, economic compensation for an 
     injury will never be enough. They point to lower wages for 
     women than men in comparable jobs, as well as to the 
     pathetically low wages identified for women who care for the 
     children and home in a family.
       Women always must stand firm for equal wages for equal 
     work. We also must fight for economic respect for our work 
     within the family unit. (This might even include calculating 
     compensatory damages based on the total income of the family 
     unit, not just the market value of domestic services). But 
     our struggle for economic equality should not be used as a 
     smokescreen to justify a liability system that threatens 
     women's health.
       Women live longer and suffer from chronic diseases (such as 
     osteoporosis) to a greater extent than men. More than men, we 
     will rely on new drugs and therapies to combat these 
     debilitating diseases. Unfortunately, unpredictable and 
     excessive product liability costs are forcing drug and 
     medical device companies to withdraw needed products, or even 
     to decline to develop them.
       Some products used exclusively by women--namely, those for 
     pregnancy and contraception--are particularly susceptible to 
     withdrawal by companies fearing lawsuits. For example, the 
     price of Bendectin, a drug approved by the FDA for morning 
     sickness, skyrocketed 250 percent after lawsuits 
     [[Page S5891]] alleged birth defects. Although no causal link 
     to birth defects was ever found, the manufacturer withdrew 
     the
      drug from the market. There are no other drugs for morning 
     sickness.
       Improvement to contraceptive products also have been 
     stalled by the product liability system. While there was a 
     need to compensate women for problems associated with the 
     Dalkon Shield intrauterine device (which physicians--not 
     lawsuits--first called to the attention of the FDA), the 
     lengthy, hyperadversarial and profit-oriented stream of 
     lawsuits seriously wounded the development and acceptance of 
     an improved version. The same may become true for Norplant. 
     Liability intimidation over minor problems in the first 
     generation of this useful contraceptive may foreclosure the 
     development of an updated version.
       Another threat to women's health comes from the current 
     medical malpractice system. The American College of 
     Obstetricians and Gynecologists found that malpractice 
     premiums increased 237 percent between 1982 and 1991. Added 
     on are the indirect costs of defensive medicine (like too 
     many Cesarean sections) and fewer doctors choosing to go into 
     obstetrics.
       No one pays a higher price for this system than the poor. 
     The Institute of Medicine reports that physicians' fear of 
     lawsuits has left many rural communities without obstetrical 
     care. The National Council of Negro Women reports the same 
     for urban low-income areas.
       Who gains from this tort tax on women's health? Only 40 
     percent of malpractice insurance premiums goes to injured 
     patients, while the remaining 60 percent goes to lawyers' 
     fees and administrative costs.
       Instead of health care by lottery, women need good science 
     and the aggressive pursuit of medical advances by the NIH, 
     academia and the private sector. We don't need women's 
     advocates who protect a liability system that limits our 
     health care choices by turning businesses away from women's 
     health.
       Nor do we need the same people who rightly argue for women 
     to pilot F-16s then to characterize us as too delicate to 
     weight our health risks. It is time to recognize that women, 
     armed with solid research and medical information, can make 
     their own intelligent choices about their health, from 
     choosing a contraceptive to getting breast implants.
       During the House debate, a congresswoman characterized 
     liability reform as a male conspiracy, comparing the 
     ``second-class status'' of non-economic damages under a 
     reformed system to what she viewed as a ``second-class 
     status'' for women. But just as women's health has finally 
     been upgraded to first class, we cannot abide a liability 
     system that holds women back in the dark ages of medicine.

  Mr. President, two principal points in Dr. Healy's essay, I think, 
deserve special emphasis.
  The first has almost been ignored entirely since the opening salvos 
in this debate. That is, the tremendous cost of the present system, a 
tremendous cost which does not go to victims under any set of 
circumstances.
  Dr. Healy speaks of medical malpractice as producing 40 percent of 
all the insurance premiums that go into medical malpractice insurance 
to victims and 60 percent to lawyers and to administrative costs, the 
rest to the costs of the system itself.
  Mr. President, that figure is not limited to medical malpractice. It 
is endemic across the board in product liability litigation. I am 
astounded that we have not been met with an outrageous attack on this 
system by the very Members of this body who, instead, are arguing for 
its preservation without change.
  They who speak of victimization, they who speak of appropriate 
compensation seem overwhelmingly content with a system where 60 percent 
of the money that goes into it ends up in the pockets of people who are 
not victims but who are lawyers or expert witnesses or insurance 
investigators or the like.
  In almost any other aspect of our lives, we would be outraged by a 
60-percent administrative cost. If anything, Mr. President, that 60 to 
40 percent split underestimates the cost of the system. That is only 
what is reflected in medical malpractice premiums. It does not reflect 
at all the unnecessary defensive medicine that is practiced in order to 
try to prevent such claims from coming up in the first place.
  If there were no other reason for change, to make more effective 
compensating the actual victims of negligence, either in product 
liability or medical malpractice, we should be demanding reform instead 
of fighting that reform.
  At the same time, Mr. President, if this split in favor of 
overwhelming administrative costs is shocking, it seems to me 
especially shocking is the other principal point made by Dr. Healy and 
by others, the tremendously adverse impact of the present system on 
research, on the development of new products, whether National 
Institutes of Health related, machine tools--a wide range of products 
and the marketing of those products.
  First, of course, is that the price of every such product includes an 
insurance premium, a product liability insurance premium. More 
significant than that--more significant than that --are the choices 
made by companies faced with this lottery system.
  My distinguished friend and colleague from New Mexico last Friday 
read a statement by retired U.S. Supreme Court Justice Lewis Powell, 
which I can only paraphrase here, saying that the most irrational form 
of business regulation is the product liability system.
  We have in this Government a large number of regulatory bodies, many 
of which are devoted to the safety and effectiveness of the kinds of 
articles, the kinds of products that we use in our lives every day. 
Those agencies, of course, are not infallible. By comparison, a jury 
system dealing with a specific instance only, in every case is a pure 
lottery. The argument that somehow or another this system, which on 
identical facts can come up with a verdict for a defendant after a huge 
investment in the costs, or a multimillion-dollar punitive damage claim 
for actions deemed by the jury to have been deliberate or close to 
deliberate, is exactly that; it is a lottery.
  What is the rational response of a small business or, for that 
matter, a very large business in the field of producing new and 
improved items, especially related to our health? Well, the response 
is, in many cases, the flame is not worth the candle. Why should we as 
a company subject ourselves to tens of millions of dollars in 
attorney's fees, even in cases in which we are successful, and the 
possibility, however remote, of multi-million dollar judgments and 
terrible publicity in punitive damages in connection with a product 
which sells for a relatively low profit margin?
 Companies will, under those circumstances, not so much weigh the 
question of the safety of a particular device or medicine or product, 
they will weigh their potentials for successful business against the 
potential of all of these large attorney's fees and potential punitive 
damage awards.

  And what happens? What happens is many companies simply get out of 
the business; 90 percent of all of the companies manufacturing football 
helmets, for example, have abandoned the business during the course of 
the last 20 years. Major national laboratories and developers have 
abandoned the search for drugs that will have a positive impact on the 
AIDS epidemic because their calculation was that the legal costs of 
introducing such drugs, even with the approval of the Food and Drug 
Administration, vastly exceeded any profit that they can make on them. 
Other companies have gotten out of the business, as Dr. Healy says in 
one particular case here, ``. . . have gotten out of the business of 
producing traditional immunizations and the like because of the 
potential cost of either verdicts or even the cost of successfully 
defending lawsuits.''
  We have discussed on this floor the dramatic impact of product 
liability litigation against companies manufacturing piston driven 
aircraft, a 95-percent reduction in the production of that kind of 
aircraft in the United States over a 20-year period all because of 
product liability litigation. Not successful lawsuits, Mr. President; 
in the overwhelming majority of these cases, the lawsuits were 
unsuccessful. But the costs of a successful defense are often more than 
the costs of a judgment. So that industry was practically destroyed 
until a modest change was made by this Congress last year and we have, 
in that one industry, the beginning of a recovery.
  Mr. CRAIG assumed the chair.
  Mr. GORTON. The goal of product liability legislation is the recovery 
and development of those industries which make our lives better, which 
provide new and more effective treatment for medical conditions to 
which all of us are subject, more and better products for our 
enjoyment, for our transportation, for every other aspect of our lives. 
And when we can do that without 
[[Page S5892]] denying a single claimant the right to go into court and 
the right to recover all of the actual damages that a jury awards to 
that plaintiff--all of the actual damages--and when we can do that at 
so low a cost to anyone except those who benefit from the litigation 
itself, it would not seem to me that this debate should have lasted as 
long as it did or that its result should still be so highly 
unpredictable.
  So, I congratulate Dr. Healy on her particular insight into this 
question, and say that insight can be expanded across the entire scope 
of the legislation with which we are dealing here and urgently speaks 
for its passage.
  I did want to remark briefly on two questions which were propounded 
by the Senator from Minnesota to the supporters of this legislation an 
hour or so ago. The Senator from Minnesota asks, and I hope I 
paraphrase him accurately, ``What projections are there for how many 
people will be denied how much money as a result of the cap on punitive 
damages included in this legislation?'' The second question was, ``What 
is the extent of adverse effects of the bill on the deterrent effect of 
uncapped punitive damages?''
  In a sense, each of those questions is the same. Ironically, the 
answer to the first question, how many people will be denied how much 
money by some kind of limitations on punitive damages, has probably 
been answered most eloquently by the opponents to the bill. Opponents 
to the bill have been at great pains to say that there is no litigation 
explosion with respect to product liability litigation. That is an 
interesting argument, since the contrary argument has never been made 
on the floor of this Senate during the course of the last week. And 
that only a relative handful of punitive damages judgments had been 
entered in the last 10 to 12 to 20 years in product liability 
litigation.
  Of course, not all of those awards would be affected by this cap. A 
number of them are less than the cap is in the bill in its present 
form. So the answer is, ``Not very many people directly through the 
litigation system will be denied very much money by the passage of this 
bill in this form.''
  But what is not asked in the question is, no one, not a single 
individual, will be denied $1 of the actual damages that they suffer 
and have proved to a judge and jury by this litigation because punitive 
damages, by its very definition, is an award above and beyond the 
damages suffered by a claimant in a particular case.
  The importance of this legislation in connection with punitive 
damages is not so much in connection with actual awards as it is with 
the effect of the threat of potential awards against sound business 
judgment about the marketing, particularly of new and improved 
articles, items, and products; and the fear of losing such a lottery on 
the settlement of lawsuits for more money than can justly be found due 
to a given claimant in order to prevent that lottery from going against 
a particular defendant.
  While we can probably come up with an accurate and relatively low 
count of the number of major punitive damage judgments in product 
liability cases, it is impossible to come up with the number of product 
liability cases in which punitive damages have been alleged for $1 
million, for $10 million, for $100 million. It costs very little for 
the word processor to add another zero to the prayer in a complaint for 
damages. And in every case, that complaint must be taken seriously by a 
potential defendant. There is no way to predict the outcome and 
therefore many settlements are made for claims which are not justified, 
in significant amounts of money, and it is that uncertainty which has 
so constricted the desire of many businesses to make valid business 
judgments, not only from the point of view of the businesses themselves 
but to the great gain of the people who would otherwise have used those 
new products.
  Again, we can simply go back to the one area in which we know what 
the impact has been and will be, piston driven aircraft,
 95 percent destroyed by the system, significantly restored already 
last year since the modest reform in the system has been made.

  That, too, answers the second question propounded by the Senator from 
Minnesota. What is the extent of the adverse effects of the bill on the 
deterrent effect of uncapped punitive damages? Again to paraphrase 
Justice Powell, this is the most irrational system of business 
regulation that can be imagined. It lacks any general principle 
whatsoever. It lacks any certainty whatsoever. It is utterly arbitrary.
  Mr. President, I am sure that the Senator from Minnesota would not 
for 1 minute countenance our changing the Criminal Code to one in which 
no matter what the crime the jury could impose whatever sentence it 
thought appropriate--capital punishment for an assault, life 
imprisonment for running a stop sign. Yet, that is by analogy exactly 
what we do with a punitive damages system, unlimited in every case 
except by the judgment of the jury itself.
  Moreover, the criminal justice system at least requires proof beyond 
a reasonable doubt, something not required as far as I know by any 
State having punitive damages. The deterrent effect: Well, Mr. 
President, the State I represent in this body does not now and never 
has allowed punitive damages in the bulk of civil litigation, nor have 
four or five other States. And there is no evidence that there is any 
greater carelessness or willfulness on the part of business enterprises 
in that State in dealing with consumers in our State because of the 
entire absence of punitive damages.
  So my answer to the question, ``What is the extent of the adverse 
effects of the bill on the deterrent effect of uncapped punitive 
damages?'' is: None. Not a conditional answer whatsoever; the answer is 
none. We have far better and far more just ways of dealing with rogue 
business enterprises than to deal with any such businesses in this 
fashion and in a fashion which deter the State's legitimate businesses 
and those who would wish to use such, to benefit from what those 
businesses will produce in the way of products and treatments and the 
like.
  So, Mr. President, I think we are perhaps winding up our day on this 
subject. I repeat once again, for the benefit of all of my colleagues, 
that today we must have all of the amendments introduced to the 
McConnell amendment, the amendment seeking to limit malpractice to a 
product liability bill. There will be a brief time of debate, 
approximately 1\1/2\ hours and a half tomorrow in the morning and then 
a series of votes on all of those amendments, after which we will go on 
to other amendments dealing with the general bill itself.
  Seeing no Member who wishes to offer an amendment or a comment on the 
floor at the present time, 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. KYL. 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. KYL. Mr. President, I have been trying to watch the proceedings 
on the floor all day. I was here twice before talking about amendments 
that are pending before the body on the issue of malpractice reform. I 
have been disappointed, frankly, that there has not been more debate 
joined on two very, very critical questions, except for a brief 
colloquy which the Senator from Minnesota and I had earlier today, I 
have heard virtually no refutation of the points that I have set forth 
regarding the two amendments. I wanted to spend 5 minutes this evening 
summarizing my views prior to the time that we will have votes on these 
two issues tomorrow.
  Mr. President, you know that we have before us the product liability 
legislation by which we are going to try to reform this Nation's 
product liability laws. Pending is also an 
amendment--the McConnell-Lieberman-Kassebaum amendment--
which will add the medical malpractice area to that reform. There are a 
couple of specific amendments pending to that which we hope will help 
to further reform our tort law relating to medical malpractice; 
specifically, an amendment that would limit attorney's fees and, 
secondly, one that would put a cap on noneconomic damages.
  [[Page S5893]] The point of these two amendments is to try to return 
more of the recoveries of these cases to the victims, to the plaintiffs 
or claimants in the cases. In the past, the claimants received--in 
fact, today the claimants receive on the order of 40 to 50 percent of 
the recoveries, and the attorneys receive most of the rest.
  In fact, several studies demonstrate that at least half of the 
recovery in these kinds of cases go to the attorneys. Let me cite two 
or three of those studies, Mr. President. There is a Rand study which 
demonstrates that about 50 percent of the money goes to lawyers, and 
less than 50 percent goes to the claimants. Some of it goes to 
administration. There are other studies that show somewhere in the 
neighborhood of between 40 and 50 percent. The bottom line is that the 
claimants are not getting the recovery; the attorneys are.
  As a result, what we have sought to do is to limit the recovery of 
the attorneys in the noneconomic damage area to 25 percent of the first 
$250,000. That is over $60,000. In addition to that, the attorney, 
under the McConnell amendment, would be getting either 33\1/3\ percent 
of the first $150,000, or 25 percent of everything thereafter, on all 
economic damages.
  So let us take a very large recovery for the sake of argument. Let us 
take a million-dollar recovery. The attorneys could easily get between 
a quarter of a million or more in their contingent fee from that. Then, 
of course, if punitive damages are further sought, an attorney, under 
my amendment, could go to the court and ask for a reasonable fee. 
Twenty-five percent would be presumed to be reasonable, and the court 
would have to determine it based on reasonableness and the ethics 
standards to apply to attorney fees. We are not limiting attorneys from 
recovering their fees. We are saying in a great big recovery, where it 
is a multimillion-dollar recovery, the bulk is not going to go to the 
attorneys. About 75 percent would go to the claimants.
  The adjunct to that is a limitation on the noneconomic damages 
themselves. By giving the claimants more of the money that they get and 
giving less of it to the attorneys, we can afford to put a cap on the 
noneconomic damages. That is what the second amendment I have 
introduced would do. The House-passed cap is $250,000. But a lot of our 
colleagues in the Senate said $250,000 was just too stringent in that 
exceptional case. They are rare, but in those exceptional cases where 
you would want to give an award of more than a quarter of a million 
dollars, you can provide an award of up to $500,000 under my amendment. 
It could not be discounted at the present value. So that is a lump sum 
of money. Invested over a period of time, it could make millions of 
dollars. That is on top of the economic damages, which would be 
collected to totally recompense the plaintiff for all out-of-pocket 
expenses as well as lost earning power and any other economic damages.
  So you do not limit the totality of the award so much as you provide 
that the claimant gets the award by putting a limit of $500,000 on the 
noneconomic damages. By having a limit on the attorney's fees, the 
claimants get essentially the same thing. But the attorney's fees are 
reduced to a more reasonable level. So these two amendments fit hand-
in-glove. We are going to be voting on them tomorrow.
  I urge my colleagues to support the limit on attorney's fees and the 
limit on noneconomic damages. Some of my colleagues says the limit on 
attorney's fees is not strong enough. It does not really whack the 
lawyers. That is not my objective. My objective is to make sure there 
is a fairness and a balance here and that some reason is restored to 
the system. With respect to the noneconomic damages limit, there is a 
question about really whether that will do any good. I just want to 
cite to my colleagues the Office of Technology Assessment report of 
1993 which said:

       Limits on noneconomic damages is the single most effective 
     reform in containing medical liability premiums.

  We all suffer by virtue of medical expenses going out of sight, of 
physicians having to close down their practices or decline to serve 
certain kinds of patients because of the escalating costs of medical 
malpractice premiums. This is one of the cost-drivers in this whole 
health care reform debate. We have to get that under control. When a 
group like the OTA notes the fact that this is one of the most 
significant reforms we can pass, it seems to me important to do so.
  So again, I urge my colleagues, when we vote on these two amendments 
tomorrow to, of course, support the McConnell-Kassebaum-Lieberman 
amendment and to support my amendment on attorney's fees and on 
limiting noneconomic damages. I think if we do all three of those 
things, we will have strengthened the bill and will be better able to 
go to conference and come out with a really strong bill that, as a 
result, we can tell the American people we have done something in this 
area of medical malpractice and tort liability reform.
  Thank you, Mr. President.
  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. KENNEDY. 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. KENNEDY. Mr. President, for 2 days during the consideration of 
the product liability bill the Senate has been debating fundamental 
change to the system under which victims of medical negligence are 
compensated for their injuries. I regret that the subject of 
malpractice reform is before the Senate as a rider to product liability 
legislation. We should not begin to tinker with the malpractice 
liability system except as a part of a more comprehensive effort to 
reform the Nation's health care system.
  As we have pointed out at other times in the debate, tomorrow we will 
have an opportunity to give consideration to a proposal that deals with 
malpractice insurance that represents the best judgment of the Human 
Resources Committee of a year ago and which will reflect a bipartisan 
effort to come to grips with that particular issue. We are not in that 
situation at the present time.
  That particular proposal was also accompanied by a variety of 
proposals to try to avoid medical malpractice, to try to enhance the 
quality of health care so that we were not going to have the incidence 
of malpractice. But we do not have included in this legislation the 
provisions to try to enhance quality health care, nor do we have this 
measure as a part of a comprehensive health care proposal.
  The health care crisis in this country continues to be extremely 
serious. Last year, the number of Americans without health insurance 
increased by more than 1 million people, 800,000 of whom were children. 
Costs are spiraling out of control. Our health care system needs urgent 
repair, and malpractice reform is at most one small part of such 
reform.
  Proponents of malpractice reform speak of a crisis, but they are 
ignoring the real health care crisis. By the year 2000, only half of 
working Americans and their families will be protected by health 
insurance through an employer. As recently as 1987, two-thirds had this 
protection. Forty million Americans have no coverage today and, by the 
year 2000, 50 million will have no coverage. If current efforts to cut 
Medicaid and Medicare are successful, the number could be much higher. 
Eighty-five percent of those who have no insurance are members of 
working families. They face a health care crisis every day. But even 
those who currently have coverage cannot be complacent because, if they 
lose their job or change jobs or become seriously ill, their health 
insurance is in jeopardy.
  This is the point, Mr. President. Here we are taking one small phase 
of the whole health care issue that effectively is going to protect 
negligent doctors and substandard hospitals as being the principal 
measure to be considered as health care reform when we have these other 
kinds of issues and challenges which we are facing as a country, and we 
are not addressing them. We are not addressing them. We are not 
addressing the serious, continued decline of the coverage of working 
families. Eighty-five percent of those not covered are from working 
families.
  Where are their interests covered in this legislation? They are not. 
And 
[[Page S5894]] what we have seen is the fastest growing group of 
individuals who are not being covered end up being children in our 
society. Working families and children, their interests are not being 
attended to with this particular measure that is before us because it 
is just dealing with the issues affecting negligent doctors and 
substandard treatment.
  Senior citizens have no coverage for prescription drugs. This is 
another problem. Coverage for long-term care is grossly inadequate--
another health care problem. Last year, the average senior citizen had 
to spend one-quarter of his or her income on health care, and that does 
not count those who are in nursing homes and hospitals.
  Health care costs are out of control. We have the problem with 
access, the coverage of people, and we have the issue of health care 
costs. Those are essential elements. We have the other additional issue 
of quality health care that has to be attended to and other measures in 
the health care debate. But we have the access issue and the cost 
issue. And the costs are out of control. The Nation spent $1 trillion 
on health care last year and that number will double in 10 years. 
Health care costs are devastating to the Federal budget and to the 
family budget.
 And this is the health care crisis we should be talking about and 
these are the people who need the protection.

  Getting the handle on health care costs in Medicare and Medicaid 
ought to be a part of health care reform. Many of us are strongly 
committed to that particular challenge. That will make a difference in 
terms of the quality of health care for senior citizens. And for the 
rest of Americans, it can make a difference in terms of the escalation 
of health care costs and it can make an important difference for the 
families in this country.
  But are those the issues that we are debating here on health care 
this evening? Absolutely not. We are dealing with a very narrow issue 
of profit for the medical insurance industry, $1.4 billion in 1991 
profits. And who pays for that? It is the American consumer. And that 
is what is happening on the floor of the Senate.
  Instead, the proposals before the Senate offer protection to 
substandard doctors and substandard hospitals. Limits on malpractice 
liability will be a windfall for them--and also for an insurance 
industry already reaping record profits. The crude limits in this 
amendment are an insult to hundreds of thousands of patients injured or 
killed every year as a consequence of medical negligence.
  Medical malpractice is the third leading cause of preventable death 
in the United States. According to researchers at the Harvard School of 
Public Health, 80,000 Americans die in hospitals each year from the 
negligence of physicians or other health providers, and an additional 
1.3 million are injured. As many as a quarter of all patient deaths 
could have been prevented but for negligent medical care.
  It is ironic that one of the first pieces of health legislation 
considered by the Senate this year would actually hurt patients by 
protecting negligent doctors and their insurance companies. In fact, 
the current malpractice compensation system already offers too much 
protection to doctors and insurance companies.
  Fewer than 2 percent of malpractice victims ever file suit. The rate 
of medical malpractice claims has declined steadily since 1985. 
Patients won fewer than one-third of the malpractice verdicts in a 1994 
study. The size of malpractice awards has dropped significantly in the 
last year alone, according to the New York Times.
  The legal system pays only 1 malpractice claim for every 15 torts 
inflicted in hospitals, according to Business Week. According to 
Business Week, the legal system pays 1 malpractice claim for every 15 
torts inflicted in hospitals.
  That is what is happening. It is not just the studies at the Harvard 
School of Public Health. This is Business Week that is demonstrating 
the inadequacy of the system--the fact that there are hundreds of 
thousands of Americans who are not compensated, that the total number 
of claims are going down, that the premiums are going down, and that 
the insurance industry's profits are soaring up through the roof. That 
is what we are dealing with here on this particular issue.
  And Business Week points out, rather than a surplus, the article 
concludes, there is a ``litigation deficit because so many injured 
people wind up undercompensated.''
  That is the true problem that we are facing. Are our fellow citizens, 
who are subject to malpractice, unable to have any kind of 
compensation, unable to get any kind of help and assistance? That is 
what we are talking about.
  Those are the issues that we addressed in a bipartisan way in the 
Labor and Human Resources Committee last year to try to work through 
alternative dispute resolutions and other kinds of measures in order to 
make sure that people are going to receive at least some benefit.
  Part of the reason for this litigation deficit is that the legal 
system is inaccessible to so many citizens. That problem will be 
exacerbated by the proposals now before the Senate. The deficit is also 
attributable to the malpractice reforms already adopted in many States 
under pressure from the powerful medical insurance lobbies.
  I do not know how many of our fellow colleagues turned on the 
television over the period of this weekend. I was back in Washington on 
Friday evening. Just after suppertime, I watch television to see the 
news for a couple of hours. I tried to watch it again on Saturday for a 
couple of hours. Eight times I saw--eight times--including twice on 
Sunday morning between 6 and 7 a.m. I do not know who the buyers of 
time are for those insurance companies and I do not know how much value 
they are getting for that particular purchase time, but you could not 
turn on the television programs all week long and not see those 
insurance industry spokesmen trying to replicate the television ads of 
last year that distorted the health care debate, talking about 
California, what is happening out in California.
  Well, it is interesting. They were talking about how California had 
worked so well. Well, we find out, of course, that California has had a 
number of the kinds of changes in their tort legislation that is 
included in the McConnell amendment.
  Here is a news release entitled ``AMA Propaganda False on Tort Law 
Restrictions, Report Shows.'' It says:

       A 1975 California law that limits the legal rights of 
     victims of medical malpractice--the model for Federal tort 
     law proposals before the U.S. Congress--has failed to deliver 
     what its backers have promised, according to a study released 
     today by a California nonprofit insurance watchdog 
     organization.

  What they pointed out is health care costs rose in California 343 
percent between 1975 and 1993. The president-elect of the new AMA says 
that the No. 1 issue in the United States is access to health care--we 
can say that is true, along with increased costs--and then says the 
access to health care costs is malpractice reform, and urges us to go 
ahead with the McConnell amendment. And here we have an example of what 
happens with the McConnell amendment in one particular State, the State 
of California.
  It shows that rather than having any impact in terms of slowing 
escalation of costs down, it has not. As a matter of fact, it has not 
done that in the other States.
  I hear my friend from Indiana, Senator Coats, talk about the changes 
they have had in Indiana. The health care costs, in terms of health 
care in Indiana, have not gone down. They have not gone down in the 
other six States that have implemented many of the suggestions that are 
included in the McConnell amendment.

       Health care costs in California rose 343 percent between 
     1975 and 1993, faster than the inflation rate in California. 
     Since 1985, the California Medical Consumer Price Index has 
     grown nearly twice as fast as the inflation rate . . . 
       Compensation paid to medical malpractice victims, as 
     estimated by insurers, is a tiny fraction--about one-fifth of 
     1 percent.

  One-fifth of 1 percent. That is what we are talking about. I mean, 
for anyone to look over, as I did the other day, the findings of this 
legislation, where they have the findings of the problem of access to 
health care, findings there is a problem of costs and therefore we have 
to enact this legislation, and you put that against what the real facts 
are and that is, if you just look at one State that has capped some 
damages 
[[Page S5895]] and has other changes in their malpractice law, they 
talk about the estimate by insurers on compensation of medical 
malpractice, one-fifth of 1 percent in 1993 of all health care costs in 
California, and the fraction has been dropping.

       Medical malpractice liability insurance premiums paid by 
     physicians and hospitals are a negligible components--about 
     half of one percent in 1993--of California's total health 
     care expenditures, and the percentage has been falling.

  The idea that it is less than half of 1 percent and to think that is 
going to be able to leverage a health care system just reaches, I 
think, the impossible to imagine.
  ``Insurance companies have not reduced malpractice liability premiums 
commensurate with the drop in malpractice claims payments''--one might 
expect, if the insurance companies are giving less in terms of payments 
out in terms of injured individuals, one might think that the cost of 
that insurance might go down; that is not what is happening, not in 
California--``in recent years in both California and the nation. 
Insurance companies have reaped excessive profits from MICRA--in 1993, 
insurers paid out only 38 cents of every premium dollar.''
 The rest of it goes in terms of administration, advertising and 
profits. That is what we are talking about this evening, because the 
McConnell amendment tracks very closely what has happened in California 
and in the five other States that have enacted measures which are 
similar to the McConnell amendment.

  Despite the claims of the backers, such reforms have not lowered 
health care costs. The cost of medical care grew faster in California. 
And in Indiana, malpractice reforms have not caused health care costs 
to decrease. Compared to neighboring States, consumers derive no 
benefit from malpractice reform. In fact, they are harmed. If they fall 
victim to medical negligence, they are likely to be undercompensated 
for their injuries.
  Malpractice reforms in States have been greeted enthusiastically by 
insurance executives. The General Accounting Office surveyed six States 
that enacted limits on recoveries in malpractice cases similar to what 
is before the Senate in terms of the McConnell amendment. And this is 
what the General Accounting Office--this is not the trial lawyers, this 
is the General Accounting Office. When I mentioned the other fact, it 
was not trial lawyers, it was Business Week talking about the fact of 
the few tort cases that are actually brought in our health care system.
  This is what the General Accounting Office has said about the six 
States that have enacted limits in terms of awards in malpractice 
cases:

       Insurance companies in those States were enjoying profits 
     that averaged 122 percent above the national average. 
     Nationwide, insurers reaped $1.4 billion in malpractice-
     related profits in 1991, but in those six States, the return 
     was so great that the National Insurance Consumer 
     Organization labeled it ``insurance profiteering.''

  Insurance profiteering. Here we have the States themselves taking 
action, and I have a letter from some of the medical profession in the 
State of Michigan. This is true in many other States. Other States are 
taking action to try and deal with this problem that has changed 
dramatically since 1985 when we saw the rather dramatic increase in the 
number of malpractice cases, particularly with regards to ob-gyn's. We 
have seen those numbers go down dramatically in the period of the last 
2 years. I included those in the Record at the end of last week.
  Here we have the States themselves dealing with this issue. In the 
hearings that we had in our Health and Human Resources Committee, we 
did not have State attorneys general that were in there testifying 
saying, ``Look, we need a Federal preemption law.'' We did not hear 
from them on that issue, not from a Republican or Democrat. We did not 
have letters from Governors saying, ``Help us out, bail us out, get a 
preemptive law. We haven't got one.''
  Maybe someone has a letter to that effect. We never saw it. It was 
never referred to, never commented on, never quoted. We do not have the 
Governors asking us for this action. We do not have the States 
attorneys general asking for this action. We do not have the State 
legislators saying, ``Please, bail us out, we can't handle this 
problem.'' We do not have that. We do not have that at all.
  What we have is the medical insurance industry looking over what has 
happened in the States where they have been effective on wanting to 
preempt the States and to do it not in a single piece of legislation, 
not even taking the bill that was reported out of the committee, not 
even giving reference to that with the modest adjustments that were 
made to try and strengthen the quality provisions of this with the 
Jeffords amendment; to recognize that in the areas of punitive damages, 
when they have been utilized in the past, it has been against primarily 
women who have been the beneficiaries as a result of sexual 
exploitation at the hands of corrupt doctors.
  We did not even have the chance to consider what was actually 
reported out of the committee. The medical malpractice industry 
insisted on the whole thing. They wanted the whole bill before it went 
to the committee and not what was acted on, either Republican 
amendments that were accepted or even Democrat amendments that were 
accepted, with support from different sides of the aisle. No, no, they 
wanted the whole thing.
  This is in an area that is different from product liability. This is 
in an area that involves the most personal relationship between the 
doctor and the patient. What could be more local, what could be more 
within a State's jurisdiction more completely?
  We can understand products produced in Massachusetts and shipped to 
California, those in Michigan are sent to Florida, we understand that 
there is a case to be made in terms of product liability. But we are 
talking about a doctor in a community dealing with a patient in that 
community and do we need a Federal solution for that?
  The McConnell amendment says yes. The McConnell amendment has a one-
size-fits-all. How many times have we heard that on the floor of the 
Senate? What we do not want is all knowledge in Washington. The 
solution to the problems in Boston are going to be different than in 
Pocatello, ID. How often do we hear that?
  Here my friends say, ``Except when it affects the medical insurance 
industry on medical malpractice.'' Sure, the States have been acting. 
Sure, the States have been dealing with their particular problems that 
they are facing that are as diverse in some of the rural States or the 
mountain States as they are in some of the industrial States. Sure, 
they have been trying to deal with those particular issues. But here we 
say on the floor of the U.S. Senate, we are going to preempt those 
States, we are preempting, we know better on the issue of malpractice 
affecting a doctor and their patient in that particular community.
  Mr. President, I find that it is an extraordinary extension of 
political philosophy that indicates a demand for this kind of 
standardization is so compelling. I think when you reach a situation 
where we are dealing with a total reform of a health care system that 
includes, for example, the 10 million Federal employees that are being 
covered by health insurance, expanding the Federal employees insurance 
to pick up people in all parts of the country that you say, ``OK, in 
those circumstances, we ought to permit the States to develop 
alternative dispute resolutions and permit the States to experiment 
with no-fault liability, pools with enterprise challenges and to permit 
experimentation, all of which we did last year.'' But, oh, no, we have 
a preemption of those States which may, according to the medical 
insurance industry, may be more sympathetic to the consumers than they 
are to substandard doctors, and that is where we are.
  So we end up with a situation as we have heard now from the Michigan 
State Medical Society:

       Dear Senator Kennedy: On behalf of our more than 12,000 
     physician members, the Michigan State Medical Society wishes 
     to appraise you of our concern that the Michigan law of joint 
     and several liability applicable to medical malpractice not 
     be affected by Federal legislation. We have fought hard to 
     retain joint and several liability in medical malpractice 
     cases in Michigan, for the reason that its abolition would 
     cause substantial increase in physicians' premiums and 
     resultant health care costs. . .
       Malpractice carriers in Michigan advise us the premiums 
     would increase by 64 percent if the coverage was increased to 
     $1 million, 
     [[Page S5896]] which would be even more unaffordable but 
     essential for the physicians' personal protection. . .
       The dynamics of malpractice litigation . . . virtually 
     require we retain the common law doctrine of joint and 
     several liability in malpractice cases. . .
       It is critical that Federal legislation not preempt State 
     joint and several liability laws.

  Twelve thousand doctors in Michigan say they do not need the 
preemption that is in the McConnell amendment. The list goes on.
  I daresay, as more and more of them begin to understand what is 
really going on here, and the fact that we have rushed to judgment on 
this issue--2 days after we take the action in the committee, we have 
the amendment right here on the floor. Generally, you have a reporting 
out of 10 days, you have a report that points out the reasons and the 
justifications for those provisions.
 You have the opinions of those that might differ that are published 
and circulated by the various groups that are interested in this, and 
had a chance to review that. Oh, no, not on this measure. We have to 
put it right on the product liability without a report, without even 
printing--I do not know whether today it is available, but last week it 
was not--even the printed changes in the legislation, based upon the 
amendments that we had included.

  You are going to find out, my friends and colleagues, how many other 
doctors are going to get a chance to finally have a chance to sit down 
and look this over and say, woe, how did we get into this? The 
president of the Michigan State Medical Society, Jack Barry, sent a 
carbon copy of a letter he sent out. I wish he sent it to colleagues on 
our committee. He sent it to his colleagues in the medical community.
  I ask unanimous consent that the letter be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                               Michigan State Medical Society,

                                 East Lansing, MI, April 20, 1995.
     Senator Edward M. Kennedy,
     Ranking Member, Senate Labor and Human Resource Committee, 
         Washington, DC.
       Dear Senator Kennedy: On behalf of our more than 12,000 
     physician members, the Michigan State Medical Society wishes 
     to apprise you of our concern that the Michigan law of joint 
     and several liability applicable to medical malpractice cases 
     not be affected by federal legislation. We have fought hard 
     to retain joint and several liability in medical malpractice 
     cases in Michigan, for the reason that its abolition would 
     cause substantial increases in physicians' premiums and 
     resultant health care costs.
       As you undoubtedly know, medical malpractice litigation in 
     Michigan has been out of control. Premium costs for 
     malpractice coverage in Michigan virtually exceed all other 
     states. Malpractice insurance in Michigan is typically 
     $200,000 per occurrence, with an annual aggregate of 
     $600,000. The annual premium cost to obstetricians and 
     surgeons in southeastern Michigan often exceeds $80,000. Even 
     with this substantial cost, the coverage is still 
     insufficient to provide comfort to physicians. Malpractice 
     carriers in Michigan advise us that premiums would increase 
     by 64 percent if the coverage was increased to $1 million, 
     which would be even more unaffordable but essential for the 
     physicians' personal protection if joint and several 
     liability was abolished.
       As a result of this unique problem in Michigan, the 
     Michigan legislature adopted malpractice reform legislation 
     which took effect on April 1, 1994. This legislation has not 
     yet had any effect upon premiums for the reason that it 
     essentially applies prospectively and is being 
     constitutionally challenged in the state appellate courts. We 
     are helpful that this legislation will cause malpractice 
     costs to fall into line with other states when this 
     legislation becomes fully applicable to malpractice cases. 
     Until then, we will continue to have the unique and costly 
     problem in Michigan.
       The dynamics of malpractice litigation in our state 
     virtually require that we retain the common law doctrine of 
     joint and several liability in malpractice cases. The 
     potential for joint liability causes hospitals and other 
     corporate defendants to more readily settle cases where the 
     greater liability might potentially be imposed upon 
     individual physicians. This provides at least some protection 
     to the physician in engaging in the higher risk practices and 
     also has a beneficial effect upon the legal system and the 
     public generally in that cases are more likely to settle. 
     Michigan law has, therefore, retained joint and several 
     liability.
       We urge you to protect the current status of joint and 
     several liability in Michigan. It is critical that federal 
     legislation not preempt state joint and several liability 
     laws. Any federal legislation enacting malpractice reform 
     should have a provision clearly making the federal 
     legislation inapplicable to the extent that state statutes 
     retain joint and several liability in medical malpractice 
     cases.
       The Michigan State Medical Society fully supports the 
     federal legislation in malpractice reform, including a 
     $250,000 limitation on noneconomic damages. We urge you to 
     support this federal legislation, but request that you 
     protect the interests of physicians and their patients in 
     Michigan by assuring that any federal legislation will not 
     preempt joint and several liability in medical malpractice 
     cases in this state.
       Thank you for your help. If you have any questions, please 
     feel free to contact Kevin A. Kelly, Managing Director, 
     Michigan State Medical Society at (517) 336-5742.
           Sincerely,
                                                Jack L. Barry, MD,
                                                        President.

  Mr. KENNEDY. If enacted, the proposals before the Senate today may 
well fatten the profit margin of malpractice insurers nationwide. But 
malpractice reform will not address the fundamental problems facing our 
health care system. It has not in California, or Indiana, or elsewhere. 
In any event, the cost of medical malpractice premiums amounts to only 
six-tenths of 1 percent of the Nation's health care costs.
  Nor will legal reforms make a dent in the prevalence of malpractice 
itself. Instead, we need more effective means to discipline the few bad 
apples in the medical profession who cause upwards of 45 percent of all 
of the unnecessary injuries. Today, a negligent auto mechanic or a 
negligent funeral director is more likely to be disciplined by a State 
licensing board than a physician.
  That is really saying something, Mr. President. Are we here 
attempting to discipline? No, we are not even beginning to go down that 
road. We are not even in the legislation that is being provided giving 
the full information. That is a matter of public record, included in 
the data bank to consumers. It can be collected. I understand my friend 
from Minnesota, Senator Wellstone, has addressed this issue. There is 
already the assemblage of that kind of information, but it is not done 
in a comprehensive way as I think it should be. Hospitals can find out 
certain information with regard to disciplinary conduct with regard to 
professions. HMO's can find that out but the consumers cannot.
  There was no real effort or attempt--there was a good faith 
expression that we ought to get after this issue and we will revisit it 
later. But we are still moving ahead with the legislation.
  First, Mr. President, here are the four major flaws of the McConnell 
amendment:
  First, it sets an impossibly high standard for awarding punitive 
damages and then imposes a cap on such damages, even in cases involving 
sexual abuse of a patient and other outrageous conduct. Sixty-eight 
percent of all punitive damage awards in malpractice cases are awarded 
to women, so the impact of this provision is discriminatory.
  Now we know that those punitive cases are only a small number of 
cases. We did not include, for example, in the markup, other kinds of 
cases, for example, when doctors go in and practice a medical procedure 
when they are on illegal drugs. We did not include that in the 
legislation, in the amendment. Or when hospitals knowingly and 
willfully destroy records with regard to the treatment of patients. We 
did not even include that in it. We did not even include the punitive 
damages situations where doctors lost their licenses in a State and 
fraudulently practice in another State. I would think that any Member 
of this body who was concerned about what is happening to any member of 
their family wrote would think that in those circumstances, and in some 
others, punitive damages would be justified. We did not. We included 
one reference in our Senate markup to permit punitive damages if the 
standard was to be met in terms of the intent standards, which is 
extremely high, and in the Dodd amendment, which gave the jury the 
power to establish whether punitive damages should be awarded and the 
judge, with guidelines, to set the amount. But that has been 
effectively set aside.
  Second, the amount severely limits the longstanding legal doctrine of 
joint and several liability, leaving the patients vulnerable to 
inadequate compensation. For at least 100 years, it has to be 
recognized as unacceptable to force an innocent patient to bear the 
cost of other people's negligence if one or more of the wrongdoers are 
available to provide compensation. That is a sensible rule to protect 
patients, and 
[[Page S5897]] we should not undermine it for the benefit of guilty 
malpractice defendants.
  I point out, Mr. President, that we are talking about an individual 
who has been wrongfully treated. I think we can understand the 
circumstances of what might appear to be unfair and unjust, payments by 
those who are brought into the compensation awards through joint and 
several. There are many here that are enormously sympathetic to anyone 
that would be so included.
  The fact of the matter is, Mr. President, we are talking about 
circumstances where there has been malpractice and where, if they do 
not collect it, they are not given any kind of adequate remedy for the 
malpractice. It is interesting. Effectively, this legislation is 
immunizing the medical insurance companies, and as we do that, make no 
mistake about who pays for all of the other care for those individuals. 
It ends up being the taxpayers--to the tune of about $60 billion a 
year.
  So here we go in and set up a program that has windfall profits when 
this has been adopted in the six States, and we are going to do it 
nationwide and you are going to see--even according to Business Week 
and the business insurance publication--the benefits that are going to 
the insurance industry. Who is left holding the bag? On the one hand, 
it is the victims, and on the other hand it is the taxpayers. They are 
going to be the ones that are going to be left paying for the care of 
this individual rather than the wrongdoer. That is wrong and unfair.
  Third, the amendment denies consumers access to the information about 
the fitness of their doctors, even when those doctors have repeatedly 
committed malpractice or have been repeatedly disciplined. The 
Wellstone amendment addresses this flaw and I hope that will be 
accepted.
  Finally, the McConnell amendment unjustifiably preempts a wide array 
of the State malpractice laws.
  The preemption language in the proposal before us is not balanced. It 
strikes down State laws that are of benefit to consumers. I think it is 
not appropriate. If preemption of State tort laws were appropriate, and 
I think it is not, it should at least be accomplished in a fair and 
even-handed manner. The one-way preemption in the amendment ensures the 
absence of the national standard that the proponents say they want.
  For these reasons, I urge defeat of the McConnell amendment. But 
rejection of that proposal does not mean we should not take some 
action. There are a series of steps Congress should take to assist the 
States and improve the efficiency of the malpractice system in a way 
that will benefit both doctors and patients.
  Last year, the Labor and Human Resources Committee favorably reported 
a health care reform bill which contained sensible malpractice reforms. 
We required alternative dispute resolution to provide for streamlined 
consideration of malpractice claims. We capped attorneys' fees to make 
sure that patients get fair compensation for their injuries, and that 
they get early resolutions for these claims, and to permit the States 
themselves to develop alternative dispute resolutions.
  Let them develop those measures--they had to meet certain minimum 
standards--but permit the States to develop their own. That was one 
part of it.
  We capped attorney's fees to make sure the parties get fair 
compensation for their injuries. We provided seed money to let the 
States experiment with innovative models such as enterprise liability, 
no-fault funds, and medical malpractice guidelines.
  Medical malpractice guidelines--there is a case we could say if a 
person would establish the medical malpractice guidelines and doctors 
follow those, that ought to be a basic presumption against the 
malpractice and would permit what would be the basis of the evidence to 
be able to rebut that. I think there is a great deal that commends that 
concept. When we talked about it last year as part of the health care 
reform, it got labeled as ``cookbook medicine,'' that we will have 
medicine by the numbers.
  So, there are legitimate public policy issues with regard to this 
issue that we ought to address seriously. That is not unimportant in 
terms of this whole debate. We ought to give serious consideration to 
that kind of an action, not just dismiss it completely as we have in 
this legislation. It is just not correct. It is a concept that can make 
an important difference in terms of quality health care and should not 
be dismissed out of hand, as it has been effectively in this 
legislation.
  Some of last year's reforms have been included in the McConnell 
amendment, but in other ways that I have described, the amendment goes 
too far. I will offer a substitute amendment tomorrow that contains the 
reasonable reforms proposed by the Labor Committee last year.
  I will also offer an amendment to strike the preemption provisions in 
the McConnell amendment. If the Federal Government is to involve itself 
in this area of the law, it should do this cautiously and with respect 
to State prerogatives.
  For example, we received a strong request from the Michigan Medical 
Society urging that we not preempt that State's law, and joint and 
several liability. Federal malpractice reforms should only apply in 
those situations where no State statute is applicable. That was the 
concept which had bipartisan support. The legislation that was reported 
out of our committee was unanimous--unanimous--Republicans and 
Democrats alike on that issue. It will be that provision which I will 
offer with regard to preemption.
  In urging ill-considered malpractice reforms, a hypocritical Congress 
is violating the Hippocratic oath, first, to do no harm. Some of the 
proposals before the Senate will cause great harm to large numbers of 
our fellow citizens if we reduce the ability of the legal system to 
deter negligent medical care. If we deny adequate compensation to 
severely injured patients, we violate basic principles of federalism. 
The Senate will have committed legislative malpractice.
  Mr. President, I see the Senator from Maine, who has been extremely 
patient. As I understand, under the previous agreement--and I want to 
comply with the parliamentary situation that exists at the current time 
in order that my amendments be eligible--as I understand it, is it the 
desire of the Chair that we call them up and have them set aside? Is 
that the procedure which has been agreed on or is that the satisfactory 
procedure?
  The PRESIDING OFFICER (Mr. Frist). The Senators have been following 
that procedure by unanimous consent.


                 Amendment No. 607 to Amendment No. 603

  Mr. KENNEDY. Mr. President, I will follow that same procedure. I ask 
unanimous consent that the pending amendment be set aside, and I will 
call up amendment No. 607 and ask it be considered.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Massachusetts [Mr. Kennedy] proposes an 
     amendment numbered 607 to amendment No. 603.

  Mr. KENNEDY. Mr. President, I ask unanimous consent further reading 
be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:
       In lieu of the matter proposed to be inserted, insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medical Liability Reform Act 
     of 1995''.
                       TITLE I--LIABILITY REFORM

     SEC. 101. FEDERAL TORT REFORM.

       (a) Applicability.--
       (1) In general.--Except as provided in section 102, this 
     title shall apply with respect to any medical malpractice 
     liability action brought in any State or Federal court, 
     except that this title shall not apply to a claim or action 
     for damages arising from a vaccine-related injury or death to 
     the extent that title XXI of the Public Health Service Act 
     applies to the claim or action.
       (2) Effect on sovereign immunity and choice of law or 
     venue.--Nothing in this title shall be construed to--
       (A) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (B) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (C) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (D) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (E) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation 
     [[Page S5898]] or to dismiss a claim of a foreign nation or 
     of a citizen of a foreign nation on the ground of 
     inconvenient forum.
       (3) Federal court jurisdiction not established on federal 
     question grounds.--Nothing in this title shall be construed 
     to establish any jurisdiction in the district courts of the 
     United States over medical malpractice liability actions on 
     the basis of section 1331 or 1337 of title 28, United States 
     Code.
       (b) Definitions.--In this Act, the following definitions 
     apply:
       (1) Alternative dispute resolution system; ADR.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system that provides for the resolution of medical 
     malpractice claims in a manner other than through medical 
     malpractice liability actions.
       (2) Claimant.--The term ``claimant'' means any person who 
     alleges a medical malpractice claim, and any person on whose 
     behalf such a claim is alleged, including the decedent in the 
     case of an action brought through or on behalf of an estate.
       (3) Health care professional.--The term ``health care 
     professional'' means any individual who provides health care 
     services in a State and who is required by the laws or 
     regulations of the State to be licensed or certified by the 
     State to provide such services in the State.
       (4) Health care provider.--The term ``health care 
     provider'' means any organization or institution that is 
     engaged in the delivery of health care services in a State 
     and that is required by the laws or regulations of the State 
     to be licensed or certified by the State to engage in the 
     delivery of such services in the State.
       (5) Injury.--The term ``injury'' means any illness, 
     disease, or other harm that is the subject of a medical 
     malpractice liability action or a medical malpractice claim.
       (6) Medical malpractice liability action.--The term 
     ``medical malpractice liability action'' means a cause of 
     action brought in a State or Federal court against a health 
     care provider or health care professional by which the 
     plaintiff alleges a medical malpractice claim.
       (7) Medical malpractice claim.--The term ``medical 
     malpractice claim'' means a claim brought against a health 
     care provider or health care professional in which a claimant 
     alleges that injury was caused by the provision of (or the 
     failure to provide) health care services, except that such 
     term does not include--
       (A) any claim based on an allegation of an intentional 
     tort;
       (B) any claim based on an allegation that a product is 
     defective that is brought against any individual or entity 
     that is not a health care professional or health care 
     provider; or
       (C) any claim brought pursuant to any remedies or 
     enforcements provision of law.

     SEC. 102. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION 
                   MECHANISMS.

       (a) Application to Malpractice Claims Under Plans.--Prior 
     to or immediately following the commencement of any medical 
     malpractice action, the parties shall participate in the 
     alternative dispute resolution system administered by the 
     State under subsection (b). Such participation shall be in 
     lieu of any other provision of Federal or State law or any 
     contractual agreement made by or on behalf of the parties 
     prior to the commencement of the medical malpractice action.
       (b) Adoption of Mechanism by State.--Each State shall--
       (1) maintain or adopt at least one of the alternative 
     dispute resolution methods satisfying the requirements 
     specified under subsection (c) and (d) for the resolution of 
     medical malpractice claims arising from the provision of (or 
     failure to provide) health care services to individuals 
     enrolled in a health plan; and
       (2) clearly disclose to enrollees (and potential enrollees) 
     the availability and procedures for consumer grievances, 
     including a description of the alternative dispute resolution 
     method or methods adopted under this subsection.
       (c) Specification of Permissible Alternative Dispute 
     Resolution Methods.--
       (1) In general.--The Board shall, by regulation, develop 
     alternative dispute resolution methods for the use by States 
     in resolving medical malpractice claims under subsection (a). 
     Such methods shall include at least the following:
       (A) Arbitration.--The use of arbitration, a nonjury 
     adversarial dispute resolution process which may, subject to 
     subsection (d), result in a final decision as to facts, law, 
     liability or damages.
       (B) Claimant-requested binding arbitration.--For claims 
     involving a sum of money that falls below a threshold amount 
     set by the Board, the use of arbitration not subject to 
     subsection (d). Such binding arbitration shall be at the sole 
     discretion of the claimant.
       (C) Mediation.--The use of mediation, a settlement process 
     coordinated by a neutral third party without the ultimate 
     rendering of a formal opinion as to factual or legal 
     findings.
       (D) Early neutral evaluation.--The use of early neutral 
     evaluation, in which the parties make a presentation to a 
     neutral attorney or other neutral evaluator for an assessment 
     of the merits, to encourage settlement. If the parties do not 
     settle as a result of assessment and proceed to trial, the 
     neutral evaluator's opinion shall be kept confidential.
       (E) Certificate of merit.--The requirement that a medical 
     malpractice plaintiff submit to the court before trial a 
     written report by a qualified specialist that includes the 
     specialist's determination that, after a review of the 
     available medical record and other relevant material, there 
     is a reasonable and meritorious cause for the filing of the 
     action against the defendant.
       (2) Standards for establishing methods.--In developing 
     alternative dispute resolution methods under paragraph (1), 
     the Board shall assure that the methods promote the 
     resolution of medical malpractice claims in a manner that--
       (A) is affordable for the parties involved;
       (B) provides for timely resolution of claims;
       (C) provides for the consistent and fair resolution of 
     claims; and
       (D) provides for reasonably convenient access to dispute 
     resolution for individuals enrolled in plans.
       (3) Waiver authority.--Upon application of a State, the 
     Board may grant the State the authority to fulfill the 
     requirement of subsection (b) by adopting a mechanism other 
     than a mechanism established by the Board pursuant to this 
     subsection, except that such mechanism must meet the 
     standards set forth in paragraph (2).
       (d) Further Redress.--Except with respect to the claimant-
     requested binding arbitration method set forth in subsection 
     (c)(1)(B), and notwithstanding any other provision of a law 
     or contractual agreement, a plan enrollee dissatisfied with 
     the determination reached as a result of an alternative 
     dispute resolution method applied under this section may, 
     after the final resolution of the enrollee's claim under the 
     method, bring a cause of action to seek damages or other 
     redress with respect to the claim to the extent otherwise 
     permitted under State law. The results of any alternative 
     dispute resolution procedure are inadmissible at any 
     subsequent trial, as are all statements, offers, and other 
     communications made during such procedures, unless otherwise 
     admissible under State law.

     SEC. 103. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY 
                   FEES.

       (a) In General.--An attorney who represents, on a 
     contingency fee basis, a plaintiff in a medical malpractice 
     liability action may not charge, demand, receive, or collect 
     for services rendered in connection with such action 
     (including the resolution of the claim that is the subject of 
     the action under any alternative dispute resolution system) 
     in excess of--
       (1) 33\1/3\ percent of the first $150,000 of the total 
     amount recovered by judgment or settlement in such action; 
     plus
       (2) 25 percent of any amount recovered above the amount 
     described in paragraph (1);
     unless otherwise determined under State law. Such amount 
     shall be computed after deductions are made for all the 
     expenses associated with the claim other than those 
     attributable to the normal operating expenses of the 
     attorney.
       (b) Calculation of Periodic Payments.--In the event that a 
     judgment or settlement includes periodic or future payments 
     of damages, the amount recovered for purposes of computing 
     the limitation on the contingency fee under subsection (a) 
     may, in the discretion of the court, be based on the cost of 
     the annuity or trust established to make the payments. In any 
     case in which an annuity or trust is not established to make 
     such payments, such amount shall be based on the present 
     value of the payments.
       (c) Contingency Fee Defined.--As used in this section, the 
     term ``contingency fee'' means any fee for professional legal 
     services which is, in whole or in part, contingent upon the 
     recovery of any amount of damages, whether through judgment 
     or settlement.

     SEC. 104. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL 
                   SOURCES.

       (a) Reduction of Award.--The total amount of damages 
     recovered by a plaintiff in a medical malpractice liability 
     action shall be reduced by an amount that equals--
       (1) the amount of any payment which the plaintiff has 
     received or to which the plaintiff is presently entitled on 
     account of the same injury for which the damages are awarded, 
     including payment under--
       (A) Federal or State disability or sickness programs;
       (B) Federal, State, or private health insurance programs;
       (C) private disability insurance programs;
       (D) employer wage continuation programs; and
       (E) any other program, if the payment is intended to 
     compensate the plaintiff for the same injury for which 
     damages are awarded; less
       (2) the amount of any premiums or any other payments that 
     the plaintiff has paid to be eligible to receive the payment 
     described in paragraph (1) and any portion of the award 
     subject to a subrogation lien or claim.
       (b) Subrogation.--The court may reduce a subrogation lien 
     or claim described in subsection (a)(2) by an amount 
     representing reasonable costs incurred in securing the award 
     subject to the lien or claim.
       (c) Inapplicability of Section.--This section shall not 
     apply to any case in which the court determines that the 
     reduction of damages pursuant to subsection (a) would 
     compound the effect of any State law limitation on damages so 
     as to render the plaintiff less than fully compensated for 
     his or her injuries.
     [[Page S5899]] SEC. 105. PERIODIC PAYMENT OF AWARDS.

       (a) In General.--A party to a medical malpractice liability 
     action may petition the court to instruct the trier of fact 
     to award any future damages on an appropriate periodic basis. 
     If the court, in its discretion, so instructs the trier of 
     fact, and damages are awarded on a periodic basis, the court 
     may require the defendant to purchase an annuity or other 
     security instrument (typically based on future damages 
     discounted to present value) adequate to assure payments of 
     future damages.
       (b) Failure or Inability To Pay.--With respect to an award 
     of damages described in subsection (a), if a defendant fails 
     to make payments in a timely fashion, or if the defendant 
     becomes or is at risk of becoming insolvent, upon such a 
     showing the claimant may petition the court for an order 
     requiring that remaining balance be discounted to present 
     value and paid to the claimant in a lump-sum.
       (c) Modification of Payment Schedule.--The court shall 
     retain authority to modify the payment schedule based on 
     changed circumstances.
       (d) Future Damages Defined.--As used in this section, the 
     term ``future damages'' means any economic or noneconomic 
     loss other than that incurred or accrued as of the time of 
     judgment.

     SEC. 106. CONSTRUCTION.

       Nothing in this title shall be construed to preempt any 
     State law that sets a maximum limit on total damages.

   PART 2--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

     SEC. 201. STATE MALPRACTICE REFORM DEMONSTRATION PROJECTS.

       (a) Establishment.--The Secretary shall award grants to 
     States for the establishment of malpractice reform 
     demonstration projects in accordance with this section. Each 
     such project shall be designed to assess the fairness and 
     effectiveness of one or more of the following models:
       (1) No-fault liability.
       (2) Enterprise liability.
       (3) Practice guidelines.
       (b) Definitions.--For purposes of this section:
       (1) Medical adverse event.--The term ``medical adverse 
     event'' means an injury that is the result of medical 
     management as opposed to a disease process that creates 
     disability lasting at least one month after discharge, or 
     that prolongs a hospitalization for more than one month, and 
     for which compensation is available under a no-fault medical 
     liability system established under this section.
       (2) No-fault medical liability system.--The terms ``no-
     fault medical liability system'' and ``system'' mean a system 
     established by a State receiving a grant under this section 
     which replaces the common law tort liability system for 
     medical injuries with respect to certain qualified health 
     care organizations and qualified insurers and which meets the 
     requirements of this section.
       (3) Provider.--The term ``provider'' means physician, 
     physician assistant, or other individual furnishing health 
     care services in affiliation with a qualified health care 
     organization.
       (4) Qualified health care organization.--The term 
     ``qualified health care organization'' means a hospital, a 
     hospital system, a managed care network, or other entity 
     determined appropriate by the Secretary which elects in a 
     State receiving a grant under this section to participate in 
     a no-fault medical liability system and which meets the 
     requirements of this section.
       (5) Qualified insurer.--The term ``qualified insurer'' 
     means a health care malpractice insurer, including a self-
     insured qualified health care organization, which elects in a 
     State receiving a grant under this section to participate in 
     a no-fault medical liability system and which meets the 
     requirements of this section.
       (6) Enterprise liability.--The term ``enterprise 
     liability'' means a system in which State law imposes 
     malpractice liability on the health plan in which a physician 
     participates in place of personal liability on the physician 
     in order to achieve improved quality of care, reductions in 
     defensive medical practices, and better risk management.
       (7) Practice guidelines.--The term ``practice guidelines'' 
     means guidelines established by the Agency for Health Care 
     Policy and Research pursuant to the Public Health Service Act 
     or this Act.
       (c) Applications by States.--
       (1) In general.--Each State desiring to establish a 
     malpractice reform demonstration project shall submit an 
     application to the Secretary at such time and in such manner 
     as the Secretary shall require.
       (2) Contents of application.--An application under 
     paragraph (1) shall include--
       (A) an identification of the State agency or agencies that 
     will administer the demonstration project and be the grant 
     recipient of funds for the State;
       (B) a description of the manner in which funds granted to a 
     State will be expended and a description of fiscal control, 
     accounting, and audit procedures to ensure the proper 
     dispersal of and accounting for funds received under this 
     section; and
       (C) such other information as the Secretary determines 
     appropriate.
       (3) Consideration of applications.--In reviewing all 
     applications received from States desiring to establish 
     malpractice demonstration projects under paragraph (1), the 
     Secretary shall consider--
       (A) data regarding medical malpractice and malpractice 
     litigation patterns in each State;
       (B) the contributions that any demonstration project will 
     make toward reducing malpractice and costs associated with 
     health care injuries;
       (C) diversity among the populations serviced by the 
     systems;
       (D) geographic distribution; and
       (E) such other criteria as the Secretary determines 
     appropriate.
       (d) Evaluation and Reports.--
       (1) By the states.--Each State receiving a grant under this 
     section shall conduct on-going evaluations of the 
     effectiveness of any demonstration project established in 
     such State and shall submit an annual report to the Secretary 
     concerning the results of such evaluations at such times and 
     in such manner as the Secretary shall require.
       (2) By the secretary.--The Secretary shall submit an annual 
     report to Congress concerning the fairness and effectiveness 
     of the demonstration projects conducted under this section. 
     Such report shall analyze the reports received by the 
     Secretary under paragraph (1).
       (e) Funding.--
       (1) In general.--There are authorized to be appropriated 
     such sums as may be necessary to carry out the purposes of 
     this section.
       (2) Limitations on expenditures.--
       (A) Administrative expenses.--Not more than 10 percent of 
     the amount of each grant awarded to a State under this 
     section may be used for administrative expenses.
       (B) Waiver of cost limitations.--The limitation under 
     subparagraph (A) may be waived as determined appropriate by 
     the Secretary.
       (f) Eligibility for No-Fault Demonstration.--A State is 
     eligible to receive a no-fault liability demonstration grant 
     if the application of the State under subsection (c) 
     includes--
       (1) an identification of each qualified health care 
     organization selected by the State to participate in the 
     system, including--
       (A) the location of each organization;
       (B) the number of patients generally served by each 
     organization;
       (C) the types of patients generally served by each 
     organization;
       (D) an analysis of any characteristics of each organization 
     which makes such organization appropriate for participation 
     in the system;
       (E) whether the organization is self-insured for 
     malpractice liability; and
       (F) such other information as the Secretary determines 
     appropriate;
       (2) an identification of each qualified insurer selected by 
     the State to participate in the system, including--
       (A) a schedule of the malpractice insurance premiums 
     generally charged by each insurer under the common law tort 
     liability system; and
       (B) such other information as the Secretary determines 
     appropriate;
       (3) a description of the procedure under which qualified 
     health care organizations and insurers elect to participate 
     in the system;
       (4) a description of the system established by the State to 
     assure compliance with the requirements of this section by 
     each qualified health care organization and insurer; and
       (5) a description of procedures for the preparation and 
     submission to the State of an annual report by each qualified 
     health care organization and qualified insurer participating 
     in a system that shall include--
       (A) a description of activities conducted under the system 
     during the year; and
       (B) the extent to which the system exceeded or failed to 
     meet relevant performance standards including compensation 
     for and deterrence of medical adverse events.
       (g) Eligibility for Enterprise Liability Demonstration.--A 
     State is eligible to receive an enterprise liability 
     demonstration grant if the State--
       (1) has entered into an agreement with a health plan (other 
     than a fee-for-service plan) operating in the State under 
     which the plan assumes legal liability with respect to any 
     medical malpractice claim arising from the provision of (or 
     failure to provide) services under the plan by any physician 
     participating in the plan; and
       (2) has provided that, under the law of the State, a 
     physician participating in a plan that has entered into an 
     agreement with the State under paragraph (1) may not be 
     liable in damages or otherwise for such a claim and the plan 
     may not require such physician to indemnify the plan for any 
     such liability.
       (h) Eligibility for Practice Guidelines Demonstration.--A 
     State is eligible to receive a practice guidelines 
     demonstration grant if the law of the State provides that in 
     the resolution of any medical malpractice action, compliance 
     or non-compliance with an appropriate practice guideline 
     shall be admissible at trial as a rebuttable presumption 
     regarding medical negligence.
                 Amendment No. 615 to Amendment No. 603

  Mr. KENNEDY. Mr. President, I ask that the pending amendment be 
temporarily set aside, and I send an amendment to the desk and ask that 
it be considered.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  [[Page S5900]] The PRESIDING OFFICER. The clerk will report the 
amendment.
  The assistant legislative clerk read as follows:

       The Senator from Massachusetts [Mr. Kennedy] proposes an 
     amendment numbered 615 to amendment No. 603.

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

       On page 8, line 20, insert after ``subsection'' the 
     following: ``(b) and''.
       Strike the material from page 9, line 4 through page 10, 
     line 17, and insert in lieu thereof the following: ``The 
     provisions of this subtitle shall not be construed to preempt 
     any state statute but shall govern any question with respect 
     to which there is no state statute.''

  Mr. KENNEDY. Mr. President, I will include the two statements, one on 
the substitute which I referred to briefly now and in great detail last 
week, which I will expand on in my extended remarks, and the other 
deals with the preemption amendment.
  As I understand from the leadership, we will consider those in a 
timely fashion in our procedure outlined by our leader tomorrow. I 
thank my colleagues. I yield the floor.
  Mr. COHEN. Mr. President, I wish to address a few comments on the 
underlying bill, the Product Liability Fairness Act, which attempts to 
address some of the abuses that have occurred in the civil justice 
system. Unfortunately, the cure being offered is worse than the disease 
itself.
  I am struck by the irony that many, particularly on this side of the 
aisle, have been calling for the deregulation of our economy, for 
returning power to the States, for empowering the people, and for 
trusting the judgment of our citizens. They invoke the 10th amendment 
as if remembering the Alamo--remember the 10th amendment.
  Yet, at the very same time we are calling for this deregulation, this 
demassification--if I can use Toffler's phrase --of the power structure 
in Washington by returning power back to the States and local 
communities, we are now calling for the passage of another Federal 
piece of legislation.
  At a time when we are searching for ways to streamline the civil 
justice system and to make litigation less cumbersome and costly, this 
bill is going to complicate the law and make litigation even more 
expensive.
  At a time when we are trying to improve the lives of hard-working 
middle-class Americans, this bill is going to make it more difficult 
for these citizens to obtain compensation when they are injured, at 
work or at home, from defective products.
  I am well aware that there have been cases involving abuse of our 
civil justice system. We have seen cases of outrageous jury awards and 
frivolous lawsuits, and they have undermined public confidence and 
interest in our legal institutions. Unfortunately, the bill before the 
Senate is not narrowly tailored to root out these abuses. Rather, it is 
an unprecedented and unwarranted Federal takeover of a core State 
responsibility.
  Our system of federalism is based on the principle that the national 
government should address problems that confront the Nation as a whole, 
and State governments, which are closer to the people in both distance 
and temperament, should be responsible for local concerns.
  Writing of ``Our Federalism'' almost 25 years ago, Justice Hugo Black 
stated that:

       The concept . . . represents . . . a system in which there 
     is sensitivity to the legitimate interest of both State and 
     National Governments, and in which the National Government, 
     anxious though it may be to vindicate and protect federal 
     rights and federal interests, always endeavors to do so in 
     ways that will not unduly interfere with the legitimate 
     activities of the States.

  No less of a proponent of a strong national government than Alexander 
Hamilton fully understood the genius of a system that divided powers 
between the national and State governments. He wrote in Federalist No. 
17 that ``Commerce, finance, negotiation and war,'' should be the 
prerogatives of the national government, while ``the administration of 
private justice . . . [is] proper to be provided for by local 
legislation.''
  There are few areas of law that are more appropriate in State 
legislation than the law of torts. In essence, tort laws deal with the 
duties and responsibilities that members of a community have toward one 
another. Tort law is, as Alexander Hamilton put it, ``private 
justice.'' It is an inherently local issue. That is the reason, for the 
past two centuries, from the beginning of our Republic, that we have 
delegated this responsibility of tort law to the State legislatures and 
courts.
  The same is true of the product liability law, which emerged as a key 
element of tort law in the 1960's. Through time-tested methods of 
common law adjudication and legislative adjustments, the courts and 
legislatures in each State have worked together to develop laws that 
strike the appropriate balance between the needs of plaintiffs and 
defendants and those of consumers and business.
  Over the past decade, many States have begun to reform their tort 
systems by experimenting with alternative dispute resolution, limiting 
punitive damages, and changing liability standards. The States continue 
to experiment with product liability reforms to achieve a balance 
between the demands of the modern economy and the need to ensure the 
products that enter that marketplace are safe. This is the way the 
Federal system is supposed to work. As Justice Louis Brandeis noted, 
``It is one of the happy incidents of the Federal system that a single 
courageous State may, if its citizens choose, serve as a laboratory; 
and try novel, social, and economic experiments without risk to the 
rest of the country.''
  The bill before Congress would bring the experimentation that is 
taking place in our States to a grinding halt by wiping most of the 
State product liability laws off the books and replacing them with one-
size-fits-all Federal law developed right here in Washington. This is 
the same Washington that has been so demonized as late for passing too 
many Federal laws.
  Now, suddenly, it is in the interests of manufacturers to have a one-
size-fits-all piece of legislation. It appears as if Congress, which 
has had virtually no experience in legislating in this area over the 
past two centuries, believes it has found the single answer to the ills 
of the civil justice system. It has decided to impose that system on 
the entire Nation.
  Ironically, it is occurring at a time when the Federal Government is 
already said to be too large. The public already resents its intrusion 
into affairs that properly belong before the States.
  Congress ought to be focusing on health care reform, the budget 
deficit, and entitlement reform, not to mention terrorism and nuclear 
proliferation. These are appropriate concerns of Congress. The time 
Congress spends wading in the minutiae of product liability law, a 
subject the States are fully capable of regulating, will be time that 
should be spent on more pressing national concerns.
  The supporters of this legislation maintain that a national product 
liability law is necessary to provide uniformity and to increase 
predictability. I believe this bill will have precisely the opposite 
effect. Litigants are no longer going to be able to rely upon well-
established State law. Instead, they will be faced with the uncertainty 
of a Federal statute loaded with undefined, untried, and untested legal 
principles.
  This bill is going to make the law more complicated. Since certain 
aspects of the State laws are going to be preempted and others are not, 
litigation is going to proceed under an amalgam of State and Federal 
law.
  I will give you an example, Mr. President. S. 565 creates a new 
standard of liability for product sellers but does not change the law 
pertaining to the manufacturers of those products. So in a case brought 
both against a manufacturer and a seller of an allegedly defective 
product, the court is going to be required to apply the Federal law to 
one defendant and the State law to another. This unnecessary complexity 
will lead to greater litigation expenses, not less.
  Mr. President, one of the great legal scholars of this century, Prof. 
Herbert Wechsler of Columbia University, once wrote that ``national 
action has * * * always been regarded as exceptional in our polity, an 
intrusion to 
[[Page S5901]] be justified by some necessity, the special rather than 
the ordinary case.''
  This presumption against Federal involvement in local affairs has not 
been overcome by the evidence that has been presented to this body. The 
so-called litigation crisis that is often cited by the sponsors of this 
legislation simply does not exist.
  The most comprehensive study to date of product liability suits 
indicates that they comprise 0.36 percent of all civil filings--hardly 
a litigation explosion. If you take away the asbestos cases, which I 
think are unique in our history, the number of Federal product 
liability cases declined by over 35 percent during the late 1980's.
  Proponents of the bill also claim that there is an explosion of 
punitive damages and rely heavily upon horror stories of irresponsible 
jury awards as a justification for Federal preemption. Putting aside 
the fact that for every punitive damage horror story, there is a more 
compelling story of manufacturer misconduct, we should not legislate on 
the basis of anecdote. Listen to the Wall Street Journal, an open 
advocate of reform, which reports that the debate is largely ``driven 
by anecdote'' and ``truth [has been the] first casualty of tort-
reform.''
  I think the case for punitive damages has been overstated. The 
objective facts demonstrate there have been few punitive damage awards 
in product liability cases in the recent past. One widely cited study 
indicates that only 355 punitive damage awards were entered by juries 
during the years 1965 to 1990. And 25 percent of these verdicts were 
reversed or remanded on appeal.
  So there is no evidence that runaway punitive damage verdicts have 
wreaked havoc, certainly not in my State of Maine. Punitive damages 
were imposed in only three product liability cases during a 25-year 
period--just three cases. The juries in Maine have acted responsibly. 
They have applied State law in a commonsense fashion and reserved the 
sanction of punitive damages for extreme cases in which there has been 
either malicious or wanton disregard for public safety on the part of 
some companies. Maine does not need a Federal solution for a problem 
that does not exist in our State. Yet, this is precisely what this law 
would do--force Maine to abandon its law.
  Our product liability laws have been subject to sweeping criticism, 
but it cannot be denied that the system has been a very important 
protection for American consumers. From the Ford Pinto to the Dalkon 
shield, product liability laws and suits have caused dangerous products 
to be taken off the market, products that have caused horrific injuries 
and multiple deaths. Without product liability, including the threat of 
punitive damages, American consumers would be at far greater risk than 
they are today.
  Let me recall a program I saw that involved a lobbyist for tobacco 
companies. He indicated that he would stop at nothing whatsoever. It 
did not matter what study was concocted; it did not matter whether it 
was truthful or untruthful. He used every conceivable trick in the book 
in order to defeat any legislation that would protect the American 
people from the effects of tobacco. This man is now suffering from 
cancer. I believe he had cancer of the throat and it spread to his hip. 
This may account for his change of heart in terms of revealing the 
kinds of tactics that have been applied by the company. I do not know 
if the allegations he made on this program are true. But if they are--
if companies have deliberately lied, deliberately falsified documents, 
and concocted studies in order to defeat consumer protection 
legislation--is that not a case in which we want to see punitive 
damages that are not limited by the amounts set forth in this bill?
  Let me give another example. Suppose a manufacturer of children's 
toys learns that a product has a dangerous defect that is likely to 
cause, let us say, 10 deaths over the lifetime of the product. Under 
current law, the company would probably recall the product. It would 
fix that defect, regardless of the cost, because it could not possibly 
risk the punitive damage award or suits that might follow.
  But under this bill, that company would know that, since children 
have little or no wages, the maximum punitive damage award would be 
$250,000 per fatal injury. If the toy makes $20 million to $30 million 
in profit, the company might well decide that it makes economic sense 
not to recall a dangerous product.
  I suspect this may have been the line of thinking by Ford Motor Co. 
when it put the Pinto on the market. And without punitive damages, many 
other dangerous products may be unleashed on the unsuspecting American 
consumer.
  This does not mean the system is free of abuses. In a recent case 
from Alabama, a jury awarded $4 million in punitive damages because BMW 
failed to disclose that a car sold as new had in fact been damaged, and 
then repainted on the way from the factory to the showroom. Even though 
BMW may have acted wrongly in this case, in my judgment this punitive 
award was well out of proportion to the seriousness of the misconduct 
on the part of the company.
  So we have examples of excessive jury awards that are outrageous from 
time to time. They undermine public support for the civil justice 
system. A narrowly tailored bill designed to curb runaway jury verdicts 
may be deserving of support. This bill, however, is not targeted at 
this problem. It uses a sledgehammer where a scalpel may be more 
appropriate.
  Regardless of the outcome of this debate, I think the legal 
profession has to undertake a concerted effort to address a major 
premise that underlies this legislation--that the law and the legal 
profession no longer serve a valid public interest.
  Lawyers are no longer held in as high regard as some once were. 
Books, plays, and movies were written about Clarence Darrow for his 
dedication to providing justice for the common man. Lawyers like 
Thurgood Marshall and Ruth Bader Ginsburg are revered for striking down 
legal barriers based on race and gender.
  However, the esteem which the legal profession once held has fallen 
quite substantially in recent years. Attorneys are often portrayed as 
being more interested in making profits than promoting the interest of 
justice.
  I believe that it is a minority of the profession that casts 
aspersion on the broad majority of lawyers who are dedicated to the 
best tradition of the profession and volunteer much of their time to 
public service. It is up to a majority of the profession to discipline 
those who file frivolous lawsuits, who sue parties only because they 
have a deep pocket, or who run up the cost of litigation solely to 
induce a settlement.
  One of the great virtues of our civil justice system is that everyone 
has a right to have his or her grievance heard before a court of law. 
When that principle is abused, the very foundations of the system are 
called into question. So I think the legal profession has to take swift 
and meaningful action in order to rebuild the public's confidence in 
our civil justice system.
  The legislation now pending before the Senate is not the right answer 
to these problems. It is a one-size-fits-all Federal solution that will 
end State experimentation in tort reform. It will impose uniformity on 
regions of the country with different needs and values. The entire 
bill, in my judgment, is an affront to the principle of federalism. 
State governments have demonstrated the capability of both developing 
and reforming product liability law. There is no need for the Federal 
Government to infringe on yet another area of State sovereignty.
  Mr. President, over the weekend, I, like the Senator from 
Massachusetts, saw many advertisements on television, some dealing with 
medical malpractice, others with the impact of product liability 
litigation on small businesses. Of course, small companies as well as 
large companies have the ability to purchase insurance to cover 
themselves for liability suits. Manufacturers have the ability to 
purchase insurance to cover their exposure to liability. But when 
companies put into the stream of commerce a product that is inherently 
dangerous or has a defect and that defect causes an injury to the 
citizens of this country, the manufacturer should bear that 
responsibility, not the consumer.
  This bill seeks to put a limitation on the ability of consumers to 
recover for the damages that have been inflicted 
[[Page S5902]] upon them and, yes, for punitive damages to discourage 
companies that either act willfully or in wanton disregard for public 
safety. These cases demand that punitive damages be imposed in order to 
discourage and deter manufacturers and the distributors of dangerous 
products from continuing to inflict harm upon the public.
  Commercials that I saw over the weekend said we are addressing this 
problem of medical malpractice in California. The State legislature 
passed a medical malpractice reform law and guess what? Those lawsuits 
have now declined. We have also passed a medical malpractice reform law 
in the State of Maine. We have prelitigation screening panels. We set 
statewide standards for doctors and hospitals. States can--in fact, 
have--adopted changes in their tort law to deal with their particular 
problems. But in a State like Maine, which, over a 25-year period, has 
actually awarded punitive damages in three product liability cases, do 
we need a Federal law to tell us what to do?
  It is an insult to the people of this country to say that the 12 men 
and women sitting in the jury cannot be trusted to weigh the evidence 
and decide to impose or not impose damages. This legislation sets a 
uniform national standard for damage awards. It says: You juries cannot 
go above this, your judgment cannot be trusted. We are saying that no 
matter how egregious the offense, no matter how defective the product, 
no matter how wanton the disregard for public safety, we do not trust 
you, ladies and gentlemen of the jury, to do what is right, to exercise 
common sense. And we here in the Halls of Congress we are going to tell 
you exactly how far you can go.
  To me, Mr. President, it is an insult to all the people of this 
country to say that we no longer have faith in their judgment, that 
only Congress can determine exactly how high they can go in terms of 
compensating citizens of their community who have been injured by 
defective products. I think this contravenes everything that is being 
said on this side of the aisle about limiting the scope of government, 
reducing the power of Washington, returning power to the people, 
deregulating the economy, and revering the 10th amendment.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SPECTER. 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. SPECTER. Mr. President, I have sought recognition to comment 
about punitive damages in our legal system as they apply to tort 
reform. I have spoken before on this bill and have noted that I have 
had experience representing both plaintiffs and defendants in personal 
injury cases and had one very involved product liability case which I 
described in a floor statement a week ago today. I have noted my 
concern that there is room for reform of product liability tort law. 
But my concern is that it be done very, very carefully because the body 
of law in the United States, common law development is slow, laborious, 
careful. Common law builds up by accretion or encrustation over a long 
period of time and is very different from the kind of processes which 
we have in legislation where there are frequently only one or two 
Senators present at hearings and where markups are done without the 
kind of background or careful evidentiary study which marks development 
of the law, case law and common law.
  There is a very erudite analysis of punitive damages in the Iowa Law 
Review, volume 78, appearing at page 1, published in 1992, by Prof. 
Michael Rustad and there are a number of aspects of that article about 
which I would like to comment.
  Even though this is a lengthy law review article, it is worth 
printing in full in the Congressional Record because of the importance 
of tort liability generally and product liability specifically and 
punitive damages as it impacts on the legislative consideration which 
we have before the Senate.
  My comments will be relatively brief compared to the scope of the 
article.
  I start by referring to four empirical studies of punitive damages in 
product liability cited in Professor Rustad's law review article.
  The first is by the Rand Institute for Civil Justice, which studied 
24,000 jury verdicts in Cook County, IL, and San Francisco, CA, between 
1960 and 1984. The Rand study stated that the ``punitive damages 
picture in personal injury cases has changed very little in 25 years.''
  As noted in this law review article, the Rand study states: ``Product 
liability cases have been of special concern to many critics, but our 
analyses indicate that punitive damages were awarded in only four 
product liability cases in San Francisco and two in Cook County from 
1960 through 1984.'' It further notes that, ``The rarity of punitive 
damage awards in products liability cases suggests that there is little 
need for tort reform.''
  The second empirical study noted in this law review article is by the 
American Bar Foundation, which examined 25,627 jury verdicts handed 
down from 1981 to 1985, drawn from State jury verdict reporters in 47 
counties in 11 States. This study found that in 5 percent of the 
verdicts there was an inclusion of punitive damages and that products 
liability accounted for 3.8 percent of the 25,627 verdicts. Of the 967 
products liability verdicts, the study found 34 cases in which punitive 
damages were awarded. The researchers concluded that the awards were 
generally quite proportionate to the actual damages, and they concluded 
that ``the median punitive damage award is not at a level that is 
likely to `boggle the mind.'''
  The third empirical study noted in the Iowa Law Review article is the 
GAO study on the frequency and size of punitive damage awards in 
product liability cases in five States between 1983 and 1985. There was 
a review of court records for 305 product liability cases resolved 
through trial in Arizona, Massachusetts, Missouri, North Dakota, and 
South Carolina. The GAO supplemented official court records with 
posttrial interviews with attorneys. The General Accounting Office 
found that punitive damage awards were neither routine nor excessively 
large and that posttrial appeals and settlements substantially reduced 
the amount of punitive damage awards.
  The fourth empirical study noted in the Iowa Law Review was conducted 
by Judge Richard Posner, a distinguished court of appeals judge in the 
Federal system, and Prof. William Landes of the University of Chicago, 
who examined all products liability cases ``reported in the 10 most 
recent volumes of each of the West Publishing Company's regional 
reporters'' and all ``product liability cases in the federal courts of 
appeals from the beginning of 1982 to November 1984.'' This study found 
```punitive damages were awarded in the trial court in 10 of 172 
cases.' The award was affirmed in whole in only one of the ten cases. 
Appellate judges reversed and remanded six of the cases for further 
proceedings.''
  Mr. President, in an era when we are looking toward less Federal 
regulation, I think it is very important that we take a close look at 
what private actions import. This is an area which has attracted my 
attention since law school days, when, as a member of the board of 
editors of the Yale Law Review, I wrote an article on private 
prosecution, which is a somewhat different line, on the need when there 
was unwarranted inaction by the public prosecutor. In the Senate, I 
have authored legislation to establish a private right of action for 
people who are damaged by unfair foreign competition, where goods come 
in the United States either as a result of subsidy or dumping because 
of the insufficient resolution of proceedings in the International 
Trade Commission.
  At this point, I am going to refer to a number of cases, some of 
which are cited in the Iowa Law Review article and some of which are 
found in other places.
  One case of considerable interest was Richardson-Merrell's 
concealment of side effects of MER/29, an anticholesterol drug. In a 
case litigated, Toole versus Richardson-Merrell, Inc., in the 
California court of appeals, the evidence was that there had been 
fictitious reports filed by the company, that none of the abnormal 
[[Page S5903]] blood changes encountered in experiments was disclosed 
and that there was a falsified chart prepared under protest by one of 
company's employees which was included in the application. One 
advertising brochure stated that MER/29 was ``virtually nontoxic and 
remarkably free from side effects, even on prolonged clinical use.''
  The evidence further showed evidence of high-level management with 
knowledge of the concealment of MER/29's known defects. There were 
1,500 civil suits filed after there were guilty pleas by the company's 
executives. Three scientists pleaded nolo contendere to criminal fraud 
charges and were fined a total of $80,000 in the context of the 
criminal conduct which seriously injured an estimated 5,000 consumers.
  Of the 1,500 civil cases which were filed in the wake of those 
criminal pleas, juries awarded punitive damages in three of those 
cases.
  Another case of some concern noted in the Iowa Law Review article is 
one involving the Dalkon shield put out by A. H. Robins, in a case 
captioned Plaintiff versus A. H. Robins Co. The Supreme Court of 
Colorado found evidence upholding a punitive damage award with the 
following statement:

       Robins' marketing program which occurred over a long period 
     of time was directed to a vast array of unwary consumers and 
     was accompanied by false claims of safety and a conscious 
     disregard of a life-threatening hazard known by it to be 
     associated with its product. Robins accumulated gross 
     revenues which exceeded $11 million from the shield alone and 
     its net worth nearly doubled during the marketing period of 
     this device.
  Another case worthy of special note, although there are many cited in 
this law review article, is a case captioned Duddleston versus Syntex 
Labs, Inc., which involved the company's failure to test a soy-derived 
baby formula which resulted in thousands of infants suffering brain 
damage. The company had removed salt from its product without 
considering the effect on child development, and that was a causative 
factor in brain damage and learning disabilities.
  Another case worthy of special note is captioned Batteast versus 
Wyeth Laboratories in which there was an assessment of substantial 
punitive damages for failure to warn physicians of certain propensities 
dangerous to children in the chemical composition of a drug, and the 
basis for the punitive damages was the company's failure to market the 
suppository in compliance with Federal Drug Administration adverse-
reaction guidelines.
  Among many of the other cases cited, my final reference is to the 
Minnesota Supreme Court decision in a case captioned Gryc versus 
Dayton-Hudson Corp. as follows:

       In April 1968, a letter from an official of [the defendant] 
     explained that satisfactory runs were made with flame-
     retardant flannelette using various chemicals, but that [the 
     defendant] was not going to use these products until Federal 
     law so required because of the cost factor. . . [T]he 
     decision not to use flame-retardant cotton flannelette was 
     merely an economic one for the benefit of [the defendant]--

  This gave rise to the imposition of punitive damages.
  In reviewing a number of cases, and these are only illustrative, Mr. 
President, of what exists in the field of tort liability, the famous 
case involving the Pinto automobile which had the gas tank in the rear 
and was justified in a letter from Ford Company to the Administrator of 
the National Highway Traffic Safety Administration which sought to 
justify the dangerous condition, because it was more cost-effective to 
suffer 180 burn deaths with 180 serious burn injuries and 2,100 burned 
vehicles at a total cost of $49.5 million, contrasted with the cost of 
repairing 1.5 million light trucks, 11 million cars at a unit cost of 
$11 per car, which would cost $137 million. This has already been 
placed in the Record, Mr. President, so I will not further burden the 
Record by asking that it be printed.
  Another matter of some notoriety involved the American Motors Corp. 
and its product, the Jeep, when there was an internal American Motors 
Corp. memo dated January 7, 1982, acknowledging a defect with the 
shackle system of the Jeep, which was known for many years to the 
company, and the following sentence from the memo is of some 
significance:

       Not to retrofit will subject Jeep Corporation to possible 
     punitive damages on a component which has previously been the 
     subject of several causes of action.

  I ask unanimous consent that this intracompany correspondence be 
printed in the Record for its probative value in showing that the 
possibility of punitive damages is something to be considered in 
retrofitting a vehicle to make it safer.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                      intracompany correspondence

     From: Mr. J.E. MacAfee,
     To: R.M. Huffstutler
     Subject: C.J. Shackles,
     Location--Ext: AMTEK/33223
     Date: January 7, 1962
     Copy to: C.S. Sklaren, W.C. Jones, C.E. Merritt.

       Confirming our telephone conversation of this P.M., we 
     understand that vehicle 1609 will soon be tested. This test 
     will be the fourth in the series of 1461, 1477, and 1484, a 
     test we presume will meet with the complete satisfaction of 
     you and your engineering staff.
       Upon successful completion of testing on the new shackle 
     design, we would appreciate the ECR being with obsolescence 
     and the new design being incorporated at the earliest 
     possible time. Assuming the shackle is released for CJ-5, CJ-
     7, Scrambler, and various export models, I will press for 
     retrofit of all CJ-7 and Scrambler vehicles produced in the 
     1982 model year. This action I believe is warranted since the 
     FMYSS 101-75 movable barrier 20 mon test which indicated a 
     problem was completed July 22, 1981, three weeks prior to the 
     1982 production. Not to retrofit will subject Jeep 
     Corporation to possible punitive damages on a component which 
     has previously been the subject of several causes of action. 
     Our legal staff has, to date, not seen the merits of testing 
     the current design before a jury; it is my belief that the 
     new design will have to be tried and thus Jeep Product 
     Engineering should have a sufficient data file to convince 
     not only engineers but lay persons as well.
       Any action by Engineering to our purchasing group to 
     forestall their dilatory tactics in this matter would be 
     appreciated. An early warning to them that the design will be 
     changed may preclude Jeep Corporation from having to pay for 
     stock ahead of our production requirements.
                                                 R.M. Huffstutler.

  Mr. SPECTER. Mr. President, an internal memo from the Cutter Co., 
which was involved in manufacturing blood factors for hemophiliacs, is 
of considerable interest. To the extent that an internal Cutter 
memorandum dated December 29, 1982, recommended several steps to warn 
about AIDS transmission through its factor concentrate product, this 
memo reads as follows, from one Ed Cutter to Jack Ryan and others:

       It appears to me to be advisable to include an AIDS warning 
     in our literature for certain factors.

  And there is a second document by a Dr. Bove, January 1983:

       This case increases the probability that AIDS may be spread 
     by blood. Further, the CDC--

  That is the Centers for Disease Control.

     continues to investigate the current cases aggressively and 
     may even have a few more. While I believe our report reacts 
     appropriately to the data at hand, I also believe that the 
     most we can do in this situation is to buy time.

  Until these documents were disclosed, the Cutter Co. argued that the 
obligation to warn did not arise until the spring of 1984. This same 
case has a cost/benefit analysis by the American Red Cross which 
concluded that it would cost more to make a correction than to treat 
the AIDS patients, with the testing costs being in the range of $13 to 
$67 million, whereas an evaluation of each AIDS case at $500,000 would 
require the prevention of some 30 to 134 AIDS claims to be cost-
effective. This suggests to me, Mr. President, a wholly inappropriate 
evaluation of cost analysis dealing with a deadly subject like AIDS.
  I ask unanimous consent that these internal corporate documents be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 cutter

     To: Jack Ryan, Carolyn Patrick, Wayne Johnson, Ralph 
         Roussall, George Akin
     From: Ed Cuttar
     Date: December 25, 1982
     Copes To: Arnold Laong
     Subject: AIDS.
       It appears to me to be advisable to include an AIDS warning 
     in our literature for Factor IX and Factor VIII. I realize 
     that very little is known about AIDS and the relationship the 
     products we manufacture have in causing 
     [[Page S5904]] the syndrome. However, litigation is 
     inevitable and we must demonstrate diligence in passing along 
     whatever we do know to the physicians who prescribe the 
     product. In my opinion, three steps are called for, once we 
     agree on the wording of our message.
       1. Include it in the package insert.
       2. Educate the sales force.
       3. Since MDs won't be reading the package insert in most 
     cases, send a letter to hematology specialists informing them 
     of the warning we are putting in the insert.
     Ed Cuttar.
                                                                    ____

     To: AIDS Working Group, Dr. Dood, Ms. Baum
     From: Dr. Cumming
     Date: 3/20/84
     Subject: Meeting request and report on: Progress on AIDS 
         marker testing marketing research.


                                summary

       Our review of AIDs marker testing issues to date brought 
     into question the value or continuing to proceed along lines 
     or developing a non scientific opinion research survey. 
     Specifically:
       Objectively it is difficult to make a case for adoption of 
     AIDS marker testing,
       Plasma industry projected adoption or such a test is a 
     rather obvious marketing initiative which will serve to 
     increase pressure on us, and
       ARCBS decision-making criteria are complicated by 
     considerations of ethics and public welfare as distinct from 
     competitive response.
       This last issue can be summarized nicely by reference to 
     ``false positives''. Essentially all anti core test results 
     are likely to be false positives. Specifically, it is 
     estimated that over 6,000,000 annual units are donated by 
     4,000,000 persons. With 5% normal population incidence of 
     anti core positive results this means 200,000 people may be 
     labelled as likely to get AIDS. Contrast this with a possible 
     50 cases per year of AIDS avoided (0.00025 of all positives). 
     Assuming these 200,000 people have additional testing done, 
     costs to society may be from $20,000,000 to $100,000,000 
     (based on $100 to $500 per false positive). And this does not 
     ascribe any value to mental anguish, time off work, etc. 
     These figures and issues make the direct cost of testing 
     minimal in comparison.
       It is from this perspective that we question the value of 
     continuing to develop a non projectable sampling effort and 
     request a meeting to clarify as precisely as possible where 
     we
      are heading and why.


                               background

       Attached for your information, review, and comment are:
       (1) A background document summarizing various marker tests 
     for AIDS, and estimating effectiveness and costs, and
       Three draft questionnaires designed to elicit the opinions 
     of various interest groups on marker tests for AIDS.
       The background document explores some of the costs and 
     benefits of implementing screening marker testing for AIDS 
     amongst blood donors. On the descriptive matrix, 
     characteristics such as effectiveness, ease of use, 
     availability, etc. are estimated, as well as other potential 
     advantages and public relations effects.
       The latter is an area of grave importance which must be 
     further explored. As you are aware, the possibility exists of 
     creating panic in the (normal) donor population from positive 
     test results, and incurring unnecessary costs to the health 
     care sector as these donors pursue further medical 
     evaluation, as well as reducing the size of the donor pool. 
     These effects must be carefully weighed against the possible 
     benefit of reassuring the blood recipient population and the 
     hypothetical benefit of reducing the incidence of 
     transfusion-associated AIDS (trx-AIDS).
       The cost matrix addresses the potential costs associated 
     with implementation of the various marker tests. Review of 
     this matrix indicates that costs for testing in all ARC Blood 
     Service regions would range from $15 million to $67 million. 
     If we assume that each average AIDS case has a value of $1M, 
     then to justify use of one of the tests would require an 
     expected reduction in trx-AIDS from ARC blood of 15 to 67 
     cases. Since trx-AIDS patients have averaged 50 years of age, 
     average earnings per worker are approximately $20,000 per 
     annum, and treatment for AIDS victims has averaged about 
     $80,000 * * * about $500,000. This lower benefit would 
     indicate a need to prevent 90 to 134 trx-AIDS cases from ARC 
     blood to justify use of a marker test exclusively on economic 
     considerations. In addition, these averted cases would have 
     to be over and above the number of cases prevented by 
     currently implemented screening measures.
       As an example, to economically justify anti-HBc testing in 
     all Blood Service regions, we would need to demonstrate an 
     anticipated rate of trx-AIDS (not prevented by screening 
     measures) of 1.75 cases per week, assuming an 88% 
     effectiveness rate of the test. This rate is considerably 
     above previous and
      current rates.


                                proposal

       To summarize the background document, implementation or any 
     AIDS marker test will be extremely expensive. Given the fact 
     that tax-AIDS is still a hypothesis, that there has been no 
     effective measurement or the success of the screening 
     procedures which have already been implemented, and that cost 
     justification or testing would rest on a considerably higher 
     incidence or tax-AIDS than is currently being observed, the 
     following recommendations are proposed for further 
     exploration.
       (1) Implement the confidential self-exclusion procedure, 
     currently used by New York Blood Center (NYBC), in all ARC 
     Blood Service regions.
       (2) Implement one of the marker tests in Los Angeles and 
     any other regions where there is reason to suspect a high 
     concentration of AIDS carriers.
       (3) Continue to evaluate the non-economic considerations 
     inherent in implementing one of the marker tests systemwide.
       It is in keeping with the last recommendation that the 
     three questionnaires are attached. The non-economic 
     considerations are primarily the opinions and beliefs of the 
     various publics which are served by ARC Blood Services. The 
     questionnaires which are attached are targeted at physicians 
     who prescribe blood, the general public including blood 
     donors and recipients, and third party payers such as 
     Medicare/Medicaid agencies and insurers. We intend to modify 
     or add to these questionnaires to also target hospital 
     administrators and other signatores of annual hospital/blood 
     region contracts.
       Relative to these questionnaires, we would appreciate 
     information or comments on the following:
       Decision making criteria given results of the survey, i.e. 
     what influence will the results of the survey have on a 
     decision whether or not to implement marker testing?
       Method of sampling and sample sizes
       Content and phrasing of questions
       Target audiences


                           purpose of meeting

       Answers to this first question are essential for further 
     development of the survey. Admittedly if public opinion could 
     determine that ARC implement testing, a very large sample 
     would be required, whereas if the questionnaires are designed 
     merely to ``test the waters'', a small screening sample would 
     suffice. At this point, we really can't see too much value in 
     a small, non-scientifically projectable sample. For such a 
     sample to be useful for other than field testing of an 
     instrument, we would have to observe a high degree of 
     unanimity or opinion. Given the subject matter this is 
     unlikely. For a large and statistically valid and reliable 
     sampling effort to be most useful, we need to be very 
     specific as to how we intend to use results from each likely 
     outcome of the sampling. I suggest that a meeting of the 
     group plus Dr. Doda and Ms. Baum is in order to gain this 
     specificity or select another course of action.
   Report to the Board Committee on Transfusion Transmitted Diseases

       The major report of your Committee on Transfusion 
     Transmitted Diseases has been issued as our recommendations 
     to the Association. These few additional paragraphs are more 
     my current views and concerns than a formal committee report. 
     Nonetheless, because of my recent experiences I am anxious to 
     share some thoughts with you.
       The report that we have submitted to our members is, in my 
     view, appropriate considering the data at hand. Since we met, 
     however, an additional child with AIDS has been admitted to a 
     Texas hospital. At birth the child had received seven 
     transfusions, one of which came from a donor who now seems to 
     have AIDS. This case increases the probability that AIDS may 
     be spread by blood. Furthermore, the CDC continues to 
     investigate the current cases aggressively and may even have 
     a few more. While I believe our report reacts appropriately 
     to the data at hand, also believe that the most we can do in 
     this situation is buy time. There is little doubt in my mind 
     that additional transfusion related cases and additional 
     cases in patients with hemophilia will surface. Should this 
     happen, we will be obliged to review our current stance and 
     probably to move in the same direction as the commercial 
     fractionators. By that I mean it will be essential for us to 
     take some active steps to screen out donor populations who 
     are at high risk of AIDS. For practical purposes this means 
     gay males.
       The matter of arranging an appropriate screening program is 
     delicate and difficult. We have had excellent cooperation 
     from individuals in the gay community and our deliberations 
     have been made easier by their knowledge and ability to help 
     us. I have no doubt that they will continue to support us 
     and, should we need to be more aggressive in this area, will 
     help us do it in a way that is socially responsible.
       Blood banks that wish to sell plasma for further 
     fractionation already face the need to do something. Perhaps 
     our Committee should prepare guidelines with suggested 
     wording for them to use. We are reluctant to do this since we 
     do not want anything that we do now to be interpreted by 
     society (or by legal authorities) as agreeing with the 
     concept--as yet unproven--that AIDS can be spread by blood.
       All in all this is a knotty problem and one that we will 
     not solve easily.
       I want to make a few comments about the process by which 
     our joint document developed. We spent a great deal of time 
     and energy and did the best we could in attempting to reach a 
     consensus. The difficulty was to get AABB,ARC, CCBC and all 
     the other groups to adopt a position which was acceptable to 
     each other. It was impossible to have a small meeting; 
     everybody wanted to attend. When we got the group together we 
     were able to hammer out a statement that pleased the 
     attendees. Unfortunately, the 
     [[Page S5905]] statement had to go through several iterations 
     with our own Board and the Boards of the other involved 
     organizations. In
      all probability these modifications resulted in a better 
     statement, but the process of getting these changes 
     incorporated and run back and forth through the three 
     organizations was difficult. We have had a good start at 
     working together on this and we hope to keep it up. The 
     mechanism was a little less smooth when it came to 
     releasing the statements and the public relations that 
     went with it.
       I hope that we are equipped psychologically to continue to 
     act together. I have been in contact with ARC (Dr. Katz) and 
     CCBC (Dr. Menitove) and believe that the three of us can, 
     together, work out whatever new problems may arise. We plan 
     frequent conference calls to keep each other informed.
       I want to comment about the Committee. They worked well 
     together and I was particularly pleased with the input of 
     advisory members. Having individuals who are not associated 
     with the blood banks nor a traditional part of the blood 
     banking community proved most useful to us. Their comments 
     and suggestions were excellent. In a like manner, we were 
     helped by participants from the National Gay Task Force. As 
     we continue to react to the various challenges before us, I 
     am sure that their help will be essential. Finally, let me 
     acknowledge the help from the Central Office and, in 
     particular from Lorry Rose.
       No immediate end to the publicity is in sight and we will 
     get continued calls for us to act more aggressively. We need 
     to do whatever is medically correct. In addition, we may have 
     to do a little more, since we are accused of burying our 
     heads in the sand. We are not being helped by the spate of 
     publicity about this illness, but will continue to react 
     responsibly to whatever scientific and medical information we 
     have.
                                                   Joseph R. Bove,
         Chairman, Committee on Transfusion Transmitted Diseases, 
                              American Association of Blood Banks.

  Mr. SPECTER. Mr. President, another very important product involved 
the Bjork-Shively heart valve where internal company documents show the 
company was notified by the inventor in 1982 of the manufacturing 
defect, with the handwritten notations on the memo by the inventor to 
try to ``settle him down,'' a defect which was not fixed for years 
resulting in damages to thousands of people who used these heart 
valves.
  Again, I ask unanimous consent that this corporate document be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                              15242 Shiley 64,

                                                   March 24, 1982.
     Attn: Paul Morris.
       Last night a 60 year old man, with a double valve (mitral 
     and aortic valve) replacement performed--August 24, 1981 with 
     a * * * degree, 25 mm in aorta and 31 mm in mitral, had 
     rupture of the smaller strut and pulmonary edema.
       During the night, I re-operated the broken mitral valve and 
     the * * * strut was localized in the pulmonary vein. The 
     patient has now woken, but has neurological seguele.
       It is evident by now that the manufacture of the prosthetic 
     valve is not acceptable. The small strut must be made in one 
     piece and much more effort and priority must be put on this 
     than has been done so far.
       Your programmed conferences, in Atlanta and California in 
     the end of August, are extremely ill timed--before an 
     acceptable production can be achieved.
       Dear friends, I am serious.
                                                  Viking O. Bjork.
       P.S. By airmail I am sending you the piece.


                     handwritten notes by recipient
       * * * also suggested we go to Sweden to talk to Bjork.
       I'd like to avoid if possible as it won't help solve 
     problem.
       Paul * * *
       Kjell called to discuss * * *. Wants us to call Bjork and 
     attempt to settle him down and convince him we are oing 
     everything possible to get the monostrut faster--I suggest we 
     use the ``double side'' EB Wolf method to get him valves 
     fast! They have to be stronger than the welded strut on 
     70 deg. cc.
                                                            Bruce.
       P.S. I have all employee meetings at 10 a.m. and 11 a.m.--
     Please call Bjork and try to settle him down and convince him 
     that we are doing everything possible.
                                                               BS.

  Mr. SPECTER. Mr. President, some of the cases disclosed procedures 
which would result in additional safety which were left uncorrected for 
very considerable periods of time, and I refer now to an intracompany 
memorandum of the Ford Motor Co., dated September 19, 1967, which 
reports:

       When properly worn, the three-point diagonal shoulder belt 
     system has been demonstrated to offer much greater protection 
     to the vehicle occupant than does a single-lap belt alone 
     since it prevents injuries from jack-knifing.

  And in the same document:

       A properly worn three-point system clearly protects the 
     occupant better than a lap-belt-only system.

  But it was not corrected until 1987 as reflected in intracompany 
correspondence of Ford. This is dated May 2, 1986:

       I believe we should consider optional rear seat shoulder 
     belts for reasons described in the attached memo to you from 
     Al Slechter as a defense against future product liability 
     claims.

  These are a series of internal memos, Mr. President, which have come 
to public light in the course of litigation and show that litigation of 
product liability cases with the potential for punitive damages is a 
significant factor leading to product safety, which I think has to be 
evaluated as we consider this legislation. Further evaluation of the 
cost benefit occurred by General Motors in a memo dated June 29, 1973, 
where as a result of their cost analysis, they made a substantial 
change, showing that where there was concern about fatalities and 
damages, safety features were added.
  I ask unanimous consent that this document be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

        Value Analysis of Auto Fuel Fed Fire Related Fatalities

       Accident statistical studies indicate a range of 650-1,000 
     fatalities per year in accidents with fuel fed fires where 
     the bodies were burnt. There has been no real determination 
     of the percent of these people which were killed by the 
     violence of the accidents rather than by fire. The condition 
     of the bodies almost precludes making this determination.
       Based on this statistic and making several assumptions, it 
     is possible to do a value analysis of automotive fire related 
     fatalities as they relate to General Motors.
       The following assumptions can be made:
       1. In G.M. automobiles there are a maximum of 500 
     fatalities per year in accidents with fuel fed fires where 
     the bodies burnt.
       2. Each fatality has a value of $200,000.
       3. There are approximately 41,000,000 G.M. automobiles 
     currently operating on U.S. highways.
       Analyzing these figures indicates that fatalities related 
     to accidents with fuel fed fires are costing General Motors 
     $2.40 per automobile in current operation.
       500 fatalities times $200,000 per fatality divided by 
     41,600,000 automobiles equals $2.40 per automobile.
       This cost will be with us until a way of preventing all 
     cash related fuel fed fires is developed.
       If we assume that all crash related fuel fed fires can be 
     prevented commencing with a specific model year another type 
     analysis can be made.
       Along with the assumptions numbered above the following 
     assumptions are necessary:
       1. G.M. builds approximately 5,000,000 automobiles per 
     year.
       2. Approximately 11% of the automobiles on the road are of 
     the current model year at the end of that model year.
       This analysis indicates that for G.M. it would be worth 
     approximately $2.20 per new model auto to prevent a fuel fed 
     fire in all accidents.
       500 fatalities times 11 percent new model autos equals 55 
     fatalities in new model autos.
       55 fatalities times $200,000 per fatality divided by 
     5,000,000 new model autos equals $2.20 per new model auto.
       This analysis must be tempered with two thoughts. First, it 
     is really impossible to put a value on human life. This 
     analysis tried to do so in an objective manner but a human 
     fatality is really beyond value, subjectively. Secondly, it 
     is impossible to design an automobile where fuel fed fires 
     can be prevented in all accidents unless the automobile has a 
     non-flammable fuel.
                                                        E.C. Ivey,
                                                    Advance Design

  Mr. SPECTER. Mr. President, another similar modification occurred by 
the Pitman-Hutsik Co., relating to boom tip contacts used on cherry 
pickers with an analysis that a large number of accidents occurred with 
these boom tip contacts, and as a result of the jury awards in product 
liability cases, the design was changed.
  I ask unanimous consent that the last item be printed in the Record.

                           Typical Accidents

       1. Boom tip contact: Metallic portion of upper boom 
     contacted a line, and the operator touched these metal parts 
     as well as another line.
       2. Boom contact or crane contact: A non-insulated boom or 
     lower boom of an insulated device contacted a line, resulting 
     in injury to personnel on the ground.
       3. Phase/phase contact: Operator in the bucket personally 
     touched two phases or a phase and ground, resulting in an 
     injury, but the machine carried no current.
       4. Tipovers: Machine turned over because of: (1) improper 
     outrigger placement; (2) outrigger malfunction or breakage; 
     (3) outriggers were not used; (4) driving accident; (5) 
     overload; (6) et al.
       [[Page S5906]] 5. Controls contacted foreign object: 
     Controls malfunctioned or contacted foreign object, forcing 
     machine to continue to move against the object.
       6. Leveling cable failures: Bucket leveling system broke 
     for some reason, causing operation to fail.
       7. Boom collapse: Component in boom system broke due to 
     overload, poor maintenance, etc., allowing the boom to 
     collapse.
       8. Boom collision: Boom collided with personnel during 
     operation of the machine. Boom collision is sometimes the 
     result of a boom collapse, also.
                      Discussion of pertinent data

       Electrical accidents account for 29 percent of the total 
     number of accidents, but account for 77 percent 
     ($21,500,000.00) of the active claims.
       The largest single type of electrical accident is ``Boom 
     Tip Contact.'' It accounts for 40 percent of the number of 
     electrical accidents and 67 percent of the total dollar value 
     of the active claims. ($18,500,000.00) Those electrical 
     accidents involving metal boom machines usually do not lead 
     to lawsuits and represent only 9 percent ($2,500,000.00) of 
     the dollar value of our active claims. The same is true for 
     ``Phase-Phase'' contacts, which account for only 1.5 percent 
     ($500,000.00) of the active claims.
       Contractors have fewer numbers of accidents than utilities, 
     but contractors have a higher accident rate per machine. 
     (This statement may be somewhat inaccurate, because it is 
     felt that utilities, in some cases, tend to hide some of 
     their accidents.)
       Contractors account for 76 percent ($21,200,000.00) of the 
     active claims against the A.B. Chance Company, while 
     utilities account for only 15 percent of the active claims 
     ($4,300,000.00). Of the $21,200,000.00 claims from the 
     contractors, $18,000,000.00 resulted from electrical 
     accidents, $15,000,000.00 of which was attributed to ``Boom 
     Tip Contact.''
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


              cost to implement technical recommendations

       (A) Estimated cost to design a machine with the following 
     features:
       1. Insulated boom tip.
       2. Insulated lifting attachments.
       3. Boom interlock system.
       4. Tip-over warning system.
       5. Improved leveling system.
       6. Improved hydraulic control system.
       7. Improved placards.
       Estimated time: 2 years:
       Design Prototype Test, Document; $200,000.00.
       Tooling:  $10,000 to $25,000.00.
       (B) Estimated Cost Increase of Machine: $2,000.00.
       (C) Dollar value of active lawsuits as result of ``Boom Tip 
     Contact'': $18,500,000.00.
       (D) Assuming average awards paid out equal to 2.5 percent 
     of total claims dollar value (.025 18,500,000): $462,500.00.


                               conclusion

       If $225,000.00 could be spent to alleviate the liability 
     exposure due to ``boom tip contact'', it would appear that 
     this expense could be justified.

  Mr. SPECTER. Mr. President, finally, in a confidential legal opinion 
on a matter involving the Clark Equipment Co., Hancock Division, is the 
following statement.

       * * * the lack of a back-up alarm presents a substantial 
     product liability exposure to Clark that far exceeds any 
     requirements of State safety laws or OSHA. In every case in 
     which we have had an injury involving a person struck by a 
     machine, the absence of a back-up alarm has been very 
     crucial.
       * * * The customer is not in the same position as the 
     manufacturer and Clark must take all steps necessary to 
     protect itself--

  Showing the safety and precaution taken as a result of the liability 
imposed in product liability cases.
  I ask unanimous consent that the full text of that document be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:




                                                 Buchanan, MI,

                                                  August 29, 1974.

                       Confidential Legal Opinion

     To: Phil Hoel, Hancock Division.
       I have received your memo concerning making back-up alarms 
     standard on all scrapers. I disagree with you that the 
     decision concerning making back-up alarms standard should be 
     made by the Sales Department.
       Although there are many states that do not require a back-
     up alarm at this time, and, in fact, OSHA would make it 
     optional since you can also provide a flagman to signal when 
     to back up, the lack of a back-up alarm presents a 
     substantial product liability exposure to Clark that far 
     exceeds any requirements of state safely laws or OSHA. In 
     every case in which we have had an injury involving a person 
     struck by a machine, the absence of a back-up alarm has been 
     very crucial. I must conclude that it is a very substantial 
     fact in the mind of any juror that if the machine had had a 
     back-up alarm, the injury might have been prevented. This 
     thought must be in the minds of the jurors no matter how 
     great the evidence is that the back-up alarms are not 
     required by state safety laws or are not effective because 
     the engine noise is too loud.
       I think this must be an overall management decision and 
     should not be left to the Sales Department since that 
     department only gives basically a reflection of what the 
     customer wants. The customer is not in the same position as 
     the manufacturer and Clark must take all steps necessary to 
     protect itself, whether the customer wants it or not. 
     Accordingly, I again strongly suggest that you consider 
     making back-up alarms standard on all scrapers. I was 
     informed yesterday by Walt Black that Benton Harbor has 
     decided to make such alarms standard on all loaders, and I 
     applaud them for that decision. I would hope you could reach 
     the same conclusion.
                                                   Steve Anderson,
                                                Assistant Counsel.

  Mr. SPECTER. Mr. President, in the Iowa Law Review article that I 
have referred to, there is a lengthy listing of protective measures 
which were taken after litigation disclosed a substantial problem. They 
have a special probative value in showing that when product liability 
litigation occurs, there is a very practical impact on safety for the 
consumers.
  For example, when the CJ-7 Jeep was found to have inadequate roll-
over protection on the off-road vehicle, punitive damages caused a 
safety measure to be taken to redesign the product and add a new 
warning.
  When the Toyota Corona was found to have a fuel integrity problem due 
to the placement of tanks with injuries and deaths, there was a 
redesign.
  When power lines were found to have uninsulated components causing 
electrocutions, there was a multi-million-dollar safety program.
  When there was a television manufacturer with tubes made of wax and 
paper which posed a fire risk, despite the company's knowledge of 
numerous house fires, it did not warn or redesign until the litigation 
in effect compelled a redesign.
  There is a long list which appears at pages 81 and 82 of the Iowa Law 
Review article, which I shall not take the time to read now, but are 
worthy of special note, because once there is an aggravating factor 
determined in the litigation of product liability cases, there are 
safety measures which are taken.
  Mr. President, I have taken this time to put into the Record some 
concrete cases, where the presence of liability and the presence of 
punitive damages has had a profound effect on influencing the conduct 
of the producers. I think these are matters which have to be taken into 
account that I have included in the Record so my colleagues will have 
access to this information when the Congressional Record is printed 
tomorrow. That will be in ample time for consideration of this kind of 
material in their legislative judgments.
  Mr. President, I see that my colleague, Senator DeWine, has come to 
the floor, so I will yield the floor to him and also the duties 
involved in wrap-up, which I have agreed to undertake thinking I would 
be the last speaker.
  I yield to my colleague, Senator DeWine, at this time.
  Mr. DeWINE. Mr. President, 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. DeWINE. 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. DeWINE. Mr. President, I rise today to discuss in general terms 
the underlying product liability this Senate has now been debating for 
several days, and to also discuss the medical malpractice amendment 
that is pending before the Senate.
  I intend to discuss tonight some of the concerns that I have with 
these bills, but also I hope to talk a little bit about some of the 
hopes that I have in regard to the things that I hope a well-crafted 
bill can, in fact, achieve, and some improvements that we can make in 
our current legal system.
  Mr. President, I do not pretend to be an expert in this area. I have 
spent a considerable period of time in the last 2 to 3 months reading, 
talking, and more importantly, listening--listening to business men and 
women, listening to others who have concerns about our 
[[Page S5907]] current system, and some who have concerns about this 
particular bill.
  Some people, Mr. President, have been, I think, surprised, some 
amazed, that this Senator from Ohio did not automatically jump on this 
bill, saying we will approve everything in it just because it was 
labeled a ``reform'' piece of legislation.
  We do need reform. I think the question before the Senate today, 
tonight, tomorrow, next week, will be what really constitutes reform? 
What will truly help the small companies, small manufacturers in Ohio 
and other States who are threatened by the current system?
 But what reform, also, will we utilize that will not take away the 
victim's rights, nor will it stop the deterrent effect that I find to 
be an essential part of our system today?

  I believe that we have to approach this debate cautiously and 
carefully. Let me first start tonight by listing a few reasons why I 
believe we do have to approach this very serious, very important debate 
from a point of view of caution. Let us make no mistake about it, even 
the relatively narrowly drafted bill that was introduced, that we began 
this debate with, even if it was passed and nothing more--no amendment, 
none of the amendments that we have heard about to expand the bill--if 
the bill was passed in its original form, it would still constitute the 
most radical, the most dramatic change in our civil justice system in 
the history of this country.
  For over 200 years the tort law in this country, the civil justice 
system, has developed not primarily at the Federal level. Rather, it 
has been a home-grown product. It has been developed in State after 
State--in Ohio since 1880--both by statute, by action taken by the 
State legislature, but also in court case after court case after court 
case. We have developed a fairly fine-tuned tort system to handle 
disputes between individuals, to handle tortious conduct.
  Clearly the system does not work perfectly. By and large it does 
work. The proposal before us is, for the first time, to federalize that 
tort system. The only example I can think of where this Congress really 
became involved in the tort law, civil justice law, was when Congress 
passed--and I think it was a correct decision--a bill to give help to 
the general aviation industry in this country. Congress acted only 
after it was clear that general aviation had been driven overseas. The 
results of that bill have been positive. We have seen jobs come back to 
this country. That industry now, instead of contracting in this 
country, is expanding. But with that exception, Congress has never 
gotten into this area.
  I believe there are some very sensible reasons for this past 
reluctance on the part of the U.S. Congress. A simple way to express 
Congress' concern is to invoke the concept of Pandora's box. Once you 
open up this area of law to congressional interference, congressional 
control, where does that stop? Where does the debate stop?
  If anyone doubts this is a legitimate concern, I ask them to look at 
some of the amendments that have already been offered or will be 
offered in the next few days. Should there be a Federal cap for 
lawyers' fees? What should be the contractual relationship between 
employers and employees? What sort of evidence should be admissible at 
trial? That is just the beginning.
  Having said this, that it is a dramatic change and we should proceed 
with caution, that does not necessarily mean we should not proceed at 
all. But what it does mean is that we should go into this debate with 
our eyes wide open, and we should understand what we are tackling, and 
we should understand how significant a change in our law this will be.
  Let me next turn to another reason I think we, particularly in the 
year 1995, need to approach this debate with caution. There is some 
irony that this historic Congress, a Congress which is devoted to 
thinking and talking about State prerogatives and States rights and the 
value of returning power to the people, the value of returning power to 
the States, that this Congress should today be debating a bill that 
does just the opposite, that really says the U.S. Congress in certain 
areas--product liability, medical malpractice--will impose its will, 
will impose a national, uniform standard on all the States in the 
Union.
  Merely because it is strange, again, Mr. President, does not mean we 
should not necessarily do it. But, again, I think it points up how 
cautious we have to be as we begin this task. It is somewhat ironic 
that the very qualities we value, particularly those of us on this side 
of the aisle--self-help, market forces, local as opposed to national 
authority being better--are basically present in our current system. 
But they would in fact be changed and be compromised by this 
legislation.
  Let me cite what to me is an interesting example. We have been 
considering in committee a regulatory reform bill. One of the 
complaints I have heard from business men and women, particularly small 
businesses, as I travel across Ohio, is how overregulated they are. I 
totally agree. If there is one thing this Congress needs to do it is to 
get the Federal Government off the backs of small business men and 
women. The bill we have reported out of our committee makes an attempt 
at doing that and I think it will improve the law. I think the bill as 
we report it could actually be improved. I am going to work to do that 
when it reaches the floor.
  But there is, again, some irony here. The bill that this Congress has 
proposed to help business men and women get the Federal Government to 
back off and to stop overregulating puts more power in the hands of 
business men and women to sue the Federal Government, to sue the 
regulators. It is almost a self-help, self-enforcing provision. And the 
basic principle behind this bill, I believe, is that if you really want 
to get control of the Federal regulators, about the only way you can do 
it--you cannot do it by changing the law and changing the regulations--
the most effective and efficient way to do that is to open up the court 
system and to rely on business men and women to go into court and sue 
the bureaucrats, sue the regulators. Again, back to some of the basic 
principles I talked a moment ago, self-help being one of them.
  This bill, in a sense, does move in the other direction. So, again, 
another reason to be cautious.
  This bill in its various forms, depending on which amendment we look 
at, caps punitive damages. I believe we need to have a very, very fine 
balancing test as we approach this particular issue. Punitive damages 
have been with us for a long time. Punitive damages--let us be very 
plain about it--are intended to punish. There have been some Members 
who have talked on the floor almost in surprise that punitive damages 
are used to punish. That is what they are intended to do. That is what 
the definition of punitive damage is.
  But the real benefit to society in regard to punitive damages is not 
the punishment inflicted on the wrongdoer. The real value to society is 
that punitive damages in some cases, and in some very important cases, 
serve as a deterrent for some small minority of people in this country 
who put a product into circulation and then who, in spite of evidence 
to the contrary, evidence that should indicate to them they should 
either make a change in that product or withdraw the product or notify 
consumers, still go ahead and do none of the above. Punitive damages, 
the threat of punitive damages in some cases can serve as a deterrent.
  When a jury awards punitive damages in a product liability case, that 
jury may in fact be saving lives. The historic purpose of punitive 
damages is to punish and also to deter. Here is what the Supreme Court 
said. I quote:

       The purposes of punitive damages are to punish the 
     defendant and protect the public by deterring the defendant 
     and others from doing such wrong in the future.

  Let me read it again:

       . . . protect the public by deterring the defendant and 
     others from doing such wrong in the future.

  The purpose of punitive damages is to deter conduct that hurts 
people, but the product liability legislation we are considering does 
seek to limit the jury's use of that vitally important deterrent. Now, 
the real question, though, Mr. President, for this Senator at least, is 
what kind of cap, what dollar amount will achieve the legitimate, 
desired results that the proponents of this bill want to achieve 
without really hurting or eliminating this deterrent effect? That I 
think is one of the key 
[[Page S5908]] and most important questions that this Senate faces.
  Let us talk a minute about how punitive damages work in real life. A 
tampon manufacturer received studies and medical reports that linked 
high absorbency tampon fibers to toxic shock syndrome. Other tampon 
manufacturers responded to the warning by either altering or 
withdrawing their product. But the manufacturer in question that I am 
talking about did not do that. This manufacturer tried to profit from 
the disadvantage of its competitors and, frankly, tried to profit from 
the good works of its competitors and the fact that they did the right 
thing. This manufacturer advertised how effective this product was at a 
time when its competitors were reducing the absorbency of their 
products because of this health warning.
  The court in this particular case came to the following conclusion:

       Our review of the record reveals abundant evidence that 
     [they] deliberately disregarded studies and medical reports 
     linking high-absorbency tampon fibers with increased risk of 
     toxic shock at a time when other tampon manufacturers were 
     responding to this information by modifying or withdrawing 
     their high absorbency products . . . that [they] deliberately 
     sought to profit from this situation by advertising . . . 
     [And this] occurred in the face of [their] awareness that 
     [their] product was far more absorbent than necessary for its 
     intended effectiveness.

  The jury in the case awarded $10 million in punitive damages. The 
manufacturer then withdrew the product. Tragically, Mr. President, that 
is what it sometimes takes--a small minority of cases--to deter people. 
It takes punishment. It takes punitive damages. So I think we need to 
proceed very carefully in this area.
  The Senator from Maine has offered I think a very appropriate 
amendment. The Snowe amendment is an attempt to preserve the punitive 
and deterrent function of punitive damages while at the same time 
placing a cap, a cap that will, in fact, bring some predictability to 
business decisions that are made by manufacturers, by other business 
men and women, a cap that will achieve a goal of not only bringing 
predictability but allowing the manufacturer to expand and allowing 
them to move into other markets and to do things that will benefit the 
public that they would not be able to do but for the cap.
  Mr. President, I support the Snowe amendment. If for some reason this 
Senate would vote down the Snowe amendment and proceed to adopt the 
product liability legislation in its current form, then I believe the 
punitive and deterrent effect of these damage awards could be seriously 
weakened. By basing punitive damage awards only on economic damages, 
the product liability legislation does an injustice, the current bill 
does an injustice in those cases where the plaintiffs suffer only minor 
monetary losses but--but--severe and other permanent harm of a 
nonmonetary kind. The Snowe amendment would rectify that. That is why I 
intend to vote for it.
  That being said, I should mention that I do have a concern about the 
equity of the Snowe formula as regards small companies versus large 
companies; that while in fact this cap may be appropriate for the huge 
companies, it may not be appropriate in regard to small companies, and 
we may need to provide them more assurance and more protection. I am 
concerned that under this particular formula small companies are 
punished somewhat disproportionately. A small company may well be 
destroyed outright by a damage award that would serve merely as an 
appropriate deterrent to a much larger company. This is a concern that 
we might want to address during the amendment process.
  In fact, one way of looking at it was expressed to me by a small 
businessman from Ohio several weeks ago. This is what he told me: A 
punitive award that might just be a serious deterrent to a big company 
might really be a death penalty for a smaller company.
  Let me list some other concerns that I do have about this bill. 
Earlier today on this floor, I offered an amendment concerning the 
civil penalties for sex abuse by doctors. I am sure that even those who 
strongly favor the passage of this bill will join me in making it clear 
that we do not want to cap damages in cases in which a doctor sexually 
abuses a patient. I think it would be wrong for this Senate, for this 
Congress to impose a national cap and to tell each State in the Union 
to tell the juries of each State in the Union that there is a limit on 
the punitive damages you can award against a doctor once you have 
already found that doctor has sexually abused a patient.
  Let me talk about another area of concern. I intend to offer another 
amendment to preserve the right of juries to consider the financial 
status of defendants in product liability cases.
  As currently written, the product liability bill would forbid juries 
from considering the assets of the corporation while considering what 
the proper punitive damages should be. This provision would drastically 
weaken the punitive and deterrent effect of damage awards, and that is 
why I will be working to amend that part of the bill.
  I can find no logical reason, Mr. President, why this Congress 
should, in this particular case, override the settled law in virtually 
every State in the Union that does, in fact, allow a jury to take that 
into consideration.
  If the jury, in the punitive, as is their job, is trying to make a 
punishment and is trying to deter, then it seems to me it would be 
wrong to deny the jury the knowledge of exactly what assets that 
company does in fact have, because, Mr. President, if that knowledge is 
denied to the jury, the jury could err either way. They may assume, 
incorrectly, that a company has a lot of assets and it may turn out the 
company does not have a lot of assets. And so when they impose that 
award to get the company's attention, to deter future conduct, it may 
not be an appropriate amount. It may be too much. It may impose an 
unbelievable burden on that company; or, on the other hand, it may not 
be enough.
  Mr. President, let me make it very clear. The current system is not 
all good. It is not perfect. If it were, I do not think we would be 
here today. If it were, I would not have heard from so many people that 
I have heard from in Ohio about this particular problem.
  What we are really doing, Mr. President, and what we should be doing, 
I think, ultimately, is a balancing test. That is what I think we have 
to do. We have to balance the benefits and costs of the current system 
versus the benefits and costs of this bill; or, maybe a better way of 
saying it, the benefits and costs of the bill that we finally do, in 
fact, pass.
  Mr. President, I am concerned that the current system in some cases 
deters innovation. And I think one of the strongest--no, I think the 
strongest--argument for changing the current system, and the strongest 
argument for imposing some caps in regard to punitive damages is that 
the current system does deter innovation.
  We all know and are aware, Mr. President, of products that have been 
kept off the market because of our current law. We have all heard how 
no company will make an antinausea drug for pregnant women. I talked 
yesterday to a lawyer from a major company who said no one is going to 
do it; simply not going to do it. ``We have the technology; we could 
put it on the market. But we are not going to take the risk. We are not 
going to accept the risk that we have to accept because of lawsuits.''
  So if we can give some relief in this area, then products such as the 
antinausea drug for pregnant women may be able to come onto the market.
  Another example, in 1992, a company stopped testing a vaccine for 
preventing the transmission of the AIDS virus from an infected mother 
to her unborn child. Think of that. I have no idea, Mr. President, 
whether or not that product would have made it onto the market. I have 
no idea whether that product would have worked. But heavens, the last 
thing in the world we want to do is to stop innovation in the research 
in regard to AIDS. What a tragedy it would be if we had the ability to 
move forward and to develop this particular vaccine that would keep 
that unborn child from being infected. That is another, I believe, 
argument for some change.
  Also, liability concerns have hindered the development of 
microbicides used to prevent the spread of AIDS.
  Mr. President, during this debate, we have all heard and will 
continue to hear provisions about lawyer's fees. There are going to be 
several other amendments also offered. I may support some; some I may 
not. I am not 
[[Page S5909]] too concerned about the lawyers. Lawyers can generally 
take care of themselves.
  But, Mr. President, I think what we have to look at when we look at 
some of these limitations on fees is what impact it will have on the 
market, what impact it will have on poor people's ability to get into 
the ball game. And in this case, getting into the ball game means 
getting into court.
  If some of these well-intentioned, well-sounding amendments do in 
fact hinder poorer people from having access to the courthouse door, 
then I think the right thing to do would be to oppose them. We need to 
preserve access to the courtroom for people who have been harmed. We 
should do this to their benefit, not for the benefit of the lawyers.
  Last week, Mr. President, I voted for an amendment that would force 
lawyers to disclose their fees. I think that is a good idea. I voted 
for another amendment that would make sanctions mandatory in cases when 
lawyers bring lawsuits that are legally determined to be frivolous by a 
trial judge. I think that is a good idea, too.
  But I do part company with the proponents of this legislation when 
they do things that would limit the legal rights of indigent 
plaintiffs. I believe that that is precisely what some of these 
amendments would have the effect of doing.
  Mr. President, over the last 4 months, I have had more than 55 
meetings with concerned Ohioans and others about the faults and merits 
of this legislation. I intend, Mr. President, to be working over the 
next couple of days and probably weeks to improve the system--to 
improve the system, but also to make sure we do not abandon some of the 
extremely positive effects of the legal system we have built up over 
the last 200 years.
  Mr. President, that concludes my statement this evening on this 
issue.
  Mr. President, at this point, on behalf of the leader, I ask 
unanimous consent that the pending amendment be set aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                 Amendment No. 616 to Amendment No. 603

(Purpose: To provide for uniform standards for the awarding of punitive 
                                damages)

  Mr. DeWINE. Mr. President, I send an amendment to the desk on behalf 
of Senator Dodd.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Ohio [Mr. DeWine], for Mr. Dodd, proposes 
     an amendment numbered 616 to amendment No. 603.

  Mr. DeWINE. 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:

       Strike section    15 of the amendment and insert the 
     following new section:

     SEC.    15. UNIFORM STANDARDS FOR AWARD OF PUNITIVE DAMAGES.

       (a) General Rule.--Notwithstanding any other provision of 
     law, punitive damages may, to the extent permitted by 
     applicable State law, be awarded against a defendant in an 
     action that is subject to this Act if the claimant 
     establishes by clear and convincing evidence that the harm 
     that is the subject of the action was the result of conduct 
     that was carried out by the defendant with a conscious, 
     flagrant indifference to the safety of others.
       (b) Bifurcation and Judicial Determination.--
       (1) In general.--Notwithstanding any other provision of 
     law, in an action that is subject to this Act in which 
     punitive damages are sought, the trier of fact shall 
     determine, concurrent with all other issues presented, 
     whether such damages shall be allowed. If such damages are 
     allowed, a separate proceeding shall be conducted by the 
     court to determine the amount of such damages to be awarded.
       (2) Admissible evidence.--
       (A) Inadmissibility of evidence relative only to a claim of 
     punitive damages in a bifurcated proceeding.--Notwithstanding 
     any other provision of law, in any proceeding to determine 
     whether the claimant in an action that is subject to this Act 
     may be awarded compensatory damages and punitive damages, 
     evidence of the defendant's financial condition and other 
     evidence bearing on the amount of punitive damages shall not 
     be admissible unless the evidence is admissible for a purpose 
     other than for determining the amount of punitive damages.
       (B) Proceeding with respect to punitive damages.--Evidence 
     that is admissible in a separate proceeding conducted under 
     paragraph (1) shall include evidence that bears on the 
     factors listed in paragraph (3).
       (3) Factors.--Notwithstanding any other provision of law, 
     in determining the amount of punitive damages awarded in an 
     action that is subject to this Act, the court shall consider 
     the following factors:
       (A) The likelihood that serious harm would arise from the 
     misconduct of the defendant in question.
       (B) The degree of the awareness of the defendant in 
     question of that likelihood.
       (C) The profitability of the misconduct to the defendant in 
     question.
       (D) The duration of the misconduct and any concealment of 
     the conduct by the defendant in question.
       (E) The attitude and conduct of the defendant in question 
     upon the discovery of the misconduct and whether the 
     misconduct has terminated.
       (F) The financial condition of the defendant in question.
       (G) The total effect of other punishment imposed or likely 
     to be imposed upon the defendant in question as a result of 
     the misconduct, including any awards of punitive or exemplary 
     damages to persons similarly situated to the claimant and the 
     severity of criminal penalties to which the defendant in 
     question has been or is likely to be subjected.
       (H) Any other factor that the court determines to be 
     appropriate.
       (4) Reasons for setting award amount.--
       (A) In general.--Notwithstanding any other provision of 
     law, with respect to an award of punitive damages in an 
     action that is subject to this Act, in findings of fact and 
     conclusions of law issued by the court, the court shall 
     clearly state the reasons of the court for setting the amount 
     of the award. The statements referred to in the preceding 
     sentence shall demonstrate the consideration of the factors 
     listed in subparagraphs (A) through (G) of paragraph (3). If 
     the court considers a factor under subparagraph (H) of 
     paragraph (3), the court shall state the effect of the 
     consideration of the factor on setting the amount of the 
     award.
       (B) Review of determination of award amount.--The 
     determination of the amount of the award shall only be 
     reviewed by a court as a factual finding and shall not be set 
     aside by a court unless the court determines that the amount 
     of the award is clearly erroneous.

  Mr. DeWINE. Mr. President, I have only offered this amendment for 
Senator Dodd so that it would qualify under the consent agreement, in 
that Senator Dodd, at this point, is unable to be on the floor.

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