[Congressional Record Volume 141, Number 71 (Tuesday, May 2, 1995)]
[Senate]
[Pages S5945-S5961]
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. GORTON. Mr. President, having completed work on all of the
amendments relating to medical malpractice, the floor of the Senate is
now open for other amendments to the product liability legislation. I
understand that serious amendments are to be proposed extending the
punitive damages provisions of this bill to all litigation and
extending the rules related to joint liability to all litigation. At
the same time, there are a number of other amendments, both those which
would broaden the legislation and those which would narrow it, which is
appropriate and is relative to be discussed in connection with this
bill.
I do hope at this point, after more than a week of debate, that
proponents and opponents to these amendments will be willing to
consider adequate, but relatively brief, time agreements, so that we
can move the legislation forward. As Members come to the floor to
present their amendments, I intend to make that suggestion to them, and
we can have first-rate debate and votes and perhaps fewer quorum calls
than we have had for some time.
Mr. DOLE addressed the Chair.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. DOLE. Mr. President, what is the pending business?
The PRESIDING OFFICER. It is amendment No. 596 to H.R. 956.
Amendment No. 617
(Purpose: To provide for certain limitations on punitive damages, and
for other purposes)
Mr. DOLE. Mr. President, I send an amendment to the desk and ask for
its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Kansas [Mr. Dole], for himself, Mr. Exon,
Mr. Hatch, Mr. McConnell, Mr. Abraham, Mr. Kyl, Mr. Thomas,
Mrs. Hutchison, and Mr. Gramm, proposes an amendment numbered
617.
Mr. DOLE. 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:
On page 19, strike line 12 through line 5 on page 21, and
insert the following:
SEC. 107. PUNITIVE DAMAGES IN CIVIL ACTIONS.
(a) Findings.--The Congress finds that--
(1) punitive damages are imposed pursuant to vague,
subjective, and often retrospective standards of liability,
and these standards vary from State to State;
(2) the magnitude and unpredictability of punitive damage
awards in civil actions have increased dramatically over the
last 40 years, unreasonably inflating the cost of settling
litigation, and discouraging socially useful and productive
activity;
(3) excessive, arbitrary, and unpredictable punitive damage
awards impair and burden commerce, imposing unreasonable and
unjustified costs on consumers, taxpayers, governmental
entities, large and small businesses, volunteer
organizations, and nonprofit entities;
(4) products and services originating in a State with
reasonable punitive damage provisions are still subject to
excessive punitive damage awards because claimants have an
economic incentive to bring suit in States in which punitive
damage awards are arbitrary and inadequately controlled;
(5) because of the national scope of the problems created
by excessive, arbitrary, and unpredictable punitive damage
awards, it is not possible for the several States to enact
laws that fully and effectively respond to the national
economic and constitutional problems created by punitive
damages; and
(6) the Supreme Court of the United States has recognized
that punitive damages can produce grossly excessive, wholly
unreasonable, and often arbitrary punishment, and therefore
raise serious constitutional due process concerns.
(b) General Rule.--Notwithstanding any other provision of
this Act, in any civil action whose subject matter affects
commerce brought in any Federal or State court on any theory,
punitive damages may, to the extent permitted by applicable
State law, be awarded against a defendant only if the
claimant establishes by clear and convincing evidence that
the harm that is the subject of the action was the result of
conduct by the defendant that was either--
(1) specifically intended to cause harm; or
(2) carried out with conscious, flagrant disregard to the
rights or safety of others.
(c) Proportional Awards.--The amount of punitive damages
that may be awarded to a
[[Page S5946]] claimant in any civil action subject to this
section shall not exceed 2 times the sum of--
(1) the amount awarded to the claimant for economic loss;
and
(2) the amount awarded to the claimant for noneconomic
loss.
This subsection shall be applied by the court and the
application of this subsection shall not be disclosed to the
jury.
(d) Bifurcation.--At the request of any party, the trier of
fact shall consider in a separate proceeding whether punitive
damages are to be awarded and the amount of such an award. If
a separate proceeding is requested--
(1) evidence relevant only to the claim of punitive
damages, as determined by applicable State law, shall be
inadmissible in any proceeding to determine whether
compensatory damages are to be awarded; and
(2) evidence admissible in the punitive damages proceeding
may include evidence of the defendant's profits, if any, from
its alleged wrongdoing.
(e) Applicability.--Nothing in this section shall be
construed to--
(1) waive or affect any defense of sovereign immunity
asserted by the United States, or by any State, under any
law;
(2) create any cause of action or any right to punitive
damages;
(3) supersede or alter any Federal law;
(4) preempt, supersede, or alter any State law to the
extent that such law would further limit the availability or
amount of punitive damages;
(5) affect the applicability of any provision of chapter 97
of title 28, United States Code;
(6) preempt State choice-of-law rules with respect to
claims brought by a foreign nation or a citizen of a foreign
nation; or
(7) affect the right of any court to transfer venue or to
apply the law of a foreign nation or to dismiss a claim of a
foreign nation or of a citizen of a foreign nation on the
ground of inconvenient forum.
(f) Federal Cause of Action Precluded.--Nothing in this
section shall confer jurisdiction on the Federal district
courts of the United States under section 1331 or 1337 of
title 28, United States Code, over any civil action covered
under this section.
(g) Definitions.--For purposes of this section:
(1) The term ``claimant'' means any person who brings a
civil action and any person on whose behalf such an action is
brought. If such action is brought through or on behalf of an
estate, the term includes the decedent. If such action is
brought through or on behalf of a minor or incompetent, the
term includes the legal guardian of the minor or incompetent.
(2) The term ``clear and convincing evidence'' means that
measure or degree of proof that will produce in the mind of
the trier of fact a firm belief or conviction as to the truth
of the allegations sought to be established. The level of
proof required to satisfy such standard shall be more than
that required under preponderance of the evidence, and less
than that required for proof beyond a reasonable doubt.
(3) The term ``commerce'' means commerce between or among
the several States, or with foreign nations.
(4)(A) The term ``economic loss'' means any objectively
verifiable monetary losses resulting from the harm suffered,
including past and future medical expenses, loss of past and
future earnings, burial costs, costs of repair or
replacement, costs of replacement services in the home,
including child care, transportation, food preparation, and
household care, costs of making reasonable accommodations to
a personal residence, loss of employment, and loss of
business or employment opportunities, to the extent recovery
for such losses is allowed under applicable State law.
(B) The term ``economic loss'' shall not include
noneconomic loss.
(5) The term ``harm'' means any legally cognizable wrong or
injury for which damages may be imposed.
(6)(A) The term ``noneconomic loss'' means subjective,
nonmonetary loss resulting from harm, including pain,
suffering, inconvenience, mental suffering, emotional
distress, loss of society and companionship, loss of
consortium, injury to reputation, and humiliation.
(B) The term ``noneconomic loss'' shall not include
economic loss or punitive damages.
(7) The term ``punitive damages'' means damages awarded
against any person or entity to punish such person or entity
or to deter such person or entity, or others, from engaging
in similar behavior in the future.
(8) The term ``State'' means any State of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, the Northern Mariana Islands, the Virgin Islands, Guam,
American Samoa, and any other territory or possession of the
United States, or any political subdivision of any of the
foregoing.
(h) Effective Date.--This section shall apply to any civil
action in which trial has not commenced before the date of
enactment of this Act.
Mr. DOLE. Mr. President, this is a bipartisan amendment--Senator Exon
is a cosponsor, as are Senators Hatch, McConnell, Abraham, Kyl, Thomas,
Hutchison, and Gramm.
This is an amendment that offers needed protections from lawsuit
abuse to every American--small business or large; volunteer or
charitable organizations. The spectre of lawsuit abuse hangs over us
all, and our amendment would expand the protections in the Gorton
substitute to ensure that every American is covered.
The bill as it now stands calls for limiting punitive damages in
product liability cases to three times economic damages, or $250,000,
whichever is greater.
This amendment makes two changes: It would extend the limits on
punitive damages beyond product liability to all civil cases; and it
would provide a rule of proportionality that limits punitive damages to
two times compensatory damages; that is, any economic and noneconomic
damages combined.
This amendment is needed because our Nation desperately needs broadly
based relief from lawsuit abuse.
America's litigation tax--the tort tax--hurts every American; at
least every American who is not a personal injury lawyer.
Anyone who cares about middle-class American families, consumers, and
workers would want that litigation tax reduced.
We all know the numbers: $20 in the cost of an ordinary $100 step
ladder goes to the litigation tax, as does one-sixth of the price of an
$18,000 pacemaker and $8 of an $11.50 DPT childhood vaccine.
The litigation tax is a
national ``value subtracted'' tax--$1,200 on every American, rich or
poor, with nothing received in return.
And where does that money go? According to a 1986 Rand Corp. study,
less than half ends up with those who are suing. Most goes to trial
expenses and particularly to lawyers.
In other words, the litigation tax takes income right out of the
middle-class family's pocket and puts it into the pockets of one of the
wealthiest groups in America--personal injury lawyers.
Even worse, just the fear of litigation has led to the canceling of
life-saving research and product improvements in many fields. Companies
are afraid of being sued over anything that is new and this has made
America less safe.
In other words, the biggest cost of the litigation tax may be
measured, not in dollars, but in lives.
The underlying bill goes a long way toward reducing the abuses we
currently suffer. But, in my view, it leaves many deserving
organizations and small businesses outside its protective scope.
The litigation tax is paid, not just by consumers who buy products,
but by every nonprofit organization, every small business, every
municipality in the Nation--and those who depend on the services they
provide.
This amendment will free our nonprofit organizations, small
businesses, and local governments to serve America without first
serving up a tribute to personal injury lawyers.
We do not have to look far to count the costs of the litigation tax
to nonprofits, small businesses, and municipalties--and to the rest of
America.
For example, the head of the Girls Scout Council of the Nation's
Capital Area wrote this to House leaders during the debate over there:
Locally, we must sell 87,000 boxes of cookies each year to
pay for liability insurance. We have no diving boards at our
camps. We will never own horses. And, many local schools will
no longer provide meeting space for our volunteers.
The chief executive officer of Little League Baseball, Dr. Creighton
Hale, has issued a similar plea.
Writing in the Wall Street Journal recently, Dr. Hale reported that,
as he put it:
In recent years, litigation has been the end result of two
boys colliding in the outfield [the two picked themselves up
and sued the coach]. * * * In still another case--
He continued:
A man and woman won a cash settlement when the woman was
hit by a ball a player failed to catch. The player was her
daughter.
Dr. Hale says:
The costs of this litigation lunacy score out * * * in
bewildered dads calling our offices asking about personal
liability, and volunteer coaches waking up to the fact that
they're taking major league risks.
And he added:
It's a problem common to all nonprofit organizations and
the volunteers they depend on.
[[Page S5947]] This is not even close to being in the ballpark of
what most people think of when we think of justice in America.
Mr. President, legal speculators have declared war on American
volunteerism, entrepreneurship, and local government--the institutions
that make for strong communities and a better America.
Expanding the limits on punitive damages to all civil suits will help
end the legal speculators' war on these institutions. It will help
return justice to the law. It will reach into every home and school and
town board and small business and community group in the Nation.
It will tell them that they need not fear for their financial
security when they venture outside their home to help a neighbor or
open a small business.
It will tell them the siege is over.
Mr. President, it seems to me that this is a very, very important
amendment to the substitute. It is one that I hope my colleagues will
look at very, very carefully.
I would certainly be willing to enter into a time agreement on this
amendment. We would like to finish action on the punitive damage
amendment today, as well as a joint and several liability amendment. I
hope we can reach some time agreement. I state that now so that my
colleagues on the other side of this issue, perhaps we can negotiate a
time agreement later this afternoon.
I yield the floor.
Mr. HATCH addressed the Chair.
The PRESIDING OFFICER (Mr. Kyl). The Senator from Utah.
Mr. HATCH. Mr. President, I am pleased to be a cosponsor of the
amendment to S. 565.
This amendment would, in effect, extend the punitive damage provision
of S. 565 for product liability actions to all civil actions. The
subject matter affects interstate commerce brought in State or Federal
courts.
Our system of civil justice is broken, in the eyes of many people.
The American people do deserve better. They deserve change. They
deserve some common sense in our legal system.
I hope we can pass this amendment, along with some others, and send
S. 565 to the President for his signature.
Let me be clear: The pending amendment helps volunteer organizations,
towns, cities, counties, States, farmers, small businesses,
transportation companies, convenience stores, blood banks, school
boards, as well as product manufacturers. This amendment is
proconsumer.
The pending amendment focuses on one aspect of our civil justice
system: Punitive damages. Punitive damages are not awarded to
compensate a victim of wrongdoing. These damages constitute punishment
in an effort to deter future egregious misconduct.
Punitive damage reform is not about shielding wrongdoers from
liability, nor does such reform prevent victims of wrongdoing from
being rightfully compensated for their injuries or for their damages.
Safeguards are needed to protect against abuse in the form of punitive
damages.
In a 1994 opinion authored by Justice Stevens, the Supreme Court
noted that punitive damages pose an acute danger of arbitrary
deprivation of property. That was the Honda Motor Co. case.
More than that, our current punitive damage system harms consumers. I
wish all of my colleagues could have heard the testimony of George L.
Priest, who appeared before the Judiciary Committee on April 4 of this
year. Mr. Priest is a professor of law and economics at the Yale Law
School and has taught in the area of tort law, product liability and
damages for 21 years, for the last 15 years at Yale.
Since 1982, he has been the director of the Yale Law School program
in civil liability. He has studied jury verdicts extensively, and he
did not appear before the committee on behalf of any client, interest,
or group.
Professor Priest testified, ``The reform of punitive damages alone,
even reforms that would cap punitive damages or introduce a
proportionality cap, will help consumers.''
I note that the amendment before Members embodies a proportionality
principle for punitive damages. I will return to Professor Priest's
remarks later in my remarks and to this point later.
Let me give examples of what is wrong. This past September, an
Alabama Supreme Court upheld a multimillion dollar punitive damage
award against an automobile distributor who failed to inform a buyer
that his new vehicle had been refinished to cure superficial paint
damage. The amount expended to refinish this automobile, $601, was less
than 3 percent of the vehicle's suggested price. A number of States do
not require disclosure of repairs costing below a 3 percent threshold.
Indeed, Alabama later adopted such a minimum threshold statute after
the events which occurred in this case.
The victim was a purchaser of a $40,000 automobile. Nine months after
his purchase, he took his vehicle to Slick Finish, an independent
automobile detailing shop, to make the car look ``snazzier'' than it
normally does--to use his terms. He was not then dissatisfied with the
vehicle's look and had not previously noticed any problems with the
car's finish. It was then that he was told by the detailer of the
partial refinishing.
As a result of the discovery, he sued the automobile dealer, the
North American distributor, and the manufacturer for fraud and breach
of contract. He also sought an award for punitive damages. He won and
he did hit the jackpot.
At trial, the jury was allowed to assess damages for each of the
partially refinished vehicles that had been sold throughout the United
States for a period of 10 years. The jury returned a verdict of $4,000
in compensatory damages. It also returned a verdict of $4 million in
punitive damages.
On appeal to the State Supreme Court, the punitive damages award was
reduced to $2 million, applicable only to the North American
distributor. The U.S. Supreme Court has accepted this case for review
of the constitutionality of the $2 million punitive damage award.
There is some indication that the law, though, did not permit that
type of an award but the court decided anyway that they would halve the
award from $4 million to $2 million.
My colleagues want to know why Americans are fed up with the civil
justice system? I defy any Member of this body to read the opinion in
this case and tell the American people that justice was done.
Why does it matter? In this case, it is not the purchasers of $40,000
automobiles that I am so concerned about, although they are consumers
too. But the North American distributor of this automobile, spending
tens of thousands of dollars in fees to defend a lawsuit over a $601
paint refinishing, and subject to a ridiculous $2 million punitive
damage award, employs our constituents. Many of those employees cannot
afford such expensive cars--nor can they afford such ridiculous results
from our legal system. If the cost of business goes up, that cost will
get passed on, and a business can only raise prices so far before its
product becomes uncompetitive. At some point, that business will have
to reduce its payroll. Who makes out like bandits from this case? The
purchaser of a car with a $601 refinished paint job and, of course, his
lawyer. I mean, punitive damages, for this case? And 2 million dollars'
worth?
I should also note that this same defendant can be sued again and
again for punitive damages by every owner of a partially refinished
vehicle. In fact, according to defense counsel, the same plaintiff's
attorney has filed 24 other similar lawsuits. No surprise there.
As a further note about this fiasco, in one of those other cases, the
jury awarded no punitive damages. The very same conduct by the
defendant and in one case, it is socked with $2 million in punitive
damages and in another case zero punitive damages. Who knows what the
litigation lottery will bring in the other, similar cases.
Let us look at another example. The September 26, 1994, National Law
Journal, has a headline reading: ``Blockbuster Busted for $123.6
Million.''
A Dallas, TX, judge ordered Blockbuster Entertainment Corp., Video
Superstores Master LP, and an individual to pay $14.7 million in
damages and interest and $108.9 million in punitive damages to an
individual investor. Why?
[[Page S5948]] In 1986, the investor invested in the first
Blockbuster franchises, and according to his attorney, ``he was
supposed to be included in the sale when the general partner sold.''
But the plaintiff-investor was not informed when such a sale was made.
He charged the three defendants with breach of fiduciary duty and
fraud. Aside from the $14.7 million in damages and interest, as
mentioned earlier, the judge assessed just over $36 million in punitive
damages to each of the three defendants, or an astonishing $108.9
million in punitive damages assessed against the defendants.
If the defendants in this case did breach their fiduciary duty and
commit fraud, the plaintiff should be made whole. The pending amendment
would not alter anyone's right to such a recovery.
But is this a case where punitive damages should also be imposed for
the wrong? Moreover, after over $10 million in actual damages and
nearly $4 million in interest, is there a further deterrent effect by
imposing punitive damages? I do not have all of the facts, and I
understand the case is under appeal. But even if punitive damages are
appropriate, is it sensible to impose nearly 109 million dollars'
worth, or over 7 times the award of damages and interest? I might add,
if this plaintiff could meet the substantive standard of the pending
amendment, the amendment itself would allow over $30 million in
punitive damages. Frankly, that is an astronomical award itself, yet
critics of this amendment argue that it is penurious.
My colleagues should understand, as the American people do, such
awards impose costs. Prices on goods and services can be affected,
wages and benefits paid to employees and the level of employment itself
can be affected. The availability of goods and services can be
affected.
Let me go back to Alabama, for yet another case, demonstrating the
lack of common sense in our current civil justice system giving rise to
this amendment. Indeed, this example is so outrageous, I will simply
quote, at some length, the well-considered testimony of Professor
Priest, at our April 4, 1995, hearing. This is from his written
statement:
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.
Professor Priest goes on to say:
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 bargains, 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 policy was only $25,000, and they had not
yet qualified to receive that. Think about it. A $25,000 policy, the
agent made a mistake, they have 2 weeks of alleged sleepless nights,
they were angry for much of that time, and they got $30,000 in economic
loss, $400,000 for their 2 weeks of sleepless nights and anger, and $25
million in punitive damages.
Professor Priest said:
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 idealist 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. In
the Gallant case, however, the judge conducting the review
affirmed the $25 million award in its entirety, 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.
Prudential, like most other life insurance companies, profits
more substantially from large dollar, rather than small
dollar policies. The expert estimated that the verdict
reduced dividends to every Alabama policyholder . . . by
$323.
That points out the ridiculousness of this.
Priest goes on to say:
How do we analyze a case like this in terms of whether
punitive damages serve a necessary deterrent effect? In his
closing argument, the . . . 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. 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 for the 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 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 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.
I understand this case settled for an undisclosed sum. I urge my
colleagues to take a close look at the concerns raised by Professor
Priest.
The consequences of our current civil justice system can be felt in
many ways.
[[Page S5949]] The July 17, 1992, Science magazine reported that
Abbot Laboratories put off testing for a drug that might prevent the
spread of AIDS from infected pregnant women to their newborns. Why?
According to the article, ``Abbott officials announced that testing its
HIV hyperimmune globulin (HIVIG) * * * would make the company too
vulnerable to lawsuits.'' This action touched off some controversy. The
Science article continued:
In spite of the uproar, National Institute of Health
officials agree with Abbott that liability is a significant
issue in AIDS vaccine and therapy research. A recent
investigation by Science (April 10, 1992, page 168) revealed
that fear of lawsuits has led several HIV vaccine developers
to delay or even abandon promising projects.
Creighton Hale, chief executive officer of Little League Baseball,
wrote about lawsuits filed against coaches over the ordinary mishaps of
a baseball game in the February 13, 1995, Wall Street Journal. He
noted, ``from my spot in the bleachers, the costs of this litigation
lunacy [result in] bewildered dads calling our offices asking about
personal liability, and volunteer coaches waking up to the fact that
they're taking on major league risks.'' He went on to say
significantly, ``It's a problem common to all nonprofits and the
volunteers they depend on. Little League Baseball has seen its
liability insurance skyrocket 1000 percent--from $75 dollars per league
annually to $795--in a recent five year period. Good Samaritans are
caught in a suicide squeeze.''
Mr. Hale urged Congress to extend common sense legal reform beyond
products liability cases to cover volunteers and others. I note that
Ms. Jan A. Verhage, executive director of the Girl Scouts Council of
the Nations Capital, which also serves the surrounding Maryland and
Virginia communities, wrote to Speaker Gingrich on February 13, 1995.
She asked that legal reform legislation be extended to include
organizations like the Girl Scouts.
Now, she was not speaking for the national organization. But her
comments are very telling: ``Locally we must sell 87,000 boxes of these
Girl Scout cookies each year to pay for liability insurance. We have no
diving boards at our camps. We will never own horses, and many local
schools will no longer provide meeting space for our volunteers.''
Paul A. Crotty, the top lawyer for New York City, wrote to Commerce
Committee Chairman Larry Pressler on April 5, 1995, on behalf of New
York City and Mayor Guiliani. He urged that the punitive damages
provision in the underlying products liability bill be extended to all
cases. He wrote, ``Although punitive damages generally cannot be
imposed against cities, they generally can be imposed against
governmental employees. Excessive awards against individuals providing
government services can be as destructive as large awards against
businesses that manufacture or sell products.''
This is all just the tip of the iceberg.
statistics
Let me say a word about the battle of statistics that rages over
punitive damages. Supporters and opponents of this amendment can rely
on various studies about the number and dollar amount of punitive
damages awards. We heard reports on some such studies in the Judiciary
Committee. There is no single definitive study.
But let me say this: anyone with even a passing familiarity
with our civil justice system knows that the likelihood of a
punitive damages award, justified or not, is far greater today than 40
years ago. Moreover, and this is the crucial point, even beyond the
increase in the frequency and amount of actual awards over that time,
the mere threat of punitive damages affects volunteers, school boards,
businesses of all sizes. The mere inclusion of a claim for punitive
damages in today's litigation climate boosts the settlement value of a
case, regardless of the case's merits. Insurance premiums go up,
products and services are curtailed, innovation is stifled, consumer
prices go up, and payroll costs rise, adversely affecting employment.
Professor Priest states,
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 severely different today. Both 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 and, necessarily, increasing the ultimate
magnitude of settlements even in cases that are settled out
of court.
The terrible, irrational consequences of these developments are easy
to see. Take the $601 paint refinishing case in Alabama that mushroomed
into a $2 million litigation bonanza. If the plaintiff knew punitive
damages were not a real possibility, the case could have settled. How
utterly wasteful to the economy to have such a minor case, the
equivalent of less than a fender-bender under any rational view,
actually proceed through depositions and discovery, let alone actually
be tried and then go through the appeals process. For heaven's sake,
this paint refinishing case is now before the Supreme Court of the
United States. What a waste of the company's resources which go to its
lawyers and to court costs, and of scarce judicial resources. Only the
plaintiff and his lawyer, if on a contingent fee, benefit from this
windfall.
A civil justice system where all of this can happen is broken. One of
the problems which needs fixing is the lack of meaningful control over
punitive damages.
deterrence
The cost of our current civil justice system might be offset at least
somewhat if it actually does deter egregious wrongdoing. Here again,
listen to the testimony of Professor Priest:
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.
* * * forty years ago, in a tort law regime that provided
little in the way of consumer remedies, it might have been
that ever-increasing civil liability verdicts, including
punitive damages verdicts, would serve to reduce the number
of accidents. 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 * * *.
He also testified that adverse publicity is another powerful
deterrent to wrongdoers.
Let me stress that the pending amendment, of course, by no means
eliminates punitive damages. Indeed, it allows punitive damages in an
appropriate case, in an amount up to
three times economic damages or $250,000, whichever is greater.
Actually, that was the old rule. Senator Snowe's language allows two
times the total of compensatory and noneconomic damages.
consumers
Do punitive damages help consumers? Here, again, is the testimony of
Professor Priest: ``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, ands 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 damage 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.
Indeed, Mr. President, as mentioned earlier, a punitive damage award
in a case like Gallant versus Prudential, involving a combination life
insurance-annuity policy with a $25,000 face value and $39 monthly
premium, can only make insurance less available and more costly for
middle- and low-income people.
Mr. President, the problems with the current punitive damages regime
in this country are national in scope. Only Congress can fix these
problems.
The pending amendment would require that the claimant establish by
clear and convincing evidence that the harmful conduct was carried out
with conscious, flagrant indifference to the
[[Page S5950]] rights or safety of the claimant before winning an
award of punitive damages. It would then place a proportional limit on
punitive damages of up to two times the sum of a plaintiff's economic
loss and noneconomic loss.
Any party to the action could obtain a separate proceeding for the
consideration of whether punitive damages are to be awarded and the
amount of such award. Our amendment does not supersede or later any
Federal law. It does not deny States the right to enact punitive
damages provisions, consistent with this amendment, or to place further
limits on such awards. These are worthy provisions.
I urge support for the Dole amendment.
I yield the floor.
Mr. KYL addressed the Chair.
The PRESIDING OFFICER (Mr. Abraham). The Senator from Arizona.
Mr. KYL. I speak in support of the Dole amendment. The comments of
the Senator from Utah just given really portray I think in the most
thorough way the basic thrust of this amendment and the arguments for
it. I will very briefly just add at the margins some information which
I think helps to flesh out the arguments that have just been made by
the Senator from Utah.
As he pointed out, this amendment would extend the product liability
punitive damage limitation in the Gorton-Rockefeller bill to be set at
two times the economic damages in all civil actions involving
interstate commerce. The exception is the civil rights and
environmental laws. Therefore, at the margin, this amendment makes the
underlying bill even better than it is.
Historically, as has been noted, punitive damages were awarded in
only the rarest and most egregious cases in order to punish, to make an
example of the defendant when that defendant's conduct fell below a
certain standard. According to Prof. George Priest of Yale Law School,
who has already been quoted here, 65 to 78 percent of all tort actions
over the last fiscal year include punitive damages in the pleadings. So
what was originally designed to be a recovery in the very most narrow
situation has now become part of the pleadings in a majority, even
exceeding three-fourths, of the cases. Although punitive damage awards
represent a relatively small part of the overall awards, the amount of
the average award continues to increase.
For example, according to Investors Business Daily, in an article of
April 3 of this year, a study of jury awards between 1965 and 1984
shows that the average inflation adjusted damage award increased 1,595
percent, Mr. President. These awards clearly are skyrocketing, and they
need to be reined in. Punitive damage awards have in effect become a
lottery in which the jackpot is continuously doubling. The lawyer's
incentive to file suit is the 30 percent of the settlement amount and
the 40 percent of most trial judgments that he or she realizes. The
plaintiff's incentive is the often outrageous jury verdict.
Two well-publicized examples will be recalled by most people: The
nearly $1 million awarded to the McDonald's customer who put hot coffee
between her legs while driving and, unfortunately, was burned; and the
Alabama case in which actual damages totaled only $1,200 but the jury
awarded $4 million in punitive damages.
I said that punitive damages were skyrocketing a moment ago. Those
were not my words. Those were the words in an opinion of Justice Sandra
Day O'Connor, who said in a 1993 Supreme Court opinion that they were
``skyrocketing.'' She was addressing a lower court ruling which upheld
a $4.3 million award, Mr. President, to a convicted felon who, in the
course of violently robbing a 72-year-old subway passenger, was shot
and paralyzed by a transit authority police officer. The case was
McCummings versus New York City Transit Authority, 1993.
This is outrageous, Mr. President. It is the kind of cap that we need
to place into law. These outrageous punitive damages create a tort tax
paid by consumers in the form of higher prices, higher insurance
premiums, and reduced market choice and quality.
It is a regressive tort tax paid disproportionately by citizens on
the lower end of the economic spectrum because higher prices, of
course, hit them the hardest.
Do punitive damages serve as a necessary deterrent? Sadly, Mr.
President, in many cases, no.
Again, according to Richard Posner, the best theory is that full
compensatory damages generate exactly the optimal level of deterrent.
Mr. President, punitive damages are a quasi-criminal remedy. They are
the product of a bygone era when the resources of public prosecutors
were slim.
Today, public prosecutors are better able to serve the public
interest in a certain level of punishment. To the contrary, plaintiffs
and their lawyers seeking huge punitive damages awards often initiate
litigation without consideration of the public interest, but of their
own interest. That is why these damages need to be controlled.
Let me cite just a few of the examples. The Senator from Utah cited
some egregious examples a moment ago.
Another example: A juror in a punitive damages case said that his
fellow jurors discussed a damage award of between $100,000 and $8.5
million before deciding on $10 million. Later, when asked why $10
million was chosen, this juror said, ``Quite honestly, I think it had
something to do with finding a round figure. We were given no
guidelines.''
There was a recent article in USA Today, March 6, 1995, which I think
had some interesting points to make and some other examples to cite. I
will cite just a couple quotations from the article.
The court system that's supposed to assure fair
compensation for people harmed through the fault of others
looks at times more like a gambling casino than the house of
Justice.
Some injured individuals are walking away with pots of
money--far, far beyond any actual losses they've suffered.
Here are some of the horror stories that the USA Today story cited.
The Alabama woman awarded $250,000 in punitive damages even
though she wasn't injured and wasn't even present when a gas
water heater malfunctioned.
The San Francisco mugger who won a $24,595 judgment for leg
injuries when a cab driver pinned him to a wall with his taxi
to keep the criminal from escaping.
The Miami woman awarded $250,000 after she, having used
cocaine and alcohol and splashed herself with gasoline, was
severely burned trying to light a barbecue.
The Florida theme park ordered to pay 86 percent of a
woman's award for injuries received on its ``Grand Prix''
ride, even though the jury found the park only 1 percent at
fault and the woman's husband--who rammed his car into hers--
85 percent at fault.
The tricycle manufacturer who settled out of court for $7.5
million rather than risk an even more generous jury award
over the color of its trikes.
According to one five-state study, the dollar volume of
punitive-damage awards against business alone is up 89-fold
over a 20-year span.
I want to quote just one other thing from this USA Today article
before I close, Mr. President.
Given the emotional pull of tragic personal injuries or
honest businesses driven to bankruptcy, few opportunities to
exaggerate have been missed by either side. But there is at
bottom an undeniable sense: The system doesn't operate
fairly. And that sense of unfairness invites opportunists to
try to cash in--looking for a jackpot on the chance that the
system's unfairness will work in their favor:
And then this article goes on to note a couple other cases.
Like the Michigan man who lost an eye when a July 4
skyrocket exploded in his face and then sued his parents for
letting him set off fireworks when he was drunk.
Or the 305-pound man who had a stomach-stapling operation
and sued the hospital because he was allowed near a
refrigerator and ate so much he popped his staples.
Mr. President, these examples would be humorous if the problem were
not so serious. The problem is that we are all paying for this, for
this jackpot, this lottery that is called punitive damages. It is time
to rein it in. It is time to put a modest cap on these punitive
damages.
That is all the amendment of the majority leader does. It is time
that we adopt this kind of approach to the liability reform that is
before us today and, hopefully, that we will be voting on later this
afternoon. I urge my colleagues to support this amendment.
I yield the floor.
Mr. ROCKEFELLER. Mr. President, I suggest absence of a quorum.
The PRESIDING OFFICER. The absence of a quorum has been noted. The
clerk will call the roll.
[[Page S5951]] The legislative clerk proceeded to call the roll.
Mr. ROCKEFELLER. 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. ROCKEFELLER. Mr. President, I rise again to report to my
colleagues on our situation and to make a reflection.
This morning, we conducted a series of rollcall votes. I believe
there were eight. They all had to do with something called malpractice
reform, which is not part of the product liability reform.
We were able to accept two amendments, which means that we did not
accept others. Those were on fairly minor issues, I might say.
Of the eight amendments that required votes, the Senate adopted three
by sort of an interesting variety of margins. The net result is that
the product liability bill, which is the sole focus of the concern of
the Senator from West Virginia, as well as the Senator from the State
of Washington, now includes the malpractice proposal as offered by the
Senator from Kentucky, which prevailed with 53 votes.
So that means we now have a bill which has product liability in it,
has malpractice reform in it. I have indicated before that I think at
some point Senators are going to have to make a choice. I do not think
when it comes right down to it, we are going to be voting on a bill
that has these two elements in it. We may be voting on no bill that
has, therefore, nothing in it. Or we may be voting on a bill that has
both elements in it which causes both elements to lose, products and
malpractice, which is in nobody's interest. Now we found another one. I
say this with all respect and without anything but respect. But we are
debating an amendment by the majority leader, with a number of other
Senators as cosponsors, to limit punitive damages in all civil actions,
not just product liability. So now this comes from the House.
This, again, opens up an entire new range of problems and
possibilities for product liability and the chances of passage. This is
opening the whole thing up. It is all civil torts. I recognize the
basis of the amendment. There is a very impressive array of
organizations, including municipalities, small businesses, nonprofit
groups--they want to curb the costs--and problems associated with
punitive damages in our legal system. They have that right in a
democracy, and they are exercising that right. And now we are seeing
the results of that.
I am not going to get into the substance of the amendment or into the
merits of the amendment. I simply want to indicate that this is not
product liability as it has been introduced. It is, again, trying to
open it up so that other things can be attached to it. Some may think
that helps it. Some may think that by adding other extraneous areas it
shows that they are abreast of everything that is going on in the House
and fighting with equal vigor, and I understand that; I understand it
politically, substantively, and every other way.
But it does not help product liability to pass. I would remind
Senators, as I have on a number of occasions and I will continue, that
the underlying amendment here is the Product Liability Reform Fairness
Act of 1995. For both those who oppose it and who favor it and who have
invested a lot of time in it, it is this bill which we want to see
acted upon.
So I just make this point at the beginning of the debate. And I am
perfectly willing to have a time agreement. I understand the majority
leader will be very amenable to a time agreement. I think that is being
shopped on both sides. I do not expect this debate to go on for a very
long time. But, again, it is an extraneous amendment. I simply point
that out. It hurts the possibilities of product liability reform. I
think it has almost no chance of passing. Of course, a vote will tell
that, but I forecast that. Thus, I wonder what it is in fact we are
accomplishing by all of this.
I thank the Chair and yield the floor.
Mr. HOLLINGS addressed the Chair.
The PRESIDING OFFICER. The Senator from South Carolina.
Mr. HOLLINGS. I turned on the TV in the office and was amused to see
a series of whining and moaning and groaning with respect to punitive
damages. This contract crowd is going in two different directions.
Under the contract now, the welfare recipient is to show more
responsibility. Under the contract, we have a family. They do not want
Government in anything, but they want it in everything. They want it in
the family. I would think that would be the last thing, to get into the
family. But the contract crowd wants a family bill. And, of course,
fundamental to the family is that we punish the child when it
misbehaves. We spank the baby and teach it some discipline when it
misbehaves and teach it how to do right as opposed to doing wrong.
But when it comes to large corporate America and manufacturers, there
should be no spanking. All of a sudden, it costs consumers. Mr.
President, whoever thought for a second that this bill is in the
interests of consumers? It is the biggest fraud that ever tried to be
perpetrated on this august body. Every consumer organization in the
United States of any size, care, or responsibility is absolutely
opposed to the bill.
And with regard to the better legal minds of the American Bar
Association, the State supreme court justices and their Conference of
Chief Justices of the several State supreme courts, the Conference of
State legislatures, the attorneys general, oh, yes, they are going to
look out for them? Uh-uh, no, they are looking out for manufacturers.
Look at the section in here that exempts the manufacturer. They have
all of these great provisions in here because they say they are so
concerned about consumers, except when you mention manufacturers. They
say, by the way, manufacturers should be exempt from this bill.
Now, come on. I will read several things about punitive damages, and
I will go right to the heart of the issue. It is not saving consumers'
pocketbooks and costs. This crowd knows the cost of everything and the
value of nothing. The truth of the matter is on account of product
liability in this country of ours, we have the safest products and we
are saving our citizenry from injury, from maiming, from blindness,
from being killed over and over again by the millions. Why do you think
there were over 19 million car recalls in the last 10 years? We went to
the Department of Transportation and we summed up all these automobile
recalls. And if you think the big automobile companies--not only in the
United States, but Toyota in Japan, and others--are recalling defective
automobiles to save consumers money--they are doing it to save
themselves money on account of product liability, because they are
going to get nailed. And so to save themselves money, they save lives
and injury to the consuming public. It is not the pocketbook that we
are involved with here. On the contrary, it is the safety of products
and the safety of our citizenry.
So let us quit bringing all of these cases, one by one, out here, and
say, oh, what a terrible punitive damage verdict this is and thereby we
have a national problem. Not so.
The States have handled this. And rather than going into this case or
that case--I do not countenance for a second that there are not some
mistakes. There are mistakes everywhere in the administration of the
law. That does not call for national legislation. But, in a general
sense, if you take all the product liability verdicts in the last 30
years--and this is what we asked when we saw the witness take the stand
in the Commerce Committee. We asked Jonathan S. Massey, an expert who
had defended punitive damages before the U.S. Supreme Court, allegedly
the most experienced attorney. I said, yes, but I still get these
anecdotal incidents of what we would call outrageous punitive damage
findings.
I said, ``Could you please go and get into the record exactly all the
punitive damage verdicts for the last 30 years, since 1965, and find
out just exactly how many there were, and what were the amendments and
then add them all up?'' With respect to that, I ask unanimous consent
to have this material printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[[Page S5952]] April 13, 1995.
Hon. Ernest F. Hollings,
U.S. Senate Committee on Commerce, Science and
Transportation, Washington, DC.
Dear Senator Hollings: At the hearing on April 4, 1995
before the Consumer Affairs, Foreign Commerce, and Tourism
Committee of the Committee on Commerce, Science, and
Transportation on S. 565, the Product Liability Fairness Act
of 1995, you asked me to compare the $3 billion in punitive
damages awarded in the Pennzoil v. Texaco case with the sum
of punitive damage awards in all product liability cases
since 1965.
The attached pages show that punitive damage awards in
products liability cases since 1965 come to a fraction of the
$3 billion figure. For products liability cases in which the
punitive damage award is known, the total comes to
$953,073,079. There are 109 additional cases in which the
punitive damage award was not reported by the court or either
party, most likely because it was not large. If one were to
extrapolate for those 109 cases by taking the average award
in cases in which the punitive award is known--which would
err on the side of the inflating punitive damage awards in
products liability cases--the total of punitive damage awards
in all products liability cases since 1965 would come to only
$1,337,832,211--less than half the award in Pennzoil v.
Texaco.
I hope this information is of assistance.
Sincerely,
Jonathan S. Massey.
____
product liability punitive awards, 1965-present
Alabama--20 cases--$58,604,000; 9 additional cases with
unknown amounts.
Alaska--2 cases--$2,520,000; 1 additional case with unknown
amounts.
Arizona--6 cases--$3,362,500; 3 additional cases with
unknown amounts.
Alabama--1 case--$25,000,000; 0 additional cases with
unknown amounts.
Alaska--1 case--$1,000,000; 0 additional cases with unknown
amounts.
Arizona--2 cases--$6,000,000; 3 additional cases with
unknown amounts.
California--17 cases--$35,854,000; 9 additional cases with
unknown amounts.
Florida--1 case--$1,000,000; 0 additional cases with
unknown amounts.
Connecticut--1 case--$688,000; 0 additional cases with
unknown amounts.
Florida--1 case--$519,000; 0 additional cases with unknown
amounts.
California--4 cases--$3,618,653; 0 additional cases with
unknown amounts.
Florida--1 case--$750,000; 0 additional cases with unknown
amounts.
California--3 cases--$2,425,000; 0 additional cases with
unknown amounts.
Colorado--3 cases--$7,350,000; 1 additional case with
unknown amounts.
Connecticut--0 cases--$0; 1 additional case with unknown
amounts.
Delaware--2 cases--$75,120,000; 0 additional cases with
unknown amounts.
Florida--26 cases--$40,607,000; 9 additional cases with
unknown amounts.
California--1 case--$30,000; 0 additional cases with
unknown amounts.
Florida--2 case--$3,500,000; 0 additional cases with
unknown amounts.
Georgia--10 cases--$43,378,333; 3 additional cases with
unknown amounts.
Hawaii--1 case--$11,250,000; 0 additional cases with
unknown amounts.
Idaho--0 cases--$0; 1 additional case with unknown amounts.
Illinois--16 cases--$44,149,827; 3 additional cases with
unknown amounts.
Minnesota--1 case--$7,000,000; 0 additional cases with
unknown amounts.
Illinois--3 cases--$5,000,000; 0 additional cases with
unknown amounts.
Indiana--1 case--$500,000; 0 additional cases with unknown
amounts.
Iowa--1 case--$50,000; 2 additional cases with unknown
amounts.
Kansas--7 cases--$47,521,500; 1 additional case with
unknown amounts.
Kentucky--2 cases--$6,500,000; 0 additional cases with
unknown amounts.
Louisiana--2 cases--$8,171,885; 0 additional cases with
unknown amounts.
Maine--3 cases--$5,112,500; 0 additional cases with unknown
amounts.
Maryland--3 cases--$77,200,000; 2 additional cases with
unknown amounts.
Michigan--2 cases--$400,000; 0 additional cases with
unknown amounts.
Minnesota--4 cases--$10,000,000; 1 additional case with
unknown amounts.
Mississippi--4 cases--$2,790,000; 1 additional case with
unknown amounts.
Missouri--9 cases--$20,785,000; 1 additional case with
unknown amounts.
Montana--2 cases--$1,600,000; 1 additional case with
unknown amounts.
Nevada--1 case--$40,000; 1 additional case with unknown
amounts.
New Jersey--4 cases--$900,000; 5 additional cases with
unknown amounts.
New Mexico--4 cases--$1,715,000; 1 additional case with
unknown amounts.
New York--7 cases--$6,019,000; 6 additional cases with
unknown amounts.
North Carolina--2 cases--$4,500,000; 0 additional cases
with unknown amounts.
Ohio--6 cases--$4,393,000; 1 additional case with unknown
amounts.
Oklahoma--6 cases--$15,390,000; 1 additional case with
unknown amounts.
Oregon--3 cases--$62,700,000; 0 additional cases with
unknown amounts.
Pennsylvania--5 cases--$16,298,000; 8 additional cases with
unknown amounts.
Rhode Island--1 case--$9,700,000; 0 additional cases with
unknown amounts.
South Carolina--5 cases--$2,945,500; 4 additional cases
with unknown amounts.
Rhode Island--1 case--$100,000; 0 additional cases with
unknown amounts.
South Dakota--1 case--$2,500,000; 0 additional cases with
unknown amounts.
Tennessee--4 cases--$4,720,000; 3 additional cases with
unknown amounts.
Texas--38 cases--$217,098,000; 19 additional cases with
unknown amounts.
Utah--1 case--$300,000; 0 additional cases with unknown
amounts.
Virginia--2 cases--$340,000; 0 additional cases with
unknown amounts.
West Virginia--3 cases--$2,433,100; 4 additional cases with
unknown amounts.
Wisconsin--7 cases--$10,622,000; 4 additional cases with
unknown amounts.
Florida--1 case--$2,500,000; 0 additional cases with
unknown amounts.
Wisconsin--2 cases--$26,000,000; 0 additional cases with
unknown amounts.
District of Columbia--1 case--$2,500,000; 0 additional
cases with unknown amounts.
Grand total--270 cases--$953,073,079; 109 additional cases
with unknown amounts.
Average punitive award: $3,529,900.
Extrapolated total of all awards: $1,337,832,211.
Mr. HOLLINGS. Mr. President, the pages show that punitive damage
awards in product liability cases since 1965 come to a fraction of $3
billion. To be exact, they come to $1,337,832,211.
Why does this Senator say ``a fraction'' of $3 billion? If we go to
the Pennzoil versus Texaco case, of businesses suing businesses, what
do we get? We get almost a $12 billion verdict that included what? It
included a finding of punitive damages in the amount of 3 billion
bucks.
In other words, of all the product liability punitive damage findings
in the last 30 years amounting to $1.3 billion, we have one business-
against-business case of $3 billion. Or another one, since they are
picking out cases, I will pick the Exxon Valdez case, a case where
Exxon was sued and they came in with a verdict of what in punitive
damages? Mr. President, $3 billion.
I cannot find out the amount for businesses, there are so many of
them. But it is up into the billions and billions of dollars. If this
Congress was really interested in lowering the verdicts in tort cases,
they would go right to the businesses suing businesses. They would go
right to the automobile accident cases. They would go to all the other
kinds of tort cases.
The fact is that, of all the civil findings in the United States of
America, tort filings only amount to 9 percent of the total amount of
civil findings; and of the 9 percent, product liability amounts to 4
percent of the 9 percent or .36 of 1 percent.
Another problem solved by the States. The Supreme Court Justices and
legislatures say we handle it, and I will go right, for example, to my
own State of South Carolina with respect to punitive damages.
In a recent case of the State versus Rush, but the heading would be
Gamble versus Stevenson, an appeal of the Southern Bell Telephone
Telegraph.
Now, I read from the opinion of the Supreme Court as follows: ``In
South Carolina punitive damages are allowed in the interest of
society.'' Listen to that. We would think punitive damages was the most
heinous offense that ever occurred without any relation in the world to
the good it has done.
Why do we fine motorists for speeding and disobeying our motor
vehicle laws in America? We fine them. Why do we fine the others for
their various crimes? To make certain they do not commit them again.
Similarly, with manufacturers.
Punitive damages--fine them, to make absolutely sure that they do not
repeat their wrong.
They would say we cannot lose, we are making money. So why has
Chrysler recalled 4 million cars to fix the back latch on the door? Not
on account of the cost. They could get by with that. They would leave
it there, but they know that there are chances now brought to the
attention of the public that they are not only going to be verdicts
against them in compensatory damages but in punitive damages. No longer
can they factor it in the cost of product because of punitive damages.
This is the very element that is bringing about the safety--not
taking care of the parties involved but taking care of society,
generally--that is the point to be made here.
The first sentence:
In South Carolina, punitive damages are allowed in the
interest of society in the nature of punishment and as a
warning and example to deter the wrongdoer and others
[[Page S5953]] from committing like offenses in the future.
Moreover, they serve as an indication of private rights when
it is proved that such have been wantonly, willfully, or
maliciously violated. Lastly, punitive damages may be awarded
only upon a finding of actual damage. In the instant case the
trial judge's jury charge concluded the degree of
recklessness requisite to punitive damage award, that such an
award was to punish a defendant or deter and stop it and
others from similar conduct in the future, that is, to make
an example of the defendant.
That is an affirmative action program, to make an example. Everybody
is interested in affirmative action. Here it is. Make an example of the
defendant, the wrongdoer. ``That it must find actual damages before
awarding punitive damages and that in calculating the amount of such
damages, it may consider the defendant's ability to pay.''
Now, Mr. President, to ensure that a punitive damages award is
proper, the trial court shall conduct a post trial review and consider
the following: one, the defendant's degree of culpability; two,
duration of the conduct.
Mind you me, Mr. President, this is not the jury, the runaway juries,
the same people that elected Members in Congress, all of a sudden
impanelled and with a sworn oath, to find unanimously by a
preponderance of the evidence, willful misconduct. And all 12 having
found such, that same crowd that elects and sends Members, all of a
sudden, they have lost their minds, their judgment. They are runaway
and now have to be restricted by national restrictions. For what? For
manufacturers, that is for what, and for less safety in America.
Let me read that again:
To ensure that punitive damages award is proper, the trial
court shall conduct a posttrial review that may consider the
following:
1, defendant's degree of culpability; 2, the duration of
the conduct; 3, the defendant's awareness or concealment; 4,
the existence of similar past conduct; 5, likelihood the
award will deter the defendant or others from like conduct;
6, whether the award is reasonably related to the harm likely
to result from such conduct; 7, defendant's ability to pay;
8, as noted in Haslip case, ``other factors'' deemed
appropriate.
That is, the court, not only the 12 impaneled jurors, but the court
itself, shall review and study.
Now, generally, this is a law that applies in 45 of the 50 States
but, of course, due to the Conference Board, due to the Business
Advisory Roundtable, due to the National Association of Manufacturers'
lobbyists that have been going on for years and they come and report at
every election time, ``Now, Senator, we have to do something about tort
reform or product liability reform.''
The average Senator or candidate, not aware of the ramifications, not
having attended any of the hearings or otherwise, might say, ``Oh? I am
trying to get votes. Reform?'' They get caught. Words do mean things in
our society. And they say, ``Heavens, I can get the support of this
strong crowd. I can even get financial contributions if all I have to
say is yes, yes, I am for reform. Product liability? Put me down.''
They put them down. Then they come here and they get embarrassed
because they finally hear the truth of the matter here. And I sort of
get embarrassed for them.
The reason I get embarrassed for them is just this. I got a letter
today from my distinguished colleague and friend, Drew Lewis, the
chairman of Union Pacific Corp., dated April 27. He is a former
Secretary of Transportation. He did an outstanding job. I do not speak
in criticism or derision. Rather, I speak--and this is the factual
dismay that I have--because I know he knows better. It is a short
letter and I know why he is writing it.
Union Pacific urges your support for S. 565, the Product
Liability Fairness Act legislation. The U.S. legal system is
out of control. The high cost of litigation and large damage
awards translate into higher prices for consumers. Typically
less than half the money awarded in product liability cases
goes to compensate the claimant. The winner is the trial
attorney, not the American consumer. If American business is
going to succeed in the global marketplace and American jobs
are to grow, your vote is critical. Please vote for cloture
and final passage of S. 565.
Sincerely, Drew.
Let us take that little letter here and see it exactly. I know this
gentleman knows better. He is the most sophisticated of former public
servants and corporate executives and he has been around. I know his
entities. The Business Roundtable and the National Association of
Manufacturers and all got him to write this thing and it was ground
out.
He calls it the ``Fairness Act.'' He picked up the title. That is not
what they called it over on the House side. It started off--if you get
the title of the bill itself on the desk here, you will find out--``To
establish legal standards and procedures for product liability
litigation.'' At least it was straightforward in the House. Applesauce
in the U.S. Senate. Fairness? Fair to whom? Not consumers. This crowd
does not represent consumers. I have; they have not.
When I asked the distinguished Chair where was the record here
whereby trial lawyers had done in their clients, under the Abraham
amendment, he had one letter from a constituent in Michigan. I knew
that there were not a big wave of clients being done in. In fact, had
it not been for the trial lawyers, they would not have received
anything.
After all, these manufacturers do have a team of attorneys,
investigators, adjusters, local attorneys and otherwise, and they
readily, on any kind of claim or letter they get, immediately zoom in
and, generally speaking, settle the case or claim. It is good business
judgment that they do; it is good business judgment they do. They do
not want to be claimed to have unsafe products.
It is only when they deny an obvious claim that should be compensated
that it comes to the trial lawyers. We do not scare up cases--except,
of course, in these class action suits, like asbestosis. But that is
what had to be done. That is exactly what was done with respect to the
example of the Senator from Michigan in his letter with the Senator
from Kentucky relative to the airlines. They had to go and get all the
airlines together, get law firms all over the country, and assemble 2.1
million clients.
In the letter to the colleagues, under the Abraham-McConnell letter,
it appeared that, heavens above, quoting the Washington Post, the
lawyers got $16.1 million in fees and the client got a $25 gift
certificate for travel. I knew that the client just getting $25 and the
lawyer getting $16 million would not be approved by any court. So we
went back to the record.
Yes, in a class action of that kind, what was the number of clients?
It was 2.1 million. What was the amount of the verdict? It was $438
million. How many law firms? They had 37 law firms all over the
country, and the average fee was not a third, or 33\1/3\ percent, or 25
percent, or 20 percent, or 10 percent, or 5 percent, or 1 percent. The
average fee of the attorneys involved was less--less than 1 percent.
Had they not correlated all that, it would not look so garish and
enormous to us unstudied witnesses here.
But this is the Fairness Act, they say. Then the next sentence, ``The
United States legal system is out of control.''
That is sheer nonsense. If it is out of control, it is on account of
businesses suing businesses. It certainly is not a litigation
explosion. We have proved that. We have proved time and again that
product liability cases, as the Senator from West Virginia, the
principal sponsor of the measure, says--when we engaged in looking at
product liability cases, we find the entity in the testimony before the
Commerce Committee, unquestioned--no one has proved otherwise--
unquestioned, that there are less filings and less verdicts and less
plaintiffs' victories all the way across the board. So if the legal
system is out of control, it is out of control for other reasons but
not product liability.
``The high cost of litigation and large damage awards translate into
higher prices for consumers.'' I just reread that my way: The high cost
of litigation and large damage awards translate into higher safety for
the consuming public of America. That is what it translates into. And
it ought to go into the costs. It is a minimal cost to them to put out
safe products. And the best of manufacturers want to do that and they
brag about the quality now of their particular manufacture. They brag
about their quality of manufacture. So it is not high cost translating
into high prices but, let us say, a higher degree of safety.
[[Page S5954]] ``Typically, less than half the money awarded in
product liability cases goes to compensate * * *'' We find that is
incorrect. There was a study by the National Insurance Foundation to
the effect that, yes, the claimant did not get the majority of the
money, but the majority of the money was going to the defendants'
attorneys.
You ought to see these billable hours. That is why the Senator from
South Carolina wanted to limit billable hours around this town to $50
an hour. I could catch the thrust of the movement earlier last week,
when they came in, about the money going to the claimant as compared to
the money going to attorneys. And the thrust was that they had given up
on Girl Scout cookies and they have given up now on Little League
baseball and all these other things they tried to raise,
competitiveness and otherwise. Now they say, ``Well, let us kill all
the lawyers.''
I say, if you want to get rid of half the 60,000 lawyers in this
town, if you want to get rid of 30,000 lawyers, just put not a minimum
wage but put a maximum wage, a maximum wage of $50 an hour which will
give them the salary of a U.S. Senator. If they worked any overtime,
like we do work overtime as Senators, they could easily make $200,000 a
year. But that is where the compensation is going. It is just like the
situation, if you had a $100 finding, you would find that $40 would go
to the defendant's attorneys, $20 would go to the plaintiff's
attorneys, and $40 to the claimant.
(Mr. THOMPSON assumed the Chair).
Mr. HOLLINGS. Mr. President, the rationale of this simple statement
is get rid of or kill all of the lawyers; get rid of the trial lawyers
because--the next sentence is--``The winner is the trial attorney, not
the American consumer.'' If you think this crowd is interested in
consumers, just get all the consumer legislation and look at their
votes on that.
But going right back to the report, in the 103d Congress, I knew we
had this when we had the hearings. In a 1977 survey conducted by the
Insurance Services Office, for every dollar paid to claimants, insurers
paid an average of an additional 42 cents in defense costs; while for
every dollar awarded to a plaintiff, the plaintiff pays an average
contingent fee of 33 cents of that dollar. Thus, in cases in which the
plaintiffs prevail, out of each $1.42 spent on litigation, half of that
goes to attorney fees, with the defendants' attorneys on average paid
better than the plaintiffs' attorneys.
That is the national insurance consumer organization finding that the
attorney for the insurance companies received on the average close to
one-third more than the average attorney's fee paid to plaintiffs'
attorneys. I am glad I quoted that for the record, but that is not the
way this letter reads. ``The winner is the trial attorney.'' We are not
winners or losers. But if you are going to characterize, as my
distinguished friend, Mr. Drew Lewis, does here in the letter about the
winner, he says, ``The winner is the trial attorney, not the American
consumer.'' Absolutely false. We have all the facts and all the
hearings proving otherwise.
Going now to the final two sentences, ``If American business is going
to succeed in the global marketplace, and American jobs are to grow,
your vote is critical.'' What is the inference there? The inference
regarding the global marketplace is that product liability costs and
the burden on American production is a cost and a burden not suffered
by foreign production. We will go right to the heart of that matter.
In addition, working over the years--and I have had a delightful
experience, I have to immodestly acknowledge, with respect to the
attraction of industry to my own State, and I will be glad to meet with
anybody and we will compare the records. We will compare the endeavor,
and we will compare the results. I have had the experience of working
at the local level on the attraction not only of the American blue chip
corporations, but those in the global marketplace. Admittedly, of
course, many of the blue chips are in the global marketplace. But let
us go directly to the ones we know. Let us say German industries and
Japanese industries.
In our great State of South Carolina, we have over 100 German
industries. I made the first trip over there with the Governors, to the
various communities in Germany, with an industrial group to attract
investment in South Carolina in 1960. So that is 35 years ago. We just
got, of course, BMW. BMW, by the way, in Spartanburg, stands not for
Bavarian Motor Works, but BMW stands for ``Bubba Makes Wheels.'' We
have a wonderful system down there.
I was with the Vice President this last Friday at a luncheon. We put
out 20,000 and some BMW automobiles this year from Spartanburg, SC. Do
they have a problem with product liability? Not at all. I went to Bosch
not long ago. They came in making fuel injectors for all automobile
manufacturers, and more particularly now have become expert in antilock
brake manufacture. They have a 10-year contract with General Motors for
all the antilock brakes on their cars. They have the contract for
Toyota and Mercedes Benz. I turned to that manufacturer. I said, ``What
about product liability? How many product liability claims?'' He said,
``What is that?'' I said, ``Product liability? You know, where you have
a defective antilock?'' ``Oh, no, no, no,'' he said, ``We will not have
that.'' He went right over on the line and he picked up one of the
antilock brake devices.
He said, ``See. See that serial number.'' He said, ``We have a serial
number on every antilock brake that comes out of this factory. We would
know immediately by that number if there was a defect where it
occurred. But we haven't had any of that occur down here, and we are
not going to have any of that occur.'' And he was proud--proud--not
whining and crying through political representation up here in the
national Congress about saving consumers money. He was proud of putting
out an absolutely safe product.
Can you imagine one of those antilock brakes not working and the
other three working on an automobile? It would turn it over into a
tailspin in a minute. They know it. So they are super careful in their
manufacture. That goes into the cost of the product. And, yes, it costs
consumers, and consumers welcome paying that higher price for the
antilock brake and safety.
Mr. President, it goes to the safety, not the cost. But what happens
in Germany? In Germany, they come with Mercedes Benz down in Alabama
where, incidentally, both Alabama Senators are opposed to this bill.
Both Alabama Senators are opposed to this bill. Mercedes Benz says,
``We love Alabama, and we are putting our new manufacturer down
there.'' BMW says, ``We love South Carolina and its product liability
law,'' just like Mercedes Benz likes Alabama's product liability law,
and they put a factory there. I have over 100 German factories liking
the product liability law in my State. I have over 50 Japanese
industries liking the product liability law in my State. But they are
not a member of the Business Roundtable.
So what you have here is this mailing out of absolutely unfounded
conclusions, which is an embarrassment to this Senator. Specifically,
you look at what they put out in their advertisements when it comes to
punitive damages and product liability. Here is the ad they are running
in newspapers. This is an easy one to carry. It is entitled, ``Let's
Put an End to the Lawsuit Lottery.''
You know, my conservative friends, when they get this rap music, say,
``You have to cut out that rap music. It teaches violence.'' There was
one that I remember even President Clinton as a candidate took to task,
about ``kill all the cops,'' the ``cop-killer'' one. He complained
then. The American public went along with him and voted for candidate
Clinton to become President because those words mean something. They
want to cut all of that out. Now that they are blowing up buildings in
America, and some people say, ``Oh, no. Words don't mean anything.''
The truth of the matter is, Mr. President, my colleagues on the other
side of the aisle have a school where they teach them to use words. I
think this is a good time, since this is the thrust of the measure
here, if I have it here in one of these files. With respect to the
words, they come in and they hold a school. I know they attend a
school, these newcomers to public office. I will see if I cannot find
that, generally speaking, so that the colleagues can be educated about
what is really going on. But this is a school that the distinguished
Speaker has been running for
[[Page S5955]] years. He tells all the candidates that have come in. I
know when a new Republican is elected from South Carolina, he has to
attend a school to find out how to talk. And, in fact, if they can get
them ahead of time, they tell them how to campaign and how to use words
that inflame, words that stir up.
It was put into the Record some time ago; I think back in 1990, if I
am not mistaken. But we had the meaningful words. I certainly would
like to be able to refer to that, because what happens is that they
call this--that is, the Government here in Washington, and this is
reported in the David Broder column. They reported that the Government
in Washington is the ``corrupt, liberal, welfare state.''
These are the handouts in the schools that they give to my Republican
colleagues and say you ought to all join in. And they list the word
``corrupt.'' They list the word ``liberal.'' They list the word
``welfare.'' So the revolution, according to Speaker Gingrich in his
courses, is against the corrupt, liberal welfare State. And that is the
way they refer to it.
Mr. President, let us go to the words here about the lawsuit lottery.
There is not any lottery, I can tell you that right now. All you have
to do, if you defend a product liability case, is convince one juror.
That is all you have to do, raise a doubt in one juror's mind because
it has to be a unanimous verdict by the greater weight of the
preponderance of the evidence.
But here is the mailout that they put in the advertisements that they
have going now for the past several weeks. ``Let's Put an End to the
Lawsuit Lottery. It's sad,'' this article says, the advertisement,
``but the civil justice system in America has become nothing more than
a legal lottery.''
That is outrageous nonsense. It is embarrassing to see things being
sponsored by responsible business entities that have buddied up
together here in what they call the Product Liability Coordinating
Committee.
It goes on to read, ``With juries returning one outrageous award
after another, it's not surprising that the number of product liability
suits is skyrocketing.''
Absolutely false. We have had hearings upon hearings upon hearings,
and the filings and the suits themselves are less and less each year.
The awards given are less and less and the number of plaintiff
victories are less and less. But this ad says they have skyrocketed--no
basis in fact.
``There are 51 separate laws, one for each State and the District of
Columbia, governing product liability.''
There are 51 separate laws, Mr. President, governing insurance
companies. Do you see them up here complaining? They have to file every
one of their policies they want to sell in any one of the States. Get
these casualty companies together and ask them when are they going to
complain about filing all of these policies here, 50 to 60 different
policies that they have now, in each one of the 50 States. They are not
complaining about that. In fact, they want the McCarran-Ferguson
antitrust exemption so they can get together. They want to continue. I
have suggested maybe we ought to federalize it because they are in
interstate commerce. ``Oh, no, no, no, we don't want that. We don't
want you to see our records.''
We have had hearings upon hearings upon hearings. We never, in the
15-year period of handling this problem, have been able to get from the
casualty insurance companies their costs and profits, their records.
Even the Senator from West Virginia has put on an amendment, which I am
constrained to submit later on when we get to the actual bill itself,
to say that they file these reports. They never have. They do not want
to.
The reason we asked for these facts way back almost 15 years ago,
they said it was impossible to obtain insurance, impossible to obtain.
They have plenty of insurance. It is easily obtainable. And we wanted
to find out, as was later found out in other hearings, if they, like
the S&L's and all, had made bad investments in real estate and where
their losses came from--not from a product liability litigation
explosion but, rather, sorry investments in real estate and supermarket
and shopping center developments. They made the same mistake that all
of these banks and insurance companies and savings and loan
institutions had made.
But this says 51 separate laws. If you did not know what you were
reading, you would say, ``Good golly, Moses; let's get uniformity.''
They do not want uniformity even under this. If they wanted uniformity,
they would give you a Federal cause of action. That is why, one of the
big reasons, the American Bar Association says this adds complexity;
this is not uniformity. You have words of art: requirements, findings,
measures of evidence, exemptions of evidence, all to be interpreted by
50 separate supreme courts and the circuit court of appeals here in the
District of Columbia.
Now, try that on for a lawyers' full employment act. Come on.
Everyone knows that if they really wanted uniformity, they would have
required a Federal cause of action and they would have uniformity and
that would have at least cut down on some of the multiplicities--the
appeals, the interpretations, the motions and everything else of that
kind in the 51 separate laws and separate jurisdictions governing
product liability.
``But today the outcome of a lawsuit can depend more on geography
than the merits of the case.''
They know that. Their commercial code, the Uniform Commercial Code,
is anything but uniform. You can sit up there in New York. You can sell
a product made in Canada and solicit down in Alabama and deliver it, by
gosh, to the factory site in North Carolina, and you can say, ``Under
my interpretation of this particular contract, I select the New York
law.''
You have got what they talk about, forum shopping. The manufacturers
do just that. They know about that. But unless you have diversity of
jurisdiction--and I do not go over to Alabama, I never have heard of a
South Carolina lawyer going over and suing in Alabama. They act like
all we have to do is go over there and file the case in Alabama.
``The current product liability system with its patchwork of local
laws''--patchwork. Who has given us patchwork? Read this bill. ``* * *
with its patchwork of local laws got its start at the turn of the
century when businesses were all so local, but times have changed.''
They are trying to give a sense of history to this. This is
absolutely false. During my 20 years of law practice before I came to
the Senate, I never heard of any of this, ever. And they continue to do
business under different laws in the 50 different States under the
interstate commerce clause and it is not about times have changed.
``American-made products now travel across State lines''--well, they
have always traveled across State lines.
I will never forget Henry Grady and the funeral in the days just
after the Civil War. The Senator from Tennessee would remember it. I
think they said that he was a poor man, buried, let us say, in South
Carolina. He was buried with a New Jersey frock and some New York
shoes, and the buttons were made in Minnesota, the wood for the shovel
had come from New Hampshire, the steel had come from Pennsylvania, and
they went on and on down there about the caskets and all. They said the
only thing South Carolina furnished was the hole in the ground.
Now, tell me about traveling in the different States. That is Henry
Grady 100 years ago. They say no, times have changed now and all
products travel across State lines. ``Unfortunately, so do plaintiffs
and their lawyers seeking the most favorable State for their claim.''
Unless you have diversity, you do not run around and seek anything of
that kind. And you have the client in the community where the client is
injured. I can tell you now, having tried these cases, that you go try
it in the vicinity of the client where they can understand and know the
injury and we might get a friend on the jury or an acquaintance or
whatever it is. Sometimes the blind hog picks up an acorn. You might
get a break. If I go to another State, that immediately cuts me down to
next to nothing with respect to the fee, if I have to go and get the
lawyers who know the local law there, let us say, if I went to
Birmingham, AL, I would have to give all the moneys to the lawyers in
Birmingham.
I am not a passthrough for lawyers in Birmingham. I am trying my
clients' cases in my own State.
[[Page S5956]] This is outrageous hogwash here and they know it.
``Unfortunately, so do plaintiffs and their lawyers seeking the most
favorable state for their claim. This not only hurts competitiveness,
it stifles innovation, eliminates jobs and hurts all Americans.
How can we stop the lawsuit lottery? We need a uniform, modern
national product liability law.
But it's time for Congress to act. When it comes to the
lawsuit lottery no one wins.
They do not say that for automobile accident cases, where there is a
far, far higher number of different laws, different highway speed laws,
degrees of care, comparative negligence, contributory negligence, go
right on down the list, all the automobile accident cases and, in this
case, automobile product liability cases.
They do not say that here with respect to medical malpractice or the
securities or anything else.
Then they have a little thing like they are even trying to mimic
Oliphant: ``Less than half of all money awarded in a lawsuit goes to
the victim.'' Like they are for the victim.
It is clever. But it is outrageous blasphemy, I can tell you right
now, to put this kind of thing out to the unknowing public and perhaps
to the unknowing Congressman and Senator. We know better.
What we have is a solution looking for a problem. What we have here
is trying to find justification for a lobbying effort that has been
going on with the AMA, the Business Roundtable, and the Conference
Board for 15 years, where they seek out the candidates and ask for a
commitment and, generally speaking, get that commitment without any
hearing.
And certainly if they are newcomers to this particular Senate, they
have not had any hearings in the Commerce Committee. We had 2 days
because we were told we had to agree to it, because we had to move, we
had to catch up with the Contract With America. We did not have
hearings in depth. We had them by reference. I had to include other
hearings that we had with respect to the law professors that oppose
this measure, with respect not only to the American Bar Association now
but the American Bar Association in each one of the five hearings that
we had over the 15-year period, and all the other entities that went
into depth on this matter.
And that is what they hope to do here with this fix that is on in the
U.S. Senate. And do not come up with, ``Oh, we are looking out for
consumers.'' They have the audacity in the same instrument here to say
they look out for consumers when they exempt the manufacturers. The
unmitigated gall of that provision is just so offensive it gets me
stirred up.
How we ever got good, right-thinking folks on the floor of the U.S.
Senate proposing this measure, saying that they are proposing it for
the consumer, I do not know. Show me that consumer. What is that
saying--``Let them come to Berlin.'' Well, show me that consumer.
Heavens above.
The Consumer Federation, Consumers Union, Public Citizen, all the
consumer groups again appear in opposition to this particular measure,
particularly with respect to punitive damages.
One more time. On punitive damages, go ahead and cite your two or
three little cases that sound outrageous. I do not have the time to run
down and search out every one of the cases to find out whether the
amount of the verdict was cut, whether it was changed.
Just like the McDonald's coffee case. Once we searched that out, we
found out, yes, there were third-degree burns over one-sixth of the
injured woman's body, 3 weeks in the hospital. After 700 calls and an
offer to settle for $20,000, they totally ignored it and said we put
this in the cost of the product, because the hotter we make the coffee,
the more coffee we produce.
It is money, money that concerns these manufacturers on product
liability. That is the one thing, the bottom line. It is not the safety
of the citizenry in America, but it is the money that they are
interested in.
But of all the product liability cases, what we have found, as they
sum up over the last 30 years, is some $1.333 billion. One verdict in
business suing business, Pennzoil versus Texaco, a $3 billion punitive
damages finding in just one case, is twice the number of the consummate
sum total of all product liability punitive findings in the last 30
years. Or take Exxon Valdez, another $3 billion in punitive damages.
At the court level, I do not think the courts of this land have gone
crazy. They have been all the way up to the Supreme Court to question
the constitutionality of punitive damages. And each State either
avoided it or it is measured or it is rescinded and sent back with a
cut or total elimination.
Look under the steps that I have read here with respect to the South
Carolina law. I can go down some other States laws if they are
interested.
As a matter of punishment, we spank the baby when the baby
misbehaves, that crowd that wants the family bill. What we are trying
to do is spank the manufacturer when the manufacturer misbehaves and
tell them, ``Don't repeat this. Don't you do this again.''
And when you tell that manufacturer, you have to look at his size,
you have to look at his income, you have to look at his culpability,
you have to look at his willfulness, whether it was mere neglect or
whether it was a willful act, whether they had any warnings or
disregarded or heeded the particular warnings, whether it was a mistake
or exactly what. And you have to prove all that by the greater weight
of the preponderance of the evidence to all 12 jurors and to the trial
judge.
I yield the floor.
Mr. GORTON addressed the Chair.
The PRESIDING OFFICER. The Senator from Washington.
Mr. GORTON. Mr. President, nominally, at least, the issue before the
Senate at the moment is the Dole amendment. The Dole amendment, which
incorporates the limitations on punitive damages proposed by the
Senator from Maine [Ms. Snowe], and accepted earlier here today, would
extend those limitations from the product liability sections of this
bill and the now medical malpractice sections of this bill to all
actions. In other words, we would have one uniform standard of
limitations and relatively one uniform definition of the degree of
proof required for punitive damages in all States which have fewer
limitations at the present time or no limitations at all.
Mr. President, the majority leader has outlined some of the
persuasive reasons for this extension. The primary reasons being the
impact on small businesses which now live under the Damocles sword of a
punitive damage judgment which can literally put them out of business
and the increasing and adverse impact of punitive damage awards or
potential punitive damage awards on nonprofit organizations, including
charities, including, as the majority leader pointed out, the Girl
Scouts, Little League, and the like.
I find these reasons to be persuasive reasons. I find it easy to be
persuaded because it has been my view, almost from the time that I
began to practice law, that the rule with respect to punitive damages
in the State I represent, the State of Washington, which prohibits
punitive damages for all practical purposes in all civil litigations,
to be the appropriate rule.
Punitive damages are just exactly that. They are a form of
punishment. In our society and American tradition, punishment by the
Government or at the hands of the Government is traditionally reserved
for the criminal code. The criminal code carries with it privileges
against self incrimination, a requirement that the prosecution prove
its case beyond a reasonable doubt and, of course, explicit statutory
limitations and definitions of what punishment is appropriate in
connection with a particular crime. None of these projections exist
with respect to punitive damages. Juries decide them on an ad hoc
basis, generally speaking, on whether or not the same conduct or
product resulted in punitive damages.
There is, of course, no self-incrimination. The standard of proof in
many States is a preponderance of the evidence, and even in this bill
it is clear and convincing evidence, which falls short of the beyond a
reasonable doubt standard. And most significantly of all, there are
absolutely no limitations on the amount of punitive damages, thus the
degree of punishment which can be imposed on a given defendant in civil
litigation.
[[Page S5957]] The Supreme Court of the United States has heard
several appeals of large punitive damage judgments, appeals based on
constitutional protections through the 14th amendment. The Supreme
Court has never come up with a standard, with a maxim, by any means,
although there have been hints that punitive damage awards that exceed
four times the actual damages come close to reaching some potential
constitutional limitation.
So from my perspective, I believe that it is both constitutional and
appropriate for the Congress to deal with these issues and for the
Congress to adopt the rule of the minority of the States--my own
included--that say punishment should be reserved for the criminal code
and that civil litigation should make a claimant whole, a wronged
claimant whole, but do no more. As a consequence, I find it easy to
support the relatively mild limitations which are included in the
amendment proposed by Senator Dole, the majority leader of this body.
My friend from South Carolina, with whom I have engaged in debates on
this subject in the Commerce Committee and here on the floor, is most
eloquent on the other side of this issue. Whatever his point about a
political organization which trains its candidates in rhetoric may have
been, it is very clear that he does not need any lessons in how to
present a case forcefully and well. He does it here on this floor in
this connection and in many others. But I must admit to being puzzled
by at least some elements of the point that he makes. He says that
because certain foreign companies--in this case in the automobile
business--are willing to locate their factories in Alabama, that must
mean they love the Alabama laws with respect to product liability.
Well, Mr. President, there is no connection between the two. Just
because the market for manufactured products is nationwide, the
location of a particular factory is absolutely irrelevant. Those
automobile companies can be sued, for all practical purposes, in any
State because they sell their automobiles in every State, whether it is
the State in which their factory is located or some other. In fact, if
there might be any possible motivation created by product liability
laws, which I doubt, it would be to locate your factory in the most
notorious plaintiff-minded State because at least the judgments in that
State would not be against an out-of-State manufacturer but an in-State
one, which might create the tiniest degree of sympathy for the
manufacturer. But the location of a place at which a manufacturer
operates and the product liability laws of that State simply have no
relevance to one another at all.
The question before this body is whether we are dealing with product
liability or with medical malpractice or, for that matter, with tort
litigation in general. Do we have a system at the present time that
appropriately balances the interests of claimants, people who have been
injured or claim injury as a result of the use of products or as a
result of the quality of health care they have received, or as a result
of any other kind of act; do we properly balance their rights in court
with other undoubted purposes of our society?
In the case of product liability, have we properly balanced it with
our desire that our companies spend large amounts on research and then
develop new and improved products and then market those products or
market existing products--sometimes for dangerous occupations where
inevitably someone using the product is going to be injured? Or do we
have a system which is so unbalanced that perfectly legitimate products
are taken off the market, not because they are unsafe but because they
simply cannot create profits enough to run the risk of litigation, even
of successful litigation.
Incidentally, Mr. President, very little has been said here on the
floor about the impact of unsuccessful litigation in these areas. The
attorney's fees, the expert witness fees, the cost in time and effort
on the part of employees is every bit as much when the claim is
rejected, when there is a verdict in litigation for the defendant, as
it is when the litigation lottery turns out exactly the other way. Any
intelligent individual or company is going to say, ``I know I am going
to get sued and even if I am successful, I am going to spend more money
than I can possibly make by marketing the product or engaging in the
activity.'' That individual is going to say, ``Why bother?'' Even if
that individual or that company has produced something good for society
or is a part of the medical profession that is frequently sued or, for
that matter, is a Little League volunteer or Red Cross volunteer, that
volunteer figures he or she has a good chance of being sued, and it
hardly matters whether they calculate that they will lose or win the
lawsuit. They are going to say, ``I do not need the aggravation.''
It seems to me that it is almost beyond arguing that we have
constricted the activities, restricted the activities, of individual
volunteers. We have caused physicians with many productive years left
in their careers to abandon those careers and to retire when they
become reasonably financially comfortable. We have caused companies to
abandon promising areas of research and development. We have caused the
removal from the market of significant products by the threat of
litigation, by the lottery of litigation--not just litigation that is
going to be lost, but litigation which, more often than not, is won.
We have done this all in the name of a system which produces only a
relatively moderate percentage of the dollars that go into it for
claimants who actually establish their claims. A claimant who loses the
case, of course, ends up with nothing. But claimants taken collectively
who win these cases, at least in the fields of product liability and
medical malpractice, win less than half the cost of the system.
Sixty percent, roughly, of the dollars that go into the system go to
the lawyers and insurance adjustors and hired expert witnesses--all of
the transaction costs of the system.
So we have a system which not only penalizes volunteers and restricts
the operation of our health care system and restricts research and
development and the production and sale of goods, but one which is
extraordinarily inefficient in compensating the actual real victims of
breakdowns in the system itself.
To say, as opponents do, that somehow or another this presents no
national issue whatever just seems to me to beg the question. There is
a problem. In a national economy, it is appropriate that at least there
be a partial national solution to the problem.
Yes, we have not attempted to move all of these cases into Federal
courts with the requirement that we probably double the number of our
judges and courthouses. We have not made an entirely uniform system.
However, we have created in this bill a considerably greater degree
of uniformity than there is now. We have even, in one section, said
that the interpretation of this statute by circuit courts of appeals
are going to be strong precedents for all State courts and all other
Federal courts in those given circuits.
So the degree of uniformity as a result of this bill will not by any
means be 100 percent. It is not designed to be 100 percent. However, it
will be far greater than it is at the present time, and the
predictability of the result will be greater than it is at the present
time, and the lottery aspects of the business will be fewer than they
are at the present time.
If we learn from the experience of this bill that greater uniformity
is not necessary, we can go ahead and change it in the future. This is
not an unchangeable law, by any stretch of the imagination.
We can at least find out, by this cautious and partial experiment,
whether or not the evils ascribed in this legislation are true, but
whether or not there is a cure or a partial cure as a result of this
legislation.
I come back to one initial point, Mr. President. We have already
tried this solution in one modest area of our Nation's economy: The
reforms we made just a year ago in connection with the manufacture and
sale of piston-driven aircraft. It is now clear beyond any argument
that that business, that manufacturing business, was for all practical
purposes destroyed by product liability litigation.
The production of such aircraft declined 95 percent in the United
States of America over a 20-year period, ascribed by the manufacturers
to product liability litigation.
[[Page S5958]] Those manufacturers said that there would be a
recovery if we reformed the system. We did reform the system a year
ago, more modestly than the product liability system is reformed here,
but in a significant fashion.
Already, there has been a significant recovery, including the
planning and construction of new plants and an increase in the
production and sale of U.S.-built piston-driven aircraft.
This side in the debate is able to argue not from theory but from
experience. That experience would, it seems to me, give extraordinarily
heavy weight to saying that if we expand it, if we expand it to other
areas, we will have a similar, if perhaps not so striking, increase in
the creation of jobs in this country, in the development and marketing
of new products, of voluntarism, if the Dole amendment passes and the
like.
I hope we will be able to go forward, Mr. President, and cast votes
on these various amendments and the other amendments before the Senate,
and reach a positive conclusion to this debate within the immediate and
foreseeable future.
Mr. HOLLINGS. Mr. President, I thank the distinguished Senator from
Washington.
I mention once again the Girl Scouts, because I want to try to clean
up the Record here. What I will read here is the Associated Press
report:
When advocates of tort reform went looking for sympathetic
symbols, they thought they had found a winner--the Girl
Scouts of America. The story spread quickly among tort reform
lobbyists and their supporters on Capitol Hill, and it was
compelling. Girl Scouts in the Nation's Capitol have to sell
87,000 boxes of cookies each year just to cover the cost of
their liability insurance. The lobbying and public relations
machinery went into high gear. The U.S. Chamber of Commerce
produced a radio ad using the information, and a business
coalition began planning a television spot showing a Girl
Scout trudging door to door with a basket of Thin Mints and
S'Mores. But when the Girl Scouts got wind of it, they called
a halt. The 87,000-box statistic was undocumented, they said.
The Girl Scouts do not consider damage suits much of a
problem. The local council in Washington has never been sued,
and the National Accounting Organization takes no position on
tort reform legislation. ``They found an easy and emotional
issue that they could get hold of,'' said Sandra Jordan,
spokeswoman for the Washington Area Girl Scouts. People will
take a sound bite on easy image over hard information.
Therein, Mr. President, is my position in referring not only to Girl
Scouts, but to the sound bites here with respect to ``Let's put an end
to the lawsuit lottery.''
Now, we are not talking about product liability reform or uniformity
or, more correctly, any kind of abuses of the law. They immediately
call it a lottery and skyrocket, and all these words that have been
used; ``The lottery wins, and the consumer loses,'' and that kind of
thing.
I referred a moment ago to the matters of words with respect to these
words being used here. I know some in this Congress are very sensitive
about it. However, it has had its effect.
A former colleague here had introduced this, and we had it received
otherwise back in 1990, because I am referring to the one who is
disassociating himself from his GOPAC movement, because here is a GOPAC
movement that I will read out, and I will say how it has had an effect
in my State with respect to the Government being the enemy.
This is a GOPAC letter, signed by Newt Gingrich, and it is addressed:
Dear friend: The enclosed tape is another in the regular
series of GOPAC audio cassettes, but is more than just
another tape. This is a special lecture I delivered just a
few weeks ago on August 22, 1990, to the third-generation
group at the Heritage Foundation.
I am sending you this tape in the belief that it contains a
timely and extraordinary message that could be of help to you
in the coming months. While most activists and legislative
candidates are not asked to give your views on Iraq, the
Mideast crisis, the budget conference, and the state of the
economy, it is critical that you have the tools available
that will help you take the offensive and define the agenda
of the campaign based on our values rather than falling into
the trap of merely answering the news releases.
I have also included a new document entitled ``Language, a
Key Mechanism of Control,'' drafted by GOPAC political
director Tom Morgan. The words in that paper attest to
language from a recent series of focus groups where we
actually tested ideas and language.
I hope this proves useful in writing speeches and other
campaign communications. My personal wish for the best of
luck in your campaign and everything else.
Then, the GOPAC language is here, ``A Key Mechanism of Control.''
As you know, one of the key points in the GOPAC tapes is
that language matters.
I will repeat that sentence. Here is the Speaker himself now saying
back 5 years ago, practically:
As you know, one of the key points in the GOPAC tapes is
that language matters.
In the video ``We Are a Majority,'' language is listed as a
key mechanism of control used by a majority party along with
gender, rules, attitude, and learning. As the tapes have been
used in training sessions across the country and mailed to
candidates, we have heard a plaintive plea: ``I wish I could
speak like Newt.'' That takes years of practice, but we
believe that you could have a significant impact on your
campaign in the way you communicate if we help a little. That
is why we have created this list of words and phrases.
This list is prepared that you might have a directory of
words to use in writing literature and mail, in preparing
speeches, and producing electronic media. The words and
phrases are powerful. Read them. Memorize as many as
possible. And remember that, like any tool, these words will
not help if they are not used. While the list could be the
size of the latest college edition dictionary, we have
attempted to keep it small enough to be readily useful yet
large enough to be broadly functional. The list is divided
into two sections, the optimistic governing words to help
describe your vision, contrasting words to help you clearly
define the policies and record of your opponent in the
Democratic Party.
Then, ``Please let us know of your suggestions.''
Now, Mr. President, listen to these words amongst others. We will put
them all in the Record:
Sick, lie, liberal, betray, traitors, devour, corrupt,
corruption, cheat, steal, criminal rights.
I ran into this in my campaign for reelection in 1992. I never heard
such expressions before, and I wondered where in the world my opponent
was getting all these blase references and words that really, in my
judgment, were out of order.
Now let us bring it up to date in two instances. The Speaker himself
uses these words. You look in David Broder's column here just about 10
days ago and you will see where Speaker Gingrich, talking of his
revolution, says we have a revolution against the Washington
Government. But he does not call it the Washington Government. He calls
it--and he has the buzz words, the key words, ``the corrupt, liberal
welfare state.''
If these are not inflammatory, I do not know what are. They have had
that effect in my State of South Carolina.
I went home to a 600-member State Chamber of Commerce seminar where
they bring in the congressional delegation and we answer these
questions as they go along. It so happened the distinguished colleague
from the 4th district in Greenville, SC, Bob Inglis, had answered a
question and ended up by saying:
Yes, abolish the Departments of Commerce, Education, Energy
and Housing.
My turn came immediately afterwards and I said:
Wait a minute. You don't mean to say that the Chamber of
Commerce wants to do away with the Department of Commerce?
Yes. Yes.
A good number of them, I would say, a fifth of them, started smiling
and putting their hands together. And I said to Dick Riley, the former
Governor, popular Governor, Secretary of Education--he was there and I
said:
Dick Reilly, do you want to do away with the Department of
Education?
Yes, yes, yes.
And HUD and Energy both? All four of them?
Yes.
Half of them clapping and all, standing up. That is what is happening
about this ``corrupt, liberal welfare state.'' They feel, irrespective
of the functions and the need for these various departments, that the
dickens with it. ``The Government is the enemy,'' they say. ``Get rid
of the Government. That is the only way. Tear it down, rip it out.
Abandon it, abolish it. And then let us start all over again and to be
sure none,'' as they say, ``get corrupted. Be sure nobody serves over 6
years, or 12 years in this body.'' That is what you have going on in
this land.
I can tell you here and now, words do count. And they count with
respect to this, which is a total mislead as to the actual hearings,
the facts that we had
[[Page S5959]] before us about the lawsuit lottery, who wins and who
loses, and about the rights of consumers and everything else. It is
entirely different. It is the safety of consumers. It is the
defendants' lawyers on billable hours that are winning, sitting up
there just grinding out, trying their own case.
It is a matter not of a lottery but a sworn jury to listen to the
facts, reviewed by the trial judge and reviewed by the appellate court.
And all back to the issue at hand, punitive damages, a sum total of
$1.333 billion, the whole sum total of all punitive damage findings in
the last 30 years, which is less than half of one business verdict
against another business verdict in punitive damages, in two cases, not
only the Pennzoil case but in the Exxon case.
I yield the floor.
Mr. DORGAN addressed the Chair.
The PRESIDING OFFICER. The Senator from North Dakota.
Amendment No. 619 to Amendment No. 617
(Purpose: To strike the punitive damage limits)
Mr. DORGAN. Mr. President, I rise to offer a second-degree amendment
to the Dole amendment that is now pending. I send the amendment to the
desk and ask for its immediate consideration.
The legislative clerk read as follows:
The Senator from North Dakota [Mr. Dorgan] proposes an
amendment numbered 619 to amendment No. 617.
Mr. DORGAN. 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:
On page 1, beginning with line 3, strike through line 2 on
page 8 and insert the following:
SEC. 107. UNIFORM STANDARDS FOR AWARDS OF PUNITIVE DAMAGES.
``(a) General Rule.--Punitive damages may, to the extent
permitted by applicable State law, be awarded against a
defendant in a product liability action that is subject to
this title 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 at Request of Either Party.--At the
request of either party, the trier of fact in a product
liability action that is subject to this title shall consider
in a separate proceeding whether punitive damages are to be
awarded for the harm that is the subject of the action and
the amount of the award.''
Mr. DORGAN. Mr. President, the amendment I have offered deals with
the cap on punitive damages in the bill, S. 565, that was reported out
by the Senate Commerce Committee. I voted for this legislation because
I think, on balance, there is reason for us to legislate in this area.
I think there is a problem with product liability legislation. And I
think the approach that is taken is generally a reasonable approach.
Therefore, I cast a ``yes'' vote. I did say in the committee, however,
I was concerned about the punitive damage section and intended to offer
an amendment on the floor of the Senate to respond to my concerns. That
is what brings me to the floor today.
It occurs to me as I listen to the debate on product liability, as
well as the debate on tort reform in general, that this is another one
of those cases where there is truth on both sides of this issue. I
listened to the Senator from South Carolina, who has spoken not just
this year but in previous years on this subject and speaks with great
passion and eloquence on this issue. He feels very strongly that it is
a mistake for Congress to move forward and to enact Federal legislation
in this area. I understand what he says and why he says it.
On the other hand, I hear others in the Chamber stand up and speak
with great persuasiveness about the need for Federal product liability
legislation to restrain the number of suits that are filed.
My sense is we are a country that litigates too much. We have lawyers
all over our country filing suits for virtually everything. I would
like to see us litigate a little less in this country. I would like to
see judges throw out frivolous lawsuits and sanction those who bring
them. I would like to see us back away from this excessive litigation.
Excessive litigation puts many small businesses and others at risk. I
talked with a business owner recently and she said, ``They have jacked
up my insurance cost to $500 a month. I pay $6,000 a year now for
liability insurance to protect me against lawsuits.'' I asked, ``Have
you ever been sued?'' ``No, never had a suit against me. But, I have to
pay these tremendous costs because somebody might decide to sue me.''
This is a real problem for many.
Some might say this is a problem with insurance companies. That may
be, I do not know. I do know we have too many lawsuits in this country
and too many people who want to sue. Excessive litigation has an effect
on people trying to run small businesses who have to shell out money
month after month in order to protect themselves.
On the other hand, there are enterprises in this country that provide
products that they know are unsafe. They make these products available
to consumers figuring they can make a bunch of money. These
corporations accept the risk that a product might hurt somebody in
order to make a profit. In most cases their profit will exceed their
potential risk for damages. There are plenty of lawsuits that exemplify
this.
I think there are merits on each side of this issue. I think we need
to pass a Federal standard with respect to product liability. But, let
us go back to last year's legislation on the issue of punitive damages.
The bill that we reported out of the Senate Commerce Committee last
year had no limit on punitive damages. We do change the standard or the
threshold. We raise the bar. We require clear and convincing evidence
that the harm caused was carried out with a conscious, flagrant
indifference to the safety of others. That is the bar you have to get
over in order to prove that you are entitled to punitive damages and
that this enterprise should be punished for its behavior.
That is an appropriate place to establish burden of proof. You have
to prove that there is clear and convincing evidence that the harm is
carried out with a conscious, flagrant indifference to the safety of
others.
Once you have done that, we should not say to the largest enterprises
in this country, those with billions and billions of dollars, do not
worry--even though you knew that product was going to harm them, could
have killed them, we have put a limit on punitive damages. It does not
make any sense to me.
Let us take punitive damages as an issue. The punitive damage section
of tort law is to punish or deter a defendant's egregious conduct.
There is no litigation crisis with respect to punitive damages.
According to a survey, from 1965 to 1990, 355 punitive damages were
awarded in State and Federal product liability lawsuits nationwide, an
average of 14 a year. Of these awards, only 35 were larger than $10
million. All but one of these awards were reduced, and 11 of the 35
were reduced to zero. This was in a 25-year span.
It is hard for anyone to make the case that punitive damages
represent some sort of crisis in the area of product liability. That is
not supported by the facts. Congress should decide to raise the bar and
create a new, higher standard, higher threshold over which someone who
was injured must cross in order to prove punitive damages. To restrict
it even further by placing a limit, a substantial limit on what someone
can collect on punitive damages, is not justified. I think in rare
cases where punitive damages should be or can be awarded, if this test
is met, the test of conscious, flagrant indifference to the safety of
others, then it is inappropriate for this Congress to provide this
limitation.
My amendment would allow the States to debate this and provide their
own limitation. Some States have limits. My amendment will not affect
those States. But it will say that the underlying bill, S. 565 will not
establish a new national standard that will replace every other State
that has a limit and replace those specific limits. Or, in cases where
States do not now have a limit, tell those States, ``Here is your new
limit on punitive damages.'' That is inappropriate.
I hope that Congress will support the amendment that I am offering
today, which strikes those provisions in the punitive damages section
that limit caps.
[[Page S5960]] I come from a State that is largely a State of small
businesses. We have some industry and a few larger enterprises. I have
visited with many North Dakotans who have told me of their view of and
their circumstances with respect to product liability. The case they
make warrants this kind of legislation. But, it does not warrant a cap
that has been placed on punitive damages.
I would like to include in the Record some examples of punitive
damage cases. I will not go into them. But most of us understand where
and when punitive damages have been awarded in this country, and in
most of these instances they were warranted and necessary. The fact is
the awarding of those punitive damages deter and persuade other
corporations from taking the same risk. Corporations who suffered those
damages may be more careful in the future.
I think that many safety improvements on products have been made not
because of the benevolence of those making the products but because
they worry about the consequences of putting an unsafe product on the
market. Especially because other large enterprises which put unsafe
products on the market knowing they were not safe suffered some very
substantial punitive damages.
That has helped this country and the people in this country produce
products that are safer and more reliable and products that consumers
could purchase without fear of being hurt by the product. I hope that
we will have an opportunity to allow others to discuss my amendment. My
understanding is that they are seeking some kind of unanimous consent
in which we would stack some votes tomorrow. I would like the
opportunity to have others discuss the issue of lifting the cap on
punitive damages in the underlying bill.
Let me again reemphasize. I am not amending the Dole amendment that
deals with issues other than product liability. My amendment will deal
with the underlying bill, and the cap on punitive damages in S. 565.
My hope would be that we will continue to debate this issue. As we
discuss punitive damages, this Congress ought to consider the option of
returning to the language in the product liability reform legislation
considered last year with respect to punitive damages. Under last
year's legislation a Federal standard would have been established
without a cap on punitive damages. The legislation we are considering
this year not only changes the standard but imposes a cap. It seems to
me this cap is not necessary and inappropriate.
Last year, I was upset about another provision. The legislation that
was brought to the floor included an FDA defense, whereby, a product
that was approved by the FDA would be immune from punitive damage
liability. Last year, I said I will not support that, and I will not
vote for cloture until that is stripped out. I voted against cloture,
until I was assured that the FDA defense would be stricken. I decided
to vote for cloture at that point.
The FDA provision was not included in this year's provision, but,
they put in another cap on punitive damages which they did not have
last year. That makes no sense to me. I hope that this Congress will
come to the same conclusion that I have come to, that this bill is
worth advancing, that we should pass a product liability reform bill,
but that it should be enacted without the section that includes a cap
on punitive damages. I think a cap is unwarranted, unfair and unwise.
With that, I yield the floor.
Mr. GORTON addressed the Chair.
The PRESIDING OFFICER (Ms. Snowe). The Senator from Washington.
Mr. GORTON. Madam President, I thank the distinguished Senator from
North Dakota for offering and defending his amendment. It moves this
process forward, and as he said we are seeking at this point a
unanimous-consent agreement under which we can deal with punitive
damages today and tomorrow morning the way in which we dealt with
medical malpractice yesterday and this morning, by gathering all the
amendments together, debating them tonight and for a while tomorrow
morning and then voting on them all in a row.
Amendment No. 620 to amendment No. 596
(Purpose: To limit the amount of punitive damages that may be awarded
in a health care liability action.)
Mr. GORTON. Madam President, at this point I send an amendment to the
desk on behalf of the distinguished Senator who now occupies the Chair
and ask for its immediate question.
I ask unanimous consent to set aside the pending amendment.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk
will report the amendment.
Mr. GORTON. This is an amendment to the Gorton substitute, so I ask
to set aside the Dole amendment as well for the purposes of considering
this amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The bill clerk read as follows:
The Senator from Washington [Mr. Gorton], for Ms. Snowe,
proposes an amendment numbered 620 to amendment No. 596.
Mr. GORTON. 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:
On page 19 strike line 22 through page 20 line 4, and
insert the following new subsection:
(b) Limitation on Amount.--
(1) In general.--The amount of punitive damages that may be
awarded to a claimant in a product liability action that is
subject to this title shall not exceed 2 times the sum of--
(A) the amount awarded to the claimant for economic loss;
and
(B) the amount awarded to the claimant for noneconomic
loss.
(2) Application by court.--This subsection shall be applied
by the court and the application of this subsection shall not
be disclosed to the jury.
Mr. GORTON. Madam President, for the information of the Senate, this
is identical to the Snowe amendment on punitive damages which was
adopted as a part of the medical malpractice amendment which now, as a
result of our last recorded vote, is a part of this bill. It differs
only in that it is an amendment to the underlying Gorton substitute and
imposes the same rule with respect to punitive damages, that is to say,
two times the combination of economic and noneconomic damages for the
original limitation on punitive damages included in the Gorton
substitute.
I have discussed this next request with the distinguished Senator
from North Dakota because it is a milder version than his, I think
logically assuming that we get the votes tomorrow, that it be voted on
before his amendment, and I ask unanimous consent that it be placed on
any future agreement to a vote ahead of the Dorgan amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DORGAN. Reserving the right to object.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. And I do not expect we will object, but I wanted to clear
that with our side of the aisle, so if the Senator will withhold
momentarily.
Mr. GORTON. I will withhold it momentarily.
Madam President, I briefly explained this amendment. I would expect
that it would be adopted by voice vote because there was a rollcall
vote earlier today on precisely this amendment, and I doubt that the
body needs that vote repeated. It is in my view a preferable formula to
that proposed by the Senator from North Dakota, which, of course, would
remove all limitations and essentially all Federal controls over
punitive damages. And it is punitive damages, of course, which is the
subject not only of the Dole amendment but of much of the original
product liability bill, and it is a formula with respect to punitive
damages proposed by the occupant of the chair as accepted by a
unanimous vote this morning.
Mr. DORGAN. Madam President, I withdraw my reservation. I have no
objection.
Mr. GORTON. I repeat the unanimous-consent request.
The PRESIDING OFFICER. Would the Senator from Washington repeat the
unanimous-consent request?
Mr. GORTON. Assuming there is later today an order for votes on all
amendments dealing with punitive damages, that the Snowe amendment
[[Page S5961]] be voted on immediately prior to the Dorgan amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GORTON. Madam President, I wish to repeat once more that I
understand there are additional amendments to be proposed by the
Senator from Tennessee [Mr. Thompson], the Senator from Arizona [Mr.
Kyl], the Senator from Utah [Mr. Hatch], the majority leader, the
Senator from Kansas [Mr. Dole], and the Senator from Alabama [Mr.
Shelby], from this side of the aisle and perhaps additional amendments
on punitive damages on the other side of the aisle. We have no
unanimous consent on the subject yet. I hope that Members who want to
speak to the subject of punitive damages and introduce amendments on
the subject of punitive damages will do so as promptly as is convenient
to them.
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. BYRD. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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